SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________
FORM 10-QSB
[ X ] QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT of 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT of 1934
For the Transition Period From ________ to ________
Commission File No. 0-16293
LANXIDE CORPORATION
(Exact name of Small Business Issuer in its charter)
Delaware 51-0270253
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1300 Marrows Road, Newark, DE 19714
(Address of principal executive offices) (Zip Code)
(302) 456-6200
Issuer's telephone number, including area code
____________________
Check whether the Issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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.
[ X ] Yes [ ] No
Transitional Small Business Disclosure Format (check one):
Yes No X
________ ________
The number of shares of Common Stock outstanding as of May 13, 1997 was:
1,325,598.
LANXIDE CORPORATION
TABLE OF CONTENTS
Page
Number
______
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheet at
March 31, 1997 (Unaudited)..................................2
Consolidated Statement of Operations
for the Three Months and Six Months Ended
March 31, 1997 and 1996 (Unaudited).........................3
Consolidated Statement of Cash Flows
for the Six Months Ended
March 31, 1997 and 1996 (Unaudited).........................4
Notes to Consolidated Financial
Statements (Unaudited)..................................5 - 8
Item 2. Management's Discussion and Analysis
of Results of Operations and Financial
Condition..............................................9 - 17
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K...........................18
LANXIDE CORPORATION
CONSOLIDATED BALANCE SHEET
(Dollars in thousands, except per share data)
(Unaudited)
MARCH 31,
1997
____
ASSETS
Cash and cash equivalents, including amounts restricted for use
by majority-owned affiliate $ 4,283
Accounts receivable 2,162
Other receivable 1,936
Inventories 2,222
Other current assets 117
----------
Total current assets 10,720
Property and equipment, net 10,115
Investment in affiliate 377
Other assets 373
----------
$ 21,585
==========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current portion of long-term debt $ 6,834
Accounts payable and accrued expenses 2,867
Deferred revenue 1,227
----------
Total current liabilities 10,928
Long-term debt 14,268
Deferred credit 409
Deferred compensation 1,305
----------
26,910
----------
Minority interest in consolidated affiliates 2,286
Redeemable Series E preferred stock
(aggregate liquidation value, $261);
26,100 shares issued and outstanding 219
----------
Shareholders' deficit
Preferred stock 15,000,000 shares authorized
Series A preferred stock
(aggregate liquidation value, $88,135) $.01 par value;
1,101,685 shares issued and outstanding 11
Common stock, $.01 par value, 25,000,000 shares authorized:
1,325,598 issued and outstanding 13
Additional paid-in capital 188,446
Accumulated deficit (197,129)
Cumulative translation adjustment 829
----------
Shareholders' deficit (7,830)
----------
$ 21,585
==========
See notes to consolidated financial statements.
<TABLE>
LANXIDE CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(Amounts in thousands, except per share data)
(Unaudited)
<CAPTION>
THREE MONTHS ENDED MARCH 31, SIX MONTHS ENDED MARCH 31,
1997 1996 1997 1996
____ ____ ____ ____
<S> <C> <C> <C> <C>
Revenue:
Sales $ 2,778 $ 784 $ 4,634 $ 1,746
Licensing revenue 3,080 8,200 5,980
Research and development contract revenue 1,256 1,621 2,984 3,111
---------- ---------- ---------- ----------
4,034 5,485 15,818 10,837
---------- ---------- ---------- ----------
Operating costs:
Cost of sales 2,573 764 4,248 1,873
Research and development contract costs 1,188 1,148 2,767 2,207
Product development and engineering 1,551 1,433 3,003 2,620
Selling, general and administration 2,053 1,309 4,248 2,749
---------- ---------- ---------- ----------
7,365 4,654 14,266 9,449
---------- ---------- ---------- ----------
Income (loss) from operations before minority allocation (3,331) 831 1,552 1,388
Minority allocation of operating (income) loss 51 (346) (1,146) 90
---------- ---------- ---------- ----------
Income (loss) from operations (3,280) 485 406 1,478
Equity in net loss of unconsolidated affiliates (384) (633)
Interest expense (456) (491) (857) (992)
Other income 166 632 994 907
---------- ---------- ---------- ----------
Income (loss) before income taxes (3,570) 242 543 760
Income tax expense 40 40 40
---------- ---------- ---------- ----------
Net income (loss) (3,570) 202 503 720
Dividends on mandatorily redeemable preferred stock (8) (9) (15) (31)
---------- ---------- ---------- ----------
Net income (loss) applicable to common shares $ (3,578) $ 193 $ 488 $ 689
========== ========== ========== ==========
Historical Income (Loss) Per Share
Primary $ (2.70) $ 0.10 $ .24 $ 0.10
Fully Diluted $ (2.70) $ 0.10 $ .24 $ 0.08
Proforma Income Per Share
Primary $ 0.36
Fully Diluted $ 0.35
Historical Average Common Shares Outstanding
Primary 1,326 1,947 1,993 6,977
Fully Diluted 1,326 1,989 1,993 8,656
Proforma Average Common Shares Outstanding
Primary 1,890
Fully Diluted 1,968
<FN>
See notes to consolidated financial statements.
</TABLE>
<TABLE>
LANXIDE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<CAPTION>
SIX MONTHS ENDED
MARCH 31,
1997 1996
____ ____
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 503 $ 720
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization 946 937
Minority allocation of operating income (loss) and equity in net loss of
unconsolidated affiliates 1,146 543
Gain on the sale of equipment (45)
Changes in assets and liabilities, net of effects of acquisitions and changes in
consolidated affiliates:
Increase in receivables (1,033) (238)
Increase in inventories (280) (591)
Decrease in other assets 420 773
Decrease in accounts payable and accrued expenses (50) (1,262)
Increase (decrease) in deferred revenue and deferred credit 868 (4,918)
Increase in other liabilities 75 51
---------- ----------
Net cash provided by (used in) operating activities 2,550 (3,985)
---------- ----------
CASH FROM INVESTING ACTIVITIES:
Capital additions (312) (518)
Proceeds from the sale of equipment/building 90 6,853
---------- ----------
Net cash (used in) provided by investing activities (222) 6,335
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from common stock, net 3,212
Proceeds from preferred stock, net 331
Retirement of preferred stock (70)
Retirement of a subsidiary's preferred stock (4,680)
Preferred stock dividends paid (1)
Capital contributions to consolidated affiliates by commercial venture partners 141
Proceeds from issuance of debt obligations 3,825 257
Repayment of debt obligations (32) (4,328)
---------- ----------
Net cash used in financing activities (887) (458)
---------- ----------
Effect of exchange rate translations (616) (4)
---------- ----------
Net increase 825 1,888
Cash and cash equivalents, beginning of period 3,458 5,212
---------- ----------
Cash and cash equivalents, end of period $ 4,283 $ 7,100
========== ==========
Cash paid for interest $ 776 $ 891
========== ==========
<FN>
See notes to consolidated financial statements.
</TABLE>
LANXIDE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. CONSOLIDATED FINANCIAL STATEMENTS
_________________________________
The consolidated balance sheet at March 31, 1997, the consolidated
statements of operations for the three and six months ended March 31, 1997
and 1996 and the consolidated statement of cash flows for the six months
ended March 31, 1997 and 1996 have been prepared by Lanxide Corporation (the
Company) and have not been audited by the Company's Independent Auditors.
In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations and cash flows at March 31, 1997 and for all periods
presented have been made.
These consolidated financial statements should be read in conjunction with
the financial statements and notes thereto included in the Company's Annual
Report on Form 10-KSB for the fiscal year ended September 30, 1996, filed
with the Securities and Exchange Commission. The results of operations for
the period ended March 31, 1997 are not necessarily indicative of operating
results for the full year.
2. CASH AND CASH EQUIVALENTS
_________________________
All highly liquid investments with a maturity of three months or less when
purchased are considered to be cash equivalents. Included in the cash
balances at March 31, 1997 are $2,518,000 held by a subsidiary company which
amounts are not available to the Company.
3. INVENTORIES
___________
Inventories are valued at the lower of cost (primarily average cost) or
market and consist of the following:
(Amounts in thousands)
Raw materials and supplies 955
Work in process 964
Finished goods 303
-------
2,222
=======
4. PER SHARE DATA
______________
Historical net income per share is computed using the weighted average
number of common shares and potentially dilutive securities outstanding
during the period. On November 14, 1995, the Company completed its
Recapitalization Plan and the number of common shares outstanding was
significantly reduced. Accordingly, the computation of historical weighted
average common shares outstanding reflects this recapitalization.
Proforma net income per share is computed using the weighted average number
of common shares and potentially dilutive securities outstanding from the
completion of the Recapitalization Plan (as if such recapitalization
occurred at October 1, 1995).
During the three months ended March 31, 1997, all potential dilutive
securities have an antidilutive effect on the loss per share and, therefore,
have not been used in determining the total weighted average number of
common shares outstanding.
<TABLE>
For the six months ended March 31, 1997:
<CAPTION>
Primary Average Fully Diluted
Common Shares Average Common
Historical Outstanding Shares Outstanding
__________ ___________ __________________
<S> <C> <C>
Common shares outstanding 1,325,598 1,325,598
Assuming exercise of options and warrants 443,604 443,604
Assuming purchase of shares with proceeds of options and warrants (185,850) (185,850)
Assuming the conversion of convertible preferred stock 409,768 409,768
---------- ----------
Weighted average common shares 1,993,120 1,993,120
========== ==========
For the six months ended March 31, 1996:
<CAPTION>
Primary Average Fully Diluted
Common Shares Average Common
Historical Outstanding Shares Outstanding
__________ ___________ __________________
<S> <C> <C>
PRIOR TO RECAPITALIZATION (25% of Weighted Average)
Common shares outstanding 10,584,444 10,584,444
Assuming the conversion of convertible preferred stock 11,651,014 18,135,452
---------- ----------
22,235,458 28,719,896
========== ==========
AFTER RECAPITALIZATION (75% of Weighted Average)
Common shares outstanding 1,183,042 1,183,042
Assuming exercise of options and warrants 495,346 495,346
Assuming purchase of shares with proceeds of options and warrants (201,427) (123,969)
Assuming the conversion of convertible preferred stock 413,478 413,478
---------- ----------
1,890,439 1,967,897
========== ==========
Weighted average common shares 6,976,694 8,655,897
========== ==========
<CAPTION>
Primary Average Fully Diluted
Common Shares Average Common
Proforma Outstanding Shares Outstanding
__________ ___________ __________________
<S> <C> <C>
Common shares outstanding 1,183,042 1,183,042
Assuming exercise of options and warrants 495,346 495,346
Assuming purchase of shares with proceeds of options and warrants (201,427) (123,969)
Assuming the conversion of convertible preferred stock 413,478 413,478
---------- ----------
Weighted average common shares 1,890,439 1,967,897
========== ==========
For the three months ended March 31, 1996:
<CAPTION>
Primary Average Fully Diluted
Common Shares Average Common
Historical Outstanding Shares Outstanding
__________ ___________ __________________
<S> <C> <C>
Common shares outstanding 1,183,754 1,183,754
Assuming exercise of options and warrants 527,464 527,464
Assuming purchase of shares with proceeds of options and warrants (177,453) (135,751)
Assuming the conversion of convertible preferred stock 413,478 413,478
---------- ----------
Weighted average common shares 1,947,243 1,988,945
========== ==========
</TABLE>
5. SIGNIFICANT EVENTS
__________________
SETTLEMENT OF A STOCKHOLDER LAWSUIT
On July 17, 1996, certain stockholders of the Company, who owned an
aggregate of 149,529 shares of the Company's old common stock prior to the
consummation of the Company's Recapitalization Plan, filed a lawsuit in the
United States District Court for the District of Colorado against the
Company.
The allegations in the Complaint arose from a settlement agreement entered
into by the plaintiffs and the Company in March 1996 relating to the
Company's Recapitalization Plan (the Settlement Agreement). Pursuant to the
Settlement Agreement, the plaintiffs agreed to relinquish all claims against
the Company relating to the Recapitalization Plan, including their demand
for appraisal rights under Section 262 of the DGCL, in exchange for Units of
the Company plus the right to purchase shares of the Company's new common
stock and to receive warrants for additional shares of the Company's new
common stock. In the Complaint, the plaintiffs alleged that the Company had
breached the Settlement Agreement by substituting for the "new common
stock," a class of restricted stock of a lesser value that was not
contemplated by the Settlement Agreement.
On January 30, 1997, the Company entered into a new settlement agreement
with the plaintiffs (the New Settlement Agreement) pursuant to which the
plaintiffs agreed to dismiss, with prejudice, their lawsuit against the
Company, and the Company agreed to pay an aggregate of $200,000 to the
plaintiffs in the form of a promissory note (the Lanxide Note). The Lanxide
Note provides that the Company will pay the plaintiffs $50,000 plus accrued
interest on July 1, 1997 and $10,000 plus accrued interest on the first of
each month commencing on August 1, 1997 for fifteen months. Interest will
accrue at a rate of 10% per annum. Pursuant to the New Settlement
Agreement, Bentley J. Blum, a director and principal stockholder of the
Company, executed a promissory note in favor of the plaintiffs (the Blum
Note) with the same terms as the Lanxide Note, except that Mr. Blum has no
obligations under the Blum Note unless an Event of Default occurs under the
Lanxide Note.
The Company recorded a charge of $74,000 in March 1996 relating to the
Settlement Agreement and a charge of $92,000 in January 1997 relating to the
New Settlement Agreement. The remaining $34,000 represents the value of the
plaintiffs' shares returned to the Company as part of the New Settlement
Agreement.
PROPOSED MERGER WITH COMMODORE ENVIRONMENTAL SERVICES, INC. (COMMODORE)
In November 1996, the Company entered into a Merger Agreement with Commodore
Environmental Services, Inc. (Commodore) providing for the acquisition of
the Company by Commodore and the conversion of the Company's outstanding
common stock and Series A preferred stock into common stock of Commodore.
The Company's Series E Redeemable Preferred Stock would be exchanged for
shares of a newly created issue of Commodore Series D Preferred Stock. This
merger is subject to several conditions, including the completion of a
public offering of Commodore capital stock with gross proceeds of at least
$50 million. Commodore is continuing to seek an underwriter for such
offering and, therefore, there can be no assurances given that this merger
will be consummated in the near future, if at all.
6. UNAUDITED PROFORMA RESULTS OF OPERATIONS:
The following summarizes the condensed proforma results of operations of the
Company for the six months ended March 31, 1996 to give effect to the
purchase of E. I. Du Pont de Nemours & Company's interests in Lanxide Armor
Company, L.P. and Lanxide Electronic Components, Inc. on June 28, 1996, as
if they had occurred on October 1, 1995.
(Amounts in thousands except per share data)
Revenue $ 13,813
Income from operations $ 423
Net loss $ (89)
Historical loss per share $ (.03)
Proforma loss per share $ (.08)
Historical Average Common Shares Outstanding 3,533
Proforma Average Common Shares Outstanding 1,183
The proforma loss per share and the proforma average number of common shares
outstanding reflect the Company's recapitalization that occurred on November
14, 1995 as if the recapitalization had taken place on October 1, 1995. All
potential dilutive securities have an antidilutive effect on the loss per
share and, therefore, have not been used in determining the total historical
or proforma average number of common shares outstanding.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following is a discussion of the consolidated financial condition and
results of operations of the Lanxide Corporation and its majority-owned
affiliates (the Company) for the three and six months ended March 31, 1997 and
1996, as well as certain factors that may affect the Company's prospective
financial condition. This section should be read in conjunction with the
Consolidated Financial Statements and the Notes thereto included elsewhere in
this 10-QSB.
OVERVIEW
Historically, the Company's revenues were derived primarily from research
contracts and development agreements with E.I. DuPont de Nemours & Company
(DuPont) and the U.S. Government, and a substantial portion of its research,
development and engineering and other operating costs were funded by Alcan
Aluminium Limited and its affiliates (Alcan), DuPont and Kanematsu Corporation
(Kanematsu) through the Company's consolidated affiliates. More recently, the
Company's revenues consist mainly of technology licensing revenue and sales to
outside customers and, to a lesser degree, contract funding. The Company
operates principally in the United States and to some degree in Japan through
its subsidiary, Lanxide K.K.
During fiscal year 1995, the Company embarked on a program to license its
technology in certain specific market sectors by product and geography in order
to generate immediate cash for the Company. Since implementing this strategy,
the Company consummated license agreements with A.P. Green Industries, Inc.
(A.P. Green), Waupaca Foundry, Inc. (Waupaca), Sturm Ruger & Company, Inc.
(Sturm Ruger), Brembo S.p.A. (Brembo) and AKN Corporation (AKN) which generated
initial license fees, as well as future license fees and royalties which are
subject to certain termination clauses. In addition, the Company entered into
two license agreements pursuant to the sale of two wholly-owned subsidiaries and
converted its joint venture with Nihon Cement Co., Ltd (Nihon) into a license
and royalty arrangement. On December 6, 1996, Waupaca notified the Company that
it would not exercise its right to extend its license beyond March 31, 1997.
In fiscal year 1997, the Company anticipates that its revenues will
continue to be derived primarily from research and development contract revenue,
technology licensing revenue and product sales.
RESULTS OF OPERATIONS
Revenues from research and development contracts and commercial development
agreements (other than the Company's agreements with its consolidated
affiliates) are reported under "Research and development contract revenue" in
the Company's Consolidated Statement of Operations. Expenses related to these
contracts and agreements are reported under operating costs as "Research and
development contract costs."
Product development and engineering (PD&E) costs represent costs incurred
for projects sponsored by the Company and/or its commercial venture partners
through the Company's consolidated affiliates. This includes PD&E costs
expended in support of the Company's patent portfolio. Operating income and
losses allocated to commercial venture partners through the Company's
consolidated affiliates are reported under "Minority allocation of operating
(income) loss."
SIGNIFICANT CUSTOMERS; COMMERCIAL RELATIONSHIPS WITH THE U.S. GOVERNMENT
The Company's significant revenue sources in the first six months of fiscal
year 1997 consist primarily of (i) technology licensing revenues; (ii) U.S.
Government contract funding; (iii) revenues from a brake component development
program between the Company and AKN; and (iv) sales revenues of consolidated
subsidiaries of the Company.
The U.S. Government is a significant customer of the Company. Contract
revenues received from the Government amounted to $1,088,000 and $1,201,000 for
the six months ended March 31, 1997 and 1996, respectively. Currently, the
Company has seven government contracts totaling $2.1 million of which $1.2
million has been billed through March 31, 1997. The Company anticipates
revenues of $1.7 million in 1997 associated with these government contracts.
These contracts may be terminated at the convenience of the government upon
written notice to the Company. Termination of these contracts would adversely
affect the Company.
COMMERCIAL RELATIONSHIPS WITH DUPONT
Since 1987, the Company and DuPont have formed three commercial joint
ventures -- Lanxide Electronic Components, Inc. (LEC), Lanxide Armor Company,
L.P. (LAC) and Du Pont Lanxide Composites, L.P. (DLC).
On June 28, 1996, the Company purchased DuPont's remaining ownership
interests in LAC and LEC and sold a portion of its interest in DLC to DuPont
(the Ownership Change). LAC and LEC are now owned 100% by the Company while its
ownership interest in DLC has been reduced to 10%. Concomitant with the
purchase, LAC was merged into the company's wholly-owned subsidiary, Lanxide
Armor Products, Inc. (LAP), with LAP the surviving entity.
The ownership interests of these commercial ventures prior to and following the
Ownership Change are as follows:
Lanxide-Ownership DuPont-Ownership
_________________ ________________
Before After Before After
______ _____ ______ _____
LEC 80% 100% 20% 0%
LAC 27% 100% 73% 0%
DLC 30% 10% 70% 90%
DuPont is required to provide 100% of the funding requirements of DLC
through 1999, after which funding will be based on ownership interest. If
either DuPont or the Company fails to meet future funding obligations, its
respective ownership interest will be diluted if such funding obligations are
met by the other owner.
LAP, LEC and DLC sublease space from the Company primarily in the Marrows
Road manufacturing facility. Also, the Company provides accounting, purchasing,
payroll and human resource services to these ventures. Amounts received by the
Company from unconsolidated affiliates for administrative and facilities costs
and services are reflected as a reduction to selling, general and administrative
expense, which totaled $288,000 and $1,262,000 for the six months ended March
31, 1997 and 1996, respectively.
These three commercial ventures also contract R&D services from the
Company. Revenue received by the Company from unconsolidated affiliates are
recorded as contract revenue, which totaled $707,000 and $612,000 for the six
months ended March 31, 1997 and 1996, respectively.
PERCENTAGE RELATIONSHIP TO NET REVENUES
The following table sets forth the percentage relationship to net revenues
of certain items in the Company's Consolidated Statement of Operations for the
periods presented:
<TABLE>
<CAPTION>
Six months ended Three months ended
March 31, March 31,
1997 1996 1997 1996
____ ____ ____ ____
<S> <C> <C> <C> <C>
Revenues 100% 100% 100% 100%
Operating costs:
Cost of sales (27) (17) (64) (14)
Research and development contract costs (17) (20) (29) (21)
Product development and engineering (19) (24) (38) (26)
Selling, general, and administrative (27) (25) (51) (24)
Minority allocation of operating (income) loss (7) 1 1 (6)
Equity in net loss of unconsolidated affiliates (6) (7)
Interest expense (5) (9) (11) (9)
Other income 6 8 4 12
Net income (loss) 3 7 (88) 4
</TABLE>
SIX MONTHS ENDED MARCH 31, 1997 COMPARED TO SIX MONTHS ENDED MARCH 31, 1996
The Company recorded net income of $503,000 on revenues of $15,818,000 for
the six months ended March 31, 1997, as compared to a $720,000 net income on
revenues of $10,837,000 during the six months ended March 31, 1996. Significant
events occurring during these periods which impacted the results comparison
include the following:
1.) The consolidation of the full operations of LAP and LEC as a result of
the Ownership Change which took place in June 1996.
2.) The completion of a $3.0 million government contract in December 1996.
3.) The revenue recorded in fiscal 1996 associated with the amortization
of equipment purchased under contract related to the brake component
development program with Nihon (which ended in April 1996).
4.) The completion of a brake components licensing agreement by Lanxide
K.K., the Company's subsidiary, in October 1996, the impact of which
was partially diluted by Kanematsu's 35% ownership in Lanxide K.K.
NET SALES AND COST OF SALES
Consolidated sales increased by $2,888,000, from $1,746,000 to $4,634,000,
and cost of sales increased by $2,375,000, from $1,873,000 to $4,248,000,
compared to the prior period. These increases are primarily attributable to the
consolidation of LAP operations in fiscal 1997 due to the Ownership Change as
well as additional commercial sales by LEC and Lanxide K.K. The positive
increase in the gross margin was caused by (i) manufacturing improvements and
(ii) allocation of the Company's fixed costs over a larger amount of sales.
LICENSING REVENUE
Licensing revenue of $8,200,000 and $5,980,000 during the six months ended
March 31, 1997 and 1996, respectively, relates to the following license
agreements:
(Dollars in thousands)
Six months ended March 31,
1997 1996
____ ____
Waupaca $ 2,000
A.P. Green 500
Brembo $ 400 400
Sturm Ruger 1,000
Nihon Cement 2,080
AKN 7,800
------- -------
$ 8,200 $ 5,980
======= =======
The Waupaca license was in the area of automotive brake system components
and certain agricultural machine wear components. On December 6, 1996, Waupaca
notified the Company that it would not exercise its right under the agreement to
extend its license beyond March 31, 1997. Waupaca indicated that it viewed its
rate of market penetration with the new technology as insufficient in light of
large demands for investment in Waupaca's expanding cast iron business.
Pursuant to the A.P. Green license agreement, A.P. Green has the exclusive
and perpetual right to use LANXIDE(TM) technology to make, use and sell
industrial refractories, other than those employed in the ferrous metal
industry, worldwide except for Japan. Subject to its unilateral right to
terminate this license, A.P. Green is required to make the following additional
payments totaling $1,050,000 over the next year: $250,000 in April 1997, which
was received; $300,000 in July 1997; and $500,000 in January 1998. A.P. Green
will also pay to the Company royalties on annual sales of products manufactured
and sold under the license.
The Brembo license agreement is in the area of automotive brake rotors and
drums for motor vehicles. Subject to its unilateral right to terminate the
license, Brembo is required to make the following additional payments totaling
$800,000 over the next year: $400,000 in June 1997; and $400,000 in December
1997. In addition, the license agreement includes royalty payments on the sale
of licensed products. A minimum annual royalty payment of $250,000 is
applicable for years three through six of the license agreement.
Pursuant to the Sturm Ruger license agreement, which grants Sturm Ruger the
right to produce and sell certain sporting goods components outside of Japan,
the Company received an initial license fee of $1,000,000 in April 1995. The
initial license agreement granted Sturm Ruger a one-year option to terminate the
license and be repaid the $1,000,000 by the Company in the form of either cash
or common stock at the Company's option. As a result, the Company deferred
recognition of the license fee revenue in fiscal 1995. In January 1996, the
Company and Sturm Ruger signed a new license agreement which grants the licensee
some additional product rights to certain sporting goods components outside of
Japan. In consideration for the expanded license, Sturm Ruger waived its one-
year option to terminate the license. Thus, the original deferred amount of
$1,000,000 was recorded as revenue during the second quarter of fiscal year
1996. The license agreement includes a royalty to the Company on the sale of
licensed products.
On March 28, 1996, Lanxide K.K. sold its remaining 50% ownership interest
in Celanx KK to Nihon effectively giving Nihon sole ownership of the license to
manufacture, market and sell precision instruments in Japan. As consideration
for its interest in Celanx KK, Lanxide K.K. will receive ongoing royalties from
precision instrument sales generated by Celanx KK. Concurrent with this sale,
Lanxide K.K. reacquired its wear products license from Celanx KK. As a result
of this transaction, Lanxide K.K. recorded license revenue of $2,080,000.
In October 1996, the Company signed a non-exclusive license agreement with
AKN for the manufacture, use and sale of brake components in Southeast Asia and
Oceania. AKN is a newly created joint venture of three global companies
headquartered in Japan: Akebono Brake Industry Co., Ltd (Akebono); Nihon; and
Kanematsu. The joint venture is also licensed by Lanxide K.K. for the
manufacture, use and sale of brake products in Japan. Under the agreement, AKN
made an initial payment of $4.0 million to the Company in November 1996. In
addition, AKN is required to make payments totaling $4.0 million to Lanxide
K.K., payable in four equal installments. The first two payments were received
in November 1996 and January 1997. The remaining two payments are due on June
30, 1997 and December 31, 1997. Of the $8.0 million to be received under the
license agreements, $7.8 million was recorded as licensing revenue in the first
quarter of fiscal 1997. The license also requires AKN to pay a royalty on all
sales of licensed products. The agreement grants AKN the option to execute an
exclusive manufacturing license in Southeast Asia and Oceania for an additional
$4.0 million. This option expires in September 1997 and payment of $4.0 million
is due no later than September 1998.
The Company expects to continue to license its technology in certain
specific market sectors by product and geography. Although the Company will,
subject to the availability of capital, continue to commercialize products using
the LANXIDE(TM) technology through its wholly or partially owned ventures, the
Company plans to seek advantageous licensing arrangements with third parties
which have the ability to commercialize products in those areas where there are
significant barriers to entry (i.e., substantial up-front costs or the need for
a substantial industry presence or where LANXIDE(TM) technology provides only a
portion of the necessary solution).
RESEARCH AND DEVELOPMENT CONTRACT REVENUE AND CONTRACT COSTS
Research and development contract revenue decreased $127,000, from
$3,111,000 to $2,984,000, and contract costs increased $560,000, from $2,207,000
to $2,767,000, compared to the prior period. The change in the gross margin was
primarily attributable to contract revenue associated with the amortization of
equipment purchased under contract in fiscal 1996 related to the brake component
development program with Nihon. The costs associated with such equipment will
be recorded as depreciation expense over a ten year period.
PRODUCT DEVELOPMENT AND ENGINEERING
PD&E spending increased by $383,000, from $2,620,000 to $3,003,000, for the
periods presented. This increase was principally due to the consolidation of
LAP operations due to the previously mentioned Ownership Change.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased $1,499,000, from
$2,749,000 to $4,248,000, over the prior period. This increase was mainly
attributable to three factors:
1.) The consolidation of LAP operations in fiscal 1997 due to the
Ownership Change.
2.) An expansion of the operations of Lanxide Performance Materials, Inc.
(LPM) a wholly-owned subsidiary, since March 1996.
3.) The parent company incurred additional costs associated with (i) being
a publicly held company and (ii) the continued pursuit of the
licensing strategy.
Included in selling, general and administrative expenses are reimbursements
of $288,000 and $1,262,000 for 1997 and 1996, respectively, received from
unconsolidated affiliates for administrative and facilities costs and services.
MINORITY ALLOCATION OF OPERATING (INCOME) LOSS
The Company recorded $1,146,000 in minority allocation of operating income
for the six months ending March 31, 1997 as compared to $90,000 in minority
allocation of operating loss for the prior period. This change was primarily
attributable to $3.9 million in licensing revenue recorded by Lanxide K.K. from
AKN in October 1996, of which, 35% was allocated to the minority owner. In
March 1996, Lanxide K.K. recorded license revenue of $2,080,000 associated with
the sale of its remaining 50% ownership interest in Celanx KK to Nihon, of
which, 35% was allocated to the minority owner.
EQUITY IN NET LOSS OF UNCONSOLIDATED AFFILIATES
In fiscal 1996, the equity in net loss of unconsolidated affiliates was
$633,000. These losses pertained to the following:
1.) The Company's 27% share of the losses of LAC. As a result of the
Ownership Change, LAC was consolidated into the Company's financials
starting in June 1996.
2.) The start-up losses associated with Celanx KK, a subsidiary of Lanxide
K.K., which was sold in March 1996.
INTEREST EXPENSE
Interest expense decreased 14%, from $992,000 to $857,000, compared to the
prior period. This decrease reflects the prepayment of a $4.1 million mortgage
on the Marrows Road facility in March 1996. This prepayment occurred when the
Company consummated the sale and leaseback of the facility in the second quarter
of fiscal 1996. Partially offsetting this reduction is the interest associated
with the $4.5 million in loans from Commodore Environmental Services, Inc. and
Commodore Applied Technologies, Inc. See "The Merger" in the Liquidity and
Capital Resources section.
OTHER INCOME
Other income increased $87,000 from $907,000 to $994,000. This minor
increase was due to variety of factors including the reversal of accrued
dividends on preferred stock of a subsidiary in the first quarter of fiscal
1997.
INCOME TAX EXPENSE
In 1997 and 1996, the $40,000 in income tax expense reflects taxes withheld
on foreign source income.
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO
THREE MONTHS ENDED MARCH 31, 1996
The following table presents the results of operations for the three months
ended March 31, 1997 and 1996. Additionally, the table presents the differences
between the quarters in terms of dollars and percentages. The analysis of the
six month changes presented on the previous pages also serves to explain the
quarterly changes presented below.
<TABLE>
<CAPTION>
For the three months ended March 31,
1997 1996 Difference % Difference
____ ____ __________ ____________
<S> <C> <C> <C> <C>
Sales $ 2,778 $ 784 $ 1,994 254%
Licensing revenue 3,080 (3,080) (100)
Research and development contract revenue 1,256 1,621 (365) (23)
Cost of sales 2,573 764 1,809 237
Research and development contract costs 1,188 1,148 40 3
Product development and engineering 1,551 1,433 118 8
Selling, general and administrative 2,053 1,309 744 57
Minority allocation of operating (income) loss 51 (346) 397 (115)
Equity in net loss of unconsolidated affiliate (384) 384 (100)
Interest expense (456) (491) 35 (7)
Other income $ 166 632 466 (74)
Income tax expense $ 40 $ 40 (100)%
</TABLE>
Liquidity and Capital Resources
Since its inception, the Company has financed its working capital and
capital expenditure requirements with the proceeds from the sale of stock,
borrowings, product sales, research and development contracts and, more
recently, technology licensing revenues. The Company had working capital of
negative $208,000 at March 31, 1997, as compared to $4,367,000 at September 30,
1996. The consolidated cash balance at March 31, 1997 was $4,283,000 (including
$2,518,000 held by a subsidiary company which is unavailable to the Company for
general corporate purposes).
At March 31, 1997, the Company had no significant commitments to purchase
capital equipment. However, the Company signed four leases during the second
quarter of fiscal 1997. These transactions were accounted for as capital leases
and amounted to $404,000. This strategy enabled the Company to purchase needed
equipment without utilizing valuable cash resources. The payments required on
the leases are reflected in the debt payout schedule discussed later.
During the first quarter of fiscal 1997, the Company repurchased the $4.0
million of Lanxide Wear Products, Inc.'s preferred stock held by Nihon.
In March 1995, the Company implemented a licensing strategy and has since
signed five technology licensing agreements which provide funds for the
continuing operations of the Company. Although one of these licensees gave
notice to the Company in December 1996 that it would not renew its license
beyond March 31, 1997, and another license agreement contained a one-time
payment in fiscal 1995, the remaining license agreements form a financial base
to cover a portion of the Company's operating expenses in 1997 and beyond.
License agreements which are currently in effect, but some of which are subject
to cancellation by the licensee with prior notice, are expected to provide the
following funds in addition to various royalty payments:
License Agreements
(Dollars in millions)
1997 1998 1999
____ ____ ____
A.P. Green 0.6 0.5 -
Brembo 0.8 0.4 0.3
AKN 7.0 1.0 -
Of the $8.0 million AKN license fee, $4.0 million will be paid directly to
Lanxide K.K. and is expected to be used by that subsidiary in the conduct of its
business.
The Company has been engaged in discussions with a number of industrial
entities in the United States, Europe and Asia regarding the potential licensing
of the Company's technology to such entities for up-front fees and ongoing
royalty payments. These discussions include the potential licensing of
automotive brake components in North America that Waupaca determined not to
renew. However, no assurance can be given that any of these discussions will
lead to the licensing of the Company's technology to any of these entities.
The Company has a $6.0 million revolving credit and term note with PNC
Bank, Delaware, guaranteed by DuPont, under which all available amounts have
been drawn. The note bears interest at the prime rate and is payable in
installments from March 1997 to March 2000. The Company also has a
$10.0 million secured revolving credit and term note with Kanematsu under which
all available amounts have been drawn. This note bears interest at 2% above
LIBOR and matures in full in December 1998. During the latter part of 1996,
LPM established an aggregate line of credit of $4.5 million with Commodore
Environmental Services, Inc. and Commodore Applied Technologies, Inc. As of
March 31, 1997, LPM had drawn all available amounts under this line. See "The
Merger" below. Principal payments due on the outstanding indebtedness are as
follows:
Fiscal Year Ended Principal Payments
_________________ __________________
(Dollars in thousands)
Remainder of 1997 $ 608
1998 6,559
1999 12,165
2000 1,671
2001 78
2002 21
--------
Total $ 21,102
========
No assurance can be given that the Company will be able to make these payments
when they become due.
The terms of the agreements relating to (i) the loan from Kanematsu and
(ii) the lease with QRS 12-16, Inc., as Landlord for the Marrows Road facility,
currently restrict the Company's ability to incur additional indebtedness other
than in connection with the operation of its subsidiaries.
THE MERGER
In November 1996, the Company entered into a Merger Agreement with
Commodore Environmental Services, Inc. (Commodore) providing for the acquisition
of the Company by Commodore and the conversion of the Company's outstanding
Common Stock and Series A Preferred Stock into common stock of Commodore (the
Merger). The Company's Series E Redeemable Preferred Stock would be exchanged
for shares of a newly created issue of Commodore Series D Preferred Stock. The
Merger is subject to several conditions, including the completion of a public
offering of Commodore capital stock with gross proceeds of at least $50 million.
Commodore is continuing to seek an underwriter for such offering and, therefore,
there can be no assurances given that the Merger will be consummated in the near
future, if at all. The Company is also pursuing alternative sources of
financing in an effort to satisfy its cash needs in the event the Merger is not
consummated. No assurances can be given, however, that the Company will be
successful in obtaining alternative financing on acceptable terms.
In August 1996, in order to provide the Company with temporary liquidity by
freeing up working capital which the Company had provided to its wholly-owned
subsidiary, LPM, Commodore Applied Technologies, Inc. (Applied), a subsidiary of
Commodore, extended a $1.5 million line of credit to LPM. The line of credit is
guaranteed by the Company and secured by the assets of LPM, excluding its
proprietary technology. The principal balance outstanding will be due on the
earlier of completion of the Merger or February 28, 1998 and bears interest at
Citibank N.A.'s prime rate of interest. As additional consideration for the
line of credit, the Company, through its affiliate, Lanxide Technology Company
L.P., granted to Applied an exclusive worldwide (other than Japan) license for
the use of LANXIDE(TM) technology in process reactor vessels for
decontamination, remediation, neutralization, separation and destruction of (i)
soils and substrates contaminated with PCBs and other halogenated substances,
(ii) PCBs and other halogenated substances in their unmixed form, (iii) other
materials and substances subjected to Applied's SET process, (iv) low level
nuclear waste, radionuclides and other radioactive matter, and (v) ordnance,
chemical weapons and related materials.
In September 1996, Commodore also agreed to provide LPM a $3.0 million line
of credit to fund LPM's working capital deficiencies between November 1996 and
March 1997. The line of credit is guaranteed by the Company and secured by the
assets of LPM, excluding its proprietary technology. Such line of credit
matures on February 28, 1998.
The Company's immediate cash needs are being met through cash reserves,
working capital from operations and license fees due under existing agreements.
However, the Company remains critically dependent on achieving new licensing
arrangements or alternative financing in the near term to sustain its current
operations. No assurances can be given, however, that the Company will be able
to conclude such licenses or obtain such financing on acceptable terms.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
10.68 Settlement Agreement, dated January 30, 1997, among the Company,
the plaintiffs listed in Exhibit A thereto, (the "Plaintiffs") and
Bentley J. Blum.
10.69 Promissory Note of the Company, dated January 30, 1997 in favor of
the Plaintiffs. Incorporated by reference to Exhibit B of Exhibit
10.68 of the Company's Quarterly Report on Form 10-QSB for the
quarter ended March 31, 1997.
27 Financial Data Schedule
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
LANXIDE CORPORATION
Date: May 15, 1997 By: /s/Robert J. Ferris
_____________________________________
Robert J. Ferris
Vice President - Administration
Secretary and Treasurer
(Duly Authorized Officer and
Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
Company's Consolidated Balance Sheet at March 31, 1997 and Consolidated
Statement of Operations for the six months ended March 31, 1997, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 4,283
<SECURITIES> 0
<RECEIVABLES> 4,157
<ALLOWANCES> (59)
<INVENTORY> 2,222
<CURRENT-ASSETS> 10,720
<PP&E> 24,330
<DEPRECIATION> (14,215)
<TOTAL-ASSETS> 21,585
<CURRENT-LIABILITIES> 10,928
<BONDS> 22,407
219
11
<COMMON> 13
<OTHER-SE> 188,446
<TOTAL-LIABILITY-AND-EQUITY> 21,585
<SALES> 4,634
<TOTAL-REVENUES> 15,818
<CGS> 4,248
<TOTAL-COSTS> 7,015
<OTHER-EXPENSES> 7,251
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (857)
<INCOME-PRETAX> 543
<INCOME-TAX> 40
<INCOME-CONTINUING> 503
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 503
<EPS-PRIMARY> .24
<EPS-DILUTED> .24
</TABLE>
EXHIBIT 10.68
SETTLEMENT AGREEMENT
____________________
Settlement Agreement, dated as of January 30, 1997, entered into among
Lanxide Corporation, a Delaware corporation (the "Company"), the plaintiffs
listed on Exhibit A hereto (the "Plaintiffs") and Bentley J. Blum, a director
and principal stockholder of the Company ("Blum").
WHEREAS, the Plaintiffs commenced an action in the U.S. District Court
for the District of Colorado entitled BANBURY FAMILY TRUST, et al. v. LANXIDE
CORPORATION, Civil Action No. 96-B-1722 (the "Litigation");
WHEREAS, the Plaintiffs and the Company now desire to avoid the
expense, disruption and uncertainty of further litigation by settling fully and
finally all differences or disputes that have arisen or might have arisen
between Plaintiffs and the Company or any of its parents, subsidiaries,
predecessors, successors or affiliates;
WHEREAS, the Plaintiffs have agreed to dismiss the Litigation and the
Company has agreed to pay the Plaintiffs $200,000 pursuant to the terms set
forth herein and in the Lanxide Note attached hereto as Exhibit B (the "Lanxide
Note");
WHEREAS, Blum, who beneficially owns 46.6% of the common stock, par
value $.01 per share, of the Company, desires to have the Litigation dismissed
and, in order to induce Plaintiffs to enter into the Settlement Agreement,
agrees to execute and deliver to the Plaintiffs a note in the amount of
$200,000, substantially in the form attached hereto as Exhibit C (the "Blum
Note"), the payments of which will be due only if the Company fails to make
payments when due under the Lanxide Note.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
Section 1. Dismissal of Litigation and General Release.
____________________________________________
The Plaintiffs hereby agree to dismiss with prejudice all claims
asserted in the Litigation. Immediately following the execution of this
Settlement Agreement, the Plaintiffs and the Company shall execute and file with
the U.S. District Court for the District of Colorado a Stipulation,
substantially in the form attached hereto as Exhibit D.
The Plaintiffs and the Company hereby mutually release and forever
discharge each other, including each other's respective affiliates, directors,
officers, employees, agents and stockholders and each of their respective
affiliates and each of their respective heirs, executors, administrators,
successors, assigns, agents and employees (such persons being hereinafter
referred to collectively as the "Releasee"), from all actions, causes of action,
suits, debts, dues, sums of money, accounts, reckonings, bonds, bills,
specialties, covenants, contracts, controversies, agreements, promises,
variances, trespasses, damages, judgments, extends, executions, claims and
demands whatsoever, in law or equity, (collectively, "Claims"), which the
Plaintiffs or the Company, or their respective heirs, executors, administrators,
successors, assigns, stockholders, partners, agents and employees now have or
hereafter can, shall or may have for, upon, or against any of the Releasee,
whether known or unknown, by reason of any matters, cause or thing whatsoever
from the beginning of the world to the date hereof relating to or arising out of
the Litigation, the letter agreement dated March 5, 1996 between Brooke Banbury
and Bentley J. Blum (the "Letter Agree- ment"), or the Recapitalization Plan,
the Merger, the Rights Offering and the transactions contemplated thereby (as
such terms are defined in the Company's Proxy Statement/Prospectus, dated
October 11, 1995); PROVIDED, HOWEVER, that nothing herein shall release the
Plaintiffs or the Company from their obligation to comply with the terms of this
Settlement Agreement.
The Company and each Plaintiff, severally and not jointly, represent
and warrant that there have been no assignments or other transfers of any
interest in any Claim which he, she or it may have against any of the Releasee
pursuant to this Section 1, and the Company and each Plaintiff, severally and
not jointly, agrees to indemnify and hold the Releasee harmless from any
liability, Claims, demands, damages, costs, expenses and attorneys' fees
incurred by any of the foregoing as a result of any person asserting any such
assignment or transfer, or any rights or Claims under any such assignment or
transfer. It is the intention of the Plaintiffs and the Company that this
indemnity does not require payment by any Releasee as a condition precedent to
recovery against them under this indemnity.
Each Plaintiff agrees that if their heirs, executors, administrators,
successors, assigns, agents or employees hereafter make any Claim against any of
the Releasee arising out of the matters released hereunder, each Plaintiff
shall, severally and not jointly, indemnify and hold harmless the party against
whom such Claim is made from any loss, liability, cost or expense arising
therefrom, including, but not limited to, the attorneys' fees and costs incurred
in defending against such Claim.
The Company agrees that if its heirs, executors, administrators,
successors, assigns, agents or employees hereafter make any Claim against any of
the Releasee arising out of the matters released hereunder, the Company shall
indemnify and hold harmless the party against whom such Claim is made from any
loss, liability, cost or expense arising therefrom, including, but not limited
to, the attorneys' fees and costs incurred in defending against such Claim.
Section 2. Payment of Settlement Amount.
_____________________________
The Company agrees to pay to Plaintiffs an aggregate of $200,000 by
executing and delivering the Lanxide Note to Brooke Banbury, as authorized
representative of the Plaintiffs ("Banbury").
Section 3. Blum Note.
__________
Blum shall execute and deliver to Banbury the Blum Note, the terms of
which shall be the same as the terms of the Lanxide Note, except that Blum shall
have no obligations under the Blum Note unless the Company fails to make
payments when due under the Lanxide Note.
Section 4. Surrender of Stock.
___________________
Within 30 days of the execution of this Settlement Agreement, each
Plaintiff shall surrender to the Company stock certificates representing the
shares of stock of the Company held by such Plaintiff as set forth in Exhibit A.
Such shares shall be canceled for all purposes and the holders thereof shall
not be entitled to any consideration therefor other than a portion of the
proceeds of the Lanxide Note. Each Plaintiff hereby acknowledges and agrees
that he, she or it has no right to receive any shares of capital stock or other
property of the Company upon surrender of the stock certificates. In the event
any of the foregoing stock certificates have been lost or damaged, such
Plaintiff shall execute a certificate provided by the Company and shall agree to
indemnify the Company for any losses resulting from Plaintiff's loss or
destruction of such stock certificate; PROVIDED, HOWEVER, that such Plaintiff
shall not be required to purchase a bond in connection with such
indemnification.
Section 5. Distribution of Note Payments.
______________________________
Banbury, as authorized representative of the Plaintiffs, shall be
responsible for distributing to each Plaintiff his portion of each payment made
by the Company pursuant to the Lanxide Note or by Blum pursuant to the Blum
Note.
Section 6. Expenses.
_________
Each party hereto shall be responsible for its own attorneys' fees and
expenses.
Section 7. Entire Agreement; Amendments, etc.
__________________________________
This Settlement Agreement represents the entire understanding and
agreement among the parties hereto with respect to the subject matter hereof,
and supersedes all prior agreements or understandings, whether written or oral.
Neither this Settlement Agreement nor any provision hereof may be changed,
waived, discharged or terminated orally, except by a statement in writing
authorized as aforesaid and signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
Section 8. Successors.
___________
This Settlement Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their successors and assigns.
Section 9. Section Headings.
_________________
The section headings contained in this Settlement Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Settlement Agreement.
Section 10. Applicable Law.
_______________
This Settlement Agreement shall be governed by, construed and enforced
in accordance with the substantive laws of the State of Colorado, without
reference to or application of principles of conflicts of laws. Parties agree
to jurisdiction and venue in Colorado.
Section 11. Severability.
_____________
If at any time subsequent to the date hereof, any provision of this
Settlement Agreement shall be held by any court of competent jurisdiction to be
illegal, void or unenforceable, such provision shall be of no force and effect,
but the illegality or unenforceability of such provision shall have no effect
upon and shall not impair the enforceability of any other provision of this
Settlement Agreement.
Section 12. Counterparts.
_____________
This Settlement Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
Section 13. Notices.
________
All notices, requests, demands and other communications under this
Settlement Agreement shall be in writing and shall be deemed to have been duly
given (i) on the date of service if served personally on the party to whom
notice is to be given, or if given by facsimile transmission to the number
indicated below, or (ii) on the third day after mailing if mailed to the party
to whom notice is to be given, by first class mail, registered or certified,
postage prepaid, and properly addressed as follows:
(a) If to Plaintiffs:
Brooke Banbury
Four Writer Square
1512 Larimer Street
Denver, Colorado 80202
Facsimile No. (303) 623-7389
with a copy sent to:
Berenbaum, Weinshienk & Eason, PC
370 17th Street, Suite 2600
Denver, Colorado 80202
Attention: J. Hunter Banbury, Esq.
Facsimile No. (303) 629-7610
(b) If to the Company:
Lanxide Corporation
1300 Marrows Road
P.O. Box 6077
Newark, Delaware 19714-6077
Attention: President
Facsimile No. (302) 454-1712
with a copy sent to:
Skadden, Arps, Slate, Meagher & Flom (Delaware)
One Rodney Square
P.O. Box 636
Wilmington, Delaware 19899
Attention: Robert B. Pincus, Esq.
Facsimile No. (302) 651-3001
(c) If to Blum:
Bentley J. Blum
150 East 58th Street
New York, New York 10155
Facsimile No. (212) 753-0731
or to such other address as any party shall have specified by notice in writing
given to the other parties.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Settlement Agreement as of the day and year first written above.
LANXIDE CORPORATION
By:/s/ Marc S. Newkirk
_______________________________
Marc S. Newkirk
President and Chief
Executive Officer
THE PLAINTIFFS
/s/ Brooke Banbury
__________________________________
Brooke Banbury
/s/ C.O. McLaughlin
__________________________________
C.O. McLaughlin
/s/ Mary Jo Banbury
__________________________________
Banbury Children's Trust
By Mary Jo Banbury, as Trustee
/s/ Mary Jo Banbury
__________________________________
Banbury Family Trust
By Mary Jo Banbury, as Trustee
/s/ Mary Jo Banbury
__________________________________
Mary Jo Banbury
/s/ Jennifer Banbury
__________________________________
Jennifer Banbury
/s/ Louise D. Ledwith
__________________________________
Louise D. Ledwith
/s/ Joshua D. Ledwith
__________________________________
Joshua D. Ledwith
/s/ Richard W. Ledwith, III
__________________________________
Richard W. Ledwith, III
/s/ Richard W. Ledwith, Jr.
__________________________________
Richard W. Ledwith, Jr.
/s/ Edwin Park
__________________________________
Edwin Park
/s/ Mark LeVan
__________________________________
Mark LeVan
/s/ Jack LeVan
__________________________________
Jack LeVan
/s/ Carolyn Arcure
__________________________________
Carolyn Arcure
/s/ Susan LeVan
__________________________________
Susan LeVan
BENTLEY J. BLUM
/s/ Bentley J. Blum
__________________________________
Bentley J. Blum
EXHIBIT A
Plaintiff NO. OF SHARES
_________ OF OLD COMMON STOCK
___________________
Brooke Banbury 19,971
C. O. McLaughlin 4,000
Banbury Children's Trust
By Brooke Banbury, as Trustee 42,733
Banbury Family Trust
By Brooke Banbury, as Trustee 12,000
Mary Jo Banbury 47,000
Jennifer Banbury 1,000
Louise D. Ledwith 500
Joshua D. Ledwith 500
Richard W. Ledwith, III 500
Richard W. Ledwith, Jr. 9,500
Edwin Park 2,325
Mark LeVan 3,000
Jack LeVan 3,500
Carolyn Arcure 1,500
Susan LeVan 1,500
Exhibit B
This Note has not been registered under the Securities Act of 1933, as amended
(the "1933 Act"), or under the provisions of any applicable state securities
laws, but has been acquired by the registered holder hereof for purposes of
investment and in reliance on statutory exemptions under the 1933 Act, and under
any applicable state securities laws. This Note may not be sold, pledged,
transferred or assigned except in a transaction which is exempt under provisions
of the 1933 Act and any applicable state securities laws or pursuant to an
effective registration statement.
PROMISSORY NOTE
$200,000 January 30, 1997
FOR VALUE RECEIVED, the undersigned, LANXIDE CORPORATION, a Delaware
corporation (the "Company"), hereby promises to pay to Brooke Banbury, an
individual residing in the State of Colorado, as authorized representative of
the plaintiffs in the Litigation (as defined below), (including any subsequent
holders of this Note, the "Holder"), the principal sum of Two Hundred Thousand
Dollars ($200,000), plus all accrued interest thereon in lawful money of the
United States of America, payable as follows: (i) on July 1, 1997, $50,000 of
the principal amount, plus accrued interest thereon; and (ii) on the first day
of each month, commencing August 1, 1997 and ending October 1, 1998, $10,000
plus accrued but unpaid interest on the outstanding balance. Simple interest
shall accrue on the unpaid principal amount of this Note at a rate equal to 10%
per annum, commencing January 11, 1997 and continuing until the entire principal
amount of and accrued interest on this Note have been paid in full.
If the date for payment of principal or interest hereunder is a
Saturday, Sunday or legal holiday, then such payment shall be made on the next
succeeding business day. Unless otherwise specified in writing to the Company
and Blum (as defined below), all payments due under this Note shall be made by
check or by wire transfer payable to Brooke Banbury delivered on or prior to the
due date thereof at NBD Bank, 1320 Venice Avenue East, Venice, Florida 34292,
Attention: Brooke Banbury, Checking Account No. 002007672658, or to such other
location as Holder specifies in writing at least ten days prior to any payment
date.
This Note has been delivered in accordance with the terms of a
Settlement Agreement (the "Agreement"), dated January 30, 1997, among the
Company, the plaintiffs listed in Exhibit A thereto (the "Plaintiffs"), and
Bentley J. Blum, a director and principal stockholder of the Company ("Blum").
Pursuant to the Agreement, (i) the Plaintiffs agreed, among other
things, to dismiss, with prejudice, the civil action entitled BANBURY FAMILY
TRUST, et al. v. LANXIDE CORPORATION, Civil Action No. 96-B-1722 (the
"Litigation"), filed in the U.S. District Court for the District of Colorado,
(ii) the Company agreed to execute and deliver to the Plaintiffs this Note and
(iii) Blum agreed to execute a note (the "Blum Note") pursuant to which Blum
agreed to make any payments pursuant to this Note which are not made by the
Company when due.
Capitalized terms used herein and not otherwise defined shall have the
meanings ascribed to them in the Agreement.
This Note is subject to the following further terms and conditions:
1. PREPAYMENT. The Company may, at its option, prepay this Note, in
whole or in part, at any time or from time to time without penalty or premium.
Any prepayment of any portion of the principal amount of this Note shall be
accompanied by payment of all interest accrued and unpaid through the date of
prepayment. Upon final payment of principal and interest on this Note, it shall
be surrendered to the Company for cancellation.
2. EVENTS OF DEFAULT. Upon the occurrence of any of the following
events ("Events of Default"):
(a) failure to pay any principal of or accrued interest on this
Note within 10 days following the date on which such payment is due, PROVIDED,
HOWEVER, that if, pursuant to the Blum Note, Blum makes the payment which is due
within 10 days of the date of written notice from Holder of the Company's
failure to pay, then no Event of Default shall have occurred; or
(b) the appointment of a receiver for any part of the Company's
property; the making by the Company of an assignment for the benefit of
creditors; or
(c) the filing by the Company of a voluntary petition in
bankruptcy or a petition or an answer seeking reorganization, or an arrangement
with creditors; or
(d) the entering against the Company of a court order approving
a petition filed against it under the federal bankruptcy laws, which order shall
not have been stayed, vacated or set aside or otherwise terminated within 60
days; or
(e) the refinancing of (i) the Company's Revolving Credit Line
Note for $5,970,000 in favor of Bank of Delaware, dated February 24, 1993 or
(ii) the Loan and Security Agreement between Kanematsu Corporation and the
Company, dated April 29, 1994; or
(f) the merger, consolidation, recapitalization or public
offering of securities by the Company; PROVIDED, HOWEVER, that the following
shall not constitute an Event of Default: any other issuance of securities by
the Company, provided that the Company pay to the Plaintiffs up to 20% of the
net proceeds of any such issuance to reduce any outstanding balance on this
Note;
then, and in any event, the Holder may declare, by notice of default given to
the Company, the entire principal amount of this Note to be forthwith due and
payable, whereupon the entire principal amount of this Note outstanding and all
accrued and unpaid interest hereunder shall become due and payable without
presentment, demand, protest, notice of dishonor and all other demands and
notices of any kind, all of which are hereby expressly waived. If an Event of
Default shall occur, interest shall accrue at a rate of 18% per annum from the
date of such Event of Default on any outstanding balance.
No delay or failure by the Holder in the exercise of any right or
remedy shall constitute a waiver thereof, and no single or partial exercise by
the Holder of any right or remedy shall preclude other or future exercise
thereof or the exercise of any other right or remedy.
3. PAYMENT BY BLUM. Any amount paid by Blum to the Holder
pursuant to the Blum Note shall reduce the outstanding balance of this Note by
such amount.
4. ATTORNEYS' FEES. The Company agrees to pay the Holder's
reasonable attorneys' fees if judicial enforcement of this Note is required.
5. NOTICE OF TRANSFER. The Holder shall provide to the Company and
Blum immediate written notice of any sale, assignment, transfer, pledge or other
disposition of this Note or the right to receive payments hereunder.
6. MISCELLANEOUS.
(a) The provisions of this Note shall be governed by and
construed and enforced in accordance with the laws of the State of Colorado
without regard to the conflicts of law principles thereof.
(b) All notices and other communications hereunder shall be in
writing and shall be delivered or mailed in accordance with the Agreement.
(c) The headings contained in this Note are for reference
purposes only and shall not affect in any way the meaning or interpretation of
the provisions hereof.
(d) This Note may not be modified, terminated or discharged nor
shall any waiver hereunder be effective unless in writing and signed by the
party against whom the same is asserted.
IN WITNESS WHEREOF, this Note has been duly executed and delivered by
the Company on the date first above written.
LANXIDE CORPORATION
By:________________________
Marc S. Newkirk
President
Witness:
___________________
Exhibit C
This Note has not been registered under the Securities Act of 1933, as amended
(the "1933 Act"), or under the provisions of any applicable state securities
laws, but has been acquired by the registered holder hereof for purposes of
investment and in reliance on statutory exemptions under the 1933 Act, and under
any applicable state securities laws. This Note may not be sold, pledged,
transferred or assigned except in a transaction which is exempt under provisions
of the 1933 Act and any applicable state securities laws or pursuant to an
effective registration statement.
PROMISSORY NOTE
$200,000 January 30, 1997
FOR VALUE RECEIVED, the undersigned, Bentley J. Blum ("Blum"), a
director and principal stockholder of Lanxide Corporation, a Delaware
corporation (the "Company), hereby promises to pay to Brooke Banbury, an
individual residing in the State of Colorado, as authorized representative of
the plaintiffs in the Litigation (as defined below), (including any subsequent
holders of this Note, the "Holder"), the principal sum of Two Hundred Thousand
Dollars ($200,000), plus all accrued interest thereon in lawful money of the
United States of America, payable as follows: (i) on July 1, 1997, $50,000 of
the principal amount, plus accrued interest thereon; and (ii) on the first day
of each month, commencing August 1, 1997 and ending October 1, 1998, $10,000
plus accrued but unpaid interest on the outstanding balance; PROVIDED, HOWEVER,
that no payments shall be due under this Note unless the Company fails to make
any payment within ten days of when due pursuant to the promissory note, dated
January 30, 1997, made by the Company in favor of the Plaintiffs (the
"Lanxide Note") and until Holder provides written notice to Blum of the
Company's failure to pay. Simple interest shall accrue on the unpaid principal
amount of this Note at a rate equal to 10% per annum, commencing January 11,
1997 and continuing until the entire principal amount of and accrued interest on
this Note have been paid in full.
If the date for payment of principal or interest hereunder is a
Saturday, Sunday or legal holiday, then such payment shall be made on the next
succeeding business day. Unless otherwise specified in writing to Blum and the
Company, all payments due under this Note shall be made by check or by wire
transfer payable to Brooke Banbury delivered on or prior to the due date thereof
at NBD Bank, 1320 Venice Avenue East, Venice, Florida 34292, Attention: Brooke
Banbury, Checking Account No. 002007672658, or to such other location as the
Holder specifies in writing at least ten days prior to any payment date.
This Note has been delivered in accordance with the terms of a
Settlement Agreement (the "Agreement"), dated January 30, 1997, among the
Company, the plaintiffs listed in Exhibit A thereto (the "Plaintiffs") and Blum.
Pursuant to the Agreement, (i) the Plaintiffs agreed, among other
things, to dismiss, with prejudice, the civil action entitled BANBURY FAMILY
TRUST, et al. v. LANXIDE CORPORATION, Civil Action No. 96-B-1722 (the
"Litigation"), filed in the U.S. District Court for the District of Colorado;
(ii) the Company agreed to execute and deliver to the Plaintiffs the Lanxide
Note; and (iii) Blum agreed to execute and deliver to the Plaintiffs this Note.
Capitalized terms used herein and not otherwise defined shall have the
meanings ascribed to them in the Agreement.
This Note is subject to the following further terms and conditions:
1. NOTICE. Holder shall provide immediate written notice to Blum of
any Event of Default by the Company pursuant to the Lanxide Note.
2. REDUCTION OF PRINCIPAL AMOUNT. Each payment of principal and/or
interest made by the Company to the Holder pursuant to the Lanxide Note shall
reduce the outstanding balance of this Note by the amount of such payment.
3. PREPAYMENT. Blum may, at his option, prepay this Note, in whole
or in part, at any time or from time to time without penalty or premium. Any
prepayment of any portion of the principal amount of this Note shall be
accompanied by payment of all interest accrued and unpaid through the date of
prepayment. Upon final payment of principal and interest on this Note, it shall
be surrendered to Blum for cancellation.
4. EVENTS OF DEFAULT. Ten days after the date of the notice
provided by Holder pursuant to Section 1 above of the occurrence of any of the
following events ("Events of Default"):
(a) failure to pay any principal of or accrued interest on this
Note following the date on which such payment is due; or
(b) the appointment of a receiver for any part of the Company's
property; the making by the Company of an assignment for the benefit of
creditors; or
(c) the filing by the Company of a voluntary petition in
bankruptcy or a petition or an answer seeking reorganization, or an arrangement
with creditors; or
(d) the entering against the Company of a court order approving
a petition filed against it under the federal bankruptcy laws, which order shall
not have been stayed, vacated or set aside or otherwise terminated within 60
days; or
(e) the refinancing of (i) the Company's Revolving Credit Line
Note for $5,970,000 in favor of Bank of Delaware, dated February 24, 1993 or
(ii) the Loan and Security Agreement between Kanematsu Corporation and the
Company, dated April 29, 1994; or
(f) the merger, consolidation, recapitalization or public
offering of securities by the Company; PROVIDED, HOWEVER, that the following
shall not constitute an Event of Default: any other issuance of securities by
the Company, provided that the Company pay to the Plaintiffs up to 20% of the
net proceeds of such issuance to reduce any outstanding balance on the Lanxide
Note;
then, and in any event, the Holder may declare, by notice of default given to
Blum, the entire principal amount of this Note to be forthwith due and payable,
whereupon the entire principal amount of this Note outstanding and all accrued
and unpaid interest hereunder shall become due and payable without presentment,
demand, protest, notice of dishonor and all other demands and notices of any
kind, all of which are hereby expressly waived. If an Event of Default shall
occur, interest shall accrue at a rate of 18% per annum from the date of such
Event of Default on any outstanding balance.
No delay or failure by the Holder in the exercise of any right or
remedy shall constitute a waiver thereof, and no single or partial exercise by
the Holder of any right or remedy shall preclude other or future exercise
thereof or the exercise of any other right or remedy.
5. ATTORNEYS' FEES. The Company agrees to pay the Holder's
reasonable attorneys' fees if judicial enforcement of this Note is required.
6. NOTICE OF TRANSFER. The Holder shall provide to the Company and
Blum immediate written notice of any sale, assignment, transfer, pledge or other
disposition of this Note or the right to receive payments hereunder.
7. MISCELLANEOUS.
(a) The provisions of this Note shall be governed by and
construed and enforced in accordance with the laws of the State of Colorado
without regard to the conflicts of law principles thereof.
(b) All notices and other communications hereunder shall be in
writing and shall be delivered or mailed in accordance with the Agreement.
(c) The headings contained in this Note are for reference
purposes only and shall not affect in any way the meaning or interpretation of
the provisions hereof.
(d) This Note may not be modified, terminated or discharged nor
shall any waiver hereunder be effective unless in writing and signed by the
party against whom the same is asserted.
IN WITNESS WHEREOF, this Note has been duly executed and delivered by
the Company on the date first above written.
__________________________
Bentley J. Blum
Witness:
______________________
Exhibit D
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
________________________________________________________________________________
Civil Action No. 96-B-1722
BANBURY CHILDRENS TRUST, Mary Jo Banbury, Trustee, BANBURY FAMILY TRUST, Mary Jo
Banbury, Trustee, MARY JO BANBURY, BROOKE BANBURY, JENNIFER BANBURY, C.O.
MCLAUGHLIN, LOUISE T. LEDWITH, JOSHUA D. LEDWITH, RICHARD W. LEDWITH, III,
RICHARD W. LEDWITH, JR., EDWIN PARK, JACK LE VAN, MARK LE VAN, CAROLYN ARCURE
and SUSAN LE VAN
Plaintiffs,
v.
LANXIDE CORPORATION, a Delaware corporation,
Defendant.
________________________________________________________________________________
STIPULATION OF DISMISSAL
The parties hereby stipulate that the above-captioned action shall be
dismissed with prejudice, each party to bear its own costs.
____________________________
Michael G. Bohn
CAMPBELL BOHN & LEFFERT, LLC
Republic Plaza, Suite 3200
370 17th Street
Denver, CO 80202-5632
(303) 623-4000
Attorneys for Lanxide Corporation
____________________________
J. Hunter Banbury
I H. Kaiser
BERENBAUM, WEINSHIENK & EASON, PC
370 17th Street, Suite 2600
Denver, CO 80202
(303) 825-0800
Attorneys for Plaintiffs
DATED:
