SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
SCHEDULE 14D-1
Tender Offer Statement Pursuant to Section
14(d)(1) of the Securities Exchange Act of 1934
This Schedule constitutes an amendment to the
Schedule 13D previously filed by the Bidder (1)
LXE INC.
- --------------------------------------------------------------
(Name of Subject Company [Issuer])
Electromagnetic Sciences, Inc.
- --------------------------------------------------------------
(Bidder)
Common Stock, $.01 par value
- --------------------------------------------------------------
(Title of Class of Securities)
502465 10 7
- --------------------------------------------------------------
(CUSIP Number of Class of Securities)
William S. Jacobs, 660 Engineering Drive,
Norcross, Georgia 30092, (770) 263-9200
- --------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications
on Behalf of Bidder)
Calculation of Filing Fee
- --------------------------------------------------------------
Transaction valuation* Amount of filing fee
$13,408,772 $2,681.75
- --------------------------------------------------------------
* Estimated solely for the purpose of determining the
registration fee pursuant to Rules 0-11(a)(4) and 0-11(d).
Calculated on the basis of $13.00 per share, the average of the
high and low sale prices of the common stock of LXE Inc.
(constituting the securities to be received by the Bidder in the
transaction) reported on the NASDAQ National Market System on
November 21, 1996.
Check if any part of the fee is offset as provided by Rule
[X] 0-11(a)(2) and identify the filing with which the offsetting
fee was previously paid. Identify the previous filing by
registration statement number, or the Form or Schedule and
the date of its filing.
Amount Previously Paid: $4,289.56
Filing Party: Electromagnetic Sciences, Inc.
Form or Registration No.: 333-14235
Date Filed: October 16, 1996 and November 26, 1996
Note: The remainder of this cover page is only to be completed
if this Schedule 14D-1 (or amendment thereto) is being filed,
inter alia, to satisfy the reporting requirements of section
13(d) of the Securities Exchange Act of 1934. See General
Instructions D, E and F to Schedule 14D-1.
- --------------------------
Footnote:
1 The remainder of this cover page shall be filled out for a
reporting person's initial filing on this form with respect to
the subject class of securities, and for any subsequent amendment
containing information which would alter the disclosure provided
in a prior cover page.
The information required in the remainder of this cover page
shall not be deemed to be filed' for the purpose of section 18
of the Securities Exchange Act of 1934 or otherwise subject to
the liabilities of that section of the Act but shall be subject
to all other provisions of the act (however, see the Notes).
1. Names of Reporting Persons (S.S. or I.R.S. Identification
No. of Above Persons):
Electromagnetic Sciences, Inc. 58-1035424
2. Check the Appropriate Box if a Member of a Group (See Instructions):
a. Not
b. Applicable
3. SEC Use Only
4. Source of Funds (See Instructions): WC, 00
5. Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(e) or 2(f):
Not Applicable
6. Citizenship or Place of Organization: Georgia
7. Aggregate Amount Beneficially owned by Each Reporting
Person: 4,543,074
8. Check Box if the Aggregate Amount in Row (7) Excludes
Certain Shares (See Instructions):
Not Applicable
9. Percent of Class Represented by Amount in Row (7): 81.5%
10. Type of Reporting Person (See Instructions): NC
Item 1. Security and Subject Company.
(a) The name of the subject company is LXE Inc., a
Georgia corporation ("LXE"). The address of LXE's principal
executive offices is 303 Research Drive, Norcross, Georgia 30092.
(b) The title of the class of equity securities being
sought is the Common Stock, par value $.01 per share, of LXE
("LXE Shares") of which there were shares outstanding at November
25, 1996. Electromagnetic Sciences, Inc. ("ELMG") seeks to
acquire all of the outstanding LXE Shares not currently owned by
ELMG (1,031,444 shares) by exchanging .75 shares of Common Stock,
par value $.10 per share, of ELMG ("ELMG Shares") for each LXE
Share (the "Exchange Offer"). If the Exchange Offer is
consummated, ELMG intends to merge LXE with and into a wholly-owned
subsidiary of ELMG, with the result that LXE will become a
wholly-owned subsidiary of ELMG.
(c) The LXE Shares are quoted for trading on the
NASDAQ National Market System (the "NMS"). Information with
respect to the high and low closing sales prices of LXE shares as
quoted by NASDAQ is provided in the Offering Circular/Prospectus
attached hereto as Exhibit (a-1) (the "Prospectus") under the
caption "Markets for the ELMG and LXE Shares -- Comparative
Market Prices," which information is incorporated herein by this
reference.
Item 2. Identity and Background.
ELMG, through its subsidiaries, designs and produces a wide
range of advanced communications and signal processing products,
with an emphasis on wireless networks. The principal office of
ELMG is located at 660 Engineering Drive, Norcross, Georgia
30092.
ELMG has not during the last five years (I) been convicted
in a criminal proceeding, or (ii) been a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject
to a judgment, decree or final order enjoining future violations
of, or prohibiting activities subject to, federal or state
securities laws or finding any violation of such laws.
Item 3. Past Contacts, Transactions or Negotiations with the
Subject Company.
(a) The information set forth in the section of the
Prospectus entitled "THE EXCHANGE OFFER -- Background" is
incorporated herein by this reference.
(b) As described on the cover page of the Prospectus,
if the Exchange Offer is consummated, ELMG intends to merge LXE
with and into a wholly-owned subsidiary of ELMG. Information
with respect to any negotiations between ELMG and LXE in
connection with the Exchange Offer is included in the Prospectus
under the caption "THE EXCHANGE OFFER -- Background," which
information is incorporation herein by this reference.
Item 4. Source and Amount of Funds or Other Consideration.
The consideration in the transaction will be comprised
solely of ELMG Shares, which will be newly issued, and cash in
lieu of payment for fractional shares. The source of the cash in
lieu of payment for fractional shares will be ELMG's working
capital. No funds are expected to be borrowed in connection with
the Exchange Offer.
Item 5. Purpose of the Tender Offer and Plans or Proposals of
the Bidder.
The section of the Prospectus entitled "THE EXCHANGE
OFFER -- Purpose of the Exchange Offer; and Merger" is
incorporated herein by this reference. If the Exchange Offer is
consummated, ELMG intends to merge LXE with and into a
wholly-owned subsidiary of ELMG, with the result that LXE will
become a wholly-owned subsidiary of ELMG. As a result of the
Exchange Offer and such merger, LXE Shares no longer will be
quoted for trading on the NMS and will become eligible for
termination of registration pursuant to section 12(g)(4) of the
Securities Exchange Act of 1934, as amended.
Item 6. Interest in Securities of the Subject Company.
(a) Information concerning the aggregate number of LXE
Shares, and the percentage of outstanding LXE Shares represented
by such shares, beneficially owned by ELMG is included in the
section of the Prospectus entitled "SUMMARY -- Background;
Purpose of the Exchange Offer," which information is incorporated
herein by this reference.
(b) There are no transactions in LXE Shares known by ELMG
to have been effected by ELMG or by an executive officer,
director, affiliate or subsidiary of ELMG during the past 60
days.
Item 7. Contracts, Arrangements, Understandings or
Relationships With Respect to the Subject Company's
Securities.
Information regarding contracts between ELMG and others with
respect to LXE Shares is included in the section of the
Prospectus entitled "THE EXCHANGE OFFER -- Background," which
information is incorporated herein by this reference.
Item 8. Persons Retained, Employed or to be Compensated.
The sections of the Prospectus entitled "THE EXCHANGE OFFER
- -- Financial Advisor" and -- "Fees and Expenses" are incorporated
herein by this reference.
Item 9. Financial Statements of Certain Bidders.
The following sections of the Prospectus are incorporated
herein by this reference: "SUMMARY -- Selected Historical
Financial Data" and -- "Summary Pro Forma Financial
Data -- Unaudited" and "Pro Forma Consolidated Financial
Information -- Unaudited." In addition, current financial
information concerning ELMG is included in ELMG's Annual Report
on Form 10-K for the year ended December 31, 1995, and in ELMG's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1996, which financial information is incorporated herein by this
reference.
The Prospectus, reports and other information filed by ELMG
with the Securities and Exchange Commission (the "Commission")
can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C., 20549, and at the following Regional Offices of
the Commission: New York Regional Office, 75 Park Place, 14th
Floor, New York 10007; and Chicago Regional Office, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60606. Copies of
material also can be obtained from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. ELMG Shares are quoted for trading
on the NMS, and reports or other information concerning ELMG also
may be inspected and copied at the offices of NASDAQ, 1735 K
Street, N.W., Washington, D.C. 20006.
Item 10. Additional Information.
(a) None.
(b) None.
(c) Not applicable.
(d) Not applicable.
(e) None.
Item 11. Material to be Filed as Exhibits.
(a-1) Offering Circular/Prospectus dated November
27, 1996, included in ELMG's Registration
Statement No. 333-14235 on Form S-4 relating
to the Exchange Offer, together with letter
to LXE shareholders regarding same.
(a-2) Letter of Transmittal (incorporated herein by
reference to Exhibit 99.1 to ELMG's
Registration Statement No. 333-14235 on Form
S-4).
(a-3) Letter to Securities Dealers, Commercial
Banks, Trust Companies and Other Nominees
(incorporated herein by reference to Exhibit
99.2 to ELMG's Registration Statement No.
333-14235 on Form S-4).
(a-4) Letter to Clients of Securities Dealers,
Commercial Banks, Trust Companies and Other
Nominees (incorporated herein by reference to
Exhibit 99.3 to ELMG's Registration
Statement No. 333-14235 on Form S-4).
(a-5) Notice of Guaranteed Delivery (incorporated
herein by reference to Exhibit 99.4 to
ELMG's Registration Statement No. 333-14235
on Form S-4).
(d) Opinion of Kilpatrick & Cody, L.L.P.
(incorporated herein by reference to Exhibit
8.1 to ELMG's Registration Statement No.
333-14235 on Form S-4).
(e) See Exhibit (a-1).
SIGNATURE
After due inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this
statement is true, complete and correct.
Date: November 27, 1996 ELECTROMAGNETIC SCIENCES, INC.
-----------------
By: /s/ William S. Jacobs
---------------------------
Name: William S. Jacobs
Title: Vice President and
General Counsel
EXHIBIT (a-1)
November 27, 1996
Shareholders of LXE Inc.:
Electromagnetic Sciences, Inc. ("ELMG") is offering to acquire any
and all outstanding common shares of LXE Inc. (the LXE Shares"),
not already owned by ELMG, in exchange for .75 shares of the common
stock of ELMG for each LXE Share acquired. This Exchange Offer
will be closed only if ELMG receives tenders of sufficient LXE
Shares to increase its ownership of LXE, currently at 81.4%, to at
least 90%. In that event, immediately following the acquisition of
LXE Shares under the Exchange Offer, ELMG will cause LXE, without
further vote of its shareholders or Board, to merge with a wholly
owned subsidiary of ELMG; as a result of such merger, LXE would
become a wholly owned subsidiary of ELMG, and all then-remaining
LXE Shares would each be converted into .75 ELMG Shares.
The reasons for the Exchange Offer and subsequent merger, and the
factors considered by the ELMG Board of Directors in setting the
exchange ratio, are described in the attached Offering
Circular/Prospectus. In general, ELMG believes that if LXE is a
wholly owned subsidiary, the combined companies can more
effectively share technical and marketing resources to address
growing commercial wireless communications opportunities, as well
as realize significant savings from the elimination of LXE's
public-company expenses and potentially from synergistic operating
efficiencies. ELMG also believes that the proposed transaction
provides an opportunity for LXE shareholders to obtain a premium
over the market prices for the LXE Shares that were available prior
to our announcement of the Exchange Offer on October 3, 1996; it
also provides the opportunity to exchange LXE Shares for a security
with greater liquidity and trading volume, and narrower bid-asked
spreads, while allowing LXE shareholders to continue to participate
in LXE's financial performance through ELMG's ownership of LXE.
We urge that you promptly and thoroughly review the enclosed
Offering Circular/Prospectus. If you choose to tender your LXE
Shares in the Exchange Offer, and you are the record holder of your
Shares, you should use the enclosed Letter of Transmittal and
follow the instructions appearing thereon; if your LXE Shares are
held in "street name," or in the name of any other nominee, the
tender must be made on your behalf by your broker or other nominee,
and you should contact that broker or nominee, or otherwise follow
its instructions, in order to tender your LXE Shares.
If you are uncertain as to how to respond to the Exchange Offer,
you should consult with your broker, investment advisor, attorney
or other professional advisor. For further information, or
additional copies of the Exchange Offer materials, you should
contact the Dealer Manager, Oppenheimer, & Co., Inc., at 1-800-999-6726,
or the Information Agent, Corporate Investor Communications, Inc.,
at 1-888-776-9943.
Very truly yours,
ELECTROMAGNETIC SCIENCES, INC.
Thomas E. Sharon
President and Chief Executive Officer
OFFERING CIRCULAR/PROSPECTUS
Offer by
ELECTROMAGNETIC SCIENCES, INC.
for all outstanding Shares of Common Stock of
LXE INC.
on the basis of .75
ELMG Shares for each LXE Share
Electromagnetic Sciences, Inc. ("ELMG.") hereby offers, upon
the terms and subject to the conditions set forth herein and in
the related Letter of Transmittal (collectively, the "Exchange
Offer"), to exchange shares of common stock, par value $.10 per
share, of Electromagnetic Sciences, Inc. ("ELMG Shares") for all
outstanding shares of common stock ("LXE Shares"), par value $.01
per share, of LXE Inc. ("LXE") not already owned by ELMG, at an
exchange ratio of .75 ELMG Shares for each LXE Share. The
Exchange Offer is subject to certain conditions as set forth
under "THE EXCHANGE OFFER -- Certain Conditions of the Exchange
Offer," including the conditions, which cannot be waived, that on
or before the date on which the Exchange Offer expires (the
"Expiration Date"), ELMG's shareholders approve the issuance of
ELMG Shares in the Exchange Offer and Merger described below, and
that ELMG receive tenders of a sufficient number of LXE Shares to
increase its ownership of LXE Shares to at least 90% of those
outstanding. Both ELMG Shares and LXE Shares are traded on the
NASDAQ National Market System ("NASDAQ"). On November 25, 1996,
the last reported sale price per ELMG Share as quoted on NASDAQ
was $21-1/8 and the last reported sale price per LXE Share as
quoted on NASDAQ was $15.00.
If ELMG accepts LXE Shares under the Exchange Offer, it
will immediately thereafter, and without further action by the
board of directors of LXE (the "LXE Board"), the shareholders of
ELMG or other shareholders of LXE, cause LXE to merge with a
wholly owned subsidiary of ELMG. If such merger is effected,
shareholders of LXE would receive ELMG Shares on the same basis
as in the Exchange Offer. Any such merger is referred to herein
as the "Merger" and, together with the Exchange Offer, the
"Transaction." This Offering Circular/Prospectus also
constitutes the prospectus with respect to the ELMG Shares
issuable in the Merger.
Questions and requests for assistance or additional copies
of this Offering Circular/Prospectus and the Letter of
Transmittal may be directed to the Information Agent at its
address and telephone number set forth on the back cover of this
Offering Circular/Prospectus.
- -----------------------------------------------------------------
THIS EXCHANGE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00
MIDNIGHT, ATLANTA TIME, ON December 30, 1996, UNLESS THE EXCHANGE
OFFER IS EXTENDED.
- -----------------------------------------------------------------
THE SECURITIES TO WHICH THIS OFFERING CIRCULAR/PROSPECTUS RELATES
HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS OFFERING
CIRCULAR/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Offering Circular/Prospectus
is November 27, 1996
The Dealer Manager for the Exchange Offer is:
Oppenheimer & Co., Inc.
IMPORTANT
Any LXE shareholder desiring to tender shares either should
(i) complete and sign the Letter of Transmittal (or facsimile
thereof) in accordance with the instructions in the Letter of
Transmittal and deliver it with such shares and all other
required documents to the Exchange Agent, or (ii) request such
shareholder's broker, dealer, commercial bank, trust company or
other nominee to effect the transaction for such shareholder. An
LXE shareholder having shares registered in the name of a broker,
dealer, commercial bank, trust company or other nominee must
contact such person if such shareholder desires to tender such
shares.
Any LXE shareholder who desires to tender shares and cannot
deliver such shares and all other required documents to the
Exchange Agent by the expiration of the Exchange Offer must
tender such shares pursuant to the guaranteed delivery procedure
set forth under "THE EXCHANGE OFFER -- Procedure for Tendering
LXE Shares."
No person has been authorized to give any information or to
make any representation not contained in this Offering
Circular/Prospectus with respect to the transactions contemplated
hereby, and, if given or made, such information or representation
should not be relied upon as having been authorized. The
delivery of this Offering Circular/Prospectus does not constitute
an offer to sell, or the solicitation of an offer to purchase,
the securities offered hereby where such offer or solicitation
would be unlawful. Neither the delivery of this Offering
Circular/Prospectus nor the issuance of any securities hereunder
shall under any circumstances create any implication that there
has been no change in the affairs of either LXE or ELMG since the
date as of which information is furnished or the date hereof.
In accordance with various state securities laws applicable
to the Exchange Offer which require the Exchange Offer to be made
to the public by a licensed broker or dealer, the Exchange Offer
hereby is made to LXE shareholders residing in each such state by
Oppenheimer & Co., Inc. ("Oppenheimer"), as Dealer Manager, on
behalf of ELMG.
THIS OFFERING CIRCULAR/PROSPECTUS INCORPORATES DOCUMENTS BY
REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH.
THESE DOCUMENTS (OTHER THAN EXHIBITS TO SUCH DOCUMENTS, UNLESS
SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO THE
INFORMATION INCORPORATED HEREIN) ARE AVAILABLE WITHOUT CHARGE,
UPON ORAL OR WRITTEN REQUEST BY ANY PERSON RECEIVING THIS
OFFERING CIRCULAR/PROSPECTUS TO WILLIAM S. JACOBS, SECRETARY,
ELECTROMAGNETIC SCIENCES, INC., 660 ENGINEERING DRIVE, NORCROSS,
GEORGIA 30092, (770) 263-9200. IN ORDER TO ENSURE TIMELY
DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY December
19, 1996.
TABLE OF CONTENTS
AVAILABLE INFORMATION
SUMMARY
ELMG
LXE
Background; Purpose of the Exchange Offer
The Exchange Offer
Selected Historical Financial Data
Summary Pro Forma Financial Data -- Unaudited
MARKETS FOR THE ELMG AND LXE SHARES
Comparative Market Prices
Condition of the Market for the LXE Shares
THE EXCHANGE OFFER
Background
Purpose of the Exchange Offer and Merger
Determination of the Exchange Ratio
Financial Advisor
Interests of Certain Persons in the Exchange Offer and
Merger
Terms of the Exchange Offer
Conversion of LXE Options
Procedure for Tendering LXE Shares
Exchange of LXE Shares
Withdrawal Rights
Extension of Tender Period; Termination; Amendment
Certain Conditions of the Exchange Offer
Approval by ELMG's Shareholders
Certain Federal Income Tax Consequences
Effects of the Exchange Offer and Merger
Fees and Expenses
Source of Funds
Regulatory Approvals
Miscellaneous
INFORMATION ABOUT LXE
INFORMATION ABOUT ELMG
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SECURITY OWNERSHIP
LACK OF DISSENTERS' RIGHTS OF LXE AND ELMG SHAREHOLDERS
DESCRIPTION OF CAPITAL STOCK OF ELMG
Antitakeover Provisions
Miscellaneous
DESCRIPTION OF CAPITAL STOCK OF LXE; COMPARISON
OF ELMG SHARES AND LXE SHARES
LXE Capital Stock
Comparison
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION -- UNAUDITED
ELMG Pro Forma Consolidated Condensed Balance
Sheet -- Unaudited (September 30, 1996)
ELMG Pro Forma Consolidated Statement of
Income -- Unaudited (Nine Months Ended September 30, 1996)
ELMG Pro Forma Consolidated Condensed Statement
of Income -- Unaudited (Year Ended December 31, 1995)
LEGAL MATTERS
EXPERTS
SCHEDULE I -- DIRECTORS AND EXECUTIVE OFFICERS OF ELMG
AVAILABLE INFORMATION
Electromagnetic Sciences, Inc. has filed a Registration
Statement on Form S-4 (the "Registration Statement") with the
Securities and Exchange Commission (the "Commission") covering
the ELMG Shares to be issued in connection with the Exchange
Offer and Merger, and will file a Tender Offer Statement on
Schedule 14D-1 (the "Schedule 14D-1") with the Commission in
connection with the Exchange Offer. As permitted by the rules
and regulations of the Commission, this Offering
Circular/Prospectus omits certain information contained in the
Registration Statement and the Schedule 14D-1. For such
information, reference is made to the Registration Statement, the
Schedule 14D-1 and the exhibits thereto.
Pursuant to Rules 14d-9 and 14e-2 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), LXE will
be required to file with the Commission within ten business days
after the commencement of the Exchange Offer a statement on
Schedule 14D-9 furnishing certain information with respect to its
position concerning the Exchange Offer. Such Schedule and any
amendments thereto should be available for inspection and copying
as set forth below (except that such Schedule and any amendments
thereto will not be available at the regional offices of the
Commission).
Each of Electromagnetic Sciences, Inc. and LXE Inc. is subject
to the informational requirements of the Exchange Act, and in
accordance therewith files reports and other information with the
Commission. The Registration Statement, as well as reports,
proxy statements and other information filed by Electromagnetic
Sciences, Inc. and LXE Inc. with the Commission pursuant to the
information requirements of the Exchange Act may be inspected and
copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the following Regional Offices of the Commission: New York
Regional Office, 7 World Trade Center, Suite 1300, New York, New
York 10007; and Chicago Regional Office, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60606. Copies of such material
also can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. ELMG Shares and LXE Inc. Shares are quoted
for trading on NASDAQ, and such reports, proxy statements and
other information concerning Electromagnetic Sciences, Inc. and
LXE Inc. may be inspected at the offices of NASDAQ, 1735 K
Street, N.W., Washington, D.C. 20006.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission
pursuant to the Exchange Act are hereby incorporated by reference
in this Offering Circular/Prospectus:
(a) Annual Report on Form 10-K of Electromagnetic Sciences,
Inc. for the fiscal year ended December 31, 1995;
(b) Quarterly Reports on Form 10-Q of Electromagnetic
Sciences, Inc. for the quarters ended March 31, June 30 and
September 30, 1996;
(c) Annual Report on Form 10-K of LXE Inc. for the fiscal
year ended December 31, 1995*; and
(d) Quarterly Reports on Form 10-Q of LXE Inc. for the
quarters ended March 31, June 30 and September 30*, 1996.
* Copies of these items are being delivered with this Offering
Circular/Prospectus.
All documents filed by Electromagnetic Sciences, Inc. or LXE
Inc. pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act after the date hereof and before the date on which
the Transaction is completed or the Exchange Offer is terminated,
whichever first occurs, shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of filing
thereof. 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 Offering
Circular/Prospectus 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 such statement so modified or
superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Offering
Circular/Prospectus.
SUMMARY
The following summary is qualified in its entirety by the
detailed information appearing elsewhere in this Offering
Circular/Prospectus. Capitalized terms used and not otherwise
defined in this Summary have the meanings ascribed to them
elsewhere in this Offering Circular/Prospectus.
As used herein the term "ELMG" refers to Electromagnetic
Sciences, Inc. and "LXE" refers to LXE Inc. and, unless the
context otherwise requires, such entities and their respective
subsidiaries.
ELMG
ELMG designs and produces a wide range of advanced
communications and signal processing products with an emphasis on
wireless networks. ELMG's operations are conducted through its
wholly-owned subsidiary, EMS Technologies, Inc.; a 74%-owned
subsidiary, CAL Corporation, which is a Canadian corporation
acquired in 1993; and LXE, of which ELMG owns approximately 81.4%
of the outstanding shares. The Company's antennas, microwave
systems, subsystems and components are used in space and
satellite communications, cellular telecommunications, radar,
surveillance, search and rescue systems, and military
countermeasures. Through LXE, ELMG also produces wireless data
communications systems; these systems provide real-time, wireless
data and transaction processing, mainly for materials handling
operations. Advanced communications and signal processing
products accounted for 52%, 46% and 54% of consolidated net sales
in 1995, 1994 and 1993, respectively, while LXE's wireless data
communications systems accounted for 48%, 54% and 46% of
consolidated sales in the same respective years.
ELMG is a Georgia corporation with its principal executive
offices at 660 Engineering Drive, Norcross, Georgia 30092,
telephone (770) 263-9200.
LXE
LXE designs, manufactures and supports wireless data
communications systems, mainly for materials handling operations.
Typical customers in the materials handling markets are medium
and large sized companies that have substantial inventories or
complex distribution networks. LXE 's systems permit real-time
interaction between the customer's host computer network and
terminal operations in situations where mobility is desirable or
where cabled computer connections are not practical. LXE 's
systems improve the speed and reliability of communications with
materials handling personnel, facilitate improved accuracy of
inventory records and, in general, increase efficiency and
productivity in materials handling operations. LXE also has
begun developing and marketing systems for applications "outside
of the warehouse," which are believed to have potential for
future growth, including factory floor movement, transportation
and delivery, and electronic medical records retrieval.
LXE is a Georgia corporation with its principal executive
offices located at 303 Research Drive, Norcross, Georgia 30092,
telephone (770) 447-4224.
Background; Purpose of the Exchange Offer
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 experienced by LXE 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. In addition, ELMG
believes that LXE 's status as a separate public company results
in disproportionate analyst and investor attention to LXE 's role
within the overall ELMG organization. As a result of these
considerations, during 1995 ELMG began considering increasing its
ownership of LXE, and through certain transactions in February
and May 1996 increased its ownership from 71.6% to approximately
81.5%.
On July 31, 1996, ELMG's management reviewed with the ELMG
Board of Directors (the "ELMG Board") the benefits and costs of a
transaction that would result in full ownership of LXE . The
ELMG Board authorized management to continue the review process
and to retain investment banking assistance, and appointed a
special committee (the "ELMG Special Committee") to approve the
retention of an investment banker and to make a recommendation to
the full ELMG Board. At a meeting held on October 2, 1996, the
ELMG Special Committee unanimously made the recommendation that
ELMG proceed with the Exchange Offer on the terms recommended by
the Committee, and at a meeting on October 3, 1996, the full
ELMG Board unanimously accepted and approved the Committee's
recommendation. See "THE EXCHANGE OFFER -- Background."
ELMG currently owns 81.5% of the LXE shares. The acquisition
of 100% of LXE is primarily intended to facilitate and encourage
the exchange and sharing of technical, production and marketing
resources among ELMG's subsidiaries, to eliminate various
expenses associated with LXE's status as a separate publicly
traded company, and to improve ELMG's ability to communicate the
role and capabilities of its various subsidiaries in the context
of its overall business strategies. ELMG also believes that the
Exchange Offer may be attractive to holders of LXE Shares because
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 because as holders of ELMG
Shares they will retain a significant indirect interest in LXE.
See "THE EXCHANGE OFFER -- Purpose of the Exchange Offer and
Merger."
THE EXCHANGE OFFER
Terms of The Exchange Offer
- ---------------------------
ELMG is offering to exchange ELMG Shares for LXE Shares on the
basis of .75 ELMG Shares for each LXE Share exchanged pursuant to
the Exchange Offer. To be eligible to receive ELMG Shares
pursuant to the Exchange Offer, a holder of LXE Shares must
validly tender for exchange and not withdraw LXE Shares on or
before the Expiration Date. See "THE EXCHANGE OFFER -- Terms of
the Exchange Offer."
Expiration Date
- ---------------
12:00 midnight, Atlanta time, on December 30, 1996, unless
extended, in which case the term "Expiration Date" shall mean the
last date and time to which the Exchange Offer is extended. See
"THE EXCHANGE OFFER -- Extension of Tender Period; Termination;
Amendment."
Exchange Offer Terms Not Arm's Length
- -------------------------------------
The terms of the Exchange Offer are not the result of an arm's-
length negotiating process. They were determined solely by the
ELMG special Committee and ELMG Board, whose principal fiduciary
duty is to ELMG and its shareholders. No investment banker or
other independent third party has passed on the adequacy of
fairness of the Exchange Offer. ELMG and the ELMG Board are
making no recommendation to LXE shareholders as to whether to
tender, and each LXE shareholder should decide for itself whether
to accept the terms of the Exchange Offer.
Certain Consequences of The Exchange Offer and The Merger
- ---------------------------------------------------------
Upon consummation of the Exchange Offer and the Merger, the
Unaffiliated LXE Shareholders will become shareholders of
ELMG. LXE Shares will cease to trade on NASDAQ and application
will be made to de-register those Shares under the Exchange Act.
After consummation of the Exchange Offer and Merger, and without
giving effect to outstanding stock options of ELMG and LXE, the
holders of ELMG Shares immediately prior to the consummation of
the Exchange Offer will own approximately 90.7% of the ELMG
Shares that will be outstanding after the Merger and the LXE
shareholders other than ELMG will own approximately 9.3% of the
ELMG Shares that will be outstanding after the Merger.
Operation of LXE After the Exchange Offer and Merger
- ----------------------------------------------------
ELMG currently intends that, following consummation of the
Exchange Offer and Merger, the business of LXE will operate in
substantially the same way as at present, except for greater
exchange and sharing of technical, production and marketing
resources among LXE and ELMG's other subsidiaries. LXE will
continue in those positions. ELMG has formulated no plans for
changes in the officers of LXE following the Merger, but may do
so in the future. It is unlikely that following the Merger the
LXE Board of Directors would continue to include members who were
not employed by or otherwise affiliated with ELMG.
Conduct of the Business of the Business of ELMG and LXE if the
Exchange Offer and Merger Are Not Consummated
- -----------------------------------------------------------------
If the Exchange Offer (and, therefore, the Merger) are not
consummated, it is expected that the business and operations of
ELMG and LXE will each continue to be conducted substantially
as they are currently being conducted and that LXE will continue
to be controlled by ELMG. ELMG has made no determination as to
any future transactions that might occur if the Exchange Offer
and Merger are not consummated, but reserves the right in such
event to purchase or propose to purchase LXE Shares from time to
time, subject to availability at prices deemed acceptable to
ELMG, pursuant to a merger transaction, cash tender offer,
exchange offer, open market or privately negotiated purchase or
otherwise, on terms that could be more or less favorable to other
LXE Shareholders than the terms of the Exchange Offer.
Interest of Certain Persons in the Merger
- -----------------------------------------------------------------
Certain officers and directors of ELMG are also officers and/or
directors of LXE, and are the holders of LXE Shares and options
to acquire additional LXE Shares. See "CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS" and "SECURITY OWNERSHIP."
Conditions of the Exchange Offer
- -----------------------------------------------------------------
The Exchange Offer is subject to certain conditions, including
the conditions, which cannot be waived, (i) that ELMG's
shareholders approve certain aspects of the Transaction, and (ii)
that ELMG receive sufficient tenders of LXE Shares to increase
its ownership above 90% , and that it then cause the Merger to
occur immediately after accepting such tendered shares. To
satisfy the second condition, not less than 473,993 LXE Shares
must be tendered, subject to the effects of possible exercises of
LXE Options. All of the other conditions to the Exchange Offer
may be waived in whole or in part in the sole discretion of ELMG.
See "THE EXCHANGE OFFER -- Certain Conditions of the Exchange
Offer."
Amendment and Termination
- -----------------------------------------------------------------
The Exchange Offer may be amended at any time before or after
requisite approval by ELMG's shareholders and may be terminated
by ELMG at any time. See "THE EXCHANGE OFFER -- Certain
Conditions of the Exchange Offer; -- Extension of Tender Period;
Termination; Amendment."
Procedures for Tendering
- -----------------------------------------------------------------
Holders of LXE Shares desiring to accept the Exchange Offer must
complete and sign the Letter of Transmittal in accordance with
instructions contained therein, and forward or hand deliver it,
together with any other required documents, to the Exchange
Agent, either with the LXE Shares to be tendered or in compliance
with the specified procedures for guaranteed delivery of LXE
Shares. See "THE EXCHANGE OFFER -- Procedure for Tendering LXE
Shares."
Withdrawal Rights
- -----------------------------------------------------------------
Subject to the conditions set forth herein, tenders of LXE Shares
may be withdrawn at any time on or before the Expiration Date,
and, unless theretofore accepted for exchange, after January 26,
1996. See "THE EXCHANGE OFFER -- Withdrawal Rights."
No Fractional Shares
- -----------------------------------------------------------------
No fractional ELMG Shares will be distributed. Holders of LXE
Shares who would otherwise be entitled to receive a fractional
ELMG Share will be paid cash in lieu of such fraction. See "THE
EXCHANGE OFFER -- Terms of the Exchange Offer."
Delivery of ELMG Shares
- -----------------------------------------------------------------
ELMG will deliver ELMG Shares and cash in lieu of fractional
shares as soon as possible after acceptance of LXE Shares for
exchange. See "THE EXCHANGE OFFER -- Exchange of LXE Shares."
Exchange Agent
- -----------------------------------------------------------------
SunTrust Bank, Atlanta
Information Agent
- -----------------------------------------------------------------
Corporate Investor Communications, Inc.
Certain Federal Income Tax Consequences
- -----------------------------------------------------------------
The Exchange Offer and Merger will constitute a tax-free
reorganization and no income, gain or loss will be recognized by
LXE shareholders upon the receipt of ELMG Shares in exchange for
their LXE Shares. For a discussion of certain federal income tax
consequences to holders of LXE Shares who receive cash in lieu of
fractional shares in the Exchange Offer, see "THE EXCHANGE OFFER
- -- Certain Federal Income Tax Consequences."
The Merger
Under applicable corporate law, if ELMG acquires sufficient
LXE Shares in the Exchange Offer to increase its ownership of LXE
to at least 90% of the then-outstanding LXE Shares, ELMG may
cause the Merger (in which each remaining LXE Share not owned by
ELMG would be converted into .75 ELMG Shares) to occur without
further action by the LXE Board or by the shareholders of either
ELMG or LXE. It is a condition of ELMG's acceptance of LXE
Shares in the Exchange Offer that ELMG receive sufficient tenders
to reach the 90% ownership level, and that it exercise its right
to cause the Merger immediately upon acquisition of the tendered
LXE Shares.
As of November 25, 1996, 5,574,518 LXE Shares were outstanding
and options covering 293,118 LXE Shares were exercisable.
Assuming that no LXE Options are exercised, 473,993 LXE Shares
must have been validly tendered and not withdrawn as of the
Expiration Date for ELMG to own 90% of the then-outstanding LXE
Shares.
The terms of the Merger would result in the conversion of all
options (the "LXE Options") outstanding under LXE's 1989 Stock
Incentive Plan (the "LXE Stock Plan") into options (the "ELMG
Options") to acquire a proportionate number of ELMG Shares under
ELMG's 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 be adjusted upwards such that the aggregate exercise price
of each option would be unchanged by the conversion. See "THE
EXCHANGE OFFER -- Conversion of LXE Options."
Determination of the Exchange Ratio
The exchange ratio being offered for the LXE Shares was
recommended by the ELMG Special Committee (whose members have no
ownership or other personal interest in LXE) and approved by the
ELMG Board. The exchange ratio is not the product of an arm's-length
negotiating process, and in particular has not been
negotiated with LXE or the LXE Board. LXE's Board has designated
a Special Committee, consisting of those LXE Board members who
are not employed by or otherwise affiliated with ELMG, to review
the Exchange Offer. The LXE Special Committee retained The
Robinson-Humphrey Company, Inc. as financial advisor to assist in
its review. For information concerning the LXE Special
Committee's position with respect to the Exchange Offers,
holders of LXE shares should refer to the
Solicitation/Recommendation Statement on Schedule 14D-9 effected
to be distributed by the LXE Special Committee on or before
December 12, 1996.
In fixing the exchange ratio, the ELMG Special Committee and
Board considered a variety of factors, principally including:
relative historical and anticipated contributions to ELMG's
earnings; relative share trading prices; market valuations of
comparable companies as multiples of various operating results;
the terms of comparable minority buy-out transactions; the fact
that tendering holders of LXE Shares would continue to
participate in the business of LXE as holders of ELMG Shares; the
perception of ELMG's management regarding LXE 's business
prospects; the condition of the NASDAQ public market for the LXE
Shares; and the perceived benefits to ELMG of obtaining 100%
ownership of LXE. See "THE EXCHANGE OFFER -- Determination of
the Exchange Ratio."
Required Action by ELMG Shareholders
The Exchange Offer is conditioned upon approval of certain
aspects of the Transaction by the shareholders of ELMG. The ELMG
Board has called a Special Meeting of the ELMG Shareholders (the
"ELMG Special Meeting"), to be held at 11:00 a.m. on December 30,
1996, for the purpose of voting on the matter, and is
distributing a Proxy Statement to the ELMG Shareholders in
connection with that meeting and vote.
The affirmative vote of a majority of the ELMG Shares present
at the ELMG Special Meeting is required to approve the
Transaction. The ELMG Board believes that the Transaction is in
the best interests of ELMG and its shareholders, and is
recommending that ELMG shareholders vote for its approval.
Market Prices
ELMG Shares and LXE Shares are traded on the NASDAQ National
Market System ("NASDAQ"). On November 22, 1996, the last full
trading day for which quotations were available at the time of
printing of this Offering Circular/Prospectus, the reported
closing sales prices as quoted by NASDAQ were $21-1/8 per ELMG
Share and $15 per LXE Share, and the closing high bids (the
prices that dealers stood ready to pay to investors seeking to
sell their shares) were $20-3/4 and $14, respectively.
The following chart sets forth certain information concerning
the market value of the ELMG and LXE Shares on October 2, 1996,
the day preceding the announcement of the Exchange Offer and
proposed Merger:
Equivalent Value
Final NASDAQ Based on .75
Sales Price Exchange Ratio
------------ ----------------
ELMG Shares 17-1/4 Not Applicable
LXE Shares 10-3/4 12-15/16
For information relating to market prices of ELMG Shares and LXE
Shares during the current fiscal year and the past two fiscal
years, see "MARKETS FOR THE ELMG AND LXE SHARES." SHAREHOLDERS
ARE URGED TO OBTAIN CURRENT QUOTATIONS FOR ELMG SHARES AND LXE
SHARES.
Lack of Dissenters' Rights
Holders of LXE Shares and ELMG Shares will not be entitled to
dissenters' rights under the Georgia Business Corporation Code in
connection with the Transaction. See "LACK OF DISSENTERS' RIGHTS
OF LXE AND ELMG SHAREHOLDERS."
Accounting Treatment
ELMG's acquisition of LXE Shares in the Exchange Offer and
Merger will be accounted for by ELMG using the purchase method of
accounting under generally accepted accounting principles.
Currently, ELMG's consolidated financial statements include
all of LXE 's assets, liabilities, revenues, costs and other
deductions, and a minority interest amount that represents the
portion of LXE 's results of operations and shareholders' equity
applicable to the interest of minority shareholders of LXE . In
accordance with the purchase method of accounting, the
consolidated financial statements of ELMG would reflect the
Exchange Offer and Merger only from and after the closing date.
The minority interest amount reflected in ELMG's consolidated
financial statements applicable to LXE would be eliminated as a
result of the Exchange Offer and Merger, and ELMG's share of
LXE's results of operations would be increased to 100%.
ELMG will establish a new accounting basis for the portion of
LXE 's assets and liabilities attributable to the minority
shareholders' interests being purchased. LXE 's assets and
liabilities will be adjusted by ELMG to their respective fair
values as of the date of acquisition to the extent of the
ownership interests acquired. The value of the ELMG Shares being
exchanged for LXE Shares held by the minority shareholders is
anticipated to exceed the fair value of the net assets applicable
to the LXE Shares being acquired from the minority shareholders.
This excess cost will be allocated to goodwill, which will be
amortized on a straight-line basis over a 25-year period from the
date of acquisition.
Regulatory Approvals
ELMG is not aware of any federal or state regulatory agencies
whose approval is required for completion of the Transaction.
Selected Historical Financial Data
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 elsewhere in this Offering Circular/Prospectus.
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 Offering
Circular/Prospectus. In each case, the following summary
financial information should be read along with the incorporated
consolidated financial statements and related notes. See
"INCORPORATION OF DOCUMENTS BY REFERENCE."
<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:
<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 59,217 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>
Summary Pro Forma Financial Data -- Unaudited
The unaudited pro forma financial information presented is 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. For
additional detail, see "PRO FORMA CONSOLIDATED FINANCIAL
INFORMATION -- UNAUDITED."
The following summary unaudited pro forma consolidated
financial information is based on the historical results of
operations and financial condition of ELMG and LXE . For the
periods presented, LXE has been a majority-owned subsidiary of
ELMG and, accordingly, has been consolidated with ELMG in the
historical financial statements of ELMG. This information should
be read in conjunction with the Pro Forma Consolidated Financial
Statements that are included elsewhere herein and with the
historical consolidated financial statements of ELMG incorporated
by reference in this Offering Circular/Prospectus. The pro forma
data give effect to the Exchange Offer and Merger, resulting in
LXE being a wholly owned subsidiary of ELMG, accounted for as a
purchase and based upon the conversion (i) of each currently
outstanding 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 LXW Option, with the per-share
exercise price being adjusted upwards by one-third, as if
such transactions had occurred effective as of the first day of
the accounting period presented or as of the balance sheet date
presented.
ELMG Pro Forma Financial Data -- Unaudited
The following tables set forth for the periods and the dates
indicated certain unaudited pro forma consolidated financial
information of ELMG adjusted to reflect ownership at the dates
and for the periods presented of 100% of the LXE Shares, on the
terms specified in the Exchange Offer.
<TABLE>
(In thousands, except per share amounts)
Nine Months Ended Year Ended
September 30, 1996 December 31, 1995
As As As As
Reported Adjusted Reported Adjusted
-------- -------- -------- --------
Consolidated results
of operations:
<C> <C> <C> <C>
Net sales $ 106,771 106,771 128,950 128,950
Net earnings $ 2,916 2,699 2,310 2,108
Net earnings per
common and common
equivalent share $ .38 .31 .32 .24
Weighted average
number of common
and common
equivalent shares
outstanding 7,669 8,585 7,266 8,639
</TABLE>
September 30, 1996
As Reported As Adjusted
----------- -----------
Consolidated financial
condition:
Total assets $114,841 124,589
Long-term debt (excluding
current installments) 12,422 12,422
Minority interest in LXE 6,093 -
Stockholders' equity 68,134 86,204
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
MARKETS FOR THE ELMG AND LXE SHARES
Comparative Market Prices
ELMG Shares and LXE Shares are principally traded on NASDAQ
(symbols: ELMG and LXEI). The following tables set forth the
high and low sales prices per ELMG Share and LXE Share as
reported by NASDAQ for each period indicated. They also set
forth the closing high bid and low asked prices quoted by market
makers for the ELMG Shares and the LXE Shares. The high bid at
any given time is the highest price that a market maker is at
that time offering to pay to an investor who wishes to sell his
or her shares, and the low asked at any given time is the lowest
price at which a market maker is at that time offering to sell
shares to an investor who wishes to buy them. For shares with
wide bid-asked spreads, such as the LXE Shares, the high bid and
low asked prices provide clearer information concerning market
prices than do the reported sales prices; because the sales
prices are reported for transactions between a market maker and
an investor, the reported sales price will be relatively high if
the reported transaction is a sale by a market maker, and
relatively low if it is a purchase by a market maker. The bid-asked
prices provide no assurance that the specified prices were
available for transactions involving more than one round lot (100
shares).
Neither ELMG nor LXE has paid a cash dividend with respect to
its shares. The fiscal year for each company ends on December 31
of each year. On October 3, 1996, the last full trading day
before the public announcement of the Exchange Offer, the closing
sale price per ELMG Share, as quoted by NASDAQ, was $17.25 and
such price per LXE Share was $10.625. also on that day, there
was a $.375 spread between ELMG's closing bid price of $17 and
closing asked price of $17.375, compared with a $1.375 spread
between LXE's closing bid price of $10.125 and closing asked
price of $11.50.
SHAREHOLDERS ARE URGED TO OBTAIN CURRENT QUOTATIONS FOR ELMG
SHARES AND LXE SHARES.
ELMG Shares LXE Shares
Price Range Price Range
High Low High Low
---- --- ---- ---
1994
First Quarter $ 9-3/8 7-3/4 12-1/2 9-1/2
Second Quarter 9-1/4 7-7/8 12-1/4 10-1/4
Third Quarter 9-1/8 8 14 11
Fourth Quarter 12-1/8 8 15-1/4 12-3/4
1995
First Quarter 12-1/8 10 17-3/4 13-1/2
Second Quarter 15-3/8 10 16-1/4 13
Third Quarter 17-5/8 10-3/8 16-3/8 9-1/2
Fourth Quarter 12-1/8 9-1/2 10-1/4 7-1/2
1996
First Quarter 13-11/16 10-1/2 10-3/8 7
Second Quarter 16-3/8 10-3/4 12 8-3/4
Third Quarter 17 10-1/4 12 8
Fourth Quarter
(through 11/22) 21-1/8 16-1/8 15 10-1/8
ELMG Shares LXE Shares
1996 Bid Asked Bid Asked
--- ----- --- -----
January 2 $ 11 11-1/4 8-1/4 8-3/4
January 31 11-1/8 11-3/8 8 8-3/4
February 29 12-7/8 13-1/4 9-5/8 10-1/4
March 29 12-1/8 12-3/8 9-1/4 9-3/4
April 30 11-3/8 11-3/4 8-3/4 9-1/4
May 31 14-1/4 14-1/2 9-3/4 10-3/8
June 28 14-3/8 14-3/4 10 10-5/8
July 31 12-1/4 12-1/2 8-1/4 9
August 30 13-3/8 13-3/4 10-5/8 11-3/8
September 30 17-3/8 17-1/4 10-1/8 11-1/2
Condition of the Market for the LXE Shares
Of the 1,031,444 outstanding LXE Shares not owned by ELMG, an
aggregate of approximately 656,000 are held by nine institutional
investors, and the remaining approximately 375,000 shares are
believed to be held by approximately 2,000 holders. As compared
with the trading market for the ELMG Shares, the market for the
publicly held LXE Shares in recent months has been characterized
by wide bid-asked spreads, as indicated in the foregoing table.
It has also been characterized by relatively sporadic, low-volume
trading, as indicated in the following table that sets forth
NASDAQ trading volume for the first nine months of 1996. The
volumes are reported by market makers, and thus may represent
only one side of the buy-sell cycle, with subsequent offsetting
transactions also being reported as separate trading volume.
ELMG Shares LXE Shares
Number of Total Number of Total
Days With Monthly Days With Monthly
1996 No Trading Volume No Trading Volume
---- ---------- ------- ---------- -------
January - 375,187 3 108,077
February - 1,435,122 2 93,089
March - 547,931 3 44,922
April - 304,493 3 104,160
May - 883,071 5 86,085
June - 938,911 1 96,554
July - 611,301 6 60,022
August - 793,905 6 136,237
September - 1,047,750 3 26,241
October - 948,980 8 22,689
To be included in NASDAQ, a security must have at least two
market makers. As late as August 1996, there were 4 market
makers for the LXE Shares, but currently only two broker-dealers
are making a market. If either of these market makers concluded
that the low trading volumes did not justify the risks and
required commitment of resources, the LXE Shares would no longer
be eligible for inclusion NASDAQ. By way of comparison,
6 broker-dealers act as market makers for the ELMG Shares, which
have approximately 5,000 holders and an average trading volume
during 1996 of 789,000 shares per day.
THE EXCHANGE OFFER
Background
In 1991, ELMG caused LXE, which at that time was its wholly-owned
subsidiary, to offer approximately 22% 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 experienced by LXE 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, the ELMG Board authorized
management to identify investment banking assistance in analyzing
methods of increasing ELMG's ownership of LXE, to prepare a plan
for protecting ELMG'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, before management acted on the ELMG 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, for 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 ELMG Board, that it was no longer
desirable or appropriate at that time to pursue 100% ownership.
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 ELMG 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 Shares. The ELMG Shares delivered in the
transaction were not registered under state or federal securities
laws, and could not be freely traded by their holders, but ELMG
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 who 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 in connection with
his employment. 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 future quarters. As a
result, in July 1996, ELMG's management conducted a review of the
benefits and costs of a transaction that would result in full
ownership of LXE . 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 ELMG Board delegated to the ELMG
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 ELMG Board as to whether to proceed
with a transaction and if so, on what terms.
The LXE Board held its regular quarterly meeting the following
day, August 1, 1996. ELMG management and directors present at
this meeting were Thomas E. Sharon, John E. Pippin, John B.
Mowell, Don T. Scartz and William S. Jacobs. Dr. Sharon and
Messrs. Scartz and Jacobs advised the other members of the LXE
Board of the status of ELMG's consideration of a transaction to
acquire the minority LXE Shares by issuing ELMG Shares, and
reported the appointment of the ELMG Special Committee and
proposed retention of investment banking assistance. Because
ELMG was at that time considering the possibility of a merger
transaction, which would involve negotiations with and, in order
to proceed, approval of the LXE Board, the LXE Board appointed
its own Special Committee (the "LXE Special Committee")
consisting of Frank W. Blount, William F. Evans and Francis X.
Stankard, being all of the LXE directors who were not directors,
employees or shareholders of ELMG.
The LXE Special Committee was delegated full authority to
identify and retain investment banking and legal advisors in
order to be in position to respond to a merger offer by ELMG, if
one was forthcoming, and to negotiate (or reject) an agreement on
behalf of LXE .
Other than the proposed use of ELMG Shares, no proposed
transaction terms were discussed. Mr. Evans observed that, in
his view, in recent years LXE had become less attractive as a
separate investment approach, and that LXE shareholders likely
would improve their investment prospects by becoming ELMG
shareholders in an appropriately structured transaction. No
member of the LXE Special Committee indicated the merger terms or
exchange ratio that he might consider to be appropriate.
Following further review of alternative transactions,
potential transaction costs and timing, the number of LXE 's
shareholders, and the concentration of LXE Shares in a small
number of institutional holders, ELMG concluded that if the ELMG
Special Committee and the ELMG Board chose to proceed, an
exchange offer directly to the LXE Shareholders probably would be
the most efficient and cost-effective transaction structure. On
September 3, 1996, Mr. Scartz, as ELMG's Senior Vice President
and Chief Financial Officer, and Mr. Jacobs, as its Vice
President and General Counsel, participated in telephone
conversations with each of Messrs. Evans and Stankard. At this
time, Messrs. Evans and Stankard were advised that ELMG was
contemplating the possibility of an exchange offer and was no
longer considering the possibility of proposing a negotiated
merger. Messrs. Scartz and Jacobs also advised that ELMG was not
contemplating negotiation with the LXE Special Committee
concerning the terms of an exchange offer, if one were initiated.
Based on this information, Messrs. Evans and Stankard concluded
that retention of an investment banker was not necessary at that
time, but that independent legal counsel would be retained to
advise the LXE Special Committee if and at the time ELMG
determined to proceed.
At a meeting held on October 2, 1996, following presentations
by and discussions with ELMG's management and Oppenheimer, which
had been retained to provide investment banking assistance, the
ELMG Special Committee unanimously approved the recommendation
that ELMG proceed with the Exchange Offer, on the terms described
in this Offering Circular/Prospectus. At a meeting held on
October 3, 1996, the full ELMG Board unanimously accepted and
approved the ELMG Special Committee's recommendation.
At its regular quarterly meeting held on October 24, 1996, the
LXE Board received a report on the status and expected schedule
of the Exchange Offer, but held no substantive discussions of its
proposed terms. At that meeting, the LXE Board, with approval by
the members of the Special Committee, authorized access by ELMG
to the LXE shareholder list for use in the Exchange Offer. The
Board also delegated to the Special Committee full authority to
determine and communicate the LXE Board's position statement
required by SEC Rule 14d-9.
On November 12, 1996, the LXE Special Committee held a meeting
to which it invited, as representatives of ELMG, Dr. Sharon and
Messrs. Scartz and Jacobs. The meeting was also attended by
representatives of Hicks, Maloof & Campbell, legal counsel to the
LXE Special Committee, and by representatives of The Robinson-Humphrey
Company, Inc. ("R-H"), investment bankers. The purposes
of this meeting were to provide to the LXE Special Committee data
assembled by ELMG with the assistance of Oppenheimer, and used by
the ELMG Special Committee and Board in determining the exchange
ratio; to review the analysis and reasons considered by the ELMG
Special Committee and Board in that process; and to provide an
opportunity for the LXE Special Committee to question ELMG
representatives concerning the proposed Exchange Offer and
Merger. During the course of the meeting, the ELMG
representatives provided and discussed: information concerning
the shareholders of each company; data concerning market
valuations of comparable companies based on multiples of various
operating results, including current and expected earnings per
share; historical and projected operating results for each
company; historical stock trading patterns for each company; and
comparative data concerning other minority interest buy-out
transactions and acquisition transactions involving data
communications companies. The ELMG representatives also reviewed
the manner in which the ELMG Special Committee and Board had
determined the .75 exchange ratio, stating that the principal
factors considered had been comparative multiples of 1997
estimated net income, expected relative contribution to 1997
operating results, and typical minority buy-out premiums to pre-offer
market trading prices. In reviewing the analyses based on
future operating performance, it was explained that, as had been
presented at the recent quarterly meeting of the LXE Board, rapid
growth in new markets for LXE products, primarily healthcare
applications, could result in higher actual future levels of
sales and earnings than those used by the ELMG Special Committee
and Board in determining the exchange ratio; the ELMG
representatives also stated that the projections used by the ELMG
Special Committee and Board for ELMG's future operating
performance similarly did not include potential higher-than-expected
growth rates in certain new markets, particularly that
for PCS/cellular base station antennas, and that because these
products are directly manufactured by ELMG, they provide
substantially higher margins than do the LXE healthcare products,
which are largely manufactured by other companies. Dr. Sharon
discussed with the LXE Special Committee his view of potential
operating efficiencies available if LXE were a wholly owned
subsidiary and thus technical, manufacturing and marketing
resources could be more easily shared; he also discussed his
view that development by LXE of radio products needed to achieve
higher margins on healthcare installations requires RF
engineering expertise that LXE does not separately possess but
that is a strength of other ELMG subsidiaries.
At the conclusion of the LXE Special Committee meeting, the
Committee advised the ELMG representatives that the Committee
would be holding a further meeting on November 13, 1996, to
review its responsibilities and to determine the procedures that
would be followed, including the possibility that R-H would be
retained as financial advisor. Following that subsequent
meeting, the LXE Special Committee advised ELMG that it had
retained R-H to review, and to provide advice to the Committee
with respect to, the Exchange Offer as it affects holders of LXE
Shares. The LXE Special Committee also reported that due to the
time required for R-H to perform its review and for the Committee
to thereafter meet and determine its position, the Committee
planned to provide its position statement to the holders of LXE
Shares in a separate mailing subsequent to distribution by ELMG
of its Exchange Offer materials.
Purpose of the Exchange Offer and Merger
The Exchange Offer is being made for the purpose of acquiring
100% of the outstanding LXE Shares. ELMG is seeking 100%
ownership of LXE 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. ELMG 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 and 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 SEC reporting,shareholder reporting, tax reporting,
annual meeting and independent board expenses, as well as other
certain separate corporate expenses. ELMG estimates that
elimination of these expenses would result in savings of
approximately $420,000 per year.
* ELMG 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 ELMG's belief, based on its management's 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. See "MARKETS FOR THE ELMG AND LXE SHARES." In
addition, as holders of ELMG Shares, LXE shareholders would
retain a significant indirect interest in LXE.
If ELMG holds, upon completion of the Exchange Offer, at least
90% of such outstanding shares, under Georgia law ELMG could and
would cause the merger of LXE with a newly formed subsidiary of
ELMG without seeking a vote of LXE's shareholders or the LXE
Board, in which event remaining LXE shareholders (other than
ELMG) would receive .75 ELMG Shares for each LXE Share.
If ELMG does not receive a sufficient tender in the Exchange
Offer to increase its LXE ownership above 90%, it will not accept
tendered LXE Shares, and has not formulated any plans or
proposals with respect to any subsequent efforts to acquire
additional LXE Shares.
Management believes that if the Exchange Offer is successful
the above-referenced 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.
ELMG management also believes it is possible that LXE's future
operations could achieve higher levels than those contained in
the above-described projections. In the course of managing LXE's
business affairs, management has analyzed potential scenarios
involving, for example, higher assumed rates of growth in LXE's
traditional markets and in new markets (such as healthcare) that
LXE is seeking to establish. Utilizing favorable assumptions,
such scenarios support the possibility of future earnings at LXE
substantially exceeding those considered by the ELMG Special
Commmittee and Board in determining the Exchange Ratio, or
required for ELMG to avoid earnings-per-share dilution as a
result of the Exchange Offer and Merger. Such scenarios and
higher earnings are believed to be possible, and from time to
time are used internally for purposes of contingency planning and
encouraging higher levels of achievement. However, while
achievement of higher earnings is a primary objective of ELMG's
management and Board, such scenarios are viewed by ELMG as being
speculative, dependent on favorable future developments, and
highly subject to risks. For this reason, such scenarios and the
potential higher earnings that they support have not been relied
upon either by management for purposes of establishing employment
levels or other external commitments, or by the ELMG Special
Committee or Board in determining the exchange ratio.
Except for the Transaction and except as otherwise described
in this Offering Circular/Prospectus, ELMG does not have any
present plans or proposals which relate to or would result in an
extraordinary corporate transaction, such as a merger,
reorganization, liquidation, relocation of any operations of LXE,
or the sale or transfer of a material amount of assets involving
LXE or any of its subsidiaries, or any changes in LXE's
capitalization or any other change in LXE's corporate structure
or business or the composition of its management. However, ELMG
may, in the future, propose or develop additional or new plans or
proposals, or may propose the acquisition or disposition of
assets or other changes in LXE's business, corporate structure,
capitalization, management or dividend policy.
Determination of the Exchange Ratio
The ELMG Board has approved the exchange ratio being offered
for the LXE shares, based on the recommendation of the ELMG
Special Committee, whose members have no ownership or other
personal interest in LXE. In making such recommendation and
giving such approval, both the ELMG Special Committee and ELMG
Board received analyses and advice of Oppenheimer as described
below at "Financial Advisor," and also discussed various matters
deemed relevant, including business prospects, with the Chief
Executive Officer and other management personnel of each company.
The ELMG Special Committee and ELMG 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, with particular
emphasis on estimated 1997 earnings; relative trading prices for
the LXE and ELMG Shares; market valuations of comparable
companies as multiples of selected operating results, including
revenues and earnings per share, again with particular emphasis
on estimated 1997 earnings; the terms of comparable minority buy-out
transactions; the fact that tendering holders of LXE Shares
would continue to participate in the business of LXE as holders
of ELMG Shares; the perception of ELMG's management regarding
LXE's business prospects; the condition of the NASDAQ public
market for the LXE Shares; 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 bing disclosed in this Offering
Circular/Prospectus. As discussed above at "Purpose of the
Exchange 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 of, LXE or ELMG. Accordingly, actual results could
vary significantly from those set forth in such projections.
The exchange ratio selected by the ELMG Special Committee and
Board represents a premium of 22.1% based on the relative final
closing sales prices of ELMG Shares and LXE Shares on October 2,
1996, the last trading day preceding the date on which the
exchange ratio was approved 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 10 trading days ending on such date, in each case as
reported by NASDAQ. Based on relative closing high bid
quotations reported by NASDAQ, the premiums are 29.5% and 20.4%,
respectively; high bid prices are the prices at which at least
one market maker stands ready to purchase at least one round lot
from investors seeking to sell their shares, and ELMG believes
that, for shares (such as those of LXE ) with wide bid-asked
spreads, the high bids provide a more accurate measure of sales
prices available to individual investors.
As discussed below at "Financial Advisor," Oppenheimer provided
various analyses to the ELMG Special Committee and Board, but
advised that, in its view, the three most important analytical
approaches 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. Oppenheimer's analyses of comparable-company share
price multiples of estimated 1997 earnings per share reflected
that companies deemed comparable to LXE were trading at a
representative multiple of 15.5x, and those deemed comparable to
ELMG were trading at a representative multiple of 16.6x; applying
these 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. Oppenheimer's analysis of relative contribution to
combined-company estimated 1997 net income of the ownership
interest of the LXE minority shareholders reflected an 8.5%
contribution; 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's
analysis of premiums paid in other minority buyout transactions
revealed average premiums, as a percentage of the target
companies' stock prices at certain times prior to announcement
of the transaction ranging from 19.4% to 23.3%.
In selecting an exchange ratio of .75 ELMG Shares for each LXE
Share, the ELMG Special Committee and Board considered
Oppenheimer's advice (which, as described below at "Financial
Advisor," did not constitute an opinion as to the 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 by offset by synergistic operating efficiencies, and
to the overall benefits of the Transaction to ELMG as described
above at "Purpose of the Exchange Offer and Merger."
Financial Advisor
Oppenheimer was retained by the ELMG Special Committee and
Board to provide advice in connection with the Transaction.
However, Oppenheimer was not requested to, and has not, rendered
any opinion as to the fairness of the Exchange Offer, from a
financial point of view or otherwise, to either LXE shareholders
or ELMG shareholders, and Oppenheimer makes no recommendation as
to whether LXE shareholders should tender their LXE shares to
ELMG pursuant to the Exchange Offer.
Oppenheimer is an internationally recognized investment
banking firm and is engaged in the valuation of businesses and
their securities in connection with mergers and acquisitions,
leveraged buyouts, negotiated underwritings, secondary
distributions of listed and unlisted securities and private
placements, and in valuations for estate, corporate and other
purposes. Oppenheimer was retained by the ELMG Special Committee
and Board as financial advisor because of, among other things,
Oppenheimer's expertise in financial matters in general and in
wireless technology industries in particular, and because of its
familiarity with both ELMG and LXE through analysts and
investment bankers who have been following and maintaining
contact with both companies.
In providing assistance to the ELMG Special Committee and
Board, Oppenheimer performed and described to the Special
Committee and/or the Board a variety of financial analyses. 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.
In providing assistance to the ELMG Special Committee and
Board, Oppenheimer reviewed, among other things, (i) the Annual
Reports to Shareholders and Annual Reports on Form 10-K for the
three fiscal years ended December 31, 1995 of ELMG and LXE; (ii)
Quarterly Reports on Form 10-Q of ELMG and LXE for the fiscal
years 1995 and 1996; (iii) certain other communications from ELMG
and LXE to their respective stockholders; (iv) certain internal
financial analyses and forecasts of ELMG and LXE prepared by
their respective managements; (v) the reported price and trading
activity for the ELMG Shares and the LXE Shares; (vi) certain
financial and stock market information for ELMG and LXE, which
was compared with similar information for certain other publicly
traded companies; (vii) to the extent publicly available, the
financial terms of certain recent business combinations in the
wireless communications industry; and (viii) stock price premiums
paid in certain minority buyout transactions. In addition,
Oppenheimer held discussions with members of the managements of
ELMG and LXE regarding the past and current business operations,
financial condition and future prospects of their respective
companies and the business synergies expected by the respective
managements to be realized from the Merger, and performed such
other studies and analyses and considered such other financial,
economic and market criteria as it believed necessary.
The following summary is not a complete description of the
analyses performed by Oppenheimer and furnished to the ELMG
Special Committee and Board. Rather, it is intended to describe
generally the analytical approaches utilized by Oppenheimer, and
to provide additional information concerning those approaches
that were believed by Oppenheimer to be most relevant to the ELMG
Special Committee's and Board's objective of selecting a
reasonable and appropriate exchange ratio.
Analysis of LXE
Comparable Company Analysis. Oppenheimer furnished the ELMG
Special Committee and Board with a comparison 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 LXE.
Financial data compared included enterprise value (defined as the
sum of the face value of a company's debt plus the market value
of its equity securities ("market capitalization") less cash and
cash equivalents), market capitalization, sales, operating cash
flow (defined as earnings before interest, taxes, depreciation
and amortization ("EBITDA")), operating income (defined as
earnings before interest and taxes ("EBIT")), net income,
earnings per share ("EPS"), gross margin, operating margin, net
margin, historical sales, operating cash flow, net income and EPS
growth, projected EPS and EPS growth rates, balance sheet data,
and certain expenses and expense ratios. Multiples compared
included enterprise value to sales, enterprise value to operating
cash flow, enterprise value to operating income, and price per
share to actual and projected EPS. The analysis of the ratios of
price per share to projected 1997 EPS, which Oppenheimer believed
to be the most important and widely accepted indicator of value,
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.
Minority-Buyout Valuation Analysis. Oppenheimer furnished the
ELMG Special Committee and Board with an analysis of the premiums
paid in 41 pending and completed minority-buyout transactions
occurring since January 1992. Oppenheimer considered, among
other factors, the structure (tender offer or merger), the
consideration (cash or stock), and the percentage of the target's
shares held by the acquiror at the time of the announcement.
This analysis revealed that the average premiums paid in these
transactions, as a percentage of the target companies' stock
prices one day, one week, and four weeks prior to announcement of
the transaction, ranged from 19.4% to 23.3%.
Other Analytical Approaches. Oppenheimer also furnished the
ELMG Special Committee and Board with a discounted cash flow
analysis of LXE on a stand-alone basis, and an analysis of the
implied valuation multiples of seven completed merger and
acquisition transactions occurring since October 1994 and
involving companies in the data communications industry. Because
the discounted cash flow analysis in LXE's case is heavily
dependent upon the ending, or "terminal," valuation, which is
derived from expected income, capital market conditions, and
applicable multiples and discount rates at the end of five years,
Oppenheimer advised the ELMG Special Committee that in its view
the discounted cash flow analysis would not be an appropriate or
widely accepted indicator of value in the circumstances.
Oppenheimer also advised the ELMG Special Committee and Board
that the universe of recent data communications company mergers
did not include companies with businesses similar to that of LXE,
and that the seven transactions reviewed by Oppenheimer involved
third-party acquisitions and thus the higher premiums typically
paid for the transfer of control. For these reasons, and in view
of the fact that ELMG already holds a controlling equity interest
in LXE, Oppenheimer expressed its belief that the comparative
merger-and-acquisition analysis was not appropriate or helpful in
the Special Committee's and Board's efforts to determine an
exchange ratio.
Analysis of ELMG
Comparable Company Analysis. Oppenheimer furnished the ELMG
Special Committee and Board with an analysis 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 ELMG.
Financial data compared included enterprise value, market
capitalization, sales, operating cash flow, operating income, net
income, earnings per share, gross margin, operating margin, net
margin, historical sales, operating cash flow, net income and EPS
growth, projected EPS and EPS growth rates, balance sheet data,
and certain expenses and expense ratios. Multiples compared
included enterprise value to sales, enterprise value to operating
cash flow, enterprise value to operating income, and price per
share to actual and projected EPS. The analysis of the ratios of
price per share to projected 1997 EPS, which Oppenheimer believed
to be the most important and widely accepted indicator of value,
reflected that the ELMG comparable companies traded at average
and representative multiples to projected 1997 EPS of 19.1x and
16.6x, respectively.
Other Analytical Approaches. Oppenheimer also furnished the
ELMG Special Committee and Board with a discounted cash flow
analysis of ELMG on a stand-alone basis. As was also the case
with LXE, the ELMG discounted cash flow analysis is heavily
dependent upon the terminal valuation, which is derived from
expected income, capital market conditions, and applicable
multiples and discount rates at the end of five years. For this
reason, Oppenheimer advised that the discounted cash flow
analysis would not be an appropriate or widely accepted indicator
of value in the circumstances.
Analysis of Combined ELMG/LXE
Contribution Analysis. Oppenheimer furnished the ELMG Special
Committee and Board with an analysis of the relative contribution
to combined-company operating results represented by the
ownership interest of the unaffiliated LXE shareholders, and
compared that contribution to the pro forma combined-company
ownership of the unaffiliated LXE shareholders based on various
exchange ratios. This analysis, which was based on Oppenheimer's
review of fiscal 1995 actual results and estimates of 1996 and
1997 financial information (including projected 1997 EPS for LXE
of $.59 as discussed above at "Determination of the Exchange
Ratio"),as provided by LXE's and ELMG's respective managements,
revealed that for the specified periods the interest of the
unaffiliated LXE shareholders 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.
Historical Market Prices Ratio Analysis. Oppenheimer reviewed
for the ELMG Special Committee and Board the relationship of the
daily closing prices of LXE Shares relative to the daily closing
prices of ELMG Shares. This analysis indicated that the ratio of
the daily closing prices of the LXE Shares to ELMG Shares 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.
Pro Forma Merger Impact Analysis. Oppenheimer furnished the
ELMG Special Committee and Board with an analysis of certain pro
forma effects resulting from the Merger. In conducting its
analysis, Oppenheimer relied upon certain assumptions and
financial forecasts provided by the managements of ELMG and LXE,
as described above. Oppenheimer also discussed, without
independent verification, with the managements of ELMG and LXE
the possible cost savings and synergies achievable as a result of
the Merger. As part of this analysis, Oppenheimer reviewed the
pro forma accretion of or dilution to ELMG's 1997 to 2001
projected earnings per share following the Merger. Oppenheimer's
analysis separately considered the accretion/dilution (i) on an
unadjusted basis excluding any effects from possible operating
cost savings and synergies (other than savings from elimination
of the costs of separate public-company requirements, such as
financial and shareholder reporting), and (ii) after giving
effect to varying levels of operating synergies. Oppenheimer
also considered the effect on its analysis of variances between
actual operating results and the operating results projected by
LXE's management.
Summary Advice. Following presentation of its analysis,
Oppenheimer advised the Special Committee that, in its view, the
three most important of the analytical approaches described above
were the analyses 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. As noted above, however, 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 the ordinary course of business, Oppenheimer and its
affiliates may actively trade the securities of ELMG and LXE for
their own account or for the accounts of their customers and,
accordingly, may at any time hold a long or short position in
such securities. Oppenheimer has advised ELMG that as of the date
it presented its analysis to the ELMG Special Committee and
Board, and as of the date of this Offering Circular/Prospectus,
Oppenheimer and its affiliates held no securities of ELMG or LXE
for their own account.
As compensation for its services in providing advice to the
ELMG Special Committee and Board, and for serving as Dealer
Manager for the Exchange Offer, ELMG has paid Oppenheimer
$125,000 ($25,000 of which constituted a retainer and $100,000 of
which became payable upon commencement of the Exchange Offer),
and has agreed to pay Oppenheimer an additional fee of $175,000
in the event ELMG is successful in acquiring, pursuant to the
Exchange Offer or otherwise, 50% or more of the LXE shares not
already owned by ELMG. In addition, and regardless of whether
ELMG is successful in acquiring 50% or more of the LXE Shares not
already owned by ELMG, 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.
Interests of Certain Persons in the Exchange Offer and Proposed
Merger
Thomas E. Sharon is the President and Chief Executive Officer
of ELMG and is the Chairman of the Board and Chief Executive
Officer of LXE. John E. Pippin is the Chairman of the Board of
ELMG and a director of LXE. Don T. Scartz is the Senior Vice
President and Chief Financial Officer, Treasurer and a director
of ELMG, and is Chief Financial Officer and Treasurer of LXE.
William S. Jacobs is Vice President, Secretary and General
Counsel of ELMG, and is Secretary and General Counsel of LXE.
John B. Mowell is a director of both ELMG and LXE.
Two holders of in excess of 5% of the outstanding ELMG Shares
also are substantial holders of LXE Shares, and certain directors
and executive officers of ELMG are the beneficial owners of LXE
Shares or LXE Options. The tables set forth in "SECURITY
OWNERSHIP" detail the holdings of ELMG Shares, ELMG Options, LXE
Shares and LXE Options of each such person.
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 Merger. ELMG has been advised
by Kopp Investment Advisors, Inc. that it currently intends to
tender its LXE Shares in the Exchange Offer, and to recommend to
the beneficial holders of the ELMG Shares controlled by it that
they be voted in favor of the Transaction. ELMG has not
requested or received a binding commitment from these directors,
officers or shareholders with respect to their tender of LXE
Share or their voting of ELMG Shares.
Terms of the Exchange Offer
Upon the terms and subject to the conditions of the Exchange
Offer, ELMG hereby offers to exchange ELMG Shares for all
outstanding LXE Shares, at an exchange ratio of .75 ELMG Shares
for each LXE Share, provided that such LXE Shares are validly
tendered by the Expiration Date and not withdrawn as provided at
"Withdrawal Rights." The term "Expiration Date" means 12:00
midnight, Atlanta time, on December 30, 1996, unless ELMG extends
the period of time for which the Exchange Offer is open, in which
event the term "Expiration Date" means the latest time and date
to which the Exchange Offer is so extended by ELMG.
Upon the terms and subject to the conditions of the Exchange
Offer, ELMG will exchange all LXE Shares for ELMG Shares.
Tendering shareholders will not be obligated to pay any charges
or expenses of the Exchange Agent or any brokerage commissions.
Except as set forth in the Letter of Transmittal, any transfer
taxes on the exchanged LXE Shares pursuant to the Exchange Offer
will be paid by or on behalf of ELMG unless such payment would
jeopardize the tax-free nature of the Transaction for federal
income tax purposes. Currently, ELMG is not aware of any
transfer taxes, the payment of which by ELMG would have such a
result.
No fractional ELMG Shares will be distributed. The Exchange
Agent, acting as agent for LXE shareholders otherwise entitled to
receive fractional shares, will aggregate all fractional shares
and sell them for the accounts of such shareholders. Proceeds
from sales of fractional shares will be paid by the Exchange
Agent based upon the average gross selling price per share of all
such sales.
The Exchange Offer is subject to certain conditions set forth
below at "Certain Conditions of the Exchange Offer," including
the conditions, which cannot be waived, (i) that on or before the
Expiration Date, ELMG's shareholders approve the issuance of ELMG
Shares pursuant to the Transaction and certain amendments to the
ELMG Stock Plan related to the conversion of LXE Options in the
Merger, and (ii) that ELMG receive sufficient tenders of LXE
Shares to increase its ownership to at least 90% and that it then
causes the Merger to occur immediately after accepting such
tendered Shares. If any condition is not satisfied, ELMG may (i)
terminate the Exchange Offer and return all tendered LXE Shares
to tendering shareholders, (ii) extend the Exchange Offer and,
subject to withdrawal rights as set forth below at "Withdrawal
Rights," retain all such LXE Shares until the expiration of the
Exchange Offer as so extended, or (iii) waive such condition
(other than the conditions specifically referred to in the
preceding sentence) and, subject to any requirement to extend the
period during which the Exchange Offer is open, exchange all LXE
Shares validly tendered for exchange by the Expiration Date and
not withdrawn. For a description of ELMG's right to extend the
period during which the Exchange Offer is open and to amend or
terminate the Exchange Offer, see "Extension of Tender Period;
Termination; Amendment," below.
This Offering Circular/Prospectus and the related Letter of
Transmittal will be mailed to record holders of LXE Shares and
will be furnished, for transmittal to beneficial owners of LXE
Shares, to brokers, banks and similar persons whose names, or the
names of whose nominees, appear on the LXE shareholder list or,
if applicable, who are listed as participants in a clearing
agency's security position listing.
Conversion of LXE Options
LXE has maintained 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 LXE
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 293,118
shares currently are exercisable at prices ranging from $3.66 to
$18.25. The remaining options for 53,425 shares become
exercisable not later than September 26, 2002, at option prices
ranging from $5.66 to $11.25. The ELMG Special Committee and
other members of the ELMG 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 ELMG Special Committee and the
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 proportionately
upwards by one-third, 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 ELMG 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 the exercise prices and taxes on income realized on
exercise. The ELMG 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 also would eliminate the continuing incentives intended
at the time the LXE Options were granted.
Procedures for Tendering LXE Shares
To tender LXE Shares pursuant to the Exchange Offer, either:
(a) a properly completed and duly executed Letter of Transmittal
(or facsimile thereof) and any other documents required by the
Letter of Transmittal must be received by the Exchange Agent at
one of its addresses set forth on the back cover of this Offering
Circular/Prospectus and either (i) certificates for the shares of
LXE Shares to be tendered must be received by the Exchange Agent
at one of such addresses, or (ii) such LXE Shares must be
delivered pursuant to the procedures for book-entry transfer
described below (and a confirmation of such delivery received by
the Exchange Agent), in each case by the Expiration Date; or (b)
the guaranteed delivery procedure described below must be
complied with.
The Exchange Agent will establish an account with respect to
the LXE Shares at The Depository Trust Corporation ("DTC" or
collectively, the "Book-Entry Transfer Facility") for purposes of
the Exchange Offer within two business days after the date of
this Offering Circular/Prospectus, and any financial institution
that is a participant in the system of any Book-Entry Transfer
Facility may make delivery of LXE Shares by causing such Book-Entry
Transfer Facility to transfer such LXE Shares into the
Exchange Agent's account in accordance with the procedures of
such Book-Entry Transfer Facility. However, although delivery of
LXE Shares may be effected through book-entry transfer, the
Letter of Transmittal (or facsimile thereof) and any other
required documents must, in any case, be received by the Exchange
Agent at one of its addresses set forth on the back cover of this
Offering Circular/Prospectus by the Expiration Date, or the
guaranteed delivery procedure described below must be complied
with. Delivery of the Letter of Transmittal and any other
required documents to a Book-Entry Transfer Facility does not
constitute delivery to the Exchange Agent.
Except as otherwise provided below, all signatures on a Letter
of Transmittal must be guaranteed by a financial institution
(including most banks, savings and loan associations and
brokerage houses) which is a participant in the Securities
Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Guarantee Program or the Stock Exchange
Medallion Program (an "Eligible Institution"). Signatures on a
Letter of Transmittal need not be guaranteed if (a) the Letter of
Transmittal is signed by the registered holder of the LXE Shares
tendered therewith and such holder has not completed the box
entitled "Special Exchange Instructions" on the Letter of
Transmittal, or (b) such LXE Shares are tendered for the account
of an Eligible Institution. See Instructions 5 and 7 of the
Letter of Transmittal.
If a shareholder desires to tender LXE Shares pursuant to the
Exchange Offer and cannot deliver such LXE Shares and all other
required documents to the Exchange Agent by the Expiration Date,
such LXE Shares may nevertheless be tendered if all of the
following conditions are met:
(i) such tender is made by or through an Eligible
Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery substantially in the form provided by ELMG
is received by the Exchange Agent by the Expiration Date; and
(iii) the certificates for such LXE Shares (or a
confirmation of a book-entry transfer of such LXE Shares into the
Exchange Agent's account at one of the Book Entry Transfer
Facilities), together with a properly completed and duly executed
Letter of Transmittal (or facsimile thereof) and any other
documents required by the Letter of Transmittal, are received by
the Exchange Agent within five NASDAQ trading days after the date
of execution of the Notice of Guaranteed Delivery.
The method of delivery of LXE Shares and all other required
documents is at the option and risk of the tendering shareholder.
If certificates for LXE Shares are sent by mail, registered mail
with return receipt requested, properly insured, is recommended
and sufficient time to ensure timely receipt should be allowed.
To avoid backup federal income tax withholding with respect to
ELMG Shares received by a shareholder pursuant to the Exchange
Offer, the shareholder must provide the Exchange Agent with his
correct taxpayer identification number or certify that he is not
subject to backup federal income tax withholding by completing
the Substitute Form W-9 included in the Letter of Transmittal.
The tender of LXE Shares pursuant to any one of the procedures
described above will constitute an agreement between the
tendering shareholder and ELMG upon the terms and subject to the
conditions of the Exchange Offer.
All questions as to the form of documents and the validity,
eligibility (including time of receipt) and acceptance for
exchange of any tender of LXE Shares will be determined by ELMG,
in its sole discretion, which determination will be final and
binding. ELMG reserves the absolute right to reject any or all
tenders of LXE Shares determined by it not to be in proper form
or the acceptance for exchange of LXE Shares which may, in the
opinion of ELMG's counsel, be unlawful. ELMG also reserves the
absolute right to waive any defect or irregularity in any tender
of LXE Shares. None of ELMG, the Exchange Agent, the Information
Agent, the Dealer Manager or any other person will be under any
duty to give notification of any defect or irregularity in
tenders, or incur any liability for failure to give any such
notification.
Exchange of LXE Shares
Upon the terms and subject to the conditions of the Exchange
Offer, ELMG will accept for exchange, and will transfer ELMG
Shares in exchange for, LXE Shares validly tendered and not
withdrawn by the Expiration Date as promptly as practicable
after the Expiration Date. In addition, ELMG reserves the right,
in its sole discretion subject to Rule 14e-1(c) promulgated under
the Exchange Act, to delay the acceptance for exchange, or delay
exchange, of any LXE Shares in order to comply with any
applicable law. For a description of ELMG's right to terminate
the Exchange Offer and not accept or exchange, or to delay
acceptance or exchange of any LXE Shares, see "Extension of
Tender Period; Termination; Amendment," below.
For purposes of the Exchange Offer, ELMG shall be deemed to
have accepted for exchange and exchanged LXE Shares tendered for
exchange when, as and if ELMG gives oral or written notice to the
Exchange Agent of its acceptance of the tenders of such LXE
Shares for exchange. Exchange of LXE Shares accepted for
exchange pursuant to the Exchange Offer will be made by deposit
of tendered LXE Shares with the Exchange Agent, which will act as
agent for the tendering shareholders for the purpose of receiving
ELMG Shares from ELMG and transmitting such ELMG Shares to
tendering shareholders. In all cases, exchange for shares of LXE
Shares accepted for exchange pursuant to the Exchange Offer will
be made only after timely receipt by the Exchange Agent of
certificates for such LXE Shares (or of a confirmation of a book-entry
transfer of such LXE Shares into the Exchange Agent's
account at one of the Book-Entry Transfer Facilities), a properly
completed and duly executed Letter of Transmittal (or facsimile
thereof), and any other required documents. For a description of
the procedure for tendering LXE Shares pursuant to the Exchange
Offer, see " Procedures for Tendering LXE Shares," above.
Accordingly, exchanges of ELMG Shares for LXE Shares may be made
to tendering shareholders at different times if delivery of the
LXE Shares and other required documents occur at different times.
Under no circumstances will interest be paid by ELMG pursuant to
the Exchange Offer, regardless of any delay in making such
exchange.
If certain events occur, ELMG may not be obligated to exchange
ELMG Shares for LXE Shares pursuant to the Exchange Offer. See
"Certain Conditions of the Exchange Offer," below.
If any tendered LXE Shares are not exchanged pursuant to the
Exchange Offer for any reason, or if certificates are submitted
for more LXE Shares than are tendered, certificates for such
unexchanged or untendered LXE Shares will be returned (or, in the
case of LXE Shares tendered by book-entry transfer, such LXE
Shares will be credited to an account maintained at one of the
Book-Entry Transfer Facilities), without expense to the tendering
shareholder, as promptly as practicable following the expiration
or termination of the Exchange Offer.
Withdrawal Rights
Tenders of LXE Shares made pursuant to the Exchange Offer may
be withdrawn at any time before the Expiration Date. Thereafter,
such tenders are irrevocable, except that they may be withdrawn
after January 26, 1997 unless theretofore accepted for exchange
as provided in this Offering Circular/Prospectus. If ELMG
extends the period during which the Exchange Offer is open, is
delayed in its acceptance of LXE Shares for exchange or is unable
to accept LXE Shares for exchange pursuant to the Exchange Offer
for any reason, then, without prejudice to ELMG's rights under
the Exchange Offer, the Exchange Agent may, on behalf of ELMG,
retain all LXE Shares tendered, and such LXE Shares may not be
withdrawn except as otherwise provided in this section, subject
however to legal restrictions identified below at "Extension of
Tender Period; Termination; Amendment."
To be effective, a written, telegraphic, telex or facsimile
transmission notice of withdrawal must be timely received by the
Exchange Agent at one of its addresses set forth on the back
cover of this Offering Circular/Prospectus, and must specify the
name of the shareholder who tendered the LXE Shares to be
withdrawn and the number of LXE Shares to be withdrawn. If the
LXE Shares to be withdrawn have been delivered to the Exchange
Agent, a signed notice of withdrawal with signatures guaranteed
by an Eligible Institution (unless not required by the terms set
forth above at "Procedures for Tendering LXE Shares") must be
submitted before such LXE Shares will be released. In addition,
such notice must specify, in the case of LXE Shares tendered by
delivery of certificates, the name of the registered holder (if
different from that of the tendering shareholder) and the serial
numbers shown on the particular certificates evidencing the LXE
Shares to be withdrawn or, in the case of LXE Shares tendered by
book-entry transfer, the name and number of the account at one of
the Book-Entry Transfer Facilities to be credited with the
withdrawn LXE Shares. Withdrawals may not be rescinded and LXE
Shares withdrawn will thereafter be deemed not validly tendered
for purposes of the Exchange Offer. However, withdrawn LXE
Shares may be retendered by again following one of the procedures
described above at "Procedures for Tendering LXE Shares" before
the Expiration Date.
All questions as to the form and validity (including time of
receipt) of any notice of withdrawal will be determined by ELMG,
in its sole discretion, which determination will be final and
binding. None of ELMG, the Exchange Agent, the Information
Agent, the Dealer Manager or any other person will be under any
duty to give notification of any defect or irregularity in any
notice of withdrawal, or incur any liability for failure to give
any such notification.
Extension of Tender Period; Termination; Amendment
ELMG reserves the right (but will not be obligated), at any
time or from time to time, in its sole discretion and regardless
of whether or not any of the conditions specified below at
"Certain Conditions of the Exchange Offer" have been satisfied,
to (i) extend the period during which the Exchange Offer is open
by giving oral or written notice of such extension to the
Exchange Agent and by making public announcement of such
extension, or (ii) amend the Exchange Offer in any respect by
making a public announcement of such amendment. There can be no
assurance that ELMG will exercise its right to extend or amend
the Exchange Offer.
If ELMG materially changes the terms of the Exchange Offer
(other than a change in price or percentage of securities sought)
or the information concerning the Exchange Offer, or waives a
material condition of the Exchange Offer, ELMG will extend the
Exchange Offer, if required by applicable law, for a period
sufficient to allow shareholders to consider the amended terms of
the Exchange Offer. Certain rules promulgated under the Exchange
Act provide that the minimum period during which an offer must
remain open following material changes in the terms of the offer
or information concerning the offer (other than a change in price
or a change in percentage of securities sought) will depend on
the facts and circumstances, including the relative materiality
of such terms or information. The Commission has stated that, as
a general rule, it is of the view that an offer should remain
open for a minimum of five business days from the date that
notice of such a material change is first published, sent or
given, and that, if material changes are made with respect to
information that approaches the significance of price and share
levels, a minimum of ten business days may be required to allow
adequate dissemination and investor response. If (i) ELMG
increases or decreases the consideration offered for LXE Shares
pursuant to the Exchange Offer or ELMG decreases the number of
LXE Shares eligible for exchange, and (ii) the Exchange Offer is
scheduled to expire at any time earlier than the expiration of a
period ending on the tenth business day from and including the
date that notice of such increase or decrease is first published,
sent or given, the Exchange Offer will be extended until the
expiration of such period of ten business days. The term
"business day" means any day other than a Saturday, Sunday or
federal holiday and consists of the time period from 12:01 a.m.
through 12:00 midnight, Atlanta time.
ELMG also reserves the right, in its sole discretion, if any
condition specified below at "Certain Conditions of the Exchange
Offer" has not been satisfied on or prior to the Expiration Date
and so long as LXE Shares have not theretofore been accepted for
exchange, to delay (except as otherwise required by applicable
law) acceptance of, or the delivery of ELMG Shares in exchange
for, any tendered LXE Shares, or to terminate the Exchange Offer
and not accept, or deliver ELMG Shares in exchange for, any such
LXE Shares.
If ELMG extends the period of time during which the Exchange
Offer is open for any reason, is delayed in accepting or in
delivering ELMG Shares in exchange for, any LXE Shares, or is
unable to accept or so deliver in exchange for, any tendered LXE
Shares, then, without prejudice to ELMG's rights under the
Exchange Offer, the Exchange Agent may, on behalf of ELMG, retain
all LXE Shares tendered, and such LXE Shares may not be withdrawn
except as otherwise provided above at "Withdrawal Rights." The
reservation by ELMG of the right to delay acceptance, or exchange
of, any LXE Shares is subject to the requirements of Rule 14e-1(c)
under the Exchange Act, which requires that ELMG pay the
consideration offered or return the LXE Shares deposited by or on
behalf of shareholders promptly after the termination or
withdrawal of the Exchange Offer.
Any extension, termination or amendment of the Exchange Offer
will be followed as promptly as practicable by a public
announcement thereof. Without limiting the manner in which ELMG
may choose to make any public announcement, ELMG will have no
obligation (except as otherwise required by applicable law) to
publish, advertise or otherwise communicate any such public
announcement other than by making a release to the Dow Jones News
Service, subject to ELMG's obligations under Rule 14d-4(c) under
the Exchange Act (relating to the dissemination of public
announcements concerning material changes in the Offering
Circular/Prospectus), if such rule is applicable. If the
Exchange Offer is extended, Commission regulations require a
public announcement of such extension no later than 9:00 a.m.,
Atlanta time, on the next business day after the previously
scheduled Expiration Date.
Certain Conditions of the Exchange Offer
ELMG may not accept tendered LXE Shares for exchange unless
each of the following conditions, which may not be waived by
ELMG, shall have been satisfied:
(a) The shareholders of ELMG, acting at a duly convened
meeting by vote of not less than half of the ELMG Shares voted,
shall have approved the issuance of ELMG Shares in the
Transaction, and certain amendments to the ELMG Stock Plan
related to conversion of LXE Options in the Merger (see "Approval
by ELMG's Shareholders," below); and
(b) There shall have been tendered in the Exchange Offer
and not withdrawn at least that number of LXE Shares as shall,
upon acceptance thereof, increase ELMG's ownership of LXE Shares
to at least 90% of those then-outstanding, and ELMG shall have
provided to the Exchange Agent its irrevocable commitment to
cause the Merger to occur immediately following such acceptance.
Notwithstanding any other provision of the Exchange Offer and
without prejudice to ELMG's other rights under the Exchange
Offer, ELMG shall not be required to accept or deliver ELMG
Shares in exchange for any LXE Shares, and may terminate the
Exchange Offer as provided above at "Extension of Tender Period;
Termination; Amendment," if any of the following conditions
exists:
(c) there shall be threatened, instituted or pending any
action or proceeding by any government or governmental authority
or agency, domestic or foreign, or by any other person, domestic
or foreign, before any court or governmental authority or agency,
domestic or foreign, (i) challenging or seeking to make illegal,
to delay or otherwise directly or indirectly to restrain or
prohibit the making of the Exchange Offer or any other material
element of the Transaction, the acceptance for exchange of, or
delivery of ELMG Shares in exchange for, some of or all of the
LXE Shares by ELMG, or seeking to obtain material damages or
otherwise directly or indirectly relating to the transactions
contemplated by the Exchange Offer (including the other elements
of the Transaction), (ii) seeking any material diminution in the
benefits expected to be derived by ELMG or any of its affiliates,
including LXE , as a result of the transactions contemplated by
the Exchange Offer (or any other elements of the Transaction), or
(iii) that otherwise, in the reasonable judgment of ELMG, has or
may have material adverse significance with respect to either the
value of ELMG or any of its subsidiaries or affiliates (including
LXE) or the value of the LXE Shares to ELMG;
(d) there shall be any action taken, or any statute,
rule, regulation, injunction, order or decree proposed, enacted,
enforced, promulgated, issued or deemed applicable
to the Exchange Offer or any transaction contemplated by the
Exchange Offer (including the other elements of the Transaction)
by any court, government or governmental authority or agency,
domestic or foreign, that, in the reasonable judgment of ELMG
might, directly or indirectly, result in any of the consequences
referred to in clauses (i) through (iii) of paragraph (c)above;
(e) there shall have occurred (i) any general suspension
of trading in, or limitation on prices for, securities on any
national securities exchange or in the over-the counter market,
(ii) the declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States, (iii) any
material adverse change (or development or threatened development
involving a prospective material adverse change) in United States
or any other currency exchange rates, or a suspension of or a
limitation on the markets therefor, (iv) the commencement of a
war, armed hostilities or other international or national calamity
directly or indirectly involving the United States, (v)
any limitation (whether or not mandatory) by any governmental
authority or agency on, or any other event that, in the
reasonable judgment of ELMG, might adversely affect, the
extension of credit by banks or other financial institutions, or
(vi) in the case of any of the foregoing existing at the time of
the commencement of the Exchange Offer, a material acceleration
or worsening thereof; or
(f) any material adverse change (i) shall have occurred
or been threatened (or any development shall have occurred or
been threatened involving a prospective material adverse change)
in the business, financial condition, results of operations or
prospects of LXE , or (ii) shall have occurred in the market
price of the LXE Shares or in the United States securities,
financial or commodities markets, or ELMG shall have become aware
of any facts which, in the reasonable judgment of ELMG, have or
may have material adverse significance with respect to the value
of LXE Shares to ELMG, which, in the sole judgment of ELMG, in
any such case and regardless of the circumstances (including any
action or omission by ELMG) giving rise to any such condition,
makes it inadvisable to proceed with such acceptance for exchange
of, or delivery of ELMG Shares in exchange for, any LXE Shares.
The foregoing conditions (c) - (f) are for the sole benefit
of ELMG and may be asserted by ELMG in its sole discretion
regardless of the circumstances (including any action or omission
by ELMG) giving rise to any such condition or may be waived by
ELMG in its sole discretion in whole at any time or in part from
time to time. The failure by ELMG at any time to exercise its
rights under any of the foregoing conditions shall not be deemed
a waiver of any such right. The waiver of any such right with
respect to particular facts and circumstances shall not be deemed
a waiver with respect to any other facts and circumstances, and
each such right shall be deemed an ongoing right which may be
asserted at any time or from time to time.
Any determination by ELMG concerning the events described in
this section will be final and binding upon all parties. All
applicable conditions must be either waived or satisfied prior to
the Expiration Date.
In addition, ELMG will not accept for exchange any LXE Shares
tendered, and no ELMG Shares will be transferred in exchange for
any such LXE Shares, at any time at which there is in effect a
stop order issued by the Commission with respect to the
Registration Statement under which the ELMG Shares are being
offered.
Approval by ELMG's Shareholders
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. 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 outstanding LXE Options in the Merger. In
addition, some holders of LXE Options currently are not employees
of LXE and would not be eligible to receive a current grant of an
ELMG Option under the ELMG Stock 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 intends to seek shareholder approval, of the matters
required to complete the Transaction, at the ELMG Special
Meeting, which is expected to be held on December 30, 1996. See
"THE EXCHANGE OFFER -- Certain Conditions of the Exchange Offer."
Certain Federal Income Tax Consequences
The following discussion summarizes certain federal income tax
consequences of the Exchange Offer and Merger to holders of LXE
Shares, but does not purport to be a complete analysis of all of
the potential tax effects of the Transaction. The discussion is
based upon the Internal Revenue Code of 1986, as amended (the
"Code"), Treasury regulations, Internal Revenue Service ("IRS")
rulings and judicial decisions now in effect, all of which are
subject to change at any time by legislative, judicial or
administrative action, and any such change may be applied
retroactively. No information is provided herein with respect to
foreign, state or local tax laws or estate and gift tax
considerations. This information is directed to LXE shareholders
who hold their LXE Shares as "capital assets" within the meaning
of Section 1221 of the Code. This information does not apply to
LXE shareholders who are entitled to special treatment under
federal income tax laws, including dealers in securities, banks,
insurance companies, tax-exempt organizations, non-United States
persons, and persons who acquired their LXE Shares pursuant to
the exercise of options or otherwise as compensation. ELMG does
not intend to request a ruling from the IRS with respect to the
Exchange Offer or the Merger. The opinion of Kilpatrick & Cody,
L.L.P., tax counsel to ELMG ("Tax Counsel") regarding federal
income tax consequences relevant to the Exchange Offer and Merger
is filed as an exhibit to the Registration Statement of which
this Offering Circular/Prospectus is a part, and is subject to
the qualifications stated therein. Such opinion, however, has no
binding effect on the IRS or the courts.
In the opinion of Tax Counsel, (i) the Exchange Offer together
with the Merger will constitute a tax-free exchange under
Section 368 of the Code; (ii) no income, gain or loss will be
recognized by LXE shareholders upon the receipt of ELMG Shares in
exchange for their LXE Shares, (iii) no income, gain or loss will
be recognized by ELMG or LXE pursuant to the Exchange Offer and
Merger, (iv) the tax basis of the ELMG Shares received by LXE
shareholders will be equal to their tax basis in LXE Shares
immediately before consummation of the Exchange Offer and Merger,
(v) the holding period of the ELMG Shares received by each LXE
shareholder will include the period for which such shareholder
has held the LXE Shares surrendered in exchange therefor, and
(vi) the payment of cash in lieu of fractional share interests in
ELMG will be treated for federal income tax purposes as if the
fractional shares were issued as part of the overall transaction,
and then were redeemed by ELMG. The cash payments will be
treated as having been received as distributions in full payment
in exchange for the shares redeemed as provided in Section 302(a)
of the Code.
Certain LXE shareholders may be subject to backup withholding
at a rate of 20% on payments of cash in lieu of fractional share
interests in ELMG. In order to avoid such backup withholding,
each LXE shareholder must provide the Exchange Agent with such
LXE shareholder's correct taxpayer identification number and
certify that such is not subject to such backup withholding by
completing the Substitute Form W-9 included in the Letter of
Transmittal.
Effects of the Exchange Offer and Merger
As a result of the Exchange Offer and Merger, if completed,
LXE would become a wholly owned subsidiary of ELMG, and LXE's
shareholders other than ELMG would hold, in lieu of their
currently outstanding LXE Shares, ELMG Shares representing
approximately 9.3% of the then-outstanding equity ownership of
ELMG.
LXE Shares would no longer be traded on NASDAQ or on any other
market, and would no longer be registered under the Exchange Act.
ELMG currently intends that the business of LXE will operate in
substantially the same way as at present, except for greater
exchange and sharing of technical, production and marketing
resources among LXE and ELMG's other subsidiaries. ELMG has
formulated no plans for changes in the officers of LXE following
the Merger, but may do so in the future. It is unlikely that
LXE's Board would continue to include members who were not
employed by or otherwise affiliated with ELMG.
Fees and Expenses
Financial Advisor and Dealer Manager. Oppenheimer is acting
as ELMG's financial advisor in connection with the proposed
acquisition of LXE and as Dealer Manager for the Exchange Offer.
In connection with such services, ELMG has agreed to pay to
Oppenheimer an aggregate fee of up to $300,000, plus certain
expenses. See "THE EXCHANGE OFFER--Financial Advisor."
Oppenheimer may be an underwriter of the ELMG Shares under the
Securities Act.
The LXE Special Committee is incurring fees and expenses of
its legal counsel and financial advisor in connection with
determining its position with respect to the Exchange Offer, and
is also incurring printing and mailing expenses to disseminate
that portion to the LXE shareholders. ELMG has agreed to pay
such fees and expenses on behalf of LXE and the LXE Special
Committee.
Information and Exchange Agents. ELMG has retained Corporate
Investor Communications, Inc. to act as the Information Agent and
SunTrust Bank, Atlanta to act as the Exchange Agent in connection
with the Exchange Offer. The Information Agent may contact
holders of LXE Shares by mail, telephone, telex, telegraph and
personal interviews, and may request brokers, dealers and other
nominee shareholders to forward materials relating to the
Exchange Offer to beneficial owners. The Information Agent and
the Exchange Agent each will receive reasonable and customary
compensation for their respective services, will be reimbursed
for certain reasonable out-of-pocket expenses and will be
indemnified against certain liabilities in connection therewith,
including certain liabilities under the federal securities laws.
The Information Agent and the Exchange Agent have not been
retained to make solicitations or recommendations in their
respective roles as Information Agent or Exchange Agent.
Others. Brokers, dealers, commercial banks and trust
companies will, upon request, be reimbursed by ELMG for
reasonable and necessary costs and expenses incurred by them in
forwarding materials to their customers.
It is estimated that the expenses incurred by ELMG in
connection with the Exchange Offer and Merger will be
approximately as set forth below:
Investment banking fees $ 300,000
Legal fees 75,000
Expenses of the LXE Special
Committee, including legal
and financial advisor fees 150,000
Accounting and Exchange Agent fees
Filing fees 5,000
Printing, mailing and Information
Agent fees 55,000
Miscellaneous 15,000
---------
$ 650,000
=========
Source of Funds
ELMG expects to obtain the funds for fees and expenses related
to the Transaction from available cash and cash equivalents.
Regulatory Approvals
ELMG is not aware of any license or regulatory permit which
appears to be material to the business of LXE and which is likely
to be adversely affected by ELMG's acquisition of LXE Shares
pursuant to the Exchange Offer and Merger, or of any approval or
other action by any state, federal or foreign government or
governmental agency that would be required before the acquisition
of LXE Shares pursuant to the Exchange Offer or Merger. ELMG
presently intends to take such actions with respect to any
approvals as will enable it to acquire LXE Shares as
expeditiously as possible. In this regard, ELMG expressly
reserves the right to challenge the validity and applicability of
any state, foreign or other statutes or regulations purporting to
require approval of the commencement or consummation of the
Exchange Offer and Merger.
There can be no assurance that any license, permit, approval
or other action, if needed, would be obtained or, if so obtained,
when, or that adverse consequences might not result to LXE or to
its business in the event of adverse regulatory action or
inaction.
Miscellaneous
ELMG is not aware of any jurisdiction where the making of the
Exchange Offer or the acceptance thereof would not comply with
applicable law. If ELMG becomes aware of any jurisdiction where
the making of the Exchange Offer or acceptance thereof would not
comply with applicable law, ELMG will make a good faith effort to
comply with such law. If, after such good faith effort, ELMG
cannot comply, the Exchange Offer will not be made to, nor will
tenders be accepted from or on behalf of, holders of LXE Shares
in such jurisdiction.
No person has been authorized to give any information or make
any representation on behalf of ELMG not contained in this
Offering Circular/Prospectus or in the Letter of Transmittal and,
if given or made, such information or representation must not be
relied upon as having been authorized.
INFORMATION ABOUT LXE
Copies of LXE's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995, and of its Quarterly Report on Form 10-Q
for the quarter ended September 30, 1996, are delivered with this
Offering Circular/Prospectus. The description of LXE in such
Reports and in certain other reports filed by LXE with the
Commission pursuant to the Exchange Act is incorporated herein by
reference. See "INCORPORATION OF DOCUMENTS BY REFERENCE."
INFORMATION ABOUT ELMG
The description of ELMG set forth in its Annual Report on Form
10-K for the fiscal year ended December 31, 1995 and in
subsequent reports filed by ELMG with the Commission pursuant to
the Exchange Act is incorporated herein by reference. See
"INCORPORATION OF DOCUMENTS BY REFERENCE."
ELMG is subject to the informational filing requirements of
the Exchange Act and, in accordance therewith, is obligated to
file reports and other information with the Commission relating
to its business, financial statements and other matters.
Information as of particular dates concerning ELMG's directors
and executive officers, their remuneration, options granted to
them, the principal holders of ELMG's securities and any material
interests of such persons in transactions with ELMG is required
to be disclosed in proxy statements distributed to ELMG's
shareholders and filed with the Commission. Such reports, proxy
statements and other information are available for inspection and
may be copied as described in "AVAILABLE INFORMATION," or
obtained in the manner specified on page -ii- of this Offering
Circular/Prospectus.
Except as described above and in "THE EXCHANGE OFFER --
Background" and "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,"
(a) neither ELMG nor, to the best of ELMG's knowledge, any of
ELMG's directors and executive officers has any contract,
arrangement, understanding or relationship with any other person
with respect to any securities of LXE , and (b) there have not
been any contracts, negotiations or transactions between (i) ELMG
or any of ELMG's directors, officers or affiliates, on the one
hand, and (ii) LXE or any of its directors, officers or
affiliates, on the other hand, that are required to be disclosed
pursuant to the rules and regulations of the Commission. None of
ELMG and its directors and executive officers has effected any
transaction in LXE Shares during the 60 days preceding the
commencement of the Exchange Offer.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
LXE's Relationship and Transactions with ELMG
As of October 11, 1996, ELMG owned 4,543,074 LXE Shares,
representing approximately 81.5% of the 5,574,518 outstanding LXE
Shares. ELMG has the power, acting alone, to elect the entire
LXE Board and, except as may otherwise be provided by law, to
approve any action requiring shareholder approval, and three of
the six members of the LXE Board are also members of the ELMG
Board. ELMG's ownership of more than a majority of the
outstanding LXE Shares precludes a change in control of LXE not
favored by ELMG.
During the past three fiscal years, ELMG has provided LXE with
a variety of services, and ELMG and LXE have entered into a
variety of transactions. It is the intention of LXE and ELMG
that all transactions between them, or between LXE and any other
affiliated party, will be beneficial to LXE and will be approved
by disinterested members of the LXE Board. In this regard,
transactions with ELMG or other affiliates are reviewed and
approved by the LXE Audit Committee members who are not otherwise
affiliated with ELMG. Reviews of continuing relationships, such
as those under the Services Agreement or with respect to the
retirement and group health plans, as described below, occur no
less often than annually. The following is a description of
transactions between ELMG and LXE since the beginning of the
fiscal year ended December 31, 1992:
Administrative and Other Services. Pursuant to a Services
Agreement that is updated annually, ELMG provides administrative
and other services to LXE. Under this Agreement, ELMG is
obligated for a one-year term, and during any subsequent
renewals, to provide services as reasonably required by LXE. The
Services Agreement covers accounting services, services related
to facilities operations and maintenance, data processing
services, investor relations services, and engineering design
services. Amounts to be paid are determined by reference to
allocation formulas that are reviewed each year and are intended
to reimburse ELMG for the cost of providing each category of
services, including overhead costs associated with the personnel
and facilities involved. The Services Agreement also provides
for the allocation to LXE of approximately 50% (45% in 1994) of
the compensation and overhead costs of ELMG's Chief Executive
Officer, Chief Financial Officer and General Counsel, each of
whom also serves LXE in a similar capacity. This allocation was
determined after consideration of anticipated relative time
commitments and of anticipated relative net sales of the two
companies for the year in question. For all services under the
Services Agreements, LXE paid to ELMG $1,579,000 for 1993,
$1,739,000 for 1994, and $1,724,000 for 1995, and ELMG
anticipates that the amount to be paid in 1996 will not
significantly differ from the 1995 amount.
In order to reduce the number of items for which allocations
are made, the Services Agreement provides that, to the extent
feasible, all third-party suppliers will submit invoices directly
to LXE for goods or services provided for LXE's benefit; to the
extent separate invoicing is not feasible, third-party invoices
are allocated between LXE and ELMG on a basis determined by ELMG
to fairly reflect the respective benefits to LXE and ELMG.
ELMG believes that it will continue to be beneficial for the
foreseeable future for LXE to obtain a significant portion of its
administrative services from ELMG, whether or not the Transaction
occurs, because of the efficiencies involved in utilizing a
larger-scale, existing administrative structure.
Employee Benefit Plans. LXE personnel participate in a
defined-contribution retirement plan maintained by ELMG and under
which annual contributions are determined from year to year by
the ELMG Board. ELMG has charged LXE $477,000, $411,000, and
$534,000 for the years ended December 31, 1993, 1994 and 1995,
respectively, representing the actual contributions allocated to
the accounts of LXE's employees for the year. LXE also is
responsible for a prorata share of plan overhead expenses.
LXE personnel participate in the group health plans maintained
by ELMG; for the years ended December 31, 1993, 1994 and 1995,
ELMG charged LXE $1,199,000, $1,319,000 and $1,346,000,
respectively, for expenses incurred under these plans, based on
LXE's proportionate share of the covered employee census. ELMG
expects that LXE's personnel will continue to participate in the
ELMG group health plans for the foreseeable future.
LXE personnel are also eligible to participate in the stock
purchase and 401(k) savings plans maintained by ELMG. Under the
stock purchase plan, LXE matches, on a one-for-four basis,
employee salary deductions, up to a maximum matching contribution
of 1-1/4% of base compensation; the employee deductions and LXE
contributions are forwarded to a custodian to be applied to the
purchase of ELMG Sharesfor the employee's account. Under the
ELMG 401(k) savings plan, the employer matches on a one-for-four
basis, up to a maximum matching contribution of 1-1/2% of
eligible compensation, salary deductions for employee personal
savings plan accounts. During the years ended December 31, 1993,
1994 and 1995, LXE's contributions with respect to the
participation of its employees in these plans were $3,000, $3,000
and $23,000, respectively, for the stock purchase plan and
$99,000, $88,000 and $106,000, respectively, for the 401(k)
savings plan.
Technology Park Buildings. In 1991, LXE acquired from ELMG
the 112,000 square-foot 125 Technology Park Building, which had
previously been occupied by ELMG and had been renovated to LXE's
specifications. A portion of the purchase price of this building
is being financed by ELMG under a note providing for monthly
installments of principal and interest over a 10-year period,
bearing interest at the prime rate, and secured by a junior
mortgage on the building. During 1993, 1994 and 1995, the
principal balance of this note was reduced from $2,496,000 to
$1,672,000, and LXE paid $141,000, $132,000 and $177,000 to ELMG
as interest. During 1993 and 1994, ELMG used approximately
22,000 square feet, and during 1995 approximately 8,000 square
feet, of the 125 Technology Park Building for certain of its
production operations. For such usage, ELMG paid LXE rent of
$3.23 per square foot per year in 1993 and 1994, and $3.70 per
square foot per year in 1995, plus operating expenses. The
rental payments equal LXE's cost, based on actual depreciation
charges, interest cost on the unamortized investment, taxes and
insurance. Also during 1995, ELMG used approximately 20,000
square feet of space in another building located in Technology
Park in which LXE has leased approximately 36,000 square feet.
ELMG paid LXE rent for such space equal to LXE's own lease
payments, or $8.52 per square foot per annum, plus operating
expenses. The amount of such space initially used by ELMG during
1996 was approximately the same as in 1995, but ELMG moved these
production operations to a larger facility in September 1996; LXE
plans to vacate its portion of the building, and is seeking
another tenant to assume its lease obligations, but until this
occurs, ELMG is continuing to reimburse LXE for lease payments on
the 20,000 square feet.
Interests of ELMG Directors and Executive Officers
Thomas E. Sharon is the President and Chief Executive Officer
of ELMG and is the Chairman of the Board and Chief Executive
Officer of LXE. John E. Pippin is the Chairman of the Board of
ELMG and a director of LXE. Don T. Scartz is the Senior Vice
President and Chief Financial Officer, Treasurer and a director
of ELMG, and is Chief Financial Officer and Treasurer of LXE.
William S. Jacobs is Vice President, Secretary and General
Counsel of ELMG, and is Secretary and General Counsel of LXE.
John B. Mowell is a director of both ELMG and LXE.
The tables included at "SECURITY OWNERSHIP" detail the holdings
of ELMG Shares, ELMG Options, LXE Shares and LXE Shares by the
executive officers and directors of ELMG.
SECURITY OWNERSHIP
The following table sets forth certain information
concerning ELMG Shares and LXE Shares beneficially
owned as of November 22, 1996 (except as otherwise
noted), by ELMG's directors and executive officers, 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 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. 1,445,455 (1) 18.3% 304,305(1) 5.4% 1,677,955 19.1%
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 2.9% 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% - * 403,000 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 206,767 (4) 2.6% 114,210 (5) 2.0% 292,425 3.3%
Don T. Scartz 55,252 (4) * 4,092 (5) * 58,321 *
Thomas E. Sharon 117,660 (4) 1.5% 48,219 (5) * 153,824 1.8%
William S. Jacobs 22,033 (4) * 7,000 (5) * 27,283 *
John J. Farrell, Jr. 6,000 (4) * - * 6,000 *
Jeffrey A. Leddy 33,249 (4) * - * 33,249 *
Neilson A. Mackay 22,718 (4) * - * 22,718 *
All directors and executive officers
as a group (11 persons) 516,135 6.5% 200,421 3.5% 666,451 7.6%
- ------------------------------------
</TABLE>
* Percentage of shares beneficially owned does not exceed 1%
(1) Data 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 to 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, 130,514 for
Dr. Pippin, 42,000 for Mr. Scartz, 109,916 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.
--------------------------------
LACK OF DISSENTERS' RIGHTS OF LXE AND ELMG SHAREHOLDERS
Neither holders of ELMG Shares nor holders of LXE Shares would be
entitled to dissenters' rights under Georgia law in connection with
the Exchange Offer or Merger, and ELMG does not intend to accord
dissenters' rights to holders of ELMG Shares or LXE Shares. Georgia
law provides that holders of LXE Shares are not entitled to
dissenters' rights if, at the LXE record date for the Merger, LXE
Shares are listed on a national securities exchange (or securities
quotation system such as NASDAQ) and if, as a result of the Merger,
the holders of LXE Shares become entitled to receive only shares of
stock of a corporation which at the effective time of the Merger are
either listed on a national securities exchange (or securities
quotation system such as NASDAQ) or held of record by more than 2,000
shareholders, and cash in lieu of fractional shares. It is expected
that each of these conditions will be satisfied in connection with the
Merger, and that holders of LXE Shares will thus not be entitled to
any dissenters' rights in connection with the Transaction. Georgia
law provides appraisal rights only to shareholders of the constituent
corporations in a merger. Because the Merger would be effected by a
newly formed subsidiary of ELMG, holders of ELMG Shares would not be
entitled to dissenters' rights under Georgia law.
DESCRIPTION OF CAPITAL STOCK OF ELMG
The authorized capital stock of ELMG consists of 75,000,000
shares of common stock, $.10 par value per share, of which 7,641,073
shares currently are outstanding. Holders of ELMG Shares are entitled
to one vote per share on all matters to be voted upon by shareholders.
ELMG has authorized 10,000,000 shares of preferred stock, $1.00 par
value per share. No shares of preferred stock have been issued and
ELMG presently does not contemplate the issuance of such shares.
Antitakeover Provisions
Existing provisions of ELMG's Articles of Incorporation and By
laws could deter, to varying degrees and in various circumstances, an
effort to take control of ELMG without approval of the ELMG Board.
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 ELMG Board with sufficient time and leverage
to adequately represent shareholder interests in response to
unsolicited, and potentially abusive or unfair, takeover efforts.
Kopp Investment Advisors, Inc. ("Kopp") 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 are exchanged in the
Exchange Offer or converted in the Merger, Kopp could beneficially own
in excess of 20% of the ELMG Shares outstanding after the Merger. In
order to make it possible for Kopp to tender its LXE Shares in the
Exchange Offer, if it wishes to do so, and to support approval of the
Transaction as an ELMG shareholder without further restricting its
investment activities prior to completion of the Transaction, the ELMG
Board has formally consented to the acquisition of additional ELMG
Shares by Kopp in the Exchange Offer and Merger, in an amount not
exceeding 23% of the ELMG Shares outstanding after the Merger. Under
the ELMG Stockholder Rights Plan, Kopp could thereafter acquire up to
an additional 2% of the outstanding ELMG Shares (for aggregate
beneficial ownership not exceeding 25%) without triggering a rights
distribution.
Bylaws Provisions. The Bylaws of ELMG elect coverage of two
provisions of the Georgia Business Corporation Code which would
provide certain protections to ELMG and its shareholders in the event
of an attempt to take over ELMG by third parties. The first provision
(the "Fair Price Provision") is designed to achieve a measure of
assurance that any multi-step attempt to take over ELMG is made on
terms which offer similar treatment of all holders of each class of
ELMG's voting stock. The second provision (the "Business Combination
Provision") is designed to encourage any person who would acquire 10%
or more of the voting stock of ELMG to seek the approval of the ELMG
Board before the acquisition.
These provisions may have the effect of discouraging takeover
attempts and also may have the effect of maintaining the position of
incumbent management. In addition, the provisions may have a
significant effect on the ability of shareholders of ELMG to benefit
from certain kinds of transactions that may be opposed by the
incumbent ELMG Board. Accordingly, before tendering their LXE Shares,
LXE shareholders are urged to consider the Fair Price and Business
Combination Provisions.
The Fair Price Provision requires that a business combination
with a holder of at least 10% of a company's outstanding voting stock
(an "Interested Shareholder") either be unanimously approved by the
members of the board who are unaffiliated with the Interested
Shareholder (the "Continuing Directors"), or recommended by at least
two-thirds of the Continuing Directors and approved by the holders of
a majority of the outstanding shares entitled to vote thereon other
than voting shares beneficially owned by the Interested Shareholder.
If the approval or recommendation requirements cannot be met, then the
business combination cannot be completed unless certain minimum price
criteria and procedural safeguards are satisfied.
The Business Combination Provision prohibits an Interested
Shareholder from engaging in any business combination with ELMG for a
period of five years from the date the person became an Interested
Shareholder, unless either (a) before such person became an Interested
Shareholder, the ELMG Board approves either the business combination
or the transaction which resulted in such person becoming an
Interested Shareholder, (b) the Interested Shareholder becomes the
owner of at least 90% of the voting shares of ELMG in the same
transaction in which he became an Interested Shareholder, excluding
voting shares owned by directors, officers, their affiliates and
associates, subsidiaries of ELMG, and employee stock plans of ELMG in
which employee participants do not have the right to determine
confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer (collectively, "Insiders"), or
(c) subsequent to becoming an Interested Shareholder, the Interested
Shareholder acquires additional shares resulting in ownership of at
least 90% of the voting shares and obtains the approval of the holders
of a majority of the voting shares other than voting shares
beneficially owned by the Interested Shareholder and Insiders.
DESCRIPTION OF CAPITAL STOCK OF LXE; COMPARISON
OF ELMG SHARES AND LXE SHARES
LXE has authorized 20,000,000 shares of common stock, $0.01 par
value per share (the "LXE Shares"), with 5,574,518 shares currently
outstanding, of which 4,543,074 are owned by ELMG. Holders of LXE
Shares are entitled to one vote per share on all matters to be voted
upon by shareholders. LXE has authorized 5,000,000 shares of
preferred stock, $1.00 par value per share. No shares of preferred
stock have been issued and LXE presently does not contemplate the
issuance of such shares.
Comparison
Both ELMG and LXE are Georgia corporations. Consequently, except
for the differences noted below, the rights of holders of ELMG Shares
and LXE Shares are substantially identical. The Articles of
Incorporation and the Bylaws of LXE do not elect coverage under the
Fair Price and Business Combination Provisions under which ELMG has
elected coverage. In addition, LXE has not adopted a shareholder
rights plan or any other plan similar to the ELMG Stockholder Rights
Plan described above. See "DESCRIPTION OF CAPITAL STOCK OF ELMG --
Antitakeover Provisions."
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."
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.
LEGAL MATTERS
The validity of the securities offered hereby has been
passed upon by William S. Jacobs, Vice President, Secretary and
General Counsel of ELMG.
Mr. Jacobs is an officer and employee of ELMG, and he and/or
members of his family are beneficial owners of an aggregate of
13,033 of the outstanding ELMG Shares, and of options to acquire
13,000 additional shares (of which options for 9,000 shares
currently may be exercised); they also are beneficial owners of
2,000 of the outstanding LXE Shares, and of currently exercisable
options to acquire an additional 5,000 shares.
EXPERTS
The consolidated financial statements and schedules of ELMG
as of December 31, 1994 and 1995, and for each of the years in
the three-year period ended December 31, 1995, have been
incorporated by reference herein and in the Registration
Statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts
in accounting and auditing.
The consolidated financial statements and schedules of LXE
as of December 31, 1994 and 1995, and for each of the years in
the three-year period ended December 31, 1995, have been
incorporated by reference herein and in the Registration
Statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts
in accounting and auditing.
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF ELMG
The name, business address, present principal occupation or
employment and five-year employment history of each director and
executive officer of ELMG are set forth below. Unless otherwise
indicated below, the address of each director and officer is 660
Engineering Drive, Norcross, Georgia 30092. All directors and
officers listed below are citizens of the United States, except
for Dr. Mackay, who is a citizen of Canada.
Present Principal Occupation or
Name, Title and Employment, Five Year Employment
Business Address History
- ------------------- -------------------------------------
Thomas E. Sharon, President and Chief Executive Officer of ELMG
President and Chief (since 1994); previously President and Chief
Executive Officer, Operating Officer of ELMG.
and Director
John E. Pippin, Chairman Chairman of the Board of ELMG; until 1994,
of the Board Dr. Pippin also served as Chief Executive
Officer.
Don T. Scartz, Senior Vice President since 1995, Chief
Senior Vice President Financial Officer and Treasurer of ELMG.
and Chief Financial Until 1995, Mr. Scartz was a Vice President
Officer, Treasurer, of ELMG.
and Director
Anthony J. Iorillo, Until 1996, Chairman of the Board, American
Director Mobile Satellite Corporation, Reston,
551 Paseo Miramar Virginia, a major provider of satellite-
Pacific Palisades, CA based communications for ground vehicles,
90272 ships and aircraft in the United States and
surrounding areas and waters (since 1994).
Previously, and until his retirement in 1994,
Mr. Iorillo was a Senior Vice President of
Hughes Aircraft Company and President of
Hughes telecommunications and Space Sector
El Segundo, California, a leading supplier
and operator of communications satellites and
related network equipment. Mr. Iorillo also
is a director of Ortel Corp.
Jerry H. Lassiter, Private investor organizing and managing
48 Hickory Hollow interests in finance and real estate.
Winder, GA 30680
John H. Levergood, President, Broadband Communications Group,
4261 Communications Dr. Scientific-Atlanta, Inc., Atlanta, Georgia,
Norcross, GA 30092 which designs and produces a broad range of
advanced cable television equipment (since
1992). Previously, Mr. Levergood had served
as a consultant to the Broadband
Communications Group following his retirement,
in 1989, as president and Chief Operating
Officer of Scientific-Atlanta. Mr. Levergood
also is a director of Golden Poultry, Inc.
John B. Mowell, President, Mowell Financial Group, Inc.,
Director Tallahassee, Florida, an investment counseling
407 East 6th Avenue firm.
Tallahassee, Florida
32315
William S. Jacobs, General Counsel and Secretary of ELMG since
Vice President, General 1992, and Vice President since 1993. He also
Counsel and Secretary serves as General Counsel and Secretary of
EMS Technologies, Inc. and LXE. Previously,
he was engaged in the private practice of law
with Trotter Smith & Jacobs, Atlanta, Georgia,
and in such capacity had served as ELMG's
principal corporate legal counsel since 1982.
Neilson A. Mackay, President of CAL Corporation since September
President of CAL 1992, a controlling interest in which was
Corporation acquired by ELMG in January 1993. Before
1050 Morrison Drive joining CAL, he had served since 1988 as
Ottawa, Ontario President of Innotech Aviation Limited, a
K2H 8K7 Montreal, Quebec-based privately held aero-
space company with approximately 650
employees. Innotech is active in all post-
manufacturing sectors of the corporate
aviation market, including aircraft sales,
flight management, maintenance, and interior
and avionics modifications.
Jeffrey A. Leddy, President of EMS Technologies, Inc. since July
EMS Technologies, Inc. 1994. Mr. Leddy joined ELMG as an engineer
in September 1980.
John J. Farrell, President and Chief Operating Officer of LXE
Chief Operating since May 1995. Before joining LXE, Mr.
Officer of LXE Farrell had been Senior Vice President and
303 Research Drive Chief Operating Officer of Oki Telecom, a
Norcross, GA 30092 world-wide supplier of cellular telephones
and base stations, since 1993. During the
three years before 1993, he directed Oki
Telecom's marketing and sales efforts.
Facsimile copies of the Letter of Transmittal will be accepted. The
Letter of Transmittal, certificates for LXE Shares and any other required
documents should be sent by each shareholder of LXE or such shareholder's
broker-dealer, commercial bank, trust company or other nominee to the
Exchange Agent as follows:
The Exchange Agent is:
SunTrust Bank, Atlanta
By Mail: Corporate Trust Department
P. O. Box 4625
Atlanta, Georgia 30302
By Facsimile Transmission: (404) 332-3875
By Hand: Corporate Trust Department
58 Edgewood Avenue
Room 225 Annex
Atlanta, Georgia 30308
For Information call:
(404) 588-7815
(800) 568-3476
Any questions or requests for assistance or additional copies of the
Offering Circular/Prospectus and the Letter of Transmittal may be directed
to either the Information Agent or the Dealer Manager at their respective
telephone numbers and locations listed below. You also may contact your
broker, dealer, commercial bank, trust company or other nominee for
assistance concerning the Exchange Offer.
The Information Agent is:
Corporate Investor Communications, Inc.
111 Commerce Road
Carlstadt, New Jersey 07072-2586
Call Toll Free: (888) 776-9943
Banks and Brokers call: (201) 896-1900
The Dealer Manager is:
Oppenheimer & Co., Inc.
Oppenheimer Tower
One World Financial Center
39th Floor
New York, New York 10281
(212) 667-7000 or
(800) 999-6726
