-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, K8wdd2vNs0S1B1TOd2LWpJ9BUFfNfqOqCNjWovDBiAkTUOBeuEkempW3B2S2Lato QHuPTYASPpp/bCOwMWDllQ== 0000950152-96-001305.txt : 19960402 0000950152-96-001305.hdr.sgml : 19960402 ACCESSION NUMBER: 0000950152-96-001305 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 26 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960401 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: LEXINGTON PRECISION CORP CENTRAL INDEX KEY: 0000012570 STANDARD INDUSTRIAL CLASSIFICATION: FABRICATED RUBBER PRODUCTS, NEC [3060] IRS NUMBER: 221830121 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-03252 FILM NUMBER: 96542414 BUSINESS ADDRESS: STREET 1: 767 THIRD AVE 29TH FL CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2123194657 MAIL ADDRESS: STREET 1: 30195 CHAGRIN BLVD STREET 2: SUITE 208W CITY: CLEVELAND STATE: OH ZIP: 44124-5755 FORMER COMPANY: FORMER CONFORMED NAME: BLASIUS INDUSTRIES INC DATE OF NAME CHANGE: 19890116 10-K 1 LEXINGTON PRECISION 10-K 1 ================================================================================ 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, 1995 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 at February 29, 1996 was approximately $3,719,000. The number of shares outstanding of the registrant's common stock as of February 29, 1996 was 4,228,036. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's proxy statement to be issued in connection with its 1996 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. =============================================================================== 2 LEXINGTON PRECISION CORPORATION ANNUAL REPORT ON FORM 10-K TABLE OF CONTENTS
PAGE ---- PART I Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . 7 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . 22 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 PART III Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . 45 Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . 45 Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . 45 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K . . . . . . . . . . . . . 46
3 PART I ITEM 1. BUSINESS Lexington Precision Corporation ("LPC") is a Delaware corporation which was incorporated in 1966. Unless the context otherwise requires, all references herein to the "Company" are to LPC and its wholly-owned subsidiary, Lexington Components, Inc. ("LCI"). Through its two business segments, the Rubber Group and the Metals Group, the Company manufactures, to customer specifications, rubber and metal component parts used primarily by manufacturers of automobiles, automotive replacement parts, industrial equipment, computers, office equipment, medical devices and home appliances. The Company's business is conducted primarily in the continental United States. RUBBER GROUP The Company's Rubber Group manufactures silicone and organic rubber components. The Rubber Group currently conducts its business through three divisions of LCI, the Precision Seals Division, the Electrical Insulator Division and Lexington Medical, and through a division of LPC, Lexington Manufacturing. 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 designed to assure the integrity of the many connections which are required throughout the harnesses. The seals are generic in nature. A particular seal may be used in a number of connectors within a harness and in a variety of car models produced by several different car manufacturers. The Precision Seals 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 33% of the insulators manufactured by the Electrical Insulator Division are used in harnesses for new vehicles, primarily those manufactured by Ford Motor Company and Chrysler Corporation, and approximately 67% are used in replacement harnesses. LEXINGTON MEDICAL. Lexington Medical manufactures molded rubber components which are used in a variety of medical devices, such as intravenous feeding systems, syringes, laparoscopic instruments and catheters. LEXINGTON MANUFACTURING. Lexington Manufacturing manufactures rubber molds which are sold to customers of the other divisions of the Rubber Group and are used by the other divisions to produce components. Lexington Manufacturing also provides engineering support to the other divisions of the Rubber Group. During 1995, the Company sold the Rubber Group's Extruded and Lathe-Cut Products Division. The former Division manufactured extruded rubber components used primarily by manufacturers of industrial equipment, lighting products and home appliances. -1- 4 METALS GROUP The Company's Metals Group manufactures metal components. The Metals Group conducts its business through Falconer Die Casting Company ("Falconer") and Ness Precision Products ("Ness"), both of which are divisions of LPC. FALCONER DIE CASTING COMPANY. Falconer manufactures aluminum, magnesium and zinc die castings used primarily by manufacturers of computers, office equipment, recreational equipment, communications equipment, industrial equipment and automobiles. Many of the die castings produced by Falconer are also machined by Falconer using computer-controlled machining centers and other secondary machining equipment. NESS PRECISION PRODUCTS. Ness produces machined aluminum, brass and steel components used primarily by manufacturers of automobiles, home appliances, office equipment, communications equipment and industrial equipment. In 1995, approximately 38% of the revenues of Ness were generated by sales of components for automotive air bag inflators. PRINCIPAL END USES FOR THE COMPANY'S PRODUCTS The following table summarizes net sales of the Company during 1995, 1994 and 1993 by the type of product in which the Company's components were utilized (dollar amounts in thousands):
1995 1994 1993 ------------------ ---------------- ----------------- Automobiles and light trucks $ 68,083 65.3% $53,005 59.9% $45,223 60.3% Industrial equipment 10,916 10.5 9,639 10.9 6,724 9.0 Computers and office equipment 8,670 8.3 6,835 7.7 5,406 7.2 Medical devices 6,973 6.7 5,959 6.7 4,576 6.1 Recreational equipment and home appliances 6,154 5.9 8,710 9.8 7,626 10.2 Other 3,502 3.3 4,384 5.0 5,421 7.2 -------- ----- ------- ----- ------- ----- $104,298 100.0% $88,532 100.0% $74,976 100.0% ======== ===== ======= ===== ======= =====
-2- 5 The following table summarizes net sales of the Rubber Group and the Metals Group during 1995, 1994 and 1993 by the type of product in which the Company's components were utilized (dollar amounts in thousands):
1995 1994 1993 ---------------- ---------------- ---------------- Rubber Group: Automobiles and light trucks $53,734 86.2% $37,584 80.2% $32,761 81.1% Medical devices 6,577 10.6 5,536 11.8 3,946 9.8 Other 1,991 3.2 3,748 8.0 3,681 9.1 ------- ----- ------- ----- ------- ----- $62,302 100.0% $46,868 100.0% $40,388 100.0% ======= ===== ======= ===== ======= ===== Metals Group: Automobiles and light trucks $14,349 34.2% $15,421 37.0% $12,452 36.0% Industrial equipment 10,581 25.2 9,083 21.8 6,207 17.9 Computers and office equipment 8,655 20.6 6,800 16.3 5,351 15.5 Recreational equipment and home appliances 5,733 13.6 7,871 18.9 6,712 19.4 Other 2,678 6.4 2,489 6.0 3,866 11.2 ------- ----- ------- ----- ------- ----- $41,996 100.0% $41,664 100.0% $34,588 100.0% ======= ===== ======= ===== ======= =====
(For additional information concerning the Rubber Group and the Metals Group, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7, and 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. SEASONAL VARIATIONS The Company's business generally is not subject to significant seasonal variations. MAJOR CUSTOMERS During 1995, 1994 and 1993, net sales to the largest customer of the Rubber Group, Delphi Packard Electric, accounted for 22.5%, 20.6% and 22.3%, respectively, of the Company's total net sales. Net sales to the second largest customer of the Rubber Group accounted for 6.8%, 6.1% and 5.1%, respectively, of the -3- 6 Company's total net sales. Net sales to the largest customer of the Metals Group, TRW Vehicle Safety Systems, Inc. ("TRW VSSI"), accounted for 8.1%, 13.0% and 11.8%, respectively, of the Company's total net sales. Loss of a significant amount of business from the Company's three largest customers, as a group, would have a material adverse effect on the business of the Company 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 - Liquidity and Capital Resources - Dependence on Large Customers" 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 1996 substantially all of the orders which were included in the backlog at December 31, 1995. 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 at December 31, 1995 and 1994 (dollar amounts in thousands):
DECEMBER 31, ------------------- 1995 1994 ---- ---- Rubber Group $13,566 $ 7,976 Metals Group 15,370 19,057 ------- ------- $28,936 $27,033 ======= =======
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 component parts. Although there have been no 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. Although the Company maintains insurance coverage for product liability, there can be no assurance that, in the event of a claim, such insurance coverage would automatically apply or that, in the event of an award arising out of a claim, the amount of such insurance coverage would be sufficient to satisfy the award. 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 -4- 7 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 following table shows the number of employees at the Rubber Group, the Metals Group and the Corporate Office at December 31, 1995:
DECEMBER 31, 1995 ------------ Rubber Group 568 Metals Group 558 Corporate Office 5 ----- 1,131 =====
At December 31, 1995, thirty-four hourly workers at one plant location within the Rubber Group were subject to a collective bargaining agreement. The Company believes that its employee relations are generally good. -5- 8 ITEM 2. PROPERTIES At December 31, 1995, the Company conducted its operations at eight manufacturing plants. In 1995, the Company acquired real estate in North Canton, Ohio, and commenced construction of an additional manufacturing facility. Production is expected to commence at the new facility during the second quarter of 1996. In addition, in 1995, the Company sold a manufacturing facility in Blue Ridge, Georgia. The following table shows the location and square footage of each of the properties of the Rubber Group, the Metals Group and the Corporate Office at December 31, 1995:
SQUARE LOCATION FEET ------------------- -------- Rubber Group: Precision Seals Division Vienna, OH 60,000(1) Precision Seals Division LaGrange, GA 77,000(1) Electrical Insulator Division Jasper, GA 91,000(2) Lexington Medical Rock Hill, SC 60,000(1) Lexington Manufacturing North Canton, OH 41,000(1)(3) -------- 329,000 -------- Metals Group: Falconer Lakewood, NY 91,000(1)(4) Falconer Manchester, NY 21,000 Ness Rochester, NY 60,000(1)(5) Ness Casa Grande, AZ 26,000(1) -------- 198,000 -------- Corporate Office: Executive Offices New York, NY 3,000(6) Administrative Offices Cleveland, OH 3,000(7) -------- 6,000 -------- 533,000 ========
[FN] (1) Encumbered by mortgage. (2) Includes a 26,000 square foot addition, which was under construction at December 31, 1995. The addition was completed in the first quarter of 1996. (3) Under construction at December 31, 1995. The Company expects this facility to be completed during the second quarter of 1996. (4) Includes a 30,000 square foot addition, which was under construction at December 31, 1995. The Company expects the addition to be completed during the second quarter of 1996. This facility is leased from an industrial development authority pursuant to a lease which expires in 2006 and provides the Company with an option to purchase the facility for nominal consideration. (5) 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 for nominal consideration. (6) 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 the space. (7) Leased. -6- 9 All of the plants are well maintained, general manufacturing facilities which are suitable for the Company's operations. The Company believes that, except for Ness, which generally is operating near capacity, all of the operating companies have facilities which are adequate to meet significant increases in the demand for their products. ITEM 3. LEGAL PROCEEDINGS The Company is a party to certain 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 pursuant to environmental laws. 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 There were no matters submitted to a vote of security holders during the fourth quarter of 1995. -7- 10 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 29, 1996, is traded in the over-the-counter market. Trading of shares of the Company's common stock is limited. No reliable 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 selling prices of the Company's common stock as reported by the OTC Bulletin Board:
SELLING PRICES -------------------------- PERIOD HIGH LOW -------------------- ----------- ---------- 4/8/94 - 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 1/1/95 - 3/31/95 $2.375 $1.25 4/1/95 - 6/30/95 $3.25 $1.50 7/1/95 - 9/30/95 $3.125 $2.00 10/1/95 - 12/31/95 $3.75 $2.50
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 five 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, and the terms of the Company's preferred stock, 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 $3,495,000 of dividends on its common stock at December 31, 1995. (See also Notes 6 and 7 to the consolidated financial statements in Part II, Item 8.) 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. -8- 11 ITEM 6. SELECTED FINANCIAL DATA The following table sets forth selected consolidated financial data of the Company as of and for each of the years in the five-year period ended December 31, 1995 (dollar amounts in thousands, except per share amounts). The financial data set forth below has been taken from the consolidated financial statements of the Company, which have been audited by Ernst & Young LLP, independent certified public accountants. The information set forth below is not necessarily indicative of the results of future operations and should be read in conjunction with, and are qualified by, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 and the consolidated financial statements in Part II, Item 8.
YEAR ENDED DECEMBER 31, -------------------------------------------------------- 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- SELECTED STATEMENTS OF OPERATIONS DATA: Net sales $104,298 $88,532 $74,976 $65,201 $65,180 ======== ======= ======= ======= ======= Income from continuing operations (1) $ 9,657 $ 8,102 $ 6,347 $ 548 $ 3,965 Interest expense 7,585 6,272 5,496 5,041 5,867 Other income/(expense), net 641 536 - - (56) Provision/(credits) for income taxes 425 34 - - (396) -------- ------- ------- ------- ------- Income/(loss) before discontinued operations and extraordinary item 2,288 2,332 851 (4,493) (1,562) Loss from discontinued operations - - - - (209) Extraordinary item (2) - - - - 978 -------- ------- ------- ------- ------- Net income/(loss) $ 2,288 $ 2,332 $ 851 $(4,493) $ (793) ======== ======= ======= ======= ======= Per fully diluted share of common stock (3): Income/(loss) before discontinued operations and extraordinary item $ .49 $ .51 $ .13 $ (1.11) $ (.39) Discontinued operations - - - - (.05) Extraordinary item - - - - .24 -------- ------- ------- ------- ------- Net income/(loss) $ .49 $ .51 $ .13 $ (1.11) $ (.20) ======== ======= ======= ======= =======
(Footnotes on following page) (Continued) - 9 - 12 ITEM 6. SELECTED FINANCIAL DATA (CONTINUED)
YEAR ENDED DECEMBER 31, -------------------------------------------------------------------- 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- OTHER DATA: Average number of employees 1,147 968 860 883 905 Depreciation and amortization expenses $ 6,449 $ 5,060 $ 4,297 $ 5,050 $ 5,216 Capital expenditures $ 17,902 $ 15,319 $ 6,288 $ 2,235 $ 613 DECEMBER 31, -------------------------------------------------------------------- 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- SELECTED BALANCE SHEET DATA: Current assets $ 24,478 $ 22,752 $ 15,715 $ 14,257 $ 15,211 Current liabilities (4) 29,253 24,330 12,733 51,224 50,940 --------- ---------- --------- ---------- --------- Net working capital/(deficit) $ (4,775) $ (1,578) $ 2,982 $ (36,967) $ (35,729) ========= ========== ========= ========== ========= Total assets $ 81,876 $ 67,396 $ 49,983 $ 45,584 $ 50,978 Long-term debt, excluding current portion (4) $ 56,033 $ 49,627 $ 46,273 $ 3,795 $ 5,013 Redeemable preferred stock at par value $ 510 $ 555 $ 600 $ 735 $ 735 Total stockholders' deficit $ (4,976) $ (7,215) $ (9,623) $ (10,170) $ (5,710)
[FN] (1) In 1992, income from continuing operations included charges of $1,113,000 for the amortization of and $2,132,000 for the write-off of covenants not to compete. In 1991, income from continuing operations included a charge of $1,113,000 for the amortization of covenants not to compete. (2) In 1991, the extraordinary item represented the gain on the repurchase of $1,500,000 principal amount of the Company's 12-3/4% Subordinated Notes, due February 1, 1997. (3) In 1995, 1994 and 1993, fully diluted income per common share was reduced by $.02, $.02 and $.07, 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 preferred stock exceeded the par value of such shares. (4) At December 31, 1992 and 1991, $29,046,000 and $30,429,000, respectively, of debt obligations with scheduled maturities of one year or more were classified as current liabilities because of certain defaults. In January 1993, the Company completed a restructuring of substantially all of its indebtedness which eliminated all defaults on its outstanding debt. -10- 13 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Various statements in "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this report are based upon projections and estimates, as distinct from past or historical facts and events. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to be materially different. Such risks and uncertainties include changes in future economic conditions, changes in the competitive environment, changes in the capital markets, unanticipated operating results and a number of other factors. The results of operations for any particular fiscal period of the Company are not necessarily indicative of the results to be expected for any one or more succeeding fiscal periods. In addition, because the Company's business is materially affected by the level of activity in the automotive industry, any material reduction in the level of activity in that industry may have a material adverse effect on the Company's results of operations. RESULTS OF OPERATIONS 1995 VERSUS 1994 NET SALES A summary of the net sales of the Rubber Group and the Metals Group for 1995 and 1994 follows (dollar amounts in thousands):
PERCENTAGE 1995 1994 INCREASE ---- ---- -------- Rubber Group $ 62,302 $46,868 32.9% Metals Group 41,996 41,664 0.8 -------- ------- ---- $104,298 $88,532 17.8% ======== ======= ====
Approximately 89% of the $15,434,000 increase in net sales of the Rubber Group came from increased sales of seals for primary wire-harnesses and insulators for ignition-wire-harnesses. Increased sales of tooling and medical components were responsible for the balance of the increase. If net sales of the Extruded and Lathe-Cut Products Division, which was sold on June 30, 1995, were excluded from the above table, net sales of the Rubber Group would have increased from $44,306,000 to $60,981,000, an increase of 37.6%. In 1995, net sales of the Metals Group were adversely affected by a decline of $3,978,000 in sales of a single component to TRW VSSI. The decline in sales of the component resulted from the planned phase-out of the inflator system of which the component is a part. (See also "Liquidity and Capital Resources - Dependence on Large Customers" in this Item 7.) -11- 14 COST OF SALES A summary of cost of sales and cost of sales as a percentage of net sales for the Rubber Group and the Metals Group for 1995 and 1994 follows (dollar amounts in thousands):
PERCENTAGE 1995 1994 INCREASE ---------------- --------------- ---------- Rubber Group $50,623 81.3% $39,314 83.9% 28.8% Metals Group 34,138 81.3 32,320 77.6 5.6 ------- ---- ------- ---- ---- $84,761 81.3% $71,634 80.9% 18.3% ======= ==== ======= ==== ====
The decrease in cost of sales of the Rubber Group as a percentage of net sales from 83.9% in 1994 to 81.3% in 1995, resulted from reduced direct labor expense as a percentage of net sales, primarily because of the purchase of new equipment and the introduction of improved manufacturing processes, and reduced factory overhead expense as a percentage of net sales, primarily because factory overhead expense grew at a slower rate than sales at the Precision Seals Division and the Electrical Insulator Division. Reductions in factory overhead expense as a percentage of net sales at the Precision Seals Division and the Electrical Insulator Division were offset in part by costs associated with the development and startup of new products at Lexington Medical. The reduction in factory overhead expense as a percentage of net sales at the Precision Seals Division would have been greater but for the impact of startup expenses and production inefficiencies at the Division's new facility in LaGrange, Georgia. Cost of sales of the Metals Group as a percentage of net sales increased from 77.6% in 1994 to 81.3% in 1995, primarily because of increased factory overhead expense as a percentage of net sales and, to a lesser extent, increased direct labor expense as a percentage of net sales at Ness. Increased factory overhead expense and direct labor expense as a percentage of net sales at Ness were offset in part by lower material costs as a percentage of net sales and decreased factory overhead expense and direct labor expense as a percentage of net sales at Falconer. Factory overhead and direct labor expense as a percentage of net sales increased at Ness because of the installation of new equipment and the start-up of new products. In addition, factory overhead expense as a percentage of net sales increased because of reduced absorption of fixed factory overhead expense due to a decrease in net sales at Ness. SELLING AND ADMINISTRATIVE EXPENSES A summary of selling and administrative expenses and selling and administrative expenses as a percentage of net sales for the Rubber Group, the Metals Group and the Corporate Office follows (dollar amounts in thousands):
PERCENTAGE 1995 1994 INCREASE --------------- -------------- ---------- Rubber Group $4,175 6.7% $3,694 7.9% 13.0% Metals Group 3,712 8.8 3,284 7.9 13.0 Corporate Office 1,993 N/A 1,818 N/A 9.6 ------ ---- ------ ---- ---- $9,880 9.5% $8,796 9.9% 12.3% ====== ==== ====== ==== ====
-12- 15 At the Rubber Group, selling and administrative expenses as a percentage of net sales decreased to 6.7% during 1995, primarily because most selling and administrative expenses grew at a slower rate than net sales and because of reduced legal expenses. At the Metals Group, selling and administrative expenses as a percentage of net sales increased to 8.8% during 1995, primarily because of increased legal expenses. In 1995, administrative expenses at the Corporate Office increased, primarily because of increased wage expenses and increased accruals for incentive compensation, offset in part by reduced legal expenses. INTEREST EXPENSE Interest expense totaled $7,585,000 during 1995, an increase of $1,313,000, compared to 1994. This increase was caused primarily by an increase in average borrowings outstanding. OTHER INCOME On June 30, 1995, the Company sold the Extruded and Lathe-Cut Products Division of LCI for cash and the assumption by the purchaser of certain liabilities, which resulted in a pre-tax gain of $578,000. In addition, during 1995, the Company realized a pre-tax gain in the amount of $63,000 on the sale of several other pieces of equipment. During 1994, other income consisted of a 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 income tax provisions otherwise recognizable during 1995 and 1994 were reduced by the utilization of portions of the Company's tax loss carryforwards and tax credit carryforwards. In 1995, the income tax provision was also reduced by $265,000 because the Company's valuation allowance was reduced by the recognition of federal operating loss carryforwards which the Company expects to utilize during 1996. The Company's valuation allowance decreased $703,000 in 1995. At December 31, 1994, the Company's valuation allowance equaled 100% of its net deferred tax assets. (For additional information concerning income tax expense and the utilization of tax loss carryforwards and tax credit carryforwards, see Note 10 to the consolidated financial statements in Part II, Item 8.) 1994 VERSUS 1993 NET SALES A summary of the net sales of the Rubber Group and the Metals Group for 1994 and 1993 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% ======= ======= ====
-13- 16 Approximately 77% of the $6,480,000 increase in net sales of the Rubber Group came from increased sales of seals for primary wire-harnesses and insulators for ignition-wire-harnesses. Increased net sales of medical components were primarily responsible for the balance of the increase. Net sales of the Metals Group increased by $7,076,000 in 1994, primarily due to a $2,762,000 increase in net sales to TRW VSSI and a $2,690,000 increase in net sales of die cast components. COST OF SALES A summary of cost of sales and cost of sales as a percentage of net sales for the Rubber Group and the Metals Group for 1994 and 1993 follows (dollar amounts in thousands):
PERCENTAGE 1994 1993 INCREASE ------------------ ----------------- ---------- Rubber Group $ 39,314 83.9% $ 33,280 82.4% 18.1% Metals Group 32,320 77.6 27,413 79.3 17.9 -------- ---- -------- ---- ---- $ 71,634 80.9% $ 60,693 80.9% 18.0% ======== ==== ======== ==== ====
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 expense as a percentage of net sales. During 1994, increased factory overhead expense included increased indirect labor expense, increased workers' compensation expense and increased depreciation and amortization expense. Increased factory overhead expense as a percentage of net sales was offset in part by lower direct labor expense 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 costs and direct labor expense as percentages of net sales were essentially unchanged, while factory overhead expense as a percentage of net sales decreased, primarily because sales increased while certain components of factory overhead expense remained relatively unchanged. SELLING AND ADMINISTRATIVE EXPENSES A summary of selling and administrative expenses and selling and administrative expenses as a percentage of net sales for the Rubber Group, the Metals Group and the Corporate Office follows (dollar amounts in thousands):
PERCENTAGE 1994 1993 INCREASE ------------------ ----------------- ---------- Rubber Group $ 3,694 7.9% $ 3,166 7.8% 16.7% Metals Group 3,284 7.9 2,894 8.4 13.5 Corporate Office 1,818 N/A 1,876 N/A N/A -------- ---- -------- ---- ---- $ 8,796 9.9% $ 7,936 10.6% 10.8% ======== ==== ======== ==== ====
-14- 17 At the Rubber Group, selling and administrative expenses as a percentage of net sales increased to 7.9% in 1994 compared to 7.8% in 1993, primarily as a result of the addition of sales and administrative personnel. At the Metals Group, selling and administrative expenses as a percentage of net sales decreased to 7.9% in 1994, compared to 8.4% in 1993. Increased sales of products subject to sales commissions and increased advertising costs were more than offset by efficiencies related to increased volume. In 1994, administrative expenses at the Corporate Office decreased by $58,000, or 3.1%, primarily as a result of reduced legal fees. In 1993, administrative expenses at the Corporate Office included $730,000 of expenses recorded in connection with the Company's restructuring of its 12-3/4% Subordinated Notes, due February 1, 1997 (the "12-3/4% Notes"), and 14% Junior Subordinated Convertible Notes, due May 1, 2000, which were partially offset by a credit of $215,000 resulting from the settlement of litigation. 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 in average borrowings outstanding and increases in the Prime Rate. OTHER INCOME During 1994, other income consisted of a 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 income tax provisions otherwise recognizable during 1994 and 1993 were reduced by the utilization of portions of the Company's tax loss carryforwards and tax credit carryforwards. (For additional information concerning income tax expense and the utilization of tax loss carryforwards and tax credit carryforwards, see Note 10 to the consolidated financial statements in Part II, Item 8.) IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARD ADOPTED DURING 1994 FINANCIAL ACCOUNTING STANDARD NO. 112 Effective January 1, 1994, the Company changed its method of accounting for postemployment 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 Standard No. 112, Employers' Accounting for Postemployment Benefits" ("FAS 112"). The adoption of FAS 112 did not materially affect the financial position or results of operations of the Company because benefits of this type currently provided by the Company are de minimis in amount. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS TO BE ADOPTED DURING 1996 FINANCIAL ACCOUNTING STANDARD NO. 121 - IMPAIRMENT OF LONG-LIVED ASSETS In March 1995, the Financial Accounting Standards Board issued "Financial Accounting Standard No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("FAS 121"), which requires losses to be recorded on long-lived assets used in operations where indicators of -15- 18 impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of such assets. FAS 121 also addresses the accounting for long-lived assets to be disposed of. The Company plans to adopt FAS 121 during the first quarter of 1996 and believes that, at the time of adoption, FAS 121 will not affect the financial position or results of operations of the Company. FINANCIAL ACCOUNTING STANDARD NO. 123 - STOCK-BASED COMPENSATION The Company has a Restricted Stock Award Plan and an Incentive Stock Option Plan pursuant to which it may award to officers and key employees restricted shares of the Company's common stock and options to purchase shares of the Company's common stock. Awards under both plans are accounted for in accordance with the provisions of "Accounting Principles Board Opinion Number 25, Accounting for Stock Issued to Employees" ("APB 25"). With respect to restricted shares, the Company recognizes compensation expense on the date of grant equal to the then market value of the Company's common stock. With respect to options to purchase shares of common stock or shares of common stock issued at the time options are exercised, the Company does not recognize compensation expense. During 1995, the Financial Accounting Standards Board issued "Financial Accounting Standard No. 123, Accounting for Stock-Based Compensation" ("FAS 123"), which establishes new standards for the measurement and recognition of stock-based compensation, but allows entities to continue using APB 25 to account for the issuance of stock-based compensation if they disclose the pro forma effect of stock-based compensation on net income and earnings per share as if FAS 123 had been adopted. FAS 123 is effective for 1996. The Company intends to continue using the provisions of APB 25 to account for stock-based compensation. LIQUIDITY AND CAPITAL RESOURCES CASH FLOWS RELATING TO OPERATING ACTIVITIES During 1995, net cash provided by the operating activities of the Company totaled $7,860,000. During 1995, $481,000 of cash was used to fund increased levels of accounts receivable, resulting primarily from increased levels of sales and orders during the fourth quarter of 1995, compared to the fourth quarter of 1994. At December 31, 1995, the Company's trade accounts payable included approximately $2,876,000 relating to the purchase of new property, equipment and customer-owned tooling, compared to $4,325,000 at December 31, 1994. Excluding accounts payable balances related to purchases of new property, equipment and customer-owned tooling, trade accounts payable increased by $1,588,000, from $6,164,000 at December 31, 1994 to $7,752,000 at December 31, 1995. The increase resulted from higher levels of production during the fourth quarter of 1995, compared to the fourth quarter of 1994, and, to a lesser extent, a temporary slowing of payments to suppliers. Compared to December 31, 1994, accrued expenses at December 31, 1995 included increased accruals for employee compensation and related taxes and benefits and increased accruals for alternative minimum taxes. Net working capital declined during 1995 by $3,197,000, primarily because capital expenditures were financed with increased short-term borrowings under the Company's revolving line of credit (the "Revolving Line of Credit") provided to the Company by Congress Financial Corporation ("Congress"). (For additional information concerning the Revolving Line of Credit, see "Cash Flows Relating to Financing Activities" in this Item 7 and Notes 5 and 6 to the consolidated financial statements in Part II, Item 8.) -16- 19 CASH FLOWS RELATING TO INVESTING ACTIVITIES During 1995, the investing activities of the Company used $17,997,000 of cash, primarily for capital expenditures. The following table sets forth capital expenditures for the Rubber Group, the Metals Group and the Corporate Office during 1995 and 1994 (dollar amounts in thousands):
Year Ended December 31, ----------------------- 1995 1994 Total ---- ---- ----- Rubber Group: Equipment $ 8,487 $ 6,537 $ 15,024 Land and buildings 4,097 2,114 6,211 ----------- ---------- ---------- 12,584 8,651 21,235 ----------- ---------- ---------- Metals Group: Equipment 3,384 6,622 10,006 Land and buildings 1,918 34 1,952 ----------- ---------- ---------- 5,302 6,656 11,958 ----------- ---------- ---------- Corporate Office: Equipment 16 12 28 Land and buildings - - - ----------- ---------- ---------- 16 12 28 ----------- ---------- ---------- Total Company: Equipment 11,887 13,171 25,058 Land and buildings 6,015 2,148 8,163 ----------- ---------- ---------- $ 17,902 $ 15,319 $ 33,221 =========== ========== ==========
As a result of growing market share in certain market niches and increased volume because of a healthy economy and, in particular, a strong automotive industry, the Company commenced a major expansion plan in 1994. Net sales increased from $74,976,000 in 1993, to $88,532,000 in 1994 and then to $104,298,000 in 1995. Net sales for 1996 are currently projected to range between $110,000,000 and $120,000,000. The Company estimates that approximately $4,000,000 of capital expenditures are required annually to maintain or replace existing equipment or to effect cost reductions and that the balance of capital expenditures are for the expansion of facilities and the purchase of production equipment to meet increased demand for product. During 1995, $958,000 of funds were used to finance deferred tooling expense. Also, during 1995, $998,000 of funds were provided by the sale of the Extruded and Lathe-Cut Products Division of LCI. The Company presently estimates that capital expenditures will total approximately $13,000,000 during 1996. At December 31, 1995, the Company had commitments outstanding for capital expenditures totaling approximately $6,700,000. The Company anticipates that the funds needed for capital expenditures in 1996 will be provided by cash flows from operations and from borrowings. (See also "Liquidity" in this Item 7.) -17- 20 CASH FLOWS RELATING TO FINANCING ACTIVITIES During 1995, the financing activities of the Company provided $10,176,000 of cash, primarily from increased borrowings. The Company finances its day-to-day operations through the Revolving Line of Credit. The Company also uses the Revolving Line of Credit to fund capital expenditures with the intention of later refinancing such borrowings with term loans. The Company borrows and repays loans outstanding under the Revolving Line of Credit daily, depending on cash receipts and disbursements. The ability of the Company to borrow under the Revolving Line of Credit is based on certain availability formulas, agreed upon by the Company and Congress, which are based on the levels of accounts receivable and inventories of the Company. In addition to borrowings under the Revolving Line of Credit, in 1995, the Company borrowed an aggregate of $15,067,000 in term loans from Congress. Proceeds from the term loans were used to refinance loans outstanding under the Revolving Line of Credit. Congress provides the Company with a line of credit which can be used to finance a portion of qualifying new equipment purchases through term loans (the "Equipment Line of Credit"). Generally, the amount of financing available to fund new equipment purchases is equal to 85% of the appraised orderly liquidation value of the equipment being purchased. At December 31, 1995, the Equipment Line of Credit totaled $5,466,000. In the first quarter of 1996, the Company obtained from Congress, The CIT Group/Equipment Financing, Inc. and Bank One, Akron, NA ("Bank One") term loans in the aggregate amount of $10,302,000. Proceeds from the term loans were used to refinance $4,035,000 of term loans outstanding with Congress and $6,267,000 of loans outstanding under the Revolving Line of Credit. As a result of the borrowings under long-term agreements during the first quarter of 1996, $3,730,000 of loans outstanding under the Revolving Line of Credit were classified as long-term debt at December 31, 1995. Also, in the first quarter of 1996, the Company borrowed $1,000,000 from Bank One on a demand basis. The $1,000,000 loan is scheduled to be refinanced as part of a $2,500,000 term loan to be advanced during the second quarter of 1996 (the "Bank One Commitment"). The Company's financing arrangements, which are secured by substantially all of the Company's assets and the stock of LCI, require the Company to maintain certain financial ratios and limit the payment of dividends. LIQUIDITY The Company operates with high financial leverage and limited liquidity. During 1995, aggregate indebtedness of the Company, excluding accounts payable, increased by $10,808,000 to $68,086,000 at December 31, 1995. As a result of increased borrowings during the first quarter of 1996, the aggregate indebtedness of the Company, excluding accounts payable, totaled $75,390,000 as of March 26, 1996. Cash interest and principal payments totaled $7,299,000 and $3,228,000, respectively, in 1995. During 1996, cash interest and principal payments are projected to total approximately $7,986,000 and $5,163,000, respectively. Availability under the Revolving Line of Credit totaled $2,340,000 at March 26, 1996. Availability under the Revolving Line of Credit is calculated without deducting outstanding checks issued by the Company. Typically, outstanding checks average approximately $1,500,000. -18- 21 During 1996, the Company anticipates that, in addition to its projected cash flows from operations, borrowings in the amount of approximately $10,400,000 will be required to meet the Company's working capital, capital expenditure and debt service requirements. Peak borrowing requirements during 1996 of approximately $78,000,000 are projected to occur on August 1, 1996, the scheduled payment date for $2,022,000 of interest then due on the 12-3/4% Notes. Although no assurances can be given, based on its present business plan, the Company currently believes that cash flows from operations and availability under the Revolving Line of Credit, the Equipment Line of Credit, and the Bank One Commitment should be adequate to meet its anticipated working capital, capital expenditure and debt service requirements for 1996. If cash flows from operations or availability under the Revolving Line of Credit, the Equipment Line of Credit, and the Bank One Commitment fall below expectations, the Company intends to reduce or delay its capital expenditure program and/or to extend accounts payable balances with suppliers beyond terms which the Company believes are customary in the industries in which it operates. DEPENDENCE ON LARGE CUSTOMERS During 1995, 1994 and 1993, net sales to TRW VSSI, the Company's second largest customer, accounted for 8.1%, 13.0% and 11.8%, respectively, of the Company's total net sales and consisted primarily of sales of a single component. During 1995, net sales of the single component declined by $3,978,000. The decline in sales, which occurred because of the planned phase-out of the inflator system of which the component is a part, had an adverse affect on the operating profit of Ness and the Company. Currently, management of the Company believes that the component will only be in production through June 30, 1996. The Company believes that, during 1996, orders for new parts from TRW VSSI and other companies which supply TRW VSSI will not offset the decrease in sales of the single component and that the decrease will result in a significant reduction of operating profit at Ness in 1996. The Company currently believes that the reduction in operating profit at Ness will not have a material adverse effect on the financial position or operating profit of the Company. ACQUISITIONS 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 Congress 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. INFLATION Many customers of the Company will not accept price increases from the Company to compensate for increases in labor and overhead expenses that result from inflation. To the extent practical, fluctuations in material costs are passed through to customers. Although the Company may, in certain cases, commit to a fixed material cost for a specified time period, generally, a similar offsetting commitment is made to the Company by its material supplier. To offset inflationary costs which the Company cannot pass through to its customers and to maintain or improve its operating margins, the Company has continually worked to improve its production efficiencies and manufacturing processes. Although the Company believes that during the three-year period ended December 31, 1995 inflationary increases in labor and overhead expenses have been substantially offset as a result of its efforts, there can be no assurance that the Company will continue to be able offset inflationary cost increases through such measures. -19- 22 ENVIRONMENTAL MATTERS The Company has been named from time to time as one of numerous potentially responsible parties under applicable environmental laws for restoration costs at waste disposal sites, as a third-party defendant in cost recovery actions pursuant to applicable environmental laws and as a defendant or potential defendant in various other environmental law matters. It is the Company's policy to record accruals for such matters when a loss is 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 environmental litigation, in the event such litigation were commenced, 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 its financial position. -20- 23 THIS PAGE INTENTIONALLY LEFT BLANK -21- 24 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA TABLE OF CONTENTS
Page ---- Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . 23 Consolidated Balance Sheets at December 31, 1995 and 1994 . . . . . . . . . . . 24 Consolidated Statements of Income for the Years Ended December 31, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . 26 Consolidated Statements of Stockholders' Deficit for the Years Ended December 31, 1995, 1994 and 1993 . . . . . . . . . . . . . . . 27 Consolidated Statements of Cash Flows for the Years Ended December 31, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . 28 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . 30
-22- 25 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 at December 31, 1995 and 1994, and the related consolidated statements of income, stockholders' deficit, and cash flows for each of the three years in the period ended December 31, 1995. 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, 1995 and 1994, and the consolidated results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1995, 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 taken as a whole, presents fairly in all material respects the information set forth therein. ERNST & YOUNG LLP Cleveland, Ohio March 22, 1996 -23- 26 LEXINGTON PRECISION CORPORATION CONSOLIDATED BALANCE SHEETS (THOUSANDS OF DOLLARS)
DECEMBER 31, ------------------------ 1995 1994 ---- ---- ASSETS: Current assets: Cash $ 118 $ 79 Accounts receivable 12,959 12,478 Inventories 8,105 8,186 Prepaid expenses and other assets 2,101 2,009 Deferred income taxes 1,195 - ---------- --------- Total current assets 24,478 22,752 ---------- --------- Property, plant and equipment: Land 1,525 823 Buildings 17,190 12,274 Equipment 57,110 46,516 ---------- --------- 75,825 59,613 Less accumulated depreciation 30,887 27,019 ---------- --------- Property, plant and equipment, net 44,938 32,594 ---------- --------- Excess of cost over net assets of businesses acquired, net 9,726 10,041 ---------- --------- Other assets, net 2,734 2,009 ---------- --------- $ 81,876 $ 67,396 ========== ========= See notes to consolidated financial statements. (Continued)
-24- 27 LEXINGTON PRECISION CORPORATION CONSOLIDATED BALANCE SHEETS (CONTINUED) (THOUSANDS OF DOLLARS)
DECEMBER 31, ----------------------- 1995 1994 ---- ---- LIABILITIES AND STOCKHOLDERS' DEFICIT: Current liabilities: Accounts payable $ 10,628 $ 10,489 Accrued expenses 6,572 6,190 Short-term debt 7,522 5,052 Current portion of long-term debt 4,531 2,599 ---------- --------- Total current liabilities 29,253 24,330 ---------- --------- Long-term debt, excluding current portion 56,033 49,627 ---------- --------- Deferred income taxes and other long-term liabilities 1,056 99 ---------- --------- Redeemable preferred stock, $100 par value, at redemption value 1,020 1,110 Less excess of redemption value over par value 510 555 ---------- --------- Redeemable preferred stock at par value 510 555 ---------- --------- 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 12,547 12,659 Accumulated deficit (18,305) (20,593) Cost of common stock in treasury, 120,915 and 145,915 shares, respectively (305) (368) ---------- --------- Total stockholders' deficit (4,976) (7,215) ---------- --------- $ 81,876 $ 67,396 ========== =========
See notes to consolidated financial statements. -25- 28 LEXINGTON PRECISION CORPORATION CONSOLIDATED STATEMENTS OF INCOME (THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31, -------------------------------------- 1995 1994 1993 ---- ---- ---- Net sales $ 104,298 $ 88,532 $ 74,976 --------- --------- --------- Costs and expenses: Cost of sales 84,761 71,634 60,693 Selling and administrative expenses 9,880 8,796 7,936 --------- --------- --------- Total costs and expenses 94,641 80,430 68,629 --------- --------- --------- Income from operations 9,657 8,102 6,347 Interest expense 7,585 6,272 5,496 Other income 641 536 - --------- --------- --------- Income before income taxes 2,713 2,366 851 Provision for income taxes 425 34 - --------- --------- --------- Net income $ 2,288 $ 2,332 $ 851 ========= ========= ========= Net income per primary and fully diluted common share: Primary $ .52 $ .53 $ .13 ========= ========= ========= Fully diluted $ .49 $ .51 $ .13 ========= ========= =========
See notes to consolidated financial statements. -26- 29 LEXINGTON PRECISION CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (THOUSANDS OF DOLLARS)
ADDITIONAL TOTAL COMMON PAID-IN ACCUMULATED TREASURY STOCKHOLDERS' STOCK CAPITAL DEFICIT STOCK DEFICIT ----- ------- ------- ----- ------- Balance at January 1, 1993 $ 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) Net income - - 2,288 - 2,288 Preferred stock dividends and redemptions - (89) - - (89) Issuance of common shares - (23) - 63 40 -------- -------- --------- -------- ---------- Balance at December 31, 1995 $ 1,087 $ 12,547 $ (18,305) $ (305) $ (4,976) ======== ======== ========= ======== ==========
See notes to consolidated financial statements. -27- 30 LEXINGTON PRECISION CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (THOUSANDS OF DOLLARS)
YEAR ENDED DECEMBER 31, -------------------------------------- 1995 1994 1993 ---- ---- ---- OPERATING ACTIVITIES: Net income $ 2,288 $ 2,332 $ 851 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 6,449 5,060 4,297 Deferred income taxes (265) - - Gain on sale of property, plant and equipment (668) - - Gain on sale of marketable equity securities - (336) - Gain on sale of real estate - (200) - Changes in operating assets and liabilities which provided/(used) cash: Receivables (481) (3,399) (1,672) Inventories 81 (2,488) (348) Prepaid expenses and other assets (92) (1,149) 529 Accounts payable 139 6,037 32 Accrued expenses 382 (110) 5,844 Other 27 210 68 --------- ----------- -------- Net cash provided by operating activities 7,860 5,957 9,601 --------- ----------- -------- INVESTING ACTIVITIES: Purchases of property, plant and equipment (17,902) (15,319) (6,288) Decrease/(increase) in equipment deposits, net 20 229 (575) Proceeds from sales of property, plant and equipment 998 614 5 Proceeds from sale of marketable securities - 338 - Additions to deferred tooling expense (958) (824) (373) Other (155) (4) - --------- ----------- -------- Net cash used by investing activities (17,997) (14,966) (7,231) --------- ----------- -------- See notes to consolidated financial statements. (Continued)
-28- 31 LEXINGTON PRECISION CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (THOUSANDS OF DOLLARS)
YEAR ENDED DECEMBER 31, -------------------------------------- 1995 1994 1993 ---- ---- ---- FINANCING ACTIVITIES: Net increase in short-term debt $ 2,470 $ 5,052 $ 498 Proceeds from issuance of long-term debt 15,566 9,847 - Repayment of long-term debt (7,263) (5,735) (2,421) Redemption of preferred stock (90) (90) (270) Preferred stock dividends (44) (47) (176) Issuance of common stock 40 90 - Other (503) (62) - --------- --------- -------- Net cash provided/(used) by financing activities 10,176 9,055 (2,369) --------- --------- -------- Net increase in cash 39 46 1 Cash at beginning of year 79 33 32 --------- -------- -------- Cash at end of year $ 118 $ 79 $ 33 ========= ======== ========= Supplemental disclosure of cash flow information: Interest paid $ 7,299 $ 9,779 $ 1,134 Income taxes paid $ 99 $ 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. -29- 32 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 ("LPC") and its wholly-owned subsidiary, Lexington Components, Inc. ("LCI"). Unless the context otherwise requires all references herein to the "Company" are to LPC and LCI. All significant intercompany accounts and transactions have been eliminated. USE OF ESTIMATES The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the consolidated financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. CONCENTRATION OF CREDIT RISK At December 31, 1995 and 1994, trade accounts receivable outstanding from automotive customers totaled $8,357,000 and $7,904,000, 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. At December 31, 1995 and 1994, the Company had reserves for credit losses of $175,000 and $174,000, 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 (dollar amounts in thousands):
DECEMBER 31, ---------------------- 1995 1994 ---- ---- Finished goods $ 3,040 $ 2,696 Work in process 2,213 2,285 Raw materials and purchased parts 2,852 3,205 -------- -------- $ 8,105 $ 8,186 ======== ========
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 $3,162,000, $2,484,000 and $2,189,000 for 1995, 1994 and 1993, 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. -30- 33 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. At December 31, 1995 and 1994, accumulated amortization of goodwill was $2,264,000 and $1,948,000, respectively. Amortization of goodwill is classified as part of selling and administrative expenses. During each of 1995, 1994 and 1993, amortization of goodwill totaled $316,000. The carrying value of goodwill is assessed for impairment quarterly. Based upon such assessment, the Company believes that no impairment of goodwill existed at December 31, 1995. INCOME PER SHARE Primary net income per common share and fully diluted net income per common share are computed using 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 is 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"), exceed the par value of such shares. Common equivalent shares are those shares issuable upon the assumed exercise of outstanding dilutive 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"). 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. FINANCIAL ACCOUNTING STANDARD NO. 121 - IMPAIRMENT OF LONG-LIVED ASSETS In March 1995, the Financial Accounting Standards Board issued "Financial Accounting Standard No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("FAS 121"), which requires losses to be recorded on long-lived assets used in operations where indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of such assets. FAS 121 also addresses the accounting for long-lived assets to be disposed of. The Company plans to adopt FAS 121 during the first quarter of 1996 and believes that, at the time of adoption, FAS 121 will not affect the financial position or results of operations of the Company. FINANCIAL ACCOUNTING STANDARD NO. 123 - STOCK-BASED COMPENSATION The Company has a Restricted Stock Award Plan and an Incentive Stock Option Plan pursuant to which it may award to officers and key employees restricted shares of the Company's common stock and options to purchase shares of the Company's common stock. Awards under both plans are accounted for in accordance with the provisions of "Accounting Principles Board Opinion Number 25, Accounting for Stock Issued to Employees" ("APB 25"). With respect to restricted shares, the Company recognizes compensation expense on the date of grant equal to the then market value of the Company's common stock. With respect to options to purchase shares of common stock or shares of common stock issued at the time options are exercised, the Company does not recognize compensation expense. -31- 34 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS During 1995, the Financial Accounting Standards Board issued "Financial Accounting Standard No. 123, Accounting for Stock-Based Compensation" ("FAS 123"), which establishes new standards for the measurement and recognition of stock-based compensation, but allows entities to continue using APB 25 to account for the issuance of stock-based compensation if they disclose the pro forma effect of stock-based compensation on net income and earnings per share as if FAS 123 had been adopted. FAS 123 is effective for 1996. The Company intends to continue using the provisions of APB 25 to account for stock-based compensation. RECLASSIFICATIONS Certain amounts in the consolidated financial statements have been reclassified to conform to the 1995 presentation. NOTE 2 -- PREPAID EXPENSES AND OTHER ASSETS At December 31, 1995 and 1994, other current assets included $1,790,000 and $1,242,000, 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 At December 31, 1995 and 1994, other noncurrent assets included $1,481,000 and $990,000, 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 1995 and 1994, amortization expense related to tooling owned by customers but funded by the Company was $626,000 and $272,000, respectively. NOTE 4 -- ACCRUED EXPENSES Accrued expenses at December 31, 1995 and 1994 are summarized below (dollar amounts in thousands):
DECEMBER 31, ---------------------- 1995 1994 ---- ---- Interest $ 1,717 $ 1,716 Employee fringe benefits 1,196 1,645 Salaries and wages 1,562 976 Taxes 1,264 755 Other 833 1,098 ------- ------- $ 6,572 $ 6,190 ======= =======
NOTE 5 -- SHORT-TERM DEBT At December 31, 1995 and 1994, short-term debt consisted of loans outstanding under the revolving line of credit (the "Revolving Line of Credit") provided to the Company by Congress Financial Corporation ("Congress"). The Revolving Line of Credit has an expiration date of January 2, 1998. Except for certain loans -32- 35 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS which were refinanced under long-term agreements before the consolidated financial statements were issued, the loans outstanding under the Revolving Line of Credit have been classified as short-term debt at December 31, 1995 and 1994 because the Company's cash receipts are automatically used to reduce the loans outstanding under the Revolving Line of Credit on a daily basis, by means of a lock-box sweep arrangement, and Congress has the ability to modify certain terms of the Revolving Line of Credit without the prior approval of the Company. (See also Note 6, "Long-Term Debt.") At December 31, 1995, 1994 and 1993, the interest rates on borrowings under the Revolving Line of Credit were 9.1%, 10.0% and 7.5%, respectively. NOTE 6 -- LONG-TERM DEBT Long-term debt at December 31, 1995 and 1994 is summarized below (dollar amounts in thousands):
DECEMBER 31, ------------------------ 1995 1994 ---- ----- Loans outstanding under the Revolving Line of Credit $ 3,730 $ 7,267 Congress term loans, payable in monthly installments, final maturities in 2002 or 2003 20,488 8,029 12% Note, payable in monthly installments through 2000 2,635 3,078 Industrial Revenue Bond, 75% of prime, payable in monthly installments, final maturity in 2000 498 598 12-3/4% Senior Subordinated Notes, due 2000 31,682 31,647 14% Junior Subordinated Convertible Notes, due 2000 1,000 1,000 14% Junior Subordinated Nonconvertible Notes, due 2000 347 347 Other 184 260 --------- --------- Total long-term debt 60,564 52,226 Less current portion 4,531 2,599 --------- --------- Total long-term debt, excluding current portion $ 56,033 $ 49,627 ========= =========
LOANS OUTSTANDING UNDER THE REVOLVING LINE OF CREDIT CLASSIFIED AS LONG-TERM DEBT At December 31, 1995 and 1994, there were loans of $3,730,000 and $7,267,000, respectively, outstanding under the Revolving Line of Credit which were classified as long-term debt because the loans were refinanced under long-term agreements before the consolidated financial statements for the respective years were issued. During the first quarter of 1996, the Company obtained term loans in the aggregate amount of $10,302,000, payable in installments ranging from 48 to 84 months. Of that amount, $4,035,000 was used to refinance term loans and $6,267,000 was used to refinance loans outstanding under the Revolving Line of Credit. Of the latter amount, $3,730,000 was used to refinance loans that were outstanding under the Revolving Line of Credit at December 31, 1995. -33- 36 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The term loans obtained during the first quarter of 1996 are payable in monthly installments with final maturities in 2000, 2001, 2002 or 2003. Interest on the loans is due monthly at the London Interbank Offered Rate ("LIBOR") plus 3% or 3-1/4%, Prime Rate plus 3/4% or 1%, or a fixed rate of 8.37%. The loans are secured, in the aggregate, by all receivables, inventories and equipment, and by certain real property and other personal property. CONGRESS TERM LOANS At December 31, 1995 and 1994, term loans in the aggregate amounts of $20,488,000 and $8,029,000, respectively, were outstanding with Congress. The loans are payable in monthly installments with final maturities in 2002 or 2003, subject to earlier maturity in the event the Revolving Line of Credit terminates or expires. Interest on the loans is due monthly at LIBOR plus 3-1/4% or Prime Rate plus 1%. The loans are secured by all receivables and inventories and by certain equipment, real property and other personal property. 12% NOTE The 12% Note, due April 30, 2000 (the "12% Note"), is payable by LCI, is secured by a mortgage on LCI's Rock Hill, South Carolina, facility and is guaranteed by LPC. Level payments of principal and interest in the amount of $66,000 are due monthly until the 12% Note is paid in full. 12-3/4% NOTES The 12-3/4% Senior Subordinated Notes, due February 1, 2000 (the "12-3/4% 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% Notes is due semi-annually on February 1 and August 1. 14% NOTES The 14% Junior Subordinated Convertible Notes, due May 1, 2000, and 14% Junior Subordinated Nonconvertible 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. 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. FAIR VALUE OF FINANCIAL INSTRUMENTS The Company believes that, at December 31, 1995, the fair value of the Congress term loans and the loans outstanding under the Revolving Line of Credit approximately equaled the outstanding principal balances of such loans because the interest rates on these loans floated at a spread over LIBOR or Prime Rate and because the Company obtained commitments for similar loans from lending institutions other than Congress during 1995. -34- 37 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The 12% Note is secured by a mortgage on the Company's manufacturing facility located in Rock Hill, South Carolina. The Company believes that the fair value of the 12% Note is probably between 85% and 115% of its principal amount because, although the interest rate on the loans is probably in excess of market rates for industrial mortgage loans, the market value of the facility may be less than the outstanding balance of the 12% Note so that a portion of the 12% Note may be unsecured. Depending on how unsecured the loan is perceived to be, the rate on the note may actually be lower than market rates and, as a result, the fair value for the loan may be less than the outstanding principal balance. There is a limited market for the 12-3/4% Notes. The Company believes that, based on informal discussions with securities brokers that have traded the 12-3/4% Notes and with buyers and sellers of the 12-3/4% Notes, that the 12-3/4% Notes traded at discounts of between 15% and 30% during 1995. The Company believes that the 14% Nonconvertible Notes would hypothetically trade at a discount equal to or in excess of the discount assumed for the 12-3/4% Notes and that the 14% Convertible Notes would hypothetically trade at around par or in excess of par because, at December 31, 1995, they were convertible at a price per common share of $2.2727, which was 9% below the last reported trade of the Company's common stock in 1995. Fair value estimates of the Company's securities are subjective in nature and involve uncertainties and matters of judgement and therefore cannot be determined definitively. Any change in the market for similar securities, the financial performance of the Company or interest rates could materially affect the fair value of all of the Company's securities. SCHEDULED MATURITIES OF LONG-TERM DEBT Maturities of long-term debt for the five-year period ending December 31, 2000 and for the years thereafter are listed below (dollar amounts in thousands): 1996 $ 4,531 1997 4,927 1998 4,999 1999 5,082 2000 35,385 Thereafter 5,640 ----------- $ 60,564 ===========
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 and 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, 1995, 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 retire annually -35- 38 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 450 shares of Redeemable Preferred Stock. Scheduled redemptions for the years 1996 through 2000 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 1995, the Company paid the holders of the Redeemable Preferred Stock regular dividends aggregating $8.00 per share. 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"). At December 31, 1995 and 1994, 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. At December 31, 1995 and 1994, no shares of the preferred stock, $1 par value, were issued or outstanding. NOTE 8 -- COMMON STOCK COMMON STOCK, $.25 PAR VALUE At December 31, 1995 and 1994, there were 4,228,036 and 4,203,036 shares, respectively, of the Company's common stock outstanding and 385,000 and 410,000 shares, respectively, reserved for issuance under the Company's Restricted Stock Award Plan and Incentive Stock Option Plan. 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. During 1995, 1994 and 1993, no shares of restricted common stock were awarded. At December 31, 1995 and 1994, 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 price of an option is established by the Compensation Committee of the Company's Board of Directors at the date of grant at a price not less than the then market price of the Company's common stock. During 1995, 1994 and 1993, no options were granted. At December 31, 1995, options for 35,000 shares were outstanding and no options were available for future grant. -36- 39 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Activity in the Company's Incentive Stock Option Plan for 1995 and 1994 is summarized below:
OPTION PRICE OR SHARES PRICE RANGE UNDER OPTION ------------------- ---------------- Outstanding at January 1, 1994 $.625 to $1.625 125,000 Granted None Exercised $1.625 55,000 Terminated $1.625 10,000 --------- Outstanding at December 31, 1994 $.625 to $1.625 60,000 ========= Granted None Exercised $1.625 25,000 Terminated None --------- Outstanding at December 31, 1995 $.625 35,000 =========
At December 31, 1995 and 1994, outstanding options for 35,000 and 51,250 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 1995, 1994 and 1993, provisions for Company matching contributions totaled approximately $372,000, $339,000 and $296,000, respectively. In addition, the Company has the option to make 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 recorded for profit sharing contributions authorized by the Company's Board of Directors totaled $401,000, $370,000 and $334,000 during 1995, 1994 and 1993, respectively. Company contributions to the Plan vest for a participant at a rate of 20% per year commencing in the participant's third year of service until the participant becomes fully vested after seven years of service. 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 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 Compensation Committee, are based upon prescribed formulae relating to the attainment of predetermined divisional and consolidated operating profit -37- 40 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS targets and the achievement of other objectives. Accruals for bonuses totaled $560,000, $214,000 and $386,000 during 1995, 1994 and 1993, 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 insurance premiums for certain retirees of one of its divisions. At December 31, 1995, the Company's accumulated postretirement benefit obligation totaled $564,000. The Company is amortizing its accumulated postretirement benefit obligation over the remaining life expectancy of the participants (i.e., an annual rate of $57,000). The following table presents the funded status of the postretirement benefits at December 31, 1995, 1994 and 1993 (dollar amounts in thousands):
DECEMBER 31, ----------------------------------------- 1995 1994 1993 ---- ---- ---- Accumulated postretirement benefit obligation: Retirees $ 500 $ 469 $ 525 Fully eligible active plan participants 16 13 16 Other active plan participants 48 39 48 -------- --------- --------- 564 521 589 Unrecognized net gain 83 156 107 Unrecognized transition obligation (521) (578) (635) -------- --------- --------- Accrued postretirement benefit cost $ 126 $ 99 $ 61 ======== ========= ========= Net postretirement benefit cost: Service cost $ 1 $ 1 $ 1 Interest cost 41 41 54 Net amortization and deferral 42 46 57 -------- --------- --------- Net periodic postretirement benefit cost $ 84 $ 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 10.2% for 1996 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 health care costs. The weighted average discount rate used in determining the accumulated postretirement benefit obligation was 7.25% and 8.25% at December 31, 1995 and 1994, respectively. The change in the discount rate at December 31, 1995 reflects lower prevailing interest rates. -38- 41 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 10 -- INCOME TAXES The following table reflects the deferred tax assets and the deferred tax liabilities of the Company at December 31, 1995 and 1994 (dollar amounts in thousands):
DECEMBER 31, ---------------------- 1995 1994 ---- ---- Deferred tax assets: Tax carryforwards: Federal operating loss carryforwards $ 2,510 $ 2,829 State operating loss carryforwards 643 456 Capital loss carryforwards 2,177 2,313 Federal alternative minimum taxes 623 46 Investment tax credit carryforwards 232 341 Other tax credit carryforwards 81 81 --------- --------- Total tax carryforwards 6,266 6,066 Asset loss reserves 223 254 Tax inventory over book 332 375 Deferred compensation liabilities 63 111 Vacation accruals 53 168 Non-economic performance accruals 224 179 Deferred financing costs 112 58 Other 11 10 --------- --------- Total deferred tax assets 7,284 7,221 Valuation allowance (5,059) (5,762) --------- --------- Net deferred tax assets 2,225 1,459 Deferred tax liabilities -- tax over book depreciation 1,960 1,459 --------- --------- Net deferred taxes $ 265 $ - ========= =========
At December 31, 1995, the Company's valuation allowance was adjusted to recognize the change in the Company's deferred tax assets and deferred tax liabilities and the federal operating loss carryforwards which the Company expects to utilize in 1996. The Company's valuation allowance decreased by $703,000 in 1995. At December 31, 1994, the Company's valuation allowance equaled 100% of its net deferred tax assets. At December 31, 1995, the Company had net operating loss carryforwards for federal income tax purposes of $7,381,000 that expire in the years 2004 through 2007. Capital loss carryforwards for federal income tax purposes totaled $6,402,000 at December 31, 1995 and expire in 1996. For purposes of the federal alternative minimum tax, the Company essentially utilized all of its alternative minimum tax operating loss carryforwards during 1994. -39- 42 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The income tax provision consisted of the following for 1995, 1994 and 1993 (dollar amounts in thousands):
1995 1994 1993 ---- ---- ---- Current: Federal $ 537 $ 34 $ - State and local 153 - - ----- ----- ----- 690 34 - Deferred: Federal (265) - - ----- ----- ----- $ 425 $ 34 $ - ===== ===== =====
Reconciliations of the federal statutory income tax rate to the Company's effective income tax rate for 1995, 1994 and 1993 are summarized below:
1995 1994 1993 ---- ---- ---- Statutory federal income tax rate 34.0% 34.0% 34.0% Change in valuation allowance (25.9) (38.9) (51.0) Goodwill 3.9 4.5 12.6 State taxes, net of federal benefit 3.6 - - Other .1 1.8 4.4 ----- ----- ----- Effective income tax rate 15.7% 1.4% - % ===== ===== =====
NOTE 11 -- INDUSTRY SEGMENTS Through its two business segments, the Rubber Group and the Metals Group, the Company manufactures, to customer specifications, rubber and metal components. The Rubber Group manufactures silicone and organic rubber components used primarily by manufacturers of automobiles, automotive replacement parts and medical devices. The Metals Group manufactures metal components used primarily by manufacturers of automobiles, industrial equipment, computers, office equipment and home appliances. During 1995, 1994 and 1993, net sales to automotive industry customers totaled $68,083,000, $53,005,000 and $45,223,000, respectively, which represented 65.3%, 59.9% and 60.3%, respectively, of the Company's total net sales. The Company's three largest customers accounted for 37.4%, 39.7% and 39.2% of net sales during the same respective periods. One customer of the Company's Rubber Group accounted for 22.5%, 20.6% and 22.3% of the Company's total net sales during the same respective periods. In addition, one customer of the Metals Group accounted for 8.1%, 13.0% and 11.8% of the Company's total net sales during such respective periods. Loss of a significant amount of business from the Company's three largest customers, as a group, would have a material adverse effect on the Company's business. -40- 43 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Information relating to the Company's industry segments for 1995, 1994 and 1993 is summarized below (dollar amounts in thousands):
1995 1994 1993 ---- ---- ---- NET SALES: Rubber Group $ 62,302 $ 46,868 $ 40,388 Metals Group 41,996 41,664 34,588 --------- --------- --------- Total net sales $ 104,298 $ 88,532 $ 74,976 ========= ========= ========= INCOME FROM OPERATIONS: Rubber Group $ 7,504 $ 3,860 $ 3,942 Metals Group 4,146 6,060 4,281 --------- --------- --------- Subtotal 11,650 9,920 8,223 Corporate expense (1,993) (1,818) (1,876) --------- --------- --------- Total income from operations $ 9,657 $ 8,102 $ 6,347 ========= ========= ========= IDENTIFIABLE ASSETS: Rubber Group $ 52,288 $ 42,013 $ 31,986 Metals Group 28,479 25,025 17,531 --------- --------- --------- Subtotal 80,767 67,038 49,517 Corporate 1,109 358 466 --------- --------- --------- Total identifiable assets $ 81,876 $ 67,396 $ 49,983 ========= ========= ========= DEPRECIATION AND AMORTIZATION EXPENSE: Rubber Group $ 4,106 $ 3,316 $ 2,440 Metals Group 2,045 1,510 1,602 --------- --------- --------- Subtotal 6,151 4,826 4,042 Corporate 298 234 255 --------- --------- --------- Total depreciation and amortization expense $ 6,449 $ 5,060 $ 4,297 ========= ========= ========= CAPITAL EXPENDITURES: Rubber Group $ 12,584 $ 8,651 $ 5,046 Metals Group 5,302 6,656 1,225 --------- --------- --------- Subtotal 17,886 15,307 6,271 Corporate 16 12 17 --------- --------- --------- Total capital expenditures $ 17,902 $ 15,319 $ 6,288 ========= ========= =========
-41- 44 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 12 -- INCOME PER SHARE The calculation of primary net income per share and fully diluted net income per share for 1995, 1994 and 1993 are set forth below (dollar amounts in thousands, except per share amounts):
1995 1994 1993 ---- ---- ---- PRIMARY NET INCOME PER COMMON SHARE: Weighted average common shares outstanding during period 4,219 4,186 4,048 Common equivalent shares - incentive stock options 26 23 - --------- -------- -------- Weighted average common and common equivalent shares 4,245 4,209 4,048 ========= ======== ======== Net income $ 2,288 $ 2,332 $ 851 Preferred stock dividends (44) (47) (176) Pro rata portion of the excess of the redemption cost over the value of preferred stock redeemed (45) (45) (135) --------- -------- -------- Income for primary net income per common share $ 2,199 $ 2,240 $ 540 ========= ======== ======== Primary net income per common share $ .52 $ .53 $ .13 ========= ======== ======== FULLY DILUTED NET INCOME PER COMMON SHARE: Weighted average common shares outstanding during period 4,228 4,203 4,048 Pro forma conversion of 14% Convertible Notes 440 440 440 Common equivalent shares - incentive stock options 26 23 - --------- -------- -------- Weighted average common and common equivalent shares 4,694 4,666 4,488 ========= ======== ======== Net income $ 2,288 $ 2,332 $ 851 Preferred stock dividends (44) (47) (176) Pro rata portion of the excess of the redemption cost over the value of preferred stock redeemed (45) (45) (135) Pro forma elimination of interest expense on the 14% Convertible Notes, net of applicable income taxes 104 140 140 --------- -------- -------- Income for fully diluted net income per common share $ 2,303 $ 2,380 $ 680 ========= ======== ======== Fully diluted net income per common share $ .49 $ .51 $ .13 ========= ======== ========
The calculation of fully diluted net income per common share for 1993 is antidilutive, therefore, fully diluted net income per common share for 1993 is equal to the primary net income per share. -42- 45 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 $269,000, $177,000 and $89,000 for 1995, 1994 and 1993, respectively. At December 31, 1995, 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 arise in the ordinary course of its business activities, including actions naming the Company as a potentially responsible party or a third-party defendant, along with other companies, for certain waste disposal sites. 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, are the holders of the 14% Notes and beneficially own $200,000 principal amount of the 12-3/4% Notes. In addition, the Chairman of the Board and certain of his affiliates hold an aggregate of $1,300,000 principal amount of the 12-3/4% Notes. The Chairman of the Board 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, 1995, for an annual fee of $400,000. Additionally, the firm may receive incentive compensation tied to the Company's operating performance and other compensation 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 1995, the Company paid the firm aggregate fees of $600,000 and reimbursed it for direct and indirect expenses of $97,000. During 1994, the Company paid the firm aggregate fees of $678,000 and reimbursed it for direct and indirect expenses of $135,000. During 1993, 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 1995, 1994 and 1993, the Company made payments to the law firm for legal services in the amounts of $371,000, $364,000 and $383,000, 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 competitive bidding, 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 1995, 1994 and 1993, the Company made cash payments to the brokerage firm for insurance premiums, including commissions thereon, of $798,000, $1,319,000 and $1,518,000, respectively, -43- 46 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS and for administrative fees for services performed in connection with the administration of the Company's hospital and medical plans of $88,000, $70,000 and $76,000, respectively. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. -44- 47 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information required by Item 10 is incorporated by reference to the Company's proxy statement to be issued in connection with its 1996 Annual Meeting of Stockholders and to be filed with the Commission not later than 120 days after December 31, 1995. ITEM 11. EXECUTIVE COMPENSATION Information required by Item 11 is incorporated by reference to the Company's proxy statement to be issued in connection with its 1996 Annual Meeting of Stockholders and to be filed with the Commission not later than 120 days after December 31, 1995. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information required by Item 12 is incorporated by reference to the Company's proxy statement to be issued in connection with its 1996 Annual Meeting of Stockholders and to be filed with the Commission not later than 120 days after December 31, 1995. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information required by Item 13 is incorporated by reference to the Company's proxy statement to be issued in connection with its 1996 Annual Meeting of Stockholders and to be filed with the Commission not later than 120 days after December 31, 1995. -45- 48 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 ("LPC") and its wholly owned subsidiary, Lexington Components, Inc. ("LCI"), 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 53. 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
-46- 49 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 3-29 Certificate of Retirement of Stock dated January 5, 1996 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 LPC and L&D Precision Limited Partnership ("L&D Precision") and exhibits thereto 4-3 Amendment Agreement dated as of April 27, 1990 between LPC 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 LPC and L&D Woolens Limited Partnership ("L&D Woolens") and exhibits thereto
-47- 50 4-5 Specimen of Junior Subordinated Convertible Increasing Rate Note, due May 1, 2000 4-6 Specimen of 14% Junior Subordinated Note, due May 1, 2000 4-7 Indenture dated as of August 1, 1993 between LPC and IBJ Schroder Bank & Trust Company, as Trustee 4-8 Specimen of 12-3/4% Senior Subordinated Note, due February 1, 2000 10-1 Purchase Agreement dated as of February 7, 1985 between LPC and L&D Precision and exhibits thereto 10-2 Amendment Agreement dated as of April 27, 1990 between LPC 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 1995 Compensation Arrangements with Lubin, Delano, & Company 10-8 *Corporate Office 1995 Management Cash Bonus Plan 10-9 Lease Agreement dated as of December 1, 1985 between the County of Monroe Industrial Development Agency and LPC 10-10 Consent and Amendment Letter Agreement between Chemical Bank of New Jersey and LPC dated as of December 29, 1993 10-11 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 10-12 Guaranty dated as of November 30, 1988 from LPC to Paul H. Pennell 10-13 Amendment Agreement dated as of November 30, 1991 between LCI and Paul H. Pennell 10-14 Release and Notice Agreement dated as of March 31, 1993 between LCI and Paul H. Pennell 10-15 Standstill Agreement dated as of November 2, 1988 between Atlas Corporation and LPC 10-16 Recapitalization Agreement dated as of April 27, 1990 between LPC and L&D Woolens and exhibits thereto
-48- 51 10-17 Accounts Financing Agreement [Security Agreement] dated as of January 11, 1990 between Congress Financial Corporation ("Congress") and LPC 10-18 Accounts Financing Agreement [Security Agreement] dated as of January 11, 1990 between Congress and LCI 10-19 Covenants Supplement to Accounts Financing Agreement [Security Agreement] dated as of January 11, 1990 between Congress and LPC 10-20 Covenants Supplement to Accounts Financing Agreement [Security Agreement] dated as of January 11, 1990 between Congress and LCI 10-21 Letter dated April 11, 1990 from LPC and Wise Die Casting, Inc. to Congress 10-22 Letter Agreement dated February 28, 1991 between LPC and Congress amending certain financing agreements and consent thereto of LCI 10-23 Letter Agreement dated February 28, 1991 between LCI and Congress amending certain financing agreements and consent thereto of LPC 10-24 Letter Agreement dated January 14, 1994 between LPC and Congress amending certain financing agreements and consent thereto of LCI 10-25 Letter Agreement dated January 14, 1994 between LCI and Congress amending certain financing agreements and consent thereto of LPC 10-26 Letter Agreement dated March 25, 1994 between Congress and LPC and consent thereto of LCI 10-27 Letter Agreement dated March 25, 1994 between Congress and LCI and consent thereto of LPC 10-28 Letter Agreement dated as of August 1, 1994 between LPC and Congress amending certain financing agreements and consent thereto of LCI 10-29 Letter Agreement dated as of August 1, 1994 between LCI and Congress amending certain financing agreements and consent thereto of LPC 10-30 Trade Financing Agreement Supplement to Accounts Financing Agreement [Security Agreement] dated as of July 19, 1994 between LPC and Congress 10-31 Letter Agreement dated January 13, 1995 between LCI and Congress amending certain financing agreements and consent thereto of LPC 10-32 Term Promissory Note dated January 13, 1995 from LCI in favor of Congress 10-33 Letter Agreement dated January 31, 1995 between LPC and Congress amending certain financing agreements and consent thereto of LCI
-49- 52 10-34 Second Amended and Restated Promissory Note dated January 31, 1995 from LPC in favor of Congress 10-35 Letter Agreement dated January 31, 1995 between LCI and Congress amending certain financing agreements and consent thereto of LPC 10-36 Second Amended and Restated Promissory Note dated January 31, 1995 from LCI in favor of Congress 10-37 Term Promissory Note dated April 26, 1995 from LCI in favor of Congress 10-38 Equipment Term Note dated June 26, 1995 from LCI in favor of Congress 10-39 Amendment to Financing Agreements dated August 1, 1995 from LPC in favor of Congress 10-40 Amendment to Financing Agreements dated August 1,1995 from LCI in favor of Congress 10-41 Term Note dated September 13, 1995 from LPC in favor of Congress 10-42 Term Note dated September 13, 1995 from LCI in favor of Congress 10-43 Term Note dated October 11, 1995 from LPC in favor of Congress 10-44 Term Note dated October 11, 1995 from LCI in favor of Congress 10-45 Term Promissory Note dated August 1, 1995 from LPC in favor of Congress 10-46 Term Promissory Note dated August 1, 1995 from LCI in favor of Congress 10-47 New Equipment Term Note dated December 15, 1995 from LPC in favor of Congress 10-48 New Equipment Term Note dated December 15, 1995 from LCI in favor of Congress 10-49 Amendment to Financing Agreements dated January 16, 1996 from LPC in favor of Congress 10-50 Term Promissory Note dated January 16, 1996 in the amount of $375,000 from LPC in favor of Congress 10-51 Term Promissory Note dated January 16, 1996 in the amount of $450,000 from LPC in favor of Congress 10-52 Promissory Note dated January 17, 1996 from LPC in favor of The CIT Group/Equipment Financing, Inc. ("CIT")
-50- 53 10-53 Loan and Security Agreement and Rider A to Loan and Security Agreement dated January 17, 1996 from LPC in favor of CIT 10-54 Amendment No. 1 to Loan and Security Agreement dated February 29, 1996 from LPC in favor of CIT 10-55 Promissory Note dated March 1, 1996 from LPC in favor of CIT 10-56 New Equipment Term Note dated March 15, 1996 from LCI in favor of Congress 10-57 Promissory Note (Demand Loan) dated March 14, 1996 from LPC in favor of Bank One, Akron, NA ("Bank One") 10-58 Credit Facility and Security Agreement and Rider A to Credit Facility and Security Agreement dated March 14, 1996 from LPC and LCI in favor of Bank One 10-59 Promissory Note (Vienna Term Loan) dated March 14, 1996 from LCI in favor of Bank One 10-60 Cognovit Guarantee of LPC dated March 14, 1996 in favor of Bank One 10-61 Cognovit Guarantee of LCI dated March 14, 1996 in favor of Bank One 10-62 Letter Agreement re: Amendment to Financing Agreements and Consent dated February 28, 1996 from LPC in favor of Congress 10-63 Amendment to Financing Agreements and Consent dated March 14, 1996 from LPC in favor of Congress 10-64 Amendment to Financing Agreements and Consent dated March 14, 1996 from LCI in favor of Congress 10-65 Promissory Note (Equipment Term Loan) dated March 27, 1996 from LPC in favor of Bank One 21-1 Subsidiary of Registrant 23-1 Consent of Ernst & Young LLP 27-1 **Financial Data Schedule
[FN] * 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. -51- 54 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: No reports on Form 8-K were filed during the quarter ended December 31, 1996. -52- 55 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, 1995 $ 174 $ 1 $ - $ 175 Year ended December 31, 1994 159 20 5 174 Year ended December 31, 1993 181 25 47 159 INVENTORY RESERVES ------------------ Year ended December 31, 1995 $ 367 $ 49 $ 42 $ 374 Year ended December 31, 1994 337 92 62 367 Year ended December 31, 1993 281 57 1 337
-53- 56 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 28, 1996 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 28, 1996: 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 -54- 57 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 Incorporated by reference from Exhibit 3-3 to the September 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 December 17, 1982 10-K
58 - 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
59 - 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 Incorporated by reference from Exhibit 3-27 to 1994 April 29, 1994 10-K 3-28 Certificate of Retirement of Stock dated Incorporated by reference from Exhibit 3-28 to 1994 January 6, 1995 10-K 3-29 Certificate of Retirement of Stock dated Filed with this Form 10-K January 5, 1996 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 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 Specimen of 14% Junior Subordinated Note due Included in Exhibit 4-6 hereto May 1, 2000 4-7 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 4-8 Specimen of 12-3/4% Senior Subordinated Note Included in Exhibit 4-8 hereto due February 1, 2000
60 - 4 - 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 1995 Compensation Filed with this Form 10-K Arrangements with Lubin, Delano & Company 10-8 Lexington Precision Corporate Office 1995 Incorporated by reference from Exhibit 10-9 to 1994 10-K Management Cash Bonus Plan 10-9 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 10-10 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 10-11 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 10-12 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 10-13 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
61 - 5 - 10-14 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 10-15 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 10-16 Recapitalization Agreement dated as of April See Exhibit 4-4 hereto 27, 1990 between the Company and Woolens and exhibits thereto 10-17 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 10-18 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 10-19 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 10-20 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 10-21 Letter dated April 11, 1990 from the Company Incorporated by reference from Exhibit 10-51 to 1990 and Wise to Congress 10-K 10-22 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 10-23 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 10-24 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")
62 - 6 - 10-25 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 10-26 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 10-27 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 10-28 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") 10-29 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 10-30 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 10-31 Letter Agreement dated January 13, 1995 Incorporated by reference from Exhibit 10-32 to 1994 between LCI and Congress amending certain Form 10-K financing agreements and consent thereto of the Company 10-32 Term Promissory Note dated January 13, 1995 Incorporated by reference from Exhibit 10-33 to 1994 from LCI in favor of Congress Form 10-K 10-33 Letter Agreement dated January 31, 1995 Incorporated by reference from Exhibit 10-34 to 1994 between the Company and Congress amending Form 10-K certain financing agreements and consent thereto of LCI 10-34 Second Amended and Restated Promissory Note Incorporated by reference from Exhibit 10-35 to 1994 dated January 31, 1995 Form 10-K from the Company in favor of Congress 10-35 Letter Agreement dated January 31, 1995 Incorporated by reference from Exhibit 10-36 to 1994 between LCI and Congress amending certain Form 10-K financing agreements and consent thereto of the Company
63 - 7 - 10-36 Second Amended and Restated Promissory Note Incorporated by reference from Exhibit 10-37 to 1994 dated January 31, 1995 from LCI in favor of Form 10-K Congress 10-37 Term Promissory Note dated April 26, 1995 Incorporated by reference from Exhibit 10-1 to from Lexington Components, Inc. in favor of March 31, 1995 Form 10-Q Congress Financial Corporation 10-38 Equipment Term Note dated June 26, 1995 from Incorporated by reference from Exhibit 10-1 to June 30, Lexington Components, Inc. in favor of 1995 Form 10-Q Congress Financial Corporation 10-39 Amendment to Financing Agreements dated Incorporated by reference from Exhibit 10-1 to August 1, 1995 from Lexington Precision September 30, 1995 Form 10-Q Corporation in favor of Congress Financial Corporation 10-40 Amendment to Financing Agreements dated Incorporated by reference from Exhibit 10-2 to August 1,1995 from Lexington Components, September 30, 1995 Form 10-Q Inc. in favor of Congress Financial Corporation 10-41 Term Note dated September 13, 1995 from Incorporated by reference from Exhibit 10-3 to Lexington Precision Corporation in favor of September 30, 1995 Form 10-Q Congress Financial Corporation 10-42 Term Note dated September 13, 1995 from Incorporated by reference from Exhibit 10-4 to Lexington Components, Inc. in favor of September 30, 1995 Form 10-Q Congress Financial Corporation 10-43 Term Note dated October 11, 1995 from Incorporated by reference from Exhibit 10-5 to Lexington Precision Corporation in favor of September 30, 1995 Form 10-Q Congress Financial Corporation 10-44 Term Note dated October 11, 1995 from Incorporated by reference from Exhibit 10-6 to Lexington Components, Inc. in favor of September 30, 1995 Form 10-Q Congress Financial Corporation 10-45 Term Promissory Note dated August 1, 1995 Filed with this Form 10-K from Lexington Precision Corporation in favor of Congress Financial Corporation 10-46 Term Promissory Note dated August 1, 1995 Filed with this Form 10-K from Lexington Components, Inc. in favor of Congress Financial Corporation
64 - 8 - 10-47 New Equipment Term Note dated December 15, Filed with this Form 10-K 1995 from Lexington Precision Corporation in favor of Congress Financial Corporation 10-48 New Equipment Term Note dated December 15, Filed with this Form 10-K 1995 from Lexington Components, Inc. in favor of Congress Financial Corporation 10-49 Amendment to Financing Agreements dated Filed with this Form 10-K January 16, 1996 from Lexington Precision Corporation in favor of Congress Financial Corporation 10-50 Term Promissory Note dated January 16, 1996 Filed with this Form 10-K in the amount of $375,000 from Lexington Precision Corporation in favor of Congress Financial Corporation 10-51 Term Promissory Note dated January 16, 1996 Filed with this Form 10-K in the amount of $450,000 from Lexington Precision Corporation in favor of Congress Financial Corporation 10-52 Promissory Noted dated January 17, 1996 from Filed with this Form 10-K Lexington Precision Corporation in favor of CIT Group/Equipment Financing, Inc. 10-53 Loan and Security Agreement and Rider A to Filed with this Form 10-K Loan and Security Agreement dated January 17, 1996 from Lexington Precision Corporation in favor of CIT Group/Equipment Financing, Inc. 10-54 Amendment No. 1 to Loan and Security Filed with this Form 10-K Agreement dated February 29, 1996 from Lexington Precision Corporation in favor of CIT Group/Equipment Financing, Inc. 10-55 Promissory Note dated March 1, 1996 from Filed with this Form 10-K Lexington Precision Corporation in favor of CIT Group/Equipment Financing, Inc. 10-56 New Equipment Term Note dated March 15, 1996 Filed with this Form 10-K from Lexington Components, Inc. in favor of Congress Financial Corporation
65 - 9 - 10-57 Promissory Note (Demand Loan) dated March Filed with this Form 10-K 14, 1996 from Lexington Precision Corporation in favor of Bank One, Akron, NA 10-58 Credit Facility and Security Agreement and Filed with this Form 10-K Rider A to Credit Facility and Security Agreement dated March 14, 1996 from Lexington Precision Corporation and Lexington Components, Inc. in favor of Bank One, Akron, NA 10-59 Promissory Note (Vienna Term Loan) dated Filed with this Form 10-K March 14, 1996 from Lexington Components, Inc. in favor of Bank One, Akron, NA 10-60 Cognovit Guarantee of Lexington Precision Filed with this Form 10-K Corporation dated March 14, 1996 from Lexington Precision Corporation in favor of Bank One, Akron, NA 10-61 Cognovit Guarantee of Lexington Components, Filed with this Form 10-K Inc. dated March 14, 1996 from Lexington Components, Inc. in favor of Bank One, Akron, NA 10-62 Letter Agreement re Amendment to Financing Filed with this Form 10-K Agreements and Consent dated February 28, 1996 from Lexington Precision Corporation in favor of Congress Financial Corporation 10-63 Amendment to Financing Agreements and Filed with this Form 10-K Consent dated March 14, 1996 from Lexington Precision Corporation in favor of Congress Financial Corporation 10-64 Amendment to Financing Agreements and Filed with this Form 10-K Consent dated March 14, 1996 from Lexington Components, Inc. in favor of Congress Financial Corporation 10-65 Promissory Note (Equipment Term Loan) Filed with this Form 10-K dated March 27, 1996 from Lexington Precision Corporation in favor of Bank One, Akron, NA 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-3.29 2 EXHIBIT 3.29 1 Exhibit 329 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 Treasurer, this 5th day of January, 1996. LEXINGTON PRECISION CORPORATION By: Dennis J. Welhouse ------------------ Dennis J. Welhouse Senior Vice President and Assistant Secretary ATTEST: By: Kelly L. MacMillan ------------------ Kelly L. MacMillan Treasurer EX-10.7 3 EXHIBIT 10.7 1 Exhibit 107 DESCRIPTION OF 1995 COMPENSATION ARRANGEMENTS WITH LUBIN, DELANO & COMPANY During 1995, 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 1995 budgeted operating profit of the Company, 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-10.45 4 EXHIBIT 10.45 1 Exhibit 1045 TERM PROMISSORY NOTE -------------------- $1,000,000 August 1, 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 ONE MILLION DOLLARS ($1,000,000) in lawful money of the United States of America and in immediately available funds, in seventy-seven (77) consecutive monthly installments (or earlier as hereinafter referred to) on the first day of each month, commencing October 1, 1995, of which the first seventy-six (76) installments shall each be in the amount of THIRTEEN THOUSAND DOLLARS ($13,000), and the last (i.e. SEVENTY-SEVENTH (77th)) 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 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. 2 The Interest Rate payable hereunder as to Prime Rate Loans 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 of even date herewith between Debtor and Payee (the "Amendment") to evidence the "Additional Term 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. Debtor (i) waives diligence, demand, presentment, protest and notice of any kind, (ii) agrees that it will not be necessary -2- 3 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 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 -3- 4 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 ----------------------- - --------------------- Chairman of the Board Title: President ----------------------- [Corporate Seal] -4- EX-10.46 5 EXHIBIT 10.46 1 Exhibit 1046 TERM PROMISSORY NOTE -------------------- $1,000,000 August 1, 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 DOLLARS ($1,000,000) in lawful money of the United States of America and in immediately available funds, in seventy-seven (77) consecutive monthly installments (or earlier as hereinafter referred to) on the first day of each month, commencing October 1, 1995, of which the first seventy-six (76) installments shall each be in the amount of THIRTEEN THOUSAND DOLLARS ($13,000), and the last (i.e. SEVENTY-SEVENTH (77th)) 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 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. 2 The Interest Rate payable hereunder as to Prime Rate Loans 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 of even date herewith between Debtor and Payee (the "Amendment") to evidence the "Additional Term 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. Debtor (i) waives diligence, demand, presentment, protest and notice of any kind, (ii) agrees that it will not be necessary -2- 3 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 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 -3- 4 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 Chairman of the Board ----------------- [Corporate Seal] -4- EX-10.47 6 EXHIBIT 10.47 1 Exhibit 1047 NEW EQUIPMENT TERM NOTE ----------------------- $500,000 December 15, 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 FIVE HUNDRED THOUSAND DOLLARS ($500,000) in lawful money of the United States of America and in immediately available funds, in seventy-three (73) consecutive monthly installments (or earlier as hereinafter referred to) on the first day of each month commencing February 1, 1996, of which the first seventy-two (72) installments shall each be in the amount of SIX THOUSAND EIGHT HUNDRED DOLLARS ($6,800), and the last (i.e. seventy- third (73rd)) 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 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. 2 The Interest Rate payable hereunder as to Prime Rate Loans 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 31, 1995 between Debtor and Payee and by letter agreement re: Amendment to Financing Agreements, dated as of August 1, 1995 (collectively, 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 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 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 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 -3- 4 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 ------------------------ - --------------------- Chairman of the Board Title: President ------------------------ [Corporate Seal] -4- EX-10.48 7 EXHIBIT 10.48 1 Exhibit 1048 NEW EQUIPMENT TERM NOTE ----------------------- $600,000 December 15, 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 HUNDRED THOUSAND DOLLARS ($600,000) in lawful money of the United States of America and in immediately available funds, in seventy-three (73) consecutive monthly installments (or earlier as hereinafter referred to) on the first day of each month commencing February 1, 1996, of which the first seventy-two (72) installments shall each be in the amount of EIGHT THOUSAND TWO HUNDRED DOLLARS ($8,200), and the last (i.e. seventy- third (73rd)) 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 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. 2 The Interest Rate payable hereunder as to Prime Rate Loans 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 31, 1995 between Debtor and Payee as amended by letter agreement re: Amendment to Financing Agreements, dated as of August 1, 1995 (collectively, 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 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 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 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 -3- 4 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 ------------------ - --------------------- Chairman of the Board Title: Vice Chairman ----------------- [Corporate Seal] -4- EX-10.49 8 EXHIBIT 10.49 1 Exhibit 1049 January 16, 1996 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 (capitalized terms used herein, unless otherwise defined herein, shall have the meanings ascribed thereto in the Accounts Agreement and the other Financing Agreements): 1. Definitions. ----------- (a) The definition of "LPC Financing Agreements" contained in the Covenant Supplement to the Accounts Agreement is hereby amended to include, without limitation, the LPC Arizona Real Estate Note and the LPC New York Real Estate Notes (as each such term is defined below). (b) The definition of "Term Loans" contained in the letter agreement re: Amendment to Financing Agreements, dated January 31, 1995, between LPC and Congress is hereby amended to include, without limitation, the term loans made by Congress to LPC evidenced by the LPC Arizona Real Estate Note and the LPC New York Real Estate Notes (as each such term is defined below). 2 2. Additional Term Loans. --------------------- (a) Contemporaneously herewith, in order to evidence an additional one-time advance to LPC in the principal amount of $375,000 (the "LPC Arizona Real Estate Loan"), LPC is executing and delivering to Congress the Term Promissory Note, dated of even date herewith, in the original principal amount of $375,000 (as the same now exists or may hereafter be amended, supplemented, renewed, extended, restated or replaced, the "LPC Arizona Real Estate Note"). The Obligations evidenced by the LPC Arizona 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 Arizona Real Estate Note, as provided in the other Financing Agreements, and shall be secured by all Collateral. (b) Contemporaneously herewith, in order to evidence an additional one-time advance to LPC in the principal amount of $450,000 (the "LPC New York Real Estate Loan A"), LPC is executing and delivering to Congress the Term Promissory Note, dated of even date herewith, in the original principal amount of $450,000 (as the same now exists or may hereafter be amended, supplemented, renewed, extended, restated or replaced, the "LPC New York Real Estate Note A"). The Obligations evidenced by the LPC New York Real Estate Note A shall be payable, including interest and other amounts, as provided therein and, to the extent not inconsistent with the terms of the LPC New York Real Estate Note A, as provided in the other Financing Agreements, and shall be secured by all Collateral. (c) At LPC's request made on or before May 31, 1996, 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 5 are then satisfied, Congress agrees to make an additional one-time advance to LPC in the principal amount of $375,000 (the "LPC New York Real Estate Loan B"; and together with the LPC New York Real Estate Loan A, collectively, the "LPC New York Real Estate Loans"). The LPC New York Real Estate Loan B shall be evidenced by a Term Promissory Note in the principal amount of $375,000 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 New York Real Estate Note B; and together with the LPC New York Real Estate Note A, collectively, the "LPC New York Real Estate Notes"). The Obligations evidenced by the LPC New York Real Estate Note B shall be payable, including interest and other amounts, as provided therein, and, to the extent not inconsistent with the terms of the LPC New York Real Estate Note B, as provided in the other Financing Agreements, and shall be secured by all Collateral. -2- 3 3. 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 and on the date of each advance in respect of the LPC Arizona Real Estate Loan and the LPC New York Real Estate Loans; (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; and (c) LPC agrees that, in connection with each of the proposed equipment and real estate financing arrangements between LPC and Bank One, Akron, NA ("Bank One") as set forth in the proposal letter dated October 26, 1995 between LPC and Bank One and the proposed equipment financing arrangements between LPC and The CIT Group/Capital Equipment Financing, Inc. ("CIT") as set forth in the proposal letter dated October 30, 1995 between LPC and CIT, LPC shall not enter into any such arrangements, or any other similar financing arrangements with Bank One or CIT or other lender(s), unless Congress has consented in writing to such arrangements and has approved in writing the collateral to be granted thereunder, and unless the lender providing such financing has entered into an intercreditor agreement with Congress, in form and substance satisfactory to Congress, setting forth the relative priorities of Congress and such lender in the collateral securing such financing arrangements, and providing Congress rights of access and use of the equipment and real estate subject to the senior security interests (if any) of such lender, as well as notice and opportunity to cure defaults before the exercise by such lender of enforcement rights against LPC or its property. 4. CONDITIONS TO THE EFFECTIVENESS OF AMENDMENT. Anything contained in this Amendment to the contrary notwithstanding, LPC shall only be entitled to receive the LPC Arizona Real Estate Loan and the LPC New York Real Estate Loans pursuant to the terms and other conditions of this Amendment upon the satisfaction of the following additional conditions precedent: (a) Congress shall have received an executed original or executed original counterparts (as the case may be) of this -3- 4 Amendment together with the following, each of which shall be in form and substance satisfactory to Congress: (i) the LPC Arizona Real Estate Note; (ii) an Amendment to the 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 previously granted with respect to LPC's real property in Pinal County, Arizona to expressly secure, INTER ALIA, the LPC Arizona Real Estate Loan, together with an updating endorsement, at LPC's expenses, to the existing title policy with respect thereto; (iii) an updated Phase I Environmental Assessment addressed to Congress or upon which Congress is expressly permitted to rely, a certification that there has been no change in the facts set forth on the existing ALTA standard survey previously certified to Congress, and an appraisal report addressed to Congress or upon which Congress is expressly permitted to rely, showing a fair market value of not less than $500,000 (such fair market value to be determined by using methodology acceptable to Congress), each with respect to LPC's owned real property in Pinal County, Arizona and each dated as of a date acceptable to Congress and prepared, at LPC's expense, by an environmental engineering firm, a surveyor and an appraiser, respectively, reasonably satisfactory to Congress; (iv) 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.; (v) the LPC New York Real Estate Note A; (vi) a Mortgage and Security Agreement between LPC and Congress, together with a title policy, with respect to LPC's owned real property in Lakewood, New York; -4- 5 (vii) a Phase I Environmental Assessment addressed to Congress or upon which Congress is expressly permitted to rely, together with a NYSAPLS standard survey certified to Congress, each with respect to LPC's real property in Lakewood, New York and each dated as of a date acceptable to Congress and prepared, at LPC's expenses, by an environmental engineering firm and a surveyor respectively, reasonably satisfactory to Congress; (viii) an appraisal report addressed to Congress, or upon which Congress is expressly permitted to rely, showing a fair market value of LPC's owned real property in Lakewood, New York of not less than $925,000 as such real property existed prior to the construction of the Lakewood Improvements (as defined below), and of not less than $1,650,000 assuming the construction of the Lakewood Improvements (such fair market values to be determined by using methodology acceptable to Congress), each dated as of a date acceptable to Congress and prepared, at LPC's expense, by an appraiser reasonably satisfactory to Congress; (ix) the resolutions of the Boards of Directors of LPC and LCI duly authorizing the execution and delivery of this Amendment and the instruments and transactions contemplated by this Amendment; (x) evidence of casualty, hazard and business interruption insurance and loss payable endorsements naming Congress as a loss payee thereunder and certificates of insurance policies naming Congress as additional insured as to liability insurance, at LPC's cost and expense, in each case with respect to the Pinal County, Arizona and Lakewood, New York real property of LPC (including the Lakewood Improvements) and issued by an insurance company and in amounts satisfactory to Congress; and (xi) evidence that none of LPC's owned real property in Pinal County, Arizona and Lakewood, New York is within an area having -5- 6 special flood hazard or flood prone characteristics, unless LPC has obtained insurance coverage with respect to such flood hazard issued by an insurance company and in amounts satisfactory to Congress, and as to which Congress has been named as a loss payee thereunder. (b) All representation and warranties contained herein, in the Accounts Agreements 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 shall be existing which, with notice or passage of time or both, would constitute an Event of Default. 5. DELIVERIES RELATING TO LPC NEW YORK REAL ESTATE LOAN B. Anything contained in this Amendment to the contrary notwithstanding, LPC shall only be entitled to receive the LPC New York Real Estate Loan B pursuant to the terms and other conditions of this Amendment upon the satisfaction of the following additional conditions precedent: (a) Congress shall have received an executed original or executed original counterparts (as the case may be) of each of the following, each of which shall be in form and substance satisfactory to Congress: (i) the LPC New York Real Estate Note B; (ii) a Mortgage and Agreement of Consolidation and Modification between LPC and Congress which amends, modifies and consolidates the terms of the existing Mortgage and Security Agreement in favor of Congress with respect to LPC's Lakewood, New York owned real property to secure, with a consolidated first mortgage lien upon such real property of LPC, all of LPC's Obligations in respect of the LPC New York Real Estate Loan A and the LPC New York Real Estate Loan B, and which shall contain terms and conditions substantially similar to those contained in the existing Mortgage and Security Agreement; (iii) a title policy issued to Congress insuring the Mortgage and Agreement of Consolidation and Modification referred to above; -6- 7 (iv) a Certificate of Occupancy or other municipal certification of completion, by no later than May 31, 1996, of the improvements to LPC's Lakewood, New York real property described in the Building Proposal of Kessel Construction dated June 15, 1995 which has been submitted to Congress; and (v) an updated NYSAPLS standard survey certified to Congress reflecting the completion of the improvements described in subparagraph (iv) above (the "Lakewood Improvements") by no later than May 31, 1996. (b) All of the conditions precedent set forth in Section 4 above are satisfied; (c) All representations and warranties contained herein, in the Accounts Agreements and in the other Financing Agreements shall be true and correct in all material respects; and (d) No Event of Default shall have occurred an no event shall have occurred or condition shall be existing which, with notice or passage of time or both, would constitute an Event of Default. 6. 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. 7. 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. 8. 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. -7- 8 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 ----------------------- -8- 9 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 Chairman ------------------ -9- 10 EXHIBIT A LPC NEW YORK TERM PROMISSORY NOTE B* ------------------------------------ $375,000 New York, New York ____________ __, 1996 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 THREE HUNDRED SEVENTY-FIVE THOUSAND DOLLARS ($375,000) in lawful money of the United States of America and in immediately available funds, in _____ (___) consecutive monthly installments (or earlier as hereinafter referred to) on the first day of each month commencing _______________ 1, 1996, of which the first __________ (__) installments shall each be in the amount of _____________________________________ DOLLARS ($____________), 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 _____________ 1, 1996 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 __________________________________ * For preparation of Note: The blanks are to be completed such that the principal amount of the LPC New York Term Promissory Note B is amortized in equal, consecutive monthly installments of principal commencing on the first day of the month following the date of advance and ending December 1, 2002. 11 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 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 December __, 1995, between Debtor and Payee (the "Amendment") to evidence the "LPC New York Real Estate Loan B" (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 -2- 12 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 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 -3- 13 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:________________________ _____________________ Title:_____________________ [Corporate Seal] -4- EX-10.50 9 EXHIBIT 10.50 1 Exhibit 1050 TERM PROMISSORY NOTE -------------------- $375,000 New York, New York January 16, 1996 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 THREE HUNDRED SEVENTY-FIVE THOUSAND DOLLARS ($375,000) 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, 1996, of which the first eighty-three (83) installments shall each be in the amount of FOUR THOUSAND FOUR HUNDRED SIXTY-FOUR AND 29/100 DOLLARS ($4,464.29), 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, 1996 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 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. 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 as of the date hereof, between Debtor and Payee (the "Amendment") to evidence the "LPC Arizona 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 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 -3- 4 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 ----------------------- Kenneth I. Greenstein - ------------------------ Title: President ----------------------- [Corporate Seal] -4- EX-10.51 10 EXHIBIT 10.51 1 Exhibit 1051 TERM PROMISSORY NOTE -------------------- $450,000 New York, New York January 16, 1996 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 FOUR HUNDRED FIFTY THOUSAND DOLLARS ($450,000) 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, 1996, of which the first eighty-three (83) installments shall each be in the amount of FIVE THOUSAND THREE HUNDRED FIFTY-SEVEN AND 14/100 DOLLARS ($5,357.14), 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, 1996 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 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. 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 as of the date hereof, between Debtor and Payee (the "Amendment") to evidence the "LPC New York Real Estate Loan A" (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 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 -3- 4 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 ----------------------- Kenneth I. Greenstein - ---------------------- Title: President ----------------------- [Corporate Seal] -4- EX-10.52 11 EXHIBIT 10.52 1 Exhibit 1052 PROMISSORY NOTE $4,554,900.00 New York, New York January 17, 1996 FOR VALUE RECEIVED, LEXINGTON PRECISION CORPORATION ("Debtor") promises to pay to the order of THE CIT GROUP/EQUIPMENT FINANCING, INC. ("CIT"), at such address as CIT may designate, in lawful money of the United States, the principal sum of FOUR MILLION FIVE HUNDRED FIFTY-FOUR THOUSAND NINE HUNDRED and no/100 DOLLARS ($4,554,900.00) in forty-eight (48) equal consecutive monthly installments, commencing on April 30, 1996 with the following installments on the last day of each month thereafter until payment in full of this Note. Each such installment shall be a payment of principal in the amount of $94,893.75. Debtor shall pay interest together with each such installment of principal, in like money, from the date hereof until payment in full, on the unpaid principal balance hereof at an interest rate per annum equal to three percent (3%) above the LIBOR Rate. Each payment shall be applied first to the payment of any unpaid interest on the principal sum and then to payment of principal. Interest shall be calculated on the basis of a 360-day year and actual number of days elapsed. Any amount not paid when due under this Note shall bear late charges thereon, calculated at the Late Charge Rate, from the due date thereof until such amount shall be paid in full. Any payment received after the maturity of any installment of principal shall be applied first to the payment of unpaid late charges, second to the payment of any unpaid interest on said principal, and third to the payment of principal. This Note is one of the Notes referred to in the Loan and Security Agreement dated as of January , 1996, between Debtor and CIT (herein, as the same may from time to time be amended, supplemented or otherwise modified, called the "Agreement"), is secured as provided in the Agreement, and is subject to prepayment only as provided therein, and the holder hereof is entitled to the benefits thereof. Terms defined in the Agreement shall have the same meaning when used in this Note, unless the context shall otherwise require. Except as provided in Section 6 of the Agreement, Debtor hereby waives presentment, demand of payment, notice of dishonor, and any and all other notices or demands in connection with the delivery, acceptance, performance, default or enforcement of this Note and hereby consents to any extensions of time, renewals, releases of any party to this Note, waivers or modifications that may be granted or consented to by the holder of this Note. Upon the occurrence and during the continuance of any one or more of the Events of Default specified in the Agreement, the amounts then remaining unpaid on this Note, together with any interest accrued, may be declared to be (or, with respect to certain Events of Default, automatically shall become) immediately due and payable as provided therein. In the event that any holder shall institute any action for the enforcement or the collection of this Note, there shall be immediately due and payable, in addition to the unpaid balance hereof, all late charges and all reasonable costs and expenses of such action, including reasonable attorneys' fees. In accordance with the provisions of the Agreement, Debtor and CIT waive trial by jury in any litigation relating to or in connection with this Note in which they shall be adverse parties and Debtor hereby waives the right to interpose any setoff counterclaim or defense of any nature or description whatsoever, but Debtor shall have the right to assert in an independent action against CIT any such defense, offset or counterclaim (including any compulsory counterclaim) which it may have which has not otherwise been waived pursuant to the Agreement. Page 1 of 2 2 Debtor agrees that its liabilities hereunder are absolute and unconditional without regard to the liability of any other party, and that no delay on the part of the holder hereof in exercising any power or right hereunder shall operate a waiver thereof; nor shall any single or partial exercise of any power or right hereunder preclude other or further exercise thereof or the exercise of any other power or right. If at any time this transaction would be usurious under applicable law, then regardless of any provision contained in the Agreement, in this Note or in any other agreement made in connection with this transaction, it is agreed that (a) the total of all consideration which constitutes interest under applicable law that is contracted for, charged or received upon the Agreement, this Note or any such other agreement shall under no circumstances exceed the maximum rate of interest authorized by applicable law and any excess shall be credited to Debtor and (b) if CIT elects to accelerate the maturity of, or if CIT permits Debtor to prepay the indebtedness described in, this Note, any amounts which because of such action would constitute interest may never include more than the maximum rate of interest authorized by applicable law and any excess interest, if any, shall be credited to Debtor automatically as of the date of acceleration or prepayment. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK. LEXINGTON PRECISION CORPORATION By: Warren Delano ------------- Title: President ------------- Page 2 of 2 EX-10.53 12 EXHIBIT 10.53 1 Exhibit 1053 LOAN AND SECURITY AGREEMENT THIS LOAN AND SECURITY AGREEMENT dated as of January 17, 1996, is made by and between LEXINGTON PRECISION CORPORATION ("DEBTOR") and THE CIT GROUP/EQUIPMENT FINANCING, INC. ("CIT"). SECTION 1. DEFINITIONS. All capitalized terms which are not defined herein are defined in Rider A attached hereto and made a part hereof ("RIDER A"). Accounting terms not specifically defined shall be construed in accordance with generally accepted accounting principles. SECTION 2. AMOUNT AND TERMS OF LOANS; GRANT OF SECURITY INTEREST. Subject to the terms and conditions hereof, CIT agrees to make Loans to Debtor from time to time, in the amounts described in paragraph 2 of Rider A. Each Loan shall be evidenced by Debtor's Note, which Note shall set forth the repayment terms and Interest Rate for such Loan. As security for the prompt and complete payment and performance when due of all the Obligations and in order to induce CIT to enter into this Agreement and make the Loans and to extend other credit from time to time to Debtor, whether under this Agreement or otherwise, Debtor hereby grants to CIT a first priority security interest in all Debtor's right, title and interest in, to and under the Collateral. SECTION 3. CONDITIONS OF BORROWING. CIT shall not be required to make any Loan hereunder unless on the Closing Date thereof all legal matters with respect to, and all legal documents executed in connection with, the contemplated transactions are satisfactory to CIT and all of the following conditions are met to the satisfaction of CIT (except that (a) and (b) are required in connection with the initial Loan only): (a) CIT has received a satisfactory Secretary's Certificate certified by Debtor's Secretary or Assistant Secretary; (b) Debtor has executed and delivered to CIT the Note evidencing, and a Supplement describing the Equipment to be financed by, such Loan; (c) the Equipment being financed by such Loan has been delivered to, and accepted by, Debtor and CIT has received satisfactory evidence that the Equipment is insured in accordance with the provisions hereof and that the Cost thereof has been, or concurrently with the making of the Loan shall be, fully paid; (d) CIT has received copies of the invoices and bills of sale, if any, with respect to the Equipment being financed by such Loan; (e) all filings, recordings and other actions (including the obtaining of landlord and/or mortgagee waivers and a satisfactory intercreditor Agreement with Congress) deemed necessary or desirable by CIT in order to perfect a first priority security interest in the Equipment being financed by such Loan have been duly effected, and all fees, taxes and other charges relating to such filings and recordings have been paid by Debtor; (f) the representations and warranties contained in this Agreement are true and correct in all material respects with the same effect as if made on and as of such date, and no Default or Event of Default is in existence on such date or shall occur as a result of such Loan; (g) in the sole judgment of CIT, there has been no material adverse change in the financial condition, business or operations of Debtor from the date referred to in Section 4(j) hereof; (h) CIT has received from Debtor such other documents and information as CIT has reasonably requested; (i) CIT has inspected and appraised each item of used Equipment and found it satisfactory in value and condition, and all items of Equipment shall be satisfactory to CIT in value, condition and type, except that CIT has already so inspected and approved the items of Equipment listed on EXHIBIT 1 hereto. SECTION 4. REPRESENTATIONS AND WARRANTIES. In order to induce CIT to enter into this Agreement and to make each Loan, Debtor represents and warrants to CIT that: (a) Debtor is a corporation duly organized, validly existing and in good standing under the laws of its State of incorporation, has the necessary authority and power to own the Equipment and its other assets and to transact the business in which it is engaged, is duly qualified to do business in each jurisdiction where the Equipment is located and in each other jurisdiction in which the conduct of its business or the ownership of its assets requires such qualification, and its chief executive office is located at the address set forth in paragraph 6 of Rider A; (b) Debtor has full power, authority and legal right to execute and deliver this Agreement and the Notes, to perform its obligations hereunder and thereunder, to borrow hereunder and to grant the security interest created hereby; (c) this Agreement has been (and each Note when executed and delivered shall have been) duly authorized, executed and delivered by Debtor and constitutes (and each Note when executed and delivered shall constitute) a legal, valid and binding obligation of Debtor enforceable in accordance with its terms except as such rights may be limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditors' rights generally; (d) the execution, delivery and performance by Debtor of this Agreement and the Notes do not and will not violate any provision of any applicable law or regulation or of any judgment or order of any court or governmental instrumentality, and will not violate any provision of, or cause a default under, any loan, other agreement, contract or judgment to which Debtor is a party; (e) Debtor is not in default under any material agreement, contract or judgment to which Debtor is a party; (f) Debtor has filed all tax returns that are required to be filed and has paid all taxes as shown on said returns and all assessments received by it to the extent such taxes and assessments have become due other than those which are the subject of valid extensions and those which are being contested in good faith by appropriate proceedings and as to which appropriate reserves are being maintained by Debtor in accordance with generally accepted accounting principles and so long as such proceedings Page 1 of 8 2 operate during the pendency thereof to prevent the sale, forfeiture, or loss of the Collateral by or to such taxing authority, and Debtor does not have any knowledge of any actual or proposed deficiency or additional assessment in connection therewith; (g) to the best of its knowledge, there is no action, audit, investigation or proceeding pending or threatened against or affecting Debtor or any of its assets which involves any of the Equipment or any of the contemplated transactions hereunder or which, if adversely determined, could reasonably be expected to have a material adverse effect on Debtor's business, operations or financial condition; (h) on each Closing Date, Debtor shall have good and marketable title to the Equipment being financed on such date and CIT shall have a perfected first Lien on such Equipment; and (i) (i) the operations of Debtor comply in all material respects with all applicable Environmental Laws; and (ii) except as disclosed to CIT, (A) none of the operations of Debtor are subject to any judicial or administrative proceeding alleging the violation of any Environmental Laws; (B) none of the operations of Debtor is the subject of an investigation to determine whether any remedial action is needed to respond to a release of any Hazardous Material into the environment; and (C) Debtor has no known material contingent liability in connection with any release of any Hazardous Material into the environment: (j) all annual and quarterly financial statements of Debtor which have been delivered to CIT have been prepared in accordance with generally accepted accounting principles consistently applied, and present fairly in all material respects Debtor's financial position as at, and the results of its operations for, the periods ended on the dates set forth on such financial statements, and there has been no material adverse change in Debtor's financial condition, business or operations since September 30, 1995, as reflected in such financial statements; (k) Debtor has not changed its name in the last five years or done business under any other name except as previously disclosed in writing to CIT; and (l) no consent of any Person, and no consent, license, approval or authorization of, or registration or filing with, any governmental authority, bureau or agency is required in connection with the execution, delivery and performance of, and payment under, this Agreement or the Notes other than the consent of Congress and the filing of financing statements. SECTION 5. COVENANTS. Debtor covenants and agrees that from and after the date hereof and so long as the Commitment or any of the Notes is outstanding: A. It will: (1) promptly give written notice to CIT of the occurrence of any Event of Loss; (2) observe all material requirements of any governmental authorities relating to the conduct of its business, to the performance of its obligations hereunder, to the use, operation or ownership of the Equipment, or to its other properties or assets, maintain its existence as a legal entity and obtain and keep in full force and effect all material rights, franchises, licenses and permits which are necessary to the proper conduct of its business, and pay all fees, taxes, assessments and governmental charges or levies imposed upon any of the Equipment; (3) at any reasonable time or times, permit CIT or its authorized representative (A) upon prior written request to inspect the Equipment and, (B) following the occurrence and during the continuation of an Event of Default, to inspect the books and records of Debtor; (4) in accordance with generally accepted accounting principles, keep proper books of record and account in which entries will be made of all dealings or transactions in relation to its business and activities; (5) furnish to CIT the following financial statements, all in reasonable detail, prepared in accordance with generally accepted accounting principles applied on a basis consistently maintained throughout the period involved, (a) as soon as available, but not later than 120 days after the end of each fiscal year, its consolidated balance sheet as at the end of such fiscal year, and its consolidated statements of income and consolidated statements of cash flow, including all footnotes, or such fiscal year, together with comparative information for the prior fiscal year, audited by Ernst & Young, LLP or other certified public accountants reasonably acceptable to CIT; and (b) as soon as available, but not later than 90 days after the end of each of the first three quarterly periods of each fiscal year, its consolidated balance sheet as at the end of such quarterly period and its consolidated statements of income and consolidated statements of cash flow for such quarterly period and for the portion of the fiscal year then ended together with comparative information for the prior comparable period, certified as to their accuracy by its chief financial officer; (6) furnish to CIT, (i) together with the financial statements described in clauses 5(a) and 5(b) above, a statement signed by Debtor's chief financial officer certifying that Debtor is in compliance with all financial covenants contained herein, or if Debtor is not in compliance, the nature of such noncompliance or default, and the status thereof (such statement shall set forth the actual calculations of any financial covenants), and (ii) promptly, such additional financial and other information as CIT may from time to time reasonably request; (7) promptly, at Debtor's expense, execute and deliver to CIT such instruments and documents, and take such action, as CIT may from time to time reasonably request in order to carry out the intent and purpose of this Agreement and to establish and protect the rights, interests and remedies created, or intended to be created, in favor of CIT hereby, including, without limitation, the execution, delivery, recordation and filing of financing statements (hereby authorizing CIT, in such jurisdictions where such action is authorized by law, to effect any such recordation or filing of financing statements without Debtor's signature, and to file as valid financing statements in the applicable financing statement records, photocopies hereof and of any other financing statement executed in connection herewith); PROVIDED, HOWEVER, notwithstanding anything in this Agreement to the contrary, in no event shall CIT file any financing statement or other public document which specifically lists the particular items of Equipment included in the Collateral; (8) warrant and defend its good and marketable title to the Equipment, and CIT's perfected first priority security interest in the Collateral, against all claims and demands whatsoever (hereby agreeing that the Equipment shall be and at all times remain separately identifiable personal property, and shall not become part of any real estate), and will, at its expense, take such action as may be necessary to prevent any other Person (other than Congress) from acquiring any right or interest in the Equipment; (9) at Debtor's expense, if requested by CIT in writing, attach to the Equipment a notice satisfactory to CIT disclosing CIT's security interest in the Equipment; (10) at Debtor's expense, maintain the Equipment in good condition and working order and furnish all parts, replacements and servicing required therefor so that the value, condition and operating efficiency thereof will at all times be maintained, normal wear and tear excepted, and any repairs, replacements and parts added to the Equipment in connection with any repair or maintenance or with any improvement, change, addition or alteration shall immediately, without further act, become part of the Equipment Page 2 of 8 3 and subject to the security interest created by this Agreement; and (11) obtain and maintain at all times on the Collateral, at Debtor's expense, "All-Risk" physical damage and, if required by CIT, liability insurance (including bodily injury and property damage) in such amounts, against such risks, in such form and with such insurers as shall be reasonably satisfactory to CIT; PROVIDED, HOWEVER, that the amount of physical damage insurance shall not be less than the then aggregate outstanding principal amount of the Notes. All physical damage insurance policies shall be made payable to CIT as its interest may appear; if liability insurance is required by CIT, the liability insurance policies shall name CIT as an additional insured. Debtor shall maintain and deliver to CIT the original certificates of insurance or other documents satisfactory to CIT prior to policy expiration or upon CIT's request, but CIT shall bear no duty or liability to ascertain the existence or adequacy of such insurance. Each insurance policy shall, among other things, require that the insurer give CIT at least 30 days' prior written notice of any material alteration in the terms of such policy or the cancellation thereof and that the interests of CIT be continued insured regardless of any breach of or violation by Debtor of any warranties, declarations or conditions contained in such insurance policy. The insurance maintained by the Debtor shall be primary with no other insurance maintained by CIT (if any) contributory. B. It will not: (1) sell, convey, transfer, exchange, lease or otherwise relinquish possession or dispose of any of the Collateral or attempt or offer to do any of the foregoing; (2) create, assume or suffer to exist any Lien upon the Collateral except for the security interest created hereby and the subordinate security interest in favor of Congress; (3) liquidate or dissolve; (4) change the form of organization of its business; or (5) without thirty (30) days prior written notice to CIT, change its name or its chief executive office; (6) move (or in the case of titled vehicles, change the principal base of) any of the Equipment from the location specified on the Supplement relating thereto without the prior written consent of CIT except within the continental United States upon 30 days prior written notice to CIT (provided that Debtor delivers to CIT such financing statements as CIT requests to maintain its perfected first priority security interest in such Equipment); or (7) make or authorize any improvement, change, addition or alteration to the Equipment which would impair its originally intended function or use or its value. Notwithstanding anything herein to the contrary, Debtor shall have the right to substitute up to $1,000,000.00 of items of Equipment included in the Collateral with other items of Equipment of a like type and of a value and utility equal to or greater than the Equipment replaced, or other items of Equipment acceptable to CIT. Any Equipment which is so substituted for shall no longer be Collateral for purposes of this Agreement. SECTION 6. EVENTS OF DEFAULT; REMEDIES. The following events shall each constitute an "EVENT OF DEFAULT" hereunder: (a) Debtor shall fail to pay any principal or interest on any Note within 10 days after the same becomes due (whether at the stated maturity, by acceleration or otherwise) or shall fail to pay any other Obligation when due (whether at the stated maturity, by acceleration or otherwise) which failure is not cured within 10 days after Debtor's receipt of notice from CIT; (b) any representation or warranty made by Debtor in this Agreement or in any document, certificate or financial or other statement now or hereafter furnished by Debtor in connection with this Agreement or any Loan shall at any time prove to be untrue or misleading in any material respect as of the time when made; (c) Debtor shall fail to observe any covenant, condition or agreement contained in Sections 5.A(11) or 5.B hereof or in paragraphs 4 or 5(b) of Rider A, which failure shall continue for a period of ten (10) days after receipt of notice from CIT; (d) Debtor shall fail to observe or perform any other covenant or condition contained in this Agreement, and such failure shall continue unremedied for a period of 30 days after the date on which notice thereof shall be given by CIT to Debtor; (e) Debtor or any affiliate of Debtor shall default (i) in the payment of, or other performance under, any obligation for payment or lease (whether or not capitalized) or any guarantee to CIT or any affiliate of CIT beyond the period of grace, if any, provided with respect thereto, or (ii) in the payment or performance of any obligation for borrowed money to any other Person beyond the period of grace, if any, provided with respect thereto, where such obligation or amount guaranteed is in excess of $100,000 if such obligation for borrowed money is accelerated as a result thereof; (f) a complaint in bankruptcy or for arrangement or reorganization or for relief under any insolvency law is filed by or against Debtor (and when filed against Debtor is in effect for 60 days) or Debtor admits its inability to pay its debts as they mature; or (g) upon the expiration of Debtor's current revolving loan facility with Congress, Debtor shall fail to renew such facility with Congress or shall fail to replace such facility with another lender reasonably acceptable to CIT with terms and conditions reasonably acceptable to CIT. If an Event of Default shall occur and be continuing, CIT may, by notice of default given to Debtor, do any one or more of the following: (a) terminate the Commitment and/or (b) declare the Notes to be due and payable, whereupon the principal amount of the Notes, together with accrued interest thereon and all other amounts owing under this Agreement and the Notes, shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived (and in the case of any Event of Default specified in clause (f) of the above paragraph, such acceleration of the Notes shall be automatic, without any notice by CIT). In addition, if an Event of Default shall occur and be continuing, CIT may exercise all other rights and remedies available to it, whether under this Agreement, under any other instrument or agreement securing, evidencing or relating to the Obligations, under the Code, or otherwise available at law or in equity. Without limiting the generality of the foregoing, Debtor agrees that in any such event, CIT, without demand of performance or other demand, advertisement or notice of any kind (except the notice specified below of time and place of public or private sale) to or upon Debtor or any other Person (all and each of which demands, advertisements and notices are hereby expressly waived), may forthwith do any one or more of the following: collect, receive, appropriate and realize upon the Collateral or any part thereof, and sell, lease, assign, give an option or options to purchase or otherwise dispose of and deliver, the Collateral (or contract to do so), or any part thereof, in one or more parcels at public or private sale or sales at such places and at such prices as it may deem best, for cash or on credit or for future delivery without the assumption of any credit risk. CIT shall have the right upon any such public sale or sales, and, to the extent permitted Page 3 of 8 4 by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption of Debtor, which right or equity is hereby expressly released. Debtor further agrees, at CIT's request, to assemble (at Debtor's expense) the Collateral and make it available to CIT at such places which CIT shall select, whether at Debtor's premises or elsewhere but not more than 1000 miles from Debtor's premises. CIT shall apply the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale (after deducting all reasonable costs and expenses of every kind incurred therein or incidental to the care, safekeeping or otherwise of any or all of the Collateral or in any way relating to the rights of CIT hereunder, including reasonable attorney's fees and legal expenses) to the payment in whole or in part of the Obligations, in such order as CIT may elect. Debtor agrees that CIT need not give more than 10 days' notice of the time and place of any public sale or of the time after which a private sale may take place and that such notice is reasonable notification of such matters. Debtor shall be liable for any deficiency if the proceeds of any sale or disposition of the Collateral are insufficient to pay all amounts to which CIT is entitled. Debtor agrees to pay all costs of CIT, including reasonable attorneys' fees, incurred with respect to collection of any of the Obligations and enforcement of any of CIT's rights hereunder. To the extent permitted by law, Debtor hereby waives presentment, demand, protest or any notice (except as expressly provided in this Section 6) of any kind in connection with this Agreement or any Collateral. SECTION 7. MISCELLANEOUS. No failure or delay by CIT in exercising any right, remedy or privilege hereunder or under any Note shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy or privilege hereunder or thereunder preclude any other or further exercise thereof or the exercise of any other right, remedy or privilege. No right or remedy in this Agreement is intended to be exclusive but each shall be cumulative and in addition to any other remedy referred to herein or otherwise available to CIT at law or in equity; and the exercise by CIT of any one or more of such remedies shall not preclude the simultaneous or later exercise by CIT of any or all such other remedies. No express or implied waiver by CIT of an Event of Default shall in any way be, or be construed to be, a waiver of any other or subsequent Event of Default. The acceptance by CIT of any regular installment payment or any other sum owing hereunder shall not (a) constitute a waiver of any Event of Default in existence at the time, regardless of CIT's knowledge or lack of knowledge thereof at the time of such acceptance, or (b) constitute a waiver of any Event of Default unless CIT shall have agreed in writing to waive the Event of Default. All notices, requests and demands to or upon any party hereto shall be deemed duly given or made when sent, if given by telecopier, when delivered, if given by personal delivery or overnight commercial carrier, or the fifth calendar day after deposit in the United States mail, certified mail, return receipt requested, addressed to such party at its address (or telecopier number) set forth in paragraph 6 of Rider A or such other address or telecopier number as may be hereafter designated in writing by such party to the other party hereto. Debtor agrees (A) to pay or reimburse CIT for (i) all expenses of CIT in connection with the documentation hereof; (ii) all fees, taxes and expenses of whatever nature incurred in connection with the creation, preservation and protection of CIT's security interest in the Collateral, including, without limitation, all filing and lien search fees, payment or discharge of any taxes or Liens upon, or in respect to, the Collateral, and all other fees and expenses reasonably incurred in connection with protecting or maintaining the Collateral or in connection with defending or prosecuting any actions, suits or proceedings arising out of, or related to, the Collateral; and (iii) all costs and expenses (including reasonable legal fees and disbursements) of CIT in connection with the enforcement of this Agreement and the Notes, and (B) to pay, and to indemnify and hold CIT harmless from and against any and all liabilities, obligations, losses, damages, penalties, claims, actions, judgments, suits, out-of-pocket costs, expenses (including reasonable legal expenses) or disbursements of any kind or nature whatsoever arising out of or with respect to (a) this Agreement, the Collateral or CIT's interest therein, including, without limitation, the execution, delivery, enforcement, performance or administration of this Agreement and the Notes and the manufacture, purchase, ownership, possession, use, selection, operation or condition of the Collateral or any part thereof, or (b) Debtor's violation or alleged violation of any Environmental Laws or any law or regulation relating to Hazardous Materials (the foregoing being referred to as the "indemnified liabilities"), PROVIDED, that Debtor shall have no obligation hereunder with respect to indemnified liabilities arising from the gross negligence or willful misconduct of CIT. If Debtor fails to perform or comply with any of its agreements contained in this Agreement and CIT shall itself perform, comply or cause performance or compliance, the expenses of CIT so incurred, together with interest thereon at the Late Charge Rate, shall be payable by Debtor to CIT on demand and until such payment is made shall constitute Obligations hereunder. The agreements and indemnities contained in this paragraph shall survive termination of this Agreement and payment of the Notes. This Agreement contains the complete, final and exclusive statement of the terms of the agreement between CIT and Debtor related to the contemplated transactions, and neither this Agreement, nor any terms hereof, may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of a change, waiver, discharge or termination is sought. This Agreement shall be binding upon, and inure to the benefit of, Debtor and CIT and their respective successors and assigns, except that Debtor may not assign or transfer its rights hereunder or any interest herein without the prior written consent of CIT. Headings of sections and paragraphs are for convenience only, are not part of this Agreement and shall not be deemed to affect the meaning or construction of any of the provisions hereof. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining Page 4 of 8 5 provisions hereof, and any such prohibition or unenforceability shall not invalidate or render unenforceable such provision in any other jurisdiction. Debtor hereby authorizes CIT to correct patent errors and to fill in such blanks as dates herein and in the Notes, Supplements and in any document executed in connection herewith. THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK. DEBTOR HEREBY IRREVOCABLY CONSENTS AND AGREES THAT ANY LEGAL ACTION IN CONNECTION WITH THIS AGREEMENT MAY BE INSTITUTED IN THE COURTS OF THE STATE OF NEW YORK, IN THE COUNTY OF NEW YORK OR THE UNITED STATES COURTS FOR THE SOUTHERN DISTRICT OF NEW YORK, AS CIT MAY ELECT, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, DEBTOR HEREBY IRREVOCABLY ACCEPTS AND SUBMITS TO, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, THE NON-EXCLUSIVE JURISDICTION OF ANY SUCH COURT, AND TO ALL PROCEEDINGS IN SUCH COURTS. DEBTOR AND CIT ACKNOWLEDGE THAT JURY TRIALS OFTEN ENTAIL ADDITIONAL EXPENSES AND DELAYS NOT OCCASIONED BY NONJURY TRIALS. DEBTOR AND CIT AGREE AND STIPULATE THAT A FAIR TRIAL MAY BE HAD BEFORE A STATE OR FEDERAL JUDGE BY MEANS OF A BENCH TRIAL WITHOUT A JURY. IN VIEW OF THE FOREGOING, AND AS A SPECIFICALLY NEGOTIATED PROVISION OF THIS AGREEMENT, DEBTOR AND CIT HEREBY EXPRESSLY WAIVE ANY RIGHT TO TRIAL BY JURY OF AN CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS AGREEMENT, OR THE TRANSACTIONS RELATED HERETO, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT O TORT OR OTHERWISE; AND DEBTOR AND CIT HEREBY AGREE AND CONSENT THAT DEBTOR OR CIT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered by their duly authorized officers as of January 17, 1996. CIT: DEBTOR: THE CIT GROUP/EQUIPMENT LEXINGTON PRECISION CORPORATION, FINANCING, INC., A DELAWARE CORPORATION A NEW YORK CORPORATION By: Richard J. Doherty By: Warren Delano ------------------ ----------------------- Title: Senior Vice President Title: President --------------------- ---------------------- Page 5 of 8 6 RIDER A TO LOAN AND SECURITY AGREEMENT DATED AS OF JANUARY 17, 1996 BETWEEN THE CIT GROUP/EQUIPMENT FINANCING, INC. ("CIT") AND LEXINGTON PRECISION CORPORATION ("DEBTOR"). 1. DEFINITIONS. As used in the Loan and Security Agreement, the following terms shall have the following defined meanings (applicable to both singular and plural forms), unless the context otherwise requires: "Agreement": "hereof", "hereto", "hereunder" and words of similar meaning: the Loan and Security Agreement of even date herewith between Debtor and CIT including this Rider A and any other rider, schedule and exhibit executed by Debtor and CIT in connection herewith, as from time to time amended, modified or supplemented. "Appraisal": an appraisal satisfactory to CIT commissioned by CIT with respect to the items of used Equipment. {this definition can be made more specific once the appraiser is engaged and the appraisal conducted]. "Business Day": a day other than a Saturday, Sunday or legal holiday under the laws of the State of New York. " "Cash Flow Coverage Ratio": with respect to Debtor shall mean at any time, the sum of Debtor's net income, depreciation and amortization less its dividends divided by the current portion of its long term debt excluding its 12 3/4% Senior Subordinated Notes due February 1, 2002 in the original principal amount of $31,720,000; PROVIDED; that for the purposes of this calculation the Debtor's results of operations for any twelve-month period shall exclude any write-down or write-off of assets (whether tangible or intangible) of any manufacturing facility or business unit of the Debtor which is recorded by Debtor as a result of the restructuring, relocation, shut-down or sale of such manufacturing facility or business unit or as a result of compliance with Financial Accounting Standard No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of. "Closing Date": each date on which a Loan is made. "Code": the Uniform Commercial Code as from time to time in effect in any applicable jurisdiction. "Collateral": the Equipment and the Proceeds thereof. "Commitment": CIT's obligation to make Loans in the aggregate principal amount stated in paragraph 2 of this Rider A. "Congress": Congress Financial Corporation and its successors and assigns. "Cost": with respect to any item of new Equipment, the seller's invoiced purchase price therefor (after giving effect to any discount or other reduction) payable by Debtor excluding all other amounts and expenses payable by Debtor unless approved by CIT such as installation, freight, tooling, delivery charges, sales taxes, site preparation, and other similar costs with respect Equipment or, with respect to any item of used Equipment, such amount as CIT may approve. The Cost shall be set forth in the applicable Supplement. "Default": any event which with notice, lapse of time, or both would constitute an Event of Default. "Equipment": any and all items of property which are listed on Supplements, together with all now owned or hereafter acquired accessories, parts, repairs, replacements, substitutions, attachments, modifications, additions, improvements, upgrades and accessions of, to or upon such items of property. "Environmental Laws": the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act, any so-called "Superfund" or "Superlien" law, the Toxic Substances Control Act, or any other federal, state or local statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to, or imposing liability or standards of conduct concerning, any hazardous, toxic or dangerous waste, substance or material, as now or at any time hereafter in effect. "Event Of Default": as set forth in Section 6 of the Agreement. "Event Of Loss": with respect to any item of Equipment, (i) the actual or constructive loss or loss of use thereof, due to theft, destruction, damage beyond repair or to an extent which makes repair uneconomical, or (ii) the condemnation, confiscation or seizure thereof, or requisition of title thereto, or use thereof, by any Person. "Hazardous Materials": any pollutant or contaminant defined as such in (or for the purposes of) any Environmental Laws including, but not limited to, petroleum, any radioactive material, and asbestos in any form or condition. "Indebtedness" shall mean all items which, in accordance with generally accepted accounting principles, consistently applied, would be included in determining total liabilities of Debtor shown on the liability side of its balance sheet as at the date such Indebtedness is to be calculated. "Installment Payment Date": with respect to any Note, each date on which a regular installment of interest is due. "Interest Rate": as set forth in paragraph 3 of this Rider A. "Interest Rate Period" shall mean each successive one-month period beginning on the day each Loan is made and ending on the day before such date in the subsequent month. "Late Charge Rate": a rate per annum equal to the higher of 3% over the applicable Interest Rate, but not to exceed the highest rate permitted by applicable law. "Libor Rate": shall mean the rate of interest equal to the thirty (30)-day London Interbank Offered Rate on United States Dollars as reported and published in THE WALL STREET JOURNAL. The LIBOR Rate in effect during any Interest Rate Period shall be the LIBOR Rate in effect at the close of business on the latest Rate Determination Date preceding the Installment Payment Date upon which such Interest Rate Period commences. Page 6 of 8 7 "Liens": liens, mortgages, security interests, financing statements or other encumbrances of any kind whatsoever. "Loan": each loan made pursuant to the Agreement. "Note": each promissory note executed and delivered by Debtor pursuant hereto, satisfactory in form and substance to CIT. "Obligations": all indebtedness, obligations, liabilities and performance of Debtor to CIT, now existing or hereafter incurred under, arising out of, or in connection with, the Agreement or any Note. "Parent Company": any Person having beneficial ownership (directly or indirectly) of 25% or more of Debtor's shares of voting stock. "Person": an individual, partnership, corporation, trust, unincorporated association, joint venture, governmental authority or other entity of whatever nature. "Prepayment Percentage": on the date of any prepayment of any Note pursuant to the Agreement (i) during or prior to the first twelve months thereof, 3%, (ii) during the second twelve months thereof, 1.5%, and thereafter 0%. The first twelve month period shall commence on the Installment Payment Date first occurring after March 31, 1996. "Proceeds": the meaning assigned to it in the Code, and in any event, including, without limitation, (i) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to Debtor from time to time with respect to any of the Equipment; (ii) any and all payments made, or due and payable from time to time, in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Equipment by any Person; (iii) any and all accounts arising out of, or chattel paper evidencing a lease of, any of the Equipment; and (iv) any and all other rents or profits or other amounts from time to time paid or payable in connection with any of the Equipment. "Prohibited Transaction": a transaction in which: (i) Debtor enters into any transaction of merger or consolidation where (x) it shall not be the surviving corporation or (y) if it is the surviving corporation, after giving effect to such merger or consolidation its tangible net worth does not equal or exceed that which existed prior to such merger or consolidation; or (ii) Debtor sells, transfers or otherwise disposes of all or substantially all its assets; or (iii) any Person, or group of Persons acting together, becomes or agrees to become the beneficial owner (directly or indirectly) of 25% or more of Debtor's shares of voting stock (excluding current shareholders and their affiliates as of the date of this Agreement owning in the aggregate 25% or more of Debtor's shares of voting stock). "Rate Determination Date" shall mean with respect to any Interest Rate Period for any Loan made hereunder, shall mean the third preceding Business Day prior to the commencement of any Interest Rate Period, or if such day is not a day on which THE WALL STREET JOURNAL is published (or if published, does not publish the LIBOR Rate), then on the next preceding day prior to the day on which THE WALL STREET JOURNAL is published and reports the LIBOR Rate. "Supplement": each supplement executed and delivered by Debtor pursuant hereto, satisfactory in form and substance to CIT. "Working Capital": shall mean and include, at any time, the amount, if any, by which (i) the aggregate net book value of all assets of Debtor which would, in accordance with generally accepted accounting principles, consistently applied, be classified as current assets at any such time, exceeds (ii) all Indebtedness of Debtor which would, in accordance with generally accepted accounting principles, consistently applied, be classified as current liabilities at such time; PROVIDED, THAT in computing Working Capital hereunder, none of the Obligations of Debtor to CIT and none of the obligations of Debtor to Congress shall be considered current liabilities. 2. LOAN AND COMMITMENT. The aggregate principal amount of all Loans shall not exceed the lesser of (x) $5,000,000.00 or (y) the sum of (i) $2,600,000 with respect to the items of Equipment listed on EXHIBIT 1 hereto; (ii) 100% of the fair market value (as determined by CIT) of the used Equipment not listed on Exhibit 1 but set forth on the Appraisal and (iii) 100% of the Cost (as approved by CIT) of items of new and used Equipment not listed on the Appraisal, which items are satisfactory to CIT. Each Loan shall be in a principal amount of not less than $300,000, and CIT shall not make more than four (4) Loans. Each Loan shall be amortized in level payments of principal. Interest on the unpaid principal balance shall be payable at the rate specified in the Notes. With respect to any Loan made prior to March 31, 1996, interest only shall be payable through March 31, 1996 and thereafter the Loan shall be payable in forty-eight (48) payments equal payments of principal commencing on April 30, 1996. Interest shall be payable monthly on the last day of each calendar month. CIT's Commitment shall terminate on July 31, 1996. The proceeds of each Loan shall be to finance the purchase of, or reimburse Debtor for the cost of, the Equipment. 3. INTEREST RATE. The interest rate per annum on the unpaid principal amount of each Loan shall be equal to the LIBOR Rate plus 3.00%. 4. FINANCIAL COVENANTS. Debtor agrees that so long as any Note remains outstanding and unpaid, Debtor shall, directly or indirectly, at all times: (a) maintain on a basis consolidated with Debtor's direct and indirect subsidiaries, Working Capital of not less than $1,000,000; (b) maintain on a basis consolidated with Debtor's direct and indirect subsidiaries, a minimum Net Worth of not less than negative $9,500,000; (c) maintain a Cash Flow Coverage Ratio of not less than 1.25 to 1.0; or (d) not incur, make or commit to make any expenditure in respect of the purchase or other acquisition of fixed or capital assets including leases which in accordance with generally accepted accounting principles should be capitalized on the books of Debtor (including normal replacements and maintenance) which after giving effect thereto, would cause the aggregate amount of such capital expenditures by Debtor to exceed $15,000,000 (on a non-cumulative basis) in any fiscal year. Page 7 of 8 8 5. PREPAYMENT. (a) Should any item of Equipment suffer an Event of Loss, Debtor shall either replace such item of Equipment within 60 days with equipment (which shall become Equipment) of a value and utility equal to or greater than that of the Equipment suffering the Event of Loss (such determination of value and utility being deemed made immediately prior to the Event of Loss) or make a prepayment on the corresponding Note within 60 days after the occurrence of the Event of Loss. The amount to be prepaid shall be (i) the unpaid principal amount of such Note multiplied by a fraction the numerator of which is the Cost of the item of Equipment which suffered the Event of Loss and the denominator of which is the Cost of all items of Equipment less the Cost of each item of Equipment which previously suffered an Event of Loss or for which a prepayment has otherwise previously been made (the "PREPAID PRINCIPAL AMOUNT"), (ii) all other amounts then due and owing hereunder and under the Notes and (iii) an amount equal to the product of the Prepayment Percentage and the Prepaid Principal Amount. (b) A Prohibited Transaction may be consummated only with CIT's prior written consent. Not less than twenty (20) Business Days prior to the date the proposed Prohibited Transaction is expected to be consummated, Debtor shall give CIT written notice of the proposed Prohibited Transaction. In the event CIT does not consent to the Prohibited Transaction and the Prohibited Transaction is nonetheless to be consummated, Debtor shall, on or prior to the date the Prohibited Transaction is to be consummated, prepay the outstanding principal under all Notes together with (1) all interest accrued thereon, (2) all other amounts then due and owing hereunder and under the Notes, and (3) an amount equal to the product of the Prepayment Percentage and the outstanding principal amount of the Notes. (c) On any Installment Payment Date Debtor may, at its option, on at least 30 days' prior written notice to CIT, prepay all, but not less than all, of the outstanding principal under all Notes executed hereunder together with (i) all interest accrued thereon to the date of prepayment, (ii) all other amounts then due and owing hereunder or under the Notes, and (iii) an amount equal to the product of the outstanding principal under all Notes and the Prepayment Percentage. (d) Except as provided in (a), (b) or (c) of this paragraph 5, the Notes may not be prepaid in whole or in part. 6. ADDRESSES FOR NOTICE PURPOSES AND DEBTOR'S CHIEF EXECUTIVE OFFICE.
CIT: DEBTOR: THE CIT GROUP/EQUIPMENT FINANCING, INC. LEXINGTON PRECISION CORPORATION 1211 Avenue of the Americas c/o Lubin Delano & Co. 21st Floor 767 Third Avenue New York, New York 10036 New York, New York 10017 Telecopier No. (212) 536-1385 Telecopier No. (212) 319-4659 Attention: Senior Vice President/Credit Attention: Warren Delano
7. COMMITMENT FEE. CIT acknowledges receipt from Debtor of a commitment fee in the amount of $25,000. CIT agrees to refund to Debtor after the expiration of the commitment period hereunder and completion by CIT of all follow-up matters related to the transactions contemplated hereby, as the refundable portion of the Commitment Fee, the amount determined in accordance with the following formula:
Refund = $25,000 Fee Aggregate principal amount of all Loans made X hereunder - not to exceed $5,000,000 -------------------------------------------- $5,000,0000
Such refund shall be net, however, of any unreimbursed out-of-pocket fees, costs, disbursements and expenses incurred by CIT in connection with the transactions contemplated hereby. Debtor agrees that the difference, if any, between the amount of the Commitment Fee and the amount determined in accordance with the foregoing formula shall be retained by CIT. THE PROVISIONS SET FORTH IN THIS RIDER A ARE INCORPORATED IN AND MADE A PART OF THE LOAN AND SECURITY AGREEMENT BETWEEN CIT AND DEBTOR DATED AS OF JANUARY 17, 1996.
CIT: DEBTOR: THE CIT GROUP/EQUIPMENT LEXINGTON PRECISION FINANCING, INC., A NEW YORK CORPORATION A DELAWARE CORPORATION, By: Richard J. Doherty By: Warren Delano --------------------------------------------- --------------------------------------------- Title: Senior Vice President Title: President ------------------------------------------ ------------------------------------------
Page 8 of 8 EX-10.54 13 EXHIBIT 10.54 1 EXHIBIT 1054 AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT AMENDMENT NO. 1 dated as of February 29, 1996, to LOAN AND SECURITY AGREEMENT, dated as of January 17, 1996 (the "Agreement"), between LEXINGTON PRECISION CORPORATION., and THE CIT GROUP/EQUIPMENT FINANCING, INC. ("Amendment No. 1"). RECITAL ------- CIT and Debtor desire to amend the Agreement to provide for, among other things, an adjustment in the method by which the Interest Rate is determined from time to time as hereinafter set forth. IN CONSIDERATION OF THE FOREGOING and the mutual covenants and agreements herein contained, CIT and Debtor hereby agree as follows: 1. DEFINITIONS. Terms defined in the Agreement shall have the same meanings herein unless otherwise defined herein or unless the context clearly requires otherwise. 2. AMENDMENTS TO THE AGREEMENT. --------------------------- (a) The reference in the definition of "Cash Flow Coverage Ratio" in Section 1 of Rider A to "February 1, 2002" is hereby changed to "February 1, 2000." (b) The definition of "Interest Rate Period" in Section 1 of Rider A is hereby amended in its entirety to read as follows: "INTEREST RATE PERIOD" shall mean each successive one-month period beginning on the day each Loan is made and ending on the day before such date in the subsequent month; PROVIDED, HOWEVER, that if a Loan is made on a day other than the last day of the month, then the first Interest Rate Period shall commence on the day such Loan is made and end on the day before the last day of the month, so that all succeeding Interest Rate Periods shall commence on the last day of the month. (c) Section 2 of Rider A is hereby amended in its entirety to read as follows: 2. LOAN AND COMMITMENT. The aggregate principal amount of all Loans shall not exceed the lesser of (x) $5,500,000.00 or (y) the sum of (i) $2,600,000 with respect to the items of Equipment presented to CIT which are located in Casa Grande, Arizona; (ii) 100% of the fair market value (as determined by CIT) of the used Equipment set forth on the Appraisal other than those items presented to CIT and located in Casa Grande, Arizona; and (iii) 100% of the Cost (as approved by CIT) of items of new and used Equipment not listed on the Appraisal, which items are satisfactory to CIT. Each Loan shall be in a principal amount of not less than $300,000, and CIT shall not make more than four (4) Loans. Each Loan shall be amortized in level payments of principal. Interest on the unpaid principal balance shall be payable at the rate specified in the Notes. Each Loan shall be payable in forty-eight (48) payments equal payments of principal commencing on April 30, 1996, and interest shall be payable monthly on the last day of each calendar month commencing on April 30, 1996 (in the case of both principal and interest, assuming no Loan is made after April 30, 1996). CIT's Commitment shall terminate on July 31, 1996. The proceeds of each Loan shall be to finance the purchase of, or reimburse Debtor for the cost of, the Equipment. 2 (d) The reference in Subsection 3(i) to the Agreement to "the items of Equipment listed on EXHIBIT 1 hereto" is hereby deleted and replaced with the following: "the 19 items of Equipment presented to CIT for approval prior to the date hereof." 3. RATIFICATION. CIT and Debtor ratify and reaffirm the terms of the Agreement as amended by this Amendment No. 1. IN WITNESS WHEREOF, the parties hereto have caused their duly elected and authorized officers to execute this Amendment No. 1 as of the day and year first written above. THE CIT GROUP/EQUIPMENT LEXINGTON PRECISION CORPORATION FINANCING, INC. By: Richard J. Doherty By: Warren Delano ---------------------------- -------------- Title: Senior Vice President Title: President ------------------------- -------------- 2 EX-10.55 14 EXHIBIT 10.55 1 EXHIBIT 1055 PROMISSORY NOTE $822,364.71 New York, New York March 1, 1996 FOR VALUE RECEIVED, LEXINGTON PRECISION CORPORATION ("Debtor") promises to pay to the order of THE CIT GROUP/EQUIPMENT FINANCING, INC. ("CIT"), at such address as CIT may designate, in lawful money of the United States, the principal sum of EIGHT HUNDRED TWENTY-TWO THOUSAND THREE HUNDRED SIXTY-FOUR AND 71/100 DOLLARS ($822,364.71) in forty-eight (48) equal consecutive monthly installments, commencing on April 30, 1996 with the following installments due on the last day of each month thereafter until payment in full of this Note. The initial forty-seven (47) installments shall be level payments of principal in the amount of $17,132.60 each, and the forty-eighth (48th) and final installment shall be a payment of principal in the amount of $17,132.51. Debtor shall pay interest together with each such installment of principal, in like money, from the date hereof until payment in full, on the unpaid principal balance hereof at an interest rate per annum equal to three percent (3%) above the LIBOR Rate. Each payment shall be applied first to the payment of any unpaid interest on the principal sum and then to payment of principal. Interest shall be calculated on the basis of a 360-day year and actual number of days elapsed. Any amount not paid when due under this Note shall bear late charges thereon, calculated at the Late Charge Rate, from the due date thereof until such amount shall be paid in full. Any payment received after the maturity of any installment of principal shall be applied first to the payment of unpaid late charges, second to the payment of any unpaid interest on said principal, and third to the payment of principal. This Note is one of the Notes referred to in the Loan and Security Agreement dated as of January 17, 1996, between Debtor and CIT (herein, as the same may from time to time be amended, supplemented or otherwise modified, called the "Agreement"), is secured as provided in the Agreement, and is subject to prepayment only as provided therein, and the holder hereof is entitled to the benefits thereof. Terms defined in the Agreement shall have the same meaning when used in this Note, unless the context shall otherwise require. Except as provided in Section 6 of the Agreement, Debtor hereby waives presentment, demand of payment, notice of dishonor, and any and all other notices or demands in connection with the delivery, acceptance, performance, default or enforcement of this Note and hereby consents to any extensions of time, renewals, releases of any party to this Note, waivers or modifications that may be granted or consented to by the holder of this Note. Upon the occurrence and during the continuance of any one or more of the Events of Default specified in the Agreement, the amounts then remaining unpaid on this Note, together with any interest accrued, may be declared to be (or, with respect to certain Events of Default, automatically shall become) immediately due and payable as provided therein. In the event that any holder shall institute any action for the enforcement or the collection of this Note, there shall be immediately due and payable, in addition to the unpaid balance hereof, all late charges and all reasonable costs and expenses of such action, including reasonable attorneys' fees. In accordance with the provisions of the Agreement, Debtor and CIT waive trial by jury in any litigation relating to or in connection with this Note in which they shall be adverse parties and Debtor hereby waives the right to interpose any setoff counterclaim or defense of any nature or description whatsoever, but Debtor shall have the right to assert in an independent action against CIT any such defense, offset or counterclaim (including any compulsory counterclaim) which it may have which has not otherwise been waived pursuant to the Agreement. Page 1 of 2 2 Debtor agrees that its liabilities hereunder are absolute and unconditional without regard to the liability of any other party, and that no delay on the part of the holder hereof in exercising any power or right hereunder shall operate a waiver thereof; nor shall any single or partial exercise of any power or right hereunder preclude other or further exercise thereof or the exercise of any other power or right. If at any time this transaction would be usurious under applicable law, then regardless of any provision contained in the Agreement, in this Note or in any other agreement made in connection with this transaction, it is agreed that (a) the total of all consideration which constitutes interest under applicable law that is contracted for, charged or received upon the Agreement, this Note or any such other agreement shall under no circumstances exceed the maximum rate of interest authorized by applicable law and any excess shall be credited to Debtor and (b) if CIT elects to accelerate the maturity of, or if CIT permits Debtor to prepay the indebtedness described in, this Note, any amounts which because of such action would constitute interest may never include more than the maximum rate of interest authorized by applicable law and any excess interest, if any, shall be credited to Debtor automatically as of the date of acceleration or prepayment. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK. LEXINGTON PRECISION CORPORATION By: Warren Delano --------------- Title: President ------------ Page 2 of 2 EX-10.56 15 EXHIBIT 10.56 1 EXHIBIT 1056 NEW EQUIPMENT TERM NOTE ----------------------- $800,000 March 15, 1996 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 EIGHT HUNDRED THOUSAND DOLLARS ($800,000) in lawful money of the United States of America and in immediately available funds, in seventy (70) consecutive monthly installments (or earlier as hereinafter referred to) on the first day of each month commencing May 1, 1996, of which the first sixty-nine (69) installments shall each be in the amount of ELEVEN THOUSAND FOUR HUNDRED DOLLARS ($11,400), and the last (i.e. seventieth (70th)) 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 April 1, 1996 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 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. 2 The Interest Rate payable hereunder as to Prime Rate Loans 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 31, 1995 between Debtor and Payee as amended by letter agreement re: Amendment to Financing Agreements, dated as of August 1, 1995 (collectively, 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 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 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 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 successors, endorsees and assigns. If any term or provision of -3- 4 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 Kenneth I. Greenstein ------------- --------------------- Secretary Title: Vice Chairman ------------- [Corporate Seal] -4- EX-10.57 16 EXHIBIT 10.57 1 EXHIBIT 1057 PROMISSORY NOTE --------------- (Demand Loan) $1,000,000.00 Canton, Ohio March 14,1996 FOR VALUE RECEIVED, LEXINGTON PRECISION CORPORATION, a corporation organized under the laws of the State of Delaware (hereinafter referred to as the "Company"), promises to pay to the order of BANK ONE, AKRON, NA (hereinafter referred to as the "Bank"), the principal amount of ONE MILLION AND NO/100 DOLLARS ($1,000,000.00), on demand on or after May 15, 1996, with interest on the unpaid balance of said principal amount from the date hereof at eight and thirty-seven one-hundredths percent (8.37%) per annum. If any installment of principal, interest or other amounts due and payable hereunder are not paid when due, or within any applicable grace periods, the Company shall pay interest thereon at the rate per annum of three percent (3.0%) in excess of the Base Rate, as the same may from time to time be established but not to exceed the maximum rate allowed by law. Bank shall have the right to assess a late payment processing fee in the amount of the greater of FIFTY AND NO/100 DOLLARS ($50.00) or five percent (5.0%) of the scheduled payment in the event of a default in payment that remains uncured for a period of at least ten (10) days. The Company agrees to pay interest on the unpaid principal amount outstanding of this Note in monthly installments, commencing on April 1, 1996, and continuing on first day of each month thereafter. The unpaid balance of the principal amount outstanding and all accrued interest thereon shall be due and payable on demand on or after May 15, 1996. Payments of both principal of and interest on this Note shall be made in lawful money of the United States of America, at 50 South Main Street, Akron, Ohio 44308-1888, or at such other place as the Bank or any subsequent holder hereof shall have designated to the Company in writing. Interest payable on this Note shall be computed on a three hundred sixty (360) day per year basis counting the actual number of days elapsed. This Note is issued pursuant to and is entitled to the benefits of a Credit Facility and Security Agreement dated March 14, 1996, by and between the Company and the Bank (the "Agreement"), to which Agreement reference is hereby made for a statement of the rights and obligations of the Bank and the duties and obligations of the Company in relation thereto; but neither this reference to said Agreement nor any provisions thereof shall affect or impair the absolute and unconditional obligation of the Company to pay the principal of or interest on this Note when due. The Company may prepay all or any portion of this Note at any time or times and in any amount without penalty or premium. Upon demand of the Bank on or after May 15, 1996, or if an Event of Default, as defined in said Agreement, shall occur, the principal of this Note may be declared immediately due and payable at the option of the Bank. In the event that the Company fails to pay any regularly scheduled principal or interest payment on the Vienna Term Note when due (other than as a result of acceleration thereof based on a default or event of default other than the failure to make any such regularly scheduled payments of principal or interest on the Vienna Term Note when due) which failure is not cured within the ten (10)-day cure period provided in Section 6A of the Agreement (a "Payment Default"), or if an Event of Default occurs and is continuing, 2 which arises from fraudulent act(s) or practice(s) of the Company which Event of Default is not cured within three (3) Business Days after the Company's receipt of written notice thereof from the Bank (a "Fraud Default"), the Company hereby authorizes any attorney-at-law to appear in an court of record in the State of Ohio, or in any other state or territory of the United States, at any time or times after the above sum becomes due, and waive the issuance and service of process and confess judgment against it, in favor of any holder of this Note, for the amount then appearing due, together with the costs of suit, and thereupon to release all errors and waive all rights of appeal and stay of execution. The foregoing warrant of attorney shall survive any judgment, it being understood that should any judgment be vacated for any reason, the foregoing warrant of attorney nevertheless may thereafter be used for obtaining an additional judgment or judgments. To the extent that the provisions of the cognovit warning set forth above the Company's signature specifically contradict the provisions of this paragraph regarding the requirement of a Payment Default or a Fraud Default to take a cognovit judgment, the provisions of this paragraph control. No delay on the part of any holder hereof in exercising any power or rights hereunder shall operate as a waiver of any power or rights. Any demand or notice hereunder to the Company shall be deemed duly given or made when sent, if given by telecopier, when delivered, if given by personal delivery or overnight commercial carrier, or the fifth calendar day after deposit in the United States mail, certified mail, return receipt requested, addressed to the Company at its address (or telecopier number) set forth in Rider A of the Agreement or such other address or telecopier number as may be hereafter designated in writing by the Company to the Bank. This Note is executed at Canton, Stark County, Ohio. - ------------------------------------------------------------------------------ WARNING--BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME, A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR, WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE. - ------------------------------------------------------------------------------ LEXINGTON PRECISION CORPORATION By Dennis J. Welhouse ------------------ Dennis J. Welhouse Senior Vice President and Assistant Secretary 2 EX-10.58 17 EXHIBIT 10.58 1 Exhibit 1058 CREDIT FACILITY AND SECURITY AGREEMENT -------------------------------------- THIS CREDIT FACILITY AND SECURITY AGREEMENT is made as of the 14 day of MARCH, 1996, by and between BANK ONE, AKRON, NA, a national banking association organized and existing under the laws of the United States of America ("Lender"), with its principal place of business located at 50 South Main Street, Akron, Ohio 44308, and LEXINGTON PRECISION CORPORATION, a corporation organized and existing under the laws of the State of Delaware ("LPC"), with its principal place of business and executive offices located at 767 Third Avenue, New York, New York 10017-2023, and LEXINGTON COMPONENTS, INC., a corporation organized and existing under the laws of the State of Delaware ("LCI"), with its principal place of business and executive offices located at 767 Third Avenue, New York, New York 10017-2023 (hereinafter LPC and LCI are referred to each as Borrower singularly and referred to jointly and severally as the "Borrowers," which term shall mean each of the companies individually and both of the companies collectively). WITNESSETH: WHEREAS, LPC is the parent of LCI; and WHEREAS, LCI is a wholly subsidiary of LPC; and WHEREAS, Borrowers desire, from time to time hereafter, to borrow from Lender, and Lender is willing and may, from time to time hereafter, be willing to make loans to each of the Borrowers, subject to the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the terms and conditions contained herein, and of any extension of credit heretofore, now or hereafter made by Lender to Borrowers, the parties hereto hereby agree as follows: SECTION 1. DEFINITIONS All capitalized terms which are not defined herein are defined in Rider A attached hereto and made a part hereof ("Rider A"). Accounting terms not specifically defined shall be construed in accordance with generally accepted accounting principles. All other terms contained in this Agreement shall have, unless the context indicates to the contrary, the meanings provided for by the Code to the extent the same are used or defined therein. All definitions shall be equally applicable to both the singular and plural forms of the defined terms. SECTION 2. AMOUNT AND TERMS OF LOANS; GRANT OF SECURITY INTEREST Subject to the terms and conditions of this Agreement and each of the other Credit Documents and otherwise provided that no loan advances need be made by Lender if, at the date of any request for a loan advance hereunder by Borrower, an Event of Default, or event or condition which, with notice, lapse of time or both, would constitute an Event of Default, then exists, Lender will provide the credit facility described in this Section 2 for the account of Borrower. 2 A. EQUIPMENT TERM LOAN. Lender will make a term loan (the "Equipment Term Loan") to LPC in a principal amount not to exceed ONE MILLION EIGHT HUNDRED THOUSAND AND NO/100 DOLLARS ($1,800,000.00) for the purchase of the North Canton Equipment to be located at the North Canton Location. The amount advanced pursuant to the Equipment Term Loan shall, subject to the terms and conditions of this Agreement, be the lesser of ninety percent (90%) of the purchase price of the North Canton Equipment Collateral or ONE MILLION EIGHT HUNDRED THOUSAND AND NO/100 DOLLARS ($1,800,000.00). Upon ordering of specific equipment by LPC, the purchase orders for such orders shall be submitted to Lender for Lender's review of the same as equipment to be purchased under the Equipment Term Loan. To the extent the Seller of the equipment has not already been paid, funds disbursed under the Equipment Term Loan shall be paid directly to the seller of the equipment to such extent. All purchases of equipment under the Equipment Term Loan shall be completed no later than April 30, 1996. The Equipment Term Loan shall be subject to repayment in accordance with, and bear interest as provided in Section 2.B of this Agreement and shall otherwise be evidenced by, and repayable in accordance with, the Equipment Term Note. B. PAYMENT TERMS OF EQUIPMENT TERM LOAN. (1) INTEREST. The Equipment Term Loan shall bear interest on the unpaid principal balance until the date paid in full at a rate per annum equal to the LIBOR Interest Rate on the Core Borrowing Amount, if any, pursuant to Section 2.B.(2) below and at a rate per annum equal to three-quarters percent (.75%) in excess of the Base Rate on the unpaid principal amount excluding the Core Borrowing Amount, such interest being payable monthly on the first day of each calendar month, commencing on the first day of the second calendar month following the disbursement of the loan and continuing on the first day of each calendar month thereafter. Interest shall be computed on a three hundred sixty (360)-day year basis based upon the actual number of days elapsed. (2) CORE BORROWING AMOUNT. LPC may request that a portion of the outstanding balance of the Equipment Term Loan accrue interest at the LIBOR Interest Rate (the "Core Borrowing Amount") by delivering to Lender a written, telephonic, or telegraphic request (effective upon receipt) by facsimile, telephone, or telegraph by 12:00 p.m. three (3) Business Days prior to the Business Day the LIBOR Interest Rate is to be effective. The request shall specify (i) the Core Borrowing Amount, which shall be in incremental amounts of ONE HUNDRED THOUSAND AND NO/100 DOLLARS ($100,000.00), not to exceed the Core Cap and (ii) the duration of the LIBOR Interest Period which shall be either one (1) month or two (2) months, provided that at no time may the Core Borrowing Amount exceed the Core Cap. During the term of the Equipment Term Loan, the Core Borrowing Amount shall not exceed the Core Cap. It shall be the responsibility of the Borrowers to ensure that at no time shall the Core Borrowing Amount exceed the Core Cap. If such an event occurs, the Core Borrowing Amount shall be immediately reduced to a figure equal to or less than the Core Cap, and LPC shall pay to Lender on demand a TWENTY-FIVE DOLLAR ($25) fee, together with interest on the incremental amount(s) which was in excess of the Core Cap at a rate per annum equal to three-quarters percent (.75%) in excess of the Base Rate less any interest previously paid at the LIBOR Interest Rate during such period that there was an amount in excess of the Core Cap. 2 3 (3) FIXED PRINCIPAL INSTALLMENTS. Subject otherwise to the terms and provisions of the Equipment Term Note, the principal balance of the Equipment Term Loan shall be payable in fifty-nine (59) consecutive equal monthly installments of THIRTY THOUSAND AND NO/100 DOLLARS ($30,000.00) each, commencing on the first day of the second month following disbursement of the loan amount, and continuing on the first day of each calendar month thereafter and a final installment of THIRTY THOUSAND AND NO/100 DOLLARS ($30,000.00). C. NORTH CANTON INTERIM LOAN. Lender will make a demand loan (the "North Canton Interim Loan") to LPC in the principal amount of ONE MILLION AND NO/100 DOLLARS ($1,000,000.00). D. PAYMENT TERMS OF NORTH CANTON INTERIM LOAN (1) DEMAND OBLIGATION. Subject otherwise to the terms and provisions of the Demand Note, the North Canton Interim Loan shall be payable on demand on or after May 15, 1996, and bear interest as provided in Section 2.D(2) of this Agreement and shall otherwise be evidenced by, and repayable in accordance with, the Demand Note. Upon completion of the construction at the North Canton Property, on or before May 15, 1996, and, if the conditions for the North Canton Term Loan are met, the principal amount of the Demand Note shall be paid in full out of the proceeds of the North Canton Term Loan and the Demand Note shall be canceled. (2) INTEREST. The North Canton Interim Loan shall bear interest on the unpaid principal balance at a rate per annum equal to eight and thirty-seven one-hundredths percent (8.37%) per annum, such interest being payable monthly on the first day of each calendar month, commencing April 1, 1996, and continuing on the first day of each calendar month thereafter. E. NORTH CANTON TERM LOAN. Lender will make a term loan (the "North Canton Term Loan") to LPC in the principal amount not to exceed TWO MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($2,500,000.00). The amount advanced under the North Canton Term Loan shall be limited to the lesser of (i) eighty percent (80%) of the appraised value of the North Canton Property, (ii) ninety percent (90%) of the total cost of the project at the North Canton Property, or (iii) TWO MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($2,500,000.00). The review of the appraised value and the project's total cost shall be within the sole discretion of Lender. Upon the completion of such project, LPC shall submit to Lender, in form and substance satisfactory to Lender, an itemization of the project's total cost, together with an updated appraisal of the property completed by an MAI appraiser, acceptable to Lender. The completion of the project, the submission of the appraisal, cost reports, and any other items requested or required by Lender, and the disbursement of the loan amount shall be completed no later than May 15, 1996. The North Canton Term Loan shall be subject to repayment in accordance with, and bear interest as provided in Section 2.F of this Agreement and shall otherwise be evidenced by, and repayable in accordance with, the North Canton Term Note. 3 4 F. PAYMENT TERMS OF NORTH CANTON TERM LOAN (1) INTEREST. The North Canton Term Loan shall bear interest at a fixed rate on the unpaid principal balance until the date paid in full at a rate per annum equal to eight and thirty-seven one-hundredths percent (8.37%), such interest being payable monthly on the first day of each calendar month, commencing on the first day of the second calendar month following the disbursement of the loan and continuing on the first day of each calendar month thereafter. Interest shall be computed on a three hundred sixty (360)-day year basis based upon the actual number of days elapsed. (2) FIXED PRINCIPAL INSTALLMENTS. Subject otherwise to the terms and provisions of the North Canton Term Note, the principal balance of the North Canton Term Loan shall be payable in fifty-nine (59) consecutive, equal monthly installments of principal, commencing on the first day of the second calendar month following the disbursement of the loan and continuing on the first day of each calendar month thereafter, based on a fifteen (15) year amortization of the original loan amount, with a sixtieth (60th) payment of the remaining balance. G. VIENNA TERM LOAN. Lender will make a term loan (the "Vienna Term Loan") to LCI in the principal amount of ONE MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($1,500,000.00). The Vienna Term Loan shall be subject to repayment in accordance with, and bear interest as provided in Section 2.H of this Agreement and shall otherwise be evidenced by, and repayable in accordance with, the Vienna Term Note. H. PAYMENT TERMS OF VIENNA TERM LOAN. (1) INTEREST. The Vienna Term Loan shall bear interest at a fixed rate on the unpaid principal balance until the date paid in full at a rate per annum equal to eight and thirty-seven one-hundredths percent (8.37%), such interest being payable monthly commencing on April 1, 1996, and continuing on the first day of each calendar month thereafter. Interest shall be computed on a three hundred sixty (360)-day year basis based upon the actual number of days elapsed. (2) FIXED PRINCIPAL INSTALLMENTS. Subject otherwise to the terms and provisions of the Vienna Term Note, the principal balance of the Vienna Term Loan shall be payable in fifty-nine (59) consecutive, equal monthly installments of EIGHT THOUSAND THREE HUNDRED THIRTY-THREE DOLLARS AND THIRTY-THREE CENTS ($8,333.33) each, commencing on April 1, 1996, and continuing on the first day of each calendar month thereafter and a final installment of ONE MILLION EIGHT THOUSAND THREE HUNDRED THIRTY-THREE DOLLARS AND FIFTY-THREE CENTS ($1,008,333.53) on March 1, 2001. I. DEFAULT RATE. Upon and after the occurrence of an Event of Default, and during the continuation thereof, unless Lender otherwise agrees, the Notes and the obligations under this Agreement shall bear interest, calculated daily on the basis of a three hundred and sixty (360)-day year, for the actual days elapsed, at the Default Rate. 4 5 J. LIBOR-RELATED PROVISIONS (1) ILLEGALITY; LENDER'S POLICY. Notwithstanding any other provision in this Agreement, if the Lender determines that any applicable law, rule, regulation, or directive (whether or not having the force of law) shall make it (1) unlawful or impossible for the Lender to extend the LIBOR Interest Rate, or (2) imposes or modifies any reserve, special deposit, compulsory loan, or similar requirements relating to any extensions of credit or their assets, or any deposits with or other liabilities, of such Lender; or (3) imposes any other condition adversely affecting Lender's rights hereunder, or (4) if Lender no longer offers the LIBOR Interest Rate, then the interest rate shall automatically convert to a rate per annum equal to three-quarters percent (.75%) in excess of the Base Rate. Borrower shall not be required to pay any costs, penalties, or other amounts as a result of or in connection with any such conversion. (2) DISASTER; COSTS. Notwithstanding anything to the contrary herein, if the Lender determines (which determination shall be conclusive) that (i) quotations of interest rates for the relevant deposits referred to in the definition of LIBOR Interest Rate are not being provided in the relevant amounts or for the relative maturities for purposes of determining the LIBOR Interest Rate as provided in this Agreement; or (ii) if the Lender determines (which determination shall be conclusive) that the relevant rates of interest referred to in the definition of LIBOR Interest Rate, do not accurately cover the cost to the Lender of extending the LIBOR Interest Rate, or (iii) the Lender matches funds in the London Interbank market or in any other money market, then the interest rate shall, upon notice to Borrower, automatically convert to a rate per annum equal to three-quarters percent (.75%) in excess of the Base Rate. Borrower shall not be required to pay any costs, penalties, or other amounts as a result of or in connection with any such conversion. K. ALL ADVANCES TO CONSTITUTE ONE LOAN. The Equipment Term Loan, North Canton Term Loan, and Vienna Term Loan, and all other sums owed by Borrowers to Lender under this Agreement, whether or not evidenced by the Notes, shall be secured by Lender's lien on and security interest in all of the Collateral. Borrowers shall be liable, as provided under this Agreement and their respective guarantees, to Lender for all Obligations. L. ORIGINATION FEE. In order to compensate Lender for its services in preparing and reviewing the Credit Documents and the documentation relating thereto in connection with this Credit Facility, Borrowers shall pay to Lender on the date of each advance hereunder an origination fee of one-half of one percent (.5%) of the total principal amount of the Notes, provided in the case of the North Canton Term Note, the origination fee shall be paid on the principal amount in excess of the principal amount of the Demand Note (the "Origination Fee"). M. SECURITY. As security for the prompt and complete payment and performance when due of all the Obligations and in order to induce Lender to enter into this Agreement and make the Loans and to extend other credit from time to time to Borrower, whether under this Agreement or otherwise, LPC hereby grants to Lender a first priority security interest in all LPC's right, title, and interest in, to, and under the Equipment and the 5 6 proceeds thereof. As security for the prompt and complete payment and performance when due of all the Obligations and in order to induce Lender to enter into this Agreement and make the Loans and to extend other credit from time to time to Borrower, whether under this Agreement or otherwise, LPC or LCI, as applicable, shall execute and deliver an open-end mortgage, granting the Lender the first and best lien on the North Canton Property and the Vienna Property subject only to Permitted Encumbrances. SECTION 3. CONDITIONS OF BORROWING Notwithstanding any other provision of this Agreement or any of the other Credit Documents, and without affecting in any manner the rights of Lender under the other sections of this Agreement, it is understood and agreed that Lender shall have no obligation at any time under Section 2 of this Agreement unless and until the following conditions have been and continue to be satisfied, all in form and substance satisfactory to Lender and its counsel: A. CONDITIONS. The following conditions shall have been and shall continue to be satisfied, in the sole discretion of Lender: (1) No legal action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed before any court, governmental agency or legislative body to enjoin, restrain, or prohibit, or to obtain damages in respect of, or which is related to or arises out of this Agreement or any of the other Credit Documents or the consummation of the transactions contemplated hereby or thereby, or which, in Lender's opinion would make it inadvisable to consummate the transactions contemplated by this Agreement. (2) The representations and warranties of the Borrowers herein are true and correct in all respects and no Event of Default or condition which, with notice, lapse of time or both would constitute an Event of Default then exists. (3) No event, occurrence or condition shall then exist which might have a Material Adverse Effect. B. DOCUMENTATION. Lender shall have received the following documents, each to be in form and substance satisfactory to Lender and its counsel: (1) Certificates of insurance or certified copies of Borrower's casualty insurance policies evidencing the existence of the insurance coverage required pursuant to this Agreement, together with loss payable endorsements thereto naming Lender as a loss payee or additional insured in form and substance satisfactory to Lender. (2) Such UCC financing statements as are required by Lender to perfect the Liens of Lender in the Collateral (subject to the provisions in Section 5.A.(8) hereof) and evidence, in a form acceptable to Lender, that such Liens will constitute valid and first priority perfected Liens. (3) A Certificate of the secretary or an assistant secretary of Borrower, dated as of the date Lender makes its initial advance of loan proceeds pursuant hereto, certifying 6 7 (i) that attached thereto is a true and complete copy of the Bylaws of Borrower, as in effect on the date of such certification, (ii) that attached thereto is a true and complete copy of resolutions, in form satisfactory to Lender, adopted by the Board of Directors of Borrower, authorizing the execution, delivery and performance of this Agreement and each of the other Credit Documents to which it is a party and the consummation of the transactions contemplated hereby and thereby, and (iii) as to the incumbency and genuineness of the signature of each officer of Borrower executing this Agreement or any of the other Credit Documents to which Borrower is a party. (4) A copy of the Articles of Incorporation of Borrower, and all amendments thereto, certified by the Secretary of State of the Borrower's state of incorporation. (5) A good standing certificate for Borrower issued by the Secretary of State of Borrower's state of incorporation and the Secretary of State of Ohio. (6) A certificate of Borrower signed by the chairman, vice chairman, president or chief financial officer of Borrower and dated as of the date Lender makes its initial advance of loan proceeds pursuant hereto, stating that (i) the representations and warranties set forth in Section 4 hereof are true and correct on and as of such date, (ii) Borrower is on such date in compliance with all the terms and provisions set forth in this Agreement, and (iii) on such date no event or condition has occurred or is continuing which, with the giving of notice, the lapse of time, or both, would constitute an Event of Default. (7) Written instructions from Borrowers directing the disbursement of the loan proceeds made pursuant to this Agreement. (8) The written opinion of counsel to Borrowers as to the transactions contemplated by this Agreement, in form and substance satisfactory to Lender. (9) The Equipment Term Note, North Canton Term Note, and Vienna Term Note, duly executed by Borrower, and such other agreements, instruments and documents, including, without limitation, assignments, security agreements, mortgages, deeds of trust, pledges, guaranties and consents, which Lender may require to be executed in connection herewith, including, but not limited to, the following: (a) Duly executed guarantees of all Obligations of Borrowers by both LPC and LCI, in form and substance satisfactory to Lender and its counsel. (b) Environmental Assessments, Appraisals of Real Property and North Canton Equipment Collateral, ALTA Lender Title Policies and Surveys of the North Canton Property and the Vienna Property, together with any other items or information requested by Lender in regard to the North Canton Property and the Vienna Property. (c) Duly executed Environmental Indemnity Agreement from Borrower, in form and substance acceptable to Lender and its counsel. 7 8 (d) Duly executed UCC-1 Financing Statements from Borrowers, in recordable form, in form and substance acceptable to Lender and its counsel (subject to the provisions of Section 5.A.(8) hereof). (e) Duly executed and delivered open-end mortgage of the North Canton Property from LPC in recordable form, in form and substance acceptable to Lender and its counsel, granting Lender the first lien on the North Canton Property, subject only to the Permitted Encumbrances. (f) Duly executed and delivered open-end mortgage of the Vienna Property from LCI in recordable form, in form and substance acceptable to Lender and its counsel, granting Lender the first lien on the Vienna Property, subject only to the Permitted Encumbrances. (10) An Intercreditor Agreement executed by Congress Financial Corporation in form and substance acceptable to Lender and its counsel subordinating the rights of Congress Financial Corporation to Lender's rights in the Collateral. SECTION 4. REPRESENTATIONS AND WARRANTIES In order to induce Lender to enter into this Agreement and to make each Loan, Borrower represents and warrants to Lender that: A. Borrower is a corporation duly organized, validly existing, and in good standing under the laws of its state of incorporation, has the necessary authority and power to own its respective Collateral and its other assets and to transact the business in which it is engaged, is duly qualified to do business in each jurisdiction where the Collateral is located and in each other jurisdiction in which the conduct of its business or the ownership of its assets requires such qualification, and its chief executive office is located at the address set forth in paragraph 4.B of Rider A; B. Borrower has full power, authority, and legal right to execute and deliver this Agreement and each of the other Credit Documents, to perform its obligations hereunder and thereunder, to borrow hereunder and to grant the security interest created hereby and to grant the mortgages on the North Canton Property and the Vienna Property; C. This Agreement and each of the other Credit Documents has been (and each of the Notes when executed and delivered shall have been) duly authorized, executed, and delivered by Borrower and constitutes (and each of the Notes when executed and delivered shall constitute) a legal, valid, and binding obligation of Borrower enforceable in accordance with their respective terms; D. The execution, delivery, and performance by Borrower of this Agreement and each of the Credit Documents do not and will 8 9 not violate any provision of any applicable law or regulation or of any judgment or order of any court or governmental instrumentality, and will not violate any provision of, or cause a default under, any loan, other agreement, contract, or judgment to which Borrower is a party; E. Borrowers' uses of the proceeds of the Equipment Term Loan, North Canton Term Loan, and Vienna Term Loan made by Lender to Borrowers pursuant to this Agreement are, and will continue to be, legal and proper corporate uses, and such uses are and will continue to be consistent with all applicable laws and statutes. F. As of the date hereof, and after giving effect to the transactions contemplated by this Agreement, (i) Borrower is able to pay its debts as they mature and is not otherwise insolvent in any respect, and (ii) Borrower's capital is sufficient and not unreasonably small for the business and transactions in which Borrower is engaged or about to engage. G. Borrower is not in default under any material agreement, contract, or judgment to which Borrower is a party; H. Borrower has filed all tax returns that are required to be filed and has paid all taxes as shown on said returns and all assessments received by it to the extent such taxes and assessments have become due other than those which are the subject of valid extensions and those which are being contested in good faith by appropriate proceedings and as to which appropriate reserves are being maintained by Borrower in accordance with generally accepted accounting principles and so long as such proceedings operate during the pendency thereof to prevent the sale, forfeiture, or loss of the Collateral by or to such taxing authority, and Borrower does not have any knowledge of any actual or proposed deficiency or additional assessment in connection therewith; I. To the best of its knowledge, there is no action, audit, investigation, or proceeding pending or threatened against or affecting Borrower or any of its assets which involves any of the Collateral or any of the contemplated transactions hereunder or which, if adversely determined, could reasonably be expected to have a Material Adverse Effect on Borrower's business, operations, or financial condition; J. On each Closing Date, Borrower shall have good and marketable title to the Collateral being secured on such date and, upon the filing of proper financing statements and recording of the Mortgages, Lender shall have a perfected first Lien on such Collateral (subject to Permitted Encumbrances); and (1) Except as disclosed in writing to Lender (including in any environmental audit or assessment report) the operations of Borrower at the North Canton Property and the Vienna Property comply in all material respects with all applicable Environmental Laws; and (2) Except as disclosed in writing to Lender (including in any environmental audit or assessment report): (a) None of the operations of Borrower at the North Canton Property and the Vienna Property are subject to any judicial or 9 10 administrative proceeding alleging the violation of any Environmental Laws; (b) None of the operations of Borrower at the North Canton Property and the Vienna Property is the subject of an investigation to determine whether any remedial action is needed to respond to a release of any Hazardous Material into the environment; and (c) Borrower has no known contingent liability with respect to the North Canton Property or the Vienna Property in connection with any release of any Hazardous Material into the environment; K. All annual and quarterly financial statements of Borrower, included in any annual reports on form 10-K or included in any quarterly reports on form 10-Q, which have been delivered to Lender have been prepared in accordance with generally accepted accounting principles consistently applied, and present fairly in all material respects Borrower's financial position as at, and the results of its operations for, the periods ended on the dates set forth on such financial statements, and there has been no material adverse change in Borrower's financial condition, business, or operations since September 30, 1995, as reflected in such financial statements; L. Borrower has not changed its name in the last five (5) years or done business or been known under any other name except as disclosed in writing to Lender; and M. No consent of any person, and no consent, license, approval, or authorization of, or registration or filing with, any governmental authority, bureau, or agency is required in connection with the execution, delivery, and performance of, and payment under, this Agreement or the Notes, other than the consent of Congress, and the filing of financing statements and the recording of the Mortgages. N. Neither this Agreement, nor any written statement made by Borrower in connection herewith, contains any untrue statement of a material fact or omits a material fact necessary to make the statements contained therein or herein not misleading. There is no fact which Borrower has not disclosed to Lender which has, or will have, a Material Adverse Effect. O. All Equipment is in good operating condition and repair and all necessary replacements of and repairs to the same have been made so that the value and operating efficiency thereof has been maintained and preserved, reasonable wear and tear excepted. None of the Equipment is so affixed to the real property where located (other than the North Canton Property) so that an interest therein arises under the real property laws of such jurisdiction nor is any such Equipment an accession to any other personal property not otherwise a part of the Collateral. Each request for an advance made by Borrowers pursuant to this Agreement shall, unless Lender is otherwise notified in writing prior to the time of such advance, constitute (I) an automatic representation and warranty by Borrowers to Lender that there does not then exist an Event of Default or any event or condition which, with notice, lapse of time and/or the 10 11 making of such advance, would constitute an Event of Default, and (ii) a reaffirmation as of the date of said request of all of the representations and warranties of Borrowers contained in this Agreement or any of the other Credit Documents. Borrower covenants, warrants and represents to Lender that all representations and warranties of Borrower contained in this Agreement and each of the other Credit Documents shall be true at the time of Borrower's execution of this Agreement and such other Credit Documents, and shall survive the execution, delivery and acceptance thereof by Lender and the parties thereto and the closing of the transactions described therein or related thereto. SECTION 5. COVENANTS Borrower covenants and agrees that from and after the date hereof and so long as any Obligations remain unsatisfied, unless otherwise consented to by Lender in writing: A. It will: (1) Promptly give written notice to Lender of the occurrence of any Event of Loss; (2) Observe all material requirements of any governmental authorities relating to the conduct of its business, to the performance of its obligations hereunder, to the use, operation or ownership of the Equipment, or to its other properties or assets, maintain its existence as a legal entity and obtain and keep in full force and effect all material rights, franchises, licenses and permits which are necessary to the proper conduct of its business, and pay all fees, taxes, assessments and governmental charges or levies imposed upon any of the Equipment; (3) At any reasonable time or times, permit Lender or its authorized representative (a) upon prior written notice, to inspect the Collateral and Borrower's books and records pertaining to the Collateral and, (b) following the occurrence and during the continuation of an Event of Default, to inspect all of the books and records of Borrower, (4) In accordance with generally accepted accounting principles, keep proper books of record and account in which entries will be made of all dealings or transactions in relation to its business and activities; (5) Furnish to Lender the following financial statements, prepared in accordance with generally accepted accounting principles applied on a basis consistently maintained throughout the period involved, 11 12 (a) as soon as available, but not later than 120 days after the end of each fiscal year, its consolidated balance sheet as at the end of such fiscal year, and its consolidated statements of income and consolidated statements of cash flow, including all footnotes, or such fiscal year, together with comparative information for the prior fiscal year, audited by Ernst & Young, LLP or other certified public accountants reasonably acceptable to Lender; and (b) as soon as available, but not later than 45 days after the end of each of the first three quarterly periods of each fiscal year, its consolidated balance sheet as at the end of such quarterly period and its consolidated statements of income and consolidated statements of cash flow for such quarterly period and for the portion of the fiscal year then ended together with comparative information for the prior comparable period, certified as to their accuracy by its chief financial officer, (6) Furnish to Lender, (i) together with the financial statements described in clauses 5.A.(5)(a) and 5.A.(5)(b) above, a statement of Borrower signed by Borrower's chief financial officer certifying that Borrower is in compliance with all financial covenants contained herein, or if Borrower is not in compliance, the nature of such noncompliance or default, and the status thereof (such statement shall set forth the actual calculations of any financial covenants), and (ii) promptly, such additional financial and other information as Lender may from time to time reasonably request; (7) Promptly, at Borrower's expense, execute and deliver to Lender such instruments and documents, and take such action, as Lender may from time to time reasonably request in order to carry out the intent and purpose of this Agreement and to establish and protect the rights, interests and remedies created, or intended to be created, in favor of Lender hereby, including, without limitation, the execution, delivery, recordation and filing of financing statements (hereby authorizing Lender, in such jurisdictions where such action is authorized by law, to effect any such recordation or filing of financing statements without Borrower's signature, and to file as valid financing statements in the applicable financing statement records, photocopies hereof and of any other financing statement executed in connection herewith); PROVIDED, HOWEVER, notwithstanding anything in this Agreement or any other Credit Document to the contrary, in no event shall Lender file or record any financing statement or other public document which specifically lists the particular items of Equipment included in the Collateral; (8) Warrant and defend its good and marketable title to the Equipment, and Lender's perfected first priority security interest in the Collateral, against all claims and demands whatsoever (hereby agreeing that the Equipment shall be and at all times remain separately identifiable personal property, and shall not become part of any real estate other than the North Canton Property), and will, at its expense, take such action as may be necessary to prevent any other Person (other than Congress) from acquiring any right or interest in the Equipment; 12 13 (9) At Borrower's expense, if requested by Lender in writing, attach to the Equipment a notice satisfactory to Lender disclosing Lender's security interest in the Equipment; (10) At Borrower's expense, maintain the Equipment in good condition and working order and furnish all parts, replacements and servicing required therefor so that the value, condition and operating efficiency thereof will at all times be maintained, normal wear and tear excepted, and any repairs, replacements and parts added to the Equipment in connection with any repair or maintenance or with any improvement, change, addition or alteration shall immediately, without further act, become part of the Equipment and subject to the security interest created by this Agreement; and (11) Deliver to Lender, upon demand, any and all evidence of ownership of the Equipment, inclusive of any certificates of title or applications therefor, and maintain accurate, itemized records describing the kind, type, quantity and value of all the Equipment, a summary of which shall be provided to Lender on at least an annual basis and more frequently if requested by Lender. (12) Obtain and maintain at all times on the Equipment, at Borrower's expense, "All-Risk" physical damage and, if required by Lender, liability insurance (including bodily injury and property damage) in such amounts, against such risks, in such form and with such insurers as shall be reasonably satisfactory to Lender; PROVIDED, HOWEVER, that the amount of physical damage insurance shall not be less than the then aggregate outstanding principal amount of the Equipment Term Note. All physical damage insurance policies shall be made payable to Lender as its interest may appear, if liability insurance is required by Lender, the liability insurance policies shall name Lender as an additional insured. Borrower shall maintain and deliver to Lender the original certificates of insurance or other documents reasonably satisfactory to Lender prior to policy expiration or upon Lender's request, but Lender shall bear no duty or liability to ascertain the existence or adequacy of such insurance. Each insurance policy shall, among other things, require that the insurer give Lender at least 30 days' prior written notice of any material alteration in the terms of such policy or the cancellation thereof and that the interests of Lender continue to be insured regardless of any breach of or violation by Borrower of any warranties, declarations or conditions contained in such insurance policy. The insurance maintained by the Borrower shall be primary with no other insurance maintained by Lender (if any) contributory. Unless Lender otherwise agrees in writing, following the occurrence of an Event of Default and during the continuance thereof Lender shall have the sole right, in its name or in Borrower's name, to file claims under any insurance policies, to receive, receipt, and give acquittance for any payments that may be payable thereunder, and to execute any and all endorsements, receipts, releases, assignments, reassignments, or other documents that may be necessary to effect the collection, compromise, or settlement of any claims under any such insurance policies. B. It will not: (1) Sell, convey, transfer, exchange, lease or otherwise relinquish possession or dispose of any of the Collateral or attempt or offer to do any of the foregoing; 13 14 provided, however, that Borrower may offer to sell Collateral after giving Lender notice of its wish to offer Collateral for sale; (2) Create, assume or suffer to exist any Lien upon the Collateral except for the security interest created hereby and the subordinate security interest in favor of Congress subordinated to the extent provided in an Intercreditor Agreement of even date herewith and except for Permitted Encumbrances; (3) Liquidate or dissolve; (4) Change the form of organization of its business; or (5) Without thirty (30) days prior written notice to Lender, change its name or its chief executive office; (6) At any time after Lender advances the North Canton Term Loan, move (or in the case of titled vehicles, change the principal base of) any of the Equipment from the North Canton Property without the prior written consent of Lender except within the continental United States upon thirty (30) days prior written notice to Lender (provided that Borrower delivers to Lender such financing statements as Lender requests to maintain its perfected first priority security interest in such Equipment); or (7) Make or authorize any improvement, change, addition or alteration to the Equipment which would impair its originally intended function or use or its value. C. After obtaining the written consent of Lender as to each item of Equipment, Borrower shall have the right to substitute up to THREE HUNDRED SIXTY THOUSAND AND NO/100 DOLLARS ($360,000.00) of items of Equipment with other items of Equipment of a similar type and of a value to Lender equal to or greater than the Equipment replaced or with other items of Equipment acceptable to Lender. SECTION 6. EVENTS OF DEFAULT; REMEDIES The following events shall each constitute an "EVENT OF DEFAULT" hereunder: A. Borrower shall fail to pay any principal or interest on any Notes within 10 days after the same becomes due (whether at the stated maturity, by acceleration or otherwise) which failure is not cured within 10 days after Borrower's receipt of written notice from Lender or shall fail to pay any other Obligation when due (whether at the stated maturity, by acceleration or otherwise), which failure is not cured within 10 days after Borrower's receipt of written notice from Lender; B. Any representation or warranty made by Borrower in this Agreement or in any document, certificate or financial or other statement now or hereafter furnished by Borrower in connection with this Agreement or any Loan shall at any time prove to be untrue or misleading in any material respect as of the time when made; 14 15 C. Borrower shall fail to observe any covenant, condition or agreement contained in Sections 5.A.(11) or 5.B hereof or in paragraphs 2 or 3.A of Rider A, which failure shall continue for a period of 10 days after receipt of written notice from Lender; D. Borrower shall fail to observe or perform any other covenant or condition contained in this Agreement, and such failure shall continue unremedied for a period of 30 days after the date on which written notice thereof shall be given by Lender to Borrower; E. Borrowers or any guarantor of the Obligations fails to perform, keep or observe any other term, provision, condition, covenant, warranty or representation contained in any of the Credit Documents other than this Agreement or the Notes, which is required to be performed, kept or observed by Borrowers or any such guarantor, which failure shall continue unremedied for a period of thirty (30) days after the date on which written notice thereof shall be given by Lender to Borrower. F. Borrower or any subsidiary of Borrower shall default (i) in the payment of, or other performance under, any obligation for payment or lease (whether or not capitalized) or any guarantee to Lender or any affiliate of Lender (excluding all Participation Obligations) beyond the period of grace, if any, provided with respect thereto, (ii) in the payment of any obligation for borrowed money in excess of ONE HUNDRED THOUSAND AND NO/100 DOLLARS ($100,000.00) to any other Person beyond the period of grace, if any, provided with respect thereto, if such obligation for borrowed money is accelerated as a result thereof, or (iii) in the performance of any obligation for borrowed money in excess of ONE HUNDRED THOUSAND AND NO/100 DOLLARS ($100,000.00) to any other Person beyond the period of grace, if any, provided with respect thereto if such obligation for borrowed money is accelerated as a result thereof; G. A complaint in bankruptcy or for arrangement or reorganization or for relief under any insolvency law is filed by or against Borrower (and when filed against Borrower is in effect for 60 days) or Borrower admits its inability to pay its debts as they mature; or H. Any material adverse change in the value of the Collateral or the financial condition or operating results of Borrower or any guarantor of the Obligations. I. The revocation of any Guaranty of the Obligations. If an Event of Default shall occur and be continuing, Lender may in addition to any of the remedies otherwise available to Lender, by notice of default given to Borrower, do any one or more of the following: J. Terminate the Commitment and/or K. Declare the Notes to be due and payable, whereupon the principal amount of the Notes, together with accrued interest thereon and all other amounts owing under this Agreement and the Notes or the other Credit Documents, shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived (and in the case of any Event of Default specified in clause 6.G of the above 15 16 paragraph, such acceleration of the Notes shall be automatic, without any notice by Lender). In addition, if an Event of Default shall occur and be continuing, Lender may exercise all other rights and remedies available to it, whether under this Agreement, under any other instrument or agreement securing, evidencing or relating to the Obligations, under the Code, or otherwise available at law or in equity. Without limiting the generality of the foregoing, Borrower agrees that in any such event, Lender, without demand of performance or other demand, advertisement or notice of any kind (except the notice specified below of time and place of public or private sale and any notice specified in any applicable mortgage) to or upon Borrower or any other Person (all and each of which demands, advertisements and notices are hereby expressly waived), may forthwith do any one or more of the following: collect, receive, appropriate and realize upon the Collateral or any part thereof, and sell, lease, assign, give an option or options to purchase or otherwise dispose of and deliver, the Collateral (or contract to do so), or any part thereof, in one or more parcels at public or private sale or sales at such places and at such prices as it may deem best, for cash or on credit or for future delivery without the assumption of any credit risk. Lender shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption of Borrower, which right or equity is hereby expressly released. Borrower further agrees, at Lender's request, to assemble (at Borrower's expense) the Collateral and make it available to Lender at such places which Lender shall select, whether at Borrower's premises or elsewhere but not more than 1000 miles from Borrower's premises. Lender shall apply the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale (after deducting all reasonable costs and expenses of every kind incurred therein or incidental to the care, safekeeping or otherwise of any or all of the Collateral or in any way relating to the rights of Lender hereunder, including reasonable attorney's fees and legal expenses) to the payment in whole or in part of the Obligations, in such order as Lender may elect. Borrower agrees that Lender need not give more than 10 days' notice of the time and place of any public sale or of the time after which a private sale may take place and that such notice is reasonable notification of such matters. Borrower shall be liable for any deficiency if the proceeds of any sale or disposition of the Collateral are insufficient to pay all amounts to which Lender is entitled. Borrower agrees to pay all costs of Lender, including reasonable attorneys' fees, incurred with respect to collection of any of the Obligations and enforcement of any of Lender's rights hereunder. To the extent permitted by law, Borrower hereby waives presentment, demand, protest or any notice (except as expressly provided in this Section 6) of any kind in connection with this Agreement or any of the other Credit Documents or any Collateral except as otherwise specifically provided in any Credit Document. SECTION 7. MISCELLANEOUS No failure or delay by Lender in exercising any right, remedy or privilege hereunder or under any Notes or any of the other Credit Documents shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy or privilege hereunder or thereunder preclude any other or further exercise thereof or the exercise of any other right, remedy or privilege. No right or remedy in this Agreement or any of the other Credit Documents is intended to be exclusive but each shall be cumulative and in addition to any other remedy referred to herein or otherwise available to Lender at law or in equity; and the exercise by Lender of any one or more of such remedies shall not preclude the simultaneous or later exercise by 16 17 Lender of any or all such other remedies. No express or implied waiver by Lender of an Event of Default shall in any way be, or be construed to be, a waiver of any other or subsequent Events of Default. The acceptance by Lender of any regular installment payment or any other sum owing hereunder shall not (a) constitute a waiver of any Event of Default in existence at the time, regardless of Lender's knowledge or lack of knowledge thereof at the time of such acceptance, or (b) constitute a waiver of any Event of Default unless Lender shall have agreed in writing to waive the Event of Default. All notices, requests and demands to or upon any party hereto shall be deemed duly given or made when sent, if given by telecopier, when delivered, if given by personal delivery or overnight commercial carrier, or the fifth calendar day after deposit in the United States mail, certified mail, return receipt requested, addressed to such party at its address (or telecopier number) set forth in paragraph 4 of Rider A or such other address or telecopier number as may be hereafter designated in writing by such party to the other party hereto. Borrower agrees: A. To pay or reimburse Lender for (i) all expenses of Lender in connection with the documentation hereof, (ii) all fees, taxes and expenses of whatever nature reasonably incurred in connection with the creation, preservation and protection of Lender's security interest in the Collateral, including, without limitation, all filing and lien search fees, payment or discharge of any taxes or Liens upon, or in respect to, the Collateral, and all other fees and expenses reasonably incurred in connection with protecting or maintaining the Collateral or in connection with defending or prosecuting any actions, suits or proceedings arising out of, or related to, the Collateral; (iii) all costs and expenses (including reasonable legal fees and disbursements) of Lender in connection with the enforcement of this Agreement or any of the other Credit Documents, including, but not limited to (a) any court or administrative proceeding involving the Collateral or the Credit Documents to which Lender is made a party or is subject to subpoena by reason of its being the holder of any Credit Documents, including, without limitation, bankruptcy, insolvency, or a reorganization, and (b) any court or administrative proceeding or other action undertaken by Lender to enforce any remedy or to collect any indebtedness due under the Credit Documents and (c) any remedy exercised by Lender; (iv) any activity in connection with any request by Borrowers or anyone acting on behalf of Borrowers that the Lender consent to a proposed action which, pursuant to the Credit Documents may be undertaken or consummated only with the prior consent of Lender, whether or not such consent is granted, and (v) any negotiation undertaken between Borrowers and Lender, or anyone acting on behalf of Borrowers, pertaining to the existence or cure of any default under or the modification or extension of any of the Credit Documents, and B. to pay, and to indemnify and hold Lender harmless from and against any and all liabilities, obligations, losses, damages, penalties, claims, actions, judgments, suits, out-of-pocket costs, expenses (including reasonable legal expenses) or disbursements of any kind or nature whatsoever arising out of or with respect to (a) this Agreement or any of the other Credit Documents, the Collateral or Lender's interest therein, including, without limitation, the execution, delivery, enforcement, performance or administration of this Agreement or any of the other Credit Documents and the manufacture, purchase, ownership, possession, use, selection, 17 18 operation or condition of the Collateral or any part thereof, or (b) Borrower's violation or alleged violation of any Environmental Laws or any law or regulation relating to Hazardous Materials (the foregoing being referred to as the "indemnified liabilities"), PROVIDED, that Borrower shall have no obligation hereunder with respect to indemnified liabilities arising from the gross negligence or willful misconduct of Lender. If Borrower fails to perform or comply with any of its agreements contained in this Agreement or any of the other Credit Documents and Lender shall itself perform, comply or cause performance or compliance, the expenses of Lender so incurred, together with interest thereon at the Default Rate, shall be payable by Borrower to Lender on demand and until such payment is made shall constitute Obligations hereunder. The agreements and indemnities contained in this paragraph shall survive termination of this Agreement or any of the other Credit Documents and payment of the Notes. This Agreement together with the other Credit Documents contains the complete, final and exclusive statement of the terms of the agreement between Lender and Borrower related to the contemplated transactions, and neither this Agreement, the Notes, or the other Credit Documents, nor any terms hereof, may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of a change, waiver, discharge or termination is sought. This Agreement and the other Credit Documents shall be binding upon, and inure to the benefit of, Borrower and Lender and their respective successors and assigns, except that Borrower may not assign or transfer its rights hereunder or any interest herein without the prior written consent of Lender. Borrowers hereby consent to Lender's participation, sale, assignment, transfer, or other disposition to a bank or other financial institution which does not and whose affiliates are not competitors of either Borrower, at any time or times hereafter, of this Agreement, or any of the other Credit Documents, or any portion hereof or thereof, including, without limitation, Lender's rights, title, interest, remedies, powers, and/or duties hereunder or thereunder. Headings of sections and paragraphs are for convenience only, are not part of this Agreement and shall not be deemed to affect the meaning or construction of any of the provisions hereof. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability shall not invalidate or render unenforceable such provision in any other jurisdiction. Borrower hereby authorizes Lender to correct patent errors and to fill in such blanks as dates herein and in the Notes and in any of the other Credit Documents. Except with the respect to obligations of the Borrowers to make payments pursuant to the Notes, all agreements, obligations, and covenants contained herein to be kept and performed by the Borrowers shall be joint and several. THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF OHIO. EXCEPT AS OTHERWISE PROVIDED FOR IN THIS AGREEMENT OR AS REQUIRED BY APPLICABLE LAW, BORROWER WAIVES (i) PRESENTMENT, 18 19 DEMAND AND PROTEST AND NOTICE OF PRESENTMENT, PROTEST, DEFAULT, NONPAYMENT, MATURITY, RELEASE, COMPROMISE, SETTLEMENT, EXTENSION OR RENEWAL OF ANY OR ALL COMMERCIAL PAPER, ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS, CHATTEL PAPER AND GUARANTIES AT ANY TIME HELD BY LENDER ON WHICH BORROWER MAY IN ANY WAY BE LIABLE, (ii) NOTICE PRIOR TO TAKING POSSESSION OR CONTROL OF THE COLLATERAL WHICH MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING LENDER TO EXERCISE ANY OF LENDER'S REMEDIES AND (iii) ITS RIGHT TO A JURY TRIAL IN THE EVENT OF ANY LITIGATION INSTITUTED IN RESPECT OF THIS AGREEMENT, THE NOTES OR ANY OF THE OTHER CREDIT DOCUMENTS. BORROWER ACKNOWLEDGES THAT IT HAS BEEN ADVISED BY COUNSEL OF ITS CHOICE WITH RESPECT TO THIS AGREEMENT AND THE TRANSACTIONS EVIDENCED BY THIS AGREEMENT. BORROWER HEREBY IRREVOCABLY CONSENTS AND AGREES THAT ANY LEGAL ACTION IN CONNECTION WITH THIS AGREEMENT MAY BE INSTITUTED IN THE COURTS OF THE STATE OF OHIO, IN THE COUNTY OF STARK OR THE UNITED STATES COURTS FOR THE NORTHERN DISTRICT OF OHIO, AS LENDER MAY ELECT, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, BORROWER HEREBY IRREVOCABLY ACCEPTS AND SUBMITS TO, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, THE NON-EXCLUSIVE JURISDICTION OF ANY SUCH COURT, AND TO ALL PROCEEDINGS IN SUCH COURTS. BORROWER AND LENDER ACKNOWLEDGE THAT JURY TRIALS OFTEN ENTAIL ADDITIONAL EXPENSES AND DELAYS NOT OCCASIONED BY NON-JURY TRIALS. BORROWER AND LENDER AGREE AND STIPULATE THAT A FAIR TRIAL MAY BE HAD BEFORE A STATE OR FEDERAL JUDGE BY MEANS OF A BENCH TRIAL WITHOUT A JURY. IN VIEW OF THE FOREGOING, AND AS A SPECIFICALLY NEGOTIATED PROVISION OF THIS AGREEMENT, BORROWER AND LENDER HEREBY EXPRESSLY WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS AGREEMENT, OR THE TRANSACTIONS RELATED HERETO, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND BORROWER AND LENDER HEREBY AGREE AND CONSENT THAT BORROWER OR LENDER MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN 19 20 EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered by their duly authorized officers as of MARCH 14, 1996. LEXINGTON PRECISION CORPORATION ("Borrower") By Dennis J. Welhouse ---------------------------------------------- Name: Dennis J. Welhouse Title: Senior Vice President and Assistant Secretary LEXINGTON COMPONENTS, INC. ("Borrower") By Dennis J. Welhouse ---------------------------------------------- Name: Dennis J. Welhouse Title: Vice Chairman and Assistant Secretary Accepted at Canton, Ohio, as of the date first above written. BANK ONE, AKRON, NA By Rudolf G Bentlage ------------------------------------------ Name: Rudolf G. Bentlage Title: Vice President
20 21 RIDER A TO CREDIT FACILITY AND SECURITY AGREEMENT DATED AS OF MARCH 14, 1996, BETWEEN BANK ONE, AKRON, NA ("LENDER"), AND LEXINGTON PRECISION CORPORATION ("LPC") AND LEXINGTON COMPONENTS, INC. ("LCI") (HEREINAFTER LPC AND LCI ARE REFERRED TO EACH AS BORROWER SINGULARLY AND REFERRED TO JOINTLY AND SEVERALLY AS THE "BORROWERS," WHICH TERM SHALL MEAN EACH OF THE COMPANIES INDIVIDUALLY AND BOTH OF THE COMPANIES COLLECTIVELY) 1. DEFINITIONS As used in the Credit Facility and Security Agreement, the following terms shall have the following defined meanings (applicable to both singular and plural forms), unless the context otherwise requires: AGREEMENT: "Hereof," "hereto," "hereunder" and words of similar meaning: the Credit Facility and Security Agreement of even date herewith between Borrower and Lender including this Rider A and any other rider, schedule and exhibit executed by Borrower and Lender in connection herewith, as from time to time amended, modified or supplemented. BASE RATE: The Lender's Prime Rate for commercial loans, as in effect from time to time, or such other designation announced in replacement of such Prime Rate for commercial loans, which in either instance may not necessarily be the most favorable or lowest or best rate offered by Lender. BUSINESS DAY: A day other than a Saturday, Sunday or legal holiday under the laws of the State of Ohio or day on which commercial banks are authorized or required to close in Ohio. CASH FLOW RATIO: The ratio of cash flow to debt service calculated as fiscal net income plus depreciation and amortization minus dividends divided by current maturities of all long-term debt excluding the twelve and three-quarter percent (12.75%) Senior Subordinated Notes of LPC due February 1, 2000, in the original principal amount of THIRTY-ONE MILLION SEVEN HUNDRED TWENTY THOUSAND ONE HUNDRED TWENTY-FIVE AND NO/100 DOLLARS ($31,720,125.00) the fourteen percent (14%) junior subordinated notes of LPC due May 1, 2000, in the original principal amount of THREE HUNDRED FORTY-SIX THOUSAND SIX HUNDRED SIXTY-SIX DOLLARS AND SIXTY-SEVEN CENTS ($346,666.67) and the junior subordinated convertible increasing rate notes of LPC due May 1, 2000, in the original principal amount of ONE MILLION AND NO/100 DOLLARS ($1,000,000.00), provided that for the purposes of this calculation, the Borrower's results of operations for any twelve (12) month period shall exclude any write down or write-off of asset (whether tangible or intangible) of any manufacturing facility or business unit of the Borrower which is recorded by Borrower as a result of the restructuring, relocation, shutdown, or sale of such manufacturing facility or business unit or as a result of compliance with Financial Accounting Standard No. 121, accounting for the Impairment of Long-Lived Assets and for the Long-Lived Assets to Be Disposed of. 1 22 CLOSING DATE: Each date on which a Loan is made. CODE: The Uniform Commercial Code as from time to time in effect in any applicable jurisdiction. COLLATERAL: The Equipment, the North Canton Property, the Vienna Property, and all other Property of the Borrower now or at any time or times hereafter subject to a Lien in favor of Lender pursuant to the Credit Documents and the Proceeds thereof. COMMITMENT: Lender's obligation to make Loans in the aggregate principal amount stated in paragraph 2 of this Rider A. CONGRESS: Congress Financial Corporation and its successors and assigns. CORE BORROWING AMOUNT: That portion of the outstanding balance of the Equipment Term Loan designated by Borrowers to accrue interest at the LIBOR Interest Rate during the LIBOR Interest Period and which shall be in incremental amounts of ONE HUNDRED THOUSAND AND NO/100 DOLLARS ($100,000.00) and which shall not exceed the Core Cap. CORE CAP: An amount that the Core Borrowing Amount shall not exceed at any time during the term of the Equipment Term Loan. The Core Cap shall be ONE MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($1,500,000.00) until August 1, 1996, on which date it shall be reduced to ONE MILLION FOUR HUNDRED THOUSAND AND NO/100 DOLLARS ($1,400,000.00) and shall be reduced by another ONE HUNDRED THOUSAND AND NO/100 DOLLARS ($100,000.00) on the first day of each month every four (4) months thereafter until December 1, 2000, on which date it shall be reduced to ONE HUNDRED THOUSAND AND NO/100 DOLLARS ($100,000.00). COST: With respect to any item of new Equipment, the seller's invoiced purchase price therefor (after giving effect to any discount or other reduction) payable by Borrower excluding all other amounts and expenses payable by Borrower unless approved by Lender such as installation, freight, tooling, delivery charges, sales taxes, site preparation, and other similar costs with respect to Equipment or, with respect to any item of used Equipment, such amount as Lender may approve. CREDIT DOCUMENTS: This Agreement, the Notes, and all other agreements, instruments and documents (including, without limitation, all assignments, security agreements, mortgages, deeds of trust, lien waivers, subordinations, guarantees, pledges, powers of attorney and consents) heretofore, now or hereafter executed by Borrower in respect of the transactions contemplated by this Agreement or any amendments or additions thereto, in each instance as amended from time to time, provided, in no event shall the Credit Documents include any agreement with respect to any Participation Obligation. DEFAULT: Any event which with notice, lapse of time, or both would constitute an Event of Default. 2 23 DEFAULT RATE: A fluctuating rate of interest equal to three percentage points (3.0%) above the Base Rate but not to exceed the maximum rate allowed by law. DEMAND NOTE: The Demand Note to be executed by LPC in the form attached as Exhibit F to this Agreement (with such changes or modifications, if any, to which Lender may agree) evidencing the North Canton Interim Loan made by Lender pursuant to Section 2.C of this Agreement, together with all amendments thereto and all promissory notes issued in substitution therefor or replacement thereof. ENVIRONMENTAL LAWS: The Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Federal Occupational Safety and Health Act, the Environmental Protection Act, any so-called "Superfund" or "Superlien law, the Toxic Substances Control Act, or any other federal, state or local statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to, or imposing liability or standards of conduct concerning, any solid or hazardous or, toxic or dangerous waste, substance or material, as now or at any time hereafter in effect, as well as any other substance the ownership, possession, use, storage, or disposal of which is regulated under any federal, state, or local laws, ordinances, regulations, codes, rules, orders, or decrees pertaining to environmental, health, or safety matters. EQUIPMENT: Specific machinery and equipment of Lexington Precision Corporation ("LPC") consisting of: lathes, machining centers, grinders, bandsaw, drilling machine, transfer molding presses, vacuum pump, ultrasonic cleaning tank, compressor/dryer, lift truck, sweeper, scrubber and cabinets, now owned or hereafter acquired by LPC, as more particularly described on a certain Schedule of Equipment dated March 14, 1996, executed by LPC and Bank One, Akron, NA (the "Specific Equipment"), together with all currently owned or hereafter acquired accessories and parts for, and repairs, modifications, improvements, upgrades, accessions and attachments to, the Specific Equipment, PROVIDED, in each case that such machinery and equipment is either (i) located at the North Canton Property as of March 14, 1996, or (ii) moved to the North Canton Property at any time after March 14, 1996, or (iii) removed from the North Canton Property at any time after March 14, 1996; and replacements and substitutions for the Specific Equipment acquired after the date hereof that are (i) located at the North Canton Property at any time after March 14, 1996, or (ii) removed from the North Canton Property at any time after March 14, 1996. EQUIPMENT TERM LOAN: As defined in Section 2.A of this Agreement. EQUIPMENT TERM NOTE: The term promissory note to be executed by LPC in the form attached as Exhibit B to this Agreement (with such changes or modifications, if any, to which Lender may agree) evidencing the Equipment Term Loan made by Lender pursuant to Section 2.A of this Agreement, together with all amendments thereto and all promissory notes issued in substitution therefor or replacement thereof. EVENT OF DEFAULT: As set forth in Section 6 of the Agreement. 3 24 EVENT OF LOSS: With respect to any item of Equipment (i) the actual or constructive loss or loss of use thereof, due to theft, destruction, damage beyond repair or to an extent which makes repair uneconomical, or (ii) the condemnation, confiscation or seizure thereof, or requisition of title thereto, or use thereof, by any Person. HAZARDOUS MATERIALS: Any substance, pollutant or contaminant regulated by (or for the purposes of) any Environmental Laws including, but not limited to, petroleum, any radioactive material, and asbestos in any form or condition. INDEBTEDNESS: Shall mean all items which, in accordance with generally accepted accounting principles, consistently applied, would be included in determining total liabilities of Borrower shown on the liability side of its balance sheet as at the date such Indebtedness is to be calculated. INSTALLMENT PAYMENT DATE: with respect to any Note, each date on which a regular installment of interest is due. LIBOR INTEREST PERIOD: The period commencing on the date the LIBOR Interest Rate on the Core Borrowing Amount is to be made, and ending, as the Borrowers may elect, pursuant to Section 2.B.(2) of the Agreement, one (1) month or two (2) months thereafter; provided that all of the foregoing provisions relating to interest periods are subject to the following: (i) No interest period may extend beyond any demand of payment made by Lender; (ii) If an interest period would end on a day that is not a Business Day, such interest period shall be extended to the next Business Day. LIBOR INTEREST RATE: Means the London Interbank Offered Rate on United States dollars plus three hundred (300) basis points per annum. LIENS: Liens, mortgages, security interests, financing statements or other encumbrances of any kind whatsoever. MATERIAL ADVERSE EFFECT: As to any events, occurrences or conditions, if the result thereof would, either singly or in the aggregate, have a material and adverse effect on (i) the Borrower's Property, business, operations, prospects, profitability or condition (financial or otherwise), (ii) Borrower's ability to repay the Obligations or (iii) Lender's Lien on the Collateral or the priority thereof. MORTGAGES: The open-end mortgage by LPC in favor of Lender with respect to the North Canton Property and the open-end mortgage by LCI in favor of Lender with respect to the Vienna Property. 4 25 NORTH CANTON INTERIM LOAN: As defined in Section 2.C of this Agreement. NORTH CANTON LOCATION: LPC's building and offices located at 3565 Highland Park NW, North Canton, Ohio. NORTH CANTON PROPERTY: Certain property owned by LPC located in Stark County, Ohio, described on Exhibit C hereto. NORTH CANTON TERM LOAN: As defined in Section 2.C of this Agreement. NORTH CANTON TERM NOTE: The term promissory note to be executed by LPC in the form attached as Exhibit D to this Agreement (with such changes or modifications, if any, to which Lender may agree) evidencing the North Canton Term Loan made by Lender pursuant to Section 2.C of this Agreement, together with all amendments thereto and all promissory notes issued in substitution therefor or replacement thereof. NOTES: The Equipment Term Note, the North Canton Term Note, the Vienna Term Note, and any other promissory note or other instrument evidencing a Borrower's obligation to repay any Obligations. OBLIGATIONS: All debts, liabilities and obligations of the Borrower to Lender under this Agreement and also any and all other debts, liabilities and obligations of Borrower to Lender of every kind and description, direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, including without limiting the generality of the foregoing, any debt, liability or obligation of Borrower to Lender under any guaranty, and all interest, fees, charges and expenses which at any time may be payable by Borrower to Lender thereunder, provided that in no event shall the Obligations include any Participation Obligations or any obligation, guarantee, or liability of Borrower to any other Person which Lender may have obtained by assignment, grant, or transfer. ORIGINATION FEE: As defined in Section 2.I of this Agreement. PARENT COMPANY: Any Person having beneficial ownership (directly or indirectly) of 25% or more of Borrower's shares of voting stock. PARTICIPATION OBLIGATIONS: Any obligation, guarantee, or other liability of any kind whatsoever to Lender or any affiliate of Lender as a result of or arising out of Lender's or any affiliate of Lender's participation in any loan, credit facility, or other extension of credit to or with any Borrower by Congress or any other Person. PERMITTED ENCUMBRANCES: The (i) Lien of Congress Financial Corporation, (ii) any Liens which are not in excess of TWENTY- FIVE THOUSAND DOLLARS ($25,000) in the aggregate, and (iii) any "Permitted Encumbrances" as defined in each of the Mortgages. 5 26 PERSON: An individual, partnership, corporation, trust, unincorporated association, joint venture, governmental authority or other entity of whatever nature. PRIME RATE: The interest rate established from time to time by Lender as the Lender's Prime Rate, whether or not publicly announced, which may not necessarily be the most favorable or lowest or best rate offered by Lender. PROCEEDS: All proceeds of the Equipment, which proceeds shall include the meaning assigned to it in the Code, and in any event, including, without limitation, (i) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to Borrower from time to time with respect to any of the Equipment; (ii) any and all payments made, or due and payable from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Equipment by any Person; (iii) any and all accounts arising out of a sale or lease of any of the Equipment, or chattel paper evidencing a lease of any of the Equipment; (iv) any and all other rents or profits or other amounts from time to time paid or payable upon the sale, lease, or other disposition of any of the Equipment; and (v) all books and records (including, without limitation, programs, printouts, and other accounting records) of LPC pertaining to the Equipment. SUBORDINATED DEBT: The 14% Junior Subordinated Notes of LPC due May 1, 2000 in the original principal amount of $346,666.67, the Junior Subordinated Convertible Increasing Rate Notes of LPC due May 1, 2000 in the original principal amount of $1,000,000 and such other Indebtedness which is subordinated and junior in right of payment to the Obligations to the extent, in such manner, and pursuant to an instrument evidencing such subordination, acceptable to Lender. TANGIBLE NET WORTH: At any time, Stockholder's Equity plus Preferred Stock plus Subordinated Debt, less the sum of: (i) any surplus resulting from any write-up of assets of Borrower subsequent to September 30, 1995; and (ii) good will, including any amounts, however designated on a balance sheet of the Borrower, representing the excess of the purchase price paid for assets or stock acquired over the value assigned thereto on the books of the Borrower; and (iii) proprietary rights of Borrower, including all patents, trademarks, trade names and copyrights; and (iv) loans and advances to stockholders of Borrower who own five percent (5%) or more of LPC's common stock. 6 27 TREASURY RATE: The weekly average yield on United States Treasury securities adjusted to a constant maturity of five (5) years as in effect from time to time. Should the United States Treasury Department cease to issue Treasury securities having a maturity as noted above in the same manner existing on the date of this Agreement, then the Lender shall select an index that in the opinion of the Lender, accurately reflects monetary trends intended to be reflected by the Treasury Rate. VIENNA PROPERTY: Certain property owned by LCI located in Trumbull County, Ohio, described on Exhibit E hereto. VIENNA TERM LOAN: As defined in Section 2.E of this Agreement. VIENNA TERM NOTE: The term promissory note to be executed by LCI in the form attached as Exhibit F to this Agreement (with such changes or modifications, if any, to which Lender may agree) evidencing the Vienna Term Loan made by Lender pursuant to Section 2.E of this Agreement, together with all amendments thereto and all promissory notes issued in substitution therefor or replacement thereof. 2. FINANCIAL COVENANTS So long as any Obligations remain unsatisfied, Borrowers covenant that, unless otherwise consented to by Lender in writing, LPC shall: A. Maintain on a basis consolidated with LPC's direct and indirect subsidiaries at all times a Tangible Net Worth equal to or greater than FIFTEEN MILLION THREE HUNDRED THOUSAND AND NO/100 DOLLARS ($15,300,000.00). B. Maintain on a basis consolidated with LPC's direct and indirect subsidiaries a positive Cash Flow Ratio of not less than one and twenty-five hundredths (1.25) to one (1.0). C. Maintain on a basis consolidated with LPC's direct and indirect subsidiaries operating working capital (excess of current assets over current liabilities) as determined in accordance with generally accepted accounting principles (excluding notes payable and the current portion of long-term indebtedness) of not less than THREE MILLION EIGHT HUNDRED THOUSAND AND NO/100 DOLLARS ($3,800,000.00). D. Not incur, make, or commit to make any expenditure in respect of the purchase or other acquisition of fixed or capital assets, including leases which in accordance with generally accepted accounting principles should be capitalized on the books of LPC (including normal replacements and maintenance), which after giving effect thereto would cause the aggregate amount of such capital expenditures by LPC to exceed FIFTEEN MILLION AND NO/100 DOLLARS ($15,000,000.00) (on a non-cumulative basis) in any fiscal year. 7 28 3. PREPAYMENT E. Should any item of Equipment suffer an Event of Loss, Borrower shall either replace such item of Equipment within 60 days with equipment (which shall become Equipment) of a value and utility equal to or greater than that of the Equipment suffering the Event of Loss (such determination of value and utility being deemed made immediately prior to the Event of Loss) or make a prepayment on the corresponding Note within 60 days after the occurrence of the Event of Loss. The amount to be prepaid shall be (i) the unpaid principal amount of such Note multiplied by a fraction the numerator of which is the Cost of the item of Equipment which suffered the Event of Loss and the denominator of which is the Cost of all items of Equipment less the Cost of each item of Equipment which previously suffered an Event of Loss or for which a prepayment has otherwise previously been made (the PREPAID PRINCIPAL AMOUNT) and (ii) all other amounts then due and owing hereunder and under the Notes. F. On any Installment Payment Date Borrower may, at its option, on at least 30 days' prior written notice to Lender, prepay all, but not less than all, of the outstanding principal under all Notes executed hereunder together with (i) all interest accrued thereon to the date of prepayment and (ii) all other amounts then due and owing hereunder or under the Notes. 4. ADDRESSES FOR NOTICE PURPOSES AND DEBTOR'S CHIEF EXECUTIVE OFFICE A. If to Lender, at: Bank One, Akron, NA Attention: Rudolf G. Bentlage 50 South Main Street Akron, Ohio 44308 Telecopier No. (216) 438-8212 With a copy to: Krugliak, Wilkins, Griffiths & Dougherty Co., L.P.A. Attention: Sam O. Simmerman 4775 Munson Street NW P.O. Box 36963 Canton, Ohio 44735-6963 Telecopier No. (216) 497-4020 8 29 B. If to Borrowers, at: Lexington Precision Corporation Attention: Warren Delano 767 Third Avenue New York, New York 10017 Telecopier No. (212) 319-4659 With a copy to: Nixon, Hargrave, Devans & Doyle Attention: Lauren E. Wiesenberg 437 Madison Avenue, 24th Floor New York, New York 10022 Telecopier No. (212) 940-3111 9 30 or to such other address as each party may designate for itself by like notice given in accordance with this section. THE PROVISIONS SET FORTH IN THIS RIDER A ARE INCORPORATED IN AND MADE A PART OF THE CREDIT FACILITY AND SECURITY AGREEMENT BETWEEN LENDER AND DEBTOR DATED AS OF MARCH 14, 1996. LEXINGTON PRECISION CORPORATION ("Borrower") By Dennis J. Welhouse ----------------------------------------------- Name: Dennis J. Welhouse Title: Senior Vice President and Assistant Secretary LEXINGTON COMPONENTS, INC. ("Borrower") By Dennis J. Welhouse ----------------------------------------------- Name: Dennis J. Welhouse Title: Vice Chairman and Assistant Secretary Accepted at Canton, Ohio, as of the date first above written. BANK ONE, AKRON, NA By Rudolf G. Bentlage ---------------------------------------- Name: Rudolf G. Bentlage Title: Vice President
10 31 Exhibits to the Credit Facility and Security Agreement dated March 14, 1996 have been omitted. The following is a list of the omitted Exhibits which the Registrant agrees to furnish supplementally to the Commission upon request: Exhibits: A Equipment Term Note B North Canton Property C North Canton Term Note D Vienna Property E Vienna Term Note F Demand Note EX-10.59 18 EXHIBIT 10.59 1 Exhibit 1059 PROMISSORY NOTE ------------------ (Vienna Term Loan) $1,500,000.00 Canton, Ohio March 14, 1996 FOR VALUE RECEIVED, LEXINGTON COMPONENTS, INC., a corporation organized under the laws of the State of Delaware (hereinafter referred to as the "Company"), promises to pay to the order of BANK ONE, AKRON, NA (hereinafter referred to as the "Bank"), the principal amount of ONE MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($1,500,000.00), on April 1, 2001, or sooner as hereinafter provided, with interest on the unpaid balance of said principal amount from the date hereof at a rate per annum equal to eight and thirty-seven one-hundredths percent (8.37%). If any installment of principal, interest or other amounts due and payable hereunder are not paid when due, or within any applicable grace periods set forth in the Agreement, the Company shall pay interest thereon at the rate of three percent (3.0%) per annum in excess of the Base Rate (as defined in the Agreement) as the same may from time to time be established but not to exceed the maximum rate allowed by law. Bank shall have the right to assess a late payment processing fee in the amount of the greater of FIFTY AND NO/100 DOLLARS ($50.00) or five percent (5%) of the scheduled payment in the event of a default in payment that remains uncured for a period of at least ten (10) days. The Company agrees to pay the principal amount of this Note in fifty-nine (59) consecutive equal installments of EIGHT THOUSAND THREE HUNDRED THIRTY-THREE DOLLARS THIRTY-THREE CENTS ($8,333.33) each, together with all accrued interest due at the time of payment of each such installment of principal, commencing on May 1, 1996, and continuing on the first day of each month thereafter and a final installment of ONE MILLION EIGHT THOUSAND THREE HUNDRED THIRTY-THREE DOLLARS FIFTY-THREE CENTS ($1,008,333.53), together with all accrued interest due at the time of payment of such installment, on April 1, 2001. Monthly payments hereunder shall be applied first to interest due and the balance to reduction of the principalamount outstanding. Payments of both principal of and interest on this Note shall be made in lawful money of the United States of America, at 50 South Main Street, Akron, Ohio 44308-1888, or at such other place as the Bank or any subsequent holder hereof shall have designated to the Company in writing. Interest payable on this Note shall be computed on a three hundred sixty (360) day per year basis counting the actual number of days elapsed. If any payment under this Note becomes due and payable on a day which is not a Business Day (as defined in this Agreement), payment thereof shall be made on the immediately succeeding Business Day. This Note is issued pursuant to and is entitled to the benefits of a Credit Facility and Security Agreement dated March 14, 1996, by and among the Company, Lexington Precision Corporation ("LPC"), and the Bank (the "Agreement"), to which Agreement reference is hereby made for a statement of the rights and obligations of the Bank and the duties and obligations of the Company and LPC in relation thereto; but neither this reference to said Agreement nor any provisions thereof shall affect or impair the absolute and unconditional obligation of the Company to pay the principal of or interest on this Note when due. The Company may prepay all or any portion of this Note at any time and in any amount without penalty or premium, provided that all prepayments shall be applied to installments of principal in the inverse order of their maturities. 2 If an Event of Default (as defined in the Agreement), shall occur and shall be continuing, the principal of this Note may be declared immediately due and payable at the option of the Bank. In the event that the Company fails to pay any regularly scheduled principal or interest payment on the Demand Note, the Equipment Term Note, or the North Canton Term Note (the "Notes") when due (other than as a result of acceleration thereof based on a default or event of default other than the failure to make any such regularly scheduled payments of principal or interest on the Notes when due) which failure is not cured within the ten (10)-day cure period provided in Section 6A of the Agreement (a "Payment Default"), or if an Event of Default occurs and is continuing, which arises from fraudulent act(s) or practice(s) of the Company which Event of Default is not cured within three (3) Business Days after the Company's receipt of written notice thereof from the Bank (a "Fraud Default"), the Company hereby authorizes any attorney-at-law to appear in any court of record in the State of Ohio, or in any other state or territory of the United States, at any time or times after the above sum becomes due, and waives the issuance and service of process and confesses judgment against it, in favor of any holder of this Note, for the amount then appearing due, together with the costs of suit, and thereupon to release all errors and waive all rights of appeal and stay of execution. The foregoing warrant of attorney shall survive any judgment, it being understood that should any judgment be vacated for any reason, the foregoing warrant of attorney nevertheless may thereafter be used for obtaining an additional judgment or judgments. To the extent that the provisions of the cognovit warning set forth above the Company's signature specifically contradict the provisions of this paragraph regarding the requirement of a Payment Default or a Fraud Default to take a cognovit judgment, the provisions of this paragraph control. No delay on the part of any holder hereof in exercising any power or rights hereunder shall operate as a waiver of any power or rights. Any demand or notice hereunder to the Company shall be deemed duly given or made when sent, if given by telecopier, when delivered, if given by personal delivery or overnight commercial carrier, or the fifth calendar day after deposit in the United States mail, certified mail, return receipt requested, addressed to the Company at its address (or telecopier number) set forth in Rider A of the Agreement or such other address or telecopier number as may be hereafter designated in writing by the Company to the Bank. This note is executed at Canton, Stark County, Ohio. - ------------------------------------------------------------------------------- WARNING--BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME, A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR, WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE. - ------------------------------------------------------------------------------- LEXINGTON COMPONENTS, INC. By Dennis J. Welhouse ------------------------------------ Dennis J. Welhouse Vice Chairman and Assistant Secretary EX-10.60 19 EXHIBIT 10.60 1 Exhibit 1060 COGNOVIT GUARANTEE OF LEXINGTON PRECISION CORPORATION In consideration of the extension of credit by BANK ONE, AKRON, NA (the "Bank"), to LEXINGTON COMPONENTS, INC. (the "Debtor"), and for the purpose of inducing the Bank, its successors and assigns, to continue, in whole or in part, existing indebtedness, or to advance credit, to loan money to the Debtor, and as a condition to the continuance of credit to the Debtor and other good and valuable considerations, the receipt of which is acknowledged, the undersigned, Lexington Precision Corporation (hereinafter referred to as the "undersigned" or "Guarantor"), hereby guarantees to the Bank the prompt payment, when due, of all debts, liabilities and obligations of the Debtor to Bank pursuant to a Credit Facility and Security Agreement of even date herewith (the "Credit Facility") and also any and all other debts, liabilities and obligations of Debtor to Bank of every kind and description, direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, including without limiting the generality of the foregoing, any debt, liability or obligation of Debtor to Bank under any guarantee, and all interest, fees, charges and expenses which at any time may be payable by Debtor to Bank thereunder, provided that in no event shall the Obligations include any obligation, guarantee, or other liability of any kind whatsoever to Bank or any affiliate of Bank as a result of or arising out of Bank's or any affiliate of Bank's participation in any loan, credit facility, or other extension of credit to or with Debtor by Congress Financial Corporation or any other person or any obligation, guarantee, or liability of Debtor to any other person which Bank may have obtained by assignment, grant, or transfer (hereinafter collectively referred to as the "Obligations"). This is a guarantee of payment and not of collection. All sums at any time to the credit of the undersigned and any property of the undersigned on which the Bank at any time has a security interest or lien or of which the Bank at any time has possession, shall secure payment and performance of all this Guarantee and all other obligations of the undersigned to the Bank, however arising (except any property to which the Truth-in-Lending Act and Regulation Z promulgated thereunder apply), including, but not limited to, the following collateral, together with all re-issues, renewals, replacements, and extensions or substitutions thereof and the income and proceeds thereof: The collateral granted to Bank pursuant to an Ohio Open-End Mortgage of even date herewith in regard to certain real estate located in North Canton, Ohio. The liability of the undersigned hereunder is direct, absolute, and unconditional, and may be enforced against the undersigned irrespective of the validity or enforceability of the Obligations. This is an absolute, unconditional, and continuing guarantee and will remain in full force and effect until revoked by written notice received by the Bank. Such revocation shall not affect then existing liabilities of the undersigned hereunder, including but not limited to, any outstanding obligation or liability hereunder, or any unpaid portion thereof which may be renewed or extended. In no event shall such notice relieve the undersigned from liability for any Obligations incurred before termination or for post-termination collection expenses and interest pertaining to any Obligations arising before termination. After the effective date of such termination, the Bank may apply, in the exercise of its absolute discretion, any proceeds received upon realization of any collateral securing the Obligations to Obligations incurred by Debtor or otherwise arising after the effective date of such termination. This Guarantee will extend to and cover renewals of the Obligations and any number of extensions of time 2 for payment thereof and will not be affected by any surrender, exchange, acceptance, or release by the Bank of the Debtor, any other guarantee or any security held by it for any of the Obligations. Except for notices of Event(s) of Default given to the Debtor pursuant to the Credit Facility and Security Agreement of even date herewith, notice of acceptance of this Guarantee, notice of extensions of credit to the Debtor from time to time, notice of default, diligence, presentment, protest, demand for payment, notice of nonpayment, notice of demand or protest, and to the extent allowed by applicable law any defense based upon a failure of the Bank to comply with the notice requirements of the applicable version of Uniform Commercial Code Section 9-504 are hereby waived. The Bank at any time and from time to time, without the consent of the undersigned, may change the manner, place, or terms of payment of or interest rates on, or change or extend the time of payment of, or renew or alter, any of the Obligations, without impairing or releasing the liabilities of the undersigned hereunder. Undersigned consents to any impairment of collateral, including, but not limited to release of the collateral to a third party or failure to perfect any security interest. The Bank in its sole discretion may determine the reasonableness of the period which may elapse prior to the making of demand for any payment upon the Debtor and it need not pursue any of its remedies against said Debtor before having recourse against the undersigned under this Guarantee. The Bank may enforce this Guarantee against the undersigned without being first required to resort to any other Guarantors of the Obligations. In addition to the waiver set forth above, undersigned waives any other defense at law or in equity that may be available to the undersigned. Notwithstanding anything to the contrary in this Guarantee, the Guarantor hereby irrevocably waives all rights it may have at law or in equity (including, without limitation, any law subrogating the Guarantor to the rights of the Bank) to seek contribution, indemnification, or any other form of reimbursement from the Debtor, any other Guarantor of any Obligations, or any other person now or hereafter primarily or secondarily liable for any Obligations of the Debtor to the Bank, for any disbursement made by the Guarantor under or in connection with this Guarantee until the Obligations are paid in full. Upon the dissolution, or insolvency of the undersigned, or if proceedings are instituted by or against the undersigned in bankruptcy or insolvency, or for reorganization, arrangement, receivership, or the like, or if the undersigned calls a meeting of creditors or commits any act of bankruptcy, the liability of the undersigned for the Obligations shall mature, even if the liability of Debtor therefor has or does not. The undersigned agrees that, to the extent that Debtor makes a payment or payments to the Bank, or the Bank receives any proceeds of collateral securing the Obligations, which payment or payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to the Debtor, its estate, trustee, receiver, or any other party, including, without limitation, the undersigned, under any bankruptcy law, state or federal law, common law, or equity, then to the extent of such payment or repayment, the Obligations or part thereof which has been paid, reduced, or satisfied by such amount shall be reinstated and continued in full force and effect as of the date such initial payment, reduction, or satisfaction occurred. If any demand is made at any time upon the Bank for the repayment or recovery of any amount or amounts received by it in payment or on account of any of the Obligations and if the Bank repays all or any part of such amount or amounts by reason of any judgment, decree, or order of any court or administrative body or by reason of any settlement or compromise of any such demand, the undersigned will be and remain liable hereunder for the amount or amounts so repaid or recovered to the same extent as if such amount or amounts had never been received originally by the Bank. 3 The Bank's books and records showing the account between the Bank and Debtor shall be admissible in evidence in any action or proceeding as prima facie proof of the items therein set forth; and the Bank's monthly or other periodic statements rendered to Debtor to the extent to which no written objection is made within thirty (30) days after the date thereof, shall constitute an account stated between the Bank and Debtor and shall be binding on the undersigned. At any time or times after the occurrence of and during the continuance of an event of default under the documents evidencing the Obligations or after maturity of any of the Obligations, by acceleration or otherwise, Bank at its option and with only such notice as required by law, may appropriate and apply any balances, credits, deposits, accounts, or monies of the undersigned, now or hereafter in the possession or control of Bank, toward payment of any or all of the Obligations, with the undersigned agreeing to remain liable for the full balance of Obligations remaining unpaid after any such setoff. Guarantor shall pay all the reasonable costs, expenses, and fees, including all reasonable attorneys' fees and litigation costs, which may be incurred by the Bank in enforcing or attempting to enforce this Guarantee following any default on the part of Guarantor hereunder, whether the same shall be enforced by suit or otherwise. If any such fees and expenses are not so reimbursed, the amount thereof shall, to the extent permitted by law, constitute indebtedness guaranteed hereby, and in any action brought to collect such indebtedness the Bank shall be entitled to seek the recovery of such fees and expenses in such action except as limited by law or by judicial order or decision entered in such proceedings. No waiver of Bank's rights or options hereunder shall be effective unless in writing and signed by Bank; and any rights and remedies hereunder are cumulative and not alternative. If any term, restriction or covenant of this Guarantee is deemed illegal or unenforceable, all other terms, restrictions and covenants, and the application thereof to all persons and circumstances subject hereto, shall remain unaffected to the extent permitted by law; and if any application of any term, restriction or covenant to any person or circumstance is deemed illegal, the application of such term, restriction or covenant to other persons and circumstances shall remain unaffected to the extent permitted by law. The obligations and liabilities hereunder shall be binding upon the successors and assigns of the Guarantor. In the event that Debtor fails to pay any regularly scheduled principal or interest payment on the Vienna Term Note (the "Note") when due (other than as a result of acceleration thereof based on a default or event of default other than the failure to make any such regularly scheduled payments of principal or interest on the Note when due) which failure is not cured within the ten (10)-day cure period provided in Section 6A of the Credit Facility (a "Payment Default"), or if an Event of Default occurs and is continuing, which arises from fraudulent act(s) or practice(s) of the Debtor which Event of Default is not cured within three (3) Business Days after the Debtor's receipt of written notice thereof from the Bank (a "Fraud Default"), the undersigned hereby authorizes any attorney-at-law to appear in any court of record and lawful jurisdiction in the State of Ohio or in any state or territory of the United States, or in any court of the United States, from time to time, after any or all of Obligations become due by acceleration or otherwise, to admit the maturity thereof, to waive the issuance and service of process and 4 confess a judgment against the undersigned in favor of payee or any other holder of such Obligations for the amount then appearing due, together with costs of suit, and thereupon to waive all errors and rights of appeal and stay of execution, but no such judgment or judgments against less than all of those obligated hereunder, or based on nonpayment of less than all of the Obligations, shall bar subsequent judgment or judgments against any other Guarantor, or based on nonpayment of other guaranteed Obligations. It is agreed that the identification of any obligation as a guaranteed Obligation and the amount due thereon under this Guarantee shall be conclusively evidenced by any statement relative thereto in any petition filed in any court by any holder hereof against any Guarantor for judgment thereon. To the extent that the provisions of the cognovit warning set forth above the undersigned's signature specifically contradict the provisions of this paragraph regarding the requirement of a Payment Default or a Fraud Default to take a cognovit judgment, the provisions of this paragraph control. This Guarantee will be governed by and construed in accordance with the laws of the State of Ohio and will be binding upon the undersigned and the successors and assigns thereof and inure to the benefit of the Bank and its successors and assigns. The undersigned agrees that legal action or proceedings between the Bank and the undersigned may be brought in any court of competent jurisdiction in the State of Ohio and waives objections to summons, service of process, jurisdiction of the person or venue of any such court. THE UNDERSIGNED WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED ON THIS GUARANTEE. Signed at Canton, Stark County, Ohio, this 14 day of March, 1996. - ------------------------------------------------------------------------------- WARNING--BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME, A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR, WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE. - ------------------------------------------------------------------------------- LEXINGTON PRECISION CORPORATION By Dennis J. Welhouse -------------------------------------------- Dennis J. Welhouse Senior Vice President and Assistant Secretary EX-10.61 20 EXHIBIT 10.61 1 Exhibit 1061 COGNOVIT GUARANTEE OF LEXINGTON COMPONENTS, INC. In consideration of the extension of credit by BANK ONE, AKRON, NA (the "Bank"), to LEXINGTON PRECISION CORPORATION (the "Debtor"), and for the purpose of inducing the Bank, its successors and assigns, to continue, in whole or in part, existing indebtedness, to advance credit, or to loan money to the Debtor, and as a condition to the continuance of credit to the Debtor and other good and valuable considerations, the receipt of which is acknowledged, the undersigned, Lexington Components, Inc. (hereinafter referred to as the "undersigned" or "Guarantor"), hereby guarantees to the Bank the prompt payment, when due, of all debts, liabilities and obligations of the Debtor to Bank pursuant to a Credit Facility and Security Agreement of even date herewith (the "Credit Facility") and also any and all other debts, liabilities and obligations of Debtor to Bank of every kind and description, direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, including without limiting the generality of the foregoing, any debt, liability or obligation of Debtor to Bank under any guarantee, and all interest, fees, charges and expenses which at any time may be payable by Debtor to Bank thereunder, provided that in no event shall the Obligations include any obligation, guarantee, or other liability of any kind whatsoever to Bank or any affiliate of Bank as a result of or arising out of Bank's or any affiliate of Bank's participation in any loan, credit facility, or other extension of credit to or with Debtor by Congress Financial Corporation or any other person or any obligation, guarantee, or liability of Debtor to any other person which Bank may have obtained by assignment, grant, or transfer (hereinafter collectively referred to as the "Obligations"). This is a guarantee of payment and not of collection. All sums at any time to the credit of the undersigned and any property of the undersigned on which the Bank at any time has a security interest or lien or of which the Bank at any time has possession, shall secure payment and performance of all this Guarantee and all other obligations of the undersigned to the Bank, however arising (except any property to which the Truth-in-Lending Act and Regulation Z promulgated thereunder apply), including, but not limited to, the following collateral, together with all re-issues, renewals, replacements, and extensions or substitutions thereof and the income and proceeds thereof: The collateral granted to Bank pursuant to an Ohio Open-End Mortgage of even date herewith in regard to certain real estate located in North Canton, Ohio, and the collateral granted to Bank pursuant to the Credit Facility and Security Agreement of even date herewith. The liability of the undersigned hereunder is direct, absolute, and unconditional, and may be enforced against the undersigned irrespective of the validity or enforceability of the Obligations. This is an absolute, unconditional, and continuing guarantee and will remain in full force and effect until revoked by written notice received by the Bank. Such revocation shall not affect then existing liabilities of the undersigned hereunder, including but not limited to, any outstanding obligation or liability hereunder, or any unpaid portion thereof which may be renewed or extended. In no event shall such notice relieve the undersigned from liability for any Obligations incurred before termination or for post-termination collection expenses and interest pertaining to any Obligations arising before termination. After the effective date of such termination, the Bank may apply, in the exercise of its absolute discretion, any proceeds received upon realization of any collateral securing the Obligations to Obligations incurred by Debtor or otherwise arising after the effective date of such termination. This 2 Guarantee will extend to and cover renewals of the Obligations and any number of extensions of time for payment thereof and will not be affected by any surrender, exchange, acceptance, or release by the Bank of the Debtor, any other guarantee or any security held by it for any of the Obligations. Except for notices of Event(s) of Default given to the Debtor pursuant to the Credit Facility and Security Agreement of even date herewith, notice of acceptance of this Guarantee, notice of extensions of credit to the Debtor from time to time, notice of default, diligence, presentment, protest, demand for payment, notice of nonpayment, notice of demand or protest, and to the extent allowed by applicable law any defense based upon a failure of the Bank to comply with the notice requirements of the applicable version of Uniform Commercial Code Section 9-504 are hereby waived. The Bank at any time and from time to time, without the consent of the undersigned, may change the manner, place, or terms of payment of or interest rates on, or change or extend the time of payment of, or renew or alter, any of the Obligations, without impairing or releasing the liabilities of the undersigned hereunder. Undersigned consents to any impairment of collateral, including, but not limited to release of the collateral to a third party or failure to perfect any security interest. The Bank in its sole discretion may determine the reasonableness of the period which may elapse prior to the making of demand for any payment upon the Debtor and it need not pursue any of its remedies against said Debtor before having recourse against the undersigned under this Guarantee. The Bank may enforce this Guarantee against the undersigned without being first required to resort to any other Guarantors of the Obligations. In addition to the waiver set forth above, undersigned waives any other defense at law or in equity that may be available to the undersigned. Notwithstanding anything to the contrary in this Guarantee, the Guarantor hereby irrevocably waives all rights it may have at law or in equity (including, without limitation, any law subrogating the Guarantor to the rights of the Bank) to seek contribution, indemnification, or any other form of reimbursement from the Debtor, any other Guarantor of any Obligations, or any other person now or hereafter primarily or secondarily liable for any Obligations of the Debtor to the Bank, for any disbursement made by the Guarantor under or in connection with this Guarantee until the Obligations are paid in full. Upon the dissolution, or insolvency of the undersigned, or if proceedings are instituted by or against the undersigned in bankruptcy or insolvency, or for reorganization, arrangement, receivership, or the like, or if the undersigned calls a meeting of creditors or commits any act of bankruptcy, the liability of the undersigned for the Obligations shall mature, even if the liability of Debtor therefor has or does not. The undersigned agrees that, to the extent that Debtor makes a payment or payments to the Bank, or the Bank receives any proceeds of collateral securing the Obligations, which payment or payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to the Debtor, its estate, trustee, receiver, or any other party, including, without limitation, the undersigned, under any bankruptcy law, state or federal law, common law, or equity, then to the extent of such payment or repayment, the Obligations or part thereof which has been paid, reduced, or satisfied by such amount shall be reinstated and continued in full force and effect as of the date such initial payment, reduction, or satisfaction occurred. If any demand is made at any time upon the Bank for the repayment or recovery of any amount or amounts received by it in payment or on account of any of the Obligations and if the Bank repays all or any part of such amount or amounts by reason of any judgment, decree, or order of any court or administrative body or by reason of any settlement or compromise of any such demand, the undersigned will be and remain liable hereunder for the amount or amounts so repaid or recovered to the same extent as if such amount or amounts had never been received originally by the Bank. 3 The Bank's books and records showing the account between the Bank and Debtor shall be admissible in evidence in any action or proceeding as prima facie proof of the items therein set forth; and the Bank's monthly or other periodic statements rendered to Debtor to the extent to which no written objection is made within thirty (30) days after the date thereof, shall constitute an account stated between the Bank and Debtor and shall be binding on the undersigned. At any time or times after the occurrence of and during the continuance of an event of default under the documents evidencing the Obligations or after maturity of any of the Obligations, by acceleration or otherwise, Bank at its option and with only such notice as required by law, may appropriate and apply any balances, credits, deposits, accounts, or monies of the undersigned, now or hereafter in the possession or control of Bank, toward payment of any or all of the Obligations, with the undersigned agreeing to remain liable for the full balance of Obligations remaining unpaid after any such setoff. Guarantor shall pay all the reasonable costs, expenses, and fees, including all reasonable attorneys' fees and litigation costs, which may be incurred by the Bank in enforcing or attempting to enforce this Guarantee following any default on the part of Guarantor hereunder, whether the same shall be enforced by suit or otherwise. If any such fees and expenses are not so reimbursed, the amount thereof shall, to the extent permitted by law, constitute indebtedness guaranteed hereby, and in any action brought to collect such indebtedness the Bank shall be entitled to seek the recovery of such fees and expenses in such action except as limited by law or by judicial order or decision entered in such proceedings. No waiver of Bank's rights or options hereunder shall be effective unless in writing and signed by Bank; and any rights and remedies hereunder are cumulative and not alternative. If any term, restriction or covenant of this Guarantee is deemed illegal or unenforceable, all other terms, restrictions and covenants, and the application thereof to all persons and circumstances subject hereto, shall remain unaffected to the extent permitted by law; and if any application of any term, restriction or covenant to any person or circumstance is deemed illegal, the application of such term, restriction or covenant to other persons and circumstances shall remain unaffected to the extent permitted by law. The obligations and liabilities hereunder shall be binding upon the successors and assigns of the Guarantor. In the event that Debtor fails to pay any regularly scheduled principal or interest payment on the Demand Note, the Equipment Term Note, or the North Canton Term Note (the "Notes") when due (other than as a result of acceleration thereof based on a default or event of default other than the failure to make any such regularly scheduled payments of principal or interest on the Notes when due) which failure is not cured within the ten (10)-day cure period provided in Section 6A of the Credit Facility (a "Payment Default"), or if an Event of Default occurs and is continuing, which arises from fraudulent act(s) or practice(s) of the Debtor which Event of Default is not cured within three (3) Business Days after the Debtor's receipt of written notice thereof from the Bank (a "Fraud Default"), the undersigned hereby authorizes any attorney-at- law to appear in any court of record and lawful jurisdiction in the State of Ohio or in any state or territory of the United States, or in any court of the United States, from time to time, after any or all of Obligations become due by acceleration or otherwise, to admit the maturity thereof, to waive the issuance and service of process and confess a judgment against the undersigned in favor of payee or any other holder of such Obligations for the amount then appearing due, together with 4 costs of suit, and thereupon to waive all errors and rights of appeal and stay of execution, but no such judgment or judgments against less than all of those obligated hereunder, or based on nonpayment of less than all of the Obligations, shall bar subsequent judgment or judgments against any other Guarantor, or based on nonpayment of other guaranteed Obligations. It is agreed that the identification of any obligation as a guaranteed Obligation and the amount due thereon under this Guarantee shall be conclusively evidenced by any statement relative thereto in any petition filed in any court by any holder hereof against any Guarantor for judgment thereon. To the extent that the provisions of the cognovit warning set forth above the undersigned's signature specifically contradict the provisions of this paragraph regarding the requirement of a Payment Default or a Fraud Default to take a cognovit judgment, the provisions of this paragraph control. This Guarantee will be governed by and construed in accordance with the laws of the State of Ohio and will be binding upon the undersigned and the successors and assigns thereof and inure to the benefit of the Bank and its successors and assigns. The undersigned agrees that legal action or proceedings between the Bank and the undersigned may be brought in any court of competent jurisdiction in the State of Ohio and waives objections to summons, service of process, jurisdiction of the person or venue of any such court. THE UNDERSIGNED WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED ON THIS GUARANTEE. Signed at Canton, Stark County, Ohio, this 14 day of March, 1996. - ------------------------------------------------------------------------------- WARNING--BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME, A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR, WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE. - ------------------------------------------------------------------------------- LEXINGTON COMPONENTS, INC. By Dennis J. Welhouse ------------------------------------------ Dennis J. Welhouse Vice Chairman and Assistant Secretary EX-10.62 21 EXHIBIT 10.62 1 Exhibit 1062 February 28, 1996 Lexington Precision Corporation 767 Third Avenue New York, New York 10017 Re: Amendment to Financing Agreements and Consent --------------------------------------------- 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"). Reference is further made to the letter agreement re: Amendment to Financing Agreements dated January 16, 1996 between Congress and LPC (the "1996 LPC Real Estate Loan Amendment") pursuant to which, INTER ALIA, Congress has made the LPC Arizona Real Estate Loan and the LPC New York Real Estate Loan A to LPC and has agreed, upon certain terms and conditions, to make the LPC New York Real Estate Loan B to LPC. LPC has requested Congress' consent to a transfer of the real property securing the LPC New York Real Estate Loan A and required to secure the LPC New York Real Estate Loan B in connection with a proposed sale/leaseback transaction between LPC and the Chautauqua County Industrial Development Agency. Congress is willing to provide such consent upon the terms and conditions set forth in this Amendment to Financing Agreements and Consent (this "Amendment") and, in connection with such consent and other matters pertaining to 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 (capitalized terms used herein, unless otherwise defined herein, shall have the meanings ascribed thereto in the Accounts Agreement, the 1996 LPC Real Estate Loan Amendment and the other Financing Agreements): 1. Definitions. ----------- (a) "Chautauqua IDA" shall mean the County of Chautauqua Industrial Development Agency, a public benefit corporation of the State of New York and a body corporate and politic organized under the New York State Industrial Development Agency Act, and its successors and assigns. (b) "Lakewood Deed" shall mean the Warranty Deed dated as of February 28, 1996 executed and delivered by LPC conveying title to the Lakewood Facility to the Chautauqua IDA. 2 (c) "Lakewood Facility" shall mean the real property subject to the Mortgage and Security Agreement, dated January 16, 1996 ("Existing Lakewood Mortgage"), made by LPC in favor of Congress to secure LPC's Obligations in respect of the LPC New York Real Estate Loan A (plus other sums as provided in the Existing Lakewood Mortgage), and which will secure, as well, other Obligations of LPC, including LPC's Obligations in respect of the LPC New York Real Estate Loan B upon and after the making of such loan as to be provided in the Consolidated Mortgage (as defined in Section 5(a)(ii) of the 1996 LPC Real Estate Loan Amendment, as amended by this Amendment), plus additional sums as to be provided in the Consolidated Mortgage. (d) "Lakewood IDA Agreements" shall mean the Lakewood Deed, the Lakewood IDA Lease, the Lakewood PILOT Agreement, together with all documents instruments and agreements executed and delivered in connection therewith or pursuant thereto, as the same now exist or may hereafter be amended, modified, supplemented, renewed, restated or replaced. (e) "Lakewood IDA Lease" shall mean the Lease dated as of February 1, 1996 between the Chautauqua IDA, as lessor, and LPC (d/b/a Falconer Die Casting Company), as lessee. (f) "Lakewood IDA Transaction" shall mean the sale/leaseback transaction between LPC and the Chautauqua IDA pursuant to which LPC shall, pursuant to the Lakewood Deed, convey title to the Lakewood Facility to the Chautauqua IDA which shall, simultaneously therewith, together with LPC, enter into the Lakewood IDA Lease, the Lakewood PILOT Agreement and the other Lakewood IDA Agreements, in each case as such agreements are in effect on the date hereof. (g) "Lakewood PILOT Agreement" shall mean the Payment in Lieu of Taxes Agreement dated as of February 1, 1996 between LPC and the Chautauqua IDA providing for certain payments by LPC in lieu of certain real estate tax levies upon the Lakewood Facility. 2. CONSENT REGARDING LAKEWOOD IDA TRANSACTION. To the extent such consent is required under the Financing Agreements, Congress hereby consents to the conveyance of title to the Lakewood Facility from LPC to the Chautauqua IDA pursuant to the Lakewood Deed and the simultaneous leaseback of the Lakewood Facility by the Chautauqua IDA to LPC pursuant to the Lakewood IDA Lease, in each case pursuant to such agreements as in effect on the date hereof; PROVIDED, HOWEVER, that the Chautauqua IDA shall acquire title to the Lakewood Facility expressly subject to the lien of the Existing Lakewood Mortgage in favor of Congress, and that in no event shall LPC be released or discharged from any of the LPC Obligations secured by the Existing Lakewood Mortgage, nor shall such conveyance or Congress' consent thereto or the -2- 3 Lakewood IDA Agreements or any provision thereof in any manner release or impair the lien of the Existing Lakewood Mortgage. 3. AMENDMENT TO REQUIREMENTS FOR LPC NEW YORK REAL ESTATE LOAN B. Section 5(a) of the 1996 LPC Real Estate Loan Amendment is hereby deleted and the following substituted therefor: "(a) Congress shall have received an executed original or executed original counterparts (as the case may be) of each of the following, each of which shall be in form and substance satisfactory to Congress: (i) the LPC New York Real Estate Note B; (ii) a Mortgage, Spreader Agreement and Agreement of Consolidation and Modification among Congress, LPC and the Chautauqua IDA ("Consolidated Mortgage"), which amends, modifies, spreads and consolidates the terms of the existing Mortgage and Security Agreement in favor of Congress with respect to LPC's Lakewood, New York real property ("Lakewood Facility") to secure, with a consolidated first mortgage lien upon the fee simple estate in such real property owned by the Chautauqua IDA and the leasehold estate in such real property owned by LPC (including, without limitation, its early lease termination and purchase options with respect to the Lakewood Facility) (A) $825,000 in principal amount of LPC's Obligations in respect of (1) the LPC New York Real Estate Loan A, (2) the LPC New York Real Estate Loan B, (3) other outstanding term loans previously made by Congress to LPC, and (4) the guarantee by LPC of outstanding and future term loans made by Congress to LCI, plus (B) interest and other obligations and sums of the kinds secured under the existing Mortgage and Security Agreement, and which shall otherwise contain terms and conditions substantially similar to those contained in the existing Mortgage and Security Agreement, except that such Consolidated Mortgage may be without representation, warranty or covenant on the part of, and without recourse to, the Chautauqua IDA, except for those representations, warranties and covenants by, and recourse against, the Chautauqua IDA, as to which enforcement against the Chautauqua IDA is limited to the interest -3- 4 of the Chautauqua IDA in the Lakewood Facility; (iii) a title insurance policy issued to Congress insuring the lien of the Consolidated Mortgage in the amount of $825,000, issued by the title insurance company that issued the existing title insurance policy insuring the lien of the Existing Lakewood Mortgage and containing only such exceptions, terms and conditions, and including such endorsements, as are included in such existing policy; (iv) a resolution duly adopted by the Chautauqua IDA authorizing it to join with LPC in the execution of the Consolidated Mortgage to encumber their respective interests in the Lakewood Facility (but without recourse to the Chautauqua IDA beyond its interest in the Lakewood Facility); (v) a Certificate of Occupancy or other municipal certification of completion, by no later than May 31, 1996, of the improvements to the Lakewood Facility described in the Building Proposal of Kessel Construction dated June 15, 1995 which has been submitted to Congress; and (vi) an updated NYSAPLS standard survey certified to Congress reflecting the completion of the improvements described in subparagraph (v) above (the "Lakewood Improvements") by no later than May 31, 1996." 4. 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 and on the date of each advance in respect of the LPC New York Real Estate Loan B; and (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 -4- 5 herein constitute the legal, valid and binding obligations of LPC enforceable against LPC in accordance with their terms. 5. CONDITIONS TO THE EFFECTIVENESS OF THIS AMENDMENT. Anything contained in this Amendment to the contrary notwithstanding, LPC shall only be permitted to enter into the Lakewood IDA Agreements and consummate the transactions provided thereunder pursuant to the consent set forth herein and the other terms and conditions of this Amendment and only upon the satisfaction of the following conditions precedent to the effectiveness of this Amendment: (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; (b) The Lakewood IDA Transaction shall have closed pursuant to the Lakewood IDA Agreements, including authorizing resolutions, in each case in form and substance satisfactory to Congress and Congress shall have received true and complete copies of the Lakewood IDA Agreements in effect on the date hereof; (c) Congress shall have received a letter from the issuer of its existing title insurance policy with respect to the lien of the Existing Lakewood Mortgage, or an authorized agent thereof, confirming that neither the conveyance of title to the Lakewood Facility to the Chautauqua IDA nor Congress' consent thereto will affect or impair Congress' title insurance coverage as to the lien of the Existing Lakewood Mortgage under such policy (which condition shall be deemed satisfied by the letter dated February 7, 1996 received by Congress' counsel from such issuer); (d) Congress shall have received a letter from Protection Mutual Insurance Company ("Protection Mutual"), stating that neither the conveyance of title to the Lakewood Facility to the Chautauqua IDA nor Congress' consent thereto will affect or impair the rights or interests of Congress in the casualty and hazard insurance coverage for the Lakewood Facility under Policy No. 727901-93 notwithstanding anything to the contrary contained in such policy or any mortgagee loss payable clause issued in favor of Congress by Protection Mutual (which condition shall be deemed satisfied by the letter dated February 27, 1996, by Protection Mutual to Congress); (e) All representations and warranties contained herein, in the Accounts Agreements and in the other Financing Agreements shall be true and correct in all material respects; and -5- 6 (f) No Event of Default shall have occurred and no event shall have occurred or condition shall be existing which, with notice or passage of time or both, would constitute an Event of Default. 6. EFFECT OF THIS AMENDMENT. Except as modified pursuant hereto, the Accounts Agreement and all supplements to the Accounts Agreement, the 1996 LPC Real Estate Loan Amendment, all existing mortgages by LPC in favor of Congress 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, including the 1996 LPC Real Estate Loan Amendment, the terms of this Amendment control. 7. 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. 8. 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: Frank L. Chiovari ---------------------------- Title: Vice President ------------------------- AGREED AND ACCEPTED: LEXINGTON PRECISION CORPORATION By: Warren Delano ---------------------------- Title: President ------------------------- -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 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 Chairman -------------------- -7- EX-10.63 22 EXHIBIT 10.63 1 Exhibit 1063 March 14, 1996 Lexington Precision Corporation 767 Third Avenue New York, New York 10017 Re: Amendment to Financing Agreements and Consent --------------------------------------------- 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"). LPC has requested Congress' consent to: (i) the security interest in certain equipment of LPC granted to CIT (as defined below) to secure certain loans by CIT to LPC in the aggregate principal amount of up to $5,500,000, (ii) the security interest in certain equipment and mortgage liens upon certain real property and related personal property of LPC, to be granted by LPC to Bank One (as defined below) in order to secure certain loans by Bank One to LPC in the aggregate principal amount of up to $4,300,000 and LPC's guarantee of a loan by Bank One to LCI in the principal amount of $1,500,000, and (iii) the mortgage lien to be granted by LCI to Bank One covering certain real property and related personal property in Vienna, Ohio to secure such $1,500,000 loan to LCI. Congress is willing to provide such consent upon the terms and conditions set forth in this Amendment to Financing Agreements and Consent (this "Amendment") and, in connection with such consent and other matters pertaining to 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 (capitalized terms used herein, unless otherwise defined herein, shall have the meanings ascribed thereto in the Accounts Agreement and the other Financing Agreements): 1. Definitions. ----------- (a) "Bank One" shall mean Bank One, Akron, NA, a national banking association, and its successors and assigns. (b) "Bank One Collateral" shall mean the collateral set forth on Exhibits A, B and C annexed hereto. 2 (c) "Bank One Financing" shall mean the loans made and to be made by Bank One to LPC and LCI in the aggregate principal amount of up to $5,800,000 and the respective guarantees thereof by LPC and LCI in favor of Bank One, all pursuant to the Bank One Financing Agreements. (d) "Bank One Financing Agreements" shall mean the Credit Facility and Security Agreement, dated as of the date hereof, among LPC, LCI and Bank One, together with the promissory notes, guarantees and mortgages delivered thereunder and all other documents, instruments and agreements executed in connection therewith or pursuant thereto, as the same now exist or may hereafter be amended, modified, supplemented, renewed, restated or replaced. (e) "CIT" shall mean The CIT Group/Equipment Financing, Inc., and its successors and assigns. (f) "CIT Collateral" shall mean the equipment of LPC described on Exhibit A to the Subordination Agreement, dated as of January 17, 1996, as amended by Amendment No. 1 to Subordination Agreement, dated as of February 29, 1996, each between CIT and Congress, agreed to and confirmed by LPC, together with the proceeds thereof. (g) "CIT Financing" shall mean the loans to LPC in the aggregate principal amount not to exceed $5,500,000, secured by the CIT Collateral, pursuant to the CIT Financing Agreements. (h) "CIT Financing Agreements" shall the Loan and Security Agreement, dated as of January 17, 1996, as amended by Amendment No. 1 thereto, dated as of February 29, 1996, and Rider A to Loan and Security Agreement, dated as of January 17, 1996, each between LPC and CIT, together with all notes, guarantees and other documents, instruments and agreements executed pursuant thereto or in connection therewith, as the same now exist or may hereafter be amended, modified, supplemented, renewed, restated or replaced. 2. CONSENT REGARDING CIT COLLATERAL AND BANK ONE COLLATERAL. To the extent such consent is required under the Financing Agreements, Congress hereby consents to (i) the security interest in the CIT Collateral granted by LPC to CIT to secure the CIT Financing pursuant to the CIT Financing Agreements, such consent to be effective as of January 17, 1996, and (ii) the mortgage liens and security interests in the Bank One Collateral granted by LPC and LCI to Bank One to secure the Bank One Financing pursuant to the Bank One Financing Agreements, including any documents contemplated thereby which are to be executed and delivered after the date hereof in connection with the loans to be advanced pursuant to the Bank One Financing -2- 3 Agreements after the date hereof, such consent to be effective as of the date hereof. 3. ADDITIONAL COVENANTS RELATING TO THE CIT COLLATERAL AND BANK ONE COLLATERAL. In addition to all other covenants, representations and warranties contained in the Financing Agreements applicable to the types or items of property included in the CIT Collateral and Bank One Collateral, respectively (whether or not included in the Collateral), LPC agrees as follows: (a) LPC shall not remove any of the CIT Collateral from the premises of LPC located at 3181 North Lear Avenue, Casa Grande, Arizona, 3011 in North Piper Avenue, Casa Grade, Arizona or 677 Buffalo Road, Rochester, New York (such three premises, collectively, the "CIT Collateral Locations"), except removal upon prior written notice to Congress to locations otherwise permitted under the Financing Agreements. In addition, LPC shall not remove from the premises of LPC described in Exhibit A annexed hereto (the "North Canton Property"), any of the tangible personal property comprising part of the Bank One Collateral, nor shall any equipment or other tangible personal property of LPC, of any subsidiary of LPC, be moved from another location of LPC or a subsidiary of LPC, to the North Canton Property, in each case, except upon prior written notice to Congress. Notices given under this Section 3(a) shall include serial numbers or other information sufficient to identify the particular items removed. (b) LPC shall furnish to Congress all material written notices or demands concerning the CIT Financing and Bank One Financing, required to be delivered pursuant to the CIT Financing Agreements and Bank One Financing Agreements, respectively, other than notices under the Bank One Financing Agreements as to future advances or loans or interest rates or interest periods on borrowings, either received by LPC, promptly after receipt thereof, or sent by LPC or on its behalf, promptly upon the sending thereof, as the case may be. 4. CERTAIN COLLATERAL NOT ELIGIBLE FOR LENDING PURPOSES. Anything contained in the Financing Agreements to the contrary notwithstanding, i) no Inventory located or to be located at the North Canton Property shall be considered Eligible Inventory for lending purposes, and ii) no Equipment located or to be located at the North Canton Property shall be considered Eligible New Equipment for purposes of New Equipment Term Loans from time to time requested by LPC. 5. ADDITIONAL 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, -3- 4 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 and on the date of each advance in respect of the CIT Financing and Bank One Financing. (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. 6. CONDITIONS TO THE EFFECTIVENESS OF THIS AMENDMENT. Anything contained in this Amendment to the contrary notwithstanding, this Amendment shall be effective only upon the satisfaction of the following conditions precedent: (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; (b) Congress shall have received true and complete copies of the CIT Financing Agreements and the Bank One Financing Agreements as in effect on the date hereof; (c) Congress shall have received a duly executed Intercreditor Agreement between Congress and Bank One, duly executed and delivered on behalf of Bank One; (d) Congress shall have received from LPC an executed original or executed original counterparts of a letter agreement pursuant to which LPC and LCI acknowledge and consent to the Intercreditor Agreement between Congress and Bank One and agree that, although neither LPC nor LCI is a party thereto, each of LPC and LCI will, together with its successors and assigns, be bound by the provisions thereof; (e) Congress shall have received from LCI an executed original or executed original counterparts of a letter agreement re: Amendment to Financing Agreements and Consent, pertaining to the Bank One Collateral to be granted by LCI to Bank One pursuant to the Bank One Financing and related matters, together with the documents, instruments and agreements to be delivered pursuant thereto; (f) Congress shall have received from Bank One, the sum of $1,500,000, in immediately available funds, representing full disbursement for the account of LCI of the "Vienna Term -4- 5 Loan" (as defined in the Bank One Financing Agreements), which sum shall be applied to fully prepay the outstanding principal amount of the LCI Ohio Real Estate Loan (as defined in the LCI Financing Agreements) and the balance applied to the Revolving Loan (as defined in the LCI Financing Agreements) account of LCI maintained by Congress; (g) Congress shall have received from Bank One, the sum of $1,000,000, in immediately available funds, representing full disbursement for the account of LPC of the "North Canton Interim Loan" (as defined in the Bank One Financing Agreements), $418,118 of which shall be used to prepay the unpaid principal installments under the LPC Second Restated Note in the inverse order of the maturities thereof, and the balance of which shall be applied to the Revolving Loan account of LPC maintained by Congress; (h) All representations and warranties contained herein, in the Accounts Agreements and in the other Financing Agreements shall be true and correct in all material respects; and (i) No Event of Default shall have occurred and no event shall have occurred or condition shall be existing which, with notice or passage of time or both, would constitute an Event of Default. 7. EFFECT OF THIS AMENDMENT. Except as modified pursuant hereto, the Accounts Agreement and all supplements to the Accounts Agreement, including, without limitation, the Covenant Supplement 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. 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. 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, -5- 6 the parties hereto mutually covenant, warrant and agree as set forth herein. Very truly yours, CONGRESS FINANCIAL CORPORATION By: Frank L. Chiovari --------------------------- Title: Vice President ------------------------ AGREED AND ACCEPTED: LEXINGTON PRECISION CORPORATION By: Warren Delano ---------------------------- Title: President ------------------------- -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 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 Chairman -------------------- -7- EX-10.64 23 EXHIBIT 10.64 1 Exhibit 1064 March 14, 1996 Lexington Components, Inc. 767 Third Avenue New York, New York 10017 Re: Amendment to Financing Agreements and Consent --------------------------------------------- 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"). LCI has requested Congress' consent to: (i) a mortgage lien upon certain real property and related personal property in Vienna, Ohio, to be granted by LCI to Bank One (as defined below) in order to secure a loan by Bank One to LCI in the principal amount of $1,500,000 and a guarantee by LCI of certain loans by Bank One to LPC in the aggregate principal amount of up to $4,300,000, (ii) the security interest in certain equipment and mortgage liens upon certain real property and related personal property of LPC, to be granted by LPC to Bank One to secure certain loans by Bank One to LPC in the aggregate principal amount of up to $4,300,000 and LPC's guarantee of such $1,500,000 loan to LCI, and (iii) the security interest in certain equipment of LPC granted to CIT (as defined below) to secure certain loans by CIT to LPC in the aggregate principal amount of up to $5,500,000. Congress is willing to provide such consent upon the terms and conditions set forth in this Amendment to Financing Agreements and Consent (this "Amendment") and, in connection with such consent and other matters pertaining to 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 (capitalized terms used herein, unless otherwise defined herein, shall have the meanings ascribed thereto in the Accounts Agreement and the other Financing Agreements): 1. Definitions. (a) "Bank One" shall mean Bank One, Akron, NA, a national banking association, and its successors and assigns. (b) "Bank One Collateral" shall mean the collateral set forth on Exhibits A, B and C annexed hereto. 2 (c) "Bank One Financing" shall mean the loans made and to be made by Bank One to LPC and LCI in the aggregate principal amount of up to $5,800,000 and the respective guarantees thereof by LPC and LCI in favor of Bank One, all pursuant to the Bank One Financing Agreements. (d) "Bank One Financing Agreements" shall mean the Credit Facility and Security Agreement, dated as of the date hereof, among LPC, LCI and Bank One, together with the promissory notes, guarantees and mortgages delivered thereunder and all other documents, instruments and agreements executed in connection therewith or pursuant thereto, as the same now exist or may hereafter be amended, modified, supplemented, renewed, restated or replaced. (e) "CIT" shall mean The CIT Group/Equipment Financing, Inc., and its successors and assigns. (f) "CIT Collateral" shall mean the equipment of LPC described on Exhibit A to the Subordination Agreement, dated as of January 17, 1996, as amended by Amendment No. 1 to Subordination Agreement, dated as of February 29, 1996, each between CIT and Congress, agreed to and confirmed by LPC, together with the proceeds thereof. (g) "CIT Financing" shall mean the loans to LPC in the aggregate principal amount not to exceed $5,500,000, secured by the CIT Collateral, pursuant to the CIT Financing Agreements. (h) "CIT Financing Agreements" shall the Loan and Security Agreement, dated as of January 17, 1996, as amended by Amendment No. 1 thereto, dated as of February 29, 1996, and Rider A to Loan and Security Agreement, dated as of January 17, 1996, each between LPC and CIT, together with all notes, guarantees and other documents, instruments and agreements executed pursuant thereto or in connection therewith, as the same now exist or may hereafter be amended, modified, supplemented, renewed, restated or replaced. 2. CONSENT REGARDING CIT COLLATERAL AND BANK ONE COLLATERAL. To the extent such consent is required under the Financing Agreements, Congress hereby consents to (i) the security interest in the CIT Collateral granted by LPC to CIT to secure the CIT Financing pursuant to the CIT Financing Agreements, such consent to be effective as of January 17, 1996, and (ii) the mortgage liens and security interests in the Bank One Collateral granted by LPC and LCI to Bank One to secure the Bank One Financing pursuant to the Bank One Financing Agreements, including any documents contemplated thereby which are to be executed and delivered after the date hereof in connection with the loans to be advanced pursuant to the Bank One Financing -2- 3 Agreements after the date hereof, such consent to be effective as of the date hereof. 3. ADDITIONAL COVENANTS RELATING TO THE BANK ONE COLLATERAL. In addition to all other covenants, representations and warranties contained in the Financing Agreements applicable to the types or items of property included in the Bank One Collateral, LCI shall furnish to Congress all material written notices or demands concerning the Bank One Financing, required to be delivered pursuant to the Bank One Financing Agreements, other than notices under the Bank One Financing Agreements as to future advances or loans or interest rates or interest periods on borrowings, either received by LCI, promptly after receipt thereof, or sent by LCI or on its behalf, promptly upon the sending thereof, as the case may be. 4. ADDITIONAL 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 and on the date of each advance in respect of the CIT Financing and Bank One Financing. (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. 5. CONDITIONS TO THE EFFECTIVENESS OF THIS AMENDMENT. Anything contained in this Amendment to the contrary notwithstanding, this Amendment shall be effective only upon the satisfaction of the following conditions precedent: (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; (b) Congress shall have received true and complete copies of the CIT Financing Agreements and the Bank One Financing Agreements as in effect on the date hereof; (c) Congress shall have received a duly executed Intercreditor Agreement between Congress and Bank One, duly executed and delivered on behalf of Bank One; -3- 4 (d) Congress shall have received from LPC an executed original or executed original counterparts of a letter agreement pursuant to which LPC and LCI acknowledge and consent to the Intercreditor Agreement between Congress and Bank One and agree that, although neither LPC nor LCI is a party thereto, each of LPC and LCI will, together with its successors and assigns, be bound by the provisions thereof; (e) Congress shall have received from LPC an executed original or executed original counterparts of a letter agreement re: Amendment to Financing Agreements and Consent, pertaining to the Bank One Collateral to be granted by LPC pursuant to the Bank One Financing and the CIT Financing and related matters, together with the documents, instruments and agreements to be delivered pursuant thereto; (f) Congress shall have received from Bank One, the sum of $1,500,000, in immediately available funds, representing full disbursement for the account of LCI of the "Vienna Term Loan" (as defined in the Bank One Financing Agreements), which sum shall be applied to fully prepay the outstanding principal amount of the LCI Ohio Real Estate Loan and the balance applied to the Revolving Loan account of LCI maintained by Congress; (g) Congress shall have received from Bank One, the sum of $1,000,000, in immediately available funds, representing full disbursement for the account of LPC of the "North Canton Interim Loan" (as defined in the Bank One Financing Agreements), $418,118 of which shall be used to prepay the unpaid principal installments under the LPC Second Restated Note (as defined in the LPC Financing Agreements) in the inverse order of the maturities thereof, and the balance of which shall be applied to the Revolving Loan (as defined in the LPC Financing Agreements) account of LPC maintained by Congress; (h) All representations and warranties contained herein, in the Accounts Agreements and in the other Financing Agreements shall be true and correct in all material respects; and (i) No Event of Default shall have occurred and no event shall have occurred or condition shall be existing which, with notice or passage of time or both, would constitute an Event of Default. 6. EFFECT OF THIS AMENDMENT. Except as modified pursuant hereto, the Accounts Agreement and all supplements to the Accounts Agreement, including, without limitation, the Covenant Supplement 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 -4- 5 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. 7. 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. 8. 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: Frank L. Chiovari --------------------------- Title: Vice President ------------------------ AGREED AND ACCEPTED: LEXINGTON COMPONENTS, INC. By: Warren Delano ----------------------- Title: Vice Chairman -------------------- -5- 6 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 ------------------------- -6- EX-10.65 24 EXHIBIT 10.65 1 Exhibit 1065 EXHIBIT A PROMISSORY NOTE --------------- (Equipment Term Loan) $1,800,000.00 North Canton, Ohio March 26, 1996 FOR VALUE RECEIVED, LEXINGTON PRECISION CORPORATION, a corporation organized under the laws of the State of Delaware (hereinafter collectively referred to as the "Company"), promises to pay to the order of BANK ONE, AKRON, NA (hereinafter referred to as the "Bank"), the principal amount of ONE MILLION EIGHT HUNDRED THOUSAND AND NO/100 DOLLARS ($1,800,000.00) on April 1, 2001, or sooner as hereinafter provided, with interest on the unpaid balance of said principal amount from the date hereof at a rate per annum equal to the LIBOR Interest Rate (as defined in the Agreement) on the Core Borrowing Amount, if any, pursuant to the immediately succeeding paragraph and at a rate per annum equal to three-quarter percent (.75%) in excess of the Base Rate (as defined in the Agreement), which definition is hereby accepted by the Company, as the same may from time to time be established on the unpaid principal amount excluding the Core Borrowing Amount (as defined below). If any installment of principal, interest or other amounts due and payable hereunder are not paid when due, or within any applicable grace periods set forth in the Agreement, the Company shall pay interest thereon at the rate of three percent (3.0%) per annum in excess of the Base Rate (as defined in the Agreement hereinafter referred to) as the same may from time to time be established but not to exceed the maximum rate allowed by law. Bank shall have the right to assess a late payment processing fee in the amount of the greater of FIFTY AND NO/100 DOLLARS ($50.00) or five percent (5%) of the scheduled payment in the event of a default in payment that remains uncured for a period of at least ten (10) days. The Company shall have the right to elect to have a portion of the outstanding balance of the Equipment Term Loan accrue interest at the LIBOR Interest Rate (the "Core Borrowing Amount") by delivering to the Bank a written, telephonic, or telegraphic request (effective upon receipt) by facsimile, telephone, or telegraph by 12:00 p.m. three (3) Business Days prior to the Business Day the LIBOR Interest Rate is to be effective, specifying (i) the Core Borrowing Amount, which shall be in incremental strips of ONE HUNDRED THOUSAND AND NO/100 DOLLARS ($100,000.00) and which shall not exceed the Core Cap (as defined in the Agreement) in the aggregate and (ii) the duration of the LIBOR Interest Period which shall be either one (1) month or two (2) months. If the Company shall fail to give the Bank the notice as specified above for the renewal of the LIBOR Interest Rate on the Core Borrowing Amount prior to the end of the LIBOR Interest Period with respect thereto, the interest rate on the Core Borrowing Amount shall automatically be converted into an interest rate per annum equal to three-quarter percent (.75%) in excess of the Base Rate, as the same may from time to time be established, on the last day of the LIBOR Interest Period for such Core Borrowing Amount. The Company agrees to pay the principal amount of this Note in fifty-nine (59) consecutive equal installments of THIRTY THOUSAND AND NO/100 DOLLARS ($30,000.00) each, together with all accrued interest due at the time of payment of each such installment of principal, commencing on May 1, 1996, and continuing on the first day of each calendar month thereafter and a final installment of THIRTY THOUSAND AND NO/100 DOLLARS ($30,000.00), together with all accrued interest due at the time of payment of such installment, on April 1, 2001. Monthly payments 2 hereunder shall be applied first to interest due and the balance to reduction of the principal amount outstanding. Payments of both principal of and interest on this Note shall be made in lawful money of the United States of America, at 50 South Main Street, Akron, Ohio 44308-1888, or at such other place as the Bank or any subsequent holder hereof shall have designated to the Company in writing. Interest payable on this Note shall be computed on a three hundred sixty (360) day per year basis counting the actual number of days elapsed. If any payment under this Note becomes due and payable on a day which is not a Business Day (as defined in this Agreement), payment thereof shall be made on the immediately succeeding Business Day. This Note is issued pursuant to and is entitled to the benefits of a Credit Facility and Security Agreement dated as of March 14, 1996, by and among the Company, Lexington Components, Inc. ("LCI"), and the Bank (the "Agreement"), to which Agreement reference is hereby made for a statement of the rights and obligations of the Bank and the duties and obligations of the Company and LCI in relation thereto; but neither this reference to said Agreement nor any provisions thereof shall affect or impair the absolute and unconditional obligation of the Company to pay the principal of or interest on this Note when due. The Company may prepay all or any portion of this Note at any time and in any amount without penalty or premium, provided that all prepayments shall be applied to installments of principal in the inverse order of their maturities and subject to the terms of prepayment of the Core Borrowing Amount set forth herein. The Core Borrowing Amount accruing interest at the LIBOR Interest Rate may be prepaid only on the last day of the LIBOR Interest Period (as defined in the Agreement) for the Core Borrowing Amount without premium or penalty, provided, however, as long as the Bank has not matched funds in a money market to fund the Core Borrowing Amount, (i) the Company may prepay the Core Borrowing Amount during a LIBOR Interest Period if the Company pays a penalty in the amount of one percent (1%) of the prepayment amount and (ii) the outstanding balance of the Core Borrowing Amount upon the application of the prepayment amount shall be an increment of ONE HUNDRED THOUSAND AND NO/100 DOLLARS ($100,000.00). If an Event of Default (as defined in the Agreement), shall occur and shall be continuing, the principal of this Note may be declared immediately due and payable at the option of the Bank. In the event that the Company fails to pay any regularly scheduled principal or interest payment on this Note when due (other than as a result of acceleration thereof based on a default or event of default other than the failure to make any such regularly scheduled payments of principal or interest on this Note when due) which failure is not cured within the ten (10)-day cure period provided in Section 6A of the Agreement (a "Payment Default"), or if an Event of Default occurs and is continuing, which arises from fraudulent act(s) or practice(s) of the Company which Event of Default is not cured within three (3) Business Days after the Company's receipt of written notice thereof from the Bank (a "Fraud Default"), the Company hereby authorizes any attorney-at-law to appear in any court of record in the State of Ohio, or in any other state or territory of the United States, at any time or times after the above sum becomes due, and waives the issuance and service of process and confesses judgment against it, in favor of any holder of this Note, for the amount then appearing due, together with the costs of suit, and thereupon to release all errors and waive all rights of appeal and stay of execution. The foregoing warrant of attorney shall survive any judgment, it being understood that should any judgment be vacated for any reason, the foregoing warrant of attorney nevertheless may thereafter be used for obtaining an 3 additional judgment or judgments. To the extent that the provisions of the cognovit warning set forth above the Company's signature specifically contradict the provisions of this paragraph regarding the requirement of a Payment Default or a Fraud Default to take a cognovit judgment, the provisions of this paragraph control. No delay on the part of any holder hereof in exercising any power or rights hereunder shall operate as a waiver of any power or rights. Any demand or notice hereunder to the Company shall be deemed duly given or made when sent, if given by telecopier, when delivered, if given by personal delivery or overnight commercial carrier, or the fifth calendar day after deposit in the United States mail, certified mail, return receipt requested, addressed to the Company at its address (or telecopier number) set forth in Rider A of the Agreement or such other address or telecopier number as may be hereafter designated in writing by the Company to the Bank. This note is executed at North Canton, Stark County, Ohio. WARNING--BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME, A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR, WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE. LEXINGTON PRECISION CORPORATION By Warren Delano ----------------------------- Warren Delano President EX-23.1 25 EXHIBIT 23.1 1 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in Registration Statement (Form S-8 No. 2-93448) pertaining to the Lexington Precision Corporation (formerly Blasius Industries, Inc.) 1983 Incentive Stock Option Plan of our report dated March 22, 1996 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, 1995. ERNST & YOUNG LLP Cleveland, Ohio March 29, 1996 EX-27.2 26 EXHIBIT 27.2
5 1,000 YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 118 0 12,959 175 8,105 24,478 75,825 30,887 81,876 29,253 56,033 1,087 510 0 (6,063) 81,876 104,298 104,298 84,761 84,761 0 1 7,585 2,713 425 2,288 0 0 0 2,288 .52 .49
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