ITEM 1. BUSINESS
GENERAL
The Lehigh Group Inc., a Delaware corporation (formerly The LVI Group Inc.) (the "Company"), through its wholly owned subsidiary, HallMark Electrical Supplies Corp. ("HallMark"), is engaged in the distribution of electrical supplies for the construction industry both domestically (primarily in the New York Metropolitan area) and for export.
Prior to 1994, the Company, through its wholly owned subsidiaries, had been engaged in the following other businesses: (i) through certain of its operating subsidiaries ("NICO Construction"), interior construction; (ii) through its wholly owned subsidiary, LVI Environmental Services Group Inc. ("LVI Environmental") and subsidiaries thereof, asbestos abatement; (iii) through Riverside Mfg., Inc. ("Riverside"), the design, production and sale of electrical products; (iv) through Mobile Pulley and Machine Works, Inc. ("Mobile Pulley"), the manufacture and sale of dredging equipment and precision machined castings; and (v) through LVI Energy Recovery Corporation ("LVI Energy"), energy recovery and power generation and landfill closure services. All of such other businesses were transferred or sold prior to 1994.
Riverside and Mobile Pulley were transferred to a liquidating trust in connection with the Company's financial restructuring of its outstanding debt and preferred stock on March 15, 1991 (the "1991 Restructuring"). During the third quarter of 1991, the Company discontinued its interior construction business operated through its NICO Construction subsidiaries due to the general economic slowdown, particularly as it related to the real estate market. In the third quarter of 1990, the Company discontinued its LVI Energy business which was prompted by technical problems at the LVI Energy power plant facility. Both the NICO Construction and LVI Energy subsidiaries were sold on December 31, 1991.
The Company consummated a restructuring on May 5, 1993 (the "1993 Restructuring"). Pursuant to the 1993 Restructuring, the Company, through NICO Inc., a wholly owned subsidiary ("NICO"), sold LVI Environmental to LVI Holding Corporation ("LVI Holding"), a newly formed company organized by the management of LVI Environmental, which had a minority interest in LVI Holding. The owners of LVI Holding were certain holders of the 9.5% Class A Senior Secured Redeemable Notes due March 15, 1997 and the 8% Class B Senior Secured Redeemable Notes due March 15, 1999 issued by NICO and guaranteed by the Company (the "Class A Notes" and "Class B Notes," respectively) and members of the management of LVI Environmental. As a result of the 1993 Restructuring, 100% of the Class A Notes and over 97% of the Class B Notes (together, the "Notes"), of NICO were surrendered to the Company, together with 3,000,000 shares of its Common Stock, par value $.001 per share ("Common Stock") (27% of all Common Stock then outstanding), and, in exchange therefor, participating holders of the Notes acquired, through LVI Holding, all of the stock of LVI Environmental. The Company's consolidated indebtedness was thereby reduced from approximately $45.9 million to approximately $3.6 million (excluding approximately $431,217 of indebtedness under Class B Notes that LVI Holding agreed to pay in connection with the 1993 Restructuring, but for which the Company remains liable). LVI Holding paid $1.5 million to the Company during 1993 and 1994 in connection with the 1993 Restructuring to fund operating expenses and working capital requirements.
On October 29, 1996, the Company and First Medical Corporation ("FMC") entered into a Merger Agreement. Under the terms of the Merger Agreement, each share of the FMC Common Stock would be exchanged for (i) 1,033.925 shares of Lehigh Common Stock and (ii) 95.1211 shares of Lehigh Preferred Stock. Each share of Lehigh Preferred Stock will be convertible into 250 shares of Lehigh Common Stock and will have a like number of votes per share, voting together with the Lehigh Common Stock. Currently, there are outstanding 10,000 shares of FMC Common Stock. As a result of these actions, immediately following the Merger, current Lehigh stockholders and FMC stockholders will each own 50% of the issued and outstanding shares of Lehigh Common Stock. In the event that all of the shares of Lehigh Preferred Stock issued to the FMC stockholders are converted into Lehigh Common Stock, current Lehigh stockholders will own approximately 4% and FMC stockholders will own approximately 96% of the issued
and outstanding shares of Lehigh Common Stock. In addition, under the terms of the Merger Agreement Lehigh will be renamed "First Medical Group, Inc.". Following the Merger, Mr. Sokol, Chief Executive Officer of FMC, will become Chairman and Chief Executive Officer of the combined company, Mr. Zizza will become Executive Vice President and Treasurer and Mr. Bruno will continue as Vice President and Secretary. However, there can be no assurance at this time that the Company will be able to consummate this transaction.
The Company was incorporated under the laws of the State of Delaware in 1928. The Company's principal executive offices are located at 810 Seventh Avenue, New York, NY 10019 and its telephone number at that address is (212) 333-2620.
ELECTRICAL SUPPLIES
HallMark was acquired by the Company in December 1988. HallMark's sales include electrical conduit, armored cable, switches, outlets, fittings, panels and wire which are purchased by HallMark from electrical equipment manufacturers in the United States. Approximately 70% of HallMark's sales are domestic and 30% are export.
Domestic sales are made by HallMark employees. Nine customers accounted for approximately 74%, 61% and 72% (including one customer which accounted for approximately 21%, 25% and 18%) of HallMark's total domestic sales in 1996, 1995 and 1994, respectively. The loss of any of these customers could have a material adverse effect on its business. Export sales are made by sales agents retained by HallMark. Distribution is made in approximately 26 countries.
Management believes that many companies (certain of which are substantially larger and have greater financial resources than HallMark) are in competition with HallMark. Management believes that the primary factors for effective competition between HallMark with its competitors are price, in-stock merchandise and a reliable delivery service. As a result, orders for merchandise are received daily and shipped daily; hence, backlog is insignificant.
Management believes that HallMark is generally in compliance with applicable governmental regulations and that these regulations have not had and will not have a material adverse effect on its business or financial condition.
EMPLOYEES
As of March 1, 1997, the Company had 3 employees and HallMark had 35. Approximately 85% of such employees are compensated on an hourly basis.
The Company and HallMark comply with prevailing local contracts in the respective geographic locations of particular jobs with respect to wages, fringe benefits and working conditions. Most employees of HallMark are unionized. The current collective bargaining agreement for HallMark, which is with the International Brotherhood of Electrical Workers, Local Union #3, expires on April 30, 1999.
ITEM 2.

ITEM 2. PROPERTIES
The Company subleases approximately 300 square feet of space on the 27th floor of 810 Seventh Ave., New York, NY 10019 pursuant to a month-to-month lease at a monthly rental of $2,500 per month. HallMark leases 28,250 square feet of office and warehouse facilities in Brooklyn, New York, pursuant to a lease expiring on June 30, 2004, at an annual rental of approximately $78,000 (which progressively escalates to $106,000 in 2003). In December 1994, HallMark leased 4,500 square feet of additional warehouse facilities
in Brooklyn, New York, pursuant to a lease expiring on June 30, 2004, at an annual rental of $18,000 (which progressively escalates to $21,600).
The Company believes that all of its facilities are adequate for the business in which it is engaged.
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS
The State of Maine and Bureau of Labor Standards commenced an action in Maine Superior Court on or about November 29, 1990 against the Company and Dori Shoe Company (an indirect former subsidiary) to recover severance pay under Maine's plant closing law. The case was tried without a jury in December 1994. Under that law, an "employer" who shuts down a large factory is liable to the employees for severance pay at the rate of one week's pay for each year of employment. Although the law did not apply to the Company when the Dori Shoe plant was closed it was amended so as to arguably apply to the Company retroactively. In a prior case brought against the Company (then known as Lehigh Valley Industries) and its former subsidiary under the Maine severance pay statute prior to its amendment, the Company was successful against the State of Maine (see CURTIS V. LOREE FOOTWEAR AND LEHIGH VALLEY INDUSTRIES, 516 A. 2d 558 (Me. 1986).
The Superior Court by decision docketed April 10, 1995 entered judgement in favor of the former employees of Dori Shoe Company against Dori Shoe and the Company in the amount of $260,969.11 plus prejudgment interest and reasonable attorneys' fees and costs to the Plaintiff upon their application pursuant to Maine Rules of Civil Procedure 54(b) (3) (d). The Company filed a timely appeal appealing that decision and the matter was argued before the Maine Supreme Judicial Court on December 7, 1995. Prejudgment interest will accrue at an annual rate of approximately $20,800 from November 29, 1990.
On February 18, 1997, the Supreme Judicial Court of Maine affirmed the Superior Court's decision. The Company is currently considering an appeal to the United States Supreme Court. Approximately $350,000 has been accrued by the Company relating to this judgment.
The Company is involved in other minor litigation, none of which is considered by management to be material to its business or, if adversely determined, would have a material adverse effect on the Company's financial condition.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
N/A.
PART II
ITEM 5.

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Common Stock is listed on the New York Stock Exchange. The Company did not pay cash dividends on the Common Stock during 1996, 1995 or 1994 and has no intention of paying cash dividends on the Common Stock in the foreseeable future. On March 3, 1997, there were approximately 7,791 holders of record of the Common Stock (excluding shares held in "nominee" or "street" name).
The following table sets forth the reported high and low closing sales prices of the Common Stock on the Composite Tape for the quarters indicated.
High Low ---- ---
1995:
First Quarter $ 3/4 $ 5/8 Second Quarter 5/8 3/8 Third Quarter 1/2 3/8 Fourth Quarter 33/64 13/64
1996:
First Quarter $ 11/16 $ 7/16 Second Quarter 9/16 3/8 Third Quarter 11/16 1/4 Fourth Quarter 15/32 1/8
1997:
First Quarter (through March 3, 1997) $ 3/8 $ 1/4
ITEM 6.

ITEM 6. SELECTED FINANCIAL DATA
THE LEHIGH GROUP INC. & SUBSIDIARIES Selected Financial Information (in Thousands, Except For Per Share Data)
(A) Includes long term debt, current maturities of long term debt and Note payable - bank.
ITEM 7.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
1996 IN COMPARISON WITH 1995
Revenues earned for 1996 were $10.4 million, a decrease of $1.7 million or 14% compared with 1995. Most of the decrease in sales occurred in the HallMark export operation due in part to the departure of certain clients of HallMark that resulted when certain clients of HallMark decided to purchase supplies directly from the manufacturers instead of through HallMark and also the departure of a member of HallMark's sales force in the export sector and the departure of certain clients that have been obtained by such person. In June, 1996, the person in charge of HallMark's export operation in Miami and another employee were terminated. On October 31, 1996, HallMark sold its export operation in Miami. Management does not believe the closure of the Miami export operation will have a material adverse effect on the Company. HallMark may continue its export operation from its home office in New York.
Gross profit as a percentage of revenues increased from 29% in 1995 to 32% in 1996. The increase was attributable to higher profit margins in the domestic operations. Selling, general and administrative expenses for 1996 decreased by approximately $121,000, or 3%, compared with 1995. The decrease was primarily a result of the closing of HallMark's export operation in Miami.
The net result of the factors discussed above resulted in an operating loss of $562,000 in 1996 compared to $517,000 in 1995.
Interest expense increased by $38,000 to $471,000 in 1996 from $433,000 in 1995. The increase in interest expense was due primarily to an increase in outstanding borrowings during 1996.
There was no federal income tax for 1996, due to the Company's operating loss.
On December 31, 1991, the Company sold its right, title and interest in the stock of the various subsidiaries which made up its discontinued interior construction and energy recovery business segments subject to existing security interests. The excess of liabilities over assets of subsidiaries sold amounted to approximately $9.6 million. Since 1991, the Company has reduced this deferred credit (the reduction is shown as income from discontinued operations) due to the successful resolution of the majority of the liabilities for amounts significantly less than was originally recorded. The deferred credits were reduced as follows: 1996 - $250,000, 1995 - $250,000, 1994 - $5,000,000, 1993 - $1,760,000, 1992 - $2,376,000.
1995 IN COMPARISON WITH 1994
Revenues earned for 1995 were $12.1 million, a decrease of $.1 million or 1% compared with 1994. A slight increase in the Company's domestic sales was more than offset by a decrease in export sales. As to the export business, the Company has been unable to fully replace those sales lost due to the departure of one of its key sales people approximately three years ago. Gross profit as a percentage of revenues decreased from 30% in 1994 to 29% in 1995. The slight decrease was again attributable to weakened margins in export. Selling, general and administrative expenses for 1995 decreased by approximately $200,000, or 5%, compared with 1994. The reduction was primarily a result of decreased sales and certain cost cutting initiatives instituted by the Company during 1995.
The net result of the factors discussed above resulted in no change in operating loss in 1995 compared to 1994.
Interest expense increased by $35,000 to $433,000 in 1995 from $398,000 in 1994. A decrease in interest expense due to the continued reductions of long term debt was more than offset by an increase in interest rates.
There was no federal income tax for 1995, due to the Company's operating loss.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal capital requirements have been to fund working capital needs, capital expenditures and the payment of long term debt. The Company has recently relied primarily on internally generated funds, private placement proceeds and loans to finance its operation.
Net cash used in operating activities was $139,000, $267,000, and $160,000 in 1996, 1995 and 1994, respectively. The change from 1994 and 1995 was primarily due to the net loss after the addback of the deferred credit income only being partially offset by a decrease in receivables and an increase in accrued expenses. The change from 1995 to 1996 was primarily due to the net loss after the add back of the deferred credit income and the gain on extinguishment of debt being partially offset by a decrease in accounts receivable and inventory and an increase in accrued expenses.
Net cash used in investing activities was $13,000, $21,000, and $39,000 in 1996, 1995 and 1994, respectively. Due to the amount of cash used in operating activities, the Company has expended very little with respect to property and equipment.
Net cash provided by (used in) financing activities was $276,000, $(290,000), and $656,000 in 1996, 1995 and 1994, respectively. The change from 1994 to 1995 was primarily due to the fact that in 1995 the Company did not receive any outside funds whereas in 1994 it did. The Company was unable to borrow from its bank under a previous credit agreement. The change from 1995 to 1996 was primarily due to the loan from First Medical Corporation and a decrease in the amount of capital lease payments and decrease in loan payments to Banca Nazionale del Lavoro, SPA.
On August 22, 1994, pursuant to a private placement, the Company sold 2,575,000 shares of Common Stock at an aggregate purchase price of $1,030,000 ($.40 per share). On November 18, 1994, the Company sold an additional 106,250 shares of Common Stock at an aggregate price of $42,500 ($.40 per share) pursuant to such private placement.
On June 11, 1996, the Company and DHB Capital Group Inc. ("DHB") executed a letter of intent providing for the merger of DHB with a subsidiary of the Company (which resulted in the execution of a definitive merger agreement on July 8, 1996). Concurrent with the execution of the letter of intent, DHB made a loan to the Company in the amount of $300,000 pursuant to the terms of a Debenture. The Debenture includes interest at the rate of two percent (2%) per annum over the prime lending rate of Chase Manhattan Bank, N.A. payable monthly, commencing on the 1st day of each subsequent month next ensuing through and including June 1, 1998 when the entire principal balance plus all accrued interest is due and payable.
The proceeds of the loan from DHB were used to satisfy the loan the Company previously obtained from Macrocom Investors, LLC on March 28, 1996.
On October 29, 1996 in connection with the execution of a definitive merger agreement between the Company and First Medical Corporation, the Company issued a convertible debenture in the amount of $300,000 plus interest at two (2%) percent per annum over the prime lending rate of Chase Manhattan Bank, N.A. payable on the 1st day of each subsequent month next ensuing through and including 24 months
thereafter. On the 24th month, the outstanding principal balance and all accrued interest shall become due and payable.
The proceeds of the loan from First Medical Corporation were used to satisfy the loan the Company previously obtained from DHB on June 11, 1996. On February 7, 1997, First Medical Corporation elected to convert the debenture in 937,500 shares of the Company's common stock.
The Company continues to be in default in the payment of interest (approximately $628,000 interest was past due as of December 31, 1996) on the $390,000 aggregate principal amount of its 13-1/2% Senior Subordinated Notes due May 15,1998 ("13-1/2% Notes") and 14-7/8% Subordinated Debentures due October 15, 1995 ("14-7/8% Debentures") that remain outstanding and were not surrendered to the Company in connection with its financial restructuring consummated in 1991. The Company has been unable to locate the holders of the 13-1/2% Notes and 14-7/8% Debentures (with the execption of certain of the 14-7/8 Subordinated Debentures which were retired during 1996). The Company does not presently have sufficient funds to repay its outstanding indebtedness under the 13-1/2% Notes and 14-7/8% Debentures.
On November 6, 1996, HallMark paid off its loan with Banca Nazionale del Lavoro, SPA and entered into a three year revolving loan with The CIT Group/Credit Finance, Inc., with maximum borrowings of $5,000,000 subject to a borrowing base formula.
IMPACT OF INFLATION
Inflation has not had a significant impact on the Company's operations over the past three years.
ITEM 8.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See pages through and page S-1 of this Form 10-K, which are incorporated herein by reference.
ITEM 9.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
NOT APPLICABLE
PART III
ITEM 10.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following are the directors and executive officers of the Company:
Name Age Position ---- --- --------
Salvatore J. Zizza 51 Chairman of the Board, President, Chief Executive Officer and Director of the Company
Robert A. Bruno 40 Vice President, General Counsel, Secretary and Director of the Company
Richard L. Bready 52 Director of the Company
Charles A. Gargano 61 Director of the Company
Anthony F. L. Amhurst 54 Director of the Company
Salvatore M. Salibello 51 Director of the Company
Joseph Delowery 62 President of HallMark
Mr. Zizza has been a director of the Company since 1985 (except that he did not serve as a director during the period from March 15, 1991 through April 16, 1991) and Chairman of the Board of the Company since April 16, 1991, and was Chief Executive Officer of the Company from April 16, 1991 through August 22, 1991 and President of NICO from 1983 through August 22, 1991. He also served as President of the Company from October 1985 until April 16, 1991. He is also a director of the Gabelli Equity Trust, Inc.; The Gabelli Asset Fund; The Gabelli Growth Fund; The Gabelli Convertible Securities Funds, Inc. and The Gabelli Global MultiMedia Trust Inc. On December 12, 1995, Mr. Zizza became Chairman of the Board of The Bethlehem Corporation (an American Stock Exchange Company). On November 18, 1992, Mr. Zizza also became Chairman of the Board, President and Treasurer of Initial Acquisition Corp. (a Nasdaq listed Company).
Mr. Bruno has served as Vice President and General Counsel since May 5, 1993 and as Secretary since August 22, 1994. He was appointed to the Board on March 31, 1994. He also has served as General Counsel to NICO and its subsidiaries since June 1983 (except he did not serve as General Counsel to NICO during the period of January 1, 1992 through May 31, 1993).
Mr. Bready has been a director of the Company since May 18, 1994. He has served since 1991 as the Chairman of the Board and Chief Executive Officer of Nortek, Inc. (an NYSE-listed company engaged in the manufacture and marketing of residential, commercial and industrial building products) and since 1979 as its President.
Mr. Charles A. Gargano was elected as a director of the Company on December 20, 1994. He has been an entrepreneur since August 1991 and was the Finance chairman of the New York State Republican Committee in 1994. He served as the United States Ambassador to the Republic of Trinidad and Tobago from August 1988 through August 1991. Currently, Mr. Gargano is Commissioner of the New York State Office of Economic Development and President and Chief Executive Officer of the New York State Urban Development Corporation. Mr. Gargano is also on the board of directors of Alpha Hospitality Corporation and Winners All International, Inc., both Nasdaq-listed companies.
Mr. Anthony F. L. Amhurst was elected as a director of the Company on December 20, 1994. He has been a Senior and Managing Partner of Amhurst Brown Colombotti ( a law firm the principal office of which is in London) and a Solicitor of the Supreme Court of Judicature of England for more than the past five years.
Mr. Salibello was elected as a director of the Company on December 20, 1994. He is the founder and for more than the past five years has been the managing partner of Salibello & Broder, a certified public accounting firm. He is also a director of Nine West Group Inc. (an NYSE-listed company that designs, develops and markets women's footwear).
Mr. Delowery has been the President of HallMark since July 1990. He served as Vice President in charge of sales of HallMark from June 1988 through July 1990.
No family relationship exists between any of the directors and executive officers of the Company.
All directors will serve until the annual meeting of stockholders of the Company to be held in 1997 and until their respective successors are duly elected and qualified or until their earlier death, resignation or removal. Officers are elected annually by the Board and serve at the discretion thereof.
ITEM 11.

ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth a summary of compensation awarded to, earned by or paid to the Chief Executive Officer and the other executive officers of the Company whose total annual salary and bonus exceeded $100,000 for services rendered in all capacities to the Company during each of the years ended December 31, 1996, December 31, 1995 and December 31, 1994:
SUMMARY COMPENSATION TABLE
* Mr. Bruno's compensation for 1994 did not exceed $100,000 and therefore no disclosure was required to be provided for that year.
(1) On August 22, 1994, the Company and Mr. Zizza entered into an employment agreement providing for his employment through December 31, 1999 as President, Chairman of the Board and Chief Executive Officer of the Company at an annual salary of $200,000 (subject to increase, in the discretion of the Board, if the Company acquires one or more new businesses, to a level commensurate with the compensation paid to the top executives of comparable businesses). Pursuant to such agreement, if the Company acquires any business with annual revenues in the year immediately prior to such acquisition of at least $25 million (an "Acquired Business"), Mr. Zizza will be entitled to a bonus for each year of his employment following such acquisition (including the portion of the year immediately following such acquisition), in an amount equal to one-half of (i) 10% of the first $1,000,000 of all Acquired Business Pre-Tax Income (as hereinafter defined) for such year (or portion thereof), PLUS (ii) 9% of all Acquired Business Pre-Tax Income for such year (or portion thereof) above $1,000,000 up to but not exceeding $2,000,000, PLUS (iii) 8% of all Acquired Business Pre-Tax Income for such year (or portion thereof) above $2,000,000 up to but not exceeding $3,000,000, PLUS (iv) 7% of all Acquired Business Pre-Tax Income for such year (or portion thereof) above $3,000,000 up to but not exceeding $4,000,000, plus (v) 6% of all Acquired Business Pre-Tax Income for such year above $4,000,000 up to but not exceeding $5,000,000, PLUS (vi) 5% of all Acquired Business Pre-Tax Income for such year above $5,000,000. For the purposes hereof, "Acquired Business Pre-Tax Income" for any year (or portion thereof) means the total pre-tax income of all Acquired Businesses for such year (or portion thereof), excluding any income earned by Acquired Businesses prior to their acquisition by the Company, any earnings attributable to any minority interest in Acquired Businesses, and any extraordinary items.
Mr. Zizza and Lehigh have amended the terms of Mr. Zizza's employment agreement effective as of the Effective Time of the Merger. In general, the amendment provides that (i) Mr. Zizza may be entitled to a bonus at the discretion of Lehigh, in lieu of the current bonus formula, (ii) Mr. Zizza's options and warrants exercisable at $.75 per share into an aggregate of 6,000,000 shares of Lehigh Common Stock and options and warrants exercisable at $1.00 per share into an aggregate of 6,000,000 shares of Lehigh Common Stock shall be converted into 3% of the total issued and outstanding shares of Lehigh Common Stock, on a fully diluted basis (after giving effect to a conversion of all of the shares of Lehigh Preferred Stock issued in connection with the Merger) at a blended exercise price of $.875 per share and (iii) the term of Mr. Zizza's employment agreement be extended for an additional year through December 31, 2000.
(2) As to each individual named, the aggregate amounts of personal benefits not included in the Summary Compensation Table do not exceed the lesser of either $50,000 or 10% of the total annual salary and bonus reported for the named executive officer.
(3) Represents premiums paid by the Company with respect to term life insurance for the benefit of the named executive officer.
(4) On January 1, 1995, the Company and Mr. Bruno entered into an employment agreement providing for his employment through December 31, 1999 as Vice President and General Counsel for the Company at an annual salary of $150,000. Pursuant to such agreement, Mr. Bruno has deferred one-third of his annual salary until such time as the Company's annual revenues exceed $25 million. In April 1995 the Company granted Mr. Bruno an option to purchase 250,000 shares of common stock at an exercise price of $.50 per share. The option is (i) immediately exercisable as to 100,000 shares subject to such option, (ii) exercisable December 31, 1995 as to an additional 75,000 shares subject to such option, and (iii) exercisable December 31, 1996 as to the remaining 75,000 shares subject to such option. The option will expire December 31, 1999.
Mr. Bruno and Lehigh have amended the terms of Mr. Bruno's employment agreement effective as of the Effective Time of the Merger. In general, the amendment provides that (i) Mr. Bruno's salary be reduced from $150,000 to $120,000 per year, (ii) no part of Mr. Bruno's salary shall be deferred and (iii) the term of the employment shall be extended for an additional year through December 31, 2000.
(5) Mr. Delowery may be deemed to be an executive officer of the Company by virtue of his position with HallMark. HallMark became the Company's principal operating subsidiary following the 1993 Restructuring.
COMPENSATION OF DIRECTORS
Directors receive no compensation for serving on the Board other than the reimbursement of reasonable expenses incurred in attending meetings. In April 1995, the Company issued options to purchase 15,000 shares of common stock at an exercise price of $.50 per share to Mr. Bready and options to purchase 10,000 shares of common stock at an exercise price of $.50 per share to each of Messrs. Gargano, Amhurst and Salibello. On December 13, 1996, the Company issued options to purchase 10,000 shares of common stock at an exercise price of $.50 per share to each of Messrs. Bready, Gargano, Amhurst and Salibello in lieu of cash compensation for serving on the Board for 1996.
The following table sets forth the number of options exercised and the dollar value realized thereon by the executive officers of the Company named in the Summary Compensation Table, along with the number and dollar value of any options remaining unexercised on December 31, 1996.
AGGREGATED OPTION EXERCISES IN 1996 AND YEAR-END OPTION VALUES
(1) On December 31, 1996, the average of the high and low prices per share of the Common Stock on the New York Stock Exchange was $.25.
(2) Represents the difference between the market value of the Common Stock underlying the option and the exercise price of such option upon exercise or year-end, as the case may be.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 and the regulations of the Securities and Exchange Commission (the "SEC") thereunder require the Company's executive officers and directors, and persons who own more than ten percent of a registered class of the Company's equity securities, to file reports of initial ownership and changes in ownership with the SEC and the National Association of Securities Dealers, Inc. Such officers, directors and ten-percent stockholders are also required by SEC rules to furnish the Company with copies of all Section 16(a) forms they file. Based solely on its review of the copies of such forms received by it, or written representations from certain reporting persons that no other reports were required for such persons, the Company believes that, during or with respect to the period from January 1, 1996 to December 31, 1996, all Section 16(a) filing requirements applicable to its executive officers, directors and ten-percent stockholders were complied with.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Both Anthony Amhurst and Charles Gargano are members of the Company's Compensation Committee and are directors. There are no compensation committee interlock relationships to be disclosed pursuant to Item 402 of Regulation S-K.
BOARD REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is responsible for developing the Company's executive compensation policies and determining the compensation paid to the Company's Chief Executive Officer and its other executive officers.
The Compensation Committee considers the current executive compensation (other than for Mr. Delowery) to be below the standard for executives performing comparable services (such as, debt restructurings, work-outs, negotiations with bondholders and various creditors, restructuring bank credit lines for more favorable terms, pursuing opportunities to raise working capital, etc.).
The Company entered into an employment agreement with Mr. Zizza in August 1994 providing for his employment through December 31, 1999 as President, Chairman of the Board and Chief Executive Officer of the Company at an annual salary of $200,000 (the same salary previously paid to him). His salary is subject to increase, in the Board's discretion, if the Company acquires one or more new businesses, to a level commensurate with the compensation paid to the top executives of comparable businesses. If the Company acquires any business with annual revenues in the year immediately prior to such acquisition of at least $25 million, Mr. Zizza will be entitled to a bonus for each year of his employment following such acquisition (including the portion of the year immediately following such acquisition), based on specified percentages of the total pre-tax income of all such acquired businesses for such year or portion thereof. See "Certain Transactions." Pursuant to such employment agreement, the Company also granted to Mr. Zizza options to purchase 10,250,000 shares of Common Stock at exercise prices ranging from $.50 to $1.00 per share. For information as to the terms and conditions of exercisability of such options, see "Certain Transactions."
CHARLES A. GARGANO ANTHONY F.L. AMHURST
PERFORMANCE GRAPH
The graph below compares the cumulative total shareholder return on the Common Stock of the Company with the cumulative total return on the NYSE Market Index and MG Group Index (assuming the investment of $100 in the Company's Common Stock, the NYSE Market Index and MG Group Index on January 1, 1992, and reinvestment of all dividends).
COMPARISON OF CUMULATIVE TOTAL RETURN OF COMPANY, INDUSTRY INDEX AND BROAD MARKET
COMPANY 1991 1992 1993 1994 1995 1996
LEHIGH GROUP INC 100 180.00 130.00 110.00 45.01 45.01 INDUSTRY INDEX 100 122.34 138.32 131.68 151.52 175.21 BROAD MARKET 100 104.70 118.88 116.57 151.15 182.08
ITEM 12.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information on March 12, 1997 (except as otherwise noted below) with respect to each person (including any "group", as that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) known to the Company to be the beneficial owner of more than 5% of the Common Stock.
(1) Except as otherwise indicated each of the persons listed above has sole voting and investment power with respect to all of the shares shown in the table as beneficially owned by such person.
(2) Based on information set forth on Schedule 13G's filed with the SEC by Equitable on February 9, 1996, The Godt Trust on September 27, 1994 and Teachers on April 23, 1992 (assuming, in each case, no change in beneficial ownership since such date except in connection with the 1993 Restructuring. Information as to FBL was obtained from an investment specialist at T. Rowe Price on March 5, 1997.
(3) Includes (i) 4,250,000 shares issuable upon the exercise of immediately exercisable options at a price of $.50 per share, (ii) 382 shares owned by trust accounts for the benefit of Mr. Zizza's minor children, as to which he disclaims beneficial ownership and (iii) 1,750,000 shares issuable upon the exercise of immediately exercisable warrants at a price of $.50 per share. Excludes 12,000,000 shares of Common Stock issuable upon the exercise of options held by Mr. Zizza at exercise prices of $.75 per share, in the case of 3,000,000 shares, $1.00 per share, in the case of 3,000,000 shares, 3,000,000 shares issuable upon the exercise of warrants at a price of $.75 per share and 3,000,000 shares issuable upon the exercise of warrants at a price of $1.00 per share. These options are not currently exercisable or expected to become exercisable within the next 60 days, and will not be exercisable until such time as (i) the Company receives aggregate net cash proceeds of at least $10 million from the sale (whether public or private) of its equity securities, (ii) the Company consummates an acquisition of a business with annual revenues during the year immediately preceding such acquisition of at least $25 million, and (iii) the fair market value (determined over a 30-day period) of the Common Stock shall have equalled or exceeded $1.00 per share. All of the options granted to Mr. Zizza will terminate on the fifth anniversary of the date of grant, subject to earlier termination under certain circumstances in the event of his death or the termination of his employment. The Company also granted to him one demand registration right (exercisable only if the Company is eligible to file a registration statement on Form S-3 or a form substantially equivalent thereto) and certain "piggyback" registration rights with respect to the shares of the Common Stock purchasable upon exercise of such options.
SECURITY OWNERSHIP OF MANAGEMENT
The following table indicates the number of shares of Common Stock beneficially owned on March 1, 1997 by (i) each director of the Company, (ii) each of the executive officers named in the Summary Compensation Table set forth above and (iii) all directors and executive officers of the Company as a group.
- --------------------- * Less than 1%.
(1) Each of the persons listed above has sole voting and investment power with respect to all shares shown in the table as beneficially owned by such person.
(2) See note 3 of the table under the caption "Security Ownership of Certain Beneficial Owners" above.
(3) Includes 250,000 options to purchase common stock at $.50 per share.
(4) Includes and excludes shares as indicated in notes (2) and (3) above.
(5) Represents options to purchase common stock at $.50 per share.
ITEM 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On August 22, 1994, the Company sold 2,575,000 shares of Common Stock pursuant to the Private Placement at a purchase price of $.40 per share, including 250,000 shares sold to Salvatore J. Zizza (the Company's President, Chairman of the board and Chief Executive Officer), 62,500 shares sold to Robert A. Bruno (the Company's Vice President, General Counsel and Secretary) and 750,000 shares sold to Kenneth Godt as Trustee of the Orion Trust (which, by virtue of such sale, became the owner of more than 5% of the outstanding Common Stock). Pursuant to a registration rights agreement dated as of August 22, 1994 among the Company and the investors that purchased Common Stock pursuant to the Private Placement (including Mr. Zizza, Mr. Bruno and Kenneth Godt as Trustee for the Orion Trust), such investors have one demand registration right (exercisable at any time after the first anniversary and prior to the fifth anniversary of such date) and certain "piggyback" registration rights with respect to such Common Stock. The Company is attempting to register such shares under the Securities Act pursuant to the registration statement that was filed on December 12, 1995 which has not yet been declared effective. On August 22, 1994, the Company also (i) issued to Goldis Financial Group, Inc. warrants to purchase 386,250 shares of Common Stock at $.50 per share, as partial consideration for its services as selling agent in connection with the Private Placement, and (ii) granted to it certain piggyback registration rights as to such shares. The shares of Common Stock issuable upon the exercise of such warrants are attempting to be registered under the Securities Act pursuant to the above mentioned registration statement.
On August 22, 1994 (immediately prior to the closing under the Private Placement), (i) the Company and Mr. Zizza entered into an employment agreement providing for the employment of Mr. Zizza through December 31, 1999 as President, Chairman of the Board and Chief Executive Officer of the Company at an annual salary of $200,000 (subject to increase, in the discretion of the Board, if the Company acquires one or more new businesses, to a level commensurate with the compensation paid to the top executives of comparable businesses), and (ii) the Company and Dominic Bassani entered into a consulting agreement providing for Mr. Bassani to serve as a consultant to the Company for a five year period and to provide during such period such financial advisory services and assistance as the Company may request in connection with arranging for financing for the Company (including pursuant to the Private Placement) and in connection with the selection and evaluation of potential acquisitions. The consulting agreement with Mr. Bassani was mutually terminated in July 1995. If the Company acquires any business with annual revenues in the year immediately prior to such acquisition of at least $25 million (an "Acquired Business"), Mr. Zizza will be entitled to a bonus for each year of his employment following such acquisition (including the portion of the year immediately following such acquisition), based on specified percentages of the total pre-tax income of all Acquired Businesses for such year or portion thereof ("Acquired Business Pre-Tax Income"). For this purpose, Acquired Business Pre-Tax Income excludes any income earned by Acquired Businesses prior to their acquisition by the Company, any earnings attributable to any minority interest in Acquired Businesses, and any extraordinary items. The bonus for Mr. Zizza for each such year (or portion thereof) will be an amount equal to one-half of (i) 10% of the first $1,000,000 of all Acquired Business Pre-Tax Income for such year (or portion thereof), (ii) 9% of all Acquired Business Pre-Tax Income for such year (or portion thereof) above $1,000,000 up to but not exceeding $2,000,000,
PLUS (iii) 8% of all Acquired Business Pre-Tax Income for such year (or portion thereof) above $2,000,000 up to but not exceeding $3,000,000, PLUS (iv) 7% of all Acquired Business Pre-Tax Income for such year (or portion thereof) above $3,000,000 up to but not exceeding $4,000,000, plus (v) 6% of all Acquired Business Pre-Tax Income for such year above $4,000,000 up to but not exceeding $5,000,000, (vi) 5% of all Acquired Business Pre- Tax Income for such year above $5,000,000.
The Company also granted (i) to Mr. Zizza options to purchase a total of 10,250,000 shares of Common Stock: 4,250,000 exercisable at $.50 per share, 3,000,000 exercisable at $.75 per share, and 3,000,000 exercisable at $1.00 per share; and (ii) to Mr. Bassani warrants to purchase a total of 7,750,000 shares of Common Stock: 1,750,000 exercisable at $.50 per share, 3,000,000 at $.75 per share, and 3,000,000 at $1.00 per share. In July 1995, Mr. Zizza purchased all the warrants held by Mr. Bassani. At the time of such purchase, the Board consented to the transaction and amended the Bassani warrants to make their expiration date co-terminus with the other warrants which had been issued to Mr. Zizza. The $.50 per share options are exercisable immediately; the $.75 and $1.00 per share options will not be exercisable until such time as (i) the Company has raised at least $10 million of equity, (ii) the Company has consummated an acquisition of a business with annual revenues in the year immediately prior to such acquisition of at least $25 million, and (iii) the fair market value of the Common Stock (as measured over a period of 30 consecutive days) has equalled or exceeded $1.00 per share. The options and warrants held by Mr. Zizza will terminate on the fifth anniversary of the date of grant, subject to earlier termination under certain circumstances in the event of his death or the termination of his employment. The Company also granted to Mr. Zizza one demand registration right (exercisable only if the Company is eligible to file a registration statement on Form S-3 or a form substantially equivalent thereto) and certain "piggyback" registration rights with respect to the shares of Common Stock purchasable upon exercise of the options or warrants granted to him.
The Company will require that any future transactions (other than those described above) between the Company and its officers, directors, principal stockholders and the affiliates of the foregoing persons be on terms no less favorable to the Company than could reasonably be obtained in arm's length transactions with independent third parties.
In connection with the issuance by the Company of Common Stock pursuant to the 1991 Restructuring to the former holders of the 13-1/2% Notes and 14-7/8% Debentures and NICO's Senior Secured Notes (which holders included BAT, FBL, Allstate and Teachers or their predecessors in interest), the Company granted to such holders two demand and unlimited piggyback registration rights (which remain in effect to the extent such Common Stock is not otherwise freely transferable). For information as to the Common Stock held by BAT, FBL, Allstate and Teachers (which is covered by such registration rights), see "Item 12. Security Ownership of Certain Beneficial Owners and Management."
PART IV
ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Page ----
a. (1) Financial Statements -------------------- The following financial statements are included in Part II, Item 8 of this Annual Report on Form 10-K:
Report of Independent Public Accountants as of December 31, 1996, 1995 and 1994.
Consolidated Balance Sheets, December
31, 1996 and 1995. -
Consolidated Statements of Operations, Years Ended December 31, 1996, 1995 and 1994.
Consolidated Statements of Changes in Shareholders' Equity (Deficit), Years Ended December 31, 1996, 1995 and 1994.
Consolidated Statements of Cash Flows, Years Ended December 31, 1996, 1995 and 1994.
Notes to Consolidated Financial - Statements.
a. (2) SCHEDULE
The following schedule for the Years Ended December 31, 1996, 1995 and 1994 are submitted herewith:
Schedule II - Valuation and Qualifying Accounts S-1
All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
a. (3) EXHIBITS
The Exhibits to this Annual Report on Form 10-K are listed in the Exhibit Index annexed hereto and incorporated by reference.
(b) REPORTS ON FORM 8-K
There was one report on Form 8-K filed during the last quarter covered by this report, dated November, 1996.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
THE LEHIGH GROUP INC.
By: /s/ Salvatore J. Zizza ---------------------- Salvatore J. Zizza President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
/s/ Salvatore J. Zizza - ---------------------------- Chairman of the Board Director March 25, 1997 Salvatore J. Zizza and President Chief Executive Officer (Chief Financial Officer)
/S/ Robert A. Bruno - ---------------------------- Vice President, General March 25, 1997 Robert A. Bruno Counsel, Secretary and Director
/s/ Richard L. Bready - ---------------------------- Director March 25, 1997 Richard L. Bready
- ---------------------------- Director March , 1997 Charles A. Gargano
- ---------------------------- Director March , 1997 Anthony F.L. Amhurst
/s/ Salvatore M. Salibello Director March 25, 1997 - ---------------------------- Salvatore M. Salibello
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page ----
Report of Independent Certified Public Accountants as of December 31, 1996, 1995 and 1994
Consolidated Balance Sheets, December 31, 1996 and 1995 and
Consolidated Statements of Operations, Years Ended December 31, 1996, 1995 and 1994
Consolidated Statements of Changes in Shareholders' Equity, (Deficit) Years Ended December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows, Years Ended December 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements to
Schedule, Years Ended December 31, 1996, 1995 and 1994
II - Valuation and Qualifying Accounts S-1
All other schedules are omitted because the required information is either or is included in the consolidated financial statements or the notes thereto.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To The Board of Directors and Shareholders of The Lehigh Group Inc.:
We have audited the accompanying consolidated balance sheets of The Lehigh Group Inc. and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of operations, shareholders' equity (deficit) and cash flows for each of the three years in the period ended December 31, 1996. We have also audited the schedule listed in the accompanying index. These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements and schedule are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and schedule. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and schedule. We believe that our audits provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of The Lehigh Group Inc. and subsidiaries at December 31, 1996 and 1995, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles.
Also in our opinion, the schedule presents fairly, in all material respects, the information set forth therein.
/S/ BDO SEIDMAN, LLP -------------------- BDO Seidman, LLP
New York, New York February 18, 1997
THE LEHIGH GROUP INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
December 31, 1996 1995 - -------------------------------------------------------------------------------- (in thousands except for per share data)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 471 $ 347 Accounts receivable, net of allowance for 3,581 4,335 doubtful accounts of $342 and $174 (notes 6 and 10)
Inventories (Note 6) 1,215 1,823 Prepaid expenses and other current assets 279 22 ------ ------
Total current assets 5,546 6,527
Property, plant and equipment, net of 50 61 accumulated depreciation and amortization (Notes 5 and 6)
Other assets 29 34 ------ ------
TOTAL ASSETS $5,625 $6,622 ====== ======
The accompanying notes to consolidated financial statements are an integral part of these financial statements.
THE LEHIGH GROUP INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
The accompanying notes to consolidated financial statements are an integral part of these balance sheets.
THE LEHIGH GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
The accompanying notes to consolidated financial statements are an integral part of these statements.
THE LEHIGH GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
The accompanying notes to consolidated financial statements are an integral part of these statements.
THE LEHIGH GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (NOTE 11)
The accompanying notes to consolidated financial statements are an integral part of these statements.
THE LEHIGH GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLES INCLUDED IN THE FOOTNOTES ARE IN THOUSANDS EXCEPT FOR PER SHARE DATA)
1 - GENERAL
The Lehigh Group Inc. (the "Company"), through its wholly owned subsidiary, HallMark Electrical Supplies Corp. ("HallMark"), is engaged in the distribution of electrical supplies for the construction industry both domestically (primarily in the New York Metropolitan area) and for export. HallMark was acquired by the Company in December 1988. HallMark's sales include electrical conduit, armored cable, switches, outlets, fittings, panels and wire which are purchased by HallMark from electrical equipment manufacturers in the United States. Approximately 70% of HallMark's sales are domestic and 30% are export. Export sales are made by sales agents retained by HallMark. Distribution is made in approximately 26 countries.
Export sales as a percentage of total sales are summarized as follows:
1996 1995 1994 ---- ---- ----
Central America 10% 16% 14% South America 8% 18% 16% Caribbean 6% 6% - West Indies 2% - 6% Other 4% - 2% --- --- --- Total 30% 40% 38% === === ===
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include all of the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
INVENTORIES - Inventories are stated at the lower of cost or market using a first-in, first-out basis to determine cost. Inventories consist of electrical supplies held for resale.
PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are carried at cost. Depreciation is provided on the straight-line method over the estimated useful lives of the related assets. Amortization of leasehold improvements is provided over the life of each respective lease.
INCOME TAXES - The Company uses the liability method of accounting for deferred income taxes. The provision for income taxes typically includes Federal, state and local income taxes currently payable and those deferred because of temporary timing differences between the financial statement and tax bases of assets and liabilities. The financial statements do not include a provision for income taxes due to the Company's net operating losses.
EARNINGS PER SHARE - Earnings per common share is calculated by dividing net income (loss) applicable to common shares by the weighted average number of common shares and share equivalents outstanding during each period. Excluded from fully diluted computations are certain stock options granted (12,000,000 options which are contingently exercisable pending the occurrence of certain future events).
THE LEHIGH GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLES INCLUDED IN THE FOOTNOTES ARE IN THOUSANDS EXCEPT FOR PER SHARE DATA)
TREASURY STOCK - Treasury stock is recorded at net acquisition cost. Gains and losses on disposition are recorded as increases or decreases to capital with losses in excess of previously recorded gains charged directly to retained earnings.
STOCK OPTIONS - The Company uses the intrinsic value method of accounting for employee stock options as permitted by Statement of Financial Accounting Standards No. 123 "According for Stock-Based Compensation". Accordingly, compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Company's stock at the date of the grant over the amount the employee must pay to acquire the stock. The compensation cost is recognized over the vesting period of the options.
ESTIMATES - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
LONG-LIVED ASSETS - The Company adopted Statement of Financial Accounting Standards No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long Lived-Assets to be Disposed Of" in 1996. The Company reviews certain long-lived assets and identifible intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. In that regard, the Company assesses the recoverability of such assets based upon estimated non-discounted cash flow forecasts. The Company has determined that no impairment loss needs to be recognized for long lived assets.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying values of financial instruments including cash and cash equivalents, accounts receivable and accounts payable approximate fair value at December 31, 1996, because of the relative short maturities of these instruments. It is not possible to presently determine the market value of the long term debt and notes payable given the Company's current financial condition.
STATEMENTS OF CASH FLOWS - Cash equivalents include time deposits with original maturities of three months or less.
REVENUE RECOGNITION - Revenue is recognized when products are shipped or when services are rendered.
THE LEHIGH GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (TABLES INCLUDED IN THE FOOTNOTES ARE IN THOUSANDS EXCEPT FOR PER SHARE DATA)
3 - MERGER
On October 29, 1996, the Company and First Medical Corporation ("FMC") entered into a Merger Agreement. Under the terms of the Merger Agreement, each share of the FMC Common Stock would be exchanged for (i) 1,033.925 shares of Lehigh Common Stock and (ii) 95.1211 shares of Lehigh Preferred Stock. Each share of Lehigh Preferred Stock will be convertible into 250 shares of Lehigh Common Stock and will have a like number of votes per share, voting together with the Lehigh Common Stock. Currently, there are outstanding 10,000 shares of FMC Common Stock. As a result of these actions, immediately following the Merger, current Lehigh stockholders and FMC stockholders will each own 50% of the issued and outstanding shares of Lehigh Common Stock. In the event that all of the shares of Lehigh Preferred Stock issued to the FMC stockholders are converted into Lehigh Common Stock, current Lehigh stockholders will own approximately 4% and FMC stockholders will own approximately 96% of the issued and outstanding shares of Lehigh Common Stock. In addition, under the terms of the Merger Agreement Lehigh will be renamed "First Medical Group, Inc.". Although the Company has entered into this merger agreement, there can be no assurance at this time that the Company will be able to consummate this transaction.
4 - DISCONTINUED OPERATIONS
On December 31, 1991, the Company sold its right, title and interest in the stock of the various subsidiaries which made up its discontinued interior construction and energy recovery business segments subject to existing security interests. The excess of liabilities over assets of subsidiaries sold amounted to approximately $9.6 million. Since 1991, the Company has reduced this deferred credit (the reduction is shown as income from discontinued operations) due to the successful resolution of the majority of the liabilities for amounts significantly less than was originally recorded. The deferred credits were reduced as follows:
1992 $ 2,376 1993 $ 1,760 1994 $ 5,000 1995 $ 250 1996 $ 250
THE LEHIGH GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (TABLES INCLUDED IN THE FOOTNOTES ARE IN THOUSANDS EXCEPT FOR PER SHARE DATA)
5 - PROPERTY, PLANT AND EQUIPMENT
December 31 ---------------------- Estimated Useful Lives ---------------
1996 1995 ---------- --------
Machinery and equipment $ 483 $ 475 3 to 5 years Leasehold improvements 295 285 Term of leases ----- ----- 778 760
Less accumulated depreciation and
amortization (728) (699) ----- ------ $ 50 $ 61 ===== ======
6 - LONG-TERM DEBT
December 31, ----------------------------
Interest Rate 1996 1995 -------------
Subordinated Debentures 14-7/8% $ 290 $ 400 Senior Subordinated Notes 13-1/2% 100 100
Convertible Debenture 10.25% 300 -- Note Payable-BNL 10.56% -- 2,440
Revolving Credit Facility-CIT 10.56% 2,425 -- Other Long-Term Debt 10.25% -- 10 -------- -------- 3,115 2,950
Less Current Portion (390) (870) -------- -------- Total Long-Term Debt $ 2,725 $ 2,080 ======== ========
SUBORDINATED DEBENTURES AND SENIOR SUBORDINATED NOTES
On March 15, 1991, pursuant to a restructuring done by the Company (the "1991 Restructuring"), the holders of $8,760,000 principal amount of the 14-7/8% Debentures exchanged such securities, together with the accrued but unpaid interest thereon, for $2,156,624 principal amount of Class B Notes and 53,646,240 shares of Common Stock. Additionally, the holders of $33,840,000 principal amount of the 13- 1/2% Notes exchanged such securities, together with the accrued but unpaid interest thereon, for $8,642,736 principal amount of Class B Notes and 212,650,560 shares of Common Stock.
THE LEHIGH GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (TABLES INCLUDED IN THE FOOTNOTES ARE IN THOUSANDS EXCEPT FOR PER SHARE DATA)
The Company was in default of certain covenants to the holders of Class A Notes and Class B Notes (the "Notes") at December 31, 1992 and 1991 and, as a consequence, the Notes were classified as current in the 1992 and 1991 Financial Statements. The Company continues to be in default in the payment of interest (approximately 628,000 and $653,000 of interest is past due as of December 31, 1996 and 1995) on the $500,000 principal amount of 13-1/2% Notes and 14-7/8% Debentures that were not tendered in the Company's 1991 Restructuring. In May 1993 the Company reached an agreement (the "1993 Restructuring") whereby participating holders of the Notes ("Noteholders") surrendered their Notes, together with a substantial portion of their Common Stock, and, in exchange therefore, the Noteholders acquired, through a newly formed corporation ("LVI Holding"), all of the stock of LVI Environmental Services Group Inc. ("LVI Environmental"), a subsidiary of the Company that conducted its asbestos abatement operations. Management of LVI Environmental have a minority equity interest in LVI Holding. As a consequence, the Company's outstanding consolidated indebtedness was reduced from approximately $45.9 million to approximately $3.6 million (excluding approximately $120,944 of indebtedness under Class B Notes that LVI Holding agreed to pay in connection with the 1993 Restructuring but for which the Company remains liable). Since the Noteholders were also principal stockholders of the Company, the gain from this transaction, net of the carrying value of LVI Environmental, was credited directly to additional paid-in capital.
In accordance with Statement of Financial Accounting Standards No. 15, the Class A Notes and the Class B Notes were carried on the consolidated balance sheet at the total expected future cash payments (including interest and principal) specified by the terms of the Notes. A gain on early extinguishment of debt occurred as a result of the carrying amounts of the 13-1/2% Notes, 14-7/8% Debentures and Senior Secured Notes (including accrued but unpaid interest and unamortized deferred financing costs) being greater than the fair market value of the common stock issued, the net assets transferred to a liquidating trust, and total expected future cash payments of the Class A Notes and Class B Notes, net of direct restructuring costs.
Included in interest and other income in 1996 and 1995 is approximately $106,000 and $380,000 respectively of other income which represents an adjustment to the value of certain items which relate to the Company's 1991 Restructuring.
During 1996, the Company retired $110,000 of the 14-7/8% debentures plus accrued and unpaid interest of $181,000 for approximately $9,000. The gain on extinguishment of debt of approximately $282,000 is included in extraordinary item of $382,000.
The Company continues to be in default in the payment of interest (approximately $628,000 and $653,000 at December 31, 1996 and 1995, respectively) and principal approximately $390,000 and $500,000 at December 31, 1996 and 1995 respectively on the 13-1/2 Notes and 14-7/8 Debentures not tendered in the Company's 1991 Restructuring. The principal of $390,000 and $500,000 is included as current maturities of long term debt and the unpaid interest is included in accrued expenses and other current liabilities.
THE LEHIGH GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (TABLES INCLUDED IN THE FOOTNOTES ARE IN THOUSANDS EXCEPT FOR PER SHARE DATA)
REVOLVING CREDIT FACILITY
In November 1996, HallMark entered into a three year revolving credit facility with a financial institution, which provides a maximum line of credit equal to the lesser of eligible accounts receivable and inventory or $5 million. The credit facility bears interest at the prime rate plus 2%, and is collaterized by the Company's accounts receivable, inventory and property and equipment.
The Company used proceeds from the revolving credit facility to pay down its outstanding note payable with a bank. The extinguishment of debt resulted in a gain of approximately $100,000. This gain is included in the extraordinary item of $382,000.
CONVERTIBLE DEBENTURE
On October 29, 1996 in connection with the execution of the definitive merger agreement described in Note 3 between the Company and FMC, the Company issued a convertible debenture in the amount of $300,000 plus interest at two (2%) percent per annum over the prime lending rate of Chase Manhattan Bank, N.A. payable on the first day of each subsequent month next ensuing through and including twenty four months thereafter. On the twenty fourth month, the outstanding principal balance and all accrued interest shall become due and payable.
The proceeds of the loan from FMC were used to satisfy the loan the Company previously obtained from DHB Capital Group Inc. on June 11, 1996. On February 7, 1997, First Medical Corporation elected to convert the debenture in 937,500 shares of the Company's common stock.
THE LEHIGH GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (TABLES INCLUDED IN THE FOOTNOTES ARE IN THOUSANDS EXCEPT FOR PER SHARE DATA)
7 - INCOME TAXES
At December 31, 1996 and 1995, the Company had a net deferred tax asset amounting to approximately $2.2 and $1.6 million respectively. The net deferred tax asset consists primarily of net operating loss ("NOL") carryforwards, and temporary differences resulting from inventory and accounts receivable reserves, and it is fully offset by a valuation allowance of the same amount due to uncertainty regarding its ultimate utilization. The following is a summary of the significant components of the Company's deferred tax assets and liabilities.
December 31, 1996 1995 ------------
Deferred tax assets:
Nondeductible accruals and allowances $ 206 $ 65 Net operating loss carryforward 2,008 1,575 ------ ------ 2,214 1,640 Deferred tax liabilities:
Depreciation and amortization 30 30 ------ ------
Net deferred tax asset $2,184 $1,610 Less: Valuation Allowance 2,184 1,610 ------ ------
Deferred Income Taxes - - ------ ------ - - ====== ======
The Company did not have Federal taxable income in 1996, 1995 and 1994 and, accordingly, no Federal taxes have been provided in the accompanying consolidated statements of operations. As of December 31, 1996, the Company had NOL carryforwards of approximately $5 million expiring through 2011.
8 - COMMITMENTS AND CONTINGENCIES
LEASES
The Company and its subsidiaries lease machinery, office and warehouse space, as well as certain data processing equipment and automobiles under operating leases. Rent expense aggregated $165,000, $177,000, and $148,000 for the years ended December 31, 1996, 1995, and 1994, respectively.
THE LEHIGH GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (TABLES INCLUDED IN THE FOOTNOTES ARE IN THOUSANDS EXCEPT FOR PER SHARE DATA)
Future minimum annual lease commitments, primarily for office and warehouse space, with respect to non-cancelable leases are as follows:
1997 104 1998 105 1999 114 2000 118 2001 121 Thereafter 313 ------ $ 875 ======
In addition to the above, certain office and warehouse space leases require the payment of real estate taxes and operating expense increases.
EMPLOYMENT AGREEMENTS
On August 22, 1994 the Company and Mr. Salvatore Zizza entered into an employment agreement providing employment to Mr. Zizza through December 31, 1999 as President, Chairman of the Board and Chief Executive Officer of the Company at an annual salary of $200,000. On December 20, 1996, the Company agreed to extend Mr. Zizza's employment contract through December 31, 2000.
On January 1, 1995 the Company and Mr. Robert Bruno entered into an employment agreement providing employment to Mr. Bruno through December 31, 1999 as Vice President and General Counsel of the Company at an annual salary of $150,000. The agreement calls for deferral of $50,000 of Mr. Bruno's salary each year until the Company's annual revenues exceed $25 million. The $50,000 deferral has not been accrued due to uncertainty regarding the Company achieving $25 million in sales. On December 20, 1996, the Company agreed to extend Mr. Bruno's employment agreement through December 31, 2000. Mr. Bruno reduced his annual salary to $120,000 no part of which shall be deferred pending consummation of the proposed merger with First Medical Corporation.
THE LEHIGH GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (TABLES INCLUDED IN THE FOOTNOTES ARE IN THOUSANDS EXCEPT FOR PER SHARE DATA)
LITIGATION
The State of Maine and Bureau of Labor Standards commenced an action against the Company and Dori Shoe Company (an indirect former subsidiary) to recover severance pay under Maine's plant closing law. The case was tried without a jury on December 12 and 13, 1994 in Maine Superior Court. Under that law, an "employer" who shuts down a large factory is liable to the employees for severance pay at the rate of one week's pay for each year of employment. Although the law did not apply to the Company at the time that the Dori Shoe plant was closed it was amended so as to arguably apply to the Company retroactively.
In a prior case brought against the Company (then known as Lehigh Valley Industries) and its former subsidiary under the Maine severance pay statute prior to its amendment the Company was successful against the State of Maine (see CURTIS V. LOREE FOOTWEAR AND LEHIGH VALLEY INDUSTRIES, 516 A. 2d 558 (Me. 1986).
The Superior Court by decision docketed April 10, 1995 entered judgement in favor of the former employees of Dori Shoe Company against Dori Shoe and the Company in the amount of $260,969. plus prejudgment interest and reasonable attorneys' fees and costs to the Plaintiff upon their application pursuant to Maine Rules of Civil Procedure 54(b) (3) (d). Interest and other fees are approximately $100,000 at December 31, 1996. The Company filed a timely appeal appealing the decision and the matter was argued before the Maine Supreme Judicial Court on December 7, 1995. On February 18, 1997 the Supreme Judicial Court of Maine affirmed the Superior Court's decision. The Company is currently considering an appeal to the United States Supreme Court. Approximately $350,000 has been accrued by the Company relating to this judgment.
THE LEHIGH GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (TABLES INCLUDED IN THE FOOTNOTES ARE IN THOUSANDS EXCEPT FOR PER SHARE DATA)
9 - STOCK OPTIONS
The following table contains information on stock options for the three year period ended December 31, 1996:
The Company issues stock options from time to time to certain employees and outside directors. The Company applies APB Opinion 25, "Accounting for Stock Issued to Employees", and related Interpretations in accounting for stock options issued. Under APB Opinion 25, because the exercise price of the Company's stock options equals the market price of the underlying stock on the date of grant, no compensation cost is recognized.
FASB Statement 123, "Accounting for Stock-Based Compensation", requires the Company provide pro forma information regarding net income and earnings per share as if compensation cost for the Company's stock option plans had been determined in accordance with the fair value based method prescribed in FASB Statement 123. The Company estimates the fair value of each stock option at the grant date by using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in 1995 and 1996, respectively: no dividends paid for both years; expected volatility of 30% for both years; risk-free interest rates of 6.78% and 6.42%; and expected lives of 4 and 5 years.
Under the accounting provisions of FASB Statement 123, the Company's net loss and loss per share would have been adjusted to the pro forma amounts indicated below:
THE LEHIGH GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (TABLES INCLUDED IN THE FOOTNOTES ARE IN THOUSANDS EXCEPT FOR PER SHARE DATA)
1996 1995 ---- ----
Net loss
As reported (288) (308) Pro forma (304) (310)
Primary earnings per share
As reported (0.03) (0.03) Pro forma (0.03) (0.03)
Fully diluted earnings per share
As reported (0.03) (0.03) Pro forma (0.03) (0.03)
The following table summarizes information about stock options outstanding at December 31, 1996.
OPTIONS OUTSTANDING OPTIONS EXERCISABLE ------------------- -------------------
Weighted- Average Weighted- Weighted- Range of Number Remaining Average Number Average Exercise Outstanding Contractual Exercise Exercisable Exercise Peixwa at 12/31/96 Life Price at 12/31/96 Prices ------ ----------- ---- ----- ----------- ------
$0.50 to $1.00 18,752,187 3 years $0.75 6,752,187 $0.50
Twelve million of the eighteen million options and warrants granted in 1994 are contingently exercisable pending the occurrence of certain future events. These events include the Company acquiring any business with annual revenues in the year immediately prior to such acquisition of at least $25 million dollars. The occurrence of this event as well as certain other events will constitute the measurement date for those options and the Company will recognize as compensation the difference between measurement date price and the granted price.
10 - SIGNIFICANT CUSTOMER
Sales to a customer accounted for approximately 21%, 25%, and 22% for years ended December 31, 1996, 1995 and 1994, respectively. This customer accounted for approximately 14%, 21% and 15 % of accounts receivable on December 31, 1996, 1995, and 1994, respectively.
11 - SUPPLEMENTARY INFORMATION
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996 1995 1994
Cash paid during the year for:
Interest $252 $278 $264 Income taxes 1 12 78
Supplemental disclosure of non-cash financing activities:
DECEMBER 31, 1996 AND 1995
Accounts payable and operating loss were both reduced by approximately $106,000 and $380,000 for December 31, 1996 and 1995, respectively relating to an adjustment to the value of certain items which relate to the Company's 1991 Restructuring.
THE LEHIGH GROUP INC. AND SUBSIDIARIES SCHEDULE II
Valuation and Qualifying Accounts Years Ended December 31, 1996, 1995 and 1994
(Dollar Amounts in Thousands)
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EXHIBIT INDEX
EXHIBIT
2 Agreement and Plan of Merger, dated as of October 29, 1996, between the Company, the Company's Acquisition Corp., and First Medical Corporation, as amended (filed as Appendix A to the Joint Proxy Statement/Prospectus (incorporated by reference to Exhibit 2.1 to the Company's Form S-4 Amendment No. 1 dated December 27, 1996).
3(a) Restated Certificate of Incorporation, By-Laws and Amendments to By-Laws (incorporated by reference to Exhibits A and B to Company's Annual Report on Form 10-K for the year ended December 31, 1970. Exhibits 3 and 1, respectively, to Company's Current Reports on Form 8-K dated September 8, 1972 and May 9, 1973, and Exhibit to Company's Current Report on Form 8-K dated October 10, 1973, and Exhibit 3 to Company's Annual Report on Form 10-K for the year ended December 31, 1980).
3(b) Certificate of Amendment to Restated Certificate of Incorporation dated September 30, 1983 (incorporated by reference to Exhibit 4(a) to Company's Quarterly Report on Form 10-Q for the quarter ended June 29, 1985).
3(c) Certificate of Amendment to Restated Certificate of Incorporation of Company filed with the Secretary of State of the State of Delaware on October 31, 1985 (incorporated by reference to Exhibit 4(c) to Company's Current Report on Form 8-K dated November 7, 1985).
3(d) Certificate of Amendment to Restated Certificate of Incorporation of Company filed with the Secretary of State of the State of Delaware on January 2, 1986 (incorporated by reference to Exhibit 3(d) to Company's Annual Report on Form 10-K for the year ended December 31, 1985).
3(e) Certificate of Amendment to Restated Certificate of Incorporation of Company filed with the Secretary of State of the State of Delaware on June 4, 1986 (incorporated by reference to Exhibit 4(a) to Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1986).
3(f) By-Laws of Company, as amended to date (incorporated by reference to Exhibit 3(f) to Company's Annual Report on Form 10-K for the year ended December 31, 1990).
3(g) Certificate of Amendment to Restated Certificate of Incorporation of Company filed with the Secretary of State of the State of Delaware on March 15, 1991 (incorporated by reference to Exhibit 3(g) to Company's Annual Report on Form 10-K for the year ended December 31, 1990).
3(h) Certificate of Amendment to Certificate of Incorporation of Company filed with the Secretary of State of the State of Delaware on December 27, 1991 (incorporated by reference to Exhibit 3(h) to Company's Annual Report on Form 10-K for the year ended December 31, 1991).
3(i) Certificate of Amendment to Certificate of Incorporation of Company filed with the Secretary of State of the State of Delaware on January 27, 1995 (incorporated by
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reference to Exhibit 3(i) to Company's Annual Report on Form 10-K for the year ended December 31, 1994).
3(j) Amended and Restated By-laws of the Company, as amended to date (incorporated by reference to Exhibit 3(ii) to the Registrant's Current Report of Form 8-K dated July 17, 1996).
4(a) Form of Indenture, dated as of October 15, 1985, among Registrant, NICO, Inc. and J. Henry Schroder Bank & Trust Company, as Trustee, including therein the form of the subordinated debentures to which such Indenture relates (incorporated by reference to Exhibit 4(a) to the Company's Current Report on Form 8-K dated November 7, 1985).
4(b) Amendment to Indenture dated as of March 14, 1991 referenced to in Item 4(b)(1) (incorporated by reference to Exhibit 4(b)(2) to Registrant's Annual Report on Form 10- K for the year ended December 31, 1990).
4(c) Indenture dated as of March 15, 1991 (the "Class B Note Indenture") among the Company, NICO, the guarantors signatory thereto, and Continental Stock Transfer and Trust Company, as Trustee, pursuant to which the 8% Class B Senior Secured Redeemable Notes due March 15, 1999 of NICO were issued together with the form of such Notes (incorporated by reference to Exhibit 4(i) to Company's Annual Report on Form 10-K for the year ended December 31, 1990).
4(d) First Supplemental Indenture dated as of May 5, 1993 between NICO and Continental Stock Transfer & Trust Company, as trustee under the Class B Note Indenture (incorporated by reference to Exhibit 4(h) to Company's Annual Report on Form 10-K for the year ended December 31, 1993).
4(e) Form of indenture between the Company, NICO and Shawmut Bank, N.A., as Trustee, included therein the form of Senior Subordinated Note due April 15, 1998 (incorporated by reference to Exhibit 4(b) to Amendment No. 2 to Company's Registration Statement on Form S-2 dated May 13, 1988).
10(a) Guaranty of LVI Environmental dated as of May 5, 1993 (incorporated by reference to Exhibit 10(f) to the Company's Annual Report on Form 10-K for the year ended December 31, 1993).
10(b) Indemnification Agreement dated as of May 5, 1993 among LVI Environmental, Company and certain directors and officers of Company (incorporated by reference to Exhibit 10(h) to the Company's Annual Report on Form 10-K for the year ended December 31, 1993).
10(c) Assumption Agreement dated as of May 5, 1993 among Company, NICO and LVI Holding for the benefit of holders of certain securities of Hold-Out Notes (as defined therein) (incorporated by reference to Exhibit 10(i) to the Company's Annual Report on Form 10-K for the year ended December 31, 1993).
10(d) Exchange Offer and Registration Rights Agreement dated as of March 15, 1991 made by the Company in favor of those persons participating in the Company's exchange offers (incorporated by reference to Exhibit 10(j) to the Company's Annual Report on Form 10-K/A Amendment #2 for the year ended December 31, 1993).
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10(e) Employment Agreement between Company and Salvatore J. Zizza dated August 22, 1994 (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission in September 1994).
10(f) Options of Mr. Zizza to purchase an aggregate of 10,250,000 shares of Common Stock of the Company (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission in September 1994).
10(g) Registration Rights Agreement dated as of August 22, 1994 between Mr. Zizza and the Company (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission in September 1994).
10(h) Consulting Agreement dated as of August 22, 1994 between Dominic Bassani and the Company (incorporated by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission in September 1994).
10(i) Warrants of Mr. Bassani to purchase an aggregate of 7,750,000 shares of Common Stock of the Company (incorporated by reference to Exhibit 10.5 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission in September 1994).
10(j) Registration Rights Agreement dated as of August 22, 1994 between Mr. Bassani and the Company (incorporated by reference to Exhibit 10.6 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission in September 1994).
10(k) Form of Registration Rights Agreement dated as of August 22, 1994 among the Company and the investors in the Private Placement (incorporated by reference to Exhibit 10.7 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission in September 1994).
10(l) Warrant of Goldis Financial Group, Inc. to purchase an aggregate of 386,250 shares of Common Stock of the Company (incorporated by reference to Exhibit 10.8 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission in September 1994).
10(m) Employment Agreement between the Company and Robert A. Bruno dated January 1, 1995 (incorporated by reference to Exhibit 10(m) to the Company's Annual Report on Form 10-K for the year ended December 31, 1995).
21 Subsidiaries of the Company (incorporated by reference to Exhibit 21 of the Company's Annual Report on Form 10-K for the year ended December 31, 1995).
27* Financial Data Schedule to the Company's 10-K for the year ended December 31, 1995. *Filed herewith.
The Company will provide a copy of any of the exhibits included in this Annual Report on Form 10-K upon written request and payment of a fee to cover the reasonable expense of furnishing such exhibits to The Lehigh Group Inc., 810 Seventh Avenue, New York, New York, 10019, Attention: Secretary (Telephone: (212) 333-2620).
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