10-K
1
LEXINGTON PRECISION CORP. 10-K
1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE YEAR ENDED DECEMBER 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-3252
LEXINGTON PRECISION CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 22-1830121
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
767 THIRD AVENUE, NEW YORK, NY 10017
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 319-4657
___________________________
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, $.25 PAR VALUE
(TITLE OF CLASS)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of February 28, 1995 was approximately $3,085,000.
The number of shares outstanding of the registrant's common stock as of
February 28, 1995 was 4,203,036.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's proxy statement to be issued in connection with
its 1995 Annual Meeting of Stockholders (the "Proxy Statement") are
incorporated by reference into Part III. Only those portions of the Proxy
Statement which are specifically incorporated by reference are deemed filed as
part of this report on Form 10-K.
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2
LEXINGTON PRECISION CORPORATION
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
PAGE
----
PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . 6
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . 20
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
PART III
Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . 43
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . 43
Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . 43
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K . . . . . . . . . . . . . 44
3
PART I
ITEM 1. BUSINESS
Lexington Precision Corporation (the "Company") is a Delaware
corporation which was incorporated in 1966. The Company manufactures, to
customer specifications, rubber and metal component parts used primarily by
manufacturers of automobiles, automotive replacement parts, computers, office
equipment, medical devices, home appliances and industrial equipment. The
Company's business is conducted primarily in the continental United States.
Unless the context otherwise requires, all references herein to the Company are
to Lexington Precision Corporation and its wholly-owned subsidiary, Lexington
Components, Inc. ("LCI").
RUBBER GROUP
The Company's Rubber Group manufactures, to customer specifications,
close tolerance silicone and organic rubber components. The Group conducts its
business through four operating divisions of LCI.
PRECISION SEALS DIVISION. The Precision Seals Division manufactures
molded rubber seals used in primary wire harnesses for automobiles and trucks.
Primary wire harnesses distribute electrical power to interior and exterior
lighting fixtures, electrically powered accessories and other electrical
equipment. The seals are used to assure the integrity of the many connections
which are required throughout the harnesses. The Division's largest customer
is Delphi Packard Electric Systems, a division of General Motors Corporation
("Delphi Packard Electric").
ELECTRICAL INSULATOR DIVISION. The Electrical Insulator Division
manufactures molded rubber insulators used in ignition wire harnesses for
automobiles and trucks. Insulators are used to shield the electrical
connections made by the ignition wire at the distributor and at the spark plug.
Approximately 30% of the insulators manufactured by the Division are used in
new vehicles, primarily those manufactured by Ford Motor Company and Chrysler
Corporation, with the balance used in automotive replacement parts.
LEXINGTON MEDICAL DIVISION. The Lexington Medical Division manufactures
molded rubber components which are used in a variety of medical devices, such
as syringes, laparoscopic instruments, catheters and intravenous feeding
systems.
EXTRUDED AND LATHE CUT PRODUCTS DIVISION. The Extruded and Lathe Cut
Products Division manufactures extruded rubber components which are used
primarily by manufacturers of industrial equipment, lighting products and home
appliances.
METALS GROUP
The Company's Metals Group manufactures, to customer specifications,
close tolerance metal components. The Group conducts its business through
Falconer Die Casting Company ("Falconer") and Ness Precision Products ("Ness"),
both of which are divisions of the Company.
FALCONER DIE CASTING COMPANY. Falconer manufactures aluminum,
magnesium and zinc die castings used primarily by manufacturers of computers,
office equipment, leisure time equipment, communications equipment, industrial
equipment and automobiles. Many of the die castings which are
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produced by Falconer are also machined by Falconer using computer-controlled
machining centers and other secondary machining equipment.
NESS PRECISION PRODUCTS. Ness produces precision-machined aluminum,
brass and stainless steel components used primarily by manufacturers of
automobiles, home appliances, office equipment, communications equipment and
industrial equipment. In 1994, approximately half of the revenues of Ness were
generated by sales of components for automotive air bag systems.
PRINCIPAL END USES FOR THE COMPANY'S PRODUCTS
The following table summarizes net sales of the Rubber Group and the
Metals Group during 1994, 1993 and 1992 by the type of product in which the
Company's components were utilized (in thousands of dollars):
1994 1993 1992
------------- ------------- -------------
Rubber Group:
Automobiles and light trucks $37,584 80.2% $32,761 81.1% $26,018 78.3%
Medical devices 5,536 11.8 3,946 9.8 3,345 10.1
Other 3,748 8.0 3,681 9.1 3,865 11.6
------- ----- ------- ----- ------- -----
$46,868 100.0% $40,388 100.0% $33,228 100.0%
======= ===== ======= ===== ======= =====
Metals Group:
Automobiles and light trucks $15,421 37.0% $12,452 36.0% $ 8,578 26.8%
Industrial equipment 9,083 21.8 6,207 17.9 7,472 23.4
Leisure time equipment
and home appliances 7,871 18.9 6,712 19.4 6,953 21.7
Computers and office equipment 6,800 16.3 5,351 15.5 5,182 16.3
Other 2,489 6.0 3,866 11.2 3,788 11.8
------- ----- ------- ----- ------- -----
$41,664 100.0% $34,588 100.0% $31,973 100.0%
======= ===== ======= ===== ======= =====
(For additional information concerning the Rubber Group and the Metals
Group, see Note 11 to the Consolidated Financial Statements in Part II, Item
8.)
MARKETING AND SALES
The marketing and sales effort within the Rubber Group is carried out by
management personnel and internal sales personnel. The marketing and sales
effort within the Metals Group is carried out by management personnel, internal
sales personnel and independent sales representatives.
RAW MATERIALS
Each of the principal raw materials used by the Company is available at
competitive prices from several major manufacturers. All raw materials have
been readily available and the Company does not foresee any significant
shortages.
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SEASONAL VARIATIONS
The Company's business generally is not subject to significant seasonal
variations.
MAJOR CUSTOMERS
Net sales to two customers of the Rubber Group accounted for 26.7%,
27.4% and 27.2% of the Company's total net sales during 1994, 1993 and 1992,
respectively. During such years, net sales to Delphi Packard Electric
accounted for 20.6%, 22.3% and 20.4%, respectively, of the Company's total net
sales. During 1994, 1993 and 1992, net sales to one customer of the Metals
Group, TRW Vehicle Safety Systems, Inc. ("TRW VSSI"), accounted for 13.0%,
11.8% and 9.0%, respectively, of the Company's total net sales. Sales to TRW
VSSI consisted primarily of sales of one component part. Loss of a significant
amount of business from any of the Company's three largest customers would have
a material adverse effect on the business of the affected Group and the Company
as a whole if such business were not replaced by additional business from
existing or new customers. (See also "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in Part II, Item 7.)
BACKLOG
The Company's backlog of customer orders includes orders which have
scheduled shipping dates and orders which do not have scheduled shipping dates
but which, based upon historical experience, the Company anticipates will be
produced and shipped within one year. Orders included in such backlog may be
subject to cancellation or postponement by customers, however, based upon past
experience, the Company expects to ship during 1995 substantially all of the
orders which were included in the backlog as of December 31, 1994. The Company
believes that its order backlog is not necessarily indicative of future net
sales levels. The following table sets forth the backlog of orders for the
Rubber Group and the Metals Group (in thousands of dollars):
DECEMBER 31,
-----------------------
1994 1993
------- -------
Rubber Group $ 7,976 $ 6,271
Metals Group 19,057 15,696
------- -------
$27,033 $21,967
======= =======
COMPETITION
The Company competes for business primarily on the basis of quality,
service, technical and engineering capabilities and price. The Rubber Group
and the Metals Group encounter substantial competition from a large number of
manufacturing companies. Competitors range from small and medium-sized
specialized firms to large diversified companies, many of which have resources
substantially greater than those of the Company. Additionally, some of the
Company's customers have captive manufacturing operations which compete with
the Company.
PRODUCT LIABILITY RISKS
The Company is subject to potential product liability risks which are
inherent in the manufacture and sale of precision components, including
components of medical devices. Although there have been no
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claims made to date against the Company which the Company believes will have a
material adverse effect upon its financial position, there can be no assurance
that any existing claims or any claims made in the future will not have a
material adverse effect upon the financial position of the Company. (For a
description of a product liability claim against LCI, see "Legal Proceedings"
in Part I, Item 3.)
ENVIRONMENTAL COMPLIANCE
The Company's operations are subject to numerous federal, state and
local laws and regulations controlling the discharge of materials into the
environment or otherwise relating to the protection of the environment.
Although the Company continues to make expenditures for the protection of the
environment, compliance with federal, state and local environmental regulations
has not had a significant impact on the capital spending requirements, earnings
or competitive position of the Company. There can be no assurance that changes
in environmental laws and regulations, or the interpretation or enforcement
thereof, will not require material expenditures by the Company in the future.
(See also "Legal Proceedings" in Part I, Item 3.)
EMPLOYEES
The breakdown of employees of the Company by industry group is set forth
below:
DECEMBER 31,
1994
-------------
Rubber Group 506
Metals Group 482
Corporate Office 4
---
992
===
Thirty hourly workers at one plant location within the Rubber Group are
subject to a collective bargaining agreement. Although certain of the
Company's facilities have experienced union organizing activity from time to
time, the Company believes that its employee relations are generally good.
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ITEM 2. PROPERTIES
At December 31, 1994, the Company conducted its operations at eight
manufacturing plants located in the United States. In December 1994, the
Company acquired an additional manufacturing facility in LaGrange, Georgia, at
which production is expected to commence during the second quarter of 1995.
The following table sets forth the manufacturing facilities of the Rubber Group
and the Metals Group and the Company's corporate offices as of December 31,
1994:
Square
Feet
------
Rubber Group:
Blue Ridge, GA 35,000
Jasper, GA 65,000
LaGrange, GA 77,000 (1)(2)
Vienna, OH 60,000 (2)
Rock Hill, SC 60,000 (2)
-------
297,000
-------
Metals Group:
Casa Grande, AZ 26,000 (2)
Lakewood, NY 53,000
Manchester, NY 21,000
Rochester, NY 60,000 (3)
-------
160,000
-------
Corporate Offices:
New York, NY 3,000 (4)
Cleveland, OH 3,000 (5)
-------
463,000
=======
(1) Purchased in December 1994.
(2) Encumbered by mortgage.
(3) Leased from an industrial development authority pursuant to a
lease which expires in 2000 and provides the Company with an
option to purchase the facility at the end of the lease term
for nominal consideration.
(4) Provided to the Company by an affiliate pursuant to arrangements
under which the Company reimburses the affiliate for a portion
of the cost relating to this office.
(5) Leased.
All of the plants are well maintained, general manufacturing facilities
which are suitable for the Company's operations. Although the Company believes
that, to varying degrees, each of the Company's manufacturing facilities has
the flexibility to meet increased demand for the Company's products, the
Company currently plans to add approximately 62,000 square feet of
manufacturing space within the Rubber Group and approximately 95,000 square
feet of manufacturing space within the Metals Group during 1995.
ITEM 3. LEGAL PROCEEDINGS
During the fourth quarter of 1994, the Company settled an action
commenced on April 26, 1991 in New York Supreme Court, County of Chautauqua,
and previously reported in the Company's Annual Reports on Form 10-K for the
years ended December 31, 1991 through 1993, by the purchaser of certain assets
of
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the Company's discontinued office furniture division. As part of the
settlement, the Company sold certain real estate to a designee of the purchaser
for $200,000 in cash. In addition, the Company and the purchaser agreed to
dismiss the action with prejudice and exchanged mutual releases. During the
fourth quarter of 1994, the Company recorded a pre-tax gain of $200,000
relating to the sale and settlement.
On December 3, 1993, Kingston Oil Supply Corp. ("Kingston") commenced a
third party action against, among others, LCI in New York Supreme Court,
Ulster County, alleging that LCI had manufactured a defective gasket used in a
furnace which leaked oil and caused damage to a party who has sued Kingston
seeking $2,000,000 in compensatory damages plus punitive damages. Kingston has
sought contribution or indemnification from LCI and other third party
defendants with respect to any judgment awarded against Kingston. LCI has
asserted a crossclaim in this action against the customer for whom LCI
manufactured the gasket, seeking indemnification in the event LCI is held
liable in the action. LCI intends to appeal a decision denying its motion for
summary judgment dismissing the complaint against LCI. A trial of the action
has been tentatively scheduled for April 1995. LCI intends to defend the
allegations against it vigorously. Based upon the information presently
available to the Company, the Company believes that the outcome of the action
will not have a material adverse effect upon its financial position.
The Company has been one of approximately 150 potentially responsible
parties under the federal Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended ("CERCLA"), for aggregate costs of
approximately $2,000,000 incurred by the Environmental Protection Agency
("EPA") in connection with, among other things, inventorying, sampling,
analyzing, removing and disposing of containerized hazardous substances found
at a site to which such substances had been transported from a hazardous
substance treatment and disposal facility. The Company and other potentially
responsible parties have entered into an Administrative Order on Consent with
the EPA settling the matter. The Company has paid its pro rata share of the
settlement in the amount of $6,000. The Order on Consent is currently pending
approval by the Department of Justice. It is not anticipated that the EPA will
take any further action with respect to the site.
The Company has been one of approximately 50 potentially responsible
parties under CERCLA for costs of approximately $1,000,000 incurred by the EPA
in connection with, among other things, inventorying, sampling, analyzing,
removing and disposing of containerized hazardous substances found at a
hazardous substance treatment and disposal facility. The Company and other
potentially responsible parties have entered into an Administrative Order on
Consent with the EPA settling the matter. The Company has paid its pro rata
share of the settlement in the amount of $15,000. The Order on Consent was
approved by the Department of Justice in November 1994.
The Company is a party to certain other legal actions arising in the
ordinary course of its business, including actions naming the Company as a
potentially responsible party or as a third-party defendant in cost recovery
actions initiated by the EPA pursuant to applicable sections of CERCLA. Based
upon the information presently available to the Company, the Company believes
that the ultimate outcome of these actions will not have a material adverse
effect upon its financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's common stock, held by approximately 1,100 holders of
record as of February 28, 1995, is traded in the over-the-counter market. The
Company's common stock has not been listed on the National Association of
Securities Dealers Automated Quotation System (NASDAQ) since May 24, 1991
because the Company has failed to meet applicable net worth requirements.
Trading of shares of the Company's common stock is limited. No material
trading data for the Company's common stock was publicly available for the
period January 1, 1993 through April 7, 1994. Since April 8, 1994, trading
information has been available from the OTC Bulletin Board provided by the
National Association of Securities Dealers (NASD). The following table sets
forth information regarding selling prices obtained from the OTC Bulletin
Board:
SELLING PRICES
--------------
PERIOD HIGH LOW
---------------- ------ ------
4/1/94 - 6/30/94 $3.00 $1.50
7/1/94 - 9/30/94 $2.50 $1.50
10/1/94-12/31/94 $2.50 $1.50
The Company is not able to determine whether or not retail mark-ups,
mark-downs or commissions were included in the above prices. The Company
believes that four brokerage firms currently make a market in the Company's
common stock, although both bid and asked quotations may at times be limited.
No dividends have been paid on the Company's common stock since 1979.
The future payment of dividends is dependent upon, among other things, the
earnings and capital requirements of the Company. The agreements pursuant to
which certain of the Company's indebtedness is outstanding contain provisions
limiting the Company's ability to make dividend payments on its common stock.
The most restrictive of such provisions would have permitted the Company to pay
$2,264,000 of dividends on its common stock as of December 31, 1994.
The Board of Directors intends, for the foreseeable future, to follow a
policy of retaining the Company's earnings in order to reduce the indebtedness
of the Company and finance the development and expansion of its business.
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ITEM 6. SELECTED FINANCIAL DATA (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AND EMPLOYEE DATA)
Selected financial information of the Company is set forth below:
Years Ended December 31,
------------------------------------------------------------------
1994 1993 1992 (1) 1991 (1)(2) 1990 (1)(2)(3)
---- ---- ---- ---- ----
SELECTED STATEMENTS OF OPERATIONS DATA:
Net sales $ 88,532 $ 74,976 $ 65,201 $ 65,180 $ 69,584
======== ======== ========= ======== =========
Income/(loss) from continuing operations (4) $ 8,102 $ 6,347 $ 548 $ 3,965 $ (3,861)
Interest expense 6,272 5,496 5,041 5,867 6,096
Other income/(expense), net (4) 536 - - (56) 31
Provision/(credits) for income taxes 34 - - (396) (620)
-------- -------- --------- -------- ---------
Income/(loss) before discontinued operations
and extraordinary items 2,332 851 (4,493) (1,562) (9,306)
Discontinued operations - - - (209) (90)
Extraordinary items - - - 978 1,294
-------- -------- --------- -------- ---------
Net income/(loss) $ 2,332 $ 851 $ (4,493) $ (793) $ (8,102)
======== ======== ========= ======== =========
Per fully diluted share of common stock (5):
Income/(loss) before discontinued operations
and extraordinary items $ .51 $ .13 $ (1.11) $ (.39) $ (2.36)
Discontinued operations - - - (.05) (.02)
Extraordinary items - - - .24 .32
-------- -------- --------- -------- ---------
Net income/(loss) $ .51 $ .13 $ (1.11) $ (.20) $ (2.06)
======== ======== ========= ======== =========
OTHER DATA:
Average number of employees 968 860 883 905 1,075
Depreciation and amortization expenses $ 5,060 $ 4,297 $ 5,050 $ 5,216 $ 4,838
Capital expenditures $ 15,319 $ 6,288 $ 2,235 $ 613 $ 6,360
(Footnotes on following page) (Continued)
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ITEM 6. SELECTED FINANCIAL DATA (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA) (CONT.)
DECEMBER 31,
--------------------------------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
SELECTED BALANCE SHEET DATA:
Current assets $ 22,752 $ 15,715 $ 14,257 $ 15,211 $ 16,629
Current liabilities 24,429 12,733 51,224 50,940 58,684
--------- ---------- --------- ---------- ---------
Net working capital/(deficit) $ (1,677) $ 2,982 $ (36,967) $ (35,729) $ (42,055)
========= ========== ========= ========== =========
Total assets $ 67,396 $ 49,983 $ 45,584 $ 50,978 $ 55,450
Long-term debt, excluding current portion $ 49,627 $ 46,273 $ 3,795 $ 5,013 $ 981
Redeemable preferred stock at par value $ 555 $ 600 $ 735 $ 735 $ 735
Total stockholders' deficit $ (7,215) $ (9,623) $ (10,170) $ (5,710) $ (4,950)
(1) In 1992, income/(loss) before discontinued operations and extraordinary
items included $1,113,000 for the amortization of and $2,132,000 for
the write-off of covenants not to compete. In each of 1991 and 1990,
income/(loss) before discontinued operations and extraordinary items
included $1,113,000 of amortization of the covenants not to compete.
(2) In 1991 and 1990, extraordinary items represented the gains on the
repurchase of $1,500,000 and $5,800,000 principal amount, respectively,
of the Company's 12-3/4% Subordinated Notes, due February 1, 1997.
(3) In 1990, income/(loss) before discontinued operations and extraordinary
items included a restructuring charge of $7,043,000.
(4) Effective for 1994, amortization of the excess of cost over net assets
of businesses acquired (goodwill) has been classified as an operating
expense. Previously, amortization of goodwill had been classified as
other expense. Prior period presentations have been reclassified to
conform to the current year's presentation. During each of the years
in the above table, amortization of goodwill totaled $316,000.
(5) In 1994, 1993, and 1990, fully diluted income/(loss) per common share
was reduced by $.02, $.07, and $.06, respectively, to reflect the
effect of dividends paid or accrued on the Company's preferred stock
and the amount by which payments made to effect the redemption of the
$8 Cumulative Convertible Redeemable Preferred Stock, Series B,
exceeded the par value of such shares.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Through its two business segments, the Rubber Group and the Metals
Group, the Company manufactures, to customer specifications, close tolerance
rubber and metal components. The Rubber Group manufactures silicone and organic
rubber components for sale primarily to manufacturers of automobiles,
automotive replacement parts and medical devices. The Metals Group
manufactures metal components for sale primarily to manufacturers of
automobiles, automotive replacement parts, industrial equipment, home
appliances and business machines.
LIQUIDITY AND CAPITAL RESOURCES
DEBT RESTRUCTURING
In January 1994, the Company completed a restructuring of substantially
all of its outstanding debt. The restructuring included the completion of an
exchange offer (the "Exchange Offer") for the Company's 12-3/4% Subordinated
Notes, due February 1, 1997 (the "12-3/4% Subordinated Notes"), the
restructuring of the Company's 14% Junior Subordinated Convertible Notes, due
May 1, 2000 (the "14% Convertible Notes"), and the amendment of the Company's
borrowing arrangement (the "Working Capital Facility") with its working capital
lender (the "Working Capital Lender"). Upon the completion of the
restructuring, all defaults which existed on the Company's debt at the time of
the restructuring were eliminated.
Pursuant to the Exchange Offer, all of the 12-3/4% Subordinated Notes
(principal of $25,275,000 and accrued interest of $10,079,000) were tendered in
exchange for $31,720,000 principal amount of 12-3/4% Senior Subordinated Notes,
due February 1, 2000 (the "12-3/4% Senior Subordinated Notes"), and $3,634,000
of cash. The restructuring of the 14% Convertible Notes included the
satisfaction of past due interest through the payment of $99,000 in cash and
the issuance of $347,000 principal amount of 14% Junior Subordinated
Non-Convertible Notes, due May 1, 2000 (the "14% Non-Convertible Notes"). The
funds used to make the cash payments required at the closing of the debt
restructuring in January 1994 were obtained through increased borrowings under
the Working Capital Facility.
The Company did not record any gain or loss for book purposes or for tax
purposes from the restructuring of its indebtedness in January 1994.
WORKING CAPITAL FINANCING
The Company's working capital financing is provided through the Working
Capital Facility, originally entered into between the Company and the Working
Capital Lender in 1990. The Working Capital Facility currently permits the
Company to borrow up to $40,000,000, provided that the aggregate borrowings
may not exceed an availability formula set by the Working Capital Lender.
During 1994, the Working Capital Facility was amended to, among other things,
increase the Company's maximum borrowing availability from $10,000,000 to
$25,000,000, convert certain borrowings thereunder from revolving loans to term
loans, reduce the rate of interest charged on loans outstanding under the
Working Capital Facility from Prime plus 2% to Prime plus 1-1/2% and revise
certain financial covenants.
In January 1995, the Working Capital Facility was further amended to,
among other things, increase the Company's maximum borrowing availability from
$25,000,000 to $40,000,000, subject to availability formulas set by the Working
Capital Lender, convert $7,873,000 of term loans and $7,267,000 of revolving
loans into new term loans in the aggregate amount of $15,140,000 payable in 84
monthly principal
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installments of $181,000 each, reduce the rate of interest charged on loans
outstanding under the Working Capital Facility from Prime plus 1-1/2% to either
Prime plus 1% or the London Interbank Offered Rate plus 3-1/4% and revise a
financial covenant. As amended, the Working Capital Facility includes a line
(the "Equipment Line") of $11,300,000 which, subject to availability formulas
set by the Working Capital Lender, can be used to finance a portion of the
purchase price of new equipment. If utilized, borrowings under the Equipment
Line will convert to term loans which will be payable in equal monthly
principal installments through February 1, 2002. As of March 1, 1995, the
Company had borrowings of $23,943,000 outstanding under the Working Capital
Facility and had approximately $3,097,000 of unused availability, without
giving effect to new borrowings which are expected to be available under the
Equipment Line to finance purchases of new equipment.
Amounts outstanding under the Working Capital Facility are
collateralized by substantially all of the accounts receivable, inventory,
equipment and other personal property, and certain real property of the
Company.
OPERATING ACTIVITIES OF THE COMPANY
During 1994, net cash provided by the operating activities of the
Company totaled $5,957,000, a decrease of $3,644,000 when compared to 1993.
The decrease was attributable, in large part, to the payment during January
1994, in connection with the restructuring of substantially all of the
Company's indebtedness, of all past due interest of the Company. During 1993,
cash provided by operating activities included an increase in accrued interest
of $4,152,000 resulting from the Company's failure to pay, during 1993,
interest due on the 12-3/4% Subordinated Notes and the 14% Convertible Notes.
During 1994, accounts receivable increased by $3,384,000. The increase
was primarily the result of increased net sales during the fourth quarter of
1994 compared to the fourth quarter of 1993 and a slowdown in payments from one
of the Company's largest customers. Inventories increased by $2,458,000 during
1994, primarily as a result of increased sales levels during the fourth quarter
of 1994 and anticipated higher sales levels during the first quarter of 1995.
Accounts payable increased by $6,037,000 during 1994. The increase
included an increase of $2,293,000 in payables relating to purchases of capital
equipment, an increase of $1,218,000 in payables relating to purchases of
tooling, and a general slowing of payments to suppliers during the fourth
quarter of 1994 pending the completion of the amendments to the Working Capital
Facility. Subsequent to the completion of the amendments to the Working
Capital Facility in January 1995, the Company reduced its accounts payable to
bring the amounts outstanding to its suppliers generally within terms which the
Company believes are customary in the industries in which the Company operates.
The funds used to reduce the Company's trade debt were obtained through
increased borrowings under the Working Capital Facility.
Although 1994 net income exceeded 1993 net income by $1,481,000 and
non-cash charges for depreciation and amortization expenses increased by
$763,000 during 1994, net working capital declined by $4,659,000 primarily
because, at December 31, 1994, the Company classified as short-term debt
$5,052,000 of revolving loans outstanding under the Working Capital Facility.
Although the revolving loans, as amended in January 1995, have a maturity date
of January 2, 1998, the revolving loans have been classified as short-term debt
because the Company's cash receipts are automatically used to reduce the
revolving loans on a daily basis, by means of a lock-box sweep agreement, and
the Working Capital Lender has the ability to modify certain terms of the
revolving loan financing agreements without the prior approval of the Company.
-11-
14
During 1994, aggregate income from operations of the Rubber Group and
the Metals Group totaled $9,920,000. After deducting corporate operating
expenses of $1,818,000, income from operations totaled $8,102,000, or 9.2% of
net sales. Included in income from operations for 1994 were non-cash expenses
of $5,018,000 (principally depreciation expense of $4,239,000). Net income
for 1994 included a gain, net of income taxes, of $336,000 from the sale of
marketable equity securities and a gain, net of applicable income taxes, of
$200,000 from a sale of real estate in connection with the settlement of
certain litigation.
INVESTING ACTIVITIES OF THE COMPANY
During 1994, the investing activities of the Company used $14,966,000 of
cash. During the year, the Company made $15,319,000 of capital expenditures,
which included $1,500,000 for the purchase of a 77,000 square foot
manufacturing facility in LaGrange, Georgia. During 1994, capital expenditures
attributable to the Rubber Group and the Metals Group totaled $8,651,000 and
$6,656,000, respectively. The Company estimates that approximately $3,000,000
of the 1994 capital expenditures were made to maintain or replace existing
equipment or to effect cost reductions. The Company estimates that
approximately $10,000,000 of the 1994 capital expenditures were for the
purchase and installation of production equipment to meet orders which have
been awarded to the Company. During 1994, the capital expenditure program
included the purchase and rebuilding of die casting machines, the purchase of
metal machining equipment, the purchase and rebuilding of rubber molding
machines and ancillary equipment, the expansion of clean room facilities for
the molding of rubber components for medical devices and the purchase of the
LaGrange facility to provide space for ongoing expansion of production capacity
within the Rubber Group. The Company presently projects that 1995 capital
expenditures will total approximately $19,000,000. As of December 31, 1994,
the Company had commitments outstanding to purchase equipment of approximately
$4,727,000.
FINANCING ACTIVITIES OF THE COMPANY
During 1994, the financing activities of the Company provided $9,055,000
of cash, primarily from increased borrowings under the Working Capital Facility.
The Company operates with high financial leverage. As of December 31,
1994, the Company's aggregate indebtedness, excluding trade payables, was
$57,278,000, compared to $48,077,000 as of December 31, 1993, an increase of
$9,201,000. As a result of increased borrowings under the Working Capital
Facility during the first two months of 1995, aggregate indebtedness, excluding
trade payables, totaled $60,780,000 as of March 1, 1995 an increase of
$3,502,000. The additional borrowings were used for the payment, on February
1, 1995, of the interest due on the 12-3/4% Senior Subordinated Notes and the
14% Convertible and Non-Convertible Notes and the reduction of trade payables.
During 1994, cash interest and principal payments required and paid under the
terms of the Company's various financing agreements (exclusive of cash interest
payments of $3,733,000 made upon completion of the debt restructuring in
January 1994) totaled $6,046,000 and $1,804,000, respectively. During 1995,
the cash interest and principal payments required under the terms of the
Company's loan agreements are currently projected to total $7,900,000 and
$2,599,000, respectively.
Based upon the Company's present business plan, the achievement of which
cannot be assured, the Company believes that for the foreseeable future
anticipated borrowings under the Working Capital Facility and cash generated
from operations should be adequate to meet its presently anticipated working
capital, capital expenditure and debt service requirements. If cash flow from
operations or availability under the Working Capital Facility fall below
expectations, the Company's capital expenditure program will be reduced or
delayed.
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15
ACQUISITIONS OF BUSINESSES
The Company is seeking to acquire assets and businesses related to its
current operations with the intention of expanding its existing operations.
Depending on, among other things, the size and terms of such acquisitions, the
Company may be required to obtain additional financing and, in some cases, the
approval of the Working Capital Lender and the holders of other debt of the
Company. The Company's ability to effect acquisitions may be dependent upon
its ability to obtain such financing and, to the extent applicable, consents.
DEPENDENCE ON LARGE CUSTOMERS
The Company has limited ability to predict the volume and pricing of
orders from its existing and potential customers. For example, since 1992,
Delphi Packard Electric and other divisions of General Motors Corporation have
followed a policy of soliciting bids from large groups of manufacturers for the
majority of the component parts purchased by General Motors and its divisions,
including those parts which have previously been awarded to the Company and its
competitors. The Company is unable to predict the timing or the outcome of
future rounds of competitive bidding or other programs designed to lower Delphi
Packard Electric's cost of purchased parts. During 1994, 1993, and 1992, net
sales to Delphi Packard Electric accounted for 20.6%, 22.3% and 20.4%,
respectively, of the Company's total net sales. Loss of all or a major portion
of the Delphi Packard Electric business would have a material adverse effect on
the Company's operations.
During 1994, 1993 and 1992, net sales to TRW VSSI, the Company's second
largest customer, accounted for 13.0%, 11.8% and 9.0%, respectively, of the
Company's total net sales and consisted primarily of a single component part.
The Company has limited ability to predict the customer's future requirements
for this component part and the percentage of production, if any, which will be
awarded to the Company. Currently, management of the Company believes that the
part will remain in production for all of 1995 and at substantially reduced
quantities during 1996 and 1997. During 1993 and 1994, the Company received
several orders for new parts from TRW VSSI and anticipates receiving orders for
additional new parts during 1995, although there can be no assurance such
orders will be received. Loss of all or a major portion of the TRW VSSI
business, if not replaced by equivalent volume of other parts, would have a
material adverse effect on the Company's operations.
-13-
16
RESULTS OF OPERATIONS
1994 VERSUS 1993
NET SALES
A summary of the net sales of the Rubber Group and the Metals Group
follows (dollar amounts in thousands):
Percentage
1994 1993 Increase
------- ------- ---------
Rubber Group $46,868 $40,388 16.0%
Metals Group 41,664 34,588 20.5
------- ------- ----
$88,532 $74,976 18.1%
======= ======= ====
Net sales of the Rubber Group increased by $6,480,000 in 1994. Net
sales to automotive customers increased by $4,823,000, or 14.7%, primarily as a
result of increased sales of wire harness seals to Delphi Packard Electric and
increased sales of ignition wire insulators for new vehicles. Net sales of
rubber components for medical devices increased to $5,536,000 in 1994 from
$3,946,000 in 1993, primarily as a result of increased sales efforts.
Net sales of the Metals Group increased by $7,076,000 in 1994, primarily
due to a 30.5% increase in net sales to TRW VSSI of component parts used in
automotive airbag systems.
COST OF SALES
A summary of the cost of sales (in thousands of dollars and as a
percentage of net sales) for the Rubber Group and the Metals Group follows:
1994 1993
------------ ------------
Rubber Group $39,314 83.9% $33,280 82.4%
Metals Group 32,320 77.6 27,413 79.3
------- ---- ------- ----
$71,634 80.9% $60,693 80.9%
======= ==== ======= ====
Cost of sales of the Rubber Group as a percentage of net sales increased
from 82.4% in 1993 to 83.9% in 1994, primarily as a result of increased factory
overhead costs as a percentage of net sales. During 1994, increased factory
overhead costs included higher indirect labor costs, increased depreciation and
amortization expenses resulting from the installation and startup of new and
refurbished equipment and new tooling and increased workers' compensation
costs. Increased factory overhead costs as a percentage of net sales were
offset in part by lower direct labor costs as a percentage of net sales
resulting from the installation of new and refurbished equipment and the
introduction of improved manufacturing processes.
Cost of sales of the Metals Group as a percentage of net sales decreased
from 79.3% in 1993 to 77.6% in 1994. During 1994, material and direct labor
costs as percentages of net sales were essentially unchanged,
-14-
17
while factory overhead costs as a percentage of net sales decreased, primarily
because sales increased while certain components of factory overhead costs
remained relatively unchanged.
SELLING AND ADMINISTRATIVE EXPENSES
In 1994, consolidated selling and administrative expenses totaled
$8,796,000, or 9.9% of net sales, compared to $7,936,000, or 10.6% of net
sales, in 1993. Selling and administrative expenses of the Rubber Group
increased to $3,694,000, or 7.9% of net sales, during 1994, compared to
$3,166,000, or 7.8% of net sales, during 1993, primarily as a result of the
addition of sales and administrative personnel. Selling and administrative
expenses of the Metals Group increased to $3,284,000, or 7.9% of net sales,
during 1994, compared to $2,894,000, or 8.4% of net sales, during 1993.
Increased sales of products subject to sales commissions and increased
advertising costs were more than offset by efficiencies related to increased
volume. Corporate office administrative expenses decreased by $58,000, or
3.1%, primarily as a result of reduced legal fees. During 1993, corporate
office administrative expenses included $730,000 of expenses recorded in
connection with the Company's restructuring of its 12-3/4% Subordinated Notes
and 14% Convertible Notes which were partially offset by a credit of $215,000
resulting from the settlement of litigation. Effective for 1994, the Company
determined that amortization of the excess of cost over net assets of
businesses acquired (goodwill) should be classified as part of selling and
administrative expenses. Previously, amortization of goodwill had been
classified as other expense. Prior period presentations have been reclassified
to conform to the current year's presentation. During each of the years
presented, amortization of goodwill totaled $316,000.
INTEREST EXPENSE
Interest expense totaled $6,272,000 during 1994, an increase of $776,000
compared to 1993. This increase was caused primarily by an increase of
approximately $7,690,000 in average borrowings outstanding under the Working
Capital Facility and an increase in the weighted average rate of interest
charged on the Working Capital Facility due to increases in the Prime rate
which more than offset interest rate reductions negotiated by the Company.
OTHER INCOME
During 1994, other income consisted of a realized gain of $336,000 on
the sale of marketable securities and a gain of $200,000 from the sale of real
estate in connection with the settlement of litigation.
PROVISION FOR INCOME TAXES
The provisions for income tax otherwise recognizable during 1994 and
1993 were reduced by the utilization of portions of the Company's tax loss and
tax credit carryforwards. For information concerning income tax expense and
the utilization of tax loss and tax credit carryforwards, see Note 10 to the
Consolidated Financial Statements in Part II, Item 8.
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1993 VERSUS 1992
NET SALES
A summary of the net sales for the Rubber Group and the Metals Group
follows (dollar amounts in thousands):
PERCENTAGE
1993 1992 INCREASE
------- ------- --------
Rubber Group $40,388 $33,228 21.5%
Metals Group 34,588 31,973 8.2
------- ------- ----
$74,976 $65,201 15.0%
======= ======= ====
Net sales of the Rubber Group increased by $7,160,000 in 1993. Net
sales to automotive customers increased by 25.9%, primarily as a result of
increased net sales of cable and connector seals to Delphi Packard Electric,
increased net sales of rubber insulators for ignition wire harnesses and
increased tooling sales.
Net sales of the Metals Group increased by $2,615,000 in 1993, primarily
due to a 50.6% increase in net sales to TRW VSSI of component parts used in
automotive airbag systems.
COST OF SALES
A summary of the cost of sales (in thousands of dollars and as a
percentage of net sales) for the Rubber Group and the Metals Group follows:
1993 1992
------------ ------------
Rubber Group $33,280 82.4% $27,964 84.2%
Metals Group 27,413 79.3 25,922 81.1
------- ---- ------- ----
$60,693 80.9% $53,886 82.6%
======= ==== ======= ====
Cost of sales of the Rubber Group as a percentage of net sales decreased
in 1993 primarily because of reduced direct labor and material costs as
percentages of net sales at certain of the Group's facilities resulting
primarily from the upgrading of the Group's manufacturing capacity through the
purchase of new rubber molding presses and tooling, the rebuilding of existing
molding presses and the introduction of improved manufacturing processes. This
was offset in part by increased factory overhead costs as a percentage of net
sales resulting principally from increased depreciation relating to the
installation and operation of new or refurbished equipment and increased
maintenance and repair expenses.
Cost of sales of the Metals Group as a percentage of net sales decreased
in 1993 from 1992 primarily because of (1) a provision recorded during the
fourth quarter of 1992 in the amount of $213,000 for the costs to close and
hold for disposition a manufacturing facility located in Silver Springs, New
York, and to consolidate the operations conducted at the Silver Springs
facility into the Company's manufacturing facility located in Rochester, New
York, and (2) reduced direct labor and material costs as percentages of net
sales resulting from a favorable change in the mix of products sold.
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SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative expenses decreased by 26.3% in 1993 from 1992
primarily because 1992 results included a charge of $2,132,000 to write off the
unamortized portion, as of December 31, 1992, of covenants not to compete and
$1,113,000 of amortization of the covenants not to compete. Selling and
administrative expenses in 1993 included $730,000 of expenses recorded in
connection with the restructuring of substantially all of the Company's
indebtedness in January 1994. Partially offsetting these restructuring
expenses was a credit of $215,000 resulting from the settlement of a commercial
claim.
INTEREST EXPENSE
Interest expense totaled $5,496,000 during 1993, an increase of $455,000
compared to 1992. Interest expense increased due to the accrual of interest on
the pro forma issuance, effective February 1, 1993, of $6,445,000 principal
amount of 12-3/4% Senior Subordinated Notes and $277,000 principal amount of
14% Non-Convertible Notes in connection with the Company's debt restructuring,
which was completed in January 1994. This increase was offset in part by
reduced interest expense on the Working Capital Facility and other secured
indebtedness due to lower average borrowings.
PROVISION FOR INCOME TAXES
The provisions for income tax otherwise recognizable during 1993 and
1992 were reduced by the utilization of portions of the Company's tax loss and
tax credit carryforwards. For information concerning income tax expense and
the utilization of the tax loss and tax credit carryforwards, see Note 10 to
the Consolidated Financial Statements in Part II, Item 8.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS ADOPTED DURING 1994 AND 1993
FINANCIAL ACCOUNTING STANDARD NO. 106
Effective January 1, 1993, the Company changed its method of accounting
for postretirement benefits other than pensions from the cash basis
(recognizing expense as benefits are paid) to the accrual method (recognizing
the estimated cost of providing retiree health and welfare benefits as an
expense while the employee renders service) as required by "Financial
Accounting Standard No. 106, Employers' Accounting for Postretirement Benefits
Other Than Pensions" ("FAS 106"). The adoption of FAS 106 did not materially
affect the financial position or operating results of the Company. (See also
Note 9 to the Consolidated Financial Statements in Part II, Item 8.)
On January 1, 1993, the Company's accumulated postretirement benefit
obligation (the "transition obligation") totaled $692,000. The Company is
amortizing the transition obligation over the remaining life expectancy of the
participants (i.e., an annual rate of $57,000). During 1993, the adoption of
FAS 106 reduced earnings before income taxes by approximately $61,000.
As of December 31, 1994, the Company increased the discount rate used to
calculate the obligation for its postretirement benefit plan from 7-1/4% to
8-1/4%, in recognition of higher prevailing long-term interest rates. The
effect of the change in discount rate on 1995 postretirement benefit costs will
not be material. The determination of postretirement benefit costs beyond 1995
will depend on various factors, including long-term interest rates, health care
cost trend rates, other actuarial assumptions, benefit levels, and demographic
changes.
-17-
20
FINANCIAL ACCOUNTING STANDARD NO. 109
Effective January 1, 1993, the Company changed its method of accounting
for income taxes from the deferred method to the liability method as required
by "Financial Accounting Standard No. 109, Accounting for Income Taxes" ("FAS
109"). In accordance with the provisions of FAS 109, the Company has recorded
deferred tax assets and deferred tax liabilities.
As a result of losses incurred in 1992, 1991 and 1990, at January 1,
1993 the Company recorded a valuation allowance equal to 100% of its net
deferred tax position. Accordingly, the adoption of FAS 109 did not affect the
Company's operating results during 1993. As permitted by FAS 109, prior year
financial statements have not been restated. (See also Note 10 to the
Consolidated Financial Statements in Part II, Item 8.)
FINANCIAL ACCOUNTING STANDARD NO. 112
Effective January 1, 1994, the Company changed its method of accounting
for post-employment benefits, such as company funded disability benefits, from
the cash basis (recognizing expense as benefits are paid) to the accrual method
(recognizing the estimated cost of providing such benefits as an expense while
the employee renders service) as required by "Financial Accounting Standards
No. 112, Employers' Accounting for Postemployment Benefits" ("FAS 112"). The
adoption of FAS 112 did not have any effect on the Company's financial position
or results of operations because benefits of this type currently provided by
the Company are de minimis in amount.
FINANCIAL ACCOUNTING STANDARD NO. 115
Effective January 1, 1994, the Company adopted "Financial Accounting
Standard No. 115, Accounting for Certain Investments in Debt and Equity
Securities" ("FAS 115"), which required the Company to carry its marketable
equity securities at fair value. The adoption of FAS 115 did not affect the
financial position or operating results of the Company.
INFLATION
The Company believes that, during 1994, 1993 and 1992, the impact of
inflation on the Company's manufacturing and selling and administrative costs
has been minimal. To the extent practicable, fluctuations in material costs
relating to existing components typically are passed through to customers.
Although the Company may, in certain cases, commit to a fixed material cost for
an agreed upon time period, generally a similar, offsetting commitment is made
to the Company by its material supplier. In recent years, inflationary
increases in salaries, wages, benefits and other expenses have been
substantially offset by improvements in manufacturing processes and by
adjustments to quoted prices.
ENVIRONMENTAL AND OTHER LEGAL MATTERS
The Company has been named one of numerous potentially responsible
parties, under CERCLA for restoration costs at three waste disposal sites, a
third-party defendant in cost recovery actions initiated by the EPA pursuant to
applicable sections of CERCLA and as a defendant or potential defendant in
various legal matters. It is the Company's policy to record accruals for such
matters when losses are deemed probable and the amount of such loss can be
reasonably estimated. The various actions to which the Company is or may be a
party in the future are at various stages of completion and, although there can
be no assurance as to the outcome of existing or potential litigation, in the
event such litigation were instituted,
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21
based upon the information currently available to the Company, the Company
believes that the outcome of such actions would not have a material adverse
effect upon the financial position of the Company.
(For additional information concerning environmental and other legal
matters, see "Business" in Part I, Item 1, and "Legal Proceedings" in Part I,
Item 3.)
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
TABLE OF CONTENTS
Page
----
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . 21
Consolidated Balance Sheets as of December 31, 1994 and 1993 . . . . . . . . . . 22
Consolidated Statements of Operations for the Years Ended
December 31, 1994, 1993 and 1992 . . . . . . . . . . . . . . . . . . . . . . . 24
Consolidated Statements of Stockholders' Deficit for
the Years Ended December 31, 1994, 1993 and 1992 . . . . . . . . . . . . . . . 25
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1994, 1993 and 1992 . . . . . . . . . . . . . . . . . . . . . . . 26
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . 28
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23
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Lexington Precision Corporation and Subsidiary
We have audited the accompanying consolidated balance sheets of
Lexington Precision Corporation and subsidiary as of December 31, 1994 and
1993, and the related consolidated statements of operations, stockholders'
deficit, and cash flows for each of the three years in the period ended
December 31, 1994. Our audits also included the financial statement schedule
listed in the table of contents in Part IV, Item 14(a). These financial
statements and schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Lexington Precision Corporation and subsidiary at December 31, 1994 and
1993, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1994, in conformity
with generally accepted accounting principles. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
financial statements as a whole, presents fairly in all material respects the
information set forth therein.
As discussed in the notes to consolidated financial statements,
effective January 1, 1993, the Company changed its methods of accounting for
income taxes and postretirement benefits other than pensions.
ERNST & YOUNG LLP
Cleveland, Ohio
February 28, 1995
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24
LEXINGTON PRECISION CORPORATION
CONSOLIDATED BALANCE SHEETS
(THOUSANDS OF DOLLARS)
DECEMBER 31,
------------------------
1994 1993
--------- ---------
ASSETS:
Current assets:
Cash $ 79 $ 33
Accounts recievable 12,478 9,094
Inventories 8,237 5,779
Prepaid expenses and other current assets 1,958 809
--------- ---------
Total current assets 22,752 15,715
--------- ---------
Property, plant and equipment:
Land 823 658
Buildings 12,274 11,348
Equipment 46,516 33,808
--------- ---------
59,613 45,814
Less accumumulated depriciation 27,019 23,721
--------- ---------
Property, plant and equipment, net 32,594 22,093
Excess of costs over net assets of businesses acquired, net 10,041 10,357
Other assets, net 2,009 1,818
--------- ---------
$ 67,396 $ 49,983
========= =========
See notes to consolidated financial statements. (Continued)
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LEXINGTON PRECISION CORPORATION
CONSOLIDATED BALANCE SHEETS (CONT.)
(THOUSANDS OF DOLLARS)
DECEMBER 31,
-------------------------
1994 1993
---- ----
LIABILITIES AND STOCKHOLDERS' DEFICIT:
Current liabilities:
Accounts payable $ 10,489 $ 4,452
Accrued expenses 6,289 6,477
Short-term debt 5,052 -
Current portion of long-term debt 2,599 1,804
---------- ---------
Total current liabilities 24,429 12,733
---------- ---------
Long-term debt, excluding current portion 49,627 46,273
---------- ---------
Redeemable preferred stock, $100 par value,
at redemption value 1,110 1,200
Less excess of redemption value over par value 555 600
---------- ---------
Redeemable preferred stock at par value 555 600
---------- ---------
Stockholders' deficit:
Common stock, $.25 par value, 10,000,000
shares authorized, 4,348,951 shares issued 1,087 1,087
Additional paid-in-capital 12,659 12,975
Accumulated deficit (20,593) (22,925)
Cost of common stock in treasury, 145,915 and
300,915 shares, respectively (368) (760)
---------- ---------
Total stockholders' deficit (7,215) (9,623)
---------- ---------
$ 67,396 $ 49,983
========== =========
See notes to consolidated financial statements.
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LEXINGTON PRECISION CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
Years Ended December 31,
--------------------------------------
1994 1993 1992
--------- -------- ---------
Net sales $ 88,532 $ 74,976 $ 65,201
--------- -------- ---------
Costs and expenses:
Cost of sales 71,634 60,693 53,886
Selling and administrative expenses 8,796 7,936 10,767
--------- -------- ---------
Total costs and expenses 80,430 68,629 64,653
--------- -------- ---------
Income from operations 8,102 6,347 548
Interest expense 6,272 5,496 5,041
Other income 536 - -
--------- -------- ---------
Income/(loss) before income taxes 2,366 851 (4,493)
Provision for income taxes 34 - -
--------- -------- ---------
Net income/(loss) $ 2,332 $ 851 $ (4,493)
========= ======== =========
Net income/(loss) per primary and fully diluted
common share:
Primary $ .53 $ .13 $ (1.11)
========= ======== =========
Fully diluted $ .51 $ .13 $ (1.11)
========= ======== =========
See notes to consolidated financial statements.
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LEXINGTON PRECISION CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(THOUSANDS OF DOLLARS)
ADDITIONAL TOTAL
COMMON PAID-IN ACCUMULATED TREASURY STOCKHOLDERS'
STOCK CAPITAL DEFICIT STOCK DEFICIT
----- ------- ------- ----- -------
Balance at January 1, 1992 $ 1,087 $ 13,286 $ (19,323) $ (760) $ (5,710)
Net loss - - (4,493) - (4,493)
Deferred compensation expense
on restricted stock - - 33 - 33
-------- -------- --------- -------- ----------
Balance at December 31, 1992 1,087 13,286 (23,783) (760) (10,170)
Net income - - 851 - 851
Preferred stock dividends
and redemptions - (311) - - (311)
Deferred compensation expense
on restricted stock - - 7 - 7
-------- -------- --------- -------- ----------
Balance at December 31, 1993 1,087 12,975 (22,925) (760) (9,623)
Net income - - 2,332 - 2,332
Preferred stock dividends
and redemptions - (92) - - (92)
Issuance of common shares - (224) - 392 168
-------- -------- --------- -------- ----------
Balance at December 31, 1994 $ 1,087 $ 12,659 $ (20,593) $ (368) $ (7,215)
======== ======== ========= ======== ==========
See notes to consolidated financial statements.
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LEXINGTON PRECISION CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(THOUSANDS OF DOLLARS)
YEARS ENDED DECEMBER 31,
--------------------------------------
1994 1993 1992
---- ---- ----
OPERATING ACTIVITIES:
Net income/(loss) $ 2,332 $ 851 $ (4,493)
Adjustments to reconcile net income/(loss) to net cash
provided by operating activities:
Depreciation and amortization 5,060 4,297 5,050
Gain on sale of marketable equity securities (336) - -
Gain on sale of real estate (200) - -
Write-off of covenants not to compete - - 2,132
Changes in operating assets and liabilities which
provided/(used) cash:
Receivables (3,399) (1,672) 908
Inventories (2,488) (348) 64
Prepaid expenses and other current assets (1,149) 529 (200)
Accounts payable 6,037 32 (1,384)
Accrued expenses (110) 5,844 3,326
Other 210 68 51
--------- --------- --------
Net cash provided by operating activities 5,957 9,601 5,454
--------- --------- --------
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (15,319) (6,288) (2,235)
Decrease/(increase) in equipment deposits, net 36 (575) (315)
Sales of property, plant and equipment 614 5 57
Sale of marketable securities 338 - -
Other (635) (373) (177)
--------- --------- --------
Net cash used by investing activities (14,966) (7,231) (2,670)
--------- --------- --------
See notes to consolidated financial statements. (Continued)
-26-
29
LEXINGTON PRECISION CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONT.)
(THOUSANDS OF DOLLARS)
YEARS ENDED DECEMBER 31,
--------------------------------------
1994 1993 1992
---- ---- ----
FINANCING ACTIVITIES:
Proceeds from/(repayment of) revolving loans, net 5,052 498 (973)
Proceeds from issuance of long-term debt 9,847 - -
Repayment of long-term debt (5,735) (2,421) (1,938)
Redemption of preferred stock (90) (270) -
Preferred stock dividends (47) (176) -
Issuance of common stock 90 - -
Other (62) - -
--------- -------- ---------
Net cash provided/(used) by financing activities 9,055 (2,369) (2,911)
--------- -------- ---------
Net increase/(decrease) in cash 46 1 (127)
Cash at beginning of year 33 32 159
--------- -------- ---------
Cash at end of year $ 79 $ 33 $ 32
========= ======== =========
Supplemental disclosure of cash flow information:
Interest paid $ 9,779 $ 1,134 $ 1,489
Income taxes paid $ 26 $ - $ -
Supplemental disclosure of noncash financing activities:
Accrued interest converted to long-term debt $ - $ 10,525 $ -
Issuance of 100,000 shares of common stock in exchange
for investment banking services $ 78 $ - $ -
See notes to consolidated financial statements.
-27-
30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Lexington
Precision Corporation and its wholly-owned subsidiary (collectively, the
"Company"). All significant intercompany accounts and transactions have been
eliminated.
CONCENTRATION OF CREDIT RISK
As of December 31, 1994 and 1993, trade accounts receivable outstanding
from automotive customers totaled $7,904,000 and $5,364,000, respectively. The
Company provides for credit losses based upon historical experience and ongoing
credit evaluations of its customers' financial condition but does not generally
require collateral from its customers to support the extension of trade credit.
As of December 31, 1994 and 1993, the Company had reserves for credit losses of
$174,000 and $159,000, respectively.
INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out method)
or market. Inventory levels by principal classification are set forth below
(in thousands of dollars):
DECEMBER 31,
-------------------
1994 1993
------- -------
Finished goods $ 2,696 $ 1,737
Work in process 2,285 2,012
Raw materials and purchased parts 3,256 2,030
------- -------
$ 8,237 $ 5,779
======= =======
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are carried at cost less accumulated
depreciation. Depreciation is calculated principally on the straight-line
method over the estimated useful life of the various assets (15 to 32 years for
buildings and 3 to 10 years for equipment). Maintenance and repair expenses
were $2,484,000, $2,189,000 and $1,395,000 for 1994, 1993 and 1992,
respectively. Maintenance and repair expenses are charged against income as
incurred, while major improvements are capitalized. When property is retired
or otherwise disposed of, the related cost and accumulated depreciation are
eliminated.
EXCESS OF COST OVER NET ASSETS OF BUSINESSES ACQUIRED
Excess of cost over the net assets of businesses acquired (goodwill) is
amortized on the straight-line method, principally over 40 years. As of
December 31, 1994 and 1993, accumulated amortization of goodwill was $1,948,000
and $1,632,000, respectively. Effective for 1994, the Company determined that
amortization of goodwill should be classified as part of selling and
administrative expenses. Previously, amortization of goodwill had been
classified as other expense. Prior period presentations have been reclassified
to conform to the current year's presentation. During each of the periods
presented, amortization
-28-
31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
of goodwill totaled $316,000. The carrying value of goodwill is reviewed
quarterly using an analysis of historical and projected operating performance
of the business to which the goodwill relates. Based upon such analysis, the
Company believes that no impairment of goodwill existed as of December 31,
1994.
INCOME PER SHARE
Income per common and dilutive common equivalent share were computed
based upon the weighted average number of common shares and dilutive common
equivalent shares outstanding. For purposes of the income per share
calculations, income for each period was reduced by preferred stock dividends
and by the amount by which payments made to redeem shares of the Company's $8
Cumulative Convertible Redeemable Preferred Stock, Series B (the "Redeemable
Preferred Stock"), exceeded the par value of such shares. Common equivalent
shares were those shares issuable upon the assumed exercise of outstanding
stock options and conversion of Redeemable Preferred Stock, calculated using
the treasury stock method. Fully diluted income per share assumes conversion
of the 14% Junior Subordinated Convertible Notes, due May 1, 2000 (the "14%
Convertible Notes"), if dilutive.
REPORTING OF CASH FLOWS
The Company considers all highly liquid investments with maturities at
the time of purchase of less than three months to be cash equivalents.
RECLASSIFICATIONS
Certain amounts in the consolidated financial statements for 1993 and
1992 have been reclassified to conform to the statement presentation for 1994.
NOTE 2 -- OTHER CURRENT ASSETS
As of December 31, 1994 and 1993, other current assets included
$1,242,000 and $237,000, respectively, of tooling acquired by the company for
certain customers. Upon customer approval of the components produced from such
tooling, which normally takes less than 90 days, the customer is required to
purchase the tooling from the Company.
NOTE 3 -- OTHER NONCURRENT ASSETS
As of December 31, 1994 and 1993, other noncurrent assets included
$797,000 and $438,000, respectively, which represented amounts paid by the
Company for tooling owned by the Company's customers in excess of the amounts
paid by the customers for such tooling. Such excess amounts are amortized over
periods not exceeding three years. During 1994 and 1993, amortization expense
related to tooling owned by customers but funded by the Company was $272,000
and $115,000, respectively.
NOTE 4 -- SHORT-TERM DEBT
As of December 31, 1994, short-term debt consisted of $5,052,000 of
revolving loans outstanding under the Company's borrowing arrangement (the
"Working Capital Facility") with its working capital lender (the "Working
Capital Lender"). Although the revolving loans, as amended in January 1995,
have a maturity date of January 2, 1998, the revolving loans have been
classified as short-term debt as of
-29-
32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994 because the Company's cash receipts are automatically used to
reduce the revolving loans on a daily basis, by means of a lock-box sweep
arrangement, and the Working Capital Lender has the ability to modify certain
terms of the revolving loan financing agreements without the prior approval of
the Company.
At December 31, 1994, 1993 and 1992, the interest rate on borrowings
under the revolving line of credit was 10.0%, 7.5% and 8.5%, respectively.
(Also see Note 6, Long-Term Debt.)
NOTE 5 -- ACCRUED EXPENSES
Accrued expenses are summarized below (in thousands of dollars):
DECEMBER 31,
--------------------
1994 1993
---- ----
Employee fringe benfits $ 1,744 $ 897
Accured interest 1,716 1,715
Salaries and wages 976 1,086
Taxes 523 617
Preferred dividends and redemptions - 446
Other 1,330 1,716
------ ------
$ 6,289 $ 6,477
====== ======
-30-
33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 -- LONG TERM DEBT
Long-term debt is summarized below (in thousands of dollars):
DECEMBER 31,
---------------------
1994 1993
---- ----
Long-term portion of Working Capital Facility:
Revolving loans, converted to term loans in January 1995,
payable in monthly installments through 2002 $ 7,267 $ --
Revolving loans, as amended in January 1994 -- 5,888
Term loans, as amended in January 1995,
payable in monthly installments through 2002 8,029 --
Term loans payable in monthly installments
through 1995 -- 1,004
12% Term Note, payable in monthly installments through 2000 3,078 3,471
Industrial Revenue Bond, 75% of prime, payable in monthly
installments through 2000 598 698
12-3/4% Senior Subordinated Notes, due 2000 31,647 --
12-3/4% Subordinated Notes due 1997:
Principal exchanged in January 1994 for
12-3/4% Senior Subordinated Notes -- 25,167
Interest exchanged in January 1994 for
12-3/4% Senior Subordinated Notes -- 6,445
Interest paid in January 1994 with proceeds
from term loans -- 3,634
14% Junior Subordinated Convertible Notes, due 2000:
Principal 1,000 1,000
Interest exchanged in January 1994 for
14% Junior Subordinated Non-Convertible Notes -- 347
Interest paid in January 1994 with proceeds
from term loans -- 99
14% Junior Subordinated Non-Convertible Notes, due 2000 347 --
Other 260 324
------- ------
Total long-term debt 52,226 48,077
Less current portion 2,599 1,804
------- ------
Total long-term debt, excluding current portion $ 49,627 $ 46,273
======= =======
- 31 -
34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
WORKING CAPITAL FACILITY
As of December 31, 1994 and 1993, the Working Capital Facility
consisted of loans outstanding under a revolving line of credit and term loans.
At December 31, 1994, the long-term portion of the Working Capital Facility
consisted of $8,029,000 of term loans and $7,267,000 of revolving loans which
were converted into new term loans in January 1995. In January 1995, the
Working Capital Facility was further amended to, among other things, increase
the company's maximum borrowing availability from $25,000,000 to $40,000,000,
subject to availability formulas set by the Working Capital Lender, convert
$7,873,000 of term loans and $7,267,000 of revolving loans into new term loans
in the aggregate amount of $15,140,000 payable in 84 monthly principal
installments of $181,000 each, reduce the rate of interest charged on loans
outstanding under the Working Capital Facility from Prime plus 1-1/2% to either
Prime plus 1% or the London Interbank Offered Rate plus 3-1/4% and revise a
financial covenant. As amended, the Working Capital Facility includes a line
(the "Equipment Line") of $11,300,000 which, subject to availability formulas
set by the Working Capital Lender, can be used to finance a portion of the
purchase price of new equipment. If utilized, borrowings under the equipment
line will convert to term loans which will be payable in equal monthly
principal installments through February 1, 2002. As of March 1, 1995, the
Company had borrowings of $23,943,000 outstanding under the Working Capital
Facility and had approximately $3,097,000 of unused availability, without
giving effect to new borrowings which are expected to be available under the
Equipment Line to finance purchases of new equipment.
Under the terms of the Working Capital Facility the Company is
required, among other things, to maintain at all times working capital,
exclusive of amounts borrowed under the Working Capital Facility which are
classified as current liabilities, of not less than $1,000,000 and net worth of
not less than negative $9,500,000.
Amounts outstanding under the Working Capital Facility are
collateralized by substantially all of the accounts receivable, inventory,
equipment and other personal property and certain real property of the Company.
12% TERM NOTE
The 12% Term Note, due April 30, 2000 (the "12% term note"), is
payable by the Company's wholly-owned subsidiary, Lexington Components, Inc.
("LCI"), is secured by a mortgage on the premises of LCI's Rock Hill, South
Carolina, facility and is guaranteed by the Company. Level payments of
principal and interest in the amount of $66,000 are due monthly until the 12%
Term Note is paid in full.
12-3/4% SENIOR SUBORDINATED NOTES AND 12-3/4% SUBORDINATED NOTES
The 12-3/4% Senior Subordinated Notes, due 2000 (the "12-3/4% Senior
Subordinated Notes"), are unsecured obligations of the Company, redeemable at
the option of the Company, in whole or in part, at a declining premium over the
principal amount thereof. Interest on the 12-3/4% Senior Subordinated Notes is
due semi-annually on February 1 and August 1. In January 1994, in connection
with the restructuring of substantially all of the Company's indebtedness, the
Company issued $31,720,000 principal amount of the 12-3/4 % Senior Subordinated
Notes to the holders of the Company's 12-3/4% Subordinated Notes, due February
1, 1997 (the "12-3/4 Subordinated Notes"), in exchange for $25,275,000
principal amount of the 12-3/4% Subordinated Notes and accrued but unpaid
interest on the 12-3/4% Subordinated Notes in the amount of $6,445,000.
-32-
35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14% NOTES
The 14% Junior Subordinated Convertible and Non-Convertible Notes, due
May 1, 2000 (collectively the "14% Notes"), are unsecured obligations of the
Company and are redeemable at the option of the Company, in whole or in part,
at a declining premium over the principal amount thereof. Interest on the 14%
Notes is due quarterly on February 1, May 1, August 1 and November 1. the 14%
Convertible Notes are convertible into 440,000 shares of the Company's common
stock.
The holders of the 14% Notes are the Chairman of the Board and the
President of the Company, each of whom has a controlling equity interest in the
Company. As of December 31, 1994, the Chairman and the President held 14%
Notes in the amounts of $680,000 and $667,000, respectively.
RESTRUCTURING OF INDEBTEDNESS
In January 1994, the Company completed the restructuring of the
12-3/4% Subordinated Notes, the 14% Convertible Notes, the Working Capital
Facility and a certain industrial revenue bond. The restructuring eliminated
all defaults that existed at December 31, 1993. Accordingly, obligations
previously classified as current liabilities due to the defaults were
reclassified as long-term liabilities as of December 31, 1993.
RESTRICTIVE COVENANTS
Certain of the Company's loan agreements contain covenants restricting
the Company's business and operations, including restrictions on the issuance
or assumption of additional debt, the sale of all or substantially all of the
Company's assets, the purchase of common stock, the redemption of preferred
stock and the payment of cash dividends and prohibitions against any material
adverse change in the Company's business, assets or financial condition.
SCHEDULED MATURITIES OF LONG-TERM DEBT
Maturities of long-term debt for the five-year period ending December
31, 1999 and for the years thereafter are listed below (in thousands of
dollars):
1995 $ 2,599
1996 2,782
1997 2,846
1998 2,919
1999 3,001
Thereafter 38,079
---------
$ 52,226
=========
-33-
36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 -- PREFERRED STOCK
REDEEMABLE PREFERRED STOCK
Each share of $8 Cumulative Convertible Redeemable Preferred Stock,
Series B, is (1) entitled to one vote, (2) redeemable for $200 plus accumulated
unpaid dividends, (3) convertible into 14.8148 shares of common stock (subject
to adjustment) and (4) entitled, upon voluntary or involuntary liquidation and
after payment of the debts and other liabilities of the Company, to a
liquidation preference of $200 plus accumulated and unpaid dividends. On
November 30, 1994, 450 shares of Redeemable Preferred Stock were redeemed for
$90,000. Further redemptions of $90,000 are scheduled on November 30 of each
year in order to annually retire 450 shares of Redeemable Preferred Stock.
Scheduled redemptions for the years 1995 through 1999 total $450,000. For
accounting purposes, when such stock is redeemed, the redeemable preferred
stock account is reduced by the $100 par value of each share redeemed and
paid-in-capital is charged for the $100 excess of redemption value over par
value of each share redeemed. Under the terms of the Redeemable Preferred
Stock, the Company may not declare any cash dividends on its common stock if
there exists a dividend arrearage on the Redeemable Preferred Stock. During
1994, the Company paid the holders of the Redeemable Preferred Stock regular
dividends aggregating $8.00 per share and past due dividends aggregating $24.00
per share which had been accrued by the Company as of December 31, 1993.
OTHER AUTHORIZED PREFERRED STOCK
The Company's Restated Certificate of Incorporation provides that the
Company is authorized to issue 2,500 shares of 6% Cumulative Convertible
Preferred Stock, Series A, $100 par value ("Series A Preferred Stock"). As of
December 31, 1994 and 1993, no shares of the Series A Preferred Stock were
issued or outstanding.
The Company's Restated Certificate of Incorporation also provides that
the Company is authorized to issue 2,500,000 shares of Preferred Stock having a
par value of $1 per share. As of December 31, 1994 and 1993, no shares of the
preferred stock, $1 par value, were issued or outstanding.
NOTE 8 -- COMMON STOCK
COMMON STOCK, $.25 PAR VALUE
As of December 31, 1994 and 1993, there were 4,203,036 and 4,048,036
shares, respectively, of the Company's common stock outstanding and 410,000 and
475,000 shares, respectively, reserved for issuance under the Company's
Incentive Stock Option and Restricted Stock Award Plans.
RESTRICTED STOCK AWARD PLAN
The Company has a Restricted Stock Award Plan pursuant to which the
Company may award restricted shares of common stock to officers and key
employees. Plan participants are entitled to receive cash dividends (if any)
and to vote their respective shares. The restricted shares vest at a rate set
by the Compensation Committee of the Company's Board of Directors which has
generally set the rate at 25% per year on each of the four anniversary dates
subsequent to the award date. Unless otherwise amended, the Restricted Stock
Award Plan expires on December 31, 2001.
-34-
37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During 1994, 1993 and 1992, no shares of restricted common stock were
awarded. As of December 31, 1994 and 1993, 350,000 shares of common stock were
available for grant under the terms of the Restricted Stock Award Plan.
INCENTIVE STOCK OPTION PLAN
The Company has an Incentive Stock Option Plan that provides for
grants to officers and key employees of options to purchase shares of the
Company's common stock. The exercise prices of the options granted thereunder
are established at the date of grant at prices not less than the market price
of the Company's common stock on the date of grant. As of December 31, 1994,
options for 60,000 shares were outstanding and no options were available for
future grant.
Activity in the Company's Incentive Stock Option Plan for 1994 and
1993 is summarized below:
OPTION PRICE
OR SHARES
PRICE RANGE UNDER OPTION
------------- --------------
Outstanding at January 1, 1993 $.63 to $1.63 130,000
Granted None
Exercised None
Terminated $1.28 5,000
-------
Outstanding at December 31, 1993 $.63 to $1.63 125,000
Granted None
Exercised $1.63 55,000
Terminated $1.63 10,000
-------
Outstanding at December 31, 1994 $.63 to $1.63 60,000
=======
As of December 31, 1994 and 1993, options for 51,250 and 98,750
shares, respectively, were exercisable.
NOTE 9 -- EMPLOYEE BENEFIT PLANS
RETIREMENT AND SAVINGS PLAN
The Company maintains a retirement and savings plan (the "Plan")
pursuant to section 401 of the Internal Revenue Code (i.e., a 401(k) plan).
All employees of the Company are entitled to participate in the Plan after
meeting the eligibility requirements. Generally, employees may contribute up
to 15% of their annual compensation but not more than prescribed amounts as
established by the United States Secretary of the Treasury. Employee
contributions, up to a maximum of 6% of an employee's compensation, are matched
50% by the Company. During 1994, 1993 and 1992, provisions for company
matching contributions totaled approximately $339,000, $296,000 and $248,000,
respectively. In addition, the Company has the option of making a profit
sharing contribution to the Plan. The size of the profit sharing contribution
is set annually at the end of each Plan year by the Company's Board of
Directors. Provisions
-35-
38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
recorded for profit sharing contributions authorized by the Company's Board of
Directors totaled $370,000, $334,000 and $153,000 during 1994, 1993 and 1992,
respectively. The Company's matching and profit sharing contributions vest
over a seven-year period, with 20% vesting after three years of service and an
additional 20% vesting for each year of service thereafter until fully vested.
INCENTIVE COMPENSATION PLAN
The Company has incentive compensation plans which provide for the
payment of cash bonus awards to certain officers and key employees of the
Company. The Compensation Committee (the "Committee") of the Company's Board
of Directors, which consists of two directors who are not employees of the
Company, oversees the administration of the plans. Cash bonus awards, which
are subject to the approval of the Committee, are based upon prescribed
formulae relating to the attainment of predetermined consolidated and
divisional operating profit and sales targets and the achievement of other
objectives. The amounts charged against operations for bonus expense totaled
$214,000, $386,000 and $103,000 during 1994, 1993 and 1992, respectively.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company maintains programs to fund certain costs related to a
prescription drug card program for retirees of one of its former divisions and
to fund certain insurance premiums for retirees of one of its divisions.
Effective January 1, 1993, the Company adopted "Financial Accounting
Standard No. 106, Employers' Accounting For Postretirement Benefits Other Than
Pensions" ("FAS 106"). As a result, during 1994 and 1993, the Company
recognized the estimated future cost of providing retiree health and welfare
benefits as an expense while employees render service. in 1993, the adoption
of FAS 106 reduced earnings before income taxes by approximately $61,000.
As of January 1, 1993, the Company's accumulated postretirement benefit
obligation (the "transition obligation") totaled $692,000. The Company is
amortizing the transition obligation over the remaining life expectancy of the
participants (i.e., an annual rate of $57,000). During 1992, the Company's
cost of providing postretirement health care benefits (accounted for on a cash
basis) totaled $65,000.
-36-
39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the plan's funded status (in thousands of
dollars):
DECEMBER 31,
------------------
1994 1993
---- ----
Accumulated postretirement benefit obligation:
Retirees $ 469 $ 525
Fully eligible active plan participants 13 16
Other active plan participants 39 48
------ -------
521 589
Unrecognized net gain 156 107
Unrecognized transition obligation (578) (635)
------ -------
Accrued postretirement benefit cost $ 99 $ 61
====== =======
Net postretirement benefit cost:
Service cost $ 1 $ 1
Interest cost 41 54
Net amortization and deferral 46 57
------ -------
Net periodic postretirement benefit cost $ 88 $ 112
====== =======
The weighted-average annual assumed rate of increase in the per capita
cost of covered benefits for the prescription drug card program is 10.7% for
1995 and is assumed to decrease gradually to 6.45% in 2005. Changing the
assumed rate of increase in the prescription drug cost by one percentage point
in each year would not have a significant effect on the accumulated
postretirement benefit obligation. The Company's program to fund certain
insurance premiums for retirees of one of its divisions has a defined dollar
benefit and is therefore unaffected by increases in the health care cost trend
rates. The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 8.25% and 7.25% as of December 31, 1994
and 1993, respectively. The change in the discount rate at December 31, 1994,
reflects the higher prevailing interest rates.
NOTE 10 -- INCOME TAXES
Effective January 1, 1993, the Company changed its method of accounting
for income taxes from the deferred method to the liability method as required
by "Financial Accounting Standard No. 109, Accounting For Income Taxes" ("FAS
109"). The Company recorded a valuation allowance equal to 100% of its net
deferred tax asset at January 1, 1993. As a result, the adoption of FAS 109
did not affect the Company's results for 1993. As permitted by FAS 109, prior
year financial statements were not restated.
In accordance with the provisions of FAS 109, at December 31, 1994 and
1993, the Company has recorded deferred tax assets and deferred tax
liabilities. Deferred tax assets and liabilities recorded by the Company
reflect the tax effects of loss carryforwards, tax credit carryforwards and
temporary differences between the values of assets and liabilities for
financial reporting purposes and income tax purposes. The tax effects of loss
carryforwards, tax credit carryforwards and temporary differences existing at
-37-
40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994 and 1993 that gave rise to the deferred tax assets and
deferred tax liabilities are presented below (in thousands of dollars):
DECEMBER 31,
------------------
1994 1993
---- ----
Deferred tax assets:
Tax carryforwards:
Operating loss carryforwards $ 3,285 $ 3,512
Capital loss carryforwards 2,313 2,313
Investment tax credit carryforwards 341 366
Other tax credit carryforwards 127 101
--------- ---------
Total tax carryforwards 6,066 6,292
Asset loss reserves 254 428
Write-off of intangible assets - 347
Tax inventory over book 375 414
Deferred compensation liabilities 111 111
Vacation accruals 168 157
Non-economic performance accruals 179 84
Deferred financing costs 58 77
Other 10 8
--------- ---------
Total deferred tax assets 7,221 7,918
Valuation allowance (5,762) (6,918)
--------- ---------
Net deferred tax assets 1,459 1,000
Deferred tax liabilities -- tax over book depreciation 1,459 1,000
--------- ---------
Net deferred taxes $ - $ -
========= =========
Management of the Company believes, after reviewing the positive and
negative evidence available with respect to the realization of its net deferred
tax assets, that a valuation allowance equal to 100% of its net deferred tax
asset is appropriate. In 1994 and 1993, the change in the valuation allowance
was $1,156,000 and $835,000, respectively.
At December 31, 1994, the Company had net operating loss carryforwards
for federal income tax purposes of $8,319,000 that expire in the years 2004
through 2007. Capital loss carryforwards for federal income tax purposes
totaled $6,802,000 at December 31, 1994 and expire in 1995 and 1996. For
purposes of the Federal Alternative Minimum Tax, the Company essentially
utilized all of its Alternative Minimum Tax operating loss carryforward during
1994.
-38-
41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A reconciliation of income taxes at the United States federal statutory
rate to the effective income tax rate are summarized below (liability method of
accounting in 1994 and 1993 and deferred method of accounting in 1992):
1994 1993 1992
------ ------ ------
Statutory federal income tax rate on
income/(loss) before income taxes 34.0% 34.0% (34.0)%
Tax benefit not currently utilized -- -- 29.7
Goodwill 4.5 12.6 2.4
Other 1.8 4.4 1.9
Current year NOL Utilization (12.4) (39.1) --
Current year temporary differences (26.5) (11.9) --
------ ------ ------
Effective income tax rate 1.4% --% --%
====== ====== ======
NOTE 11 -- INDUSTRY SEGMENTS
Through its two business segments, the Rubber Group and the Metals
Group, the Company manufactures, to customer specifications, close tolerance
rubber and metal components. The Rubber Group manufactures silicone and organic
rubber components for sale primarily to manufacturers of automobiles,
automotive replacement parts and medical devices. The Metals Group
manufactures metal components for sale primarily to manufacturers of
automobiles, automotive replacement parts, industrial equipment, home
appliances and business machines.
During 1994, 1993 and 1992, net sales to automotive industry customers
totaled $53,005,000, $45,213,000 and $34,596,000, respectively, which
represented 59.9%, 60.3% and 53.1%, respectively, of the Company's total net
sales. The Company's three largest customers accounted for 39.7% 39.2% and
36.2% of net sales during the same respective periods. One customer of the
Company's Rubber Group accounted for 20.6%, 22.3% and 20.4% of the Company's
total net sales during the same respective periods. In addition, one customer
of the Metals Group accounted for 13.0%, 11.8% and 9.0% of the Company's total
net sales during such respective periods. Loss of a significant amount of
business from any of the Company's three largest customers could have a
material adverse effect on the Company's business.
-39-
42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Information relating to the Company's industry segments is summarized
below (in thousands of dollars):
1994 1993 1992
------- -------- --------
NET SALES:
Rubber Group $ 46,868 $ 40,388 $ 33,228
Metals Group 41,664 34,588 31,973
-------- -------- --------
NET SALES $ 88,532 $ 74,976 $ 65,201
======== ======== ========
INCOME/(LOSS) FROM OPERATIONS:
Rubber Group $ 3,860 $ 3,942 $ (840)
Metals Group 6,060 4,281 3,301
-------- -------- --------
Subtotal 9,920 8,223 2,461
Corporate expense 1,818 1,876 1,913
-------- -------- --------
Income from operations $ 8,102 $ 6,347 $ 548
======== ======== ========
IDENTIFIABLE ASSETS:
Rubber Group $ 42,013 $ 31,986 $ 27,728
Metals Group 25,025 17,531 16,899
-------- -------- --------
Subtotal 67,038 49,517 44,627
Corporate 358 466 957
-------- -------- --------
Total identifiable assets $ 67,396 $ 49,983 $ 45,584
======== ======== ========
DEPRECIATION AND AMORTIZATON EXPENSES:
Rubber Group $ 3,316 $ 2,440 $ 3,225
Metals Group 1,510 1,602 1,562
-------- -------- --------
Subtotal 4,826 4,042 4,787
Corporate 234 255 263
-------- -------- --------
Total depreciation and amortization
expenses $ 5,060 $ 4,297 $ 5,050
======== ======== ========
CAPITAL EXPENDITURES:
Rubber Group $ 8,651 $ 5,046 $ 1,377
Metals Group 6,656 1,225 833
-------- -------- --------
Subtotal 15,307 6,271 2,210
Corporate 12 17 25
-------- -------- --------
Total capital expenditures $ 15,319 $ 6,288 $ 2,235
======== ======== ========
During 1992, the Rubber Group's operating loss included $3,245,000 for the amortization and write-off of covenants not to
compete.
-40-
43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 -- INCOME PER SHARE
PRIMARY INCOME PER SHARE
Primary income per share is based upon the weighted average number of
common shares outstanding and, if dilutive, the common share equivalents
outstanding during each period. The weighted average number of common and
dilutive common equivalent shares used in the calculation of primary income per
share totaled 4,209,000 in 1994 and 4,048,000 in each of 1993 and 1992. For
purposes of the primary income per share calculations, net income for 1994 was
reduced by (1) $47,000 of dividends on Redeemable Preferred Stock and (2)
$45,000, the amount by which the payment made to effect the scheduled
redemption of 450 shares of Redeemable Preferred Stock exceeded the par value
of such shares. Net income for 1993 was reduced by (1) $176,000 of dividends
on Redeemable Preferred Stock and (2) $135,000, the amount by which the payment
made to effect the redemption of 1,350 shares of redeemable preferred stock
exceeded the par value of such shares. Net income for 1992 was not reduced by
preferred stock dividends or the redemption of preferred shares because the
Company did not pay any such dividends and did not redeem any of such shares.
FULLY DILUTED INCOME PER SHARE
Fully diluted income per share is based upon the total of the weighted
average number of common shares outstanding, the exercise or conversion of
common share equivalents, if dilutive, as of the beginning of each period or,
if later, their date of issuance and the conversion, as of the beginning of
each period, of $1,000,000 principal amount of 14% Convertible Notes, if
dilutive, into 440,000 shares of the Company's common stock. The weighted
average number of common and dilutive common equivalent shares used in the
calculation of fully diluted income per share totaled 4,666,000 in 1994 and
4,048,000 in each of 1993 and 1992. For purposes of the fully diluted income
per share calculations, net income for 1994 and 1993 was reduced to reflect
dividends on the Redeemable Preferred Stock and the amount by which payments
made to effect the redemption of Redeemable Preferred Stock exceeded the par
value of such shares. In addition, net income for 1994 was increased by
$140,000, net of applicable income taxes, to reflect the pro forma elimination
of interest expense on the 14% Convertible Notes. For 1993 and 1992, exercise
or conversion of common stock equivalents and the conversion of the 14%
Convertible Notes was not assumed because such exercise or conversion would
have been antidilutive.
NOTE 13 -- COMMITMENTS AND CONTINGENCIES
LEASES
The Company is lessee under various leases relating to buildings and
equipment. Total rent expense under operating leases aggregated $177,000,
$89,000 and $85,000 for 1994, 1993 and 1992, respectively. As of December 31,
1994, future minimum lease commitments under non-cancelable operating leases
were not significant for any year or in the aggregate.
LEGAL ACTIONS
The Company is subject to various claims and legal proceedings covering
a wide range of matters that arose in the ordinary course of its business
activities. In addition, the Company has been named a potentially responsible
party or a third-party defendant, along with other companies, for certain waste
disposal sites.
-41-
44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Each of these matters is subject to various uncertainties, and it is possible
that some of these matters may be decided unfavorably to the Company.
Management believes that any liability that may ultimately result from the
resolution of these matters will not have a material adverse effect on the
financial position of the Company.
NOTE 14 -- RELATED PARTIES
The Chairman of the Board and the President of the Company are the two
largest holders of the Company's common stock and are the holders of the 14%
Notes.
The Chairman and the President of the Company are partners of an
investment banking firm which was retained by the Company to provide management
and investment banking services through December 31, 1994, for an annual fee of
$400,000 and additional compensation related to the Company's operating
performance and for specific transactions completed by the Company with the
assistance of the firm. The Company also has agreed to reimburse the firm for
certain expenses. During 1994, the Company paid the firm aggregate fees in the
amount of $678,000 (including $328,000 which the company had accrued at
December 31, 1993 relating to the restructuring of the Company's debt in
January 1994) and reimbursed it for direct and indirect expenses incurred by
the Chairman of the Board and the President in an amount totaling $135,000.
During each of 1993 and 1992, the Company paid the firm aggregate fees of
$300,000 and reimbursed it for indirect expenses of $50,000.
The Secretary of the Company, who is also a member of the Company's
Board of Directors, is a stockholder of a professional corporation which is a
partner in a law firm which serves as general counsel to the Company. During
1994, 1993 and 1992, the Company made payments to the law firm for legal
services in the amounts of $364,000, $383,000 and $342,000, respectively. As
of December 31, 1994 and 1993, outstanding accounts payable for legal services
to the law firm totaled $36,000 and $67,000, respectively.
A member of the Board of Directors of the Company is a member of the
board of directors of an insurance brokerage firm which specializes in
brokering commercial, life and accident insurance coverage and providing third
party administration of health claims. After a competitive bidding process,
the Company has from time to time secured large portions of its insurance
coverage through this firm and purchased third party administrative services
from this firm. During 1994, 1993 and 1992, the Company made cash payments to
the brokerage firm for (1) insurance premiums, including commissions thereon,
of $1,319,000, $1,518,000 and $1,794,000, respectively, and (2) administrative
fees for services performed in connection with the administration of the
Company's hospital and medical plans of $70,000, $76,000 and $85,000,
respectively. As of December 31, 1994, and 1993, the Company did not have a
balance due to or from the brokerage firm. As of December 31, 1992, the
Company had a net refund due from the brokerage firm of approximately $65,000.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
-42-
45
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required by Item 10 is incorporated by reference from the
Company's proxy statement to be issued in connection with its 1995 Annual
Meeting of Stockholders and to be filed with the Securities and Exchange
Commission (the "Commission") not later than 120 days after December 31, 1994.
ITEM 11. EXECUTIVE COMPENSATION
Information required by Item 11 is incorporated by reference from the
Company's proxy statement to be issued in connection with its 1995 Annual
Meeting of Stockholders and to be filed with the Commission not later than 120
days after December 31, 1994.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information required by Item 12 is incorporated by reference from the
Company's proxy statement to be issued in connection with its 1995 Annual
Meeting of Stockholders and to be filed with the Commission not later than 120
days after December 31, 1994.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by Item 13 is incorporated by reference from the
Company's proxy statement to be issued in connection with its 1995 Annual
Meeting of Stockholders and to be filed with the Commission not later than 120
days after December 31, 1994.
-43-
46
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(A) 1. FINANCIAL STATEMENTS
The consolidated financial statements of Lexington
Precision Corporation are included in Part II, Item 8.
2. FINANCIAL STATEMENT SCHEDULES
Schedule II, Valuation and Qualifying Accounts and Reserves,
is included in this Part IV, item 14, on page 49. All other
schedules are omitted because the required information is
not applicable, not material or included in the consolidated
financial statements or notes thereto.
3. EXHIBITS
3-1 Articles of Incorporation and Restatement thereof
3-2 By-Laws, as amended
3-3 Certificate of Correction dated September 21, 1976
3-4 Certificate of Ownership and Merger dated May 24, 1977
3-5 Certificate of Ownership and Merger dated May 31, 1977
3-6 Certificate of Reduction of Capital dated December 30, 1977
3-7 Certificate of Retirement of Preferred Shares dated December 30, 1977
3-8 Certificate of Reduction of Capital dated December 28, 1978
3-9 Certificate of Retirement of Preferred Shares dated December 28, 1978
3-10 Certificate of Reduction of Capital dated January 9, 1979
3-11 Certificate of Reduction of Capital dated December 20, 1979
3-12 Certificate of Retirement of Preferred Shares dated December 20, 1979
3-13 Certificate of Reduction of Capital dated December 16, 1982
3-14 Certificate of Reduction of Capital dated December 17, 1982
-44-
47
3-15 Certificate of Amendment of Restated Certificate of Incorporation dated September 26, 1984
3-16 Certificate of Retirement of Stock dated September 24, 1986
3-17 Certificate of Amendment of Restated Certificate of Incorporation dated
November 21, 1986
3-18 Certificate of Retirement of Stock dated January 15, 1987
3-19 Certificate of Retirement of Stock dated February 22, 1988
3-20 Certificate of Amendment of Restated Certificate of Incorporation dated
January 6, 1989
3-21 Certificate of Retirement of Stock dated August 17, 1989
3-22 Certificate of Retirement of Stock dated January 9, 1990
3-23 Certificate of the Designations, Preferences and Relative Participating, Optional
and Other Special Rights of 12% Cumulative Convertible Exchangeable
Preferred Stock, Series C and the Qualifications, Limitations and Restrictions
thereof dated January 10, 1990
3-24 Certificate of Ownership and Merger dated April 25, 1990
3-25 Certificate of Elimination of 12% Cumulative Convertible Exchangeable
Preferred Stock, Series C, dated June 4, 1990
3-26 Certificate of Retirement of Stock dated March 6, 1991
3-27 Certificate of Retirement of Stock dated April 29, 1994
3-28 Certificate of Retirement of Stock dated January 6, 1995
4-1 Certificate of Designations, Preferences, Rights and Number of Shares of
Preferred Stock, Series B
4-2 Purchase Agreement dated as of February 7, 1985 between the Company and
L&D Precision Limited Partnership ("L&D Precision") and exhibits thereto
4-3 Amendment Agreement dated as of April 27, 1990 between the Company and
L&D Precision with respect to Purchase Agreement dated as of February 7, 1985
4-4 Recapitalization Agreement dated as of April 27, 1990 between the Company
and L&D Woolens Limited Partnership ("Woolens") and exhibits thereto
4-5 Specimen of Junior Subordinated Convertible Increasing Rate Note due
May 1, 2000
-45-
48
4-6 Restructuring Agreement dated as of December 10, 1993 among the Company,
Warren Delano and Michael A. Lubin and exhibits thereto
4-7 Specimen of 14% Junior Subordinated Note due May 1, 2000
4-8 Indenture dated as of August 1, 1993 between the Company and IBJ Schroder
Bank & Trust Company, as Trustee
4-9 Specimen of 12-3/4% Senior Subordinated Note due February 1, 2000
10-1 Purchase Agreement dated as of February 7, 1985 between the Company and
L&D Precision and exhibits thereto
10-2 Amendment Agreement dated as of April 27, 1990 between the Company and
L&D Precision with respect to Purchase Agreement dated as of February 7, 1985
10-3 *Lexington Precision Corporation Flexible Compensation Plan, as amended
10-4 *1983 Incentive Stock Option Plan, as amended
10-5 *1986 Restricted Stock Award plan, as amended
10-6 *Lexington Precision Corporation Retirement & Savings Plan, as amended
10-7 *Description of 1994 Compensation Arrangements with Lubin, Delano, &
Company
10-8 *Lexington Precision Corporate Office 1994 Management Cash Bonus Plan
10-9 *Lexington Precision Corporate Office 1995 Management Cash Bonus Plan
10-10 Lease Agreement dated as of December 1, 1985 between the County of Monroe
Industrial Development Agency and the Company
10-11 Consent and Amendment Letter Agreement between Chemical Bank of New
Jersey and the Company dated as of December 29, 1993
10-12 Promissory Note dated November 30, 1988 of LCI payable to the order of Paul
H. Pennell in the original principal amount of $3,530,000
10-13 Guaranty dated as of November 30, 1988 from the Company to Paul H. Pennell
10-14 Amendment Agreement dated as of November 30, 1991 between LCI and Paul
H. Pennell
10-15 Release and Notice Agreement dated as of March 31, 1993 between LCI and
Paul H. Pennell
-46-
49
10-16 Standstill Agreement dated as of November 2, 1988 between Atlas Corporation
and the Company
10-17 Recapitalization Agreement dated as of april 27, 1990 between the Company
and Woolens and exhibits thereto
10-18 Accounts Financing Agreement [Security Agreement] dated as of January 11,
1990 between Congress Financial Corporation ("Congress") and the Company
10-19 Accounts Financing Agreement [Security Agreement] dated as of January 11,
1990 between Congress and LCI
10-20 Covenants Supplement to Accounts Financing Agreement [Security Agreement]
dated as of January 11, 1990 between Congress and the Company
10-21 Covenants Supplement to Accounts Financing Agreement [Security Agreement]
dated as of January 11, 1990 between Congress and LCI
10-22 Letter dated April 11, 1990 from the Company and Wise Die Casting, Inc. to
Congress
10-23 Letter Agreement dated February 28, 1991 between the Company and Congress
amending certain financing agreements and consent thereto of LCI
10-24 Letter Agreement dated February 28, 1991 between LCI and Congress amending
certain financing agreements and consent thereto of the Company
10-25 Letter Agreement dated January 14, 1994 between the Company and Congress
amending certain financing agreements and consent thereto of LCI
10-26 Letter Agreement dated January 14, 1994 between LCI and Congress amending
certain financial agreements and consent thereto of the Company
10-27 Letter Agreement dated March 25, 1994 between Congress and the Company,
and consent thereto of LCI
10-28 Letter Agreement dated March 25, 1994 between Congress and LCI, and consent
thereto of the Company
10-29 Letter Agreement dated as of August 1, 1994 between the Company and
Congress amending certain financing agreements and consent thereto of LCI
10-30 Letter Agreement dated as of August 1, 1994 between LCI and Congress
amending certain financing agreements and consent thereto of the Company
10-31 Trade Financing Agreement Supplement to Accounts Financing Agreement
[Security Agreement] dated as of July 19, 1994 between the Company and
Congress
-47-
50
10-32 Letter Agreement dated January 13, 1995 between LCI and Congress amending
certain financing agreements and consent thereto of the Company
10-33 Term Promissory Note dated January 13, 1995 from LCI in favor of Congress
10-34 Letter Agreement dated January 31, 1995 between the Company and Congress
amending certain financing agreements and consent thereto of LCI
10-35 Second Amended and Restated Promissory Note dated January 31, 1995 from
the Company in favor of Congress
10-36 Letter Agreement dated January 31, 1995 between LCI and Congress amending
certain financing agreements and consent thereto of the Company
10-37 Second Amended and Restated Promissory Note dated January 31, 1995 from
LCI in favor of Congress
10-38 Restructuring Agreement dated as of December 10, 1993 among the Company,
Warren Delano and Michael A. Lubin and exhibits thereto
10-39 Consent and Amendment letter Agreement between Chemical Bank of New
Jersey and the Company dated as of December 30, 1994
21-1 Subsidiary of Registrant
23-1 Consent of Ernst & Young LLP
27-1 **Financial Data Schedule
* Indicates a management contract or compensatory plan or
arrangement required to be filed as an exhibit pursuant to
item 14(a)(3).
** Not deemed filed for purposes of section 11 of the Securities
Act of 1933, Section 18 of the Securities Exchange Act of 1934
and Section 323 of the Trust Indenture Act of 1939, or
otherwise subject to the liabilities of such sections and not
deemed part of any regulation statement to which such exhibit
relates.
Note: Pursuant to section (b)(4)(iii) of item 601 of Regulation
S-K, the Company agrees to furnish to the Securities and
Exchange Commission upon request documents defining the
rights of other holders of long-term debt.
(b) Reports on Form 8-K:
On February 2, 1995, the Company filed with the Securities and
Exchange Commission a Current Report on Form 8-K dated
January 31, 1995 which stated, among other things, that
the Company had amended its Working Capital Facility with its
Working Capital Lender.
-48-
51
LEXINGTON PRECISION CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(THOUSANDS OF DOLLARS)
BALANCE AT CHARGED TO DEDUCTIONS BALANCE
BEGINNING COSTS AND FROM AT END
OF PERIOD EXPENSES RESERVES OF PERIOD
---------- -------- -------- ---------
ALLOWANCE FOR
DOUBTFUL ACCOUNTS
-----------------
Year ended December 31, 1994 $ 159 $ 20 $ 5 $ 174
Year ended December 31, 1993 181 25 47 159
Year ended December 31, 1992 164 44 27 181
INVENTORY RESERVES
------------------
Year ended December 31, 1994 $ 337 $ 92 $ 62 $ 367
Year ended December 31, 1993 281 57 1 337
Year ended December 31, 1992 243 81 43 281
-49-
52
SIGNATURES
Pursuant to the requirements of Section 13 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.
LEXINGTON PRECISION CORPORATION
---------------------------------------
(Registrant)
By: /s/ Warren Delano
-----------------------------------
Warren Delano,
President
March 29, 1995
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 29, 1995:
PRINCIPAL EXECUTIVE OFFICERS:
/s/ Michael A. Lubin
-------------------------------------------------------
Michael A. Lubin, Chairman of the Board
/s/ Warren Delano
--------------------------------------------------------
Warren Delano, President and Director
PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER:
/s/ Dennis J. Welhouse
------------------------------------------------------
Dennis J. Welhouse, Senior Vice President
and Chief Financial Officer
DIRECTORS:
/s/ William B. Conner
------------------------------------------------------
William B. Conner, Director
/s/ Kenneth I. Greenstein
-----------------------------------------------------
Kenneth I. Greenstein, Secretary and
Director
/s/ Arnold W. MacAlonan
--------------------------------------------------
Arnold W. MacAlonan, Director
/s/ Phillips E. Patton
----------------------------------------------------------
Phillips E. Patton, Director
-50-
53
EXHIBIT INDEX
Exhibit
Number Exhibit
------ -------
Location
--------
3-1 Articles of Incorporation and Restatement Incorporated by reference from Exhibit 3-1 to the
thereof Company's Form 10-K for the year ended May 31, 1981
located under Securities and Exchange Commission File
No. 0-3252 ("1981 10-K")
3-2 By-laws, as amended Incorporated by reference from Exhibit 3-2 to the
Company's Form 10-K for the year ended December 31,
1991 located under Securities and Exchange Commission
File No. 0-3252 ("1991 10-K")
3-3 Certificate of Correction dated September Incorporated by reference from Exhibit 3-3 to the
21, 1976 Company's Form 10-K for the year ended May 31, 1983
located under Securities and Exchange Commission File
No. 0-3252 ("1983 10-K")
3-4 Certificate of Ownership and Merger dated Incorporated by reference from Exhibit 3-4 to
May 24, 1977 1983 10-K
3-5 Certificate of Ownership and Merger dated Incorporated by reference from Exhibit 3-5 to
May 31, 1977 1983 10-K
3-6 Certificate of Reduction of Capital dated Incorporated by reference from Exhibit 3-6 to
December 30, 1977 1983 10-K
3-7 Certificate of Retirement of Preferred Incorporated by reference from Exhibit 3-7 to
Shares dated December 30, 1977 1983 10-K
3-8 Certificate of Reduction of Capital dated Incorporated by reference from Exhibit 3-8 to
December 28, 1978 1983 10-K
3-9 Certificate of Retirement of Preferred Incorporated by reference from Exhibit 3-9 to
Shares dated December 28, 1978 1983 10-K
3-10 Certificate of Reduction of Capital dated Incorporated by reference from Exhibit 3-10 to 1983
January 9, 1979 10-K
3-11 Certificate of Reduction of Capital dated Incorporated by reference from Exhibit 3-11 to 1983
December 20, 1979 10-K
3-12 Certificate of Retirement of Preferred Incorporated by reference from Exhibit 3-12 to 1983
Shares dated December 20, 1979 10-K
3-13 Certificate of Reduction of Capital dated Incorporated by reference from Exhibit 3-13 to 1983
December 16, 1982 10-K
3-14 Certificate of Reduction of Capital dated Incorporated by reference from Exhibit 3-14 to 1983 10-K
December 17, 1982
54
-2-
3-15 Certificate of Amendment of Restated Incorporated by reference from Exhibit 3-15 to the
Certificate of Incorporation dated September Company's Form 10-K for the year ended May 31, 1985
26, 1984 located under Securities and Exchange Commission File
No. 0-3252
3-16 Certificate of Retirement of Stock dated Incorporated by reference from Exhibit 4-3 to the
September 24, 1986 Company's Registration Statement on Form S-2 located
under Securities and Exchange Commission File No.
33-9380 ("1933 Act Registration Statement")
3-17 Certificate of Amendment of Restated Incorporated by reference from Exhibit 3-17 to the
Certificate of Incorporation Dated Company's Form 10-K for the year ended May 31, 1987
November 21, 1986 located under Securities and Exchange Commission File
No. 0-3252
3-18 Certificate of Retirement of Stock dated Incorporated by reference from Exhibit 4-5 to Amendment
January 15, 1987 No. 1 to 1933 Act Registration Statement
3-19 Certificate of Retirement of Stock dated Incorporated by reference from Exhibit 3-19 to the
February 22, 1988 Company's Form 10-K for the year ended May 31, 1989
located under Securities and Exchange Commission File
No. 0-3252 ("May 31, 1989 10-K")
3-20 Certificate of Amendment of Restated Incorporated by reference from Exhibit 3-20 to May 31,
Certificate of Incorporation dated 1989 10-K
January 6, 1989
3-21 Certificate of Retirement of Stock dated Incorporated by reference from Exhibit 3-21 to May 31,
August 17, 1989 1989 10-K
3-22 Certificate of Retirement of Stock dated Incorporated by reference from Exhibit 3-22 to the
January 9, 1990 Company's Form 10-K for the seven months ended
December 31, 1989 located under Securities and
Exchange Commission File No. 0-3252
("December 31, 1989 10-K")
3-23 Certificate of the Designations, Preferences Incorporated by reference from Exhibit 3-1 to the
and Relative Participating, Optional and Company's Form 10-Q for the quarter ended November 30,
Other Special Rights of 12% Cumulative 1989 located under Securities and Exchange Commission
Convertible Exchangeable Preferred Stock, File No. 0-3252 ("November 30, 1989 10-Q")
Series C and the Qualifications, Limitations
and Restrictions thereof dated January 10,
1990
3-24 Certificate of Ownership and Merger dated Incorporated by reference from Exhibit 3-24 to December
April 25, 1990 31, 1989 10-K
55
-3-
3-25 Certificate of Elimination of 12% Cumulative Incorporated by reference from Exhibit 3-25 to the
Convertible Exchangeable Preferred Stock, Company's Form 10-K for the year ended December 31,
Series C, dated June 4, 1990 1990 located under Securities and Exchange Commission
File No. 0-3252 ("1990 10-K")
3-26 Certificate of Retirement of Stock dated Incorporated by reference from Exhibit 3-26 to 1990
March 6, 1991 10-K
3-27 Certificate of Retirement of Stock dated Filed with this Form 10-K
April 29, 1994
3-28 Certificate of Retirement of Stock dated Filed with this Form 10-K
January 6, 1995
4-1 Certificate of Designations, Preferences, Incorporated by reference from Exhibit 3-3 to 1981 10-K
Rights and Number of Shares of Preferred
Stock, Series B
4-2 Purchase Agreement dated as of February 7, Incorporated by reference from Exhibit 4-1 to the
1985 between the Company and L&D Precision Company's Form 8-K dated February 7, 1985 (date of
Limited Partnership ("L&D Precision") and earliest event reported) located under Securities and
exhibits thereto Exchange Commission File No. 0-3252
4-3 Amendment Agreement dated as of April 27, Incorporated by reference from Exhibit 10-2 to 1990 10-K
1990 between the Company and L&D Precision
with respect to Purchase Agreement dated as
of February 7, 1985
4-4 Recapitalization Agreement dated as of Incorporated by reference from Exhibit 4-10 to December
April 27, 1990 between the Company and 31, 1989 10-K
L&D Woolens Limited Partnership ("Woolens")
and exhibits thereto
4-5 Specimen of Junior Subordinated Convertible Incorporated by reference from Exhibit 4-11 to December
Increasing Rate Note Due May 1, 2000 31, 1989 10-K
4-6 Restructuring Agreement dated as of December Incorporated by reference from Exhibit 10-2 to the
10, 1993 among the Company, Warren Delano Company's Form 8-K dated December 10, 1993 (date of
and Michael A. Lubin and exhibits thereto earliest event reported) located under Securities and
Exchange Commission File No. 0-3252
4-7 Specimen of 14% Junior Subordinated Note due Included in Exhibit 4-6 hereto
May 1, 2000
4-8 Indenture dated as of August 1, 1993 between Incorporated by reference from Exhibit 4-2 to the
the Company and IBJ Schroder Bank & Trust Company's Form 8-K dated January 18, 1994 (date of
Company, as Trustee earliest event reported) located under Securities and
Exchange Commission File No. 0-3252
56
-4-
4-9 Specimen of 12-3/4% Senior Subordinated Note Included in Exhibit 4-8 hereto
due February 1, 2000
10-1 Purchase Agreement dated as of February 7, See Exhibit 4-2 hereto
1985 between the Company and L&D Precision
and exhibits thereto
10-2 Amendment Agreement dated as of April 27, See Exhibit 4-3 hereto
1990 between the Company and L&D Precision
with respect to Purchase Agreement dated as
of February 7, 1985
10-3 Lexington Precision Corporation Flexible Incorporated by reference from Exhibit 10-3 to 1991 10-K
Compensation Plan, as amended
10-4 1983 Incentive Stock Option Plan, as amended Incorporated by reference from Exhibit 10-37 to
December 31, 1989 10-K
10-5 1986 Restricted Stock Award Plan, as amended Incorporated by reference from Exhibit 10-38 to
December 31, 1989 10-K
10-6 Lexington Precision Corporation Retirement Incorporated by reference from Exhibit 10-9 to 1991 10-K
and Savings Plan, as amended
10-7 Description of 1994 Compensation Filed with this Form 10-K
Arrangements with Lubin, Delano & Company
10-8 Lexington Precision Corporate Office 1994 Filed with this Form 10-K
Management Cash Bonus Plan
10-9 Lexington Precision Corporate Office 1995 Filed with this Form 10-K
Management Cash Bonus Plan
10-10 Lease Agreement dated as of December 1, 1985 Incorporated by reference from Exhibit 10-22 to the
between the County of Monroe Industrial Company's Form 10-K for the year ended May 31, 1986
Development Agency and the Company located under Securities and Exchange Commission File
No. 03252
10-11 Consent and Amendment Letter Agreement Incorporated by reference from Exhibit 10-1 to the
between Chemical Bank of New Jersey and the Company's Form 8-K dated December 30, 1993 (date of
Company dated as of December 29, 1993 earliest event reported) located under Securities and
Exchange Commission File No. 0-3252
10-12 Promissory Note dated November 30, 1988 of Incorporated by reference from Exhibit 10-32 to May 31,
LCI payable to the order of Paul H. Pennell 1989 10-K
in the original principal amount of
$3,530,000
57
-5-
10-13 Guaranty dated as of November 30, 1988 from Incorporated by reference from Exhibit 10-33 to May 31,
the Company to Paul H. Pennell 1989 10-K
10-14 Amendment Agreement dated as of November 30, Incorporated by reference from Exhibit 10-28 to 1991
1991 between LCI and Paul H. Pennell 10-K
10-15 Release and Notice Agreement dated as of Incorporated by reference from Exhibit 10-40 to the
March 31, 1993 between LCI and Paul H. Company's Form 10-K for the year ended December 31,
Pennell 1992 located under Securities and Exchange Commission
File No. 0-3252
10-16 Standstill Agreement dated as of November 2, Incorporated by reference from Exhibit 10-49 to May 31,
1988 between Atlas Corporation and the 1989 10-K
Company
10-17 Recapitalization Agreement dated as of April See Exhibit 4-4 hereto
27, 1990 between the Company and Woolens and
exhibits thereto
10-18 Accounts Financing Agreement [Security Incorporated by reference from Exhibit 4-2 to November
Agreement] dated as of January 11, 1990 30, 1989 10-Q
between Congress Financial Corporation
("Congress") and the Company
10-19 Accounts Financing Agreement [Security Incorporated by reference from Exhibit 4-3 to November
Agreement] dated as of January 11, 1990 30, 1989 10-Q
between Congress and LCI
10-20 Covenants Supplement to Accounts Financing Incorporated by reference from Exhibit 10-49 to 1990
Agreement [Security Agreement] dated as of 10-K
January 11, 1990 between Congress and the
Company
10-21 Covenants Supplement to Accounts Financing Incorporated by reference from Exhibit 10-50 to 1990
Agreement [Security Agreement] dated as of 10-K
January 11, 1990 between Congress and LCI
10-22 Letter dated April 11, 1990 from the Company Incorporated by reference from Exhibit 10-51 to 1990
and Wise to Congress 10-K
10-23 Letter Agreement dated February 28, 1991 Incorporated by reference from Exhibit 10-54 to 1990
between the Company and Congress amending 10-K
certain financing agreements and consent
thereto of LCI
58
-6-
10-24 Letter Agreement dated February 28, 1991 Incorporated by reference from Exhibit 10-56 to 1990
between LCI and Congress amending certain 10-K
financing agreements and consent thereto of
the Company
10-25 Letter Agreement dated January 14, 1994 Incorporated by reference from Exhibit 10-26 to the
between the Company and Congress amending Company's Form 10-K for the year ended December 31,
certain financing agreements and consent 1993 located under Securities and Exchange Commission
thereto of LCI File No. 0-3252 ("1993 10-K")
10-26 Letter Agreement dated January 14, 1994 Incorporated by reference from Exhibit 10-27 to 1993
between LCI and Congress amending certain 10-K
financing agreements and consent thereto of
the Company
10-27 Letter Agreement dated March 25, 1994 Incorporated by reference from Exhibit 10-30 to 1993
between Congress and the Company, and 10-K
consent thereto of LCI
10-28 Letter Agreement dated March 25, 1994 Incorporated by reference from Exhibit 10-31 to 1993
between Congress and LCI, and consent 10-K
thereto of the Company
10-29 Letter Agreement dated as of August 1, 1994 Incorporated by reference from Exhibit 10-1 to the
between the Company and Congress amending Company's Form 10-Q for the quarter ended September 30,
certain financing agreements and consent 1994 located under Securities and Exchange Commission
thereto of LCI File No. 0-3252 ("September 30, 1994 10-Q")
10-30 Letter Agreement dated as of August 1, 1994 Incorporated by reference from Exhibit 10-2 to
between LCI and Congress amending certain September 30, 1994 10-Q
financing agreements and consent thereto of
the Company
10-31 Trade Financing Agreement Supplement to Incorporated by reference from Exhibit 10-3 to
Accounts Financing Agreement [Security September 30, 1994 10-Q
Agreement] dated as of July 19, 1994 between
the Company and Congress
10-32 Letter Agreement dated January 13, 1995 Filed with this Form 10-K
between LCI and Congress amending certain
financing agreements and consent thereto of
the Company
10-33 Term Promissory Note dated January 13, 1995 Filed with this Form 10-K
from LCI in favor of Congress
59
-7-
10-34 Letter Agreement dated January 31, 1995 Filed with this Form 10-K
between the Company and Congress amending
certain financing agreements and consent
thereto of LCI
10-35 Second Amended and Restated Promissory Note Filed with this Form 10-K
dated January 31, 1995
from the Company in favor of Congress
10-36 Letter Agreement dated January 31, 1995 Filed with this Form 10-K
between LCI and Congress amending certain
financing agreements and consent thereto of
the Company
10-37 Second Amended and Restated Promissory Note Filed with this Form 10-K
dated January 31, 1995 from LCI in favor of
Congress
10-38 Restructuring Agreement dated as of December See Exhibit 4-6 hereto
10, 1993 among the Company, Warren Delano
and Michael A. Lubin and exhibits thereto
10-39 Consent and Amendment Letter Agreement Filed with this Form 10-K
between Chemical Bank of New Jersey and the
Comnpany dated as of December 30, 1994
21-1 Subsidiary of Registrant Incorporated by reference from Exhibit 22-1 to 1991 10-K
23-1 Consent of Ernst & Young LLP Filed with this Form 10-K
27-1 Financial Data Schedule Filed with this Form 10-K
EX-3.27
2
LEXINGTON PRECISION CORP. 10-K EXHIBIT 3.27
1
CERTIFICATE OF RETIREMENT OF STOCK
LEXINGTON PRECISION CORPORATION, a corporation organized and
existing under the General Corporation Law of the State of Delaware ("the
Corporation") ,
DOES HEREBY CERTIFY:
FIRST: That the Corporation acquired an aggregate of Four
Hundred Fifty (450) shares of the Corporation's $4 - $8 Cumulative Convertible
Preferred Stock, Series B, par value $100 per share, which shares had capital
applied in connection with their acquisition and which shares upon their
acquisition became retired shares.
SECOND: That the Restated Certificate of Incorporation of the
Corporation prohibits the reissue of the shares of $4 - $8 Cumulative
Convertible Preferred Stock, Series B, when so retired; and pursuant to the
provisions of Section 243 of the General Corporation Law of the State of
Delaware, upon the effective date of the filing of this certificate as therein
provided, the Restated Certificate of Incorporation of the Corporation shall be
amended so as to effect a reduction in the authorized number of shares of the
$4 - $8 Cumulative Convertible Preferred Stock, Series B, to the extent of Four
Hundred Fifty (450) shares, being the total number of shares retired with a par
value of $100 per share, and an aggregate par value of $45,000.
IN WITNESS WHEREOF, the Corporation has caused this
certificate to be signed by Dennis J. Welhouse, its Senior Vice President and
Assistant Secretary, and attested to by Kelly L. MacMillan, its Assistant
Treasurer, this 6th day of January, 1995.
LEXINGTON PRECISION CORPORATION
By: Dennis J. Welhouse
-----------------------------------
Dennis J. Welhouse
Senior Vice President and Assistant
Secretary
ATTEST:
By: Kelly L. MacMillan
----------------------------
Kelly L. MacMillan
Assistant Treasurer
EX-3.28
3
LEXINGTON PRECISION CORP. 10-K EXHIBIT 3.28
1
CERTIFICATE OF RETIREMENT OF STOCK
LEXINGTON PRECISION CORPORATION, a corporation organized and
existing under the General Corporation Law of the State of Delaware ("the
Corporation") ,
DOES HEREBY CERTIFY:
FIRST: That the Corporation acquired an aggregate of One
Thousand Three Hundred Fifty (1,350) shares of the Corporation's $4 - $8
Cumulative Convertible Preferred Stock, Series B, par value $100 per share,
which shares had capital applied in connection with their acquisition and which
shares upon their acquisition became retired shares.
SECOND: That the Restated Certificate of Incorporation of the
Corporation prohibits the reissue of the shares of $4 - $8 Cumulative
Convertible Preferred Stock, Series B, when so retired; and pursuant to the
provisions of Section 243 of the General Corporation Law of the State of
Delaware, upon the effective date of the filing of this certificate as therein
provided, the Restated Certificate of Incorporation of the Corporation shall be
amended so as to effect a reduction in the authorized number of shares of the
$4 - $8 Cumulative Convertible Preferred Stock, Series B, to the extent of One
Thousand Three Hundred Fifty (1,350) shares, being the total number of shares
retired with a par value of $100 per share, and an aggregate par value of
$135,000.
IN WITNESS WHEREOF, the Corporation has caused this
certificate to be signed by Dennis J. Welhouse, its Senior Vice President and
Assistant Secretary, and attested to by Kelly L. Buttle, its Assistant
Treasurer, this 29th day of April, 1994.
LEXINGTON PRECISION CORPORATION
By: Dennis J. Welhouse
-----------------------------------
Dennis J. Welhouse
Senior Vice President and Assistant
Secretary
ATTEST:
By: Kelly L. Buttle
-------------------------
Kelly L. Buttle
Assistant Treasurer
EX-10.7
4
LEXINGTON PRECISION CORP. 10-K EXHIBIT 10.7
1
DESCRIPTION OF 1994 COMPENSATION ARRANGEMENTS
WITH LUBIN, DELANO & COMPANY
During 1994, Lexington Precision Corporation (the "Company")
compensated Michael A. Lubin, its Chairman of the Board, and Warren Delano, its
President, indirectly through payments to Lubin, Delano & Company, an
investment banking firm of which they are the only partners. These
compensation arrangements provided for payment to Lubin, Delano & Company of
(i) a basic fee of $400,000, (ii) an incentive fee based upon the Company's
performance as measured against its 1994 budgeted operating profit, and (iii)
transaction fees as agreed upon by the Company and Lubin, Delano & Company in
connection with acquisitions, divestitures, financings and other similar
transactions.
EX-10.8
5
LEXINGTON PRECISION CORP. 10-K EXHIBIT 10.8
1
LEXINGTON PRECISION CORPORATE OFFICE
1994 MANAGEMENT CASH BONUS PLAN
2
LEXINGTON PRECISION CORPORATE OFFICE
TABLE OF CONTENTS
SECTION
NUMBER PAGE
-------- ----
I. PURPOSE OF PLAN 1
II. ELIGIBILITY 1
III. PLAN YEAR 1
IV. GROUPING OF PARTICIPANTS 1
V. SETTING OF TARGET BONUS PERCENTAGES 1
VI. AUTHORIZATION FORM 2
VII. NOTIFICATION OF EMPLOYEES 2
VIII. BASIS FOR BONUS PAYMENTS 3
IX. SETTING OF GOALS 3
X. CALCULATING THE BONUS POOL 4
XI. ADJUSTMENTS FOR PERSONAL PERFORMANCE 5
XII. TIMING OF BONUS PAYMENTS 6
XIII. OTHER 6
3
LEXINGTON PRECISION CORPORATE OFFICE
1994 MANAGEMENT CASH BONUS PLAN
I. PURPOSE OF PLAN
The "1994 Management Cash Bonus Plan" (the "Plan") is designed to
provide meaningful incentives for officers and key employees of the
Corporate Office (the "Bonus Group") of Lexington Precision Corporation
(the "Company") to increase profitability while efficiently managing the
Company's assets.
II. ELIGIBILITY
A "Participant" shall mean an individual who meets both of the following
criteria:
(1) The individual has been selected to participate in the
Plan by the Compensation Committee of the Board of
Directors of Lexington Precision Corporation upon
recommendation of the president of Lexington Precision
Corporation; and
(2) The individual is a full-time, salaried, exempt employee
of the Company on the last day of the plan year.
Participants who retire during the plan year and are aged 62 or older on
the date of retirement and estates of Participants who die during
the plan year will be paid bonuses (if and to the extent earned) at the
same time that all other Participants receive their bonuses after the end
of the plan year.
III. PLAN YEAR
The plan year shall mean the year ending December 31, 1994.
IV. GROUPING OF PARTICIPANTS
The Participants in the Bonus Group, will be designated at the beginning
of the plan year by the Compensation Committee of the Board of Directors
of Lexington Precision Corporation upon recommendation of the president of
Lexington Precision Corporation.
V. SETTING OF TARGET BONUS PERCENTAGES
Subject to the adjustment for Personal Performance (defined in Section XI
below), the "Target Bonus" for each Participant shall mean the amount
calculated by multiplying the Participant's aggregate base-salary received
during the year by a "Target Bonus Percentage" which will be set at the
beginning of the plan year by the Compensation Committee of the Board of
-1-
4
Directors of Lexington Precision Corporation upon recommendation of the
president of Lexington Precision Corporation. The "Group Target Bonus"
shall mean the aggregate of the Target Bonuses of all Participants in a
Bonus Group. The Target Bonus Percentage for the president of the Company
will be set by the president of Lexington Precision Corporation.
A Participant's bonus will always be based on the aggregate base-salary
received during the year, not on the base-salary level at any particular
point during the year (i.e., when calculating bonuses for Participants who
received salary increases during the year, for Participants who are hired
during the year or for Participants who retire or die during the year).
As a general guideline, the Target Bonus Percentage levels which would
typically be assigned to various categories of employees in the Bonus
Group are set forth below:
TARGET BONUS
POSITION PERCENTAGE
---------- ----------
Senior Vice Presidents 20-35%
Vice Presidents 15-25%
Junior Officers 5-15%
If a Participant moves to a higher management level during the year, such
Participant's Target Bonus Percentage will be reset at an appropriate
higher level determined by the Compensation Committee of the Board of
Directors of Lexington Precision Corporation upon recommendation of the
president of Lexington Precision Corporation, as if the Target Bonus
Percentage had been at the higher level for the entire year. If a
Participant moves to a lower management level during the year, such
Participant's Target Bonus Percentage will be reset at an appropriate
lower level determined by the Compensation Committee of the Board of
Directors of Lexington Precision Corporation upon recommendation of the
president of Lexington Precision Corporation, as if the Target Bonus
Percentage had been at the lower level for the entire year.
VI. AUTHORIZATION FORM
Attached hereto as Exhibit A is the "Authorization Form" which shall be
used by the Compensation Committee of the Board of Directors of
Lexington Precision Corporation upon recommendation of the president of
Lexington Precision Corporation at the beginning of each plan year when
designating Participants, Target Bonus Percentages and the Bonus Group's
Target Pre-Bonus Operating Profit (defined in Section IX below).
VII. NOTIFICATION OF EMPLOYEES
Attached hereto as Exhibit B is the form of memorandum which shall be used
-2-
5
at the beginning of each plan year to inform employees of their
participation in the Plan and their Target Bonus Percentages and
Target Bonuses.
VIII. BASIS FOR BONUS PAYMENTS
After the end of the plan year, when financial results for the year are
available, a calculation will be made to determine the bonus that will be
paid to each Participant.
The percentage of Target Bonus earned by each Participant will depend
on the following:
(1) how well the Bonus Group performed relative to its Target
Pre-Bonus Operating Profit; and
(2) the Participant's Personal Performance (discussed below).
All bonuses will be subject to the review and approval of the Board of
Directors of Lexington Precision Corporation.
IX. SETTING OF GOALS
"Operating Profit" means profit before interest, income taxes and other
non-operating expenses in accordance with the Company's standard
accounting procedures.
"Pre-Bonus Operating Profit" means operating profit before deducting any
expenses for bonuses relating to the 1994 Management Cash Bonus Plan.
The "Target Pre-Bonus Operating Profit" for the Bonus Group will be set at
the beginning of the year by the Compensation Committee of the
Board of Directors of Lexington Precision Corporation upon recommendation
of the president of Lexington Precision Corporation. The Target Pre-Bonus
Operating Profit will equal ONE of the following:
(1) the Bonus Group's "Budgeted Pre-Bonus Operating Profit"
as reflected in the annual budget for the Company;
(2) an amount higher than the Company's Budgeted Pre-Bonus
Operating Profit if the Budgeted Pre-Bonus Operating
Profit is below reasonable performance-standards
(taking into account, among other things, industry
performance standards, historical performance standards,
and the amount of capital invested in the Company); or
-3-
6
(3) an amount lower than the Company's Budgeted Pre-Bonus
Operating Profit if the Budgeted Pre-Bonus Operating
Profit is above reasonable performance-standards
(taking into account, among other things, industry
performance standards, historical performance standards,
and the amount of capital invested in the Company).
The "reasonable performance standards" discussed above will be determined
in the sole discretion of the Compensation Committee of the Board of
Directors of Lexington Precision Corporation upon recommendation by the
president of Lexington Precision Corporation.
The Target Pre-Bonus Operating Profit will not be revised during the plan
year, except in cases where an acquisition or divestiture of a
business completed during the plan year materially affects reported
operating results during that plan year.
X. CALCULATING THE BONUS POOL
To calculate the bonus for each of the Participants in the Bonus Group, it
is first necessary to calculate the "Group Bonus Pool".
The Group Bonus Pool will be calculated by multiplying the Group Target
Bonus by the percentage in the column on the right below, opposite
the percentage of the Target Pre-Bonus Operating Profit which was attained
by that Bonus Group.
PERCENTAGE PERCENTAGE OF TARGET
OF TARGET BONUS EARNED
PRE-BONUS (BEFORE ADJUSTING FOR
OPERATING PROFIT ATTAINED PERSONAL PERFORMANCE)
------------------------- ---------------------
less than 85.00% None
85.00 - 89.99% 25%
90.00 - 94.99% 50
95.00 - 99.99% 75
100.00 - 109.99% (target) 100
110.00 - 119.99% 125
120.00 - 129.99% 150
130.00 - 139.99% 175
140.00 % or more 200 (maximum)
The percentage of Target Bonus earned, before giving effect to adjustments
for Personal Performance, must be in the increments shown on the
above chart. For example, if the Bonus Group attained 108% of the Target
Pre-Bonus Operating Profit, the percentage used for each Participant in
the Bonus Group would be 100% (not 120% or 125%). The percentages of
Target Bonus earned are "stepped," not linear. No bonuses will be earned
by any Participant in the Bonus Group if less than 85% of the Target
Pre-Bonus Operating Profit is
-4-
7
attained. The Group Bonus Pool cannot exceed 200% of the Group Target
Bonus.
XI. ADJUSTMENTS FOR PERSONAL PERFORMANCE
Half of the Group Bonus Pool will automatically be awarded to each
Participant in the Bonus Group in proportion to the relative Target
Bonuses of all Participants in the Bonus Group. With respect to all
Participants, other than the president of the Company, the balance of the
Group Bonus Pool will be divided among the Participants (or retained by
the Company) based upon an evaluation of each Participant's "Personal
Performance" relative to that Participant's personal job objectives for
the plan year and relative to the performance of all other Participants in
the Bonus Group (other than the president of the Company), in every case,
as determined in the sole discretion of the Compensation Committee of the
Board of Directors of Lexington Precision Corporation upon recommendation
by the president of Lexington Precision Corporation. In no event can this
subjective portion of a Participant's bonus exceed 200% of the portion of
the Participant's Bonus which is not subject to adjustment.
For example, if a Participant's bonus was calculated to be $10,000
before any adjustment, $5,000 would be fixed and the remaining $5,000
would be subject to upward or downward adjustment by up to 100%. This
means that if the Participant performed exceptionally poorly, the
maximum downward adjustment of that Participant's bonus would eliminate
the entire half of the bonus which was subject to adjustment and the
Participant would receive only the $5,000 fixed portion of the bonus.
Subject to the limitation set forth in the next paragraph, if the
Participant performed exceptionally well, the maximum upward adjustment
of that Participant's bonus would double the half of the bonus which was
subject to adjustment and the Participant would receive $15,000 (i.e.,
the $5,000 fixed portion of the bonus plus 200% of the $5,000 subjective
portion of the bonus).
Adjustments to bonuses of Participants in the Bonus Group will be limited
so that the net effect of all adjustments made to bonuses within the Bonus
Group cannot raise the aggregate bonuses paid to the Bonus Group to an
amount in excess of the Group Bonus Pool. This means that to adjust any
Participant's bonus upward, the bonuses of one or more other Participants
within the Bonus Group must be reduced by at least that amount.
Although the bonuses of one or more Participants may be reduced due to
below par personal performance, bonus funds made available by such
-5-
8
reductions do not have to be reallocated to other Participants in the
Bonus Group. If funds are not reallocated, they are simply retained by
the Company.
Adjustments for Personal Performance will be made at the sole discretion
of the Compensation Committee of the Board of Directors of Lexington
Precision Corporation upon recommendation by the president of Lexington
Precision Corporation.
XII. TIMING OF BONUS PAYMENTS
All bonus payments will be made as soon as practicable after the end of
the plan year. Before any bonus payments can be made the following
two requirements must be met:
(1) necessary accounting and audit work must be completed so that
all bonus calculations can be made; and
(2) the bonus must be approved by a vote of the Board of Directors
of Lexington Precision Corporation.
It is anticipated that bonuses will be paid approximately 45-75 days after
the end of the plan year.
XIII. OTHER
Bonuses will be subject to income and employment tax withholding to the
extent required by applicable law.
Bonuses and the right to receive bonuses cannot be pledged, assigned or
alienated, voluntarily or involuntarily, by any Participant.
THE 1994 MANAGEMENT CASH BONUS PLAN AND ANY BONUSES GRANTED UNDER THE 1994
MANAGEMENT CASH BONUS PLAN SHALL NOT CONFER UPON ANY PARTICIPANT ANY RIGHT
WITH RESPECT TO THE CONTINUANCE OF EMPLOYMENT BY THE COMPANY, NOR SHALL
THEY INTERFERE IN ANY WAY WITH THE RIGHT OF THE COMPANY TO TERMINATE A
PARTICIPANT'S EMPLOYMENT AT ANY TIME.
THE 1994 MANAGEMENT CASH BONUS PLAN MAY BE REVISED, MODIFIED OR TERMINATED
IN ANY WAY, FOR ANY REASON AND AT ANY TIME AT THE SOLE DISCRETION OF THE
BOARD OF DIRECTORS OF LEXINGTON PRECISION CORPORATION BY VOTE OF A
MAJORITY OF THE BOARD AT ANY REGULAR OR SPECIAL MEETING OF THE BOARD.
Revised and approved by the Board of Directors of Lexington Precision
Corporation on October 18, 1994
-6-
9
EXHIBIT A
LEXINGTON PRECISION CORPORATE OFFICE
1994 MANAGEMENT CASH BONUS PLAN
AUTHORIZATION FORM
1. BONUS GROUP: CORPORATE OFFICE
-------------------------------------------------------------
2. BUDGETED OPERATING PROFIT . . . . . . . . . . . . . . . . . $
------------
3. TARGET OPERATING PROFIT . . . . . . . . . . . . . . . . . . $
------------
4. GROUP BONUS TARGET . . . . . . . . . . . . . . . . . . . . $
------------
5. TARGET PRE-BONUS OPERATING PROFIT . . . . . . . . . . . . . $
------------
6. PARTICIPANTS AS OF JANUARY 1, 1994 (IN DECLINING ORDER OF BASE SALARY):
TARGET
BONUS BASE SALARY TARGET BONUS
NAME TITLE PERCENTAGE AS OF 1/1/94 AS OF 1/1/94
------------------- ------------------------------ ------------ -------------- --------------
REVIEWED BY:___________________________________ DATE: __________________
CFO of Lexington Precision Corporation
APPROVED BY:___________________________________ DATE: __________________
President of Lexington Precision Corporation
APPROVED BY:___________________________________ DATE: _________________
Chairman of Compensation Committee
-7-
10
EXHIBIT B
---CONFIDENTIAL---
TO:
FROM:
DATE:
RE: 1994 MANAGEMENT CASH BONUS PLAN
-------------------------------
I am pleased to confirm that you have been selected to participate in Lexington
Precision Corporation's 1994 Management Cash Bonus Plan (the "Plan"). Attached
to this memorandum is a copy of the Plan document which describes how the Plan
works.
You will be a member of the following Bonus Group and have the following
targets under the 1994 Management Cash Bonus Plan:
Bonus Group: CORPORATE OFFICE
----------------------------------------
Your Target Bonus Percentage %
--------
Your Base Salary (as of 1/1/94) $
--------------------
Your Target Bonus (as of 1/1/94) $
--------------------
Please note that your participation in the Plan is entirely subject to the
terms and conditions of the Plan as set forth in the Plan document.
THE 1994 MANAGEMENT CASH BONUS PLAN MAY BE REVISED, MODIFIED OR TERMINATED IN
ANY WAY, FOR ANY REASON AND AT ANY TIME AT THE SOLE DISCRETION OF THE BOARD OF
DIRECTORS OF LEXINGTON PRECISION CORPORATION BY VOTE OF A MAJORITY OF THE BOARD
AT ANY REGULAR OR SPECIAL MEETING OF THE BOARD.
-8-
EX-10.9
6
LEXINGTON PRECISION CORP. 10-K EXHIBIT 10.9
1
LEXINGTON PRECISION CORPORATE OFFICE
1995 MANAGEMENT CASH BONUS PLAN
2
LEXINGTON PRECISION CORPORATE OFFICE
TABLE OF CONTENTS
SECTION
NUMBER PAGE
------ ----
I. PURPOSE OF PLAN 1
II. ELIGIBILITY 1
III. PLAN YEAR 1
IV. GROUPING OF PARTICIPANTS 1
V. SETTING OF TARGET BONUS PERCENTAGES 1
VI. AUTHORIZATION FORM 2
VII. NOTIFICATION OF EMPLOYEES 2
VIII. BASIS FOR BONUS PAYMENTS 3
IX. SETTING OF GOALS 3
X. CALCULATING THE BONUS POOL 4
XI. ADJUSTMENTS FOR PERSONAL PERFORMANCE 5
XII. TIMING OF BONUS PAYMENTS 6
XIII. OTHER 6
3
LEXINGTON PRECISION CORPORATE OFFICE
1995 MANAGEMENT CASH BONUS PLAN
I. PURPOSE OF PLAN
The "1995 Management Cash Bonus Plan" (the "Plan") is designed to provide
meaningful incentives for officers and key employees of the Corporate Office
(the "Bonus Group") of Lexington Precision Corporation (the "Company") to
increase profitability while efficiently managing the Company's assets.
II. ELIGIBILITY
A "Participant" shall mean an individual who meets both of the following
criteria:
(1) The individual has been selected to participate in the
Plan by the Compensation Committee of the Board of
Directors of Lexington Precision Corporation upon
recommendation of the president of Lexington Precision
Corporation; and
(2) The individual is a full-time, salaried, exempt employee
of the Company on the last day of the plan year.
Participants who retire during the plan year and are aged 62 or older on the
date of retirement and estates of Participants who die during the plan year
will be paid bonuses (if and to the extent earned) at the same time that all
other Participants receive their bonuses after the end of the plan year.
III. PLAN YEAR
The plan year shall mean the year ending December 31, 1995.
IV. GROUPING OF PARTICIPANTS
The Participants in the Bonus Group, will be designated at the beginning of the
plan year by the Compensation Committee of the Board of Directors of Lexington
Precision Corporation upon recommendation of the president of Lexington
Precision Corporation.
V. SETTING OF TARGET BONUS PERCENTAGES
Subject to the adjustment for Personal Performance (defined in Section XI
below), the "Target Bonus" for each Participant shall mean the amount
calculated by multiplying the Participant's aggregate base-salary received
during the year by a "Target Bonus Percentage" which will be set at the
beginning of the plan year by the Compensation Committee of the Board of
-1-
4
Directors of Lexington Precision Corporation upon recommendation of the
president of Lexington Precision Corporation. The "Group Target Bonus" shall
mean the aggregate of the Target Bonuses of all Participants in a Bonus Group.
The Target Bonus Percentage for the president of the Company will be set by the
president of Lexington Precision Corporation.
A Participant's bonus will always be based on the aggregate base-salary
received during the year, not on the base-salary level at any particular point
during the year (i.e., when calculating bonuses for Participants who received
salary increases during the year, for Participants who are hired during the
year or for Participants who retire or die during the year).
As a general guideline, the Target Bonus Percentage levels which would
typically be assigned to various categories of employees in the Bonus Group are
set forth below:
TARGET BONUS
POSITION PERCENTAGE
-------- ----------
Senior Vice Presidents 20-35%
Vice Presidents 15-25%
Junior Officers 5-15%
If a Participant moves to a higher management level during the year, such
Participant's Target Bonus Percentage will be reset at an appropriate higher
level determined by the Compensation Committee of the Board of Directors of
Lexington Precision Corporation upon recommendation of the president of
Lexington Precision Corporation, as if the Target Bonus Percentage had been at
the higher level for the entire year. If a Participant moves to a lower
management level during the year, such Participant's Target Bonus Percentage
will be reset at an appropriate lower level determined by the Compensation
Committee of the Board of Directors of Lexington Precision Corporation upon
recommendation of the president of Lexington Precision Corporation, as if the
Target Bonus Percentage had been at the lower level for the entire year.
VI. AUTHORIZATION FORM
Attached hereto as Exhibit A is the "Authorization Form" which shall be used by
the Compensation Committee of the Board of Directors of Lexington Precision
Corporation upon recommendation of the president of Lexington Precision
Corporation at the beginning of each plan year when designating Participants,
Target Bonus Percentages and the Bonus Group's Target Pre-Bonus Operating
Profit (defined in Section IX below).
VII. NOTIFICATION OF EMPLOYEES
Attached hereto as Exhibit B is the form of memorandum which shall be used
-2-
5
at the beginning of each plan year to inform employees of their participation
in the Plan and their Target Bonus Percentages and Target Bonuses.
VIII. BASIS FOR BONUS PAYMENTS
After the end of the plan year, when financial results for the year are
available, a calculation will be made to determine the bonus that will be paid
to each Participant.
The percentage of Target Bonus earned by each Participant will depend on the
following:
(1) how well the Bonus Group performed relative to its Target
Pre-Bonus Operating Profit; and
(2) the Participant's Personal Performance (discussed below).
All bonuses will be subject to the review and approval of the Board of
Directors of Lexington Precision Corporation.
IX. SETTING OF GOALS
"Operating Profit" means profit before interest, income taxes and other
non-operating expenses in accordance with the Company's standard accounting
procedures.
"Pre-Bonus Operating Profit" means operating profit before deducting any
expenses for bonuses relating to the 1995 Management Cash Bonus Plan.
The "Target Pre-Bonus Operating Profit" for the Bonus Group will be set at the
beginning of the year by the Compensation Committee of the Board of Directors
of Lexington Precision Corporation upon recommendation of the president of
Lexington Precision Corporation. The Target Pre-Bonus Operating Profit will
equal one of the following:
(1) the Bonus Group's "Budgeted Pre-Bonus Operating Profit"
as reflected in the annual budget for the Company;
(2) an amount higher than the Company's Budgeted Pre-Bonus
Operating Profit if the Budgeted Pre-Bonus Operating
Profit is below reasonable performance-standards (taking
into account, among other things, industry performance
standards, historical performance standards, and the
amount of capital invested in the Company); or
-3-
6
(3) an amount lower than the Company's Budgeted
Pre-Bonus Operating Profit if the Budgeted
Pre-Bonus Operating Profit is above reasonable
performance-standards (taking into account, among
other things, industry performance standards,
historical performance standards, and the amount of
capital invested in the Company).
The "reasonable performance standards" discussed above will be determined in
the sole discretion of the Compensation Committee of the Board of Directors of
Lexington Precision Corporation upon recommendation by the president of
Lexington Precision Corporation.
The Target Pre-Bonus Operating Profit will not be revised during the plan year,
except in cases where an acquisition or divestiture of a business completed
during the plan year materially affects reported operating results during that
plan year.
X. CALCULATING THE BONUS POOL
To calculate the bonus for each of the Participants in the Bonus Group, it is
first necessary to calculate the "Group Bonus Pool".
The Group Bonus Pool will be calculated by multiplying the Group Target Bonus
by the percentage in the column on the right below, opposite the percentage of
the Target Pre-Bonus Operating Profit which was attained by that Bonus Group.
PERCENTAGE PERCENTAGE OF TARGET
OF TARGET BONUS EARNED
PRE-BONUS (BEFORE ADJUSTING FOR
OPERATING PROFIT ATTAINED PERSONAL PERFORMANCE)
------------------------- ---------------------
less than 85.00% None
85.00 - 89.99% 25%
90.00 - 94.99% 50
95.00 - 99.99% 75
100.00 - 109.99% (target) 100
110.00 - 119.99% 125
120.00 - 129.99% 150
130.00 - 139.99% 175
140.00 % or more 200 (maximum)
The percentage of Target Bonus earned, before giving effect to adjustments for
Personal Performance, must be in the increments shown on the above chart. For
example, if the Bonus Group attained 108% of the Target Pre-Bonus Operating
Profit, the percentage used for each Participant in the Bonus Group would be
100% (not 120% or 125%). The percentages of Target Bonus earned are "stepped,"
not linear. No bonuses will be earned by any Participants in the Bonus Group
if less than 85% of the Target Pre-Bonus Operating Profit is
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7
attained. The Group Bonus Pool cannot exceed 200% of the Group Target Bonus.
XI. ADJUSTMENTS FOR PERSONAL PERFORMANCE
Half of the Group Bonus Pool will automatically be awarded to each Participant
in the Bonus Group in proportion to the relative Target Bonuses of all
Participants in the Bonus Group. With respect to all Participants, other than
the president of the Company, the balance of the Group Bonus Pool will be
divided among the Participants (or retained by the Company) based upon an
evaluation of each Participant's "Personal Performance" relative to that
Participant's personal job objectives for the plan year and relative to the
performance of all other Participants in the Bonus Group (other than the
president of the Company), in every case, as determined in the sole discretion
of the Compensation Committee of the Board of Directors of Lexington Precision
Corporation upon recommendation by the president of Lexington Precision
Corporation. In no event can this subjective portion of a Participant's bonus
exceed 200% of the portion of the Participant's Bonus which is not subject to
adjustment.
For example, if a Participant's bonus was calculated to be $10,000 before
any adjustment, $5,000 would be fixed and the remaining $5,000 would be
subject to upward or downward adjustment by up to 100%. This means that
if the Participant performed exceptionally poorly, the maximum downward
adjustment of that Participant's bonus would eliminate the entire half of
the bonus which was subject to adjustment and the Participant would
receive only the $5,000 fixed portion of the bonus. Subject to the
limitation set forth in the next paragraph, if the Participant performed
exceptionally well, the maximum upward adjustment of that Participant's
bonus would double the half of the bonus which was subject to adjustment
and the Participant would receive $15,000 (i.e., the $5,000 fixed portion
of the bonus plus 200% of the $5,000 subjective portion of the bonus).
Adjustments to bonuses of Participants in the Bonus Group will be limited so
that the net effect of all adjustments made to bonuses within the Bonus Group
cannot raise the aggregate bonuses paid to the Bonus Group to an amount in
excess of the Group Bonus Pool. This means that to adjust any Participant's
bonus upward, the bonuses of one or more other Participants within the Bonus
Group must be reduced by at least that amount.
Although the bonuses of one or more Participants may be reduced due to below
par personal performance, bonus funds made available by such
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8
reductions do not have to be reallocated to other Participants in the Bonus
Group. If funds are not reallocated, they are simply retained by the Company.
Adjustments for Personal Performance will be made at the sole discretion of the
Compensation Committee of the Board of Directors of Lexington Precision
Corporation upon recommendation by the president of Lexington Precision
Corporation.
XII. TIMING OF BONUS PAYMENTS
All bonus payments will be made as soon as practicable after the end of the
plan year. Before any bonus payments can be made the following two
requirements must be met:
(1) necessary accounting and audit work must be completed so that
all bonus calculations can be made; and
(2) the bonus must be approved by a vote of the Board of Directors
of Lexington Precision Corporation.
It is anticipated that bonuses will be paid approximately 45-75 days after the
end of the plan year.
XIII. OTHER
Bonuses will be subject to income and employment tax withholding to the extent
required by applicable law.
Bonuses and the right to receive bonuses cannot be pledged, assigned or
alienated, voluntarily or involuntarily, by any Participant.
THE 1995 MANAGEMENT CASH BONUS PLAN AND ANY BONUSES GRANTED UNDER THE 1995
MANAGEMENT CASH BONUS PLAN SHALL NOT CONFER UPON ANY PARTICIPANT ANY RIGHT WITH
RESPECT TO THE CONTINUANCE OF EMPLOYMENT BY THE COMPANY, NOR SHALL THEY
INTERFERE IN ANY WAY WITH THE RIGHT OF THE COMPANY TO TERMINATE A PARTICIPANT'S
EMPLOYMENT AT ANY TIME.
THE 1995 MANAGEMENT CASH BONUS PLAN MAY BE REVISED, MODIFIED OR TERMINATED IN
ANY WAY, FOR ANY REASON AND AT ANY TIME AT THE SOLE DISCRETION OF THE BOARD OF
DIRECTORS OF LEXINGTON PRECISION CORPORATION BY VOTE OF A MAJORITY OF THE BOARD
AT ANY REGULAR OR SPECIAL MEETING OF THE BOARD.
Revised and approved by the Board of Directors of Lexington Precision
Corporation on October 18, 1994
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9
Exhibit A
LEXINGTON PRECISION CORPORATE OFFICE
1995 MANAGEMENT CASH BONUS PLAN
AUTHORIZATION FORM
1. BONUS GROUP: CORPORATE OFFICE
---------------------------------------------------------------
2. BUDGETED OPERATING PROFIT . . . . . . . $__________________________________
3. TARGET OPERATING PROFIT . . . . . . . . $__________________________________
4. GROUP BONUS TARGET . . . . . . . . . . $__________________________________
5. TARGET PRE-BONUS OPERATING PROFIT . . . $__________________________________
6. PARTICIPANTS AS OF JANUARY 1, 1995 (IN DECLINING ORDER OF BASE SALARY):
Target
Bonus Base Salary Target Bonus
Name Title Percentage as of 1/1/95 as of 1/1/95
---- ----- ---------- ------------ ------------
REVIEWED BY: DATE:
-------------------------------------------- ---------------------------
CFO of Lexington Precision Corporation
APPROVED BY: DATE:
-------------------------------------------- ---------------------------
President of Lexington Precision Corporation
APPROVED BY: DATE:
-------------------------------------------- ---------------------------
Chairman of Compensation Committee
LPC 10/18/94
-7-
10
EXHIBIT B
---CONFIDENTIAL---
TO:
FROM:
DATE:
RE: 1995 MANAGEMENT CASH BONUS PLAN
I am pleased to confirm that you have been selected to participate in Lexington
Precision Corporation's 1995 Management Cash Bonus Plan (the "Plan"). Attached
to this memorandum is a copy of the Plan document which describes how the Plan
works.
You will be a member of the following Bonus Group and have the following
targets under the 1995 Management Cash Bonus Plan:
Bonus Group: CORPORATE OFFICE
------------------------------------------------------
Your Target Bonus Percentage _____________ %
Your Base Salary (as of 1/1/95) $_____________________
Your Target Bonus (as of 1/1/95) $_____________________
Please note that your participation in the Plan is entirely subject to the
terms and conditions of the Plan as set forth in the Plan document.
THE 1995 MANAGEMENT CASH BONUS PLAN MAY BE REVISED, MODIFIED OR TERMINATED IN
ANY WAY, FOR ANY REASON AND AT ANY TIME AT THE SOLE DISCRETION OF THE BOARD OF
DIRECTORS OF LEXINGTON PRECISION CORPORATION BY VOTE OF A MAJORITY OF THE BOARD
AT ANY REGULAR OR SPECIAL MEETING OF THE BOARD.
-8-
LPC 10/18/94
EX-10.32
7
LEXINGTON PRECISION CORP. 10-K EXHIBIT 10.32
1
January 13, 1995
Lexington Components, Inc.
767 Third Avenue
New York, New York 10017
Re: Amendment to Financing Agreements
Gentlemen:
Reference is made to certain financing agreements dated January 11,
1990 between Lexington Components, Inc. ("LCI") and Congress Financial
Corporation ("Congress"), including, but not limited to, an Accounts Financing
Agreement [Security Agreement], as amended (the "Accounts Agreement"), and all
supplements thereto and all other related financing and security agreements
(collectively, all of the foregoing, as the same have heretofore or
contemporaneously been or may be hereafter, amended, replaced, extended,
modified or supplemented, the "Financing Agreements").
In connection with the financing arrangements pursuant to the Accounts
Agreement and the other Financing Agreements, the parties hereto hereby agree
to amend the Financing Agreements, as set forth below:
1. Definitions:
(a) Additional Definitions. As used herein, the
following terms shall have the respective meanings given to them below and the
Accounts Agreement (including all supplements thereto) shall be deemed and is
hereby amended to include, in addition and not in limitation, each of the
following definitions:
"Interest Rate" shall mean a rate of one and one-half (1-1/2%)
percent per annum in excess of the Prime Rate; provided, that, Interest Rate
shall mean the rate of four and one-half (4-1/2%) percent per annum in excess
of the Prime Rate at Congress' option, without notice (a) for the period on and
after the date of termination or non-renewal hereof, or the date of the
occurrence of any Event of Default, and for so long as such Event of Default is
continuing as determined by Congress and until such time as all Obligations are
indefeasibly paid in full (notwithstanding entry of any judgment against LCI)
and (b) on the Revolving Loans at any time outstanding in excess of the amounts
available to LCI under the Accounts Agreement and supplements thereto (whether
or not such excess(es), arise or are made with or without Congress' knowledge
or consent and whether made before or after an Event of Default); provided,
further, that, the higher Interest Rate under the immediately preceding proviso
shall be inapplicable in the case of any excess(es)
2
described in clause (b) thereof if and to the extent that Congress shall, at
Congress' option, have agreed not to charge the higher Interest Rate otherwise
permitted to be charged under such proviso, as evidenced by a writing signed by
Congress at or prior to the date Congress makes a Revolving Loan(s) that is
expressly identified in such writing as giving rise to such excess(es) with
Congress' knowledge and consent
"Loans" shall mean the Revolving Loans and the Term Loans.
"Prime Rate Loans" shall mean any Loans or portions thereof on
which interest is payable based on the Prime Rate in accordance with the terms
thereof.
"Revolving Loans" shall mean the loans now or hereafter made
by Congress to or for the benefit of LCI on a revolving basis (involving
advances, repayments and readvances) as set forth in Section 2.1 of the
Accounts Agreement and Paragraph 3 of the letter agreement re: Inventory Loans,
dated March 23, 1990, by LCI, in favor of Congress.
"Term Loans" shall mean the term loans made by Congress to LCI
evidenced by the Term Note, the LCI Real Estate Note (as defined below) and the
New Equipment Term Note dated August 1, 1994 in the principal sum of
$2,000,000, each made by LCI in favor of Congress, as such notes may hereafter
be amended, supplemented, renewed, extended, restated or replaced.
(b) Interpretation. Capitalized terms used herein,
unless otherwise defined herein, shall have the meanings ascribed thereto in
the Accounts Agreement and the other Financing Agreements.
2. Maximum Credit
For purposes of Section 2.3 of the Accounts Agreement, all existing
and future Term Loans, including, without limitation, the Loans evidenced by
the LCI Amended and Restated Note, the LCI Real Estate Note and any and all New
Equipment Term Notes by LCI shall be considered made pursuant to a supplement
to the Accounts Agreement, and the loans and advances to LPC evidenced by the
"LPC Amended and Restated Note" and the "New Equipment Term Notes" (as each
such quoted term is defined in the LPC Financing Agreements), shall be
considered made pursuant to a supplement to the Accounts Financing Agreement
[Security Agreement], dated January 11, 1990, between LPC and Congress.
3. Additional Term Loan.
(a) Contemporaneously herewith, in order to evidence an
additional one-time advance to LCI (the "LCI Real Estate
-2-
3
Loan"), which is deemed to be made upon the effective date hereof, LCI is
executing and delivering to Congress a Term Promissory Note in the principal
amount of $1,500,000 (as the same now exists or may hereafter be amended,
supplemented, renewed, extended, restated or replaced, the "LCI Real Estate
Note"). The Obligations evidenced by the LCI Real Estate Note shall be
payable, including interest and other amounts, as provided therein, and to the
extent not inconsistent with the terms of the LCI Real Estate Note, as provided
in the other Financing Agreements, and shall be secured by all Collateral.
(b) As of the effective date of this Amendment, there is
no option for any of the Loans to bear interest at any rate other than the
Interest Rate, as herein defined. Accordingly, as of the effective date of
this Amendment, all Loans are and shall be Prime Rate Loans, and all references
in the LCI Real Estate Note, to "Eurodollar Rate Loans" or "Adjusted Eurodollar
Rate", shall not be deemed operative, unless and until such quoted terms are
defined in, and any such provisions are made operative by, a subsequent written
amendment to the Financing Agreements signed by LCI and Congress.
4. Interest.
(a) Section 3.1 of the Accounts Agreement, as heretofore
amended, is hereby deleted in its entirety and replaced with the following:
"3.1 (a) We shall pay to you interest on the
outstanding principal amount of the non-contingent
Obligations at the Interest Rate. All interest
accruing hereunder on and after the date of any Event
of Default or following the termination or
non-renewal hereof shall be payable on demand.
(b) Interest shall be payable by us to you
monthly in arrears not later than the first day of
each calendar month and shall be calculated on the
basis of a three hundred sixty (360) day year and
actual days elapsed. The Interest Rate on
non-contingent Obligations shall increase or decrease
by an amount equal to each increase or decrease in
the Prime Rate effective on the first day of the
month after any change in such Prime Rate is
announced based on the Prime Rate in effect on the
last day of the month in which any such change
occurs. In no event shall charges constituting
interest payable by us to you exceed the maximum
amount or the rate permitted under any applicable law
or regulation, and if any such part or provision of
this Agreement is in contravention of
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4
any such law or regulation, such part or provision
shall be deemed amended to conform thereto."
(b) Section 3.2 of the Accounts Agreement is hereby
deleted in its entirety and replaced with the following:
"[INTENTIONALLY OMITTED]"
(c) Any and all references in the Financing Agreements to
the post-default rate of interest continued in Section 3.2 of the Accounts
Agreement are hereby amended to refer to the post-default rate of interest
contained in Section 3.1 of the Accounts Agreement, as herein amended.
5. Representations, Warranties and Covenants. In addition to the
continuing representations, warranties and covenants heretofore or hereafter
made by LCI to Congress pursuant to the Financing Agreements, LCI hereby
represents, warrants and covenants with and to Congress as follows (which
representations, warranties and covenants are continuing and shall survive the
execution and delivery hereof and shall be incorporated into and made a part of
the Financing Agreements):
(a) No Event of Default exists or has occurred and is
continuing on the date of this Amendment.
(b) This Amendment has been duly executed and delivered
by LCI and is in full force and effect as of the date hereof, and the
agreements and obligations of LCI contained herein constitute the legal, valid
and binding obligations of LCI enforceable against LCI in accordance with their
terms.
6. Conditions to Effectiveness of Amendment. Anything contained
in this Amendment to the contrary notwithstanding, the terms and provisions of
this Amendment shall only become effective upon the satisfaction of the
following additional conditions precedent that:
(a) Congress shall have received an executed original or
executed original counterparts (as the case may be) of this Amendment together
with the following, each of which shall be in form and substance satisfactory
to Congress:
(i) the LCI Real Estate Note;
(ii) Deed to Secure Debt, Security
Agreement and Assignment of Leases
and Rents covering LCI's owned
property in Troup County, Georgia
(the "Georgia Deed to Secure Debt")
between LCI and Congress which
secures the Obligations evidenced by
the LCI Real Estate Note and certain
-4-
5
other Obligations as therein
provided, together with a 1,500,000
ALTA Loan title insurance policy
insuring Congress' interest under
the Georgia Deed to Secure Debt;
(iii) Uniform Commercial Code financing
statements (form UCC-1) and notice
filing (form UCC-2) executed by LCI
to be filed in Troup County, Georgia
as to personal property and fixtures;
(iv) a Phase I Environmental Assessment,
ALTA standard survey, and an orderly
liquidation value appraisal report,
each with respect to LCI's real
property in Troup County, Georgia
and each prepared, at LCI's expense,
by an environmental engineering
firm, a surveyor and an appraiser,
respectively, reasonably
satisfactory to Congress;
(v) the resolutions of the Board of
Directors of LCI duly authorizing
the execution and delivery of this
Amendment;
(vi) evidence of insurance and loss
payable endorsements naming Congress
as a loss payee thereunder, issued
by an insurance company satisfactory
to Congress, and certificates of
insurance policies and/or
endorsements naming Congress as
additional insured and loss payee,
all at LCI's cost and expense; and
(vii) evidence that LCI's owned real
property in Troup County, Georgia is
not within an area having special
flood hazard or flood prone
characteristics;
(b) All representations and warranties contained herein,
in the Accounts Agreement and in the other Financing Agreements shall be true
and correct in all material respects; and
(c) No Event of Default shall have occurred and no event
shall have occurred or condition be existing which, with notice or passage of
time or both, would constitute an Event of Default.
-5-
6
7. Effect of this Amendment. Except as modified pursuant hereto,
the Accounts Agreement and all supplements to the Accounts Agreement and all
other Financing Agreements, are hereby specifically ratified, restated and
confirmed by the parties hereto as of the date hereof and no existing defaults
or Events of Default have been waived in connection herewith. To the extent of
conflict between the terms of this Amendment and the Accounts Agreement, or any
of the other Financing Agreements, the terms of this Amendment control.
8. Further Assurances. LCI shall execute and deliver such
additional documents and take such additional actions as may be reasonably
requested by Congress to effectuate the provisions and purposes of this
Amendment.
9. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York without
reference to its principles of conflicts of law.
By the signatures hereto of the duly authorized officers, the parties
hereto mutually covenant, warrant and agree as set forth herein.
Very truly yours,
CONGRESS FINANCIAL CORPORATION
By: Lawrence S. Forte
---------------------------------
Title: Vice Presicent
------------------------------
AGREED AND ACCEPTED:
LEXINGTON COMPONENTS, INC.
By: Warren Delano
----------------------
Title: Vice Chairman
-------------------
-6-
7
CONSENT
The undersigned guarantor hereby consents to the foregoing Amendment,
agrees to be bound by its terms applicable to it, and ratifies and confirms the
terms of its Guarantee and Waiver dated January 11, 1990 as applicable to all
present and future indebtedness, liabilities and obligations of LEXINGTON
COMPONENTS, INC. ("LCI") to CONGRESS FINANCIAL CORPORATION ("Congress"),
including, without limitation, all indebtedness, liabilities and obligations
under the Financing Agreements as amended hereby.
LEXINGTON PRECISION CORPORATION
By: Warren Delano
-------------------------------
Title: President
----------------------------
-7-
EX-10.33
8
LEXINGTON PRECISION CORP. 10-K EXHIBIT 10.33
1
TERM PROMISSORY NOTE
$1,500,000 New York, New York
January 13, 1995
FOR VALUE RECEIVED, LEXINGTON COMPONENTS, INC., a Delaware corporation
(the "Debtor"), hereby unconditionally promises to pay to the order of CONGRESS
FINANCIAL CORPORATION, a California corporation (the "Payee"), at the offices
of Payee at 1133 Avenue of the Americas, New York, New York 10036, or at such
other place as the Payee or any holder hereof may from time to time designate,
the principal sum of ONE MILLION FIVE HUNDRED THOUSAND DOLLARS ($1,500,000) in
lawful money of the United States of America and in immediately available
funds, in eighty-four (84) consecutive monthly installments (or earlier as
hereinafter referred to) on the first day of each month commencing February 1,
1995, of which the first eighty-three (83) installments shall each be in the
amount of SEVENTEEN THOUSAND EIGHT HUNDRED FIFTY-SEVEN and 14/100 DOLLARS
($17,857.14), and the last (i.e. eighty-fourth (84th)) installment shall be in
the amount of the entire unpaid balance of this Note.
Debtor hereby further promises to pay interest to the order of Payee
on the unpaid principal balance hereof at the Interest Rate. Such interest
shall be paid in like money at said office or place from the date hereof,
commencing February 1, 1995 and on the first day of each month thereafter until
the indebtedness evidenced by this Note is paid in full. Interest payable upon
and after an Event of Default or following the termination or non-renewal of
the Financing Agreements shall be payable upon demand.
For purposes hereof (a) the term "Interest Rate" shall mean, as to
Prime Rate Loans, a rate of one and one-half (1-1/2%) percent per annum in
excess of the Prime Rate and as to Eurodollar Rate Loans, a rate of three and
one-quarter (3-1/4%) percent per annum in excess of the Adjusted Eurodollar
Rate; provided, that, at Payee's option, the Interest Rate shall mean a rate of
four and one-half (4-1/2%) percent per annum in excess of the Prime Rate as to
Prime Rate Loans and a rate of five and one-quarter (5-1/4%) percent per annum
in excess of the Adjusted Eurodollar Rate as to Eurodollar Rate Loans, upon and
during the continuance of an Event of Default or following the termination or
non-renewal of the Financing Agreements, and (b) the term "Prime Rate" shall
mean the rate from time to time publicly announced by CoreStates Bank, N.A., or
its successors, at its office in Philadelphia, Pennsylvania, as its prime rate,
whether or not such announced rate is the best rate available at such bank.
Unless otherwise defined herein, all capitalized terms used herein shall have
the meanings assigned thereto in the Accounts Agreement (as hereinafter
defined) and the other Financing Agreements.
2
The interest rate applicable to Prime Rate Loans payable hereunder
shall increase or decrease by an amount equal to each increase or decrease,
respectively, in the Prime Rate, effective on the first day of the month after
any change in the Prime Rate, based on the Prime Rate in effect on the last day
of the month in which any such change occurs. Interest shall be calculated on
the basis of a three hundred sixty (360) day year and actual days elapsed. In
no event shall the interest charged hereunder exceed the maximum permitted
under the laws of the State of New York or other applicable law.
This Note is issued pursuant to the terms and provisions of the letter
agreement re: Amendment to Financing Agreements, dated of even date herewith,
between Debtor and Payee (the "Amendment") to evidence the "LCI Real Estate
Loan" (as defined in the Amendment) made by Payee to Debtor. This Note is
secured by the "Collateral" described in the Accounts Financing Agreement
[Security Agreement], dated January 11, 1990, by and between Payee and Debtor,
as amended (the "Accounts Agreement") and any agreement, document or instrument
now or at any time hereafter executed and/or delivered in connection therewith
or related thereto (the foregoing, as the same now exist or may hereafter be
amended, modified, supplemented, renewed, extended, restated or replaced, are
hereinafter collectively referred to as the "Financing Agreements") and is
entitled to all of the benefits and rights thereof and of the Financing
Agreements. At the time any payment is due hereunder, at its option, Payee may
charge the amount thereof to any account of Debtor maintained by Payee.
If any principal or interest payment is not made when due hereunder,
and such failure shall continue for three (3) days, or if any other Event of
Default (as defined in the Accounts Agreement) shall occur for any reason, or
if the Financing Agreements shall be terminated or not renewed for any reason
whatsoever, then and in any such event, in addition to all rights and remedies
of Payee under the Financing Agreements, applicable law or otherwise, all such
rights and remedies being cumulative, not exclusive and enforceable
alternatively, successively and concurrently, Payee may, at its option, declare
any or all of Debtor's obligations, liabilities and indebtedness owing to Payee
under the Financing Agreements (the "Obligations"), including, without
limitation, all amounts owing under this Note, to be due and payable, whereupon
the then unpaid balance hereof together with all interest accrued thereon,
shall forthwith become due and payable, together with interest accruing
thereafter at the then applicable rate stated above until the indebtedness
evidenced by this Note is paid in full, plus the costs and expenses of
collection hereof, including, but not limited to, reasonable attorneys' fees.
- 2 -
3
Debtor (i) waives diligence, demand, presentment, protest and notice
of any kind, (ii) agrees that it will not be necessary for any holder hereof to
first institute suit in order to enforce payment of this Note and (iii)
consents to any one or more extensions or postponements of time of payment,
release, surrender or substitution of collateral security, or forbearance or
other indulgence, without notice or consent. Upon the occurrence and during
the continuance of any Event of Default, Payee shall have the right, but not
the obligation to setoff against this Note all money owed by Payee to Debtor.
Payee shall not be required to resort to any Collateral for payment,
but may proceed against Debtor and any guarantors or endorsers hereof in such
order and manner as Payee may choose. None of the rights of Payee shall be
waived or diminished by any failure or delay in the exercise thereof.
Debtor hereby waives the right to a trial by jury and all rights of
setoff and rights to interpose counterclaims and cross-claims in any litigation
or proceeding arising in connection with this Note, the Accounts Agreement, the
other Financing Agreements, the Obligations or the Collateral, other than
compulsory counterclaims, the non-assertion of which would result in a
permanent waiver. Debtor hereby irrevocably consents to the non-exclusive
jurisdiction of the Supreme Court of the State of New York and of the United
States District Court for the Southern District of New York for all purposes in
connection with any action or proceeding arising out of or relating to this
Note, the Accounts Agreement, the other Financing Agreements, the Obligations
or the Collateral and further consents that any process or notice of motion or
other application to said Courts or judge thereof, or any notice in connection
with any proceeding hereunder may be served (i) inside or outside the State of
New York by registered or certified mail, return receipt requested, and service
or notice so served shall be deemed complete five (5) days after the same shall
have been posted or (ii) in such other manner as may be permissible under the
rules of said Courts. Within thirty (30) days after such mailing, Debtor shall
appear in answer to such process or notice of motion or other application to
said Courts, failing which Debtor shall be deemed in default and judgment may
be entered by Payee against Debtor for the amount of the claim and other relief
requested therein.
The execution and delivery of this Note has been authorized by the
Board of Directors and by any necessary vote or consent of the stockholders of
Debtor.
This Note, the other Obligations and the Collateral shall be governed
by and construed in accordance with the laws of the State of New York and shall
be binding upon the successors and assigns of Debtor and inure to the benefit
of Payee and its successors, endorsees and assigns. If any term or provision
of this Note shall
- 3 -
4
be held invalid, illegal or unenforceable, the validity of all other terms and
provisions hereof shall in no way be affected thereby.
This Note may not be changed, modified or terminated orally, but only
by an agreement in writing signed by the Payee or the holder hereof.
Whenever used herein, the terms "Debtor" and "Payee" shall be deemed
to include their respective successors and assigns.
LEXINGTON COMPONENTS, INC.
ATTEST:
By: Warren Delano
------------------------------
Michael A. Lubin
------------------------------
Chairman Title: Vice Chairman
---------------------------
[Corporate Seal]
- 4 -
EX-10.34
9
LEXINGTON PRECISION CORP. 10-K EXHIBIT 10.34
1
January 31, 1995
Lexington Precision Corporation
767 Third Avenue
New York, New York 10017
Re: Amendment to Financing Agreements
Gentlemen:
Reference is made to certain financing agreements dated January 11,
1990 between Lexington Precision Corporation ("LPC") and Congress Financial
Corporation ("Congress"), including, but not limited to, an Accounts Financing
Agreement [Security Agreement], as amended (the "Accounts Agreement"), and all
supplements thereto and all other related financing and security agreements
(collectively, all of the foregoing, as the same have heretofore or
contemporaneously been or may be hereafter, amended, replaced, extended,
modified or supplemented, the "Financing Agreements").
In connection with the financing arrangements pursuant to the Accounts
Agreement and the other Financing Agreements, the parties hereto hereby agree
to amend the Financing Agreements, as set forth below:
1. Definitions:
(a) Additional Definitions. As used herein or in any of
the other Financing Agreements, the following terms shall have the respective
meanings given to them below and the Accounts Agreement (including all
supplements thereto) shall be deemed and is hereby amended to include, in
addition and not in limitation, each of the following definitions:
"Adjusted Eurodollar Rate" shall mean, with respect to each
Interest Period for any Eurodollar Rate Loan, the rate per annum (rounded
upwards, if necessary, to the next one-sixteenth (1/16) of one (1%) percent)
determined by dividing (a) the Eurodollar Rate for such Interest Period by (b)
a percentage equal to: (i) one (1) minus (ii) the Reserve Percentage. For
purposes hereof, "Reserve Percentage" shall mean the reserve percentage,
expressed as a decimal, prescribed by any United States or foreign banking
authority for determining the reserve requirement which is or would be
applicable to deposits of United States dollars in a non-United States or an
international banking office of Reference Bank used to fund a Eurodollar Rate
Loan or any Eurodollar Rate Loan made with the proceeds of such deposit,
whether or not the Reference Bank actually holds or has made any such deposits
or loans. The Adjusted Eurodollar Rate shall be
2
adjusted on and as of the effective day of any change in the Reserve Percentage.
"Business Day" or "business day" shall mean (a) for the Prime
Rate Loans, any day other than a Saturday, Sunday, or other day on which
commercial banks are authorized or required to close under the laws of the
State of New York or the Commonwealth of Pennsylvania, and a day on which the
Reference Bank and Congress are open for the transaction of business, and (b)
for all Eurodollar Rate Loans, any such day as described in (a) above in this
definition, excluding any day on which banks are closed for dealings in dollar
deposits in the London interbank market or other applicable Eurodollar Rate
market.
"Eurodollar Rate Loans" shall mean any Loans or portion
thereof on which interest is payable based on the Adjusted Eurodollar Rate in
accordance with the terms hereof.
"Eurodollar Rate" shall mean with respect to the Interest
Period for a Eurodollar Rate Loan, the interest rate per annum equal to the
arithmetic average of the rates of interest per annum (rounded upwards, if
necessary, to the next one-sixteenth (1/16) of one (1%) percent) at which
Reference Bank is offered deposits of United States dollars in the London
interbank market (or other Eurodollar Rate market selected by LPC and approved
by Congress) on or about 9:00 a.m. (New York time) two (2) Business Days prior
to the commencement of such Interest Period in amounts substantially equal to
the principal amount of the Eurodollar Rate Loans requested by and available to
LPC in accordance with this Agreement, with a maturity of comparable duration
to the Interest Period selected by LPC.
"Interest Period" shall mean for any Eurodollar Rate Loan, a
period of approximately one (1), two (2), or three (3) months duration as LPC
may elect, the exact duration to be determined in accordance with the customary
practice in the applicable Eurodollar Rate market; provided, that, LPC may not
elect an Interest Period which will end after the last day of the then-current
term of the Financing Agreements or after the effective date of any notice of
termination given under the Financing Agreements.
"Interest Rate" shall mean, as to Prime Rate Loans, a rate of
one (1%) percent per annum in excess of the Prime Rate and, as to Eurodollar
Rate Loans, a rate of three and one-quarter (3 1/4%) percent per annum in
excess of the Adjusted Eurodollar Rate (based on the Eurodollar Rate applicable
for the Interest Period selected by LPC as in effect three (3) Business Days
after the date of receipt by Congress of the request of LPC for such Eurodollar
Rate Loans in accordance with the terms hereof, whether such rate is higher or
lower than any rate previously quoted to LPC); provided, that, Interest Rate
shall mean the rate
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of three (3%) percent per annum in excess of the Prime Rate as to Prime Rate
Loans and the rate of five and one quarter (5 1/4%) percent per annum in excess
of the Adjusted Eurodollar Rate as to Eurodollar Rate Loans, at Congress'
option, without notice, (a) for the period on and after the effective date of
termination or non-renewal hereof, or the date of the occurrence of any Event
of Default, and for so long as such Event of Default is continuing as
determined by Congress and until such time as all Obligations are indefeasibly
paid in full (notwithstanding entry of any judgment against LPC) and (b) on the
Revolving Loans at any time outstanding in excess of the amounts available to
LPC under the Accounts Agreement and supplements thereto, which excess(es)
continue to exist or arise after three (3) days' telephonic or written notice
to LPC of any such excess(es) (whether or not such excess(es), arise or are
made with or without Congress' knowledge or consent and whether made before or
after an Event of Default); provided, further, that, the higher Interest Rate
under the immediately preceding proviso shall be inapplicable in the case of
any excess(es) described in clause (b) thereof if and to the extent that
Congress shall, at Congress' option, have agreed not to charge the higher
Interest Rate otherwise permitted to be charged under such proviso, as
evidenced by a writing expressly so stating and signed by Congress.
"Loans" shall mean the Revolving Loans and the Term Loans.
"Participant" shall mean any person which at any time
participates with Congress in respect of the Loans, the Credits or other
Obligations or any portion thereof.
"Prime Rate Loans" shall mean any Loans or portions thereof on
which interest is payable based on the Prime Rate in accordance with the terms
thereof.
"Reference Bank" shall mean CoreStates Bank, N.A., or such
other bank as Lender may from time to time designate.
"Revolving Loans" shall mean the loans now or hereafter made
by Congress to or for the benefit of LPC on a revolving basis (involving
advances, repayments and readvances) as set forth in Section 2.1 of the
Accounts Agreement and Paragraph 3 of the letter agreement re: Inventory Loans,
dated March 23, 1990, by LPC, in favor of Congress.
"Term Loans" shall mean the term loans made by Congress to LPC
evidenced by the LPC Second Restated Note (as defined below), the LPC Real
Estate Note (as defined below) and the New Equipment Term Notes by LPC in favor
of Congress, as such notes may hereafter be amended, supplemented, renewed,
extended, restated or replaced.
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(b) Interpretation. Capitalized terms used herein,
unless otherwise defined herein, shall have the meanings ascribed thereto in
the Accounts Agreement and the other Financing Agreements.
2. Acknowledgement of Obligations. LPC hereby acknowledges and
agrees that, as of the close of business on January 26, 1995, LPC was indebted
to Congress for Obligations under the Financing Agreements (including LPC's
Guarantee with respect to the Obligations of LCI) in a principal amount of not
less than $20,980,920.61, together with interest accrued and accruing thereon,
plus the fees, charges, costs and expenses provided under the Financing
Agreements, all of which is owed without offset, defense or counterclaim of any
kind, nature or description.
3. Maximum Credit.
(a) Section 1.7 of the Accounts Agreement, as heretofore
amended, is hereby deleted in its entirety and replaced with the following:
"1.7. "Maximum Credit" shall mean the amount of $40,000,000."
(b) For purposes of Section 2.3 of the Accounts
Agreement, all existing and future Term Loans, including, without limitation,
the Loans evidenced by the LPC Second Restated Note, the LPC Real Estate Note
(if the LPC Real Estate Loan has been made) and any and all New Equipment Term
Notes by LPC shall be considered made pursuant to a supplement to the Accounts
Agreement, and the "Loans" to LCI evidenced by the "LCI Second Restated Note",
the "LCI Ohio Real Estate Note", the "LCI Georgia Real Estate Note" and the
"New Equipment Term Notes" (as each such quoted term is defined in the LCI
Financing Agreements), shall be considered made pursuant to a supplement to the
Accounts Financing Agreement [Security Agreement], dated January 11, 1990,
between LCI and Congress.
4. Additional Term Loans.
(a) Contemporaneously herewith, in order to evidence the
balance of the outstanding Obligations owed by LPC pursuant to the Amended and
Restated Promissory Note, dated January 14, 1994, made payable by LPC in favor
of Congress, in the original principal amount of $2,700,000 and the New
Equipment Term Note, dated as of August 1, 1994, made payable by LPC in favor
of Congress, in the original principal amount of $1,000,000, and in order to
evidence an additional one-time advance to LPC, which is deemed to be made upon
the effective date hereof, in the principal amount of $3,605,499.55, LPC is
executing and delivering to Congress a Second Amended and Restated Promissory
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Note in the original principal amount of $6,683,000 (as the same now exists or
may hereafter be amended, supplemented, renewed, extended, restated or replaced,
the "LPC Second Restated Note"). The Obligations evidenced by the LPC Second
Restated Note shall be payable, including interest and other amounts, as
provided therein and, to the extent not inconsistent with the terms of the LPC
Second Restated Note, as provided in the other Financing Agreements, and shall
be secured by all Collateral.
(b) At LPC's request made within ninety (90) days after
the date hereof and upon not less than five (5) business days' prior written
notice by LPC to Congress and provided all of the conditions precedent set
forth in Section 12 are then satisfied, Congress agrees to make an additional
one-time advance to LPC (the "LPC Real Estate Loan") in an amount equal to the
lesser of (i) eighty (80%) percent of the orderly liquidation value of the
owned real property of LPC in Pinal County, Arizona as shown on the appraisal
required to be delivered under Section 12 hereof, or (ii) $2,500,000 minus the
sum of (A) $1,500,000 plus (B) the original principal amount of the "LCI Ohio
Real Estate Loan" (as defined in the LCI Financing Agreements). The LPC Real
Estate Loan shall be evidenced by a Term Promissory Note in the principal
amount of the LPC Real Estate Loan in the form annexed hereto as Exhibit A (as
the same now exists or may hereafter be amended, supplemented, renewed,
extended, restated or replaced, the "LPC Real Estate Note"). The Obligations
evidenced by the LPC Real Estate Note shall be payable, including interest and
other amounts, as provided therein, and, to the extent not inconsistent with
the terms of the LPC Real Estate Note, as provided in the other Financing
Agreements, and shall be secured by all Collateral.
5. New Equipment Term Loans.
(a) Sections 2(a) and 2(b) of the letter agreement re:
Amendment to Financing Agreements, dated as of March 25, 1994, between Congress
and LPC, as heretofore amended by the letter agreement re: Amendment to
Financing Agreement, dated as of August 1, 1994 (as so amended, the "New
Equipment Term Loan Agreement") are hereby deleted in their entirety and
replaced with the following:
"(a) Subject to and upon the terms and conditions
contained herein and in the other Financing
Agreements, including the sublimit set forth below in
Section 2(b), Congress shall, in its discretion, make
New Equipment Term Loans to LPC, from time to time,
at LPC's request, of up to eighty (80%) percent of
the orderly liquidation value of such Eligible New
Equipment, as set forth in an appraisal report
prepared for Congress, at LPC's expense, by MB
Valuation Services, Inc.,
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Daley-Hodkin Appraisal Corporation or other appraiser
reasonably satisfactory to Congress.
(b) Except in Congress' discretion (i) the aggregate
original principal amount of all New Equipment Term
Loans made to LPC plus the aggregate original
principal amount of all "New Equipment Term Loans"
(as defined in the LCI Financing Agreements) made to
LCI under the LCI Financing Agreements after the date
hereof, shall not exceed $11,300,000, and (ii) the
aggregate principal amount of all Obligations
evidenced by the LPC Second Restated Note, the LPC
Real Estate Note, the "LCI Second Restated Note" (as
defined in the LCI Financing Agreements), the "LCI
Georgia Real Estate Note" (as defined in the LCI
Financing Agreements) and the "LCI Ohio Real Estate
Note" (as defined in the LCI Financing Agreements)
and each of the New Equipment Term Notes made by each
of LPC and LCI in favor of Congress, shall not exceed
the sum of $26,000,000 at any one time outstanding.
Except in Congress' discretion, New Equipment Term
Loans shall only be available (subject to the
foregoing lending formula and sublimits set forth
herein) in integral multiples of $100,000 and in
amounts not less than $500,000 for each New Equipment
Term Loan."
(b) Section 2(d)(iii) of the New Equipment Term Loan
Agreement is hereby deleted in its entirety and replaced with the following:
"(iii) Congress shall have received a copy(ies) of
the invoice(s) covering the Cost of New Equipment with respect to the Eligible
New Equipment and all other amounts required to be paid in connection
therewith, together with a copy of an appraisal report as required under
Section 2(a) above setting forth the orderly liquidation value of the Eligible
New Equipment as provided in Section 2(a)."
(c) Exhibit I to the New Equipment Term Loan Agreement is
hereby replaced with the form designated as Exhibit I annexed hereto.
6. Interest.
(a) Section 3.1 of the Accounts Agreement, as heretofore
amended, is hereby deleted in its entirety and replaced with the following:
"3.1 (a) We shall pay to you interest on the
outstanding principal amount of the non-contingent
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Obligations at the Interest Rate. All interest
accruing hereunder on and after the date of any Event
of Default or following the effective date of
termination or non-renewal hereof shall be payable on
demand.
(b) We may from time to time request that Prime
Rate Loans be converted to Eurodollar Rate Loans or
that any existing Eurodollar Rate Loans continue for
an additional Interest Period. Such request from us
shall specify the amount of the Prime Rate Loans
which will constitute Eurodollar Rate Loans (subject
to the limits set forth below) and the Interest
Period to be applicable to such Eurodollar Rate
Loans. Subject to the terms and conditions contained
herein, three (3) Business Days after receipt by you
of such a request from us, such Prime Rate Loans
shall be converted to Eurodollar Rate Loans or such
Eurodollar Rate Loans shall continue, as the case may
be, provided, that, each of the following additional
conditions are satisfied: (i) no Event of Default,
or event which with notice or passage of time or both
would constitute an Event of Default exists or has
occurred and is continuing, (ii) we shall have
complied with such customary procedures as are
established by you and specified by you to us from
time to time for requests by us for Eurodollar Rate
Loans, (iii) no more than three (3) Interest Periods
may be in effect at any one time with respect to LPC
and no more than four (4) Interest Periods in the
aggregate may be in effect with respect to LPC and
LCI at any one time, (iv) the amount of the
Eurodollar Rate Loans subject to a given Interest
Period must be in the amount of $1,000,000 or an
integral multiple thereof, (v) the minimum aggregate
amount of Eurodollar Rate Loans outstanding and/or
requested by us and LCI shall not be less than
$5,000,000, (vi) the maximum amount of the Eurodollar
Rate Loans at any time outstanding and/or requested
by us shall not exceed the amount equal to
ninety-five (95%) percent of the principal amount of
the Term Loans plus eighty (80%) percent of the
Revolving Loans which it is anticipated will be
outstanding on the last day of the applicable
Interest Period, as determined by you, and (vii) you
shall have determined that the Adjusted Eurodollar
Rate is available to you for such Interest Period
through the Reference Bank and can be readily
determined as of the date of the request for such
Eurodollar Rate Loan by us. Any request by us to
convert
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Prime Rate Loans to Eurodollar Rate Loans or to
continue any existing Eurodollar Rate Loans shall be
irrevocable. Notwithstanding anything to the contrary
contained herein, you and the Reference Bank shall not
be required to purchase United States Dollar deposits
in the London interbank market or other applicable
Eurodollar Rate market to fund any Eurodollar Rate
Loans, but the provisions hereof shall be deemed to
apply as if you and Reference Bank had purchased such
deposits to fund the Eurodollar Rate Loans.
(c) Any Eurodollar Rate Loans shall automatically
convert to Prime Rate Loans upon the last day of the
applicable Interest Period, unless you have received
a request complying with the terms hereof to continue
such Eurodollar Rate Loan at least three (3) Business
Days prior to such last day in accordance with the
terms hereof. Any Eurodollar Rate Loans shall, at
your option, upon notice by you to us, convert to
Prime Rate Loans in the event that (i) an Event of
Default has occurred and is continuing, (ii) this
Agreement shall terminate or not be renewed, or (iii)
the aggregate principal amount of the Prime Rate
Loans which have previously been converted to
Eurodollar Rate Loans or existing Eurodollar Rate
Loans continued, as the case may be, at the beginning
of an Interest Period shall at any time during such
Interest Period exceed either (A) the aggregate
principal amount of the Loans then outstanding or (B)
the sum of the then outstanding principal amount of
the Term Loans plus the Revolving Loans then
available to us under the Accounts Agreement and
supplements thereto. We shall pay to you, upon
demand by you (or you may, at your option, charge any
of our loan accounts) any amounts required to
compensate you, the Reference Bank or any Participant
with you for any loss (including loss of anticipated
profits), cost or expense incurred by such person, as
a result of the conversion of Eurodollar Rate Loans
to Prime Rate Loans pursuant to any of the foregoing.
(d) Interest shall be payable by us to you
monthly in arrears not later than the first day of
each calendar month and shall be calculated on the
basis of a three hundred sixty (360) day year and
actual days elapsed. The Interest Rate on
non-contingent Obligations (other than Eurodollar
Rate Loans) shall increase or decrease by an amount
equal to each increase or decrease in the Prime
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Rate effective on the first day of the month after any
change in such Prime Rate is announced based on the
Prime Rate in effect on the last day of the month in
which any such change occurs. In no event shall
charges constituting interest payable by us to you
exceed the maximum amount or the rate permitted under
any applicable law or regulation, and if any such part
or provision of this Agreement is in contravention of
any such law or regulation, such part or provision
shall be deemed amended to conform thereto.
(e) Notwithstanding anything to the contrary
contained herein, all Eurodollar Rate Loans shall,
upon notice by you to us, subject to our option (if
applicable) set forth in the following sentence,
convert to Prime Rate Loans in the event that (i) any
change in applicable law or regulation (or the
interpretation or administration thereof) shall
either (A) make it unlawful for you, Reference Bank
or any Participant to make or maintain Eurodollar
Rate Loans or to comply with the terms hereof in
connection with the Eurodollar Rate Loans, by an
amount deemed by you to be material, or (B) shall
result in the increase in the costs to you, Reference
Bank or any Participant of making or maintaining any
Eurodollar Rate Loans or (C) reduce the amounts
received or receivable by you in respect thereof, by
an amount deemed by you to be material or (ii) the
cost to you, Reference Bank or any Participant of
making or maintaining any Eurodollar Rate Loans shall
otherwise increase by an amount deemed by you to be
material. In the circumstances described in clauses
(i)(B), (i)(C) or (ii), in lieu of conversion to
Prime Rate Loans, we shall have the option, for the
balance of the Interest Period(s) for
then-outstanding Eurodollar Rate Loans, of paying any
and all increased costs to you, Reference Bank and
each Participant, together with the aggregate amount
by which the amounts received or receivable by you
have been reduced in respect of such Eurodollar Rate
Loans. In the event of any conversion of Eurodollar
Rate Loans to Prime Rate Loans, we shall pay to you,
upon demand by you (or you may, at your option,
charge any of our loan accounts) any amounts required
to compensate you, the Reference Bank or any
Participant with you for any loss (including loss of
anticipated profits), cost or expense incurred by you
or any such person as a result of any conversion of
Eurodollar Rate Loans
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to Prime Rate Loans, including, without limitation,
any such loss, cost or expense incurred by reason of
the liquidation or reemployment of deposits or other
funds acquired by you or any such person to make or
maintain the Eurodollar Rate Loans or any portion
thereof. A certificate signed by you setting forth
the basis for the determination of such amount
necessary to compensate you as aforesaid shall be
delivered to us and shall be conclusive, absent
manifest error.
(f) If any payments or prepayments in respect of
the Eurodollar Rate Loans are received by you other
than on the last day of the applicable Interest
Period (whether pursuant to acceleration, upon
maturity or otherwise), including any payments
pursuant to the application of collections under
Section 5 of this Agreement or any other payments
made with the proceeds of Collateral, we shall pay to
you upon demand by you (or you may, at your option,
charge any of our loan accounts) any amounts required
to compensate you, the Reference Bank or any
Participant for any additional loss (including loss
of anticipated profits), cost or expense incurred by
such person as a result of such prepayment or
payment, including, without limitation, any loss,
cost or expense incurred by reason of the liquidation
or reemployment of deposits or other funds acquired
by you or any such person to make or maintain such
Eurodollar Rate Loans or any portion thereof."
(b) Section 3.2 of the Accounts Agreement is hereby
deleted in its entirety and replaced with the following:
"[INTENTIONALLY OMITTED]"
(c) Any and all references in the Financing Agreements to
the post-default rate of interest continued in Section 3.2 of the Accounts
Agreement are hereby amended to refer to the post-default rate of interest
contained in Section 3.1 of the Accounts Agreement, as herein amended.
7. Net Worth Covenants. Section IV (g)(ii) of the Covenant
Supplement to the Accounts Agreement, dated January 11, 1990, as amended, is
hereby further amended by deleting it in its entirety and replacing it with the
following:
"(ii) Borrower shall, at all times, maintain on a
basis consolidated with Borrower's direct and
indirect Subsidiaries, a Net Worth not less than
negative $9,500,000."
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8. Term. The first sentence of Section 9.1 of the Accounts
Agreement, as heretofore amended, is hereby deleted in its entirety and
replaced with the following:
"This Agreement shall become effective upon acceptance by
you and shall continue in full force and effect for a term
ending January 2, 1998 (the "Renewal Date"), unless sooner
terminated pursuant to the terms hereof."
9. Inventory Sublimit. Paragraph 3 of the letter agreement re:
Inventory Loans, dated March 23, 1990, is hereby amended by deleting the
reference to "$3,000,000" and replacing it with "$5,000,000".
10. Fees.
(a) LPC shall pay to Congress a facility fee in an amount
equal to $62,500, payable simultaneously with the execution hereof, which fee
is fully earned as of the date hereof.
(b) Section 3.5 of the Account Agreement is hereby
deleted in its entirety and replaced with the following:
"3.5 If the average outstanding daily
principal balance of all Loans made and Credits provided
by you to us under this Agreement or any supplement hereto
in any calendar month during the applicable time period
set forth below, plus the average outstanding daily
principal balance of all "Loans" made or "Credits"
provided by you to LCI under (and as such quoted terms are
defined in) the LCI Financing Agreements for such time
period, shall be less than the corresponding amount set
forth below (the "Unused Line Base Amount"), we and LCI
shall be jointly and severally obligated to pay to you, on
or before the tenth (10th) day of the next succeeding
calendar month, an unused line fee calculated at the rate
of one- half of one (1/2 of 1%) percent per annum upon the
amount by which the Unused Line Base Amount exceeds the
average outstanding daily principal balance of all such
Loans and Credits to LPC and LCI in respect of such month:
Unused Line
Time Period Base Amount
----------- -----------
(i) April 1, 1995 through $25,000,000
and including
December 31, 1995
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(ii) January 1, 1996 through $20,000,000
and including
December 31, 1996
(iii) January 1, 1997 and 15,000,000
thereafter
(c) Section 9.2 of the Accounts Agreement, as heretofore amended, is
hereby deleted in its entirety and replaced with the following:
"9.2 If for any reason the Financing Agreements are terminated
prior to January 2, 1998, in view of the impracticability and
extreme difficulty of ascertaining actual damages and by mutual
agreement of the parties as to a reasonable calculation of your
lost profits as a result thereof, we hereby agree to pay to you
upon the effective date of such termination, jointly and
severally with LCI, an early termination fee in an amount equal
to: (i) two (2%) percent of the average outstanding balance of
all Loans and Credits provided by you to us and LCI during the
twelve (12) calendar month period ended immediately prior to the
effective date of termination (such average balance, the "Average
Line Usage") if such termination occurs on or prior to December
31, 1995, (ii) one (1%) percent of the Average Line Usage if such
termination occurs after December 31, 1995, but on or prior to
December 31, 1996, or (iii) one-half of one (1/2 of 1%) of the
Average Line Usage if such termination occurs after December 31,
1996 but on or prior to June 30, 1997; provided, that, the early
termination fee for a termination effective after December 31,
1996 as provided for in this clause (iii) of Section 9.2 will not
be payable by us and/or LCI (A) if we and LCI have obtained and
delivered to you a written proposal for a complete replacement
and refinancing of our and LCI's Obligations to you, (B) you
determine in your sole and absolute discretion not to offer us
and LCI continued financing on substantially the same terms and
conditions of such written proposal (such determination by you to
be made within fifteen (15) business days after your receipt of
such written proposal) and (C) we enter into new financing
arrangements with such replacement lender on the same terms and
conditions of such written proposal and we pay and perform all of
our Obligations hereunder upon and in connection with such
termination. No early termination fee shall
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be payable if termination occurs effective after June 30, 1997.
The early termination fee payable as provided for herein shall be
presumed to be the amount of damages sustained by you as a result
of said early termination and we agree that it is reasonable
under the circumstances currently existing. The early
termination fee provided for herein shall be deemed included in
the Obligations."
(d) Section 1.8 of the Trade Financing Agreement
Supplement to the Accounts Agreement, dated July 19, 1994, is hereby amended by
deleting the reference to "two and one-half percent (2-1/2%)" and replacing it
with "one percent (1%)".
11. Representations, Warranties and Covenants. In addition to the
continuing representations, warranties and covenants heretofore or hereafter
made by LPC to Congress pursuant to the Financing Agreements, LPC hereby
represents, warrants and covenants with and to Congress as follows (which
representations, warranties and covenants are continuing and shall survive the
execution and delivery hereof and shall be incorporated into and made a part of
the Financing Agreements):
(a) No Event of Default exists or has occurred and is continuing
on the date of this Amendment.
(b) This Amendment has been duly executed and delivered by LPC
and is in full force and effect as of the date hereof, and the agreements and
obligations of LPC contained herein constitute the legal, valid and binding
obligations of LPC enforceable against LPC in accordance with their terms.
(c) As of the date hereof, LPC is not liable for any outstanding
purchase money indebtedness or indebtedness under capitalized leases, which
indebtedness was incurred after January 11, 1990 and is secured by any of the
equipment of LPC, except purchase money indebtedness to Congress secured by
equipment (among other Collateral).
12. Conditions to Effectiveness of Amendment. Anything contained
in this Amendment to the contrary notwithstanding, the terms and provisions of
this Amendment shall only become effective upon the satisfaction of the
following additional conditions precedent, subject to Section 13 below:
(a) Congress shall have received an executed original or
executed original counterparts (as the case may be) of this Amendment together
with the following, each of which shall be in form and substance satisfactory to
Congress:
(i) the LPC Second Restated Note;
(ii) the LPC Real Estate Note;
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(iii) Second Amended and Restated Deed of Trust and
Assignment of Rents with Security Agreement
and Financing Statement (Fixture Filing)
between LPC and Congress which amends the
terms of the existing deed of trust in favor
of Congress to reflect, inter alia, the
increase in the Maximum Credit and all of the
Term Loans, together with an updating
endorsement, at LPC's expense, to the existing
title policy with respect thereto;
(iv) a Phase I Environmental Assessment addressed
to Congress or upon which Congress is
expressly permitted to rely, an ALTA standard
survey certified to Congress, and an orderly
liquidation value appraisal report addressed
to Congress or upon which Congress is
expressly permitted to rely, showing an
orderly liquidation value of not less than one
hundred twenty five (125%) percent of the LPC
Real Estate Loan (such orderly liquidation
value to be determined by using methodology
acceptable to Congress), each with respect to
LPC's real property in Pinal County, Arizona
and each currently dated and prepared, at
LPC's expense, by an environmental engineering
firm, a surveyor and an appraiser,
respectively, reasonably satisfactory to
Congress;
(v) an appraisal report with respect to the
orderly liquidation values of LPC's Equipment,
currently dated and prepared for Congress, at
LPC's expense, by MB Valuation Services, Inc.,
Daley-Hodkin Appraisal Corporation or other
appraiser reasonably satisfactory to Congress;
(vi) a Landlord Waiver, by Tri-Valley Electric
Supply Co., as lessor of LPC's premises at
3011 N. Piper Dr., Casa Grande, Pinal County,
Arizona, in favor of Congress, duly
authorized, executed and delivered by
Tri-Valley Electric Supply Co.;
(vii) the resolutions of the Board of Directors of
LPC duly authorizing the
-14-
15
execution and delivery of this Amendment and
the instruments and transactions hereunder;
(viii) an Amendment between LCI and Congress with
respect to the LCI Financing Agreements and
the documents and instruments required
thereunder and the satisfaction of all
conditions precedent to the effectiveness
thereof;
(ix) evidence of insurance and loss payable
endorsements naming Congress as a loss payee
thereunder, issued by an insurance company
satisfactory to Congress, and certificates of
insurance policies and/or endorsements naming
Congress as additional insured and loss payee,
all at LPC's cost and expense;
(x) evidence that LPC's owned real property in
Pinal County, Arizona is not within an area
having special flood hazard or flood prone
characteristics;
(xi) additional landlord/mortgagee waivers as
required by Congress; and
(xii) legal opinion of counsel to LPC and LCI
addressed to Congress with respect to the
Amendment and the instruments delivered
hereunder and such other matters as Congress
shall reasonably request.
(b) All representations and warranties contained herein,
in the Accounts Agreement and in the other Financing Agreements shall be true
and correct in all material respects; and
(c) No Event of Default shall have occurred and no event
shall have occurred or condition be existing which, with notice or passage of
time or both, would constitute an Event of Default.
13. Deliveries Relating to Real Estate.
(a) Anything contained in Section 12(a) to the contrary
notwithstanding, the instruments, documents and other items required to be
executed and/or delivered to Congress pursuant to Sections 12(a)(ii), (iii),
(iv) and (x) need only be executed and/or delivered (as the case may be) at or
before the
-15-
16
funding of the LPC Real Estate Loan; provided, that, in the event that a timely
request for the LPC Real Estate Loan is not received by Congress as required
herein, or LPC is otherwise not entitled to receive the LPC Real Estate Loan
pursuant to the other terms and conditions of this Amendment, then LPC shall,
within ninety (90) days after the date hereof, nevertheless execute and/or
deliver (as the case may be) to Congress all of the instruments, documents and
other items required under Sections 12(a)(iii), (iv) and (x), and the failure to
do so shall, at Congress' option, constitute an Event of Default.
(b) Anything contained in Section 12(a) to the contrary
notwithstanding, the instruments required to be executed and/or delivered to
Congress pursuant to Sections 12(a)(vi) and (xi) shall only be required to be
executed and/or delivered within ninety (90) days after the date hereof.
Failure to timely deliver any such instruments shall entitle Congress to
establish from time to time reserves against availability of Loans or Credits
in amounts determined by Congress to be necessary to cover risks or increased
risks to which the Collateral or Congress' rights (including rights of access)
and enforcement remedies with respect to Collateral may be subject or exposed
by reason of the absence of such instruments.
14. Effect of this Amendment. Except as modified pursuant hereto,
the Accounts Agreement and all supplements to the Accounts Agreement and all
other Financing Agreements, are hereby specifically ratified, restated and
confirmed by the parties hereto as of the date hereof and no existing defaults
or Events of Default have been waived in connection herewith. To the extent of
conflict between the terms of this Amendment and the Accounts Agreement or any
of the other Financing Agreements, the terms of this Amendment control.
15. Further Assurances. LPC shall execute and deliver such
additional documents and take such additional actions as may reasonably be
requested by Congress to effectuate the provisions and purposes of this
Amendment.
16. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York without
reference to its principles of conflicts of law.
-16-
17
By the signatures hereto of the duly authorized officers, the parties
hereto mutually covenant, warrant and agree as set forth herein.
Very truly yours,
CONGRESS FINANCIAL CORPORATION
By: Lawrence S. Forte
---------------------------
Title: Vice President
------------------------
AGREED AND ACCEPTED:
LEXINGTON PRECISION CORPORATION
By: Warren Delano
------------------------
Title: President
---------------------
-17-
18
CONSENT
The undersigned guarantor hereby consents to the foregoing Amendment,
agrees to be bound by its terms applicable to it, and ratifies and confirms the
terms of its Guarantee and Waiver dated January 11, 1990 as applicable to all
present and future indebtedness, liabilities and obligations of LEXINGTON
PRECISION CORPORATION ("LPC") to CONGRESS FINANCIAL CORPORATION ("Congress"),
including, without limitation, all indebtedness, liabilities and obligations
under the Financing Agreements as amended hereby.
LEXINGTON COMPONENTS, INC.
By: Warren Delano
-------------------------
Title: Vice Chaiman
----------------------
-18-
19
EXHIBIT A
TERM PROMISSORY NOTE
$_______________ New York, New
York
____________ __, 1995
FOR VALUE RECEIVED, LEXINGTON PRECISION CORPORATION, a Delaware
corporation (the "Debtor"), hereby unconditionally promises to pay to the order
of CONGRESS FINANCIAL CORPORATION, a California corporation (the "Payee"), at
the offices of Payee at 1133 Avenue of the Americas, New York, New York 10036,
or at such other place as the Payee or any holder hereof may from time to time
designate, the principal sum of __________________________ DOLLARS
($_____________) in lawful money of the United States of America and in
immediately available funds, in eighty-four (84) consecutive monthly
installments (or earlier as hereinafter referred to) on the first day of each
month commencing _______________ 1, 1995, of which the first eighty-three (83)
installments shall each be in the amount of
_____________________________________ DOLLARS ($____________), and the last
(i.e. eighty-fourth (84th)) installment shall be in the amount of the entire
unpaid balance of this Note.
Debtor hereby further promises to pay interest to the order of Payee
on the unpaid principal balance hereof at the Interest Rate. Such interest
shall be paid in like money at said office or place from the date hereof,
commencing _____________ 1, 1995 and on the first day of each month thereafter
until the indebtedness evidenced by this Note is paid in full. Interest
payable upon and during the continuance of an Event of Default or following the
effective date of termination or non-renewal of the Financing Agreements shall
be payable upon demand.
For purposes hereof (a) the term "Interest Rate" shall mean, as to
Prime Rate Loans, a rate of one and one-half (1-1/2%) percent per annum in
excess of the Prime Rate and as to Eurodollar Rate Loans, a rate of three and
one-quarter (3-1/4%) percent per annum in excess of the Adjusted Eurodollar
Rate; provided, that, at Payee's option, the Interest Rate shall mean a rate of
four and one-half (4-1/2%) percent per annum in excess of the Prime Rate as to
Prime Rate Loans and a rate of five and one-quarter (5-1/4%) percent per annum
in excess of the Adjusted Eurodollar Rate as to Eurodollar Rate Loans, upon and
during the continuance of an Event of Default or following the effective date
of termination or non-renewal of the Financing Agreements, and (b) the term
"Prime Rate" shall mean the rate from time to time publicly announced by
CoreStates Bank, N.A., or its successors, at its office in Philadelphia,
Pennsylvania, as its prime rate, whether or not such announced rate is the best
rate available at such bank. Unless otherwise defined herein, all capitalized
terms used herein shall
20
have the meanings assigned thereto in the Accounts Agreement (as hereinafter
defined) and the other Financing Agreements.
The Interest Rate applicable to Prime Rate Loans payable hereunder
shall increase or decrease by an amount equal to each increase or decrease,
respectively, in the Prime Rate, effective on the first day of the month after
any change in the Prime Rate, based on the Prime Rate in effect on the last day
of the month in which any such change occurs. Interest shall be calculated on
the basis of a three hundred sixty (360) day year and actual days elapsed. In
no event shall the interest charged hereunder exceed the maximum permitted
under the laws of the State of New York or other applicable law.
This Note is issued pursuant to the terms and provisions of the letter
agreement re: Amendment to Financing Agreements, dated as of January __, 1995,
between Debtor and Payee (the "Amendment") to evidence the "LPC Real Estate
Loan" (as defined in the Amendment) made by Payee to Debtor. This Note is
secured by the "Collateral" described in the Accounts Financing Agreement
[Security Agreement], dated January 11, 1990, by and between Payee and Debtor,
as amended (the "Accounts Agreement") and any agreement, document or instrument
now or at any time hereafter executed and/or delivered in connection therewith
or related thereto (the foregoing, as the same now exist or may hereafter be
amended, modified, supplemented, renewed, extended, restated or replaced, are
hereinafter collectively referred to as the "Financing Agreements") and is
entitled to all of the benefits and rights thereof and of the Financing
Agreements. At the time any payment is due hereunder, at its option, Payee may
charge the amount thereof to any account of Debtor maintained by Payee.
If any principal or interest payment is not made when due hereunder,
and such failure shall continue for three (3) days, or if any other Event of
Default (as defined in the Accounts Agreement) shall occur for any reason, or
if the Financing Agreements shall be terminated or not renewed for any reason
whatsoever, then and in any such event, in addition to all rights and remedies
of Payee under the Financing Agreements, applicable law or otherwise, all such
rights and remedies being cumulative, not exclusive and enforceable
alternatively, successively and concurrently, Payee may, at its option, declare
any or all of Debtor's obligations, liabilities and indebtedness owing to Payee
under the Financing Agreements (the "Obligations"), including, without
limitation, all amounts owing under this Note, to be due and payable, whereupon
the then unpaid balance hereof together with all interest accrued thereon,
shall forthwith become due and payable, together with interest accruing
thereafter at the then applicable rate stated above until the indebtedness
evidenced by this Note is paid in full, plus the costs and expenses of
collection hereof, including, but not limited to, reasonable attorneys' fees.
-2-
21
Debtor (i) waives diligence, demand, presentment, protest and notice
of any kind, (ii) agrees that it will not be necessary for any holder hereof to
first institute suit in order to enforce payment of this Note and (iii)
consents to any one or more extensions or postponements of time of payment,
release, surrender or substitution of collateral security, or forbearance or
other indulgence, without notice or consent. Upon the occurrence and during
the continuance of any Event of Default, Payee shall have the right, but not
the obligation to setoff against this Note all money owed by Payee to Debtor.
Payee shall not be required to resort to any Collateral for payment,
but may proceed against Debtor and any guarantors or endorsers hereof in such
order and manner as Payee may choose. None of the rights of Payee shall be
waived or diminished by any failure or delay in the exercise thereof.
Debtor hereby waives the right to a trial by jury and all rights of
setoff and rights to interpose counterclaims and cross-claims in any litigation
or proceeding arising in connection with this Note, the Accounts Agreement, the
other Financing Agreements, the Obligations or the Collateral, other than
compulsory counterclaims, the non-assertion of which would result in a
permanent waiver. Debtor hereby irrevocably consents to the non-exclusive
jurisdiction of the Supreme Court of the State of New York and of the United
States District Court for the Southern District of New York for all purposes in
connection with any action or proceeding arising out of or relating to this
Note, the Accounts Agreement, the other Financing Agreements, the Obligations
or the Collateral and further consents that any process or notice of motion or
other application to said Courts or any judge thereof, or any notice in
connection with any proceeding hereunder may be served (i) inside or outside
the State of New York by registered or certified mail, return receipt
requested, and service or notice so served shall be deemed complete five (5)
days after the same shall have been posted or (ii) in such other manner as may
be permissible under the rules of said Courts. Within thirty (30) days after
such mailing, Debtor shall appear in answer to such process or notice of motion
or other application to said Courts, failing which Debtor shall be deemed in
default and judgment may be entered by Payee against Debtor for the amount of
the claim and other relief requested therein.
The execution and delivery of this Note has been authorized by the
Board of Directors of Debtor.
This Note, the other Obligations and the Collateral shall be governed
by and construed in accordance with the laws of the State of New York and shall
be binding upon the successors and assigns of Debtor and inure to the benefit
of Payee and its successors, endorsees and assigns. If any term or provision
of this Note shall be held invalid, illegal or unenforceable, the validity of
all
-3-
22
other terms and provisions hereof shall in no way be affected thereby.
This Note may not be changed, modified or terminated orally, but only
by an agreement in writing signed by the Payee or the holder hereof.
Whenever used herein, the terms "Debtor" and "Payee" shall be deemed
to include their respective successors and assigns.
LEXINGTON PRECISION CORPORATION
ATTEST:
_____________________ By:________________________
Title:_____________________
[Corporate Seal]
-4-
23
EXHIBIT I
NEW EQUIPMENT TERM NOTE *
$_____________ ______________, 19__
FOR VALUE RECEIVED, LEXINGTON PRECISION CORPORATION, a Delaware
corporation (the "Debtor"), hereby unconditionally promises to pay to the order
of CONGRESS FINANCIAL CORPORATION, a California corporation (the "Payee"), at
the offices of Payee at 1133 Avenue of the Americas, New York, New York 10036,
or at such other place as the Payee or any holder hereof may from time to time
designate, the principal sum of ____________________________ DOLLARS
($_________) in lawful money of the United States of America and in immediately
available funds, in _________ (__) consecutive monthly installments (or earlier
as hereinafter referred to) on the first day of each month commencing
__________, 19__, of which the first ____________ (__) installments shall each
be in the amount of ___________________ DOLLARS ($________), and the last (i.e.
___________ (___)) installment shall be in the amount of the entire unpaid
balance of this Note.
Debtor hereby further promises to pay interest to the order of Payee
on the unpaid principal balance hereof at the Interest Rate. Such interest
shall be paid in like money at said office or place from the date hereof,
commencing on the first day of the month next following the date hereof, and on
the first day of each month thereafter until the indebtedness evidenced by this
Note is paid in full. Interest payable upon and during the continuance of an
Event of Default or following the effective date of termination or non-renewal
of the Financing Agreements shall be payable upon demand.
For purposes hereof, (a) the term "Interest Rate" shall mean, as to
Prime Rate Loans, a rate of one (1%) percent per annum in excess of the Prime
Rate, and as to Eurodollar Rate Loans, a rate of three and one-quarter (3 1/4%)
percent per annum in excess of the Adjusted Eurodollar Rate; provided, that, at
Payee's option, the Interest Rate shall mean a rate of three (3%) percent per
annum in excess of the Prime Rate as to Prime Rate Loans and a rate of five and
one-quarter (5 1/4%) percent per annum in excess of the Adjusted Eurodollar
Rate as to Eurodollar
__________________________________
*For preparation of Note:
The blanks are to be completed such that the principal amount of the
New Equipment Term Loan is amortized in equal, consecutive monthly
installments of principal commencing on the first day of the month
following the date of advance and ending on February 1, 2002.
24
Rate Loans, upon and during the continuance of an Event of Default or following
the effective date of termination or non-renewal of the Financing Agreements,
and (b) the term "Prime Rate" shall mean the rate from time to time publicly
announced by CoreStates Bank, N.A., or its successors, at its office in
Philadelphia, Pennsylvania, as its prime rate, whether or not such announced
rate is the best rate available at such bank. Unless otherwise defined herein,
all capitalized terms used herein shall have the meanings assigned thereto in
the Accounts Agreement (as hereinafter defined) and the other Financing
Agreements.
The Interest Rate payable hereunder shall increase or decrease by an
amount equal to each increase or decrease, respectively, in such Prime Rate,
effective on the first day of the month after any change in such Prime Rate,
based on the Prime Rate in effect on the last day of the month in which any
such change occurs. Interest shall be calculated on the basis of a three
hundred sixty (360) day year and actual days elapsed. In no event shall the
interest charged hereunder exceed the maximum permitted under the laws of the
State of New York or other applicable law.
This Note is issued pursuant to the terms and provisions of the letter
agreement re: Amendment to Financing Agreements, dated as of January __, 1995
between Debtor and Payee (the "Amendment") to evidence a "New Equipment Term
Loan" (as defined in the New Equipment Term Loan Agreement as referred to in
and as modified by the Amendment) made by Payee to Debtor. This Note is
secured by the "Collateral" described in the Accounts Financing Agreement
[Security Agreement], dated January 11, 1990, by and between Payee and Debtor,
as amended (the "Accounts Agreement") and any agreement, document or instrument
now or at any time hereafter executed and/or delivered in connection therewith
or related thereto (the foregoing, as the same now exist or may hereafter be
amended, modified, supplemented, renewed, extended, restated or replaced, are
hereinafter collectively referred to as the "Financing Agreements") and is
entitled to all of the benefits and rights thereof and of the Financing
Agreements. At the time any payment is due hereunder, at its option, Payee may
charge the amount thereof to any account of Debtor maintained by Payee.
If any principal or interest payment is not made when due hereunder,
and such failure shall continue for three (3) days, or if any other Event of
Default (as defined in the Accounts Agreement) shall occur for any reason, or
if the Financing Agreements shall be terminated or not renewed for any reason
whatsoever, then and in any such event, in addition to all rights and remedies
of Payee under the Financing Agreements, applicable law or otherwise, all such
rights and remedies being cumulative, not exclusive and enforceable
alternatively, successively and concurrently, Payee may, at its option, declare
any or all of
-2-
25
Debtor's obligations, liabilities and indebtedness owing to Payee under the
Financing Agreements (the "Obligations"), including, without limitation, all
amounts owing under this Note, to be due and payable, whereupon the then unpaid
balance hereof together with all interest accrued thereon, shall forthwith
become due and payable, together with interest accruing thereafter at the then
applicable rate stated above until the indebtedness evidenced by this Note is
paid in full, plus the costs and expenses of collection hereof, including, but
not limited to, reasonable attorneys' fees.
Debtor (i) waives diligence, demand, presentment, protest and notice
of any kind, (ii) agrees that it will not be necessary for any holder hereof to
first institute suit in order to enforce payment of this Note and (iii)
consents to any one or more extensions or postponements of time of payment,
release, surrender or substitution of collateral security, or forbearance or
other indulgence, without notice or consent. Upon the occurrence of any Event
of Default and during the continuance thereof, Payee shall have the right, but
not the obligation to setoff against this Note all money owed by Payee to
Debtor.
Payee shall not be required to resort to any Collateral for payment,
but may proceed against Debtor and any guarantors or endorsers hereof in such
order and manner as Payee may choose. None of the rights of Payee shall be
waived or diminished by any failure or delay in the exercise thereof.
Debtor hereby waives the right to a trial by jury and all rights of
setoff and rights to interpose counterclaims and cross-claims in any litigation
or proceeding arising in connection with this Note, the Accounts Agreement, the
other Financing Agreements, the Obligations or the Collateral, other than
compulsory counterclaims, the non-assertion of which would result in a
permanent waiver. Debtor hereby irrevocably consents to the non-exclusive
jurisdiction of the Supreme Court of the State of New York and of the United
States District Court for the Southern District of New York for all purposes in
connection with any action or proceeding arising out of or relating to this
Note, the Accounts Agreement, the other Financing Agreements, the Obligations
or the Collateral and further consents that any process or notice of motion or
other application to said Courts or any judge thereof, or any notice in
connection with any proceeding hereunder may be served (i) inside or outside
the State of New York by registered or certified mail, return receipt
requested, and service or notice so served shall be deemed complete five (5)
days after the same shall have been posted or (ii) in such other manner as may
be permissible under the rules of said Courts. Within thirty (30) days after
such mailing, Debtor shall appear in answer to such process or notice of motion
or other application to said Courts, failing which Debtor shall be deemed in
default and judgment may be entered by Payee against
-3-
26
Debtor for the amount of the claim and other relief requested therein.
The execution and delivery of this Note has been authorized by the
Board of Directors of Debtor.
This Note, the other Obligations and the Collateral shall be governed
by and construed in accordance with the laws of the State of New York and shall
be binding upon the successors and assigns of Debtor and inure to the benefit
of Payee and its successors, endorsees and assigns. If any term or provision
of this Note shall be held invalid, illegal or unenforceable, the validity of
all other terms and provisions hereof shall in no way be affected thereby.
This Note may not be changed, modified or terminated orally, but only
by an agreement in writing signed by the Payee or the holder hereof.
Whenever used herein, the terms "Debtor" and "Payee" shall be deemed
to include their respective successors and assigns.
LEXINGTON PRECISION CORPORATION
ATTEST:
BY:__________________________
_____________________
SECRETARY TITLE:_________________________
[CORPORATE SEAL]
-4-
EX-10.35
10
LEXINGTON PRECISION CORP. 10-K EXHIBIT 10.35
1
SECOND
AMENDED AND RESTATED
PROMISSORY NOTE
$6,683,000 New York, New York
January 31, 1995
FOR VALUE RECEIVED, LEXINGTON PRECISION CORPORATION, a Delaware
corporation (the "Debtor"), hereby unconditionally promises to pay to the order
of CONGRESS FINANCIAL CORPORATION, a California corporation (the "Payee"), at
the offices of Payee at 1133 Avenue of the Americas, New York, New York 10036,
or at such other place as the Payee or any holder hereof may from time to time
designate, the principal sum of SIX MILLION SIX HUNDRED EIGHTY-THREE THOUSAND
AND NO/100 DOLLARS ($6,683,000.00) in lawful money of the United States of
America and in immediately available funds, in eighty-four (84) consecutive
monthly installments (or earlier as hereinafter referred to) on the first day
of each month commencing March 1, 1995, of which the first eighty-three (83)
installments shall each be in the amount of EIGHTY THOUSAND AND NO/100 DOLLARS
($80,000.00), and the last (i.e. eighty-fourth (84th)) installment shall be in
the amount of the entire unpaid balance of this Note.
Debtor hereby further promises to pay interest to the order of Payee
on the unpaid principal balance hereof at the Interest Rate. Such interest
shall be paid in like money at said office or place from the date hereof,
commencing February 1, 1995 and on the first day of each month thereafter until
the indebtedness evidenced by this Note is paid in full. Interest payable upon
and during the continuance of an Event of Default or following the effective
date of termination or non-renewal of the Financing Agreements shall be payable
upon demand.
For purposes hereof, (a) the term "Interest Rate" shall mean, as to
Prime Rate Loans, a rate of one (1%) percent per annum in excess of the Prime
Rate, and as to Eurodollar Rate Loans, a rate of three and one-quarter (3 1/4%)
percent per annum in excess of the Adjusted Eurodollar Rate; provided, that, at
Payee's option, the Interest Rate shall mean a rate of three (3%) percent per
annum in excess of the Prime Rate as to Prime Rate Loans and a rate of five and
one-quarter (5 1/4%) percent per annum in excess of the Adjusted Eurodollar
Rate as to Eurodollar Rate Loans, upon and during the continuance of an Event
of Default or after the effective date of termination or non-renewal of the
Financing Agreements, and (b) the term "Prime Rate" shall mean the rate from
time to time publicly announced by CoreStates Bank, N.A., or its successors, at
its office in Philadelphia, Pennsylvania, as its prime rate, whether or not
such announced rate is the best rate available at such bank. Unless otherwise
defined herein, all capitalized terms used herein shall have the
2
meanings assigned thereto in the Accounts Agreement (as hereinafter defined)
and the other Financing Agreements.
The Interest Rate applicable to Prime Rate Loans payable hereunder
shall increase or decrease by an amount equal to each increase or decrease,
respectively, in the Prime Rate, effective on the first day of the month after
any change in the Prime Rate, based on the Prime Rate in effect on the last day
of the month in which any such change occurs. Interest shall be calculated on
the basis of a three hundred sixty (360) day year and actual days elapsed. In
no event shall the interest charged hereunder exceed the maximum permitted
under the laws of the State of New York or other applicable law.
This Note is the "LPC Second Restated Note" issued pursuant to the
terms and provisions of the letter agreement re: Amendment to Financing
Agreements, dated as of the date hereof, between Debtor and Payee. The
principal amount of this Note represents: (i) (A) the unpaid principal balance
of $2,160,000.45 outstanding under that certain Amended and Restated Promissory
Note, dated January 14, 1994, in the original principal sum of $2,700,000 made
by Debtor to Payee and (B) the unpaid principal balance of $917,500.00
outstanding under that certain New Equipment Term Note, dated as of August 1,
1994, in the original principal sum of $1,000,000 made by Debtor to Payee
(collectively, the "Existing Promissory Notes"), plus (ii) an additional
one-time advance made on the date hereof by Payee to Debtor in the principal
sum of $3,605,499.55 ("Additional Term Loan"). None of the outstanding
indebtedness evidenced by the Existing Promissory Notes shall be deemed
extinguished by Debtor's issuance or Payee's acceptance of this Note. This
Note shall be deemed to evidence the Additional Term Loan and to substitute
for, and to amend and restate in its entirety, the Existing Promissory Notes as
to the indebtedness previously evidenced thereby, and the Existing Promissory
Notes shall be so marked by Payee.
This Note is secured by the "Collateral" described in the Accounts
Financing Agreement [Security Agreement], dated January 11, 1990, by and
between Payee and Debtor, as amended (the "Accounts Agreement") and any
agreement, document or instrument now or at any time hereafter executed and/or
delivered in connection therewith or related thereto (the foregoing, as the
same now exist or may hereafter be amended, modified, supplemented, renewed,
extended, restated or replaced, are hereinafter collectively referred to as the
"Financing Agreements") and is entitled to all of the benefits and rights
thereof and of the Financing Agreements. At the time any payment is due
hereunder, at its option, Payee may charge the amount thereof to any account of
Debtor maintained by Payee.
- 2 -
3
If any principal or interest payment is not made when due hereunder,
and such failure shall continue for three (3) days, or if any other Event of
Default (as defined in the Accounts Agreement) shall occur for any reason, or
if the Financing Agreements shall be terminated or not renewed for any reason
whatsoever, then and in any such event, in addition to all rights and remedies
of Payee under the Financing Agreements, applicable law or otherwise, all such
rights and remedies being cumulative, not exclusive and enforceable
alternatively, successively and concurrently, Payee may, at its option, declare
any or all of Debtor's obligations, liabilities and indebtedness owing to Payee
under the Financing Agreements (the "Obligations"), including, without
limitation, all amounts owing under this Note, to be due and payable, whereupon
the then unpaid balance hereof together with all interest accrued thereon,
shall forthwith become due and payable, together with interest accruing
thereafter at the then applicable rate stated above until the indebtedness
evidenced by this Note is paid in full, plus the costs and expenses of
collection hereof, including, but not limited to, reasonable attorneys' fees.
Debtor (i) waives diligence, demand, presentment, protest and notice
of any kind, (ii) agrees that it will not be necessary for any holder hereof to
first institute suit in order to enforce payment of this Note and (iii)
consents to any one or more extensions or postponements of time of payment,
release, surrender or substitution of collateral security, or forbearance or
other indulgence, without notice or consent. Upon the occurrence and during
the continuance of any Event of Default, Payee shall have the right, but not
the obligation to setoff against this Note all money owed by Payee to Debtor.
Payee shall not be required to resort to any Collateral for payment,
but may proceed against Debtor and any guarantors or endorsers hereof in such
order and manner as Payee may choose. None of the rights of Payee shall be
waived or diminished by any failure or delay in the exercise thereof.
Debtor hereby waives the right to a trial by jury and all rights of
setoff and rights to interpose counterclaims and cross-claims in any litigation
or proceeding arising in connection with this Note, the Accounts Agreement, the
other Financing Agreements, the Obligations or the Collateral, other than
compulsory counterclaims, the non-assertion of which would result in a
permanent waiver. Debtor hereby irrevocably consents to the non-exclusive
jurisdiction of the Supreme Court of the State of New York and of the United
States District Court for the Southern District of New York for all purposes in
connection with any action or proceeding arising out of or relating to this
Note, the Accounts Agreement, the other Financing Agreements, the Obligations
or the Collateral and further consents that any process or notice of motion or
other application to said Courts
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or any judge thereof, or any notice in connection with any proceeding hereunder
may be served (i) inside or outside the State of New York by registered or
certified mail, return receipt requested, and service or notice so served shall
be deemed complete five (5) days after the same shall have been posted or (ii)
in such other manner as may be permissible under the rules of said Courts.
Within thirty (30) days after such mailing, Debtor shall appear in answer to
such process or notice of motion or other application to said Courts, failing
which Debtor shall be deemed in default and judgment may be entered by Payee
against Debtor for the amount of the claim and other relief requested therein.
The execution and delivery of this Note has been authorized by the
Board of Directors of Debtor.
This Note, the other Obligations and the Collateral shall be governed
by and construed in accordance with the laws of the State of New York and shall
be binding upon the successors and assigns of Debtor and inure to the benefit
of Payee and its successors, endorsees and assigns. If any term or provision
of this Note shall be held invalid, illegal or unenforceable, the validity of
all other terms and provisions hereof shall in no way be affected thereby.
This Note may not be changed, modified or terminated orally, but only
by an agreement in writing signed by the Payee or the holder hereof.
Whenever used herein, the terms "Debtor" and "Payee" shall be deemed
to include their respective successors and assigns.
LEXINGTON PRECISION CORPORATION
ATTEST:
By: Warren Delano
Michael A. Lubin --------------------------------
----------------
Title: President
-----------------------------
[Corporate Seal]
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EX-10.36
11
LEXINGTON PRECISION CORP. 10-K EXHIBIT 10.36
1
January 31, 1995
Lexington Components, Inc.
767 Third Avenue
New York, New York 10017
Re: Amendment to Financing Agreements
Gentlemen:
Reference is made to certain financing agreements dated January 11,
1990 between Lexington Components, Inc. ("LCI") and Congress Financial
Corporation ("Congress"), including, but not limited to, an Accounts Financing
Agreement [Security Agreement], as amended (the "Accounts Agreement"), and all
supplements thereto and all other related financing and security agreements
(collectively, all of the foregoing, as the same have heretofore or
contemporaneously been or may be hereafter, amended, replaced, extended,
modified or supplemented, the "Financing Agreements").
In connection with the financing arrangements pursuant to the Accounts
Agreement and the other Financing Agreements, the parties hereto hereby agree
to amend the Financing Agreements, as set forth below:
1. Definitions:
(a) Additional Definitions. As used herein or in any of
the other Financing Agreements, the following terms shall have the respective
meanings given to them below and the Accounts Agreement (including all
supplements thereto) shall be deemed and is hereby amended to include, in
addition and not in limitation, each of the following definitions:
"Adjusted Eurodollar Rate" shall mean, with respect to each
Interest Period for any Eurodollar Rate Loan, the rate per annum (rounded
upwards, if necessary, to the next one-sixteenth (1/16) of one (1%) percent)
determined by dividing (a) the Eurodollar Rate for such Interest Period by (b)
a percentage equal to: (i) one (1) minus (ii) the Reserve Percentage. For
purposes hereof, "Reserve Percentage" shall mean the reserve percentage,
expressed as a decimal, prescribed by any United States or foreign banking
authority for determining the reserve requirement which is or would be
applicable to deposits of United States dollars in a non-United States or an
international banking office of Reference Bank used to fund a Eurodollar Rate
Loan or any Eurodollar Rate Loan made with the proceeds of such deposit,
whether or not the Reference Bank actually holds or has made any such deposits
or loans. The Adjusted Eurodollar Rate shall be adjusted on and as of the
effective day of any change in the Reserve Percentage.
2
"Business Day" or "business day" shall mean (a) for the Prime
Rate Loans, any day other than a Saturday, Sunday, or other day on which
commercial banks are authorized or required to close under the laws of the
State of New York or the Commonwealth of Pennsylvania, and a day on which the
Reference Bank and Congress are open for the transaction of business, and (b)
for all Eurodollar Rate Loans, any such day as described in (a) above in this
definition, excluding any day on which banks are closed for dealings in dollar
deposits in the London interbank market or other applicable Eurodollar Rate
market.
"Eurodollar Rate Loans" shall mean any Loans or portion
thereof on which interest is payable based on the Adjusted Eurodollar Rate in
accordance with the terms hereof.
"Eurodollar Rate" shall mean with respect to the Interest
Period for a Eurodollar Rate Loan, the interest rate per annum equal to the
arithmetic average of the rates of interest per annum (rounded upwards, if
necessary, to the next one-sixteenth (1/16) of one (1%) percent) at which
Reference Bank is offered deposits of United States dollars in the London
interbank market (or other Eurodollar Rate market selected by LCI and approved
by Congress) on or about 9:00 a.m. (New York time) two (2) Business Days prior
to the commencement of such Interest Period in amounts substantially equal to
the principal amount of the Eurodollar Rate Loans requested by and available to
LCI in accordance with this Agreement, with a maturity of comparable duration
to the Interest Period selected by LCI.
"Interest Period" shall mean for any Eurodollar Rate Loan, a
period of approximately one (1), two (2), or three (3) months duration as LCI
may elect, the exact duration to be determined in accordance with the customary
practice in the applicable Eurodollar Rate market; provided, that, LCI may not
elect an Interest Period which will end after the last day of the then-current
term of the Financing Agreements or after the effective date of any notice of
termination given under the Financing Agreements.
"Interest Rate" shall mean, as to Prime Rate Loans, a rate of
one (1%) percent per annum in excess of the Prime Rate and, as to Eurodollar
Rate Loans, a rate of three and one-quarter (3 1/4%) percent per annum in
excess of the Adjusted Eurodollar Rate (based on the Eurodollar Rate applicable
for the Interest Period selected by LCI as in effect three (3) Business Days
after the date of receipt by Congress of the request of LCI for such Eurodollar
Rate Loans in accordance with the terms hereof, whether such rate is higher or
lower than any rate previously quoted to LCI); provided, that, Interest Rate
shall mean the rate of three (3%) percent per annum in excess of the Prime Rate
as to Prime Rate Loans and the rate of five and one quarter (5 1/4%) percent
per annum in excess of the Adjusted Eurodollar Rate as to
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Eurodollar Rate Loans, at Congress' option, without notice, (a) for the period
on and after the effective date of termination or non-renewal hereof, or the
date of the occurrence of any Event of Default, and for so long as such Event
of Default is continuing as determined by Congress and until such time as all
Obligations are indefeasibly paid in full (notwithstanding entry of any
judgment against LCI) and (b) on the Revolving Loans at any time outstanding in
excess of the amounts available to LCI under the Accounts Agreement and
supplements thereto, which excess(es) continue to exist or arise after three
(3) days' telephonic or written notice to LCI of any such excess(es) (whether
or not such excess(es), arise or are made with or without Congress' knowledge
or consent and whether made before or after an Event of Default); provided,
further, that, the higher Interest Rate under the immediately preceding proviso
shall be inapplicable in the case of any excess(es) described in clause (b)
thereof if and to the extent that Congress shall, at Congress' option, have
agreed not to charge the higher Interest Rate otherwise permitted to be charged
under such proviso, as evidenced by a writing expressly so stating and signed
by Congress.
"Loans" shall mean the Revolving Loans and the Term Loans.
"Participant" shall mean any person which at any time
participates with Congress in respect of the Loans, the Credits or other
Obligations or any portion thereof.
"Prime Rate Loans" shall mean any Loans or portions thereof on
which interest is payable based on the Prime Rate in accordance with the terms
thereof.
"Reference Bank" shall mean CoreStates Bank, N.A., or such
other bank as Lender may from time to time designate.
"Revolving Loans" shall mean the loans now or hereafter made
by Congress to or for the benefit of LCI on a revolving basis (involving
advances, repayments and readvances) as set forth in Section 2.1 of the
Accounts Agreement and Paragraph 3 of the letter agreement re: Inventory Loans,
dated March 23, 1990, by LCI, in favor of Congress.
"Term Loans" shall mean the term loans made by Congress to LCI
evidenced by the LCI Second Restated Note (as defined below), the Term
Promissory Note, dated as of January 13, 1995, made by LCI in favor of Congress
in the original principal amount of $1,500,000 (the "LCI" Georgia Real Estate
Note"), the LCI Ohio Real Estate Note (as defined below) and the New Equipment
Term Notes by LCI in favor of Congress, as such notes may hereafter be amended,
supplemented, renewed, extended, restated or replaced.
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(b) Interpretation. Capitalized terms used herein,
unless otherwise defined herein, shall have the meanings ascribed thereto in
the Accounts Agreement and the other Financing Agreements.
2. Acknowledgement of Obligations. LCI hereby acknowledges and
agrees that, as of the close of business on January 26, 1995, LCI was indebted
to Congress for Obligations under the Financing Agreements (including LCI's
Guarantee with respect to the Obligations of LPC) in a principal amount of not
less than $20,980,920.61, together with interest accrued and accruing thereon,
plus the fees, charges, costs and expenses provided under the Financing
Agreements, all of which is owed without offset, defense or counterclaim of any
kind, nature or description.
3. Maximum Credit.
(a) Section 1.7 of the Accounts Agreement, as heretofore
amended, is hereby deleted in its entirety and replaced with the following:
"1.7. "Maximum Credit" shall mean the amount of
$40,000,000."
(b) For purposes of Section 2.3 of the Accounts
Agreement, all existing and future Term Loans, including, without limitation,
the Loans evidenced by the LCI Second Restated Note, the LCI Georgia Real
Estate Note, the LCI Ohio Real Estate Note (if the LCI Ohio Real Estate Loan is
made) and any and all New Equipment Term Notes by LCI shall be considered made
pursuant to a supplement to the Accounts Agreement, and the "Loans" to LPC
evidenced by the "LPC Second Restated Note", the "LPC Real Estate Note" and the
"New Equipment Term Notes" (as each such quoted term is defined in the LPC
Financing Agreements), shall be considered made pursuant to a supplement to the
Accounts Financing Agreement [Security Agreement], dated January 11, 1990,
between LPC and Congress.
4. Additional Term Loans.
(a) Contemporaneously herewith, in order to evidence the
balance of the outstanding Obligations owed by LCI pursuant to the Amended and
Restated Promissory Note, dated January 14, 1994, made payable by LCI in favor
of Congress, in the original principal amount of $3,700,000 and the New
Equipment Term Note, dated as of August 1, 1994, made payable by LCI in favor
of Congress, in the original principal amount of $2,000,000, and in order to
evidence an additional one-time advance to LCI, which is deemed to be made upon
the effective date hereof, in the principal amount of $2,161,999.59 LCI is
executing and delivering to Congress a Second Amended and Restated Promissory
Note in the
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original principal amount of $6,957,000.00 (as the same now exists or
may hereafter be amended, supplemented, renewed, extended, restated or
replaced, the "LCI Second Restated Note"). The Obligations evidenced
by the LCI Second Restated Note shall be payable, including interest
and other amounts, as provided therein and, to the extent not
inconsistent with the terms of the LCI Second Restated Note, as
provided in the other Financing Agreements, and shall be secured by
all Collateral, other than the owned real property of LCI in Troup
County, Georgia, presently subject to a Deed to Secure Debt, dated as
of January 13, 1995 (the "LCI Georgia Real Estate").
(b) At LCI's request made within ninety (90) days after
the date hereof and upon not less than five (5) business days' prior written
notice by LCI to Congress and provided all of the conditions precedent set
forth in Section 12 are then satisfied, Congress agrees to make an additional
one-time advance to LCI (the "LCI Ohio Real Estate Loan") in an amount equal to
the lesser of (i) eighty (80%) percent of the orderly liquidation value of
LCI's owned real property in Trumbull County, Ohio, as shown on the appraisal
required to be delivered under Section 12 below, minus $340,000, or (ii)
$2,500,000 minus the sum of (A) $1,500,000 plus (B) the original principal
amount of the LPC Real Estate Loan (as defined in the LPC Financing
Agreements). The LCI Ohio Real Estate Loan shall be evidenced by a Term
Promissory Note in the principal amount of the LCI Ohio Real Estate Loan in the
form annexed hereto as Exhibit A (as the same now exists or may hereafter be
amended, supplemented, renewed, extended, restated or replaced, the "LCI Ohio
Real Estate Note"). The Obligations evidenced by the LCI Ohio Real Estate Note
shall be payable, including interest and other amounts, as provided therein,
and, to the extent not inconsistent with the terms of the LCI Ohio Real Estate
Note, as provided in the other Financing Agreements, and shall be secured by
all Collateral (other than the LCI Georgia Real Estate).
5. New Equipment Term Loans.
(a) Sections 2(a) and 2(b) of the letter agreement re:
Amendment to Financing Agreements, dated as of March 25, 1994, between Congress
and LCI, as heretofore amended by the letter agreement re: Amendment to
Financing Agreement, dated as of August 1, 1994 (as so amended, the "New
Equipment Term Loan Agreement") are hereby deleted in their entirety and
replaced with the following:
"(a) Subject to and upon the terms and conditions
contained herein and in the other Financing
Agreements, including the sublimit set forth below in
Section 2(b), Congress shall, in its discretion, make
New Equipment Term Loans to LCI, from time to time,
at LCI's request, of up to
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eighty (80%) percent of the orderly liquidation value
of such Eligible New Equipment, as set forth in an
appraisal report prepared for Congress, at LCI's
expense, by MB Valuation Services, Inc., Daley-Hodkin
Appraisal Corporation or other appraiser reasonably
satisfactory to Congress.
(b) Except in Congress' discretion (i) the aggregate
original principal amount of all New Equipment Term
Loans made to LCI plus the aggregate original
principal amount of all "New Equipment Term Loans"
(as defined in the LPC Financing Agreements) made to
LPC under the LPC Financing Agreements after the date
hereof, shall not exceed $11,300,000, and (ii) the
aggregate principal amount of all Obligations
evidenced by the LCI Second Restated Note, the LCI
Georgia Real Estate Note, the LCI Ohio Real Estate
Note, the "LPC Second Restated Note" (as defined in
the LPC Financing Agreements), the "LPC Real Estate
Note" (as defined in the LPC Financing Agreements)
and each of the New Equipment Term Notes made by each
of LCI and LPC in favor of Congress, shall not exceed
the sum of $26,000,000 at any one time outstanding.
Except in Congress' discretion, New Equipment Term
Loans shall only be available (subject to the
foregoing lending formula and sublimits set forth
herein) in integral multiples of $100,000 and in
amounts not less than $500,000 for each New Equipment
Term Loan."
(b) Section 2(d)(iii) of the New Equipment Term Loan
Agreement is hereby deleted in its entirety and replaced with the following:
"(iii) Congress shall have received a copy(ies) of
the invoice(s) covering the Cost of New Equipment with respect to the Eligible
New Equipment and all other amounts required to be paid in connection
therewith, together with a copy of an appraisal report as required under
Section 2(a) above setting forth the orderly liquidation value of the Eligible
New Equipment as provided in Section 2(a)."
(c) Exhibit I to the New Equipment Term Loan Agreement is
hereby replaced with the form designated as Exhibit I annexed hereto.
6. Interest.
(a) Section 3.1 of the Accounts Agreement, as heretofore
amended, is hereby deleted in its entirety and replaced with the following:
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"3.1 (a) We shall pay to you interest on the
outstanding principal amount of the non-contingent
Obligations at the Interest Rate. All interest
accruing hereunder on and after the date of any Event
of Default or following the effective date of
termination or non-renewal hereof shall be payable on
demand.
(b) We may from time to time request that Prime
Rate Loans be converted to Eurodollar Rate Loans or
that any existing Eurodollar Rate Loans continue for
an additional Interest Period. Such request from us
shall specify the amount of the Prime Rate Loans
which will constitute Eurodollar Rate Loans (subject
to the limits set forth below) and the Interest
Period to be applicable to such Eurodollar Rate
Loans. Subject to the terms and conditions contained
herein, three (3) Business Days after receipt by you
of such a request from us, such Prime Rate Loans
shall be converted to Eurodollar Rate Loans or such
Eurodollar Rate Loans shall continue, as the case may
be, provided, that, each of the following additional
conditions are satisfied: (i) no Event of Default,
or event which with notice or passage of time or both
would constitute an Event of Default exists or has
occurred and is continuing, (ii) we shall have
complied with such customary procedures as are
established by you and specified by you to us from
time to time for requests by us for Eurodollar Rate
Loans, (iii) no more than three (3) Interest Periods
may be in effect at any one time with respect to LCI
and no more than four (4) Interest Periods in the
aggregate may be in effect with respect to LCI and
LPC at any one time, (iv) the amount of the
Eurodollar Rate Loans subject to a given Interest
Period must be in the amount of $1,000,000 or an
integral multiple thereof, (v) the minimum aggregate
amount of Eurodollar Rate Loans outstanding and/or
requested by us and LPC shall not be less than
$5,000,000, (vi) the maximum amount of the Eurodollar
Rate Loans at any time outstanding and/or requested
by us shall not exceed the amount equal to
ninety-five (95%) percent of the principal amount of
the Term Loans plus eighty (80%) percent of the
Revolving Loans which it is anticipated will be
outstanding on the last day of the applicable
Interest Period, as determined by you, and (vii) you
shall have determined that the Adjusted Eurodollar
Rate is available to you for such Interest Period
through the Reference Bank and can be readily
determined
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as of the date of the request for such Eurodollar
Rate Loan by us. Any request by us to convert Prime
Rate Loans to Eurodollar Rate Loans or to continue
any existing Eurodollar Rate Loans shall be
irrevocable. Notwithstanding anything to the
contrary contained herein, you and the Reference Bank
shall not be required to purchase United States
Dollar deposits in the London interbank market or
other applicable Eurodollar Rate market to fund any
Eurodollar Rate Loans, but the provisions hereof
shall be deemed to apply as if you and Reference Bank
had purchased such deposits to fund the Eurodollar
Rate Loans.
(c) Any Eurodollar Rate Loans shall automatically
convert to Prime Rate Loans upon the last day of the
applicable Interest Period, unless you have received
a request complying with the terms hereof to continue
such Eurodollar Rate Loan at least three (3) Business
Days prior to such last day in accordance with the
terms hereof. Any Eurodollar Rate Loans shall, at
your option, upon notice by you to us, convert to
Prime Rate Loans in the event that (i) an Event of
Default has occurred and is continuing, (ii) this
Agreement shall terminate or not be renewed, or (iii)
the aggregate principal amount of the Prime Rate
Loans which have previously been converted to
Eurodollar Rate Loans or existing Eurodollar Rate
Loans continued, as the case may be, at the beginning
of an Interest Period shall at any time during such
Interest Period exceed either (A) the aggregate
principal amount of the Loans then outstanding or (B)
the sum of the then outstanding principal amount of
the Term Loans plus the Revolving Loans then
available to us under the Accounts Agreement and
supplements thereto. We shall pay to you, upon
demand by you (or you may, at your option, charge any
of our loan accounts) any amounts required to
compensate you, the Reference Bank or any Participant
with you for any loss (including loss of anticipated
profits), cost or expense incurred by such person, as
a result of the conversion of Eurodollar Rate Loans
to Prime Rate Loans pursuant to any of the foregoing.
(d) Interest shall be payable by us to you
monthly in arrears not later than the first day of
each calendar month and shall be calculated on the
basis of a three hundred sixty (360) day year and
actual days elapsed. The Interest Rate on
non-contingent Obligations (other than Eurodollar
Rate
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Loans) shall increase or decrease by an amount equal
to each increase or decrease in the Prime Rate
effective on the first day of the month after any
change in such Prime Rate is announced based on the
Prime Rate in effect on the last day of the month in
which any such change occurs. In no event shall
charges constituting interest payable by us to you
exceed the maximum amount or the rate permitted under
any applicable law or regulation, and if any such
part or provision of this Agreement is in
contravention of any such law or regulation, such
part or provision shall be deemed amended to conform
thereto.
(e) Notwithstanding anything to the contrary
contained herein, all Eurodollar Rate Loans shall,
upon notice by you to us, subject to our option (if
applicable) set forth in the following sentence,
convert to Prime Rate Loans in the event that (i) any
change in applicable law or regulation (or the
interpretation or administration thereof) shall
either (A) make it unlawful for you, Reference Bank
or any Participant to make or maintain Eurodollar
Rate Loans or to comply with the terms hereof in
connection with the Eurodollar Rate Loans, by an
amount deemed by you to be material, or (B) shall
result in the increase in the costs to you, Reference
Bank or any Participant of making or maintaining any
Eurodollar Rate Loans or (C) reduce the amounts
received or receivable by you in respect thereof, by
an amount deemed by you to be material or (ii) the
cost to you, Reference Bank or any Participant of
making or maintaining any Eurodollar Rate Loans shall
otherwise increase by an amount deemed by you to be
material. In the circumstances described in clauses
(i)(B), (i)(C) or (ii), in lieu of conversion to
Prime Rate Loans, we shall have the option, for the
balance of the Interest Period(s) for
then-outstanding Eurodollar Rate Loans, of paying any
and all increased costs to you, Reference Bank and
each Participant, together with the aggregate amount
by which the amounts received or receivable by you
have been reduced in respect of such Eurodollar Rate
Loans. In the event of any conversion of Eurodollar
Rate Loans to Prime Rate Loans, we shall pay to you,
upon demand by you (or you may, at your option,
charge any of our loan accounts) any amounts required
to compensate you, the Reference Bank or any
Participant with you for any loss (including loss of
anticipated profits), cost
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or expense incurred by you or any such person as a
result of any conversion of Eurodollar Rate Loans to
Prime Rate Loans, including, without limitation, any
such loss, cost or expense incurred by reason of the
liquidation or reemployment of deposits or other
funds acquired by you or any such person to make or
maintain the Eurodollar Rate Loans or any portion
thereof. A certificate signed by you setting forth
the basis for the determination of such amount
necessary to compensate you as aforesaid shall be
delivered to us and shall be conclusive, absent
manifest error.
(f) If any payments or prepayments in respect of
the Eurodollar Rate Loans are received by you other
than on the last day of the applicable Interest
Period (whether pursuant to acceleration, upon
maturity or otherwise), including any payments
pursuant to the application of collections under
Section 5 of this Agreement or any other payments
made with the proceeds of Collateral, we shall pay to
you upon demand by you (or you may, at your option,
charge any of our loan accounts) any amounts required
to compensate you, the Reference Bank or any
Participant for any additional loss (including loss
of anticipated profits), cost or expense incurred by
such person as a result of such prepayment or
payment, including, without limitation, any loss,
cost or expense incurred by reason of the liquidation
or reemployment of deposits or other funds acquired
by you or any such person to make or maintain such
Eurodollar Rate Loans or any portion thereof."
(b) Section 3.2 of the Accounts Agreement is hereby
deleted in its entirety and replaced with the following:
"[INTENTIONALLY OMITTED]"
(c) Any and all references in the Financing Agreements to
the post-default rate of interest continued in Section 3.2 of the Accounts
Agreement are hereby amended to refer to the post-default rate of interest
contained in Section 3.1 of the Accounts Agreement, as herein amended.
7. Net Worth Covenants. Section IV (g)(ii) of the Covenant
Supplement to the Accounts Agreement, dated January 11, 1990, as amended, is
hereby further amended by deleting it in its entirety and replacing it with the
following:
"(ii) Borrower shall, at all times, maintain on a
basis consolidated with LPC and LPC's direct and
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indirect Subsidiaries, a Net Worth not less than
negative $9,500,000."
8. Term. The first sentence of Section 9.1 of the Accounts
Agreement, as heretofore amended, is hereby deleted in its entirety and
replaced with the following:
"This Agreement shall become effective upon
acceptance by you and shall continue in full force
and effect for a term ending January 2, 1998 (the
"Renewal Date"), unless sooner terminated pursuant to
the terms hereof."
9. Inventory Sublimit. Paragraph 3 of the letter agreement re:
Inventory Loans, dated March 23, 1990, is hereby amended by deleting the
reference to "$3,000,000" and replacing it with "$5,000,000".
10. Fees.
(a) LCI shall pay to Congress a facility fee in an amount
equal to $62,500, payable simultaneously with the execution hereof, which fee
is fully earned as of the date hereof.
(b) Section 3.5 of the Account Agreement is hereby
deleted in its entirety and replaced with the following:
"3.5 If the average outstanding daily
principal balance of all Loans made and Credits
provided by you to us under this Agreement or any
supplement hereto in any calendar month during the
applicable time period set forth below, plus the
average outstanding daily principal balance of all
"Loans" made or "Credits" provided by you to LPC
under (and as such quoted terms are defined in) the
LPC Financing Agreements for such time period, shall
be less than the corresponding amount set forth below
(the "Unused Line Base Amount"), we and LPC shall be
jointly and severally obligated to pay to you, on or
before the tenth (10th) day of the next succeeding
calendar month, an unused line fee calculated at the
rate of one- half of one (1/2 of 1%) percent per
annum upon the amount by which the Unused Line Base
Amount exceeds the average outstanding daily
principal balance of all such Loans and Credits to
LCI and LPC in respect of such month:
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Unused Line
Time Period Base Amount
----------- -----------
(i) April 1, 1995 through $25,000,000
and including
December 31, 1995
(ii) January 1, 1996 through $20,000,000
and including
December 31, 1996
(iii) January 1, 1997 and $15,000,000
thereafter
(c) Section 9.2 of the Accounts Agreement, as heretofore
amended, is hereby deleted in its entirety and replaced with the following:
"9.2 If for any reason the Financing Agreements are
terminated prior to January 2, 1998, in view of the
impracticability and extreme difficulty of
ascertaining actual damages and by mutual agreement
of the parties as to a reasonable calculation of your
lost profits as a result thereof, we hereby agree to
pay to you upon the effective date of such
termination, jointly and severally with LPC, an early
termination fee in an amount equal to: (i) two (2%)
percent of the average outstanding balance of all
Loans and Credits provided by you to us and LPC
during the twelve (12) calendar month period ended
immediately prior to the effective date of
termination (such average balance, the "Average Line
Usage") if such termination occurs on or prior to
December 31, 1995, (ii) one (1%) percent of the
Average Line Usage if such termination occurs after
December 31, 1995, but on or prior to December 31,
1996, or (iii) one-half of one (1/2 of 1%) of the
Average Line Usage if such termination occurs after
December 31, 1996 but on or prior to June 30, 1997;
provided, that, the early termination fee for a
termination effective after December 31, 1996 as
provided for in this clause (iii) of Section 9.2 will
not be payable by us and/or LPC (A) if we and LPC
have obtained and delivered to you a written proposal
for a complete replacement and refinancing of our and
LPC's Obligations to you, (B) you determine in your
sole and absolute discretion not to offer us and LPC
continued financing on substantially the same terms
and conditions of such written proposal (such
determination by you to be made within
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fifteen (15) business days after your receipt of such written
proposal) and (C) we enter into new financing arrangements with such
replacement lender on the same terms and conditions of such written
proposal and we pay and perform all of our Obligations hereunder upon
and in connection with such termination. No early termination fee
shall be payable if termination occurs effective after June 30, 1997.
The early termination fee payable as provided for herein shall be
presumed to be the amount of damages sustained by you as a result of
said early termination and we agree that it is reasonable under the
circumstances currently existing. The early termination fee provided
for herein shall be deemed included in the Obligations."
(d) Section 1.8 of the Trade Financing Agreement
Supplement to the Accounts Agreement, dated January 11, 1990, is hereby amended
by deleting the reference to "two and one-half percent (2-1/2%)" and replacing
it with "one percent (1%)".
11. Representations, Warranties and Covenants. In addition to the
continuing representations, warranties and covenants heretofore or hereafter
made by LCI to Congress pursuant to the Financing Agreements, LCI hereby
represents, warrants and covenants with and to Congress as follows (which
representations, warranties and covenants are continuing and shall survive the
execution and delivery hereof and shall be incorporated into and made a part of
the Financing Agreements):
(a) No Event of Default exists or has occurred and is
continuing on the date of this Amendment.
(b) This Amendment has been duly executed and delivered
by LCI and is in full force and effect as of the date hereof, and the
agreements and obligations of LCI contained herein constitute the legal, valid
and binding obligations of LCI enforceable against LCI in accordance with their
terms.
(c) As of the date hereof, LCI is not liable for any
outstanding purchase money indebtedness or indebtedness under capitalized
leases, which indebtedness is secured by any of the equipment of LCI, except
purchase money indebtedness to Congress secured by equipment (among other
Collateral).
12. Conditions to Effectiveness of Amendment. Anything contained
in this Amendment to the contrary notwithstanding, the terms and provisions of
this Amendment shall only become effective upon the satisfaction of the
following additional conditions precedent, subject to Section 13 below:
-13-
14
(a) Congress shall have received an executed original or
executed original counterparts (as the case may be) of this Amendment together
with the following, each of which shall be in form and substance satisfactory
to Congress:
(i) the LCI Second Restated Note;
(ii) LCI Ohio Real Estate Note;
(iii) Second Amended and Restated Open-End Mortgage
and Security Agreement between LCI and
Congress which amends the terms of the
existing mortgage in favor of Congress to
reflect, inter alia, the increase in the
Maximum Credit and all of the Term Loans,
together with an updating endorsement, at
LCI's expense, to the existing title policy
with respect thereto;
(iv) a Phase I Environmental Assessment
addressed to Congress or upon which Congress
is expressly permitted to rely, an ALTA
standard survey certified to Congress, and an
orderly liquidation value appraisal report
addressed to Congress or upon which Congress
is expressly permitted to rely, showing an
orderly liquidation value of not less than
the sum of $425,000 plus one hundred
twenty-five (125%) percent of the LCI Ohio
Real Estate Loan (such orderly liquidation
value to be determined by using methodology
acceptable to Congress), each with respect to
LCI's real property in Trumbull County, Ohio
and each currently dated and prepared, at
LCI's expense, by an environmental
engineering firm, a surveyor and an
appraiser, respectively, reasonably
satisfactory to Congress;
(v) an appraisal report with respect to
the orderly liquidation values of
LCI's Equipment, currently dated and
prepared for Congress, at LCI's
expense, by MB Valuation Services,
Inc., Daley-Hodkin Appraisal
Corporation or other appraiser
reasonably satisfactory to Congress;
(vi) the resolutions of the Board of
Directors of LCI duly authorizing the
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15
execution and delivery of this
Amendment and the instruments and
transactions hereunder;
(vii) an Amendment between LPC and Congress
with respect to the LPC Financing
Agreements and the documents and
instruments required thereunder and
the satisfaction of all conditions
precedent to the effectiveness
thereof;
(viii) evidence of insurance and loss
payable endorsements naming Congress
as a loss payee thereunder, issued by
an insurance company satisfactory to
Congress, and certificates of
insurance policies and/or
endorsements naming Congress as
additional insured and loss payee,
all at LCI's cost and expense;
(ix) evidence that LCI's owned real
property in Trumbull County, Ohio is
not within an area having special
flood hazard or flood prone
characteristics;
(x) additional landlord/mortgagee waivers
as required by Congress; and
(xi) legal opinion of counsel to LCI and
LPC addressed to Congress with
respect to the Amendment and the
instruments delivered hereunder and
such other matters as Congress shall
reasonably request.
(b) All representations and warranties contained herein,
in the Accounts Agreement and in the other Financing Agreements shall be true
and correct in all material respects; and
(c) No Event of Default shall have occurred and no event
shall have occurred or condition be existing which, with notice or passage of
time or both, would constitute an Event of Default.
13. Deliveries Relating to Real Estate.
(a) Anything contained in Section 12(a) to the contrary
notwithstanding, the instruments, documents and other items required to be
executed and/or delivered to Congress pursuant to Sections 12(a)(ii), (iii),
(iv) and (ix) need only be executed and/or delivered (as the case may be) at or
before the
-15-
16
funding of the LCI Ohio Real Estate Loan; provided, that, in the event that a
timely request for the LCI Ohio Real Estate Loan is not received by Congress as
required herein, or LCI is otherwise not entitled to receive the LCI Ohio Real
Estate Loan pursuant to the other terms and conditions of this Amendment, then
LCI shall, within ninety (90) days after the date hereof, nevertheless execute
and/or deliver (as the case may be) to Congress all of the instruments,
documents and other items required under Sections 12(a) (iii), (iv) and (ix),
and the failure to do so shall, at Congress' option, constitute an Event of
Default.
(b) Anything contained in Section 12(a) to the contrary
notwithstanding, the instruments required to be executed and/or delivered to
Congress pursuant to Section 12(a)(x) shall only be required to be executed
and/or delivered within ninety (90) days after the date hereof. Failure to
timely deliver any such instruments shall entitle Congress to establish, from
time to time, reserves against availability of Loans or Credits in amounts
determined by Congress to be necessary to cover risks or increased risks to
which the Collateral or Congress' rights (including rights of access) and
enforcement remedies may be subject or exposed by reason of the absence of such
instruments.
14. Effect of this Amendment. Except as modified pursuant hereto,
the Accounts Agreement and all supplements to the Accounts Agreement and all
other Financing Agreements, are hereby specifically ratified, restated and
confirmed by the parties hereto as of the date hereof and no existing defaults
or Events of Default have been waived in connection herewith. To the extent of
conflict between the terms of this Amendment and the Accounts Agreement or any
of the other Financing Agreements, the terms of this Amendment control.
15. Further Assurances. LCI shall execute and deliver such
additional documents and take such additional actions as may reasonably be
requested by Congress to effectuate the provisions and purposes of this
Amendment.
16. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York without
reference to its principles of conflicts of law.
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17
By the signatures hereto of the duly authorized officers, the parties
hereto mutually covenant, warrant and agree as set forth herein.
Very truly yours,
CONGRESS FINANCIAL CORPORATION
By: Lawrence S. Forte
-----------------
Title: Vice President
--------------
AGREED AND ACCEPTED:
LEXINGTON COMPONENTS, INC.
By: Warren Delano
-------------
Title: Vice Chairman
-------------
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18
CONSENT
The undersigned guarantor hereby consents to the foregoing Amendment,
agrees to be bound by its terms applicable to it, and ratifies and confirms the
terms of its Guarantee and Waiver dated January 11, 1990 as applicable to all
present and future indebtedness, liabilities and obligations of LEXINGTON
COMPONENTS, INC. ("LCI") to CONGRESS FINANCIAL CORPORATION ("Congress"),
including, without limitation, all indebtedness, liabilities and obligations
under the Financing Agreements as amended hereby.
LEXINGTON PRECISION CORPORATION
By: Warren Delano
---------------------------
Title: President
------------------------
-18-
19
EXHIBIT A
TERM PROMISSORY NOTE
$_______________ New York, New York
____________ __, 1995
FOR VALUE RECEIVED, LEXINGTON COMPONENTS, INC., a Delaware corporation
(the "Debtor"), hereby unconditionally promises to pay to the order of CONGRESS
FINANCIAL CORPORATION, a California corporation (the "Payee"), at the offices
of Payee at 1133 Avenue of the Americas, New York, New York 10036, or at such
other place as the Payee or any holder hereof may from time to time designate,
the principal sum of __________________________ DOLLARS ($_____________) in
lawful money of the United States of America and in immediately available
funds, in eighty-four (84) consecutive monthly installments (or earlier as
hereinafter referred to) on the first day of each month commencing
_______________ 1, 1995, of which the first eighty-three (83) installments
shall each be in the amount of _____________________________________ DOLLARS
($____________), and the last (i.e. eighty-fourth (84th)) installment shall be
in the amount of the entire unpaid balance of this Note.
Debtor hereby further promises to pay interest to the order of Payee
on the unpaid principal balance hereof at the Interest Rate. Such interest
shall be paid in like money at said office or place from the date hereof,
commencing _____________ 1, 1995 and on the first day of each month thereafter
until the indebtedness evidenced by this Note is paid in full. Interest
payable upon and during the continuance of an Event of Default or following the
effective date of termination or non-renewal of the Financing Agreements shall
be payable upon demand.
For purposes hereof (a) the term "Interest Rate" shall mean, as to
Prime Rate Loans, a rate of one and one-half (1-1/2%) percent per annum in
excess of the Prime Rate and as to Eurodollar Rate Loans, a rate of three and
one-quarter (3-1/4%) percent per annum in excess of the Adjusted Eurodollar
Rate; provided, that, at Payee's option, the Interest Rate shall mean a rate of
four and one-half (4-1/2%) percent per annum in excess of the Prime Rate as to
Prime Rate Loans and a rate of five and one-quarter (5-1/4%) percent per annum
in excess of the Adjusted Eurodollar Rate as to Eurodollar Rate Loans, upon and
during the continuance of an Event of Default or following the effective date
of termination or non-renewal of the Financing Agreements, and (b) the term
"Prime Rate" shall mean the rate from time to time publicly announced by
CoreStates Bank, N.A., or its successors, at its office in Philadelphia,
Pennsylvania, as its prime rate, whether or not such announced rate is the best
rate available at such bank. Unless otherwise defined herein, all capitalized
terms used herein shall
20
have the meanings assigned thereto in the Accounts Agreement (as hereinafter
defined) and the other Financing Agreements.
The Interest Rate applicable to Prime Rate Loans payable hereunder
shall increase or decrease by an amount equal to each increase or decrease,
respectively, in the Prime Rate, effective on the first day of the month after
any change in the Prime Rate, based on the Prime Rate in effect on the last day
of the month in which any such change occurs. Interest shall be calculated on
the basis of a three hundred sixty (360) day year and actual days elapsed. In
no event shall the interest charged hereunder exceed the maximum permitted
under the laws of the State of New York or other applicable law.
This Note is issued pursuant to the terms and provisions of the letter
agreement re: Amendment to Financing Agreements, dated as of January __, 1995,
between Debtor and Payee (the "Amendment") to evidence the "LCI Ohio Real
Estate Loan" (as defined in the Amendment) made by Payee to Debtor. This Note
is secured by the "Collateral" described in the Accounts Financing Agreement
[Security Agreement], dated January 11, 1990, by and between Payee and Debtor,
as amended (the "Accounts Agreement") and any agreement, document or instrument
now or at any time hereafter executed and/or delivered in connection therewith
or related thereto (the foregoing, as the same now exist or may hereafter be
amended, modified, supplemented, renewed, extended, restated or replaced, are
hereinafter collectively referred to as the "Financing Agreements") and is
entitled to all of the benefits and rights thereof and of the Financing
Agreements. At the time any payment is due hereunder, at its option, Payee may
charge the amount thereof to any account of Debtor maintained by Payee.
If any principal or interest payment is not made when due hereunder,
and such failure shall continue for three (3) days, or if any other Event of
Default (as defined in the Accounts Agreement) shall occur for any reason, or
if the Financing Agreements shall be terminated or not renewed for any reason
whatsoever, then and in any such event, in addition to all rights and remedies
of Payee under the Financing Agreements, applicable law or otherwise, all such
rights and remedies being cumulative, not exclusive and enforceable
alternatively, successively and concurrently, Payee may, at its option, declare
any or all of Debtor's obligations, liabilities and indebtedness owing to Payee
under the Financing Agreements (the "Obligations"), including, without
limitation, all amounts owing under this Note, to be due and payable, whereupon
the then unpaid balance hereof together with all interest accrued thereon,
shall forthwith become due and payable, together with interest accruing
thereafter at the then applicable rate stated above until the indebtedness
evidenced by this Note is paid in full, plus the costs and expenses of
collection hereof, including, but not limited to, reasonable attorneys' fees.
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21
Debtor (i) waives diligence, demand, presentment, protest and notice
of any kind, (ii) agrees that it will not be necessary for any holder hereof to
first institute suit in order to enforce payment of this Note and (iii)
consents to any one or more extensions or postponements of time of payment,
release, surrender or substitution of collateral security, or forbearance or
other indulgence, without notice or consent. Upon the occurrence and during
the continuance of any Event of Default, Payee shall have the right, but not
the obligation to setoff against this Note all money owed by Payee to Debtor.
Payee shall not be required to resort to any Collateral for payment,
but may proceed against Debtor and any guarantors or endorsers hereof in such
order and manner as Payee may choose. None of the rights of Payee shall be
waived or diminished by any failure or delay in the exercise thereof.
Debtor hereby waives the right to a trial by jury and all rights of
setoff and rights to interpose counterclaims and cross-claims in any litigation
or proceeding arising in connection with this Note, the Accounts Agreement, the
other Financing Agreements, the Obligations or the Collateral, other than
compulsory counterclaims, the non-assertion of which would result in a
permanent waiver. Debtor hereby irrevocably consents to the non-exclusive
jurisdiction of the Supreme Court of the State of New York and of the United
States District Court for the Southern District of New York for all purposes in
connection with any action or proceeding arising out of or relating to this
Note, the Accounts Agreement, the other Financing Agreements, the Obligations
or the Collateral and further consents that any process or notice of motion or
other application to said Courts or any judge thereof, or any notice in
connection with any proceeding hereunder may be served (i) inside or outside
the State of New York by registered or certified mail, return receipt
requested, and service or notice so served shall be deemed complete five (5)
days after the same shall have been posted or (ii) in such other manner as may
be permissible under the rules of said Courts. Within thirty (30) days after
such mailing, Debtor shall appear in answer to such process or notice of motion
or other application to said Courts, failing which Debtor shall be deemed in
default and judgment may be entered by Payee against Debtor for the amount of
the claim and other relief requested therein.
The execution and delivery of this Note has been authorized by the
Board of Directors of Debtor.
This Note, the other Obligations and the Collateral shall be governed
by and construed in accordance with the laws of the State of New York and shall
be binding upon the successors and assigns of Debtor and inure to the benefit
of Payee and its successors, endorsees and assigns. If any term or provision
of this Note shall be held invalid, illegal or unenforceable, the validity of
all
-3-
22
other terms and provisions hereof shall in no way be affected thereby.
This Note may not be changed, modified or terminated orally, but only
by an agreement in writing signed by the Payee or the holder hereof.
Whenever used herein, the terms "Debtor" and "Payee" shall be deemed
to include their respective successors and assigns.
LEXINGTON COMPONENTS, INC.
ATTEST: By:
--------------------------------
-------------------------------- Title:
-----------------------------
[Corporate Seal]
-4-
23
EXHIBIT I
NEW EQUIPMENT TERM NOTE *
$_____________ ______________, 19__
FOR VALUE RECEIVED, LEXINGTON COMPONENTS, INC., a Delaware corporation
(the "Debtor"), hereby unconditionally promises to pay to the order of CONGRESS
FINANCIAL CORPORATION, a California corporation (the "Payee"), at the offices
of Payee at 1133 Avenue of the Americas, New York, New York 10036, or at such
other place as the Payee or any holder hereof may from time to time designate,
the principal sum of ____________________________ DOLLARS ($_________) in
lawful money of the United States of America and in immediately available
funds, in _________ (__) consecutive monthly installments (or earlier as
hereinafter referred to) on the first day of each month commencing __________,
19__, of which the first ____________ (__) installments shall each be in the
amount of ___________________ DOLLARS ($________), and the last (i.e.
___________ (___)) installment shall be in the amount of the entire unpaid
balance of this Note.
Debtor hereby further promises to pay interest to the order of Payee
on the unpaid principal balance hereof at the Interest Rate. Such interest
shall be paid in like money at said office or place from the date hereof,
commencing on the first day of the month next following the date hereof, and on
the first day of each month thereafter until the indebtedness evidenced by this
Note is paid in full. Interest payable upon and during the continuance of an
Event of Default or following the effective date of termination or non-renewal
of the Financing Agreements shall be payable upon demand.
For purposes hereof, (a) the term "Interest Rate" shall mean, as to
Prime Rate Loans, a rate of one (1%) percent per annum in excess of the Prime
Rate, and as to Eurodollar Rate Loans, a rate of three and one-quarter (3 1/4%)
percent per annum in excess of the Adjusted Eurodollar Rate; provided, that, at
Payee's option, the Interest Rate shall mean a rate of three (3%) percent per
annum in excess of the Prime Rate as to Prime Rate Loans and a rate of five and
one-quarter (5 1/4%) percent per annum in excess of the Adjusted Eurodollar
Rate as to Eurodollar
__________________________________
*For preparation of Note:
The blanks are to be completed such that the principal amount of the
New Equipment Term Loan is amortized in equal, consecutive monthly
installments of principal commencing on the first day of the month
following the date of advance and ending on February 1, 2002.
24
Rate Loans, upon and during the continuance of an Event of Default or following
the effective date of termination or non-renewal of the Financing Agreements,
and (b) the term "Prime Rate" shall mean the rate from time to time publicly
announced by CoreStates Bank, N.A., or its successors, at its office in
Philadelphia, Pennsylvania, as its prime rate, whether or not such announced
rate is the best rate available at such bank. Unless otherwise defined herein,
all capitalized terms used herein shall have the meanings assigned thereto in
the Accounts Agreement (as hereinafter defined) and the other Financing
Agreements.
The Interest Rate payable hereunder shall increase or decrease by an
amount equal to each increase or decrease, respectively, in such Prime Rate,
effective on the first day of the month after any change in such Prime Rate,
based on the Prime Rate in effect on the last day of the month in which any
such change occurs. Interest shall be calculated on the basis of a three
hundred sixty (360) day year and actual days elapsed. In no event shall the
interest charged hereunder exceed the maximum permitted under the laws of the
State of New York or other applicable law.
This Note is issued pursuant to the terms and provisions of the letter
agreement re: Amendment to Financing Agreements, dated as of January __, 1995
between Debtor and Payee (the "Amendment") to evidence a "New Equipment Term
Loan" (as defined in the New Equipment Term Loan Agreement as referred to in
and as modified by the Amendment) made by Payee to Debtor. This Note is
secured by the "Collateral" described in the Accounts Financing Agreement
[Security Agreement], dated January 11, 1990, by and between Payee and Debtor,
as amended (the "Accounts Agreement") and any agreement, document or instrument
now or at any time hereafter executed and/or delivered in connection therewith
or related thereto (the foregoing, as the same now exist or may hereafter be
amended, modified, supplemented, renewed, extended, restated or replaced, are
hereinafter collectively referred to as the "Financing Agreements") and is
entitled to all of the benefits and rights thereof and of the Financing
Agreements. At the time any payment is due hereunder, at its option, Payee may
charge the amount thereof to any account of Debtor maintained by Payee.
If any principal or interest payment is not made when due hereunder,
and such failure shall continue for three (3) days, or if any other Event of
Default (as defined in the Accounts Agreement) shall occur for any reason, or
if the Financing Agreements shall be terminated or not renewed for any reason
whatsoever, then and in any such event, in addition to all rights and remedies
of Payee under the Financing Agreements, applicable law or otherwise, all such
rights and remedies being cumulative, not exclusive and enforceable
alternatively, successively and concurrently, Payee may, at its option, declare
any or all of
-2-
25
Debtor's obligations, liabilities and indebtedness owing to Payee under the
Financing Agreements (the "Obligations"), including, without limitation, all
amounts owing under this Note, to be due and payable, whereupon the then unpaid
balance hereof together with all interest accrued thereon, shall forthwith
become due and payable, together with interest accruing thereafter at the then
applicable rate stated above until the indebtedness evidenced by this Note is
paid in full, plus the costs and expenses of collection hereof, including, but
not limited to, reasonable attorneys' fees.
Debtor (i) waives diligence, demand, presentment, protest and notice
of any kind, (ii) agrees that it will not be necessary for any holder hereof to
first institute suit in order to enforce payment of this Note and (iii)
consents to any one or more extensions or postponements of time of payment,
release, surrender or substitution of collateral security, or forbearance or
other indulgence, without notice or consent. Upon the occurrence of any Event
of Default and during the continuance thereof, Payee shall have the right, but
not the obligation to setoff against this Note all money owed by Payee to
Debtor.
Payee shall not be required to resort to any Collateral for payment,
but may proceed against Debtor and any guarantors or endorsers hereof in such
order and manner as Payee may choose. None of the rights of Payee shall be
waived or diminished by any failure or delay in the exercise thereof.
Debtor hereby waives the right to a trial by jury and all rights of
setoff and rights to interpose counterclaims and cross-claims in any litigation
or proceeding arising in connection with this Note, the Accounts Agreement, the
other Financing Agreements, the Obligations or the Collateral, other than
compulsory counterclaims, the non-assertion of which would result in a
permanent waiver. Debtor hereby irrevocably consents to the non-exclusive
jurisdiction of the Supreme Court of the State of New York and of the United
States District Court for the Southern District of New York for all purposes in
connection with any action or proceeding arising out of or relating to this
Note, the Accounts Agreement, the other Financing Agreements, the Obligations
or the Collateral and further consents that any process or notice of motion or
other application to said Courts or any judge thereof, or any notice in
connection with any proceeding hereunder may be served (i) inside or outside
the State of New York by registered or certified mail, return receipt
requested, and service or notice so served shall be deemed complete five (5)
days after the same shall have been posted or (ii) in such other manner as may
be permissible under the rules of said Courts. Within thirty (30) days after
such mailing, Debtor shall appear in answer to such process or notice of motion
or other application to said Courts, failing which Debtor shall be deemed in
default and judgment may be entered by Payee against
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26
Debtor for the amount of the claim and other relief requested therein.
The execution and delivery of this Note has been authorized by the
Board of Directors of Debtor.
This Note, the other Obligations and the Collateral shall be governed
by and construed in accordance with the laws of the State of New York and shall
be binding upon the successors and assigns of Debtor and inure to the benefit
of Payee and its successors, endorsees and assigns. If any term or provision
of this Note shall be held invalid, illegal or unenforceable, the validity of
all other terms and provisions hereof shall in no way be affected thereby.
This Note may not be changed, modified or terminated orally, but only
by an agreement in writing signed by the Payee or the holder hereof.
Whenever used herein, the terms "Debtor" and "Payee" shall be deemed
to include their respective successors and assigns.
LEXINGTON COMPONENTS, INC.
ATTEST:
By:
-----------------------------
-------------------------------
Secretary Title:
--------------------------
[Corporate Seal]
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EX-10.37
12
LEXINGTON PRECISION CORP. 10-K EXHIBIT 10.37
1
SECOND
AMENDED AND RESTATED
PROMISSORY NOTE
$6,957,000 New York, New York
January 31, 1995
FOR VALUE RECEIVED, LEXINGTON COMPONENTS, INC., a Delaware corporation
(the "Debtor"), hereby unconditionally promises to pay to the order of CONGRESS
FINANCIAL CORPORATION, a California corporation (the "Payee"), at the offices
of Payee at 1133 Avenue of the Americas, New York, New York 10036, or at such
other place as the Payee or any holder hereof may from time to time designate,
the principal sum of SIX MILLION NINE HUNDRED FIFTY-SEVEN THOUSAND AND NO/100
DOLLARS ($6,957,000.00) in lawful money of the United States of America and in
immediately available funds, in eighty-four (84) consecutive monthly
installments (or earlier as hereinafter referred to) on the first day of each
month commencing March 1, 1995, of which the first eighty-three (83)
installments shall each be in the amount of EIGHTY THREE THOUSAND AND NO/100
DOLLARS ($83,000.00), and the last (i.e. eighty-fourth (84th)) installment
shall be in the amount of the entire unpaid balance of this Note.
Debtor hereby further promises to pay interest to the order of Payee
on the unpaid principal balance hereof at the Interest Rate. Such interest
shall be paid in like money at said office or place from the date hereof,
commencing February 1, 1995 and on the first day of each month thereafter until
the indebtedness evidenced by this Note is paid in full. Interest payable upon
and during the continuance of an Event of Default or following the effective
date of termination or non-renewal of the Financing Agreements shall be payable
upon demand.
For purposes hereof, (a) the term "Interest Rate" shall mean, as to
Prime Rate Loans, a rate of one (1%) percent per annum in excess of the Prime
Rate, and as to Eurodollar Rate Loans, a rate of three and one-quarter (3 1/4%)
percent per annum in excess of the Adjusted Eurodollar Rate; provided, that, at
Payee's option, the Interest Rate shall mean a rate of three (3%) percent per
annum in excess of the Prime Rate as to Prime Rate Loans and a rate of five and
one-quarter (5 1/4%) percent per annum in excess of the Adjusted Eurodollar
Rate as to Eurodollar Rate Loans, upon and during the continuance of an Event
of Default or after the effective date of termination or non-renewal of the
Financing Agreements, and (b) the term "Prime Rate" shall mean the rate from
time to time publicly announced by CoreStates Bank, N.A., or its successors, at
its office in Philadelphia, Pennsylvania, as its prime rate, whether or not
such announced rate is the best rate available at such bank. Unless otherwise
defined herein, all capitalized terms used herein shall have the
2
meanings assigned thereto in the Accounts Agreement (as hereinafter defined)
and the other Financing Agreements.
The Interest Rate applicable to Prime Rate Loans payable hereunder
shall increase or decrease by an amount equal to each increase or decrease,
respectively, in the Prime Rate, effective on the first day of the month after
any change in the Prime Rate, based on the Prime Rate in effect on the last day
of the month in which any such change occurs. Interest shall be calculated on
the basis of a three hundred sixty (360) day year and actual days elapsed. In
no event shall the interest charged hereunder exceed the maximum permitted
under the laws of the State of New York or other applicable law.
This Note is the "LCI Second Restated Note" issued pursuant to the
terms and provisions of the letter agreement re: Amendment to Financing
Agreements, dated as of the date hereof, between Debtor and Payee. The
principal amount of this Note represents: (i) (A) the unpaid principal balance
of $2,960,000.41 outstanding under that certain Amended and Restated Promissory
Note, dated January 14, 1994, in the original principal sum of $3,700,000 made
by Debtor to Payee and (B) the unpaid principal balance of $1,835,000.00
outstanding under that certain New Equipment Term Note, dated as of August 1,
1994, in the original principal sum of $2,000,000 made by Debtor to Payee
(collectively, the "Existing Promissory Notes"), plus (ii) an additional one-
time advance made on the date hereof by Payee to Debtor in the principal sum of
$2,161,999.59 ("Additional Term Loan"). None of the outstanding indebtedness
evidenced by the Existing Promissory Notes shall be deemed extinguished by
Debtor's issuance or Payee's acceptance of this Note. This Note shall be
deemed to evidence the Additional Term Loan and to substitute for, and to amend
and restate in its entirety, the Existing Promissory Notes as to the
indebtedness previously evidenced thereby, and the Existing Promissory Notes
shall be so marked by Payee.
This Note is secured by the "Collateral" described in the Accounts
Financing Agreement [Security Agreement], dated January 11, 1990, by and
between Payee and Debtor, as amended (the "Accounts Agreement") and any
agreement, document or instrument now or at any time hereafter executed and/or
delivered in connection therewith or related thereto (the foregoing, as the
same now exist or may hereafter be amended, modified, supplemented, renewed,
extended, restated or replaced, are hereinafter collectively referred to as the
"Financing Agreements") and is entitled to all of the benefits and rights
thereof and of the Financing Agreements. At the time any payment is due
hereunder, at its option, Payee may charge the amount thereof to any account of
Debtor maintained by Payee.
- 2 -
3
If any principal or interest payment is not made when due hereunder,
and such failure shall continue for three (3) days, or if any other Event of
Default (as defined in the Accounts Agreement) shall occur for any reason, or
if the Financing Agreements shall be terminated or not renewed for any reason
whatsoever, then and in any such event, in addition to all rights and remedies
of Payee under the Financing Agreements, applicable law or otherwise, all such
rights and remedies being cumulative, not exclusive and enforceable
alternatively, successively and concurrently, Payee may, at its option, declare
any or all of Debtor's obligations, liabilities and indebtedness owing to Payee
under the Financing Agreements (the "Obligations"), including, without
limitation, all amounts owing under this Note, to be due and payable, whereupon
the then unpaid balance hereof together with all interest accrued thereon,
shall forthwith become due and payable, together with interest accruing
thereafter at the then applicable rate stated above until the indebtedness
evidenced by this Note is paid in full, plus the costs and expenses of
collection hereof, including, but not limited to, reasonable attorneys' fees.
Debtor (i) waives diligence, demand, presentment, protest and notice
of any kind, (ii) agrees that it will not be necessary for any holder hereof to
first institute suit in order to enforce payment of this Note and (iii)
consents to any one or more extensions or postponements of time of payment,
release, surrender or substitution of collateral security, or forbearance or
other indulgence, without notice or consent. Upon the occurrence and during
the continuance of any Event of Default, Payee shall have the right, but not
the obligation to setoff against this Note all money owed by Payee to Debtor.
Payee shall not be required to resort to any Collateral for payment,
but may proceed against Debtor and any guarantors or endorsers hereof in such
order and manner as Payee may choose. None of the rights of Payee shall be
waived or diminished by any failure or delay in the exercise thereof.
Debtor hereby waives the right to a trial by jury and all rights of
setoff and rights to interpose counterclaims and cross-claims in any litigation
or proceeding arising in connection with this Note, the Accounts Agreement, the
other Financing Agreements, the Obligations or the Collateral, other than
compulsory counterclaims, the non-assertion of which would result in a
permanent waiver. Debtor hereby irrevocably consents to the non-exclusive
jurisdiction of the Supreme Court of the State of New York and of the United
States District Court for the Southern District of New York for all purposes in
connection with any action or proceeding arising out of or relating to this
Note, the Accounts Agreement, the other Financing Agreements, the Obligations
or the Collateral and further consents that any process or notice of motion or
other application to said Courts
- 3 -
4
or any judge thereof, or any notice in connection with any proceeding hereunder
may be served (i) inside or outside the State of New York by registered or
certified mail, return receipt requested, and service or notice so served shall
be deemed complete five (5) days after the same shall have been posted or (ii)
in such other manner as may be permissible under the rules of said Courts.
Within thirty (30) days after such mailing, Debtor shall appear in answer to
such process or notice of motion or other application to said Courts, failing
which Debtor shall be deemed in default and judgment may be entered by Payee
against Debtor for the amount of the claim and other relief requested therein.
The execution and delivery of this Note has been authorized by the
Board of Directors of Debtor.
This Note, the other Obligations and the Collateral shall be governed
by and construed in accordance with the laws of the State of New York and shall
be binding upon the successors and assigns of Debtor and inure to the benefit
of Payee and its successors, endorsees and assigns. If any term or provision
of this Note shall be held invalid, illegal or unenforceable, the validity of
all other terms and provisions hereof shall in no way be affected thereby.
This Note may not be changed, modified or terminated orally, but only
by an agreement in writing signed by the Payee or the holder hereof.
Whenever used herein, the terms "Debtor" and "Payee" shall be deemed
to include their respective successors and assigns.
LEXINGTON COMPONENTS, INC.
ATTEST:
By: Warren Delano
Michael A. Lubin --------------------------------
----------------
Title: Vice Chairman
-----------------------------
[Corporate Seal]
- 4 -
EX-10.39
13
LEXINGTON PRECISION CORP. 10-K EXHIBIT 10.39
1
LEXINGTON PRECISION CORPORATION
767 THIRD AVENUE
NEW YORK, NY 10017
As of December 30, 1994
Chemical Bank of New Jersey
2 Tower Center
P.O. Box 1094
East Brunswick, New Jersey 08816-1094
Ladies and Gentlemen:
Reference is made to the Lease Agreement, dated as of December 1, 1985,
between the County of Monroe Industrial Development Agency, a New York public
benefit corporation ("COMIDA"), and Lexington Precision Corporation, a Deleware
corporation formerly known as Blasius Industries, Inc. ("LPC"), as amended by
certain letter agreements dated January 10, 1990 and December 29, 1993 between
Chemical Bank of New Jersey, a national banking association formerly known as
Horizon Bank ("Chemical"), and LPC (the "Lease"). Capitalized terms used
herein which are not defined herein shall have the respective meanings ascribed
therto in the Lease
In connection with and as consideration for the execution and delivery
hereof by Chemical, LPC agrees to pay Chemical $1,500.
Article I of the Lease is hereby further amended by adding therto the
following definitions of the terms "Working Capital":
"'CONSOLIDATED WORKING CAPITAL' means (i) the consolidated
working capital of the Company, as determined in accordance with
generally accepted accounting principles, plus (ii) the amount of any
borrowing of the Company or any of its subsidiaries which is (a) under
a revolving credit facility having a stated maturity of termination
date more than one year from the date with respect to which such
calculation is made and (b) classified by the Company as a current
liability."
The foregoing amendment is effective as of the date hereof.
2
By the signatures hereon of their duly authorized officers, the parties
hereto mutually covenant, warrant and agree as set forth herein.
Very truly yours,
LEXINGTON PRECISION CORPORATION
BY: Warren Delano
----------------------------
Waren Delano
President
Agreed and Accepted As of the
Date Set Forth Above:
CHEMICAL BANK OF NEW JERSEY
BY: Robert M. Recine
-------------------------
Name: Robert M. Recine
-----------------------
Title: Vice President
----------------------
- 2 -
EX-23.1
14
LEXINGTON PRECISION CORP. 10-K EXHIBIT 23.1
1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statement No.
2-93448 on Form S-8, pertaining to the Lexington Precision Corporation
(formerly Blasius Industries, Inc.) 1983 Incentive Stock Option Plan of our
report dated February 28, 1995 with respect to the consolidated financial
statements and schedule of Lexington Precision Corporation included in the
Annual Report (Form 10-K) for the year ended December 31, 1994.
ERNST & YOUNG LLP
Cleveland, Ohio
March 30, 1995
EX-27.1
15
LEXINGTON PRECISION CORP. 10-K EXHIBIT 27.1
5
1,000
YEAR
DEC-31-1994
JAN-01-1994
DEC-31-1994
79
0
12,478
174
8,237
22,752
59,613
27,019
67,396
24,429
49,627
1,087
555
0
(8,302)
67,396
88,532
88,532
71,634
71,634
0
20
6,272
2,366
34
2,332
0
0
0
2,332
.53
.51