1
Exhibit 1053
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT dated as of January 17, 1996, is made by
and between LEXINGTON PRECISION CORPORATION ("DEBTOR") and THE CIT
GROUP/EQUIPMENT FINANCING, INC. ("CIT").
SECTION 1. DEFINITIONS.
All capitalized terms which are not defined herein are defined in Rider A
attached hereto and made a part hereof ("RIDER A"). Accounting terms not
specifically defined shall be construed in accordance with generally accepted
accounting principles.
SECTION 2. AMOUNT AND TERMS OF LOANS; GRANT OF SECURITY INTEREST.
Subject to the terms and conditions hereof, CIT agrees to make Loans to
Debtor from time to time, in the amounts described in paragraph 2 of Rider A.
Each Loan shall be evidenced by Debtor's Note, which Note shall set forth the
repayment terms and Interest Rate for such Loan.
As security for the prompt and complete payment and performance when due
of all the Obligations and in order to induce CIT to enter into this Agreement
and make the Loans and to extend other credit from time to time to Debtor,
whether under this Agreement or otherwise, Debtor hereby grants to CIT a first
priority security interest in all Debtor's right, title and interest in, to and
under the Collateral.
SECTION 3. CONDITIONS OF BORROWING.
CIT shall not be required to make any Loan hereunder unless on the
Closing Date thereof all legal matters with respect to, and all legal documents
executed in connection with, the contemplated transactions are satisfactory to
CIT and all of the following conditions are met to the satisfaction of CIT
(except that (a) and (b) are required in connection with the initial Loan
only): (a) CIT has received a satisfactory Secretary's Certificate certified by
Debtor's Secretary or Assistant Secretary; (b) Debtor has executed and
delivered to CIT the Note evidencing, and a Supplement describing the Equipment
to be financed by, such Loan; (c) the Equipment being financed by such Loan has
been delivered to, and accepted by, Debtor and CIT has received satisfactory
evidence that the Equipment is insured in accordance with the provisions hereof
and that the Cost thereof has been, or concurrently with the making of the Loan
shall be, fully paid; (d) CIT has received copies of the invoices and bills of
sale, if any, with respect to the Equipment being financed by such Loan; (e)
all filings, recordings and other actions (including the obtaining of landlord
and/or mortgagee waivers and a satisfactory intercreditor Agreement with
Congress) deemed necessary or desirable by CIT in order to perfect a first
priority security interest in the Equipment being financed by such Loan have
been duly effected, and all fees, taxes and other charges relating to such
filings and recordings have been paid by Debtor; (f) the representations and
warranties contained in this Agreement are true and correct in all material
respects with the same effect as if made on and as of such date, and no Default
or Event of Default is in existence on such date or shall occur as a result of
such Loan; (g) in the sole judgment of CIT, there has been no material adverse
change in the financial condition, business or operations of Debtor from the
date referred to in Section 4(j) hereof; (h) CIT has received from Debtor such
other documents and information as CIT has reasonably requested; (i) CIT has
inspected and appraised each item of used Equipment and found it satisfactory
in value and condition, and all items of Equipment shall be satisfactory to CIT
in value, condition and type, except that CIT has already so inspected and
approved the items of Equipment listed on EXHIBIT 1 hereto.
SECTION 4. REPRESENTATIONS AND WARRANTIES.
In order to induce CIT to enter into this Agreement and to make each
Loan, Debtor represents and warrants to CIT that: (a) Debtor is a corporation
duly organized, validly existing and in good standing under the laws of its
State of incorporation, has the necessary authority and power to own the
Equipment and its other assets and to transact the business in which it is
engaged, is duly qualified to do business in each jurisdiction where the
Equipment is located and in each other jurisdiction in which the conduct of its
business or the ownership of its assets requires such qualification, and its
chief executive office is located at the address set forth in paragraph 6 of
Rider A; (b) Debtor has full power, authority and legal right to execute and
deliver this Agreement and the Notes, to perform its obligations hereunder and
thereunder, to borrow hereunder and to grant the security interest created
hereby; (c) this Agreement has been (and each Note when executed and delivered
shall have been) duly authorized, executed and delivered by Debtor and
constitutes (and each Note when executed and delivered shall constitute) a
legal, valid and binding obligation of Debtor enforceable in accordance with
its terms except as such rights may be limited by bankruptcy, insolvency or
other similar laws affecting the enforcement of creditors' rights generally;
(d) the execution, delivery and performance by Debtor of this Agreement and the
Notes do not and will not violate any provision of any applicable law or
regulation or of any judgment or order of any court or governmental
instrumentality, and will not violate any provision of, or cause a default
under, any loan, other agreement, contract or judgment to which Debtor is a
party; (e) Debtor is not in default under any material agreement, contract or
judgment to which Debtor is a party; (f) Debtor has filed all tax returns that
are required to be filed and has paid all taxes as shown on said returns and
all assessments received by it to the extent such taxes and assessments have
become due other than those which are the subject of valid extensions and those
which are being contested in good faith by appropriate proceedings and as to
which appropriate reserves are being maintained by Debtor in accordance with
generally accepted accounting principles and so long as such proceedings
Page 1 of 8
2
operate during the pendency thereof to prevent the sale, forfeiture, or loss
of the Collateral by or to such taxing authority, and Debtor does not have any
knowledge of any actual or proposed deficiency or additional assessment in
connection therewith; (g) to the best of its knowledge, there is no action,
audit, investigation or proceeding pending or threatened against or affecting
Debtor or any of its assets which involves any of the Equipment or any of the
contemplated transactions hereunder or which, if adversely determined, could
reasonably be expected to have a material adverse effect on Debtor's business,
operations or financial condition; (h) on each Closing Date, Debtor shall have
good and marketable title to the Equipment being financed on such date and CIT
shall have a perfected first Lien on such Equipment; and (i) (i) the operations
of Debtor comply in all material respects with all applicable Environmental
Laws; and (ii) except as disclosed to CIT, (A) none of the operations of Debtor
are subject to any judicial or administrative proceeding alleging the violation
of any Environmental Laws; (B) none of the operations of Debtor is the subject
of an investigation to determine whether any remedial action is needed to
respond to a release of any Hazardous Material into the environment; and (C)
Debtor has no known material contingent liability in connection with any
release of any Hazardous Material into the environment: (j) all annual and
quarterly financial statements of Debtor which have been delivered to CIT have
been prepared in accordance with generally accepted accounting principles
consistently applied, and present fairly in all material respects Debtor's
financial position as at, and the results of its operations for, the periods
ended on the dates set forth on such financial statements, and there has been
no material adverse change in Debtor's financial condition, business or
operations since September 30, 1995, as reflected in such financial statements;
(k) Debtor has not changed its name in the last five years or done business
under any other name except as previously disclosed in writing to CIT; and (l)
no consent of any Person, and no consent, license, approval or authorization
of, or registration or filing with, any governmental authority, bureau or
agency is required in connection with the execution, delivery and performance
of, and payment under, this Agreement or the Notes other than the consent of
Congress and the filing of financing statements.
SECTION 5. COVENANTS.
Debtor covenants and agrees that from and after the date hereof and so
long as the Commitment or any of the Notes is outstanding:
A. It will: (1) promptly give written notice to CIT of the occurrence of
any Event of Loss; (2) observe all material requirements of any governmental
authorities relating to the conduct of its business, to the performance of its
obligations hereunder, to the use, operation or ownership of the Equipment, or
to its other properties or assets, maintain its existence as a legal entity and
obtain and keep in full force and effect all material rights, franchises,
licenses and permits which are necessary to the proper conduct of its business,
and pay all fees, taxes, assessments and governmental charges or levies imposed
upon any of the Equipment; (3) at any reasonable time or times, permit CIT or
its authorized representative (A) upon prior written request to inspect the
Equipment and, (B) following the occurrence and during the continuation of an
Event of Default, to inspect the books and records of Debtor; (4) in accordance
with generally accepted accounting principles, keep proper books of record and
account in which entries will be made of all dealings or transactions in
relation to its business and activities; (5) furnish to CIT the following
financial statements, all in reasonable detail, prepared in accordance with
generally accepted accounting principles applied on a basis consistently
maintained throughout the period involved, (a) as soon as available, but not
later than 120 days after the end of each fiscal year, its consolidated balance
sheet as at the end of such fiscal year, and its consolidated statements of
income and consolidated statements of cash flow, including all footnotes, or
such fiscal year, together with comparative information for the prior fiscal
year, audited by Ernst & Young, LLP or other certified public accountants
reasonably acceptable to CIT; and (b) as soon as available, but not later than
90 days after the end of each of the first three quarterly periods of each
fiscal year, its consolidated balance sheet as at the end of such quarterly
period and its consolidated statements of income and consolidated statements of
cash flow for such quarterly period and for the portion of the fiscal year then
ended together with comparative information for the prior comparable period,
certified as to their accuracy by its chief financial officer; (6) furnish to
CIT, (i) together with the financial statements described in clauses 5(a) and
5(b) above, a statement signed by Debtor's chief financial officer certifying
that Debtor is in compliance with all financial covenants contained herein, or
if Debtor is not in compliance, the nature of such noncompliance or default,
and the status thereof (such statement shall set forth the actual calculations
of any financial covenants), and (ii) promptly, such additional financial and
other information as CIT may from time to time reasonably request; (7)
promptly, at Debtor's expense, execute and deliver to CIT such instruments and
documents, and take such action, as CIT may from time to time reasonably
request in order to carry out the intent and purpose of this Agreement and to
establish and protect the rights, interests and remedies created, or intended
to be created, in favor of CIT hereby, including, without limitation, the
execution, delivery, recordation and filing of financing statements (hereby
authorizing CIT, in such jurisdictions where such action is authorized by law,
to effect any such recordation or filing of financing statements without
Debtor's signature, and to file as valid financing statements in the applicable
financing statement records, photocopies hereof and of any other financing
statement executed in connection herewith); PROVIDED, HOWEVER, notwithstanding
anything in this Agreement to the contrary, in no event shall CIT file any
financing statement or other public document which specifically lists the
particular items of Equipment included in the Collateral; (8) warrant and
defend its good and marketable title to the Equipment, and CIT's perfected
first priority security interest in the Collateral, against all claims and
demands whatsoever (hereby agreeing that the Equipment shall be and at all
times remain separately identifiable personal property, and shall not become
part of any real estate), and will, at its expense, take such action as may be
necessary to prevent any other Person (other than Congress) from acquiring any
right or interest in the Equipment; (9) at Debtor's expense, if requested by
CIT in writing, attach to the Equipment a notice satisfactory to CIT disclosing
CIT's security interest in the Equipment; (10) at Debtor's expense, maintain
the Equipment in good condition and working order and furnish all parts,
replacements and servicing required therefor so that the value, condition and
operating efficiency thereof will at all times be maintained, normal wear and
tear excepted, and any repairs, replacements and parts added to the Equipment
in connection with any repair or maintenance or with any improvement, change,
addition or alteration shall immediately, without further act, become part of
the Equipment
Page 2 of 8
3
and subject to the security interest created by this Agreement; and (11) obtain
and maintain at all times on the Collateral, at Debtor's expense, "All-Risk"
physical damage and, if required by CIT, liability insurance (including bodily
injury and property damage) in such amounts, against such risks, in such form
and with such insurers as shall be reasonably satisfactory to CIT; PROVIDED,
HOWEVER, that the amount of physical damage insurance shall not be less than
the then aggregate outstanding principal amount of the Notes. All physical
damage insurance policies shall be made payable to CIT as its interest may
appear; if liability insurance is required by CIT, the liability insurance
policies shall name CIT as an additional insured. Debtor shall maintain and
deliver to CIT the original certificates of insurance or other documents
satisfactory to CIT prior to policy expiration or upon CIT's request, but CIT
shall bear no duty or liability to ascertain the existence or adequacy of such
insurance. Each insurance policy shall, among other things, require that the
insurer give CIT at least 30 days' prior written notice of any material
alteration in the terms of such policy or the cancellation thereof and that the
interests of CIT be continued insured regardless of any breach of or violation
by Debtor of any warranties, declarations or conditions contained in such
insurance policy. The insurance maintained by the Debtor shall be primary with
no other insurance maintained by CIT (if any) contributory.
B. It will not: (1) sell, convey, transfer, exchange, lease or otherwise
relinquish possession or dispose of any of the Collateral or attempt or offer
to do any of the foregoing; (2) create, assume or suffer to exist any Lien
upon the Collateral except for the security interest created hereby and the
subordinate security interest in favor of Congress; (3) liquidate or dissolve;
(4) change the form of organization of its business; or (5) without thirty (30)
days prior written notice to CIT, change its name or its chief executive
office; (6) move (or in the case of titled vehicles, change the principal base
of) any of the Equipment from the location specified on the Supplement relating
thereto without the prior written consent of CIT except within the continental
United States upon 30 days prior written notice to CIT (provided that Debtor
delivers to CIT such financing statements as CIT requests to maintain its
perfected first priority security interest in such Equipment); or (7) make or
authorize any improvement, change, addition or alteration to the Equipment
which would impair its originally intended function or use or its value.
Notwithstanding anything herein to the contrary, Debtor shall have the right to
substitute up to $1,000,000.00 of items of Equipment included in the Collateral
with other items of Equipment of a like type and of a value and utility equal
to or greater than the Equipment replaced, or other items of Equipment
acceptable to CIT. Any Equipment which is so substituted for shall no longer
be Collateral for purposes of this Agreement.
SECTION 6. EVENTS OF DEFAULT; REMEDIES.
The following events shall each constitute an "EVENT OF DEFAULT"
hereunder: (a) Debtor shall fail to pay any principal or interest on any Note
within 10 days after the same becomes due (whether at the stated maturity, by
acceleration or otherwise) or shall fail to pay any other Obligation when due
(whether at the stated maturity, by acceleration or otherwise) which failure is
not cured within 10 days after Debtor's receipt of notice from CIT; (b) any
representation or warranty made by Debtor in this Agreement or in any document,
certificate or financial or other statement now or hereafter furnished by
Debtor in connection with this Agreement or any Loan shall at any time prove to
be untrue or misleading in any material respect as of the time when made; (c)
Debtor shall fail to observe any covenant, condition or agreement contained in
Sections 5.A(11) or 5.B hereof or in paragraphs 4 or 5(b) of Rider A, which
failure shall continue for a period of ten (10) days after receipt of notice
from CIT; (d) Debtor shall fail to observe or perform any other covenant or
condition contained in this Agreement, and such failure shall continue
unremedied for a period of 30 days after the date on which notice thereof shall
be given by CIT to Debtor; (e) Debtor or any affiliate of Debtor shall default
(i) in the payment of, or other performance under, any obligation for payment
or lease (whether or not capitalized) or any guarantee to CIT or any affiliate
of CIT beyond the period of grace, if any, provided with respect thereto, or
(ii) in the payment or performance of any obligation for borrowed money to any
other Person beyond the period of grace, if any, provided with respect thereto,
where such obligation or amount guaranteed is in excess of $100,000 if such
obligation for borrowed money is accelerated as a result thereof; (f) a
complaint in bankruptcy or for arrangement or reorganization or for relief
under any insolvency law is filed by or against Debtor (and when filed against
Debtor is in effect for 60 days) or Debtor admits its inability to pay its
debts as they mature; or (g) upon the expiration of Debtor's current revolving
loan facility with Congress, Debtor shall fail to renew such facility with
Congress or shall fail to replace such facility with another lender reasonably
acceptable to CIT with terms and conditions reasonably acceptable to CIT.
If an Event of Default shall occur and be continuing, CIT may, by notice
of default given to Debtor, do any one or more of the following: (a) terminate
the Commitment and/or (b) declare the Notes to be due and payable, whereupon
the principal amount of the Notes, together with accrued interest thereon and
all other amounts owing under this Agreement and the Notes, shall become
immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived (and in the case
of any Event of Default specified in clause (f) of the above paragraph, such
acceleration of the Notes shall be automatic, without any notice by CIT). In
addition, if an Event of Default shall occur and be continuing, CIT may
exercise all other rights and remedies available to it, whether under this
Agreement, under any other instrument or agreement securing, evidencing or
relating to the Obligations, under the Code, or otherwise available at law or
in equity. Without limiting the generality of the foregoing, Debtor agrees
that in any such event, CIT, without demand of performance or other demand,
advertisement or notice of any kind (except the notice specified below of time
and place of public or private sale) to or upon Debtor or any other Person (all
and each of which demands, advertisements and notices are hereby expressly
waived), may forthwith do any one or more of the following: collect, receive,
appropriate and realize upon the Collateral or any part thereof, and sell,
lease, assign, give an option or options to purchase or otherwise dispose of
and deliver, the Collateral (or contract to do so), or any part thereof, in one
or more parcels at public or private sale or sales at such places and at such
prices as it may deem best, for cash or on credit or for future delivery
without the assumption of any credit risk. CIT shall have the right upon any
such public sale or sales, and, to the extent permitted
Page 3 of 8
4
by law, upon any such private sale or sales, to purchase the whole or any part
of the Collateral so sold, free of any right or equity of redemption of Debtor,
which right or equity is hereby expressly released. Debtor further agrees, at
CIT's request, to assemble (at Debtor's expense) the Collateral and make it
available to CIT at such places which CIT shall select, whether at Debtor's
premises or elsewhere but not more than 1000 miles from Debtor's premises. CIT
shall apply the net proceeds of any such collection, recovery, receipt,
appropriation, realization or sale (after deducting all reasonable costs and
expenses of every kind incurred therein or incidental to the care, safekeeping
or otherwise of any or all of the Collateral or in any way relating to the
rights of CIT hereunder, including reasonable attorney's fees and legal
expenses) to the payment in whole or in part of the Obligations, in such order
as CIT may elect. Debtor agrees that CIT need not give more than 10 days'
notice of the time and place of any public sale or of the time after which a
private sale may take place and that such notice is reasonable notification of
such matters. Debtor shall be liable for any deficiency if the proceeds of any
sale or disposition of the Collateral are insufficient to pay all amounts to
which CIT is entitled. Debtor agrees to pay all costs of CIT, including
reasonable attorneys' fees, incurred with respect to collection of any of the
Obligations and enforcement of any of CIT's rights hereunder. To the extent
permitted by law, Debtor hereby waives presentment, demand, protest or any
notice (except as expressly provided in this Section 6) of any kind in
connection with this Agreement or any Collateral.
SECTION 7. MISCELLANEOUS.
No failure or delay by CIT in exercising any right, remedy or privilege
hereunder or under any Note shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, remedy or privilege hereunder or
thereunder preclude any other or further exercise thereof or the exercise of
any other right, remedy or privilege. No right or remedy in this Agreement is
intended to be exclusive but each shall be cumulative and in addition to any
other remedy referred to herein or otherwise available to CIT at law or in
equity; and the exercise by CIT of any one or more of such remedies shall not
preclude the simultaneous or later exercise by CIT of any or all such other
remedies. No express or implied waiver by CIT of an Event of Default shall in
any way be, or be construed to be, a waiver of any other or subsequent Event of
Default. The acceptance by CIT of any regular installment payment or any other
sum owing hereunder shall not (a) constitute a waiver of any Event of Default
in existence at the time, regardless of CIT's knowledge or lack of knowledge
thereof at the time of such acceptance, or (b) constitute a waiver of any Event
of Default unless CIT shall have agreed in writing to waive the Event of
Default.
All notices, requests and demands to or upon any party hereto shall be
deemed duly given or made when sent, if given by telecopier, when delivered, if
given by personal delivery or overnight commercial carrier, or the fifth
calendar day after deposit in the United States mail, certified mail, return
receipt requested, addressed to such party at its address (or telecopier
number) set forth in paragraph 6 of Rider A or such other address or telecopier
number as may be hereafter designated in writing by such party to the other
party hereto.
Debtor agrees (A) to pay or reimburse CIT for (i) all expenses of CIT in
connection with the documentation hereof; (ii) all fees, taxes and expenses of
whatever nature incurred in connection with the creation, preservation and
protection of CIT's security interest in the Collateral, including, without
limitation, all filing and lien search fees, payment or discharge of any taxes
or Liens upon, or in respect to, the Collateral, and all other fees and
expenses reasonably incurred in connection with protecting or maintaining the
Collateral or in connection with defending or prosecuting any actions, suits or
proceedings arising out of, or related to, the Collateral; and (iii) all costs
and expenses (including reasonable legal fees and disbursements) of CIT in
connection with the enforcement of this Agreement and the Notes, and (B) to
pay, and to indemnify and hold CIT harmless from and against any and all
liabilities, obligations, losses, damages, penalties, claims, actions,
judgments, suits, out-of-pocket costs, expenses (including reasonable legal
expenses) or disbursements of any kind or nature whatsoever arising out of or
with respect to (a) this Agreement, the Collateral or CIT's interest therein,
including, without limitation, the execution, delivery, enforcement,
performance or administration of this Agreement and the Notes and the
manufacture, purchase, ownership, possession, use, selection, operation or
condition of the Collateral or any part thereof, or (b) Debtor's violation or
alleged violation of any Environmental Laws or any law or regulation relating
to Hazardous Materials (the foregoing being referred to as the "indemnified
liabilities"), PROVIDED, that Debtor shall have no obligation hereunder with
respect to indemnified liabilities arising from the gross negligence or willful
misconduct of CIT. If Debtor fails to perform or comply with any of its
agreements contained in this Agreement and CIT shall itself perform, comply or
cause performance or compliance, the expenses of CIT so incurred, together with
interest thereon at the Late Charge Rate, shall be payable by Debtor to CIT on
demand and until such payment is made shall constitute Obligations hereunder.
The agreements and indemnities contained in this paragraph shall survive
termination of this Agreement and payment of the Notes.
This Agreement contains the complete, final and exclusive statement of
the terms of the agreement between CIT and Debtor related to the contemplated
transactions, and neither this Agreement, nor any terms hereof, may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of a change, waiver, discharge or
termination is sought.
This Agreement shall be binding upon, and inure to the benefit of, Debtor
and CIT and their respective successors and assigns, except that Debtor may not
assign or transfer its rights hereunder or any interest herein without the
prior written consent of CIT.
Headings of sections and paragraphs are for convenience only, are not
part of this Agreement and shall not be deemed to affect the meaning or
construction of any of the provisions hereof. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining
Page 4 of 8
5
provisions hereof, and any such prohibition or unenforceability shall not
invalidate or render unenforceable such provision in any other jurisdiction.
Debtor hereby authorizes CIT to correct patent errors and to fill in such
blanks as dates herein and in the Notes, Supplements and in any document
executed in connection herewith.
THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK.
DEBTOR HEREBY IRREVOCABLY CONSENTS AND AGREES THAT ANY LEGAL ACTION IN
CONNECTION WITH THIS AGREEMENT MAY BE INSTITUTED IN THE COURTS OF THE STATE OF
NEW YORK, IN THE COUNTY OF NEW YORK OR THE UNITED STATES COURTS FOR THE
SOUTHERN DISTRICT OF NEW YORK, AS CIT MAY ELECT, AND BY EXECUTION AND DELIVERY
OF THIS AGREEMENT, DEBTOR HEREBY IRREVOCABLY ACCEPTS AND SUBMITS TO, FOR ITSELF
AND IN RESPECT OF ITS PROPERTY, THE NON-EXCLUSIVE JURISDICTION OF ANY SUCH
COURT, AND TO ALL PROCEEDINGS IN SUCH COURTS. DEBTOR AND CIT ACKNOWLEDGE THAT
JURY TRIALS OFTEN ENTAIL ADDITIONAL EXPENSES AND DELAYS NOT OCCASIONED BY
NONJURY TRIALS. DEBTOR AND CIT AGREE AND STIPULATE THAT A FAIR TRIAL MAY BE
HAD BEFORE A STATE OR FEDERAL JUDGE BY MEANS OF A BENCH TRIAL WITHOUT A JURY.
IN VIEW OF THE FOREGOING, AND AS A SPECIFICALLY NEGOTIATED PROVISION OF THIS
AGREEMENT, DEBTOR AND CIT HEREBY EXPRESSLY WAIVE ANY RIGHT TO TRIAL BY JURY OF
AN CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS AGREEMENT, OR
THE TRANSACTIONS RELATED HERETO, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER SOUNDING IN CONTRACT O TORT OR OTHERWISE; AND DEBTOR AND CIT HEREBY
AGREE AND CONSENT THAT DEBTOR OR CIT MAY FILE AN ORIGINAL COUNTERPART OR A COPY
OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their duly authorized officers as of January 17,
1996.
CIT: DEBTOR:
THE CIT GROUP/EQUIPMENT LEXINGTON PRECISION CORPORATION,
FINANCING, INC., A DELAWARE CORPORATION
A NEW YORK CORPORATION
By: Richard J. Doherty By: Warren Delano
------------------ -----------------------
Title: Senior Vice President Title: President
--------------------- ----------------------
Page 5 of 8
6
RIDER A TO
LOAN AND SECURITY AGREEMENT
DATED AS OF JANUARY 17, 1996
BETWEEN THE CIT GROUP/EQUIPMENT FINANCING, INC. ("CIT") AND
LEXINGTON PRECISION CORPORATION ("DEBTOR").
1. DEFINITIONS. As used in the Loan and Security Agreement, the following
terms shall have the following defined meanings (applicable to both singular
and plural forms), unless the context otherwise requires:
"Agreement": "hereof", "hereto", "hereunder" and words of similar meaning:
the Loan and Security Agreement of even date herewith between Debtor and CIT
including this Rider A and any other rider, schedule and exhibit executed by
Debtor and CIT in connection herewith, as from time to time amended, modified
or supplemented.
"Appraisal": an appraisal satisfactory to CIT commissioned by CIT with
respect to the items of used Equipment. {this definition can be made more
specific once the appraiser is engaged and the appraisal conducted].
"Business Day": a day other than a Saturday, Sunday or legal holiday under
the laws of the State of New York. "
"Cash Flow Coverage Ratio": with respect to Debtor shall mean at any
time, the sum of Debtor's net income, depreciation and amortization
less its dividends divided by the current portion of its long term debt
excluding its 12 3/4% Senior Subordinated Notes due February 1, 2002 in the
original principal amount of $31,720,000; PROVIDED; that for the purposes of
this calculation the Debtor's results of operations for any twelve-month period
shall exclude any write-down or write-off of assets (whether tangible or
intangible) of any manufacturing facility or business unit of the Debtor which
is recorded by Debtor as a result of the restructuring, relocation, shut-down
or sale of such manufacturing facility or business unit or as a result of
compliance with Financial Accounting Standard No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of.
"Closing Date": each date on which a Loan is made.
"Code": the Uniform Commercial Code as from time to time in effect in any
applicable jurisdiction.
"Collateral": the Equipment and the Proceeds thereof.
"Commitment": CIT's obligation to make Loans in the aggregate principal
amount stated in paragraph 2 of this Rider A.
"Congress": Congress Financial Corporation and its successors and assigns.
"Cost": with respect to any item of new Equipment, the seller's invoiced
purchase price therefor (after giving effect to any discount or
other reduction) payable by Debtor excluding all other amounts and expenses
payable by Debtor unless approved by CIT such as installation, freight,
tooling, delivery charges, sales taxes, site preparation, and other similar
costs with respect Equipment or, with respect to any item of used Equipment,
such amount as CIT may approve. The Cost shall be set forth in the applicable
Supplement.
"Default": any event which with notice, lapse of time, or both would
constitute an Event of Default.
"Equipment": any and all items of property which are listed on
Supplements, together with all now owned or hereafter acquired accessories,
parts, repairs, replacements, substitutions, attachments, modifications,
additions, improvements, upgrades and accessions of, to or upon such items of
property.
"Environmental Laws": the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability Act, any
so-called "Superfund" or "Superlien" law, the Toxic Substances Control Act, or
any other federal, state or local statute, law, ordinance, code, rule,
regulation, order or decree regulating, relating to, or imposing liability or
standards of conduct concerning, any hazardous, toxic or dangerous waste,
substance or material, as now or at any time hereafter in effect.
"Event Of Default": as set forth in Section 6 of the Agreement.
"Event Of Loss": with respect to any item of Equipment, (i) the actual or
constructive loss or loss of use thereof, due to theft, destruction, damage
beyond repair or to an extent which makes repair uneconomical, or (ii) the
condemnation, confiscation or seizure thereof, or requisition of title thereto,
or use thereof, by any Person.
"Hazardous Materials": any pollutant or contaminant defined as such in (or
for the purposes of) any Environmental Laws including, but not limited to,
petroleum, any radioactive material, and asbestos in any form or condition.
"Indebtedness" shall mean all items which, in accordance with generally
accepted accounting principles, consistently applied, would be included in
determining total liabilities of Debtor shown on the liability side of its
balance sheet as at the date such Indebtedness is to be calculated.
"Installment Payment Date": with respect to any Note, each date on which a
regular installment of interest is due.
"Interest Rate": as set forth in paragraph 3 of this Rider A.
"Interest Rate Period" shall mean each successive one-month period
beginning on the day each Loan is made and ending on the day before such date
in the subsequent month.
"Late Charge Rate": a rate per annum equal to the higher of 3% over the
applicable Interest Rate, but not to exceed the highest rate permitted by
applicable law.
"Libor Rate": shall mean the rate of interest equal to the thirty (30)-day
London Interbank Offered Rate on United States Dollars as reported and
published in THE WALL STREET JOURNAL. The LIBOR Rate in effect during any
Interest Rate Period shall be the LIBOR Rate in effect at the close of business
on the latest Rate Determination Date preceding the Installment Payment Date
upon which such Interest Rate Period commences.
Page 6 of 8
7
"Liens": liens, mortgages, security interests, financing statements or
other encumbrances of any kind whatsoever.
"Loan": each loan made pursuant to the Agreement.
"Note": each promissory note executed and delivered by Debtor pursuant
hereto, satisfactory in form and substance to CIT.
"Obligations": all indebtedness, obligations, liabilities and performance
of Debtor to CIT, now existing or hereafter incurred under, arising out of, or
in connection with, the Agreement or any Note.
"Parent Company": any Person having beneficial ownership (directly or
indirectly) of 25% or more of Debtor's shares of voting stock.
"Person": an individual, partnership, corporation, trust, unincorporated
association, joint venture, governmental authority or other entity of whatever
nature.
"Prepayment Percentage": on the date of any prepayment of any Note
pursuant to the Agreement (i) during or prior to the first twelve months
thereof, 3%, (ii) during the second twelve months thereof, 1.5%, and
thereafter 0%. The first twelve month period shall commence on the Installment
Payment Date first occurring after March 31, 1996.
"Proceeds": the meaning assigned to it in the Code, and in any event,
including, without limitation, (i) any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to Debtor from time to time with
respect to any of the Equipment; (ii) any and all payments made, or due and
payable from time to time, in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of the Equipment by any
Person; (iii) any and all accounts arising out of, or chattel paper evidencing
a lease of, any of the Equipment; and (iv) any and all other rents or profits
or other amounts from time to time paid or payable in connection with any of
the Equipment.
"Prohibited Transaction": a transaction in which: (i) Debtor enters into
any transaction of merger or consolidation where (x) it shall not be the
surviving corporation or (y) if it is the surviving corporation, after giving
effect to such merger or consolidation its tangible net worth does not equal or
exceed that which existed prior to such merger or consolidation; or (ii) Debtor
sells, transfers or otherwise disposes of all or substantially all its assets;
or (iii) any Person, or group of Persons acting together, becomes or agrees to
become the beneficial owner (directly or indirectly) of 25% or more of Debtor's
shares of voting stock (excluding current shareholders and their affiliates as
of the date of this Agreement owning in the aggregate 25% or more of Debtor's
shares of voting stock).
"Rate Determination Date" shall mean with respect to any Interest Rate
Period for any Loan made hereunder, shall mean the third preceding Business Day
prior to the commencement of any Interest Rate Period, or if such day is not a
day on which THE WALL STREET JOURNAL is published (or if published, does not
publish the LIBOR Rate), then on the next preceding day prior to the day on
which THE WALL STREET JOURNAL is published and reports the LIBOR Rate.
"Supplement": each supplement executed and delivered by Debtor pursuant
hereto, satisfactory in form and substance to CIT.
"Working Capital": shall mean and include, at any time, the amount, if
any, by which (i) the aggregate net book value of all assets of Debtor which
would, in accordance with generally accepted accounting principles,
consistently applied, be classified as current assets at any such time, exceeds
(ii) all Indebtedness of Debtor which would, in accordance with generally
accepted accounting principles, consistently applied, be classified as current
liabilities at such time; PROVIDED, THAT in computing Working Capital
hereunder, none of the Obligations of Debtor to CIT and none of the obligations
of Debtor to Congress shall be considered current liabilities.
2. LOAN AND COMMITMENT. The aggregate principal amount of all Loans shall not
exceed the lesser of (x) $5,000,000.00 or (y) the sum of (i) $2,600,000 with
respect to the items of Equipment listed on EXHIBIT 1 hereto; (ii) 100% of the
fair market value (as determined by CIT) of the used Equipment not listed on
Exhibit 1 but set forth on the Appraisal and (iii) 100% of the Cost (as
approved by CIT) of items of new and used Equipment not listed on the
Appraisal, which items are satisfactory to CIT. Each Loan shall be in a
principal amount of not less than $300,000, and CIT shall not make more than
four (4) Loans. Each Loan shall be amortized in level payments of principal.
Interest on the unpaid principal balance shall be payable at the rate specified
in the Notes. With respect to any Loan made prior to March 31, 1996, interest
only shall be payable through March 31, 1996 and thereafter the Loan shall be
payable in forty-eight (48) payments equal payments of principal commencing on
April 30, 1996. Interest shall be payable monthly on the last day of each
calendar month. CIT's Commitment shall terminate on July 31, 1996. The
proceeds of each Loan shall be to finance the purchase of, or reimburse Debtor
for the cost of, the Equipment.
3. INTEREST RATE. The interest rate per annum on the unpaid principal amount of
each Loan shall be equal to the LIBOR Rate plus 3.00%.
4. FINANCIAL COVENANTS. Debtor agrees that so long as any Note remains
outstanding and unpaid, Debtor shall, directly or indirectly, at all times: (a)
maintain on a basis consolidated with Debtor's direct and indirect
subsidiaries, Working Capital of not less than $1,000,000; (b) maintain on a
basis consolidated with Debtor's direct and indirect subsidiaries, a minimum
Net Worth of not less than negative $9,500,000; (c) maintain a Cash Flow
Coverage Ratio of not less than 1.25 to 1.0; or (d) not incur, make or commit
to make any expenditure in respect of the purchase or other acquisition of
fixed or capital assets including leases which in accordance with generally
accepted accounting principles should be capitalized on the books of Debtor
(including normal replacements and maintenance) which after giving effect
thereto, would cause the aggregate amount of such capital expenditures by
Debtor to exceed $15,000,000 (on a non-cumulative basis) in any fiscal year.
Page 7 of 8
8
5. PREPAYMENT. (a) Should any item of Equipment suffer an Event of Loss, Debtor
shall either replace such item of Equipment within 60 days with equipment
(which shall become Equipment) of a value and utility equal to or greater than
that of the Equipment suffering the Event of Loss (such determination of value
and utility being deemed made immediately prior to the Event of Loss) or make a
prepayment on the corresponding Note within 60 days after the occurrence of the
Event of Loss. The amount to be prepaid shall be (i) the unpaid principal
amount of such Note multiplied by a fraction the numerator of which is the Cost
of the item of Equipment which suffered the Event of Loss and the denominator
of which is the Cost of all items of Equipment less the Cost of each item of
Equipment which previously suffered an Event of Loss or for which a prepayment
has otherwise previously been made (the "PREPAID PRINCIPAL AMOUNT"), (ii) all
other amounts then due and owing hereunder and under the Notes and (iii) an
amount equal to the product of the Prepayment Percentage and the Prepaid
Principal Amount.
(b) A Prohibited Transaction may be consummated only with CIT's prior
written consent. Not less than twenty (20) Business Days prior to the date the
proposed Prohibited Transaction is expected to be consummated, Debtor shall
give CIT written notice of the proposed Prohibited Transaction. In the event
CIT does not consent to the Prohibited Transaction and the Prohibited
Transaction is nonetheless to be consummated, Debtor shall, on or prior to the
date the Prohibited Transaction is to be consummated, prepay the outstanding
principal under all Notes together with (1) all interest accrued thereon, (2)
all other amounts then due and owing hereunder and under the Notes, and (3) an
amount equal to the product of the Prepayment Percentage and the outstanding
principal amount of the Notes.
(c) On any Installment Payment Date Debtor may, at its option, on at least
30 days' prior written notice to CIT, prepay all, but not less than all, of the
outstanding principal under all Notes executed hereunder together with (i) all
interest accrued thereon to the date of prepayment, (ii) all other amounts then
due and owing hereunder or under the Notes, and (iii) an amount equal to the
product of the outstanding principal under all Notes and the Prepayment
Percentage.
(d) Except as provided in (a), (b) or (c) of this paragraph 5, the Notes
may not be prepaid in whole or in part.
6. ADDRESSES FOR NOTICE PURPOSES AND DEBTOR'S CHIEF EXECUTIVE OFFICE.
CIT: DEBTOR:
THE CIT GROUP/EQUIPMENT FINANCING, INC. LEXINGTON PRECISION CORPORATION
1211 Avenue of the Americas c/o Lubin Delano & Co.
21st Floor 767 Third Avenue
New York, New York 10036 New York, New York 10017
Telecopier No. (212) 536-1385 Telecopier No. (212) 319-4659
Attention: Senior Vice President/Credit Attention: Warren Delano
7. COMMITMENT FEE. CIT acknowledges receipt from Debtor of a commitment fee in
the amount of $25,000. CIT agrees to refund to Debtor after the expiration of
the commitment period hereunder and completion by CIT of all follow-up matters
related to the transactions contemplated hereby, as the refundable portion of
the Commitment Fee, the amount determined in accordance with the following
formula:
Refund = $25,000 Fee Aggregate principal amount of all Loans made
X hereunder - not to exceed $5,000,000
--------------------------------------------
$5,000,0000
Such refund shall be net, however, of any unreimbursed out-of-pocket fees,
costs, disbursements and expenses incurred by CIT in connection with the
transactions contemplated hereby. Debtor agrees that the difference, if any,
between the amount of the Commitment Fee and the amount determined in
accordance with the foregoing formula shall be retained by CIT.
THE PROVISIONS SET FORTH IN THIS RIDER A ARE INCORPORATED IN AND MADE A PART OF
THE LOAN AND SECURITY AGREEMENT BETWEEN CIT AND DEBTOR DATED AS OF JANUARY 17,
1996.
CIT: DEBTOR:
THE CIT GROUP/EQUIPMENT LEXINGTON PRECISION
FINANCING, INC., A NEW YORK CORPORATION A DELAWARE CORPORATION,
By: Richard J. Doherty By: Warren Delano
--------------------------------------------- ---------------------------------------------
Title: Senior Vice President Title: President
------------------------------------------ ------------------------------------------
Page 8 of 8