1
Exhibit 10-5
October 20, 1998
Lexington Precision Corporation
767 Third Avenue
New York, New York 10017
Re: AMENDMENT TO FINANCING AGREEMENTS
Gentlemen:
Reference is made to certain financing agreements dated January 11,
1990 between Lexington Precision Corporation ("LPC") and Congress Financial
Corporation ("Congress"), including, but not limited to, an Accounts Financing
Agreement [Security Agreement], as amended (the "Accounts Agreement"), and all
supplements thereto and all other related financing and security agreements
(collectively, all of the foregoing, as the same have heretofore or
contemporaneously been or may be hereafter, amended, replaced, extended,
modified or supplemented, the "Financing Agreements").
In connection with the financing arrangements pursuant to the Accounts
Agreement and the other Financing Agreements, the parties hereto hereby agree to
amend the Financing Agreements, as set forth below:
1. NEW EQUIPMENT TERM LOANS. Section 2(a) of the letter agreement re:
Amendment to Financing Agreements, dated as of March 25, 1994, between Congress
and LPC, as heretofore amended by the letter agreement re: Amendment to
Financing Agreements, dated as of August 1, 1994, the January 31, 1995
Amendment, and the March 11, 1997 Amendment (as so amended, the "New Equipment
Term Loan Agreement") is hereby deleted in its entirety and replaced with the
following, effective for New Equipment Term Loans made after the date hereof:
"(a) Subject to and upon the terms and conditions
contained herein and in the other Financing Agreements,
including the sublimit set forth below in Section 2(b),
Congress shall, in its discretion, make New Equipment Term
Loans to LPC, from time to time, at LPC's request, of up to
(i) sixty-five (65%) percent of the Cost of Eligible New
Equipment, or (ii) if LPC shall elect to obtain an Appraisal
Report (as defined below) or if the Eligible New Equipment
which is the subject of the New Equipment Term Loan requested
hereunder is equivalent in all respects (including, without
limitation, model, make and manufacturer) to Equipment shown
in an acceptable Appraisal Report prepared not more than
twenty-four (24) months prior to the date the requested New
Equipment Term Loan is to be made, ninety (90%) percent of the
appraised orderly liquidation value of
2
such Eligible New Equipment (or such equivalent Equipment) as
shown in such Appraisal Report. As used herein, "Appraisal
Report" shall mean an orderly liquidation value appraisal
report prepared for Congress, at LPC's expense, by MB
Valuation Services, Inc., Daley-Hodkin Appraisal Corporation
or other appraiser reasonably satisfactory to Congress, and
including the orderly liquidation value appraisal reports of
MB Valuation Services Inc., dated January 15, 1997, with
respect to LPC's Equipment".
2. INVENTORY LOANS.
(a) INVENTORY ADVANCE RATES. Paragraph 2 of the Letter re:
Inventory Loans, dated March 23, 1990, by LPC in favor of Congress (the
"Inventory Loan Letter"), as heretofore amended by the August 1, 1995 Amendment,
is hereby amended by deleting the phrase "(i) up to sixty-five (65%) percent of
the Value of eligible finished goods Inventory, (ii) up to fifty (50%) percent
of the Value of eligible raw materials Inventory and (iii) up to thirty (30%)
percent of the scrap value of eligible work-in- process Inventory" and replacing
it with the following:
"(i) up to sixty-five (65%) percent of the Value of
eligible finished goods Inventory, (ii) up to sixty-five (65%)
percent of the Value of eligible raw materials Inventory,
(iii) up to sixty-five (65%) percent of the value of eligible
work-in-process Inventory and (iv) up to fifty (50%) percent
of the Value of eligible Inventory of scrap metal saleable as
a commodity".
(b) INVENTORY SUBLIMIT. Paragraph 3 of the Inventory Loan
Letter is hereby further amended by deleting the reference to "$6,000,000" and
replacing it with "$7,000,000".
3. ACCOUNTS RECEIVABLE ADVANCE RATES. Section 2.1 of the Accounts
Agreement is hereby amended by deleting the reference to "eighty-five percent
(85%)" and replacing it with "eighty-seven and one-half percent (87.5%)".
4. REPRESENTATIONS, WARRANTIES AND COVENANTS. In addition to the
continuing representations, warranties and covenants heretofore or hereafter
made by LPC to Congress pursuant to the Financing Agreements, LPC hereby
represents, warrants and covenants with and to Congress as follows (which
representations, warranties and covenants are continuing and shall survive the
execution and delivery hereof and shall be incorporated into and made a part of
the Financing Agreements):
(a) No Event of Default exists or has occurred and is
continuing on the date of this Amendment.
-2-
3
(a) This Amendment has been duly executed and delivered by LPC
and is in full force and effect as of the date hereof, and the agreements and
obligations of LPC contained herein constitute the legal, valid and binding
obligations of LPC enforceable against LPC in accordance with their terms.
5. CONDITIONS TO EFFECTIVENESS OF AMENDMENT. Anything contained in this
Amendment to the contrary notwithstanding, the terms and provisions of this
Amendment shall only become effective upon the satisfaction of the following
additional conditions precedent: Congress shall have received an executed
original or executed original counterparts (as the case may be) of this
Amendment, together with an Amendment between LCI and Congress with respect to
the LCI Financing Agreements and the documents and instruments required
thereunder (if any) and the satisfaction of all conditions precedent to the
effectiveness thereof, which shall be in form and substance satisfactory to
Congress.
6. EFFECT OF THIS AMENDMENT. Except as modified pursuant hereto, the
Accounts Agreement and all supplements to the Accounts Agreement and all other
Financing Agreements, are hereby specifically ratified, restated and confirmed
by the parties hereto as of the date hereof and no existing defaults or Events
of Default have been waived in connection herewith. To the extent of conflict
between the terms of this Amendment and the Accounts Agreement or any of the
other Financing Agreements, the terms of this Amendment control.
7. FURTHER ASSURANCES. LPC shall execute and deliver such additional
documents and take such additional actions as may reasonably be requested by
Congress to effectuate the provisions and purposes of this Amendment.
8. GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the laws of the State of New York without reference to its
principles of conflicts of law.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-3-
4
By the signatures hereto of the duly authorized officers, the parties
hereto mutually covenant, warrant and agree as set forth herein.
Very truly yours,
CONGRESS FINANCIAL CORPORATION
By: Herbert C. Korn
-----------------------------
Title: Assistant Vice President
--------------------------
AGREED AND ACCEPTED:
LEXINGTON PRECISION CORPORATION
By: Dennis J. Welhouse
------------------------------
Title: Senior Vice President
---------------------------
-4-
5
CONSENT
-------
The undersigned guarantor hereby consents to the foregoing Amendment,
agrees to be bound by its terms applicable to it, and ratifies and confirms the
terms of its Guarantee and Waiver dated January 11, 1990 as applicable to all
present and future indebtedness, liabilities and obligations of LEXINGTON
PRECISION CORPORATION ("LPC") to CONGRESS FINANCIAL CORPORATION ("Congress"),
including, without limitation, all indebtedness, liabilities and obligations
under the Financing Agreements as amended hereby.
LEXINGTON COMPONENTS, INC.
By: Dennis J. Welhouse
----------------------------
Title: Senior Vice President
--------------------------
-5-