SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<Table>
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11c or Section 240.14a-12
</Table>
LEXINGTON PRECISION CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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[ ] Fee paid previously with preliminary materials.
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previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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LEXINGTON PRECISION CORPORATION
767 THIRD AVENUE
NEW YORK, NEW YORK 10017
--------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 20, 2003
Notice is hereby given that the Annual Meeting of Stockholders of
LEXINGTON PRECISION CORPORATION (the Company) will be held at the offices of
Nixon Peabody LLP, 437 Madison Avenue, 24th Floor, New York, New York, on
Tuesday, May 20, 2003, at 10:30 A.M., for the purpose of considering and acting
upon the following matters:
1. The election of six directors by the holders of Common Stock and $8
Cumulative Convertible Preferred Stock, Series B, as set forth in the
accompanying Proxy Statement;
2. The ratification of Ernst & Young LLP as independent auditors of the
Company for the year ending December 31, 2003; and
3. The transaction of such other business as may properly come before
the meeting and any adjournments thereof.
The Board of Directors has fixed the close of business on April 10,
2003, as the record date for determining the stockholders of the Company
entitled to receive notice of and to vote at the meeting and any adjournments
thereof.
PLEASE SIGN, DATE, AND MAIL THE ENCLOSED PROXY PROMPTLY. A POSTAGE-PAID
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
By Order of the Board of Directors,
Kenneth I. Greenstein
Secretary
April 18, 2003
New York, New York
LEXINGTON PRECISION CORPORATION
767 THIRD AVENUE
NEW YORK, NEW YORK 10017
---------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 20, 2003
This Proxy Statement is being mailed to stockholders on or about April
18, 2003, in connection with the solicitation by the Board of Directors of
LEXINGTON PRECISION CORPORATION, a Delaware corporation (the "Company"), of
proxies to be voted at the annual meeting of stockholders of the Company to be
held on May 20, 2003 (the "Annual Meeting"). Accompanying this Proxy Statement
are the Notice of Annual Meeting of Stockholders and a form of proxy for such
meeting and a copy of the Company's Annual Report for the year ended December
31, 2002, which contains financial statements and related data.
All proxies that are properly completed, signed, and returned to the
Company in time will be voted in accordance with the instructions thereon.
Proxies may be revoked prior to the exercise thereof by filing with the
Secretary of the Company a written revocation or a duly executed proxy bearing a
later date, or by voting in person at the Annual Meeting. The cost of preparing
and mailing the accompanying form of proxy and related materials and the cost of
soliciting proxies will be borne by the Company. The Company has requested
brokers, custodians, and other like parties to distribute proxy materials to the
beneficial owners of shares and to solicit their proxies and will reimburse such
persons for their services in doing so. Without additional compensation,
officers and regular employees of the Company may solicit proxies personally or
by telephone. The cost of additional solicitation incurred other than by use of
the mails is estimated not to exceed $3,000.
Only stockholders of record at the close of business on the record
date, April 10, 2003, are entitled to notice of, and to vote at, the Annual
Meeting and any adjournments thereof. As of the record date, there were
outstanding 4,828,036 shares of the Company's common stock, $0.25 par value (the
"Common Stock"), and 3,300 shares of its $8 Cumulative Convertible Preferred
Stock, Series B, $100 par value (the "Series B Preferred Stock"), each entitling
the holder thereof to one vote. The holders of a majority of the outstanding
shares of Common Stock and Series B Preferred Stock present in person or
represented by proxy, voting together, will constitute a quorum for all matters
before the Annual Meeting. The affirmative vote of a plurality of the shares of
Common Stock and Series B Preferred Stock present in person or represented by
proxy and entitled to vote at the Annual Meeting, voting together, is required
for the election of the six directors. All other matters require the affirmative
vote of a majority of the shares of Common Stock and Series B Preferred Stock
present in person or represented by proxy and entitled to vote at the Annual
Meeting.
With regard to the election of directors, votes may be cast in favor or
withheld. Votes withheld from the election of directors will be counted to
determine the presence or absence of a quorum for the transaction of business at
the Annual Meeting, but they have no legal effect under Delaware law and,
consequently, will not affect the outcome of the voting on such proposal. With
regard to other proposals, abstentions may be specified and will have the same
effect as votes against the subject proposal at the Annual Meeting. Broker
nonvotes (that is, proxies from brokers or nominees indicating that such persons
have not received instructions from the beneficial owners or other persons
entitled to vote shares on a
particular matter as to which the brokers or nominees do not have discretionary
power) are counted for purposes of determining a quorum for the transaction of
business at the Annual Meeting but are not considered as votes for purposes of
determining the outcome of a vote.
PROPOSAL 1 -- ELECTION OF DIRECTORS
The Bylaws of the Company provide for the election of directors for one
year terms. The holders of Common Stock and Series B Preferred Stock, voting
together, will be asked to vote at the Annual Meeting for the election of six
directors, each to serve until the annual meeting of stockholders to be held in
2004 and until his successor has been elected and qualified. Unless authority to
vote for the election of a director is specifically withheld by appropriate
designation on the face of the proxy, it is the intention of the persons named
in the accompanying proxy to vote such proxy for the election of William B.
Conner, Warren Delano, Kenneth I. Greenstein, Michael A. Lubin, Joseph A. Pardo,
and Elizabeth H. Ruml as directors to be elected by the holders of Common Stock
and Series B Preferred Stock, voting together, to serve until the 2004 annual
meeting of stockholders and until their respective successors shall have been
elected and qualified. Messrs. Conner, Delano, Greenstein, Lubin, and Pardo, and
Ms. Ruml are presently members of the Board of Directors. The proxies cannot be
voted for a greater number of persons than six in respect of Proposal 1.
Management has no reason to believe that the named nominees will be unable or
unwilling to serve, if elected. However, in such case, it is intended that the
individuals named in the accompanying proxy will vote for the election of such
substituted nominees as the Board of Directors may recommend.
Certain information concerning the nominees for election pursuant to
Proposal 1 is set forth in the following table. The Board of Directors
recommends that shareholders vote "FOR" the election of the named nominees.
PRINCIPAL OCCUPATION, BUSINESS
NAME AGE EXPERIENCE, AND DIRECTORSHIPS
---- --- -----------------------------
William B. Conner 70 Private Investor. President and director
of Conner Holding Company, a holding
company for aviation companies, and
Chairman of the Board of the
subsidiaries thereof for more than five
years. Director of the Company since
1981.
Warren Delano 52 President of the Company for more than
five years. Partner of Lubin, Delano &
Company, an investment banking and
consulting firm, for more than five
years. Director of the Company since
1985.
Kenneth I. Greenstein 73 Secretary of the Company since September
1979. Consultant since January 1998. For
more than five years prior thereto,
stockholder of a professional
corporation that was a partner in Nixon,
Hargrave, Devans & Doyle LLP (now known
as Nixon Peabody LLP), a law firm.
Director of the Company since 1978.
-2-
Michael A. Lubin 53 Chairman of the Board of the Company for
more than five years. Partner of Lubin,
Delano & Company, an investment banking
and consulting firm, for more than five
years. President and Chief Operating
Officer of Salant Corporation, a
manufacturer of men's, women's, and
children's apparel, from April 1997
through July 1997 and Executive Vice
President and Chief Operating Officer of
Salant Corporation from October 1995
through March 1997. On December 29,
1998, Salant Corporation filed a
petition seeking relief from creditors
under chapter 11 of the U.S. Bankruptcy
Code. Director of the Company since
1985.
Joseph A. Pardo 69 Restructuring consultant. Chairman of
Phoenix Advisors, LLC since July 2000.
During the past five years, Mr. Pardo
has served as a financial consultant to
a number of public and private
companies, including, as Trustee of
various creditor trusts in connection
with reorganizations under Chapter 11 of
the federal bankruptcy code. Mr. Pardo
has also served as Chairman of the Board
of Brothers Gourmet Coffee Co. since
October 2000, and Director of Weblink
Wireless, Inc., a wireless
communications company, from March 2001
through September 2002. Director of the
Company since March 2002.
Elizabeth H. Ruml 50 Retired since 1999. From June 1999
through October 1999, Ms. Ruml was
Managing Director and Co-Head of the
Group Market Risk Management Function at
Deutsche Bank. From March 1998 through
June 1999, she was Managing Director and
Head of the Corporate Portfolio
Management Group at Bankers Trust
Company. From May 1993 through December
1997, she was Managing Director and
Chief Credit Officer at Salomon
Brothers. Ms. Ruml was a Director of
Benjamin Moore & Company from July 2000
through December 2000. Director of the
Company since June 2002.
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board of Directors met five times during 2002. During 2002, each
director attended all meetings held by the Board of Directors and all meetings
held by the Committees of the Board of Directors on which such person served.
The Board of Directors has a standing Audit Committee and a standing
Compensation Committee. The Board of Directors does not have a standing
nominating committee. The members of those committees are as follows:
NAME OF COMMITTEE CHAIRMAN OTHER MEMBER(S)
----------------- -------- ---------------
Audit Committee Joseph A. Pardo Kenneth I. Greenstein
Elizabeth H. Ruml
Compensation Committee William B. Conner Kenneth I. Greenstein
The Audit Committee, which is comprised of three non-employee members
of the Board of Directors, met three times during 2002. Its primary purpose is
to review the financial information
-3-
provided to the Company's stockholders and others, to oversee the system of
internal financial controls, and to monitor the independent audit process. Its
functions include recommending the independent auditors for appointment by the
Board of Directors, consulting periodically with the Company's independent
auditors as to the nature, scope, and results of their audit of the accounts of
the Company, reviewing the Company's internal accounting controls and
procedures, and such other related matters as the Audit Committee deems
advisable.
The Compensation Committee, which is comprised of two non-employee
members of the Board of Directors, met once during 2002. Its functions included
reviewing salaries, cash bonus awards, and existing or potential compensation
plans for the Company's executive officers and other eligible employees and
making recommendations to the Board of Directors regarding such salaries, cash
bonus awards, and compensation plans. Additionally, the Committee administered
the Company's 1986 Restricted Stock Award Plan, which expired on December 31,
2001.
Each member of the Board of Directors receives an annual fee of
$12,000. Each member of the Audit Committee receives an annual fee of $2,000.
Directors receive $1,500 for each Board or Committee meeting attended in person
as well as reasonable out-of-pocket expenses incurred in connection with
attending such meetings. Directors receive $350 for each Board or Committee
meeting attended by telephone. There are no other fees paid to directors for
services rendered as members of the Board.
EXECUTIVE OFFICERS
The following table sets forth certain information concerning the
executive officers of the Company.
NAME POSITION AND OFFICES AGE
---- -------------------- ---
Michael A. Lubin Chairman of the Board 53
Warren Delano President and Director 52
Dennis J. Welhouse Senior Vice President, Chief Financial Officer, 54
and Assistant Secretary
James R. Bower Treasurer 38
Mr. Lubin has been Chairman of the Board of the Company for more than
five years. For more than five years, Mr. Lubin has been a partner of Lubin,
Delano & Company, an investment banking and consulting firm.
Mr. Delano has been President of the Company for more than five years.
For more than five years, Mr. Delano has been a partner of Lubin, Delano &
Company, an investment banking and consulting firm.
Mr. Welhouse has been Senior Vice President, Chief Financial Officer,
and Assistant Secretary of the Company for more than five years.
Mr. Bower has been Treasurer of the Company since December 2000. From
February 1994 through September 2000, Mr. Bower was Director of Finance of the
Alan Ross Insurance Agency, Inc.
Each of the Company's executive officers serves at the pleasure of the
Board of Directors.
-4-
SECURITY OWNERSHIP
The following table sets forth the beneficial ownership of the
Company's Common Stock, as of April 10, 2003, by (i) each director and director
nominee, (ii) each of the named executive officers, (iii) all directors and
executive officers as a group, and (iv) each person known by the Company to be
the beneficial owner of more than 5% of its outstanding Common Stock. Except as
set forth below, the business address of each officer, director, or stockholder
listed below is c/o Lexington Precision Corporation, 767 Third Avenue, 29th
Floor, New York, NY 10017.
SHARES OF COMMON STOCK PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED (1) CLASS OWNED
------------------------ ---------------------- -----------
Michael A. Lubin 1,516,242 (2) 31.4%
Warren Delano 1,385,855 (3) 28.7
William B. Conner 281,906 (4) 5.8
Dennis J. Welhouse 90,842 (5) 1.9
Kenneth I. Greenstein 35,636 (6) *
Joseph A. Pardo 4,600 *
James R. Bower - -
Elizabeth H. Ruml - -
Directors and executive
officers as a group (8
persons) 3,226,019 (7) 66.8
* Less than 1 percent.
(1) The persons named in the table have sole voting and dispositive power
with respect to all shares of the Company's Common Stock shown as
beneficially owned by them, subject to community property laws, where
applicable, except as set forth in the notes to the table.
(2) Includes (a) 35,000 shares owned by each of Mr. Lubin's two minor
children, with respect to which Mr. Lubin acts as custodian under the
New York Uniform Gifts to Minors Act, (b) 50,000 shares owned by an
individual retirement account of Mr. Lubin, and (c) 89,062 shares owned
by a retirement benefit plan of which Mr. Lubin and Mr. Delano are both
beneficiaries.
(3) Includes 110,750 shares owned by individual retirement accounts of Mr.
Delano and 89,062 shares owned by a retirement benefit plan of which
Mr. Delano and Mr. Lubin are both beneficiaries.
(4) Includes 220,594 shares owned by Conner Holding Company, a Nevada
corporation, of which Mr. Conner is president, a director, and majority
stockholder. Mr. Conner's address is c\o Conner Holding Company, 1030
State Street, Erie, Pennsylvania 16501.
(5) Includes 10,000 shares granted to Mr. Welhouse on January 28, 2000,
pursuant to the Company's Restricted Stock Award Plan that are
scheduled to vest during 2004 and 2005.
(6) Includes 8,170 shares owned by a retirement benefit plan of which Mr.
Greenstein is the sole beneficiary.
-5-
(7) See footnotes 1 through 6, above. Total includes 89,062 shares owned by
a retirement benefit plan of which Messrs. Delano and Lubin are
beneficiaries that are reported in the shares beneficially owned by
both Mr. Delano and Mr. Lubin.
EQUITY COMPENSATION PLAN INFORMATION
The Company currently has no compensation plans under which it has
equity securities authorized for future issuance.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, and
the rules promulgated thereunder require the Company's officers and directors
and persons who own more than 10 percent of the Common Stock to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(SEC) and to furnish to the Company copies of all such filings.
Based solely on its review of the copies of such reports and written
representations from certain reporting persons that certain reports were not
required to be filed by such persons, the Company believes that all of its
directors, officers, and beneficial owners complied with all of the filing
requirements applicable to them with respect to transactions during the year
ended December 31, 2002.
EXECUTIVE COMPENSATION
The following table summarizes, for the Company's past three fiscal
years, the compensation paid to each of the Company's co-principal executive
officers and to each of the Company's other executive officers whose total
annual salary and bonus exceeded $100,000.
<Table>
<Caption>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
---------------------------- ---------------
RESTRICTED ALL OTHER
NAME AND POSITION FISCAL YEAR SALARY($) BONUS($) STOCK AWARD($) COMPENSATION($)
- ---------------------------- ----------- ---------- -------- --------------- ----------------
Michael A. Lubin 2002 267,750 (1) - - -
Chairman of the Board 2001 263,500 (1) - - -
(Co-Principal Executive 2000 263,000 (1) - - -
Officer)
Warren Delano 2002 267,750 (2) - - -
President and Director 2001 263,500 (2) - - -
(Co-Principal Executive 2000 263,000 (2) - - -
Officer)
Dennis J. Welhouse 2002 148,500 - - 5,100 (4)
Senior Vice President 2001 148,500 - - 5,474 (4)
Chief Financial Officer 2000 148,500 - 27,344 (3) 5,591 (4)
and Assistant Secretary
(1) Includes (a) compensation, paid indirectly to Mr. Lubin through Lubin,
Delano & Company, in the amount of $250,000 during each of 2002, 2001,
and 2000, for services rendered as an executive officer of the Company
and (b) fees paid to Mr. Lubin for serving as a member of the Company's
Board of Directors. Lubin, Delano & Company is an investment banking
and consulting firm of which Messrs. Lubin and Delano are the only
partners. See "Compensation Committee Report on Executive Compensation"
and "Certain Relationships and Transactions."
(2) Includes (a) compensation, paid indirectly to Mr. Delano through Lubin,
Delano & Company, in the amount of $250,000 during each of 2002, 2001,
and 2000, for services rendered as an executive officer of the Company
and (b)
-6-
fees paid to Mr. Delano for serving as a member of the Company's Board
of Directors. See "Compensation Committee Report on Executive
Compensation" and "Certain Relationships and Transactions."
(3) Represents the fair market value of 25,000 shares of restricted common
stock on January 28, 2000, the date on which the restricted shares were
awarded to Mr. Welhouse. The restricted shares vest over a five-year
period.
(4) Includes (a) Company contributions of $4,455, $4,471, and $4,627, made
to Mr. Welhouse's account under the Company's 401(k) Plan in 2002,
2001, and 2000, respectively, (b) insurance premiums of $477, $477, and
$360 paid by the Company in 2002, 2001, and 2000, respectively, for
term life insurance owned by Mr. Welhouse, and (c) imputed interest of
$168, $526, and $604 in 2002, 2001, and 2000, respectively.
No stock options or stock appreciation rights were granted to,
exercised by, or held by any of the persons named in the Summary Compensation
Table above during 2002, 2001, or 2000.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is composed of two non-employee members of
the Company's Board of Directors. The Compensation Committee is responsible,
subject to the approval of the Board of Directors, for reviewing salaries, cash
bonus awards, and existing or potential compensation plans for the Company's
executive officers and other eligible employees and making recommendations to
the Board of Directors regarding such salaries, cash bonus awards, and
compensation plans.
COMPENSATION PHILOSOPHY AND POLICY
The Company's compensation program generally is designed to motivate
and reward the Company's executive officers for attaining financial,
operational, and strategic objectives that will contribute to the overall goal
of enhancing stockholder value. The principal elements of the compensation plan
include base salary and cash bonus awards.
BASE SALARY. In determining the base pay levels for executive officers
of the Company, the Compensation Committee considers the compensation paid by a
group of industrial companies that are generally similar to the Company. The
group of companies with which the Company compares itself for this purpose is
subject to change as the companies change size or focus, merge, or are acquired.
Base pay levels, prior to taking into account other factors considered by the
Compensation Committee, are at the mid-range of base pay levels for such group
of companies. The Compensation Committee believes that the Company's most direct
competitors are private companies that do not publicly disclose information
regarding executive compensation, financial condition, or operating performance.
The Compensation Committee also believes that the companies with which the
Company compares itself for the purpose of determining executive compensation
are not necessarily included in the indices used to compare stockholder returns
that are contained elsewhere in this Proxy Statement. In determining the salary
component of compensation packages for executive officers, the Compensation
Committee also takes into consideration the recent performance of the individual
and the Company, the experience of the individual, and the scope and complexity
of the position. The Compensation Committee does not assign weights to these
factors and does not consider any one factor more important than another.
INCENTIVE COMPENSATION PLAN. To provide incentives to increase
profitability, the Company has an incentive compensation plan that provides for
the payment of cash bonus awards to executive officers and other eligible
employees of the Company. Bonus awards for eligible divisional employees are
based upon the attainment of predetermined targets for earnings before interest,
taxes, depreciation, and amortization (EBITDA) at each respective division.
Bonus awards for executive officers and other eligible corporate employees are
based upon the attainment of a predetermined consolidated EBITDA target. The
Compensation Committee is responsible for the supervision of the incentive
compensation
-7-
plan. The Company also had a restricted stock plan that permitted it to award
restricted shares of common stock to officers and key employees of the Company.
In January 2000, the Compensation Committee awarded 125,000 shares of restricted
common stock to key employees of the Company, which shares vest as provided in
the restricted stock award plan. The restricted stock award plan expired on
December 31, 2001.
COMPENSATION OF MESSRS. DELANO AND LUBIN. Messrs. Delano and Lubin are
compensated indirectly by the Company through payments made to Lubin, Delano &
Company, an investment banking and consulting firm of which they are the only
partners. During 2002, the aggregate payments made to Lubin, Delano & Company
for services provided by Messrs. Delano and Lubin in their capacities as
President and Chairman of the Board, respectively, totaled $500,000. The
Company's arrangements with Lubin, Delano & Company also provide for an
incentive fee based upon the attainment of predetermined consolidated EBITDA
targets and additional compensation, as mutually agreed upon, for services
provided by Lubin, Delano & Company in connection with acquisitions,
divestitures, financings, or other similar transactions involving the Company.
Messrs. Delano and Lubin received no payments under the incentive compensation
plan for 2002 and no additional compensation for services provided in connection
with acquisitions, divestitures, financings, or similar transactions during
2002.
The compensation paid for the combined services of Messrs. Delano and
Lubin as President and Chairman of the Board of the Company, respectively, was
agreed to after considering the responsibilities of such positions and the
competitive marketplace for executive talent. The Compensation Committee
believes that the compensation paid to Lubin, Delano & Company during 2002 for
the combined services of Messrs. Delano and Lubin as executive officers of the
Company comports with the Compensation Committee's subjective perception of the
base compensation levels of chief executives employed by other industrial
companies, both public and private.
COMPENSATION COMMITTEE
William B. Conner, Chairman
Kenneth I. Greenstein, Member
-8-
AUDIT COMMITTEE REPORT
The Audit Committee oversees the Company's financial reporting process
on behalf of the Board of Directors and performs the other duties and
responsibilities set forth in the Audit Committee Charter. It is the
responsibility of the Company's independent auditors to perform an independent
audit of and express an opinion on the Company's financial statements. The Audit
Committee's responsibility is one of review and oversight. In fulfilling its
oversight responsibilities:
(1) The Audit Committee has reviewed and discussed with the
Company's management the audited financial statements.
(2) The Audit Committee has discussed with Ernst & Young LLP, the
Company's independent auditors, the matters required to be
discussed by Statement on Auditing Standards No. 61,
"Codification of Statements on Auditing Standards, AU ss.
380."
(3) The Audit Committee has received the written disclosures and
the letter from Ernst & Young LLP required by the Independence
Standards Board Standard No. 1, "Independence Discussions with
Audit Committees," and has discussed with Ernst & Young LLP
the independence of that firm as the Company's auditors.
(4) Based on the Audit Committee's review and discussions referred
to above, the Audit Committee recommended to the Board of
Directors that the Company's audited financial statements be
included in the Company's Annual Report on Form 10-K for the
year ended December 31, 2002, for filing with the Securities
and Exchange Commission.
On September 12, 2000, the Board of Directors formally adopted a
written charter for the Audit Committee, which sets forth the operating
practices and responsibilities of the Audit Committee. Each of the Audit
Committee members is independent, as defined in Rule 4200(a) of the National
Association of Securities Dealers' listing standards.
The members of the Audit Committee are not professionally engaged in
the practice of auditing or accounting and are not experts in the fields of
accounting, auditing, or auditor independence. Members of the Committee rely
without independent verification on the information provided to them and on the
representations made by management and the independent auditors.
AUDIT COMMITTEE
Joseph A. Pardo, Chairman
Kenneth I. Greenstein, Member
Elizabeth H. Ruml, Member
-9-
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Company's Compensation Committee are William B.
Conner and Kenneth I. Greenstein. Neither of Messrs. Conner and Greenstein has
ever been an employee of the Company, and Mr. Conner, who is the Chairman of the
Compensation Committee, has never been an officer of the Company. Mr. Greenstein
has served as Secretary of the Company since 1979 (although he receives no
compensation for acting in his capacity as such).
STOCK PRICE PERFORMANCE
Set forth below is a line graph comparing the yearly cumulative total
return on the Company's Common Stock, based on the market price of the Common
Stock, with the yearly cumulative total return on the common stock of companies
in the Standard & Poors 500 Index and the NASDAQ Composite Index.
COMPARISON OF FIVE-YEAR TOTAL RETURN FOR
LEXINGTON PRECISION CORPORATION, S & P 500 INDEX, AND NASDAQ COMPOSITE INDEX
Lexington Precision Corporation S&P 500 Index NASDAQ Composite Index
1997 100 100 100
1998 55.81 126.67 139.63
1999 44.19 151.4 259.13
2000 29.4 103.05 157.32
2001 11.53 118.31 124.2
2002 19.72 90.66 85.05
YEAR ENDED DECEMBER 31
At December 31, 1997, 1998, 1999, 2000, 2001, and 2002, the last trade
listed on the OTC Bulletin Board, provided by the National Association of
Securities Dealers, was $2.6875, $1.50, $1.1875, $0.79, $0.31, and $0.53 per
share, respectively. The Company believes that eight brokerage firms currently
make a market in the Company's Common Stock, although both bid and asked
quotations may be limited.
-10-
CERTAIN RELATIONSHIPS AND TRANSACTIONS
Warren Delano and Michael A. Lubin beneficially own 28.7% and 31.4%,
respectively, of the Common Stock of the Company.
Messrs. Delano and Lubin are compensated indirectly by the Company
through payments made to Lubin, Delano & Company, an investment banking and
consulting firm of which they are the only partners. During 2002, the aggregate
payments made to Lubin, Delano & Company for services provided by Messrs. Delano
and Lubin in their capacities as President and Chairman of the Board,
respectively, were $500,000. The Company's arrangements with Lubin, Delano &
Company also provide for an incentive fee based upon the attainment of
predetermined consolidated EBITDA targets and additional compensation, as
mutually agreed upon, for services provided by Lubin, Delano & Company in
connection with acquisitions, divestitures, financings, or other similar
transactions involving the Company. Messrs. Delano and Lubin received no
payments under the incentive compensation plan for 2002 and no additional
compensation for services provided in connection with acquisitions,
divestitures, financings, or similar transactions during 2002.
Messrs. Delano and Lubin and their affiliates are holders of $1,500,000
aggregate principal amount of the Company's senior subordinated notes due
February 1, 2000, and of $347,000 aggregate principal amount of the Company's
junior subordinated nonconvertible notes due May 1, 2003. On February 1, 2000,
Messrs. Delano and Lubin converted the $1,000,000 principal amount of the
Company's junior subordinated convertible notes due May 1, 2000, into 440,000
shares of Common Stock in accordance with the terms of such notes, although
there remains accrued and unpaid interest on the junior subordinated convertible
notes. The Company is in default in respect of its senior subordinated notes
because it did not make payments of principal of $27,412,000, and interest of
$1,748,000, on the senior subordinated notes that were due on February 1, 2000.
As a result, the Company is prohibited from paying interest on the junior
subordinated convertible notes and the junior subordinated nonconvertible notes
until the payment default on the senior subordinated notes is remedied. On July
10, 2002, the company commenced an exchange offer for the senior subordinated
notes, which offer was amended on March 7, 2003. One of the conditions to the
exchange offer is that it will not be consummated unless, prior to or
simultaneously therewith, the junior subordinated nonconvertible notes have been
exchanged for new junior subordinated notes with a maturity date of November 1,
2007, and the accrued and unpaid interest on the junior subordinated
nonconvertible notes and the junior convertible subordinated notes (which were
converted into common stock on February 1, 2000) through the date the amended
exchange offer is consummated, has been exchanged for shares of common stock.
Messrs. Lubin and Delano have agreed to participate in the exchange offer with
respect to their senior subordinated notes and to effect the exchanges set forth
above with respect to their junior subordinated notes.
PROPOSAL 2 -- RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors, on the recommendation of the Audit Committee,
has appointed the firm of Ernst & Young LLP, independent public accountants, to
audit the accounts of the Company for the year ending December 31, 2003. Ernst &
Young LLP has been employed by the Company as its independent auditor since the
fiscal year ended May 31, 1989.
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AUDIT FEES
Ernst & Young LLP billed the Company $204,000 for professional services
rendered in connection with the audit of the Company's annual financial
statements for the year ended December 31, 2002, and the review of the financial
statements included in the Company's Quarterly Reports on Form 10-Q for the
year.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
No fees were billed by Ernst & Young LLP for professional services
rendered to the Company relating to financial information systems design and
implementation during the fiscal year ended December 31, 2002.
OTHER FEES
Ernst & Young LLP billed the Company $93,000 for all other professional
services rendered during 2002. These fees related to services rendered in
connection with the preparation of income tax returns, an audit of Lexington
Rubber Group, Inc., a wholly-owned subsidiary of the Company, an audit of the
Company's Retirement and Savings Plan (a 401(k) plan), and other miscellaneous
services.
Stockholders are asked to approve the action of the Board of Directors
in appointing Ernst & Young LLP. It is intended that, unless any proxy is marked
to the contrary, the shares represented by such proxy shall be voted for the
ratification of such appointment. It is expected that a representative of Ernst
& Young LLP will be present at the Annual Meeting to answer questions of
stockholders and will have the opportunity, if desired, to make a statement.
The Board of Directors recommends that shareholders vote "FOR" such
ratification.
STOCKHOLDER PROPOSALS
Proposals by stockholders intended to be presented at the next annual
meeting (to be held in 2004) must be received by the Secretary of the Company on
or before December 1, 2003, in order to be included in the proxy statement and
the proxy for that meeting. Proposals should be directed to the Secretary,
Lexington Precision Corporation, 767 Third Avenue, New York, NY 10017, and must
comply with the applicable requirements of the federal securities laws and the
Company's Bylaws.
OTHER MATTERS
Management does not know of any other matters that are likely to be
brought before the Annual Meeting. However, in the event that any other matters
properly come before the Annual Meeting, the persons named in the enclosed proxy
will vote in accordance with their judgment on such matters.
A copy of the Company's Annual Report on Form 10-K for the year ended
December 31, 2002, which includes financial statements and related data,
accompanies this Proxy Statement.
According to SEC rules, the information presented in this Proxy
Statement under the captions "Audit Committee Report," "Compensation Committee
Report on Executive Compensation" and "Stock Price Performance" will not be
deemed to be "soliciting material" or to be filed with the SEC under the
Securities Act of 1933 or the Securities Exchange Act of 1934, and nothing
contained in any previous
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filings made by the Company under such Acts shall be interpreted as
incorporating by reference the information presented under the specified
captions.
By Order of the Board of Directors,
Kenneth I. Greenstein
Secretary
Dated: April 18, 2003
New York, New York
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LEXINGTON PRECISION CORPORATION
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HOLDER ACCOUNT NUMBER
C 1234567890 J N T
MR A SAMPLE
DESIGNATION (IF ANY)
ADD 1
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[ ] Mark this box with an X if
you have made changes to
your name or address
details above.
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ANNUAL MEETING PROXY CARD
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1. Election of Directors
The Board of Directors recommends a vote FOR the listed nominees.
FOR WITHHOLD FOR WITHHOLD
01 - William B. Conner [ ] [ ] 05 - Joseph A. Pardo [ ] [ ]
FOR WITHHOLD FOR WITHHOLD
02 - Warren Delano [ ] [ ] 04 - Michael A. Lubin [ ] [ ]
FOR WITHHOLD FOR WITHHOLD
03 - Kenneth Greenstein [ ] [ ] 06 - Elizabeth H. Ruml [ ] [ ]
The Board of Directors recommends a vote FOR the following proposal.
FOR AGAINST ABSTAIN
2. Ratification of the appointment of Ernst & Young LLP [ ] [ ] [ ]
as the Company's independent auditors.
3. Proxies may vote on such other matters as may properly come before the
meeting and any adjournments thereof.
AUTHORIZED SIGNATURES - SIGN HERE - THIS SECTION MUST BE COMPLETED FOR YOUR
INSTRUCTIONS TO BE EXECUTED.
NOTE: Please sign your name(s) EXACTLY as your name(s) appear(s) on this proxy.
All joint holders must sign. When signing as attorney, trustee, executor,
administrator, guardian or corporate officer, please provide your FULL title.
Signature 1 - Please keep signature within the box Signature 2 - Please keep signature within the box Date (mm/dd/yyyy)
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1 U P X HHH P P P P 001795
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PROXY - LEXINGTON PRECISION CORPORATION
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767 THIRD AVENUE, NEW YORK, NEW YORK 10017
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY FOR ANNUAL
MEETING OF STOCKHOLDERS ON MAY 20, 2003
The undersigned hereby appoints as Proxies, each of WARREN DELANO and DENNIS J.
WELHOUSE, each with full power to appoint his substitute, and hereby authorizes
them to represent and vote, as designated below, all shares of capital stock of
Lexington Precision Corporation held of record by the undersigned on April 10,
2003, at the Annual Meeting of Stockholders to be held on May 20, 2003, and any
adjournments thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED. YOU ARE ENCOURAGED
TO SPECIFY YOUR CHOICE BY MARKING THE APPROPRIATE BOXES ON THE REVERSE SIDE OF
THIS CARD, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE
WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. IF NO DIRECTION IS GIVEN WITH
RESPECT TO A PARTICULAR PROPOSAL, THIS PROXY WILL BE VOTED FOR SUCH PROPOSAL.
THE PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY CARD PROMPTLY, USING THE ENCLOSED
ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES OF AMERICA.
009TBD