<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 JUNE 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-3252
LEXINGTON PRECISION CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 22-1830121
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
767 THIRD AVENUE, NEW YORK, NY 10017
(ADDRESS OF PRINCIPAL EXECUTIVE 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 -- 4,263,036 SHARES AS OF AUGUST 9, 1996
(INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE)
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<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 4. Submission of Matters to a Vote of Security Holders.................. 20
Item 6. Exhibits and Reports on Form 8-K .................................... 20
</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>
JUNE 30, DECEMBER 31,
1996 1995
----------- ---------------
<S> <C> <C>
ASSETS:
Current assets:
Cash $ 487 $ 118
Accounts receivable 14,578 12,959
Inventories 8,728 8,105
Prepaid expenses and other assets 3,548 2,101
Deferred income taxes 843 1,195
--------- --------
Total current assets 28,184 24,478
--------- --------
Property, plant and equipment:
Land 1,533 1,525
Buildings 19,452 17,190
Equipment 64,106 57,110
--------- --------
85,091 75,825
Less accumulated depreciation 33,934 30,887
--------- --------
Property, plant and equipment, net 51,157 44,938
--------- --------
Excess of cost over net assets of businesses acquired, net 9,568 9,726
--------- --------
Other assets, net 2,456 2,734
--------- --------
$ 91,365 $ 81,876
========= ========
</TABLE>
See notes to consolidated financial statements.
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<PAGE> 4
LEXINGTON PRECISION CORPORATION
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
------------- ---------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' DEFICIT:
Current liabilities:
Accounts payable $ 12,670 $ 10,628
Accrued expenses 6,989 6,572
Short-term debt 11,325 7,522
Current portion of long-term debt 5,651 4,531
--------- ---------
Total current liabilities 36,635 29,253
--------- ---------
Long-term debt, excluding current portion 58,053 56,033
--------- ---------
Deferred income taxes and other long-term liabilities 842 1,056
--------- ---------
Redeemable preferred stock, $100 par value,
at redemption value 1,020 1,020
Less excess of redemption value over par value 510 510
--------- ---------
Redeemable preferred stock, at par value 510 510
--------- ---------
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 12,461 12,547
Accumulated deficit (18,006) (18,305)
Cost of common stock in treasury, 85,915 and 120,915
shares, respectively (217) (305)
--------- ---------
Total stockholders' deficit (4,675) (4,976)
--------- ---------
$ 91,365 $ 81,876
========= =========
</TABLE>
See notes to consolidated financial statements.
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<PAGE> 5
LEXINGTON PRECISION CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- ------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 28,081 $ 26,433 $ 55,979 $ 53,507
-------- -------- -------- --------
Costs and expenses:
Cost of sales 23,169 21,249 45,911 42,790
Selling and administrative expenses 2,779 2,514 5,443 5,134
-------- -------- -------- --------
Total costs and expenses 25,948 23,763 51,354 47,924
-------- -------- -------- --------
Income from operations 2,133 2,670 4,625 5,583
Interest expense 2,109 1,857 4,063 3,667
Other income - 641 - 641
-------- -------- -------- --------
Income before income taxes 24 1,454 562 2,557
Provision for income taxes 79 383 260 667
-------- -------- -------- --------
Net income/(loss) $ (55) $ 1,071 $ 302 $ 1,890
======== ======== ======== ========
Net income/(loss) per primary and fully diluted
common share:
Primary $ (.02) $ .25 $ .06 $ .44
======== ======== ======== ========
Fully diluted $ (.02) $ .23 $ .06 $ .40
======== ======== ======== ========
</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>
SIX MONTHS ENDED
JUNE 30,
-----------------------------
1996 1995
---- ----
OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 302 $ 1,890
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,979 3,007
Deferred income taxes 110 -
Loss/(gain) on sale of property, plant and equipment 3 (641)
Changes in operating assets and liabilities which
provided/(used) cash:
Receivables (1,619) (1,207)
Inventories (623) (1,685)
Prepaid expenses and other assets (1,447) 8
Accounts payable 2,042 731
Accrued expenses 414 1,402
Other 61 -
--------- ---------
Net cash provided by operating activities 3,222 3,505
--------- ---------
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (9,559) (7,378)
Decrease/(increase) in equipment deposits, net 170 (722)
Proceeds from sales of property, plant and equipment 57 970
Additions to deferred tooling expense (260) (457)
--------- ---------
Net cash used by investing activities (9,592) (7,587)
--------- ---------
FINANCING ACTIVITIES:
Net increase in short-term debt 3,803 3,523
Proceeds from issuance of long-term debt 9,725 2,300
Repayments of long-term debt (6,603) (1,534)
Other (186) (228)
--------- ---------
Net cash provided by financing activities 6,739 4,061
--------- ---------
Net increase/(decrease) in cash 369 (21)
Cash at beginning of period 118 79
--------- ---------
Cash at end of period $ 487 $ 58
========= =========
</TABLE>
See notes to consolidated financial statements.
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<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- BASIS OF PRESENTATION
The unaudited interim consolidated financial statements include the
accounts of Lexington Precision Corporation ("LPC") and its wholly owned
subsidiary, Lexington Components, Inc. ("LCI"). Unless the context otherwise
requires, all references herein to the "Company" are to LPC and LCI. The
financial statements have been prepared pursuant to the rules and regulations of
the Securities and Exchange Commission. Accordingly, the financial statements do
not include all the information and footnotes normally included in the annual
consolidated financial statements prepared in accordance with generally accepted
accounting principles. Significant accounting policies followed by 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, 1995, which
was filed with the Securities and Exchange Commission.
In the opinion of management, the unaudited interim consolidated
financial statements contain all adjustments necessary to present fairly the
financial position of the Company at June 30, 1996, the Company's results of
operations for the three-month and six-month periods ended June 30, 1996 and
1995 and the Company's cash flows for the six-month periods ended June 30, 1996
and 1995. All such adjustments were of a normal recurring nature.
The results of operations for the three-month and six-month periods ended
June 30, 1996 are not necessarily indicative of the results to be expected for
the full year or for any succeeding quarter.
NOTE 2 -- INVENTORIES
Inventories at June 30, 1996 and December 31, 1995 are summarized below
(in thousands of dollars):
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
------------ ---------------
<S> <C> <C>
Finished goods $ 2,973 $ 3,040
Work in process 2,550 2,213
Raw materials and purchased parts 3,205 2,852
-------- ---------
$ 8,728 $ 8,105
======== =========
</TABLE>
NOTE 3 -- SHORT-TERM DEBT
At June 30, 1996 and December 31, 1995, short-term debt consisted of
$11,325,000 and $7,522,000, respectively, of loans outstanding under the
Company's revolving line of credit. The revolving line of credit has an
expiration date of January 2, 1998. Except for loans totaling $1,779,000 and
$3,730,000 at June 30, 1996 and December 31, 1995, respectively, which were
refinanced under long-term agreements before the financial statements were
issued, the loans outstanding under the revolving line of credit have been
classified as short-term debt at June 30, 1996 and December 31, 1995 because the
Company's cash receipts are automatically used to reduce the loans outstanding
under the revolving line of credit on a daily basis, by means of a lock-box
sweep arrangement, and the lender has the ability to modify certain terms of the
revolving line of credit without the prior approval of the Company. Loans
outstanding under the revolving line of credit bear interest at the London
Interbank Offered Rate ("LIBOR") plus 3-1/4% and/or Prime Rate plus 1%.
-6-
<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4 -- ACCRUED EXPENSES
At June 30, 1996 and December 31, 1995, accrued expenses included accrued
interest expense of $1,783,000 and $1,717,000, respectively.
NOTE 5 -- LONG-TERM DEBT
Long-term debt at June 30, 1996 and December 31, 1995 is summarized below
(in thousands of dollars):
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
----------- ---------------
<S> <C> <C>
Loans outstanding under revolving line of credit $ 1,779 $ 3,730
Construction loan 1,000 -
Term loans, payable in monthly installments, final
maturities in 2000, 2001, 2002 or 2003 24,858 20,488
12% Note, payable in monthly installments through 2000 2,393 2,635
Industrial Revenue Bond, 75% of prime, payable in monthly
installments, final maturity in 2000 448 498
12-3/4% Senior Subordinated Notes, due 2000 31,700 31,682
14% Junior Subordinated Convertible Notes, due 2000 1,000 1,000
14% Junior Subordinated Nonconvertible Notes, due 2000 347 347
Other 179 184
-------- --------
Total long-term debt 63,704 60,564
Less current portion 5,651 4,531
-------- --------
Total long-term debt, excluding current portion $ 58,053 $ 56,033
======== ========
</TABLE>
LOANS OUTSTANDING UNDER REVOLVING LINE OF CREDIT
At June 30, 1996 and December 31, 1995, $1,779,000 and $3,730,000,
respectively, of borrowings outstanding under the Company's revolving line of
credit were classified as long-term debt because the borrowings were refinanced
under long-term agreements before the financial statements for each respective
date were issued.
CONSTRUCTION LOAN
At June 30, 1996, a construction loan totaling $1,000,000 was classified
as long-term debt because it was refinanced under a long-term agreement before
the financial statements for June 30, 1996 were issued.
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<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
TERM LOANS
Term loans having an aggregate principal balance of $23,375,000 at June
30, 1996 are payable in equal monthly principal installments with maturities in
2000, 2001, 2002 or 2003. A term loan having a principal balance of $1,483,000
at June 30, 1996 is payable in equal monthly principal installments of $8,000
until 2001 when the remaining principal balance of $1,008,000 will be due. Term
loans having a principal balance of $17,882,000 at June 30, 1996 are subject to
earlier maturity in the event the Company's revolving line of credit terminates
or expires.
The term loans having an aggregate principal balance of $23,375,000 bear
interest at LIBOR plus 3% or 3-1/4% or Prime Rate plus 3/4% or 1%. The term loan
having a principal balance of $1,483,000 bears interest at a fixed rate of 8.37%
per annum. The term loans are secured by the Company's receivables, inventories
and equipment and by certain of the Company's real property.
12% NOTE
The 12% Note, due April 30, 2000 (the "12% Note"), is payable by LCI, is
secured by a mortgage on LCI's Rock Hill, South Carolina, facility and is
guaranteed by LPC. Level payments of principal and interest in the amount of
$66,000 are due monthly until the 12% Note is paid in full.
12-3/4% NOTES
The 12-3/4% Senior Subordinated Notes, due February 1, 2000 (the "12-3/4%
Notes"), are unsecured obligations of the Company, redeemable at the option of
the Company, in whole or in part, at a declining premium over the principal
amount thereof. Interest on the 12-3/4% Notes is due semi-annually on February 1
and August 1.
14% NOTES
The 14% Junior Subordinated Convertible Notes, due May 1, 2000 (the "14%
Convertible Notes"), and 14% Junior Subordinated Nonconvertible Notes, due May
1, 2000 (collectively with the 14% Convertible Notes, the "14% Notes"), are
unsecured obligations of the Company and are redeemable at the option of the
Company, in whole or in part, at a declining premium over the principal amount
thereof. Interest on the 14% Notes is due quarterly on February 1, May 1, August
1 and November 1. The 14% Convertible Notes are convertible into 440,000 shares
of the Company's common stock.
RESTRICTIVE COVENANTS
Certain of the Company's loan agreements contain requirements with
respect to the maintenance of minimum levels of working capital, net worth and
cash flow coverage, and place certain restrictions on the Company's business and
operations, including restrictions on the issuance or assumption of additional
debt, the sale of all or substantially all of the Company's assets, the funding
of capital expenditures, the purchase of common stock, the redemption of
preferred stock and the payment of cash dividends.
-8-
<PAGE> 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 6 -- PROVISION FOR INCOME TAXES
At June 30, 1996 and December 31, 1995, the excess of the Company's
deferred tax assets over its deferred tax liabilities was substantially offset
by a valuation allowance. The income tax provisions recorded for the three-month
and six-month periods ended June 30, 1996 were primarily attributable to state
income taxes and deferred federal income taxes and were calculated using the
projected effective tax rate for the year ending December 31, 1996.
NOTE 7 -- NET INCOME OR NET LOSS PER COMMON SHARE
The calculations for primary and fully diluted net income or net loss
per common share for the three-month and six-month periods ended June 30, 1996
and 1995 are set forth below (in thousands, except per share amounts):
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
----------------- -----------------
1996 1995 1996 1995
---- ---- ---- ----
PRIMARY NET INCOME/(LOSS) PER COMMON SHARE:
<S> <C> <C> <C> <C>
Weighted average common shares outstanding during period 4,244 4,214 4,236 4,209
Common stock equivalents: incentive stock options - 26 - 26
------ ------ ------- -------
Weighted average common and common equivalent shares
common equivalent shares 4,244 4,240 4,236 4,235
====== ====== ======= =======
Net income/(loss) $ (55) $ 1,071 $ 302 $ 1,890
Preferred stock dividends (10) (11) (20) (22)
Pro rata portion of the excess of the redemption cost over the
value of preferred stock redeemed (11) (11) (22) (22)
------ ------ ------- -------
Income for primary net income/(loss) per share $ (76) $ 1,049 $ 260 $ 1,846
====== ====== ======= =======
Primary net income/(loss) per common share $ (.02) $ .25 $ .06 $ .44
====== ====== ======= =======
FULLY DILUTED NET INCOME/(LOSS) PER COMMON SHARE:
Weighted average common shares outstanding during period 4,263 4,228 4,263 4,228
Pro forma conversion of 14% Convertible Notes 440 440 440 440
Common stock equivalents: incentive stock options - 26 - 26
------ ------ ------- -------
Weighted average common and common equivalent shares 4,703 4,694 4,703 4,694
====== ====== ======= =======
Net income/(loss) $ (55) $ 1,071 $ 302 $ 1,890
Preferred stock dividends (10) (11) (20) (22)
Pro rata portion of the excess of the redemption cost over the
value of preferred stock redeemed (11) (11) (22) (22)
Pro forma elimination of interest expense on the 14%
Convertible Notes, net of applicable income taxes 27 26 54 52
------ ------ ------- -------
Income for fully diluted income per share $ (49) $ 1,075 $ 314 $ 1,898
====== ====== ======= =======
Fully diluted net income/(loss) per common share $ (.02) $ .23 $ .06 $ .40
======= ======= ======== ========
</TABLE>
-9-
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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, for certain waste
disposal sites. Each of these matters is subject to various uncertainties and it
is possible that some of these matters may be decided unfavorably to the
Company. Management believes that any liability that may ultimately result from
the resolution of these matters will not have a material adverse effect on the
financial position of the Company.
-10-
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Unless the context otherwise requires, all references herein to the
"Company" are to Lexington Precision Corporation ("LPC") and its wholly-owned
subsidiary, Lexington Components, Inc. ("LCI"). Through its two business
segments, the Rubber Group and the Metals Group, the Company manufactures, to
customer specifications, rubber and metal component parts. 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 LCI, the
Electrical Insulator Division, the Precision Seals Division and Lexington
Medical, and through a division of LPC, Lexington Manufacturing. The Metals
Group operates through two divisions of LPC, Falconer Die Casting Company
("Falconer") and Ness Precision Products ("Ness").
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Various statements in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" are based upon projections and estimates,
as distinct from past or historical facts and events. These forward-looking
statements are subject to a number of risks, uncertainties and contingencies
that could cause actual results to be materially different. Such risks and
uncertainties include increases and decreases in business awarded to the Company
by its various customers, unanticipated operating results and cash flows,
changes in future economic conditions, changes in the competitive environment,
changes in the capital markets and a number of other factors.
The results of operations for any particular fiscal period of the Company
are not necessarily indicative of the results to be expected for any one or more
succeeding fiscal periods.
RESULTS OF OPERATIONS -- SECOND QUARTER OF 1996 VERSUS SECOND QUARTER OF 1995
NET SALES
A summary of the net sales of the Rubber Group and the Metals Group for
the second quarters of 1996 and 1995 follows (dollar amounts in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30, PERCENTAGE
------------------------- INCREASE/
1996 1995 (DECREASE)
---- ---- ----------
<S> <C> <C> <C>
Rubber Group $ 18,775 $ 15,923 17.9%
Metals Group 9,306 10,510 (11.5)
-------- -------- ------
$ 28,081 $ 26,433 6.2%
======== ======== ======
</TABLE>
The increase in net sales of the Rubber Group was the result of increased
sales of insulators and seals for automotive wiring systems and increased sales
of medical components offset, in part, by reduced sales of tooling. The second
quarter of 1995 included net sales of $665,000 from the Rubber Group's Extruded
and Lathe-Cut Products Division, which was sold in June 1995.
-11-
<PAGE> 13
The decrease in net sales of the Metals Group resulted primarily from
lower sales of computer components manufactured by Falconer. At Ness, an
increase in the net sales of a variety of components was substantially offset by
the continued decline in net sales of a single automotive airbag component to
TRW Vehicle Safety Systems, Inc. ("TRW VSSI"). The decline in sales of the
single component resulted from the planned phase-out during 1995 and 1996 of the
inflator system in which the component is used. Net sales of the component
totaled $2,378,000, $1,228,000 and $614,000, during the second quarters of 1994,
1995 and 1996, respectively. Net sales of the component are projected to be
negligible during the second half of 1996. The decline in sales of the component
has resulted in operating losses at Ness' manufacturing facility in Casa Grande,
Arizona, during the first and second quarters of 1996. Although there can be no
assurance, management of the Company believes that net sales of new airbag
components manufactured at the Casa Grande facility will increase during the
second half of 1996, returning the facility to profitability.
COST OF SALES
A summary of cost of sales and cost of sales as a percentage of net sales
for the Rubber Group and the Metals Group for the second quarters of 1996 and
1995 follows (dollar amounts in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
--------------------------------------- PERCENTAGE
1996 1995 INCREASE
---------------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
Rubber Group $ 14,787 78.8% $ 13,016 81.7% 13.6%
Metals Group 8,382 90.1 8,233 78.3 1.8
-------- ----- -------- ----- ------
$ 23,169 82.5% $ 21,249 80.4% 9.0%
======== ===== ======== ===== ======
</TABLE>
Cost of sales of the Rubber Group as a percentage of net sales decreased
to 78.8% during the second quarter of 1996 from 81.7% during the second quarter
of 1995 primarily because of reduced material costs expressed as a percentage of
net sales. Material costs as a percentage of net sales decreased primarily
because of a change in the mix of components sold, a reduction in the cost of
certain raw materials, a reduction in sales of tooling purchased from third
parties and the exclusion of sales of the Company's Extruded and Lathe-Cut
Products Division. During the second quarter of 1996, factory overhead expense
as a percentage of net sales was unchanged, compared to the second quarter of
1995, primarily because of start-up expenses incurred at Lexington
Manufacturing, the Rubber Group's new mold manufacturing and engineering
division, and increased depreciation expense, which totaled $1,228,000 during
the second quarter of 1996, compared to $894,000 during the second quarter of
1995.
Cost of sales of the Metals Group as a percentage of net sales increased
to 90.1% during the second quarter of 1996 from 78.3% during the second quarter
of 1995. Factory overhead expense as a percentage of net sales and, to a lesser
extent, direct labor cost as a percentage of net sales both increased during the
second quarter of 1996 primarily because of additional expenses incurred in
connection with the start-up of new metal machining equipment, reduced
absorption of fixed factory overhead expenses due to the decrease in net sales
and increased depreciation expense, which totaled $607,000 during the second
quarter of 1996, compared to $474,000 during the second quarter of 1995.
-12-
<PAGE> 14
SELLING AND ADMINISTRATIVE EXPENSES
A summary of selling and administrative expenses and selling and
administrative expenses as a percentage of net sales for the Rubber Group, the
Metals Group and the Corporate Office for the second quarters of 1996 and 1995
follows (dollar amounts in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
--------------------------------------- PERCENTAGE
1996 1995 INCREASE
---------------- ---------------- ----------
<S> <C> <C> <C> <C> <C>
Rubber Group $ 1,179 6.3% $ 1,061 6.7% 11.1%
Metals Group 999 10.7 887 8.4 12.6
Corporate Office 601 N/A 566 N/A 6.2
-------- ----- -------- ----- -----
$ 2,779 9.9% $ 2,514 9.5% 10.5%
======== ===== ======== ===== =====
</TABLE>
At the Rubber Group, selling and administrative expenses as a percentage
of net sales decreased to 6.3% during the second quarter of 1996 primarily
because most selling and administrative expenses grew at a slower rate than net
sales and because employee-related relocation expenses declined.
At the Metals Group, selling and administrative expenses as a percentage
of net sales increased to 10.7% during the second quarter of 1996 primarily
because most selling and administrative expenses remained unchanged while net
sales declined by 11.5%. Legal expenses and personnel costs at the Metals Group
also increased during second quarter of 1996, compared to the second quarter of
1995.
INTEREST EXPENSE
Interest expense totaled $2,109,000 during the second quarter of 1996, an
increase of $252,000, compared to the second quarter of 1995. This increase was
caused primarily by an increase in average borrowings outstanding.
PROVISION FOR INCOME TAXES
At June 30, 1996 and December 31, 1995, the excess of the Company's
deferred tax assets over its deferred tax liabilities was substantially offset
by a valuation allowance. The income tax provision recorded during the second
quarter of 1996 was primarily attributable to state income taxes and deferred
federal income taxes and was calculated using the projected effective tax rate
for the year ending December 31, 1996. The income tax provision otherwise
recognizable during the second quarter of 1995 was reduced by the utilization of
portions of the Company's tax loss carryforwards and tax credit carryforwards.
-13-
<PAGE> 15
RESULTS OF OPERATIONS -- FIRST SIX MONTHS OF 1996 VERSUS FIRST SIX MONTHS OF
1995
NET SALES
A summary of the net sales of the Rubber Group and the Metals Group for
the first six months of 1996 and 1995 follows (dollar amounts in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, PERCENTAGE
------------------------- INCREASE/
1996 1995 (DECREASE)
---- ---- ----------
<S> <C> <C> <C>
Rubber Group $ 36,926 $ 31,611 16.8%
Metals Group 19,053 21,896 (13.0)
-------- -------- ------
$ 55,979 $ 53,507 4.6%
======== ======== ======
</TABLE>
The increase in net sales of the Rubber Group was the result of increased
sales of insulators and seals for automotive wiring systems and increased sales
of medical components. The first six months of 1995 included net sales of
$1,321,000 from the Rubber Group's Extruded and Lathe-Cut Products Division,
which was sold in June 1995.
The decrease in net sales of the Metals Group resulted primarily from
lower sales of computer components manufactured by Falconer and airbag
components manufactured by Ness. The decrease in net sales at Ness during the
first six months of 1996, versus the first six months of 1995, resulted
primarily from a decline in net sales of a single airbag component to TRW VSSI.
The decline in sales of the single component resulted from the planned phase-out
during 1995 and 1996 of the inflator system in which the component is used. Net
sales of the component totaled $2,378,000, $1,228,000 and $614,000 during the
first six months of 1994, 1995 and 1996, respectively. Net sales of the
component are projected to be negligible during the second half of 1996. The
decline in sales of the component has resulted in operating losses at Ness'
manufacturing facility in Casa Grande, Arizona, during the first six months of
1996. Although there can be no assurance, management of the Company believes
that net sales of new airbag components manufactured at the Casa Grande facility
will increase during the second half of 1996, returning the facility to
profitability.
COST OF SALES
A summary of cost of sales and cost of sales as a percentage of net sales
for the Rubber Group and the Metals Group for the first six months of 1996 and
1995 follows (dollar amounts in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, PERCENTAGE
--------------------------------------- INCREASE/
1996 1995 (DECREASE)
---------------- ---------------- ----------
<S> <C> <C> <C> <C> <C>
Rubber Group $ 29,059 78.7% $ 25,436 80.5% 14.2%
Metals Group 16,852 88.5 17,354 79.3 (2.9)
-------- ----- -------- ----- ------
$ 45,911 82.0% $ 42,790 80.0% 7.3%
======== ===== ======== ===== ======
</TABLE>
-14-
<PAGE> 16
Cost of sales of the Rubber Group as a percentage of net sales decreased
to 78.7% during the first six months of 1996 from 80.5% during the first six
months of 1995 primarily because of reduced material costs expressed as a
percentage of net sales. Material costs as a percentage of net sales decreased
primarily because of a change in the mix of components sold, a reduction in the
cost of certain raw materials and the exclusion of the sales of the Company's
Extruded and Lathe-Cut Products Division. During the first six months of 1996,
factory overhead expense as a percentage of net sales decreased primarily
because of increased absorption of fixed factory overhead expense due to the
increase in net sales and because of reduced workers' compensation expense. The
reduction in factory overhead expense as a percentage of net sales was
substantially offset by start-up expenses incurred at Lexington Manufacturing,
the Rubber Group's new mold manufacturing and engineering division, and by
increased depreciation expense, which totaled $2,359,000 during the first six
months of 1996, compared to $1,695,000 during the first six months of 1995.
Cost of sales of the Metals Group as a percentage of net sales increased
to 88.5% during the first six months of 1996 from 79.3% during the first six
months of 1995. Factory overhead expense as a percentage of net sales and, to a
lesser extent, direct labor cost as a percentage of net sales both increased
during the first six months of 1996 primarily because of additional expenses
incurred in connection with the start-up of new metal machining equipment,
reduced absorption of fixed factory overhead expense due to the decrease in net
sales and increased depreciation expense, which totaled $1,187,000 during the
first six months of 1996, compared to $925,000 during the first six months of
1995.
SELLING AND ADMINISTRATIVE EXPENSES
A summary of selling and administrative expenses and selling and
administrative expenses as a percentage of net sales for the Rubber Group, the
Metals Group and the Corporate Office for the first six months of 1996 and 1995
follows (dollar amounts in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
--------------------------------------- PERCENTAGE
1996 1995 INCREASE
---------------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
Rubber Group $ 2,164 5.9% $ 2,071 6.6% 4.5%
Metals Group 1,982 10.4 1,844 8.4 7.5
Corporate Office 1,297 N/A 1,219 N/A 6.4
-------- ----- -------- ----- -------
$ 5,443 9.7% $ 5,134 9.6% 6.0%
======== ===== ======== ===== =======
</TABLE>
At the Rubber Group, selling and administrative expenses as a percentage
of net sales decreased to 5.9% during the first six months of 1996 primarily
because most selling and administrative expenses grew at a slower rate than net
sales and because employee-related relocation expenses declined.
At the Metals Group, selling and administrative expenses as a percentage
of net sales increased to 10.4% during the first six months of 1996 primarily
because most selling and administrative expenses remained unchanged while net
sales declined by 13.0%. Legal expenses and personnel costs at the Metals Group
also increased during the first six months of 1996, compared to the first six
months of 1995.
-15-
<PAGE> 17
INTEREST EXPENSE
Interest expense totaled $4,063,000 during the first six months of 1996,
an increase of $396,000, compared to the first six months of 1995. This increase
was caused primarily by an increase in average borrowings outstanding.
PROVISION FOR INCOME TAXES
At June 30, 1996 and December 31, 1995, the excess of the Company's
deferred tax assets over its deferred tax liabilities was substantially offset
by a valuation allowance. The income tax provision recorded during the first six
months of 1996 was primarily attributable to state income taxes and deferred
federal income taxes and was calculated using the projected effective tax rate
for the year ending December 31, 1996. The income tax provision otherwise
recognizable during the first six months of 1995 was reduced by the utilization
of portions of the Company's tax loss carryforwards and tax credit
carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
OPERATING ACTIVITIES
During the first six months of 1996, the operating activities of the
Company provided $3,222,000 of cash.
During the first six months of 1996, cash provided by operating
activities included $2,042,000 of cash provided by increased accounts payable.
At June 30, 1996, accounts payable included approximately $3,957,000 of accounts
payable relating to building construction, the acquisition of equipment and the
purchase of customer-owned tooling, compared to $2,876,000 at December 31,
1995. Excluding accounts payable relating to building construction, the
acquisition of equipment and the purchase of customer-owned tooling, accounts
payable increased by $961,000, or 12%, from $7,752,000 at December 31, 1995 to
$8,713,000 at June 30, 1996. The increase resulted primarily from higher levels
of production during the second quarter of 1996 compared to the fourth quarter
of 1995.
During the first six months of 1996, cash was used to fund increased
accounts receivable, prepaid expenses and other current assets. Accounts
receivable increased by $1,619,000 primarily because net sales in June 1996
exceeded net sales in December 1995. Prepaid expenses and other current assets
increased by $1,447,000 primarily because of increased customer tooling in
process.
INVESTING ACTIVITIES
During the first six months of 1996, the investing activities of the
Company used $9,592,000 of cash, primarily for capital expenditures. During the
first six months of 1996, capital expenditures attributable to the Rubber Group
and the Metals Group totaled $5,909,000 and $3,650,000, respectively.
FINANCING ACTIVITIES
During the first six months of 1996, the financing activities of the
Company provided $6,739,000 of cash.
The Company finances its day-to-day operations through a revolving line
of credit. The Company borrows and repays loans outstanding under the revolving
line of credit daily, depending on cash receipts and disbursements. The ability
of the Company to borrow under the revolving line of credit is governed by
certain availability formulas which are based on the levels of accounts
receivable and inventories of the Company. The
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<PAGE> 18
Company also uses the revolving line of credit to fund capital expenditures with
the intention of later refinancing a portion of such borrowings with term loans.
The Company also uses an equipment line of credit to finance a portion of
qualified new equipment purchases with term loans, repayable in equal monthly
installments through 2003. Generally, the amount of financing available under
the equipment line of credit to fund new equipment purchases is equal to 85% of
the appraised orderly liquidation value of the equipment being purchased. At
July 31, 1996, subject to the acquisition of new equipment as collateral,
funding potentially available under the equipment line of credit totaled
approximately $4,300,000.
During the first six months of 1996, the Company's net borrowings under
the revolving line of credit increased by $1,852,000. Also, during the first six
months of 1996, the Company incurred additional borrowings of $1,000,000 in
connection with the construction of its new facility in North Canton, Ohio. On
July 1, 1996, the construction loan was refinanced as part of a $2,000,000 term
loan which bears interest at a fixed rate of 8.37% and is payable in 59 monthly
installments of $11,000 with a final payment of $1,344,000 due in 2001. At
June 30, 1996 and December 31, 1995, $1,779,000 and $3,730,000, respectively, of
borrowings outstanding under the revolving line of credit were classified as
long-term debt in the Company's consolidated financial statements because the
borrowings were refinanced under long-term agreements before the Company's
financial statements for June 30, 1996 and December 31, 1995, respectively, were
issued. In addition, the $1,000,000 construction loan was also classified as
long-term debt at June 30, 1996 because it was refinanced under a long-term
agreement before the Company's financial statements for June 30, 1996 were
issued.
During the first six months of 1996, the Company borrowed $10,677,000 in
term loans to refinance $4,035,000 of pre-existing term loans and $6,642,000 of
loans outstanding under the revolving line of credit. The new term loans are
secured by the Company's receivables, inventories and equipment and by certain
of the Company's real property. New term loans totaling $5,377,000 bear interest
at the London Interbank Offered Rate ("LIBOR") plus 3% and are payable in 48
equal monthly principal installments; new term loans totaling $2,000,000 bear
interest at LIBOR plus 3-1/4% and/or Prime Rate plus 1% and are payable in equal
monthly principal installments ranging from 70 to 84 months; a new $1,800,000
term loan bears interest at LIBOR plus 3% and/or Prime Rate plus 3/4% and is
payable in 60 equal monthly principal installments; and a new $1,500,000 term
loan bears interest at a fixed rate of 8.37% per annum and is payable in 59
monthly installments of $8,000 with a final payment of $1,008,000 due in 2001.
In July 1996, the Company borrowed $3,400,000 in term loans to refinance
$2,400,000 of loans outstanding under the revolving line of credit and the
$1,000,000 construction loan.
LIQUIDITY
The Company operates with high financial leverage and limited liquidity.
During the first six months of 1996, aggregate indebtedness of the Company,
excluding accounts payable, increased by $6,943,000 to $75,029,000. Net working
capital declined by $3,676,000, primarily because capital expenditures were
financed with increased borrowings under the Company's revolving line of credit.
During the year ending December 31, 1996, cash interest and principal
payments are projected to total approximately $8,000,000 and $5,200,000,
respectively.
At August 9, 1996, availability under the Company's revolving line of
credit totaled $1,203,000 before deducting outstanding checks of approximately
$700,000. On August 9, 1996, the Company received a commitment, subject to
appropriate documentation, for term loans totaling $2,000,000 which will bear
interest at LIBOR plus 3-1/4% and/or Prime Rate plus 1% and will be payable in
66 equal monthly principal installments. Proceeds received from the loan, if
completed, will be used to refinance $2,000,000 of loans
-17-
<PAGE> 19
outstanding under the Company's revolving line of credit. There can be no
assurance that the financing will be completed.
The Company presently projects that capital expenditures will total
approximately $22,000,000 during 1996, including approximately $18,000,000 for
equipment and approximately $4,000,000 for buildings. At June 30, 1996, the
Company had commitments outstanding for capital expenditures totaling
approximately $4,400,000.
The Company's projected capital expenditures for 1996 have increased by
approximately $8,000,000 since it previously disclosed projected capital
expenditures in May 1996. The increase is primarily the result of an effort to
increase production capacity at Ness' manufacturing facility in Casa Grande,
Arizona. Management of the Company currently projects that the additional
production capacity will be required to support increased sales of components
used in automotive airbags.
Certain of the Company's loan agreements currently include a covenant
which limits capital expenditures to $15,000,000 in any calendar year. Although
management of the Company believes that it should be able to obtain a waiver or
amendment of the covenant to permit the spending of approximately $22,000,000 in
1996, there can be no assurance given that such waiver or amendment will be
obtained. If the Company is unable to obtain such waiver or amendment, the
Company would have to reduce or delay its capital spending program in order to
remain in compliance with the covenant, which could have an adverse effect upon
the Company.
In conjunction with its plans to fund the additional $8,000,000 of
capital expenditures currently projected for 1996, on August 1, 1996, the
Company received a non-binding proposal from an institutional lender for a
$7,000,000 line of credit to finance the purchase of certain metal machining
equipment. If consummated in accordance with the terms of the proposal,
borrowings under this additional equipment line of credit will be repayable in
84 equal monthly installments with interest at a rate of LIBOR plus 3-1/4%.
During the remaining six months of 1996 and the first six months of 1997,
the Company anticipates that, in addition to cash flows from operations, new
loans in the amount of approximately $17,000,000 will be required to meet the
Company's working capital, capital expenditure and debt service requirements.
The Company is currently projecting that it will require financing of
approximately $2,000,000 in excess of its current lines of credit, assuming the
new proposed $7,000,000 equipment line of credit is consummated. Although no
assurance can be given, the Company currently believes that cash flows from
operations along with financing provided by existing and/or new institutional
lenders should be adequate to meet its anticipated working capital, capital
expenditure and debt service requirements for the remainder of 1996 and the
first six months of 1997. If cash flows from operations or financing provided by
existing and/or new institutional lenders fall below expectations, the Company
intends to reduce or delay its capital expenditure program and/or to extend
accounts payable balances with suppliers beyond terms which the Company believes
are customary in the industries in which it operates. Any such reduction or
delay in capital expenditures could have an adverse effect upon the Company.
Certain of the Company's loan agreements contain requirements with
respect to the maintenance of minimum levels of working capital, net worth and
cash flow coverage and place certain restrictions on the Company's business and
operations, including restrictions on the issuance or assumption of additional
debt, the sale of all or substantially all of the Company's assets, the funding
of capital expenditures, the purchase of common stock, the redemption of
preferred stock and the payment of cash dividends.
-18-
<PAGE> 20
ACQUISITIONS
The Company may seek, from time to time, 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 certain holders of the Company's debt. 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 from time to time as one of numerous
potentially responsible parties under applicable environmental laws for
restoration costs at waste disposal sites, as a third-party defendant in cost
recovery actions pursuant to applicable environmental laws and as a defendant or
potential defendant in various other environmental law matters. It is the
Company's policy to record accruals for such matters when a loss is deemed
probable and the amount of such loss can be reasonably estimated. The various
actions to which the Company is or may be a party in the future are at various
stages of completion and, although there can be no assurance as to the outcome
of existing or potential environmental litigation, in the event such litigation
were commenced, based upon the information currently available to the Company,
the Company believes that the outcome of such actions would not have a material
adverse effect upon its financial position.
-19-
<PAGE> 21
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Stockholders of the Company was held on May 16,
1996.
(b) The matters voted upon at the Annual Meeting and the results of the
voting as to each such matter are set forth below:
(i) The election of William B. Conner and Phillips E. Patton as
directors of the Company for terms expiring in 1999.
Votes for Mr. Conner 3,798,431
Votes withheld from Mr. Conner 20,836
Votes for Mr. Patton 3,798,279
Votes withheld from Mr. Patton 20,988
(ii) The ratification of Ernst & Young LLP as independent auditors of
the Company for the year ending December 31, 1996.
Votes for Ernst & Young LLP 3,810,785
Votes against Ernst & Young LLP 2,662
Abstentions 5,820
There were no broker non-votes in respect of the foregoing
matters.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed herewith:
10-1 Term Note dated May 31, 1996 from Lexington Precision Corporation
in favor of Congress Financial Corporation
10-2 Term Note dated July 1, 1996 from Lexington Components, Inc. in
favor of Congress Financial Corporation
10-3 Term Note dated July 1, 1996 from Lexington Precision Corporation
in favor of Congress Financial Corporation
10-4 Term Note dated July 1, 1996 from Lexington Precision Corporation
in favor of Bank One, Akron, NA
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:
No reports on Form 8-K were filed during the quarter ended June 30,
1996.
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<PAGE> 22
LEXINGTON PRECISION CORPORATION
FORM 10-Q
JUNE 30, 1996
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)
August 14, 1996 By: /s/ Michael A. Lubin
- --------------- -----------------------
Date Michael A. Lubin
Chairman of the Board
August 14, 1996 By: /s/ Warren Delano
- --------------- -----------------------
Date Warren Delano
President
August 14, 1996 By: /s/ Dennis J. Welhouse
- --------------- -----------------------
Date Dennis J. Welhouse
Senior Vice President and
Chief Financial Officer
-21-
<PAGE> 23
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Location
------ ------- --------
<S> <C> <C> <C>
10-1 Term Note dated May 31, 1996 from Filed with this Form 10-Q
Lexington Precision Corporation in favor
of Congress Financial Corporation
10-2 Term Note dated July 1, 1996 from Filed with this Form 10-Q
Lexington Components, Inc. in favor of
Congress Financial Corporation
10-3 Term Note dated July 1, 1996 from Filed with this Form 10-Q
Lexington Precision Corporation in favor
of Congress Financial Corporation
10-4 Term Note dated July 1, 1996 from Filed with this Form 10-Q
Lexington Precision Corporation in favor
of Bank One, Akron, NA
27-1 Financial Data Schedule Filed with this Form 10-Q
</TABLE>
<PAGE> 1
Exhibit 10.1
TERM PROMISSORY NOTE
--------------------
$375,000 New York, New York
May 31, 1996
FOR VALUE RECEIVED, LEXINGTON PRECISION CORPORATION, a Delaware
corporation (the "Debtor"), hereby unconditionally promises to pay to the order
of CONGRESS FINANCIAL CORPORATION, a California corporation (the "Payee"), at
the offices of Payee at 1133 Avenue of the Americas, New York, New York 10036,
or at such other place as the Payee or any holder hereof may from time to time
designate, the principal sum of THREE HUNDRED SEVENTY-FIVE THOUSAND DOLLARS
($375,000) in lawful money of the United States of America and in immediately
available funds, in eighty (80) consecutive monthly installments (or earlier as
hereinafter referred to) on the first day of each month commencing June 1, 1996,
of which the first seventy-nine (79) installments shall each be in the amount of
FOUR THOUSAND SIX HUNDRED EIGHTY-SEVEN AND 50/100 ($4,687.50), and the last
(i.e. the eightieth (80th)) 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
June 1, 1996 and on the first day of each month thereafter until the
indebtedness evidenced by this Note is paid in full. Interest payable upon and
during the continuance of an Event of Default or following the effective date
of termination or non-renewal of the Financing Agreements shall be payable upon
demand.
For purposes hereof (a) the term "Interest Rate" shall mean, as to
Prime Rate Loans, a rate of one (1%) percent per annum in excess of the Prime
Rate and as to Eurodollar Rate Loans, a rate of three and one-quarter (3-1/4%)
percent per annum in excess of the Adjusted Eurodollar Rate; PROVIDED, THAT, at
Payee's option, the Interest Rate shall mean a rate of three (3%) percent per
annum in excess of the Prime Rate as to Prime Rate Loans and a rate of five and
one-quarter (5-1/4%) percent per annum in excess of the Adjusted Eurodollar Rate
as to Eurodollar Rate Loans, upon and during the continuance of an Event of
Default or following the effective date of termination or non-renewal of the
Financing Agreements, and (b) the term "Prime Rate" shall mean the rate from
time to time publicly announced by CoreStates Bank, N.A., or its successors, at
its office in Philadelphia, Pennsylvania, as its prime rate, whether or not such
announced rate is the best rate available at such bank. Unless otherwise defined
herein, all capitalized terms used herein shall have the meanings
<PAGE> 2
assigned thereto in the Accounts Agreement (as hereinafter defined) and the
other Financing Agreements.
The Interest Rate applicable to Prime Rate Loans payable hereunder
shall increase or decrease by an amount equal to each increase or decrease,
respectively, in the Prime Rate, effective on the first day of the month after
any change in the Prime Rate, based on the Prime Rate in effect on the last day
of the month in which any such change occurs. Interest shall be calculated on
the basis of a three hundred sixty (360) day year and actual days elapsed. In no
event shall the interest charged hereunder exceed the maximum permitted under
the laws of the State of New York or other applicable law.
This Note is issued pursuant to the terms and provisions of the letter
agreement re: Amendment to Financing Agreements, dated as of January 16, 1996,
between Debtor and Payee (the "Amendment") to evidence the "LPC New York Real
Estate Loan B" (as defined in the Amendment) made by Payee to Debtor. This Note
is secured by the "Collateral" described in the Accounts Financing Agreement
[Security Agreement], dated January 11, 1990, by and between Payee and Debtor,
as amended (the "Accounts Agreement") and any agreement, document or instrument
now or at any time hereafter executed and/or delivered in connection therewith
or related thereto (the foregoing, as the same now exist or may hereafter be
amended, modified, supplemented, renewed, extended, restated or replaced, are
hereinafter collectively referred to as the "Financing Agreements") and is
entitled to all of the benefits and rights thereof and of the Financing
Agreements. At the time any payment is due hereunder, at its option, Payee may
charge the amount thereof to any account of Debtor maintained by Payee.
If any principal or interest payment is not made when due hereunder,
and such failure shall continue for three (3) days, or if any other Event of
Default (as defined in the Accounts Agreement) shall occur for any reason, or if
the Financing Agreements shall be terminated or not renewed for any reason
whatsoever, then and in any such event, in addition to all rights and remedies
of Payee under the Financing Agreements, applicable law or otherwise, all such
rights and remedies being cumulative, not exclusive and enforceable
alternatively, successively and 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
-2-
<PAGE> 3
collection hereof, including, but not limited to, reasonable attorneys' fees.
Debtor (i) waives diligence, demand, presentment, protest and notice of
any kind, (ii) agrees that it will not be necessary for any holder hereof to
first institute suit in order to enforce payment of this Note and (iii) consents
to any one or more extensions or postponements of time of payment, release,
surrender or substitution of collateral security, or forbearance or other
indulgence, without notice or consent. Upon the occurrence and during the
continuance of any Event of Default, Payee shall have the right, but not the
obligation to setoff against this Note all money owed by Payee to Debtor.
Payee shall not be required to resort to any Collateral for payment,
but may proceed against Debtor and any guarantors or endorsers hereof in such
order and manner as Payee may choose. None of the rights of Payee shall be
waived or diminished by any failure or delay in the exercise thereof.
Debtor hereby waives the right to a trial by jury and all rights of
setoff and rights to interpose counterclaims and cross-claims in any litigation
or proceeding arising in connection with this Note, the Accounts Agreement, the
other Financing Agreements, the Obligations or the Collateral, other than
compulsory counterclaims, the non-assertion of which would result in a permanent
waiver. Debtor hereby irrevocably consents to the non-exclusive jurisdiction of
the Supreme Court of the State of New York and of the United States District
Court for the Southern District of New York for all purposes in connection with
any action or proceeding arising out of or relating to this Note, the Accounts
Agreement, the other Financing Agreements, the Obligations or the Collateral and
further consents that any process or notice of motion or other application to
said Courts or any judge thereof, or any notice in connection with any
proceeding hereunder may be served (i) inside or outside the State of New York
by registered or certified mail, return receipt requested, and service or notice
so served shall be deemed complete five (5) days after the same shall have been
posted or (ii) in such other manner as may be permissible under the rules of
said Courts. Within thirty (30) days after such mailing, Debtor shall appear in
answer to such process or notice of motion or other application to said Courts,
failing which Debtor shall 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
-3-
<PAGE> 4
State of New York and shall be binding upon the successors and assigns of Debtor
and inure to the benefit of Payee and its successors, endorsees and assigns. If
any term or provision of this Note shall be held invalid, illegal or
unenforceable, the validity of all other terms and provisions hereof shall in no
way be affected thereby.
This Note may not be changed, modified or terminated orally, but only
by an agreement in writing signed by the Payee or the holder hereof.
Whenever used herein, the terms "Debtor" and "Payee" shall be deemed to
include their respective successors and assigns.
LEXINGTON PRECISION CORPORATION
ATTEST:
By: Warren Delano
Kenneth I. Greenstein -------------------------------
- --------------------------
Secretary Title: President
----------------------------
[Corporate Seal]
-4-
<PAGE> 1
Exhibit 10.2
NEW EQUIPMENT TERM NOTE
-----------------------
$500,000 July 1, 1996
FOR VALUE RECEIVED, LEXINGTON COMPONENTS, INC., a Delaware corporation
(the "Debtor"), hereby unconditionally promises to pay to the order of CONGRESS
FINANCIAL CORPORATION, a California corporation (the "Payee"), at the offices of
Payee at 1133 Avenue of the Americas, New York, New York 10036, or at such other
place as the Payee or any holder hereof may from time to time designate, the
principal sum of FIVE HUNDRED THOUSAND DOLLARS ($500,000) in lawful money of the
United States of America and in immediately available funds, in sixty-seven (67)
consecutive monthly installments (or earlier as hereinafter referred to) on the
first day of each month commencing August 1, 1996, of which the first sixty-six
(66) installments shall each be in the amount of SEVEN THOUSAND FIVE HUNDRED
DOLLARS ($7,500), and the last (i.e. sixty-seventh (67th)) 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
-3-
<PAGE> 4
successors, endorsees and assigns. If any term or provision of this Note shall
be held invalid, illegal or unenforceable, the validity of all other terms and
provisions hereof shall in no way be affected thereby.
This Note may not be changed, modified or terminated orally, but only
by an agreement in writing signed by the Payee or the holder hereof.
Whenever used herein, the terms "Debtor" and "Payee" shall be deemed to
include their respective successors and assigns.
LEXINGTON COMPONENTS, INC.
ATTEST:
By: Warren Delano
Kenneth I. Greenstein --------------------------------
- -------------------------------
Secretary Title: President
-----------------------------
[Corporate Seal]
-4-
<PAGE> 1
Exhibit 10.3
NEW EQUIPMENT TERM NOTE
-----------------------
$900,000 July 1, 1996
FOR VALUE RECEIVED, LEXINGTON PRECISION CORPORATION, a Delaware
corporation (the "Debtor"), hereby unconditionally promises to pay to the order
of CONGRESS FINANCIAL CORPORATION, a California corporation (the "Payee"), at
the offices of Payee at 1133 Avenue of the Americas, New York, New York 10036,
or at such other place as the Payee or any holder hereof may from time to time
designate, the principal sum of NINE HUNDRED THOUSAND DOLLARS ($900,000) in
lawful money of the United States of America and in immediately available funds,
in sixty-seven (67) consecutive monthly installments (or earlier as hereinafter
referred to) on the first day of each month commencing August 1, 1996, of which
the first sixty-six (66) installments shall each be in the amount of THIRTEEN
THOUSAND FOUR HUNDRED DOLLARS ($13,400), and the last (i.e. sixty-seventh
(67th)) 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
Kenneth I. Greenstein -------------------------------
- -----------------------------
Secretary Title: President
----------------------------
[Corporate Seal]
-4-
<PAGE> 1
Exhibit 10.4
PROMISSORY NOTE
---------------
(North Canton Term Loan)
$2,000,000.00 Canton, Ohio
July 1, 1996
FOR VALUE RECEIVED, LEXINGTON PRECISION CORPORATION, a
corporation organized under the laws of the State of Delaware (hereinafter
referred to as the " Company"), promises to pay to the order of BANK ONE, AKRON,
NA (hereinafter referred to as the "Bank"), the principal amount of TWO MILLION
DOLLARS ($2,000,000), on August 1, 2001, or sooner as hereinafter provided, with
interest on the unpaid balance of said principal amount from the date hereof at
a rate per annum equal to eight and thirty-seven one-hundredths percent (8.37%).
If any installment of principal, interest or other amounts due and payable
hereunder are not paid when due, or within any applicable grace periods set
forth in the Agreement, the Company shall pay interest thereon at the rate of
three percent (3.0%) per annum in excess of the Base Rate, as defined in the
Agreement hereinafter referred to, as the same may from time to time be
established but not to exceed the maximum rate allowed by law. Bank shall have
the right to assess a late payment processing fee in the amount of the greater
of FIFTY AND NO/100 DOLLARS ($50.00) or five percent (5%) of the scheduled
payment in the event of a default in payment that remains uncured for a period
of at least ten (10) days.
The Company agrees to pay the principal amount of this Note in
fifty-nine (59) consecutive, equal monthly installments of ELEVEN THOUSAND ONE
HUNDRED ELEVEN DOLLARS ELEVEN CENTS ($11,111.11) each, together with all accrued
interest due at the time of payment of each such installment of principal,
commencing on September 1, 1996, and continuing on the first day of each month
thereafter and a final installment of ONE MILLION THREE HUNDRED FORTY-FOUR
THOUSAND FOUR HUNDRED FORTY-FOUR DOLLARS FIFTY-ONE CENTS ($1,344,444.51),
together with all accrued interest due at the time of payment of such
installment, on August 1, 2001. Monthly payments hereunder shall be applied
first to interest due and the balance to reduction of the principal amount
outstanding.
Payments of both principal of and interest on this Note shall
be made in lawful money of the United States of America, at 50 South Main
Street, Akron, Ohio 44308-1888, or at such other place as the Bank or any
subsequent holder hereof shall have designated to the Company in writing.
Interest payable on this Note shall be computed on a three hundred sixty (360)
day per year basis counting the actual number of days elapsed. If any payment
under this Note becomes due and payable on a day which is not a Business Day (as
defined in this Agreement), payment thereof shall be made on the immediately
succeeding Business Day.
This Note is issued pursuant to and is entitled to the
benefits of a Credit Facility and Security Agreement dated as of March 14, 1996,
by and among the Company, Lexington Components, Inc. ("LCI"), and the Bank (the
"Agreement"), to which Agreement reference is hereby made for a statement of the
rights and obligations of the Bank and the duties and obligations of the Company
and LCI in relation thereto; but neither this reference to said Agreement nor
any provisions thereof shall affect or impair the absolute and unconditional
obligation of the Company to pay the principal of or interest on this Note when
due.
The Company may prepay all or any portion of this Note at any
time and in any amount without penalty or premium, provided that all prepayments
shall be applied to installments of principal in the inverse order of their
maturities.
<PAGE> 2
If an Event of Default, as defined in said Agreement, shall
occur and shall be continuing, the principal of this Note may be declared
immediately due and payable at the option of the Bank.
In the event that the Company fails to pay any regularly
scheduled principal or interest payment on the Vienna Term Note when due (other
than as a result of acceleration thereof based on a default or event of default
other than the failure to make any such regularly scheduled payments of
principal or interest on the Vienna Term Note when due) which failure is not
cured within the ten (10)-day cure period provided in Section 6A of the
Agreement (a "Payment Default"), or if an Event of Default occurs and is
continuing, which arises from fraudulent act(s) or practice(s) of the Company
which Event of Default is not cured within three (3) Business Days after the
Company's receipt of written notice thereof from the Bank (a "Fraud Default"),
the Company hereby authorizes any attorney-at-law to appear in any court of
record in the State of Ohio, or in any other state or territory of the United
States, at any time or times after the above sum becomes due, and waives the
issuance and service of process and confesses judgment against it, in favor of
any holder of this Note, for the amount then appearing due, together with the
costs of suit, and thereupon to release all errors and waive all rights of
appeal and stay of execution. The foregoing warrant of attorney shall survive
any judgment, it being understood that should any judgment be vacated for any
reason, the foregoing warrant of attorney nevertheless may thereafter be used
for obtaining an additional judgment or judgments. To the extent that the
provisions of the cognovit warning set forth above the Company's signature
specifically contradict the provisions of this paragraph regarding the
requirement of a Payment Default or a Fraud Default to take a cognovit judgment,
the provisions of this paragraph control.
No delay on the part of any holder hereof in exercising any
power or rights hereunder shall operate as a waiver of any power or rights. Any
demand or notice hereunder to the Company shall be deemed duly given or made
when sent, if given by telecopier, when delivered, if given by personal delivery
or overnight commercial carrier, or the fifth calendar day after deposit in the
United States mail, certified mail, return receipt requested, addressed to the
Company at its address (or telecopier number) set forth in Rider A of the
Agreement or such other address or telecopier number as may be hereafter
designated in writing by the Company to the Bank.
This note is executed at Cleveland, Cuyahoga County, Ohio.
- --------------------------------------------------------------------------------
WARNING--BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL.
IF YOU DO NOT PAY ON TIME, A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT
YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU
REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR, WHETHER FOR RETURNED
GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY
OTHER CAUSE.
- --------------------------------------------------------------------------------
LEXINGTON PRECISION CORPORATION
By Dennis J. Welhouse
------------------------------------------------
Dennis J. Welhouse
Senior Vice President and Assistant Secretary
2
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 487
<SECURITIES> 0
<RECEIVABLES> 14,578
<ALLOWANCES> 0
<INVENTORY> 8,728
<CURRENT-ASSETS> 28,184
<PP&E> 85,091
<DEPRECIATION> 33,934
<TOTAL-ASSETS> 91,365
<CURRENT-LIABILITIES> 36,635
<BONDS> 58,053
<COMMON> 1,087
510
0
<OTHER-SE> (5,762)
<TOTAL-LIABILITY-AND-EQUITY> 91,365
<SALES> 55,979
<TOTAL-REVENUES> 55,979
<CGS> 45,911
<TOTAL-COSTS> 45,911
<OTHER-EXPENSES> 0
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<INCOME-PRETAX> 562
<INCOME-TAX> 260
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