<PAGE> 1
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 PERIOD ENDED SEPTEMBER 30, 1997
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, $0.25 PAR VALUE, 4,263,036 SHARES AS OF NOVEMBER 7, 1997
(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
QUARTERLY REPORT ON FORM 10-Q
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,
1997 1996
--------------- ---------------
<S> <C> <C>
ASSETS:
Current assets:
Cash $ 171 $ 187
Trade receivables 15,120 16,820
Inventories 8,871 8,899
Prepaid expenses and other assets 3,344 3,211
Deferred income taxes 1,675 1,728
--------- --------
Total current assets 29,181 30,845
--------- --------
Plant and equipment:
Land 1,533 1,533
Buildings 23,030 19,915
Equipment 75,143 68,232
--------- --------
99,706 89,680
Accumulated depreciation (41,864) (36,380)
--------- --------
Plant and equipment, net 57,842 53,300
--------- --------
Excess of cost over net assets of businesses acquired, net 9,173 9,410
--------- --------
Other assets, net 4,419 3,475
--------- --------
$ 100,615 $ 97,030
========= ========
</TABLE>
See notes to consolidated financial statements. (continued on next page)
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<PAGE> 4
LEXINGTON PRECISION CORPORATION
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
--------------- ---------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' DEFICIT:
Current liabilities:
Trade accounts payable $ 13,254 $ 14,334
Accrued expenses 7,666 8,282
Short-term debt 3,896 7,326
Current portion of long-term debt 6,002 5,225
--------- --------
Total current liabilities 30,818 35,167
--------- --------
Long-term debt, excluding current portion 74,153 65,148
--------- --------
Deferred income taxes and other long-term liabilities 1,475 1,307
--------- --------
Redeemable preferred stock, $100 par value,
at redemption value 930 930
Excess of redemption value over par value (465) (465)
--------- --------
Redeemable preferred stock at par value 465 465
--------- --------
Stockholders' deficit:
Common stock, $0.25 par value, 10,000,000
shares authorized, 4,348,951 shares issued 1,087 1,087
Additional paid-in-capital 12,367 12,395
Accumulated deficit (19,533) (18,322)
Cost of common stock in treasury, 85,915 shares (217) (217)
--------- --------
Total stockholders' deficit (6,296) (5,057)
--------- --------
$ 100,615 $ 97,030
========= ========
</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 DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------ ------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 28,342 $ 29,287 $ 87,347 $ 85,266
Cost of sales 24,171 24,301 72,959 70,212
------- -------- ------- -------
Gross profit 4,171 4,986 14,388 15,054
Selling and administrative expenses 2,787 3,024 8,632 8,467
------- -------- ------- -------
Income from operations 1,384 1,962 5,756 6,587
Interest expense 2,275 2,177 6,704 6,240
------- -------- ------- -------
Income/(loss) before income taxes (891) (215) (948) 347
Provision for income taxes 120 113 263 373
------- -------- ------- -------
Net loss (1,011) (328) (1,211) (26)
Preferred stock dividends 9 11 28 31
Allocated portion of excess of redemption value over par
value of preferred stock to be redeemed during year 11 11 34 34
------- -------- ------- -------
Net loss attributable to common stockholders $ (1,031) $ (350) $ (1,273) $ (91)
======= ======== ======= =======
Net loss per common share:
Primary $ (0.24) $ (0.08) $ (0.30) $ (0.02)
======= ======== ======= =======
Fully diluted $ (0.24) $ (0.08) $ (0.30) $ (0.02)
======= ======== ======= =======
</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
---------------------------
1997 1996
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (1,211) $ (26)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation 6,243 5,119
Amortization included in operating expense 983 799
Amortization included in interest expense 112 220
Deferred income taxes 211 188
Changes in operating assets and liabilities that provided/(used) cash:
Trade receivables 1,700 (2,026)
Inventories 28 (632)
Prepaid expenses and other assets (133) (1,687)
Trade accounts payable (1,080) 1,743
Accrued expenses (616) 747
Other 379 57
--------- ---------
Net cash provided by operating activities 6,616 4,502
--------- ---------
INVESTING ACTIVITIES:
Purchases of plant and equipment (11,802) (12,442)
Increase in equipment deposits (187) (380)
Proceeds from sales of equipment 63 195
Expenditures for tooling owned by customers (669) (397)
--------- ---------
Net cash used by investing activities (12,595) (13,024)
--------- ---------
FINANCING ACTIVITIES:
Net increase/(decrease) in short-term debt (3,430) 4,406
Proceeds from issuance of long-term debt 43,492 12,346
Repayment of long-term debt (33,713) (7,974)
Other (386) (319)
--------- ---------
Net cash provided by financing activities 5,963 8,459
--------- ---------
Net decrease in cash (16) (63)
Cash at beginning of period 187 118
--------- ---------
Cash at end of period $ 171 $ 55
========= =========
</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 and its subsidiaries (collectively,
the "Company"). 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
included in the Company's annual consolidated financial statements. Significant
accounting policies followed by the Company are set forth, except as described
below, in Note 1 to the consolidated financial statements in the Company's
annual report on Form 10-K for the year ended December 31, 1996.
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 September 30, 1997, the Company's
results of operations for the three-month and nine-month periods
ended September 30, 1997 and 1996, and the Company's cash flow for the
nine-month periods ended September 30, 1997 and 1996. All such adjustments
were of a normal recurring nature.
The results of operations for the third quarter of 1997 are not
necessarily indicative of the results to be expected for the full year or for
any succeeding quarter.
NOTE 2 -- INVENTORIES
Inventories at September 30, 1997, and December 31, 1996, are set forth
below (dollar amounts in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
---------------- --------------
<S> <C> <C>
Finished goods $ 3,305 $ 3,615
Work in process 2,374 2,360
Raw materials and purchased parts 3,192 2,924
------ ------
$ 8,871 $ 8,899
====== ======
</TABLE>
NOTE 3 -- ACCRUED EXPENSES
At September 30, 1997, and December 31, 1996, accrued expenses included
accrued interest expense of $795,000 and $1,754,000, respectively.
NOTE 4 -- DEBT
At September 30, 1997, and December 31, 1996, short-term debt consisted
of loans outstanding under the Company's revolving line of credit. At September
30, 1997, and December 31, 1996, $7,500,000 and $6,856,000, respectively, of
loans outstanding under the revolving line of credit were classified as
long-term debt because they were refinanced under long-term agreements before
the consolidated financial statements for the respective periods were issued. At
September 30, 1997, loans outstanding under the revolving line of credit accrued
interest at prime rate plus 0.25% and the London Interbank Offered Rate
("LIBOR") plus 2.75%.
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<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Long-term debt at September 30, 1997, and December 31, 1996, is set forth
below (in thousands of dollars):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
--------------- ---------------
<S> <C> <C>
Long-term secured debt:
Revolving line of credit, prime rate plus 1% and LIBOR plus 3.25% $ - $ 6,856(1)
Term loan payable in equal monthly principal installments, final
maturity in 2000, 75% of prime rate - 398(1)
Term loans payable in equal monthly principal installments, final
maturities in 2000, LIBOR plus 3.0% - 4,369
Term loan payable in increasing monthly principal installments, final
maturity in 2000, 12% 1,720 2,136
Term loans payable in equal monthly principal installments based on
a 180-month amortization schedule, final maturities in 2001, 8.37% 3,214 3,389
Term loan payable in equal monthly principal installments, final
maturity in 2001, prime rate plus 0.25% and LIBOR plus 2.75% at September
30, 1997, prime rate plus 0.75% and LIBOR plus 3.00% at
December 31, 1996 1,809 1,560
Term loans payable in equal monthly principal installments, final
maturities in 2002, LIBOR plus 2.75% 3,517 -
Term loan payable in equal monthly principal installments based on
a 180-month amortization schedule, final maturity in 2002, 9.37% 1,538 -
Term loan payable in equal monthly principal installments based on
a 180-month amortization schedule, final maturity in 2002, 9% 2,983 -
Term loans payable in equal monthly principal installments, final
maturities in 2002 and 2003, prime rate plus 1% and LIBOR plus
3.25% - 17,626(1)
Term loan, interest only until the earlier of March 1, 1998, or the first
day of the second month following the date on which the loan amount
outstanding equals $950,000, then payable in 60 equal monthly
installments, final maturity in 2003, prime rate plus 0.75% 468 -
Term loans payable in equal monthly principal installments, final
maturity in 2003, prime rate plus 0.25% and LIBOR plus 2.75% at September
30, 1997, prime rate plus 1% and LIBOR plus 3.25% at
December 31, 1996 643(2) 734(2)
Term loans payable in equal monthly principal installments, final
maturity in 2004, prime rate plus 0.25% and LIBOR plus 2.75% 23,483(2) -
------- --------
Total long-term secured debt 39,375 37,068
------- --------
</TABLE>
(continued on next page)
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<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
--------------- ---------------
<S> <C> <C>
Long-term unsecured debt:
Revolving line of credit, prime rate plus 0.25% and LIBOR plus 2.75% $ 7,500(1) $ -
12.75% senior subordinated notes, due 2000 31,720 31,717
14% junior subordinated convertible notes, due 2000, convertible
into 440,000 shares of common stock 1,000 1,000
14% junior subordinated nonconvertible notes, due 2000 347 347
Other unsecured obligations 213 241
------- --------
Total long-term unsecured debt 40,780 33,305
------- --------
Total long-term debt 80,155 70,373
Less current portion 6,002 5,225
------- --------
Total long-term debt, excluding current portion $ 74,153 $ 65,148
======= ========
</TABLE>
(1) Refinanced under long-term agreements before the consolidated financial
statements for the respective periods were issued. Amounts classified as
secured or unsecured and amounts reflected in current portion are based
upon the terms of the new borrowings.
(2) Maturity date can be accelerated by the lender if the Company's revolving
line of credit expires prior to the stated maturity date of the term loan.
The loans outstanding under the Company's revolving line of credit and
the secured term loans listed above are collateralized by substantially all of
the assets of the Company, including trade receivables, inventories, equipment,
certain real estate, and the stock of one of the Company's subsidiaries.
RESTRICTIVE COVENANTS
Certain of the Company's financing arrangements contain covenants 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 the incurrence 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.
NOTE 5 -- PROVISION FOR INCOME TAXES
At September 30, 1997, and December 31, 1996, the excess of the
Company's deferred tax assets over its deferred tax liabilities was
substantially offset by a valuation allowance. There was no material change in
net deferred taxes during the first nine months of 1997.
The income tax provisions recorded during the three-month and nine-month
periods ended September 30, 1997, were primarily attributable to alternative
minimum taxes and to the reversal of a portion of a credit resulting from the
recognition in 1996 of the projected utilization of federal operating loss
carryforwards in 1997.
-8-
<PAGE> 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 6 -- NET INCOME OR NET LOSS PER COMMON SHARE
The calculations of primary and fully diluted net loss per common share
for the three months ended September 30, 1997 and 1996, and the nine months
ended September 30, 1997 and 1996, are set forth below (in thousands, except per
share amounts). Because the pro forma conversion of the Company's 14% junior
subordinated convertible notes was calculated to be antidilutive for each of the
periods shown, the reported fully diluted net loss per common share for all
periods equals the primary net loss per common share.
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30 SEPTEMBER 30
------------ ------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
PRIMARY NET LOSS PER COMMON SHARE:
Weighted average common shares 4,263 4,263 4,263 4,245
======= ====== ======= ======
Net loss $ (1,011) $ (328) $ (1,211) $ (26)
Preferred stock dividends (9) (11) (28) (31)
Allocated portion of excess of redemption value over par
value of preferred stock to be redeemed during year (11) (11) (34) (34)
------- ------ ------- ------
Primary net loss attributable to common stockholders $ (1,031) $ (350) $ (1,273) $ (91)
======= ====== ======= ======
Primary net loss per common share $ (0.24) $ (0.08) $ (0.30) $ (0.02)
======= ====== ======= ======
FULLY DILUTED NET LOSS PER COMMON SHARE:
Weighted average common shares outstanding during period 4,263 4,263 4,263 4,263
Pro forma conversion of 14% junior subordinated convertible
notes 440 440 440 440
------- ------ ------- ------
Weighted average common and common equivalent shares 4,703 4,703 4,703 4,703
======= ====== ======= ======
Net loss $ (1,011) $ (328) $ (1,211) $ (26)
Preferred stock dividends (9) (11) (28) (31)
Allocated portion of excess of redemption value over par
value of preferred stock to be redeemed during year (11) (11) (34) (34)
Pro forma elimination of interest expense on the 14% junior
subordinated convertible notes, net of applicable income
taxes 26 27 78 81
------- ------ ------- ------
Fully diluted net loss attributable to common stockholders $ (1,005) $ (323) $ (1,195) $ (10)
======= ====== ======= ======
Fully diluted net loss per common share $ (0.24) $ (0.08) $ (0.30) $ (0.02)
======= ====== ======= ======
</TABLE>
In February 1997, the Financial Accounting Standards Board issued
"Financial Accounting Standard No. 128, Earnings per Share" ("FAS 128"), which
is effective for fiscal periods ending after December 15,
-9-
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1997. Earlier application is not permitted. FAS 128 will require the
presentation of basic and diluted earnings per share. Basic earnings per share
is based on the weighted-average number of common shares outstanding during each
period, and diluted earnings per share includes the dilutive effect of stock
options, convertible securities, and other potentially dilutive securities. FAS
128 will require companies to report all earnings per share amounts using the
revised method of calculation. The Company believes that the adoption of FAS 128
will not affect the earnings per share data reported by the Company during 1996
and 1997.
NOTE 7 -- 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, including actions naming the Company 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 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. 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 currently believes that the outcome of
such actions would not have a material adverse effect upon its financial
position.
NOTE 8 -- SUBSEQUENT EVENT
On October 29, 1997, the Company entered into a term loan financing
pursuant to which it issued $7,500,000 principal amount of its 10.5% senior
unsecured notes to an institutional investor. The notes mature in their entirety
on February 1, 2000. Proceeds from the financing were used to refinance loans
outstanding under the Company's secured revolving line of credit.
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<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Various statements in this Item 2 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 price reductions for the
Company's products as a result of competition, unanticipated operating results
and cash flows, increases or decreases in capital expenditures, changes in
economic conditions, changes in the competitive environment, changes in the
capital markets, labor interruptions at the Company or at its customers, and a
number of other factors. Because the Company operates with substantial financial
leverage and limited liquidity, the impact of any negative event may have a
greater adverse effect upon the Company than if the Company operated with lower
financial leverage and greater liquidity. 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 -- THIRD QUARTER OF 1997 VERSUS THIRD QUARTER OF 1996
The Company manufactures, to customer specifications, component parts
through two business segments, the Rubber Group and the Metals Group.
RUBBER GROUP
The Rubber Group manufactures silicone and organic rubber components.
The Rubber Group consists of four operating companies: Lexington Connector
Seals, Lexington Insulators, Lexington Medical, and Lexington Technologies.
During the third quarters of 1997 and 1996, net sales of automotive components
represented 89.8% and 87.9%, respectively, of the Rubber Group's total net
sales. Any material reduction in the level of activity in the automotive
industry may have a material adverse effect on the results of operations of the
Rubber Group and the Company.
The following table sets forth the operating results of the Rubber Group
for the third quarters of 1997 and 1996 (dollar amounts in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30
----------------------------------------
1997 1996
----------------- ----------------
<S> <C> <C> <C> <C>
Net sales $ 18,885 100.0% $ 18,844 100.0%
Cost of sales 15,461 81.9 15,115 80.2
-------- ------ ------- ------
Gross profit 3,424 18.1 3,729 19.8
Selling and administrative expenses 1,305 6.9 1,225 6.5
-------- ------ ------- ------
Income from operations $ 2,119 11.2% $ 2,504 13.3%
======== ====== ======= ======
</TABLE>
During the third quarter of 1997, net sales of the Rubber Group
increased by $41,000, or less than 1%, compared to the third quarter of 1996.
While net sales of insulators for automotive wiring systems and net sales of
tooling increased, net sales of connector seals for automotive wiring systems
and medical components decreased. The small increase in net sales also reflected
the effect of price reductions on certain automotive components.
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<PAGE> 13
During the third quarter of 1997, income from operations decreased by
$385,000, or 15.4%, compared to the third quarter of 1996. Cost of sales as a
percentage of net sales increased to 81.9% during the third quarter of 1997. The
increase in cost of sales as a percentage of net sales resulted, in part, from
(i) increased depreciation and amortization, which totaled $1,875,000, or 9.9%
of net sales, during the third quarter of 1997, compared to $1,488,000, or 7.9%
of net sales, during the third quarter of 1996, (ii) underabsorption of fixed
overhead caused by reduced net sales at Lexington Connector Seals, (iii)
increased indirect labor expense resulting primarily from continuing start-up
expenses incurred at Lexington Technologies, and (iv) increased sales of
tooling, which generally have lower margins than sales of components. Selling
and administrative expenses as a percentage of net sales increased during the
third quarter of 1997 compared to the third quarter of 1996 primarily because of
costs incurred in connection with the installation of new information systems at
Lexington Insulators.
METALS GROUP
The Metals Group manufactures aluminum, magnesium, and zinc die castings
and machines aluminum, brass, steel, and stainless steel components. The Metals
Group consists of three operating companies: Lexington Die Casting, Lexington
Machining, and Lexington Safety Components. During the third quarters of 1997
and 1996, net sales of automotive components represented 41.8% and 41.5%,
respectively, of the Metals Group's total net sales.
The following table sets forth the operating results of the Metals Group
for the third quarters of 1997 and 1996 (dollar amounts in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30
----------------------------------------
1997 1996
----------------- ----------------
<S> <C> <C> <C> <C>
Net sales $ 9,457 100.0% $ 10,443 100.0%
Cost of sales 8,710 92.1 9,186 88.0
-------- ------ ------- ------
Gross profit 747 7.9 1,257 12.0
Selling and administrative expenses 941 10.0 1,317 12.6
-------- ------ ------- ------
Loss from operations $ (194) (2.1)% $ (60) (0.6)%
======== ====== ======= ======
</TABLE>
During the third quarter of 1997, net sales of the Metals Group
decreased by $986,000, or 9.4%, compared to the third quarter of 1996. This
reduction resulted primarily from lower net sales of a variety of components at
Lexington Machining.
During the third quarter of 1997, the Metals Group incurred a loss from
operations of $194,000, compared to a loss of $60,000 during the third quarter
of 1996. While material costs as a percentage of net sales decreased during the
third quarter of 1997, manufacturing overhead as a percentage of net sales
increased primarily because of (i) underabsorption of fixed overhead caused by
reduced net sales at Lexington Machining, (ii) start-up expenses related to the
production of new airbag components and the installation of new metal machining
equipment at Lexington Safety Components, (iii) the write-down of equipment held
for sale, and (iv) increased depreciation, which totaled $779,000, or 8.2% of
net sales, during the third quarter of 1997, compared to $629,000, or 6.0% of
net sales, during the third quarter of 1996. Reduced selling and administrative
expenses resulted primarily from a reduction in commissions paid to sales
representatives who were terminated during the last quarter of 1996 and the
first quarter of 1997.
During 1996, the Company commenced a program to try to increase net
sales, profitability, and operating cash flow of the Metals Group. Actions to be
taken included (i) hiring of new technical and
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<PAGE> 14
professional staff with the goal of improving the Metals Group's manufacturing
processes, quality systems, and administrative capabilities, (ii) formation of
Lexington Safety Components as a separate business unit with its own management
team, (iii) elimination of sales representatives and hiring of additional
in-house sales personnel, (iv) purchases of additional equipment and
construction of an additional 44,000 square feet of manufacturing and office
space at Lexington Safety Components, (v) reduction of low-volume, unprofitable
production, (vi) focus on higher-volume business in target markets, and (vii)
enhancement of quality systems at a number of facilities with the objective of
obtaining QS 9000 certification in 1997. The management of the Company believes
that certain of these actions have had, and may continue to have, an adverse
affect on the profitability of the Company in the short term.
CORPORATE OFFICE
Corporate office expenses, which are consolidated with selling and
administrative expenses of the Rubber Group and the Metals Group in the
Company's consolidated financial statements, totaled $541,000 and $482,000
during the third quarters of 1997 and 1996, respectively.
INTEREST EXPENSE
During the third quarters of 1997 and 1996, interest expense totaled
$2,275,000 and $2,177,000, respectively. The increase during the third quarter
of 1997 was caused primarily by an increase in average borrowings outstanding.
PROVISION FOR INCOME TAXES
At September 30, 1997, and December 31, 1996, the excess of the
Company's deferred tax assets over its deferred tax liabilities was
substantially offset by a valuation allowance. There was no material change in
net deferred taxes during the third quarter of 1997.
The income tax provision recorded during the three months ended
September 30, 1997, was primarily attributable to alternative minimum taxes and
to the reversal of a portion of a credit resulting from the recognition in 1996
of the projected utilization of federal operating loss carryforwards in 1997.
RESULTS OF OPERATIONS -- FIRST NINE MONTHS OF 1997 VERSUS FIRST NINE MONTHS OF
1996
RUBBER GROUP
During the first nine months of 1997 and 1996, net sales of automotive
components represented 90.4% and 88.4%, respectively, of the Rubber Group's
total net sales.
The following table sets forth the operating results of the Rubber Group
for the first nine months of 1997 and 1996 (dollar amounts in thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30
----------------------------------------
1997 1996
----------------- ----------------
<S> <C> <C> <C> <C>
Net sales $ 59,674 100.0% $ 55,770 100.0%
Cost of sales 47,395 79.4 44,174 79.2
-------- ------ ------- ------
Gross profit 12,279 20.6 11,596 20.8
Selling and administrative expenses 3,749 6.3 3,531 6.3
-------- ------ ------- ------
Income from operations $ 8,530 14.3% $ 8,065 14.5%
======== ====== ======= ======
</TABLE>
-13-
<PAGE> 15
During the first nine months of 1997, net sales of the Rubber Group
increased by $3,904,000, or 7.0%, compared to the first nine months of 1996.
This increase was primarily due to increased net sales of connector seals and
insulators for automotive wiring systems and increased net sales of tooling,
offset, in part, by reduced net sales of medical components and price reductions
on certain automotive components.
During the first nine months of 1997, income from operations totaled
$8,530,000, an increase of $465,000, or 5.8%, compared to the first nine months
of 1996. Cost of sales as a percentage of net sales increased during the first
nine months of 1997 primarily because of (i) increased depreciation and
amortization, which totaled $5,244,000, or 8.8% of net sales, during the first
nine months of 1997, compared to $4,242,000, or 7.6% of net sales, during the
first nine months of 1996, and (ii) increased indirect labor expense resulting
primarily from (a) the hiring of technical and supervisory personnel in
conjunction with the start-up of production of a new style of connector seal and
(b) continuing start-up expenses incurred at Lexington Technologies. Selling and
administrative expenses as a percentage of net sales were unchanged during the
first nine months of 1997 compared to the first nine months of 1996.
METALS GROUP
During the first nine months of 1997 and 1996, net sales of automotive
components represented 40.4% and 34.0%, respectively, of the Metals Group's
total net sales.
The following table sets forth the operating results of the Metals Group
for the first nine months of 1997 and 1996 (dollar amounts in thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30
----------------------------------------
1997 1996
----------------- ----------------
<S> <C> <C> <C> <C>
Net sales $ 27,673 100.0% $ 29,496 100.0%
Cost of sales 25,564 92.4 26,038 88.3
-------- ------ ------- ------
Gross profit 2,109 7.6 3,458 11.7
Selling and administrative expenses 3,251 11.7 3,315 11.2
-------- ------ ------- ------
Income/(loss) from operations $ (1,142) (4.1)% $ 143 0.5%
======== ====== ======= ======
</TABLE>
During the first nine months of 1997, net sales of the Metals Group
decreased by $1,823,000, or 6.2%, compared to the first nine months of 1996.
This reduction resulted primarily from lower net sales of a variety of
components at Lexington Machining and Lexington Die Casting, offset, in part, by
an increase in net sales of airbag components by Lexington Safety Components.
During the first nine months of 1997, the Metals Group incurred a loss
from operations of $1,142,000, compared to income from operations of $143,000
during the first nine months of 1996. While material and direct labor costs as a
percentage of net sales decreased during the first nine months of 1997,
manufacturing overhead as a percentage of net sales increased primarily because
of (i) underabsorption of fixed overhead caused by reduced sales at Lexington
Machining and Lexington Die Casting, (ii) start-up expenses related to the
production of new airbag components and the installation of new metal machining
equipment at Lexington Safety Components, (iii) increased depreciation, which
totaled $2,080,000, or 7.5% of net sales, during the first nine months of 1997,
compared to $1,816,000, or 6.2% of net sales, during the first nine months of
1996, and (iv) increased indirect labor costs resulting, in part, from the
hiring of additional technical and professional staff. Reduced selling and
administrative expenses resulted primarily from a reduction of commissions paid
to sales representatives who were terminated during the last quarter of 1996
-14-
<PAGE> 16
and the first quarter of 1997, offset, in part, by increased personnel expense
and the accrual of certain litigation expenses.
CORPORATE OFFICE
Corporate office expenses, which are consolidated with selling and
administrative expenses of the Rubber Group and the Metals Group in the
Company's consolidated financial statements, totaled $1,632,000 and $1,621,000
during the first nine months of 1997 and 1996, respectively.
INTEREST EXPENSE
During the first nine months of 1997 and 1996, interest expense totaled
$6,704,000 and $6,240,000, respectively. The increase during the first nine
months of 1997 was caused primarily by an increase in average borrowings
outstanding.
PROVISION FOR INCOME TAXES
At September 30, 1997, and December 31, 1996, the excess of the
Company's deferred tax assets over its deferred tax liabilities was
substantially offset by a valuation allowance. There was no material change in
net deferred taxes during the first nine months of 1997.
The income tax provision recorded during the first nine months of 1997
was primarily attributable to alternative minimum taxes and the reversal of a
portion of a credit resulting from the recognition in 1996 of the projected
utilization of federal operating loss carryforwards in 1997.
LIQUIDITY AND CAPITAL RESOURCES
OPERATING ACTIVITIES
During the first nine months of 1997, the operating activities of the
Company provided $6,616,000 of cash.
From December 31, 1996, to September 30, 1997, trade receivables
decreased by $1,700,000 primarily because in January 1997 the Company received a
payment of $1,612,000 that was due in December 1996 from its largest customer.
From December 31, 1996, to September 30, 1997, trade accounts payable
decreased by $1,080,000. Trade accounts payable related to the purchase of
plant, equipment, and customer-owned tooling decreased by $2,600,000 while all
other trade accounts payable increased by $1,520,000.
INVESTING ACTIVITIES
During the first nine months of 1997, the investing activities of the
Company used $12,595,000 of cash, primarily for capital expenditures. Capital
expenditures attributable to the Rubber Group and the Metals Group totaled
$5,361,000 and $6,441,000, respectively. The Company presently expects that
capital expenditures will total approximately $16,200,000 during 1997, including
$12,500,000 for equipment and $3,700,000 for buildings. At September 30, 1997,
the Company had commitments outstanding for capital expenditures totaling
approximately $3,600,000.
-15-
<PAGE> 17
FINANCING ACTIVITIES
During the first nine months of 1997, the financing activities of the
Company provided $5,963,000 of cash.
During the first nine months of 1997, the Company obtained new term
loans in the aggregate amount of $43,492,000. Proceeds from the new term loans
financed $2,473,000 of capital expenditures and refinanced $22,790,000 of
existing term loans and $18,229,000 of loans outstanding under the revolving
line of credit. Certain information concerning new borrowings completed during
the third quarter of 1997 is set forth below.
- In July 1997, the Company borrowed the remaining $457,000 available
under a $3,000,000 construction line of credit for its Casa Grande,
Arizona, facility. In August 1997, the borrowings under the
construction line of credit converted to a term loan payable in 59
equal monthly principal installments of $17,000 with a final payment
of $2,017,000 due in 2002. At the time of conversion, the rate of
interest on the loan changed from prime rate plus 0.75% to a fixed
rate of 9%.
- In August 1997, the Company borrowed $1,117,000 under an equipment
line of credit to purchase equipment for its Casa Grande, Arizona,
facility. The borrowings financed capital expenditures of $713,000 and
refinanced amounts outstanding under the Company's revolving line of
credit totaling $404,000, which had been used to provide partial
interim financing for the purchase of the equipment pending completion
of the term loan financing. The new term loan bears interest at LIBOR
plus 2.75% and is payable in 60 equal monthly principal installments
of $19,000.
- In September 1997, the Company borrowed $468,000 under an equipment
line of credit to purchase equipment for its North Canton, Ohio,
facility. The borrowings refinanced amounts outstanding under the
Company's revolving line of credit totaling $468,000, which had been
used to provide interim financing for the purchase of the equipment
pending completion of the term loan financing. The new borrowings bear
interest at prime rate plus 0.75%. The first of 60 equal monthly
principal payments is scheduled to be made on the earlier of March 1,
1998, or the first day of the second month following the date on which
the remaining $482,000 of remaining availability is borrowed under the
equipment line of credit.
From December 31, 1996, to September 30, 1997, borrowings under the
Company's revolving line of credit decreased by $2,786,000 primarily because the
Company refinanced loans outstanding under the revolving line of credit with
funds obtained from new term loans. At September 30, 1997, and December 31,
1996, $7,500,000 and $6,856,000, respectively, of loans outstanding under the
revolving line of credit were classified as long-term debt because they were
refinanced under long-term agreements before the consolidated financial
statements for the respective period were issued.
On October 29, 1997, the Company entered into a term loan financing
pursuant to which it issued $7,500,000 principal amount of its 10.5% senior
unsecured notes to an institutional investor. The notes mature in their entirety
on February 1, 2000. Proceeds from the financing were used to refinance loans
outstanding under the Company's secured revolving line of credit.
LIQUIDITY
The Company finances its operations with cash from operating activities
and a variety of financing arrangements, including term loans and loans under
the Company's revolving line of credit. The ability of
-16-
<PAGE> 18
the Company to borrow under its revolving line of credit is subject to, among
other things, covenant compliance and certain availability formulas based on the
levels of trade receivables and inventories of the Company.
The Company operates with substantial financial leverage and limited
liquidity. As a result of increased borrowings during the first nine months of
1997, aggregate indebtedness of the Company, excluding trade accounts payable,
increased by $6,352,000 to $84,051,000. During 1997, interest and principal
payments are projected to total approximately $8,700,000 and $5,600,000,
respectively.
The Company had a net working capital deficit of $1,637,000 at September
30, 1997. Loans outstanding under the revolving line of credit classified as
short-term debt at September 30, 1997, totaled $3,896,000. Although the
expiration date of the revolving line of credit is April 1, 2000, these loans
are classified as current liabilities 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 agreement, and the lender
has the ability to modify certain terms of the revolving line of credit without
the prior approval of the Company.
At November 10, 1997, availability under the Company's revolving line of
credit totaled $8,921,000 before deducting outstanding checks of approximately
$2,783,000. The Company currently has equipment lines of credit in the aggregate
amount of $6,247,000 that can be used to finance a portion of the cost of
certain types of future equipment purchases.
Although no assurance can be given, the Company currently believes that
cash flows from operations, borrowings available to the Company under existing
financing agreements, and additional borrowings that the Company believes it
will be able to obtain when required should be adequate to meet its projected
working capital and debt service requirements and fund capital expenditures
currently anticipated by the Company for the remainder of 1997 and for 1998. If
cash flows from operations or availability under existing or new financing
agreements fall below expectations, the Company may be forced to delay planned
capital expenditures, reduce operating expenses, and/or extend trade accounts
payable balances beyond terms that the Company believes are customary in the
industries in which it operates. Any such actions could have an adverse effect
upon the Company.
On February 1, 2000, $31,720,000 principal amount of the Company's
12.75% senior subordinated notes, $7,500,000 principal amount of its 10.5%
senior unsecured notes, and $1,347,000 principal amount of its 14% junior
unsecured notes mature. Although the Company currently believes that it has or
will have the ability to refinance these obligations on or before their due
date, there are many factors that will affect the Company's ability to satisfy
its payment obligations at maturity or to consummate a refinancing of such
obligations. Accordingly, there can be no assurance that the Company will be
successful in satisfying or refinancing such payment obligations.
Certain of the Company's financing arrangements, which are secured by
substantially all of the Company's assets and the stock of one of its
subsidiaries, contain covenants 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 the incurrence
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.
-17-
<PAGE> 19
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 the size, terms, and other aspects of such acquisitions, the
Company may be required to obtain additional financing and, in some cases, the
consents of its existing lenders. The Company's ability to effect acquisitions
may be dependent upon its ability to obtain such financing and, to the extent
applicable, consents.
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, including actions naming the Company 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 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; 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 currently believes that the outcome of
such actions would not have a material adverse effect upon its financial
position.
In October 1996, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued "Statement of Position
No. 96-1, Environmental Remediation Liabilities" ("SOP 96-1"), which clarifies
the existing authoritative guidance on loss contingencies that apply in
determining environmental liabilities. Adoption of SOP 96-1 during the first
quarter of 1997 by the Company was not material to the Company's results of
operations.
FINANCIAL ACCOUNTING STANDARD NO. 128, EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued
"Financial Accounting Standard No. 128, Earnings per Share" ("FAS 128"), which
is effective for fiscal periods ending after December 15, 1997. Earlier
application is not permitted. FAS 128 requires the presentation of basic and
diluted earnings per share. Basic earnings per share is based on the
weighted-average number of common shares outstanding during each period, and
diluted earnings per share includes the dilutive effect of stock options,
convertible securities, and other potentially dilutive securities. Upon
adoption, FAS 128 requires the Company to restate all previously reported
earnings per share amounts. The Company does not believe that the recalculation
of earnings per share data will have any impact on the reported earnings per
share data reported during 1996 or 1997.
-18-
<PAGE> 20
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
The following exhibits are filed herewith:
10-1 Promissory Note dated August 29, 1997, from Lexington
Precision Corporation to The CIT Group/Equipment Financing,
Inc.
10-2 Note Purchase Agreement dated October 27, 1997, between
Lexington Precision Corporation and Nomura Holding America,
Inc.
10-3 10.5% Senior Unsecured Note due February 1, 2000, from
Lexington Precision Corporation to Nomura Holding America,
Inc.
27-1 Financial Data Schedule
(b) REPORTS OF FORM 8-K
No reports on Form 8-K were filed with the Securities and Exchange
Commission during the third quarter of 1997.
-19-
<PAGE> 21
LEXINGTON PRECISION CORPORATION
FORM 10-Q
SEPTEMBER 30, 1997
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 12, 1997 By: /s/ Michael A. Lubin
- ----------------- -------------------------
Date Michael A. Lubin
Chairman of the Board
November 12, 1997 By: /s/ Warren Delano
- ----------------- ------------------
Date Warren Delano
President
November 12, 1997 By: /s/ Dennis J. Welhouse
- ----------------- -------------------------
Date Dennis J. Welhouse
Senior Vice President and
Chief Financial Officer
-20-
<PAGE> 1
Exhibit 10.1
PROMISSORY NOTE
New York, New York
$1,116,949.58 August 27, 1997
--
FOR VALUE RECEIVED, LEXINGTON PRECISION CORPORATION ("Debtor") promises
to pay to the order of THE CIT GROUP/EQUIPMENT FINANCING, INC. ("CIT"), at such
address as CIT may designate, in lawful money of the United States, the
principal sum of ONE MILLION ONE HUNDRED SIXTEEN THOUSAND NINE HUNDRED FORTY
NINE AND 58/100THS DOLLARS ($1,116,949.58) in sixty (60) consecutive monthly
installments of principal in the amount of $18,615.83. The first payment shall
be due on October 1, 1997, and the following installments shall be due on the
same day of each month thereafter until payment in full of this Note. Debtor
shall pay interest together with each such installment of principal, in like
money, from the date hereof until payment in full, on the unpaid principal
balance hereof at an interest rate per annum equal to two and seventy-five
hundredths percent (2.75) above the LIBOR Rate. Each payment shall be applied
first to the payment of any unpaid interest on the principal sum and then to
payment of principal. Interest shall be calculated on the basis of a 360-day
year and actual number of days elapsed. Any amount not paid when due under this
Note shall bear late charges thereon, calculated at the Late Charge Rate, from
the due date thereof until such amount shall be paid in full. Any payment
received after the maturity of any installment of principal shall be applied
first to the payment of unpaid late charges, second to the payment of any unpaid
interest on said principal, and third to the payment of principal.
This Note is one of the Notes referred to in the Loan and Security
Agreement dated as of March 19, 1997 between Debtor and CIT (herein, as the same
may from time to time be amended, supplemented or otherwise modified, called the
"Agreement"), is secured as provided in the Agreement, and is subject to
prepayment only as provided therein, and the holder hereof is entitled to the
benefits thereof.
Terms defined in the Agreement shall have the same meaning when used in
the Note, unless the context shall otherwise require.
Except as provided in Section 6 of the Agreement, Debtor hereby waives
presentment, demand of payment, notice of dishonor, and any and all other
notices or demands in connection with the delivery, acceptance, performance,
default or enforcement of this Note and hereby consents to any extensions of
time, renewals, releases of any party to this Note, waivers or modifications
that may be granted or consented to by the holder of this Note.
Upon the occurrence and during the continuance of any one or more of
the Events of Default specified in the Agreement, the amounts then remaining
unpaid on this Note, together with any interest accrued, may be declared to be
(or, with respect to certain Events of Default, automatically shall become)
immediately due and payable as provided therein.
In the event that any holder shall institute any action for the
enforcement or the collection of the Note, there shall be immediately due and
payable, in addition to the unpaid balance hereof, all late charges and all
reasonable costs and expenses of such action, including reasonable attorneys'
fees. In accordance with the provisions of the Agreement, Debtor and CIT waive
trial by jury in any litigation relating to or in connection with this Note in
which they shall be adverse parties, and Debtor hereby waives the right to
interpose any setoff, counterclaim or defense of any nature or description
whatsoever, but Debtor shall have the right to assert in an
Page 1 of 2
<PAGE> 2
independent action against CIT any such defense, offset or counterclaim
(including any compulsory counterclaim) which it may have which has not
otherwise been waived pursuant to the Agreement.
Debtor agrees that its liabilities hereunder are absolute and
unconditional without regard to the liability of any other party, and that no
delay on the part of the holder hereof in exercising any power or right
hereunder shall operate a waiver thereof; nor shall any single or partial
exercise of any power or right hereunder preclude other or further exercise
thereof or the exercise of any other power or right.
If at any time this transaction would be usurious under applicable law,
then regardless of any provision contained in the Agreement, in this Note or in
any other agreement made in connection with this transaction, it is agreed that
(a) the total of all consideration with constitutes interest under applicable
law that is contracted for, charged or received upon the Agreement, this Note or
any such other agreement shall under no circumstances exceed the maximum rate of
interest authorized by applicable law and any excess shall be credited to Debtor
and (b) if CIT elects to accelerate the maturity of, or if CIT permits Debtor to
prepay the indebtedness described in, this Note, any amounts which because of
such action would constitute interest may never include more than the maximum
rate of interest authorized by applicable law and any excess interest, if any,
shall be credited to Debtor automatically as of the date of acceleration or
prepayment.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK.
LEXINGTON PRECISION CORPORATION
By: Warren Delano
-------------------------------
Page 2 of 2
<PAGE> 1
Exhibit 10.2
----------
NOTE PURCHASE AGREEMENT
DATED AS OF OCTOBER 27, 1997
BETWEEN
LEXINGTON PRECISION CORPORATION
and
NOMURA HOLDING AMERICA, INC.
----------
<PAGE> 2
TABLE OF CONTENTS
-----------------
Page
SECTION 1
Purchase and Sale of Notes
1.1 Description of Transaction.......................................... 1
1.2 Purchase and Sale of Notes.......................................... 1
SECTION 2
Closing Date; Delivery
2.1 Closing Date........................................................ 1
2.2 Transactions at Closing; Delivery................................... 2
SECTION 3
Representations and Warranties of the Company
3.1 Organization and Standing; Certificate of Incorporation and By-laws. 2
3.2 Corporate Power..................................................... 2
3.3 Subsidiaries........................................................ 2
3.4 Authorization....................................................... 3
3.5 Compliance with Other Instruments................................... 3
3.6 Litigation, etc..................................................... 3
3.7 Governmental Consent, etc........................................... 3
3.8 Disclosure.......................................................... 4
3.9 Financial Condition................................................. 4
3.10 No Change........................................................... 4
3.11 Taxes............................................................... 4
3.12 Compliance with ERISA............................................... 5
3.13 Private Sale........................................................ 5
3.14 Title to Properties................................................. 5
3.15 Labor Relations..................................................... 6
3.16 Insurance........................................................... 6
3.17 Investment Company Act.............................................. 6
3.18 Existing Indebtedness............................................... 6
3.19 Senior Debt......................................................... 6
i
<PAGE> 3
SECTION 4
Representations and Warranties of Purchaser
4.1 Investment.......................................................... 6
4.2 Experience and Information ........................................ 7
4.3 Rule 144............................................................ 7
4.4 Additional Representations.......................................... 8
SECTION 5
Transactions at Closing
5.1 Conditions to Obligations of Purchaser............................... 8
5.2 Conditions to Obligations of the Company............................. 9
SECTION 6
Covenants of the Company
6.1 Basic Financial Information......................................... 10
6.2 Additional Information and Rights................................... 11
6.3 Obligations Upon Merger or Consolidation............................ 12
SECTION 7
Restrictions on Transferability of Securities;
Compliance with Securities Act of 1933
7.1 Restrictions on Transferability..................................... 12
7.2 Restrictive Legend.................................................. 12
7.3 Notice of Proposed Transfers........................................ 13
SECTION 8
Miscellaneous
8.1 Governing Law; Consent to Forum..................................... 13
8.2 Survival............................................................ 14
8.3 Successors and Assigns.............................................. 14
8.4 Entire Agreement; Amendment......................................... 14
8.5 Notices, etc........................................................ 14
8.6 Delay or Omission................................................... 15
8.7 Brokers, etc........................................................ 15
ii
<PAGE> 4
8.8 Information Confidential............................................ 15
8.9 Expenses............................................................ 16
8.10 Indemnification..................................................... 16
8.11 Titles.............................................................. 16
8.12 Severability........................................................ 16
8.13 Interpretation...................................................... 16
8.14 Counterparts........................................................ 17
8.15 Schedules........................................................... 17
SCHEDULE 1 Form of Note....................................... 19
SCHEDULE 2 List of Subsidiaries and Investments............... 20
SCHEDULE 3 Pending or Threatened Legal Actions or
Proceedings........................................ 21
SCHEDULE 4 Changes............................................ 22
SCHEDULE 5 Certain Liens...................................... 23
SCHEDULE 6 Labor Relations.................................... 24
SCHEDULE 7 Existing Indebtedness.............................. 25
SCHEDULE 8 Form of Opinion of Counsel to the Company.......... 26
iii
<PAGE> 5
NOTE PURCHASE AGREEMENT
-----------------------
THIS NOTE PURCHASE AGREEMENT is made as of the 27th day of October,
1997 by and between Lexington Precision Corporation, a Delaware corporation (the
"COMPANY"), and Nomura Holding America, Inc., a Delaware corporation
("PURCHASER").
WHEREAS, the Company wishes to sell and Purchaser wishes to buy certain
securities of the Company as described in and subject to the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and for other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto, intending to be legally
bound hereby, agree as follows:
SECTION 1
Purchase and Sale of Notes
--------------------------
1.1 DESCRIPTION OF TRANSACTION. Purchaser proposes to purchase from the
Company, and the Company proposes to sell to Purchaser, $7,500,000 aggregate
principal amount of the Company's 10 1/2% Senior Unsecured Notes due February 1,
2000 (the "NOTES") at the Closing provided for in Section 2.1 for a purchase
price of $7,500,000.00 (the "PURCHASE PRICE"). The Notes shall be issued in
substantially the form annexed hereto as SCHEDULE 1.
1.2 PURCHASE AND SALE OF NOTES. Subject to the terms and conditions
hereof, Purchaser shall purchase from the Company, and the Company shall sell to
Purchaser, at the Closing provided for in Section 2.1, the Notes for an amount
equal to the Purchase Price. At the Closing, and upon delivery of the Notes and
upon completion of the transactions described in Section 5 hereof, the Company
shall issue and deliver the Notes to Purchaser in consideration of the payment
by Purchaser of the Purchase Price in immediately available funds.
SECTION 2
Closing Date; Delivery
----------------------
2.1 CLOSING DATE. Subject to the terms and conditions of this
Agreement, the closing of the purchase and sale of the Notes (the "CLOSING")
shall be held on October 27, 1997 (the "CLOSING DATE") or such other date as the
parties may mutually agree upon in writing.
1
<PAGE> 6
2.2 TRANSACTIONS AT CLOSING; DELIVERY. At the Closing, and upon
completion of the transactions described in Section 5 hereof, the Company shall
deliver instruments in such denominations as Purchaser may request evidencing
the Notes against payment to the Company of the Purchase Price therefor in
accordance with Section 1.2 hereof. Payment of the Purchase Price shall be made
in immediately available funds to such account or accounts as may be designated
by the Company. At the Closing, the Company shall pay Nomura Holding America,
Inc. a fee in the amount of $75,000 (the "TRANSACTION FEE").
SECTION 3
Representations and Warranties of the Company
---------------------------------------------
The Company hereby represents and warrants to Purchaser as follows:
3.1 ORGANIZATION AND STANDING; CERTIFICATE OF INCORPORATION AND
BY-LAWS. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. The Company has all
requisite corporate power and authority to own and operate its properties and
assets and to carry on its business as presently conducted. The Company is
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction in which the ownership, leasing or operation of its properties
or the nature of its activities makes such qualification necessary, except where
the failure to so qualify would not have a material adverse effect on the
condition (financial or otherwise), properties, assets, business, or results of
operations of the Company. The Company has furnished to Purchaser a copy,
certified by the Secretary or an Assistant Secretary of the Company, of its
Restated Certificate of Incorporation and By-laws, as amended. Said copies are
true, correct and complete and contain all amendments thereto.
3.2 CORPORATE POWER. The Company has all requisite corporate power and
authority to execute and deliver this Agreement, and has all requisite corporate
power and authority to issue the Notes in the manner contemplated by this
Agreement and to carry out and perform its obligations hereunder.
3.3 SUBSIDIARIES. The Company does not own or control, directly or
indirectly, any interest or investment in any corporation, association or
business entity, except as set forth on SCHEDULE 2 hereto. Each of the
corporations listed on SCHEDULE 2 hereto of which the Company, as of the Closing
Date, will own at least a majority of the outstanding capital stock as indicated
on SCHEDULE 2 hereto (each, a "SUBSIDIARY" and, collectively, the
"SUBSIDIARIES"), is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation. Each
Subsidiary has all requisite corporate power and authority to own and operate
its properties and assets, and to carry on its business as presently conducted.
Each Subsidiary is qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which the ownership, leasing or operation of
its properties or the nature of its activities makes
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<PAGE> 7
such qualification necessary, except where the failure to so qualify would not
have a material adverse effect on the condition (financial or otherwise),
properties, assets, business, or results of operations of such Subsidiary.
Lexington Components, Inc., a Delaware corporation that is a Subsidiary of the
Company ("LCI"), has all requisite corporate power and authority to execute and
deliver its guarantee of the Notes (the "GUARANTEE")
3.4 AUTHORIZATION. All corporate action on the part of the Company
necessary for the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated herein, and for the issuance and
delivery of the Notes has been taken. This Agreement, is, and each of the Notes
upon issuance by the Company will be, a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms. All
corporate action on the part of LCI necessary for the execution, delivery and
performance of the Guarantee and the consummation of the transactions
contemplated therein has been taken. Upon execution thereof by LCI, the
Guarantee will be a valid and binding obligation of LCI, enforceable against LCI
in accordance with its terms.
3.5 COMPLIANCE WITH OTHER INSTRUMENTS. Neither the Company nor any of
its Subsidiaries is in violation of any term or condition of its Certificate of
Incorporation or By-laws or any law, rule or regulation applicable to it, and,
on the Closing Date, will not be in violation of or default under any term or
condition of any material mortgage, indenture, contract, agreement, lease,
license, instrument, judgment, decree or order to which it is a party or by
which it or any of its properties is bound. The execution, delivery and
performance of this Agreement by the Company, the issuance and delivery of the
Notes, the execution, delivery and performance by LCI of the Guarantee and the
consummation of the transactions contemplated hereby and thereby, will not (i)
as of the Closing Date, result in any such violation or be in conflict with or
constitute any such default under any such term or condition, or (ii) except as
expressly provided by this Agreement, result in the creation as of the Closing
Date of any mortgage, pledge, lien, encumbrance or charge upon any of the
properties or assets of the Company or any of its Subsidiaries pursuant to any
such term or condition.
3.6 LITIGATION, ETC. Except as set forth in SCHEDULE 3 annexed hereto,
there are no actions or proceedings pending or, to the knowledge of the Company,
threatened against the Company or any Subsidiary or any of their respective
properties which relate to or call into question the validity or legality of
this Agreement, the issuance and delivery of the Notes, the Guarantee or the
transactions contemplated hereby or thereby or which either individually or in
the aggregate can reasonably be expected to have a material and adverse effect
on the condition (financial or otherwise), properties, assets, business,
prospects or results of operations of the Company.
3.7 GOVERNMENTAL CONSENT, ETC. (a) Except as set forth in paragraph
3.7(b) hereof, no consent, approval, license or authorization of, or
designation, declaration, notification, registration, qualification or filing
with (each, an "APPROVAL") any governmental authority on the part of the Company
or LCI is required in connection with the valid execution, delivery and
performance of this Agreement, the issuance and delivery of the Notes, the
execution, delivery
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<PAGE> 8
and performance by LCI of the Guarantee, or the consummation of any other
transaction contemplated hereby.
(b) Any required Approval under applicable federal securities laws and
state Blue Sky laws of the issuance and delivery of the Notes or the execution
and delivery of the Guarantee has been obtained on or before the date hereof or
will have been obtained within the applicable period for obtaining such
Approval.
3.8 DISCLOSURE. Neither this Agreement, the Company's Annual Report on
Form 10-K for the year ended December 31, 1996 (the "1996 10-K") nor any of the
Company's periodic reports or forms filed with the Securities and Exchange
Commission (the "COMMISSION") after the filing of the 1996 10-K, as of the
respective dates thereof, contained any untrue statement of a material fact or
omitted to state any material fact necessary in order to make the statements
contained herein or therein not misleading in light of the circumstances under
which such statements were made. There exists no fact or circumstance which, to
the knowledge of the Company, materially and adversely affects the business,
properties or assets, or condition (financial or otherwise), prospects (other
than those facts and circumstances affecting generally any industry in which the
Company operates or the economy generally) or results of operations of the
Company, which has not been set forth in this Agreement or the Schedules hereto
or disclosed in such reports or forms filed with the Commission.
3.9 FINANCIAL CONDITION. The consolidated balance sheets of the Company
as at December 31, 1995 and December 31, 1996 and the related consolidated
statements of operations, stockholders' deficit and cash flows (together with
the notes thereto) for the fiscal years ended on such dates, certified by Ernst
& Young LLP, and the unaudited consolidated balance sheets of the Company as of
June 30, 1997 and the related unaudited consolidated statements of operations,
stockholders' deficit and cash flows for the six-month period then ended
contained in the Company's Quarterly Report on Form 10-Q for the period ended
June 30, 1997, are complete and correct and present fairly (subject, in the case
of the interim statements described above, to normal year-end adjustments) the
consolidated financial condition of the Company as at such dates, and the
consolidated results of its operations, its stockholders' deficit and its
consolidated cash flows for the fiscal periods then ended. All such consolidated
financial statements, including the related schedules and notes thereto, have
been prepared in accordance with generally accepted accounting principles
applied consistently throughout the periods involved.
3.10 NO CHANGE. Since June 30, 1997, there has been no material adverse
change in the business, operations, properties, assets, financial or other
condition (other than those changes in prospects affecting generally any
industry in which the Company operates or the economy generally) of the Company
or any Subsidiary except as set forth on SCHEDULE 4 hereto.
3.11 TAXES. The Company and each Subsidiary has filed all tax returns
which are required to be filed, and has paid all taxes, assessments and other
governmental charges levied upon it and its respective properties or assets,
income or franchises which are due and payable.
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<PAGE> 9
Federal tax liabilities for the Company and its Subsidiaries have been finally
determined by the Internal Revenue Service and satisfied, or the time for audit
has expired, for all fiscal periods through December 31, 1993 (except with
respect to net operating loss carryforwards relating to such periods). The
Company has made adequate provision consistent with past practice on its balance
sheet for the payment of all federal, state and local income taxes.
3.12 COMPLIANCE WITH ERISA. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will not
involve any prohibited transaction within the meaning of the Employee Retirement
Income Security Act of 1974, as amended, and the rules and regulations
thereunder (collectively and as from time to time in effect, the "PENSION REFORM
ACT"). Each pension or other employee benefit plan (a "PLAN") subject to the
Pension Reform Act which the Company or any Subsidiary maintains, contributes
to, or otherwise participates in (other than a multiemployer plan) is in
compliance with those provisions of the Pension Reform Act the failure to be in
compliance with which could, individually or in the aggregate, have a material
and adverse effect on the Company and its Subsidiaries (taken as a whole).
Neither the Company nor any Subsidiary has, as a result of any previous
sale of assets of the Company or any Subsidiary, any contingent withdrawal
liability under the Pension Reform Act. The Company and each Subsidiary has met
all of the minimum funding standards applicable to such Plans.
3.13 PRIVATE SALE. Based upon the representations and warranties of
Purchaser contained in Sections 4.1 through 4.4 of this Agreement, and assuming
compliance by Purchaser and any transferee thereof with the terms of this
Agreement and with the transfer restrictions set forth on the Notes, the
issuance of the Notes is exempt from the registration requirement of Section 5
of the Securities Act of 1933, as amended (the "1933 ACT")
3.14 TITLE TO PROPERTIES. To the Company's knowledge, the Company has
insurable title to all of the material real property owned by it and title to
the material personal property owned by it, all as reflected in the audited
consolidated balance sheets referred to in Section 3.9 hereof subject only to
(a) the liens and security interests, if any, listed on SCHEDULE 5 hereto or
referred to in or reflected on the financial statements (or notes thereto)
referred to in Section 3.9 hereof, (b) liens for taxes not yet due or which are
being contested in good faith and by appropriate proceedings, (c) carriers',
warehousemen's, mechanics', materialmen's, repairmen's or other like liens
arising in the ordinary course of business, (d) pledges or deposits in
connection with workmen's compensation, unemployment insurance and other social
security legislation, (e) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory obligations, surety
and appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business, and (f) easements, rights-of-way,
restrictions and other similar encumbrances incurred in the ordinary course of
business, none of which materially impair the ability of the Company or any
Subsidiary to use such property in the course of its ordinary business or
operations.
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<PAGE> 10
3.15 LABOR RELATIONS. Except as disclosed in SCHEDULE 6 hereto, there
is no material dispute or controversy with any union or other organization
representing the employees of the Company or any Subsidiary. Except as disclosed
in SCHEDULE 6 hereto, the Company is not aware of any pending union elections or
organizing activity involving any employees of the Company or any Subsidiary.
3.16 INSURANCE. The Company keeps insured, by financially sound and
reputable insurers, all of its property of a character usually insured by
entities engaged in the same or similar businesses similarly situated, against
loss or damage of the kinds and in amounts customarily insured against by such
entities and with such deductibles, self-insurance or coinsurance as is
customary for entities engaged in the same or similar businesses similarly
situated.
3.17 INVESTMENT COMPANY ACT. The Company is not an "investment company"
or a company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
3.18 EXISTING INDEBTEDNESS. SCHEDULE 7 hereto sets forth a true and
correct list of all indebtedness for borrowed money of the Company and its
Subsidiaries outstanding as of September 30, 1997. The Company has provided
Purchaser or its representatives with true and correct copies of (i) the
Indenture dated as of August 1, 1993 between the Company and IBJ Schroder Bank &
Trust Company, as Trustee, relating to the Company's 12 3/4% Senior Subordinated
Notes due February 1, 2000, (ii) the Company's Junior Subordinated Convertible
Increasing Rate Notes due May 1, 2000, and (iii) the Company's 14% Junior
Subordinated Notes due May 1, 2000 (collectively, the "SUBORDINATED DEBT
DOCUMENTS").
3.19 SENIOR DEBT. Upon the issuance thereof, the Notes shall constitute
"Senior Debt" as such term is defined in the Subordinated Debt Documents.
SECTION 4
Representations and Warranties of Purchaser
-------------------------------------------
4.1 INVESTMENT. Purchaser hereby represents and warrants to the Company
that the Notes will, on the Closing Date, be acquired for its own account, and
that it has no present intention of selling, granting participation in, or
otherwise distributing any of the Notes to be issued to it in any transaction
which would be in violation of the securities laws of the United States of
America or any state or other jurisdiction thereof, without prejudice, however,
to Purchaser' rights at all times to sell or otherwise dispose of all or any
part of such securities under a registration under 1933 Act or under an
exemption from such registration available under the 1933 Act and subject,
nevertheless, to the disposition of Purchaser' property being at all times
within its control. Purchaser acknowledges that the Notes will not, on the
Closing Date, be
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registered under the 1933 Act, on the ground that the sale provided for in this
Agreement and the issuance of securities hereunder is exempt from registration
under the 1933 Act, and that the Company's reliance on such exemption is
predicated on the representations set forth in this Section 4.
4.2 EXPERIENCE AND INFORMATION. Purchaser represents to the Company
that (a) Purchaser, by and through its officers (each of whom is experienced in
evaluating companies such as the Company), is experienced in evaluating
companies such as the Company; (b) Purchaser, by and through its officers (each
of whom has such knowledge and experience in financial and business matters as
to be capable of evaluating Purchaser's investment), has such knowledge and
experience in financial and business matters as to be capable of evaluating its
investment, and Purchaser has the ability to bear the economic risks of its
investment; (c) Purchaser, by and through its officers, has reviewed this
Agreement, including all exhibits and schedules hereto, and has received the
Company's annual reports to shareholders for fiscal years ended December 31,
1994 through 1996, and all of the Company's periodic reports and amendments
thereto and forms and amendments thereto prepared for filing with the Commission
(including, without limitation, the Company's Annual Reports on Form 10-K for
fiscal years ended December 31, 1994 through 1996, the Company's Quarterly
Reports on Form 10-Q for the periods ended March 31, 1997 and June 30, 1997, and
the Company's proxy statements prepared in connection with the Company's annual
meeting of shareholders held on May 15, 1997 and the financial statements
included in such periodic reports and forms and the financial statements
referred to in Section 3.12 hereof; and (d) Purchaser, by and through its
officers, has had, during the course of the transactions contemplated hereby and
prior to its receipt of the Notes, the opportunity to ask questions of, and has
received answers from, the Company concerning the transactions contemplated
hereby and to obtain any additional information which the Company possesses or
could acquire without unreasonable effort or expense; PROVIDED, HOWEVER, that no
such investigation by Purchaser or by its officers shall limit, diminish, or
constitute a waiver of any representation or warranty made under this Agreement
by the Company or impair any rights which Purchaser may have with respect
thereto.
4.3 RULE 144. Purchaser understands that the Notes may not be sold,
transferred, or otherwise disposed of without registration under the 1933 Act or
the availability of an exemption therefrom and that in the absence of such
registration or exemption, the Notes must be held indefinitely. In particular,
Purchaser is aware that the Notes may not be sold pursuant to Rule 144
promulgated under the 1933 Act unless all of the applicable conditions of that
Rule are met, and that the Company is making no representation that such
conditions will be met in the future. Purchaser represents that, in the absence
of an effective registration statement covering the Notes, it will sell,
transfer, or otherwise dispose of the Notes only in a manner consistent with its
representations set forth in Section 4.1.
4.4 ADDITIONAL REPRESENTATIONS. Purchaser represents that (a) it is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
execute and deliver this Agreement, to purchase the Notes and to carry out and
perform its obligations hereunder; (b) the execution, delivery and
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<PAGE> 12
performance by Purchaser of this Agreement, the purchase of the Notes and the
consummation of the transactions contemplated hereby and thereby (i) will not
result in any violation of, or conflict with, any term or condition of the
certificate of Incorporation or By-laws of Purchaser or of any material term of
any material agreement, instrument or indenture to which it is a party or by
which it or any of its assets is bound or any law, rule or regulation applicable
to it, and (ii) have been duly authorized by all necessary corporate action on
behalf of Purchaser; and (c) this Agreement has been duly authorized by and duly
executed and delivered on behalf of Purchaser and constitutes a legal, valid and
binding obligation of Purchaser enforceable against Purchaser in accordance with
its terms.
SECTION 5
Transactions at Closing
-----------------------
5.1 CONDITIONS TO OBLIGATIONS OF PURCHASER. The obligations of
Purchaser under this Agreement are, at the option of Purchaser, subject to the
fulfillment of each of the following conditions:
(a) REPRESENTATIONS, ETC. All representations and warranties
of the Company contained herein shall be true and accurate in all material
respects as of the date when made and shall be deemed to be made again on and as
of the Closing Date and shall then be true and accurate in all material
respects; and the Company shall have performed and complied in all material
respects with every covenant, agreement and condition to be performed or
complied with by the Company prior to or at the Closing Date.
(b) OFFICER'S CERTIFICATE. The Company shall have delivered to
Purchaser a certificate executed on behalf of the Company by an executive
officer of the Company dated the Closing Date, certifying to the fulfillment of
the conditions set forth in Section 5.1(a) hereof.
(c) NOTES; GUARANTEE. The Company shall have delivered the
Notes in the manner set forth in Sections 1 and 2 hereof and LCI shall have
delivered the Guarantee.
(d) OPINION OF COUNSEL. Nixon, Hargrave, Devans & Doyle LLP,
counsel to the Company, shall have delivered to Purchaser its opinion in the
form attached as SCHEDULE 8.
(e) PROCEEDINGS. No judicial or administrative proceeding
shall be pending or threatened seeking to enjoin or prevent, nor shall any order
or injunction have been issued prohibiting, consummation of any of the
transactions contemplated hereby.
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(f) CONSENTS. The Company and Purchaser shall have obtained
all necessary consents of third parties, to the execution and delivery of this
Agreement, the purchase and sale of the Notes and the consummation of the
transactions contemplated by this Agreement.
(g) TRANSACTION FEE. The Company shall have paid the
Transaction Fee to Nomura Holding America, Inc. in immediately available funds.
(h) OTHER INSTRUMENTS. The Company shall have delivered to
Purchaser such other instruments, documents and certificates as shall have been
reasonably requested by Purchaser.
5.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligations of the
Company under this Agreement are, at the option of the Company, subject to the
fulfillment of each of the following conditions:
(a) REPRESENTATIONS, ETC. All representations and warranties
of Purchaser contained herein shall be true and accurate in all material
respects as of the date when made and shall be deemed to be made again on and as
of the Closing Date and shall then be true and accurate in all material
respects; and Purchaser shall have performed and complied in all material
respects with every covenant, agreement and condition to be performed or
complied with by Purchaser prior to or at the Closing Date.
(b) OFFICER'S CERTIFICATE. Purchaser shall have delivered to
the Company a certificate executed on behalf of the Purchaser by an executive
officer of Purchaser, dated the Closing Date, certifying to the fulfillment of
the conditions set forth in Section 5.2(a) hereof.
(c) PURCHASE PRICE. Purchaser shall have paid the Purchase
Price to the Company in immediately available funds.
(d) PROCEEDINGS. No judicial or administrative proceeding
shall be pending or threatened seeking to enjoin or prevent, nor shall any order
or injunction have been issued prohibiting, consummation of any of the
transactions contemplated hereby.
(e) CONSENTS. The Company and Purchaser shall have obtained
all necessary consents of third parties to the execution and delivery of this
Agreement, the purchase and sale of the Notes and the consummation of the
transactions contemplated by this Agreement.
(f) OTHER INSTRUMENTS. Purchaser shall have delivered to the
Company such other instruments, documents and certificates as shall have been
reasonably requested by the Company.
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SECTION 6
Covenants of the Company
------------------------
The Company hereby covenants and agrees that from and after the Closing
Date so long as any of the Notes shall remain outstanding:
6.1 BASIC FINANCIAL INFORMATION. The Company will furnish the following
reports to the Holders:
(a) As soon as practicable after the end of each fiscal year, and in
any event within 100 days thereafter, consolidated balance sheets of the Company
and its Subsidiaries as of the end of such fiscal year, and consolidated
statements of operations and of cash flows of the Company and its Subsidiaries
for such year, prepared in accordance with generally accepted accounting
principles consistently applied and setting forth in each case in comparative
form the corresponding figures for the previous fiscal year, all in reasonable
detail, accompanied by a report of an independent public accounting firm of
nationally recognized standing selected by the Company;
(b) As soon as practicable after the end of the first, second and third
quarterly accounting periods in each fiscal year of the Company and its
Subsidiaries and in any event within 55 days thereafter, consolidated balance
sheets of the Company and its Subsidiaries as of the end of each such quarterly
period, consolidated statements of operations of the Company and its
Subsidiaries for such periods and for the current fiscal year to date and
consolidated statements of cash flows of the Company and its Subsidiaries for
the current fiscal year to date, prepared in accordance with generally accepted
accounting principles consistently applied and setting forth in comparative form
the corresponding figures for the corresponding periods of the previous fiscal
year, all in reasonable detail;
(c) As soon as practicable, copies of any special or interim audit
reports with respect to the Company, its Subsidiaries or their operations
submitted to the Company by independent public accountants otherwise than in the
ordinary course of business and intended for public dissemination; and
(d) As soon as practicable, copies of all financial statements, proxy
material or reports sent to the stockholders of the Company and all reports or
final registration statements, including accompanying prospectuses, filed with
the Securities and Exchange Commission pursuant to the 1933 Act or the
Securities Exchange Act of 1934, as amended (the "1934 ACT").
(e) As soon as practicable, copies of any other documents or
information as may be reasonably requested by the Holders.
6.2 ADDITIONAL INFORMATION AND RIGHTS.
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(a) The Company will afford to the Holders the following:
(i) Promptly upon the occurrence thereof, written notice to
the Purchaser of (A) any material violation or default by the Company in the
performance of its agreements or covenants contained herein or in any material
agreement to which the Company is a party or (B) the commencement of any action
or proceeding against the Company or any of its Subsidiaries which could have a
material adverse effect on any of them;
(ii) Upon the occurrence and during the continuance of an
"Event of Default" (as defined in the Notes), the right to, or to designate in
writing any agent of Purchaser to, visit and inspect any of the properties of
the Company and its Subsidiaries; and
(iii) The right to, or to designate in writing any agent of
Purchaser to, examine books of account and other records and make copies
thereof, and discuss the financial, accounting, business and other affairs of
the Company and any of its Subsidiaries with the Company's officers, directors
and accountants, all at such reasonable times and as often as may be reasonably
requested, and all in accordance with the requirements of Section 8.8 hereof and
such other confidentiality restrictions as may be reasonably requested by the
Company.
(b) The Company will, and will cause each Subsidiary to:
(i) Maintain their respective tangible properties and assets
in good repair, working order and condition so far as necessary or advantageous
to the proper conduct of their respective businesses;
(ii) Comply in all material respects with all applicable laws,
orders, rules, regulations and decrees applicable to the Company or such
Subsidiary; PROVIDED, HOWEVER, that such compliance shall not be necessary so
long as the applicability or validity of any such law, order, rule, regulation
or decree shall be contested by or on behalf of the Company or a Subsidiary in
good faith by appropriate proceedings and an adequate reserve shall have been
established by or on behalf of the Company or a Subsidiary with respect thereto;
(iii) Pay promptly when due all taxes, fees, assessments and
other governmental charges imposed upon their respective properties, assets or
income which might by law become a lien upon such properties or assets;
PROVIDED, HOWEVER, that payment of any such tax, fee, assessment or charge shall
not be necessary so long as the applicability or validity thereof shall be
contested by or on behalf of the Company or a Subsidiary in good faith by
appropriate proceedings and an adequate reserve shall have been established by
or on behalf of the Company or a Subsidiary with respect thereto; and
(iv) Keep adequately insured, by financially sound and
reputable insurers, all their respective property of a character usually insured
by entities engaged in the same or similar businesses similarly situated,
against loss or damage of the kinds and in amounts customarily
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<PAGE> 16
insured against by such entities and with such deductibles, self-insurance or
coinsurance as is customary for entities engaged in the same or similar
businesses similarly situated.
6.3 OBLIGATIONS UPON MERGER OR CONSOLIDATION. In the event of a merger
or consolidation of the Company with or into another corporation in which the
Company is not the surviving corporation (the surviving corporation to such
merger or consolidation hereinafter being referred to as the "SURVIVING
CORPORATION"), the Company shall ensure that the Surviving Corporation shall
assume all obligations of the Company under this Agreement.
SECTION 7
Restrictions on Transferability of Securities;
Compliance with Securities Act of 1933
--------------------------------------
7.1 RESTRICTIONS ON TRANSFERABILITY. The Notes shall not be
transferable except upon compliance with the conditions specified in this
Section 7.
7.2 RESTRICTIVE LEGEND.
(a) Each certificate representing any of the Notes shall (unless
otherwise permitted by the provisions of Section 7.3 below) be stamped or
otherwise imprinted with a legend in substantially the following form (in
addition to any legend required under applicable state securities laws):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THEY MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT
OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED. THESE SECURITIES ARE SUBJECT TO THE
TERMS OF A NOTE PURCHASE AGREEMENT DATED AS OF OCTOBER 27, 1997 WITH
THE COMPANY, A COPY OF WHICH IS ON FILE AND AVAILABLE FOR INSPECTION AT
THE PRINCIPAL CORPORATE OFFICE OF THE COMPANY.
An appropriate "stop transfer" order may be placed with the Company's
transfer agent with respect to each such certificate.
(b) Any legend endorsed on an instrument pursuant to Section 7.2(a)
hereof and the stop transfer instructions with respect to such Notes shall be
removed, and the Company shall issue an instrument without such legend to the
holder of such Notes, if (i) such holder provides
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<PAGE> 17
the Company with an opinion of counsel who shall be reasonably satisfactory to
the Company, in form and substance reasonably satisfactory to the Company, that
a public sale, transfer or assignment of such Notes may be made without
registration, or (ii) such Notes may be sold to the public without restriction
pursuant to Rule 144 promulgated under the Securities Act or any similar
provision.
7.3 NOTICE OF PROPOSED TRANSFERS. The holder of each certificate
representing Notes, by acceptance thereof, agrees to comply in all respects with
the provisions of this Section 7.3. Prior to any proposed transfer of any Notes
the holder thereof shall give written notice to the Company of such holder's
intention to effect such transfer. Each such notice shall describe the manner
and circumstances of the proposed transfer in sufficient detail, and shall be
accompanied (except in transactions in compliance with Rule 144 promulgated
under the 1933 Act or any similar provision where the holder provides the
Company with information for it to make a determination as to such compliance)
by a written opinion of legal counsel who shall be reasonably satisfactory to
the Company, addressed to the Company, to the effect that the proposed transfer
of the Notes may be effected without registration under the 1933 Act. Each
certificate evidencing the Notes transferred as above provided shall bear the
appropriate restrictive legend set forth in Section 7.2 above, except that such
certificate evidencing Notes shall not bear such restrictive legend if the sale
is made pursuant to Rule 144 promulgated under the Securities Act or any similar
provision or if the opinion of counsel referred to above is to the further
effect that such legend is not required in order to establish compliance with
any provisions of the 1933 Act.
SECTION 8
Miscellaneous
-------------
8.1 GOVERNING LAW; CONSENT TO FORUM. (a) This Agreement shall be
governed in all respects by the internal laws of the State of New York without
reference to its principles of conflict of laws.
(b) Any action or suit in connection with this Agreement may be brought
in a court of record of the State of New York or a United States District Court
situated in the State of New York, the parties to this Agreement hereby
consenting to the nonexclusive jurisdiction of each thereof.
8.2 SURVIVAL. The representations, warranties, covenants and agreements
made herein shall survive the closing of the transactions contemplated hereby.
8.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors and assigns of the parties hereto.
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8.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subject matter hereof and
thereof and supersede all other prior agreements and understandings, written and
oral, among any or all of the parties, with respect to the subject matter
hereof. Neither this Agreement nor any term hereof may be amended, waived,
discharged or terminated orally, but only by a written instrument signed by the
Company and Purchaser.
8.5 NOTICES, ETC. All notices, claims, demands and other communications
required or permitted hereunder shall be deemed to have been duly given or
served if in writing and delivered by hand (effective upon delivery) or sent by
registered or certified mail, return receipt requested (effective five days
following the time of postmark), or by facsimile (effective upon receipt of
confirmation of transmission) to the parties (and other persons or entities
receiving copies thereof) at the following addresses or facsimile numbers (or to
such other address or facsimile number as a party may have specified by notice
given to the other party pursuant to this provision):
If to the Company:
Lexington Precision Corporation
767 Third Avenue
29th Floor
New York, New York 10017-2023
Attention: President
Facsimile: (212) 319-4659
with a copy to:
Nixon, Hargrave, Devans & Doyle LLP
437 Madison Avenue
New York, New York 10022
Attention: Richard F. Langan, Jr.
Facsimile: (212) 940-3740
14
<PAGE> 19
If to Purchaser:
Nomura Holding America, Inc.
Special Situations Group
21st Floor
Two World Financial Center
New York, New York 10281-1198
Attention: Mr. Thomas Fuller
Facsimile: (212) 667-1708
with a copy to:
Robinson, Silverman, Pearce, Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, New York 10104-0053
Attention: Thomas Moers Mayer
Facsimile: (212) 541-4630
8.6 DELAY OR OMISSION. No delay or omission to exercise any right,
power or remedy accruing to any holder of any Notes upon any breach or default
by the Company under this Agreement, shall impair such right, power or remedy of
such holder nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring.
8.7 BROKERS, ETC.
(a) The Company represents, warrants and agrees that there is no finder
or broker or other person who would have a valid claim against either party to
this Agreement for a commission or brokerage fee in connection with the
transactions contemplated by this Agreement (other than the Transaction Fee
payable by the Company) as a result of any agreement, understanding or action by
the Company.
(b) Purchaser represents, warrants and agrees that there is no finder
or broker or other person who would have a valid claim against either party to
this Agreement for a commission or brokerage fee in connection with the
transactions contemplated by this Agreement (other than the Transaction Fee
payable by the Company) as a result of any agreement, understanding or action by
Purchaser.
8.8 INFORMATION CONFIDENTIAL. Purchaser acknowledges that certain of
the information received or to be received by it pursuant hereto may be
confidential and proprietary and for its use only, and Purchaser will not use
such confidential or proprietary information in violation of the 1934 Act or any
other law, rule or regulation and will use its reasonable efforts to maintain
the
15
<PAGE> 20
confidentiality of any confidential or proprietary information so received by it
which is otherwise not available from other sources; PROVIDED, HOWEVER, that the
foregoing shall in no way limit or otherwise restrict the ability of Purchaser
or its authorized representatives or employees to disclose any such information
concerning the Company to its shareholders in accordance with its ordinary
disclosure policies or procedures provided that such information (a) is already
in the public domain through no fault or action on the part of Purchaser or (b)
is required to be disclosed pursuant to or as required by law or as directed by
any court of competent jurisdiction in connection with any action to which
Purchaser or the Company is a party.
8.9 EXPENSES. The Company and Purchaser shall each bear its own
expenses and legal fees incurred with respect to this Agreement and the
transactions contemplated hereby; provided, however, that the Company will pay
the reasonable legal fees and out-of-pocket expenses of Robinson, Silverman,
Pearce, Aronsohn & Berman LLP, counsel to Purchaser, incurred by Purchaser in
connection with the preparation, execution and delivery hereof and of the Notes.
8.10 INDEMNIFICATION. (a) The Company shall indemnify, defend and hold
Purchaser harmless against all liability, losses, damages, claims, actions,
suits, proceedings, judgments, costs and expenses of any nature whatsoever
(including, without limitation, reasonable attorneys' fees, settlement costs
incurred with the prior written consent of the indemnifying party, disbursements
and other costs and expenses reasonably incurred in investigating, defending or
attempting to avoid or oppose the bringing of, any actions or threatened
actions) (collectively, "DAMAGES") incurred by Purchaser, together with all
reasonable costs and expenses related thereto, including reasonable attorneys'
fees, arising from, relating to or resulting from any misrepresentation or
breach of warranty or agreement of the Company contained in this Agreement or in
any certificate delivered by the Company at the Closing pursuant to this
Agreement.
(b) Purchaser shall indemnify, defend and hold the Company harmless
against all Damages incurred by the Company, together with all reasonable costs
and expenses related thereto, including reasonable attorney's fees, arising from
any misrepresentation or breach of warranty or agreement of Purchaser contained
in this Agreement or in any certificate delivered by Purchaser at the Closing
pursuant to this Agreement.
8.11 TITLES. The titles of the sections of this Agreement are for
convenience of reference only and are not to be considered in construing this
Agreement.
8.12 SEVERABILITY. Any provision or provisions hereof found to be
unenforceable or prohibited by law will be ineffective only to the extent of
such unenforceability or prohibition and no other provision of this Agreement
will be invalidated thereby.
8.13 INTERPRETATION. The parties acknowledge and agree that (i) each
party and its counsel reviewed and negotiated the terms and provisions of this
Agreement and have contributed
16
<PAGE> 21
to its revision, (ii) the rule of construction to the effect that any
ambiguities are resolved against the drafting party shall not be employed in the
interpretation of this Agreement, and (iii) the terms and provisions of this
Agreement shall be construed fairly as to both parties hereto, regardless of
which party was generally responsible for the preparation of this Agreement or
any provision hereof.
8.14 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
8.15 SCHEDULES. The disclosure of information in any Schedule hereto
shall be deemed to be disclosure in each other Schedule hereto. The inclusion of
any information in any Schedule hereto shall not be deemed to be an admission by
the Company that such information is material or outside the ordinary course of
business.
17
<PAGE> 22
NOTE PURCHASE AGREEMENT SIGNATURE PAGE
IN WITNESS WHEREOF, the Company and Purchaser have each caused this
Agreement to be duly executed and delivered in its name and on its behalf, all
as of the date first written above.
LEXINGTON PRECISION CORPORATION
By: /s/ Warren Delano
------------------------------
Warren Delano
President
NOMURA HOLDING AMERICA, INC.
By: /s/ Dennis Dolan
------------------------------
Dennis Dolan
Managing Director
18
<PAGE> 23
Schedules to the Note Purchase Agreement dated as of October
27, 1997 have been omitted.
The following is a list of the omitted Schedules which the
Registrant agrees to furnish supplementary to the Commission upon request:
Schedules:
SCHEDULE 1 Form of Note
SCHEDULE 2 List of Subsidiaries and Investment
SCHEDULE 3 Pending or Threatened Legal Actions or
Proceedings
SCHEDULE 4 Changes
SCHEDULE 5 Certain Liens
SCHEDULE 6 Labor Relations
SCHEDULE 7 Existing Indebtedness
SCHEDULE 8 Form of Opinion of Counsel to the
Company
19
<PAGE> 1
Exhibit 10.3
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THEY MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT
OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED. THESE SECURITIES ARE SUBJECT TO THE
TERMS OF A NOTE PURCHASE RECAPITALIZATION AGREEMENT DATED AS OF OCTOBER
27, 1997 WITH THE COMPANY, A COPY OF WHICH IS ON FILE AND AVAILABLE FOR
INSPECTION AT THE PRINCIPAL CORPORATE OFFICE OF THE COMPANY.
LEXINGTON PRECISION CORPORATION
10 1/2% Senior Unsecured Note due February 1, 2000
U.S.$7,500,000.00 Dated: October 27, 1997
No. SU-1 New York, New York
FOR VALUE RECEIVED, LEXINGTON PRECISION CORPORATION, a
Delaware corporation (the "Company"), hereby promises to pay to NOMURA HOLDING
AMERICA, INC., a Delaware corporation, the principal sum of SEVEN MILLION FIVE
HUNDRED THOUSAND UNITED STATES DOLLARS (U.S.$7,500,000.00) on February 1, 2000,
together with accrued interest thereon as herein provided.
1. Interest.
---------
The Company promises to pay interest on the principal amount
of this Note at the rate of 10 1/2% per annum during the period from the date of
this Note until the principal amount of this Note shall have been paid in full.
The Company will pay interest quarterly on February 1, May 1, August 1 and
November 1 of each year (each, an "Interest Payment Date"), commencing on
November 1, 1997. Interest on this Note shall accrue from the most recent date
to which interest has been paid or, if no interest has been paid, from October
27, 1997. Interest shall be computed on the basis of a 360-day year of twelve
30-day months.
<PAGE> 2
- 2 -
2. Method of Payment.
------------------
2.1 The Company shall pay interest on each Note (except
Defaulted Interest, as hereinafter defined) to the person who is the registered
holder of a Note ("Noteholder" or "Holder") at the close of business on the
January 15, April 15, July 15 or October 15 preceding the Interest Payment Date.
The Holder must surrender this Note to the Company at its offices at 767 Third
Avenue, 29th Floor, New York, New York 10017-2023 or such other address as the
Company may specify in a notice mailed or delivered to the registered address of
the Holder hereof (the "Designated Office") to collect principal payments. The
Company shall pay principal and interest in money of the United States of
America that at the time of payment is legal tender for payment of public and
private debts. The Company may, however, pay principal and interest by its check
payable in such money. It may mail an interest check to the Holder's registered
address. In the event this Note is issued or held in two or more units, such
units shall hereinafter be collectively referred to as the "Notes" and
individually as a "Note", and in the event this Note shall be the only Note
outstanding, the term "Notes" as used herein shall refer only to this Note. Any
payment of interest or principal which is due on a Saturday, Sunday or holiday
shall be payable on the next succeeding business day.
2.2 Any interest on a Note which is payable, but is not
punctually paid or provided for, on any Interest Payment Date ("Defaulted
Interest") shall forthwith cease to be payable to the registered Holder on the
relevant regular record date, and such Defaulted Interest may be paid by the
Company, at its election in each case, as provided in clause (a) or (b) below:
(a) The Company may elect to make payment of any Defaulted
Interest to the persons in whose names the Notes were registered at the
close of business on a regular record date for the payment of such
Defaulted Interest, which shall be fixed in the following manner. The
Company shall set aside for payment, an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted
Interest, such money when so set aside to be held in trust for the
benefit of the persons entitled to such Defaulted Interest as provided
herein. Thereupon the Company shall fix a special record date for the
payment of such Defaulted Interest which shall be not more than 15 nor
less than 10 days prior to the date of the proposed payment. The
Company, at its sole expense, shall cause notice of the proposed
payment of such Defaulted Interest and the special record date therefor
to be mailed, first class postage prepaid, to each Noteholder at his
address as it appeared in the registration books of the Company on such
regular record date for payment of such Defaulted Interest, not less
than 10 days prior to such special record date. Notice of the proposed
payment of such Defaulted Interest and the special record date therefor
having been mailed as aforesaid, such Defaulted Interest shall be paid
to the persons in whose names the Notes were registered on such special
record date and shall no longer be payable pursuant to the following
Clause (b).
<PAGE> 3
- 3 -
(b) The Company may make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Notes may be listed, and upon such
notice as may be required by such exchange.
Subject to the foregoing provisions of this subparagraph 2.2, each Note
issued by the Company upon transfer of, in exchange for or in lieu of any other
Note shall carry the rights to interest accrued and unpaid, and to accrue, which
were carried by such other Note.
2.3 Notwithstanding subparagraph 2.1 hereof, the Company will
make payments of principal and interest by check payable to the order of the
Holder of this Note duly mailed or delivered to its registered address, or, if
requested, by wire transfer of federal or other immediately available funds to
its account at any bank or trust company in the United States of America. Before
any such Note is transferred in accordance with the terms hereof and of the Note
Purchase Agreement dated as of October 27, 1997 between the Company and Nomura
Holding America, Inc. (the "Note Purchase Agreement"), the Holder will make or
cause to be made a notation thereon of principal payments previously made
thereon and of the date to which interest thereon has been paid.
3. Optional Redemption.
--------------------
3.1 The Notes are subject to redemption from and after the
date of initial issuance, as a whole or, from time to time, in part (in units of
$100,000 or integral multiples thereof), at the option of the Company, on not
less than 15 nor more than 60 days' prior notice given, during the periods
specified below, at the redemption prices (expressed in percentages of principal
amount) set forth below and subject to the conditions set forth in this Section
3:
<TABLE>
<CAPTION>
Redemption Occurring During Period: Redemption Price
---------------------------------- ----------------
<S> <C>
Prior to August 1, 1998 102.0%
August 1, 1998 through October 31, 1998 101.5%
November 1, 1998 through January 31, 1999 101.0%
After January 31, 1999 100.0%
</TABLE>
3.2 In the event that at the time the Company elects to make a
redemption pursuant to this paragraph 3, there is more than one Note
outstanding, the aggregate principal amount of such redemption shall be
allocated among the then outstanding Notes in proportion, as nearly as
practicable, to the respective unpaid principal amounts of such Notes.
3.3 Notice of redemption will be mailed at least 15 days but
not more than 60 days before the redemption date to each holder of Notes to be
redeemed at his registered address specifying: (i) the redemption date; (ii) the
redemption price; (iii) that Notes to be redeemed must
<PAGE> 4
- 4 -
be surrendered to the Company to collect the redemption price; (iv) that
interest on the Notes called for redemption ceases to accrue on and after the
redemption date; and (v) the aggregate principal amount of each Note to be
redeemed and the registration number of such Note. On and after the redemption
date, interest ceases to accrue on Notes or portions of them called for
redemption.
3.4 Once notice of redemption is mailed, Notes called for
redemption become due and payable on the redemption date and at the redemption
price. Upon surrender to the Company, such Notes shall be paid at the redemption
price plus accrued interest to the redemption date.
3.5 Upon surrender of a Note that is redeemed in part, the
Company shall issue to the Holder thereof a new Note equal in principal amount
to the unredeemed portion of the Note surrendered.
4. Covenants.
----------
The Company covenants and agrees that so long as the Notes
remain outstanding:
(a) The Company shall pay the principal of and interest on the
Notes on the dates and in the manner provided in the Notes.
(b) The Company shall pay, to the extent permitted by
applicable law, interest on overdue principal at 2% per annum above the
rate borne by the Notes; it shall pay interest on overdue installments
of interest at the same rate to the extent lawful.
(c) The Company shall maintain outstanding Subordinated Debt
having an aggregate principal amount of at least U.S.$25,000,000
exclusive of Subordinated Debt owned by Subsidiaries of the Company.
(d) The Company shall not effectuate any waiver or amendment
of any of the terms, covenants or provisions of the Subordinated Notes
without the written consent of the Holders of a majority in principal
amount of the Notes then outstanding.
(e) The Company shall make no redemption, distribution or
payment (collectively, "Restricted Payments") with respect to its
capital stock (other than Restricted Payments payable solely in capital
stock of the Company or rights to acquire capital stock of the
Company); provided, however, that this Section 4(e) shall not prohibit
(1) any Restricted Payment made in accordance with the terms set forth
as of the date hereof in the Company's Restated Certificate of
Incorporation governing preferred stock of the Company outstanding as
of the date hereof, and/or (2) any Restricted Payment that would
<PAGE> 5
- 5 -
be permitted to be made pursuant to Section 4.04 of that certain
Indenture dated as of August 1, 1993 between the Company and IBJ
Schroder Bank & Trust Company, as Trustee (the "Existing Indenture").
5. Denomination, Transfer, Exchange.
---------------------------------
5.1 The Notes are issuable only in registered form without
coupons in denominations of $100,000 and integral multiples of $100,000 (except
to the extent a smaller denomination may be required as a result of the optional
redemption, from time to time, of Notes). The registered Holder of a Note may be
treated as the owner of it for all purposes (including, without limitation, for
the purpose of receiving payment of principal of, premium, if any, and interest
on such Note) and the Company shall not be affected by any notice to the
contrary. The Notes may not be transferred or otherwise disposed of except to a
registered assign and otherwise in accordance with the terms of the Note
Purchase Agreement. The Company may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay any taxes and
fees required by law or permitted hereby. The Company need not transfer or
exchange any Note (or portion of a Note in an integral multiple of $100,000)
selected for redemption, or transfer or exchange any Notes for a period of 15
days before a selection of Notes to be redeemed. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Note and, in the case of any such loss, theft or destruction, upon delivery
of a bond of indemnity satisfactory to the Company, or in the case of any such
mutilation, upon surrender and cancellation of this Note, the Company will issue
a new Note of like tenor as if the lost, stolen, destroyed or mutilated Note
were then surrendered for exchange in lieu of such lost, stolen, destroyed or
mutilated Note.
5.2 If the Company deems it necessary or appropriate to
qualify an indenture with respect to the Notes under the Trust Indenture Act of
1939, as amended (the "TIA"), the Company will, as soon as reasonably
practicable, execute and deliver to a bank or trust company organized under the
laws of the United States of America or any state thereof having an office in
New York, New York, as trustee, satisfactory to the Company, and having a
capital surplus of at least $100,000,000 (if there be such an institution
willing, qualified and able to accept the trust upon reasonable or customary
terms), an indenture of trust (the "Indenture"), providing for the issuance, and
will authorize the issuance thereunder as herein provided, of a principal amount
of new 10 1/2% senior unsecured notes due February 1, 2000 of the Company (the
"New Notes"), equal in aggregate principal amount to the aggregate principal
amount of all Notes outstanding and unpaid at the time of such authorization,
bearing interest at the same rate as such outstanding Notes and in all other
respects substantially similar to, and having substantially all the rights and
privileges carried by, the Notes.
The Indenture and the New Notes to be issued thereunder shall,
insofar as may be appropriate, respectively embody the substance of all
covenants, conditions and provisions of the
<PAGE> 6
- 6 -
Notes, together with such other provisions as may be desirable (not inconsistent
with the provisions of the Notes) and as are usually contained in indentures of
similar issuers providing for notes of comparable aggregate principal amount and
maturity, or are usually contained in such notes.
At the time of the execution of the Indenture, the Company
shall cause counsel (which may include an employee of or counsel to the Company
or the trustee under the Indenture) to furnish to the Noteholders and to the
trustee under the Indenture an opinion to the effect that (i) the Indenture has
been duly authorized, executed and delivered by the Company, and is a legal,
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, and (ii) the New Notes have been duly authorized, and
when executed, authenticated and delivered as provided in the Indenture, will
constitute, legal, valid and binding obligations of the Company enforceable
against the Company in accordance with their terms.
After the execution and delivery of the Indenture, upon
surrender of any Note by the holder thereof, the Company will deliver to such
holder, in exchange therefor, New Notes in the same principal amount and
maturities as the Notes surrendered, in such authorized form and denomination as
such holder may elect, and bearing interest from the date to which interest
shall have been paid on the Notes so surrendered. The holders of the Notes agree
to surrender such Notes and to otherwise cooperate with the Company in
connection with any qualification of the Indenture under the TIA. Upon issuance
of New Notes pursuant to the Indenture, the Company shall apply the provisions
set forth in Sections 6 and 7 of the Note Purchase Agreement, provided that in
so applying such provisions, the term "Notes" shall be deemed to include the
term "New Notes".
6. Amendment, Supplement, Waiver.
------------------------------
This Note and any other Notes outstanding may be amended (or
any provision hereof, waived) with the written consent of the Company and the
Holder or Holders of at least a majority in aggregate principal amount of the
Notes then outstanding; provided, however, that no such amendment or waiver
shall, without the consent of each Holder affected, (i) reduce the amount of
Notes whose Holders must consent to an amendment, supplement or waiver, (ii)
reduce the rate of or extend the time of payment of interest on any Note, (iii)
reduce the principal of or premium on or extend the fixed maturity of any Note,
(iv) waive a default in the payment of the principal of or interest on any Note,
or (v) make any Note payable in money other than that stated in the Note. The
Company and each Holder of a Note then or thereafter outstanding shall be bound
by any amendment or waiver effected in accordance with the provisions hereof,
whether or not such Note shall have been marked to indicate such modification,
but any Note issued thereafter shall bear a notation as to any such
modification. Promptly after obtaining the written
<PAGE> 7
- 7 -
consent of the Holders herein provided, the Company shall transmit a copy of the
instrument evidencing such modification to all of the Holders of the Notes then
outstanding.
7. Defaults and Remedies.
----------------------
7.1 An "Event of Default" occurs if:
(a) the Company defaults in the payment of interest on any
Note when the same becomes due and payable and the default continues
for a period of 30 days;
(b) the Company defaults in the payment of the principal of
any Note when the same becomes due and payable at maturity, upon
redemption or otherwise;
(c) the Company fails to comply with any of its other
covenants, conditions or agreements in the Notes and/or Note Purchase
Agreement, and the default continues for the period and after the
notice specified below;
(d) an event or events of default, as defined in any one or
more mortgages, indentures or instruments under which there may be
issued, or by which there may be secured or evidenced, any Debt of the
Company or any Subsidiary, whether such Debt now exists or shall
hereafter be created, shall happen which permits the holders of such
Debt to declare an aggregate principal amount of at least $250,000 of
such Debt to become due and payable prior to the date on which it would
otherwise have become due and payable and such event of default shall
not have been cured in accordance with the provisions of such
instrument, or such Debt shall not have been discharged within a period
of 30 days after there shall have been given, by registered or
certified mail, to the Company by the Holders of at least 25% in
principal amount of the outstanding Notes a written notice specifying
such event or events of default and requiring the Company to cause such
event of default to be cured, or such Debt to be discharged and stating
that such notice is a "Notice of Default" hereunder; PROVIDED, HOWEVER,
that the Company is not in good faith contesting in appropriate
proceedings the occurrence of such an event of default;
(e) a court of competent jurisdiction shall enter a final,
non-appealable judgment or judgments for the payment of money in the
aggregate in excess of $250,000 against the Company or any Subsidiary
and the judgment is not rescinded, annulled, stayed or satisfied for a
period (during which execution shall not be effectively stayed) of 30
days after the amount of such judgment is determined;
<PAGE> 8
- 8 -
(f) the Company, pursuant to or within the meaning of any
Bankruptcy Law:
(1) commences a voluntary case,
(2) consents to the entry of an order for relief
against it in an involuntary case,
(3) consents to the appointment of a Custodian of it
or for all or substantially all of its property, or
(4) makes a general assignment for the benefit of its
creditors; or
(g) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(1) is for relief against the Company in an
involuntary case,
(2) appoints a Custodian of the Company or for all or
substantially all of its property, or
(3) orders the liquidation of the Company,
and the order or decree remains unstayed and in effect for 30 days.
A default under clause (c) of this subparagraph 7.1 is not an
Event of Default until the Holders of at least 25% in principal amount of the
outstanding Notes notify the Company of the default and the Company does not
cure the default within 30 days after receipt of the notice. The notice must
specify the default, demand that it be remedied and state that the notice is a
"Notice of Default".
7.2 If an Event of Default (other than an Event of Default
specified in subparagraph 7.1(a), (b), (f) or (g)) occurs and is continuing, the
Holders of at least 25% in principal amount of the outstanding Notes by notice
to the Company, may declare the principal of, and accrued interest on, all the
Notes to be due and payable immediately. If an Event of Default specified in
subparagraph 7.1(a) or (b) occurs, the Holder of this Note, by notice to the
Company, may declare the principal amount of, and accrued interest on, this Note
to be due and payable immediately. If an Event of Default specified in
subparagraph 7.1(f) or (g) occurs, all unpaid principal of and accrued interest
on the Notes then outstanding shall become and be immediately due and payable
without any declaration or other act on the part of any Noteholder. Upon such
declaration, such principal and interest shall be due and payable immediately.
The Holders of a majority in principal amount of the outstanding Notes by notice
to the Company may
<PAGE> 9
- 9 -
rescind an acceleration and its consequences if all existing Events of Default
have been cured or waived (other than the nonpayment of principal of and accrued
interest on the Notes which shall have become due by acceleration) and if the
rescission would not conflict with any judgment or decree.
7.3 If an Event of Default occurs and is continuing, the
Noteholders may pursue any available remedy by proceeding at law or in equity to
collect the payment of principal of or interest on the Notes or to enforce the
performance of any provision of the Notes. A delay or omission by any Noteholder
in exercising any right or remedy accruing upon an Event of Default shall not
impair the right or remedy or constitute a waiver of or acquiescence in the
Event of Default. No remedy is exclusive of any other remedy. All available
remedies are cumulative.
7.4 Subject to paragraph 6 of this Note, the Holders of a
majority in principal amount of the outstanding Notes by notice to the Company
may waive an existing Default and its consequences. When a Default is waived, it
is cured and no longer continuing.
8. Definitions; Rules of Construction.
-----------------------------------
8.1 For all purposes of this Note, the following definitions
shall apply unless the text otherwise requires:
"Bankruptcy Law" or the "Federal Bankruptcy Code" means Title
11, U.S. Code or any similar Federal or State law for the relief of debtors.
"Company" means the party named as such in this Note until a
successor replaces it and thereafter means the successor.
"Custodian" means any receiver, trustee, assignee, liquidator
or similar official under any Bankruptcy Law.
"Debt" means (1) any debt of the Company (i) for borrowed
money, or (ii) evidenced by a note, debenture or similar instrument (including a
capitalized lease or a purchase money obligation) given in connection with the
acquisition of any property or assets, including, without limitation,
securities; (2) any debt of others of the types described in the preceding
clause (1) which the Company has guaranteed or for which it is otherwise liable;
and (3) any amendment, renewal, extension, restructuring, refunding or
replacement of any such debt described in (1) and (2) above.
<PAGE> 10
- 10 -
"Default" means any event which is, or after notice or passage
of time would be, an Event of Default.
"Subordinated Debt" means the Subordinated Notes and all Debt
(present or future) for borrowed money created or incurred by the Company (and
all renewals, extensions or refundings thereof) pursuant to an instrument that
expressly provides that such Debt is junior in right of payment to the Notes on
terms, taken as a whole, that are no less favorable to the Holders than those
relating to the Subordinated Notes.
"Subordinated Notes" means the Company's 12 3/4% Senior
Subordinated Notes due February 1, 2000 and the Existing Indenture, Junior
Subordinated Convertible Increasing Rate Notes due May 1, 2000 and 14% Junior
Subordinated Notes due May 1, 2000.
"Subsidiary" means a corporation a majority of whose Voting
Stock is owned by the Company or a Subsidiary.
"Voting Stock" means capital stock having voting power under
ordinary circumstances to elect directors.
8.2 Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with generally accepted accounting
principles;
(3) "or" is not exclusive; and
(4) words in the singular include the plural, and in
the plural include the singular.
9. No Recourse Against Others.
---------------------------
A director, officer, employee or shareholder, as such, of the
Company shall not have any liability for any obligations of the Company under
the Notes or for any claim based on, in respect of or by reason of, such
obligations or their creation. Each Noteholder by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
<PAGE> 11
- 11 -
10. Abbreviations.
--------------
Customary abbreviations may be used in the name of a
Noteholder or an assignee, such as : TEN COM (= tenants in common), TENANT (=
tenants by the entirety), JT TEN (= joint tenants with right of survivorship and
not as tenants in common), CUST (= custodian), and U/G/M/A/ (= Uniform Gifts to
Minors Act).
11. Notices.
--------
All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made, given
or served if delivered or sent to the persons and entities in the manner set
forth in the Note Purchase Agreement.
12. Information Confidential.
-------------------------
By acceptance of this Note, the Holder hereof acknowledges
that certain of the information received or to be received by it pursuant hereto
may be confidential and proprietary and for its use only, and agrees that the
Holder will not use such confidential or proprietary information in violation of
federal or state securities law, or any other law, rule or regulation and will
use its reasonable efforts to maintain the confidentiality of any confidential
or proprietary information so received by it which is otherwise not available
from other sources; PROVIDED, HOWEVER, that the foregoing shall in no way limit
or otherwise restrict the ability of the Holder to disclose any such information
concerning the Company which (i) is already in the public domain through no
fault or action on the part of the Holder or (ii) it may be required to disclose
pursuant to or as required by law or as directed by any court of competent
jurisdiction in connection with any action to which the Holder or the Company is
a party.
13. Severability.
-------------
Any provision or provisions of this Note found to be
unenforceable or prohibited by law will be ineffective only to the extent of
such unenforceability or prohibition and no other provision hereof will be
invalidated thereby.
<PAGE> 12
- 12 -
14. Waiver of Usury Law.
--------------------
The Company covenants (to the extent that it may lawfully do
so) that it will not at any time voluntarily (and that it will resist any effort
to make it do so involuntarily) insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any usury law wherever
enacted, or at any time hereafter in force, which may affect the covenants or
the performance of this Note.
15. Governing Law and Consent to Forum.
-----------------------------------
(a) THIS NOTE IS DELIVERED IN AND SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE
OF NEW YORK WITHOUT REFERENCE TO ITS PRINCIPLES OF CONFLICTS OF LAW.
(b) ANY ACTION OR SUIT IN CONNECTION WITH THIS NOTE MAY BE
BROUGHT IN A COURT OF RECORD OF THE STATE OF NEW YORK OR A UNITED STATES
DISTRICT COURT SITUATED IN THE STATE OF NEW YORK, THE COMPANY HEREBY CONSENTING
TO THE NONEXCLUSIVE JURISDICTION OF EACH THEREOF.
IN WITNESS WHEREOF, LEXINGTON PRECISION CORPORATION has
caused this Note to be dated and to be executed and attested to on its behalf by
its duly authorized officers, and its corporate seal to be hereunto duly
affixed.
LEXINGTON PRECISION CORPORATION
By: /s/ Warren Delano
----------------------------------
Warren Delano
President
[SEAL]
Attest: /s/ Kenneth I. Greenstein
<PAGE> 13
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form below and have your
Medallion signature guaranteed:
I or we assign and transfer this Note to
------------------------
------------------------
(Insert assignee's social
security or tax ID number)
------------------------
------------------------
------------------------
(Print or type assignee's
name, address and zip code)
and irrevocably appoint ____________________ agent to transfer this Note on the
books of the Company. The agent may substitute another to act for him.
- ---------------------------------
Date: Your signature:
------------------------------------------
(Sign exactly as your name appears on the other
side of this Note)
Medallion Signature Guarantee:
-------------------------------------------
<PAGE> 14
GUARANTEE
Subject to the terms and conditions of this Guarantee,
Lexington Components, Inc., a Delaware corporation (the "Guarantor"), hereby
irrevocably and unconditionally guarantees (i) the due and punctual payment of
the principal of, premium, if any, and interest on the 10 1/2% Senior Unsecured
Notes due February 1, 2000 (the "Notes") of Lexington Precision Corporation, a
Delaware corporation (the "Company"), whether at stated maturity, by
acceleration or otherwise, the due and punctual payment of interest on the
overdue principal of and interest, if any, on the Notes, to the extent lawful,
and the due and punctual performance of all other obligations of the Company to
the registered holders of the Notes (the "Holders"), (ii) in case of any
extension of time of payment or renewal of any Notes or any such other
obligations, that the same will be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise and (iii) the payment of any and all
costs and expenses (including reasonable attorneys' fees) incurred by any Holder
in enforcing any rights under this Guarantee. The Guarantor agrees that this is
a guarantee of payment and not a guarantee of collection.
Subject to the terms and conditions of this Guarantee, the
Guarantor hereby agrees that its obligations hereunder shall be unconditional,
irrespective of the validity, regularity or enforceability of the Notes, the
absence of any action to enforce the same, the recovery of any judgment against
the Company, any action to enforce the same or any other circumstances which
might otherwise constitute a legal or equitable discharge or defense of a
guarantor. Except to the extent permitted by applicable law or as expressly
provided herein, the Guarantor further waives and relinquishes all claims,
rights and remedies accorded by applicable law. The Guarantor further waives and
relinquishes all claims, rights and remedies accorded by applicable law to
guarantors and agree not to assert or take advantage of any such claims, rights
or remedies including, but not limited to: (a) any right to require the Holders
(each, a "Benefitted Party") to proceed against the Company or any other person
or entity or to proceed against or exhaust any security held by a Benefitted
Party at any time to pursue any other party's power before proceeding again the
Guarantor; (b) the defense of the statue of limitations in any action hereunder
or in any action for the collection of any Debt or the performance of any
obligation hereby guaranteed; (c) any defense that may arise by reason of the
incapacity, lack of authority, death or disability of any other person or
entity; (d) appraisal, valuation, stay, extension, marshalling of assets,
redemption, exemptions, demand, presentment, protest and notice of any kind
including but not limited to notice of the existence, creation or incurring of
any new or additional Debt or obligation; (e) any defense based upon an election
of remedies by a Benefitted Party, including but not limited to an election to
proceed by non-judicial rather than judicial foreclosure which destroys or
otherwise impairs the subrogation rights of the Guarantor, the right of the
Guarantor to proceed against the Company or any other person or entity for
reimbursement, or both; (f) any defense based upon any statute or rule of law
which provides that the obligation of a surety must be neither larger in amount
nor in other respects more burdensome than the principal; (g) any duty on the
part of a Benefitted Party to disclose to the Guarantor any facts a Benefitted
Party may now or hereafter know about the Company or any other person or entity,
regardless of whether a Benefitted Party has reason to believe that any such
facts materially increase the risk beyond that which the Guarantor intends to
assume, or has reason to believe that such facts are unknown to
<PAGE> 15
- 2 -
the Guarantor, or has reasonable opportunity to communicate such facts to the
Guarantor, since the Guarantor acknowledges that it is fully responsible for
being and keeping informed of the financial condition of the Company and of all
circumstances bearing on the risk of non-payment of any obligations hereby
guaranteed; (h) any defense arising because of a Benefitted Party's election, in
any proceeding instituted under the Federal Bankruptcy Code, of the application
of Section 1111(b)(2) of the Federal Bankruptcy Code, (i) any defense based on
any borrowing or grant of a security interest under Section 364 of the Federal
Bankruptcy Code; (j) any claim or other rights which the Guarantor may now or
hereafter acquire against the Company or any other person or entity that arise
from the existence or performance of the Guarantor's obligations under this
Guarantee in favor of the Company, including, without limitation, (x) any right
of subrogation, reimbursement, exoneration, contribution, or indemnification, or
(y) any right to participate in any claim or remedy by a Benefitted Party
against the Company whether or not such claim, remedy or right arises in equity
or under contract, statute or common law, by any payment made hereunder or
otherwise, including without limitation, the right to take or receive from the
Company, directly or indirectly, in cash or other property or by set-off or in
any other manner, payment or security on account of such claim or rights; and
(k) any rights which the Guarantor may acquire by way of contribution under this
Guarantee in favor of the Company, by any payment made hereunder or otherwise,
including without limitation, the right to take or receive from any other
guarantor, directly or indirectly, in cash or other property or by set-off or in
any other manner, payment or security on account of such contribution rights.
The Guarantor hereby covenants that this Guarantee will not be discharged except
by complete performance of the obligations contained in this Guarantee.
If any Holder is required by any court otherwise to return to
either the Company or the Guarantor, or any Custodian, trustee, or similar
official acting in relation to either the Company or the Guarantor any amount
paid by the Company to such Holder, this Guarantee, to the extent theretofore
discharged, shall be reinstated in full force and effect. The Guarantor agrees
that it will not be entitled to any right of subrogation in relation to the
Holders in respect of any obligations guaranteed hereby until payment in full of
all obligations guaranteed hereby.
The Guarantor further agrees that, as between the Guarantor,
on the one hand, and the Holders on the other hand, (i) the maturity of the
obligations guaranteed hereby may be accelerated as provided in the Notes for
the purposes of this Guarantee notwithstanding any stay, injunction or other
prohibition preventing such acceleration as to the Company of the obligations
guaranteed hereby, and (ii) in the event of any declaration of acceleration of
those obligations as provided in the Notes, those obligations (whether or not
due and payable) will forthwith become due and payable by the Guarantor for the
purpose of this Guarantee.
<PAGE> 16
- 3 -
Notwithstanding any provision of this Guarantee to the
contrary, the Guarantor and by acceptance hereof, each beneficiary hereof,
hereby confirms is its intention that this Guarantee by such Guarantor not
violate or conflict with any applicable corporate law, or constitute a
fraudulent transfer or conveyance for purposes of the Bankruptcy Law, the
Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act, or any
similar federal or state law to the extent applicable to this Guarantee. To
effectuate the foregoing intention, notwithstanding any provision of this
Guarantee to the contrary, each such person or entity hereby irrevocable agrees
that the obligation of the Guarantor under this Guarantee shall be limited (i)
to the extent necessary under any applicable corporate law and (ii) to the
maximum amount as will, after giving effect to such maximum amount and all other
(contingent or otherwise) liabilities of the Guarantor that are relevant under
such laws, and after giving effect to any collections from or payments made by
or on behalf of any other guarantor in respect of the obligations of Guarantor,
result in the obligations of the Guarantor in respect of such maximum amount
constituting a fraudulent conveyance. Each beneficiary under this Guarantee, by
accepting this benefits hereof, confirms its intention that, notwithstanding any
provision of this Guarantee to the contrary, in the event of a bankruptcy,
reorganization or other similar proceeding of the Company or the Guarantor in
which concurrent claims are made upon such the Guarantor hereunder, to the
extent such claims will not be fully satisfied, each such claimant with a valid
claim against the Company shall be entitled to a ratable share of all payments
by the Guarantor in respect of such concurrent claims.
This is a continuing Guarantee and shall remain in full force
and effect and shall be binding upon the Guarantor and its successors and
assigns until full and final payment of all of the Company's obligations under
the Notes and shall inure to the benefit of the successors and assigns of the
Holder and, in the event of any transfer of assignments of rights by any Holder
the rights and privileges herein conferred upon that party shall automatically
extend to and be vested in such transferee or assignee, all subject to the terms
and conditions hereof.
A director, officer, employee or shareholder, as such, of the
Guarantor shall not have any liability for any obligations of the Guarantor
under this Guarantee or for any claim based on, in respect of or by reason of,
such obligations or their creation. Each beneficiary hereof by accepting this
Guarantee waives and releases all such liability. The waiver and release are
part of the consideration for the issue of this Guarantee.
Capitalized terms used herein have the same meanings given in
the Notes unless otherwise indicated.
THIS GUARANTEE IS DELIVERED IN AND SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
WITHOUT REFERENCE TO ITS PRINCIPLES OF CONFLICTS OF LAW.
<PAGE> 17
- 4 -
ANY ACTION OR SUIT IN CONNECTION WITH THIS GUARANTEE MAY BE
BROUGHT IN A COURT OF RECORD OF THE STATE OF NEW YORK OR A UNITED STATES
DISTRICT COURT SITUATE IN THE STATE OF NEW YORK, THE GUARANTOR HEREBY CONSENTING
TO THE NONEXCLUSIVE JURISDICTION OF EACH THEREOF.
Guarantor:
LEXINGTON COMPONENTS, INC.
By: /s/ Warren Delano
------------------------------------
Warren Delano
President
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 171
<SECURITIES> 0
<RECEIVABLES> 15,120
<ALLOWANCES> 0
<INVENTORY> 8,871
<CURRENT-ASSETS> 29,181
<PP&E> 99,706
<DEPRECIATION> 41,864
<TOTAL-ASSETS> 100,615
<CURRENT-LIABILITIES> 30,818
<BONDS> 74,153
465
0
<COMMON> 1,087
<OTHER-SE> (7,383)
<TOTAL-LIABILITY-AND-EQUITY> 100,615
<SALES> 87,347
<TOTAL-REVENUES> 87,347
<CGS> 72,959
<TOTAL-COSTS> 72,959
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,704
<INCOME-PRETAX> (948)
<INCOME-TAX> 263
<INCOME-CONTINUING> (1,211)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,211)
<EPS-PRIMARY> (.30)
<EPS-DILUTED> (.30)
</TABLE>
