<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 OR 15(d) of the Securities
Exchange Act of 1934 for the Quarterly Period Ended September 30, 1995
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number 0-3252
LEXINGTON PRECISION CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 22-1830121
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
767 THIRD AVENUE, NEW YORK, NY 10017
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
(212) 319-4657
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NOT APPLICABLE
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
REPORT DATE)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
COMMON STOCK, $.25 PAR VALUE -- 4,228,036 SHARES AS OF NOVEMBER 10, 1995
(INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S
CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE)
<PAGE> 2
LEXINGTON PRECISION CORPORATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. Financial Information
Item 1. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 2
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . 11
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . 19
</TABLE>
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<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LEXINGTON PRECISION CORPORATION
CONSOLIDATED BALANCE SHEETS
(THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
<S> <C> <C>
ASSETS:
Current assets:
Cash $ 73 $ 79
Accounts receivable 13,745 12,478
Inventories 9,322 8,186
Prepaid expenses and other current assets 3,002 1,958
-------- --------
Total current assets 26,142 22,701
-------- --------
Property, plant and equipment:
Land 1,507 823
Buildings 13,665 12,274
Equipment 54,693 46,516
-------- --------
69,865 59,613
Less accumulated depreciation 29,465 27,019
-------- --------
Property, plant and equipment, net 40,400 32,594
-------- --------
Excess of cost over net assets of businesses acquired, net 9,805 10,041
-------- --------
Other assets, net 3,021 2,060
-------- --------
$ 79,368 $ 67,396
======== ========
</TABLE>
See notes to consolidated financial statements. (Continued)
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<PAGE> 4
LEXINGTON PRECISION CORPORATION
CONSOLIDATED BALANCE SHEETS (CONT.)
(THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------ -----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' DEFICIT:
Current liabilities:
Accounts payable $ 9,917 $ 10,489
Accrued expenses 6,119 6,289
Short-term debt 11,553 5,052
Current portion of long-term debt 3,776 2,599
------- --------
Total current liabilities 31,365 24,429
------- --------
Long-term debt, excluding current portion 52,876 49,627
------- --------
Redeemable preferred stock, $100 par value,
at redemption value 1,110 1,110
Less excess of redemption value over par value 555 555
------- -------
Redeemable preferred stock, at par value 555 555
------- -------
Stockholders' deficit:
Common stock, $.25 par value, 10,000,000 shares
authorized, 4,348,951 shares issued 1,087 1,087
Additional paid-in-capital 12,604 12,659
Accumulated deficit (18,814) (20,593)
Cost of common stock in treasury, 120,915 and 145,915
shares, respectively (305) (368)
------- --------
Total stockholders' deficit (5,428) (7,215)
------- --------
$79,368 $ 67,396
======= ========
</TABLE>
See notes to consolidated financial statements.
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<PAGE> 5
LEXINGTON PRECISION CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ ------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 24,221 $ 23,045 $ 77,728 $ 66,035
-------- -------- -------- --------
Costs and expenses:
Cost of sales 20,135 18,662 62,925 52,823
Selling and administrative expenses 2,306 2,066 7,440 6,704
------- -------- -------- ---------
Total costs and expenses 22,441 20,728 70,365 59,527
------- -------- -------- ---------
Income from operations 1,780 2,317 7,363 6,508
Interest expense 1,962 1,607 5,629 4,601
Other income - - 641 336
------- -------- -------- ---------
Income/(loss) before income taxes (182) 710 2,375 2,243
Provision/(credit) for income taxes (73) 5 594 34
------- -------- -------- ---------
Net income/(loss) $ (109) $ 705 $ 1,781 $ 2,209
======= ======== ======== ========
Net income/(loss) per common share:
Primary $ (.03) $ 0.16 $ .40 $ 0.51
======= ======== ======= ========
Fully diluted $ (.03) $ 0.15 $ .38 $ 0.48
======== ======== ======= ========
</TABLE>
See notes to consolidated financial statements.
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<PAGE> 6
LEXINGTON PRECISION CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1995 1994
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 1,781 $ 2,209
Adjustments to reconcile net income to net cash
provided/(used) by operating activities:
Depreciation and amortization 4,671 3,625
Gain on sale of property, plant and equipment (668) -
Gain on sale of marketable securities - (336)
Changes in operating assets and liabilities which
provided/(used) cash:
Receivables (1,267) (2,470)
Inventories (1,136) (1,821)
Prepaid expenses and other current assets (1,044) (816)
Accounts payable (572) 3,581
Accrued expenses (170) (1,048)
Other - 162
-------- ---------
Net cash provided by operating activities 1,595 3,086
-------- ---------
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (11,9435) (8,861)
Decrease/(increase) in deposits relating to equipment purchases (396) 326
Proceeds from sales of property, plant and equipment 998 414
Proceeds from sale of marketable equity securities - 338
Additions to deferred tooling expense (705) (514)
-------- ---------
Net cash used by investing activities (12,046) (8,297)
-------- ---------
FINANCING ACTIVITIES:
Net proceeds from short-term borrowings 6,501 1,810
Proceeds from issuance of long-term debt 6,700 8,468
Repayments of long-term debt (2,301) (5,124)
Other (455) 72
-------- ---------
Net cash provided by financing activities 10,445 5,226
-------- ---------
Net increase/(decrease) in cash (6) 15
Cash at beginning of period 79 33
-------- ---------
Cash at end of period $ 73 $ 48
======== =========
</TABLE>
See Notes to consolidated financial statements.
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<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by Lexington Precision
Corporation (the "company") are set forth in Note 1 to the consolidated
financial statements in the Company's annual report on Form 10-K for the year
ended December 31, 1994, which was filed with the Securities and Exchange
Commission. Unless the context otherwise requires, all references to the
"Company" in this quarterly report on Form 10-Q shall be to Lexington Precision
Corporation and its wholly-owned subsidiary, Lexington Components, Inc.
("LCI").
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary to present fairly the
consolidated financial position of the Company as of September 30, 1995, the
Company's consolidated results of operations for the three-month and nine-month
periods ended September 30, 1995 and 1994 and the Company's consolidated cash
flows for the nine-month periods ended September 30, 1995 and 1994. All such
adjustments were of a normal recurring nature. Certain amounts in the
consolidated financial statements for 1994 have been reclassified to conform to
the presentation for 1995.
The results of operations for the three-month and nine-month periods
ended September 30, 1995 are not necessarily indicative of the results to be
expected for the full year or for any succeeding quarter.
NOTE 2 -- INVENTORIES
Inventories as of September 30, 1995 and December 31, 1994 are summarized
below (in thousands of dollars):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
<S> <C> <C>
Raw materials and purchased parts $ 3,309 $ 3,205
Work in process 2,909 2,285
Finished goods 3,104 2,696
------- -------
$ 9,322 $ 8,186
======= =======
</TABLE>
NOTE 3 -- SHORT-TERM DEBT
As of September 30, 1995 and December 31, 1994, short-term debt consisted
of borrowings under the revolving line of credit available under the Company's
borrowing arrangement (the "Working Capital Facility") with its working capital
lender (the "Working Capital Lender"). As of September 30, 1995, $1,200,000 of
revolving loans were classified as long-term debt because they were refinanced
by terms loan in October 1995. (For additional information regarding the
Working Capital Facility, see Note 5 -- Long-Term Debt.)
NOTE 4 -- ACCRUED EXPENSES
As of September 30, 1995 and December 31, 1994, accrued expenses included
accrued interest expense of $753,000 and $1,716,000, respectively.
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<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 -- LONG-TERM DEBT
Long-term debt as of September 30, 1995 and December 31, 1994 is
summarized below (in thousands of dollars):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
<S> <C> <C>
Term loans outstanding under the Working Capital Facility,
payable in monthly installments through 2002 $20,154 $ 15,296
12% Term Note, payable in monthly installments through 2000 2,750 3,078
Industrial Revenue Bond, 75% of the Prime Rate, payable in
monthly installments through 2000 523 598
12-3/4% Senior Subordinated Notes, due 2000 31,674 31,647
14% Junior Subordinated Convertible Notes, due 2000 1,000 1,000
14% Junior Subordinated Non-Convertible Notes, due 2000 347 347
Other 204 260
------- --------
Total long-term debt 56,652 52,226
Less current portion 3,776 2,599
------- --------
Total long-term debt, excluding current portion $52,876 $ 49,627
======= ========
</TABLE>
WORKING CAPITAL FACILITY
The Working Capital Facility, which expires in January 1998, enables the
Company to borrow up to $40,000,000, subject to availability formulas set by
the Working Capital Lender. Interest is charged on loans outstanding under the
Working Capital Facility at either the Prime Rate plus 1% or the London
Interbank Offered Rate plus 3-1/4%. The Working Capital Facility includes a
revolving line of credit, term loans and an equipment line of credit. The
Company classifies loans outstanding under the revolving line of credit as
short-term debt. The unused portion of the equipment line of credit, which
totaled $5,600,000 at September 30, 1995, can be used to finance a portion of
the purchase price of new equipment through new term loans which will be
payable in equal monthly principal installments through 2002. As of
November 9, 1995, the Company had borrowings of $32,143,000 outstanding under
the Working Capital Facility and had approximately $1,145,000 of unused
availability.
Under the terms of the Working Capital Facility, the Company is required,
among other things, to maintain net working capital of not less than
$1,000,000, exclusive of amounts borrowed under the Working Capital Facility
which are classified as current liabilities, and net worth of not less than
negative $9,500,000.
Amounts outstanding under the Working Capital Facility are collateralized
by substantially all of the personal property of the Company, including
accounts receivable, inventory and equipment, and certain real property of the
Company.
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<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12-3/4% SENIOR SUBORDINATED NOTES
The 12-3/4% Senior Subordinated Notes, due February 1, 2000, are
unsecured obligations of the Company, redeemable at the option of the Company,
in whole or in part, at a declining premium over the principal amount thereof.
(See also "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in Part I, Item 2.)
NOTE 6 -- PROVISIONS OR CREDITS FOR INCOME TAXES
As of September 30, 1995 and December 31, 1994, the Company's net
deferred tax assets were entirely offset by a valuation allowance.
The provisions for income taxes otherwise recognizable during the three
and nine months ended September 30, 1995 and 1994 were reduced by the
utilization of portions of the Company's tax loss carryforwards and tax credit
carryforwards. The provisions or credits for income taxes recorded for the
three and nine months ended September 30, 1995 were calculated using the
projected annual effective tax rate (primarily attributable to federal
alternative minimum taxes) for the year ending December 31, 1995.
- 8 -
<PAGE> 10
NOTE 7 -- INCOME/(LOSS) PER SHARE
The calculation of primary and fully diluted income/(loss) per share
for the three-month and nine-month September 30, 1995 and 1994 are set forth
below (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
September 30, September 30,
------------------ -----------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
PRIMARY NET INCOME/(LOSS) PER COMMON SHARE:
Weighted average common shares outstanding during period 4,228 4,203 4,215 4,173
Common stock equivalents - incentive stock options 28 25 28 25
------ ----- ----- -----
Weighted average common and common equivalent shares 4,256 4,228 4,243 4,198
====== ===== ===== =====
Net income/(loss) $ (109) $ 705 $ 1,781 $ 2,209
Preferred stock dividends (11) (12) (33) (36)
Pro rata portion of the excess of the redemption cost over
the value of preferred stock redeemed (11) (11) (33) (33)
------ ------ ------ ------
Income/(loss) for primary income per share $ (131) $ 682 $ 1,715 $ 2,140
====== ====== ======= ======
Primary net income/(loss) per common share $ (.03) $ .16 $ .40 $ .51
====== ====== ======= ======
FULLY DILUTED NET INCOME/(LOSS) PER COMMON SHARE:
Weighted average common shares outstanding during period 4,228 4,203 4,228 4,196
Pro forma conversion of 14% Junior Subordinated
Convertible Notes 440 440 440 440
Common stock equivalents - incentive stock options 28 25 28 25
------- ------ ------- ------
Weighted average common and common equivalent shares 4,696 4,668 4,696 4,661
======= ====== ======= ======
Net income/(loss) $ (109) $ 705 $ 1,781 $ 2,209
Preferred stock dividends (11) (12) (33) (36)
Pro rata portion of the excess of the redemption cost over
the value of preferred stock redeemed (11) (11) (33) (33)
Pro forma elimination of interest expense on the 14%
Junior Subordinated Convertible Notes, net of applicable
income taxes 26 35 78 105
------ ------ ------ ------
Income/(loss) for fully diluted income/(loss) per share $ (105) $ 717 $ 1,793 $ 2,245
====== ====== ====== ======
Fully diluted net income/(loss) per common share $ (.02) $ .15 $ .38 $ .48
====== ====== ====== ======
</TABLE>
The fully diluted loss per common share for the three months ended
September 30, 1995 is less than the primary loss per common share for the three
months ended September 30, 1995 because the calculation of fully diluted loss
per common share includes the effect of the pro forma conversion of the 14%
Junion Subordinated
- 9 -
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Convertible Notes. As a result, the primary and fully diluted net loss per
common share for the three months ended September 30, 1995 is equal to
$.03 per common share.
NOTE 8 -- COMMITMENTS AND CONTINGENCIES
The Company is subject to various claims and legal proceedings covering
a wide range of matters that arise in the ordinary course of its business
activities. In addition, the Company has been named a potentially responsible
party or a third-party defendant, along with other companies, with respect to
certain waste disposal sites. Each of these matters is subject to various
uncertainties and it is possible that some of these matters may be decided
unfavorably to the Company. Management believes that any liability that may
ultimately result from the resolution of these matters will not have a material
adverse effect on the financial position of the Company.
- 10 -
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Through its two business segments, the Rubber Group and the Metals
Group, the Company manufactures, to customers' specifications, high tolerance
rubber and metal components. The Rubber Group manufactures silicone and
organic rubber components for sale primarily to manufacturers of automobiles,
automotive replacement parts and medical devices. The Metals Group
manufactures metal components for sale primarily to manufacturers of
automobiles, industrial equipment, home appliances and business machines. The
Rubber Group operates through three divisions of Lexington Components, Inc., a
wholly owned subsidiary of the Company ("LCI"), the Electrical Insulator
Division, the Precision Seals Division and Lexington Medical and through
Lexington Manufacturing, a division of the Company. The Metals Group operates
through two divisions of the Company, Falconer Die Casting Company and Ness
Precision Products.
The results of operations for any particular fiscal period of the
Company are not necessarily indicative of the results to be expected for any
one or more succeeding fiscal periods. In addition, because the Company's
business is materially affected by the level of activity in the automotive
industry, any material reduction in the level of activity in that industry may
have a material adverse effect on the Company's results of operations.
RESULTS OF OPERATIONS --THIRD QUARTER OF 1995 VERSUS THIRD QUARTER OF 1994
NET SALES
A summary of the net sales of the Rubber Group and the Metals Group for
the third quarters of 1995 and 1994 follows (dollar amounts in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30, PERCENTAGE
-------------------- INCREASE/
1995 1994 (DECREASE)
---- ---- ----------
<S> <C> <C> <C>
Rubber Group $ 14,335 $ 12,486 14.8%
Metals Group 9,886 10,559 (6.4)
-------- -------- ----
$ 24,221 $ 23,045 5.1%
======== ======== ====
</TABLE>
The increase in net sales of the Rubber Group was primarily the result
of increased sales of cable and connector seals for automotive wire harnesses,
electrical insulators for ignition wire harnesses and components for medical
devices and increased sales of tooling. The third quarter of 1995 did not
include any sales of the Rubber Group's Extruded and Lathe-Cut Products Division
which was sold on June 30, 1995. During the third quarter of 1994, the Extruded
and Lathe-Cut Products Division had net sales of $760,000. Excluding the net
sales of the Extruded and Lathe-Cut Products Division from the third quarter of
1994, net sales of the Rubber Group increased 22.2%. The $673,000 decrease in
net sales of the Metals Group was principally caused by a $1,353,000 decline in
sales of a single component to TRW Vehicle Safety Systems, Inc. ("TRW VSSI").
The decline in sales of the component resulted from the planned phase-out of the
component. If sales of the component were excluded from both the third quarter
of 1994 and the third quarter of 1995, net sales of the Metals Group would have
increased by 8.4%.
- 11 -
<PAGE> 13
COST OF SALES
A summary of the cost of sales for the Rubber Group and the Metals
Group follows (in thousands of dollars and as a percentage of net sales of each
Group):
<TABLE>
<CAPTION>
Three Months Ended September 30,
---------------------------------------- PERCENTAGE
1995 1994 INCREASE
------------------ ------------------ ----------
<S> <C> <C> <C> <C> <C>
Rubber Group $ 11,943 83.3% $ 10,638 85.2% 12.3%
Metals Group 8,192 82.9 8,024 76.0 2.1
------- ----- ------- ----- -----
$ 20,135 83.1% $ 18,662 81.0% 7.9%
======= ===== ======= ===== =====
</TABLE>
Cost of sales of the Rubber Group as a percentage of net sales
decreased to 83.3% during the third quarter of 1995. During the third quarter
of 1995, reduced material costs as a percentage of net sales were offset in
part by increased factory overhead expenses as a percentage of net sales,
primarily because of increased costs associated with the development and
start-up of new products at Lexington Medical and start-up expenses incurred at
the Precision Seals Division's new 78,000 square foot facility in LaGrange,
Georgia.
Cost of sales of the Metals Group as a percentage of net sales
increased to 82.9% during the third quarter of 1995. During the third quarter
of 1995, reduced material costs as a percentage of net sales were offset by
increased direct labor and factory overhead expenses as a percentage of net
sales which resulted from increased costs associated with the installation of
new equipment and the start-up of new products at Ness Precision Products and
reduced absorption of fixed factory overhead expenses due to the decrease in
net sales.
SELLING AND ADMINISTRATIVE EXPENSES
A summary of the selling and administrative expenses for the Rubber
Group, the Metals Group and the Corporate Office follows (dollar amounts in
thousands and as a percentage of net sales of each Group):
<TABLE>
<CAPTION>
Three Months Ended September 30,
-------------------------------- PERCENTAGE
1995 1994 INCREASE
----------------- ------------------ ----------
<S> <C> <C> <C> <C> <C>
Rubber Group $ 910 6.3% $ 814 6.5% 11.8%
Metals Group 892 9.0 800 7.6 11.5
Corporate Office 504 N/A 452 N/A 11.5
------- ----- ------- ---- ----
$ 2,306 9.5% $ 2,066 9.0% 11.6%
======= ===== ======= ==== ====
</TABLE>
As a percentage of Rubber Group net sales, selling and administrative
expenses decreased slightly to 6.3% during the third quarter of 1995, primarily
because most selling and administrative expenses grew at a slower rate than net
sales and because of reduced legal expenses. As a percentage of Metals Group
net sales, selling and administrative expenses increased to 9.0% during the
third quarter of 1995, primarily because of reduced absorption of selling and
administrative expenses resulting from lower net sales and because of increased
legal fees. Corporate Office administrative expenses increased during the
third quarter of 1995 primarily because of increased accruals of incentive
compensation and increased recruiting expenses.
- 12 -
<PAGE> 14
INTEREST EXPENSE
Interest expense totaled $1,962,000 during the third quarter of 1995,
an increase of $355,000 compared to the third quarter of 1994. This increase
was caused by an increase of $11,947,000 in average borrowings outstanding
under the Company's borrowing arrangement (the "Working Capital Facility") with
its working capital lender (the "Working Capital Lender").
PROVISIONS OR CREDITS FOR INCOME TAXES
As of September 30, 1995 and December 31, 1994, the Company's net
deferred tax assets were entirely offset by a valuation allowance.
The provisions for income taxes otherwise recognizable during the third
quarters of 1995 and 1994 were reduced by the utilization of portions of the
Company's tax loss carryforwards and tax credit carryforwards. At September
30, 1995, the Company adjusted its estimate of its projected annual effective
tax rate (primarily attributable to federal alternative minimum tax) from 26%
to 25% of net income. As a result, the income tax credit recorded for the
third quarter of 1995 reflects the adjustment of the Company's projected annual
effective tax rate.
RESULTS OF OPERATIONS -- NINE MONTHS ENDED SEPTEMBER 1995 VERSUS NINE MONTHS
ENDED SEPTEMBER 1994
NET SALES
A summary of the net sales of the Rubber Group and the Metals Group for
the first nine months of 1995 and 1994 follows (dollar amounts in thousands):
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------- Percentage
1995 1994 Increase
------ ------ --------
<S> <C> <C> <C>
Rubber Group $ 45,946 $ 34,446 33.4%
Metals Group 31,782 31,589 .6
------- -------- -----
$ 77,728 $ 66,035 17.7%
======= ======== =====
</TABLE>
The increase in net sales of the Rubber Group was primarily the result
of increased sales of cable and connector seals for automotive wire harnesses,
electrical insulators for ignition wire harnesses and components for medical
devices and increased sales of tooling. Although sales by the Metals Group of a
single component to TRW VSSI declined by $3,132,000, the decline was more than
offset by increased sales of other components. The decline in sales of the
component resulted from the planned phase-out of the component. If sales of the
component were excluded from both the first nine months of 1994 and the first
nine months of 1995, net sales of the Metals Group would have increased by
14.0%.
- 13 -
<PAGE> 15
COST OF SALES
A summary of the cost of sales for the Rubber Group and the Metals
Group follows (in thousands of dollars and as a percentage of net sales of each
Group):
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------- PERCENTAGE
1995 1994 INCREASE
------------------ ------------------ ----------
<S> <C> <C> <C> <C> <C>
Rubber Group $ 37,379 81.4% $ 28,661 83.2% 30.4%
Metals Group 25,546 80.4 24,162 76.5 5.7
------- ---- -------- ---- ----
$ 62,925 80.9% $ 52,823 79.9% 19.1%
======= ==== ======== ==== ====
</TABLE>
Cost of sales of the Rubber Group as a percentage of net sales decreased
to 81.4% during the first nine months of 1995. During the first nine months of
1995, material costs as a percentage of net sales increased because of increased
sales of tooling, which generally have higher material costs as a percentage of
net sales. Increased material costs as a percentage of net sales were offset by
reduced factory overhead expense as a percentage of net sales, primarily because
factory overhead expenses grew at a slower rate than sales. Although factory
overhead expenses as a percentage of net sales decreased during the first nine
months of 1995, the reduction was partially offset by start-up expenses incurred
at the Precision Seals Division's new facility in LaGrange, Georgia.
Cost of sales of the Metals Group as a percentage of net sales increased
to 80.4% during the first nine months of 1995, primarily because of increased
factory overhead expenses. Increased factory overhead expenses as a percentage
of net sales primarily resulted from increased costs associated with the
installation of new equipment and the start-up of new products at Ness Precision
Products.
SELLING AND ADMINISTRATIVE EXPENSES
A summary of the selling and administrative expenses for the Rubber
Group, the Metals Group and the Corporate Office follows (dollar amounts in
thousands and as a percentage of net sales of each Group):
<TABLE>
<CAPTION>
Nine Months Ended September 30,
------------------------------ PERCENTAGE
1995 1994 INCREASE
------------------ ------------------ -----------
<S> <C> <C> <C> <C> <C>
Rubber Group $ 2,981 6.5% $ 2,517 7.3% 18.4%
Metals Group 2,736 8.6 2,500 7.9 9.4
Corporate Office 1,723 N/A 1,687 N/A 2.1
------- ---- ------- ---- ----
$ 7,440 9.6% $ 6,704 10.2% 11.0%
======= ==== ======= ==== ====
</TABLE>
Selling and administrative expenses of the Rubber Group increased
primarily as a result of the addition of administrative personnel and increased
relocation costs. As a percentage of Rubber Group net sales, selling and
administrative expenses fell to 6.5% during the first nine months of 1995. As a
percentage of Metals Group net sales, selling and administrative expenses
increased to 8.6% during the first nine months of 1995, primarily because of the
addition of administrative personnel, increased legal fees and relocation costs.
- 14 -
<PAGE> 16
INTEREST EXPENSE
Interest expense totaled $5,629,000 during the first nine months of
1995, an increase of $1,028,000 compared to the first nine months of 1994.
This increase was caused by an increase of $11,942,000 in average borrowings
outstanding under the Working Capital Facility and an increase in the average
rate of interest charged on borrowings outstanding under the Working Capital
Facility due to increases in short-term interest rates.
OTHER INCOME
On June 30, 1995, the Company sold the inventory, equipment and
manufacturing facility of the Extruded and Lathe-Cut Products Division of LCI
for cash and the assumption by the purchaser of certain liabilities, which
resulted in a pre-tax gain of $578,000. During 1994, the Extruded and
Lathe-Cut Products Division had net sales of approximately $2,600,000, which
represented approximately 3% of the Company's consolidated net sales. In
addition, during the first nine months of 1995, the Company realized a pretax
gain on the sale of several other pieces of equipment in the amount of $63,000.
PROVISION FOR INCOME TAXES
As of September 30, 1995 and December 31, 1994, the Company's net
deferred tax assets were entirely offset by a valuation allowance.
The income tax provisions otherwise recognizable during the first nine
months of 1995 and 1994 were reduced by the utilization of portions of the
Company's tax loss carryforwards and tax credit carryforwards. The income tax
provision recorded for the first nine months of 1995 was calculated using the
projected annual effective tax rate (primarily attributable to federal
alternative minimum taxes) for the year ending December 31, 1995.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS RELATING TO OPERATING ACTIVITIES
During the first nine months of 1995, net cash provided by the
operating activities of the Company totaled $1,595,000. During the first nine
months of 1995, $2,403,000 of cash was used to fund increased levels of
accounts receivable and inventories resulting primarily from increased levels
of sales and orders. Also during the first nine months of 1995, $1,044,000 of
cash was used to fund an increase in other current assets which resulted
primarily from increased customer orders for production tooling. At
September 30, 1995, the Company's trade accounts payable included approximately
$2,900,000 relating to the purchase of new equipment and tooling, a decrease
from $4,325,000 at December 31, 1994. Compared to December 31, 1994, accrued
expenses at September 30, 1995, included increased accruals for employee
compensation and related taxes and benefits and increased accruals for
alternative minimum taxes. The increased accruals were offset by a lower
accrual for interest expense on the Company's 12-3/4% Senior Subordinated Notes
because interest is paid on these notes on February 1 and August 1 of each
year.
Net working capital declined during the first nine months of 1995 by
$3,495,000 primarily because capital expenditures were financed with increased
short-term borrowings under the Working Capital Facility.
- 15 -
<PAGE> 17
CASH FLOWS RELATING TO INVESTING ACTIVITIES
During the first nine months of 1995, the investing activities of the
Company used $12,046,000 of cash. Capital expenditures totaled $11,943,000
during the first nine months of 1995, of which $8,784,000 was attributable to
the Rubber Group and $3,159,000 was attributable to the Metals Group. The
Company presently estimates that capital expenditures will total approximately
$20,000,000 during 1995, including approximately $6,000,000 for the
construction or improvement of manufacturing facilities and approximately
$14,000,000 for the purchase of equipment. The Company currently estimates
that approximately $4,000,000 of anticipated 1995 capital expenditures are
being made to maintain or replace existing equipment or to effect cost
reductions and that the balance of capital expenditures are primarily for the
purchase of production equipment to meet orders which have been awarded to the
Company or the expansion of manufacturing facilities required to accommodate
the anticipated future growth of the Company. As of September 30, 1995, the
Company had commitments outstanding for capital expenditures totaling
approximately $11,400,000.
CASH FLOWS RELATING TO FINANCING ACTIVITIES
During the first nine months of 1995, the financing activities of the
Company provided $10,445,000 of cash, primarily from increased borrowings under
the Working Capital Facility. The Company operates with high financial
leverage. During the first nine months of 1995, the aggregate indebtedness of
the Company, excluding trade payables, increased by $10,927,000 to $68,205,000.
Cash interest and principal payments required under the terms of the Company's
loan agreements are expected to total approximately $7,045,000 and $3,227,000,
respectively, in 1995.
The Company finances its operations primarily through the Working
Capital Facility, which expires in January 1998. The Company's maximum
borrowing availability under the Working Capital Facility is $40,000,000,
subject to availability formulas set by the Working Capital Lender. The
Working Capital Facility includes a revolving line of credit, term loans and an
equipment line of credit. Term loans outstanding under the Working Capital
Facility are due in equal monthly principal installments through February 2002
(subject to accelerated maturity in the event of the termination or non-renewal
of the Working Capital Facility). As of September 30, 1995, the equipment line
of credit totaled $5,600,000. The equipment line of credit can be used to
finance a portion of qualifying new equipment purchases through term loans.
The Company classifies loans outstanding under the revolving line of credit as
short-term debt.
In August 1995, the Working Capital Facility was amended in order to,
among other things, increase the advance rates on equipment and inventory. As
a result of the change in the equipment advance rate, the Working Capital
Lender made available to the Company $2,000,000 of additional term loans. As a
result of the change in the inventory advance rate, the Company's availability
under its revolving loan agreement increased by $905,000. Furthermore, on
September 13, 1995 and October 11, 1995, the Company converted $1,200,000 of
borrowings outstanding under its revolving line of credit to term loans.
LIQUIDITY
As of November 9, 1995, the Company had approximately $1,145,000 of
unused availability under the Working Capital Facility. Amounts outstanding
under the Working Capital Facility are collateralized by substantially all of
the personal property of the Company, including accounts receivable, inventory
and equipment, and certain real property of the Company.
- 16 -
<PAGE> 18
As a result of increasing market share in certain market niches and
growing overall volume because of a generally healthy economic environment and,
in particular, a strong automotive industry, the Company commenced a major
expansion plan in 1994 which is currently expected to be completed during the
first half of 1996. During 1994, 1995 and the first half of 1996, capital
expenditures have totaled or are projected to total $15,319,000, $20,000,000
and $7,000,000, respectively, or an aggregate of $42,319,000. The Company
estimates that approximately $35,000,000 of those capital expenditures
represent investments for expansion of the Company's business of which
approximately $9,000,000 will represent capital expenditures for real estate
and approximately $26,000,000 will represent capital expenditures for
equipment. Net sales have grown from $74,976,000 in 1993 to a projected level
of $102,000,000 in 1995. Net sales for 1996 are currently projected to range
between $110,000,000 and $120,000,000. The Company currently anticipates that
the rate of sales growth will be reduced beginning in the second half of 1996
and, as a result, that capital expenditure requirements of the Company will
drop to a level of approximately $5,000,000 annually. This amount would
provide for technological upgrades, maintenance, cost reduction programs and
nominal growth.
The Company anticipates that, in addition to its projected cash flows
from operations and projected availability under the Working Capital Facility
as currently in effect, incremental borrowings in the amount of approximately
$4,900,000 will be required to meet the Company's working capital, capital
expenditure and debt service requirements for the balance of 1995 and the first
quarter of 1996. Management of the Company believes that three factors have
caused liquidity to be less than had been planned. First, operating profits
for 1995 are projected to fall approximately $1,500,000 below planned levels.
Second, approximately $1,300,000 in excess of planned amounts is currently
invested in tooling which will be billed to customers after certification of
the tooling has been obtained. Third, but perhaps most important, although
capital expenditures are expected to approximate planned levels, the mix of
spending has been weighted more heavily than planned to assets that do not
generate borrowing availability under the Working Capital Facility. Such
assets include purchased land, new buildings, building additions and upgrades
and equipment modifications and retrofits. Although these three factors have
had a negative impact on the Company's short term liquidity, they do not
necessarily reflect negatively on the business of the Company.
As previously stated, projected incremental borrowings in the amount of
approximately $4,900,000 will be required to meet the Company's working
capital, capital expenditure and debt service requirements for the balance of
1995 and the first quarter of 1996. Projected peak incremental borrowing
requirements of approximately $5,300,000 will occur on February 1, 1996, the
scheduled payment date for $2,069,000 of interest then due on the 12-3/4%
Senior Subordinated Notes and 14% Junior Subordinated Notes. Assuming a
moderate extension of accounts payable balances with suppliers beyond terms
which the Company believes are customary in the industries in which it
operates, projected incremental borrowings required to meet the Company's
working capital, capital expenditure and debt service requirements for the
balance of 1995 and the first quarter of 1996 would be reduced to approximately
$3,400,000 and projected peak incremental borrowing requirements on February 1,
1996 would be reduced to approximately $3,800,000. In order to finance its
projected cash requirements, the Company has commenced negotiations with the
Working Capital Lender and two other financial institutions regarding three new
borrowing facilities which would generate approximately $5,500,000 of
incremental borrowing availability. Although there can be no assurance that
the incremental financing can be obtained, the Company presently believes that
such financing can be obtained on terms which are satisfactory to the Company.
If the Company is unable to obtain incremental financing in adequate amounts
and on satisfactory terms or if the Company's cash flow from operations falls
below expectations, the Company will attempt to reduce its cash requirements by
reducing or delaying its capital expenditure program, renegotiating payment
terms with certain suppliers of capital assets on terms which are more
favorable to the Company, and extending accounts payable balances with
suppliers beyond terms which the Company believes are customary in the
industries in which it operates. If the Company is
- 17 -
<PAGE> 19
unsuccessful in its efforts, the Company may be forced to defer the
payment of the February 1, 1996 interest due on the 12-3/4% Senior Subordinated
Notes and 14% Junior Subordinated Notes. Under certain circumstances, such
non-payment could result in defaults under other loan and financing agreements
of the Company and could have a material adverse effect upon the Company and
its operations. The Company believes that its tight cash position is short
term in nature and that, after completion of its real estate expansion program,
cash flow from operations in conjunction with the borrowing availability under
the Working Capital Facility will be more than adequate to meet the projected
cash requirements of the Company.
DEPENDENCE ON LARGE CUSTOMERS
During the first nine months of 1995, the Company's three largest
customers accounted for 35.5% of the Company's total net sales. The Company
has limited ability to predict the volume and pricing of orders from such
customers. Loss of all or a major portion of the business of any of the
Company's three largest customers would have a material adverse effect on the
Company's operations.
ACQUISITIONS
The Company is seeking to acquire assets and businesses related to its
current operations with the intention of expanding its existing operations.
Depending on, among other things, the size and terms of such acquisitions, the
Company may be required to obtain additional financing and, in some cases, the
approval of the Working Capital Lender and the holders of other debt of the
Company. The Company's ability to effect acquisitions may be dependent upon its
ability to obtain such financing and, to the extent applicable, consents.
ENVIRONMENTAL MATTERS
The Company has been named as one of numerous potentially responsible
parties under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA") for restoration costs at three waste disposal
sites, as a third-party defendant in cost recovery actions initiated by the
Environmental Protection Agency pursuant to applicable sections of CERCLA and
as a defendant or potential defendant in various other legal matters. It is
the Company's policy to record accruals for such matters when a loss is deemed
probable and the amount of such loss can be reasonably estimated. The various
actions to which the Company is or may be a party in the future are at various
stages of completion and, although there can be no assurance as to the outcome
of existing or potential litigation, in the event such litigation were
commenced, based upon the information currently available to the Company, the
Company believes that the outcome of such actions would not have a material
adverse effect upon its financial position.
- 18 -
<PAGE> 20
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed herewith:
10-1 Amendment to Financing Agreements dated August 1, 1995
from Lexington Precision Corporation in favor of Congress
Financial Corporation
10-2 Amendment to Financing Agreements dated August 1, 1995
from Lexington Components, Inc. in favor of Congress
Financial Corporation
10-3 Term Note dated September 13, 1995 from Lexington
Precision Corporation in favor of Congress Financial
Corporation
10-4 Term Note dated September 13, 1995 from Lexington
Components, Inc. in favor of Congress Financial
Corporation
10-5 Term Note dated October 11, 1995 from Lexington
Precision Corporation in favor of Congress Financial
Corporation
10-6 Term Note dated October 11, 1995 from Lexington
Components, Inc. in favor of Congress Financial
Corporation
27-1 Financial Data Schedule*
* Not deemed filed for purposes of Section 11 of the
Securities Act of 1933, Section 18 of the Securities Exchange
Act of 1934 and Section 323 of the Trust Indenture Act of
1939, or otherwise subject to the liabilities of such sections
and not deemed part of any registration statement to which
such exhibit relates.
(b) REPORTS ON FORM 8-K
On July 5, 1995, the Company filed a Form 8-K with the Securities
and Exchange Commission stating that, on June 30, 1995, Lexington
Components, Inc., a wholly-owned subsidiary, of the Company, had
sold assets of its Extruded and Lathe-Cut Products Division to
Kismet Products, Inc., of Painesville, Ohio, recognizing a
pre-tax gain of $578,000 on the sale.
- 19 -
<PAGE> 21
LEXINGTON PRECISION CORPORATION
FORM 10-Q
SEPTEMBER 30, 1995
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, thereunto duly authorized.
LEXINGTON PRECISION CORPORATION
(Registrant)
November 10, 1995 By: /s/ Michael A. Lubin
- ----------------- -------------------------
Date Michael A. Lubin
Chairman of the Board
November 10, 1995 By: /s/ Warren Delano
- ----------------- -------------------------
Date Warren Delano
President
November 10, 1995 By: /s/ Dennis J. Welhouse
- ----------------- -------------------------
Date Dennis J. Welhouse
Senior Vice President and
Chief Financial Officer
- 20 -
<PAGE> 22
EXHIBIT INDEX
Exhibit
Number Exhibit Location
- ------- ------- --------
10-1 Amendment to Financing Agreements Filed with this Form 10-Q
dated August 1, 1995 from Lexington
Precision Corporation in favor of
Congress Financial Corporation
10-2 Amendment to Financing Agreements Filed with this Form 10-Q
dated August 1, 1995 from Lexington
Components, Inc. in favor of Congress
Financial Corporation
10-3 Term Note dated September 13, 1995 from Filed with this Form 10-Q
Lexington Precision Corporation in favor
of Congress Financial Corporation
10-4 Term Note dated September 13, 1995 from Filed with this Form 10-Q
Lexington Components, Inc. in favor of
Congress Financial Corporation
10-5 Term Note dated October 11, 1995 from Filed with this Form 10-Q
Lexington Precision Corporation in favor
of Congress Financial Corporation
10-6 Term Note dated October 11, 1995 from Filed with this Form 10-Q
Lexington Components, Inc. in favor of
Congress Financial Corporation
27-1 Financial Data Schedule Filed with this Form 10-Q
<PAGE> 1
August 1, 1995
Lexington Precision Corporation
767 Third Avenue
New York, New York 10017
Re: Amendment to Financing Agreements
---------------------------------
Gentlemen:
Reference is made to certain financing agreements dated January 11,
1990 between Lexington Precision Corporation ("LPC") and Congress Financial
Corporation ("Congress"), including, but not limited to, an Accounts Financing
Agreement [Security Agreement], as amended (the "Accounts Agreement"), and all
supplements thereto and all other related financing and security agreements
(collectively, all of the foregoing, as the same have heretofore or
contemporaneously been or may be hereafter, amended, replaced, extended,
modified or supplemented, the "Financing Agreements").
In connection with the financing arrangements pursuant to the Accounts
Agreement and the other Financing Agreements, the parties hereto hereby agree
to amend the Financing Agreements, as set forth below (capitalized terms used
herein shall have the meanings assigned thereto in the Accounts Agreement and
in the other Financing Agreements, unless otherwise defined herein):
1. Definitions.
-----------
(a) The definition of "LPC Financing Agreements"
contained in the Covenant Supplement to the Accounts Agreement is hereby
amended to include, without limitation, the Additional Term Note (as defined
below).
(b) The definition of "LCI Financing Agreements"
contained in the Covenant Supplement to the Accounts Financing Agreement
[Security Agreement] between LCI and Congress is hereby amended to include,
without limitation, the Term Promissory Note, dated of even date herewith, by
LCI in favor of Congress, in the original principal amount of $1,000,000.
2. ADDITIONAL TERM LOAN. Contemporaneously herewith, in order to
evidence an additional one-time advance to LPC in the principal amount of
$1,000,000 (the "Additional Term Loan"), LPC is executing and delivering to
Congress the Term Promissory Note, dated of even date herewith, in the original
principal amount of $1,000,000 (as the same now exists or may hereafter be
amended, supplemented, renewed, extended, restated or replaced, the "Additional
Term Note"). The Obligations evidenced by the Additional Term Note shall be
payable, including interest and other amounts, as provided therein and, to the
extent not inconsistent with the terms of the Additional Term Note, as
<PAGE> 2
provided in the other Financing Agreements, and shall be secured by all
Collateral.
3. Inventory Loans.
---------------
(a) ELIGIBLE INVENTORY. Subparagraph 1a. of the Letter
re: Inventory Loans, dated March 23, 1990, by LPC in favor of Congress, as
amended (the "Inventory Loan Letter") is hereby amended by adding the following
sentence at the end of such subparagraph:
"Notwithstanding the foregoing, finished goods
Inventory shall not be considered Eligible Inventory unless,
in addition to satisfying all of your other criteria for
determining Eligible Inventory, such Inventory is the subject
of written purchase agreements providing for delivery of such
Inventory no later than ninety (90) days following the
applicable date of your determination of Eligible Inventory
hereunder."
(b) INVENTORY ADVANCE RATES. Paragraph 2 of the
Inventory Loan Letter is hereby amended by deleting the phrase "up to fifty
(50%) percent of the value of eligible finished goods and raw materials
Inventory and up to thirty (30%) percent of the scrap value of eligible
work-in-process Inventory" and replacing it with the following:
"(i) up to sixty-five (65%) percent of the Value
of eligible finished goods Inventory, (ii) up to fifty (50%)
percent of the Value of eligible raw materials Inventory and
(iii) up to thirty (30%) percent of the scrap value of
eligible work-in-process Inventory".
(c) INVENTORY ADVANCE SUBLIMITS. Paragraph 3 of the
Inventory Loan Letter is hereby restated in its entirety as follows:
"3. Except in your sole discretion, the
outstanding aggregate principal amount of loans by you to us
hereunder plus the outstanding aggregate principal amount of
loans by you to our subsidiary, Lexington Components, Inc.
("LCI"), pursuant to the Letter re: Inventory Loans executed
the date hereof by LCI and you, shall not exceed, at any time,
the lower of (a) the aggregate amount of the above percentages
of Value of Eligible Inventory or (b) $5,000,000".
4. FEE. In consideration of Congress' entering into this
Amendment, LPC agrees to pay Congress a fee in the sum of $7,500, which fee is
fully earned as of the date hereof and may be charged directly to LPC's
Revolving Loan account maintained by Congress under the Financing Agreements.
-2-
<PAGE> 3
5. AMENDMENT TO NEW EQUIPMENT TERM NOTE. The form of New
Equipment Term Note attached as Exhibit I to the Letter Agreement re: Amendment
to Financing Agreements dated as of January 31, 1995 is hereby amended as of
January 31, 1995, such that the phrase "The Interest Rate payable hereunder
shall increase or" appearing on the first line of the fourth paragraph thereof,
is replaced with the following: "The Interest Rate payable hereunder as to
Prime Rate Loans shall increase or".
6. REPRESENTATIONS, WARRANTIES AND COVENANTS. In addition to the
continuing representations, warranties and covenants heretofore or hereafter
made by LPC to Congress pursuant to the Financing Agreements, LPC hereby
represents, warrants and covenants with and to Congress as follows (which
representations, warranties and covenants are continuing and shall survive the
execution and delivery hereof and shall be incorporated into and made a part of
the Financing Agreements):
(a) No Event of Default exists or has occurred and is
continuing on the date of this Amendment.
(b) This Amendment has been duly executed and delivered
by LPC and is in full force and effect as of the date hereof, and the
agreements and obligations of LPC contained herein constitute the legal, valid
and binding obligations of LPC enforceable against LPC in accordance with their
terms.
7. EFFECT OF THIS AMENDMENT. Except as modified pursuant hereto,
the Accounts Agreement and all supplements to the Accounts Agreement and all
other Financing Agreements, are hereby specifically ratified, restated and
confirmed by the parties hereto as of the date hereof. To the extent of any
conflict between the terms of this Amendment and the Accounts Agreement, the
terms of this Amendment control.
8. FURTHER ASSURANCES. LPC shall execute and deliver such
additional documents and take such additional actions as may be reasonably
requested by Congress to effectuate the provisions and purposes of this
Amendment.
9. GOVERNING LAW. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York without
reference to its principles of conflicts of law.
-3-
<PAGE> 4
By the signatures hereto of the duly authorized officers, the parties
hereto mutually covenant, warrant and agree as set forth herein.
Very truly yours,
CONGRESS FINANCIAL CORPORATION
By: Lawrence S. Forte
---------------------------
Title: Vice President
------------------------
AGREED AND ACCEPTED:
LEXINGTON PRECISION CORPORATION
By: Warren Delano
---------------------------
Title: President
------------------------
-4-
<PAGE> 5
CONSENT
-------
The undersigned guarantor hereby consents to the foregoing Amendment
and ratifies and confirms that the terms of its Guarantee and Waiver dated
January 11, 1990 are applicable to all present and future indebtedness,
liabilities and obligations of LEXINGTON PRECISION CORPORATION to CONGRESS
FINANCIAL CORPORATION including, without limitation, all indebtedness,
liabilities and obligations under the amended Financing Agreements.
LEXINGTON COMPONENTS, INC.
By: Warren Delano
-----------------------
Title: Vice Chairman
--------------------
-5-
<PAGE> 1
August 1, 1995
Lexington Components, Inc.
767 Third Avenue
New York, New York 10017
Re: Amendment to Financing Agreements
---------------------------------
Gentlemen:
Reference is made to certain financing agreements dated January 11,
1990 between Lexington Components, Inc. ("LCI") and Congress Financial
Corporation ("Congress"), including, but not limited to, an Accounts Financing
Agreement [Security Agreement], as amended (the "Accounts Agreement"),
and all supplements thereto and all other related financing and security
agreements (collectively, all of the foregoing, as the same have heretofore or
contemporaneously been or may be hereafter, amended, replaced, extended,
modified or supplemented, the "Financing Agreements").
In connection with the financing arrangements pursuant to the Accounts
Agreement and the other Financing Agreements, the parties hereto hereby agree
to amend the Financing Agreements, as set forth below (capitalized terms used
herein shall have the meanings assigned thereto in the Accounts Agreement and
in the other Financing Agreements, unless otherwise defined herein):
1. Definitions.
-----------
(a) The definition of "LCI Financing Agreements" contained in
the Covenant Supplement to the Accounts Agreement is hereby amended to include,
without limitation, the Additional Term Note (as defined below).
(b) The definition of "LPC Financing Agreements" contained in the
Covenant Supplement to the Accounts Financing Agreement [Security Agreement]
between LPC and Congress is hereby amended to include, without limitation, the
Term Promissory Note, dated of even date herewith, by LPC in favor of Congress,
in the original principal amount of $1,000,000.
2. ADDITIONAL TERM LOAN. Contemporaneously herewith, in order to
evidence an additional one-time advance to LCI in the principal amount of
$1,000,000 (the "Additional Term Loan"), LCI is executing and delivering to
Congress the Term Promissory Note, dated of even date herewith, in the original
principal amount of $1,000,000 (as the same now exists or may hereafter be
amended, supplemented, renewed, extended, restated or replaced, the "Additional
Term Note"). The Obligations evidenced by the Additional Term Note shall be
payable, including interest and other amounts, as provided therein and, to the
extent not inconsistent with the terms of the Additional Term Note, as provided
in the other Financing Agreements, and shall be secured
<PAGE> 2
by all Collateral, other than LCI's real estate in La Grange, Georgia.
3. Inventory Loans.
(a) ELIGIBLE INVENTORY. Subparagraph 1a. of the Letter re:
Inventory Loans, dated March 23, 1990, by LCI in favor of Congress, as amended
(the "Inventory Loan Letter") is hereby amended by adding the following
sentence at the end of such subparagraph:
"Notwithstanding the foregoing, finished goods and work-in-
process Inventory shall not be considered Eligible Inventory
unless, in addition to satisfying all of your other criteria for
determining Eligible Inventory, such Inventory is the subject of
written purchase agreements providing for delivery of such finished
goods, and finished goods to be made from such work-in- process
Inventory, in each case, no later than ninety (90) days following
the applicable date of your determination of Eligible
Inventory hereunder."
(b) INVENTORY ADVANCE RATES. Paragraph 2 of the Inventory
Loan Letter is hereby amended by deleting the phrase "up to fifty (50%)
percent of the value of eligible finished goods and raw materials Inventory
and up to thirty (30%) percent of the scrap value of eligible work-in-process
Inventory" and replacing it with the following:
"(i) up to sixty-five (65%) percent of the Value of eligible
finished goods Inventory, (2) up to fifty (50%) percent of the
Value of eligible raw materials Inventory and (3) up to fifty
(50%) percent of the Value of eligible work-in-process Inventory".
(c) INVENTORY ADVANCE SUBLIMITS. Paragraph 3 of the
Inventory Loan Letter is hereby deleted in its entirety and replaced with the
following:
"3. Except in your sole discretion, the outstanding aggregate
principal amount of loans by you to us hereunder plus the
outstanding aggregate principal amount of loans by you to our
parent, Lexington Precision Corporation ("LPC"), pursuant to the
Letter re: Inventory Loans executed the date hereof by LPC and
you, shall not exceed, at any time, the lower of (a) the aggregate
amount of the above percentages of Value of Eligible Inventory or
(b) $5,000,000; PROVIDED, THAT, the outstanding aggregate
principal amount of loans by you to us based on the percentage of
Value of eligible work-in-process Inventory set forth in paragraph
2(iii) above, shall not exceed $1,000,000 at any time."
-2-
<PAGE> 3
4. FEE. In consideration of Congress' entering into this Amendment,
LCI agrees to pay Congress a fee in the sum of $7,500, which fee is fully
earned as of the date hereof and may be charged directly to LCI's Revolving
Loan account maintained by Congress under the Financing Agreements.
5. AMENDMENT TO NEW EQUIPMENT TERM NOTE. The form of New Equipment
Term Note attached as Exhibit I to the Letter Agreement re: Amendment to
Financing Agreements dated as of January 31, 1995 and the outstanding New
Equipment Term Note dated as of June 26, 1995 made by LCI in the original
principal sum of $1,300,000, are each hereby amended as of January 31, 1995 and
June 26, 1995, respectively, such that the phrase "The Interest Rate payable
hereunder shall increase or" appearing on the first line of the fourth
paragraph thereof, is replaced with the following: "The Interest Rate payable
hereunder as to Prime Rate Loans shall increase or".
6. REPRESENTATIONS, WARRANTIES AND COVENANTS. In addition to the
continuing representations, warranties and covenants heretofore or hereafter
made by LCI to Congress pursuant to the Financing Agreements, LCI hereby
represents, warrants and covenants with and to Congress as follows (which
representations, warranties and covenants are continuing and shall survive the
execution and delivery hereof and shall be incorporated into and made a part of
the Financing Agreements):
(a) No Event of Default exists or has occurred and
is continuing on the date of this Amendment.
(b) This Amendment has been duly executed and delivered by LCI
and is in full force and effect as of the date hereof, and the agreements and
obligations of LCI contained herein constitute the legal, valid and binding
obligations of LCI enforceable against LCI in accordance with their terms.
7. EFFECT OF THIS AMENDMENT. Except as modified pursuant hereto, the
Accounts Agreement and all supplements to the Accounts Agreement and all other
Financing Agreements, are hereby specifically ratified, restated and confirmed
by the parties hereto as of the date hereof. To the extent of any conflict
between the terms of this Amendment and the Accounts Agreement, the terms of
this Amendment control.
8. FURTHER ASSURANCES. LCI shall execute and deliver such additional
documents and take such additional actions as may be reasonably requested by
Congress to effectuate the provisions and purposes of this Amendment.
9. GOVERNING LAW. This Amendment shall be governed by and construed
in accordance with the laws of the State of New York without reference to its
principles of conflicts of law.
-3-
<PAGE> 4
By the signatures hereto of the duly authorized officers, the parties
hereto mutually covenant, warrant and agree as set forth herein.
Very truly yours,
CONGRESS FINANCIAL CORPORATION
By: Lawrence S. Forte
---------------------------
Title: Vice President
---------------------
AGREED AND ACCEPTED:
LEXINGTON COMPONENTS, INC.
By: Warren Delano
-----------------------
Title: Vice Chairman
--------------------
-4-
<PAGE> 5
CONSENT
-------
The undersigned guarantor hereby consents to the foregoing Amendment
and ratifies and confirms that the terms of its Guarantee and Waiver dated
January 11, 1990 are applicable to all present and future indebtedness,
liabilities and obligations of LEXINGTON COMPONENTS, INC. to CONGRESS FINANCIAL
CORPORATION including, without limitation, all indebtedness, liabilities and
obligations under the amended Financing Agreements.
LEXINGTON PRECISION CORPORATION
By: Warren Delano
----------------------------
Title: President
-------------------------
-5-
<PAGE> 1
NEW EQUIPMENT TERM NOTE
-----------------------
$600,000 September 13, 1995
FOR VALUE RECEIVED, LEXINGTON PRECISION CORPORATION, a Delaware
corporation (the "Debtor"), hereby unconditionally promises to pay to the order
of CONGRESS FINANCIAL CORPORATION, a California corporation (the "Payee"), at
the offices of Payee at 1133 Avenue of the Americas, New York, New York 10036,
or at such other place as the Payee or any holder hereof may from time to time
designate, the principal sum of SIX HUNDRED THOUSAND DOLLARS ($600,000) in
lawful money of the United States of America and in immediately available
funds, in seventy-seven (77) consecutive monthly installments (or earlier as
hereinafter referred to) on the first day of each month commencing October 1,
1995, of which the first seventy-six (76) installments shall each be in the
amount of SEVEN THOUSAND SEVEN HUNDRED DOLLARS ($7,700), and the last (i.e.
seventy-seventh (77th)) installment shall be in the amount of the entire unpaid
balance of this Note.
Debtor hereby further promises to pay interest to the order of Payee on
the unpaid principal balance hereof at the Interest Rate. Such interest shall
be paid in like money at said office or place from the date hereof, commencing
on the first day of the month next following the date hereof, and on the first
day of each month thereafter until the indebtedness evidenced by this Note is
paid in full. Interest payable upon and during the continuance of an Event of
Default or following the effective date of termination or non-renewal of the
Financing Agreements shall be payable upon demand.
For purposes hereof, (a) the term "Interest Rate" shall mean, as to
Prime Rate Loans, a rate of one (1%) percent per annum in excess of the Prime
Rate, and as to Eurodollar Rate Loans, a rate of three and one-quarter (3 1/4%)
percent per annum in excess of the Adjusted Eurodollar Rate; PROVIDED, THAT, at
Payee's option, the Interest Rate shall mean a rate of three (3%) percent per
annum in excess of the Prime Rate as to Prime Rate Loans and a rate of five and
one-quarter (5 1/4%) percent per annum in excess of the Adjusted Eurodollar
Rate as to Eurodollar Rate Loans, upon and during the continuance of an Event
of Default or following the effective date of termination or non-renewal of the
Financing Agreements, and (b) the term "Prime Rate" shall mean the rate from
time to time publicly announced by CoreStates Bank, N.A., or its successors, at
its office in Philadelphia, Pennsylvania, as its prime rate, whether or not
such announced rate is the best rate available at such bank. Unless otherwise
defined herein, all capitalized terms used herein shall have the meanings
assigned thereto in the Accounts Agreement (as hereinafter defined) and the
other Financing Agreements.
<PAGE> 2
The Interest Rate payable hereunder as to Prime Rate Loans shall
increase or decrease by an amount equal to each increase or decrease,
respectively, in such Prime Rate, effective on the first day of the month after
any change in such Prime Rate, based on the Prime Rate in effect on the last
day of the month in which any such change occurs. Interest shall be calculated
on the basis of a three hundred sixty (360) day year and actual days elapsed.
In no event shall the interest charged hereunder exceed the maximum permitted
under the laws of the State of New York or other applicable law.
This Note is issued pursuant to the terms and provisions of the letter
agreement re: Amendment to Financing Agreements, dated as of January 31, 1995
between Debtor and Payee and by letter agreement re: Amendment to Financing
Agreements, dated as of August 1, 1995 (collectively, the "Amendment") to
evidence a "New Equipment Term Loan" (as defined in the New Equipment Term Loan
Agreement as referred to in and as modified by the Amendment) made by Payee to
Debtor. This Note is secured by the "Collateral" described in the Accounts
Financing Agreement [Security Agreement], dated January 11, 1990, by and
between Payee and Debtor, as amended (the "Accounts Agreement") and any
agreement, document or instrument now or at any time hereafter executed and/or
delivered in connection therewith or related thereto (the foregoing, as the
same now exist or may hereafter be amended, modified, supplemented, renewed,
extended, restated or replaced, are hereinafter collectively referred to as the
"Financing Agreements") and is entitled to all of the benefits and rights
thereof and of the Financing Agreements. At the time any payment is due
hereunder, at its option, Payee may charge the amount thereof to any account of
Debtor maintained by Payee.
If any principal or interest payment is not made when due hereunder,
and such failure shall continue for three (3) days, or if any other Event of
Default (as defined in the Accounts Agreement) shall occur for any reason, or
if the Financing Agreements shall be terminated or not renewed for any reason
whatsoever, then and in any such event, in addition to all rights and remedies
of Payee under the Financing Agreements, applicable law or otherwise, all such
rights and remedies being cumulative, not exclusive and enforceable
alternatively, successively and concurrently, Payee may, at its option, declare
any or all of Debtor's obligations, liabilities and indebtedness owing to Payee
under the Financing Agreements (the "Obligations"), including, without
limitation, all amounts owing under this Note, to be due and payable, whereupon
the then unpaid balance hereof together with all interest accrued thereon,
shall forthwith become due and payable, together with interest accruing
thereafter at the then applicable rate stated above until the indebtedness
evidenced by this Note is paid in full, plus the costs and expenses of
collection hereof, including, but not limited to, reasonable attorneys' fees.
-2-
<PAGE> 3
Debtor (i) waives diligence, demand, presentment, protest and notice of
any kind, (ii) agrees that it will not be necessary for any holder hereof to
first institute suit in order to enforce payment of this Note and (iii)
consents to any one or more extensions or postponements of time of payment,
release, surrender or substitution of collateral security, or forbearance or
other indulgence, without notice or consent. Upon the occurrence of any Event
of Default and during the continuance thereof, Payee shall have the right, but
not the obligation to setoff against this Note all money owed by Payee to
Debtor.
Payee shall not be required to resort to any Collateral for payment,
but may proceed against Debtor and any guarantors or endorsers hereof in such
order and manner as Payee may choose. None of the rights of Payee shall be
waived or diminished by any failure or delay in the exercise thereof.
Debtor hereby waives the right to a trial by jury and all rights of
setoff and rights to interpose counterclaims and cross-claims in any litigation
or proceeding arising in connection with this Note, the Accounts Agreement, the
other Financing Agreements, the Obligations or the Collateral, other than
compulsory counterclaims, the non-assertion of which would result in a
permanent waiver. Debtor hereby irrevocably consents to the non-exclusive
jurisdiction of the Supreme Court of the State of New York and of the United
States District Court for the Southern District of New York for all purposes in
connection with any action or proceeding arising out of or relating to this
Note, the Accounts Agreement, the other Financing Agreements, the Obligations
or the Collateral and further consents that any process or notice of motion or
other application to said Courts or any judge thereof, or any notice in
connection with any proceeding hereunder may be served (i) inside or outside
the State of New York by registered or certified mail, return receipt
requested, and service or notice so served shall be deemed complete five (5)
days after the same shall have been posted or (ii) in such other manner as may
be permissible under the rules of said Courts. Within thirty (30) days after
such mailing, Debtor shall appear in answer to such process or notice of motion
or other application to said Courts, failing which Debtor shall be deemed in
default and judgment may be entered by Payee against Debtor for the amount of
the claim and other relief requested therein.
The execution and delivery of this Note has been authorized by the
Board of Directors of Debtor.
This Note, the other Obligations and the Collateral shall be governed
by and construed in accordance with the laws of the State of New York and shall
be binding upon the successors and assigns of Debtor and inure to the benefit
of Payee and its successors, endorsees and assigns. If any term or provision
of
-3-
<PAGE> 4
this Note shall be held invalid, illegal or unenforceable, the validity of all
other terms and provisions hereof shall in no way be affected thereby.
This Note may not be changed, modified or terminated orally, but only
by an agreement in writing signed by the payee or the holder hereof.
Whenever used herein, the terms "Debtor" and "Payee" shall be deemed to
include their respective successors and assigns.
LEXINGTON PRECISION CORPORATION
ATTEST:
By: Warren Delano
----------------------------
Michael A. Lubin
- ---------------------
Chairman of the Board Title: President
-------------------------
[CORPORATE SEAL]
-4-
<PAGE> 1
NEW EQUIPMENT TERM NOTE
-----------------------
$600,000 September 13, 1995
FOR VALUE RECEIVED, LEXINGTON COMPONENTS, INC., a Delaware corporation
(the "Debtor"), hereby unconditionally promises to pay to the order of CONGRESS
FINANCIAL CORPORATION, a California corporation (the "Payee"), at the offices
of Payee at 1133 Avenue of the Americas, New York, New York 10036, or at such
other place as the Payee or any holder hereof may from time to time designate,
the principal sum of SIX HUNDRED THOUSAND DOLLARS ($600,000) in lawful money of
the United States of America and in immediately available funds, in
seventy-seven (77) consecutive monthly installments (or earlier as hereinafter
referred to) on the first day of each month commencing October 1, 1995, of
which the first seventy-six (76) installments shall each be in the amount of
SEVEN THOUSAND SEVEN HUNDRED DOLLARS ($7,700), and the last (i.e.
seventy-seventy (77th)) installment shall be in the amount of the entire unpaid
balance of this Note.
Debtor hereby further promises to pay interest to the order of Payee on
the unpaid principal balance hereof at the Interest Rate. Such interest shall
be paid in like money at said office or place from the date hereof, commencing
on the first day of the month next following the date hereof, and on the first
day of each month thereafter until the indebtedness evidenced by this Note is
paid in full. Interest payable upon and during the continuance of an Event of
Default or following the effective date of termination or non-renewal of the
Financing Agreements shall be payable upon demand.
For purposes hereof, (a) the term "Interest Rate" shall mean, as to
Prime Rate Loans, a rate of one (1%) percent per annum in excess of the Prime
Rate, and as to Eurodollar Rate Loans, a rate of three and one-quarter (3 1/4%)
percent per annum in excess of the Adjusted Eurodollar Rate; PROVIDED, THAT, at
Payee's option, the Interest Rate shall mean a rate of three (3%) percent per
annum in excess of the Prime Rate as to Prime Rate Loans and a rate of five and
one-quarter (5 1/4%) percent per annum in excess of the Adjusted Eurodollar
Rate as to Eurodollar Rate Loans, upon and during the continuance of an Event
of Default or following the effective date of termination or non-renewal of the
Financing Agreements, and (b) the term "Prime Rate" shall mean the rate from
time to time publicly announced by CoreStates Bank, N.A., or its successors, at
its office in Philadelphia, Pennsylvania, as its prime rate, whether or not
such announced rate is the best rate available at such bank. Unless otherwise
defined herein, all capitalized terms used herein shall have the meanings
assigned thereto in the Accounts Agreement (as hereinafter defined) and the
other Financing Agreements.
<PAGE> 2
The Interest Rate payable hereunder as to Prime Rate Loans shall
increase or decrease by an amount equal to each increase or decrease,
respectively, in such Prime Rate, effective on the first day of the month after
any change in such Prime Rate, based on the Prime Rate in effect on the last
day of the month in which any such change occurs. Interest shall be calculated
on the basis of a three hundred sixty (360) day year and actual days elapsed.
In no event shall the interest charged hereunder exceed the maximum permitted
under the laws of the State of New York or other applicable law.
This Note is issued pursuant to the terms and provisions of the letter
agreement re: Amendment to Financing Agreements, dated as of January 31, 1995
between Debtor and Payee as amended by letter agreement re: Amendment to
Financing Agreements, dated as of August 1, 1995 (collectively, the
"Amendment") to evidence a "New Equipment Term Loan" (as defined in the New
Equipment Term Loan Agreement as referred to in and as modified by the
Amendment) made by Payee to Debtor. This Note is secured by the "Collateral"
described in the Accounts Financing Agreement [Security Agreement], dated
January 11, 1990, by and between Payee and Debtor, as amended (the "Accounts
Agreement") and any agreement, document or instrument now or at any time
hereafter executed and/or delivered in connection therewith or related thereto
(the foregoing, as the same now exist or may hereafter be amended, modified,
supplemented, renewed, extended, restated or replaced, are hereinafter
collectively referred to as the "Financing Agreements") and is entitled to all
of the benefits and rights thereof and of the Financing Agreements. At the
time any payment is due hereunder, at its option, Payee may charge the amount
thereof to any account of Debtor maintained by Payee.
If any principal or interest payment is not made when due hereunder,
and such failure shall continue for three (3) days, or if any other Event of
Default (as defined in the Accounts Agreement) shall occur for any reason, or
if the Financing Agreements shall be terminated or not renewed for any reason
whatsoever, then and in any such event, in addition to all rights and remedies
of Payee under the Financing Agreements, applicable law or otherwise, all such
rights and remedies being cumulative, not exclusive and enforceable
alternatively, successively and concurrently, Payee may, at its option, declare
any or all of Debtor's obligations, liabilities and indebtedness owing to Payee
under the Financing Agreements (the "Obligations"), including, without
limitation, all amounts owing under this Note, to be due and payable, whereupon
the then unpaid balance hereof together with all interest accrued thereon,
shall forthwith become due and payable, together with interest accruing
thereafter at the then applicable rate stated above until the indebtedness
evidenced by this Note is paid in full, plus the costs and expenses of
collection hereof, including, but not limited to, reasonable attorneys' fees.
-2-
<PAGE> 3
Debtor (i) waives diligence, demand, presentment, protest and notice of
any kind, (ii) agrees that it will not be necessary for any holder hereof to
first institute suit in order to enforce payment of this Note and (iii)
consents to any one or more extensions or postponements of time of payment,
release, surrender or substitution of collateral security, or forbearance or
other indulgence, without notice or consent. Upon the occurrence of any Event
of Default and during the continuance thereof, Payee shall have the right, but
not the obligation to setoff against this Note all money owed by Payee to
Debtor.
Payee shall not be required to resort to any Collateral for payment,
but may proceed against Debtor and any guarantors or endorsers hereof in such
order and manner as Payee may choose. None of the rights of Payee shall be
waived or diminished by any failure or delay in the exercise thereof.
Debtor hereby waives the right to a trial by jury and all rights of
setoff and rights to interpose counterclaims and cross-claims in any litigation
or proceeding arising in connection with this Note, the Accounts Agreement, the
other Financing Agreements, the Obligations or the Collateral, other than
compulsory counterclaims, the non-assertion of which would result in a
permanent waiver. Debtor hereby irrevocably consents to the non-exclusive
jurisdiction of the Supreme Court of the State of New York and of the United
States District Court for the Southern District of New York for all purposes in
connection with any action or proceeding arising out of or relating to this
Note, the Accounts Agreement, the other Financing Agreements, the Obligations
or the Collateral and further consents that any process or notice of motion or
other application to said Courts or any judge thereof, or any notice in
connection with any proceeding hereunder may be served (i) inside or outside
the State of New York by registered or certified mail, return receipt
requested, and service or notice so served shall be deemed complete five (5)
days after the same shall have been posted or (ii) in such other manner as may
be permissible under the rules of said Courts. Within thirty (30) days after
such mailing, Debtor shall appear in answer to such process or notice of motion
or other application to said Courts, failing which Debtor shall be deemed in
default and judgment may be entered by Payee against Debtor for the amount of
the claim and other relief requested therein.
The execution and delivery of this Note has been authorized by the
Board of Directors of Debtor.
This Note, the other Obligations and the Collateral shall be governed
by and construed in accordance with the laws of the State of New York and shall
be binding upon the successors and assigns of Debtor and inure to the benefit
of Payee and its successors, endorsees and assigns. If any term or provision
of
-3-
<PAGE> 4
this Note shall be held invalid, illegal or unenforceable, the validity of all
other terms and provisions hereof shall in no way be affected thereby.
This Note may not be changed, modified or terminated orally, but only
by an agreement in writing signed by the Payee or the holder hereof.
Whenever used herein, the terms "Debtor" and "Payee" shall be deemed to
include their respective successors and assigns.
LEXINGTON COMPONENTS, INC.
ATTEST:
By: Warren Delano
----------------------------
Michael A. Lubin
- ---------------------
Chairman of the Board Title: Vice Chairman
-------------------------
[CORPORATE SEAL]
-4-
<PAGE> 1
NEW EQUIPMENT TERM NOTE
-----------------------
$500,000 October 11, 1995
FOR VALUE RECEIVED, LEXINGTON PRECISION CORPORATION, a Delaware
corporation (the "Debtor"), hereby unconditionally promises to pay to the order
of CONGRESS FINANCIAL CORPORATION, a California corporation (the "Payee"), at
the offices of Payee at 1133 Avenue of the Americas, New York, New York 10036,
or at such other place as the Payee or any holder hereof may from time to time
designate, the principal sum of FIVE HUNDRED THOUSAND DOLLARS ($500,000) in
lawful money of the United States of America and in immediately available
funds, in seventy-five (75) consecutive monthly installments (or earlier as
hereinafter referred to) on the first day of each month commencing December 1,
1995, of which the first seventy-four (74) installments shall each be in the
amount of SIX THOUSAND SEVEN HUNDRED DOLLARS ($6,700), and the last (i.e.
seventy-fifth (75th)) installment shall be in the amount of the entire unpaid
balance of this Note.
Debtor hereby further promises to pay interest to the order of Payee on
the unpaid principal balance hereof at the Interest Rate. Such interest shall
be paid in like money at said office or place from the date hereof, commencing
on the first day of the month next following the date hereof, and on the first
day of each month thereafter until the indebtedness evidenced by this Note is
paid in full. Interest payable upon and during the continuance of an Event of
Default or following the effective date of termination or non-renewal of the
Financing Agreements shall be payable upon demand.
For purposes hereof, (a) the term "Interest Rate" shall mean, as to
Prime Rate Loans, a rate of one (1%) percent per annum in excess of the Prime
Rate, and as to Eurodollar Rate Loans, a rate of three and one-quarter (3 1/4%)
percent per annum in excess of the Adjusted Eurodollar Rate; PROVIDED, THAT, at
Payee's option, the Interest Rate shall mean a rate of three (3%) percent per
annum in excess of the Prime Rate as to Prime Rate Loans and a rate of five and
one-quarter (5 1/4%) percent per annum in excess of the Adjusted Eurodollar
Rate as to Eurodollar Rate Loans, upon and during the continuance of an Event
of Default or following the effective date of termination or non-renewal of the
Financing Agreements, and (b) the term "Prime Rate" shall mean the rate from
time to time publicly announced by CoreStates Bank, N.A., or its successors, at
its office in Philadelphia, Pennsylvania, as its prime rate, whether or not
such announced rate is the best rate available at such bank. Unless otherwise
defined herein, all capitalized terms used herein shall have the meanings
assigned thereto in the Accounts Agreement (as hereinafter defined) and the
other Financing Agreements.
<PAGE> 2
The Interest Rate payable hereunder as to Prime Rate Loans shall
increase or decrease by an amount equal to each increase or decrease,
respectively, in such Prime Rate, effective on the first day of the month after
any change in such Prime Rate, based on the Prime Rate in effect on the last
day of the month in which any such change occurs. Interest shall be calculated
on the basis of a three hundred sixty (360) day year and actual days elapsed.
In no event shall the interest charged hereunder exceed the maximum permitted
under the laws of the State of New York or other applicable law.
This Note is issued pursuant to the terms and provisions of the letter
agreement re: Amendment to Financing Agreements, dated as of January 31, 1995
between Debtor and Payee and by letter agreement re: Amendment to Financing
Agreements, dated as of August 1, 1995 (collectively, the "Amendment") to
evidence a "New Equipment Term Loan" (as defined in the New Equipment Term Loan
Agreement as referred to in and as modified by the Amendment) made by Payee to
Debtor. This Note is secured by the "Collateral" described in the Accounts
Financing Agreement [Security Agreement], dated January 11, 1990, by and
between Payee and Debtor, as amended (the "Accounts Agreement") and any
agreement, document or instrument now or at any time hereafter executed and/or
delivered in connection therewith or related thereto (the foregoing, as the
same now exist or may hereafter be amended, modified, supplemented, renewed,
extended, restated or replaced, are hereinafter collectively referred to as the
"Financing Agreements") and is entitled to all of the benefits and rights
thereof and of the Financing Agreements. At the time any payment is due
hereunder, at its option, Payee may charge the amount thereof to any account of
Debtor maintained by Payee.
If any principal or interest payment is not made when due hereunder,
and such failure shall continue for three (3) days, or if any other Event of
Default (as defined in the Accounts Agreement) shall occur for any reason, or
if the Financing Agreements shall be terminated or not renewed for any reason
whatsoever, then and in any such event, in addition to all rights and remedies
of Payee under the Financing Agreements, applicable law or otherwise, all such
rights and remedies being cumulative, not exclusive and enforceable
alternatively, successively and concurrently, Payee may, at its option, declare
any or all of Debtor's obligations, liabilities and indebtedness owing to Payee
under the Financing Agreements (the "Obligations"), including, without
limitation, all amounts owing under this Note, to be due and payable, whereupon
the then unpaid balance hereof together with all interest accrued thereon,
shall forthwith become due and payable, together with interest accruing
thereafter at the then applicable rate stated above until the indebtedness
evidenced by this Note is paid in full, plus the costs and expenses of
collection hereof, including, but not limited to, reasonable attorneys' fees.
-2-
<PAGE> 3
Debtor (i) waives diligence, demand, presentment, protest and notice of
any kind, (ii) agrees that it will not be necessary for any holder hereof to
first institute suit in order to enforce payment of this Note and (iii)
consents to any one or more extensions or postponements of time of payment,
release, surrender or substitution of collateral security, or forbearance or
other indulgence, without notice or consent. Upon the occurrence of any Event
of Default and during the continuance thereof, Payee shall have the right, but
not the obligation to setoff against this Note all money owed by Payee to
Debtor.
Payee shall not be required to resort to any Collateral for payment,
but may proceed against Debtor and any guarantors or endorsers hereof in such
order and manner as Payee may choose. None of the rights of Payee shall be
waived or diminished by any failure or delay in the exercise thereof.
Debtor hereby waives the right to a trial by jury and all rights of
setoff and rights to interpose counterclaims and cross-claims in any litigation
or proceeding arising in connection with this Note, the Accounts Agreement, the
other Financing Agreements, the Obligations or the Collateral, other than
compulsory counterclaims, the non-assertion of which would result in a
permanent waiver. Debtor hereby irrevocably consents to the non-exclusive
jurisdiction of the Supreme Court of the State of New York and of the United
States District Court for the Southern District of New York for all purposes in
connection with any action or proceeding arising out of or relating to this
Note, the Accounts Agreement, the other Financing Agreements, the Obligations
or the Collateral and further consents that any process or notice of motion or
other application to said Courts or any judge thereof, or any notice in
connection with any proceeding hereunder may be served (i) inside or outside
the State of New York by registered or certified mail, return receipt
requested, and service or notice so served shall be deemed complete five (5)
days after the same shall have been posted or (ii) in such other manner as may
be permissible under the rules of said Courts. Within thirty (30) days after
such mailing, Debtor shall appear in answer to such process or notice of motion
or other application to said Courts, failing which Debtor shall be deemed in
default and judgment may be entered by Payee against Debtor for the amount of
the claim and other relief requested therein.
The execution and delivery of this Note has been authorized by the
Board of Directors of Debtor.
This Note, the other Obligations and the Collateral shall be governed
by and construed in accordance with the laws of the State of New York and shall
be binding upon the successors and assigns of Debtor and inure to the benefit
of Payee and its successors, endorsees and assigns. If any term or provision
of
-3-
<PAGE> 4
this Note shall be held invalid, illegal or unenforceable, the validity of all
other terms and provisions hereof shall in no way be affected thereby.
This Note may not be changed, modified or terminated orally, but only
by an agreement in writing signed by the Payee or the holder hereof.
Whenever used herein, the terms "Debtor" and "Payee" shall be deemed to
include their respective successors and assigns.
LEXINGTON PRECISION CORPORATION
ATTEST:
By: Warren Delano
---------------------------
Michael A. Lubin
- ---------------------
Chairman of the Board Title: President
------------------------
[CORPORATE SEAL]
-4-
<PAGE> 1
NEW EQUIPMENT TERM NOTE
-----------------------
$700,000 October 11, 1995
FOR VALUE RECEIVED, LEXINGTON COMPONENTS, INC., a Delaware corporation
(the "Debtor"), hereby unconditionally promises to pay to the order of CONGRESS
FINANCIAL CORPORATION, a California corporation (the "Payee"), at the offices
of Payee at 1133 Avenue of the Americas, New York, New York 10036, or at such
other place as the Payee or any holder hereof may from time to time designate,
the principal sum of SEVEN HUNDRED THOUSAND DOLLARS ($700,000) in lawful money
of the United States of America and in immediately available funds, in
seventy-five (75) consecutive monthly installments (or earlier as hereinafter
referred to) on the first day of each month commencing December 1, 1995, of
which the first seventy-four (74) installments shall each be in the amount of
NINE THOUSAND THREE HUNDRED DOLLARS ($9,300), and the last (i.e. seventy-fifth
(75th)) installment shall be in the amount of the entire unpaid balance of this
Note.
Debtor hereby further promises to pay interest to the order of Payee
on the unpaid principal balance hereof at the Interest Rate. Such interest
shall be paid in like money at said office or place from the date hereof,
commencing on the first day of the month next following the date hereof, and on
the first day of each month thereafter until the indebtedness evidenced by this
Note is paid in full. Interest payable upon and during the continuance of an
Event of Default or following the effective date of termination or non-renewal
of the Financing Agreements shall be payable upon demand.
For purposes hereof, (a) the term "Interest Rate" shall mean, as to
Prime Rate Loans, a rate of one (1%) percent per annum in excess of the Prime
Rate, and as to Eurodollar Rate Loans, a rate of three and one-quarter (3 1/4%)
percent per annum in excess of the Adjusted Eurodollar Rate; PROVIDED, THAT, at
Payee's option, the Interest Rate shall mean a rate of three (3%) percent per
annum in excess of the Prime Rate as to Prime Rate Loans and a rate of five and
one-quarter (5 1/4%) percent per annum in excess of the Adjusted Eurodollar
Rate as to Eurodollar Rate Loans, upon and during the continuance of an Event
of Default or following the effective date of termination or non-renewal of the
Financing Agreements, and (b) the term "Prime Rate" shall mean the rate from
time to time publicly announced by CoreStates Bank, N.A., or its successors, at
its office in Philadelphia, Pennsylvania, as its prime rate, whether or not
such announced rate is the best rate available at such bank. Unless otherwise
defined herein, all capitalized terms used herein shall have the meanings
assigned thereto in the Accounts Agreement (as hereinafter defined) and the
other Financing Agreements.
<PAGE> 2
The Interest Rate payable hereunder as to Prime Rate Loans shall
increase or decrease by an amount equal to each increase or decrease,
respectively, in such Prime Rate, effective on the first day of the month after
any change in such Prime Rate, based on the Prime Rate in effect on the last
day of the month in which any such change occurs. Interest shall be calculated
on the basis of a three hundred sixty (360) day year and actual days elapsed.
In no event shall the interest charged hereunder exceed the maximum permitted
under the laws of the State of New York or other applicable law.
This Note is issued pursuant to the terms and provisions of the letter
agreement re: Amendment to Financing Agreements, dated as of January 31, 1995
between Debtor and Payee as amended by letter agreement re: Amendment to
Financing Agreements, dated as of August 1, 1995 (collectively, the
"Amendment") to evidence a "New Equipment Term Loan" (as defined in the New
Equipment Term Loan Agreement as referred to in and as modified by the
Amendment) made by Payee to Debtor. This Note is secured by the "Collateral"
described in the Accounts Financing Agreement [Security Agreement], dated
January 11, 1990, by and between Payee and Debtor, as amended (the "Accounts
Agreement") and any agreement, document or instrument now or at any time
hereafter executed and/or delivered in connection therewith or related thereto
(the foregoing, as the same now exist or may hereafter be amended, modified,
supplemented, renewed, extended, restated or replaced, are hereinafter
collectively referred to as the "Financing Agreements") and is entitled to all
of the benefits and rights thereof and of the Financing Agreements. At the
time any payment is due hereunder, at its option, Payee may charge the amount
thereof to any account of Debtor maintained by Payee.
If any principal or interest payment is not made when due hereunder,
and such failure shall continue for three (3) days, or if any other Event of
Default (as defined in the Accounts Agreement) shall occur for any reason, or
if the Financing Agreements shall be terminated or not renewed for any reason
whatsoever, then and in any such event, in addition to all rights and remedies
of Payee under the Financing Agreements, applicable law or otherwise, all such
rights and remedies being cumulative, not exclusive and enforceable
alternatively, successively and concurrently, Payee may, at its option, declare
any or all of Debtor's obligations, liabilities and indebtedness owing to Payee
under the Financing Agreements (the "Obligations"), including, without
limitation, all amounts owing under this Note, to be due and payable, whereupon
the then unpaid balance hereof together with all interest accrued thereon,
shall forthwith become due and payable, together with interest accruing
thereafter at the then applicable rate stated above until the indebtedness
evidenced by this Note is paid in full, plus the costs and expenses of
collection hereof, including, but not limited to, reasonable attorneys' fees.
-2-
<PAGE> 3
Debtor (i) waives diligence, demand, presentment, protest and notice
of any kind, (ii) agrees that it will not be necessaryfor any holder hereof to
first institute suit in order to enforce payment of this Note and (iii)
consents to any one or more extensions or postponements of time of payment,
release, surrender or substitution of collateral security, or forbearance or
other indulgence, without notice or consent. Upon the occurrence of any Event
of Default and during the continuance thereof, Payee shall have the right, but
not the obligation to setoff against this Note all money owed by Payee to
Debtor.
Payee shall not be required to resort to any Collateral for payment,
but may proceed against Debtor and any guarantors or endorsers hereof in such
order and manner as Payee may choose. None of the rights of Payee shall be
waived or diminished by any failure or delay in the exercise thereof.
Debtor hereby waives the right to a trial by jury and all rights of
setoff and rights to interpose counterclaims and cross-claims in any litigation
or proceeding arising in connection with this Note, the Accounts Agreement, the
other Financing Agreements, the Obligations or the Collateral, other than
compulsory counterclaims, the non-assertion of which would result in a
permanent waiver. Debtor hereby irrevocably consents to the non-exclusive
jurisdiction of the Supreme Court of the State of New York and of the United
States District Court for the Southern District of New York for all purposes in
connection with any action or proceeding arising out of or relating to this
Note, the Accounts Agreement, the other Financing Agreements, the Obligations
or the Collateral and further consents that any process or notice of motion or
other application to said Courts or any judge thereof, or any notice in
connection with any proceeding hereunder may be served (i) inside or outside
the State of New York by registered or certified mail, return receipt
requested, and service or notice so served shall be deemed complete five (5)
days after the same shall have been posted or (ii) in such other manner as may
be permissible under the rules of said Courts. Within thirty (30) days after
such mailing, Debtor shall appear in answer to such process or notice of motion
or other application to said Courts, failing which Debtor shall be deemed in
default and judgment may be entered by Payee against Debtor for the amount of
the claim and other relief requested therein.
The execution and delivery of this Note has been authorized by the
Board of Directors of Debtor.
This Note, the other Obligations and the Collateral shall be governed
by and construed in accordance with the laws of the State of New York and shall
be binding upon the successors and assigns of Debtor and inure to the benefit
of Payee and its successors, endorsees and assigns. If any term or provision
of
-3-
<PAGE> 4
this Note shall be held invalid, illegal or unenforceable, the validity of all
other terms and provisions hereof shall in no way be affected thereby.
This Note may not be changed, modified or terminated orally, but only
by an agreement in writing signed by the Payee or the holder hereof.
Whenever used herein, the terms "Debtor" and "Payee" shall be deemed
to include their respective successors and assigns.
LEXINGTON COMPONENTS, INC.
ATTEST:
By: Warren Delano
----------------------------
Michael A. Lubin
- ---------------------
Chairman of the Board Title: Vice Chairman
-------------------------
[Corporate Seal]
-4-
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
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<SALES> 77,728
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