<PAGE> 1
==============================================================================
SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY RULE
14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
LEXINGTON PRECISION CORPORATION
- --------------------------------------------------------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
- --------------------------------------------------------------------------------
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of filing fee (Check the appropriate box):
[ X ] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
---------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------
(5) Total fee paid:
------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------
(3) Filing Party:
--------------------------------------------------
(4) Date Filed:
----------------------------------------------------
==============================================================================
<PAGE> 2
LEXINGTON PRECISION CORPORATION
767 THIRD AVENUE
NEW YORK, NEW YORK 10017
------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 13, 1998
The Annual Meeting of Stockholders of LEXINGTON PRECISION CORPORATION
(the "Company") will be held at the offices of Nixon, Hargrave, Devans & Doyle
LLP, 437 Madison Avenue, 24th Floor, New York, New York, on Wednesday, May 13,
1998, at 10:30 A.M. for the purpose of considering and acting upon the following
matters:
1A. In the event the proposal to amend Article III, Section 1 of the
Company's Bylaws, as described under item 2 below, is approved by
the Company's stockholders, the election of five directors as set
forth in the accompanying Proxy Statement;
1B. In the event the proposal to amend Article III, Section 1 of the
Company's Bylaws, as described under item 2 below, is not approved
by the Company's stockholders, the election of two directors as
set forth in the accompanying Proxy Statement;
2. A proposal to amend Article III, Section 1 of the Company's Bylaws
to declassify the Company's Board of Directors by eliminating the
provision in the Bylaws that provides that the Company's Board of
Directors shall be divided into three classes, as nearly equal in
number as possible, and that directors shall be elected for terms
of three years on a staggered basis;
3. The ratification or disapproval of Ernst & Young LLP as
independent auditors of the Company for the year ending
December 31, 1998; and
4. The transaction of such other business as may properly come before
the meeting and any adjournments thereof.
Pursuant to the provisions of the Bylaws, the Board of Directors has
fixed the close of business on April 1, 1998, as the record date for determining
the stockholders of the Company entitled to notice of and to vote at the meeting
and any adjournments thereof.
PLEASE SIGN, DATE, AND MAIL THE ENCLOSED PROXY PROMPTLY. A POSTAGE-
PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
By Order of the Board of Directors,
Kenneth I. Greenstein
Secretary
April 17, 1998
New York, New York
<PAGE> 3
LEXINGTON PRECISION CORPORATION
767 THIRD AVENUE
NEW YORK, NEW YORK 10017
------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 13, 1998
This Proxy Statement is being mailed to stockholders on or about
April 21, 1998, in connection with the solicitation of proxies by the Board of
Directors of LEXINGTON PRECISION CORPORATION, a Delaware corporation (the
"Company"), to be voted at the annual meeting of stockholders of the Company to
be held on May 13, 1998 (the "Annual Meeting"). Accompanying this Proxy
Statement is a Notice of Annual Meeting of Stockholders and a form of proxy for
such meeting. A copy of the Company's Annual Report for the year ended
December 31, 1997, which contains financial statements and related data, also
accompanies this Proxy Statement.
All proxies that are properly completed, signed, and returned to the
Company in time will be voted in accordance with the instructions thereon.
Proxies may be revoked by any stockholder upon written notice to the Secretary
of the Company prior to the exercise thereof and stockholders who are present at
the Annual Meeting may withdraw their proxies and vote in person if they so
desire.
The cost of preparing and mailing the accompanying form of proxy and
related materials and the cost of soliciting proxies will be borne by the
Company. The Company has requested brokers, custodians, and other like parties
to distribute proxy materials to the beneficial owners of shares and to solicit
their proxies and will reimburse such persons for their services in doing so.
Without additional compensation, officers and regular employees of the Company
may solicit proxies personally or by telephone. The cost of additional
solicitation incurred other than by use of the mails is estimated not to exceed
$3,000. In addition, the Company may employ a proxy solicitation organization at
a cost not to exceed $7,500.
Only stockholders of record at the close of business on the record
date, April 1, 1998, are entitled to notice of, and to vote at, the Annual
Meeting and any adjournments thereof. As of the record date, the Company had
outstanding 4,263,036 shares of its common stock, $0.25 par value (the "Common
Stock"), and 4,200 shares of its $8 Cumulative Convertible Preferred Stock,
Series B, $100 par value (the "Series B Preferred Stock"), each entitling the
holder thereof to one vote per share. The affirmative vote of a plurality of the
shares of the Company's Common Stock and Series B Preferred Stock present in
person or represented by proxy and entitled to vote at the Annual Meeting is
required for the election of directors. The affirmative vote of the holders of
75% of the outstanding shares of the Company's Common Stock and Series B
Preferred Stock entitled to vote in the election of directors considered as one
class is required for the approval of the amendment of the Company's Bylaws to
declassify the Company's Board of Directors. The affirmative vote of a majority
of shares of the Company's Common Stock and Series B Preferred Stock present in
person or represented by proxy and entitled to vote at the Annual Meeting is
required for the ratification of the selection of auditors.
-1-
<PAGE> 4
With regard to the election of directors, votes may be cast in favor or
withheld. Votes withheld from the election of directors will be counted to
determine the presence or absence of a quorum for the transaction of business at
the Annual Meeting, but they have no legal effect under Delaware law and,
consequently, will not affect the outcome of the voting on such proposal. With
regard to other proposals, abstentions may be specified and will have the same
effect as votes against the subject proposal at the Annual Meeting. Broker
nonvotes (that is, proxies from brokers or nominees indicating that such persons
have not received instructions from the beneficial owners or other persons
entitled to vote shares on a particular matter as to which the brokers or
nominees do not have discretionary power) are counted for purposes of
determining a quorum for the transaction of business at the Annual Meeting but
are not considered as votes for purposes of determining the outcome of a vote.
PRINCIPAL STOCKHOLDERS
The following table sets forth the beneficial ownership of the
Company's Common Stock, as of April 1, 1998, by each person known to, or
believed by the Company to, own beneficially more than 5% of its outstanding
Common Stock.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF SHARES OF COMMON STOCK PERCENT OF
BENEFICIAL OWNER BENEFICIALLY OWNED (1) CLASS OWNED
------------------- ---------------------- -----------
<S> <C> <C>
Michael A. Lubin 1,477,180(2) 32.9%
Lubin, Delano & Company
767 Third Avenue
New York, New York 10017
Warren Delano 1,346,793(3) 30.1
Lubin, Delano & Company
767 Third Avenue
New York, New York 10017
William B. Conner 219,906(4) 5.2
Conner Holding Company
1030 State Street
Erie, Pennsylvania 16501
</TABLE>
(1) The persons named in the table have sole voting and dispositive power with
respect to all shares of the Company's Common Stock shown as beneficially
owned by them, except as set forth in the notes to the table and subject to
community property laws, where applicable.
(2) Includes (i) 35,000 shares owned by each of Mr. Lubin's two minor children
with respect to which Mr. Lubin acts as custodian under the New York
Uniform Gifts to Minors Act, (ii) 222,200 shares that Mr. Lubin has the
right to acquire upon the conversion of $505,000 principal amount of the
Company's 14% Junior Subordinated Convertible Notes, due May 1, 2000 (the
"14% Convertible Notes"), owned by Mr. Lubin, at a conversion price
(subject to adjustment) of $2.27273 per share, (iii) 50,000 shares owned by
an Individual Retirement Account of Mr. Lubin, and (iv) 50,000 shares owned
by a retirement benefit plan of which Mr. Lubin is a beneficiary.
(3) Includes (i) 217,800 shares that Mr. Delano has the right to acquire upon
the conversion of $495,000 principal amount of the Company's 14%
Convertible Notes owned by Mr. Delano, at a conversion price (subject to
adjustment) of $2.27273 per share, (ii) 110,750 shares owned by Individual
Retirement Accounts of Mr. Delano, and (iii) 50,000 shares owned by a
retirement benefit plan of which Mr. Delano is a beneficiary.
(4) Includes 158,594 shares owned by Conner Holding Company, a Nevada
corporation, of which Mr. Conner is President, a director, and majority
stockholder.
-2-
<PAGE> 5
PROPOSALS 1A AND 1B -- ELECTION OF DIRECTORS
If "Proposal 2 -- Amendment of Bylaws to Declassify the Company's Board
of Directors" is adopted at the Annual Meeting, the amended Bylaws of the
Company will provide that five directors shall be elected whose terms would
expire in 1999. Pursuant to Proposal 1A, in the event that the proposed
amendment of the Bylaws is approved, the stockholders will be asked to vote for
the election of five directors at the Annual Meeting, each to serve for a term
expiring at the annual meeting of stockholders to be held in 1999 and until his
successor has been elected and qualified. Unless authority to vote for the
election of a director is specifically withheld by appropriate designation on
the face of the proxy, it is the intention of the persons named in the
accompanying proxy to vote such proxy for the election of William B. Conner,
Warren Delano, Kenneth I. Greenstein, Michael A. Lubin, and Phillips E. Patton
as directors, to serve until the 1999 annual meeting of stockholders and until
their respective successors shall have been elected and qualified. Messrs.
Conner, Delano, Greenstein, Lubin, and Patton are presently members of the
Company's Board of Directors. The proxies cannot be voted for a greater number
of persons than five in respect of Proposal 1A. Management has no reason to
believe that the named nominees will be unable or unwilling to serve if elected.
However, in such case, it is intended that the individuals named in the
accompanying proxy will vote for the election of such substituted nominees as
the Company's Board of Directors may recommend.
Proposal 1A will have no effect if the proposed amendment of the Bylaws
is not approved by the stockholders at the Annual Meeting.
If Proposal 2 is not adopted at the Annual Meeting, the Bylaws of the
Company will continue to provide that the Board of Directors shall be divided
into three classes, as nearly equal in number as possible, and that directors
shall be elected for terms of three years on a staggered basis. Pursuant to
Proposal 1B, in the event the proposed amendment of the Bylaws is not approved
by the stockholders at the Annual Meeting, the stockholders will be asked to
vote for the election of two directors, each to serve for a term expiring at the
annual meeting of stockholders to be held in 2001 and until his successor has
been elected and qualified. There are presently five directors: two whose terms
expire in 1998, two whose terms expire in 1999, and one whose term expires in
2000. Unless authority to vote for the election of a director is specifically
withheld by appropriate designation on the face of the proxy, it is the
intention of the persons named in the accompanying proxy to vote such proxy for
the election of Warren Delano and Kenneth I. Greenstein as directors, to serve
until the 2001 annual meeting of stockholders and until their respective
successors shall have been elected and qualified. Messrs. Delano and Greenstein
are presently members of the Company's Board of Directors. The proxies cannot be
voted for a greater number of persons than two in respect of Proposal 1B.
Management has no reason to believe that the named nominees will be unable or
unwilling to serve if elected. However, in such case, it is intended that the
individuals named in the accompanying proxy will vote for the election of such
substituted nominees as the Company's Board of Directors may recommend.
Proposal 1B will have no effect if the proposed amendment of the Bylaws
is approved by the stockholders at the Annual Meeting.
-3-
<PAGE> 6
Certain information concerning the nominees (under Proposals 1A and 1B)
and directors continuing in office (under Proposal 1B) is set forth in the
following table.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION, BUSINESS
NAME AGE EXPERIENCE, AND DIRECTORSHIPS
---- --- -----------------------------
NOMINEES FOR TERMS EXPIRING IN 1999 UNDER PROPOSAL 1A OR NOMINEES FOR TERMS EXPIRING IN 2001 UNDER
PROPOSAL 1B
<S> <C> <C>
Warren Delano 47 President of the Company for more than five years. Partner of Lubin,
Delano & Company, an investment banking and consulting firm, for
more than five years. Director of the Company since 1985.
Kenneth I. Greenstein 68 Secretary of the Company since September 1979. Consultant since
January 1998. Prior thereto, stockholder of a professional corporation
that was a partner in Nixon, Hargrave, Devans & Doyle LLP, a law
firm, for more than five years. Director of the Company since 1978.
NOMINEE FOR TERM EXPIRING IN 1999 UNDER PROPOSAL 1A OR DIRECTOR WHOSE TERM EXPIRES IN 2000 UNDER
PROPOSAL 1B
Michael A. Lubin 48 Chairman of the Board of the Company for more than five years.
Partner of Lubin, Delano & Company, an investment banking and
consulting firm, for more than five years. President and Chief
Operating Officer of Salant Corporation, a manufacturer of men's,
women's, and children's apparel, from April 1997 through July 1997
and Executive Vice President and Chief Operating Officer of Salant
Corporation from October 1995 through March 1997. Director of the
Company since 1985.
NOMINEES FOR TERMS EXPIRING IN 1999 UNDER PROPOSAL 1A OR DIRECTORS WHOSE TERMS EXPIRE IN 1999 UNDER
PROPOSAL 1B
William B. Conner 65 Private Investor. President and director of Conner Holding Company,
a holding company for aviation companies, and Chairman of the
Board of the subsidiaries thereof for more than five years. Director of
Acordia, Inc., a holding company for insurance brokerage, claims
administration, and employee benefits consulting companies, from
April 1991 through May 1996. President of Robinson-Conner, Inc., an
insurance brokerage firm that became a subsidiary of Acordia, Inc. in
April 1991, from 1967 through June 1993. Executive Vice President
of Acordia, Inc. from April 1991 through March 1993. Director of the
Company since 1981.
Phillips E. Patton 60 Private Investor. Chairman of the Board and President of Specialty
Packaging Products Inc., a manufacturer of metal and plastic
packaging components, from February 1984 through November 1992.
Director of Regency Bank, a Richmond, Virginia, commercial bank,
since 1987. Director of the Company since 1993.
</TABLE>
-4-
<PAGE> 7
PROPOSAL 2 -- AMENDMENT OF BYLAWS TO DECLASSIFY THE COMPANY'S
BOARD OF DIRECTORS
The Board of Directors recommends that the stockholders of the Company
consider and approve a proposal to amend the Company's Bylaws to declassify the
Company's Board of Directors by eliminating the provision in the Bylaws that
provides that the Board of Directors shall be divided into three classes, as
nearly equal in number as possible, and that directors shall be elected for
terms of three years on a staggered basis.
EXISTING BYLAW PROVISION
Article III, Section 1 of the Company's Bylaws as in effect on the date
hereof reads as follows:
SECTION 1. The number of directors which shall constitute the
whole board shall be not less than three nor more than fifteen. The
board, following adoption of the amendment to this Section on
September 29, 1976, shall consist of nine directors. Thereafter,
within the limits above specified, the number of directors shall be
fixed by resolution of the board of directors, subject to the
provisions of Delaware law or these bylaws regarding removal of
directors. The board of directors shall be divided into three classes
each consisting of three directors with the term of office of the
first class expiring at the annual meeting of stockholders in 1977, of
the second class expiring at the annual meeting of stockholders in
1978, and of the third class expiring at the annual meeting of
stockholders in 1979.
Any newly created directorships or decrease in directorships
arising out of a change in the number of directors shall be so
apportioned among the classes so as to make all classes as nearly equal
in number of directors as possible.
At each annual meeting of stockholders, successors to
directors of the class whose terms then expire shall be elected to hold
office for a term expiring the third succeeding annual meeting of
stockholders and until their successors shall have been duly elected
and qualified. No director may be removed from his office as a director
by vote or other action of stockholders or otherwise except for cause.
Notwithstanding the foregoing, whenever the holders of any
preferred stock, as provided in the certificate of incorporation or in
any resolution or resolutions of the board of directors establishing
any such preferred stock, shall have the right voting as a single
class, to elect directors at the annual or a special meeting of
stockholders, the then- authorized number of directors of the
corporation may be increased by such number as may be therein provided,
and the additional directors so provided for shall be elected and hold
office as provided therein.
PROPOSED AMENDED BYLAW PROVISION
It is proposed that Article III, Section 1 of the Company's Bylaws be
amended to read as follows:
SECTION 1. The number of directors that shall constitute the
whole board shall not be less than three nor more than fifteen.
-5-
<PAGE> 8
Notwithstanding the foregoing, whenever the holders of any
preferred stock, as provided in the certificate of incorporation or in
any resolution or resolutions of the board of directors establishing
any such preferred stock, shall have the right voting as a single class
to elect directors at the annual or a special meeting of stockholders,
the then-authorized number of directors of the corporation may be
increased by such number as may be therein provided, and the additional
directors so provided for shall be elected and hold office as provided
therein.
REASONS FOR THE PROPOSED BYLAW AMENDMENT
The provisions concerning the classification of the Company's Board of
Directors were initially included in the Company's Bylaws as an anti-takeover
device in 1976, and these provisions are permissible for a Delaware corporation,
such as the Company, to include in its bylaws. However, for the reasons
described below, the Company is proposing to amend the Bylaws to declassify the
Company's Board of Directors.
Adoption of the proposed amendment of Article III, Section 1 of the
Company's Bylaws would have the effect of causing directors of the Company to
serve on the Board of Directors until their respective successors shall have
been elected and qualified, rather than for the present staggered terms of three
years, and until their respective successors shall have been elected and
qualified. Implicit in the proposed amendment is the concept that directors will
serve for one-year terms, subject to reelection, since Delaware law requires
that Delaware corporations, such as the Company, hold an annual meeting for the
election of directors. Although the Company values the continued involvement of
its incumbent directors and presently does not intend to change the composition
of the Board of Directors, the Company believes that the proposed amendments
will enhance the Company's ability to attract and retain qualified candidates to
serve on the Company's Board of Directors by affording the Company greater
flexibility in the regular recruitment and nomination of director candidates.
The Company also believes that adoption of the proposed amendment would
eliminate an anti-takeover device that, under certain circumstances, could
prevent a potential acquiror of the Company from gaining control of a majority
of the Board of Directors for up to two years absent the voluntary resignation
of a sufficient number of directors to enable the potential acquiror to gain
such control. Consequently, the existing Bylaw provision could tend to entrench
an incumbent Board. In addition, the Company believes that it is appropriate to
limit the terms of directors to one year in order to ensure that the Company's
stockholders have the ability annually to evaluate and vote upon the performance
of the Board of Directors.
If the proposed amendment is adopted by the stockholders, under
Delaware law, any director or the entire Board of Directors may be removed, with
or without cause, by the holders of a majority of the shares of capital stock
then entitled to vote at an election of directors. Since incumbent members of
the Company's Board of Directors Michael A. Lubin and Warren Delano collectively
are currently the beneficial owners of more than a majority of the outstanding
shares of the Company's Common Stock, the proposed Bylaw amendment would afford
them the ability to act together, or together with other stockholders, to remove
one or more of the Company's directors, with or without cause. See "Principal
Stockholders." The Company's directors and executive officers as a group are the
beneficial owners of 69.5% of the Company's Common Stock. See "Security
Ownership of Management." However, even if Article III, Section 1 of the Bylaws
is not amended as proposed, Messrs. Lubin and Delano have sufficient voting
power to significantly influence, if not control, the election of the Company's
Board of Directors. The present Bylaws prohibit stockholders from removing
directors without cause. Delaware law requires that, if a director of a Delaware
corporation
-6-
<PAGE> 9
is to be removed for cause, the director is entitled to notice of specific
charges of misconduct, adequate notice of proceedings to remove him or her, and
an opportunity to answer the charges. Failure to follow such procedures may
constitute grounds to invalidate an attempted removal for cause. The Company
believes that the Company's stockholders will be afforded greater influence and
flexibility in corporate governance matters by amending the Bylaws to permit the
removal of directors with or without cause. If the proposed amendment is
adopted, however, any directors elected by a specific class or series of capital
stock may be removed with or without cause by the holders of such class or
series of capital stock, and not by the holders of all outstanding shares. The
Company's Restated Certificate of Incorporation provides that, in the event six
quarterly dividends (whether or not consecutive) payable on the then-outstanding
Series B Preferred Stock are in arrears, the Company's Board of Directors will
be expanded by two if the holders of Series B Preferred Stock, voting as a
class, vote to elect two directors. Holders of the Series B Preferred Stock will
continue to vote as a class to elect the two additional directors until such
time as all dividends in arrears on the Series B Preferred Stock are paid.
In the event that the proposed amendment of the Bylaws is approved by
the stockholders at the Annual Meeting, the stockholders will be asked to vote
for election of five directors at the Annual Meeting, each to serve for a term
expiring at the annual meeting of stockholders to be held in 1999 and until his
successor has been elected and qualified. In such event, the Board of Directors
intends to nominate and, pursuant to this Proxy Statement, solicit proxies for
the election of each of the incumbent directors. In the event the proposed
amendment of the Bylaws is not approved by the stockholders at the Annual
Meeting, the stockholders will be asked to vote for the election of two
directors at the Annual Meeting, each to serve for a term expiring at the annual
meeting of stockholders to be held in 2001 and until his successor has been
elected and qualified. In such event, the Board of Directors intends to nominate
and, pursuant to this Proxy Statement, solicit proxies for the election of
incumbent directors Warren Delano and Kenneth I. Greenstein.
See "Proposals 1A and 1B - Election of Directors."
The Board of Directors approved the foregoing amendments of the
Company's Bylaws on March 10, 1998.
The Company's Restated Certificate of Incorporation provides that
Article III, Section 1 of the Bylaws may not be amended except upon the
affirmative vote of the holders of at least 75% of the outstanding shares of
capital stock of the Company entitled to vote in the election of directors,
considered as one class.
ACCORDINGLY, YOUR VOTE ON THIS PROPOSAL 2 IS VERY IMPORTANT. BECAUSE
APPROVAL OF THIS PROPOSAL REQUIRES THE AFFIRMATIVE VOTE OF AT LEAST 75% OF THE
COMPANY'S OUTSTANDING SHARES OF CAPITAL STOCK, A NONVOTE OR ABSTENTION WILL BE
EQUIVALENT TO A VOTE AGAINST THIS PROPOSAL.
UNLESS THE ENCLOSED PROXY IS MARKED TO THE CONTRARY, THE SHARES
REPRESENTED THEREBY WILL BE VOTED FOR THIS PROPOSAL 2.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS
VOTE FOR APPROVAL OF THIS AMENDMENT TO THE COMPANY'S BYLAWS.
-7-
<PAGE> 10
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board of Directors met five times during 1997. During 1997, each
director attended 80% or more of the meetings held by the Board of Directors and
the meetings held by the Committees of the Board of Directors on which such
person served.
As of December 31, 1997, the Board of Directors had standing an Audit
Committee and a Compensation Committee. The members of those committees were as
follows:
NAME OF COMMITTEE CHAIRMAN OTHER MEMBER
----------------- -------- ------------
Audit Committee Phillips E. Patton Kenneth I. Greenstein
Compensation Committee William B. Conner Phillips E. Patton
The Audit Committee, which is composed of two non-employee members of
the Board of Directors, met two times during 1997. Its functions included
consulting periodically with the Company's independent auditors as to the
nature, scope, and results of their audit of the accounts of the Company and
reviewing the Company's internal accounting controls and procedures and such
other related matters as the Audit Committee deemed advisable.
The Compensation Committee, which is composed of two non-employee
members of the Board of Directors who are not eligible to receive restricted
stock awards pursuant to the Company's 1986 Restricted Stock Award Plan, met
once during 1997. Its functions included reviewing salaries, cash bonus awards,
and existing or potential compensation plans for the Company's executive
officers and other eligible employees and making recommendations to the Board of
Directors regarding such salaries, cash bonus awards, and compensation plans.
Additionally, the Committee administers the Company's 1986 Restricted Stock
Award Plan and is responsible for determining the employees of the Company to
whom, and the time or times at which, awards will be granted.
Each member of the Board of Directors receives an annual fee of
$12,000. Directors receive $1,000 for each Board or Committee meeting attended
in person as well as reasonable out-of-pocket expenses incurred in connection
with attending such meetings. Directors receive $250 for each Board or Committee
meeting attended by telephone. There are no other fees paid to directors for
services rendered as members of the Board.
EXECUTIVE OFFICERS
The following table sets forth certain information concerning the
executive officers of the Company.
NAME POSITION AND OFFICES AGE
---- -------------------- ---
Michael A. Lubin Chairman of the Board 48
Warren Delano President and Director 47
Dennis J. Welhouse Senior Vice President, Chief Financial
Officer, and Assistant Secretary 49
Kelly L. MacMillan Treasurer 32
-8-
<PAGE> 11
Mr. Lubin has been Chairman of the Board of the Company for more than
five years. For more than five years, Mr. Lubin has been a partner of Lubin,
Delano & Company, an investment banking and consulting firm that has been
retained by the Company. Mr. Lubin was President and Chief Operating Officer of
Salant Corporation, a manufacturer of men's, women's, and children's apparel,
from April 1997 through July 1997 and was Executive Vice President and Chief
Operating Officer of Salant Corporation from October 1995 through March 1997.
Mr. Delano has been President of the Company for more than five years.
For more than five years, Mr. Delano has been a partner of Lubin, Delano &
Company, an investment banking and consulting firm that has been retained by the
Company.
Dennis J. Welhouse has been Senior Vice President of the Company since
March 1992 and Chief Financial Officer and Assistant Secretary of the Company
since November 1988.
Kelly L. MacMillan has been Treasurer of the Company since July 1995.
Ms. MacMillan served as Assistant Treasurer of the Company from November 1991
through June 1995.
Each of the Company's executive officers serves at the pleasure of the
Board of Directors.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the beneficial ownership of the
Company's Common Stock, as of April 1, 1997, by each director and director
nominee, by each of the named executive officers, and by all directors and
executive officers as a group.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED (1) CLASS OWNED
- ------------------------ --------------------------- -----------
<S> <C> <C>
Michael A. Lubin 1,477,180(2) 32.9%
Warren Delano 1,346,793(3) 30.1
William B. Conner 219,906(4) 5.2
Phillips E. Patton 124,000 2.9
Dennis J. Welhouse 65,842 1.5
Kenneth I. Greenstein 35,636(5) *
Kelly L. MacMillan - -
Directors and executive officers
as a group (7 persons) 3,269,357(6) 69.5
</TABLE>
* Less than 1 percent.
(1) The persons named in the table have sole voting and dispositive power with
respect to all shares of the Company's Common Stock shown as beneficially
owned by them, except as set forth in the notes to the table and subject to
community property laws, where applicable.
(2) Includes (i) 35,000 shares owned by each of Mr. Lubin's two minor children
with respect to which Mr. Lubin acts as custodian under the New York
Uniform Gifts to Minors Act, (ii) 222,200 shares that Mr. Lubin has the
right to acquire upon the conversion of $505,000 principal amount of the
Company's 14% Convertible Notes owned by Mr. Lubin, at a conversion price
(subject to adjustment) of $2.27273 per share, (iii) 50,000 shares owned by
an Individual Retirement Account of Mr. Lubin, and (iv) 50,000 shares owned
by a retirement benefit plan of which Mr. Lubin is a beneficiary.
-9-
<PAGE> 12
(3) Includes (i) 217,800 shares that Mr. Delano has the right to acquire upon
the conversion of $495,000 principal amount of the Company's 14%
Convertible Notes owned by Mr. Delano, at a conversion price (subject to
adjustment) of $2.27273 per share, (ii) 110,750 shares owned by Individual
Retirement Accounts of Mr. Delano, and (iii) 50,000 shares owned by a
retirement benefit plan of which Mr. Delano is a beneficiary.
(4) Includes 158,594 shares owned by Conner Holding Company, a Nevada
corporation, of which Mr. Conner is President, a director, and majority
stockholder.
(5) Includes 8,170 shares owned by a retirement benefit plan of which Mr.
Greenstein is sole beneficiary.
(6) See footnotes 1 through 5, above.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, and
the rules promulgated thereunder require the Company's officers and directors
and persons who own more than 10 percent of a registered class of the Company's
equity securities to file reports of ownership and changes in ownership with the
Securities and Exchange Commission ("SEC") and to furnish to the Company copies
of all such filings.
The Company believes, based solely upon a review of (i) those reports
and amendments thereto furnished to the Company during and with respect to the
year ended December 31, 1997, and (ii) written representations from certain
reporting persons, that all required reports for the year ended December 31,
1997, were timely filed.
EXECUTIVE COMPENSATION
The following table summarizes compensation, for the Company's past
three fiscal years, paid to the Company's executive officers whose total annual
salary and bonus exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
NAME AND FISCAL ------------------------------ ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) COMPENSATION($)
------------------ ---- --------- ----------- ---------------
<S> <C> <C> <C> <C>
Michael A. Lubin 1997 215,750(2) - -
Chairman of the Board 1996 211,250(2) - -
1995 211,250(2) 175,000(3) -
Warren Delano 1997 215,750(4) - -
President and Director 1996 211,250(4) - -
1995 211,250(4) 175,000(3) -
Dennis J. Welhouse 1997 135,000 - 7,772(5)
Senior Vice President, 1996 131,000 9,825 8,449(5)
Chief Financial Officer, and 1995 126,552 28,474 6,741(5)
Assistant Secretary
</TABLE>
(1) Amounts reported in a particular year reflect bonuses earned for services
rendered in that year and paid in that year or the following year.
(2) Includes (i) compensation in the amount of $200,000, paid indirectly to Mr.
Lubin through Lubin, Delano & Company, for services rendered as an
executive officer of the Company and (ii) fees paid to Mr. Lubin for
serving as a member of the Company's Board of Directors. Lubin, Delano &
Company is an investment banking and consulting firm of which Messrs. Lubin
and Delano are the only partners. See "Compensation Committee Report on
Executive Compensation" and "Certain Relationships and Transactions."
-10-
<PAGE> 13
(3) Includes (i) an incentive bonus payment of $75,000 and (ii) 50% of a
$200,000 fee paid on January 31, 1995, to Lubin, Delano & Company for
services rendered in connection with the refinancing of certain of the
Company's indebtedness.
(4) Includes (i) compensation in the amount of $200,000, paid indirectly to Mr.
Delano through Lubin, Delano & Company, for services rendered as an
executive officer of the Company and (ii) fees paid to Mr. Delano for
serving as a member of the Company's Board of Directors. Lubin, Delano &
Company is an investment banking and consulting firm of which Messrs.
Delano and Lubin are the only partners. See "Compensation Committee Report
on Executive Compensation" and "Certain Relationships and Transactions."
(5) Includes (i) Company contributions of $7,241, $7,939, and $6,252 made to
Mr. Welhouse's account under the Company's 401(k) Plan in 1997, 1996, and
1995, respectively, and (ii) insurance premiums of $531, $510, and $489
paid by the Company in 1997, 1996, and 1995, respectively, for term life
insurance owned by Mr. Welhouse.
No stock options or stock appreciation rights were granted to,
exercised by, or held by any of the persons named in the Summary Compensation
Table above during 1997.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is composed of two non-employee members of
the Company's Board of Directors. The Compensation Committee is responsible,
subject to the approval of the Board of Directors, for reviewing salaries, cash
bonus awards, and existing or potential compensation plans for the Company's
executive officers and other eligible employees and making recommendations to
the Board of Directors regarding such salaries, cash bonus awards, and
compensation plans. Additionally, the Committee administers the Company's 1986
Restricted Stock Award Plan and is responsible for determining the employees of
the Company to whom, and the time or times at which, awards will be granted.
COMPENSATION PHILOSOPHY AND POLICY
The Company's compensation program generally is designed to motivate
and reward the Company's executive officers for attaining financial,
operational, and strategic objectives that will contribute to the overall goal
of enhancing stockholder value. The principal elements of the compensation plan
include base salary and cash bonus awards.
BASE SALARY. In determining the base pay levels for executive officers
of the Company, the Compensation Committee considers the compensation paid by a
group of industrial companies that are generally similar to the Company. The
number and composition of the group with which the Company compares itself for
this purpose are subject to change as the companies change size or focus, merge,
or are acquired. Base pay levels, prior to taking into account other factors
considered by the Compensation Committee, are at the mid-range of base pay
levels for such group of companies. The Compensation Committee believes that the
Company's most direct competitors are private companies that do not publicly
disclose executive compensation, financial condition, or operating performance
information. The Compensation Committee also believes that the companies with
which the Company compares itself for the purpose of determining executive
compensation are not necessarily included in the indices used to compare
stockholder returns that are contained elsewhere in the Proxy Statement in which
this report appears. In determining the salary component of compensation
packages for executive officers, the Compensation Committee also takes into
consideration the recent performance of the individual and the Company, the
experience of the individual, and the scope and complexity of the position. The
Compensation Committee does not assign weights to these factors and does not
consider any one factor more important than another.
-11-
<PAGE> 14
INCENTIVE COMPENSATION PLAN. To provide incentives to increase
profitability, the Company has an incentive compensation plan that provides for
the payment of cash bonus awards to executive officers and other eligible
employees of the Company. Bonus awards for eligible operating company employees
are based upon the attainment of predetermined profit targets at each respective
operating company. Bonus awards for executive officers and other eligible
corporate employees are based upon the attainment of predetermined consolidated
profit targets. The Compensation Committee of the Company's Board of Directors
is responsible for the supervision of the plan. The Company also has a
restricted stock plan but has not utilized the plan for incentive compensation
in recent years.
COMPENSATION OF MESSRS. DELANO AND LUBIN. Messrs. Delano and Lubin are
compensated indirectly by the Company through payments made to Lubin, Delano &
Company, an investment banking and consulting firm of which they are the only
partners. During 1997, the aggregate payments made to Lubin, Delano & Company
for services provided by Messrs. Delano and Lubin in their capacities as
President and Chairman of the Board, respectively, were $400,000. The Company's
arrangements with Lubin, Delano & Company also provided for an incentive fee
based upon the attainment of predetermined consolidated profit targets and
additional compensation, as mutually agreed upon, for services provided by
Lubin, Delano & Company in connection with acquisitions, divestitures,
financings, or similar transactions involving the Company. Messrs. Delano and
Lubin received no payments under the incentive compensation plan for 1997 or for
services provided in connection with acquisitions, divestitures, financings, or
similar transactions during 1997. Currently, Lubin, Delano & Company is being
compensated for the services of Messrs. Delano and Lubin in their capacities as
President and Chairman of the Board, respectively, at the base rate of $400,000
per year.
The compensation paid for the combined services of Messrs. Delano and
Lubin as President and Chairman of the Board of the Company, respectively, was
agreed to after considering the competitive marketplace for executive talent and
the responsibilities of such positions. From October 1995 through March 1997,
Mr. Lubin was Executive Vice President and Chief Operating Officer of Salant
Corporation ("Salant"). From April 1997 through July 1997, Mr. Lubin was
President and Chief Operating Officer of Salant. The Compensation Committee
believes that, notwithstanding Mr. Lubin's engagement by Salant, the
compensation package payable to Lubin, Delano & Company for the combined
services of Messrs. Delano and Lubin over the course of 1997 as executive
officers of the Company comports with the Compensation Committee's subjective
perception of the base compensation levels of chief executives employed by other
industrial companies, both public and private.
COMPENSATION COMMITTEE
William B. Conner, Chairman
Phillips E. Patton
-12-
<PAGE> 15
STOCK PRICE PERFORMANCE
Set forth below is a line graph comparing the yearly cumulative total
return on the Company's Common Stock, based on the market price of the Common
Stock, with the yearly cumulative total return on the common stock of companies
in the S & P 500 Index and the NASDAQ Composite Index.
<TABLE>
<CAPTION>
LEXINGTON PRECISION CORPORATION
SHARE OF COMMON STOCK S&P 500 INDEX NASDAQ COMPOSITE INDEX
------------------------------- -------------------- -------------------------
CLOSING INDEXED TO INDEXED TO INDEXED TO
DATE PRICE 12/31/92 CLOSE 12/31/92 CLOSE 12/31/92
- ---- ------- ---------- ----- ---------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
12/31/92 $0.2500 $ 100.00 435.71 $100.00 676.95 $100.00
12/31/93 1.0000 400.00 466.45 107.06 776.82 114.75
12/31/94 1.7500 700.00 459.27 105.41 751.96 111.08
12/31/95 2.5000 1,000.00 615.93 141.36 1,052.14 155.42
12/31/96 2.1250 850.00 740.74 170.01 1,291.03 190.71
12/31/97 2.6875 1,075.00 970.43 222.72 1,570.35 231.97
</TABLE>
At December 31, 1992 and 1993, no material trading data for the
Company's Common Stock was publicly available. Based upon then-current
conversations with market-makers in the Common Stock, the Company believes that
the bid quotation for the Common Stock was $0.25 per share at December 31, 1992,
and $1.00 per share at December 31, 1993. At December 31, 1994, 1995, 1996, and
1997, the last trade listed on the OTC Bulletin Board, provided by the National
Association of Securities Dealers, was $1.75, $2.50, $2.125, and $2.6875 per
share, respectively. The Company believes that eight brokerage firms currently
make a market in the Company's Common Stock, although both bid and asked
quotations may at times be limited.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
Warren Delano and Michael A. Lubin beneficially own 30.1% and 32.9%,
respectively, of the Common Stock of the Company.
Messrs. Delano and Lubin are compensated indirectly by the Company
through payments made to Lubin, Delano & Company, an investment banking and
consulting firm of which they are the only partners. During 1997, the aggregate
payments made to Lubin, Delano & Company for services provided by Messrs. Delano
and Lubin in their capacities as President and Chairman of the Board,
respectively, were $400,000. The Company's arrangements with Lubin, Delano &
Company also provide for an incentive fee based upon the attainment of
predetermined consolidated profit targets and additional compensation, as
mutually agreed upon, for services provided by Lubin, Delano & Company in
connection with acquisitions, divestitures,
-13-
<PAGE> 16
financings, or similar transactions involving the Company. Messrs. Delano and
Lubin received no payments under the incentive compensation plan for 1997 or for
services provided in connection with acquisitions, divestitures, financings, or
similar transactions during 1997. Currently, Lubin, Delano & Company is being
compensated for the services provided by Messrs. Delano and Lubin in their
capacities as President and Chairman of the Board, respectively, at the base
rate of $400,000 per year.
Messrs. Delano and Lubin and their affiliates are holders of $1,500,000
principal amount of the Company's 12.75% Senior Subordinated Notes due
February 1, 2000, $1,000,000 principal amount of the Company's 14% Junior
Subordinated Convertible Notes due May 1, 2000, and $347,000 principal amount
of the Company's 14% Junior Subordinated Nonconvertible Notes due May 1, 2000.
In 1997, Messrs. Delano and Lubin and their affiliates received interest
payments on these notes in the aggregate amount of $379,783.
The Company made cash payments in respect of fees and expenses of
approximately $395,000 to the law firm of Nixon, Hargrave, Devans & Doyle LLP
during 1997. Kenneth I. Greenstein, Secretary and a director of the Company, was
a stockholder of a professional corporation that, until December 31, 1997, was a
partner in that law firm.
PROPOSAL 3 -- RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors, on the recommendation of the Audit Committee,
has appointed the firm of Ernst & Young LLP, independent public accountants, to
audit the accounts of the Company for the year ending December 31, 1998. Ernst &
Young LLP has been employed by the Company as its independent auditor since the
fiscal year ended May 31, 1989.
Stockholders are asked to approve the action of the Board of Directors
in appointing Ernst & Young LLP. It is intended that, unless marked to the
contrary, the shares represented by proxy shall be voted for the ratification of
such appointment. It is expected that a representative of Ernst & Young LLP will
be present at the Annual Meeting to answer questions of stockholders and will
have the opportunity, if desired, to make a statement.
STOCKHOLDER PROPOSALS
Proposals by stockholders intended to be presented at the next annual
meeting (to be held in 1999) must be received by the Secretary of the Company on
or before January 5, 1999, in order to be included in the proxy statement and
the proxy for that meeting. Proposals should be directed to Secretary, Lexington
Precision Corporation, 767 Third Avenue, New York, NY 10017.
OTHER MATTERS
Management does not know of any other matters that are likely to be
brought before the Annual Meeting. However, in the event that any other matters
properly come before the Annual Meeting, the persons named in the enclosed proxy
will vote in accordance with their judgment on such matters.
A copy of the Company's Annual Report for the year ended December 31,
1997, which includes financial statements and related data, accompanies this
Proxy Statement.
-14-
<PAGE> 17
According to SEC rules, the information presented in this Proxy
Statement under the captions "Compensation Committee Report on Executive
Compensation" and "Stock Price Performance" shall not be deemed to be
"soliciting material" or to be filed with the SEC under the Securities Act of
1933 or the Securities Exchange Act of 1934, and nothing contained in any
previous filings made by the Company under such Acts shall be interpreted as
incorporating by reference the information presented under the specified
captions.
By Order of the Board of Directors,
Kenneth I. Greenstein
Secretary
Dated: April 17, 1998
New York, New York
-15-
<PAGE> 18
LEXINGTON PRECISION CORPORATION
767 Third Avenue
New York, New York 10017
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
P THE COMPANY FOR THE ANNUAL MEETING OF STOCKHOLDERS ON MAY 13, 1998
R
O The undersigned hereby appoints as Proxies, each of WARREN DELANO
X and DENNIS J. WELHOUSE, each with full power to appoint his
Y substitute, and hereby authorizes them to represent and to vote, as
designated below, all shares of capital stock of Lexington
Precision Corporation held of record by the undersigned on April 1,
1998, at the Annual Meeting of Stockholders to be held on May 13,
1998, and any adjournments thereof.
<TABLE>
<S> <C>
If Proposal 2 is approved, nominees for election of five (change of address)
directors: ------------------------------------
------------------------------------
William B. Conner Michael A. Lubin ------------------------------------
Warren Delano Phillips E. Patton (If you have written in the above
Kenneth I. Greenstein space, please mark the corresponding
box on the reverse side of this card)
If Proposal 2 is not approved, nominees for election of two
directors:
Warren Delano Kenneth I. Greenstein
(see reverse side to vote for or withhold vote for
nominees)
</TABLE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED. YOU
ARE ENCOURAGED TO SPECIFY YOUR CHOICE BY MARKING THE APPROPRIATE
BOXES, SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU
WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS'
RECOMMENDATIONS. IF NO DIRECTION IS GIVEN WITH RESPECT TO A
PARTICULAR PROPOSAL, THIS PROXY WILL BE VOTED FOR SUCH PROPOSAL.
THE PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS
CARD.
PLEASE MARK, DATE, SIGN, AND RETURN THIS PROXY CARD PROMPTLY, USING
THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE
UNITED STATES OF AMERICA.
SEE REVERSE
SIDE
................................................................................
DETACH CARD
<PAGE> 19
LEXINGTON PRECISION CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [ ]
<TABLE>
<CAPTION>
FOR WITHHELD FOR ALL
ALL ALL EXCEPT:
<S> <C> <C> <C>
1A. If Proposal 2 is approved, [ ] [ ] [ ]
Election of 5 Directors (cross out exceptions)
William B. Conner, Warren Delano, Kenneth I. Greenstein,
Michael A. Lubin, Phillips E. Patton
1B. If Proposal 2 is not approved, [ ] [ ] [ ]
Election of 2 Directors (cross out exceptions)
Warren Delano, Kenneth I. Greenstein
</TABLE>
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
2. Amendment of Article III, Section 1 of the bylaws. [ ] [ ] [ ]
3. Ratify the appointment of Ernst & Young LLP as independent [ ] [ ] [ ]
auditors.
4. In their discretion, the Proxies are authorized to vote
upon any other business that may properly come before the
meeting.
Plan to Attend Meeting [ ]
Address change requested [ ]
</TABLE>
Date:_____________________,1998
---------------------------------------
Signature(s)
---------------------------------------
Signature(s)
NOTE: Please sign exactly as name
appears hereon.
If shares are registered in more than one
name, the signatures of all such persons
are required. A corporation, should sign in
the full corporate name by a duly
authorized officer stating his title.
Trustees, guardians, executors and
administrators should sign in their
official capacity giving their full title
as such. If a partnership, please sign in
the partnership name by authorized persons.
................................................................................
[ARROW] FOLD AND DETACH HERE [ARROW]
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY FORM PROMPTLY USING THE ENCLOSED
ENVELOPE.
