UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
Commission File #0-19051
LXE INC.
(Exact name of registrant as specified in its charter)
Georgia 58-1829757
(State of incorporation) (IRS Employer ID #)
or organization)
303 Research Drive
Norcross, Georgia 30092
(Address of principal (Zip Code)
executive offices)
Registrant's Telephone Number, Including Area Code-(770) 447-4224
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days: Yes X No .
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or amendment to this Form
10-K: [X]
The aggregate market value of voting stock held by non-affiliates
of the registrant on March 8, 1996, was $10,216,000, based on a
closing price of $10.38 per share. The basis of this calculation
does not constitute a determination by the registrant that all of
its directors and executive officers are affiliates as defined in
Rule 405.
As of March 8, 1996, the number of shares of the registrant's
common stock outstanding was 5,554,644 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information contained in the Company's 1995 Annual Report
to Shareholders and definitive proxy statement for the 1996
Annual Meeting of Shareholders of the registrant is incorporated
herein by reference in Parts II, III and IV of this Annual Report
on Form 10-K.
PART I
ITEM 1. Business.
GENERAL
LXE Inc. ("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 companies that have substantial inventories or complex
distribution networks. LXE systems permit real-time interaction
between the customer's host computer network and terminal
operators in situations where mobility is desirable or where
cabled computer connections are not practical. The Company'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. The Company has
also begun developing and marketing systems for applications
"outside of the warehouse", that are believed to have potential
for future growth including factory floor movement,
transportation and delivery, and electronic medical records
retrieval. Management believes these products represent
significant growth opportunities for the Company.
Organization
Development of the Company's technology was begun in the mid-1970's by
Electromagnetic Sciences, Inc. ("ELMG"), a manufacturer
of advanced wireless communications products. The Company's
business began operating as a division of ELMG in 1983. In 1989,
the Company was organized as a wholly owned subsidiary to which
ELMG contributed all of the division's assets and liabilities in
exchange for common stock. On April 18, 1991, the Company
completed an initial public offering of 1,265,000 shares of
common stock; as a result of this offering, subsequent exercises
of employee stock options and, in February 1996, the repurchase
of 548,000 shares in a private transaction, ELMG's ownership of
the Company is 81%. The Company has five wholly owned European
sales subsidiaries, LXE Belgium N.V., LXE France S.A.R.L., LXE
GmbH, LXE Netherlands B.V. and LXE Scandinavia AB.
Systems
The Company is a leader in the development and implementation of
interactive, real-time, radio-linked data communications systems
for materials handling operations. The Company has the expertise
to tailor systems for customers in a variety of industries, as
well as to provide comprehensive customer service and support.
The principal components of typical LXE systems are:
- Terminals that incorporate radio transmitters and
receivers;
- a radio frequency unit to communicate with the terminals;
- a controller (CPU) to provide an interface between the
base station and the host computer;
- communications software to allow connection to various
networking and host protocols;
- various accessories;
- and a complete service and support offering.
Terminals
The Company offers several types of terminals, all of which
utilize radio frequency ("RF") technology. Hand-held terminals
are small, lightweight, and contain their own rechargeable,
replaceable battery. Vehicle-mounted terminals are intended for
fork-lift trucks, cranes, or other mobile materials handling
equipment. Table-top terminals (also called factory data
terminals) are used at temporary data collection points or where
the installation of computer cabling is impractical. Wireless
modems provide wireless communication capabilities for non-LXE
devices, such as small computers or process controllers.
All terminals incorporate built-in radios that operate either in
a licensed, narrow frequency band or in an unlicensed broader
frequency band. The broad-band or "spread spectrum" radio
developed by LXE utilizes a unique frequency-hopping technology
that is exceptionally resistant to interference, even from very
disruptive sources such as vehicle location systems or other
nearby spread spectrum systems.
Historically all LXE terminals have been based on a proprietary
CPU and software architecture. During 1995, LXE began shipping a
terminal family based on Intel CPU and DOS/Windows software. The
Company's transition to this new architecture provides for higher
system performance, compatibility with client server applications
and entry into new markets.
Base Stations and Controllers
The wireless communications link between the terminal and the
computer is completed by a radio base station and controller,
which may be integrated into a single unit for smaller systems.
A radio frequency unit converts the radio signals from a terminal
to digital signals recognizable by the controller, and also
converts data from the controller into radio signals for
transmission to the terminals. Radio base stations can operate
effectively in facilities of many sizes and structural designs.
Controllers provide the critical interface between the radio base
station and the host computer. LXE controllers provide
transparent connectivity to all widely accepted computer
architecture without modifications of existing software and
network structure. Controllers also manage complex transmission
traffic with sophisticated programming algorithms.
LXE's mainstream product line, introduced in 1993, is the 6200
system, an industrial RF LAN built especially for the transaction
processing requirements of LXE's traditional material handling
market. The 6200 system features LXE's 900 MHz frequency hopping
spread spectrum radios which provide the superior coverage and
interference rejection needed to cover large warehouses, ports,
and manufacturing facilities. A full line of ruggedized handheld
and vehicle mounted terminals and a family of narrowband
synthesized radios completes the 6200 product line offering
making the 6200 the Reliable Choice for logistics operations
worldwide.
In 1995, LXE introduced its sixth generation product line, the
6400 system. Based around 2.4GHz Frequency Hopping Spread
Spectrum radios and open systems architecture, the 6400 series is
designed to support both client server applications and
traditional transaction processing requirements, primarily in
areas such as Europe. The 6400's 1.6 Mbps of throughput, TCP/IP
based transports, and DOS based terminals make it easy for
information systems professionals to utilize their hardwired
expertise when developing wireless applications.
Connectivity Software
The Company provides embedded software that runs on the terminals
and controllers to provide plug and run connectivity to all
commonly used host computers and network architectures. This
software includes standard IBM and ANSI terminal emulators as
well as IBM's SNA compatible cluster controllers, Telnet terminal
servers, and LAT terminal servers that have been enhanced to
maximize performance over an RF network. The Company also
provides standard networking protocols, such as TCP/IP, to allow
LXE systems to attach directly to a user's network and permit the
terminals to communicate in a client server architecture with the
host computer.
Accessories
The Company sells a variety of accessories for use with its
products. These accessories, which are primarily purchased from
third parties, include battery chargers, bar code scanners and
wands.
Maintenance Services
The Company's service staff repairs and maintains LXE products at
its facilities in Norcross, Georgia, and, when needed, at the
customer's facilities. Beginning in 1996, a European service
center will be operational to provide more responsive service to
European customers. The Company typically offers a 180-day
warranty on its products and currently offers a variety of
service arrangements. The price of such services are based on
the level of service requested and the size of the customer's
system. Service contracts generally have a term of one year. In
addition, the Company offers time-and-materials service on a non-contract,
as-needed basis.
Markets, Customers and Backlog
The Company provides data communications systems to a variety of
customers across a wide industry base. Since 1984, the Company's
systems have been installed at more than 3,500 sites worldwide,
including the facilities of many Fortune 500 companies, and some
of the world's largest materials handling installations. In
1995, the Company received significant orders from such diverse
enterprises as 3M, Deluxe Printers, Georgia Pacific, M&M Mars,
Mercedes Benz, Nike, Proctor and Gamble, and Wal Mart.
In the U.S. and Canada, the Company markets, sells and services
its products directly through 21 regional sales offices, and also
through selected value added resellers ("VAR's"). VAR's enable
the Company to broaden its distribution network and participate
in opportunities requiring "turn-key" solutions that include the
necessary application software; VAR's accounted for approximately
36% of the Company's 1995 sales in the U.S. and Canada.
Outside of the U.S. the Company sells its products through 19
independent distributors in over 40 countries in Europe, the
Pacific Rim, the Middle East and South America. The Company also
sells in Europe through its wholly-owned subsidiaries, LXE
Belgium N.V., LXE GmbH and LXE Netherlands B.V. and, beginning in
1995, LXE Scandinavia AB and LXE France S.A.R.L. The Company's
sales to unaffiliated foreign customers were $23 million, $18
million and $10 million in 1995, 1994 and 1993, respectively.
The Company's order backlog at December 31, 1995 was $22.1
million, compared with $23.7 million at December 31, 1994.
Substantially all of the 1995 backlog is expected to be shipped
during 1996.
For further information on sales by geographic areas, see Note 6
of "Notes to Consolidated Financial Statements" included in Item
8 of this report.
Competition
The business in which the Company is engaged is highly
competitive. Several firms with considerable resources are
engaged in the manufacturing and marketing of radio-linked data
communications products for materials handling applications,
including Norand Corporation, Symbol Technologies, Teklogix
Corp., and Telxon Corporation.
In responding to its competition, the Company emphasizes the
performance and quality of its products and services,
particularly their connectivity characteristics, durability in
industrial environments, and design flexibility that permits
accommodation of particular customer needs. The Company's
current principal customers are medium and large businesses that
use the Company's data communications systems in complex
applications where performance and quality characteristics are
considered the most significant variables in the decision-making
process; however, pricing is also an increasingly important
competitive factor.
Product Development and Engineering
The Company believes that its future growth depends, in part,
upon its ability to achieve continuous product improvement and to
develop new products that enhance the capabilities and
performance of the Company's systems. The Company's development
efforts in 1995 were focused on developing capabilities to
support DOS, Windows, and client/server networks. Two new DOS
terminals and a 2.4 GHz backbone were introduced in the second
half of the year. The 2.4 GHz backbone allows mobile industrial
computers or standard portable PC's to run like hard wired PC's
on a standard LAN. These products will be followed, in the
second half of 1996, by the addition of more DOS/Windows based
terminals.
LXE has also undertaken significant efforts to develop products
aimed at emerging markets. An example is in the health care
field, where LXE is currently conducting several field trials for
wireless electronic medical record retrieval. This technology
will be marketed to large hospital systems where the need to
provide data quickly to mobile users is important.
During 1995, 1994 and 1993, the Company invested $6.7 million,
$6.0 million and $6.8 million, respectively, in product
development and engineering.
Manufacturing and Suppliers
The Company manufactures its principal products at its facilities
in Norcross, Georgia. While components and supplies are
generally available from a variety of sources, the Company
presently depends on a limited number of suppliers for several
components of its equipment, including radios, modems and printed
circuit boards, and on single sourced subassembly manufacturers
for keypad assemblies and molded parts.
Bar code scanners are included in almost all of LXE's orders, and
a significant number of the scanners are purchased from PSC Inc.
and from Symbol Technologies, Inc. (Symbol), which is also a
competitor of the Company; however, there are alternative
suppliers that manufacture and sell bar code scanners under
license agreements with Symbol. The Company believes that LXE's
other competitors also rely on scanning equipment purchased from
or licensed by Symbol. In addition, Symbol and LXE have a
license agreement which allows the Company to utilize Symbol's
patented integrated scanning technology in future products.
The Company believes that its present sources and availability of
its required materials are adequate. The Company does not
believe that the loss of any supplier or subassembly manufacturer
would have a material adverse effect on its business. In the
past, shortages of supplies and delays in the receipt of
necessary components have not had a material adverse affect on
shipments of the Company's products.
The Company produces and sells or licenses certain of its
software products under licenses from third parties. The
licenses entitle the company to market the software as long as it
pays the specified royalties, and the Company possesses the
source codes necessary to adapt the software to various computers
and system configurations.
Governmental Regulation
Radio emissions are subject to governmental regulation in all
countries in which the Company currently conducts business.
There is little consistency among the regulations of various
countries outside North America. At the present time, the
Company holds radio approvals in a number of foreign countries,
but future regulatory changes could have an adverse effect on the
Company.
Employees
As of March 1, 1996, the Company employed approximately 396
people, all located in North America, except for 42 employees
located in Belgium, France, Germany, the Netherlands and Sweden.
Of these, approximately 34% were engaged in manufacturing and
customer support, 23% in engineering and 43% in selling, general
and administrative functions. Management believes that the
Company's relationship with its employees is good.
Executive Officers of the Registrant
Information concerning the executive officers of the Company is
set forth below:
John J. Farrell, Jr., age 44, joined LXE as President and Chief
Operating Officer in May 1995. Previously, he had been Senior
Vice President and Chief Operating Officer of Oki Telecom, a
world-wide supplier of cellular telephones and base stations,
since 1993. During the three years prior to 1993, he directed
Oki's marketing and sales efforts.
William S. Jacobs, age 50, joined both LXE and ELMG as Secretary
and General Counsel in 1992, and became Vice President of ELMG in
1993. He had previously engaged in the private practice of law
with Trotter, Smith & Jacobs, Atlanta, Georgia, in which capacity
he served as principal corporate counsel to ELMG since 1982 and
to LXE since its organization in 1989.
John F. Mewshaw, age 50, has served as Vice President, Sales
since 1993. He joined LXE in 1989 as the North American Sales
Manager.
William H. Roeder, age 42, became Vice President, Product
Marketing in 1994. Previously, he served as Vice President,
Engineering since the Company's organization in 1989. He joined
ELMG in 1987 as Manager of Engineering for the LXE Division,
having previously held engineering and marketing management
positions with Reliance Electric Co., a manufacturer of
industrial controls and telecommunications systems.
Don T. Scartz, age 53, became Treasurer of LXE at its formation
in 1989. He has also served as a Director and Senior Vice
President and Chief Financial Officer of ELMG since 1995 and as
its Treasurer since 1981; he served as ELMG's Vice President -
Finance from 1981 to 1995.
Thomas E. Sharon, age 50, became Chairman of the Board and Chief
Executive Officer in 1994. He also served as President for a
part of 1994 and 1995. He has served as Chairman of the Board
since 1995 and as a director since LXE's organization in 1989.
He also serves as Chief Executive Officer of ELMG (since 1994);
he has served ELMG in various capacities since joining ELMG in
1971, including Director since 1985 and President and Chief
Operating Officer from 1987 to 1994.
ITEM 2. Properties.
The Company's manufacturing, engineering/development, service and
maintenance, and marketing functions are currently housed in an
approximately 112,000 square foot facility, located on 7.6 acres
of land in Technology Park, Norcross, Georgia. The building is
subject to an outstanding industrial revenue bond of $0.4 million
and a junior mortgage from ELMG of $1.7 million.
The Company leases approximately 36,000 square feet of office
space in Technology Park, Norcross, Georgia, for sales, marketing
and administrative functions. The lease on this space expires in
February 1998, and may be extended at the Company's option for an
additional two years. The Company leases sales offices
throughout the U.S. and in Canada; the lease terms do not exceed
one year. The Company also leases office space in Belgium,
France, Germany, the Netherlands and Sweden for sales, marketing
and administrative functions.
ITEM 3. Legal Proceedings.
Not Applicable.
ITEM 4. Submission of Matters to a Vote of Security Holders.
Not Applicable.
PART II
ITEM 5. Market for the Registrant's Common Equity and Related
Stockholder Matters.
The common stock of LXE Inc. is traded in the over-the-counter
market (NASDAQ symbol LXEI). At March 1, 1996, there were
approximately 200 shareholders of record, but the Company
believes that there were approximately 1,800 beneficial
shareholders, based upon broker requests for distribution of
Annual Meeting materials. The high and low price range of the
stock is shown below:
1995 Price Range 1994 Price Range
High Low High Low
First Quarter $17-3/4 13-1/4 $12-1/2 9-1/2
Second Quarter 16-1/4 13 12-1/4 10-1/4
Third Quarter 16-3/8 9-1/2 14 11
Fourth Quarter 10-1/4 7-1/2 15-1/4 12-3/4
The Company has not paid a cash dividend with respect to shares
of its common stock and has retained its earnings to provide cash
for operations and expansion of its business. Future dividends,
if any, will be determined by the Board of Directors in light of
the circumstances then existing, including the Company's earnings
and financial and general business conditions.
ITEM 6. Selected Financial Data.
Information required for this item is incorporated herein by
reference to Selected Financial Data contained in the Company's
1995 Annual Report to Shareholders, and is included in Exhibit
13.1.
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Information required for this item is incorporated herein by
reference to Management's Discussion and Analysis of Financial
Condition and Results of Operations contained in the Company's
1995 Annual Report to Shareholders, and is included in Exhibit
13.1.
ITEM 8. Financial Statements and Supplementary Data.
Information required for this item is incorporated herein by
reference to the Consolidated Financial Statements and Notes to
Consolidated Financial Statements contained in the Company's 1995
Annual Report to Shareholders, and is included in Exhibit 13.1.
PART III
ITEM 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
Not Applicable.
ITEM 10. Directors and Executive Officers of the Registrant.
The information with respect to directors called for by this Item
is contained in the Company's definitive Proxy Statement for its
1996 Annual Meeting of Shareholders and is incorporated herein by
reference.
The information concerning executive officers called for by this
Item is set forth under the caption "Executive Officers of the
Registrant" in Item 1 hereof.
ITEM 11. Executive Compensation.
The information called for by this Item is contained in the
Company's definitive Proxy Statement for its 1996 Annual Meeting
of Shareholders and is incorporated herein by reference.
ITEM 12. Security Ownership of Certain Beneficial Owners and
Management.
The information called for by this Item is contained in the
Company's definitive Proxy Statement for its 1996 Annual Meeting
of Shareholders and is incorporated herein by reference.
ITEM 13. Certain Relationships and Related Transactions.
The information called for by this Item is contained in the
Company's definitive Proxy Statement for its 1996 Annual Meeting
of Shareholders and is incorporated herein by reference.
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.
(a) 1. Financial Statements
The following consolidated financial statements are contained
in the Company's 1995 Annual Report to Shareholders, and are
incorporated herein by reference to Exhibit 13.1:
Consolidated Statements of Operations - Years ended
December 31, 1995, 1994 and 1993
Consolidated Statements of Stockholders' Equity - Years
ended December 31, 1995, 1994 and 1993
Consolidated Balance Sheets - December 31, 1995 and
1994
Consolidated Statements of Cash Flows - Years ended
December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
Independent Auditors' Report
Page
Numbers
(a) 2. Financial Statement Schedules
The following schedule and related independent
auditors' report are included in this Report on Form 10-K:
Independent Auditors' Report 12
II. Valuation and Qualifying Accounts -
Years ended December 31, 1995, 1994
and 1993 13
All other schedules are omitted as the required information is
inapplicable, or the information is presented in the consolidated
financial statements or related notes.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
LXE Inc.:
Under date of January 19, 1996, we reported on the consolidated
balance sheets of LXE Inc. and subsidiaries as of December 31,
1995 and 1994, and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of the
years in the three-year period ended December 31, 1995, as
contained in the 1995 annual report to stockholders. These
consolidated financial statements and our report thereon are
incorporated by reference in the annual report on Form 10-K for
the year 1995. In connection with our audits of the
aforementioned consolidated financial statements, we also audited
the related consolidated financial statement schedule as listed
in the accompanying index. This financial statement schedule is
the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial
statement schedule based on our audits.
In our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
KPMG Peat Marwick LLP
Atlanta, Georgia
January 19, 1996
Schedule II
LXE Inc.
Valuation and Qualifying Accounts
Years Ended December 31, 1995, 1994 and 1993
(In thousands)
Charged
to
Costs
Beginning and Ending
Classification Balance Expenses Deductions Other Balance
Allowance for
doubtful accounts
December 31, 1995 $ 625 190 (315) - 500
December 31, 1994 $ 300 325 - - 625
December 31, 1993 $ 200 296 (196) - 300
In 1995, deductions represented a reduction of certain non-U.S.
receivables. In 1993, deductions represented a charge-off of the
balance due from customers who discontinued operations.
Allowance for
deferred tax assets
December 31, 1995 $ 47 (47) - - 0
December 31, 1994 $ 77 (30) - - 47
December 31, 1993 $ - 77 - - 77
(a)3. Exhibits
The following exhibits are filed as part of this report:
3.1 Articles of Incorporation of LXE Inc., as amended and
restated March 4, 1991 (incorporated by reference to
Exhibit 3.1 to Registration Statement 33-39264 filed by
the Company on March 6, 1991).
3.2 Bylaws of LXE Inc., as amended and restated March 1,
1991 (incorporated by reference to Exhibit 3.2 to
Registration Statement 33-39264 filed by the Company
on March 6, 1991).
4.1 Agreement with respect to long-term debt pursuant to
Item 601(b)(4)(iii)(A).
4.2 Revolving Credit Agreement dated as of December 15,
1995, by and between LXE Inc. and SunTrust Bank, Atlanta.
10.1 LXE Inc. 1989 Stock Incentive Plan, as amended and restated
March 1, 1991 and further amended through March 6, 1992
(incorporated by reference to Exhibit 19.2 to the Company's
Report on Form 10-Q for the quarter ended March 31, 1992).
10.2 Form of LXE Inc. Stock Option Agreement evidencing
options granted January 1, 1989, to executive officers
(incorporated by reference to Exhibit 10.8 to the
Annual Report on Form 10-K of Electromagnetic Sciences,
Inc. for the fiscal year ended December 31, 1990).
10.3 Form of Stock Option Agreement evidencing options
granted September 26, 1990, to executive officers (incorporated
by reference to Exhibit 19.2 to the Company's Report on
Form 10-Q for the quarter ended June 30, 1991).
10.4 Form of Stock Option Agreement evidencing options
granted September 26, 1990, to John B. Mowell under the
Company's 1989 Stock Incentive Plan (incorporated by
reference to Exhibit 19.3 to the Company's Report on
Form 10-Q for the quarter ended June 30, 1991).
10.5 Form of Stock Option Agreement evidencing options granted in
1992 to executive officers under the LXE Inc. 1989 Stock
Incentive Plan (incorporated by reference to Exhibit 19.1 to
the Company's Report on Form 10-Q for the quarter ended
June 30, 1992).
10.6 Stock Option Agreement evidencing options granted
May 15, 1995, to John J. Farrell, Jr. under the LXE Inc.
1989 Stock Incentive Plan.
10.7 Form of Stock Option Agreement evidencing options granted
automatically to new non-employee members of the Board of
Directors (incorporated by reference to Exhibit 19.4 to the
Company's Report on Form 10-Q for the quarter ended June 30,
1991).
10.8 Form of Restricted Stock Agreement governing the award of
stock to executive officers under the LXE Inc. 1989
Stock Incentive Plan (incorporated by reference to
Exhibit 10.6 to the Company's Annual Report on Form
10-K for the year ended December 31, 1991).
10.9 Form of Director's Indemnification Agreement executed
by and between LXE Inc. and each member of its Board of
Directors (incorporated by reference to Exhibit 19.2 to
the Company's Report on Form 10-Q for the quarter ended
June 30, 1992).
10.10 Form of Officer's Indemnification Agreement executed by
and between LXE Inc. and each of its Chief Financial
Officer and General Counsel (incorporated by reference
to Exhibit No. 19.3 to the Company's Report
on Form 10-Q for the quarter ended June 30, 1992).
10.11 Letters dated April 17, 1995 and April 19, 1995,
between LXE Inc. and John J. Farrell, Jr. concerning
the terms of his employment as President of the
Company (incorporated by reference to Exhibit 10.1 to the
Company's Report on Form 10-Q for the quarter ended
June 30, 1995).
10.12 Services Agreement dated as of January 1, 1995, by and
among LXE Inc., Electromagnetic Sciences, Inc., and EMS
Technologies, Inc.
10.13 Promissory Note dated December 31, 1991, made by LXE
Inc. in favor of Electromagnetic Sciences, Inc., in the
principal amount of $2,747,940.37, and related Deed to
Secure Debt and Security Agreement (incorporated by
reference to Exhibit 10.11 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1992).
10.14 Separation Agreement between the Company and Malcolm M.
Bibby effective December 13, 1994 (incorporated by
reference to Exhibit 10.12 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1994).
13.1 Those portions of the Company's 1995 Annual Report to
Shareholders incorporated by reference into this Annual
Report on Form 10-K.
22.1 Subsidiaries of the Registrant.
23.1 Independent Auditors' Consent to incorporation by
reference in Registration Statements Nos. 33-42009 and
33-41185, each on Form S-8.
(b) Reports on Form 8-K
No Reports on Form 8-K were filed by the Registrant during the
quarter ended December 31, 1995.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly
authorized.
LXE INC.
By: /s/ John J. Farrell, Jr. Date: 3/28/96
John J. Farrell, Jr., President
(Principal Operating Officer)
Pursuant to the requirements of the Securities and Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated.
By: /s/ Thomas E. Sharon Date: 3/28/96
Chairman of the Board and Chief
Executive Officer (Principal
Executive Officer)
By: /s/ Don T. Scartz Date: 3/28/96
Vice President and Treasurer
(Principal Financial and
Accounting Officer)
By: /s/ W. Frank Blount Date: 3/28/96
Director
By: /s/ William F. Evans Date: 3/28/96
Director
By: /s/ John B. Mowell Date: 3/28/96
Director
By: /s/ John E. Pippin Date: 3/28/96
Director
By: /s/ Francis X. Stankard Date: 3/28/96
Director
EXHIBIT 4.1
AGREEMENT TO FILE INSTRUMENTS
WITH RESPECT TO LONG-TERM DEBT
Pursuant to Regulations S-K Item 601(b)(4)(iii)(A), LXE Inc.
hereby agrees to cause to be filed with the Securities and
Exchange Commission, upon its request, a copy of any instrument,
not filed as an exhibit to the Report or Registration Statement
to which this Exhibit pertains, with respect to long-term debt of
LXE Inc. or any consolidated subsidiary of LXE Inc.
LXE Inc.
Date: March 25, 1996 By: /s/ William S. Jacobs
William S. Jacobs
General Counsel
EXHIBIT 4.2
EXECUTION COPY
REVOLVING CREDIT AGREEMENT
Dated as of December 15, 1995
By and Between
LXE INC.
AND
SUNTRUST BANK, ATLANTA
REVOLVING CREDIT AGREEMENT
THIS REVOLVING CREDIT AGREEMENT, dated as of December
15, 1995, by and between LXE INC., a corporation organized and
existing under the laws of the State of Georgia (the "Borrower"),
and SUNTRUST BANK, ATLANTA, a Georgia banking corporation, and
its successors and assigns (the "Bank").
W I T N E S S E T H :
WHEREAS, the Borrower has requested the Bank to
establish a $10,000,000 revolving credit facility to finance
working capital, acquisitions, the purchase of its common stock
to retire or hold as "treasury stock" and other general corporate
purposes of the Borrower; and
WHEREAS, the Bank is willing to establish the revolving
credit facility in the aforesaid amount, subject to the terms and
conditions as hereinafter set forth;
NOW THEREFORE, for and in consideration of the sum of
$10.00 in hand paid by the Bank to the Borrower, and for other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. In addition to the other terms
defined herein, the following terms used herein shall have the
meanings herein specified (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
"Accounts" shall have the meaning given to such term in
UCC Section 9-106.
"Advance" shall mean any advance of funds by the Bank
to the Borrower under this Agreement, which shall be either a
Base Rate Advance or a LIBOR Advance.
"Affiliate" shall mean, with respect to any Person (the
"Specified Person"), a Person other than the Specified Person
directly or indirectly controlling or controlled by, or under
direct or indirect common control with, the Specified Person,
other than a Subsidiary of the Specified Person. For purposes of
this definition, the term "control" when used with respect to any
Specified Person means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and
policies of the Specified Person, whether through the ownership
of voting securities, by contract or otherwise.
"Agreement" shall mean this Revolving Credit Agreement,
either as originally executed or as it may be from time to time
supplemented, amended, renewed or extended.
"Applicable Margin" shall mean, with respect to a LIBOR
Advance or a Base Rate Advance, the percentage per annum
determined by reference to the ratio of Consolidated Funded Debt
to Consolidated EBITDA in effect at such time, as set forth
below:
Consolidated Funded
Debt/Consolidated EBITDA LIBOR Base
Ratio Advances Rate Advances
greater than or equal to 2.5 to 1.0 2.50% 0.00%
greater than 1.0 to 1.0 but
less than 2.5 to 1.0 2.00% 0.00%
less than or equal to 1.0 to 1.0 1.50% -0.50%
The Bank shall determine the "Applicable Margin" on a quarterly
basis by calculating the ratio of Consolidated Funded Debt to
Consolidated EBITDA promptly after receipt of the financial
statements required to be delivered by the Borrower pursuant to
Section 5.02(a) or (b) hereof, as applicable. Any adjustment to
the Applicable Margin shall be effective as of the first day of
the fiscal quarter immediately following the fiscal quarter
during which the quarterly (or annual) financial statements are
required to be delivered to the Bank; provided, that for the
purpose of determining the effective date of any change in the
Applicable Margin and notwithstanding the provisions of Section
5.02(a) hereof, the annual financial statements shall be deemed
to be delivered on the last day of the fiscal quarter immediately
following any fiscal year-end. Notwithstanding the foregoing,
for the period from the date of this Agreement to December 31,
1995, the Applicable Margin for LIBOR Advances shall equal 1.50%
and the Applicable Margin for Base Rate Advances shall equal -0.50%.
Thereafter, the Applicable Margin shall be adjusted from
time to time as set forth above.
"Bankruptcy Code" shall mean the Bankruptcy Code of
1978, as amended, 11 U.S.C. 101 et. seq.
"Base Rate" shall mean the higher of (i) the Prime Rate
and (ii) the Federal Funds Rate plus 0.50% per annum.
"Base Rate Advance" shall mean any Advance hereunder
that bears interest at the Base Rate.
"Business Day" shall mean, with respect to a LIBOR
Advance, any day other than a Saturday, Sunday or a day on which
commercial banks are required or authorized to close for domestic
or international business, including dealings in Dollar deposits,
in Atlanta, Georgia or London, England and with respect to all
other matters, any day other than a Saturday, Sunday or a day on
which commercial banks are required or authorized to close in
Atlanta, Georgia.
"Capital Lease Obligation", shall mean, with respect to
any Person, all payments and other obligations of such Person as
lessee under any leases which are required or permitted to be
capitalized on a balance sheet of such Person in accordance with
GAAP.
"Closing Date" shall mean the date that all conditions
pursuant to Sections 3.01 and 3.02 hereof have been satisfied.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and the regulations promulgated and
the rulings issued thereunder.
"Commitment" shall have the meaning set forth in
Section 2.01 (a) hereof, as such amount may be reduced pursuant
to Section 2.07 hereof.
"Commitment Fee" shall have the meaning set forth in
Section 2.09 hereof.
"Commitment Termination Date" shall mean the earlier
of: (a) the later of that date on which (i)the Initial Term or
(ii) any Renewal Term has terminated pursuant to Section 2.01(c)
hereof or (b) the date on which the Commitment has been fully
terminated pursuant to Section 8.02 hereof.
"Consolidated Capitalization" shall mean, for the
Borrower and its Subsidiaries as of any date of determination,
the sum of (i) Consolidated Funded Debt and (ii) Consolidated
Net Worth.
"Consolidated EBIT" shall mean for any period an amount
equal to the sum of (a) Consolidated Net Income plus (b) to the
extent deducted in determining Consolidated Net Income, (i)
Consolidated Tax Expense and (ii) Consolidated Interest Expense.
"Consolidated EBITDA" shall mean for any fiscal quarter
an amount equal to the sum for such fiscal quarter and the
immediately preceding three fiscal quarters of (a) Consolidated
Net Income, plus (b) to the extent deducted in determining
Consolidated Net Income, (i) Consolidated Tax Expense, (ii)
Consolidated Interest Expense and (iii) depreciation,
amortization and other non-cash charges determined on a
consolidated basis in accordance with GAAP.
"Consolidated Funded Debt" shall mean for any period
the Funded Debt of the Borrower and its Subsidiaries determined
on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" shall mean for any
period all interest expense (including all amortization of debt
discount and expenses and reported interest) on all Indebtedness
of the Borrower and its Subsidiaries determined on a consolidated
basis in accordance with GAAP.
"Consolidated Net Income" shall mean for any period the
net income (or loss), after deducting all operating expenses,
provisions for taxes and reserves (including reserves for
deferred income taxes) and all other proper deductions, of the
Borrower and its Subsidiaries determined on a consolidated basis
in accordance with GAAP, excluding (i) extraordinary items, (ii)
any equity interest of the Borrower in the unremitted earnings of
any corporation not a Subsidiary and (iii) the income (or loss)
of any Person accrued prior to the date such Person becomes a
Subsidiary or is merged with the Borrower or any of its
Subsidiaries or such Person's assets are acquired by the Borrower
or any of its Subsidiaries.
"Consolidated Net Worth" shall mean for any period the
sum of capital stock (including any preferred stock but excluding
treasury stock and capital stock subscribed but unissued) and
surplus (including earned surplus, capital surplus and the
balance of the current profit and loss account not transferred to
surplus) accounts of the Borrower and its Subsidiaries determined
on a consolidated basis in accordance with GAAP.
"Consolidated Tax Expense" shall mean for any period
the income tax expense deducted in calculating Consolidated Net
Income of the Borrower and its Subsidiaries determined on a
consolidated basis in accordance with GAAP.
"Default" shall mean any event that, with notice or
lapse of time or both, would constitute an Event of Default.
"Default Rate" shall have the meaning set forth in
Section 2.16 hereof.
" Dollar" and the sign "$" shall mean lawful money
of the United States of America.
"ELMG" shall mean Electromagnetic Sciences, Inc., a
Georgia corporation and the parent company of the Borrower.
"ELMG Agreement" shall mean the Amended and Restated
Loan Agreement dated as of the date hereof between ELMG and the
Bank.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time, and the
regulations promulgated and rulings issued thereunder.
"ERISA Affiliate" shall mean, as of any date, any trade
or business (whether or not incorporated) which together with the
Borrower is treated as a single employer under Section 414(b),
(c), (m) or (o) of the Code.
"Event of Default" shall have the meaning set forth in
Section 8.01 hereof.
"Federal Funds Rate" shall mean, for any day, the rate
per annum (rounded upward, if necessary, to the nearest 1/100 of
1%) equal to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Business
Day next succeeding such day, provided that (i) if such day is
not a Business Day, the Federal Funds Rate for such day shall be
such rate on such transactions on the next preceding Business Day
as so published on the next succeeding Business Day, and (ii) if
no such rate is so published on such next succeeding Business
Day, the Federal Funds Rate for such day shall be the average
rate quoted to the Bank on such day on such transactions.
"Funded Debt" shall mean, with respect to any Person,
all Indebtedness of such Person of the types listed in clauses
(i), (ii), and (iv) of the definition of Indebtedness.
"GAAP" shall mean Generally Accepted Accounting
Principles consistently applied and maintained throughout the
period indicated and consistent with the prior financial practice
of the Borrower and any predecessor, as reflected in the
financial statements previously furnished to the Bank pursuant to
Section 4.07 hereof and the financial statements to be provided
to the Bank pursuant to Section 5.02 hereof; provided, that if
the Borrower notifies the Bank that the Borrower wishes to amend
any of the covenants set forth in Article VI hereof to eliminate
the effect of any change in GAAP mandated by the Financial
Accounting Standards Board or similar accounting authority of
comparable standing or shall be recommended by the Borrower's
independent public accountants on the operation of such
covenant(s), then the Borrower's compliance with such covenant(s)
shall be determined on the basis of GAAP in effect immediately
before the relevant change in GAAP became effective, until such
covenant(s) are amended in a manner satisfactory to the Borrower
and the Bank.
"Indebtedness" shall mean, with respect to any Person
as of any date of determination and without duplication, (i) all
obligations for money borrowed (whether on a senior or
subordinated basis) or evidenced by bonds, debentures, notes or
other similar instruments of such Person; (ii) all obligations of
such Person for the deferred purchase price of property or
services other than trade payables incurred in the ordinary
course of business and not overdue by more than ninety (90) days;
(iii) all obligations of such Person created or arising under any
conditional sale or other title retention agreement with respect
to property acquired by such Person (even though the rights and
remedies of the seller or lender under such agreement in the
event of a default are limited to repossession or sale of such
property); (iv) all Capital Lease Obligations of such Person; (v)
all obligations of such Person to purchase, redeem, retire,
defease or otherwise make any payment in respect of any capital
stock of or other ownership or profit interest in such Person or
any other Person or any warrants, rights or options to acquire
such capital stock; (vi) all obligations of other Persons (other
than a Subsidiary of such Person) which such Person has
guaranteed, directly or indirectly, contingent or otherwise
(including by the issuance of a letter of credit or similar
instrument for the account of such Person) and the obligation of
such Person to purchase or otherwise acquire, or otherwise insure
any creditor against loss in respect of, indebtedness of any
other Person referred to in clauses (i) through (v) above, or
with respect to all obligations of such Person consisting of
recourse liability with respect to accounts receivable sold or
otherwise disposed of by such Person; (vii) Indebtedness of
others secured by any Lien upon Property owned by such Person,
whether or not assumed; (viii) all obligations of such Person
under letters of credit on which it is the account party; (ix)
all obligations of such Person under "synthetic leases" or
similar types of transactions; and (x)all obligations of such
Person under interest rate protection agreements, foreign
currency exchange agreements or other interest rate or foreign
exchange hedging arrangements.
"Initial Term" shall have the meaning set forth in
Section 2.01(c) hereof.
"Interest Period" shall mean, with respect to any LIBOR
Advance, a period of 1, 2, 3 or 6 months, as the Borrower may
elect as provided in this Agreement; provided, that (i) the first
day of an Interest Period must be a Business Day, (ii) any
Interest Period that would otherwise end on a day that is not a
Business Day shall be extended to the next succeeding Business
Day, unless such Business Day falls in the next calendar month,
in which case the Interest Period shall end on the next preceding
Business Day, (iii) any Interest Period which begins on the last
Business Day of a calendar month (or on a day for which there is
no numerically corresponding day in the calendar month at the end
of an Interest Period) shall end on the last Business Day of a
calendar month and (iv) no Interest Period with respect to any
LIBOR Advance shall extend beyond the Commitment Termination
Date.
"Inventory" shall have the meaning given to such term
in UCC Section 9-109(4).
"Investment" shall mean, when used with respect to any
Person, any direct or indirect advance, loan or other extension
of credit (other than the creation of receivables in the ordinary
course of business) or capital contribution by such Person (by
means of transfers of property to others or payments for property
or services for the account or use of others or otherwise) to any
Person, or any direct or indirect purchase or other acquisition
by such Person of, or of a beneficial interest in, capital stock,
partnership interests, bonds, notes, debentures warrants, options
or other securities issued by any other Person.
"LIBOR" shall mean with respect to any Interest Period
for any LIBOR Advance the rate per annum equal to the quotient
of (i) the offered rate for deposits in Dollars of amounts equal
or comparable to the principal amount of such LIBOR Advance
offered for a term comparable to such Interest Period, which rate
appears on the Telerate Page 3750 as of 11:00 A.M. (London,
England) time, two (2) Business Days prior to the first day of
such Interest Period; provided, that if no such offered rates
appear on such page, the rate used for such Interest Period will
be the arithmetic average (rounded upward, if necessary, to the
next higher l/16th of 1%) of rates offered to the Bank by not
less than two major banks in London, England at approximately
10:00 A.M. (Atlanta, Georgia time), two (2) Business Days prior
to the first day of such Interest Period for deposits in Dollars
in the London interbank market for a period comparable to such
Interest Period in an amount comparable to the principal amount
of such LIBOR Advance, divided by a number equal to 1.00 minus
the Reserve Percentage. The rate so determined in accordance
herewith shall be rounded upwards to the nearest multiple of
l/l00th of 1%. "Telerate Page 3750" shall mean the display
designated as "Page 3750" on the Telerate Service (or such other
page as may replace Page 3750 on that service or another service
as may be nominated by the British Bankers' Association as the
information vendor for the purpose of displaying British Bankers'
Association Interest Settlement Rate for Dollars).
"LIBOR Advance" shall mean any Advance hereunder which
bears interest based on LIBOR.
"Lien" shall mean any mortgage, pledge, security
interest, encumbrance, lien or charge of any kind (including any
written agreement to give any of the foregoing, any conditional
sale or other title retention agreement, any lease in the nature
thereof, and the filing of or agreement to give any financing
statement under the Uniform Commercial Code of any jurisdiction.)
"Loan Documents" shall mean and include, as the context
requires, this Agreement, the Revolving Credit Note, the Security
Agreement (when executed and delivered by the Borrower pursuant
to Section 5.14 hereof), the Subordination Agreement, the
Subsidiary Guaranty (when executed and delivered by any
Subsidiary Guarantor pursuant to Section 7.04 hereof) and any and
all other instruments, agreements, documents and writings
contemplated hereby or executed in connection herewith.
"Material Adverse Effect" shall mean a material adverse
effect on (a) the properties, operations, business, condition
(financial or otherwise) or prospects of the Borrower or (b) the
validity of this Agreement or any other Loan Document or the
Borrower's ability to pay the Revolving Credit Note or to perform
its obligations under this Agreement and the other Loan
Documents.
"Material Subsidiary" shall mean any Subsidiary of the
Borrower in which the Borrower's Investment equals on any date of
determination at least 10% of the Borrower's Consolidated Net
Worth.
"Multiemployer Plan" shall mean a "multiemployer plan"
as defined in section 4001(a)(3) of ERISA.
"Officer's Certificate" shall mean a certificate,
signed by an authorized executive officer of the Borrower, in
form reasonably satisfactory to the Bank for the purpose(s)
thereof.
"Notice of Borrowing" shall have the meaning set forth
in Section 2.03 hereof.
"PBGC" shall mean the Pension Benefit Guaranty
Corporation and any successor thereto.
"Person" shall mean an individual, partnership,
corporation (including a business trust), joint stock company,
limited liability company, trust, unincorporated association,
joint venture or other entity, or a government or political
subdivision or agency thereof.
"Plan" shall mean any "employee benefit plan" as
defined in Section 3(3) of ERISA maintained by or on behalf of
the Borrower or any ERISA Affiliate, including, but not limited
to, any defined benefit pension plan, profit sharing plan, money
purchase pension plan, savings or thrift plan, stock bonus plan,
employee stock ownership plan, Multiemployer Plan, or any plan,
fund, program, arrangement or practice providing for medical
(including post-retirement medical), hospitalization, accident,
sickness, disability, or life insurance benefits.
"Prime Rate" shall mean the per annum rate of interest
designated from time to time by the Bank to be its prime rate,
with any change in the rate of interest resulting from a change
in the Prime Rate to be effective as of the opening of business
of the Bank on the day of such change. The Prime Rate is a
reference rate and does not necessarily represent the lowest or
best rate actually charged to any customer. The Bank may make
commercial loans and any other loans at rates of interest at,
above or below the Prime Rate.
"Proceeds" shall have the meaning given to such term in
UCC Section 9-306(1).
"Property" shall mean any interest in any kind of
property or asset, whether real, personal or mixed, or tangible
or intangible.
"Renewal Term" shall have the meaning set forth in
Section 2.01(c) hereof.
"Reserve Percentage" shall mean, for any day, the
stated maximum rate (expressed as a decimal) of all reserves
required to be maintained with respect to liabilities or assets
consisting of or including "eurocurrency liabilities", as
prescribed by Regulation D of the Board of Governors of the
Federal Reserve System (or by any other governmental body having
jurisdiction with respect thereto), including without limitation
any basic, marginal, emergency, supplemental, special,
transitional or other reserves, the rate so determined to be
rounded upward to the nearest whole multiple of 1/100 of 1%.
"Revolving Credit Note" shall mean a promissory note of
the Borrower payable to the order of the Bank, in substantially
the form of Exhibit A attached hereto, evidencing the original
principal amount of the Commitment, either as originally executed
or as it may be from time to time supplemented, modified,
amended, renewed or extended.
"Security Agreement" shall mean that certain security
agreement between the Borrower and the Bank which grants a first
priority perfected Lien in all Accounts and Inventory of the
Borrower, whether now owned or hereafter created, and all
Proceeds thereof, substantially in the form of Exhibit B attached
hereto.
"Solvent" shall mean, as to any Person, such Person (i)
owns Property whose fair saleable value is greater than the
amount required to pay all of such Person's liabilities
(including contingent liabilities), (ii) is able to pay all of
its liabilities as such liabilities mature and (iii) has capital
sufficient to carry on its business and transactions and all
business and transactions in which it is about to engage.
"Subordination Agreement" shall mean the agreement
dated the date hereof among the Borrower, the Bank and ELMG,
which subordinates the Indebtedness of the Borrower owed to ELMG
to the Indebtedness of the Borrower under this Agreement in form
and content satisfactory to the Bank.
"Subsidiary" shall mean, with respect to the Borrower,
any Person of which securities or other ownership interests
having ordinary voting power to elect a majority of the board of
directors or other Persons performing similar functions are at
the time directly or indirectly owned by the Borrower.
"Subsidiary Guarantor" shall mean each Material
Subsidiary of the Borrower which executes the Subsidiary Guaranty
or an Additional Subsidiary Guarantor Supplement; and
"Subsidiary Guarantors" shall mean collectively all Subsidiary
Guarantors, as the context requires.
"Subsidiary Guaranty" shall mean the joint and several
guaranty of the Subsidiary Guarantors in the form of Exhibit C
attached hereto, including without limitation each duly executed
supplement to the Subsidiary Guaranty in the form of Exhibit D
attached hereto.
"UCC" shall mean the "Uniform Commercial Code - Secured
Transactions" in effect in the State of Georgia.
SECTION 1.02. Use of Defined Terms; Accounting Terms;
Interpretation. All terms defined in this Agreement shall have
the same defined meanings when used in any other Loan Documents,
unless the context shall require otherwise. All accounting terms
not specifically defined herein shall be construed as having the
respective meanings customary under GAAP. All personal pronouns
used in this Agreement, whether used in the masculine, feminine
or neuter gender, shall include all genders; the singular shall
include the plural, and the plural shall include the singular;
"hereunder", "hereof", "hereto" and words of similar import shall
be deemed references to this Agreement and not to any particular
Article, Section or other provision hereof; "or" is not
exclusive; and relative to any determination of any period of
time, "from" means "from and including", "to" means "to but not
including" and "through" means "through and including". All
Exhibits and Schedules attached hereto are by reference made a
part hereof.
ARTICLE II
AMOUNT AND TERMS OF THE COMMITMENT
SECTION 2.01. Advances and Revolving Credit Note.
(a) Subject to and upon the terms and conditions set forth
in this Agreement, the Bank agrees to make available to the
Borrower from time to time to the Commitment Termination Date
Advances in aggregate principal amount at any one time
outstanding equal to $10,000,000 (the "Commitment"). Within the
limits of the Commitment, the Borrower may borrow, repay and
reborrow under the terms of this Agreement; provided, that the
Borrower may neither borrow nor reborrow should there exist a
Default or an Event of Default.
(b) The Borrower's obligations to pay the principal of, and
interest on, the Advances made pursuant to the Commitment shall
be evidenced by the records of the Bank and by the Revolving
Credit Note completed in conformity with this Agreement. The
aggregate principal amount of each LIBOR Advance shall be
$500,000 or a greater integral multiple of $100,000, and each
Base Rate Advance shall be $50,000 or a greater integral multiple
of $10,000. In addition, no more than five (5) LIBOR Advances
shall be outstanding at any time.
(c) Unless sooner accelerated in accordance with Article
VIII hereof, the Commitment shall terminate on December 15, 1998
(the "Initial Term"); provided, that the Bank may decide in its
sole discretion to grant an extension of the Commitment for an
additional one-year period if the Bank receives a request for
such extension from the Borrower not earlier than 60 days and not
later than 30 days prior to each anniversary of the Closing Date
(the "Renewal Term"). The Bank shall use its best efforts to
notify the Borrower not later than 60 days after receipt of such
request whether it will grant any such extension; provided, that
the failure of the Bank to give such notice shall not mean or
imply that the Bank has granted any such extension.
SECTION 2.02. Interest on Notes. Interest shall
accrue on the unpaid principal amount of each Advance under the
Commitment at the following per annum rates, which may be
selected by the Borrower subject to and in accordance with the
terms of this Agreement:
(i) the Base Rate, plus the Applicable Margin
applicable thereto; or
(ii) LIBOR for the Interest Period selected by the
Borrower, plus the Applicable Margin applicable thereto.
SECTION 2.03. Method of Borrowing Under the
Commitment. The Borrower shall give the Bank written (including
by telecopy) or telephonic notice (promptly confirmed in writing)
of any requested Advance under the Commitment (a "Notice of
Borrowing") specifying (a) the principal amount of such Advance,
(b) the date such Advance is to be made (which shall be a
Business Day), (c) whether such Advance shall be a Base Rate
Advance or a LIBOR Advance, and (d) in the case of a LIBOR
Advance, the duration of the initial Interest Period applicable
thereto. Each Notice of Borrowing shall be given to the Bank (i)
with respect to any LIBOR Advance, not later than 1:00 P.M.
(Atlanta, Georgia time) on the second Business Day preceding the
date of such requested Advance, and (ii) with respect to any Base
Rate Advance, not later than 11:00 A.M. (Atlanta, Georgia time)
on the day of such requested Advance. The Bank shall be entitled
to rely on any telephonic Notice of Borrowing which it believes
in good faith to have been given by a duly authorized officer or
employee of the Borrower and any Advances made by the Bank based
on such telephonic notice, when credited to the Borrower in
accordance with the Borrower's instructions, shall be Advances
for all purposes hereunder.
SECTION 2.04. Selection of Successive Interest Rates
and Interest Periods. The Borrower may, on the last day of the
Interest Period relating thereto, convert any LIBOR Advance into
a Base Rate Advance or continue a LIBOR Advance in the same
aggregate principal amount. The Borrower may at any time convert
a Base Rate Advance into a LIBOR Advance (unless a Default or
Event of Default shall then exist). The Borrower shall give the
Bank telephonic notice (promptly confirmed in writing) at least
two (2) Business Days prior to a conversion or continuation of
any such Advance (other than the continuation of a Base Rate
Advance), such notice to specify whether such Advance is to be
continued as a LIBOR Advance or converted to a LIBOR Advance or a
Base Rate Advance, as the case may be, and, if applicable, the
Interest Period selected by the Borrower for such Advance. If
the Bank does not receive timely notice with respect to any LIBOR
Advance of any succeeding interest rate and/or Interest Period
selected by the Borrower as provided for herein or if the
Borrower selects an interest rate for an Interest Period which is
not available under Section 2.02, or if a Default or Event of
Default shall exist at the end of an Interest Period applicable
thereto, any such outstanding LIBOR Advance shall be converted to
a Base Rate Advance.
SECTION 2.05. Interest Payment Dates. Interest on the
Revolving Credit Note shall be payable (a) on the last day of the
relevant Interest Period for LIBOR Advances (except if any
Interest Period is longer than three (3) months, interest will
be payable every three (3) months); (b) on the last day of each
calendar quarter, in arrears, for each Base Rate Advance; and
(c)on the Commitment Termination Date.
SECTION 2.06. Prepayment of Advances Under the
Commitment. The Borrower shall have the right to prepay LIBOR
Advances and Base Rate Advances under the Commitment, in whole at
any time or in part from time to time, without premium or penalty
but with accrued interest on the principal amount prepaid to the
date of such prepayment; provided, that (a) the Borrower gives
the Bank at least two Business Days' prior written notice of such
prepayment, specifying the date such prepayment will occur and
the Advance to be prepaid, (b) each partial prepayment of a LIBOR
Advance shall be in an amount of $500,000 or a greater integral
multiple of $100,000 and each partial prepayment of a Base Rate
Advance shall be $50,000 or a greater integral multiple of
$10,000, and (c) a LIBOR Advance may only be prepaid on the last
day of the then current Interest Period with respect thereto.
SECTION 2.07. Optional Reduction of Commitment. The
Borrower shall have the right to reduce permanently the amount of
the unutilized Commitment from time to time, without premium or
penalty; provided, that (a) the Borrower gives the Bank at least
five (5) Business Days' prior written notice of such reduction,
specifying the date that such reduction will be effective, and
(b) each reduction shall be in an amount of $500,000 or a greater
integral multiple of $100,000.
SECTION 2.08. Use of Proceeds. The proceeds of each
Advance under the Commitment will be used by the Borrower solely
to finance working capital, acquisitions, the purchase of its own
common stock to retire or hold as "treasury stock" and other
general corporate purposes.
SECTION 2.09. Commitment Fee. From and after the date
hereof up to and including the Commitment Termination Date, the
Borrower shall pay to the Bank a commitment fee equal to 0.20%
per annum on the average daily amount of the unused Commitment
(the "Commitment Fee"). The Commitment Fee shall be payable by
the Borrower quarterly in arrears, commencing on last day of the
first calendar quarter ending after the Closing Date and on the
Commitment Termination Date.
SECTION 2.10. Illegality. Notwithstanding any other
provisions of this Agreement, if the introduction of, or any
change in or in the interpretation or application of, any
applicable law, regulation or directive shall make it unlawful or
impossible for the Bank to make, maintain or fund any LIBOR
Advance, the obligation of the Bank hereunder to make, maintain
or fund LIBOR Advances shall forthwith be cancelled, and the
Borrower shall, at its option, if any LIBOR Advances are then
outstanding, prepay all such LIBOR Advances or convert such LIBOR
Advances to Base Rate Advances, in either case without penalty
notwithstanding Section 2.12 hereof.
SECTION 2.11. Increased Costs. In the event that the
introduction of, or any change in or in the interpretation of or
application of, any applicable law, treaty or governmental
regulation, or the compliance by the Bank with any guideline,
request or directive (whether or not having the force of law)
from any central bank or other U.S. or foreign financial,
monetary or other governmental authority, shall: (a) subject the
Bank to any tax of any kind whatsoever with respect to this
Agreement or any Advance or change the basis of taxation of
payments to the Bank of principal, interest, fees or any other
amount payable hereunder (except for changes in the rate of tax
in the overall net income of the Bank); (b) impose, modify, or
hold applicable any reserve, special deposit, assessment or
similar requirement against assets held by, or deposits in or
for the account of, advances or loans by, or other credit
extended by or committed to be extended by any office of the Bank
(other than any change by way of imposition or increase of
reserve requirements under Regulation D of the Board of Governors
of the Federal Reserve System, in the case of LIBOR Advances,
included in the Reserve Percentage); or (c) impose on the Bank or
on the London interbank market any other condition with respect
to this Agreement, the Revolving Credit Note or any LIBOR Advance
thereunder; and the result of any of the foregoing is to increase
the cost to the Bank of making or committing to make, renewing or
maintaining any LIBOR Advance or to reduce the amount of any
payment (whether of principal, interest or otherwise) in respect
of any LIBOR Advance, THEN, IN ANY SUCH CASE, the Borrower shall
promptly pay from time to time, upon demand of the Bank, such
additional amounts as will compensate the Bank for such
additional cost or such reduction, as the case may be. The Bank
shall certify the amount of such additional cost or reduced
amount to the Borrower, including a description of the
calculation thereof in reasonable detail, and such certification
shall be conclusive absent manifest error; provided, that unless
such certificate is delivered to the Borrower no later than
ninety (90) days after the Bank receives actual notice of, or
obtains actual knowledge of, the promulgation of any such law,
rule or regulation, or any such change therein, or any such
change in the interpretation or administration thereof, the
Borrower shall not have any obligation to pay any such additional
compensation to the Bank accruing prior to the ninetieth (90th)
day preceding the delivery of such certificate; and provided
further, that the Borrower shall not have any obligation to pay
any such additional compensation to the Bank accruing prior to
one (1) year of the Bank receiving actual notice of, or obtaining
actual knowledge of, any such promulgation.
SECTION 2.12. Indemnity. The Borrower hereby agrees
to indemnify the Bank and hold the Bank harmless from any loss,
cost or expense it may sustain or incur as a consequence of (a)
the failure by the Borrower to complete any LIBOR Advance or the
failure of the Borrower to convert any outstanding Prime Rate
Advance into a LIBOR Advance pursuant to Section 2.04 hereof
after notice thereof has been given to the Bank or (b) the
payment or conversion of a LIBOR Advance on a day other than the
last day of the Interest Period applicable thereto, including,
without limitation, any loss, cost or expense incurred by reason
of the liquidation or reemployment of deposits or other funds
acquired or deemed acquired by the Bank to fund such Advance or
the Term Loan, as the case may be, when such Advance, as result
of such failure, is not made on such date. The Bank shall
certify the amount of its loss or expense to the Borrower, and
such certification shall be conclusive absent manifest error.
SECTION 2.13. Capital Adequacy. If, after the date of
this Agreement, the Bank shall have determined that the adoption
of any applicable law, rule or regulation regarding capital
adequacy, or any change therein, or any change in the
interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the
Bank with any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect
of reducing the rate of return on the Bank's capital (whether on
this Commitment or otherwise) as a consequence of its obligations
hereunder to a level below that which the Bank could have
achieved but for such adoption, change or compliance (taking into
consideration the Bank's policies with respect to capital
adequacy) by an amount deemed by the Bank to be material, then
from time to time, promptly upon demand by the Bank, the Borrower
shall pay the Bank such additional amount or amounts as will
compensate the Bank for such reduction. A certificate of the
Bank setting forth the additional amount or amounts to be paid to
it hereunder, providing a description of the calculation thereof
in reasonable detail, shall be conclusive absent manifest error;
provided, that unless such certificate is delivered to the
Borrower no later than ninety (90) days after the Bank receives
actual notice of, or obtains actual knowledge of, the
promulgation of any such law, rule or regulation, or any such
change therein, or any such change in the interpretation or
administration thereof, the Borrower shall not have any
obligation to pay any such additional compensation to the Bank
accruing prior to the ninetieth (90th) day preceding the delivery
of such certificate; and provided further, that the Borrower
shall not have any obligation to pay any such additional
compensation to the Bank accruing prior to one (1) year of the
Bank receiving actual notice of, or obtaining actual knowledge
of, any such promulgation. In determining any such amount, the
Bank may use any reasonable averaging and attribution methods.
SECTION 2.14. Survival. The obligations of the
Borrower under Sections 2.11, 2.12 and 2.13 shall survive the
termination of this Agreement and the payment of the Revolving
Credit Note.
SECTION 2.15. Making of Payments. The Commitment Fee
and all payments of principal of, or interest on, the Revolving
Credit Note shall be made in immediately available funds to the
Bank at its principal office in Atlanta, Georgia. All such
payments shall be made not later than 11:00 A.M. (Atlanta,
Georgia time) and funds received after that hour shall be deemed
to have been received by the Bank on the next following Business
Day.
SECTION 2.16. Default Rate of Interest. If the
Borrower shall fail to pay on the due date therefor, whether by
acceleration or otherwise, any principal owing under the
Revolving Credit Note, then interest shall accrue on such unpaid
principal, and to the extent allowed by law, other amounts due,
at the option of the Bank, from the due date until and including
the date on which such principal or other amount is paid in full
at (i) the then applicable interest rate with respect to LIBOR
Advances until the end of the Interest Period applicable thereto
plus an additional two per cent (2%) per annum and (ii)
thereafter and with respect to Base Rate Advances and Prime Rate
Loans, a rate of interest equal to the Base Rate plus an
additional two percent (2.0) per annum (the "Default Rate").
SECTION 2.17. Calculation of Interest. Interest
payable on the Revolving Credit Note and the Commitment Fee shall
be calculated on the basis of a year of 360 days and paid for the
actual number of days elapsed.
ARTICLE III
CONDITIONS TO ADVANCES
The obligation of the Bank to make Advances hereunder
and under the Revolving Credit Note is subject to the
satisfaction of the following conditions:
SECTION 3.01. Conditions Precedent to the Initial
Advance. At the time of the making by the Bank of its initial
Advance hereunder, the Bank shall have received the following,
each dated as of the date of the initial Advance, in form and
substance satisfactory to the Bank:
(a) A duly executed Agreement.
(b) A duly executed Revolving Credit Note.
(c) A duly executed Subordination Agreement.
(d) Copies of the articles of incorporation of the
Borrower, certified as true and correct by the Secretary of State
of the State of Georgia, and a certificate from the Secretary of
State of the State of Georgia, certifying the Borrower's
existence as a corporation in such State.
(e) Certified copies of the by-laws of the Borrower,
of the resolutions of the Board of Directors of the Borrower
approving this Agreement, the Revolving Credit Note and the other
Loan Documents to which the Borrower is a party, and of all
documents evidencing other necessary corporate action and
governmental approvals, if any, with respect to this Agreement,
the Revolving Credit Note and the other Loan Documents to which
the Borrower is a party.
(f) A certificate of the Secretary or Assistant
Secretary of the Borrower certifying the names and true
signatures of the officers of the Borrower authorized to execute
this Agreement, the Revolving Credit Note and the other Loan
Documents to which the Borrower is a party.
(g) A favorable written opinion of William S. Jacobs,
General Counsel of the Borrower, in form and content reasonably
satisfactory to the Bank and addressed to the Bank.
(h) All corporate and other proceedings taken or to be
taken in connection with the transactions contemplated hereby and
all Loan Documents and other documents incident thereto, or
delivered in connection therewith, shall be satisfactory in form
and substance to the Bank.
SECTION 3.02. Conditions Precedent to Each Advance.
At the time of the making by the Bank of each Advance hereunder
(including the Initial Advance), (a) the following statements
shall be true (and each of the giving by the Borrower of a Notice
of Borrowing in accordance with Section 2.03 hereof and the
acceptance by the Borrower of the proceeds of each Advance shall
constitute a representation and warranty by the Borrower that on
the date of such Advance, before and after giving effect thereto
and to the application of the proceeds therefrom, such statements
are true):
(i) The representations and warranties contained
in Article IV hereof are true and correct on and as of the date
of such Advance as though made on and as of such date, other than
those representations and warranties that, by their terms, refer
to a date other than the date of such Advance, and
(ii) No Default or Event of Default exists or
would result from such Advance or from the application of the
proceeds therefrom; and
(b) the Bank shall have received such other approvals,
opinions or documents as it may reasonably request (including,
without limitation, a Federal Reserve Form U-1 duly completed to
the Bank's satisfaction and those documents and opinions which
comply with Sections 5.08 and 5.14 hereof).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants as follows:
SECTION 4.01. Corporate Existence. The Borrower is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Georgia, and each Material
Subsidiary is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation.
Each of the Borrower and each Material Subsidiary is duly
qualified and in good standing as a foreign corporation
authorized to do business in each jurisdiction (other than the
jurisdiction of its incorporation) in which the nature of its
activities or the character of the properties it owns or leases
makes such qualification necessary, except where the failure to
so qualify would not have Material Adverse Effect.
SECTION 4.02. Corporate Power and Authority;
Contravention. The execution, delivery and performance by the
Borrower of this Agreement, the Revolving Credit Note and any
other Loan Documents to which it is a party are within the
Borrower's corporate powers, have been duly authorized by all
necessary corporate action (including any necessary shareholder
action), and do not and will not (a) violate any provision of any
law, rule or regulation, any judgment, order or ruling of any
court or governmental agency, the articles of incorporation or
by-laws of the Borrower, or any material indenture, agreement or
other instrument to which the Borrower is a party or by which the
Borrower or any of any of its properties is bound, (b) be in
conflict with, result in a breach of, or constitute with notice
or lapse of time or both, a default under any such indenture,
agreement or other instrument or (c) result in or require the
creation of any Lien (other than pursuant to a Loan Document)
upon or with respect to any of its Properties.
SECTION 4.03. Enforceability. This Agreement, the
Revolving Credit Note and all other Loan Documents to which the
Borrower is a party are the valid and binding obligations of the
Borrower, enforceable against the Borrower in accordance with
their respective terms, except as the enforceability of any of
them may be limited by bankruptcy, insolvency, reorganization,
moratorium and other laws affecting creditors' rights and
remedies generally and by general principles of equity, whether
considered in a proceeding at law or in equity.
SECTION 4.04. Governmental Consent. Neither the
nature of the Borrower nor any of its Material Subsidiaries nor
any of their respective businesses or properties, nor any
relationship between the Borrower or any Material Subsidiary and
any other Person, nor any circumstance in connection with the
execution and delivery of the Loan Documents and the consummation
of the transactions contemplated thereby is such as to require
any authorization, consent, approval, order, license, execution
or other action by or notice to or filing with any court or
administrative or governmental body (other than routine filings,
if any, after the date of closing with the Securities and
Exchange Commission and/or state Blue Sky authorities) in
connection with the execution, delivery and performance of this
Agreement, the Revolving Credit Note and the other Loan Documents
to which the Borrower is a party thereto.
SECTION 4.05. Material Subsidiaries. The Borrower has
no Material Subsidiaries other than the Material Subsidiaries
listed on Schedule 4.05 attached hereto or as hereafter amended.
All the outstanding shares of the capital stock of each such
Material Subsidiary have been validly issued and are fully paid
and nonassessable, and all such outstanding shares are owned of
record and beneficially by the Borrower free of any Lien or
claim.
SECTION 4.06. Insurance. Each Property owned by the
Borrower and each of its Material Subsidiaries is insured for the
benefit of the Borrower or such Material Subsidiary in amounts
deemed adequate by the Borrower's management against risks
customarily insured against by Persons operating businesses
similar to those of the Borrower and its Material Subsidiaries in
the localities where such Properties are located.
SECTION 4.07. Financial Statements. The Borrower has
furnished the Bank with the following financial statements,
identified by the chief financial officer of the Borrower: the
consolidated balance sheets of the Borrower and its Subsidiaries
as at December 31, 1994 and 1993 and the related consolidated
statements of income, stockholders' equity and cash flows of the
Borrower and its Subsidiaries for such years, all certified by
KPMG Peat Marwick. All such financial statements (including any
related schedules and/or notes) are true and correct in all
material respects, have been prepared in accordance with GAAP
consistently applied throughout the periods involved and show all
liabilities, direct and contingent, of the Borrower and its
Subsidiaries required to be shown in accordance with GAAP. The
balance sheets fairly present the financial position of the
Borrower and its Subsidiaries as at the dates thereof, and the
statements of income, stockholders' equity and cash flows fairly
present the results of their operations and their cash flows for
the periods indicated. There has been no material adverse change
in the business, operations, condition (financial or otherwise),
or prospects of the Borrower, or of the Borrower and its
Subsidiaries taken as a whole, since December 31, 1994.
SECTION 4.08. Taxes. The Borrower and each of its
Material Subsidiaries have filed all federal, state and other
income tax returns which are required to be filed, and each such
Person has paid all taxes as shown on such returns and on all
assessments received by it to the extent that such taxes have
become due, except such as are being contested in good faith by
appropriate proceedings and for which adequate reserves have been
established in accordance with GAAP.
SECTION 4.09. Actions Pending. There is no action,
suit, investigation, or proceeding pending, or to the best
knowledge of the Borrower, threatened, against the Borrower or
any of its Material Subsidiaries or any Properties or rights of
the Borrower or any of its Material Subsidiaries by or before any
court, arbitrator or administrative or governmental body, which
seeks damages or other remedies, not otherwise reserved for in
determining Consolidated Net Worth, that, if awarded at the
highest amount believed (after consultation with independent
counsel reasonably satisfactory to the Bank) to be a reasonable
possibility, would, individually or in the aggregate, reduce the
Borrower's Consolidated Net Worth below the amount required by
Section 6.01 of this Agreement.
SECTION 4.10. Title to Properties. Each of the
Borrower and its Material Subsidiaries has good and marketable
title to its respective real properties (other than real
properties that it leases) and good title to all of its other
respective material properties and assets, including the
properties and assets reflected in the balance sheet as at
December 31, 1994 hereinabove described (other than properties
and assets disposed of in the ordinary course of business),
subject to no Lien of any kind except Liens permitted by Section
7.01 hereof. Each of the Borrower and its Material Subsidiaries
enjoys peaceful and undisturbed possession under all leases
necessary in any material respect for the operation of its
respective properties and assets, none of which contains any
unusual or burdensome provisions which might materially affect or
impair the operations of such properties and assets in the manner
intended to be operated by the Borrower or such Material
Subsidiaries. All such leases are valid and subsisting and in
full force and effect.
SECTION 4.11. Federal Reserve Regulations. Neither
the Borrower nor any Material Subsidiary is in the business of
extending credit for the purpose of purchasing or carrying any
"margin stock" as defined in Regulation U (12 C.F.R. Part 221) of
the Board of Governors of the Federal Reserve System (hereinafter
called "margin stock"). Neither the Borrower nor any agent of
the Borrower acting on its behalf has taken or will take any
action which might cause this Agreement or the Revolving Credit
Note to violate Regulation G, T, U, or X or (to the best
knowledge of the Borrower) any other regulation of the Board of
Governors of the Federal Reserve System or to violate the
Securities Exchange Act of 1934, as amended, in each case as now
in effect or as the same may hereafter be in effect.
SECTION 4.12. ERISA. Except as disclosed on Schedule
4.12 attached hereto or as hereafter amended:
(a) Identification of Plans. Neither the Borrower nor
any ERISA Affiliate maintains or contributes to, or has
maintained or contributed to, any "employee pension benefit plan"
as defined in Section 3(2) of ERISA.
(b) Liabilities. Neither the Borrower nor any
Subsidiary is currently or will become subject to any liability
(other than routine Plan expenses or contributions, if timely
paid), tax or penalty whatsoever to any Person whomsoever, which
liability, tax or penalty is directly or indirectly related to
any Plan including, but not limited to, any penalty or liability
arising under Title I or Title IV of ERISA, any tax or penalty
resulting from a loss of deduction under Section 404 or 419 of
the Code, or any tax or penalty under Chapter 43 of the Code,
except such liabilities, taxes or penalties (when taken as a
whole) as would not have a Material Adverse Effect; and
(c) Funding. The Borrower and each ERISA Affiliate
have made full and timely payment of all amounts (i) required to
be contributed under the terms of each Plan and applicable law
and (ii) required to be paid as expenses of each Plan. No Plan
would have an "amount of unfunded benefit liabilities" (as
defined in Section 4001(a)(18) of ERISA) if such Plan were
terminated as of the date on which this representation and
warranty is made.
SECTION 4.13. Outstanding Indebtedness. There exists
no default or any condition or event which, with the lapse of
time or giving of notice or both, would constitute a default
under the provisions of any instrument evidencing or securing any
Indebtedness in an amount greater than $1,000,000 or of any
agreement otherwise relating thereto.
SECTION 4.14. Pollution and Environmental Control.
Each of the Borrower and its Material Subsidiaries has obtained
all material permits, licenses and other authorizations which are
required under, and is in material compliance with, all federal,
state and local laws and regulations (including any laws and
regulations of foreign countries comparable thereto) relating to
pollution, reclamation, or protection of the environment,
including laws relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants, or hazardous or
toxic materials or wastes into the environment (including without
limitation ambient air, surface water, ground water or land), or
otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, chemical or industrial, hazardous or
toxic materials or wastes, and any and all regulations, codes,
plans, orders, decrees, judgments, injunctions, notices or demand
letters issued, entered, promulgated or approved thereunder,
except to the extent that any failure to obtain such permits,
licenses and other authorizations or any such non-compliance
would not, individually or in the aggregate, have a Material
Adverse Effect.
SECTION 4.15. Employee Relations. Each of the
Borrower and its Material Subsidiaries has a stable work force in
place and is not a party to any collective bargaining agreement,
and no labor union has been recognized as a representative of the
Borrower's or any such Material Subsidiary's employees. As of the
Closing Date, neither the Borrower nor any Material Subsidiary
knows of any pending, threatened or contemplated strikes, work
stoppage or any other labor dispute involving its employees which
would have a Material Adverse Effect.
SECTION 4.16. Investment Company Act. The Borrower is
not an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company
Act of 1940, as amended.
SECTION 4.17. Public Utility Holding Company. The
Borrower is not a "holding company," or a "subsidiary company" of
a "holding company," or an "affiliate" of a "holding company" or
a "subsidiary company" of a "holding company," within the meaning
of the Public Utility Holding Company Act of 1935, as amended.
SECTION 4.18. Solvency. After giving effect to the
execution and delivery of the Loan Documents and the making of
the Advances under the Commitment, the Borrower will be Solvent.
SECTION 4.19. Possession of Franchises, Licenses, Etc.
Except as disclosed on Schedule 4.19 attached hereto or as
hereafter amended, each of the Borrower and its Material
Subsidiaries possesses all franchises, certificates, licenses,
permits and other authorizations from governmental subdivisions
or regulatory authorities, and all patents, trademarks, service
marks, trade names, copyrights, licenses and other rights that
are used in, and are material to, the operations of the Borrower
or such Material Subsidiaries as currently conducted, free from
burdensome restrictions, that are necessary for the ownership,
maintenance and operation of any of their respective material
Properties, and neither the Borrower nor any of its Material
Subsidiaries is in violation of any thereof.
SECTION 4.20. Disclosure. Neither this Agreement nor
any other document, certificate or statement furnished to the
Bank (or to the Securities and Exchange Commission in connection
with the Borrower's 10-Q, upon which the Bank may expressly rely)
by or on behalf of the Borrower in connection herewith contains
any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained
herein and therein not misleading at the time such document,
certificate or statement was furnished to the Bank. There is no
fact peculiar to the Borrower or any of its Material Subsidiaries
which has had, or could have, a Material Adverse Effect which has
not been set forth or appropriately reflected in this Agreement
or in the other Loan Documents, certificates and statements
furnished to the Bank by or on behalf of the Borrower prior to
the date hereof in connection with the transactions contemplated
hereby.
ARTICLE V
AFFIRMATIVE COVENANTS
So long as the Revolving Credit Note remains unpaid or
the Commitment remains outstanding hereunder, the Borrower will,
unless the Bank otherwise consents in writing:
SECTION 5.01. Notice of Default. Furnish to the Bank,
as soon as possible and in any event within ten (10) Business
Days after discovery by any authorized officer of the Borrower of
any Default or Event of Default or any event of default or event
which with the passage of time or the giving of notice or both
would become an event of default under any agreement evidencing
any other Indebtedness, an Officer's Certificate setting forth
the details of such Default, Event of Default or event or
condition.
SECTION 5.02. Financial Statements. Deliver to the
Bank: (a) as soon as practicable and in any event within ninety
(90) days after the end of each fiscal year of the Borrower, an
audited consolidated and an unaudited consolidating balance sheet
of the Borrower and its Subsidiaries as of the end of such fiscal
year and the related audited consolidated and unaudited
consolidating statements of income, stockholders' equity and cash
flows for such fiscal year and setting forth in each case in
comparative form corresponding figures for the preceding fiscal
year, all in reasonable detail and reasonably satisfactory in
scope to the Bank and with respect to the audited consolidated
financial statements only, certified as correct by the Borrower's
chief financial officer and accompanied by an unqualified opinion
from KPMG Peat Marwick or such other independent certified public
accountants of recognized standing selected by the Borrower and
acceptable to the Bank; (b) as soon as practicable and in any
event within forty-five (45) days after the end of each of the
first three quarters of each fiscal year of the Borrower, an
unaudited consolidated and consolidating balance sheet of the
Borrower and its Subsidiaries as of the end of such fiscal
quarter and the related consolidated and consolidating
statements of income, stockholders' equity and cash flows for
such quarter and for the portion of the Borrower's fiscal year
ended at the end of such quarter, setting forth in the case of
such statements in comparative form the figures for the
Borrower's corresponding periods in the Borrower's previous
fiscal year; (c) as they are delivered, copies of all statements
and reports, if any, filed with the Securities and Exchange
Commission; and (d) such other financial data and information as
the Bank may reasonably request. The Bank is hereby authorized
to deliver a copy of any financial statement delivered to it
pursuant to this Section 5.02 to any regulatory body having
jurisdiction over it and having the governmental authority to
require delivery of the same.
SECTION 5.03. Certificate of No Default. Together
with the financial statements delivered pursuant to Section 5.02
(a) and Section 5.02 (b) hereof, deliver to the Bank an Officer's
Certificate, executed by the chief financial officer of the
Borrower, evidencing the calculations necessary to establish
compliance with the financial covenants set forth in Article VI
hereof and with respect to the financial statements delivered
pursuant to Section 5.02(a) only, stating that, to the best
knowledge of the Borrower, there exists no Default or Event of
Default, or if any Default or Event of Default exists, stating
the nature thereof, the period of existence thereof and what
action the Borrower proposes to take with respect thereto,
provided no such proposal shall affect the Bank's recourse to any
and all available remedies.
SECTION 5.04. ERISA. Promptly after the occurrence
thereof with respect to any Plan, or any trust established
thereunder, deliver to the Bank notice of (a) a "reportable
event" described in Section 4043 of ERISA and the regulations
issued from time to time thereunder (other than a "reportable
event" not subject to the provisions for 30-day notice to the
PBGC under such regulations), (b) any other event which could
subject the Borrower or any ERISA Affiliate to any tax, penalty
or liability under Title I or Title IV of ERISA or Chapter 43 of
the Code which would have a Material Adverse Effect, and (c) at
the same time and in the same manner as such notice must be
provided to the PBGC, or to a Plan participant, beneficiary or
alternative payee, any notice required under Section 101(d),
302(f)(4), 303, 307, 4041(b)(1)(A) or 4041(c)(1)(A) of ERISA or
under Section 401(a)(29) or 412 of the Code with respect to any
Plan.
SECTION 5.05. Visits and Inspections. Permit, and
cause each Subsidiary to permit, the Bank or any Person
designated by the Bank upon advance notice in writing (except
after the occurrence and continuation of an Event of Default, in
which case no advance notice will be required) to visit and
inspect any of the Properties of the Borrower and its
Subsidiaries, to examine the books and financial records of the
Borrower and its Subsidiaries, and make reasonable requests for
copies thereof or extracts therefrom, and to discuss the affairs,
finances and accounts of the Borrower and its Subsidiaries with
their executive officers, all at such reasonable times and as
often as the Bank may reasonably request.
SECTION 5.06. Compliance with Laws; Payment of Taxes.
(a) Comply, and cause each Material Subsidiary to comply, with
all applicable laws, rules, regulations and orders (including
without limitation all federal, state and local laws relating to
pollution, reclamation or protection of the environment), except
where the failure to comply would not have a Material Adverse
Effect.
(b) Pay, and cause each Material Subsidiary to pay, all
taxes, assessments and governmental charges imposed upon it or
upon its Properties with respect thereto, except to the extent
contested in good faith and for which appropriate reserves have
been established in accordance with GAAP.
SECTION 5.07. Corporate Existence. Preserve and keep,
and cause each of its Material Subsidiaries to preserve and keep,
its corporate existence (except as permitted in Section 7.02
hereof) and good standing in its jurisdiction of incorporation
and its qualification and good standing as a foreign corporation
in all jurisdictions where not so qualifying would have a
Material Adverse Effect, and shall conduct its business in the
manner in which it is now conducted subject only to changes in
the ordinary course of business (which for the purposes of this
Section shall mean and include the right to enter into
businesses, operations and/or markets which are functionally
related to the existing businesses, expertise, operations and/or
markets of the Borrower or such Material Subsidiaries).
SECTION 5.08. Insurance. Maintain, and cause each
Material Subsidiary to maintain, casualty insurance coverage on
its Property and other insurance against other risks, including
public liability, in such amounts and such types as are
ordinarily carried by similar corporations with a company or
companies reasonably satisfactory to the Bank. If and when the
Security Agreement is executed and delivered pursuant to Section
5.14 hereof, all policies of insurance covering Inventory of the
Borrower shall name the Bank as a loss payee and shall provide
for thirty days' prior written notice to the Bank in the event of
cancellation, change, alteration or modification, and the
Borrower shall deliver to the Bank on the date of such execution
a certificate of insurance to such effect.
SECTION 5.09. Books and Records. Keep, and cause each
Subsidiary to keep, complete and accurate books and records with
respect to business and its Property, consistent with good
business practices and as may be necessary to permit the
preparation of the Borrower's annual financial statements in
accordance with GAAP.
SECTION 5.10. Maintenance of Property. Preserve,
protect, keep and maintain, and cause each of its Material
Subsidiaries to preserve, protect, keep and maintain, its
respective Property in good operating condition, repair and
working order in all material respects, with reasonable allowance
for wear and tear for tangible Property, so that the value and
operating efficiency thereof shall at all times be maintained and
preserved for its intended use.
SECTION 5.11. Compliance with Other Agreements.
Comply, and cause each Material Subsidiary to comply, with all
agreements, indentures and mortgages to which it is a party or by
which it or any of its Property is bound, where the effect of
noncompliance would have a Material Adverse Effect.
SECTION 5.12. Notice of Litigation. Within ten (10)
days after (a) the occurrence thereof, deliver to the Bank notice
of the institution by any Person of any action, suit or
proceeding or any governmental investigation or any arbitration
seeking money damages in excess of $1,000,000 and seeking relief
that, if granted, would have a Material Adverse Effect, before
any court or arbitrator or any governmental or administrative
body, agency, or official, against the Borrower, any Subsidiary,
or any material Property of any of them, or (b) the receipt of
actual knowledge thereof, deliver to the Bank notice of the
threat of any such action, suit, proceeding, investigation or
arbitration, each such notice under this subsection to specify,
if known, the amount of damages being claimed or other relief
being sought, the nature of the claim, the Person instituting the
action, suit, proceeding, investigation or arbitration, and any
other significant features of the claim.
SECTION 5.13. Environmental Notices. Promptly notify
the Bank of the Borrower's or any Material Subsidiary's receipt
of any governmental notice of a violation of any federal, state
or local environmental law, standard or regulation (including any
such law, standard or regulation of any foreign country, whether
at the national or local level, applicable to the Borrower or any
of its Material Subsidiaries), which violation would have a
Material Adverse Effect.
SECTION 5.14. Springing Lien. (a) Upon the occurrence
and during the continuance of a Default or an Event of Default or
(b) if at the end of any fiscal quarter the Borrower's
Consolidated EBIT for such fiscal quarter and the immediately
preceding three fiscal quarters (excluding the fiscal quarter
ending September 30, 1995) is less than 2.0 times Consolidated
Interest Expense for such fiscal quarter and the immediately
preceding three fiscal quarters (excluding the fiscal quarter
ending September 30, 1995), the Borrower shall promptly execute
and deliver to the Bank the Security Agreement, together with
such UCC-1 financing statements as the Bank may request to
perfect its security interest in the Borrower's Accounts and
Inventory (and Proceeds thereof), and an opinion of counsel
reasonably satisfactory to the Bank regarding the enforceability
of the Security Agreement, the perfection of the Lien granted
pursuant thereto and such other matters as the Bank may
reasonably request.
ARTICLE VI
SPECIFIC FINANCIAL COVENANTS
The Borrower hereby covenants and agrees with the Bank
that it will, during the term of this Agreement or for so long as
the Revolving Credit Note remains unpaid or the Commitment
remains outstanding:
SECTION 6.01. Consolidated Net Worth. Have at the end
of each fiscal year Consolidated Net Worth of not less than the
sum of (i) $25,000,000 (as such amount may be reduced by the
amount of its common stock purchased and retired or held by the
Borrower as "treasury stock") plus (ii) fifty percent (50%) of
positive Consolidated Net Income for such fiscal year, commencing
with the fiscal year ending December 31, 1994; provided, that in
no event shall the Consolidated Net Worth required pursuant to
this Section 6.01 be less than that required on any previous date
of determination.
SECTION 6.02. Leverage. Maintain at all times
Consolidated Funded Debt of less than 45% of Consolidated
Capitalization.
SECTION 6.03. Interest Coverage. Have at the end of
each fiscal quarter Consolidated EBIT for any four of the
immediately preceding six fiscal quarters (which have been
identified by the Borrower to the Bank in its Officer's
Certificate delivered pursuant to Section 5.03 hereof) of greater
than 2.0 times Consolidated Interest Expense for such fiscal
quarter and the immediately preceding three fiscal quarters.
ARTICLE VII
NEGATIVE COVENANTS
So long as the Revolving Credit Note remains unpaid or
the Commitment remains outstanding hereunder, the Borrower will
not, and will not permit any Material Subsidiary to, without the
prior written consent of the Bank:
SECTION 7.01. Liens, Etc. Create, assume or suffer to
exist any Lien upon any of its Property whether now owned or
hereafter acquired except:
(a) Liens created in favor of the Bank pursuant to the
Security Agreement (if and when executed and delivered pursuant
to Section 5.14 hereof;
(b) Liens existing on the date hereof as set forth on
Schedule 7.01 attached hereto (other than Liens permitted
pursuant to subsection (a) and subsections (c) through (k)
below);
(c) purchase money Liens upon any Property
constituting fixed assets acquired or held by the Borrower or any
Material Subsidiary in the ordinary course of business to secure
the purchase price of such Property or to secure Indebtedness
incurred solely for the purpose of financing the acquisition of
such Property, provided that such Lien does not extend to any
other Property;
(d) Liens existing on any Property held by the
Borrower or any Material Subsidiary in the ordinary course of
business at the time of its acquisition (other than any such Lien
created in contemplation of such acquisition);
(e) Liens existing on Property of any Person acquired
by the Borrower or any Material Subsidiary at the time of
acquisition of such Person (other than any such Lien created in
contemplation of such acquisition);
(f) Liens securing the Indebtedness of any Material
Subsidiary to the Borrower or of any Material Subsidiary to any
other Subsidiary;
(g) Liens for taxes or assessments or other
governmental charges or levies not yet due or which are being
actively contested in good faith by appropriate proceedings if
adequate reserves with respect thereto are maintained on the
books of the Borrower or any Material Subsidiary in accordance
with GAAP;
(h) statutory Liens of landlords and Liens of
carriers, warehousemen, mechanics, materialmen and other Liens
imposed by law created in the ordinary course of business for
amounts not yet due or which are being contested in good faith by
appropriate proceedings and with respect to which adequate
reserves are being maintained on the books of the Borrower or any
Material Subsidiary in accordance with GAAP;
(i) Liens (other than any Lien imposed by ERISA)
incurred or deposits made in the ordinary course of business in
connection with workmen's compensation, unemployment insurance
and other types of social security, or to secure the performance
of tenders, statutory obligations, surety and appeal bonds, bids,
leases, government contracts, performance and return-of-money
bonds and other similar obligations (other than obligations for
the payment of borrowed money);
(j) easements, rights-of-way, restrictions and other
similar charges or encumbrances not interfering with the ordinary
conduct of the business of the Borrower or any of its Material
Subsidiaries or any of their respective properties;
(k) Liens on any common stock of the Borrower purchased
and held by the Borrower as "treasury stock"; and
(l) extensions, renewals or replacements of any Lien
referred to in clauses (a) through (k) of this Section 7.01;
provided, that the principal amount of the Indebtedness or
obligation secured thereby is not increased (other than the
Indebtedness on the real property and improvements of the
Borrower listed on Schedule 7.01 which may be increased in any
refinancing thereof) and that any such extension, renewal or
replacement is limited to the property originally encumbered by
the Lien.
SECTION 7.02. Consolidations and Mergers. Merge or
consolidate with or into any Person or sell all or substantially
all of its assets, except (a) a merger (i) in which the Borrower
is the surviving corporation, so long as, both immediately prior
to and after giving effect to such merger, no Default or Event of
Default exists or would exist after giving effect thereto and
(ii) in which the Borrower is merged into ELMG, so long as the
ELMG Agreement remains in effect and both immediately prior to
and after giving effect to such merger, no default or event of
default exists or would exist under the ELMG Agreement; and (b) a
merger of any Material Subsidiary with the Borrower (provided
that the Borrower shall be the surviving corporation) or with any
one or more other Subsidiaries (provided that any Subsidiary
Guarantor involved in such merger shall be the surviving
corporation).
SECTION 7.03. Compliance with ERISA. Take or fail to
take, nor permit any ERISA Affiliate to take or fail to take, any
action with respect to a Plan including but not limited to (a)
establishing any Plan, (b) amending any Plan, (c) terminating or
withdrawing from any Plan, or (d) incurring an amount of unfunded
benefit liabilities, as defined in Section 4001(a)(18) of ERISA,
or any withdrawal liability under Title IV of ERISA, where such
action or failure could have a Material Adverse Effect.
SECTION 7.04. Issuance of Stock by Material
Subsidiaries. (a) Permit any Material Subsidiary (either
directly or indirectly by the issuance of rights or options for,
or securities convertible into such shares) to issue, sell or
dispose of any shares of its stock of any class (other than
directors' qualifying shares, if any), except to the Borrower, to
ELMG or to any other Person or Persons which would result in the
Borrower owning less than a majority of the voting stock of such
Material Subsidiary.
(b) Create any new Material Subsidiaries, whether by
incorporation, merger or acquisition, unless (i) if such Material
Subsidiary is wholly-owned by the Borrower, such Material
Subsidiary promptly executes a Subsidiary Guaranty or a
supplement to the Subsidiary Guaranty substantially in the form
of Exhibit D attached hereto ( a "Supplement") or (ii) if such
Material Subsidiary is not wholly-owned by the Borrower and (A)
if the Borrower's Investment in such Material Subsidiary
constitutes solely a purchase from a third Person of the capital
stock of, or the partnership or members' interest in, such
Material Subsidiary, the Borrower will use its best efforts to
cause such Material Subsidiary to promptly execute a Subsidiary
Guaranty or a Supplement in an amount limited to such Investment
outstanding as of the date on which such Subsidiary Guaranty is
enforced or (B) if the Borrower's Investment constitutes any
other type of transaction referenced in the definition of
Investment, the Borrower will cause such Material Subsidiary to
execute a Subsidiary Guaranty or a Supplement in an amount
limited to such Investment outstanding as of the date on which
such Subsidiary Guaranty is enforced. In any such case in which a
new Material Subsidiary is not wholly-owned by the Borrower, the
Borrower will execute a pledge agreement in form and content
satisfactory to the Bank pledging the stock or other ownership
interest held by the Borrower in such Material Subsidiary and any
other documents which the Bank reasonably deems necessary, but
only if such pledge would not cause any Advance used to make such
Investment to be a "purpose" credit under, or to otherwise
violate, Regulation U of the Federal Reserve Board. In addition,
each new Material Subsidiary becoming a Subsidiary Guarantor
hereunder shall deliver to the Bank the same documents required
under Section 2.1(e)(ii) of the ELMG Agreement and if requested
by the Bank, an opinion of counsel in form and content reasonably
satisfactory to the Bank.
SECTION 7.05. Affiliate Transactions. At any time
engage in, or permit any Material Subsidiary to engage in, any
material transaction requiring disclosure pursuant to the rules
and regulations of the Securities and Exchange Commission with an
Affiliate of the Borrower or of any Material Subsidiary (other
than transactions with their directors or officers in the nature
of compensation for their services as such) , unless such
transaction is determined by those members of the board of
directors of the Borrower or such Material Subsidiary (or a
committee of such members) who have no material interest (whether
through ownership of stock, employment or otherwise) in such
Affiliate to be beneficial to the Borrower or such Material
Subsidiary and is unanimously approved by such members or
committee, such determination and approval to occur not later
than the next meeting of such members or committee at which
transactions between the Borrower and ELMG or any Subsidiary of
ELMG are scheduled for review and consideration in the ordinary
course of the discharge by the Borrower's board of directors of
its responsibilities, but not less frequently than annually.
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
SECTION 8.01. Events of Default. Any one or more of
the following shall constitute an Event of Default hereunder:
(a) The Borrower shall fail to pay when due any
payment of (i) principal on the Revolving Credit Note or (ii)
interest due on the Revolving Credit Note or any other amount
payable hereunder or under any of the other Loan Documents and
such failure continues for more than five (5) calendar days; or
(b) Any representation or warranty contained herein or
deemed to have been made hereunder or made by or furnished on
behalf of the Borrower in connection herewith or in any other
Loan Document shall be false or misleading in any material
respect as of the date made or deemed to have been made; or
(c) The Borrower shall fail to perform or observe any
covenant, term or condition contained in Article VI or Article
VII of this Agreement; or
(d) The Borrower shall fail to perform or observe any
covenant, term or condition contained in Article V or any other
covenant, term or condition of this Agreement not specifically
referred to elsewhere in this Section 8.01 or any covenant or
agreement contained in any other Loan Document and such failure
shall continue for more than thirty 30 calendar days from receipt
of written notice from the Bank; or
(e) The Borrower or any Material Subsidiary (i) shall
default in any payment of any amount on any other Indebtedness
which individually or in the aggregate exceeds $1,000,000 beyond
any period of grace provided with respect thereto, or (ii) shall
fail to perform or observe any other agreement, term or condition
contained in any agreement under which any such Indebtedness is
created (or if any other event shall occur and be continuing
thereunder) and the effect of such failure or other event is to
cause or to permit the holder or holders of such Indebtedness (or
a trustee on behalf of such holder or holders) to cause such
Indebtedness to become due prior to any stated maturity; or
(f) The Borrower or any Material Subsidiary shall fail
to pay its debts generally as they become due or shall admit in
writing its inability to pay its debts generally; or
(g) The Borrower or any Material Subsidiary shall make
or take any action to make an assignment for the benefit of
creditors, petition or take any action to petition any tribunal
for the appointment of a custodian, receiver or any trustee for
it or a substantial part of its assets, or shall commence or take
any action to commence any proceeding under any bankruptcy,
reorganization, arrangement, readjustment of debt, dissolution,
liquidation or debtor relief law or statute of any jurisdiction,
whether now or hereafter in effect including, without limitation,
the Bankruptcy Code; or, if there shall have been filed any such
petition or application, or any such proceeding shall have been
commenced against it, in which an order for relief is entered or
which remains unstayed and in effect for more than 60 days; or
the Borrower or any Material Subsidiary by any act or omission
shall indicate its consent to, approval of or acquiescence in any
such petition, application or proceeding or order for relief or
the appointment of a custodian, receiver or any trustee for it or
any substantial part of any of its properties, or shall suffer to
exist any such custodianship, receivership or trusteeship; or any
corporate action is taken by the Borrower or any such Material
Subsidiary for the purpose of effecting any of the foregoing; or
(h) The Borrower or any Material Subsidiary shall have
concealed, removed, or permitted to be concealed or removed, any
part of its Property, with intent to hinder, delay or defraud its
creditors or any of them, or made or suffered a transfer of any
of its Property which may be fraudulent under any bankruptcy,
fraudulent conveyance or similar law; or shall have made any
transfer of its Property to or for the benefit of a creditor at a
time when other creditors similarly situated have not been paid
while the Borrower or such Material Subsidiary is insolvent; or
shall have suffered or permitted, while insolvent, any creditor
to obtain a Lien upon any of its Property through legal
proceedings or distraint; or
(i) Any order, judgment or decree is entered in any
proceedings against the Borrower or any Material Subsidiary
decreeing the dissolution or split-up of the Borrower or such
Material Subsidiary and such order, judgment or decree remains
unstayed and in effect for more than 30 days; or
(j) A judgment or order for the payment of money in an
amount in excess of $1,000,000 and which would have a Material
Adverse Effect shall have been rendered against the Borrower or
any Material Subsidiary and either (i) enforcement proceedings
shall have been commenced by any creditor upon such judgment or
order or (ii) there shall be any period of 30 consecutive days
during which a stay of enforcement of such judgment or order, by
reason of a pending appeal or otherwise, shall not be in effect;
or
(k) ELMG shall at any time own less than a majority of
the outstanding shares of voting stock of the Borrower; or
Persons who are directors of the Borrower on the Closing Date (or
who have been nominated for election by a board of directors of
which a majority of the members are such current directors or
were so nominated) shall at any time cease to constitute a
majority of the board of directors of the Borrower; or
(l) The occurrence of an "event of default" (which has
not been cured by the Borrower or waived by the Bank) under the
ELMG Agreement.
SECTION 8.02. Remedies on Default.
(a) Upon the occurrence and during the continuance of
an Event of Default (other than an Event of Default described in
Section 8.01 (g), the Bank may (i) terminate its obligations to
the Borrower, including, without limitation, all obligations to
make Advances under the Commitment, (ii) declare the Revolving
Credit Note, including, without limitation, principal, accrued
interest and costs of collection (including, without limitation,
reasonable attorneys' fees actually incurred if collected by or
through an attorney at law or in bankruptcy, receivership or
other judicial proceedings) immediately due and payable, without
presentment, demand, protest or an other notice of any kind, all
of which are expressly waived.
(b) Upon the occurrence of an Event of Default under
Section 8.01 (g), (i) all obligations of the Bank to the
Borrower, including, without limitation, all obligations to make
Advances under the Commitment, shall terminate automatically and
(ii) the Revolving Credit Note, including, without limitation,
principal, accrued interest and costs of collection (including,
without limitation, reasonable attorneys' fees actually incurred
if collected by or through an attorney at law or in bankruptcy,
receivership or other judicial proceedings) shall be immediately
due and payable, without presentment, demand, protest, or any
other notice of any kind, all of which are expressly waived.
(c) Upon the occurrence of an Event of Default and
acceleration of the Revolving Credit Note as provided in (a) or
(b) above, the Bank may pursue any remedy available under this
Agreement, the Revolving Credit Note, the Security Agreement or
any other Loan Document, or available at law or in equity, all of
which shall be cumulative. The order and manner in which the
rights and remedies of the Bank under the Loan Documents and
otherwise may be exercised shall be determined by the Bank.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. No Waiver. No delay or failure on the
part of the Bank or any holder of the Revolving Credit Note in
the exercise of any right, power or privilege granted under this
Agreement or any other Loan Document, or available at law or in
equity, shall impair any such right, power or privilege or be
construed as a waiver of any Event of Default or any acquiescence
therein. No single or partial exercise of any such right, power
or privilege shall preclude the further exercise of such right,
power or privilege. No waiver shall be valid against the Bank
unless made in writing and signed by the Bank, and then only to
the extent expressly specified therein.
SECTION 9.02. Notices. Unless otherwise provided
herein, all notices, requests and other communications provided
for hereunder shall be in writing (including telecopy or similar
teletransmission or writing) and shall be given at the following
addresses:
(1) If to the Bank: SunTrust Bank, Atlanta
25 Park Place/Center Code 127
Atlanta, Georgia 30303
Attention: Mr. Kevin S. MacDonald
Assistant Vice President
Telephone: (404) 588-8560
Telecopy: (404) 588-8833
(2) If to Borrower: LXE Inc.
660 Engineering Drive
Norcross, Georgia 30092-9200
Attention: Treasurer
Telephone: (770) 263-9200
Telecopy: (770) 447-4397
Any such notice, request or other communication shall be
effective (a) if given by mail, upon the earlier of receipt or
the third Business Day after such communication is deposited in
the United States mails, registered or certified, with first
class postage prepaid, addressed as aforesaid, (b) if given by
telecopy, upon receipt during regular business hours on a
Business Day or if received at any other time, on the next
succeeding Business Day, or (c) if given by any other means
(including, without limitation, by air courier), when delivered
at the address specified herein during regular business hours on
a Business Day. The Borrower and the Bank may change its address
for notice purposes by notice to the other parties in the manner
provided herein.
SECTION 9.03. Survival of Representations and
Warranties. All representations and warranties contained herein
or made by or furnished on behalf of the Borrower in connection
herewith shall survive the execution and delivery of this
Agreement and all other Loan Documents.
SECTION 9.04. Descriptive Headings. The descriptive
headings of the several sections of this Agreement are inserted
for convenience only and do not constitute a part of this
Agreement.
SECTION 9.05. Severability. If any part of any
provision contained in this Agreement or in any other Loan
Document shall be invalid or unenforceable under applicable law,
said part shall be ineffective to the extent of such invalidity
only, without in any way affecting the remaining parts of said
provision or the remaining provisions.
SECTION 9.06. Time is of the Essence. Time is of the
essence in interpreting and performing this Agreement and all
other Loan Documents.
SECTION 9.07. Counterparts. This Agreement may be
executed in any number of counterparts, each of which shall be
deemed to be an original and all of which, taken together, shall
constitute one and the same instrument.
SECTION 9.08. Payment of Costs. The Borrower shall
pay all costs, expenses, taxes and fees (i) incurred by the Bank
in connection with the preparation, execution and delivery of
this Agreement and all other Loan Documents including, without
limitation, the reasonable costs and expenses of counsel
(including in-house counsel) to the Bank, and any and all stamp,
intangible or other taxes that may be payable or determined in
the future to be payable in connection therewith; (ii) incurred
by the Bank in connection with administration of the Advances and
the Loan Documents in accordance with the provisions thereof
which would not be considered in the ordinary course of business
and the preparation, execution and delivery of any waiver,
amendment or consent by the Bank relating to the Loan Documents,
including, without limitation, the reasonable costs and expenses
of counsel (including in-house counsel) for the Bank; and (iii)
incurred by the Bank in enforcing the Loan Documents, including,
without limitation, reasonable costs and expenses of counsel
(including in-house counsel) for the Bank.
SECTION 9.09. Successors and Assigns. This Agreement
shall bind and inure to the benefit of the Borrower and the Bank,
and their respective successors and assigns; provided, that the
Borrower shall have no right to assign its rights or obligations
hereunder to any Person. The Bank may assign its rights and
delegate its obligations under this Agreement and the other Loan
Documents and further may assign all or any part of its
Commitment, any Advances under the Revolving Credit Note or the
Revolving Credit Note or any other interest herein or in any
other Loan Document. Any assignee shall have, to the extent of
such assignment unless otherwise provided therein, the same
rights, obligations and benefits as it would have if it were the
Bank hereunder and under the other Loan Documents. The Bank may
sell participations in the Commitment and/or any Advances under
the Revolving Credit Note to other banks, financial institutions
and qualified investors without the consent of the Borrower;
provided, that no participant shall have any right to deal
directly with the Borrower and no participant shall have any
voting rights under this Agreement except with respect to any
proposed increase in the Commitment, any extension of the
Commitment Termination Date, any decrease in the interest rate
margin or any release of any guarantor or any collateral.
SECTION 9.10. Amendments; Consents. No amendment,
modification, supplement, termination, or waiver of any provision
of this Agreement or any other Loan Document, and no consent to
any departure by the Borrower therefrom, may in any event be
effective unless in writing signed by the Bank, and then only in
the specific instance and for the specific purpose given.
SECTION 9.11. Set-Off. Upon the occurrence and during
the continuation of an Event of Default, the Borrower authorizes
the Bank or any other holder of the Revolving Credit Note,
without notice or demand, to apply all deposits of the Borrower
(general or special, time or demand, provisional or final) held
by the Bank or such holder and any other Indebtedness due or to
become due to the Borrower from the Bank or such holder in
satisfaction of any of the liabilities or obligations of the
Borrower under this Agreement or under any other Loan Document.
The Bank or such holder shall promptly notify the Borrower of any
set off hereunder.
SECTION 9.12. Indemnity. The Borrower agrees to
protect, indemnify and save harmless the Bank and its affiliates,
shareholders, directors, officers, employees and agents, from and
against any and all (i) claims, demands and causes of action of
any nature whatsoever brought by any Person not a party to this
Agreement and arising from or related or incident to this
Agreement or any other Loan Document, (ii) costs and expenses
incident to the defense of such claims, demands and causes of
action, including, without limitation, reasonable attorneys'
fees, and (iii) liabilities, judgments, settlements, penalties
and assessments arising from such claims, demands and causes of
action, except in each case such claims, costs and liabilities
caused by the Bank's gross negligence or willful misconduct. The
indemnity contained in this Section shall survive the termination
of this Agreement.
SECTION 9.13. Usury. It is the intent of the parties
hereto not to violate any Federal or state law, rule or
regulation pertaining either to usury or to the contracting for
or charging or collecting of interest, and the Borrower and the
Bank agree that, should any provision of this Agreement or the
Revolving Credit Note, or any act performed hereunder or
thereunder, violate any such law, rule or regulation, then the
excess of interest contracted for or charged or collected over
the maximum lawful rate of interest shall be applied to the
outstanding principal Indebtedness due to the Bank by the
Borrower under this Agreement and the Revolving Credit Note.
SECTION 9.14. Governing Law and Submission to
Jurisdiction.
(a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER AND UNDER THE REVOLVING CREDIT NOTE SHALL BE
CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE
STATE OF GEORGIA (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW
PRINCIPLES THEREOF) AND THE LAWS OF THE UNITED STATES.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT, THE REVOLVING CREDIT NOTE OR ANY OTHER LOAN DOCUMENT
MAY BE BROUGHT IN THE SUPERIOR COURT OF FULTON COUNTY, GEORGIA,
OR ANY OTHER COURT OF COMPETENT JURISDICTION IN THE STATE OF
GEORGIA OR OF THE UNITED STATES OF AMERICA FOR THE NORTHERN
DISTRICT OF GEORGIA, AND BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, THE BORROWER HEREBY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION
OF THE AFORESAID COURTS. THE BORROWER HEREBY IRREVOCABLY
WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO
THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF
ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS.
(c) THE PARTIES HERETO HEREBY IRREVOCABLY WAIVE TRIAL BY
JURY TO THE EXTENT PERMITTED BY APPLICABLE LAW.
(d) Nothing herein shall affect the right of the Bank or
any holder of the Revolving Credit Note to commence legal
proceedings or otherwise proceed against the Borrower in any
other jurisdiction.
SECTION 9.15. Construction. Should any provision of
this Agreement require judicial interpretation, the parties
hereto agree that the court interpreting or construing the same
shall not apply a presumption that the terms hereof shall be more
strictly construed against one party by reason of the rule of
construction that a document is to be more strictly construed
against the party that itself or through its agents prepared the
same, it being agreed that the Borrower and the Bank and their
respective agents have participated equally in the preparation
hereof.
SECTION 9.16. Entire Agreement. This Agreement and
the other Loan Documents executed and delivered contemporaneously
herewith, together with the exhibits and schedules attached
hereto and thereto, constitute the entire understanding of the
parties with respect to the subject matter hereof, and any other
prior or contemporaneous agreements, whether in writing or oral,
with respect thereto including, without limitation, any loan
commitment from the Bank to the Borrower, are expressly
superseded hereby. The execution of this Agreement and the other
Loan Documents by the Borrower was not based upon any facts or
materials provided by the Bank, nor was the Borrower induced to
execute this Agreement or any other Loan Document by any
representation, statement or analysis made by the Bank.
WITNESS the hand and seal of the parties hereto through
their duly authorized officers, as of the date first above
written.
LXE INC.
By /s/
Name: Don T. Scartz
Title: Treasurer
Attest /s/
Name: William S. Jacobs
Title: Secretary
[CORPORATE SEAL]
SUNTRUST BANK, ATLANTA
By /s/
Name: Kevin S. MacDonald
Title: Assistant Vice President
Schedule 4.05
Material Subsidiaries
Jurisdiction Amount of %
Name of Incorporation Investment Ownership
- None -
Schedule 4.12
ERISA
1. Electromagnetic Sciences, Inc. Retirement Program
2. Electromagnetic Sciences, Inc. Retirement Income Plan
(terminated December 15, 1993)
Schedule 4.19
Franchises, Licenses, etc.
License Agreement between LXE Inc. and Symbol Technologies, Inc.,
dated March 4, 1991, licensing LXE Inc. to use certain patented
bar-code scanning technology in handheld computer terminals,
requires royalty payments equal to 71/2% of the net sales value
to LXE of terminals using such technology.
Schedule 7.01
Outstanding Liens
1. Lien created under Deed to Secure Debt and Security
Agreement from LXE Inc. to Electromagnetic Sciences, Inc., dated
December 31, 1991, recorded in Deed Book 7015, Page 1, Gwinnett
County, Georgia.
2. Lien created under Deed to Secure Debt and Security
Agreement dated August 1, 1981, by and between Electromagnetic
Sciences, Inc., a Nevada Corporation (EMS Nevada), and Trust
Company Bank (the Bank) in connection with the issuance of
$2,100,000 Development Authority of Gwinnett County Bond (the
Issuer), Series 1981, recorded in Deed Book 2283, Page 280,
Gwinnett County, Georgia, and which was assigned to
Electromagnetic Sciences, Inc. (EMS), a Georgia Corporation and
successor of EMS Nevada, recorded in Deed Book 2283, Page 318,
Gwinnett County, Georgia, and which was further assigned to LXE
Inc. (LXE) under an Assignment and Assumption Agreement date
December 31, 1991 by and between EMS, LXE, the Issuer, and the
Bank and recorded in Deed Book 7014, Page 233, Gwinnett County,
Georgia.
EXHIBIT A
REVOLVING CREDIT NOTE
December 15, 1995 $10,000,000.00
Atlanta, Georgia
FOR VALUE RECEIVED, the undersigned, LXE INC., a
Georgia corporation (the "Borrower"), promises to pay to the
order of SUNTRUST BANK, ATLANTA, a Georgia banking corporation
(the "Bank"), at the principal office of the Bank at One Park
Place, Atlanta, Georgia 30303 or at such other place as the
holder hereof may designate, in immediately available funds in
lawful money of the United States, the principal sum of (i)TEN
MILLION AND NO/100 DOLLARS ($10,000,000.00) or (ii) so much as
shall have been advanced hereunder as LIBOR Advances and Base
Rate Advances and remaining outstanding as shown on the records
of the Bank, plus all accrued and unpaid interest hereon as set
forth in that certain Revolving Credit Agreement dated as of even
date herewith between the Borrower and the Bank (as the same may
hereafter be amended, modified, extended or supplemented from
time to time, the "Agreement"). Interest shall accrue from the
date hereof up to and through the date on which all principal and
interest hereunder is paid in full, shall be computed on the
basis of actual days elapsed in a 360-day year, and shall be
calculated on the outstanding principal balance hereunder at the
interest rates specified in Section 2.02 of the Agreement.
Principal and interest hereunder shall be paid on the
dates specified in the Agreement and shall be due and payable in
full on the Commitment Termination Date. Any principal amount
and, to the extent permitted by law, interest due under this Note
that is not paid on the due date therefor whether on the maturity
date, or resulting from the acceleration of maturity upon the
occurrence of an Event of Default, shall bear interest from the
date due until payment in full at the default rate specified in
Section 2.16 of the Agreement.
This Note evidences the Advances made pursuant to the
terms and conditions of the Agreement, to which Agreement
reference is hereby made for a full and complete description of
such terms and conditions, including, without limitation,
provisions for the acceleration of the maturity hereof upon the
existence or occurrence of certain conditions or events, and the
terms of any permitted prepayments hereof. All capitalized terms
used in this Note shall have the same meanings as set forth in
the Agreement.
Upon the occurrence and during the continuance of any
Event of Default, the principal and all accrued interest hereof
shall automatically become, or may be declared, due and payable
in the manner and with the effect provided in the Agreement.
The payment of any indebtedness evidenced by this Note
shall not affect the enforceability of this Note as to any
future, different or other indebtedness evidenced hereby. In the
event the indebtedness evidenced by this Note is collected by
legal action or through an attorney-at-law, or in bankruptcy or
other judicial proceedings, the Bank shall be entitled to recover
from the Borrower all costs of collection, including, without
limitation, reasonable attorneys' fees actually incurred.
FAILURE OR FORBEARANCE OF THE BANK TO EXERCISE ANY
RIGHT HEREUNDER, OR OTHERWISE GRANTED BY THE AGREEMENT OR BY
LAW, SHALL NOT AFFECT OR RELEASE THE LIABILITY OF THE BORROWER
HEREUNDER AND SHALL NOT CONSTITUTE A WAIVER OF SUCH RIGHT UNLESS
SO STATED BY THE BANK IN WRITING.
DEMAND, PRESENTMENT FOR PAYMENT, NOTICE OF DISHONOR AND
PROTEST ARE HEREBY WAIVED.
TIME IS OF THE ESSENCE HEREUNDER.
THIS NOTE SHALL BE DEEMED TO BE MADE UNDER, AND SHALL
BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY, THE LAWS OF
THE STATE OF GEORGIA (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS
PRINCIPLES THEREOF) AND THE LAWS OF THE UNITED STATES.
EXECUTED AND DELIVERED under seal of the Borrower by
its duly authorized officers as of the day and year first above
written.
LXE INC.
By /s/
Name: Don T. Scartz
Title: Treasurer
Attest /s/
Name: William S. Jacobs
Title: Secretary
[CORPORATE SEAL]
EXHIBIT C
SUBSIDIARY GUARANTY
THIS SUBSIDIARY GUARANTY, dated as of ,
1995, of [ ], a [ ] corporation (the "Guarantor"), and each
Subsidiary Guarantor which executes and delivers an Additional
Subsidiary Guarantor Supplement pursuant to Section 7.04(b) of
the Credit Agreement (as hereinafter defined) (the "Additional
Guarantors"; and together with the Guarantor, the "Guarantors"),
in favor of SUNTRUST BANK, ATLANTA f/k/a Trust Company Bank, a
Georgia banking corporation ("Bank").
W I T N E S S E T H:
WHEREAS, Bank has entered into a $10,000,000 Revolving
Credit Agreement dated as of December , 1995 (the "Credit
Agreement") between LXE Inc. ("Borrower") and Bank, to provide a
revolving credit facility to finance working capital, the
purchase of its own stock to retire or hold as "treasury stock",
acquisitions and other general corporate purposes of Borrower and
the Guarantors;
WHEREAS, the Guarantors and Borrower are members of the
same consolidated group of companies and are engaged in similar
or related businesses, and the Guarantors will receive direct
and indirect economic benefits from the Advances under the
Commitment pursuant to the Credit Agreement;
WHEREAS, Bank has required that, as a condition to
entering into the Credit Agreement and making Advances
thereunder, the Guarantors shall have executed and delivered this
Guaranty;
NOW, THEREFORE, in consideration of the premises and
the covenants hereinafter contained, and to induce Bank to
provide the Advances under the Commitment, it is agreed as
follows:
1. DEFINITIONS. Capitalized terms used herein shall
have the meanings assigned to them in the Loan Agreement, unless
the context otherwise requires or unless otherwise defined
herein.
References to this "Guaranty" shall mean this Guaranty,
including all amendments, modifications and supplements and any
exhibits or schedules to any of the foregoing, and shall refer to
this Guaranty as the same may be in effect at the time such
reference becomes operative.
2. THE GUARANTY. The guaranty of the Guarantors
hereunder is as follows:
2.01. Guaranty of Obligations of Borrower. (a)
Each of the Guarantors hereby jointly and severally fully and
unconditionally guarantees to Bank, and its successors,
endorsees, transferees and assigns, the prompt payment (whether
at stated maturity, by acceleration or otherwise) and performance
of all present and future obligations of Borrower under the
Credit Agreement and any other Loan Document (including without
limitation all principal and accrued interest on the Advances
and the Commitment Fee), whether due or to become due, matured or
unmatured, liquidated or unliquidated, or contingent or non-contingent,
including obligations of performance as well as payment and including
to the extent permitted by the Bankruptcy Code, interest that accrues
after the commencement of any proceeding against Borrower under the
Bankruptcy Code or other debtor relief laws (the "Obligations");
provided, that the
maximum liability of each Guarantor herein as of any date shall
in no event exceed the Maximum Guaranty Liability (as hereinafter
defined) of such Guarantor as of such date. It is the intention
of the parties hereto that in no event shall any Guarantor's
obligations under this Guaranty constitute or result in a
violation of any applicable fraudulent conveyance or similar law
of any relevant jurisdiction. Therefore, in the event that this
Guaranty would, but for the preceding sentence, constitute or
result in such violation, then the liability of a Guarantor under
this Guaranty shall be reduced to the maximum amount permissible
under the applicable fraudulent conveyance or similar laws. Any
and all payments by the Guarantors hereunder shall be made free
and clear of and without deduction for any set-off or
counterclaim.
(b) "Maximum Guaranty Liability" of a Guarantor as of
any date shall mean the greater of the following amounts as of
such date: (i) the sum of the following amounts as of such date:
(A) the outstanding amount of all loans, advances, capital
contributions or other investments made by Borrower to or in such
Guarantor with the proceeds of Advances under the Loan Agreement
(such proceeds being referred to herein as "Senior Financing
Proceeds"), plus (without duplication ) (B) the fair market value
of all property acquired with Senior Financing Proceeds
transferred to such Guarantor, plus (C) with respect to each
transfer of Senior Financing Proceeds referred to in the
foregoing clauses (A) and (B), an amount equal to the amount of
interest under the Loan Agreement allocable to such Senior
Financing Proceeds until the same is repaid to Borrower; and (ii)
the greatest of the Fair Value Net Worth (as hereinafter defined)
of such Guarantor as of the Closing Date, each fiscal quarter-end
of such person thereafter occurring on or prior to any date of
determination of the Maximum Guaranty Liability, the date on
which enforcement of this Guaranty is sought, and the date on
which a case under the Bankruptcy Code is commenced with respect
to Borrower or such Guarantor. "Fair Value Net Worth" of a
Guarantor as of any date shall mean (i) the fair value or fair
saleable value (as the case may be, determined in accordance with
the Bankruptcy Code and applicable state laws affecting
creditors' rights and governing determinations of insolvency of
debtors (collectively, "Insolvency Laws")) of such Guarantor's
assets as of such date, minus (ii) the amount of all liabilities
of such Guarantor (determined in accordance with the Insolvency
Laws) as of such date, excluding this Guaranty and (y)
liabilities under the Loan Agreement effectively assumed by such
Guarantor by hypothecation of such Guarantor's assets, minus
(iii) $1.00.
(c) Each Guarantor agrees that the Obligations may at
any time and from time to time exceed the Maximum Guaranty
Liability of such Guarantor, and may exceed the aggregate Maximum
Guaranty Liability of all Guarantors, without impairing this
Guaranty or affecting the rights and remedies of Bank hereunder.
2.02. Guaranty Absolute. The Guarantors agree that
this Guaranty is a guaranty of payment and performance and not of
collection, and that their obligations under this Guaranty shall
be primary, absolute and unconditional, joint and several,
irrespective of, and unaffected by:
(a) the genuineness, validity, regularity,
enforceability or any future amendment of, or change in this
Guaranty, any other Loan Document or any other agreement,
document or instrument to which Borrower and/or the Guarantors is
or are or may become a party;
(b) the absence of any action to enforce this
Guaranty or any other Loan Document or the waiver or consent by
Bank with respect to any of the provisions thereof;
(c) the existence, value or condition of, or
failure to perfect its Lien against, any security for the
Obligations or any action, or the absence of any action, by Bank
in respect thereof (including, without limitation, the release of
any such security); or
(d) any other action or circumstances which might
otherwise constitute a legal or equitable discharge or defense of
a surety or guarantor;
it being agreed by each of the Guarantors that its obligations
under this Guaranty shall not be discharged until the payment and
performance, in full, of the Obligations. Each of the Guarantors
shall be regarded, and shall be in the same position, as
principal debtor with respect to the Obligations. Each of the
Guarantors expressly waives all rights it may now or in the
future have under any statute, or at common law, or at law or in
equity, or otherwise, to compel Bank to proceed in respect of the
Obligations against Borrower or any other party or against any
security for the payment and performance of the Obligations
before proceeding against, or as a condition to proceeding
against, any of the Guarantors. Each of the Guarantors further
expressly waives and agrees not to assert or take advantage of
any defense based upon the failure of Bank to commence an action
in respect of the Obligations against Borrower or any other party
or any security for the payment and performance of the
Obligations, including, without limitation, the provisions of
O.C.G.A. Subsection 10-7-24. Each of the Guarantors agrees that
any notice or directive given at any time to Bank which is
inconsistent with the waivers in the preceding two sentences
shall be null and void and may be ignored by Bank, and, in
addition, may not be pleaded or introduced as evidence in any
litigation relating to this Guaranty for the reason that such
pleading or introduction would be at variance with the written
terms of this Guaranty, unless Bank has specifically agreed
otherwise in writing. It is agreed between each of the
Guarantors and Bank that the foregoing waivers are of the essence
of the transaction contemplated by the Loan Documents and that,
but for this Guaranty and such waivers, Bank would decline to
make the Advances under the Loan Agreement.
Notwithstanding any of the foregoing, and in addition
thereto, and in no manner composing any limitation thereon, each
of the Guarantors expressly understands and agrees that, if the
then outstanding principal amount of the Obligations (together
with accrued interest thereon) is declared to be immediately due
and payable, then the Guarantors shall, on a joint and several
basis, upon demand in writing from Bank, pay to Bank or any other
holder of the Revolving Credit Note, the entire outstanding
Obligations due and owing to Bank or such holder.
2.03. Enforcement of Guaranty. In no event shall
Bank have any obligation (although it is entitled, at its option)
to proceed against Borrower or any other person or any real or
personal property pledged to secure the Obligations before
proceeding against the Guarantors or any of them and may proceed,
prior or subsequent to, or simultaneously with, the enforcement
of Bank's rights hereunder, to exercise any right or remedy which
it may have against the property, real or personal, as a result
of any Lien it may have as security for all or any portion of the
Obligations.
2.04. Waivers. In addition to the waivers
contained in Section 2.01 hereof, each of the Guarantors waives,
and agrees that it shall not at any time insist upon, plead or in
any manner whatever claim or take the benefit or advantage of,
any appraisal, valuation, stay, extension, marshalling of assets
or redemption laws, or exemption, whether now or at any time
hereafter in force, which may delay, prevent or otherwise affect
the performance by the Guarantors of their obligations under, or
the enforcement by Bank of, this Guaranty. Each of the
Guarantors further hereby waives diligence, presentment, notice
and demand (whether for non-payment or protest or of acceptance,
maturity, extension of time, change in nature or form of the
Obligations, acceptance of further security, release of further
security, composition or agreement arrived at as to the amount
of, or the terms of, the Obligations, notice of adverse change in
Borrower's financial condition or any other fact which might
materially increase the risk to such Guarantor) with respect to
any of the Obligations or all other demands whatsoever and waives
the benefit of all provisions of law which are or might be in
conflict with the terms of this Guaranty. Each of the Guarantors
represents, warrants and agrees that, as of the date of this
Guaranty, its obligations under this Guaranty are not subject to
any offset or defense against Bank or Borrower of any kind. Each
of the Guarantors further agrees that its obligations under this
Guaranty shall not be subject to any counterclaims, offsets or
defenses against Bank or Borrower of any kind which may arise in
the future.
2.05. Benefits of Guaranty. The provisions of this
Guaranty are for the benefit of Bank and its respective
successors, transferees, endorsees and assigns, and nothing
herein contained shall impair, as between Borrower and Bank, the
obligations of Borrower under the Loan Documents. In the event
all or any part of the Obligations are transferred, endorsed or
assigned by Bank to any Person, any reference to "Bank" herein
shall be deemed to refer equally to such Person.
2.06. Modification of Obligations, etc. If Bank or
any other Person shall at any time or from time to time, with or
without the consent of, or notice to, the Guarantors or any of
them:
(a) change or extend the manner, place or terms
of payment of, or renew or alter all or any portion of, the
Obligations;
(b) take any action under or in respect of the
Loan Documents in the exercise of any remedy, power or privilege
contained therein or available to it at law, equity or otherwise,
or waive or refrain from exercising any such remedies, powers or
privileges;
(c) amend or modify, in any manner whatsoever,
the Loan Documents;
(d) extend or waive the time for any of
Guarantors', Borrower's or other Person's performance of, or
compliance with, any term, covenant or agreement on its part to
be performed or observed under the Loan Documents, or waive such
performance or compliance or consent to a failure of, or
departure from, such performance or compliance;
(e) take and hold security or collateral for the
payment of the Obligations guaranteed hereby or sell, exchange,
release, dispose of, or otherwise deal with, any property
pledged, mortgaged or conveyed, or in which Bank has been granted
a Lien, to secure any indebtedness of the Guarantors or Borrower
to Bank;
(f) release any Person (including another
Guarantor) which may be liable in any manner for the payment of
any amounts owed by the Guarantors or Borrower to Bank;
(g) modify or terminate the terms of any
intercreditor or subordination agreement pursuant to which claims
of other creditors of the Guarantors or Borrower are subordinated
to the claims of Bank; and/or
(h) apply any sums by whomever paid or however
realized to any amounts owing by the Guarantors or Borrower to
Bank in such manner as Bank shall determine in its discretion;
then Bank shall not incur any liability to the Guarantors
pursuant hereto as a result thereof, and no such action shall
impair or release the obligations of the Guarantors or any of
them under this Guaranty.
2.07. Reinstatement. This Guaranty shall remain in
full force and effect and continue to be effective in the event
any petition be filed by or against Borrower or any Guarantor for
liquidation or reorganization, in the event Borrower or any such
Guarantor becomes insolvent or makes an assignment for the
benefit of creditors or in the event a receiver or trustee be
appointed for all or any significant part of assets of Borrower
or any such Guarantor, and shall continue to be effective or be
reinstated, as the case may be, if at any time payment and
performance of the Obligations, or any part thereof, is, pursuant
to applicable law, rescinded or reduced in amount, or must
otherwise be restored or returned by Bank, whether as a "voidable
preference", "fraudulent conveyance", or otherwise, all as though
such payment or performance had not been made. In the event that
any payment, or any part thereof, is rescinded, reduced, restored
or returned, the Obligations shall be reinstated and deemed
reduced only by such amount paid and not so rescinded, reduced,
restored or returned.
2.08. Election of Remedies, etc. Any election of
remedies which results in the denial or impairment of the right
of Bank to seek a deficiency judgment against Borrower shall not
impair each Guarantor's obligation to pay the full amount of the
Obligations. In the event Bank shall bid at any foreclosure or
trustee's sale or at any private sale permitted by law or the
Loan Documents, Bank may bid all or less than the amount of the
Obligations and the amount of such bid need not be paid by Bank
but shall be credited against the Obligations. The amount of the
successful bid at any such sale, whether Bank or any other party
is the successful bidder, shall be conclusively deemed to be the
fair market value of the collateral and the difference between
such bid amount and the remaining balance of the Obligations
shall be conclusively deemed to be the amount of the Obligations
guaranteed under this Guaranty, notwithstanding that any present
or future law or court decision or ruling may have the effect of
reducing the amount of any deficiency claim to which Bank might
otherwise been entitled but for such bidding at any such sale.
2.09. Continuing Guaranty. The Guarantors agree
that this Guaranty is a continuing guaranty and shall remain in
full force and effect until the payment and performance in full
of the Obligations.
3. DELIVERIES. In a form satisfactory to Bank, the
Guarantors shall deliver to Bank such of the Loan Documents and
other instruments, certificates and documents as are required to
be delivered by the Guarantors to Bank under the Loan Agreement.
4. REPRESENTATIONS AND WARRANTIES. To induce Bank to
make the Advances under the Revolving Credit Note and the Loan
Agreement, each Guarantor hereby reaffirms each representation
and warranty in the Loan Agreement applicable to it.
5. PERMITTED ASSIGNMENT BY BANK. Bank may freely
assign its rights and delegate its duties under this Guaranty to
the extent permitted under the Loan Agreement, but no such
assignment or delegation shall increase or diminish any
Guarantor's obligations hereunder.
6. FURTHER ASSURANCES. Each Guarantor agrees, upon
the written request of Bank, to execute and deliver to Bank, from
time to time, any additional instruments or documents reasonably
considered necessary by Bank to cause this Guaranty to be, become
or remain valid and effective in accordance with its terms.
7. MISCELLANEOUS.
7.01. Entire Agreement; Amendments. This Guaranty
constitutes the entire agreement between the parties with respect
to the subject matter hereof and supersedes all prior agreements
relating to a guaranty of the Obligations and may not be amended
or supplemented except by a writing signed by the Guarantors and
Bank.
7.02. Severability. In the event that any one or
more of the provisions contained in this Guaranty shall be
determined to be invalid, illegal or unenforceable in any respect
for any reason, the validity, legality and enforceability of any
such provision or provisions in every other respect and the
remaining provisions of this Guaranty shall not be in any way
impaired.
7.03. Notices. Whenever it is provided herein that
any notice, demand, request, consent, approval, declaration or
other communication shall or may be given to or served upon any
of the parties by another, or whenever any of the parties desires
to give or serve upon another any such communication with respect
to this Guaranty, each such notice, demand, request, consent,
approval, declaration or other communication shall be in writing
and shall be delivered in accordance with Section 9.02 of the
Loan Agreement, addressed as follows:
(a) If to Bank:
SunTrust Bank, Atlanta
25 Park Place/Mail Code 127
Atlanta, Georgia 30303
Attention: Kevin S. MacDonald
Assistant Vice President
Telephone: (404) 588-8560
Telecopy: (404) 588-8833
(b) If to Guarantors:
c/o LXE, Inc.
660 Engineering Drive
Norcross, Georgia 30092-9200
Attention: Treasurer
Telephone: (770) 263-9200
Telecopy: (770) 447-4397
or at such other address as may be substituted by notice given as
herein provided. The giving of any notice required hereunder may
be waived in writing by the party entitled to receive such
notice.
7.04. Binding Effect. This Guaranty shall bind
each Guarantor and shall inure to the benefit of Bank and its
successors and assigns. The Guarantors may not assign this
Guaranty.
7.05. Non-Waiver. The failure of Bank to enforce
any right or remedy hereunder, or promptly to enforce any such
right or remedy hereunder, or promptly to enforce any such right
or remedy, shall not constitute a waiver thereof, nor give rise
to any estoppel against Bank, nor excuse the Guarantors or any of
them from their obligations hereunder.
7.06. Governing Law and Submission to Jurisdiction.
(a) THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND
BE GOVERNED BY THE LAWS OF THE STATE OF GEORGIA (WITHOUT GIVING
EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF) AND THE LAWS OF
THE UNITED STATES.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO
THIS GUARANTY MAY BE BROUGHT IN THE SUPERIOR COURT OF FULTON
COUNTY, GEORGIA, OR ANY OTHER COURT OF COMPETENT JURISDICTION IN
THE STATE OF GEORGIA OR OF THE UNITED STATES OF AMERICA FOR THE
NORTHERN DISTRICT OF GEORGIA, AND BY EXECUTION AND DELIVERY OF
THIS GUARANTY, EACH
GUARANTOR HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE
AFORESAID COURTS. THE GUARANTORS HEREBY IRREVOCABLY WAIVE TRIAL
BY JURY TO THE EXTENT PERMITTED BY APPLICABLE LAW, AND THE
GUARANTORS HEREBY IRREVOCABLY WAIVE ANY OBJECTION, INCLUDING,
WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED
ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING
IN SUCH RESPECTIVE JURISDICTIONS.
7.07. Expenses. The Guarantors, jointly and
severally, agree that, with or without notice or demand, they
will reimburse Bank for all costs and expenses (including
reasonable attorney's fees) incurred by Bank in connection with
the Obligations of Borrower to Bank under the Loan Agreement or
any of the Loan Documents and all costs and expenses (including
reasonable attorney's fees) incurred by Bank in connection with
the enforcement of this Guaranty.
7.08. Counterparts. This Guaranty may be executed
in any number of counterparts which shall individually and
collectively constitute one agreement.
IN WITNESS WHEREOF, the Guarantors have executed and
delivered this Guaranty under seal through their duly authorized
officers as of the date first above written.
"GUARANTORS"
[ ].
By
Name:
Title:
Attest
Name:
Title:
[CORPORATE SEAL]
EXHIBIT D
ADDITIONAL SUBSIDIARY GUARANTOR SUPPLEMENT
SunTrust Bank, Atlanta
25 Park Place, Mail Code 127
Atlanta, Georgia 30303
Attention: Mr. Kevin S. MacDonald
Assistant Vice President
Dear Sirs:
Reference is made to the Revolving Credit Agreement dated as
of December 15, 1995 between LXE, Inc. (the "Borrower") and
SunTrust Bank, Atlanta (the "Agreement"). Terms not defined
herein which are defined in the Agreement shall have for the
purposes hereof the meaning provided therein.
The undersigned, [name of Subsidiary Guarantor], a
[jurisdiction of incorporation] corporation, hereby elects to
become an "Additional Guarantor" under the Subsidiary Guaranty
and to become a "Subsidiary Guarantor" for all purposes under the
Agreement, effective from the date hereof. The undersigned
confirms that the representations and warranties set forth in
Article IV of the Agreement applicable to it as a Material
Subsidiary of the Borrower and/or a Subsidiary Guarantor are true
and correct as to the undersigned as of the date hereof.
Without limiting the generality of the foregoing, the
undersigned hereby agrees to perform all of the obligations of a
Guarantor under, and to be bound in all respects by the terms of,
the Subsidiary Guaranty to the same extent and with the same
force and effect as if the undersigned were a signatory party
thereto. [additional language applicable to non wholly-owned
Material Subsidiary: ;provided, that the guaranty of the
undersigned Subsidiary Guarantor shall be limited to the amount
of the Investment of the Borrower in the undersigned Subsidiary
Guarantor as of the date on which the Subsidiary Guaranty shall
be enforced by the Bank.]
This Agreement shall be construed in accordance with and
governed by the internal laws of the State of Georgia and the
laws of the United States.
Very truly yours,
[NAME OF SUBSIDIARY GUARANTOR]
By
Name:
Title:
Dated:
EXHIBIT 10.6
Officers/Non-ISO
03/13/92
LXE INC.
1989 STOCK INCENTIVE PLAN
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT, entered into as of the 15th day
of May, 1995 (the "Date of Grant"), by and between LXE INC., a
Georgia corporation (hereinafter referred to as the
"Corporation"), and John J. Farrell, Jr. (hereinafter referred to
as the "Employee").
W I T N E S S E T H
WHEREAS, the Board of Directors (the "Board") of the
Corporation has adopted a stock incentive plan for the
Corporation's and certain related corporations' officers and
employees, known as the "LXE Inc. 1989 Stock Incentive Plan"
(hereinafter referred to as the "Plan");
WHEREAS, the Plan and the Board have authorized the
Compensation Committee of the Board (hereinafter referred to as
the "Committee") to grant to persons who are Officers (as defined
in the Plan) stock options enabling them to purchase the number
of shares of the Corporation's common stock allocated to them by
the Committee;
WHEREAS, the Committee has determined that the Employee is
eligible to participate in the Plan, and that it is in the best
interests of the Corporation that the Employee, through such
participation, be provided with additional incentive to achieve
the Company's objectives; and
WHEREAS, the Committee has accordingly granted the Employee
an option to purchase the number of shares of the Corporation's
common stock as hereinafter set forth, and the Corporation and
the Employee desire to enter into a written agreement with
respect to such option in accordance with the Plan.
NOW, THEREFORE, as an employment incentive and to encourage
stock ownership and in consideration of the mutual covenants
contained herein, the parties hereto agree as follows:
1. Incorporation of Plan. This option is granted pursuant
to the provisions of the Plan, and the terms of and definitions
set forth in the Plan are incorporated by reference into this
Stock Option Agreement and made a part hereof. A copy of the
Plan has been delivered to, and receipt is hereby acknowledged
by, the Employee.
2. Grant of Option. Subject to the terms, restrictions,
limitations and conditions stated herein, the Corporation hereby
evidences its grant to the Employee, not in lieu of salary or
other compensation, of the right and option (hereinafter referred
to as the "Option"), which is not an ISO, to purchase all or any
part of an aggregate of twenty thousand (20,000) shares of the
Corporation's $.01 par value common stock (the "Common Stock"),
this Option becoming exercisable and such shares becoming first
purchasable as follows:
As to
Number of Date First
Shares Purchasable
5,000 May 15, 1998
5,000 May 15, 1999
5,000 May 15, 2000
5,000 May 15, 2001
The Option shall expire and is not exercisable after 5:00 p.m.,
Atlanta time, on May 15, 2004 (the "Expiration Date"), or such
other date as determined pursuant to Section 8, 9 or 10.
Notwithstanding the beginning date or dates for exercise set
forth in the preceding paragraph, but subject to the provisions
of such preceding paragraph with respect to expiration of this
Option, this Option may be exercised as to all or any portion of
the full number of shares subject thereto if: (a) a tender offer
or exchange offer has been made for shares of the Common Stock,
other than one made by the Corporation or Electromagnetic
Sciences, Inc. ("ELMG"), provided that the corporation, person or
other entity making such offer purchases or otherwise acquires
shares of Common Stock pursuant to such offer; or (b) any person
or group (as such terms are defined in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "Act")), other
than ELMG, becomes the holder of 50% or more of the outstanding
shares of Common Stock. If either of the events specified in
this paragraph has occurred, the Option shall be fully
exercisable: (x) in the event of (a) above, during the period
commencing on the date the tender offer or exchange offer is
commenced and ending on the date such offer expires and is not
extended; or (y) in the event of (b) above, during the 30-day
period commencing on the date upon which the Corporation is
provided a copy of a Schedule 13D or amendment thereto, filed
pursuant to Section 13(d) of the Act and the rules and
regulations promulgated thereunder, indicating that any person or
group has become the holder of 50% or more of the outstanding
shares of Common Stock. In the case of (a) above, if the
corporation, person or other entity making the offer does not
purchase or otherwise acquire shares of Common Stock pursuant to
such offer, then the Employee's right under this paragraph to
exercise this Option shall terminate, the Employee and the
Corporation shall rescind any exercise of this Option pursuant to
this paragraph, and this Option shall be reinstated as if such
exercise had not occurred.
3. Purchase Price. The price per share to be paid by the
Employee for the shares subject to this Option shall be Fifteen
and no/100 dollars ($15.00).
4. Exercise Terms. Beginning on the date or dates
specified in, and prior to the expiration of this Option as
provided in, Section 2, the Employee may exercise this Option as
to all such number of shares, or as to any part thereof, at any
time and from time to time during the remaining term of this
Option; provided that the Employee must exercise this Option for
at least the lesser of 100 shares or the unexercised portion of
the Option. In the event this Option is not exercised with
respect to all or any part of the shares subject to this Option
prior to its expiration, the shares with respect to which this
Option was not exercised shall no longer be subject to this
Option.
5. Option Non-Transferable. This Option and all rights
hereunder are neither assignable nor transferable by the Employee
otherwise than by will or under the laws of descent and
distribution, or pursuant to a Qualified Domestic Relations
Order, and during the Employee's lifetime this Option is
exercisable only by him or her (or by his or her guardian or
legal representative, should one be appointed, or qualified
transferee). More particularly (but without limiting the
generality of the foregoing), this Option may not be assigned,
transferred (except as aforesaid), pledged or hypothecated in any
way (whether by operation of law or otherwise) and shall not be
subject to execution, attachment or similar process. Any
attempted assignment, transfer, pledge, hypothecation or other
disposition of this Option contrary to the provisions hereof
shall be null and void and without legal effect.
6. Notice of Exercise of Option. This Option may be
exercised by the Employee, or by his administrator, executor,
personal representative or qualified transferee, by a written
notice (in substantially the form of the "Notice of Exercise"
attached hereto as Exhibit A) signed by the Employee, or by such
administrator, executor, personal representative or qualified
transferee, and delivered or mailed to the Corporation at its
principal office in Norcross, Georgia, to the attention of the
President, Treasurer or such other officer as the Corporation may
designate. Any such notice shall (a) specify the number of
shares of Common Stock which the Employee or such administrator,
executor, personal representative or qualified transferee, as the
case may be, then elects to purchase hereunder, and (b) be
accompanied by (i) a certified or cashier's check payable to the
Corporation, or personal check acceptable to the Corporation, in
payment of the total price applicable to such shares as provided
herein, or (ii) (subject to any restrictions referred to in
Exhibit A) shares of Common Stock, owned by him or her and duly
endorsed or accompanied by stock transfer powers, having a Fair
Market Value equal to the total purchase price applicable to such
shares purchased hereunder, or (iii) such a check, and the number
of such shares whose Fair Market Value when added to the amount
of the check equals the total purchase price applicable to such
shares purchased hereunder. Such notice shall also be accompanied
by the Employee's check or shares of Common Stock in payment of
applicable withholding and employment taxes, or Employee shall
authorize the withholding of shares of Common Stock otherwise
issuable under this Option in payment of such taxes, all as set
forth on Exhibit A and subject to any restrictions referred to
therein. Upon receipt of any such notice and accompanying
payment, and subject to the terms hereof, the Corporation agrees
to cause to be issued to the Employee or to such administrator,
executor, personal representative or qualified transferee, as the
case may be, stock certificates for the number of shares
specified in such notice registered in the name of the person
exercising this Option.
7. Adjustment in Option. If, between the Date of Grant of
this Option and prior to the complete exercise thereof, there
shall be a change in the outstanding Common Stock by reason of
one or more stock splits, stock dividends, combinations or
exchanges of shares, recapitalizations or similar capital
adjustments, then the number, kind and option price of the shares
remaining subject to this Option shall be equitably adjusted in
accordance with the terms of the Plan, so that the proportionate
interest in the Corporation represented by the shares then
subject to the Option shall be the same as before the occurrence
of such event.
8. Termination of Employment. Except as set forth in
Section 10, if the Employee ceases to be employed as an employee
of the Corporation, any Parent or any of its Subsidiaries (such
event being hereinafter referred to as a "Termination" and such
corporation that employs the Employee from time to time as the
"Employer"), before the earliest date for exercise of this Option
set forth in Section 2, then this Option shall forthwith
terminate on the date of Termination and shall not thereafter be
or become exercisable.
In the event of a Termination after the earliest date for
exercise set forth in Section 2, which Termination is either (i)
voluntary on the part of the Employee and with the written
consent of the Employer, (ii) involuntary and without cause, or
(iii) the result of retirement at the normal retirement date, as
prescribed from time to time by the Employer, or at an earlier
date expressly approved by the Employer as an early retirement
date for the Employee, the Employee may exercise this Option at
any time within a period ending at the earlier of the Expiration
Date or 5:00 p.m., Atlanta time, on the third anniversary of such
Termination, to the extent of the number of shares that were
purchasable hereunder at the date of Termination.
In the event of a Termination that is either (i) for cause
or (ii) voluntary on the part of the Employee and not described
in the preceding paragraph, this Option, to the extent not
theretofore exercised, shall forthwith terminate and shall not
thereafter be or become exercisable.
This Option does not confer upon the Employee any right with
respect to continuance of employment by the Corporation, any
Parent or any of its Subsidiaries. This Option shall not be
affected by any change of employment, so long as the Employee
continues to be an employee of the Corporation, any Parent or any
such Subsidiary. In the event the Employer is not the
Corporation, and such Employer ceases to be the Corporation's
Parent, or the Corporation's or its Parent's Subsidiary, as a
result of a sale of stock or assets or other change of corporate
status, then in the discretion of the Committee (but subject to
Section 5.2 of the Plan regarding certain transactions affecting
the Corporation) either: (i) this Option shall remain in effect
as if such sale or other change of status had not occurred, for
so long as Employee shall remain an employee of the corporation
that previously was such Parent or Subsidiary, or of any
successor or subsequent Parent of such corporation, or of any
Subsidiary of either such corporation or any such Parent or
successor; or (ii) concurrent with such sale or other change of
status, the Corporation shall redeem this Option at a price equal
to the number of shares then subject hereto (whether or not then
purchasable) multiplied by the excess (if any) of the then Fair
Market Value of each such share over the purchase price per share
specified in Section 3 (as adjusted pursuant to Section 7.)
9. Disabled Employee. In the event of a Termination
because the Employee becomes disabled, the Employee (or his
personal representative) may exercise this Option at any time
within a period ending at the earlier of the Expiration Date or
5:00 p.m., Atlanta time, on the first anniversary of such
Termination, to the extent of the number of shares that were
purchasable hereunder at the date of Termination.
For the purposes of this Agreement, the Employee shall be
considered "disabled" if he or she is unable to engage in any
substantial gainful activity by reason of any medically
determinable physical or mental impairment that can be expected
to last for a continuous period of not less than twelve months.
10. Death of Employee. In the event of the Employee's
death while employed by the Corporation, any Parent or any of its
Subsidiaries, or during a period in which the Employee may
exercise this Option notwithstanding an earlier Termination, the
persons described in Section 6 may exercise this Option at any
time within a period ending at the earlier of (i) 5:00 p.m.,
Atlanta time, on the third anniversary of the Employee's death,
or (ii) the Expiration Date, but in any event ending not earlier
than 5:00 p.m., Atlanta time, on the first anniversary of the
Employee's death. If the Employee was an employee of the
Corporation, any Parent or one of its Subsidiaries at the time of
the Employee's death, this Option may be so exercised to the
extent of the full number of shares covered by the Option. If a
Termination occurred prior to Employee's death, this Option may
be so exercised only to the extent of the number of shares that
were purchasable hereunder at the date of Termination.
11. Binding Agreement. This Agreement shall be binding
upon the parties hereto and their representatives, successors and
assigns.
IN WITNESS WHEREOF, the Compensation Committee of the Board
of Directors of the Corporation has caused this Stock Option
Agreement to be executed on behalf of the Corporation and the
Corporation's seal to be affixed hereto and attested by the
Secretary of the Corporation, and the Employee has executed this
Agreement under his seal, all as of the day and year first above
written.
LXE INC.
[CORPORATE SEAL]
ATTEST: By: /s/ Thomas E. Sharon
Chief Executive Officer
/s/ William S. Jacobs /s/ John J. Farrell, Jr.
Secretary Employee
EXHIBIT A
LXE INC.
1989 STOCK INCENTIVE PLAN
NOTICE OF EXERCISE
OF STOCK OPTION
The undersigned hereby notifies LXE Inc. (the "Corporation")
of his or her election to exercise an option to purchase
___________ shares of the Corporation's common stock, $.01 par
value (the "Common Stock"), pursuant to that Stock Option
Agreement (the "Agreement") between ____________ (the "Employee")
and the Corporation dated _______. Accompanying this Notice is
(1) a certified or a cashier's check (or other check acceptable
to the Corporation) in the amount of $___________ payable to the
Corporation and/or (2) (subject to such restrictions as may be
determined to be necessary or appropriate to avoid earnings
charges or other adverse consequences to the Corporation under
applicable accounting or tax rules or regulations) ________
shares of the Common Stock presently owned by the undersigned and
duly endorsed or accompanied by stock transfer powers, having an
aggregate Fair Market Value (as defined in the LXE Inc. 1989
Stock Incentive Plan (the "Plan")) as of the date hereof of
$________ , such amounts being equal, in the aggregate, to the
purchase price per share set forth in Section 3 of the Agreement
multiplied by the number of shares being hereby purchased (in
each instance subject to appropriate adjustment pursuant to
Section 7 of the Agreement).
Also accompanying this Notice is my check in the amount of
$_________ , in payment of federal and state income withholding
and employment taxes applicable to this exercise. The amount of
such payment is based on advice received from appropriate
officials of the Corporation responsible for the administration
of its payroll and employment tax obligations. Alternatively, or
in addition, and subject to such restrictions as may be
determined to be necessary or appropriate to comply with Rule
16b-3 under the Securities Exchange Act of 1934, or to avoid
earnings charges or other adverse consequences to the Corporation
under applicable accounting or tax rules or regulations, in full
or partial payment of such taxes:
(1) I deliver herewith an additional ________ shares
of the Common Stock presently owned by me, having an aggregate
Fair Market Value as of the date hereof of $ __________; and/or
(2) I hereby authorize the Corporation to withhold,
from the shares of Common stock otherwise issuable to me pursuant
to this exercise, ___________ such shares having an aggregate
Fair Market Value at the date hereof of $____________.
The sum of (i) any such check plus (ii) the Fair Market Value at
the date hereof of any shares of Common Stock specified in the
foregoing clauses (1) and (2) is not less than the amount of
federal and state withholding and employment taxes applicable to
this exercise, and is not greater than the total of all federal
and state income and employment taxes to be owed by me as a
result of such exercise.
IN WITNESS WHEREOF, the undersigned has set his or her hand
and seal, this ________day of _________, 19___ .
EMPLOYEE OR HIS OR HIS ADMINISTRATOR,
EXECUTOR, PERSONAL REPRESENTATIVE OR
QUALIFIED TRANSFEREE
_____________________________
EXHIBIT 10.12
SERVICES AGREEMENT
This Services Agreement (this "Agreement") is made and
entered into as of January 1, 1995, by and among LXE Inc., a
Georgia corporation ("LXE"), Electromagnetic Sciences, Inc., a
Georgia corporation ("ELMG"), and EMS Technologies, Inc., a
Georgia corporation ("EMST") (ELMG and EMST are collectively
referred to herein as "EMS," except that references to "EMS"
shall be to ELMG or EMST individually as appropriate in the
context of a particular reference).
WHEREAS, certain officers of LXE are employees of ELMG and are
compensated on a full-time basis by ELMG; and
WHEREAS, LXE and EMS wish to provide for the payment by LXE of
its appropriate share of the compensation of such officers, and
LXE further desires that EMS perform certain administrative and
other services related to LXE's business, all subject to the
terms and conditions hereinafter set forth, which terms and
conditions are satisfactory to EMS.
NOW, THEREFORE, in consideration of the premises and the mutual
promises of the parties hereto, the parties hereby covenant and
agree as follows:
ARTICLE I
SERVICES
1.1 General. The services set forth in this Article I shall
be provided from time to time as. and to the extent, reasonably
required by LXE.
1.2 Certain Definitions. For the purposes hereof:
(a) "Compensation Costs" shall mean (i) the actual cost to
EMS (net of such costs otherwise allocated to third parties) of
the direct salary and bonus compensation of the subject
personnel, plus (ii) a pro rata share of employment taxes,
personal insurance and similar benefits, and retirement plan
expense incurred by EMS (to the extent not otherwise separately
calculated for each employee, such expenses described in (ii)
shall be allocated according to the proportion that such direct
compensation expense bears to the total of direct compensation
expense, excluding overtime, incurred by EMS). Unless otherwise
specified herein, the Compensation Costs of providing a specified
service to LXE shall mean the Compensation Costs of the personnel
providing such services, allocated to LXE based on estimates made
by EMS, in good faith and with a reasonable basis, of the hours
so devoted by each such person, or the portion of each such
person's total available hours so devoted.
(b) "Overhead Costs" shall include all costs, other than
Compensation Costs or other costs specifically identified in and
allocated by this Agreement, incurred by EMS in connection with
employing the subject personnel, and with providing such
personnel with necessary services, supplies, facilities and
equipment, such costs including, but not being limited to, costs
of providing and maintaining office space, office equipment, and
supporting services.
1.3 Accounting Services.
(a) Services. Subject to the terms hereof, EMS shall provide
services with respect to LXE's general ledger, accounts payable,
travel and travel accounting, cash management, monthly and annual
financial statements, Securities and Exchange Commission
reporting, financial analysis, state and federal tax obligations,
financial control, and regular and special internal financial
reporting.
(b) Compensation. As compensation for services provided
pursuant to this Section 1.3, LXE shall pay to EMS the
Compensation Costs (plus 9% thereof as Overhead Costs) incurred
by EMS in providing such services to LXE. For individuals set
forth on the schedule (the "Schedule") maintained by the Chief
Financial Officer of ELMG and provided to the Audit Committee of
the LXE Board of Directors (the "Committee"), the allocation
factors for determining such Compensation Costs are, as of the
date of execution hereof, as so set forth.
1.4 Personnel Services.
(a) Services. Subject to the terms hereof, EMS shall provide
to LXE services with respect to the selection, employment,
evaluation, promotion, benefit plan administration, counseling
and motivation, and termination of employees.
(b) Compensation. As compensation for services provided
pursuant to this Section 1.4, LXE shall pay to EMS the
Compensation Cost of employees dedicated exclusively to providing
services to LXE, plus 9% thereof as Overhead Costs. In addition,
LXE shall pay to EMS (i) 48% of the Compensation Costs of the
Personnel Manager, plus 9% thereof as Overhead Costs, plus (ii)
the applicable percentage of the aggregate Compensation Costs
(plus such Overhead Costs) incurred by EMS with respect to other
personnel providing such services for EMS and LXE, plus the
applicable percentage of any costs of employee publications,
social events and similar incidental employee benefits not
included in Overhead Costs and in which LXE employees participate
on an equal per capita basis with EMS employees. For the purposes
of this paragraph, the applicable percentages for services
provided by individuals set forth on the Schedule are, as of the
date of execution hereof, as so set forth; for any other
individuals subsequently employed in or transferred into
providing such services, and for such other costs, the applicable
percentage shall be 48%, which is the percentage that (x) the
projected average number of LXE employees during the period
covered by this Agreement constitutes of (y) the projected
average aggregate number of EMS and LXE employees during such
period.
1.5 Facilities Operation and Maintenance Services.
(a) Services. Subject to the terms hereof, EMS shall provide
services related to the operation and maintenance of physical
facilities occupied by LXE, including mechanical, electrical and
telephone systems and adjoining grounds, and mailroom services.
(b) Compensation. As compensation for services provided
pursuant to this Section 1.5, LXE shall pay to EMS the
Compensation Costs of employees dedicated exclusively to
providing such services to LXE, plus 9% thereof as Overhead
Costs. In addition, LXE shall pay to EMS, with respect to
personnel whose services are provided jointly with respect to
facilities occupied by EMS and those occupied by LXE, the
applicable percentage of the aggregate Compensation Costs (plus
9% Overhead Costs) attributable to such personnel.
For the purposes of this paragraph, the applicable
percentages for services provided by individuals set forth on the
Schedule are, as of the date of execution hereof, as so set
forth; for any other individuals subsequently employed in or
transferred into providing such services the applicable
percentage shall be 43.5%, which is the percentage that (x) the
square footage of the building space occupied by LXE constitutes
of (y) the total square footage of the building space occupied by
EMS and LXE (except that for mailroom services the applicable
percentage for any individuals providing such services and not
set forth on the Schedule shall be 50%).
1.6 Data Processing Services.
(a) Services. Subject to the terms hereof, EMS shall provide
to LXE electronic data processing services related to LXE's
business, including such services with respect to LXE's general
ledger and financial statements, accounts payable, invoicing and
accounts receivable, personnel. inventory and engineering design
activities.
(b) Compensation. As compensation for services provided
pursuant to this Section 1.6, LXE shall pay to EMS the following
amounts:
(i) With respect to personnel providing services
jointly to LXE and EMS, the Compensation Costs (plus 9% thereof
as Overhead Costs)incurred by EMS in providing such services to
LXE (for the individuals set forth on the Schedule, the
allocation factors for determining such Compensation Costs are,
as of the date of execution hereof, as so set forth);
(ii) With respect to hardware and software dedicated
exclusively to providing such services, (x) the actual
depreciation incurred thereon for financial reporting purposes,
(y) the actual cost of third-party maintenance and support
services with respect thereto, and (z) 8% of the average book
value thereof as payment for the interest cost of acquiring and
holding such hardware and software; and
(iii) With respect to hardware and software used
jointly by EMS and LXE, 50% of (x) the depreciation incurred by
EMS thereon for financial accounting purposes, (y) the actual
cost of third-party maintenance and support services with respect
thereto, and (z) 8% of the average book value thereof as payment
for the interest cost of acquiring and holding such hardware and
software.
(c) Safeguarding Data. EMS will maintain safeguards to
protect against the distribution, loss or alteration of LXE's
data files, such safeguards to be no less rigorous than those
maintained by EMS with respect to its own data files.
(d) Right to Use Software Programs. EMS warrants that it
has, or at the time of delivery of services pursuant to this
Section 1.6 will have, all rights, licenses and third-party
consents necessary to provide such services. All software and
computer equipment utilized in providing such services shall
remain the property of EMS, but all data files related to LXE's
business shall be the exclusive property of LXE and EMS shall
have no rights or interest therein.
1.7 Investor Relations Services.
(a) Services. Subject to the terms hereof, EMS shall provide
to LXE services related to maintaining favorable relations
between LXE and its public shareholders, including but not
limited to: responding to investor inquiries; maintaining
communications with analysts, market makers and other financial
intermediaries; organizing the Annual Meeting of LXE's
shareholders; and preparing press releases and annual and
quarterly reports to LXE's shareholders.
(b) Compensation. As compensation for services provided
pursuant to this Section 1.7, LXE shall pay to EMS the
Compensation Costs of providing such services, plus 9% thereof as
Overhead Costs, plus any direct postal, printing, supply and
other costs incurred by EMS in providing such services. For the
individual set forth on the Schedule, the allocation factor for
determining such Compensation Costs is, as of the date of
execution hereof, as so set forth.
1.8 Engineering Design Services.
(a) Services. Subject to the terms hereof, EMS shall provide
to LXE engineering services with respect to the design of LXE's
products and production processes.
(b) Compensation. As compensation for services provided
pursuant to this Section 1.8, LXE shall pay to EMS the
Compensation Costs of providing such services, plus standard EMS
burden rates, determined by reference to the number of hours
devoted to such services as evidenced by EMS's standard
engineering job cost allocation procedures.
1.9 Use of Copying Equipment. LXE shall compensate EMS for
its usage of copying machines owned and operated by EMS, the cost
of which is not otherwise included as Overhead Costs otherwise
compensable hereunder, in an amount equal to the applicable
percentage of the aggregate cost of leasing and operating such
machines not otherwise treated as Overhead Costs hereunder. For
the purposes of this Section, the applicable percentage shall be
the percentage that (x) such usage of such machines for the
benefit of LXE constitutes of (y) the aggregate usage thereof for
the benefit of EMS and LXE.
1.10 Compensation of Shared Officers. In the case of
officers of ELMG or EMST who are officers of or who otherwise
provide services to LXE, LXE shall reimburse EMS the applicable
percentage of the Compensation Costs of such officers, exclusive
of any portion thereof allocated between LXE and EMS pursuant to
any other provision hereof, plus 9% thereof as Overhead Costs.
For the purposes of this Section, the applicable percentage for
the individuals set forth on the Schedule are, as of the date of
execution hereof, as so set forth; for any other ELMG or EMST
officer subsequently designated to provide services to LXE, the
applicable percentage shall be determined by EMS, acting in good
faith and with a reasonable basis, after consideration of the
roles, time commitments and contributions of any such officer and
the nature and relative levels of business activity of EMS and
LXE.
1.11 Adjustments and Approvals. Any applicable percentage or
allocation factor contemplated under this Article I may be
appropriately adjusted by EMS, acting in good faith and with a
reasonable basis, in the event such percentage or factor
otherwise in effect does not result in a reasonable allocation of
any individual's aggregate Compensation Costs or of any other
cost. Any such adjustment, and any initial determination by EMS
pursuant to Section 1.10 of a new officer's applicable
percentage, shall be reported to and subject to approval by the
Committee, except that such reporting of any such adjustments
causing a net additional cost to LXE of less than $25,000 may be
deferred until after the expiration date specified in Section
2.9.
ARTICLE II
GENERAL MATTERS
2.1 Third-Party Services and Suppliers. EMS shall be
entitled to engage third parties to provide services or supplies
reasonably necessary for or incidental to rendering services
hereunder. To the extent feasible, ail such third parties shall
submit invoices to LXE for payment by LXE. In circumstances in
which such direct invoicing is not feasible, the cost of such
services or supplies will be allocated between LXE and EMS on a
basis determined by EMS in good faith and with a reasonable basis
to fairly reflect the respective benefits thereof to EMS and LXE.
2.2 Payment Terms and Accounting Periods. Payment of amounts
owed hereunder shall be made by LXE within fifteen days of
receipt of accounting data setting forth such charges. Charges
may be rendered not more frequently than monthly. EMS shall
provide such additional information supporting and setting forth
the calculation of such charges as LXE shall reasonably request.
2.3 Confidentiality of Information. EMS agrees that all
information, not otherwise publicly available, communicated to it
by or on behalf of LXE while this Agreement is in force shall be
used by EMS only for the purposes of this Agreement and that,
during the term of this Agreement and thereafter, EMS will not
disclose such information to any person who is not a director,
officer or authorized employee or agent of LXE except to the
extent that such disclosure is reasonably required in the
performance of this Agreement or is otherwise required by
applicable law.
2.4 Records and Reports. All forms, records, statements,
reports, files and other data and information prepared,
maintained or collected by EMS in connection with the performance
of this Agreement shall be the sole property of LXE, except
insofar as such data and information pertain to calculations of
amounts owed hereunder to EMS, or to maintaining records of, or
monitoring the services provided hereunder and payment therefor.
Such items that are the property cf LXE shall be furnished by LXE
upon reasonable request.
2.5 Inspection of Books and Records. EMS shall keep proper
books of account and records relating to the services performed
hereunder in which full and accurate entries will be made in
accordance with generally accepted accounting procedures. LXE or
its designated agents shall have the right to inspect such books
and records at the offices of EMS during normal business hours
for purposes relating solely to EMS's performance of this
Agreement or the determination of the fees required to be paid by
LXE to EMS hereunder.
2.6 Performance. The failure of any party to insist upon
strict performance of any provision of this Agreement shall not
constitute a waiver of either the right to insist upon strict
performance or the obligation to strictly perform thereafter.
2.7 Relationship of Parties. It is expressly understood and
agreed that, with respect to and for the purposes of this
Agreement, EMS and LXE are not partners or joint venturers and
nothing herein shall be construed so as to make them partners or
joint venturers or to impose any liability as such on either of
them. The relationship of EMS to LXE with respect to and for the
purposes of this Agreement is and shall be that of independent
contractor.
2.8 Responsibility and Indemnification.
(a) Responsibility and Indemnification by EMS. EMS's
responsibility hereunder shall be to provide services in
accordance with the terms hereof in good faith. EMS agrees to
indemnify, defend and hold harmless LXE from damages, costs
(including reasonable costs of investigation or defense), claims
or other liabilities incurred by LXE as a result of any act or
omission by EMS in the performance of its duties hereunder if
such act or omission constituted bad faith, willful malfeasance,
gross negligence or reckless disregard by EMS of its duties.
(b) Indemnification by LXE. LXE agrees to indemnify, defend
and hold harmless EMS from and against damages, costs (including
reasonable costs of investigation or defense), claims or other
liabilities incurred by EMS in connection with the performance of
its duties hereunder, except to the extent that such damages,
costs, claims or other liabilities are the result of actions of
EMS constituting bad faith, willful malfeasance, gross negligence
or reckless disregard of its duties.
2.9 Term of Agreement. This Agreement shall remain in full
force and effect through December 31, 1995.
Upon termination, LXE shall immediately pay EMS all sums due
hereunder through the date of termination for the performance of
services and EMS shall promptly upon request deliver to LXE or
its designee all forms, records, statements, files, reports and
other data and information that is the property of LXE.
ARTICLE III
MISCELLANEOUS
3.1 Entire Agreement. This Agreement contains the entire
understanding of the parties hereto and supersedes all prior
agreements with respect to the subject matter contained herein.
3.2 Amendments. This Agreement shall not be amended,
changed, modified, terminated or discharged in whole in part, nor
shall any provision hereof be waived, except by an instrument in
writing duly executed by both parties hereto, or by their
respective successors or assigns.
3.3 Binding Agreement. This Agreement shall be binding upon
and inure to the benefit of the Parties hereto and their
respective successors and assigns.
3.4 Severable Provisions. If any provision of this Agreement
shall be determined to be invalid, such invalidity shall not
affect the remaining provisions of this Agreement, and all other
provisions hereof shall remain in full force and effect.
3.5 Notices. Except as otherwise provided herein, any
notices and other communications hereunder shall be in writing
and shall be deemed to have been duly given when actually
delivered (by courier, facsimile transmission, personal delivery,
or otherwise) to the following addresses (or to such other
address as EMS or LXE may specify in writing):
If to EMS, to:
Electromagnetic Sciences, Inc.
and/or
EMS Technologies, Inc.
660 Engineering Drive
Technology Park/Atlanta
Norcross, Georgia 30092
Attention: President
Facsimile: 770-447-4397
If to LXE, to:
LXE Inc.
303 Research Drive
Suite 144
Norcross, Georgia 30092
Attention: President
Facsimile: 770-447-4405
3.6 Governing Law. This Agreement shall be interpreted and
enforced in accordance with the laws of the State of Georgia.
3.7 Assignment. This Agreement shall not be assigned by
either party hereto without the prior written consent of the
other. party.
3.8 Counterparts. This Agreement may be executed in two or
more separate counterparts, each of which shall be deemed to be
an original hereof, but all of which shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed the 31 day of August 1995, to be
effective the 1st day of January, 1995.
LXE INC.
By: /s/ John J. Farrell, Jr.
Name: John J. Farrell, Jr.
Title: President
ATTEST:
/s/ William S. Jacobs
Secretary
ELECTROMAGNETIC SCIENCES, INC.
By: /s/ Thomas E. Sharon
Name: Thomas E. Sharon
Title: President and Chief
Executive Officer
ATTEST:
/s/ William S. Jacobs
Secretary
EMS TECHNOLOGIES, INC.
By: /s/ Jeffrey A. Leddy
Title: President
ATTEST:
/s/ William S. Jacobs
Secretary
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Years Ended December 31
1995 1994 1993
Net sales (note 8) $62,291 63,142 45,653
Cost of sales 35,163 31,323 22,122
Gross profit 27,128 31,819 23,531
Selling, general and adminis-
trative expenses (note 2) 20,993 19,368 16,171
Product development and
engineering expenses 6,746 6,039 6,800
Operating income (loss) (611) 6,412 560
Interest and other income 661 423 149
Interest expense (note 2) (406) (197) (210)
Earnings (loss) before
income taxes (356) 6,638 499
Income taxes (note 6) (191) 2,516 163
Net earnings (loss) $ (165) 4,122 336
Net earnings (loss) per common
and common equivalent share $ (.03) .71 .06
(note 5)
Weighted average number of
common and common equivalent
shares (note 5) 5,532 5,766 5,721
See accompanying notes to consolidated financial statements.
CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31
1995 1994
ASSETS
Current assets:
Cash, including interest-bearing
deposits of $311 in 1995 and $787
in 1994 $ 1,881 1,537
Reverse repurchase agreements - 6,400
Total cash and cash equivalents 1,881 7,937
Trade accounts receivable, net of
allowance for doubtful accounts
of $500 in 1995 and $625 in 1994 16,237 16,222
Inventories:
Work in process 3,623 3,334
Parts and materials 8,906 6,145
Total inventories 12,529 9,479
Prepaid income taxes 1,027 -
Deferred income tax benefit (note 6) 869 778
Total current assets 32,543 34,416
Property, plant and equipment (note 3):
Land 250 250
Building and leasehold improvements 5,371 4,872
Machinery and equipment 17,213 13,919
Furniture and fixtures 1,238 1,051
24,072 20,092
Less accumulated depreciation
and amortization 11,949 9,376
Net property, plant and equipment 12,123 10,716
Other assets (note 4) 4,815 609
$ 49,481 45,741
See accompanying notes to consolidated financial statements.
December 31
1995 1994
(In thousands,except share data)
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term
debt (note 3) $ 275 244
Current installments of long-term
debt to Parent (notes 2 and 3) 275 275
Accounts payable 4,431 5,552
Income taxes - 1,186
Accrued compensation costs 994 1,452
Deferred revenue 1,296 1,147
Other current liabilities 220 593
Due to Parent (note 2) 240 355
Total current liabilities 7,731 10,804
Long-term debt, excluding current
installments (note 3) 6,925 350
Long-term debt to Parent, excluding
current installments (notes 2 and 3) 1,397 1,672
Deferred income taxes (note 6) 817 617
Total liabilities 16,870 13,443
Stockholders' equity (note 5):
Preferred stock of $1.00 par value
per share. Authorized 5,000,000
shares; none issued or outstanding - -
Common stock of $0.01 par value per
share. Authorized 20,000,000 shares;
issued and outstanding 5,555,000 in
1995 and 5,436,000 in 1994 56 54
Additional paid-in capital 18,949 18,473
Retained earnings 13,606 13,771
Total stockholders' equity 32,611 32,298
Commitments (note 9)
$ 49,481 45,741
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31 1995 1994 1993
(In thousands)
Cash from operating activities:
Net earnings (loss) $ (165) 4,122 336
Adjustments to reconcile net
earnings to net cash from
operating activities:
Depreciation and amortization 2,747 2,468 2,121
Provision for doubtful accounts (125) 325 100
Deferred income taxes 109 (96) (363)
Changes in operating assets and
liabilities:
Trade accounts receivable 110 (4,461) (2,609)
Inventories (3,050) 997 (1,550)
Accounts payable (1,121) 2,087 571
Income taxes (2,213) 913 (277)
Accrued compensation costs (458) 587 (114)
Deferred revenue 149 127 293
Due to Parent and other (301) 376 303
Net cash provided by
(used in) operating
activities (4,318) 7,445 (1,189)
Cash flows from investing
activities:
Purchase of property, plant and
equipment (4,259) (2,622) (2,343)
Proceeds from maturities of
marketable securities - 800 1,210
Investment in non-public U.S.
company (2,500) - -
Capitalized product software (1,167) - -
Net cash used in
investing activities (7,926) (1,822) (1,133)
Cash flows from financing actities:
Payments on long-term debt to
Parent (275) (275) (275)
Payments on long-term debt (244) (217) (192)
Borrowings under long-term debt
agreement 6,850 - -
Proceeds from exercise of
stock options 237 109 -
Withholding taxes paid on stock
options (380) - -
Net cash provided by
(used in) financing
activities 6,188 (383) (467)
Net change in cash and
cash equivalents (6,056) 5,240 (2,789)
Cash and cash equivalents at
January 1 7,937 2,697 5,486
Cash and cash equivalents at
December 31 $ 1,881 7,937 2,697
Supplemental disclosure of
cash flow information:
Cash paid for income taxes $ 1,476 1,349 953
Cash paid for interest $ 372 197 210
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Three years ended December 31, 1995
(In thousands)
Additional Total
Common stock paid-in Retained stockholders'
Shares Amount capital earnings equity
Balance, December 31,
1992 5,351 $ 54 $17,897 $ 9,313 $27,264
Net earnings - - - 336 336
Grant of restricted
stock 8 - 113 - 113
Balance, December 31,
1993 5,359 54 18,010 9,649 27,713
Net earnings - - - 4,122 4,122
Exercise of common
stock options 96 - 362 - 362
Income tax benefit
from exercise of
non-qualified
stock options (note
6) - - 354 - 354
Redemption of shares
upon exercise of
common stock options (19) - (253) - (253)
Balance, December 31,
1994 5,436 54 18,473 13,771 32,298
Net loss - - - (165) (165)
Exercise of common
stock options 172 2 235 - 237
Income tax benefit
from exercise of
non-qualified stock
options (note 6) - - 621 - -
Redemption of shares
upon exercise of
common stock option (53) - (380) - (380)
Balance, December 31,
1995 5,555 $ 56 $18,949 $13,606 $32,611
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include the accounts of LXE
Inc. and its wholly-owned subsidiaries, LXE GmbH, LXE Belgium
N.V., LXE Netherlands B.V., LXE Sweden A.B., and LXE France
S.A.R.L., (collectively, the "Company"). All significant
intercompany balances and transactions have been eliminated in
consolidation.
LXE Inc. was organized in Georgia effective January 1, 1989 as a
wholly-owned subsidiary of Electromagnetic Sciences, Inc. (the
"Parent"), at which time the Company's initial capitalization was
established. The Company completed its initial public offering
in April 1991. As a result of this offering and stock options
subsequently exercised by employees, the Parent's ownership
interest in the Company decreased from 100% to 72% as of December
31, 1995.
The Company is engaged in the design, development, manufacture,
sale, and support of wireless data communications products.
Following is a summary of the significant accounting policies
followed by the Company:
MANAGEMENT'S USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principals requires management to
make estimates and assumptions that affect the amounts of assets,
liabilities, revenues and expenses reported in the financial
statements and accompanying notes. Actual results could differ
from those estimates.
REVENUE RECOGNITION AND ALLOWANCE FOR DOUBTFUL ACCOUNTS
Revenues under most contracts are recognized when units are
delivered or services are performed and represent amounts earned
and billed under the terms of the contracts. Revenues collected
in advance under certain service contracts are initially deferred
and later recognized over the term of the contract. A provision
for doubtful accounts is made for revenues estimated to be
uncollectible and is adjusted periodically based upon the
Company's evaluation of the economy, the industry and collection
experience.
INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out)
or market (net realizable value). Work in process consists of
raw material and production costs, including indirect
manufacturing costs. Provisions for obsolescence and variances
from standard costs are made in the period in which such amounts
are determined.
CASH EQUIVALENTS
Cash equivalents at December 31, 1995 and 1994 consist of reverse
repurchase agreements with a bank, with U. S. government
securities as the underlying assets, and short term interest-bearing deposits.
For the consolidated statements of cash flows,
the Company considers all highly liquid debt instruments with
original maturities of three months or less to be cash
equivalents.
PRODUCT WARRANTY
The Company's products typically have a 180-day warranty.
Management maintains an accrual for warranty claims and adjusts
this accrual periodically based on historical experience and
known warranty claims.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation
is provided on the straight-line method over the following
estimated useful lives of the assets:
Buildings 25 years
Machinery and equipment 3 to 8 years
Furniture and fixtures 10 years
Leasehold improvements are amortized over the shorter of their
estimated useful lives or the terms of the respective leases.
The Company has adopted Statement of Financial Accounting
Standard No. 121 (SFAS 121), "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed Of," which
was issued in March 1995. The adoption of SFAS 121 did not
result in any adjustments to the carrying value of property,
plant and equipment or other long-lived assets.
INCOME TAXES
The Company provides for income taxes using the asset and
liability method. Under the asset and liability method, deferred
tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be
recovered or settled.
EARNINGS PER SHARE
Earnings per common and common equivalent share are based on the
weighted average number of shares of common stock outstanding and
the equivalent shares derived from dilutive stock options (except
in loss periods.) Fully diluted earnings per share are not
significantly different from the primary earnings per share
presented.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of the Company's foreign subsidiaries are
remeasured into U.S. dollars at current exchange rates. Income
and expenses of the foreign subsidiaries are remeasured into U.S.
dollars at the approximate average exchange rates which prevailed
during the year presented. The Company does not engage in any
foreign currency speculation. The effects of remeasuring foreign
currency financial statements are accumulated and reported in the
consolidated statement of operations. Foreign currency
transactions and remeasurement resulted in a net gain of $550,000
in 1995 and $237,000 in 1994 but had no material effect in 1993.
RELATED PARTY TRANSACTIONS
The Parent charges the Company for directly providing a variety
of administrative services, including accounting, personnel,
facilities operation and maintenance, data processing, copying
and employee relations services, and for a portion of expenses
related to employees of the Parent who provide senior management
services to the Company. The charges for these services
represent a portion of actual direct and overhead expenses
incurred by the Parent, and are allocated to the Company based on
estimated relative time commitments of managerial personnel,
relative net sales and relative numbers of employees. Management
believes that these allocation methods are reasonable for the
relevant costs. Charges from the Parent are reported in cost of
sales, product development and engineering expenses or selling,
general and administrative expenses, depending on the nature of
each charge.
The Company's employees participate in the Parent's defined
contribution pension plan. The contribution for all eligible
employees under this plan is determined each year by the Parent's
board of directors; although a minimum annual contribution is not
required, the contribution target has been 5% of base payroll.
Contributions to the plan are allocated to employees based upon
an age-weighted formula that results in an equivalent benefit at
age 65. The Parent allocates defined contribution expense to the
Company based on actual cost. The Company also participates in
the Parent's group health insurance plan, for which the Parent
allocates expense based on the number of employees.
NOTE 2 - RELATED PARTY TRANSACTIONS
Following is a summary of transactions with the Parent (in
thousands):
1995 1994 1993
Due to Parent and long-term debt
to Parent, beginning balance $ 2,302 2,381 2,773
Charges from Parent:
Administrative and related
services 1,724 1,739 1,579
Retirement plan 588 535 411
Group health plan 1,346 1,319 1,199
Interest 177 132 141
Short-term advances from Parent 1,000 - -
Payments to Parent (4,950) (3,529) (3,447)
Net change in due to Parent (115) 196 (117)
Repayment of long-term debt to
Parent (275) (275) (275)
Due to Parent and long-term debt
to Parent, ending balance $ 1,912 2,302 2,381
NOTE 3 - LONG-TERM DEBT AND LONG-TERM DEBT TO PARENT
Following is a summary of long-term debt and long-term debt to
Parent (in thousands):
December 31
1995 1994
Industrial development revenue bond secured
by land, building and equipment, due in
varying monthly installments until March
1997, including interest at 79% of the
prime rate not to exceed 13.5% and not less
than 7% (7% at the end of 1995 and 1994) $ 350 594
Revolving credit loan, unsecured, maturing
in December 1998, interest payable quarterly
at a variable rate (7.67% at the end of
1995) 6,850 -
Junior mortgage debt to Parent secured by
land, building and eqipment, due in monthly
installments of $23 through December
2001, plus interest at the prime rate
(8.75% at the end of 1995 and 8.5% at the
end of 1994) 1,672 1,947
Total long-term debt and long-term
debt to Parent 8,872 2,541
Less current installments 550 519
Long-term debt and long-term debt
to Parent, exluding current
installments $ 8,322 2,022
The approximate prinicpal maturities of long-term debt and long-term
debt to Parent for each of the next five years are $550,000
in 1996, $349,000 in 1997, $7,125,000 in 1998, $275,000 in 1999
and $275,000 in 2000.
In December 1995, the Company entered into a $10 million
revolving credit agreement with a bank that extends through
December 1998. Under the terms of the credit agreement, LXE must
maintain certain ratios related to interest coverage and
leverage, and maintain net worth of at least $25 million, among
other restrictions. Interest is, at the Company's option, a
function of either the bank's prime rate or LIBOR. Additionally,
a commitment fee equal to .20% per annum of the daily average
unused credit available is payable quarterly in arrears. At
December 31, 1995 the Company has $3.1 million of available
credit under the revolving credit loan
NOTE 4 - OTHER ASSETS
Following is a summary of other assets (in thousands):
1995 1994
Investment in non-public U.S. company $ 2,500 -
Capitalized software costs 1,167 -
Other 1,148 609
Total other assets $ 4,815 609
The Company made an investment in a non-public U.S. company
with complementary technologies; the investment comprised a
minority ownership interest and a loan repayable in three years.
This investment is valued at cost.
The Company also capitalized $1,167,000 of certain costs incurred
in 1995 to develop software which will be licensed to customers.
Capitalized software costs will be amortized using the greater of
the ratio of current gross revenues for the product to the total
of current and anticipated future gross revenues or the straight-
line method over three years.
NOTE 5 - STOCK INCENTIVE PLAN
The Company established a stock incentive plan in 1989 with
1,000,000 shares available for grant of restricted shares or
options to employees and directors. The exercise prices of the
options granted under this plan prior to the
Company's initial public offering in 1991 were established at
what the board of directors determined to be the fair market
values of the Company's common stock at the dates of grant.
Subsequent to the public offering, the exercise price of the
options granted under this plan has been at 100% of fair market
value on the grant date, as determined by the closing price of
the Company's stock in the over-the-counter market. These
options become exercisable at various dates through 2000, with
318,000 exercisable at December 31, 1995. Certain options are
subject to possible acceleration to earlier dates based on
achievement of criteria that are expected to be specified in the
future. All outstanding options expire not later than 2004.
Following is a summary of activity in the Company's stock option
plan for the years ended December 31, 1995 and 1994 (in
thousands, except price per share data):
Option
Price Total
Per Option
Shares Share Price
Options outstanding at
December 31, 1993 730 $3.77-18.25 $4,023
Grants 11 8.75-11.25 111
Exercised (96) 3.77 (362)
Canceled (66) 5.66-18.25 (470)
Options outstanding at
December 31, 1994 579 3.77-18.25 3,302
Grants 20 15.00 300
Exercised (172) 3.77- 5.66 (660)
Canceled (20) 5.66-18.25 (193)
Options outstanding at
December 31, 1995 407 $3.77-18.25 $2,749
The Company has accounted for the issuance of options to
employees under Accounting Principles Board Opinion No. 25 (APB
25), which recognizes compensation cost from the issuance of
options based upon the option's "intrinsic value," the amount by
which the quoted market price of an option's underlying stock
exceeds the amount an employee must pay to acquire the stock.
APB 25 specifies different dates for the pertinent quoted market
price, depending on whether the terms of an award are fixed or
variable. Substantially all of the options granted by the
Company have not resulted in compensation cost under APB 25. In
October 1995, the Financial Accounting Standards Board adopted
Statement of Financial Accounting Standards No. 123 (SFAS 123),
"Accounting for Stock-Based Compensation," effective for fiscal
years beginning after December 15, 1995. SFAS 123 requires the
recognition or disclosure of compensation cost based upon the
"fair value" of a stock option (estimated by an option-pricing
valuation model such as Black-Scholes) as of the grant date. The
Company intends to comply with the provisions of SFAS 123
beginning in fiscal 1996 by continuing to recognize compensation
cost from stock options under the "intrinsic value" method of APB
25, with additional footnote disclosures to be provided,
including the pro forma effects of applying the "fair value"
method of SFAS 123. Based upon this accounting policy, the
Company would not have recognized any compensation cost
associated with stock options granted in fiscal 1995, nor does
the Company expect to recognize any such cost in 1996.
Note 6 - INCOME TAXES
The income tax expense (benefit) provided for in the Company's
consolidated financial statements consists of the following (in
thousands):
1995 1994 1993
Consolidated income tax expense
(benefit) $ (191) 2,516 163
Income tax benefit resulting
from exercise of stock options
credited to stockholders' equity (621) (354) -
$ (812) 2,162 163
Income tax expense (benefit) differed as follows from the amounts
computed by applying the U.S. federal income tax rate of 34% to
earnings (loss) before income taxes (in thousands):
1995 1994 1993
Computed "expected" income taxes $ (121) 2,257 170
State income taxes, net of
federal income tax benefit (99) 216 42
Credit for increasing research
activities (141) (150) (112)
Effect of higher foreign tax rate 172 50 (121)
Change in valuation allowance (47) (30) 77
Benefit from foreign sales
corporation (FSC) (73) (141) -
Other, net 118 314 107
$ (191) 2,516 163
The components of income tax expense (benefit) were (in
thousands):
1995 1994 1993
Current: Federal $ (370) 2,102 452
State (162) 395 72
Foreign 232 73 -
(300) 2,570 524
Deferred: Federal (83) (130) (53)
State 12 (30) (8)
Foreign 180 106 (300)
109 (54) (361)
$ (191) 2,516 163
The tax effects of temporary differences between the financial
statement carrying amounts and tax bases of assets and
liabilities that give rise to significant portions of the
deferred tax assets and deferred tax liabilities at December 31,
1995 and 1994 are presented below (in thousands):
1995 1994
Deferred tax assets:
Accounts receivable $ 170 231
Inventories 186 231
Accrued compensation costs 130 115
Foreign net operating loss carryforward 239 241
Credits for increasing research activities 141 -
Other, net 3 7
Total gross deferred tax assets 869 825
Less valuation allowance - (47)
Net deferred tax assets 869 778
Deferred tax liability:
Property, plant and equipment (504) (529)
Foreign currency transaction and
remeasurement gain (313) (88)
Total gross deferred tax liabilities (817) (617)
Net deferred tax asset $ 52 161
The components of earnings (loss) before income tax expense
(benefit) were as follows (in thousands):
1995 1994 1993
U.S. earnings (loss) before
income taxes $(1,201) 6,115 1,252
Foreign earnings (loss) before
income taxes 845 523 (753)
$ (356) 6,638 499
As of December 31, 1995, the Company had recognized a cumulative
deferred tax asset of $239,000 relating to cumulative net
operating losses of $725,000 from certain foreign operations,
which may be carried forward through 2000. Management believes
that the foreign operations will generate adequate earnings
before income taxes within the next two years to fully realize
this deferred tax asset.
NOTE 7 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The following summarizes certain information regarding the fair
value of the Company's financial instruments at December 31,
1995:
Cash and Cash Equivalents, Trade Accounts Receivable and Accounts
Payable:
The carrying amount approximates fair value because of the short
maturity of these instruments.
Other Assets:
Included in other assets at December 31, 1995 is a $2.5 million
minority interest investment in a non-public U.S. company made in
1995. Based on the discounted cash flows to be derived from this
investment, management estimates that its carrying value
approximates its fair value.
Long-Term Debt:
Substantially all of the Company's long-term debt bears interest
at variable rates which management believes are commensurate with
rates currently available on similar debt. Accordingly, the
carrying value of long-term debt approximates fair value.
NOTE 8 - GEOGRAPHIC INFORMATION
The Company operates in one industry segment related to the
design and production of wireless data communications systems
primarily for materials handling operations. The Company's
primary operations are in the United States, but in 1993 the
Company also began conducting significant sales and marketing
activities through its wholly owned subsidiaries in Europe.
Geographic information for the years ended December 31, 1995,
1994 and 1993, as measured by the locale of revenue producing
activities, were as follows (in thousands):
1995 1994 1993
Net sales to unaffiliated customers
United States $49,735 56,332 44,380
Europe 12,556 6,810 1,273
Total $62,291 63,142 45,653
Operating income (loss)
United States $ (889) 6,130 751
Europe 278 282 (191)
Total $ (611) 6,412 560
Identifiable assets
United States $42,504 41,261 35,908
Europe 6,777 4,480 1,957
Total $49,281 45,741 37,865
The Company's intercompany policy is to transfer product at third
party prices. Export sales from the U.S. to European affiliates
were approximately $6.3 million in 1995, $3.3 million in 1994 and
$1.3 million in 1993. Export sales from the U.S. to unaffiliated
customers were approximately $10.3 million, $10.8 million, and
$8.9 million in 1995, 1994 and 1993, respectively.
NOTE 9 - COMMITMENTS
The Company is committed under several noncancellable operating
leases for computer equipment and for sales and administrative
office space at its headquarters. All of these leases expire
within three years, and the combined minimum annual lease
payments are $403,000 in 1996, $218,000 in 1997, and $35,000 in
1998. The Company also has short-term leases for office
equipment, regional sales office space, and automobiles. The
total rent expense under all operating leases was approximately
$1,527,000, $1,032,000, and $1,130,000 in 1995, 1994, and 1993,
respectively.
NOTE 10 - SELECTED QUARTERLY FINANCIAL DATA (Unaudited)
Following is a summary of interim financial information for the
years ended December 31, 1995 and 1994 (in thousands, except per
share data):
1995 Quarters Ended
March 31 June 30 September 30 December 31
Net sales $17,306 16,534 11,348 17,103
Gross profit 8,132 7,187 4,151 7,658
Net earnings (loss) 907 817 (2,023) 134
Net earnings (loss)
per share .16 .14 (.36) .02
1994 Quarters Ended
March 31 June 30 September 30 December 31
Net sales $13,100 15,300 17,031 17,711
Gross profit 6,911 7,733 8,344 8,831
Net earnings 767 918 1,109 1,328
Net earnings per
share .13 .16 .19 .23
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
LXE Inc.:
We have audited the accompanying consolidated balance sheets of
LXE Inc. and subsidiaries as of December 31, 1995 and 1994, and
the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the years in the three-year
period ended December 31, 1995. These consolidated financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of LXE Inc. and subsidiaries as of December 31, 1995 and
1994, and the results of their operations and their cash flows
for each of the years in the three-year period ended December 31,
1995, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Atlanta, Georgia
January 19, 1996
SELECTED FINANCIAL DATA
(In thousands, except per
share data)
Years Ended December 31
1995 1994 1993 1992 1991
Net sales $62,291 63,142 45,653 44,401 38,721
Cost of sales 35,163 31,323 22,122 19,127 17,413
Gross profit 27,128 31,819 23,531 25,274 21,308
Selling, general and adminis-
trative expenses 20,993 19,368 16,171 13,802 11,404
Product development and engi-
neering expenses 6,746 6,039 6,800 6,337 5,036
Operating income (loss) (611) 6,412 560 5,135 4,868
Interest and other income 661 423 149 352 353
Interest expense (406) (197) (210) (234) -
Earnings (loss) before
income taxes (356) 6,638 499 5,253 5,221
Income taxes (191 2,516 163 1,943 1,985
Net earnings (loss) $ (165) 4,122 336 3,310 3,236
Net earnings (loss) per common
and common equivalent share $ (.03) .71 .06 .57 .60
Weighted average number of
common and common equivalent
shares 5,532 5,766 5,721 5,786 5,398
Years Ended December 31
1995 1994 1993 1992 1991
(In thousands)
Working capital $24,812 23,612 19,750 19,118 16,964
Total assets 49,481 45,741 37,865 37,115 32,718
Long-term debt 6,925 350 594 827 1,004
Long-term debt to Parent and
due to parent - noncurrent 1,397 1,672 1,946 2,221 2,473
Stockholders' equity 32,611 32,298 27,713 27,264 23,663
No cash dividends have been declared or paid during any of the periods
presented.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Consolidated net sales decreased in 1995 due to a third quarter
revenue shortfall, mainly in the U.S. market, which management
believes was related to the start of the Company's transition to an
expanded product line. Much of the decrease in domestic revenues was
offset by increased revenues from international markets (particularly
Europe), which grew in 1995 to $22.9 million from $17.6 million in
1994. Higher revenues from the Company's European markets were also
an important factor in the growth of net sales from 1993 to 1994, as
were increased sales through U.S.-based third-party distributors.
Cost of sales, as a percentage of consolidated net sales, was 56%
in 1995, compared with 50% in 1994 and 48% in 1993. This growth was
mainly attributable to greater distribution of the Company's products
through indirect channels that typically carry lower gross profit
margins, and to a more competitive pricing environment. Cost of sales
in 1995 was also affected by the transition to an expanded product
line, which resulted in higher manufacturing overhead and additional
efforts to adapt current generation products to certain customers'
requirements.
Selling, general and administrative expenses have increased over
the past three years due to establishment of European sales
subsidiaries and expansion of the Company's marketing and internal
sales support efforts.
Product development and engineering expenses totaled $6.7 million
in 1995, compared with $6.0 million in 1994 and $6.8 million in 1993.
Expenses increased in 1995 from 1994 due to the development of an
expanded product line with DOS and Windows capabilities that support
client/server networks and emerging software standards. Expenses
decreased in 1994 from 1993 upon completing the design of the
Company's current generation of products, which was developed and
introduced during 1993 and 1992.
Interest and other income increased in 1995 compared with 1994,
due to higher gains from foreign currency transactions and
remeasurement associated with European subsidiaries, which more than
offset a decrease in interest income from lower cash available for
investment. In 1994, higher levels of cash available for investment,
as well as gains from foreign currency transactions and remeasurement,
resulted in increased interest and other income compared with 1993.
The effective income tax rate was 54% for 1995, 38% for 1994 and
33% for 1993. The change in 1995 reflected the effect of tax credits
for research and development. The increase in 1994 was related to
profit growth from European operations and the reduced effect of tax
credits of research and development.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased as a result of several
factors during 1995, including an increase in inventory levels related
to lower sales in the second half of the year. More cash was also
used in investing activities in 1995 compared with 1994 as a result of
increases in capital expenditures for purchases of equipment,
development of product software, and the acquisition of a minority
interest in a strategic business partner. Capital expenditures were
financed by existing cash and cash equivalents and by borrowing under
the revolving credit agreement.
During 1995, the Company replaced its previous $5 million short-term
line of credit with a $10 million, three-year revolving credit
agreement with a bank. At December 31, 1995, the Company had $3.1
million remaining under the revolving credit agreement. The Company
does not have material existing capital commitments, but does
anticipate that continued growth of its business will require cash to
finance increased accounts receivable and to continue to acquire
capital equipment for use in manufacturing and product development.
Management believes that the Company's present cash and cash
equivalents and investments, together with cash from operations and
currently available external financing, will support its current
business activities and capital investment plans.
NEW ACCOUNTING PRONOUNCEMENT
The Financial Accounting Standards Board has issued Statements of
Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," which will be effective for the Company's fiscal year
ended December 31, 1996. Management believes that adoption of this
new accounting standard will not have a material effect on the
Company's financial statements.
EXHIBIT 22.1
LXE INC. AND SUBSIDIARIES
Subsidiaries of the Registrant
LXE Belgium N.V.
Generaal de Whitelaan 9-12
2800 Mechelen
Belgium
LXE France S.A.R.L.
Parc Scientifique du Perget
Immeuble Pythagore
25-27 Bd. Victor Hugo
31770 Colomiers, France
LXE GmbH
Karl Heinz Beckurts-Strasse
D-52428 Julich
Germany
LXE Netherlands B.V.
Australielaan 14A
3526 AB Utrecht
The Netherlands
LXE Scandinavia A.B.
Foretagsallen 8
184 84 Akersberga
Sweden
Exhibit 23.1
LXE INC. AND SUBSIDIARIES
Independent Auditors' Consent
The Board of Directors and Stockholders
LXE Inc.:
We consent to incorporation by reference in the Registration
Statements No. 33-42009 and No 33-41185 on Form S-8 of LXE Inc.
of our reports dated January 19, 1996, relating to the
consolidated balance sheets of LXE Inc. and subsidiaries as of
December 31, 1995 and 1994, and the related consolidated
statements of operations, stockholders' equity, and cash flows
for each of the years in the three-year period ended December 31,
1995, and the related schedule, which reports appear in the December 31,
1995 annual report on Form 10-K of LXE Inc.
KPMG Peat Marwick LLP
Atlanta, Georgia
March 29, 1996
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