ITEM 1. BUSINESS
(a) General Development of Business Aydin Corporation (the "Company" or "Aydin") was incorporated under the laws of the State of Delaware in September, 1967.
The Company consists domestically of three major operating and two smaller support divisions, and three foreign operating subsidiaries. The divisions and subsidiaries are profit centers each with engineering, manufacturing, marketing and accounting functions. In addition, a new division (Aydin Telecom) is presently being formed.
(b) Financial Information About Industry Segments The Company operates predominantly in the electronics manufacturing industry. Therefore, no segment information is reported.
(c) Narrative Description of Business The following table sets forth the percentage of the Company's total revenue contributed by each of its classes of products (among which overlapping does occur) for each of the last three years:
As stated above, the Company operates predominantly in the electronics manufacturing industry, and all information set forth below is with respect to the Company's business as a whole. The Company designs, manufactures, and sells five classes of products as set forth above and as described below:
(1) Telecommunications Aydin engineers, manufactures and sells microwave digital and analog transmission equipment and systems for commercial and military applications which include wireless and hybrid fiber coax telephony communications equipment, cellular range extender, line-of-site (LOS) microwave radios, satellite earth stations, TDMA terminals and high power transmitters, portable communications terminals, troposcatter networks and wired network access products. Aydin also installs turnkey telecom systems.
(2) Airborne and Ground Data Acquisition and Avionics Aydin provides airborne equipment and systems to gather critical information and to process, format and transmit to the ground through communication data links from a communications satellite, spacecraft, aircraft and/or missile. Aydin's terminals receive this data on the ground and analyze it further for display to track and control.
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(3) Computer Equipment and Software Aydin sells a line of commercial, high-resolution CRT monitors ranging in size from 10 inches to 29 inches. Workstations are also offered, mostly for the process control industry. Aydin also offers ruggedized and TEMPEST-qualified versions of the same for military applications. Software is written by Aydin for commercial and military purposes for specific applications such as radar simulation, modernization and integration; command, control and communications; and air traffic control systems.
(4) Radars, Radar Simulation, Integration and Modernization Aydin has developed a modern 3-dimensional tactical air defense radar and has completed and/or is working on several projects in radar simulation, radar integration and automation of manual radars. Modernization of previously designed radars is also done by Aydin.
(5) Command, Control and Communications Systems Aydin provides turnkey command, control and communications (C3) systems with or without radars for defense systems, both fixed and mobile.
The Company's products and systems are sold directly by Company sales personnel and manufacturers' representatives. Sales personnel for the Company are located in many cities across the United States as well as at key major military bases, with corporate marketing located in the Washington, D.C. area. With respect to exports, sales efforts are conducted by its international subsidiaries, its international sales network and manufacturers' representatives in many countries.
The Company maintains standard product lines and systems sold by catalogue, although it generally does not maintain an inventory of finished goods. A significant portion of current sales is attributable to such standard products, modifications thereof, and turnkey communications systems using these products. Another portion of sales is attributable to special, made-to-order equipment based on customer's specific requirements.
The Company's customers include U.S. and foreign communications and electronic and aerospace firms, electric utilities, regulated and unregulated telephone organizations, major transportation organizations, other industrial and financial concerns and process control companies, research laboratories, universities, large defense contractors, foreign governments, the U.S. Government through various agencies of the Department of Defense, and the National Aeronautics and Space Administration.
A breakdown of sales for the last three years including sales to major customers who accounted for 10% or more of sales is as follows:
The Company along with others is responsible for the cost of cleanup at a site leased by the Company prior to 1984 under an order of the State of California. The cost to date for the cleanup of the California site over the past ten years has been approximately $5.8 million. Settlement has been reached with three of four insurance carriers for approximately $6.7 million which was received during 1993 and applied to the cleanup costs previously incurred and cost to go. A court has granted a declaratory judgement requiring the fourth carrier to pay all cleanup costs in excess of the $6.7 million already received. This judgement is being appealed by the fourth carrier. Management believes the ultimate resolution of this entire matter will not have a materially adverse effect on the financial position or results of operations.
The Company employs approximately 1,500 persons, with operations concentrated principally in the Philadelphia and San Jose areas. Employer-employee relations are considered to be satisfactory.
(d) Financial Information About Foreign and Domestic Operations and Export Sales
The Company had no significant foreign operations prior to 1991 although a $210 million contract from the Government of Turkey became effective in October, 1990 with approximately 35% of this contract being performed by the Company's Turkish subsidiary. Foreign assets included in the consolidated balance sheet amounted to $33.7 million, $22.9 million, and $23.4 million at December 31, 1994, 1993, and 1992, respectively. Of these amounts, $6.7 million, $10.0 million, and $19.1 million at December 31, 1994, 1993, and 1992, respectively, is cash and short term investments of the Company's Turkish subsidiary consisting mainly of U.S. dollar denominated interest-bearing time deposits. In addition, at December 31, 1994 cash and short-term investments at the Argentina subsidiary was $1.9 million. Foreign sales and pretax income for 1994 amounted to $37.2 million and $6.7 million, respectively, of which $21.1 million and $2.1 million, respectively, was for the Argentina subsidiary. Foreign sales and pretax income for 1993 amounted to $23.0 million and $3.9 million, respectively. Foreign sales and pretax income for 1992 amounted to $19.3 million and $3.3 million, respectively. The Company's domestic operations include sales derived from customers or projects located in areas of the world outside the United States. Export and foreign sales for 1994, 1993, and 1992 by geographic area are set forth below:
On a percentage basis, export and foreign sales (direct and indirect) accounted for approximately 53% of total sales in 1994, 56% in 1993, and 54% in 1992. A majority of such export and foreign sales were in the telecommunications field. Licenses are required from U.S. Government agencies for most of the Company's export products. The Company and its foreign subsidiaries may be adversely affected by certain risks
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generally associated with foreign contracts and operations, including ownership and control limitations, currency fluctuations, restrictions on repatriation of profits, difficulty in the enforcement of judgments, late delivery penalties, potential political or labor instability and general worldwide economic conditions. However, such factors have not had a material effect on the Company's operations to date, and management believes that the risks involved in such foreign business are no greater than the normal risks of any other portion of the Company's sales. The Company has generally been able to protect itself against foreign credit risks through contract provisions, advance payments and irrevocable letters of credit in its favor. However, it should be noted that foreign contracts are sometimes subject to foreign laws.
ITEM 2.
ITEM 2. PROPERTIES
The Company's total plant capacity is approximately 700,000 square feet of administrative and production facilities, 540,000 of which it owns and the balance of which it leases. Three owned properties totalling 192,000 square feet are subject to mortgages and six owned properties totalling 348,000 square feet are unencumbered. All major leased properties are held under leases expiring between 1998 and 1999, most with renewal options. The principal owned properties are two administrative/production facilities in Fort Washington, Pennsylvania, and five more in the Greater Philadelphia area, and one in the San Jose area. In addition, the Company maintains its corporate headquarters in Horsham, Pennsylvania, and numerous sales offices within and outside the U.S. The administrative and production facilities occupied by the Company are well maintained and suitable for its operations, and include plant area, warehouse space, and management, engineering and clerical offices. The plants of each of the manufacturing operations generally contain machine shops, assembly areas, testing facilities and packing and shipping departments in addition to the engineering and laboratory areas.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
On January 5, 1994, the Company reached settlement agreements with the U.S. Army and the Department of Justice ("DOJ") with reference to the AN/GRC-222 microwave radio contract. Under the terms of the agreement, the U.S. Army will reinstate the radio contract by withdrawing its previous termination for default issued November 30, 1993. Further, the investigation and all possible charges against the Company by the DOJ are settled.
On January 6, 1994, pursuant to the terms of settlement with DOJ, the Company entered a plea of guilty to the falsification of testing data, charges to which two of its low level employees previously pled guilty to in March 1993, and the plea was accepted by the court (U.S. District Court for the Northern District of California). The Company is reinstated on its AN/GRC-222 microwave radio contract with all of its previous terms and conditions. Further, the Company withdrew its contract claims, is doing additional work for the Army at no additional cost, and paid $2 million as an added consideration. The total impact on pretax income of this settlement was approximately $14,819,000, which has been charged to the 1993 fourth quarter earnings. The additional work and the related expenditures will be spread over a period of three years or longer.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the Fourth Quarter of 1994.
EXECUTIVE OFFICERS OF THE REGISTRANT
The names, ages, year first elected as officer or appointed as general manager, positions and recent prior experience of all current executive officers of the Company as of March 21, 1995, are as follows:
AYHAN HAKIMOGLU, CHAIRMAN AND C.E.O. (1) 67. First elected 1967. Chairman of the Board of Directors; President of the Company through February 1992 and from March 1994 through December 1994.
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DONALD S. TAYLOR, PRESIDENT 51. 1995. President of the Company and President Aydin Corp. (East) since January 1995. From 1970 through 1994 held various positions with Computer Sciences Corporation, the last 13 years as Vice President of its Integrated Systems Division.
JOHN F. VANDERSLICE, SENIOR VICE PRESIDENT 53. 1983. Senior Vice President of the Company. President of the Vector Division (manufactures airborne data communications products) since November 1982. Previously, he was Manager of Engineering (1969-1972), Operations Manager (1972-1973), and Vice President of Operations (1973-1982) of the Vector Division.
DEMIRHAN HAKIMOGLU, VICE PRESIDENT (2) 55. 1992. Vice President of the Company. Chairman of the Board and CEO of the Company's foreign subsidiary, Aydin Yazilim A.S., since July 1990. Prior to that, served in various engineering and management positions with various divisions of the Company since 1968 (except for a two year period, 1978-1980).
MATS J. OFVERBERG, VICE PRESIDENT (3) 54. 1990. Vice President of the Company and President of Aydin Corporation (West) Division from December 1990 to November 1993 and from March 14, 1994. Prior to his election as an officer, he served as Vice President of Engineering of the Company's Radar & EW Division and Executive Vice President of the Company's Aydin (West) group of divisions from February 1987.
HERBERT WELBER, CONTROLLER AND ASSISTANT TREASURER 59. 1986. Controller and Assistant Treasurer of the Company since August 1986. Previously, he was Controller and Vice President of Controls Division (manufactures display terminals) since August 1981.
Except for Dr. Taylor, each of the above officers was elected at the Annual Meeting of the Board of Directors on April 29, 1994. Dr. Taylor commenced his employment on January 3, 1995 and was elected President of the Company as of that date. Officers are elected each year after the Annual Meeting of Stockholders. Each serves subject to the discretion of the Board of Directors until his successor shall be elected and qualified or until his death, disqualification, resignation or removal in the manner provided in the Company's By-Laws. There are no family relationships among any executive officers of Aydin, except for Ayhan Hakimoglu and Demirhan Hakimoglu who are brothers.
__________________
(1) From July 1971 to May 1972 did not serve as an officer of the Company, although he remained as a director.
(2) First elected Vice President in February 1991, and resigned that position in July 1991. Re-elected Vice President in February 1992.
(3) Retired November 3, 1993, and accepted re-employment effective March 14, 1994.
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PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Incorporated by reference is the information under the heading, "Common Stock Prices" and "Stockholder and Dividend Information" on page 24 of the Annual Report. The Company has no present plans to pay any cash dividends. Future cash dividends, if any, will depend on business conditions. There are no restrictions that prevent the Company from paying future cash dividends, except that the Company's Board of Directors had determined in December 1992 that no cash dividend will be declared or paid for the foreseeable future, and except for maintaining compliance with certain covenants of a Credit Agreement for the funding of a standby Letter of Credit, as described more fully in Note D to the Financial Statements.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Incorporated by reference is the information under the heading, "Selected Financial Data" on page 23 of the Annual Report.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Incorporated by reference is the information under the heading, "Management's Discussion and Analysis of Financial Condition and Results of Operations" on page 22 of the Annual Report.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated by reference are the Consolidated Financial Statements of Aydin Corporation and the related Notes to Consolidated Financial Statements, and Report of Independent Auditors on pages 14 to 21, inclusive, and the data under the heading, "Quarterly Financial Data" on page 23, of the Annual Report.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Incorporated by reference is the information under the heading, "Independent Auditors" on page 17 of the Proxy Statement.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated by reference is the information under the heading, "Election of Directors" on pages 3-5 of the Proxy Statement, the information under the heading, "Compliance With Section 16(a) of the Exchange Act" on pages 11 and 12 of the Proxy Statement, and the information under the heading, "Executive Officers of the Registrant" on pages 6 and 7, Part I of this 10-K.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference is the information under the heading, "Compensation of Executive Officers", "Option Grants in Last Fiscal, "Aggregated Option Exercises and Fiscal Year-End Option Values", "Ten-Year Option Repricing", "Employment Contracts and Termination of Employment Arrangements", and "Compensation Committee Interlocks and Insider Participation" on pages 5-9 and 10 of the Proxy Statement.
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ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference is the information under the headings, "Beneficial Ownership of Common Stock" and "Beneficial Ownership by Management" on pages 2 and 3 of the Proxy Statement.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
The Company files as part of this report the following documents:
(a) 1. Financial Statements The following is a list of the Consolidated Financial Statements of Aydin Corporation and Subsidiaries which have been incorporated by reference from the Annual Report as set forth in Item 8 - "Financial Statements and Supplementary Data":
Consolidated Balance Sheets, as of December 31, 1994 and 1993. Consolidated Statements of Operations for the years ended December 31, 1994, 1993 and 1992. Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1993 and 1992. Notes to Consolidated Financial Statements. Report of Independent Auditors.
2. Schedules The following is a list of the Schedules of Aydin Corporation and Subsidiaries filed as part of this report:
Schedule II - Valuation and Qualifying Accounts
Report of Independent Auditors
All other schedules not listed above are omitted because they are inapplicable or are not required.
3. Exhibits The following is a list of Exhibits filed as part of this report:
3(i) Restated Certificate of Incorporation
3(ii) By-Laws
10.1 Restricted Stock Agreement
10.2 Form of Individual Non-Qualified Stock Option
10.3 The 1981 Incentive Stock Option Plan
10.4 The 1983 Incentive Stock Option Plan
10.5 The 1984 Non-Qualified Stock Option Plan
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10.6 The 1994 Incentive Stock Option Plan
13 Annual Report to Security Holders
21 Subsidiaries of Registrant
23.1 Consent of Independent Auditors, Grant Thornton LLP
23.2 Consent of Independent Auditors, KPMG Peat Marwick LLP
27 Financial Data Schedule (electronic filing only)
99.1 Report of Independent Auditors, Grant Thornton LLP
99.2 Report of Independent Auditors, KPMG Peat Marwick LLP
All other exhibits not listed above are omitted because they are inapplicable.
(b) Reports on Form 8-K No reports on Form 8-K were filed during the Fourth Quarter of 1994.
AYDIN CORPORATION SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS FOR THE YEAR S 1994, 1993, AND 1992
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SIGNATURES
Pursuant to the requirements of section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Aydin Corporation
Dated: March 29, 1995 By: /s/ Robert A. Clancy Robert A. Clancy Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: /s/ Ayhan Hakimoglu Dated: March 29, 1995 Ayhan Hakimoglu Chief Executive Officer and Chairman of the Board of Directors
By: /s/ Donald S. Taylor Dated: March 29, 1995 Donald S. Taylor President and Director
By: /s/ John F. Vanderslice Dated: March 29, 1995 John F. Vanderslice Vice President and Director
By: /s/ Herbert Welber Dated: March 29, 1995 Herbert Welber Controller and Assistant Treasurer Principal Accounting Officer
By: /s/ Jay L. Landis Dated: March 29, 1995 Jay L. Landis Treasurer Principal Financial Officer
By: /s/ I. Gary Bard Dated: March 29, 1995 I. Gary Bard Director
By: /s/ Nev A. Gokcen Dated: March 29, 1995 Nev A. Gokcen Director
By: /s/ Harry D. Train, II Dated: March 29, 1995 Harry D. Train, II Director
EXHIBIT INDEX
Exhibit Description No. of Exhibit
3(i) Restated Certificate of Incorporation
3(ii) By-Laws
10.1 Restricted Stock Agreement
10.2 Form of Individual Non-Qualified Stock Option
10.3 The 1981 Incentive Stock Option Plan
10.4 The 1983 Incentive Stock Option Plan
10.5 The 1984 Non-Qualified Stock Option Plan
10.6 The 1994 Incentive Stock Option Plan
13 Annual Report to Security Holders
21 Subsidiaries of Registrant
23.1 Consent of Independent Auditors, Grant Thornton LLP
23.2 Consent of Independent Auditors, KPMG Peat Marwick LLP
27 Financial Data Schedule (electronic filing only)
99.1 Report of Independent Auditors, Grant Thornton LLP
99.2 Report of Independent Auditors, KPMG Peat Marwick LLP
Exhibit 3(i) RESTATED CERTIFICATE OF INCORPORATION of AYDIN CORPORATION
FIRST. The name of the corporation is AYDIN CORPORATION SECOND. The address of its registered office in the State of Delaware is 32 Loocherman Square, Suite L-100, Dover, County of Kent. The name of its registered agent at such address is United States Corporation Company. THIRD. The nature of the business or purposes to be conducted or promoted is any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. FOURTH. The total number of shares of Common Stock which the corporation shall have authority to issue is Seven Million Five Hundred Thousand (7,500,000) and the par value of each of such shares is One Dollar ($1.00) amounting in the aggregate to Seven Million Five Hundred Thousand Dollars ($7,500,000). These shares shall have no preemptive or preferential rights of subscription concerning further issuance or authorization of the corporation's shares. FIFTH. In furtherance and not in limitation of the powers conferred by statute, the board of directors is expressly authorized: To make, alter or repeal by-laws of the corporation. To authorize and cause to be executed mortgages and liens upon the real and personal property of the corporation. To set apart out of any of the funds of the corporation available for dividends a reserve or reserves for any proper purpose and to abolish any such reserve in the manner in which it was created. By a majority of the whole board, to designate one or more committees, each committee to consist of two or more of the directors of the corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Any such committee, to the extent provided in the resolution or in the by-laws of the corporation, shall have and may exercise the powers of the board of directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; provided, however, the by- laws may provide that in the absence or disqualification of any member of such committee or committees, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in the place of any such absent or disqualified member. When and as authorized by the affirmative vote of the holders of a majority of the stock issued and outstanding having voting power given at a stockholders' meeting duly called upon such notice as is required by statute, or when authorized by the written consent of the holders of a majority of the voting stock issued and outstanding, to sell, lease or exchange all or substantially all of the property and assets of the corporation, including its good will and its corporate franchises, upon such terms and conditions and for such consideration, which may consist in whole or in part of money or property including shares of stock in, and/or other securities of, any other corporation or corporations, as its board of directors shall deem expedient and for the best interests of the corporation. SIXTH. A director of this corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any beach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. SEVENTH. Meetings of stockholders may be held within or without the State of Delaware, as the by-laws may provide. The books of the corporation may be kept (subject to any provision contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the board of directors or in the by-laws of the corporation. Elections of directors need not be by written ballot unless the by-laws of the corporation shall so provide. EIGHTH. The corporation reserves the right to amend, alter, change or repeal any provision contained in this certificate of incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation.
Exhibit 3(ii) AYDIN CORPORATION BY-LAWS (Last Amended July 29, 1994) ******* ARTICLE I OFFICERS Section 1. The registered office shall be in the City of Dover, County of Kent, State of Delaware. Section 2. The corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the corporation may require.
ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. All meetings of the stockholders for the election of Directors shall be held in the City of Fort Washington, State of Pennsylvania, at such place as may be fixed from time to time by the Board of Directors, or at such other place either within or without the State of Delaware as shall be designed from time to time by the Board of Directors and stated in the notice of the meeting. Meetings of stockholders for any other purpose may be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2. Annual meetings of stockholders shall be held on the third Thursday of April if not a legal holiday, and if a legal holiday, then on the next secular day following at 3:00 P.M. or at such other date and time as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting, at which they shall elect by a plurality vote a board of Directors, and transact such other business as may properly be brought before this meeting. Section 3. Written notice of the annual meeting stating the place, date and hour of the meeting shall be given to each stockholder entitled to vote at such meeting not less than ten nor more than fifty days before the date of the meeting. Section 4. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Section 5. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the certificate of incorporation, may be called by the Chairman of the Board and shall be called by the Chairman of the Board or Secretary at the request in writing of a majority of the Board of Directors, or at the request in writing of stockholders owning a majority in amount of the entire capital stock of the corporation issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting. Section 6. Written notice of a special meeting stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called, shall be given not less than ten nor more than fifty days before the date of the meeting, to each stockholder entitled to vote at such meeting. Section 7. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. Section 8. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meeting of the stockholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholder, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transaction which might have been transacted at the meeting as originally notified. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 9. When a quorum is present at any meeting, the vote of the holder of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes or of the certificate of incorporation, a different vote is required in which case such express provision shall govern and control the decision of such question. Section 10. Each stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of the capital stock having voting power held by such stockholder, but no proxy shall be voted on after three years from its date, unless the proxy provides for a longer period. Section 11. Whenever the vote of stockholders at a meeting thereof is required or permitted to be taken for or in connection with any corporate action, by any provision of the statutes, the meeting and vote of stockholders may be dispensed with if all of the stockholder who would have been entitled to vote upon the action if such meeting were held shall consent in writing to such corporate action being taken; or if the certificate of incorporation authorizes the action to be taken with the written consent of the holders of less than all of the stock who would have been entitled to vote upon the action if a meeting were held, then on the written consent of the stockholders having not less than such percentage of the total number of votes as may be authorized in the certificate of incorporation; provided that in no case shall the written consent be by the holders of stock having less than the minimum percentage of the total vote required by statute for the proposed corporate action, and provided that prompt notice must be given to all stockholders of the taking of corporate action without a meeting and by less than unanimous written consent.
ARTICLE III DIRECTORS Section 1. The number of Directors which shall constitute the whole Board shall be six (6). The Directors shall be elected at the annual meeting of the stockholders, except as provided in Section 2 of this Article, and each Director elected shall hold office until his successor is elected and qualified. Directors need not be stockholders. Section 2. Vacancies and newly created directorships resulting from any increase in the authorized number of Directors may be filled by a majority of the Directors then in office, though less than a quorum, or by a sole remaining director, and the Directors so chosen shall held office until the next annual election and until their successors are duly elected and shall qualify, unless sooner displaced. If their are no Directors in office, then an election of Directors may be held in the manner provided by statute. If, at the time of filling any vacancy or any newly created directorship, the Directors then in office shall constitute less than a majority of the whole board (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten percent of the total number of the shares at the time outstanding having the right to vote for such Directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the Directors chosen by the Directors then in office. Section 3. The business of the corporation shall be managed by its Board of Directors which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these by-laws directed or required to be exercised or done by the stockholders. MEETING OF THE BOARD OF DIRECTORS Section 4. The Board of Directors of the corporation may hold meetings, both regular and special, either within or without the State of Delaware. Section 5. The first meeting of each newly elected Board of Directors shall be held at such time and place as shall be fixed by the vote of the stockholders at the annual meeting and no notice of such meeting shall be necessary to the newly elected Directors in order legally to constitute the meeting, provided a quorum shall be present. In the event of the failure of the stockholders to fix the time or place of such first meeting of the newly elected Board of Directors, or in the event such meeting is not held at the time and place so fixed by the stockholders, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors, or as shall be specified in a written waiver signed by all of the Directors. Section 6. Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by the Board. Section 7. Special meetings of the Board may be called by the Chairman of the Board on one day's notice to each director, either personally, by telephone, by mail or by telegram; special meetings shall be called by the Chairman of the Board or Secretary in like manner and on like notice on the written request of two directors. Section 8. At all meetings of the Board, a majority of the directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute or by the certificate of incorporation. If a quorum shall not be present at any meeting of the Board of Directors the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 9. Unless otherwise restricted by the certificate of incorporation or these by-laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee. COMMITTEES OF DIRECTORS Section 10. The Board of Directors may, by resolution passed by a majority of the whole board, designate one or more committees, each committee to consist of two or more of the directors of the corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Any such committee, to the extent provided in the resolution, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; provided, however, that in the absence or disqualification of any member of such committee or committees, the member of members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. Section 11. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS Section 12. The Directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as Director. No such payment shall preclude any Director from serving the corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings.
ARTICLE IV NOTICES Section 1. Whenever, under the provisions of the statutes or of the Certificate of Incorporation or of these by-laws, notice is required to be given to any Director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such Director or stockholder, at his address as it appears on the records of the corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to Directors may also be given by telegram, or by telephone. Section 2. Whenever any notice is required to be given under the provisions of the statutes or of the Certificate of Incorporation or of these by-laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto.
ARTICLE V OFFICERS Section 1. The officers of the corporation shall be chosen by the Board of Directors and shall be a Chairman of the Board, a President, an Executive Vice President, a Secretary and a Treasurer. The Board of Directors may also choose additional Vice Presidents, and one or more Assistant Secretaries and Assistant Treasurers. Any number of offices may be held by the same person, unless the certificate of incorporation of these by-laws otherwise provide. Section 2. The Board of Directors at its first meeting after each annual meeting of stockholders shall choose a Chairman of the Board, a President, an Executive Vice President, a Secretary and a Treasurer, and may choose additional Vice Presidents, and one or more Assistant Secretaries and Assistant Treasurers. Section 3. The Board of Directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board. Section 4. The salaries of all officers and agents of the corporation shall be fixed by the Board of Directors. Section 5. The officers of the corporation shall hold office until their successors are chosen and qualified. Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Board of Directors. Any vacancy occurring in any office of the corporation shall be filled by the Board of Directors. CHAIRMAN OF THE BOARD Section 6. The Chairman of the Board shall be the chief executive officer of the corporation and, subject to the control of the Board of Directors, shall have the general direction and supervision over the business and affairs of the corporation. He shall preside at all meetings of the stockholders and of the Board of Directors and shall be an ex officio member of all committees and shall see that all orders and resolutions of the Board of Directors are carried into effect. He shall participate in determining the policies to be followed by the corporation and shall perform such other duties as the Board of Directors shall from time to time request.
THE PRESIDENT Section 7. The President shall undertake such duties as may be delegated to him by the Chairman of the Board and shall also have such other powers and duties as the Board of Directors may from time to time determine. In the absence of the Chairman of the Board or in the event of his inability or refusal to act, the President shall perform the duties of the Chairman of the Board, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Chairman of the Board. THE VICE PRESIDENTS Section 8. In the absence of the President or in the event of his inability or refusal to act, the Executive Vice President, (or in the event of the absence or inability of or refusal to act by the Executive Vice President and in the further event there be more than one Vice President, the Vice Presidents in the order designated, or in the absence of any designation, then in the order of their election) shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. Such powers of and restrictions upon the President shall include the performance of the duties of the Chairman of the Board in the further event that the Chairman is absent or is unable or refuses to act. Vice Presidents shall perform such other duties and have such other powers as the Board or Directors may from time to time prescribe. THE SECRETARY AND ASSISTANT SECRETARY Section 9. The Secretary shall attend all meetings of the Board of Directors and all meetings of the stockholders and record all the proceedings of the meetings of the corporation and of the Board of Directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or Chairman of the Board, under whose supervision he shall be. He shall have custody of the corporate seal of the corporation and he, or an Assistant Secretary, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by his signature or by the signature of such Assistant Secretary. The Board of Directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by his signature. Section 10. The Assistant Secretary, or if there be more than one, the Assistant Secretaries in the order determined by the Board of Directors (or if there is no such determination, then in the order of their election), shall, in the absence of the Secretary or in the event of his inability or refusal to act, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. THE TREASURER AND ASSISTANT TREASURERS Section 11. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts if receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the Board of Directors. Section 12. He shall disburse the funds of the corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the Chairman of the Board and the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all his transactions as Treasurer and of the financial conditions of the corporation. Section 13. If required by the Board of Directors, he shall give the corporation a bond (which shall be renewed every six years) in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the corporation, in case of his death, resignation, retirement or removal form office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation. Section 14. The Assistant Treasurer, or if there shall be more than one, the Assistant Treasurers in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election), shall, in the absence of the Treasurer or in the event of his inability or refusal to act, perform the duties and exercise the powers of the Treasurer and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.
ARTICLE VI CERTIFICATES OF STOCK Section 1. Every holder of stock in the corporation shall be entitled to have a certificate, signed by, or in the name of the corporation by, the Chairman or Vice Chairman of the Board of Directors, the President or a Vice President and the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the corporation, certifying the number of shares owned by him in the corporation. Section 2. Where a certificate is countersigned (1) by a transfer agent other than the corporation or its employee, or, (2) by a registrar other than the corporation or its employee, the signatures of the officers of the corporation may be facsimiles. In case any officer who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer at the date of issue. LOST CERTIFICATES Section 3. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen or destroyed. TRANSFERS OF STOCK Section 4. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. FIXING RECORD DATE Section 5. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. REGISTERED STOCKHOLDERS Section 6. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VII GENERAL PROVISIONS DIVIDENDS Section 1. Dividends upon the capital stock of the corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Certificate of Incorporation. Section 2. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the Directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the Directors shall think conducive to the interest of the corporation, and the Directors may notify or abolish any such reserve in the manner in which it was created. ANNUAL REPORT Section 3. (a) The Board of Directors shall present at each annual meeting, and at any special meeting of the stockholders when called for by vote of the stockholders, a full and clear statement of the business and condition of the corporation. (b) On or before 120 days from the close of each fiscal year, the Board of Directors shall cause to be delivered to each stockholder of record an audited statement of financial condition of the corporation as at the close of such fiscal year, together with a statement of operations, including profit and loss for such fiscal year. For the purposes of subsection (b), it will be sufficient if such report is mailed in the ordinary course of business to those shareholder of record as at the date on which the record of shareholders has been taken for the purpose of the annual meeting, pursuant to Section 5 of ARTICLE VI of these by-laws.
CHECKS Section 4. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate. FISCAL YEAR Section 5. The fiscal year of the corporation shall be fixed by resolution of the Board of Directors.
SEAL Section 6. The corporate seal shall have inscribed thereon the name of the corporation, the year of its organization and the words "Corporate Seal, Delaware." The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. INDEMNIFICATION Section 7. (a) Directors, Officers and Employees of the Corporation. Every person now or hereafter serving as a Director, Officer or Employee of the Corporation shall be indemnified and held harmless by the corporation from and against any and all loss, cost, liability and expense that may be imposed upon or incurred by him in connection with or resulting from any claim, action, suit, or proceeding, civil or criminal, in which he may become involved, as a party or otherwise, by reason of his being or having been a director, officer or employee of the corporation, whether or not he continues to be such at the time such loss, cost, liability or expense shall have been imposed or incurred. As used herein, the term "loss, cost, liability and expense" shall include, but shall not be limited to, counsel fees and disbursements and amounts of judgments, fines or penalties against, and amounts paid in settlement by, any such director, officer or employee; provided, however that no such director, officer or employee shall be entitled to claim such indemnity: (1) with respect to any matter as to which there shall have been a final adjudication that he has committed or allowed some act or omission, (a) otherwise than in good faith in what he considers to be the best interests of the corporation, and (b) without reasonable cause to believe that such act or omission was proper and legal; or (2) in the event of a settlement of such claim, action, suit, or proceeding unless (a) the court having jurisdiction thereof shall have approved of such settlement with knowledge of the indemnity provided herein, or (b) a written opinion of independent legal counsel, selected by or in manner determined by the Board of Directors, shall have been rendered substantially concurrently with such settlement, to the effect that it was not probable that the matter as to which indemnification is being made would have resulted in a final adjudication as specified in clause (1) above and that the said loss, cost, liability or expense may properly be borne by the corporation. A conviction or judgment (whether based on a plea of guilty or nolo contendere or its equivalent, or after trial) in a criminal action, suit or proceeding shall not be deemed an adjudication that such director, officer or employee has committed or allowed some act or omission as hereinabove provided if independent legal counsel, selected as hereinabove set forth, shall substantially concurrently with such conviction or judgement give to the corporation a written opinion that such director, officer or employee was acting in good faith in what he considered to be the best interests of the corporation or was not without reasonable cause to believe that such act or omission was proper and legal. (b) Directors, Officers and Employees of Subsidiaries. Every person (including a director, officer or employee of the corporation) who at the request of the corporation acts as a director, officer or employee of any other corporation in which the corporation owns shares of stock or of which it is a creditor shall be indemnified to the same extent and subject to the same conditions that the directors, officers, and employees of the corporation are indemnified under the preceding paragraph, except that the amount of such loss, cost, liability or expense paid to any such director, officer or employee shall be reduced by and to the extent of any amounts which may be collected by him from such other corporation. (c) Miscellaneous. The provisions of this section shall cover claims, actions, suits and proceedings, civil or criminal, whether now pending or hereafter commenced and shall be retroactive to cover acts or omissions or alleged acts or omissions which heretofore have taken place. In the event of death of any person having a right of indemnification under the provisions of this section, such right shall inure to the benefit of his heirs, executors, administrators and personal representatives. If any part of this section should be found to be invalid or ineffective in any proceeding, the validity and effect of the remaining provisions shall not be affected. (d) Indemnification Not Exclusive. The foregoing right of indemnification shall not be deemed exclusive of any other right to which those indemnified may be entitled, and the corporation may provide additional indemnity and rights to its directors, officers or employees.
ARTICLE VIII AMENDMENTS Section 1. These by-laws may be altered or repealed at any regular meeting of the stockholders or of the Board of Directors or at any special meeting of the stockholders or of the Board of Directors if notice of such alteration or repeal be contained in the notice of such special meeting.
Exhibit 10.1
AYDIN CORPORATION RESTRICTED STOCK AGREEMENT
THIS AGREEMENT, made on this 3rd day of January, 1995, by and between AYDIN CORPORATION, a Delaware corporation (hereinafter called the "Company"), and DONALD S. TAYLOR (hereinafter called the "Employee").
WITNESSETH:
WHEREAS, the Employee has been elected by the Board of Directors of the Company (the "Board") as President of the Company effective January 3, 1995; and
WHEREAS, the Company and the Employee have agreed to certain terms and conditions of employment of the Employee as set forth in the Company's offer of employment letter (the "Employment Letter") dated September 29, 1994; and
WHEREAS, the Employment Letter provides for a one-time bonus for joining the Company of a restricted stock award (the "Award") of 10,000 shares of common stock of the Company (the "Common Stock") that will vest over a four-year period; and
WHEREAS, the Board has authorized the granting of the Award conditioned upon the execution by the Company and the Employee of this Agreement, thereby allowing the Employee to acquire a proprietary interest in the Company in order that the Employee will have a further incentive for remaining with and increasing his efforts on behalf of the Company or one of its Affiliates;
NOW Therefore, in consideration of the foregoing and of the mutual covenants hereafter set forth and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree as follows:
1. The Company hereby awards to the Employee as a separate incentive in connection with his employment and not in lieu of any salary or other compensation for his services, an Award covering 10,000 shares (the "Shares") of Common Stock on the terms and conditions set forth in this Agreement.
2. The Shares covered by the Award shall vest in four equal installments of 2,500 Shares each on the first, second, third and fourth anniversary, respectively, of the date of this Agreement as long as the Employee remains employed by the Company or one of its Affiliates until such dates.
3. Upon notification that the New York Stock Exchange has authorized listing of the Shares, a stock certificate evidencing the Shares shall be registered on the Company's books in the name of the Employee as of the date of this Agreement. Such certificate shall contain a legend restricting the transferability of such certificate and the Shares represented thereby, and referring to the terms and conditions approved by the Board and applicable to the Shares represented by the certificate (the "Restrictive Legend"). While the Shares are restricted and subject to the Delaware General Corporation Law, the Employee shall be entitled to all rights of a shareholder of the Company, including the right to vote the Shares and receive dividends and Other distributions declared on the Shares. The Employee shall have the right to return the certificate to the Company at any time for cancellation and to receive a certificate without the Restrictive Legend representing the Shares that have vested as provided in Section 2 hereof and a balance certificate bearing the Restrictive Legend for those Shares, if any, that shall not have been vested at such time; provided, however, that certificates representing vested or unvested Shares shall also bear a restrictive legend restricting transferability if legal counsel for the Company deems such legend to be required under applicable securities laws.
4. If the employment of the Employee with the Company terminates for any reason during a vesting period, the Shares that have not vested shall be forfeited on the date of such termination of employment, except that for any portion of a vesting period that has elapsed through the date of such termination, the Employee shall receive a pro-rata portion of the Shares that would have been vested at the end of such period (the "Pro-Rata Shares") equal to the product of the Shares that are subject to vesting during such period (i.e., 2,500 Shares) multiplied by a fraction the numerator of which is the number of days that have elapsed during such vesting period through the date of termination and the denominator of which is 365. Upon termination of employment, the certificate(s) bearing the Restrictive Legend shall be returned to the Company for cancellation and a new certificate representing Shares that have vested as of the termination date for which the Restrictive Legend had not previously been removed and for the Pro-Rata Shares shall be issued to the Employee. The Employee may designate a beneficiary to receive the stock certificate representing the Shares that the Employee would have been entitled to receive under this Section 4 in the event that termination of employment of the Employee is due to his death. Each such beneficiary designation shall be in writing, making specific reference to this Agreement, and shall be addressed to the Company's Secretary and Corporate Counsel. The Employee has the right to change such beneficiary designation at will by delivering another written designation similar in form to the preceding designation to the Company's Secretary and Corporate Counsel.
5. The Company shall have the right to obtain and withhold from any payment or transfer of property under this Agreement the amount of taxes required by any government to be withheld or otherwise deducted and paid with respect to such payment or transfer. At its discretion, the Company may require the Employee as a condition to receiving any Shares of pursuant to the Award to reimburse the Company for any such taxes required to be withheld by the Company and withhold any distribution or transfer of Shares in whole or in part until the Company is so reimbursed. In lieu thereof~ the Company shall have the right to withhold from any other cash amount due or to become due from the Company to the Employee an amount equal to such taxes as required to be withheld by the Company to reimburse the Company for any such taxes or to retain and withhold a number of Shares having a market value no less than the amount of such taxes and to cancel (in whole or m part) any such Shares so withheld in order to reimburse the Company for any such taxes. Moreover, if the Employee elects, in accordance with Section 83(b) of the Internal Revenue Code of 1986, as amended, to recognize ordinary income upon the grant of the Award, the Company will require at the time of that election the Employee to reimburse the Company for the amount of taxes required by any government to be withheld or otherwise paid as a consequence of that election.
6. Any notice to be given to the Company under the terms of this Agreement shall be addressed to the Company, in care of its Secretary and Corporate Counsels at 700 Dresher Road, P.O. Box 349, Horsham, Pennsylvania 19044, or at such other address as the Company may hereafter designate in writing. Any notice to be given to the Employee shall be addressed to the Employee at the Employee's home address of record as reflected in the Company's personnel files. Any such notice shall be deemed to have been duly given, if and when enclosed in a properly sealed envelope, addressed as aforesaid, registered or certified and deposited, postage and registry fee prepaid, in a United States post office.
7. Nothing herein contained shall affect the Employee's right to participate in and receive benefits under and in accordance with the then current provisions of any pension, insurance or other employee welfare plan or program of the Company or any Affiliate.
8. Except as otherwise herein provided, the Award herein granted and the rights and privileges conferred hereby shall not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to sale under execution, attachment or similar process.
9. Subject to the limitation on the transferability contained herein, this Agreement shall be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.
10. The Board shall have the power to interpret this Agreement and to adopt such rules for the administration, interpretation and application of this Agreement as are consistent therewith and to interpret or revoke any such rules. All actions taken and all interpretations and determinations made by the Board in good faith shall be final and binding upon Employee, the Company and all other interested persons. No member of the Board shall be personally liable for any action, determination or interpretation made in good faith with respect to this Agreement.
11. In the event of changes in the capital stock of the Company by reason of stock dividends, split-ups or combinations of shares, reclassifications, mergers, consolidations, reorganizations or liquidations during the restriction period, any and all new, substituted or additional securities to which the Employee is entitled by reason of the ownership of the Award shall be subject immediately to the terms, conditions and restrictions of this Agreement.
12. In the event that any provision in this Agreement shall be held invalid or unenforceable, such provision shall be severable from, and such invalidity or unenforceability shall not be construed to have any effect on, the remaining provisions of this Agreement.
13. This Agreement shall be construed and enforced in accordance with the internal laws of the Commonwealth of Pennsylvania.
14. The Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute but one and the same instrument.
15. This Agreement may be amended or modified only by a written instrument executed by both the Company and the Employee.
IN WITNESS WHEREOF, the parties have executed this Agreements in duplicate, the day and year first above written.
Attest: AYDIN CORPORATION
/s/ Robert A. Clancy By: /s/ Ayhan Hakimoglu Secretary Title: Chairman
/s/ Donald S. Taylor Employee's Signature
PH1\104045. 1
Exhibit 10.2
AYDIN CORPORATION
INDIVIDUAL NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, made on between AYDIN CORPORATION and its subsidiaries (hereinafter called the "Company") and (hereinafter called "Optionee").
The Board of Directors of the Company has determined that it is to the advantage and interest of the Company and its stockholders to grant the option provided for herein to the Optionee for their services to the Company and as an incentive for increased effort in the future, and in consideration of the mutual convenants herein contained, the parties hereto agree as follows:
1. Shares Optioned; Time of Exercise; Option Price.
The Company grants to Optionee the right and option to purchase, on the terms and conditions hereinafter set forth, all or any part of an aggregate of shares of the Company's presently authorized but unissued common stock (par value $1.00) at the purchase price of $ per share, excerisable at the time and for the number of shares indicated hereafter.
A. On or after , to and including , shares. B. On or after , to and including , shares. C. On or after , to and including . shares.
D. On or after , to and including . shares.
2. Payment for Delivery of Stock.
The option granted hereunder shall be exercisable by Optionee from time to time (as hereinabove provided), by delivery of written notice specifying therein the number of shares which he has elected to purchase and the payment to the Company of the purchase price of the shares which Optionee shall then elect to purchase. Payment is acceptable if it is made either: (i) in cash (including check, bank draft, or money order); or (ii) by delivering Company Common Stock ("Stock") already owned by Optionee; or (iii) by a combination of cash and Stock. The fair market value of Stock so delivered shall be the mean of the high and the low prices on the principal Exchange upon which the Stock is traded on the trading day immediately preceding the date of exercise.
3. Necessity of Affiliation When Option is Exercised.
The option granted hereby and all rights hereunder to the extent such rights shall not have been exercised, shall terminate and become null and void if the Optionee ceases to be affiliated with the Company (whether by resignation, retirement, dismissal, disability or otherwise), except that (a) in the event of the termination of such affiliation for any reason other than the death of the Optionee, the Optionee may at any time within a period of thirty (30) days thereafter exercise the option granted hereby to the extent such option was exercisable by Optionee on the date of the termination of such affiliation, and (b) in the event of the death of the Optionee while affiliated with the Company, the options granted hereby which would have become exercisable by the Optionee at time of death may be exercised immediately or any time within three (3) months after such death by the person or persons to whom the Optionee's rights under the option granted hereby shall pass by will or by the applicable laws of descent and distribution; provided, however, that in no event may the option granted hereby be exercised to any extent by anyone after the terminal date specified in Section 1 of this Agreement. As used herein, the term "affiliation" includes, but is not limited to employee or director.
4. Nonassignability of Options.
Except as otherwise provided in Section 3 of this Agreement, the option granted hereunder and the rights and privileges conferred hereby shall be exercisable only by the Optionee and shall not be transferable or be assignable, either voluntarily or by operation of law, by Optionee, in whole or in part, and if the Optionee shall attempt to make any such transfer or assignment of the option granted hereunder, or any of the rights and privileges conferred, such attempt to transfer or assign shall be void and of no affect, and the Company shall have the right to terminate this Agreement as of the date of such purported transfer or assignment.
5. Termination of Optionee
If Optionee is an employee or non-employee Director of the Company, subject to the terms of any employment contract or other arrangement to the contrary, the Company shall have the right to terminate or change the terms of employment of the Optionee at any time for any reason whatsoever. A leave of absence or an interruption in service (including an interruption during military service) authorized or approved by the Company shall not be deemed a termination of employment for the purpose of this Section 5.
6. Compliance with Governmental and Other Regulations.
This option shall not be exercisable in whole or in part, and the Company shall not be obligated to sell any shares of stock pursuant to the exercise of this option, (a) until this option has
been approved by the shareholders of the Company, and (b) if such exercise and sale would, in the opinion of counsel for the Company, require registration of such shares under the Securities Act of 1933 (or other Federal or State statues having similar requirements), as it may be in effect at that time, and the Company shall at such time not desire to so register such shares. If at any time the Board of Directors of the Company shall determine in its discretion that the listing or qualifications of the shares of stock subject to this option on any securities exchange or under any applicable law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with the issue of shares pursuant to the exercise hereof, this option may not be exercised in whole or in part unless such listing, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Company's Board of Directors. 7. Acquisition for Investment; Notification of Disposition.
By accepting this option, Optionee agrees for himself, his heirs, and legates that any and all shares purchased hereunder shall be acquired for investment and not for distribution, and upon the issuance of any or all of the shares subject to the option granted hereunder, Optionee, his heirs or legates receiving such shares, shall deliver to the Company a representation in writing that such shares are being acquired in good faith for investment and not for distribution. The Company, at its sole discretion, may take all reasonable steps (including the affixing of an appropriate legend on certificates embodying the shares) to assure itself against any sale or distribution by Optionee not in compliance with the Federal or State securities laws. In the event that the Optionee at any time contemplates the disposition (whether by sale, exchange, gift or other form of transfer) of any shares of stock acquired pursuant to the exercise of the option granted hereby, Optionee will first notify the Company of such proposed disposition and will thereafter cooperate with the Company in complying with all the applicable requirements of law which, in the opinion of the Company, must be satisfied prior to the making of such disposition. In the event that the Optionee disposes (whether by sale, exchange, gift or any other transfer) of any shares of stock acquired pursuant to the exercise of the option granted hereby, within one (1) year after the transfer of such shares to him upon his exercise of such option, he will notify the Company in writing within thirty (30) days after such disposition.
8. Adjustments
In the event that the shares of stock subject to the option granted hereby shall be changed into or exchanged for a different number of kinds of shares of stock or other securities of the Company, or of another corporation (whether by reason of merger, consolidation, recapitalization, reclassification, split-up, combination of shares or otherwise) or if the number of such shares of stock shall be increased through the payment of a stock
dividend, then there shall be substituted for or added to each share of stock of the Company theretofore or thereafter subject to this option the number and kind of shares of stock or other securities into which each outstanding share of stock of the Company shall be so changed, or for which each such share shall be exchanged, or to which each such shall be entitled, as the case may be. This option shall also be appropriately amended as to price and any other terms as may be necessary to reflect the foregoing events. In the event there shall be any other change in the number or kinds of the outstanding shares of stock of the Company subject to this option, or of any stock for which it shall have been exchanged, then if the Company's Board of Directors shall, in its sole discretion, determine that such change equitably requires an adjustment in this option, such adjustments shall be made in accordance with such determination. No fractional shares will be issued as a result of any adjustment in this option pursuant to this Section 8, nor shall any cash payment be made in lieu thereof. To the extent possible, any fractional shares resulting from such adjustment will be aggregated and the resulting whole shares added to any shares remaining to be purchased under this option. Notice of any adjustment shall be given by the Company to the Optionee and such adjustment (whether or not such notice is given) shall be final, effective, binding and conclusive for all purposes hereof. The Board of Directors shall have the power, in the event of any merger or consolidation of the Company with or into any other corporation or company, to amend this option to permit the exercise of this option prior to the effectiveness of any such merger or consolidation and to terminate this option as of such effectiveness. If the Board of Directors of the Company shall exercise such power, this option shall be deemed to have been amended to permit the exercise hereof in whole or in part by the Optionee at any time or from time to time as determined by the Board of Directors prior to the effectiveness of such merger or consolidation, and this option shall be deemed to terminate upon such effectiveness. 9. Rights of Optionee in Stock.
Neither the Optionee nor his executor, administrator, heirs or legatees shall be or have any rights or privileges of a shareholder of the Company in respect to the shares issuable upon exercise of the option granted hereunder, unless and until certificates representing such shares shall have been issued and del ivered. 10. Notices
Any notice to be given under the terms of this Agreement shall be addressed to the Company at 700 Dresher Road, P.O. Box 349, Horsham, PA 19044, and any notice to be given to the Optionee shall be addressed to him at the address given beneath his signature hereto, or at such other address as either party may
hereafter designate in writing to the other. Any such notice shall have been deemed duly given when enclosed in a properly sealed envelope or wrapper addressed as aforesaid and deposited (first class postage prepaid) in post office or branch post office regularly maintained by the United States Government.
11. Effect of Agreement; Execution.
This Agreement shall be binding upon and inure to the benefit of any successor or successors of the Company.
IN WITNESS WHEREOF, the Company has caused these presents to be executed on its behalf by its Chairman, to be sealed by its Corporate seal, attested by its Secretary, and Optionee has hereunto set his hand the day and year first above written which is the time of granting of the option hereunder.
ATTESTED: AYDIN CORPORATION
_______________________ By___________________________ Robert A. Clancy Ayhan Hakimoglu Secretary Chairman
{SEAL)
_____________________________ Optionee's signature
_____________________________
_____________________________ Optionee's Address (zip code)
Exhibit 10.3
THE 1981 INCENTIVE STOCK OPTION PLAN OF AYDIN CORPORATION
100,000 Shares
(Last amended, April 27, 1990)
I. Purpose
The purpose of this Plan is to advance the interests of the Corporation and its shareholders by strengthening the ability of the Corporation to attract and retain in its employ key men of training, experience and ability and to furnish additional incentive to officers and valued key employees upon whose judgement, initiative and efforts the successful conduct and development of its business largely depends, by encouraging them to purchase stock in the Corporation.
II. Definitions
As used in this Plan, "Corporation" means Aydin Corporation; "Board of Directors" means the Board of Directors of Aydin Corporation; "employee" includes officers and other key employees of the Corporation and its subsidiaries but excludes members of the Board of Directors who are not also officers or employees of the Corporation; "Stock Option Committee" (the "Committee") means the Board of Directors; "Common Stock" means the Corporation's Common Stock of the par value of $1.00 per share; "Code" means the Internal Revenue Code of 1954, as amended from time to time.
III. Eligible Personnel
A. All full-time salaried officers and key employees.
B. An employee who has been granted an option may, if he is otherwise eligible, be granted an additional option or options.
IV. Stock Option Committee
A. Subject to the provisions of the Plan, the Board of Directors shall be the Stock Option Committee and shall administer the Plan. It shall have authority to construe and interpret the Plan, to define the terms used therein, to prescribe, amend and rescind rules and regulations for the administration of the Plan and to take such other action in the administration of the Plan as it shall deem proper. The interpretation by the Committee of any provision of the Plan or of any option agreement entered into hereunder shall be in accordance with Section 422A of the Code and Regulations issued thereunder as they may be amended from time to time, in order that rights granted hereunder and under said option agreements shall constitute "Incentive Stock Options" within the meaning of such Section.
B. A majority of the members of the Committee shall constitute a quorum and make all Committee determinations, take all Committee actions and conduct all Committee business. The Committee shall keep minutes of its meetings.
C. Any Committee action may be taken or determination made without a meeting if all members of the Committee shall individually or collectively consent in writing to such action or determination. Such written consent or consents shall be filed with the minutes of the Committee.
D. All interpretations, determinations and actions by the Committee shall be final, conclusive and binding upon all parties.
E. No member of the Board of Directors or the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any option agreement.
V. Granting of Options
A. The Board of Directors or the Stock Option Committee may at any time and from time to time grant options to eligible employees, to purchase shares of Common Stock of the Corporation under this Plan, determining the specific employees to whom options may be granted, the number of shares to be subject to each option, the terms and provisions of the option agreements, and the time or times at which such options shall be granted, provided, however, no officer of the Corporation who is also a director of the Corporation on the date of any specific grant may be granted an option if such grant, when aggregated with all previous grants to such person under this plan (as adjusted as provided for in Section IX) would exceed ten percent (10%) of the total number of shares authorized under this plan.
B. The date of grant shall be the date the Board of Directors or the Stock Option Committee takes the necessary action to make the grant; provided, however, that if the minutes or appropriate resolutions of the Board or the Committee provide than an option is to be granted as of a date in the future, the date of grant shall be such future date. In any event, the optionee must be an employee on the date of the grant.
C. No option shall be granted under this Plan after the close of business on October 22, 1991, but options theretofore granted may extend beyond that date.
D. The options granted hereunder shall be "Incentive Stock Options" as that term is used in the code.
VI. Shares Subject to the Plan
The total number of shares of Common Stock that may be purchased pursuant to options granted under this Plan shall not exceed 100,000 subject to adjustment as provided in Section IX and subject to amendment as provided in Section X. If any option outstanding hereunder shall expire or terminate for any reasons without having been exercised in full, the unpurchased shares subject to the option shall again be available for the grant of options under this Plan. Upon the exercise of an option outstanding hereunder, the Corporation may reissue Common Stock held in its treasury or issue authorized but unissued Common Stock.
VII. Terms of Options
A. Each option granted under the Plan shall include the following provisions, or terms consistent with the following provisions:
1. The purchase price (option price) of the shares subject to option shall be not less than the fair market value of the stock on the day the option is granted. Such fair market value shall be established as the following, in order of descending preference:
a. Mean between the highest and the lowest quoted selling prices of the stock on an exchange.
b. Lacking a. above, the mean between the "bid" and "asked" prices as provided to the Company by a legitimate broker.
c. Lacking a. or b. for the date of grant, the mean between the "bid" and "asked" prices for the most recent date quoted, as obtained for the Company by a legitimate broker.
d. Lacking a., b. or c., the last established determinable price.
2. Except as provided in Section VIII herein, no option may be exercised unless the optionee is at the time of such exercise in the employ of the Corporation or of a subsidiary and shall have been continuously so employed since the granting of his option. For the purpose of the Plan, an employee who is on leave of absence or who is in the Armed Services or the civilian employment of the United States will be considered in the employ of the Corporation or its subsidiaries to the extent his employment would be treated as continuing intact under Section 421 and 422A of the Code, and the Regulations thereunder, as amended, from time to time.
3. No option may be exercised prior to one year nor after five years from the date of its grant. Unless the option Agreement provides otherwise, any time after one year from the date of grant the employee may exercise his option in accordance with the following schedule:
After: The optionee may purchase:
One year from date of grant.........................25% of the total. Two years from date of grant..........An additional 25% of the total. Three years from date of grant........An additional 25% of the total. Four years from date of grant.........An additional 25% of the total.
4. An option granted under this Plan prior to January 1, 1987, shall not be exercisable while there is "outstanding" (within the meaning of Section 422A(c)(7) of the Code) any incentive stock option which was granted, before the granting of said option, to the optionee to purchase stock (i) of the Corporation, (ii) of a corporation which (at the time of the granting of such option) was a subsidiary of the Corporation, or (iii) of a predecessor corporation of any such corporation.
5. Upon each exercise of an option the purchase price shall be payable in full in cash, (or its equivalent acceptable to the Corporation), or Common Stock already owned by the employee, or a combination of cash and Common Stock.
6. No fractional shares shall be issued under this Plan or under any option granted hereunder, nor shall any cash payment be made in lieu thereof.
7. An option shall not be assignable nor transferable by the employee to whom granted otherwise than by will or by the laws of descent and distribution, and may be exercised, during his lifetime, only by such employee.
8. No person shall have the rights and privileges of a shareholder with respect to shares subject to or purchased under an option until the date appearing on the certificates issued upon the exercise of the option.
B. The aggregate fair market value (determined as of the date the option is granted) of the stock for which any employee may be granted options in any calendar year prior to 1987 under this Plan and any other "Incentive Stock Option Plan" (within the meaning of Section 422A of the Code) of the Corporation or its subsidiaries, shall not exceed $100,000 plus any "unused limit carryover" to such year, as determined in accordance with Subsection (c)(4) of such Section. Subsequent to December 31, 1986, options granted under this Plan shall not be subject to these limitations, provided, however, the value of the shares subject to one or more Incentive Stock Option Plans first exercisable in any calendar year does not exceed $100,000 (determined as of the date the option is granted).
C. No option under this Plan may be granted to an employee who, at the time the option is granted, owns stock possessing more than 10 percent of the total combined voting power of all classes of stock of the Corporation or of its subsidiaries, provided, however, this limitation shall not apply if such option is granted at an option price of at least 110 percent of the fair market value of the stock on the date of the grant.
D. Each option granted under this Plan may, but need not, include other terms and conditions not inconsistent with the provisions hereof, including a requirements that the optionee represent at the time of each exercise of option that the shares purchased are being acquired for investment and not for resale.
E. Nothing in this Plan or in any option granted hereunder shall confer any rights to continue in the employ of the Corporation or its subsidiaries or interfere in any way with the rights of the Corporation or any subsidiary to terminate the employee at any time.
VIII. Termination of Employment or Death of Employee
A. If the employment of an optionee is terminated for cause, or if he voluntarily quits, his option shall expire forthwith, but he may exercise any installments accrued as of the date of termination or voluntary quit provided payment for same is received within 30 days of the termination. Retirement, including Early Retirement, under any retirement plan of the Corporation or subsidiary is not deemed a voluntary quit.
B. If the employment of an optionee terminates for any reason other than termination for cause, a voluntary quit, disability or death, the option shall expire three months thereafter unless by its terms it expires sooner. During said period, the option may be exercised in accordance with its terms but only for the number of shares with respect to which installments had accrued as of the date of termination of employment.
C. If an optionee dies while he is employed by the Corporation or a subsidiary or within the three month period referred to in Section VIII(B) above or within the twelve month period referred to in Section VIII(D) below, during said period, the option may be exercised by his personal representatives or the persons to whom his rights under the option shall pass by will or the laws of descent and distribution in accordance with terms of the option but only for that number of shares with respect to which installments had accrued as of the date of death or disability. Such exercisable installments must be exercised within three months of death, unless, by its terms, it expires sooner.
D. If the employment of an optionee terminates by reason of the optionee's "disability" (within the meaning of Section 105(d)(4) of the Code), the option shall expire 12 months thereafter unless by its terms it expires sooner. During said period, the option may be exercised in accordance with its terms but only for the number of shares with respect to which installments had accrued as of the date of termination of employment.
E. Notwithstanding the above, an option may not be exercised after the expiration of five years from the date the option is granted.
IX. Adjustments Upon Changes in Capitalization
In the event of any recapitalization, stock dividend, stock split, or combination affecting the stock subject to this Plan, or in the event of any merger, consolidation, or reorganization as a result of which the Corporation is the surviving corporation, the Committee will make appropriate adjustments in the aggregate number of kind of shares subject to the Plan, the number of shares that may be granted to any one employee, and the number of shares and the price per share subject to outstanding options provided that such options remain or constitute incentive stock options within the meaning of Section 422A of the Code. Any such determination of adjustment shall be final and conclusive upon the parties.
In the event of the dissolution or liquidation of the Corporation, or in the event of a reorganization, merger, or consolidation of the Corporation with one or more corporations as a result of which the Corporation is not the surviving corporation, or in the event of a sale of substantially all of the property or stock of the Corporation to another corporation, the Plan shall terminate; and any option then outstanding hereunder shall terminate on the effective date of such transaction; provided, however, that in the event of any such transaction the Board of Directors may, but need not, modify all outstanding options so as to make all such options exercisable in full on a date sufficiently in advance of the effective date of such transaction to permit the shares acquired pursuant to any exercise of such options to be issued before the effective date of such transaction.
X. Amendment and Termination
A. The Board of Directors shall have the power, in its discretion, to amend, suspend or terminate this Plan at any time. The Board of Directors shall not have the power except as may be permitted in Section IX herein:
1. To change the class of employees eligible to receive options under the Plan; or
2. To increase the number of shares subject to the Plan in the aggregate subsequent to the date the Plan is submitted to the shareholders of the Corporation for their approval; or
3. To increase the number of shares subject to an option for anyone individual; or
4. To reduce the option price below the fair market value of the stock at the time the option was granted; or
5. To increase the maximum terms of options provided herein.
B. The Board of Directors may, with the consent of an optionee, make such modifications of the terms and conditions of his option as it shall deem advisable.
XI. Effective Date of Plan
This Plan shall become effective as of October 23, 1981 upon approval of the shareholders of the Corporation and shall terminate at the close of business on October 22, 1991.
Exhibit 10.4
THE 1983 INCENTIVE STOCK OPTION PLAN OF AYDIN CORPORATION
120,000 Shares
(Last amended, April 27, 1990)
I. Purpose
The purpose of this Plan is to advance the interests of the Corporation and its shareholders by strengthening the ability of the Corporation to attract and retain in its employ key men of training, experience and ability and to furnish additional incentive to officers and valued key employees upon whose judgement, initiative and efforts the successful conduct and development of its business largely depends, by encouraging them to purchase stock in the Corporation.
II. Definitions
As used in this Plan, "Corporation" means Aydin Corporation; "Board of Directors" means the Board of Directors of Aydin Corporation; "employee" includes officers and other key employees of the Corporation and its subsidiaries but excludes members of the Board of Directors who are not also officers or employees of the Corporation; "Stock Option Committee" (the "Committee") means the Board of Directors; "Common Stock" means the Corporation's Common Stock of the par value of $1.00 per share; "Code" means the Internal Revenue Code of 1954, as amended from time to time.
III. Eligible Personnel
A. All full-time salaried officers and key employees.
B. An employee who has been granted an option may, if he is otherwise eligible, be granted an additional option or options.
IV. Stock Option Committee
A. Subject to the provisions of the Plan, the Board of Directors shall be the Stock Option Committee and shall administer the Plan. It shall have authority to construe and interpret the Plan, to define the terms used therein, to prescribe, amend and rescind rules and regulations for the administration of the Plan and to take such other action in the administration of the Plan as it shall deem proper. The interpretation by the Committee of any provision of the Plan or of any option agreement entered into hereunder shall be in accordance with Section 422A of the Code and Regulations issued thereunder as they may be amended from time to time, in order that rights granted hereunder and under said option agreements shall constitute "Incentive Stock Options" within the meaning of such Section.
B. A majority of the members of the Committee shall constitute a quorum and make all Committee determinations, take all Committee actions and conduct all Committee business. The Committee shall keep minutes of its meetings.
C. Any Committee action may be taken or determination made without a meeting if all members of the Committee shall individually or collectively consent in writing to such action or determination. Such written consent or consents shall be filed with the minutes of the Committee.
D. All interpretations, determinations and actions by the Committee shall be final, conclusive and binding upon all parties.
E. No member of the Board of Directors or the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any option agreement.
V. Granting of Options
A. The Board of Directors or the Stock Option Committee may at any time and from time to time grant options to eligible employees, to purchase shares of Common Stock of the Corporation under this Plan, determining the specific employees to whom options may be granted, the number of shares to be subject to each option, the terms and provisions of the option agreements, and the time or times at which such options shall be granted, provided, however, no officer of the Corporation who is also a director of the Corporation on the date of any specific grant may be granted an option if such grant, when aggregated with all previous grants to such person under this plan (as adjusted as provided for in Section IX) would exceed ten percent (10%) of the total number of shares authorized under this plan.
B. The date of grant shall be the date the Board of Directors or the Stock Option Committee takes the necessary action to make the grant; provided, however, that if the minutes or appropriate resolutions of the Board or the Committee provide than an option is to be granted as of a date in the future, the date of grant shall be such future date. In any event, the optionee must be an employee on the date of the grant.
C. No option shall be granted under this Plan after the close of business on October 31, 1993, but options theretofore granted may extend beyond that date.
D. The options granted hereunder shall be "Incentive Stock Options" as that term is used in the code.
VI. Shares Subject to the Plan
The total number of shares of Common Stock that may be purchased pursuant to options granted under this Plan shall not exceed 120,000 subject to adjustment as provided in Section IX and subject to amendment as provided in Section X. If any option outstanding hereunder shall expire or terminate for any reasons without having been exercised in full, the unpurchased shares subject to the option shall again be available for the grant of options under this Plan. Upon the exercise of an option outstanding hereunder, the Corporation may reissue Common Stock held in its treasury or issue authorized but unissued Common Stock.
VII. Terms of Options
A. Each option granted under the Plan shall include the following provisions, or terms consistent with the following provisions:
1. The purchase price (option price) of the shares subject to option shall be not less than the fair market value of the stock on the day the option is granted. Such fair market value shall be established as the following, in order of descending preference:
a. Mean between the highest and the lowest quoted selling prices of the stock on an exchange.
b. Lacking a. above, the mean between the "bid" and "asked" prices as provided to the Company by a legitimate broker.
c. Lacking a. or b. for the date of grant, the mean between the "bid" and "asked" prices for the most recent date quoted, as obtained for the Company by a legitimate broker.
d. Lacking a., b. or c., the last established determinable price.
2. Except as provided in Section VIII herein, no option may be exercised unless the optionee is at the time of such exercise in the employ of the Corporation or of a subsidiary and shall have been continuously so employed since the granting of his option. For the purpose of the Plan, an employee who is on leave of absence or who is in the Armed Services or the civilian employment of the United States will be considered in the employ of the Corporation or its subsidiaries to the extent his employment would be treated as continuing intact under Section 421 and 422A of the Code, and the Regulations thereunder, as amended, from time to time.
3. No option may be exercised prior to one year nor after five years from the date of its grant. Unless the option Agreement provides otherwise, any time after one year from the date of grant the employee may exercise his option in accordance with the following schedule:
After: The optionee may purchase:
One year from date of grant.........................25% of the total. Two years from date of grant..........An additional 25% of the total. Three years from date of grant........An additional 25% of the total. Four years from date of grant.........An additional 25% of the total.
4. An option granted under this Plan prior to January 1, 1987, shall not be exercisable while there is "outstanding" (within the meaning of Section 422A(c)(7) of the Code) any incentive stock option which was granted, before the granting of said option, to the optionee to purchase stock (i) of the Corporation, (ii) of a corporation which (at the time of the granting of such option) was a subsidiary of the Corporation, or (iii) of a predecessor corporation of any such corporation.
5. Upon each exercise of an option the purchase price shall be payable in full in cash, (or its equivalent acceptable to the Corporation), or Common Stock already owned by the employee, or a combination of cash and Common Stock.
6. No fractional shares shall be issued under this Plan or under any option granted hereunder, nor shall any cash payment be made in lieu thereof.
7. An option shall not be assignable nor transferable by the employee to whom granted otherwise than by will or by the laws of descent and distribution, and may be exercised, during his lifetime, only by such employee.
8. No person shall have the rights and privileges of a shareholder with respect to shares subject to or purchased under an option until the date appearing on the certificates issued upon the exercise of the option.
B. The aggregate fair market value (determined as of the date the option is granted) of the stock for which any employee may be granted options in any calendar year prior to 1987 under this Plan and any other "Incentive Stock Option Plan" (within the meaning of Section 422A of the Code) of the Corporation or its subsidiaries, shall not exceed $100,000 plus any "unused limit carryover" to such year, as determined in accordance with Subsection (c)(4) of such Section. Subsequent to December 31, 1986, options granted under this Plan shall not be subject to these limitations, provided, however, the value of the shares subject to one or more Incentive Stock Option Plans first exercisable in any calendar year does not exceed $100,000 (determined as of the date the option is granted).
C. No option under this Plan may be granted to an employee who, at the time the option is granted, owns stock possessing more than 10 percent of the total combined voting power of all classes of stock of the Corporation or of its subsidiaries, provided, however, this limitation shall not apply if such option is granted at an option price of at least 110 percent of the fair market value of the stock on the date of the grant.
D. Each option granted under this Plan may, but need not, include other terms and conditions not inconsistent with the provisions hereof, including a requirements that the optionee represent at the time of each exercise of option that the shares purchased are being acquired for investment and not for resale.
E. Nothing in this Plan or in any option granted hereunder shall confer any rights to continue in the employ of the Corporation or its subsidiaries or interfere in any way with the rights of the Corporation or any subsidiary to terminate the employee at any time.
VIII. Termination of Employment or Death of Employee
A. If the employment of an optionee is terminated for cause, or if he voluntarily quits, his option shall expire forthwith, but he may exercise any installments accrued as of the date of termination or voluntary quit provided payment for same is received within 30 days of the termination. Retirement, including Early Retirement, under any retirement plan of the Corporation or subsidiary is not deemed a voluntary quit.
B. If the employment of an optionee terminates for any reason other than termination for cause, a voluntary quit, disability or death, the option shall expire three months thereafter unless by its terms it expires sooner. During said period, the option may be exercised in accordance with its terms but only for the number of shares with respect to which installments had accrued as of the date of termination of employment.
C. If an optionee dies while he is employed by the Corporation or a subsidiary or within the three month period referred to in Section VIII(B) above or within the twelve month period referred to in Section VIII(D) below, during said period, the option may be exercised by his personal representatives or the persons to whom his rights under the option shall pass by will or the laws of descent and distribution in accordance with terms of the option but only for that number of shares with respect to which installments had accrued as of the date of death or disability. Such exercisable installments must be exercised within three months of death, unless, by its terms, it expires sooner.
D. If the employment of an optionee terminates by reason of the optionee's "disability" (within the meaning of Section 105(d)(4) of the Code), the option shall expire 12 months thereafter unless by its terms it expires sooner. During said period, the option may be exercised in accordance with its terms but only for the number of shares with respect to which installments had accrued as of the date of termination of employment.
E. Notwithstanding the above, an option may not be exercised after the expiration of five years from the date the option is granted.
IX. Adjustments Upon Changes in Capitalization
In the event of any recapitalization, stock dividend, stock split, or combination affecting the stock subject to this Plan, or in the event of any merger, consolidation, or reorganization as a result of which the Corporation is the surviving corporation, the Committee will make appropriate adjustments in the aggregate number of kind of shares subject to the Plan, the number of shares that may be granted to any one employee, and the number of shares and the price per share subject to outstanding options provided that such options remain or constitute incentive stock options within the meaning of Section 422A of the Code. Any such determination of adjustment shall be final and conclusive upon the parties.
In the event of the dissolution or liquidation of the Corporation, or in the event of a reorganization, merger, or consolidation of the Corporation with one or more corporations as a result of which the Corporation is not the surviving corporation, or in the event of a sale of substantially all of the property or stock of the Corporation to another corporation, the Plan shall terminate; and any option then outstanding hereunder shall terminate on the effective date of such transaction; provided, however, that in the event of any such transaction the Board of Directors may, but need not, modify all outstanding options so as to make all such options exercisable in full on a date sufficiently in advance of the effective date of such transaction to permit the shares acquired pursuant to any exercise of such options to be issued before the effective date of such transaction.
X. Amendment and Termination
A. The Board of Directors shall have the power, in its discretion, to amend, suspend or terminate this Plan at any time. The Board of Directors shall not have the power except as may be permitted in Section IX herein:
1. To change the class of employees eligible to receive options under the Plan; or
2. To increase the number of shares subject to the Plan in the aggregate subsequent to the date the Plan is submitted to the shareholders of the Corporation for their approval; or
3. To increase the number of shares subject to an option for anyone individual; or
4. To reduce the option price below the fair market value of the stock at the time the option was granted; or
5. To increase the maximum terms of options provided herein.
B. The Board of Directors may, with the consent of an optionee, make such modifications of the terms and conditions of his option as it shall deem advisable.
XI. Effective Date of Plan
This Plan shall become effective as of November 1, 1983 upon approval of the shareholders of the Corporation and shall terminate at the close of business on October 31, 1993.
Exhibit 10.5
THE 1984 NON-QUALIFIED STOCK OPTION PLAN OF AYDIN CORPORATION
125,000 Shares
(Last amended, April 27, 1990)
I. Purpose
The purpose of this Plan is to advance the interests of the Corporation and its shareholders by strengthening the ability of the Corporation to attract and retain in its employ key men of training, experience and ability and to furnish additional incentive to officers and valued key employees upon whose judgement, initiative and efforts the successful conduct and development of its business largely depends, by encouraging them to purchase stock in the Corporation.
II. Definitions
As used in this Plan, "Corporation" means Aydin Corporation; "Board of Directors" means the Board of Directors of Aydin Corporation; "employee" includes officers and other key employees of the Corporation and its subsidiaries but excludes members of the Board of Directors who are not also officers or employees of the Corporation; "Stock Option Committee" (the "Committee") means the Board of Directors; "Common Stock" means the Corporation's Common Stock of the par value of $1.00 per share; "Code" means the Internal Revenue Code of 1954, as amended from time to time.
III. Eligible Personnel
A. All full-time salaried officers and key employees.
B. An employee who has been granted an option may, if he is otherwise eligible, be granted an additional option or options.
IV. Stock Option Committee
A. Subject to the provisions of the Plan, the Board of Directors shall be the Stock Option Committee and shall administer the Plan. It shall have authority to construe and interpret the Plan, to define the terms used therein, to prescribe, amend and rescind rules and regulations for the administration of the Plan and to take such other action in the administration of the Plan as it shall deem proper.
B. A majority of the members of the Committee shall constitute a quorum and make all Committee determinations, take all Committee actions and conduct all Committee business. The Committee shall keep minutes of its meetings.
C. Any Committee action may be taken or determination made without a meeting if all members of the Committee shall individually or collectively consent in writing to such action or determination. Such written consent or consents shall be filed with the minutes of the Committee.
D. All interpretations, determinations and actions by the Committee shall be final, conclusive and binding upon all parties.
E. No member of the Board of Directors or the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any option agreement.
V. Granting of Options
A. The Board of Directors or the Stock Option Committee may at any time and from time to time grant options to eligible employees, to purchase shares of Common Stock of the Corporation under this Plan, determining the specific employees to whom options may be granted, the number of shares to be subject to each option, the purchase price (option price) of the shares subject to the option, the terms and provisions of the option agreements, and the time or times at which such options shall be granted, provided, however, no officer of the Corporation who is also a director of the Corporation on the date of any specific grant may be granted an option if such grant, when aggregated with all previous grants to such person under this plan (as adjusted as provided for in Section IX) would exceed ten percent (10%) of the total number of shares authorized under this plan.
B. The date of grant shall be the date the Board of Directors or the Stock Option Committee takes the necessary action to make the grant; provided, however, that if the minutes or appropriate resolutions of the Board or the Committee provide than an option is to be granted as of a date in the future, the date of grant shall be such future date. In any event, the optionee must be an employee on the date of the grant.
C. No option shall be granted under this Plan after the close of business on July 1, 1995, but options theretofore granted may extend beyond that date.
D. The options granted hereunder shall be "Non-Qualified Stock Options" as that term is used in the code.
VI. Shares Subject to the Plan
The total number of shares of Common Stock that may be purchased pursuant to options granted under this Plan shall not exceed 125,000 subject to adjustment as provided in Section IX and subject to amendment as provided in Section X. If any option outstanding hereunder shall expire or terminate for any reasons without having been exercised in full, the unpurchased shares subject to the option shall again be available for the grant of options under this Plan. Upon the exercise of an option outstanding hereunder, the Corporation may reissue Common Stock held in its treasury or issue authorized but unissued Common Stock.
VII. Terms of Options
A. Each option granted under the Plan shall include the following provisions, or terms consistent with the following provisions:
1. The purchase price (option price) of the shares subject to option shall be determined by the Board of Directors or the Stock Option Committee, but the option price will not be less than fifty percent (50%) of the fair market value of the shares subject to the option on the date the option is granted. Such fair market value shall be established as the following, in order of descending preference:
a. Mean between the highest and the lowest quoted selling prices of the stock on an exchange.
b. Lacking a. above, the mean between the "bid" and "asked" prices as provided to the Company by a legitimate broker.
c. Lacking a. or b. for the date of grant, the mean between the "bid" and "asked" prices for the most recent date quoted, as obtained for the Company by a legitimate broker.
d. Lacking a., b. or c., the last established determinable price.
2. Except as provided in Section VIII herein, no option may be exercised unless the optionee is at the time of such exercise in the employ of the Corporation or of a subsidiary and shall have been continuously so employed since the granting of his option. For the purpose of the Plan, an employee who is on leave of absence which is authorized or approved by the Corporation or who is in the Armed Services or the civilian employment of the United States will be considered in the employ of the Corporation or its subsidiaries and his employment would be treated as continuing intact under this Plan.
3. No option may be exercised prior to one year nor after five years from the date of its grant. Unless the option Agreement provides otherwise, any time after one year from the date of grant the employee may exercise his option in accordance with the following schedule:
After: The optionee may purchase:
One year from date of grant.........................25% of the total. Two years from date of grant..........An additional 25% of the total. Three years from date of grant........An additional 25% of the total. Four years from date of grant.........An additional 25% of the total.
4. Upon each exercise of an option the purchase price shall be payable in full in cash, (or its equivalent acceptable to the Corporation), or Common Stock already owned by the employee, or a combination of cash and Common Stock.
5. No fractional shares shall be issued under this Plan or under any option granted hereunder, nor shall any cash payment be made in lieu thereof.
6. An option shall not be assignable nor transferable by the employee to whom granted otherwise than by will or by the laws of descent and distribution, and may be exercised, during his lifetime, only by such employee.
7. No person shall have the rights and privileges of a shareholder with respect to shares subject to or purchased under an option until the date appearing on the certificates issued upon the exercise of the option.
B. Each option granted under this Plan may, but need not, include other terms and conditions not inconsistent with the provisions hereof, including a requirement that the optionee represent at the time of each exercise of option that the shares purchased are being acquired for investment and not for resale.
C. Nothing in this Plan or in any option granted hereunder shall confer any rights to continue in the employ of the Corporation or its subsidiaries or interfere in any way with the rights of the Corporation or any subsidiary to terminate the employee at any time.
VIII. Termination of Employment or Death of Employee
A. If the employment of an optionee is terminated for cause, or if he voluntarily quits, his option shall expire forthwith, but he may exercise any installments accrued as of the date of termination of employment provided payment for same is received within 30 days of the termination.
B. If an optionee dies while he is employed by the Corporation or a subsidiary, the option may be exercised by his personal representatives or the persons to whom his rights under the option shall pass by will or the laws of descent and distribution in accordance with terms of the option but only for that number of shares with respect to which installments had accrued as of the date of death. Such exercisable installments must be exercised within three months of death, unless, by its terms, it expires sooner.
C. Notwithstanding the above, an option may not be exercised after the expiration of five years from the date the option is granted.
IX. Adjustments Upon Changes in Capitalization
In the event of any recapitalization, stock dividend, stock split, or combination affecting the stock subject to this Plan, or in the event of any merger, consolidation, or reorganization as a result of which the Corporation is the surviving corporation, the Committee will make appropriate adjustments in the aggregate number of kind of shares subject to the Plan, the number of shares that may be granted to any one employee, and the number of shares and the price per share subject to outstanding options provided that such options remain or constitute incentive stock options within the meaning of Section 422A of the Code. Any such determination of adjustment shall be final and conclusive upon the parties.
In the event of the dissolution or liquidation of the Corporation, or in the event of a reorganization, merger, or consolidation of the Corporation with one or more corporations as a result of which the Corporation is not the surviving corporation, or in the event of a sale of substantially all of the property or stock of the Corporation to another corporation, the Plan shall terminate; and any option then outstanding hereunder shall terminate on the effective date of such transaction; provided, however, that in the event of any such transaction the Board of Directors may, but need not, modify all outstanding options so as to make all such options exercisable in full on a date sufficiently in advance of the effective date of such transaction to permit the shares acquired pursuant to any exercise of such options to be issued before the effective date of such transaction.
X. Amendment and Termination
A. The Board of Directors shall have the power, in its discretion, to amend, suspend or terminate this Plan at any time. The Board of Directors shall not have the power except as may be permitted in Section IX herein:
1. To change the class of employees eligible to receive options under the Plan; or
2. To increase the number of shares subject to the Plan in the aggregate subsequent to the date the Plan is submitted to the shareholders of the Corporation for their approval; or
3. To increase the number of shares subject to an option for any one individual; or
4. To reduce the option price below the fair market value of the stock at the time the option was granted; or
5. To increase the maximum terms of options provided herein.
B. The Board of Directors may, with the consent of an optionee, make such modifications of the terms and conditions of his option as it shall deem advisable.
XI. Effective Date of Plan
This Plan shall become effective as of July 1, 1984, upon approval of the shareholders of the Corporation and shall terminate at the close of business on July 1, 1995.
Exhibit 10.6
THE 1994 INCENTIVE STOCK OPTION PLAN OF AYDIN CORPORATION
150,000 Shares (Last amended October 28, 1994) I. Purpose
The purpose of this Plan is to advance the interests of the Corporation and its shareholders by strengthening the ability of the Corporation to attract and retain in its employ key individuals of training, experience and ability and to furnish additional incentive to officers and valued key employees upon whose judgement, initiative and efforts the successful conduct and development of its business largely depends, by encouraging them to purchase stock in the Corporation.
II. Definitions
As used in this Plan, "Corporation" means Aydin Corporation; "Board of Directors" means the Board of Directors of Aydin Corporation; "employee" includes officers and other key employees of the Corporation and its subsidiaries but excludes members of the Board of Directors who are not also officers or employees of the Corporation; "Stock Option Committee" (the "Committee") means the Board of Directors; "Special Committee" means a committee composed of at least three non-employee Directors that qualify as "disinterested persons" under Rule 16b-3(d)(3); "Common Stock" means the Corporation's Common Stock of the par value of $1.00 per share; "Code" means the Internal Revenue Code of 1986, as amended from time to time.
III. Eligible Personnel
A. All full-time salaried officers and key employees.
B. An employee who has been granted an option may, if he is otherwise eligible, be granted an additional option or options.
IV. Stock Option Committee
A. Subject to the provisions of the Plan, the Committee shall administer the Plan. It shall have authority to construe and interpret the Plan, to define the terms used therein, to prescribe, amend and rescind rules and regulations for the administration of the Plan and to take such other action in the administration of the Plan as it shall deem proper. The interpretation by the Committee of any provision of the Plan or of any option agreement entered into hereunder shall be in accordance with Section 422 of the Code and Regulations issued thereunder as they may be amended from time to time, in order that rights granted hereunder and under said option agreements shall constitute "Incentive Stock Options" within the meaning of that Section.
B. A majority of the members of the Committee, or the Special Committee as the case may be, shall constitute a quorum and make all determinations, take all actions and conduct all business. They shall keep minutes of their respective meetings.
C. Any Committee or Special Committee action may be taken or determination made without a meeting if all members of the respective committee shall individually or collectively consent in writing to such action or determination. Such written consent or consents shall be filed with the minutes of the Corporation.
D. All interpretations, determinations and actions by the respective committee shall be final, conclusive and binding upon all parties.
E. No member of the Committee, or Special Committee as the case may be,shall be liable for any action or determination made in good faith with respect to the Plan or any option agreement.
V. Granting of Options
A. The Committee may at any time and from time to time grant options to eligible employees, to purchase shares of Common Stock of the Corporation under this Plan, determining the specific employees to whom options may be granted, the number of shares to be subject to each option, the terms and provisions of the option agreements, and the time or times at which such options shall be granted, provided, however, only the Special Committee may grant options to officers of the Corporation who are also directors of the Corporation on the date of such grant.
B. The date of grant shall be the date either committee takes the necessary action to make the grant; provided, however, that if the minutes or appropriate resolutions of the respective committee provide than an option is to be granted as of a date in the future, the date of grant shall be such future date. In any event, the optionee must be an employee on the date of the grant.
C. No option shall be granted under this Plan after the close of business on December 31, 2003, but options theretofore granted may extend beyond that date.
D. The options granted hereunder shall be "Incentive Stock Options" as that term is used in Section 422 of the Code.
VI. Shares Subject to the Plan
The total number of shares of Common Stock that may be purchased pursuant to options granted under this Plan shall not exceed 150,000 subject to adjustment as provided in Section IX and subject to amendment as provided in Section X. If any option outstanding hereunder shall expire or terminate for any reason without having been exercised in full, the unpurchased shares subject to the option shall again be available for the grant of options under this Plan. Upon the exercise of an option outstanding hereunder, the Corporation may reissue Common Stock held in its treasury or issue authorized but unissued Common Stock.
VII. Terms of Options
A. Each option granted under the Plan shall include the following provisions, or terms consistent with the following provisions:
1. The purchase price (option price) of the shares subject to option shall be not less than the fair market value of the stock on the day the option is granted. Such fair market value shall be established as the following, in order of descending preference:
a. Mean between the highest and the lowest quoted selling prices of the stock on an exchange.
b. Lacking a. above, the mean between the "bid" and "asked" prices as provided to the Company by a legitimate broker.
c. Lacking a. or b. for the date of grant, the mean between the "bid" and "asked" prices for the most recent date quoted, as obtained for the Company by a legitimate broker.
d. Lacking a., b. or c., the last established determinable price.
2. Except as provided in Section VIII herein, no option may be exercised unless the optionee is at the time of such exercise in the employ of the Corporation or of a subsidiary and shall have been continuously so employed since the granting of his option. For the purpose of the Plan, an employee who is on leave of absence or who is in the Armed Services or the civilian employment of the United States will be considered in the employ of the Corporation or its subsidiaries to the extent his employment would be treated as continuing intact under Sections 421 and 422 of the Code, and the Regulations thereunder, as amended, from time to time.
3. No option may be exercised prior to one year nor after five years from the date of its grant. Unless the option Agreement provides otherwise, any time after one year from the date of grant the employee may exercise his option in accordance with the following schedule:
After: The optionee may purchase:
One year from date of grant.....25% of the total. Two years from date of grant....additional 25% of the total. Three years from date of grant..additional 25% of the total. Four years from date of grant...additional 25% of the total.
4. Upon each exercise of an option the purchase price shall be payable in full in cash, (or its equivalent acceptable to the Corporation), or Common Stock already owned by the employee, or a combination of cash and Common Stock.
5. No fractional shares shall be issued under this Plan or under any option granted hereunder, nor shall any cash payment be made in lieu thereof.
6. An option shall not be assignable or transferable by the employee to whom granted otherwise than by will or by the laws of descent and distribution, and may be exercised, during his lifetime, only by such employee.
7. No person shall have the rights and privileges of a shareholder with respect to shares subject to or purchased under an option until the date appearing on the certificates issued upon the exercise of the option.
B. The aggregate fair market value (determined as of the date the option is granted) of the stock for which any employee may be granted options first exercisable in any calendar year under this Plan and all other "Incentive Stock Option Plans" of the Corporation or its subsidiaries, shall not exceed $100,000.
C. No option under this Plan may be granted to an employee who, at the time the option is granted, owns stock possessing more than 10 percent of the total combined voting power of all classes of stock of the Corporation or of its subsidiaries, provided, however, this limitation shall not apply if such option is granted at an option price of at least 110 percent of the fair market value of the stock on the date of the grant.
D. Each option granted under this Plan may, but need not, include other terms and conditions not inconsistent with the provisions hereof, including a requirement that the optionee represent at the time of each exercise of option that the shares purchased are being acquired for investment and not for resale.
E. Nothing in this Plan nor in any option granted hereunder shall confer any rights to continue in the employ of the Corporation or its subsidiaries or interfere in any way with the rights of the Corporation or any subsidiary to terminate the employee at any time.
VIII. Termination of Employment or Death of Employee
A. If the employment of an optionee is terminated for cause, or if he voluntarily quits, his option shall expire forthwith, but he may exercise any options that are exercisable as of the date of termination or voluntary quit provided payment for same is received within 30 days of the termination. Retirement, including Early Retirement, under any retirement plan of the Corporation or subsidiary is not deemed a voluntary quit.
B. If the employment of an optionee terminates for any reason other than termination for cause, a voluntary quit, disability or death, the option shall expire three months thereafter unless by its terms it expires sooner. During said period, the option may be exercised in accordance with its terms but only for the number of shares with respect to which options could be exercised as of the date of termination of employment.
C. If an optionee dies while he is employed by the Corporation or a subsidiary or within the three month period referred to in Section VIII(B) above or within the twelve month period referred to in Section VIII(D) below, during said period, the option may be exercised by his personal representatives or the persons to whom his rights under the option shall pass by will or the laws of descent and distribution in accordance with terms of the option but only for that number of shares with respect to which options could be exercised as of the date of death. Such exercisable option must be exercised within three months of death, unless, by its terms, it expires sooner.
D. If the employment of an optionee terminates by reason of the optionee's "disability" (within the meaning of Section 22(e)(3) of the Code), the option shall expire 12 months thereafter unless by its terms it expires sooner. During said period, the option may be exercised in accordance with its terms but only for the number of shares with respect to which options could be exercised as of the date of termination of employment.
E. Notwithstanding the above, an option may not be exercised after the expiration of five years from the date the option is granted.
IX. Adjustments Upon Changes in Capitalization
In the event of any recapitalization, stock dividend, stock split, or combination affecting the stock subject to this Plan, or in the event of any merger, consolidation, or reorganization as a result of which the Corporation is the surviving corporation, the Committee will make appropriate adjustments in the aggregate number of kind of shares subject to the Plan, the number of shares that may be granted to any one employee, and the number of shares and the price per share subject to outstanding options provided that such options remain or constitute incentive stock options within the meaning of Section 422 of the Code. Any such determination of adjustment shall be final and conclusive upon the parties.
In the event of the dissolution or liquidation of the Corporation, or in the event of a reorganization, merger, or consolidation of the Corporation with one or more corporations as a result of which the Corporation is not the surviving corporation, or in the event of a sale of substantially all of the property or stock of the Corporation to another corporation, the Plan shall terminate; and any option then outstanding hereunder shall terminate on the effective date of such transaction; provided, however, that in the event of any such transaction the Board of Directors may, but need not, modify all outstanding options so as to make all such options exercisable in full on a date sufficiently in advance of the effective date of such transaction to permit the shares acquired pursuant to any exercise of such options to be issued before the effective date of such transaction.
X. Amendment and Termination
A. The Board of Directors shall have the power, in its discretion, to amend, suspend or terminate this Plan at any time. The Board of Directors shall not have the power except as may be permitted in Section IX herein:
1. To change the class of employees eligible to receive options under the Plan; or
2. To increase the number of shares subject to the Plan in the aggregate unless such increase is submitted to the shareholders of the Corporation for their approval; or
3. To increase the number of shares subject to an option for any one individual; or
4. To reduce the option price below the fair market value of the stock (or below the 110% fair market value when required by Section VII (C) hereof) at the time the option was granted; or
5. To increase the maximum terms of options provided herein.
B. The Board of Directors may, with the consent of an optionee, make such modifications of the terms and conditions of his option as it shall deem advisable.
XI. Compliance with Rule 16b-3
The provisions of this Plan are intended to comply in all respects with the provisions of Rule 16b-3 under the Securities Exchange Act of 1934 and any amendments thereto, and, if this Plan shall not so comply, whether on the date of adoption or by reason of any later amendment to or interpretation of Rule 16b-3, the provisions of this Plan shall be deemed to be automatically amended so as to bring them into full compliance with such rule.
XII. Effective Date of Plan
This Plan shall become effective as of January 3, 1994 upon approval of the shareholders of the Corporation and shall terminate at the close of business on December 31, 2003.
Exhibit 13
Dear Stockholder: Total sales for 1994 were $142,441,000, versus sales of $141,475,000 in 1993. In 1994, the Company had a net income of $5,047,000 or $1.01 per share, as compared to a net loss of $4,967,000 or $1.00 per share in 1993. Aydin's backlog at the end of 1994 was approximately $134 million, as compared to $155 million at this time last year. Lower present backlog, coupled with delays in bookings, may have negative impact on earnings early in 1995. The Company has sizeable production options not included in the above figures. The Company is continuing to bid on large and small military and industrial programs. During the last half of 1994, the Company submitted approximately $800 million in proposals. This is a record for the past several years, and there are several other significant proposals in the preparation stage. The Company's growth strategy is to continue bidding on its basic industrial and military business. In addition, the Company will stress its telecommunication business, including digital wireless telephony and digital telephony for video cable systems. The Company has formed a new division, "Aydin Telecom". Mr. Thomas LoCasale has been appointed President of this Division, reporting to me. This Division will develop, market and sell digital wireless telephony equipment & systems, digital telephony networks for video cable systems, network access equipment, satellite modems, satellite TDMA next generation equipment, transcoders and certain types of multiplexers. In the telecommunications field, Aydin (West) will continue as a separate Division to market and sell microwave radios, cell extender for cellular systems, high power amplifiers and other satellite earth station equipment, troposcatter equipment and turnkey telecom systems. Aydin plans to be a major factor in digital wireless telephony and cable video systems telephony products and network access equipment. The Company expects long-distance carriers as well as cable TV companies to enter into competition with the Baby Bells in local telephony business. Similarly, local telephone companies will enter into long-distance telephony. All of these will be the result of deregulation which is at the proposal stage at this time. Digital wireless systems are competitive in providing telephony networks for developing countries such as Russia, China, and others who wish to expand their telephone networks. At this stage, it is not practical to hang or bury wires to bring a connection to every house, especially in low population density areas. Aydin expects that there will be a large market in telecom equipment business of the type Aydin Telecom and Aydin (West) will sell in the USA and world-wide. Another significant part of our growth plan is to stress System Integration (SI). Aydin believes that the Company is well-positioned to expand its Systems Integration business base. This belief is based on the fact that Aydin has already demonstrated its ability to successfully bid and win major SI contracts against U.S. and international competition. Further, Dr. Donald Taylor was hired effective January 3, 1995, as President of Aydin Corporation and President of the Aydin (East) Division being formed by combining three Aydin Divisions. Before joining Aydin, Dr. Taylor was a vice president of Computer Sciences Corporation and was the key executive responsible for over $2 billion in major SI wins. As a recognized industry expert in bidding, winning and performing on SI contracts, Dr. Taylor will provide valuable guidance to the Company's plans to expand its SI contract base. Finally, the Company recognizes that it must expand its SI business base beyond the government military sector. Thus, the Company will leverage its engineering and software expertise in key technology areas to acquire SI contracts in the non-military and commercial/industrial marketplace. New product development efforts will continue in 1995, especially in the Telecom field. Work is continuing on the Command, Control, and Communication program (Turkish Mobile Radar Complexes), with most of the remaining work being done at Aydin's Turkish subsidiary. This program, valued at approximately $210 million, was awarded to Aydin by the Turkish Government in late 1990. As a result of expected completion of certain phases of this project, Aydin expects a significant reduction of its unbilled revenue and significant positive cash flow starting in the middle of 1995. Capital equipment expenditures in 1994 were approximately $4.4 million, and will probably not change significantly in 1995.
/s/ Ayhan Hakimoglu
Ayhan Hakimoglu Chairman of the Board
February 24, 1995
[PHOTO]
(page 1)
THE COMPANY
CAPABILITIES Aydin's major business areas are described below: Telecommunications - Aydin offers microwave digital and analog transmission equipment and systems for commercial and military applications which include wireless and hybrid fiber coax telephony communications equipment, cellular range extender, line-of-sight (LOS) microwave radios, satellite earth stations, TDMA terminals and high power transmitters, portable communications terminals, troposcatter networks and wired network access products. Aydin also installs turnkey telecom systems. Airborne and Ground Data Acquisition and Avionics - Aydin provides airborne equipment and systems to gather critical information and to process, format and transmit to the ground through communication data links from a communications satellite, spacecraft, aircraft and/or missile. Aydin's terminals receive this data on the ground and analyze it further for display to track and control. Computer Equipment and Software - Aydin sells a line of commercial, high-resolution CRT monitors ranging in size from 10 inches to 29 inches. Workstations are also offered, mostly for the process control industry. Aydin also offers ruggedized and TEMPEST-qualified versions of the same for military applications. Software is written by Aydin for commercial and military purposes for specific applications such as radar simulation, modernization and integration; command, control and communications; and air traffic control systems. Air and Other Traffic Control - Aydin offers radar approach control systems including appropriate radars. Aydin also manufactures VHF and UHF radios for ground-to-air communication. Radars, Radar Simulation, Integration and Modernization - Aydin has developed a modern 3-dimensional tactical air defense radar and has completed and/or is working on several projects in radar simulation, radar integration and automation of manual radars. Modernization of previously designed radars is also done by Aydin. Command, Control and Communications - Aydin provides turnkey command, control and communications (C3) systems with or without radars for defense systems, both fixed and mobile. Systems Integration - Some of the capabilities described above consist of system integration. Aydin plans to expand its present system integration business and additionally pursue industrial/commercial systems.
ORGANIZATION AND MANUFACTURING PLANTS Three major divisions, two smaller support divisions and three operational subsidiaries, form Aydin's organization. The divisions and subsidiaries are profit centers, maintaining individual engineering, manufacturing, marketing and accounting functions. The manufacturing plants, concentrated outside of Philadelphia, Pennsylvania, and in San Jose, California, have approximately 575,000 square feet of space. The Company's foreign subsidiaries, with total plant space of an additional 110,000 square feet, are situated in Ankara, Turkey; Buenos Aires, Argentina; and Hertfordshire, England. An office has been opened in Belgium in support of the NATO RIS Programs.
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OFFICERS Ayhan Hakimoglu * Chairman of the Board, Chief Executive Officer Dr. Donald S. Taylor * President & President, Aydin Corp. (East) John Vanderslice * Exec. Vice President & President, Aydin Vector Demirhan Hakimoglu * Vice President & Chief Executive Officer, Aydin Yazilim ve Elektronik A.S. Mats J. Ofverberg, Ph.D. * Vice President & President, Aydin Corp. (West) Thomas LoCasale * Vice President & President, Aydin Telecom Gary Boswell General Manager, Computer & Monitor Unit of Aydin Corp. (East) John Wong General Manager, Controls Unit of Aydin Corp. (East) Alexis Mozarovski Vice President & President, Aydin S.A. Jay L. Landis Treasurer & Assistant Secretary Herbert Welber * Controller & Assistant Treasurer Robert A. Clancy Secretary Zeynep B. Hakimoglu Assistant Secretary Serdar Akkor General Manager, Aydin Yazilim ve Elektronik A.S. Robert Bancroft President, Aydin Electro Fab Robert Kamin President, Raytor Unit of Aydin Corp. (East) George Isaacs Chief Executive Officer, Aydin Controls (U.K.) Ltd. Gerald Slehofer President, Aydin Molded Devices
BOARD OF DIRECTORS Ayhan Hakimoglu Chairman of the Board Dr. Donald S. Taylor President Dr. Nev A. Gokcen ** Thermodynamicist Department of the Interior Bureau of Mines, Albany, Oregon Admiral Harry D. Train, II, USN (Ret.) ** General Manager, Strategic Research and Management Services Division of Science Applications International Corporation, Norfolk, Virginia I. Gary Bard ** Consultant and Private Investor John F. Vanderslice Exec. Vice President & President, Aydin Vector
* Executive Officer ** Member of the Audit Committee
(page 2)
The complementary nature of Aydin's divisions and product lines enables the divisions to work together to develop and market complete systems. Aydin engineers and computer software specialists have the capability to design any communications, information processing, air defense or air traffic control network utilizing Aydin's various product lines. The Company offers a broad range of products due to its ability to combine analog microwave engineering methods with digital techniques and software.
SALES AND MARKETING Corporate marketing, located in suburban Washington, DC, supports the direct sales forces of the divisions. Major cities and key military bases are covered by Aydin sales personnel or manufacturers' representatives. For exports, Aydin's sales efforts are conducted by its international subsidiaries, its international sales network and representatives in many countries. Proprietary products and systems are available from Aydin, although an inventory of finished goods is not generally maintained. About one-half of the sales is attributable to standard products and systems, including modifications thereof, and the other half is for custom-designed and engineered equipment based on customers' specific requirements. Customers include domestic and foreign electronic and aerospace firms, regulated and unregulated telephone organizations, computer and aircraft manufacturers, large defense contractors, industrial and financial concerns, process control companies, research laboratories, foreign governments, and the military branches and other agencies of the U.S. Government. Industrial business was approximately 18% of the total revenues in 1994, while 29 % was comprised of sales in which Aydin was a prime or subcontractor to the military branches and other agencies of the U.S. Government. The remaining 53% of revenues was from overseas sales including equipment sold to other U.S. companies for export.
SUBSIDIARIES Aydin has three operating international subsidiaries, all 100%-owned. Aydin Controls (U.K.) Ltd., located in Hertfordshire, England, provides sales and service for color terminals, display processors, high resolution color monitors and telecommunications products. In Argentina, Aydin S.A. sells and installs wireless and other telecommunications products and systems. The Company's subsidiary in Turkey, Aydin Yazilim ve Elektronik A.S., is located in Ankara. Aydin Yazilim ve Elektronik is manufacturing the last portion of the Turkish Mobile Command, Control and Communications (C3) system in Turkey. Aydin Yazilim also writes software for NATO and Turkish Programs in conjunction with Aydin. Aydin Yazilim enhances Aydin's export business. All of the above mentioned subsidiaries have extensive technological capabilities. See Note I to the financial statements for more information concerning export sales.
RESEARCH AND NEW PRODUCT DEVELOPMENT Product development expenditures in 1994 were 7.0% of Aydin's revenues. About 48% of new product development is done through customer contracts.
[PHOTO] Line-of-Sight Radios and Troposcatter Terminals, Transportable
(page 3)
TELECOMMUNICATIONS
Aydin offers microwave digital and analog transmission equipment and systems for commercial and military applications, which include wireless and hybrid fiber coax telephony communications equipment, cellular range extender, line-of-sight (LOS) microwave radios, satellite earth stations, TDMA terminals and high power transmitters, portable communications terminals, troposcatter communications and wired Network Access products. Aydin also installs turnkey telecom systems.
Wireless and Hybrid Fiber Coax Telephony Aydin is developing its DigiCall(TM) product line which combines our microwave and digital capabilities to provide voice, data and video conferencing services over wireless or hybrid fiber coax networks. The Aydin DigiCall(TM) Model 6032 is a radio frequency-based digital loop carrier system that uses enhanced TDMA/FDMA to provide a cost effective wireless link between the telecom service provider and service subscribers. Voice quality is far superior to standard cellular telephone. The Aydin DigiCall(TM) Model 7024 provides telephony and PCS services via wired or wireless access to a hybrid fiber coax cable system owned by the Cable TV companies. Aydin's DigiCall(TM) systems interface with all standard telephone infrastructure equipment and are transparent to the cable TV, central office telephone plant and subscriber telephone equipment. The Aydin AyCell, currently under development, provides an inexpensive method of expanding cellular telephone coverage to areas where calls cannot currently be completed. Functioning as a user-transparent remote antenna link, the AyCell will enable an existing cell to communicate with areas that were previously "blacked out" due to geographical or man-made obstructions. Applications include coverage inside convention centers, shopping malls and sports arenas. Aydin is continuing work on installation of a cellular telephony network for a local cellular telephone company in Argentina by its subsidiary.
Line-of-Sight Radios Many types of medium and light route digital and analog microwave radios for commercial and military use are manufactured by Aydin. These radios include a light route AMLD analog and AMLDD digital low density commercial radios, and the new AMCD series of medium route fixed frequency high density digital radios. The AN/GRC-222 tactical digital radio, used by the U.S. Army in Desert Storm is manufactured by Aydin. For commercial and military users requiring field tunable digital radios, the AMD series is available for tactical, strategic and emergency uses. These radios are available for use with North American or CEPT European data rates from 1.5 to 45 Mbps, and cover tunable bands from 3.2 to 15 GHz. For medium route U.S. domestic and international commercial markets, the AMCD series of fixed frequency, high density digital radios are offered. Both 64 quadrature amplitude modulation (QAM) and 128 Trellis Coded Modulation (TCM) techniques are used to satisfy the bandwidth requirements of modern digital systems. E3 (34 Mbps), DS3 (45 Mbps), and SONET (51 Mbps) data rates and frequency options with 6, 7, and 11 GHz versions are available in a 19-inch EIA rack configuration. The low cost AMLD series of low density analog and digital radios are intended for the light route commercial market. Sales of analog microwave systems continue to be strong, particularly in the Third World, as analog systems are still the most cost effective solution for light route systems. The digital variations are available with optional multiplexers in North American or CEPT rates up to 8 Mbps. Aydin's radio products can be combined with the Aydin multiplex products providing significant Aydin content in turnkey systems.
Satellite Communications Aydin manufactures the major products used in satellite earth stations, such as high power amplifiers (transmitters), medium power and low noise GaAs amplifiers, up/down converters, digital data buffers, and modems featuring forward error correction.
[PHOTO]
Multi-User Subscriber for DigiCall(TM) for Wireless or Cable TV Telephony Networks
[PHOTO]
Field Tunable Military AN/GRC-222 Tactical Digital Radio for U.S. Army
(page 4)
Aydin and COMSAT Laboratories are cooperating to market and manufacture the Second Generation Satellite TDMA Terminals. These terminals, which significantly reduce the size and cost over first generation terminals, are easily reconfigurable to meet a user's changing traffic needs. Current Aydin satellite communication high speed modems operate up to 120 Mbps; a 420 Mbps modem is in development. Aydin modems are installed in major government and commercial networks in North America and Europe. These products are used for both primary links and as a back-up to cable service. Customers include AT&T, KDD (Japan), British Telecom, France Telecom, Telesat Canada, and Embratel (Brazil).
High Power Transmitters and Magnetics Aydin continues to provide commercial high power transmitters (HPAs) for satellite earth stations. Aydin's line of compact, intelligent, microprocessor controlled TWT and Klystron microwave amplifiers offers a distinct advantage over the competition. Aydin's latest HPA product is an outdoor-mounted 400 Watt Tri-Band (C, X, Ku-Band) TWTA suitable for mobile military SATCOM applications. In addition to the HPA business, Aydin has maintained a steady presence in magnetics products, supplying high power transformers to the electronics industry. Aydin's high efficiency television transmitter upgrade transformers are expected to show continuing demand.
Portable Communication Terminals Aydin is producing the AYCOM portable line-of-sight communication terminal with two voice and data PABX, capable of providing service for up to 96 subscribers. The AYCOM terminal contains an Aydin Hot-Standby protected microwave radio configured for terminal operation, and an AT&T Definity G3Vs digital automatic PABX with software selectable line and station capabilities. The AYCOM terminal is the perfect solution for short-haul (40-50 Km), low density remote subscriber link requirements.
Troposcatter Communications As one of the few manufacturers of troposcatter equipment, Aydin has analog and digital versions of this equipment for both transportable and fixed station use. Aydin's digital troposcatter modem is the most modern dual or quad diversity adaptively equalized modem. Troposcatter terminals are used in air defense systems, command and control systems, on offshore platforms and for military tactical communications. Aydin's digital troposcatter terminals have been in production for years and are being delivered to international customers. Some customers are classified, but others include the U.S. Armed Forces, Argentina, Australia, Chile, Egypt, Finland, Malaysia, the Philippines, Saudi Arabia and South Korea. Aydin provides ongoing support to these customers for maintenance and upgrades.
[PHOTO]
Satellite TDMA Terminal (Second Generation) Jointly Developed with COMSAT
[PHOTO]
For Satellite Communications, Outdoor-Mounted, 400 Watt Tri-Band (C, X, Ku-Band) TWTA High Power Transmitters
[PHOTO]
For Satellite Communications, 600 Watt Ku-Band TWTA High Power Transmitter
(page 5)
Network Access Equipment Aydin's network access unit (AYNACS 8000) provides cost effective access to public telephone networks for today's voice, data and video applications. It integrates all communications needs of the user of various bandwidths and transmits them through public networks at T1 standard for domestic market, and E1 standard for the rest of the world, to form an integrated and coherent product family. A major development effort is underway to expand this network access product line to include standalone Digital Access and Cross Connect Systems (DACS), E1/T1 conversion and HDSL products.
Transcoders & Multiplexers Aydin has a variety of T1 and E1 transcoders for voice and voiceband applications. Aydin's product line includes T1 and E1 ADPCM 2:1 (Models 9100 and 9102) and 4:1 (Model 6441) T1 transcoders and echo cancellers for the domestic and international marketplace. Customers include Regional Bell Operating Companies and other service providers. Model 9100 transcoder is equipped with unique features including bundle cross connect and drop/insert capability, automatic routing and protection switching and restoration. Aydin transcoders are capable of handling Group III fax or 9600 bps modem traffic. The 9100 series transcoders are also offered in a single 19-inch rack mount multislot chassis for plugging in up to 11 modules. The Aydin VDM-1000 multiplexer accepts up to 30 standard telephone channels and combines them into E1 digital format. Both voice and data requirements can be combined using the same multiplexer dependent on the channel card mix. A ruggedized version is available for military applications.
Turnkey Telecommunications Systems Aydin continues to respond to the demands for highly reliable, turnkey systems which may include line-of-sight radios, troposcatter links, satellite earth stations, multiplexers, switches, fiber optic cables, etc. Aydin has established a reputation in this sector of the industry with turnkey systems supplied to countries such as Argentina, Australia, Chile, Egypt, Ghana, Malaysia, Saudi Arabia, Thailand, Turkey, Zambia and Finland.
Thick and Thin Film Microcircuits Aydin's vertical integration strategy enables the design and manufacture of small and highly reliable RF and microwave microcircuits that operate over 100 MHz and through 40 GHz. These hybrid devices are used in extreme environments and meet special performance requirements and applicable Federal-MIL Standards. Applications include high performance telecommunications systems, satellite terminals and microwave simulation, as well as test equipment.
[PHOTO]
Aydin Portable Communication Terminal (Includes Radio and Switch)
[PHOTO]
Light Route, Low Cost LOS Digital Microwave Radio
[PHOTO]
Medium Route 34 and 45 Mb/s QAM or 51 Mb/s 128 TCM LOS Digital Radios for E3, DS#, or SONET Capacities, respectively
(page 6)
DATA ACQUISITION & AVIONICS
Ground-Based Data Receive and Acquisition Systems Aydin provides extensive capabilities in the reception, processing, and analysis of data streams associated with spacecraft, aircraft and missile systems or ground vehicles. Aydin's satellite Telemetry, Tracking, and Control (TT&C) product line continues to expand in response to the proliferation of international commercial communication satellites. Key components of INTELSAT's global system, and many regional systems include Aydin Subsystems which collect and distribute satellite data. Major remote sensing systems like NASA's Earth Observing System (EOS) program have principal components supplied by Aydin, such as the Space Data Receiver. Aydin is a leader in CCSDS communication technology, which serves as a common baseline for many remote sensing systems. Aydin also offers systems that support aircraft testing, using data-driven architectures with advanced database management techniques. The growing small or micro satellite industry uses Aydin's equipment and systems to provide a cost-effective link with these systems. The personal communication satellite systems and remote imaging and sensing fields are all expanding and are attractive markets for Aydin's products.
Airborne Data Acquisition and Transmission Aydin systems and equipment gather critical information from spacecraft, aircraft, missiles and guided weapons. The data is then processed, formatted and transmitted to a fixed or mobile station on the ground by VHF, UHF or microwave links. Aydin designs and manufactures both the airborne and ground-based links for many types of applications. Aydin airborne data acquisition systems and subsystems are compact, rugged and ideally suited for use in hostile environments or where space is limited. The systems are microprocessor based, computer programmable, and utilize the latest microcircuit technology. Aydin airborne hardware is located on most military aircraft and missiles, and most space programs including the Space Shuttle. Applications include flight certification for commercial and military aircraft. The transmission equipment manufactured by Aydin includes solid state transmitters, receivers, and high power amplifiers. Transmission power of up to 2 kilowatts is available in either continuous or pulsed power operation. Aydin high power UHF transmission communication links are currently being used by NASA to relay satellite and Space Shuttle information from various sites around the world. Advanced airborne RF processors, modulators, power amplifiers and receivers are used in the latest technology missile guidance systems. For remotely piloted vehicles and precision guided weapons, Aydin manufactures command/control data links, video communications links and telemetry systems.
Avionics Aydin offers a series of MIL-STD-1553 and ARINC 429 avionic bus systems, tape recorders, and transponders. This equipment provides on board processing of data and communicates with other avionic systems. These avionic products include a small, ruggedized digital tape recorder designed to meet the demands of commercial, industrial and military users. The tape recorder is used in applications which require high capacity data storage. An Aydin companion playback unit with analytical software is used for data reduction and analysis.
[PHOTO]
Wideband Satellite Telementry Transmitter
[PHOTO]
Airborne Data Acquisition Systems for Testing Commercial Aircraft for Indonesia
(page 7)
COMPUTER EQUIPMENT & SOFTWARE
Color CRT Monitors Aydin provides a complete line of commercial color monitor products ranging in size from 10" to 28". The products support applications from TV to 1600 x 1280 resolutions and may integrate with a wide variety of touch screen technologies. With this wide range of sizes and options, Aydin offers customers a single monitor supplier solution. To reinforce our commitment to customer satisfaction, Aydin has a "Specials" department to supply customized solutions. Aydin continues its research in CRT and flat panel display technologies. The company expects to introduce new products in 1995 utilizing 29" CRT's, and 13" color flat panel displays at resolutions up to 1280 x 1024. The products will include stand alone displays and terminals.
Color Displays & Workstations Aydin also specializes in providing display processing solutions for the critical man-machine interface between operators and their processes. Applications include petro-chemical, oil, gas, pulp and paper, transportation, power generation, and power distribution utilities, as well as most other industries. Presently, Aydin is manufacturing and developing new products to upgrade these existing customers and to branch out into new application areas. Open system-based solutions are being offered which allow the user to maintain the investment in installed system software, upgrade hardware to current state-of-the-art, and expand capabilities beyond the boundaries of the initial installation. Aydin has developed and offers software packages, which emulate the installed base of Aydin 5215 display processors in process control industries especially by electric utilities. These emulators, which facilitate upgrades for existing customers, are available for a number of platforms including UNIX/X-Windows, MS-DOS, MS Windows, and Windows NT. The Aydin Model 7402 Industrial Workstation not only provides a replacement for an Aydin display processor, but also functions as the equivalent of eight individual workstations, each with state-of-the-art computing power. UNIX, X-Windows and Ethernet ensure open architecture compliance, along with industry standard VME and SCSI busses. The workstation can connect to existing installed host computers using its own integrated gateway or by means of an external gateway. Both methods provide the user with an economical, yet powerful plug-and-play upgrade solution. Recently, Aydin has included a complete line of high performance X-Terminals to address network solutions in a client-server environment. These are available in a number of configurations, including color (24 bit), greyscale, and monochrome. A 13" color LCD version is available, as well as other LCD and CRT versions.
Ruggedized Workstations Aydin's ruggedized Sun SPARCstation 10 color workstations have been supplied to the Australian Army for use in a shelter, mobile resource and communications management system. Also, Aydin is under contract to the Australian Army to supply ruggedized Sun SPARCstation 10 servers as line control units for this same project. All of these units have been tested to ground mobile shock and vibration requirements, EMI and TEMPEST, and for operation at temperatures down to -15 degrees C. Aydin also has a ruggedized portable "briefcase" style workstation utilizing color LCD displays and a variety of CPUs.
[PHOTO]
Spectrum Autosync(R) 28" Large Screen MicroProcessor-Controlled High Performance Monitor
[PHOTO]
Spectrum Autosync(R) 20" Microprocessor-Controlled VGA Monitor
(page 8)
Ruggedized Monitors Aydin's ruggedized product line of color video monitors now includes a 19" auto-scanning RGB monitor (Model 9010R/20). This high resolution, ruggedized auto-scanning monitor is also offered with a newly developed Active Magnetic Cancellation System (AMCS). The AMCS enables the color monitor to maintain full performance under a high magnetic field used by a warship, including submarines, to eliminate its magnetic signature. Aydin completed the qualification testing and delivery of ruggedized 19" color monitors (Model 8943R/19) for use in severe ground mobile environments including operation at low temperature down to -35 degrees C encountered in the Swiss Alps. Air defense consoles and radar displays for airspace management, aircraft simulation training, shipboard combat information centers and air defense centers are manufactured for a variety of programs. Aydin's air defense console, the field-proven ADC-22, is operating effectively in many current Air Defense and Radar Sites in numerous countries. Rugged EMI/TEMPEST flat panel tactical terminals, TEMPEST monitors, radar displays, and air defense consoles are also manufactured by Aydin.
Software Software is written by Aydin for commercial and military purposes for specific applications such as radar simulation, modernization, integration, and for command, control and communication and traffic control. Aydin has combined several new software technologies into an integrated tool set. The Aydin software engineering includes development platform independent popular software operating environments like Ada, C, C++, FORTRAN and 4th Generation compilers and SQL's, various functional and application dependent library utilities, language linkers, popular relational data bases, symbolic debuggers and automatic software configuration/documentation tools. Aydin is experienced in developing its software in accordance with MIL-STD-2167A to produce highly reliable, easily maintainable and very transportable applications code. Also, Aydin uses automated "look and feel" applications generators like Visual BasicTM to quickly generate Man Machine Interfaces that are essential in its systems products.
[PHOTO]
Aydin Model 7402 Industrial Workstation
[PHOTO]
Ruggedized SPARC 10 Workstation with Ruggedized 20" Color Monitor and Keyboard/Trackball Unit
(page 9)
AIR & OTHER TRAFFIC CONTROL
Radar Approach Control (RAPCON) Aydin has developed an advanced Mobile Radar Approach Control Operations System which uses extensive multi-processor air traffic and air space management software, large flat panel (plasma) displays, local area networking, and highly automated voice and data communications. The system can be configured for both military fixed site and commercial air traffic control applications. Aydin also offers complete RAPCON systems with surveillance and precision approach radar.
UHF and VHF Radios Aydin's UHF and VHF transmitters, receivers and power amplifiers are used in ground-to-air communications for air traffic operations, control and reporting centers, airport towers and ground control approach applications. These radios are configured for either collocated transceiver applications or split site, and can be controlled either locally or from a remote position. For UHF operation, Have Quick II anti-jam capability is provided.
Vessel & Other Traffic Control Aydin offers vessel and other traffic control systems similar to Rapcon described above with appropriate communication equipment.
[PHOTO]
GCA-1000 Series Radio for Commercial and Military Air Traffic Control Applications
[PHOTO]
Interior View of the Operations Center for Air Traffic Control
(page 10)
RADARS, RADAR SIMULATION, INTEGRATION & MODERNIZATION
Radars Aydin has developed a modern three-dimensional (3-D) tactical air defense radar system, ASTAR-3. A C-band radar, it offers the latest technology, microprocessor-based processing, sophisticated ECCM, high system availability, low cost and advanced clutter rejection. A key feature of ASTAR-3 is its mobility, as it can be transported on a single truck. The ASTAR-3 development effort included the design of a sophisticated phased array antenna.
[PHOTO]
Aydin has delivered eleven Multiple-Threat Emitter Simulator Systems (MUTES), a Radar Simulator System for the U.S. Air Force
Radar Simulation and EW A contract for the production of eleven Multiple Threat Emitter Simulators (MUTES) was won by Aydin several years ago. The last system was delivered in 1994. MUTES, nomenclatured AN/MST/T1A, is a ground-based radar simulator, used for evaluation of airborne radar warning and electronic countermeasures systems and pilot training. Operating under computer control, MUTES controls the radiation characteristics of a bank of transmitters in order to simulate the electronic environment created by a wide range of surveillance, tracking and guidance systems.
Radar Integration An air defense program for NATO is RIS (Radar Integration System), used for NATO's southern flank. Aydin's system is a LAN for radars. The system is implemented using Ada software which links multiple local and remote radars to a central processor for concurrent display.
Radar Modernization The Automation of Manual Radars and integration into the NATO Air Defense Ground Environment (NADGE) system, ordered by the Turkish Ministry of Defense in late 1992, is in its final acceptance phases. Aydin is under contract to the Belgian Air Force to add a Radar Environmental Simulator and modern computer workstation to the Belgian Air Defense System. This system contains radar video data extractors, automated data processing including multiple radar target tracking, Link-1 interfacing to other sites and multiple operator display consoles. Aydin will offer this product worldwide.
[PHOTO]
Radar Integration System (RIS)
(page 11)
COMMAND, CONTROL & COMMUNICATION (C3)
Turnkey command, control and communications (C3) and complete air defense systems, both fixed and mobile, are provided by Aydin. In-house capability in sensor technology includes 2-D and 3-D ASTAR radars, long haul communications using microwave radios and/or troposcatter, local communications using LANs and ground/air/ground radios, data links for external systems interfaces, computer systems, display systems and other security devices. Applications software is also provided for air surveillance, sea surveillance, anti-submarine warfare and air defense systems. These C3 and air defense systems are built by coupling hardware elements with standard software elements such as link processing, tracking, correlation, database, sensor and multisensor processing, flight plan processing, data recording-reduction-playback, simulation and training. System elements include Aydin's ADC-22 standard console, large screen plasma display consoles with soft-touch screen controls, color CRT Operator Workstations with Windows environment, Aydin's GRC-222 radio, LINK-11, JTIDS, Aydin UHF/VHF radios with or without frequency hopping, and a variety of radar specific devices. Using technical expertise in a range of disciplines, such as weapons, communications, radio theory, antenna design and placement, threat analysis, sensor and display technology, coupled with Aydin's wide range of standard hardware and software system elements, Aydin can be very cost effective for C3 and air defense systems. Work continues on the Turkish Mobile Radar Complexes program, the C3 portion of a mobile air defense system, valued at approximately $210 million, awarded to Aydin by the Turkish Government in late 1990. Most of the remaining work is being done at Aydin's Turkish subsidiary.
[PHOTO]
Interior View of Aydin's Command Shelter for C3 Applications
[PHOTO]
Mobile Command, Control, and Communication Shelter Assembly at Aydin Yazilim ve Electronik A.S. in Turkey
(page 12)
SYSTEM INTEGRATION
Aydin believes that the Company is well positioned to expand its Systems Integration (SI) business base. This belief is based on the fact that Aydin has already demonstrated its ability to successfully bid and win major SI contracts against U.S. and international competition. The most recent examples are the Turkish TMRC Command, Control, Communication, Belgium Radar, and the NATO RIS projects. The Company successfully executed three major initiatives that were specifically targeted to grow its SI contract base. First, the Sales and Marketing organization was tasked to identify target SI opportunities that fall within Aydin's existing business areas, e.g. telecommunications; command, control, and communications; and radar systems. This initiative resulted in the identification of over $750M of new SI opportunities that the Company is actively pursuing. These opportunities include the Air Traffic, Navigation, Integration, and Coordination System (ATNAVICS), Next Generation Target Control System (NGTCS), Digital Video Teleconferencing System (DVTS), and the Integrated Management Communication Program (IMCP), and the new Egyptian National Railroad Communications Project. Second, recently in 1995, the Company combined its Controls and Computer and Monitor Divisions, forming Aydin Corporation (East), to improve the efficiency and competitiveness of its computer equipment, software, air traffic control, radar integration and command, control and communications operations. Third, the Company sought to acquire a new Corporate President with a proven record of success in the SI arena. This initiative was accomplished when Dr. Donald S. Taylor was hired, effective January 3, 1995, as Corporate President and President of the recently formed Aydin Corporation (East) Division. Before joining Aydin, Dr. Taylor was a Vice President of Computer Sciences Corporation (CSC) and was the key executive responsible for over $2 billion in major SI wins. As a recognized industry expert in bidding, winning, and performing on SI contracts, Dr. Taylor will provide invaluable strategic guidance to the Company's plans to expand its SI contract base. In 1995, Aydin will continue to aggressively pursue SI opportunities world-wide, particularly in Turkey, NATO, Argentina, Egypt, and other countries where the Company has had success in the past. Additionally, Aydin will target selected SI opportunities with the U.S. Government, either as a prime or as a major subcontractor. Corporate focus and priority will be on $50M+ SI opportunities whose technical and cost drivers are directly related to the technology and products provided by the Company's three major product areas. Finally, the Company recognizes that it must expand its SI business base beyond the government military sector. Thus, the Company will leverage its engineering and software expertise in key technology areas to acquire SI contracts in the non-military and commercial/industrial marketplace. Representative examples of opportunities that the Company is considering include computer-controlled manufacturing, turnkey process control systems, wireless and other communications systems, multimedia systems, and industrial simulation and training systems.
[PHOTO]
Field Testing of Turkish Mobile Radar Complex (TMRC), actually a Command, Control, and Communications System
(page 13)
CONSOLIDATED STATEMENTS OF OPERATIONS
Aydin Corporation and Subsidiaries
See notes to consolidated financial statements.
(page 14)
CONSOLIDATED BALANCE SHEETS
Aydin Corporation and Subsidiaries
See notes to consolidated financial statements.
(page 15)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Aydin Corporation and Subsidiaries
See notes to consolidated financial statements.
(page 16)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Aydin Corporation and Subsidiaries
Note A Summary of Significant Accounting Policies Principles of Consolidation: The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and balances are eliminated in consolidation. During 1994, $75,000 was paid to minority shareholders in the Turkish subsidiary raising the ownership to 100% from 99% at December 31, 1993. Contract Accounting: Revenue on long-term type contracts in excess of $100,000 is recorded on the percentage-of-completion method. For such contracts, a portion of the total contract price is included in sales in the proportion that costs incurred to date bear to total estimated costs at completion. The impact of periodic revisions in costs and estimated profit is reflected in the accounting period in which the facts become known. For all other contracts, revenue is recognized upon completion of the contract or upon shipment of identifiable units. The entire amount of ultimate losses estimated to be incurred upon completion of contracts is charged to income when such losses become known. Contract progress billings are based upon contract provisions for customer advance payments, contract costs incurred, and completion of specified contract objectives. Contract billings for partial shipments where product title passes to the customer are not considered progress billings. Contracts may provide for customer retainage of a portion of amounts billed until contract completion. All contract retainage at December 31, 1994 matures in 1995. Claims from customers of approximately $1.0 million for work performed outside the scope of certain contracts for which the Company anticipates recovery are included in unbilled revenue at December 31, 1993 and 1994. Unbilled revenue at December 31, 1994 also includes approximately $2.7 million relating to contract options exercised by a customer conditional upon completion of certain acceptance tests. Under the contract with the Government of Turkey, the Company received total advance payments of $56 million in October 1990 which are being applied against future billings over a period of approximately six years. The contract provides for price escalation based on U.S. and Turkish inflation rates. Inventories: Inventories are valued at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO) and average cost method which approximates FIFO. Depreciation and Amortization: Depreciation is provided by the straight-line method ove the estimated useful lives of the depreciable assets. Amortization of leasehold improvements under operating leases is provided over the terms of the related leases or the asset lives, if shorter. Income Taxes: The Company accounts for income taxes on the liability method in accordance with Statement of Financial Accounting Standards (FAS) No. 109. Foreign Currency Translation: In accordance with FAS No. 52, balance sheet accounts of the Company s United Kingdom and Argentina subsidiaries are translated from the local currency into U.S. dollars at year-end rates while income and expenses are translated at the weighted average exchange rate for the year. The resulting translation gains or losses are shown as a separate component of stockholders equity. The translation effects of the Turkish subsidiary are reflected in the income statement as required by FAS No. 52 because of the high inflation in the Turkish economy. Pretax income for 1994 includes foreign currency translation gains relating to the Turkish subsidiary of $755,000. Earnings (Loss) Per Share: Earnings (loss) per share are based on the weighted average number of common shares outstanding plus shares issuable upon the assumed exercise of dilutive common stock options. The number of shares used in earnings (loss) per share calculations was 4,998,701 for 1994, 4,959,740 for 1993, and 5,043,063 for 1992. Statement of Cash Flows: The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Short-Term Investments: Short-term investments are carried at cost which approximates market. Short-term investments at December 31, 1994 consist of interest-bearing certificates of deposit and time deposits with initial terms of 3 to 6 months. Cash and short term investments include $18.2 million held as collateral against outstanding letters of credit.
Note B - Inventories Inventories at December 31, 1994 and 1993 consist of:
Note C - Property, Plant, and Equipment The Company s investment in property, plant, and equipment at December 31, 1994 and 1993 follows:
Note D - Short- and Long-Term Financing Arrangements The Company has arrangements with certain banks whereby $46,300,000 has been used for letters of credit and short-term cash borrowings. These arrangements provide for interest on borrowings at the prime lending rate (8.5% at December 31, 1994) plus 2%. These arrangements also require informal compensating cash balances of $150,000 and provide for commission rates on letters of credit at 1% to 1 1/8%. As of December 31, 1994 and 1993, there were $6,486,000 and $21,525,000 of bank borrowings under these arrangements, respectively. The banks are requesting payment of these short-term borrowings which the Company anticipates making during 1995 from internal cash flow. The Company is seeking new banking arrangements to cover future potential needs. At December 31, 1994, $39,843,000 of letters of credit were outstanding under these arrangements. Cash or short-term investment collateral of $13,081,000 is required to be maintained for letters of credit that have been issued. These have been issued to foreign entities, principally to guarantee either contract performance or the return of unearned advance payments in the unlikely event that performance is not in accordance with the contracts, or to foreign suppliers to guarantee payment to them of the amount due. Of the total amount outstanding, $30.3 million pertains to the Company s contract with the Government of Turkey. This letter of credit was issued pursuant to a Credit Agreement with certain banks. The term extends to October 4, 1996 or until the letter of credit is reduced to zero, whichever occurs first. Cash or short-term investment collateral is required to be maintained equal to 1/3 of the balance outstanding in the letter of credit which amounts to $10.1 million. In addition to certain financial covenant requirements, the Credit Agreement contains restrictions concerning the payment of dividends and purchase of treasury stock which in the aggregate are limited to 50% of net income for the prior four fiscal quarters. Additional letters of credit of $5.1 million pertaining to the Turkish contract and other requirements have been issued by a Turkish bank for the Company s Turkish subsidiary. These letters of credit are not part of the Company s line of credit. Cash or short-term investment collateral is required to be maintained by the Turkish subsidiary equal to 100% of the balance outstanding on these letters of credit.
(page 17)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Aydin Corporation and Subsidiaries
Note E - Long-Term Debt Long-term debt at December 31, 1994 and 1993 consists of the following:
Interest expense on long- and short-term debt for the years 1994, 1993, and 1992 amounted to $1,142,000, $1,310,000, and $639,000, respectively. Interest paid for the years 1994, 1993, and 1992 amounted to $1,226,000, $1,402,000, and $409,000, respectively.
Land and buildings having a net carrying value of $5,276,000 at December 31, 1994 have been pledged as collateral for the mortgages.
Aggregate maturities of long-term debt for each of the years 1995 through 1999 are as follows: 1995-$402,000; 1996-$407,000; 1997-$413,000; 1998-$201,000; and 1999-$207,000.
Note F - Stockholders' Equity The changes in common stock, additional paid-in capital, treasury stock, retained earnings, and foreign currency translation effects durinq the years 1992, 1993, and 1994 were as follows:
(page 18)
NOTES TO CONSOLIDATED FINANCIAL STATMENTS (CONTINUED)
Aydin Corporation and Subsidiaries
Note G - Stock Options Pursuant to stock option plans, the Company has granted certain officers, directors, and key employees options to purchase shares of its common stock. Options granted under the plans must have an option price determined by the Board of Directors, but in any event, not less than the fair market value of the date of grant except for the 1984 plan of 187,500 shares which permits the Board of Directors to set an option price up to 50% less than the fair market value of the stock on the date of grant. Generally, options become exercisable one-fourth annually beginning one year after grant, on a cumulative basis, and expire five years after grant.
There is no charge to income with respect to stock options under the plans. A summary of the changes in options during 1992, 1993, and 1994 follows:
These options expire on various dates beginning January 1995 and ending December 1999. The average exercise price of options outstanding at December 31, 1994 is $11.66.
Note H - Taxes on Income The provision (recovery) for income taxes consists of the following:
A reconciliation between the federal statutory rate and the effective income tax rate (computed by dividing income taxes by income before income taxes and minority interest) is as follows:
Income tax payments, net of refunds, amounted to $5,066,000 in 1992 and $2,138,000 in 1993. Income tax refunds, net of payments, amounted to $940,000 in 1994.
The Company has not provided deferred income taxes of approximately $600,000 on cumulative unremitted earnings of foreign subsidiaries, based on management's intention to permanently invest such earnings in the foreign jurisdictions.
Note I - Export Sales, Major Customers, and Foreign Operations The Company operates predominantly in the electronics manufacturing industry. Export sales by geographic area are as follows:
The U.S. Government, the Government of Turkey and CTI (Argentina) were the only customers to whom sales exceeded 10% of consolidated sales during any of the past three years. Sales to U.S. Government agencies, principally the Department of Defense, amounted to $42,015,000, $38,600,000 and $39,347,000 in 1994, 1993 and 1992, respectively. Sales to the Government of Turkey amounted to $24,888,000, $45,134,000 and $48,738,000 in 1994, 1993 and 1992, respectively. Accounts receivable at December 31, 1994 includes $12.5 million from the Government of Turkey. Sales to CTI amounted to $15,739,000 in 1994. Foreign assets included in the consolidated balance sheet amounted to $33.7 million, $22.9 million and $23.4 million at December 31, 1994, 1993 and 1992, respectively. Of these amounts, $6.7 million, $10.0 million and $19.1 million, at December 31, 1994, 1993 and 1992, respectively, is cash and short-term investments of the Company's Turkish subsidiary consisting of U.S. dollar denominated interest-bearing time deposits. In addition, at December 31, 1994 cash and short-term investments at the Argentina subsidiary was $1.9 million. Foreign sales and pretax income for 1994 amounted to $37.2 million and $6.7 million, respectively, of which $21.1 million and $2.1 million, respectively, was for the Argentina subsidiary. Foreign sales and pretax income for 1993 amounted to $23.0 million and $3.9 million, respectively. Foreign sales and pretax income for 1992 amounted to $19.3 mililion and $3.3 million, respectively.
Note J - Contingencies The Company along with others is responsible for the cost of cleanup at a site leased by the Company prior to 1984 under an order of the State of California. The cost to date for the cleanup of the California site over the past ten years has been approximately $5.8 million. Settlement has been reached with three of four insurance carriers for approximately $6.7 million which was received during 1993 and applied to the cleanup costs previously incurred and cost to go. A court has granted a declaratory judgment requiring the fourth carrier to pay all cleanup costs in excess of the $6.7 million already received. This judgment is being appealed by the fourth carrier. Management believes the ultimate resolution of this entire matter will not have a materially adverse effect on the financial position or results of operations.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Aydin Corporation and Subsidiaries
The IRS, as part of a field examination, has disallowed certain prior years research and development tax credits taken by the Company amounting to approximately $3.5 million plus related interest. The Company is challenging this finding with the appeals office of the IRS. Management is of the opinion that the ultimate resolution will not have a materially adverse effect on the financial position or results of operations.
Note K - Settlement with the Department of Justice On January 5, 1994, the Company reached settlement agreements with the U.S. Army and the Department of Justice ("DOJ") with reference to the AN/GRC-222 microwave radio contract. Under the terms of the agreement, the U.S. Army will reinstate the radio contract by withdrawing its previous termination for default issued November 30, 1993. Further, the investigation and all possible charges against the Company by the DOJ are settled.
On January 6, 1994, pursuant to the terms of settlement with DOJ, the Company entered a plea of guilty to the falsification of testing data, charges to which two of its low level employees previously pled guilty to in March 1993, and the plea was accepted by the court (U.S. District Court for the Northern District of California). The Company is reinstated on its AN/GRC-222 microwave radio contract with all of its previous terms and conditions. Further, the Company withdrew its contract claims, is doing additional work for the Army at no additional cost, and paid $2 million as an added consideration. The total impact on pretax income of this settlement was approximately $14,819,000, which has been charged to the 1993 fourth quarter earnings. The additional work and the related expenditures will be spread over a period of three years or longer.
REPORT OF INDEPENDENT AUDITORS
Report of Grant Thornton LLP Independent Auditors
Stockholders and Board of Directors Aydin Corporation
We have audited the consolidated balance sheet of Aydin Corporation and subsidiaries as of December 31, 1994, and the related consolidated statements of operations and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company s management. Our responsibility is to express an opinion on these financial statements based on our audit. The consolidated financial statements of Aydin Corporation and subsidiaries as of and for the years ended December 31, 1993 and 1992, were audited by other auditors whose report dated February 25, 1994, expressed an unqualified opinion on those statements.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the 1994 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Aydin Corporation and subsidiaries as of December 31, 1994, and the results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles.
/s/ Grant Thornthon LLP
Philadelphia, Pennsylvania February 20, 1995
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Aydin Corporation and Subsidiaries
Liquidity and Sources of Capital Cash provided from operations during 1994 was $22.8 million. In addition to the net income, the primary reason for the positive cash flow was a $11.6 million decrease in unbilled revenue mainly because of an excess of billings rendered on the TMRC-C3 contract with the Government of Turkey versus costs incurred and resulting revenue recorded for this contract.
The positive cash from operations was used to repay $15.0 million of short-term bank debt and purchase capital equipment of $4.4 million.
Of the $27.9 million of cash and short-term investments at December 31, 1994, approximately $18.2 million is required to be maintained as collateral against letters of credit on the Turkish and other contracts.
Cash used by operations during 1993 was $7.0 million. The primary reasons for the cash outflow included: (1) a $7.5 million increase in unbilled revenue mainly because of costs incurred and resulting revenue recognized on the TMRC-C3 contract with the Government of Turkey in excess of billings rendered; and (2) a $7.9 million increase in accounts receivable primarily because of the commencement in 1993 of billings on the TMRC-C3 contract especially in the fourth quarter, offset partially by $4.0 million of cash received in settlement of insurance litigation related to environmental matters. Partially offsetting these cash outflows was a $3.3 million decline in inventories and $4.5 million of depreciation.
Also during 1993, $2.4 million was spent for capital additions and $2.8 million was spent to increase the ownership in the Turkish subsidiary from 71% at December 31, 1992 to 99% at December 31, 1993.
The Company at December 31, 1994 has short-term bank borrowings outstanding of $6.5 million. The banks are requesting payment of these short-term borrowings. The Company anticipates making full payment of these bank loans during 1995 from internal cash flow. The Company is seeking new banking arrangements to cover its future potential needs.
Based on the present backlog and projected cash flows, the Company anticipates financing its capital needs from internal sources and from some short-term borrowings in the foreseeable future.
Results of Operations 1994 versus 1993: Net sales for 1994 were basically flat compared to 1993. U.S. Government sales, although still depressed, increased to 29% of total sales from 27% last year. Export and foreign sales declined to 53% of total sales from 56% last year because of a slow down in sales on the TMRC-C3 contract, partially offset by higher sales at the Company s South American subsidiary. There is no assurance that the higher level of sales and earnings at the Argentina subsidiary will continue. Domestic industrial sales increased slightly to 18% of total sales from 17% last year.
Cost of sales, other than the settlement with the Department of Justice, as a percentage of sales was essentially the same as last year. Costs incurred during 1994 against the settlement amounted to $3,994,000 and have been charged against the settlement liability established at December 31, 1993. During 1994 the settlement liability was further reduced by $403,000, reflecting a decrease in the December 31, 1993 estimate of ultimate costs to be incurred.
Selling, general and administrative expenses increased by $902,000 (4%) in 1994 primarily as a result of a higher level of proposal activity and resulting proposal costs.
The effective income tax rate was 27% for 1994 compared to a 34% benefit for 1993. The lower rate for 1994 is primarily the result of the impact on the rates of the 1993 pretax loss compared to pretax income in 1994.
1993 versus 1992: Net sales of $141,475,000 for 1993 decreased by $3,746,000 from 1992, a decline of 3%. Industrial sales declined to 17% of total sales from 19% last year due to continued market weakness in the Company s market niches. U.S. Government sales declined slightly and were offset by a small increase in export and foreign sales which now represent 56% of total sales versus 54% last year.
The $14,819,000 1993 special settlement charge included in the cost of sales caption is the result of the Company s decision to assume responsibility and plead guilty to criminal charges of falsification of test data on a U.S. Government contract (GRC-222), actions to which two low level employees had previously pled guilty. Of this charge, $2.0 million were cash payments made after December 31, 1993. The balance represents additional work and to upgrade the GRC-222 microwave radios for the U.S. Army and Aydin s dropping of claims it had filed against the Army.
Other cost of sales as a percentage of sales increased to 73.3% from 69.9% last year as a result of a more competitive U.S. Government business environment in 1993, a more favorable sales mix in 1992 and cost overruns on certain contracts in 1993.
Selling, general and administrative expenses declined by $2,212,000 from 1992 because of cost reductions necessitated by the declines in sales and backlog.
Net interest expense was $273,000 in 1993 compared to last year s net interest income of $1,177,000. The unfavorable swing reflects the higher level of this year s short-term borrowings and a decreased level of cash available for investment this year.
The effective income tax rate decreased to 34% for 1993 from 36% last year. The primary reason for the lower 1993 income tax rate is a function of a pretax loss in the U.S. in 1993 which means that the following elements of tax reduced the effective rate: foreign income tax provisions, non-deductible costs in connection with the Department of Justice settlement, and theimpact on deferred taxes of the increased U.S. statutory rate effective January 1, 1994. Partially offsetting these effects was the tax benefit from non-taxable Foreign Sales Corporation income and a higher state income tax recovery on the 1993 U.S. pretax loss than the 1992 state income tax provision. See Note H for the impact of each of these items.
(page 22)
SELECTED FINANCIAL DATA
Aydin Corporation and Subsidiaries
($000 omitted except for per share amounts)
QUARTERLY FINANCIAL DATA ($000 omitted except for per share amounts)
(page 23)
COMMON STOCK PRICES
Aydin Corporation and Subsidiaries
Aydin Corporation is listed on the New York Stock Exchange, symbol AYD.
STOCKHOLDER AND DIVIDEND INFORMATION Aydin has approximately 6,000 stockholders of record and individual participants in security position listings. Aydin has no present plans to pay any special cash dividends.
ANNUAL MEETING The Company's Annual Meeting of Stockholders will be held on Friday, April 28, 1995, at 3:00 p.m., in the Corporate Office at 700 Dresher Road, Horsham, Pennsylvania. Stockholders are cordially invited to attend the Annual Meeting.
FORM 10K A copy of Aydin Corporation's Annual Report on Form 10K may be obtained without charge by writing to Aydin Corporation, 700 Dresher Road, P.O. Box 349, Horsham, PA 19044, Attn: Investor Relations.
HISTORY OF OPERATIONS*
(page 24)
Exhibit 21
SUBSIDIARIES OF REGISTRANT