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 three month period ended December 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 of (I.R.S. Employer
incorporation or organization) Identification No.)
1300 Marrows Road
P.O. Box 6077
Newark, DE 19714-6077
(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 February 12, 1998 was:
1,325,598.
THIS FORM 10-QSB CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 WITH RESPECT TO
THE FINANCIAL CONDITION, RESULTS OF OPERATIONS AND BUSINESS OF LANXIDE
CORPORATION, INCLUDING STATEMENTS UNDER ITEM 1. FINANCIAL STATEMENTS AND ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION. THESE FORWARD-LOOKING STATEMENTS INVOLVE CERTAIN RISKS AND
UNCERTAINTIES. NO ASSURANCE CAN BE GIVEN THAT ANY SUCH MATTERS WILL BE
REALIZED. FACTORS THAT MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS INCLUDE, AMONG OTHERS, THE
FOLLOWING POSSIBILITIES: (I) COMPETITIVE CONDITIONS IN THE INDUSTRIES IN WHICH
LANXIDE OPERATES; (II) FAILURE TO FURTHER COMMERCIALIZE ONE OR MORE OF THE
TECHNOLOGIES OF LANXIDE; (III) GENERAL ECONOMIC CONDITIONS THAT ARE LESS
FAVORABLE THAN EXPECTED AND (IV) ABILITY TO SECURE ADEQUATE FUNDING.
LANXIDE CORPORATION
TABLE OF CONTENTS
Page
Number
------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheet at
December 31, 1997 (Unaudited)...............................2
Consolidated Statement of Operations
for the Three Months Ended
December 31, 1997 and 1996 (Unaudited)......................3
Consolidated Statement of Cash Flows
for the Three Months Ended
December 31, 1997 and 1996 (Unaudited)......................4
Notes to Consolidated Financial
Statements (Unaudited)..................................5 - 9
Item 2. Management's Discussion and Analysis
of Results of Operations and Financial
Condition.............................................10 - 14
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K...........................15
<TABLE>
LANXIDE CORPORATION
CONSOLIDATED BALANCE SHEET
(Dollars in thousands, except per share data)
(Unaudited)
<CAPTION>
December 31,
1997
----
<S> <C>
ASSETS
Cash and cash equivalents, including amounts restricted for use
by majority-owned affiliate $ 1,816
Accounts receivable 2,578
Inventories 2,925
Other current assets 693
----------
Total current assets 8,012
Property and equipment, net 9,777
Investment in affiliates 377
Other assets 323
----------
$ 18,489
==========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current portion of long-term debt $ 16,906
Accounts payable and accrued expenses 3,944
Deferred compensation 1,396
Deferred revenue 589
----------
Total current liabilities 22,835
Long-term debt 3,982
Deferred credit 1,051
Deferred compensation 21
----------
27,889
----------
Minority interest in consolidated affiliates 1,830
Redeemable Series E preferred stock (aggregate liquidation value, $261);
26,100 shares issued and outstanding 228
----------
Shareholders' deficit
Preferred stock 15,000,000 shares authorized
Series A preferred stock (aggregate liquidation value, $88,135)
$.01 par value; 1,101,683 shares issued and outstanding 11
Series G preferred stock (aggregate liquidation value, $2,000)
$.01 par value; 20,000 shares issued and outstanding
Common stock, $.01 par value, 25,000,000 shares authorized:
1,325,598 issued and outstanding 13
Additional paid-in capital 191,006
Accumulated deficit (203,251)
Cumulative translation adjustment 763
----------
Shareholders' deficit (11,458)
----------
$ 18,489
==========
<FN>
See notes to consolidated financial statements.
</TABLE>
<TABLE>
LANXIDE CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(Amounts in thousands except per share data)
(Unaudited)
<CAPTION>
Three Months Ended December 31,
1997 1996
---- ----
<S> <C> <C>
Revenue:
Sales $ 3,248 $ 1,626
Licensing and other related revenues 1,877 8,445
Research and development contract revenue 1,068 1,728
---------- ----------
6,193 11,799
---------- ----------
Operating costs:
Cost of sales 2,391 1,494
Product development and engineering 2,848 1,873
Research and development contract costs 1,032 1,466
Selling, general and administration 1,755 2,068
---------- ----------
8,026 6,901
---------- ----------
Income (loss) from operations before minority allocation (1,833) 4,898
Minority allocation of operating (income) loss 92 (1,197)
---------- ----------
Income (loss) from operations (1,741) 3,701
Interest expense (492) (401)
Other income 18 133
---------- ----------
Income (loss) before income taxes (2,215) 3,433
Income tax expense 150 40
---------- ----------
Net income (loss) (2,365) 3,393
Dividends on mandatorily redeemable preferred stock (7) (7)
Gain on redemption of subsidiary's preferred stock 680
---------- ----------
Net income (loss) applicable to common shares $ (2,372) $ 4,066
========== ==========
Income (Loss) Per Share
Basic $ (1.79) $ 3.07
Diluted $ (1.79) $ 2.01
Average Common Shares Outstanding
Basic 1,326 1,326
Diluted 1,326 2,025
<FN>
See notes to consolidated financial statements.
</TABLE>
<TABLE>
LANXIDE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<CAPTION>
Three Months Ended
December 31,
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (2,365) $ 3,393
Adjustments to reconcile net income (loss) to net cash (used in) provided by
operating activities:
Depreciation and amortization 477 474
Minority allocation of operating income (loss) (92) 1,197
Gain on the sale of equipment (6) (78)
Changes in assets and liabilities:
Decrease (increase) in receivables 160 (2,118)
Decrease (increase) in inventories 111 (272)
(Increase) decrease in other assets (223) 82
(Decrease) increase in accounts payable and accrued expenses (293) 133
Increase in deferred revenue and deferred credit 903 435
Increase in other liabilities 40 36
---------- ----------
Net cash (used in) provided by operating activities (1,288) 3,282
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital additions (573) (75)
Proceeds from the sale of equipment 6 85
---------- ----------
Net cash (used in) provided by investing activities (567) 10
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemption of a subsidiary's preferred stock (4,000)
Proceeds from issuance of debt obligations 250 2,000
Repayment of debt obligations (230) (2)
---------- ----------
Net cash provided by (used in) financing activities 20 (2,002)
---------- ----------
Effect of exchange rate translations (241) (259)
---------- ----------
Net (decrease) increase (2,076) 1,031
Cash and cash equivalents, beginning of period 3,892 3,458
---------- ----------
Cash and cash equivalents, end of period $ 1,816 $ 4,489
========== ==========
Cash paid for interest $ 575 $ 364
========== ==========
<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 December 31, 1997, the consolidated
statements of operations and of cash flows for the three months ended
December 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 December 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, 1997, filed
with the Securities and Exchange Commission. The results of operations for
the period ended December 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 December 31, 1997 are $1,080,000 held by a subsidiary company
which amounts are not generally 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 $ 890
Work in process 1,249
Finished goods 786
----------
$ 2,925
==========
4. PER SHARE DATA
Net income (loss) per share is computed using the weighted average number of
common shares and potentially dilutive securities outstanding during the
period. The Company adopted the Financial Accounting Standards Board (FASB)
statement No. 128 "Earnings Per Share" for the periods presented. For
comparative purposes, the Company was required to restate the earnings per
share calculations for the quarter ended December 31, 1996.
For the three months ended December 31, 1997:
During the quarter ended December 31, 1997, all potential dilutive
securities have an anti-dilutive effect on the loss per share and,
therefore, have not been used in determining the weighted average number of
common shares outstanding. The following table lists the options and
warrants to purchase shares of common stock and the convertible preferred
stock that were not included in the computation of diluted earnings per
share because of the anti-dilutive effect on the loss per share. All
options and preferred shares were outstanding at the end of the period.
OPTIONS
Shares Exercise Price Expiration Date
------ -------------- ---------------
289,165 $5.625 11/13/05 - 12/03/07
281,524 (1) $7.41 07/25/07 - 10/26/09
6,500 $7.50 - $22.25 12/21/05 - 05/16/09
59,481 $25.00 06/01/98 - 03/31/00
766 $100.00 - $160.00 06/30/01 - 06/30/04
612 $320.00 02/23/05
WARRANTS
Shares Exercise Price Expiration Date
------ -------------- ---------------
58,763 $4.50 01/14/99
3,105,000 (1) $7.41 06/30/2000
66,000 $7.41 07/02/07
7,500 $7.50 08/14/02
66,000 $8.50 12/21/05
15,500 $14.00 03/31/01
Number of Common
Type of Preferred Stock Shares, if Converted
----------------------- --------------------
Convertible Series A Preferred Stock 409,768
Convertible Series G Preferred Stock 270,000
(1) The Board of Directors approved the Securities Purchase Agreement by
and between the Company and Commodore Environmental Services, Inc. on
July 3, 1997. Among other things, the Securities Purchase Agreement
provided for the granting of additional stock options and warrants to
employees of the Company, Lanxide Armor Products, Inc. and Lanxide
Performance Materials, Inc. equal to that number of options and warrants
held by each employee on July 3, 1997.
The new stock options and warrants are exercisable at a price of $7.41 per
share; vest ratably over a five year period from the date of grant and are
exercisable commencing July 1, 2000, and then only proportionate to the
extent that Commodore has exercised its Warrant to purchase 250,000 shares
of preferred stock, which Warrant was issued pursuant to the Securities
Purchase Agreement. To-date, Commodore has invested $2.0 million in Series
G Preferred Stock of the Company which may be used to exercise 20,000
Warrant shares or 8% of the total shares exercisable pursuant to the
Warrants.
<TABLE>
For the three months ended December 31, 1996:
<CAPTION>
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ------
<S> <C> <C> <C>
Net Income $ 3,393,000
Less: Dividends on mandatorily redeemable
preferred stock (7,000)
Add: Gain on redemption of subsidiary's
preferred stock 680,000
-------------
Basic earnings per share
Income available to common shareholders $ 4,066,000 1,325,598 $ 3.07
=======
Effect of Dilutive Securities
Assuming exercise of options and warrants 443,604
Assuming purchase of shares with proceeds of
options and warrants (156,801)
Assuming conversion of convertible preferred stock 412,552
------------- -------------
Diluted earnings per share
Income available to common stockholders
+ assumed conversion $ 4,066,000 2,024,953 $ 2.01
============= ============= =======
</TABLE>
The following table lists the options to purchase shares of common stock
that were not included in the computation of diluted earnings per share
because the options' exercise price was greater than the average market
price of the common shares. All options were outstanding at the end of the
period.
Shares Exercise Price Expiration Date
------ -------------- ---------------
59,481 $25.00 06/01/98 - 03/31/00
3,700 $18.00 - $22.25 01/31/06 - 11/28/06
766 $100.00 - $160.00 06/30/01 - 06/30/94
612 $320.00 02/23/05
5. SIGNIFICANT EVENTS
Loan from Lanxide K.K.
On December 29, 1997, Lanxide K.K., a 65% owned Japanese subsidiary, agreed
to loan $1.8 million to the Company (the Lanxide K.K. Loan). The Company
received $1.3 million on December 29, 1997 and an additional $.5 million was
received on January 12, 1998. Cash held by Lanxide K.K. is generally
unavailable to the Company for general corporate purposes. The Lanxide K.K.
Loan was to mature on January 31, 1998 and bears interest at the rate of 6%
per annum. Upon an event of default under the Lanxide K.K. Loan, the
Company shall transfer to Lanxide K.K. either its ownership of 100% of the
common stock of Lanxide Electronic Components, Inc. (the LEC Interest) or
its 10% ownership in DuPont Lanxide Composites, Inc. (the DLC Interest) as
follows. If the Company's $6.0 million loan from PNC Bank (the PNC Bank
Loan), which loan is guaranteed by E.I. DuPont de Nemours and Company, Inc.
(DuPont), has been paid in full, then the Company shall transfer either, the
LEC Interest or the DLC Interest to Lanxide K.K., provided, however, that if
the Company defaults under the PNC Bank Loan and DuPont is required to
satisfy its obligations as guarantor, then (1) the Company shall first
transfer to DuPont, at DuPont's option, either the LEC Interest or the DLC
Interest, both of which serve as collateral for the PNC Bank Loan guarantee,
and (2) the Company shall then transfer to Lanxide K.K. the remaining
interest: either the LEC Interest or the DLC Interest (see "Assignment of
Option; Transfer of Subsidiaries" below for a further discussion of DuPont's
option and collateral). Upon an event of default under the Lanxide K.K.
Loan, the Company shall not be required to transfer the LEC Interest or the
DLC Interest to Lanxide K.K. until either an event of default has occurred
under the PNC Bank Loan or the Company has paid the PNC Bank Loan in full.
A ten day extension has been received on payment of the $1.8 million loan,
which now matures on February 10, 1998. In addition to its other remedies,
if the loan is not paid in full by February 10, 1998, Lanxide K.K. has the
right to offset any trade payables due the Company's subsidiary, Lanxide
Electronic Components, Inc. for all shipments made to Lanxide K.K. following
February 10, 1998 in an amount equal to any unpaid principal balance that
may be outstanding as of February 10, 1998. As of February 17, 1998, the
Company has not repaid the loan.
Termination of Employees
On February 3, 1998, the Company terminated all of its employees, as well as
those of three of its subsidiaries located at the Company's Newark, Delaware
offices, as a result of its inability to secure adequate funding to continue
its operations.
Assignment of Option; Transfer of Subsidiaries
As discussed previously, DuPont entered into an agreement with PNC Bank (the
Bank), pursuant to which DuPont agreed to guaranty the Company's obligations
to the Bank under a Revolving Credit and Term Note, dated February 24, 1993,
in the original principal amount of $5,970,000 (the PNC Bank Loan). In
consideration for DuPont's guaranty, the Company and DuPont entered into a
Loan Guarantee Letter Agreement, dated December 15, 1992 (as amended, the
Guarantee Agreement), pursuant to which the Company granted to DuPont, as
collateral, an option (the Option) to acquire all of the outstanding common
equity securities of Lanxide Armor Products, Inc. (LAP) and Lanxide
Electronic Components, Inc. (LEC). DuPont's exercise of the Option would
release the Company from all obligations and liabilities under the PNC Bank
Loan. Under the terms of the Guarantee Agreement, the Option would become
exercisable by DuPont upon the Company's notification to DuPont of the
Company's inability to meet its obligations under the PNC Bank Loan.
In a letter agreement entered into between the Company and DuPont, dated
February 6, 1998 (the Letter Agreement), the Company notified DuPont that
the Company would not be able to meet its obligations under the PNC Bank
Loan. In the Letter Agreement, the Company consented to DuPont's assignment
of its right to exercise the Option to DHB Capital Group, Inc. (DHB) and
DuPont agreed to repay the Bank all amounts owed by the Company to the Bank
under the PNC Bank Loan.
Concurrent with the assignment of the Option by DuPont to DHB, the Company
entered into a Transfer Agreement, dated as of February 6, 1998 (the
Transfer Agreement), by and among the Company, DHB, LAP, LEC and Lanxide
Technology Company, L.P. (LTC), pursuant to which DHB elected to exercise
the Option and, accordingly, the Company transferred to DHB all of the
outstanding common equity securities of LEC and LAP. Pursuant to the
Transfer Agreement, DHB has agreed to use its best efforts to cause LEC and
LAP to hire, at a minimum, all of the persons employed as of February 2,
1998, by LEC and LAP, respectively. Pursuant to the Transfer Agreement, DHB
further agreed to transfer to LTC certain assets of LAP set forth on a
schedule attached to the Transfer Agreement (the Asset Sale) and (i) LTC and
LEC have each agreed to amend the License Agreement, dated as of July 25,
1995, between LTC and LEC and (ii) LTC and LAP have each agreed to amend the
License Agreement, dated as of March 31, 1987, between LTC and LAP to
provide for a royalty to LTC of all products containing the Company's
technology that are sold by LEC or LAP.
Termination of Voting Agreement; Resignation of Directors and Officers
As previously disclosed on the Company's Current Report on Form 8-K dated
July 3, 1997, Commodore Environmental Services, Inc., a Delaware corporation
(COES), assumed effective control of the Company pursuant to a Voting
Agreement, dated July 3, 1997, among the Company and certain of its
stockholders (the Voting Agreement) which was executed in connection with
certain transactions contemplated by a Securities Purchase Agreement, dated
July 3, 1997, between the Company and COES (the Securities Purchase
Agreement). Pursuant to the Voting Agreement, stockholders of the Company
who owned 664,329 shares of common stock, par value $.01 per share (the
Common Stock), or 50.1% of the outstanding Common Stock, granted proxies to
the members of the Board of Directors of COES (the Proxyholders) to vote all
shares of Common Stock held by each such stockholder until December 31,
1998.
In accordance with the Securities Purchase Agreement, the Board of Directors
of the Company increased the number of members on the Company's Board of
Directors to seven and elected Messrs. Michael Fullwood and William Toller
to fill the newly created directorships. In addition, the Board of
Directors of the Company appointed Mr. Toller to the position of
Vice Chairman and Senior Executive Officer of the Company and Mr. Fullwood
to the position of Senior Vice President, Chief Financial and Administrative
Officer and General Counsel of the Company.
On February 3, 1998, COES terminated the Voting Agreement in accordance with
its terms and Messrs. Fullwood and Toller resigned from their respective
positions as directors and officers of the Company. On February 6, 1998,
Paul E. Hannesson, chairman of the Board of Directors of the Company and
COES, resigned from his position on the Company's Board of Directors.
Messrs. Stephen A. Weiss and J. Frederick Van Vranken, Jr. resigned from
their positions on the Company's Board of Directors on February 11 and 12,
1998, respectively.
The Board of Directors currently consists of two directors: Messrs.
Bentley J. Blum and Marc S. Newkirk. Although the Company's Certificate of
Incorporation requires the Company to have a minimum of three directors,
applicable law permits the two to fill vacancies on the Board.
The Company is considering alternatives to attempt to resolve its financial
situation. No assurances can be given that any such alternatives will allow
the Company to continue any of its operations.
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 months ended December 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 have been 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 the
Company's 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), AKN Corporation (AKN) and Nihon Cement
Co., Ltd. (Nihon Cement) which have generated license fees, as well as future
royalties. 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 into a license arrangement.
In fiscal year 1998, the Company anticipates that its revenues will
continue to be derived primarily from technology licensing revenue, product
sales, and research and development contract revenue.
The Company is in the process of conducting a comprehensive review of its
computer systems to identify the systems which could be affected by the "Year
2000" issue and is developing a plan to resolve the issue. The Year 2000 issue
creates risk for the Company from unforeseen problems in its own computer
systems and from third parties with whom the Company deals both domestically and
internationally. The Company presently believes that, with modifications to
existing software and conversions to new software, the Year 2000 problem will
not pose significant operational problems for the Company's computer systems.
However, if such modifications and conversions are not completed timely, the
year 2000 problem may have a material adverse impact on the operations of the
Company.
Results of Operations
Results of operations may vary from period to period depending on several
factors including licensing transactions. Revenues from license agreements
often do not occur evenly in each reporting period, which can cause the results
to fluctuate.
"Licensing and other related revenues" represent amounts earned by the
Company from licensing its technology by product and geographic area and are
recognized as revenue when the Company fulfills its obligation under the
applicable license agreement. Also included in this revenue category are
ancillary product sales that are produced solely in support of existing or
potential license agreements. Costs incurred by the Company from licensing its
technology are included in "Product development and engineering" (PD&E) costs.
PD&E also includes costs incurred for projects sponsored by the Company and/or
its joint venture partners through the Company's consolidated affiliates.
Operating income and losses allocated to commercial venture partners through the
Company's consolidated affiliates are reported under "Minority allocation of
operating (income) loss."
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."
The Company's significant revenue sources in the first quarter of fiscal
year 1998 consist primarily of (i) technology licensing revenues; (ii) sales
revenues of consolidated subsidiaries of the Company; (iii) revenues from a
brake component development program between the Company and AKN; and (iv) U.S.
Government contract funding.
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:
Three months ended December 31,
1997 1996
---- ----
Revenues 100% 100%
Operating costs:
Cost of sales (39) (13)
Product development and engineering (46) (16)
Research and development contract costs (17) (12)
Selling, general, and administrative (28) (18)
Minority allocation of operating (income) loss 2 (10)
Interest expense (8) (3)
Other income 1
Income tax expense (2)
Net income (loss) (38) 29
Three months ended December 31, 1997 compared to three months ended
December 31, 1996
The Company recorded a net loss of $2,365,000 for the three months ended
December 31, 1997, as compared to a $3,393,000 net income for the three months
ended December 31, 1996. The change was primarily a result of the signing of a
brake components licensing agreement by the Company and Lanxide K.K., the
Company's subsidiary, with AKN Corporation in October 1996. The impact to the
financial results was partially diluted by Kanematsu's 35% ownership in Lanxide
K.K.
Net Sales and Cost of Sales
Consolidated sales increased by $1,622,000, from $1,626,000 to $3,248,000,
and cost of sales increased by $897,000, from $1,494,000 to $2,391,000, compared
to the prior period. These increases are primarily attributable to a
significant increase in commercial sales in Japan by Lanxide K.K. from
electronic components and ingot manufactured by Lanxide Electronic Components,
Inc. (LEC) and Lanxide Performance Materials, Inc. (LPM), respectively.
Licensing and Other Related Revenues
Licensing and other related revenues of $1,877,000 and $8,445,000 for the
quarters ended December 31, 1997 and 1996, respectively, primarily relate to the
license agreements discussed below.
In December 1995, the Company and Brembo signed a license agreement, which
was subsequently amended in May 1997. The amended agreement gives Brembo a
license in the area of automotive brake rotors, drums and certain brake caliper
components for motor vehicles. Pursuant to the May 1997 amendment, Brembo paid
its remaining obligations under the amended license agreement during the third
quarter of 1997. Accordingly, no further license payments are required of
Brembo. However, under the license agreement, Brembo will pay royalties to the
Company on the sale of licensed products, including but not limited to a minimum
annual royalty payment for the four years following December 15, 1997.
In March 1996, Lanxide K.K. sold its remaining 50% ownership interest in
Celanx K.K. to Nihon Cement effectively giving Nihon Cement 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. was to 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. In November 1997, Lanxide K.K. and Nihon Cement subsequently amended the
Celanx KK royalty arrangement, whereby Celanx KK paid a one-time fee in lieu of
future royalties.
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; Kanematsu; and Nihon Cement. Also in October
1996, the joint venture purchased a license from Lanxide K.K. for the
manufacture, use and sale of brake products in Japan. In addition to license
payments, the agreements also require AKN to pay royalties on all sales of
licensed products.
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).
Product Development and Engineering
PD&E spending increased by $975,000, from $1,873,000 to $2,848,000, for the
quarters presented. This increase was principally a result of Lanxide K.K.'s
royalty distribution to Kanematsu, a 35% owner in Lanxide K.K., due to the
previously mentioned amendment to the Celanx KK royalty arrangement in November
1997.
Research and Development Contract Revenue and Contract Costs
Research and development contract revenue decreased $660,000, from
$1,728,000 to $1,068,000, and contract costs decreased $434,000, from $1,466,000
to $1,032,000, compared to the prior period. This decrease was primarily
attributable to the completion of a $3.0 million government contract in December
1996.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased $313,000, from
$2,068,000 to $1,755,000, over the prior period. The decrease was a result of
many factors as the Company continues in its efforts to reduce cash
expenditures. Such factors include lower outside patent costs and travel
expenses, officers' salary reduction until certain financial goals are achieved
and the critical examination of the need to fill its job openings due to
attrition.
Included in selling, general and administrative expenses are reimbursements
of $168,000 and $113,000 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 $92,000 in minority allocation of operating loss for
the first quarter of fiscal 1998 as compared to $1,197,000 in minority
allocation of operating income for the prior period. This change was primarily
attributable to licensing revenue recorded by Lanxide K.K. from AKN, of which
35% was allocated to the minority owner.
Interest Expense
Interest expense increased 23%, from $401,000 to $492,000, compared to the
prior period. The increase primarily represents interest on the $4.5 million
line of credit from Commodore Environmental Services, Inc. and Commodore Applied
Technologies, Inc. The Company had drawn all available amounts under this line
of credit by the middle of fiscal year 1997.
Income Tax Expense
Income tax expense reflects taxes withheld on foreign source income for the
quarters presented.
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's working capital was a
negative $14,823,000 at December 31, 1997, as compared to a negative $2,650,000
at September 30, 1997. The consolidated cash balance at December 31, 1997 was
$1,816,000 (including $1,080,000 held by a subsidiary company which is generally
unavailable to the Company for general corporate purposes). At December 31,
1997, the Company had no significant commitments to purchase capital equipment.
In March 1995, the Company implemented a licensing strategy and has since
signed seven technology licensing agreements which, along with other sources,
have provided funds for the continuing operations of the Company for the last
three years. For 1998, the Company continues to engage 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. 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 $10.0 million secured note payable with Kanematsu. This
note bears interest at 2% above LIBOR and matures in full in December 1998.
During the latter part of 1996, LPM established lines of credit of $3.0 and
$1.5 million with Commodore Environmental Services, Inc. and Commodore Applied
Technologies, Inc., respectively. As of December 31, 1997, LPM had drawn all
available amounts under these lines of credit. The note bears interest at
Citibank N.A.'s prime rate of interest and matures on February 28, 1998. As
previously discussed in the Notes to the Consolidated Financial Statements
under "Significant Events", the $6.0 million note payable with PNC Bank,
Delaware was paid in full in February 1998 by DuPont, who guaranteed the loan.
After giving effect to DuPont's repayment of the $6.0 million note payable,
principal payments due on the outstanding indebtedness are as follows:
Fiscal Year Ended Principal Payments
----------------- ------------------
(Dollars in thousands)
Remainder of 1998 $ 4,601
1999 10,145
2000 157
2001 171
2002 109
2003 5
----------
Total $ 15,188
==========
No assurance can be given that the Company will be able to make these
payments when they become due.
Loan from Lanxide K.K.
On December 29, 1997, Lanxide K.K., a 65% owned Japanese subsidiary, agreed
to loan $1.8 million to the Company. The Company received $1.3 million on
December 29, 1997 and an additional $.5 million was received on January 12,
1998. The cash held by Lanxide K.K. is generally unavailable to the Company for
general corporate purposes. The loan originally was to mature on January 31,
1998. However, a ten day extension has been received on payment of the
$1.8 million loan, which now matures on February 10, 1998. In addition to its
other remedies, if the loan is not paid in full by February 10, 1998,
Lanxide K.K. has the right to offset any trade payables due the Company's
subsidiary, LEC, for all shipments made to Lanxide K.K. following February 10,
1998 in an amount equal to any unpaid principal balance that may be
outstanding as of February 10, 1998. As of February 17, 1998, the Company has
not repaid the loan.
As previously discussed in the Notes to Consolidated Financial Statements
under "Significant Events", on February 3, 1998, the Company terminated all of
its employees, as well as those of its three subsidiaries located at the
Company's Newark, Delaware offices, as a result of its inability to secure
adequate funding to continue its operations. On February 6, 1998, the Company
transferred all of its ownership interests in two of its subsidiaries, Lanxide
Electronic Components, Inc. and Lanxide Armor Products, Inc. to DHB Capital
Group, Inc. as part of DuPont's payment of the $6.0 million loan with PNC Bank.
The Company is considering alternatives to attempt to resolve its financial
situation.
No assurances can be given that any such alternatives will allow the
Company to continue any of its operations.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) 10.72 Amendment to Loan Agreement, dated November 6, 1997, between the
Company and PNC Bank, Delaware.
10.73 Promissory Note, dated December 29, 1997, between the Company and
Lanxide K.K..
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: February 17, 1998 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 December 31, 1997 and Consolidated
Statement of Operations for the 3 months ended December 31, 1997, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-1-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,816
<SECURITIES> 0
<RECEIVABLES> 2,637
<ALLOWANCES> (59)
<INVENTORY> 2,925
<CURRENT-ASSETS> 8,012
<PP&E> 23,915
<DEPRECIATION> (14,138)
<TOTAL-ASSETS> 18,489
<CURRENT-LIABILITIES> 22,835
<BONDS> 22,284
228
11
<COMMON> 13
<OTHER-SE> 191,006
<TOTAL-LIABILITY-AND-EQUITY> 18,489
<SALES> 3,248
<TOTAL-REVENUES> 6,193
<CGS> 2,391
<TOTAL-COSTS> 6,271
<OTHER-EXPENSES> 1,755
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 492
<INCOME-PRETAX> (2,215)
<INCOME-TAX> 150
<INCOME-CONTINUING> (2,365)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,365)
<EPS-PRIMARY> (1.79)
<EPS-DILUTED> (1.79)
</TABLE>
EXHIBIT 10.72
Amendment to Note PNC BANK
THIS AMENDMENT TO NOTE (this "Amendment") is made as of November 6, 1997, by
and between LANXIDE CORPORATION, a Delaware corporation (the "Borrower") and
PNC BANK, DELAWARE (f/k/a Bank of Delaware) (the "Bank").
WITNESSETH:
WHEREAS, the Borrower has executed and delivered to the Bank, a note dated
February 24, 1993, in the original principal amount of FIVE MILLION NINE
HUNDRED SEVENTY THOUSAND and 00/100 Dollars ($5,970,000.00) (the "Note"),
pursuant to a letter agreement \ loan agreement of even date (the "Agreement"),
to evidence the Borrower's indebtedness to the Bank for a certain loan (the
"Loan");
WHEREAS, the Bank and the Borrower executed an amendment to the note dated
August 15, 1995, amending the payment terms and extending the maturity dated to
March 31, 2000;
WHEREAS, the Borrower and the Bank desire to further amend the Note as
provided for below;
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and intending to be legally bound hereby, the parties hereto agree as follows:
1. Effective as of the date of this Amendment, the Note is hereby amended
as follows:
a. CHANGE IN INTEREST RATE. The Interest Rate is hereby reduced to
a floating rate equal to the Prime Rate minus one-half of one percent (0.50%)
per annum.
b. CHANGE IN PAYMENT TERMS. The remaining principal outstanding
shall be due and payable in 24 equal consecutive monthly installments in the
amount of $228,000.00 each, commencing on April 1, 1998, and continuing on the
first day of each consecutive month thereafter to and including March 1, 2000,
and a final installment of $228,000.00 on March 31, 2000. Interest shall be
payable at the same times as the principal payments, as billed by the Bank.
Any outstanding principal and accrued interest shall be due and payable in full
on March 31, 2000.
2. Any and all references to the Note in any document, instrument or
certificate evidencing, securing or otherwise delivered in connection with the
Loan shall be deemed to refer to the Note as amended hereby. Any initially
capitalized terms used in this Amendment without definition shall have the
meanings assigned to those terms in the Note or the Agreement.
3. This Amendment is deemed incorporated into the Note. To the extent
that any term or provision of this Amendment is or may be deemed expressly
inconsistent with any term or provision in the Agreement or the Note, the terms
and provisions hereof shall control.
4. The Borrower hereby represents and warrants that (a) all of its
representations and warranties in the Agreement are true and correct, (b) no
default or Event of Default exists under the Note or the Agreement, and
(c) this Amendment has been duly authorized, executed and delivered and
constitutes the legal, valid and binding obligation of the Borrower,
enforceable in accordance with its terms.
5. The Borrower hereby confirms that any collateral for the Loan,
including but not limited to liens, security interests, and pledges granted by
the Borrower, shall continue unimpaired and in full force and effect.
6. This Amendment may be signed in any number of counterpart copies and
by the parties hereto on separate counterparts, but all such copies shall
constitute one and the same instrument.
7. This Amendment will be binding upon and inure to the benefit of the
Borrower and the Bank and their respective heirs, executors, administrators,
successors and assigns.
8. Except as amended hereby, the terms and provisions of the Note remain
unchanged and in full force and effect. Except as expressly provided herein,
this Amendment shall not constitute an amendment, waiver, consent or release
with respect to any provision of the Agreement or the Note, a waiver of any
default or Event of Default thereunder, or a waiver or release of any of the
Bank's rights and remedies (all of which are hereby reserved). The Borrower
expressly ratifies and confirms the confession of judgment and waiver of jury
trial provisions.
WITNESS the due execution hereof as a document under seal, as of the date first
written above.
WITNESS / ATTEST: LANXIDE CORPORATION
/s/ Robert J. Ferris By: /s/ Christopher R. Kennedy
_____________________________ ____________________________
(SEAL)
Print Name: Robert J. Ferris Print Name: C. Kennedy
Title: V. P. Technology
PNC BANK, DELAWARE
By: /s/ Jeffrey C. Allen
____________________________
(SEAL)
Print Name: Jeffrey C. Allen
Title: Vice President
(Guarantor's consent follows on page 3.)
CONSENT OF GUARANTOR
The undersigned guarantor hereby consents to the provisions of the
foregoing Amendment and confirms and agrees that the undersigned's obligations
under the Guaranty and Suretyship Agreement dated February 11, 1993 as amended
from time to time (the "Guaranty"), relating to the Loan mentioned in the
foregoing Amendment shall be unimpaired by the Amendment and that the
undersigned has no defenses or set offs against the Bank, its officers,
directors, employees, agents or attorneys with respect to the Guaranty and that
all of the terms, conditions and covenants in the Guaranty remain unaltered and
in full force and effect and are hereby ratified and confirmed. The undersigned
further confirms that the expiration date of the Guaranty is March 31, 2000.
The undersigned hereby certifies that the representations and warranties made
in the Guaranty are true and correct.
WITNESS the due execution hereof as a document under seal, as of October 31,
1997.
WITNESS / ATTEST: E. I. DUPONT DE NEMOURS AND COMPANY
/s/ Veronica A. Thomas By: /s/ John C. Sargent
________________________ ____________________________
Veronica A. Thomas John C. Sargent
Assistant Secretary Vice President and Treasurer
[LETTERHEAD OF PNC BANK]
October 17, 1997
Mr. R. Michael Rice
c/o Lanxide Corporation
1300 Marrows Road
P.O. Box 6077
Newark, Delaware 19714-6077
RE: Modification of $5,970,000 Revolving Credit Facility
Dear Mike:
We are pleased to inform you that PNC Bank, Delaware (the "Bank") has
approved the request of Lanxide Corporation (the "Borrower") for modifications
of the $5,970,000 revolving credit facility (the "Credit Facility"), subject to
the terms and conditions set forth in this letter.
The Borrower requested the Bank to (i) to reduce the interest rate to a
reduced floating rate equal to Prime Rate minus one-half of one percent (0.50%)
per annum; and (ii) change the payment terms, as set forth in the Amendment to
the Note enclosed herewith (the "Amendment").
The Bank hereby agrees to reduce the interest rate, subject to conditions
a, b, and c below, and change the payment terms as set forth in the Amendment,
subject to conditions b and c below:
(a) The Borrower shall provide evidence satisfactory to the Bank that
indebtedness owed by the Borrower to Kanematsu ($5,000,000) and Commodore
Environmental Service ($4,500,000), has been converted into equity in the
Borrower;
(b) The Borrower shall execute and deliver to the Bank the Amendment, an
updated corporate resolution and incumbency certificate and any other
instruments or documents reasonably requested by the Bank from the Borrower;
and
(c) E. I. duPont de Nemours and Company (the "Guarantor") shall execute and
deliver to the Bank its consent and reaffirmation of guarantee, an updated
corporate resolution and incumbency certificate and any other instruments or
documents reasonable requested by the Bank from the Guarantor.
Although the Bank has approved the modification, the Bank's obligations
are conditioned on the Amendment and other required documents being signed and
delivered to the Bank in a form that is satisfactory to the Bank and its
counsel. This letter is governed by the laws of Delaware. No modification or
waiver of any of the terms of this letter will be valid and binding unless
agreed to in writing by the Bank.
To accept the terms of the modification set forth in this letter, please
sign this letter return it to me within 30 days from the date of this letter.
Upon acceptance of the terms and conditions as outlined, we will prepare the
necessary documents.
We appreciate this opportunity to provide financial services to you, and
look forward to our continued successful relationship.
Very truly yours,
PNC BANK, DELAWARE
By: /s/ Jeffrey C. Allen
_______________________________
Jeffrey C. Allen
Vice President
ACCEPTANCE
With the intent to be legally bound, the above terms and conditions are hereby
agreed to and accepted as of this 20th day of October, 1997.
BORROWER:
LANXIDE CORPORATION
By: /s/ Marc S. Newkirk
_______________________
(SEAL)
Print Name: Marc S. Newkirk
Title: President & CEO
PNC BANK DELAWARE LOAN TO LANXIDE CORPORATION
AMENDED PAYMENT SCHEDULE
03/31/97 $20,000 Paid
06/30/97 50,000 Paid
09/30/97 200,000 Paid
03/31/98 228,000
04/30/98 228,000
05/31/98 228,000
06/30/98 228,000
07/31/98 228,000
08/31/98 228,000
09/30/98 228,000
10/31/98 228,000
11/30/98 228,000
12/31/98 228,000
01/31/99 228,000
02/28/99 228,000
03/31/99 228,000
04/30/99 228,000
05/31/99 228,000
06/30/99 228,000
07/31/99 228,000
08/31/99 228,000
09/30/99 228,000
10/31/99 228,000
11/30/99 228,000
12/31/99 228,000
01/31/00 228,000
02/29/00 228,000
03/31/00 228,000
----------
Total $5,970,000
==========
EXHIBIT 10.73
PROMISSORY NOTE
_______________
$1,800,000
FOR VALUE RECEIVED, the undersigned, LANXIDE CORPORATION, a Delaware
corporation (the "Maker"), hereby promises to pay to the order of LANXIDE K.K.,
a Japanese corporation (the "Payee"), the principal sum of One Million Eight
Hundred Thousand ($1,800,000) Dollars, representing the aggregate unpaid
principal amount of Advances to be made by the Payee to the Maker as follows:
$1,300,000 December 29, 1997; $500,000 January 12, 1998; together with interest
(computed on the daily unpaid balance of all such Advances based on a three
hundred sixty (360) day year counting the actual number of days elapsed) on any
and all principal amounts remaining unpaid hereunder from time to time from the
date hereof until payment in full hereof, at a rate per annum equal to 6%.
1. PAYMENT OF PRINCIPAL AND INTEREST.
(a) The entire principal balance of this Note shall be due and
payable on January 31, 1998.
(b) Accrued interest under this Note shall be due and payable
monthly in arrears on the last calendar day of each calendar month (provided
that, if such calendar day is a day on which commercial banks in the State of
Delaware are authorized or required to be closed, then such payment shall be
due and payable on the next succeeding business day, with interest thereon at
the rate in effect during the calendar month then ended).
(c) In full satisfaction of the accrued interest owed in any month
the Payee shall offset any trade payables due the Maker and/or its subsidiary
Lanxide Electronic Components, Inc. in that month in an amount equal in value
to the accrued interest owed.
(d) The Payee shall have the right to offset any trade payables
due the Maker's subsidiary Lanxide Electronic Components, Inc. for all
shipments made to Payee following January 31, 1998 in an amount equal to any
unpaid principal balance that may be outstanding as of January 31, 1998.
(d) All payments of principal and interest hereunder shall be
payable in lawful money of the United States of America at the office of the
Payee located at 2-2-22, Shiba-koen, Minato-ku, Tokyo 105, Japan.
2. PREPAYMENT.
The Maker shall have the right to prepay, without premium or penalty,
at any time or times after the date hereof, all or any portion of the
outstanding principal balance of this Note. The Maker agrees that if J.P.
Morgan, Zilkha and Company or Toyota Motor Company provide any financing to
Maker, that Maker will prepay this loan in full using proceeds therefrom
immediately following the receipt of such proceeds by Maker.
3. EVENTS OF DEFAULT.
Any failure by the Maker to pay when due all or any portion of any
principal hereunder shall be an Event of Default hereunder.
4. REMEDIES ON DEFAULT.
If an Event of Default shall occur and shall be uncured for more than
15 days, Maker shall transfer either its stock ownership in Lanxide Electronic
Components, Inc. ("LEC") or its 10% ownership in DuPont Lanxide Composites Inc.
("DLC") to Payee in satisfaction of the loan hereunder immediately following
satisfaction of Makers note to PNC Bank that is guaranteed by E.I. duPont
de Nemours and Company, Inc. ("DuPont"). If Maker has defaulted on such note
to PNC Bank and DuPont has been called upon to perform against its guaranty,
then such transfer shall occur immediately following DuPont's election to
accept either Maker's stockholding in LEC or Maker's 10% stockholding in DLC as
part of DuPont's rights under its guaranty agreement with Maker. If the stock
of LEC is transferred by Maker to Payee in satisfaction of the loan hereunder,
Payee shall first cause LEC to execute the license hereunder attached as
Exhibit A.
5. CERTAIN WAIVERS.
Except as otherwise expressly provided in this Note, the Maker hereby
waives diligence, demand, presentment for payment, protest, dishonor,
nonpayment, default, and notice of any and all of the foregoing. The Maker
hereby expressly agrees that this Note, or any payment hereunder, may be
extended, modified or subordinated (by forbearance or otherwise) from time to
time, without in any way affecting the liability of the Maker. The Maker
hereby further waives the benefit of any exemption under the homestead
exemption laws, if any, or any other exemption or insolvency laws, and consents
that the Payee may release or surrender, exchange or substitute any personal
property or other collateral security now or hereafter held as security for the
payment of this Note.
6. AMENDMENTS.
Neither any provisions of this Note nor any performance hereunder may
be amended or waived orally, but only by an agreement in writing and signed by
the party against whom enforcement of any waiver, change, modification or
discharge is sought.
7. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL.
This Note shall be deemed to be a contract made under the laws of the
State of Delaware and shall be governed by, and construed in accordance with,
the laws of the State of Delaware. The Maker hereby irrevocably consents to
the jurisdiction of all courts (state and federal) sitting in the State of
Delaware in connection with any claim, action or proceeding relating to or for
the collection or enforcement of this Note, and hereby waives any defense of
forum non conveniens or other such claim or defense in respect of the lodging
of any such claim, action or proceeding in any such court. THE MAKER HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY CLAIM, ACTION OR
PROCEEDING RELATING TO OR FOR THE COLLECTION OR ENFORCEMENT OF THIS NOTE.
8. OTHER AGREEMENTS.
Maker agrees to immediately remit the interest due and payable on a
separate $10 Million note to Kanematsu Corporation from Maker by wire transfer
immediately following receipt of the $1,300,000 advance from Payee hereunder.
Maker agrees to cause LEC to use its best efforts within the various
constraints and commitments of the business to ship by January 31, 1998, a
maximum number of the parts ordered by Toyota and Mitsubishi for delivery
through March of 1998.
Maker agrees to cause LEC to accept an observer from Lanxide K.K. to
observe production by LEC of parts for Toyota and Mitsubishi through January
1998.
This note shall supersede and replace all previously executed versions.
IN WITNESS WHEREOF, the undersigned has executed and delivered this Note
on and as of the 29th day of December 1997.
LANXIDE CORPORATION
By: /s/ Marc S. Newkirk
______________________________
Title: President
Lanxide Electronics Components Inc. agrees to be bound by the provisions of
Sections 1c and 1d above as surety and the provisions of Section 8 above that
relate to LEC, for so long as LEC is owned by Lanxide Corporation.
LANXIDE ELECTRONIC COMPONENTS INC.
By: /s/ Andrew W. Urquhart
______________________________
Title: President & CEO
