LXE INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 26, 1996
Notice is hereby given that the Annual Meeting of
Shareholders of LXE Inc. (the "Company") will be held at 4:00
p.m. local Atlanta time on April 26, 1996, at the Atlanta
Mariott Norcross, 475 Technology Parkway, Norcross, Georgia, for
the following purposes:
(1) To elect six members of the Board of Directors to serve
during the ensuing year; and
(2) To transact such other business as may properly come
before the Meeting or any adjournment thereof.
Only holders of record of common stock of the Company at the
close of business on March 8, 1996, will be entitled to notice of
and to vote at the Meeting or any adjournment thereof.
By Order of the Board of Directors,
WILLIAM S. JACOBS, Secretary
Norcross, Georgia
March 28, 1996
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING OF
SHAREHOLDERS, YOU ARE REQUESTED TO FILL IN AND SIGN THE ENCLOSED
FORM OF PROXY AND MAIL IT IN THE ENCLOSED RETURN ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IT IS
IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. IF YOU DO ATTEND
THE MEETING AND DECIDE THAT YOU WISH TO VOTE IN PERSON, YOU MAY
WITHDRAW YOUR PROXY.
LXE INC.
303 Research Drive, Technology Park/Atlanta
Norcross, Georgia 30092
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 26, 1996
GENERAL INFORMATION
Shareholders' Meeting
This Proxy Statement is furnished in connection with the
solicitation by the Board of Directors of LXE Inc. (the
"Company") of proxies to be used at the Annual Meeting of
Shareholders to be held at 4:00 p.m. local Atlanta time on April
26, 1996, at the Atlanta Mariott Norcross, Norcross, Georgia.
This Proxy Statement is being mailed to shareholders on
approximately April 1, 1996.
Matters to be Acted Upon
The following matters will be acted upon at the Annual
Meeting of Shareholders:
(1) The election of six members of the Board of Directors, each
to serve a term of one year and thereafter until his successor is
duly elected and qualified; and
(2) The transaction of such other business as may properly come
before the Meeting or any adjournment thereof.
Revocation of Proxies
A proxy form is enclosed herewith. Any shareholder who
executes and delivers a proxy may revoke it at any time prior to
its use by giving written notice of such revocation to the
Secretary of the Company at 303 Research Drive, Technology
Park/Atlanta, Norcross, Georgia 30092, or by executing and
delivering to the Secretary of the Company a proxy bearing a
later date. A proxy may also be revoked at the Annual Meeting by
any shareholder present at the Annual Meeting who elects to vote
in person.
Voting of Proxies
When the enclosed proxy is properly executed and returned,
the shares that it represents will be voted at the Annual Meeting
in accordance with the instructions noted thereon. In the
absence of such instructions, the shares represented thereby will
be voted in favor of the six nominees for election to the Board
of Directors. The Board of Directors does not know of any other
business to be brought before the Meeting, but it is intended
that as to such other business, if any, a vote may be cast
pursuant to the proxy in accordance with the judgment of the
person or persons acting thereunder.
Only holders of record of issued and outstanding shares of
common stock of the Company at the close of business on March 8,
1996, are entitled to notice of, or to vote at, the Annual
Meeting. Each holder is entitled to one vote for each share of
common stock held on the record date. On March 8, 1996, there
were 5,554,644 shares of common stock outstanding and entitled to
vote.
Cost of Solicitation
The cost of soliciting proxies will be borne by the Company.
Officers, directors and employees of the Company may solicit
proxies by telephone, telegraph or personal interview.
1997 Shareholder Proposals
Any proposals by shareholders intended for presentation at
the 1997 Annual Meeting must be received by the Company at its
principal executive offices, attention of the Secretary, no later
than December 1, 1996, in order to be included in the proxy
materials for that Meeting.
ELECTION OF DIRECTORS
The Company's Bylaws provide that the number of members of
the Board of Directors may be determined by the Board, which has
set such number at six. Unless otherwise directed, it is the
intention of the persons named in the enclosed form of proxy to
vote such proxy in favor of the election of the six persons named
below as directors of the Company. Each such person elected will
serve until the next Annual Meeting of Shareholders and
thereafter until his successor is elected and has qualified. In
case any of the named nominees should become unable to serve, or
for good cause will not serve, as a director, the persons named
in the proxy will have the right to use their discretion to vote
for a substitute or substitutes or to vote only for the remaining
nominees.
Assuming the presence of a quorum at the Meeting, the
nominees will be elected by favorable vote of a plurality of the
shares actually voted. Abstentions and broker non-vote shares
will be considered as present for the purposes of determining the
presence of a quorum, but will not otherwise be considered in
determining the outcome of the vote. Shares for which authority
to cast a favorable vote is affirmatively withheld will be
treated as voting shares in determining whether the requisite
plurality has been achieved. It is the intention of
Electromagnetic Sciences, Inc., which holds 81% of the Company's
outstanding shares, to vote in favor of the election of each of
the nominees, in which case their election would be assured.
The table on the following page lists the nominees and their
ages, their other positions with the Company, their principal
occupations at present and during the past five years, and the
year each was first elected as a director. All nominees are
currently directors of the Company and were elected by the
shareholders at the last Annual Meeting.
Year First
Name and Principal Occupations Elected
For the Last Five Years Age Director
W. Frank Blount 57 1991
Chief Executive Officer of Telstra
Telecommunications Corporation -
formerly Australia and Overseas
Telecommunications Corporation
(since 1991), which operates the
Australian domestic and inter-
national telecommunications system.
Previously, Mr. Blount served in
various executive positions with
American Telephone and Telgraph
Co., including Group President,
Communications Products Group (1989-
1991), and during 1991 was appointed
President and Chief Executive Officer
of the New American School Devel-
opment Corporation. Mr. Blount is
a member of the Board of Directgors
of Entergy Corporation, New Orleans,
Louisiana.
William F. Evans 48 1992
Executive Vice President and Chief
Financial Officer, ProSource Distri-
bution Services, Coral Gables,
Florida, a distributor to fast food
and casual dining restaurant chains
(since 1995); Former Senior Vice
President, H&R Block Inc., Kansas
City, Missouri, a leading provider
of income tax preparation and
other services (June 1992-October
1994); Executive Vice President and
Chief Financial Officer, Dun &
Bradstreet Software Services, Inc.,
Atlanta, Georgia, which develops and
markets business application software
(1989-1992). Mr. Evans is a member of
the Board of Directors of Interim
Services, Inc., Ft. Lauderdale, Florida.
John B. Mowell 61 1989
President, Mowell Financial Group,
Inc., Tallahassee, Florida, an
investment counseling firm. Mr.
Mowell is also a member of the
Board of Directors of Electromagnetic
Sciences, Inc.
John E. Pippin 68 1989
Chairman of the Board of
Electromagnetic Sciences, Inc.;
Chief Executive Officer of the
Company and Electromagnetic
Sciences, Inc. (until 1994)
Thomas E. Sharon 50 1989
Chairman of the Board and Chief
Executive Officer of the Company
(since 1994); President, Chief
Executive Officer (since 1994),
and a member of the Board of
Directors of Electromagnetic
Sciences, Inc.; previously,
President and Chief Operating
Officer of Electromagnetic
Sciences, Inc.
Francis X. Stankard 64 1991
Vice Chairman, American Express
Bank, Ltd., a subsidiary of
American Express Co. engaged in
international banking operations
in 40 countries around the world
(since 1994). Chairman, FXS, Inc.,
a consulting firm for international
financial matters (1991-1994).
Previously, Mr. Stankard was Chair-
man of the Chase Manhattan Overseas
Banking Corporation (1987-1992).
From 1975 until his retirement in
1991, Mr. Stankard was an Executive
Vice President of The Chase Manhattan
Bank, N.A.
Committees and Meetings of the Board of Directors
The Board of Directors has designated a Compensation
Committee composed of Dr. Pippin and Messrs. Blount, Evans,
Mowell and Stankard; this committee reviews and recommends to the
Board compensation and benefits for the Company's executive
officers, and administers the Company's stock option plan with
respect to the participation of employees who are officers and
directors. The Compensation Committee met three times during the
last fiscal year. The Board has also designated an Audit
Committee, which met once during the past year, composed of
Messrs. Blount, Evans and Stankard. The principal functions of
this committee are to meet annually with the Company's
independent auditors, to review the Company's fiscal year
consolidated financial statements, to review the independence,
qualifications and activities of the independent auditors, to
recommend to the Board of Directors the appointment of the
independent auditors, and to review transactions in which
Electromagnetic Sciences, Inc. ("ELMG") or other related parties
have an interest. The Company does not have a separate
nominating committee. The Stock Incentive Plan Committee of the
Board consists of Drs. Pippin and Sharon and Mr. Mowell; this
committee is generally responsible for administering the
Company's stock option plan with respect to the participation of
employees who are not officers or directors.
During the last fiscal year, there were six meetings of the
Company's Board of Directors. No director attended fewer than
75% of the aggregate of (i) the total number of meetings of the
Board of Directors and (ii) the total number of meetings held by
all committees on which he served.
Directors who are employees of the Company or ELMG are not
separately compensated for services as directors of the Company.
Other directors are compensated at the rate of $3,000 per quarter
plus $1,000 per meeting attended, and $500 for attending any
committee meetings not held in conjunction with a meeting of the
Board. In addition, each director who is not an employee of the
Company or ELMG receives, on the date first elected as a member
of the Board, an automatically granted option to acquire 10,000
shares of common stock at its fair market value on the date of
grant; such options become exercisable in three equal annual
installments beginning six months after date of grant, if the
individual continues at that time to serve as a director, and
once exercisable remain so until the sixth anniversary of the
date of grant.
SECURITY OWNERSHIP
The following table sets forth certain information, as of
March 8, 1996, concerning shares of the Company's common stock
beneficially owned by the Company's directors and named executive
officers, by the directors and executive officers as a group, and
by persons who beneficially own more than 5% of the common stock.
Except as otherwise indicated, each person possessed sole voting
and investment power with respect to the shares shown.
LXE Inc. Common Stock Approximate
Amount of Percent of
Name Beneficial Ownership Class
Electromagnetic Sciences, Inc. 4,523,200 81.4%
660 Engineering Drive
Norcross, Georgia 30092
W. Frank Blount 10,000 (1) *
William F. Evans 11,000 (1) *
John J. Farrell -0- -
John B. Mowell 26,900 (1) *
John E. Pippin 114,210 (1) 2.0%
Thomas E. Sharon 48,219 (1) *
Francis X. Stankard 10,000 (1) *
John F. Mewshaw 26,563 (1) *
William J. Roeder 27,647 (1) *
All directors and executive
officers as a group (11 persons) 285,631 (1) 5.1%
* Percentage of shares beneficially owned does not exceed 1%
(1) Includes shares that are subject to currently
exercisable options in the amounts of 10,000 for Mr. Blount,
10,000 for Mr. Evans, 15,900 for Mr. Mowell, 95,400 for Dr.
Pippin, 40,893 for Dr. Sharon, 10,000 for Mr. Stankard, 22,376
for Mr. Mewshaw, 27,325 for Mr. Roeder and 7,000 for other
officers. The total for Mr. Mowell also includes 1,000 shares,
and for an officer 300 shares, as to which each shares voting and
investment power with a family member, but disclaims beneficial
interest.
The table below sets forth certain information, as of March
8, 1996, regarding the beneficial ownership of the common stock
of ELMG by each of the Company's directors and named executive
officers, and by the Company's directors and executive officers
as a group. Except as otherwise noted, the indicated persons
hold sole voting and investment power with respect to all shares
of ELMG common stock set forth opposite their names.
Electromagnetic Sciences, Inc. Common Stock
LXE Inc. Common Stock Approximate
Amount of Percent of
Name Beneficial Ownership Class
W. Frank Blount - *
William F. Evans 3,048 (1) *
John J. Farrell 6,000 *
John B. Mowell 27,543 (1) *
John E. Pippin 223,207 (1) 3.0%
Thomas E. Sharon 165,950 (1) 2.2%
Francis X. Stankard - *
John F. Mewshaw 1,250 (1) *
William J. Roeder 2,700 (1) *
All directors and executive
officers as a group (9 persons) 496,927 (1) 6.6%
* Percentage of shares beneficially owned does not exceed 1%
(1) Includes shares that are subject to currently
exercisable options in the amounts of 11,697 for Mr. Evans,
10,456 for Mr. Mowell, 94,975 for Dr. Pippin, 118,591 for Dr.
Sharon, 1,250 for Mr. Mewshaw, 2,700 for Mr. Roeder and 7,400 for
other officers. For Mr. Mowell, Dr. Pippin and another officer,
these totals include 5,000, 42,593 and 6,150 shares,
respectively, as to which each person shares voting and
investment power with family members, but disclaims beneficial
interest.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table discloses, for the years ended December 31, 1995,
1994 and 1993, the cash compensation paid by the Company and its
subsidiaries, as well as certain other compensation paid, accrued or granted
for those years, to each executive officer whose combined salary and bonus
compensation paid by the Company for 1995 exceeded $100,000. The Company's
Chief Executive Officer, Thomas E. Sharon, is not an employee of the Company
and receives no compensation from it. Dr. Sharon's compensation is paid by
Electromagnetic Sciences, Inc (ELMG), which is paid by the Company
for various services, including those of Dr. Sharon, as described below at
"Relationship with ELMG."
<TABLE>
Summary Compensation Table
<CAPTION>
Annual Compensation Long-Term Compensation
Awards Payouts
Other Securities All
Annual Restricted Underlying Other
Name and Compen- Stock Options/SAR's LTIP Compen-
Principal Positions Year Salary Bonus sation(2) Awards (No. of Shares) Payouts sation(1)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John J. Farrell 1995 $107,699 $ -0- $ -0- $78,000 20,000 $ -0- $ 610
President and 20,000 ELMG
Chief Operating
Officer (since
May 1995)
William H. Roeder 1995 99,085 -0- -0- -0- -0- -0- 5,090
Vice President, 1994 95,283 20,000 -0- -0- 2,000 ELMG -0- 4,274
Product Marketing 1993 93,244 -0- -0- -0- -0- -0- 3,924
John F. Mewshaw 1995 88,465 34,791(3) -0- -0- -0- -0- 8,997
Vice President, 1994 82,130 89,581(3) -0- -0- 3,000 ELMG -0- 7,937
Sales 1993 76,619 58,239(3) -0- -0- 2,500 -0- 5,610
</TABLE>
Footnotes to Compensation Table:
(1) For 1995, includes, in the case of Mr. Farrell, $9,650 in
benefits associated with a split-dollar life insurance arrangement
and $611 under the ELMG age-weighted defined contribution
retirement plan; in the case of Mr. Roeder, $1,429 in 401(k)
matching contributions and $3,661 under the defined contribution
retirement plan; and in the case of Mr. Mewshaw, $1,318 in 401(k)
matching contributions and $7,679 under the defined contribution
retirement plan.
(2) Does not include personal benefits that do not exceed the
applicable reporting threshold for any officer.
(3) Mr. Mewshaw's bonus is determined under pre-agreed formulas.
In general, the formulas depend on net new orders during the year,
and to a lesser extent on gross margin achieved on products shipped
during the year, and in each case on the relationship of actual
amounts to plan amounts for the year.
Option Exercises During Last Fiscal Year and Year-End Option Values
The following chart sets forth certain information with respect to the
Chief Executive Officer and the named executive officers concerning the
exercise in 1995 of options in the Company's common stock, and unexercised
options in the Company's stock held as of December 31, 1995:
<TABLE>
<CAPTION>
Year Ended Number of Unexercised Value of Unexercised
December 31, 1995 Options Held At In-the-Money Options
Shares December 31, 1995 At December 31, 1995
Acquired Value
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <S>
Thomas E. Sharon -0- -0- 40,983 -0- $ 188,312 -0-
John J. Farrell -0- -0- -0- 20,000 -0- -0-
William J. Roeder -0- -0- 27,325 15,900 114,220 43,169
John F. Mewshaw -0- -0- 22,376 15,900 91,449 43,169
</TABLE>
Option Grants During Last Fiscal Year
In connection with his employment as President in May 1995, Mr. Farrell
was granted options in the Company's stock and ELMG stock as set forth in
the following table. No other named executive officer
received option grants during 1995.
<TABLE>
<CAPTION>
Number Percentage
of Shares Total Options
Underlying Granted to Exercise or
Options Employees in Base Price Expiration Grant Date
Name Granted Fiscal 1995 (per share) Date Present Value*
<S> <C> <C> <C> <C> <C>
John J. Farrell 20,000 100% $ 15.00 5/15/04 $ 101,200
20,000 ELMG 29% 13.00 5/15/04 115,400
</TABLE>
Footnote to table:
* Based upon the Black-Scholes option pricing model, assuming 0.65 expected
volatility, a 6.0% risk-free rate of return, no dividend yield, and six
years to exercise.
Employment Arrangements with President
Mr. Farrell was employed as the Company's new President and
Chief Operating Officer in May 1995. The Company and Mr. Farrell
have not entered into a contract providing for a minimum period of
employment, but the Company has agreed to continue his
compensation, which initially is at the rate of $175,000 per year,
for nine months in the event of Mr. Farrell's termination (other
than by voluntary resignation or termination for cause) during the
first year of this employment. Mr. Farrell's employment
arrangements also provide for the grant by ELMG of 6,000 shares of
its common stock with forfeiture restrictions that lapse over
three years of continued employment; grants of options to acquire
20,000 shares of the stock of each of ELMG and the Company,
vesting in equal increments after each of the third, fourth, fifth
and sixth years of employment; supplemental life insurance
benefits; and $60,000 in loans that will be forgiven as to
principal and interest over five years of employment.
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors has
furnished the following report with respect to certain aspects of
executive compensation:
The Company is an 81%-owned subsidiary of
Electromagnetic Sciences, Inc. ("ELMG"). The Company's Chief
Executive Officer, Treasurer and Chief Financial Officer, and
General Counsel are each full-time employees of ELMG and are
compensated by ELMG and not directly by the Company. Their
services are made available to the Company pursuant to the
Services Agreement between the Company and ELMG described below
at "Relationship with ELMG." For this reason, the Compensation
Committee and its policies do not determine the compensation of
these three officers, except with respect to the grant of stock-based
incentive compensation under the 1989 Stock Incentive
Plan.
The Compensation Committee does review and make
recommendations to the Board concerning compensation
arrangements with the Company's officers who are also Company
employees. In making these recommendations, the Committee
believes it is important to adopt compensation policies that
attract and retain experienced and well-qualified executive
officers, and that provide significant incentives for financial
and business achievements that benefit the Company's
shareholders. As a result, the Compensation Committee seeks to
maintain the salary component of each officer's compensation at
a moderate level, provides bonuses based on financial
performance, and in the past has provided stock options whose
value depends on appreciation in the market value of the
Company's common stock. Except with respect to the Vice
President, Sales, the Company and the Committee have not
employed formulas that tie executive compensation to specific
performance measures in a pre-determined manner. In exercising
its judgment on compensation matters, and in seeking to adhere
to the foregoing guidelines, the Committee considers, but does
not use in any pre-determined manner, information provided
through the American Electronics Association annual compensation
survey, particularly data for electronics companies having
revenues similar to those of the Company. Members of the
Committee also familiarize themselves with, but do not use on
any specific quantitative basis, published information about
compensation policies and practices of competitors and other
companies with related product lines. The Committee's policies
are similar to those of the Compensation Committee of ELMG,
whose Chairman also serves as Chairman of the Committee.
The Committee believes that bonus compensation paid to
executive officers should be highly dependent upon the Company's
financial performance during the year in question, primarily as
reflected in the level of and change in earnings. Because of
the significant decline in earnings during 1993, no bonuses were
paid for that year, other than to Mr. Mewshaw, whose base salary
is set at a level below that of the other vice president and
whose bonus compensation is determined by a formula based on net
new orders and gross margins on sales. For 1994, the Company's
earnings increased to record levels, and substantial bonuses
were paid. In 1995, the Company operated at a loss, and no
discretionary bonuses were paid.
In determining salary levels and bonuses for
individual officers, the Committee considers each officer's
performance of his responsibilities, relying heavily in this
regard on the CEO's evaluations of performance.
In addition to salary and annual bonuses, the Company
has from time to time in the past granted stock options to the
CEO and other executive officers (including those who are
employees of ELMG) in order to provide long-term incentive
compensation directly linked to growth in shareholder value.
However, no options for Company stock have been granted to
executive officers since 1992, except those granted to Mr.
Farrell in 1995 in connection with his acceptance of employment
as the Company's President. The current intention of the
Committee and the Compensation and Stock Incentive Committees of
the ELMG Board is for the Company's executive officers to
periodically receive ELMG stock options (as occurred in 1994),
reflecting the growing interdependence of the business
strategies of LXE and the other ELMG operating subsidiaries.
This report is provided by the members of the Compensation
Committee:
John B. Mowell
(Chairman)
W. Frank Blount
William F. Evans
John E. Pippin
Francis X. Stankard
Compensation Committee Interlocks
And Insider Participation
As stated above, the members of the Compensation Committee
are Dr. Pippin and Messrs. Blount, Evans, Mowell and Stankard. Dr.
Pippin is a former officer of the Company, having served as Chairman
of the Board and Chief Executive Officer until July 1994.
Shareholder Return
The changes for the period shown in the following graph
are based on the assumption that $100 had been invested in the
common stock of LXE Inc. and each index on April 11, 1991, which is
the date the Company's initial public offering became effective and
trading of its common stock commenced on the NASDAQ National Market
System.
Comparison of Cumulative Total Return
LXE Inc. Common Stock (LXEI)
S&P Composite-500 and S&P High Technology Composite Indices
Company Index Dec 90 Dec 91 Dec 92 Dec 93 Dec 94 Dec 95
S&P 500 Index 100 130.47 140.41 154.56 156.60 215.45
S&P High Tech Comp 100 114.08 118.79 146.13 170.31 245.32
LXEI 100 210.53 123.68 110.53 160.52 88.20
RELATIONSHIP WITH ELMG
From the Company's inception until April 1991, it was
wholly owned by ELMG, which currently owns 81% of the outstanding
common stock. ELMG has the power, acting alone, to elect the
entire Board of Directors of the Company and, except as may
otherwise be provided by law, to approve any action requiring
shareholder approval, and three of the six nominees for election
as directors during the coming year are also nominees to serve as
members of the ELMG Board of Directors during that year. The
retention by ELMG of more than a majority of the outstanding
voting stock of the Company will preclude a change in control of
the Company not favored by ELMG.
During the past fiscal year, ELMG has provided the
Company with a variety of services, and ELMG and the Company have
entered into a variety of transactions. It is the intention of
the Company and ELMG that all transactions between them, or
between the Company and any other affiliated party, will be
beneficial to the Company and will be approved by disinterested
members of the Board of Directors. In this regard, transactions
with ELMG or other affiliates are reviewed and approved by the
Audit Committee members who are not otherwise affiliated with
ELMG. Reviews of continuing relationships, such as those under
the Services Agreement or with respect to the retirement and group
health plans, as described below, occur no less often than
annually. The following is a description of transactions between
ELMG and the Company since the beginning of the past fiscal year.
Administrative and Other Services
Pursuant to a Services Agreement that is updated
annually, ELMG provides administrative and other services to the
Company. Under this Agreement, ELMG is obligated for a one-year
term, and during any subsequent renewals, to provide services as
reasonably required by LXE. The Services Agreement covers
accounting services, services related to facilities operations and
maintenance, data processing services, investor relations
services, and engineering design services. Amounts to be paid are
determined by reference to allocation formulas that are reviewed
each year and are intended to reimburse ELMG for the cost of
providing each category of services, including overhead costs
associated with the personnel and facilities involved. The 1995
Services Agreement also provides for the allocation to the Company
of approximately 50% of the compensation and overhead costs of
ELMG's Chief Executive Officer, Chief Financial Officer and
General Counsel, each of whom also serves the Company in a similar
capacity. This allocation was determined after consideration of
anticipated relative time commitments and of anticipated relative
net sales of the two companies for that year. For all services
under the 1995 Services Agreement, the Company paid $1,724,000 to
ELMG, and anticipates that the amount to be paid in 1996 will not
significantly differ from the 1995 amount.
In order to reduce the number of items for which
allocations are made, the Services Agreement provides that, to the
extent feasible, all third-party suppliers will submit invoices
directly to the Company for goods or services provided for the
Company's benefit; to the extent separate invoicing is not
feasible, third-party invoices are allocated between the Company
and ELMG on a basis determined by ELMG to fairly reflect the
respective benefits to the Company and ELMG.
The Company believes that it will continue to be
beneficial for the foreseeable future for the Company to obtain a
significant portion of its administrative services from ELMG,
because of the efficiencies involved in utilizing a larger-scale,
existing administrative structure.
Employee Benefit Plans
LXE personnel participate in a defined-contribution
retirement plan maintained by ELMG and under which annual
contributions are determined from year to year by the ELMG Board
of Directors. ELMG has charged the Company $477,000 for the year
ended December 31, 1995, representing the actual contributions
allocated to the accounts of the Company's employees for the year.
The Company also is responsible for a pro rata share of plan
overhead expenses.
LXE personnel participate in the group health plans
maintained by ELMG; for the year ended December 31, 1995, ELMG
charged the Company $1,346,000 for expenses incurred under these
plans, based on the Company's proportionate share of the covered
employee census. The Company expects that its personnel will
continue to participate in the ELMG group health plans for the
foreseeable future.
LXE personnel are also eligible to participate in the
stock purchase and 401(k) savings plans maintained by ELMG. Under
the stock purchase plan, the Company matches, on a one-for-four
basis, employee salary deductions, up to a maximum matching
contribution of 1-1/4% of base compensation; the employee
deductions and LXE contributions are forwarded to a custodian to
be applied to the purchase for the employee's account of ELMG
common stock. Under the ELMG 401(k) savings plan, the Company
matches, on a one-for-four basis, up to a maximum matching
contribution of 1-1/2% of eligible compensation, salary deductions
for employee personal savings plan accounts. During the year
ended December 31, 1995, the Company's contributions with respect
to the participation of its employees in these plans were $23,000
for the stock purchase plan and $106,000 for the 401(k) savings
plan.
Technology Park Buildings
In 1991, the Company acquired from ELMG the 112,000
square-foot 125 Technology Park Building, which had previously
been occupied by ELMG and had been renovated to the Company's
specifications. A portion of the purchase price of this building
is being financed by ELMG under a note providing for monthly
installments of principal and interest over a 10-year period,
bearing interest at the prime rate, and secured by a junior
mortgage on the building. During 1995, the principal balance of
this note was reduced from $1,947,000 to $1,672,000, and the
Company paid $177,000 to ELMG as interest. During 1995, ELMG used
approximately 8,000 square feet of the 125 Technology Park
Building for certain of its production operations. For such
usage, ELMG paid the Company rent of $3.70 per square foot per
year, plus operating expenses. The rental payment equals the
Company's cost, based on actual depreciation charges, interest
cost on the unamortized investment, taxes and insurance. Also
during 1995, ELMG used approximately 20,000 square feet of space
in another building located in Technology Park in which the
Company has leased approximately 36,000 square feet. ELMG paid
the Company rent for such space equal to the Company's own lease
payments, or $8.52 per square foot per annum, plus operating
expenses. The amount of such space used by ELMG during 1996 will
be approximately the same as in 1995.
COMPLIANCE WITH REPORTING OBLIGATIONS
Pursuant to Section 16(a) of the Securities Exchange
Act, each executive officer, director and beneficial owner of 10%
or more of the Company's common stock is required to file certain
forms with the Securities and Exchange Commission. A report of
beneficial ownership of the Company's common stock on Form 3 is
due at the time such person becomes subject to the reporting
requirements and reports on Forms 4 and 5 must be filed to reflect
changes in beneficial ownership occurring thereafter. Based on
written statements and copies of forms provided to the Company by
persons subject to the reporting requirements, the Company
believes that all Forms 3, 4 and 5 required to be filed by such
reporting persons during or for 1995 were filed on a timely basis.
INDEPENDENT PUBLIC ACCOUNTANTS
KPMG Peat Marwick LLP acted as the Company's independent
public accountants during the last fiscal year and, it is
anticipated, will continue to act as such during the current
fiscal year. A representative of KPMG Peat Marwick LLP is
expected to be present at the Annual Meeting to respond to
appropriate questions, and will have the opportunity to make a
statement if he desires to do so.
AVAILABLE INFORMATION
The Company files Annual Reports on Form 10-K with the
Securities and Exchange Commission. A copy of the Annual Report
for the fiscal year ended December 31, 1995 (except for exhibits
thereto) may be obtained, free of charge, upon written request by
any shareholder to LXE Inc., Attn: Don T. Scartz, Treasurer, 303
Research Drive, P. O. Box 926000, Norcross, Georgia 30092-9200.
Copies of all exhibits to the Annual Report are available upon a
similar request, subject to payment of a $.15 per page charge to
reimburse the Company for its expenses.
Norcross, Georgia
March 28, 1996
