-----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, Fi+CcsnjnYhlQxgURjN9xELqd/qRtj3r7YRHaimymPPuWUj97Ba0pGSShEDgQXYq qiYF2RqlSsjnBh2XcgiUMw== 0000950152-03-010430.txt : 20031219 0000950152-03-010430.hdr.sgml : 20031219 20031219172456 ACCESSION NUMBER: 0000950152-03-010430 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 17 CONFORMED PERIOD OF REPORT: 20031218 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20031219 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: 0814 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-03252 FILM NUMBER: 031066027 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 8-K 1 l04690ae8vk.txt LEXINGTON PRECISION CORPORATION SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) December 18, 2003 Lexington Precision Corporation - -------------------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) Delaware 0-3252 22-1830121 - -------------------------------------------------------------------------------- (State or other jurisdiction (Commission (I.R.S. Employer of incorporation) File Number) 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 - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report) Item 5. Other Events On December 18, 2003, Lexington Precision Corporation (the "Company") completed a refinancing of substantially all of its outstanding debt. In connection therewith, on December 18, 2003, the Company issued a press release, a copy of which is attached hereto as Exhibit 99.1, and incorporated herein by reference. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits (c) Exhibits Exhibit 4.1 Indenture, dated as of December 18, 2003, between Lexington Precision Corporation and Wilmington Trust Company, as Trustee. Exhibit 4.2 Registration Rights Agreement, dated as of December 18, 2003, between Lexington Precision Corporation and Purchasers listed therein. Exhibit 4.3 Form of Unit. Exhibit 4.4 Form of Warrant. Exhibit 4.5 Form of 12% Senior Subordinated Note due August 1, 2003. Exhibit 4.6 Form of 13% Junior Subordinated Note due November 1, 2009. Exhibit 10.1 Exchange Agreement, dated as of December 18, 2003, between Lexington Precision Corporation and each of Michael A. Lubin and Warren Delano. Exhibit 10.2 Warrant Agent Agreement, dated as of December 18, 2003, between Lexington Precision Corporation and Wilmington Trust Company, as Warrant Agent. Exhibit 10.3 Amended and Restated Loan and Security Agreement, dated as of December 18, 2003, by and among Lexington Precision Corporation and Lexington Rubber Group, Inc., as borrowers, and Congress Financial Corporation, as Agent, The Cit Group/ Commercial Financing, Inc., as Co-Agent and the Lenders from time to time party thereto. Exhibit 10.4 Pledge and Security Agreement, dated as of December 18, 2003, made by Lexington Precision Corporation in favor of Congress Financial Corporation, as agent. Exhibit 10.5 Amended and Restated Term Promissory Note, dated as of December 18, 2003, made by Lexington Precision Corporation in favor of Congress Financial Corporation, as agent, in the original principal amount of $4,000,000. Exhibit 10.6 Amended and Restated Term Promissory Note, dated as of December 18, 2003, made by Lexington Rubber Group, Inc. in favor of Congress Financial Corporation, as agent, in the original principal amount of $9,500,000. Exhibit 10.7 Loan and Security Agreement, dated December 18, 2003, by and among Lexington Precision Corporation and Lexington Rubber Group, Inc., as Borrowers, Ableco Finance LLC, as Agent, and the lenders from time to time party thereto. Exhibit 10.8 Pledge and Security Agreement, dated December 18, 2003, made by Lexington Precision Corporation in favor of Ableco Finance LLC, as agent. Exhibit 10.9 Payoff Agreement, dated as of December 18, 2003, by and between Nomura Special Situations Investment Trust and Lexington Precision Corporation. Exhibit 99.1 Press release dated December 18, 2003. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: December 18, 2003 LEXINGTON PRECISION CORPORATION By: /s/ Warren Delano -------------------------------- Warren Delano President EXHIBIT INDEX
Exhibit Number Exhibit Name Location - ------ ------------ -------- 4.1 Indenture, dated as of December 18, 2003, between Lexington Filed herewith Precision Corporation and Wilmington Trust Company, as Trustee. Filed herewith 4.2 Registration Rights Agreement, dated as of December 18, 2003, between Lexington Precision Corporation and Purchasers listed therein. Filed herewith 4.3 Form of Unit. Filed herewith 4.4 Form of Warrant. Filed herewith 4.5 Form of 12% Senior Subordinated Note due August 1, 2003. Filed herewith 4.6 Form of 13% Junior Subordinated Note due November 1, 2009. Filed herewith 10.1 Exchange Agreement, dated as of December 18, 2003, between Lexington Precision Corporation and each of Michael A. Lubin and Warren Delano. Filed herewith 10.2 Warrant Agent Agreement, dated as of December 18, 2003, between Lexington Precision Corporation and Wilmington Trust Company, as Warrant Agent. Filed herewith 10.3 Amended and Restated Loan and Security Agreement, dated as of December 18, 2003, by and among Lexington Precision Corporation and Lexington Rubber Group, Inc., as borrowers, and Congress Financial Corporation, as Agent, The Cit Group/ Commercial Financing, Inc., as Co-Agent and the Lenders from time to time party thereto. Filed herewith 10.4 Pledge and Security Agreement, dated as of December 18, 2003, made by Lexington Precision Corporation in favor of Congress Financial Corporation, as agent. Filed herewith
10.5 Amended and Restated Term Promissory Note, dated as of December 18, 2003, made by Lexington Precision Corporation in favor of Congress Financial Corporation, as agent, in the original principal amount of $4,000,000. Filed herewith 10.6 Amended and Restated Term Promissory Note, dated as of December 18, 2003, made by Lexington Rubber Group, Inc. in favor of Congress Financial Corporation, as agent, in the original principal amount of $9,500,000. Filed herewith 10.7 Loan and Security Agreement, dated December 18, 2003, by and among Lexington Precision Corporation and Lexington Rubber Group, Inc., as Borrowers, Ableco Finance LLC, as Agent, and the lenders from time to time party thereto. Filed herewith 10.8 Pledge and Security Agreement, dated December 18, 2003, made by Lexington Precision Corporation in favor of Ableco Finance LLC, as agent. Filed herewith 10.9 Payoff Agreement, dated as of December 18, 2003, by and between Nomura Special Situations Investment Trust and Lexington Precision Corporation. Filed herewith 99.1 Press release dated December 18, 2003. Filed herewith
EX-4.1 3 l04690aexv4w1.txt EX-4.1 INDENTURE DATED 12/18/2003 EXHIBIT 4.1 ================================================================================ LEXINGTON PRECISION CORPORATION 12% Senior Subordinated Notes due August 1, 2009 ---------------------- INDENTURE Dated as of December 18, 2003 ---------------------- WILMINGTON TRUST COMPANY, as Trustee ================================================================================ CROSS-REFERENCE TABLE
TIA Indenture Section Section 310 (a)(1)................................................................................... 7.10 (a)(2)................................................................................... 7.10 (a)(3)................................................................................... N.A. (a)(4)................................................................................... N.A. (b)...................................................................................... 7.08; 7.10 (c)...................................................................................... N.A. 311 (a)...................................................................................... 7.11 (b)...................................................................................... 7.11 (c)...................................................................................... N.A. 312 (a)...................................................................................... 2.05 (b)...................................................................................... 12.03 (c)...................................................................................... 12.03 313 (a)...................................................................................... 7.06 (b)(1)................................................................................... N.A. (b)(2)................................................................................... 7.06 (c)...................................................................................... 7.06; 12.02 (d)...................................................................................... 7.06 314 (a)...................................................................................... 4.02; 12.02 (b)...................................................................................... N.A. (c)(1)................................................................................... 12.04 (c)(2)................................................................................... 12.04 (c)(3)................................................................................... N.A. (d)...................................................................................... N.A. (e)...................................................................................... 12.05 (f)...................................................................................... N.A. 315 (a)...................................................................................... 7.01(b) (b)...................................................................................... 7.05; 12.02 (c)...................................................................................... 7.01(a) (d)...................................................................................... 7.01(c) (e)...................................................................................... 6.11 316 (a)(last sentence)....................................................................... 12.06 (a)(1)(A)................................................................................ 6.05 (a)(1)(B)................................................................................ 6.04 (a)(2)................................................................................... N.A. (b)...................................................................................... 6.07 317 (a)(1)................................................................................... 6.08 (a)(2)................................................................................... 6.09 (b)...................................................................................... 2.04 318 (a)...................................................................................... 12.01
- ------------------- N.A. means Not Applicable. -i- TABLE OF CONTENTS ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE....................................................... 1 SECTION 1.01. Definitions...................................................................................... 1 SECTION 1.02. Other Definitions................................................................................ 13 SECTION 1.03. Incorporation by Reference of Trust Indenture Act................................................ 14 SECTION 1.04. Rules of Construction............................................................................ 14 ARTICLE TWO THE SECURITIES................................................................................... 15 SECTION 2.01. Form and Dating.................................................................................. 15 SECTION 2.02. Execution and Authentication..................................................................... 15 SECTION 2.03. Registrar and Paying Agent....................................................................... 15 SECTION 2.04. Paying Agent to Hold Money in Trust.............................................................. 16 SECTION 2.05. Securityholder Lists............................................................................. 16 SECTION 2.06. Registration, Transfer and Exchange.............................................................. 16 SECTION 2.07. Replacement Securities........................................................................... 17 SECTION 2.08. Outstanding Securities........................................................................... 17 SECTION 2.09. Temporary Securities............................................................................. 18 SECTION 2.10. Cancellation..................................................................................... 18 SECTION 2.11. Defaulted Interest............................................................................... 18 SECTION 2.12. CUSIP Number..................................................................................... 19 SECTION 2.13. Conditions to Effectiveness of Indenture......................................................... 19 ARTICLE THREE REDEMPTION....................................................................................... 19 SECTION 3.01. Notices to Trustee............................................................................... 19 SECTION 3.02. Selection of Securities to be Redeemed........................................................... 20 SECTION 3.03. Notice of Redemption............................................................................. 20 SECTION 3.04. Effect of Notice of Redemption................................................................... 20 SECTION 3.05. Deposit of Redemption Price...................................................................... 21 SECTION 3.06. Securities Redeemed in Part...................................................................... 21 ARTICLE FOUR COVENANTS........................................................................................ 21 SECTION 4.01. Payment of Securities............................................................................ 21 SECTION 4.02. SEC Reports...................................................................................... 21 SECTION 4.03. Annual and Quarterly Review Certificates......................................................... 22 SECTION 4.04. Limitation on Restricted Payments................................................................ 22 SECTION 4.05. Limitation on Incurrence of Indebtedness......................................................... 24 SECTION 4.06. Transactions with Affiliates..................................................................... 26 SECTION 4.07. Sales of Assets.................................................................................. 27 SECTION 4.08. Change of Control................................................................................ 31 SECTION 4.09. Prohibition Against Becoming an Investment Company............................................... 32 SECTION 4.10. Limitation on Ranking of Future Debt............................................................. 32 SECTION 4.11. Maintenance of Office or Agency.................................................................. 33 SECTION 4.12. Transfer of Metals Group......................................................................... 33
-ii- ARTICLE FIVE SUCCESSOR CORPORATION............................................................................ 33 SECTION 5.01. When Company May Merge, etc...................................................................... 33 ARTICLE SIX DEFAULTS AND REMEDIES............................................................................. 34 SECTION 6.01. Events of Default................................................................................ 34 SECTION 6.02. Acceleration..................................................................................... 35 SECTION 6.03. Other Remedies................................................................................... 36 SECTION 6.04. Waiver of Past Defaults.......................................................................... 36 SECTION 6.05. Control by Majority.............................................................................. 36 SECTION 6.06. Limitations on Suits by Holders.................................................................. 36 SECTION 6.07. Rights of Holders to Receive Payment............................................................. 37 SECTION 6.08. Collection Suit by Trustee....................................................................... 37 SECTION 6.09. Trustee May File Proofs of Claim................................................................. 37 SECTION 6.10. Priorities....................................................................................... 37 SECTION 6.11. Undertaking for Costs............................................................................ 38 SECTION 6.12. Waiver of Usury Law.............................................................................. 38 ARTICLE SEVEN TRUSTEE.......................................................................................... 38 SECTION 7.01. Duties of Trustee................................................................................ 38 SECTION 7.02. Rights of Trustee................................................................................ 39 SECTION 7.03. Individual Rights of Trustee..................................................................... 40 SECTION 7.04. Trustee's Disclaimer............................................................................. 41 SECTION 7.05. Notice of Defaults............................................................................... 41 SECTION 7.06. Reports by Trustee to Holders.................................................................... 41 SECTION 7.07. Compensation and Indemnity....................................................................... 41 SECTION 7.08. Replacement of Trustee........................................................................... 42 SECTION 7.09. Successor Trustee by Merger, etc................................................................. 43 SECTION 7.10. Eligibility; Disqualification.................................................................... 43 SECTION 7.11. Preferential Collection of Claims Against Company................................................ 43 ARTICLE EIGHT DISCHARGE OF INDENTURE........................................................................... 44 SECTION 8.01. Termination of Company's Obligations............................................................. 44 SECTION 8.02. Application of Trust Money....................................................................... 45 SECTION 8.03. Repayment to Company............................................................................. 45 ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS.............................................................. 46 SECTION 9.01. Without Consent of Holders....................................................................... 46 SECTION 9.02. With Consent of Holders.......................................................................... 46 SECTION 9.03. Compliance with Trust Indenture Act.............................................................. 47 SECTION 9.04. Revocation and Effect of Consents................................................................ 47 SECTION 9.05. Notation on or Exchange of Securities............................................................ 47 SECTION 9.06. Trustee to Sign Amendments, etc.................................................................. 47
-iii-
ARTICLE TEN SECURITYHOLDERS' MEETINGS AND CONSENTS........................................................... 48 SECTION 10.01. Purposes of Meetings............................................................................. 48 SECTION 10.02. Calling of Meetings by Trustee................................................................... 48 SECTION 10.03. Calling of Meetings by Company or Securityholders................................................ 48 SECTION 10.04. Qualifications for Voting........................................................................ 49 SECTION 10.05. Regulations...................................................................................... 49 SECTION 10.06. Voting. 49 SECTION 10.07. No Delay of Rights by Meeting.................................................................... 50 SECTION 10.08. Written Consent in Lieu of Meeting............................................................... 50 ARTICLE ELEVEN SUBORDINATION.................................................................................... 50 SECTION 11.01. Securities Subordinated to Senior Debt........................................................... 50 SECTION 11.02. Company Not to Make Payments with Respect to Securities in Certain Circumstances............................................................................ 50 SECTION 11.03. Securities Subordinated to Prior Payment of All Senior Debt on Dissolution, Liquidation or Reorganization of Company............................................ 52 SECTION 11.04. Securityholders to be Subrogated to Right of Holders of Senior Debt.............................. 53 SECTION 11.05. Obligation of the Company Unconditional.......................................................... 53 SECTION 11.06. Trustee and Paying Agent Entitled to Assume Payments Not Prohibited in Absence of Notice............................................................................. 54 SECTION 11.07. Application by Trustee of Monies Deposited with it............................................... 54 SECTION 11.08. Subordination Rights Not Impaired by Acts or Omissions of Company or Holders of Senior Debt........................................................................ 54 SECTION 11.09. Securityholders Authorize Trustee to Effectuate Subordination of Securities....................................................................................... 54 SECTION 11.10. Right of Trustee to Hold Senior Debt; Compensation Not Prejudiced................................ 55 SECTION 11.11. Article Eleven Not to Prevent Events of Default.................................................. 55 ARTICLE TWELVE MISCELLANEOUS.................................................................................... 55 SECTION 12.01. Trust Indenture Act Controls..................................................................... 55 SECTION 12.02. Notices.......................................................................................... 55 SECTION 12.03. Communication by Holders with Other Holders...................................................... 56 SECTION 12.04. Certificate and Opinion as to Conditions Precedent............................................... 56 SECTION 12.05. Statements Required in Certificate or Opinion.................................................... 56 SECTION 12.06. When Treasury Securities Disregarded............................................................. 57 SECTION 12.07. Rules by Trustee and Agents...................................................................... 57 SECTION 12.08. Legal Holidays................................................................................... 57 SECTION 12.09. Governing Law.................................................................................... 57 SECTION 12.10. No Adverse Interpretation of Other Agreements.................................................... 57 SECTION 12.11. No Recourse Against Others....................................................................... 57 SECTION 12.12. Successors....................................................................................... 57 SECTION 12.13. Duplicate Originals.............................................................................. 57 SECTION 12.14. Effective Date................................................................................... 58 SECTION 12.15. Severability..................................................................................... 58
-iv- SIGNATURES....................................................................................................... 58 ACKNOWLEDGMENTS.................................................................................................. 58
EXHIBIT A - FORM OF SECURITY EXHIBIT B - FORM OF OFFICERS' CERTIFICATE EXHIBIT C - FORM OF OPINION OF NIXON PEABODY LLP -v- INDENTURE dated as of December 18, 2003 between Lexington Precision Corporation, a Delaware corporation (the "Company"), and Wilmington Trust Company, a Delaware banking corporation, as trustee (the "Trustee"). WHEREAS, all conditions and requirements necessary to make this Indenture a valid, binding, and legal instrument in accordance with the terms hereof have been performed and fulfilled and the execution, delivery, and performance hereof by the Company have been in all respects duly authorized; WHEREAS, upon the execution and delivery of the Indenture in accordance with the terms hereof, the Indenture will be a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms; WHEREAS, upon the execution and authentication of the Securities in accordance with the terms hereof, the Securities will be valid and binding obligations of the Company, enforceable against the Company in accordance with their terms; WHEREAS, the Company has requested that the Trustee execute and deliver this Indenture and has delivered to the Trustee a copy of a Board Resolution authorizing the execution of this Indenture; and WHEREAS, this Indenture confirms through the definition of "Restricted Subsidiary" contained herein, that Lexington Rubber Group, Inc. is a Restricted Subsidiary of the Company. NOW, THEREFORE, in consideration of the above premises, each party agrees, for the benefit of the other and for the equal and ratable benefit of the Holders of the Securities, as follows: ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. Definitions. "Additional Assets" means (i) any property or assets substantially related to the primary businesses of the Company and its Subsidiaries as of the effective date of this Indenture, (ii) the Capital Stock of a Person engaged in a business substantially related to the primary business of the Company and its Subsidiaries as of the effective date of the Indenture that becomes a Restricted Subsidiary as a result of the acquisition of such Capital Stock by the Company or another Restricted Subsidiary or (iii) Capital Stock constituting a minority interest in any Person that at such time is a Restricted Subsidiary. "Affiliate" of any specified Person means any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. For purposes of -2- Sections 4.06 and 4.07 only, "Affiliate" shall also mean any beneficial owner of shares representing 5% or more of the total voting power of the Voting Stock (on a fully diluted basis) of the Company or of rights or warrants to purchase such stock (whether or not currently exercisable) and any Person who is an Affiliate of any such beneficial owner pursuant to the first sentence hereof. "Agent" means any Registrar, Paying Agent, or co-Registrar. See Section 2.03. "Asset Sale" means any sale, transfer or other disposition (including by way of merger, consolidation or sale leaseback but excluding any such transactions permitted by Section 5.01) by the Company or any Restricted Subsidiary to any Person other than the Company or any Wholly Owned Subsidiary, of any (i) of the Capital Stock of any Restricted Subsidiary, (ii) of the assets or property of any division or line of business of the Company or any Restricted Subsidiary or (iii) other assets of the Company or any Restricted Subsidiary, in each case other than dispositions of assets or property at fair market value in the ordinary course of business. "Average Life" means, as of the date of determination, with respect to any Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum of the products of the numbers of years from the date of determination to the dates of each successive scheduled principal payment of such Indebtedness or scheduled redemption or similar payment with respect to such Preferred Stock multiplied by the amount of such payment by (ii) the sum of all such payments. "Board of Directors" means the Board of Directors of the Company or any committee thereof. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. Where any provision of this Indenture refers to action to be taken pursuant to a Board Resolution, such action may be taken by any committee of the Board of Directors or any officer or employee of the Company authorized to take such action by a Board Resolution. "Business Day" means each day which is not a Legal Holiday. "Capital Stock" means any and all shares, interests, options, warrants and similar rights (other than debt securities convertible into or exchangeable for capital stock or options, warrants and similar rights to acquire debt securities convertible into or exchangeable for Capital Stock provided that none of such Capital Stock is Redeemable Stock or Exchangeable Stock) participations or other equivalents (however designated) or capital stock of a corporation or any and all equivalent ownership interest in a Person (other than a corporation). "Capitalized Lease Obligation" means an obligation that is required to be classified and accounted for as a capitalized lease for financial reporting purposes in accordance with generally accepted accounting principles, and the amount of Indebtedness represented by such obligation shall be the capitalized amount of such obligation determined in accordance with such principles; and the Stated Maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. -3- "Change of Control" means the "beneficial ownership" (as such term is used in Rules 13d-3 and 13d-5 under the Exchange Act) by any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than an underwriter engaged in a firm commitment underwriting on behalf of the Company or a Subsidiary and other than one or more Permitted Holders or any "group" (as such term is used in Rule 13d-5 under the Exchange Act) of which any one or more of the Permitted Holders is a member, of more than 50% of the total voting power of the Voting Stock of the Company. "Code" means the Internal Revenue Code of 1986, as amended. "Company" means the party named as such in this Indenture until a successor replaces it in accordance with the provisions of Article Five and thereafter means the successor. "Consolidated Coverage Ratio," as of any date of determination, means the ratio of (i) the aggregate amount of EBITDA for the period of the most recent four consecutive fiscal quarters for which financial statements are available to (ii) the Consolidated Interest Expense for such four fiscal quarters; provided, however, that if the Company or any Restricted Subsidiary has Incurred any Indebtedness since the beginning of such period that remains outstanding or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, or both, Consolidated Interest Expense for such period shall be calculated after giving effect on a pro forma basis to (x) such new Indebtedness as if such Indebtedness had been Incurred on the first day of such period and (y) the repayment, redemption, repurchase, defeasance or discharge of any Indebtedness repaid, redeemed, repurchased, defeased or discharged with the proceeds of such new Indebtedness as if such repayment, redemption, repurchase, defeasance or discharge had been made on the first day of such period; provided, further, that if within the period during which EBITDA or Consolidated Interest Expense is measured, the Company or any of its Restricted Subsidiaries shall have made any Asset Sales, (x) the EBITDA for such period shall be reduced by an amount equal to the EBITDA (if positive) directly attributable to the assets or Capital Stock which are the subject of such Asset Sales for such period, or increased by an amount equal to the EBITDA (if negative), directly attributable thereto for such period and (y) the Consolidated Interest Expense for such period shall be reduced by an amount equal to the Consolidated Interest Expense directly attributable to any Indebtedness for which neither the Company nor any Restricted Subsidiary shall continue to be liable as a result of any such Asset Sale or repaid, redeemed, defeased, discharged or otherwise retired in connection with or with the proceeds of the assets or Capital Stock that are the subject of such Asset Sales for such period; and provided, further, that if the Company or any Restricted Subsidiary shall have made any acquisition of assets or Capital Stock (occurring by merger or otherwise) since the beginning of such period (including any acquisition of assets or Capital Stock occurring in connection with a transaction causing a calculation to be made hereunder) the EBITDA for such period shall be calculated, after giving pro forma effect thereto (and without regard to clause (ii) of the proviso to the definition of "Consolidated Net Income"), as if such acquisition of assets or Capital Stock took place on the first day of such period. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest on such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period. "Consolidated Interest Expense" means, for any period, the sum, without duplication, of (a) the total interest expense of the Company and its consolidated subsidiaries -4- other than Unrestricted Subsidiaries, determined on a consolidated basis in accordance with generally accepted accounting principles, including, (i) interest expense attributable to capital leases, (ii) amortization of debt discount and debt issuance cost, (iii) amortization of capitalized interest, (iv) non-cash interest payments, (v) commissions, discounts and other fees and charges paid with respect to letters of credit and bankers' acceptance financing, (vi) interest actually paid by the Company or any such subsidiary under any guarantee of Indebtedness or other obligation of any other Person and (vii) net costs incurred during such period under interest rate swaps, caps, collars, options and similar arrangements and foreign currency hedges (including amortization of fees); (b) Preferred Stock dividends paid during such period in respect of all Preferred Stock of Restricted Subsidiaries held by Persons other than the Company or a Wholly Owned Subsidiary and (c) the cash contributions to any employee stock ownership plan to the extent such contributions are used by such employee stock ownership plan to pay interest or fees to any person (other than the Company or a Restricted Subsidiary) in connection with loans incurred by such employee stock ownership plan to purchase Capital Stock of the Company. "Consolidated Net Income" means, for any period, the net income of the Company and its consolidated subsidiaries, determined on a consolidated basis in accordance with generally accepted accounting principles; provided however, that there shall not be included in such Consolidated Net Income: (i) any net income of any Person (other than the Company) if such Person is not a Restricted Subsidiary, except that (A) the Company's equity in the net income of any such Person for such period and prior periods shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to the Company or a Subsidiary as a dividend or other distribution and (B) the Company's equity in a net loss of any such Person for such period shall be included in determining such Consolidated Net Income (other than with respect to an Unrestricted Subsidiary, in which case the Company's equity in any such net loss shall not be so included); (ii) any net income (or loss) of any Person acquired by the Company or a Subsidiary in a pooling of interests transaction for any period prior to the date of such acquisition; (iii) any gain (but not loss, except to the extent of gains recorded during such period) realized upon the sale or other disposition of any property, plant or equipment of the Company or its Restricted Subsidiaries (including pursuant to any sale-and-leaseback arrangement) which is not sold or otherwise disposed of in the ordinary course of business and any gain (but not loss, except to the extent of gains recorded during such period) realized upon the sale or other disposition by the Company or any Restricted Subsidiary of any Capital Stock of any Person; (iv) the cumulative effect of a change in accounting principles; (v) any Recapitalization Expenses; and (vi) any gain realized by the Company on the repurchase of the Senior Note in connection with the Recapitalization. -5- "Consolidated Net Worth" means shareholders' equity on a consolidated balance sheet of the Company prepared in accordance with generally accepted accounting principles then in effect and, for an interim period, on a basis substantially consistent with generally accepted accounting principles then in effect. "Default" means any event which is, or after notice or passage of time would be, an Event of Default. "EBITDA" for any period means the sum of Consolidated Net Income (but without giving effect to adjustments, accruals, deductions or entries resulting from purchase accounting, extraordinary losses or gains and any gains or losses from any Asset Sales), plus the following to the extent included in calculating Consolidated Net Income: (a) all income tax expense, (b) Consolidated Interest Expense, (c) depreciation expense, (d) amortization expense and (e) to the extent not already included in (a) through (d) above, Recapitalization Expenses (including any amortization of Recapitalization Expenses), in each case for such period. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and all rules and regulations promulgated thereunder. "Exchange Offer" means the offer commenced by the Company on or about July 10, 2002, as amended and supplemented, to exchange Securities issued under this Indenture, and warrants to purchase common stock of the Company for the Company's outstanding Old Notes. "Exchangeable Stock" means any Capital Stock which by its terms is exchangeable or convertible at the option of any Person other than the Company into another security (other than Capital Stock which is neither Exchangeable Stock nor Redeemable Stock). "Foreign Asset Sale" means an Asset Sale in respect of the Capital Stock or assets of a Foreign Subsidiary or a Restricted Subsidiary of the type described in Section 936 of the Code to the extent that the proceeds of such Asset Sale are received by a Person subject in respect of such proceeds to the tax laws of a jurisdiction other than the United States or any State thereof or the District of Columbia. "Foreign Subsidiary" means a Restricted Subsidiary that is incorporated in a jurisdiction other than the United States or a State thereof or the District of Columbia. "Guarantee" means as applied to any obligation (other than an obligation arising from the endorsement of negotiable instruments for deposit or collection in the ordinary course of business), without duplication, (i) a guarantee, direct or indirect, in any manner, of any part or all of such obligation and (ii) an agreement, direct or indirect, contingent or otherwise, the practical effect of which is to insure in any way the payment or performance (or payment of damages in the event of nonperformance) of any part or all of such obligation, including the payment of amounts drawn down under letters of credit. "Holder" or "Securityholder" means the person in whose name a Security is registered on the Registrar's books. "Incur" means, as applied to any obligation, to create, incur, issue, assume, guarantee or in any other manner become liable with respect to, contingently or otherwise, such -6- obligation, and "Incurred," "Incurrence" and "Incurring" shall each have a correlative meaning; provided, however, that any Indebtedness or Capital Stock of a Person existing at the time such Person becomes (after the effective date of this Indenture) a Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred by such Subsidiary at the time it becomes a Subsidiary; and provided further, that any amendment, modification or waiver of any provision of any document pursuant to which Indebtedness was previously Incurred shall not be deemed to be an Incurrence of Indebtedness as long as (i) such amendment, modification or waiver does not (A) increase the principal or premium thereof or interest rate thereon, (B) change to an earlier date the Stated Maturity thereof or the date of any scheduled or required principal payment thereon or the time or circumstances under which such Indebtedness may or shall be redeemed, (C) if such Indebtedness is contractually subordinated in right of payment to the Securities, modify or affect, in any manner adverse to the Holders, such subordination, or (D) if the Company is the obligor thereon, provide that a Restricted Subsidiary shall be an obligor and (ii) such Indebtedness would, after giving effect to such amendment, modification or waiver as if it were an Incurrence, comply with clause (i) of the first proviso to the definition of "Refinancing Indebtedness." "Indebtedness" of any Person means, without duplication, (i) the principal of and premium (if any such premium is then due and owing) in respect of (A) indebtedness of such Person for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable; (ii) all Capitalized Lease Obligations of such person; (iii) all obligations of such Person Incurred as the deferred purchase price of property or services (other than trade accounts payable and accrued expenses, arising in the ordinary course of business which are payable within 90 days after goods are delivered or services rendered), all conditional sale obligations of such Person and all obligations of such Person under any title retention agreement; (iv) all obligations of such Person for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction (other than obligations with respect to letters of credit securing obligations (other than obligations described in (i) through (iii) above) entered into in the ordinary course of business of such Person to the extent such letters of credit are not drawn upon or to the extent such letters of credit are otherwise collateralized by cash, or, if and to the extent drawn upon, such drawing is reimbursed no later than the tenth Business Day following receipt by such Person of a demand for reimbursement following payment on the letter of credit); (v) the amount of all obligations of such Person with respect to the scheduled redemption, repayment or other repurchase of any Redeemable Stock and, with respect to any Restricted Subsidiary, any other Preferred Stock (but excluding in each case any accrued dividends); -7- (vi) all obligations of other Persons of the type referred to in clauses (i) through (v) and all dividends of other Persons for the payment of which, in either case, such Person is responsible or liable, directly or indirectly, as obligor, guarantor or otherwise, including by means of any Guarantee; (vii) all obligations of other Persons of the type referred to in clauses (i) through (vi) secured by any Lien on any property or asset of such Person (whether or not such obligation is assumed by such Person), the amount of such obligations being deemed to be the lesser of the fair market value of such property or assets or the amount of the obligations so secured; provided, however, that Indebtedness shall not include trade accounts payable or accrued expenses arising in the ordinary course of business. "Indenture" means this Indenture, as it may hereafter be amended, restated, or supplemented from time to time. "Investment" in any Person means any loan or advance to, Guarantee of any obligations of, any acquisition for value of Capital Stock, equity interest, obligation or other security of, capital contribution to or other investment in, such Person. For purposes of the definition of "Unrestricted Subsidiary" and Section 4.04 only, (i) "Investment" shall include the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of any Subsidiary at the time that such Subsidiary is designated an Unrestricted Subsidiary and shall exclude the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of any Unrestricted Subsidiary at the time such Unrestricted Subsidiary is designated a Restricted Subsidiary; and (ii) any property transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value at the time of such transfer, in each case as determined by the Board of Directors in good faith. "Junior Notes" means the Company's 13% Junior Subordinated Notes due November 1, 2009, to be outstanding upon the completion of the Recapitalization, as amended from time to time. "Lien" means any mortgage, lien, pledge, charge, or other security interest or encumbrance of any kind, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof and any agreement to give any security interest). "LRGI" means Lexington Rubber Group, Inc., a Delaware corporation, and its successors and assigns. "Maximum Principal Amount" means the sum of (a) the aggregate principal amount of Old Notes tendered pursuant to the Exchange Offer and not withdrawn and (b) the interest accrued on such Old Notes from August 1, 1999, through the day before the date the Exchange Offer is consummated. -8- "Metals Group" means the business of the Company described in the Annual Report of the Company on Form 10-K for the year ended December 31, 2001 as its "Metals Group." "Net Available Cash" means the cash payments received by the Company or a Restricted Subsidiary in connection with an Asset Sale (including any cash received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise, but only as and when received, and if received in a currency other than United States dollars, such payments shall not be deemed received until the earliest time at which such currency is, or could freely be, converted into United States dollars) net of all legal, title and recording tax expenses, commissions and other fees and expenses Incurred, and all federal, state, local and foreign taxes required to be paid or accrued as a liability under generally accepted accounting principles, as a consequence of such Asset Sale, and in each case net of all payments made on any Indebtedness which is secured by any assets subject to such Asset Sale, in accordance with the terms of any Lien upon or other security agreement of any kind with respect to such assets, or which must by its terms, or in order to obtain a necessary consent to such Asset Sale, or by applicable law, be repaid out of the proceeds from such Asset Sale. "Net Cash Proceeds," with respect to any issuance or sale of Capital Stock, means the cash proceeds of such issuance or sale net of attorneys' fees, accountants' fees, underwriters' or placement agents' fees, discounts or commissions and brokerage, consultancy and other fees and expenses actually incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof. "Officer" means the Chairman of the Board, the President, any Vice President, the Treasurer or the Secretary of the Company. "Officers' Certificate" means a certificate signed by two Officers or by an Officer and an Assistant Treasurer or Assistant Secretary of the Company. See Sections 12.04 and 12.05. "Old Notes" means the $27,412,125 aggregate outstanding principal amount of the Company's 12 3/4% Senior Subordinated Notes due February 1, 2000. "Opinion of Counsel" means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Company or the Trustee. See Sections 12.04 and 12.05. "Pari passu," as applied to the ranking of any Indebtedness of a Person in relation to other Indebtedness of such Person, means that each such Indebtedness either (i) is not subordinated in right of payment to any other Indebtedness or (ii) is subordinate in right of payment to the same Indebtedness as is the other, and is so subordinated to the same extent, and is not subordinate in right of payment to each other or to any Indebtedness as to which the other is not so subordinate. "Permitted Holder" means Warren Delano, Michael A. Lubin or any of their respective Affiliates. -9- "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "Plan" means any employee benefit plan, retirement plan, deferred compensation plan, restricted stock plan, health, life, disability or other insurance plan or program, employee stock purchase plan, employee stock ownership plan, pension plan, stock option plan, stock appreciation right plan or similar plan or arrangement of the Company or any Restricted Subsidiary, or any successor plan thereof. "Preferred Stock," as applied to the Capital Stock of any corporation, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such corporation, over shares of Capital Stock of any other class of such corporation. "Principal" of a debt security means the principal of the security plus, when appropriate, the premium, if any (including any payments in respect of a Change of Control Offer or Asset Sale Offer), on the security. "Recapitalization" means the execution and delivery of this Indenture, the consummation of the Exchange Offer, the issuance of the Securities and certain warrants to purchase common stock of the Company, the repurchase of the Senior Note, the issuance of the Junior Notes together with shares of Common Stock and Warrants in exchange for the Company's outstanding junior subordinated notes and claims for interest thereunder on or about the date of execution and delivery of this Indenture, the completion and/or amendment of secured financing arrangements for the Company and its Subsidiaries effected on or about the date of execution and delivery of this Indenture, the entering into of certain agreements or arrangements with, and the delivery of certain instruments to, certain trade creditors of the Company and its Subsidiaries in respect of the payment of outstanding trade accounts payable and any Indebtedness arising as a result thereof, effected on or about the date of execution and delivery of this Indenture, the obtaining of consents of creditors of the Company in connection with the foregoing, and the payment of Recapitalization Expenses. "Recapitalization Expenses" means legal, accounting, investment banking, consulting, printing, engraving, registration, blue sky and other reasonable fees and expenses Incurred by the Company and its Subsidiaries that are directly attributable to the Recapitalization, including, without limitation, any fees payable to the Company's secured lenders or to holders of the Securities or the Junior Notes. "Redeemable Stock" means any Capital Stock that by its terms or otherwise is required to be redeemed (other than upon a change of control or asset sale) on or prior to the first anniversary of the Stated Maturity of the Securities or is redeemable at the option of the holder thereof (other than upon a change of control or asset sale) at any time on or prior to the first anniversary of the Stated Maturity of the Securities. "Refinancing Indebtedness" means Indebtedness that refunds, refinances, replaces, renews, repays or extends (including pursuant to any defeasance or discharge mechanism) (collectively, "refinances," and "refinanced" shall have correlative meanings) any -10- Indebtedness existing on the effective date of this Indenture or Incurred in compliance with this Indenture (including Indebtedness of the Company that refinances Indebtedness of any Subsidiary and Indebtedness of any Restricted Subsidiary that refinances Indebtedness of another Restricted Subsidiary) including Indebtedness that refinances Refinancing Indebtedness; provided, however, that (i) the Refinancing Indebtedness is contractually subordinated in right and priority of payment to the Securities to at least the same extent (if any) as the Indebtedness being refinanced or such refinancing is not prohibited by under Section 4.05, (ii) the Refinancing Indebtedness is scheduled to mature either (a) no earlier than the Indebtedness being refinanced or (b) after the Stated Maturity of the Securities, (iii) the Refinancing Indebtedness has an Average Life at the time such Refinancing Indebtedness is Incurred that is equal to or greater than the Average Life of the Indebtedness being refinanced and (iv) such Refinancing Indebtedness is in an aggregate principal amount (or if issued with original issue discount, an aggregate issue price) that is equal to or less than the aggregate principal amount (or if issued with original issue discount, the aggregate accreted value) then outstanding (plus reasonable fees and expenses, including any premium and defeasance costs) under the Indebtedness being refinanced; and provided, further, that Refinancing Indebtedness shall not include Indebtedness of a Subsidiary that refinances Indebtedness of the Company. "Restricted Payment" with respect to any Person means (i) the declaration or payment of any dividend or any other distribution of any sort in respect of its Capital Stock (including any payment in connection with any merger or consolidation involving the Company) or similar payment to the direct or indirect holders of its Capital Stock (other than (x) a dividend or distribution payable solely in Capital Stock or rights to acquire Capital Stock (other than Redeemable Stock or Exchangeable Stock), (y) a dividend or distribution payable solely to the Company or a Restricted Subsidiary, or (z) a pro rata dividend or other distribution made by a Subsidiary that is not a wholly owned Subsidiary to the Company, one or more Subsidiaries and minority stockholders (or owners of any equivalent interest in the case of a Subsidiary that is an entity other than a corporation)), (ii) the purchase, redemption or other acquisition or retirement for value of any Capital Stock of the Company or of any direct or indirect parent of the Company, or the exercise by the Company of any option to exchange any Capital Stock that by its terms is exchangeable solely at the option of the Company (other than into Capital Stock of the Company) which is neither Exchangeable Stock nor Redeemable Stock, (iii) the purchase, repurchase, redemption, defeasance or other acquisition or retirement for value, prior to scheduled maturity, scheduled repayment or scheduled sinking fund payment of any Subordinated Obligations (other than the purchase, repurchase or other acquisition of Subordinated Obligations purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of acquisition) or (iv) the making of any Investment in any Unrestricted Subsidiary, or any Affiliate of the Company other than a Restricted Subsidiary or a Person which will become a Restricted Subsidiary as a result of any such Investment (and other than a loan or advance to any employee permitted under Section 4.06(b)(v)); provided, however, that the foregoing shall not include any of the transactions comprising the Recapitalization. "Restricted Subsidiary" shall mean LRGI, and any other Subsidiary that is not an Unrestricted Subsidiary. "SEC" means the Securities and Exchange Commission. -11- "Securities" means the Securities as amended or supplemented from time to time that are issued under this Indenture. "Senior Debt" means all Indebtedness (present or future) created, incurred, assumed or guaranteed by the Company (and all renewals, extensions or refundings of such Indebtedness, as the same may be renewed, amended, extended or refunded from time to time) unless the instrument under which such Indebtedness is created, incurred or assumed or guaranteed expressly provides that such Indebtedness is not senior in right of payment to the Securities, but Senior Debt does not include (a) Indebtedness of the Company to any of its subsidiaries or Affiliates (or any interest, fees, charges or other amounts outstanding in respect of such Indebtedness), (b) any Indebtedness or liability for compensation to employees of the Company, or incurred for the purchase of goods, materials or services in the ordinary course of business and which constitutes a trade payable even if overdue (or any interest, fees, charges or other amounts outstanding in respect of such Indebtedness), (c) any liability for federal, state, local or other taxes owed or owing by the Company, (d) any Indebtedness, guarantee or obligation that is contractually subordinate or junior in right and priority of payment to the Securities, (e) any payments or obligations in respect of any Preferred Stock, Redeemable Stock or Exchangeable Stock, and (f) that portion of any Indebtedness that at the time of issuance is issued in violation of this Indenture. "Senior Debt Ratio," as of any date of determination, means the ratio of (i) the sum, without duplication, of (x) the Senior Debt of the Company plus (y) the Indebtedness of all Restricted Subsidiaries, to (ii) the aggregate amount of EBITDA for the period of the most recent four consecutive fiscal quarters for which financial statements are available; provided, however, that if within the period during which EBITDA is measured, the Company or any of its Restricted Subsidiaries shall have made any Asset Sales, (x) the EBITDA for such period shall be reduced by an amount equal to the EBITDA (if positive) directly attributable to the assets or Capital Stock which are the subject of such Asset Sales for such period, or increased by an amount equal to the EBITDA (if negative), directly attributable thereto for such period; and provided, further, that if the Company or any Restricted Subsidiary shall have made any acquisition of assets or Capital Stock (occurring by merger or otherwise) since the beginning of such period (including any acquisition of assets or Capital Stock occurring in connection with a transaction causing a calculation to be made hereunder) the EBITDA for such period shall be calculated, giving pro forma effect thereto (and without regard to clause (ii) of the proviso to the definition of "Consolidated Net Income"), as if such acquisition of assets or Capital Stock took place on the first day of such period. For purposes of this definition, whenever pro forma effect is to be given to an acquisition of assets or Capital Stock, the amount of income or earnings relating thereto shall be determined in good faith by a responsible financial or accounting Officer of the Company. "Senior Note" means the Company's senior, unsecured notes due April 30, 2002, in the outstanding principal amount of $7,500,000. "Series B Preferred Stock" means the $8 Cumulative Convertible Preferred Stock, Series B of the Company. "Stated Maturity" means, with respect to any security, the date specified in such security as the fixed date on which the principal of such security is due and payable, including -12- pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency). "Subordinated Obligation" means any Indebtedness of the Company (whether outstanding on the date hereof or hereafter incurred) which is contractually subordinate or junior in right of payment to the Securities. "Subsidiary" means (i) a corporation at least a majority of whose Capital Stock with voting power, under ordinary circumstances, entitled to elect a majority of the board of directors of such corporation is at the time, directly or indirectly, owned or controlled by the Company, by a Subsidiary or Subsidiaries of the Company, or by the Company and a Subsidiary or Subsidiaries of the Company or (ii) any other Person (other than a corporation) in which the Company, a Subsidiary or Subsidiaries of the Company, or the Company and a Subsidiary or Subsidiaries of the Company, directly or indirectly, at the date of determination, has at least a majority ownership interest. "TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Sections 77aaa-77bbbb) as in effect on the date of this Indenture; provided, however, that in the event the Trust Indenture Act of 1939 is amended after such date, "TIA" means, to the extent required by such amendment, the Trust Indenture Act of 1939, as so amended. "Total Debt Ratio," as of any date of determination, means the ratio of (i) the total Indebtedness of the Company and its Restricted Subsidiaries, determined on a consolidated basis, to (ii) the aggregate amount of EBITDA for the period of the most recent four consecutive fiscal quarters for which financial statements are available; provided, however, that if within the period during which EBITDA is measured, the Company or any of its Restricted Subsidiaries shall have made any Asset Sales, (x) the EBITDA for such period shall be reduced by an amount equal to the EBITDA (if positive) directly attributable to the assets or Capital Stock which are the subject of such Asset Sales for such period, or increased by an amount equal to the EBITDA (if negative), directly attributable thereto for such period; and provided, further, that if the Company or any Restricted Subsidiary shall have made any acquisition of assets or Capital Stock (occurring by merger or otherwise) since the beginning of such period (including any acquisition of assets or Capital Stock occurring in connection with a transaction causing a calculation to be made hereunder) the EBITDA for such period shall be calculated, giving pro forma effect thereto (and without regard to clause (ii) of the proviso to the definition of "Consolidated Net Income"), as if such acquisition of assets or Capital Stock took place on the first day of such period. For purposes of this definition, whenever pro forma effect is to be given to an acquisition of assets or Capital Stock, the amount of income or earnings relating thereto shall be determined in good faith by a responsible financial or accounting Officer of the Company. "Trustee" means the party named as such in this Indenture until a successor replaces it in accordance with the terms of this Indenture and thereafter means the successor. "Trust Officer" means any Vice President, any Assistant Vice President or any assistant officer of the Trustee assigned by the Trustee to administer its corporate trust matters, and also means, with respect to a particular trust matter, any other authorized officer of the Trustee to whom such matter is referred. -13- "United States" means the United States of America. "Unrestricted Subsidiary" means (i) any Subsidiary that as of the time of determination shall have theretofore been designated an Unrestricted Subsidiary by the Board of Directors in the manner provided below and not redesignated as a Restricted Subsidiary and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property of, the Company or any other Subsidiary that is not a subsidiary of the Subsidiary to be so designated; provided, however, that either (A) the Subsidiary to be designated has total assets of One Thousand Dollars ($1,000) or less or (B) if such Subsidiary has assets greater than One Thousand Dollars ($1,000), that such designation would be permitted under Section 4.04. The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary of the Company, provided that any such redesignation shall be deemed to be an Incurrence by the Company and its Restricted Subsidiaries of the Indebtedness (if any) of such redesignated Restricted Subsidiary for purposes of Section 4.05 as of the date of such redesignation to the extent that such Indebtedness does not already constitute Indebtedness of the Company or one or more of its Restricted Subsidiaries, and, provided, further, that immediately after giving effect to such designation (x) the Company could Incur One Dollar ($1.00) of additional Indebtedness under Section 4.05(a) and (y) no Default shall have occurred and be continuing. Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the resolution of the Board of Directors giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions; provided, however, that the failure to so file such resolution or Officers' Certificate with the Trustee shall not impair or affect the validity of such designation. "Voting Stock" with respect to any Person means the Capital Stock normally entitled to vote in elections of the Board of Directors. "Wholly Owned Subsidiary" means a Subsidiary (other than an Unrestricted Subsidiary) all the Capital Stock of which (other than directors' qualifying shares or shares held for the benefit of the Company or a Restricted Subsidiary for the purpose of maintaining the limited liability status of such Subsidiary) is owned by the Company or another Wholly Owned Subsidiary. SECTION 1.02. Other Definitions.
Term Defined in Section "Affiliate Transaction" 4.06 "Application Period" 4.07 "Asset Sale Offer" 4.07 "Asset Sale Offer Amount" 4.07 "Asset Sale Purchase Date" 4.07 "Assumed Indebtedness" 4.08 "Bankruptcy Law" 6.01 "Change of Control Offer" 4.08 "Change of Control Purchase Date" 4.08 "Custodian" 6.01
-14-
Term Defined in Section "Defaulted Interest" 2.11 "Event of Default" 6.01 "Legal Holiday" 12.08 "Offer Period" 4.07 "Paying Agent" 2.03 "Payment" 11.02 "Registrar" 2.03 "U.S. Government Obligations" 8.01
SECTION 1.03. Incorporation by Reference of Trust Indenture Act. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms incorporated by reference in and made a part of or used in this Indenture have the following meaning: "Commission" means the SEC. "indenture securities" means the Securities. "indenture security holder" means a Securityholder. "indenture to be qualified" means this Indenture. "indenture trustee" or "institutional trustee" means the Trustee. "obligor" on the indenture securities means the Company. All other TIA terms incorporated by reference in and made a part of or used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them. SECTION 1.04. Rules of Construction. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with generally accepted accounting principles; (3) "or" is not exclusive; and (4) words in the singular include the plural, and in the plural include the singular. -15- ARTICLE TWO THE SECURITIES SECTION 2.01. Form and Dating. The Securities shall be issuable as registered securities without coupons and in denominations provided for substantially in the form of Exhibit A, which is a part of this Indenture. The Securities shall be numbered, lettered, or otherwise distinguished in such manner or in accordance with such plans as the Officers of the Company executing the same may determine with the approval of the Trustee. The Securities and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A hereto. The Securities may have notations, legends or endorsements required by law, stock exchange rule or usage. The Company shall approve the form of the Securities and any notation, legend or endorsement on them; provided that the Securities shall conform to the requirements of this Indenture and Exhibit A hereto which is a part of this Indenture. Each Security shall be dated the date of its authentication. SECTION 2.02. Execution and Authentication. Two Officers shall sign the Securities for the Company by manual or facsimile signature. The Company's seal shall be reproduced on the Securities in facsimile form. Typographical and other minor errors or defects in any such reproduction of the seal or any such signature shall not affect the validity or enforceability of any Security which has been duly authenticated and delivered by the Trustee. If an Officer whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security, the Security shall be valid nevertheless; and any Security may be signed on behalf of the Company by such persons as, at the actual date of the execution of such Security, shall be the proper Officers of the Company, although at the date of the execution and delivery of this Indenture any such person was not such officer. A Security shall not be valid or obligatory until the Trustee manually signs the certificate of authentication on the Security. The signature shall be conclusive evidence that the Security has been authenticated under this Indenture. Upon a written order of the Company signed by two Officers or by an Officer and an Assistant Treasurer of the Company, which order shall specify the aggregate principal amount to be issued and the date of issuance, the Trustee shall authenticate Securities for original issue in such aggregate principal amount as specified in such order, which shall be an amount equal to the Maximum Principal Amount. The aggregate principal amount of Securities outstanding at any time may not exceed the Maximum Principal Amount, except as provided in Sections 2.07 and 2.08. SECTION 2.03. Registrar and Paying Agent. The Company shall maintain an office or agency where Securities may be presented for registration of transfer or for exchange ("Registrar") and an office or agency where -16- Securities may be presented for payment ("Paying Agent"). The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company may appoint one or more co-Registrars, and one or more additional Paying Agents; provided that the co-Registrar shall not keep the aforesaid register. The term "Paying Agent" includes any additional paying agent. Upon receipt of the Company's written consent, the Trustee may appoint an authenticating agent acceptable to the Company to authenticate Securities. An authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such authenticating agent. An authenticating agent has the same rights as an Agent to deal with the Company or an Affiliate. The Company shall enter into an appropriate agency agreement with any Paying Agent not a party to this Indenture. The agreement shall implement the provisions of this Indenture that relate to such Paying Agent. The Company shall notify the Trustee of the name and address of any such Paying Agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as such. The Company initially appoints the Trustee as Registrar and Paying Agent and the Trustee hereby accepts such appointment. SECTION 2.04. Paying Agent to Hold Money in Trust. Each Paying Agent shall hold in trust for the benefit of Securityholders or the Trustee all money held by the Paying Agent for the payment of principal of or interest on the Securities; provided, however, that such Paying Agent shall not have any obligation to pay any interest on such money to the Holders or the Trustee. Each Paying Agent shall notify the Trustee of any default by the Company in making any such payment. While any default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee and, upon doing so, the Paying Agent shall have no further liability for the money. If the Company or a Subsidiary acts as Paying Agent, it shall segregate the money and hold it as a separate trust fund. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon doing so the Paying Agent shall have no further liability for the money. SECTION 2.05. Securityholder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee at least one business day before each semiannual interest payment date and at such other times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Securityholders. SECTION 2.06. Registration, Transfer and Exchange. When a Security is presented to the Registrar or a co-Registrar with a request to register a transfer, the Registrar or co-Registrar shall register the transfer as requested if the requirements for such transaction are met. Every Security presented or surrendered for registration of transfer or for exchange shall be duly endorsed by, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Registrar duly executed by, the Holder thereof or his attorney duly authorized in writing and accompanied by -17- all necessary transfer tax stamps attached thereto. When Securities are presented to the Registrar or a co-Registrar with a request to exchange them for an equal principal amount of Securities of other denominations, the Registrar or co-Registrar shall make the exchange as requested if the same requirements are met; provided, however, that the Registrar or co-Registrar shall not be required to register the transfer or exchange of any Security (a) during the period of 15 days prior to the first mailing of notice of redemption or (b) after the selection of such Security for redemption. To permit transfers and exchanges, the Company shall execute and the Trustee shall authenticate Securities at the Registrar's or co-Registrar's request. Any exchange or transfer shall be without charge, except that the Company may require payment of a sum sufficient to cover any taxes or other government charge that may be imposed in relation thereto. SECTION 2.07. Replacement Securities. If the Holder of a Security claims that the Security has been lost, destroyed or wrongfully taken, the Company shall issue and, upon receipt of a written order of the Company signed by two Officers, the Trustee shall authenticate a replacement Security if the Trustee's and the Company's requirements are met. If required by the Trustee or the Company, the Holder shall provide an affidavit in form satisfactory to the Trustee and the Company and an indemnity bond in an amount sufficient in the judgment of the Company and the Trustee to protect the Company, the Trustee or any Agent from any loss which any of them may suffer if a Security is replaced. The Company may charge for its expenses in replacing a Security. Every substitute Security of any series issued pursuant to the provisions of this Section by virtue of the fact that any Security is destroyed, lost or stolen shall constitute an additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone and shall be entitled to all the benefits of (but shall be subject to all the limitations of rights set forth in) this Indenture equally and proportionately with any and all other Securities duly authenticated and delivered hereunder. All Securities shall be held and owned upon the express condition that, to the extent permitted by law, the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, defaced, destroyed, lost or stolen Securities and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender. SECTION 2.08. Outstanding Securities. Securities outstanding at any time are all Securities authenticated by the Trustee except for those cancelled by it and those described in this Section. A Security does not cease to be outstanding because the Company or one of its Affiliates holds the Security. If a Security is replaced pursuant to Section 2.07, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replacement Security is held by a bona fide purchaser. If the Paying Agent holds on a redemption date or maturity date money sufficient to pay Securities payable on that date, then on or after that date such Securities cease to be outstanding and interest on them ceases to accrue. Such Securities carry no rights except the right to receive payment. -18- SECTION 2.09. Temporary Securities. Until definitive Securities are ready for delivery, the Company may prepare and execute and the Trustee shall authenticate Temporary Securities. Temporary Securities shall be substantially in the form of definitive Securities but may have variations that the Company considers appropriate for temporary Securities. Without unreasonable delay, the Company shall execute and the Trustee shall authenticate definitive Securities in exchange for temporary Securities without charge. Until so exchanged, the temporary Securities shall be entitled to the same benefits under this Indenture as definitive Securities. SECTION 2.10. Cancellation. The Company at any time may deliver Securities to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Securities surrendered to them for transfer, exchange or payment. The Trustee and no one else shall cancel and destroy all Securities surrendered for transfer, exchange, payment or cancellation. The Trustee shall, upon the cancellation and destruction of any Securities, deliver a certificate of destruction to the Company. The Company may not issue new Securities to replace Securities that it has paid or delivered to the Trustee for cancellation. SECTION 2.11. Defaulted Interest. Any interest on any Security which is payable, but is not punctually paid or duly provided for, on any interest payment date ("Defaulted Interest") shall forthwith cease to be payable to the registered Holder on the relevant regular record date, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in clause (1) or clause (2) below: (1) The Company may elect to make payment of any Defaulted Interest to the persons in whose names the Securities were registered at the close of business on a regular record date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the persons entitled to such Defaulted Interest as provided herein. Thereupon the Trustee shall fix a special record date for the payment of such Defaulted Interest which shall be not more than 15 nor less than 10 days prior to the date of the proposed payment, and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such special record date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the special record date therefor to be mailed, first class postage prepaid, to each Securityholder at his address as it appeared in the Security register on such regular record date for payment of such Defaulted Interest, not less than 10 days prior to such special record date. Notice of the proposed payment of such -19- Defaulted Interest and the special record date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the persons in whose names the Securities were registered on such regular record date and shall no longer be payable pursuant to the following Clause (2). (2) The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this Clause, such payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. SECTION 2.12. CUSIP Number. The Company may use a "CUSIP" number when issuing the Securities, and if so, the Trustee may use the CUSIP number in notices of redemption or exchange as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness or accuracy of the CUSIP number printed in the notice or on the Securities, and that reliance may be placed only on the other identification numbers printed on the Securities. SECTION 2.13. Conditions to Effectiveness of Indenture. The effectiveness of this Indenture shall be subject to the satisfaction of the following conditions precedent: (1) The Company shall have delivered to the Trustee, and to each Holder of an Old Note that is tendered for exchange and not withdrawn pursuant to the Exchange Offer who shall have requested a copy in writing, an Officers' Certificate in the form of Exhibit B to this Indenture; and (2) The Company shall have delivered to the Trustee, and to each Holder of an Old Note that is tendered for exchange and not withdrawn pursuant to the Exchange Offer who shall have requested a copy in writing, an opinion of its counsel, Nixon Peabody LLP, in the form of Exhibit C to this Indenture. ARTICLE THREE REDEMPTION SECTION 3.01. Notices to Trustee. If the Company wants to redeem Securities pursuant to paragraph 5 of the Securities, it shall notify the Trustee of the redemption date and the principal amount of Securities to be redeemed and the applicable redemption price. The notice shall be accompanied -20- by an Officer's Certificate and shall state that the redemption complies with the provisions of this Indenture. The Company shall give such notice and Officer's Certificate provided for in this Section at least 45 days but not more than 60 days before the redemption date. SECTION 3.02. Selection of Securities to be Redeemed. If less than all the Securities are to be redeemed, the Trustee shall select the Securities to be redeemed by lot in accordance with a method the Trustee considers fair and appropriate and which complies with applicable legal and stock exchange requirements, if any. The Trustee shall make the selection from Securities outstanding and not previously called for redemption. If less than all the Securities are to be redeemed, the Trustee may select for redemption only portions of the principal of Securities that have denominations in amounts of $1,000 or integral multiples of $1,000. If less than all the Securities are to be redeemed, Securities and portions of them it selects shall be in amounts of $1,000 or integral multiples of $1,000. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. SECTION 3.03. Notice of Redemption. At least 30 days but not more than 60 days before a redemption date, the Company shall mail a notice of redemption by first-class mail to each Holder of Securities to be redeemed at his address as it appears on the registration books of the Registrar. The notice shall identify the Securities to be redeemed, including the CUSIP number, and shall state: (1) the redemption date; (2) the redemption price; (3) the name and address of the Paying Agent; (4) that Securities called for redemption must be surrendered to the Paying Agent to collect the redemption price; (5) that interest on Securities called for redemption ceases to accrue on and after the redemption date; and (6) the provision of the Indenture or paragraph of the Securities pursuant to which the Securities are to be redeemed. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at its expense. SECTION 3.04. Effect of Notice of Redemption. Once notice of redemption is mailed, Securities called for redemption become due and payable on the redemption date and at the redemption price. Upon surrender to the Paying -21- Agent, such Securities shall be paid at the redemption price, plus accrued interest to the redemption date. SECTION 3.05. Deposit of Redemption Price. On or before the redemption date, the Company shall deposit with the Paying Agent money sufficient to pay the redemption price of and accrued interest on all Securities (or portions thereof) to be redeemed on that date. SECTION 3.06. Securities Redeemed in Part. Upon surrender of a Security that is redeemed in part, the Trustee shall authenticate for the Holder a new Security equal in principal amount to the unredeemed portion of the Security surrendered. ARTICLE FOUR COVENANTS SECTION 4.01. Payment of Securities. The Company shall pay the principal of and interest on the Securities on the dates and in the manner provided in the Securities. The Company shall pay interest on overdue principal at the rate borne by the Securities; it shall pay interest on overdue installments of interest at the same rate to the extent lawful. SECTION 4.02. SEC Reports. The Company shall file with the Trustee within 15 days after it files them with the SEC copies of the annual reports and of the information, documents, and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) which the Company is required to file with the SEC pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. The Company also shall comply with the other provisions of TIA Section 314(a). So long as the Securities remain outstanding, the Company shall cause its annual report to stockholders and any quarterly or other financial reports furnished by it to stockholders to be mailed to the Holders at their addresses appearing in the register of Securities maintained by the Registrar. If the Company is not required to furnish annual or quarterly reports to its stockholders pursuant to the Securities Exchange Act of 1934, the Company will cause its financial statements, including any notes thereto, and a "Management's Discussion and Analysis of Financial Condition and Results Of Operations," to be mailed to the Holders within 90 days after the end of each fiscal year and within 45 days after the end of each of the first three fiscal quarters in each year, and such financial statements shall otherwise contain substantially the same information as would have been required to have been furnished to the SEC in any annual or quarterly report, as the case may be. A copy of such statements shall be provided to the Trustee at the same time as it is mailed to the Holders. -22- SECTION 4.03. Annual and Quarterly Review Certificates. The Company shall file with the Trustee (who shall promptly deliver a copy thereof to any Holder that so requests in writing) within 105 days after the end of each fiscal year of the Company and within 60 days after the end of each other fiscal quarter of the Company, commencing with the first such period to end after the effective date of the Indenture, an Officers' Certificate stating that: (1) the signing officers have supervised a review of the activities of the Company and its Subsidiaries during the fiscal period with respect to which such Officers' Certificate is being issued to determine whether the Company has observed and performed its obligations under this Indenture; (2) to the best knowledge of each officer signing such certificate, the Company has observed and performed all of its covenants in this Indenture and is not in default in the observance and performance of any of the terms, provisions and conditions of this Indenture (or if the Company is in such default, specifying those defaults and the nature thereof of which he has knowledge); and (3) to the best knowledge of each such signing officer, no event has occurred and is continuing which would prohibit payment of the principal or interest on the Securities. SECTION 4.04. Limitation on Restricted Payments. (a) So long as any of the Securities are outstanding, the Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, make any Restricted Payment, unless: (i) no Default shall have occurred and be continuing (or would result therefrom); (ii) upon giving effect on a pro forma basis, as if paid, to the proposed Restricted Payment, the Company would be permitted to incur an additional One Dollar ($1.00) of Indebtedness pursuant to Section 4.05(a); provided, however, that solely for purposes of this Section 4.04(a)(ii), the Consolidated Coverage Ratio determined pursuant to Section 4.05(a) shall be calculated on a pro forma basis as if the Company had incurred an amount of Indebtedness equal to the amount of such Restricted Payment and all other Restricted Payments theretofore made in respect of the calculation period (such amount of Indebtedness which is assumed to have been incurred being hereafter referred to as the "Assumed Indebtedness") as of the first day of the applicable four consecutive fiscal quarter period with respect to which the Consolidated Coverage Ratio is to be calculated, and that the Company's Consolidated Interest Expense for such period included the interest that the Company would have paid in respect of the Assumed Indebtedness with respect to such period, assuming the interest rate thereon equaled the average interest rate on the Company's outstanding Indebtedness Incurred under Section 4.05(b)(v) hereof for such period; and -23- (iii) upon giving effect, as if paid, to the proposed Restricted Payment, the aggregate amount of all such Restricted Payments subsequent to September 30, 2003, shall not exceed the sum of: (A) fifty percent (50%) of aggregate Consolidated Net Income accrued during the period (treated as one accounting period) from October 1, 2003, to the end of the most recent fiscal quarter for which financial statements are available (or if such Consolidated Net Income is a deficit, minus one hundred percent (100%) of such deficit), and minus one hundred percent (100%) of the amount of any write-downs, write-offs, other negative revaluations and other extraordinary charges (other than relating to Recapitalization Expenses or the amortization thereof) not otherwise reflected in Consolidated Net Income during such period; (B) the aggregate Net Cash Proceeds received by the Company after the date hereof from the issuance or sale (other than to a Subsidiary or an employee stock ownership plan) of Capital Stock (other than Redeemable Stock or Exchangeable Stock) of the Company; (C) the aggregate Net Cash Proceeds received by the Company from the issuance or sale of its Capital Stock (other than Redeemable Stock or Exchangeable Stock) to an employee stock ownership plan subsequent to the date hereof; provided, however, that if such employee stock ownership plan incurs any Indebtedness, such Net Cash Proceeds shall be included only to the extent that any such proceeds are equal to any increase in the Consolidated Net Worth resulting from principal repayments made by such employee stock ownership plan with respect to Indebtedness Incurred by it to finance the purchase of such Capital Stock; (D) the amount by which the principal amount of and any accrued interest on Indebtedness of the Company or its Restricted Subsidiaries (other than Indebtedness in respect of any Subordinated Obligation that was outstanding as of the effective date of this Indenture) is reduced on the Company's consolidated balance sheet upon the conversion or exchange (other than by a Subsidiary) subsequent to the date hereof of any Indebtedness of the Company or any Restricted Subsidiary for Capital Stock (other than Redeemable Stock or Exchangeable Stock) of the Company (less the amount of any cash, or the value of any other property, distributed by the Company or any Restricted Subsidiary upon such conversion or exchange); and (E) an amount equal to the net reduction in Investments in Unrestricted Subsidiaries resulting from payments of interest on Indebtedness, dividends, repayments of loans or advances, or other transfers of assets, in each case to the Company or any Restricted Subsidiary from Unrestricted Subsidiaries, or from redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case as provided in the definition of "Investments"), not to exceed in the case -24- of any Unrestricted Subsidiary the aggregate amount of Investments previously made by the Company or any Restricted Subsidiary in such Unrestricted Subsidiary which were treated as Restricted Payments. (b) The failure to satisfy the conditions set forth in paragraphs (ii) and (iii) of Section 4.04(a), and, with respect to the redemption, cancellation or retirement of shares of the Company's Series B Preferred Stock, the failure to satisfy the condition set forth in paragraph (i) of Section 4.04(a) (unless such failure results from the failure to pay when due the interest on or principal of the Securities), shall not prohibit any of the following as long as the conditions set forth in Section 4.04(a)(i) (except as set forth below) is satisfied (and payments made in accordance with the following shall not (except as set forth in paragraph (ii) below) be included in the calculation of Restricted Payments pursuant to paragraph (iii) of Section 4.04(a): (i) any purchase or redemption of Capital Stock or Subordinated Obligations of the Company made by exchange for, or out of the proceeds of the substantially concurrent sale of, Capital Stock of the Company (other than Redeemable Stock or Exchangeable Stock and other than Capital Stock issued or sold to a Subsidiary or an employee stock ownership plan); provided, however, that notwithstanding Section 4.04(a)(i), the occurrence or existence of a Default (other than a Default arising from the failure to pay when due, by acceleration or otherwise, the interest on or principal of the Securities) shall not prohibit, for purposes of this Section, the making of such purchase or redemption; and provided, further, the Net Cash Proceeds from such sale shall be excluded from clauses (B) and (C) of Section 4.04(a)(iii); (ii) dividends paid within sixty (60) days after the date of declaration thereof if at such date of declaration such dividend would have complied with this Section; provided, however, that notwithstanding Section 4.04(a)(i), the occurrence or existence of a Default (other than a Default arising from the failure to pay when due, by acceleration or otherwise, the interest on or principal of the Securities) at such time of payment shall not prohibit the payment of such dividends; and provided, further, that such dividends shall be included in the calculation of the amount of Restricted Payments for purposes of Section 4.04(a)(iii); (iii) any declaration or payment of dividends on, and any redemption, cancellation or retirement of, the Series B Preferred Stock required, but only to the extent so required (and in no event prior to the date on which any such declaration, payment, redemption, cancellation or other retirement is mandatorily required), by the terms of the Company's Restated Certificate of Incorporation as in effect on the date hereof without amendment; or (iv) any payment of Recapitalization Expenses. SECTION 4.05. Limitation on Incurrence of Indebtedness. (a) The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, Incur any Indebtedness (other than the Securities and any other Indebtedness outstanding as of the effective date of this Indenture) unless, after giving effect -25- thereto, the Consolidated Coverage Ratio determined at the time of such Incurrence is greater than or equal to 2.50, the Senior Debt Ratio is less than or equal to 2.50, and the Total Debt Ratio is less than or equal to 4.50. (b) Notwithstanding the foregoing, this Section 4.05 shall not limit the ability of the Company or any Restricted Subsidiary to Incur the following Indebtedness: (i) Refinancing Indebtedness; (ii) In addition to any Indebtedness otherwise permitted to be Incurred pursuant to this Section 4.05, up to Five Million Dollars ($5,000,000) aggregate principal amount of Indebtedness of the Company and Restricted Subsidiaries at any one time outstanding; (iii) Indebtedness of the Company that is owed to and held by one or more Wholly Owned Subsidiaries and Indebtedness of a Wholly Owned Subsidiary which is owed to and held by the Company and one or more Wholly Owned Subsidiaries; provided, however, that any subsequent issuance or transfer of any Capital Stock that results in any such Wholly Owned Subsidiary ceasing to be a Wholly Owned Subsidiary or any transfer of such Indebtedness (other than to the Company or a Wholly Owned Subsidiary) shall be deemed, in each case, to constitute the Incurrence of such Indebtedness by the Company or by a Wholly-Owned Subsidiary, as the case may be; (iv) Indebtedness Incurred, in the form of revolving loans, letters of credit and acceptances, term loans, or any one or more of the foregoing, for the purpose of financing the working capital needs and capital expenditures of the Company and its Subsidiaries or for any other purpose not prohibited by this Indenture; provided, however, that after giving effect to the Incurrence of such Indebtedness and any substantially simultaneous use of proceeds thereof the aggregate principal amount of all such Indebtedness Incurred pursuant to this clause (iv) and then outstanding immediately after such Incurrence and such use of proceeds shall not exceed the sum of (x) Thirty-five Million Dollars ($35,000,000), (y) sixty-five percent (65%) of the net book value of the inventory, as defined in accordance with generally accepted accounting principles, and (z) ninety percent (90%) of the net book value of the receivables as defined in accordance with generally accepted accounting principles, of the Company and its Restricted Subsidiaries on a consolidated basis at such time; (v) Indebtedness of a Subsidiary issued and outstanding on or prior to the date on which such Subsidiary was acquired by the Company (other than Indebtedness issued as consideration in, or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of related transactions pursuant to which such Subsidiary became a Subsidiary or was acquired by the Company); provided, however, that the Company would have been able to Incur such Indebtedness at the time pursuant to Section 4.05(a) and provided that the holders of such Indebtedness do not, at any time, have direct or indirect recourse to any property or assets of the Company and its Subsidiaries other than the property and assets of such acquired entity and its Subsidiaries, -26- including the Capital Stock thereof except to the extent such recourse exists pursuant to a Guarantee which constitutes Indebtedness permitted to be Incurred under Section 4.05(a); (vi) Other indebtedness outstanding upon completion of or Incurred in connection with the Recapitalization; (vii) Indebtedness of the Company or any Wholly Owned Subsidiary assumed by the Company or a Wholly Owned Subsidiary, as the case may be, in connection with the sale, transfer or other disposition (including, without limitation, by way of merger or consolidation) of assets of the Company or any Wholly Owned Subsidiary to the Company or a Wholly Owned Subsidiary; or (viii) guarantees by the Company or a Restricted Subsidiary of Indebtedness of a Restricted Subsidiary otherwise permitted to be Incurred under this Section. (c) Notwithstanding Sections 4.05(a) and 4.05(b), the Company shall not issue any Indebtedness if the proceeds thereof are used, directly or indirectly, to repay, prepay, redeem, defease, retire, refund or refinance any Subordinated Obligations (other than as contemplated by Section 4.05(b)(vi), provided, however, that in no event shall the Company be permitted to repay, prepay, redeem, defease, retire, refund or refinance Junior Notes by reason of this parenthetical phrase) unless such repayment, prepayment, redemption, defeasance, retirement or refunding is not prohibited by Section 4.04 or 4.06 or unless such Indebtedness shall be subordinated to the Securities to at least the same extent as such Subordinated Obligations. SECTION 4.06. Transactions with Affiliates. (a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, enter into any transaction or series of related transactions (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate of the Company (an "Affiliate Transaction") unless: (i) the terms thereof taken as a whole are not less favorable to the Company or such Restricted Subsidiary than those that could reasonably be expected to be obtained in a comparable arm's length transaction with an unrelated third Person, (ii) such transaction or series of related transactions shall have been approved as meeting such standard, in good faith, by a majority of the disinterested members of the Board of Directors of the Company (even though such majority may constitute less than a quorum of the entire Board of Directors) as evidenced by a Board Resolution and (iii) if the amount of such transaction or the aggregate amount of such series of transactions is greater than $5,000,000, the Company or such Restricted Subsidiary shall have received an opinion from an independent investment banking firm that such transaction or series of transactions is fair to the Company or such Restricted Subsidiary, as the case may be, from a financial point of view. The Company shall deliver to the Trustee, within 90 days after the end of each fiscal year, an Officer's Certificate which shall (x) specify the aggregate dollar amount of all Affiliate Transactions occurring during such year involving individually in excess of $60,000 and (y) briefly describe the nature of such Affiliate Transactions. -27- (b) The foregoing restriction shall not apply to (i) the payment of any Restricted Payment which is permitted to be paid pursuant to Section 4.04; (ii) any issuance of securities, or other payments, awards or grants, in cash or otherwise, pursuant to, or the funding of, employment arrangements and Plans approved by the Board of Directors which are (1) payable in consideration for services actually rendered and (2) comparable to those generally paid or made available by entities engaged in the same or similar businesses as the Company; (iii) the grant of stock options, restricted stock awards, stock appreciation rights or similar rights to employees, agents and directors of the Company pursuant to Plans approved by the Board of Directors; (iv) loans or advances to employees in the ordinary course of business; (v) payments by the Company and any of its Subsidiaries pursuant to any tax sharing agreement among the members of the consolidated group of corporations of which the Company is the common parent, provided that such tax sharing agreement does not, in the good faith determination of the Board of Directors, adversely affect the ability of the Company to make all payments of principal and interest on the Securities as and when due; (vi) the payment of reasonable fees to directors of the Company and its Subsidiaries who are not employees of the Company or its Subsidiaries; (vii) any Affiliate Transaction between the Company and a Wholly Owned Subsidiary or between Wholly Owned Subsidiaries; (viii) the transactions constituting the Recapitalization; and (ix) the agreement to do any of the foregoing. (c) Notwithstanding anything else to the contrary herein, in no event shall the Company and its Subsidiaries make any payment or payments (excluding any payments made in the form of Capital Stock), to Lubin, Delano & Company or any partner thereof, any member of the immediate family (as such term is used in Item 404(a) of SEC Regulation S-K) of any partner of Lubin, Delano & Company or any Affiliate of Lubin, Delano & Company or any partner thereof in connection with the performance of investment banking or other services with respect to the Recapitalization. SECTION 4.07. Sales of Assets. (a) Neither the Company nor any Restricted Subsidiary shall consummate any Asset Sale unless (i) the Company or such Restricted Subsidiary receives consideration at the time of such Asset Sale at least equal to the fair market value, as determined in good faith by the Board of Directors, of the shares or assets subject to such Asset Sale (including the value of any noncash consideration), (ii) with respect to any Asset Sale involving total consideration in excess of Two Million Five Hundred Thousand Dollars ($2,500,000), at least 80% of the consideration therefor (exclusive of indemnities and assumptions of liabilities other than Indebtedness) received by the Company or such Restricted Subsidiary is in the form of cash and (iii) an amount equal to one hundred percent (100%) of the Net Available Cash is applied by the Company (or such Subsidiary, as the case may be) as set forth herein. For the purposes of this Section, the following are deemed to be cash: (x) any Indebtedness (as reflected on the Company's consolidated balance sheet) of the Company or any Restricted Subsidiary (but not of any Unrestricted Subsidiary) for which neither the Company nor any Restricted Subsidiary will continue to be liable, directly or indirectly, as a result of such Asset Sale; and (y) securities received by the Company or any Restricted Subsidiary from such transferee that are promptly converted by the Company or such Restricted Subsidiary into cash. Nothing in this Section 4.07 shall prohibit the Company or any Subsidiary from transferring assets, properties or Capital Stock of any Subsidiary to any Wholly-Owned Subsidiary or to the Company, nor shall the provisions of this Section be applicable to any such transfer. The Company shall not permit any -28- Unrestricted Subsidiary to make any Asset Sale unless such Unrestricted Subsidiary receives consideration at the time of such Asset Sale at least equal to the fair market value of the shares or assets so disposed of as determined in good faith by the Board of Directors. (b) Within two hundred seventy (270) days (such two hundred seventy (270) days being the "Application Period") following the consummation of an Asset Sale (or in the case of Net Available Cash from the conversion of securities, within two hundred seventy (270) days after the receipt of such cash), the Company or such Restricted Subsidiary shall apply the Net Available Cash from such Asset Sale as follows: (i) first, to the extent the Company or such Restricted Subsidiary elects, to reinvest in Additional Assets (including by means of an investment in Additional Assets by a Restricted Subsidiary with Net Available Cash received by the Company or another Restricted Subsidiary); (ii) second, to the extent of the balance of such Net Available Cash after application in accordance with clause (i), and to the extent the Company or such Restricted Subsidiary elects (or is required by the terms of any Senior Debt or any Indebtedness of such Restricted Subsidiary), to prepay, repay or purchase Senior Debt or Indebtedness (other than any Preferred Stock) of a Restricted Subsidiary (in each case other than Indebtedness owed to the Company or an Affiliate of the Company); provided, however, that nothing contained in this clause (ii) shall prohibit or otherwise impair the Company from subsequently increasing, at any time and from time to time, the amount of such Senior Debt or Indebtedness to the extent that the Incurrence of such Senior Debt or Indebtedness is permitted pursuant to Section 4.05 hereof (and no violation of this Section shall be deemed to have occurred as a consequence of any such subsequent increase), (iii) third, to the extent of the balance of such Net Available Cash after application in accordance with clause (i) and (ii), and to the extent the Company or such Restricted Subsidiary elects, to purchase Securities; (iv) fourth, to the extent of the balance of such Net Available Cash after application in accordance with clauses (i), (ii) and (iii), to make an offer to purchase Securities pursuant to and subject to the conditions of Section 4.07(c); provided, however, that in connection with any prepayment, repayment or purchase of Indebtedness pursuant to clause (ii) or (iii) above, the Company or such Restricted Subsidiary shall retire such Indebtedness and cause the related loan commitment (if any) to be permanently reduced in an amount equal to the principal amount so prepaid, repaid or purchased, except that nothing contained in the foregoing proviso shall prohibit or otherwise impair the Company from subsequently increasing, at any time (other than substantially contemporaneous with such prepayment, repayment or purchase) and from time to time, the amount of such loan commitment to the extent necessary to permit the Incurrence of Senior Debt or Indebtedness of a Restricted Subsidiary which Indebtedness is otherwise permitted pursuant to Section 4.05 hereof (and no violation of this Section shall be deemed to have occurred as a consequence of any such subsequent increase). Notwithstanding the foregoing, the Company shall not be required to apply Net Available Cash in accordance with this Section 4.07 except to the extent that the aggregate Net Available Cash from all Assets Sales exceeds Two Million Five Hundred Thousand Dollars ($2,500,000) per fiscal year. To the extent that any Net Available Cash remains after the application of such Net Available Cash in accordance with this paragraph, the Company or such Restricted Subsidiary may utilize such remaining Net Available Cash in any manner not otherwise prohibited by this Indenture. If Indebtedness of the Company issued after the date of the Indenture and ranking pari passu in right of payment with the Securities is at the time outstanding, and the terms of such Indebtedness provide that a similar offer is to be made with respect thereto, then the Asset Sale Offer for the Securities shall be made concurrently with such other offer, and the Securities -29- and such other Indebtedness shall be accepted pro rata in proportion to the respective aggregate principal amounts which the holders of Securities and such Indebtedness, respectively, elect to have redeemed. To the extent that any or all of the Net Available Cash of any Foreign Asset Sale is prohibited or delayed by applicable local law from being repatriated to the United States, the portion of such Net Available Cash so affected shall not be required to be applied at the time provided above, but may be retained by the applicable Restricted Subsidiary so long, but only so long, as the applicable local law will not permit repatriation to the United States (the Company hereby agreeing to cause the applicable Restricted Subsidiary to promptly take all actions required by the applicable local law to permit such repatriation). Once such repatriation of any such affected Net Available Cash is permitted under the applicable local law, such repatriation shall be immediately effected and such repatriated Net Available Cash will be applied in the manner set forth in this Section. To the extent that the Board of Directors determines, in good faith, that repatriation of any or all of the Net Available Cash of any Foreign Asset Sale would have a material adverse tax consequence, the Net Available Cash so affected may be retained by the applicable Restricted Subsidiary for so long as such material adverse tax consequence would continue. Notwithstanding the foregoing, this Section shall not apply to, or prevent, (i) any sale of assets, property, or Capital Stock of Subsidiaries to the extent that the fair market value (as determined in good faith by the Board of Directors) of such assets, property, or Capital Stock of Subsidiaries, together with the fair market value of all other assets, property, or Capital Stock of Subsidiaries sold, transferred or otherwise disposed of in Asset Sales during the 12 month period preceding the date of such sale, does not exceed $1,000,000, or (ii) any sale of trade accounts receivable in connection with customary forms of receivables financing transactions. (c) Subject to the last sentence of this paragraph, in the event of an Asset Sale that requires the purchase of Securities pursuant to Section 4.07(b)(iv), the Company will be required to purchase Securities tendered pursuant to an offer by the Company for the Securities (the "Asset Sale Offer") at a purchase price of 100% of their principal amount plus accrued and unpaid interest to the Asset Sale Purchase Date in accordance with the procedures (including prorationing in the event of oversubscription) set forth in Section 4.07(d). If the aggregate purchase price of Securities tendered pursuant to the Asset Sale Offer is less than the Net Available Cash allotted to the purchase of the Securities, the Company shall apply the remaining Net Available Cash in accordance with the last sentence of the first paragraph of Section 4.07(b). The Company shall not be required to make an Asset Sale Offer for Securities pursuant to this Section if the Net Available Cash available therefor (after application of the proceeds as provided in Section 4.07(b)(i), (ii) and (iii)) is less than One Million Dollars ($1,000,000). (d) (1) Promptly, and in any event prior to the two hundred thirtieth (230th) day after the later of the date of each Asset Sale as to which the Company must make an Asset Sale Offer or the receipt of Net Available Cash therefrom, the Company shall be obligated to deliver to the Trustee and send, by first-class mail to each Holder, a written notice stating that the Holder may elect to have his Securities purchased by the Company either in whole or in part (subject to proration as hereinafter described in the event the Asset Sale Offer is oversubscribed) in integral -30- multiples of $1,000 of principal amount, at the applicable purchase price. The notice shall specify a purchase date not less than thirty (30) days, nor more than sixty (60) days, after the date of such notice (the "Asset Sale Purchase Date") and shall also state that: (A) the Asset Sale Offer is being made pursuant to this Section; (B) any Security not surrendered or accepted for payment will continue to accrue interest; (C) any Security accepted for payment pursuant to the Asset Sale Offer shall cease to accrue interest after the Asset Sale Purchase Date; (D) any Holder electing to have a Security purchased (in whole or in part) pursuant to an Asset Sale Offer will be required to surrender the Security, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Security completed, to the Paying Agent at the address specified in the notice at least five (5) Business Days before the Asset Sale Purchase Date; and (E) any Holder will be entitled to withdraw his or her election if the Paying Agent receives, not later than three (3) Business Days prior to the Asset Sale Purchase Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security the Holder delivered for purchase and a statement that such Holder is withdrawing his or her election to have the Security purchased. (2) Not later than the date upon which written notice of an Asset Sale Offer is delivered to the Trustee as provided herein, the Company shall deliver to the Trustee an Officers' Certificate as to (i) the amount of the Asset Sale Offer (the "Asset Sale Offer Amount"), (ii) the allocation of the Net Available Cash from the Asset Sales as a result of which such Asset Sale Offer is being made and (iii) the compliance of such allocation with the provisions of Section 4.07(a). On such date, the Company shall also deposit with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust) funds in an amount equal to the Asset Sale Offer Amount to be held for payment in accordance with the provisions of this Section. Upon the expiration of the period for which the Asset Sale Offer remains open (the "Offer Period"), the Company shall deliver, or cause to be delivered, to the Trustee the Securities or portions thereof which have been properly tendered to and are to be accepted by the Company. The Paying Agent shall, on the Asset Sale Purchase Date, mail or deliver payment to each tendering Holder in the amount of the purchase price. In the event that the aggregate purchase price of the Securities delivered, or caused to be delivered, by the Company to the Trustee is less than the Asset Sale Offer Amount, the Paying Agent shall deliver the excess to the Company as soon as practicable after the expiration of the Offer Period. (3) Holders electing to have a Security purchased will be required to surrender the Security, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Security duly completed, to the Company or the Paying Agent as specified in, and at the address specified in, the notice at least five (5) Business Days prior to the Asset Sale Purchase Date. Holders will be entitled to withdraw their election if the Paying Agent receives not later than three (3) Business Days prior to the Asset Sale Purchase Date, a telegram, telex, facsimile -31- transmission or letter setting forth the name of the Holder, the principal amount of the Security which was delivered for purchase by the Holder and a statement that such Holder is withdrawing his election to have such Security purchased. If at the expiration of the Offer Period the aggregate principal amount of Securities surrendered by Holders exceeds the Asset Sale Offer Amount, the Company shall select the Securities to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Company so that, to the extent practicable, only Securities in denominations of $1,000, or integral multiples thereof, shall be purchased). Holders whose Securities are purchased only in part will be issued new Securities equal in principal amount to the unpurchased portion of the Securities surrendered. (4) At the time the Company delivers Securities to the Trustee which are to be accepted for purchase, the Company will also deliver an Officers' Certificate stating that such Securities are to be accepted by the Company pursuant to and in accordance with the terms of this Section. A Security shall be deemed to have been accepted for purchase at the time the Paying Agent, directly or through an agent, mails or delivers payment therefor to the surrendering Holder. (e) The Company shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Securities pursuant to this Section. To the extent that the provisions of any securities laws or regulations conflict with provisions of this Section, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section by virtue thereof. SECTION 4.08. Change of Control. In the event of a Change of Control, the Company shall make an offer to purchase (the "Change of Control Offer") the Securities then outstanding at a purchase price equal to one hundred percent (100%) of the principal amount thereof plus accrued and unpaid interest to the Change of Control Purchase Date (as defined below) on the terms set forth in this Section. The date on which the Company shall purchase the Securities pursuant to this Section (the "Change of Control Purchase Date") shall be no earlier than 30 days, nor later than 60 days, after the notice referred to below is mailed, unless a longer period shall be required by law. The Company shall notify the Trustee in writing promptly after the occurrence of any Change of Control of the Company's obligation to offer to purchase all of the Securities. Notice of a Change of Control Offer shall be mailed by the Company to the Holders of the Securities at their last registered address (with a copy to the Trustee and the Paying Agent) within thirty (30) days after a Change of Control has occurred. The Change of Control Offer shall remain open from the time of mailing until five (5) Business Days before the Change of Control Purchase Date. The notice shall contain all instructions and materials necessary to enable such Holders to tender Securities (in whole or in part) pursuant to the Change of Control Offer. The notice, which shall govern the terms of the Change of Control Offer, shall state: (a) that the Change of Control Offer is being made pursuant to this Section; (b) the purchase price and the Change of Control Purchase Date; -32- (c) that any Security not surrendered or accepted for payment will continue to accrue interest; (d) that any Security accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest after the Change of Control Purchase Date; (e) that any Holder electing to have a Security purchased (in whole or in part) pursuant to a Change of Control Offer will be required to surrender the Security, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Security completed, to the Paying Agent at the address specified in the notice at least five (5) Business Days before the Change of Control Purchase Date; and (f) that any Holder will be entitled to withdraw his or her election if the Paying Agent receives, not later than three (3) Business Days prior to the Change of Control Purchase Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security the Holder delivered for purchase and a statement that such Holder is withdrawing his or her election to have the Security purchased. On the Change of Control Purchase Date, the Company shall (i) accept for payment Securities or portions thereof surrendered and properly tendered, and not withdrawn, pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent money sufficient to pay the purchase price of all Securities or portions thereof so accepted and (iii) deliver to the Trustee Securities so accepted together with an Officers' Certificate stating that such Securities have been accepted for payment by the Company and instructing the Trustee to cancel such Securities. The Paying Agent shall promptly mail or deliver to Holders of Securities so accepted payment in an amount equal to the purchase price. Holders whose Securities are purchased only in part will be issued new Securities equal in principal amount to the unpurchased portion of the Securities surrendered. The Company shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Securities pursuant to this Section. To the extent that the provisions of any securities laws or regulations conflict with provisions of this Section, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section by virtue thereof. SECTION 4.09. Prohibition Against Becoming an Investment Company. The Company shall not, and shall not permit a Subsidiary, to (i) register as an investment company under the Investment Company Act of 1940, or (ii) conduct its business or take any action so as to subject the Company or any Subsidiary to regulation as an investment company under the Investment Company Act of 1940 pursuant to an order of the Commission which remains unstayed and in effect for 60 days. SECTION 4.10. Limitation on Ranking of Future Debt. The Company will not incur, issue, assume or guarantee any indebtedness which is senior in right of payment to the Securities and which is subordinate or junior in right of -33- payment to any other Senior Debt. For purposes of this Section 4.10, any Indebtedness of the Company (other than by virtue of a Guarantee), whether or not contractually subordinate in right of payment to the Securities, which is secured by any assets of the Company or any Restricted Subsidiary shall be deemed to be "senior" in right of payment to the Securities. SECTION 4.11. Maintenance of Office or Agency. So long as any of the Securities remain outstanding, the Company shall maintain in the City of New York, State of New York an office or agency where (a) Securities may be presented or surrendered for payment, (b) Securities may be surrendered for registration or transfer or exchange and (c) notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the address of the Trustee set forth in or designated pursuant to Section 12.02. The Company may also from time to time designate one or more other offices or agencies where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind any such designation; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the City of New York, the State of New York for such purposes. SECTION 4.12. Transfer of Metals Group. The Company shall not sell, assign, or transfer the Metals Group to an Unrestricted Subsidiary of the Company and, in the event of a sale, assignment, or transfer of the Metals Group to a Subsidiary of the Company, the Company shall not designate such Subsidiary as an Unrestricted Subsidiary. ARTICLE FIVE SUCCESSOR CORPORATION SECTION 5.01. When Company May Merge, etc. The Company shall not consolidate or merge with or into, or transfer all or substantially all of its assets to, any other Person unless (i) the resulting, surviving or transferee Person (if not the Company) is a corporation organized or existing under the laws of the United States or a State thereof, (ii) such Person (if not the Company) expressly assumes by supplemental indenture, in form satisfactory to the Trustee, all the obligations of the Company under the Securities and this Indenture, (iii) such Person (if not the Company) has a Consolidated Net Worth immediately after such transaction at least equal to the Consolidated Net Worth of the Company immediately prior to such transaction, (iv) such Person would be able, immediately after such transaction to incur $1.00 of additional Indebtedness pursuant to Section 4.05(a), and (v) immediately after such transaction, no Default exists; provided, however, that notwithstanding the foregoing, any Wholly-Owned Subsidiary may be merged into the Company (with the Company as the surviving entity). Thereafter all such obligations of the predecessor Person shall terminate. The Company shall deliver to the Trustee prior to any such proposed -34- transaction an Officer's Certificate that such proposed transaction complies with the provisions of this Section. ARTICLE SIX DEFAULTS AND REMEDIES SECTION 6.01. Events of Default. An "Event of Default" occurs if: (1) the Company defaults in the payment, whether or not prohibited by Article Eleven, of interest on any Security when the same becomes due and payable and the default continues for a period of 30 days; (2) the Company defaults in the payment, whether or not prohibited by Article Eleven, of the principal of any Security when the same becomes due and payable at maturity, required repurchase, upon redemption or otherwise; (3) the Company fails to comply with any of its other covenants, conditions or agreements in the Securities or this Indenture and the default continues for the period and after the notice specified below; (4) an event or events of default, as defined in any one or more mortgages, indentures or instruments under which there may be issued, or by which there may be secured or evidenced, any Indebtedness of the Company or any Subsidiary (other than the Old Notes), whether such Indebtedness now exists or shall hereafter be created, shall happen which permits the holders of such Indebtedness to declare an aggregate principal amount of at least $250,000 of such Indebtedness to become due and payable prior to the date on which it would otherwise have become due and payable and such event of default shall not have been cured in accordance with the provisions of such instrument, or such Indebtedness shall not have been discharged within a period of 30 days after there shall have been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in principal amount of the outstanding Securities a written notice specifying such event or events of default and requiring the Company to cause such event of default to be cured, or such Indebtedness to be discharged and stating that such notice is a "Notice of Default" hereunder; provided, however, that the Company is not in good faith contesting in appropriate proceedings the occurrence of such an event of default; (5) a court of competent jurisdiction shall enter a final, non-appealable judgment or judgments for the payment of money in the aggregate in excess of $250,000 against the Company or any Subsidiary (other than in respect of an event or events of default relating to the Old Notes) and the judgment is not rescinded, annulled, stayed or satisfied for a period (during which execution shall not be effectively stayed) of 60 days after the amount of such judgment is determined; -35- (6) the Company pursuant to or within the meaning of any Bankruptcy Law: (A) commences a voluntary case, (B) consents to the entry of an order for relief against it in an involuntary case, (C) consents to the appointment of a Custodian of it or for all or substantially all of its property, or (D) makes a general assignment for the benefit of its creditors; or (7) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Company in an involuntary case, (B) appoints a Custodian of the Company or for all or substantially all of its property, or (C) orders the liquidation of the Company, and the order or decree remains unstayed and in effect for 60 days. The term "Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. A default under clause (3) is not an Event of Default until the Trustee notifies the Company or the Holders of at least 25% in principal amount of the outstanding Securities notify the Company and the Trustee of the default and the Company does not cure the default within 60 days after receipt of the notice. The notice must specify the default, demand that it be remedied and state that the notice is a "Notice of Default." In the event the Company shall incur any Indebtedness other than Senior Debt which contains a cross-default provision, the Company shall promptly enter into a supplemental indenture to add at least as favorable a provision to this Indenture. SECTION 6.02. Acceleration. If an Event of Default (other than an Event of Default specified in Sections 6.01(6) or (7)) occurs and is continuing, the Trustee by notice to the Company, or the Holders of at least 25% in principal amount of the outstanding Securities by notice to the Company and the Trustee, may declare the principal of, and accrued interest on all the Securities to be due and payable immediately. If an Event of Default specified in Sections 6.01(6) or (7) occurs, all unpaid principal, and accrued interest on the Securities then Outstanding shall become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Securityholder. Upon such declaration such principal and interest shall be due and payable -36- immediately. The Holders of a majority in principal amount of the outstanding Securities by notice to the Trustee may rescind an acceleration and its consequences if all existing Events of Default have been cured or waived (other than the nonpayment of principal of and accrued interest on the Securities which shall have become due by acceleration) and if the rescission would not conflict with any judgment or decree. SECTION 6.03. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy by proceeding at law or in equity to collect the payment of principal of or interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture. The Trustee may file proofs of claim and maintain proceedings even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative. SECTION 6.04. Waiver of Past Defaults. Subject to Section 9.02, the Holders of a majority in principal amount of the outstanding Securities by notice to the Trustee may waive an existing Default and its consequences. When a Default is waived, it is cured and no longer continuing. SECTION 6.05. Control by Majority. The Holders of a majority in principal amount of the outstanding securities may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on it. The Trustee, however, may refuse to follow any direction that conflicts with law or this Indenture, that is unduly prejudicial to the rights of another Securityholder, that would involve the Trustee in personal liability, or if the Trustee does not have sufficient indemnification against any loss or expense. SECTION 6.06. Limitations on Suits by Holders. No holder of any Security shall have any right by virtue or by availing of any provision of this Indenture to institute any action or proceeding at law or in equity or in bankruptcy or otherwise upon or under or with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder unless such holder previously shall have given to the Trustee written notice of default and of the continuance thereof, as hereinbefore provided, and unless also the holders of not less than 25% in the aggregate principal amount of the Securities then outstanding shall have made a written request upon the Trustee to institute such action or proceedings in its own name as Trustee hereunder and shall have offered to the Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby, and the Trustee for 60 days after its receipt of such notice, request and offer of indemnity shall have failed to institute any such action or proceedings and no direction inconsistent with such written request shall have been given to the -37- Trustee; it being understood and intended, and being expressly covenanted by the Holder of every Security with every other Holder and the Trustee that no one or more holders of Securities shall have any right in any manner whatever by virtue or by availing of any provision of this Indenture to affect, disturb or prejudice the rights of any other Holder of Securities, or to obtain or seek to obtain priority over or preference to any other such Holder or to enforce any right under this Indenture, except in the manner herein provided and for the equal, ratable and common benefit of all holders of Securities. For the protection and enforcement of the provisions of this Section 6.06, each and every Holder and the Trustee shall be entitled to such relief as can be given either at law or in equity. SECTION 6.07. Rights of Holders to Receive Payment. Subject to Article Eleven and notwithstanding any other provision of this Indenture, the right of any Holder of a Security to receive payment of principal or premium, if any, of and interest on the Security, on or after the respective due dates expressed in the Security, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of the Holder. SECTION 6.08. Collection Suit by Trustee. If an Event of Default in payment of interest or principal specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee may recover judgment in its own name as trustee of an express trust against the Company for the whole amount of principal, premium, if any, and interest remaining unpaid and, in addition, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may, and is appointed the true and lawful attorney-in-fact for the Holders of the Securities to: (1) file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and the Securityholders allowed in any judicial proceedings relative to the Company, its creditors or its property; (2) collect and receive any moneys or property payable or deliverable on account of such claims; and (3) distribute the same after deduction of its charges and expenses to the extent that such charges and expenses are not paid out of the estate in any such proceedings. SECTION 6.10. Priorities. If the Trustee collects any money pursuant to this Article, it shall pay out the money in the following order: -38- First: to the Trustee for amounts due under Section 7.07; Second: to holders of Senior Debt to the extent required by Article Eleven; Third: to Securityholders for amounts due and unpaid on the Securities for principal and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal and interest, respectively; and Fourth: to the Company. The Trustee may fix a record date and payment date for any payment to Securityholders under this Section 6.10. SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07, or a suit by Holders of more than 10% in principal amount of the outstanding Securities. SECTION 6.12. Waiver of Usury Law. The Company covenants (to the extent that it may lawfully do so) that it will not at any time voluntarily (and that it will resist any effort to make it do so involuntarily) insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any usury law wherever enacted, or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants (to the extent it may lawfully do so) that it will not hinder, delay or impede the execution of any power herein granted to the Trustee as a result of any such law, but will suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE SEVEN TRUSTEE SECTION 7.01. Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee, at such time as the Trustee has actual knowledge thereof, shall exercise such of the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. -39- (b) Except during the continuance of an Event of Default of which the Trustee has actual knowledge: (1) The Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture. (2) In the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. The Trustee, however, shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (1) This paragraph does not limit the effect of paragraph (b) of this Section. (2) The Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer, unless it is proved that the Trustee acted in bad faith in ascertaining the pertinent facts. (3) The Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05. (d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section. (e) The Trustee may refuse to perform any duty or exercise any right or power unless it receives indemnity satisfactory to it against any loss, liability or expense. No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any financial liability in the performance of its duties hereunder if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree with the Company. Money held in trust by the Trustee need not be segregated from other funds held by the Trustee except to the extent required by law. SECTION 7.02. Rights of Trustee. In furtherance of and subject to the TIA, and subject to Section 7.01: (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, Officers' Certificate or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture, note, coupon, security or other -40- paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties, including, but not limited to, any representation or statement contained therein that no Event of Default has occurred or is continuing, or that no conditions exist that, with the passage of time or the giving of notice or both, would constitute or give rise to an Event of Default, unless the Trustee has actual knowledge to the contrary; (b) any request, direction, order or demand of the Company mentioned herein may, at the request of Trustee, be sufficiently evidenced by an Officer's Certificate (unless other evidence in respect thereof be herein specifically prescribed), and any resolution of the Board of Directors may be evidenced to the Trustee by a copy thereof certified by the Secretary or any Assistant Secretary of the Company; (c) the Trustee may consult with counsel and any written advice or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it hereunder in good faith and in accordance with such written advice or Opinion of Counsel; (d) the Trustee shall be under no obligation to exercise any of the trusts or powers vested in it by this Indenture at the request, order or direction of any of the Holders pursuant to the provisions of this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred therein or thereby; (e) the Trustee shall not be liable for any action taken or omitted by it in good faith and reasonably believed by it to be authorized or within the discretion, rights or powers conferred upon it by this Indenture; (f) prior to the occurrence of an Event of Default hereunder and after the curing or waiving of all Events of Default, the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture, note, coupon, security or other paper or document unless requested in writing so to do by the Holders of not less than a majority in aggregate principal amount of the Securities then outstanding; provided, however, that, if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee, not reasonably assured to the Trustee by the security afforded to it by the terms of this Indenture, the Trustee may require reasonable indemnity against such expenses or liabilities as a condition to proceeding; and (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys not regularly in its employ and the Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed with due care by it hereunder. SECTION 7.03. Individual Rights of Trustee. Subject to the provisions of the TIA and regulations promulgated thereunder, the Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or its affiliates with the same rights it would have if it -41- were not Trustee. Any Agent may do the same with like rights. The Trustee, however, must comply with Sections 7.10 and 7.11. SECTION 7.04. Trustee's Disclaimer. The Trustee makes no representation as to the validity or adequacy of this Indenture or the Securities; it shall not be accountable for the Company's use of the proceeds from the Securities; and it shall not be responsible for any recital or statement in the Securities other than its certificate of authentication. SECTION 7.05. Notice of Defaults. If a Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to each Securityholder, as provided in Section 12.02, notice of the Default within 90 days after it occurs. Except in the case of a default in payment of principal of or interest on any Security, the Trustee may withhold the notice if and so long as a committee of its Trust Officers in good faith determines that withholding the notice is in the interests of Securityholders. SECTION 7.06. Reports by Trustee to Holders. Within 60 days after each May 15 beginning with the May 15 in the year following the date of this Indenture, the Trustee shall mail to each Securityholder a brief report dated as of such May 15 that complies with TIA Section 313(a). The Trustee also shall comply with TIA Section 313(b) and (c). A copy of each report at the time of its mailing to Securityholders shall be filed with the SEC and each stock exchange on which the Securities are listed. The Company shall notify the trustee when the Securities are listed on any stock exchange. SECTION 7.07. Compensation and Indemnity. The Company shall pay to the Trustee from time to time such reasonable compensation as the Company and the Trustee shall from time to time agree in writing for Trustee's services which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable out-of-pocket expenses incurred by it in accordance with any provision of this Indenture. Such expenses shall include the reasonable compensation and expenses of the Trustee's agents and counsel. The Company also covenants to indemnify the Trustee and each predecessor Trustee for, and to defend and hold it harmless from and against, any loss, liability, claim, action, damage, demand, judgment, decree or expense incurred without gross negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of this Indenture or the trusts hereunder and its duties hereunder, including the reasonable costs and expenses of defending itself against or investigating any claim of liability in the premises. The Trustee shall not be under any obligation to institute any suit, or to take any remedial action under this Indenture, or to enter any appearance or in any way defend in any suit in which it may be made defendant, or to take any steps in the execution of the trusts created -42- hereby or thereby or in the enforcement of any rights and powers under this Indenture, until it shall be indemnified to its satisfaction against any and all reasonable compensation for services, costs and expenses, outlays, and counsel fees and other disbursements, and against all liability not due to its misconduct, gross negligence or bad faith. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity; however, the failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder unless the Company is prejudiced thereby. The Company shall defend the claim and the Trustee shall cooperate in the defense. Before the Company assumes the defense of such claim, the Trustee may have separate counsel and the Company shall pay for such counsel's reasonable fees and expenses, provided, however, once the Company has assumed such defense, the Company shall have no obligation to pay, except as provided below, for fees and expenses of such counsel. If, however, such counsel advises the Company and the Trustee as to such claim that the posture of the Company is or may be inconsistent with the posture of the Trustee, then the Trustee may resume the defense of such claim with its counsel and the Company shall pay the reasonable fees and expenses of such counsel incurred after that time. The Company need not pay for any settlement made without its consent. The Company need not reimburse any expense or indemnify against any loss or liability incurred by the Trustee through gross negligence or bad faith. To secure the Company's payment obligations in this Section, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee, except that held in trust to pay principal of and interest on particular Securities. If the Trustee incurs expenses or renders services after an event of default specified in Section 6.01(4) or (5) has occurred, any such expense (including the reasonable fees and expenses of its counsel) and compensation for such services are intended to constitute expenses of administration under any bankruptcy law. SECTION 7.08. Replacement of Trustee. The Trustee may resign by so notifying the Company. The Holders of a majority in principal amount of the outstanding Securities may remove the Trustee by so notifying the removed Trustee and may appoint a successor Trustee with the Company's consent. A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section. The Company may remove the Trustee if: (1) the Trustee fails to comply with Section 7.10; (2) the Trustee is adjudged a bankrupt or an insolvent; (3) a receiver or other public officer takes charge of the Trustee or its property; or (4) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. -43- A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Immediately after that, the retiring Trustee shall transfer all property held by it as Trustee to the successor Trustee, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The Company's obligation to make payment of all sums then owing to the Trustee pursuant to Section 7.07 shall survive any such resignation or removal. A successor Trustee shall mail notice of its succession to each Securityholder. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 shall continue for the benefit of the retiring Trustee. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of a majority in principal amount of the outstanding Securities may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10, any Securityholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. SECTION 7.09. Successor Trustee by Merger, etc. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust assets to, another corporation, the successor corporation without any further act shall be the successor Trustee. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities. SECTION 7.10. Eligibility; Disqualification. This Indenture shall always have a Trustee who satisfies the requirements of TIA Section 310(a)(1). The Trustee shall have a combined capital and surplus of at least $25,000,000 as set forth in its most recent published annual report of condition. The Trustee shall comply with TIA Section 310(b), including the optional provision permitted by the second sentence of TIA Section 310(b)(9). SECTION 7.11. Preferential Collection of Claims Against Company. The Trustee shall comply with TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated. -44- ARTICLE EIGHT DISCHARGE OF INDENTURE SECTION 8.01. Termination of Company's Obligations. The Company may terminate all of its obligations under the Securities and this Indenture if all Securities previously authenticated and delivered (other than destroyed, lost or stolen Securities which have been replaced or paid) have been delivered to the Trustee cancelled or for cancellation, or (a) the Company will cease to be under any obligation to comply with Articles Four and Five of this Indenture and (b) from and after the ninety-first (91st) day after the conditions set forth below have been satisfied, the Company will be deemed to have been discharged from all of its obligations with respect to the Securities and this Indenture if: (1) the Securities mature within one year or all of them are to be called for redemption within one year under arrangements satisfactory to the Trustee for giving the notice of redemption; (2) the Company irrevocably deposits in trust with the Trustee (or, solely to meet the requirements specified by this Section, a trustee meeting the requirements of this Indenture and satisfactory to the Company and the Trustee under the terms of an irrevocable trust agreement among the Company, the Trustee and such trustee in form and substance satisfactory to the Trustee and the Company), money or U.S. Government Obligations maturing as to principal and interest in such amounts and at such times as are sufficient to pay principal and interest on the Securities to maturity or redemption, as the case may be, confirmed in writing to the Trustee by a nationally recognized firm of independent public accountants; provided, however, that the Trustee shall have been irrevocably instructed by the Company to apply such money or the proceeds of such U.S. Government Obligations to the payment of such principal and interest with respect to the Securities; (3) no Default or Event of Default has occurred or is continuing on the date of such deposit or will occur as a result of such deposit and such deposit will not result in a breach or violation of, or constitute a Default under, any other instrument to which the Company is a party or by which it is bound, as evidenced to the Trustee in an Officer's Certificate delivered to the Trustee concurrently with such deposit; (4) the Company has delivered to the Trustee an Opinion of Counsel to the effect that the holders of the Securities will not recognize income, gain or loss for federal income tax purposes as a result of such deposit and will be subject to federal income tax in the same amounts and in the same manner and at the same time as would have been the case if such deposit had not been made, and, in the case of the Securities being discharged, a ruling to that effect has been received from or published by the Internal Revenue Service (it being understood that (A) such opinion will also state that such opinion is consistent with the conclusions reached in such ruling and (B) notwithstanding any other provision of -45- this Indenture, the Trustee will be under no duty to investigate the basis or correctness of such opinion); and (5) the Company has delivered to the Trustee an Opinion of Counsel to the effect that the Company's exercise of its option described above will not result in any of the Company, the Trustee or the trust created by such deposit becoming or being deemed to be an "investment company" under the Investment Company Act of 1940, as amended. In connection with the making of any deposit pursuant to Section 8.01(2) hereof, the Company shall deliver to the Trustee an Officer's Certificate and an Opinion of Counsel to the effect that all conditions to this Section 8.01 have been complied with. The Company's obligations in paragraph 11 of the Securities and in Sections 2.03, 2.04, 2.05, 2.06, 7.07 and 7.08, however, shall survive until the Securities are no longer outstanding. Thereafter the Company's obligations in such paragraph 11 and in Section 7.07 shall survive to the extent provided therein. Subject to Section 8.01(2) hereof, the Trustee upon request and at the Company's expense shall acknowledge in writing the discharge of the Company's obligations under the Securities and this Indenture except for those surviving obligations specified above. In order to have money available on a payment date to pay principal of or interest on the Securities, the U.S. Government Obligations shall be payable as to principal or interest on or before such payment date in such amounts as will provide the necessary money. U.S. Government Obligations shall not be callable at the issuer's option. "U.S. Government Obligations" means direct obligations of the United States for the payment of which the full faith and credit of the United States is pledged. SECTION 8.02. Application of Trust Money. The Trustee shall hold in trust money or U.S. Government Obligations deposited with it pursuant to Section 8.01, but such money need not be segregated from other funds except to the extent required by law. It shall apply the deposited money and the money from U.S. Government Obligations through the Paying Agent and in accordance with this Indenture to the payment of principal of and interest on the Securities. Money and securities so held in trust are not subject to the subordination provisions of Article Eleven. SECTION 8.03. Repayment to Company. The Trustee and the Paying Agent shall promptly pay to the Company upon request any excess money or securities held by them at any time. The Trustee and the Paying Agent shall pay to the Company upon request any money held by them for the payment of interest that remains unclaimed for two years. After payment to the Company, Securityholders entitled to the money must look to the Company as general creditors unless an applicable abandoned property law designates another person. -46- ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS SECTION 9.01. Without Consent of Holders. The Company may amend or supplement this Indenture or the Securities without notice to or consent of any Securityholder: (1) to cure any ambiguity, defect or inconsistency; (2) to comply with Section 5.01; (3) to provide for uncertificated Securities in addition to or in place of certificated Securities; or (4) to make any change that does not materially adversely affect the rights of any Securityholder (including but not limited to a supplement to this Indenture under Section 5.01 or the last paragraph of Section 6.01). SECTION 9.02. With Consent of Holders. The Company, when duly authorized by a resolution of its Board of Directors, may amend or supplement this Indenture or the Securities without notice to any securityholder, but with the written consent of the Holders of at least a majority in principal amount of the outstanding Securities. The Holders of a majority in principal amount of the outstanding Securities may waive compliance by the Company with any provision of this Indenture or the Securities without notice to any Securityholder. Without the consent of each Securityholder affected, however, an amendment, supplement or waiver, including a waiver pursuant to Section 6.04, may not: (1) reduce the amount of Securities whose Holders must consent to an amendment, supplement or waiver; (2) reduce the rate of or extend the time for payment of interest on any Security; (3) reduce the principal of or premium on or extend the fixed maturity of any Security; (4) waive a default in the payment of the principal of or interest on any Security; (5) make any Security payable in money other than that stated in the Security; or (6) make any change in the provisions contained in the Indenture regarding subordination that adversely affects the rights of any holders of Securities. -47- It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed supplement, but it shall be sufficient if such consent approves the substance thereof. SECTION 9.03. Compliance with Trust Indenture Act. Every amendment to or supplement of this Indenture or the Securities shall comply with the TIA. SECTION 9.04. Revocation and Effect of Consents. A consent to an amendment, supplement or waiver by a Holder of a Security shall bind the Holder and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent is not made on any Security. Any such Holder or subsequent Holder, however, may revoke the consent as to his Security or portion of a Security. Such revocation shall be effective only if the Trustee receives the notice of revocation before the date the amendment, supplement or waiver becomes effective. An amendment, supplement or waiver shall become effective when it has been approved by the Holders of the majority or percentage in principal amount of the outstanding Securities specified in this Indenture in connection with such amendment, supplement or waiver. After an amendment, supplement or waiver becomes effective, it shall bind every Securityholder unless it makes a change described in any of clauses (2) through (5) of Section 9.02. In that case the amendment, supplement or waiver shall bind each Holder of a Security who has consented to it and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security. SECTION 9.05. Notation on or Exchange of Securities. If an amendment, supplement or waiver changes the terms of a Security, the Trustee may require the Holder of the Security to deliver it to the Trustee. The Trustee may place an appropriate notation on the Security about the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. SECTION 9.06. Trustee to Sign Amendments, etc. The Trustee shall sign any amendment, supplement or waiver authorized pursuant to this Article if the amendment, supplement or waiver does not adversely affect the rights of the Trustee. In executing, or accepting the additional trusts created by, any amendment or supplemental indenture permitted by this Article Nine or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 7.01) shall be fully protected in relying upon, an Opinion of Counsel of the Company, stating that the execution of such amendment or supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such amendment or supplemental indenture which affects the Trustee's own rights, duties or immunities under this -48- Indenture or otherwise. The Company may not sign an amendment or supplement until the Board of Directors approves it. ARTICLE TEN SECURITYHOLDERS' MEETINGS AND CONSENTS SECTION 10.01. Purposes of Meetings. A meeting of Securityholders may be called at any time and from time to time pursuant to the provisions of this Article Ten for any of the following purposes: (a) to give any notice to the Company or to the Trustee, or to give any directions to the Trustee, or to consent to the waiving of any Default or Event of Default hereunder and its consequences, or to take any other action authorized to be taken by Securityholders pursuant to any of the provisions of Article Six; (b) to remove the Trustee and nominate a successor trustee pursuant to the provisions of Article Seven; (c) to consent to the execution of an indenture or indentures supplemental hereto pursuant to the provisions of Section 9.02; or (d) to take any other action authorized to be taken by or on behalf of the Holders of any specified aggregate principal amount of the Securities under any other provision of this Indenture or under applicable law. SECTION 10.02. Calling of Meetings by Trustee. The Trustee may, at the Company's expense as provided in Section 7.07, at any time call a meeting of Securityholders to take any action specified in Section 10.01, to be held at such time and at such place in the Borough of Manhattan, the City of New York, as the Trustee shall determine. Notice of every meeting of the Securityholders, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be mailed to Holders at their last addresses as they shall appear on the Security register. Such notice shall be mailed not less than 10 nor more than 90 days prior to the date fixed for the meeting. Any meeting of Securityholders shall be valid without notice if the Holders of all Securities then outstanding are presented in person or by proxy or if notice is waived before or after the meeting by the Holders of all Securities outstanding and if the Company and the Trustee are present by duly authorized representative or have before or after the meeting waived notice. SECTION 10.03. Calling of Meetings by Company or Securityholders. In case at any time the Company, pursuant to a duly authorized resolution of its Board of Directors, or the Holders of at least 10% in aggregate principal amount of the Securities then outstanding, shall have requested the Trustee to call a meeting of Securityholders, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, -49- and the Trustee shall not have mailed the notice of such meeting within 10 days after receipt of such request, then the Company or such Holders may determine the time and the place in said Borough of Manhattan for such meeting and may call such meeting to take any action authorized in Section 10.01, by mailing notice thereof as provided in Section 10.02. SECTION 10.04. Qualifications for Voting. To be entitled to vote at any meeting of Securityholders a person shall (a) be a Holder of one or more Securities, or (b) be a person appointed by an instrument in writing as proxy by a Holder of one or more Securities. Unless specifically prohibited by law, any proxy shall remain in effect unless specifically revoked and shall be binding on any future Holder of the Securities represented by such proxy, unless specifically revoked by any such future Holder before being voted. The only persons who shall be entitled to be present or to speak at any meeting of Securityholders shall be the persons entitled to vote at such meeting and their counsel and any representatives of the Trustee and its counsel and any representatives of the Company and its counsel. SECTION 10.05. Regulations. Notwithstanding any other provisions of this Indenture, the Trustee may make such reasonable regulations as it may deem advisable for any meeting of Securityholders, in regard to proof of the holding of Securities and of the appointment of proxies, and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall think fit. The Trustee shall, by an instrument in writing, appoint a temporary chairman of the meeting, unless the meeting shall have been called by the Company or by Securityholders as provided in Section 10.03, in which case the Company or the Securityholders calling the meeting, as the case may be, shall in like manner appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall be elected by majority vote of the meeting. Subject to the provisions of Section 12.06, at any meeting each Holder or proxy shall be entitled to one vote for each $1,000 principal amount of Securities held or represented by him; provided, however, that no vote shall be cast or counted at any meeting in respect of any Security challenged as not outstanding and ruled by the chairman of the meeting to be not outstanding. The chairman of the meeting shall have no right to vote other than by virtue of Securities held by him or instruments in writing as aforesaid duly designating him as the person to vote on behalf of other Holders. Any meeting of Holders duly called pursuant to the provisions of Section 10.02 or 10.03 may be adjourned from time to time by the holders of a majority of the principal amount of Securities present, whether or not constituting a quorum, and the meeting may be held as so adjourned without further notice. SECTION 10.06. Voting. The vote upon any resolution submitted to any meeting of Holders shall be by written ballots on which shall be subscribed the signatures of the Holders or of their representatives by proxy and the principal amount of the Securities held or represented by them. -50- The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in duplicate of all votes cast at the meeting. A record in duplicate of the proceedings of each meeting of Holders shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that said notice was mailed as provided in Section 10.02. The record shall be signed and verified by the affidavits of the permanent chairman and secretary of the meeting and one of the duplicates shall be delivered to the Company and the other to the Trustee to be preserved by the Trustee. Any record so signed and verified shall be conclusive evidence of the matters therein stated. SECTION 10.07. No Delay of Rights by Meeting. Nothing in this Article Ten contained shall be deemed or construed to authorize or permit, by reason of any call of a meeting of Holders or any rights expressly or impliedly conferred hereunder to make such call, any hindrance or delay in the exercise of any right or rights conferred upon or reserved to the Trustee or to the Holders under any of the provisions of this Indenture or of the Securities. SECTION 10.08. Written Consent in Lieu of Meeting. The written authorization or consent of the requisite percentage of Holders herein provided entitled to vote at any meeting of Holders and filed with the Trustee shall be effective in lieu of a meeting of Holders, with respect to any matter provided for in this Article Ten. ARTICLE ELEVEN SUBORDINATION SECTION 11.01. Securities Subordinated to Senior Debt. The Company agrees, and each holder of the Securities by his acceptance thereof likewise agrees, that the payment of the principal of and interest on the Securities is subordinated, to the extent and in the manner provided in this Article, to the prior payment in full of all Senior Debt. This Article shall constitute a continuing offer to all persons who, in reliance upon such provisions, become holders of, or continue to hold, Senior Debt, and such provisions are made for the benefit of the holders of Senior Debt, and such holders are made obligees hereunder and they and/or each of them may enforce such provisions. SECTION 11.02. Company Not to Make Payments with Respect to Securities in Certain Circumstances. (a) Upon the occurrence of any default in the payment of principal, premium, if any, or interest then due and payable in respect of any Senior Debt (either at maturity, upon -51- redemption, by declaration or otherwise), no direct or indirect payment (in cash, property, securities, by set-off or otherwise) shall be made or agreed to be made on account of the principal of, premium, if any, or interest on the Securities, or in respect of any redemption, retirement, purchase or other acquisition of any of the Securities, and no holder of any Security shall be entitled to demand or receive any such payment (any of the foregoing payments or actions being referred to in this Section 11.02 as a "Payment"), unless and until such default has been waived or cured or all amounts then due and payable for principal of, premium, if any, and interest on all Senior Debt shall have been paid in full or provision therefor in cash, in cash equivalents, or in accordance with the terms of such Senior Debt and the agreements, if any, under which such Senior Debt was issued or created, shall have been made. (b) The Company may not make any Payment if: (1) a default or event of default under any agreement governing Senior Debt (other than a default or event of default relating to payment of principal, premium, if any, or interest, either at maturity, upon redemption, by declaration or otherwise) occurs and is continuing that permits the holders of such Senior Debt to accelerate its maturity (whether or not such acceleration has occurred); and (2) the Company or the Trustee receives a notice of such default or event of default from a person who may give such notice (including, without limitation, a holder of such Senior Debt, a representative of any such holder, or a trustee for the benefit of holders of such Senior Debt). If the Company receives any such notice, a similar notice received within 360 consecutive days thereafter shall not be effective for purposes of this Section. Notwithstanding the provisions of this Section 11.02(b), the Company may make Payments on the Securities when: (A) the default or event of default is cured or waived; or (B) 90 days pass after the earliest such notice is given, with respect to such default or event of default so long as this Article (including, without limitation, Section 11.02(a)) otherwise permits a Payment at that time. (c) In the event that the Trustee or any Securityholder receives any Payment at a time when, in case of payment to the Trustee, the Trustee or, in case of payment to any Securityholder, such Securityholder has actual knowledge such Payment is prohibited by this Section 11.02, such Payment shall be held by the Trustee or such Securityholder, as the case may be, in trust for the benefit of, and shall be paid forthwith over and delivered, upon written request, to, the holders and owners of Senior Debt as their interests may appear or their agent or representative or the trustee under the indenture or other agreement (if any) pursuant to which Senior Debt may have been issued, as their respective interests may appear, for application to the payment of all Senior Debt remaining unpaid to the extent necessary to pay such Senior Debt in full in accordance with its terms, after giving effect to any concurrent payment or distribution to or for the holders and owners of Senior Debt. -52- (d) The Company shall give prompt written notice to the Trustee of any default in the payment of principal of or interest on any Senior Debt. SECTION 11.03. Securities Subordinated to Prior Payment of All Senior Debt on Dissolution, Liquidation or Reorganization of Company. Upon any distribution of assets of the Company upon any dissolution, winding up, liquidation or reorganization of the Company (whether in bankruptcy, insolvency or receivership proceedings or upon an assignment for the benefit of creditors or otherwise): (a) the holders of all Senior Debt shall first be entitled to receive payments in full of the principal thereof and interest due thereon before the Holders of the Securities are entitled to receive any payment on account of the principal of or interest on the Securities; (b) any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the Holders of the Securities or the Trustee on behalf of the Holders of the Securities would be entitled except for the provisions of this Article Eleven, shall be paid by the liquidating trustee or agent or other person making such payment or distribution directly to the holders of Senior Debt or their representative, or to the trustee under any indenture under which Senior Debt may have been issued (pro rata as to each such holder, representative or trustee on the basis of the respective amounts of unpaid Senior Debt held or represented by each), to the extent necessary to make payment in full of all Senior Debt remaining unpaid, after giving effect to any concurrent payment or distribution or provision therefor to the holders of such Senior Debt; and (c) in the event that notwithstanding the foregoing provisions of this Section 11.03, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, shall be received by the Trustee or the Holders of the Securities on account of principal of or interest on the Securities before all Senior Debt is paid in full, or effective provision made for its payment, such payment or distribution (subject to the provisions of Section 11.06 and 11.07) shall be received and held in trust for and shall be paid over to the holders of the Senior Debt remaining unpaid or unprovided for or their representative, or to the trustee under any indenture under which such Senior Debt may have been issued (pro rata as provided in subsection (b) above), for application to the payment of such Senior Debt until all such Senior Debt shall have been paid in full, after giving effect to any concurrent payment or distribution or provision therefor to the holders of such Senior Debt. Upon any payment or distribution of assets of the Company referred to in this Article Eleven, the Trustee and the Holders shall be entitled to rely upon a certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent or other person making such payment or distribution, delivered to the Trustee or to the Holders, for the purpose of ascertaining the person entitled to participate in such distribution, the holders of the Senior Debt and other indebtedness of the Company, the amount thereof or payment thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article Eleven. In the event that -53- the Trustee determines, in good faith, that further evidence is required with respect to the right of any person as a holder of Senior Debt to participate in any payments or distribution Pursuant to this Article Eleven, the Trustee may request such person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Debt held by such person, as to the extent to which such person is entitled to participate in such payment or distribution, and as to other facts pertinent to the rights of such person under this Article Eleven, and if such evidence is not furnished, the Trustee may defer any payment to such person pending judicial determination as to the right of such person to receive such payment. The Company shall give prompt written notice to the Trustee of any dissolution, winding up, liquidation or reorganization of the Company. SECTION 11.04. Securityholders to be Subrogated to Right of Holders of Senior Debt. Subject to the payment in full of all Senior Debt, the Holders of the Securities shall be subrogated equally and ratably to the rights of the holders of Senior Debt to receive payments or distributions of assets of the Company applicable to the Senior Debt until all amounts owing on the Securities shall be paid in full, and for the purpose of such subrogation no payments or distributions to the holders of the Senior Debt by or on behalf of the Company or by or on behalf of the Holders of the Securities by virtue of this Article which otherwise would have been made to the Holders of the Securities shall, as between the Company, its creditors other than holders of Senior Debt and the Holders of the Securities, be deemed to be payment by the Company to or on account of the Senior Debt, it being understood that the provisions of this Article Eleven are and are intended solely for the purpose of defining the relative rights of the Holders of the Securities, on the one hand, and the holders of the Senior Debt, on the other hand. SECTION 11.05. Obligation of the Company Unconditional. Nothing contained in this Article Eleven or elsewhere in this Indenture or in any Security is intended to or shall impair, as between the Company, its creditors other than holders of Senior Debt and the Holders of the Securities, the obligation of the Company, which is absolute and unconditional, to pay to the Holders of the Securities the principal of and interest on the Securities as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holders of the Securities and creditors of the Company other than the holders of the Senior Debt, nor shall anything herein or therein prevent the Trustee or the Holder of any Security from exercising all remedies otherwise permitted by applicable law upon default, under this Indenture, subject to the rights, if any, under this Article Eleven of the holders of Senior Debt in respect of cash, property or securities of the Company receives upon the exercise of any such remedy. Nothing contained in this Article Eleven or elsewhere in this Indenture or in any Security is intended to or shall affect the obligation of the Company to make, or prevent the Company from making, at any time except during the pendency of any dissolution, winding up, liquidation or reorganization proceeding, and except during the continuance of any event of default specified in Section 11.02 (not cured or waived) payments at any time of the principal of or interest on the Securities. -54- SECTION 11.06. Trustee and Paying Agent Entitled to Assume Payments Not Prohibited in Absence of Notice. Neither the Trustee nor any Paying Agent shall at any time be charged with knowledge of the existence of any facts which would prohibit the making of any payment to or by it, unless and until it shall have received written notice thereof from the Company or from one or more holders of Senior Debt or from any representative thereof or from any trustee therefor; and prior to the receipt by it of any such written notice, the Trustee or any Paying Agent, subject to the provisions of Section 7.01 and 7.02, shall be entitled to assume conclusively that no such facts exist. SECTION 11.07. Application by Trustee of Monies Deposited with it. Except as provided in Section 8.02, any deposit of monies by the Company with the Trustee or any Paying Agent (whether or not in trust) for the payment of the principal of or interest on any Securities shall be subject to the provisions of Section 11.01, 11.02, 11.03 and 11.04 except that, if prior to the date on which by the terms of this Indenture any such monies may become payable for any purpose (including, without limitation, the payment of either the principal of or the interest on any Security) the Trustee or such Paying Agent shall not have received with respect to such monies the notice provided for in Section 11.06, then the Trustee or such Paying Agent shall have full power and authority to receive such monies and to apply the same to the purpose for which they were received, and shall not be affected by any notice to the contrary which may be received by it on or after such date. This section shall be construed solely for the benefit of the Trustee and Paying Agent and shall not otherwise affect the rights of holders of such Senior Debt. SECTION 11.08. Subordination Rights Not Impaired by Acts or Omissions of Company or Holders of Senior Debt. No right of any present or future holders of any Senior Debt to enforce subordination as provided herein shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act (other than a waiver thereof enforceable against such holder) or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms of this Indenture, regardless of any knowledge thereof which any such holder may have or be otherwise charged with. SECTION 11.09. Securityholders Authorize Trustee to Effectuate Subordination of Securities. Each Holder of the Securities by his acceptance thereof authorizes and expressly directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article Eleven and appoints the Trustee his attorney-in-fact for such purpose, including, in the event of any dissolution, winding up, liquidation or reorganization of the Company (whether in bankruptcy, insolvency or receivership proceedings or upon an assignment for the benefit of creditors or otherwise) tending towards liquidation of the business and assets of the Company, the immediate filing of a claim for the unpaid balance of its or his Securities in the form required in said proceedings and cause said claim to be approved. If the Trustee does not file a proper claim or proof of debt in the form required in such proceeding prior to 30 days before the expiration of the time to file such claim -55- or claims, then the holders of Senior Debt are hereby authorized to have the right to file and are hereby authorized to file an appropriate claim for and on behalf of the Holders of said Securities. SECTION 11.10. Right of Trustee to Hold Senior Debt; Compensation Not Prejudiced. The Trustee shall be entitled to all of the rights set forth in this Article Eleven in respect of any Senior Debt at any time held by it to the same extent as any other holder of Senior Debt, and nothing in this Indenture shall be construed to deprive the Trustee of any of its rights as such holder. Nothing in this Article Eleven shall apply to claims of or payments to the Trustee pursuant to Section 7.07. SECTION 11.11. Article Eleven Not to Prevent Events of Default. The failure to make a payment on account of principal or interest by reason of any provision in this Article Eleven shall not be construed as preventing the occurrence of an Event of Default under Section 6.01. ARTICLE TWELVE MISCELLANEOUS SECTION 12.01. Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies, or conflicts with another provision which is required to be included in this Indenture by the TIA, the required provision shall control. SECTION 12.02. Notices. Any notice or communication shall be sufficiently given if in writing and delivered in person or mailed by first-class mail addressed as follows: if to the Company: Lexington Precision Corporation 767 Third Avenue New York, New York 10017-2023 Attention: Secretary if to the Trustee: Wilmington Trust Company 1100 North Market Street Rodney Square North Wilmington, Delaware 19890-1615 Attention: Corporate Trust Administration The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. -56- Any notice or communication mailed to a Securityholder shall be sufficiently given to him if mailed to him by first class mail at his address as it appears on the registration books of the Registrar and shall be so mailed within the time prescribed. Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Securityholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. If the Company mails a notice or communication to Securityholders, it shall also mail a copy of such notice to the Trustee and each Paying Agent at the same time. SECTION 12.03. Communication by Holders with Other Holders. Securityholders may communicate pursuant to TIA Section 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities, and, in connection therewith, the Trustee shall comply with TIA Section 312(b). The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c). SECTION 12.04. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (1) an Officers' Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (2) an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with. SECTION 12.05. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: (1) a statement that the person making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of such person, such condition or covenant has been complied with. -57- SECTION 12.06. When Treasury Securities Disregarded. In determining whether the Holders of the required principal amount of Securities have concurred in any direction, waiver or consent, Securities owned by the Company or by any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company shall be disregarded, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities which the Trustee knows are so owned shall be so disregarded. SECTION 12.07. Rules by Trustee and Agents. The Trustee may make reasonable rules for the administration of this Indenture. Such rules may cover matters relating to action by or a meeting of Securityholders. The Registrar or Paying Agent may make reasonable rules for its functions. SECTION 12.08. Legal Holidays. A "Legal Holiday" is a Saturday, a Sunday or a day on which banking institutions in the State of New York are not required to be open. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. SECTION 12.09. Governing Law. The laws of New York shall govern this Indenture and the Securities without reference to its principles of conflicts of law. SECTION 12.10. No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret another indenture, loan and debt agreement of the Company or a Subsidiary. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 12.11. No Recourse Against Others. A director, officer, employee or shareholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of, such obligations or their creation. Each Securityholder by accepting any of the Securities waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. SECTION 12.12. Successors. All agreements of the Company in this Indenture and the Securities shall bind its successor. All agreements of the Trustee in this indenture shall bind its successor. SECTION 12.13. Duplicate Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. -58- SECTION 12.14. Effective Date. The date of this Indenture shall be for reference purposes only and shall not be construed to imply that this Indenture was executed on such date. This Indenture shall be effective as of the date of execution hereof and all covenants and agreements contained herein shall be deemed to have been made as of such date of execution. SECTION 12.15. Severability. In case any provision of this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be impaired thereby, and no Holder shall have any obligation thereof against any party hereto. -59- IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed and their respective corporate seals to be hereto affixed and attested, all as of the date of execution. SIGNATURES Dated: December 18, 2003 LEXINGTON PRECISION CORPORATION By: /s/ Michael A. Lubin ------------------------------ Name: Michael A. Lubin Title: Chairman Attest: /s/ Dennis J. Welhouse ------------------------ (Seal) Dated: December 18, 2003 WILMINGTON TRUST COMPANY, as Trustee By: /s/ James J. McGinley ------------------------------- Name: James J. McGinley Title: Authorized Signer Attest: /s/ Beth Fitzgerald, notary --------------------------- (Seal) A-1 EXHIBIT A LEXINGTON PRECISION CORPORATION No. CUSIP: 529529 AE 9 promises to pay to or registered assigns the principal sum of Dollars on August 1, 2009 12% Senior Subordinated Notes due August 1, 2009 Interest Payment Dates: February 1, May 1, August 1, and November 1 Record Dates: January 15, April 15, July 15, and October 15 Dated: Reference is hereby made to the further provisions of this Note as attached hereto which provisions shall have the same effect as if set forth at this place. WILMINGTON TRUST COMPANY, LEXINGTON PRECISION CORPORATION as Trustee, certifies that this is one of the Securities referred to in the Indenture. By _________________________ By:______________________________ Authorized Signatory Title: - and - By:______________________________ Title: (Seal) A-2 [The following legend is to be inserted only in the Note to be issued to Cede & Co.: UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO LEXINGTON PRECISION CORPORATION OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUIRED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] LEXINGTON PRECISION CORPORATION 12% Senior Subordinated Note due August 1, 2009 THIS NOTE, AND THE WARRANT ATTACHED HERETO, SHALL CONSTITUTE A UNIT. THIS NOTE WILL NOT BE DETACHABLE FROM THE WARRANT UNTIL AUGUST 1, 2005, AND THIS NOTE AND THE WARRANT WILL ONLY BE TRANSFERABLE AS A UNIT PRIOR TO THAT TIME. IF THIS NOTE IS REDEEMED BY THE COMPANY PURSUANT TO SECTION 5 HEREOF PRIOR TO AUGUST 1, 2005, THE ATTACHED WARRANT WILL REVERT TO THE COMPANY FOR NO FURTHER CONSIDERATION AND WILL BE CANCELED. THE UNIT MAY NOT BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, HYPOTHECATED, MORTGAGED, ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SECTION 8 HEREOF. 1. Interest. LEXINGTON PRECISION CORPORATION (the "Company"), a Delaware corporation, promises to pay interest on the principal amount of this Note at the rate of 12% per annum for the period from [the date the Exchange Offer is consummated], through the date this Note is paid in full. The Company will pay interest quarterly on February 1, May 1, August 1, and November 1 of each year, commencing on February 1, 2004. Interest on the Notes will accrue from the date of the Indenture. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company will pay interest on overdue principal at the rate per annum then in effect on the Notes, as set forth in the preceding paragraph; it shall pay interest on overdue installments of interest at the same rate to the extent lawful. A-3 2. Method of Payment. The Company will pay interest on the Notes (except Defaulted Interest) to the persons who are registered holders of Notes ("Noteholders" or "Holders") at the close of business on the January 15, April 15, July 15 or October 15 immediately preceding the next interest payment date, except for the first interest payment which will be made to persons who are Holders at the time of original issuance of Notes under the Indenture. Holders must surrender Notes to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. The Company may, however, pay principal and interest by its check payable in such money. It may mail checks for interest to a Holder's registered address. 3. Paying Agent, Registrar. Initially, Wilmington Trust Company (the "Trustee") will act as Paying Agent and Registrar. The Company may change any Paying Agent, Registrar or co-Registrar without notice. The Company or any of its Subsidiaries may act as Paying Agent, Registrar or co-Registrar. 4. Indenture. The Company issued the Notes under an Indenture dated as of [the date the Exchange Offer is consummated], (the "Indenture") between the Company and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code Sections 77aaa-77bbbb), as amended (the "Act"). The Notes are subject to all such terms, and Noteholders are referred to the Indenture and the Act for a statement of such terms. The Notes are unsecured general obligations of the Company, limited in aggregate principal amount as provided in the Indenture. Capitalized terms used herein and not otherwise defined herein shall have the respective meanings ascribed thereto in the Indenture. 5. Optional Redemption. The Notes are subject to redemption, as a whole or from time to time in part, at any time (subject to the provisions of the Indenture), at the option of the Company, on not less than 30 nor more than 60 days' prior notice given as provided in the Indenture, at a redemption price of 100% of principal amount, together with accrued interest to the redemption date. 6. Notice of Redemption. Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each holder of Notes to be redeemed at his registered address. The selection of Notes for any redemption will be made by the Trustee pursuant to the terms of the Indenture. If less than all the Notes are to be redeemed, Notes in denominations larger than $1,000 may be redeemed in part but only in integral multiples of $1,000. On and after the redemption date interest ceases to accrue on Notes or portions of them called for redemption. A-4 7. Subordination. The Notes are subordinated in right of payment to Senior Debt, (as defined in the Indenture). Senior Debt does not include (a) Indebtedness of the Company to any of its subsidiaries or Affiliates (or any interest, fees, charges or other amounts outstanding in respect of such Indebtedness), (b) any Indebtedness or liability for compensation to employees of the Company, or incurred for the purchase of goods, materials or services in the ordinary course of business and which constitutes a trade payable even if overdue (or any interest, fees, charges or other amounts outstanding in respect of such Indebtedness), (c) any liability for federal, state, local or other taxes owed or owing by the Company, (d) any Indebtedness, guarantee or obligation which is contractually subordinate or junior in right and priority of payment to the Securities, (e) any payments or obligations in respect of any Preferred Stock, Redeemable Stock or Exchangeable Stock, and (f) that portion of any Indebtedness which at the time of issuance is issued in violation of this Indenture. To the extent provided in the Indenture, Senior Debt must be paid before the Notes may be paid. Each Noteholder by accepting a Note agrees to the subordination and authorizes the Trustee to give it effect. 8. Denominations, Transfer, Exchange. (a) The Notes are issuable only in registered form without coupons in denominations of $1,000 and integral multiples of $1,000 except to the extent of fractional Notes outstanding as a result of the Recapitalization of the Indenture or to the extent necessary to effect transfers in whole of such fractional Notes or to issue Notes upon redemption or upon the completion of an Asset Sale Offer or a Change of Control Offer (as such terms are defined in the Indenture). A Holder may transfer or exchange Notes in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not transfer or exchange any Note (or portion of a Note in an integral multiple of $1,000) selected for redemption, or transfer or exchange any Notes for a period of 15 days before a selection of Notes to be redeemed. (b) Prior to August 1, 2005, this Note shall only be transferable as a Unit, together with the Warrant issued to the Holder hereof, in connection with an exchange offer made pursuant to the Company's Amended Offering Circular dated March 7, 2003, as amended on September 18, 2003, and as otherwise extended, amended or supplemented. 9. Persons Deemed Owners. The registered Holder of a Note may be treated as the owner of it for all purposes. 10. Unclaimed Money. If money held by the Trustee or the Paying Agent for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent will pay the money back to the Company at its request. After that, Holders entitled to the money must look to the Company for payment unless an applicable escheat or abandoned or unclaimed property law designates another person. A-5 11. Amendment, Supplement, Waiver. Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the outstanding Notes, and any past default or compliance with any provision may be waived with the consent of the Holders of a majority in principal amount of the outstanding Notes. Without the consent of any Noteholder, the Company may amend or supplement the Indenture, to provide for assumption of the Company's obligations hereunder in connection with a merger, consolidation, or transfer of assets as permitted by the Indenture or the Notes, to cure any ambiguity, defect or inconsistency or to provide for uncertificated Notes in addition to or in place of certificated Notes or to make any change that does not materially adversely affect the rights of any Noteholder. 12. Successor Corporation. When a successor corporation assumes all the obligations of its predecessor under the Notes and the Indenture (and in accordance with the terms of the Indenture), the predecessor corporation will be released from those obligations. 13. Defaults and Remedies. An Event of Default is: default for 30 days in payment of interest on the Notes; default in payment of principal on them, upon maturity, redemption or otherwise; failure by the Company for 60 days after notice to it to comply with any of its other covenants, conditions or agreements in the Indenture or the Notes; the occurrence of an event which permits the acceleration of the maturity of any Indebtedness in excess of $250,000; judgment for the payment for more than $250,000 rendered against the Company or any Subsidiary and not discharged within 60 days after such judgment becomes final and non-appealable; and certain events of bankruptcy or insolvency. If an Event of Default (other than an Event of Default as the result of certain events of bankruptcy and insolvency) occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the outstanding Notes may declare all the Notes to be due and payable immediately. If an Event of Default occurs as the result of certain events of bankruptcy and insolvency, all the Notes shall be due and payable immediately without any declaration or other act on the part of the Trustee or any Holder. Noteholders may not enforce the Indenture or the Notes except as provided in the Indenture. The Trustee may require indemnity satisfactory to it before it enforces the Indenture or the Notes. Subject to certain limitations, Holders of a majority in principal amount of the outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Noteholders notice of any continuing default (except a default in payment of principal or interest) if it determines that withholding notice is in their interests. The Company is required to file periodic reports with the Trustee as to the absence of default. 14. Sales of Assets. The Company shall make offers to purchase Notes at a purchase price of 100% of their principal amount plus accrued interest to the Asset Sale Purchase Date (as defined in the Indenture) pursuant to and subject to the conditions set forth in the Indenture within 270 days following the consummation of an Asset Sale (as defined in the Indenture) (or in the case of Net A-6 Available Cash (as defined in the Indenture) from the conversion of securities, within 270 days after the receipt of such cash). 15. Change of Control. The Company shall make offers to purchase Notes at a purchase price of 100% of their principal amount plus accrued interest to the Change of Control Purchase Date (as defined in the Indenture) pursuant to and subject to the conditions set forth in the Indenture in the event of a Change of Control (as defined in the Indenture). 16. Trustee Dealings with Company. Subject to the provisions of the Act and regulations promulgated thereunder, the Trustee under the Indenture, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its affiliates, and may otherwise deal with the Company or its affiliates, as if it were not Trustee. 17. No Recourse Against Others. A director, officer, employee or shareholder, as such, of the Company shall not have any liability for any obligations of the Company under the Notes or the Indenture or for any claim based on, in respect of or by reason of, such obligations or their creation. Each Noteholder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Notes. 18. Authentication. This Note shall not be valid until the Trustee or an authenticating agent manually signs the certificate of authentication on the other side of this Note. 19. Abbreviations. Customary abbreviations may be used in the name of a Noteholder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entirety), JT TEN (= joint tenant with right of survivorship and not as tenants in common), CUST (= custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 20. Inspection of Indenture and Requests for Copies. Holders may inspect the Indenture at the principal executive office of the Company. The Company will furnish to any Noteholder upon written request and without charge a copy of the Indenture. Requests may be made to: Lexington Precision Corporation 767 Third AVE New York, NY 10017-2023 Attention: President A-7 A-8 ASSIGNMENT FORM If you the Holder want to assign this Note, fill in the form below and have your signature guaranteed: I or we assign and transfer this Note to ____________________________________ ____________________________________ (Insert assignee's social security or tax ID number) ____________________________________ ____________________________________ ____________________________________ ____________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint _________________ agent to transfer this Note on the books of the Company. The agent may substitute another to act for him. ________________________________________________________________________________ Date: Your signature:__________________________________________________________ (Sign exactly as your name appears on the other side of this Note) Signature Guarantee: ___________________________________________________________ A-9 OPTION OF HOLDER TO ELECT PURCHASE If you the holder want to elect to have this Note purchased by the Company pursuant to Section 4.07 or 4.08 of the Indenture, check the box: [ ] If you want to elect to have only part of this Note purchased by the Company, state the amount: $____.* *As set forth in the Indenture, any purchase pursuant to Section 4.07 is subject to proration in the event the offer is oversubscribed. Date: _________________ Your Signature: _________________________________ (Sign exactly as your name appears on the other side of this Note) Signature Guarantee: ___________________________________________________________ B-1 EXHIBIT B LEXINGTON PRECISION CORPORATION OFFICERS' CERTIFICATE To: Wilmington Trust Company 1100 North Market Street Rodney Square North Wilmington, Delaware 19890-1615 Attention: Corporate Trust Administration and The Bank of New York 101 Barclay Street New York, NY 10286 and Registered Holders of Lexington Precision Corporation's 12 3/4% Senior Subordinated Notes due February 1, 2000 validly tendered pursuant to the Exchange Offer Each of the undersigned officers of Lexington Precision Corporation, a Delaware corporation (the "Company"), does hereby certify in the name of and on behalf of the Company, relating to the issuance of Units (the "Units") consisting of 12% Senior Subordinated Notes due August 1, 2009 (the "New Notes"), in an aggregate principal amount not to exceed the sum of $27,412,125 (the "Old Note Principal Amount") plus accrued and unpaid interest on the Old Note Principal Amount from August 1, 1999, through [the day before the date the Exchange Offer is consummated], pursuant to the Company's offer to exchange Old Notes for New Notes and warrants to purchase shares of the Company's common stock made pursuant to the Company's Amended Offering Circular dated March 7, 2003, as amended on September 18, 2003, and as otherwise extended, amended or supplemented (the "Exchange Offer"), as follows: 1. I am authorized to execute and deliver this Certificate on behalf of the Company with respect to (i) the issuance of New Notes and (ii) the issuance of the Warrants to registered holders of the Company's 12 3/4% Senior Subordinated Notes due February 1, 2000 (the "Old Notes") that exchange their Old Notes for Units pursuant to the Exchange Offer. 2. The Company will issue the New Notes pursuant to an Indenture dated as of [the date the Exchange Offer is consummated], between the Company and Wilmington Trust Company, as Trustee (the "Trustee"), in the form attached hereto as Schedule A (the "Indenture"). Unless otherwise specified, all terms in this Officers' Certificate have the meanings ascribed to them in the Indenture. 3. Attached hereto as Schedule B is a list provided to the Company by The Depository Trust Company ("DTC") setting forth all of the DTC participant holders of the Old Notes (the B-2 "DTC Participant Holders") as of the close of business on July 1, 2002 (the "Record Date"). 4. Attached hereto as Schedule C-1 is a list provided to the Company by The Bank of New York, as trustee under an indenture dated August 1, 1993, between the Company and The Bank of New York as successor to IBJ Whitehall Bank & Trust Company as trustee, setting forth all of the registered holders of the Old Notes (the "Registered Holders") as of the Record Date. Such list is a true and correct list of the Registered Holders as of the Record and, except as act forth on Schedule C-2, there have been no changes in the Registered Holders since the Record Date. 5. Attached hereto as Schedule D are copies of certain documents related to the Exchange Offer, including the forms of the New Notes and the Warrants, together with the exhibits to such documents (the "Exchange Offer Documents"), and the forms of a letter of transmittal (the "Letter of Transmittal"), that the Company has sent or caused to be sent to DTC, the DTC Participant Holders, and the Registered Holders for use to evidence the tender of the Old Notes pursuant to the Exchange Offer. 6. Attached hereto as Schedule E are (i) the computer printouts evidencing the tender of $______ principal amount of the outstanding Old Notes by or on behalf of the DTC Participant Holders pursuant to the Automated Tender Offer Procedures of DTC ("ATOP") and (ii) the Letters of Transmittal evidencing the tender of $______ principal amount of the outstanding Old Notes by or on behalf of the Registered Holders, together being not less than 99% in aggregate principal amount of the Old Notes outstanding as of the Record Date. Such Letters of Transmittal have not been revoked and remain in full force and effect. 7. Attached hereto as Schedule F is a certified copy of the resolutions of the Board of Directors of the Company approving the Exchange Offer Documents and authorizing the Exchange Offer, the issuance of the New Notes, and the issuance of the Warrants. 8. Attached hereto as Schedule G is a list of each subsidiary of the Company and such subsidiary's designation as either a "Restricted Subsidiary" or an "Unrestricted Subsidiary." The Metals Group is a division of the Company. 9. Attached hereto as Schedule H is a list of the indebtness to which Section 4.05(b)(vi) pertains. 10. I have read and understood the covenants and conditions in the Indenture relating to the issuance of the New Notes, and have made such examination and investigation, including a review of the Indenture and the matters and proceedings described in the foregoing paragraphs of this Certificate, as is necessary to enable me to express an informed opinion as to whether or not such covenants and conditions have been complied with in connection with the issuance of the New Notes. 11. All conditions and covenants provided for in the Indenture relating to the issuance of the New Notes have been complied with, in order that the Trustee may execute and deliver the Indenture and authenticate the New Notes. B-3 IN WITNESS WHEREOF, the undersigned has executed this Certificate as of this __ of __________, 2003. LEXINGTON PRECISION CORPORATION By: _______________________________ Warren Delano President By: _______________________________ Michael A. Lubin Chairman B-4 SCHEDULE G
Name of Subsidiary Restricted Subsidiary Unrestricted Subsidiary - ------------------ --------------------- ----------------------- Lexington Rubber Group, Inc. [X] Lexington Precision GmbH [X]
C-1 EXHIBIT C _________ __, 2003 Wilmington Trust Company 1100 North Market Street Rodney Square North Wilmington, DE 19890-1615 Attention: Corporate Trust Administration and Registered Holders of Lexington Precision Corporation's 12 3/4% Senior Subordinated Notes due February 1, 2000 validly tendered pursuant to the Exchange Offer Ladies and Gentlemen: We have acted as counsel to Lexington Precision Corporation, a Delaware corporation (the "Company"), in connection with (i) the issuance by the Company , pursuant to Section 2.02 of the Indenture dated as of [the date the Exchange Offer is consummated] between the Company and Wilmington Trust Company, as Trustee (the "Indenture"), of 12% Senior Subordinated Notes (the "New Notes"), due August 1, 2009, in an aggregate principal amount not to exceed the sum of $27,412,125 (the "Old Note Principal Amount") plus accrued and unpaid interest on the Old Note Principal Amount from August 1, 1999, through [the day before the date the Exchange Offer is consummated], and (ii) the issuance by the Company of warrants to purchase shares of the Company's common stock (the "Warrants") to registered holders of 12 3/4% Senior Subordinated Notes due February 1, 2000 (the "Old Notes"), that exchange Old Notes for New Notes pursuant to the Company's offer to exchange Units (the "Units") consisting of New Notes and Warrants for Old Notes made pursuant to the Company's Amended Offering Circular dated March 7, 2003, as amended on September 18, 2003, and as otherwise extended, amended or supplemented (the "Exchange Offer"). Capitalized terms used herein without definition have the respective meanings ascribed to them in the Indenture. In connection with the foregoing, we have examined: (i) a copy of the Indenture; (ii) a copy of an Officers' Certificate (the "Officers' Certificate") of the Company dated _________ __, 2003 relating to the issuance of the New Notes; (iii) a copy of a certificate, dated as of ___________ ___, 2003, of Wilmington Trust Company, as Tabulation Agent, Depositary, and Exchange Agent under the Exchange Offer; (iv) the form of the New Notes and specimen certificates thereof; and (v) the form of the Warrants. As to questions of fact material to our opinions expressed herein, we have, when relevant facts were not independently established, relied upon certificates of, and information received from, the Company, the Trustee, the Exchange Agent, and/or the registrar of the Old Notes. We have not independently investigated or verified the facts represented in such certificates or any information C-2 received from the Company, the Trustee, the Exchange Agent, and/or such registrar, and do not opine as to the accuracy of any such facts. In rendering the following opinions, we have assumed, without independent investigation or verification, (i) the authenticity of any document or instrument submitted to us as an original, (ii) the conformity to the originals of any document or instrument submitted to us as a copy or obtained by us in electronic form and the authenticity of the originals of such latter documents, (iii) the legal capacity of natural persons who executed any such document or instrument at the time of execution thereof and the genuineness of all signatures on such originals or copies (other than signatures of officers of the Company), (iv) that all documents or instruments executed by a party (other than the Company) were duly and validly authorized, executed and delivered by such party in the proper exercise of its corporate, organizational, governmental, or individual power, as the case may be, (v) that all documents or instruments executed by a party (other than the Company) are legal, valid, and binding obligations of such party enforceable against such party in accordance with their respective terms, and (vi) that no consents of Holders or their respective nominees, proxies, or designees were or have been revoked. We express no opinion herein as to (i) whether a federal or state court outside the State of New York would give effect to the New York choice of law set forth in the Indenture, (ii) any provisions of the Indenture to the effect that terms may not be waived or modified except in writing, (iii) any provisions of the Indenture that provide for severability of provisions, (iv) any laws regarding fraudulent transfers or conveyances, or (v) state securities or blue sky laws, rules or regulations. Members of our firm involved in the preparation of this opinion are licensed to practice law in the State of New York, and we do not purport to be experts on, or to express any opinion herein concerning, the laws of any jurisdiction other than the law of the State of New York. Based upon and subject to the foregoing, and the other assumptions and qualifications contained herein, we are of the opinion that: (1) The Indenture has been duly authorized, executed, and delivered by the Company and, assuming the due execution and delivery thereof by the Trustee, is a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be limited by (a) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, liquidation, or similar laws relating to, or affecting the enforcement of, creditors' rights and remedies, (b) the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law), including, without limiting the generality of the foregoing, (i) the possible unavailability of specific performance, injunctive relief, or any other equitable remedy and (ii) concepts of materiality, reasonableness, good faith, and fair dealing, and (c) public policy (the "General Exceptions"). (2) The New Notes have been duly authorized, executed, and delivered by the Company, and, assuming that they have been duly authenticated in accordance with the terms of the Indenture, are valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as such enforceability may be limited by the General Exceptions. C-3 (3) The Warrants have been duly authorized, executed and delivered by the Company and, assuming that they have been duly countersigned by the Warrant Agent (as defined in the Warrants) in accordance with the terms of the Warrants, are valid and binding agreements of the Company, enforceable against the Company in accordance with their terms except as such enforceability may be limited by the General Exceptions. This opinion is intended solely for your use in connection with the Indenture and may not be otherwise communicated to, reproduced, filed publicly, or relied upon by any other person or entity for any other purpose without our express prior written consent. This opinion is limited to the matters stated herein and no opinion is implied or may be inferred beyond the matters expressly stated herein. The opinions expressed herein are rendered as of the date hereof, and we disclaim any undertaking to advise you of changes in law or fact that may affect the continued correctness of any of our opinions as of a later date. We wish to advise you that, from time to time, we represent the Trustee, Exchange Agent and Warrant Agent on specified matters. Very truly yours, EX-4.2 4 l04690aexv4w2.txt EX-4.2 REGISTRATION RIGHTS AGMT DATED 12/18/2003 EXHIBIT 4.2 REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") made as of December 18, 2003, from Lexington Precision Corporation, a Delaware corporation (the "Company"), to and for the benefit of Holders of Registrable Securities (as defined below) of the Company listed on Exhibit A hereto (each a "Holder" and, collectively, the "Holders"). WITNESSETH: WHEREAS, the Holders, pursuant to an exchange offer made under the Company's Amended Offering Circular, dated as of March 7, 2003, as amended on September 18, 2003, and as otherwise extended, amended or supplemented (the "Amended Offering Circular"), exchanged their 12 3/4% Senior Subordinated Notes due February 1, 2000 (the "Old Notes"), for units (the "Units"), consisting of new 12% Senior Subordinated Notes due August 1, 2009, and warrants (the "Warrants") to purchase common stock of the Company, par value $0.25 per share, at a price of $3.50 per share (the "Common Stock") during the period from August 1, 2005, through August 1, 2009; and WHEREAS, the Company desires to provide the Holders with certain registration rights as provided herein; NOW, THEREFORE, in consideration of the recitals, mutual covenants, and agreements herein contained, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto do hereby covenant and agree as follows: SECTION 1. DEFINITIONS. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Form S-3" means such form under the Securities Act as in effect on the date hereof or any registration form under the Securities Act subsequently adopted by the SEC that permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC. "registered" and "registration" refer to a registration effected by preparing and filing a registration statement or similar document (a "Registration Statement") in compliance with the Securities Act, and the declaration or ordering of effectiveness of such Registration Statement or document. "Registrable Securities" means all shares of Common Stock issued or issuable upon exercise of the Warrants until, with respect to such shares of Common Stock, (i) a registration statement covering such shares of Common Stock has been declared effective by the SEC and such shares of Common Stock have been disposed of pursuant to such effective registration statement, (ii) such shares of Common Stock are sold under circumstances in which all of the applicable conditions of Rule 144 (or any similar provisions then in force) under the Securities Act are met permitting resale without subsequent registration under the Securities Act, or (iii) such shares of Common Stock have been otherwise transferred, sold, or otherwise conveyed to any other person or entity, the Company has delivered a new certificate or other evidence of -1- ownership for such Common Stock not bearing the legend required pursuant to this Agreement, and such Common Stock may be resold without subsequent registration under the Securities Act. "Rule 144" means Rule 144 under the Securities Act. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. "Underwritten Offering" means an offering to the public of Common Stock pursuant to an effective Registration Statement that is firmly underwritten by a nationally recognized United States underwriter or underwriters selected or approved by the Company in accordance with this Agreement. SECTION 2 REGISTRATION RIGHTS. (a) Request for Registration. (i) Upon the written request to the Company from Holders of Registrable Securities and/or Holders of unexercised Warrants holding in the aggregate more than 50% of the total of (x) the number of outstanding shares of Common Stock that constitute Registrable Securities, and (y) the number of shares of Common Stock issuable upon the exercise of then-outstanding Warrants, (the "Initiating Holders"), that the Company file a Registration Statement under the Securities Act, with respect to at least 200,000 shares of Common Stock constituting Registrable Securities (as adjusted for stock splits, stock dividends, recapitalizations and similar events), the Company shall give written notice of such requested registration to all other Holders and shall, subject to the limitations of this Section 2, use commercially reasonable efforts to effect the registration under the Securities Act of: (1) the Registrable Securities that the Company has been so requested to register by the Initiating Holders; and (2) all other Registrable Securities that the Company has been requested to register by any other Holder thereof by written request received by the Company within 15 days after the giving of such written notice by the Company, all to the extent necessary to permit the disposition of the Registrable Securities so to be registered. (ii) Notwithstanding the foregoing, the Company shall not be obligated to take any action to effect any such registration pursuant to this Section 2(a) if the Initiating Holders shall have previously initiated one registration pursuant to this Section 2(a) that has been declared or ordered effective pursuant to which securities have been sold or have been withdrawn by the Initiating Holders other than as a result of a material adverse change to the Company. (iii) If any requested registration pursuant to this Section 2(a) is in the form of an Underwritten Offering, the underwriting shall be managed by an underwriter or underwriters of national reputation selected by the Company. The Company shall (together with all Holders proposing to distribute their securities through such underwriting) enter into an underwriting agreement in customary form with the underwriter or underwriters selected as -2- above provided. The rights of any Holder to registration pursuant to this Section 2(a) shall be conditioned on such Holder's participation in an Underwritten Offering and the inclusion of such Holder's Registrable Securities to be registered in the Underwritten Offering. If any Holder does not agree to the terms of such underwriting, he or she shall be excluded therefrom by written notice from the Company or the underwriter. (iv) Subject to the provisions of this Agreement, the Company shall use commercially reasonable efforts to file a Registration Statement as soon as possible after receipt of the request or requests of the Initiating Holders under this Section 2(a), but in any event within 60 days after receipt of such request or requests. (v) All expenses incurred in connection with any registration, filing or qualification of Registrable Securities with respect to the registrations pursuant to this Section 2(a) shall be borne by the Company, including (without limitation) all registration, filing, and qualification fees, printers and accounting fees relating or apportionable thereto and the reasonable fees and disbursements of counsel for the Company and the reasonable fees and disbursements, not to exceed $12,500 in the aggregate, of one separate counsel for the selling Holders hereunder (selected by the Holders of a majority of the Registrable Securities that are included in the corresponding registration); provided, however, that (i) the Company shall have no liability for such expenses if such registration does not become effective due solely to the action or failure to act of any Holder requesting such registration and (ii) the Holders shall bear underwriting and selling discounts and commissions attributable to their Registrable Securities being registered and transfer taxes on shares being sold by such Holders. (b) Company Registration. If (but without the obligation to do so) the Company proposes to register any of its Common Stock under the Securities Act (other than a registration on Form S-8 or S-4 or any successor or similar form that does not permit secondary sales) in connection with the public offering of such securities, the Company shall, at such time, give each Holder written notice of such registration. On written request of each Holder given within 10 days after the giving of such notice by the Company in accordance with Section 7(e), the Company shall, subject to the provisions of Section 2(b)(ii), cause to be registered under the Securities Act all of the Registrable Securities that each such Holder has requested to be registered. (i) In connection with any offering involving an underwriting of shares of Common Stock, the Company shall not be required under this Section 2(b) to include any Registrable Securities in such underwriting unless the Holders accept the terms of the underwriting as agreed on between the Company and the underwriters selected by it, and then only in such quantity as the underwriters determine in their sole discretion will not jeopardize the success of the offering by the Company. (ii) If the total amount of securities, including the Registrable Securities, to be included in an Underwritten Offering exceeds the amount of securities that the underwriters determine in good faith is compatible with the success of the offering, the Company shall so advise the Holders and the number of shares of Common Stock to be included in the registration shall be allocated pro rata among all Holders requesting inclusion (Initiating and -3- non-Initiating) and holders of other registration rights granted by the Company in such manner as the managing underwriter in such offering may determine. (iii) All expenses incurred in connection with any registration, filing, or qualification of Registrable Securities with respect to the registrations pursuant to this Section 2(b) shall be borne by the Company, except that the selling Holders shall bear underwriting and selling discounts and commissions attributable to their Registrable Securities being registered and transfer taxes on shares being sold by such Holders. SECTION 3. REGISTRATION PROCEDURE. (a) Company's Obligation. The Company, in connection with any registration pursuant to Section 2, shall use its commercially reasonably efforts to, as expeditiously as reasonably possible: (i) Prepare and file with the SEC a Registration Statement and such amendments and supplements to said Registration Statement and the prospectus used in connection therewith as may be necessary to cause such Registration Statement to become effective, and keep such Registration Statement effective for a period of up to 120 days. Notwithstanding anything to the contrary in this Agreement, the Company may withhold efforts to cause a Registration Statement to become effective, for a period not to exceed 120 days, if there exists material nonpublic information about the Company that would be required to be disclosed in such Registration Statement pursuant to federal securities laws, and the Board of Directors of the Company determines in good faith that such disclosure would not be in the best interest of the Company, provided that the Company uses commercially reasonable efforts to minimize the period of such delay. (ii) Furnish to the selling Holders such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them. (iii) Enter into any reasonable underwriting agreement required by the proposed underwriter, if any. Each selling Holder participating in such underwriting shall also enter into and perform its obligations under such agreement. (iv) Register and qualify the securities covered by such Registration Statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders; provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or file a general consent to service of process in any such state or jurisdiction or subject itself to taxation therein. (v) Notify each selling Holder covered by such Registration Statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing. -4- (vi) Cause all such Registrable Securities registered pursuant hereto to be listed on each securities exchange on which similar securities issued by the Company are then listed. (vii) Comply with all applicable rules and regulations of the SEC and make generally available to its security holders, in each case as soon as practicable, an earnings statement of the Company that will satisfy the provisions of Section 11(a) of the Securities Act. (viii) Obtain and furnish to each selling Holder, immediately prior to the effectiveness of the Registration Statement (and, in the case of an Underwritten Offering, at the time of execution of an underwriting agreement for the sale of any Registrable Securities pursuant thereto) a cold comfort letter from the Company's independent public accountants in customary form and covering such matters of the type customarily covered by cold comfort letters as the Holders of a majority of the Registrable Securities being sold reasonably request. (ix) Choose the underwriters, auditors, Company legal counsel, and financial printer to be engaged by the Company in any such registration, and provide a transfer agent and registrar for all Registrable Securities registered pursuant hereto. (b) Holder's Compliance. The Company's obligations under this Agreement with respect to a selling Holder shall be conditioned upon such Holder's compliance with the following: (i) Such Holder shall cooperate with the Company in connection with the preparation of the Registration Statement, and such Holder will provide to the Company, the proposed underwriters, agents, or seller-dealers of the offering or other distribution and their respective representatives and agents, in writing, for use in the Registration Statement, all information regarding such Holder and such other information as may be necessary to enable the Company to prepare the Registration Statement and Prospectus covering the Registrable Securities and to maintain the currency and effectiveness thereof. (ii) Such Holder shall enter into such agreements with the Company and any underwriter, seller-dealer, or similar securities industry professional containing such representations, warranties, indemnities, and agreements as are in each case customarily entered into and made by selling stockholders, and will cause its counsel to give any legal opinion customarily given in secondary distributions under similar circumstances. (iii) During such time as such Holder may be engaged in a distribution of the Registrable Securities, such Holder will comply with all applicable laws, and pursuant thereto will, among other things: (i) not engage in any stabilization activity in connection with the securities of the Company in contravention of such rules; (ii) distribute the Registrable Securities owned by such Holder solely in the manner described in the Registration Statement; (iii) cause to be furnished to each underwriter, agent, or seller-dealer to or through whom the Registrable Securities owned by such Holder may be offered, or to the offeree if an offer is made directly by the Holder, such copies of the prospectus (as amended and -5- supplemented to such date) and documents incorporated by reference therein as may be required by such underwriter, agent, seller-dealer or offeree; and (iv) not bid for or purchase any securities of the Company other than as permitted under the Exchange Act. (iv) On notice from the Company that it has delayed, suspended, abandoned or withdrawn any Registration Statement or any related offering or other distribution or it otherwise requires the suspension by such Holder of the distribution of any of the Registrable Securities, such Holder shall cease offering or distributing the Registrable Securities until such time, if any, as the Company notifies such Holder that offering and distribution of the Registrable Securities may recommence. (c) Condition Precedent. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Agreement with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as shall be required to effect the registration of such Holder's Registrable Securities. SECTION 4. INDEMNIFICATION. In the event any Registrable Securities are included in a Registration Statement under this Section 4: (a) Indemnification by the Company. To the extent permitted by law, the Company will indemnify and hold harmless each Holder, and each person, if any, who controls such Holder within the meaning of the Securities Act or the Exchange Act, against any loss, claim, damage, or liability (joint or several) to which they may become subject under the Securities Act, the Exchange Act, or other federal or state law, insofar as such loss, claim, damage, or liability (or action in respect thereof) arises out of is are based on any of the following statements, omissions or violations (collectively a "Violation"): (i) any untrue statement or alleged untrue statement of a material fact contained in such Registration Statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto or (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; the Company will pay to each such Holder, or controlling person, as incurred, any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the Company will not be liable for amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), and to the extent that such loss, claim, damage, or liability (or action in respect thereof) (x) arises out of and is based on an untrue statement or omission or alleged untrue statement or omission made in reliance on and in conformity with information furnished in writing to the Company by or on behalf of such Holder or controlling person expressly for use in such registration statement or, (y) provided that the Company has theretofore timely prepared all necessary prospectus supplements or amendments and provided them to the Holder or its representatives, arises from the failure of any Holder to comply with such prospectus delivery requirements as are applicable to it. -6- (b) Indemnification by Holders. To the extent permitted by law, each selling Holder will indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the Registration Statement, each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, any underwriter, any other Holder selling securities in such Registration Statement and any controlling person of any such underwriter or other Holder, against any loss, claim, damage or liability (joint or several) to which any of the foregoing persons may become subject, under the Securities Act, the Exchange Act, or other federal or state law, insofar as such loss, claim, damage or liability (or action in respect thereof) arises out of or is based on any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance on and in conformity with written information furnished by such Holder expressly for use in connection with such registration or a Violation of any federal or state securities laws, rules or regulations by that Holder; and each such Holder will pay, as incurred, any legal or other expenses reasonably incurred by any person intended to be indemnified pursuant to this Section 4(b), in connection with investigating or defending any such loss, claim, damage, liability or action; provided, that, in no event shall any indemnity under this Section 4(b) exceed the net proceeds received by such Holder from the offering. (c) Conduct of Indemnification Proceedings. Promptly after receipt by an indemnified party under this Section 4 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 4, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties that may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 4, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 4. (d) Contribution. If the indemnification provided for in this Section 4 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage, or expense referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage, or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage, or expense as well as any other relevant equitable considerations. The relative fault of the indemnifying party and the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue -7- statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or the indemnified party and the parties' relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission. (e) Conflict; Survival. (i) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with an Underwritten Offering are in conflict with the foregoing provisions, the provisions of the underwriting agreement shall control. (ii) The obligations of the Company and the Holders under this Section 4 shall survive the completion of any offering of Registrable Securities pursuant to a Registration Statement under this Agreement, and otherwise. SECTION 5. REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to making available to the Holders the benefits of Rule 144 and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company agrees to use its commercially reasonable efforts to: (a) make and keep available public information, as those terms are understood and defined in Rule 144; and (b) file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act. SECTION 6. TERMINATION OF REGISTRATION RIGHTS. This Agreement shall terminate on August 1, 2011; provided, however, the rights of any Holder to request registration or inclusion in any registration with respect to any Registrable Securities held by such Holder shall terminate on the second anniversary of the original issuance of such Registrable Securities as a result of the exercise of a Warrant. SECTION 7. MISCELLANEOUS. (a) Successors and Assigns. The terms and conditions of this Agreement shall inure to the benefit of and be binding on the respective heirs, representatives, successors, and assigns of the parties (including transferees of any shares of Registrable Securities). Nothing in this Agreement, express or implied, is intended to confer on any party, other than the parties hereto or their respective heirs, representatives, successors, and assigns, any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. (b) Governing Law. This Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of New York, without regard to that state's conflict of laws principles. -8- (c) Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument. (d) Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. (e) Notices. Any notice, consent, authorization, or other communication to be given hereunder shall be in writing and shall be deemed duly given and received when delivered personally or transmitted by facsimile transmission with receipt acknowledged by the addressee, or three days after being mailed by first class mail, or the next business day after being deposited for next-day delivery with a nationally recognized overnight delivery service, charges and postage prepaid, properly addressed to the party to receive such notice at the following address for such party (or at such other address as shall be specified by like notice): if to the Company, to: Lexington Precision Company 767 Third AVE New York, NY 10017-2023 Attn: President Telephone: (212) 319-4657 Facsimile: (212) 319-4659 with copies to: Nixon Peabody LLP 437 Madison AVE New York, NY 10022-7001 Attn: Richard F. Langan, Jr., Esq. Telephone: (212) 940-3140 Facsimile: (212) 940-3111 if to the Holders, to the addresses indicated on Exhibit A or such other address or addresses as a Holder may notify the Company from time to time. (f) Amendments and Waivers. For purposes of this Agreement and all agreements, documents, and instruments executed pursuant hereto, except as otherwise specifically set forth herein or therein, no course of dealing between the Company and any Holder and no delay on the part of any party hereto in exercising any right hereunder or thereunder shall operate as a waiver of any of such rights. No covenant or other provision hereof or thereof may be waived or amended other than by a written instrument signed by the party so waiving or amending such covenant or other provision; provided, however, that except as otherwise provided herein or therein, waivers or amendments or additions to, and any consents required by, this Agreement may be made, and compliance with any term, covenant, condition, -9- or provision set forth herein may be omitted or waived (either generally or in a particular instance and either retroactively or prospectively) by a consent or consents in writing signed by Holders of a majority of the Registrable Securities and (in the case of any such amendment, change, or addition) the Company. Any amendment or waiver effected in accordance with this Section 7(f) shall be binding on each Holder of any Registrable Securities at the time such waiver or amendment is effected and the Company. (g) Severability. If any provision of this Agreement, or the application of such provision to any person or circumstance, shall be held invalid or unenforceable, the remainder of this Agreement, or the application of such provision to persons or circumstances other than those to which it is held to be invalid or unenforceable, shall not be affected thereby. (h) Entire Agreement. This Agreement is the entire agreement of the parties and supersedes all prior negotiations, correspondence, agreements, and understandings, written or oral, between or among the parties, regarding the subject matter hereof. (i) Further Assurances. Each party shall execute such other and further certificates, instruments, and other documents as may be necessary and proper to implement, complete, and perfect the transactions contemplated by this Agreement. If requested by the Company, each Holder including Registrable Securities in a registration effected pursuant to this Agreement shall execute such agreement or instrument as may be reasonably requested by the Company to confirm that such Holder is bound by and subject to the terms of this Agreement. -10- IN WITNESS WHEREOF, the Company has executed this Agreement as of the date first above written. LEXINGTON PRECISION CORPORATION By: /s/ Michael A. Lubin ---------------------------------- Name: Michael A. Lubin Title: Chairman Exhibit A to Registration Rights Agreement HOLDERS
Name Address - ----------------------------------------------------------------- Stanley Jacobson and 518 Susquehanna Road Barbara Jacobson Philadelphia, PA 19111 - ----------------------------------------------------------------- Executive Life Insurance c/o JPMorgan Chase Bank Co. of New York Corporate Actions Department Four New York Plaza, 4th Floor New York, NY 10004 - ----------------------------------------------------------------- Cede & Co. 55 Water Street New York, NY 10041 - -----------------------------------------------------------------
A-1 EX-4.3 5 l04690aexv4w3.txt EX-4.3 FORM OF UNIT EXHIBIT 4.3 No. CUSIP: 529529 AD 1 [The following legend is to be inserted only in the Unit to be issued to Cede & Co.: UNLESS THIS UNIT IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO LEXINGTON PRECISION CORPORATION OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY UNIT ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUIRED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] THE WARRANT AND THE NOTE ATTACHED HERETO SHALL CONSTITUTE A UNIT. THE WARRANT WILL NOT BE DETACHABLE FROM THE NOTE UNTIL AUGUST 1, 2005, AND THE WARRANT AND THE NOTE WILL ONLY BE TRANSFERABLE AS A UNIT PRIOR TO THAT TIME. IF THE NOTE IS REDEEMED BY THE COMPANY PRIOR TO AUGUST 1, 2005, THE WARRANT WILL REVERT TO THE COMPANY FOR NO FURTHER CONSIDERATION AND WILL BE CANCELED. THIS UNIT MAY NOT BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, HYPOTHECATED, MORTGAGED, ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE WITH THE RESPECTIVE PROVISIONS SET FORTH IN THE NOTE AND THE WARRANT. LEXINGTON PRECISION CORPORATION UNITS, CONSISTING OF 12% SENIOR SUBORDINATED NOTES DUE AUGUST 1, 2009 AND WARRANTS TO PURCHASE COMMON STOCK This certifies that, for value received, __________ (the "holder") is the holder of units, each consisting of __________ Dollars ($__________) aggregate principal amount of 12% Senior Subordinated Notes due August 1, 2009 ("Notes") of Lexington Precision Corporation, a Delaware corporation (the "Company"), and warrants ("Warrants") to purchase up to __________ shares of fully paid and nonassessable Common Stock, $0.25 par value per share, of the Company, each in the form attached hereto. Reference is hereby made to the further provisions of this Unit set forth in each of the Note and the Warrant, which provisions shall have the same effect as if set forth herein. IN WITNESS WHEREOF, the Company has caused this Unit to be executed by its officers thereunto duly authorized. Dated: December 18, 2003 LEXINGTON PRECISION CORPORATION By: __________________________________ Name: ________________________________ Title: _______________________________ - and - By: __________________________________ Name: ________________________________ Title: _______________________________ COUNTERSIGNED: WILMINGTON TRUST COMPANY By: __________________________________ Name: ________________________________ Title: _______________________________ EX-4.4 6 l04690aexv4w4.txt EX-4.4 FORM OF WARRANT EXHIBIT 4.4 CUSIP: 529529 12 5 WARRANT NO. LW-__ [The following legend is to be inserted only upon issuance or transfer of the warrant to an affiliate of the Company or upon receipt by the Warrant Agent of documentation from the Company stating that the holder is believed to be an affiliate of the Company: THIS WARRANT AND ANY SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL FOR THE HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION. THIS WARRANT SHALL NOT BE TRANSFERRED OR PLEDGED EXCEPT IN ACCORDANCE WITH SECTION 9 HEREOF.] THIS WARRANT, AND THE NOTE ATTACHED HERETO, SHALL CONSTITUTE A UNIT. THIS WARRANT WILL NOT BE DETACHABLE FROM THE NOTE UNTIL AUGUST 1, 2005, AND THIS WARRANT AND THE NOTE WILL ONLY BE TRANSFERABLE AS A UNIT PRIOR TO THAT TIME. IF THE NOTE IS REDEEMED BY THE COMPANY PRIOR TO AUGUST 1, 2005, THIS WARRANT WILL REVERT TO THE COMPANY FOR NO FURTHER CONSIDERATION AND WILL BE CANCELED. THE UNIT MAY NOT BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, HYPOTHECATED, MORTGAGED, ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SECTION 9 HEREOF. LEXINGTON PRECISION CORPORATION WARRANT TO PURCHASE COMMON STOCK ($3.50 Per Share*) This certifies that, for value received, __________ (the "holder") is entitled to subscribe for and purchase up to __________ shares* of fully paid and nonassessable Common Stock of Lexington Precision Corporation, a Delaware corporation (the "Company"), at the price specified in Section 2 (the "Warrant Price"), subject to the provisions and upon the terms and conditions hereinafter set forth. This Warrant is issued under and in accordance with a Warrant Agent Agreement dated as of December 18, 2003, between the Company and Wilmington Trust Company, as Warrant Agent (the "Warrant Agent Agreement"), and is subject to the terms and provisions contained in the Warrant Agent Agreement. By acceptance of this Warrant the Holder hereof consents to all the terms and provision contained in the Warrant Agent Agreement. A copy of the - -------- * Subject to adjustment from time to time pursuant to the provisions of Section 5. Warrant Agent Agreement may be obtained by the Holder of the Warrant upon written request to the Warrant Agent. As used herein, the term "Common Stock" shall mean the Company's presently authorized Common Stock, par value $0.25 per share, as adjusted from time to time in accordance with Section 5. SECTION 1. TERM OF WARRANT. The purchase right represented by this Warrant is exercisable, in whole or in part, at any time subsequent to 9:30 a.m., New York City Time, on or after August 1, 2005 (the "Detachment Date"), and prior to 5:00 p.m., New York City Time, on August 1, 2009; provided, however, that if the 12% Senior Subordinated Note of the Company (the "Note") with which this Warrant comprises a Unit or the 13% Junior Subordinated Note of the Company (the "Junior Note") with which this Warrant comprises a Junior Note Unit issued in connection with an exchange offer (the "Exchange Offer") made pursuant to the Company's Offering Circular Supplement dated September 18, 2003, as amended or supplemented, is redeemed prior to the Detachment Date, this Warrant shall revert to the Company for no further consideration. SECTION 2. WARRANT PRICE. The Warrant Price is $3.50 per share, as adjusted from time to time pursuant to the provisions of Section 5; provided, however, that in no event shall the Warrant Price be less than the par value of the Company's presently authorized Common Stock. SECTION 3. METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT. (a) Subject to Section 1 and Section 8, the purchase right represented by this Warrant may be exercised by the holder, in whole or in part, by the surrender of this Warrant together with the Notice of Exercise and the Investment Representation Statement, each completed and duly executed in the form attached hereto as Exhibit A and Exhibit B, respectively, to the Company at the principal office of the Warrant Agent and by the payment to the Warrant Agent, for the account of the Company, by certified check or wire transfer of federal or other immediately available funds, of an amount equal to the then applicable Warrant Price per share multiplied by the number of shares then being purchased. (b) The Company and Warrant Agent agree that the shares so purchased shall be deemed to be issued to the holder as the record owner of such shares as of the close of business on the date on which this Warrant, together with the completed and duly executed Notice of Exercise and the Investment Representation Statement, shall have been surrendered and payment made for such shares as aforesaid. In the event of any exercise of the rights represented by this Warrant, certificates for the shares of Common Stock so purchased shall be delivered to the holder promptly thereafter and, unless this Warrant has been fully exercised or expired, a new Warrant representing the unexercised and unexpired portion of this Warrant, shall also be issued to the holder promptly. SECTION 4. STOCK FULLY PAID; RESERVATION OF SHARES. All shares of Common Stock that may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be fully paid and nonassessable, and free from all taxes, liens, and charges with respect -2- to the issue thereof, other than restrictions upon transfer referred to herein or required under applicable federal or state securities laws. During the period within which the rights represented by this Warrant may be exercised, the Company will, at all times, have authorized and reserved for the purpose of the issuance upon exercise of the purchase rights evidenced by this Warrant, a sufficient number of shares of its Common Stock to provide for the exercise of the rights represented by this Warrant. SECTION 5. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES. The kind of securities purchasable upon the exercise of this Warrant, the Warrant Price, and the number of shares purchasable upon exercise of this Warrant shall be subject to adjustment from time to time upon the occurrence of certain events as follows: (a) Reclassification, Consolidation, or Merger. In case of any reclassification or change of outstanding securities of the class issuable upon exercise of this Warrant (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), or in case of any consolidation or merger of the Company with or into another corporation, other than a merger with another corporation in which the Company is the continuing corporation and that does not result in any reclassification or change of outstanding securities issuable upon exercise of this Warrant, or in case of any sale of all or substantially all of the assets of the Company, the Company, or such successor or purchasing corporation, as the case may be, and the Warrant Agent shall execute a new Warrant, providing that the holder of this Warrant shall have the right to exercise such new Warrant and procure upon such exercise, in lieu of each share of Common Stock theretofore issuable upon exercise of this Warrant, the kind and amount of shares of stock, other securities, money, and/or property receivable upon such reclassification, change, consolidation, merger, or sale by a holder of one share of Common Stock. Such new Warrant shall provide for adjustments that shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 5. The provisions of this Section 5(a) shall similarly apply to successive reclassifications, changes, consolidations, mergers, and sales. (b) Subdivision or Combination of Shares. If, at any time while this Warrant remains outstanding and unexpired, the Company shall subdivide or combine its Common Stock, the Warrant Price shall be proportionately decreased in the case of a subdivision or increased in the case of a combination. (c) Stock Dividends. If, at any time while this Warrant remains outstanding and unexpired, the Company shall pay a dividend with respect to Common Stock payable in, or make any other distribution to holders of Common Stock (except any distribution specifically provided for in Section 5(a) or Section 5(b)) of, additional shares of Common Stock, the Warrant Price shall be adjusted, from and after the record date for the determination of stockholders entitled to receive such dividend or distribution, to that price determined by multiplying the Warrant Price in effect immediately prior to such record date by a fraction (i) the numerator of which shall be the total number of shares of Common Stock outstanding immediately prior to such dividend or distribution, and (ii) the denominator of which shall be the total number of shares of Common Stock outstanding immediately after such dividend or distribution and the number of shares of Common Stock purchasable upon the exercise of the rights represented by this Warrant shall be adjusted by dividing the number of shares of Common Stock purchasable -3- immediately prior to such record date by the same fraction. In the case of issuance of shares of Common Stock as a dividend, the shares shall be deemed to have been issued at the close of business on the dividend record date. If no dividend record date is fixed, the day on which the Board of Directors of the Company adopts the resolution authorizing the dividend shall be treated as the dividend record date. SECTION 6. NOTICE OF ADJUSTMENTS. Whenever the Warrant Price shall be adjusted pursuant to Section 5, the Company shall prepare promptly a certificate signed by its chief financial officer setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, the Warrant Price after giving effect to such adjustment and the number of shares then purchasable upon exercise of this Warrant, and shall cause copies of such certificate to be mailed (by first class mail, postage prepaid) to the Warrant Agent and to the holder at the addresses specified in Section 10(d), or at such other address as may be provided to the Company in writing by the holder. SECTION 7. FRACTIONAL SHARES. The Company shall not be required to issue any fractional shares of Common Stock in connection with any exercise hereunder. In the event the Company elects not to issue such fractional shares, the Company shall make a cash payment in lieu of such fractional shares upon the basis of the Warrant Price then in effect. SECTION 8. COMPLIANCE WITH SECURITIES ACT. The holder, by acceptance hereof, agrees that (a) the shares of Common Stock issuable upon exercise hereof and, (b) this Warrant are being acquired solely for the holder's own account and not as a nominee for any other party, for investment purposes only, and that it will not offer, sell, assign, transfer, pledge, hypothecate, mortgage, encumber, or otherwise dispose of any of the shares of Common Stock issuable upon exercise hereof or, if the holder is an "affiliate" (as defined in Rule 144(a) promulgated under the Securities Act of 1933, as amended (the "Act")) of the Company, this Warrant except under circumstances that will not result in a violation of the Act, or any applicable state securities laws. Upon exercise of this Warrant, the holder shall, if requested by the Company or the Warrant Agent, confirm in writing, in a form satisfactory to the Company and the Warrant Agent, that the shares of Common Stock so purchased are being acquired solely for the holder's own account and not as a nominee for any other party, for investment, and not with a view toward distribution or resale in any transaction that would be in violation of the Act or any applicable state securities laws, subject, however, to the disposition of the holder's property being at all times within their control. All shares of Common Stock issued upon exercise of this Warrant (unless registered under the Act) shall be stamped or imprinted with a legend substantially in the following form: THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL FOR THE HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR RECEIPT OF -4- A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION STATING THAT SUCH REGISTRATION IS NOT REQUIRED. THIS SECURITY AND ANY SECURITY RECEIVED UPON THE EXERCISE HEREOF SHALL NOT BE TRANSFERRED OR PLEDGED EXCEPT IN ACCORDANCE WITH SECTION 9 OF A CERTAIN WARRANT ISSUED BY THE COMPANY AS OF DECEMBER 18, 2003. SECTION 9. TRANSFER. (a) The holder shall not offer, sell, assign, transfer, pledge, hypothecate, mortgage, encumber, or otherwise dispose of (a) all or any of the securities issuable upon exercise of this Warrant, or (b) if the holder is an affiliate of the Company, this Warrant, except in compliance with applicable federal and state securities laws (including the delivery by the transferor and the transferee of investment representation letters and legal opinions reasonably satisfactory to the Company and the Warrant Agent, if such are requested by the Company or the Warrant Agent). (b) Subject to compliance with the terms of Section 8 and Section 9(a), this Warrant and all rights hereunder are transferable, in whole or in part, at the office of the Warrant Agent by the holder in person or by its duly authorized attorney, upon surrender of this Warrant properly endorsed; provided, however, that prior to August 1, 2005, this Warrant shall only be transferable together with the Note or Junior Note with which this Warrant comprises a Unit or a Junior Note Unit, respectively issued in connection with the Exchange Offer. Each taker and holder of this Warrant, by taking or holding the same, consents and agrees that this Warrant, when endorsed in blank, shall be deemed negotiable; provided, however, that the last holder of this Warrant, as registered on the warrant register (the "Warrant Register") maintained by the Warrant Agent, may be treated by the Company, the Warrant Agent, and all other persons dealing with this Warrant as the absolute owner hereof for any purposes and as the person entitled to exercise the rights represented by this Warrant, any notice to the contrary notwithstanding, unless and until such holder seeks to transfer registered ownership of this Warrant on the Warrant Register and such transfer is effected. SECTION 10. MISCELLANEOUS. (a) No Rights as Stockholder. No holder of a Warrant shall be entitled to vote or receive dividends on or be deemed for any other purpose the holder of any Common Stock or any other securities of the Company that may at any time be issuable upon the exercise hereof, nor shall anything contained herein be construed to confer upon the holder of this Warrant, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value or change of stock to no par value, consolidation, merger, conveyance, or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights, or otherwise until this Warrant shall have been exercised and the shares purchasable upon the exercise hereof shall have become deliverable, as provided herein. -5- (b) Replacement. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction, or mutilation of this Warrant and, in the case of loss, theft, or destruction, upon delivery of an indemnity agreement or bond reasonably satisfactory in form and amount to the Company or, in the case of mutilation, upon surrender and cancellation of this Warrant, the Company, at its expense, will execute and deliver, and the Warrant Agent will countersign, in lieu of this Warrant, a new Warrant of like tenor. (c) Notice of Capital Changes. In the event: (i) The Company shall declare any dividend or distribution payable to the holders of its Common Stock; (ii) There shall be any capital reorganization or reclassification of the capital stock of the Company, or any consolidation or merger of the Company with, or sale of all or substantially all of its assets to, another corporation or business organization; or (iii) There shall be a voluntary or involuntary dissolution, liquidation, or winding up of the Company; then, in any one or more of said cases, the Company shall give the holder and the Warrant Agent written notice, in the manner set forth in Section 10(d), of the date on which a record shall be taken for such dividend or distribution or for determining stockholders entitled to vote upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, or winding up and of the date on which any such transaction shall take place, as the case may be. Such written notice shall be given at least 20 days prior to the transaction in question and not less than 10 days prior to the record date in respect thereof. (d) Notices. All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by registered or certified mail, postage prepaid, or otherwise delivered by hand or by a nationally recognized overnight courier, as follows: If to the Company: Lexington Precision Corporation 767 Third AVE New York, NY 10017 Attention: President If to the holder: at the address of the registered holder then maintained on the Warrant Register. -6- If to the Warrant Agent: (i) by registered or certified mail: Wilmington Trust Company DC-1615 Reorg Services P.O. Box 8861 Wilmington, DE 19899-8861 Attention: Aubrey Rosa (ii) by hand delivery or overnight courier: Wilmington Trust Company Reorg Services 1100 North Market ST Rodney Square North Wilmington, DE 19890-1615 Attention: Aubrey Rosa All such notices (other than notices of exercise of this Warrant, which shall be deemed to have been received only upon actual receipt thereof by the Warrant Agent) and communications shall be deemed to have been received (i) in the case of personal delivery, on the date of such delivery, (ii) in the case of a nationally recognized overnight courier, on the next business day after the date when sent, and (iii) in the case of mailing, on the third business day following the date on which the piece of mail containing such communication has been deposited in a regularly maintained receptacle for the deposit of the United States mail, addressed and mailed as aforesaid. (e) No Impairment. The Company will not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issuance or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions in this Warrant. (f) Governing Law. Except to the extent that the General Corporation Law of the State of Delaware may govern this Warrant by virtue of the fact that the Company is incorporated under the laws of the State of Delaware, this Warrant shall be governed by and construed under the laws of the State of New York without regard to its conflict of laws rules or principles. (g) Countersignature. This Warrant shall not be valid or obligatory for any purpose until it shall have been countersigned by the Warrant Agent. -7- IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officers thereunto duly authorized. Dated: December __, 2003 LEXINGTON PRECISION CORPORATION By:__________________________________ Name:________________________________ Title: ______________________________ - and - By:__________________________________ Name:________________________________ Title: ______________________________ COUNTERSIGNED: WILMINGTON TRUST COMPANY as Warrant Agent By: ____________________________ Name: ___________________________ Title: __________________________ -8- Exhibit A to Warrant to Purchase Common Stock NOTICE OF EXERCISE TO: Lexington Precision Corporation 1. The undersigned hereby elects to purchase ________ shares of the Common Stock of Lexington Precision Corporation pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price of such shares in full. 2. Please issue a certificate or certificates representing said shares of Common Stock in the name of the undersigned or in such other name as is specified below: ______________________ (Name) ______________________ ______________________ (Address) 3. The undersigned represents that the aforesaid shares of Common Stock are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or reselling such shares. _____________________________ _____________________________ (Date) (Name of Warrant Holder) By:__________________________ Title:_______________________ A-1 Exhibit B to Warrant to Purchase Common Stock INVESTMENT REPRESENTATION STATEMENT The undersigned hereby represents to Lexington Precision Corporation (the "Company") and to Wilmington Trust Company, as Warrant Agent, as follows: The securities to be received upon the exercise of the Warrant to which this Statement is an exhibit (the "Warrant") will be acquired for investment for its own account, not as a nominee or agent, and not with a view to the sale or distribution of any part thereof, and the undersigned has no present intention of offering, selling, granting participation in, or otherwise distributing the same in any transaction that would be in violation of applicable federal or state securities laws, but subject to any requirement of law that the disposition of its property shall at all times be within its control. By executing this Statement, the undersigned further represents that it does not have any contract, undertaking, agreement, or arrangement with any person to offer, sell, transfer, grant participations in, or otherwise distribute to such person or to any third person any securities issuable upon exercise of the Warrant. The undersigned acknowledges that the securities issuable upon exercise of the Warrant at the time of issuance may not be registered under the Securities Act of 1933, as amended (the "Act"), or any applicable state securities laws on the ground that the issuance of such securities is exempt pursuant to Section 4(2) of the Act and state law exemptions relating to offers and sales not by means of a public offering, and that the Company's reliance on such exemptions is predicated on the undersigned's representations set forth herein. The undersigned represents that it is an "accredited investor" within the meaning of Rule 501 of Regulation D under the Act as presently in effect or a "qualified institutional buyer" within the meaning of Rule 144A under the Act as presently in effect. The undersigned agrees that in no event will it make a disposition of any securities acquired upon the exercise of the Warrant unless and until (a) it shall have notified the Company of the proposed disposition and shall have furnished to the Company a statement of the circumstances surrounding the proposed disposition, and (b) it shall have furnished the Company with an opinion of counsel satisfactory to the Company to the effect that (i) appropriate action necessary for compliance with the Act and any applicable state securities laws has been taken and an exemption from the registration requirements of the Act and such laws is available, and (ii) the proposed transfer will not violate any of said laws. The undersigned acknowledges that an investment in the Company is highly speculative and represents that it is able to fend for itself in the transactions contemplated by this Statement, that it has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of their investments, and that it has the ability to bear the economic risks (including the risk of a total loss) of its investment. The undersigned represents that it has had the opportunity to ask questions of the Company concerning the Company's business and assets and to obtain any additional information that it considered necessary to verify the accuracy of or to amplify on the Company's disclosures, and that it has had all questions asked by it satisfactorily answered by the Company. -1- The undersigned acknowledges that the securities issuable upon exercise of the Warrant must be held indefinitely unless subsequently registered under the Act or an exemption from such registration is available. The undersigned is aware of the provisions of Rule 144 promulgated under the Act that permit limited resale of securities purchased in a private placement subject to the satisfaction of certain conditions, including, among other things, the existence of a public market for such securities, the availability of certain current public information about the Company, the resale occurring not less than one year after a party has purchased and paid for the securities, the sale being executed through a "broker's transaction" or in transactions directly with "market makers" (as provided by Rule 144(f)) and the number of securities being sold during any three-month period not exceeding specified limitations. _________________________ __________________________________ (Date) (Name of Warrant Holder) By:_______________________________ Title:____________________________ -2- EX-4.5 7 l04690aexv4w5.txt EX-4.5 FORM OF 12% SR. SUB NOTE DUE 8/1/2003 EXHIBIT 4.5 LEXINGTON PRECISION CORPORATION No. CUSIP: 529529 AE 9 Lexington Precision promises to pay to or registered assigns the principal sum of Dollars on August 1, 2009 12% Senior Subordinated Notes due August 1, 2009 Interest Payment Dates: February 1, May 1, August 1, and November 1 Record Dates: January 15, April 15, July 15, and October 15 Dated: December __, 2003 Reference is hereby made to the further provisions of this Note as attached hereto which provisions shall have the same effect as if set forth at this place. WILMINGTON TRUST COMPANY, LEXINGTON PRECISION CORPORATION as Trustee, certifies that this is one of the Securities referred to in the Indenture. By _________________________ By:______________________________ Authorized Signatory Title: - and - By:______________________________ Title: (Seal) [The following legend is to be inserted only in the Note to be issued to Cede & Co.: UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO LEXINGTON PRECISION CORPORATION OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUIRED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] LEXINGTON PRECISION CORPORATION 12% Senior Subordinated Note due August 1, 2009 THIS NOTE, AND THE WARRANT ATTACHED HERETO, SHALL CONSTITUTE A UNIT. THIS NOTE WILL NOT BE DETACHABLE FROM THE WARRANT UNTIL AUGUST 1, 2005, AND THIS NOTE AND THE WARRANT WILL ONLY BE TRANSFERABLE AS A UNIT PRIOR TO THAT TIME. IF THIS NOTE IS REDEEMED BY THE COMPANY PURSUANT TO SECTION 5 HEREOF PRIOR TO AUGUST 1, 2005, THE ATTACHED WARRANT WILL REVERT TO THE COMPANY FOR NO FURTHER CONSIDERATION AND WILL BE CANCELED. THE UNIT MAY NOT BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, HYPOTHECATED, MORTGAGED, ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SECTION 8 HEREOF. 1. Interest. LEXINGTON PRECISION CORPORATION (the "Company"), a Delaware corporation, promises to pay interest on the principal amount of this Note at the rate of 12% per annum for the period from December __, 2003, through the date this Note is paid in full. The Company will pay interest quarterly on February 1, May 1, August 1, and November 1 of each year, commencing on February 1, 2004. Interest on the Notes will accrue from the date of the Indenture. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company will pay interest on overdue principal at the rate per annum then in effect on the Notes, as set forth in the preceding paragraph; it shall pay interest on overdue installments of interest at the same rate to the extent lawful. - 2 - 2. Method of Payment. The Company will pay interest on the Notes (except Defaulted Interest) to the persons who are registered holders of Notes ("Noteholders" or "Holders") at the close of business on the January 15, April 15, July 15 or October 15 immediately preceding the next interest payment date, except for the first interest payment which will be made to persons who are Holders at the time of original issuance of Notes under the Indenture. Holders must surrender Notes to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. The Company may, however, pay principal and interest by its check payable in such money. It may mail checks for interest to a Holder's registered address. 3. Paying Agent, Registrar. Initially, Wilmington Trust Company (the "Trustee") will act as Paying Agent and Registrar. The Company may change any Paying Agent, Registrar or co-Registrar without notice. The Company or any of its Subsidiaries may act as Paying Agent, Registrar or co-Registrar. 4. Indenture. The Company issued the Notes under an Indenture dated as of [the date the Exchange Offer is consummated], (the "Indenture") between the Company and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code Sections 77aaa-77bbbb), as amended (the "Act"). The Notes are subject to all such terms, and Noteholders are referred to the Indenture and the Act for a statement of such terms. The Notes are unsecured general obligations of the Company, limited in aggregate principal amount as provided in the Indenture. Capitalized terms used herein and not otherwise defined herein shall have the respective meanings ascribed thereto in the Indenture. 5. Optional Redemption. The Notes are subject to redemption, as a whole or from time to time in part, at any time (subject to the provisions of the Indenture), at the option of the Company, on not less than 30 nor more than 60 days' prior notice given as provided in the Indenture, at a redemption price of 100% of principal amount, together with accrued interest to the redemption date. 6. Notice of Redemption. Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each holder of Notes to be redeemed at his registered address. The selection of Notes for any redemption will be made by the Trustee pursuant to the terms of the Indenture. If less than all the Notes are to be redeemed, Notes in denominations larger than $1,000 may be redeemed in part but only in integral multiples of $1,000. On and after the redemption date interest ceases to accrue on Notes or portions of them called for redemption. - 3 - 7. Subordination. The Notes are subordinated in right of payment to Senior Debt, (as defined in the Indenture). Senior Debt does not include (a) Indebtedness of the Company to any of its subsidiaries or Affiliates (or any interest, fees, charges or other amounts outstanding in respect of such Indebtedness), (b) any Indebtedness or liability for compensation to employees of the Company, or incurred for the purchase of goods, materials or services in the ordinary course of business and which constitutes a trade payable even if overdue (or any interest, fees, charges or other amounts outstanding in respect of such Indebtedness), (c) any liability for federal, state, local or other taxes owed or owing by the Company, (d) any Indebtedness, guarantee or obligation which is contractually subordinate or junior in right and priority of payment to the Securities, (e) any payments or obligations in respect of any Preferred Stock, Redeemable Stock or Exchangeable Stock, and (f) that portion of any Indebtedness which at the time of issuance is issued in violation of this Indenture. To the extent provided in the Indenture, Senior Debt must be paid before the Notes may be paid. Each Noteholder by accepting a Note agrees to the subordination and authorizes the Trustee to give it effect. 8. Denominations, Transfer, Exchange. (a) The Notes are issuable only in registered form without coupons in denominations of $1,000 and integral multiples of $1,000 except to the extent of fractional Notes outstanding as a result of the Recapitalization of the Indenture or to the extent necessary to effect transfers in whole of such fractional Notes or to issue Notes upon redemption or upon the completion of an Asset Sale Offer or a Change of Control Offer (as such terms are defined in the Indenture). A Holder may transfer or exchange Notes in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not transfer or exchange any Note (or portion of a Note in an integral multiple of $1,000) selected for redemption, or transfer or exchange any Notes for a period of 15 days before a selection of Notes to be redeemed. (b) Prior to August 1, 2005, this Note shall only be transferable as a Unit, together with the Warrant issued to the Holder hereof, in connection with an exchange offer made pursuant to the Company's Amended Offering Circular dated March 7, 2003, as amended on September 18, 2003, and as otherwise extended, amended or supplemented. 9. Persons Deemed Owners. The registered Holder of a Note may be treated as the owner of it for all purposes. 10. Unclaimed Money. If money held by the Trustee or the Paying Agent for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent will pay the money back to the Company at its request. After that, Holders entitled to the money must look to the Company for payment unless an applicable escheat or abandoned or unclaimed property law designates another person. - 4 - 11. Amendment, Supplement, Waiver. Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the outstanding Notes, and any past default or compliance with any provision may be waived with the consent of the Holders of a majority in principal amount of the outstanding Notes. Without the consent of any Noteholder, the Company may amend or supplement the Indenture, to provide for assumption of the Company's obligations hereunder in connection with a merger, consolidation, or transfer of assets as permitted by the Indenture or the Notes, to cure any ambiguity, defect or inconsistency or to provide for uncertificated Notes in addition to or in place of certificated Notes or to make any change that does not materially adversely affect the rights of any Noteholder. 12. Successor Corporation. When a successor corporation assumes all the obligations of its predecessor under the Notes and the Indenture (and in accordance with the terms of the Indenture), the predecessor corporation will be released from those obligations. 13. Defaults and Remedies. An Event of Default is: default for 30 days in payment of interest on the Notes; default in payment of principal on them, upon maturity, redemption or otherwise; failure by the Company for 60 days after notice to it to comply with any of its other covenants, conditions or agreements in the Indenture or the Notes; the occurrence of an event which permits the acceleration of the maturity of any Indebtedness in excess of $250,000; judgment for the payment for more than $250,000 rendered against the Company or any Subsidiary and not discharged within 60 days after such judgment becomes final and non-appealable; and certain events of bankruptcy or insolvency. If an Event of Default (other than an Event of Default as the result of certain events of bankruptcy and insolvency) occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the outstanding Notes may declare all the Notes to be due and payable immediately. If an Event of Default occurs as the result of certain events of bankruptcy and insolvency, all the Notes shall be due and payable immediately without any declaration or other act on the part of the Trustee or any Holder. Noteholders may not enforce the Indenture or the Notes except as provided in the Indenture. The Trustee may require indemnity satisfactory to it before it enforces the Indenture or the Notes. Subject to certain limitations, Holders of a majority in principal amount of the outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Noteholders notice of any continuing default (except a default in payment of principal or interest) if it determines that withholding notice is in their interests. The Company is required to file periodic reports with the Trustee as to the absence of default. 14. Sales of Assets. The Company shall make offers to purchase Notes at a purchase price of 100% of their principal amount plus accrued interest to the Asset Sale Purchase Date (as defined in the Indenture) pursuant to and subject to the conditions set forth in the Indenture within 270 days following the consummation of an Asset Sale (as defined in the Indenture) (or in the case of Net - 5 - Available Cash (as defined in the Indenture) from the conversion of securities, within 270 days after the receipt of such cash). 15. Change of Control. The Company shall make offers to purchase Notes at a purchase price of 100% of their principal amount plus accrued interest to the Change of Control Purchase Date (as defined in the Indenture) pursuant to and subject to the conditions set forth in the Indenture in the event of a Change of Control (as defined in the Indenture). 16. Trustee Dealings with Company. Subject to the provisions of the Act and regulations promulgated thereunder, the Trustee under the Indenture, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its affiliates, and may otherwise deal with the Company or its affiliates, as if it were not Trustee. 17. No Recourse Against Others. A director, officer, employee or shareholder, as such, of the Company shall not have any liability for any obligations of the Company under the Notes or the Indenture or for any claim based on, in respect of or by reason of, such obligations or their creation. Each Noteholder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Notes. 18. Authentication. This Note shall not be valid until the Trustee or an authenticating agent manually signs the certificate of authentication on the other side of this Note. 19. Abbreviations. Customary abbreviations may be used in the name of a Noteholder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entirety), JT TEN (= joint tenant with right of survivorship and not as tenants in common), CUST (= custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 20. Inspection of Indenture and Requests for Copies. Holders may inspect the Indenture at the principal executive office of the Company. The Company will furnish to any Noteholder upon written request and without charge a copy of the Indenture. Requests may be made to: Lexington Precision Corporation 767 Third AVE New York, NY 10017-2023 Attention: President - 6 - ASSIGNMENT FORM If you the Holder want to assign this Note, fill in the form below and have your signature guaranteed: I or we assign and transfer this Note to ______________________________ ______________________________ (Insert assignee's social security or tax ID number) ______________________________ ______________________________ ______________________________ ______________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint _________________ agent to transfer this Note on the books of the Company. The agent may substitute another to act for him. ________________________________________________________________________________ Date: Your signature:___________________________________________________________ (Sign exactly as your name appears on the other side of this Note) Signature Guarantee:____________________________________________________________ OPTION OF HOLDER TO ELECT PURCHASE If you the holder want to elect to have this Note purchased by the Company pursuant to Section 4.07 or 4.08 of the Indenture, check the box: [ ] If you want to elect to have only part of this Note purchased by the Company, state the amount: $____.* *As set forth in the Indenture, any purchase pursuant to Section 4.07 is subject to proration in the event the offer is oversubscribed. Date: __________________ Your Signature: _____________________________________ (Sign exactly as your name appears on the other side of this Note) Signature Guarantee:____________________________________________________________ EX-4.6 8 l04690aexv4w6.txt EX-4.6 FORM OF 13% JR. SUB NOTE DUE 11/01/09 EXHIBIT 4.6 THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, AN OPINION OF COUNSEL FOR THE HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES SHALL NOT BE TRANSFERRED OR PLEDGED EXCEPT IN ACCORDANCE WITH SECTION VI OF A CERTAIN EXCHANGE AGREEMENT DATED AS OF DECEMBER 18, 2003 WITH THE COMPANY. THIS NOTE, AND THE WARRANT ATTACHED HERETO, SHALL CONSTITUTE A JUNIOR NOTE UNIT. THIS NOTE WILL NOT BE DETACHABLE FROM THE WARRANT UNTIL AUGUST 1, 2005, AND THIS NOTE AND THE WARRANT WILL ONLY BE TRANSFERABLE AS A UNIT PRIOR TO THAT TIME. IF THIS NOTE IS REDEEMED BY THE COMPANY PURSUANT TO SECTION 4 HEREOF PRIOR TO AUGUST 1, 2005, THE ATTACHED WARRANT WILL REVERT TO THE COMPANY FOR NO FURTHER CONSIDERATION AND WILL BE CANCELED. THE JUNIOR NOTE UNIT MAY NOT BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, HYPOTHECATED, MORTGAGED, ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SECTION 6 HEREOF. LEXINGTON PRECISION CORPORATION 13% Junior Subordinated Note due November 1, 2009 $346,667.00 Dated: December 18, 2003 New York, New York FOR VALUE RECEIVED, LEXINGTON PRECISION CORPORATION, a Delaware corporation (the "Company"), hereby promises to pay to MICHAEL A. LUBIN the principal sum of THREE HUNDRED FORTY SIX THOUSAND SIX HUNDRED SIXTY SEVEN DOLLARS (U.S.$ 346,667.00) on November 1, 2009, together with accrued interest thereon as herein provided. 1. Interest. The Company promises to pay interest on the principal amount of this Note at the rate of 13% per annum from the date of this Note until the principal amount of this Note shall have been paid in full. The Company will pay interest quarterly on February 1, May 1, August 1 and November 1 of each year (each, an "Interest Payment Date"), commencing on February 1, 2004. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. 2. Method of Payment. 2.1. The Company shall pay interest on each Note to the person who is the registered holder of a Note ("Noteholder" or "Holder") at the close of business on the January 15, April 15, July 15 or October 15 preceding the Interest Payment Date. The Holder must surrender this Note to the Company at its offices at 767 Third Avenue, New York, New York 10017-2023 or such other address as the Company may specify in a notice mailed or delivered to the registered address of the Holder hereof (the "Designated Office") to collect principal payments. The Company shall pay principal and interest in money of the United States of America that at the time of payment is legal tender for the payment of public and private debts. The Company may, however, pay principal and interest by its check payable in such money. It may mail an interest check to the Holder's registered address. In the event this Note is issued or held in two or more units, such units shall hereinafter be collectively referred to as the "Notes" and individually as a "Note", and in the event this Note shall be the only Note outstanding, the term "Notes" as used herein shall refer only to this Note. Any payment of interest or principal which is due on a Saturday, Sunday or holiday shall be payable on the next succeeding business day. Each Note issued by the Company upon transfer of, in exchange for or in lieu of any other Note shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Note. 2.2. Notwithstanding subparagraph 2.1 hereof, the Company will make payments of principal and interest by check payable to the order of the Holder of this Note duly mailed or delivered to its registered address, or, if requested, by wire transfer of federal or other immediately available funds to its account at any bank or trust company in the United States of America. Before any such Note is transferred in accordance with the terms hereof, the Holder will make or cause to be made a notation thereon of principal payments previously made thereon and of the date to which interest thereon has been paid. 3. Subordination. 3.1. The Company covenants and agrees, and the Holder of this Note by such Holder's acceptance hereof likewise covenants and agrees, that the payment of the principal of and interest on the Notes is subordinated and subject in right of payment, to the extent and in the manner provided in this paragraph 3, to the prior payment in full of all Senior Debt (as hereinafter defined). This paragraph 3 shall constitute a continuing offer to all persons who, in reliance upon the provisions of this paragraph 3, become holders of, or continue to hold, Senior Debt, and such provisions are made for the benefit of the holders of Senior Debt, and such holders are made obligees hereunder and they and/or each of them may enforce such provisions. 3.2. Upon the occurrence of any default in the payment of principal, premium, if any, or interest then due and payable in respect of any Senior Debt (whether at maturity, upon redemption, by declaration, or otherwise), no direct or indirect payment (in cash, property, securities, by set-off, or otherwise) shall be made or agreed to be made on account of the principal of, premium, if any, or interest on the Notes, or in respect of any redemption, retirement, purchase or other acquisition of any of the Notes, and no Holder of any Note shall be entitled to demand or receive any such payment (any of the foregoing payments or actions being referred to in this paragraph 3 as a "Payment"), unless and until such default has been waived or cured or all amounts then due and payable for principal of, premium, if any, and interest on all Senior Debt shall have been paid in full or provision therefor in cash, in cash equivalents or in accordance with the terms of such Senior Debt and the agreements, if any, under which such Senior Debt was issued or created, shall have been made. The Company may not make any Payment if: (a) a default or event of default under any agreement governing Senior Debt (other than a default or event of default relating to payment of principal, premium, if any, or interest, either at maturity, upon redemption, by declaration, or otherwise) occurs and is continuing that permits the holders of such Senior Debt to accelerate its maturity (whether or not such acceleration has occurred); and (b) the Company receives a notice of such default or event of default from a person who may give such notice (including, without limitation, a holder of such Senior Debt, a representative of any such holder, or a trustee for the benefit of holders of such Senior Debt). Notwithstanding the provisions of this paragraph 3, the Company may make Payments on the Notes when: (i) the default or event of default is cured or waived; or (ii) 90 days pass after the earliest such notice is given, with respect to such default or event of default so long as this paragraph 3 otherwise permits a Payment at that time. In the event that any Noteholder receives any Payment at a time when such Noteholder has actual knowledge such payment is prohibited by this paragraph 3, such Payment shall be held by such Noteholder in trust for the benefit of, and shall be paid over and delivered forthwith, upon written request, to the holders and owners of Senior Debt as their interests may appear or their agent or representative or the trustee under the indenture or other agreement (if any) pursuant to which Senior Debt may have been issued, as their respective interests may appear, for application to the payment of all Senior Debt remaining unpaid to the extent necessary to pay such Senior Debt in full in accordance with its terms, after giving effect to any concurrent payment or distribution to or for the holders and owners of Senior Debt. The Company shall endeavor to give prompt written notice to each Noteholder of any default in payment of principal of or interest on any Senior Debt. 3.3. Upon any distribution of assets of the Company upon any dissolution, winding up, liquidation, or reorganization of the Company (whether in bankruptcy, insolvency, or receivership proceedings or upon an assignment for the benefit of creditors or otherwise): (a) the holders of all Senior Debt shall first be entitled to receive payments in full of the principal thereof and interest due thereon before the Holders of the Notes are entitled to receive any payment on account of the principal of or interest on the Notes; (b) any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the Holders of the Notes would be entitled except for the provisions of this paragraph 3, shall be paid by the liquidating trustee or agent or other person making such payment or distribution directly to the holders of Senior Debt or their representative, or to the trustee under the indenture under which Senior Debt may have been issued (pro rata as to each such holder, representative or trustee on the basis of the respective amounts of unpaid Senior Debt held or represented by each), to the extent necessary to make payment in full of all Senior Debt remaining unpaid, after giving effect to any concurrent payment or distribution or provision therefor to the holders of such Senior Debt; and (c) in the event that, notwithstanding the foregoing provisions of this subparagraph 3.3, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, shall be received by the Holders of the Notes on account of principal of or interest on the Notes before all Senior Debt is paid in full, or effective provision made for its payment, such payment or distribution shall be received and held in trust for and shall be paid over to the holders of the Senior Debt remaining unpaid or unprovided for or their representative, or to the trustee under any indenture under which such Senior Debt may have been issued (pro rata as provided in clause (b) of this subparagraph 3.3), for application to the payment of such Senior Debt until all such Senior Debt shall have been paid in full, after giving effect to any concurrent payment or distribution or provision therefor to the holders of such Senior Debt. Upon any payment or distribution of assets of the Company referred to in this paragraph 3, the Holders shall be entitled to rely upon a certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent or other person making such payment or distribution, delivered to the Holders, for the purpose of ascertaining the person entitled to participate in such distribution, the holders of the Senior Debt and other indebtedness of the Company, the amounts thereof, the amount or amounts paid or distributed thereon, and all other facts pertinent thereto or to this paragraph 3. In the event that the Noteholder determines, in good faith, that further evidence is required with respect to the right of any person as a holder of Senior Debt to participate in any payment or distribution pursuant to this paragraph 3, such Noteholder may request such person to furnish evidence to the reasonable satisfaction of such Noteholder as to the amount of Senior Debt held by such person, as to the extent to which such person is entitled to participate in such payment or distribution, and as to other facts pertinent to the rights of such person under this paragraph 3, and if such evidence is not furnished, such Noteholder may defer any payment to such person pending judicial determination as to the right of such person to receive such payment. The Company shall give prompt written notice to any Noteholder of any dissolution, winding up, liquidation, or reorganization of the Company. 3.4. Subject to the payment in full of all Senior Debt, the Holders of the Notes shall be subrogated (equally and ratably with the holders of all indebtedness of the Company that by its express terms is subordinated to Senior Debt to the same extent as the Notes are subordinated and which is entitled to like rights of subrogation) to the rights of the holders of Senior Debt to receive payments or distributions of assets of the Company applicable to the Senior Debt until all amounts owing on the Notes shall be paid in full, and for the purpose of such subrogation no payments or distributions to the holders of the Senior Debt by or on behalf of the Company or by or on behalf of the Holders of the Notes by virtue of this paragraph that otherwise would have been made to the Holders of the Notes shall, as between the Company, its creditors other than holders of Senior Debt and the Holders of the Notes, be deemed to be payment by the Company to or on account of the Senior Debt, it being understood that the provisions of this paragraph 3 are and are intended solely for the purpose of defining the relative rights of the Holders of the Notes, on the one hand, and the holders of the Senior Debt, on the other hand. 3.5. Nothing contained in this paragraph 3 or elsewhere in this Note is intended to or shall impair, as between the Company, its creditors other than holders of Senior Debt and the Holders of the Notes, the obligation of the Company, which is absolute and unconditional, to pay to the Holders of the Notes the principal of and interest on the Notes as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holders of the Notes and creditors of the Company other than the holders of the Senior Debt, nor shall anything herein or therein prevent the Holder of any Note from exercising all remedies otherwise permitted by applicable law upon default under this Note, subject to the rights, if any, under this paragraph 3 of the holders of Senior Debt in respect of cash, property or securities of the Company received upon the exercise of any such remedy. Nothing contained in this paragraph 3 or elsewhere in this Note is intended to or shall affect the obligation of the Company to make, or prevent the Company from making, at any time except during the pendency of any dissolution, winding up, liquidation or reorganization proceeding, and except during the continuance of any event of default specified in this paragraph 3 that has not been cured or waived, payments at any time of the principal of or interest on the Notes. 3.6. No right of any present or future holder of any Senior Debt to enforce subordination as provided herein shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act (other than a waiver thereof enforceable against such holder) or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms of this Note, regardless of any knowledge thereof that any such holder may have or be otherwise charged with. 3.7. The failure to make a payment on account of principal or interest by reason of any provision in this paragraph 3 shall not be construed as preventing the occurrence of an Event of Default under paragraph 9 of this Note. 4. Optional Redemption. 4.1. The Notes are subject to redemption, as a whole or, from time to time, in part (in units of $1,000 or integral multiples thereof), at the option of the Company, on not less than 30 nor more than 60 days' prior notice. Each Note shall be redeemable at a redemption price equal to 100% of the principal amount to be redeemed plus accrued interest to the date of redemption. 4.2. In the event that at the time the Company elects to make a redemption pursuant to this paragraph 4, there is more than one Note outstanding, the aggregate principal amount of such redemption shall be allocated among the then outstanding Notes in proportion, as nearly as practicable, to the respective unpaid principal amounts of such Notes. 4.3. Notice of redemption will be mailed at least 15 days but not more than 60 days before the redemption date to each holder of Notes to be redeemed at his registered address specifying: (i) the redemption date; (ii) the redemption price; (iii) that Notes to be redeemed must be surrendered to the Company to collect the redemption price; (iv) that interest on the Notes called for redemption ceases to accrue on and after the redemption date; and (v) the aggregate principal amount of each Note to be redeemed and the registration or serial number of such Note. The selection of Notes for any redemption will be made by the Company. On and after the redemption date, interest ceases to accrue on Notes or portions of them called for redemption. 4.4. Once notice of redemption is mailed, Notes called for redemption become due and payable on the redemption date and at the redemption price. Upon surrender to the Company, such Notes shall be paid at the redemption price plus accrued interest to the redemption date. 4.5. Upon surrender of a Note that is redeemed in part, the Company shall issue to the Holder thereof a new Note equal in principal amount to the unredeemed portion of the Note surrendered. 5. Covenants. The Company covenants and agrees that so long as the Notes remain outstanding: 5.1. The Company shall pay the principal of and interest on the Notes on the dates and in the manner provided in the Notes. 5.2. The Company shall pay, to the extent permitted by applicable law, interest on overdue principal at 2% per annum above the rate borne by the Notes; it shall pay interest on overdue installments of interest at the same rate to the extent lawful. 5.3. The Company shall deliver to the Holders within 15 days after it files them with the U.S. Securities and Exchange Commission ("SEC") copies of the annual reports and of all other information, documents, and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) that the Company is required to file with the SEC pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). 5.4. The Company shall cause its annual report to stockholders and any quarterly or other financial reports furnished by it to stockholders to be mailed to the Holders at their addresses appearing in the register of Notes maintained by the Company. If the Company is not required to furnish annual or quarterly reports to its stockholders pursuant to the Exchange Act, the Company will cause its financial statements, including any notes thereto, and a "Management's Discussion and Analysis of Financial Condition and Results of Operations", to be mailed to the Holders within 90 days after the end of each fiscal year and within 45 days after the end of each of the first three fiscal quarters of each fiscal year. 5.5. The Company shall deliver to the Holders within four months after the end of each fiscal year of the Company, commencing with the fiscal year ending December 31, 2003, an Officers' Certificate stating that: (a) the signing officers have supervised a review of the activities of the Company and its Subsidiaries (as hereinafter defined) during the preceding fiscal year to determine whether the Company has observed and performed its obligations under the Notes; (b) to the best knowledge of each officer signing such certificate, the Company has observed and performed all of its covenants contained herein and is not in default in the observance and performance of any of the terms, provisions and conditions of the Notes (or if the Company is in such default, specifying those defaults of which he has knowledge and the nature thereof); and (c) to the best knowledge of each such signing officer, no event has occurred and is continuing that would prohibit payment of the principal or interest on the Notes. 5.6. The Company shall not consolidate with or merge into, or transfer all or substantially all of its assets to, any other person unless (i) such other person is a corporation organized or existing under the laws of the United States or a state thereof, (ii) such person expressly assumes all the obligations of the Company under the Notes, and (iii) immediately after such transaction no Default exists. Thereafter all such obligations of the predecessor corporation shall terminate. Upon request of the Holders, the Company shall deliver to the Holders prior to any such proposed transaction an Officers' Certificate that such proposed transaction complies with the provisions of this paragraph. 6. Denomination, Transfer, Exchange. 6.1. The Notes are issuable only in registered form without coupons in denominations of $1,000 and integral multiples of $1,000, except that, to the extent necessary to issue Notes pursuant to the Exchange Agreement dated as of December 18, 2003 among the Company and the holders of the Notes (the "Exchange Agreement"), Notes may be issued in a fractional denomination of $1,000. The registered Holder of a Note may be treated as the owner of it for all purposes (including, without limitation, for the purpose of receiving payment of principal of, premium, if any, and interest on such Note) and the Company shall not be affected by any notice to the contrary. The Notes may not be transferred or otherwise disposed of except to a registered assign and otherwise in accordance with the terms of the Exchange Agreement. The Company may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted hereby. The Company need not transfer or exchange any Note (or portion of a Note in an integral multiple of $1,000) selected for redemption, or transfer or exchange any Notes for a period of 15 days before a selection of Notes to be redeemed. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of this Note and, in the case of any such loss, theft or destruction, upon delivery of a bond of indemnity satisfactory to the Company, or in the case of any such mutilation, upon surrender and cancellation of this Note, the Company will issue a new Note of like tenor as if the lost, stolen, destroyed, or mutilated Note were then surrendered for exchange in lieu of such lost, stolen, destroyed, or mutilated Note. 6.2. If (a) at any time any Holder or Holders of not less than 51% of the aggregate principal amount of Notes then outstanding shall so request of the Company in a written notice delivered to the Company, whether or not there is more than one holder of the Notes, or (b) in connection with any registration of Notes under the Securities Act of 1933, as amended (the "Securities Act"), the Company deems it necessary or appropriate to qualify an indenture with respect to the Notes under the Trust Indenture Act of 1939, as amended (the "TIA"), the Company will, as soon as reasonably practicable, execute and deliver to a bank or trust company organized under the laws of the United States of America or any state thereof having an office in New York, New York, as trustee, satisfactory to the Company, and having a capital surplus of at least $100,000,000 (if there be such an institution willing, qualified and able to accept the trust upon reasonable or customary terms), an indenture of trust (the "Indenture"), providing for the issuance, and will authorize the issuance thereunder as herein provided, of a principal amount of new 13% junior subordinated notes of the Company (the "New Notes"), equal in aggregate principal amount to the aggregate principal amount of all Notes outstanding and unpaid at the time of such authorization, bearing interest at the same rate as such outstanding Notes and in all other respects substantially similar to, and having substantially the same rights and privileges carried by, the Notes. The Indenture and the New Notes to be issued thereunder shall, insofar as may be appropriate, respectively embody the substance of all covenants, conditions and provisions of the Notes, together with such other provisions as may be desirable (not inconsistent with the provisions of the Notes) and as are usually contained in indentures of similar issuers providing for notes of comparable aggregate principal amount and maturity, or are usually contained in such notes. At the time of the execution of the Indenture, the Company shall cause counsel (which may include an employee of or counsel to the Company or the trustee under the Indenture) to furnish to the Noteholders and to the trustee under the Indenture an opinion to the effect that (i) the Indenture has been duly authorized, executed and delivered by the Company, and is a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, and (ii) the New Notes have been duly authorized, and when executed, authenticated and delivered as provided in the Indenture, will constitute, legal, valid and binding obligations of the Company enforceable against the Company in accordance with their terms. After the execution and delivery of the Indenture, upon surrender of any Note by the holder thereof, the Company will deliver to such holder, in exchange therefor, New Notes, in the same principal amount and with the same maturities as the Notes surrendered, in such authorized form and denomination as such holder may elect, and bearing interest from the date to which interest shall have been paid on the Notes so surrendered. The holders of the Notes agree to surrender such Notes and to otherwise cooperate with the Company in connection with any qualification of the Indenture under the TIA. Upon issuance of New Notes pursuant to the Indenture, the Company shall apply the provisions set forth in Sections V, VI, and 8.1 of the Exchange Agreement, provided that in so applying such provisions, the term "Notes" be deemed to include the term "New Notes". 7. Amendment, Supplement, Waiver. This Note and any other Notes outstanding may be amended (or any provision hereof, waived) with the written consent of the Company and the Holder or Holders of at least a majority in aggregate principal amount of the Notes then outstanding; provided, however, that no such amendment or waiver shall (i) change the fixed maturity of any Note, the rate or the time of payment of interest thereon or the principal amount thereof without the written consent of the Holder of the Note so affected, (ii) reduce the aforesaid outstanding principal amount of Notes, the Holders of which are required to consent to any such amendment or waiver, without the written consent of the Holders of all the Notes then outstanding, or (iii) increase the outstanding principal amount of the Notes, the Holders of which may declare the Notes to be due and payable without the written consent of the Holders of all Notes then outstanding. The Company and each Holder of a Note then or thereafter outstanding shall be bound by any amendment or waiver effected in accordance with the provisions hereof, whether or not such Note shall have been marked to indicate such modification, but any Note issued thereafter shall bear a notation as to any such modification. Promptly after obtaining the written consent of the Holders herein provided, the Company shall transmit a copy of the instrument evidencing such modification to all of the Holders of the Notes then outstanding. 8. Defaults and Remedies. 8.1. An "Event of Default" occurs if: (a) the Company defaults in the payment of interest on any Note when the same becomes due and payable and the default continues for a period of 30 days; (b) the Company defaults in the payment of the principal of any Note when the same becomes due and payable at maturity, upon redemption or otherwise; (c) the Company fails to comply with any of its other covenants, conditions or agreements in the Notes and the default continues for the period and after the notice specified below; (d) an event or events of default, as defined in any one or more mortgages, indentures or instruments under which there may be issued, or by which there may be secured or evidenced, any Debt of the Company or any Subsidiary (other than the Company' 12 3/4% Senior Subordinated Notes due February 1, 2000), whether such Debt now exists or shall hereafter be created, shall happen which permits the holders of such Debt to declare an aggregate principal amount of at least $250,000 of such Debt to become due and payable prior to the date on which it would otherwise have become due and payable and such event of default shall not have been cured in accordance with the provisions of such instrument, or such Debt shall not have been discharged within a period of 30 days after there shall have been given, by registered or certified mail, to the Company by the Holders of at least 51% in principal amount of the outstanding Notes a written notice specifying such event or events of default and requiring the Company to cause such event of default to be cured or such Debt to be discharged, and stating that such notice is a "Notice of Default" hereunder; provided, however, that the Company is not in good faith contesting in appropriate proceedings the occurrence of such an event of default; (e) a court of competent jurisdiction shall enter a final, non-appealable judgment or judgments for the payment of money in the aggregate in excess of $250,000 against the Company or any Subsidiary (other than in respect of the Company's 12 3/4% Senior Subordinated Notes due February 1, 2000) and the judgment is not rescinded, annulled, stayed or satisfied for a period (during which execution shall not be effectively stayed) of 30 days after the amount of such judgment is determined; (f) the Company, pursuant to or within the meaning of any Bankruptcy Law: (i) commences a voluntary case, (ii) consents to the entry of an order for relief against it in an involuntary case, (iii) consents to the appointment of a Custodian of it or for all or substantially all of its property, or (iv) makes a general assignment for the benefit of its creditors; or (g) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company in an involuntary case, (ii) appoints a Custodian of the Company or for all or substantially all of its property, or (iii) orders the liquidation of the Company, and the order or decree remains unstayed and in effect for 30 days. A default under clause (c) of this subparagraph 8.1 is not an Event of Default until the Holders of at least 51% in principal amount of the outstanding Notes notify the Company of the default and the Company does not cure the default within 60 days after receipt of the notice. The notice must specify the default, demand that it be remedied, and state that the notice is a "Notice of Default". In the event the Company shall incur any Debt, other than Senior Debt, that contains a cross-default provision, the Company shall promptly amend this Note to add at least as favorable a provision. 8.2. If an Event of Default (other than an Event of Default specified in subparagraph 8.1(a), (b), (f) or (g)) occurs and is continuing, the Holders of at least 51% in principal amount of the outstanding Notes, by notice to the Company, may declare the principal of, and accrued interest on, all the Notes to be due and payable immediately. If an Event of Default specified in subparagraph 8.1(a) or (b) occurs, the Holder of this Note, by notice to the Company, may declare the principal amount of, and accrued interest on, this Note to be due and payable immediately. If an Event of Default specified in subparagraph 8.1(f) or (g) occurs, all unpaid principal, and accrued interest on the Notes then outstanding shall become and be immediately due and payable without any declaration or other act on the part of any Noteholder. Upon such declaration, such principal and interest shall be due and payable immediately. The Holders of a majority in principal amount of the outstanding Notes, by notice to the Company, may rescind an acceleration and its consequences if all existing Events of Default have been cured or waived (other than the nonpayment of principal of and accrued interest on the Notes that shall have become due by acceleration) and if the rescission would not conflict with any judgment or decree. 8.3. If an Event of Default occurs and is continuing, the Noteholders may pursue any available remedy by proceeding at law or in equity to collect the principal of, and interest on, the Notes or to enforce the performance of any provision of the Notes. A delay or omission by any Noteholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative. 8.4. Subject to paragraph 7 of this Note, the Holders of a majority in principal amount of the outstanding Notes by notice to the Company may waive an existing Default and its consequences. When a Default is waived, it is cured and no longer continuing. 9. Definitions; Rules of Construction. 9.1. For all purposes of this Note, the following definitions shall apply unless the text otherwise requires: "Affiliate" means any person directly or indirectly controlling, controlled by, or under common control with the Company. "Bankruptcy Law" means Title 11, U.S. Code or any similar Federal or State law for the relief of debtors. "Company" means the party named as such in this Note until a successor replaces it and thereafter means the successor. "Custodian" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. "Debt" means (1) any debt of the Company (i) for borrowed money, or (ii) evidenced by a note, debenture or similar instrument (including a capitalized lease or a purchase money obligation) given in connection with the acquisition of any property or assets, including, without limitation, securities; (2) any debt of others described in the preceding clause (1) that the Company has guaranteed or for which it is otherwise liable; and (3) any amendment, renewal, extension, restructuring, refunding or replacement of any such debt described in (1) and (2) above. "Default" means any event which is, or after notice or passage of time would be, an Event of Default. "Senior Debt" means all Debt (present or future) created, incurred, assumed or guaranteed by the Company (and all renewals, amendments, extensions or refundings thereof, as the same may be renewed, amended, extended or refunded, from time to time) unless the instrument under which such Debt is created, incurred, assumed or guaranteed expressly provides that such Debt is not senior in right of payment to the Notes, but Senior Debt does not include (1) Debt of the Company to any of its subsidiaries or Affiliates, and (2) any Debt or liability for compensation to employees of the Company, or incurred for the purchase of goods, materials or services in the ordinary course of business and which constitutes a trade payable. "Series B Preferred Stock" means the $8 Cumulative Convertible Preferred Stock, Series B of the Company. "Subsidiary" means a corporation a majority of whose Voting Stock is owned by the Company or a Subsidiary. "Voting Stock" means capital stock having voting power under ordinary circumstances to elect directors. 9.2. Unless the context otherwise requires: (a) a term has the meaning assigned to it; (b) an accounting term not otherwise defined has the meaning assigned to it in accordance with generally accepted accounting principles; (c) "or" is not exclusive; and (d) words in the singular include the plural, and in the plural include the singular. 10. No Recourse Against Others. A director, officer, employee or shareholder, as such, of the Company shall not have any liability for any obligations of the Company under the Notes or for any claim based on, in respect of, or by reason of, the Notes or their issuance. Each Noteholder, by accepting a Note, waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. 11. Abbreviations. Customary abbreviations may be used in the name of a Noteholder or an assignee, such as : TEN COM (= tenants in common), TENANT (= tenants by the entirety), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= custodian), and U/G/M/A/ (= Uniform Gifts to Minors Act). 12. Notices. All notices, requests, consents and other communications hereunder shall be in writing and shall be deemed to have been duly made, given or served if delivered by hand (effective upon tender of delivery) or sent by registered or certified mail, return receipt requested (effective at the time of postmark) addressed: (a) If to the holder of this Note or any other Note, at the address of such holder set forth on the registration books of the Company; or (b) If to the Company, at 767 Third Avenue, 29th Floor, New York, New York 10017-2023 or at such other address as may have been furnished to the holders of the Notes in writing by the Company. 13. Information Confidential. By acceptance of this Note, the Holder hereof acknowledges that certain of the information received or to be received by it pursuant hereto may be confidential and proprietary and for its use only, and agrees that the Holder will not use such confidential or proprietary information in violation of the Securities Act, the Exchange Act or any other law, rule or regulation and will use its reasonable efforts to maintain the confidentiality of any confidential or proprietary information so received by it that is not otherwise available from other sources; provided, however, that the foregoing shall in no way limit or otherwise restrict the ability of the Holder to disclose any such information concerning the Company that (i) is already in the public domain through no fault or action on the part of the Holder or (ii) it may be required to disclose pursuant to or as required by law or as directed by any court of competent jurisdiction in connection with any action to which the Holder or the Company is a party. 14. Severability. Any provision or provisions of this Note found to be unenforceable or prohibited by law will be ineffective only to the extent of such unenforceability or prohibition and no other provision hereof will be invalidated thereby. 15. Waiver of Usury Law. The Company covenants (to the extent that it may lawfully do so) that it will not at any time voluntarily (and that it will resist any effort to make it do so involuntarily) insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any usury law wherever enacted, or at any time hereafter in force, which may affect the covenants or the performance of this Note. 16. Governing Law and Consent to Forum. 16.1. THIS NOTE IS DELIVERED IN AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS PRINCIPLES OF CONFLICTS OF LAW. 16.2. ANY ACTION OR SUIT IN CONNECTION WITH THIS NOTE MAY BE BROUGHT IN A COURT OF RECORD OF THE STATE OF NEW YORK OR A UNITED STATES DISTRICT COURT SITUATE IN THE STATE OF NEW YORK, THE COMPANY HEREBY CONSENTING TO THE NONEXCLUSIVE JURISDICTION OF EACH THEREOF. IN WITNESS WHEREOF, LEXINGTON PRECISION CORPORATION has caused this Note to be dated and to be executed and attested to on its behalf by its duly authorized officers, and its corporate seal to be hereunto duly affixed. LEXINGTON PRECISION CORPORATION By: _______________________________ Dennis J. Welhouse Senior Vice President and Chief Financial Officer [SEAL] Attest: _________________ ASSIGNMENT FORM If you the Holder want to assign this Note, fill in the form below and have your signature guaranteed: I or we assign and transfer this Note to (Insert assignee's social security or tax ID number) __________________________________________________________ __________________________________________________________ __________________________________________________________ (Print or type assignee's name, address and zip code) __________________________________________________________ and irrevocably appoint __________________ agent to transfer this Note on the books of the Company. The agent may substitute another to act for him. Date: Your signature: _______________________________________________________ (Sign exactly as your name appears on the other side of this Note) Signature Guarantee: ___________________________________________________________ EX-10.1 9 l04690aexv10w1.txt EX-10.1 EXCHANGE AGMT DATED 12/18/03 EXHIBIT 10.1 ================================================================================ EXCHANGE AGREEMENT Dated as of December 18, 2003 By and Among Lexington Precision Corporation, Warren Delano, and Michael A. Lubin ================================================================================ TABLE OF CONTENTS
Page Section I. Description of Transaction; Exchange of the Junior Subordinated Notes................ 1 1.1 Description of Transaction.......................................................... 1 1.2 Exchange............................................................................ 2 Section II. Closing Date; Delivery.............................................................. 2 2.1 Closing Date........................................................................ 2 2.2 Transactions at Closing; Delivery................................................... 2 Section III. Representations and Warranties of the Company...................................... 2 3.1 Organization and Standing; Restated Certificate of Incorporation and By-Laws........ 2 3.2 Corporate Power..................................................................... 3 3.3 Authorization; Enforceability....................................................... 3 3.4 Exchange Shares and Warrant Shares.................................................. 3 3.5 Compliance with Other Instruments................................................... 3 3.6 Amended Exchange Offer.............................................................. 3 3.7 Litigation, Etc..................................................................... 3 3.8 Governmental Consent, Etc........................................................... 4 3.9 Disclosure.......................................................................... 4 3.10 Financial Condition................................................................. 4 3.11 No Change........................................................................... 4 3.12 Exemption from Registration......................................................... 5 Section IV. Representations and Warranties of the Holders....................................... 5 4.1 Investment.......................................................................... 5 4.2 Experience and Information.......................................................... 5 4.3 Additional Representation........................................................... 6 4.4 Title............................................................................... 6 4.5 No Litigation....................................................................... 6 4.6 Governmental Consents and Approvals................................................. 6 Section V. Certain Covenants.................................................................... 6 5.1. Basic Financial Information......................................................... 7 5.2 Filing of Reports under the 1934 Act................................................ 7 5.3 Assignability of Contractual Rights................................................. 7 5.4 Obligations upon Merger or Consolidation............................................ 7 Section VI. Restriction on Transferability of Securities; Compliance with 1933 Act.............. 8 6.1 Restriction on Transferability...................................................... 8
- i - 6.2 Restrictive Legend.................................................................. 8 Section VII. Release and Waiver................................................................. 9 7.1 Release............................................................................. 9 7.2 Waiver.............................................................................. 9 7.3 Definition.......................................................................... 9 Section VIII. Miscellaneous..................................................................... 10 8.1 Registration Rights................................................................. 10 8.2 Governing Law; Consent to Forum..................................................... 10 8.3 Successors and Assigns.............................................................. 10 8.4 Titles.............................................................................. 10 8.5 Severability........................................................................ 10 8.6 Counterparts........................................................................ 10 8.7 Information Confidential............................................................ 10 8.8 Limitation of Remedies.............................................................. 11 8.9 Construction........................................................................ 11 8.10 Several Obligations................................................................. 11
Exhibit A Form of New Junior Note Exhibit B Form of Warrant Agreement - ii - EXCHANGE AGREEMENT THIS EXCHANGE AGREEMENT (this "Agreement") is made as of December 18, 2003 by and among Lexington Precision Corporation, a Delaware corporation (the "Company"), Warren Delano ("Delano" or "Holder") and Michael A. Lubin ("Lubin" or "Holder" and, together with Delano, the "Holders"). WHEREAS, Lubin is the holder of record and beneficial owner of 100% of the outstanding principal amount of the Company's Junior Subordinated Non-Convertible Notes due May 1, 2000 (the "Junior Subordinated Notes"); and WHEREAS, the Company has failed to make to the Holders quarterly interest payments that were due on its Junior Subordinated Notes and its Junior Subordinated Convertible Increasing Rate Notes due May 1, 2000 ("Junior Subordinated Convertible Increasing Rate Notes" and, together with the Junior Subordinated Notes, the "Junior Notes") in the aggregate amount of $235,469.63 (the "Defaulted Interest"); and WHEREAS, as a condition to consummation of the Company's exchange offer (the "Amended Exchange Offer") for its 12 3/4% Senior Subordinated Notes due February 1, 2000 (the "12 3/4% Senior Subordinated Notes"), made pursuant to the Amended Offering Circular dated March 10, 2003 (the "Amended Offering Circular") and the Offering Circular Supplement dated September 18, 2003 (the "Offering Circular Supplement"), the Company intends to exchange the Junior Subordinated Notes and the Defaulted Interest in accordance with the terms of this Agreement (the "Restructuring"); and WHEREAS, the Holders and the Company wish to enter into the Restructuring on the terms and conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the mutual covenants contained herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows: Section I. Description of Transaction; Exchange of the Junior Subordinated Notes 1.1 Description of Transaction. (a) Junior Subordinated Notes. Lubin proposes to exchange with the Company, and the Company proposes to exchange with Lubin and retire, all of the Junior Subordinated Notes upon delivery by the Company of units (the "Units"), consisting of (i) new junior subordinated notes with a maturity date of November 1, 2009 and an interest rate of 13% (the "New Junior Notes"), substantially in the form of Exhibit A hereto, in the principal amount of $346,667 and (ii) warrants (the "Warrants") to purchase 3,467 shares (the "Warrant Shares") of common stock of the Company, par value $.25 per share (the "Common Stock") pursuant to a Warrant Agent Agreement in substantially the form of Exhibit B hereto (the "Warrant Agreement"). (b) Defaulted Interested. Each of the Holders proposes to exchange with the Company, and the Company proposes to exchange with the Holders and cancel all outstanding Defaulted Interest upon delivery by the Company of 103,731 shares of Common Stock (the "Exchange Shares," together with the Units, the "Exchange Consideration"). 1.2 Exchange. Subject to the terms and conditions hereof, upon completion of the Amended Exchange Offer, at the Closing provided for in Section 2.1, (a) the Company shall issue to Lubin, and the Lubin shall acquire from the Company, the Units in exchange for the Junior Subordinated Notes, (b) the Company shall issue to the Holders and the Holders shall acquire from the Company, the Exchange Shares in exchange for the Defaulted Interest, and (c) the Releases (as hereinafter defined) shall become effective. The Holders hereby consent to the Restructuring and all such actions to be taken by the Company in connection therewith. Section II. Closing Date; Delivery 2.1 Closing Date. Subject to the terms and conditions of this Agreement, the closing of the Restructuring (the "Closing") shall be held on the date of the consummation of the Amended Exchange Offer (the "Closing Date") or such later date as the parties may mutually agree upon in writing. 2.2 Transactions at Closing; Delivery. At the Closing, and upon completion of the Amended Exchange Offer, the Company shall deliver to the Holders, in accordance with Section 1.2 hereof, in exchange for the Junior Notes and the Defaulted Interest, the Exchange Consideration, which shall be delivered to each Holder in such amounts as are set forth opposite the name of such Holder on the signature page hereto. Section III. Representations and Warranties of the Company The Company hereby represents and warrants to the Holders as follows: 3.1 Organization and Standing; Restated Certificate of Incorporation and By-Laws. The Company is a corporation validly existing and in good standing under the laws of the State of Delaware. The Company has all requisite corporate power and authority to own and operate its properties and assets and to carry on its business as presently conducted. The Company is qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which the ownership, leasing, or operation of its properties or the nature of its activities makes such qualification necessary, except where the failure to so qualify would not have a material adverse effect on the business, operations, or financial condition of the Company and its subsidiaries taken as a whole (a "Material Adverse Effect"). The Company has made available to the Holders copies of its Restated Certificated of Incorporation and By-Laws, as amended. Said copies are true, correct and complete and contain all amendments thereto. - 2 - 3.2 Corporate Power. The Company has all requisite corporate power and authority to execute and deliver this Agreement, to issue the Exchange Consideration in the manner contemplated by this Agreement, and to carry out and perform its obligations hereunder. 3.3 Authorization; Enforceability. All corporate action on the part of the Company necessary for the authorization, execution, delivery, and performance of this Agreement and the consummation of the transactions contemplated hereby, and for the issuance and delivery of the Exchange Consideration has been taken. This Agreement is a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms. Upon completion of the Closing, the New Junior Notes, the Warrants, and the Warrant Agreement will be valid and binding obligations of the Company, enforceable against the Company in accordance with their terms. 3.4 Exchange Shares and Warrant Shares. The Exchange Shares and the Warrant Shares are duly authorized, and upon issuance thereof, will be validly issued, fully paid and nonassessable. The Company has reserved such number of shares of the authorized and unissued Common Stock of the Company as may be necessary to provide for the issuance of all Warrant Shares issuable from time to time upon the exercise of the Warrants in accordance with their terms. 3.5 Compliance with Other Instruments. The execution, delivery and performance of this Agreement by the Company, the issuance and delivery of the Exchange Consideration, and the consummation of the transactions contemplated hereby, will not (a) as of the Closing Date, result in any violation of or constitute any default under the Company's Restated Certificate of Incorporation or By-Laws, any material agreement, instrument or indenture to which the Company is a party or by which it is bound, or any law, rule or regulation applicable to the Company or (b) except as expressly provided by this Agreement or as contemplated in connection with the Restructuring, result in the creation as of the Closing Date of any mortgage, pledge, lien, encumbrance or charge upon any of the properties or assets of the Company pursuant thereto. 3.6 Amended Exchange Offer. The Company has made available to the Holders copies of the Amended Offering Circular and the Offering Circular Supplement (collectively, the "Amended Exchange Offer Materials") in respect of the Amended Exchange Offer and the New Indenture (as defined in the Amended Exchange Offer Materials). The Company has all requisite corporate power and authority to execute and deliver the New Indenture and to carry out and perform the Amended Exchange Offer and its obligations under the New Indenture. 3.7 Litigation, Etc. There are no actions or proceedings pending or, to the knowledge of the Company, threatened against the Company or its subsidiaries or any of their respective properties which relate to or call into question the validity or legality of this Agreement, the issuance and delivery of the Exchange Consideration, or the other transactions contemplated hereby, which either individually or in the aggregate can reasonably be expected to have a Material Adverse Effect. - 3 - 3.8 Governmental Consent, Etc. (a) Except for the filing of a current report on Form 8-K, as set forth in paragraph 3.8(b) hereof and as contemplated by Section VI hereof, no consent, approval, license, or authorization of, or designation, declaration, notification, registration, qualification, or filing with (each, an "Approval") any governmental authority on the part of the Company is required in connection with the valid execution, delivery and performance of this Agreement, the issuance and delivery of the Exchange Consideration, or the consummation of any other transaction contemplated hereby. (b) Any required Approval under applicable federal securities laws and state Blue Sky laws of the issuance and delivery of the Exchange Consideration and the 12% Senior Subordinated Notes due November 1, 2009, and Warrants being issued pursuant to the Amended Exchange Offer has been obtained or made on or before the date hereof or will have been obtained or made prior to the Closing or within the applicable period for obtaining such Approval. 3.9 Disclosure. Neither this Agreement, nor any of the Company's periodic reports or forms, as amended, filed with the Securities and Exchange Commission (the "Commission"), as of the respective dates thereof after giving effect to any subsequent amendments thereof, contained any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements contained herein or therein not misleading in light of the circumstances under which such statements were made. 3.10 Financial Condition. Assuming the ability of the Company to continue as a going concern, the consolidated balance sheets of the Company and its subsidiaries as at December 31, 2001 and 2002, and the related consolidated statements of operations, of common stockholders' equity, and of cash flows (together with the notes thereto) for the fiscal years ended on such dates, reported on by Ernst & Young LLP, and the unaudited consolidated balance sheet of the Company as of September 30, 2003, and the related unaudited consolidated statements of operations and cash flows (together with the notes thereto) for the period then ended, copies of which have heretofore been furnished to the Holders, present fairly (in each case, after giving effect to any subsequent amendments thereto and subject, in the case of the interim statements described above, to normal year-end adjustments) the consolidated financial condition of the Company as at such dates, and the consolidated results of operations and consolidated cash flows of the Company and its subsidiaries for the fiscal periods then ended. Assuming the ability of the Company to continue as a going concern, all such consolidated financial statements, as amended, including the related schedules and notes thereto, have been prepared in accordance with generally accepted accounting principles ("GAAP") applied consistently throughout the periods involved. 3.11 No Change. Since September 30, 2003, there has been no material adverse change in the business, operations, or financial condition (other than those changes affecting generally the economy or any industry in which the Company operates) of the Company or its subsidiaries except as set forth on Schedule 3.11 hereto. - 4 - 3.12 Exemption from Registration. Based upon the representations and warranties of the Holders contained in Section IV of this Agreement, and assuming compliance by the Holders and any transferee thereof with the terms of this Agreement and with the transfer restrictions set forth on the Warrants and in the Warrant Agent Agreement, the issuance of the Exchange Consideration is exempt from the registration requirement of Section 5 of the Securities Act of 1933, as amended (the "1933 Act"). Section IV. Representations and Warranties of the Holders Each of the Holders hereby severally (and not jointly and severally) represents and warrants to the Company that: 4.1 Investment. The Exchange Consideration and the Warrant Shares underlying the Warrants (together with any securities issued in respect thereof upon any stock split, stock dividend, recapitalization, or similar event, the "Restricted Securities"), will be acquired for his own account, and he has no present intention of selling, granting participations in, or otherwise distributing any of the Restricted Securities to be issued to him in any transaction that would be in violation of the securities laws of the United States of America or any state or other jurisdiction thereof. Such Holder acknowledges that the Restricted Securities will not be registered under the 1933 Act, on the basis that the issuance of securities hereunder is exempt from registration under the 1933 Act, and that the Company's reliance on such exemption is predicated on the representations set forth in this Section IV. In the absence of an effective registration statement under the 1933 Act covering any of the Restricted Securities, he will sell, transfer or otherwise dispose of such securities only in compliance with applicable law and then only in accordance with the provisions of Section VI of this Agreement, the terms of the Warrants, and the Warrant Agent Agreement. Such Holder understands that the Restricted Securities may not be sold, transferred, or otherwise disposed of without registration under the 1933 Act or the availability of an exemption therefrom and that in the absence of such registration or exemption, the Restricted Securities must be held indefinitely. Such Holder is aware that the Company is making no representation that the applicable conditions of Rule 144 promulgated under the 1933 Act or any other exemption from registration under the 1933 Act will be met in the future. 4.2 Experience and Information. Such Holder (a) is an "accredited investor" within the meaning of Rule 501(a) promulgated under the 1933 Act and an executive officer and director of the Company; (b) has reviewed this Agreement, including all Exhibits hereto, and has reviewed all of the Company's periodic reports and amendments thereto and forms and amendments thereto prepared for filing with the Commission that have been made available to such Holder and the financial statements included in such periodic reports and forms and the Amended Exchange Offer Materials; and (c) has had, during the course of the transactions contemplated hereby and prior to his receipt of the Exchange Consideration, the opportunity to ask questions of, and has received answers from, the Company concerning the transactions contemplated hereby and to obtain any additional information that the Company possesses or could acquire without unreasonable effort or expense; provided, however, that, except as set forth in Section 8.8, no such investigation by any Holder shall limit, diminish, or constitute a - 5 - waiver of any representation or warranty made under this Agreement by the Company or impair any rights that such Holder may have with respect thereto. 4.3 Additional Representation. Such Holder has all requisite power and authority to execute and deliver this Agreement and to carry out and perform his obligations hereunder. The execution, delivery, and performance by such Holder of this Agreement and the consummation of the transactions contemplated hereby will not result in any violation of, or conflict with, any term or condition of any material agreement, instrument, or indenture to which such Holder is a party or by which he is bound or any law, rule, or regulation applicable to him. This Agreement has been duly executed and delivered by such Holder and constitutes a valid and binding obligation of such Holder enforceable against such Holder in accordance with its terms. Such Holder has not assigned or otherwise conveyed, and no person or entity is the successor to, any of such Holder's rights in, to, or under the Junior Subordinated Notes or the Junior Subordinated Convertible Notes beneficially owned by him and such Holder is the only person presently entitled to exercise any of his rights in, to or under such Junior Subordinated Notes or Junior Subordinated Convertible Notes. 4.4 Title. Such Holder is the lawful owner of record of the principal amount of Junior Subordinated Notes and Defaulted Interest set forth opposite his name on the signature page hereof and has full right, power and authority to enter into and perform this Agreement and forever relinquish, forego, release and discharge his right to receive the Defaulted Interest in accordance with the terms of this Agreement, which right is owned by such Holder free and clear of any security interests, pledges, mortgages, liens, claims, charges and encumbrances of any nature whatsoever. 4.5 No Litigation. There are no actions, suits, proceedings, or investigations pending or, to the knowledge of such Holder, threatened against such Holder that, either individually or in the aggregate, question the validity of this Agreement, or any action taken or to be taken in connection herewith or in connection with the execution, delivery, and performance by such Holder of this Agreement and the consummation of the transactions contemplated hereby. 4.6 Governmental Consents and Approvals. No consent, approval, order, or authorization of, or registration, qualification, or filing with, any court or governmental authority is required to be obtained by such Holder in connection with the execution, delivery, and performance of this Agreement and/or the consummation of the transactions contemplated hereby. Section V. Certain Covenants The Company hereby covenants and agrees that from and after the Closing Date so long as any of the New Junior Notes shall remain outstanding: - 6 - 5.1. Basic Financial Information. So long as Lubin is a holder, beneficially or of record, of any of the New Junior Notes, the Company will furnish or make available the following reports to Lubin: (a) As soon as practicable after the end of each fiscal year, and in any event within 90 days thereafter, consolidated balance sheets of the Company and its subsidiaries as of the end of such fiscal year, and consolidated statements of operations, stockholders' equity, and cash flows of the Company and its subsidiaries for such year, prepared in accordance with GAAP consistently applied and setting forth in comparative form the corresponding figures for the previous fiscal year, all in reasonable detail, accompanied by a report of an independent public accounting firm of nationally recognized standing selected by the Company; (b) As soon as practicable after the end of the first, second and third quarterly accounting periods in each fiscal year of the Company and its subsidiaries and in any event within 45 days thereafter, consolidated balance sheets of the Company and its subsidiaries as of the end of each such quarterly period, and consolidated statements of operations, stockholders' equity, and cash flows of the Company and its subsidiaries for such period and for the current fiscal year to date, prepared in accordance with GAAP consistently applied and setting forth in comparative form the corresponding figures for the corresponding periods of the previous fiscal year, all in reasonable detail; and (c) As soon as practicable, copies of all financial statements, proxy materials, or reports sent to the stockholders of the Company and all reports or financial registration statements, including accompanying prospectuses, filed with the Commission pursuant to the 1933 Act. 5.2 Filing of Reports under the 1934 Act. To the extent applicable, the Company shall comply with all reporting requirements of the Securities Exchange Act of 1934 Act, as amended (the "1934 Act"), and shall comply with all other public information reporting requirements of the Commission and take such further action, all to the extent required from time to time as a condition to the availability of an exemption from the 1933 Act (under Rule 144 thereof (as amended from time to time) or any similar or successor rule thereto or otherwise) for the sale by the Holders of any of the Restricted Securities. Upon request of the Holders, the Company will promptly furnish a written statement as to its compliance with such requirements. The Company shall cooperate with the Holders in supplying such information as may be necessary for the Holders to complete and file any information reporting forms presently or hereafter required by the Commission as a condition to the availability of an exemption from the 1933 Act (under Rule 144 thereof or otherwise) for the sale by the Holders of any Restricted Securities. 5.3 Assignability of Contractual Rights. Except with respect to Section 5.4 hereof, the Holders' rights under this Section V are not assignable or otherwise transferable. 5.4 Obligations upon Merger or Consolidation. In the event of a merger or consolidation of the Company with or into another corporation in which the Company is not the surviving corporation (the surviving corporation to such merger or consolidation hereinafter being referred to as the "Surviving Corporation") and in which securities of the Surviving - 7 - Corporation are issued to Holders in respect of the then outstanding shares of Common Stock issued pursuant to this Agreement that are Restricted Securities, the Company shall ensure that the Surviving Corporation shall assume all obligations of the Company under this Agreement. Section VI. Restriction on Transferability of Securities; Compliance with 1933 Act 6.1 Restriction on Transferability. The Restricted Securities shall not be transferable except upon compliance with the conditions specified in this Section VI. 6.2 Restrictive Legend. (a) Each certificate representing any of the New Junior Notes and the Exchange Shares shall be stamped or otherwise imprinted with a legend in substantially the following form (in addition to any legend required under applicable state securities laws): THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, AN OPINION OF COUNSEL FOR THE HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES SHALL NOT BE TRANSFERRED OR PLEDGED EXCEPT IN ACCORDANCE WITH SECTION VI OF A CERTAIN EXCHANGE AGREEMENT DATED AS OF DECEMBER 18, 2003 WITH THE COMPANY. (b) Each certificate representing any of the Warrants or the Warrant Shares shall be stamped or otherwise imprinted with a legend in substantially the form as provided in the Warrants or the Warrant Agreement (in addition to any legend required under applicable state securities laws). (c) An appropriate "stop transfer" order may be placed with the Company's transfer agent to each such certificate referenced in Sections 6.2(a) or 6.2(b). (d) Any legend endorsed on an instrument pursuant to Sections 6.2(a) or 6.2(b) hereof and the stop transfer instructions with respect to such Restricted Securities shall be removed, and the Company shall issue an instrument without such legend to the holder of such Restricted Securities, if (i) such Restricted Securities are registered under the 1933 Act and a prospectus meeting the requirements of the 1933 Act is available (provided that, if all of the shares represented by the certificate(s) have not been sold by the conclusion of the offering period, the holder of the Restricted Securities shall submit to the Company all certificates representing securities from which the legends were removed but that were not sold in the offering, and the Company shall, with respect to those remaining securities, reissue certificates - 8 - representing them but with an appropriate restrictive legend and stop transfer order, all in accordance with Sections 6.2(a), 6.2(b) or 6.2(c) hereof), or (ii) such holder provides the Company with an opinion of counsel who shall be reasonably satisfactory to the Company, in form and substance reasonably satisfactory to the Company, that a public sale, transfer, or assignment of such Restricted Securities may be sold to the public without registration, or (iii) such Restricted Securities may be sold to the public without restriction pursuant to Rule 144 promulgated under the 1933 Act or any similar provision. Section VII. Release and Waiver 7.1 Release. (a) Effective upon the Closing and without any further action or writing on the part of either Holder, each of the Holders, for himself and on behalf of his respective heirs, personal representatives, and assigns (all, collectively referred to in this Section VII as "Releasors"), does hereby irrevocably and unconditionally release and forever discharge the Company, and its present or former affiliates, and each of their respective stockholders, directors, officers, employees, advisors, attorneys, and controlling persons, and all persons acting by, through, under, in concert, and/or in combination with any of them, as well as their respective successors, heirs, and assigns (all, collectively referred to in this Section VII as "Releasees"), from any and all manner of claims, actions, causes of action, suits at law, in equity or otherwise, known or unknown, suspected or unsuspected, fixed or contingent, and equitable or ownership interests (hereinafter called "Claims"), that each of the Releasors now has or hereafter can, shall, or may have against any one or all of the Releasees by reason of any action, omission, conduct, transaction, matter, cause, or thing whatsoever from the beginning of the world to the Closing Date, arising out of or in any way related to the Defaulted Interest. Each of the Holders, for himself and on behalf of his related Releasors, acknowledges that he understands that a general release may not extend to Claims that the Holder or the other related Releasors do not know or suspect to exist in their favor at the time of executing this Agreement, which if known by them might have materially affected the Holder's decision to consummate the Restructuring and to execute and deliver this Agreement and agree to the release contained herein. Each of the Holders, for himself and on behalf of his related Releasors, being so advised, hereby expressly waives any rights such Releasors may have with respect to such unknown Claims. 7.2 Waiver. Effective upon the Closing and without any further action or writing on the part of either Holder, each of the Holders hereby waives any and all defaults and events of default on the part of the Company and/or its directors or officers existing at the Closing (and any and all rights of the Holders in respect thereof) in respect of the Junior Notes, including, without limitation, the Defaulted Interest. 7.3 Definition. For purposes of this Agreement, the releases set forth in Section 7.1 hereof and the waiver set forth in Section 7.2 hereof shall be collectively referred to as the "Releases." - 9 - Section VIII. Miscellaneous 8.1 Registration Rights. The Restricted Securities shall be entitled to the registration rights existing under that that certain Recapitalization Agreement, dated as of April 27, 1990, between the Company and L&D Woolens Limited Partnership (the "Recapitalization Agreement"), which rights were assigned to the Holders pursuant to that certain Restructuring Agreement, dated as of December 10, 1993, among the Company and each of the Holders, and such Restricted Securities shall constitute "Registrable Securities" as defined therein. 8.2 Governing Law; Consent to Forum. Except to the extent that the General Corporation Law of the State of Delaware may govern this Agreement by virtue of the fact that the Company is incorporated under the laws of the State of Delaware, this Agreement shall be governed in all respects by the internal laws of the State of New York without reference to its principles of conflict of laws. Any action or suit in connection with this Agreement may be brought in a court of record of the State of New York or a United States District Court situated in the State of New York, the parties to this Agreement hereby consenting to the nonexclusive jurisdiction of each thereof. 8.3 Successors and Assigns. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors and assigns of the parties hereto. In the event of the distribution of any of the New Junior Notes then held by Lubin to any person(s), upon delivery to the Company of a written instrument (reasonably satisfactory in form and in substance to the Company pursuant to which such person(s) agree to remain subject to the obligations of Lubin hereunder), the provisions hereof (except as otherwise expressly provided herein) shall inure to the benefit of, and be binding upon, such person(s) as if such person(s) constituted Lubin. 8.4 Titles. The titles of the sections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement. 8.5 Severability. Any provision or provisions hereof found to be unenforceable or prohibited by law will be ineffective only to the extent of such unenforceability or prohibition and no other provision of this Agreement will be invalidated thereby. 8.6 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. 8.7 Information Confidential. Each Holder acknowledges that certain of the information received or to be received by him pursuant hereto may be confidential and proprietary and for his use only, and such Holder will not use such confidential or proprietary information in violation of the 1934 Act or any other law, rule or regulation and will use its reasonable efforts to maintain the confidentiality of any confidential information so received by it which is otherwise not available from other sources. - 10 - 8.8 Limitation of Remedies. No Holder shall have any right or remedy in respect of any breach of representation or warranty of which he had actual knowledge as of the date of this Agreement. 8.9 Construction. The language used in this Agreement shall be deemed to be the language chosen by the parties to express their mutual intent, and no rule of strict construction shall be applied against any party. This Agreement is the joint drafting project of the parties hereto and each provision has been subject to negotiation and agreement and shall not be construed for or against any party as drafter thereof. 8.10 Several Obligations. The obligations of Holders hereunder shall be several (and not joint and several). [SIGNATURE PAGE TO FOLLOW] - 11 - IN WITNESS WHEREOF, the Company and each of the Holders have caused this Agreement to be duly executed and delivered in its name and on its behalf, all as of the date first written above. LEXINGTON PRECISION CORPORATION By: /s/ Dennis J. Welhouse ------------------------------------ Dennis J. Welhouse Senior Vice President and Chief Financial Officer
Principal Amount Number of Junior Number of Shares of Subordinated Notes of Warrants Common Stock - ------------------ ----------- ------------ -0- -0- 7,632 /s/ Warren Delano ------------------------ Warren Delano $346,667 3,467 96,099 /s/ Michael A. Lubin ------------------------ Michael A. Lubin
- 12 - Exhibit A Form of New Junior Note Exhibit B Form of Warrant Agreement Schedule 3.11 No Change EX-10.2 10 l04690aexv10w2.txt EX-10.2 WARRANT AGENT AGMT DATED 12/18/03 EXHIBIT 10.2 ================================================================================ LEXINGTON PRECISION CORPORATION and WILMINGTON TRUST COMPANY -------------------------------- WARRANT AGENT AGREEMENT Dated as of December 18, 2003 ================================================================================ WARRANT AGENT AGREEMENT TABLE OF CONTENTS
Page ---- SECTION 1. Appointment of Warrant Agent.................................................... 1 SECTION 2. Warrant Certificates............................................................ 2 SECTION 3. Execution of Warrant Certificates............................................... 2 SECTION 4. Registration and Countersignature............................................... 2 SECTION 5. Registration of Transfers and Exchanges......................................... 2 (a) Transfer.......................................................... 2 (b) Exchange.......................................................... 3 (c) Countersignature.................................................. 3 SECTION 6. Terms and Release of Warrants................................................... 3 (a) Terms of Warrants................................................. 3 (b) Exercise of Warrants.............................................. 3 (c) Cancellation of Warrants.......................................... 3 (d) Inspection by Holders............................................. 4 SECTION 7. Payment of Taxes................................................................ 4 SECTION 8. Mutilated or Missing Warrant Certificates....................................... 4 SECTION 9. Reservation of Warrant Shares................................................... 4 SECTION 10. Adjustment of Number of Warrant Shares.......................................... 4 (a) Notice of Adjustment.............................................. 4 (b) Warrant Agent's Disclaimer........................................ 5 SECTION 11. Fractional Interests........................................................... 5 SECTION 12. Notices to Warrant holders; No Rights as Shareholders.......................... 5 SECTION 13. Merger, Consolidation, or Change of Name of Warrant Agent...................... 5 SECTION 14. Warrant Agent.................................................................. 6 (a) Correctness of Statements......................................... 6 (b) Breach of Covenants............................................... 6 (c) Reliance on Counsel............................................... 6 (d) Reliance on Documents............................................. 6 (e) Compensation...................................................... 6 (f) Legal Proceedings................................................. 7 (g) Other Transactions in Securities of the Company................... 7
- i - (h) Liability of Warrant Agent........................................ 7 (i) Adjustment of Exercise Price...................................... 7 (j) Written Instructions.............................................. 8 (k) Proper Execution.................................................. 8 SECTION 15. Change of Warrant Agent........................................................ 8 SECTION 16. Notices to Company and Warrant Agent........................................... 8 SECTION 17. Supplements and Amendments..................................................... 9 SECTION 18. Successors..................................................................... 9 SECTION 19. Termination.................................................................... 9 SECTION 20. Governing Law.................................................................. 9 SECTION 21. Benefits of This Agreement..................................................... 10 SECTION 22. Counterparts................................................................... 10
Exhibits Exhibit A Form of Warrant Certificate - ii - WARRANT AGENT AGREEMENT dated as of December 18, 2003 between Lexington Precision Corporation, a Delaware corporation (the "COMPANY"), and Wilmington Trust Company, a Delaware banking corporation, as Warrant Agent (the "WARRANT AGENT"). WHEREAS, the Company intends to issue common stock purchase warrants (the "WARRANTS") to holders of the Company's 12 3/4% Senior Subordinated Notes due February 1, 2000 (the "OLD NOTES"), which, in the aggregate, entitle the holders thereof to purchase up to [423,923] shares of common stock of the Company, par value $.25 per share (the "COMMON STOCK"), during the period from August 1, 2005, through August 1, 2009 (the Common Stock issuable on exercise of the Warrants being referred to herein as the "WARRANT SHARES"), in connection with an Exchange Offer (the "EXCHANGE OFFER"), whereby the Company is seeking tenders of the Old Notes in exchange for units, consisting of new 12% Senior Subordinated Notes due August 1, 2009 (the "NEW NOTES"), and the Warrants (collectively with the New Notes, the "UNITS"). WHEREAS, the Company intends to issue Warrants to holders of the Company's 14% Junior Subordinated Notes due August 1, 2001 (the "OLD JUNIOR NOTES"), which in the aggregate, entitle the holders thereof to purchase up to 3,467 Warrant Shares during the period from August 1, 2005, through August 1, 2009, in connection with the Exchange Offer, whereby the Exchange Offer will not be consummated unless, prior to or simultaneous therewith, as one of the conditions to the Exchange Offer, the Company's Old Junior Notes have been exchanged for units, consisting of new 13% Junior Subordinated Notes due November 1, 2009 (the "NEW JUNIOR NOTES") and Warrants (collectively with the New Junior Notes, the "JUNIOR NOTE UNITS"). WHEREAS, prior to August 1, 2005, the Warrants and the New Notes or the New Junior Notes will be transferable only as a Unit or Junior Note Unit. If any or all of the New Notes or the New Junior Notes are redeemed by the Company prior to August 1, 2005, the Warrants attached to those New Notes or New Junior Notes, respectively will revert to the Company for no further consideration and will be cancelled. WHEREAS, the terms and conditions of the Exchange Offer are as set forth in an Amended Offering Circular dated March 7, 2003, as amended on September 18, 2003, and as otherwise extended, amended or supplemented through the date of this Warrant Agent Agreement (the "OFFERING CIRCULAR") and the related Letter of Transmittal. Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in the Offering Circular. WHEREAS, the Company desires the Warrant Agent to act on behalf of the Company, and the Warrant Agent is willing so to act, in connection with the issuance, transfer, exchange, and exercise of Warrants and other matters as provided herein; NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereto agree as follows: SECTION 1. Appointment of Warrant Agent. The Company hereby appoints the Warrant Agent to act as agent for the Company in accordance with the instructions set forth hereinafter in this Agreement, and the Warrant Agent hereby accepts such appointment. SECTION 2. Warrant Certificates. The certificates evidencing the Warrants (the "WARRANT CERTIFICATES") to be delivered pursuant to this Agreement shall be in registered form only and shall be substantially in the form set forth in Exhibit A attached hereto. SECTION 3. Execution of Warrant Certificates. Warrant Certificates shall be signed on behalf of the Company by its Chairman of the Board or its President or a Vice President and by its Secretary or an Assistant Secretary. Each such signature upon the Warrant Certificates may be in the form of a facsimile signature of the present or any future Chairman of the Board, President, Vice President, Secretary, or Assistant Secretary and may be imprinted or otherwise reproduced on the Warrant Certificates and for that purpose the Company may adopt and use the facsimile signature of any person who shall have been Chairman of the Board, President, Vice President, Secretary, or Assistant Secretary, notwithstanding the fact that at the time the Warrant Certificates shall be countersigned and delivered he or she shall have ceased to hold such office. In case any officer of the Company who shall have signed any of the Warrant Certificates shall cease to be such officer before such Warrant Certificates shall have been countersigned by the Warrant Agent, such Warrant Certificates nevertheless may be countersigned and delivered as though such person had not ceased to be such officer of the Company; and any Warrant Certificate may be signed on behalf of the Company by any person who, at the actual date of the execution of such Warrant Certificate, shall be a proper officer of the Company to sign such Warrant Certificate, although at the date of the execution of this Warrant Agent Agreement any such person was not such officer. SECTION 4. Registration and Countersignature. The Warrant Agent shall number and register the Warrants in a Warrant Register, to be maintained by the Warrant Agent as Warrants are issued. Warrant Certificates shall be manually countersigned by the Warrant Agent and shall not be valid for any purpose unless so countersigned. The Warrant Agent shall, upon written instructions of the Chairman of the Board, the President, a Vice President, the Treasurer, or the Chief Financial Officer of the Company, initially countersign, issue, and deliver Warrant Certificates collectively for all Warrants outstanding entitling the holders thereof to purchase not more than the number of Warrant Shares referred to above in the first recital hereof and shall countersign and deliver Warrants as otherwise provided in this Agreement. The Company and the Warrant Agent may deem and treat the registered holder(s) of each Warrant Certificate as the absolute owner(s) thereof (notwithstanding any notation of ownership or other writing thereon made by anyone), for all purposes, and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary. SECTION 5. Registration of Transfers and Exchanges. (a) Transfer. The Warrant Agent shall, subject to the limitations of Section 6 hereof and upon satisfaction of the terms and conditions set forth in the Warrant Certificate, register the transfer of any outstanding Warrant Certificate in the Warrant Register. Upon any such registration of transfer, a new Warrant Certificate shall be issued to the transferee(s) and the - 2 - surrendered Warrant Certificate shall be cancelled by the Warrant Agent. Cancelled Warrant Certificates shall thereafter be disposed of by the Warrant Agent in its customary manner. (b) Exchange. Subject to the terms of this Agreement, Warrant Certificates may be exchanged at the option of the holder(s) thereof, when surrendered to the Warrant Agent at its principal office, for another Warrant Certificate or other Warrant Certificates of like tenor and representing in the aggregate a like number of Warrants. Any holder desiring to exchange a Warrant Certificate shall deliver a written request to the Warrant Agent, and shall surrender, duly endorsed or accompanied (if so required by the Warrant Agent) by a written instrument or instruments of transfer in form satisfactory to the Warrant Agent, the Warrant Certificate or Warrant Certificates to be so exchanged. Warrant Certificates surrendered for exchange shall be cancelled by the Warrant Agent. Such cancelled Warrant Certificates shall then be disposed of by the Warrant Agent in its customary manner. (c) Countersignature. The Warrant Agent is hereby authorized to countersign, in accordance with the provisions of this Section 5 and of Section 4 hereof, the new Warrant Certificates required pursuant to the provisions of this Section 5. SECTION 6. Terms and Release of Warrants. (a) Terms of Warrants. The terms of the Warrants shall be as set forth in the Warrant Certificate. (b) Exercise of Warrants. A Warrant may be exercised by the holder thereof as set forth in the Warrant Certificate. In the event that a certificate evidencing Warrants is exercised in respect of fewer than all of the Warrant Shares issuable on such exercise at any time prior to the date of expiration of the Warrants, a new Warrant Certificate evidencing the remaining Warrant or Warrants will be issued, and the Warrant Agent is hereby irrevocably authorized to countersign and to deliver the required new Warrant Certificate or Certificates pursuant to the provisions of this Section 6 and of Section 4 hereof, and the Company, whenever required by the Warrant Agent, shall supply the Warrant Agent with Warrant Certificates duly executed on behalf of the Company for such purpose. The Warrant Agent may assume that any Warrant presented for exercise is permitted to be so exercised under applicable law and shall have no liability for acting in reliance on such assumption. (c) Cancellation of Warrants. (i) All Warrant Certificates surrendered upon exercise of Warrants shall be canceled by the Warrant Agent. Such canceled Warrant Certificates shall then be disposed of by the Warrant Agent in its customary manner. The Warrant Agent shall account to the Company promptly with respect to Warrants exercised and concurrently pay to the Company all monies received by the Warrant Agent for the purchase of the Warrant Shares through the exercise of such Warrants. (ii) Additionally, if any or all of the New Notes or the New Junior Notes are redeemed by the Company prior to August 1, 2005, the Warrants attached to those New Notes or New Junior Notes, respectively, will revert to the Company for no further consideration and will be canceled. - 3 - (d) Inspection by Holders. The Warrant Agent shall keep copies of this Agreement and any notices given or received hereunder available for inspection by the holders with reasonable prior written notice during normal business hours at its office. The Company shall supply the Warrant Agent from time to time with such number of copies of this Agreement as the Warrant Agent may request. SECTION 7. Payment of Taxes. The Company will pay all documentary stamp taxes attributable to the initial issuance of Warrant Shares upon the exercise of Warrants; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issue of any Warrant Certificates or any certificates for Warrant Shares in a name other than that of the registered holder of a Warrant Certificate surrendered upon the exercise of a Warrant, and the Company shall not be required to issue or deliver such Warrant Certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. SECTION 8. Mutilated or Missing Warrant Certificates. In case any of the Warrant Certificates shall be mutilated, lost, stolen, or destroyed, the Company shall issue and the Warrant Agent shall countersign a new Warrant Certificate upon the terms and conditions set forth in the Warrant Certificate. SECTION 9. Reservation of Warrant Shares. The Company will reserve and keep available, as set forth in the Warrant Certificate, a number of shares of Common Stock sufficient for the exercise of the Warrants. The Warrant Agent shall have no duty to verify availability of such shares set aside by the Company. The Company will keep a copy of this Agreement on file with the transfer agent for the Common Stock (the "TRANSFER AGENT") and with every subsequent transfer agent for the Common Stock. The Warrant Agent is hereby authorized to requisition from time to time from the Transfer Agent the stock certificates required to honor outstanding Warrants upon exercise thereof in accordance with the terms of this Agreement. The Company will supply the Transfer Agent with duly executed certificates for such purpose and will provide or otherwise make available any cash that may be payable as provided in Section 11 hereof. The Company will furnish to the Transfer Agent a copy of all notices of adjustments and certificates related thereto, transmitted to each holder pursuant to Section 13 hereof. SECTION 10. Adjustment of Number of Warrant Shares. The number of Warrant Shares issuable upon the exercise of each Warrant, the exercise price (the "Exercise Price"), and the kind of securities purchasable upon exercise of the Warrants is subject to adjustment from time to time as set forth in the Warrant Certificate and upon the occurrence of the events seth forth therein. (a) Notice of Adjustment. Whenever the number of shares of Common Stock issuable upon exercise of each Warrant is adjusted, the Company shall provide notices thereof as required by the Warrant Certificate. - 4 - (b) Warrant Agent's Disclaimer. The Warrant Agent has no duty to determine when an adjustment under this Section 10 should be made, how it should be made, or what it should be. The Warrant Agent makes no representation as to the validity or value of any securities or assets issued upon exercise of Warrants. The Warrant Agent shall not be responsible for the Company's failure to comply with this Section. SECTION 11. Fractional Interests. The Company shall not be required to issue fractional Warrant Shares on the exercise of Warrants except as set forth in the Warrant Certificates. SECTION 12. Notices to Warrant holders; No Rights as Shareholders . Upon any adjustment of the Exercise Price pursuant to Section 10 herein, the Company shall give notice of such adjustment as set forth in the Warrant Certificate. The Warrant Agent shall be fully protected in relying on any such notice provided to it pursuant to this Section 12 and on any adjustment therein contained and shall not be deemed to have knowledge of such adjustment unless and until it shall have received such notice. In the event: (a) the Company shall declare any dividend or distribution payable to the holders of its Common Stock; or (b) there shall be any capital reorganization or reclassification of the capital stock of the Company, or any consolidation or merger of the Company with, or sale of all or substantially all of the assets of the Company to, another corporation or business organization; or (c) of the voluntary or involuntary dissolution, liquidation, or winding up of the Company, then the Company shall provide notice to the Warrant Agent and the holders of the Warrant Certificates as set forth in the Warrant Certificates. The holders of the Warrants shall have no rights as shareholders of the Company, except as set forth in the Warrant Certificates. SECTION 13. Merger, Consolidation, or Change of Name of Warrant Agent. Any corporation into which the Warrant Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Warrant Agent shall be a party, or any corporation succeeding to the business of the Warrant Agent, shall be the successor to the Warrant Agent hereunder without the necessity for the execution or filing of any document or any further act on the part of any of the parties hereto, provided that such corporation would be eligible for appointment as a successor warrant agent under the provisions of Section 15. In case at the time such successor to the Warrant Agent shall succeed to the agency created by this Agreement, any of the Warrant Certificates shall have been countersigned but not delivered, any such successor to the Warrant Agent may adopt the countersignature of the original Warrant Agent; and in case at that time any of the Warrant Certificates shall not have been countersigned, any successor to the Warrant Agent may countersign such Warrant Certificates either in the name of the predecessor Warrant Agent or in - 5 - the name of the successor to the Warrant Agent; and in all such cases such Warrant Certificates shall have the full force and effect provided in the Warrant Certificates and in this Agreement. In case at any time the name of the Warrant Agent shall be changed and at such time any of the Warrant Certificates shall have been countersigned but not delivered, the Warrant Agent whose name has been changed may adopt the countersignature under its prior name, and in case at that time any of the Warrant Certificates shall not have been countersigned, the Warrant Agent may countersign the Warrant Certificates either in its prior name or in its changed name, and in all such cases such Warrant Certificates shall have the full force and effect provided in the Warrant Certificates and in this Agreement. SECTION 14. Warrant Agent. The Warrant Agent undertakes the duties and obligations imposed by this Agreement (and no implied duties or obligations shall be read into this Agreement against the Warrant Agent) upon the following terms and conditions, by all of which the Company and the holders of Warrants, by their acceptance thereof, shall be bound: (a) Correctness of Statements. The statements contained herein and in the Warrant Certificates shall be taken as statements of the Company and the Warrant Agent assumes no responsibility for the correctness of any of the same except such as describe the Warrant Agent or action taken or to be taken by it. The Warrant Agent assumes no responsibility with respect to the distribution of the Warrant Certificates except as otherwise provided herein. (b) Breach of Covenants. The Warrant Agent shall not be responsible for any failure of the Company to comply with any of the covenants contained in this Agreement or in the Warrant Certificates to be complied with by the Company. (c) Reliance on Counsel. The Warrant Agent may consult at any time with counsel of its own selection (who may be counsel for the Company) and the Warrant Agent shall incur no liability or responsibility to the Company or to any holder of a Warrant Certificate in respect of any action taken, suffered, or omitted by it hereunder in good faith and in accordance with the opinion or the advice of such counsel. (d) Reliance on Documents. The Warrant Agent shall incur no liability or responsibility to the Company or to any holder of any Warrant Certificate for any action taken in reliance on any Warrant Certificate, certificate of shares, notice, resolution, waiver, consent, order, certificate, or other paper, document, or instrument (whether in its original or facsimile form) believed by it to be genuine and to have been signed, sent, or presented by the proper party or parties. (e) Compensation. The Company agrees to pay to the Warrant Agent such compensation for all services rendered by the Warrant Agent while this Agreement is in effect in the administration and execution of this Agreement as set forth in Schedule I attached hereto, to reimburse the Warrant Agent for all expenses, taxes, and governmental charges and other charges of any kind and nature incurred by the Warrant Agent in the execution of this Agreement (including the reasonable fees and expenses of its counsel) and to indemnify the Warrant Agent, defend it from and save it harmless against any and all claims (whether asserted by the Company, a registered holder, or any other person), damages, losses, expenses (including taxes - 6 - other than taxes based on the income of the Warrant Agent), liabilities, including judgments, costs, and reasonable counsel fees and expenses, for anything done or omitted by the Warrant Agent in the execution of this Agreement except as a result of the Warrant Agent's gross negligence or willful misconduct. The provisions of this Section 14(e) shall survive the expiration of the Warrants, the termination of this Agreement and the resignation or removal of the Warrant Agent, such that the Warrant Agent shall continue to enjoy the provisions of this Section 14(e) if it resigns or is removed. (f) Legal Proceedings. The Warrant Agent shall be under no obligation to institute any action, suit, or legal proceeding or to take any other action likely to involve expense unless the Company or one or more registered holders of Warrant Certificates shall furnish the Warrant Agent with security and indemnity reasonably satisfactory to it for any costs and expenses that may be incurred, but this provision shall not affect the power of the Warrant Agent to take such action as it may consider proper, with or without any such security or indemnity. All rights of action under this Agreement or under any of the Warrants may be enforced by the Warrant Agent without the possession of any of the Warrant Certificates or the production thereof at any trial or other proceeding relative thereto, and any such action, suit, or proceeding instituted by the Warrant Agent shall be brought in its name as Warrant Agent and any recovery of judgment shall be for the ratable benefit of the registered holders of the Warrants, as their respective rights or interests may appear. (g) Other Transactions in Securities of the Company. The Warrant Agent, and any of its stockholders, directors, officers or employees, may buy, sell, or deal in the Warrants or any other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company, or otherwise act as fully and freely as though it were not Warrant Agent under this Agreement. Nothing herein shall preclude the Warrant Agent from acting in any other capacity for the Company or for any other legal entity. (h) Liability of Warrant Agent. The Warrant Agent shall act hereunder solely as agent for the Company, and its duties shall be determined solely by the provisions hereof. The Warrant Agent shall not be liable for anything that it may do or refrain from doing in connection with this Agreement except for its own gross negligence or willful misconduct. (i) Adjustment of Exercise Price. The Warrant Agent shall not at any time be under any duty or responsibility to any holder of a Warrant Certificate to make or cause to be made any adjustment of the Exercise Price or the number of Warrant Shares or other securities or property deliverable as provided in this Agreement, or to determine whether any facts exist that may require any such adjustment, or with respect to the nature or extent of any such adjustments, when made, or with respect to the method employed in making the same. The Warrant Agent shall not be accountable with respect to the validity or value or the kind or amount of Warrant Shares or any other securities or property that may at any time be issued or delivered upon the exercise of a Warrant or with respect to whether any Warrant Shares or any such other securities or property will, when issued, be validly issued, fully paid, and nonassessable, and makes no representation with respect thereto. - 7 - (j) Written Instructions. Any application by the Warrant Agent for written instructions from the Company may, at the option of the Warrant Agent, set forth in writing any action proposed to be taken or omitted by the Warrant Agent under this Agreement and the date on and/or after which such action shall be taken or such omission shall be effective. The Warrant Agent shall not be liable for any action or any omission to act in accordance with a proposal included in such application on or after the date specified in such application (which date shall not be less than three Business Days after the date any officer of the Company actually receives such application, unless any such officer shall have consented in writing to any earlier date) unless prior to acting or omitting to take any action, the Warrant Agent shall have received written instructions in response to such application specifying the action to be taken or omitted. (k) Proper Execution. In addition to the foregoing, the Warrant Agent shall be protected and shall incur no liability for, or in respect of, any of its actions or omissions to act in connection with its administration of this Agreement if such acts or omissions are in reliance upon (i) the proper execution of the form of Notice of Exercise and the form of Investment Representation Statement and attached as Exhibits 1 and 2, respectively, to Exhibit A hereto, unless the Warrant Agent shall have actual knowledge that, as executed, such certificate is untrue, or (ii) the non-execution of such certificate including, without limitation, any refusal to honor any otherwise permissible assignment or election by reason of such non-execution. SECTION 15. Change of Warrant Agent. If the Warrant Agent shall become incapable of acting as Warrant Agent, it may resign by giving 30 days written notice to the Company and the Company shall appoint a successor to the Warrant Agent. If the Company shall fail to make such appointment within a period of 30 days after it has been notified in writing of such incapacity by the Warrant Agent, the registered holder of any Warrant Certificate may apply to any court of competent jurisdiction for the appointment of a successor to the Warrant Agent. Pending appointment of a successor to the Warrant Agent, either by the Company or by such a court, the duties of the Warrant Agent shall be carried out by the Company. The Company shall be entitled, upon 30 days prior written notice to the Warrant Agent, to remove the Warrant Agent and appoint a successor to the Warrant Agent. After appointment, the successor to the Warrant Agent shall be vested with the same powers, rights, duties, and responsibilities as if it had been originally named as Warrant Agent without further act or deed; but the former Warrant Agent shall promptly deliver and transfer to the successor to the Warrant Agent any property at the time held by it hereunder and execute and deliver any further assurance, conveyance, act, or deed necessary for the purpose. Failure to give any notice provided for in this Section 15, however, or any defect therein, shall not affect the legality or validity of the appointment of a successor to the Warrant Agent. SECTION 16. Notices to Company and Warrant Agent. Any notice or demand authorized by this Agreement to be given to or made on the Company by the Warrant Agent or by the registered holder of any Warrant Certificate shall be sufficiently given or made when and if deposited in the mail, first class or registered, postage prepaid, addressed (until another address is filed in writing by the Company with the Warrant Agent), as follows: - 8 - Lexington Precision Corporation 767 Third Avenue New York, New York 10017 Attention: President The Company shall promptly notify the Warrant Agent in the event the Company ceases to maintain such office or agency and of any change in the location thereof. In case the Company shall fail to maintain such office or agency or shall fail to give such notice of the location or of any change in the location thereof to any registered holder, presentations may be made and notices and demands may be served at the principal office of the Warrant Agent. Any notice pursuant to this Agreement to be given to the Warrant Agent by the Company or by the registered holder(s) of any Warrant Certificate shall be sufficiently given when and if deposited in the mail, first-class or registered, postage prepaid, addressed (until another address is filed in writing by the Warrant Agent with the Company) to the Warrant Agent as follows: Wilmington Trust Company 1100 North Market Street Rodney Square North Wilmington, Delaware 19890-1615 Attention: Corporate Trust Administration SECTION 17. Supplements and Amendments. The Company and the Warrant Agent may from time to time supplement or amend this Agreement without the approval of the holders of Warrant Certificates in order to cure any ambiguity or to correct or supplement any provision contained herein that may be defective or inconsistent with any other provision herein, or to make any other provisions in regard to matters or questions arising hereunder that the Company and the Warrant Agent may deem necessary or desirable and that shall not in any way adversely affect the interests of the holders of the Warrant Certificates. Notwithstanding anything in this Agreement to the contrary, the prior written consent of the Warrant Agent must be obtained in connection with any supplement or amendment that alters the rights or duties of the Warrant Agent. The Company and the Warrant Agent may amend any provision herein with the consent of the holders of Warrants exercisable for a majority of the Warrant Shares issuable on exercise of all outstanding Warrants. SECTION 18. Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Warrant Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. SECTION 19. Termination. This Agreement will terminate on August 1, 2009, or if earlier, the date on which all of the Warrants shall have been exercised. The provisions of Section 14 hereof shall survive such termination. SECTION 20. Governing Law. This Agreement and each Warrant Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of New York and for all purposes shall be construed in accordance with the internal laws of said state. - 9 - SECTION 21. Benefits of This Agreement. Nothing in this Agreement shall be construed to give to any person or corporation other than the Company, the Warrant Agent, and the registered holders of the Warrant Certificates any legal or equitable right, remedy, or claim under this Agreement, and this Agreement shall be for the sole and exclusive benefit of the Company, the Warrant Agent, and the registered holders of the Warrant Certificates. SECTION 22. Counterparts. This Agreement may be executed in any number of counterparts, each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. - 10 - IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, as of the day and year first above written. LEXINGTON PRECISION CORPORATION By: /s/ Michael A. Lubin ------------------------------------- Name: Michael A. Lubin Title: Chairman WILMINGTON TRUST COMPANY By: /s/ James J. McGinley ------------------------------------- Name: James J. McGinley Title: Authorized Signer EXHIBIT A CUSIP: 529529 12 5 WARRANT NO. LW- ___ [The following legend is to be inserted only in the Warrant to be issued to Cede & Co.: UNLESS THIS WARRANT IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO LEXINGTON PRECISION CORPORATION OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY WARRANT ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUIRED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] [The following legend is to be inserted only upon issuance or transfer of the warrant to an affiliate of the Company or upon receipt by the Warrant Agent of documentation from the Company stating that the holder is believed to be an affiliate of the Company: THIS WARRANT AND ANY SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL FOR THE HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION. THIS WARRANT SHALL NOT BE TRANSFERRED OR PLEDGED EXCEPT IN ACCORDANCE WITH SECTION 9 HEREOF.] THIS WARRANT, AND THE NOTE ATTACHED HERETO, SHALL CONSTITUTE A UNIT. THIS WARRANT WILL NOT BE DETACHABLE FROM THE NOTE UNTIL AUGUST 1, 2005, AND THIS WARRANT AND THE NOTE WILL ONLY BE TRANSFERABLE AS A UNIT PRIOR TO THAT TIME. IF THE NOTE IS REDEEMED BY THE COMPANY PRIOR TO AUGUST 1, 2005, THIS WARRANT WILL REVERT TO THE COMPANY FOR NO FURTHER CONSIDERATION AND WILL BE CANCELED. THE UNIT MAY NOT BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, HYPOTHECATED, MORTGAGED, ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SECTION 9 HEREOF. A-1 LEXINGTON PRECISION CORPORATION WARRANT TO PURCHASE COMMON STOCK ($3.50 Per Share*) This certifies that, for value received, ____________________ (the "holder") is entitled to subscribe for and purchase up to __________ shares* of fully paid and nonassessable Common Stock of Lexington Precision Corporation, a Delaware corporation (the "Company"), at the price specified in Section 2 (the "Warrant Price"), subject to the provisions and upon the terms and conditions hereinafter set forth. This Warrant is issued under and in accordance with a Warrant Agent Agreement dated as of December __, 2003, between the Company and Wilmington Trust Company, as Warrant Agent (the "Warrant Agent Agreement"), and is subject to the terms and provisions contained in the Warrant Agent Agreement. By acceptance of this Warrant the Holder hereof consents to all the terms and provision contained in the Warrant Agent Agreement. A copy of the Warrant Agent Agreement may be obtained by the Holder of the Warrant upon written request to the Warrant Agent. As used herein, the term "Common Stock" shall mean the Company's presently authorized Common Stock, par value $0.25 per share, as adjusted from time to time in accordance with Section 5. SECTION 1. TERM OF WARRANT. The purchase right represented by this Warrant is exercisable, in whole or in part, at any time subsequent to 9:30 a.m., New York City Time, on or after August 1, 2005 (the "Detachment Date"), and prior to 5:00 p.m., New York City Time, on August 1, 2009; provided, however, that if the 12% Senior Subordinated Note of the Company (the "Note") with which this Warrant comprises a Unit or the 13% Junior Subordinated Note of the Company (the "Junior Note") with which this Warrant comprises a Junior Note Unit issued in connection with an exchange offer (the "Exchange Offer") made pursuant to the Company's Offering Circular Supplement dated September 18, 2003, as amended or supplemented, is redeemed prior to the Detachment Date, this Warrant shall revert to the Company for no further consideration. SECTION 2. WARRANT PRICE. The Warrant Price is $3.50 per share, as adjusted from time to time pursuant to the provisions of Section 5; provided, however, that in no event shall the Warrant Price be less than the par value of the Company's presently authorized Common Stock. SECTION 3. METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT. (a) Subject to Section 1 and Section 8, the purchase right represented by this Warrant may be exercised by the holder, in whole or in part, by the surrender of this Warrant together with the Notice of Exercise and the Investment Representation Statement, each - ---------------------- * Subject to adjustment from time to time pursuant to the provisions of Section 5. A-2 completed and duly executed in the form attached hereto as Exhibit A and Exhibit B, respectively, to the Company at the principal office of the Warrant Agent and by the payment to the Warrant Agent, for the account of the Company, by certified check or wire transfer of federal or other immediately available funds, of an amount equal to the then applicable Warrant Price per share multiplied by the number of shares then being purchased. (b) The Company and Warrant Agent agree that the shares so purchased shall be deemed to be issued to the holder as the record owner of such shares as of the close of business on the date on which this Warrant, together with the completed and duly executed Notice of Exercise and the Investment Representation Statement, shall have been surrendered and payment made for such shares as aforesaid. In the event of any exercise of the rights represented by this Warrant, certificates for the shares of Common Stock so purchased shall be delivered to the holder promptly thereafter and, unless this Warrant has been fully exercised or expired, a new Warrant representing the unexercised and unexpired portion of this Warrant, shall also be issued to the holder promptly. SECTION 4. STOCK FULLY PAID; RESERVATION OF SHARES. All shares of Common Stock that may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be fully paid and nonassessable, and free from all taxes, liens, and charges with respect to the issue thereof, other than restrictions upon transfer referred to herein or required under applicable federal or state securities laws. During the period within which the rights represented by this Warrant may be exercised, the Company will, at all times, have authorized and reserved for the purpose of the issuance upon exercise of the purchase rights evidenced by this Warrant, a sufficient number of shares of its Common Stock to provide for the exercise of the rights represented by this Warrant. SECTION 5. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES. The kind of securities purchasable upon the exercise of this Warrant, the Warrant Price, and the number of shares purchasable upon exercise of this Warrant shall be subject to adjustment from time to time upon the occurrence of certain events as follows: (a) Reclassification, Consolidation, or Merger. In case of any reclassification or change of outstanding securities of the class issuable upon exercise of this Warrant (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), or in case of any consolidation or merger of the Company with or into another corporation, other than a merger with another corporation in which the Company is the continuing corporation and that does not result in any reclassification or change of outstanding securities issuable upon exercise of this Warrant, or in case of any sale of all or substantially all of the assets of the Company, the Company, or such successor or purchasing corporation, as the case may be, and the Warrant Agent shall execute a new Warrant, providing that the holder of this Warrant shall have the right to exercise such new Warrant and procure upon such exercise, in lieu of each share of Common Stock theretofore issuable upon exercise of this Warrant, the kind and amount of shares of stock, other securities, money, and/or property receivable upon such reclassification, change, consolidation, merger, or sale by a holder of one share of Common Stock. Such new Warrant shall provide for adjustments that shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 5. The A-3 provisions of this Section 5(a) shall similarly apply to successive reclassifications, changes, consolidations, mergers, and sales. (b) Subdivision or Combination of Shares. If, at any time while this Warrant remains outstanding and unexpired, the Company shall subdivide or combine its Common Stock, the Warrant Price shall be proportionately decreased in the case of a subdivision or increased in the case of a combination. (c) Stock Dividends. If, at any time while this Warrant remains outstanding and unexpired, the Company shall pay a dividend with respect to Common Stock payable in, or make any other distribution to holders of Common Stock (except any distribution specifically provided for in Section 5(a) or Section 5(b)) of, additional shares of Common Stock, the Warrant Price shall be adjusted, from and after the record date for the determination of stockholders entitled to receive such dividend or distribution, to that price determined by multiplying the Warrant Price in effect immediately prior to such record date by a fraction (i) the numerator of which shall be the total number of shares of Common Stock outstanding immediately prior to such dividend or distribution, and (ii) the denominator of which shall be the total number of shares of Common Stock outstanding immediately after such dividend or distribution and the number of shares of Common Stock purchasable upon the exercise of the rights represented by this Warrant shall be adjusted by dividing the number of shares of Common Stock purchasable immediately prior to such record date by the same fraction. In the case of issuance of shares of Common Stock as a dividend, the shares shall be deemed to have been issued at the close of business on the dividend record date. If no dividend record date is fixed, the day on which the Board of Directors of the Company adopts the resolution authorizing the dividend shall be treated as the dividend record date. SECTION 6. NOTICE OF ADJUSTMENTS. Whenever the Warrant Price shall be adjusted pursuant to Section 5, the Company shall prepare promptly a certificate signed by its chief financial officer setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, the Warrant Price after giving effect to such adjustment and the number of shares then purchasable upon exercise of this Warrant, and shall cause copies of such certificate to be mailed (by first class mail, postage prepaid) to the Warrant Agent and to the holder at the addresses specified in Section 10(d), or at such other address as may be provided to the Company in writing by the holder. SECTION 7. FRACTIONAL SHARES. The Company shall not be required to issue any fractional shares of Common Stock in connection with any exercise hereunder. In the event the Company elects not to issue such fractional shares, the Company shall make a cash payment in lieu of such fractional shares upon the basis of the Warrant Price then in effect. SECTION 8. COMPLIANCE WITH SECURITIES ACT. The holder, by acceptance hereof, agrees that (a) the shares of Common Stock issuable upon exercise hereof and, (b) this Warrant are being acquired solely for the holder's own account and not as a nominee for any other party, for investment purposes only, and that it will not offer, sell, assign, transfer, pledge, hypothecate, mortgage, encumber, or otherwise dispose of any of the shares of Common Stock issuable upon exercise hereof or, if the holder is an "affiliate" (as defined in Rule 144(a) promulgated under the A-4 Securities Act of 1933, as amended (the "Act")) of the Company, this Warrant except under circumstances that will not result in a violation of the Act, or any applicable state securities laws. Upon exercise of this Warrant, the holder shall, if requested by the Company or the Warrant Agent, confirm in writing, in a form satisfactory to the Company and the Warrant Agent, that the shares of Common Stock so purchased are being acquired solely for the holder's own account and not as a nominee for any other party, for investment, and not with a view toward distribution or resale in any transaction that would be in violation of the Act or any applicable state securities laws, subject, however, to the disposition of the holder's property being at all times within their control. All shares of Common Stock issued upon exercise of this Warrant (unless registered under the Act) shall be stamped or imprinted with a legend substantially in the following form: THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL FOR THE HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION STATING THAT SUCH REGISTRATION IS NOT REQUIRED. THIS SECURITY AND ANY SECURITY RECEIVED UPON THE EXERCISE HEREOF SHALL NOT BE TRANSFERRED OR PLEDGED EXCEPT IN ACCORDANCE WITH SECTION 9 OF A CERTAIN WARRANT ISSUED BY THE COMPANY AS OF DECEMBER __, 2003. SECTION 9. TRANSFER. (a) The holder shall not offer, sell, assign, transfer, pledge, hypothecate, mortgage, encumber, or otherwise dispose of (a) all or any of the securities issuable upon exercise of this Warrant, or (b) if the holder is an affiliate of the Company, this Warrant, except in compliance with applicable federal and state securities laws (including the delivery by the transferor and the transferee of investment representation letters and legal opinions reasonably satisfactory to the Company and the Warrant Agent, if such are requested by the Company or the Warrant Agent). (b) Subject to compliance with the terms of Section 8 and Section 9(a), this Warrant and all rights hereunder are transferable, in whole or in part, at the office of the Warrant Agent by the holder in person or by its duly authorized attorney, upon surrender of this Warrant properly endorsed; provided, however, that prior to August 1, 2005, this Warrant shall only be transferable together with the Note or Junior Note with which this Warrant comprises a Unit or a Junior Note Unit, respectively issued in connection with the Exchange Offer. Each taker and holder of this Warrant, by taking or holding the same, consents and agrees that this Warrant, when endorsed in blank, shall be deemed negotiable; provided, however, that the last holder of A-5 this Warrant, as registered on the warrant register (the "Warrant Register") maintained by the Warrant Agent, may be treated by the Company, the Warrant Agent, and all other persons dealing with this Warrant as the absolute owner hereof for any purposes and as the person entitled to exercise the rights represented by this Warrant, any notice to the contrary notwithstanding, unless and until such holder seeks to transfer registered ownership of this Warrant on the Warrant Register and such transfer is effected. SECTION 10. MISCELLANEOUS. (a) No Rights as Stockholder. No holder of a Warrant shall be entitled to vote or receive dividends on or be deemed for any other purpose the holder of any Common Stock or any other securities of the Company that may at any time be issuable upon the exercise hereof, nor shall anything contained herein be construed to confer upon the holder of this Warrant, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value or change of stock to no par value, consolidation, merger, conveyance, or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights, or otherwise until this Warrant shall have been exercised and the shares purchasable upon the exercise hereof shall have become deliverable, as provided herein. (b) Replacement. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction, or mutilation of this Warrant and, in the case of loss, theft, or destruction, upon delivery of an indemnity agreement or bond reasonably satisfactory in form and amount to the Company or, in the case of mutilation, upon surrender and cancellation of this Warrant, the Company, at its expense, will execute and deliver, and the Warrant Agent will countersign, in lieu of this Warrant, a new Warrant of like tenor. (c) Notice of Capital Changes. In the event: (i) The Company shall declare any dividend or distribution payable to the holders of its Common Stock; (ii) There shall be any capital reorganization or reclassification of the capital stock of the Company, or any consolidation or merger of the Company with, or sale of all or substantially all of its assets to, another corporation or business organization; or (iii) There shall be a voluntary or involuntary dissolution, liquidation, or winding up of the Company; then, in any one or more of said cases, the Company shall give the holder and the Warrant Agent written notice, in the manner set forth in Section 10(d), of the date on which a record shall be taken for such dividend or distribution or for determining stockholders entitled to vote upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, or winding up and of the date on which any such transaction shall take place, as the case may be. Such written notice shall be given at least 20 days prior to the transaction in question and not less than 10 days prior to the record date in respect thereof. A-6 (d) Notices. All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by registered or certified mail, postage prepaid, or otherwise delivered by hand or by a nationally recognized overnight courier, as follows: If to the Company: Lexington Precision Corporation 767 Third AVE New York, NY 10017 Attention: President If to the holder: at the address of the registered holder then maintained on the Warrant Register. If to the Warrant Agent: (i) by registered or certified mail: Wilmington Trust Company DC-1615 Reorg Services P.O. Box 8861 Wilmington, DE 19899-8861 Attention: Aubrey Rosa (ii) by hand delivery or overnight courier: Wilmington Trust Company Reorg Services 1100 North Market ST Rodney Square North Wilmington, DE 19890-1615 Attention: Aubrey Rosa All such notices (other than notices of exercise of this Warrant, which shall be deemed to have been received only upon actual receipt thereof by the Warrant Agent) and communications shall be deemed to have been received (i) in the case of personal delivery, on the date of such delivery, (ii) in the case of a nationally recognized overnight courier, on the next business day after the date when sent, and (iii) in the case of mailing, on the third business day following the date on which the piece of mail containing such communication has been deposited in a regularly maintained receptacle for the deposit of the United States mail, addressed and mailed as aforesaid. (e) No Impairment. The Company will not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, A-7 dissolution, issuance or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions in this Warrant. (f) Governing Law. Except to the extent that the General Corporation Law of the State of Delaware may govern this Warrant by virtue of the fact that the Company is incorporated under the laws of the State of Delaware, this Warrant shall be governed by and construed under the laws of the State of New York without regard to its conflict of laws rules or principles. (g) Countersignature. This Warrant shall not be valid or obligatory for any purpose until it shall have been countersigned by the Warrant Agent. A-8 IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officers thereunto duly authorized. Dated: _____________ LEXINGTON PRECISION CORPORATION By:___________________________________ Name:_________________________________ Title: _______________________________ - and - By:___________________________________ Name:_________________________________ Title: _______________________________ COUNTERSIGNED: WILMINGTON TRUST COMPANY as Warrant Agent By: _______________________________ Name: _____________________________ Title: ____________________________ A-9 Exhibit A to Warrant to Purchase Common Stock NOTICE OF EXERCISE TO: Lexington Precision Corporation 1. The undersigned hereby elects to purchase ________ shares of the Common Stock of Lexington Precision Corporation pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price of such shares in full. 2. Please issue a certificate or certificates representing said shares of Common Stock in the name of the undersigned or in such other name as is specified below: ______________________________ (Name) ______________________________ ______________________________ (Address) 3. The undersigned represents that the aforesaid shares of Common Stock are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or reselling such shares. _____________________________ ________________________________ (Date) (Name of Warrant Holder) By:_____________________________ Title:__________________________ A-10 Exhibit B to Warrant to Purchase Common Stock INVESTMENT REPRESENTATION STATEMENT The undersigned hereby represents to Lexington Precision Corporation (the "Company") and to Wilmington Trust Company, as Warrant Agent, as follows: The securities to be received upon the exercise of the Warrant to which this Statement is an exhibit (the "Warrant") will be acquired for investment for its own account, not as a nominee or agent, and not with a view to the sale or distribution of any part thereof, and the undersigned has no present intention of offering, selling, granting participation in, or otherwise distributing the same in any transaction that would be in violation of applicable federal or state securities laws, but subject to any requirement of law that the disposition of its property shall at all times be within its control. By executing this Statement, the undersigned further represents that it does not have any contract, undertaking, agreement, or arrangement with any person to offer, sell, transfer, grant participations in, or otherwise distribute to such person or to any third person any securities issuable upon exercise of the Warrant. The undersigned acknowledges that the securities issuable upon exercise of the Warrant at the time of issuance may not be registered under the Securities Act of 1933, as amended (the "Act"), or any applicable state securities laws on the ground that the issuance of such securities is exempt pursuant to Section 4(2) of the Act and state law exemptions relating to offers and sales not by means of a public offering, and that the Company's reliance on such exemptions is predicated on the undersigned's representations set forth herein. The undersigned represents that it is an "accredited investor" within the meaning of Rule 501 of Regulation D under the Act as presently in effect or a "qualified institutional buyer" within the meaning of Rule 144A under the Act as presently in effect. The undersigned agrees that in no event will it make a disposition of any securities acquired upon the exercise of the Warrant unless and until (a) it shall have notified the Company of the proposed disposition and shall have furnished to the Company a statement of the circumstances surrounding the proposed disposition, and (b) it shall have furnished the Company with an opinion of counsel satisfactory to the Company to the effect that (i) appropriate action necessary for compliance with the Act and any applicable state securities laws has been taken and an exemption from the registration requirements of the Act and such laws is available, and (ii) the proposed transfer will not violate any of said laws. The undersigned acknowledges that an investment in the Company is highly speculative and represents that it is able to fend for itself in the transactions contemplated by this Statement, that it has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of their investments, and that it has the ability to bear the economic risks (including the risk of a total loss) of its investment. The undersigned represents that it has had the opportunity to ask questions of the Company concerning the Company's business and assets and to obtain any additional information that it considered necessary to verify the accuracy of or to amplify on the Company's disclosures, and that it has had all questions asked by it satisfactorily answered by the Company. A-11 The undersigned acknowledges that the securities issuable upon exercise of the Warrant must be held indefinitely unless subsequently registered under the Act or an exemption from such registration is available. The undersigned is aware of the provisions of Rule 144 promulgated under the Act that permit limited resale of securities purchased in a private placement subject to the satisfaction of certain conditions, including, among other things, the existence of a public market for such securities, the availability of certain current public information about the Company, the resale occurring not less than one year after a party has purchased and paid for the securities, the sale being executed through a "broker's transaction" or in transactions directly with "market makers" (as provided by Rule 144(f)) and the number of securities being sold during any three-month period not exceeding specified limitations. _____________________________ ________________________________ (Date) (Name of Warrant Holder) By:_____________________________ Title:__________________________ A-12 SCHEDULE I COMPENSATION OF WARRANT AGENT A-13 EX-10.3 11 l04690aexv10w3.txt EX-10.3 AMND AND RESTD LOAN/SECRTY AGMT 12/18/03 EXHIBIT 10.3 [Execution] AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT by and among LEXINGTON PRECISION CORPORATION LEXINGTON RUBBER GROUP, INC. as Borrowers and CONGRESS FINANCIAL CORPORATION as Agent THE CIT GROUP/COMMERCIAL FINANCING, INC. as Co-Agent and THE LENDERS FROM TIME TO TIME PARTY HERETO as Lenders Dated: December 18, 2003 TABLE OF CONTENTS
Page SECTION 1. DEFINITIONS................................................................................... 1 SECTION 2. CREDIT FACILITIES............................................................................. 29 2.1 Loans......................................................................................... 29 2.2 Letter of Credit Accommodations............................................................... 30 2.3 Term Loans. ................................................................................. 34 2.4 Commitments................................................................................... 36 2.5 Joint and Several Liability................................................................... 36 2.6 Mandatory Prepayments......................................................................... 37 SECTION 3. INTEREST AND FEES............................................................................. 39 3.1 Interest...................................................................................... 39 3.2 Fees.......................................................................................... 40 3.3 Changes in Laws and Increased Costs of Loans.................................................. 41 SECTION 4. CONDITIONS PRECEDENT.......................................................................... 43 4.1 Conditions Precedent to Initial Loans and Letter of Credit Accommodations..................... 43 4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations......................... 45 SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST..................................................... 46 SECTION 6. COLLECTION AND ADMINISTRATION................................................................. 51 6.1 Borrowers' Loan Accounts...................................................................... 51 6.2 Statements.................................................................................... 52 6.3 Collection of Accounts........................................................................ 52 6.4 Payments...................................................................................... 53 6.5 Authorization to Make Loans................................................................... 54 6.6 Use of Proceeds............................................................................... 54 6.7 Appointment of Administrative Borrower as Agent for Requesting Loans and Receipts of Loans and Statements................................................................................ 55 6.8 Pro Rata Treatment............................................................................ 55 6.9 Sharing of Payments, Etc...................................................................... 56 6.10 Settlement Procedures......................................................................... 57 6.11 Obligations Several; Independent Nature of Lenders' Rights.................................... 59 SECTION 7. COLLATERAL REPORTING AND COVENANTS............................................................ 59 7.1 Collateral Reporting.......................................................................... 59 7.2 Accounts Covenants............................................................................ 60 7.3 Inventory Covenants........................................................................... 61
(i) 7.4 Equipment Covenants........................................................................... 61 7.5 Power of Attorney............................................................................. 62 7.6 Right to Cure................................................................................. 63 7.7 Access to Premises............................................................................ 63 SECTION 8. REPRESENTATIONS AND WARRANTIES................................................................ 64 8.1 Corporate Existence, Power and Authority...................................................... 64 8.2 Name; State of Organization; Chief Executive Office; Collateral Locations..................... 64 8.3 Financial Statements; No Material Adverse Change.............................................. 65 8.4 Priority of Liens; Title to Properties........................................................ 65 8.5 Tax Returns................................................................................... 65 8.6 Litigation.................................................................................... 65 8.7 Compliance with Other Agreements and Applicable Laws.......................................... 66 8.8 Environmental Compliance...................................................................... 66 8.9 Employee Benefits............................................................................. 67 8.10 Bank Accounts................................................................................. 68 8.11 Intellectual Property......................................................................... 68 8.12 Subsidiaries; Affiliates; Capitalization; Solvency............................................ 68 8.13 Labor Disputes................................................................................ 69 8.14 Restrictions on Subsidiaries.................................................................. 69 8.15 Material Contracts............................................................................ 70 8.16 Payable Practices............................................................................. 70 8.17 Accuracy and Completeness of Information...................................................... 70 8.18 Survival of Warranties; Cumulative............................................................ 70 SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS............................................................ 70 9.1 Maintenance of Existence...................................................................... 70 9.2 New Collateral Locations...................................................................... 71 9.3 Compliance with Laws, Regulations, Etc........................................................ 71 9.4 Payment of Taxes and Claims................................................................... 72 9.5 Insurance..................................................................................... 72 9.6 Financial Statements and Other Information.................................................... 73 9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc....................................... 75 9.8 Encumbrances.................................................................................. 76 9.9 Indebtedness.................................................................................. 78 9.10 Loans, Investments, Etc....................................................................... 85 9.11 Dividends and Redemptions..................................................................... 86 9.12 Transactions with Affiliates.................................................................. 87 9.13 Compliance with ERISA. ...................................................................... 88 9.14 End of Fiscal Years; Fiscal Quarters.......................................................... 88 9.15 Change in Business............................................................................ 88 9.16 Limitation of Restrictions Affecting Subsidiaries............................................. 88 9.17 Net Worth..................................................................................... 89
(ii) 9.18 Minimum EBITDA................................................................................ 89 9.19 Fixed Charge Coverage Ratio................................................................... 90 9.20 Maximum Capital Expenditures.................................................................. 91 9.21 License Agreements............................................................................ 91 9.22 Costs and Expenses............................................................................ 92 9.23 Further Assurances............................................................................ 93 SECTION 10. EVENTS OF DEFAULT AND REMEDIES................................................................ 93 10.1 Events of Default............................................................................. 93 10.2 Remedies...................................................................................... 95 SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW.................................. 99 11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver......................... 99 11.2 Waiver of Notices............................................................................. 100 11.3 Amendments and Waivers........................................................................ 100 11.4 Waiver of Counterclaims....................................................................... 102 11.5 Indemnification............................................................................... 102 SECTION 12. THE AGENT..................................................................................... 103 12.1 Appointment, Powers and Immunities............................................................ 103 12.2 Reliance by Agent............................................................................. 103 12.3 Events of Default............................................................................. 104 12.4 Congress in its Individual Capacity........................................................... 104 12.5 Indemnification............................................................................... 105 12.6 Non-Reliance on Agent and Other Lenders....................................................... 105 12.7 Failure to Act................................................................................ 105 12.8 Additional Loans.............................................................................. 105 12.9 Concerning the Collateral and the Related Financing Agreements................................ 106 12.10 Field Audit, Examination Reports and other Information; Disclaimer by Lenders ................ 106 12.11 Collateral Matters............................................................................ 107 12.12 Agency for Perfection......................................................................... 108 SECTION 13. TERM OF AGREEMENT; MISCELLANEOUS.............................................................. 109 13.1 Term.......................................................................................... 109 13.2 Interpretative Provisions..................................................................... 111 13.3 Notices....................................................................................... 113 13.4 Partial Invalidity............................................................................ 113 13.5 Confidentiality............................................................................... 113 13.6 Successors.................................................................................... 115 13.7 Assignments; Participations................................................................... 115 13.8 Entire Agreement.............................................................................. 117
(iii) SECTION 14. ACKNOWLEDGMENT AND RESTATEMENT................................................................ 118 14.1 Existing Obligations.......................................................................... 118 14.2 Acknowledgment of Security Interests.......................................................... 118 14.3 Existing Agreement............................................................................ 118 14.4 Restatement................................................................................... 119 14.5 Release....................................................................................... 119
(iv) INDEX TO EXHIBITS AND SCHEDULES Exhibit A Form of Assignment and Acceptance Exhibit B Form of Compliance Certificate Schedule 1.52 Existing LPC Term Notes Schedule 1.53 Existing LRG Term Notes Schedule 1.100 Permitted Holders Schedule 1.116 Holders of Remaining Existing Subordinated Note Indebtedness Schedule 1.132 Term Loan Lender Agreements (i) AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT This Amended and Restated Loan and Security Agreement dated December 18, 2003 is entered into by and among Lexington Precision Corporation, a Delaware corporation ("LPC") and Lexington Rubber Group, Inc., a Delaware corporation ("LRG", and together with LPC, each, individually, a "Borrower" and collectively, "Borrowers"), the parties hereto from time to time as lenders, whether by execution of this Agreement or an Assignment and Acceptance (each individually, a "Lender" and collectively, "Lenders"), Congress Financial Corporation , a Delaware corporation, in its capacity as agent for Lenders (in such capacity, "Agent") and The CIT Group/Commercial Financing, Inc., a New York corporation, in its capacity as co-agent for Lenders (in such capacity, "Co-Agent"). W I T N E S S E T H: WHEREAS, Congress Financial Corporation, in its individual capacity ("Congress"), and Borrowers are presently parties to certain financing arrangements pursuant to an Accounts Financing Agreement [Security Agreement], dated January 11, 1990, by and between Congress and LPC and an Accounts Financing Agreement [Security Agreement], dated January 11, 1990, by and between Congress and LRG (collectively, the Existing Accounts Agreements", together with all supplements thereto and all other related financing and security agreements, collectively, the "Existing Financing Agreements"); WHEREAS, Agent, Lenders and Borrowers wish to amend and restate the Existing Financing Agreements pursuant to which Lenders may make loans and provide other financial accommodations to Borrowers; and WHEREAS, each Lender is willing to agree (severally and not jointly) to make such loans and provide such financial accommodations to Borrowers on a pro rata basis according to its Commitment (as defined below) on the terms and conditions set forth herein and Agent is willing to act as agent for Lenders on the terms and conditions set forth herein and in the other Financing Agreements; NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: SECTION 1. DEFINITIONS For purposes of this Agreement, the following terms shall have the respective meanings given to them below: 1.1 "Accounts" shall mean, as to each Borrower, all present and future rights of such Borrower to payment of a monetary obligation, whether or not earned by performance, which is not evidenced by chattel paper or an instrument, (a) for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of, (b) for services rendered or to be rendered, (c) for a secondary obligation incurred or to be incurred, or (d) arising out of the use of a credit or charge card or information contained on or for use with the card. 1.2 "Adjusted Eurodollar Rate" shall mean, with respect to each Interest Period for any Eurodollar Rate Loan, the rate per annum (rounded upwards, if necessary, to the next one-sixteenth (1/16) of one (1%) percent) determined by dividing (a) the Eurodollar Rate for such Interest Period by (b) a percentage equal to: (i) one (1) minus (ii) the Reserve Percentage. For purposes hereof, "Reserve Percentage" shall mean the reserve percentage, expressed as a decimal, prescribed by any United States or foreign banking authority for determining the reserve requirement which is or would be applicable to deposits of United States dollars in a non-United States or an international banking office of Reference Bank used to fund a Eurodollar Rate Loan or any Eurodollar Rate Loan made with the proceeds of such deposit, whether or not the Reference Bank actually holds or has made any such deposits or loans. The Adjusted Eurodollar Rate shall be adjusted on and as of the effective day of any change in the Reserve Percentage. 1.3 "Administrative Borrower" shall mean LPC in its capacity as Administrative Borrower on behalf of itself and the other Borrowers pursuant to Section 6.7 hereof and it successors and assigns in such capacity. 1.4 "Affiliate" shall mean, with respect to a specified Person, any other Person which directly or indirectly, through one or more intermediaries, controls or is controlled by or is under common control with such Person, and without limiting the generality of the foregoing, includes (a) any Person which beneficially owns or holds ten (10%) percent or more of all classes of Voting Stock of such Person, (b) any Person of which such Person beneficially owns or holds ten (10%) percent or more of all classes of Voting Stock and (c) any director or executive officer of such Person. For the purposes of this definition, the term "control" (including with correlative meanings, the terms "controlled by" and "under common control with"), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Stock, by agreement or otherwise. 1.5 "Agent" shall mean Congress Financial Corporation, in its capacity as agent on behalf of Lenders pursuant to the terms hereof and any replacement or successor agent hereunder. 1.6 "Agent Payment Account" shall mean account no. 5000000030279 of Agent at Wachovia Bank, National Association, or such other account of Agent as Agent may from time to time designate to Administrative Borrower as the Agent Payment Account for purposes of this Agreement and the other Financing Agreements. 1.7 "Appraisal Reserve" shall mean the Reserve in the amount equal to $650,000; provided, that, such Appraisal Reserve shall be released within five (5) Business Days following the receipt by Agent of an updated appraisal as to the Equipment, in form, scope and methodology acceptable to Agent and by an appraiser acceptable to Agent and upon which Agent 2 is expressly permitted to rely, in the event that the results of such appraisal reflect that the then outstanding principal amount of the Term Loans do not exceed eighty-five (85%) percent of the net orderly liquidation value of the Equipment that is subject to a valid, perfected first priority lien of Agent. 1.8 "Assignment and Acceptance" shall mean an Assignment and Acceptance substantially in the form of Exhibit A attached hereto (with blanks appropriately completed) delivered to Agent in connection with an assignment of a Lender's interest hereunder in accordance with the provisions of Section 13.7 hereof. 1.9 "Bank One" shall mean Bank One, N.A., a national banking association, and its successors and assigns. 1.10 "Bank One Financing" shall mean the loans by Bank One to Borrowers pursuant to the Bank One Financing Agreements. 1.11 "Bank One Financing Agreements" shall mean the Credit Facility and Security Agreement, dated as of January 31, 1997, by and among Borrowers and Bank One, as amended, together with the promissory notes, guarantees and mortgages delivered in connection 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. 1.12 "Blocked Accounts" shall have the meaning set forth in Section 6.3 hereof. 1.13 "Borrowing Base" shall mean, at any time, as to each Borrower, the amount equal to: (a) the lesser of: (i) the amount equal to: (A) eighty-eight (88%) percent of the Net Amount of the Eligible Domestic Accounts of such Borrower, plus (B) eighty (80%) percent of the Net Amount of the Eligible Foreign Accounts of such Borrower, plus (C) the lesser of the Inventory Loan Limit for such Borrower or the sum of: (1) sixty-five (65%) percent multiplied by the Value of the Eligible Inventory of such Borrower consisting of finished goods, plus (2) sixty-five (65%) percent multiplied by the Value of the Eligible Inventory of such Borrower consisting of raw materials, plus (3) sixty-five (65%) percent multiplied by the Value of the Eligible Inventory of such Borrower consisting of work-in-process, or (ii) the Revolving Loan Limit for such Borrower, minus (b) Reserves attributable to such Borrower. 3 For purposes only of applying the Inventory Loan Limit, Agent may treat the then undrawn amounts of outstanding Letter of Credit Accommodations for the purpose of purchasing Eligible Inventory as Revolving Loans to the extent Agent is in effect basing the issuance of the Letter of Credit Accommodations on the Value of the Eligible Inventory being purchased with such Letter of Credit Accommodations. In determining the actual amounts of such Letter of Credit Accommodations to be so treated for purposes of the sublimit, the outstanding Revolving Loans and Reserves shall be attributed first to any components of the lending formulas set forth above that are not subject to such sublimit, before being attributed to the components of the lending formulas subject to such sublimit. The amounts of Eligible Inventory of any Borrower shall, at Agent's option, be determined based on the lesser of the amount of Inventory set forth in the general ledger of such Borrower or the perpetual inventory record maintained by such Borrower. 1.14 "Business Day" shall mean any day other than a Saturday, Sunday, or other day on which commercial banks are authorized or required to close under the laws of the State of New York, or the State of North Carolina, and a day on which Agent is open for the transaction of business, except that if a determination of a Business Day shall relate to any Eurodollar Rate Loans, the term Business Day shall also exclude any day on which banks are closed for dealings in dollar deposits in the London interbank market or other applicable Eurodollar Rate market. 1.15 "Capital Expenditures" shall mean all expenditures for any fixed or capital assets (including, but not limited to, tooling) or improvements, or for replacements, substitutions or additions thereto, which have a useful life of more than one (1) year, including, but not limited to, the direct or indirect acquisition of such assets by way of offset items or otherwise and shall include the principal amount of Capitalized Lease payments. 1.16 "Capitalized Leases" shall mean, as applied to any Person, any lease of (or any agreement conveying the right to use) any property (whether real, personal or mixed) by such Person as lessee which, in accordance with GAAP, is required to be reflected as a liability on the balance sheet of such Person. 1.17 "Capital Stock" shall mean, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated) of such Person's capital stock or partnership, limited liability company or other equity interests at any time outstanding, and any and all rights, warrants or options exchangeable for or convertible into such capital stock or other interests (but excluding any debt security that is exchangeable for or convertible into such capital stock). 1.18 "Cash Equivalents" shall mean, at any time, (a) any evidence of Indebtedness with a maturity date of ninety (90) days or less issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof; provided, that, the full faith and credit of the United States of America is pledged in support thereof; (b) certificates of deposit or bankers' acceptances with a maturity of ninety (90) days or less of any financial institution that is a member of the Federal Reserve System having combined capital, surplus and undivided profits of not less than $250,000,000; (c) commercial paper (including variable rate demand notes) with a maturity of ninety (90) days or less issued by a corporation (except an 4 Affiliate of any Borrower) organized under the laws of any State of the United States of America or the District of Columbia and rated at least A-1 by Standard & Poor's Ratings Service, a division of The McGraw-Hill Companies, Inc. or at least P-1 by Moody's Investors Service, Inc.; (d) repurchase obligations with a term of not more than thirty (30) days for underlying securities of the types described in clause (a) above entered into with any financial institution having combined capital, surplus and undivided profits of not less than $250,000,000; (e) repurchase agreements and reverse repurchase agreements relating to marketable direct obligations issued or unconditionally guaranteed by the United States of America or issued by any governmental agency thereof and backed by the full faith and credit of the United States of America, in each case maturing within ninety (90) days or less from the date of acquisition; provided, that, the terms of such agreements comply with the guidelines set forth in the Federal Financial Agreements of Depository Institutions with Securities Dealers and Others, as adopted by the Comptroller of the Currency on October 31, 1985; and (f) investments in money market funds and mutual funds which invest substantially all of their assets in securities of the types described in clauses (a) through (e) above. 1.19 "Change of Control" shall mean (a) the transfer (in one transaction or a series of transactions) of all or substantially all of the assets of any Borrower to any Person or group (as such term is used in Section 13(d)(3) of the Exchange Act), other than as permitted in Section 9.7 hereof; (b) the liquidation or dissolution of any Borrower or the adoption of a plan by the stockholders of any Borrower relating to the dissolution or liquidation of such Borrower, other than as permitted in Section 9.7 hereof; (c) the acquisition by any Person or group (as such term is used in Section 13(d)(3) of the Exchange Act), except for one or more Permitted Holders, of beneficial ownership, directly or indirectly, of a majority of the voting power of the total outstanding Voting Stock of any Borrower or the Board of Directors of any Borrower; (d) during any period of two (2) consecutive years, individuals who at the beginning of such period constituted the Board of Directors of any Borrower (together with any new directors who have been appointed by any Permitted Holder, or whose nomination for election by the stockholders of such Borrower, as the case may be, was approved by a vote of at least sixty-six and two-thirds (66 2/3%) percent of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors of any Borrower then still in office; (e) the failure of the LPC to own directly or indirectly one hundred (100%) percent of the voting power of the total outstanding Voting Stock of LRG; or (f) the failure of Permitted Holders to own directly or indirectly forty (40%) percent of the voting power of the total outstanding Voting Stock of LPC. 1.20 "CIT" shall mean The CIT Group/Equipment Financing, Inc., a New York corporation, and its successors and assigns. 1.21 "CIT Financing" shall mean the loans by CIT to Borrowers pursuant to the CIT Financing Agreements. 1.22 "CIT Financing Agreements" shall mean the Loan and Security Agreement, dated as of March 19, 1997, Rider A to the Loan and Security Agreement and the Supplement and Exhibit 5 A thereto, each dated and/or delivered as of March 19, 1997, each between LPC and CIT, together with all notes, guarantees and other documents, instruments and agreements executed pursuant thereto or in connection therewith and all supplements executed and delivered pursuant thereto, as the same now exist or may hereafter be amended, modified, supplemented, renewed, restated or replaced. 1.23 "Code" shall mean the Internal Revenue Code of 1986, as the same now exists or may from time to time hereafter be amended, modified, recodified or supplemented, together with all rules, regulations and interpretations thereunder or related thereto. 1.24 "Collateral" shall have the meaning set forth in Section 5.1 hereof. 1.25 "Collateral Access Agreement" shall mean an agreement in writing, in form and substance reasonably satisfactory to Agent, from any lessor of premises to any Borrower, or any other person to whom any Collateral is consigned or who has custody, control or possession of any such Collateral or is otherwise the owner or operator of any premises on which any of such Collateral is located, pursuant to which such lessor, consignee or other person, inter alia, acknowledges the first priority security interest of Agent in such Collateral, agrees to waive any and all claims such lessor, consignee or other person may, at any time, have against such Collateral, whether for processing, storage or otherwise, and agrees to permit Agent access to, and the right to remain on, the premises of such lessor, consignee or other person so as to exercise Agent's rights and remedies and otherwise deal with such Collateral and in the case of any consignee or other person who at any time has custody, control or possession of any Collateral, acknowledges that it holds and will hold possession of the Collateral for the benefit of Agent and Lenders and agrees to follow all instructions of Agent with respect thereto. 1.26 "Commitment" shall mean, at any time, as to each Lender, the principal amount set forth below such Lender's signature on the signatures pages hereto designated as the Commitment or on Schedule 1 to the Assignment and Acceptance Agreement pursuant to which such Lender became a Lender hereunder in accordance with the provisions of Section 13.7 hereof, as the same may be adjusted from time to time in accordance with the terms hereof; sometimes being collectively referred to herein as "Commitments". 1.27 "Congress" shall mean Congress Financial Corporation, a Delaware corporation, in its individual capacity, and its successors and assigns. 1.28 "Consolidated Net Income" shall mean, with respect to any Person for any period, the aggregate of the net income (loss) of such Person and its Subsidiaries, on a consolidated basis, for such period (excluding to the extent included therein any extraordinary or non-recurring gains and extraordinary non-cash charges to property, plant and equipment or goodwill) after deducting all charges which should be deducted before arriving at the net income (loss) for such period and after deducting the Provision for Taxes for such period, all as determined in accordance with GAAP; provided, that, (a) the net income of any Person that is not a wholly-owned Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid or payable to such 6 Person or a wholly-owned Subsidiary of such Person; (b) except to the extent included pursuant to the foregoing clause, the net income of any Person accrued prior to the date it becomes a wholly-owned Subsidiary of such Person or is merged into or consolidated with such Person or any of its wholly-owned Subsidiaries or the date that Person's assets are acquired by such Person or by any of its wholly-owned Subsidiaries shall be excluded; (c) the effect of any change in accounting principles adopted by such Person or its Subsidiaries after the date hereof shall be excluded; (d) net income shall exclude interest accrued, but not paid on indebtedness owing to a Subsidiary or parent corporation of such Person, which is subordinated in right of payment to the payment in full of the Obligations, on terms and conditions acceptable to Agent; and (e) the net income (if positive) of any wholly-owned Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such wholly-owned Subsidiary to such Person or to any other wholly-owned Subsidiary of such Person is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such wholly-owned Subsidiary shall be excluded. For the purposes of this definition, net income excludes any gain and any non-cash loss (but not any cash loss) together with any related Provision for Taxes for such gain and non-cash loss (but not any cash loss) realized upon the sale or other disposition of any assets that are not sold in the ordinary course of business (including, without limitation, dispositions pursuant to sale and leaseback transactions) or of any Capital Stock of such Person or a Subsidiary of such Person and any net income or loss realized as a result of changes in accounting principles or the application thereof to such Person. 1.29 "Credit Facility" shall mean the Loans and Letter of Credit Accommodations provided to or for the benefit of any Borrower pursuant to Sections 2.1 and 2.2 hereof. 1.30 "Credit Facility Revolving Loan Limit" shall mean $23,500,000. 1.31 "Default" shall mean an act, condition or event which, with notice or passage of time or both, would constitute an Event of Default. 1.32 "Defaulting Lender" shall have the meaning set forth in Section 6.10 hereof. 1.33 "Deposit Account Control Agreement" shall mean an agreement in writing, in form and substance reasonably satisfactory to Agent, by and among Agent, the Borrower with a deposit account at any bank and the bank at which such deposit account is at any time maintained, which agreement provides that such bank will comply with instructions originated by Agent directing disposition of the funds in the deposit account without further consent by such Borrower and such other terms and conditions as Agent may reasonably require, including as to any such agreement with respect to any Blocked Account, providing that all items received or deposited in the Blocked Accounts are the property of Agent, that the bank has no lien upon, or right to setoff against, the Blocked Accounts, the items received for deposit therein, or the funds from time to time on deposit therein and that the bank will wire, or otherwise transfer, in immediately available funds, on a daily basis to the Agent Payment Account all funds received or deposited into the Blocked Accounts. 7 1.34 "EBITDA" shall mean, as to any Person, with respect to any period, an amount equal to: (a) the Consolidated Net Income of such Person for such period, plus (b) depreciation and amortization for such period (to the extent deducted in the computation of Consolidated Net Income of such Person), all in accordance with GAAP, plus (c) Interest Expense for such period (to the extent deducted in the computation of Consolidated Net Income of such Person), plus (d) the Provision for Taxes for such period (to the extent deducted in the computation of Consolidated Net Income of such Person); provided, that, for purposes of this calculation, EBITDA shall exclude (i) any write-down or write-off of assets recorded in accordance with the requirements of Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets", and Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", and any reduction in net income resulting from the adoption of Statement of Financial Accounting Standards No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity" and (ii) any other items of income or expense that are required by GAAP to be classified as non-operating amounts in the Borrowers' Statement of Income. 1.35 "Eligible Accounts" shall mean Accounts created by a Borrower which are and continue to be acceptable to Agent based on the criteria set forth below. In general, Accounts shall be Eligible Accounts if: (a) such Accounts arise from the actual and bona fide sale and delivery of goods by such Borrower or rendition of services by such Borrower in the ordinary course of its business which transactions are completed in accordance with the terms and provisions contained in any documents related thereto; (b) such Accounts are not unpaid after the earlier of (i) ninety (90) days after the date of the original invoice for them or (ii) sixty (60) days after the original due date for them; (c) such Accounts comply with the terms and conditions contained in Section 7.2(b) of this Agreement; (d) such Accounts do not arise from sales on consignment, guaranteed sale, sale and return, sale on approval, or other terms under which payment by the account debtor may be conditional or contingent, until such payment is no longer conditional or contingent in Agent's determination, and subject to the satisfaction of the other criteria set forth in this definition; (e) the chief executive office of the account debtor with respect to such Accounts is located in the United States of America or Canada (provided, that, at any time promptly upon Agent's request, such Borrower shall execute and deliver, or cause to be executed and delivered, such other agreements, documents and instruments as may be required by Agent to perfect the security interests of Agent in those Accounts of an account debtor with its chief executive office or principal place of business in Canada in accordance with the applicable laws of the Province of Canada in which such chief executive office or principal place of business is located and take or cause to be taken such other and further actions as Agent may request to enable Agent as secured party with respect thereto to collect such Accounts under the applicable Federal or 8 Provincial laws of Canada) or, at Agent's option, if the chief executive office and principal place of business of the account debtor with respect to such Accounts is located other than in the United States of America or Canada, then if either: (i) the account debtor has delivered to such Borrower an irrevocable letter of credit issued or confirmed by a bank satisfactory to Agent and payable only in the United States of America and in U.S. dollars, sufficient to cover such Account, in form and substance satisfactory to Agent and if required by Agent, the original of such letter of credit has been delivered to Agent or Agent's agent and the issuer thereof, and such Borrower has complied with the terms of Section 5.2(f) hereof with respect to the assignment of the proceeds of such letter of credit to Agent or naming Agent as transferee beneficiary thereunder, as Agent may specify, or (ii) such Account is subject to credit insurance payable to Agent issued by an insurer and on terms and in an amount acceptable to Agent, or (iii) such Account is otherwise acceptable in all respects to Agent (subject to such lending formula with respect thereto as Agent may determine); (f) such Accounts do not consist of progress billings (such that the obligation of the account debtors with respect to such Accounts is conditioned upon such Borrower's satisfactory completion of any further performance under the agreement giving rise thereto), bill and hold invoices or retainage invoices, except, as to bill and hold invoices, if Agent shall have received an agreement in writing from the account debtor, in form and substance reasonably satisfactory to Agent, confirming the unconditional obligation of the account debtor to take the goods related thereto and pay such invoice; (g) the account debtor with respect to such Accounts has not asserted a counterclaim, defense or dispute and is not owed any amounts that may give rise to any right of setoff or recoupment against such Accounts (but the portion of the Accounts of such account debtor in excess of the amount at any time and from time to time owed by such Borrower to such account debtor or claimed owed by such account debtor shall, subject to the satisfaction of the other criteria of this definition, be deemed Eligible Accounts), (h) there are no facts, events or occurrences which would impair the validity, enforceability or collectability of such Accounts or reduce the amount payable or delay payment (beyond ninety (90) days after the date of the original invoice permitted under subsection (b) above) thereunder; (i) such Accounts are subject to the first priority, valid and perfected security interest of Agent and any goods giving rise thereto are not, and were not at the time of the sale thereof, subject to any liens except those permitted in this Agreement that are subject to an intercreditor agreement in form and substance satisfactory to Agent between the holder of such security interest or lien and Agent; (j) neither the account debtor nor any officer or employee of the account debtor with respect to such Accounts is an officer, employee, agent or other Affiliate of any Borrower; (k) the account debtors with respect to such Accounts are not any foreign government, the United States of America, any State, political subdivision, department, agency 9 or instrumentality thereof, unless, if the account debtor is the United States of America, any State, political subdivision, department, agency or instrumentality thereof, upon Agent's request, the Federal Assignment of Claims Act of 1940, as amended or any similar State or local law, if applicable, has been complied with in a manner satisfactory to Agent; (l) there are no proceedings or actions which are threatened or pending against the account debtors with respect to such Accounts which might result in any material adverse change in any such account debtor's financial condition (including, without limitation, any bankruptcy, dissolution, liquidation, reorganization or similar proceeding); (m) the aggregate amount of such Accounts owing by a single account debtor do not constitute more than thirty (30%) percent of the aggregate amount of all otherwise Eligible Accounts (but the portion of the Accounts not in excess of the applicable percentages may be deemed Eligible Accounts); (n) such Accounts are not owed by an account debtor who has Accounts unpaid more than ninety (90) days after the original invoice date for them which constitute more than fifty (50%) percent of the total Accounts of such account debtor; (o) the account debtor is not located in a state requiring the filing of a Notice of Business Activities Report or similar report in order to permit such Borrower to seek judicial enforcement in such State of payment of such Account, unless such Borrower has qualified to do business in such state or has filed a Notice of Business Activities Report or equivalent report for the then current year or such failure to file and inability to seek judicial enforcement is capable of being remedied without any material delay or material cost; (p) such Accounts are owed by account debtors whose total indebtedness to such Borrower does not exceed the credit limit with respect to such account debtors as determined by such Borrower from time to time, to the extent such credit limit as to any account debtor is established consistent with the current practices of such Borrower as of the date hereof and such credit limit is acceptable to Agent (but the portion of the Accounts not in excess of such credit limit shall, subject to the satisfaction of the other criteria of this definition, be deemed Eligible Accounts); and (q) such Accounts are owed by account debtors deemed creditworthy at all times by Agent. The criteria for Eligible Accounts set forth above may only be changed and any new criteria for Eligible Accounts may only be established by Agent in good faith based on either: (i) an event, condition or other circumstance arising after the date hereof, or (ii) an event, condition or other circumstance existing on the date hereof to the extent Agent has no written notice thereof from a Borrower prior to the date hereof, in either case, if such event, condition or other circumstance under either clause (i) or clause (ii) adversely affects or could reasonably be expected to adversely affect the Accounts in the good faith determination of Agent. Any Accounts which are not Eligible Accounts shall nevertheless be part of the Collateral. 10 1.36 "Eligible Inventory" shall mean, as to each Borrower, Inventory of such Borrower consisting of finished goods held for resale in the ordinary course of the business of such Borrower, work-in-process and raw materials for the production of such finished goods, in each case which are acceptable to Agent based on the criteria set forth below. In general, Eligible Inventory shall not include (a) scrap-metal; (b) components which are not part of finished goods; (c) spare parts for equipment; (d) packaging and shipping materials; (e) supplies used or consumed in such Borrower's business; (f) Inventory at premises other than premises owned or leased and controlled by any Borrower or, in the case of premises owned or operated by a third person, as to which Congress has not received a Collateral Access Agreement; provided, that, (i) as to locations which are leased by a Borrower, if Agent shall not have received a Collateral Access Agreement from the owner or lessor with respect to such location, duly authorized, executed and delivered by such owner or lessor (or Agent shall determine to accept a Collateral Access Agreement that does not include all required provisions or provisions in the form otherwise required by Agent), Agent may, at its option, include the Inventory held at such location as Eligible Inventory subject to the satisfaction of other terms and conditions set forth in this definition and establish such Reserves in respect of amounts at any time due or to become due to the owner and lessor thereof as Agent shall determine, and (ii) as to locations owned and operated by a third person, if Agent shall not have received a Collateral Access Agreement from the owner and operator with respect to such location, duly authorized, executed and delivered by such owner and operator (or Agent shall determine to accept a Collateral Access Agreement that does not include all required provisions or provisions in the form otherwise required by Agent), Agent may, at its option, establish such Reserves in respect of amounts at any time due or to become due to the owner and operator thereof as Agent shall determine, provided that, in addition, if required by Agent, in order for such Inventory at locations owned and operated by a third person to be Eligible Inventory, Agent shall have received: (A) UCC financing statements between the owner and operator, as consignee or bailee and such Borrower, as consignor or bailor, in form and substance satisfactory to Agent, which are duly assigned to Agent and (B) a written notice to any lender to the owner and operator of the first priority security interest in such Inventory of Agent; (g) Inventory subject to a security interest or lien in favor of any Person other than Agent except those permitted in this Agreement that are subject to an intercreditor agreement in form and substance satisfactory to Agent between the holder of such security interest or lien and Agent; (h) bill and hold goods; (i) unserviceable, obsolete or slow moving Inventory; (j) Inventory which is not subject to the first priority, valid and perfected security interest of Agent; (k) returned, damaged and/or defective Inventory; (l) Inventory purchased or sold on consignment and (m) Inventory located outside the United States of America. The criteria for Eligible Inventory set forth above may only be changed and any new criteria for Eligible Inventory may only be established by Agent in good faith based on either: (i) an event, condition or other circumstance arising after the date hereof, or (ii) an event, condition or other circumstance existing on the date hereof to the extent Agent has no written notice thereof from a Borrower prior to the date hereof, in either case, if such event, condition or other circumstance under either clause (i) or (ii) adversely affects or could reasonably be expected to adversely affect the Inventory in the good faith determination of Agent. Any Inventory which is not Eligible Inventory shall nevertheless be part of the Collateral. 11 1.37 "Eligible Transferee" shall mean (a) any Lender; (b) the parent company of any Lender and/or any Affiliate of such Lender which is at least fifty (50%) percent owned by such Lender or its parent company; (c) any person (whether a corporation, partnership, trust or otherwise) that is approved by Agent and (i) is engaged in the business of making, purchasing, holding or otherwise investing in bank loans and similar extensions of credit in the ordinary course of its business and is administered or managed by a Lender or (ii) with respect to any Lender that is a fund which invests in bank loans and similar extensions of credit, any other fund that invests in bank loans and similar extensions of credit and is managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor; and (d) any other commercial bank, financial institution or "accredited investor" (as defined in Regulation D under the Securities Act of 1933) approved by Agent, provided, that, (i) neither any Borrower nor any Affiliate of any Borrower shall qualify as an Eligible Transferee and (ii) no Person to whom any Indebtedness which is in any way subordinated in right of payment to any other Indebtedness of any Borrower shall qualify as an Eligible Transferee, except as Agent may otherwise specifically agree. 1.38 "Environmental Laws" shall mean all foreign, Federal, State and local laws (including common law), legislation, rules, codes, licenses, permits (including any conditions imposed therein), authorizations, judicial or administrative decisions, injunctions or agreements between any Borrower and any Governmental Authority, (a) relating to pollution and the protection, preservation or restoration of the environment (including air, water vapor, surface water, ground water, drinking water, drinking water supply, surface land, subsurface land, plant and animal life or any other natural resource), or to human health or safety, (b) relating to the exposure to, or the use, storage, recycling, treatment, generation, manufacture, processing, distribution, transportation, handling, labeling, production, release or disposal, or threatened release, of Hazardous Materials, or (c) relating to all laws with regard to recordkeeping, notification, disclosure and reporting requirements respecting Hazardous Materials. The term "Environmental Laws" includes (i) the Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Federal Superfund Amendments and Reauthorization Act, the Federal Water Pollution Control Act of 1972, the Federal Clean Water Act, the Federal Clean Air Act, the Federal Resource Conservation and Recovery Act of 1976 (including the Hazardous and Solid Waste Amendments thereto), the Federal Solid Waste Disposal Act and the Federal Toxic Substances Control Act, the Federal Insecticide, Fungicide and Rodenticide Act, and the Federal Safe Drinking Water Act of 1974, (ii) applicable state counterparts to such laws and (iii) any common law or equitable doctrine that may impose liability or obligations for injuries or damages due to, or threatened as a result of, the presence of or exposure to any Hazardous Materials. 1.39 "Equipment" shall mean, as to each Borrower, all of such Borrower's now owned and hereafter acquired equipment, wherever located, including machinery, data processing and computer equipment (whether owned or licensed and including embedded software), vehicles, tools, furniture, fixtures, all attachments, accessions and property now or hereafter affixed thereto or used in connection therewith, and substitutions and replacements therefor, wherever located. 12 1.40 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, together with all rules, regulations and interpretations thereunder or related thereto. 1.41 "ERISA Affiliate" shall mean any person required to be aggregated with any Borrower, or any of its respective Subsidiaries under Sections 414(b), 414(c), 414(m) or 414(o) of the Code. 1.42 "ERISA Event" shall mean (a) any "reportable event", as defined in Section 4043(c) of ERISA or the regulations issued thereunder, with respect to a Plan for which the reporting requirements have not been waived in writing; (b) the adoption of any amendment to a Plan that would require the provision of security pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA; (c) the existence with respect to any Plan of an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (d) the filing pursuant to Section 412 of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (e) the occurrence of a "prohibited transaction" with respect to which any Borrower or any of its respective Subsidiaries is a "disqualified person" (within the meaning of Section 4975 of the Code) or with respect to which any Borrower or any of its respective Subsidiaries could otherwise be liable; (f) a complete or partial withdrawal by any Borrower or any ERISA Affiliate from a Multiemployer Plan or a cessation of operations which is treated as such a withdrawal or notification that a Multiemployer Plan is in reorganization; (g) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the Pension Benefit Guaranty Corporation to terminate a Plan; (h) an event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, (i) the imposition of any liability under Title IV of ERISA, other than Pension Benefit Guaranty Corporation premiums due but not delinquent under Section 4007 of ERISA, upon any Borrower or any ERISA Affiliate in excess of $1,000,000 and (j) any other event of condition with respect to a Plan, including any Plan subject to Title IV of ERISA maintained, or contributed to, by any ERISA Affiliate, that could reasonably be expected to result in liability of any Borrower in excess of $1,000,000. 1.43 "Eurodollar Rate" shall mean with respect to the Interest Period for a Eurodollar Rate Loan, the interest rate per annum equal to the arithmetic average of the rates of interest per annum (rounded upwards, if necessary, to the next one-sixteenth (1/16) of one (1%) percent) at which Reference Bank is offered deposits of United States dollars in the London interbank market (or other Eurodollar Rate market selected by a Borrower or Administrative Borrower on behalf of such Borrower and approved by Agent) on or about 9:00 a.m. (New York time) two (2) Business Days prior to the commencement of such Interest Period in amounts substantially equal to the principal amount of the Eurodollar Rate Loans requested by and available to such Borrower in accordance with this Agreement, with a maturity of comparable duration to the Interest Period selected by a Borrower or Administrative Borrower. 1.44 "Eurodollar Rate Loans" shall mean, individually and collectively, Eurodollar Rate Revolving Loans and Eurodollar Rate Term Loans. 13 1.45 "Eurodollar Rate Revolving Loans" shall mean any portion of the Revolving Loans on which interest is payable based on the Adjusted Eurodollar Rate in accordance with the terms hereof. 1.46 "Eurodollar Rate Term Loans" shall mean any portion of the Term Loans on which interest is payable based on the Adjusted Eurodollar Rate in accordance with the terms hereof. 1.47 "Event of Default" shall mean the occurrence or existence of any event or condition described in Section 10.1 hereof. 1.48 "Excess Availability" shall mean, as to each Borrower, the amount, as determined by Agent, calculated at any date, equal to: (a) the lesser of: (i) the Borrowing Base of such Borrower and (ii) the Revolving Loan Limit of such Borrower (in each case under (i) or (ii) after giving effect to any Reserves other than Reserves in respect of Letter of Credit Accommodations), minus (b) the sum of: (i) the amount of all then outstanding and unpaid Obligations of such Borrower (but not including, without duplication, for this purpose Obligations of such Borrower arising pursuant to any guarantees in favor of Agent and Lenders of the Obligations of the other Borrowers or the then outstanding aggregate principal amount of the Term Loans or any outstanding Letter of Credit Accommodations), plus (ii) the amount of all Reserves then established in respect of Letter of Credit Accommodations, plus (iii) the aggregate amount of all then outstanding and unpaid trade payables and other obligations of such Borrower which are outstanding more than sixty (60) days past due as of such time (other than trade payables or other obligations being contested or disputed by such Borrower in good faith), plus (iv) without duplication, the amount of checks issued by such Borrower to pay trade payables and other obligations which are more than sixty (60) days past due as of such time (other than trade payables or other obligations being contested or disputed by such Borrower in good faith), but not yet sent. 1.49 "Exchange Act" shall mean the Securities Exchange Act of 1934, together with all rules, regulations and interpretations thereunder or related thereto. 1.50 "Exchange Agreement" shall mean the Exchange Agreement, dated as of December 18, 2003, by and among LPC, Warren Delano and Michael A. Lubin, as the same now exists or may hereafter be amended, modified, supplemented, renewed, restated or replaced. 1.51 "Existing Financing Agreements" shall have the meaning set forth in the Recitals hereto, including, without limitation, the Existing Term Notes. 1.52 "Existing LPC Term Notes" shall mean the promissory notes made by LPC payable to Congress listed on Schedule 1.52 hereto. 1.53 "Existing LRG Term Notes" shall mean the promissory notes made by LRG payable to Congress listed on Schedule 1.53 hereto. 14 1.54 "Existing Junior Subordinated Notes" shall mean, collectively, the 14% Junior Subordinated Notes due May 1, 2000 issued by LPC in the current outstanding principal amount of $346,667 and the Junior Subordinated Convertible Increasing Rate Notes due May 1, 2000 issued by LPC, the principal amount of which has been converted into Capital Stock, as the same have been amended and now exist. 1.55 "Existing Senior Subordinated Notes" shall mean, collectively, the 12 3/4% Senior Subordinated Notes due February 1, 2000 issued by LPC in the current outstanding principal amount of $27,412,125, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced. 1.56 "Existing Term Notes" shall mean, collectively, the Existing LPC Term Notes and the Existing LRG Term Notes. 1.57 "Extraordinary Receipts" shall mean any cash received by a Borrower or any of its Subsidiaries not in the ordinary course of business from the following, (a) proceeds of insurance in respect of the Collateral, (b) condemnation awards (and payments in lieu thereof) in respect of the Collateral, (c) indemnity payments, and (d) after the occurrence and during the continuance of a Default or an Event of Default, (i) foreign, United States, state or local tax refunds, (ii) pension plan reversions and (iii) judgments, proceeds of settlements or other consideration of any kind in connection with any cause of action in respect of the Collateral. 1.58 "Fee Letter" shall mean the letter agreement, dated of even date herewith, by and between Borrowers and Agent, setting forth certain fees payable by Borrowers to Agent for the benefit of itself and Lenders, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced. 1.59 "Financing Agreements" shall mean, collectively, this Agreement and all notes, guarantees, security agreements, deposit account control agreements, investment property control agreements, intercreditor agreements and all other agreements, documents and instruments now or at any time hereafter executed and delivered by any Borrower or Obligor in connection this Agreement. 1.60 "Fixed Charge Coverage Ratio" shall mean, as to any applicable period, with respect to Borrowers and their Subsidiaries, on a consolidated basis, the ratio of (a) EBITDA for such period less Capital Expenditures for such period that were not financed within such period to (b) Fixed Charges of Borrowers and their Subsidiaries for such period. 1.61 "Fixed Charges" shall mean, as to any Person and its Subsidiaries with respect to any period, the sum of, without duplication, (a) all cash Interest Expense, provided that any annual fees paid to the Term Loan Lenders or Term Loan Agent will be considered cash Interest Expense when such amounts are recognized as an expense in the Borrowers' Statement of Income, plus (b) all regularly scheduled (as determined at the beginning of the respective period) principal payments of Indebtedness for borrowed money (including, without limitation, all regularly scheduled payments of principal in respect of the Term Loans) and Indebtedness with 15 respect to Capitalized Leases (and without duplicating amounts in item (a) of this definition, the interest component with respect to Indebtedness under Capitalized Leases), plus (c) all cash income taxes other than cash income taxes related to income that is required by GAAP to be classified as non-operating amounts in the Borrowers' Statement of Income, plus (d) all cash dividends paid on preferred stock to the extent not included in item (a) of this definition, but excluding any such cash dividends that were scheduled to be paid prior to December 31, 2003. 1.62 "GAAP" shall mean generally accepted accounting principles in the United States of America as in effect from time to time as set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and the statements and pronouncements of the Financial Accounting Standards Board which are applicable to the circumstances as of the date of determination consistently applied, except that, for purposes of Sections 9.17 and 9.18 hereof, GAAP shall be determined on the basis of such principles in effect on the date hereof and consistent with those used in the preparation of the most recent audited financial statements delivered to Agent prior to the date hereof. 1.63 "Governmental Authority" shall mean any nation or government, any state, province, or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. 1.64 "Hazardous Materials" shall mean any hazardous, toxic or dangerous substances, materials and wastes, including hydrocarbons (including naturally occurring or man-made petroleum and hydrocarbons), flammable explosives, asbestos, urea formaldehyde insulation, radioactive materials, biological substances, polychlorinated biphenyls, pesticides, herbicides and any other kind and/or type of pollutants or contaminants (including materials which include hazardous constituents), sewage, sludge, industrial slag, solvents and/or any other similar substances, materials, or wastes and including any other substances, materials or wastes that are or become regulated under any Environmental Law (including any that are or become classified as hazardous or toxic under any Environmental Law). 1.65 "Indebtedness" shall mean, with respect to any Person, any liability, whether or not contingent, (a) in respect of borrowed money (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof) or evidenced by bonds, notes, debentures or similar instruments; (b) representing the balance deferred and unpaid of the purchase price of any property or services (except any such balance that constitutes an account payable to a trade creditor (whether or not an Affiliate) created, incurred, assumed or guaranteed by such Person in the ordinary course of business of such Person in connection with obtaining goods, materials or services that is not overdue by more than ninety (90) days, unless the trade payable is being contested in good faith); (c) all obligations as lessee under leases which have been, or should be in accordance with GAAP, recorded as Capitalized Leases; (d) any contractual obligation, contingent or otherwise, of such Person to pay or be liable for the payment of any indebtedness described in this definition of another Person, including, without limitation, any such indebtedness directly or indirectly guaranteed, or any agreement to purchase, repurchase, or otherwise acquire such indebtedness, obligation or liability or any security therefor, or to provide 16 funds for the payment or discharge thereof, or to maintain solvency, assets, level of income, or other financial condition; (e) all obligations with respect to redeemable stock and redemption or repurchase obligations under any Capital Stock or other equity securities issued by such Person; (f) all reimbursement obligations and other liabilities of such Person with respect to surety bonds (whether bid, performance or otherwise), letters of credit, banker's acceptances, drafts or similar documents or instruments issued for such Person's account; (g) all indebtedness of such Person in respect of indebtedness of another Person for borrowed money or indebtedness of another Person otherwise described in this definition which is secured by any consensual lien, security interest, collateral assignment, conditional sale, mortgage, deed of trust, or other encumbrance on any asset of such Person, whether or not such obligations, liabilities or indebtedness are assumed by or are a personal liability of such Person, all as of such time; (h) all obligations, liabilities and indebtedness of such Person (marked to market) arising under swap agreements, cap agreements and collar agreements and other agreements or arrangements designed to protect such Person against fluctuations in interest rates or currency or commodity values; (i) all obligations owed by such Person under License Agreements with respect to non-refundable, advance or minimum guaranteed royalty payments; and (j) the principal and interest portions of all rental obligations of such Person under any synthetic lease or similar off-balance sheet financing where such transaction is considered to be borrowed money for tax purposes but is classified as an operating lease in accordance with GAAP. For purposes of calculating Net Worth, EBITDA and the Fixed Charge Coverage Ratio pursuant to Sections 9.17, 9.18 and 9.19 hereof, the Nomura Debt shall not constitute Indebtedness and the principal and interest in respect of the Nomura Debt shall not be included in making any such calculations. 1.66 "Information Certificate" shall mean the Information Certificate dated of even date herewith of Borrowers containing information with respect to Borrowers and their respective businesses and assets executed by Borrowers and delivered to Agent in connection with the preparation of this Agreement and the other Financing Agreements and the financing arrangements provided for herein. 1.67 "Insurance Premium Collateral" shall mean, collectively, (a) any insurance policies of Borrowers for which an Insurance Premium Finance Party has entered into arrangements to allow Borrowers to pay all or a portion of the applicable insurance premiums on such insurance policies in installments rather than in one lump sum annual payment, and (b) any loss proceeds paid or payable to a Borrower pursuant to the insurance policies for which such Insurance Premium Finance Party has entered into arrangements to allow Borrowers to pay all or a portion of the applicable insurance premiums on such insurance policies in installments rather than in one lump sum annual payment (to the extent of the amount owed to such Insurance Premium Finance Party), provided, that, (i) in no event shall the Insurance Premium Collateral include any amounts deposited in or received in the lockbox or blocked account established by Borrowers in connection with the Financing Agreements or otherwise with respect to Borrowers' financing arrangements with Agent and Lenders for the handling of collections of Accounts or other assets and (ii) in no event shall the Insurance Premium Collateral of any Insurance Premium Finance Party secure any obligation to any other Insurance Premium Finance Party. 1.68 "Insurance Premium Finance Party" shall mean, in connection with insurance 17 policies maintained by Borrowers, an insurance company or a third party that enters into arrangements to allow Borrowers to pay all or a portion of the applicable insurance premiums on such insurance policies in installments rather than in one lump sum annual payment 1.69 "Intellectual Property" shall mean, as to each Borrower, such Borrower's now owned and hereafter arising or acquired: patents, patent rights, patent applications, copyrights, works which are the subject matter of copyrights, copyright registrations, trademarks, trade names, trade styles, trademark and service mark applications, and licenses and rights to use any of the foregoing; all extensions, renewals, reissues, divisions, continuations, and continuations-in- part of any of the foregoing; all rights to sue for past, present and future infringement of any of the foregoing; inventions, trade secrets, formulae, processes, compounds, drawings, designs, blueprints, surveys, reports, manuals, and operating standards; goodwill (including any goodwill associated with any trademark or the license of any trademark); customer and other lists in whatever form maintained; trade secret rights, copyright rights, rights in works of authorship, domain names and domain name registrations; software and contract rights relating to computer software programs, in whatever form created or maintained. 1.70 "Intercreditor Agreement" shall mean the Intercreditor Agreement, dated of even date herewith, by and among Agent (on behalf of the Lenders) and Term Loan Agent, as acknowledged and agreed to by Borrowers, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced. 1.71 "Interest Expense" shall mean, for any period, as to any Person, as determined in accordance with GAAP, the total interest expense of such Person, whether paid or accrued during such period (including the interest component of Capitalized Leases for such period), including, without limitation, discounts in connection with the sale of any Accounts, but excluding interest paid in property other than cash and any other interest expense not payable in cash. 1.72 "Interest Period" shall mean for any Eurodollar Rate Loan, a period of approximately one (1), two (2), or three (3) months duration as any Borrower (or Administrative Borrower on behalf of such Borrower) may elect, the exact duration to be determined in accordance with the customary practice in the applicable Eurodollar Rate market; provided, that, such Borrower (or Administrative Borrower on behalf of such Borrower) may not elect an Interest Period which will end after the last day of the then-current term of this Agreement. 1.73 "Interest Rate" shall mean, (a) Subject to clause (b) of this definition below: (i) as to Prime Rate Revolving Loans, a rate equal to one (1%) percent per annum in excess of the Prime Rate, (ii) as to Prime Rate Term Loans, a rate equal to one and one-half (1 1/2%) percent per annum in excess of the Prime Rate, 18 (iii) as to Eurodollar Rate Revolving Loans, a rate equal to three and one-quarter (3 1/4%) percent per annum in excess of the Adjusted Eurodollar Rate (in each case, based on the Eurodollar Rate applicable for the Interest Period selected by a Borrower, or by Administrative Borrower on behalf of such Borrower, as in effect three (3) Business Days after the date of receipt by Agent of the request of or on behalf of such Borrower for such Eurodollar Rate Loans in accordance with the terms hereof, whether such rate is higher or lower than any rate previously quoted to any Borrower), and (iv) as to Eurodollar Rate Term Loans, a rate equal to three and three- quarters (3 3/4%) percent per annum in excess of the Adjusted Eurodollar Rate (determined as provided above). (b) Notwithstanding anything to the contrary contained in clause (a) of this definition, the Interest Rate (i) shall mean the rate of three (3%) percent per annum in excess of the Prime Rate as to Prime Rate Loans and the rate of five and one-quarter (5 1/4%) percent per annum in excess of the Adjusted Eurodollar Rate as to Eurodollar Rate Loans and (ii) shall mean the rate of three and one-half (3 1/2%) percent per annum in excess of the Prime Rate as to Prime Rate Term Loans and the rate of five and three-quarters (5 3/4%) percent per annum in excess of the Adjusted Eurodollar Rate as to Eurodollar Rate Term Loans, at Agent's option, without notice, (A) either (1) for the period on and after the date of termination or non-renewal hereof until such time as all Obligations are indefeasibly paid and satisfied in full in immediately available funds, or (2) for the period from and after the date of the occurrence of any Event of Default, and for so long as such Event of Default is continuing as determined by Agent and (B) on the Revolving Loans to any Borrower at any time outstanding in excess of the Borrowing Base of such Borrower or the Revolving Loan Limit of such Borrower (whether or not such excess(es) arise or are made with or without Agent's or any Lender's knowledge or consent and whether made before or after an Event of Default). 1.74 "Inventory" shall mean, as to each Borrower, all of such Borrower's now owned and hereafter existing or acquired goods, wherever located, which (a) are leased by such Borrower as lessor; (b) are held by such Borrower for sale or lease or to be furnished under a contract of service; (c) are furnished by such Borrower under a contract of service; or (d) consist of raw materials, work in process, finished goods or materials used or consumed in its business. 1.75 "Inventory Loan Limit" shall mean, as to each Borrower, at any time, the amount equal to $8,000,000 minus the then outstanding principal amount of Revolving Loans to the other Borrowers (and including Letter of Credit Accommodations to the extent provided in the definition of the term Borrowing Base) based on Eligible Inventory. 1.76 "Investment Property Control Agreement" shall mean an agreement in writing, in form and substance reasonably satisfactory to Agent, by and among Agent, any Borrower (as the case may be) and any securities intermediary, commodity intermediary or other person who has custody, control or possession of any investment property of such Borrower acknowledging that such securities intermediary, commodity intermediary or other person has custody, control or possession of such investment property on behalf of Agent, that it will comply with entitlement 19 orders originated by Agent with respect to such investment property, or other instructions of Agent, or (as the case may be) apply any value distributed on account of any commodity contract as directed by Agent, in each case, without the further consent of such Borrower and including such other terms and conditions as Agent may require. 1.77 "Junior Subordinated Notes" shall mean, collectively, the 13% Junior Subordinated Notes due November 1, 2009 issued by LPC, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced. 1.78 "Lenders" shall mean the financial institutions who are signatories hereto as Lenders and other persons made a party to this Agreement as a Lender in accordance with Section 13.7 hereof, and their respective successors and assigns; each sometimes being referred to herein individually as a "Lender". 1.79 "Letter of Credit Accommodations" shall mean, collectively, the letters of credit, merchandise purchase or other guaranties which are from time to time either (a) issued or opened by Agent or any Lender for the account of any Borrower or Obligor or (b) with respect to which Agent or Lenders have agreed to indemnify the issuer or guaranteed to the issuer the performance by any Borrower or Obligor of its obligations to such issuer; sometimes being referred to herein individually as "Letter of Credit Accommodation". 1.80 "License Agreements" shall have the meaning set forth in Section 8.11 hereof. 1.81 "Loan Limit" shall mean, as to each Borrower, at any time, the amount equal to the Maximum Credit minus the then outstanding principal amount of Loans and the amount of Letter of Credit Accommodations provided to the other Borrower. 1.82 "Loans" shall mean, collectively, the Revolving Loans and the Term Loans. 1.83 "LPC Term Note" shall mean the Amended and Restated Term Promissory Note, dated of even date herewith, made by LPC payable to Agent in the original principal amount of $4,000,000, amending and restating the Existing LPC Term Notes in order to evidence the existing Obligations previously evidenced by or arising under such Existing LPC Term Notes and the additional Obligations evidenced by or arising under the Term Loans, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced. 1.84 "LRG Term Note" shall mean the Amended and Restated Term Promissory Note, dated of even date herewith, made by LRG payable to Agent in the original principal amount of $9,500,000, amending and restating the Existing LRG Term Notes in order to evidence the existing Obligations previously evidenced by or arising under such Existing LPC Term Notes and the additional Obligations evidenced by or arising under the Term Loans, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced. 20 1.85 "Material Adverse Effect" shall mean a material adverse effect on (a) the financial condition, business, performance or operations of Borrowers taken as a whole or the legality, validity or enforceability of this Agreement or any of the other Financing Agreements; (b) the legality, validity, enforceability, perfection or priority of the security interests and liens of Agent upon the Collateral of Borrowers (taken as a whole); (c) the Collateral of Borrowers (taken as a whole) or its value; (d) the ability of the Borrowers (taken as a whole) to repay the Obligations or perform their obligations under this Agreement or any of the other Financing Agreements as and when to be performed in accordance therewith; or (e) the ability of Agent or any Lender to enforce the Obligations or realize upon the Collateral or otherwise with respect to the rights and remedies of Agent and Lenders under this Agreement or any of the other Financing Agreements. 1.86 "Material Contract" shall mean (a) any contract or other agreement (other than customer purchase orders with a term of one year or less and the Financing Agreements or other agreements with respect to borrowed money), written or oral, of any Borrower involving monetary liability of or to any Person in an amount in excess of $1,000,000 in any fiscal year and (b) any other contract or other agreement (other than customer purchase orders with a term of one year or less and the Financing Agreements or other agreements with respect to borrowed money), whether written or oral, to which any Borrower is a party and as to which the breach, nonperformance, cancellation or failure to renew by any party thereto would have a Material Adverse Effect. 1.87 "Maximum Credit" shall mean the amount of $37,000,000 minus, at any time of determination, the then aggregate amount of principal re-paid by Borrowers to Agent in respect of the Term Loans in accordance with the terms of this Agreement and the Term Notes. 1.88 "Multiemployer Plan" shall mean a "multi-employer plan" as defined in Section 4001(a)(3) of ERISA which is or was at any time during the current year or the immediately preceding six (6) years contributed to by any Borrower or any ERISA Affiliate. 1.89 "Net Amount of Eligible Domestic Accounts" shall mean, as to any Borrower, the gross amount of the Eligible Accounts of such Borrower with respect to account debtors with chief executive offices located in the United States of America or Canada less (a) sales, excise or similar taxes included in the amount thereof and (b) returns, discounts, claims, credits and allowances of any nature at any time issued, owing, granted, outstanding, available or claimed with respect thereto. 1.90 "Net Amount of Eligible Foreign Accounts" shall mean, as to any Borrower, the gross amount of the Eligible Accounts of such Borrower with respect to account debtors with chief executive offices located outside of the United States of America and Canada which, in Agent's sole determination, satisfy all of the conditions set forth in Section 1.39(e) hereof and all other conditions of eligibility set forth in Section 1.39 hereof less (a) sales, excise or similar taxes included in the amount thereof and (b) returns, discounts, claims, credits and allowances of any nature at any time issued, owing, granted, outstanding, available or claimed with respect thereto. 1.91 "Net Cash Proceeds" shall mean, with respect to any sale, lease, transfer or other 21 disposition of any asset or the sale or issuance of any Indebtedness, the aggregate amount of cash received from time to time (whether as initial consideration or through payment or disposition of deferred consideration) by or on behalf of such Person in connection with such transaction after deducting therefrom only (without duplication) (a) reasonable and customary brokerage commissions, underwriting fees and discounts, legal fees, accountant's fees, investment banking fees, finder's fees, other similar fees and commissions and reasonable out-of-pocket expenses, (b) the amount of taxes reasonably estimated by such Person to be actually and reasonably attributable to such transaction, (c) the amount of any Indebtedness secured by a security interest, lien or other encumbrance (other than a security interest or other lien created under any Financing Agreement) on such asset that, by the terms of such transaction, is required to be repaid upon such disposition, in each case to the extent, but only to the extent, that the amounts so deducted are actually paid to a Person that, except in the case of reasonable out-of-pocket expenses, is not an Affiliate of such Person or any Affiliate of any Borrower and, in each case, are properly attributable to such transaction or to the asset that is the subject thereof. 1.92 "Net Worth" shall mean as to any Person, at any time, in accordance with GAAP (except as otherwise specifically set forth below), on a consolidated basis for such Person and its Subsidiaries (if any), the amount equal to the difference between: (a) the aggregate net book value of all assets of such Person and its Subsidiaries, calculating the book value of inventory for this purpose on a first-in-first-out basis, after deducting from such book values all appropriate reserves in accordance with GAAP (including all reserves for doubtful receivables, obsolescence, depreciation and amortization) and (b) the aggregate amount of the Indebtedness and other liabilities of such Person and its Subsidiaries (including tax and other proper accruals); provided, that, for purposes of this calculation, Net Worth shall exclude any write-down or write-off of assets, net of the applicable income tax effect, recorded in accordance with the requirements of Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets", and Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", and any reduction in net worth resulting from the adoption of Statement of Financial Accounting Standards No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. 1.93 "Nomura" shall mean Nomura Special Situations Investment Trust, a Delaware trust (as successor-in-interest to Tri-Links Investment Trust, as successor-in-interest to Nomura Holdings America, Inc.), and its successors and assigns. 1.94 "Nomura Agreements" shall mean, collectively, the following (as the same now exist or may hereafter be amended, modified, supplemented, renewed, restated or replaced): (a) Note Purchase Agreement, dated as of October 27, 1997, between LPC and Nomura, (b) promissory note, dated as of October 27, 1997, made by LPC payable to the order of Nomura in the original principal amount of $7,500,000 and (c) all other agreements, documents and instruments executed in connection therewith. 1.95 "Nomura Debt" shall mean all obligations, liabilities and indebtedness of every kind, nature and description owing by LPC to Nomura pursuant to the Nomura Agreements and the Nomura Payoff Agreement, including principal, interest, costs and expenses arising under the 22 Nomura Agreements. 1.96 "Nomura Payoff Agreement" shall mean the Payoff Agreement, dated December 18, 2003, by and between Nomura and LPC, as the same now exists or may hereafter be amended, modified, supplemented, renewed, restated or replaced, reflecting, among other things, the terms and conditions of, and the effective date of, the payoff of the Nomura Debt outstanding under the Nomura Agreements. 1.97 "Obligations" shall mean any and all Loans, Letter of Credit Accommodations and all other obligations, liabilities and indebtedness of every kind, nature and description owing by any or all of Borrowers to Agent or any Lender and/or any of their Affiliates, including principal, interest, charges, fees, costs and expenses, however evidenced, whether as principal, surety, endorser, guarantor or otherwise, arising under this Agreement or any of the other Financing Agreements, whether now existing or hereafter arising, whether arising before, during or after the initial or any renewal term of this Agreement or after the commencement of any case with respect to such Borrower under the United States Bankruptcy Code or any similar statute (including the payment of interest and other amounts which would accrue and become due but for the commencement of such case, whether or not such amounts are allowed or allowable in whole or in part in such case), whether direct or indirect, absolute or contingent, joint or several, due or not due, primary or secondary, liquidated or unliquidated, or secured or unsecured. 1.98 "Obligor" shall mean any guarantor, endorser, acceptor, surety or other person liable on or with respect to the Obligations or who is the owner of any property which is security for the Obligations, other than Borrowers. 1.99 "Participant" shall mean any financial institution that acquires and holds a participation in the interest of any Lender in any of the Loans and Letter of Credit Accommodations in conformity with the provisions of Section 13.7 of this Agreement governing participations. 1.100 "Permitted Holders" shall mean the persons listed on Schedule 1.100 hereto and their respective successors and assigns. 1.101 "Person" or "person" shall mean any individual, sole proprietorship, partnership, corporation (including any corporation which elects subchapter S status under the Code), limited liability company, limited liability partnership, business trust, unincorporated association, joint stock corporation, trust, joint venture or other entity or any government or any agency or instrumentality or political subdivision thereof. 1.102 "Plan" means an employee benefit plan (as defined in Section 3(3) of ERISA) which any Borrower sponsors, maintains, or to which it makes, is making, or is obligated to make contributions, or any Multiemployer Plan to which Borrower has made contributions at any time during the immediately preceding six (6) plan years. 1.103 "Prime Rate" shall mean the rate from time to time publicly announced by 23 Wachovia Bank, National Association, or its successors, as its prime rate, whether or not such announced rate is the best rate available at such bank. 1.104 "Prime Rate Loans" shall mean, individually and collectively, the Prime Rate Revolving Loans and the Prime Rate Term Loans. 1.105 "Prime Rate Revolving Loans" shall mean the portion of the Revolving Loans on which interest is payable based on the Prime Rate in accordance with the terms hereof. 1.106 "Prime Rate Term Loans" shall mean the portion of the Term Loans on which interest is payable based on the Prime Rate in accordance with the terms hereof. 1.107 "Pro Rata Share" shall mean as to any Lender, the fraction (expressed as a percentage) the numerator of which is such Lender's Commitment and the denominator of which is the aggregate amount of all of the Commitments of Lenders, as adjusted from time to time in accordance with the provisions of Section 13.7 hereof; provided, that, if the Commitments have been terminated, the numerator shall be the unpaid amount of such Lender's Loans and its interest in the Letter of Credit Accommodations and the denominator shall be the aggregate amount of all unpaid Loans and Letter of Credit Accommodations. 1.108 "Provision for Taxes" shall mean an amount equal to all taxes imposed on or measured by net income, whether Federal, State, Provincial, county or local, and whether foreign or domestic, that are paid or payable by any Person in respect of any period in accordance with GAAP. 1.109 "Real Property" shall mean all now owned and hereafter acquired real property of each Borrower, including leasehold interests, together with all buildings, structures, and other improvements located thereon and all licenses, easements and appurtenances relating thereto, wherever located. 1.110 "Receivables" shall mean all of the following now owned or hereafter arising or acquired property of each Borrower: (a) all Accounts; (b) all interest, fees, late charges, penalties, collection fees and other amounts due or to become due or otherwise payable in connection with any Account; (c) all payment intangibles of such Borrower; (d) letters of credit, indemnities, guarantees, security or other deposits and proceeds thereof payable to any Borrower or otherwise in favor of or delivered to any Borrower in connection with any Account; or (e) all other accounts, contract rights, chattel paper, instruments, notes, general intangibles and other forms of obligations owing to any Borrower, whether from the sale and lease of goods or other property, the licensing of any property (including Intellectual Property or other general intangibles), the rendition of services or from the making of loans or advances by any Borrower or to or for the benefit of any third person (including loans or advances to any Affiliates or Subsidiaries of any Borrower) or otherwise associated with any Accounts, Inventory or general intangibles of any Borrower (including, without limitation, choses in action, causes of action, tax refunds, tax refund claims, any funds which may become payable to any Borrower in connection with the termination of any Plan and any other amounts payable to any Borrower from any Plan, rights 24 and claims against carriers and shippers, rights to indemnification, business interruption insurance and proceeds thereof, casualty or any similar types of insurance and any proceeds thereof and proceeds of insurance covering the lives of employees on which any Borrower is a beneficiary). 1.111 "Records" shall mean, as to each Borrower, all of its present and future books of account of every kind or nature, purchase and sale agreements, invoices, ledger cards, bills of lading and other shipping evidence, statements, correspondence, memoranda, credit files and other data relating to the Collateral or any account debtor, together with the tapes, disks, diskettes and other data and software storage media and devices, file cabinets or containers in or on which the foregoing are stored (including any rights of any Borrower with respect to the foregoing maintained with or by any other person). 1.112 "Reference Bank" shall mean Wachovia Bank, National Association, or such other bank as Agent may from time to time designate. 1.113 "Refinancing Indebtedness" shall have the meaning set forth in Section 9.9(j) hereof. 1.114 "Renewal Date" shall have the meaning set forth in Section 13.1 hereof. 1.115 "Remaining Existing Senior Subordinated Notes" shall mean the Existing Senior Subordinated Notes which are not exchanged by the holders thereof for Senior Subordinated Notes, not to exceed the Remaining Existing Subordinated Note Indebtedness. 1.116 "Remaining Existing Subordinated Note Indebtedness" shall mean an amount not to exceed $500,000 in respect of Indebtedness (including principal, interest, fees and expenses) arising from or evidenced by the Remaining Existing Senior Subordinated Notes. Schedule 1.116 hereto sets forth the holders of the Remaining Existing Subordinated Note Indebtedness and the principal amount of the Existing Senior Subordinated Notes held by each such holder. 1.117 "Register" shall have the meaning set forth in Section 13.7 hereof. 1.118 "Required Lenders" shall mean, at any time, those Lenders whose Pro Rata Shares aggregate sixty-six and two-thirds (66 2/3%) percent or more of the aggregate of the Commitments of all Lenders, or if the Commitments shall have been terminated, Lenders to whom at least sixty-six and two-thirds (66 2/3%) percent of the then outstanding Obligations are owing. 1.119 "Reserves" shall mean as of any date of determination, such amounts as Agent may from time to time establish and revise in good faith reducing the amount of Revolving Loans and Letter of Credit Accommodations which would otherwise be available to any Borrower under the lending formula(s) provided for herein: (a) to reflect events, conditions, contingencies or risks which, as determined by Agent in good faith, adversely affect, or would have a reasonable likelihood of adversely affecting, either (i) the Collateral or any other property which is security 25 for the Obligations or its value or (ii) the assets, business or prospects of any Borrower or Obligor or (iii) the security interests and other rights of Agent or any Lender in the Collateral (including the enforceability, perfection and priority thereof), (b) to reflect Agent's good faith belief that any collateral report or financial information furnished to Agent by or on behalf of any Borrower or Obligor is or may have been incomplete, inaccurate or misleading in any material respect, (c) to reflect outstanding Letter of Credit Accommodations as provided in Section 2.2 hereof or (d) in respect of any state of facts which Agent determines in good faith constitutes a Default or an Event of Default. Without limiting the generality of the foregoing, Reserves may be established to reflect that dilution with respect to the Accounts (based on the ratio of the aggregate amount of non-cash reductions in Accounts for any period to the aggregate dollar amount of the sales of Borrower for such period) as calculated by Agent for any period is or is reasonably anticipated to be greater than three (3%) percent or to reflect that the net orderly liquidation value of the Equipment as set forth in the most recent acceptable appraisals received by Agent with respect thereto has declined so that the then outstanding principal amount of the Term Loans is greater than eighty-five (85%) percent of such appraised net orderly liquidation value. To the extent Agent may revise the lending formulas used to determine the Borrowing Base or establish new criteria or revise existing criteria for Eligible Accounts or Eligible Inventory so as to address any circumstances, condition, event or contingency in a manner satisfactory to Agent, Agent shall not establish a Reserve for the same purpose. The term "Reserves" as used herein shall include, in addition and not in limitation, the Special Reserve, the Appraisal Reserve and the Rubber Group Reserve. The amount of any Reserve established by Agent (other than the Special Reserve, the Appraisal Reserve and the Rubber Group Reserve) shall have a reasonable relationship to the event, condition or other matter which is the basis for such reserve as determined by Agent in good faith. 1.120 "Revolving Loan Limit" shall mean, as to each Borrower, at any time, the amount equal to the $23,500,000 minus the then outstanding principal amount of the Revolving Loans and Letter of Credit Accommodations provided to the other Borrower. 1.121 "Revolving Loans" shall mean the loans now or hereafter made by or on behalf of any Lender or by Agent for the account of any Lender on a revolving basis pursuant to the Credit Facility (involving advances, repayments and readvances) as set forth in Section 2.1 hereof. 1.122 "Rubber Group Reserve" shall mean the Reserve in the amount of $1,000,000; provided, that, such Rubber Group Reserve shall be released within five (5) Business Days from the last to be received by Agent of each of the following: (a) a certificate from Borrowers, executed by the Chief Financial Officer of each Borrower and either the Chairman of the Board or President of each Borrower, stating that the EBITDA of Borrowers' "Rubber Group", as such EBITDA of the Rubber Group is reflected in Borrowers' quarterly reports on Form 10-Q and annual reports on Form 10-K, for each of the prior two consecutive fiscal quarters was not less $8,000,000 and (b) the financial statements of Borrowers with respect to such prior two consecutive fiscal quarters as required pursuant to Section 9.6(a) hereof; provided, further, that, in the event such Reserve is released in accordance with the conditions as set forth above, Agent shall re-establish such Reserve in the amount of $1,000,000 at any time that Agent determines that the EBITDA of Borrowers' Rubber Group, as such EBITDA of the Rubber Group is 26 reflected in Borrowers' quarterly reports on Form 10-Q and annual reports on Form 10-K, for any prior two consecutive fiscal quarters was less than $8,000,000 and such Reserve shall be released in the event that the conditions as set forth above for its release have been satisfied. 1.123 "Senior Subordinated Notes" shall mean, collectively, the 12% Senior Subordinated Notes due August 1, 2009 issued by LPC pursuant to the Subordinated Note Indenture, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced. 1.124 "Senior Subordinated Note Indenture" shall mean the Indenture, dated as of December 18, 2003, between LPC, as issuer, and Wilmington Trust Company, as trustee, with respect to the Senior Subordinated Notes, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced. 1.125 "Series B Preferred Stock" shall mean the $8 Cumulative Convertible Preferred Stock, Series B, of LPC. 1.126 "Solvent" shall mean, at any time with respect to any Person, that at such time such Person (a) is generally able to pay its debts as they mature and has (and has a reasonable basis to believe it will continue to have) sufficient capital (and not unreasonably small capital) to carry on its business consistent with its practices as of the date hereof, and (b) the assets and properties of such Person (and its Subsidiaries, taken as a whole) at a fair valuation (and including as assets for this purpose at a fair valuation all rights of subrogation, contribution or indemnification arising pursuant to any guarantees given by such Person and its Subsidiaries, taken as a whole) are greater than the Indebtedness of such Person and its Subsidiaries, taken as a whole, and including subordinated and contingent liabilities (without duplication) computed at the amount which, such person has a reasonable basis to believe, represents an amount which can reasonably be expected to become an actual or matured liability (and including (without duplication) as to contingent liabilities arising pursuant to any guarantee the face amount of such liability as reduced to reflect the probability of it becoming a matured liability). 1.127 "Special Agent Advances" shall have the meaning set forth in Section 12.11 hereof. 1.128 "Special Reserve" shall mean the Reserve in the amount equal to $1,350,000. 1.129 "Subsidiary" or "subsidiary" shall mean, with respect to any Person, any corporation, limited liability company, limited liability partnership or other limited or general partnership, trust, association or other business entity of which at least a majority of the outstanding Capital Stock or other interests entitled to vote in the election of the board of directors of such corporation (irrespective of whether, at the time, Capital Stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency), managers, trustees or other controlling persons, or an equivalent controlling interest therein, of such Person is, at the time, directly or indirectly, owned by such Person and/or one or more subsidiaries of such Person. 27 1.130 "Term Loan Agent" shall mean Ableco Finance LLC, a Delaware limited liability company, in its capacity as agent acting for and on behalf of the Term Loan Lenders pursuant to the Term Loan Agreement, and its successors and assigns (including any replacement or successor agent or additional agent acting for and on behalf of the Term Loan Lenders). 1.131 "Term Loan Agreement" shall mean the Loan and Security Agreement, dated of even date herewith, by and among Term Loan Agent, Term Loan Lenders and Borrowers, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, including any agreements with respect to Refinancing Indebtedness. 1.132 "Term Loan Debt" shall mean all obligations, liabilities and indebtedness of every kind, nature and description owing by any Borrower to Term Loan Agent or any Term Loan Lender, including principal, interest, charges, fees, premiums, indemnities, costs and expenses, however evidenced, whether as principal, surety, endorser, guarantor or otherwise, arising under the Term Loan Lender Agreements. 1.133 "Term Loan Lender Agreements" shall mean, collectively, the following (as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced): (a) the Term Loan Agreement; (b) the mortgages, deeds of trust, agreements, documents and instruments set forth on Schedule 1.133 hereto; and (c) all other agreements, documents and instruments at any time executed and/or delivered by any Borrower with, to or in favor of Term Loan Agent or any Term Loan Lender in connection therewith or related thereto; sometimes being referred to herein individually as a "Term Loan Lender Agreement". 1.134 "Term Loan Lenders" shall mean, collectively, Ableco Finance LLC in its individual capacity and the other lenders who are from time to time parties to the Term Loan Agreement as lenders, and their respective successors and assigns, and the lenders with respect to any Refinancing Indebtedness; each sometimes being referred to herein individually as a "Term Loan Lender". 1.135 "Term Loans" shall mean, collectively, the term loans made by or on behalf of Lenders to each Borrower evidenced by the Term Notes as provided for in Section 2.3 hereof; sometimes being referred to herein individually as a "Term Loan". 1.136 "Term Notes" shall mean, collectively, the LPC Term Note and the LRG Term Note; sometimes being referred to herein individually as a "Term Note". 1.137 "UCC" shall mean the Uniform Commercial Code as in effect in the State of New York, and any successor statute, as in effect from time to time (except that terms used herein which are defined in the Uniform Commercial Code as in effect in the State of New York on the date hereof shall continue to have the same meaning notwithstanding any replacement or amendment of such statute except as Agent may otherwise determine). 1.138 "Value" shall mean, with respect to Inventory, the lower of (a) cost computed on a 28 first-in first-out basis in accordance with GAAP or (b) market value, as determined by Agent in good faith, provided, that, for purposes of the calculation of the Borrowing Base, the Value of the Inventory shall not include: (i) the portion of the value of Inventory equal to the profit earned by any Affiliate on the sale thereof to any Borrower or (ii) write-ups or write-downs in value with respect to currency exchange rates. 1.139 "Voting Stock" shall mean with respect to any Person, (a) one (1) or more classes of Capital Stock of such Person having general voting powers to elect at least a majority of the board of directors, managers or trustees of such Person, irrespective of whether at the time Capital Stock of any other class or classes have or might have voting power by reason of the happening of any contingency, and (b) any Capital Stock of such Person convertible or exchangeable without restriction at the option of the holder thereof into Capital Stock of such Person described in clause (a) of this definition. 1.140 "Warrant Agent Agreement" shall mean the Warrant Agent Agreement, dated as of December 18, 2003, by and between LPC and Wilmington Trust Company, in its capacity as warrant agent, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced. 1.141 "Weighted Average to Maturity" shall mean when applied to any Indebtedness at any date, the number of years obtained by dividing (a) the then outstanding principal amount of such Indebtedness into (b) the product obtained by multiplying (i) the amount of each then outstanding installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (ii) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment. SECTION 2. CREDIT FACILITIES 2.1 Loans. (a) Subject to and upon the terms and conditions contained herein, each Lender severally (and not jointly) agrees to make its Pro Rata Share of Revolving Loans to each Borrower from time to time in amounts requested by such Borrower (or Administrative Borrower on behalf of such Borrower) up to the amount outstanding at any time equal to the lesser of: (i) the Borrowing Base of such Borrower at such time or (ii) the Revolving Loan Limit of such Borrower at such time. (b) Agent may, in its discretion, from time to time, upon not less than five (5) days prior notice to Administrative Borrower, reduce the lending formula(s) with respect to Eligible Inventory to the extent that Agent determines in good faith that: (i) the number of days of the turnover of the Inventory for any period has adversely changed or (ii) the liquidation value of the Eligible Inventory, or any category thereof, has decreased, including any decrease attributable to a change in the nature, quality or mix of the Inventory. The amount of any decrease in the lending formulas shall have a reasonable relationship to the event, condition or circumstance which is the basis for such decrease, as determined by Agent in good faith. In 29 determining whether to reduce the lending formula(s), Agent may consider events, conditions, contingencies or risks which are also considered in determining Eligible Accounts, Eligible Inventory or in establishing Reserves. (c) Except in Agent's discretion, with the consent of all Lenders, or as otherwise provided herein, (i) the aggregate amount of the Loans and the Letter of Credit Accommodations outstanding at any time shall not exceed the Maximum Credit, (ii) the aggregate principal amount of the Revolving Loans and Letter of Credit Accommodations outstanding at any time to a Borrower shall not exceed the lesser of the Borrowing Base of such Borrower or the Revolving Loan Limit of such Borrower, (iii) the aggregate principal amount of Loans and Letter of Credit Accommodations outstanding at any time to a Borrower shall not exceed the Loan Limit of such Borrower, (iv) the aggregate principal amount of Revolving Loans outstanding at any time to Borrowers based on the Eligible Inventory of Borrowers shall not exceed $8,000,000, (v) the aggregate principal amount of Revolving Loans outstanding at any time to Borrowers based on the percentage of Eligible Inventory consisting of work-in-process as set forth in Section 1.12(a)(i)(C)(3) shall not exceed $2,000,000 and (vi) the aggregate principal amount of Revolving Loans outstanding at any time to Borrowers based on the Net Amount of Eligible Foreign Accounts as set forth in Section 1.12(a)(i)(B) shall not exceed $2,000,000. (d) In the event that (i) the aggregate principal amount of Revolving Loans and Letter of Credit Accommodations outstanding to a Borrower exceed the Borrowing Base of such Borrower or the Revolving Loan Limit of such Borrower, (ii) the aggregate principal amount of Revolving Loans and Letter of Credit Accommodations based on the Eligible Inventory of a Borrower exceed the Inventory Loan Limit of such Borrower, (iii) the aggregate principal amount of Revolving Loans and Letter of Credit Accommodations based on the Eligible Inventory of all Borrowers exceeds the sublimit set forth above, (iv) the aggregate amount of the outstanding Letter of Credit Accommodations exceed the sublimit for Letter of Credit Accommodations set forth in Section 2.2(e), or (v) the aggregate amount of Loans and Letter of Credit Accommodations exceed the Maximum Credit, such event shall not limit, waive or otherwise affect any rights of Agent or Lenders in such circumstances or on any future occasions and Borrowers shall, upon demand by Agent, which may be made at any time or from time to time, immediately repay to Agent the entire amount of any such excess(es) for which payment is demanded. 2.2 Letter of Credit Accommodations. (a) Subject to and upon the terms and conditions contained herein, at the request of a Borrower (or Administrative Borrower on behalf of such Borrower), Agent agrees, for the ratable risk of each Lender according to its Pro Rata Share, to provide or arrange for Letter of Credit Accommodations for the account of such Borrower containing terms and conditions acceptable to Agent and the issuer thereof. Any payments made by or on behalf of Agent or any Lender to any issuer thereof and/or to any related parties in connection with the Letter of Credit Accommodations provided to or for the benefit of a Borrower shall constitute additional Revolving Loans to such Borrower pursuant to this Section 2 (or Special Agent Advances as the case may be). 30 (b) In addition to any charges, fees or expenses charged by any bank or issuer in connection with the Letter of Credit Accommodations, Borrowers shall pay to Agent, for the benefit of Lenders, a letter of credit fee at a rate equal to one and one-half (1 1/2 %) percent per annum, on the daily outstanding balance of the Letter of Credit Accommodations for the immediately preceding month (or part thereof), payable in arrears as of the first day of each succeeding month, except that Agent may, and upon the written direction of Required Lenders shall, require Borrowers to pay to Agent for the ratable benefit of Lenders such letter of credit fee, at a rate equal to three and one-half (3 1/2 %) percent per annum on such daily outstanding balance for: (i) the period from and after the date of termination hereof until Agent and Lenders have received full and final payment of all Obligations (notwithstanding entry of a judgment against any Borrower) and (ii) the period from and after the date of the occurrence of an Event of Default for so long as such Event of Default is continuing as determined by Agent. Such letter of credit fee shall be calculated on the basis of a three hundred sixty (360) day year and actual days elapsed and the obligation of Borrowers to pay such fee shall survive the termination of this Agreement. (c) The Borrower requesting such Letter of Credit Accommodation (or Administrative Borrower on behalf of such Borrower) shall give Agent two (2) Business Days' prior written notice of such Borrower's request for the issuance of a Letter of Credit Accommodation. Such notice shall be irrevocable and shall specify the original face amount of the Letter of Credit Accommodation requested, the effective date (which date shall be a Business Day and in no event shall be a date less than ten (10) days prior to the end of the then current term of this Agreement) of issuance of such requested Letter of Credit Accommodation, whether such Letter of Credit Accommodations may be drawn in a single or in partial draws, the date on which such requested Letter of Credit Accommodation is to expire (which date shall be a Business Day), the purpose for which such Letter of Credit Accommodation is to be issued, and the beneficiary of the requested Letter of Credit Accommodation. The Borrower requesting the Letter of Credit Accommodation (or Administrative Borrower on behalf of such Borrower) shall attach to such notice the proposed terms of the Letter of Credit Accommodation. (d) In addition to being subject to the satisfaction of the applicable conditions precedent contained in Section 4 hereof and the other terms and conditions contained herein, no Letter of Credit Accommodations shall be available unless each of the following conditions precedent have been satisfied in a manner satisfactory to Agent: (i) the Borrower requesting such Letter of Credit Accommodation (or Administrative Borrower on behalf of such Borrower) shall have delivered to the proposed issuer of such Letter of Credit Accommodation at such times and in such manner as such proposed issuer may require, an application, in form and substance satisfactory to such proposed issuer and Agent, for the issuance of the Letter of Credit Accommodation and such other documents as may be required pursuant to the terms thereof, and the form and terms of the proposed Letter of Credit Accommodation shall be satisfactory to Agent and such proposed issuer, (ii) as of the date of issuance, no order of any court, arbitrator or other Governmental Authority shall purport by its terms to enjoin or restrain money center banks generally from issuing letters of credit of the type and in the amount of the proposed Letter of Credit Accommodation, and no law, rule or regulation applicable to money center banks generally and no request or directive (whether or not having the force of law) from any 31 Governmental Authority with jurisdiction over money center banks generally shall prohibit, or request that the proposed issuer of such Letter of Credit Accommodation refrain from, the issuance of letters of credit generally or the issuance of such Letter of Credit Accommodations; and (iii) the Excess Availability of the Borrower requesting such Letter of Credit Accommodation, prior to giving effect to any Reserves with respect to such Letter of Credit Accommodations, on the date of the proposed issuance of any Letter of Credit Accommodations, shall be equal to or greater than: (A) if the proposed Letter of Credit Accommodation is for the purpose of purchasing Eligible Inventory and the documents of title with respect thereto are consigned to the issuer, the sum of (1) the Value of such Eligible Inventory multiplied by the percentage equal to one hundred (100%) percent minus the then applicable percentage with respect to Eligible Inventory set forth in the definition of the term Borrowing Base, plus (2) freight, taxes, duty and other amounts which Agent estimates must be paid in connection with such Inventory upon arrival and for delivery to one of such Borrower's locations for Eligible Inventory within the United States of America and (B) if the proposed Letter of Credit Accommodation is for any other purpose or the documents of title are not consigned to the issuer in connection with a Letter of Credit Accommodation for the purpose of purchasing Inventory, an amount equal to one hundred (100%) percent of the face amount thereof and all other commitments and obligations made or incurred by Agent with respect thereto. Effective on the issuance of each Letter of Credit Accommodation, a Reserve shall be established in the applicable amount set forth in Section 2.2(d)(iii)(A) or Section 2.2(d)(iii)(B). (e) Except in Agent's discretion, with the consent of all Lenders, the amount of all outstanding Letter of Credit Accommodations and all other commitments and obligations made or incurred by Agent or any Lender in connection therewith shall not at any time exceed $2,500,000. (f) Borrowers shall indemnify and hold Agent and Lenders harmless from and against any and all losses, claims, damages, liabilities, costs and expenses which Agent or any Lender may suffer or incur in connection with any Letter of Credit Accommodations and any documents, drafts or acceptances relating thereto, including any losses, claims, damages, liabilities, costs and expenses due to any action taken by any issuer or correspondent with respect to any Letter of Credit Accommodation, except for such losses, claims, damages, liabilities, costs or expenses that are a direct result of the gross negligence or wilful misconduct of Agent or any Lender as determined pursuant to a final non-appealable order of a court of competent jurisdiction. Each Borrower assumes all risks with respect to the acts or omissions of the drawer under or beneficiary of any Letter of Credit Accommodation. Each Borrower assumes all risks for, and agrees to pay, all foreign, Federal, State and local taxes, duties and levies relating to any goods subject to any Letter of Credit Accommodations or any documents, drafts or acceptances thereunder. Each Borrower hereby releases and holds Agent and Lenders harmless from and against any acts, waivers, errors, delays or omissions, whether caused by any Borrower, by any issuer or correspondent or otherwise with respect to or relating to any Letter of Credit Accommodation, except for the gross negligence or wilful misconduct of Agent or any Lender as determined pursuant to a final, non-appealable order of a court of competent jurisdiction. The provisions of this Section 2.2(f) shall survive the payment of Obligations and the termination of this Agreement. 32 (g) In connection with Inventory purchased pursuant to Letter of Credit Accommodations, Borrowers shall, at Agent's request, instruct all suppliers, carriers, forwarders, customs brokers, warehouses or others receiving or holding cash, checks, Inventory, documents or instruments in which Agent holds a security interest to deliver them to Agent and/or subject to Agent's order, and if they shall come into such Borrower's possession, to deliver them, upon Agent's request, to Agent in their original form; provided, that, Agent shall not exercise its rights under this clause (g) to have such persons deliver any cash, checks, documents or instruments (so long as such documents or instruments are held by a customs broker) or Inventory to Agent unless an Event of Default exists or has occurred and is continuing. Borrowers shall also, at Agent's request, designate Agent as the consignee on all bills of lading and other negotiable and non-negotiable documents. (h) Each Borrower hereby irrevocably authorizes and directs any issuer of a Letter of Credit Accommodation to name such Borrower as the account party therein and to deliver to Agent all instruments, documents and other writings and property received by issuer pursuant to the Letter of Credit Accommodations and to accept and rely upon Agent's instructions and agreements with respect to all matters arising in connection with the Letter of Credit Accommodations or the applications therefor. Nothing contained herein shall be deemed or construed to grant any Borrower any right or authority to pledge the credit of Agent or any Lender in any manner. Agent and Lenders shall have no liability of any kind with respect to any Letter of Credit Accommodation provided by an issuer other than Agent or any Lender unless Agent has duly executed and delivered to such issuer the application or a guarantee or indemnification in writing with respect to such Letter of Credit Accommodation. Borrowers shall be bound by any reasonable interpretation made in good faith by Agent, or any other issuer or correspondent under or in connection with any Letter of Credit Accommodation or any documents, drafts or acceptances thereunder, notwithstanding that such interpretation may be inconsistent with any instructions of any Borrower. (i) Notwithstanding anything in this Agreement to the contrary, so long as no Event of Default exists or has occurred and is continuing, a Borrower may (i) approve or resolve any questions of non-compliance of documents, (ii) give any instructions as to acceptance or rejection of any documents or goods, (iii) execute any and all applications for steamship or airway guaranties, indemnities or delivery orders, and (iv) with Agent's consent, grant any extensions of the maturity of, time of payment for, or time of presentation of, any drafts, acceptances, or documents, and agree to any amendments, renewals, extensions, modifications, changes or cancellations of any of the terms or conditions of any of the applications, Letter of Credit Accommodations, or documents, drafts or acceptances thereunder or any letters of credit included in the Collateral. (j) At any time an Event of Default exists or has occurred and is continuing, Agent, upon notice to Administrative Borrower, shall have the right and authority to, and Borrowers shall not, without the prior written consent of Agent, (i) approve or resolve any questions of non-compliance of documents, (ii) give any instructions as to acceptance or rejection of any documents or goods, (iii) execute any and all applications for steamship or airway guaranties, indemnities or delivery orders, (iv) grant any extensions of the maturity of, time of 33 payments for, or time of presentation of, any drafts, acceptances, or documents, and (v) agree to any amendments, renewals, extensions, modifications, changes or cancellations of any of the terms or conditions of any of the applications, Letter of Credit Accommodations, or documents, drafts or acceptances thereunder or any letters of credit included in the Collateral. Agent may take such actions either in its own name or in any Borrower's name. (k) Any rights, remedies, duties or obligations granted or undertaken by any Borrower to any issuer or correspondent in any application for any Letter of Credit Accommodation, or any other agreement in favor of any issuer or correspondent relating to any Letter of Credit Accommodation, shall be deemed to have been granted or undertaken by such Borrower to Agent for the ratable benefit of Lenders. Any duties or obligations undertaken by Agent to any issuer or correspondent in any application for any Letter of Credit Accommodation, or any other agreement by Agent in favor of any issuer or correspondent to the extent relating to any Letter of Credit Accommodation, shall be deemed to have been undertaken by Borrowers to Agent for the ratable benefit of Lenders and to apply in all respects to Borrowers. (l) Immediately upon the issuance or amendment of any Letter of Credit Accommodation, each Lender shall be deemed to have irrevocably and unconditionally purchased and received, without recourse or warranty, an undivided interest and participation, to the extent of such Lender's Pro Rata Share, of the liability with respect to such Letter of Credit Accommodation (including, without limitation, all Obligations with respect thereto). (m) Each Borrower is irrevocably and unconditionally obligated, without presentment, demand or protest, to pay to Agent any amounts paid by an issuer of a Letter of Credit Accommodation with respect to such Letter of Credit Accommodation (whether through the borrowing of Loans in accordance with Section 2.2(a) or otherwise). In the event that any Borrower fails to pay Agent on the date of any payment under a Letter of Credit Accommodation in an amount equal to the amount of such payment, Agent (to the extent it has actual notice thereof) shall promptly notify each Lender of the unreimbursed amount of such payment and each Lender agrees, upon one (1) Business Day's notice, to fund to Agent the purchase of its participation in such Letter of Credit Accommodation in an amount equal to its Pro Rata Share of the unpaid amount. The obligation of each Lender to deliver to Agent an amount equal to its respective participation pursuant to the foregoing sentence is absolute and unconditional and such remittance shall be made notwithstanding the occurrence or continuance of any Event of Default, the failure to satisfy any other condition set forth in Section 4 or any other event or circumstance. If such amount is not made available by a Lender when due, Agent shall be entitled to recover such amount on demand from such Lender with interest thereon, for each day from the date such amount was due until the date such amount is paid to Agent at the interest rate then payable by any Borrower in respect of Loans that are Prime Rate Loans as set forth in Section 3.1(a) hereof. 2.3 Term Loans. (a) Agent, Lenders and LPC are hereby amending and restating the terms of the outstanding term loans to LPC evidenced by the Existing LPC Term Notes. LPC hereby 34 acknowledges, confirms and agrees that as of December 18, 2003, the aggregate principal amount outstanding in respect of the Existing LPC Term Notes is $3,300,800. On the date hereof, subject to and upon the terms and conditions contained herein, each Lender severally (and not jointly) agrees to make an additional advance to LPC in an amount equal to its Pro Rata Share of the excess of the original principal amount of the LPC Term Loan over the outstanding aggregate principal amount of the Existing LPC Term Notes, which additional advances shall be in the aggregate amount of $699,200. Such advance shall, together with the amount outstanding in respect of the Existing LPC Term Notes immediately prior thereto, constitute the Term Loan to LPC (the "LPC Term Loan"), which shall be in the total principal amount of $4,000,000. The indebtedness of LPC to Agent and Lenders arising pursuant to the LPC Term Loan, including the additional advance provided for herein, is hereby amended and restated as set forth in the LPC Term Note. The terms of the LPC Term Loan, including the additional advance described above, shall be set forth in the LPC Term Note and evidenced thereby and shall together constitute part of the Term Loans. LPC hereby promises to pay to the order of Agent on the date hereof, the interest due under the terms of the Existing LPC Term Notes for the period from December 1, 2003 through the date hereof. (b) The LPC Term Loan is (i) evidenced by the LPC Term Note in such original principal amount duly executed and delivered by LPC to Agent concurrently herewith and shall constitute part of the Term Loans; (ii) to be repaid, together with interest and other amounts, in accordance with this Agreement and the LPC Term Note and (iii) secured by all of the Collateral. The principal amount of the LPC Term Loan shall be repaid in forty-five (45) consecutive monthly installments (or earlier as provided herein) payable on the first day of each month commencing February, 2004, of which the first forty-four (44) installments shall each be in the amount of $88,000 and the last installment shall be in the amount of the entire unpaid balance of the LPC Term Loan. (c) Agent, Lenders and LRG are hereby amending and restating the terms of the outstanding term loans to LRG evidenced by the Existing LRG Term Notes. LRG hereby acknowledges, confirms and agrees that as of December 18, 2003, the aggregate principal amount outstanding in respect of the Existing LRG Term Notes is $3,749,178. On the date hereof, subject to and upon the terms and conditions contained herein, each Lender severally (and not jointly) agrees to make an additional advance to LRG in an amount equal to its Pro Rata Share of the excess of the aggregate original principal amount of the LRG Term Loan over the outstanding principal amount of the Existing LRG Term Notes, which additional advances shall be in the aggregate amount of $5,750,822. Such advance shall, together with the amount outstanding in respect of the Existing LRG Term Notes immediately prior thereto, constitute the Term Loan to LRG (the "LRG Term Loan"), which shall be in the total principal amount of $9,500,000. The indebtedness of LRG to Agent and Lenders arising pursuant to the LRG Term Loan and including the additional advance provided for herein is hereby amended and restated as set forth in the LRG Term Note. The terms of the LRG Term Loan, including the additional advance described above, shall be set forth in the LRG Term Note and evidenced thereby and shall together constitute part of the Term Loans. LRG hereby promises to pay to the order of Agent on the date hereof, the interest due under the terms of the Existing LRG Term Notes for the period from December 1, 2003 through the date hereof. 35 (d) The LRG Term Loan is (i) evidenced by the LRG Term Note in such original principal amount duly executed and delivered by LRG to Agent concurrently herewith and shall constitute part of the Term Loans; (ii) to be repaid, together with interest and other amounts, in accordance with this Agreement and the LRG Term Note and (iii) secured by all of the Collateral. The principal amount of the LRG Term Loan shall be repaid in forty-five (45) consecutive monthly installments (or earlier as provided herein) payable on the first day of each month commencing February, 2004, of which the first forty-four (44) installments shall each be in the amount of $212,000 and the last installment shall be in the amount of the entire unpaid balance of the LRG Term Loan. 2.4 Commitments. The aggregate amount of each Lender's Pro Rata Share of the Loans and Letter of Credit Accommodations shall not exceed the amount of such Lender's Commitment, as the same may from time to time be amended in accordance with the provisions hereof. 2.5 Joint and Several Liability. Each Borrower shall be jointly and severally liable for all amounts due to Agent and Lenders under this Agreement and the other Financing Agreements, regardless of which Borrower actually receives the Loans or Letter of Credit Accommodations hereunder or the amount of such Loans received or the manner in which Agent or any Lender accounts for such Loans, Letter of Credit Accommodations or other extensions of credit on its books and records. All references herein or in any of the other Financing Agreements to any of the obligations of Borrowers to make any payment hereunder or thereunder shall constitute joint and several obligations of Borrowers. The Obligations with respect to Loans made to a Borrower, and the Obligations arising as a result of the joint and several liability of a Borrower hereunder, with respect to Loans made to the other Borrower, shall be separate and distinct obligations, but all such other Obligations shall be primary obligations of all Borrowers. The Obligations arising as a result of the joint and several liability of a Borrower hereunder with respect to Loans, Letter of Credit Accommodations or other extensions of credit made to the other Borrower shall, to the fullest extent permitted by law, be unconditional irrespective of (a) the validity or enforceability, avoidance or subordination of the Obligations of the other Borrower or of any promissory note or other document evidencing all or any part of the Obligations of the other Borrower, (b) the absence of any attempt to collect the Obligations from the other Borrower, any Obligor or any other security therefor, or the absence of any other action to enforce the same, (c) the waiver, consent, extension, forbearance or granting of any indulgence by Agent or any Lender with respect to any provisions of any instrument evidencing the Obligations of the other Borrower, or any part thereof, or any other agreement now or hereafter executed by the other Borrower and delivered to Agent or any Lender, (d) the failure by Agent or any Lender to take any steps to perfect and maintain its security interest in, or to preserve its rights and maintain its security or collateral for the Obligations of the other Borrower, (e) the election of Agent and Lenders in any proceeding instituted under the Bankruptcy Code, of the application of Section 1111(b)(2) of the Bankruptcy Code, (f) the disallowance of all or any portion of the claim(s) of Agent or any Lender for the repayment of the Obligations of the other Borrower under Section 502 of the Bankruptcy Code, or (g) any other circumstances which might constitute a legal or equitable discharge or defense of an Obligor or of the other Borrower. With respect to the Obligations arising as a result of the joint and several liability of a Borrower 36 hereunder with respect to Loans, Letter of Credit Accommodations or other extensions of credit made to the other Borrower hereunder, each Borrower waives, until the Obligations shall have been paid in full and this Agreement shall have been terminated, any right to enforce any right of subrogation or any remedy which Agent or any Lender now has or may hereafter have against any Borrower or Obligor and any benefit of, and any right to participate in, any security or collateral given to Agent or any Lender. At any time an Event of Default exists or has occurred and is continuing, Agent may proceed directly and at once, without notice, against any Borrower to collect and recover the full amount, or any portion of the Obligations, without first proceeding against the other Borrower or any other Person, or against any security or collateral for the Obligations. Each Borrower consents and agrees that Agent and Lenders shall be under no obligation to marshall any assets in favor of Borrower(s) or against or in payment of any or all of the Obligations. 2.6 Mandatory Prepayments. Notwithstanding the provisions of Section 6.4 hereof, so long as no Event of Default exists or has occurred and is continuing: (a) Subject to Section 2.6(c) hereof, upon the receipt by any Borrower or any of its Subsidiaries of any Extraordinary Receipts, Borrowers shall pay to Agent an amount equal to one hundred percent (100%) of such Extraordinary Receipts, net of any reasonable expenses incurred in collecting such Extraordinary Receipts, which payments shall be applied to the Obligations as follows: (i) if such Extraordinary Receipts are the proceeds of Inventory or Accounts, then such proceeds shall be applied as follows: first, to pay the outstanding principal amount of the Revolving Loans, and second, to pay the outstanding principal amount of the Term Loans; and (ii) if such Extraordinary Receipts are the proceeds of any Collateral other than Inventory or Accounts, then such proceeds shall be applied as follows: first, to pay the outstanding principal amount of Term Loans, and then, unless otherwise agreed to by Agent, to pay the outstanding principal amount of Revolving Loans (to the extent the amounts are applied to reduce the outstanding principal amount of the Revolving Loans, Borrowers direct Agent to, and Agent shall, establish and maintain a permanent Reserve and permanently reduce the Revolving Loan Limit, in each case, in an amount equal to the amount of such net proceeds that are so applied to the outstanding principal amount of Revolving Loans). (b) Upon (i) the sale or disposition of any Collateral by any Borrower or any of its Subsidiaries as permitted in Sections 9.7(b)(ii) and (vi) hereof, (ii) the issuance or sale by any Borrower or any of its Subsidiaries of Capital Stock of such Borrower or Subsidiary as permitted in Sections 9.7(b)(iii), (iv) and (v) hereof, (iii) the issuance or incurrence by any Borrower or any of its Subsidiaries of any Indebtedness of the type described in Section 9.9(h) hereof or (iv) upon the sale or disposition of any Collateral by any Borrower or any of its Subsidiaries not otherwise permitted in this Agreement but consented to by Required Lenders, in each case, Borrowers shall pay to Agent an amount equal to one hundred percent (100%) of the Net Cash Proceeds received by such Person in connection therewith, which payments shall be applied to the Obligations as 37 follows: (i) if such sale or disposition is of Inventory or Accounts, then such Net Cash Proceeds shall be applied as follows: first, to pay the outstanding principal amount of the Revolving Loans, and second, to pay the outstanding principal amount of the Term Loans; and (ii) if such sale or disposition is of any Collateral other than Inventory or Accounts, or from the issuance of such Capital Stock, then such Net Cash Proceeds shall be applied first, to pay the outstanding principal amount of Term Loans and then, unless otherwise agreed to by Agent, to pay the outstanding principal amount of Revolving Loans (to the extent the amounts are applied to reduce the outstanding principal amount of the Revolving Loans, Borrowers direct Agent to, and Agent shall, establish and maintain a permanent Reserve and permanently reduce the Revolving Loan Limit, in each case, in an amount equal to the amount of such Net Cash Proceeds that are so applied to the outstanding principal amount of Revolving Loans). (c) Notwithstanding Section 2.6(a) above, if any of the Equipment is lost, damaged or physically destroyed, upon the written request of Administrative Borrower, Agent shall release to Administrative Borrower any Extraordinary Receipts consisting of insurance proceeds from insurance policies covering such loss, damage or destruction which are received by Agent pursuant to Section 9.5 hereof or otherwise to the extent a Borrower elects to apply such Extraordinary Receipts to the repair, refurbishing or replacement of Equipment which has been so lost, damages or destroyed, provided, that, all of the following conditions are satisfied: (i) no Default or Event of Default shall exist or have occurred and be continuing, (ii) the amount of the insurance proceeds (together with any deductible to be satisfied by a Borrower) are sufficient, in Lender's good faith determination, to effect such repair, refurbishment or replacement in a satisfactory manner, (iii) such proceeds shall be used first to repair, refurbish or replace the Collateral so lost, damaged or destroyed (free and clear of any security interests, liens, claims or encumbrances), (iv) the insurance carrier shall have waived any right of subrogation against Borrowers under its policy, (v) the casualty resulted in the receipt of Extraordinary Receipts from insurance proceeds of $250,000 or less, (vi) such repair, refurbishment or replacement shall be commenced as soon as reasonably practicable and shall be diligently pursued to satisfactory completion, and (vii) the repair, refurbishment or replacement to which the proceeds are applied shall cause the Equipment so lost, damaged or destroyed to be of at least equal value and substantially the same character as prior to such loss, damage or destruction. Pending any release of such Extraordinary Receipts to Administrative Borrower pursuant to this Section 2.6(c), such Extraordinary Receipts received by Agent shall be applied against Revolving Loans and no Reserve shall be established in connection therewith. Nothing contained in this Section 2.6(c) shall be construed to limit the use of any subsequent Revolving Loans for the costs of repair or replacement of the Collateral lost or damaged resulting in the payment of such insurance proceeds. Any Extraordinary Receipts applied to repair, refurbish or replace Equipment pursuant to and in accordance with this Section 2.6(c) shall not be deemed Capital Expenditures for purposes of this Agreement. (d) Notwithstanding Section 2.6(b) above, the Net Cash Proceeds of any sale or 38 disposition of Collateral permitted by Sections 9.7(b)(ii) and (vi) hereof may be reinvested by a Borrower to purchase property or assets used or useful in such Borrower's business at any time within one hundred twenty (120) days after receipt of such Net Cash Proceeds, provided, that, (i) any such Net Cash Proceeds not so used within such one hundred twenty (120) day period shall be immediately remitted to Agent for application to the Obligations as provided in Section 2.6(b) above, (ii) Agent, for itself and the benefit of Lenders, shall have a valid and perfected first- priority lien on and security interest in such replacement or new property or assets and (iii) at the time of the receipt of any such Net Cash Proceeds, no Default or Event of Default shall exist or have occurred and be continuing. Any Net Cash Proceeds reinvested by a Borrower pursuant to and in accordance with this Section 2.6(d) shall not be deemed to be Capital Expenditures for purposes of this Agreement. (e) Nothing contained in this Section 2.6 shall be deemed to be a consent by Agent and Lenders to the sale or disposition of any Collateral except as expressly permitted in this Agreement. (f) All prepayments of any Term Loans under this Section 2.6 shall be applied against the remaining installments (if any) of principal due on the Term Loans in the inverse order of maturity. Notwithstanding anything to the contrary in this Section 2.6, all prepayments of principal under this Section 2.6 shall be made together with accrued and unpaid interest thereon to the date of such prepayment. SECTION 3. INTEREST AND FEES 3.1 Interest. (a) Borrowers shall pay to Agent, for the benefit of Lenders, interest on the outstanding principal amount of the Loans at the Interest Rate. All interest accruing hereunder on and after the date that any Event of Default exists or has occurred and is continuing or on and after the date of termination hereof shall be payable on demand. (b) Each Borrower (or Administrative Borrower on behalf of such Borrower) may from time to time request Eurodollar Rate Loans or may request that Prime Rate Loans be converted to Eurodollar Rate Loans or that any existing Eurodollar Rate Loans continue for an additional Interest Period. Such request from a Borrower (or Administrative Borrower on behalf of such Borrower) shall specify the amount of the Eurodollar Rate Loans, the amount of the Prime Rate Loans to be converted to Eurodollar Rate Loans or the amount of the Eurodollar Rate Loans to be continued (subject to the limits set forth below) and the Interest Period to be applicable to such Eurodollar Rate Loans. Subject to the terms and conditions contained herein, three (3) Business Days after receipt by Agent of such a request from a Borrower (or Administrative Borrower on behalf of such Borrower), such Eurodollar Rate Loans shall be made, such Prime Rate Loans shall be converted to Eurodollar Rate Loans or such Eurodollar Rate Loans shall continue, as the case may be, provided, that, (i) no Default or Event of Default shall exist or have occurred and be continuing, (ii) no party hereto shall have sent any notice of 39 termination of this Agreement, such Borrower (or Administrative Borrower on behalf of such Borrower) shall have complied with such customary procedures as are established by Agent and specified by Agent to Administrative Borrower from time to time for requests by Borrowers for Eurodollar Rate Loans, (iii) no more than four (4) Interest Periods may be in effect at any one time, (iv) the aggregate amount of the Eurodollar Rate Loans must be in an amount not less than $5,000,000 or an integral multiple of $1,000,000 in excess thereof, (v) the maximum amount of the Eurodollar Rate Loans in the aggregate at any time requested by Borrowers shall not exceed the amount equal to (A) eighty (80%) percent of the lowest aggregate principal amount of the Term Loans which it is anticipated will be outstanding as of the last day of the applicable Interest Period plus (B) eighty (80%) percent of the lowest principal amount of the Revolving Loans which it is anticipated will be outstanding during the applicable Interest Period, in each case as determined by Agent in good faith (but with no obligation of Agent or Lenders to make such Loans), and (vi) Agent and each Lender shall have determined that the Interest Period or Adjusted Eurodollar Rate is available to Agent and such Lender and can be readily determined as of the date of the request for such Eurodollar Rate Loan by such Borrower. Any request by or on behalf of a Borrower for Eurodollar Rate Loans or to convert Prime Rate Loans to Eurodollar Rate Loans or to continue any existing Eurodollar Rate Loans shall be irrevocable. Notwithstanding anything to the contrary contained herein, Agent and Lenders shall not be required to purchase United States Dollar deposits in the London interbank market or other applicable Eurodollar Rate market to fund any Eurodollar Rate Loans, but the provisions hereof shall be deemed to apply as if Agent and Lenders had purchased such deposits to fund the Eurodollar Rate Loans. (c) Any Eurodollar Rate Loans shall automatically convert to Prime Rate Loans upon the last day of the applicable Interest Period, unless Agent has received and approved a request to continue such Eurodollar Rate Loan at least three (3) Business Days prior to such last day in accordance with the terms hereof. Any Eurodollar Rate Loans shall, at Agent's option, upon notice by Agent to Parent, be subsequently converted to Prime Rate Loans in the event that this Agreement shall terminate or not be renewed. Borrowers shall pay to Agent, for the benefit of Lenders, upon demand by Agent (or Agent may, at its option, charge any loan account of any Borrower) any amounts required to compensate any Lender or Participant for any loss (including loss of anticipated profits), cost or expense incurred by such person, as a result of the conversion of Eurodollar Rate Loans to Prime Rate Loans pursuant to any of the foregoing. (d) Interest shall be payable by Borrowers to Agent, for the account of Lenders, monthly in arrears on the first Business Day of each calendar month and shall be calculated on the basis of a three hundred sixty (360) day year and actual days elapsed. The interest rate on non-contingent Obligations (other than Eurodollar Rate Loans) shall increase or decrease by an amount equal to each increase or decrease in the Prime Rate effective on the first day of the month after any change in such Prime Rate is announced and shall be based on the Prime Rate in effect on the last day of the month in which any such change occurs. In no event shall charges constituting interest payable by Borrowers to Agent and Lenders exceed the maximum amount or the rate permitted under any applicable law or regulation, and if any such part or provision of this Agreement is in contravention of any such law or regulation, such part or provision shall be deemed amended to conform thereto. 40 3.2 Fees. (a) Borrowers shall pay to Agent, for the account of Lenders, monthly an unused line fee at a rate equal to one-half of one (1/2%) percent per annum calculated upon the amount by which the Credit Facility Revolving Loan Limit exceeds the average daily principal balance of the outstanding Revolving Loans and Letter of Credit Accommodations during the immediately preceding month (or part thereof) while this Agreement is in effect and for so long thereafter as any of the Obligations are outstanding, which fee shall be payable on the first Business Day of each month in arrears. (b) Borrowers agree to pay to Agent the other fees and amounts set forth in the Fee Letter in the amounts and at the times specified therein. 3.3 Changes in Laws and Increased Costs of Loans. (a) If after the date hereof, either (i) any change in, or in the interpretation of, any law or regulation is introduced, including, without limitation, with respect to reserve requirements, applicable to Lender or any banking or financial institution from whom any Lender borrows funds or obtains credit (a "Funding Bank"), (ii) a Funding Bank or any Lender complies with any future guideline or request from any central bank or other Governmental Authority or (iii) a Funding Bank or any Lender determines that the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof has or would have the effect described below, or a Funding Bank or any Lender complies with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, and in the case of any event set forth in this clause (iii), such adoption, change or compliance has or would have the direct or indirect effect of reducing the rate of return on any Lender's capital as a consequence of its obligations hereunder to a level below the rate that such Lender could have achieved but for such adoption, change or compliance (taking into consideration the Funding Bank's or Lender's policies with respect to capital adequacy) by an amount deemed by such Lender to be material, and the result of any of the foregoing events described in clauses (i), (ii) or (iii) is or results in an increase in the cost to any Lender of funding or maintaining the Loans, the Letter of Credit Accommodations or its Commitment, then Borrowers shall from time to time upon demand by Agent pay to Agent additional amounts sufficient to indemnify Lenders against such increased cost on an after-tax basis (after taking into account applicable deductions and credits in respect of the amount indemnified). A certificate showing the calculations for the amount of such increased cost shall be submitted to Administrative Borrower by Agent and shall be conclusive, absent manifest error. (b) If prior to the first day of any Interest Period, (i) Agent shall have determined in good faith (which determination shall be conclusive and binding upon Borrowers) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period, (ii) Agent has received notice from the Required Lenders that the Eurodollar Rate determined or to be determined for 41 such Interest Period will not adequately and fairly reflect the cost to Lenders of making or maintaining Eurodollar Rate Loans during such Interest Period, or (iii) Dollar deposits in the principal amounts of the Eurodollar Rate Loans to which such Interest Period is to be applicable are not generally available in the London interbank market, Agent shall give telecopy or telephonic notice thereof to Administrative Borrower as soon as practicable thereafter, and will also give prompt written notice to Administrative Borrower when such conditions no longer exist. If such notice is given (A) any Eurodollar Rate Loans requested to be made on the first day of such Interest Period shall be made as Prime Rate Loans, (B) any Loans that were to have been converted on the first day of such Interest Period to, or continued as, Eurodollar Rate Loans shall be converted to or continued as Prime Rate Loans and (C) each outstanding Eurodollar Rate Loan shall be converted, on the last day of the then-current Interest Period thereof, to Prime Rate Loans. Until such notice has been withdrawn by Agent, no further Eurodollar Rate Loans shall be made or continued as such, nor shall any Borrower (or Administrative Borrower on behalf of any Borrower) have the right to convert Prime Rate Loans to Eurodollar Rate Loans. (c) Notwithstanding any other provision herein, if the adoption of or any change in any law, treaty, rule or regulation or final, non-appealable determination of an arbitrator or a court or other Governmental Authority or in the interpretation or application thereof occurring after the date hereof shall make it unlawful for Agent or any Lender to make or maintain Eurodollar Rate Loans as contemplated by this Agreement, (i) Agent or such Lender shall promptly give written notice of such circumstances to Administrative Borrower (which notice shall be withdrawn whenever such circumstances no longer exist), (ii) the commitment of such Lender hereunder to make Eurodollar Rate Loans, continue Eurodollar Rate Loans as such and convert Prime Rate Loans to Eurodollar Rate Loans shall forthwith be canceled and, until such time as it shall no longer be unlawful for such Lender to make or maintain Eurodollar Rate Loans, such Lender shall then have a commitment only to make a Prime Rate Loan when a Eurodollar Rate Loan is requested and (iii) such Lender's Loans then outstanding as Eurodollar Rate Loans, if any, shall be converted automatically to Prime Rate Loans on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law. If any such conversion of a Eurodollar Rate Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, Borrowers shall pay to such Lender such amounts, if any, as may be required pursuant to Section 3.3(d) below. (d) Borrowers shall indemnify Agent and each Lender and to hold Agent and each Lender harmless from any loss or expense (excluding lost profits) which Agent or such Lender may sustain or incur as a consequence of (i) default by Borrower in making a borrowing of, conversion into or extension of Eurodollar Rate Loans after such Borrower (or Administrative Borrower on behalf of such Borrower) has given a notice requesting the same in accordance with the provisions of this Loan Agreement, (ii) default by any Borrower in making any prepayment of a Eurodollar Rate Loan after such Borrower has given a notice thereof in accordance with the provisions of this Agreement, and (iii) the making of a prepayment of Eurodollar Rate Loans on a day which is not the last day of an Interest Period with respect thereto. With respect to Eurodollar Rate Loans, such indemnification may include an amount equal to the excess, if any, of (A) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, converted or extended, for the period from the date of such prepayment or of such 42 failure to borrow, convert or extend to the last day of the applicable Interest Period (or, in the case of a failure to borrow, convert or extend, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Eurodollar Rate Loans provided for herein over (B) the amount of interest (as determined by such Agent or such Lender) which would have accrued to Agent or such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank Eurodollar market. This covenant shall survive the termination or non-renewal of this Loan Agreement and the payment of the Obligations. SECTION 4. CONDITIONS PRECEDENT 4.1 Conditions Precedent to Initial Loans and Letter of Credit Accommodations. Each of the following is a condition precedent to Agent and Lenders making the initial Loans and providing the initial Letter of Credit Accommodations hereunder: (a) Agent shall have received, in form and substance reasonably satisfactory to Agent, all releases, terminations and such other documents as Agent may request to evidence and effectuate the termination by Bank One of the Bank One Financing and the termination and release by it of any interest in and to any assets and properties of each Borrower, duly authorized, executed and delivered by it or each of them, including, but not limited to, (i) UCC termination statements for all UCC financing statements previously filed by it or any of them or their predecessors, as secured party and any Borrower, as debtor; and (ii) satisfactions and discharges of any mortgages, deeds of trust or deeds to secure debt by any Borrower in favor of it or any of them, in form acceptable for recording with the appropriate Governmental Authority; (b) Agent shall have received, in form and substance reasonably satisfactory to Agent, all releases, terminations and such other documents as Agent may request to evidence and effectuate the termination by CIT of the CIT Financing and the termination and release by it of any interest in and to any assets and properties of each Borrower, duly authorized, executed and delivered by it or each of them, including, but not limited to, (i) UCC termination statements for all UCC financing statements previously filed by it or any of them or their predecessors, as secured party and any Borrower, as debtor; and (ii) satisfactions and discharges of any mortgages, deeds of trust or deeds to secure debt by any Borrower in favor of it or any of them, in form acceptable for recording with the appropriate Governmental Authority; (c) Agent shall have received evidence, in form and substance satisfactory to Agent, that Borrowers have exchanged the Existing Senior Subordinated Notes (other than the Remaining Existing Subordinated Note Indebtedness) for the Senior Subordinated Notes. (d) Agent shall have received evidence, in form and substance satisfactory to Agent, that Borrowers have exchanged the Existing Junior Subordinated Notes for the Junior Subordinated Notes. (e) Agent shall have received a true, correct and complete copy of the Nomura Payoff Agreement, duly authorized, executed and delivered by the parties thereto. 43 (f) all requisite corporate action and proceedings in connection with this Agreement and the other Financing Agreements shall be in form and substance reasonably satisfactory to Agent, and Agent shall have received all information and copies of all documents, including records of requisite corporate action and proceedings which Agent may have reasonably requested in connection therewith, such documents where requested by Agent or its counsel to be certified by appropriate corporate officers or Governmental Authority (and including a copy of the certificate of incorporation of each Borrower certified by the Secretary of State (or equivalent Governmental Authority) which shall set forth the same complete corporate name of such Borrower as is set forth herein and such document as shall set forth the organizational identification number of each Borrower, if one is issued in its jurisdiction of incorporation); (g) no material adverse change shall have occurred in the assets, business or prospects of Borrowers since the date of Agent's latest field examination (not including for this purpose the field review referred to in clause (e) below) and no change or event shall have occurred which would impair the ability of any Borrower or Obligor to perform its obligations hereunder or under any of the other Financing Agreements to which it is a party or the ability of Agent or any Lender to enforce the Obligations or realize upon the Collateral; (h) Agent shall have completed a field review of the Records and such other information with respect to the Collateral as Agent may require to determine the amount of Loans available to Borrowers (including, without limitation, current perpetual inventory records and/or roll-forwards of Accounts and Inventory through the date of closing and test counts of the Inventory in a manner satisfactory to Agent, together with such supporting documentation as may be necessary or appropriate, and other documents and information that will enable Agent to accurately identify and verify the Collateral), the results of which in each case shall be satisfactory to Agent, not more than three (3) Business Days prior to the date hereof; (i) Borrowers shall have, at their expense, delivered or caused to be delivered to Agent a written orderly liquidation value appraisal as to the Equipment (updated from the most recent appraisal received by Agent as to the Equipment prior to the date of this Agreement) in form, scope and methodology acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent and upon which Agent is expressly permitted to rely; (j) Agent shall have received, in form and substance reasonably satisfactory to Agent, all consents, waivers, acknowledgments and other agreements from third persons which Agent may deem necessary or desirable in order to permit, protect and perfect its security interests in and liens upon the Collateral or to effectuate the provisions or purposes of this Agreement and the other Financing Agreements, including, without limitation, Collateral Access Agreements by owners and lessors of leased premises of each Borrower and by processors and warehouses at which Collateral is located; (k) Agent shall have received the Intercreditor Agreement, in form and substance reasonably satisfactory to Agent, duly authorized, executed and delivered by Term Loan Agent, Borrowers; 44 (l) the Excess Availability as determined by Agent, as of the date hereof, shall be not less than $5,500,000 after giving effect to the initial Loans made or to be made and Letter of Credit Accommodations issued or to be issued in connection with the initial transactions hereunder but without giving effect to the Special Reserve, the Appraisal Reserve and the Rubber Group Reserve; (m) Agent shall have received, in form and substance reasonably satisfactory to Agent, Deposit Account Control Agreements by and among Agent, each Borrower, as the case may be and each bank at which such Borrower has a deposit account (other than the Excluded Deposit Accounts, as defined in Section 5.2(d) hereof), in each case, duly authorized, executed and delivered by such bank and Borrower, as the case may be (or Agent shall be the bank's customer with respect to such deposit account as Agent may specify); (n) Agent shall have received evidence, in form and substance satisfactory to Agent, that Agent has a valid perfected first priority security interest in all of the Collateral, subject only to purchase money security interests in Equipment to the extent permitted in Section 9.8(e) hereof and as set forth on Schedule 8.4 to the Information Certificate, and any security interests on Insurance Premium Collateral to the extent permitted in Section 9.8(k) hereof which may have priority; (o) Agent shall have received and reviewed lien and judgement search results for the jurisdiction of incorporation of each Borrower, the jurisdiction of the chief executive office of each Borrower and all jurisdictions in which assets of Borrowers are located, which search results shall be in form and substance satisfactory to Agent; (p) Agent shall have received originals of the shares of the stock certificates representing all of the issued and outstanding shares of the Capital Stock of LRG, together with stock powers duly executed in blank with respect thereto; (q) Agent shall have received evidence of insurance and loss payee endorsements required hereunder and under the other Financing Agreements, in form and substance reasonably satisfactory to Agent, and certificates of insurance policies and/or endorsements naming Agent as loss payee; (r) Agent shall have received, in form and substance reasonably satisfactory to Agent, such opinion letters of counsel to Borrowers with respect to the Financing Agreements and such other matters as Agent may reasonably request; and (s) the other Financing Agreements and all instruments and documents hereunder and thereunder shall have been duly executed and delivered to Agent, in form and substance satisfactory to Agent. 4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations. Each of the following is an additional condition precedent to Agent and Lenders making the Loans and/or providing Letter of Credit Accommodations to Borrowers, including the initial Loans and 45 Letter of Credit Accommodations and any future Loans and Letter of Credit Accommodations: (a) all representations and warranties contained herein and in the other Financing Agreements shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the date of the making of each such Loan or providing each such Letter of Credit Accommodation and after giving effect thereto, except to the extent that such representations and warranties expressly relate solely to an earlier date (in which case such representations and warranties shall have been true and accurate in all material respects on and as of such earlier date); (b) no law, regulation, order, judgment or decree of any Governmental Authority shall exist, and no action, suit, investigation, litigation or proceeding shall be pending or threatened in any court or before any arbitrator or Governmental Authority, which (i) purports to enjoin, prohibit, restrain or otherwise affect (A) the making of the Loans or providing the Letter of Credit Accommodations, or (B) the consummation of the transactions contemplated pursuant to the terms hereof or the other Financing Agreements or (ii) has or has a reasonable likelihood of having a Material Adverse Effect; and (c) no Default or Event of Default shall exist or shall have occurred and be continuing on and as of the date of the making of such Loan or providing each such Letter of Credit Accommodation and after giving effect thereto. SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST 5.1 Grant of Security Interest. (a) To secure payment and performance of all Obligations, each Borrower hereby grants to Agent, for itself and the benefit of Lenders, a continuing security interest in, a lien upon, and a right of set off against, and hereby assigns to Agent, for itself and the benefit of Lenders, as security, all personal property, and interests in personal property, of each Borrower, whether now owned or hereafter acquired or existing, and wherever located (together with all other collateral security for the Obligations at any time granted to or held or acquired by Agent or any Lender, collectively, the "Collateral"), including: (i) all Accounts; (ii) all general intangibles, including, without limitation, all Intellectual Property; (iii) all goods, including, without limitation, Inventory and Equipment; (iv) all chattel paper, including, without limitation, all tangible and electronic chattel paper; (v) all instruments, including, without limitation, all promissory notes; 46 (vi) all documents; (vii) all deposit accounts; (viii) all letters of credit, banker's acceptances and similar instruments, including all letter-of-credit rights; (ix) all supporting obligations and all present and future liens, security interests, rights, remedies, title and interest in, to and in respect of Receivables and other Collateral, including (A) rights and remedies under or relating to guaranties, contracts of suretyship, letters of credit and credit and other insurance related to the Collateral, (B) rights of stoppage in transit, replevin, repossession, reclamation and other rights and remedies of an unpaid vendor, lienor or secured party, (C) goods described in invoices, documents, contracts or instruments with respect to, or otherwise representing or evidencing, Receivables or other Collateral, including returned, repossessed and reclaimed goods, and (D) deposits by and property of account debtors or other persons securing the obligations of account debtors; (x) all (A) investment property (including securities, whether certificated or uncertificated, securities accounts, security entitlements, commodity contracts or commodity accounts) and (B) monies, credit balances, deposits and other property of any Borrower now or hereafter held or received by or in transit to Agent, any Lender or its Affiliates or at any other depository or other institution from or for the account of any Borrower, whether for safekeeping, pledge, custody, transmission, collection or otherwise; (xi) all commercial tort claims, including, without limitation, those identified in the Information Certificate; (xii) to the extent not otherwise described above, all Receivables; (xiii) all Records; and (xiv) all products and proceeds of the foregoing, in any form, including insurance proceeds and all claims against third parties for loss or damage to, or destruction of or other involuntary conversion of any kind or nature of, any or all of the other Collateral. (b) Excluded Collateral. Notwithstanding anything to the contrary set forth in Section 5.1(a) above, the types or items of Collateral described in such Section shall not include any Equipment (or proceeds thereof) which is or becomes subject to a mortgage or other lien or security interest (including capitalized or finance leases) permitted under Sections 9.8(e) or (m) hereof if the valid grant of a security interest or lien therein to Agent in such Equipment is prohibited by the terms of the agreement between such Borrower and the holder of such mortgage or other lien or security interest or under applicable law and such prohibition has not been or is not waived, or the consent of the holder of the mortgage or other lien or security interest has not been or is not otherwise obtained (it being understood that Borrower shall have no obligation to Agent whatsoever to obtain such consent), or under applicable law such 47 prohibition cannot be waived. 5.2 Perfection of Security Interests. (a) Each Borrower irrevocably and unconditionally authorizes Agent (or its agent) to file at any time and from time to time such financing statements with respect to the Collateral naming Agent or its designee as the secured party and such Borrower as debtor, as Agent may require, and including any other information with respect to such Borrower or otherwise required by part 5 of Article 9 of the Uniform Commercial Code of such jurisdiction as Agent may determine, together with any amendments and continuations with respect thereto, which authorization shall apply to all financing statements filed on, prior to or after the date hereof. Each Borrower hereby ratifies and approves all financing statements naming Agent or its designee as secured party and such Borrower, as the case may be, as debtor with respect to the Collateral (and any amendments with respect to such financing statements) filed by or on behalf of Agent prior to the date hereof in respect of the security interest granted pursuant to this Agreement and ratifies and confirms the authorization of Agent to file such financing statements (and amendments thereto, if any). Each Borrower hereby authorizes Agent to adopt on behalf of such Borrower any symbol required for authenticating any electronic filing. In the event that the description of the collateral in any financing statement naming Agent or its designee as the secured party and any Borrower as debtor includes assets and properties of such Borrower that do not at any time constitute Collateral, whether hereunder, under any of the other Financing Agreements or otherwise, the filing of such financing statement shall nonetheless be deemed authorized by such Borrower to the extent of the Collateral included in such description and it shall not render the financing statement ineffective as to any of the Collateral or otherwise affect the financing statement as it applies to any of the Collateral. In no event shall any Borrower at any time file, or permit, authorize or cause to be filed, any correction statement or termination statement with respect to any financing statement (or amendment or continuation with respect thereto) naming Agent or its designee as secured party and such Borrower as debtor. (b) Each Borrower does not have any chattel paper (whether tangible or electronic) or instruments as of the date of this Agreement, except as set forth in the Information Certificate. In the event that any Borrower shall be entitled to or shall receive any chattel paper or instrument after the date hereof, Borrowers shall promptly notify Agent thereof in writing. Promptly upon the receipt thereof by or on behalf of any Borrower (including by any agent or representative), such Borrower shall deliver, or cause to be delivered to Agent, all tangible chattel paper and instruments that such Borrower has or may at any time acquire, accompanied by such instruments of transfer or assignment duly executed in blank as Agent may from time to time specify, in each case except as Agent may otherwise agree. At Agent's option, each Borrower shall, or Agent may at any time on behalf of any Borrower, cause the original of any such instrument or chattel paper to be conspicuously marked in a form and manner acceptable to Agent with the following legend referring to chattel paper or instruments as applicable: "This [chattel paper][instrument] is subject to the security interest of Congress Financial Corporation, as Agent, pursuant to the Amended and Restated Loan and Security Agreement, dated December 18, 2003, as the same now exists or may be amended, modified, supplemented, extended, restated, renewed or replaced, and any sale, transfer, assignment or encumbrance of this [chattel 48 paper][instrument] violates the rights of such secured party." (c) In the event that any Borrower shall at any time hold or acquire an interest in any electronic chattel paper or any "transferable record" (as such term is defined in Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction), such Borrower shall promptly notify Agent thereof in writing. Promptly upon Agent's request, such Borrower shall take, or cause to be taken, such actions as Agent may request to give Agent control of such electronic chattel paper under Section 9-105 of the UCC and control of such transferable record under Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or, as the case may be, Section 16 of the Uniform Electronic Transactions Act, as in effect in such jurisdiction. (d) None of the Borrowers has any deposit accounts as of the date hereof, except as set forth in the Information Certificate. Borrowers shall not, directly or indirectly, after the date hereof open, establish or maintain any deposit account unless each of the following conditions is satisfied: (i) Agent shall have received not less than five (5) Business Days prior written notice of the intention of any Borrower to open or establish such account which notice shall specify in reasonable detail and specificity acceptable to Agent the name of the account, the owner of the account, the name and address of the bank at which such account is to be opened or established, the individual at such bank with whom such Borrower is dealing and the purpose of the account, (ii) the bank where such account is opened or maintained shall be acceptable to Agent, and (iii) on or before the opening of such deposit account, such Borrower shall as Agent may specify either (A) deliver to Agent a Deposit Account Control Agreement with respect to such deposit account duly authorized, executed and delivered by such Borrower and the bank at which such deposit account is opened and maintained or (B) arrange for Agent to become the customer of the bank with respect to the deposit account on terms and conditions acceptable to Agent. The terms of this subsection (d) shall not apply to deposit accounts specifically and exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of any Borrower's salaried employees (the "Excluded Deposit Accounts"). (e) No Borrower owns or holds, directly or indirectly, beneficially or as record owner or both, any investment property, as of the date hereof, or have any investment account, securities account, commodity account or other similar account with any bank or other financial institution or other securities intermediary or commodity intermediary as of the date hereof, in each case except as set forth in the Information Certificate. (i) In the event that any Borrower shall be entitled to or shall, at any time after the date hereof, hold or acquire any certificated securities, such Borrower shall promptly endorse, assign and deliver the same to Agent, accompanied by such instruments of transfer or assignment duly executed in blank as Agent may from time to time specify. If any securities, now or hereafter acquired by any Borrower are uncertificated and are issued to such Borrower or its nominee directly by the issuer thereof, such Borrower shall immediately notify Agent thereof and shall, as Agent may specify, either (A) direct the issuer to agree to comply with instructions from Agent as to such securities, without further consent of any Borrower or 49 such nominee, or (B) arrange for Agent to become the registered owner of the securities. (ii) Borrowers shall not, directly or indirectly, after the date hereof open, establish or maintain any investment account, securities account, commodity account or any other similar account (other than a deposit account) with any securities intermediary or commodity intermediary unless each of the following conditions is satisfied: (A) Agent shall have received not less than five (5) Business Days prior written notice of the intention of such Borrower to open or establish such account which notice shall specify in reasonable detail and specificity acceptable to Agent the name of the account, the owner of the account, the name and address of the securities intermediary or commodity intermediary at which such account is to be opened or established, the individual at such intermediary with whom such Borrower is dealing and the purpose of the account, (B) the securities intermediary or commodity intermediary (as the case may be) where such account is opened or maintained shall be acceptable to Agent, and (C) on or before the opening of such investment account, securities account or other similar account with a securities intermediary or commodity intermediary, such Borrower shall as Agent may specify either (1) execute and deliver, and cause to be executed and delivered to Agent, an Investment Property Control Agreement with respect thereto duly authorized, executed and delivered by such Borrower and such securities intermediary or commodity intermediary or (2) arrange for Agent to become the entitlement holder with respect to such investment property on terms and conditions acceptable to Agent; provided, that, LPC may maintain its investment account number 390-01616 maintained with Jefferies & Company, Inc. without delivery of an Investment Property Control Agreement so long as at any time the balance therein exceeds $1,000, LPC shall promptly remit such excess to Agent. (f) Borrowers are not the beneficiary or otherwise entitled to any right to payment under any letter of credit, banker's acceptance or similar instrument as of the date hereof, except as set forth in the Information Certificate. In the event that any Borrower shall be entitled to or shall receive any right to payment under any letter of credit, banker's acceptance or any similar instrument, whether as beneficiary thereof or otherwise, after the date hereof, such Borrower shall promptly notify Agent thereof in writing. Such Borrower shall immediately, as Agent may specify, either (i) deliver, or use its reasonable best efforts to cause to be delivered to Agent, with respect to any such letter of credit, banker's acceptance or similar instrument, the written agreement of the issuer and any other nominated Person obligated to make any payment in respect thereof (including any confirming or negotiating bank), in form and substance satisfactory to Agent, consenting to the assignment of the proceeds of the letter of credit to Agent by such Borrower and agreeing to make all payments thereon directly to Agent or as Agent may otherwise direct or (ii) cause Agent to become, at Borrowers' expense, the transferee beneficiary of the letter of credit, banker's acceptance or similar instrument (as the case may be). (g) Borrowers do not have any pending commercial tort claims as of the date hereof, except as set forth in the Information Certificate. In the event that any Borrower shall, at any time after the date hereof have any pending commercial tort claims, such Borrower shall promptly notify Agent thereof in writing, which notice shall (i) set forth in reasonable detail the basis for and nature of such commercial tort claim and (ii) include the express grant by such Borrower to Agent of a security interest in such commercial tort claim (and the proceeds thereof). 50 In the event that such notice does not include such grant of a security interest, the sending thereof by such Borrower to Agent shall be deemed to constitute such grant to Agent. Upon the sending of such notice, any commercial tort claim described therein shall constitute part of the Collateral and shall be deemed included therein. Without limiting the authorization of Agent provided in Section 5.2(a) hereof or otherwise arising by the execution by such Borrower of this Agreement or any of the other Financing Agreements, Agent is hereby irrevocably authorized from time to time and at any time to file such financing statements naming Agent or its designee as secured party and such Borrower as debtor, or any amendments to any financing statements, covering any such commercial tort claim as Collateral. In addition, each Borrower shall promptly upon Agent's request, execute and deliver, or cause to be executed and delivered, to Agent such other agreements, documents and instruments as Agent may reasonably require in connection with such commercial tort claim. (h) Borrowers do not have any goods, documents of title or other Collateral in the custody, control or possession of a third party as of the date of this Agreement, except as set forth in the Information Certificate and except for goods located in the United States in transit to a location of a Borrower permitted herein in the ordinary course of business of such Borrower and in the possession of the carrier transporting such goods. In the event that any goods, documents of title or other Collateral are at any time after the date hereof in the custody, control or possession of any other person not referred to in the Information Certificate (other than such carriers), Borrowers shall promptly notify Agent thereof in writing. Promptly upon Agent's request, Borrowers shall use its reasonable best efforts to deliver to Agent a Collateral Access Agreement duly authorized, executed and delivered by such person and the Borrower that is the owner of such Collateral. (i) Borrowers shall take any other actions reasonably requested by Agent from time to time to cause the attachment, perfection and first priority (subject to the prior security interests on Equipment to the extent permitted pursuant to Section 9.8(e) hereof, the prior purchase money security interests on Equipment to the extent set forth on Schedule 8.4 of the Information Certificate and the security interests on Insurance Premium Collateral to the extent permitted in Section 9.8(k) hereof in the event it is determined that any such security interests have priority), and the ability of Agent to enforce, the security interest of Agent in any and all of the Collateral, including, without limitation, (i) executing, delivering and, where appropriate, filing financing statements and amendments relating thereto under the UCC or other applicable law, to the extent, if any, that any Borrower's signature thereon is required therefor, (ii) causing Agent's name to be noted as secured party on any certificate of title for a titled good if such notation is a condition to attachment, perfection or priority of, or ability of Agent to enforce, the security interest of Agent in such Collateral, (iii) complying with any provision of any statute, regulation or treaty of the United States as to any Collateral if compliance with such provision is a condition to attachment, perfection or priority of, or ability of Agent to enforce, the security interest of Agent in such Collateral, and (iv) taking all commercially reasonable actions to obtain the consents and approvals of any Governmental Authority or third party, including, without limitation, any consent of any licensor, lessor or other person obligated on Collateral, and taking all commercially reasonable actions required by any earlier versions of the UCC or by other law, as applicable in any relevant jurisdiction. 51 SECTION 6. COLLECTION AND ADMINISTRATION 6.1 Borrowers' Loan Accounts. Agent shall maintain one or more loan account(s) on its books in which shall be recorded (a) all Loans, Letter of Credit Accommodations and other Obligations and the Collateral, (b) all payments made by or on behalf of any Borrower and (c) all other appropriate debits and credits as provided in this Agreement, including interest, fees, charges, costs and expenses. All entries in the loan account(s) shall be made in accordance with Agent's customary practices as in effect from time to time. 6.2 Statements. Agent shall render to Administrative Borrower each month a statement setting forth the balance in the Borrowers' loan account(s) maintained by Agent for Borrowers pursuant to the provisions of this Agreement, including principal, interest, fees, costs and expenses. Each such statement shall be subject to subsequent adjustment by Agent but shall, absent manifest errors or omissions, be considered correct and deemed accepted by Borrowers and conclusively binding upon Borrowers and as an account stated, except to the extent that Agent receives a written notice from Administrative Borrower of any specific exceptions of Administrative Borrower thereto within thirty (30) days after the date such statement has been received by Administrative Borrower. Until such time as Agent shall have rendered to Administrative Borrower a written statement as provided above, the balance in any Borrower's loan account(s) shall be presumptive evidence of the amounts due and owing to Agent and Lenders by Borrowers. 6.3 Collection of Accounts. (a) Borrowers shall establish and maintain, at their expense, blocked accounts or lockboxes and related blocked accounts (in either case, "Blocked Accounts"), with such banks as are acceptable to Agent, into which Borrowers shall promptly deposit and direct their respective account debtors to directly remit all payments on Receivables and all payments constituting proceeds of Inventory or other Collateral in the identical form in which such payments are made, whether by cash, by check or other manner. Borrowers shall deliver, or cause to be delivered to Agent, a Deposit Account Control Agreement duly authorized, executed and delivered by each bank where a Blocked Account is maintained as provided in Section 5.2 hereof or at any time and from time to time Agent may become the bank's customer with respect to any of the Blocked Accounts and promptly upon Agent's request, Borrowers shall execute and deliver such agreements and documents as Agent may require in connection therewith. Each Borrower agrees that all payments made to such Blocked Accounts or other funds received and collected by Agent or any Lender, whether in respect of the Receivables, as proceeds of Inventory or other Collateral or otherwise, shall be treated as payments to Agent and Lenders in respect of the Obligations and therefore shall constitute the property of Agent (other than the Excluded Deposit Accounts) and Lenders to the extent of the then outstanding Obligations. (b) For purposes of calculating the amount of Loans available to each Borrower, such payments will be applied (conditional upon final collection) to the Obligations on the Business Day of receipt by Agent of immediately available funds in the Agent Payment 52 Account, provided such payments and notice thereof are received in accordance with Agent's usual and customary practices as in effect from time to time and within sufficient time to credit such Borrower's loan account on such day, and if not, then on the next Business Day. For the purposes of calculating interest on the Obligations, such payments or other funds received will be applied (conditional upon final collection) to the Obligations in accordance with Section 6.4(a) hereof one (1) Business Day following the date of receipt of immediately available funds by Agent in the Agent Payment Account provided such payments or other funds and notice thereof are received in accordance with Agent's usual and customary practices as in effect from time to time and within sufficient time to credit such Borrower's loan account on such day, and if not, then on the next Business Day. (c) Each Borrower and their respective Subsidiaries or other Affiliates (other than individual shareholders) shall, acting as trustee for Agent, receive, as the property of Agent, any monies, checks, notes, drafts or any other payment relating to and/or proceeds of Accounts or other Collateral which come into their possession or under their control and, immediately upon receipt thereof, shall deposit or cause the same to be deposited in the Blocked Accounts, or remit the same or cause the same to be remitted, in kind, to Agent. In no event shall the same be commingled with any Borrower's own funds. Borrowers agree to reimburse Agent on demand for any amounts owed or paid to any bank or other financial institution at which a Blocked Account or any other deposit account or investment account is established or any other bank, financial institution or other person involved in the transfer of funds to or from the Blocked Accounts arising out of Agent's payments to or indemnification of such bank, financial institution or other person in connection with such Blocked Account or any amount received therein or transferred therefrom. The obligations of Borrowers to reimburse Agent for such amounts pursuant to this Section 6.3 shall survive the termination of this Agreement. 6.4 Payments. (a) All Obligations shall be payable to the Agent Payment Account as provided in Section 6.3 or to such other place as Agent may designate in writing to Borrowers from time to time. Other than as expressly set forth in Section 2.6 hereof (and only with respect to proceeds of Real Property, subject to the terms of Section 2.4 of the Intercreditor Agreement), Agent shall apply payments received or collected from any Borrower or for the account of any Borrower (including the monetary proceeds of collections or of realization upon any Collateral), other than proceeds from the sale or other disposition of Real Property (which proceeds shall be applied as set forth in the Intercreditor Agreement) , as follows: first, to pay any fees, indemnities or expense reimbursements then due to Agent and Lenders from any Borrower; second, to pay interest due in respect of any Loans (and including any Special Agent Advances); third, to pay or prepay principal in respect of Special Agent Advances; fourth, to pay principal due in respect of the Loans in the following order: at all times prior to the existence of an Event of Default, first to the Revolving Loans and then to the Term Loans and at all times after an Event of Default exists or has occurred and in continuing, in such order and manner as Agent determines; fifth, to pay or prepay any other Obligations whether or not then due, in such order and manner as Agent determines. Notwithstanding anything to the contrary contained in this Agreement, (i) unless so directed by Administrative Borrower, or unless a Default or an Event of Default shall exist or 53 have occurred and be continuing, Agent shall not apply any payments which it receives to any Eurodollar Rate Loans, except (A) on the expiration date of the Interest Period applicable to any such Eurodollar Rate Loans or (B) in the event that there are no outstanding Prime Rate Loans and (ii) to the extent any Borrower uses any proceeds of the Loans or Letter of Credit Accommodations to acquire rights in or the use of any Collateral or to repay any Indebtedness used to acquire rights in or the use of any Collateral, payments in respect of the Obligations shall be deemed applied first to the Obligations arising from Loans and Letter of Credit Accommodations that were not used for such purposes and second to the Obligations arising from Loans and Letter of Credit Accommodations the proceeds of which were used to acquire rights in or the use of any Collateral in the chronological order in which such Borrower acquired such rights in or the use of such Collateral. (b) At Agent's option, all principal, interest, fees, costs, expenses and other charges provided for in this Agreement or the other Financing Agreements may be charged directly to the loan account(s) of any Borrower maintained by Agent. Borrowers shall make all payments to Agent and Lenders on the Obligations free and clear of, and without deduction or withholding for or on account of, any setoff, counterclaim, defense, duties, taxes, levies, imposts, fees, deductions, withholding, restrictions or conditions of any kind. If after receipt of any payment of, or proceeds of Collateral applied to the payment of, any of the Obligations, Agent or any Lender is required to surrender or return such payment or proceeds to any Person for any reason, then the Obligations intended to be satisfied by such payment or proceeds shall be reinstated and continue and this Agreement shall continue in full force and effect as if such payment or proceeds had not been received by Agent or such Lender. Borrowers shall be liable to pay to Agent, and do hereby indemnify and hold Agent and Lenders harmless for the amount of any payments or proceeds surrendered or returned. This Section 6.4(b) shall remain effective notwithstanding any contrary action which may be taken by Agent or any Lender in reliance upon such payment or proceeds. This Section 6.4 (b) shall survive the payment of the Obligations and the termination of this Agreement. 6.5 Authorization to Make Loans. Agent and Lenders are authorized to make the Loans and provide the Letter of Credit Accommodations based upon telephonic or other instructions received from anyone purporting to be (and believed by Agent to be) an officer of Administrative Borrower or any Borrower or other authorized person or, at the discretion of Agent, if such Loans are necessary to satisfy any Obligations. All requests for Loans or Letter of Credit Accommodations hereunder shall specify the date on which the requested advance is to be made or the requested Letter of Credit Accommodations established (which day shall be a Business Day) and the amount of the requested Loan. Requests received after 11:00 a.m. New York City time on any day shall be deemed to have been made as of the opening of business on the immediately following Business Day. All Loans and Letter of Credit Accommodations under this Agreement shall be conclusively presumed to have been made to, and at the request of and for the benefit of, any Borrower when deposited to the credit of any Borrower or otherwise disbursed or established in accordance with the instructions of any Borrower or in accordance with the terms and conditions of this Agreement. 6.6 Use of Proceeds. Borrowers shall use the initial proceeds of the Loans provided 54 by Agent to Borrowers hereunder only for: (a) payments to each of the persons listed in the disbursement direction letter furnished by Borrowers to Agent on or about the date hereof and (b) costs, expenses and fees in connection with the preparation, negotiation, execution and delivery of this Agreement and the other Financing Agreements. All other Loans made or Letter of Credit Accommodations provided to or for the benefit of any Borrower pursuant to the provisions hereof shall be used by such Borrower only for general operating, working capital and other proper corporate purposes of such Borrower not otherwise prohibited by the terms hereof. None of the proceeds will be used, directly or indirectly, for the purpose of purchasing or carrying any margin security or for the purposes of reducing or retiring any indebtedness which was originally incurred to purchase or carry any margin security or for any other purpose which might cause any of the Loans to be considered a "purpose credit" within the meaning of Regulation U of the Board of Governors of the Federal Reserve System, as amended. 6.7 Appointment of Administrative Borrower as Agent for Requesting Loans and Receipts of Loans and Statements. (a) Each Borrower hereby irrevocably appoints and constitutes Administrative Borrower as its agent to request and receive Loans and Letter of Credit Accommodations pursuant to this Agreement and the other Financing Agreements from Agent or any Lender in the name or on behalf of such Borrower. Agent and Lenders may disburse the Loans to such bank account of Administrative Borrower or a Borrower or otherwise make such Loans to a Borrower and provide such Letter of Credit Accommodations to a Borrower as Administrative Borrower may designate or direct, without notice to any other Borrower or Obligor. Notwithstanding anything to the contrary contained herein, Agent may at any time and from time to time require that Loans to or for the account of any Borrower be disbursed directly to an operating account of such Borrower. (b) Administrative Borrower hereby accepts the appointment by Borrowers to act as the agent of Borrowers pursuant to this Section 6.7. Administrative Borrower shall ensure that the disbursement of any Loans to each Borrower requested by or paid to or for the account of such Borrower, or the issuance of any Letter of Credit Accommodations for a Borrower hereunder, shall be paid to or for the account of such Borrower. (c) Each Borrower hereby irrevocably appoints and constitutes Administrative Borrower as its agent to receive statements on account and all other notices from Agent and Lenders with respect to the Obligations or otherwise under or in connection with this Agreement and the other Financing Agreements. (d) Any notice, election, representation, warranty, agreement or undertaking by or on behalf of any other Borrower by Administrative Borrower shall be deemed for all purposes to have been made by such Borrower, as the case may be, and shall be binding upon and enforceable against such Borrower to the same extent as if made directly by such Borrower. (e) No purported termination of the appointment of Administrative Borrower as agent as aforesaid shall be effective, except after ten (10) days' prior written notice to Agent. 55 6.8 Pro Rata Treatment. Except to the extent otherwise provided in this Agreement: (a) the making and conversion of Loans shall be made among the Lenders based on their respective Pro Rata Shares and (b) each payment on account of any Obligations to or for the account of one or more of Lenders in respect of any Obligations due on a particular day shall be allocated among the Lenders entitled to such payments based on their respective Pro Rata Shares and shall be distributed accordingly. 6.9 Sharing of Payments, Etc. (a) Each Borrower agrees that, in addition to (and without limitation of) any right of setoff, banker's lien or counterclaim Agent or any Lender may otherwise have, each Lender shall be entitled, at its option (but subject, as among Agent and Lenders, to the provisions of Section 12.3(b) hereof), to offset balances held by it for the account of such Borrower at any of its offices, in dollars or in any other currency, against any principal of or interest on any Loans owed to such Lender or any other amount payable to such Lender hereunder, that is not paid when due (regardless of whether such balances are then due to such Borrower), in which case it shall promptly notify Administrative Borrower and Agent thereof; provided, that, such Lender's failure to give such notice shall not affect the validity thereof. (b) If any Lender (including Agent) shall obtain from any Borrower payment of any principal of or interest on any Loan owing to it or payment of any other amount under this Agreement or any of the other Financing Agreements through the exercise of any right of setoff, banker's lien or counterclaim or similar right or otherwise (other than from Agent as provided herein), and, as a result of such payment, such Lender shall have received more than its Pro Rata Share of the principal of the Loans or more than its share of such other amounts then due hereunder or thereunder by any Borrower to such Lender than the percentage thereof received by any other Lender, it shall promptly pay to Agent, for the benefit of Lenders, the amount of such excess and simultaneously purchase from such other Lenders a participation in the Loans or such other amounts, respectively, owing to such other Lenders (or such interest due thereon, as the case may be) in such amounts, and make such other adjustments from time to time as shall be equitable, to the end that all Lenders shall share the benefit of such excess payment (net of any expenses that may be incurred by such Lender in obtaining or preserving such excess payment) in accordance with their respective Pro Rata Shares or as otherwise agreed by Lenders. To such end all Lenders shall make appropriate adjustments among themselves (by the resale of participation sold or otherwise) if such payment is rescinded or must otherwise be restored. (c) Each Borrower agrees that any Lender purchasing a participation (or direct interest) as provided in this Section may exercise, in a manner consistent with this Section, all rights of setoff, banker's lien, counterclaim or similar rights with respect to such participation as fully as if such Lender were a direct holder of Loans or other amounts (as the case may be) owing to such Lender in the amount of such participation. (d) Nothing contained herein shall require any Lender to exercise any right of setoff, banker's lien, counterclaim or similar right or shall affect the right of any Lender to 56 exercise, and retain the benefits of exercising, any such right with respect to any other Indebtedness or obligation of any Borrower. If, under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a setoff to which this Section applies, such Lender shall, to the extent practicable, assign such rights to Agent for the benefit of Lenders and, in any event, exercise its rights in respect of such secured claim in a manner consistent with the rights of Lenders entitled under this Section to share in the benefits of any recovery on such secured claim. 6.10 Settlement Procedures. (a) In order to administer the Credit Facility in an efficient manner and to minimize the transfer of funds between Agent and Lenders, Agent may, at its option, subject to the terms of this Section, make available, on behalf of Lenders, the full amount of the Loans requested or charged to any Borrower's loan account(s) or otherwise to be advanced by Lenders pursuant to the terms hereof, without requirement of prior notice to Lenders of the proposed Loans. (b) With respect to all Loans made by Agent on behalf of Lenders as provided in this Section, the amount of each Lender's Pro Rata Share of the outstanding Loans shall be computed weekly, and shall be adjusted upward or downward on the basis of the amount of the outstanding Loans as of 5:00 p.m. New York City time on the Business Day immediately preceding the date of each settlement computation; provided, that, Agent retains the absolute right at any time or from time to time to make the above described adjustments at intervals more frequent than weekly, but in no event more than twice in any week. Agent shall deliver to each of the Lenders after the end of each week, or at such lesser period or periods as Agent shall determine, a summary statement of the amount of outstanding Loans for such period (such week or lesser period or periods being hereinafter referred to as a "Settlement Period"). If the summary statement is sent by Agent and received by a Lender prior to 12:00 p.m. New York City time, then such Lender shall make the settlement transfer described in this Section by no later than 3:00 p.m. New York City time on the same Business Day and if received by a Lender after 12:00 p.m. New York City time, then such Lender shall make the settlement transfer by not later than 3:00 p.m. New York City time on the next Business Day following the date of receipt. If, as of the end of any Settlement Period, the amount of a Lender's Pro Rata Share of the outstanding Loans is more than such Lender's Pro Rata Share of the outstanding Loans as of the end of the previous Settlement Period, then such Lender shall forthwith (but in no event later than the time set forth in the preceding sentence) transfer to Agent by wire transfer in immediately available funds the amount of the increase. Alternatively, if the amount of a Lender's Pro Rata Share of the outstanding Loans in any Settlement Period is less than the amount of such Lender's Pro Rata Share of the outstanding Loans for the previous Settlement Period, Agent shall forthwith transfer to such Lender by wire transfer in immediately available funds the amount of the decrease. The obligation of each of the Lenders to transfer such funds and effect such settlement shall be irrevocable and unconditional and without recourse to or warranty by Agent. Agent and each Lender agrees to mark its books and records at the end of each Settlement Period to show at all times the dollar amount of its Pro Rata Share of the outstanding Loans and Letter of Credit Accommodations. Each Lender shall only be entitled to receive interest on its Pro Rata Share of 57 the Loans to the extent such Loans have been funded by such Lender. Because the Agent on behalf of Lenders may be advancing and/or may be repaid Loans prior to the time when Lenders will actually advance and/or be repaid such Loans, interest with respect to Loans shall be allocated by Agent in accordance with the amount of Loans actually advanced by and repaid to each Lender and the Agent and shall accrue from and including the date such Loans are so advanced to but excluding the date such Loans are either repaid by Borrowers or actually settled with the applicable Lender as described in this Section. (c) To the extent that Agent has made any such amounts available and the settlement described above shall not yet have occurred, upon repayment of any Loans by a Borrower, Agent may apply such amounts repaid directly to any amounts made available by Agent pursuant to this Section. In lieu of weekly or more frequent settlements, Agent may, at its option, at any time require each Lender to provide Agent with immediately available funds representing its Pro Rata Share of each Loan, prior to Agent's disbursement of such Loan to Borrower. In such event, all Loans under this Agreement shall be made by the Lenders simultaneously and proportionately to their Pro Rata Shares. No Lender shall be responsible for any default by any other Lender in the other Lender's obligation to make a Loan requested hereunder nor shall the Commitment of any Lender be increased or decreased as a result of the default by any other Lender in the other Lender's obligation to make a Loan hereunder. (d) If Agent is not funding a particular Loan to a Borrower (or Administrative Borrower for the benefit of such Borrower) pursuant to this Section on any day, Agent may assume that each Lender will make available to Agent such Lender's Pro Rata Share of the Loan requested or otherwise made on such day and Agent may, in its discretion, but shall not be obligated to, cause a corresponding amount to be made available to or for the benefit of such Borrower on such day. If Agent makes such corresponding amount available to a Borrower and such corresponding amount is not in fact made available to Agent by such Lender, Agent shall be entitled to recover such corresponding amount on demand from such Lender together with interest thereon for each day from the date such payment was due until the date such amount is paid to Agent at the Federal Funds Rate for each day during such period (as published by the Federal Reserve Bank of New York or at Agent's option based on the arithmetic mean determined by Agent of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by each of the three leading brokers of Federal funds transactions in New York City selected by Agent) and if such amounts are not paid within three (3) days of Agent's demand, at the highest Interest Rate provided for in Section 3.1 hereof applicable to Prime Rate Loans. During the period in which such Lender has not paid such corresponding amount to Agent, notwithstanding anything to the contrary contained in this Agreement or any of the other Financing Agreements, the amount so advanced by Agent to or for the benefit of any Borrower shall, for all purposes hereof, be a Loan made by Agent for its own account. Upon any such failure by a Lender to pay Agent, Agent shall promptly thereafter notify Administrative Borrower of such failure and Borrowers shall pay such corresponding amount to Agent for its own account within five (5) Business Days of Administrative Borrower's receipt of such notice. A Lender who fails to pay Agent its Pro Rata Share of any Loans made available by the Agent on such Lender's behalf, or any Lender who fails to pay any other amount owing by it to Agent, is a "Defaulting Lender". Agent shall not be obligated to transfer to a Defaulting 58 Lender any payments received by Agent for the Defaulting Lender's benefit, nor shall a Defaulting Lender be entitled to the sharing of any payments hereunder (including any principal, interest or fees). Amounts payable to a Defaulting Lender shall instead be paid to or retained by Agent. Agent may hold and, in its discretion, relend to a Borrower the amount of all such payments received or retained by it for the account of such Defaulting Lender. For purposes of voting or consenting to matters with respect to this Agreement and the other Financing Agreements and determining Pro Rata Shares, such Defaulting Lender shall be deemed not to be a "Lender" and such Lender's Commitment shall be deemed to be zero (0). This Section shall remain effective with respect to a Defaulting Lender until such default is cured. The operation of this Section shall not be construed to increase or otherwise affect the Commitment of any Lender, or relieve or excuse the performance by any Borrower or Obligor of their duties and obligations hereunder. (e) Nothing in this Section or elsewhere in this Agreement or the other Financing Agreements shall be deemed to require Agent to advance funds on behalf of any Lender, to relieve any Lender from its obligation to fulfill its Commitment hereunder or to prejudice any rights that any Borrower may have against any Lender as a result of any default by any Lender hereunder in fulfilling its Commitment. 6.11 Obligations Several; Independent Nature of Lenders' Rights. The obligation of each Lender hereunder is several, and no Lender shall be responsible for the obligation or commitment of any other Lender hereunder. Nothing contained in this Agreement or any of the other Financing Agreements and no action taken by the Lenders pursuant hereto or thereto shall be deemed to constitute the Lenders to be a partnership, an association, a joint venture or any other kind of entity. The amounts payable at any time hereunder to each Lender shall be a separate and independent debt, and subject to Section 12.3 hereof, each Lender shall be entitled to protect and enforce its rights arising out of this Agreement and it shall not be necessary for any other Lender to be joined as an additional party in any proceeding for such purpose. SECTION 7. COLLATERAL REPORTING AND COVENANTS 7.1 Collateral Reporting. (a) Borrowers shall provide Agent with the following documents in a form reasonably satisfactory to Agent: (i) on a regular basis as required by Agent, schedules of sales made, credits issued and cash received; (ii) as soon as possible after the end of each month (but in any event within ten (10) Business Days after the end thereof), on a monthly basis or more frequently as Agent may request, (A) inventory reports, (B) inventory reports by location and category (and including the amounts of Inventory and the value thereof at any leased locations and at premises of warehouses, processors or other third parties), (C) agings of accounts receivable (together with 59 a reconciliation to the previous month's aging and general ledger) and (D) agings of accounts payable (and including information indicating the amounts owing to owners and lessors of leased premises, warehouses, processors and other third parties from time to time in possession of any Collateral); (iii) upon Agent's request, (A) copies of customer statements, purchase orders, sales invoices, credit memos, remittance advices and reports, and copies of deposit slips and bank statements, (B) copies of shipping and delivery documents, and (C) copies of purchase orders, invoices and delivery documents for Inventory and Equipment acquired by any Borrower; (iv) such other reports as to the Collateral as Agent shall request from time to time. (b) If any Borrower's records or reports of the Collateral are prepared or maintained by an accounting service, contractor, shipper or other agent, such Borrower hereby irrevocably authorizes such service, contractor, shipper or agent to deliver such records, reports, and related documents to Agent and to follow Agent's instructions with respect to further services at any time that an Event of Default exists or has occurred and is continuing. 7.2 Accounts Covenants. (a) Borrowers shall notify Agent promptly of: (i) any material delay in any Borrower's performance of any of its material obligations to any account debtor or the assertion of any material claims, offsets, defenses or counterclaims by any account debtor, or any material disputes with account debtors, or any settlement, adjustment or compromise thereof, (ii) all material adverse information known to any Borrower relating to the financial condition of any account debtor and (iii) any event or circumstance which, to the best of any Borrower's knowledge, would cause Agent to consider any then existing Accounts as no longer constituting Eligible Accounts. No credit, discount, allowance or extension or agreement for any of the foregoing shall be granted to any account debtor without Agent's consent, except in the ordinary course of a Borrower's business in accordance with practices and policies previously disclosed in writing to Agent and except as set forth in the schedules delivered to Agent pursuant to Section 7.1(a) above. Notwithstanding anything in this Agreement to the contrary, so long as no Event of Default exists or has occurred and is continuing, Borrowers shall settle, adjust or compromise any claim, offset, counterclaim or dispute with any account debtor. Notwithstanding anything in this Agreement to the contrary, at any time that an Event of Default exists or has occurred and is continuing, Agent shall, at its option, upon notice to Borrowers, have the exclusive right to settle, adjust or compromise any claim, offset, counterclaim or dispute with account debtors or grant any credits, discounts or allowances. (b) With respect to each Account: (i) the amounts shown on any invoice delivered to Agent or schedule thereof delivered to Agent shall be true and complete, (ii) no payments shall be made thereon except payments immediately delivered to Agent pursuant to the terms of this Agreement, (iii) except as provided in Section 7.2(a) above, no credit, discount, allowance or extension or agreement for any of the foregoing shall be granted to any account 60 debtor except as reported to Agent in accordance with this Agreement and except for credits, discounts, allowances or extensions made or given in the ordinary course of each Borrower's business in accordance with practices and policies previously disclosed to Agent, (iv) there shall be no setoffs, deductions, contras, defenses, counterclaims or disputes existing or asserted with respect thereto except as reported to Agent in accordance with the terms of this Agreement, (v) none of the transactions giving rise thereto will violate any applicable foreign, Federal, State or local laws or regulations, all documentation relating thereto will be legally sufficient under such laws and regulations and all such documentation will be legally enforceable in accordance with its terms. (c) Agent shall have the right at any time or times, in Agent's name or in the name of a nominee of Agent, to verify the validity, amount or any other matter relating to any Receivables or other Collateral, by mail, telephone, facsimile transmission or otherwise. 7.3 Inventory Covenants. With respect to the Inventory: (a) each Borrower shall at all times maintain inventory records reasonably satisfactory to Agent, keeping correct and accurate records itemizing and describing the kind, type, quality and quantity of Inventory, such Borrower's cost therefor and daily withdrawals therefrom and additions thereto; (b) Borrowers shall conduct a physical count of the Inventory at least once each year but at any time or times as Agent may request at any time an Event of Default exists or has occurred and is continuing, and promptly following such physical inventory shall supply Agent with a report in such form and with such specificity as may be satisfactory to Agent concerning such physical count; (c) Borrowers shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Agent, except for sales of Inventory in the ordinary course of its business and except to move Inventory directly from one location set forth or permitted herein to another such location and except for Inventory shipped from the manufacturer thereof to such Borrower which is in transit to the locations set forth or permitted herein; (d) upon Agent's request, Borrowers shall, at their expense, no more than once in any twelve (12) month period, but at any time or times as Agent may request at any time an Event of Default exists or has occurred and is continuing, deliver or cause to be delivered to Agent written appraisals (or updates of appraisals) as to the Inventory in form, scope and methodology acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely; (e) Borrowers shall produce, use, store and maintain the Inventory with all reasonable care and caution and in accordance with applicable standards of their insurance and in material conformity with applicable laws (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) none of the Inventory or other Collateral constitutes farm products or the proceeds thereof; (g) each Borrower assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory; (h) Borrowers shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower to repurchase such Inventory, other than the right of customers to return any product that does not meet the specifications provided to Borrowers by the customer in accordance with the Borrowers' current practices as in effect on the date hereof; (i) Borrowers shall keep the Inventory in good and marketable condition; and (j) Borrowers and shall not, without prior written notice to Agent or the specific identification of such Inventory in 61 a report with respect thereto provided by Administrative Borrower to Agent pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approval. 7.4 Equipment Covenants. With respect to the Equipment: (a) upon Agent's request, Borrowers shall, at their expense, no more than once in any twelve (12) month period, but at any time or times as Agent may request at any time an Event of Default exists or has occurred and is continuing, deliver or cause to be delivered to Agent written appraisals (or updates of appraisals) as to the Equipment in form, scope and methodology acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent and upon which Agent is expressly permitted to rely; (b) Borrowers shall keep the Equipment in good order, repair, running and marketable condition (ordinary wear and tear excepted); (c) Borrowers shall use the Equipment with all reasonable care and caution and in accordance with applicable standards of any insurance and in material conformity with all applicable laws; (d) the Equipment is and shall be used in the business of Borrowers and not for personal, family, household or farming use; (e) Borrowers shall not remove any Equipment from the locations set forth or permitted herein, except to the extent necessary to have any Equipment repaired or maintained in the ordinary course of its business or to move Equipment directly from one location set forth or permitted herein to another such location and except for the movement of motor vehicles used by or for the benefit of such Borrower in the ordinary course of business; (f) the Equipment is now and shall remain personal property and Borrowers shall not permit any of the Equipment to be or become a part of or affixed to real property; and (g) each Borrower assumes all responsibility and liability arising from its use of the Equipment. 7.5 Power of Attorney. Each Borrower hereby irrevocably designates and appoints Agent (and all persons designated by Agent) as such Borrower's true and lawful attorney-in-fact, and authorizes Agent, in such Borrower's or Agent's name, to: (a) at any time an Event of Default exists or has occurred and is continuing (i) demand payment on Receivables or other Collateral, (ii) enforce payment of Receivables by legal proceedings or otherwise, (iii) exercise all of such Borrower's rights and remedies to collect any Receivable or other Collateral, (iv) sell or assign any Receivable upon such terms, for such amount and at such time or times as the Agent deems advisable, (v) settle, adjust, compromise, extend or renew an Account, (vi) discharge and release any Receivable, (vii) prepare, file and sign such Borrower's name on any proof of claim in bankruptcy or other similar document against an account debtor or other obligor in respect of any Receivables or other Collateral, (viii) notify the post office authorities to change the address for delivery of remittances from account debtors or other obligors in respect of Receivables or other proceeds of Collateral to an address designated by Agent, and open and dispose of all mail addressed to such Borrower and handle and store all mail relating to the Collateral; and (ix) do all acts and things which are necessary, in Agent's determination, to fulfill such Borrower's obligations under this Agreement and the other Financing Agreements and (b) at any time to (i) take control in any manner of any item of payment in respect of Receivables or constituting Collateral or otherwise received in or for deposit in the Blocked Accounts or otherwise received by Agent or any Lender, (ii) have access to any lockbox or postal box into which remittances from account debtors or other obligors in respect of Receivables or other proceeds of Collateral are sent or received, (iii) endorse such Borrower's name upon any items of payment in respect of Receivables or constituting Collateral or otherwise received by Agent and any Lender and 62 deposit the same in Agent's account for application to the Obligations, (iv) endorse such Borrower's name upon any chattel paper, document, instrument, invoice, or similar document or agreement relating to any Receivable or any goods pertaining thereto or any other Collateral, including any warehouse or other receipts, or bills of lading and other negotiable or non-negotiable documents, (v) clear Inventory the purchase of which was financed with Letter of Credit Accommodations through U.S. Customs or foreign export control authorities in such Borrower's name, Agent's name or the name of Agent's designee, and to sign and deliver to customs officials powers of attorney in such Borrower's name for such purpose, and to complete in such Borrower's or Agent's name, any order, sale or transaction, obtain the necessary documents in connection therewith and collect the proceeds thereof, and (vi) sign such Borrower's name on any request for verification of Receivables and notices thereof to account debtors or any secondary obligors or other obligors in respect thereof (and thereafter Agent shall give Administrative Borrower prompt written notice thereof). Each Borrower hereby releases Agent and Lenders and their respective officers, employees and designees from any liabilities arising from any act or acts under this power of attorney and in furtherance thereof, whether of omission or commission, except as a result of Agent's or any Lender's own gross negligence or wilful misconduct as determined pursuant to a final non-appealable order of a court of competent jurisdiction. 7.6 Right to Cure. Agent may, at its option, upon notice to Administrative Borrower, (a) cure any default by any Borrower under any material agreement with a third party that affects the Collateral, its value or the ability of Agent to collect, sell or otherwise dispose of the Collateral or the rights and remedies of Agent or any Lender therein or the ability of any Borrower to perform its obligations hereunder or under any of the other Financing Agreements, at any time on or after a Default or Event of Default exists or has occurred and is continuing, (b) pay or bond on appeal any judgment entered against any Borrower, at any time on or after a Default or Event of Default exists or has occurred and is continuing, (c) discharge taxes, liens, security interests or other encumbrances at any time levied on or existing with respect to the Collateral and pay any amount, incur any expense or perform any act which, in Agent's judgment, is necessary or appropriate to preserve, protect, insure or maintain the Collateral and the rights of Agent and Lenders with respect thereto, provided, that, Agent shall not exercise its right pursuant to this Section 7.6(c) to discharge such taxes, liens, security interest or other encumbrances that are permitted under Section 9.8 hereof, unless either (i) a Default or Event of Default shall exist or have occurred and be continuing, or (ii) with respect to liens, security interests or other encumbrances, the beneficiary or holder of such lien, security interest or other encumbrance has the right to take action against or with respect to the Collateral which right is not subject to an effective stay pursuant to applicable law. Agent may add any amounts so expended to the Obligations and charge any Borrower's account therefor, such amounts to be repayable by Borrowers on demand. Agent and Lenders shall be under no obligation to effect such cure, payment or bonding and shall not, by doing so, be deemed to have assumed any obligation or liability of any Borrower. Any payment made or other action taken by Agent or any Lender under this Section shall be without prejudice to any right to assert an Event of Default hereunder and to proceed accordingly. 7.7 Access to Premises. From time to time as requested by Agent, at the cost and 63 expense of Borrowers, (a) Agent or its designee shall have complete access to all of each Borrower's premises during normal business hours and after reasonable notice to Administrative Borrower, or at any time and without notice to Administrative Borrower if an Event of Default exists or has occurred and is continuing, for the purposes of inspecting, verifying and auditing the Collateral and all of each Borrower's books and records, including the Records, and (b) each Borrower shall promptly furnish to Agent such copies of such books and records or extracts therefrom as Agent may reasonably request, and Agent or any Lender or Agent's designee may use during normal business hours such of any Borrower's personnel, equipment, supplies and premises as may be reasonably necessary for the foregoing (provided, that, Borrowers shall make such personnel, equipment, supplies and premises available to Agent or its designee in such manner so that Agent or its designee shall not materially interfere with the operations of Borrowers) and if an Event of Default exists or has occurred and is continuing for the collection of Receivables and realization of other Collateral. SECTION 8. REPRESENTATIONS AND WARRANTIES Each Borrower hereby represents and warrants to Agent and Lenders the following (which shall survive the execution and delivery of this Agreement), the truth and accuracy of which are a continuing condition of the making of Loans and providing Letter of Credit Accommodations to Borrowers: 8.1 Corporate Existence, Power and Authority. Each Borrower is a corporation duly organized and in good standing under the laws of its state of incorporation and is duly qualified as a foreign corporation and in good standing in all states or other jurisdictions where the nature and extent of the business transacted by it or the ownership of assets makes such qualification necessary, except for those jurisdictions in which the failure to so qualify would not have a Material Adverse Effect. The execution, delivery and performance of this Agreement, the other Financing Agreements and the transactions contemplated hereunder and thereunder (a) are all within each Borrower's corporate powers, (b) have been duly authorized by all necessary corporate action, (c) are not in contravention of law or the terms of any Borrower's certificate of incorporation, by-laws, or other organizational documentation, or any material indenture, agreement or undertaking to which any Borrower is a party or by which any Borrower or its property are bound and (d) will not result in the creation or imposition of, or require or give rise to any obligation to grant any lien, security interest, charge or other encumbrance upon any property of any Borrower except in favor of Agent pursuant to this Agreement and the other Financing Agreements and as contemplated by this Agreement. This Agreement and the other Financing Agreements to which any Borrower is a party constitute legal, valid and binding obligations of such Borrower enforceable in accordance with their respective terms. 8.2 Name; State of Organization; Chief Executive Office; Collateral Locations. (a) The exact legal name of each Borrower is as set forth on the signature page of this Agreement and in the Information Certificate. No Borrower has, during the five years prior to the date of this Agreement, been known by or used any other corporate or fictitious name 64 or been a party to any merger or consolidation, or acquired all or substantially all of the assets of any Person, or acquired any of its material property or assets out of the ordinary course of business, except as set forth in the Information Certificate. (b) Each Borrower is an organization of the type and organized in the jurisdiction set forth in the Information Certificate. The Information Certificate accurately sets forth the organizational identification number of each Borrower or accurately states that such Borrower has none and accurately sets forth the federal employer identification number of each Borrower. (c) The chief executive office and mailing address of each Borrower and each Borrower's Records concerning Accounts are located only at the addresses identified as such in Schedule 8.2 to the Information Certificate and its only other places of business and the only other locations of Collateral, if any, are the addresses set forth in Schedule 8.2 to the Information Certificate, subject to the rights of any Borrower to establish new locations in accordance with Section 9.2 below. The Information Certificate correctly identifies any of such locations which are not owned by a Borrower and sets forth the owners and/or operators thereof. 8.3 Financial Statements; No Material Adverse Change. All financial statements relating to any Borrower which have been or may hereafter be delivered by any Borrower to Agent and Lenders have been prepared in accordance with GAAP (except as to any interim financial statements, to the extent such statements are subject to normal year-end adjustments and do not include certain footnote disclosures) and fairly present in all material respects the financial condition and the results of operation of such Borrower as at the dates and for the periods set forth therein. Except as disclosed in any interim financial statements furnished by Borrowers to Agent prior to the date of this Agreement, there has been no act, condition or event which has had or is reasonably likely to have a Material Adverse Effect since the date of the most recent audited financial statements of any Borrower furnished by any Borrower to Agent prior to the date of this Agreement. 8.4 Priority of Liens; Title to Properties. The security interests and liens granted to Agent under this Agreement and the other Financing Agreements constitute valid and perfected first priority liens and security interests in and upon the Collateral subject only to the liens indicated on Schedule 8.4 to the Information Certificate and the other liens permitted under Section 9.8 hereof. Each Borrower has good and insurable fee simple title to or valid leasehold interests in all of its Real Property and good, valid and merchantable title to all of its other properties and assets subject to no liens, mortgages, pledges, security interests, encumbrances or charges of any kind, except those granted to Agent and such others as are specifically listed on Schedule 8.4 to the Information Certificate or permitted under Section 9.8 hereof. 8.5 Tax Returns. Each Borrower has filed, or caused to be filed, in a timely manner all tax returns, reports and declarations which are required to be filed by it. All information in such tax returns, reports and declarations is complete and accurate in all material respects. Each Borrower has paid or caused to be paid all taxes due and payable or claimed due and payable in any assessment received by it, except taxes the validity of which are being contested in good faith 65 by appropriate proceedings diligently pursued and available to such Borrower and with respect to which reserves have been set aside on its books in accordance with GAAP. Adequate provision has been made for the payment of all accrued and unpaid Federal, State, county, local, foreign and other taxes whether or not yet due and payable and whether or not disputed. 8.6 Litigation. Except as set forth on Schedule 8.6 to the Information Certificate, (a) there is no investigation by any Governmental Authority pending, or to the best of any Borrower's knowledge threatened, against or affecting any Borrower, its respective assets or business and (b) there is no action, suit, proceeding or claim by any Person pending, or to the best of any Borrower's knowledge threatened, against any Borrower or its assets or goodwill, or against or affecting any transactions contemplated by this Agreement, in each case, which if adversely determined against such Borrower has or could reasonably be expected to have a Material Adverse Effect. 8.7 Compliance with Other Agreements and Applicable Laws. (a) None of the Borrowers are in default in any respect under, or in violation in any respect of the terms of, any material agreement, contract, instrument, lease or other commitment to which it is a party or by which it or any of its assets are bound (other than defaults or events of default under the Remaining Existing Senior Subordinated Notes) where such default or violation has or could reasonably be expected to have a Material Adverse Effect. Borrowers are in compliance with the requirements of all applicable laws, rules, regulations and orders of any Governmental Authority relating to their respective businesses, including, without limitation, those set forth in or promulgated pursuant to the Occupational Safety and Health Act of 1970, as amended, the Fair Labor Standards Act of 1938, as amended, ERISA, the Code, as amended, and the rules and regulations thereunder where the failure to so comply has or could reasonably be expected to have a Material Adverse Effect, and all Environmental Laws where the failure to so comply has or could reasonably be expected to have a Material Adverse Effect. (b) Each of the Borrowers have obtained all material permits, licenses, approvals, consents, certificates, orders or authorizations of any Governmental Authority required for the lawful conduct of its business (the "Permits") where the failure to obtain such Permits has or could reasonably be expected to have a Material Adverse Effect. All of the Permits are valid and subsisting and in full force and effect where the failure of any of the Permits to be valid and subsisting has or could reasonably be expected to have a Material Adverse Effect. There are no actions, claims or proceedings pending or to the best of any Borrower's knowledge, threatened that seek the revocation, cancellation, suspension or modification of any of the Permits where the revocation, cancellation, suspension or modification of any of the Permits has or could reasonably be expected to have a Material Adverse Effect. 8.8 Environmental Compliance. (a) Except as set forth on Schedule 8.8 to the Information Certificate, Borrowers and any of their Subsidiaries have not generated, used, stored, treated, transported, manufactured, handled, produced or disposed of any Hazardous Materials, on or off its premises 66 (whether or not owned by it) in any manner which at any time violates in any material respect any applicable Environmental Law or Permit, and the operations of Borrowers and any Subsidiary of any Borrower complies in all material respects with all Environmental Laws and all Permits where the failure to so comply has or could reasonably be expected to have a Material Adverse Effect. (b) Except as set forth on Schedule 8.8 to the Information Certificate, to the Borrowers' knowledge, there has been no investigation by any Governmental Authority or any proceeding, complaint, order, directive, claim, citation or notice by any Governmental Authority or any other person nor is any pending or to the best of any Borrower's knowledge threatened, with respect to any non-compliance with or violation of the requirements of any Environmental Law by any Borrower or any of their respective Subsidiaries or the release, spill or discharge, threatened or actual, of any Hazardous Material or the generation, use, storage, treatment, transportation, manufacture, handling, production or disposal of any Hazardous Materials or any other environmental, health or safety matter, which has or could reasonably be expected to have a Material Adverse Effect. (c) Except as set forth on Schedule 8.8 to the Information Certificate, Borrowers and their Subsidiaries have no knowledge of any material liability (contingent or otherwise) in connection with a release, spill or discharge, threatened or actual, of any Hazardous Materials or the generation, use, storage, treatment, transportation, manufacture, handling, production or disposal of any Hazardous Materials. (d) Borrowers and their Subsidiaries have all Permits required to be obtained or filed in connection with the operations of Borrowers under any Environmental Law and all of such licenses, certificates, approvals or similar authorizations and other Permits are valid and in full force and effect where the failure to have obtained or filed such has or could reasonably be expected to have a Material Adverse Effect. 8.9 Employee Benefits. (a) Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other Federal or State law. Each Plan which is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the Internal Revenue Service and to the best of any Borrower's knowledge, nothing has occurred which would cause the loss of such qualification. Each Borrower and its ERISA Affiliates have made all required contributions to any Plan subject to Section 412 of the Code, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any Plan. (b) There are no pending, or to the best of any Borrower's knowledge, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan that if adversely determined would have or could reasonably be expected to have a Material Adverse Effect. There has been no prohibited transaction or violation of the fiduciary responsibility rules in any material respect with respect to any Plan. 67 (c) (i) No ERISA Event has occurred or is reasonably expected to occur; (ii) the current value of each Plan's assets (determined in accordance with the assumptions used for funding such Plan pursuant to Section 412 of the Code) are not less than such Plan's liabilities under Section 4001(a)(16) of ERISA; (iii) each Borrower, and their ERISA Affiliates, have not incurred and do not reasonably expect to incur, any liability under Title IV of ERISA with respect to any Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv) each Borrower, and their ERISA Affiliates, have not incurred and do not reasonably expect to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v) each Borrower, and their ERISA Affiliates, have not engaged in a transaction that would be subject to Section 4069 or 4212(c) of ERISA. 8.10 Bank Accounts. All of the deposit accounts, investment accounts or other accounts in the name of or used by any Borrower maintained at any bank or other financial institution are set forth on Schedule 8.10 to the Information Certificate, subject to the right of each Borrower to establish new accounts in accordance with Section 5.2 hereof. 8.11 Intellectual Property. Each Borrower owns or licenses or otherwise has the right to use all material Intellectual Property necessary for the operation of its business as presently conducted or proposed to be conducted. As of the date hereof, Borrowers do not have any Intellectual Property registered, or subject to pending applications, in the United States Patent and Trademark Office or any similar office or agency in the United States, any State thereof, any political subdivision thereof or in any other country, other than those described in Schedule 8.11 to the Information Certificate and has not granted any licenses with respect thereto other than as set forth in Schedule 8.11 to the Information Certificate. No event has occurred which permits or would permit after notice or passage of time or both, the revocation, suspension or termination of such rights. To the best of any Borrower's knowledge, no slogan or other advertising device, product, process, method, substance or other Intellectual Property or goods bearing or using any Intellectual Property presently contemplated to be sold by or employed by any Borrower infringes any patent, trademark, servicemark, tradename, copyright, license or other Intellectual Property owned by any other Person presently and no claim or litigation is pending or, to the knowledge of any Borrower, threatened against or affecting any Borrower contesting its right to sell or use any such Intellectual Property. Schedule 8.11 to the Information Certificate sets forth all of the material agreements or other arrangements of each Borrower pursuant to which such Borrower has a license or other right to use any trademarks, logos, designs, representations or other Intellectual Property that are material to the operation of its business as conducted on the date hereof owned by another person as in effect on the date hereof and the dates of the expiration of such agreements or other arrangements of such Borrower (other than such agreements which are generally commercially available for a fee) as in effect on the date hereof (collectively, together with such agreements or other arrangements as may be entered into by any Borrower after the date hereof, collectively, the "License Agreements" and individually, a "License Agreement"). No trademark, servicemark, copyright or other Intellectual Property used by any Borrower on or after the date hereof which is owned by another person, or owned by such Borrower subject to any security interest, lien, collateral assignment, pledge or other encumbrance in favor of any person other than Agent, is affixed to any Eligible Inventory, except (a) to the extent permitted 68 under the term of the license agreements listed on Schedule 8.11 to the Information Certificate and (b) to the extent the sale of Inventory to which such Intellectual Property is affixed is permitted to be sold by such Borrower under applicable law (including the United States Copyright Act of 1976). 8.12 Subsidiaries; Affiliates; Capitalization; Solvency. (a) None of the Borrowers has any direct or indirect Subsidiaries or Affiliates or is engaged in any joint venture or partnership except as set forth in Schedule 8.12 to the Information Certificate. (b) Each Borrower is the record and beneficial owner of all of the issued and outstanding shares of Capital Stock of each of the Subsidiaries listed on Schedule 8.12 to the Information Certificate as being owned by such Borrower and there are no proxies, irrevocable or otherwise, with respect to such shares and no equity securities of any of the Subsidiaries are or may become required to be issued by reason of any options, warrants, rights to subscribe to, calls or commitments of any kind or nature and there are no contracts, commitments, understandings or arrangements by which any Subsidiary is or may become bound to issue additional shares of it Capital Stock or securities convertible into or exchangeable for such shares. (c) The issued and outstanding shares of Capital Stock of LRG are directly and beneficially owned and held by the persons indicated in the Information Certificate, and all of such shares have been duly authorized and are fully paid and non-assessable, free and clear of all claims, liens, pledges and encumbrances of any kind, except as disclosed in writing to Agent prior to the date hereof. (d) Borrowers, taken as a whole, are Solvent and will continue to be Solvent after the creation of the Obligations, the security interests of Agent and the other transactions contemplated hereunder. 8.13 Labor Disputes. (a) Set forth on Schedule 8.13 to the Information Certificate is a list (including dates of termination) of all collective bargaining or similar agreements between or applicable to each Borrower and any union, labor organization or other bargaining agent in respect of the employees of any Borrower on the date hereof. (b) There is (i) no significant unfair labor practice complaint pending against any Borrower or, to the best of any Borrower's knowledge, threatened against it, before the National Labor Relations Board, and no significant grievance or significant arbitration proceeding arising out of or under any collective bargaining agreement is pending on the date hereof against any Borrower or, to best of any Borrower's knowledge, threatened against it, and (ii) no significant strike, labor dispute, slowdown or stoppage is pending against any Borrower or, to the best of any Borrower's knowledge, threatened against any Borrower which has or could reasonably be expected to have a Material Adverse Effect. 69 8.14 Restrictions on Subsidiaries. Except for restrictions contained in this Agreement or any other agreement with respect to Indebtedness of any Borrower permitted hereunder as in effect on the date hereof, there are no contractual or consensual restrictions on any Borrower or any of its Subsidiaries which prohibit or otherwise restrict (a) the transfer of cash or other assets (i) between any Borrower and any of its Subsidiaries or (ii) between any Subsidiaries of any Borrower or (b) the ability of any Borrower or any of its Subsidiaries to incur the Obligations or grant security interests to Agent or any Lender in the Collateral. 8.15 Material Contracts. Schedule 8.15 to the Information Certificate sets forth all Material Contracts to which any Borrower is a party or is bound as of the date hereof. Borrowers have delivered true, correct and complete copies of such Material Contracts to Agent on or before the date hereof. Borrowers are not in breach or in default in any material respect of or under any Material Contract and have not received any notice of the intention of any other party thereto to terminate any Material Contract. 8.16 Payable Practices. Each Borrower have not made any material change in the historical accounts payable practices from those in effect immediately prior to the date hereof. 8.17 Accuracy and Completeness of Information. All information furnished by or on behalf of any Borrower in writing to Agent or any Lender in connection with this Agreement or any of the other Financing Agreements or any transaction contemplated hereby or thereby, including all information on the Information Certificate is true and correct in all material respects on the date as of which such information is dated or certified and does not omit any material fact necessary in order to make such information not misleading as of the date as of which such information is dated or certified. No event or circumstance has occurred since the date of the most recent audited financial statements delivered by Borrowers to Agent which has had or could reasonably be expected to have a Material Adverse Affect, which has not been fully and accurately disclosed to Agent in writing prior to the date hereof. 8.18 Survival of Warranties; Cumulative. All representations and warranties contained in this Agreement or any of the other Financing Agreements shall survive the execution and delivery of this Agreement and shall be deemed to have been made again to Agent and Lenders on the date of each additional borrowing or other credit accommodation hereunder and shall be conclusively presumed to have been relied on by Agent and Lenders regardless of any investigation made or information possessed by Agent or any Lender (except to the extent any such representation or warranty was expressly made as of a specified date, in which case it shall only be deemed made as of such date). The representations and warranties set forth herein shall be cumulative and in addition to any other representations or warranties which any Borrower shall now or hereafter give, or cause to be given, to Agent or any Lender. SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS 9.1 Maintenance of Existence. 70 (a) Each Borrower shall at all times preserve, renew and keep in full force and effect its corporate existence and rights and franchises with respect thereto and maintain in full force and effect all licenses, trademarks, tradenames, approvals, authorizations, leases, contracts and Permits necessary to carry on the business as presently conducted. (b) No Borrower shall change its name unless each of the following conditions is satisfied: (i) Agent shall have received not less than thirty (30) days prior written notice from any Borrower of such proposed change in its corporate name, which notice shall accurately set forth the new name; and (ii) Agent shall have received a copy of the amendment to the Certificate of Incorporation of such Borrower providing for the name change certified by the Secretary of State of the jurisdiction of incorporation or organization of such Borrower promptly after it becomes available. (c) No Borrower shall change its chief executive office or its mailing address or organizational identification number (or if it does not have one, shall not acquire one) unless Agent shall have received not less than thirty (30) days' prior written notice from Administrative Borrower of such proposed change, which notice shall set forth such information with respect thereto as Agent may require and Agent shall have received such agreements as Agent may reasonably require in connection therewith. No Borrower shall change its type of organization, jurisdiction of organization or other legal structure except as otherwise permitted pursuant to Section 9.7(a) of this Agreement. 9.2 New Collateral Locations. Each Borrower may open any new location within the continental United States provided such Borrower (a) gives Agent thirty (30) days prior written notice of the intended opening of any such new location and (b) executes and delivers, or causes to be executed and delivered, to Agent such agreements, documents, and instruments as Agent may deem reasonably necessary or desirable to protect its interests in the Collateral at such location. 9.3 Compliance with Laws, Regulations, Etc. (a) Each Borrower shall, and shall cause any Subsidiary to, at all times, comply in all material respects with all laws, rules, regulations, licenses, approvals, orders and other Permits applicable to it and duly observe all requirements of any foreign, Federal, State or local Governmental Authority, including ERISA, the Code, the Occupational Safety and Health Act of 1970, as amended, the Fair Labor Standards Act of 1938, as amended, and all statutes, rules, regulations, orders, permits and stipulations relating to environmental pollution and employee health and safety, including all of the Environmental Laws, where the failure to so comply has or could reasonably be expected to have a Material Adverse Effect. (b) Borrowers shall give written notice to Agent promptly upon any Borrower's receipt of any notice of, or any Borrower's otherwise obtaining knowledge of, (i) the occurrence of any event involving the release, spill or discharge, threatened or actual, of any Hazardous Material or (ii) any investigation, proceeding, complaint, order, directive, claims, citation or notice with respect to: (A) any non-compliance with or violation of any Environmental 71 Law by any Borrower or (B) the release, spill or discharge, threatened or actual, of any Hazardous Material other than in the ordinary course of business and other than as permitted under any applicable Environmental Law which, in the case of any of the foregoing, is reasonably likely to result in a material liability. Copies of all environmental surveys, audits, assessments, feasibility studies and results of remedial investigations made after the date hereof shall be promptly furnished, or caused to be furnished, by such Borrower or Agent. Each Borrower shall take prompt action to respond to any material non-compliance with any of the Environmental Laws and shall report to Agent on such response. (c) Without limiting the generality of the foregoing, whenever Agent reasonably determines that there is non-compliance, or any condition which requires any action by or on behalf of any Borrower in order to avoid any non-compliance, with any Environmental Law, Borrowers shall, at Agent's request and Borrowers' expense: (i) cause an independent environmental engineer reasonably acceptable to Agent to conduct such tests of the site where non-compliance or alleged non-compliance with such Environmental Laws has occurred as to such non-compliance and prepare and deliver to Agent a report as to such non-compliance setting forth the results of such tests, a proposed plan for responding to any environmental problems described therein, and an estimate of the costs thereof and (ii) provide to Agent a supplemental report of such engineer whenever the scope of such non-compliance, or such Borrower's response thereto or the estimated costs thereof, shall change in any material respect. (d) Each Borrower shall indemnify and hold harmless Agent and Lenders and their respective directors, officers, employees, agents, invitees, representatives, successors and assigns, from and against any and all losses, claims, damages, liabilities, costs, and expenses (including reasonable attorneys' fees and expenses) directly or indirectly arising out of or attributable to the use, generation, manufacture, reproduction, storage, release, threatened release, spill, discharge, disposal or presence of a Hazardous Material related to any Borrower or any of its real or personal property, including the costs of any required or necessary repair, cleanup or other remedial work with respect to any property of any Borrower and the preparation and implementation of any closure, remedial or other required plans. All representations, warranties, covenants and indemnifications in this Section 9.3 shall survive the payment of the Obligations and the termination of this Agreement. 9.4 Payment of Taxes and Claims. Each Borrower shall, and shall cause any Subsidiary to, duly pay and discharge all taxes, assessments, contributions and governmental charges upon or against it or its properties or assets, except for taxes the validity of which are being contested in good faith by appropriate proceedings diligently pursued and available to such Borrower or Subsidiary, as the case may be, and with respect to which adequate reserves have been set aside on its books. Each Borrower shall be liable for any tax or penalties imposed on Agent or any Lender as a result of the financing arrangements provided for herein and each Borrower agrees to indemnify and hold Agent harmless with respect to the foregoing, and to repay to Agent, for the benefit of Lenders, on demand the amount thereof, and until paid by such Borrower such amount shall be added and deemed part of the Loans, provided, that, nothing contained herein shall be construed to require any Borrower to pay any income or franchise taxes attributable to the income of Lenders from any amounts charged or paid hereunder to Lenders. 72 The foregoing indemnity shall survive the payment of the Obligations and the termination of this Agreement. 9.5 Insurance. Each Borrower shall, and shall cause any Subsidiary to, at all times, maintain with financially sound and reputable insurers insurance with respect to the Collateral against loss or damage and all other insurance of the kinds and in the amounts customarily insured against or carried by corporations of established reputation engaged in the same or similar businesses and similarly situated. Said policies of insurance shall be reasonably satisfactory to Agent as to form, amount and insurer. Borrowers shall furnish certificates, policies or endorsements to Agent as Agent shall reasonably require as proof of such insurance, and, if any Borrower fails to do so within five (5) days after written request by Agent, Agent is authorized, but not required, to obtain such insurance at the expense of Borrowers. All policies shall provide for at least thirty (30) days prior written notice to Agent of any cancellation or reduction of coverage and that Agent may act as attorney for each Borrower in obtaining, and at any time an Event of Default exists or has occurred and is continuing, adjusting, settling, amending and canceling such insurance. Borrowers shall cause Agent to be named as a loss payee and an additional insured as its interests may appear (but without any liability for any premiums) under such insurance policies and Borrowers shall obtain non-contributory lender's loss payable endorsements to all insurance policies in form and substance reasonably satisfactory to Agent. Such lender's loss payable endorsements shall specify that the proceeds of such insurance shall be payable to Agent as its interests may appear and further specify that Agent and Lenders shall be paid regardless of any act or omission by any Borrower, except, that, the proceeds of such insurance with respect to Equipment that is subject to liens permitted under Section 9.8(e) or 9.8(m) shall not be payable to Agent and Lenders. Without limiting any other rights of Agent or Lenders, any insurance proceeds received by Agent at any time may be applied to the cost of repairs, refurbishment or replacement of Collateral and/or to payment of the Obligations, so long as no Event of Default exists or has occurred and is continuing, in accordance with the terms of Section 2.6 hereof and, at any time an Event of Default exists or has occurred and is continuing, in accordance with Section 6.4 hereof. Upon application of such proceeds to the Revolving Loans, nothing contained in this Section 9.5 shall be construed to limit the use of any subsequent Revolving Loans for the costs of repair or replacement of the Collateral lost or damaged resulting in the payment of such insurance proceeds. 9.6 Financial Statements and Other Information. (a) Each Borrower shall, and shall cause any Subsidiary to, keep proper books and records in which true and complete entries shall be made of all dealings or transactions of or in relation to the Collateral and the business of such Borrower and its Subsidiaries in accordance with GAAP. Borrowers shall promptly furnish to Agent and Lenders all such financial and other information as Agent shall reasonably request relating to the Collateral and the assets, business and operations of Borrowers, and Borrower shall notify the auditors and accountants of Borrowers that Agent is authorized to obtain such information directly from them, provided, that, Agent shall give Borrowers notice concurrently with Agent's request for any such information. Without limiting the foregoing, Borrowers shall furnish or cause to be furnished to Agent, the following: (i) within thirty (30) days after the end of each fiscal month (or within forty-five (45) 73 days after the end of a fiscal month that is also the end of a fiscal quarter, as applicable), monthly unaudited consolidated financial statements, and unaudited consolidating financial statements (including in each case balance sheets, statements of income and loss, statements of cash flow, and statements of shareholders' equity), all in reasonable detail, fairly presenting the financial position and the results of the operations of Borrowers and their Subsidiaries as of the end of and through such fiscal month, certified to be correct by the chief financial officer of each Borrower, subject to normal year-end adjustments and no footnotes and accompanied by a compliance certificate substantially in the form of Exhibit C hereto, along with a schedule in a form satisfactory to Agent of the calculations used in determining, as of the end of such month, whether Borrowers are in compliance with the covenants set forth in Sections 9.17, 9.18, 9.19 and 9.20 of this Agreement for such month and (ii) within one hundred twenty (120) days after the end of each fiscal year, audited consolidated financial statements and unaudited consolidating financial statements of Borrowers and their Subsidiaries (including in each case balance sheets, statements of income and loss, statements of cash flow, and statements of shareholders' equity), and the accompanying notes thereto, all in reasonable detail, fairly presenting in all material respects the financial position and the results of the operations of Borrowers and their Subsidiaries as of the end of and for such fiscal year, together with the unqualified opinion of independent certified public accountants with respect to the audited consolidated financial statements, which accountants shall be an independent accounting firm selected by Borrowers and reasonably acceptable to Agent, that such audited consolidated financial statements have been prepared in accordance with GAAP, and present fairly the results of operations and financial condition of Borrowers and their respective Subsidiaries as of the end of and for the fiscal year then ended. (b) Borrowers shall promptly notify Agent in writing of the details of (i) any loss, damage, investigation, action, suit, proceeding or claim relating to Collateral having a value of more than $250,000 or which if adversely determined would have or could reasonably be expected to have a Material Adverse Effect, (ii) any Material Contract being terminated or amended in any material respect or any new Material Contract entered into (in which event Borrowers shall provide Agent with a copy of such Material Contract), (iii) any order, judgment or decree in excess of $500,000 shall have been entered against any Borrower any of its properties or assets, (iv) any notification of a material violation of laws or regulations received by any Borrower, (v) any ERISA Event, and (vi) the occurrence of any Default or Event of Default. (c) Borrowers shall promptly after the sending or filing thereof furnish or cause to be furnished to Agent copies of all reports which any Borrower sends to its stockholders generally and copies of all reports and registration statements which any Borrower files with the Securities and Exchange Commission, any national securities exchange or the National Association of Securities Dealers, Inc. (d) Borrowers shall furnish or cause to be furnished to Agent such budgets, forecasts, projections and other information respecting the Collateral and the business of Borrowers, as Agent may, from time to time, reasonably request. Agent is hereby authorized to deliver a copy of any financial statement or any other information relating to the business of Borrowers to any court or other Governmental Authority or to any Lender or Participant or 74 prospective Lender or Participant or any Affiliate of any Lender or Participant subject to and in accordance with the confidentiality provisions contained in Section 13.5 of this Agreement. Each Borrower hereby irrevocably authorizes and directs all accountants or auditors to deliver to Agent, at Borrowers' expense, copies of the financial statements of any Borrower and any reports or management letters prepared by such accountants or auditors on behalf of any Borrower and to disclose to Agent and Lenders such information as they may have regarding the business of any Borrower. Any documents, schedules, invoices or other papers delivered to Agent or any Lender may be destroyed by Agent or such Lender one (1) year after the same are delivered to Agent or such Lender, except as otherwise designated by Administrative Borrower to Agent or such Lender in writing. 9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. Each Borrower shall not, and shall not permit any Subsidiary to, directly or indirectly, (a) merge into or with or consolidate with any other Person or permit any other Person to merge into or with or consolidate with it except that any wholly-owned Subsidiary of a Borrower may merge with and into or consolidate with any other wholly-owned Subsidiary of a Borrower and any Borrower may merge with and into or consolidate with any other Borrower, provided, that, each of the following conditions is satisfied as determined by Agent in good faith: (i) Agent shall have received not less than ten (10) Business Days' prior written notice of the intention of such Subsidiaries to so merge or consolidate, which notice shall set forth in reasonable detail satisfactory to Agent, the persons that are merging or consolidating, which person will be the surviving entity, the locations of the assets of the persons that are merging or consolidating, and the material agreements and documents relating to such merger or consolidation, (ii) Agent shall have received such other information with respect to such merger or consolidation as Agent may reasonably request, (iii) as of the effective date of the merger or consolidation and after giving effect thereto, no Default or Event of Default shall exist or have occurred, (iv) Agent shall have received, true, correct and complete copies of all agreements, documents and instruments relating to such merger or consolidation, including, but not limited to, the certificate or certificates of merger to be filed with each appropriate Secretary of State (with a copy as filed promptly after such filing), (v) the surviving corporation shall expressly confirm, ratify and assume the Obligations and the Financing Agreements to which it is a party in writing, in form and substance satisfactory to Agent, and Borrowers shall execute and deliver such other agreements, documents and instruments as Agent may reasonably request in connection therewith; (b) sell, issue, assign, lease, license, transfer, abandon or otherwise dispose of any Capital Stock or any of its other assets (other than Real Property) to any other Person, except for (i) sales of Inventory in the ordinary course of business, (ii) the sale or other disposition of Equipment (including worn-out or obsolete Equipment or Equipment no longer used or useful in the business of any Borrower) so long as such sales or other dispositions do not involve Equipment having an aggregate fair 75 market value in excess of $250,000 for all such Equipment disposed of in any fiscal year of Borrowers or as Agent may otherwise agree, and (iii) the issuance and sale by any Borrower of Capital Stock of such Borrower after the date hereof; provided, that, (A) the terms of such Capital Stock, and the terms and conditions of the purchase and sale thereof, shall not include any terms that include any limitation on the right of any Borrower to request or receive Loans or Letter of Credit Accommodations or the right of any Borrower to amend or modify any of the terms and conditions of this Agreement or any of the other Financing Agreements or otherwise in any way relate to or affect the arrangements of Borrowers with Agent and Lenders, (B) except as Agent may otherwise agree in writing, all of the Net Cash Proceeds of the sale and issuance of such Capital Stock (other than proceeds of Capital Stock to be used for the exchange of Remaining Existing Senior Subordinated Notes in accordance with Section 9.10(i) hereof) shall be paid to Agent for application to the Obligations in accordance with Section 6.4 of this Agreement, (C) after giving effect to such issuance and sale, no Change of Control shall occur and (D) as of the date of such issuance and sale and after giving effect thereto, no Default or Event of Default shall exist or have occurred, (iv) the issuance of Capital Stock of any Borrower consisting of common stock pursuant to an employee stock option or grant or similar equity plan or 401(k) plans of such Borrower for the benefit of its employees, directors and consultants, provided, that, in no event shall such Borrower be required to issue, or shall such Borrower issue, Capital Stock pursuant to such stock plans or 401(k) plans which would result in a Change of Control or other Event of Default, (v) the issuance and sale by LPC of Capital Stock (including, without limitation, in connection with the exercise of warrants to purchase such Capital Stock) pursuant to and in accordance with the Warrant Agent Agreement and the Exchange Agreement as in effect on the date hereof; provided, that, (A) except as Agent may otherwise agree in writing, all of the Net Cash Proceeds of the sale and issuance of such Capital Stock shall be paid to Agent for application to the Obligations in accordance with Section 6.4 of this Agreement and (B) after giving effect to any such issuance and sale, no Change of Control shall occur. (vi) the sale or other disposition of Collateral not otherwise permitted above so long as such sales or other dispositions do not involve Collateral having an aggregate fair market value in excess of $200,000 for all such Collateral disposed of in any fiscal year of Borrowers, provided, that, (A) Agent shall have received not less than five (5) Business Days' prior written notice of such sale or disposition and (B) as of the date of any such sale or disposition, and after giving effect thereto, no Default or Event of Default shall exist or shall have occurred and be continuing, (vii) the intercompany loans and dividend payments to the extent permitted by Sections 9.10(g), 9.11 and 9.12, (c) wind up, liquidate or dissolve; or 76 (d) agree to do any of the foregoing except if conditioned on approval by Agent. 9.8 Encumbrances. Each Borrower shall not, and shall not permit any Subsidiary to, create, incur, assume or suffer to exist any security interest, mortgage, pledge, lien, charge or other encumbrance of any nature whatsoever on any of its assets or properties, including the Collateral, or file or permit the filing of, or permit to remain in effect, any financing statement or other similar notice of any security interest or lien with respect to any such assets or properties, except: (a) the security interests and liens of Agent for itself and the benefit of Lenders; (b) liens securing the payment of taxes, assessments or other governmental charges or levies either not yet overdue or the validity of which are being contested in good faith by appropriate proceedings diligently pursued and available to such Borrower or Subsidiary, as the case may be and with respect to which reserves have been set aside on its books as required by GAAP; (c) non-consensual statutory liens (other than liens securing the payment of taxes) arising in the ordinary course of such Borrower's or Subsidiary's business to the extent: (i) such liens secure Indebtedness which is not overdue or (ii) such liens secure Indebtedness relating to claims or liabilities which are fully insured and being defended at the sole cost and expense and at the sole risk of the insurer or being contested in good faith by appropriate proceedings diligently pursued and available to such Borrower or such Subsidiary, in each case prior to the commencement of foreclosure or other similar proceedings and with respect to which reserves have been set aside on its books as required by GAAP; (d) zoning restrictions, easements, licenses, covenants and other restrictions affecting the use of Real Property which do not interfere in any material respect with the use of such Real Property or ordinary conduct of the business of such Borrower or such Subsidiary as presently conducted thereon or materially impair the value of the Real Property (or, in the case of leasehold interests, the value of Borrowers' interest in the Real Property) that is subject thereto; (e) purchase money or other types of security interests in Equipment and the proceeds thereof (including Capitalized Leases) acquired after the date hereof and purchase money or other types of mortgages on Real Property to secure Indebtedness permitted under Section 9.9(b) hereof; (f) pledges and deposits of cash by any Borrower after the date hereof in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security benefits consistent with the current practices of such Borrower as of the date hereof; (g) pledges and deposits of cash by any Borrower after the date hereof to 77 secure the performance of tenders, bids, leases, trade contracts (other than for the repayment of Indebtedness), statutory obligations and other similar obligations in each case in the ordinary course of business consistent with the current practices of such Borrower as of the date hereof; (h) liens arising from (i) operating leases and the precautionary UCC financing statement filings in respect thereof and (ii) equipment or other materials which are not owned by any Borrower located on the premises of such Borrower (but not in connection with, or as part of, the financing thereof) from time to time in the ordinary course of business and consistent with current practices of such Borrower and the precautionary UCC financing statement filings in respect thereof; (i) the security interests in and liens upon the Collateral and mortgages and liens upon the Real Property in favor of Term Loan Agent to secure the Term Loan Debt, provided, that, the security interests in and liens upon the Collateral in favor of Term Loan Agent are and shall at all times be subject and subordinate to the security interests and liens therein of Agent pursuant to the terms of the Intercreditor Agreement; (j) judgments and other similar liens arising in connection with court proceedings that do not constitute an Event of Default, provided, that, (i) such liens are being contested in good faith and by appropriate proceedings diligently pursued, (ii) adequate reserves or other appropriate provision, if any, as are required by GAAP have been made therefor, (iii) a stay of enforcement of any such liens is in effect and (iv) Agent may establish a Reserve with respect thereto; (k) the security interests and liens of an Insurance Premium Finance Party on the Insurance Premium Collateral to secure the Indebtedness described in and to the extent permitted in Section 9.9 (l) hereof; (l) liens on Real Property pursuant to or as permitted by the Term Loan Lender Agreements; and (m) the security interests and liens set forth on Schedule 8.4 to the Information Certificate. 9.9 Indebtedness. Each Borrower shall not, and shall not permit any Subsidiary to, incur, create, assume, become or be liable in any manner with respect to, or permit to exist, any Indebtedness, or guarantee, assume, endorse, or otherwise become responsible for (directly or indirectly), the Indebtedness, performance, obligations or dividends of any other Person, except: (a) the Obligations; (b) purchase money or other types of Indebtedness (including Capitalized Leases) arising after the date hereof to the extent secured by purchase money or other types of security interests in Equipment and the proceeds thereof (including Capitalized Leases) and purchase money or other type of mortgages or liens on Real Property not to exceed $2,500,000 in 78 the aggregate incurred during any fiscal year so long as such security interests, mortgages or liens do not apply to any property of such Borrower or Subsidiary other than the Equipment or Real Property (and the proceeds thereof) acquired after the date of this Agreement, and the Indebtedness secured thereby does not exceed the cost of the Equipment or Real Property so acquired, as the case may be; provided, that, with respect to Indebtedness permitted to be incurred pursuant to this Section 9.9(b) other than purchase money Indebtedness: (i) Agent shall have received five (5) Business Days' prior written notice of the intention of Borrowers to incur such Indebtedness, (ii) Agent shall have received true, correct and complete copies of the agreements, documents and instruments evidencing or otherwise related to such Indebtedness, duly authorized, executed and delivered by the parties thereto, (iii) Agent shall have received true, correct and complete copies of any amendments to the documentation evidencing such Indebtedness which amend, modify, alter or change in any material respect the terms of such Indebtedness, (iv) Borrowers shall not, directly or indirectly, redeem, retire, defease, purchase or otherwise acquire such Indebtedness or set aside or otherwise deposit or invest any sums for such purpose, except with respect to the exercise of a purchase option on Equipment subject to such Indebtedness, (iv) Borrowers shall furnish to Agent all notices of default or demands for payment in connection with such Indebtedness either received by any Borrower or on its behalf, promptly after the receipt thereof, and (v) as of the date of incurring such Indebtedness and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing; (c) guarantees by any Borrower of the Obligations of the other Borrower in favor of Agent for the benefit of Lenders; (d) the Indebtedness of any Borrower to any other Borrower arising after the date hereof pursuant to loans by any Borrower permitted under Section 9.10(g) hereof; (e) Indebtedness of Borrowers to the Term Loan Lenders evidenced by or arising under the Term Loan Agreement and the other Term Loan Lender Agreements (as in effect on the date hereof or as amended in accordance with clause (v) below), provided, that: (i) the principal amount of such Indebtedness shall not exceed $11,500,000, less the aggregate amount of all repayments, repurchases or redemptions thereof, whether optional or mandatory, plus interest thereon at the rate provided in the Term Loan Lender Agreements as in effect on the date hereof, 79 (ii) as of the date hereof, no event of default, or event which with notice or passage of time or both would constitute an event of default exists, or has occurred under the Term Loan Lender Agreements, (iii) Agent shall have received true, correct and complete copies of all of the Term Loan Lender Agreements, as duly authorized, executed and delivered by the parties thereto, (iv) Borrowers shall not, directly or indirectly, make, or be required to make, any payments in respect of such Indebtedness, except, that, Borrowers may make regularly scheduled payments and mandatory prepayments (as set forth in Section 2.4 of the Term Loan Agreement) of principal and interest and fees and other amounts in respect of the Term Loan Debt in accordance with the terms of the Term Loan Lender Agreements as in effect on the date hereof; (v) Borrowers shall not, directly or indirectly, (A) amend, modify, alter or change in any material respect any of the material terms of such Indebtedness or any of the Term Loan Lender Agreements as in effect on the date hereof, except, that, Borrowers may, after prior written notice to Agent, amend, modify, alter or change the terms thereof so as to extend the maturity thereof or defer the timing of any payments in respect thereof, or to forgive or cancel any portion of such Indebtedness other than pursuant to payments thereof, or to reduce the interest rate or any fees in connection therewith, or to release any liens on or security interests in any assets or properties of Borrowers, or (B) redeem, retire, defease, purchase or otherwise acquire such Indebtedness, or set aside or otherwise deposit or invest any sums for such purpose, except as permitted in clause (iv) above, and (vi) Borrowers shall furnish to Agent all notices of default or demands for payment in connection with such Indebtedness either received by such Borrower or on its behalf promptly after the receipt thereof, and all such notices or demands sent by any Borrower or on its behalf concurrently with the sending thereof, as the case may be; (f) Indebtedness of LPC evidenced by the Senior Subordinated Notes as in effect on the date hereof or as permitted to be amended pursuant to the terms hereof, provided, that: (i) the aggregate principal amount of such Indebtedness shall not exceed $42,476,099, less the aggregate amount of all repayments or redemptions, whether optional or mandatory, in respect thereof, plus interest thereon at the rate provided for in the Senior Subordinated Notes as in effect on the date hereof, (ii) the Obligations are and shall at all time constitute "Senior Debt" as such term is defined in the Senior Subordinated Note Indenture as in effect on the date hereof and Agent and Lenders are and shall be entitled to all of the rights and benefits thereof under the Senior Subordinated Note Indenture as in effect on the date hereof and there shall be no other "Senior Debt" except for Indebtedness permitted by Section 9.9 hereof or as Agent may otherwise agree, 80 (iii) Borrowers shall not, directly or indirectly, make any payments in respect of such Indebtedness, except that they may make regularly scheduled payments of interest and fees, if any, in respect of such Indebtedness when due in accordance with the terms of the Senior Subordinated Notes and the Senior Subordinated Note Indenture as in effect on the date hereof, (iv) Borrowers shall not, directly or indirectly, amend, modify, alter or change in any material respect any terms of such Indebtedness or any of the Senior Subordinated Notes or the Senior Subordinated Note Indenture, except that Borrowers may, after prior written notice to Agent, amend, modify, alter or change the terms thereof so as to extend the maturity thereof or defer the timing of any payments in respect thereof, or to forgive or cancel any portion of such Indebtedness other than pursuant to payments thereof, or to reduce the interest rate or any fees in connection therewith, and (v) Borrowers shall not, directly or indirectly, redeem, retire, defease, purchase or otherwise acquire all or any part of such Indebtedness other than at maturity (as set forth in the Senior Subordinated Note Indenture as in effect on the date hereof or as extended after the date hereof), or set aside or otherwise deposit or invest any sums for such purpose, except, that, Borrowers may redeem or purchase all or any part of such Indebtedness after one (1) year from the date of this Agreement, provided, that, as of the date of any such redemption or purchase or any payment in respect thereof and after giving effect thereto: (i) Borrowers shall give to Agent written notice thereof on the day Borrowers so redeem or purchase all or any part of such Indebtedness, which notice shall specify the maximum amount that Borrowers will pay in respect thereof and the range of the principal amount of the Senior Subordinated Notes which Borrowers anticipate will be so redeemed or purchased, (ii) as of the date of any such redemption or purchase or payments in respect thereof and after giving effect thereto, the aggregate amount of the Excess Availability of Borrowers shall be not less than $4,000,000 and (iii) as of the date of any such redemption or purchase or payment in respect thereof and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing; (g) Indebtedness of LPC evidenced by the Junior Subordinated Notes as in effect on the date hereof or as permitted to be amended pursuant to the terms hereof, provided, that: (i) the aggregate principal amount of such Indebtedness shall not exceed $346,667 the aggregate amount of all repayments or redemptions, whether optional or mandatory, in respect thereof, plus interest thereon at the rate provided for in the Junior Subordinated Notes as in effect on the date hereof, (ii) the Obligations are and shall at all time constitute "Senior Debt" as such term is defined in the Junior Subordinated Notes as in effect on the date hereof and Agent and Lenders are and shall be entitled to all of the rights and benefits thereof under the Junior Subordinated Notes as in effect on the date hereof and there shall be no other "Senior Debt" except for Indebtedness permitted by Section 9.9 hereof or as Agent may otherwise agree, (iii) Borrowers shall not, directly or indirectly, make any payments in respect of such Indebtedness, except that they may make regularly scheduled payments of interest and fees, 81 if any, in respect of such Indebtedness when due in accordance with the terms of the Junior Subordinated Notes as in effect on the date hereof, (iv) Borrowers shall not, directly or indirectly, amend, modify, alter or change in any material respect any terms of such Indebtedness or any of the Junior Subordinated Notes, except that Borrowers may, after prior written notice to Agent, amend, modify, alter or change the terms thereof so as to extend the maturity thereof or defer the timing of any payments in respect thereof, or to forgive or cancel any portion of such Indebtedness other than pursuant to payments thereof, or to reduce the interest rate or any fees in connection therewith, and (v) Borrowers shall not, directly or indirectly, redeem, retire, defease, purchase or otherwise acquire all or any part of such Indebtedness other than at maturity (as set forth in the Junior Subordinated Notes as in effect on the date hereof or as extended after the date hereof), or set aside or otherwise deposit or invest any sums for such purpose, except, that, Borrowers may redeem or purchase all or any part of such Indebtedness after one (1) year from the date of this Agreement, provided, that, as of the date of any such redemption or purchase or any payment in respect thereof and after giving effect thereto: (i) Borrowers shall give to Agent written notice thereof on the day Borrowers so redeem or purchase all or any part of such Indebtedness, which notice shall specify the maximum amount that Borrowers will pay in respect thereof and the range of the principal amount of the Junior Subordinated Notes which Borrowers anticipate will be so redeemed or purchased, (ii) as of the date of any such redemption or purchase or payments in respect thereof and after giving effect thereto, the aggregate amount of the Excess Availability of Borrowers shall be not less than $4,000,000 and (iii) as of the date of any such redemption or purchase or payment in respect thereof and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing; (h) unsecured Indebtedness of any Borrower arising after the date hereof to any third person (but not to any other Borrower), provided, that, each of the following conditions is satisfied as determined by Agent: (i) Agent shall have received not less than ten (10) days prior written notice of the intention of such Borrower to incur such Indebtedness, which notice shall set forth in reasonable detail satisfactory to Agent the amount of such Indebtedness, the person or persons to whom such Indebtedness will be owed, the interest rate, the schedule of repayments and maturity date with respect thereto and such other information as Agent may request with respect thereto, (ii) Agent shall have received true, correct and complete copies of all agreements, documents and instruments evidencing or otherwise related to such Indebtedness, (iii) except as Agent may otherwise agree in writing, all of the cash proceeds of the loans or other accommodations giving rise to such Indebtedness (other than proceeds of such loans to be used for the purchase or exchange of Remaining Existing Senior Subordinated Notes in accordance with Section 9.10(i) hereof) shall be paid to Agent for application to the Obligations in accordance with Section 2.6 or Section 6.4 hereof, as applicable, (iv) as of the date of incurring such Indebtedness and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing, and (v) Borrowers shall furnish to Agent all default notices or demands for payment in connection with such Indebtedness either received by any Borrower or on its behalf promptly after the receipt thereof, or sent by any Borrower or on its behalf concurrently with the sending thereof, as the case may be; 82 (i) the Indebtedness set forth on Schedule 9.9 to the Information Certificate; provided, that, (i) Borrowers may only make regularly scheduled payments of principal and interest in respect of such Indebtedness in accordance with the terms of the agreement or instrument evidencing or giving rise to such Indebtedness as in effect on the date hereof, (ii) Borrowers shall not, directly or indirectly, (A) amend, modify, alter or change in any material respect the terms of such Indebtedness or any agreement, document or instrument related thereto as in effect on the date hereof except, that, Borrowers may, after prior written notice to Agent, amend, modify, alter or change the terms thereof so as to extend the maturity thereof, or defer the timing of any payments in respect thereof, or to forgive or cancel any portion of such Indebtedness (other than pursuant to payments thereof), or to reduce the interest rate or any fees in connection therewith, or (B) redeem, retire, defease, purchase or otherwise acquire such Indebtedness, or set aside or otherwise deposit or invest any sums for such purpose, and (iii) Borrowers shall furnish to Agent all notices or demands in connection with such Indebtedness either received by any Borrower or on its behalf, promptly after the receipt thereof, or sent by any Borrower or on its behalf, concurrently with the sending thereof, as the case may be; (j) Indebtedness of Borrowers arising after the date hereof issued in exchange for, or the proceeds of which are used to extend, refinance, replace or substitute for, Indebtedness permitted under Section 9.9(e) hereof (the "Refinancing Indebtedness"); provided, that, as to any such Refinancing Indebtedness, each of the following conditions is satisfied: (i) Agent shall have received not less than ten (10) Business Days' prior written notice of the intention to incur such Indebtedness, which notice shall set forth in detail reasonably satisfactory to Agent, the amount of such Indebtedness, the schedule of repayments and maturity date with respect thereto and such other information with respect thereto as Agent may reasonably request, (ii) promptly upon Agent's request, Agent shall have received true, correct and complete copies of all agreements, documents and instruments evidencing or otherwise related to such Indebtedness, as duly executed and delivered by the parties thereto, (iii) the Refinancing Indebtedness shall have a Weighted Average Life to Maturity and a final maturity equal to or greater than the Weighted Average Life to Maturity and the final maturity, respectively, of the Indebtedness being extended, refinanced, replaced, or substituted for, (iv) the Refinancing Indebtedness shall rank in right of payment no more senior relative to the Obligations as the Indebtedness being extended, refinanced, replaced, or substituted for, (v) the Refinancing Indebtedness shall not include terms and conditions with respect to Borrowers which are more burdensome or restrictive in any material respect than those included in the Indebtedness so extended, refinanced, replaced or substituted for, (vi) such Indebtedness incurred by Borrowers shall be at rates and with fees or other charges no higher or greater than the Indebtedness so extended, refinanced, replaced or substituted for, (vii) as of the date of incurring such Indebtedness and after giving effect thereto, no Event of Default shall exist or have occurred and be continuing, (viii) the principal amount of such Refinancing Indebtedness shall not exceed the principal amount of the Indebtedness so extended, refinanced, replaced or substituted for (plus the amount of reasonable refinancing fees and expenses incurred in connection therewith), (ix) the Refinancing Indebtedness shall be secured by substantially the same assets that secure the Indebtedness so extended, refinanced, replaced or substituted for, provided, that, such security interests with respect to the Refinancing Indebtedness shall have a priority no more senior than, and be at least as subordinated (on terms and conditions acceptable to Agent) as the security interest with respect to the Indebtedness so 83 extended, refinanced, replaced or substituted for, (x) Borrowers may only make regularly scheduled payments and mandatory prepayments of principal, interest and fees, if any, in respect of such Indebtedness as permitted in Section 9.9 (e) hereof, (xi) Borrowers shall not, directly or indirectly, (A) amend, modify, alter or change in any material respect the terms of the agreements with respect to such Refinancing Indebtedness, except that Borrowers may, after prior written notice to Agent, amend, modify, alter or change the terms thereof so as to extend the maturity thereof, or defer the timing of any payments in respect thereof, or to forgive or cancel any portion of such Refinancing Indebtedness other than pursuant to payments thereof, or to reduce the interest rate or any fees in connection therewith, or to release any liens on or security interests in any assets or properties of Borrowers, or (B) redeem, retire, defease, purchase or otherwise acquire such Refinancing Indebtedness, or set aside or otherwise deposit or invest any sums for such purpose (other than with Refinancing Indebtedness to the extent permitted herein and to the extent permitted with respect to the Indebtedness so extended, refinanced, replaced or substituted for), and (xi) Borrowers shall furnish to Agent all notices of default or demands for payment in connection with such Indebtedness either by such Borrower or on its behalf promptly after the receipt thereof, and all such notices or demands sent by any Borrower or on its behalf concurrently with the sending thereof, as the case may be; (k) the Remaining Existing Subordinated Note Indebtedness, which may be purchased for cash or exchanged for Senior Subordinated Notes or other unsecured Indebtedness and/or Capital Stock as permitted in Section 9.10(i) hereof; (l) Indebtedness of Borrowers to an Insurance Premium Finance Party in connection with insurance policies maintained by Borrowers arising as a result of such Insurance Premium Finance Party entering into arrangements to allow Borrowers to pay all or a portion of the applicable insurance premiums on such insurance policies in installments rather than in one lump sum annual payment; provided, that, (i) the Insurance Premium Finance Party to which such Indebtedness is owed shall only have the right to cancel or terminate the insurance policy subject to its security interest, and shall only cancel or terminate any such policy after ten (10) days prior written notice to Agent and may only take such action with respect to such policy in the event that (A) a Borrower has failed to make a regularly scheduled installment payment in respect of the Indebtedness owed to such Insurance Premium Finance Party when due and described in this Section 9.9(l) and (B) any applicable cure period with respect thereto has expired, (ii) Upon Agent's request, Borrowers shall promptly deliver to Agent true, correct and complete copies of all agreements related to such Indebtedness, as duly authorized, executed and delivered by the parties thereto, (iii) such Indebtedness shall be unsecured except to the extent permitted under Section 9.8(k) hereof, (iv) Borrowers shall furnish to Agent all default notices or demands for payment in connection with such Indebtedness either received by Borrowers or on their behalf 84 after the receipt thereof, or sent by Borrowers or on their behalf, concurrently with the sending thereof, as the case may be; and (m) the unsecured Nomura Debt to the extent outstanding as provided in or pursuant to the Nomura Payoff Agreement as in effect on the date hereof. 9.10 Loans, Investments, Etc. Each Borrower shall not, and shall not permit any Subsidiary to, directly or indirectly, make any loans or advance money or property to any person, or invest in (by capital contribution, dividend or otherwise) or purchase or repurchase the Capital Stock or Indebtedness or all or a substantial part of the assets or property of any person, or form or acquire any Subsidiaries, or agree to do any of the foregoing (unless conditioned upon Agent's consent), except: (a) the endorsement of instruments for collection or deposit in the ordinary course of business; (b) investments in cash or Cash Equivalents, provided, that, (i) no Loans are then outstanding and (ii) the terms and conditions of Section 5.2 hereof shall have been satisfied with respect to the deposit account, investment account or other account in which such cash or Cash Equivalents are held; (c) the existing equity investments of each Borrower as of the date hereof in its Subsidiaries, provided, that, no Borrower shall have any further obligations or liabilities to make any capital contributions or other additional investments or other payments to or in or for the benefit of any of such Subsidiaries, except, that, a Borrower may make capital contributions to another Borrower in the form of dividend payments as permitted pursuant to Sections 9.11 and 9.12 hereof; (d) loans and advances by any Borrower to employees of such Borrower after the date hereof not to exceed the principal amount of $250,000 in the aggregate at any time outstanding; (e) stock or obligations issued to any Borrower by any Person (or the representative of such Person) in respect of Indebtedness of such Person owing to such Borrower in connection with the insolvency, bankruptcy, receivership or reorganization of such Person or a composition or readjustment of the debts of such Person; provided, that, the original of any such stock or instrument evidencing such obligations shall be promptly delivered to Agent, upon Agent's request, together with such stock power, assignment or endorsement by such Borrower as Agent may request; (f) obligations of account debtors to any Borrower arising from Accounts which are past due evidenced by a promissory note made by such account debtor payable to such Borrower; provided, that, promptly upon the receipt of the original of any such promissory note by such Borrower, such promissory note shall be endorsed to the order of Agent by such Borrower and promptly delivered to Agent as so endorsed; 85 (g) loans by a Borrower to another Borrower after the date hereof, provided, that, (i) upon Agent's request, Borrowers shall provide to Agent a report in form and substance satisfactory to Agent of the outstanding amount of such loans as of the last day of the immediately preceding month and indicating any loans made and payments received during the immediately preceding month, (ii) if any such loan shall be evidenced by a promissory note or other instrument, the single original of such note or other instrument shall be promptly delivered to Agent upon its request to hold as part of the Collateral, with such endorsement and/or assignment by the payee of such note or other instrument as Agent may require, (iii) as of the date of any such loan and after giving effect thereto, the Borrower making such loan shall be Solvent and (iv) as of the date of any such loan and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing; (h) the loans and advances set forth on Schedule 9.10 to the Information Certificate; provided, that, as to such loans and advances, Borrowers shall not, directly or indirectly, amend, modify, alter or change the terms of such loans and advances or any agreement, document or instrument related thereto and Borrowers shall furnish to Agent all default notices or demands for payment in connection with such loans and advances received by any Borrower or on its behalf, promptly after the receipt thereof, or sent by any Borrower or on its behalf, concurrently with the sending thereof, as the case may be; (i) the purchase of the Remaining Existing Subordinated Note Indebtedness or the exchange of such Indebtedness for Indebtedness on terms substantially similar to the Senior Subordinated Notes for cash or for other unsecured Indebtedness and/or Capital Stock in accordance with Sections 9.9(h) and 9.7(b)(iii)(B) hereof, respectively; provided, that, as of the date of any such purchase, no Default or Event of Default shall exist or have occurred and be continuing; (j) the exchange of the Existing Junior Subordinated Notes for the Junior Subordinated Notes and the exchange of defaulted interest for Capital Stock of LPC pursuant to the Exchange Agreement and, to the extent permitted in Section 9.7(b)(v), the issuance of warrants pursuant to the Warrant Exchange Agreement in connection with the exchange of Existing Senior Subordinated Notes and Existing Junior Subordinated Notes; and (k) the payment of dividends by Borrowers to the extent permitted by Sections 9.11 and 9.12 hereof. 9.11 Dividends and Redemptions. Each Borrower shall not, directly or indirectly, declare or pay any dividends on account of any shares of class of any Capital Stock of such Borrower now or hereafter outstanding, or set aside or otherwise deposit or invest any sums for such purpose, or redeem, retire, defease, purchase or otherwise acquire any shares of any class of Capital Stock (or set aside or otherwise deposit or invest any sums for such purpose) for any consideration or apply or set apart any sum, or make any other distribution (by reduction of capital or otherwise) in respect of any such shares or agree to do any of the foregoing, except that: 86 (a) any Borrower may declare and pay such dividends or redeem, retire, defease, purchase or otherwise acquire any shares of any class of Capital Stock for consideration in the form of shares of common stock (so long as after giving effect thereto no Change of Control or other Default or Event of Default shall exist or occur); (b) Borrowers may pay dividends to the extent permitted in Section 9.12 below; (c) any Subsidiary of a Borrower (other than LRG except as permitted in clause (d) below) may pay dividends to a Borrower; (d) LRG may pay dividends to LPC; provided, that, (i) after giving effect to any such dividend payment, the Excess Availability of LRG shall be not less than $2,000,000 and (iii) as of the date of such dividend payment and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing; (e) Borrowers may repurchase Capital Stock consisting of common stock held by employees pursuant to any employee stock ownership plan thereof upon the termination, retirement or death of any such employee in accordance with the provisions of such plan, provided, that, as to any such repurchase, each of the following conditions is satisfied: (i) as of the date of the payment for such repurchase and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing, (ii) such repurchase shall be paid with funds legally available therefor, (iii) such repurchase shall not violate any law or regulation or the material terms of any indenture, agreement or undertaking to which such Borrower is a party or by which such Borrower or its property are bound, and (iv) the aggregate amount of all payments for such repurchases in any calendar year shall not exceed $200,000; and (f) LPC may declare and pay cash dividends in respect of, and redeem, cancel or retire, the Series B Preferred Stock in accordance with the terms of the Restated Certificate of Incorporation of LPC as in effect on the date hereof so long as (i) (A) the aggregate amount of all payments in respect of dividends due prior to December 31, 2003 shall not exceed $106,000, (B) the aggregate amount of all payments in respect of dividends (not including those permitted in clause (A) above) in any fiscal year shall not exceed $30,000, and (C) the aggregate amount of all such payments in respect of redemptions, cancellations or retirements (exclusive of dividends) shall not exceed $660,000 (which amount includes past due payments of up to $270,000) and (ii) on the date of any such payment, redemption, cancellation or retirement and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing. 9.12 Transactions with Affiliates. Each Borrower shall not, directly or indirectly: (a) purchase, acquire or lease any property from, or sell, transfer or lease any property to, any officer, director or other Affiliate of such Borrower, except in the ordinary course of and pursuant to the reasonable requirements of such Borrower's business (as the case may be) and upon fair and reasonable terms no less favorable to such Borrower than such Borrower would obtain in a comparable arm's length transaction with an unaffiliated person; or 87 (b) make any payments (whether by dividend, loan or otherwise) of management, consulting or other fees for management or similar services, or of any Indebtedness owing to any officer, employee, shareholder, director or any other Affiliate of such Borrower, except (i) reasonable compensation to, and reimbursement of reasonable expenses incurred by, officers, employees and directors for services rendered to such Borrower in the ordinary course of business, (ii) payments by any Borrower to any other Borrower for actual and necessary reasonable out-of-pocket legal and accounting, insurance, marketing, payroll and similar types of services paid for by any Borrower on behalf of such other Borrower, in the ordinary course of their respective businesses or as the same may be directly attributable to such Borrower and for the payment of taxes by or on behalf of such Borrower, (iii) the grant of stock options, restricted stock awards, stock appreciation rights or similar rights to employees, officers or directors pursuant to a plan approved by the Board of Directors of the applicable Borrower (so long as after giving effect thereto no Change of Control or other Default or Event of Default shall exist or occur), (iv) loans or advances to employees permitted by Section 9.10(d) of this Agreement, (v) the payment of reasonable fees to the directors of any Borrower who are not employees of such Borrower, (vi) the transactions contemplated by the Exchange Agreement and the Warrant Agent Agreement as permitted in Section 9.7(b)(v) and (vii) regularly scheduled payments in respect of the Senior Subordinated Notes and the Junior Subordinated Notes to officers, directors or employees of LPC in their capacity as holders thereof to the extent permitted in Sections 9.9(f)(iii) and (g)(iii), respectively. 9.13 Compliance with ERISA. Each Borrower shall, and shall cause each of its ERISA Affiliates, to: (a) maintain each Plan in compliance in all material respects with the applicable provisions of ERISA, the Code and other Federal and State law; (b) cause each Plan which is qualified under Section 401(a) of the Code to maintain such qualification; (c) not terminate any of such Plans so as to incur any material liability to the Pension Benefit Guaranty Corporation; (d) not allow or suffer to exist any prohibited transaction involving any of such Plans or any trust created thereunder which would subject such Borrower or such ERISA Affiliate to a material tax or penalty or other liability on prohibited transactions imposed under Section 4975 of the Code or ERISA; (e) make all required contributions to any Plan which it is obligated to pay under Section 302 of ERISA, Section 412 of the Code or the terms of such Plan; (f) not allow or suffer to exist any accumulated funding deficiency, whether or not waived, with respect to any such Plan; or (g) allow or suffer to exist any occurrence of a reportable event or any other event or condition which presents a material risk of termination by the Pension Benefit Guaranty Corporation of any such Plan that is a single employer plan, which termination could result in any material liability to the Pension Benefit Guaranty Corporation. 9.14 End of Fiscal Years; Fiscal Quarters. Each Borrower shall, for financial reporting purposes, cause its, and each of its Subsidiaries' (a) fiscal years to end on December 31 of each year and (b) fiscal quarters to end on March 31, June 30, September 30, and December 31 of each year. 9.15 Change in Business. Each Borrower shall not engage in any business other than the business of such Borrower on the date hereof and any business reasonably related, ancillary or complimentary to the business in which such Borrower is engaged on the date hereof. 88 9.16 Limitation of Restrictions Affecting Subsidiaries. Each Borrower shall not, directly, or indirectly, create or otherwise cause or suffer to exist any encumbrance or restriction which prohibits or limits the ability of any Subsidiary of such Borrower to (a) pay dividends or make other distributions or pay any Indebtedness owed to such Borrower or any Subsidiary of such Borrower; (b) make loans or advances to such Borrower or any Subsidiary of such Borrower, (c) transfer any of its properties or assets to such Borrower or any Subsidiary of such Borrower; or (d) create, incur, assume or suffer to exist any lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, other than encumbrances and restrictions arising under (i) applicable law, (ii) this Agreement, (iii) customary provisions restricting subletting or assignment of any lease governing a leasehold interest of such Borrower or any Subsidiary of such Borrower, (iv) customary restrictions on dispositions of real property interests found in reciprocal easement agreements of such Borrower or any Subsidiary of such Borrower, (v) any agreement relating to permitted Indebtedness incurred by a Subsidiary of such Borrower prior to the date on which such Subsidiary was acquired by such Borrower and outstanding on such acquisition date, and (vi) the extension or continuation of contractual obligations in existence on the date hereof; provided, that, any such encumbrances or restrictions contained in such extension or continuation are no less favorable to Agent and Lenders than those encumbrances and restrictions in effect on the date hereof under or pursuant to the contractual obligations so extended or continued. 9.17 Net Worth. Borrowers (on a consolidated basis) shall, as of the end of each month, have Net Worth of not less than the amount set forth below with respect to such month:
Month Minimum Net Worth ----- ----------------- January 2004 and each month $ (14,500,000) thereafter through and including December 2004 January 2005 and each month (12,000,000) thereafter through and including December 2005 January 2006 and each (10,000,000) month thereafter
Numbers in parentheses indicates a negative amount. 9.18 Minimum EBITDA. (a) The EBITDA of Borrowers (on a consolidated basis) as of the end of each month during fiscal year 2004 (commencing with March 2004), on a cumulative year-to-date basis, shall be not less than the amount set forth below with respect to such month: 89
Month Minimum EBITDA ----- -------------- March 2004 $ 3,000,000 April 2004 4,000,000 May 2004 5,000,000 June 2004 6,000,000 July 2004 7,000,000 August 2004 8,500,000 September 2004 10,000,000 October 2004 11,500,000 November 2004 13,000,000 December 2004 14,000,000
(b) The EBITDA of Borrowers (on a consolidated basis) for the immediately preceding twelve (12) consecutive months (treated as a single accounting period) as of the end of each month set forth below shall be not less than the amount set forth below with respect to such month:
Month Minimum EBITDA ----- -------------- January 2005 and each month $ 15,000,000 thereafter through and including March 2005 April 2005 and each 16,000,000 month thereafter
9.19 Fixed Charge Coverage Ratio. (a) The Fixed Charge Coverage Ratio for Borrowers (on a consolidated basis) as of the last day of each fiscal quarter during fiscal year 2004 (commencing with the fiscal quarter ending March 31, 2004), on a cumulative year to date basis, shall be not less than 1.10:1. (b) The Fixed Charge Coverage Ratio of Borrowers (on a consolidated basis) for the immediately preceding twelve (12) consecutive months (treated as a single accounting period) as of the last day of each fiscal quarter set forth below shall be not less than the ratio set forth below with respect to such fiscal quarter: 90
Fiscal Quarter Ending Ratio - --------------------- ----- March 31, 2005 1.15:1 June 30, 2005 1.15:1 September 30, 2005 1.15:1 December 31, 2005 1.15:1 March 31, 2006 and the last day 1.20:1 of each fiscal quarter thereafter
9.20 Maximum Capital Expenditures. Borrowers shall not, in the aggregate, make Capital Expenditures (other than those financed by Indebtedness permitted under Section 9.9(b) hereof) in excess of $5,000,000 in any fiscal year. 9.21 License Agreements. (a) Each Borrower shall (i) promptly and faithfully observe and perform all of the material terms, covenants, conditions and provisions of the material License Agreements to which it is a party to be observed and performed by it, at the times set forth therein, if any, (ii) not do, permit, suffer or refrain from doing anything that could reasonably be expected to result in a default under or breach of any of the terms of any material License Agreement, (iii) not cancel, surrender, modify, amend, waive or release any material License Agreement in any material respect or any term, provision or right of the licensee thereunder in any material respect, or consent to or permit to occur any of the foregoing if any of the foregoing would have a Material Adverse Effect; except, that, subject to Section 9.21(b) below, such Borrower may cancel, surrender or release any material License Agreement in the ordinary course of the business of such Borrower; provided, that, such Borrower (as the case may be) shall give Agent not less than thirty (30) days prior written notice of its intention to so cancel, surrender and release any such material License Agreement, (iv) give Agent prompt written notice of any material License Agreement entered into by such Borrower after the date hereof, together with a true, correct and complete copy thereof and such other information with respect thereto as Agent may request, (v) give Agent prompt written notice of any material breach of any obligation, or any default, by any party under any material License Agreement, and deliver to Agent (promptly upon the receipt thereof by such Borrower in the case of a notice to such Borrower and concurrently with the sending thereof in the case of a notice from such Borrower) a copy of each notice of default and every other notice and other communication received or delivered by such Borrower in connection with any material License Agreement which relates to the right of such Borrower to continue to use the property subject to such License Agreement, and (vi) furnish to Agent, promptly upon the request of Agent, such information and evidence as Agent may reasonably require from time to time concerning the observance, performance and compliance by such Borrower or the other party or parties thereto with the material terms, covenants or provisions of any material License Agreement. 91 (b) Each Borrower will either exercise any option to renew or extend the term of each material License Agreement to which it is a party in such manner as will cause the term of such material License Agreement to be effectively renewed or extended for the period provided by such option and give prompt written notice thereof to Agent or give Agent prior written notice that such Borrower does not intend to renew or extend the term of any such material License Agreement or that the term thereof shall otherwise be expiring, not less than sixty (60) days prior to the date of any such non-renewal or expiration. In the event of the failure of such Borrower to extend or renew any material License Agreement to which it is a party, Agent shall have, and is hereby granted, the irrevocable right and authority, at its option, at any time that an Event of Default shall exist or have occurred and be continuing, to renew or extend the term of such material License Agreement, whether in its own name and behalf, or in the name and behalf of a designee or nominee of Agent or in the name and behalf of such Borrower. At any time that an Event of Default shall exist or have occurred and be continuing, Agent may, but shall not be required to, perform any or all of such obligations of such Borrower under any of the License Agreements, including, but not limited to, the payment of any or all sums due from such Borrower thereunder. Any sums so paid by Agent shall constitute part of the Obligations. 9.22 Costs and Expenses. Borrowers shall pay to Agent on demand all costs, expenses, filing fees and taxes paid or payable in connection with the preparation, negotiation, execution, delivery, recording, syndication, administration, collection, liquidation, enforcement and defense of the Obligations, Agent's rights in the Collateral, this Agreement, the other Financing Agreements and all other documents related hereto or thereto, including any amendments, supplements or consents which may hereafter be contemplated (whether or not executed) or entered into in respect hereof and thereof, including: (a) all costs and expenses of filing or recording (including Uniform Commercial Code financing statement filing taxes and fees, documentary taxes, intangibles taxes and mortgage recording taxes and fees, if applicable); (b) costs and expenses and fees for insurance premiums, environmental audits, title insurance premiums, surveys, assessments, engineering reports and inspections, appraisal fees and search fees, costs and expenses of remitting loan proceeds, collecting checks and other items of payment, and establishing and maintaining the Blocked Accounts, together with Agent's customary charges and fees with respect thereto; (c) charges, fees or expenses charged by any bank or issuer in connection with the Letter of Credit Accommodations; (d) costs and expenses of preserving and protecting the Collateral; (e) costs and expenses paid or incurred in connection with obtaining payment of the Obligations, enforcing the security interests and liens of Agent, selling or otherwise realizing upon the Collateral, and otherwise enforcing the provisions of this Agreement and the other Financing Agreements or defending any claims made or threatened against Agent or any Lender arising out of the transactions contemplated hereby and thereby (including preparations for and consultations concerning any such matters); (f) reasonable all out-of-pocket expenses and costs heretofore and from time to time hereafter incurred by Agent during the course of periodic field examinations of the Collateral and such Borrower's operations, plus a per diem charge at the rate of $750 per person per day for Agent's examiners in the field and office (which per diem charges shall not exceed the aggregate amount of $40,000 in any fiscal year, provided, that, any per diem charge incurred at any time that a Default or Event of Default shall exist or have occurred and be continuing shall not be included for purposes of such $40,000 limitation); and (g) the reasonable fees and disbursements of counsel (including legal 92 assistants) to Agent in connection with any of the foregoing. 9.23 Further Assurances. At the request of Agent at any time and from time to time, Borrowers shall, at their expense, duly execute and deliver, or cause to be duly executed and delivered, such further agreements, documents and instruments, and do or cause to be done such further acts as may be necessary or proper to evidence, perfect, maintain and enforce the security interests and the priority thereof in the Collateral and to otherwise effectuate the provisions or purposes of this Agreement or any of the other Financing Agreements. Agent may at any time and from time to time request a certificate from an officer of any Borrower representing that all conditions precedent to the making of Loans and providing Letter of Credit Accommodations contained herein are satisfied. In the event of such request by Agent, Agent and Lenders may, at Agent's option, cease to make any further Loans or provide any further Letter of Credit Accommodations until Agent has received such certificate and, in addition, Agent has determined that such conditions are satisfied. SECTION 10. EVENTS OF DEFAULT AND REMEDIES 10.1 Events of Default. The occurrence or existence of any one or more of the following events are referred to herein individually as an "Event of Default", and collectively as "Events of Default": (a) (i) any Borrower fails to pay any of the Obligations when due or (ii) any Borrower or Obligor fails to perform any of the covenants contained in Sections 9.3, 9.4, 9.13, 9.14, 9.15, and 9.16 of this Agreement and such failure shall continue for ten (10) days; provided, that, such ten (10) day period shall not apply in the case of: (A) any failure to observe any such covenant which is not capable of being cured at all or within such ten (10) day period or which has been the subject of a prior failure within a six (6) month period or (B) an intentional breach by any Borrower or Obligor of any such covenant or (iii) any Borrower or Obligor fails to perform any of the terms, covenants, conditions or provisions contained in this Agreement or any of the other Financing Agreements other than those described in Sections 10.1(a)(i) and 10.1(a)(ii) above; (b) any representation, warranty or statement of fact made by any Borrower to Agent in this Agreement, the other Financing Agreements or any other written agreement, schedule or confirmatory assignment shall when made or deemed made be false or misleading in any material respect; (c) any Obligor revokes or terminates or purports to revoke or terminate or fails to perform any of the terms, covenants, conditions or provisions of any guarantee, endorsement or other agreement of such party in favor of Agent or any Lender executed and delivered pursuant to this Agreement; (d) any judgment for the payment of money is rendered against any Borrower or Obligor in excess of $1,000,000 in any one case or in excess of $2,000,000 in the aggregate 93 (excluding in such calculation amounts covered by insurance where the insurer has acknowledged coverage in writing for such judgment) and shall remain undischarged or unvacated for a period in excess of forty-five (45) days or execution shall at any time not be effectively stayed, or any judgment other than for the payment of money, or injunction, attachment, garnishment or execution is rendered against any Borrower or Obligor that has or is reasonably likely to have a Material Adverse Effect or against any of the Collateral having a value in excess of $250,000 (and, after giving effect to any Reserve established by Agent in respect of any such judgment, injunction, attachment, garnishment or execution against any Collateral having a value in excess of $250,000, the Excess Availability of Borrowers shall be less than $2,000,000 in the aggregate); (e) any Borrower or Obligor dissolves or suspends or discontinues doing business, except as permitted pursuant to Section 9.7 hereof; (f) any Borrower or Obligor makes an assignment for the benefit of creditors, makes or sends notice of a bulk transfer or calls a meeting of its creditors or principal creditors in connection with a moratorium or adjustment of the Indebtedness due to them; (g) a case or proceeding under the bankruptcy laws of the United States of America now or hereafter in effect or under any insolvency, reorganization, receivership, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction now or hereafter in effect (whether at law or in equity) is filed against any Borrower or Obligor or all or any part of its properties and such case or proceeding is not dismissed within forty-five (45) days after the date of its filing or any Borrower or Obligor shall file any answer admitting the allegations made in such proceeding or not contesting such petition or application or indicates its consent to, acquiescence in or approval of, any such action or proceeding or the relief requested is granted sooner; (h) a case or proceeding under the bankruptcy laws of the United States of America now or hereafter in effect or under any insolvency, reorganization, receivership, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction now or hereafter in effect (whether at a law or equity) is filed by any Borrower or Obligor or for all or any part of its property; (i) (A) any default in the payment of principal, interest or other monetary obligations in respect of any Indebtedness of any Borrower (other than Indebtedness owing to Agent or Lenders pursuant to the Financing Agreements and the Remaining Existing Subordinated Indebtedness), in any such case in an amount in excess of $500,000, which default continues beyond the applicable cure period, if any, with respect thereto and is not waived in writing or (B) any default (other than a default in payment of principal, interest or other monetary obligations) in respect of any Indebtedness of any Borrower (other than Indebtedness owing to Agent or Lenders pursuant to the Financing Agreements and the Remaining Existing Subordinated Indebtedness), which default continues beyond the applicable cure period, if any, and is not waived in writing and the holders of such Indebtedness accelerate such Indebtedness or otherwise exercise their remedies in respect of such default, or (C) any default by any Borrower 94 under any Material Contract (other than agreements or contracts entered into in respect of borrowed money), which default continues for more than the applicable cure period with respect thereto (and is not waived in writing) if the other party to such Material Contract exercises its remedies with respect to such default and such exercise results in termination of such Material Contract or a liability on the part of any Borrower in excess of $500,000; (j) any material provision hereof or of any of the other Financing Agreements shall for any reason cease to be valid, binding and enforceable with respect to any party hereto or thereto (other than Agent) in accordance with its terms, or any such party shall challenge the enforceability hereof or thereof, or shall assert in writing, or take any action or fail to take any action based on the assertion that any provision hereof or of any of the other Financing Agreements has ceased to be or is otherwise not valid, binding or enforceable in accordance with its terms, or any security interest provided for herein or in any of the other Financing Agreements shall cease to be a valid and perfected first priority security interest in any of the Collateral subject thereto (except as otherwise permitted herein or therein); (k) an ERISA Event shall occur which results in or could reasonably be expected to result in liability of any Borrower in an aggregate amount in excess of $1,000,000; (l) any Change of Control; (m) the indictment by any Governmental Authority of any Borrower or Obligor of which any Borrower, Obligor or Agent receives notice as to which there is a reasonable possibility of an adverse determination, in the good faith determination of Agent, under any criminal statute, or commencement or threatened commencement of criminal or civil proceedings against such Borrower or Obligor, pursuant to which statute or proceedings the penalties or remedies sought or available include forfeiture of (i) any of the Collateral having a value in excess of $250,000 (and, after giving effect to any Reserve established by Agent in respect of any such possible forfeiture, the Excess Availability of Borrowers shall be less than $2,000,000 in the aggregate) or (ii) any other property of any Borrower which is necessary or material to the conduct of its business; (n) there shall be an act, condition or event that has a Material Adverse Effect after the date hereof; (o) there shall be no Excess Availability after giving effect to any Rubber Group Reserve established in accordance with Section 1.122 hereof; or (p) an event of default shall exist or have occurred and be continuing under any of the Financing Agreements. 10.2 Remedies. (a) At any time an Event of Default exists or has occurred and is continuing, Agent and Lenders shall have all rights and remedies provided in this Agreement, the other 95 Financing Agreements, the UCC and other applicable law, all of which rights and remedies may be exercised without notice to or consent by any Borrower or Obligor, except as such notice or consent is expressly provided for hereunder or required by applicable law. All rights, remedies and powers granted to Agent and Lenders hereunder, under any of the other Financing Agreements, the UCC or other applicable law, are cumulative, not exclusive and enforceable, in Agent's discretion, alternatively, successively, or concurrently on any one or more occasions, and shall include, without limitation, the right to apply to a court of equity for an injunction to restrain a breach or threatened breach by any Borrower or Obligor of this Agreement or any of the other Financing Agreements. Subject to Section 12 hereof, Agent may, and at the direction of the Required Lenders shall, at any time or times, proceed directly against any Borrower or Obligor to collect the Obligations without prior recourse to the Collateral. (b) Without limiting the generality of the foregoing, at any time an Event of Default exists or has occurred and is continuing, Agent may, at its option and shall upon the direction of the Required Lenders, (i) upon notice to Administrative Borrower, accelerate the payment of all Obligations and demand immediate payment thereof to Agent for itself and the benefit of Lenders (provided, that, upon the occurrence of any Event of Default described in Sections 10.1(g) and 10.1(h), all Obligations shall automatically become immediately due and payable), and (ii) terminate the Commitments and this Agreement (provided, that, upon the occurrence of any Event of Default described in Sections 10.1(g) and 10.1(h), the Commitments and any other obligation of the Agent or a Lender hereunder shall automatically terminate). (c) Without limiting the foregoing, at any time an Event of Default exists or has occurred and is continuing, Agent may, in its discretion, and upon the direction of the Required Lenders, shall (i) with or without judicial process or the aid or assistance of others, enter upon any premises on or in which any of the Collateral may be located and take possession of the Collateral or complete processing, manufacturing and repair of all or any portion of the Collateral, (ii) require any Borrower or Obligor, at Borrowers' expense, to assemble and make available to Agent any part or all of the Collateral at any place and time designated by Agent, (iii) collect, foreclose, receive, appropriate, setoff and realize upon any and all Collateral, (iv) remove any or all of the Collateral from any premises on or in which the same may be located for the purpose of effecting the sale, foreclosure or other disposition thereof or for any other purpose, (v) sell, lease, transfer, assign, deliver or otherwise dispose of any and all Collateral (including entering into contracts with respect thereto, public or private sales at any exchange, broker's board, at any office of Agent or elsewhere) at such prices or terms as Agent may deem reasonable, for cash, upon credit or for future delivery, with the Agent having the right to purchase the whole or any part of the Collateral at any such public sale, all of the foregoing being free from any right or equity of redemption of any Borrower or Obligor, which right or equity of redemption is hereby expressly waived and released by Borrowers and Obligors and/or (vi) terminate this Agreement. If any of the Collateral is sold or leased by Agent upon credit terms or for future delivery, the Obligations shall not be reduced as a result thereof until payment therefor is finally collected by Agent. If notice of disposition of Collateral is required by law, ten (10) days prior notice by Agent to Administrative Borrower designating the time and place of any public sale or the time after which any private sale or other intended disposition of Collateral is to be made, shall be deemed to be reasonable notice thereof and Borrowers and Obligors waive 96 any other notice. In the event Agent institutes an action to recover any Collateral or seeks recovery of any Collateral by way of prejudgment remedy, each Borrower and Obligor waives the posting of any bond which might otherwise be required. At any time an Event of Default exists or has occurred and is continuing, upon Agent's request, Borrowers will either, as Agent shall specify, furnish cash collateral to the issuer to be used to secure and fund Agent's reimbursement obligations to the issuer in connection with any Letter of Credit Accommodations or furnish cash collateral to Agent for the Letter of Credit Accommodations. Such cash collateral shall be in the amount equal to one hundred five (105%) percent of the amount of the Letter of Credit Accommodations plus the amount of any fees and expenses payable in connection therewith through the end of the latest expiration date of such Letter of Credit Accommodations. (d) At any time or times that an Event of Default exists or has occurred and is continuing, Agent may, in its discretion, enforce the rights of any Borrower or Obligor against any account debtor, secondary obligor or other obligor in respect of any of the Accounts or other Receivables. Without limiting the generality of the foregoing, Agent may, in its discretion, at such time or times (i) notify any or all account debtors, secondary obligors or other obligors in respect thereof that the Receivables have been assigned to Agent and that Agent has a security interest therein and Agent may direct any or all accounts debtors, secondary obligors and other obligors to make payment of Receivables directly to Agent, (ii) extend the time of payment of, compromise, settle or adjust for cash, credit, return of merchandise or otherwise, and upon any terms or conditions, any and all Receivables or other obligations included in the Collateral and thereby discharge or release the account debtor or any secondary obligors or other obligors in respect thereof without affecting any of the Obligations, (iii) demand, collect or enforce payment of any Receivables or such other obligations, but without any duty to do so, and Agent and Lenders shall not be liable for any failure to collect or enforce the payment thereof nor for the negligence of its agents or attorneys with respect thereto and (iv) take whatever other action Agent may deem necessary or desirable for the protection of its interests and the interests of Lenders. At any time that an Event of Default exists or has occurred and is continuing, at Agent's request, all invoices and statements sent to any account debtor shall state that the Accounts and such other obligations have been assigned to Agent and are payable directly and only to Agent and Borrowers and Obligors shall deliver to Agent such originals of documents evidencing the sale and delivery of goods or the performance of services giving rise to any Accounts as Agent may require. In the event any account debtor returns Inventory when an Event of Default exists or has occurred and is continuing, Borrowers shall, upon Agent's request, hold the returned Inventory in trust for Agent, segregate all returned Inventory from all of its other property, dispose of the returned Inventory solely according to Agent's instructions, and not issue any credits, discounts or allowances with respect thereto without Agent's prior written consent. (e) To the extent that applicable law imposes duties on Agent or any Lender to exercise remedies in a commercially reasonable manner (which duties cannot be waived under such law), each Borrower acknowledges and agrees that it is not commercially unreasonable for Agent or any Lender (i) to fail to incur expenses reasonably deemed significant by Agent or any Lender to prepare Collateral for disposition or otherwise to complete raw material or work in process into finished goods or other finished products for disposition, (ii) to fail to obtain third 97 party consents for access to Collateral to be disposed of, or to obtain or, if not required by other law, to fail to obtain consents of any Governmental Authority or other third party for the collection or disposition of Collateral to be collected or disposed of, (iii) to fail to exercise collection remedies against account debtors, secondary obligors or other persons obligated on Collateral or to remove liens or encumbrances on or any adverse claims against Collateral, (iv) to exercise collection remedies against account debtors and other persons obligated on Collateral directly or through the use of collection agencies and other collection specialists, (v) to advertise dispositions of Collateral through publications or media of general circulation, whether or not the Collateral is of a specialized nature, (vi) to contact other persons, whether or not in the same business as any Borrower, for expressions of interest in acquiring all or any portion of the Collateral, (vii) to hire one or more professional auctioneers to assist in the disposition of Collateral, whether or not the collateral is of a specialized nature, (viii) to dispose of Collateral by utilizing Internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capability of doing so, or that match buyers and sellers of assets, (ix) to dispose of assets in wholesale rather than retail markets, (x) to disclaim disposition warranties, (xi) to purchase insurance or credit enhancements to insure Agent or Lenders against risks of loss, collection or disposition of Collateral or to provide to Agent or Lenders a guaranteed return from the collection or disposition of Collateral, or (xii) to the extent deemed appropriate by Agent, to obtain the services of other brokers, investment bankers, consultants and other professionals to assist Agent in the collection or disposition of any of the Collateral. Each Borrower acknowledges that the purpose of this Section is to provide non-exhaustive indications of what actions or omissions by Agent or any Lender would not be commercially unreasonable in the exercise by Agent or any Lender of remedies against the Collateral and that other actions or omissions by Agent or any Lender shall not be deemed commercially unreasonable solely on account of not being indicated in this Section. Without limitation of the foregoing, nothing contained in this Section shall be construed to grant any rights to any Borrower or to impose any duties on Agent or Lenders that would not have been granted or imposed by this Agreement or by applicable law in the absence of this Section. (f) For the purpose of enabling Agent to exercise the rights and remedies hereunder, each Borrower and Obligor hereby grants to Agent, to the extent assignable, an irrevocable, non-exclusive license (exercisable at any time an Event of Default shall exist or have occurred and only for so long as the same is continuing) without payment of royalty or other compensation to any Borrower or Obligor, to use, assign, license or sublicense any of the trademarks, service-marks, trade names, business names, trade styles, designs, logos and other source of business identifiers and other Intellectual Property and general intangibles now owned or hereafter acquired by any Borrower or Obligor, wherever the same maybe located, including in such license reasonable access to all media in which any of the licensed items may be recorded or stored and to all computer programs used for the compilation or printout thereof. (g) Agent may apply the cash proceeds of Collateral actually received by Agent from any sale, lease, foreclosure or other disposition of the Collateral to payment of the Obligations, in whole or in part and in such order as Agent may elect, whether or not then due. Borrowers shall remain liable to Agent and Lenders for the payment of any deficiency with interest at the highest rate provided for herein and all costs and expenses of collection or 98 enforcement, including attorneys' fees and expenses. (h) Without limiting the foregoing, upon the occurrence of a Default or an Event of Default and for so long as the same is continuing, (i) Agent and Lenders may, at Agent's option, and upon the occurrence of an Event of Default, and for so long as the same is continuing, at the direction of the Required Lenders, Agent and Lenders shall, without notice, (A) cease making Loans or arranging for Letter of Credit Accommodations or reduce the lending formulas or amounts of Loans and Letter of Credit Accommodations available to Borrowers and/or (B) terminate any provision of this Agreement providing for any future Loans or Letter of Credit Accommodations to be made by Agent and Lenders to Borrowers and (ii) Agent may, at its option, establish such Reserves as Agent determines, without limitation or restriction, notwithstanding anything to the contrary contained herein. SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW 11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver. (a) The validity, interpretation and enforcement of this Agreement and the other Financing Agreements (except as otherwise provided therein) and any dispute arising out of the relationship between the parties hereto, whether in contract, tort, equity or otherwise, shall be governed by the internal laws of the State of New York but excluding any principles of conflicts of law or other rule of law that would cause the application of the law of any jurisdiction other than the laws of the State of New York. (b) Borrowers, Agent and Lenders irrevocably consent and submit to the non-exclusive jurisdiction of the Supreme Court of the State of New York for New York County and the United States District Court for the Southern District of New York, whichever Agent may elect, and waive any objection based on venue or forum non conveniens with respect to any action instituted therein arising under this Agreement or any of the other Financing Agreements or in any way connected with or related or incidental to the dealings of the parties hereto in respect of this Agreement or any of the other Financing Agreements or the transactions related hereto or thereto, in each case whether now existing or hereafter arising, and whether in contract, tort, equity or otherwise, and agree that any dispute with respect to any such matters shall be heard only in the courts described above (except that Agent and Lenders shall have the right to bring any action or proceeding against any Borrower or its property in the courts of any other jurisdiction which Agent deems necessary or appropriate in order to realize on the Collateral or to otherwise enforce its rights against any Borrower or its property). (c) Each Borrower hereby waives personal service of any and all process upon it and consents that all such service of process may be made by certified mail (return receipt requested) directed to its address set forth herein and service so made shall be deemed to be completed five (5) days after the same shall have been so deposited in the U.S. mails, or, at Agent's option, by service upon any Borrower (or Administrative Borrower on behalf of such Borrower) in any other manner provided under the rules of any such courts. Within thirty (30) 99 days after such service, such Borrower shall appear in answer to such process, failing which such Borrower shall be deemed in default and judgment may be entered by Agent against such Borrower for the amount of the claim and other relief requested. (d) BORROWERS, AGENT AND LENDERS EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWERS, AGENT AND LENDERS EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY BORROWER, AGENT OR ANY LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. (e) Agent and Lenders shall not have any liability to any Borrower (whether in tort, contract, equity or otherwise) for losses suffered by such Borrower in connection with, arising out of, or in any way related to the transactions or relationships contemplated by this Agreement, or any act, omission or event occurring in connection herewith, unless it is determined by a final and non-appealable judgment or court order binding on Agent and such Lender, that such losses were the result of acts or omissions constituting gross negligence or willful misconduct. In any such litigation, Agent and Lenders shall be entitled to the benefit of the rebuttable presumption that it acted in good faith and with the exercise of ordinary care in the performance by it of the terms of this Agreement. Each Borrower: (i) certifies that neither Agent, any Lender nor any representative, agent or attorney acting for or on behalf of Agent or any Lender has represented, expressly or otherwise, that Agent and Lenders would not, in the event of litigation, seek to enforce any of the waivers provided for in this Agreement or any of the other Financing Agreements and (ii) acknowledges that in entering into this Agreement and the other Financing Agreements, Agent and Lenders are relying upon, among other things, the waivers and certifications set forth in this Section 11.1 and elsewhere herein and therein. 11.2 Waiver of Notices. Each Borrower hereby expressly waives demand, presentment, protest and notice of protest and notice of dishonor with respect to any and all instruments and chattel paper, included in or evidencing any of the Obligations or the Collateral, and any and all other demands and notices of any kind or nature whatsoever with respect to the Obligations, the Collateral and this Agreement, except such as are expressly provided for herein. No notice to or demand on any Borrower which Agent or any Lender may elect to give shall entitle such Borrower to any other or further notice or demand in the same, similar or other circumstances. 11.3 Amendments and Waivers. 100 (a) Neither this Agreement nor any other Financing Agreement nor any terms hereof or thereof may be amended, waived, discharged or terminated unless such amendment, waiver, discharge or termination is in writing signed by Agent and the Required Lenders or at Agent's option, by Agent with the authorization of the Required Lenders, and as to amendments to any of the Financing Agreements (other than with respect to any provision of Section 12 hereof), by any Borrower; except, that, no such amendment, waiver, discharge or termination shall: (i) reduce the interest rate or any fees or extend the time of payment of principal, interest or any fees or reduce the principal amount of any Loan or Letter of Credit Accommodations, in each case without the consent of each Lender directly affected thereby, (ii) increase the Commitment of any Lender over the amount thereof then in effect or provided hereunder, in each case without the consent of the Lender directly affected thereby, (iii) release any Collateral (except as expressly required hereunder or under any of the other Financing Agreements or applicable law and except as permitted under Section 12.11(b) hereof), without the consent of Agent and all of Lenders, (iv) reduce any percentage specified in the definition of Required Lenders, without the consent of Agent and all of Lenders, (v) consent to the assignment or transfer by any Borrower of any of their rights and obligations under this Agreement, without the consent of Agent and all of Lenders, (vi) amend, modify or waive any terms of this Section 11.3 hereof, without the consent of Agent and all of Lenders, or (vii) increase the advance rates constituting part of the Borrowing Base, without the consent of Agent and all of Lenders. (b) Agent and Lenders shall not, by any act, delay, omission or otherwise be deemed to have expressly or impliedly waived any of its rights, powers and/or remedies unless such waiver shall be in writing and signed as provided herein. Any such waiver shall be enforceable only to the extent specifically set forth therein. A waiver by Agent or any Lender of any right, power and/or remedy on any one occasion shall not be construed as a bar to or waiver of any such right, power and/or remedy which Agent or any Lender would otherwise have on any future occasion, whether similar in kind or otherwise. (c) Notwithstanding anything to the contrary contained in Section 11.3(a) above, in connection with any amendment, waiver, discharge or termination, in the event that any Lender whose consent thereto is required shall fail to consent or fail to consent in a timely manner (such Lender being referred to herein as a "Non-Consenting Lender"), but the consent of any other Lenders to such amendment, waiver, discharge or termination that is required are 101 obtained, if any, then Congress shall have the right, but not the obligation, at any time thereafter, and upon the exercise by Congress of such right, such Non-Consenting Lender shall have the obligation, to sell, assign and transfer to Congress or such Eligible Transferee as Congress may specify, the Commitment of such Non-Consenting Lender and all rights and interests of such Non-Consenting Lender pursuant thereto. Congress shall provide the Non-Consenting Lender with prior written notice of its intent to exercise its right under this Section, which notice shall specify on date on which such purchase and sale shall occur. Such purchase and sale shall be pursuant to the terms of an Assignment and Acceptance (whether or not executed by the Non-Consenting Lender), except that on the date of such purchase and sale, Congress, or such Eligible Transferee specified by Congress, shall pay to the Non-Consenting Lender (except as Congress and such Non- Consenting Lender may otherwise agree) the amount equal to: (i) the principal balance of the Loans held by the Non-Consenting Lender outstanding as fo the close of business on the business day immediately preceding the effective date of such purchase and sale, plus (ii) amounts accrued and unpaid in respect of interest and fees payable to the Non-Consenting Lender to the effective date of the purchase (but in no event shall the Non-Consenting Lender be deemed entitled to any early termination fee), minus (iii) the amount of the closing fee received by the Non-Consenting Lender pursuant to the terms hereof or of any of the other Financing Agreements multiplied by the fraction, the numerator of which is the number of months remaining in the then current term of the Credit Facility and the denominator of which is the number of months in the then current term thereof. Such purchase and sale shall be effective on the date of the payment of such amount to the Non-Consenting Lender and the Commitment of the Non-Consenting Lender shall terminate on such date. (d) The consent of Agent shall be required for any amendment, waiver or consent affecting the rights or duties of Agent hereunder or under any of the other Financing Agreements, in addition to the consent of the Lenders otherwise required by this Section and the exercise by Agent of any of its rights hereunder with respect to Reserves or Eligible Accounts or Eligible Inventory shall not be deemed an amendment to the advance rates provided for in this Section 11.3. 11.4 Waiver of Counterclaims. Each Borrower waives all rights to interpose any claims, deductions, setoffs or counterclaims of any nature (other then compulsory counterclaims) in any action or proceeding with respect to this Agreement, the Obligations, the Collateral or any matter arising therefrom or relating hereto or thereto. 11.5 Indemnification. Each Borrower shall, jointly and severally, indemnify and hold Agent and each Lender, and its officers, directors, agents, employees, advisors and counsel and their respective Affiliates (each such person being an "Indemnitee"), harmless from and against any and all losses, claims, damages, liabilities, costs or expenses (including reasonable attorneys' fees and expenses) imposed on, incurred by or asserted against any of them in connection with any litigation, investigation, claim or proceeding commenced or threatened related to the negotiation, preparation, execution, delivery, enforcement, performance or administration of this Agreement, any other Financing Agreements, or any undertaking or proceeding related to any of the transactions contemplated hereby or any act, omission, event or transaction related or attendant thereto, including amounts paid in settlement, court costs, and the fees and expenses of 102 counsel, except that Borrowers shall not have any obligation under this Section 11.5 to indemnify an Indemnitee with respect to a matter covered hereby resulting from the gross negligence or wilful misconduct of such Indemnitee as determined pursuant to a final, non-appealable order of a court of competent jurisdiction (but without limiting the obligations of Borrowers as to any other Indemnitee). To the extent that the undertaking to indemnify, pay and hold harmless set forth in this Section may be unenforceable because it violates any law or public policy, Borrowers shall pay the maximum portion which it is permitted to pay under applicable law to Agent and Lenders in satisfaction of indemnified matters under this Section. To the extent permitted by applicable law, no Borrower shall assert, and each Borrower hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any of the other Financing Agreements or any undertaking or transaction contemplated hereby. All amounts due under this Section shall be payable upon demand. The foregoing indemnity shall survive the payment of the Obligations and the termination or non-renewal of this Agreement. SECTION 12. THE AGENT 12.1 Appointment, Powers and Immunities. Each Lender irrevocably designates, appoints and authorizes Congress to act as Agent hereunder and under the other Financing Agreements with such powers as are specifically delegated to Agent by the terms of this Agreement and of the other Financing Agreements, together with such other powers as are reasonably incidental thereto. Agent (a) shall have no duties or responsibilities except those expressly set forth in this Agreement and in the other Financing Agreements, and shall not by reason of this Agreement or any other Financing Agreement be a trustee or fiduciary for any Lender; (b) shall not be responsible to Lenders for any recitals, statements, representations or warranties contained in this Agreement or in any of the other Financing Agreements, or in any certificate or other document referred to or provided for in, or received by any of them under, this Agreement or any other Financing Agreement, or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Financing Agreement or any other document referred to or provided for herein or therein or for any failure by any Borrower or any Obligor or any other Person to perform any of its obligations hereunder or thereunder; and (c) shall not be responsible to Lenders for any action taken or omitted to be taken by it hereunder or under any other Financing Agreement or under any other document or instrument referred to or provided for herein or therein or in connection herewith or therewith, except for its own gross negligence or willful misconduct as determined by a final non-appealable judgment of a court of competent jurisdiction. Agent may employ agents and attorneys-in-fact and shall not be responsible for the negligence or misconduct of any such agents or attorneys-in-fact selected by it in good faith. Agent may deem and treat the payee of any note as the holder thereof for all purposes hereof unless and until the assignment thereof pursuant to an agreement (if and to the extent permitted herein) in form and substance satisfactory to Agent shall have been delivered to and acknowledged by Agent. 12.2 Reliance by Agent. Agent shall be entitled to rely upon any certification, notice or 103 other communication (including any thereof by telephone, telecopy, telex, telegram or cable) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by Agent. As to any matters not expressly provided for by this Agreement or any other Financing Agreement, Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder or thereunder in accordance with instructions given by the Required Lenders or all of Lenders as is required in such circumstance, and such instructions of such Agents and any action taken or failure to act pursuant thereto shall be binding on all Lenders. 12.3 Events of Default. (a) Agent shall not be deemed to have knowledge or notice of the occurrence of a Default or an Event of Default or other failure of a condition precedent to the Loans and Letter of Credit Accommodations hereunder, unless and until Agent has received written notice from a Lender, or a Borrower specifying such Event of Default or any unfulfilled condition precedent, and stating that such notice is a "Notice of Default or Failure of Condition". In the event that Agent receives such a Notice of Default or Failure of Condition, Agent shall give prompt notice thereof to the Lenders. Agent shall (subject to Section 12.7) take such action with respect to any such Event of Default or failure of condition precedent as shall be directed by the Required Lenders; provided, that, unless and until Agent shall have received such directions, Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to or by reason of such Event of Default or failure of condition precedent, as it shall deem advisable in the best interest of Lenders. Without limiting the foregoing, and notwithstanding the existence or occurrence and continuance of an Event of Default or any other failure to satisfy any of the conditions precedent set forth in Section 4 of this Agreement to the contrary, Agent may, but shall have no obligation to, continue to make Loans and issue or cause to be issued Letter of Credit Accommodations for the ratable account and risk of Lenders from time to time if Agent believes making such Loans or issuing or causing to be issued such Letter of Credit Accommodations is in the best interests of Lenders. (b) Except with the prior written consent of Agent, no Lender may assert or exercise any enforcement right or remedy in respect of the Loans, Letter of Credit Accommodations or other Obligations, as against any Borrower or Obligor or any of the Collateral or other property of any Borrower or Obligor. 12.4 Congress in its Individual Capacity. With respect to its Commitment and the Loans made and Letter of Credit Accommodations issued or caused to be issued by it (and any successor acting as Agent), so long as Congress shall be a Lender hereunder, it shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not acting as Agent, and the term "Lender" or "Lenders" shall, unless the context otherwise indicates, include Congress in its individual capacity as Lender hereunder. Congress (and any successor acting as Agent) and its Affiliates may (without having to account therefor to any Lender) lend money to, make investments in and generally engage in any kind of business with Borrowers (and any of its Subsidiaries or Affiliates) as if it were not acting as Agent, and 104 Congress and its Affiliates may accept fees and other consideration from any Borrower and any of its Subsidiaries and Affiliates for services in connection with this Agreement or otherwise without having to account for the same to Lenders. 12.5 Indemnification. Lenders agree to indemnify Agent (to the extent not reimbursed by Borrowers hereunder and without limiting any obligations of Borrowers hereunder) ratably, in accordance with their Pro Rata Shares, for any and all claims of any kind and nature whatsoever that may be imposed on, incurred by or asserted against Agent (including by any Lender) arising out of or by reason of any investigation in or in any way relating to or arising out of this Agreement or any other Financing Agreement or any other documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby (including the costs and expenses that Agent is obligated to pay hereunder) or the enforcement of any of the terms hereof or thereof or of any such other documents, provided, that, no Lender shall be liable for any of the foregoing to the extent it arises from the gross negligence or willful misconduct of the party to be indemnified as determined by a final non-appealable judgment of a court of competent jurisdiction. The foregoing indemnity shall survive the payment of the Obligations and the termination or non-renewal of this Agreement. 12.6 Non-Reliance on Agent and Other Lenders. Each Lender agrees that it has, independently and without reliance on Agent or other Lender, and based on such documents and information as it has deemed appropriate, made its own credit analysis of Borrowers and Obligors and has made its own decision to enter into this Agreement and that it will, independently and without reliance upon Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under this Agreement or any of the other Financing Agreements. Agent shall not be required to keep itself informed as to the performance or observance by any Borrower or Obligor of any term or provision of this Agreement or any of the other Financing Agreements or any other document referred to or provided for herein or therein or to inspect the properties or books of any Borrower or Obligor. Agent will use reasonable efforts to provide Lenders with any information received by Agent from any Borrower or Obligor which is required to be provided to Lenders or deemed to be requested by Lenders hereunder and with a copy of any Notice of Default or Failure of Condition received by Agent from any Borrower or any Lender; provided, that, Agent shall not be liable to any Lender for any failure to do so, except to the extent that such failure is attributable to Agent's own gross negligence or willful misconduct as determined by a final non-appealable judgment of a court of competent jurisdiction. Except for notices, reports and other documents expressly required to be furnished to Lenders by Agent hereunder, Agent shall not have any duty or responsibility to provide any Lender with any other credit or other information concerning the affairs, financial condition or business of any Borrower or Obligor that may come into the possession of Agent. 12.7 Failure to Act. Except for action expressly required of Agent hereunder and under the other Financing Agreements, Agent shall in all cases be fully justified in failing or refusing to act hereunder and thereunder unless it shall receive further assurances to its satisfaction from Lenders of their indemnification obligations under Section 12.5 hereof against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such 105 action. 12.8 Additional Loans. Agent shall not make any Revolving Loans or provide any Letter of Credit Accommodations to any Borrower on behalf of Lenders intentionally and with actual knowledge that such Revolving Loans or Letter of Credit Accommodations would cause the aggregate amount of the total outstanding Revolving Loans and Letter of Credit Accommodations to such Borrower to exceed the Borrowing Base of such Borrower, without the prior consent of all Lenders, except, that, Agent may make such additional Revolving Loans or provide such additional Letter of Credit Accommodations on behalf of Lenders, intentionally and with actual knowledge that such Revolving Loans or Letter of Credit Accommodations will cause the total outstanding Revolving Loans and Letter of Credit Accommodations to such Borrower to exceed the Borrowing Base of such Borrower, as Agent may deem necessary or advisable in its discretion, provided, that: (a) the total principal amount of the additional Revolving Loans or additional Letter of Credit Accommodations to any Borrower which Agent may make or provide after obtaining such actual knowledge that the aggregate principal amount of the Revolving Loans equal or exceed the Borrowing Bases of Borrowers, plus the amount of Special Agent Advances made pursuant to Section 12.11(a)(ii) hereof then outstanding, shall not exceed the aggregate amount equal to ten (10%) of the Maximum Credit and shall not cause the total principal amount of the Loans and Letter of Credit Accommodations to exceed the Maximum Credit and (b) no such additional Revolving Loan or Letter of Credit Accommodation shall be outstanding more than ninety (90) days after the date such additional Revolving Loan or Letter of Credit Accommodation is made or issued (as the case may be), except as the Required Lenders may otherwise agree. Each Lender shall be obligated to pay Agent the amount of its Pro Rata Share of any such additional Revolving Loans or Letter of Credit Accommodations. 12.9 Concerning the Collateral and the Related Financing Agreements. Each Lender authorizes and directs Agent to enter into this Agreement and the other Financing Agreements. Each Lender agrees that any action taken by Agent or Required Lenders in accordance with the terms of this Agreement or the other Financing Agreements and the exercise by Agent or Required Lenders of their respective powers set forth therein or herein, together with such other powers that are reasonably incidental thereto, shall be binding upon all of the Lenders. 12.10 Field Audit, Examination Reports and other Information; Disclaimer by Lenders. By signing this Agreement, each Lender: (a) is deemed to have requested that Agent furnish such Lender, promptly after it becomes available, a copy of each field audit or examination report and report with respect to the Borrowing Base prepared or received by Agent (each field audit or examination report and report with respect to the Borrowing Base being referred to herein as a "Report" and collectively, "Reports"), appraisal and financial statements; (b) expressly agrees and acknowledges that Agent (i) does not make any representation or warranty as to the accuracy of any Report, appraisal or financial statement or (ii) shall not be liable for any information contained in any Report, appraisal or financial statement; 106 (c) expressly agrees and acknowledges that the Reports are not comprehensive audits or examinations, that Agent or any other party performing any audit or examination will inspect only specific information regarding Borrowers and will rely significantly upon Borrowers' books and records, as well as on representations of Borrowers' personnel; and (d) agrees to keep all Reports confidential and strictly for its internal use in accordance with the terms of Section 13.5 hereof, and not to distribute or use any Report in any other manner. 12.11 Collateral Matters. (a) Agent may, at its option, from time to time, at any time on or after an Event of Default and for so long as the same is continuing or upon any other failure of a condition precedent to the Loans and Letter of Credit Accommodations hereunder, make such disbursements and advances ("Special Agent Advances") which Agent, in its sole discretion, (i) deems necessary or desirable either to preserve or protect the Collateral or any portion thereof or (ii) to enhance the likelihood or maximize the amount of repayment by Borrowers of the Loans and other Obligations, provided, that, the aggregate principal amount of the Special Agent Advances pursuant to this clause (ii), plus the then outstanding principal amount of the additional Loans and Letter of Credit Accommodations which Agent may make or provide as set forth in Section 12.8 hereof, shall not exceed the aggregate amount of [ten (10%)] percent of the Maximum Credit or (iii) to pay any other amount chargeable to any Borrower pursuant to the terms of this Agreement or any of the other Financing Agreements consisting of (A) costs, fees and expenses and (B) payments to any issuer of Letter of Credit Accommodations. Special Agent Advances shall be repayable on demand and together with all interest thereon shall constitute Obligations secured by the Collateral. Special Agent Advances shall not constitute Loans but shall otherwise constitute Obligations hereunder. Interest on Special Agent Advances shall be payable at the Interest Rate then applicable to Prime Rate Loans and shall be payable on demand. Without limitation of its obligations pursuant to Section 6.10, each Lender agrees that it shall make available to Agent, upon Agent's demand, in immediately available funds, the amount equal to such Lender's Pro Rata Share of each such Special Agent Advance. If such funds are not made available to Agent by such Lender, such Lender shall be deemed a Defaulting Lender and Agent shall be entitled to recover such funds, on demand from such Lender together with interest thereon for each day from the date such payment was due until the date such amount is paid to Agent at the Federal Funds Rate for each day during such period (as published by the Federal Reserve Bank of New York or at Agent's option based on the arithmetic mean determined by Agent of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by each of the three leading brokers of Federal funds transactions in New York City selected by Agent) and if such amounts are not paid within three (3) days of Agent's demand, at the highest Interest Rate provided for in Section 3.1 hereof applicable to Prime Rate Loans. (b) Lenders hereby irrevocably authorize Agent, at its option and in its discretion to release any security interest in, mortgage or lien upon, any of the Collateral (i) upon termination of the Commitments and payment and satisfaction of all of the Obligations and 107 delivery of cash collateral to the extent required under Section 13.1 below, or (ii) constituting property being sold or disposed of if Administrative Borrower or any Borrower certifies to Agent that the sale or disposition is made in compliance with Section 9.7 hereof (and Agent may rely conclusively on any such certificate, without further inquiry), or (iii) constituting property in which any Borrower did not own an interest at the time the security interest, mortgage or lien was granted or at any time thereafter, or (iv) having a value in the aggregate in any twelve (12) month period of less than $400,000, and to the extent Agent may release its security interest in and lien upon any such Collateral pursuant to the sale or other disposition thereof, such sale or other disposition shall be deemed consented to by Lenders, or (v) if required or permitted under the terms of any of the other Financing Agreements, including any intercreditor agreement, or (vi) approved, authorized or ratified in writing by all of Lenders. Except as provided above, Agent will not release any security interest in, mortgage or lien upon, any of the Collateral without the prior written authorization of all of Lenders. Upon request by Agent at any time, Lenders will promptly confirm in writing Agent's authority to release particular types or items of Collateral pursuant to this Section. (c) Without any manner limiting Agent's authority to act without any specific or further authorization or consent by the Required Lenders, each Lender agrees to confirm in writing, upon request by Agent, the authority to release Collateral conferred upon Agent under this Section. Agent shall (and is hereby irrevocably authorized by Lenders to) execute such documents as may be necessary to evidence the release of the security interest, mortgage or liens granted to Agent upon any Collateral to the extent set forth above; provided, that, (i) Agent shall not be required to execute any such document on terms which, in Agent's opinion, would expose Agent to liability or create any obligations or entail any consequence other than the release of such security interest, mortgage or liens without recourse or warranty and (ii) such release shall not in any manner discharge, affect or impair the Obligations or any security interest, mortgage or lien upon (or obligations of any Borrower in respect of) the Collateral retained by such Borrower. (d) Agent shall have no obligation whatsoever to any Lender or any other Person to investigate, confirm or assure that the Collateral exists or is owned by any Borrower or is cared for, protected or insured or has been encumbered, or that any particular items of Collateral meet the eligibility criteria applicable in respect of the Loans or Letter of Credit Accommodations hereunder, or whether any particular reserves are appropriate, or that the liens and security interests granted to Agent pursuant hereto or any of the Financing Agreements or otherwise have been properly or sufficiently or lawfully created, perfected, protected or enforced or are entitled to any particular priority, or to exercise at all or in any particular manner or under any duty of care, disclosure or fidelity, or to continue exercising, any of the rights, authorities and powers granted or available to Agent in this Agreement or in any of the other Financing Agreements, it being understood and agreed that in respect of the Collateral, or any act, omission or event related thereto, Agent may act in any manner it may deem appropriate, in its discretion, given Agent's own interest in the Collateral as a Lender and that Agent shall have no duty or liability whatsoever to any other Lender. 12.12 Agency for Perfection. Each Lender hereby appoints Agent and each other Lender as agent and bailee for the purpose of perfecting the security interests in and liens upon the 108 Collateral of Agent in assets which, in accordance with Article 9 of the UCC can be perfected only by possession (or where the security interest of a secured party with possession has priority over the security interest of another secured party) and Agent and each Lender hereby acknowledges that it holds possession of any such Collateral for the benefit of Agent as secured party. Should any Lender obtain possession of any such Collateral, such Lender shall notify Agent thereof, and, promptly upon Agent's request therefor shall deliver such Collateral to Agent or in accordance with Agent's instructions. 12.13 Successor Agent. Agent may resign as Agent upon thirty (30) days' notice to Lenders and Administrative Borrower. If Agent resigns under this Agreement, the Required Lenders shall appoint from among the Lenders a successor agent for Lenders. If no successor agent is appointed prior to the effective date of the resignation of Agent, Agent may appoint, after consulting with Lenders and Administrative Borrower, a successor agent from among Lenders. Upon the acceptance by the Lender so selected of its appointment as successor agent hereunder, such successor agent shall succeed to all of the rights, powers and duties of the retiring Agent and the term "Agent" as used herein and in the other Financing Agreements shall mean such successor agent and the retiring Agent's appointment, powers and duties as Agent shall be terminated. After any retiring Agent's resignation hereunder as Agent, the provisions of this Section 12 shall inure to its benefit as to any actions taken or omitted by it while it was Agent under this Agreement. If no successor agent has accepted appointment as Agent by the date which is thirty (30) days after the date of a retiring Agent's notice of resignation, the retiring Agent's resignation shall nonetheless thereupon become effective and Lenders shall perform all of the duties of Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above. 12.14 Co-Agent. The Lender identified on the facing page or signature pages of this Agreement as a "co-agent" shall have no right, power, obligation, liability, responsibility or duty under this Agreement or any of the other Financing Agreements other than those applicable to all Lenders as such. Without limiting the foregoing, the Lender so identified shall not have or be deemed to have any fiduciary relationship with any Lender. Each Lender acknowledges that it has not relied, and will not rely, on the Lender so identified in deciding to enter into this Agreement or in taking or not taking action hereunder. SECTION 13. TERM OF AGREEMENT; MISCELLANEOUS 13.1 Term. (a) This Agreement and the other Financing Agreements shall become effective as of the date set forth on the first page hereof and shall continue in full force and effect for a term ending on June 30, 2006 (the "Renewal Date"), and from year to year thereafter, unless sooner terminated pursuant to the terms hereof. Agent may, at its option (or shall at the direction of any Lender in writing received by Agent at least ninety (90) days prior to the Renewal Date or the anniversary of any Renewal Date, as the case may be), terminate this Agreement and the other Financing Agreements, or Administrative Borrower or any Borrower may terminate this 109 Agreement and the other Financing Agreements, in each case, effective on the Renewal Date or on the anniversary of the Renewal Date in any year by giving to the other party at least sixty (60) days prior written notice; provided, that, this Agreement and all other Financing Agreements must be terminated simultaneously. In addition, Borrowers may terminate this Agreement at any time upon ten (10) days prior written notice to Agent (which notice shall be irrevocable) and Agent may, at its option, and shall at the direction of Required Lenders, terminate this Agreement at any time an Event of Default exists or has occurred and is continuing. Upon the Renewal Date or any other effective date of termination of the Financing Agreements, Borrowers shall pay to Agent all outstanding and unpaid Obligations and shall furnish cash collateral to Agent (or at Agent's option, a letter of credit issued for the account of Borrowers and at Borrowers' expense, in form and substance satisfactory to Agent, by an issuer acceptable to Agent and payable to Agent as beneficiary) in such amounts as Agent determines are reasonably necessary to secure Agent and Lenders from loss, cost, damage or expense, including reasonable attorneys' fees and expenses, in connection with any contingent Obligations, including issued and outstanding Letter of Credit Accommodations and checks or other payments provisionally credited to the Obligations and/or as to which Agent or any Lender has not yet received final and indefeasible payment and any continuing obligations of Agent or any Lender pursuant to any Deposit Account Control Agreement. The amount of such cash collateral (or letter of credit, as Agent may determine) as to any Letter of Credit Accommodations shall be in the amount equal to one hundred five percent (105%) of the amount of the Letter of Credit Accommodations plus the amount of any reasonable fees and expenses payable in connection therewith through the end of the latest expiration date of such Letter of Credit Accommodations. Such payments in respect of the Obligations and cash collateral shall be remitted by wire transfer in Federal funds to the Agent Payment Account or such other bank account of Agent, as Agent may, in its discretion, designate in writing to Administrative Borrower for such purpose. Interest shall be due until and including the next Business Day, if the amounts so paid by Borrowers to the Agent Payment Account or other bank account designated by Agent are received in such bank account later than 12:00 noon, New York City time. (b) No termination of this Agreement or the other Financing Agreements shall relieve or discharge any Borrower of its respective duties, obligations and covenants under this Agreement or the other Financing Agreements until all Obligations have been fully and finally discharged and paid, and Agent's continuing security interest in the Collateral and the rights and remedies of Agent and Lenders hereunder, under the other Financing Agreements and applicable law, shall remain in effect until all such Obligations have been fully and finally discharged and paid. Accordingly, each Borrower waives any rights it may have under the UCC to demand the filing of termination statements with respect to the Collateral and Agent shall not be required to send such termination statements to Borrowers, or to file them with any filing office, unless and until this Agreement shall have been terminated in accordance with its terms and all Obligations paid and satisfied in full in immediately available funds. (c) If for any reason this Agreement is terminated prior to the Renewal Date, in view of the impracticality and extreme difficulty of ascertaining actual damages and by mutual agreement of the parties as to a reasonable calculation of Agent's and each Lender's lost profits as a result thereof, Borrowers agree to pay to Agent for itself and the ratable benefit of Lenders, 110 upon the effective date of such termination, an early termination fee in the amount equal to
Amount Period ------ ------ (i) 2% of the aggregate amount From the date hereof to and including the of the Credit Facility Revolving second anniversary of the date hereof; and Loan Limit plus the then outstanding principal amount of the Term Loans (ii) 1% of the aggregate amount From and after the second anniversary of the of the Credit Facility Revolving date hereof to but not including the date Loan Limit plus the then which is 60 days prior to the Renewal Date. outstanding principal amount of the Term Loans
Such early termination fee shall be presumed to be the amount of damages sustained by Agent and Lenders as a result of such early termination and Borrowers agree that it is reasonable under the circumstances currently existing. In addition, Agent and Lenders shall be entitled to such early termination fee upon the occurrence of any Event of Default described in Sections 10.1(g) and 10.1(h) hereof, even if Agent and Lenders do not exercise the right to terminate this Agreement, but elect, at their option, to provide financing to any Borrower or permit the use of cash collateral under the United States Bankruptcy Code. The early termination fee provided for in this Section 13.1 shall be deemed included in the Obligations. 13.2 Interpretative Provisions. (a) All terms used herein which are defined in Article 1, Article 8 or Article 9 of the UCC shall have the meanings given therein unless otherwise defined in this Agreement. (b) All references to the plural herein shall also mean the singular and to the singular shall also mean the plural unless the context otherwise requires. (c) All references to any Borrower, Agent and Lenders pursuant to the definitions set forth in the recitals hereto, or to any other person herein, shall include their respective successors and assigns. (d) The words "hereof", "herein", "hereunder", "this Agreement" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not any particular provision of this Agreement and as this Agreement now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced. (e) The word "including" when used in this Agreement shall mean "including, without limitation" and the word "will" when used in this Agreement shall be construed to have the same meaning and effect as the word "shall". (f) An Event of Default shall exist or continue or be continuing until such 111 Event of Default is waived in accordance with Section 11.3 or is cured in a manner satisfactory to Agent, if such Event of Default is capable of being cured as determined by Agent. (g) All references to the term "good faith" used herein when applicable to Agent or any Lender shall mean, notwithstanding anything to the contrary contained herein or in the UCC, honesty in fact in the conduct or transaction concerned. Borrowers shall have the burden of proving any lack of good faith on the part of Agent or any Lender alleged by any Borrower at any time. (h) Any accounting term used in this Agreement shall have, unless otherwise specifically provided herein, the meaning customarily given in accordance with GAAP, and all financial computations hereunder shall be computed unless otherwise specifically provided herein, in accordance with GAAP as consistently applied and using the same method for inventory valuation as used in the preparation of the financial statements of Borrowers most recently received by Agent prior to the date hereof. Notwithstanding anything to the contrary contained in GAAP or any interpretations or other pronouncements by the Financial Accounting Standards Board or otherwise, the term "unqualified opinion" as used herein to refer to opinions or reports provided by accountants shall mean an opinion or report that is not only unqualified but also does not include any explanatory note or language, including any explanation, supplemental comment or other comment concerning the ability of the applicable person to continue as a going concern or otherwise. (i) In the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including", the words "to" and "until" each mean "to but excluding" and the word "through" means "to and including". (j) Unless otherwise expressly provided herein, (i) references herein to any agreement, document or instrument shall be deemed to include all subsequent amendments, modifications, supplements, extensions, renewals, restatements or replacements with respect thereto, but only to the extent the same are not prohibited by the terms hereof or of any other Financing Agreement, and (ii) references to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending, replacing, recodifying, supplementing or interpreting the statute or regulation. (k) The captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement. (l) This Agreement and other Financing Agreements may use several different limitations, tests or measurements to regulate the same or similar matters. All such limitations, tests and measurements are cumulative and shall each be performed in accordance with their terms. (m) This Agreement and the other Financing Agreements are the result of negotiations among and have been reviewed by counsel to Agent and the other parties, and are the products of all parties. Accordingly, this Agreement and the other Financing Agreements 112 shall not be construed against Agent or Lenders merely because of Agent's or any Lender's involvement in their preparation. 13.3 Notices. All notices, requests and demands hereunder shall be in writing and deemed to have been given or made: if delivered in person, immediately upon delivery; if by telex, telegram or facsimile transmission, immediately upon sending and upon confirmation of receipt; if by nationally recognized overnight courier service with instructions to deliver the next Business Day, one (1) Business Day after sending; and if by certified mail, return receipt requested, five (5) days after mailing. All notices, requests and demands upon the parties are to be given to the following addresses (or to such other address as any party may designate by notice in accordance with this Section): If to any Borrower: Lexington Precision Corporation 767 Third Avenue New York, New York 10017-2023 Attention: President Telephone No.: 212-319-4657 Telecopy No.: 212-319-4659 with a copy to: Nixon Peabody LLP 437 Madison Avenue New York, New York 10022 Attention: Lauren Wiesenberg, Esq. Telephone No.: 212-940-3136 Telecopy No.: 866-947-2363 If to Agent: Congress Financial Corporation 1133 Avenue of the Americas New York, New York 10036 Attention: Portfolio Manager Telephone No.: 212-840-2000 Telecopy No.: 212-545-4583
13.4 Partial Invalidity. If any provision of this Agreement is held to be invalid or unenforceable, such invalidity or unenforceability shall not invalidate this Agreement as a whole, but this Agreement shall be construed as though it did not contain the particular provision held to be invalid or unenforceable and the rights and obligations of the parties shall be construed and enforced only to such extent as shall be permitted by applicable law. 13.5 Confidentiality. (a) Agent and each Lender shall use all reasonable efforts to keep confidential, in accordance with its customary procedures for handling confidential information and safe and sound lending practices, any non-public information supplied to it by any Borrower pursuant to this Agreement, provided, that, nothing contained herein shall limit the disclosure of any such 113 information: (i) to the extent required by statute, rule, regulation, subpoena or court order provided Administrative Borrower, if practicable, is given prior notice of any such disclosure and in all other instances Administrative Borrower is given notice of any such disclosure promptly after Agent's or such Lender's disclosure of such information, (ii) to bank examiners and other regulators, auditors and/or accountants, in connection with any litigation to which Agent or such Lender is a party, (iii) to any Lender or Participant (or prospective Lender or Participant) or to any Affiliate of any Lender so long as such Lender or Participant (or prospective Lender or Participant) or Affiliate shall have instructed in writing, and by acceptance of the information be deemed to have agreed, to treat such information as confidential in accordance with this Section 13.5, or (iv) to counsel for Agent or any Lender or Participant (or prospective Lender or Participant). (b) In the event that Agent or any Lender receives a request or demand to disclose any confidential information pursuant to any subpoena or court order, Agent or such Lender, as the case may be, agrees (i) to the extent permitted by applicable law or if permitted by applicable law, to the extent Agent or such Lender determines in good faith that it will not create any risk of liability to Agent or such Lender, Agent or such Lender will promptly notify Administrative Borrower of such request so that Administrative Borrower may seek a protective order or other appropriate relief or remedy and (ii) if disclosure of such information is required, disclose such information and, subject to reimbursement by Borrowers of Agent's or such Lender's expenses, cooperate with Administrative Borrower in the reasonable efforts to obtain an order or other reliable assurance that confidential treatment will be accorded to such portion of the disclosed information which Administrative Borrower so designates, to the extent permitted by applicable law or if permitted by applicable law, to the extent Agent or such Lender determines in good faith that it will not create any risk of liability to Agent or such Lender. (c) In no event shall this Section 13.5 or any other provision of this Agreement, any of the other Financing Agreements or applicable law be deemed: (i) to apply to or restrict disclosure of information that has been or is made public by any Borrower, or any third party or otherwise becomes generally available to the public other than as a result of a disclosure in violation hereof, (ii) to apply to or restrict disclosure of information that was or becomes available to Agent or any Lender (or any Affiliate of any Lender) on a non-confidential basis from a person other than a Borrower, (iii) to require Agent or any Lender to return any materials furnished by a Borrower to Agent or a Lender or prevent Agent or a Lender from responding to routine informational requests in accordance with the Code of Ethics for the Exchange of Credit Information promulgated by The Robert Morris Associates or other applicable industry standards relating to the exchange of credit information. The obligations of Agent and Lenders under this Section 13.5 shall supersede and replace the obligations of Agent and Lenders under any confidentiality letter signed prior to the date hereof. (d) Notwithstanding anything to the contrary set forth herein or in any of the other Financing Agreements or any other written or oral understanding or agreement, (i) any obligations of confidentiality contained herein, in any of the other Financing Agreements or any such other understanding or agreement do not apply and have not applied from the commencement of discussions between the parties to the tax treatment and tax structure of the 114 transactions contemplated herein (and any related transactions or arrangements), and (ii) each party (and each of its employees, representatives, or other agents) may disclose to any and all persons the tax treatment and tax structuring of the transactions contemplated herein and all materials of any kind (including opinions or other tax analyses) that are provided to such party relating to such tax treatment and tax structure, all within the meaning of Treasury Regulation Section 1.6011-4; provided, that, each party recognizes that the privilege that it may, in its discretion, maintain with respect to the confidentiality of a communication relating to the transactions contemplated herein, including a confidential communication with its attorney or a confidential communication with a federally authorized tax practitioner under Section 7525 of the Internal Revenue Code, is not intended to be affected by the foregoing. Borrowers do not intend to treat the Loans and related transactions as being a "reportable transaction" (within the meaning of Treasury Regulation Section 1.6011-4). In the event Borrowers determine to take any action inconsistent with such intention, it will promptly notify Agent thereof. Each Borrower acknowledges that one or more of Lenders may treat its Loans as part of a transaction that is subject to Treasury Regulation Section 1.6011-4 or Section 301.6112-1, and the Agent and such Lender or Lenders, as applicable, may file such IRS forms or maintain such lists and other records as they may determine is required by such Treasury Regulations. 13.6 Successors. This Agreement, the other Financing Agreements and any other document referred to herein or therein shall be binding upon and inure to the benefit of and be enforceable by Agent, Lenders, Borrowers, and their respective successors and assigns, except that no Borrower may assign its rights under this Agreement and the other Financing Agreements without the prior written consent of Agent and Lenders. Any such purported assignment without such express prior written consent shall be void. No Lender may assign its rights and obligations under this Agreement without the prior written consent of Agent, except as provided in Section 13.7 below. The terms and provisions of this Agreement and the other Financing Agreements are for the purpose of defining the relative rights and obligations of Borrowers, Agent and Lenders with respect to the transactions contemplated hereby and there shall be no third party beneficiaries of any of the terms and provisions of this Agreement or any of the other Financing Agreements. 13.7 Assignments; Participations. (a) Each Lender may, with the prior written consent of Agent, assign all or, if less than all, a portion equal to at least $5,000,000 in the aggregate for the assigning Lender, of such rights and obligations under this Agreement to one or more Eligible Transferees (but not including for this purpose any assignments in the form of a participation), each of which assignees shall become a party to this Agreement as a Lender by execution of an Assignment and Acceptance; provided, that, (i) such transfer or assignment will not be effective until recorded by Agent on the Register (as defined below) and (ii) Agent shall have received for its sole account payment of a processing fee from the assigning Lender or the assignee in the amount of $5,000. (b) Agent shall maintain a register of the names and addresses of Lenders, their Commitments and the principal amount of their Loans (the "Register"). Agent shall also maintain a copy of each Assignment and Acceptance delivered to and accepted by it and shall 115 modify the Register to give effect to each Assignment and Acceptance. The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and any Borrowers, Obligors, Agent and Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by Administrative Borrower and any Lender at any reasonable time and from time to time upon reasonable prior notice. (c) Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, the assignee thereunder shall be a party hereto and to the other Financing Agreements and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations (including, without limitation, the obligation to participate in Letter of Credit Accommodations) of a Lender hereunder and thereunder and the assigning Lender shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement. (d) By execution and delivery of an Assignment and Acceptance, the assignor and assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, the assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or any of the other Financing Agreements or the execution, legality, enforceability, genuineness, sufficiency or value of this Agreement or any of the other Financing Agreements furnished pursuant hereto, (ii) the assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Borrower, Obligor or any of their Subsidiaries or the performance or observance by any Borrower or Obligor of any of the Obligations; (iii) such assignee confirms that it has received a copy of this Agreement and the other Financing Agreements, together with such other documents and information it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance, (iv) such assignee will, independently and without reliance upon the assigning Lender, Agent and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and the other Financing Agreements, (v) such assignee appoints and authorizes Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the other Financing Agreements as are delegated to Agent by the terms hereof and thereof, together with such powers as are reasonably incidental thereto, and (vi) such assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement and the other Financing Agreements are required to be performed by it as a Lender. Agent and Lenders may furnish any information concerning any Borrower or Obligor in the possession of Agent or any Lender from time to time to assignees and Participants. (e) Each Lender may sell participations to one or more banks or other entities in or to all or a portion of its rights and obligations under this Agreement and the other Financing Agreements (including, without limitation, all or a portion of its Commitments and the Loans 116 owing to it and its participation in the Letter of Credit Accommodations, without the consent of Agent or the other Lenders); provided, that, (i) such Lender's obligations under this Agreement (including, without limitation, its Commitment hereunder) and the other Financing Agreements shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, and Borrowers, the other Lenders and Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and the other Financing Agreements, and (iii) the Participant shall not have any rights under this Agreement or any of the other Financing Agreements (the Participant's rights against such Lender in respect of such participation to be those set forth in the agreement executed by such Lender in favor of the Participant relating thereto) and all amounts payable by any Borrower or Obligor hereunder shall be determined as if such Lender had not sold such participation. (f) Nothing in this Agreement shall prevent or prohibit any Lender from pledging its Loans hereunder to a Federal Reserve Bank in support of borrowings made by such Lenders from such Federal Reserve Bank; provided, that, no such pledge shall release such Lender from any of its obligations hereunder or substitute any such pledgee for such Lender as a party hereto. (g) Borrowers agree to cooperate with Agent or any Lender permitted to sell assignments or participations under this Section 13.7 and upon request shall take such commercially reasonable actions in order to enable or effect any such assignment or participation, including (but not limited to) the execution and delivery of any and all agreements, notes and other documents and instruments as shall be reasonably requested by Agent or any Lender and the delivery of informational materials, appraisals or other documents for, and the participation of relevant management in meetings and conference calls with, potential Lenders or Participants. 13.8 Entire Agreement. This Agreement, the other Financing Agreements, any supplements hereto or thereto, and any instruments or documents delivered or to be delivered in connection herewith or therewith represents the entire agreement and understanding concerning the subject matter hereof and thereof between the parties hereto, and supersede all other prior agreements, understandings, negotiations and discussions, representations, warranties, commitments, proposals, offers and contracts concerning the subject matter hereof, whether oral or written. In the event of any inconsistency between the terms of this Agreement and any schedule or exhibit hereto, the terms of this Agreement shall govern. 13.9 Counterparts, Etc. This Agreement or any of the other Financing Agreements may be executed in any number of counterparts, each of which shall be an original, but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of this Agreement or any of the other Financing Agreements by telefacsimile shall have the same force and effect as the delivery of an original executed counterpart of this Agreement or any of such other Financing Agreements. Any party delivering an executed counterpart of any such agreement by telefacsimile shall also deliver an original executed counterpart, but the failure to do so shall not affect the validity, enforceability or binding effect of such agreement. 117 SECTION 14. ACKNOWLEDGMENT AND RESTATEMENT 14.1 Existing Obligations. Each Borrower hereby acknowledges, confirms and agrees that Borrowers are indebted to Lender under the Existing Financing Agreements, as of the close of business on December 17, 2003, in respect of loans, advances and other financial accommodations, which amounts, together with all interest accrued and accruing thereon (to the extent applicable), and all fees, costs, expenses and other charges relating thereto, all of which are unconditionally owing by Borrowers to Lender, without offset, defense or counterclaim of any kind, nature or description whatsoever, as follows: (a) in respect of loans, advances, letters of credit and other financial accommodations to LPC, the aggregate principal amount of $6,598,592 consisting of (i) revolving loans in the aggregate outstanding principal amount of $1,779,792, plus accrued fees and interest thereon, (ii) the term loans evidenced by the Existing LPC Term Notes in the aggregate outstanding principal amount of $3,300,800, plus accrued fees and interest thereon and (iii) letters of credit in the outstanding principal amount of $1,518,000, and (b) in respect of loans, advances, letters of credit and other financial accommodations to LRG, the aggregate principal amount of $18,761,052 consisting of (i) revolving loans in the aggregate outstanding principal amount of $15,011,874, plus accrued fees and interest thereon, (ii) the term loans evidenced by the Existing LRG Term Notes in the aggregate outstanding principal amount of $3,749,178, plus accrued fees and interest thereon and (iii) letters of credit in the outstanding principal amount of $0. 14.2 Acknowledgment of Security Interests. (a) Each Borrower hereby acknowledges, confirms and agrees that Congress has and Agent on behalf of Congress and Lenders shall continue to have a security interest in and lien upon the Collateral heretofore granted to Congress pursuant to the Existing Financing Agreements to secure the Obligations, as well as any Collateral granted under this Agreement or under any of the other Financing Agreements. (b) The liens and security interests of Agent in the Collateral shall be deemed to be continuously granted and perfected from the earliest date of the granting and perfection of such liens and security interests to Congress, whether under the Existing Financing Agreements, this Agreement or any of the other Financing Agreements, all to the fullest extent permitted by applicable law. 14.3 Existing Agreements. Each Borrower each hereby acknowledges, confirms and agrees that at all times prior to the effectiveness of this Agreement: (a) the Existing Financing Agreements have been duly executed and delivered by such Borrower and are in full force and effect and (b) the agreements and obligations of such Borrower contained in the Existing Financing Agreements constitute the legal, valid and binding obligations of such Borrower enforceable against it in accordance with their respective terms and such Borrower has no valid defense to the enforcement of such obligations and (c) Agent and Lenders are entitled to all of 118 the rights and remedies provided for in the Existing Agreements. 14.4 Restatement. (a) Except as otherwise stated in Section 14.2 hereof and this Section 14.4, as of the date hereof, the Existing Financing Agreements are hereby amended and restated in their entirety, and as so amended and restated, are replaced and superseded by this Agreement and the other Financing Agreements, and the Borrowers shall continue to be jointly and severally liable for the Obligations (which obligations pursuant to the Existing Financing Agreements shall be deemed incorporated into, a part of, and amended, restated and allocated as provided in Section 14.4(b) hereof). The amendment and restatement contained herein shall not, in any manner, be construed to constitute (i) payment of the Indebtedness and other obligations and liabilities of Borrowers evidenced by or arising under the Existing Financing Agreements (all of which Indebtedness and other obligations and liabilities shall be deemed incorporated into, a part of, and amended, restated and allocated as provided in Section 14.4(b) hereof) or (ii) a release, termination or impairment of the liens and security interests securing such Indebtedness and other obligations and liabilities, all of which liens and security interests shall be deemed to secure the Obligations and shall be assigned to Agent for the benefit of Lenders. (b) The principal amount of the revolving loans, the amount of the letters of credit (including all "Credits" as defined in the Existing Financing Agreements) and the principal amount of term loans outstanding as of the date hereof under the Existing Financing Agreements as set forth in Section 14.1 above shall be deemed Loans, Letter of Credit Accommodations and Term Loans made under Sections 2.1, 2.2 and 2.3 of this Agreement, respectively, in such amounts as set forth in Section 14.1 above for revolving loans, letters of credit and term loans and shall be allocated Pro-Rata to Lenders in accordance with their Commitment. 14.5 Release. Each Borrower for itself and its successors and assigns does hereby remise, release, discharge and hold Congress (in its capacity as lender under the Existing Financing Agreements), Agent and Lenders, its officers, directors, agents and employees and their respective predecessors, successors and assigns harmless from all claims, demands, debts, sums of money, accounts, damages, judgments, financial obligations, actions, causes of action, suits at law or in equity, of any kind or nature whatsoever, whether or not now existing or known, which such Borrower or their respective successors or assigns has had or may now or hereafter claim to have against Congress (in its capacity as lender under the Existing Financing Agreements), Agent, Lenders or any of their officers, directors, agents and employees and their respective predecessors, successors and assigns in any way arising from or connected with the Existing Financing Agreements or the arrangements set forth therein or transactions thereunder up to and including the date hereof. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 119 IN WITNESS WHEREOF, Agent, Lenders, Borrowers have caused these presents to be duly executed as of the day and year first above written. AGENT CONGRESS FINANCIAL CORPORATION, as Agent By: /s/ Herb Korn ______________________________________ Title: Vice President ____________________________________ CO-AGENT THE CIT GROUP/COMMERCIAL FINANCING, INC., as Co-Agent By: /s/ Louis McKinley ______________________________________ Title: Vice President ____________________________________ LENDERS CONGRESS FINANCIAL CORPORATION By: /s/ Herb Korn ______________________________________ Title: Vice President ___________________________________ Commitment: $18,500,000 THE CIT GROUP/COMMERCIAL FINANCING, INC. By: /s/ Louis McKinley ______________________________________ Title: Vice President ___________________________________ Commitment: $18,500,000 BORROWERS LEXINGTON PRECISION CORPORATION By: /s/ Michael A. Lubin ______________________________________ Title: Chairman of the Board ___________________________________ LEXINGTON RUBBER GROUP, INC. By: /s/ Michael A. Lubin ______________________________________ Title: Chairman of the Board ___________________________________ 120 EXHIBIT A to LOAN AND SECURITY AGREEMENT ASSIGNMENT AND ACCEPTANCE AGREEMENT This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "Assignment and Acceptance") dated as of _____________, 2003 is made between ________________________ (the "Assignor") and ____________________ (the "Assignee"). W I T N E S S E T H: WHEREAS, Congress Financial Corporation, in its capacity as agent pursuant to the Loan Agreement (as hereinafter defined) acting for and on behalf of the parties thereto as lenders (in such capacity, "Agent"), and the parties to the Loan Agreement as lenders (individually, each a "Lender" and collectively, "Lenders") have entered or are about to enter into financing arrangements pursuant to which Agent and Lenders may make loans and advances and provide other financial accommodations to Lexington Precision Corporation and Lexington Rubber Group, Inc. (collectively, "Borrowers") as set forth in the Amended and Restated Loan and Security Agreement, dated _________, 2003, by and among Borrowers, Agent, The CIT Group/Commercial Financing, Inc., in its capacity as co-agent, and Lenders (as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, the "Loan Agreement"), and the other agreements, documents and instruments referred to therein or at any time executed and/or delivered in connection therewith or related thereto (all of the foregoing, together with the Loan Agreement, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, being collectively referred to herein as the "Financing Agreements"); WHEREAS, as provided under the Loan Agreement, Assignor committed to making Loans (the "Committed Loans") to Borrowers in an aggregate amount not to exceed $___________ (the "Commitment"); WHEREAS, Assignor wishes to assign to Assignee [part of the] [all] rights and obligations of Assignor under the Loan Agreement in respect of its Commitment in an amount equal to $______________ (the "Assigned Commitment Amount") on the terms and subject to the conditions set forth herein and Assignee wishes to accept assignment of such rights and to assume such obligations from Assignor on such terms and subject to such conditions; NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows: 1. Assignment and Acceptance. A-1 (a) Subject to the terms and conditions of this Assignment and Acceptance, Assignor hereby sells, transfers and assigns to Assignee, and Assignee hereby purchases, assumes and undertakes from Assignor, without recourse and without representation or warranty (except as provided in this Assignment and Acceptance) an interest in (i) the Commitment and each of the Committed Loans of Assignor and (ii) all related rights, benefits, obligations, liabilities and indemnities of the Assignor (in its capacity as a Lender) under and in connection with the Loan Agreement and the other Financing Agreements, so that after giving effect thereto, the Commitment of Assignee shall be as set forth below and the Pro Rata Share of Assignee shall be _______ (__%) percent. (b) With effect on and after the Effective Date (as defined in Section 5 hereof), Assignee shall be a party to the Loan Agreement and succeed to all of the rights and be obligated to perform all of the obligations of a Lender under the Loan Agreement, including the requirements concerning confidentiality and the payment of indemnification, with a Commitment in an amount equal to the Assigned Commitment Amount. Assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Loan Agreement are required to be performed by it as a Lender. It is the intent of the parties hereto that the Commitment of Assignor shall, as of the Effective Date, be reduced by an amount equal to the Assigned Commitment Amount and Assignor shall relinquish its rights and be released from its obligations under the Loan Agreement to the extent such obligations have been assumed by Assignee; provided, that, Assignor shall not relinquish its rights under Sections 2.1, 6.4, 6.8 and 6.9 of the Loan Agreement to the extent such rights relate to the time prior to the Effective Date. (c) After giving effect to the assignment and assumption set forth herein, on the Effective Date Assignee's Commitment will be $_____________. (d) After giving effect to the assignment and assumption set forth herein, on the Effective Date Assignor's Commitment will be $______________ (as such amount may be further reduced by any other assignments by Assignor on or after the date hereof). 2. Payments. (a) As consideration for the sale, assignment and transfer contemplated in Section 1 hereof, Assignee shall pay to Assignor on the Effective Date in immediately available funds an amount equal to $____________, representing Assignee's Pro Rata Share of the principal amount of all Committed Loans. (b) Assignee shall pay to Agent the processing fee in the amount specified in Section 13.7(a) of the Loan Agreement. 3. Reallocation of Payments. Any interest, fees and other payments accrued to the Effective Date with respect to the Commitment, Committed Loans and outstanding Letter of Credit Accommodations shall be for the account of Assignor. Any interest, fees and other payments accrued on and after the Effective Date with respect to the Assigned Commitment Amount shall be A-2 for the account of Assignee. Each of Assignor and Assignee agrees that it will hold in trust for the other party any interest, fees and other amounts which it may receive to which the other party is entitled pursuant to the preceding sentence and pay to the other party any such amounts which it may receive promptly upon receipt. 4. Independent Credit Decision. Assignee acknowledges that it has received a copy of the Loan Agreement and the Schedules and Exhibits thereto, together with copies of the most recent financial statements of Borrowers, and such other documents and information as it has deemed appropriate to make its own credit and legal analysis and decision to enter into this Assignment and Acceptance and agrees that it will, independently and without reliance upon Assignor, Agent or any Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit and legal decisions in taking or not taking action under the Loan Agreement. 5. Effective Date; Notices. (a) As between Assignor and Assignee, the effective date for this Assignment and Acceptance shall be _______________, 200_ (the "Effective Date"); provided, that, the following conditions precedent have been satisfied on or before the Effective Date: (i) this Assignment and Acceptance shall be executed and delivered by Assignor and Assignee; (ii) the consent of Agent as required for an effective assignment of the Assigned Commitment Amount by Assignor to Assignee shall have been duly obtained and shall be in full force and effect as of the Effective Date; (iii) written notice of such assignment, together with payment instructions, addresses and related information with respect to Assignee, shall have been given to Administrative Borrower and Agent; (iv) Assignee shall pay to Assignor all amounts due to Assignor under this Assignment and Acceptance; and (v) the processing fee referred to in Section 2(b) hereof shall have been paid to Agent. (b) Promptly following the execution of this Assignment and Acceptance, Assignor shall deliver to Administrative Borrower and Agent for acknowledgment by Agent, a Notice of Assignment in the form attached hereto as Schedule 1. [6. Agent. [INCLUDE ONLY IF ASSIGNOR IS AN AGENT] (a) Assignee hereby appoints and authorizes Assignor in its capacity as Agent to take such action as agent on its behalf to exercise such powers under the Loan Agreement as are A-3 delegated to Agent by Lenders pursuant to the terms of the Loan Agreement. (b) Assignee shall assume no duties or obligations held by Assignor in its capacity as Agent under the Loan Agreement.] 7. Withholding Tax. Assignee (a) represents and warrants to Assignor, Agent and Borrowers that under applicable law and treaties no tax will be required to be withheld by Assignee, Agent or Borrowers with respect to any payments to be made to Assignee hereunder or under any of the Financing Agreements, (b) agrees to furnish (if it is organized under the laws of any jurisdiction other than the United States or any State thereof) to Agent and Borrowers prior to the time that Agent or Borrowers are required to make any payment of principal, interest or fees hereunder, duplicate executed originals of either U.S. Internal Revenue Service Form W-8BEN or W-8ECI, as applicable (wherein Assignee claims entitlement to the benefits of a tax treaty that provides for a complete exemption from U.S. federal income withholding tax on all payments hereunder) and agrees to provide new such Forms upon the expiration of any previously delivered form or comparable statements in accordance with applicable U.S. law and regulations and amendments thereto, duly executed and completed by Assignee, and (c) agrees to comply with all applicable U.S. laws and regulations with regard to such withholding tax exemption. 8. Representations and Warranties. (a) Assignor represents and warrants that (i) it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any security interest, lien, encumbrance or other adverse claim, (ii) it is duly organized and existing and it has the full power and authority to take, and has taken, all action necessary to execute and deliver this Assignment and Acceptance and any other documents required or permitted to be executed or delivered by it in connection with this Assignment and Acceptance and to fulfill its obligations hereunder, (iii) no notices to, or consents, authorizations or approvals of, any Person are required (other than any already given or obtained) for its due execution, delivery and performance of this Assignment and Acceptance, and apart from any agreements or undertakings or filings required by the Loan Agreement, no further action by, or notice to, or filing with, any Person is required of it for such execution, delivery or performance, and (iv) this Assignment and Acceptance has been duly executed and delivered by it and constitutes the legal, valid and binding obligation of Assignor, enforceable against Assignor in accordance with the terms hereof, subject, as to enforcement, to bankruptcy, insolvency, moratorium, reorganization and other laws of general application relating to or affecting creditors' rights and to general equitable principles. (b) Assignor makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Loan Agreement or any of the other Financing Agreements or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Agreement or any other instrument or document furnished pursuant thereto. Assignor makes no representation or warranty in connection with, and assumes no responsibility with respect to, the solvency, financial condition or statements of Borrowers or any of their respective Affiliates, or the performance or observance by Borrowers or any other Person, of any of its respective obligations under the Loan Agreement or any other A-4 instrument or document furnished in connection therewith. (c) Assignee represents and warrants that (i) it is duly organized and existing and it has full power and authority to take, and has taken, all action necessary to execute and deliver this Assignment and Acceptance and any other documents required or permitted to be executed or delivered by it in connection with this Assignment and Acceptance, and to fulfill its obligations hereunder, (ii) no notices to, or consents, authorizations or approvals of, any Person are required (other than any already given or obtained) for its due execution, delivery and performance of this Assignment and Acceptance, and apart from any agreements or undertakings or filings required by the Loan Agreement, no further action by, or notice to, or filing with, any Person is required of it for such execution, delivery or performance; and (iii) this Assignment and Acceptance has been duly executed and delivered by it and constitutes the legal, valid and binding obligation of Assignee, enforceable against Assignee in accordance with the terms hereof, subject, as to enforcement, to bankruptcy, insolvency, moratorium, reorganization and other laws of general application relating to or affecting creditors' rights to general equitable principles. 9. Further Assurances. Assignor and Assignee each hereby agree to execute and deliver such other instruments, and take such other action, as either party may reasonably request in connection with the transactions contemplated by this Assignment and Acceptance, including the delivery of any notices or other documents or instruments to Borrowers or Agent, which may be required in connection with the assignment and assumption contemplated hereby. 10. Miscellaneous (a) Any amendment or waiver of any provision of this Assignment and Acceptance shall be in writing and signed by the parties hereto. No failure or delay by either party hereto in exercising any right, power or privilege hereunder shall operate as a waiver thereof and any waiver of any breach of the provisions of this Assignment and Acceptance shall be without prejudice to any rights with respect to any other for further breach thereof. (b) All payments made hereunder shall be made without any set-off or counterclaim. (c) Assignor and Assignee shall each pay its own costs and expenses incurred in connection with the negotiation, preparation, execution and performance of this Assignment and Acceptance. (d) This Assignment and Acceptance may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument. (e) THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. Assignor and Assignee each irrevocably submits to the non-exclusive jurisdiction of any State or Federal court sitting in New York County, New York over any suit, action or proceeding arising A-5 out of or relating to this Assignment and Acceptance and irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such New York State or Federal court. Each party to this Assignment and Acceptance hereby irrevocably waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding. (f) ASSIGNOR AND ASSIGNEE EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS ASSIGNMENT AND ACCEPTANCE, THE LOAN AGREEMENT, ANY OF THE OTHER FINANCING AGREEMENTS OR ANY RELATED DOCUMENTS AND AGREEMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALING, OR STATEMENTS (WHETHER ORAL OR WRITTEN). IN WITNESS WHEREOF, Assignor and Assignee have caused this Assignment and Acceptance to be executed and delivered by their duly authorized officers as of the date first above written. [ASSIGNOR] By: __________________________________ Title: _______________________________ [ASSIGNEE] By: __________________________________ Title: _______________________________ A-6 SCHEDULE 1 NOTICE OF ASSIGNMENT AND ACCEPTANCE _____________________________ _____________________________ _____________________________ _____________________________ _____________________________ ___, 20__ Attn.: ______________________________ Re: ____________________________________ Ladies and Gentlemen: Congress Financial Corporation, in its capacity as agent pursuant to the Loan Agreement (as hereinafter defined) acting for and on behalf of the parties thereto as lenders (in such capacity, "Agent"), and the parties to the Loan Agreement as lenders (individually, each a "Lender" and collectively, "Lenders") have entered or are about to enter into financing arrangements pursuant to which Agent and Lenders may make loans and advances and provide other financial accommodations to Lexington Precision Corporation and Lexington Rubber Group, Inc. (collectively, "Borrowers") as set forth in the Loan and Security Agreement, dated _____________, 2003, by and among Borrowers, Agent and Lenders (as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, the "Loan Agreement"), and the other agreements, documents and instruments referred to therein or at any time executed and/or delivered in connection therewith or related thereto (all of the foregoing, together with the Loan Agreement, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, being collectively referred to herein as the "Financing Agreements"). Capitalized terms not otherwise defined herein shall have the respective meanings ascribed thereto in the Loan Agreement. 1. We hereby give you notice of, and request your consent to, the assignment by __________________________ (the "Assignor") to ___________________________ (the "Assignee") such that after giving effect to the assignment Assignee shall have an interest equal to ________ (__%) percent of the total Commitments pursuant to the Assignment and Acceptance Agreement attached hereto (the "Assignment and Acceptance"). We understand that the Assignor's Commitment shall be reduced by $_____________, as the same may be further reduced by other assignments on or after the date hereof. 2. Assignee agrees that, upon receiving the consent of Agent to such assignment, Assignee will be bound by the terms of the Loan Agreement as fully and to the same extent as if the Assignee were the Lender originally holding such interest under the Loan Agreement. A-7 3. The following administrative details apply to Assignee: (A) Notice address: Assignee name: ____________________________________ Address: ____________________________________ Attention: ____________________________________ Telephone: ____________________________________ Telecopier: ____________________________________ (B) Payment instructions: Account No.: ____________________________________ At: ____________________________________ ____________________________________ Reference: ____________________________________ Attention: ____________________________________ 4. You are entitled to rely upon the representations, warranties and covenants of each of Assignor and Assignee contained in the Assignment and Acceptance. A-8 IN WITNESS WHEREOF, Assignor and Assignee have caused this Notice of Assignment and Acceptance to be executed by their respective duly authorized officials, officers or agents as of the date first above mentioned. Very truly yours, [NAME OF ASSIGNOR] By: _________________________________________ Title: ______________________________________ [NAME OF ASSIGNEE] By: _________________________________________ Title: ______________________________________ ACKNOWLEDGED AND ASSIGNMENT CONSENTED TO: CONGRESS FINANCIAL CORPORATION, as Agent By: _________________________________________ Title: ______________________________________ A-9 EXHIBIT B TO LOAN AND SECURITY AGREEMENT Compliance Certificate To: Congress Financial Corporation, as Agent 1133 Avenue of the Americas New York, New York 10036 Ladies and Gentlemen: Pursuant to Section 9.6 of the Loan Agreement (as defined below), Lexington Precision Corporation, a Delaware corporation and Lexington Rubber Group, Inc., a Delaware corporation (collectively, "Borrower"), hereby certify as follows: 1. Capitalized terms used herein without definition shall have the meanings given to such terms in the Loan and Security Agreement, dated ______, 2003, by and among Congress Financial Corporation, in its capacity as agent for the parties thereto as lenders (in such capacity, "Agent"), The CIT Group/Commercial Financing, Inc., in its capacity as co-agent, and the parties thereto as lenders (collectively, "Lenders") and Borrowers (as such Loan and Security Agreement is amended, modified or supplemented, from time to time, the "Loan Agreement"). 2. The Borrowers have reviewed the terms of the Loan Agreement, and the transactions and the financial condition of Borrowers, during the fiscal month ending ____________. 3. The review described in Section 2 above did not disclose the existence at the end of such fiscal month, and Borrowers have no knowledge of the existence and continuance on the date hereof, of any condition or event which constitutes a Default or an Event of Default, except as set forth on Schedule I attached hereto. Schedule I attached hereto sets forth the exceptions, if any, to this Section 3 listing, in detail, the nature of such Default of Event of Default and the action which any Borrower has taken, is taking, or proposes to take with respect to such Default or Event of Default. 4. Borrowers further certify that, based on the review described in Section 2 above, no Borrower has at any time during or at the end of such fiscal month, except as specifically described on Schedule II attached hereto, as previously described or disclosed to you in writing, or as permitted by the Loan Agreement, done any of the following: (a) Changed its respective corporate name, or transacted business under any trade name, style, or fictitious name, other than those previously described to you and C - 1 set forth in the Financing Agreements. (b) Changed the location of its chief executive office, changed its jurisdiction of incorporation, changed its type of organization or changed the location of or disposed of any of its properties or assets, or established any new asset locations. (c) Materially changed the terms upon which it sells goods (including sales on consignment) or provides services, nor has any vendor or trade supplier to any Borrower during or at the end of such period materially adversely changed the terms upon which it supplies goods to any Borrower. 5. Attached hereto as Schedule III are the calculations used in determining, as of the end of such fiscal month whether Borrowers are in compliance with the covenants set forth in Sections 9.17, 9.18, 9.19 and 9.20 of the Loan Agreement for such fiscal month. The foregoing certifications are made and delivered by the undersigned this day of ___________, 20__. Very truly yours, LEXINGTON PRECISION CORPORATION By:___________________________ Title:________________________ LEXINGTON RUBBER GROUP, INC. By:___________________________ Title:________________________ C - 2 EX-10.4 12 l04690aexv10w4.txt EX-10.4 PLEDGE AND SECURITY AGMT DATED 12/18/03 EXHIBIT 10.4 PLEDGE AND SECURITY AGREEMENT THIS PLEDGE AND SECURITY AGREEMENT ("Pledge Agreement"), dated December ___, 2003, is by LEXINGTON PRECISION CORPORATION, a Delaware corporation ("Pledgor"), with its chief executive office at 767 Third Avenue, New York, New York 10017, to and in favor of CONGRESS FINANCIAL CORPORATION, a Delaware corporation, in its capacity as agent pursuant to the Loan Agreement (as hereinafter defined) acting for and on behalf of the parties thereto as lenders (in such capacity, "Pledgee"). W I T N E S S E T H: WHEREAS, Pledgor is now the direct and beneficial owner of all of the issued and outstanding shares of capital stock of Lexington Rubber Group, Inc., a Delaware corporation ("Issuer"), as described on Exhibit A annexed hereto and made a part hereof (the "Pledged Securities"); WHEREAS, Issuer, Pledgor, Pledgee and the parties to the Loan Agreement as lenders (individually, each a "Lender" and collectively, "Lenders") have entered into or are about to enter into financing arrangements pursuant to which Lenders (or Pledgee on behalf of Lenders) may make loans and advances and provide other financial accommodations to Pledgor and Issuer as set forth in the Amended and Restated Loan and Security Agreement, dated of even date herewith, by and among Issuer, Pledgor, Pledgee and Lenders (as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, the "Loan Agreement") and other agreements, documents and instruments referred to therein or at any time executed and/or delivered in connection therewith or related thereto, including, but not limited to, this Pledge Agreement (all of the foregoing, together with the Loan Agreement, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, being collectively referred to herein as the "Financing Agreements"); WHEREAS, in order to induce Pledgee and Lenders to enter into the Loan Agreement and the other Financing Agreements and to make loans and advances and provide other financial accommodations to Pledgor and Issuer pursuant thereto, Pledgor has agreed to secure the payment and performance of the Obligations (as hereinafter defined) and to accomplish same by (i) executing and delivering to Pledgee this Pledge Agreement, (ii) delivering to Pledgee the Pledged Securities which are registered in the name of Pledgor, together with appropriate powers duly executed in blank by Pledgor, and (iii) delivering to Pledgee, at Pledgee's reasonable request, any and all other documents which Pledgee deems necessary to protect Pledgee's interests hereunder. NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Pledgor hereby agrees as follows: 1. GRANT OF SECURITY INTEREST As collateral security for the prompt performance, observance and full and final payment of all of the Obligations, Pledgor hereby assigns, pledges, hypothecates, transfers and sets over to Pledgee and grants to Pledgee (for itself and the ratable benefit of Lenders) a security interest in and lien upon: (a) the Pledged Securities, together with all cash dividends, stock dividends, interests, profits, redemptions, warrants, subscription rights, stock, securities options, substitutions, exchanges and other distributions now or hereafter distributed by Issuer or which may hereafter be delivered to the possession of Pledgor or Pledgee with respect thereto, (b) Pledgor's records with respect to the foregoing, and (c) the proceeds of all of the foregoing (all of the foregoing being collectively referred to herein as the "Pledged Property"). 2. OBLIGATIONS SECURED The security interest, lien and other interests granted to Pledgee (for itself and the ratable benefit of Lenders) pursuant to this Pledge Agreement shall secure the prompt performance and payment in full of any and all obligations, liabilities and indebtedness of every kind, nature and description owing by Pledgor to Pledgee and/or any Lender and/or their respective affiliates, including principal, interest, charges, fees, costs and expenses, however evidenced, whether as principal, surety, endorser, guarantor or otherwise, arising under this Pledge Agreement, the Loan Agreement or the other Financing Agreements, whether now existing or hereafter arising, whether arising before, during or after the initial or any renewal term of the Loan Agreement or after the commencement of any case with respect to Pledgor under the United States Bankruptcy Code or any similar statute (including, without limitation, the payment of interest and other amounts which would accrue and become due but for the commencement of such case, whether or not such amounts are allowed or allowable in whole or in part in such case), whether direct or indirect, absolute or contingent, joint or several, due or not due, primary or secondary, liquidated or unliquidated, secured or unsecured (all of the foregoing being collectively referred to herein as the "Obligations"). 3. REPRESENTATIONS, WARRANTIES AND COVENANTS Pledgor hereby represents, warrants and covenants with and to Pledgee and Lenders the following (all of such representations, warranties and covenants being continuing so long as any of the Obligations are outstanding): (a) The Pledged Securities are duly authorized, validly issued, fully paid and non-assessable capital stock of Issuer and constitute Pledgor's entire equity interest in Issuer and are not registered, nor has Pledgor authorized the registration thereof, in the name of any person or entity other than Pledgor or Pledgee. (b) The Pledged Property is directly, legally and beneficially owned by Pledgor, free and clear of all claims, liens, pledges and encumbrances of any kind, nature or description, except for the pledge and security interest in favor of Pledgee hereunder and under the Loan Agreement, for itself and the ratable benefit of Lenders, and the pledges and security interests permitted under the Loan Agreement. (c) The Pledged Property is not subject to any restrictions relative to the transfer thereof and Pledgor has the right to transfer and hypothecate the Pledged Property free and clear of any liens, encumbrances or restrictions, except as provided in or pursuant to the Financing Agreements. (d) The Pledged Property is duly and validly pledged to Pledgee, for itself and the ratable benefit of Lenders, and no consent or approval of any governmental or regulatory authority or of any securities exchange or the like, nor any consent or approval of any other third party, was or is necessary to the validity and enforceability of this Pledge Agreement. (e) Pledgor authorizes Pledgee to: (i) store, deposit and safeguard the Pledged Property, (ii) perform any and all other acts which Pledgee in good faith deems necessary or appropriate for the protection and preservation of the Pledged Property or its value or Pledgee's security interest therein and (iii) pay any charges or expenses which Pledgee deems necessary for the foregoing purpose, but without any obligation to do so. Any obligation of Pledgee for reasonable care for the Pledged Property in Pledgee's possession shall be limited to the same degree of care which Pledgee uses for similar property pledged to Pledgee by other persons. (f) If Pledgor shall become entitled to receive or acquire, or shall receive any stock certificate, or stock option or right with respect to the stock of Issuer (including without limitation, any certificate representing a dividend or a distribution or exchange of or in connection with reclassification of the Pledged Securities) whether as an addition to, in substitution of, or in exchange for any of the Pledged Property or otherwise (except as otherwise permitted by Section 3(g) hereof), Pledgor agrees to accept same as Pledgee's agent, to hold same in trust for Pledgee and to deliver same forthwith to Pledgee or Pledgee's agent or bailee in the form received, with the endorsement(s) of Pledgor where necessary and/or appropriate powers and/or assignments duly executed to be held by Pledgee or Pledgee's agent or bailee subject to the terms hereof, as further security for the Obligations. (g) Pledgor shall not, without the prior consent of Pledgee, directly or indirectly, sell, assign, transfer, or otherwise dispose of, or grant any option with respect to the Pledged Property, nor shall Pledgor create, incur or permit any further pledge, hypothecation, encumbrance, lien, mortgage or security interest with respect to the Pledged Property other than pursuant to or as provided in the Financing Agreements. (h) Notwithstanding anything in this Agreement to the contrary, so long as no Event of Default (as hereinafter defined) has occurred and is continuing, Pledgor shall have the right to vote, exercise all rights and take any other actions with respect to the Pledged Securities, except as expressly prohibited herein, and to receive any distributions in respect of the Pledged Securities. (i) Pledgor shall not permit Issuer, directly or indirectly, to issue, sell, grant, assign, transfer or otherwise dispose of, any additional shares of capital stock of Issuer or any option or warrant with respect to, or other right or security convertible into, any additional shares of capital stock of Issuer, now or hereafter authorized, unless all such additional shares, options, warrants, rights or other such securities are made and shall remain part of the Pledged Property subject to the pledge and security interest granted herein. (j) Pledgor shall pay all charges and assessments of any nature against the Pledged Property or with respect thereto prior to said charges and/or assessments being delinquent except such charges and assessments being contested in good faith by Pledgor. (k) Pledgor shall promptly reimburse Pledgee on demand, together with interest at the rate then applicable to the Obligations set forth in the Loan Agreement, for any charges, assessments or expenses paid or incurred by Pledgee in Pledgee's discretion for the protection, preservation and maintenance of the Pledged Property and the enforcement of Pledgee's (on behalf of itself and Lenders) rights hereunder, including, without limitation, reasonable attorneys' fees and legal expenses incurred by Pledgee in protecting, collecting or enforcing its rights in the Pledged Property or otherwise hereunder. (l) Pledgor shall furnish, or cause to be furnished, to Pledgee such information concerning Issuer and the Pledged Property as Pledgee may from time to time reasonably request in good faith as required pursuant to the Loan Agreement. (m) Pledgee may notify Issuer or the appropriate transfer agent of the Pledged Securities to register the security interest and pledge granted herein and honor the rights of Pledgee and Lenders with respect thereto. (n) Pledgor waives: (i) all rights to require Pledgee or any Lender to proceed against any other person, entity or collateral or to exercise any remedy, (ii) to the extent permitted under applicable law, the defense of the statute of limitations in any action upon any of the Obligations, (iii) any right of subrogation or interest in the Obligations or Pledged Property until all Obligations have been paid in full, (iv) any rights to notice of any kind or nature whatsoever, unless specifically required in this Pledge Agreement or the Loan Agreement or non-waivable under any applicable law, and (v) to the extent permitted under applicable law, its rights under Section 9-207 of the Uniform Commercial Code. Pledgor agrees that the Pledged Property, other collateral, or any other guarantor or endorser may be released, substituted or added with respect to the Obligations, in whole or in part, without releasing or otherwise affecting the liability of Pledgor, the pledge and security interests granted hereunder, or this Pledge Agreement. Pledgee, for and on behalf of itself and Lenders, is entitled to all of the benefits of a secured party set forth in Section 9-207 of the Uniform Commercial Code. 4. EVENTS OF DEFAULT The occurrence or existence of any Event of Default under the Loan Agreement is referred to herein individually as an "Event of Default", and collectively as "Events of Default". 5. RIGHTS AND REMEDIES At any time an Event of Default exists or has occurred and is continuing, in addition to all other rights and remedies of Pledgee and Lenders, whether provided under this Pledge Agreement, the Loan Agreement, the other Financing Agreements, applicable law or otherwise, Pledgee shall have the following rights and remedies which may be exercised without notice to, or consent by, Pledgor except as such notice or consent is expressly provided for hereunder or is required by law and not waivable by Pledgor: (a) Pledgee, at its option, shall be empowered to exercise its continuing right (at any time that an Event of Default exists or has occurred and is continuing) to instruct Issuer (or the appropriate transfer agent of the Pledged Securities) to register any or all of the Pledged Securities in the name of Pledgee or in the name of Pledgee's nominee (including, without limitation, any Lender) and Pledgee may complete, in any manner Pledgee may deem expedient, any and all stock powers, assignments or other documents heretofore or hereafter executed in blank by Pledgor and delivered to Pledgee. After said instruction, and without further notice, Pledgee shall have the exclusive right to exercise all voting and corporate rights with respect to the Pledged Securities and other Pledged Property, and exercise any and all rights of conversion, redemption, exchange, subscription or any other rights, privileges, or options pertaining to any shares of the Pledged Securities or other Pledged Property as if Pledgee were the absolute owner thereof, including, without limitation, the right to exchange, in its discretion, any and all of the Pledged Securities and other Pledged Property upon any merger, consolidation, reorganization, recapitalization or other readjustment with respect thereto. Upon the exercise of any such rights, privileges or options by Pledgee, Pledgee shall have the right to deposit and deliver any and all of the Pledged Securities and other Pledged Property to any committee, depository, transfer agent, registrar or other designated agency upon such terms and conditions as Pledgee may determine, all without liability, except to account for property actually received by Pledgee. However, Pledgee shall have no duty to exercise any of the aforesaid rights, privileges or options (all of which are exercisable in the sole discretion of Pledgee) and shall not be responsible for any failure to do so or delay in doing so. (b) In addition to all the rights and remedies of a secured party under the Uniform Commercial Code or other applicable law, Pledgee shall have the right, at any time and 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 Pledgor or any other person (all and each of which demands, advertisements and/or notices are hereby expressly waived to the extent permitted by applicable law), to proceed forthwith to collect, redeem, recover, receive, appropriate, realize, sell, or otherwise dispose of and deliver said Pledged Property or any part thereof in one or more lots at public or private sale or sales at any exchange, broker's board or at any of Pledgee's offices or elsewhere at such prices and on such terms as Pledgee may deem best. The foregoing disposition(s) may be for cash or on credit or for future delivery without assumption of any credit risk, with Pledgee having the right to purchase all or any part of said Pledged Property so sold at any such sale or sales, public or private, free of any right or equity of redemption in Pledgor, which right or equity is hereby expressly waived or released by Pledgor to the fullest extent permitted by applicable law. The proceeds of any such collection, redemption, recovery, receipt, appropriation, realization, sale or other disposition shall be applied in accordance with Section 6.4(a) of the Loan Agreement and then to the payment of any other amounts required by applicable law, including Section 9-615(a)(3) of the Uniform Commercial Code, with Pledgor to be and remain liable for any deficiency. Pledgor shall be liable to Pledgee and Lenders for the payment on demand of all such costs and expenses, together with interest at the rate then applicable to the Obligations set forth in the Loan Agreement, and any reasonable attorneys' fees and legal expenses. Pledgor agrees that ten (10) business days prior written notice by Pledgee designating the place and time of any public sale or of the time after which any private sale or other intended disposition of any or all of the Pledged Property is to be made, is reasonable notification of such matters. (c) Pledgor and Pledgee recognize that Pledgee may be unable to effect a public sale of all or part of the Pledged Property by reason of certain prohibitions contained in the Securities Act of 1933, as amended, as now or hereafter in effect or in applicable Blue Sky or other state securities law, as now or hereafter in effect, but may be compelled to resort to one or more private sales to a restricted group of purchasers who will be obliged to agree, among other things, to acquire such Pledged Property for their own account for investment and not with a view to the distribution or resale thereof. If at the time of any sale of the Pledged Property or any part thereof, the same shall not, for any reason whatsoever, be effectively registered (if required) under the Securities Act of 1933 (or other applicable state securities law), as then in effect, Pledgee in its sole and absolute discretion is authorized to sell such Pledged Property or such part thereof by private sale in such manner and under such circumstances as Pledgee or its counsel may deem necessary or advisable in order that such sale may legally be effected without registration. Pledgor agrees that private sales so made may be at prices and other terms less favorable to the seller than if such Pledged Property were sold at public sale, and that Pledgee has no obligation to delay the sale of any such Pledged Property for the period of time necessary to permit Issuer, even if Issuer would agree, to register such Pledged Property for public sale under such applicable securities laws. Pledgor agrees that any private sales made under the foregoing circumstances shall be deemed to have been in a commercially reasonable manner. (d) All of the rights and remedies of Pledgee and Lenders, including, but not limited to, the foregoing and those otherwise arising under this Pledge Agreement, the Loan Agreement and the other Financing Agreements, the instruments comprising the Pledged Property, applicable law or otherwise, shall be cumulative and not exclusive and shall be enforceable alternatively, successively or concurrently as Pledgee may deem expedient. No failure or delay on the part of Pledgee or any Lender in exercising any of its options, powers or rights or partial or single exercise thereof, shall constitute a waiver of such option, power or right. 6. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW (a) The validity, interpretation and enforcement of this Pledge Agreement and the other Financing Agreements and any dispute arising out of the relationship between the parties hereto, whether in contract, tort, equity or otherwise, shall be governed by the internal laws of the State of New York excluding any principles of conflicts of laws or other rule of law that would cause the application of the law of any jurisdiction other that the laws of the State of New York. (b) Each of Pledgor and Pledgee irrevocably consents and submits to the non-exclusive jurisdiction of the Supreme Court of the State of New York for New York County and the United States District Court for the Southern District of New York and waives any objection based on venue or forum non conveniens with respect to any action instituted therein arising under this Pledge Agreement or any of the other Financing Agreements or in any way connected with or related or incidental to the dealings of the parties hereto in respect of this Pledge Agreement or any of the other Financing Agreements or the transactions related hereto or thereto, in each case whether now existing or hereafter arising, and whether in contract, tort, equity or otherwise, and agrees that any dispute with respect to any such matters shall be heard only in the courts described above (except that Pledgee and Lenders shall have the right to bring any action or proceeding against Pledgor or its property in the courts of any other jurisdiction which Pledgee deems necessary or appropriate in order to realize on the Pledged Property or to otherwise enforce its rights against Pledgor or its property). (c) Pledgor hereby waives personal service of any and all process upon it and consents that all such service of process may be made by certified mail (return receipt requested) directed to its address set forth herein and service so made shall be deemed to be completed five (5) days after the same shall have been so deposited in the U.S. mails, or, at Pledgee's option, by service upon Pledgor in any other manner provided under the rules of any such courts. Within thirty (30) days after such service, Pledgor shall appear in answer to such process, failing which Pledgor shall be deemed in default and judgment may be entered by Pledgee against Pledgor for the amount of the claim and other relief requested. (d) EACH OF PLEDGOR AND PLEDGEE HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS PLEDGE AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF PLEDGOR AND PLEDGEE OR ANY LENDER IN RESPECT OF THIS PLEDGE AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. EACH OF PLEDGOR AND PLEDGEE HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT PLEDGOR OR PLEDGEE MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS PLEDGE AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. (e) Pledgee and Lenders shall not have any liability to Pledgor (whether in tort, contract, equity or otherwise) for losses suffered by Pledgor in connection with, arising out of, or in any way related to the transactions or relationships contemplated by this Pledge Agreement, or any act, omission or event occurring in connection herewith, unless it is determined by a final and non-appealable judgment or court order binding on Pledgee or such Lender, that the losses (including losses resulting from a breach of Pledgee's duty of care as set forth in Section 3(e) of this Agreement) were the result of acts or omissions constituting gross negligence or willful misconduct. 7. MISCELLANEOUS (a) Pledgor agrees that at any time and from time to time upon the written request of Pledgee, Pledgor shall execute and deliver such further documents, including, but not limited to, irrevocable proxies or stock powers, in form reasonably satisfactory to counsel for Pledgee, and will take or cause to be taken such further acts as Pledgee may reasonably request in order to effect the purposes of this Pledge Agreement and perfect or continue the perfection of the security interest in the Pledged Property granted to Pledgee hereunder. (b) Beyond the exercise of reasonable care to assure the safe custody of the Pledged Property (whether such custody is exercised by Pledgee, or Pledgee's nominee, agent or bailee) Pledgee or Pledgee's nominee agent or bailee shall have no duty or liability to protect or preserve any rights pertaining thereto and shall be relieved of all responsibility for the Pledged Property upon surrendering it to Pledgor or foreclosure with respect thereto. (c) All notices, requests and demands to or upon the respective parties hereto shall be in writing and shall be deemed to have been duly given or made: if delivered in person, immediately upon delivery; if by nationally recognized overnight courier service with instructions to deliver the next business day, one (1) business day after sending; and if by registered or certified mail, return receipt requested, five (5) days after so mailing. All notices, requests and demands upon the parties are to be given to the following addresses (or to such other address as any party may designate by notice in accordance with this Section): If to Pledgor: Lexington Precision Corporation 767 Third Avenue New York, New York 10017-2023 Attention: President Telephone No.: 212-319-4650 Telecopy No.: 212-319-4659 with a copy to: Nixon Peabody LLP 437 Madison Avenue New York, New York 10022 Attention: Lauren Wiesenberg, Esq. Telephone No.: 212-940-3136 Telecopy No.: 866-947-2363 If to Pledgee Congress Financial Corporation and Lenders: 1133 Avenue of the Americas New York, New York 10036 Attention: Portfolio Manager Telephone No.: 212-840-2000 Telecopy No.: 212-545-4583 (d) All references to the plural herein shall also mean the singular and to the singular shall also mean the plural. All references to Pledgor, Issuer, Pledgee and any Lender pursuant to the definitions set forth in the recitals hereto, or to any other person herein, shall include their respective successors and assigns. The words "hereof," "herein," "hereunder," "this Pledge Agreement" and words of similar import when used in this Pledge Agreement shall refer to this Pledge Agreement as a whole and not any particular provision of this Pledge Agreement and as this Pledge Agreement now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced. An Event of Default shall exist or continue or be continuing until such Event of Default is waived in accordance with the terms of the Loan Agreement. All references to the term "Person" or "Persons" herein shall mean any individual, sole proprietorship, partnership, corporation (including, without limitation, any corporation which elects subchapter S status under the Internal Revenue Code of 1986, as amended), limited liability company, limited liability partnership, business trust, unincorporated association, joint stock company, trust, joint venture or other entity or any government or any agency, instrumentality or political subdivision thereof. (e) This Pledge Agreement shall be binding upon Pledgor and its successors and assigns and inure to the benefit of and be enforceable by Pledgee and Lenders and their respective successors and assigns. (f) If any provision of this Pledge Agreement is held to be invalid or unenforceable, such invalidity or unenforceability shall not invalidate this Pledge Agreement as a whole, but this Pledge Agreement shall be construed as though it did not contain the particular provision held to be invalid or unenforceable and the rights and obligations of the parties shall be construed and enforced only to such extent as shall be permitted by applicable law. (g) Neither this Pledge Agreement nor any provision hereof shall be amended, modified, waived or discharged orally or by course of conduct, but only by a written agreement signed by an authorized officer of Pledgee and Pledgor. Neither Pledgee nor Lenders shall, by any act, delay, omission or otherwise be deemed to have expressly or impliedly waived any of their respective rights, powers and/or remedies unless such waiver shall be in writing and signed by an authorized officer of Pledgee. Any such waiver shall be enforceable only to the extent specifically set forth therein. A waiver by Pledgee or any Lender of any right, power and/or remedy on any one occasion shall not be construed as a bar to or waiver of any such right, power and/or remedy which Pledgee or such Lender would otherwise have on any future occasion, whether similar in kind or otherwise. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, Pledgor has executed this Pledge Agreement as of the day and year first above written. LEXINGTON PRECISION CORPORATION By: /s/ Michael A. Lubin _____________________ Title: Chairman of the Board _____________________ ACKNOWLEDGED AS TO SECTION 3(e): CONGRESS FINANCIAL CORPORATION, as Agent By: /s/ Herb Kim __________________ Title: Vice President __________________ EXHIBIT A TO PLEDGE AND SECURITY AGREEMENT
Issuer Certificate No. No. of Shares Percentage ------ --------------- ------------- ---------- Lexington Rubber Group, Inc. 1 1 100%
EX-10.5 13 l04690aexv10w5.txt EX-10.5 AMND AND RESTATD TRM PRMSRY NOTE 12/18/03 EXHIBIT 10.5 AMENDED AND RESTATED TERM PROMISSORY NOTE $4,000,000 New York, New York December ___, 2003 FOR VALUE RECEIVED, LEXINGTON PRECISION CORPORATION, a Delaware corporation (the "Debtor"), hereby unconditionally promises to pay to the order of CONGRESS FINANCIAL CORPORATION, a Delaware corporation, in its capacity as agent pursuant to the Loan Agreement (as hereinafter defined) acting for and on behalf of the parties to the Loan Agreement as lenders (in such capacity, "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 MILLION AND 00/100 DOLLARS ($4,000,000) in lawful money of the United States of America and in immediately available funds, in forty-five (45) consecutive monthly installments (or earlier as hereinafter provided) on the first day of each month commencing February 1, 2004, of which the first forty-four (44) installments shall each be in the amount of EIGHTY-EIGHT THOUSAND AND 00/100 DOLLARS ($88,000), and the last 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, 2004 and on the first day of each month thereafter until the indebtedness evidenced by this Note is paid in full. Interest payable upon and after an Event of Default or termination or non-renewal of the Loan Agreement shall be payable upon demand. For purposes hereof, (a) subject to clause (i) below, the term "Interest Rate" shall mean, as to Prime Rate Term Loans, a rate equal to one and one-half (1 1/2%) percent per annum in excess of the Prime Rate, and as to Eurodollar Rate Term Loans, a rate equal to three and three-quarters (3 3/4%) percent per annum in excess of the Adjusted Eurodollar Rate (determined as provided in the Loan Agreement); provided, that, (I) NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED ABOVE, THE INTEREST RATE SHALL MEAN THE RATE OF THREE AND ONE-HALF (3 1/2%) PERCENT PER ANNUM IN EXCESS OF THE PRIME RATE AS TO PRIME RATE TERM LOANS AND THE RATE OF FIVE AND THREE-QUARTERS (5 3/4%) PERCENT PER ANNUM IN EXCESS OF THE ADJUSTED EURODOLLAR RATE AS TO EURODOLLAR RATE TERM LOANS, AT PAYEE'S OPTION, WITHOUT NOTICE, (A) EITHER (1) FOR THE PERIOD ON AND AFTER THE DATE OF TERMINATION OR NON-RENEWAL HEREOF UNTIL SUCH TIME AS ALL OBLIGATIONS ARE INDEFEASIBLY PAID AND SATISFIED IN FULL IN IMMEDIATELY AVAILABLE FUNDS, OR (2) FOR THE PERIOD FROM AND AFTER THE DATE OF THE OCCURRENCE OF ANY EVENT OF DEFAULT, AND FOR SO LONG AS SUCH EVENT OF DEFAULT IS CONTINUING AS DETERMINED BY PAYEE, (b) the term "Prime Rate" shall mean the rate from time to time publicly announced by Wachovia Bank, National Association, or its successors, as its prime rate, whether or not such announced rate is the best rate available at such bank, (c) the term "Event of Default" shall mean an Event of Default as such term is defined in the Loan Agreement, and (d) the term "Loan Agreement" shall mean the Amended and Restated Loan and Security Agreement, dated of even date herewith, by and among Payee, the lenders party thereto, Debtor and Lexington Rubber Group, Inc., as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced. Unless otherwise defined herein, all capitalized terms used herein shall have the meaning assigned thereto in the Loan Agreement. The Interest Rate applicable to Prime Rate Term Loans payable hereunder shall increase or decrease as to 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 is announced. The increase or decrease shall be 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 Loan Agreement to evidence the LPC Term Loan made by Payee to Debtor and to AMEND AND RESTATE THE EXISTING LPC TERM NOTES, AND AS SO AMENDED AND RESTATED, THE EXISTING LPC TERM NOTES ARE REPLACED AND SUPERSEDED BY THIS NOTE IN THEIR ENTIRETY. DEBTOR IS, AS OF THE DATE HEREOF, INDEBTED TO PAYEE IN THE PRINCIPAL AMOUNT OF THIS NOTE, TOGETHER WITH INTEREST ACCRUING AFTER THE DATE HEREOF, WITHOUT OFFSET, DEFENSE OR COUNTERCLAIM OF ANY KIND, NATURE OR DESCRIPTION WHATSOEVER. THE SUBSTITUTION AND REPLACEMENT OF THE EXISTING LPC TERM NOTES SHALL NOT, IN ANY MANNER, BE CONSTRUED TO CONSTITUTE PAYMENT OF THE UNPAID INDEBTEDNESS AND OTHER OBLIGATIONS AND LIABILITIES OF DEBTOR EVIDENCED BY OR ARISING UNDER THE EXISTING LPC TERM NOTES (ALL OF WHICH INDEBTEDNESS AND OTHER OBLIGATIONS AND LIABILITIES SHALL BE DEEMED INCORPORATED INTO, A PART OF, AND AMENDED, RESTATED AND ALLOCATED AS PROVIDED IN SECTION 14.1(A)(ii) OF THE LOAN AGREEMENT). This Note is secured by the Collateral described in the Loan Agreement and the other Financing Agreements, and is entitled to all of the benefits and rights thereof and of the other 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 payment of principal or interest is not made when due hereunder, or if any other Event of Default shall occur for any reason, or if the Loan Agreement 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, including, without limitation, all amounts owing under this Note, to be due and payable in accordance with the terms of the Loan Agreement, 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 Interest Rate stated above until the Obligations are paid in full. Debtor (i) waives diligence, demand, presentment, protest and notice (except as otherwise expressly provided in Section 10.2 of the Loan Agreement) of any kind, (ii) agrees that it will not 2 be necessary for Payee 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. The pleading of any statute of limitations as a defense to any demand against Debtor is expressly hereby waived by Debtor. Upon any Event of Default or termination or non-renewal of the Loan Agreement, 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 is consistent with the terms of the Loan Agreement) as Payee may choose. None of the rights of Payee shall be waived or diminished by any failure or delay in the exercise thereof. The validity, interpretation and enforcement of this Note and the other Financing Agreements and any dispute arising in connection herewith or therewith shall be governed by the internal laws of the State of New York, BUT EXCLUDING ANY PRINCIPLES OF CONFLICTS OF LAW OR OTHER RULE OF LAW THAT WOULD RESULT IN THE APPLICATION OF THE LAW OF ANY JURISDICTION OTHER THAN THE LAWS OF THE STATE OF NEW YORK. Debtor irrevocably consents and submits to the non-exclusive jurisdiction of the Supreme Court of the State of New York for New York County and the United States District Court for the Southern District of New York, whichever Payee may elect, and waives any objection based on venue or forum non conveniens with respect to any action instituted therein arising under this Note or any of the other Financing Agreements or in any way connection with or related or incidental to the dealings of Debtor and Payee in respect of this Note or any of the other Financing Agreements or the transactions related hereto or thereto, in each case whether now existing or hereafter arising, and whether in contract, tort, equity or otherwise, and agrees that any dispute arising out of the relationship between Debtor and Payee or the conduct of such persons in connection with this Note or otherwise shall be heard only in the courts described above (except that Payee shall have the right to bring any action or proceeding against Debtor or its property in the courts of any other jurisdiction which Payee deems necessary or appropriate in order to realize on the Collateral or to otherwise enforce its rights against Debtor or its property). Debtor hereby waives personal service of any and all process upon it and consents that all such service of process may be made by certified mail (return receipt requested) directed to it and service so made shall be deemed to be completed five (5) days after the same shall have been so deposited in the U.S. mails, or, at Payee's option, by service upon Debtor in any other manner provided under the rules of any such courts. Within thirty (30) days after such service, Debtor shall appear in answer to such process, 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. DEBTOR HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS NOTE OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS BETWEEN DEBTOR AND PAYEE IN RESPECT OF THIS NOTE OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR 3 THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. DEBTOR AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY. This Note shall be binding upon the successors and assigns of Debtor and inure to the benefit of Payee and its successors, endorsees and assigns. Whenever used herein, the term "Debtor" shall be deemed to include its successors and assigns and the term "Payee" shall be deemed to include 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. LEXINGTON PRECISION CORPORATION BY: /s/ Michael A. Lubin TITLE: Chairman of the Board 4 EX-10.6 14 l04690aexv10w6.txt EX-10.6 AMND AND RESTD TERM PROMSRY NOTE 12/18/03 EXHIBIT 10.6 AMENDED AND RESTATED TERM PROMISSORY NOTE $9,500,000 New York, New York December 18, 2003 FOR VALUE RECEIVED, LEXINGTON RUBBER GROUP, INC., a Delaware corporation (the "Debtor"), hereby unconditionally promises to pay to the order of CONGRESS FINANCIAL CORPORATION, a Delaware corporation, in its capacity as agent pursuant to the Loan Agreement (as hereinafter defined) acting for and on behalf of the parties to the Loan Agreement as lenders (in such capacity, "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 NINE MILLION FIVE HUNDRED THOUSAND AND 00/100 DOLLARS ($9,500,000) in lawful money of the United States of America and in immediately available funds, in forty-five (45) consecutive monthly installments (or earlier as hereinafter provided) on the first day of each month commencing February 1, 2004, of which the first forty-four (44) installments shall each be in the amount of TWO HUNDRED TWELVE THOUSAND AND 00/100 DOLLARS ($212,000), and the last 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, 2004 and on the first day of each month thereafter until the indebtedness evidenced by this Note is paid in full. Interest payable upon and after an Event of Default or termination or non-renewal of the Loan Agreement shall be payable upon demand. For purposes hereof, (a) subject to clause (i) below, the term "Interest Rate" shall mean, as to Prime Rate Term Loans, a rate equal to one and one-half (1 1/2%) percent per annum in excess of the Prime Rate, and as to Eurodollar Rate Term Loans, a rate equal to three and three-quarters (3 3/4%) percent per annum in excess of the Adjusted Eurodollar Rate (determined as provided in the Loan Agreement); provided, that, (I) NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED ABOVE, THE INTEREST RATE SHALL MEAN THE RATE OF THREE AND ONE-HALF (3 1/2%) PERCENT PER ANNUM IN EXCESS OF THE PRIME RATE AS TO PRIME RATE TERM LOANS AND THE RATE OF FIVE AND THREE-QUARTERS (5 3/4%) PERCENT PER ANNUM IN EXCESS OF THE ADJUSTED EURODOLLAR RATE AS TO EURODOLLAR RATE TERM LOANS, AT PAYEE'S OPTION, WITHOUT NOTICE, (A) EITHER (1) FOR THE PERIOD ON AND AFTER THE DATE OF TERMINATION OR NON-RENEWAL HEREOF UNTIL SUCH TIME AS ALL OBLIGATIONS ARE INDEFEASIBLY PAID AND SATISFIED IN FULL IN IMMEDIATELY AVAILABLE FUNDS, OR (2) FOR THE PERIOD FROM AND AFTER THE DATE OF THE OCCURRENCE OF ANY EVENT OF DEFAULT, AND FOR SO LONG AS SUCH EVENT OF DEFAULT IS CONTINUING AS DETERMINED BY PAYEE, (b) the term "Prime Rate" shall mean the rate from time to time publicly announced by Wachovia Bank, National Association, or its successors, as its prime rate, whether or not such announced rate is the best rate available at such bank, (c) the term "Event of Default" shall mean an Event of Default as such term is defined in the Loan Agreement, and (d) the term "Loan Agreement" shall mean the Amended and Restated Loan and Security Agreement, dated of even date herewith, by and among Payee, the lenders party thereto, Debtor and Lexington Precision Corporation, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced. Unless otherwise defined herein, all capitalized terms used herein shall have the meaning assigned thereto in the Loan Agreement. The Interest Rate applicable to Prime Rate Term Loans payable hereunder shall increase or decrease as to 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 is announced. The increase or decrease shall be 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 Loan Agreement to evidence the LRG Term Loan made by Payee to Debtor and to AMEND AND RESTATE THE EXISTING LRG TERM NOTES, AND AS SO AMENDED AND RESTATED, THE EXISTING LRG TERM NOTES ARE REPLACED AND SUPERSEDED BY THIS NOTE IN THEIR ENTIRETY. DEBTOR IS, AS OF THE DATE HEREOF, INDEBTED TO PAYEE IN THE PRINCIPAL AMOUNT OF THIS NOTE, TOGETHER WITH INTEREST ACCRUING AFTER THE DATE HEREOF, WITHOUT OFFSET, DEFENSE OR COUNTERCLAIM OF ANY KIND, NATURE OR DESCRIPTION WHATSOEVER. THE SUBSTITUTION AND REPLACEMENT OF THE EXISTING LRG TERM NOTES SHALL NOT, IN ANY MANNER, BE CONSTRUED TO CONSTITUTE PAYMENT OF THE UNPAID INDEBTEDNESS AND OTHER OBLIGATIONS AND LIABILITIES OF DEBTOR EVIDENCED BY OR ARISING UNDER THE EXISTING LRG TERM NOTES (ALL OF WHICH INDEBTEDNESS AND OTHER OBLIGATIONS AND LIABILITIES SHALL BE DEEMED INCORPORATED INTO, A PART OF, AND AMENDED, RESTATED AND ALLOCATED AS PROVIDED IN SECTION 14.1(B)(ii) OF THE LOAN AGREEMENT). This Note is secured by the Collateral described in the Loan Agreement and the other Financing Agreements, and is entitled to all of the benefits and rights thereof and of the other 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 payment of principal or interest is not made when due hereunder, or if any other Event of Default shall occur for any reason, or if the Loan Agreement 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, including, without limitation, all amounts owing under this Note, to be due and payable in accordance with the terms of the Loan Agreement, 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 Interest Rate stated above until the Obligations are paid in full. Debtor (i) waives diligence, demand, presentment, protest and notice (except as otherwise expressly provided in Section 10.2 of the Loan Agreement) of any kind, (ii) agrees that it will not 2 be necessary for Payee 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. The pleading of any statute of limitations as a defense to any demand against Debtor is expressly hereby waived by Debtor. Upon any Event of Default or termination or non-renewal of the Loan Agreement, 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 is consistent with the terms of the Loan Agreement) as Payee may choose. None of the rights of Payee shall be waived or diminished by any failure or delay in the exercise thereof. The validity, interpretation and enforcement of this Note and the other Financing Agreements and any dispute arising in connection herewith or therewith shall be governed by the internal laws of the State of New York, BUT EXCLUDING ANY PRINCIPLES OF CONFLICTS OF LAW OR OTHER RULE OF LAW THAT WOULD RESULT IN THE APPLICATION OF THE LAW OF ANY JURISDICTION OTHER THAN THE LAWS OF THE STATE OF NEW YORK. Debtor irrevocably consents and submits to the non-exclusive jurisdiction of the Supreme Court of the State of New York for New York County and the United States District Court for the Southern District of New York, whichever Payee may elect, and waives any objection based on venue or forum non conveniens with respect to any action instituted therein arising under this Note or any of the other Financing Agreements or in any way connection with or related or incidental to the dealings of Debtor and Payee in respect of this Note or any of the other Financing Agreements or the transactions related hereto or thereto, in each case whether now existing or hereafter arising, and whether in contract, tort, equity or otherwise, and agrees that any dispute arising out of the relationship between Debtor and Payee or the conduct of such persons in connection with this Note or otherwise shall be heard only in the courts described above (except that Payee shall have the right to bring any action or proceeding against Debtor or its property in the courts of any other jurisdiction which Payee deems necessary or appropriate in order to realize on the Collateral or to otherwise enforce its rights against Debtor or its property). Debtor hereby waives personal service of any and all process upon it and consents that all such service of process may be made by certified mail (return receipt requested) directed to it and service so made shall be deemed to be completed five (5) days after the same shall have been so deposited in the U.S. mails, or, at Payee's option, by service upon Debtor in any other manner provided under the rules of any such courts. Within thirty (30) days after such service, Debtor shall appear in answer to such process, 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. DEBTOR HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS NOTE OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS BETWEEN DEBTOR AND PAYEE IN RESPECT OF THIS NOTE OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR 3 THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. DEBTOR AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY. This Note shall be binding upon the successors and assigns of Debtor and inure to the benefit of Payee and its successors, endorsees and assigns. Whenever used herein, the term "Debtor" shall be deemed to include its successors and assigns and the term "Payee" shall be deemed to include 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. LEXINGTON RUBBER GROUP, INC. BY: /s/ Michael A. Lubin TITLE: Chairman of the Board 4 EX-10.7 15 l04690aexv10w7.txt EX-10.7 LOAN AND SECURITY AGMT DATED 12/18/03 EXHIBIT 10.7 LOAN AND SECURITY AGREEMENT by and among LEXINGTON PRECISION CORPORATION LEXINGTON RUBBER GROUP, INC. as Borrowers and ABLECO FINANCE LLC as Agent and THE LENDERS FROM TIME TO TIME PARTY HERETO as Lenders Dated: December 18, 2003 TABLE OF CONTENTS
Page SECTION 1. DEFINITIONS.................................................................................... 1 SECTION 2. Loan facility.................................................................................. 19 2.1 The Loan....................................................................................... 19 2.2 Commitments.................................................................................... 20 2.3 Joint and Several Liability.................................................................... 20 2.4 Mandatory Prepayments.......................................................................... 21 SECTION 3. INTEREST AND FEES.............................................................................. 24 3.1 Interest....................................................................................... 24 3.2 Fees........................................................................................... 24 3.3 Changes in Laws and Increased Costs of Loan.................................................... 24 SECTION 4. CONDITIONS PRECEDENT........................................................................... 25 4.1 Conditions Precedent to the Loan............................................................... 25 SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST...................................................... 28 5.1 Grant of Security Interest..................................................................... 28 5.2 Perfection of Security Interests............................................................... 30 SECTION 6. COLLECTION AND ADMINISTRATION.................................................................. 34 6.1 Borrowers' Loan Accounts....................................................................... 34 6.2 Statements..................................................................................... 34 6.3 Collection of Accounts......................................................................... 34 6.4 Payments....................................................................................... 34 6.5 Authorization to Make the Loan................................................................. 35 6.6 Use of Proceeds................................................................................ 35 6.7 Appointment of Administrative Borrower as Agent for Requesting the Loan and Receipt of Loan and Statements ................................................................................ 35 6.8 Pro Rata Treatment............................................................................. 36 6.9 Sharing of Payments, Etc....................................................................... 36 6.10 Obligations Several; Independent Nature of Lenders' Rights..................................... 37 SECTION 7. COLLATERAL REPORTING AND COVENANTS............................................................. 37 7.1 Collateral Reporting........................................................................... 37 7.2 Accounts Covenants............................................................................. 38 7.3 Inventory Covenants............................................................................ 39 7.4 Equipment and Real Property Covenants.......................................................... 40 7.5 Power of Attorney.............................................................................. 40 7.6 Right to Cure.................................................................................. 41 7.7 Access to Premises............................................................................. 41 SECTION 8. REPRESENTATIONS AND WARRANTIES................................................................. 42
-i- 8.1 Corporate Existence, Power and Authority....................................................... 42 8.2 Name; State of Organization; Chief Executive Office; Collateral Locations...................... 42 8.3 Financial Statements; No Material Adverse Change............................................... 43 8.4 Priority of Liens; Title to Properties......................................................... 43 8.5 Tax Returns.................................................................................... 43 8.6 Litigation..................................................................................... 43 8.7 Compliance with Other Agreements and Applicable Laws........................................... 44 8.8 Environmental Compliance....................................................................... 44 8.9 Employee Benefits.............................................................................. 45 8.10 Bank Accounts.................................................................................. 46 8.11 Intellectual Property.......................................................................... 46 8.12 Subsidiaries; Affiliates; Capitalization; Solvency............................................. 46 8.13 Labor Disputes................................................................................. 47 8.14 Restrictions on Subsidiaries................................................................... 47 8.15 Material Contracts............................................................................. 47 8.16 Payable Practices.............................................................................. 47 8.17 Accuracy and Completeness of Information....................................................... 47 8.18 Survival of Warranties; Cumulative............................................................. 48 SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS............................................................. 48 9.1 Maintenance of Existence....................................................................... 48 9.2 New Collateral Locations....................................................................... 48 9.3 Compliance with Laws, Regulations, Etc......................................................... 49 9.4 Payment of Taxes and Claims.................................................................... 50 9.5 Insurance...................................................................................... 50 9.6 Financial Statements and Other Information..................................................... 51 9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc........................................ 52 9.8 Encumbrances................................................................................... 54 9.9 Indebtedness................................................................................... 56 9.10 Loans, Investments, Etc........................................................................ 63 9.11 Dividends and Redemptions...................................................................... 64 9.12 Transactions with Affiliates................................................................... 65 9.13 Compliance with ERISA.......................................................................... 66 9.14 End of Fiscal Years; Fiscal Quarters........................................................... 66 9.15 Change in Business............................................................................. 67 9.16 Limitation of Restrictions Affecting Subsidiaries.............................................. 67 9.17 Leverage Ratio................................................................................. 67 9.18 Minimum EBITDA................................................................................. 68 9.19 Fixed Charge Coverage Ratio.................................................................... 69 9.20 Maximum Capital Expenditures................................................................... 69 9.21 License Agreements............................................................................. 69 9.22 After Acquired Real Property................................................................... 70 9.23 Additional Guaranties and Collateral Security.................................................. 71 9.24 Costs and Expenses............................................................................. 71 9.25 Further Assurances............................................................................. 72 SECTION 10. EVENTS OF DEFAULT AND REMEDIES................................................................. 72
-ii- 10.1 Events of Default.............................................................................. 72 10.2 Remedies....................................................................................... 75 SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW................................... 78 11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver.......................... 78 11.2 Waiver of Notices.............................................................................. 79 11.3 Amendments and Waivers......................................................................... 79 11.4 Waiver of Counterclaims........................................................................ 81 11.5 Indemnification................................................................................ 81 SECTION 12. THE AGENT...................................................................................... 81 12.1 Appointment, Powers and Immunities............................................................. 81 12.2 Reliance by Agent.............................................................................. 82 12.3 Events of Default.............................................................................. 82 12.4 Ableco in its Individual Capacity.............................................................. 83 12.5 Indemnification................................................................................ 83 12.6 Non-Reliance on Agent and Other Lenders........................................................ 83 12.7 Failure to Act................................................................................. 84 12.8 [Intentionally Omitted.]....................................................................... 84 12.9 Concerning the Collateral and the Related Financing Agreements................................. 84 12.10 Field Audit, Examination Reports and other Information; Disclaimer by Lenders.................. 84 12.11 Collateral Matters............................................................................. 84 12.12 Agency for Perfection.......................................................................... 86 12.13 Successor Agent................................................................................ 86 SECTION 13. TERM OF AGREEMENT; MISCELLANEOUS............................................................... 87 13.1 Term .......................................................................................... 87 13.2 Interpretative Provisions...................................................................... 88 13.3 Notices........................................................................................ 89 13.4 Partial Invalidity............................................................................. 90 13.5 Confidentiality................................................................................ 90 13.6 Successors..................................................................................... 91 13.7 Assignments; Participations.................................................................... 92 13.8 Entire Agreement............................................................................... 94 13.9 Counterparts, Etc.............................................................................. 94
-iii- INDEX TO EXHIBITS AND SCHEDULES Exhibit A Form of Assignment and Acceptance Exhibit B Form of Compliance Certificate Schedule 1.82 Permitted Holders Schedule 1.96 Holders of Remaining Existing Subordinated Note Indebtedness Schedule 1.117 Working Capital Lender Agreements -iv- LOAN AND SECURITY AGREEMENT This Loan and Security Agreement dated December 18, 2003 is entered into by and among Lexington Precision Corporation, a Delaware corporation ("LPC") and Lexington Rubber Group, Inc., a Delaware corporation ("LRG", and together with LPC, each, individually, a "Borrower" and collectively, "Borrowers"), the parties hereto from time to time as lenders, whether by execution of this Agreement or an Assignment and Acceptance (each individually, a "Lender" and collectively, "Lenders") and Ableco Finance LLC, a Delaware limited liability company, in its capacity as agent for Lenders (in such capacity, "Agent"). W I T N E S S E T H: Borrowers have asked Lenders to extend credit to Borrowers consisting of a term loan in the aggregate principal amount of $11,500,000. The proceeds of the term loan shall be used to refinance existing indebtedness of Borrowers, for general working capital purposes of Borrowers and to pay fees and expenses related to this Agreement. Lenders are severally, and not jointly, willing to extend such credit to Borrowers subject to the terms and conditions set forth herein and Agent is willing to act as agent for Lenders on the terms and conditions set forth herein and in the other Financing Agreements. In consideration of the mutual conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: SECTION 1. DEFINITIONS For purposes of this Agreement, the following terms shall have the respective meanings given to them below: 1.1 "Ableco" shall mean Ableco Finance LLC, a Delaware limited liability company, in its individual capacity and its successors and assigns. 1.2 "Accounts" shall mean, as to each Borrower, all present and future rights of such Borrower to payment of a monetary obligation, whether or not earned by performance, which is not evidenced by chattel paper or an instrument, (a) for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of, (b) for services rendered or to be rendered, (c) for a secondary obligation incurred or to be incurred, or (d) arising out of the use of a credit or charge card or information contained on or for use with the card. 1.3 "Administrative Borrower" shall mean LPC in its capacity as Administrative Borrower on behalf of itself and the other Borrowers pursuant to Section 6.7 hereof and it successors and assigns in such capacity. 1.4 "Affiliate" shall mean, with respect to a specified Person, any other Person which directly or indirectly, through one or more intermediaries, controls or is controlled by or is under common control with such Person, and without limiting the generality of the foregoing, includes (a) any Person which beneficially owns or holds ten (10%) percent or more of all classes of Voting Stock of such Person, (b) any Person of which such Person beneficially owns or holds ten (10%) percent or more of all classes of Voting Stock and (c) any director or executive officer of such Person. For the purposes of this definition, the term "control" (including with correlative meanings, the terms "controlled by" and "under common control with"), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Stock, by agreement or otherwise. 1.5 "Agent" shall mean Ableco Finance LLC, in its capacity as agent on behalf of Lenders pursuant to the terms hereof and any replacement or successor agent hereunder. 1.6 "Agent Payment Account" shall mean an account at a bank designated by Agent from time to time as the account into which Borrowers shall make all payments to Agent for the benefit of Agent and Lenders under this Agreement and the other Financing Agreements. 1.7 "Appraisal Reserve" shall mean the term "Appraisal Reserve" as defined in the Working Capital Loan Agreement as in effect on the date hereof. 1.8 "Approved Fund" shall mean with respect to any Lender that is a fund or similar investment vehicle that makes or invests in commercial loans, any other fund or similar investment vehicle that invests in commercial loans which is managed or advised by the same investment advisor as such Lender or by an Affiliate of such investment advisor. 1.9 "Assignment and Acceptance" shall mean an Assignment and Acceptance substantially in the form of Exhibit A attached hereto or such other form as shall be acceptable to Agent (with blanks appropriately completed) delivered to Agent in connection with an assignment of a Lender's interest hereunder in accordance with the provisions of Section 13.7 hereof. 1.10 "Bank One" shall mean Bank One, N.A., a national banking association, and its successors and assigns. 1.11 "Bank One Financing" shall mean the loans by Bank One to Borrowers pursuant to the Bank One Financing Agreements. 1.12 "Bank One Financing Agreements" shall mean the Credit Facility and Security Agreement, dated as of January 31, 1997, by and among Borrowers and Bank One, as amended, together with the promissory notes, guarantees and mortgages delivered in connection 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. 1.13 "Blocked Accounts" shall have the meaning set forth in Section 6.3 of the Working Capital Loan Agreement as in effect on the date hereof. 1.14 "Borrowing Base" shall mean the term "Borrowing Base" as defined, together with the terms used therein, in the Working Capital Loan Agreement as in effect on the date hereof. 2 1.15 "Business Day" shall mean any day other than a Saturday, Sunday, or other day on which commercial banks are authorized or required to close under the laws of the State of New York, or the State of North Carolina, and a day on which Agent is open for the transaction of business. 1.16 "Capital Expenditures" shall mean all expenditures for any fixed or capital assets (including, but not limited to, tooling) or improvements, or for replacements, substitutions or additions thereto, which have a useful life of more than one (1) year, including, but not limited to, the direct or indirect acquisition of such assets by way of offset items or otherwise and shall include the principal amount of Capitalized Lease payments. 1.17 "Capitalized Leases" shall mean, as applied to any Person, any lease of (or any agreement conveying the right to use) any property (whether real, personal or mixed) by such Person as lessee which, in accordance with GAAP, is required to be reflected as a liability on the balance sheet of such Person. 1.18 "Capital Stock" shall mean, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated) of such Person's capital stock or partnership, limited liability company or other equity interests at any time outstanding, and any and all rights, warrants or options exchangeable for or convertible into such capital stock or other interests (but excluding any debt security that is exchangeable for or convertible into such capital stock). 1.19 "Cash Equivalents" shall mean, at any time, (a) any evidence of Indebtedness with a maturity date of ninety (90) days or less issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof; provided, that, the full faith and credit of the United States of America is pledged in support thereof; (b) certificates of deposit or bankers' acceptances with a maturity of ninety (90) days or less of any financial institution that is a member of the Federal Reserve System having combined capital, surplus and undivided profits of not less than $250,000,000; (c) commercial paper (including variable rate demand notes) with a maturity of ninety (90) days or less issued by a corporation (except an Affiliate of any Borrower) organized under the laws of any State of the United States of America or the District of Columbia and rated at least A-1 by Standard & Poor's Ratings Service, a division of The McGraw-Hill Companies, Inc. or at least P-1 by Moody's Investors Service, Inc.; (d) repurchase obligations with a term of not more than thirty (30) days for underlying securities of the types described in clause (a) above entered into with any financial institution having combined capital, surplus and undivided profits of not less than $250,000,000; (e) repurchase agreements and reverse repurchase agreements relating to marketable direct obligations issued or unconditionally guaranteed by the United States of America or issued by any governmental agency thereof and backed by the full faith and credit of the United States of America, in each case maturing within ninety (90) days or less from the date of acquisition; provided, that, the terms of such agreements comply with the guidelines set forth in the Federal Financial Agreements of Depository Institutions with Securities Dealers and Others, as adopted by the Comptroller of the Currency on October 31, 1985; and (f) investments in money market funds and mutual funds which invest substantially all of their assets in securities of the types described in clauses (a) through (e) above. 3 1.20 "Change of Control" shall mean (a) the transfer (in one transaction or a series of transactions) of all or substantially all of the assets of any Borrower to any Person or group (as such term is used in Section 13(d)(3) of the Exchange Act), other than as permitted in Section 9.7 hereof; (b) the liquidation or dissolution of any Borrower or the adoption of a plan by the stockholders of any Borrower relating to the dissolution or liquidation of such Borrower, other than as permitted in Section 9.7 hereof; (c) the acquisition by any Person or group (as such term is used in Section 13(d)(3) of the Exchange Act), except for one or more Permitted Holders, of beneficial ownership, directly or indirectly, of a majority of the voting power of the total outstanding Voting Stock of any Borrower or the Board of Directors of any Borrower; (d) during any period of two (2) consecutive years, individuals who at the beginning of such period constituted the Board of Directors of any Borrower (together with any new directors who have been appointed by any Permitted Holder, or whose nomination for election by the stockholders of such Borrower, as the case may be, was approved by a vote of at least sixty-six and two-thirds (66 2/3%) percent of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors of any Borrower then still in office; (e) the failure of the LPC to own directly or indirectly one hundred (100%) percent of the voting power of the total outstanding Voting Stock of LRG; or (f) the failure of Permitted Holders to own directly or indirectly forty (40%) percent of the voting power of the total outstanding Voting Stock of LPC. 1.21 "CIT" shall mean The CIT Group/Equipment Financing, Inc., a New York corporation, and its successors and assigns. 1.22 "CIT Financing" shall mean the loans by CIT to Borrowers pursuant to the CIT Financing Agreements. 1.23 "CIT Financing Agreements" shall mean the Loan and Security Agreement, dated as of March 19, 1997, Rider A to the Loan and Security Agreement and the Supplement and Exhibit A thereto, each dated and/or delivered as of March 19, 1997, each between LPC and CIT, together with all notes, guarantees and other documents, instruments and agreements executed pursuant thereto or in connection therewith and all supplements executed and delivered pursuant thereto, as the same now exist or may hereafter be amended, modified, supplemented, renewed, restated or replaced. 1.24 "Code" shall mean the Internal Revenue Code of 1986, as the same now exists or may from time to time hereafter be amended, modified, recodified or supplemented, together with all rules, regulations and interpretations thereunder or related thereto. 1.25 "Collateral" shall have the meaning set forth in Section 5.1 hereof. 1.26 "Collateral Access Agreement" shall mean an agreement in writing, in form and substance reasonably satisfactory to Agent, from any lessor of premises to any Borrower, or any other person to whom any Collateral is consigned or who has custody, control or possession of any such Collateral or is otherwise the owner or operator of any premises on which any of such Collateral is located, pursuant to which such lessor, consignee or other person, inter alia, acknowledges the security interest of Agent in such Collateral, agrees to waive any and all 4 claims such lessor, consignee or other person may, at any time, have against such Collateral, whether for processing, storage or otherwise, and agrees to permit Agent access to, and the right to remain on, the premises of such lessor, consignee or other person so as to exercise Agent's rights and remedies and otherwise deal with such Collateral and in the case of any consignee or other person who at any time has custody, control or possession of any Collateral, acknowledges that it holds and will hold possession of the Collateral for the benefit of Agent and Lenders and agrees to follow all instructions of Agent with respect thereto. 1.27 "Commitment" shall mean, at any time, as to each Lender, the principal amount set forth below such Lender's signature on the signatures pages hereto designated as the Commitment or on Schedule 1 to the Assignment and Acceptance Agreement pursuant to which such Lender became a Lender hereunder in accordance with the provisions of Section 13.7 hereof, as the same may be adjusted from time to time in accordance with the terms hereof; sometimes being collectively referred to herein as "Commitments". 1.28 "Congress" shall mean Congress Financial Corporation, a Delaware corporation, and its successors and assigns. 1.29 "Consolidated Net Income" shall mean, with respect to any Person for any period, the aggregate of the net income (loss) of such Person and its Subsidiaries, on a consolidated basis, for such period (excluding to the extent included therein any extraordinary or non-recurring gains and extraordinary non-cash charges to property, plant and equipment or goodwill) after deducting all charges which should be deducted before arriving at the net income (loss) for such period and after deducting the Provision for Taxes for such period, all as determined in accordance with GAAP; provided, that, (a) the net income of any Person that is not a wholly-owned Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid or payable to such Person or a wholly-owned Subsidiary of such Person; (b) except to the extent included pursuant to the foregoing clause, the net income of any Person accrued prior to the date it becomes a wholly-owned Subsidiary of such Person or is merged into or consolidated with such Person or any of its wholly-owned Subsidiaries or the date that Person's assets are acquired by such Person or by any of its wholly-owned Subsidiaries shall be excluded; (c) the effect of any change in accounting principles adopted by such Person or its Subsidiaries after the date hereof shall be excluded; (d) net income shall exclude interest accrued, but not paid on indebtedness owing to a Subsidiary or parent corporation of such Person, which is subordinated in right of payment to the payment in full of the Obligations, on terms and conditions acceptable to Agent; and (e) the net income (if positive) of any wholly-owned Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such wholly-owned Subsidiary to such Person or to any other wholly-owned Subsidiary of such Person is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such wholly-owned Subsidiary shall be excluded. For the purposes of this definition, net income excludes any gain and any non-cash loss (but not any cash loss) together with any related Provision for Taxes for such gain and non-cash loss (but not any cash loss) realized upon the sale or other disposition of any assets that are not sold in the ordinary course of business (including, without limitation, dispositions pursuant to sale and leaseback transactions) or of any Capital Stock of such Person or a Subsidiary of such Person 5 and any net income or loss realized as a result of changes in accounting principles or the application thereof to such Person. 1.30 "Credit Facility" shall mean the Loan provided to or for the benefit of Borrowers pursuant to Section 2.1 hereof. 1.31 "Default" shall mean an act, condition or event which, with notice or passage of time or both, would constitute an Event of Default. 1.32 "Deposit Account Control Agreement" shall mean an agreement in writing, in form and substance reasonably satisfactory to Agent, by and among the Working Capital Agent, the Borrower with a deposit account at any bank and the bank at which such deposit account is at any time maintained, which agreement provides that such bank will comply with instructions originated by the Working Capital Agent directing disposition of the funds in the deposit account without further consent by such Borrower and such other terms and conditions as the Working Capital Agent may reasonably require, including as to any such agreement with respect to any Blocked Account, providing that all items received or deposited in the Blocked Accounts are the property of the Working Capital Agent, that the bank has no lien upon, or right to setoff against, the Blocked Accounts, the items received for deposit therein, or the funds from time to time on deposit therein and that the bank will wire, or otherwise transfer, in immediately available funds, on a daily basis to the Working Capital Agent all funds received or deposited into the Blocked Accounts. 1.33 "EBITDA" shall mean, as to any Person, with respect to any period, an amount equal to: (a) the Consolidated Net Income of such Person for such period, plus (b) depreciation and amortization for such period (to the extent deducted in the computation of Consolidated Net Income of such Person), all in accordance with GAAP, plus (c) Interest Expense for such period (to the extent deducted in the computation of Consolidated Net Income of such Person), plus (d) the Provision for Taxes for such period (to the extent deducted in the computation of Consolidated Net Income of such Person); provided, that, for purposes of this calculation, EBITDA shall exclude (i) any write-down or write-off of assets recorded in accordance with the requirements of Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets", and Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", and any reduction in net income resulting from the adoption of Statement of Financial Accounting Standards No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity" and (ii) any other items of income or expense that are required by GAAP to be classified as non-operating amounts in the Borrowers' Statement of Income. 1.34 "Eligible Transferee" shall mean (a) any Lender; (b) the parent company of any Lender and/or any Affiliate of such Lender which is at least fifty (50%) percent owned by such Lender or its parent company; (c) any person (whether a corporation, partnership, trust or otherwise) that is approved by Agent and (i) is engaged in the business of making, purchasing, holding or otherwise investing in bank loans and similar extensions of credit in the ordinary course of its business and is administered or managed by a Lender or (ii) with respect to any Lender that is a fund which invests in bank loans and similar extensions of credit, any other fund that invests in bank loans and similar extensions of credit and is managed by the same 6 investment advisor as such Lender or by an Affiliate of such investment advisor; and (d) any other commercial bank, financial institution or "accredited investor" (as defined in Regulation D under the Securities Act of 1933) approved by Agent, provided, that, (i) neither any Borrower nor any Affiliate of any Borrower shall qualify as an Eligible Transferee and (ii) no Person to whom any Indebtedness which is in any way subordinated in right of payment to any other Indebtedness of any Borrower shall qualify as an Eligible Transferee, except as Agent may otherwise specifically agree. 1.35 "Environmental Laws" shall mean all foreign, Federal, State and local laws (including common law), legislation, rules, codes, licenses, permits (including any conditions imposed therein), authorizations, judicial or administrative decisions, injunctions or agreements between any Borrower and any Governmental Authority, (a) relating to pollution and the protection, preservation or restoration of the environment (including air, water vapor, surface water, ground water, drinking water, drinking water supply, surface land, subsurface land, plant and animal life or any other natural resource), or to human health or safety, (b) relating to the exposure to, or the use, storage, recycling, treatment, generation, manufacture, processing, distribution, transportation, handling, labeling, production, release or disposal, or threatened release, of Hazardous Materials, or (c) relating to all laws with regard to recordkeeping, notification, disclosure and reporting requirements respecting Hazardous Materials. The term "Environmental Laws" includes (i) the Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Federal Superfund Amendments and Reauthorization Act, the Federal Water Pollution Control Act of 1972, the Federal Clean Water Act, the Federal Clean Air Act, the Federal Resource Conservation and Recovery Act of 1976 (including the Hazardous and Solid Waste Amendments thereto), the Federal Solid Waste Disposal Act and the Federal Toxic Substances Control Act, the Federal Insecticide, Fungicide and Rodenticide Act, and the Federal Safe Drinking Water Act of 1974, (ii) applicable state counterparts to such laws and (iii) any common law or equitable doctrine that may impose liability or obligations for injuries or damages due to, or threatened as a result of, the presence of or exposure to any Hazardous Materials. 1.36 "Equipment" shall mean, as to each Borrower, all of such Borrower's now owned and hereafter acquired equipment, wherever located, including machinery, data processing and computer equipment (whether owned or licensed and including embedded software), vehicles, tools, furniture, fixtures, all attachments, accessions and property now or hereafter affixed thereto or used in connection therewith, and substitutions and replacements therefor, wherever located. 1.37 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, together with all rules, regulations and interpretations thereunder or related thereto. 1.38 "ERISA Affiliate" shall mean any person required to be aggregated with any Borrower, or any of its respective Subsidiaries under Sections 414(b), 414(c), 414(m) or 414(o) of the Code. 1.39 "ERISA Event" shall mean (a) any "reportable event", as defined in Section 4043(c) of ERISA or the regulations issued thereunder, with respect to a Plan for which the reporting requirements have not been waived in writing; (b) the adoption of any amendment to a 7 Plan that would require the provision of security pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA; (c) the existence with respect to any Plan of an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (d) the filing pursuant to Section 412 of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (e) the occurrence of a "prohibited transaction" with respect to which any Borrower or any of its respective Subsidiaries is a "disqualified person" (within the meaning of Section 4975 of the Code) or with respect to which any Borrower or any of its respective Subsidiaries could otherwise be liable; (f) a complete or partial withdrawal by any Borrower or any ERISA Affiliate from a Multiemployer Plan or a cessation of operations which is treated as such a withdrawal or notification that a Multiemployer Plan is in reorganization; (g) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the Pension Benefit Guaranty Corporation to terminate a Plan; (h) an event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, (i) the imposition of any liability under Title IV of ERISA, other than Pension Benefit Guaranty Corporation premiums due but not delinquent under Section 4007 of ERISA, upon any Borrower or any ERISA Affiliate in excess of $1,000,000 and (j) any other event of condition with respect to a Plan, including any Plan subject to Title IV of ERISA maintained, or contributed to, by any ERISA Affiliate, that could reasonably be expected to result in liability of any Borrower in excess of $1,000,000. 1.40 "Excess Availability" shall mean the term "Excess Availability" as defined in the Working Capital Loan Agreement as in effect on the date hereof. 1.41 "Exchange Act" shall mean the Securities Exchange Act of 1934, together with all rules, regulations and interpretations thereunder or related thereto. 1.42 "Exchange Agreement" shall mean the Exchange Agreement, dated as of December 18, 2003, by and among LPC, Warren Delano and Michael A. Lubin, as the same now exists or may hereafter be amended, modified, supplemented, renewed, restated or replaced. 1.43 "Existing Junior Subordinated Notes" shall mean, collectively, the 14% Junior Subordinated Notes due May 1, 2000 issued by LPC in the current outstanding principal amount of $346,667 and the Junior Subordinated Convertible Increasing Rate Notes due May 1, 2000 issued by LPC, the principal amount of which has been converted into Capital Stock, as the same have been amended to date and now exist. 1.44 "Existing Senior Subordinated Notes" shall mean, collectively, the 12 3/4% Senior Subordinated Notes due February 1, 2000 issued by LPC in the current outstanding principal amount of $27,412,125, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced. 1.45 "Extraordinary Receipts" means any cash received by a Borrower or any of its Subsidiaries not in the ordinary course of business from the following, (i) proceeds of insurance, (ii) condemnation awards (and payments in lieu thereof), (iii) indemnity payments, and (iv) after the occurrence and during the continuance of a Default or an Event of Default, (A) foreign, 8 United States, state or local tax refunds, (B) pension plan reversions and (C) judgments, proceeds of settlements or other consideration of any kind in connection with any cause of action. 1.46 "Event of Default" shall mean the occurrence or existence of any event or condition described in Section 10.1 hereof. 1.47 "Fee Letter" shall mean the letter agreement, dated of even date herewith, by and among Borrowers and Agent, setting forth certain fees payable by Borrowers to Agent for the benefit of itself and Lenders, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced. 1.48 "Financing Agreements" shall mean, collectively, this Agreement and all notes, guarantees, security agreements, deposit account control agreements, investment property control agreements, intercreditor agreements and all other agreements, documents and instruments now or at any time hereafter executed and delivered by any Borrower or Obligor in connection this Agreement. 1.49 "Fixed Charge Coverage Ratio" shall mean, as to any applicable period, with respect to Borrowers and their Subsidiaries, on a consolidated basis, the ratio of (a) EBITDA for such period less Capital Expenditures for such period that were not financed within such period to (b) Fixed Charges of Borrowers and their Subsidiaries for such period. Notwithstanding anything in this Agreement to the contrary, the Fixed Charge Coverage Ratio for the three month period ending December 31, 2003 shall be calculated on a pro forma basis as if the transactions contemplated by this Agreement, the Working Capital Lender Agreements, the Senior Subordinated Note Indenture, the Warrant Agent Agreement, the Exchange Agreement and the Nomura Payoff Agreement were consummated and fully effective as of the first day of such period. 1.50 "Fixed Charges" shall mean, as to any Person and its Subsidiaries with respect to any period, the sum of, without duplication, (a) all cash Interest Expense, provided that any annual fees paid to the Working Capital Lenders or Working Capital Agent will be considered cash Interest Expense when such amounts are recognized as an expense in the Borrowers' Statement of Income, plus (b) all regularly scheduled (as determined at the beginning of the respective period) principal payments of Indebtedness for borrowed money (including, without limitation, all regularly scheduled payments of principal in respect of the Loan) and Indebtedness with respect to Capitalized Leases (and without duplicating amounts in item (a) of this definition, the interest component with respect to Indebtedness under Capitalized Leases), plus (c) all cash income taxes other than cash income taxes related to income that is required by GAAP to be classified as non-operating amounts in the Borrowers' Statement of Income, plus (d) all cash dividends paid on preferred stock to the extent not included in item (a) of this definition, but excluding any such cash dividends that were scheduled to be paid prior to December 31, 2003. 1.51 "GAAP" shall mean generally accepted accounting principles in the United States of America as in effect from time to time as set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and the statements and pronouncements of the Financial Accounting Standards Board which are applicable to the circumstances as of the date of determination consistently applied, except that, 9 for purposes of Sections 9.17 and 9.18 hereof, GAAP shall be determined on the basis of such principles in effect on the date hereof and consistent with those used in the preparation of the most recent audited financial statements delivered to Agent prior to the date hereof. 1.52 "Governmental Authority" shall mean any nation or government, any state, province, or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. 1.53 "Hazardous Materials" shall mean any hazardous, toxic or dangerous substances, materials and wastes, including hydrocarbons (including naturally occurring or man-made petroleum and hydrocarbons), flammable explosives, asbestos, urea formaldehyde insulation, radioactive materials, biological substances, polychlorinated biphenyls, pesticides, herbicides and any other kind and/or type of pollutants or contaminants (including materials which include hazardous constituents), sewage, sludge, industrial slag, solvents and/or any other similar substances, materials, or wastes and including any other substances, materials or wastes that are or become regulated under any Environmental Law (including any that are or become classified as hazardous or toxic under any Environmental Law). 1.54 "Indebtedness" shall mean, with respect to any Person, any liability, whether or not contingent, (a) in respect of borrowed money (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof) or evidenced by bonds, notes, debentures or similar instruments; (b) representing the balance deferred and unpaid of the purchase price of any property or services (except any such balance that constitutes an account payable to a trade creditor (whether or not an Affiliate) created, incurred, assumed or guaranteed by such Person in the ordinary course of business of such Person in connection with obtaining goods, materials or services that is not overdue by more than ninety (90) days, unless the trade payable is being contested in good faith); (c) all obligations as lessee under leases which have been, or should be in accordance with GAAP, recorded as Capitalized Leases; (d) any contractual obligation, contingent or otherwise, of such Person to pay or be liable for the payment of any indebtedness described in this definition of another Person, including, without limitation, any such indebtedness directly or indirectly guaranteed, or any agreement to purchase, repurchase, or otherwise acquire such indebtedness, obligation or liability or any security therefor, or to provide funds for the payment or discharge thereof, or to maintain solvency, assets, level of income, or other financial condition; (e) all obligations with respect to redeemable stock and redemption or repurchase obligations under any Capital Stock or other equity securities issued by such Person; (f) all reimbursement obligations and other liabilities of such Person with respect to surety bonds (whether bid, performance or otherwise), letters of credit, banker's acceptances, drafts or similar documents or instruments issued for such Person's account; (g) all indebtedness of such Person in respect of indebtedness of another Person for borrowed money or indebtedness of another Person otherwise described in this definition which is secured by any consensual lien, security interest, collateral assignment, conditional sale, mortgage, deed of trust, or other encumbrance on any asset of such Person, whether or not such obligations, liabilities or indebtedness are assumed by or are a personal liability of such Person, all as of such time; (h) all obligations, liabilities and indebtedness of such Person (marked to market) arising under swap agreements, cap agreements and collar agreements and other agreements or arrangements designed to protect such Person against fluctuations in interest rates 10 or currency or commodity values; (i) all obligations owed by such Person under License Agreements with respect to non-refundable, advance or minimum guaranteed royalty payments; and (j) the principal and interest portions of all rental obligations of such Person under any synthetic lease or similar off-balance sheet financing where such transaction is considered to be borrowed money for tax purposes but is classified as an operating lease in accordance with GAAP. For purposes of calculating EBITDA and the Fixed Charge Coverage Ratio pursuant to Sections 9.18 and 9.19 hereof, the Nomura Debt shall not constitute Indebtedness and the principal and interest in respect of the Nomura Debt shall not be included in the making of any such calculations. 1.55 "Information Certificate" shall mean the Information Certificate dated of even date herewith of Borrowers containing information with respect to Borrowers and their respective businesses and assets executed by Borrowers and delivered to Agent in connection with the preparation of this Agreement and the other Financing Agreements and the financing arrangements provided for herein. 1.56 "Insurance Premium Collateral" shall mean, collectively, (a) any insurance policies of Borrowers for which an Insurance Premium Finance Party has entered into arrangements to allow Borrowers to pay all or a portion of the applicable insurance premiums on such insurance policies in installments rather than in one lump sum annual payment, and (b) any loss proceeds paid or payable to a Borrower pursuant to the insurance policies for which such Insurance Premium Finance Party has entered into arrangements to allow Borrowers to pay all or a portion of the applicable insurance premiums on such insurance policies in installments rather than in one lump sum annual payment (to the extent of the amount owed to such Insurance Premium Finance Party), provided, that, (i) in no event shall the Insurance Premium Collateral include any amounts deposited in or received in the lockbox or blocked account established by Borrowers in connection with the Financing Agreements or the Working Capital Lender Agreements or otherwise with respect to Borrowers' financing arrangements with Agent and Lenders or with Working Capital Agent and Working Capital Lenders for the handling of collections of Accounts or other assets and (ii) in no event shall the Insurance Premium Collateral of any Insurance Premium Finance Party secure any obligation to any other Insurance Premium Finance Party. 1.57 "Insurance Premium Finance Party" shall mean, in connection with insurance policies maintained by Borrowers, an insurance company or a third party that enters into arrangements to allow Borrowers to pay all or a portion of the applicable insurance premiums on such insurance policies in installments rather than in one lump sum annual payment. 1.58 "Intellectual Property" shall mean, as to each Borrower, such Borrower's now owned and hereafter arising or acquired: patents, patent rights, patent applications, copyrights, works which are the subject matter of copyrights, copyright registrations, trademarks, trade names, trade styles, trademark and service mark applications, and licenses and rights to use any of the foregoing; all extensions, renewals, reissues, divisions, continuations, and continuations-in-part of any of the foregoing; all rights to sue for past, present and future infringement of any of the foregoing; inventions, trade secrets, formulae, processes, compounds, drawings, designs, blueprints, surveys, reports, manuals, and operating standards; goodwill (including any goodwill associated with any trademark or the license of any trademark); customer and other lists in 11 whatever form maintained; trade secret rights, copyright rights, rights in works of authorship, domain names and domain name registrations; software and contract rights relating to computer software programs, in whatever form created or maintained. 1.59 "Intercreditor Agreement" shall mean the Intercreditor Agreement, dated of even date herewith, by and among Agent (on behalf of the Lenders) and Working Capital Agent (on behalf of the lenders from time to time party to the Working Capital Loan Agreement), as acknowledged and agreed to by Borrowers, as the same now exists or may hereafter by amended, modified, supplemented, extended, renewed, restated or replaced. 1.60 "Interest Expense" shall mean, for any period, as to any Person, as determined in accordance with GAAP, the total interest expense of such Person, whether paid or accrued during such period (including the interest component of Capitalized Leases for such period), including, without limitation, discounts in connection with the sale of any Accounts, but excluding interest paid in property other than cash and any other interest expense not payable in cash. 1.61 "Interest Rate" shall mean, (a) Subject to clause (b) of this definition below, a rate equal to the greater of (i) four percent (4%) per annum in excess of the Prime Rate and (ii) eight and one quarter percent (8.25%) per annum. (b) Notwithstanding anything to the contrary contained in clause (a) of this definition, the Interest Rate shall mean a rate of interest per annum equal to the rate of interest otherwise in effect from time to time pursuant to the terms of this Agreement plus 2.5%, or, if a rate of interest is not otherwise in effect, the greater of (i) the Prime Rate plus 6.5% and (ii) 10.75%, either (1) for the period on and after the date of termination or non-renewal hereof until such time as all Obligations are indefeasibly paid and satisfied in full in immediately available funds, or (2) for the period from and after the date of the occurrence of any Event of Default, and for so long as such Event of Default is continuing as determined by Agent. 1.62 "Inventory" shall mean, as to each Borrower, all of such Borrower's now owned and hereafter existing or acquired goods, wherever located, which (a) are leased by such Borrower as lessor; (b) are held by such Borrower for sale or lease or to be furnished under a contract of service; (c) are furnished by such Borrower under a contract of service; or (d) consist of raw materials, work in process, finished goods or materials used or consumed in its business. 1.63 "Investment Property Control Agreement" shall mean an agreement in writing, in form and substance reasonably satisfactory to Agent, by and among Working Capital Agent, any Borrower (as the case may be) and any securities intermediary, commodity intermediary or other person who has custody, control or possession of any investment property of such Borrower acknowledging that such securities intermediary, commodity intermediary or other person has custody, control or possession of such investment property on behalf of Working Capital Agent, that it will comply with entitlement orders originated by Working Capital Agent with respect to such investment property, or other instructions of Working Capital Agent, or (as the case may be) apply any value distributed on account of any commodity contract as directed by Working 12 Capital Agent, in each case, without the further consent of such Borrower and including such other terms and conditions as Working Capital Agent may require. 1.64 "Junior Subordinated Notes" shall mean, collectively, the 13% Junior Subordinated Notes due November 1, 2009 issued by LPC, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced. 1.65 "Lenders" shall mean the lenders who are signatories hereto as Lenders and other persons made a party to this Agreement as a Lender in accordance with Section 13.7 hereof, and their respective successors and assigns; each sometimes being referred to herein individually as a "Lender". 1.66 "License Agreements" shall have the meaning set forth in Section 8.11 hereof. 1.67 "Loan" shall mean the loans made by the Lenders to the Borrowers on the date hereof pursuant to Section 2.1 hereof. 1.68 "Material Adverse Effect" shall mean a material adverse effect on (a) the financial condition, business, performance or operations of Borrowers taken as a whole or the legality, validity or enforceability of this Agreement or any of the other Financing Agreements; (b) the legality, validity, enforceability, perfection or priority of the security interests and liens of Agent upon the Collateral of Borrowers (taken as a whole); (c) the Collateral of Borrowers (taken as a whole) or its value; (d) the ability of the Borrowers (taken as a whole) to repay the Obligations or perform their obligations under this Agreement or any of the other Financing Agreements as and when to be performed in accordance therewith; or (e) the ability of Agent or any Lender to enforce the Obligations or realize upon the Collateral or otherwise with respect to the rights and remedies of Agent and Lenders under this Agreement or any of the other Financing Agreements. 1.69 "Material Contract" shall mean (a) any contract or other agreement (other than customer purchase orders with a term of one year or less and the Financing Agreements or other agreements with respect to borrowed money), written or oral, of any Borrower involving monetary liability of or to any Person in an amount in excess of $1,000,000 in any fiscal year and (b) any other contract or other agreement (other than customer purchase orders with a term of one year or less and the Financing Agreements or other agreements with respect to borrowed money), whether written or oral, to which any Borrower is a party and as to which the breach, nonperformance, cancellation or failure to renew by any party thereto would have a Material Adverse Effect. 1.70 "Maximum Credit" shall mean the amount of $11,500,000 minus, at any time of determination, the then aggregate amount of principal re-paid by Borrowers to Agent in respect of the Loan in accordance with the terms of this Agreement. 1.71 "Mortgages" shall mean, individually and collectively, each of the mortgages, deeds of trust or other similar agreements executed by any Borrower in favor of Agent, pursuant to which such Borrower granted to Agent a lien and security interest in Borrower's Real Property and related assets. 13 1.72 "Multiemployer Plan" shall mean a "multi-employer plan" as defined in Section 4001(a)(3) of ERISA which is or was at any time during the current year or the immediately preceding six (6) years contributed to by any Borrower or any ERISA Affiliate. 1.73 "Net Cash Proceeds" shall mean, with respect to any sale, lease, transfer or other disposition of any asset or the sale or issuance of any Indebtedness, the aggregate amount of cash received from time to time (whether as initial consideration or through payment or disposition of deferred consideration) by or on behalf of such Person in connection with such transaction after deducting therefrom only (without duplication) (a) reasonable and customary brokerage commissions, underwriting fees and discounts, legal fees, accountant's fees, investment banking fees, finder's fees, other similar fees and commissions and reasonable out-of-pocket expenses, (b) the amount of taxes reasonably estimated by such Person to be actually and reasonably attributable to such transaction, and (c) the amount of any Indebtedness secured by a security interest, lien or other encumbrance (other than a security interest, lien or other encumbrance created under any Financing Agreement) on such asset that, by the terms of such transaction, is required to be repaid upon such disposition, in each case to the extent, but only to the extent, that the amounts so deducted are actually paid to a Person that, except in the case of reasonable out-of-pocket expenses, is not an Affiliate of such Person or any Affiliate of any Borrower and, in each case, are properly attributable to such transaction or to the asset that is the subject thereof. 1.74 "Nomura" shall mean Nomura Special Situations Investment Trust, a Delaware trust (as successor-in-interest to Tri-Links Investment Trust, as successor-in-interest to Nomura Holdings America, Inc.), and its successors and assigns. 1.75 "Nomura Agreements" shall mean, collectively, the following (as the same now exist or may hereafter be amended, modified, supplemented, renewed, restated or replaced): (a) Note Purchase Agreement, dated as of October 27, 1997, between LPC and Nomura, (b) promissory note, dated as of October 27, 1997, made by LPC payable to the order of Nomura in the original principal amount of $7,500,000 and (c) all other agreements, documents and instruments executed in connection therewith. 1.76 "Nomura Debt" shall mean all obligations, liabilities and indebtedness of every kind, nature and description owing by LPC to Nomura pursuant to the Nomura Agreements and the Nomura Payoff Agreement, including principal, interest, costs and expenses arising under the Nomura Agreements. 1.77 "Nomura Payoff Agreement" shall mean the Payoff Agreement, dated December 18, 2003, by and between Nomura and LPC, as the same now exists or may hereafter be amended, modified, supplemented, renewed, restated or replaced, reflecting, among other things, the terms and conditions of, and the effective date of, the payoff of the Nomura Debt outstanding under the Nomura Agreements. 1.78 "Obligations" shall mean the Loan and all other obligations, liabilities and indebtedness of every kind, nature and description owing by any or all of Borrowers to Agent or any Lender and/or any of their Affiliates, including principal, interest, charges, fees, costs and expenses, however evidenced, whether as principal, surety, endorser, guarantor or otherwise, arising under this Agreement or any of the other Financing Agreements, whether now existing or 14 hereafter arising, whether arising before, during or after the initial or any renewal term of this Agreement or after the commencement of any case with respect to such Borrower under the United States Bankruptcy Code or any similar statute (including the payment of interest and other amounts which would accrue and become due but for the commencement of such case, whether or not such amounts are allowed or allowable in whole or in part in such case), whether direct or indirect, absolute or contingent, joint or several, due or not due, primary or secondary, liquidated or unliquidated, or secured or unsecured. 1.79 "Obligor" shall mean any guarantor, endorser, acceptor, surety or other person liable on or with respect to the Obligations or who is the owner of any property which is security for the Obligations, other than Borrowers. 1.80 "Participant" shall mean any lender that acquires and holds a participation in the interest of any Lender in any portion of the Loan in conformity with the provisions of Section 13.7 of this Agreement governing participations. 1.81 "Participant Register" shall have the meaning set forth in Section 13.7 hereof. 1.82 "Permitted Holders" shall mean the persons listed on Schedule 1.82 hereto and their respective successors and assigns. 1.83 "Person" or "person" shall mean any individual, sole proprietorship, partnership, corporation (including any corporation which elects subchapter S status under the Code), limited liability company, limited liability partnership, business trust, unincorporated association, joint stock corporation, trust, joint venture or other entity or any government or any agency or instrumentality or political subdivision thereof. 1.84 "Plan" means an employee benefit plan (as defined in Section 3(3) of ERISA) which any Borrower sponsors, maintains, or to which it makes, is making, or is obligated to make contributions, or any Multiemployer Plan to which Borrower has made contributions at any time during the immediately preceding six (6) plan years. 1.85 "Prime Rate" shall mean the rate from time to time publicly announced by JPMorgan Chase Bank, or its successors, as its prime rate, whether or not such announced rate is the best rate available at such bank. 1.86 "Pro Rata Share" shall mean as to any Lender, the fraction (expressed as a percentage) the numerator of which is such Lender's Commitment and the denominator of which is the aggregate amount of all of the Commitments of Lenders, as adjusted from time to time in accordance with the provisions of Section 13.7 hereof; provided, that, if the Commitments have been terminated, the numerator shall be the unpaid amount of such Lender's portion of the Loan and the denominator shall be the aggregate amount of the unpaid Loan. 1.87 "Provision for Taxes" shall mean an amount equal to all taxes imposed on or measured by net income, whether Federal, State, Provincial, county or local, and whether foreign or domestic, that are paid or payable by any Person in respect of any period in accordance with GAAP. 15 1.88 "Real Property" shall mean, with respect to any Person, all now owned and hereafter acquired real property of such Person, including leasehold interests, together with all buildings, structures, and other improvements located thereon and all licenses, easements and appurtenances relating thereto, wherever located, including the real property and related assets more particularly described in the Mortgages. 1.89 "Receivables" shall mean all of the following now owned or hereafter arising or acquired property of each Borrower: (a) all Accounts; (b) all interest, fees, late charges, penalties, collection fees and other amounts due or to become due or otherwise payable in connection with any Account; (c) all payment intangibles of such Borrower; (d) letters of credit, indemnities, guarantees, security or other deposits and proceeds thereof payable to any Borrower or otherwise in favor of or delivered to any Borrower in connection with any Account; or (e) all other accounts, contract rights, chattel paper, instruments, notes, general intangibles and other forms of obligations owing to any Borrower, whether from the sale and lease of goods or other property, the licensing of any property (including Intellectual Property or other general intangibles), the rendition of services or from the making of loans or advances by any Borrower or to or for the benefit of any third person (including loans or advances to any Affiliates or Subsidiaries of any Borrower) or otherwise associated with any Accounts, Inventory or general intangibles of any Borrower (including, without limitation, choses in action, causes of action, tax refunds, tax refund claims, any funds which may become payable to any Borrower in connection with the termination of any Plan and any other amounts payable to any Borrower from any Plan, rights and claims against carriers and shippers, rights to indemnification, business interruption insurance and proceeds thereof, casualty or any similar types of insurance and any proceeds thereof and proceeds of insurance covering the lives of employees on which any Borrower is a beneficiary). 1.90 "Records" shall mean, as to each Borrower, all of its present and future books of account of every kind or nature, purchase and sale agreements, invoices, ledger cards, bills of lading and other shipping evidence, statements, correspondence, memoranda, credit files and other data relating to the Collateral or any account debtor, together with the tapes, disks, diskettes and other data and software storage media and devices, file cabinets or containers in or on which the foregoing are stored (including any rights of any Borrower with respect to the foregoing maintained with or by any other person). 1.91 "Reference Bank" shall mean JPMorgan Chase Bank, or such other bank as Agent may from time to time designate. 1.92 "Refinancing Indebtedness" shall have the meaning set forth in Section 9.9(k) hereof. 1.93 "Register" shall have the meaning set forth in Section 13.7 hereof. 1.94 "Registered Loan" shall have the meaning set forth in Section 2.1(e) hereof. 1.95 "Registered Note" shall have the meaning set forth in Section 2.1(e) hereof. 1.96 "Remaining Existing Subordinated Note Indebtedness" shall mean an amount not to exceed $500,000 in respect of Indebtedness (including principal, interest, fees and expenses) 16 arising from or evidenced by the Remaining Existing Senior Subordinated Notes. Schedule 1.96 hereto sets forth the holders of the Remaining Existing Subordinated Note Indebtedness and the principal amount of the Existing Senior Subordinated Notes held by each such holder. 1.97 "Remaining Existing Senior Subordinated Notes" shall mean the Existing Senior Subordinated Notes which are not exchanged by the holders thereof for Senior Subordinated Notes, not to exceed the Remaining Existing Subordinated Note Indebtedness. 1.98 "Renewal Date" shall have the meaning set forth in Section 13.1 hereof. 1.99 "Required Lenders" shall mean, at any time, those Lenders whose Pro Rata Shares aggregate sixty-six and two-thirds (66 2/3%) percent or more of the aggregate of the Commitments of all Lenders, or if the Commitments shall have been terminated, Lenders to whom at least sixty-six and two-thirds (66 2/3%) percent of the then outstanding Obligations are owing. 1.100 "Reserves" shall mean the term "Reserves" as defined in the Working Capital Loan Agreement as in effect as on the date hereof. 1.101 "Rubber Group Reserve" shall mean the term "Rubber Group Reserve" as defined in the Working Capital Loan Agreement as in effect on the date hereof. 1.102 "Series B Preferred Stock" shall mean the $8 Cumulative Convertible Preferred Stock, Series B, of LPC. 1.103 "Senior Subordinated Notes" shall mean, collectively, the 12% Senior Subordinated Notes due August 1, 2009 issued by LPC pursuant to the Senior Subordinated Note Indenture, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced. 1.104 "Senior Subordinated Note Indenture" shall mean the Indenture, dated as of December 18, 2003, between LPC, as issuer, and Wilmington Trust Company, as trustee, with respect to the Senior Subordinated Notes, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced. 1.105 "Solvent" shall mean, at any time with respect to any Person, that at such time such Person (a) is generally able to pay its debts as they mature and has (and has a reasonable basis to believe it will continue to have) sufficient capital (and not unreasonably small capital) to carry on its business consistent with its practices as of the date hereof, and (b) the assets and properties of such Person (and its Subsidiaries, taken as a whole) at a fair valuation (and including as assets for this purpose at a fair valuation all rights of subrogation, contribution or indemnification arising pursuant to any guarantees given by such Person and its Subsidiaries, taken as a whole) are greater than the Indebtedness of such Person and its Subsidiaries, taken as a whole, and including subordinated and contingent liabilities (without duplication) computed at the amount which, such person has a reasonable basis to believe, represents an amount which can reasonably be expected to become an actual or matured liability (and including (without duplication) as to contingent liabilities arising pursuant to any guarantee the face amount of such liability as reduced to reflect the probability of it becoming a matured liability). 17 1.106 "Special Agent Advances" shall have the meaning set forth in Section 12.11 hereof. 1.107 "Special Reserve" shall mean the term "Special Reserve" as defined in the Working Capital Loan Agreement as in effect on the date hereof. 1.108 "Subsidiary" or "subsidiary" shall mean, with respect to any Person, any corporation, limited liability company, limited liability partnership or other limited or general partnership, trust, association or other business entity of which at least a majority of the outstanding Capital Stock or other interests entitled to vote in the election of the board of directors of such corporation (irrespective of whether, at the time, Capital Stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency), managers, trustees or other controlling persons, or an equivalent controlling interest therein, of such Person is, at the time, directly or indirectly, owned by such Person and/or one or more subsidiaries of such Person. 1.109 "UCC" shall mean the Uniform Commercial Code as in effect in the State of New York, and any successor statute, as in effect from time to time (except that terms used herein which are defined in the Uniform Commercial Code as in effect in the State of New York on the date hereof shall continue to have the same meaning notwithstanding any replacement or amendment of such statute except as Agent may otherwise determine). 1.110 "Voting Stock" shall mean with respect to any Person, (a) one (1) or more classes of Capital Stock of such Person having general voting powers to elect at least a majority of the board of directors, managers or trustees of such Person, irrespective of whether at the time Capital Stock of any other class or classes have or might have voting power by reason of the happening of any contingency, and (b) any Capital Stock of such Person convertible or exchangeable without restriction at the option of the holder thereof into Capital Stock of such Person described in clause (a) of this definition. 1.111 "Warrant Agent Agreement" shall mean the Warrant Agent Agreement, dated as of December 18, 2003, by and between LPC and Wilmington Trust Company, in its capacity as warrant agent, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced. 1.112 "WC Revolving Loans" shall mean the term "Revolving Loans" as defined in the Working Capital Loan Agreement as in effect on the date hereof. 1.113 "WC Term Loans" shall mean the term "Term Loans" as defined in the Working Capital Loan Agreement as in effect on the date hereof. 1.114 "Weighted Average Life to Maturity" shall mean, when applied to any Indebtedness at any date, the number of years obtained by dividing (a) the then outstanding principal amount of such Indebtedness into (b) the total of the product obtained by multiplying (i) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (iii) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment. 18 1.115 "Working Capital Agent" shall mean Congress, in its capacity as agent acting for and on behalf of the Working Capital Lenders pursuant to the Working Capital Loan Agreement, and its successors and assigns (including any replacement or successor agent or additional agent acting for and on behalf of the Working Capital Lenders). 1.116 "Working Capital Debt" shall mean all obligations, liabilities and indebtedness of every kind, nature and description owing by any Borrower to Working Capital Agent or any Working Capital Lender, including principal, interest, charges, fees, premiums, indemnities, costs and expenses, however evidenced, whether as principal, surety, endorser, guarantor or otherwise, arising under the Working Capital Lender Agreements. 1.117 "Working Capital Lender Agreements" shall mean, collectively, the following (as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced): (a) the Working Capital Loan Agreement; (b) the agreements, documents and instruments set forth on Schedule 1.117 hereto; and (c) all other agreements, documents and instruments at any time executed and/or delivered by any Borrower with, to or in favor of Working Capital Lender in connection therewith or related thereto; sometimes being referred to herein individually as a "Working Capital Lender Agreement". 1.118 "Working Capital Lenders" shall mean, collectively, Congress in its individual capacity, The CIT Group/Commercial Financing, Inc. and the other lenders who are from time to time parties to the Working Capital Loan Agreement as lenders, and their respective successors and assigns, and the lenders with respect to any Refinancing Indebtedness; each sometimes referred to herein individually as a "Working Capital Lender". 1.119 "Working Capital Loan Agreement" shall mean the Amended and Restated Loan and Security Agreement, dated of even date herewith, by and among Congress, as agent, the lenders from time to time party thereto, and Borrowers, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, including any agreements with respect to Refinancing Indebtedness. SECTION 2. LOAN FACILITY 2.1 The Loan. (a) On the date hereof, each Lender severally agrees to make the Loan to the Borrowers, in an aggregate principal amount not to exceed the amount of such Lender's Commitment. (b) The Loan is (i) to be repaid, together with interest and other amounts, in accordance with this Agreement and (ii) secured by all of the Collateral. The principal amount of the Loan shall be repaid in consecutive monthly installments (or earlier as provided herein) payable on the first day of each month commencing January, 2004, each in the amount of $95,833.33; provided, however, that the last installment payable on the earlier of (i) the maturity date of this Agreement as set forth in Section 13.1 hereof, and (ii) such earlier date on which the Loan shall become due and payable in accordance with the terms of this Agreement and the other Loan Documents, shall be in the amount necessary to repay in full the unpaid principal amount of the Loan. 19 (c) The aggregate principal amount of the Loan made on the date hereof shall not exceed the Maximum Credit. Any principal amount of the Loan which is repaid or prepaid may not be reborrowed. (d) Borrowers may prepay the Loan, without penalty or premium, so long as each prepayment is an integral multiple of $100,000. (e) Agent, on behalf of Borrowers, agrees to record each Loan on the Register referred to in Section 13.7(b). The Loan recorded on the Register (the "Registered Loan") may not be evidenced by promissory notes other than a Registered Note (as defined below). Upon the registration of a Loan, any promissory note (other than a Registered Note) evidencing the same shall be null and void and shall be returned to Borrowers. Borrowers agree, at the request of any Lender, to execute and deliver to such Lender a promissory note in registered form to evidence such Registered Loan (i.e., containing registered note language) and registered as provided in Section 13.7(b) hereof (a "Registered Note"), payable to the order of such Lender and otherwise duly completed. Once recorded on the Register, the Obligations evidenced by such Registered Note may not be removed from the Register so long as it remains outstanding, and a Registered Note may not be exchanged for a promissory note that is not a Registered Note. 2.2 Commitments. The aggregate amount of each Lender's Pro Rata Share of the Loan shall not exceed the amount of such Lender's Commitment, as the same may from time to time be amended in accordance with the provisions hereof. Each Lender's Commitment shall terminate at 5:00 p.m. (New York City time) on the date hereof. 2.3 Joint and Several Liability. Each Borrower shall be jointly and severally liable for all amounts due to Agent and Lenders under this Agreement and the other Financing Agreements, regardless of which Borrower actually receives the Loans hereunder or the amount of such Loans received or the manner in which Agent or any Lender accounts for such Loans or other extensions of credit on its books and records. All references herein or in any of the other Financing Agreements to any of the obligations of Borrowers to make any payment hereunder or thereunder shall constitute joint and several obligations of Borrowers. The Obligations with respect to Loans made to a Borrower, and the Obligations arising as a result of the joint and several liability of a Borrower hereunder, with respect to Loans made to the other Borrower, shall be separate and distinct obligations, but all such other Obligations shall be primary obligations of all Borrowers. The Obligations arising as a result of the joint and several liability of a Borrower hereunder with respect to Loans or other extensions of credit made to the other Borrower shall, to the fullest extent permitted by law, be unconditional irrespective of (a) the validity or enforceability, avoidance or subordination of the Obligations of the other Borrower or of any promissory note or other document evidencing all or any part of the Obligations of the other Borrower, (b) the absence of any attempt to collect the Obligations from the other Borrower, any Obligor or any other security therefor, or the absence of any other action to enforce the same, (c) the waiver, consent, extension, forbearance or granting of any indulgence by Agent or any Lender with respect to any provisions of any instrument evidencing the Obligations of the other Borrower, or any part thereof, or any other agreement now or hereafter executed by the other Borrower and delivered to Agent or any Lender, (d) the failure by Agent or any Lender to take any steps to perfect and maintain its security interest in, or to preserve its rights and maintain its security or collateral for the Obligations of the other Borrower, (e) the 20 election of Agent and Lenders in any proceeding instituted under the Bankruptcy Code, of the application of Section 1111(b)(2) of the Bankruptcy Code, (f) the disallowance of all or any portion of the claim(s) of Agent or any Lender for the repayment of the Obligations of the other Borrower under Section 502 of the Bankruptcy Code, or (g) any other circumstances which might constitute a legal or equitable discharge or defense of an Obligor or of the other Borrower. With respect to the Obligations arising as a result of the joint and several liability of a Borrower hereunder with respect to Loans or other extensions of credit made to the other Borrower hereunder, each Borrower waives, until the Obligations shall have been paid in full and this Agreement shall have been terminated, any right to enforce any right of subrogation or any remedy which Agent or any Lender now has or may hereafter have against any Borrower or Obligor and any benefit of, and any right to participate in, any security or collateral given to Agent or any Lender. At any time an Event of Default exists or has occurred and is continuing, Agent may proceed directly and at once, without notice, against any Borrower to collect and recover the full amount, or any portion of the Obligations, without first proceeding against the other Borrower or any other Person, or against any security or collateral for the Obligations. Each Borrower consents and agrees that Agent and Lenders shall be under no obligation to marshall any assets in favor of Borrower(s) or against or in payment of any or all of the Obligations. 2.4 Mandatory Prepayments. Notwithstanding the provisions of Section 6.4 hereof, so long as no Event of Default exists or has occurred and is continuing: (a) Upon the receipt by any Borrower or any of its Subsidiaries of any Extraordinary Receipts, Borrowers shall immediately prepay the Working Capital Debt and the Obligations as set forth below, in an amount equal to 100% of such Extraordinary Receipts, net of any reasonable expenses incurred in collecting such Extraordinary Receipts: (i) if such Extraordinary Receipts are the proceeds of Inventory or Accounts, then such proceeds shall be applied, first, to the outstanding principal amount of the WC Revolving Loans, second, to the outstanding principal amount of the WC Term Loans, and third, to the outstanding principal amount of the Loan; and (ii) if such Extraordinary Receipts are the proceeds of Real Property, then such proceeds shall be applied to the outstanding principal amount of the Loan; and (iii) if such Extraordinary Receipts are the proceeds of any other Collateral (other than Inventory or Accounts and other than Real Property), then such proceeds shall be applied, at Borrowers' option, to either (A) the outstanding principal amount of the WC Term Loans, (B) the outstanding principal amount of the Loan, or (C) the outstanding principal amount of the WC Revolving Loans so long as the Working Capital Agent permanently reduces the Revolving Loan Limit (as defined in the Working Capital Loan Agreement) and establishes and maintains a permanent Reserve against the aggregate Borrowing Base of all Borrowers, in each case in an amount equal to the amount of net proceeds that are so applied by Borrowers to the prepayment of principal of the WC Revolving Loans; provided, however, that (A) so long as no Default or an Event of Default has occurred and is continuing, on the date such Person receives Extraordinary Receipts consisting of insurance 21 proceeds from one or more policies covering, or proceeds from any judgment, settlement, condemnation or other cause of action in respect of, the loss, damage, taking or theft of any property or assets, such Extraordinary Receipts received by the Borrowers may, at the option of the Borrowers, be applied to repair, refurbish or replace such property or assets or acquire replacement property or assets for the property or assets so lost, damaged or stolen or other property or assets used or useful in the business of any Borrower for the property or assets so disposed, provided, that (x) the Agent for the benefit of the Lenders has a first-priority Lien (subject to Permitted Liens) on such replacement (or repaired or restored) property or assets, (y) the Borrowers deliver a certificate to the Agent within 10 days after the date of receipt of such Extraordinary Receipts stating that such Extraordinary Receipts shall be used to repair or refurbish such property or assets or to acquire such replacement property or assets for the property or assets so lost, damaged or stolen or such other property or assets used or useful in the business of any Borrower within 180 days after the date of receipt of such Extraordinary Receipts (which certificate shall set forth an estimate of the Extraordinary Receipts to be so expended), and (z) if such Extraordinary Receipts are the proceeds of Real Property and aggregate $500,000 or more, the Borrowers obtain the prior written consent of the Agent and (B) if all or any portion of such Extraordinary Receipts are not so used within the 180-day period, such unused Extraordinary Receipts shall be applied to prepay the Working Capital Debt and the Obligations in accordance with this Section 2.4(a). Pending such reinvestment, the Extraordinary Receipts shall be applied as a prepayment of WC Revolving Loans but not as a permanent reduction in the Revolving Loan Limit (as defined in the Working Capital Loan Agreement) and no Reserve shall be taken against the Borrowing Base. Any Extraordinary Receipts applied to repair, refurbish or replace Collateral pursuant to and in accordance with this Section 2.4(a) shall not be deemed Capital Expenditures for purposes of this Agreement. (b) Upon the issuance or sale by any Borrower or any of its Subsidiaries of Capital Stock of such Borrower or Subsidiary as permitted in Sections 9.7(b)(iii), (iv) and (v) hereof, or the issuance or incurrence by any Borrower or any of its Subsidiaries of any Indebtedness of the type described in Section 9.9(h), Borrowers shall immediately prepay the Working Capital Debt and the Obligations, in an amount equal to 100% of the Net Cash Proceeds received by such Person in connection therewith (except to the extent otherwise provided in Section 9.7(b)(iii)(B)) as follows: first, to the outstanding principal amount of the WC Term Loans, and second, at Borrower's option to either (A) the outstanding principal amount of the Loan or (B) the outstanding principal amount of the WC Revolving Loans so long as the Working Capital Agent permanently reduces the Revolving Loan Limit (as defined in the Working Capital Loan Agreement) and establishes and maintains a permanent Reserve against the aggregate Borrowing Base of all Borrowers, in each case in an amount equal to the amount of Net Cash Proceeds that are so applied by Borrowers to the prepayment of principal of the WC Revolving Loans. The provisions of this subsection (b) shall not be deemed to be implied consent to any such issuance, incurrence or sale otherwise prohibited by the terms and conditions of this Agreement. (c) Upon the sale or disposition of any Collateral by any Borrower or any of its Subsidiaries as permitted in Sections 9.7(b)(ii), (vi) and (viii) or upon the sale or disposition of any Collateral of any Borrower or any of its Subsidiaries not otherwise permitted by the terms of this Agreement but consented to by Required Lenders, Borrowers shall immediately prepay 22 the Working Capital Debt and the Obligations as set forth below, in an amount equal to 100% of the Net Cash Proceeds received by such Person in connection with such sale or disposition: (i) if such sale or disposition is of Inventory or Accounts, then such Net Cash Proceeds shall be applied, first, to the outstanding principal amount of the WC Revolving Loans, second, to the outstanding principal amount of the WC Term Loans, and third, to the outstanding principal amount of the Loan; and (ii) if such sale or disposition is of Real Property, then such Net Cash Proceeds shall be applied to the outstanding principal amount of the Loan; and (iii) if such sale or disposition is of any other Collateral (other than Inventory, Accounts or Real Property), then such Net Cash Proceeds shall be applied, first, to the outstanding principal amount of the WC Term Loans, and second, at Borrower's option to either (A) the outstanding principal amount of the Loan or (B) the outstanding principal amount of the WC Revolving Loans so long as the Working Capital Agent permanently reduces the Revolving Loan Limit (as defined in the Working Capital Loan Agreement) and establishes and maintains a permanent Reserve against the aggregate Borrowing Base of all Borrowers, in each case in an amount equal to the amount of Net Cash Proceeds that are so applied by Borrowers to the prepayment of principal of the WC Revolving Loans; provided, however, that, the Net Cash Proceeds of any sale or other disposition of Equipment permitted by Sections 9.7(b)(ii) and (vi) hereof may be reinvested by a Borrower to purchase property or assets used or useful in such Borrower's business at any time within one hundred twenty (120) days after receipt of such Net Cash Proceeds, provided, that, (i) any such Net Cash Proceeds not so used within such one hundred twenty (120) day period shall be immediately applied to the Obligations and the Working Capital Debt in accordance with this Section 2.6(c), (ii) Agent, for itself and the benefit of Lenders, shall have a valid and perfected first-priority lien on and security interest in such replacement or new property or assets, and (iii) at the time of receipt of any such Net Cash Proceeds, no Default or Event of Default shall have occurred and be continuing. The provisions of this subsection (c) shall not be deemed to be implied consent to any such sale or disposition otherwise prohibited by the terms and conditions of this Agreement. Any Net Cash Proceeds reinvested by a Borrower pursuant to and in accordance with this Section 2.4(c) shall not be deemed to be Capital Expenditures for purposes of this Agreement. (d) Notwithstanding the foregoing, if the Working Capital Agent decides not to require Borrowers to make any payment that, pursuant to the terms of this Section 2.4, is required to be applied to the Working Capital Debt, such payment shall be applied to prepay the outstanding principal amount of the Loan instead. (e) All prepayments of the WC Term Loans and the Loan under this Section 2.4 shall be applied against the remaining installments (if any) of principal due on the WC Term Loans or the Loan, as applicable, in the inverse order of maturity. Notwithstanding anything to the contrary in this Section 2.4, all prepayments of principal under this Section 2.4 shall be made together with accrued and unpaid interest thereon to the date of such prepayment. 23 SECTION 3. INTEREST AND FEES 3.1 Interest. (a) Borrowers shall pay to Agent, for the benefit of Lenders, interest on the outstanding principal amount of the Loan at the Interest Rate. All interest accruing hereunder on and after the date that any Event of Default exists or has occurred and is continuing or on and after the date of termination hereof shall be payable on demand. (b) Interest shall be payable by Borrowers to Agent, for the account of Lenders, monthly in arrears on the first Business Day of each calendar month and shall be calculated on the basis of a three hundred sixty (360) day year and actual days elapsed. The interest rate on non-contingent Obligations shall increase or decrease by an amount equal to each increase or decrease in the Prime Rate effective on the first day of the month after any change in such Prime Rate is announced and shall be based on the Prime Rate in effect on the last day of the month in which any such change occurs. In no event shall charges constituting interest payable by Borrowers to Agent and Lenders exceed the maximum amount or the rate permitted under any applicable law or regulation, and if any such part or provision of this Agreement is in contravention of any such law or regulation, such part or provision shall be deemed amended to conform thereto. 3.2 Fees. Borrowers agree to pay to Agent the fees and amounts set forth in the Fee Letter in the amounts and at the times specified therein. 3.3 Changes in Laws and Increased Costs of Loan. If after the date hereof, either (i) any change in, or in the interpretation of, any law or regulation is introduced, including, without limitation, with respect to reserve requirements, applicable to Lender or any banking or financial institution from whom any Lender borrows funds or obtains credit (a "Funding Bank"), (ii) a Funding Bank or any Lender complies with any future guideline or request from any central bank or other Governmental Authority or (iii) a Funding Bank or any Lender determines that the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof has or would have the effect described below, or a Funding Bank or any Lender complies with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, and in the case of any event set forth in this clause (iii), such adoption, change or compliance has or would have the direct or indirect effect of reducing the rate of return on any Lender's capital as a consequence of its obligations hereunder to a level below the rate that such Lender could have achieved but for such adoption, change or compliance (taking into consideration the Funding Bank's or Lender's policies with respect to capital adequacy) by an amount deemed by such Lender to be material, and the result of any of the foregoing events described in clauses (i), (ii) or (iii) is or results in an increase in the cost to any Lender of funding or maintaining the Loan, then Borrowers shall from time to time upon demand by Agent pay to Agent additional amounts sufficient to indemnify Lenders against such increased cost on an after-tax basis (after taking into account applicable deductions and credits in respect of the amount indemnified). A certificate showing the calculations for the 24 amount of such increased cost shall be submitted to Administrative Borrower by Agent and shall be conclusive, absent manifest error. SECTION 4. CONDITIONS PRECEDENT 4.1 Conditions Precedent to the Loan. Each of the following is a condition precedent to Agent and Lenders making the Loan hereunder: (a) Agent shall have received, in form and substance reasonably satisfactory to Agent, all releases, terminations and such other documents as Agent may request to evidence and effectuate the termination by Bank One of the Bank One Financing and the termination and release by it of any interest in and to any assets and properties of each Borrower, duly authorized, executed and delivered by it or each of them, including, but not limited to, (i) UCC termination statements for all UCC financing statements previously filed by it or any of them or their predecessors, as secured party and any Borrower, as debtor; and (ii) satisfactions and discharges of any mortgages, deeds of trust or deeds to secure debt by any Borrower in favor of it or any of them, in form acceptable for recording with the appropriate Governmental Authority; (b) Agent shall have received, in form and substance reasonably satisfactory to Agent, all releases, terminations and such other documents as Agent may request to evidence and effectuate the termination by CIT of the CIT Financing and the termination and release by it of any interest in and to any assets and properties of each Borrower, duly authorized, executed and delivered by it or each of them, including, but not limited to, (i) UCC termination statements for all UCC financing statements previously filed by it or any of them or their predecessors, as secured party and any Borrower, as debtor; and (ii) satisfactions and discharges of any mortgages, deeds of trust or deeds to secure debt by any Borrower in favor of it or any of them, in form acceptable for recording with the appropriate Governmental Authority; (c) Agent shall have received evidence, in form and substance satisfactory to Agent, that Borrowers have exchanged the Existing Senior Subordinated Notes (other than the Remaining Existing Subordinated Note Indebtedness) for the Senior Subordinated Notes; (d) Agent shall have received evidence, in form and substance satisfactory to Agent, that Borrower have exchanged the Existing Junior Subordinated Notes for the Junior Subordinated Notes; (e) Borrower shall have transferred all amounts in excess of $1,000 from LPC's investment account number 390-01616 maintained with Jefferies & Company, Inc. to Working Capital Agent in cash or other immediately available funds; (f) all requisite corporate action and proceedings in connection with this Agreement and the other Financing Agreements shall be in form and substance reasonably satisfactory to Agent, and Agent shall have received all information and copies of all documents, including records of requisite corporate action and proceedings which Agent may have reasonably requested in connection therewith, such documents where requested by Agent or its counsel to be certified by appropriate corporate officers or Governmental Authority (and including a copy of the certificate of incorporation of each Borrower certified by the Secretary of State (or equivalent Governmental Authority) which shall set forth the same complete corporate 25 name of such Borrower as is set forth herein and such document as shall set forth the organizational identification number of each Borrower, if one is issued in its jurisdiction of incorporation); (g) no material adverse change shall have occurred in the assets, business or prospects of Borrowers since the date of Agent's latest field examination (not including for this purpose the field review referred to in clause (g) below) and no change or event shall have occurred which would impair the ability of any Borrower or Obligor to perform its obligations hereunder or under any of the other Financing Agreements to which it is a party or the ability of Agent or any Lender to enforce the Obligations or realize upon the Collateral; (h) Agent shall have received, in form and substance reasonably satisfactory to Agent, all consents, waivers, acknowledgments and other agreements from third persons which Agent may deem necessary or desirable in order to permit, protect and perfect its security interests in and liens upon the Collateral or to effectuate the provisions or purposes of this Agreement and the other Financing Agreements other than Collateral Access Agreements by owners and lessors of leased premises of each Borrower and by processors and warehouses at which Collateral is located; (i) Agent shall have received the Intercreditor Agreement, in form and substance reasonably satisfactory to Agent, duly authorized, executed and delivered by Working Capital Lender and Borrowers; (j) after giving effect to (i) the Loan made or to be made in connection with the transactions hereunder and (ii) the initial Loans (as defined in the Working Capital Loan Agreement) made or to be made and Letter of Credit Accommodations (as defined in the Working Capital Loan Agreement) issued or to be issued in connection with the initial transactions under the Working Capital Loan Agreement but without giving effect to the Special Reserve, the Appraisal Reserve and the Rubber Group Reserve, the Excess Availability as determined by Working Capital Agent, as of the date hereof, shall be not less than $5,500,000; (k) Agent shall have received, in form and substance reasonably satisfactory to Agent, Deposit Account Control Agreements by and among Working Capital Agent, Agent, each Borrower, as the case may be and each bank at which such Borrower has a deposit account (other than the Excluded Deposit Accounts, as defined in Section 5.2(d) hereof), in each case, duly authorized, executed and delivered by such bank and Borrower, as the case may be; (l) Agent shall have received evidence, in form and substance satisfactory to Agent, that Agent has a valid perfected first priority security interest in all of the Collateral, subject only to (i) the prior liens of the Working Capital Agent thereon (except in the case of the Real Property), (ii) security interests in Equipment to the extent permitted by Section 9.8(l) hereof, (iii) the security interests, liens and encumbrances on Real Property to the extent permitted by Section 9.8(m) hereof, and (iv) any security interests on Insurance Premium Collateral to the extent permitted by Section 9.8(k) hereof which may have priority; (m) Agent shall have received and reviewed lien and judgment search results for the jurisdiction of incorporation of each Borrower, the jurisdiction of the chief executive 26 office of each Borrower and all jurisdictions in which assets of Borrowers are located, which search results shall be in form and substance satisfactory to Agent; (n) Agent shall have received copies of the shares of the stock certificates representing all of the issued and outstanding shares of the Capital Stock of LRG, together with stock powers duly executed in blank with respect thereto, and shall have received evidence satisfactory to Agent that the originals of such stock certificates and stock powers have been delivered to the Working Capital Agent; (o) Agent shall have received evidence of insurance and loss payee endorsements required hereunder and under the other Financing Agreements, in form and substance reasonably satisfactory to Agent, and certificates of insurance policies and/or endorsements naming Agent as additional insured or loss payee as its interests may appear, as applicable; (p) Agent shall have received, in form and substance reasonably satisfactory to Agent, such opinion letters of counsel to Borrowers with respect to the Financing Agreements and such other matters as Agent may reasonably request; (q) Agent shall have received a true, correct and complete copy of the Nomura Payoff Agreement, duly authorized, executed and delivered by the parties thereto; (r) all representations and warranties contained herein and in the other Financing Agreements shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the date of the making of the Loan and after giving effect thereto, except to the extent that such representations and warranties expressly relate solely to an earlier date (in which case such representations and warranties shall have been true and accurate in all material respects on and as of such earlier date); (s) no law, regulation, order, judgment or decree of any Governmental Authority shall exist, and no action, suit, investigation, litigation or proceeding shall be pending or threatened in any court or before any arbitrator or Governmental Authority, which (i) purports to enjoin, prohibit, restrain or otherwise affect (A) the making of the Loan, or (B) the consummation of the transactions contemplated pursuant to the terms hereof or the other Financing Agreements or (ii) has or has a reasonable likelihood of having a Material Adverse Effect; (t) no Default or Event of Default shall exist or shall have occurred and be continuing on and as of the date of the making of the Loan and after giving effect thereto; and (u) the other Financing Agreements and all instruments and documents hereunder and thereunder shall have been duly executed and delivered to Agent, in form and substance satisfactory to Agent. 27 SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST 5.1 Grant of Security Interest. (a) To secure payment and performance of all Obligations, each Borrower hereby grants to Agent, for itself and the benefit of Lenders, a continuing security interest in, a lien upon, and a right of set off against, and hereby assigns to Agent, for itself and the benefit of Lenders, as security, all personal and real property and fixtures, and interests in property and fixtures, of each Borrower, whether now owned or hereafter acquired or existing, and wherever located (together with all other collateral security for the Obligations at any time granted to or held or acquired by Agent or any Lender, collectively, the "Collateral"), including: (i) all Accounts; (ii) all general intangibles, including, without limitation, all Intellectual Property; (iii) all goods, including, without limitation, Inventory and Equipment; (iv) Real Property and fixtures; (v) all chattel paper, including, without limitation, all tangible and electronic chattel paper; (vi) all instruments, including, without limitation, all promissory notes; (vii) all documents; (viii) all deposit accounts; (ix) all letters of credit, banker's acceptances and similar instruments, including all letter-of-credit rights; (x) all supporting obligations and all present and future liens, security interests, rights, remedies, title and interest in, to and in respect of Receivables and other Collateral, including (A) rights and remedies under or relating to guaranties, contracts of suretyship, letters of credit and credit and other insurance related to the Collateral, (B) rights of stoppage in transit, replevin, repossession, reclamation and other rights and remedies of an unpaid vendor, lienor or secured party, (C) goods described in invoices, documents, contracts or instruments with respect to, or otherwise representing or evidencing, Receivables or other Collateral, including returned, repossessed and reclaimed goods, and (D) deposits by and property of account debtors or other persons securing the obligations of account debtors; (xi) all (A) investment property (including securities, whether certificated or uncertificated, securities accounts, security entitlements, commodity contracts or commodity accounts) and (B) monies, credit balances, deposits and other property of any Borrower now or hereafter held or received by or in transit to Agent, any Lender or its Affiliates or at any other depository or other institution from or for the account of any Borrower, whether for safekeeping, pledge, custody, transmission, collection or otherwise; 28 (xii) all commercial tort claims, including, without limitation, those identified in the Information Certificate; (xiii) to the extent not otherwise described above, all Receivables; (xiv) all Records; and (xv) all products and proceeds of the foregoing, in any form, including insurance proceeds and all claims against third parties for loss or damage to, or destruction of or other involuntary conversion of any kind or nature of, any or all of the other Collateral. (b) Excluded Collateral. Notwithstanding anything to the contrary set forth in Section 5.1(a) above, the types or items of Collateral described in such Section shall not include any Equipment (or proceeds thereof) which is or becomes subject to a mortgage or other lien or security interest (including capitalized or finance leases) permitted under Sections 9.8(e) or (l) hereof if the valid grant of a security interest or lien therein to Agent in such Equipment is prohibited by the terms of the agreement between such Borrower and the holder of such mortgage or other lien or security interest or under applicable law and such prohibition has not been or is not waived, or the consent of the holder of the mortgage or other lien or security interest has not been or is not otherwise obtained (it being understood that Borrowers shall have no obligation to Agent whatsoever to obtain such consent), or under applicable law such prohibition cannot be waived. 29 5.2 Perfection of Security Interests. (a) Each Borrower irrevocably and unconditionally authorizes Agent (or its agent) to file at any time and from time to time such financing statements with respect to the Collateral naming Agent or its designee as the secured party and such Borrower as debtor, as Agent may require, and including any other information with respect to such Borrower or otherwise required by part 5 of Article 9 of the Uniform Commercial Code of such jurisdiction as Agent may determine, together with any amendments and continuations with respect thereto, which authorization shall apply to all financing statements filed on, prior to or after the date hereof. Each Borrower hereby ratifies and approves all financing statements naming Agent or its designee as secured party and such Borrower, as the case may be, as debtor with respect to the Collateral (and any amendments with respect to such financing statements) filed by or on behalf of Agent prior to the date hereof in respect of the security interest granted pursuant to this Agreement and ratifies and confirms the authorization of Agent to file such financing statements (and amendments thereto, if any). Each Borrower hereby authorizes Agent to adopt on behalf of such Borrower any symbol required for authenticating any electronic filing. In the event that the description of the collateral in any financing statement naming Agent or its designee as the secured party and any Borrower as debtor includes assets and properties of such Borrower that do not at any time constitute Collateral, whether hereunder, under any of the other Financing Agreements or otherwise, the filing of such financing statement shall nonetheless be deemed authorized by such Borrower to the extent of the Collateral included in such description and it shall not render the financing statement ineffective as to any of the Collateral or otherwise affect the financing statement as it applies to any of the Collateral. In no event shall any Borrower at any time file, or permit, authorize or cause to be filed, any correction statement or termination statement with respect to any financing statement (or amendment or continuation with respect thereto) naming Agent or its designee as secured party and such Borrower as debtor. (b) Each Borrower does not have any chattel paper (whether tangible or electronic) or instruments as of the date of this Agreement, except as set forth in the Information Certificate. In the event that any Borrower shall be entitled to or shall receive any chattel paper or instrument after the date hereof, Borrowers shall promptly notify Agent thereof in writing. Promptly upon the receipt thereof by or on behalf of any Borrower (including by any agent or representative), such Borrower shall deliver, or cause to be delivered to Agent (or if the Working Capital Loan Agreement has not been terminated, to Working Capital Agent, with copies to Agent), all tangible chattel paper and instruments that such Borrower has or may at any time acquire, accompanied by such instruments of transfer or assignment duly executed in blank as Agent may from time to time specify, in each case except as Agent may otherwise agree. Subject to the terms of the Intercreditor Agreement, at Agent's option, each Borrower shall, or Agent may at any time on behalf of any Borrower, cause the original of any such instrument or chattel paper to be conspicuously marked in a form and manner acceptable to Agent with the following legend referring to chattel paper or instruments as applicable: "This [chattel paper][instrument] is subject to the security interest of Ableco Finance LLC, as Agent, pursuant to the Loan and Security Agreement, dated December 18, 2003, as the same now exists or may be amended, modified, supplemented, extended, restated, renewed or replaced, and any sale, transfer, assignment or encumbrance of this [chattel paper][instrument] violates the rights of such secured party." 30 (c) In the event that any Borrower shall at any time hold or acquire an interest in any electronic chattel paper or any "transferable record" (as such term is defined in Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction), such Borrower shall promptly notify Agent thereof in writing. Subject to the terms of the Intercreditor Agreement, promptly upon Agent's request, such Borrower shall take, or cause to be taken, such actions as Agent may request to give Agent control of such electronic chattel paper under Section 9-105 of the UCC and control of such transferable record under Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or, as the case may be, Section 16 of the Uniform Electronic Transactions Act, as in effect in such jurisdiction. (d) None of the Borrowers has any deposit accounts as of the date hereof, except as set forth in the Information Certificate. Borrowers shall not, directly or indirectly, after the date hereof open, establish or maintain any deposit account unless each of the following conditions is satisfied: (i) Agent shall have received not less than five (5) Business Days prior written notice of the intention of any Borrower to open or establish such account which notice shall specify in reasonable detail and specificity acceptable to Agent the name of the account, the owner of the account, the name and address of the bank at which such account is to be opened or established, the individual at such bank with whom such Borrower is dealing and the purpose of the account, (ii) the bank where such account is opened or maintained shall be acceptable to Agent, and (iii) on or before the opening of such deposit account, such Borrower shall as Agent may specify and subject to the terms of the Intercreditor Agreement either (A) deliver to Agent (or if the Working Capital Loan Agreement has not been terminated, to Working Capital Agent, with a copy to Agent) a Deposit Account Control Agreement with respect to such deposit account duly authorized, executed and delivered by such Borrower and the bank at which such deposit account is opened and maintained or (B) arrange for Agent (or if the Working Capital Loan Agreement has not been terminated, Working Capital Agent) to become the customer of the bank with respect to the deposit account on terms and conditions acceptable to Agent. The terms of this subsection (d) shall not apply to deposit accounts specifically and exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of any Borrower's salaried employees (the "Excluded Deposit Accounts"). (e) No Borrower owns or holds, directly or indirectly, beneficially or as record owner or both, any investment property, as of the date hereof, or have any investment account, securities account, commodity account or other similar account with any bank or other financial institution or other securities intermediary or commodity intermediary as of the date hereof, in each case except as set forth in the Information Certificate. (i) In the event that any Borrower shall be entitled to or shall, at any time after the date hereof, hold or acquire any certificated securities, such Borrower shall promptly endorse, assign and deliver the same to Agent (or if the Working Capital Loan Agreement has not been terminated, to Working Capital Agent, with copies to Agent), accompanied by such instruments of transfer or assignment duly executed in blank as Agent may from time to time specify. If any securities, now or hereafter acquired by any Borrower are uncertificated and are issued to such Borrower or its nominee directly by the issuer thereof, such Borrower shall immediately notify Agent thereof and shall, as Agent may specify and subject to the terms of the Intercreditor Agreement, either (A) direct the issuer to agree to comply with 31 instructions from Agent as to such securities, without further consent of any Borrower or such nominee, or (B) arrange for Agent to become the registered owner of the securities. (ii) Borrowers shall not, directly or indirectly, after the date hereof open, establish or maintain any investment account, securities account, commodity account or any other similar account (other than a deposit account) with any securities intermediary or commodity intermediary unless each of the following conditions is satisfied: (A) Agent shall have received not less than five (5) Business Days prior written notice of the intention of such Borrower to open or establish such account which notice shall specify in reasonable detail and specificity acceptable to Agent the name of the account, the owner of the account, the name and address of the securities intermediary or commodity intermediary at which such account is to be opened or established, the individual at such intermediary with whom such Borrower is dealing and the purpose of the account, (B) the securities intermediary or commodity intermediary (as the case may be) where such account is opened or maintained shall be acceptable to Agent, and (C) on or before the opening of such investment account, securities account or other similar account with a securities intermediary or commodity intermediary, such Borrower shall as Agent may specify and subject to the terms of the Intercreditor Agreement either (1) execute and deliver, and cause to be executed and delivered to Agent (or if the Working Capital Loan Agreement has not been terminated, to Working Capital Agent, with a copy to Agent), an Investment Property Control Agreement with respect thereto duly authorized, executed and delivered by such Borrower and such securities intermediary or commodity intermediary or (2) arrange for Agent (or if the Working Capital Loan Agreement has not been terminated, Working Capital Agent) to become the entitlement holder with respect to such investment property on terms and conditions acceptable to Agent; provided, that LPC may maintain its investment account number 390-01616 maintained with Jefferies & Company, Inc. without delivery of an Investment Property Control Agreement so long as if at any time the balance therein exceeds $1,000, LPC shall promptly remit such excess to Working Capital Agent. (f) Borrowers are not the beneficiary or otherwise entitled to any right to payment under any letter of credit, banker's acceptance or similar instrument as of the date hereof, except as set forth in the Information Certificate. In the event that any Borrower shall be entitled to or shall receive any right to payment under any letter of credit, banker's acceptance or any similar instrument, whether as beneficiary thereof or otherwise, after the date hereof, such Borrower shall promptly notify Agent thereof in writing. Such Borrower shall immediately, as Agent may specify and subject to the terms of the Intercreditor Agreement, (i) either deliver, or use its reasonable best efforts to cause to be delivered to Agent (or if the Working Capital Loan Agreement has not been terminated, to Working Capital Agent, with a copy to Agent), with respect to any such letter of credit, banker's acceptance or similar instrument, the written agreement of the issuer and any other nominated Person obligated to make any payment in respect thereof (including any confirming or negotiating bank), in form and substance satisfactory to Agent, consenting to the assignment of the proceeds of the letter of credit to Agent, or Working Capital Agent, as the case may be, by such Borrower and agreeing to make all payments thereon directly to Agent, or Working Capital Agent, as the case may be, or as Agent, or Working Capital Agent, as the case may be, may otherwise direct or (ii) cause Agent (or if the Working Capital Loan Agreement has not been terminated, Working Capital Agent) to become, at Borrowers' expense, the transferee beneficiary of the letter of credit, banker's acceptance or similar instrument (as the case may be). 32 (g) Borrowers do not have any pending commercial tort claims as of the date hereof, except as set forth in the Information Certificate. In the event that any Borrower shall, at any time after the date hereof have any pending commercial tort claims, such Borrower shall promptly notify Agent thereof in writing, which notice shall (i) set forth in reasonable detail the basis for and nature of such commercial tort claim and (ii) include the express grant by such Borrower to Agent of a security interest in such commercial tort claim (and the proceeds thereof). In the event that such notice does not include such grant of a security interest, the sending thereof by such Borrower to Agent shall be deemed to constitute such grant to Agent. Upon the sending of such notice, any commercial tort claim described therein shall constitute part of the Collateral and shall be deemed included therein. Without limiting the authorization of Agent provided in Section 5.2(a) hereof or otherwise arising by the execution by such Borrower of this Agreement or any of the other Financing Agreements, Agent is hereby irrevocably authorized from time to time and at any time to file such financing statements naming Agent or its designee as secured party and such Borrower as debtor, or any amendments to any financing statements, covering any such commercial tort claim as Collateral. In addition, each Borrower shall promptly upon Agent's request, execute and deliver, or cause to be executed and delivered, to Agent such other agreements, documents and instruments as Agent may reasonably require in connection with such commercial tort claim. (h) Borrowers do not have any goods, documents of title or other Collateral in the custody, control or possession of a third party as of the date of this Agreement, except (i) as set forth in the Information Certificate, (ii) goods located in the United States in transit to a location of a Borrower permitted herein in the ordinary course of business of such Borrower and in the possession of the carrier transporting such goods, and (iii) the Pledged Securities (as defined in the Pledge and Security Agreement dated as of the date hereof, made by LPC in favor of the Agent) in the possession of the Working Capital Agent. In the event that any goods, documents of title or other Collateral are at any time after the date hereof in the custody, control or possession of any other person not referred to in the Information Certificate (other than such carriers), Borrowers shall promptly notify Agent thereof in writing. Promptly upon Agent's request, Borrowers shall use its reasonable best efforts to deliver to Agent a Collateral Access Agreement duly authorized, executed and delivered by such person and the Borrower that is the owner of such Collateral. (i) Borrowers shall take any other actions reasonably requested by Agent from time to time to cause the attachment, perfection and first priority of (subject only to (i) the prior liens of the Working Capital Agent thereon (except in the case of the Real Property), (ii) security interests in Equipment to the extent permitted by Sections 9.8(e) or (l) hereof, (iii) the security interests, liens and encumbrances on Real Property to the extent permitted by Section 9.8(m) hereof, and (iv) any security interests on Insurance Premium Collateral to the extent permitted by Section 9.8(k) hereof which may have priority), and the ability of Agent to enforce, the security interest of Agent in any and all of the Collateral, including, without limitation, (i) executing, delivering and, where appropriate, filing financing statements and amendments relating thereto under the UCC or other applicable law, to the extent, if any, that any Borrower's signature thereon is required therefor, (ii) causing Agent's name to be noted as secured party on any certificate of title for a titled good if such notation is a condition to attachment, perfection or priority of, or ability of Agent to enforce, the security interest of Agent in such Collateral, (iii) complying with any provision of any statute, regulation or treaty of the United States as to any 33 Collateral if compliance with such provision is a condition to attachment, perfection or priority of, or ability of Agent to enforce, the security interest of Agent in such Collateral, and (iv) taking all commercially reasonable actions to obtain the consents and approvals of any Governmental Authority or third party, including, without limitation, any consent of any licensor, lessor or other person obligated on Collateral, and taking all commercially reasonable actions required by any earlier versions of the UCC or by other law, as applicable in any relevant jurisdiction. SECTION 6. COLLECTION AND ADMINISTRATION 6.1 Borrowers' Loan Accounts. Agent shall maintain one or more loan account(s) on its books in which shall be recorded (a) the Loan and other Obligations and the Collateral, (b) all payments made by or on behalf of any Borrower and (c) all other appropriate debits and credits as provided in this Agreement, including interest, fees, charges, costs and expenses. All entries in the loan account(s) shall be made in accordance with Agent's customary practices as in effect from time to time. 6.2 Statements. Agent shall render to Administrative Borrower each month a statement setting forth the balance in the Borrowers' loan account(s) maintained by Agent for Borrowers pursuant to the provisions of this Agreement, including principal, interest, fees, costs and expenses. Each such statement shall be subject to subsequent adjustment by Agent but shall, absent manifest errors or omissions, be considered correct and deemed accepted by Borrowers and conclusively binding upon Borrowers and as an account stated, except to the extent that Agent receives a written notice from Administrative Borrower of any specific exceptions of Administrative Borrower thereto within thirty (30) days after the date such statement has been received by Administrative Borrower. Until such time as Agent shall have rendered to Administrative Borrower a written statement as provided above, the balance in any Borrower's loan account(s) shall be presumptive evidence of the amounts due and owing to Agent and Lenders by Borrowers. 6.3 Collection of Accounts. Borrowers shall comply with all terms and provisions of the Working Capital Loan Agreement (or any successor or replacement agreement acceptable to Agent) with respect to the cash management of Borrowers; provided that, if the Working Capital Loan Agreement shall have been terminated and Borrowers shall not have entered into a successor or replacement agreement acceptable to Agent, then Borrowers shall enter into control agreements, lockbox agreements and other similar agreements in form and substance reasonably satisfactory to Agent. 6.4 Payments. (a) All Obligations shall be payable to the Agent Payment Account or to such other place as Agent may designate in writing to Borrowers from time to time. Other than as expressly set forth in Section 2.4 hereof and subject to the terms of the Intercreditor Agreement, Agent shall apply payments received or collected from any Borrower or for the account of any Borrower (including the monetary proceeds of collections or of realization upon any Collateral) as follows: first, to pay any fees, indemnities or expense reimbursements then due to Agent and Lenders from any Borrower; second, to pay interest due in respect of the Loan (and including any Special Agent Advances); third, to pay or prepay principal in respect of Special Agent 34 Advances; fourth, to pay principal due in respect of the Loan; fifth, to pay or prepay any other Obligations whether or not then due, in such order and manner as Agent determines. (b) At Agent's option, all principal, interest, fees, costs, expenses and other charges provided for in this Agreement or the other Financing Agreements may be charged directly to the loan account(s) of any Borrower maintained by Agent. Borrowers shall make all payments to Agent and Lenders on the Obligations free and clear of, and without deduction or withholding for or on account of, any setoff, counterclaim, defense, duties, taxes, levies, imposts, fees, deductions, withholding, restrictions or conditions of any kind. If after receipt of any payment of, or proceeds of Collateral applied to the payment of, any of the Obligations, Agent or any Lender is required to surrender or return such payment or proceeds to any Person for any reason, then the Obligations intended to be satisfied by such payment or proceeds shall be reinstated and continue and this Agreement shall continue in full force and effect as if such payment or proceeds had not been received by Agent or such Lender. Borrowers shall be liable to pay to Agent, and do hereby indemnify and hold Agent and Lenders harmless for the amount of any payments or proceeds surrendered or returned. This Section 6.4(b) shall remain effective notwithstanding any contrary action which may be taken by Agent or any Lender in reliance upon such payment or proceeds. This Section 6.4 (b) shall survive the payment of the Obligations and the termination of this Agreement. 6.5 Authorization to Make the Loan. Agent and Lenders are authorized to make the Loan based upon telephonic or other instructions received from anyone purporting to be (and believed by Agent to be) an officer of Administrative Borrower or any Borrower or other authorized person. The Loan request hereunder shall specify the date on which the requested advance is to be made (which day shall be the date hereof) and the amount of the Loan. The Loan under this Agreement shall be conclusively presumed to have been made to, and at the request of and for the benefit of, any Borrower when deposited to the credit of any Borrower or otherwise disbursed or established in accordance with the instructions of any Borrower or in accordance with the terms and conditions of this Agreement. 6.6 Use of Proceeds. Borrowers shall use the proceeds of the Loan provided by Agent and Lenders to Borrowers hereunder only for: (a) payments to each of the persons listed in the disbursement direction letter furnished by Borrowers to Agent on or about the date hereof, (b) costs, expenses and fees in connection with the preparation, negotiation, execution and delivery of this Agreement and the other Financing Agreements, and (c) general operating, working capital and other proper corporate purposes of such Borrower not otherwise prohibited by the terms hereof. None of the proceeds will be used, directly or indirectly, for the purpose of purchasing or carrying any margin security or for the purposes of reducing or retiring any indebtedness which was originally incurred to purchase or carry any margin security or for any other purpose which might cause any of the Loan to be considered a "purpose credit" within the meaning of Regulation U of the Board of Governors of the Federal Reserve System, as amended. 6.7 Appointment of Administrative Borrower as Agent for Requesting the Loan and Receipt of Loan and Statements. (a) Each Borrower hereby irrevocably appoints and constitutes Administrative Borrower as its agent to request and receive the Loan pursuant to this Agreement and the other 35 Financing Agreements from Agent or any Lender in the name or on behalf of such Borrower. Agent and Lenders may disburse the Loan to such bank account of Administrative Borrower or a Borrower or otherwise make the Loan to a Borrower as Administrative Borrower may designate or direct, without notice to any other Borrower or Obligor. Notwithstanding anything to the contrary contained herein, Agent may require that the Loan to or for the account of any Borrower be disbursed directly to an operating account of such Borrower. (b) Administrative Borrower hereby accepts the appointment by Borrowers to act as the agent of Borrowers pursuant to this Section 6.7. Administrative Borrower shall ensure that the disbursement of the Loan to Borrowers requested by or paid to or for the account of Borrowers, shall be paid to or for the account of Borrowers. (c) Each Borrower hereby irrevocably appoints and constitutes Administrative Borrower as its agent to receive statements on account and all other notices from Agent and Lenders with respect to the Obligations or otherwise under or in connection with this Agreement and the other Financing Agreements. (d) Any notice, election, representation, warranty, agreement or undertaking by or on behalf of any other Borrower by Administrative Borrower shall be deemed for all purposes to have been made by such Borrower, as the case may be, and shall be binding upon and enforceable against such Borrower to the same extent as if made directly by such Borrower. (e) No purported termination of the appointment of Administrative Borrower as agent as aforesaid shall be effective, except after ten (10) days' prior written notice to Agent. 6.8 Pro Rata Treatment. Except to the extent otherwise provided in this Agreement: (a) the making of the Loan shall be made among the Lenders based on their respective Pro Rata Shares and (b) each payment on account of any Obligations to or for the account of one or more of Lenders in respect of any Obligations due on a particular day shall be allocated among the Lenders entitled to such payments based on their respective Pro Rata Shares and shall be distributed accordingly. 6.9 Sharing of Payments, Etc. (a) Each Borrower agrees that, in addition to (and without limitation of) any right of setoff, banker's lien or counterclaim Agent or any Lender may otherwise have, each Lender shall be entitled, at its option (but subject, as among Agent and Lenders, to the provisions of Section 12.3(b) hereof), to offset balances held by it for the account of such Borrower at any of its offices, in dollars or in any other currency, against any principal of or interest on the Loan owed to such Lender or any other amount payable to such Lender hereunder, that is not paid when due (regardless of whether such balances are then due to such Borrower), in which case it shall promptly notify Administrative Borrower and Agent thereof; provided, that, such Lender's failure to give such notice shall not affect the validity thereof. (b) If any Lender (including Agent) shall obtain from any Borrower payment of any principal of or interest on the Loan owing to it or payment of any other amount under this Agreement or any of the other Financing Agreements through the exercise of any right of setoff, banker's lien or counterclaim or similar right or otherwise (other than from Agent as provided 36 herein), and, as a result of such payment, such Lender shall have received more than its Pro Rata Share of the principal of the Loan or more than its share of such other amounts then due hereunder or thereunder by any Borrower to such Lender than the percentage thereof received by any other Lender, it shall promptly pay to Agent, for the benefit of Lenders, the amount of such excess and simultaneously purchase from such other Lenders a participation in the portion of the Loan or such other amounts, respectively, owing to such other Lenders (or such interest due thereon, as the case may be) in such amounts, and make such other adjustments from time to time as shall be equitable, to the end that all Lenders shall share the benefit of such excess payment (net of any expenses that may be incurred by such Lender in obtaining or preserving such excess payment) in accordance with their respective Pro Rata Shares or as otherwise agreed by Lenders. To such end all Lenders shall make appropriate adjustments among themselves (by the resale of participation sold or otherwise) if such payment is rescinded or must otherwise be restored. (c) Each Borrower agrees that any Lender purchasing a participation (or direct interest) as provided in this Section may exercise, in a manner consistent with this Section, all rights of setoff, banker's lien, counterclaim or similar rights with respect to such participation as fully as if such Lender were a direct holder of the Loan or other amounts (as the case may be) owing to such Lender in the amount of such participation. (d) Nothing contained herein shall require any Lender to exercise any right of setoff, banker's lien, counterclaim or similar right or shall affect the right of any Lender to exercise, and retain the benefits of exercising, any such right with respect to any other Indebtedness or obligation of any Borrower. If, under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a setoff to which this Section applies, such Lender shall, to the extent practicable, assign such rights to Agent for the benefit of Lenders and, in any event, exercise its rights in respect of such secured claim in a manner consistent with the rights of Lenders entitled under this Section to share in the benefits of any recovery on such secured claim. 6.10 Obligations Several; Independent Nature of Lenders' Rights. The obligation of each Lender hereunder is several, and no Lender shall be responsible for the obligation or commitment of any other Lender hereunder. Nothing contained in this Agreement or any of the other Financing Agreements and no action taken by the Lenders pursuant hereto or thereto shall be deemed to constitute the Lenders to be a partnership, an association, a joint venture or any other kind of entity. The amounts payable at any time hereunder to each Lender shall be a separate and independent debt, and subject to Section 12.3 hereof, each Lender shall be entitled to protect and enforce its rights arising out of this Agreement and it shall not be necessary for any other Lender to be joined as an additional party in any proceeding for such purpose. SECTION 7. COLLATERAL REPORTING AND COVENANTS 7.1 Collateral Reporting. (a) Borrowers shall provide Agent with the following documents in a form reasonably satisfactory to Agent; provided, that, in the case of items (i), (ii) and (iii) below, if 37 such documents are provided to Working Capital Agent as well, such documents shall be provided to Agent in the same form as provided to Working Capital Agent: (i) on a regular basis as required by Agent, schedules of sales made, credits issued and cash received; (ii) as soon as possible after the end of each month (but in any event within ten (10) Business Days after the end thereof), on a monthly basis or more frequently as Agent may request, (A) inventory reports, (B) inventory reports by location and category (and including the amounts of Inventory and the value thereof at any leased locations and at premises of warehouses, processors or other third parties), (C) agings of accounts receivable (together with a reconciliation to the previous month's aging and general ledger) and agings of accounts payable (and including information indicating the amounts owing to owners and lessors of leased premises, warehouses, processors and other third parties from time to time in possession of any Collateral); (iii) upon Agent's request, (A) copies of customer statements, purchase orders, sales invoices, credit memos, remittance advices and reports, and copies of deposit slips and bank statements, (B) copies of shipping and delivery documents, and (C) copies of purchase orders, invoices and delivery documents for Inventory and Equipment acquired by any Borrower; (iv) such other reports as to the Collateral as Agent shall request from time to time. (b) If any Borrower's records or reports of the Collateral are prepared or maintained by an accounting service, contractor, shipper or other agent, subject to the terms of the Intercreditor Agreement, such Borrower hereby irrevocably authorizes such service, contractor, shipper or agent to deliver such records, reports, and related documents to Agent and to follow Agent's instructions with respect to further services at any time that an Event of Default exists or has occurred and is continuing. 7.2 Accounts Covenants. (a) Borrowers shall notify Agent promptly of: (i) any material delay in any Borrower's performance of any of its material obligations to any account debtor or the assertion of any material claims, offsets, defenses or counterclaims by any account debtor, or any material disputes with account debtors, or any settlement, adjustment or compromise thereof and (ii) all material adverse information known to any Borrower relating to the financial condition of any account debtor. No credit, discount, allowance or extension or agreement for any of the foregoing shall be granted to any account debtor without Agent's consent, except in the ordinary course of a Borrower's business in accordance with practices and policies previously disclosed in writing to Agent and except as set forth in the schedules delivered to Agent pursuant to Section 7.1(a) above. Notwithstanding anything in this Agreement to the contrary, so long as no Event of Default exists or has occurred and is continuing, Borrowers shall settle, adjust or compromise any claim, offset, counterclaim or dispute with any account debtor. Notwithstanding anything in this Agreement to the contrary and subject to the terms of the Intercreditor Agreement, at any 38 time that an Event of Default exists or has occurred and is continuing, Agent shall, at its option, upon notice to Borrowers, have the exclusive right to settle, adjust or compromise any claim, offset, counterclaim or dispute with account debtors or grant any credits, discounts or allowances. (b) With respect to each Account: (i) the amounts shown on any invoice delivered to Agent or schedule thereof delivered to Agent shall be true and complete, (ii) no payments shall be made thereon except payments immediately delivered to Agent pursuant to the terms of this Agreement, (iii) except as provided in Section 7.2(a) above, no credit, discount, allowance or extension or agreement for any of the foregoing shall be granted to any account debtor except as reported to Agent in accordance with this Agreement and except for credits, discounts, allowances or extensions made or given in the ordinary course of each Borrower's business in accordance with practices and policies previously disclosed to Agent, there shall be no setoffs, deductions, contras, defenses, counterclaims or disputes existing or asserted with respect thereto except as reported to Agent in accordance with the terms of this Agreement, none of the transactions giving rise thereto will violate any applicable foreign, Federal, State or local laws or regulations, all documentation relating thereto will be legally sufficient under such laws and regulations and all such documentation will be legally enforceable in accordance with its terms. (c) Agent shall have the right at any time or times after the termination of the Working Capital Loan Agreement, in Agent's name or in the name of a nominee of Agent, to verify the validity, amount or any other matter relating to any Receivables or other Collateral, by mail, telephone, facsimile transmission or otherwise. 7.3 Inventory Covenants. With respect to the Inventory: (a) each Borrower shall at all times maintain inventory records reasonably satisfactory to Agent, keeping correct and accurate records itemizing and describing the kind, type, quality and quantity of Inventory, such Borrower's cost therefor and daily withdrawals therefrom and additions thereto; (b) Borrowers shall conduct a physical count of the Inventory at least once each year but at any time or times as Agent may request at any time an Event of Default exists or has occurred and is continuing, and promptly following such physical inventory shall supply Agent with a report in such form and with such specificity as may be satisfactory to Agent concerning such physical count; (c) Borrowers shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Agent, except for sales of Inventory in the ordinary course of its business and except to move Inventory directly from one location set forth or permitted herein to another such location and except for Inventory shipped from the manufacturer thereof to such Borrower which is in transit to the locations set forth or permitted herein; (d) Borrowers shall produce, use, store and maintain the Inventory with all reasonable care and caution and in accordance with applicable standards of their insurance and in material conformity with applicable laws (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (e) none of the Inventory or other Collateral constitutes farm products or the proceeds thereof; (f) each Borrower assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory; (g) Borrowers shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower to repurchase such Inventory, other than the right of customers to return any product that does not 39 meet the specifications provided to Borrowers by the customer in accordance with Borrowers' current practices as in effect on the date hereof; (h) Borrowers shall keep the Inventory in good and marketable condition; and (i) Borrowers and shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Administrative Borrower to Agent pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approval. 7.4 Equipment and Real Property Covenants. With respect to the Equipment and Real Property: (a) upon Agent's request, Borrowers shall, at their expense, no more than once in any twelve (12) month period, but at any time or times as Agent may request at any time an Event of Default exists or has occurred and is continuing, deliver or cause to be delivered to Agent written appraisals (or updates of appraisals) as to the Equipment and/or the Real Property in form, scope and methodology acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent and upon which Agent is expressly permitted to rely; (b) Borrowers shall keep the Equipment in good order, repair, running and marketable condition (ordinary wear and tear excepted); (c) Borrowers shall use the Equipment and Real Property with all reasonable care and caution and in accordance with applicable standards of any insurance and in material conformity with all applicable laws; (d) the Equipment is and shall be used in the business of Borrowers and not for personal, family, household or farming use; (e) Borrowers shall not remove any Equipment from the locations set forth or permitted herein, except to the extent necessary to have any Equipment repaired or maintained in the ordinary course of its business or to move Equipment directly from one location set forth or permitted herein to another such location and except for the movement of motor vehicles used by or for the benefit of such Borrower in the ordinary course of business; (f) the Equipment is now and shall remain personal property and Borrowers shall not permit any of the Equipment to be or become a part of or affixed to real property; and (g) each Borrower assumes all responsibility and liability arising from its use of the Equipment and Real Property. 7.5 Power of Attorney. Each Borrower hereby irrevocably designates and appoints Agent (and all persons designated by Agent) as such Borrower's true and lawful attorney-in-fact, and authorizes Agent, in such Borrower's or Agent's name, subject to the terms of the Intercreditor Agreement, to: (a) at any time an Event of Default exists or has occurred and is continuing (i) demand payment on Receivables or other Collateral, (ii) enforce payment of Receivables by legal proceedings or otherwise, (iii) exercise all of such Borrower's rights and remedies to collect any Receivable or other Collateral, (iv) sell or assign any Receivable upon such terms, for such amount and at such time or times as the Agent deems advisable, (v) settle, adjust, compromise, extend or renew an Account, (vi) discharge and release any Receivable, (vii) prepare, file and sign such Borrower's name on any proof of claim in bankruptcy or other similar document against an account debtor or other obligor in respect of any Receivables or other Collateral, (viii) notify the post office authorities to change the address for delivery of remittances from account debtors or other obligors in respect of Receivables or other proceeds of Collateral to an address designated by Agent, and open and dispose of all mail addressed to such Borrower and handle and store all mail relating to the Collateral; and (ix) do all acts and things which are necessary, in Agent's determination, to fulfill such Borrower's obligations under this Agreement and the other Financing Agreements and (b) at any time to (i) take control in any manner of any item of payment in respect of Receivables or constituting Collateral or otherwise received in or for deposit in the Blocked Accounts or otherwise received by Agent or any 40 Lender, (ii) have access to any lockbox or postal box into which remittances from account debtors or other obligors in respect of Receivables or other proceeds of Collateral are sent or received, (iii) endorse such Borrower's name upon any items of payment in respect of Receivables or constituting Collateral or otherwise received by Agent and any Lender and deposit the same in Agent's account for application to the Obligations, (iv) endorse such Borrower's name upon any chattel paper, document, instrument, invoice, or similar document or agreement relating to any Receivable or any goods pertaining thereto or any other Collateral, including any warehouse or other receipts, or bills of lading and other negotiable or non-negotiable documents, and (v) sign such Borrower's name on any request for verification of Receivables and notices thereof to account debtors or any secondary obligors or other obligors in respect thereof (and thereafter Agent shall give Administrative Borrower prompt written notice thereof). Each Borrower hereby releases Agent and Lenders and their respective officers, employees and designees from any liabilities arising from any act or acts under this power of attorney and in furtherance thereof, whether of omission or commission, except as a result of Agent's or any Lender's own gross negligence or wilful misconduct as determined pursuant to a final non-appealable order of a court of competent jurisdiction. 7.6 Right to Cure. Agent may, at its option, upon notice to Administrative Borrower, (a) cure any default by any Borrower under any material agreement with a third party that affects the Collateral, its value or the ability of Agent to collect, sell or otherwise dispose of the Collateral or the rights and remedies of Agent or any Lender therein or the ability of any Borrower to perform its obligations hereunder or under any of the other Financing Agreements, at any time on or after a Default of Event of Default exists or has occurred and is continuing, (b) pay or bond on appeal any judgment entered against any Borrower, at any time on or after a Default of Event of Default exists or has occurred and is continuing, (c) discharge taxes, liens, security interests or other encumbrances at any time levied on or existing with respect to the Collateral and pay any amount, incur any expense or perform any act which, in Agent's judgment, is necessary or appropriate to preserve, protect, insure or maintain the Collateral and the rights of Agent and Lenders with respect thereto, provided, that, Agent shall not exercise its right pursuant to this Section 7.6(c) to discharge such taxes, liens, security interest or other encumbrances that are permitted under Section 9.8 hereof, unless either (i) a Default or Event of Default shall exist or have occurred and be continuing, or (ii) with respect to liens, security interests or other encumbrances, the beneficiary or holder of such lien, security interest or other encumbrance has the right to take action against or with respect to the Collateral which right is not subject to an effective stay pursuant to applicable law. Agent may add any amounts so expended to the Obligations and charge any Borrower's account therefor, such amounts to be repayable by Borrowers on demand. Agent and Lenders shall be under no obligation to effect such cure, payment or bonding and shall not, by doing so, be deemed to have assumed any obligation or liability of any Borrower. Any payment made or other action taken by Agent or any Lender under this Section shall be without prejudice to any right to assert an Event of Default hereunder and to proceed accordingly. 7.7 Access to Premises. From time to time as requested by Agent, at the cost and expense of Borrowers, (a) Agent or its designee shall have complete access to all of each Borrower's premises during normal business hours and after reasonable notice to Administrative Borrower, or at any time and without notice to Administrative Borrower if an Event of Default exists or has occurred and is continuing, for the purposes of inspecting, verifying and auditing 41 the Collateral and all of each Borrower's books and records, including the Records, and (b) each Borrower shall promptly furnish to Agent such copies of such books and records or extracts therefrom as Agent may reasonably request, and Agent or any Lender or Agent's designee may use during normal business hours such of any Borrower's personnel, equipment, supplies and premises as may be reasonably necessary for the foregoing (provided, that, Borrowers shall make such personnel, equipment, supplies and premises available to Agent or its designee in such manner so that Agent or its designee shall not materially interfere with the operations of Borrowers) and if an Event of Default exists or has occurred and is continuing (subject to the terms of the Intercreditor Agreement) for the collection of Receivables and realization of other Collateral. SECTION 8. REPRESENTATIONS AND WARRANTIES Each Borrower hereby represents and warrants to Agent and Lenders the following (which shall survive the execution and delivery of this Agreement): 8.1 Corporate Existence, Power and Authority. Each Borrower is a corporation duly organized and in good standing under the laws of its state of incorporation and is duly qualified as a foreign corporation and in good standing in all states or other jurisdictions where the nature and extent of the business transacted by it or the ownership of assets makes such qualification necessary, except for those jurisdictions in which the failure to so qualify would not have a Material Adverse Effect. The execution, delivery and performance of this Agreement, the other Financing Agreements and the transactions contemplated hereunder and thereunder (a) are all within each Borrower's corporate powers, (b) have been duly authorized by all necessary corporate action, (c) are not in contravention of law or the terms of any Borrower's certificate of incorporation, by-laws, or other organizational documentation, or any material indenture, agreement or undertaking to which any Borrower is a party or by which any Borrower or its property are bound and (d) will not result in the creation or imposition of, or require or give rise to any obligation to grant any lien, security interest, charge or other encumbrance upon any property of any Borrower except in favor of Agent pursuant to this Agreement and the other Financing Agreements and as contemplated by this Agreement. This Agreement and the other Financing Agreements to which any Borrower is a party constitute legal, valid and binding obligations of such Borrower enforceable in accordance with their respective terms. 8.2 Name; State of Organization; Chief Executive Office; Collateral Locations. (a) The exact legal name of each Borrower is as set forth on the signature page of this Agreement and in the Information Certificate. No Borrower has, during the five years prior to the date of this Agreement, been known by or used any other corporate or fictitious name or been a party to any merger or consolidation, or acquired all or substantially all of the assets of any Person, or acquired any of its material property or assets out of the ordinary course of business, except as set forth in the Information Certificate. (b) Each Borrower is an organization of the type and organized in the jurisdiction set forth in the Information Certificate. The Information Certificate accurately sets forth the organizational identification number of each Borrower or accurately states that such 42 Borrower has none and accurately sets forth the federal employer identification number of each Borrower. (c) The chief executive office and mailing address of each Borrower and each Borrower's Records concerning Accounts are located only at the addresses identified as such in Schedule 8.2 to the Information Certificate and its only other places of business and the only other locations of Collateral, if any, are the addresses set forth in Schedule 8.2 to the Information Certificate, subject to the rights of any Borrower to establish new locations in accordance with Section 9.2 below. The Information Certificate correctly identifies any of such locations which are not owned by a Borrower and sets forth the owners and/or operators thereof. 8.3 Financial Statements; No Material Adverse Change. All financial statements relating to any Borrower which have been or may hereafter be delivered by any Borrower to Agent and Lenders have been prepared in accordance with GAAP (except as to any interim financial statements, to the extent such statements are subject to normal year-end adjustments and do not include certain footnote disclosures) and fairly present in all material respects the financial condition and the results of operation of such Borrower as at the dates and for the periods set forth therein. Except as disclosed in any interim financial statements furnished by Borrowers to Agent prior to the date of this Agreement, there has been no act, condition or event which has had or is reasonably likely to have a Material Adverse Effect since the date of the most recent audited financial statements of any Borrower furnished by any Borrower to Agent prior to the date of this Agreement. 8.4 Priority of Liens; Title to Properties. The security interests and liens granted to Agent under this Agreement and the other Financing Agreements constitute valid and perfected first priority liens and security interests in and upon the Collateral subject only to the liens indicated on Schedule 8.4 to the Information Certificate and the other liens permitted under Section 9.8 hereof. Each Borrower has good and insurable fee simple title to or valid leasehold interests in all of its Real Property and good, valid and merchantable title to all of its other properties and assets subject to no liens, mortgages, pledges, security interests, encumbrances or charges of any kind, except those granted to Agent and such others as are specifically listed on Schedule 8.4 to the Information Certificate or permitted under Section 9.8 hereof. 8.5 Tax Returns. Each Borrower has filed, or caused to be filed, in a timely manner all tax returns, reports and declarations which are required to be filed by it. All information in such tax returns, reports and declarations is complete and accurate in all material respects. Each Borrower has paid or caused to be paid all taxes due and payable or claimed due and payable in any assessment received by it, except taxes the validity of which are being contested in good faith by appropriate proceedings diligently pursued and available to such Borrower and with respect to which reserves have been set aside on its books in accordance with GAAP. Adequate provision has been made for the payment of all accrued and unpaid Federal, State, county, local, foreign and other taxes whether or not yet due and payable and whether or not disputed. 8.6 Litigation. Except as set forth on Schedule 8.6 to the Information Certificate, (a) there is no investigation by any Governmental Authority pending, or to the best of any Borrower's knowledge threatened, against or affecting any Borrower, its respective assets or business and (b) there is no action, suit, proceeding or claim by any Person pending, or to the 43 best of any Borrower's knowledge threatened, against any Borrower or its assets or goodwill, or against or affecting any transactions contemplated by this Agreement, in each case, which if adversely determined against such Borrower has or could reasonably be expected to have a Material Adverse Effect. 8.7 Compliance with Other Agreements and Applicable Laws. (a) None of the Borrowers are in default in any respect under, or in violation in any respect of the terms of, any material agreement, contract, instrument, lease or other commitment to which it is a party or by which it or any of its assets are bound (other than defaults or events of default under the Remaining Existing Senior Subordinated Notes) where such default or violation has or could reasonably be expected to have a Material Adverse Effect. Borrowers are in compliance with the requirements of all applicable laws, rules, regulations and orders of any Governmental Authority relating to their respective businesses, including, without limitation, those set forth in or promulgated pursuant to the Occupational Safety and Health Act of 1970, as amended, the Fair Labor Standards Act of 1938, as amended, ERISA, the Code, as amended, and the rules and regulations thereunder where the failure to so comply has or could reasonably be expected to have a Material Adverse Effect, and all Environmental Laws where the failure to so comply has or could reasonably be expected to have a Material Adverse Effect. (b) Each of the Borrowers have obtained all material permits, licenses, approvals, consents, certificates, orders or authorizations of any Governmental Authority required for the lawful conduct of its business (the "Permits") where the failure to obtain such Permits has or could reasonably be expected to have a Material Adverse Effect. All of the Permits are valid and subsisting and in full force and effect where the failure of any of the Permits to be valid and subsisting has or could reasonably be expected to have a Material Adverse Effect. There are no actions, claims or proceedings pending or to the best of any Borrower's knowledge, threatened that seek the revocation, cancellation, suspension or modification of any of the Permits where the revocation, cancellation, suspension or modification of any of the Permits has or could reasonably be expected to have a Material Adverse Effect. 8.8 Environmental Compliance. (a) Except as set forth on Schedule 8.8 to the Information Certificate, Borrowers and any of their Subsidiaries have not generated, used, stored, treated, transported, manufactured, handled, produced or disposed of any Hazardous Materials, on or off its premises (whether or not owned by it) in any manner which at any time violates in any material respect any applicable Environmental Law or Permit, and the operations of Borrowers and any Subsidiary of any Borrower complies in all material respects with all Environmental Laws and all Permits where the failure to so comply has or could reasonably be expected to have a Material Adverse Effect. (b) Except as set forth on Schedule 8.8 to the Information Certificate, to the Borrowers' knowledge, there has been no investigation by any Governmental Authority or any proceeding, complaint, order, directive, claim, citation or notice by any Governmental Authority or any other person nor is any pending or to the best of any Borrower's knowledge threatened, 44 with respect to any non-compliance with or violation of the requirements of any Environmental Law by any Borrower or any of their respective Subsidiaries or the release, spill or discharge, threatened or actual, of any Hazardous Material or the generation, use, storage, treatment, transportation, manufacture, handling, production or disposal of any Hazardous Materials or any other environmental, health or safety matter, which has or could reasonably be expected to have a Material Adverse Effect. (c) Except as set forth on Schedule 8.8 to the Information Certificate, Borrowers and their Subsidiaries have no knowledge of any material liability (contingent or otherwise) in connection with a release, spill or discharge, threatened or actual, of any Hazardous Materials or the generation, use, storage, treatment, transportation, manufacture, handling, production or disposal of any Hazardous Materials. (d) Borrowers and their Subsidiaries have all Permits required to be obtained or filed in connection with the operations of Borrowers under any Environmental Law and all of such licenses, certificates, approvals or similar authorizations and other Permits are valid and in full force and effect where the failure to have obtained or filed such has or could reasonably be expected to have a Material Adverse Effect. 8.9 Employee Benefits. (a) Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other Federal or State law. Each Plan which is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the Internal Revenue Service and to the best of any Borrower's knowledge, nothing has occurred which would cause the loss of such qualification. Each Borrower and its ERISA Affiliates have made all required contributions to any Plan subject to Section 412 of the Code, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any Plan. (b) There are no pending, or to the best of any Borrower's knowledge, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan that if adversely determined would have or could reasonably be expected to have a Material Adverse Effect. There has been no prohibited transaction or violation of the fiduciary responsibility rules in any material respect with respect to any Plan. (c) (i) No ERISA Event has occurred or is reasonably expected to occur; (ii) the current value of each Plan's assets (determined in accordance with the assumptions used for funding such Plan pursuant to Section 412 of the Code) are not less than such Plan's liabilities under Section 4001(a)(16) of ERISA; (iii) each Borrower, and their ERISA Affiliates, have not incurred and do not reasonably expect to incur, any liability under Title IV of ERISA with respect to any Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv) each Borrower, and their ERISA Affiliates, have not incurred and do not reasonably expect to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v) each Borrower, and their ERISA Affiliates, have not engaged in a transaction that would be subject to Section 4069 or 4212(c) of ERISA. 45 8.10 Bank Accounts. All of the deposit accounts, investment accounts or other accounts in the name of or used by any Borrower maintained at any bank or other financial institution are set forth on Schedule 8.10 to the Information Certificate, subject to the right of each Borrower to establish new accounts in accordance with Section 5.2 hereof. 8.11 Intellectual Property. Each Borrower owns or licenses or otherwise has the right to use all material Intellectual Property necessary for the operation of its business as presently conducted or proposed to be conducted. As of the date hereof, Borrowers do not have any Intellectual Property registered, or subject to pending applications, in the United States Patent and Trademark Office or any similar office or agency in the United States, any State thereof, any political subdivision thereof or in any other country, other than those described in Schedule 8.11 to the Information Certificate and has not granted any licenses with respect thereto other than as set forth in Schedule 8.11 to the Information Certificate. No event has occurred which permits or would permit after notice or passage of time or both, the revocation, suspension or termination of such rights. To the best of any Borrower's knowledge, no slogan or other advertising device, product, process, method, substance or other Intellectual Property or goods bearing or using any Intellectual Property presently contemplated to be sold by or employed by any Borrower infringes any patent, trademark, servicemark, tradename, copyright, license or other Intellectual Property owned by any other Person presently and no claim or litigation is pending or, to the knowledge of any Borrower, threatened against or affecting any Borrower contesting its right to sell or use any such Intellectual Property. Schedule 8.11 to the Information Certificate sets forth all of the material agreements or other arrangements of each Borrower pursuant to which such Borrower has a license or other right to use any trademarks, logos, designs, representations or other Intellectual Property that are material to the operation of its business as conducted on the date hereof owned by another person as in effect on the date hereof and the dates of the expiration of such agreements or other arrangements of such Borrower (other than such agreements which are generally commercially available for a fee) as in effect on the date hereof (collectively, together with such agreements or other arrangements as may be entered into by any Borrower after the date hereof, collectively, the "License Agreements" and individually, a "License Agreement"). 8.12 Subsidiaries; Affiliates; Capitalization; Solvency. (a) None of the Borrowers has any direct or indirect Subsidiaries or Affiliates or is engaged in any joint venture or partnership except as set forth in Schedule 8.12 to the Information Certificate. (b) Each Borrower is the record and beneficial owner of all of the issued and outstanding shares of Capital Stock of each of the Subsidiaries listed on Schedule 8.12 to the Information Certificate as being owned by such Borrower and there are no proxies, irrevocable or otherwise, with respect to such shares and no equity securities of any of the Subsidiaries are or may become required to be issued by reason of any options, warrants, rights to subscribe to, calls or commitments of any kind or nature and there are no contracts, commitments, understandings or arrangements by which any Subsidiary is or may become bound to issue additional shares of it Capital Stock or securities convertible into or exchangeable for such shares. 46 (c) The issued and outstanding shares of Capital Stock of LRG are directly and beneficially owned and held by the persons indicated in the Information Certificate, and all of such shares have been duly authorized and are fully paid and non-assessable, free and clear of all claims, liens, pledges and encumbrances of any kind, except as disclosed in writing to Agent prior to the date hereof. (d) Borrowers, taken as a whole, are Solvent and will continue to be Solvent after the creation of the Obligations and the obligations under the Working Capital Loan Agreement, the security interests of Agent and Working Capital Agent and the other transactions contemplated hereunder and under the Working Capital Loan Agreement. 8.13 Labor Disputes. (a) Set forth on Schedule 8.13 to the Information Certificate is a list (including dates of termination) of all collective bargaining or similar agreements between or applicable to each Borrower and any union, labor organization or other bargaining agent in respect of the employees of any Borrower on the date hereof. (b) There is (i) no significant unfair labor practice complaint pending against any Borrower or, to the best of any Borrower's knowledge, threatened against it, before the National Labor Relations Board, and no significant grievance or significant arbitration proceeding arising out of or under any collective bargaining agreement is pending on the date hereof against any Borrower or, to best of any Borrower's knowledge, threatened against it, and (ii) no significant strike, labor dispute, slowdown or stoppage is pending against any Borrower or, to the best of any Borrower's knowledge, threatened against any Borrower which has or could reasonably be expected to have a Material Adverse Effect. 8.14 Restrictions on Subsidiaries. Except for restrictions contained in this Agreement or any other agreement with respect to Indebtedness of any Borrower permitted hereunder as in effect on the date hereof, there are no contractual or consensual restrictions on any Borrower or any of its Subsidiaries which prohibit or otherwise restrict (a) the transfer of cash or other assets (i) between any Borrower and any of its Subsidiaries or (ii) between any Subsidiaries of any Borrower or (b) the ability of any Borrower or any of its Subsidiaries to incur the Obligations or grant security interests to Agent or any Lender in the Collateral. 8.15 Material Contracts. Schedule 8.15 to the Information Certificate sets forth all Material Contracts to which any Borrower is a party or is bound as of the date hereof. Borrowers have delivered true, correct and complete copies of such Material Contracts to Agent on or before the date hereof. Borrowers are not in breach or in default in any material respect of or under any Material Contract and have not received any notice of the intention of any other party thereto to terminate any Material Contract. 8.16 Payable Practices. Each Borrower have not made any material change in the historical accounts payable practices from those in effect immediately prior to the date hereof. 8.17 Accuracy and Completeness of Information. All information furnished by or on behalf of any Borrower in writing to Agent or any Lender in connection with this Agreement or any of the other Financing Agreements or any transaction contemplated hereby or thereby, 47 including all information on the Information Certificate is true and correct in all material respects on the date as of which such information is dated or certified and does not omit any material fact necessary in order to make such information not misleading as of the date which such information is dated or certified. No event or circumstance has occurred since the date of the most recent audited financial statements delivered by Borrowers to Agent which has had or could reasonably be expected to have a Material Adverse Affect, which has not been fully and accurately disclosed to Agent in writing prior to the date hereof. 8.18 Survival of Warranties; Cumulative. All representations and warranties contained in this Agreement or any of the other Financing Agreements shall survive the execution and delivery of this Agreement and shall be conclusively presumed to have been relied on by Agent and Lenders regardless of any investigation made or information possessed by Agent or any Lender. The representations and warranties set forth herein shall be cumulative and in addition to any other representations or warranties which any Borrower shall now or hereafter give, or cause to be given, to Agent or any Lender. SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS 9.1 Maintenance of Existence. (a) Each Borrower shall at all times preserve, renew and keep in full force and effect its corporate existence and rights and franchises with respect thereto and maintain in full force and effect all licenses, trademarks, tradenames, approvals, authorizations, leases, contracts and Permits necessary to carry on the business as presently conducted. (b) No Borrower shall change its name unless each of the following conditions is satisfied: (i) Agent shall have received not less than thirty (30) days prior written notice from any Borrower of such proposed change in its corporate name, which notice shall accurately set forth the new name; and (ii) Agent shall have received a copy of the amendment to the Certificate of Incorporation of such Borrower providing for the name change certified by the Secretary of State of the jurisdiction of incorporation or organization of such Borrower promptly after it becomes available. (c) No Borrower shall change its chief executive office or its mailing address or organizational identification number (or if it does not have one, shall not acquire one) unless Agent shall have received not less than thirty (30) days' prior written notice from Administrative Borrower of such proposed change, which notice shall set forth such information with respect thereto as Agent may require and Agent shall have received such agreements as Agent may reasonably require in connection therewith. No Borrower shall change its type of organization, jurisdiction of organization or other legal structure except as otherwise permitted pursuant to Section 9.7(a) of this Agreement. 9.2 New Collateral Locations. Each Borrower may open any new location within the continental United States provided such Borrower (a) gives Agent thirty (30) days prior written notice of the intended opening of any such new location and (b) executes and delivers, or causes to be executed and delivered, to Agent such agreements, documents, and instruments as Agent 48 may deem reasonably necessary or desirable to protect its interests in the Collateral at such location. 9.3 Compliance with Laws, Regulations, Etc. (a) Each Borrower shall, and shall cause any Subsidiary to, at all times, comply in all material respects with all laws, rules, regulations, licenses, approvals, orders and other Permits applicable to it and duly observe all requirements of any foreign, Federal, State or local Governmental Authority, including ERISA, the Code, the Occupational Safety and Health Act of 1970, as amended, the Fair Labor Standards Act of 1938, as amended, and all statutes, rules, regulations, orders, permits and stipulations relating to environmental pollution and employee health and safety, including all of the Environmental Laws, where the failure to so comply has or could reasonably be expected to have a Material Adverse Effect. (b) Borrowers shall give written notice to Agent promptly upon any Borrower's receipt of any notice of, or any Borrower's otherwise obtaining knowledge of, (i) the occurrence of any event involving the release, spill or discharge, threatened or actual, of any Hazardous Material or (ii) any investigation, proceeding, complaint, order, directive, claims, citation or notice with respect to: (A) any non-compliance with or violation of any Environmental Law by any Borrower or (B) the release, spill or discharge, threatened or actual, of any Hazardous Material other than in the ordinary course of business and other than as permitted under any applicable Environmental Law which, in the case of any of the foregoing, is reasonably likely to result in a material liability. Copies of all environmental surveys, audits, assessments, feasibility studies and results of remedial investigations made after the date hereof shall be promptly furnished, or caused to be furnished, by such Borrower or Agent. Each Borrower shall take prompt action to respond to any material non-compliance with any of the Environmental Laws and shall report to Agent on such response. (c) Without limiting the generality of the foregoing, whenever Agent reasonably determines that there is non-compliance, or any condition which requires any action by or on behalf of any Borrower in order to avoid any non-compliance, with any Environmental Law, Borrowers shall, at Agent's request and Borrowers' expense: (i) cause an independent environmental engineer reasonably acceptable to Agent to conduct such tests of the site where non-compliance or alleged non-compliance with such Environmental Laws has occurred as to such non-compliance and prepare and deliver to Agent a report as to such non-compliance setting forth the results of such tests, a proposed plan for responding to any environmental problems described therein, and an estimate of the costs thereof and (ii) provide to Agent a supplemental report of such engineer whenever the scope of such non-compliance, or such Borrower's response thereto or the estimated costs thereof, shall change in any material respect. (d) Each Borrower shall indemnify and hold harmless Agent and Lenders and their respective directors, officers, employees, agents, invitees, representatives, successors and assigns, from and against any and all losses, claims, damages, liabilities, costs, and expenses (including reasonable attorneys' fees and expenses) directly or indirectly arising out of or attributable to the use, generation, manufacture, reproduction, storage, release, threatened release, spill, discharge, disposal or presence of a Hazardous Material related to any Borrower or any of its real or personal property, including the costs of any required or necessary repair, 49 cleanup or other remedial work with respect to any property of any Borrower and the preparation and implementation of any closure, remedial or other required plans. All representations, warranties, covenants and indemnifications in this Section 9.3 shall survive the payment of the Obligations and the termination of this Agreement. 9.4 Payment of Taxes and Claims. Each Borrower shall, and shall cause any Subsidiary to, duly pay and discharge all taxes, assessments, contributions and governmental charges upon or against it or its properties or assets, except for taxes the validity of which are being contested in good faith by appropriate proceedings diligently pursued and available to such Borrower or Subsidiary, as the case may be, and with respect to which adequate reserves have been set aside on its books. Each Borrower shall be liable for any tax or penalties imposed on Agent or any Lender as a result of the financing arrangements provided for herein and each Borrower agrees to indemnify and hold Agent harmless with respect to the foregoing, and to repay to Agent, for the benefit of Lenders, on demand the amount thereof, and until paid by such Borrower such amount shall be added and deemed part of the Loan, provided, that, nothing contained herein shall be construed to require any Borrower to pay any income or franchise taxes attributable to the income of Lenders from any amounts charged or paid hereunder to Lenders. The foregoing indemnity shall survive the payment of the Obligations and the termination of this Agreement. 9.5 Insurance. Each Borrower shall, and shall cause any Subsidiary to, at all times, maintain with financially sound and reputable insurers insurance with respect to the Collateral against loss or damage and all other insurance of the kinds and in the amounts customarily insured against or carried by corporations of established reputation engaged in the same or similar businesses and similarly situated. Said policies of insurance shall be reasonably satisfactory to Agent as to form, amount and insurer. Borrowers shall furnish certificates, policies or endorsements to Agent as Agent shall reasonably require as proof of such insurance, and, if any Borrower fails to do so within five (5) days after written request by Agent, Agent is authorized, but not required, to obtain such insurance at the expense of Borrowers. All policies shall provide for at least thirty (30) days prior written notice to Agent of any cancellation or reduction of coverage and that Agent may act as attorney for each Borrower in obtaining, and at any time an Event of Default exists or has occurred and is continuing, adjusting, settling, amending and canceling such insurance. Borrowers shall cause Agent to be named as a loss payee and an additional insured as its interests may appear (but without any liability for any premiums) under such insurance policies and Borrowers shall obtain non-contributory lender's loss payable endorsements to all insurance policies in form and substance reasonably satisfactory to Agent. Such lender's loss payable endorsements shall specify that the proceeds of such insurance shall be payable to Agent as its interests may appear and further specify that Agent and Lenders shall be paid regardless of any act or omission by any Borrower, except, that, the proceeds of such insurance with respect to Equipment that is subject to liens permitted under Sections 9.8(e) or 9.8(l) shall not be payable to Agent and Lenders. Without limiting any other rights of Agent or Lenders and subject to the terms of the Intercreditor Agreement, any and all insurance proceeds received at any time may be applied to the cost of repairs, refurbishment or replacement of Collateral and/or to the payment of the Obligations and the Working Capital Debt, so long as no Event of Default exists or has occurred and is continuing, in accordance with Section 2.4 hereof and, at any time an Event of Default has occurred and is continuing, in accordance with Section 6.4 hereof. 50 9.6 Financial Statements and Other Information. (a) Each Borrower shall, and shall cause any Subsidiary to, keep proper books and records in which true and complete entries shall be made of all dealings or transactions of or in relation to the Collateral and the business of such Borrower and its Subsidiaries in accordance with GAAP. Borrowers shall promptly furnish to Agent and Lenders all such financial and other information as Agent shall reasonably request relating to the Collateral and the assets, business and operations of Borrowers, and Borrower shall notify the auditors and accountants of Borrowers that Agent is authorized to obtain such information directly from them, provided, that, Agent shall give Borrowers notice concurrently with Agent's request for any such information. Without limiting the foregoing, Borrowers shall furnish or cause to be furnished to Agent, the following: (i) within thirty (30) days after the end of each fiscal month (or within forty-five (45) days after the end of a fiscal month that is also the end of a fiscal quarter, as applicable), monthly unaudited consolidated financial statements, and unaudited consolidating financial statements (including in each case balance sheets, statements of income and loss, statements of cash flow, and statements of shareholders' equity), all in reasonable detail, fairly presenting the financial position and the results of the operations of Borrowers and their Subsidiaries as of the end of and through such fiscal month, certified to be correct by the chief financial officer of each Borrower, subject to normal year-end adjustments and no footnotes and accompanied by a compliance certificate substantially in the form of Exhibit C hereto, along with a schedule in a form satisfactory to Agent of the calculations used in determining, (A) as of the end of such month, whether Borrowers are in compliance with the covenants set forth in Sections 9.17, 9.18, 9.19 and 9.20 of this Agreement for such month and (B) as of the end of each quarter, whether Borrowers are in compliance with the conditions set forth in Section 9.9(b) of this Agreement for such quarter and (ii) within one hundred twenty (120) days after the end of each fiscal year, audited consolidated financial statements and unaudited consolidating financial statements of Borrowers and their Subsidiaries (including in each case balance sheets, statements of income and loss, statements of cash flow, and statements of shareholders' equity), and the accompanying notes thereto, all in reasonable detail, fairly presenting in all material respects the financial position and the results of the operations of Borrowers and their Subsidiaries as of the end of and for such fiscal year, together with the unqualified opinion of independent certified public accountants with respect to the audited consolidated financial statements, which accountants shall be an independent accounting firm selected by Borrowers and reasonably acceptable to Agent, that such audited consolidated financial statements have been prepared in accordance with GAAP, and present fairly the results of operations and financial condition of Borrowers and their respective Subsidiaries as of the end of and for the fiscal year then ended. (b) Borrowers shall promptly notify Agent in writing of the details of (i) any loss, damage, investigation, action, suit, proceeding or claim relating to Collateral having a value of more than $250,000 or which if adversely determined would have or could reasonably be expected to have a Material Adverse Effect, (ii) any Material Contract being terminated or amended in any material respect or any new Material Contract entered into (in which event Borrowers shall provide Agent with a copy of such Material Contract), (iii) any order, judgment or decree in excess of $500,000 shall have been entered against any Borrower any of its properties or assets, (iv) any notification of a material violation of laws or regulations received by any Borrower, (v) any ERISA Event, and (vi) the occurrence of any Default or Event of Default. 51 (c) Borrowers shall promptly after the sending or filing thereof furnish or cause to be furnished to Agent copies of all reports which any Borrower sends to its stockholders generally and copies of all reports and registration statements which any Borrower files with the Securities and Exchange Commission, any national securities exchange or the National Association of Securities Dealers, Inc. (d) Borrowers shall furnish or cause to be furnished to Agent such budgets, forecasts, projections and other information respecting the Collateral and the business of Borrowers, as Agent may, from time to time, reasonably request. Agent is hereby authorized to deliver a copy of any financial statement or any other information relating to the business of Borrowers to any court or other Governmental Authority or to any Lender or Participant or prospective Lender or Participant or any Affiliate of any Lender or Participant subject to and in accordance with the confidentiality provisions contained in Section 13.5 of this Agreement. Each Borrower hereby irrevocably authorizes and directs all accountants or auditors to deliver to Agent, at Borrowers' expense, copies of the financial statements of any Borrower and any reports or management letters prepared by such accountants or auditors on behalf of any Borrower and to disclose to Agent and Lenders such information as they may have regarding the business of any Borrower. Any documents, schedules, invoices or other papers delivered to Agent or any Lender may be destroyed by Agent or such Lender one (1) year after the same are delivered to Agent or such Lender, except as otherwise designated by Administrative Borrower to Agent or such Lender in writing. 9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. Each Borrower shall not, and shall not permit any Subsidiary to, directly or indirectly, (a) merge into or with or consolidate with any other Person or permit any other Person to merge into or with or consolidate with it except that any wholly-owned Subsidiary of a Borrower may merge with and into or consolidate with any other wholly-owned Subsidiary of a Borrower and any Borrower may merge with and into or consolidate with any other Borrower, provided, that, each of the following conditions is satisfied as determined by Agent in good faith: (i) Agent shall have received not less than ten (10) Business Days' prior written notice of the intention of such Subsidiaries to so merge or consolidate, which notice shall set forth in reasonable detail satisfactory to Agent, the persons that are merging or consolidating, which person will be the surviving entity, the locations of the assets of the persons that are merging or consolidating, and the material agreements and documents relating to such merger or consolidation, (ii) Agent shall have received such other information with respect to such merger or consolidation as Agent may reasonably request, (iii) as of the effective date of the merger or consolidation and after giving effect thereto, no Default or Event of Default shall exist or have occurred, (iv) Agent shall have received, true, correct and complete copies of all agreements, documents and instruments relating to such merger or consolidation, including, but not limited to, the certificate or certificates of merger to be filed with each appropriate Secretary of State (with a copy as filed promptly after such filing), (v) the surviving corporation shall expressly confirm, ratify and assume the Obligations and the Financing Agreements to which it is a party in writing, in form and substance satisfactory to Agent, and Borrowers shall execute and deliver such other agreements, documents and instruments as Agent may reasonably request in connection therewith; 52 (b) sell, issue, assign, lease, license, transfer, abandon or otherwise dispose of any Capital Stock or any of its other assets to any other Person, except for (i) sales of Inventory in the ordinary course of business, (ii) the sale or other disposition of Equipment (including worn-out or obsolete Equipment or Equipment no longer used or useful in the business of any Borrower) so long as such sales or other dispositions do not involve Equipment having an aggregate fair market value in excess of $250,000 for all such Equipment disposed of in any fiscal year of Borrowers or as Agent may otherwise agree, and (iii) the issuance and sale by any Borrower of Capital Stock of such Borrower after the date hereof; provided, that, (A) the terms of such Capital Stock, and the terms and conditions of the purchase and sale thereof, shall not include any terms that include any limitation on the right of any Borrower to request or receive the Loan or the right of any Borrower to amend or modify any of the terms and conditions of this Agreement or any of the other Financing Agreements or otherwise in any way relate to or affect the arrangements of Borrowers with Agent and Lenders, (B) except as Agent may otherwise agree in writing, all of the Net Cash Proceeds of the sale and issuance of such Capital Stock (other than proceeds of Capital Stock to be used for the exchange of Remaining Existing Senior Subordinated Notes in accordance with Section 9.10(i) hereof) shall be paid to Agent or Working Capital Agent for application to the Obligations and the Working Capital Debt in accordance with Section 2.4(b) of this Agreement, (C) after giving effect to such issuance and sale, no Change of Control shall occur and (D) as of the date of such issuance and sale and after giving effect thereto, no Default or Event of Default shall exist or have occurred, (iv) the issuance of Capital Stock of any Borrower consisting of common stock pursuant to an employee stock option or grant or similar equity plan or 401(k) plans of such Borrower for the benefit of its employees, directors and consultants, provided, that, in no event shall such Borrower be required to issue, or shall such Borrower issue, Capital Stock pursuant to such stock plans or 401(k) plans which would result in a Change of Control or other Event of Default, (v) the issuance and sale by LPC of Capital Stock (including, without limitation, in connection with the exercise of warrants to purchase such Capital Stock) pursuant to and in accordance with the Warrant Agent Agreement and the Exchange Agreement as in effect on the date hereof; provided, that, (A) except as Agent may otherwise agree in writing, all of the Net Cash Proceeds of the sale and issuance of such Capital Stock shall be paid to Agent or Working Capital Agent for application to the Obligations and the Working Capital Debt, prior to the occurrence and continuance of an Event of Default, in accordance with Section 2.4(b) of this Agreement and, subject to the terms of the Intercreditor Agreement, at any time an Event of Default has occurred and is continuing, in accordance with Section 6.4 of this Agreement, and (B) after giving effect to any such issuance and sale, no Change of Control shall occur, (vi) the sale or other disposition of Collateral not otherwise permitted above so long as such sales or other dispositions do not involve Collateral having an aggregate fair market value in excess of $200,000 for all such Collateral disposed of in any fiscal year of 53 Borrowers, provided, that, (A) Agent shall have received not less than five (5) Business Days' prior written notice of such sale or disposition, (B) except as Agent may otherwise agree in writing, all of the net proceeds of such sale or disposition shall be paid to Agent or Working Capital Agent for application to the Obligations and the Working Capital Debt in accordance with Section 2.4(c) of this Agreement, and (C) as of the date of any such sale or disposition, and after giving effect thereto, no Default or Event of Default shall exist or shall have occurred and be continuing, (vii) the intercompany loans and dividend payments to the extent expressly permitted by Sections 9.10(g), 9.11 and 9.12, (viii) the sale or disposition of the Real Property located in Casa Grande, Pinal County, Arizona; provided, that, (A) the net cash proceeds of such sale shall be at least $2,250,000, (B) except as Agent may otherwise agree in writing, all of the net cash proceeds of such sale or disposition shall be paid to Agent for application to the Obligations in accordance with Section 2.4(c)(ii) of this Agreement, and (C) as of the date of such sale or disposition and after giving effect thereto, no Default or Event of Default shall exist or have occurred, (c) wind up, liquidate or dissolve; or (d) agree to do any of the foregoing except if conditioned on approval by Agent. 9.8 Encumbrances. Each Borrower shall not, and shall not permit any Subsidiary to, create, incur, assume or suffer to exist any security interest, mortgage, pledge, lien, charge or other encumbrance of any nature whatsoever on any of its assets or properties, including the Collateral, or file or permit the filing of, or permit to remain in effect, any financing statement or other similar notice of any security interest or lien with respect to any such assets or properties, except: (a) the security interests and liens of Agent for itself and the benefit of Lenders; (b) liens securing the payment of taxes, assessments or other governmental charges or levies either not yet overdue or the validity of which are being contested in good faith by appropriate proceedings diligently pursued and available to such Borrower or Subsidiary, as the case may be and with respect to which reserves have been set aside on its books as required by GAAP; (c) non-consensual statutory liens (other than liens securing the payment of taxes) arising in the ordinary course of such Borrower's or Subsidiary's business to the extent: (i) such liens secure Indebtedness which is not overdue or (ii) such liens secure Indebtedness relating to claims or liabilities which are fully insured and being defended at the sole cost and expense and at the sole risk of the insurer or being contested in good faith by appropriate proceedings diligently pursued and available to such Borrower or such Subsidiary, in each case prior to the commencement of foreclosure or other similar proceedings and with respect to which reserves have been set aside on its books as required by GAAP; 54 (d) zoning restrictions, easements, licenses, covenants and other restrictions affecting the use of Real Property which do not interfere in any material respect with the use of such Real Property or ordinary conduct of the business of such Borrower or such Subsidiary as presently conducted thereon or materially impair the value of the Real Property (or, in the case of leasehold interests, the value of Borrowers' interest in the Real Property) that is subject thereto; (e) purchase money or other types of security interests in Equipment and the proceeds thereof (including Capitalized Leases) acquired after the date hereof, to the extent the Indebtedness secured by such security interests is permitted under Section 9.9(b) hereof; (f) pledges and deposits of cash by any Borrower after the date hereof in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security benefits consistent with the current practices of such Borrower as of the date hereof; (g) pledges and deposits of cash by any Borrower after the date hereof to secure the performance of tenders, bids, leases, trade contracts (other than for the repayment of Indebtedness), statutory obligations and other similar obligations in each case in the ordinary course of business consistent with the current practices of such Borrower as of the date hereof; (h) liens arising from (i) operating leases and the precautionary UCC financing statement filings in respect thereof and (ii) equipment or other materials which are not owned by any Borrower located on the premises of such Borrower (but not in connection with, or as part of, the financing thereof) from time to time in the ordinary course of business and consistent with current practices of such Borrower and the precautionary UCC financing statement filings in respect thereof; (i) the security interests in and liens upon the Collateral (other than the Real Property) in favor of the Working Capital Agent to secure the Working Capital Debt, provided, that, such security interests and liens in favor of the Working Capital Agent are and shall at all times be subject to the terms of the Intercreditor Agreement; (j) judgments and other similar liens arising in connection with court proceedings that do not constitute an Event of Default, provided, that, (i) such liens are being contested in good faith and by appropriate proceedings diligently pursued, (ii) adequate reserves or other appropriate provision, if any, as are required by GAAP have been made therefor, (iii) a stay of enforcement of any such liens is in effect and (iv) Agent may establish a Reserve with respect thereto; (k) the security interests and liens of an Insurance Premium Finance Party on the Insurance Premium Collateral to secure the Indebtedness described in and to the extent permitted by Section 9.9(l) hereof; (l) the security interests and liens set forth on Schedule 8.4 to the Information Certificate; and (m) the security interests, liens and encumbrances on Real Property that are expressly permitted by the terms of the Mortgages. 55 9.9 Indebtedness. Each Borrower shall not, and shall not permit any Subsidiary to, incur, create, assume, become or be liable in any manner with respect to, or permit to exist, any Indebtedness, or guarantee, assume, endorse, or otherwise become responsible for (directly or indirectly), the Indebtedness, performance, obligations or dividends of any other Person, except: (a) the Obligations; (b) purchase money or other types of Indebtedness (including Capitalized Leases) arising after the date hereof to the extent secured by purchase money or other types of security interests in Equipment and the proceeds thereof (including Capitalized Leases) so long as (i) such security interests or liens do not apply to any property of such Borrower or Subsidiary other than the Equipment acquired after the date of this Agreement, (ii) the Indebtedness secured thereby does not exceed the cost of the Equipment so acquired, and (iii) the aggregate amount of Indebtedness incurred pursuant to this Section 9.9(b) after the date hereof in any fiscal year shall not exceed the lesser of (A) $2,500,000 and (B) forty percent (40%) of the aggregate Capital Expenditures made by Borrowers in the applicable fiscal year; provided, that, with respect to Indebtedness permitted to be incurred pursuant to this Section 9.9(b) other than purchase money Indebtedness: (i) Agent shall have received five (5) Business Days' prior written notice of the intention of Borrowers to incur such Indebtedness, (ii) Agent shall have received true, correct and complete copies of the agreements, documents and instruments evidencing or otherwise related to such Indebtedness, duly authorized, executed and delivered by the parties thereto, (iii) Agent shall have received true, correct and complete copies of any amendments to the documentation evidencing such Indebtedness which amend, modify, alter or change in any material respect the terms of such Indebtedness, (iv) Borrowers shall not, directly or indirectly, redeem, retire, defease, purchase or otherwise acquire such Indebtedness or set aside or otherwise deposit or invest any sums for such purpose, except with respect to the exercise of a purchase option on Equipment subject to such Indebtedness, (v) Borrowers shall furnish to Agent all notices of default or demands for payment in connection with such Indebtedness either received by any Borrower or on its behalf, promptly after the receipt thereof, and (vi) as of the date of incurring such Indebtedness and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing; (c) guarantees by any Borrower of the Obligations of the other Borrowers in favor of Agent for the benefit of Lenders; (d) the Indebtedness of any Borrower to any other Borrower arising after the date hereof pursuant to loans by any Borrower permitted under Section 9.10(g) hereof; 56 (e) Indebtedness of Borrowers to Working Capital Agent and the lenders party to the Working Capital Loan Agreement evidenced by or arising under the Working Capital Lender Agreements (as in effect on the date hereof or as amended in accordance with clause (v) below), provided, that: (i) the principal amount of such Indebtedness shall not exceed the sum of (A) the lesser of (1) $23,500,000 and (2) 100% of the Borrowing Base, plus (B) the Term Loans (as defined in the Working Capital Loan Agreement as in effect on the date hereof) in an amount equal to $13,500,000 as reduced from time to time by the principal payments and prepayments thereof, whether optional or mandatory; (ii) as of the date hereof, no event of default, or event which with notice or passage of time or both would constitute an event of default exists, or has occurred under the Working Capital Lender Agreements, (iii) Agent shall have received true, correct and complete copies of all of the Working Capital Lender Agreements, as duly authorized, executed and delivered by the parties thereto, (iv) Borrowers shall not, directly or indirectly, make, or be required to make, any payments in respect of such Indebtedness, except, that, Borrowers may make payments in respect of the WC Revolving Loans and Borrowers may make regularly scheduled payments and payments required by the terms of Section 2.4 hereof of principal, interest and fees and other amounts in respect of the Working Capital Debt in accordance with the terms of the Working Capital Lender Agreements as in effect on the date hereof; (v) Borrowers shall not, directly or indirectly, (A) amend, modify, alter or change in any material respect any of the material terms of such Indebtedness or any of the Working Capital Lender Agreements as in effect on the date hereof, except, that, Borrowers may, after prior written notice to Agent, amend, modify, alter or change the terms thereof so as to forgive or cancel any portion of such Indebtedness other than pursuant to payments thereof, or to reduce the interest rate or any fees in connection therewith, or to release any liens on or security interests in any assets or properties of Borrowers, or (B) redeem, retire, defease, purchase or otherwise acquire such Indebtedness, or set aside or otherwise deposit or invest any sums for such purpose, except as permitted by clause (iv) above, and (vi) Borrowers shall furnish to Agent all notices of default or demands for payment in connection with such Indebtedness either received by such Borrower or on its behalf promptly after the receipt thereof, and all such notices or demands sent by any Borrower or on its behalf concurrently with the sending thereof, as the case may be; (f) Indebtedness of LPC evidenced by the Senior Subordinated Notes as in effect on the date hereof or as permitted to be amended pursuant to the terms hereof, provided, that: (i) the aggregate principal amount of such Indebtedness shall not exceed $42,476,099, less the aggregate amount of all repayments or redemptions, whether 57 optional or mandatory, in respect thereof, plus interest thereon at the rate provided for in the Senior Subordinated Notes as in effect on the date hereof, (ii) the Obligations are and shall at all time constitute "Senior Debt" as such term is defined in the Senior Subordinated Note Indenture as in effect on the date hereof and Agent and Lenders are and shall be entitled to all of the rights and benefits thereof under the Senior Subordinated Note Indenture as in effect on the date hereof and there shall be no other "Senior Debt" except for Indebtedness permitted by Section 9.9 hereof or as Agent may otherwise agree, (iii) Borrowers shall not, directly or indirectly, make any payments in respect of such Indebtedness, except that they may make regularly scheduled payments of interest and fees, if any, in respect of such Indebtedness when due in accordance with the terms of the Senior Subordinated Notes and the Senior Subordinated Note Indenture as in effect on the date hereof, (iv) Borrowers shall not, directly or indirectly, amend, modify, alter or change in any material respect any terms of such Indebtedness or any of the Senior Subordinated Notes or the Senior Subordinated Note Indenture, except that Borrowers may, after prior written notice to Agent, amend, modify, alter or change the terms thereof so as to extend the maturity thereof or defer the timing of any payments in respect thereof, or to forgive or cancel any portion of such Indebtedness other than pursuant to payments thereof, or to reduce the interest rate or any fees in connection therewith, and (v) Borrowers shall not, directly or indirectly, redeem, retire, defease, purchase or otherwise acquire all or any part of such Indebtedness other than at maturity (as set forth in the Senior Subordinated Note Indenture as in effect on the date hereof or as extended after the date hereof), or set aside or otherwise deposit or invest any sums for such purpose, except, that, Borrowers may redeem or purchase all or any part of such Indebtedness after one (1) year from the date of this Agreement, provided, that, as of the date of any such redemption or purchase or any payment in respect thereof and after giving effect thereto: (i) Borrowers shall give to Agent written notice thereof on the day Borrowers so redeem or purchase all or any part of such Indebtedness, which notice shall specify the maximum amount that Borrowers will pay in respect thereof and the range of the principal amount of the Senior Subordinated Notes which Borrowers anticipate will be so redeemed or purchased, (ii) as of the date of any such redemption or purchase or payments in respect thereof and after giving effect thereto, the aggregate amount of the Excess Availability of Borrowers shall be not less than $5,750,000 and (iii) as of the date of any such redemption or purchase or payment in respect thereof and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing; (g) Indebtedness of LPC evidenced by the Junior Subordinated Notes as in effect on the date hereof or as permitted to be amended pursuant to the terms hereof, provided, that: (i) the aggregate principal amount of such Indebtedness shall not exceed $346,667, less the aggregate amount of all repayments or redemptions, whether optional 58 or mandatory, in respect thereof, plus interest thereon at the rate provided for in the Junior Subordinated Notes as in effect on the date hereof, (ii) the Obligations are and shall at all time constitute "Senior Debt" as such term is defined in the Junior Subordinated Notes as in effect on the date hereof and Agent and Lenders are and shall be entitled to all of the rights and benefits thereof under the Junior Subordinated Notes as in effect on the date hereof and there shall be no other "Senior Debt" except for Indebtedness permitted by Section 9.9 hereof or as Agent may otherwise agree, (iii) Borrowers shall not, directly or indirectly, make any payments in respect of such Indebtedness, except that they may make regularly scheduled payments of interest and fees, if any, in respect of such Indebtedness when due in accordance with the terms of the Junior Subordinated Notes as in effect on the date hereof, (iv) Borrowers shall not, directly or indirectly, amend, modify, alter or change in any material respect any terms of such Indebtedness or any of the Junior Subordinated Notes, except that Borrowers may, after prior written notice to Agent, amend, modify, alter or change the terms thereof so as to extend the maturity thereof or defer the timing of any payments in respect thereof, or to forgive or cancel any portion of such Indebtedness other than pursuant to payments thereof, or to reduce the interest rate or any fees in connection therewith, and (v) Borrowers shall not, directly or indirectly, redeem, retire, defease, purchase or otherwise acquire all or any part of such Indebtedness other than at maturity (as set forth in the Junior Subordinated Notes as in effect on the date hereof or as extended after the date hereof), or set aside or otherwise deposit or invest any sums for such purpose, except, that, Borrowers may redeem or purchase all or any part of such Indebtedness after one (1) year from the date of this Agreement, provided, that, as of the date of any such redemption or purchase or any payment in respect thereof and after giving effect thereto: (i) Borrowers shall give to Agent written notice thereof on the day Borrowers so redeem or purchase all or any part of such Indebtedness, which notice shall specify the maximum amount that Borrowers will pay in respect thereof and the range of the principal amount of the Junior Subordinated Notes which Borrowers anticipate will be so redeemed or purchased, (ii) as of the date of any such redemption or purchase or payments in respect thereof and after giving effect thereto, the aggregate amount of the Excess Availability of Borrowers shall be not less than $4,000,000 and (iii) as of the date of any such redemption or purchase or payment in respect thereof and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing; (h) unsecured Indebtedness of any Borrower arising after the date hereof to any third person (but not to any other Borrower), provided, that, each of the following conditions is satisfied as determined by Agent: (i) Agent shall have received not less than ten (10) days prior written notice of the intention of such Borrower to incur such Indebtedness, which notice shall set forth in reasonable detail satisfactory to Agent the amount of such Indebtedness, the person or persons to whom such Indebtedness will be owed, the interest rate, the schedule of repayments and maturity date with respect thereto and such other information as Agent may request with respect thereto, 59 (ii) the agreements, documents and instruments evidencing or otherwise related to such Indebtedness shall be in form and substance satisfactory to Agent and Agent shall have received true, correct and complete copies thereof, duly authorized, executed and delivered by the parties thereto, (iii) such Indebtedness shall be subject and subordinate in right of payment to the indefeasible payment and satisfaction in full of all of the Obligations, pursuant to terms and conditions satisfactory to Agent, (iv) except as Agent may otherwise agree in writing, all of the cash proceeds of the loans or other accommodations giving rise to such Indebtedness (other than proceeds of such loans to be used for the purchase or exchange of Remaining Existing Senior Subordinated Notes in accordance with Section 9.10(i) hereof) shall be paid to Agent or Working Capital Agent for application to the Obligations and the Working Capital Debt in accordance with Section 2.4(b) hereof, (v) as of the date of incurring such Indebtedness and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing, (vi) Borrowers shall not, directly or indirectly, (A) amend, modify, alter or change in any material respect the terms of such Indebtedness or any agreement, document or instrument related thereto, except, that, Borrowers may, after prior written notice to Agent, amend, modify, alter or change the terms thereof so as to extend the maturity thereof, or defer the timing of any payments in respect thereof, or to forgive or cancel any portion of such Indebtedness (other than pursuant to payments thereof), or to reduce the interest rate or any fees in connection therewith, or (B) redeem, retire, defease, purchase or otherwise acquire such Indebtedness or set aside or otherwise deposit or invest any sums for such purpose, and (vii) Borrowers shall furnish to Agent all default notices or demands for payment in connection with such Indebtedness either received by any Borrower or on its behalf promptly after the receipt thereof, or sent by any Borrower or on its behalf concurrently with the sending thereof, as the case may be; (i) the Indebtedness set forth on Schedule 9.9 to the Information Certificate; provided, that, (i) Borrowers may only make regularly scheduled payments of principal and interest in respect of such Indebtedness in accordance with the terms of the agreement or instrument evidencing or giving rise to such Indebtedness as in effect on the date hereof, (ii) Borrowers shall not, directly or indirectly, (A) amend, modify, alter or change in any material respect the terms of such Indebtedness or any agreement, document or instrument related thereto as in effect on the date hereof except, that, Borrowers may, after prior written notice to Agent, amend, modify, alter or change the terms thereof so as to extend the maturity thereof, or defer the timing of any payments in respect thereof, or to forgive or cancel any portion of such Indebtedness (other than pursuant to payments thereof), or to reduce the interest rate or any fees in connection therewith, or (B) redeem, retire, defease, purchase or otherwise acquire such Indebtedness, or set aside or otherwise deposit or invest any sums for such purpose, and (iii) Borrowers shall furnish to Agent all notices or demands in connection with such Indebtedness 60 either received by any Borrower or on its behalf, promptly after the receipt thereof, or sent by any Borrower or on its behalf, concurrently with the sending thereof, as the case may be; (j) the Remaining Existing Subordinated Note Indebtedness, which may be purchased for cash or exchanged for Senior Subordinated Notes or other unsecured Indebtedness and/or Capital Stock to the extent expressly permitted by Section 9.10(i) hereof; (k) Indebtedness of Borrowers or any other Subsidiary of Borrowers arising after the date hereof issued in exchange for, or the proceeds of which are used to refinance, replace or substitute for, Indebtedness permitted under Section 9.9(e) hereof (the "Refinancing Indebtedness"); provided, that, as to any such Refinancing Indebtedness, each of the following conditions is satisfied: (i) Agent shall have received not less than ten (10) Business Days' prior written notice of the intention to incur such Indebtedness, which notice shall set forth in detail reasonably satisfactory to Agent, the amount of such Indebtedness, the schedule of repayments and maturity date with respect thereto and such other information with respect thereto as Agent may reasonably request, (ii) promptly upon Agent's request, Agent shall have received true, correct and complete copies of all agreements, documents and instruments evidencing or otherwise related to such Indebtedness, as duly authorized, executed and delivered by the parties thereto, (iii) the Refinancing Indebtedness shall have a Weighted Average Life to Maturity and a final maturity equal to or greater than the Weighted Average Life to Maturity and the final maturity, respectively, of the Indebtedness being refinanced, replaced, or substituted for, (iv) the Refinancing Indebtedness shall rank in right of payment no more senior relative to, and be at least as subordinated (if subordinated) to, the Obligations as the Indebtedness being refinanced, replaced or substituted for, and the provider of such Refinancing Indebtedness shall enter into an intercreditor agreement with the Agent on terms and conditions substantially similar to the Intercreditor Agreement, (v) the Refinancing Indebtedness shall be secured by substantially the same assets that secure the Indebtedness so refinanced, replaced or substituted for, (vi) the Refinancing Indebtedness shall not include terms and conditions with respect to any Borrower or Obligor which are more burdensome or restrictive in any material respect than those included in the Indebtedness so refinanced, replaced or substituted for, (vii) such Indebtedness incurred by any Borrower or Obligor shall be at rates and with fees or other charges higher or greater than the Indebtedness so refinanced, replaced or substituted for, 61 (viii) the principal amount of such Refinancing Indebtedness shall not exceed the principal amount of the Indebtedness so refinanced, replaced or substituted for (plus the amount of reasonable refinancing fees and expenses incurred in connection therewith), (ix) as of the date of incurring such Refinancing Indebtedness and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing, (x) Borrowers and Obligors may only make regularly scheduled payments and mandatory prepayments of principal, interest and fees, if any, in respect of such Refinancing Indebtedness to the extent such payments would have been permitted hereunder in respect of the Indebtedness so refinanced, replaced or substituted for (and except as otherwise permitted below), (xi) Borrowers and Obligors shall not, directly or indirectly, (A) amend, modify, alter or change any terms of the agreements with respect to such Refinancing Indebtedness, except that Borrowers and Obligors may, after prior written notice to Agent, amend, modify, alter or change the terms thereof to the extent permitted with respect to the Indebtedness so refinanced, replaced or substituted for, or (B) redeem, retire, defease, purchase or otherwise acquire such Refinancing Indebtedness, or set aside or otherwise deposit or invest any sums for such purpose (other than with Refinancing Indebtedness to the extent permitted herein and to the extent permitted with respect to the Indebtedness so refinanced, replaced or substituted for), and (xii) Borrowers and Obligors shall furnish to Agent copies of all notices of default or demands for payment in connection with such Refinancing Indebtedness received by any Borrower or Obligor or on its behalf promptly after the receipt thereof or sent by any Borrower or Obligor or on its behalf concurrently with the sending thereof, as the case may be; (l) Indebtedness of Borrowers to an Insurance Premium Finance Party in connection with insurance policies maintained by Borrowers arising as a result of such Insurance Premium Finance Party entering into arrangements to allow Borrowers to pay all or a portion of the applicable insurance premiums on such insurance policies in installments rather than in one lump sum annual payment; provided, that, (i) the Insurance Premium Finance Party to which such Indebtedness is owed shall only have the right to cancel or terminate the insurance policy subject to its security interest, and shall only cancel or terminate any such policy after ten (10) days prior written notice to Agent and may only take such action with respect to such policy in the event that (A) a Borrower has failed to make a regularly scheduled installment payment in respect of the Indebtedness owed to such Insurance Premium Finance Party when due and described in this Section 9.9(l) and (B) any applicable cure period with respect thereto has expired, (ii) Upon Agent's request, Borrowers shall promptly deliver to Agent true, correct and complete copies of all agreements related to such Indebtedness, as duly authorized, executed and delivered by the parties thereto, 62 (iii) such Indebtedness shall be unsecured except to the extent permitted under Section 9.8(k) hereof, and (iv) Borrowers shall furnish to Agent all default notices or demands for payment in connection with such Indebtedness either received by Borrowers or on their behalf after the receipt thereof, or sent by Borrowers or on their behalf, concurrently with the sending thereof, as the case may be; and (m) the unsecured Nomura Debt to the extent outstanding as provided in or pursuant to the Nomura Payoff Agreement as in effect on the date hereof. 9.10 Loans, Investments, Etc. Each Borrower shall not, and shall not permit any Subsidiary to, directly or indirectly, make any loans or advance money or property to any person, or invest in (by capital contribution, dividend or otherwise) or purchase or repurchase the Capital Stock or Indebtedness or all or a substantial part of the assets or property of any person, or form or acquire any Subsidiaries, or agree to do any of the foregoing (unless conditioned upon Agent's consent), except: (a) the endorsement of instruments for collection or deposit in the ordinary course of business; (b) investments in cash or Cash Equivalents, provided, that, the terms and conditions of Section 5.2 hereof shall have been satisfied with respect to the deposit account, investment account or other account in which such cash or Cash Equivalents are held; (c) the existing equity investments of each Borrower as of the date hereof in its Subsidiaries, provided, that, no Borrower shall have any further obligations or liabilities to make any capital contributions or other additional investments or other payments to or in or for the benefit of any of such Subsidiaries, except, that, a Borrower may make capital contributions to another Borrower in the form of dividend payments to the extent expressly permitted by Sections 9.11 and 9.12 hereof; (d) loans and advances by any Borrower to employees of such Borrower after the date hereof not to exceed the principal amount of $250,000 in the aggregate at any time outstanding; (e) stock or obligations issued to any Borrower by any Person (or the representative of such Person) in respect of Indebtedness of such Person owing to such Borrower in connection with the insolvency, bankruptcy, receivership or reorganization of such Person or a composition or readjustment of the debts of such Person; provided, that, the original of any such stock or instrument evidencing such obligations shall be promptly delivered to Agent (or if the Working Capital Loan Agreement has not been terminated, to Working Capital Agent, with copies to Agent), upon Agent's request, together with such stock power, assignment or endorsement by such Borrower as Agent may request; (f) obligations of account debtors to any Borrower arising from Accounts which are past due evidenced by a promissory note made by such account debtor payable to such Borrower; provided, that, promptly upon the receipt of the original of any such promissory note 63 by such Borrower, such promissory note shall be endorsed to the order of Agent (or if the Working Capital Loan Agreement has not been terminated, to Working Capital Agent) by such Borrower and promptly delivered to Agent (or if the Working Capital Loan Agreement has not been terminated, to Working Capital Agent, with copies to Agent) as so endorsed; (g) loans by a Borrower to another Borrower after the date hereof, provided, that, (i) upon Agent's request, Borrowers shall provide to Agent a report in form and substance satisfactory to Agent of the outstanding amount of such loans as of the last day of the immediately preceding month and indicating any loans made and payments received during the immediately preceding month, (ii) if any such loan shall be evidenced by a promissory note or other instrument, the single original of such note or other instrument shall be promptly delivered to Agent (or if the Working Capital Loan Agreement has not been terminated, to Working Capital Agent, with copies to Agent) upon its request to hold as part of the Collateral, with such endorsement and/or assignment by the payee of such note or other instrument as Agent, or Working Capital Agent, as applicable, may require, (iii) as of the date of any such loan and after giving effect thereto, the Borrower making such loan shall be Solvent and (iv) as of the date of any such loan and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing; (h) the loans and advances set forth on Schedule 9.10 to the Information Certificate; provided, that, as to such loans and advances, Borrowers shall not, directly or indirectly, amend, modify, alter or change the terms of such loans and advances or any agreement, document or instrument related thereto and Borrowers shall furnish to Agent all default notices or demands for payment in connection with such loans and advances received by any Borrower or on its behalf, promptly after the receipt thereof, or sent by any Borrower or on its behalf, concurrently with the sending thereof, as the case may be; (i) the purchase of the Remaining Existing Subordinated Note Indebtedness or the exchange of such Indebtedness for Indebtedness on terms substantially similar to the Senior Subordinated Notes or for other unsecured Indebtedness, cash and/or Capital Stock in accordance with Sections 9.9(j) and 9.7(b)(iii) hereof, respectively; provided, that, as of the date of any such purchase, no Default or Event of Default shall exist or have occurred and be continuing; (j) the exchange of the Existing Junior Subordinated Notes for the Junior Subordinated Notes and, to the extent permitted by Section 9.7(b)(v) hereof, the exchange of defaulted interest for Capital Stock of LPC pursuant to the Exchange Agreement and the issuance of warrants pursuant to the Warrant Exchange Agreement in connection with the exchange of Existing Senior Subordinated Notes and Existing Junior Subordinated Notes; and (k) the payment of dividends by Borrowers to the extent permitted by Sections 9.11 and 9.12 hereof. 9.11 Dividends and Redemptions. Each Borrower shall not, directly or indirectly, declare or pay any dividends on account of any shares of class of any Capital Stock of such Borrower now or hereafter outstanding, or set aside or otherwise deposit or invest any sums for such purpose, or redeem, retire, defease, purchase or otherwise acquire any shares of any class of 64 Capital Stock (or set aside or otherwise deposit or invest any sums for such purpose) for any consideration or apply or set apart any sum, or make any other distribution (by reduction of capital or otherwise) in respect of any such shares or agree to do any of the foregoing, except that: (a) any Borrower may declare and pay such dividends or redeem, retire, defease, purchase or otherwise acquire any shares of any class of Capital Stock for consideration in the form of shares of common stock (so long as after giving effect thereto no Change of Control or other Default or Event of Default shall exist or occur); (b) Borrowers may pay dividends to the extent permitted in Section 9.12 below; (c) any Subsidiary of a Borrower (other than LRG except as permitted in clause (d) below) may pay dividends to a Borrower; (d) LRG may pay dividends to LPC; provided, that, (i) after giving effect to any such dividend payment, the Excess Availability of LRG shall be not less than $2,000,000 and (ii) as of the date of such dividend payment and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing; (e) Borrowers may repurchase Capital Stock consisting of common stock held by employees pursuant to any employee stock ownership plan thereof upon the termination, retirement or death of any such employee in accordance with the provisions of such plan, provided, that, as to any such repurchase, each of the following conditions is satisfied: (i) as of the date of the payment for such repurchase and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing, (ii) such repurchase shall be paid with funds legally available therefor, (iii) such repurchase shall not violate any law or regulation or the material terms of any indenture, agreement or undertaking to which such Borrower is a party or by which such Borrower or its property are bound, and the aggregate amount of all payments for such repurchases in any calendar year shall not exceed $200,000; and (f) LPC may declare and pay cash dividends in respect of, and redeem, cancel or retire, the Series B Preferred Stock in accordance with the terms of the Restated Certificate of Incorporation of LPC as in effect on the date hereof so long as (i) (A) the aggregate amount of all payments in respect of dividends due prior to December 31, 2003 shall not exceed $106,000, (B) the aggregate amount of all payments in respect of dividends (not including those permitted in clause (A) above) in any fiscal year shall not exceed $30,000, and (C) the aggregate amount of all such payments in respect of redemptions, cancellations or retirements (exclusive of dividends) shall not exceed $660,000 (which amount includes past due payments of up to $270,000) and (ii) on the date of any such payment, redemption, cancellation or retirement and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing. 9.12 Transactions with Affiliates. Each Borrower shall not, directly or indirectly: (a) purchase, acquire or lease any property from, or sell, transfer or lease any property to, any officer, director or other Affiliate of such Borrower, except in the ordinary 65 course of and pursuant to the reasonable requirements of such Borrower's business (as the case may be) and upon fair and reasonable terms no less favorable to such Borrower than such Borrower would obtain in a comparable arm's length transaction with an unaffiliated person; or (b) make any payments (whether by dividend, loan or otherwise) of management, consulting or other fees for management or similar services, or of any Indebtedness owing to any officer, employee, shareholder, director or any other Affiliate of such Borrower, except (i) reasonable compensation to, and reimbursement of reasonable expenses incurred by, officers, employees and directors for services rendered to such Borrower in the ordinary course of business, (ii) payments by any Borrower to any other Borrower for actual and necessary reasonable out-of-pocket legal and accounting, insurance, marketing, payroll and similar types of services paid for by any Borrower on behalf of such other Borrower, in the ordinary course of their respective businesses or as the same may be directly attributable to such Borrower and for the payment of taxes by or on behalf of such Borrower, (iii) the grant of stock options, restricted stock awards, stock appreciation rights or similar rights to employees, officers or directors pursuant to a plan approved by the Board of Directors of the applicable Borrower (so long as after giving effect thereto no Change of Control or other Default or Event of Default shall exist or occur), (iv) loans or advances to employees permitted by Section 9.10(d) of this Agreement, (v) the payment of reasonable fees to the directors of any Borrower who are not employees of such Borrower, (vi) the transactions contemplated by the Exchange Agreement and the Warrant Agent Agreement as permitted by Section 9.7(b)(v), and (vii) regularly scheduled payments in respect of the Senior Subordinated Notes and the Junior Subordinated Notes to officers, directors or employees of LPC in their capacity as holders thereof to the extent permitted in Sections 9.9(f)(iii) and (g)(iii), respectively. 9.13 Compliance with ERISA. Each Borrower shall, and shall cause each of its ERISA Affiliates, to: (a) maintain each Plan in compliance in all material respects with the applicable provisions of ERISA, the Code and other Federal and State law; (b) cause each Plan which is qualified under Section 401(a) of the Code to maintain such qualification; (c) not terminate any of such Plans so as to incur any material liability to the Pension Benefit Guaranty Corporation; (d) not allow or suffer to exist any prohibited transaction involving any of such Plans or any trust created thereunder which would subject such Borrower or such ERISA Affiliate to a material tax or penalty or other liability on prohibited transactions imposed under Section 4975 of the Code or ERISA; (e) make all required contributions to any Plan which it is obligated to pay under Section 302 of ERISA, Section 412 of the Code or the terms of such Plan; (f) not allow or suffer to exist any accumulated funding deficiency, whether or not waived, with respect to any such Plan; or (g) allow or suffer to exist any occurrence of a reportable event or any other event or condition which presents a material risk of termination by the Pension Benefit Guaranty Corporation of any such Plan that is a single employer plan, which termination could result in any material liability to the Pension Benefit Guaranty Corporation. 9.14 End of Fiscal Years; Fiscal Quarters. Each Borrower shall, for financial reporting purposes, cause its, and each of its Subsidiaries' (a) fiscal years to end on December 31 of each year and (b) fiscal quarters to end on March 31, June 30, September 30, and December 31 of each year. 66 9.15 Change in Business. Each Borrower shall not engage in any business other than the business of such Borrower on the date hereof and any business reasonably related, ancillary or complimentary to the business in which such Borrower is engaged on the date hereof. 9.16 Limitation of Restrictions Affecting Subsidiaries. Each Borrower shall not, directly, or indirectly, create or otherwise cause or suffer to exist any encumbrance or restriction which prohibits or limits the ability of any Subsidiary of such Borrower to (a) pay dividends or make other distributions or pay any Indebtedness owed to such Borrower or any Subsidiary of such Borrower; (b) make loans or advances to such Borrower or any Subsidiary of such Borrower, (c) transfer any of its properties or assets to such Borrower or any Subsidiary of such Borrower; or (d) create, incur, assume or suffer to exist any lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, other than encumbrances and restrictions arising under (i) applicable law, (ii) this Agreement, (iii) customary provisions restricting subletting or assignment of any lease governing a leasehold interest of such Borrower or any Subsidiary of such Borrower, (iv) customary restrictions on dispositions of real property interests found in reciprocal easement agreements of such Borrower or any Subsidiary of such Borrower, (v) any agreement relating to permitted Indebtedness incurred by a Subsidiary of such Borrower prior to the date on which such Subsidiary was acquired by such Borrower and outstanding on such acquisition date, and (vi) the extension or continuation of contractual obligations in existence on the date hereof; provided, that, any such encumbrances or restrictions contained in such extension or continuation are no less favorable to Agent and Lenders than those encumbrances and restrictions in effect on the date hereof under or pursuant to the contractual obligations so extended or continued. 9.17 Leverage Ratio. Borrowers and their Subsidiaries, on a consolidated basis, shall, not permit the ratio of consolidated secured Indebtedness (including letters of credit) to consolidated EBITDA as of the end of each trailing twelve month period of Borrowers and their Subsidiaries for which the last month ends on a date set forth below to be greater than the applicable ratio set forth below:. 67
Leverage Ratio Applicable Period - -------------- ----------------- 3.35:1.00 For the Trailing Twelve Months Ending December 31, 2003 3.35:1.00 For the Trailing Twelve Months Ending January 31, 2004 3.35:1.00 For the Trailing Twelve Months Ending February 29, 2004 3.35:1.00 For the Trailing Twelve Months Ending March 31, 2004 3.35:1.00 For the Trailing Twelve Months Ending April 30, 2004 3.35:1.00 For the Trailing Twelve Months Ending May 31, 2004 3.00:1.00 For the Trailing Twelve Months Ending June 30, 2004 3.00:1:00 For the Trailing Twelve Months Ending July 31, 2004 3.00:1.00 For the Trailing Twelve Months Ending August 31, 2004 2.75:1.00 For the Trailing Twelve Months Ending September 30, 2004 2.75:1.00 For the Trailing Twelve Months Ending October 31, 2004 2.75:1.00 For the Trailing Twelve Months Ending November 30, 2004 2.50:1.00 Each Trailing Twelve Months Period Thereafter
9.18 Minimum EBITDA. Borrowers and their Subsidiaries, on a consolidated basis, shall, at all times have, and shall maintain, EBITDA, measured on a quarter-end basis, of at least the required amount set forth in the following table for the applicable period set forth opposite thereto:
Applicable Amount Applicable Period - ----------------- ----------------- $10,000,000 For the trailing twelve months ending December 31, 2003 $10,000,000 For the trailing twelve months ending March 31, 2004 $12,000,000 For the trailing twelve months ending June 30, 2004 $14,000,000 For the trailing twelve months ending September 30, 2004
68
Applicable Amount Applicable Period - ----------------- ----------------- $14,000,000 For the trailing twelve months ending December 31, 2004 $16,000,000 For each trailing twelve months thereafter
9.19 Fixed Charge Coverage Ratio. Each Borrower and its Subsidiaries shall, at all times have, and shall maintain, a Fixed Charge Coverage Ratio, measured on a quarter-end basis, of at least the required amount set forth in the following table for the applicable period set forth opposite thereto:
Fixed Charge Coverage Ratio Applicable Period - --------------------------- ----------------- 0.50:1.00 For the three months ending December 31, 2003 1.10:1.00 For the three months ending March 31, 2004 1.10:1.00 For the six months ending June 30, 2004 1.10:1.00 For the nine months ending September 30, 2004 1.10:1.00 For the twelve months ending December 31, 2004 1.15:1.00 For the trailing twelve months ending March 31, 2005 1.15:1.00 For the trailing twelve months ending June 30, 2005 1.15:1.00 For the trailing twelve months ending September 30, 2005 1.15:1.00 For the trailing twelve months ending December 31, 2005 1.20:1.00 For each trailing twelve months thereafter
9.20 Maximum Capital Expenditures. Borrowers shall not, in the aggregate, make Capital Expenditures (other than those financed by Indebtedness permitted under Section 9.9(b) hereof) in excess of $5,000,000 in any fiscal year. 9.21 License Agreements. (a) Each Borrower shall (i) promptly and faithfully observe and perform all of the material terms, covenants, conditions and provisions of the material License Agreements to which it is a party to be observed and performed by it, at the times set forth therein, if any, (ii) not do, permit, suffer or refrain from doing anything that could reasonably be expected to result in a default under or breach of any of the terms of any material License Agreement, (iii) not cancel, surrender, modify, amend, waive or release any material License Agreement in any material respect or any term, provision or right of the licensee thereunder in any material respect, or consent to or permit to occur any of the foregoing if any of the foregoing would have a Material Adverse Effect; except, that, subject to Section 9.21(b) below, such Borrower may 69 cancel, surrender or release any material License Agreement in the ordinary course of the business of such Borrower; provided, that, such Borrower (as the case may be) shall give Agent not less than thirty (30) days prior written notice of its intention to so cancel, surrender and release any such material License Agreement, (iv) give Agent prompt written notice of any material License Agreement entered into by such Borrower after the date hereof, together with a true, correct and complete copy thereof and such other information with respect thereto as Agent may request, (v) give Agent prompt written notice of any material breach of any obligation, or any default, by any party under any material License Agreement, and deliver to Agent (promptly upon the receipt thereof by such Borrower in the case of a notice to such Borrower and concurrently with the sending thereof in the case of a notice from such Borrower) a copy of each notice of default and every other notice and other communication received or delivered by such Borrower in connection with any material License Agreement which relates to the right of such Borrower to continue to use the property subject to such License Agreement, and (vi) furnish to Agent, promptly upon the request of Agent, such information and evidence as Agent may reasonably require from time to time concerning the observance, performance and compliance by such Borrower or the other party or parties thereto with the material terms, covenants or provisions of any material License Agreement. (b) Each Borrower will either exercise any option to renew or extend the term of each material License Agreement to which it is a party in such manner as will cause the term of such material License Agreement to be effectively renewed or extended for the period provided by such option and give prompt written notice thereof to Agent or give Agent prior written notice that such Borrower does not intend to renew or extend the term of any such material License Agreement or that the term thereof shall otherwise be expiring, not less than sixty (60) days prior to the date of any such non-renewal or expiration. In the event of the failure of such Borrower to extend or renew any material License Agreement to which it is a party, Agent shall have, and is hereby granted, the irrevocable right and authority, at its option, at any time that an Event of Default shall exist or have occurred and be continuing, to renew or extend the term of such material License Agreement, whether in its own name and behalf, or in the name and behalf of a designee or nominee of Agent or in the name and behalf of such Borrower. At any time that an Event of Default shall exist or have occurred and be continuing, Agent may, but shall not be required to, perform any or all of such obligations of such Borrower under any of the License Agreements, including, but not limited to, the payment of any or all sums due from such Borrower thereunder. Any sums so paid by Agent shall constitute part of the Obligations. 9.22 After Acquired Real Property. If any Borrower or any Subsidiary of any Borrower hereafter acquires any Real Property, fixtures or any other property that is of the kind or nature described in the Mortgages and such Real Property, fixtures or other property at any one location has a fair market value in an amount equal to or greater than $30,000 (or if a Default or Event of Default exists, then regardless of the fair market value of such assets), without limiting any other rights of Agent and Lenders, or duties or obligations of any Borrower or Subsidiary, promptly upon Agent's request, such Borrower shall, or shall cause its Subsidiaries to, execute and deliver to Agent a mortgage, deed of trust or deed to secure debt, as Agent may determine, in form and substance satisfactory to Agent in its good faith determination and in form appropriate for recording in the real estate records of the jurisdiction in which such Real Property or other property is located granting to Agent a first and only lien and mortgage on and security interest in such Real Property, fixtures or other property (except as such Borrower or 70 Subsidiary would otherwise be permitted to incur hereunder or under the Mortgages or as otherwise consented to in writing by Agent) and such other agreements, documents and instruments as Agent may require in good faith connection therewith. 9.23 Additional Guaranties and Collateral Security. Each Borrower shall cause: (a) each Subsidiary of any Borrower not in existence on the date hereof, to execute and deliver to Agent promptly and in any event within 3 days after the formation, acquisition or change in status thereof (A) a guaranty guaranteeing the Obligations, (B) a security agreement, (C) if such Subsidiary has any Subsidiaries, a pledge agreement together with (x) certificates evidencing all of the Capital Stock of any Person owned by such Subsidiary, (y) undated stock powers executed in blank with signature guaranteed, and (z) such opinion of counsel and such approving certificate of such Subsidiary as Agent may reasonably request in respect of complying with any legend on any such certificate or any other matter relating to such shares, (D) one or more Mortgages creating on the Real Property of such Subsidiary a perfected, first priority lien on such real property, a title insurance policy covering such real property, a current ALTA survey thereof and a surveyor's certificate, each in form and substance reasonably satisfactory to Agent, together with such other agreements, instruments and documents as the Agent may reasonably require, and (E) such other agreements, instruments, approvals, legal opinions or other documents reasonably requested by the Agent in order to create, perfect, establish the first priority of or otherwise protect any lien purported to be covered by any such security agreement, pledge agreement or Mortgage or otherwise to effect the intent that such Subsidiary shall become bound by all of the terms, covenants and agreements contained in the Financing Agreements and that all property and assets of such Subsidiary shall become Collateral for the Obligations; and (b) each owner of the Capital Stock of any such Subsidiary to execute and deliver promptly and in any event within 3 days after the formation or acquisition of such Subsidiary a pledge agreement, together with (A) certificates evidencing all of the Capital Stock of such Subsidiary, (B) undated stock powers or other appropriate instruments of assignment executed in blank with signature guaranteed, (C) such opinion of counsel and such approving certificate of such Subsidiary as Agent may reasonably request in respect of complying with any legend on any such certificate or any other matter relating to such shares and (D) such other agreements, instruments, approvals, legal opinions or other documents reasonably requested by Agent. (c) Notwithstanding anything to the contrary set forth in this Section 9.23, only 65% of the shares of Capital Stock of each such Subsidiary organized outside of the United States shall be pledged as Collateral. 9.24 Costs and Expenses. Borrowers shall pay to Agent on demand all costs, expenses, filing fees and taxes paid or payable in connection with the preparation, negotiation, execution, delivery, recording, syndication, administration, collection, liquidation, enforcement and defense of the Obligations, Agent's rights in the Collateral, this Agreement, the other Financing Agreements and all other documents related hereto or thereto, including any amendments, supplements or consents which may hereafter be contemplated (whether or not executed) or entered into in respect hereof and thereof, including: (a) all costs and expenses of filing or 71 recording (including Uniform Commercial Code financing statement filing taxes and fees, documentary taxes, intangibles taxes and mortgage recording taxes and fees, if applicable); (b) costs and expenses and fees for insurance premiums, environmental audits, title insurance premiums, surveys, assessments, engineering reports and inspections, appraisal fees and search fees, costs and expenses of remitting loan proceeds, collecting checks and other items of payment, and establishing and maintaining the Blocked Accounts, together with Agent's customary charges and fees with respect thereto; (c) costs and expenses of preserving and protecting the Collateral; (d) costs and expenses paid or incurred in connection with obtaining payment of the Obligations, enforcing the security interests and liens of Agent, selling or otherwise realizing upon the Collateral, and otherwise enforcing the provisions of this Agreement and the other Financing Agreements or defending any claims made or threatened against Agent or any Lender arising out of the transactions contemplated hereby and thereby (including preparations for and consultations concerning any such matters); (e) all reasonable out-of-pocket expenses and costs heretofore and from time to time hereafter incurred by Agent during the course of periodic field examinations of the Collateral and such Borrower's operations, plus a per diem charge at the rate of $1,500 per person per day for Agent's examiners in the field and office (which per diem charges shall not exceed the aggregate amount of $50,000 during the term of this Agreement, provided, that, any per diem charge incurred at any time that a Default or Event of Default shall exist or have occurred and be continuing shall not be included for purposes of such $50,000 limitation); and (f) the reasonable fees and disbursements of counsel (including legal assistants) to Agent in connection with any of the foregoing. 9.25 Further Assurances. At the request of Agent at any time and from time to time, Borrowers shall, at their expense, duly execute and deliver, or cause to be duly executed and delivered, such further agreements, documents and instruments, and do or cause to be done such further acts as may be necessary or proper to evidence, perfect, maintain and enforce the security interests and the priority thereof in the Collateral and to otherwise effectuate the provisions or purposes of this Agreement or any of the other Financing Agreements. SECTION 10. EVENTS OF DEFAULT AND REMEDIES 10.1 Events of Default. The occurrence or existence of any one or more of the following events are referred to herein individually as an "Event of Default", and collectively as "Events of Default": (a) (i) any Borrower fails to pay any of the Obligations when due or (ii) any Borrower or Obligor fails to perform any of the covenants contained in Sections 9.3, 9.4, 9.13, 9.14, 9.15, and 9.16 of this Agreement and such failure shall continue for ten (10) days; provided, that, such ten (10) day period shall not apply in the case of: (A) any failure to observe any such covenant which is not capable of being cured at all or within such ten (10) day period or which has been the subject of a prior failure within a six (6) month period or (B) an intentional breach by any Borrower or Obligor of any such covenant or (iii) any Borrower or Obligor fails to perform any of the terms, covenants, conditions or provisions contained in this Agreement or any of the other Financing Agreements other than those described in Sections 10.1(a)(i) and 10.1(a)(ii) above; 72 (b) any representation, warranty or statement of fact made by any Borrower to Agent in this Agreement, the other Financing Agreements or any other written agreement, schedule or confirmatory assignment shall when made or deemed made be false or misleading in any material respect; (c) any Obligor revokes or terminates or purports to revoke or terminate or fails to perform any of the terms, covenants, conditions or provisions of any guarantee, endorsement or other agreement of such party in favor of Agent or any Lender executed and delivered pursuant to this Agreement; (d) any judgment for the payment of money is rendered against any Borrower or Obligor in excess of $500,000 in any one case or in excess of $1,000,000 in the aggregate (excluding in such calculation amounts covered by insurance where the insurer has acknowledged coverage in writing for such judgment) and shall remain undischarged or unvacated for a period in excess of forty-five (45) days or execution shall at any time not be effectively stayed, or any judgment other than for the payment of money, or injunction, attachment, garnishment or execution is rendered against any Borrower or Obligor that has or is reasonably likely to have a Material Adverse Effect or against any of the Collateral having a value in excess of $250,000 and, after giving effect to any Reserve established by Working Capital Agent in respect of any such judgment, injunction, attachment, garnishment or execution against any Collateral having a value in excess of $250,000, the Excess Availability of Borrowers shall be less than $2,000,000 in the aggregate; (e) any Borrower or Obligor dissolves or suspends or discontinues doing business, except as permitted pursuant to Section 9.7 hereof; (f) any Borrower or Obligor makes an assignment for the benefit of creditors, makes or sends notice of a bulk transfer or calls a meeting of its creditors or principal creditors in connection with a moratorium or adjustment of the Indebtedness due to them; (g) a case or proceeding under the bankruptcy laws of the United States of America now or hereafter in effect or under any insolvency, reorganization, receivership, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction now or hereafter in effect (whether at law or in equity) is filed against any Borrower or Obligor or all or any part of its properties and such case or proceeding is not dismissed within forty-five (45) days after the date of its filing or any Borrower or Obligor shall file any answer admitting the allegations made in such proceeding or not contesting such petition or application or indicates its consent to, acquiescence in or approval of, any such action or proceeding or the relief requested is granted sooner; (h) a case or proceeding under the bankruptcy laws of the United States of America now or hereafter in effect or under any insolvency, reorganization, receivership, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction now or hereafter in effect (whether at a law or equity) is filed by any Borrower or Obligor or for all or any part of its property; 73 (i) (A) any default in the payment of principal, interest or other monetary obligations in respect of any Indebtedness of any Borrower (other than Indebtedness owing to Agent or Lenders pursuant to the Financing Agreements and the Remaining Existing Subordinated Indebtedness), in any such case in an amount in excess of $500,000, which default continues beyond the applicable cure period, if any, with respect thereto and is not waived in writing or (B) any default (other than a default in payment of principal, interest or other monetary obligations) in respect of any Indebtedness of any Borrower (other than Indebtedness owing to Agent or Lenders pursuant to the Financing Agreements and the Remaining Existing Subordinated Indebtedness), which default continues beyond the applicable cure period, if any, and is not waived in writing and the holders of such Indebtedness accelerate such Indebtedness or otherwise exercise their remedies in respect of such default, or (C) any default by any Borrower under any Material Contract (other than agreements or contracts entered into in respect of borrowed money), which default continues for more than the applicable cure period with respect thereto (and is not waived in writing) if the other party to such Material Contract exercises its remedies with respect to such default and such exercise results in termination of such Material Contract or a liability on the part of any Borrower in excess of $500,000; (j) any material provision hereof or of any of the other Financing Agreements shall for any reason cease to be valid, binding and enforceable with respect to any party hereto or thereto (other than Agent) in accordance with its terms, or any such party shall challenge the enforceability hereof or thereof, or shall assert in writing, or take any action or fail to take any action based on the assertion that any provision hereof or of any of the other Financing Agreements has ceased to be or is otherwise not valid, binding or enforceable in accordance with its terms, or any security interest provided for herein or in any of the other Financing Agreements shall cease to be a valid and perfected first priority security interest in any of the Collateral subject thereto (except as otherwise permitted herein or therein); (k) an ERISA Event shall occur which results in or could reasonably be expected to result in liability of any Borrower in an aggregate amount in excess of $1,000,000; (l) any Change of Control; (m) the indictment by any Governmental Authority of any Borrower or Obligor of which any Borrower, Obligor or Agent receives notice as to which there is a reasonable possibility of an adverse determination, in the good faith determination of Agent, under any criminal statute, or commencement or threatened commencement of criminal or civil proceedings against such Borrower or Obligor, pursuant to which statute or proceedings the penalties or remedies sought or available include forfeiture of (i) any of the Collateral having a value in excess of $250,000 and, after giving effect to any Reserve established by Working Capital Agent in respect of any such possible forfeiture, the Excess Availability of Borrowers shall be less than $2,000,000 in the aggregate or (ii) any other property of any Borrower which is necessary or material to the conduct of its business; (n) there shall be an act, condition or event that has a Material Adverse Effect after the date hereof; 74 (o) there shall be no Excess Availability after giving effect to any Rubber Group Reserve established pursuant to the terms of the Working Capital Loan Agreement; or (p) an event of default shall exist or have occurred and be continuing under any of the Financing Agreements. 10.2 Remedies. (a) At any time an Event of Default exists or has occurred and is continuing, Agent and Lenders shall have all rights and remedies provided in this Agreement, the other Financing Agreements, the UCC and other applicable law, all of which rights and remedies may be exercised without notice to or consent by any Borrower or Obligor, except as such notice or consent is expressly provided for hereunder or required by applicable law. All rights, remedies and powers granted to Agent and Lenders hereunder, under any of the other Financing Agreements, the UCC or other applicable law, are cumulative, not exclusive and enforceable, in Agent's discretion, alternatively, successively, or concurrently on any one or more occasions, and shall include, without limitation, the right to apply to a court of equity for an injunction to restrain a breach or threatened breach by any Borrower or Obligor of this Agreement or any of the other Financing Agreements. Subject to Section 12 hereof, Agent may, and at the direction of the Required Lenders shall, at any time or times, proceed directly against any Borrower or Obligor to collect the Obligations without prior recourse to the Collateral. (b) Without limiting the generality of the foregoing, at any time an Event of Default exists or has occurred and is continuing, Agent may, at its option and shall upon the direction of the Required Lenders, (i) upon notice to Administrative Borrower, accelerate the payment of all Obligations and demand immediate payment thereof to Agent for itself and the benefit of Lenders (provided, that, upon the occurrence of any Event of Default described in Sections 10.1(g) and 10.1(h), all Obligations shall automatically become immediately due and payable), and (ii) terminate this Agreement (provided, that, upon the occurrence of any Event of Default described in Sections 10.1(g) and 10.1(h), all obligations of the Agent or a Lender hereunder shall automatically terminate). (c) Without limiting the foregoing and subject to the terms of the Intercreditor Agreement, at any time an Event of Default exists or has occurred and is continuing, Agent may, in its discretion, and upon the direction of the Required Lenders, shall (i) with or without judicial process or the aid or assistance of others, enter upon any premises on or in which any of the Collateral may be located and take possession of the Collateral or complete processing, manufacturing and repair of all or any portion of the Collateral, (ii) require any Borrower or Obligor, at Borrowers' expense, to assemble and make available to Agent any part or all of the Collateral at any place and time designated by Agent, (iii) collect, foreclose, receive, appropriate, setoff and realize upon any and all Collateral, (iv) remove any or all of the Collateral from any premises on or in which the same may be located for the purpose of effecting the sale, foreclosure or other disposition thereof or for any other purpose, (v) sell, lease, transfer, assign, deliver or otherwise dispose of any and all Collateral (including entering into contracts with respect thereto, public or private sales at any exchange, broker's board, at any office of Agent or elsewhere) at such prices or terms as Agent may deem reasonable, for cash, upon credit or for future delivery, with the Agent having the right to purchase the whole or any part of the 75 Collateral at any such public sale, all of the foregoing being free from any right or equity of redemption of any Borrower or Obligor, which right or equity of redemption is hereby expressly waived and released by Borrowers and Obligors and/or (vi) terminate this Agreement. If any of the Collateral is sold or leased by Agent upon credit terms or for future delivery, the Obligations shall not be reduced as a result thereof until payment therefor is finally collected by Agent. If notice of disposition of Collateral is required by law, ten (10) days prior notice by Agent to Administrative Borrower designating the time and place of any public sale or the time after which any private sale or other intended disposition of Collateral is to be made, shall be deemed to be reasonable notice thereof and Borrowers and Obligors waive any other notice. In the event Agent institutes an action to recover any Collateral or seeks recovery of any Collateral by way of prejudgment remedy, each Borrower and Obligor waives the posting of any bond which might otherwise be required. (d) Subject to the terms of the Intercreditor Agreement, at any time or times that an Event of Default exists or has occurred and is continuing, Agent may, in its discretion, enforce the rights of any Borrower or Obligor against any account debtor, secondary obligor or other obligor in respect of any of the Accounts or other Receivables. Without limiting the generality of the foregoing and subject to the terms of the Intercreditor Agreement, Agent may, in its discretion, at such time or times (i) notify any or all account debtors, secondary obligors or other obligors in respect thereof that the Receivables have been assigned to Agent and that Agent has a security interest therein and Agent may direct any or all accounts debtors, secondary obligors and other obligors to make payment of Receivables directly to Agent, (ii) extend the time of payment of, compromise, settle or adjust for cash, credit, return of merchandise or otherwise, and upon any terms or conditions, any and all Receivables or other obligations included in the Collateral and thereby discharge or release the account debtor or any secondary obligors or other obligors in respect thereof without affecting any of the Obligations, (iii) demand, collect or enforce payment of any Receivables or such other obligations, but without any duty to do so, and Agent and Lenders shall not be liable for any failure to collect or enforce the payment thereof nor for the negligence of its agents or attorneys with respect thereto and (iv) take whatever other action Agent may deem necessary or desirable for the protection of its interests and the interests of Lenders. At any time that an Event of Default exists or has occurred and is continuing, at Agent's request and subject to the terms of the Intercreditor Agreement, all invoices and statements sent to any account debtor shall state that the Accounts and such other obligations have been assigned to Agent and are payable directly and only to Agent and Borrowers and Obligors shall deliver to Agent such originals of documents evidencing the sale and delivery of goods or the performance of services giving rise to any Accounts as Agent may require. In the event any account debtor returns Inventory when an Event of Default exists or has occurred and is continuing, Borrowers shall, upon Agent's request and subject to the terms of the Intercreditor Agreement, hold the returned Inventory in trust for Agent, segregate all returned Inventory from all of its other property, dispose of the returned Inventory solely according to Agent's instructions, and not issue any credits, discounts or allowances with respect thereto without Agent's prior written consent. (e) To the extent that applicable law imposes duties on Agent or any Lender to exercise remedies in a commercially reasonable manner (which duties cannot be waived under such law), each Borrower acknowledges and agrees that it is not commercially unreasonable for Agent or any Lender (i) to fail to incur expenses reasonably deemed significant by Agent or any 76 Lender to prepare Collateral for disposition or otherwise to complete raw material or work in process into finished goods or other finished products for disposition, (ii) to fail to obtain third party consents for access to Collateral to be disposed of, or to obtain or, if not required by other law, to fail to obtain consents of any Governmental Authority or other third party for the collection or disposition of Collateral to be collected or disposed of, (iii) to fail to exercise collection remedies against account debtors, secondary obligors or other persons obligated on Collateral or to remove liens or encumbrances on or any adverse claims against Collateral, (iv) to exercise collection remedies against account debtors and other persons obligated on Collateral directly or through the use of collection agencies and other collection specialists, (v) to advertise dispositions of Collateral through publications or media of general circulation, whether or not the Collateral is of a specialized nature, (vi) to contact other persons, whether or not in the same business as any Borrower, for expressions of interest in acquiring all or any portion of the Collateral, (vii) to hire one or more professional auctioneers to assist in the disposition of Collateral, whether or not the collateral is of a specialized nature, (viii) to dispose of Collateral by utilizing Internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capability of doing so, or that match buyers and sellers of assets, (ix) to dispose of assets in wholesale rather than retail markets, (x) to disclaim disposition warranties, (xi) to purchase insurance or credit enhancements to insure Agent or Lenders against risks of loss, collection or disposition of Collateral or to provide to Agent or Lenders a guaranteed return from the collection or disposition of Collateral, or (xii) to the extent deemed appropriate by Agent, to obtain the services of other brokers, investment bankers, consultants and other professionals to assist Agent in the collection or disposition of any of the Collateral. Each Borrower acknowledges that the purpose of this Section is to provide non-exhaustive indications of what actions or omissions by Agent or any Lender would not be commercially unreasonable in the exercise by Agent or any Lender of remedies against the Collateral and that other actions or omissions by Agent or any Lender shall not be deemed commercially unreasonable solely on account of not being indicated in this Section. Without limitation of the foregoing, nothing contained in this Section shall be construed to grant any rights to any Borrower or to impose any duties on Agent or Lenders that would not have been granted or imposed by this Agreement or by applicable law in the absence of this Section. (f) For the purpose of enabling Agent to exercise the rights and remedies hereunder, each Borrower and Obligor hereby grants to Agent, to the extent assignable, an irrevocable, non-exclusive license (exercisable at any time an Event of Default shall exist or have occurred and only for so long as the same is continuing) without payment of royalty or other compensation to any Borrower or Obligor, to use, assign, license or sublicense any of the trademarks, service-marks, trade names, business names, trade styles, designs, logos and other source of business identifiers and other Intellectual Property and general intangibles now owned or hereafter acquired by any Borrower or Obligor, wherever the same maybe located, including in such license reasonable access to all media in which any of the licensed items may be recorded or stored and to all computer programs used for the compilation or printout thereof. (g) Subject to the terms of the Intercreditor Agreement, Agent may apply the cash proceeds of Collateral actually received by Agent from any sale, lease, foreclosure or other disposition of the Collateral to payment of the Obligations, in whole or in part and in such order as Agent may elect, whether or not then due. Borrowers shall remain liable to Agent and 77 Lenders for the payment of any deficiency with interest at the highest rate provided for herein and all costs and expenses of collection or enforcement, including attorneys' fees and expenses. SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW 11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver. (a) The validity, interpretation and enforcement of this Agreement and the other Financing Agreements (except as otherwise provided therein) and any dispute arising out of the relationship between the parties hereto, whether in contract, tort, equity or otherwise, shall be governed by the internal laws of the State of New York but excluding any principles of conflicts of law or other rule of law that would cause the application of the law of any jurisdiction other than the laws of the State of New York. (b) Borrowers, Agent and Lenders irrevocably consent and submit to the non-exclusive jurisdiction of the Supreme Court of the State of New York for New York County and the United States District Court for the Southern District of New York, whichever Agent may elect, and waive any objection based on venue or forum non conveniens with respect to any action instituted therein arising under this Agreement or any of the other Financing Agreements or in any way connected with or related or incidental to the dealings of the parties hereto in respect of this Agreement or any of the other Financing Agreements or the transactions related hereto or thereto, in each case whether now existing or hereafter arising, and whether in contract, tort, equity or otherwise, and agree that any dispute with respect to any such matters shall be heard only in the courts described above (except that Agent and Lenders shall have the right to bring any action or proceeding against any Borrower or its property in the courts of any other jurisdiction which Agent deems necessary or appropriate in order to realize on the Collateral or to otherwise enforce its rights against any Borrower or its property). (c) Each Borrower hereby waives personal service of any and all process upon it and consents that all such service of process may be made by certified mail (return receipt requested) directed to its address set forth herein and service so made shall be deemed to be completed five (5) days after the same shall have been so deposited in the U.S. mails, or, at Agent's option, by service upon any Borrower (or Administrative Borrower on behalf of such Borrower) in any other manner provided under the rules of any such courts. Within thirty (30) days after such service, such Borrower shall appear in answer to such process, failing which such Borrower shall be deemed in default and judgment may be entered by Agent against such Borrower for the amount of the claim and other relief requested. (d) BORROWERS, AGENT AND LENDERS EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. 78 BORROWERS, AGENT AND LENDERS EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY BORROWER, AGENT OR ANY LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. (e) Agent and Lenders shall not have any liability to any Borrower (whether in tort, contract, equity or otherwise) for losses suffered by such Borrower in connection with, arising out of, or in any way related to the transactions or relationships contemplated by this Agreement, or any act, omission or event occurring in connection herewith, unless it is determined by a final and non-appealable judgment or court order binding on Agent and such Lender, that such losses were the result of acts or omissions constituting gross negligence or willful misconduct. In any such litigation, Agent and Lenders shall be entitled to the benefit of the rebuttable presumption that it acted in good faith and with the exercise of ordinary care in the performance by it of the terms of this Agreement. Each Borrower: (i) certifies that neither Agent, any Lender nor any representative, agent or attorney acting for or on behalf of Agent or any Lender has represented, expressly or otherwise, that Agent and Lenders would not, in the event of litigation, seek to enforce any of the waivers provided for in this Agreement or any of the other Financing Agreements and (ii) acknowledges that in entering into this Agreement and the other Financing Agreements, Agent and Lenders are relying upon, among other things, the waivers and certifications set forth in this Section 11.1 and elsewhere herein and therein. 11.2 Waiver of Notices. Each Borrower hereby expressly waives demand, presentment, protest and notice of protest and notice of dishonor with respect to any and all instruments and chattel paper, included in or evidencing any of the Obligations or the Collateral, and any and all other demands and notices of any kind or nature whatsoever with respect to the Obligations, the Collateral and this Agreement, except such as are expressly provided for herein. No notice to or demand on any Borrower which Agent or any Lender may elect to give shall entitle such Borrower to any other or further notice or demand in the same, similar or other circumstances. 11.3 Amendments and Waivers. (a) Neither this Agreement nor any other Financing Agreement nor any terms hereof or thereof may be amended, waived, discharged or terminated unless such amendment, waiver, discharge or termination is in writing signed by Agent and the Required Lenders or at Agent's option, by Agent with the authorization of the Required Lenders, and as to amendments to any of the Financing Agreements (other than with respect to any provision of Section 12 hereof), by any Borrower; except, that, no such amendment, waiver, discharge or termination shall: (i) reduce the interest rate or any fees or extend the time of payment of principal, interest or any fees or reduce the principal amount of the Loan, in each case without the consent of each Lender directly affected thereby, 79 (ii) release any Collateral (except as expressly required hereunder or under any of the other Financing Agreements or applicable law and except as permitted under Section 12.11(b) hereof), without the consent of Agent and all Lenders, (iii) reduce any percentage specified in the definition of Required Lenders, without the consent of Agent and all of Lenders, (iv) consent to the assignment or transfer by any Borrower of any of their rights and obligations under this Agreement, without the consent of Agent and all of Lenders, or (v) amend, modify or waive any terms of this Section 11.3 hereof, without the consent of Agent and all of Lenders. (b) Agent and Lenders shall not, by any act, delay, omission or otherwise be deemed to have expressly or impliedly waived any of its rights, powers and/or remedies unless such waiver shall be in writing and signed as provided herein. Any such waiver shall be enforceable only to the extent specifically set forth therein. A waiver by Agent or any Lender of any right, power and/or remedy on any one occasion shall not be construed as a bar to or waiver of any such right, power and/or remedy which Agent or any Lender would otherwise have on any future occasion, whether similar in kind or otherwise. (c) Notwithstanding anything to the contrary contained in Section 11.3(a) above, in connection with any amendment, waiver, discharge or termination, in the event that any Lender whose consent thereto is required shall fail to consent or fail to consent in a timely manner (such Lender being referred to herein as a "Non-Consenting Lender"), but the consent of any other Lenders to such amendment, waiver, discharge or termination that is required are obtained, if any, then Ableco shall have the right, but not the obligation, at any time thereafter, and upon the exercise by Ableco of such right, such Non-Consenting Lender shall have the obligation, to sell, assign and transfer to Ableco or such Eligible Transferee as Ableco may specify, such Non-Consenting Lender's portion of the Loan and all rights and interests of such Non-Consenting Lender pursuant thereto. Ableco shall provide the Non-Consenting Lender with prior written notice of its intent to exercise its right under this Section, which notice shall specify on date on which such purchase and sale shall occur. Such purchase and sale shall be pursuant to the terms of an Assignment and Acceptance (whether or not executed by the Non-Consenting Lender), except that on the date of such purchase and sale, Ableco, or such Eligible Transferee specified by Ableco, shall pay to the Non-Consenting Lender (except as Ableco and such Non-Consenting Lender may otherwise agree) the amount equal to: (i) the principal balance of the Loan held by the Non-Consenting Lender outstanding as of the close of business on the business day immediately preceding the effective date of such purchase and sale, plus (ii) amounts accrued and unpaid in respect of interest and fees payable to the Non-Consenting Lender to the effective date of the purchase (but in no event shall the Non-Consenting Lender be deemed entitled to any early termination fee), minus (iii) the amount of the closing fee received by the Non-Consenting Lender pursuant to the terms hereof or of any of the other Financing Agreements multiplied by the fraction, the numerator of which is the number of months remaining in the then current term of the Credit Facility and the denominator of which is the 80 number of months in the then current term thereof. Such purchase and sale shall be effective on the date of the payment of such amount to the Non-Consenting Lender. (d) The consent of Agent shall be required for any amendment, waiver or consent affecting the rights or duties of Agent hereunder or under any of the other Financing Agreements, in addition to the consent of the Lenders otherwise required by this Section. 11.4 Waiver of Counterclaims. Each Borrower waives all rights to interpose any claims, deductions, setoffs or counterclaims of any nature (other then compulsory counterclaims) in any action or proceeding with respect to this Agreement, the Obligations, the Collateral or any matter arising therefrom or relating hereto or thereto. 11.5 Indemnification. Each Borrower shall, jointly and severally, indemnify and hold Agent and each Lender, and its officers, directors, agents, employees, advisors and counsel and their respective Affiliates (each such person being an "Indemnitee"), harmless from and against any and all losses, claims, damages, liabilities, costs or expenses (including reasonable attorneys' fees and expenses) imposed on, incurred by or asserted against any of them in connection with any litigation, investigation, claim or proceeding commenced or threatened related to the negotiation, preparation, execution, delivery, enforcement, performance or administration of this Agreement, any other Financing Agreements, or any undertaking or proceeding related to any of the transactions contemplated hereby or any act, omission, event or transaction related or attendant thereto, including amounts paid in settlement, court costs, and the fees and expenses of counsel, except that Borrowers shall not have any obligation under this Section 11.5 to indemnify an Indemnitee with respect to a matter covered hereby resulting from the gross negligence or wilful misconduct of such Indemnitee as determined pursuant to a final, non-appealable order of a court of competent jurisdiction (but without limiting the obligations of Borrowers as to any other Indemnitee). To the extent that the undertaking to indemnify, pay and hold harmless set forth in this Section may be unenforceable because it violates any law or public policy, Borrowers shall pay the maximum portion which it is permitted to pay under applicable law to Agent and Lenders in satisfaction of indemnified matters under this Section. To the extent permitted by applicable law, no Borrower shall assert, and each Borrower hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any of the other Financing Agreements or any undertaking or transaction contemplated hereby. All amounts due under this Section shall be payable upon demand. The foregoing indemnity shall survive the payment of the Obligations and the termination or non-renewal of this Agreement. SECTION 12. THE AGENT 12.1 Appointment, Powers and Immunities. Each Lender irrevocably designates, appoints and authorizes Ableco to act as Agent hereunder and under the other Financing Agreements with such powers as are specifically delegated to Agent by the terms of this Agreement and of the other Financing Agreements, together with such other powers as are reasonably incidental thereto. Agent (a) shall have no duties or responsibilities except those expressly set forth in this Agreement and in the other Financing Agreements, and shall not by reason of this Agreement or any other Financing Agreement be a trustee or fiduciary for any 81 Lender; (b) shall not be responsible to Lenders for any recitals, statements, representations or warranties contained in this Agreement or in any of the other Financing Agreements, or in any certificate or other document referred to or provided for in, or received by any of them under, this Agreement or any other Financing Agreement, or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Financing Agreement or any other document referred to or provided for herein or therein or for any failure by any Borrower or any Obligor or any other Person to perform any of its obligations hereunder or thereunder; and (c) shall not be responsible to Lenders for any action taken or omitted to be taken by it hereunder or under any other Financing Agreement or under any other document or instrument referred to or provided for herein or therein or in connection herewith or therewith, except for its own gross negligence or willful misconduct as determined by a final non-appealable judgment of a court of competent jurisdiction. Agent may employ agents and attorneys-in-fact and shall not be responsible for the negligence or misconduct of any such agents or attorneys-in-fact selected by it in good faith. Agent may deem and treat the payee of any note as the holder thereof for all purposes hereof unless and until the assignment thereof pursuant to an agreement (if and to the extent permitted herein) in form and substance satisfactory to Agent shall have been delivered to and acknowledged by Agent. 12.2 Reliance by Agent. Agent shall be entitled to rely upon any certification, notice or other communication (including any thereof by telephone, telecopy, telex, telegram or cable) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by Agent. As to any matters not expressly provided for by this Agreement or any other Financing Agreement, Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder or thereunder in accordance with instructions given by the Required Lenders or all of Lenders as is required in such circumstance, and such instructions of such Agents and any action taken or failure to act pursuant thereto shall be binding on all Lenders. 12.3 Events of Default. (a) Agent shall not be deemed to have knowledge or notice of the occurrence of a Default or an Event of Default or other failure of a condition precedent to the Loan hereunder, unless and until Agent has received written notice from a Lender, or a Borrower specifying such Event of Default or any unfulfilled condition precedent, and stating that such notice is a "Notice of Default or Failure of Condition". In the event that Agent receives such a Notice of Default or Failure of Condition, Agent shall give prompt notice thereof to the Lenders. Agent shall (subject to Section 12.7) take such action with respect to any such Event of Default or failure of condition precedent as shall be directed by the Required Lenders; provided, that, unless and until Agent shall have received such directions, Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to or by reason of such Event of Default or failure of condition precedent, as it shall deem advisable in the best interest of Lenders. (b) Except with the prior written consent of Agent, no Lender may assert or exercise any enforcement right or remedy in respect of the Loan or other Obligations, as against any Borrower or Obligor or any of the Collateral or other property of any Borrower or Obligor. 82 12.4 Ableco in its Individual Capacity. With respect to its Commitment and the portion of the Loan made by it (and any successor acting as Agent), so long as Ableco shall be a Lender hereunder, it shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not acting as Agent, and the term "Lender" or "Lenders" shall, unless the context otherwise indicates, include Ableco in its individual capacity as Lender hereunder. Ableco (and any successor acting as Agent) and its Affiliates may (without having to account therefor to any Lender) lend money to, make investments in and generally engage in any kind of business with Borrowers (and any of its Subsidiaries or Affiliates) as if it were not acting as Agent, and Ableco and its Affiliates may accept fees and other consideration from any Borrower and any of its Subsidiaries and Affiliates for services in connection with this Agreement or otherwise without having to account for the same to Lenders. 12.5 Indemnification. Lenders agree to indemnify Agent (to the extent not reimbursed by Borrowers hereunder and without limiting any obligations of Borrowers hereunder) ratably, in accordance with their Pro Rata Shares, for any and all claims of any kind and nature whatsoever that may be imposed on, incurred by or asserted against Agent (including by any Lender) arising out of or by reason of any investigation in or in any way relating to or arising out of this Agreement or any other Financing Agreement or any other documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby (including the costs and expenses that Agent is obligated to pay hereunder) or the enforcement of any of the terms hereof or thereof or of any such other documents, provided, that, no Lender shall be liable for any of the foregoing to the extent it arises from the gross negligence or willful misconduct of the party to be indemnified as determined by a final non-appealable judgment of a court of competent jurisdiction. The foregoing indemnity shall survive the payment of the Obligations and the termination or non-renewal of this Agreement. 12.6 Non-Reliance on Agent and Other Lenders. Each Lender agrees that it has, independently and without reliance on Agent or other Lender, and based on such documents and information as it has deemed appropriate, made its own credit analysis of Borrowers and Obligors and has made its own decision to enter into this Agreement and that it will, independently and without reliance upon Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under this Agreement or any of the other Financing Agreements. Agent shall not be required to keep itself informed as to the performance or observance by any Borrower or Obligor of any term or provision of this Agreement or any of the other Financing Agreements or any other document referred to or provided for herein or therein or to inspect the properties or books of any Borrower or Obligor. Agent will use reasonable efforts to provide Lenders with any information received by Agent from any Borrower or Obligor which is required to be provided to Lenders or deemed to be requested by Lenders hereunder and with a copy of any Notice of Default or Failure of Condition received by Agent from any Borrower or any Lender; provided, that, Agent shall not be liable to any Lender for any failure to do so, except to the extent that such failure is attributable to Agent's own gross negligence or willful misconduct as determined by a final non-appealable judgment of a court of competent jurisdiction. Except for notices, reports and other documents expressly required to be furnished to Lenders by Agent hereunder, Agent shall not have any duty or responsibility to provide any Lender with any other credit or other information concerning the affairs, financial condition or business of any Borrower or Obligor that may come into the possession of Agent. 83 12.7 Failure to Act. Except for action expressly required of Agent hereunder and under the other Financing Agreements, Agent shall in all cases be fully justified in failing or refusing to act hereunder and thereunder unless it shall receive further assurances to its satisfaction from Lenders of their indemnification obligations under Section 12.5 hereof against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action. 12.8 [Intentionally Omitted.] 12.9 Concerning the Collateral and the Related Financing Agreements. Each Lender authorizes and directs Agent to enter into this Agreement and the other Financing Agreements. Each Lender agrees that any action taken by Agent or Required Lenders in accordance with the terms of this Agreement or the other Financing Agreements and the exercise by Agent or Required Lenders of their respective powers set forth therein or herein, together with such other powers that are reasonably incidental thereto, shall be binding upon all of the Lenders. 12.10 Field Audit, Examination Reports and other Information; Disclaimer by Lenders. By signing this Agreement, each Lender: (a) is deemed to have requested that Agent furnish such Lender, promptly after it becomes available, a copy of each field audit or examination report and report with respect to the Borrowing Base prepared or received by Agent (each field audit or examination report and report with respect to the Borrowing Base being referred to herein as a "Report" and collectively, "Reports"), appraisal and financial statements; (b) expressly agrees and acknowledges that Agent (i) does not make any representation or warranty as to the accuracy of any Report, appraisal or financial statement or (ii) shall not be liable for any information contained in any Report, appraisal or financial statement; (c) expressly agrees and acknowledges that the Reports are not comprehensive audits or examinations, that Agent or any other party performing any audit or examination will inspect only specific information regarding Borrowers and will rely significantly upon Borrowers' books and records, as well as on representations of Borrowers' personnel; and (d) agrees to keep all Reports confidential and strictly for its internal use in accordance with the terms of Section 13.5 hereof, and not to distribute or use any Report in any other manner. 12.11 Collateral Matters. (a) Agent may, at its option, from time to time, at any time on or after an Event of Default and for so long as the same is continuing or upon any other failure of a condition precedent to the Loan hereunder, make such disbursements and advances ("Special Agent Advances") which Agent, in its sole discretion, (i) deems necessary or desirable either to preserve or protect the Collateral or any portion thereof or (ii) to enhance the likelihood or maximize the amount of repayment by Borrowers of the Loan and other Obligations, provided, 84 that, the aggregate principal amount of the Special Agent Advances pursuant to this clause (ii) shall not exceed the aggregate amount of ten (10%) percent of the Maximum Credit or (iii) to pay any other amount chargeable to any Borrower pursuant to the terms of this Agreement or any of the other Financing Agreements consisting of costs, fees and expenses. Special Agent Advances shall be repayable on demand and together with all interest thereon shall constitute Obligations secured by the Collateral. Special Agent Advances shall not constitute a portion of the Loan but shall otherwise constitute Obligations hereunder. Interest on Special Agent Advances shall be payable at the Interest Rate then applicable to the Loan and shall be payable on demand. Each Lender agrees that it shall make available to Agent, upon Agent's demand, in immediately available funds, the amount equal to such Lender's Pro Rata Share of each such Special Agent Advance. If such funds are not made available to Agent by such Lender, Agent shall be entitled to recover such funds, on demand from such Lender together with interest thereon for each day from the date such payment was due until the date such amount is paid to Agent at the Federal Funds Rate for each day during such period (as published by the Federal Reserve Bank of New York or at Agent's option based on the arithmetic mean determined by Agent of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by each of the three leading brokers of Federal funds transactions in New York City selected by Agent) and if such amounts are not paid within three (3) days of Agent's demand, at the highest Interest Rate provided for in Section 3.1 hereof applicable to the Loan. (b) Lenders hereby irrevocably authorize Agent, at its option and in its discretion to release any security interest in, mortgage or lien upon, any of the Collateral (i) payment and satisfaction of all of the Obligations and delivery of cash collateral to the extent required under Section 13.1 below, or (ii) constituting property being sold or disposed of if Administrative Borrower or any Borrower certifies to Agent that the sale or disposition is made in compliance with Section 9.7 hereof (and Agent may rely conclusively on any such certificate, without further inquiry), or (iii) constituting property in which any Borrower did not own an interest at the time the security interest, mortgage or lien was granted or at any time thereafter, or (iv) having a value in the aggregate in any twelve (12) month period of less than $500,000, and to the extent Agent may release its security interest in and lien upon any such Collateral pursuant to the sale or other disposition thereof, such sale or other disposition shall be deemed consented to by Lenders, or (v) if required or permitted under the terms of any of the other Financing Agreements, including any intercreditor agreement, or (vi) approved, authorized or ratified in writing by all of Lenders. Except as provided above, Agent will not release any security interest in, mortgage or lien upon, any of the Collateral without the prior written authorization of all of Lenders. Upon request by Agent at any time, Lenders will promptly confirm in writing Agent's authority to release particular types or items of Collateral pursuant to this Section. (c) Without any manner limiting Agent's authority to act without any specific or further authorization or consent by the Required Lenders, each Lender agrees to confirm in writing, upon request by Agent, the authority to release Collateral conferred upon Agent under this Section. Agent shall (and is hereby irrevocably authorized by Lenders to) execute such documents as may be necessary to evidence the release of the security interest, mortgage or liens granted to Agent upon any Collateral to the extent set forth above; provided, that, (i) Agent shall not be required to execute any such document on terms which, in Agent's opinion, would expose Agent to liability or create any obligations or entail any consequence other than the release of 85 such security interest, mortgage or liens without recourse or warranty and (ii) such release shall not in any manner discharge, affect or impair the Obligations or any security interest, mortgage or lien upon (or obligations of any Borrower in respect of) the Collateral retained by such Borrower. (d) Agent shall have no obligation whatsoever to any Lender or any other Person to investigate, confirm or assure that the Collateral exists or is owned by any Borrower or is cared for, protected or insured or has been encumbered, or that the liens and security interests granted to Agent pursuant hereto or any of the Financing Agreements or otherwise have been properly or sufficiently or lawfully created, perfected, protected or enforced or are entitled to any particular priority, or to exercise at all or in any particular manner or under any duty of care, disclosure or fidelity, or to continue exercising, any of the rights, authorities and powers granted or available to Agent in this Agreement or in any of the other Financing Agreements, it being understood and agreed that in respect of the Collateral, or any act, omission or event related thereto, Agent may act in any manner it may deem appropriate, in its discretion, given Agent's own interest in the Collateral as a Lender and that Agent shall have no duty or liability whatsoever to any other Lender. 12.12 Agency for Perfection. Each Lender hereby appoints Agent and each other Lender as agent and bailee for the purpose of perfecting the security interests in and liens upon the Collateral of Agent in assets which, in accordance with Article 9 of the UCC can be perfected only by possession (or where the security interest of a secured party with possession has priority over the security interest of another secured party) and Agent and each Lender hereby acknowledges that it holds possession of any such Collateral for the benefit of Agent as secured party. Should any Lender obtain possession of any such Collateral, such Lender shall notify Agent thereof, and, promptly upon Agent's request therefor shall deliver such Collateral to Agent or in accordance with Agent's instructions. 12.13 Successor Agent. Agent may resign as Agent upon thirty (30) days' notice to Lenders and Administrative Borrower. If Agent resigns under this Agreement, the Required Lenders shall appoint from among the Lenders a successor agent for Lenders. If no successor agent is appointed prior to the effective date of the resignation of Agent, Agent may appoint, after consulting with Lenders and Administrative Borrower, a successor agent from among Lenders. Upon the acceptance by the Lender so selected of its appointment as successor agent hereunder, such successor agent shall succeed to all of the rights, powers and duties of the retiring Agent and the term "Agent" as used herein and in the other Financing Agreements shall mean such successor agent and the retiring Agent's appointment, powers and duties as Agent shall be terminated. After any retiring Agent's resignation hereunder as Agent, the provisions of this Section 12 shall inure to its benefit as to any actions taken or omitted by it while it was Agent under this Agreement. If no successor agent has accepted appointment as Agent by the date which is thirty (30) days after the date of a retiring Agent's notice of resignation, the retiring Agent's resignation shall nonetheless thereupon become effective and Lenders shall perform all of the duties of Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above. 86 SECTION 13. TERM OF AGREEMENT; MISCELLANEOUS 13.1 Term. (a) This Agreement and the other Financing Agreements shall become effective as of the date set forth on the first page hereof and shall continue in full force and effect for a term ending on June 30, 2006 (the "Renewal Date") unless renewed pursuant to the following sentence or sooner terminated pursuant to the terms hereof. Borrowers shall have the option to renew this Agreement and the other Financing Agreements for one additional successive term effective as of the Renewal Date through June 30, 2007; provided, that (i) the Working Capital Loan Agreement and the other Working Capital Lender Agreements are also renewed until at least June 30, 2007, (ii) Borrower provides to Agent written notice of such intention to renew (which notice shall be irrevocable) at least sixty (60) days prior to the Renewal Date, and (iii) no Default or Event of Default has occurred and is continuing from the time that Agent receives the notice set forth in clause (ii) above until the Renewal Date. In addition, Borrowers may terminate this Agreement at any time upon ten (10) days prior written notice to Agent (which notice shall be irrevocable) and Agent may, at its option, and shall at the direction of Required Lenders, terminate this Agreement at any time an Event of Default exists or has occurred and is continuing. Upon the Renewal Date or any other effective date of termination of the Financing Agreements, Borrowers shall pay to Agent all outstanding and unpaid Obligations and shall furnish cash collateral to Agent (or at Agent's option, a letter of credit issued for the account of Borrowers and at Borrowers' expense, in form and substance satisfactory to Agent, by an issuer acceptable to Agent and payable to Agent as beneficiary) in such amounts as Agent determines are reasonably necessary to secure Agent and Lenders from loss, cost, damage or expense, including reasonable attorneys' fees and expenses, in connection with any contingent Obligations, including checks or other payments provisionally credited to the Obligations and/or as to which Agent or any Lender has not yet received final and indefeasible payment and any continuing obligations of Agent or any Lender pursuant to any Deposit Account Control Agreement. Such payments in respect of the Obligations and cash collateral shall be remitted by wire transfer in Federal funds to the Agent Payment Account or such other bank account of Agent, as Agent may, in its discretion, designate in writing to Administrative Borrower for such purpose. Interest shall be due until and including the next Business Day, if the amounts so paid by Borrowers to the Agent Payment Account or other bank account designated by Agent are received in such bank account later than 12:00 noon, New York City time. (b) No termination of this Agreement or the other Financing Agreements shall relieve or discharge any Borrower of its respective duties, obligations and covenants under this Agreement or the other Financing Agreements until all Obligations have been fully and finally discharged and paid, and Agent's continuing security interest in the Collateral and the rights and remedies of Agent and Lenders hereunder, under the other Financing Agreements and applicable law, shall remain in effect until all such Obligations have been fully and finally discharged and paid. Accordingly, each Borrower waives any rights it may have under the UCC to demand the filing of termination statements with respect to the Collateral and Agent shall not be required to send such termination statements to Borrowers, or to file them with any filing office, unless and until this Agreement shall have been terminated in accordance with its terms and all Obligations paid and satisfied in full in immediately available funds. 87 13.2 Interpretative Provisions. (a) All terms used herein which are defined in Article 1, Article 8 or Article 9 of the UCC shall have the meanings given therein unless otherwise defined in this Agreement. (b) All references to the plural herein shall also mean the singular and to the singular shall also mean the plural unless the context otherwise requires. (c) All references to any Borrower, Agent and Lenders pursuant to the definitions set forth in the recitals hereto, or to any other person herein, shall include their respective successors and assigns. (d) The words "hereof", "herein", "hereunder", "this Agreement" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not any particular provision of this Agreement and as this Agreement now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced. (e) The word "including" when used in this Agreement shall mean "including, without limitation" and the word "will" when used in this Agreement shall be construed to have the same meaning and effect as the word "shall". (f) An Event of Default shall exist or continue or be continuing until such Event of Default is waived in accordance with Section 11.3 or is cured in a manner satisfactory to Agent, if such Event of Default is capable of being cured as determined by Agent. (g) All references to the term "good faith" used herein when applicable to Agent or any Lender shall mean, notwithstanding anything to the contrary contained herein or in the UCC, honesty in fact in the conduct or transaction concerned. Borrowers shall have the burden of proving any lack of good faith on the part of Agent or any Lender alleged by any Borrower at any time. (h) Any accounting term used in this Agreement shall have, unless otherwise specifically provided herein, the meaning customarily given in accordance with GAAP, and all financial computations hereunder shall be computed unless otherwise specifically provided herein, in accordance with GAAP as consistently applied and using the same method for inventory valuation as used in the preparation of the financial statements of Borrowers most recently received by Agent prior to the date hereof. Notwithstanding anything to the contrary contained in GAAP or any interpretations or other pronouncements by the Financial Accounting Standards Board or otherwise, the term "unqualified opinion" as used herein to refer to opinions or reports provided by accountants shall mean an opinion or report that is not only unqualified but also does not include any explanatory note or language, including any explanation, supplemental comment or other comment concerning the ability of the applicable person to continue as a going concern or otherwise. (i) In the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including", the words "to" and "until" each mean "to but excluding" and the word "through" means "to and including". 88 (j) Unless otherwise expressly provided herein, (i) references herein to any agreement, document or instrument shall be deemed to include all subsequent amendments, modifications, supplements, extensions, renewals, restatements or replacements with respect thereto, but only to the extent the same are not prohibited by the terms hereof or of any other Financing Agreement, and (ii) references to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending, replacing, recodifying, supplementing or interpreting the statute or regulation. (k) The captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement. (l) This Agreement and other Financing Agreements may use several different limitations, tests or measurements to regulate the same or similar matters. All such limitations, tests and measurements are cumulative and shall each be performed in accordance with their terms. (m) This Agreement and the other Financing Agreements are the result of negotiations among and have been reviewed by counsel to Agent and the other parties, and are the products of all parties. Accordingly, this Agreement and the other Financing Agreements shall not be construed against Agent or Lenders merely because of Agent's or any Lender's involvement in their preparation. 13.3 Notices. All notices, requests and demands hereunder shall be in writing and deemed to have been given or made: if delivered in person, immediately upon delivery; if by telex, telegram or facsimile transmission, immediately upon sending and upon confirmation of receipt; if by nationally recognized overnight courier service with instructions to deliver the next Business Day, one (1) Business Day after sending; and if by certified mail, return receipt requested, five (5) days after mailing. All notices, requests and demands upon the parties are to be given to the following addresses (or to such other address as any party may designate by notice in accordance with this Section): If to any Borrower: Lexington Precision Corporation 767 Third Avenue New York, New York 10017-2023 Attention: President Telephone No.: 212-319-4657 Telecopy No.: 212-319-4659 with a copy to: Nixon Peabody LLP 437 Madison Avenue New York, New York 10022 Attention: Lauren Wiesenberg, Esq. Telephone No.: 212-940-3136 Telecopy No.: 866-947-2363 If to Agent: Ableco Finance LLC 299 Park Avenue, 22nd Floor 89 New York, New York 10171 Attention: Mr. Daniel E. Wolf Telephone No.: 212-891-2121 Telecopy No.: 212-891-1541 with a copy to: Schulte Roth & Zabel LLP 919 Third Avenue New York, New York 10022 Attention: Eliot L. Relles, Esq. Telephone No.: 212-756-2000 Telecopy No.: 212-593-5955 13.4 Partial Invalidity. If any provision of this Agreement is held to be invalid or unenforceable, such invalidity or unenforceability shall not invalidate this Agreement as a whole, but this Agreement shall be construed as though it did not contain the particular provision held to be invalid or unenforceable and the rights and obligations of the parties shall be construed and enforced only to such extent as shall be permitted by applicable law. 13.5 Confidentiality. (a) Agent and each Lender shall use all reasonable efforts to keep confidential, in accordance with its customary procedures for handling confidential information and safe and sound lending practices, any non-public information supplied to it by any Borrower pursuant to this Agreement, provided, that, nothing contained herein shall limit the disclosure of any such information: (i) to the extent required by statute, rule, regulation, subpoena or court order provided Administrative Borrower, if practicable, is given prior notice of any such disclosure and in all other instances Administrative Borrower is given notice of any such disclosure promptly after Agent's or such Lender's disclosure of such information, (ii) to bank examiners and other regulators, auditors and/or accountants, in connection with any litigation to which Agent or such Lender is a party, (iii) to any Lender or Participant (or prospective Lender or Participant) or to any Affiliate of any Lender so long as such Lender or Participant (or prospective Lender or Participant) or Affiliate shall have instructed in writing, and by acceptance of the information be deemed to have agreed, to treat such information as confidential in accordance with this Section 13.5, or (iv) to counsel for Agent or any Lender or Participant (or prospective Lender or Participant). (b) In the event that Agent or any Lender receives a request or demand to disclose any confidential information pursuant to any subpoena or court order, Agent or such Lender, as the case may be, agrees (i) to the extent permitted by applicable law or if permitted by applicable law, to the extent Agent or such Lender determines in good faith that it will not create any risk of liability to Agent or such Lender, Agent or such Lender will promptly notify Administrative Borrower of such request so that Administrative Borrower may seek a protective order or other appropriate relief or remedy and (ii) if disclosure of such information is required, disclose such information and, subject to reimbursement by Borrowers of Agent's or such Lender's expenses, cooperate with Administrative Borrower in the reasonable efforts to obtain an order or other reliable assurance that confidential treatment will be accorded to such portion of 90 the disclosed information which Administrative Borrower so designates, to the extent permitted by applicable law or if permitted by applicable law, to the extent Agent or such Lender determines in good faith that it will not create any risk of liability to Agent or such Lender. (c) In no event shall this Section 13.5 or any other provision of this Agreement, any of the other Financing Agreements or applicable law be deemed: (i) to apply to or restrict disclosure of information that has been or is made public by any Borrower, or any third party or otherwise becomes generally available to the public other than as a result of a disclosure in violation hereof, (ii) to apply to or restrict disclosure of information that was or becomes available to Agent or any Lender (or any Affiliate of any Lender) on a non-confidential basis from a person other than a Borrower, (iii) to require Agent or any Lender to return any materials furnished by a Borrower to Agent or a Lender or prevent Agent or a Lender from responding to routine informational requests in accordance with the Code of Ethics for the Exchange of Credit Information promulgated by The Robert Morris Associates or other applicable industry standards relating to the exchange of credit information. The obligations of Agent and Lenders under this Section 13.5 shall supersede and replace the obligations of Agent and Lenders under any confidentiality letter signed prior to the date hereof. (d) Notwithstanding anything to the contrary set forth herein or in any of the other Financing Agreements or any other written or oral understanding or agreement, (i) any obligations of confidentiality contained herein, in any of the other Financing Agreements or any such other understanding or agreement do not apply and have not applied from the commencement of discussions between the parties to the tax treatment and tax structure of the transactions contemplated herein (and any related transactions or arrangements), and (ii) each party (and each of its employees, representatives, or other agents) may disclose to any and all persons the tax treatment and tax structuring of the transactions contemplated herein and all materials of any kind (including opinions or other tax analyses) that are provided to such party relating to such tax treatment and tax structure, all within the meaning of Treasury Regulation Section 1.6011-4; provided, that, each party recognizes that the privilege that it may, in its discretion, maintain with respect to the confidentiality of a communication relating to the transactions contemplated herein, including a confidential communication with its attorney or a confidential communication with a federally authorized tax practitioner under Section 7525 of the Internal Revenue Code, is not intended to be affected by the foregoing. Borrowers do not intend to treat the Loan and related transactions as being a "reportable transaction" (within the meaning of Treasury Regulation Section 1.6011-4). In the event Borrowers determine to take any action inconsistent with such intention, it will promptly notify Agent thereof. Each Borrower acknowledges that one or more of Lenders may treat its portion of the Loan as part of a transaction that is subject to Treasury Regulation Section 1.6011-4 or Section 301.6112-1, and the Agent and such Lender or Lenders, as applicable, may file such IRS forms or maintain such lists and other records as they may determine is required by such Treasury Regulations. 13.6 Successors. This Agreement, the other Financing Agreements and any other document referred to herein or therein shall be binding upon and inure to the benefit of and be enforceable by Agent, Lenders, Borrowers, and their respective successors and assigns, except that no Borrower may assign its rights under this Agreement and the other Financing Agreements without the prior written consent of Agent and Lenders. Any such purported assignment without such express prior written consent shall be void. No Lender may assign its rights and obligations 91 under this Agreement without the prior written consent of Agent, except as provided in Section 13.7 below. The terms and provisions of this Agreement and the other Financing Agreements are for the purpose of defining the relative rights and obligations of Borrowers, Agent and Lenders with respect to the transactions contemplated hereby and there shall be no third party beneficiaries of any of the terms and provisions of this Agreement or any of the other Financing Agreements. 13.7 Assignments; Participations. (a) Each Lender may, with the prior written consent of Agent, assign all or, if less than all, a portion equal to at least $1,000,000 in the aggregate for the assigning Lender (except such minimum amount shall not apply to an assignment by a Lender to an Affiliate of such Lender or an Approved Fund), of such rights and obligations under this Agreement to one or more Eligible Transferees or Approved Funds (but not including for this purpose any assignments in the form of a participation), each of which assignees shall become a party to this Agreement as a Lender by execution of an Assignment and Acceptance; provided, that, (i) such transfer or assignment will not be effective until recorded by Agent on the Register (as defined below) and (ii) Agent shall have received for its sole account payment of a processing fee from the assigning Lender or the assignee in the amount of $5,000 (except the payment of such fee shall not be required in connection with an assignment by a Lender to an Affiliate of such Lender or an Approved Fund). (b) Agent shall maintain a register of the names and addresses of Lenders, their Commitments and the principal amount of their portion of the Loan (the "Register"). Agent shall also maintain a copy of each Assignment and Acceptance delivered to and accepted by it and shall modify the Register to give effect to each Assignment and Acceptance. The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and any Borrowers, Obligors, Agent and Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by Administrative Borrower and any Lender at any reasonable time and from time to time upon reasonable prior notice. (c) Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, the assignee thereunder shall be a party hereto and to the other Financing Agreements and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender hereunder and thereunder and the assigning Lender shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement. (d) By execution and delivery of an Assignment and Acceptance, the assignor and assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, the assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or any of the other Financing Agreements or the execution, legality, enforceability, genuineness, 92 sufficiency or value of this Agreement or any of the other Financing Agreements furnished pursuant hereto, (ii) the assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Borrower, Obligor or any of their Subsidiaries or the performance or observance by any Borrower or Obligor of any of the Obligations; (iii) such assignee confirms that it has received a copy of this Agreement and the other Financing Agreements, together with such other documents and information it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance, (iv) such assignee will, independently and without reliance upon the assigning Lender, Agent and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and the other Financing Agreements, (v) such assignee appoints and authorizes Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the other Financing Agreements as are delegated to Agent by the terms hereof and thereof, together with such powers as are reasonably incidental thereto, and (vi) such assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement and the other Financing Agreements are required to be performed by it as a Lender. Agent and Lenders may furnish any information concerning any Borrower or Obligor in the possession of Agent or any Lender from time to time to assignees and Participants. (e) Each Lender may sell participations to one or more banks or other entities in or to all or a portion of its rights and obligations under this Agreement and the other Financing Agreements (including, without limitation, all or a portion of the Loan owing to it, without the consent of Agent or the other Lenders); provided, that, (i) such Lender's obligations under this Agreement and the other Financing Agreements shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, and Borrowers, the other Lenders and Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and the other Financing Agreements, and (iii) the Participant shall not have any rights under this Agreement or any of the other Financing Agreements (the Participant's rights against such Lender in respect of such participation to be those set forth in the agreement executed by such Lender in favor of the Participant relating thereto) and all amounts payable by any Borrower or Obligor hereunder shall be determined as if such Lender had not sold such participation. (f) Nothing in this Agreement shall prevent or prohibit any Lender from pledging its portion of the Loan hereunder to a Federal Reserve Bank in support of borrowings made by such Lenders from such Federal Reserve Bank; provided, that, no such pledge shall release such Lender from any of its obligations hereunder or substitute any such pledgee for such Lender as a party hereto. (g) Borrowers agree to cooperate with Agent or any Lender permitted to sell assignments or participations under this Section 13.7 and upon request shall take such commercially reasonable actions in order to enable or effect any such assignment or participation, including (but not limited to) the execution and delivery of any and all agreements, notes and other documents and instruments as shall be reasonably requested by Agent or any Lender and the delivery of informational materials, appraisals or other documents for, and the 93 participation of relevant management in meetings and conference calls with, potential Lenders or Participants. (h) A Registered Loan (and the Registered Note, if any, evidencing the same) may be assigned or sold in whole or in part only by registration of such assignment or sale on the Register (and each Registered Note shall expressly so provide). Any assignment or sale of all or part of such Registered Loan (and the Registered Note, if any, evidencing the same) may be effected only by registration of such assignment or sale on the Register, together with the surrender of the Registered Note, if any, evidencing the same duly endorsed by (or accompanied by a written instrument of assignment or sale duly executed by) the holder of such Registered Note, whereupon, at the request of the designated assignee(s) or transferee(s), one or more new Registered Notes in the same aggregate principal amount shall be issued to the designated assignee(s) or transferee(s). Prior to the registration of assignment or sale of any Registered Loan (and the Registered Note, if any evidencing the same), Agent and Borrowers shall treat the Person in whose name such Loan (and the Registered Note, if any, evidencing the same) is registered as the owner thereof for the purpose of receiving all payments thereon and for all other purposes, notwithstanding notice to the contrary. In the case of an assignment by a Lender to any of its Approved Funds that is not reflected in Agent's Register, the assigning Lender shall maintain a comparable register on behalf of Agent. (i) In the event that any Lender sells participations in a Registered Loan, such Lender shall maintain a register on which it enters the name of all participants in such Registered Loan (the "Participant Register"). A Registered Loan (and the Registered Note, if any, evidencing the same) may be participated in whole or in part only by registration of such participation on the Participant Register (and each Registered Note shall expressly so provide). Any participation of such Registered Loan (and the Registered Note, if any, evidencing the same) may be effected only by the registration of such participation on the Participant Register. 13.8 Entire Agreement. This Agreement, the other Financing Agreements, any supplements hereto or thereto, and any instruments or documents delivered or to be delivered in connection herewith or therewith represents the entire agreement and understanding concerning the subject matter hereof and thereof between the parties hereto, and supersede all other prior agreements, understandings, negotiations and discussions, representations, warranties, commitments, proposals, offers and contracts concerning the subject matter hereof, whether oral or written. In the event of any inconsistency between the terms of this Agreement and any schedule or exhibit hereto, the terms of this Agreement shall govern. 13.9 Counterparts, Etc. This Agreement or any of the other Financing Agreements may be executed in any number of counterparts, each of which shall be an original, but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of this Agreement or any of the other Financing Agreements by telefacsimile shall have the same force and effect as the delivery of an original executed counterpart of this Agreement or any of such other Financing Agreements. Any party delivering an executed counterpart of any such agreement by telefacsimile shall also deliver an original executed counterpart, but the failure to do so shall not affect the validity, enforceability or binding effect of such agreement. 94 [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 95 IN WITNESS WHEREOF, Agent, Lenders, Borrowers have caused these presents to be duly executed as of the day and year first above written. AGENT BORROWERS ALBECO FINANCE LLC, as Agent LEXINGTON PRECISION CORPORATION By: /s/ Daniel Wolf _____________________________ By: /s/ Warren Delano __________________________________ Title: Senior Vice President __________________________ Title: President _______________________________ LEXINGTON RUBBER GROUP, INC. By: /s/ Warren Delano __________________________________ Title: President _______________________________ LENDERS ABLECO FINANCE LLC By: /s/ Daniel Wolf _____________________________ Title: Senior Vice President __________________________ Commitment: $11,500,000 96 EXHIBIT A to LOAN AND SECURITY AGREEMENT ASSIGNMENT AND ACCEPTANCE AGREEMENT This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "Assignment and Acceptance") dated as of _____________, 2003 is made between ________________________ (the "Assignor") and ____________________ (the "Assignee"). W I T N E S S E T H: WHEREAS, Ableco Finance LLC, in its capacity as agent pursuant to the Loan Agreement (as hereinafter defined) acting for and on behalf of the parties thereto as lenders (in such capacity, "Agent"), and the parties to the Loan Agreement as lenders (individually, each a "Lender" and collectively, "Lenders") have entered or are about to enter into financing arrangements pursuant to which Agent and Lenders may make loans to Lexington Precision Corporation and Lexington Rubber Group, Inc. (collectively, "Borrowers") as set forth in the Loan and Security Agreement, dated December 18, 2003, by and among Borrowers, Agent and Lenders (as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, the "Loan Agreement"), and the other agreements, documents and instruments referred to therein or at any time executed and/or delivered in connection therewith or related thereto (all of the foregoing, together with the Loan Agreement, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, being collectively referred to herein as the "Financing Agreements"); WHEREAS, as provided under the Loan Agreement, Assignor has made a Loan (the "Committed Loan") to Borrowers in an aggregate amount of $___________ (the "Loan Amount"); WHEREAS, Assignor wishes to assign to Assignee [part of the] [all] rights and obligations of Assignor under the Loan Agreement in respect of its Committed Loan in an amount equal to $______________ (the "Assigned Committed Loan Amount") on the terms and subject to the conditions set forth herein and Assignee wishes to accept assignment of such rights and to assume such obligations from Assignor on such terms and subject to such conditions; NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows: A-1 1. Assignment and Acceptance. (a) Subject to the terms and conditions of this Assignment and Acceptance, Assignor hereby sells, transfers and assigns to Assignee, and Assignee hereby purchases, assumes and undertakes from Assignor, without recourse and without representation or warranty (except as provided in this Assignment and Acceptance) an interest in (i) the Committed Loan of Assignor and (ii) all related rights, benefits, obligations, liabilities and indemnities of the Assignor (in its capacity as a Lender) under and in connection with the Loan Agreement and the other Financing Agreements, so that after giving effect thereto, the Committed Loan of Assignee shall be as set forth below and the Pro Rata Share of Assignee shall be _______ (__%) percent. (b) With effect on and after the Effective Date (as defined in Section 5 hereof), Assignee shall be a party to the Loan Agreement and succeed to all of the rights and be obligated to perform all of the obligations of a Lender under the Loan Agreement, including the requirements concerning confidentiality and the payment of indemnification. Assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Loan Agreement are required to be performed by it as a Lender. It is the intent of the parties hereto that the Committed Loan of Assignor shall, as of the Effective Date, be reduced by an amount equal to the Assigned Committed Loan Amount and Assignor shall relinquish its rights and be released from its obligations under the Loan Agreement to the extent such obligations have been assumed by Assignee; provided, that, Assignor shall not relinquish its rights under Sections 2.1, 6.4, 6.8 and 6.9 of the Loan Agreement to the extent such rights relate to the time prior to the Effective Date. (c) After giving effect to the assignment and assumption set forth herein, on the Effective Date Assignee's Committed Loan will be $_____________. (d) After giving effect to the assignment and assumption set forth herein, on the Effective Date Assignor's Committed Loan will be $______________ (as such amount may be further reduced by any other assignments by Assignor on or after the date hereof). 2. Payments. (a) As consideration for the sale, assignment and transfer contemplated in Section 1 hereof, Assignee shall pay to Assignor on the Effective Date in immediately available funds an amount equal to $____________, representing Assignee's Pro Rata Share of the principal amount of the Committed Loan. (b) Assignee shall pay to Agent the processing fee in the amount specified in Section 13.7(a) of the Loan Agreement. 3. Reallocation of Payments. Any interest, fees and other payments accrued to the Effective Date with respect to the Committed Loan shall be for the account of Assignor. Any interest, fees and other payments accrued on and after the Effective Date with respect to the Assigned Committed Loan Amount shall be for the account of Assignee. Each of Assignor and Assignee agrees that it will hold in trust for the other party any interest, fees and other amounts which it may receive to which the other party is entitled pursuant to the preceding sentence and pay to the other party any such amounts which it may receive promptly upon receipt. A-2 4. Independent Credit Decision. Assignee acknowledges that it has received a copy of the Loan Agreement and the Schedules and Exhibits thereto, together with copies of the most recent financial statements of Borrowers, and such other documents and information as it has deemed appropriate to make its own credit and legal analysis and decision to enter into this Assignment and Acceptance and agrees that it will, independently and without reliance upon Assignor, Agent or any Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit and legal decisions in taking or not taking action under the Loan Agreement. 5. Effective Date; Notices. (a). As between Assignor and Assignee, the effective date for this Assignment and Acceptance shall be _______________, 200_ (the "Effective Date"); provided, that, the following conditions precedent have been satisfied on or before the Effective Date: (i) this Assignment and Acceptance shall be executed and delivered by Assignor and Assignee; (ii) the consent of Agent as required for an effective assignment of the Assigned Committed Loan Amount by Assignor to Assignee shall have been duly obtained and shall be in full force and effect as of the Effective Date; (iii) written notice of such assignment, together with payment instructions, addresses and related information with respect to Assignee, shall have been given to Agent; (iv) Assignee shall pay to Assignor all amounts due to Assignor under this Assignment and Acceptance; and (v) the processing fee referred to in Section 2(b) hereof shall have been paid to Agent. (b) Promptly following the execution of this Assignment and Acceptance, Assignor shall deliver to Agent for acknowledgment by Agent, a Notice of Assignment in the form attached hereto as Schedule 1. [6. Agent. [INCLUDE ONLY IF ASSIGNOR IS AN AGENT] (a) Assignee hereby appoints and authorizes Assignor in its capacity as Agent to take such action as agent on its behalf to exercise such powers under the Loan Agreement as are delegated to Agent by Lenders pursuant to the terms of the Loan Agreement. (b) Assignee shall assume no duties or obligations held by Assignor in its capacity as Agent under the Loan Agreement.] 7. Withholding Tax. Assignee (a) represents and warrants to Assignor, Agent and Borrowers that under applicable law and treaties no tax will be required to be withheld by Assignee, Agent or Borrowers with respect to any payments to be made to Assignee A-3 hereunder or under any of the Financing Agreements, (b) agrees to furnish (if it is organized under the laws of any jurisdiction other than the United States or any State thereof) to Agent and Borrowers prior to the time that Agent or Borrowers are required to make any payment of principal, interest or fees hereunder, duplicate executed originals of either U.S. Internal Revenue Service Form W-8BEN or W-8ECI, as applicable (wherein Assignee claims entitlement to the benefits of a tax treaty that provides for a complete exemption from U.S. federal income withholding tax on all payments hereunder) and agrees to provide new such Forms upon the expiration of any previously delivered form or comparable statements in accordance with applicable U.S. law and regulations and amendments thereto, duly executed and completed by Assignee, and (c) agrees to comply with all applicable U.S. laws and regulations with regard to such withholding tax exemption. 8. Representations and Warranties. (a) Assignor represents and warrants that (i) it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any security interest, lien, encumbrance or other adverse claim, (ii) it is duly organized and existing and it has the full power and authority to take, and has taken, all action necessary to execute and deliver this Assignment and Acceptance and any other documents required or permitted to be executed or delivered by it in connection with this Assignment and Acceptance and to fulfill its obligations hereunder, (iii) no notices to, or consents, authorizations or approvals of, any Person are required (other than any already given or obtained) for its due execution, delivery and performance of this Assignment and Acceptance, and apart from any agreements or undertakings or filings required by the Loan Agreement, no further action by, or notice to, or filing with, any Person is required of it for such execution, delivery or performance, and (iv) this Assignment and Acceptance has been duly executed and delivered by it and constitutes the legal, valid and binding obligation of Assignor, enforceable against Assignor in accordance with the terms hereof, subject, as to enforcement, to bankruptcy, insolvency, moratorium, reorganization and other laws of general application relating to or affecting creditors' rights and to general equitable principles. (b) Assignor makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Loan Agreement or any of the other Financing Agreements or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Agreement or any other instrument or document furnished pursuant thereto. Assignor makes no representation or warranty in connection with, and assumes no responsibility with respect to, the solvency, financial condition or statements of Borrowers or any of their respective Affiliates, or the performance or observance by Borrowers or any other Person, of any of its respective obligations under the Loan Agreement or any other instrument or document furnished in connection therewith. (c) Assignee represents and warrants that (i) it is duly organized and existing and it has full power and authority to take, and has taken, all action necessary to execute and deliver this Assignment and Acceptance and any other documents required or permitted to be executed or delivered by it in connection with this Assignment and Acceptance, and to fulfill its obligations hereunder, (ii) no notices to, or consents, authorizations or approvals of, any Person A-4 are required (other than any already given or obtained) for its due execution, delivery and performance of this Assignment and Acceptance, and apart from any agreements or undertakings or filings required by the Loan Agreement, no further action by, or notice to, or filing with, any Person is required of it for such execution, delivery or performance; and (iii) this Assignment and Acceptance has been duly executed and delivered by it and constitutes the legal, valid and binding obligation of Assignee, enforceable against Assignee in accordance with the terms hereof, subject, as to enforcement, to bankruptcy, insolvency, moratorium, reorganization and other laws of general application relating to or affecting creditors' rights to general equitable principles. 9. Further Assurances. Assignor and Assignee each hereby agree to execute and deliver such other instruments, and take such other action, as either party may reasonably request in connection with the transactions contemplated by this Assignment and Acceptance, including the delivery of any notices or other documents or instruments to Borrowers or Agent, which may be required in connection with the assignment and assumption contemplated hereby. 10. Miscellaneous (a) Any amendment or waiver of any provision of this Assignment and Acceptance shall be in writing and signed by the parties hereto. No failure or delay by either party hereto in exercising any right, power or privilege hereunder shall operate as a waiver thereof and any waiver of any breach of the provisions of this Assignment and Acceptance shall be without prejudice to any rights with respect to any other for further breach thereof. (b) All payments made hereunder shall be made without any set-off or counterclaim. (c) Assignor and Assignee shall each pay its own costs and expenses incurred in connection with the negotiation, preparation, execution and performance of this Assignment and Acceptance. (d) This Assignment and Acceptance may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument. (e) THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. Assignor and Assignee each irrevocably submits to the non-exclusive jurisdiction of any State or Federal court sitting in New York County, New York over any suit, action or proceeding arising out of or relating to this Assignment and Acceptance and irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such New York State or Federal court. Each party to this Assignment and Acceptance hereby irrevocably waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding. (f) ASSIGNOR AND ASSIGNEE EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING A-5 OUT OF, UNDER, OR IN CONNECTION WITH THIS ASSIGNMENT AND ACCEPTANCE, THE LOAN AGREEMENT, ANY OF THE OTHER FINANCING AGREEMENTS OR ANY RELATED DOCUMENTS AND AGREEMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALING, OR STATEMENTS (WHETHER ORAL OR WRITTEN). IN WITNESS WHEREOF, Assignor and Assignee have caused this Assignment and Acceptance to be executed and delivered by their duly authorized officers as of the date first above written. [ASSIGNOR] By:____________________________________ Title:_________________________________ [ASSIGNEE] By:____________________________________ Title:_________________________________ A-6 SCHEDULE 1 NOTICE OF ASSIGNMENT AND ACCEPTANCE ___, 20__ ________________________________ ________________________________ ________________________________ Attn.:_________________________ Re:_____________________________ Ladies and Gentlemen: Ableco Finance LLC, in its capacity as agent pursuant to the Loan Agreement (as hereinafter defined) acting for and on behalf of the parties thereto as lenders (in such capacity, "Agent"), and the parties to the Loan Agreement as lenders (individually, each a "Lender" and collectively, "Lenders") have entered or are about to enter into financing arrangements pursuant to which Agent and Lenders may make loans to Lexington Precision Corporation and Lexington Rubber Group, Inc. (collectively, "Borrowers") as set forth in the Loan and Security Agreement, dated _____________, 2003, by and among Borrowers, Agent and Lenders (as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, the "Loan Agreement"), and the other agreements, documents and instruments referred to therein or at any time executed and/or delivered in connection therewith or related thereto (all of the foregoing, together with the Loan Agreement, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, being collectively referred to herein as the "Financing Agreements"). Capitalized terms not otherwise defined herein shall have the respective meanings ascribed thereto in the Loan Agreement. i. We hereby give you notice of, and request your consent to, the assignment by __________________________ (the "Assignor") to ___________________________ (the "Assignee") such that after giving effect to the assignment Assignee shall have an interest equal to ________ (__%) percent of the total Loan pursuant to the Assignment and Acceptance Agreement attached hereto (the "Assignment and Acceptance"). We understand that the Assignor's portion of the Loan shall be reduced by $_____________, as the same may be further reduced by other assignments on or after the date hereof. ii. Assignee agrees that, upon receiving the consent of Agent to such assignment, Assignee will be bound by the terms of the Loan Agreement as fully and to the same extent as if the Assignee were the Lender originally holding such interest under the Loan Agreement. A-7 iii. The following administrative details apply to Assignee: (A) Notice address: Assignee name:______________________________ Address: ______________________________ ______________________________ Attention: ______________________________ Telephone: ______________________________ Telecopier: ______________________________ (B) Payment instructions: Account No.: ______________________________ At: ______________________________ ______________________________ ______________________________ Reference: ______________________________ Attention: ______________________________ iv. You are entitled to rely upon the representations, warranties and covenants of each of Assignor and Assignee contained in the Assignment and Acceptance. A-8 IN WITNESS WHEREOF, Assignor and Assignee have caused this Notice of Assignment and Acceptance to be executed by their respective duly authorized officials, officers or agents as of the date first above mentioned. Very truly yours, [NAME OF ASSIGNOR] By:_________________________________________ Title:______________________________________ [NAME OF ASSIGNEE] By:_________________________________________ Title:______________________________________ ACKNOWLEDGED AND ASSIGNMENT CONSENTED TO: ABLECO FINANCE LLC, as Agent By:______________________________ Title:___________________________ A-9 EXHIBIT B TO LOAN AND SECURITY AGREEMENT Compliance Certificate To: Ableco Finance LLC, as Agent 299 Park Avenue New York, New York 10171 Ladies and Gentlemen: Pursuant to Section 9.6 of the Loan Agreement (as defined below), Lexington Precision Corporation, a Delaware corporation and Lexington Rubber Group, Inc., a Delaware corporation (collectively, "Borrower"), hereby certify as follows: 1. Capitalized terms used herein without definition shall have the meanings given to such terms in the Loan and Security Agreement, dated December 18, 2003, by and among Ableco Finance LLC, in its capacity as agent for the parties thereto as lenders (in such capacity, "Agent") and the parties thereto as lenders (collectively, "Lenders") and Borrowers (as such Loan and Security Agreement is amended, modified or supplemented, from time to time, the "Loan Agreement"). 2. The Borrowers have reviewed the terms of the Loan Agreement, and the transactions and the financial condition of Borrowers, during the fiscal month ending ____________. 3. The review described in Section 2 above did not disclose the existence at the end of such fiscal month, and Borrowers have no knowledge of the existence and continuance on the date hereof, of any condition or event which constitutes a Default or an Event of Default, except as set forth on Schedule I attached hereto. Schedule I attached hereto sets forth the exceptions, if any, to this Section 3 listing, in detail, the nature of such Default of Event of Default and the action which Borrowers have taken, are taking, or propose to take with respect to such Default or Event of Default. 4. Borrowers further certify that, based on the review described in Section 2 above, no Borrower has at any time during or at the end of such fiscal month, except as specifically described on Schedule II attached hereto, as previously described or disclosed to you in writing, or as permitted by the Loan Agreement, done any of the following: (a) Changed its respective corporate name, or transacted business under any trade name, style, or fictitious name, other than those previously described to you and set forth in the Financing Agreements. B-1 (b) Changed the location of its chief executive office, changed its jurisdiction of incorporation, changed its type of organization or changed the location of or disposed of any of its properties or assets, or established any new asset locations. (c) Materially changed the terms upon which it sells goods (including sales on consignment) or provides services, nor has any vendor or trade supplier to any Borrower during or at the end of such period materially adversely changed the terms upon which it supplies goods to any Borrower. 5. Attached hereto as Schedule III are the calculations used in determining, as of the end of such fiscal month whether Borrowers are in compliance with the covenants set forth in Sections 9.17, 9.18, 9.19 and 9.20 of the Loan Agreement for such fiscal month and (ii) as of the end of each fiscal quarter whether Borrowers are in compliance with the conditions set forth in Section 9.9(b) of the Loan Agreement for such fiscal quarter. The foregoing certifications are made and delivered by the undersigned this day of ___________, 20__. Very truly yours, LEXINGTON PRECISION CORPORATION By:____________________________ Title:_________________________ LEXINGTON RUBBER GROUP, INC. By:____________________________ Title:_________________________ B-2 EX-10.8 16 l04690aexv10w8.txt EX-10.8 PLEDGE AND SECURITY AGMT DATED 12/18/03 EXHIBIT 10.8 PLEDGE AND SECURITY AGREEMENT THIS PLEDGE AND SECURITY AGREEMENT (this "Pledge Agreement"), dated December 18, 2003, is by LEXINGTON PRECISION CORPORATION, a Delaware corporation ("Pledgor"), with its chief executive office at 767 Third Avenue, New York, New York 10017, to and in favor of ABLECO FINANCE LLC, a Delaware limited liability company, in its capacity as agent pursuant to the Loan Agreement (as hereinafter defined) acting for and on behalf of the parties thereto as lenders (in such capacity, "Pledgee"). W I T N E S S E T H: WHEREAS, Pledgor is now the direct and beneficial owner of all of the issued and outstanding shares of capital stock of Lexington Rubber Group, Inc., a Delaware corporation ("Issuer"), as described on Exhibit A annexed hereto and made a part hereof (the "Pledged Securities"); WHEREAS, Issuer, Pledgor, Pledgee and the parties to the Loan Agreement as lenders (individually, each a "Lender" and collectively, "Lenders") have entered into or are about to enter into financing arrangements pursuant to which Lenders (or Pledgee on behalf of Lenders) may make loans to Pledgor and Issuer as set forth in the Loan and Security Agreement, dated of even date herewith, by and among Issuer, Pledgor, Pledgee and Lenders (as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, the "Loan Agreement") and other agreements, documents and instruments referred to therein or at any time executed and/or delivered in connection therewith or related thereto, including, but not limited to, this Pledge Agreement (all of the foregoing, together with the Loan Agreement, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, being collectively referred to herein as the "Financing Agreements"); WHEREAS, in order to induce Pledgee and Lenders to enter into the Loan Agreement and the other Financing Agreements and to make loans to Pledgor and Issuer pursuant thereto, Pledgor has agreed to secure the payment and performance of the Obligations (as hereinafter defined) and to accomplish same by, among other things, (i) executing and delivering to Pledgee this Pledge Agreement, (ii) delivering to Pledgee the Pledged Securities which are registered in the name of Pledgor, together with appropriate powers duly executed in blank by Pledgor, and (iii) delivering to Pledgee, at Pledgee's reasonable request, any and all other documents which Pledgee deems necessary to protect Pledgee's interests hereunder. NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Pledgor hereby agrees as follows: 1. GRANT OF SECURITY INTEREST As collateral security for the prompt performance, observance and full and final payment of all of the Obligations, Pledgor hereby assigns, pledges, hypothecates, transfers and sets over to Pledgee and grants to Pledgee (for itself and the ratable benefit of Lenders) a security interest in and lien upon: (a) the Pledged Securities, together with all cash dividends, stock dividends, interests, profits, redemptions, warrants, subscription rights, stock, securities options, substitutions, exchanges and other distributions now or hereafter distributed by Issuer or which may hereafter be delivered to the possession of Pledgor or Pledgee with respect thereto, (b) Pledgor's records with respect to the foregoing, and (c) the proceeds (including proceeds of proceeds) of all of the foregoing (all of the foregoing being collectively referred to herein as the "Pledged Property"). 2. OBLIGATIONS SECURED The security interest, lien and other interests granted to Pledgee (for itself and the ratable benefit of Lenders) pursuant to this Pledge Agreement shall secure the prompt performance and payment in full of any and all obligations, liabilities and indebtedness of every kind, nature and description owing by Pledgor to Pledgee and/or any Lender and/or their respective affiliates, including principal, interest, charges, fees, costs and expenses, however evidenced, whether as principal, surety, endorser, guarantor or otherwise, arising under this Pledge Agreement, the Loan Agreement or the other Financing Agreements, whether now existing or hereafter arising, whether arising before, during or after the initial or any renewal term of the Loan Agreement or after the commencement of any case with respect to Pledgor under the United States Bankruptcy Code or any similar statute (including, without limitation, the payment of interest and other amounts which would accrue and become due but for the commencement of such case, whether or not such amounts are allowed or allowable in whole or in part in such case), whether direct or indirect, absolute or contingent, joint or several, due or not due, primary or secondary, liquidated or unliquidated, secured or unsecured (all of the foregoing being collectively referred to herein as the "Obligations"). 3. REPRESENTATIONS, WARRANTIES AND COVENANTS Pledgor hereby represents, warrants and covenants with and to Pledgee and Lenders the following (all of such representations, warranties and covenants being continuing so long as any of the Obligations are outstanding): (a) The Pledged Securities are duly authorized, validly issued, fully paid and non-assessable capital stock of Issuer and constitute Pledgor's entire equity interest in Issuer and are not registered, nor has Pledgor authorized the registration thereof, in the name of any person or entity other than Pledgor or Pledgee. The Pledged Securities constitute 100% of the issued shares of capital stock of Issuer as of the date hereof. (b) The Pledged Property is directly, legally and beneficially owned by Pledgor, free and clear of all claims, liens, pledges and encumbrances of any kind, nature or description, except for the pledge and security interest in favor of Pledgee hereunder and under the Loan Agreement, for itself and the ratable benefit of Lenders, and the pledges and security interests permitted under the Loan Agreement. (c) The Pledged Property is not subject to any restrictions relative to the transfer thereof and Pledgor has the right to transfer and hypothecate the Pledged Property free and clear of any liens, encumbrances or restrictions, except as provided in or pursuant to the Financing Agreements. (d) The Pledged Property is duly and validly pledged to Pledgee, for itself and the ratable benefit of Lenders, and no consent or approval of any governmental or regulatory authority or of any securities exchange or the like, nor any consent or approval of any other third party, was or is necessary to the validity and enforceability of this Pledge Agreement. (e) Pledgor authorizes Pledgee to: (i) store, deposit and safeguard the Pledged Property, (ii) perform any and all other acts which Pledgee in good faith deems necessary or appropriate for the protection and preservation of the Pledged Property or its value or Pledgee's security interest therein and (iii) pay any charges or expenses which Pledgee deems necessary for the foregoing purpose, but without any obligation to do so. Any obligation of Pledgee for reasonable care for the Pledged Property in Pledgee's possession shall be limited to the same degree of care which Pledgee uses for similar property pledged to Pledgee by other persons. (f) If Pledgor shall become entitled to receive or acquire, or shall receive any stock certificate, or stock option or right with respect to the stock of Issuer (including without limitation, any certificate representing a dividend or a distribution or exchange of or in connection with reclassification of the Pledged Securities) whether as an addition to, in substitution of, or in exchange for any of the Pledged Property or otherwise (except as otherwise permitted by Section 3(g) hereof), Pledgor agrees to accept same as Pledgee's agent, to hold same in trust for Pledgee and to deliver same forthwith to Pledgee or Pledgee's agent or bailee in the form received, with the endorsement(s) of Pledgor where necessary and/or appropriate powers and/or assignments duly executed to be held by Pledgee or Pledgee's agent or bailee subject to the terms hereof, as further security for the Obligations. (g) Pledgor shall not, without the prior consent of Pledgee, directly or indirectly, sell, assign, transfer, or otherwise dispose of, or grant any option with respect to the Pledged Property, nor shall Pledgor create, incur or permit any further pledge, hypothecation, encumbrance, lien, mortgage or security interest with respect to the Pledged Property other than pursuant to or as provided in the Financing Agreements. (h) Notwithstanding anything in this Agreement to the contrary, so long as no Event of Default (as hereinafter defined) has occurred and is continuing, Pledgor shall have the right to vote, exercise all rights and take any other actions with respect to the Pledged Securities, except as expressly prohibited herein, and to receive any distributions in respect of the Pledged Securities. (i) Pledgor shall not permit Issuer, directly or indirectly, to issue, sell, grant, assign, transfer or otherwise dispose of, any additional shares of capital stock of Issuer or any option or warrant with respect to, or other right or security convertible into, any additional shares of capital stock of Issuer, now or hereafter authorized, unless all such additional shares, options, warrants, rights or other such securities are made and shall remain part of the Pledged Property subject to the pledge and security interest granted herein. (j) Pledgor shall pay all charges and assessments of any nature against the Pledged Property or with respect thereto prior to said charges and/or assessments being delinquent except such charges and assessments being contested in good faith by Pledgor. (k) Pledgor shall promptly reimburse Pledgee on demand, together with interest at the rate then applicable to the Obligations set forth in the Loan Agreement, for any charges, assessments or expenses paid or incurred by Pledgee in Pledgee's discretion for the protection, preservation and maintenance of the Pledged Property and the enforcement of Pledgee's (on behalf of itself and Lenders) rights hereunder, including, without limitation, reasonable attorneys' fees and legal expenses incurred by Pledgee in protecting, collecting or enforcing its rights in the Pledged Property or otherwise hereunder. (l) Pledgor shall furnish, or cause to be furnished, to Pledgee such information concerning Issuer and the Pledged Property as Pledgee may from time to time reasonably request in good faith as required pursuant to the Loan Agreement. (m) Pledgee may notify Issuer or the appropriate transfer agent of the Pledged Securities to register the security interest and pledge granted herein and honor the rights of Pledgee and Lenders with respect thereto. (n) Pledgor waives: (i) all rights to require Pledgee or any Lender to proceed against any other person, entity or collateral or to exercise any remedy, (ii) to the extent permitted under applicable law, the defense of the statute of limitations in any action upon any of the Obligations, (iii) any right of subrogation or interest in the Obligations or Pledged Property until all Obligations have been paid in full, (iv) any rights to notice of any kind or nature whatsoever, unless specifically required in this Pledge Agreement or the Loan Agreement or non-waivable under any applicable law, and (v) to the extent permitted under applicable law, its rights under Section 9-207 of the Uniform Commercial Code. Pledgor agrees that the Pledged Property, other collateral, or any other guarantor or endorser may be released, substituted or added with respect to the Obligations, in whole or in part, without releasing or otherwise affecting the liability of Pledgor, the pledge and security interests granted hereunder, or this Pledge Agreement. Pledgee, for and on behalf of itself and Lenders, is entitled to all of the benefits of a secured party set forth in Section 9-207 of the Uniform Commercial Code. 4. EVENTS OF DEFAULT The occurrence or existence of any Event of Default under the Loan Agreement is referred to herein individually as an "Event of Default", and collectively as "Events of Default". 5. RIGHTS AND REMEDIES At any time an Event of Default exists or has occurred and is continuing, in addition to all other rights and remedies of Pledgee and Lenders, whether provided under this Pledge Agreement, the Loan Agreement, the other Financing Agreements, applicable law or otherwise, Pledgee shall have the following rights and remedies which may be exercised without notice to, or consent by, Pledgor except as such notice or consent is expressly provided for hereunder or is required by law and not waivable by Pledgor: (a) Pledgee, at its option, shall be empowered to exercise its continuing right (at any time that an Event of Default exists or has occurred and is continuing) to instruct Issuer (or the appropriate transfer agent of the Pledged Securities) to register any or all of the Pledged Securities in the name of Pledgee or in the name of Pledgee's nominee (including, without limitation, any Lender) and Pledgee may complete, in any manner Pledgee may deem expedient, any and all stock powers, assignments or other documents heretofore or hereafter executed in blank by Pledgor and delivered to Pledgee. After said instruction, and without further notice, Pledgee shall have the exclusive right to exercise all voting and corporate rights with respect to the Pledged Securities and other Pledged Property, and exercise any and all rights of conversion, redemption, exchange, subscription or any other rights, privileges, or options pertaining to any shares of the Pledged Securities or other Pledged Property as if Pledgee were the absolute owner thereof, including, without limitation, the right to exchange, in its discretion, any and all of the Pledged Securities and other Pledged Property upon any merger, consolidation, reorganization, recapitalization or other readjustment with respect thereto. Upon the exercise of any such rights, privileges or options by Pledgee, Pledgee shall have the right to deposit and deliver any and all of the Pledged Securities and other Pledged Property to any committee, depository, transfer agent, registrar or other designated agency upon such terms and conditions as Pledgee may determine, all without liability, except to account for property actually received by Pledgee. However, Pledgee shall have no duty to exercise any of the aforesaid rights, privileges or options (all of which are exercisable in the sole discretion of Pledgee) and shall not be responsible for any failure to do so or delay in doing so. (b) In addition to all the rights and remedies of a secured party under the Uniform Commercial Code or other applicable law, Pledgee shall have the right, at any time and 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 Pledgor or any other person (all and each of which demands, advertisements and/or notices are hereby expressly waived to the extent permitted by applicable law), to proceed forthwith to collect, redeem, recover, receive, appropriate, realize, sell, or otherwise dispose of and deliver said Pledged Property or any part thereof in one or more lots at public or private sale or sales at any exchange, broker's board or at any of Pledgee's offices or elsewhere at such prices and on such terms as Pledgee may deem best. The foregoing disposition(s) may be for cash or on credit or for future delivery without assumption of any credit risk, with Pledgee having the right to purchase all or any part of said Pledged Property so sold at any such sale or sales, public or private, free of any right or equity of redemption in Pledgor, which right or equity is hereby expressly waived or released by Pledgor to the fullest extent permitted by applicable law. The proceeds of any such collection, redemption, recovery, receipt, appropriation, realization, sale or other disposition shall be applied in accordance with Section 6.4(a) of the Loan Agreement and then to the payment of any other amounts required by applicable law, including Section 9-615(a)(3) of the Uniform Commercial Code, with Pledgor to be and remain liable for any deficiency. Pledgor shall be liable to Pledgee and Lenders for the payment on demand of all such costs and expenses, together with interest at the rate then applicable to the Obligations set forth in the Loan Agreement, and any reasonable attorneys' fees and legal expenses. Pledgor agrees that ten (10) business days prior written notice by Pledgee designating the place and time of any public sale or of the time after which any private sale or other intended disposition of any or all of the Pledged Property is to be made, is reasonable notification of such matters. (c) Pledgor and Pledgee recognize that Pledgee may be unable to effect a public sale of all or part of the Pledged Property by reason of certain prohibitions contained in the Securities Act of 1933, as amended, as now or hereafter in effect or in applicable Blue Sky or other state securities law, as now or hereafter in effect, but may be compelled to resort to one or more private sales to a restricted group of purchasers who will be obliged to agree, among other things, to acquire such Pledged Property for their own account for investment and not with a view to the distribution or resale thereof. If at the time of any sale of the Pledged Property or any part thereof, the same shall not, for any reason whatsoever, be effectively registered (if required) under the Securities Act of 1933 (or other applicable state securities law), as then in effect, Pledgee in its sole and absolute discretion is authorized to sell such Pledged Property or such part thereof by private sale in such manner and under such circumstances as Pledgee or its counsel may deem necessary or advisable in order that such sale may legally be effected without registration. Pledgor agrees that private sales so made may be at prices and other terms less favorable to the seller than if such Pledged Property were sold at public sale, and that Pledgee has no obligation to delay the sale of any such Pledged Property for the period of time necessary to permit Issuer, even if Issuer would agree, to register such Pledged Property for public sale under such applicable securities laws. Pledgor agrees that any private sales made under the foregoing circumstances shall be deemed to have been in a commercially reasonable manner. (d) All of the rights and remedies of Pledgee and Lenders, including, but not limited to, the foregoing and those otherwise arising under this Pledge Agreement, the Loan Agreement and the other Financing Agreements, the instruments comprising the Pledged Property, applicable law or otherwise, shall be cumulative and not exclusive and shall be enforceable alternatively, successively or concurrently as Pledgee may deem expedient. No failure or delay on the part of Pledgee or any Lender in exercising any of its options, powers or rights or partial or single exercise thereof, shall constitute a waiver of such option, power or right. 6. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW (a) The validity, interpretation and enforcement of this Pledge Agreement and the other Financing Agreements and any dispute arising out of the relationship between the parties hereto, whether in contract, tort, equity or otherwise, shall be governed by the internal laws of the State of New York excluding any principles of conflicts of laws or other rule of law that would cause the application of the law of any jurisdiction other that the laws of the State of New York. (b) Each of Pledgor and Pledgee irrevocably consents and submits to the non-exclusive jurisdiction of the Supreme Court of the State of New York for New York County and the United States District Court for the Southern District of New York and waives any objection based on venue or forum non conveniens with respect to any action instituted therein arising under this Pledge Agreement or any of the other Financing Agreements or in any way connected with or related or incidental to the dealings of the parties hereto in respect of this Pledge Agreement or any of the other Financing Agreements or the transactions related hereto or thereto, in each case whether now existing or hereafter arising, and whether in contract, tort, equity or otherwise, and agrees that any dispute with respect to any such matters shall be heard only in the courts described above (except that Pledgee and Lenders shall have the right to bring any action or proceeding against Pledgor or its property in the courts of any other jurisdiction which Pledgee deems necessary or appropriate in order to realize on the Pledged Property or to otherwise enforce its rights against Pledgor or its property). (c) Pledgor hereby waives personal service of any and all process upon it and consents that all such service of process may be made by certified mail (return receipt requested) directed to its address set forth herein and service so made shall be deemed to be completed five (5) days after the same shall have been so deposited in the U.S. mails, or, at Pledgee's option, by service upon Pledgor in any other manner provided under the rules of any such courts. Within thirty (30) days after such service, Pledgor shall appear in answer to such process, failing which Pledgor shall be deemed in default and judgment may be entered by Pledgee against Pledgor for the amount of the claim and other relief requested. (d) EACH OF PLEDGOR AND PLEDGEE HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS PLEDGE AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF PLEDGOR AND PLEDGEE OR ANY LENDER IN RESPECT OF THIS PLEDGE AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. EACH OF PLEDGOR AND PLEDGEE HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT PLEDGOR OR PLEDGEE MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS PLEDGE AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. (e) Pledgee and Lenders shall not have any liability to Pledgor (whether in tort, contract, equity or otherwise) for losses suffered by Pledgor in connection with, arising out of, or in any way related to the transactions or relationships contemplated by this Pledge Agreement, or any act, omission or event occurring in connection herewith, unless it is determined by a final and non-appealable judgment or court order binding on Pledgee or such Lender, that the losses (including losses resulting from a breach of Pledgee's duty of care as set forth in Section 3(e) of this Agreement) were the result of acts or omissions constituting gross negligence or willful misconduct. 7. MISCELLANEOUS (a) Pledgor agrees that at any time and from time to time upon the written request of Pledgee, Pledgor shall execute and deliver such further documents, including, but not limited to, irrevocable proxies or stock powers, in form reasonably satisfactory to counsel for Pledgee, and will take or cause to be taken such further acts as Pledgee may reasonably request in order to effect the purposes of this Pledge Agreement and perfect or continue the perfection of the security interest in the Pledged Property granted to Pledgee hereunder. (b) Beyond the exercise of reasonable care to assure the safe custody of the Pledged Property (whether such custody is exercised by Pledgee, or Pledgee's nominee, agent or bailee) Pledgee or Pledgee's nominee agent or bailee shall have no duty or liability to protect or preserve any rights pertaining thereto and shall be relieved of all responsibility for the Pledged Property upon surrendering it to Pledgor or foreclosure with respect thereto. (c) All notices, requests and demands to or upon the respective parties hereto shall be in writing and shall be deemed to have been duly given or made: if delivered in person, immediately upon delivery; if by nationally recognized overnight courier service with instructions to deliver the next business day, one (1) business day after sending; and if by registered or certified mail, return receipt requested, five (5) days after so mailing. All notices, requests and demands upon the parties are to be given to the following addresses (or to such other address as any party may designate by notice in accordance with this Section): If to Pledgor: Lexington Precision Corporation 767 Third Avenue New York, New York 10017-2023 Attention: President Telephone No.: 212-319-4650 Telecopy No.: 212-319-4659 with a copy to: Nixon Peabody LLP 437 Madison Avenue New York, New York 10022 Attention: Lauren Wiesenberg, Esq. Telephone No.: 212-940-3136 Telecopy No.: 866-947-2363 If to Pledgee: Ableco Finance LLC and Lenders: 299 Park Avenue, 22nd Floor New York, New York 10171 Attention: Mr. Daniel E. Wolf Telephone No.: 212-891-2121 Telecopy No.: 212-891-1541 with a copy to: Schulte Roth & Zabel LLP 919 Third Avenue New York, New York 10022 Attention: Eliot L. Relles, Esq. Telephone No.: 212-756-2000 Telecopy No.: 212-593-5955 (d) All references to the plural herein shall also mean the singular and to the singular shall also mean the plural. All references to Pledgor, Issuer, Pledgee and any Lender pursuant to the definitions set forth in the recitals hereto, or to any other person herein, shall include their respective successors and assigns. The words "hereof," "herein," "hereunder," "this Pledge Agreement" and words of similar import when used in this Pledge Agreement shall refer to this Pledge Agreement as a whole and not any particular provision of this Pledge Agreement and as this Pledge Agreement now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced. An Event of Default shall exist or continue or be continuing until such Event of Default is waived in accordance with the terms of the Loan Agreement. All references to the term "Person" or "Persons" herein shall mean any individual, sole proprietorship, partnership, corporation (including, without limitation, any corporation which elects subchapter S status under the Internal Revenue Code of 1986, as amended), limited liability company, limited liability partnership, business trust, unincorporated association, joint stock company, trust, joint venture or other entity or any government or any agency, instrumentality or political subdivision thereof. (e) This Pledge Agreement shall be binding upon Pledgor and its successors and assigns and inure to the benefit of and be enforceable by Pledgee and Lenders and their respective successors and assigns. (f) If any provision of this Pledge Agreement is held to be invalid or unenforceable, such invalidity or unenforceability shall not invalidate this Pledge Agreement as a whole, but this Pledge Agreement shall be construed as though it did not contain the particular provision held to be invalid or unenforceable and the rights and obligations of the parties shall be construed and enforced only to such extent as shall be permitted by applicable law. (g) Neither this Pledge Agreement nor any provision hereof shall be amended, modified, waived or discharged orally or by course of conduct, but only by a written agreement signed by an authorized officer of Pledgee and Pledgor. Neither Pledgee nor Lenders shall, by any act, delay, omission or otherwise be deemed to have expressly or impliedly waived any of their respective rights, powers and/or remedies unless such waiver shall be in writing and signed by an authorized officer of Pledgee. Any such waiver shall be enforceable only to the extent specifically set forth therein. A waiver by Pledgee or any Lender of any right, power and/or remedy on any one occasion shall not be construed as a bar to or waiver of any such right, power and/or remedy which Pledgee or such Lender would otherwise have on any future occasion, whether similar in kind or otherwise. (h) Notwithstanding anything to the contrary in this Pledge Agreement, (i) the rights of Pledgee and Lenders under this Pledge Agreement are subject to the terms of the Intercreditor Agreement (as defined in the Loan Agreement), (ii) any obligation of Pledgor in this Pledge Agreement that requires delivery of Pledged Property to, possession or control of Pledged Property with, the pledge, assignment, endorsement or transfer of Pledged Property to or the registration of Pledged Property in the name of, Pledgee shall be deemed complied with and satisfied if such delivery of Pledged Property is made to, such possession or control of Pledged Property is with, or such Pledged Property be assigned, endorsed or transferred to or registered in the name of, the Working Capital Agent (as defined in the Loan Agreement), and (iii) in the event of a direct conflict between the terms and provisions of this Pledge Agreement and the terms and provisions of the Pledge Agreement, dated as of even date herewith, made by Pledgor in favor of Working Capital Agent (the "WC Pledge Agreement"), it is the intention of Pledgor, Pledgee and Lenders that such provisions shall be read together and construed, to the fullest extent possible, to be in concert with each other; however, in the event of any actual, irreconcilable conflict that cannot be resolved as aforesaid, the terms and provisions of the WC Pledge Agreement shall control and, in such case, Pledgor shall not be in breach of its obligations under this Pledge Agreement as a result of complying with the terms and provisions of the WC Pledge Agreement; provided that, notwithstanding the foregoing, nothing contained in this Section 7(h) shall limit or otherwise adversely effect the grant of a lien on or a security interest in any Pledged Property under Section 1 of this Pledge Agreement. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, Pledgor has executed this Pledge Agreement as of the day and year first above written. LEXINGTON PRECISION CORPORATION By: /s/ Warren Delano ________________________________ Name: Warren Delano Title: President ACKNOWLEDGED AS TO SECTION 3(e): ABLECO FINANCE LLC, as Agent By: /s/ Daniel Wolf _____________________________ Name: Daniel Wolf Title: Senior Vice President EXHIBIT A TO PLEDGE AND SECURITY AGREEMENT
Issuer Certificate No. No. of Shares Percentage ------ --------------- ------------- ---------- Lexington Rubber Group, Inc. 1 1 100%
EX-10.9 17 l04690aexv10w9.txt EX-10.9 PAYOFF AGMT DATED 12/18/03 EXHIBIT 10.9 PAYOFF AGREEMENT PAYOFF AGREEMENT (this "Agreement"), dated as of December 18, 2003, by and between NOMURA SPECIAL SITUATIONS INVESTMENT TRUST, a Delaware trust (the "Holder") (as successor-in-interest to Tri-Links Investment Trust, a Delaware trust, successor-in-interest to Nomura Holdings America Inc. ("Nomura")), and LEXINGTON PRECISION CORPORATION, a Delaware corporation (the "Company"). R E C I T A L S: WHEREAS, the Company and Nomura heretofore entered into that certain Note Purchase Agreement, dated as of October 27, 1997, as amended from time to time as described on Exhibit A hereto (the "Note Purchase Agreement") (unless otherwise defined, capitalized terms used herein without definition shall have the meanings assigned to them in the Note Purchase Agreement); WHEREAS, Nomura loaned certain sums to the Company (the "Loan") pursuant to the Note Purchase Agreement and such Loan is evidenced by a promissory note dated as of October 27, 1997, as amended from time to time as described on Exhibit A hereto (the "Note" and, together with the Note Purchase Agreement and all of the other agreements, documents and instruments executed in connected therewith, the "Note Documents"); WHEREAS, the Loan matured on April 30, 2002 and, pursuant to the terms of the Note Documents, the Company is indebted to the Holder in the principal amount of U.S.$7,500,000 plus accrued unpaid interest and other costs and expenses (together with the other obligations set forth in the Note Documents, the "Outstanding Debt"); WHEREAS, the Company has experienced certain financial difficulties, which make the Company unable to repay the Loan in full at this time and to comply with certain provisions of the Note Documents; and WHEREAS, in connection with the Company's overall financial restructuring plan described on Exhibit B hereto (the "Restructuring Plan"), the Company has requested the Holder to accept, and the Holder has agreed to accept, the Payoff Consideration (as defined below) in full and complete satisfaction of the Outstanding Debt, effective as of the Forgiveness Date (as defined below) upon satisfaction of the Forgiveness Conditions (as defined below), on the terms and subject to the conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the payment of the Payoff Consideration, the terms and conditions contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby covenant and agree as follows: -2- 1. Payoff and Termination. (a) As of the date hereof, the Company shall pay or cause to be paid to the Holder the aggregate sum of U.S. $5,550,000 (plus per diem interest after October 31, 2002 based on the Prime Rate) in immediately available funds by wire transfer (the "Payoff Consideration") in full satisfaction of the Outstanding Debt, effective as of the Forgiveness Date upon satisfaction of the Forgiveness Conditions, subject to Section 1(c) hereof. Upon delivery of the Payoff Consideration, the Holder shall deliver to the Company the executed original Note (or, if not available, a lost note affidavit) and the Note, the Note Purchase Agreement and the other Note Documents shall be terminated effective as of the Forgiveness Date upon satisfaction of the Forgiveness Conditions, subject to Section 1(c) hereof; provided, however, that Sections 8.1 and 8.10(a) of the Note Purchase Agreement shall survive any such termination. (b) Effective as of the first date upon which each of the Forgiveness Conditions is satisfied (the "Forgiveness Date"), subject to Section 1(c) hereof, the Outstanding Debt shall be deemed fully and completely satisfied, the Note Documents shall be deemed terminated (except as otherwise provided in Section 1(a)) and the Company shall be released and discharged from its obligations with respect to the Outstanding Debt and the Note Documents (except as otherwise provided in Section 1(a)). For the purposes of this Agreement, the term "Forgiveness Conditions" shall mean each of the following: (i) 124 days shall have elapsed since the date of this Agreement; (ii) all of the representations and warranties made by the Company in Section 2 shall be true and correct as if such representations and warranties were made on and as of the date hereof and as of the Forgiveness Date; (iii) the Company shall have performed and complied with all of its covenants and obligations contained in this Agreement; and (iv) either (A) no federal or state bankruptcy, reorganization or similar proceeding with respect to the Company shall have been initiated, whether voluntarily or involuntarily, and the Company shall not have made a general assignment for the benefit of its creditors under applicable law; (B) if a federal bankruptcy proceeding with respect to the Company shall have been initiated, whether voluntarily or involuntarily, and no attempt shall have been made to recover the Payoff Consideration, a plan of reorganization of the Company shall have been confirmed by a final order which is not subject to further appeal or review; or (C) if a federal bankruptcy proceeding with respect to the Company shall have been initiated, whether voluntarily or involuntarily, and an attempt shall have been made to recover the Payoff Consideration, -3- (x) such attempt shall have been defeated, (y) a plan of reorganization of the Company shall have been confirmed by a final order which is not subject to further appeal or review and (z) the Company shall have reimbursed the Holder for all costs and expenses of the Holder (including reasonable legal fees and expenses) incurred in connection with such proceeding. (c) Notwithstanding any other provision of this Agreement, if for any reason at any time the Holder or any of its affiliates is required by law, rule or regulation, court order or order or mandate of any governmental authority, or any third party acting under authority conferred by any of the foregoing, to return, surrender, turn over, relinquish, give up or disgorge all or any portion of the Payoff Consideration, then, effective immediately, the Outstanding Debt, the Note Documents and the Company's obligations with respect thereto shall be fully and completely reinstated and restored (except to the extent the Holder and its affiliates retain any portion of the Payoff Consideration). 2. Representations and Warranties of the Company. The Company hereby represents and warrants to the Holder that on and as of the date hereof: (a) The Company has been duly incorporated and is validly existing in good standing under the laws of Delaware, and has full power and authority to enter into and perform its obligations under this Agreement and the Release (as defined below) (together with any other agreements, documents and instruments executed in connection herewith, the "Payoff Documents"). Each of the Payoff Documents has been duly authorized and validly executed and delivered by the Company. Each of the Payoff Documents constitutes a legal, valid, binding and enforceable agreement of the Company. (b) The Company is not in violation of its certificate of incorporation or bylaws or in default under any agreement, indenture, document or instrument, the effect of which violation or default would have a material adverse effect on the ability of the Company to perform its obligations under any of the Payoff Documents. (c) No authorization, consent or approval of, or filing with, any court or any public body or authority and no consent or approval of any third party or parties is necessary on the part of the Company for the execution, delivery and performance of any of the Payoff Documents or the consummation by the Company of the transactions contemplated thereby, other than those consents, approvals or filings which have already been obtained. (d) There are no actions or proceedings against, or investigations of, the Company pending, or, to the knowledge of the Company, threatened, before any court, arbitrator, administrative agency or other tribunal (i) asserting the invalidity of any of the Payoff Documents or (ii) seeking to prevent the consummation of the transactions contemplated thereby. -4- (e) The Loan is in default and has been in default since April 30, 2002 and has a remaining unpaid principal balance of U.S. $7,500,000. The Company has no defenses, offsets or counterclaims to the exercise of any remedies available to the Holder in respect of such default. (f) This Agreement is an essential part of the Restructuring Plan. The Company has provided or made available to the Holder accurate and complete copies of all documentation in connection with the Restructuring Plan. No direct or indirect dividend or other distribution in respect of equity securities of the Company is being made in connection with the Restructuring Plan, except for payments not in excess of U.S. $106,000 in the aggregate in respect of dividends on the Company's Series B Preferred Stock. No payment (excluding any payment in capital stock of the Company) is being or will be made to Lubin, Delano & Company, or any partner thereof, any member of the immediate family of any partner of Lubin, Delano & Company or any affiliate of Lubin, Delano & Company or any partner thereof in connection with the performance of investment banking or other services in connection with the Restructuring Plan. The other elements of the Restructuring Plan are being consummated as of the date of this Agreement. (g) The Company has no intention nor foresees any need to become a debtor in any proceeding under Title 11, U.S. Code or any similar federal or state law for the relief of debtors ("Bankruptcy Law") or to make a general assignment for the benefit of its creditors under any applicable law. (h) The Company and its creditors (other than the Holder) have received substantial benefits from the execution and performance of this Agreement. (i) After giving effect to this Agreement and the consummation of the transactions contemplated hereby, after taking into account the contingent agreement of the Holder to forgive the unpaid balance of the Outstanding Debt, subject to Section 1(c) hereof, as of the Forgiveness Date upon satisfaction of the Forgiveness Conditions, (i) the fair value of the assets of the Company will exceed its debts and liabilities, subordinated, contingent or otherwise, (ii) the present fair saleable value of the property of the Company will be greater than the amount that will be required to pay the probable liability of its debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured, (iii) the Company will be able to pay its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured and (iv) the Company will not have unreasonably small capital with which to conduct its business in which it is engaged as such business is now conducted and is proposed to be conducted following the date hereof. (j) The Company has consulted with counsel and relied upon counsel's advice in connection with the negotiation and execution of this Agreement and the other Payoff Documents. -5- (k) At the request of the Company and in reliance on this Agreement and the other Payoff Documents, the Holder has agreed, effective as of the Forgiveness Date upon satisfaction of the Forgiveness Conditions, subject to Section 1(c) hereof, to forgive the unpaid balance of the Outstanding Debt. (l) The Company has no subsidiaries other than Lexington Rubber Group, Inc. and its wholly-owned subsidiary, Lexington Precision GmbH ("LPG"). LPG is not currently engaged in business operations and has assets of less than $50,000. LPG does not have any Released Claims (as defined in the Release). All representations and warranties made by the Company in this Section 2 shall survive the consummation of the transactions contemplated by this Agreement and the other Payoff Documents and/or any termination of this Agreement or any other Payoff Documents. 3. Representations and Warranties of the Holder. The Holder hereby represents and warrants to the Company as follows: (a) The Holder has full power and authority to enter into and perform its obligations under this Agreement. (b) This Agreement has been duly authorized and validly executed and delivered by the Holder. This Agreement constitutes a legal, valid, binding and enforceable agreement of the Holder. (c) The Holder is the holder of the Note free and clear of all liens, pledges and security interests. All representations and warranties made by the Holder in this Section 3 shall survive until the earlier of the Forgiveness Date and any termination of this Agreement. 4. Additional Covenants. (a) The Company, recognizing that the Holder is changing its position in reliance on this Agreement, covenants and agrees that: (i) for a period of 124 days following the date of this Agreement, it will not, directly or indirectly, file a petition under any Bankruptcy Law or make a general assignment for the benefit of its creditors under applicable law; and (ii) if, at any time after the date hereof, the Company, directly or indirectly, becomes a debtor in any proceeding under any Bankruptcy Law or makes a general assignment for the benefit of its creditors under applicable law: (A) it will not attempt to recover, or suffer to exist any application or action to recover, any payment -6- received by the Holder pursuant to this Agreement or otherwise; (B) such petition or proceeding (if voluntary), assignment or application or action shall have been filed, made or brought in bad faith and in violation of this Agreement, and shall be deemed to have been so filed, made or brought by the bankruptcy or other applicable court, unless, in the case of any such voluntary federal bankruptcy petition or proceeding (but not any petition, proceeding, application or action to recover any payment received by the Holder pursuant to this Agreement or otherwise), the Company can establish to the reasonable satisfaction of the Holder that such petition or proceeding was (x) attributable to a material adverse change with respect to the Company's financial condition that was not foreseeable as of the date hereof and (y) necessary for the survival of the Company (such a petition or proceeding, a "Qualified Proceeding") (it being understood that, for the avoidance of doubt, a Qualified Proceeding constitutes a federal bankruptcy proceeding for purposes of, and subject to, Sections 1(b)(iv)(B) and 1(b)(iv)(C) hereof); (C) it will consent to the dismissal of any such petition or proceeding (except for any such Qualified Proceeding) or any proceeding with respect to any such assignment, application or action; (D) in the case of any such assignment, it will consent to the discharge of the assignee and the authorization of the assignee to release the estate to it; and (E) in addition to any rights the Holder may have under the Payoff Documents, at law or in equity, the Holder shall have the right (and the Company will interpose no objection thereto and hereby waives its rights with respect thereto) to request and receive from the bankruptcy court or any other court of competent jurisdiction, a dismissal of such bankruptcy or other proceeding (except for any such Qualified Proceeding) or such a discharge and release. (b) Nothing in this Agreement or any of the other Payoff Documents shall be deemed in any way to limit or restrict any of the Holder's rights to seek in a bankruptcy court or any other court of competent jurisdiction any relief the Holder may deem appropriate in the event that a voluntary or involuntary petition under any Bankruptcy Law is filed by or against the Company or in the event the Company makes a general assignment for the benefit of its creditors. (c) The Company acknowledges and agrees that the representations, acknowledgments, agreements and warranties in this Agreement and the other Payoff Documents have been made by the Company as a material inducement to the Holder to enter into this Agreement, that the Holder is relying on such representations and warranties, that the Holder is changing its position in reliance thereon and that the Holder would not enter into this Agreement without such representations, acknowledgments, agreements and warranties. (d) Prior to the Forgiveness Date, if at any time the Company shall disclose to a third party the existence or forgiveness of debt owed to the Holder by the Company, then the Company shall also disclose to such third party the contingent forgiveness of debt described in Sections 1(b) and 1(c) hereof. -7- (e) The Company agrees that if it makes a voluntary bankruptcy filing or otherwise violates its obligations under this Section 4 and any amount is recovered from the Holder or any of its affiliates in a bankruptcy or other proceeding involving the Company or any of its creditors, then the Company shall be obligated to pay the recovered amount to the Holder and all related costs and expenses of the Holder (including reasonable legal fees and expenses). (f) On the date of this Agreement, the Company shall pay in full the invoice of Cahill Gordon & Reindel for services rendered to the Holder in connection with this matter. (g) The Company agrees that, from and after the date hereof and until the Forgiveness Date, it shall not, directly or indirectly, use any Remaining Restructuring Plan Proceeds (as defined below) for any purpose other than to fund the operations of, or to invest in, the Company's and its subsidiaries' business, make mandatory payments of principal and interest on, and other payments required in respect of, indebtedness of the Company and its subsidiaries and to pay dividends on and purchase or redeem shares of the Company's Series B Preferred Stock in accordance with its Restated Certificate of Incorporation, as amended. The term "Remaining Restructuring Plan Proceeds" means: (i) any and all proceeds from the Restructuring Plan that are not used on or after the date hereof to (x) make mandatory payments of principal of and interest on indebtedness of the Company, (y) make payments not in excess of U.S. $106,000 in the aggregate in respect of dividends on the Company's Series B Preferred Stock or (z) pay related fees and expenses of the Restructuring Plan; and (ii) any and all amounts available as of the date hereof under the Company's senior secured revolving line of credit. The Company agrees to confirm in writing to the Holder its compliance with this Section 4(g), and to provide the Holder with evidence of such compliance, in each case as the Holder may reasonably request from time to time. 5. Other Deliveries. Concurrently with the execution of this Agreement, the Company shall deliver or cause to be delivered to the Holder (i) a release by the Company and each of its subsidiaries in favor of the Holder and its affiliates in the form of Exhibit C hereto (the "Release") and (ii) a legal opinion of counsel for the Company with respect to this Agreement, the Release and the other Payoff Documents and the transactions contemplated hereby and thereby, addressed to the Holder, in the form of Exhibit D hereto. 6. Indemnification. The Company agrees to indemnify and hold harmless the Holder and its affiliates and their respective officers, directors, stockholders, partners, trustees, employees, agents, representatives and attorneys (the "Indemnified Persons") from and against any and all actions, causes of action, suits, losses, liabilities and damages, and all expenses in connection therewith, as incurred, including, without limitation, reasonable attorneys' fees and disbursements, incurred in the investigation and defense of claims and actions, incurred by any Indemnified Persons as a result of any matter arising out of or relating to this Agreement, any of the other Payoff Documents, any of the Note Documents, -8- any transaction contemplated herein or therein and any past, present or future relationship between the Holder or any affiliated entity on the one hand and the Company on the other hand relating to any of the foregoing, except to the extent that any future actions of the Indemnified Persons are determined to have been willful misconduct or in bad faith. The Company shall control the investigation and defense of any such claim or action, at the Company's expense, with counsel selected by the Company and reasonably acceptable to the Indemnified Persons, unless (i) the Company and one or more Indemnified Persons are actual or potential defendants in, or targets of, such claim or action and such Indemnified Person(s) shall have reasonably concluded that there may be legal defenses available to such Indemnified Person(s) which are different from or in addition to those available to the Company or (ii) the Indemnified Persons have reasonable doubts as to the Company's ability to satisfy in full its indemnification obligations under this Section 6 with respect to such claim or action, in either of which cases the Indemnified Persons shall automatically control the investigation and defense of such claim or action, at the Company's expense, with counsel selected by the Indemnified Persons and reasonably acceptable to the Company. At any time when the Company controls the investigation and defense of any such claim or action, the Indemnified Persons shall have the right, at their expense, to employ separate counsel (reasonably acceptable to the Company) in such claim or action and to participate in the investigation and defense thereof. No compromise or settlement of any such claim or action may be effected by the Company without the consent of the Indemnified Persons, which consent shall not be unreasonably withheld, delayed or conditioned, unless such compromise or settlement (i) provides only for monetary relief, (ii) includes a complete and unconditional release of the Indemnified Persons and (iii) does not include any admission of fault or culpability on behalf of the Indemnified Persons, in which case the consent of the Indemnified Persons shall not be required. 7. Further Assurances. The parties agree to execute and deliver such instruments and take such further actions as another party may, from time to time, reasonably request in order to effectuate the purposes and to carry out the terms of this Agreement and the other Payoff Documents. The Company shall pay any costs or expenses incurred by the Holder in connection with this Section 7, including, without limitation, the Holder's reasonable legal fees and expenses. 8. Notices. Any notice required or permitted by or in connection with this Agreement or any of the other Payoff Documents, without implying the obligation to provide any such notice, shall be in writing and shall be delivered to the appropriate addresses set forth below or to such other addresses as may be hereafter specified by written notice. Any such notice shall be deemed to be effective one (1) day after dispatch if sent by guaranteed overnight delivery or five (5) days after mailing if sent by first class mail with postage prepaid. All notices shall be deemed to be effective upon receipt if accomplished by hand delivery or by facsimile (with answerback confirmation). -9- If to the Holder: Nomura Special Situations Investment Trust Two World Financial Center, Building B New York, New York 10281 Attention: Stuart Simon Facsimile: (212) 667-1861 With a copy to: Cahill Gordon & Reindel 80 Pine Street New York, New York 10005 Attention: Robert Usadi Facsimile: (212) 269-5420 If to the Company: Lexington Precision Corporation 767 Third Avenue New York, New York 10017 Attention: President Facsimile: (212) 319-4659 With a copy to: Weil, Gotshal & Manges 767 Fifth Avenue New York, New York 10153 Attention: Marcia L. Goldstein Facsimile: (212) 310-8007 9. Choice of Law. The laws of the State of New York shall govern the rights and obligations of the parties to this Agreement, and the interpretation and construction and enforceability hereof, and any and all issues relating to the transactions contemplated hereby, without regard to conflicts of law principles. 10. Assignment. This Agreement may not be assigned by the Company without the written consent of the Holder, which consent may be granted or withheld in the Holder's sole and absolute discretion, and any such assignment by the Company without the Holder's consent shall be null and void and of no effect. This Agreement may be freely assigned by the Holder without the consent of any other party hereto. -10- 11. Entire Agreement; Amendments. This Agreement (including the exhibits hereto) and the other Payoff Documents constitute the final and entire agreement and understanding of the parties with respect to the payoff of the Loan, and any terms and conditions not set forth in this Agreement and the other Payoff Documents are not a part of the agreement and understanding of the parties with respect to the payoff of the Loan and may not be contradicted by evidence of prior, contemporaneous or subsequent oral agreements of the parties. No variation, modification, or changes hereof shall be binding on any party hereto unless set forth in a document executed by all parties hereto. 12. Severability. If any paragraph, section, sentence, clause or phrase contained in this Agreement shall become illegal, null or void or against public policy, for any reason, or shall be held by any court of competent jurisdiction to be illegal, null or void or against public policy, the remaining paragraphs, sections, sentences, clauses or phrases contained in this Agreement shall not be affected thereby to the extent that the intent of the parties hereto can be carried out absent such provision. 13. No Third Party Beneficiary. The parties hereto do not intend to create rights in or to grant remedies to any third party as a beneficiary of this Agreement or of any duty, covenant, obligation or undertaking established herein. 14. Confidentiality; Public Disclosure. The Company shall not make any disclosure to any person (other than its legal or other advisors on a need-to-know basis and its lenders) or to the public at large (by press release, public filing or otherwise), without the Holder's prior written consent, with respect to the name or identity of the Holder or any of its affiliates, the nature or amount of the Payoff Consideration or any other material term of this Agreement, unless required by applicable law, rule or regulation, court order or order of any governmental authority, or any third party acting under authority conferred by any of the foregoing, in which case the Company shall advise the Holder as soon as possible in advance of making such disclosure so that the Holder may seek any appropriate protective order or other remedy. Subject to the foregoing, the Company shall disclose only such information that, in the opinion of its legal counsel, it is so required to disclose. In connection with any such disclosure, the Company shall use its best efforts to obtain reliable assurance that any available confidential treatment will be accorded any such information, except in connection with any disclosure made in any filing by the Company or its affiliates pursuant to the Securities Exchange Act of 1934, as amended, or any rules and regulations thereunder. 15. Counterparts. This Agreement may be executed in separate counterparts, each of which shall be an enforceable document, but all of which together shall constitute one and the same document. The delivery of an executed counterpart of this Agreement by facsimile shall have the same force and effect as the delivery of an original executed counterpart of this Agreement. -11- 16. Trial by Jury, Etc. EACH PARTY HERETO, TO THE FULLEST EXTENT THAT IT MAY LAWFULLY DO SO, HEREBY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY TORT ACTION, BROUGHT BY ANY PARTY HERETO WITH RESPECT TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. ANY LEGAL SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN NEW YORK COUNTY, NEW YORK, NEW YORK, PURSUANT TO SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW, AND EACH PARTY HERETO WAIVES ANY OBJECTION WHICH IT MAY NOW HAVE OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND EACH PARTY HERETO HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY ACTION, SUIT OR PROCEEDING. 17. Rule of Construction. The parties acknowledge that each party and its legal counsel have reviewed this Agreement (including the exhibits hereto) and the parties hereby agree that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement (including the exhibits hereto) or any amendments hereof. [Signature page follows] IN WITNESS WHEREOF, the parties have executed this Payoff Agreement as of the date first written above. NOMURA SPECIAL SITUATIONS INVESTMENT TRUST By: Wilmington Trust Company as Owner Trustee By: /s/ Jeanne M. Oller ------------------------------------------ Name: Jeanne M. Oller Title: Financial Services Officer LEXINGTON PRECISION CORPORATION By: /s/ Michael A. Lubin ------------------------------------------- Name: Michael A. Lubin Title: Chairman EXHIBIT A NOTE DOCUMENTS 1. Note Purchase Agreement, dated as of October 27, 1997, between Lexington Precision Corporation and Nomura Holding America Inc. 2. 10-1/2% Senior Unsecured Note due February 1, 2000, dated October 27, 1997, issued by Lexington Precision Corporation in favor of Nomura Holding America Inc. 3. Note Amendment No. 1, dated as of January 28, 2000, between Lexington Precision Corporation and Tri-Links Investment Trust (as successor-in-trust to Nomura Holding America Inc.). 4. Agreement, dated as of January 31, 2000, between Lexington Precision Corporation and Tri-Links Investment Trust (as successor-in-trust to Nomura Holding America Inc.). 5. Note Amendment No. 2, dated as of April 30, 2000, between Lexington Precision Corporation and Tri-Links Investment Trust (as successor-in-trust to Nomura Holding America Inc.). 6. Note Amendment No. 3, dated as of July 31, 2000, between Lexington Precision Corporation and Tri-Links Investment Trust (as successor-in-trust to Nomura Holding America Inc.). 7. Note Amendment No. 4, dated as of October 31, 2000, between Lexington Precision Corporation and Tri-Links Investment Trust (as successor-in-trust to Nomura Holding America Inc.). 8. Note Amendment No. 5, dated as of January 31, 2001, between Lexington Precision Corporation and Tri-Links Investment Trust (as successor-in-trust to Nomura Holding America Inc.). 9. Note Amendment No. 6, dated as of April 30, 2001, between Lexington Precision Corporation and Tri-Links Investment Trust (as successor-in-trust to Nomura Holding America Inc.). 10. Note Amendment No. 7, dated as of July 31, 2001, between Lexington Precision Corporation and Tri-Links Investment Trust (as successor-in-trust to Nomura Holding America Inc.). -2- 11. Note Amendment No. 8, dated as of October 31, 2001, between Lexington Precision Corporation and Nomura Special Situations Investment Trust (as successor-in-trust to Nomura Holding America Inc.). 12. Note Amendment No. 9, dated as of January 31, 2002, between Lexington Precision Corporation and Tri-Links Investment Trust (as successor-in-trust to Nomura Holding America Inc.). EXHIBIT B RESTRUCTURING PLAN [See Attached] LEXINGTON PRECISION CORPORATION SUMMARY OF TERMS OF PURCHASE OF SENIOR UNSECURED NOTE PRINCIPAL OUTSTANDING: $ 7,500,000.00 PURCHASE PRICE: $ 5,810,089.73
LEXINGTON PRECISION CORPORATION SUMMARY OF TERMS OF 13% JUNIOR SUBORDINATED NOTES PRINCIPAL AMOUNT: $ 346,667 MATURITY: November 1, 2009. INTEREST RATE: 13% per annum. INTEREST PAYMENT DATES: February 1, May 1, August 1, and November 1. WARRANTS TO PURCHASE COMMON STOCK: 3,467 Warrants, each of which will entitle the holder to purchase one share of common stock at a purchase price of $3.50 per share at any time during the period August 1, 2005, through August 1, 2009. The Warrants will be detachable from the New Junior Subordinated Notes at any time after July 31, 2005. Prior to that time, the New Junior Subordinated Notes and the Warrants will be transferable only as a unit. OPTIONAL REDEMPTIONS: At any time, at par plus accrued interest. COMMON STOCK TO BE ISSUED TO HOLDERS OF OLD JUNIOR SUBORDINATED NOTES: ACCRUED INTEREST TO BE CONVERTED: $ 235,469.63 ============ CONVERSION PRICE: $ 2.27 per share ============ COMMON SHARES TO BE ISSUED: 103,731 shares ============
LEXINGTON PRECISION CORPORATION SUMMARY OF TERMS OF ABLECO SECURED TERM LOAN (REAL PROPERTY) AMOUNT: $11,500,000.00 BORROWERS: Lexington Precision Corporation and Lexington Rubber Group, Inc. LENDER(S): Ableco Finance LLC and/or an affiliate thereof, and participants. AMORTIZATION: Equal monthly payments of $95,833.33 with a balloon payment due at maturity. SECURITY: First lien on all real property and a second lien on all other assets, tangible and intangible. INTEREST RATE: Four percent (4.0%) over the Prime Rate publicly announced by a major commercial bank selected by Lender (the "Prime Rate"), but not less than eight and one quarter percent (8.25%) per annum. FUNDING FEE: $215,625 payable at the closing and on each anniversary of the closing. CONTRACT TERM: Four years from the date of closing. There shall be no early termination fee associated with this transaction, provided the loan is repaid in full Optional prepayments will be permitted in minimum increments of $100,000. COVENANTS: Financial covenants (including minimum EBITDA, maximum secured debt/EBITDA, and minimum fixed charge coverage) and other affirmative and negative covenants customary for similar transactions. MINIMUM AVAILABILITY: Borrower shall have excess availability under the revolving credit facility at closing of not less than $5,500,000 after giving effect to all transactions related to closing, Including all related fees and expenses. Accounts payable must be in a condition satisfactory to Lender. LEXINGTON PRECISION CORPORATION SUMMARY OF TERMS OF CONGRESS/CIT REVOLVING CREDIT FACILITY Amount: $23,500,000.00 Borrowers: Lexington Precision Corporation and Lexington Rubber Group, Inc. Lenders: Congress Financial Corporation and CIT Business Credit, Inc. Availability Formulae: Accounts Receivable: 88% of eligible domestic accounts receivable and 80% of eligible foreign accounts receivable. Inventory: 65% of eligible inventory. Security: First lien on all assets other than real property. Interest Rate: 3.25% over LIBOR or 1 % over the Prime Rate. Funding Fee: $352,500 payable at closing. Contract Term: June 30, 2006. Covenants; Financial covenants (including minimum net worth, minimum EBITDA, and minimum fixed charge coverage) and other affirmative and negative covenants customary for similar transactions. Minimum Availability: Borrower shall have excess availability under the revolving credit facility of not less than $5,500,000 at closing after giving effect to all transactions related to closing, including all related fees and expenses and not less than $3,000,000 thereafter. LEXINGTON PRECISION CORPORATION SUMMARY OF TERMS OF CONGRESS/CIT SECURED TERM LOAN (EQUIPMENT) Amount: $13,500,000.00 Borrowers: Lexington Precision Corporation and Lexington Rubber Group. Inc. Lenders: Congress Financial Corporation and CIT Business Credit, Inc. Amortization: Equal monthly payments of $300,000 with a balloon payment due at maturity. Security: First lien on all assets other than real property. Interest Rate: 3.75% over LIBOR. Funding Fee: $202,500 payable at closing. Maturity: June 30, 2006. Covenants: Financial covenants (including minimum net worth, minimum EBITDA, and minimum fixed charge coverage) and other affirmative and negative covenants customary for similar transactions. Minimum Availability: Borrower shall have excess availability under the revolving credit facility of not less than $5,500,000 at closing after giving effect to all transactions related to closing, including all related fees and expenses, and not less than $3,000,000 thereafter. LEXINGTON PRECISION CORPORATION SUMMARY OF TERMS OF 12% SENIOR SUBORDINATED NOTES Maturity Date: August 1, 2009 Principal Amount: $42,515,084.63 Interest Rate: 12% per annum. Interest Payments: Quarterly on each February 1, May 1, August 1, and November 1. Optional Redemption: At any time, at par plus accrued interest. Participation Fee: None. Warrants: 425,151 Warrants, each of which will entitle the holder to purchase one share of common stock at a purchase price of $3.50 per share at any time during the period August 1, 2005, through August 1, 2009. The Warrants will be detachable from the New Senior Subordinated Notes at any time after July 31, 2005. Prior to that time, the New Senior Subordinated Notes and the Warrants will be transferable only as a unit. Covenants: Limitations on the incurrence of debt, payment of cash dividends, and repurchase of capital stock. LEXINGTON PRECISION CORPORATION PROJECTED SOURCES AND USES OF FUNDS AT CLOSING AS OF DECEMBER 18, 2003 PROJECTED SOURCES OF FUNDS: LOANS RECEIVED: Projected Congress Financial revolving loans 12,815,684 Congress Financial term loans 13,500,000 Ableco term loan 11,500,000 ---------- Total projected sources of funds 37,815,684 ========== PROJECTED USES OF FUNDS: LOANS PAID: Projected Congress Financial revolving loans 16,800,000 Congress Financial term loans 7,065,791 Bank One term loans 4,664,110 CIT/Equipment Financing term loans 498,227 Rock Hill, SC, real estate loan 901,241 Senior unsecured note 5,810,090 ---------- 35,739,459 ========== PROJECTED FEES AND EXPENSES PAID: Congress Financial 555,000 Ableco 215,625 Projected other fees and expenses 500,000 ---------- 1,270,625 ---------- PROJECTED REDUCTION IN ACCOUNTS PAYABLE 700,000 ---------- PREFERRED DIVIDENDS PAID 105,600 ---------- Total projected uses of funds 37,815,684 ==========
EXHIBIT C FORM OF RELEASE This Release (this "Release") is made as of December ___, 2003, by Lexington Precision Corporation, a Delaware corporation (the "Company"), and Lexington Rubber Group, Inc., a wholly-owned subsidiary of the Company (the "Subsidiary"), in favor of Nomura Special Situations Investment Trust ("NSSIT") (as successor-in-interest to Tri-Links Investment Trust, successor-in-interest to Nomura Holdings America Inc.), and each of the persons and entities identified below as the "Released Parties". WHEREAS, the Company and NSSIT are entering into that certain Payoff Agreement, dated as of the date hereof (the "Payoff Agreement"), pursuant to which NSSIT shall agree to accept certain sums in satisfaction of certain outstanding debts owed by the Company to NSSIT on certain terms and subject to certain conditions; and WHEREAS, the execution and delivery of this Release by each of the Company and the Subsidiary is a condition to NSSIT entering into the Payoff Agreement. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, each of the Company and the Subsidiary hereby agrees as follows: 1. Release of Released Parties. Each of the Company and the Subsidiary for itself and any parent, subsidiary and/or affiliated companies and entities and the stockholders, trustees, officers, directors, partners, members, employees, agents, representatives and attorneys of all of the foregoing and their respective heirs, executors, administrators, successors, predecessors, legal representatives and assigns (as hereinafter defined) and all persons claiming by, through or under them or any of them (all hereinafter collectively referred to as the "Releasing Parties"), do hereby remise, release, acquit and forever discharge NSSIT and each of its parent, subsidiary and affiliated companies and entities and the stockholders, trustees, officers, directors, partners, members, employees, agents, accountants, representatives and attorneys of all of the foregoing and their respective heirs, executors, administrators, successors, predecessors, legal representatives and assigns, including, without limitation, Nomura Holding America Inc., Tri-Links Investment Trust and Long Drive Management Trust, as Investment Advisor to certain of the other Released Parties (all hereinafter collectively referred to as the "Released Parties"), of, from and against any and all manner of actions, causes of action, choses in action, suits, debts, dues, sums of money, compensation, accounts, rentals, commissions, reckonings, bonds, bills, specialties, covenants, rights, contracts, controversies, agreements, promises, costs, damages, judgments, executions, claims and demands whatsoever, whether known or unknown, foreseen or unforeseen (regardless of by whom raised), in law or in equity, which the Releasing Parties, and/or any of them, and/or anyone claiming by, through or under any of the Releasing Parties and/or any other person or entity, now have, ever had or may ever have from the beginning of time against the Released Parties (directly or indirectly) or any of them, singly or in any combination, on account of, arising out of, related to or in connection with any thing, cause, matter, -2- transaction, act or omission of any nature whatsoever of, or involving any of the Released Parties (i) in the case of matters on account of, arising out of, or in connection with the Payoff Agreement, the Outstanding Debt (as defined in the Payoff Agreement) or the Note Documents (as defined in the Payoff Agreement), from the beginning of time through the end of time, other than with respect to the Company's rights to enforce the Payoff Agreement and the Lost Note Agreement dated as of December 18, 2003 by NSSIT in favor of the Company, and (ii) in the case of all other matters, from the beginning of time through the date hereof (collectively, the "Released Claims"). 2. Covenant Not to Sue. Each of the Company and the Subsidiary hereby covenants and agrees, for and on behalf of itself and the Releasing Parties, that it shall forever refrain, and is hereby estopped, from instituting, prosecuting, asserting or otherwise pursuing or pressing against any Released Parties any of the Released Claims. 3. Representations and Warranties. Each of the Company and the Subsidiary jointly and severally represent and warrant that as of the date hereof: 3.1. Organization. Each of the Company and the Subsidiary (i) is a duly incorporated and validly existing entity in good standing under the laws of the jurisdiction of its incorporation, (ii) has the requisite corporate power and authority to carry on its business as now being conducted, and (iii) has the requisite corporate power to execute and deliver, and perform its obligations under, this Release. 3.2. Authorization. The execution and delivery by the Company and the Subsidiary of this Release and the performance of their respective obligations hereunder (i) have been duly authorized by all requisite corporate and stockholder action, (ii) will not violate any provision of any applicable legal requirements, any order, writ, decree, injunction or demand of any court or other governmental authority binding upon any of them, any of their respective organizational documents or any indenture or agreement or other instrument to which any of them is a party or by which any of them is bound and (iii) will not be in conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under, or result in the creation or imposition of any lien of any nature whatsoever upon any of their respective property or assets pursuant to, any indenture or agreement or instrument. Neither the Company nor the Subsidiary is required to obtain any consent, approval or authorization from or to file any declaration or statement with, any governmental authority or other agency in connection with or as a condition to the execution, delivery or performance of this Release. This Release has been duly authorized, executed and delivered by each of the Company and the Subsidiary. 3.3. Enforceability. This Release is a legal, valid and binding obligation of the Company and the Subsidiary, enforceable against each of the Company and the Subsidiary in accordance with its terms. 4. Governing Law; Submission to Jurisdiction. This Release shall be construed in accordance with and governed by the substantive laws of the State of New York, without reference to conflict of laws principles. Any legal suit, action or proceeding arising out of or relating to this Release shall be instituted in any federal or state court in New York County, New York, pursuant to section 5-1402 of the New York general obligations law and each of the -3- Company and the Subsidiary waives any objection that it may now or hereafter have to the laying of venue of any such suit, action or proceeding, and each of the Company and the Subsidiary hereby irrevocably submits to the sole and exclusive jurisdiction of any such court in any such action, suit or proceeding. 5. Integration; Amendment. This Release constitutes the sole agreement of the parties with respect to the subject matter hereof and supersedes all oral negotiations and prior writings with respect to the subject matter hereof. This Release may not be modified or amended except in a writing executed by the Company, the Subsidiary and NSSIT. 6. Successors and Assigns. This Release (i) shall be binding upon each of the Company and the Subsidiary and, where applicable, their respective heirs, executors, administrators, successors and permitted assigns, and (ii) shall inure to the benefit of the Released Parties and, where applicable, their respective heirs, executors, administrators, successors and assigns. 7. Severability and Consistency. The illegality, unenforceability or inconsistency of any provisions of this Release shall not in any way affect or impair the legality, enforceability or consistency of the remaining provisions of this Release or any instrument or agreement executed in connection herewith. 8. Enforcement Costs. The Releasing Parties shall pay all costs, charges and expenses, including reasonable attorneys' fees and disbursements, that may be incurred by any of the Released Parties in enforcing the covenants, agreements, obligations and liabilities of the Company and the Subsidiary under this Release. 9. Counterparts. This Release may be executed in any number of counterparts and by the different parties on separate counterparts. Each such counterpart shall be deemed an original, but all such counterparts shall together constitute one and the same agreement. [Signature Page Follows] -4- IN WITNESS WHEREOF, each of the Company and the Subsidiary has executed this Release on the day and year first above written. LEXINGTON PRECISION CORPORATION By: ____________________________________ Name: Title: LEXINGTON RUBBER GROUP, INC. By: ____________________________________ Name: Title: Acknowledged: NOMURA SPECIAL SITUATIONS INVESTMENT TRUST By: Wilmington Trust Company as Owner Trustee By: ____________________________________ Name: Title: -1- EXHIBIT D FORM OF OPINION OF COUNSEL December __, 2003 Nomura Special Situations Investment Trust Two World Financial Center New York, New York 10281 Ladies and Gentlemen: As special counsel to Lexington Precision Corporation, a Delaware corporation ("Company"), and Lexington Rubber Group, Inc., a Delaware corporation (the "Subsidiary"), we are furnishing this opinion to you pursuant to Section 5 of the Payoff Agreement, dated as of December __, 2003, among Nomura Special Situations Investment Trust ("Nomura"), the Company and the Subsidiary (the "Payoff Agreement"). Unless otherwise defined herein, capitalized terms used herein have the meanings set forth in the Payoff Agreement. In connection with this opinion, we have examined, among other documents, copies of the Payoff Agreement and the Release dated as of the date hereof by each of the Company and of the Subsidiary in favor of Nomura (the "Release"; the Payoff Agreement and the Release are referred to herein collectively as the "Payoff Documents"). Subject to the assumptions and qualifications contained herein, we also have examined originals or copies, certified or otherwise identified to our satisfaction of such corporate records of the Company and the Subsidiary, agreements and such other instruments and certificates of public or governmental officials and of officers and representatives of the Company and the Subsidiary, and made such investigations of law, as we have deemed necessary or appropriate as a basis for the opinions expressed below. We have relied as to factual matters upon representations and certificates of the Company and the Subsidiary and their respective officers. We have not independently investigated or verified the facts represented in such certificates and do not opine as to the accuracy of any such facts. In rendering the following opinions, we have assumed, without investigation, that the representations and warranties as to factual matters of each of the Company and the Subsidiary in the Agreement are true and correct. In addition, we have assumed, without investigation, the authenticity of any document or instrument submitted to us as original, the conformity to the originals of any document or instrument submitted to us as a copy, the authenticity of the originals of such latter documents, the legal capacity of natural persons and the genuineness of all signatures on such originals or copies. The phrase "to our knowledge", when used herein, means that our opinion is based solely on matters within the actual present knowledge of the attorneys in this firm who have performed substantive legal services on behalf of the Company in connection with the Payoff Agreement derived from inquiry of the officers of the Company or the Subsidiary (without any independent investigation) and reviewing certificates of such officers. -2- We express no opinion herein as to (i) the waiver of inconvenient forum or any claim that venue is improper or provisions relating to subject matter jurisdiction of the courts set forth in any of the Payoff Documents, (ii) the enforceability of the Payoff Documents, (iii) any laws regarding fraudulent transfers or conveyances, state securities or blue sky laws, rules or regulations, or ERISA or tax laws, rules and regulations. We express no opinion herein with respect to any documents or instruments other than the Payoff Documents. With respect to the opinions set forth in paragraph 1 below, we have relied solely on certificates of good standing or other certificates from the Secretary of State of the State of Delaware. Members of our firm involved in the preparation of this opinion are licensed to practice law in the State of New York and, in rendering the following opinions, do not purport to be experts on, or to express an opinion herein concerning, any law other than the laws of the State of New York, the General Corporation Law of the State of Delaware and the federal law of the United States. Based upon and subject to the foregoing and the other assumptions and qualifications contained herein, we are of the opinion that: B. Each of the Company and the Subsidiary is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware. C. Each of the Company and the Subsidiary has the corporate power and authority to execute, deliver and perform the Payoff Documents to which it is party and has taken all necessary corporate action to authorize the execution, delivery and performance by it of each of the Payoff Documents to which it is a party. D. Each of the Company and the Subsidiary has duly executed and delivered each of the Payoff Documents to which it is party. E. The execution, delivery and performance by the Company and the Subsidiary of the Payoff Documents to which it is a party do not violate (i) any provision of the Restated Certificate of Incorporation, as amended, of the Company, the Certificate of Incorporation, as amended, of the Subsidiary or By-laws of the Company or the Subsidiary, or (ii) those agreements set forth on attached Schedule 1. F. No approval, consent, authorization or order of, or filing with, any governmental authority of the United States of America or the State of New York is required on the part of the Company or the Subsidiary for the execution or delivery by the Company or the Subsidiary of the Payoff Documents to which it is a party, except for filing of a report under the Securities Exchange Act of 1934, as amended. G. To our knowledge, no legal or governmental proceedings are pending or threatened against the Company or the Subsidiary or any of their respective properties or assets that seeks to enjoin, prevent or otherwise challenge the consummation of the transactions contemplated by the Payoff Documents. -3- This opinion is provided to you pursuant to the Payoff Agreement and may not be furnished or relied upon by any other Person or for any purpose other than in connection with the transactions contemplated by the Payoff Agreement without our prior written consent in each instance. The opinions expressed herein are rendered as of the date hereof, and we disclaim any undertaking to advise you of changes in law or fact which may affect the continued correctness of any of our opinions as of a later date. Very truly yours, Schedule 1 Contracts Each of the following agreements as in effect on the date hereof: 1. Indenture, dated as of December __, 2003, between Lexington Precision Corporation ("LPC"), as issuer, and Wilmington Trust Company, as trustee, with respect to the 12% Senior Subordinated Notes due August 1, 2009 issued by LPC (the "Senior Subordinated Notes"). 2. 13% Junior Subordinated Note, dated as of December __, 2003, by LPC payable to Michael A. Lubin in the original principal amount of $347,667. 3. Amended and Restated Loan and Security Agreement dated as of December __, 2003, among LPC, Lexington Rubber Group, Inc. ("LRG"), the lenders as are or may become parties thereto ("Lenders"), and Congress Financial Corporation, as Administrative Agent for the Lenders, and The CIT Group/Commercial Financing, Inc., as co-agent for the Lenders. 4. Loan and Security Agreement, dated as of December __, 2003, among LPC, LRG, the lenders as are or may become parties thereto ("Lenders") and Ableco Finance LLC, as Administrative Agent for the Lenders. EX-99.1 18 l04690aexv99w1.txt EX-99.1 PRESS RELEASE DATED 12/18/03 EXHIBIT 99.1 LEXINGTON PRECISION CORPORATION 767 THIRD AVENUE NEW YORK, NY 10017 FOR IMMEDIATE RELEASE LEXINGTON PRECISION COMPLETES DEBT REFINANCING NEW YORK, December 18, 2003 - Lexington Precision Corporation (OTC: LEXP) announced today that it completed a comprehensive refinancing of substantially all of its debt. The refinancing involved (1) the completion of a new $37,000,000 secured credit facility, (2) the completion of a new $11,500,000 secured term loan, (3) the repurchase of the company's $7,500,000 senior, unsecured note, (4) the exchange of the company's senior subordinated notes, and (5) the exchange of the company's junior subordinated notes. The $37,000,000 secured credit facility consists of a $23,500,000 revolving credit facility expiring on June 30, 2006, and a $13,500,000 term loan. Loans under the revolving credit facility bear interest at either the prime rate plus 1% or the London Interbank Offered Rate (LIBOR) plus 3.25%, at the company's option. The revolving loans are limited to 88% of eligible accounts receivable plus 65% of eligible inventories. The term loan is payable in 45 monthly installments of $300,000 each, commencing on February 1, 2004, and bears interest at either the prime rate plus 1.50% or LIBOR plus 3.75%, at the company's option. The unpaid balance of the term loan is payable on June 30, 2006, if the revolving credit facility is not extended. All loans under the credit facility are secured by first priority liens on substantially all of the company's assets other than real property. The $11,500,000 secured term loan bears interest at the prime rate plus 4%, subject to a minimum of 8.25% and requires the company to pay a fee equal to 1.875% of the outstanding principal amount of the loan on the closing date and on each anniversary of the closing date. The loan is payable in monthly installments of $96,000 each from January 1, 2004, through June 1, 2006, with the unpaid balance due on June 30, 2006. The company has the option to extend the loan to June 30, 2007, on the same terms. The loan is secured by first mortgages on substantially all of the company's real property and by second priority liens on substantially all of the company's other assets. The company repurchased its $7,500,000 senior, unsecured note, and all accrued and unpaid interest thereon, for a purchase price of $5,810,000. The agreement governing the purchase of the note provides that the claim will be reinstated if the noteholder is ever required to return the purchase price to the company as a result of a judicial action. The company consummated an exchange offer to the holders of its outstanding 12 3/4% Senior Subordinated Notes (the "Old Notes"), pursuant to which each tendering holder received units consisting of (1) new 12% Senior Subordinated Notes due August 1, 2009 (the "New Notes"), in a principal amount equal to the principal amount of the Old Notes tendered plus accrued and unpaid interest on those Old Notes through yesterday, or $1,558.52 for each $1,000 of Old Notes, and (2) ten warrants (the "Warrants") to purchase common stock of the company for each Lexington Precision Corporation December 18, 2003 Page 2 $1,000 of New Notes issued. Approximately $27,254,000 principal amount, or 99.4%, of the Old Notes outstanding participated in the exchange offer. The company issued units consisting of $42,476,000 principal amount of New Notes and 424,781 Warrants. Interest on the New Notes accrues from today and is payable quarterly on each February 1, May 1, August 1, and November 1. The New Notes are redeemable at any time at 100% of principal amount plus accrued and unpaid interest. Each Warrant entitles the holder to purchase one share of the company's common stock at a price of $3.50 per share, at any time from August 1, 2005, through August 1, 2009. Prior to August 1, 2005, the Warrants will trade only as a unit with the New Notes and, if any of the New Notes are redeemed by the company, the attached Warrants will be retired for no additional value. Finally, the company exchanged units consisting of $347,000 of new 13% Junior Subordinated Notes due November 1, 2009, and 3,467 Warrants for its outstanding 14% Junior Subordinated Notes and exchanged 103,731 shares of its common stock for the $235,000 of interest that was accrued and unpaid on the old junior subordinated notes. Lexington Precision Corporation manufactures rubber and metal components that are used primarily by manufacturers of automobiles, automotive replacement parts, and medical devices. Contact: Warren Delano (212) 319-4657 # # # -----END PRIVACY-ENHANCED MESSAGE-----