UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENTS
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
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by Rule 14a-6(e)(2))
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LEXINGTON PRECISION CORPORATION
(Name of Registrant as Specified in Its Charter)
-------------------------------------------------------
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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 18, 2004
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 18, 2004, 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, 2004; 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 8,
2004, 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,
Dennis J. Welhouse
Secretary
April 20, 2004
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 18, 2004
This Proxy Statement is being mailed to stockholders on or about
April 22, 2004, 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 18, 2004 (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, 2003, 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 8, 2004, are entitled to notice of, and to vote at, the Annual
Meeting and any adjournments thereof. As of the record date, there were
outstanding 4,931,767 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 2005 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 71 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 53 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 74 Secretary of the Company from September 1979 to April 2004.
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.
Michael A. Lubin 54 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.
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Joseph A. Pardo 70 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 51 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 seven times during 2003. Each director
attended at least 75% of the 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 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 five times during 2003. Its primary purpose is to
review the financial information 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 Board of Directors has determined that each
member of the Audit Committee is independent, as defined by the rules of the
National Association of Securities Dealers ("NASD"). In addition, the Board of
Directors has determined that Joseph A. Pardo is qualified to serve as the
"audit committee financial expert" of the Company as defined in Item 401(h) of
SEC Regulation S-K.
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The Compensation Committee, which is comprised of two non-employee
members of the Board of Directors, met once during 2003. 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.
The Board of Directors does not have a standing nominating committee.
The Board of Directors has determined that is appropriate not to have a
nominating committee because of the relatively small size of the Company and the
Board of Directors. The Board of Directors considers recommendations for
director nominees from directors and members of management. The Board of
Directors is also willing to consider stockholder recommendations for director
nominees that are properly received in accordance with all applicable rules and
regulations although no such recommendations have ever been received. The Board
of Directors evaluates a prospective nominee on the basis of his or her
qualifications.
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.
The Company does not have a formal process in place for its
stockholders to communicate with its Board of Directors but is receptive to
communications from its stockholders, which may be made by writing to Michael A.
Lubin, Chairman of the Board, Lexington Precision Corporation, 767 Third Avenue,
New York, NY 10017. For each of the past five years, the Company has scheduled a
meeting of the Board of Directors immediately following the Annual Meeting and
all of the directors have attended each of such Annual Meetings.
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 54
Warren Delano President and Director 53
Dennis J. Welhouse Senior Vice President, Chief Financial 55
Officer, and Secretary
James R. Bower Treasurer 39
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.
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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.
CODE OF ETHICS
The Company has adopted a Code of Ethics that applies to its
co-principal executive officers and key financial and accounting personnel. The
Company will furnish free of charge, upon written request to the President,
Lexington Precision Corporation, 767 Third Avenue, New York, NY 10017, a paper
copy of the Code of Ethics.
SECURITY OWNERSHIP
The following table sets forth the beneficial ownership of the
Company's Common Stock, as of April 8, 2004, 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. The
business address of each officer, director, or stockholder listed below is c/o
Lexington Precision Corporation, 767 Third Avenue, New York, NY 10017.
SHARES OF COMMON STOCK PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED (1) CLASS OWNED
- ------------------------ ---------------------- -----------
Michael A. Lubin 1,612,341 (2) 32.7%
Warren Delano 1,393,487 (3) 28.3
William B. Conner 314,506 (4) 6.4
Dennis J. Welhouse 90,842 (5) 1.8
Kenneth I. Greenstein 35,636 (6) *
Joseph A. Pardo 36,205 *
James R. Bower - -
Elizabeth H. Ruml - -
Directors and executive
officers as a group (8
persons) 3,393,955 (7) 68.8
* 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.
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(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 238,194 shares owned by Conner Holding Company, a Nevada
corporation, of which Mr. Conner is president, a director, and majority
stockholder.
(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.
(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 has determined that William B.
Conner was late in filing one Form 4 with respect to two transactions that
occurred on November 24, 2003.
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 $100,000.
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
----------------------- --------------
RESTRICTED ALL OTHER
NAME AND POSITION FISCAL YEAR SALARY($) BONUS($) STOCK AWARD($) COMPENSATION($)
- -------------------------- ----------- ------------ -------- -------------- ---------------
Michael A. Lubin 2003 267,550 (1) - - -
Chairman of the Board 2002 267,750 (1) - - -
(Co-Principal Executive 2001 263,500 (1) - - -
Officer)
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Warren Delano 2003 267,900 (2) - - -
President and Director 2002 267,750 (2) - - -
(Co-Principal Executive 2001 263,500 (2) - - -
Officer)
Dennis J. Welhouse 2003 155,000 75,000 - 5,655 (4)
Senior Vice President 2002 148,500 - - 5,100 (4)
Chief Financial Officer 2001 148,500 - - 5,474 (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 2003, 2002,
and 2001, 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 2003, 2002,
and 2001, for services rendered as an executive officer of the Company
and (b) 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) Includes (a) Company contributions of $4,650, $4,455, and $4,471, made
to Mr. Welhouse's account under the Company's 401(k) Plan in 2003,
2002, and 2001, respectively, (b) insurance premiums of $942, $477, and
$477 paid by the Company in 2003, 2002, and 2001, respectively, for
term life insurance owned by Mr. Welhouse, and (c) imputed interest of
$63, $168, and $526 in 2003, 2002, and 2001, 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 2003, 2002, or 2001.
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
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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 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. The Company from time to time awards cash bonuses
to key employees who have provided unusual service to the Company. In 2003, Mr.
Welhouse received such an award in the amount of $75,000.
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 2003, 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 2003 and no additional compensation for services provided in connection
with acquisitions, divestitures, financings, or similar transactions during
2003.
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 2003 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
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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 Section
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, 2003, 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. The Audit Charter
Committee is attached as Appendix A to this Proxy Statement. 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
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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
[COMPARISON CHART]
CHART DATA:
Lexington Precision Corporation S&P 500 Index NASDAQ Composite Index
"1998" 100 100 100
"1999" 79.17 119.53 185.59
"2000" 52.67 107.41 112.67
"2001" 20.67 93.4 88.95
"2002" 35.33 71.57 60.91
"2003" 53.33 90.46 91.37
YEAR ENDED DECEMBER 31
At December 31, 1998, 1999, 2000, 2001, 2002, and 2003, the last trade
listed on the OTC Bulletin Board, provided by the National Association of
Securities Dealers, was $1.50, $1.1875, $0.79, $0.31, $0.53, and $0.80 per
share, respectively. The Company believes that eleven brokerage firms currently
make a market in the Company's Common Stock, although both bid and asked
quotations may be limited.
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CERTAIN RELATIONSHIPS AND TRANSACTIONS
Warren Delano and Michael A. Lubin beneficially own 28.3% and 32.7%,
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 2003, 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 2003 and no additional
compensation for services provided in connection with acquisitions,
divestitures, financings, or similar transactions during 2003.
In connection with the Company's refinancing of substantially all of
its debt completed on December 18, 2003, Messrs. Delano and Lubin and their
associates and affiliates exchanged 12-3/4% Senior Subordinated Notes held by
them for units consisting of 12% Senior Subordinated Notes due August 1, 2009
and warrants to purchase Common Stock, and exchanged 14% Junior Subordinated
Notes held by them and interest accrued thereon for 13% Junior Subordinated
Notes due November 1, 2009, warrants to purchase common stock, and 103,731
shares of Common Stock. Messrs. Delano and Lubin and their affiliates and
associates are holders of units consisting of $2,558,000 aggregate principal
amount of the 12% Senior Subordinated Notes, and 25,580 warrants to purchase
Common Stock, and of units consisting of $347,000 aggregate principal amount of
the 13% Junior Subordinated Notes, and 3,467 warrants to purchase Common Stock.
Each of the warrants entitles the holder to purchase one share of Common Stock
at a price of $3.50 per share at any time during the period September 1, 2005,
through July 31, 2009.
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, 2004. Ernst &
Young LLP has been employed by the Company as its independent auditor since the
fiscal year ended May 31, 1989. Set forth below is a breakdown of the fees
billed to the Company by Ernst & Young LLP for the twelve-month periods ended
December 31, 2003 and 2002:
2003 2002
------------- -------------
Audit Fees $ 199,000 $ 187,020
Audit Related Fees - 824
Tax Fees 31,605(a) 26,850(c)
All Other Fees 52,853(b) 81,177(d)
---------- ----------
$ 283,458 $ 295,871
========== ==========
(a) Assistance with the preparation of federal and state income
tax returns and refund of alternative minimum taxes.
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(b) Comprised of (i) review of compliance with Sarbanes-Oxley Act
of 2002 ($27,780), (ii) audit of Lexington Rubber Group, Inc.,
a wholly-owned subsidiary of Lexington Precision Corporation
($18,173), and (iii) audit of the Lexington Precision
Corporation Retirement & Savings Plan ($6,900).
(c) Comprised of (i) assistance with the preparation of federal
and state income tax returns ($21,850) and (ii) specialized
tax consulting ($5,000).
(d) Comprised of (i) audit of Lexington Rubber Group, Inc.
($43,088), (ii) assistance with specialized accounting issues,
including Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets," ($31,489), and (iii)
audit of the Lexington Precision Corporation Retirement &
Savings Plan ($6,600).
AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES
The Audit Committee adopted a pre-approval policy in 2003 pursuant to
which the Audit Committee pre-approves each non-audit engagement or service
performed by the Company's independent auditor. Prior to pre-approving any such
non-audit engagement or service, it is the Committee's practice to first gather
information regarding the engagement or requested service that explains the
specific engagement or service and enables the Committee to make a well-reasoned
assessment of the impact of the engagement or service on the auditor's
independence. In addition, the Audit Committee may authorize the executive
officers of the Company to incur fees for non-audit services without the
specific approval of the Committee, provided that the fees for such services do
not exceed $15,000. As required by the Sarbanes-Oxley Act of 2002, the Audit
Committee pre-approved all non-audit engagements for services provided by our
independent auditor after May 6, 2003.
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 2005) must be received by the Secretary of the Company on
or before December 1, 2004, 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.
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A copy of the Company's Annual Report on Form 10-K for the year ended
December 31, 2003, 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 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,
Dennis J. Welhouse
Secretary
Dated: April 20, 2004
New York, New York
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APPENDIX A
AUDIT COMMITTEE CHARTER
1. THE COMMITTEE. The Audit Committee is a committee of the Board of
Directors of Lexington Precision Corporation.
2. PURPOSE. The primary purpose of the Audit Committee is to review the
financial information that will be provided to the stockholders and
others, to oversee the system of internal financial controls, and to
monitor the independent audit process.
3. MEMBERSHIP. The membership of the Audit Committee will consist of at
least two independent members of the Board of Directors as defined in
Rule 4200 (a) of the National Association of Securities Dealers'
listing standards. The members of the Audit Committee and its chairman
will be selected by the full Board of Directors.
4. COMMUNICATION. The Audit Committee is expected to facilitate
communication between and among, the independent auditors, the
management of the Company, and the Board of Directors.
5. QUALIFICATIONS OF MEMBERS. Each member of the Audit Committee will be
able to read and understand fundamental financial statements, including
the Company's balance sheet, income statement, and cash flow statement.
At least one member of the Audit Committee will have past employment
experience in finance or accounting, professional certification in
accounting, or other comparable experience, including being or having
been a chief executive officer, chief financial officer, or other
senior officer with financial oversight responsibilities.
6. MEETINGS. Members of the Audit Committee may participate in meetings by
teleconference at which all participants can be heard at all times. The
Audit Committee may ask members of management or others to attend Audit
Committee meetings and provide pertinent information as necessary.
7. REPORTING. The Audit Committee will report on its activities to the
Board of Directors and will make recommendations to the Board of
Directors. The Audit Committee will submit a written report, to be
included in the Company's proxy statement.
8. SELECTION OF INDEPENDENT AUDITORS. The Audit Committee will recommend
to the Board of Directors the independent auditors to be nominated,
approve the fees of the independent auditors, and review and approve
the work of the independent auditors. The independent auditors will
have ultimate accountability to the Company's Board of Directors. If
appropriate, the Audit Committee will recommend to the Board of
Directors the replacement of the independent auditors.
9. CONFIRMATION OF INDEPENDENCE OF AUDITORS. The Audit Committee will
confirm and assure the independence of the independent auditors,
including a review of management consulting services provided by the
independent auditors and related fees. The Audit Committee will cause
the independent auditors to deliver, at least annually, a written
statement delineating all relationships between the independent
auditors and the Company. The Audit Committee will require that the
statement satisfy applicable legal, regulatory, stock exchange, and
accounting and auditing statements and requirements, including
Independence Standards Board Standard No. 1. The Audit Committee will
engage actively in communications with the independent auditors about
any disclosed relationships or services that may affect the independent
auditors' objectivity and independence, and
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will take, or recommend that the Board of Directors take, appropriate
action to oversee the independence of the independent auditors.
10. SCOPE OF AUDIT. The Audit Committee will, in consultation with the
independent auditors, consider the audit scope and plan of the
independent auditors and coordinate with the independent auditors an
audit effort to assure adequate coverage, reduction of redundant
efforts, and the effective use of audit resources. The Audit Committee
will consider and review with management and the independent auditors
any difficulties encountered in the course of the independent auditors'
audits, including any restrictions on the scope of the independent
auditors' work or access to required information, and any changes
required in the planned scope of their audit plan.
11. ANNUAL FINANCIALS. The Audit Committee will review with management and
the independent auditors, at the completion of the annual audit, the
Company's annual financial statements and related footnotes, the
independent auditors' audit of the financial statements and their
report thereon, their letter to management, any significant changes
required in the independent auditors' audit plan, any difficulties or
disputes with management encountered during the course of the audit,
and any other matters related to the conduct of the audit that are to
be communicated to the Audit Committee under generally accepted
auditing standards.
12. QUARTERLY FINANCIALS. The Audit Committee will ensure that the
independent auditors shall have conducted, in compliance with
applicable law, regulations of the Securities and Exchange Commission,
stock exchange rules, and applicable professional standards and
procedures, a pre-filing review of the Company's quarterly financial
statements included in the Company's quarterly reports on Form 10-Q.
13. REVIEW OF OTHER MATTERS. The Audit Committee will review with the
independent auditors any matters that the independent auditors believe
they are required to report to the Board of Directors pursuant to the
Private Securities Litigation Reform Act of 1995. Furthermore, the
Audit Committee will investigate any such matters and advise the Board
of Directors of appropriate remedial action to be undertaken and
thereafter confirm the completion of any such action. The Audit
Committee will also discuss with the independent auditors any matters
that are required to be discussed pursuant to "Statement on Auditing
Standards No. 61."
14. INTERNAL CONTROLS. The Audit Committee will review with the independent
auditors the adequacy of the Company's internal controls and
procedures, including computerized information system controls and
security, as well as any related significant findings and
recommendations of the independent auditors together with management's
responses thereto. Each year, the Audit Committee will review with
management and the independent auditors the company's internal auditing
activities and any auditing services performed by the independent
auditors.
15. ANALYSIS OF RISK. The Audit Committee will inquire of management and
the independent auditors about significant risks or exposures to which
the Company is exposed and assess the steps management has taken to
minimize such risks to the Company.
16. IMPACT OF LAWS AND REGULATIONS. The Audit Committee will review, at its
regular meetings, any legal and regulatory matters that may have a
material impact on the financial statements.
17. REVIEW OF OFFICERS' EXPENSES. If requested by the Board of Directors,
the Audit Committee will review policies and procedures with respect to
officers' expense accounts and perquisites, including their use of
corporate assets.
- 15 -
18. INVESTIGATIVE POWER. The Audit Committee will have the power to conduct
or authorize reviews and investigations when carrying out its
responsibilities. Investigations relating to the Company's financial
reporting and internal control, and audit processes may also be
undertaken to ensure compliance by the Company with applicable state
and federal laws, regulations of the Securities and Exchange
Commission, rules of the National Association of Securities Dealers and
any stock market exchange on which the Company's stock trades. The
Audit Committee will have unrestricted access to the Company's
personnel and documents and will be given the resources reasonably
required to fulfill its responsibilities.
19. REVIEW OF CHARTER. The Audit Committee will review and reassess its
charter at least annually and obtain the approval of the Board of
Directors for any changes to the charter. The duties and
responsibilities of a member of the Audit Committee are in addition to
those duties set out for a member of the Board of Directors.
September 20, 2000
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PROXY - LEXINGTON PRECISION CORPORATION
767 THIRD AVENUE, NEW YORK, NEW YORK 10017
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
FOR THE ANNUAL MEETING OF STOCKHOLDERS ON MAY 18, 2004
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 to vote, as designated below, all shares of capital stock
of Lexington Precision Corporation held of record by the undersigned on April 8,
2004, at the Annual Meeting of Stockholders to be held on May 18, 2004, 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.
000000 0000000000 0 0000
LEXINGTON PRECISION CORPORATION
000000000.000 ext
000000000.000 ext
000000000.000 ext
MR A SAMPLE 000000000.000 ext
DESIGNATION (IF ANY) 000000000.000 ext
ADD 1 000000000.000 ext
ADD 2 000000000.000 ext
ADD 3
ADD 4
ADD 5
ADD 6 C 1234567890 J N T
[BAR CODE] [BAR CODE]
[_] Mark this box with an X if you have made
changes to your name or address details
above.
ANNUAL MEETING PROXY CARD
A ELECTION OF DIRECTORS
1. The Board of Directors recommends a vote FOR the listed nominees.
FOR WITHHOLD FOR WITHHOLD
01 - William B. Conner [_] [_] 04 - Michael A. Lubin [_] [_]
FOR WITHHOLD FOR WITHHOLD
02 - Warren Delano [_] [_] 05 - Joseph A. Pardo [_] [_]
FOR WITHHOLD FOR WITHHOLD
03 - Kenneth I. Greenstein [_] [_] 06 - Elizabeth H. Ruml [_] [_]
B ISSUES
The Board of Directors recommends a vote FOR the following proposal.
2. Ratify the appointment of Ernst & Young LLP FOR AGAINST ABSTAIN
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.
C 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 box Date (mm/dd/yyyy)
[________________________________________________] [____________________________________________] [_][ ]/[_][_]/[_][_][_][_]