SUPER- PRIORITY DIP NOTE
Exhibit 10-1
SUPER- PRIORITY DIP NOTE
FOR VALUE RECEIVED, the undersigned, Lexington Precision Corporation and Lexington Rubber
Group, Inc., each a Delaware corporation and a debtor in possession (collectively, the
“Debtors”), hereby jointly and severally and unconditionally promise to pay to the order of
Xxxxx Partners, LLC, a Delaware limited liability company, Xxxxxxx X. Xxxxxx and XXX Associates,
LLC, a New York limited liability company (collectively, the “Holders”), the aggregate
principal sum of Two Million Dollars ($4,000,000), to be allocated among the Holders as follows:
Xxxxx Partners, LLC |
$ | 2,000,000 | ||
Xxxxxxx X. Xxxxxx |
$ | 1,500,000 | ||
ORA Associates, LLC |
$ | 500,000 |
1. Payment of Principal and Interest. The principal amount of this Note shall be paid
on the earliest of (i) the one year anniversary of the Petition Date, (ii) the effective date of a
confirmed chapter 11 plan of reorganization in the Chapter 11 Cases,1 (iii) the
conversion of any of the Chapter 11 Cases to cases under chapter 7 of the Bankruptcy Code, (iv) the
appointment of a chapter 11 trustee in any of the Chapter 11 Cases or the appointment of an
examiner with expanded powers to operate or manage the financial affairs, the business or the
reorganization of any Debtor and (v) the date of acceleration by the Holders pursuant to Section 7
hereof (such date, the “Stated Maturity Date”). The Debtors also promise to pay interest
on this Note on the first business day of each month (in arrears) and upon the date this Note
matures or otherwise becomes due and payable at the rate of LIBOR plus 7% per annum with a LIBOR
floor of 3% per annum (computed on the basis of a 360 day year for the actual number of days
lapsed); provided that any principal amount not paid when due, and to the extent permitted
by applicable law, any interest not paid when due, in each case whether at Stated Maturity Date, by
required prepayment, declaration, acceleration or demand or otherwise (both before as well as after
judgment), shall bear interest payable upon demand at the rate that is 2% per annum in excess of
the rate of interest otherwise payable upon this Note. All payments hereunder, including any
prepayment, shall be made to the Holders on a pro rata basis based on the respective principal
amounts owed to each Holder.
2. Optional Prepayment. Debtors shall have the right at any time or from time to time
and without premium or penalty, to voluntarily prepay all or any portion of this Note. Each
prepayment shall be accompanied by the payment of accrued
| 1 | Capitalized terms used but not otherwise defined shall have the meanings ascribed to such terms in Section 9 hereof. |
and unpaid interest on the amount being prepaid, through the date of prepayment. Any amounts
prepaid hereunder may not be reborrowed.
3. Lender Fee. Pursuant to the Final Order, the Debtors shall pay to the Holders a
fee in cash in the aggregate amount of $80,000, to be allocated to the Holders pro rata based upon
their funding commitment.
4. Use of Proceeds. The proceeds of this Note shall be used by the Debtors to the
extent Cash Collateral (as defined in the Final Borrowing Order) is insufficient to fund working
capital requirements and general corporate purposes relating to the Debtors’ post-petition
operations and for other expenditures as authorized in the Final Borrowing Order or as otherwise
authorized by the Bankruptcy Court; provided that no portion of the proceeds shall be used,
directly or indirectly, to (a) finance or make any payment or prepayment to any Person with respect
to a Prepetition Indebtedness unless authorized by an order of the Bankruptcy Court; or (b) finance
in any way any investigation, adversary action, suit, arbitration, proceeding or other litigation
of any type against the Holders. The Debtors shall use the entire amount of the proceeds in
accordance with this Section 4; provided, however, that nothing herein shall in any
way prejudice the Holders from objecting, for any reason, to any requests, motions or applications
made in the Bankruptcy Court, including any applications for interim or final allowances of
compensation for services rendered or reimbursement of expenses incurred under Sections 105(a), 330
or 331 of the Bankruptcy Code, by any party in interest; and provided, further,
that Debtor shall not use the proceeds for any purpose that is prohibited under the Bankruptcy
Code. The proceeds of this Note shall be deposited and held in a new bank account at a bank that
has been approved by the Office of the United States Trustee for the Southern District of New York
as an authorized bank depository (the “DIP Account”) as described in the Final Borrowing
Order and no other funds or cash collateral of the Debtors shall be co-mingled with the proceeds of
this Note or deposited in the DIP Account.
5. Superpriority Nature of Obligations. All obligations of the Debtors under this
Note (including the obligation to pay principal, interest, fees, costs, charges, commissions and
expenses) shall be paid as provided herein when due, without defense, offset, reduction or
counterclaim, and shall constitute allowed claims to the full extent thereof against the Debtors
arising under Section 364(c)(1) of the Bankruptcy Code, and senior to any and all other claims,
including, without limitation, all administrative expenses or other claims arising under sections
105, 326, 328, 330, 331, 503(b), 506(c), 507(a), 507(b), 726, 1113 or 1114 of the Bankruptcy Code;
provided, however, that notwithstanding the foregoing, the DIP Super-Priority Claim
shall be junior, subordinate, and subject to the Adequate Protection Claim, the Prepetition Senior
Secured Debt, the Senior Lender Prepetition Liens, the Carve-Out, and the Adequate Protection Lien
(all as defined in the Final Borrowing Order). Subject to the Carve-Out, the Adequate Protection
Liens (as defined in Final Borrowing Order), the Prepetition Senior Secured Debt (as defined in the
Final Borrowing Order) and the Adequate Protection Claim (as defined in the Final Borrowing Order),
the DIP Super-Priority Claim will at all times be
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senior to any unsecured claims of any creditor or other entity in this and any subsequent case
under the Bankruptcy Code. With the exception of the Carve-Out, the Adequate Protection Liens, the
Prepetition Senior Secured Debt, and the Adequate Protection Claim, no cost or expense of
administration or any claims in this case, including those resulting from or incurred after any
conversion of this case pursuant to Section 1112 of the Bankruptcy Code shall rank prior to, or on
parity with, the DIP Super-Priority Claims.
6. Covenants. Each of the Debtors covenant and agree that until this Note is paid in
full, neither of the Debtors shall, without the prior written consent of the Required Holders:
(a) Asset Sales. enter into any transaction of merger or consolidation, or liquidate,
wind-up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease or
sub-lease (as lessor or sublessor), transfer or otherwise dispose of, in one transaction or a
series of transactions, all or any part of its business, property or assets, whether now owned or
hereafter acquired, other than sales of inventory and equipment in the ordinary course of business
and sales of obsolete equipment or equipment that is no longer required in the business;
(b) Chapter 11 Claims. incur, create, assume, suffer or permit any claim or
encumbrance against it or any of its property or assets in any Chapter 11 Case (other than the
Existing Secured Claims, the Carve-Out, the Adequate Protection Claim, and the Insurance Premium
Financing) to be pari passu with or senior to the claims of the Holders against such Debtor in
respect of the obligations hereunder, or apply to the Bankruptcy Court for authority to do so; or
(c) Limitation on Payments Related to Prepetition Obligations. (i) make any payment
or prepayment on or redemption or acquisition for value of any Prepetition Indebtedness or other
pre-Petition Date obligations of such Debtor, (ii) pay any interest on any Prepetition Indebtedness
of such Debtor, including, without limitation, by way of depositing with the trustee with respect
thereto money or securities before due for the purpose of paying when due (whether in cash, in
kind, in securities or otherwise), or (iii) make any payment or create or permit any lien pursuant
to Section 361 of the Bankruptcy Code (other than the Adequate Protection Liens (as such term is
defined in the Final Borrowing Order), or apply to the Bankruptcy Court for the authority to do any
of the foregoing; provided that the Debtors may make payments as permitted in the Final
Borrowing Order, or as authorized in any other order of the Bankruptcy Court, including, for
example, making Adequate Protection Payments (as such term is defined in the Final Borrowing
Order).
7. Events of Default. Notwithstanding the provisions of Section 362 of the Bankruptcy
Code and without application or motion to, or order from, the Bankruptcy Court, if any of the
following conditions or events (“Events of Default”) shall occur:
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(a) Failure to Make Payments When Due. Failure by the Debtors to pay any installment
of principal on this Note when due or pay any installment of interest within 3 business days of
when due, whether at stated maturity, by acceleration, by notice of voluntary prepayment, by
mandatory prepayment or otherwise; or failure by the Debtors to pay any fee or any other amount due
under this Note within three days after the date due;
(b) Chapter 11 Cases. With respect to the Chapter 11 Cases, (i) the entry of an order
authorizing any Debtor in any of the Chapter 11 Cases to obtain additional financing under Section
364(c) or (d) of the Bankruptcy Code (other than Insurance Premium Financing, as defined in Final
Borrowing Order); (ii) the appointment of an interim or permanent trustee in any of the Chapter 11
Cases or the appointment of an examiner in any of the Chapter 11 Cases with expanded powers to
operate or manage the financial affairs, the business, or the reorganization of any Debtor; (iii)
the dismissal of any of the Chapter 11 Cases, or the conversion of any of the Chapter 11 Cases to a
case under chapter 7 of the Bankruptcy Code; (iv) the entry of an order granting relief from or
modifying the automatic stay of Section 362 of the Bankruptcy Code (a) to allow any creditor to
execute upon or enforce a lien on any material portion of the property or assets of any Debtor or
(b) with respect to any lien of, or the granting of any lien on any other property or assets of any
Debtor to, any state or local environmental or regulatory agency or authority, but only to the
extent that it would have a Material Adverse Effect; (v) exercise of rights by the Prepetition
Senior Lenders (as defined in the Final Borrowing Order) pursuant to Paragraph 13 of the Final
Borrowing Order against the Senior Lender Prepetition Collateral and/or the other collateral in
which Adequate Protection Liens were granted to the Prepetition Senior Lenders; (vi) the entry of
an order amending, supplementing, staying, vacating or otherwise modifying any of the Final
Borrowing Order or this Note or any of the Holders’ rights, benefits, privileges or remedies under
the Final Borrowing Order or this Note; (vii) the entry of an order consolidating or combining any
Debtor with any other Person (other than another Debtor); (viii) an order shall be entered
approving, or the Debtor shall have consented to, any claim or administrative expense claim (other
than the Carve-Out and the Adequate Protection Claim) having any priority over, or being pari passu
to the super-priority administrative expense claim of the obligations under this Note; or (ix) use
of the proceeds of this Note for any purpose that is prohibited under Section 6(c) hereof;
(c) Default. Any Debtor shall default in the due performance or observance by it of
any term, covenant or agreement contained in this Note or any term or agreement relating to this
Note that is contained in the Final Borrowing Order, and such default shall continue for a period
of 5 days after receipt by the Debtors of notice from the Holders of such default; or
(d) Judgments. (i) Any money judgment, writ or warrant of attachment or similar
process as to post-Petition Date liability or debt (a) in any individual case an amount in excess
of $50,000 or (b) in the aggregate at any time an amount in excess of $250,000 (in either case not
adequately covered by insurance as to
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which a solvent and unaffiliated insurance company has acknowledged coverage) shall be entered
or filed against the Debtors or any of their respective assets and shall remain undischarged,
unvacated, unbonded or unstayed for a period of 60 days; or (ii) any non-monetary judgment or order
with respect to a post-Petition Date event shall be rendered against any Debtor that would
reasonably be expected to result in a Material Adverse Effect and shall remain undischarged,
unvacated, unbonded or unstayed for a period of 60 days.
(e) Use of Proceeds. Funds or Cash Collateral (as defined in the Final Borrowing
Order) are co-mingled with the proceeds of this Note in the DIP Account or proceeds of this Note
are used in a manner prohibited by this Note.
Upon the occurrence and during the continuance of any Event of Default, the Holders may
(notwithstanding the provisions of Section 362 of the Bankruptcy Code and without application or
motion to, or order from, the Bankruptcy Court) by written notice to the Debtors declare (i) the
unpaid principal amount of and accrued interest on the Notes and (ii) all other obligations
immediately due and payable, without presentment, demand, protest or other requirements of any
kind, all of which are hereby expressly waived by the Debtors, and the same shall forthwith become,
immediately due and payable.
9. Definitions. The following terms shall have the following meanings in this Note:
“Bankruptcy Code” means title 11 of the United States Code entitled “Bankruptcy”, as now and
hereafter in effect, or any successor statute.
“Bankruptcy Court” means the United States Bankruptcy Court for the Southern District of New York.
“Business Day” means each day that is not a Legal Holiday.
“Chapter 11 Cases” means those certain proceedings for relief filed by the Debtors under Chapter 11
of the Bankruptcy Code and being jointly administered under Case No. 08-11153 in the United States
Bankruptcy Court for the Southern District of New York.
“Existing Secured Claims” means any secured claims in existence as of the commencement of the
Chapter 11 Cases.
“Final Borrowing Order” means that certain Final Order, issued April 17, 2008, (i) Authorizing the
Debtors to Use Cash Collateral, (ii) Granting Adequate Protection to Prepetition Secured Lenders,
and (iii) Authorizing Post-Petition Financing.
“Final Order” means an order, judgment or other decree of the Bankruptcy Court or any other court
or judicial body with proper jurisdiction, as the case may be, which is in full force and effect
and has not been reversed, stayed, modified or amended and as to which (i) any right to appeal or
seek certiorari, review or rehearing has been waived or (ii) the
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time to appeal or seek certiorari, review or rehearing has expired and as to which no appeal or
petition for certiorari, review or rehearing is pending.
“Issue Date” means the issue date of this Note on April 21, 2008.
“Legal Holiday” means a Saturday, a Sunday or a day on which banking institutions in the State of
New York are authorized or required by law to close. If a payment date is a Legal Holiday, payment
shall be made on the next succeeding date that is not a Legal Holiday, and interest shall accrue
for the intervening period at the rate set forth in Section 1 hereof. If a regular record date is
a Legal Holiday, the record shall not be affected.
“LIBOR” means a fluctuating rate of interest determined on a daily basis equal to the one-month
rate of interest appearing on Telerate Page 3750 (or any successor page) as the 30-day London
interbank offered rate for deposits in U.S. Dollars at approximately 11:00 a.m. (London Time) on
the second preceding Business Day. If for any reason such rate is not available, “LIBOR” means the
fluctuating rate of interest calculated on a daily basis equal to the one-month rate of interest
appearing on Reuters Screen LIBO Page as the 30-day London interbank offered rate for deposits in
U.S. Dollars at approximately 11:00 a.m. (London time) on the second preceding Business Day;
provided, however, if more than one rate is specified on Reuters Screen LIBO Page,
the applicable rate shall be the arithmetic mean of all such rates; provided,
however, if such rate is not available, “LIBOR” shall mean a fluctuating rate of interest
based upon a comparable rate designated by the Holders as a substitute therefore. “Telerate Page
3750” means the British Bankers Association Libor Rates (determined as of 11:00 a.m. London time)
that are published by Moneyline Telerate (or any successor thereto). As used in this definition,
the term “Business Day” means a day on which commercial banks are open for international business
(including dealings in U.S. Dollar deposits in London, England).
“Material Adverse Effect” means (i) a material adverse effect upon the business, operations,
liabilities (whether contractual, environmental or otherwise), properties, assets, condition
(financial or otherwise) or prospects of the Debtors taken as a whole or (ii) the material
impairment of the ability of any Debtor to perform the obligations of the Debtors under the Note.
“Motion” means the Debtors’ Motion for Authorization Pursuant to 11 U.S.C. §§ 105, 361, 362,
364(c)(1), and 364(e) to (i) Use Cash Collateral, (ii) Grant Adequate Protection to Prepetition
Secured Lenders, and (iii) Obtain Postpetition Financing.
“Note” means this $4,000,000 Super-Priority DIP Note by and between the Debtors and the Holders and
issued on April 21, 2008.
“Person” an individual, partnership, corporation, limited liability company, business trust, joint
stock company, trust, unincorporated association, joint venture, governmental authority or other
entity of whatever nature.
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“Petition Date” means April 1, 2008, the date on which the Debtors filed their petitions for relief
commencing these Chapter 11 Cases.
“Prepetition Indebtedness” means indebtedness of any Debtor outstanding on the Petition Date,
including Indebtedness under the Prepetition Credit Agreements, the Senior Subordinated Notes and
the 13% Junior Subordinated Note (as those terms are defined and/or referenced in the Motion).
“Required Holders” means Holders holding more than 50% of the principal amount of the Note.
10. Successors and Assigns. This Note shall inure to the benefit of the Holders and
their respective successors and assigns and shall bind the Holders, their respective successors and
assigns, and any chapter 7 or chapter 11 trustee appointed after the Petition Date or elected for
the estates of the Debtors or an examiner appointed pursuant to section 1104 of the Bankruptcy
Code.
11. Presentment and Demand. Demand, presentment, protest and notice of nonpayment and
protest are hereby waived by the Debtors.
12. Amendment and Non-Waiver.
(a) This Note may not be amended, modified, or waived except by an agreement in writing signed
by the Debtors and the Required Holders; provided that consent of all Holders shall be
required to reduce the principal amount, the interest rate, or extend any payment date.
(b) To the extent permitted by law, no failure to exercise and no delay on the part of the
Holders in exercising any power or right in connection with this Note or available at law or in
equity, shall operate as a waiver thereof, and no single or partial exercise of any such rights or
power, or any abandonment or discontinuance of steps to enforce such a right or power, shall
preclude any other or further exercise thereof or the exercise of any other right or power.
13. Notices. Except as otherwise provided herein, any notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder to be made pursuant to
the provisions of this Note shall be sufficiently given or made if in writing and either delivered
in person with receipt acknowledged or three (3) Business Days after being sent by registered or
certified mail, return receipt requested, postage prepaid, or by telecopy and confirmed by telecopy
answerback, addressed as follows:
(a)
|
If to the Debtors: | |
| Lexington Precision Corporation | ||
| Lexington Rubber Group, Inc. |
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| 000 Xxxxx Xxxxxx, 00xx Floor | ||
| New York, NY 10022 | ||
| Attn: Xxxxxx Xxxxxx | ||
| Telecopy No.: 000-000-0000 | ||
| with a copy to: | ||
| Xxxx, Gotshal & Xxxxxx LLP | ||
| 000 Xxxxx Xxxxxx | ||
| New York, NY 10153 | ||
| Telecopy No.: 212-310-8000 | ||
| Attn: Xxxxxx X. Xxxxxxxxx, Esq. | ||
| Xxxxxxxxxxx X. Xxxxxx, Esq. | ||
(b)
|
If to the Holders: | |
| c/o Xxxxxxx X. Xxxxx | ||
| Lexington Precision Corporation | ||
| 000 Xxxxx Xxxxxx, 00xx Floor | ||
| New York, NY 10022 | ||
| Telecopy No.: 000-000-0000 | ||
| with a copy to: | ||
| O’Melveny & Xxxxx LLP | ||
| 0 Xxxxx Xxxxxx | ||
| New York, NY 10036 | ||
| Telecopy No.: 000-000-0000 | ||
| Attn: Xxxxxx X. Xxxxxx, Esq. | ||
or at such other address as may be substituted by notice given as herein provided. The giving of
any notice required hereunder may be waived in writing by the party entitled to receive such
notice.
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14. Submission to Jurisdiction: Waiver of Jury Trial.
(a) The Debtors and the Holders hereby irrevocably submit to the jurisdiction of the
Bankruptcy Court, and they hereby irrevocably agree that any action concerning the Note shall be
heard and determined in the Bankruptcy Court. The Debtors and the Holders hereby irrevocably
waive, to the fullest extent they may effectively do so, the defense of an inconvenient forum to
the maintenance of any such action in the Bankruptcy Court. The Debtors and the Holders hereby
irrevocably agree that the summons and complaint or any other process in any such action may be
served by mailing in accordance with the provisions set forth in Section 13 hereof.
(b) EACH OF THE DEBTORS AND THE HOLDERS HEREBY IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY OBLIGATIONS UNDER THIS
NOTE.
15. Governing Law. This Note shall be governed by, construed and enforced in
accordance with the laws of the State of New York applicable to agreements made and to be wholly
performed in such State and without giving effect to the conflict of laws principles thereof.
16. Indemnification for Expenses. The Debtors agree to pay all reasonable
out-of-pocket expenses of the Holders incurred in connection with the preparation, execution,
delivery, enforcement and administration of this Note, the documents and instruments referred to
herein and any amendments, waivers or consents relating hereto or thereto including, without
limitation, the reasonable fees and expenses of O’Melveny & Xxxxx LLP, counsel for the Holders. In
addition, the Debtors agree to pay, and save Holders harmless from all liability for, any stamp or
other documentary taxes which may be payable in connection with the execution or delivery of this
Note by the Debtors.
17. Indemnification of Holders. The Debtors hereby agree to protect, indemnify, pay
and save harmless the Holders from and against any and all claims, demands, liabilities, damages,
losses, costs, chargers and expenses (including reasonable fees, expenses and disbursements of
outside counsel) that Holders may incur or be subject to as consequence, direct or indirect, of the
issuance of this Note by the Debtors other than as a result of the gross negligence or willful
misconduct of the Holders as determined by a final judgment of a court of competent jurisdiction.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Debtors have executed and delivered this Note as of the day and year
and at the place first above written.
| LEXINGTON PRECISION CORPORATION | ||||
| By: | /s/ Xxxxxx Xxxxxx | |||
| Name: Xxxxxx Xxxxxx | ||||
| Title: President | ||||
| LEXINGTON RUBBER GROUP, INC. | ||||
| By: | /s/ Xxxxxx Xxxxxx | |||
| Name: Xxxxxx Xxxxxx | ||||
| Title: President | ||||
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