Applicable filing fees in the amount of $4,179.22 were paid with
Registration Statement on Form S-4 No. 333-14235 filed on October
16, 1996.
ELECTROMAGNETIC SCIENCES, INC.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 30, 1996
Notice is hereby given that a Special Meeting of
Shareholders of Electromagnetic Sciences, Inc. (the "Company" or
"ELMG") will be held at 11:00 a.m. local Atlanta time on December
30, 1996, at ELMG's offices, 660 Engineering Drive, Technology
Park/Atlanta, Norcross, Georgia, for the following purposes:
(1) To consider and vote upon a proposal to issue
up to 773,583 shares of the Company's common stock, $.10 par
value per share (the "ELMG Shares ") in exchange for the
acquisition of all of the outstanding shares, $.01 par value
per share (the "LXE Shares"), of LXE Inc. ("LXE"), an 81%
subsidiary of the Company, not currently owned by the
Company, plus additional ELMG Shares as may be required to
acquire any LXE Shares hereafter issued upon exercise of
outstanding LXE stock options, and to amend the Company's
1992 Stock Incentive Plan as necessary for, and otherwise
approve, the conversion of outstanding options to acquire
LXE Shares into options to acquire a proportionate number of
ELMG Shares; and
(2) To transact such other business as may properly
come before the Meeting or any adjournment thereof.
Only holders of record of ELMG Shares at the close of
business on November 26, 1996, will be entitled to notice of and
to vote at the Meeting or any adjournment thereof.
By Order of the Board of Directors,
WILLIAM S. JACOBS, Secretary
Norcross, Georgia
November 27, 1996
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING OF
SHAREHOLDERS, YOU ARE REQUESTED TO FILL IN AND SIGN THE ENCLOSED
FORM OF PROXY AND MAIL IT IN THE ENCLOSED RETURN ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IT IS
IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. IF YOU DO ATTEND
THE MEETING AND DECIDE THAT YOU WISH TO VOTE IN PERSON, YOU MAY
WITHDRAW YOUR PROXY.
November 27, 1996
ELECTROMAGNETIC SCIENCES, INC.
660 Engineering Drive, Technology Park/Atlanta
Norcross, Georgia 30092
Telephone (770) 263-9200
PROXY STATEMENT
FOR THE SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON December 30, 1996
GENERAL INFORMATION
Special Shareholders' Meeting
This Proxy Statement is furnished in connection with the
solicitation by the Company's Board of Directors of proxies to be
used at the Special Meeting of Shareholders to be held at 11:00
a.m.local Atlanta time on December 30, 1996, at the Company's
offices, 660 Engineering Drive, Technology Park/Atlanta,
Norcross, Georgia. This Proxy Statement is being mailed to
shareholders on approximately November 27, 1996.
Matters to be Acted Upon
The following matters will be acted upon at the Special
Meeting of Shareholders:
(1) The proposal (the "Proposal") to issue ELMG Shares
in exchange for the acquisition of any or all of the
outstanding LXE Shares not currently owned by the Company,
and to amend the Company's 1992 Stock Incentive Plan as
necessary for, and otherwise approve, the conversion of
outstanding options to acquire LXE Shares into options to
acquire a proportionate number of ELMG Shares ; and
(2) The transaction of such other business as may
properly come before the Meeting or any adjournment thereof.
Revocation of Proxies
A proxy form is enclosed herewith. Any shareholder who
executes and delivers a proxy may revoke it at any time prior to
its use by giving written notice of such revocation to the
Secretary of the Company at 660 Engineering Drive, Technology
Park/Atlanta, Norcross, Georgia, 30092, or by executing and
delivering to the Secretary of the Company a proxy bearing a
later date. A proxy may also be revoked at the Special Meeting
by any shareholder who is present and elects to vote in person.
Voting of Proxies
When the enclosed proxy is properly executed and returned,
the shares that it represents will be voted at the Special
Meeting in accordance with the instructions noted thereon. In
the absence of such instructions, the shares represented thereby
will be voted in favor of the Proposal. The Board of Directors
does not know of any other business to be brought before the
Meeting, but it is intended that as to such other business, if
any, a vote may be cast pursuant to the proxy in accordance with
the judgment of the person or persons acting thereunder.
Only holders of record of issued and outstanding ELMG Shares
at the close of business on November 26, 1996, are entitled to
notice of, or to vote at, the Special Meeting. Each holder is
entitled to one vote for each ELMG Share on the record date. On
November 26, 1996, there were 7,641,073 ELMG Shares outstanding
and entitled to vote.
Vote Required
Assuming the presence of a quorum at the Special Meeting,
the Proposal will be approved by favorable vote of a majority of
the ELMG Shares actually voted. Abstentions and broker non-votes
will be considered as present for the purposes of determining the
presence of a quorum, but will not otherwise be considered in
determining the outcome of the vote.
Cost of Solicitation
The cost of soliciting proxies will be borne by the Company.
Officers, directors and employees of the Company may solicit
proxies by telephone, telegraph or personal interview.
1997 Shareholder Proposals
As stated in the Proxy Statement for the Company's 1996
Annual Meeting of Shareholders, any proposals by shareholders
intended for presentation at the 1997 Annual Meeting of
Shareholders must be received by the Company at its principal
executive offices, attention of the Secretary, no later than
December 1, 1996, in order to be included in the proxy materials
for that Meeting.
THE PROPOSAL
Summary
LXE is an 81.5% subsidiary of the Company. LXE is a leading
supplier of wireless communications systems for computerized
materials handling, information management and other operations
that require mobility and real-time access to data. LXE's
principal executive offices are located at 303 Research Dr.,
Norcross, Georgia 30092, and its telephone number is (770) 447-4224.
The Company's Board is proposing that the Company acquire
the outstanding LXE Shares currently held by persons other than
the Company. In order to effect this acquisition, the Company
has initiated an exchange offer (the "Exchange Offer") under
which all minority LXE shareholders may surrender any and all of
their LXE Shares in exchange for ELMG Shares at a ratio of .75
ELMG Shares for each LXE Share tendered. If as a result of the
Exchange Offer the Company becomes the holder of in excess of 90%
of the outstanding LXE Shares, the Company would have the right
to cause, without further vote of the LXE shareholders, a merger
(the "Merger") of LXE with a newly formed subsidiary of the
Company, as a result of which LXE would become a wholly owned
subsidiary of the Company and all remaining LXE Shares held by
the minority LXE shareholders would be converted into ELMG
Shares, at the same ratio. It is a condition of ELMG's
acceptance of LXE Shares in the Exchange Offer that ELMG receive
sufficient tenders to increase its LXE ownership above 90%, and
that ELMG exercise its right to cause the Merger immediately upon
acquisition of tendered LXE Shares. In that event, the terms of
the Merger would result in the conversion of all options (the
"LXE Options") outstanding under the LXE 1989 Stock Incentive
Plan into options (the "ELMG Options") to acquire a proportionate
number of ELMG Shares under the ELMG 1992 Stock Incentive Plan
(the "ELMG Stock Plan"). The LXE Options are held by current and
former employees, directors and officers of LXE, and the option
prices of the ELMG Options would also be adjusted upwards such
that the aggregate exercise price of the options would be
unchanged by the conversion.
The approval of the Company's shareholders is being sought
primarily in order to comply with rules of the National
Association of Securities Dealers for trading of the ELMG Shares
on the NASDAQ National Market System. These rules relate to
transactions in which officers, directors or substantial
shareholders have significant interests. Also, shareholder
approval is required of amendments to the ELMG Stock Plan that
permit the conversion of LXE Options into ELMG Options. See
"Shareholder Approval -- Reasons for Seeking Shareholder
Approval."
A vote FOR the Proposal will constitute a vote approving
each of the matters described as part of it. The Company is not
seeking separate votes on the individual matters because the
Company intends to accept shares under the Exchange Offer, and
thereby further reduce the liquidity of the trading market for
the LXE Shares, only if it has received the shareholder approval
required to exchange and/or convert all outstanding LXE Shares
and LXE Options into ELMG Shares and ELMG Options.
Background
In 1991, ELMG caused LXE, which at that time was its wholly
owned subsidiary, to offer approximately 25% of its outstanding
shares in an initial public offering. This offering was intended
to raise capital for further expansion of LXE's business, and to
increase investor familiarity with the LXE component of ELMG's
business. At that time, the defense markets, which had been
central to ELMG's growth and profitability during the 1980's, had
been declining in volume and profitability, while LXE's
commercial wireless data communications business, in various
materials handling settings, had been expanding. The offering
was completed in April 1991, and ELMG believes that the intended
objectives were achieved.
In recent years, LXE's profitability has not been maintained
at stable or growing levels, principally due to increased
competition in the materials handling market for LXE's
traditional wireless local area network ("LAN") products, and to
difficulties LXE has experienced in timely introducing new
generations of products needed to meet evolving technical
requirements. At the same time, the boundaries between LXE's
commercial LAN products and the balance of ELMG's business have
become less distinct as other commercial markets and applications
for wireless communications products have been developing, and as
an increasing portion of ELMG's other business has shifted to
commercial, rather than governmental, customers. In this
environment, ELMG has become increasingly aware of opportunities
for LXE and other components of ELMG's business to share, or
jointly develop, technology and markets.
As a result of these various considerations, during 1995
ELMG began reviewing the appropriateness of increasing its
ownership of LXE. In late August 1995, ELMG's Board authorized
management to identify investment banking assistance in analyzing
methods of increasing ELMG's ownership of LXE, to prepare a plan
for protecting the Company's level of LXE ownership if favorable
LXE share prices resulted in significant exercises of outstanding
LXE Options, and to purchase (if available at approximately then-current
market prices) the LXE Shares held by two partnerships
controlled by David A. Rocker. The Rocker partnership shares at
that time constituted the largest single holding of any LXE
shareholder other than ELMG, and were sufficient to raise ELMG's
LXE ownership above the 80% level required for filing
consolidated income tax returns.
In September 1995, prior to management acting on the Board's
various authorizations, and before any proposals were formulated,
adopted or presented to any LXE shareholders, LXE announced an
anticipated loss for the quarter ending September 30, 1995. From
a closing price of $13.50 at the end of August, the reported
closing sales prices for the LXE Shares declined to $10.25 at the
end of September and $8.00 at the end of November and December
1995, representing an aggregate decline of approximately 40%. In
view of the depressed market for LXE Shares and the efforts being
undertaken to return LXE to profitability, management concluded,
in consultation with the Board, that it was no longer desirable
or appropriate at that time to pursue<PAGE>
100% ownership of LXE.
However, management continued to believe
that ELMG would benefit by acquiring the Rocker partnership
shares and increasing its LXE ownership above 80%. Based on
preliminary discussions with Mr. Rocker, management concluded
that these shares were not available at the then-current
depressed market prices, and management sought and received the
Board's authorization to negotiate a transaction at a premium
over market prices using ELMG Shares for all or a portion of the
purchase price. Further preliminary conversations with Mr.
Rocker in October 1995 caused management to conclude that at that
time the parties would be unable to agree on key terms, including
the extent to which any purchase price would be paid by delivery
of ELMG Shares, and the matter was not pursued until January
1996. Negotiations commencing at that time resulted in the
acquisition, on February 23, 1996, of 548,200 LXE Shares. In
this transaction, ELMG delivered to the Rocker partnerships .8337
ELMG Shares plus $.912 in cash for each LXE Share acquired, and
also received the agreement of Mr. Rocker and the partnerships to
make no further purchases of LXE Shares for a period of five
years. At the date of closing, the ELMG Shares had a closing
market value of $12.25 per Share, or $10.21 for each .8337 ELMG
Share. The ELMG Shares delivered in this transaction were not
registered under state or federal securities laws, and could not
be freely traded by their holders, but the Company agreed to
register such shares for resale by such holders, and subsequently
obtained such registration.
ELMG also acquired 19,874 LXE Shares in a cash transaction,
at $9.44 per Share, on May 1, 1996; this transaction was with a
market maker that had acquired these shares from a former LXE
executive officer who had terminated as an employee and had
exercised an option previously granted to him as an employee.
This transaction was entered in connection with the conclusion of
the former officer's employment relationship, and in order to
protect ELMG's 80% ownership level.
LXE reported a further loss for the quarter ended March 31,
1996, but returned to profitability in the quarter ended June 30,
1996, and was expected by management to report improving
performance in the immediately succeeding quarters. As a result,
in July 1996 ELMG's management believed it would be appropriate
to again consider acquiring full ownership of LXE. Management
conducted a review of the benefits and costs of such a
transaction, and concluded that the factors identified in 1995
had grown in importance since that time. The matter was reviewed
with the ELMG Board at a meeting held on July 31, 1996. Based on
the potential perceived advantages, the Board authorized
management to continue the review process, and to retain
investment banking assistance in evaluating whether to propose
such a transaction and in developing a proposed structure and
terms. Because of the significant holdings of LXE Shares and LXE
Options of four members of the ELMG Board, John B. Mowell, John
E. Pippin, Don T. Scartz and Thomas E. Sharon, the Board
delegated to a Special Committee, consisting of Anthony J.
Iorillo, Jerry H. Lassiter, and John H. Levergood, the
responsibility for approving the retention of an investment
banker, and for making a recommendation to the full Board as to
whether to proceed with a transaction and if so on what terms.
At a meeting held on October 2, 1996, following presentations by
and discussions with ELMG's management and Oppenheimer & Co.,
Inc. ("Oppenheimer"), which had been retained to provide
investment banking assistance, the Special Committee unanimously
approved the recommendation that ELMG proceed with the Exchange
Offer, on the terms described in this Proxy Statement. At a
meeting held on October 3, 1996, the full ELMG Board unanimously
accepted and approved the Special Committee's recommendation.
Reasons for the Exchange Offer and Merger
ELMG's management and Board have initiated the Exchange
Offer, and are seeking shareholder approval for the Exchange
Offer and proposed Merger, for the following reasons:
Ownership of 100% of the LXE Shares would facilitate
and encourage greater exchange and sharing of technical and
marketing resources among LXE and ELMG's other operating
subsidiaries, particularly EMS Technologies, Inc., which is
a 100%-owned subsidiary and possesses superior RF wireless
engineering capabilities. Management believes that access
to such capabilities will be important in LXE's future
efforts to expand its wireless networking business into new
applications and markets, and that greater access to LXE's
marketing an d product experience will be helpful to EMS
Technologies as it seeks to further increase its sales of
commercial wireless communications products. With LXE as a
100%-owned subsidiary, such exchange and sharing can be effected
more expeditiously and with simpler review and approval procedures
than is possible under current procedures, which are designed to
protect the interests of the minority LXE shareholders.
As a 100%-owned subsidiary, LXE would no longer incur
separate accounting, SEC reporting, shareholder reporting,
annual meeting and independent board expenses. Management
estimates that elimination of these expenses would result in
savings of approximately $420,000 per year.
Management believes the greater ease in sharing of
resources among subsidiaries would permit consolidation of
various functions and operations, and more efficient
allocation and operation of production facilities, resulting
in direct savings believed to be significant but for which
no firm estimates have been developed.
It is management's belief, based on its participation
in conferences and discussions with analysts and other
members of the investment community, that LXE's status as a
separately-traded company results in disproportionate
attention to LXE's role within the ELMG organization, and
detracts from ELMG's ability to communicate the role and
capabilities of its various subsidiaries in the context of
ELMG's overall business strategies.
Conversion of the LXE minority shareholder interest
into additional outstanding ELMG shares would increase
ELMG's share capitalization and number of shareholders, and
may thus encourage market makers and analysts to participate
in the market for the ELMG Shares.
ELMG believes that the conversion on the proposed
terms of the LXE Shares held by minority LXE shareholders
may be attractive to those shareholders because, among other
possible reasons, the trading market for LXE Shares has been
relatively illiquid with much lower trading volumes and much
wider bid-asked spreads than the market for ELMG Shares, and
thus may be less attractive to potential investors,
particularly those interested in liquidity for a substantial
holding. In addition, as holders of ELMG Shares, LXE
shareholders would retain a significant indirect interest in
LXE.
Management believes that if the Exchange Offer is successful
the foregoing benefits would be obtained with no earnings-per-share
dilution in 1997 or later years. This belief reflects
projections of 1997 LXE earnings prepared internally for normal
business planning purposes. The preparation and analysis of such
projections of future operating results are, in management's
view, an essential tool in managing the business of LXE and ELMG.
However, neither management nor the ELMG Board can know the
course of future events, and thus any such projections are no
more than management's expectations, based on its current
understanding of factors it believes to be relevant, and are
subject to future developments and events that cannot currently
be known by, and may be beyond the control of, LXE or ELMG. For
example, management's projections of LXE's earnings in 1997
could be materially affected, negatively or positively, by
unexpected product advances by competitors, by the unexpected
development of alternative technologies, by unexpected growth
rates (either faster or slower) in existing and target markets
for LXE's products, by currently unknown technical breakthroughs
by LXE's engineering staff, by unexpected difficulties in
designing and manufacturing new products, and by general economic
trends and conditions both in the United States and abroad.
Management's belief that the issuance of ELMG Shares in the
Exchange Offer and Merger would not adversely affect future
earnings per share is dependent on the anticipated savings
described above. These savings include both LXE's expenses as a
separate publicly traded company, as to which quantified savings
are readily identifiable, and other savings, which have not been
specifically quantified, arising from greater ease in sharing
resources throughout the organization.
Determination of the Exchange Ratio
The exchange ratio was determined by ELMG's Board, based on
the recommendation of the Special Committee. The Special
Committee and ELMG's Board each concluded that the exchange ratio
was reasonable and appropriate in light of numerous factors,
principally including: relative historical and anticipated
contributions to ELMG's earnings; trading prices for the LXE and
ELMG Shares; market valuations of comparable companies as
multiples of selected operating results, including projected
revenues and earnings per share; the terms of comparable minority
buy-out transactions; the fact that tendering LXE shareholders
would continue to participate in the business of LXE as holders
of ELMG Shares; management's perception of LXE's business
prospects; and the perceived benefits to ELMG of obtaining 100%
ownership of LXE.
In considering the foregoing factors, the ELMG Special
Committee and board used estimated 1997 earnings for LXE of $.59
per share, an estimate that had been prepared by ELMG and LXE for
normal business planning purposes. This projection was not
prepared with a view toward public disclosure, but was believed
material and relevant by the Special Committee and Board in
connection with their determination of the exchange ratio, and
for that reason is being disclosed in this Proxy Statement. As
discussed above at "Reasons for the Exchange Offer and Merger,"
such projections represent management's expectations, based on
its current understanding of factors it believes to be relevant,
and are subject to future developments and events that cannot
currently be known by, and may be beyond the control, LXE of
ELMG. Accordingly, actual results could vary significantly from
those set forth in such projections.
The exchange ratio selected by the Special Committee and
ELMG Board represents a premium of 22.1% based on the relative
final closing trading prices of the ELMG Shares ($17.50) and LXE
Shares ($10.75) on October 2, 1996, the last trading day
preceding the date on which the exchange ratio was set by the
ELMG Board and the Exchange Offer and proposed Merger were
announced, and a premium of 15.5% based on the relative average
closing reported sales prices during the ten trading days ending
on such date. Based on relative closing high bid prices (which
are the highest prices that a market maker is at that time
offering to pay to an investor seeking to sell his or her
shares), the premiums were 29.6% and 20.4%, respectively. The
high and low NASDAQ sales prices on October 2, 1996, were $17.75
and $16.875 for the ELMG Shares, and $10.75 and $10.125 for the
LXE Shares.
In determining the exchange ratio, the Special Committee and
Board received various analyses performed by Oppenheimer. Among
other matters, these analyses included comparisons of certain
historical and estimated earnings and other operating and
financial data and ratios, and of multiples of income statement
and operating cash flow parameters of certain other publicly
traded companies deemed to be generally comparable to each of
ELMG and LXE; the analysis of ratios of price per share to 1997
estimated earnings per share ("EPS") reflected that companies
selected as comparable to LXE traded at multiples to projected
1997 EPS of between 12.1x and 18.3x, with a representative
multiple of 15.5x, and those selected as comparable to ELMG
traded at average and representative multiples of 19.1x and
16.6x, respectively; applying these representative multiples to
the respective projected 1997 EPS of each company, as prepared by
management, results in an implicit exchange ratio of
approximately .6 ELMG Shares for each LXE Share.
An analysis provided by Oppenheimer of the contribution of
the interest of the currently outstanding LXE minority shares to
ELMG's various combined company operating results for 1995 and
(on a projected basis) 1996 and 1997, revealed that their
interest provided from 8.3% (in 1996) to 8.9% (in 1995) of
combined revenues; from 4.1% (in 1995) to 7.7% (in 1997) of
combined operating cash flow; from negative 2.8% in 1995 to 8.0%
(in 1997) of combined operating income; and from negative 1.6%
(in 1995) to 8.5% (in 1997) of combined net income; the exchange
ratio that would result in LXE minority shareholders holding 8.5%
of the ELMG Shares outstanding after the Merger (based on ELMG
Shares outstanding on October 2, 1996), is .68 ELMG Shares for
each LXE Share. Oppenheimer also provided an analysis of the
relationship of the daily closing prices of LXE Shares relative
to the daily closing prices of ELMG Shares, which indicated that
this ratio has been as high as 1.8 during the past four years,
but on October 1, 1996 (two business days prior to announcement
of the Transaction) was 0.57.
Oppenheimer's analysis of the premiums paid in 41 pending
and completed minority-buyout transactions occurring since
January 1992 revealed that the average premiums paid in these
transactions, as a percentage of the acquired companies' stock
prices one day, one week and four weeks prior to announcement of
the transaction, ranged from 19.4% to 23.3%.
Oppenheimer advised the Special Committee that, in its view,
the three most important analytical approaches to be considered
in determining the exchange ratio were those based on multiples
of 1997 estimated earnings, relative contribution to combined-company
operating results, and premiums to market in other
minority-buyout transactions. While various analytical
approaches could be used to support lower or higher exchange
ratios, Oppenheimer stated its view that an exchange ratio of .70
to .75 was reasonable and consistent with the three principal
analytical approaches. Oppenheimer noted that an exchange ratio
in such range would provide a premium over recent market price
exchange ratios, while resulting in ELMG per-share pro forma
earnings dilution at minimal levels that could reasonably be
expected to be offset by synergistic operating efficiencies.
Oppenheimer was not requested to and did not provide an opinion
as to the fairness of the proposed transaction to the
shareholders of either ELMG or LXE.
In selecting an exchange ratio of .75 ELMG Shares for each
LXE Share, the ELMG Special Committee and Board considered
Oppenheimer's advice (which did not constitute an opinion as to
fairness) that an exchange ratio of .70 to .75 was reasonable and
consistent with the three principal analytical approaches; the
Special Committee and Board also gave substantial weight to the
premiums to market price that are typical in minority-buyout
transactions, to the expectation that any earnings dilution from
the Transaction would be at minimal levels that could reasonably
be expected to be offset by synergistic operating efficiencies,
and to the overall benefits of the Transaction to ELMG as
described above at "Reasons for the Exchange Offer and Merger."
The forecasts of the future operating results of ELMG and
LXE utilized by Oppenheimer in its analyses were provided to or
reviewed for Oppenheimer by the management of each of ELMG and
LXE. ELMG and LXE do not publicly disclose internal management
forecasts of the type provided to Oppenheimer in connection with
the review of the Exchange Offer and Merger, and such forecasts
were not prepared with a view toward public disclosure. The
forecasts were based on numerous variables and assumptions which
are inherently uncertain, including, without limitation, factors
related to general economic and competitive conditions.
Accordingly, actual results could vary significantly from those
set forth in such forecasts. In addition, the analyses performed
by Oppenheimer do not purport to be appraisals or necessarily to
reflect the prices at which companies or their securities
actually may be sold.
Oppenheimer provided advice to the Special Committee and
Board in connection with their consideration of the Exchange
Offer and Merger. Oppenheimer was not requested to, and has not,
rendered any opinion as to the fairness of the Exchange Offer or
Merger, from a financial point of view or otherwise, to either
ELMG shareholders or LXE shareholders, and Oppenheimer makes no
recommendation as to whether ELMG shareholders should vote in
favor of the Proposal.
The Exchange Offer
ELMG initiated the Exchange Offer on November 27, 1996.
Under the Exchange Offer, ELMG is offering to exchange .75 ELMG
Shares for each LXE Share tendered to it, subject to shareholder
approval of the Proposal at the Special Meeting. The Exchange
Offer is being made for any and all outstanding LXE Shares not
already owned by ELMG (the "LXE Minority Shares").
The maximum number of shares issuable under the Exchange
Offer and Merger is 773,583 ELMG Shares, which would constitute
9.2% of the ELMG Shares outstanding upon completion of the
transaction, assuming that none of the currently outstanding LXE
or ELMG Options are exercised prior to that time; if all
currently outstanding LXE and ELMG Options were exercised, the
ELMG Shares held in respect of converted LXE Shares or Options
would constitute 11.2% of those then outstanding.
Two holders of in excess of 5% of the ELMG Shares are also
substantial holders of LXE Shares, and certain directors and
executive officers of ELMG are the beneficial owners of LXE
Shares or LXE Options. See "Security Ownership." Each of the
individual directors and executive officers has advised ELMG of
his intention to tender the LXE Shares controlled by him in the
Exchange Offer, and to vote the ELMG Shares controlled by him in
favor of the Proposal. ELMG has been advised by Kopp Investment
Advisors, Inc. ("Kopp Advisors") that it currently intends to
tender its LXE Shares in the Exchange Offer, and to recommend to
the beneficial owners of the ELMG Shares controlled by it that
they be voted in favor of the Proposal. ELMG has not requested
or received a binding commitment from these directors, officers
or shareholders with respect to their tender of LXE Shares or
their voting of ELMG Shares.
Effect of the ELMG Stockholder Rights Plan. On March 23,
1989, the ELMG Board adopted the ELMG Stockholder Rights Plan,
under which the acquisition by any person of 20% or more of the
outstanding ELMG Shares, without prior approval of disinterested
members of the ELMG Board, would result in distribution to other
ELMG shareholders of rights that would significantly dilute the
interest of the 20% shareholder. The Plan is intended to provide
the Board with sufficient time and leverage to adequately
represent shareholder interests in response to unsolicited, and
potentially abusive or unfair, takeover efforts. As set forth at
"Security Ownership," Kopp Advisors beneficially owns 18.3% of
the currently outstanding ELMG Shares, plus 5.4% of the currently
outstanding LXE Shares, and may in the course of its normal
activities acquire beneficial ownership of additional ELMG or LXE
Shares. In that event, if the LXE Shares held by Kopp Advisors
are exchanged in the Exchange Offer or converted in the Merger,
Kopp Advisors could beneficially own in excess of 20% of the ELMG
Shares outstanding after the Merger. In order to make it
possible for Kopp Advisors to tender its LXE Shares in the
Exchange Offer, if it wishes to do so, and to support the
Proposal as an ELMG shareholder, without further restricting its
investment activities prior to the completion of the Transaction,
the Board has formally consented to the acquisition of additional
ELMG Shares by Kopp Advisors in the Exchange Offer and proposed
Merger, in an amount such that its ownership after the Merger
would not exceed 23% of the ELMG Shares outstanding at that time.
Under the Stockholder Rights Plan, Kopp Advisors could thereafter
acquire up to an additional 2% of the outstanding ELMG Shares
(for aggregate beneficial ownership not exceeding 25%) without
triggering the rights distribution.
Expenses. For its services in providing advice to the
Special Committee and the ELMG Board, and for serving as Dealer
Manager for the Exchange Offer, ELMG is paying Oppenheimer
$125,000 plus $175,000 upon the acquisition under the Exchange
Offer of not less than 50% of the LXE Minority Shares. In
addition, and regardless of whether ELMG is successful in
acquiring 50% or more of the LXE Minority Shares, ELMG has agreed
(i) to reimburse Oppenheimer for its out-of-pocket expenses, and
(ii) to indemnify Oppenheimer and certain related persons against
certain liabilities and expenses in connection with its services,
including certain liabilities under the federal securities laws.
ELMG has also agreed to pay the costs incurred by LXE and the
Special Committee of the LXE Board in determining and
disseminating to LXE's shareholders that Committee's position
with respect to the Exchange Offer; such costs are expected to
aggregate $150,000, including $100,000 in fees and expenses of
The Robinson-Humphrey Company, Inc., for services as financial
advisor to the LXE Special Committee. Other expenses of the
Exchange Offer to be incurred by ELMG, including legal,
accounting, printing and mailing costs, are expected to aggregate
approximately $200,000.
The Proposed Merger
Section 14-2-1104 of the Official Code of Georgia Annotated
(the "Short-Form Merger Provision") provides that the holder of
at least 90% of the outstanding shares of a Georgia corporation
may cause the majority-owned subsidiary to be merged with the
parent without a vote or other consent of other shareholders of
the subsidiary. In order to achieve its objectives as described
above at "Reasons for the Exchange Offer and Merger," ELMG
intends, subject to ELMG shareholder approval of the Proposal, to
exercise its rights under the Short-Form Merger Provision if
sufficient LXE Shares are tendered in the Exchange Offer for
ELMG's aggregate ownership of outstanding LXE Shares to exceed
90%. In that event, ELMG would transfer its LXE Shares to a
wholly owned subsidiary ("LXE Merger Subsidiary") formed for the
purpose, and would cause LXE Merger Subsidiary to effect the
Merger. In the Merger, LXE would become a wholly-owned
subsidiary of ELMG, and any then-remaining holders of LXE
Minority Shares would receive, automatically and without further
action on their part, ELMG Shares in the ratio of .75 ELMG Shares
for each LXE Share.
ELMG intends for the Exchange Offer and Merger to be
accomplished as a tax-free reorganization, such that neither
ELMG, LXE nor holders of LXE Minority Shares would recognize
taxable income in the transaction. Based on advice of tax
counsel, and in order to provide assurance to holders of LXE
Minority Shares that tenders may be accomplished on a tax-free
basis, ELMG has specified as a condition, which may not be
waived, of its acceptance of LXE Shares in the Exchange Offer
that it receive tenders of sufficient LXE Shares to increase its
ownership of outstanding LXE Shares to at least 90%, and that it
cause the Merger to occur immediately following its acquisition
of LXE Shares in the Exchange Offer. In order to achieve this
90% threshold, ELMG must receive tenders of 473,993 of the
outstanding 1,031,444 LXE Minority Shares, assuming no additional
LXE Shares have been issued pursuant to exercises of LXE Options.
Conversion of LXE Options. LXE has maintained the LXE 1989
Stock Incentive Plan (the "LXE Stock Plan") under which it has
from time to time issued options to acquire LXE Shares to its
directors, officers and other senior employees. All such options
have been issued at the fair market value of the LXE Shares on
the date the option was granted. Options to acquire 366,543 LXE
Shares remain outstanding, and options for 293,868 shares are
currently exercisable at prices ranging from $3.66 to $18.25.
The remaining options for 52,675 shares become exercisable not
later than September 26, 2002, at option prices ranging from
$5.66 to $11.25. The Special Committee and other members of
ELMG's Board believe that stock options are an important tool for
attracting and retaining qualified personnel, and for aligning
the interests of key employees with those of the shareholders.
As a result, the Special Committee and ELMG Board believe that
the LXE Options should be converted into options to acquire .75
ELMG Shares for each LXE Share under option, subject to the same
vesting and expiration dates and other material terms as the
existing LXE Options. The exercise prices of the ELMG Options
would be adjusted upwards such that the aggregate exercise price
for each option would be unchanged by the Merger conversion.
Under the LXE Stock Plan, the outstanding LXE Options could,
as an alternative to conversion into ELMG Options, be canceled in
the Merger, but only if the option holders first had the
opportunity to exercise their options and thus receive ELMG
Shares in the Merger. The Special Committee, the Compensation
Committee of the ELMG Board, and the full ELMG Board all believe
that it is preferable and more consistent with the original
intent of the LXE Options to convert them into ELMG Options,
thereby maintaining the equity incentives that options provide,
and limiting the potential adverse effects of substantial sales
of ELMG Shares by officers and employees who, if the cancellation
alternative were elected, would be required to cover both the
option exercise prices and the taxes on income realized on
exercise. The Special Committee, the Compensation Committee and
the full ELMG Board also concluded that converting the
outstanding LXE Options into a proportionate number of comparable
ELMG Options was preferable to making cash payments to buy out
LXE Options at their respective spreads, because the cash-buyout
approach would involve current accounting charges and use of
cash, and would also eliminate the continuing incentives intended
at the time the LXE Options were granted.
Details concerning LXE and ELMG Options held by ELMG
directors, executive officers and employees are set forth under
the heading "Security Ownership -- Additional Information About
LXE Options."
Shareholder Approval
A vote FOR the Proposal would constitute a vote in favor of
shareholder approval of each of the following actions.
* Issuance of up to 773,583 ELMG Shares in exchange for
the acquisition of outstanding LXE Minority Shares in the
Exchange Offer and the Merger, plus the issuance of such
additional LXE Shares as may be required to acquire any LXE
Shares hereafter issued upon the exercise of LXE Options,
including the issuance of ELMG Shares to persons who are
holders of 5% or more of the outstanding ELMG Shares, or who
are directors or officers of ELMG.
* The conversion of outstanding LXE Options for up to
366,543 LXE Shares into ELMG Options for up to 274,907 ELMG
Shares, subject to adjustments in the exercise prices as
described under the foregoing heading, "The Proposed Merger
-- Conversion of LXE Options."
* Amendment of the ELMG Stock Plan to increase the number
of ELMG Shares issuable thereunder by the number of the ELMG
Shares issuable as a result of conversion of LXE Options,
and to issue ELMG Options to all current holders of LXE
Options as described under "The Proposed Merger --
Conversion of the LXE Options."
Reasons for Seeking Shareholder Approval. ELMG is seeking
shareholder approval of the Proposal for the following reasons:
* The NASD's rules for securities traded on the NASDAQ
National Market System require shareholder approval of
transactions in which any director, officer or substantial
shareholder of the traded company has a 5% or greater
interest (or such persons collectively have a 10% or greater
interest) in the company to be acquired, or in the
consideration to be delivered in the transaction, and the
present or potential issuance of common stock could result
in an increase in outstanding common shares of 5% or more.
As set forth under the heading "Security Ownership," certain
holders of in excess of 5% of the ELMG Shares, as well as
certain ELMG directors and officers, have interests in LXE
exceeding these individual or collective threshold levels.
* The Shares remaining available for option under the
ELMG Stock Plan are not sufficient to allow conversion of
all outstanding LXE Options -- of the 500,000 shares
authorized under that Plan, 73,280 shares remain available
for options, whereas up to 274,907 shares would be required
for conversion of the LXE Options in the Merger. In
addition, some holders of LXE Options are not currently
employees of LXE or ELMG and would not be eligible to
receive a current grant of an ELMG Option through the Plan.
Under both the ELMG Stock Plan and NASD rules, shareholder
approval is required to amend that Plan to increase the
number of available shares and to issue ELMG Options to all
current holders of LXE Options.
ELMG is not providing for or seeking separate approval of
the various items included within the Proposal. The Special
Committee, the Compensation Committee and the ELMG Board have
unanimously concluded that it would not be appropriate or in
ELMG's interest to substantially reduce the outstanding LXE
Shares, and thereby further reduce the trading market for those
Shares, without providing for the exchange or conversion of all
LXE Minority Shares, and for the conversion of outstanding LXE
Options issued as part of LXE's incentive and compensation
programs for its directors and employees. These Committees and
the ELMG Board have also unanimously concluded that it is not in
ELMG's interest to pursue either of the alternative dispositions
of the LXE Options in the Merger, as described under the heading
"The Proposed Merger -- Conversion of LXE Options," even though
those alternatives do not require shareholder approval.
Except with respect to requirements for shareholder approval
specified in the ELMG Stock Plan, shareholder approval is not
required by applicable state corporate law in order to complete
either the Exchange Offer or the Merger. Dissenting ELMG
shareholders have no rights of appraisal or similar rights with
respect to the Merger or other matters included in the Proposal.
----------------------
THE BOARD OF DIRECTORS, INCLUDING THOSE MEMBERS WHO HAVE NO
PERSONAL INTEREST IN LXE SHARES OR OPTIONS, UNANIMOUSLY
RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSAL.
SECURITY OWNERSHIP
The following table sets forth certain information
concerning ELMG Shares and LXE Shares beneficially owned
as of October 3, 1996 (except as otherwise noted), by the
Company's directors; executive officers named in the Summary
Compensation Table appearing below; John J. Farrell, Jr.,
President of LXE, who is considered to be an ELMG executive
officer for these purposes and is expected to be included as
a named officer with respect to 1996; and by persons who
beneficially own more than 5% of the ELMG Shares. The table
also sets forth the potential issuance of ELMG Shares as a result
of the Exchange Offer and proposed Merger, based on each person's
holdings of LXE Shares or LXE Options. Except as otherwise
indicated, each person possessed sole voting and investment
power with respect to the shares shown.
<TABLE>
ELMG Shares LXE Shares
-------------------------- ------------------------- Potential ELMG
Shares Upon Potential
Amount of Approximate Amount of Approximate Exchange/ Percent of
Beneficial Percent of Beneficial Percent of Conversion of Outstanding
Name Ownership Class Ownership Class LXE Shares ELMG Shares
---- --------- ---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Kopp Investment Advisors, Inc. 1,427,855 (1) % 310,305(1) % 1,710,583 %
6600 France Avenue So.
Edina, Minnesota 55435
David A. Rocker 779,252 (2) 9.9% - * 779,252 8.9%
Suite 1759
45 Rockefeller Plaza
New York, New York 10111
Dimensional Fund Advisors, Inc. 491,499 (3) 6.2% 168,900 3.2% 618,174 7.0%
1299 Ocean Avenue
Santa Monica, California 90401
Brinson Partners, Inc. 491,800 6.2% - * 491,800 5.6%
209 South LaSalle
Chicago, Illinois 60604-1295
Wellington Management Company 403,000 5.1% - * 403,100 4.6%
75 State Street
Boston, Massachusetts 02109
Anthony J. Iorillo 2,000 (4) * - * 2,000 *
Jerry H. Lassiter 17,672 (4) * - * 17,672 *
John H. Levergood 2,000 (4) * - * 2,000 *
John B. Mowell 30,784 (4) * 26,900 (5) * 50,959 *
John E. Pippin 223,865 (4) 2.8% 114,210 (5) 2.0% 309,523 3.5%
Don T. Scartz 54,728 (4) * 4,092 (5) * 57,797 *
Thomas E. Sharon 164,155 (4) 2.1% 48,219 (5) * 200,319 1.8%
William S. Jacobs 22,033 (4) * 7,000 (5) * 26,751 *
John J. Farrell, Jr. 6,000 (4) * - * 6,000 *
Jeffrey A. Leddy 33,199 (4) * - * 33,199 *
Neilson A. Mackay 22,336 (4) * - * 22,336 *
All directors and executive officers
as a group (11 persons) 578,772 7.3% 200,421 3.5% 728,566 7.6%
- ------------------------------------
* Percentage of shares beneficially owned does not exceed 1%
</TABLE>
(1) Information as of November 11, 1996. Kopp Investment
Advisors, Inc. has advised that it exercises investment
discretion as to all listed shares, but exercises voting power
only as to approximately 85,000 ELMG Shares and 15, 000 LXE
Shares. Kopp Advisors is the record owner of 15,000 ELMG Shares
and 5,000 LXE Shares.
(2) David A. Rocker has advised that the shares of which he
is deemed to have beneficial ownership are owned by Rocker
Partners, L. P., a New York limited partnership (733,496 shares)
and Compass Holdings, Ltd., a corporation organized under the
Business Companies Ordinance of the British Virgin Islands
(81,956 shares). Ownership data is as of September 20, 1996.
(3) Dimensional Fund Advisors, Inc. (Dimensional) has
advised that the shares of which it is deemed to have beneficial
ownership are held in the portfolios of DFA Investment Dimensions
Group Inc., a registered open-end investment company, or in
series of the DFA Investment Trust Company, a Delaware business
trust, or the DFA Group Trust and DFA Participation Group Trust,
investment vehicles for qualified employee benefit plans;
Dimensional serves as investment manager to all of these
entities. Dimensional disclaims beneficial ownership of all such
shares. Ownership data is as of September 20, 1996.
(4) Includes shares that are subject to currently
exercisable options in the amounts of 2,000 for Mr. Iorillo,
10,782 for Mr. Lassiter, 2,000 for Mr. Levergood, 10,782 for Mr.
Mowell, 55,514 for Dr. Pippin, 42,000 for Mr. Scartz, 75,347 for
Dr. Sharon, 9,000 for Mr. Jacobs, 28,000 for Mr. Leddy, and
20,000 for Dr. Mackay. For Mr. Mowell, Dr. Pippin and Mr.
Jacobs, these totals also include 5,000, 42,593 and 7,400 shares,
respectively, as to which each person shares voting and
investment power with family members but disclaims beneficial
interest.
(5) Includes shares that are subject to currently
exercisable options in the amounts of 15,900 for Mr. Mowell,
95,400 for Dr. Pippin, 40,893 for Dr. Sharon, 2,000 for Mr.
Scartz, and 5,000 for Mr. Jacobs. The total for Mr. Mowell also
includes 1,000 shares, and for Mr. Jacobs 300 shares, as to which
each shares voting and investment power with a family member, but
disclaims beneficial interest.
------------------------
Additional Information About LXE Options
The following table provides information concerning the
expiration dates and exercise prices of LXE Options held by
ELMG directors and executive officers and other specified
groups, and of the ELMG Options into which their LXE Options
would be converted if the proposed Merger occurs. Expiration
dates would not be affected. The stated value of unexercised
in-the-money options is the same for the ELMG Options following
the Merger as for the converted LXE Options prior to the Merger.
<TABLE>
LXE Options Currently Held ELMG Options Received in the Merger
-------------------------- ----------------------------------------------------
Number of Number of Market Value Value of Unexercised
Underlying Expiration Exercise Underlying Exercise of Underlying In-the-Money Options
Name Shares Dates Prices Shares Prices ELMG Shares* Converted in the Merger*
---------- ---------- --------- ---------- ---------- ------------ ------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
John B. Mowell 15,900 9/26/00 $5.66 11,925 7.55 251,916 161,915
John E. Pippin 95,400 1/01/99 3.77 71,550 5.03 1,511,494 1,151,492
Don T. Scartz 19,875 9/26/02 5.66 14,906 7.55 314,895 124,144
2,000 4/24/98 15.25 1,500 20.33 31,688 -
Thomas E. Sharon 40,893 1/01/99 3.77 30,670 5.03 647,898 332,716
William S. Jacobs 5,000 3/13/98 18.25 3,750 24.33 79,219 -
John J. Farrell, Jr. 20,000 5/15/04 15.00 15,000 20.00 316,875 -
All Executive
Officers as a Group
(4 persons) 87,768 1/01/99 - 3.77 - 65,826 5.03 - 1,390,575 456,860
5/15/04 18.25 24.33
Non-Executive
Directors as a
Group
(2 persons) 111,300 1/01/99 - 3.77 - 83,475 5.03 - 1,763,410 875,514
9/26/00 5.66 7.55
Non-Executive
Employees as
a Group:
Market price exceeds
exercise price 107,975 1/01/99 - 3.77 - 107,975 7.65 - 2,047,062 825,398
9/26/00 11.25 15.13
Exercise price exceeds
market price 59,500 7/26/97 - 13.75 - 59,500 17.63 - 246,369 -
4/24/98 18.25 22.13
- --------------------------
*Based on the $21-1/8 final sales price of the ELMG Shares on November 22, 1996.
------------------------
</TABLE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table discloses, for the years ended December 31, 1995,
1994 and 1993, the cash compensation paid by the Company and its subsidiaries,
as well as certain other compensation paid, accrued or granted for those years,
to the Chief Executive Officer and to each of the four most highly compensated
other executive officers whose combined salary and bonus compensation for 1995
exceeded $100,000.
<TABLE>
Summary Compensation Table
Long-Term Compensation All Other
Annual Compensation Awards Compensation(1)
------------------------------ --------------------------- ---------------
Securities
Underlying
Name and Restricted Options/SAR's
Principal Position Year Salary Bonus Other(2) Stock(3) (No. Of Shares)
- --------------------- ---- ------ ----- ------ ---------- -------------
<S> <C> <C> <C> <S> <C> <C> <C>
Thomas E. Sharon 1995 $228,082 $ -0- -0- $ -0- 12,000 $21,412
President, Chief 1994 185,589 100,000 -0- 24,969 -0- 20,367
Executive Officer 1993 173,579 30,000 -0- -0- 7,500 19,920
(from July 1994)
and Director
Don T. Scartz 1995 146,931 -0- -0- -0- 7,000 26,801
Senior Vice President 1994 60,000 -0- 14,981 -0- 23,906
and Chief Financial 1993 132,505 20,000 -0- -0- 5,000 21,982
Officer, Treasure 124,697
William S. Jacobs 1995 139,160 -0- -0- -0- 4,000 26,269
Vice President, General 1994 133,803 30,000 -0- 9,988 -0- 23,621
Counsel and Secretary 1993 130,065 15,000 -0- -0- 4,000 16,427
Jeffrey A. Leddy 1995 111,931 28,000 -0- -0- -0- 5,466
President, EMS 1994 98,095 37,500 -0- 12,455 5,000 4,413
Technologies, Inc. 1993 90,922 20,000 -0- -0- 4,000 3,734
Neilson A. Mackay 1995 130,548 15,000 -0- -0- -0- 5,673
President, CAL 1994 119,971 22,500 -0- 7,461 2,500 7,034
Corporation 1993 103,227 20,000 -0- -0- 20,000 -0-
Footnotes to Summary Compensation Table:
(1) For 1995, includes in the case of Dr. Sharon, $2,310 in
matching contributions under the 401(k) plan, $8,118 in benefits
associated with a split-dollar life insurance arrangement, and
$10,984 under the defined contribution retirement plan; in the
case of Mr. Scartz, $2,939 in matching contributions under the
401(k) plan and Employee Stock Purchase Plan, $9,753 under split-dollar
insurance arrangements, and $14,109 under the defined
contribution retirement plan; in the case of Mr. Jacobs, $3,826
in matching contributions under the 401(k) and stock purchase
plans, $12,236 under split-dollar insurance arrangements, and
$10,207 under the defined contribution retirement plan; in the
case of Dr. Mackay, $2,572 in matching contributions under the
stock purchase plan and $3,101 under the separate defined
contribution retirement plan maintained by CAL Corporation; and
in the case of Mr. Leddy, $1,679 in matching contributions under
the 401(k) plan and $3,787 under the defined contribution
retirement plan. In each case, the split-dollar insurance
arrangement benefit is the sum of (i) the premiums paid by the
Company attributable to the term insurance portion of the policy,
plus (ii) the implicit value of the balance of the premium,
treating such balance as an interest-free loan to the scheduled
termination date of the arrangement, based on interest and
discount rates of 8%.
(2) Does not include personal benefits that do not exceed the
applicable reporting threshold for any officer.
(3) Represents the value, based on an $11.75 market price on the
date of award, of 2,125 shares awarded in January 1995 to Dr.
Sharon, 1,275 shares to Mr. Scartz, 850 shares to Mr. Jacobs, 635
shares to Dr. Mackay and 1,060 shares to Mr. Leddy. None of the
named executive officers holds any other shares of restricted
stock. The shares of restricted stock vested one year after the
award date, subject to continued service for such year. Any
dividends paid on shares of restricted stock would be subject to
the same restrictions as the shares.
------------------------
Option Exercises During Last Fiscal Year and Year-End Option Values
The following chart sets forth certain information with respect to the
named executives concerning the exercise in 1995 of ELMG Options, and
unexercised ELMG Options held as of December 31, 1995:
</TABLE>
<TABLE>
Number of Shares Under- Value of Unexercised
Year Ended lying Unexercised Options In-the-Money Options at
December 31, 1995 Held at December 31, 1995 December 31, 1995
---------------------------- ---------------------------- ----------------------------
Shares Acquired Value
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Thomas E. Sharon 75,551 $542,162 118,591 19,500 465,748 34,688
Don T. Scartz 4,000 43,000 37,000 12,000 187,750 23,125
William S. Jacobs -0- -0- 5,000 8,000 12,500 18,500
Neilson A. Mackay -0- -0- -0- 22,500 -0- 99,375
Jeffrey A. Leddy 4,470 40,658 17,575 17,000 84,391 78,250
</TABLE>
-----------------------
The following chart sets forth certain information with respect
to the named executives concerning the exercise in 1995 of LXE Options,
and unexercised LXE Options held as of December 31, 1995:
<TABLE>
Number of Shares Under- Value of Unexercised
Year Ended lying LXE Options Held at In-the-Money LXE Options
December 31, 1995 December 31, 1995 at December 31, 1995
------------------------- ---------------------------- ----------------------------
LXE Shares
Acquired Value
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <S> <C> <C> <S> <C> <S>
Thomas E. Sharon -0- $ -0- 40,893 -0- $118,312 -0-
Don T. Scartz -0- -0- 2,000 19,875 -0- 53,961
William S. Jacobs -0- -0- 5,000 -0- -0- -0-
</TABLE>
Option Grants During the Last Fiscal Year
The following named executives were granted ELMG Options during 1995:
<TABLE>
Percentage of
Total Options Exercise
Number of Granted to Or
Shares Underlying Employees in Base Price Expiration Grant Date
Options Granted Fiscal 1995 Per Share Date Present Value*
----------------- ------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Thomas E. Sharon 12,000 17.4% $11.75 1/27/01 $47,880
Don T. Scartz 7,000 10.1 11.75 1/27/01 27,930
William S. Jacobs 4,000 5.8 11.75 1/27/01 15,960
* Based upon the Black-Scholes option pricing model, assuming 0.44
expected volatility, a 4.9% risk-free rate of return, no dividend
yield, and three years to time of exercise.
---------------------------------
No option grants in LXE's stock were made during 1995 to the named executives.
</TABLE>
Employment Agreement
The Company has an employment agreement with Dr. Sharon for
services as an executive officer. This agreement originally
would have expired on December 31, 1993, but during 1992 was
extended to December 31, 1996, and in 1994 was further extended
to December 31, 1998. The specified minimum annual salary, as
amended in 1994, is $200,000. In addition, Dr. Sharon is
entitled to bonuses in amounts determined by the Board of
Directors. In the event of disability, the salary would be
continued at 100% less the amount of any other Company-sponsored
disability benefits. In the event of death, 50% of the salary
amount would be paid to Dr. Sharon's estate for the remainder of
the contract term. In the event of a change in control of the
Company after which Dr. Sharon resigned or his employment was
terminated other than for cause or breach of the agreement, or
due to death or disability, the Company would be obligated to pay
to Dr. Sharon an amount determined by obtaining the product of
(a) the greater of (i) his aggregate taxable compensation for the
calendar year preceding the calendar year in which his employment
expires, or (ii) his annualized salary for the calendar year in
which his employment expires plus the greater of his aggregate
bonus paid during either such year or the prior calendar year,
and (b) the period expressed in years from the date his
employment expires to the latest to occur of (i) December 31,
1998, (ii) the latest extension, if any, of the expiration date
of his term of employment, or (iii) the third anniversary of the
date on which the change of control occurs, which product shall
be discounted to present value. However, the amount payable to
Dr. Sharon in connection with a change in control may not exceed
the maximum amount that the Company would be entitled to deduct
as compensation expense for federal income tax purposes.
Compensation and Other Arrangements with Directors
Each director who is not an employee of the Company is paid
$1,000 per meeting attended (excluding telephonic meetings) plus
$3,000 per quarter served. Each director who is also an employee
of the Company is paid $500 per meeting attended (excluding
telephonic meetings) and $500 per quarter served. Committee
meetings that are not held in conjunction with a full Board
meeting are separately compensated at the rate of $500 or $1,000
per meeting, depending on the time commitment required. Travel
expenses are paid to out-of-town directors.
Non-employee directors receive, effective on their first
date of election, an option under the ELMG Stock Plan for the
purchase of 10,000 shares of common stock. These options have
an exercise price equal to the fair market value of the ELMG
Shares on the date of grant, and become exercisable as to 2,000
shares on the date six months following the date of grant and as
to an additional 2,000 shares on each of the first through fourth
anniversaries of such six-month date. However, these options
become immediately exercisable in the event of a third-party
tender or exchange offer for the ELMG Shares, or if any person
becomes the beneficial owner of 50% or more of the outstanding
ELMG Shares. The exercise price (together with any applicable
taxes) may be paid in cash, by delivery of ELMG Shares (valued at
their fair market value at the time of exercise), or by a
combination of cash and Shares. Upon the optionee ceasing to be
a director for any reason, these options terminate and are
forfeited to the extent that they are not exercisable at that
time. Once exercisable, these options are non-forfeitable and
remain exercisable until the tenth anniversary of the date of
grant.
During 1995, the foregoing options were automatically
granted to Messrs. Iorillo and Levergood, who were first elected
as directors during that year. Because Dr. Pippin was already a
member of the Board of Directors at the time he retired as an
employee, he did not receive the automatic option grant received
by other non-employee directors. Accordingly, the Board of
Directors, pursuant to the recommendation of the Compensation
Committee, awarded Dr. Pippin an option, not under any plan, for
10,000 shares, on terms substantially identical to the
automatically granted options (including an exercise price equal
to fair market value on the date of grant, or $11.75), except
that in view of Dr. Pippin's age and duties as Chairman, the
options vest in three increments over three terms of service as a
director.
At the time of Dr. Pippin's retirement as CEO, he and the
Company entered into a consulting arrangement under which he
provides consulting services to the Company's current CEO for a
period of three years. Such services are to be provided one day
per week, plus additional days as requested by the CEO and agreed
to by Dr. Pippin, and generally relate to the Company's strategic
planning, proposed acquisitions, restructuring and integration of
acquired businesses, and management organization and performance.
Compensation is $5,000 per month, plus $1,000 per day for
additional days. During the consulting period, Dr. Pippin will
be included in the Company's group life and health insurance
plans for executive officers, but will not otherwise participate
in employee benefit plans. He will also continue to be provided
an office and secretarial services, an automobile, and certain
tax planning and return services. If during the three-year
period Dr. Pippin becomes unable to provide services due to his
death or disability, the basic monthly payments would be
continued until the end of the three years.
The Company has a consulting arrangement with Mr. Mowell,
who provides assistance to the Company in connection with
presentations to the investment community, reviews of potential
financial transactions, and relations with financial analysts.
For his services, Mr. Mowell receives a consulting fee of $12,000
per year plus reimbursement of expenses. The other members of
the Compensation Committee have reviewed and approved the terms
of this consulting arrangement.
Dr. Pippin and Mr. Mowell have served as directors of LXE
since 1989. They are currently compensated as non-employee
directors of LXE at the rate of $3,000 per quarter plus $1,000
per meeting attended, and $500 or $1,000 (depending on the time
commitment required) for attending any committee meetings not
held in conjunction with a meeting of the LXE board. Dr. Pippin
and Mr. Mowell also have served since 1993 as directors of CAL
Corporation, another subsidiary of the Company, for which they
and other non-employee directors are currently compensated at the
rate of Can$1,500 per year plus Can$500 per meeting attended.
Compensation Committee Interlocks and Insider Participation.
During a portion of 1995, William F. Evans, a former officer
of the Company and its Senior Vice President from 1985 to 1988,
served as a member of the Compensation Committee. Mr. Evans
retired as a member of the ELMG Board on April 21, 1995, the date
of the 1995 Annual Meeting of Shareholders. Thereafter, the
Compensation Committee did not include any current or former
Company officer or employee.
AMENDMENT OF THE ELMG STOCK PLAN
Proposed Amendment
As described above at the at "The Proposal -- The Proposed
Merger," if the Merger occurs outstanding LXE Options will be
converted into ELMG Options to acquire .75 ELMG Shares for each
LXE Share under option, at exercise prices adjusted
proportionately upwards by one-third such that the aggregate
exercise price for each option remains unchanged by the
conversion. If none of the outstanding LXE Options are exercised
prior to the Merger, an aggregate of 274,907 ELMG Shares would
become issuable upon conversion of the LXE Options.
Of the 500,000 ELMG Shares available for grant or option
under the ELMG Stock Plan, 426,720 Shares have been issued or are
subject to outstanding options, leaving only 73,280 Shares
available for option under that Plan. In order to convert the
LXE Options into ELMG Options under the ELMG Stock Plan, the ELMG
Board has amended that Plan, subject to shareholder approval, to
increase the number of issuable shares from 500,000 to 500,000
plus that number required to convert LXE Options in the proposed
Merger. The maximum number of additional ELMG Shares that could
become issuable is 774,907, and this number would be reduced to
the extent that any LXE Options are exercised prior to the
Merger.
In some cases, holders of LXE Options are not currently LXE
employees, because they are either non-employee directors of LXE
or are former employees. However, the ELMG Stock Plan does not
provide for grants of ELMG Options to persons who are not ELMG
directors or current employees of either ELMG or its
subsidiaries. For this reason, the ELMG Board has amended the
Plan, subject to shareholder approval, to permit the conversion
of all outstanding LXE Options into ELMG Options, regardless of
whether the holder is otherwise currently eligible to receive an
Option under the Plan.
Shareholder approval of the Proposal will constitute
shareholder approval of each of the foregoing Plan amendments.
The outstanding LXE Options have been granted under the LXE
1989 Stock Incentive Plan (the "LXE Stock Plan"). A maximum of
228,752 LXE Shares remain available for option under the LXE
Stock Plan. No additional LXE Shares will be awarded or optioned
prior to the Merger, and if the Merger occurs the LXE Stock Plan
will be terminated without any issuance or other use of these
remaining 228,752 LXE Shares.
Disregarding ELMG Shares that would be issuable upon
exercise of ELMG Options issued in the proposed Merger, 73,280
ELMG Shares remain available under the ELMG Stock Plan, and this
number will not be affected by whether or not the Merger occurs.
The ELMG Stock Plan by its terms expires on January 24, 1997.
The ELMG Board of Directors believes that options are an
important component of the Company's compensation and incentive
programs, and expects that a proposal will be presented to the
shareholders at the 1997 Annual Meeting for an amended or new
stock plan for use in future years. However, the terms of any
such plan or have not yet been determined.
Description of the ELMG Stock Plan
The ELMG Stock Plan was adopted by the ELMG Board of
Directors and approved by its shareholders in 1992. This Plan
provides for the grant of options ("ELMG Options" or "Options") to
purchase ELMG Shares, and for the issuance of ELMG Shares
("Awards"). Any Shares issued pursuant to Awards may be subject
to a number of restrictions, including the possibility of
forfeiture under certain circumstances. The Plan will expire on
January 24, 1997, but ELMG Options or Awards granted prior to
that date will remain in effect according to their terms.
The ELMG Stock Plan was adopted because the Board believes
that stock-based incentive compensation is critical to the
Company's ability to employ and retain qualified managerial and
other key personnel. The Plan is intended to provide
participants with an opportunity to increase their stock
ownership in the Company and to give them an additional incentive
to achieve the Company's objectives. Options may be granted and
Awards may be made only to employees of the Company or a
subsidiary and to directors of the Company. The Plan is
administered by the Stock Incentive Committee of the Board of
Directors, which selects the recipients of Options and Awards.
However, the Compensation Committee, which consists solely of
non-employee members of the ELMG Board, serves as the
administering committee with respect to Options and Awards for
directors and executive officers. The appropriate Committee has
the authority to determine the terms of Options and Awards
consistent with requirements of the Plan, to interpret the Plan,
to adopt and amend rules relating to it, and to amend or replace
outstanding Options and Awards, subject to grantee approval and
the requirements of the Plan. The Plan provides that Committee
members shall not be liable to any person for any actions taken
in good faith.
The Board of Directors has the right at any time to
terminate or amend the ELMG Stock Plan, but no such action may
terminate Options already granted or otherwise affect the rights
of any holder of an outstanding Option or shares issued pursuant
to an Award, without the holder's consent. Except with
shareholder approval, the Board may not amend the Plan to
materially increase the total number of shares of stock subject
to the Plan, to materially change or modify the class of eligible
participants, or to otherwise materially increase the benefits to
participants. In addition, the provisions governing automatic
grants of Options to non-employee directors, as described below,
may not be amended more frequently than once every six months.
Stock Options. The Company receives no consideration upon
the granting of an Option. Options may be granted either as
incentive stock options (which qualify for certain favorable tax
consequences, as discussed below) or as non-qualified stock
options. To date, no Options qualifying as incentive stock
options have been issued under the Plan. The appropriate
Committee determines the number of shares, exercise price, the
term, any conditions on exercise, the consequences of any
termination of employment, and other terms of each Option. In
the case of an Option intended to be an incentive stock option,
the term of the Option may not exceed ten years from the date of
grant and the exercise price may not be less than 100% of the
fair market value of the common stock on the date of grant. With
respect to non-qualified stock options, there is no limit on the
term of the Option, and the exercise price may be as low as 50%
of fair market value on the date of grant; in practice,
discretionary Options granted under the Plan have had terms of
six years and exercise prices equal to fair market value on the
date of grant. Any Options granted at a price below the fair
market value per share on the date of grant would result in a
compensation expense to the Company in the year of grant (or
during any period of service required for vesting of the Option)
equal to the "discount," which is the amount by which the
aggregate fair market value of the optioned shares on the date of
grant exceeded the aggregate exercise price for those shares;
this accounting expense is essentially the same as for a cash
bonus equal to the amount of the discount, but no cash payments
by the Company are involved. For Options granted at an exercise
price equal to the fair market value on the date of grant, no
compensation expense is incurred, either at the time of grant or
upon exercise.
The exercise price (together with any applicable taxes) is
payable in full upon exercise, and payment may be made in cash,
by delivery of ELMG Shares (valued at their fair market value at
the time of exercise), or by a combination of cash and Shares.
In the discretion of the appropriate Committee, Options
under the ELMG Stock Plan may include a "reload option," but no
such provision has been included in any Options. A reload
option, if included in the original Option, would be triggered
when an optionee paid the exercise price of, or withholding taxes
related to, all or a portion of the original Option by delivering
ELMG Shares. In that event, the optionee would automatically be
granted an additional Option to acquire the same number of Shares
as had been so delivered or withheld. The reload option would be
subject to all of the terms and conditions of the original
Option, except that the exercise price per share would be equal
to the fair market value of the ELMG Shares on the date the
original Option was exercised, and except that the Committee
could specify additional conditions or contingencies, such as
continued employment by the Company or holding of the Shares
acquired upon exercise of the original Option for a specified
period of time.
Options granted under the Plan may not be transferred by an
optionee other than by will or by the laws of descent and
distribution, or pursuant to certain orders which may be issued
in connection with a divorce proceeding.
Options for Non-Employee Directors. Each person who is
elected a director, and who is not an employee of the Company or
any subsidiary, is automatically granted an Option for the
purchase of 10,000 ELMG Shares. These Options have an exercise
price equal to the fair market value of the ELMG Shares on the
date of grant, and become exercisable as to 2,000 Shares on the
date six months following the date of grant and as to an
additional 2,000 Shares on each of the first through fourth
anniversaries of such six-month dates. However, these Options
become immediately exercisable in the event of a third-party
tender or exchange offer for the ELMG Shares, or if any person
becomes the beneficial owner of 50% or more of the outstanding
ELMG Shares. The exercise price (together with any applicable
taxes) may be paid in cash, by delivery of ELMG Shares (valued at
their fair market value at the time of exercise), or by a
combination of cash and Shares. Upon the optionee ceasing to be
a director for any reason, these Options terminate and are
forfeited to the extent that they are not exercisable at that
time. Once exercisable, these Options are non-forfeitable and
remain exercisable until the tenth anniversary of the date of
grant.
Awards of Restricted Shares. Under the ELMG Stock Plan, up
to 100,000 ELMG Shares may be issued as Awards of restricted
stock, but the actual number issued to date is 12,370. The
recipient of an Award is issued ELMG Shares ("Restricted Shares")
in consideration of services performed or to be performed as a
condition to the lapse of restrictions applicable to the
Restricted Shares. Recipients do not make any payment to the
Company in exchange for the Restricted Shares. Each Award is
governed by a restriction agreement containing such conditions
and restrictions applicable to the Restricted Shares as the
appropriate Committee may determine. The restrictions may
include forfeiture of some or all of the Restricted Shares in
certain circumstances, such as termination of employment.
The appropriate Committee may require that Restricted Shares
be held by the Company or in escrow pending the lapse of any
restrictions. Until any restrictions on Restricted Shares have
lapsed, the Restricted Shares are not transferrable except by the
laws of descent and distribution or pursuant to certain orders
which may be issued in connection with a divorce proceeding.
Unless the appropriate Committee determines otherwise, recipients
of Restricted Shares have the right to vote the Restricted Shares
and to receive dividends or distributions made with respect to
them.
An Award of Restricted Shares results in compensation
expense to the Company in an amount equal to the fair market
value of the Restricted Shares (calculated without considering
any restrictions imposed in connection with the Award) at the
time of the Award. Such expense may be recognized ratably over
the period during which the restrictions continue in effect.
Federal Income Tax Consequences
Incentive Stock Options. There are no federal income tax
consequences to an optionee or to the Company on the granting of
an incentive stock option. When an optionee exercises an
incentive stock option, the optionee will not recognize any
taxable income, and the Company will not be entitled to a
deduction. The optionee will recognize capital gain or loss at
the time of disposition of shares acquired through the exercise
of an incentive stock option if the shares have been held for at
least two years after the option was granted and one year after
it was exercised. The Company will not be entitled to a tax
deduction if the optionee satisfies these holding-period
requirements. The federal income tax advantage of incentive
stock options to the holder who meets the holding-period
requirements is a deferral, until the acquired stock is sold, of
taxation of any increase in the stock's value from the time of
grant of the option to the time of its exercise, and taxation of
such gain, at the time of sale, as capital gain rather than
ordinary income.
For the purpose of calculating tax upon disposition where
stock is surrendered in payment of the option price, the capital
gains holding period and basis of the new shares, to the extent
of the old shares surrendered, is the same as for the old shares;
the holding period for the additional shares (that is, the shares
received on exercise in excess of the old shares surrendered)
begins on the date the option is exercised, and such additional
shares have a basis equal to the amount, if any, of the price of
the optioned shares paid in cash.
If the holding period requirements are not met, then upon
sale of the shares the optionee generally recognizes as ordinary
income the excess of the fair market value of the shares at the
date of exercise over the option price; any increase in the value
of the optioned stock subsequent to exercise is long or short-term
capital gain to the optionee depending on the optionee's
holding period for the shares. However, if the sale is for a
price less than the value of the shares on the date of exercise,
the optionee may recognize ordinary income only to the extent the
sales price exceeded the option price. In either case, the
Company is entitled to a deduction to the extent of ordinary
income recognized by the optionee.
Non-Qualified Stock Options. Generally, when a non-qualified
stock option is exercised, the optionee recognizes
income in the amount of the aggregate fair market value of the
shares received upon exercise, less the aggregate amount paid for
those shares, and the Company may deduct as an expense the amount
of income so recognized by the optionee, if the Company satisfies
certain tax withholding requirements. The holding period of the
acquired shares begins upon the exercise of the option, and the
optionee's basis in the shares is equal to the fair market value
of the acquired shares on the date of the exercise.
If the optionee pays all or part of the purchase price by
delivering shares of common stock, there are no federal income
tax consequences to the optionee or the Company to the extent of
the number of shares so delivered. As to any additional shares
issued, the optionee recognizes income equal to the aggregate
fair market value of the additional shares received, less any
cash paid to the Company, and the Company is allowed to deduct
the amount of such income, if the Company satisfies certain tax
withholding requirements. The holding period and basis of the
new shares, to the extent of the number of old shares delivered,
is the same as for the old shares. The holding period for the
additional shares begins on the date the option is exercised, and
the basis in those additional shares is equal to their fair
market value on the date of exercise.
Restricted Shares. The grantee of an Award is required to
provide for the payment of withholding taxes at the time his or
her Award results in taxable income. In the discretion of the
appropriate Committee, payment of taxes resulting from any award
may be made by delivering already-owned Shares, or by authorizing
the Company to withhold and cancel a portion of the Restricted
Shares, in each case based on the fair market value of the shares
at that time.
SELECTED FINANCIAL DATA FOR ELMG AND LXE
The following tables present summary historical consolidated
financial information for ELMG and LXE, which is derived from the
separate historical consolidated financial statements of ELMG and
LXE. The historical consolidated financial information as of
December 31, 1995, 1994, 1993, 1992 and 1991, and for the years
then ended, has been derived in part from audited consolidated
financial statements of ELMG and LXE , respectively. The
consolidated financial statements of both ELMG and LXE as of
December 31, 1995 and 1994, and for each of the years in the
three-year period ended December 31, 1995, are incorporated by
reference in this Proxy Statement. Historical consolidated
financial information as of September 30, 1996 and 1995, and for
the nine-month periods then ended, is derived in part from
unaudited consolidated financial statements incorporated by
reference elsewhere in this Proxy Statement. In each case, the
following summary financial information should be read along with
the incorporated consolidated financial statements and related
notes. See "Incorporation by Reference of Certain Documents."
<TABLE>
(In thousands, except per share amounts)
Nine Months
Ended Years Ended
September 30 December 31
--------------- -----------------------------------------------
ELMG 1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
Consolidated results of
operations for period:
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $106,771 93,930 128,950 117,993 99,004 71,822 75,340
Gain on initial public
offering of LXE common
stock, net of income
taxes $ - - - - - - 3,638
Earnings from continuing
operations $ 2,916 1,434 2,310 4,263 1,391 924 7,456
Earnings from continuing
operations per common
and common equivalent
share $ .38 .20 .32 .58 .20 .10 .98
Weighted average number
of common and common
equivalent shares
outstanding 7,669 7,124 7,266 7,043 6,856 7,331 7,605
Consolidated financial
condition at end of
period:
Total assets $114,841 100,934 104,954 96,751 87,861 72,970 75,147
Long-term debt
(excluding current
installments) 12,422 4,262 10,989 4,592 5,060 927 1,104
Minority interest in
LXE 6,093 9,236 9,274 8,681 7,155 7,012 5,971
Stockholders' equity 68,134 60,209 60,209 56,431 51,548 50,079 52,063
No cash dividends have been declared or paid during any of the periods presented.
</TABLE>
<TABLE>
(In thousands, except per share amounts)
Nine Months
Ended Years Ended
September 30 December 31
----------------- --------------------------------------------------
LXE 1996 1995 1995 1994 1993 1992 1991
------- ------ ------ ------ ------ ------ ------
Consolidated results of
operations for period:
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 48,935 45,188 62,291 63,142 45,643 44,401 38,721
Net earnings (loss) $ 200 (299) (165) 4,122 336 3,310 3,236
Net earnings (loss)
per common
and common equiva-
lent shares $ .04 (.05) (.03) .71 .06 .57 .60
Weighted average number
of common and common
equivalent shares
outstanding 5,659 5,525 5,532 5,766 5,721 5,786 5,398
Consolidated financial
condition at end of
period:
Total assets $ 54,388 48,295 49,481 45,741 37,865 37,115 32,718
Long-term debt
(excluding
current install-
ments) 8,500 144 6,925 350 594 827 1,004
Long-term debt to
parent and due to
parent - non current 1,191 1,466 1,397 1,672 1,946 2,221 2,473
Stockholders' equity 32,929 32,478 32,611 32,298 27,713 27,264 23,663
No cash dividends have been declared or paid during any of the periods presented.
</TABLE>
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION -- UNAUDITED
The following unaudited pro forma financial information is presented
for informational purposes only and is not necessarily indicative of either
future results of operations or financial position or of the results of
operations or financial position that would have been reported had the
Exchange Offer and Merger been completed at the beginning of the respective
periods or as of the dates for which such unaudited pro forma information
is presented.
The following unaudited Pro Forma Consolidated Condensed Financial
Statements for ELMG has been prepared based upon the historical
consolidated results of operations of both ELMG and LXE and the historical
financial condition of ELMG. LXE is a 81% owned subsidiary of ELMG and,
accordingly, has been consolidated and included in the historical
consolidated financial statements of ELMG. The pro forma consolidated
financial data give effect to the Exchange Offer and Merger, resulting in
LXE being a wholly owned subsidiary of ELMG. The Exchange Offer and Merger
are accounted for as a purchase based upon the conversion (i) of each LXE
Share into .75 ELMG Shares, and (ii) of each LXE Option into an option for
ELMG Shares on the basis of .75 ELMG Shares for each share subject to the
LXE Option, with the per-share exercise price being adjusted upwards by one
third. The Pro Forma Consolidated Condensed Balance Sheet as of September
30, 1996 assumes that the Exchange Offer and Merger occurred effective as
of the date presented. The Pro Forma Consolidated Condensed Income
Statements assume that the Exchange Offer and Merger occurred effective as
of January 1, 1995.
The Pro Forma Consolidated Condensed Balance Sheet should be read in
conjunction with the accompanying pro forma notes and the separate
historical consolidated financial statements and related notes thereto of
ELMG and LXE reported in their respective Annual Reports on Form 10-K for
the fiscal year ended December 31, 1995, and Quarterly Reports on Form 10-Q
for the quarters ended March 31, June 30 and September 30, 1996, which are
incorporated herein by reference. See "INCORPORATION OF DOCUMENTS BY
REFERENCE."
Comparison Of Certain Unaudited Per Share Data
The following tables show comparative historical per share data for
ELMG and LXE , pro forma per share data for ELMG and LXE , and combined and
equivalent pro forma per share data for LXE .
Nine Months Ended Year Ended
September 30, 1996 December 31, 1995
------------------------ -----------------------
Historical Pro Forma Historical Pro Forma
--------- --------- ---------- ---------
ELMG $ .38 .31 .32 .24
Net earnings
Shareholders' equity -
end of period 9.11 10.44 8.60 10.08
LXE
Net earnings .04 .23 (.03) .18
Shareholders' equity -
end of period 5.91 7.83 5.87 7.56
ELMG
Pro Forma Consolidated Balance Sheet -- Unaudited
September 30, 1996
(In thousands)
Pro Forma
As Reported Adjustments As Adjusted
----------- ----------- -----------
ASSETS
Current assets
Cash and cash equivalents $ 4,210 (650)(a) 3,560
Trade accounts receivable, net 45,512 45,512
Inventories 17,694 17,694
Deferred income taxes 1,363 1,363
------- -------
Total current assets 68,779 68,129
Net property, plant and equipment 30,315 30,315
Other assets 8,875 8,875
Goodwill, net of accumulated
depreciation 6,872 10,398 (b) 17,270
------- -------
$ 114,841 124,589
======= =======
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities
Current installments of
long-term debt 3,029 3,029
Accounts payable and
accrued liabilities 18,119 18,119
Other current liabilities 2,636 2,636
------- -------
Total current liabilities 23,784 23,784
------- -------
Long-term debt, excluding
current installments 12,422 12,422
Deferred income taxes (note 3) 4,408 (2,229)(c) 2,179
------- -------
Total liabilities 40,614 38,385
------- -------
Minority interest in LXE 6,093 (6,093)(d) -
Stockholders' equity:
Common stock 752 77 (e) 829
Paid-in capital 15,633 15,764 (e) 31,397
Foreign currency translation
adjustment (12) (12)
Retained earnings 51,761 2,229 (c) 53,900
------- -------
Total stockholders' equity 68,134 86,204
------- -------
$114,841 124,589
======= =======
Pro forma adjustments:
(a) Expenses of the Exchange Offer
(b) Goodwill from Exchange Offer and Merger
(c) Write-off of deferred income taxes
(d) Elimination of minority interest
(e) Equity increase from ELMG shares issued in
the Exchange Offer
See accompanying notes to Unaudited Pro Forma Consolidated Financial
Statements.
ELMG
Pro Forma Consolidated Statement of Income --Unaudited
Nine Months Ended September 30, 1996
(In thousands, except per share amounts)
Pro Forma
As Reported Adjustments As Adjusted
----------- ----------- -----------
Net sales $ 106,771 106,771
Cost of sales 69,094 69,094
Selling, general and
administrative expenses 23,053 312 (a)
(315)(b) 23,050
Research and development
expenses 9,136 9,136
------- -------
Operating income 5,488 5,491
Interest and other income,
net of foreign exchange
gains and losses 102 102
Interest expense (831) (831)
------- -------
Income before income
taxes and LXE
minority interest 4,759 4,762
Income taxes (note 3) (1,943) (120)(c) (2,063)
LXE minority interest 100 (100)(d) -
------- -------
Net earnings $ 2,916 2,699
======= =======
Net earnings per
common and common
equivalent share $ .38 .31
======= =======
Weighted average number
of common and common 774 (e)
equivalent shares 7,669 142 (f) 8,585
Pro Forma adjustments:
(a) Amortization of goodwill
(b) Public company expense savings
(c) Income tax effect of expense
savings
(d) Elimination of minority interest
(e) ELMG shares issued in the
Exchange Offer
(f) Common equivalent shares derived
from LXE Options converted to
ELMG Options
See accompanying notes to Unaudited Pro Forma Condensed Consolidated
Financial Statements
ELMG
Pro Forma Consolidated Statement of Income --Unaudited
Year Ended December 31, 1995
(In thousands, except per share amounts)
Pro Forma
As Reported Adjustments As Adjusted
----------- ----------- -----------
Net sales $ 128,950 128,950
Cost of sales 83,865 83,865
Selling, general and
administrative expenses 30,836 418 (a)
(420) (b) 30,384
Research and development
expenses 10,392 10,392
------- -------
Operating income 3,857 3,859
------- -------
Interest and other income,
net of foreign exchange
gains and losses 675 675
Interest expense (864) (864)
------- -------
Income before income
taxes and LXE minority
interest 3,668 3,670
Income taxes (note 3) (1,402) (160)(c) 1,562
LXE minority interest 44 (44)(d) -
------- -------
Net earnings $ 2,310 2,108
======= =======
Net earnings per common
and common equivalent
share $ .32 .24
======= =======
Weighted average number of
common and common equivalent
shares 7,266 774 (e)
142 (f)
457 (g) 8,639
Pro Forma adjustments:
(a) Amortization of goodwill
(b) Public company expense savings
(c) Income tax effect of expense savings
(d) Elimination of minority interest
(e) ELMG shares issued in the Exchange Offer
(f) Common equivalent shares derived from LXE
Options converted to ELMG Options
(g) Shares issued in connection with February 1996
purchase of LXE shares from Rocker partnerships
See accompanying notes to Unaudited Pro Forma Condensed Consolidated
Financial Statements
ELMG
Notes to Unaudited Pro Forma Financial Statements
(1) Basis of Presentation
The Unaudited Pro Forma Consolidated Financial Statements
for ELMG presented in this document have been prepared based upon
the historical consolidated results of operations and the
historical financial condition of ELMG and LXE. LXE is a 81%
owned subsidiary of ELMG and, accordingly, has been consolidated
and included in the historical consolidated financial statements
of ELMG. The pro forma consolidated financial data give effect
to the Exchange Offer and Merger, resulting in LXE being a
wholly owned subsidiary of ELMG. The Exchange Offer and Merger
are accounted for as a purchase based upon the conversion (i) of
each LXE Share into .75 ELMG Shares, and (ii) of each LXE Option
into an option for ELMG Shares on the basis of .75 ELMG Shares
for each share subject to the LXE Option, with the per-share
exercise price being adjusted upwards by one-third. The Pro
Forma Consolidated Balance Sheet as of September 30, 1996 assumes
that the Exchange Offer and Merger occurred effective as of the
date presented. The Pro Forma Consolidated Income Statements
assume that the Exchange Offer and Merger occurred effective as
of January 1, 1995.
The Unaudited Pro Forma Consolidated Financial Statements
should be read in conjunction with the separate historical
consolidated financial statements and related notes thereto of
ELMG and LXE reported in their respective Annual Reports on Form
10-K for the fiscal year ended December 31, 1995, and Quarterly
Reports on Form 10-Q for the quarters ended March 31, June 30 and
September 30, 1996, which are incorporated herein by reference.
See "INCORPORATION OF DOCUMENTS BY REFERENCE."
(2) Assumptions
The Unaudited Pro Forma Financial Statements include certain
assumptions concerning the effects of the Exchange and Merger:
Goodwill - ELMG will establish a new accounting basis for
the portion of LXE's assets and liabilities attributable to the
minority shareholders' interests being purchased. The combined
value of the ELMG Shares (based upon the October 3, 1996 closing
price of $17.25) and the exercisable ELMG Options (based upon the
Black-Scholes option pricing model) being exchanged for LXE
Shares held by the minority shareholders and LXE Options is
expected to exceed the fair value of the net assets being
acquired by ELMG; this excess will be allocated to goodwill,
which will be amortized on a straight-line basis over a 25-year
period from the date of acquisition.
Expense Savings - As a 100% owned subsidiary, LXE would no
longer incur separate SEC reporting, shareholder reporting, tax
reporting, annual meeting and independent board expenses, as well
as certain certain separate corporate expenses. Elimination of
these expenses is expected to result in initial savings of
approximately $420,000 per year.
Conversion of LXE Options - LXE Options will be converted
into options to acquire a proportionate number of ELMG Shares
under ELMG's 1992 Stock Incentive Plan. The option prices of the
ELMG Options would be adjusted upwards by one-third such that the
aggregate exercise price of each option would be unchanged by the
conversion. Under Statement of Financial Accounting Standards
123, there is no compensation charge for the conversion of the
LXE Options; however, the value (based upon the Black-Scholes
option pricing model) of converted ELMG Options that are
exercisable will increase the amount of goodwill associated with
the Exchange Offer and Merger. In addition, those converted ELMG
Options that have an exercise price below the current market
price of ELMG Shares will increase the common equivalent shares
utilized in the calculation of earnings per share.
(3) Write-off of Deferred Income Taxes
In 1991, ELMG recognized a pre-tax gain of approximately
$5.9 million, representing ELMG's share of the increase in LXE's
book value at the time of LXE's initial public offering of common
stock. ELMG provided approximately $2.2 million of deferred
income tax expense on the gain, which will be written off as a
result of the tax-free Exchange Offer and Merger; this write-off
will be reflected in ELMG's consolidated income statement as a
$2.2 million reduction of income tax expense for the year in
which the Exchange Offer and Merger become effective.
INDEPENDENT PUBLIC ACCOUNTANTS
KPMG Peat Marwick LLP acted as the independent public
accountants during the last fiscal year for both ELMG and LXE,
and is also acting as such during the current fiscal year. A
representative of KPMG Peat Marwick LLP is expected to be present
at the Special Meeting to respond to appropriate questions, and
will have the opportunity to make a statement if he desires to do
so.
INCORPORATION BY REFERENCE OF CERTAIN DOCUMENTS
The following documents heretofore filed with the Securities
and Exchange Commission are hereby incorporated in this Proxy
Statement by reference as of their respective dates:
Electromagnetic Sciences, Inc.
1. Annual Report on Form 10-K for the fiscal year ended
December 31, 1995.
2. Quarterly Reports on Form 10-Q for the quarters ended
March 31, June 30 and September 30, 1996.
LXE Inc.
1. Annual Report on Form 10-K for the fiscal year ended
December 31, 1995.*
2. Quarterly Reports on Form 10-Q for the quarters ended
March 31, June 30 and September 30,* 1996.
* Copies of these items are being delivered to shareholders
with the Proxy Statement.
--------------------
In addition, all documents filed by ELMG or LXE pursuant to
Sections 13(a),13(c), 14, or 15(d) of the Exchange Act after the
date of this Proxy Statement and prior to the date of the Special
Meeting shall be deemed to be incorporated by reference in this
Proxy Statement and to be a part hereof from the date of filing
of any such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this
Proxy Statement to the extent that a statement contained herein
or in any other subsequently filed document that also is or is
deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Proxy Statement.
ELMG hereby undertakes to provide without charge to each
person to whom a Proxy Statement is delivered, on the written or
oral request of such person, a copy of any or all of the
documents referred to above, other than certain exhibits to such
documents. Written requests should be addressed to William S.
Jacobs, Secretary, Electromagnetic Sciences, Inc., 660
Engineering Dr., Technology Park/Atlanta, Norcross, Georgia
30092, and oral requests may be made to Mr. Jacobs by telephone
(770-263-9200), or in person at the above address.
ELECTROMAGNETIC SCIENCES, INC
The undersigned hereby appoints JERRY H. LASSITER, ANTHONY
J. IORILLO and JOHN H. LEVERGOOD, and each of them with
individual power of substitution, proxies to appear and vote all
shares of the common stock of Electromagnetic Sciences, Inc. that
the undersigned may be entitled to vote at the Special Meeting of
Shareholders to be held on the 30th day of December 1996, and at
all adjournments thereof, as indicated with respect to the
following matter:
(1) PROPOSAL to approve the issuance of shares of common stock,
$.10 par value per share ("ELMG Shares"), in exchange for the
acquisition of all of the outstanding shares of common stock,
$.01 par value per share ("LXE Shares"), of LXE Inc. not
currently owned by the Company, at a ratio of .75 ELMG Shares for
each LXE Share, and to amend the Company's 1992 Stock Incentive
Plan as necessary for, and otherwise approve, the conversion of
outstanding options to acquire LXE Shares into options to acquire
a proportionate number of ELMG Shares, as more fully described in
the Proxy Statement for the Special Meeting.
FOR AGAINST ABSTAIN
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE "FOR" THE PROPOSAL.
(2) In accordance with their best judgment upon such other
matters as may properly come before the Special Meeting or any
adjournment thereof.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH ANY INSTRUCTIONS
INDICATED HEREON. IF NO INDICATION IS MADE, IT WILL BE VOTED FOR
THE PROPOSAL.
The Board of Directors is not aware of any matters to be
presented for action at the Special Meeting of Shareholders,
other than the Proposal.
This proxy is revocable at any time prior to its use.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
PLEASE DATE AND SIGN THIS PROXY ON THE REVERSE SIDE.
OTHER SOLICITING MATERIAL
November 27, 1996
Dear Fellow Shareholders:
A Special Meeting of the Shareholders of Electromagnetic
Sciences, Inc. is to be held on December 30, 1996. At that
meeting, you are being asked to vote upon the acquisition by
Electromagnetic Sciences of the remaining 18.5% of the shares of
LXE Inc. owned by public shareholders. As described in the
attached Proxy Statement, your vote will also include approvals
related to the conversion, on a proportionate basis, of
outstanding LXE stock options into options under the Company's
own option plan.
The attached Proxy Statement describes the reasons that this
transaction is being pursued, and the factors considered by the
Board of Directors in selecting the exchange ratio. We urge you
to read the Proxy Statement carefully, and to vote your shares
either in person or by use of the enclosed proxy card. Your
prompt vote will help us avoid unnecessary additional
solicitation expenses, and to enter 1997 with our full attention
devoted to jointly developing our commercial wireless
communications opportunities.
The Board of Directors recommends that you vote in favor of the
proposal. You should note that while several members of the
Board, including the undersigned, have personal interests in LXE
shares and options, the proposed transaction and its terms were
unanimously recommended by a Special Committee consisting of each
Board member who does not have any personal interest in LXE.
If you have any questions, please feel free to contact us or Don
T. Scartz, Senior Vice President and Chief Financial Officer.
Very truly yours,
- --------------------------- ------------------------
John E. Pippin Thomas E. Sharon
Chairman of the Board President and Chief
Executive Officer
As amended through
October 3, 1996
ELECTROMAGNETIC SCIENCES, INC.
1992 STOCK INCENTIVE PLAN
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS 1
(a) "Award" 1
(b) "Board" 1
(c) "Code" 1
(d) "Committee" 1
(e) "Company" 1
(f) "Director" 1
(g) "Disinterested Person" 2
(h) "Employee" 2
(i) "Employer" 2
(j) "Fair Market Value" 2
(k) "Grantee" 3
(l) "ISO" 3
(m) "1934 Act" 3
(n) "Officer" 3
(o) "Option" 3
(p) "Option Agreement" 3
(q) "Optionee" 3
(r) "Option Price" 4
(s) "Parent" 4
(t) "Plan" 4
(u) "Purchasable" 4
(v) "Qualified Domestic Relations Order" 4
(w) "Reload Option" 4
(x) "Restricted Stock" 4
(y) "Restriction Agreement" 5
(z) "Stock" 5
(aa) "Subsidiary" 5
ARTICLE II THE PLAN 5
Section 2.1 Name 5
Section 2.2 Purpose 5
Section 2.3 Effective Date 5
Section 2.4 Termination Date 5
ARTICLE III ELIGIBILITY 6
ARTICLE IV ADMINISTRATION 6
Section 4.1 Duties and Powers of the Committee 6
Section 4.2 Interpretation; Rules 7
Section 4.3 No Liability 7
Section 4.4 Majority Rule 7
Section 4.5 Company Assistance 7
ARTICLE V SHARES OF STOCK SUBJECT TO PLAN 7
Section 5.1 Limitations 7
Section 5.2 Antidilution 8
ARTICLE VI OPTIONS 10
Section 6.1 Types of Options Granted 10
Section 6.2 Option Grant and Agreement 10
Section 6.3 Optionee Limitations 10
Section 6.4 $100,000 Limitation 11
Section 6.5 Option Price 11
Section 6.6 Exercise Period 12
Section 6.7 Option Exercise 12
Section 6.8 Nontransferability of Option 13
Section 6.9 Termination of Employment 13
Section 6.10 Employment Rights 14
Section 6.11 Certain Successor Options 14
Section 6.12 Conditions to Issuing Option Stock 14
Section 6.13 Automatic Option Grants to Certain
Directors 15
ARTICLE VII RESTRICTED STOCK 16
Section 7.1 Awards of Restricted Stock 16
Section 7.2 Non-Transferability 17
Section 7.3 Lapse of Restrictions 17
Section 7.4 Termination of Employment 17
Section 7.5 Treatment of Dividends 17
Section 7.6 Delivery of Shares 17
Section 7.7 Payment of Withholding Taxes 18
ARTICLE VIII TERMINATION, AMENDMENT AND MODIFICATION OF PLAN 19
ARTICLE IX MISCELLANEOUS 19
Section 9.1 Replacement or Amended Grants 20
Section 9.2 Forfeiture for Competition 20
Section 9.3 Plan Binding on Successors 20
Section 9.4 Gender 20
Section 9.5 Headings Not a Part of Plan 20
ELECTROMAGNETIC SCIENCES, INC.
1992 STOCK INCENTIVE PLAN
ARTICLE I
DEFINITIONS
As used herein, the following terms have the meanings
hereinafter set forth unless the context clearly indicates to the
contrary:
(a) "Award" shall mean a grant of Restricted Stock.
(b) "Board" shall mean the Board of Directors of the
Company.
(c) "Code" shall mean the United States Internal
Revenue Code of 1986, as amended, including effective date and
transition rules (whether or not codified). Any reference herein
to a specific section or sections of the Code shall be deemed to
include a reference to any corresponding provision of future law.
(d) "Committee" shall mean a committee of at least two
Directors appointed from time to time by the Board, having the
duties and authority set forth herein in addition to any other
authority granted by the Board; provided, however, that with
respect to any Options or Awards granted to an individual who is
also an Officer or Director, the Committee shall consist of at
least two Directors (who need not be members of the Committee
with respect to Options or Awards granted to any other
individuals) who are Disinterested Persons, and all authority and
discretion shall be exercised by such Disinterested Persons, and
references herein to the "Committee" shall mean such
Disinterested Persons insofar as any actions or determinations of
the Committee shall relate to or affect Options or Awards made to
or held by any Officer or Director.
(e) "Company" shall mean Electromagnetic Sciences,
Inc., a Georgia corporation.
(f) "Director" shall mean a member of the Board.
(g) "Disinterested Person" shall have the meaning set
forth in Rule 16b-3 under the 1934 Act, as the same may be in
effect from time to time, or in any successor rule thereto, and
shall be determined for all purposes under the Plan according to
interpretative or "no-action" positions with respect thereto
issued by the Securities and Exchange Commission.
(h) "Employee" shall mean any employee of the Company
or any Subsidiary of the Company.
(i) "Employer" shall mean the corporation that employs
a Grantee.
(j) "Fair Market Value" of the shares of Stock on any
date shall mean
(i) the closing sales price, regular way, or
in the absence thereof the mean of the last reported
bid and asked quotations, on such date on the exchange
having the greatest volume of trading in the shares
during the thirty-day period preceding such date (or if
such exchange was not open for trading on such date,
the next preceding date on which it was open); or
(ii) if there is no price as specified in (i),
the final reported sales price, or if not reported in
the following manner, the mean of the closing high bid
and low asked prices, in the over-the-counter market
for the shares as reported by the National Association
of Securities Dealers Automatic Quotation System or, if
not so reported, then as reported by the National
Quotation Bureau Incorporated, or if such organization
is not in existence, by an organization providing
similar services, on such date (or if such date is not
a date for which such system or organization generally
provides reports, then on the next preceding date for
which it does so); or
(iii) if there also is no price as specified
in (ii), the price determined by the Committee by
reference to bid-and-asked quotations for the shares
provided by members of an association of brokers and
dealers registered pursuant to subsection 15(b) of the
1934 Act, which members make a market in the shares,
for such recent dates as the Committee shall determine
to be appropriate for fairly determining current market
value; or
(iv) if there also is no price as specified in
(iii), the amount determined in good faith by the
Committee based on such relevant facts, which may
include opinions of independent experts, as may be
available to the Committee.
(k) "Grantee" shall mean an Employee, former employee
or other person who is an Optionee or who has received an Award
of Restricted Stock.
(l) "ISO" shall mean an Option that complies with and
is subject to the terms, limitations and conditions of Code
section 422 and any regulations promulgated with respect thereto.
(m) "1934 Act" shall mean the Securities Exchange Act
of 1934, as amended from time to time.
(n) "Officer" shall mean a person who constitutes an
officer of the Company for the purposes of Section 16 of the 1934
Act, as determined by reference to such Section 16 and to the
rules, regulations, judicial decisions, and interpretative or
"no-action" positions with respect thereto of the Securities and
Exchange Commission, as the same may be in effect or set forth
from time to time.
(o) "Option" shall mean a contractual right to
purchase Stock granted pursuant to the provisions of Article VI
hereof.
(p) "Option Agreement" shall mean an agreement between
the Company and an Optionee setting forth the terms of an Option.
(q) "Optionee" shall mean a person to whom an Option
has been granted hereunder.
(r) "Option Price" shall mean the price at which an
Optionee may purchase a share of Stock pursuant to an Option.
(s) "Parent" shall mean any corporation (other than
the corporation with respect to which the determination is being
made) in an unbroken chain of corporations ending with the
corporation with the respect to which the determination is being
made if, at the relevant time, each of the corporations other
than the corporation with respect to which the determination is
being made owns stock possessing 50% or more of the total
combined voting power of all classes of stock in one of the other
corporations in such chain.
(t) "Plan" shall mean the 1992 Stock Incentive Plan of
the Company.
(u) "Purchasable," when used to describe Stock, shall
refer to Stock that may be purchased by an Optionee under the
terms of this Plan on or after a certain date specified in the
applicable Option Agreement.
(v) "Qualified Domestic Relations Order" shall have
the meaning set forth in the Code or in the Employee Retirement
Income Security Act of 1974, as amended, or the rules and
regulations promulgated under the Code or such Act.
(w) "Reload Option" shall mean an Option that is
granted, without further action of the Committee, (i) to an
Optionee who surrenders or authorizes the withholding of shares
of Stock in payment of amounts specified in paragraphs 6.7(c) or
6.7(d) hereof, (ii) for the same number of shares as is so paid,
(iii) as of the date of such payment and at an Option Price equal
to the Fair Market Value of the Stock on such date, and (iv)
otherwise on the same terms and conditions as the Option whose
exercise has occasioned such payment, subject to such
contingencies, conditions or other terms as the Committee shall
specify at the time such exercised Option is granted.
(x) "Restricted Stock" shall mean Stock issued,
subject to restrictions, to an Employee pursuant to Article VII
hereof.
(y) "Restriction Agreement" shall mean the agreement
setting forth the terms of an Award, and executed by a Grantee as
provided in Section 7.1 hereof.
(z) "Stock" shall mean the $.10 par value common stock
of the Company or, in the event that the outstanding shares of
such stock are hereafter changed into or exchanged for shares of
a different class of stock or securities of the Company or some
other corporation, such other stock or securities.
(aa) "Subsidiary" shall mean any corporation (other
than the corporation with respect to which the determination is
being made) in an unbroken chain of corporations beginning with
the corporation with respect to which the determination is being
made if, at the relevant time, each of the corporations other
than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
ARTICLE II
THE PLAN
2.1 Name. This plan shall be known as the "Electromagnetic
Sciences, Inc. 1992 Stock Incentive Plan."
2.2 Purpose. The purpose of the Plan is to advance the
interests of the Company, its shareholders, and any Subsidiary of
the Company, by offering certain Employees and Directors an
opportunity to acquire or increase their proprietary interests in
the Company. Options and Awards will promote the growth and
profitability of the Company, and any Subsidiary of the Company,
because Grantees will be provided with an additional incentive to
achieve the Company's objectives through participation in its
success and growth.
2.3 Effective Date. The Plan shall become effective on
January 24, 1992.
2.4 Termination Date. No further Options or Awards shall
be granted hereunder on or after January 24, 1997, but all
Options or Awards granted prior to that time shall remain in
effect in accordance with their terms; provided, however, that
the Plan shall terminate, and all Options or Awards theretofore
granted or awarded shall become void and may not be exercised, on
January 24, 1993, if the shareholders of the Company shall not by
that date have approved the Plan's adoption.
ARTICLE III
ELIGIBILITY
The persons eligible to participate in this Plan shall
consist only of Directors and those Employees whose participation
the Committee determines is in the best interests of the Company,
together with any persons holding options under the LXE Inc. 1989
Stock Incentive Plan at such time as the outstanding shares of
LXE Inc. common stock may be converted by merger into Stock.
ARTICLE IV
ADMINISTRATION
4.1 Duties and Powers of the Committee. The Plan shall be
administered by the Committee. The Committee shall select one of
its members as its Chairman and shall hold its meetings at such
times and places as it may determine. The Committee shall keep
minutes of its meetings and shall make such rules and regulations
for the conduct of its business as it may deem necessary. The
Committee shall have the power to act by unanimous written
consent in lieu of a meeting, and shall have the right to meet
telephonically. In administering the Plan, the Committee's
actions and determinations shall be binding on all interested
parties. The Committee shall have the power to grant Options or
Awards in accordance with the provisions of the Plan. Subject to
the provisions of the Plan, the Committee shall have the
discretion and authority to determine those individuals to whom
Options or Awards will be granted and whether such Options shall
be accompanied by the right to receive Reload Options, the number
of shares of Stock subject to each Option or Award, such other
matters as are specified herein, and any other terms and
conditions of an Option Agreement or Restriction Agreement. To
the extent not inconsistent with the provisions of the Plan, the
Committee shall have the authority to amend or modify an
outstanding Option Agreement or Restriction Agreement, or to
waive any provision thereof, provided that the Grantee consents
to such action.
4.2 Interpretation; Rules. Subject to the express
provisions of the Plan, the Committee also shall have complete
authority to interpret the Plan, to prescribe, amend and rescind
rules and regulations relating to it, and to make all other
determinations necessary or advisable in the administration of
the Plan, including, without limitation, the amending or altering
of any Options or Awards granted hereunder as may be required to
comply with or to conform to any federal, state or local laws or
regulations.
4.3 No Liability. Neither any member of the Board nor any
member of the Committee shall be liable to any person for any act
or determination made in good faith with respect to the Plan or
any Option or Award granted hereunder.
4.4 Majority Rule. A majority of the members of the
Committee shall constitute a quorum, and any action taken by a
majority at a meeting at which a quorum is present, or any action
taken without a meeting evidenced by a writing executed by all
the members of the Committee, shall constitute the action of the
Committee.
4.5 Company Assistance. The Company shall supply full and
timely information to the Committee on all matters relating to
eligible persons, their employment, death, retirement, disability
or other termination of employment, and such other pertinent
facts as the Committee may require. The Company shall furnish
the Committee with such clerical and other assistance as is
necessary in the performance of its duties.
ARTICLE V
SHARES OF STOCK SUBJECT TO PLAN
5.1 Limitations. Subject to any antidilution adjustment
pursuant to the provisions of Section 5.2 hereof, the maximum
number of shares of Stock that may be issued hereunder shall be
500,000 (of which a maximum of 100,000 shares may be issued as
Restricted Stock), plus that number of shares issuable upon
conversion by merger of options outstanding under the LXE Inc.
1989 Stock Incentive Plan into Options for that same number of
shares of Stock as would have been issued in such merger, in
respect of the LXE Inc. Shares of common stock issuable upon
exercise of such options, had such LXE Inc. shares been
outstanding at the time of the Merger. Shares subject to an
Option or issued as an Award may be either authorized and
unissued shares or shares issued and later acquired by the
Company. The shares covered by any unexercised portion of an
Option that has terminated for any reason (except as set forth in
the following paragraph), or any forfeited portion of an Award
(except any portion as to which the Grantee has received, and not
forfeited, dividends or other benefits of ownership other than
voting rights) may again be optioned or awarded under the Plan,
and such shares shall not be considered as having been optioned
or issued in computing the number of shares of Stock remaining
available for option or award hereunder.
5.2 Antidilution.
(a) In the event that the outstanding shares of Stock
are changed into or exchanged for a different number or kind of
shares or other securities of the Company by reason of merger,
consolidation, reorganization, recapitalization,
reclassification, combination or exchange of shares, stock split
or stock dividend, or in the event that any spin-off, spin-out or
other distribution of assets materially affects the price of the
Company's stock:
(i) The aggregate number and kind of shares of
Stock for which Options or Awards may be granted
hereunder shall be adjusted proportionately by the
Committee; and
(ii) The rights of Optionees (concerning the
number of shares subject to Options and the Option
Price)under outstanding Options and the rights of the
holders of Awards(concerning the terms and conditions
of the lapse of any then-remaining restrictions), shall
be adjusted proportionately by The Committee.
(b) If the Company shall be a party to any
reorganization in which it does not survive, involving merger,
consolidation, or acquisition of the stock or substantially all
the assets of the Company, the Committee, in its discretion, may:
(i) notwithstanding other provisions hereof,
declare that all Options granted under the Plan shall
become exercisable immediately notwithstanding the
provisions of the respective Option Agreements
regarding exercisability, that all such Options shall
terminate a specified period of time after the
Committee gives written notice of the immediate right
to exercise all such Options and of the decision to
terminate all Options not exercised within such period,
and that all then-remaining restrictions pertaining to
Awards under the Plan shall immediately lapse; and/or
(ii) notify all Grantees that all Options or
Awards granted under the Plan shall be assumed by the
successor corporation or substituted on an equitable
basis with options or restricted stock issued by such
successor corporation.
(c) If the Company is to be liquidated or dissolved in
connection with a reorganization described in paragraph 5.2(b),
the provisions of such paragraph shall apply. In all other
instances, the adoption of a plan of dissolution or liquidation
of the Company shall, notwithstanding other provisions hereof,
cause all then-remaining restrictions pertaining to Awards under
the Plan to lapse, and shall cause every Option outstanding under
the Plan to terminate to the extent not exercised prior to the
adoption of the plan of dissolution or liquidation by the
shareholders, provided that, notwithstanding other provisions
hereof, the Committee may declare all Options granted under the
Plan to be exercisable at any time on or before the fifth
business day following such adoption notwithstanding the
provisions of the respective Option Agreements regarding
exercisability.
(d) The adjustments described in paragraphs (a)
through (c) of this Section 5.2, and the manner of their
application, shall be determined solely by the Committee, and any
such adjustment may provide for the elimination of fractional
share interests. The adjustments required under this Article V
shall apply to any successors of the Company and shall be made
regardless of the number or type of successive events requiring
such adjustments.
ARTICLE VI
OPTIONS
6.1 Types of Options Granted. Within the limitations
provided herein, Options may be granted to one Employee at one or
several times or to different Employees at the same time or at
different times, in either case under different terms and
conditions, as long as the terms and conditions of each Option
are consistent with the provisions of the Plan. Without
limitation of the foregoing, Options may be granted subject to
conditions based on the financial performance of the Company or
any other factor the Committee deems relevant.
6.2 Option Grant and Agreement. Each Option granted or
modified hereunder shall be evidenced (a) by either minutes of a
meeting or a written consent of the Committee, and (b) by a
written Option Agreement executed by the Company and the
Optionee. The terms of the Option, including the Option's
duration, time or times of exercise, exercise price, whether the
Option is intended to be an ISO, and whether the Option is to be
accompanied by the right to receive a Reload Option, shall be
stated in the Option Agreement. Separate Option Agreements shall
be used for Options intended to be ISO's and those not so
intended, but any failure to use such separate Agreements shall
not invalidate, or otherwise adversely affect the Optionee's
rights under and interest in, the Options evidenced thereby.
6.3 Optionee Limitations. The Committee shall not grant an
ISO to any person who, at the time the ISO would be granted:
(a) is not an Employee; or
(b) owns or is considered to own stock possessing more
than 10% of the total combined voting power of all classes of
stock of the Employer, or any Parent or Subsidiary of the
Employer; provided, however, that this limitation shall not apply
if at the time an ISO is granted the Option Price is at least
110% of the Fair Market Value of the Stock subject to such Option
and such Option by its terms would not be exercisable after the
expiration of five years from the date on which the Option is
granted. For the purpose of this paragraph (b), a person shall
be considered to own (i) the stock owned, directly or indirectly,
by or for his brothers and sisters (whether by the whole or half
blood), spouse, ancestors and lineal descendants, (ii) the stock
owned, directly or indirectly, by or for a corporation,
partnership, estate, or trust in proportion to such person's
stock interest, partnership interest or beneficial interest
therein, and (iii) the stock which such person may purchase under
any outstanding options of the Employer or of any Parent or
Subsidiary of the Employer.
6.4 $100,000 Limitation. Except as provided below, the
Committee shall not grant an ISO to, or modify the exercise
provisions of outstanding ISO's held by, any person who, at the
time the ISO is granted (or modified), would thereby receive or
hold any incentive stock options (as described in Code section
422) of the Employer and any Parent or Subsidiary of the
Employer, such that the aggregate Fair Market Value (determined
as of the respective dates of grant or modification of each
option) of the stock with respect to which such incentive stock
options are exercisable for the first time during any calendar
year is in excess of $100,000; provided, that the foregoing
restriction on modification of outstanding ISO's shall not
preclude the Committee from modifying an outstanding ISO if, as a
result of such modification and with the consent of the Optionee,
such Option no longer constitutes an ISO; and provided that, if
the $100,000 limitation described in this Section 6.4 is
exceeded, an Option that otherwise qualifies as an ISO shall be
treated as an ISO up to the limitation and the excess shall be
treated as an Option not qualifying as an ISO. The preceding
sentence shall be applied by taking options intended to be ISO's
into account in the order in which they were granted.
6.5 Option Price. The Option Price under each Option shall
be determined by the Committee. However, the Option Price shall
not be less than 50% of the Fair Market Value of the Stock, or in
the case of an ISO less than the Fair Market Value of the Stock,
in each case on the date that the Option is granted (or, in the
case of an ISO that is subsequently modified, on the date of such
modification).
6.6 Exercise Period. The period for the exercise of each
Option granted hereunder shall be determined by the Committee,
but the Option Agreement with respect to each Option intended to
be an ISO shall provide that such Option shall not be exercisable
after the expiration of ten years from the date of grant (or
modification) of the Option. In addition, no Option granted to
an Employee who is also an Officer or Director shall be
exercisable prior to the expiration of six months from the date
such Option is granted, other than in the case of the death or
disability of such Employee.
6.7 Option Exercise.
(a) Unless otherwise provided in the Option Agreement,
an Option may be exercised at any time or from time to time
during the term of the Option as to any or all whole shares that
have become Purchasable under the provisions of the Option, but
not at any time as to less than 100 shares unless the remaining
shares that have become so Purchasable are less than 100 shares.
The Committee shall have the authority to prescribe in any Option
Agreement that the Option may be exercised only in accordance
with a vesting schedule during the term of the Option.
(b) An Option shall be exercised by (i) delivery to
the Treasurer of the Company at its principal office of written
notice of exercise with respect to a specified number of shares
of Stock, and (ii) payment to the Company at that office of the
full amount of the Option Price for such number of shares.
(c) The Option Price shall be paid in full upon the
exercise of the Option; provided, however, that the Committee may
provide in an Option Agreement that, in lieu of cash, all or any
portion of the Option Price may be paid by tendering to the
Company shares of Stock duly endorsed for transfer and owned by
the Optionee, to be credited against the Option Price at the Fair
Market Value of such shares on the date of exercise (however, no
fractional shares may be so transferred, and the Company shall
not be obligated to make any cash payments in consideration of
any excess of the aggregate Fair Market Value of shares
transferred over the aggregate Option Price).
(d) In addition to and at the time of payment of the
Option Price, the Optionee shall pay to the Company in cash the
full amount of any federal, state and local income, employment or
other taxes required to be withheld from the income of such
Optionee as a result of such exercise; provided, however, that in
the discretion of the Committee any Option Agreement may provide
that all or any portion of such tax obligations, together with
additional taxes not exceeding the actual additional taxes to be
owed by the Optionee as a result of such exercise, may, upon the
irrevocable election of the Optionee, be paid by tendering to the
Company whole shares of Stock duly endorsed for transfer and
owned by the Optionee, or by authorization to the Company to
withhold shares of Stock otherwise issuable upon exercise of the
Option, in either case in that number of shares having a Fair
Market Value on the date of exercise equal to the amount of such
taxes thereby being paid, in all cases subject to such
restrictions as the Committee may from time to time determine,
including any such restrictions as may be necessary or
appropriate to satisfy the conditions of the exemption set forth
in Rule 16b-3 under the 1934 Act.
(e) The holder of an Option shall not have any of the
rights of a shareholder with respect to the shares of Stock
subject to the Option until such shares have been issued upon the
exercise of the Option.
6.8 Nontransferability of Option. No Option or any rights
therein shall be transferable by an Optionee other than by will
or the laws of descent and distribution, or pursuant to a
Qualified Domestic Relations Order. During the lifetime of an
Optionee, an Option granted to that Optionee shall be exercisable
only by such Optionee (or by such Optionee's guardian or other
legal representative, should one be appointed).
6.9 Termination of Employment. The Committee shall have
the power to specify, with respect to the Options granted to any
particular Optionee, the effect upon such Optionee's right to
exercise an Option of the termination of such Optionee's
employment under various circumstances, which effect may include
immediate or deferred termination of such Optionee's rights under
an Option, or acceleration of the date at which an Option may be
exercised in full.
6.10 Employment Rights. Options granted under the Plan
shall not be affected by any change of employment so long as the
Optionee continues to be an Employee. Nothing in the Plan or in
any Option Agreement shall confer on any person any right to
continue in the employ of the Company or any Subsidiary of the
Company, or shall interfere in any way with the right of the
Company or any such Subsidiary to terminate such person's
employment at any time.
6.11 Certain Successor Options. To the extent not
inconsistent with the terms, limitations and conditions of Code
section 422, and any regulations promulgated with respect
thereto, an Option issued in respect of an option held by an
employee to acquire stock of any entity acquired, by merger or
otherwise, by the Company (or any Subsidiary of the Company) may
contain terms that differ from those stated in this Article VI,
but solely to the extent necessary to preserve for any such
employee the rights and benefits contained in such predecessor
option, or to satisfy the requirements of Code section 424(a).
6.12 Conditions to Issuing Option Stock. The Company shall
not be required to issue or deliver any Stock purchased upon the
full or partial exercise of any Option granted hereunder prior to
fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all
stock exchanges on which the Stock is then listed;
(b) The completion of any registration or other
qualification of such shares that the Company shall determine to
be necessary or advisable under any federal or state law or under
the rulings or regulations of the Securities and Exchange
Commission or any other governmental regulatory body, or the
Company's determination that an exemption is available from such
registration or qualification;
(c) The obtaining of any approval or other clearance
from any federal or state governmental agency that the Company
shall determine to be necessary or advisable; and
(d) The lapse of such reasonable period of time
following exercise as shall be appropriate for reasons of
administrative convenience.
Unless the shares of Stock covered by the Plan shall be the
subject of an effective registration statement under the
Securities Act of 1933, as amended, stock certificates issued and
delivered to Optionees shall bear such restrictive legends as the
Company shall deem necessary or advisable pursuant to applicable
federal and state securities laws.
6.13 Automatic Option Grants to Certain Directors. Each
person who is elected as a Director at the Annual Meeting of the
Shareholders of the Company held in 1992, or who thereafter
becomes a Director, and who is not also an Employee, or an
employee of any Parent or Subsidiary of the Company, shall
automatically, and without any action of the Board or the
Committee, be granted, on the date of such Annual Meeting, or
thereafter on the first day on which such person serves as a
Director, as the case may be, an Option for the purchase of
10,000 shares of Stock (subject to automatic proportionate
adjustment for stock splits or stock dividends, and otherwise to
proportionate adjustment by the Committee as provided in Section
5.2). Each such Option shall not be an ISO, shall not include
the right to receive a Reload Option, shall have an Option Price
equal to the Fair Market Value of the Stock on the date of grant,
and shall become exercisable as to 2,000 shares on the date that
is six months after the date of grant, and as to an additional
2,000 shares on each of the first, second, third and fourth
anniversaries of such six-month date. However, each such Option
shall become immediately exercisable in the event a party other
than the Company or any Parent or Subsidiary of the Company
purchases or otherwise acquires shares of Stock pursuant to a
tender offer or exchange offer for such shares, or any person or
group becomes the beneficial owner (for the purposes of Section
13(d)(3) of the Securities Exchange Act of 1934, as amended) of
50% or more of the outstanding shares of the Stock. To the
extent such an Option shall have become exercisable, it shall be
non-forfeitable and shall remain exercisable until the tenth
anniversary of its date of grant, but if the Grantee ceases to be
a Director for any reason, any portion of such Option that is not
at that time exercisable shall immediately terminate and shall
not thereafter become exercisable. The Option Price for each
such Option may be paid by tendering to the Company shares of
Stock duly endorsed for transfer and owned by the Optionee, to be
credited against the Option Price at the Fair Market Value of
such shares on the date of exercise, subject to the parenthetical
restriction set forth in paragraph 6.7(c) hereof. In addition,
any taxes related to the exercise of each such Option may be paid
in the manner contemplated in the proviso to paragraph 6.7(d)
hereof.
ARTICLE VII
RESTRICTED STOCK
7.1 Awards of Restricted Stock. The Committee may grant
Awards of Restricted Stock upon determination by the Committee,
acting pursuant to the delegation by the Board of authority to
make such determinations, that the value or other benefit to the
Company of the services of a Grantee theretofore performed or to
be performed as a condition of the lapse of restrictions
applicable to such Restricted Stock, or the benefit to the
Company of the incentives created by the issuance thereof, is
adequate consideration for the issuance of such shares. Each
such Award shall be governed by a Restriction Agreement between
the Company and the Grantee. Each Restriction Agreement shall
contain such restrictions, terms and conditions as the Committee
may, in its discretion, determine, and may require that an
appropriate legend be placed on the certificates evidencing the
subject Restricted Stock.
Shares of Restricted Stock granted pursuant to an Award
hereunder shall be issued in the name of the Grantee as soon as
reasonably practicable after the Award is granted, provided that
the Grantee has executed the Restriction Agreement governing the
Award, the appropriate blank stock powers and, in the discretion
of the Committee, an escrow agreement and any other documents
which the Committee may require as a condition to the issuance of
such shares. If a Grantee shall fail to execute the foregoing
documents, within any time period prescribed by the Committee,
the Award shall be null and void. At the discretion of the
Committee, shares of Restricted Stock issued in connection with
an Award shall be held by the Company or deposited together with
the stock powers with an escrow agent designated by the
Committee. Unless the Committee determines otherwise and as set
forth in the Restriction Agreement, upon issuance of such shares,
the Grantee shall have all of the rights of a shareholder with
respect to such shares, including the right to vote the shares
and to receive all dividends or other distributions paid or made
with respect to them.
7.2 Non-Transferability. Until any restrictions upon
Restricted Stock awarded to a Grantee shall have lapsed in a
manner set forth in Section 7.3, such shares of Restricted Stock
shall not be transferable other than by will or the laws of
descent and distribution, or pursuant to a Qualified Domestic
Relations Order, nor shall they be delivered to the Grantee.
7.3 Lapse of Restrictions. Restrictions upon Restricted
Stock awarded hereunder shall lapse at such time or times (but,
with respect to any award to an Employee who is also a Director
or Officer, not less than six months after the date of the Award)
and on such terms and conditions as the Committee may, in its
discretion, determine at the time the Award is granted or
thereafter.
7.4 Termination of Employment. The Committee shall have
the power to specify, with respect to each Award granted to any
particular Employee, the effect upon such Grantee's rights with
respect to such Restricted Stock of the termination of such
Grantee's employment under various circumstances, which effect
may include immediate or deferred forfeiture of such Restricted
Stock or acceleration of the date at which any then-remaining
restrictions shall lapse.
7.5 Treatment of Dividends. At the time an Award of
Restricted Stock is made the Committee may, in its discretion,
determine that the payment to the Grantee of any dividends, or a
specified portion thereof, declared or paid on such Restricted
Stock shall be (i) deferred until the lapsing of the relevant
restrictions, and (ii) held by the Company for the account of the
Grantee until such time. In the event of such deferral, there
shall be credited at the end of each year (or portion thereof)
interest on the amount of the account at the beginning of the
year at a rate per annum determined by the Committee. Payment of
deferred dividends, together with interest thereon, shall be made
upon the lapsing of restrictions imposed on such Restricted
Stock, and any dividends deferred (together with any interest
thereon) in respect of Restricted Stock shall be forfeited upon
any forfeiture of such Restricted Stock.
7.6 Delivery of Shares. Within a reasonable period of time
following the lapse of the restrictions on shares of Restricted
Stock, the Committee shall cause a stock certificate or
certificates to be delivered to the Grantee with respect to such
shares. Such shares shall be free of all restrictions hereunder,
except that if the shares of stock covered by the Plan shall not
be the subject of an effective registration statement under the
Securities Act of 1933, as amended, such stock certificates shall
bear such restrictive legends as the Company shall deem necessary
or advisable pursuant to applicable federal and state securities
laws.
7.7 Payment of Withholding Taxes.
(a) The Restriction Agreement may authorize the Company to
withhold from compensation otherwise due to the Grantee the full
amount of any federal, state and local income, employment or
other taxes required to be withheld from the income of such
Grantee as a result of the lapse of the restrictions on shares of
Restricted Stock, or otherwise as a result of the recognition of
taxable income with respect to an Award. At the time of and as a
condition to the delivery of a stock certificate or certificates
pursuant to Section 7.6, the Grantee shall pay to the Company in
cash any balance owed with respect to such withholding
requirements.
(b) In the discretion of the Committee, any Restriction
Agreement may provide that all or any portion of the tax
obligations otherwise payable in the manner set forth in
paragraph 7.7(a), together with additional taxes not exceeding
the actual additional taxes to be owed by the Grantee with
respect to the Award, may, upon the irrevocable election of the
Grantee, be paid by tendering to the Company whole shares of
Stock duly endorsed for transfer and owned by the Grantee, or by
authorizing the Company to withhold and cancel shares of Stock
otherwise deliverable pursuant to Section 7.6, in either case in
that number of shares having a Fair Market Value on the date that
taxable income is recognized equal to the amount of such taxes
thereby being paid, in all cases subject to such restrictions as
the Committee may from time to time determine, including any such
restrictions as may be necessary or appropriate to satisfy the
conditions of the exemption set forth in Rule 16b-3 under the
1934 Act.
ARTICLE VIII
TERMINATION, AMENDMENT AND MODIFICATION OF PLAN
The Board may at any time, (i) cause the Committee to cease
granting Options and Awards, (ii) terminate the Plan, or (iii) in
any respect amend or modify the Plan; provided, however, that the
Board (unless its actions are approved or ratified by the
shareholders of the Company within twelve months of the date the
Board amends the Plan) may not amend the Plan to:
(a) Materially increase the number of shares of Stock
subject to the Plan;
(b) Materially change or modify the class of persons
that may participate in the Plan; or
(c) Otherwise materially increase the benefits
accruing to participants under the Plan.
No termination, amendment or modification of the Plan shall
affect adversely an Optionee's rights under an Option Agreement
or Restriction Agreement without the consent of the Grantee or
his legal representative.
From and after the first date on which an Option is
automatically granted pursuant to Section 6.13, the provisions of
such Section 6.13 may not be amended in any manner more
frequently than once every six months, other than to comport with
changes in the Code, the Employee Retirement Income Security Act
of 1974, as amended, or the rules and regulations promulgated
under the Code or such Act.
ARTICLE IX
MISCELLANEOUS
9.1 Replacement or Amended Grants. At the sole discretion
of the Committee, and subject to the terms of the Plan, the
Committee may modify outstanding Options or Awards or accept the
surrender of outstanding Options or Awards and grant new Options
or Awards in substitution for them. However no modification of
an Option or Award shall adversely affect a Grantee's rights
under an Option Agreement or Restriction Agreement without the
consent of the Grantee or his legal representative.
9.2 Forfeiture for Competition. If a Grantee provides
services to a competitor of the Company or any of its
Subsidiaries, whether as an employee, officer, director,
independent contractor, consultant, agent or otherwise, such
services being of a nature that can reasonably be expected to
involve the skills and experience used or developed by the
Grantee while an Employee, then that Grantee's rights under any
Options outstanding hereunder shall be forfeited and terminated,
and any shares of Restricted Stock held by such Grantee subject
to remaining restrictions shall be forfeited, subject in each
case to a determination to the contrary by the Committee.
9.3 Plan Binding on Successors. The Plan shall be binding
upon the successors of the Company.
9.4 Gender. Whenever used herein, the masculine pronoun
shall include the feminine gender.
9.5 Headings Not a Part of Plan. Headings of Articles and
Sections hereof are inserted for convenience and reference, and
do not constitute a part of the Plan.
