<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934.
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the quarterly period
ended 9/30/95
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the transition period
from to
Commission File Number 0-4538
LUMEX, INC.
(Exact name of registrant as specified in its charter)
New York 11-1731581
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
81 Spence St., Bay Shore, N.Y. 11706
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code (516)273-2200
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
On September 30, 1995 the registrant had outstanding 4,324,759 shares
of Common Stock, par value $.10 per share, which is the registrant's
only class of common stock.
<PAGE>
LUMEX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Net sales $34,247 $32,929 $99,411 $93,751
Costs and expenses:
Cost of sales 22,448 19,727 62,465 56,719
Selling and administrative 11,837 10,711 35,931 30,283
Product development 1,477 1,140 4,604 3,351
Interest 480 298 1,134 758
Other income (principally
interest income) (585) (497) (1,550) (1,526)
35,657 31,379 102,584 89,585
(Loss) income before income
tax (benefit) provision (1,410) 1,550 (3,173) 4,166
Income tax (benefit) provision (493) 465 (1,110) 1,250
NET (LOSS) INCOME $ (917) 1,085 $(2,063) $ 2,916
NET (LOSS) INCOME PER SHARE
OF COMMON STOCK $ (.21) $ .25 $ (.47) $ .68
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE>
LUMEX, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
(unaudited)
September 30, December 31,
1995 1994
(Dollars in thousands)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 936 $ 9,746
Investments 4,992 4,768
Accounts receivable 27,428 28,854
Inventories 20,327 14,962
Lease receivables 3,741 1,801
Other current assets 4,499 3,566
Total Current Assets 61,923 63,697
Property, plant and equipment 24,713 20,067
Lease receivables 13,147 7,234
Intangible assets 5,954 2,577
Other assets 603 593
$106,340 $94,168
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $ 13,500 $ -0-
Accounts payable 13,512 11,379
Other current liabilities 12,828 15,160
Total Current Liabilities 39,840 26,539
Deferred income taxes 2,221 2,221
Long-term debt 13,316 12,771
Stockholders' Equity
Common Stock, $.10 par value
authorized 15,000,000 shares,
issued 4,390,807 in 1995 and
4,361,812 in 1994 439 436
Capital surplus 16,633 16,167
Retained earnings 34,783 37,004
Unrealized losses on investments, net (51) (225)
Unamortized compensation (96) -
Treasury stock at cost; 66,048
shares in 1995 and 1994 (745) (745)
Total Stockholders' Equity 50,963 52,637
$106,340 $94,168
</TABLE>
See notes to consolidated financial statements.
<PAGE>
LUMEX, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(unaudited)
Nine Months Ended
September 30,
1995 1994
(in thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net (loss) income $(2,063) $ 2,916
Adjustments to reconcile net (loss) income
to net cash used in operating activities:
Depreciation and amortization 3,588 2,753
Net changes in operating assets
and liabilities (18,099) (15,084)
NET CASH USED IN OPERATING ACTIVITIES (16,574) (9,415)
INVESTING ACTIVITIES:
Purchases of property, plant and
equipment (7,418) (2,529)
Proceeds from sales and maturities
of investments -0- 8,594
Purchases of investments -0- (2,505)
Purchases of intangible assets (4,094) (768)
Repayment of note receivable -0- 2,160
Other ( 70) (290)
NET CASH (USED IN) PROVIDED BY
INVESTING ACTIVITIES (11,582) 4,662
FINANCING ACTIVITIES:
Proceeds from short-term borrowings 13,500 3,000
Proceeds from long-term borrowings 4,500 5,000
Principal payments of long-term debt (3,055) (2,555)
Proceeds from sale of leases 4,491 -0-
Exercise of stock options 70 303
Common shares reacquired (2) (57)
Other (158) (71)
NET CASH PROVIDED BY FINANCING ACTIVITIES 19,346 5,620
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (8,810) 867
CASH AND CASH EQUIVALENTS -- January 1st 9,746 260
CASH AND CASH EQUIVALENTS -- September 30th $ 936 $ 1,127
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE>
LUMEX, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)
(dollars in thousands)
NOTE 1--BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements
have been prepared in accordance with the instructions to Form 10-Q
and, therefore, do not include all information and footnotes necessary
for a fair presentation of financial position, results of operations
and changes in cash flows in conformity with generally accepted
accounting principles. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a
fair presentation have been included.
It is suggested that these condensed financial statements be read in
conjunction with the financial statements and the notes thereto
included in the Company's latest Annual Report or Form 10-K for the
year ended December 31, 1994.
NOTE 2--INVENTORIES
Inventories are valued at the lower of cost or market principally on
the Last-in, First-out (LIFO) method. The estimated replacement cost
of LIFO inventories exceeds stated LIFO cost by $4,598 and $4,498 at
September 30, 1995 and December 31, 1994 respectively.
Inventories were as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
<S> <C> <C>
Finished goods $ 8,227 $ 6,024
Work in process 5,166 3,664
Raw materials 6,934 5,274
$20,327 $14,962
</TABLE>
Because the inventory determination under the LIFO method can only be
made at the end of each fiscal year based on the inventory levels and
costs at that time, interim LIFO determinations are based on
management's estimates of expected year-end inventory levels and costs.
Since future estimates of inventory levels and prices are subject to
many forces beyond the control of management, interim financial results
are subject to final year-end LIFO inventory adjustments.
<PAGE>
LUMEX, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)
(dollars in thousands)
NOTE 3--FINANCING ARRANGEMENTS AND LONG-TERM DEBT
In September 1995, the Company borrowed $4.5 million from a bank
pursuant to a five year, variable rate ( based principally on the
bank prime rate), unsecured term loan agreement.The term loan is
payable in twenty equal quarterly principal installments which will
commence December 1995.Interest is payable monthly.
Under the agreement, the Company must meet certain financial
ratios and minimum net worth requirements. At September 30, 1995, the
Company was not in compliance with certain covenants of its term loan
agreements and has obtained the appropiate bank waivers.
NOTE 4--ACQUISITION
In June 1995, the Company acquired through its newly formed subsidiary,
Lumex Bed Systems, Inc., all of the assets of the former Sci-O-Tech
Inc., a manufacturer of beds for the nursing home and home healthcare
markets, for cash in the amount of $1,146. The acquisition cost,
accounted for under the Purchase Method, represents the fair value of
the assets received which consisted principally of receivables,
inventories and equipment.
NOTE 5--CONTRACT TERMINATION
In October 1995, the Company settled a contractual dispute regarding a
manufacturing and distribution agreement. The settlement resulted in a
one time pretax charge to earnings of $750 which included, among other
things, the transfer of certain manufacturing assets and certain cash
payments.
NOTE 6-- NET (LOSS) INCOME PER SHARE OF COMMON STOCK
Net (loss) income per share of common stock is computed by dividing net
(loss) income by the weighted average number of common shares and
common share equivalents (dilutive stock options) outstanding during
each year as appears below:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Three months ended September 30 4,345,689 4,329,877
Nine months ended September 30 4,350,488 4,308,200
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, selected
items from the Consolidated Statements of Operations both as a
percentage of sales and as a percentage increase (decrease) from the
comparable three and nine months ended of the prior year:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
% %
% of Sales Inc. % of Sales Inc.
1995 1994 (Dec) 1995 1994 (Dec)
<S> <C> <C> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 4.0% 100.0% 100.0% 6.0%
Costs and Expenses:
Cost of sales 65.5 59.9 13.8 62.8 60.5 10.1
Selling and
administration 34.6 32.5 10.5 36.1 32.3 18.7
Product development 4.3 3.5 29.6 4.6 3.6 37.4
Interest expense 1.4 .9 61.1 1.2 .8 49.6
Other (income) (1.7) (1.5) 17.7 (1.5) (1.6) 1.6
(Loss)Income before
income tax
(benefit) provision (4.1) 4.7 (191.0) (3.2) 4.4 (176.2)
</TABLE>
Net sales for the 1995 third quarter were $34,247,000, 4.0% higher than
net sales in the third 1994 quarter of $32,929,000. For the nine months
ended September 30, 1995, sales rose to $99,411,000, a 6.0% increase
over net sales of $93,751,000 in the same period a year earlier.
Lumex division sales rose 11% in the third quarter 1995 compared to the
third quarter 1994, due primarily to increased shipments of its low air
loss therapy systems and initial shipments of beds, which were added in July
1995 with the purchase of the former Sci-O-Tech Company. These increases more
than offset lower shipments of its ortho-biotic seating products.
Cybex division sales were 2% lower in the third quarter 1995 as compared to
the same period a year earlier as shipments of current products were impacted
by the introduction of major new products, a new lower cost extremity testing
and rehabilitation system and a new innovative line of variable resistance
strength training equipment. Shipments of these new products began in the
latter part of the current quarter.
<PAGE>
Gross margins were lower, at 34.5%, in the third quarter 1995, resulting from
production start up costs for new products at both divisions, higher raw
material costs and a changing product mix.
Selling and administrative costs were 10.5% higher in the third quarter 1995
due to the expanded sales and marketing efforts for the low air loss therapy
products at Lumex and new product introductions at Cybex, the amortization
of rights and licenses acquired earlier in the year and a $750,000 charge to
earnings related to the settlement of a contractual dispute regarding a
manufacturing and distribution agreement.
Product development costs were 29.6% higher in the third quarter 1995 as
a result of increased costs from continued efforts to accelerate the
introduction of major new products at both divisions.
Interest expense rose 61.1% principally due to increased borrowings under
the Company's short-term bank lines of credit. The income tax benefit was
reflected at 35% representing the expected annual tax rate for the year.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1995, the Company had working capital in excess of $22
million including cash and investments of $5.9 million and a current
ratio of 1.6 to 1.
Net cash used in operating activities was in excess of $9.1 million in the
third quarter 1995 principally resulting from operating losses, growth in
both trade and lease receivables and a decrease in accounts payable.
Cash used in investing activities was in excess of $2.6 million, principally
from increased capital spending, a significant portion of which was used
to reconfigure the Bay Shore manufacturing facilities to increase
production throughput and lower costs.
Cash provided by financing activities in the third quarter of $11.8 million
included $8.0 million in increased borrowings under the Company's short-term
bank lines of credit and $4.5 million in additional unsecured term loans.
At September 30, 1995, the Company was not in compliance with certain
covenants under its existing term loans related to debt service and
minimum tangible net worth requirements, for which it has received the
appropriate bank waivers. Management believes the Company's operations
will continue to use cash through the end of 1995 which is expected to
be funded through its cash and investment portfolio and the sale of its
lease portfolio.
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10(xv)- Employment Agreement dated
August 9,1995 between J.
Raymond Elliott and the Company
(filed herewith).
27 - Financial Data Schedule (filed
herewith).
(b) There were no reports on Form 8-K filed
during the quarter ended September 30,
1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
LUMEX, INC.
Date: November 14, 1995 By /s/ J. Raymond Elliott
J. Raymond Elliott
President and
Chief Executive Officer
Date: November 14, 1995 By /s/ Robert McNally
Robert McNally
Sr. Vice President and
Chief Financial Officer
<PAGE>
Exhibit Index
Exhibit No.
10(xv) - Employment Agreement dated August 9, 1995 between J. Raymond
Elliott and the Company (filed herewith).
27 - Financial Data Schedule (filed herewith).
Lumex, Inc.
100 Spence Street
Bay Shore, New York 11706
August 9, 1995
Mr. J. Raymond Elliott
6169-5th Line Eramosa Township
Wellington County, Ontario NOB 2KO
Dear Ray:
This letter confirms our agreement
concerning your employment with Lumex, Inc. (the "Company") as follows:
1. Term. Your employment will be for
a term of three years beginning September 1, 1995 through August 31,
1998 (the "Term"). If the Company does not extend or renew this
Agreement at the end of the Term, the Company shall make a termination
payment equal to your Base Salary, at the annual rate in effect at the
time of such termination, for a period of 12 months after the effective
date of termination. In this case, the Base Salary shall be paid to
you in such intervals and in the same manner as it was paid immediately
prior to the end of the Term.
2. Duties.
(a) You shall serve as the
Company's President and Chief Executive Officer, which shall be the
most senior officer of the Company. As such, you shall have all the
functions, duties and responsibilities of a President and Chief
Executive Officer, and all other senior executives of the Company shall
report to you.
(b) During the Term, you shall
devote your full busi-ness time and energies to the business and
affairs of the Company, and shall not accept other employment, except
that, if approved by the Company's Board of Directors (the "Board"),
you may serve as a member of one of the boards of directors of other
companies. You shall use your best efforts and abilities to promote
the interests of the Company, to serve as a director or officer of any
subsidiary of the Company to which you are elected and you shall
perform such duties consistent with your status as Chief Executive
Officer as may be assigned to you by the Board.
<PAGE>
(c) So long as you shall comply
with your obligations under this Agreement and you continue to be
employed by the Company as its President and Chief Executive Officer,
throughout the Term, you shall be proposed for election to the Board.
As an executive of the Company and a member of the Board, you will be
a "covered person" under the Company's policy of directors' and
officers' liability insurance.
(d) You will perform your services
principally at the Company's Bay Shore, New York executive office,
acknowledging that the nature of your duties will require reasonable
domestic and international travel from time to time.
3. Compensation. Your compensation
shall consist of the salary and benefits described below:
(a) A base salary at the annual
rate of $300,000 ("Base Salary"). The Compensation Committee of the
Board shall review the Base Salary in 1997, and depending upon the
Company's 1996 Results of Operations, Base Salary shall be subject to
an increase in 1997. Such review shall occur not later than March 31,
1997, and shall be effective as of January 1, 1997. Thereafter, Base
Salary shall be reviewed in accordance with the Company's customary
practices respecting executive compensation, but which in any event
will occur at least once in each calendar year.
(b) You shall participate in the
Company's Bonus Incentive Compensation Plan (the "BIC Plan") in
accordance with its terms, except that the following special provisions
shall be applicable to you:
(i) Your "Target" shall be 50%,
your "Maximum" 100% and your "Max-Max" 150%, as each term is defined in
the BIC Plan.
(ii) Whether or not the 1996
Target is achieved, you shall receive on September 1, 1996 a minimum,
non-forfeitable allowance of $70,000 under the BIC Plan for the year
ending December 31, 1996, and if it develops that you are entitled
under the BIC Plan to more than $70,000 for such year, such balance
shall be paid in 1997 in accordance with the terms of the BIC Plan; and
(iii) At your election, you may
receive between 10% and 40% of the amount payable to you under the BIC
Plan in the form of the Company's common stock, converted at a value
equal to 85% of its market value, all in accordance with the BIC Plan.
(c) You shall be granted the
following under the Company's 1995 Omnibus Incentive Plan, based on the
value of the Company's common stock as of the close of trading on
August 2, 1995:
(i) A restricted stock grant of
45,000 shares of restricted common stock, in accordance with the terms
of a Restricted Stock Award agreement which will provide, among other
things, that 20% of such restricted common stock will vest on each
anniversary date of your employment, but if any "Change of Control" (as
defined in paragraph 9) occurs sooner, 25,000 shares of the restricted
stock will vest on the effective date of the Change of Control; and
<PAGE>
(ii) A non-qualified stock
option for 25,000 shares of common stock, in accordance with a grant
letter which will provide, among other things, that such options will
vest at the rate of 25% each year beginning on the first anniversary of
your employment, but if any Change of Control occurs sooner, the option
will 100% vest on the effective date of the Change of Control.
(d) You shall receive reimbursement
for your reasonable out-of pocket expenses in connection with searching
for a residence on Long Island, which shall include up to six months of
temporary housing costs on Long Island, real estate broker's fees or
commissions for the sale of your current residence, mortgage "points"
and your actual out-of-pocket moving costs. You also will receive all
other amounts which are payable in accordance with the Company's re-
location policies covering its most senior executives.
(e) The Company will arrange
to have your residence purchased through either its relocation service,
PHH Home Equity or a suitable relocation service of your choosing. The
Company also shall pay you up to $35,000 to reimburse you for your
"Market Loss" (defined below) associated with purchasing your existing
residence through the relocation service. Market Loss shall be
computed by subtracting from the actual gross sales price of such
residence the market value of same, as determined averaging two
appraisals by companies selected by the relocation service. The
Company shall tax protect you for the amount of the Market Loss it pays
to you, by paying you additional compensation sufficient to reimburse
you for the federal and state income tax, at your highest marginal
rate, that you are required to pay on any Market Loss payment to you
under this paragraph ("Tax Reimbursement"). The amount of the Tax
Reimbursement shall be determined by and set forth in a certificate of
your tax accountant, subject to review by the Company's accountants.
(f) You shall be reimbursed
for your actual ordinary and reasonable out-of-pocket expenses incurred
in the conduct of the Company's business. You shall either receive an
annual automobile allowance (payable in monthly installments) or be
furnished with a company-leased automobile, in either case commensurate
with your position as and in accordance with the policies and proce-
dures that the Company applies to its most senior executive officer.
<PAGE>
(g) A supplemental insurance
benefit which will provide you with up to $10,000 to be used for any
one or more of the following purposes:
(i) either (A) your purchase of
an individual policy of health insurance covering any gaps in the
coverage for you and your family that is available under the Company's
group health insurance plan or (B) your expenses for providing medical
care to you and your family members that are not paid or reimbursed
under the Company's group health insurance plan due to the application
of deductibles, co-insurance or exclusions;
(ii) your purchase of life
insurance to provide benefits up to three times your Base Salary; and
(iii) a policy of disability
insurance which would reduce or eliminate the waiting period under the
Company's group disability program and/or increase the monthly benefit
available to you under that program.
(h) All compensation and benefits
shall be subject to all withholdings that the Company determines are
required by federal, state or local law, and to such deductions as may
be applicable under the various benefit plans in which you participate.
4. Other Benefits. In addition to
the compensation and benefits described in paragraph 3, you shall
receive paid vacation of four weeks in each calendar year, in accor-
dance with the policies and procedures that the Company applies to a
senior executive officer. You shall be eligible for and participate in
sick leave and coverage under any life, health, dental, disability or
other insurance programs made available to other senior executive
officers. You shall also be eligible to participate in any pension,
profit-sharing, restricted stock award, stock option or other future
employment benefit, incentive or compensation program made available to
senior executive officers of the Company, and where appropriate, with
special application to you as Chief Executive Officer.
5. Termination. Termination of
employment can occur in the following manner:
(a) The Company shall have
the right to terminate this Agreement "for cause", which as used herein
shall be limited to one or more of the following:
(i) fraud or embezzlement, or
conviction of a felony or the entry of a plea (including a plea of nolo
contendere) for any felony.
(ii) breach of your material
obligations under the confidentiality or non-competition obligations
described in paragraph 8;
(iii) any act of moral turpitude
or willful misconduct which either results in your personal enrichment
at the Company's expense or, in the reasonable judgment of the Board,
has a material adverse impact on the business or reputation of the
Company or any of its affiliates; or
<PAGE>
(iv) your material breach of or
willful failure or refusal to perform your obligations under this
Agreement. You will not be considered to have materially breached this
Agreement or willfully failed to perform your obligations if you
correct the same 30 days after the Board provides notice to you
specifying the nature of the breach, failure or refusal, or if the
Board determines that you did not act in bad faith or that your action
or inaction was based on your reasonable belief that it was in the
Company's best interests.
(b) If you should die during the
Term.
(c) If you become "disabled"
during the Term. For the purpose of this Agreement, disability shall
mean either any disability as defined under the Company's disability
insurance policy that is applicable to you, or if no such policy is
available, a determination by a licensed physician practicing in New
York City or Long Island that you have suffered any physical or mental
disability or incapacity which causes you to be incapable of performing
the services required under paragraph 2. You will be considered
"disabled" if the disability actually prevents you from performing such
services for a period of three consecutive months or a total of three
months during any twelve-month period.
(d) The Company may
terminate this Agreement other than for cause, in which case you shall
receive your Base Salary, at the annual rate in effect at the time of
such termination, for a period equal to the greater of (i) the balance
of the Term after the effective date of termination, or (ii) 12 months
from such date ("Severance Pay"). In this case, 50% of the Severance
Pay shall be paid to you in equal payments over three months, and the
balance in equal payments over the applicable Severance Pay continua-
tion period, in such intervals and in the same manner as Base Salary
was paid at the time of termination. If the Company terminates other
than for cause, you also shall receive a bonus under the BIC Plan if
you reach the Target at the date termination occurs. Any bonus under
the BIC Plan will be pro rata, based upon the month of termination, and
shall be paid in the same manner and at the same time as it would have
been paid if you were still employed at the date the BIC Plan bonus was
awarded.
(e) Subject to the provisions of
paragraph 9, you shall have the right to terminate this Agreement if
there is a Change of Control.
(f) The Company shall have the
right to terminate this Agreement if, by December 31, 1995, the Company
has not obtained on your behalf your resident visa for your employment
by the Company as a result of any event that had occurred in the past
with respect to you which would, if it occurred during the Term,
constitute termination for cause under subparagraphs 5(a)(i) or (iii).
In that case, the Company shall pay all your reasonable out-of-pocket
expenses relating to your contemplated employment with the Company.
6. Other Termination Provisions.
(a) Upon any termination of your
employment or non-renewal of the Term, you shall immediately resign
from all positions and offices with the Company and its subsidiaries,
whether or not you submit a formal letter of resignation. Any
termination or non-renewal shall not affect your confidentiality or
non-disclosure obligations referred to in paragraph 8. At any
termination or non-renewal, you shall receive any restricted stock
grants which are then vested, and you shall be entitled to exercise any
stock options which are then exercisable in accordance with the terms
of your stock option grant letter with the Company.
<PAGE>
(b) Any termination shall be by
notice given in accordance with paragraph 10(e), shall specify the
effective date of termination, and shall provide the reasons for such
action, as required by paragraph 5.
(c) If termination occurs as a
result of death, the Company shall pay to your spouse, if she survives
you, or to such persons as your legal representative may direct if your
spouse does not survive you, an amount equal to your then effective
Base Salary and such other compensation or benefits to which you are
entitled, prorated to the date of death. If termination occurs under
paragraphs 5(a), 5(c) or 5(f), the Company's obligations shall be
limited to paying you your then effective Base Salary and any other
compensation or benefits prorated to the effective date of termination.
7. Representations and Covenants.
(a) You represent and warrant to
the Company that you are not now subject to any non-competition,
restrictive covenant or other restriction or agreement which would
prevent, limit or impair in any way your ability to perform all your
obligations under this Agreement. You have no obligation to any former
employer or other person which is inconsistent with or conflicts with
your duties and obligations hereunder, and the terms and conditions of
the services to be performed for the Company, as set forth herein. You
have not ever applied for and been denied a resident visa for employ-
ment in the United States, and you know of no reason why you would not
be able to obtain the resident visa necessary for you to enter into
this Agreement and perform your services as contemplated by it.
(b) At the Company's request, you
shall complete reasonable medical examinations from time to time if
necessary to obtain insurance on your life for any "keyman" insurance
policy the Company may apply for, or if required under any Company
sponsored benefit plan.
8. Confidentiality, Ownership and
Non-Competition Agreements. You shall sign the same agreements with
the Company concerning confidentiality, ownership of inventions and
other discoveries, and non-competition which the Company customarily
requires of its senior executive officers at the same time you sign
this Agreement. A copy of that form of that agreement is annexed.
However, to the extent the non-competition provisions of that agreement
cover a shorter time, the period shall be enlarged to extend through
the end of any period you continue to receive payments under this
Agreement, including payments on Change of Control.
<PAGE>
9. Change of Control.
(a) "Change of Control" means any
one of the following:
(i) a change of control of a
nature that would be required to be reported in the Company's proxy
statement under the Securities Exchange Act of 1934, as amended (the
"Exchange Act");
(ii) the approval by the Board
of a sale of all or substantially all of the Company's assets to any
unrelated third party and the consummation of such transaction;
(iii) the consummation of any
merger, consolidation, or like business combination or reorganization
of the Company which is approved by the Board and which results either
in an event described in clause (i) above.
Change of Control excludes the sale or other disposition (by spin-off,
split-off or otherwise) of one of the two divisions known today as the
Lumex and Cybex Divisions of the Company under circum-stances where you
continue to be employed by the remaining division pursuant to all the
terms and conditions of this Agreement.
(b) If you wish to exercise your
right to terminate your employment upon a Change of Control you must
give the Company at least 90 days' notice not more than 30 days after
any event constituting a Change of Control occurs. Your failure to
give such notice shall preclude you from terminating employment upon a
Change of Control, but only with respect to that occurrence. During
the 90 day period following the delivery of your notice of termination,
you shall cooperate fully with the Company (or its successor) to effect
the orderly transfer of your duties to another person or persons.
Notwithstanding the foregoing, upon receipt of your notice of termina-
tion upon a Change of Control, the Company may cause your termination
to become effective prior to the end of the 90 day period (or if later,
the date specified in your notice of termination) upon not less than
two business days' notice.
(c) If you terminate employment
upon a Change of Control, the Company (or its successor) shall pay you
an amount equal to the Base Salary, at the annual rate in effect at the
time of such termination, multiplied by 2.99. Of the amount so deter-
mined, 50% shall be paid to you in equal installments for a period of
12 months after the effective date of termination, and the balance in
equal installments over the next 24 months. In both cases, payments
shall be in such intervals and in the same manner as Base Salary was
paid at the time of termination.
<PAGE>
(d) Notwithstanding the foregoing,
you shall have no right to terminate upon a Change of Control if you
are offered continued employment for at least three full years
following the Change of Control in a comparable position, with
comparable responsibilities at comparable total compensation, all as
provided herein. If, within the three-year period following the Change
of Control, you are offered and accept such comparable employment but
(i) you are subsequently demoted to non-comparable employment, (ii) you
are terminated without Cause (as defined in paragraph 5(a)) or (iii)
you terminate for "Good Reason" (determined below), the Company (or its
successor) shall pay to you, in a single installment, an amount equal
to the difference between (i) the amount you actually received in the
new employment following the Change of Control and (ii) your Base
Salary, at the annual rate in effect at the time the Change of Control
occurred, multiplied by 2.99. Good Reason means the assignment of any
duties inconsistent in any material respect with the your position
immediately prior to the Change of Control (including office, titles
and reporting requirements), material decrease in your authorities,
duties and responsibilities, any material negative changes to Base
Salary, annual bonuses, incentives, stock plans, savings and incentive
plans, welfare/benefits plans, expense policies, fringe benefits, or
your office, support staff and physical location. Also, you would have
Good Reason to terminate if there was an attempt to terminate your
employment other than for cause, as expressly permitted by paragraph
5(a) of this Agreement.
10. Miscellaneous.
(a) Your obligations under this
Agreement are not assignable (except as provided in paragraph 6(c)) and
shall not be delegated. This Agreement and all of the Company's
rights and obligations hereunder may be assigned or transferred to and
shall be assumed by and be binding upon any corporation or other
business entity which, by merger, consolidation, purchase of the assets
or otherwise, including after a Change of Control, acquires all or a
material part of the assets of the Company.
(b) If any provision contained in
this Agreement or the agreements referred to in paragraph 8 is
determined to be unenforceable for any reason, the remainder of this
Agreement or such other agreements shall be construed as if such
provision was not included, and the remaining parts shall continue in
full effect. If the unenforceability relates to the scope, duration or
the area covered by any non-competition agreement, we agree that the
court making such determination shall have the power to reduce the
breadth of its scope or the duration or area of such restriction, and
in reduced form, such restriction shall then be enforceable.
(c) This Agreement is executed and
delivered in the State of New York and shall be interpreted in
accordance with New York law, without regard to its principles of
conflicts of laws. Any action or proceeding to enforce any provisions
of this Agreement may be brought in a federal or state court located in
the New York State Counties of New York, Nassau or Suffolk, and any
such action may be commenced and process served as provided in the laws
or rules applicable to the federal or state court where the action is
brought.
<PAGE>
(d) This Agreement and those
referred to in paragraph 8 constitute the entire understanding of the
parties with respect to your employment with the Company, and they may
not be amended, and none of their respective provisions may be waived
other than by a writing signed by both of us.
(e) All notices and other communi-
cations required or permitted hereunder shall be in writing and shall
be sufficient if delivered personally, sent by any national overnight
courier or mailed by certified mail, return receipt requested, to the
addresses indicated on page one. Any item delivered in accordance with
the provisions of this paragraph shall be deemed to have been delivered
(i) on the date of personal delivery, (ii) on the business day
following the date sent by overnight courier or (iii) on the fifth
business day following the date on which it was so mailed, as the case
may be. Notice to the Company shall be to the attention of its Chief
Financial Officer.
(f) You shall receive all your
payments in and all dollar references in this letter are to U.S.
dollars.
(g) Subject to your compliance with
the agreements referred to in paragraph 8, your right to receive the
payments set forth herein on termination or non-renewal is otherwise
unconditional. Accordingly, you shall not be required to mitigate by
seeking new employment or substitute sources of income. Further, your
obtaining other employment or positions (subject to compliance with the
agreements referred to in paragraph 8) shall not affect your right to
receive and the Company's obligation to pay or provide you with all the
termination or non-renewal payments and benefits provided herein.
Please countersign this letter where
indicated, whereupon it will become our binding Agreement. We look
forward to your joining us on September 5, 1995.
Sincerely,
LUMEX, INC.
By:/s/John C. Spratt
Name:John C. Spratt
Title:Chairman of the Board
Accepted and Agreed to:
/s/J. Raymond Elliott
J. Raymond Elliott
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
financial statements contained in the body of the accompanying Form 10-
Q and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1995
<CASH> 936
<SECURITIES> 4,992
<RECEIVABLES> 28,119
<ALLOWANCES> 691
<INVENTORY> 20,327
<CURRENT-ASSETS> 61,923
<PP&E> 50,023
<DEPRECIATION> 25,310
<TOTAL-ASSETS> 106,340
<CURRENT-LIABILITIES> 39,840
<BONDS> 13,316
<COMMON> 439
0
0
<OTHER-SE> 50,963
<TOTAL-LIABILITY-AND-EQUITY> 106,340
<SALES> 99,411
<TOTAL-REVENUES> 99,411
<CGS> 62,465
<TOTAL-COSTS> 103,000
<OTHER-EXPENSES> (1,550)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,134
<INCOME-PRETAX> (3,173)
<INCOME-TAX> (1,110)
<INCOME-CONTINUING> (2,063)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,063)
<EPS-PRIMARY> (.47)
<EPS-DILUTED> (.47)
</TABLE>
