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:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
LUMEX, INC.
------------------------------------------------------------------------
(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/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
/ / 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>
PRELIMINARY COPIES
LUMEX, INC.
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 7, 1996
------------------------
The Annual Meeting of Shareholders of Lumex, Inc., a New York corporation
(the 'Corporation'), will be held at the Ryder Cup Room at the Golf Club at
Chelsea Piers, Pier 59, New York, New York on Wednesday, August 7, 1996 at 10:00
A.M., local time, for the following purposes:
1. To elect four directors.
2. To consider and act upon a proposal to amend the Corporation's Restated
Certificate of Incorporation to change the name of the Corporation to
CYBEX International, Inc.
3. To transact such other business as may properly come before the meeting
or any adjournments thereof.
The Board of Directors has fixed the close of business on June 21, 1996 as
the record date for the determination of shareholders entitled to notice of, and
to vote at, the meeting.
TO MAKE CERTAIN THAT YOUR SHARES WILL BE VOTED AT THE MEETING, WHETHER OR
NOT YOU PLAN TO ATTEND, PLEASE FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY
WHICH IS SOLICITED BY AND ON BEHALF OF THE BOARD OF DIRECTORS.
By Order of the Board of Directors
Robert McNally
Secretary
Ronkonkoma, New York
July 8, 1996
<PAGE>
LUMEX, INC.
------------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 7, 1996
------------------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Lumex, Inc. (the 'Corporation') to be voted
at the Annual Meeting of Shareholders of the Corporation to be held on
Wednesday, August 7, 1996 and at any adjournments of the meeting (the 'Annual
Meeting'). Shareholders of record at the close of business on June 21, 1996 will
be entitled to notice of, and to vote, at such meeting.
Shareholders who execute proxies may revoke them at any time before they
are voted by notice to the Corporation in writing or at the meeting or by
delivering, at or prior to the meeting, a properly executed later-dated proxy.
Shares represented by an effective proxy given by a shareholder will be voted as
directed, unless authority to vote is withheld. If a signed proxy is received
but no specification is made thereon, the shares represented thereby will be
voted in accordance with the recommendations of the Board of Directors.
The mailing address of the Corporation's principal executive offices is
2100 Smithtown Avenue, Ronkonkoma, New York 11779. The approximate date on which
this Proxy Statement and the form of proxy were first sent or given to the
shareholders of the Corporation was July 8, 1996.
The Annual Report of the Corporation for the year ended December 31, 1995,
including audited financial statements, accompanies this Proxy Statement.
VOTING RIGHTS
As of the close of business on the record date, the Corporation had
outstanding 4,426,653 common shares, par value $.10 per share ('Common Shares').
At all meetings of shareholders, holders of Common Shares are entitled to one
vote, exercisable in person or by proxy, for each Common Share held.
As of June 3, 1996, more than five percent of the Corporation's outstanding
Common Shares (the Corporation's only outstanding class of voting securities)
were owned beneficially by the persons named in the following table. All Common
Shares are owned directly, except as otherwise indicated.
The information concerning the beneficial owners in the table below, other
than Charles E. Murcott, was obtained from public filings by those companies
with the Securities and Exchange Commission. The Corporation assumes no
responsibility for the accuracy of such information.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
- ---------------------------------------- -------------------- ---------
<S> <C> <C>
Surgical Appliance Industries, Inc. ... 529,600 12.0%
3960 Rosslyn Drive
Cincinnati, Ohio 45209
Charles E. Murcott ..................... 256,964(1) 5.8%
10 Matinecock Farms Road
Glen Cove, NY 11542
Dimensional Fund Advisors Inc. ......... 252,900(2) 5.7%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
</TABLE>
(Footnotes on next page)
<PAGE>
(Footnotes from previous page)
- ------------------
(1) Includes 5,000 shares held by a charitable trust of which Mr. Murcott is a
co-trustee and shares voting power. Does not include 27,450 shares owned by
Mr. Murcott's wife, Constance Murcott, as to which beneficial ownership is
disclaimed.
(2) Dimensional Fund Advisors Inc. ('Dimensional'), a registered investment
advisor, is deemed to have beneficial ownership of 252,900 Common Shares as
of December 31, 1995, all of which shares are held in portfolios of DFA
Investment Dimensions Group Inc., a registered open-end investment company,
or in series of the DFA Investment Trust Company, a Delaware business trust,
or the DFA Group Trust and the DFA Participating Group Trust, investment
vehicles for qualified employee benefit plans, all of which Dimensional Fund
Advisors Inc. serves as investment manager. Dimensional disclaims beneficial
ownership of all such shares. Dimensional has sole voting power for 146,500
Common Shares and sole investment power for 246,900 Common Shares.
SECURITY OWNERSHIP BY MANAGEMENT
The following table sets forth, as of June 3, 1996, information with
respect to the number of Common Shares of the Corporation beneficially owned by
each director and nominee for director of the Corporation, by each of the Named
Executive Officers identified herein under the caption 'Summary Compensation
Table' other than Mr. George (for whom the number of Common Shares beneficially
owned, if any, is unknown), and by all directors and executive officers of the
Corporation as a group. Except as otherwise indicated, all shares are owned
directly.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME OF BENEFICIAL OWNER OWNERSHIP OF CLASS
- ---------------------------------------- ---------- ------------
<S> <C> <C>
Kay Knight Clarke....................... 672 (2) (1)
John R. Cowin........................... 33,003 (2)(3) (1)
J. Raymond Elliott...................... 60,910 (2)(4) 1.4%
Thomas W. Kahle......................... 7,661 (2) (1)
Robert R. McMillan...................... 3,860 (2) (1)
Robert McNally.......................... 45,452 (2)(3)(4) 1.0%
Carol G. Nelson......................... 38,660 (2) (1)
John C. Spratt.......................... 16,260 (2)(5) (1)
Alan H. Weingarten...................... 5,660 (2) (1)
All directors, nominees and executive
officers as a group
(consisting of 9 persons)............. 212,138 (2)(3) 4.7%
</TABLE>
- ------------------
(1) Constitutes less than one percent.
(2) Includes shares which the following persons have the right to acquire within
60 days through the exercise of stock options: Mr. Cowin, 32,500 shares; Mr.
Elliott, 25,000; Mr. Kahle; 2,000 shares; Mr. McMillan, 2,000 shares; Mr.
McNally, 19,750 shares; Mr. Nelson, 2,000 shares; Mr. Spratt, 2,000 shares;
Mr. Weingarten, 2,000 shares. Also includes shares which the following
nonemployee directors have the right to acquire within 60 days as partial
payment of their retainer: Ms. Clarke, 336 shares; Mr. Kahle, 336 shares;
Mr. McMillan, 336 shares; Mr. Nelson, 336 shares; Mr. Spratt, 1,586 shares;
Mr. Weingarten, 336 shares. The number of shares that all directors,
nominees and executive officers as a group have the right to acquire within
60 days is 88,516 Common Shares. In each case the percent of class is
calculated on the basis that such shares are deemed outstanding. No voting
or investment power exists with respect to such shares prior to acquisition.
(3) Includes shares which the following persons have allocated to them under the
Lumex, Inc. Employee Stock Ownership Plan: Mr. Cowin, 503 shares; Mr.
McNally, 1,071 shares; and all directors, nominees and executive officers as
a group, 1,574 shares.
(4) Includes shares of restricted stock over which the following persons have
voting power but not investment power until such shares vest: Mr. Elliott,
25,000 shares and Mr. McNally, 3,431 shares.
(5) Includes 7,100 shares owned by Orthopaedic Health Services, Inc.
('Orthopaedic') and 200 shares owned by Orthopaedic's pension plan. Mr.
Spratt is the sole owner of Orthopaedic.
2
<PAGE>
ELECTION OF DIRECTORS
(Proposal No. 1)
Four persons are to be elected to the Board of Directors at the Annual
Meeting and the remaining three directors will continue in office for the terms
specified below. The persons named in the enclosed Proxy intend to vote for the
election of the four nominees listed below, unless instructions to the contrary
are given therein. All of the nominees are currently directors of the
Corporation. Proxies may not be voted for a greater number of persons than the
number of nominees named below.
The four nominees have indicated that they are able and willing to serve as
directors. However, if some unexpected occurrence should require the
substitution of some other person or persons for any one or more of the
nominees, the person or persons voting the Proxies will vote for such nominees
as the Director Affairs Committee of the Corporation may select.
Nominees for directors who receive a plurality of the votes cast by the
holders of the outstanding Common Shares entitled to vote at the Annual Meeting
will be elected. Abstentions, broker non-votes, and withheld votes are not
counted in determining the number of votes cast for any nominee for director.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH NOMINEE.
The Board currently has two vacancies, one in the class whose term expires
in 1997 and one in the class whose term expires in 1998. The Director Affairs
Committee is in the process of identifying qualified candidates to serve on the
remaining Board seats. In accordance with the By-laws of the Corporation such
vacancies will be filled by a majority vote of the remaining directors then in
office, and such directors so elected shall hold office for a term which shall
expire with the term of the other directors of such class, and until such
directors' respective successors shall have been elected and qualified.
The following table lists the name, age, principal occupation and certain
business experience of each of the four nominees and the three continuing
directors of the Corporation whose terms of office will continue after the
Annual Meeting, the year in which each director's term of office will expire
(assuming, in the case of each of the four nominees, such nominees are elected
at the Annual Meeting) and the year in which each director was first elected as
a director of the Corporation.
<TABLE>
<CAPTION>
AGE AT PRINCIPAL OCCUPATION YEAR FIRST
JUNE 1, AND CERTAIN YEAR TERM BECAME
NAME 1996 BUSINESS EXPERIENCE WILL EXPIRE DIRECTOR
- ------------------------- -------- ---------------------------------------- ------------ -----------
<S> <C> <C> <C> <C>
NOMINEES FOR DIRECTORS
Kay Knight Clarke........ 57 President, Templeton, Inc., a management 1997 1996
consulting company, since July 1995.
President, Micromarketing Division of
Advo, Inc., a direct marketing company,
from December 1991 to July 1995. Senior
Vice President of Business Development,
Advo, Inc., from October 1990 to
December 1991. Director, Guardian Life
Insurance Corporation of America (a
mutual insurance company).
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
AGE AT PRINCIPAL OCCUPATION YEAR FIRST
JUNE 1, AND CERTAIN YEAR TERM BECAME
NAME 1996 BUSINESS EXPERIENCE WILL EXPIRE DIRECTOR
- ------------------------- -------- ---------------------------------------- ------------ -----------
<S> <C> <C> <C> <C>
J. Raymond Elliott....... 46 President and Chief Executive Officer of 1999 1995
the Corporation since September 1, 1995.
Chairman and Chief Executive Officer,
Cablecom, a cable wire and
communications company, from January
1995 to September 1995. President and
Chief Executive Officer, J.R. Elliott
Associates, a turnaround and mergers and
acquisitions consulting company, from
January 1994 to January 1995. President
and Chief Operating Officer, Southam
Newspaper Group, a newspaper publishing
company, from November 1992 to January
1994. Chairman and Chief Executive
Officer, Southam/Dittler Group, a
consumer games and lottery company, from
July 1992 to November 1992. Group
President, Southam Graphics, a graphics
and publishing company, from January
1990 to July 1992.
Thomas W. Kahle.......... 45 Partner, Graydon Head & Ritchey since 1999 1991
1980. Lead Director of the Corporation
from August 1994 to August 1995.
Robert R. McMillan....... 63 Partner, McMillan, Rather, Bennett & 1999 1987
Rigano, P.C. since January 1991.
Previously counsel to Rivkin, Radler,
Bayh, Hart & Kremer from March 1990 to
January 1991. Prior thereto, partner,
Rivkin, Radler, Dunne & Bayh from
January 1986 to September 1989.
Director, Empire Blue Cross Blue Shield
and Key Bank of New York.
CONTINUING DIRECTORS
Alan H. Weingarten....... 56 Alan H. Weingarten & Associates, Inc., 1997 1987
consultant in general management,
marketing and product planning, since
September 1986. Director, Boca Raton
Capital Corporation.
Carol G. Nelson.......... 64 Chairman and Chief Executive Officer of 1998 1983
Security Archives Corporation, a
business records storage and management
company, since September 1986.
John C. Spratt........... 44 Chairman and Chief Executive Officer of 1998 1990
Orthopaedic Health Services, Inc., a
health care management company
specializing in rehabilitation and
occupational medicine services, since
May 1988. Partner in SCS Business
Development, a business development
company, since May 1994. From 1985 to
May 1988, President of Lumex Health
Services, Inc., formerly a subsidiary of
the Corporation. Chairman of the Board
of the Corporation since August 1995.
</TABLE>
4
<PAGE>
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Corporation held eighteen meetings during
1995 and also acted by unanimous written consent throughout the year.
The Corporation has standing Audit, Compensation, and Director Affairs
Committees of the Board of Directors.
At the end of 1995, the Audit Committee consisted of Thomas W. Kahle,
Robert R. McMillan, and Alan H. Weingarten (Chairperson). The functions of the
Committee are to recommend to the Board of Directors the engagement and
discharge of the independent auditors for the Corporation, analyze the report of
such auditors, and make such recommendations to the Board with respect thereto
as such committee may deem advisable. The Committee held six meetings in 1995.
At the end of 1995, the Compensation Committee consisted of Robert R.
McMillan (until December 26, 1995), Carol G. Nelson and Alan H. Weingarten
(Chairperson). The function of the Committee is to make recommendations to the
Board of Directors concerning executive compensation and benefits policies for
the Corporation. The Committee also administers the Corporation's Long-Term
Incentive Plan and 1995 Omnibus Incentive Plan, awarding benefits to key
employees of the Corporation and determining the terms and conditions on which
such benefits are granted. The Committee held eleven meetings during 1995. The
Option Committee of the Corporation was discontinued in August 1995 and
consisted of Robert R. McMillan, Charles E. Murcott (until June 5, 1995), and
Carol G. Nelson. The Committee administered the Corporation's Amended and
Restated 1987 Stock Option Plan. The functions of the Option Committee were
absorbed by the Compensation Committee. The Committee held one meetings during
1995.
At the end of 1995, the Director Affairs Committee consisted of Robert R.
McMillan, Carol G. Nelson (Chairperson), and Alan H. Weingarten. The Committee
investigates and reviews the qualifications of candidates to serve on the Board
of Directors and recommends nominees to the Board of Directors. During 1995, the
Director Affairs Committee held eleven meetings. The Director Affairs Committee
will consider the names and qualifications of candidates for the Board of
Directors submitted by shareholders in accordance with the procedures described
in 'Shareholder Proposals and Director Nominations for 1997 Annual Meeting'
below. In addition to its nominating function, the Director Affairs Committee
also evaluates the performance of the Corporation's Chief Executive Officer,
recommends committee selections to the Board of Directors and evaluates and
makes recommendations regarding the administration of the Board of Directors.
5
<PAGE>
EXECUTIVE OFFICERS
The following table lists the name, age, present position with the
Corporation and certain business experience with respect to the executive
officers of the Corporation, other than Mr. Elliott who is listed in the table
above and John R. Cowin, Senior Vice President, whose employment terminated on
April 2, 1996.
<TABLE>
<CAPTION>
AGE AT
JUNE 1, PRESENT POSITION WITH THE CORPORATION
NAME 1996 AND CERTAIN BUSINESS EXPERIENCE
- ----------------------------------- -------- ----------------------------------------------------------------------
<S> <C> <C>
Robert McNally..................... 49 Senior Vice President--Finance since June 1994. Vice
President--Finance from 1981 to June 1994. Chief Financial Officer and
Secretary since 1981.
</TABLE>
REPORT OF THE COMPENSATION COMMITTEE AND OPTION COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors consists entirely of
non-management directors, and its primary function is to make recommendations to
the Board of Directors concerning executive compensation and benefits policies
for the Corporation. The Compensation Committee also administers the
Corporation's Amended and Restated 1987 Stock Option Plan and 1995 Omnibus
Incentive Plan.
The Compensation Committee believes that the most effective compensation
program is one that provides executives with incentives to achieve both current
and long-term strategic business goals of the Corporation, with the ultimate
objective of enhancing shareholder value. Accordingly, the Corporation's
executive compensation programs are designed to:
o Motivate and challenge executive officers to achieve both annual and
long-term strategic business goals
o Align the interests of executive officers with the long-term interests of
shareholders
o Support an environment that rewards executive officers based on
corporate, divisional, and individual performance
o Attract and retain executive officers critical to the long-term success
of the Corporation
The Corporation's compensation package for officers during 1995 consisted
of six basic elements: (1) base salary; (2) annual incentive compensation
pursuant to the Corporation's bonus incentive compensation program (the 'Bonus
Program'); (3) long-term incentives in the form of stock options granted
pursuant to either the Corporation's Amended and Restated 1987 Stock Option Plan
(the '1987 Plan') and/or the Lumex, Inc. 1995 Omnibus Incentive Plan (the
'Omnibus Plan'); (4) long term incentives in the form of restricted stock grants
pursuant to the Omnibus Plan; (5) intermediate/long-term cash incentives
pursuant to the Corporation's Long-Term Incentive Plan (the 'Long-Term Incentive
Plan'); and (6) retirement benefits pursuant to the Corporation's Savings and
Investment Plan and the Corporation's Employee Stock Ownership Plan, all of
which are available to all non-union employees of the Corporation. Other
elements of compensation include potential benefits under employment and
severance agreements.
The Compensation Committee believes that linking a significant portion of
an executive's current and potential future net worth to the Corporation's
success, as reflected in the stock price, gives the executive a stake parallel
to that of the Corporation's other owners and results in long-term management
for the benefit of those owners. Consistent with this philosophy, the
Corporation established in 1995 a Stock Ownership Requirements Policy (the
'Policy') for the Corporation's executive officers and other key employees. The
Policy establishes minimum levels of stock ownership by the end of 1997 for the
Corporation's executive officers as follows: the Chief Executive Officer--stock
having a value equal to 150% of base salary; the Chief Financial Officer-- 75%
of base salary; and Division Presidents--100% of base salary. These minimum
levels double at the end of 1999. In keeping with this philosophy, it is
anticipated that a portion of the payment of
6
<PAGE>
incentive compensation will be made in stock of the Corporation. The value of
shares owned by an executive officer (including shares of restricted stock
granted under the Omnibus Plan, whether vested or unvested) will be included in
determining an officer's stock ownership for purposes of the Policy, but the
value of any shares subject to unexercised stock options will not be counted.
Executive officers and other employees covered by the Policy who do not make a
bona fide effort to comply with the Policy may have future grants of stock
options and restricted stock reduced or eliminated.
Base salary compensation for executive officers was maintained in 1995 at
above-average industry levels, based on information regarding executive salary
levels for comparable companies available through various sources, including the
Health Industry Manufacturers Association. The increase in the base salaries of
the executive officers in 1995, reflected the consideration of competitive data
and the expectation of above-average performance. The base salary of Mr. George,
the Corporation's former CEO, was established at an industry average level.
Pursuant to the Bonus Program, officers and key employees may receive cash
bonuses based on the annual financial performance of the applicable division of
the Corporation or on the Corporation's overall performance. No executive
officer received any compensation under the Bonus Program for 1995.
The Compensation Committee grants stock options to officers and other key
employees of the Corporation pursuant to either the 1987 Plan or the Omnibus
Plan as a means of confirming the identity of interests shared by the
Corporation's management and its other shareholders by compensating such key
personnel based on the appreciation of the Corporation's Common Shares over a
period of time. During 1995, options were awarded to certain executive officers,
at a per share exercise price equal to the market value of the Common Shares of
the Corporation on the date of grant. All such options have a term of ten years
and become exercisable ratably over four years beginning one year after the date
of grant. No options were awarded to Mr. George in 1995. In granting stock
options to certain executive officers, the Committee took into account the
practices of comparable companies as verified by an independent consultant, as
well as the executive's level of responsibility and past contributions to the
Corporation.
In 1993 the Corporation established the Long-Term Incentive Plan as a
mechanism for providing cash incentives to officers for the achievement of
long-term financial goals and the implementation of new corporate strategic
plans. The Compensation Committee made contingent awards in 1993 to certain
officers having three-year performance cycles (January 1, 1993 through December
31, 1995), where the potential cash payout is dependent on the achievement of
corporate and/or divisional cumulative earnings goals that were determined by
the Compensation Committee. None of the officers who were granted an award in
1993 received a cash payout at the end of the three year cycle based on such
earnings goals. No awards were made in 1994 or 1995.
In 1995 the Corporation established the Omnibus Plan. The Compensation
Committee believes that the Omnibus Plan will assist in aligning the interests
of the Corporation's officers to those of its shareholders and in tying
executive compensation to increases in shareholder value. During 1995, the
Compensation Committee awarded shares of restricted stock pursuant to the
Omnibus Plan to each executive officer, other than Mr. George. These shares of
stock may not be sold or otherwise disposed of until vested which generally
occurs over a five year period after the date of grant. Unvested shares are
forfeited if the executive ceases employment with the Corporation for any
reason.
In September 1995, the Corporation retained the services of Mr. Elliott,
who joined the Corporation as its President and Chief Executive Officer. The
terms of the Corporation's employment agreement with Mr. Elliott were negotiated
by the Compensation Committee and were structured to attract Mr. Elliott to
accept the challenges presented by the Corporation's business, to motivate him
to take the actions necessary and to reward him for increased value to the
shareholders. In negotiating and reviewing this agreement, the Committee
referenced information provided by two benefits consulting firms regarding
compensation levels and packages for chief executive officers of companies
similar to the Corporation. Mr. Elliott's base salary, annual incentive and
long-term incentive compensation are paid in accordance with
7
<PAGE>
this agreement. The material terms of the employment agreement are summarized on
page 13 (see 'Executive Compensation--Employment and Severance Agreements').
In 1995, in order to retain the continued services of two senior vice
presidents of the Corporation, the Compensation Committee negotiated employment
agreements with Mr. Cowin and Mr. McNally. The terms of these employment
agreements are summarized in greater detail on page 14 (see 'Executive
Compensation--Employment and Severance Agreements'). Mr. Cowin's compensation
pursuant to his employment agreement includes: base salary of $237,000,
participation in the Bonus Program, a signing bonus of $25,000, a restricted
stock grant of 2,500 shares under the Omnibus Plan, and stock options for 15,000
shares under the Omnibus Plan. Mr. McNally's compensation pursuant to his
employment agreement includes: base salary of $189,000 and participation in the
Bonus Program. His agreement also provides for payment of severance under
certain circumstances. In negotiating and reviewing each of the two employment
agreements, the Committee considered various factors, including each of the
executive's past contributions to the Corporation, the additional
responsibilities assumed by each of them during a period of transition between
Chief Executive Officers, the Corporation's desire to retain and motivate each
of the executives while the Corporation explored and evaluated various current
and future business strategies, and the compensation package included in the
employment agreement with Mr. Elliott.
The membership of the Compensation Committee changed during 1995, and,
therefore, not every person who served on the Committee during the year
participated in each of the matters described above.
Members of the Compensation Committee
(Serving at any time during 1995):
Thomas W. Kahle
Robert R. McMillan
Carol G. Nelson
John C. Spratt
Alan H. Weingarten
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee serving at any time during 1995
were: Thomas W. Kahle, Robert R. McMillan, Carol G. Nelson, John C. Spratt and
Alan H. Weingarten. The Option Committee was discontinued in August 1995 and
consisted of Charles E. Murcott (until June 5, 1995), Robert R. McMillan and
Carol G. Nelson. The functions of the Option Committee were absorbed by the
Compensation Committee.
Robert R. McMillan is a partner in the law firm of McMillan, Rather,
Bennett & Rigano, P.C., which was paid approximately $250,647 by the Corporation
for providing legal services during 1995. John C. Spratt had been from 1985 to
May 1988, President of Lumex Health Services, Inc., formerly a subsidiary of the
Corporation. Charles E. Murcott had been President of the Corporation from 1952
to 1978 and from July 1984 to 1986 and Chairman of the Board from 1977 to
December 1987.
8
<PAGE>
PERFORMANCE GRAPH
The following graph compares the five-year cumulative total return (change
in stock price plus reinvested dividends) on the Corporation's Common Shares
with the total returns of the American Stock Exchange Market Value Index, a
broad market index covering stocks listed on the American Stock Exchange, and
the Media General ('MG') Medical Instruments and Supplies Group, a group
encompassing approximately 292 companies.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN OF
LUMEX, INC., AMEX MARKET VALUE INDEX &
MG MEDICAL INSTRUMENTS AND SUPPLIES GROUP
[GRAPH]
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Lumex, Inc.................... $100 $331 $290 $205 $262 $192
Amex Mkt. Value Index......... 100 123 125 148 131 169
MG Med. Instr. & Supp.
Group....................... 100 174 155 131 144 233
</TABLE>
Assumes $100 invested on December 31, 1990 and dividends are reinvested.
Source: Media General Financial Services
9
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information in respect of the compensation
for 1995, 1994, and 1993 of the persons who were, during 1995, the Chief
Executive Officer, and at the end of 1995, all other executive officers of the
Corporation (sometimes collectively referred to as the 'Named Executive
Officers') for services in all capacities to the Corporation and its
subsidiaries.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION --------------------------
----------------------------------------- RESTRICTED SECURITIES
OTHER STOCK UNDERLYING
NAME AND PRINCIPAL ANNUAL AWARD(S) OPTIONS ALL OTHER
POSITION(S) YEAR SALARY BONUS(1) COMPENSATION ($)(2) (#) COMPENSATION (3)
- ------------------------- ---- ------- --------- ------------ ----------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
J. Raymond Elliott, ..... 1995 $ 100,000 $29,859 (5) $ 472,500 25,000 0
President and Chief
Executive Officer (4)
Robert McNally, ......... 1995 185,175 $ 10,000 37,280 12,500 $ 7,278
Chief Financial 1994 175,000 12,442 12,500 7,688
Officer, Senior Vice 1993 146,000 29,200 8,121
President--Finance and
Secretary (6)
John R. Cowin, .......... 1995 217,286 25,000 53,512 15,000 10,721
Former Senior Vice 1994 195,000 27,710 15,000 10,638
President and President 1993 164,000 0 10,026
of the Lumex Division
(7)
James E. George, ........ 1995 72,692 0 19,265 (10) 10,404
Former President and 1994 90,000 88,921 (9) 18,156 (10) 15,000 1,648
Chief Executive
Officer (8)
</TABLE>
- ------------------
(1) Annual bonus incentive compensation is based on performance in the year
shown but determined and paid in the following year.
(2) At December 31, 1995, Messrs. Elliott, McNally and Cowin held 45,000, 3,431
and 4,853 shares of restricted stock having a value of $421,875, $32,166 and
$45,497, respectively, based upon a closing price of $9.375 per Common Share
on December 29, 1995 (the last day of trading in 1995). If cash dividends
are paid by the Corporation, holders of restricted stock are entitled to
receive such dividends whether or not the shares have vested. Included in
the awards to Mr. McNally is a restricted stock grant on August 8, 1995 of
2,000 shares, which vests in annual increments of 20% beginning one year
after date of grant. For a description of certain awards of restricted stock
made to Messrs. Elliott and Cowin, see 'Employment and Severance Agreements'
below. The shares of restricted stock held by Mr. Cowin was forfeited in
connection with his termination of employment on April 2, 1996.
(3) 'All Other Compensation' for 1995 includes the following: (a) contributions
for Mr. McNally ($3,000) and Mr. Cowin ($3,000) made by the Corporation
under the Corporation's Savings and Investment Plan, a defined contribution
plan meeting the requirements of Section 401(k) of the Internal Revenue Code
of 1986, as amended (the 'Savings Plan'), to match 1995 pre-tax elective
deferral contributions (included under Salary) made by each to such plan;
(b) contributions for Mr. McNally ($2,935), Mr. Cowin ($2,878) and Mr.
George ($2,854) made by the Corporation under the Savings Plan's retirement
feature whereby
(Footnotes continued on next page)
10
<PAGE>
(Footnotes continued from previous page)
the Corporation contributes from its current or accumulated earnings 2% (or
such additional amount as the Corporation may determine) of the eligible
employees' aggregate annual compensation, which amount is then allocated to
eligible employees based on their proportionate compensation for the plan
year and their full years of service with the Corporation; (c) the value of
Common Shares allocated in 1995 under the Corporation's Employee Stock
Ownership Plan to Mr. McNally ($1,343) and Mr. Cowin ($1,343); (d) imputed
compensation of $3,500 for Mr. Cowin reflecting the difference between a
market rate and the interest-free loan extended to him by the Corporation
described under the caption 'Additional Information--Certain Relationships
and Related Transactions'; and (e) for Mr. George, Board of Directors
meeting fees ($3,000) and automobile lease payments from June through
December 1995 ($4,550) (but does not include additional automobile lease
payments to be made from January through May 1996 totalling $3,250, and a
payment of $35,388 to purchase the automobile for Mr. George in June 1996,
at the end of the lease term).
(4) Mr. Elliott joined the Corporation on September 1, 1995. His annual base
salary in 1995 was $300,000. Mr. Elliott has an employment agreement with
the Corporation (see 'Employment and Severance Agreements' below).
(5) Includes $25,459 for commuting and living expenses.
(6) Mr. McNally has an employment agreement with the Corporation (see
'Employment and Severance Agreements' below).
(7) Mr. Cowin has an employment and a severance agreement with the Corporation.
Mr. Cowin's employment with the Corporation terminated on April 2, 1996
(see 'Employment and Severance Agreements' below).
(8) Mr. George joined the Corporation on June 2, 1994 and resigned as an
employee on May 24, 1995. His annual base salary in 1995 was $180,000. Mr.
George has a severance agreement with the Corporation (see 'Employment and
Severance Agreements' below).
(9) Includes $71,875, which represents the dollar value of Common Shares
granted to Mr. George on January 17, 1995, calculated by multiplying the
closing price of a Common Share on the date of grant ($14.375) by the
number of shares awarded (5,000). Although granted in 1995, the award was
based on performance in 1994. There are no restrictions on these shares.
(10) Includes in 1995, $13,715 of rental and utility payments that were made on
a corporate residence used by Mr. George through May 1995, and includes in
1994, $10,500 of similar payments during the second half of 1994.
OPTION GRANTS IN 1995
The following table shows all grants of options to the Named Executive
Officers of the Corporation in 1995:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS (1)
----------------------------------------------------------------
OPTIONS PERCENT OF TOTAL EXERCISE MARKET
GRANTED OPTIONS GRANTED TO PRICE PRICE EXPIRATION
NAME (# OF SHARES) EMPLOYEES IN 1995 ($/SH) ($/SH) DATE
- -------------------- ------------- ------------------ -------- ------- ----------
<S> <C> <C> <C> <C> <C>
J. Raymond
Elliott........... 25,000 22.71% $10.00 $10.500 9/1/05
Robert McNally...... 12,500 11.35% 10.70 11.875 9/8/05
John R. Cowin....... 15,000 13.62% 10.00 9.875 8/1/05
James E. George..... 0 0% -- -- --
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK APPRECIATION
FOR OPTION TERM (2)
-------------------------------------------------------------------------------
NAME 0% ($) 5% ($) 10% ($)
- -------------------- -------------------------- -------------------------- --------------------------
<S> <C> $ 12,500 C> <C>
J. Raymond<C>
Elliott........... $177,585 $430,857
Robert McNally...... 14,688 108,039 251,259
John R. Cowin....... 0 91,280 234,198
James E. George..... -- -- --
</TABLE>
(Footnotes on next page)
11
<PAGE>
(Footnotes from previous page)
- ------------------
(1) The options were granted under the terms of either the Corporation's Amended
and Restated 1987 Stock Option Plan or 1995 Omnibus Incentive Plan. Each
option was granted on the date 10 years prior to the expiration date
indicated in the table, and becomes exercisable over four years in annual
increments of 25% beginning one year after the date of grant. The market
price of a Common Share on the date of grant is indicated in the table. The
exercise price may be paid in cash, by delivery of already owned shares, by
withholding of shares or by such other methods as the Compensation Committee
may prescribe. The exercisability of the options automatically accelerate
upon a 'change in control' of the Corporation (and in the case of Mr.
Elliott's option, also a 'partial sale' of the Corporation), and may also be
accelerated by the Compensation Committee.
(2) The potential realizable value is the product of (a) the difference between:
(i) the product of the per-share market price at the time of the grant and
the sum of 1 plus the adjusted stock price appreciation rate (i.e., the
assumed rate of appreciation compounded annually over the term of the
option) and (ii) the per-share exercise price of the option; and (b) the
number of securities underlying the grant at fiscal year-end. The dollar
amounts under these columns are the result of calculations at the 0% and the
5% and 10% assumed rates of appreciation prescribed by the Securities and
Exchange Commission, and therefore are not intended to forecast possible
future appreciation, if any, of the market price of the Corporation's Common
Shares. The actual value that any Named Executive Officer may realize, if
any, will depend on the amount by which the market price of the Common
Shares at the time of exercise exceeds the exercise price.
AGGREGATED OPTION EXERCISES IN 1995 AND
OPTION VALUES AT DECEMBER 31, 1995
Mr. McNally is the only Named Executive Officer who exercised options in
1995. The following table provides information as to the shares acquired on
exercise and the value realized by Mr. McNally and the value of options held by
the Named Executive Officers at year-end measured in terms of the closing price
of a Common Share on December 31, 1995 ($9.375 per share).
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED IN-THE-
SHARES NUMBER OF SECURITIES MONEY OPTIONS AT
ACQUIRED ON VALUE UNDERLYING UNEXERCISED
EXERCISE REALIZED OPTIONS AT DEC. 31, 1995
NAME (#) ($)(1) DEC. 31, 1995 (#) ($)(2)
- -------------------- ----------- -------- ---------------------- -------------------
EXERCISABLE/ EXERCISABLE/
UNEXERCISABLE UNEXERCISABLE
---------------------- -------------------
<S> <C> <C> <C> <C>
J. Raymond 0 $ 0 0/ $ 0/
Elliott........... 25,000 0
Robert McNally...... 5,000 25,600 26,000/ 54,688/
27,500 0
John R. Cowin....... 0 0 25,000/ 0/
30,000 0
James E. George..... 0 0 0/ 0/
0 0
</TABLE>
- ------------------
(1) Value realized is the difference between the market price of a Common Share
on the date of exercise and the exercise price of the option, multiplied by
the number of Common Shares underlying the option.
(2) Value of unexercised 'in-the-money' options is the difference between the
market price of a Common Share on December 31, 1995 and the exercise price
of the option, multiplied by the number of Common Shares underlying the
option.
12
<PAGE>
COMPENSATION OF DIRECTORS
The Corporation's compensation program for nonemployee directors during
1995 provided that each nonemployee director (except the Lead Director as noted
below) receive an annual retainer of $18,000 in quarterly installments, seventy
percent of which was paid in Common Shares of the Corporation (using the price
per share on January 1 of such year) pursuant to the Corporation's 1995 Stock
Retainer Plan for Nonemployee Directors (the 'Retainer Plan'). Directors also
received $1,000 for each Board meeting attended or $500 for each telephone
meeting. Directors who acted as a chairperson of a committee generally received
an annual fee of $3,200 while those who were members of a committee (including
the chairperson) generally received a fee of $500 for each special meeting of
such committee attended on a day other than on a day on which a meeting of the
Board of Directors was being held. Members of the search committee received
$1,000 for each special meeting attended. For serving as Lead Director through
August 1995, Thomas W. Kahle received a retainer (and no meeting or committee
fees) of $39,000, paid in three quarterly installments, fifty percent of which
was paid in Common Shares of the Corporation pursuant to the Retainer Plan. In
addition, John C. Spratt, for serving as the Chairman of the Board beginning in
August 1995, is to receive 5,000 Common Shares payable in four quarterly
installments of which 1,250 were issued in 1995. Mr. Spratt also received
$33,000 from the Corporation for consulting services performed in 1994 and the
cancellation of outstanding options. Alan H. Weingarten received $2,000 during
1995 for representing the Board of Directors in connection with the
Corporation's engagement of a management information system consulting firm.
During 1995 pursuant to the Retainer Plan, Mr. McMillan, Mr. Nelson, Mr. Spratt
and Mr. Weingarten each received 988 Common Shares, and Mr. Kahle received 1,777
Common Shares, which represents the stock component of their annual retainer.
EMPLOYMENT AND SEVERANCE AGREEMENTS
The Corporation and J. Raymond Elliott are parties to an employment
agreement pursuant to which Mr. Elliott is employed as the Corporation's
President and Chief Executive Officer from September 1, 1995 through August 31,
1998, unless sooner terminated in accordance with the terms of the agreement.
Pursuant to the agreement, the Corporation will pay Mr. Elliott a base salary of
$300,000 per annum. Mr. Elliott is eligible to participate in the Corporation's
Bonus Incentive Compensation Plan (the 'BIC Plan') and is guaranteed a minimum
bonus of $70,000 for 1996. He may also receive, at his election, between 10% and
40% of amounts payable to him under the BIC Plan in the form of Common Shares,
converted at a value equal to 85% of its market value. Upon joining the
Corporation on September 1, 1995, Mr. Elliott was granted pursuant to the
employment agreement and the Corporation's 1995 Omnibus Incentive Plan (the
'Omnibus Plan'): (i) 25,000 shares of restricted common stock, vesting in annual
increments of 20% beginning on the first anniversary of his commencement of
employment; (ii) 20,000 shares of restricted stock, all of which vested on
February 8, 1996; and (iii) a non-qualified stock option to purchase 25,000
Common Shares at an exercise price of $10.00 per share (the closing price on
August 2, 1995), vesting in annual increments of 25% beginning on the first
anniversary of his commencement of employment; provided, however, the stock
option will vest fully upon either a 'change of control' or 'partial sale' (each
as defined in the employment agreement), and the restricted stock grant of
25,000 Common Shares will vest fully upon a change of control. Mr. Elliott is
also entitled to various employee benefits pursuant to the agreement. If the
Corporation terminates the agreement other than 'for cause' (as defined in the
employment agreement), Mr. Elliott is entitled to receive his base salary for
the longer of one year or the remainder of the term of the agreement plus any
bonus he has earned under the BIC Plan as of the date of termination. Mr.
Elliott has the right to terminate employment upon a change of control, in which
case he is entitled to receive an amount equal to 2.99 multiplied by his base
salary, of which 50% is payable in equal installments over the 12 months
following termination and the balance is payable in equal installments over the
next 24 months. If the Corporation does not extend or renew the employment
agreement at the end of its term, the Corporation is required to pay Mr. Elliott
his base salary over the next 12 months.
13
<PAGE>
The Corporation and Robert McNally are parties to an employment agreement
pursuant to which Mr. McNally is employed as the Corporation's Chief Financial
Officer and as a Senior Vice President from September 1, 1995 through August 31,
1998, unless sooner terminated in accordance with the terms of the agreement.
Pursuant to the agreement, the Corporation will pay Mr. McNally a base salary of
$189,000 per annum. Mr. McNally is eligible to participate in the BIC Plan and
receive, at his election, between 10% and 40% of amounts payable to him under
the BIC Plan in the form of Common Shares, converted at a value equal to 85% of
its market value. Mr. McNally is also entitled to various employee benefits
pursuant to the agreement. If the Corporation terminates the agreement other
than 'for cause' (as defined in the employment agreement), Mr. McNally is
entitled to receive his base salary for the longer of 15 months or the remainder
of the term of the agreement plus any bonus he has earned under the BIC Plan as
of the date of termination. Mr. McNally has the right to terminate employment
upon a 'change of control' (as defined in the employment agreement), in which
case he is entitled to receive an amount equal to 2.99 multiplied by his base
salary, of which 50% is payable in equal installments over the 12 months
following termination and the balance is payable in equal installments over the
next 24 months. If the Corporation does not extend or renew the employment
agreement at the end of its term, the Corporation is required to pay Mr. McNally
his base salary over the next 15 months.
In connection with Mr. McNally's termination of employment on June ,
1996, he entered into a severance agreement and general release (the 'Severance
Agreement') with the Corporation. Pursuant to the Severance Agreement, the
Corporation will continue to employ Mr. McNally under the same terms and
conditions as his current employment until September 1, 1996 or, at the
Corporation's option, December 31, 1996 (the 'Transitional Period'). Following
the Transitional Period, the Corporation will pay him severance at the rate of
$15,750 per month for a period of 28 months (the 'Severance Period'). In
addition, at the end of the Transitional Period, the Corporation will pay to him
a supplemental severance bonus in the amount of $47,250.00. In the event of a
'Change of Control' (as defined in the Severance Agreement), all payments under
the Severance Agreement are accelerated. In return, Mr. McNally agrees, among
other things, to be available on a consulting basis, without additional
compensation, to assist in the Corporation's 1996 year-end audit of its
financial statements and to waive any claims he may have against the
Corporation.
The Corporation and John R. Cowin were parties to an employment agreement
pursuant to which Mr. Cowin was employed as the President of the Lumex Division
and as a Senior Vice President from August 1, 1995 through April 2, 1996, at
which time his employment was terminated in accordance with the terms of the
agreement. Pursuant to the agreement, Mr. Cowin was entitled to a base salary of
$237,000 per annum. Upon commencement of the employment term, Mr. Cowin was
granted pursuant to the employment agreement and the Corporation's Omnibus Plan:
(i) 2,500 shares of restricted common stock, vesting in annual increments of 20%
beginning on July 31, 1996 during his continued employment with the Corporation;
and (ii) a non-qualified stock option to purchase 15,000 Common Shares at an
exercise price of $10.00 per share (the closing price on August 2, 1995),
vesting in annual increments of 25% beginning on July 31, 1996. Mr. Cowin also
received a signing bonus of $25,000.
The Corporation also had an executive severance agreement with Mr. Cowin.
The severance agreement provided that if the employee's employment is terminated
during the two years following a 'change in control' of the Corporation either
by the Corporation (other than for 'cause') or by the employee for a 'good
reason,' as those terms are defined in the severance agreement, a lump sum
payment will be made to such employee. The severance agreement provided for a
lump sum payment of 2.99 times the 'base amount,' as defined in Section 280G of
the Internal Revenue Code of 1986, the base amount approximating the average
annual compensation for the five years preceding a change of control of the
Corporation. The payments and benefits provided by the severance agreement to
the employee are limited such that the value thereof when aggregated with other
benefits or payments paid to such employee in connection with a termination of
his employment would not exceed three times the 'base amount' for such employee.
In connection with Mr. Cowin's termination of employment on April 2, 1996,
he entered into a separation agreement with the Corporation. Under the terms of
the agreement, Mr. Cowin will receive his
14
<PAGE>
annual base salary of $237,000 through April 2, 1997 as severance, payable in
accordance with the Corporation's regular payroll practices (reduced by an
aggregate of $16,191, for amounts owed to the Corporation), and he will receive
substantially the same medical and health benefits generally provided to the
Corporation's employees until the earlier of April 2, 1997 or the date he
commences full-time employment with a new employer. Mr. Cowin also received a
lump sum of $92,300 in satisfaction of all bonuses he was eligible for, which
amount, however, was retained by the Corporation in accordance with the
agreement in partial satisfaction of amounts owed by him to the Corporation.
Pursuant to the agreement, Mr. Cowin has the right to exercise through July 31,
1997 any options previously granted him under the Corporation's stock option
plans that are exercisable on the date of exercise in accordance with the terms
of such plans. The agreement also provides that the Corporation will pay his
automobile lease payments through May 2, 1996, the end of the lease term, at
which time the Corporation will pay Mr. Cowin a monthly allowance in the amount
of the lease payments until the earlier of April 2, 1997 or the date he
commences full-time employment with a new employer.
The Corporation entered into a severance agreement with James E. George,
the Corporation's former President and Chief Executive Officer, on May 8, 1995,
pursuant to which he resigned as an employee and an officer effective as of May
24, 1995. Under the terms of the agreement, Mr. George received his salary
through May 24, 1995, and until December 31, 1995, substantially the same
medical and health benefits generally provided to the Corporation's employees.
The agreement also provides that the Corporation will pay Mr. George's
automobile lease payments through June 1996, the end of the lease term, at which
time the Corporation will purchase the automobile for Mr. George at no cost to
him. Mr. George has agreed not to compete with the Corporation through May 24,
1996.
ADDITIONAL INFORMATION
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Thomas W. Kahle, a director of the Corporation, is a partner in the
Cincinnati law firm of Graydon Head & Ritchey, which is general counsel to
Surgical Appliance Industries, Inc., a [12.0%] shareholder in the Corporation.
See 'Voting Rights' above. Mr. Kahle disclaims any beneficial interest in the
shares of the Corporation owned by Surgical Appliance Industries, Inc.
In 1995, the Corporation purchased approximately $306,875 of products
manufactured by Surgical Appliance Industries, Inc., a 12.0% shareholder in the
Corporation.
Robert R. McMillan, a director of the Corporation, is a partner in the law
firm of McMillan, Rather, Bennett & Rigano, P.C., which was paid approximately
$250,647 by the Corporation for providing legal services during 1995.
In 1993 the Corporation extended to John R. Cowin, now a former executive
officer of the Corporation, an interest-free loan in the amount of $67,577 in
order to facilitate his relocation to the Long Island area. The loan is
generally repaid through a deduction from his annual bonus, and in 1995 he paid
$9,237 of the loan from his 1994 bonus. During 1995, the largest amount of the
loan outstanding was $67,577. In connection with Mr. Cowin's termination of
employment on April 2, 1996, the Corporation retained the amount of $92,300 in
partial satisfaction of amounts owed by him to the Corporation. As of that date,
Mr. Cowin continued to owe $16,191, which amount is to be repaid through
reduction of severance payments.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's officers and directors, and any persons who own more than ten
percent of the Corporation's Common Shares to file reports of initial ownership
of the Corporation's Common Shares and subsequent changes in that ownership with
the Securities and Exchange Commission and the American Stock Exchange, Inc.
Officers, directors and
15
<PAGE>
greater than ten-percent beneficial owners are also required to furnish the
Corporation with copies of all Section 16(a) forms they file. Based solely upon
a review of the copies of the forms furnished to the Corporation, or written
representations from certain reporting persons that no Forms 5 were required,
the Corporation believes that during the 1995 fiscal year all Section 16(a)
filing requirements were complied with, except that one report for one
transaction was filed late by each of James E. George (former director,
president and chief executive officer) and John C. Spratt.
APPROVAL OF AMENDMENT TO THE CORPORATION'S
RESTATED CERTIFICATE OF INCORPORATION
(Proposal No. 2)
On June 19, 1996, the Board of Directors of the Corporation unanimously
adopted a resolution that would amend the Corporation's Restated Certificate of
Incorporation to change the Corporation's name to CYBEX International, Inc. (the
'Amendment'), subject to the approval of the shareholders.
On April 3, 1996, the Corporation sold the assets comprising the Lumex
Division to Fuqua Enterprises, Inc. ('Fuqua'). In connection therewith, the
Corporation assigned to Fuqua all rights in and to the intellectual property and
trademarks related to the Lumex Division, including the name and trademark
'Lumex.' The Corporation agreed to propose at this Annual Meeting that the
shareholders approve an amendment to the Corporation's Restated Certificate of
Incorporation to change its name from 'Lumex, Inc.' and to take all necessary
steps within a reasonable time to effectuate such change.
The sale of the Lumex Division to Fuqua will enable the Corporation to
focus its business efforts on developing, manufacturing, distributing and
servicing fitness and rehabilitation equipment through its CYBEX(Registered)
tradename. The Corporation believes that utilizing the CYBEX(Registered) name
will enable it to capitalize on the recognition and presence which has already
been established for that name in the fitness and rehabilitation market.
If approved by the shareholders at the Annual Meeting, the new name will
become effective upon the filing of an amendment to the Corporation's Restated
Certificate of Incorporation with the Department of State of the State of New
York. The change of corporate name will be accomplished by amending Article
First of the Corporation's Restated Certificate of Incorporation to read as
follows:
'Article First: The name of the Corporation is CYBEX International,
Inc.'
The change in corporate name will not affect the validity or
transferability of stock certificates presently outstanding, and the
Corporation's shareholders will not be required to exchange stock certificates
to reflect the new name. Shareholders should keep the certificates they now
hold, which will continue to be valid, and should not send them to the
Corporation or its transfer agent.
If the Amendment is approved, the Corporation's trading symbol will be
changed to 'CYB'.
The affirmative vote of the holders of a majority of all outstanding Common
Shares entitled to vote on the matter, in person or by proxy, at the Annual
Meeting is required for approval of the Amendment. Abstentions are treated as
votes against approval of the Amendment. Broker non-votes are not considered in
the calculation of the majority, although they do reduce the number of 'Votes
For' required.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO AMEND THE
CORPORATION'S RESTATED CERTIFICATE OF INCORPORATION
SHAREHOLDER PROPOSALS AND
DIRECTOR NOMINATIONS FOR 1997 ANNUAL MEETING
Any proposals by a shareholder intended to be presented at the 1997 Annual
Meeting of Shareholders must be received by the Corporation no later than March
10, 1997 and be in compliance with applicable
16
<PAGE>
Securities and Exchange Commission regulations, for inclusion in the
Corporation's proxy statement relating to such meeting.
The Corporation's by-laws provide that any shareholder entitled to vote for
the election of directors at a meeting may nominate persons for election as
directors only if written notice of such shareholder's intent to make such
nomination is given, either by personal delivery or by United States mail,
postage pre-paid, to the Secretary of the Corporation not later than (i) with
respect to an election held at an annual meeting of shareholders, 90 days in
advance of such meeting and (ii) with respect to an election to be held at a
special meeting of shareholders for the election of directors, the close of
business on the seventh day following the date on which notice of such meeting
is first given to shareholders. A copy of the pertinent by-law provision, which
sets forth additional requirements for the form of such notice, is available on
request to Robert McNally, Corporate Secretary, Lumex, Inc., 2100 Smithtown
Avenue, Ronkonkoma, New York 11779.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Ernst & Young LLP, independent public
accountants, to audit the financial statement of the Corporation for the fiscal
year ending December 31, 1996. Ernst & Young LLP has audited the Corporation's
financial statements since 1983. Representatives of Ernst & Young LLP are
expected to attend the 1996 Annual Meeting of Shareholders of the Corporation
and will be afforded an opportunity to make a statement and to respond to
appropriate questions.
SOLICITATION OF PROXIES
Proxies may be solicited by directors, officers and a small number of
regular employees of the Corporation personally or by mail, telephone, telegraph
or otherwise, but such persons will not be specially compensated for such
service. Banks and brokers will be requested to solicit proxies from their
customers, where appropriate, and the Corporation will reimburse them for their
reasonable expenses. The cost of such solicitation will be borne by the
Corporation.
OTHER MATTERS
Management is not aware of any matters to be presented for action at the
meeting other than the election of directors and does not intend to bring any
other matters before the meeting. However, if other matters properly come before
the meeting, it is intended that the holders of proxies solicited hereby will
vote thereon in their discretion.
By Order of the Board of Directors
Robert McNally
Secretary
Ronkonkoma, New York
July 8, 1996
17
<PAGE>
PROXY
LUMEX, INC.
ANNUAL MEETING OF SHAREHOLDERS--AUGUST 7, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby nominates and appoints Carol G. Nelson, John C.
Spratt and Alan H. Weingarten, or any one of them, as proxies of the
undersigned, with power of substitution to each, to vote all shares of stock of
LUMEX, INC. (the 'Corporation') which the undersigned may be entitled to vote at
the Annual Meeting of Shareholders of the Corporation to be held at the Ryder
Cup Room at the Golf Club at Chelsea Piers, Pier 59, New York, New York, on
Wednesday, August 7, 1996 at 10:00 A.M. and at any adjournment or adjournments
thereof with authority to vote said stock on the following matters:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1:
1. Election of Four Directors.
Kay Knight Clarke J. Raymond Elliott
Thomas W. Kahle Robert R. McMillan
/ / VOTE FOR all nominees listed above, except vote withheld from the
following nominee(s) (if any):
----------------------------------------------------------------------------
or / / VOTE WITHHELD from all nominees.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 2:
2. Approval of amendment to the Corporation's Restated Certificate of
Incorporation to change the name of the Corporation.
/ / FOR / / AGAINST / / ABSTAIN
(Continued, and to be signed on other side)
<PAGE>
(Continued from other side)
3. Upon such other matters as may properly come before the meeting.
UNLESS OTHERWISE SPECIFIED ON THIS PROXY, THE SHARES REPRESENTED BY THIS
PROXY WILL BE VOTED 'FOR' PROPOSALS 1 AND 2. DISCRETION WILL BE USED WITH
RESPECT TO SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY
ADJOURNMENT OR ADJOURNMENTS THEREOF.
NOTE: Please sign and return promptly in the envelope provided. No postage
is required if mailed in the United States.
Date: 1996
---------------
--------------------------
(Signature)
--------------------------
(Signature)
Please sign exactly as
your name appears. When
signing as attorney,
executor, administrator,
trustee or guardian,
please set forth your full
title. If signer is a
corporation, please sign
the full corporation name
by a duly authorized
officer. Joint
shareholders should each
sign.
