SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
_X_ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended __December 31, 1996__.
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to ______________.
Commission file number ____1-7203____.
AYDIN CORPORATION
_______________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 23-1686808
________________________________ ___________________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
700 DRESHER ROAD
HORSHAM, PENNSYLVANIA 19044
_________________________________ __________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (215)
657-7510
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
______________________________ _________________________
Common Stock, $1 Par Value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
_________________
(Title of Class)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes _X_ No ___
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. _X_
The aggregate market value of 5,095,834 shares of Common Stock
held by non-affiliates, computed using the closing price as of
March 27, 1997, was $57,328,133.
Number of shares of Common Stock outstanding as of March 28,
1997 5,173,400.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by
reference:
- 1996 Annual Report to Stockholders of Aydin Corporation
(hereinafter, "Annual Report") - Parts I and II
- Proxy Statement of Aydin Corporation, dated March 27, 1997
(hereinafter,"Proxy Statement") - Part III
INDEX TO FORM 10-K
----------------------------------------------------------
This index lists the requirements of Form 10-K and the
page number in this Form 10-K (or in the Annual Report or
the Proxy Statement) where each item can be found.
PART I
Item 1 Business . . . . . . . . . . . .10-K, pp. 2-5
Item 2 Properties . . . . . . . . . . .10-K, p. 6
Item 3 Legal Proceedings. . . . . . . .10-K, p. 6
Item 4 Submission of Matters to a Vote
of Security Holders. . . . . . .10-K, p. 6
Executive Officers of the
Registrant . . . . . . . . . . .10-K, pp. 6-7
PART II
Item 5 Market for the Registrant's Common
Equity and Related Stockholder
Matters. . . . . . . . . . . . .Annual Report, p. 27
Inside back cover
Item 6 Selected Financial Data. . . . .Annual Report, p. 27
Item 7 Management's Discussion and Analysis
of Financial Condition and Results
of Operation . . . . . . . . . .Annual Report, p. 23
Item 8 Financial Statements and
Supplementary Data . . . . . . .Annual Report,
pp. 10-22, 26
Item 9 Changes In and Disagreements With
Accountants on Accounting and
Financial Disclosure . . . . . .Not Applicable
PART III
Item 10 Directors and Executive Officers of the
Registrant . . . . . . . . . . Proxy Statement,
pp. 3-5, 13
10-K, pp. 6-7
Item 11 Executive Compensation . . . . Proxy Statement,
pp. 5-8, 10-12
Item 12 Security Ownership of Certain
Beneficial Owners and Management
. . . . . . . . . . . . Proxy Statement,
p. 2-3
Item 13 Certain Relationships and Related
Transactions . . . . . . . . . .10-K, p. 8
PART IV
Item 14 Exhibits, Financial Statement
Schedules and Reports on
Form 8-K . . . . . . . . . . . .10-K, pp. 9-10
Exhibits
PART I
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 three smaller support divisions, and two foreign
operating subsidiaries. The Company disposed of its 80%
interest in its Argentine subsidiary on December 31, 1996
and now owns 19% of that company. The divisions and
subsidiaries are profit centers each with engineering,
manufacturing, marketing and accounting functions.
(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:
1996 1995 1994
---- ---- ----
(1) Telecommunications 23 % 25 % 30 %
(2) Airborne & Ground Data Acquisition
and Avionics 40 34 29
(3) Computer Equipment and Software 24 23 22
(4) Radars, Radar Simulation, Integration
and Modernization 1 6 5
(5) Command, Control and Communications
Systems 12 12 14
---- ---- ----
Totals 100 % 100 % 100 %
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 telephony communications
equipment, cellular range extender, line-of-site
(LOS) microwave radios, time division multiple
access (TDMA) terminals for satellite earth
stations and solid state amplifiers, 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 and distribute it for display, tracking and
control.
(page 2)
(3) Computer Equipment and Software
Aydin sells a line of commercial, high-resolution
cathode ray tube (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 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 Horsham, PA and 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 catalog, 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 upon a 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:
1996 1995 1994
------------ ------------ ------------
U.S. Government Agencies (direct $ 38,728,000 $ 44,309,000 $ 42,015,000
and indirect), principally
Department of Defense (1)
Export and foreign sales
including equipment sold to
other U.S. companies for
export (1) (2) (3) 47,495,000 58,059,000 75,166,000
U.S. commercial and industrial
business 30,355,000 38,239,000 25,260,000
------------ ------------ ------------
TOTAL NET SALES $116,578,000 $140,607,000 $142,441,000
------------ ------------ ------------
------------ ------------ ------------
<FN>
(1) 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 the Government of Turkey
amounted to $15,116,000 in 1996, $16,549,000 in 1995,
and $24,888,000 in 1994. Sales to CTI (Argentina)
amounted to $15,739,000 in 1994.
(page 3)
(2) Includes foreign sales of $27,000,000 for 1996,
$28,943,000 for 1995, and $37,167,000 for 1994.
(3) A breakdown of total export and foreign sales by
geographic area follows in section (d) below.
Raw materials for the Company's business consist of
manufactured components and parts. The Company's raw
materials are presently available in adequate supply on
the open market.
The Company holds no material patents, trademarks,
licenses, franchises or concessions.
The Company's operations are not seasonal to any material
extent.
As stated above, although the Company maintains standard
product lines and systems sold by catalog, it generally
does not maintain a significant level of finished goods
inventory. However, the Company maintains an adequate
level of raw materials inventory so that it will be able
to meet initial delivery requirements of customers. The
Company has had no material difficulty in obtaining goods
from suppliers. The Company does not provide rights to
return its products, and generally does not provide
extended payment terms to customers.
The backlog of unfilled orders at December 31, 1996 was
$84 million as compared to $106 million at December 31,
1995. Approximately 25% of the 1996 backlog is not
reasonably expected to be filled within the current year.
The backlog includes approximately $27 million for a
command, control and communications project for the
Government of Turkey for which most of the work is to be
done over the next two years. This contract became
effective in October, 1990.
All contracts with the U.S. Government and some of the
foreign governments are subject to cancellation at the
convenience of the government. In the event a contract
with the U.S. Government is so terminated, the Armed
Services Procurement Regulations provide that the Company
shall be reimbursed for expenses incurred and shall be
entitled to reasonable profits.
The greater portion of the Company's business is obtained
by competitive bidding, while some is obtained through
sole source negotiation. In the domestic marketplace,
the Company competes with some major U.S. companies from
time to time; however, some of the competition in the
U.S. comes from companies which are similar in size or
smaller than Aydin. In the international marketplace,
Aydin competes with major companies in addition to U.S.
firms. A number of such competitors are larger than Aydin
with greater financial resources, while some are similar
to or smaller than Aydin.
Technical capability, reputation, price, ability to meet
delivery schedules and reliability are the principal
competitive factors. No single competitor offers the
same range of products and systems as Aydin. Depending on
the particular product itself and the requirements of the
contract documents, the number of firms competing with
Aydin generally ranges from one to ten.
Estimated amounts spent during 1996, 1995, and 1994 on
Company-sponsored research and development activities,
and customer-sponsored research activities relating to
the development of new products, services or techniques
or the improvement of existing products, services or
techniques are as follows:
1996 1995 1994
-------- -------- --------
Company-sponsored research and
development on direct cost basis $8,315,000 $6,603,000 $5,159,000
Customer-sponsored research
and development activities $2,081,000 $2,873,000 $4,859,000
The Company, along with others, is responsible for the
cost of cleanup under an order of the State of California
at a site leased by the Company prior to 1984. Cleanup of
the site has been completed. Costs incurred to date and
future expected monitoring costs amount to $9.7 million.
Of the total amount, $3.1
(page 4)
million are costs to be expended over the next thirty (30)
years to monitor the cleanup. Those costs have been
included in the accompanying consolidated balance sheet as
liabilities discounted at 7% for the time value of money
to the expected payment dates. Expected payments for the
years following December 31, 1996 are $105,000 annually.
In 1993 the Company reached settlement with three
insurance carriers (with which the Company maintained
environmental coverage on this site) for the payment of
$6.7 million of costs. A court granted a declaratory
judgement requiring the fourth carrier to pay cleanup
costs in excess of the $6.7 million. That carrier is
currently appealing that judgement. The amounts paid by
the Company in excess of the $6.7 million recovered from
the three insurance carriers, $1.5 million, plus the
discounted future costs of monitoring the site, $1.1
million, have been recorded as Other Assets in the
accompanying consolidated balance sheet at December 31,
1996. Management believes that it is probable that the
Company will be successful in recovering these amounts
from the insurer and that the resolution of this matter
will not have an adverse affect on the financial condition
or results of operations of the Company.
The Company employs approximately 1,200 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 $21.7 million,
$25.6 million, and $25.2 million, at December 31, 1996,
1995, and 1994, respectively. Of these amounts, $2.5
million, $.4 million, and $6.7 million at December 31,
1996, 1995, and 1994, respectively, are cash and short-
term investments of the Company's Turkish subsidiary
consisting mainly of U.S. dollar denominated interest-
bearing time deposits. Foreign sales and pretax income
for 1996 amounted to $27.0 million and $.9 million
respectively. Foreign sales and pretax income for 1995
amounted to $28.9 million and $5.4 million, respectively.
Foreign sales and pretax income for 1994 amounted to
$37.2 million and $6.7 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
1996, 1995, and 1994 by geographic area are set forth
below:
1996 1995 1994
----------- ----------- -----------
Asia $ 4,259,000 $ 6,224,000 $ 6,788,000
Africa 3,203,000 4,003,000 2,553,000
Europe 28,452,000 35,360,000 41,465,000
North America 1,273,000 1,605,000 1,852,000
South America 9,735,000 10,604,000 22,125,000
Other 573,000 263,000 383,000
----------- ----------- -----------
Total export and
foreign sales $47,495,000 $58,059,000 $75,166,000
----------- ----------- -----------
----------- ----------- -----------
On a percentage basis, export and foreign sales (direct
and indirect) accounted for approximately 41% of total
sales in 1996, 41% of total sales in 1995, and 53% in
1994. 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 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.
(page 5)
ITEM 2. PROPERTIES
The Company's total plant capacity at December 31, 1996 is
approximately 630,000 square feet of administrative and
production facilities, 495,000 of which it owns and the
balance of which it leases. All major leased properties are
held under leases expiring between 1998 and 1999, most with
renewal options. As part of the restructuring and
consolidation, three Company-owned buildings (258,000 square
feet), have been offered for sale. Two of these facilities
are under contract for sale and an offer has been received on
the third facility. 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. LEGAL PROCEEDINGS
On June 16, 1995, the Company filed a claim with Loral Defense
Systems-Eagan (formerly Unisys Corporation), a subcontractor
to the Company on the TMRC program with the Government of
Turkey, in the sum of $19.04 million for losses sustained as a
result of Loral's breach of the subcontract. On June 30, 1995,
Loral filed a Demand For Arbitration with the American
Arbitration Association claiming damages of $12.4 million for
breach of contract by the Company. On July 12, 1995, the
Company filed a revised claim of $32.8 million against Loral.
The arbitration claims were put on hold pursuant to an interim
settlement agreement dated October 3, 1995 between the parties
until completion of the User Test in Turkey and the payment of
$8.25 million by Aydin, which occurred March 13, 1996. On
June 12, 1996, Loral filed an Amended Arbitration Demand, now
claiming $18.4 million. On July 23, 1996, the Company filed
its answer to the amended claim and filed its Amended
Arbitration Counterclaim against Loral, demanding in excess of
$65 million as damages resulting from Loral's intentional
breach of the subcontract, and for Loral's failure to produce
software in accordance with the subcontract specifications.
The Company intends to vigorously prosecute its counterclaim.
The Company believes that it has meritorious defenses and
counterclaims to the claims of Loral.
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 1996.
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 27,
1997, are as follows:
I. GARY BARD, CHAIRMAN, PRESIDENT AND C.E.O.
59. 1996. Chairman of the Board of Directors and Chief
Executive Officer since May 6, 1996. President of the
Company since October 8, 1996. Prior to that, Vice
President and General Manager, Federal Systems Solutions
Integration Division of Unisys Corporation, providing
integration solutions to the federal, state and local
government marketplace, since October 1995. Consultant
on software development from February 1993 to October
1995. Chief Operating Officer of Open Software
Foundation, from November 1992 to February 1993, and
President of Integrated Systems Division of Computer
Sciences Corporation, from July 1984 to November 1992.
JOHN F. VANDERSLICE, EXECUTIVE VICE PRESIDENT
56. 1983. Executive Vice President of the Company and
President of the Products Group (formerly the Vector and
Controls Divisions) (manufactures airborne data
communications products and color display terminals)
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.
(page 6)
KLAUS D. OEBEL, VICE PRESIDENT
55. 1996. Vice President of the Company and President
of the Communication Systems Group (formerly the
Computer & Monitor and Telecom Divisions) (products and
systems for commercial and military communication and
control, radar intergration and modernization programs)
since September 1996, having initially joined the
Company as Director of Corporate Business Development in
August 1996. Prior to joining the Company, he was
President of Oebel Associates Inc., a consulting firm
specializing in strategic market planning, restructuring
and performance systems management, from October 1985 to
August 1996.
JAMES R. HENDERSON, VICE PRESIDENT
39. 1996. Vice President, Treasurer and Chief
Financial Officer of the Company since July 1996. Prior
to joining the Company, he held various accounting and
financial positions with Unisys Corporation (services
and computer manufacturing): Director of Financial
Planning and Accounting (1989-1991), Controller of
Defense Operations (1991-1993), Executive Assistance to
the President of the Defense Group (1993-1994), Director
of Operations for Unisys Services Division (1994-1995),
and Controller of Unisys Outsourcing Division (1995-
1996).
H. BARRY MASER, VICE PRESIDENT
60. 1996. Vice President of Business Development of
the Company since November 1996. Prior to joining the
Company, he was President of Lynbar Group, Inc., a
manufacturing representative, business planning and
market planning company (1981-1996).
DEMIRHAN HAKIMOGLU, VICE PRESIDENT
58. 1992. Vice President of the Company. Mr.
Hakimoglu was first elected Vice President in February
1991, and resigned that position in July 1991. He was
re-elected Vice President in February 1992. He also
served as Chairman of the Board and CEO of the Company's
foreign subsidiary, Aydin Yazilim ve Elektronik Sanayi
A.S. (software design, manufactures digital microwave
radios, telcom equipment and systems), since July 1990.
Prior to that, he served in various engineering and
management positions with various divisions of the
Company since 1968 (except for a two year period, 1978-
1980).
THOMAS M. LOCASALE, VICE PRESIDENT
59. 1994. Vice President of the Company and Chief
Scientist since August 1996. Prior to that, he was
President of Aydin Telecom Division (manufactures
digital wireless telephony equipment and systems) since
October 1994. From September 1988 to October 1994, he
was Executive Vice President of Aydin's Computer and
Monitor Division (manufactures communication and air
defense systems). Prior to the merger of the Computer
and Monitor divisions in 1988, he was Executive Vice
President of Monitor Systems Division (manufacturer of
telemetry, data acquisition, network and satellite
communication products) and held various engineering and
management positions since May 1965.
HERBERT WELBER, CONTROLLER AND ASSISTANT TREASURER
61. 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 Messrs. Bard, Oebel, Henderson and Maser, each of
the above officers was elected at the Annual Meeting of the
Board of Directors on April 26, 1996. Mr. Bard was elected
Chairman and Chief Executive Officer on May 6, 1996 to fill
the vacancy created by the resignation of Ayhan Hakimoglu and
elected President of the Company on October 8, 1996. Mr.
Henderson was elected a Vice President of the Company on July
25, 1996. On October 25, 1996, Messrs. Oebel and Maser were
elected Vice Presidents. 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 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.
(page 7)
PART II
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 27 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. SELECTED FINANCIAL DATA
Incorporated by reference is the information under the
heading, "Selected Financial Data" on page 27 of the Annual
Report.
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 23 of the Annual
Report.
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 10 to 22, inclusive, and the data under the
heading, "Quarterly Financial Data" on page 27, of the Annual
Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
PART III
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, "Section 16(a)
Beneficial Ownership Reporting Compliance" on page 13 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. 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", "Employment Contracts and Termination of
Employment Arrangements", and "Compensation Committee
Interlocks and Insider Participation" on pages 5-8 and 10-12
of the Proxy Statement.
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. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
(page 8)
PART IV
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, 1996 and
1995.
Consolidated Statements of Operations for the years ended
December 31, 1996, 1995 and 1994.
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994.
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 (filed as
Exhibit No. 3(i) to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1994 and
incorporated herein by reference).
3(ii) By-Laws.
10.1 Employment Agreement, I. Gary Bard (filed as
Exhibit No. 10.1 to Registrant Quarterly Report on
Form 10-Q for the quarter ended September 28, 1996
and incorporated herein by reference).
10.2 Employment Agreement, Klaus D. Oebel (filed as
Exhibit No. 10.2 to Registrant Quarterly Report on
Form 10-Q for the quarter ended September 28, 1996
and incorporated herein by reference).
10.3 Employment Agreement, H. Barry Maser (filed as
Exhibit No. 10.3 to Registrant Quarterly Report on
Form 10-Q for the quarter ended September 28, 1996
and incorporated herein by reference).
10.4 Employment Agreement, James R. Henderson (filed as
Exhibit No. 10.4 to Registrant Quarterly Report on
Form 10-Q for the quarter ended September 28, 1996
and incorporated herein by reference).
10.5 The 1994 Incentive Stock Option Plan, as amended.
10.6 The 1996 Equity Incentive Plan, as amended.
10.7 Restricted Stock Agreement, Klaus D. Oebel,
dated October 8, 1996.
10.8 Restricted Stock Agreement, H. Barry Maser,
dated December 16, 1996.
10.9 Consulting Agreement, Ayhan Hakimoglu, dated
May 1, 1996.
(page 9)
10.10 Restrictive Covenant Agreement, Ayhan Hakimoglu,
dated May 1, 1996.
10.11 Resignation Agreement, Donald S. Taylor, dated
September 13, 1996.
13 Annual Report to Security Holders
21 Subsidiaries of Registrant
23 Consent of Independent Auditors
27 Financial Data Schedule (electronic filing only)
99 Independent Auditors' Report
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 1996.
AYDIN CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS 1996, 1995, AND 1994
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
DESCRIPTION Balance at ADDITIONS Deductions - Balance at
Beginning Charged to Charged to Describe End of Period
of Period Costs and Other Accounts
Expenses - Describe
Year 1996
_________
Deducted from asset accounts:
Allowance for doubtful accounts $ 289,000 $1,061,000 $ 368,000 (1) $ 982,000
Raw materials inventory reserve 1,256,000 3,842,000 3,268,000 (2) 1,830,000
__________ __________ __________ __________
Totals $1,545,000 $4,903,000 $3,636,000 $2,812,000
Year 1995
_________
Deducted from asset accounts:
Allowance for doubtful accounts $ 323,000 $ 19,000 $ 53,000 (1) $ 289,000
Raw materials inventory reserve 2,450,000 1,120,000 2,314,000 (2) 1,256,000
__________ __________ __________ __________
Totals $2,773,000 $1,139,000 $2,367,000 $1,545,000
Year 1994
_________
Deducted from asset accounts:
Allowance for doubtful accounts $ 331,000 $ 43,000 $ 51,000 (1) $ 323,000
Raw materials inventory reserve 2,029,000 1,240,000 819,000 (2) 2,450,000
__________ __________ __________ __________
Totals $2,360,000 $1,283,000 $ 870,000 $2,773,000
<FN>
(1) Uncollectible accounts written off, net of recoveries.
(2) Obsolete inventory written off.
(page 10)
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 31, 1997__ 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/ I. Gary Bard _______ Dated: __March 28, 1997__
I. Gary Bard
Chief Executive Officer, President and
Chairman of the Board of Directors
By: __/s/ John F. Vanderslice__ Dated: __March 17, 1997__
John F. Vanderslice
Executive Vice President and Director
By: __/s/ James R. Henderson___ Dated: __March 26, 1997__
James R. Henderson
Vice President, Treasurer and
Chief Financial Officer
By: __/s/ Herbert Welber_______ Dated: __March 24, 1997__
Herbert Welber
Controller and Assistant Treasurer
Principal Accounting Officer
By: __/s/ Nev A. Gokcen________ Dated: __March 18, 1997__
Nev A. Gokcen
Director
By: __/s/ Irwin L. Gross_______ Dated: __March 20, 1997__
Irwin L. Gross
Director
By: ___________________________ Dated: __________________
Gary Mozenter
Director
By: __/s/ Harry D. Train_______ Dated: __March 24, 1997__
Harry D. Train, II
Director
EXHIBIT INDEX
Exhibit Description of Exhibit
No.
3(i) Restated Certificate of Incorporation (filed as
Exhibit No. 3(i) to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1994
and incorporated herein by reference).
3(ii) By-Laws.
10.1 Employment Agreement, I. Gary Bard (filed as
Exhibit No. 10.1 to Registrant Quarterly Report
on Form 10-Q for the quarter ended September 28,
1996 and incorporated herein by reference).
10.2 Employment Agreement, Klaus D. Oebel (filed as
Exhibit No. 10.2 to Registrant Quarterly Report
on Form 10-Q for the quarter ended September 28,
1996 and incorporated herein by reference).
10.3 Employment Agreement, H. Barry Maser (filed as
Exhibit No. 10.3 to Registrant Quarterly Report
on Form 10-Q for the quarter ended September 28,
1996 and incorporated herein by reference).
10.4 Employment Agreement, James R. Henderson (filed
as Exhibit No. 10.4 to Registrant Quarterly
Report on Form 10-Q for the quarter ended
September 28, 1996 and incorporated herein by
reference).
10.5 The 1994 Incentive Stock Option Plan, as amended.
10.6 The 1996 Equity Incentive Plan, as amended.
10.7 Restricted Stock Agreement, Klaus D. Oebel, dated
October 8, 1996.
10.8 Restricted Stock Agreement, H. Barry Maser, dated
December 16, 1996.
10.9 Consulting Argreement, Ayhan Hakimoglu, dated
May 1, 1996.
10.10 Restrictive Covenant Agreement, Ayhan Hakimoglu,
dated May 1, 1996.
10.11 Resignation Agreement, Donald S. Taylor, dated
September 13, 1996.
13 Annual Report to Security Holders
21 Subsidiaries of Registrant
23 Consent of Independent Auditors, Grant Thornton
LLP
27 Financial Data Schedule (electronic filing only)
99 Independent Auditors' Report, Grant Thornton LLP
Exhibit 3(ii)
AYDIN CORPORATION
BY-LAWS
(Last Amended February 27, 1997)
*******
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 10.5
THE 1994 INCENTIVE STOCK OPTION PLAN
OF
AYDIN CORPORATION
150,000 Shares
(Last amended, December 16, 1996)
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; "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 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 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 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, and determine 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.
B. The date of grant shall be the date the Committee
takes the necessary action to make the grant;
provided, however, that if the minutes or appropriate
resolutions of 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 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 after ten 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 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 and, by its terms, the option is not exercisable
after the expiration of five years from the date of
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 ten 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 10.6
THE 1996 EQUITY INCENTIVE PLAN
OF
AYDIN CORPORATION
500,000 Shares
(Last Amended December 16, 1996)
1. Purpose. The purpose of the Aydin Corporation 1996
Equity Incentive Plan (the "Plan") is to further the growth,
development and financial success of Aydin Corporation and its
subsidiaries by providing additional incentives to those
officers and key employees who are responsible for the
management of the business affairs of the Company, or its
subsidiaries, which will enable them to participate directly
in the growth of the capital stock of the Company. The Company
intends that the Plan will facilitate securing, retaining and
motivating management employees of high caliber and potential.
To accomplish these purposes, the Plan provides a means
whereby management employees may receive stock options
("Options") to purchase the Company's Common Stock.
2. Definitions. As used in this plan, "Corporation" or
the "Company" means Aydin Corporation; "Board of Directors"
means the Board of Directors of Aydin Corporation; "employee"
includes directors, officers and other key employees of the
Corporation and its subsidiaries; "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 1986, as
amended from time to time.
3. Administration. The Plan shall be administered by the
Committee who shall have full and final authority, in its sole
discretion, to interpret the provisions of the Plan and to
decide all questions of fact arising in its application; to
determine the employees to whom Options shall be granted and
the type, amount, size and terms of each such grant; to
determine the time when Options shall be granted; and to make
all other determinations necessary or advisable for the
administration of the Plan. All decisions, determinations and
interpretations of the Committee shall be final and binding on
all optionees and all other holders of Options granted under
the Plan.
4. Stock Subject to the Plan. Subject to Section 17
hereof, the shares that may be issued under the Plan shall not
exceed in the aggregate 500,000 shares of Common Stock. Such
shares may be authorized and unissued shares or shares issued
and subsequently reacquired by the Company. Except as
otherwise provided herein, any shares subject to an Option
that for any reason expires or are terminated unexercised as
to such shares shall again be available under the Plan.
5. Eligibility To Receive Options. Persons eligible to
receive Options under the Plan shall be limited to those
officers and other key employees of the Company, or any
subsidiary of the Company (as defined in Section 425 of the
Code), who are in positions in which their decisions, actions
and counsel significantly impact upon the profitability and
success of the Company, or any subsidiary of the Company.
Directors of the Company who are not also officers or
employees of the Company, or any subsidiary of the Company
shall be eligible to participate in the Plan, provided that
such persons shall not be eligible to receive grants of
Incentive Stock Options, as such term is defined in Section 6
hereof.
6. Types of Options. Grants may be made at any time and
from time to time by the Committee in the form of stock
options to purchase shares of Common Stock. Options granted
hereunder may be Options that are intended to qualify as
incentive stock options within the meaning of Section 422 of
the Code or any amendment or substitute thereto ("Incentive
Stock Options") or Options that are not intended to so qualify
("Nonqualified Stock Options").
7. Option Agreements. Options for the purchase of Common
Stock shall be evidenced by written agreements in such form
not inconsistent with the Plan as the Committee shall approve
from time to time. The Options granted hereunder may be
evidenced by a single agreement or by multiple agreements, as
determined by the Committee in its sole discretion. Each
option agreement shall contain in substance the following
terms and conditions:
(a) Type of Option. Each option agreement shall
identify the Options represented thereby either as Incentive
Stock Options or Nonqualified Stock Options, as the case may
be.
(b) Option Price. Each option agreement shall set
forth the purchase price of the Common Stock purchasable upon
the exercise of the Option evidenced thereby. Subject to the
limitation set forth in Section 7(d)(ii) off the Plan, the
purchase price of the Common Stock subject to an Incentive
Stock Option shall be not less than 100% of the fair market
value of such stock on the date the Option is granted, as
determined by the Committee, but in no event less than the par
value of such stock. The purchase price of the Common Stock
subject to a Nonqualified Stock Option shall be not less than
100% of the fair market value of such stock on the date the
Option is granted, as determined by the Committee. For this
purpose, fair market value on any date shall be the mean
between the highest and the lowest quoted selling prices of
the stock on an exchange, or if the stock is not traded that
day, the fair market value shall be as determined by the
Committee pursuant to Section 422 of the Code.
(c) Exercise Term. No option may be exercised after
ten 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.
The Committee shall have the power to permit an acceleration
of previously established exercise terms, subject to the
requirements set forth herein, upon such circumstances and
subject to such terms and conditions as the Committee deems
appropriate.
(d) Incentive Stock Options. In the case of an
Incentive Stock Option, each option agreement shall contain
such other terms, conditions and provisions as the Committee
determines to be necessary or desirable in order to qualify
such Option as a tax-favored Option (within the meaning of
Section 422 of the Code or any amendment or substitute thereto
or regulation thereunder) including without limitation, each
of the following except that any of these provisions may be
omitted or modified if it is no longer required in order to
have an Option qualify as a tax-favored Option within the
meaning of Section 422 of the Code or any substitute therefor:
(i) The aggregate fair market value (determined
as of the date the Option is granted) of the Common Stock with
respect to which Incentive Stock Options are first exercisable
by any employee during any calendar year (under all plans of
the Company) shall not exceed $100,000.
(ii) No Incentive Stock Options shall be
granted to any employee if at the time the Option is granted
to the individual who owns stock possessing more than 10% of
the total combined voting power of all classes of stock of the
Company or its subsidiaries unless at the time such Option is
granted the Option price is at least 110% of the fair market
value of the stock subject to the Option and, by its terms,
the Option is not exercisable after the expiration of five
years from the date of grant.
(iii) No Incentive Stock Options shall be
exercisable more than 30 days (or three months, in the case
where the employee is placed on layoff, or one year, in the
case of an employee who dies or becomes disabled within the
meaning of Section 22(e)(3) of the Code or any substitute
therefor) after termination of employment.
(e) Substitution of Options. Options may be granted
under the Plan from time to time in substitution for stock
options held by employees of other corporations who are about
to become, and who do concurrently with the grant of such
options become, employees of the Company, or a subsidiary of
the Company as a result of a merger or consolidation of the
employing corporation with the Company, or a subsidiary of the
Company, or the acquisition by the Company, or a subsidiary of
the Company of the assets of the employing corporation, or the
acquisition by the Company, or a subsidiary of the Company of
stock of the employing corporation. The terms and conditions
of the substitute options so granted may vary from the terms
and conditions set forth in this Section 7 to such extent as
the Committee at the time of grant may deem appropriate to
conform, in whole or in part, to the provisions of the stock
options in substitution for which they are granted.
8. Date of Grant. The date on which an Option shall be
deemed to have been granted under the Plan shall be the date
of the Committee's authorization of the Option or such later
date as may be determined by the Committee at the time the
Option is authorized. Notice of the determination shall be
given to each individual to whom an Option is so granted
within a reasonable time after the date of such grant.
9. Exercise and Payment for Shares. Options may be
exercised in whole or in part, from time to time, by giving
written notice of exercise to the Secretary of the Company,
specifying the number of shares to be purchased, except that
no Option may be exercised in whole or in part during the
first twelve months after such Option is granted. The
purchase price of the shares with respect to which an Option
is exercised shall be payable in full with the notice of
exercise in cash, Common Stock at fair market value, or a
combination thereof. 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.
10. Rights upon Termination of Employment. In the
event that an optionee ceases to be an employee of the
Company, or any subsidiary of the Company for any reason other
than lay-off, death, or disability (within the meaning of
Section 22(e)(3) of the Code or any substitute therefore), the
optionee shall have the right to exercise the Option during
its term within a period of 30 days (three months in the event
of a lay-off) after such termination to the extent that the
Option was exercisable at the time of termination. In the
event that an optionee dies or becomes disabled prior to the
expiration of his Option and without having fully exercised
his Option, the optionee or his successor shall have the right
to exercise the Option during its term within a period of one
year after termination of employment due to death or
disability to the extent that the Option was exercisable at
the time of termination unless, by its terms, it expires
sooner.
11. General Restrictions. Each Option granted under
the Plan shall be subject to the requirement that if at any
time the Committee shall determine that (i) the listing,
registration or qualification of the shares of Common Stock
subject or related thereto upon any securities exchange or
under any state or federal law, or (ii) the consent or
approval of any government regulatory body, or (iii) an
agreement by the recipient of an Option with respect to the
disposition of shares of Common Stock is necessary or
desirable as a condition of or in connection with the granting
of such Option or the issuance or purchase of shares of Common
Stock thereunder, such Option shall not be consummated in
whole or in part unless such listing, registration,
qualification, consent, approval or agreement shall have been
effected or obtained free of any conditions not acceptable to
the Committee.
12. Rights of a Stockholder. The recipient of any
Option under the Plan, unless otherwise provided by the Plan,
shall have no rights as a stockholder unless and until
certificates for shares of Common Stock are issued and
delivered to him.
13. Right to Terminate Employment. Nothing contained
in the Plan or in any option agreement entered into pursuant
to the Plan shall confer upon any optionee the right to
continue in the employment of the Company or any subsidiary of
the Company or affect any right that the Company or any
subsidiary of the Company may have to terminate the employment
of such optionee.
14. Withholding. Whenever the Company proposes or is
required to issue or transfer shares of Common Stock under the
Plan, the Company shall have the right to require the
recipient to remit to the Company an amount sufficient to
satisfy any federal, state or local withholding tax
requirements prior to the delivery of any certificate or
certificates for such shares. If and to the extent authorized
by the Committee in its sole discretion, an optionee may make
an election, by means of a form of election to be prescribed
by the Committee, to have shares of Common Stock that are
acquired upon exercise of an Option withheld by the Company or
to tender other shares of Common Stock or other securities of
the Company owned by the optionee to the Company at the time
of exercise of an Option to pay the amount of tax that would
otherwise be required by law to be withheld by the Company as
a result of any exercise of an Option. Any such election
shall be irrevocable and shall be subject to termination by
the Committee, in its sole discretion, at any time. Any
securities so withheld or tendered will be valued by the
Committee at the mean of the high and the low prices the
Common Stock traded on the trading day immediately preceding
the date exercised.
15. Non-Assignability. No Option under the Plan shall be
assignable or transferable by the recipient thereof except by
will or by the laws of descent and distribution. During the
life of the recipient, such Option shall be exercisable only
by such person or by such person's guardian or legal
representative.
16. Non-Uniform Determinations. The Committee's
determination under the Plan (including without limitation
determinations of the persons to receive Options, the form,
amount and timing of such grants, the terms and provisions of
Options, and the agreements evidencing same) need not be
uniform and may be made selectively among persons who receive,
or are eligible to receive, grants of Options under the Plan
whether or not such persons are similarly situated.
17. Adjustments.
(a) Changes in Capitalization. Subject to any
required action by the stockholders of the Company, the number
of shares of Common Stock covered by each outstanding Option
and the number of shares of Common Stock that have been
authorized for issuance under the Plan but as to which no
Options have yet been granted or which have been returned to
the Plan upon cancellation or expiration of an Option, as well
as the price per share of Common Stock covered by each such
outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock,
or any other increase or decrease in the number of issued
shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall
not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the
Committee, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein,
no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be
made with respect to, the number or price of shares of Common
Stock subject to an Option.
(b) Dissolution or Liquidation. In the event of the
proposed dissolution or liquidation of the Company, all
outstanding Options will terminate immediately prior to the
consummation of such proposed action, unless otherwise
provided by the Committee. The Committee may, in the exercise
of its sole discretion in such instances, declare that any
Option shall terminate as of a date fixed by the Committee and
give each Option holder the right to exercise his Option as to
all or any part of the shares of Common Stock covered by the
Option, including shares as to which the Option would not
otherwise be exercisable.
(c) Sale or Merger. In the event of a proposed sale
of all or substantially all of the assets of the Company, or
the merger of the Company with or into another corporation,
the Committee, in the exercise of its sole discretion, may
take such action as it deems desirable, including, but not
limited to (i) causing an Option to be assumed or an
equivalent option to be substituted by such successor
corporation or a parent or subsidiary of such successor
corporation, (ii) providing that each Option holder shall have
the right to exercise his Option as to all of the shares of
Common Stock covered by the Option, including shares as to
which the Option would not otherwise be exercisable, or (iii)
declare that an Option shall terminate at a date fixed by the
Committee provided that the Option holder is given notice and
opportunity to exercise his Option prior to such date.
18. Amendment. The Committee may terminate or amend the
Plan at any time. The termination or any modification or
amendment of the Plan shall not, without the consent of a
participant, affect his rights under an Option previously
granted.
19. Reservation of Shares. The Company, during the
term of the Plan, will at all times reserve and keep available
such number of shares as shall be sufficient to satisfy the
requirement of the Plan. Inability of the Company to obtain
authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary
to the lawful issuance and sale of any shares hereunder, shall
relieve the Company of any liability for the failure to issue
or sell such shares as to which such requisite authority shall
not have been obtained.
20. Effect on Other Plans. Participation in the Plan
shall not affect an employee's eligibility to participate in
any other benefit or incentive plan of the Company or any
subsidiary of the Company. Any Options granted pursuant to
the Plan shall not be used in determining the benefits
provided under any other plan of the Company or any subsidiary
of the Company unless specifically provided.
21. Duration of the Plan. The Plan shall remain in
effect until all Options granted under the Plan have been
satisfied by the issuance of shares, but no Option shall be
granted more than ten years after the date the Plan is adopted
by the Company's Board of Directors.
22. Forfeiture for Dishonesty. Notwithstanding
anything to the contrary in the Plan, if the Committee finds,
by a majority vote, after full consideration of the facts
presented on behalf of both the Company and any optionee, that
the optionee has been engaged in fraud, embezzlement, theft,
commission of a felony or dishonest conduct in the course of
his employment or retention by the Company or any subsidiary
of the Company that damaged the Company, or any subsidiary of
the Company or that the optionee has disclosed confidential
information of the Company or any subsidiary of the Company,
the optionee shall forfeit all unexercised Options and all
exercised Options under which the Company has not yet
delivered the certificates. The decision of the Committee in
interpreting and applying the provisions of this Section 22
shall be final. No decision of the Committee however, shall
affect the finality of the discharge or termination of such
optionee by the Company or any subsidiary of the Company in
any manner.
23. No Prohibition on Corporate Action. No provision
of the Plan shall be construed to prevent the Company or any
officer or director thereof from taking any action deemed by
the Company or such officer or director to be appropriate or
in the Company's best interests whether or not such action
could have an adverse effect on the Plan or any Options
granted hereunder, and no optionee or optionee's estate,
personal representative or beneficiary shall have any claim
against the Company or any officer or director thereof as a
result of the taking of such action.
24. Indemnification. With respect to the
administration of the Plan, the Company shall indemnify each
present and future member of the Committee and the Board of
Directors against, and each member of the Committee and the
Board of Directors shall be entitled without further action on
their part to indemnity from the Company for, all expenses
(including the amount of judgments and the amount of approved
settlements made with a view to the curtailment of costs of
litigation, other than amounts paid to the Company itself)
reasonably incurred by them in connection with or arising out
of, any action, suit or proceeding in which they may be
involved by reason of they being or having been a member of
the Committee or the Board of Directors, whether or not they
continue to be such member at the time of incurring such
expenses; provided, however, that such indemnity shall not
include any expenses incurred by any such member of the
Committee or the Board of Directors (i) in respect of matters
as to which they shall be finally adjudged in any such action,
suit or proceeding to have been guilty of gross negligence or
willful misconduct in the performance of their duty as such
member of the Committee or the Board of Directors: or (ii) in
respect of any matter in which any settlement is affected for
an amount in excess of the amount approved by the Company on
the advice of its legal counsel; and provided further that no
right of indemnification under the provisions set forth herein
shall be available to or enforceable by any such member of the
Committee or the Board of Directors unless, within 60 days
after institution of any such action, suit or proceeding, they
shall have offered the Company in writing the opportunity to
handle and defend same at its own expense. The foregoing
right of indemnification shall inure to the benefit of the
heirs, executors or administrators of each such member of the
Committee or the Board of Directors and shall be in addition
to all other rights to which such member may be entitled as a
matter of law, contract or otherwise.
25. Miscellaneous Provisions.
(a) Compliance with Plan Provisions. No optionee or
other person shall have any right with respect to the Plan,
the Common Stock reserved for issuance under the Plan or in
any Option until a written option agreement shall have been
executed by the Company and the optionee and all the terms,
conditions and provisions of the Plan and the Option
applicable to such optionee (and each person claiming under or
through him) have been met.
(b) Approval of Counsel. In the discretion of the
Committee, no shares of Common Stock, other securities or
property of the Company or other forms of payment shall be
issued hereunder with respect to any Option unless counsel for
the Company shall be satisfied that such issuance will be in
compliance with applicable federal, state, local and foreign
legal, securities exchange and other applicable requirements.
(c) Compliance with Rule 16b-3. To the extent that
Rule 16b-3 under the Exchange Act applies to Options granted
under the Plan, it is the intent of the Company that the Plan
comply in all respects with the requirements of Rule 16b-3,
that any ambiguities or inconsistencies in construction of the
Plan be interpreted to give effect to such intention and that
if the 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 the Plan shall
be deemed to be automatically amended so as to bring them into
full compliance with such rule.
(d) Effects of Acceptance of Option. By accepting
any Option or other benefit under the Plan, each optionee and
each person claiming under or through him shall be
conclusively deemed to have indicated his acceptance and
ratification of, and consent to, any action taken under the
Plan by the Company, the Board of Directors, the Committee or
its delegates.
(e) Construction. The masculine pronoun shall
include the feminine and neuter, and the singular shall
include the plural, where the context so indicates.
26. Stockholder Approval. The exercise of any Option
granted under the Plan shall be subject to the approval of the
Plan by the affirmative vote of the holders of a majority of
the outstanding shares of the Common Stock present, or
represented, and entitled to vote at a meeting duly held.
Exhibit 10.7
AYDIN CORPORATION
RESTRICTED STOCK AGREEMENT
THIS AGREEMENT, made on this 8th day of October, 1996, by
and between AYDIN CORPORATION, a Delaware corporation
(hereinafter called the "Company"), and KLAUS D. OEBEL
(hereinafter called the "Employee").
WITNESSETH:
WHEREAS, the Company and the Employee have agreed to
certain terms and conditions of employment of the Employee as
set forth in the Employment Agreement (the "Employment
Agreement") dated August 22, 1996; and
WHEREAS, the Employment Agreement 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 three-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 hereinafter 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, effective this date, 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 three
installments of 3,333, 3,333 and 3,334 Shares on the first,
second and third 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.,
3,333, 3,333 or 3,334 Shares as the case may be) 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 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
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 in 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 Counsel, 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
Agreement, in duplicate, the day and year first above written.
Attest: AYDIN CORPORATION
__/s/ Robert A. Clancy___ By: ____/s/ I. Gary Bard____
Secretary Title: __Chairman & C.E.O.__
/s/ Klaus D. Oebel
______________________
Employee's Signature
______________________
Social Security Number
Exhibit 10.8
AYDIN CORPORATION
RESTRICTED STOCK AGREEMENT
THIS AGREEMENT, made on this 16th day of December, 1996,
by and between AYDIN CORPORATION, a Delaware corporation
(hereinafter called the "Company"), and H. BARRY MASER
(hereinafter called the "Employee").
WITNESSETH:
WHEREAS, the Company and the Employee have agreed to
certain terms and conditions of employment of the Employee as
set forth in the Offer Letter (the "Employment Agreement")
dated October 23, 1996; and
WHEREAS, the Employment Agreement 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 hereinafter 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, effective this date, 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
installments of 2,500 Shares 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 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
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 in 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 Counsel, 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
Agreement, in duplicate, the day and year first above written.
Attest: AYDIN CORPORATION
__/s/ Robert A. Clancy___ By: ____/s/ I. Gary Bard____
Secretary Title: __Chairman & C.E.O.__
/s/ H. Barry Maser
______________________
Employee's Signature
______________________
Social Security Number
Exhibit 10.9
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (this "Agreement") is made and
effective as of May 1, 1996 by and between Aydin Corporation,
a Delaware corporation with its principal executive offices
located at 700 Dresher Road, Horsham, Pennsylvania 19044 (the
"Company"), and Ayhan Hakimoglu, a Pennsylvania resident with
an address at 431 Righters Mill Road, Narberth, Pennsylvania
19072 ("Consultant"). The definition of "Company" includes
all of its subsidiaries.
BACKGROUND
The Company operates internationally in the following
businesses: engineering and manufacturing of
telecommunications equipment and systems, computer monitor and
ruggedized workstations, and computer control systems with
software for industrial and governmental applications
(together with such businesses as the Company may enter during
the Term, the "Business").
On the date Ayhan Hakimoglu may sell all of his capital
stock of the Company to EA Industries, Inc. ("EA") and on the
date he may resign as Chairman and Chief Executive Officer of
the Company, this Consulting Agreement with the Company will
be effective.
In consideration of their mutual promises and covenants
set forth herein, and intending to be legally bound hereby,
Company and Consultant agree as follows:
1. Engagement. The Company hereby engages the Consultant
and the Consultant hereby accepts such engagement on the terms
and conditions hereinafter set forth.
2. Term. The term of this Agreement shall begin on the
date hereof and shall terminate on April 30, 1999 (the
"Term"), unless sooner terminated in accordance with Paragraph
6 hereof.
3. Duties. The Consultant is engaged hereunder as a
consultant, on a part-time basis, to the Company reporting to
the Chief Executive Officer. As such he shall do the
following:
(a) Consult with and assist the Company in
developing, with senior management of the Company, and
implementing through such senior management, strategic plans,
both long and short term relating to obtaining contracts for
the Company in Turkey.
(b) Consistent with developed strategic plans, help
the Company to identify and procure key employees or entities
which will supplement the Company's management and other
capabilities in the Business.
(c) Assist the Company in the collection of amounts
due to the Company arising from contracts performed for the
Turkish government.
The Consultant shall devote such of his business time,
attention, energies and best efforts to the performance of his
services hereunder and to the promotion of the business and
interests of the Company and of any of its affiliated
companies, as may be reasonably necessary to carry out his
activities as described above, it being understood that
Consultant need not spend any specific time in his activities.
4. Compensation. In consideration for the services to be
rendered by Consultant hereunder and his obligations under
paragraphs 6 and 7 hereof, Company shall pay to Consultant (a)
the sum of one hundred fifty thousand dollars ($150,000) per
annum payable in advance on or before May 3, 1996, May 1, 1997
and May 1, 1998; and (b) a fee payable in 90 days computed as
follows: for any contract executed by the Company with the
Turkish Government during the term of this Agreement, if the
contract is secured by an irrevocable letter of credit in
favor of the Company or by an advance cash payment to the
Company (collectively the "Turkish LC"), the Consultant shall
be paid a fee equal to 0.25% of such basic contract price
representing the firm commitments (excluding options and
conditional extra work) under such Turkish contract, and
within ninety (90) days after payments under such contract the
Consultant shall be paid a fee equal to 0.25% of such
payments. These fees will continue to be paid to the
Consultant after the term of this Agreement as performance
continues under such Turkish contracts.
5. Expenses and Benefits.
(a) The Company will reimburse the Consultant for
all ordinary and reasonable expenses for office rental,
secretarial expense and business travel incurred in connection
with his performance of services hereunder; provided that the
Company has approved of such expenses before they are incurred
and upon presentation to the Company of an itemized account
and written proof of such expenses.
(b) The Company shall during the term of this
Agreement, to the extent allowed by law without rendering the
Company subject to the provisions of the Employee Retirement
Income Security Act of 1974 ("ERISA") as the operator of a
"multiemployer plan" (within the meaning of Section 3(37) of
ERISA), continue to provide the Consultant with the
automobile, life insurance and health insurance coverage
benefits he is currently receiving or with comparable
replacement benefits if the Company changes such plans.
6. Death of the Consultant. Except as required by law,
in the event of the death of the Consultant during the term of
this Agreement, this Agreement shall terminate effective as of
the date of the Consultant's death, and the Company shall not
have any further obligation or liability hereunder except that
the Company shall pay to Consultant's designated beneficiary
or, if none, his estate the portion, if any, of the
Consultant's compensation for the period up to the
Consultant's date of death which remains unpaid.
7. Non-disparagement. Except as required by law, during
the Term, the Consultant shall not say, write or communicate
anything which would be harmful, detrimental or injurious to,
or otherwise disparage, the Company or EA or any of their
current or future employees, managers, executives or
directors, or the Company's or EA's name, reputation or
business, to any entity or person in public or in private.
The Consultant's communications to members of his family in
private or to the Board of Directors or Officers of the
Company as part of his performance in good faith under this
Consulting Agreement shall not be deemed to violate the
provisions of this Paragraph 7.
8. Non-interference. The Consultant shall not in any
manner interfere with any current or future negotiations or
transactions of any nature between the Company and EA or any
of their respective affiliates..
9. Notices. All notices, requests, demands, claims, and
other communications hereunder shall be in writing. Any
notice, request, demand, claim, or other communication
hereunder shall be deemed duly given if (and then two business
days after) it is sent by registered or certified mail, return
receipt requested, postage prepaid, and addressed to the
intended recipient as set forth below:
If to Consultant: 431 Righters Mill Road
Narberth, PA 19072
If to Company: 700 Dresher Road
Horsham, Pennsylvania 19044
Attn: President
Any party hereto may give any notice, request, demand, claim
or other communication hereunder using any other means
(including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic mail),
but no such notice, request, demand, claim, or other
communication shall be deemed to have been duly given unless
and until it actually is received by the individual for whom
it is intended. Any party hereto may change the address to
which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the
other parties hereto notice in the manner herein set forth.
10. Relationship of Parties. Consultant, in the
performance of the foregoing consulting services, shall be
deemed an independent contractor. Consultant shall have no
right or authority to assume or create any obligations on
behalf of the Company or to make any representations on its
behalf. The Company shall not directly control or dictate the
manner of performance of Consultant's obligations under this
Agreement.
11. Governing Law. This Agreement shall be governed by
and construed in accordance with the internal laws (and not
the law of conflicts) of the State of Delaware.
12. Contents of Agreement; Amendment and Assignment.
This Agreement sets forth the entire understanding between the
parties hereto with respect to the subject matter hereof.
This Agreement cannot be changed, modified or terminated
except upon written amendment duly executed by the parties
hereto. All of the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be
enforceable by the respective heirs, representatives,
successors and assigns of the parties hereto, except that the
duties and responsibilities of the Consultant hereunder are of
a personal nature and shall not be assignable in whole or in
part by him.
IN WITNESS WHEREOF, this Agreement has been executed by
the parties on the date first above written.
CONSULTANT
/s/ Ayhan Hakimoglu
AYHAN HAKIMOGLU
AYDIN CORPORATION
By:/s/ John F. Vanderslice
EXECUTIVE VICE PRESIDENT
Exhibit 10.10
RESTRICTIVE COVENANT AGREEMENT
THIS RESTRICTIVE COVENANT AGREEMENT (this "Agreement") is
made and effective as of May 1, 1996 by and between Aydin
Corporation, a Delaware corporation with its principal
executive offices located at 700 Dresher Road, Horsham,
Pennsylvania 19044 (the "Company"), and Ayhan Hakimoglu, a
Pennsylvania resident with an address at 431 Righters Mill
Road, Narberth, Pennsylvania 19072 ("Ayhan"). The definition
of "Company" includes all of its subsidiaries.
BACKGROUND
The Company operates internationally in the following
businesses: engineering and manufacturing of
telecommunications equipment and systems, computer monitor and
ruggedized workstations, and computer control systems with
software for industrial and governmental applications
(together with such businesses as the Company may enter during
the Term, the "Business").
On the date Ayhan Hakimoglu may sell all of his capital
stock of the Company to EA Industries, Inc. ("EA") and on the
date he may resign as Chairman and Chief Executive Officer of
the Company, this Restrictive Covenant Agreement with the
Company will be effective.
NOW, THEREFORE, in consideration of the Company's
payments to Ayhan as provided in this Agreement and intending
to be legally bound hereby, Ayhan and the Company agree, for a
period commencing on the date hereof and ending on April 30,
1999 (the "Term") as follows:
1. Non-Disclosure. Ayhan recognizes and acknowledges
that he will have access to certain confidential information
of the Company and that such information constitutes valuable,
special and unique property of the Company. Ayhan agrees that
he will not, for any reason or purpose whatsoever, during or
after the Term use, directly or indirectly, for his own
benefit or the benefit of any other person, or disclose any of
such confidential information to any party without express
authorization of the Company, except as reasonably necessary
in the performance of his duties hereunder. As used in this
Paragraph 1, "Confidential Information" shall mean any
information relating to the business or affairs of the Company
as presently conducted or proposed to be conducted now or
during the term of the Consulting Agreement, including but not
limited to information relating to financial statements,
client identities, potential clients, employees, suppliers,
servicing methods, programs, strategies and information,
analyses, profit margins, computer software, data, and
documentation, trade secrets and confidential business
information (including ideas, formulas, compositions,
inventions (whether patentable or unpatentable and whether or
not reduced to practice), know-how, manufacturing and
production processes and techniques, research and development
information, drawings, specifications, designs, plans,
proposals, technical data, copyrightable works, financial,
marketing, and business data, pricing and cost information,
business and marketing plans), other proprietary rights, and
copies and tangible embodiments thereof (in whatever form or
medium) or other proprietary information used by the Company
in connection with its business; provided, however, that
Confidential Information shall not include any information
which is in the public domain or becomes generally known in
the industry through no wrongful act on the part of Ayhan.
Ayhan acknowledges that the Confidential Information is vital,
sensitive, confidential and proprietary to the Company.
2. Noncompetition. Ayhan agrees that during the Term he
shall not, unless acting with the prior written consent of the
Board of Directors of the Company (the "Board"), directly or
indirectly:
(a) solicit business from or perform services for,
any person, company or other entity which at any time during
the Term is a client or customer of the Company if such
business or services are of the same general character as
those engaged in or performed by the Company or supplied to
the Company;
(b) solicit for employment or in any other fashion
hire any of the employees of the Company;
(c) own an interest in, manage, operate, finance,
join, control or participate in the ownership, management,
operation, financing or control of, or be connected as an
officer, director, employee, partner, principal, agent,
representative, consultant or otherwise with any business or
enterprise engaged in the Business;
(d) use or willingly permit his name to be used in
connection with, any business or enterprise engaged in the
business of the same general character as the Business;
(e) use the name of the Company or any name similar
thereto, but nothing in this clause shall be deemed, by
implication, to authorize or permit use of such name after
expiration of the Term;
provided, however, that this provision shall not be construed
to preclude Ayhan from describing his position at the Company
or from using the Company's name and his name on his resume or
curriculum vitae or to prohibit the ownership by Ayhan of not
more than 3% of any class of the outstanding equity securities
of any corporation which is engaged in any of the foregoing
businesses having a class of securities registered pursuant to
the Securities Exchange Act of 1934.
3. Non-interference. Ayhan shall not in any manner
interfere with any current or future negotiations or
transactions of any nature between the Company and EA or any
of their respective affiliates.
4. Consideration. In consideration of the undertaking of
Ayhan contained in Paragraphs 1, 2 and 3 hereof, Company
agrees to pay to Ayhan an aggregate sum of six hundred
thousand ($600,000) dollars, payable in three equal annual
installments of two hundred thousand ($200,000) dollars in
advance on May 3, 1996, May 1, 1997 and May 1, 1998.
5. Equitable Relief; Survival. Ayhan acknowledges that
the restrictions contained in Paragraphs 1, 2 and 3 hereof
are, in view of the nature of the business of the Company,
reasonable and necessary to protect the legitimate interests
of the Company, and that any violation of any provisions of
those Paragraphs will result in irreparable injury to the
Company. Ayhan also acknowledges that the Company shall be
entitled to temporary and permanent injunctive relief, without
the necessity of proving actual damages, and to an equitable
accounting of all earnings, profits and other benefits arising
from any such violation, which rights shall be cumulative and
in addition to any other rights or remedies to which the
Company may be entitled. In the event of any such violation,
the Company shall be entitled to commence an action for
temporary and permanent injunctive relief and other equitable
relief in any court of competent jurisdiction and Ayhan
further irrevocably submits to the jurisdiction of any
Delaware court or Federal court sitting in Delaware over any
suit, action or proceeding arising out of or relating to
Paragraphs 1, 2, or 3. Ayhan hereby waives, to the fullest
extent permitted by law, any objection that he may now or
hereafter have to such jurisdiction or to the venue of any
such suit, action or proceeding brought in such a court and
any claim that such suit, action or proceeding has been
brought in any inconvenient forum. Effective service of
process may be made upon Ayhan by mail under the notice
provisions contained in Paragraph 8 hereof.
6. Remedies Cumulative; No Waiver. No remedy conferred
upon the Company by this Agreement is intended to be exclusive
or any other remedy, and each and every such remedy shall be
cumulative and shall be in addition to any other remedy given
hereunder or now or hereafter existing at law or in equity.
No delay or omission by the Company in exercising any right,
remedy or power hereunder or existing at law or in equity
shall be construed as a waiver thereof, and any such right,
remedy or power may be exercised by the Company from time to
time and as often as may be deemed expedient or necessary by
the Company in its sole discretion.
7. Enforceability. If any provision of this Agreement
shall be invalid or unenforceable, in whole or in part, then
such provision shall be deemed to be modified or restricted to
the extent and in the manner necessary to render the same
valid and enforceable, or shall be deemed excised from this
Agreement, as the case may require, and this Agreement shall
be construed and enforced to the maximum extent permitted by
law, as if such provision had been originally incorporated
herein as so modified or restricted, or as if such provision
had not been originally incorporated herein, as the case may
be.
8. Notices. All notices, requests, demands, claims, and
other communications hereunder shall be in writing. Any
notice, request, demand, claim, or other communication
hereunder shall be deemed duly given if (and then two business
days after) it is sent by registered or certified mail, return
receipt requested, postage prepaid, and addressed to the
intended recipient as set forth below:
If to Ayhan: 431 Righters Mill Road
Narberth, PA 19072
If to Company: 700 Dresher Road
Horsham, Pennsylvania 19044
Attn: President
Any party hereto may give any notice, request, demand, claim
or other communication hereunder using any other means
(including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic mail),
but no such notice, request, demand, claim, or other
communication shall be deemed to have been duly given unless
and until it actually is received by the individual for whom
it is intended. Any party hereto may change the address to
which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the
other parties hereto notice in the manner herein set forth.
9. Governing Law. This Agreement shall be governed by
and construed in accordance with the internal laws (and not
the law of conflicts) of the State of Delaware.
10. Contents of Agreement; Amendment and Assignment.
This Agreement sets forth the entire understanding between the
parties hereto with respect to the subject matter hereof.
This Agreement cannot be changed, modified or terminated
except upon written amendment duly executed by the parties
hereto. All of the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be
enforceable by the respective heirs, representatives,
successors and assigns of the parties hereto, except that the
duties and responsibilities of Ayhan hereunder are of a
personal nature and shall not be assignable in whole or in
party by him.
IN WITNESS WHEREOF, this Agreement has been executed by
the parties on the date first above written.
/s/ Ayhan Hakimoglu
AYHAN HAKIMOGLU
AYDIN CORPORATION
By:/s/ Donald S. Taylor
PRESIDENT
Exhibit 10.11
AYDIN CORPORATION
Telephone 700 Dresher Road
(215) 657-7510 P.O. Box 349
FACSIMILE Horsham, PA 19044
(215) 657-3830 U.S.A.
September 13, 1996
Dr. Donald S. Taylor
3 Country Lakes Drive
Marlton, NJ 08053
Dear Dr. Taylor:
The purpose of this letter is to confirm the agreement between
Aydin Corporation ("the Company") and you concerning your
resignation as President of the Company and a Member of the
Board of Directors as follows:
1. You hereby confirm your resignation from the Board of
Directors and as President of the Company as well as your
resignation from all officerships, directorships and
employment with all subsidiaries and affiliates of the Company
(collectively, the "Companies").
2. Subject to the terms and conditions of this agreement,
the Company will pay you a salary continuation benefit and
certain other benefits as outlined on Appendix A hereto.
3. The provisions of this agreement, and any payment
provided hereunder, shall not reduce or increase any amounts
otherwise payable, or affect your rights under, any benefit
plan of the Company in accordance with the terms of any such
plan. All payments to be made to you under this agreement
shall be subject to required withholding of federal, state and
local income and employment taxes.
4. In the event of your death prior to September 13,
1997, this agreement shall terminate effective as of the date
of your death and none of the Companies shall have any further
obligations or liability hereunder except that the Company
shall pay to your estate the unpaid portion, if any, of your
salary continuation benefit for the period up to your date of
death.
5. (a) You recognize and acknowledge that you have
certain confidential information about the Companies, the
business activities of the Companies and entities related to
the Companies and the ownership thereof and related entities,
and that such information constitutes valuable, special and
unique property of the Companies. You agree that you will not,
for any reason or purpose whatsoever, during or after the term
of this agreement, (i) disclose any of such confidential
information to any person without the prior written approval
of the Company or (ii) commit any act or become involved in
any situation or occurrence which disparages the Companies or
their products or services or which reflects unfavorably upon
the reputation of the Companies or their officers or
directors.
(b) You agree with the Companies that pursuant to
the Agreement, dated January 4, 1995, you will not directly or
indirectly solicit any client, customer or employee of the
Company.
(c) You agree with the Companies that for a period of
three (3) years from this date that you will not directly or
indirectly compete with the Companies (i) as to any technology
developed or identified by the Companies during the term of
your employment and (ii) as to any programs developed of
identified during the term of your employment.
(d) You agree with the Companies that you will do nothing to
circumvent the undertakings you have agreed to in paragraphs 5
(a), 5 (b) and 5(c).
(e) You acknowledge that your compliance with your
agreements in paragraphs 5(a), 5 (b) and 5(c) and 5(d) hereof
is necessary to protect the good will and other proprietary
interests of the Companies and that a breach of your
agreements in paragraphs 5(a) or 5(b) or 5(c) or 5(d) hereof
will result in irreparable and continuing damage to the
Companies and their respective owners, for which there will be
no adequate remedy at law, and you agree that, in the event of
any breach of your agreements in paragraphs 5(a) or 5(b) or
5(c) or 5(d) hereof, the Companies and their respective
successors and assigns shall be entitled to injunctive relief
and to such other and further relief as may be proper,
including the termination of the benefits specified on
Appendix A hereto.
6. (a) In consideration of the execution of this
agreement by you and the Company, you, on behalf of yourself
and all persons claiming by, through and under you including,
without limitation, each and every dependent, heir, executor
and administrator, together with your agents, successors,
assigns and legal representatives (collectively the "Taylor
Parties"), hereby waive, remise, release, settle and forever
discharge the Companies, their respective affiliates, parents,
subsidiaries and divisions, and any current or former
director, officer, agent, employee or stockholder of the
Companies, together with their agents, successors, assigns and
legal representatives (collectively the "Company Parties")
from any and all claims, sums of money, fees, compensation,
counterclaims, cross claims, rights, demands, losses, damages,
trespasses, bonds, executions, liabilities, suits, actions and
causes of action against the Company Parties and each of them
that any of the Taylor Parties, jointly or severally, ever
had, now has or may have, in law or in equity, of every nature
or description, whether known or unknown, suspected or
unsuspected, foreseen or unforeseen, actual or potential,
which exist as of the date of this agreement in whole or in
part as a result of any act or omission in connection with
your employment with any of the Companies and your resignation
from such employment, including, without limitation, by reason
of specification, Title VII of the Civil Rights Act of 1964,
as amended, the Pennsylvania Human Relations Act, the Age
Discrimination in Employment Act, the Employee Retirement
Income Security Act, as amended, the Fair Labor Standards Act,
the Americans with Disabilities Act, any state statute or
local ordinance similar to the foregoing federal acts,
Pennsylvania wage payment law or other federal or state law,
including any claim of alleged discrimination, defamation,
slander, libel, invasion of privacy, breach of employment
contract, breach of implied covenant of good faith and fair
dealing, intentional or negligent infliction of emotional
distress or wrongful discharge, up to the date of this
agreement. This release of rights does not extend to claims
that may arise after the date of this agreement.
(b) In consideration of the execution of this
agreement by you and the Company, the Company Parties (except
as noted hereinafter) hereby waive, remise, release, settle
and forever discharge you from any and all claims, sums of
money, fees, compensation, counterclaims, cross claims,
rights, demands, losses, damages, trespasses, bonds,
executions, liabilities, suits, actions and causes of action
against you that any of the Company Parties, jointly or
severally, ever had, now has or may have, in law or in equity,
of every nature or description, whether known or unknown,
suspected or unsuspected, foreseen or unforeseen, actual or
potential, which exist as of the date of this agreement or
arise hereafter in whole or in part as a result of any act or
omission committed from the beginning of time to the date of
this agreement. This release does not run to any act
committed by you during your employment in which you exceeded
your authority as President of the Company or as a member of
the Companies Board of Directors and such act results in a
claim being made against the Companies.
7. The Companies deny any wrongdoing or liability
whatsoever to you, and the execution of this agreement by the
Company on behalf of the Companies does not constitute an
admission of any liability whatsoever to you under statutory
or common law.
8. You acknowledge that the Company advised you to
consult with an attorney prior to executing this agreement.
You further acknowledge that you have read this agreement and
understand all of its terms and that your execution of this
agreement has not been induced by any representations,
statements, warranties or agreements other than those
expressed or referred to herein. You acknowledge that you have
executed this agreement knowingly and voluntarily, with full
knowledge of its significance.
9. You acknowledge that the Company has advised you that
you have 21 days from receipt of this agreement to consider
it. In the event you sign this agreement before the expiration
of the twenty-one day review period, you explicitly agree
hereby to waive the opportunity to use the full review period.
This agreement shall become effective seven days following the
date of your signature.
10. This agreement sets forth the entire agreement
between you and the Company and, except for the Agreement
dated January 4, 1995, and the Restricted Stock Agreement
dated January 3, 1995, supersedes all prior agreements or
understandings between you and any of the Companies related to
your employment by any of the Companies.
11. In case any one or more of the provisions contained
herein shall, for any reason, be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality
or unenforceability shall not affect any other provision of
this agreement but this agreement shall be construed as if
such invalid, illegal or unenforceable provision or provisions
had never been contained herein unless the deletion of such
provision or provisions would result in such a material change
as to cause performance of this agreement to be unreasonable.
12. This agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania.
If the foregoing correctly sets forth our agreement,
please sign the enclosed copy of this letter where indicated
and return it to me.
AYDIN CORPORATION
By: /s/ I. Gary Bard
I. Gary Bard
Chairman of the Board &
Chief Executive Officer
Accepted and agreed to,
intending to be legally
bound hereby this 30
day of September, 1996:
/s/ Donald S. Taylor
Donald S. Taylor
Witness:
/s/ Gwendolyn Taylor
APPENDIX A
DONALD S. TAYLOR
COMPENSATION AND BENEFIT OFFER
1. Continue salary at $3,000 per week until September 13,
1997.
2. Continued participation in Company medical and dental plans
until March 13, 1997.
3. Company will pay you the 40% holdback on the first half
1996 bonus plan ($12,000) when the holdback is paid to all
other Company employees.
4. The Company will pay you $12,167 as your pro-rata share of
the Third Quarter bonus (through September 13, 1996) when the
payments (60% and 40%) are made in the regular course to
Company employees.
5. The Board of Directors will be requested to remove the
restrictions imposed upon the grant to you of 10,000 shares of
the Company's Common Stock, as specified in the Aydin
Corporation Restricted Stock Agreement, dated January 3, 1995.
6. The Company will make available to you out placement
services and office space for 6 months not to exceed $5,000.
7. You will have until October 14, 1996, to exercise all or
any portion of your current stock option to purchase 17,500
shares of the Company Common Stock at $11.56 per share,
pursuant to the terms of the Individual Non-Qualified Stock
Option Agreement dated January 3, 1995.
Exhibit 13
AYDIN
ANNUAL REPORT 1996
THE COMPANY
Aydin is a world class provider of products and systems for the
acquisition and distribution of information over electronic
communications media.
The Company designs, engineers, manufactures, markets, distributes
and installs technologically advanced communications products and
systems. AYDIN's customers are military, space, government and
commercial organizations around the world.
AYDIN's products and systems include: airborne and ground telemetry
products, displays, radios, microwave components, C3 systems
(Command, Control and Communications), radar automation and
integration systems, military communication systems and
telecommunications infrastructure equipment and systems.
AYDIN's offerings range from supplying basic components to providing
turnkey systems.
(page 1)
TO MY FELLOW STOCKHOLDERS:
As your new Chairman of the Board and Chief Executive Officer, I
want to share with you my perspective on where we are now and where
we are going.
1996 was a year of transition for AYDIN. Since I came on board in
May, we have been restructuring and repositioning the Company. We
are redirecting AYDIN from a business focused on government and
defense contracts with modest potential for growth, to a company
focused on communications, with a broader customer base and
potential for greater growth.
There was, and continues to be, a need to redefine our company and
its corporate culture. We are in the process of converting from
being technology directed to using technology to meet customers'
needs. We are changing from being engineering driven to being market
driven. We are moving from being a group of autonomous businesses,
to being a single business operating as a team. We are committed to
maximizing our key assets: a recognized and respected name in
specialized markets, a reputation for excellence in the design and
manufacture of high performance products, and a core group of high
skilled technologists.
FINANCIAL RESUTS. . . . . Our results in 1996 are clearly
disappointing. Sales were down. Our cost structure was not
consistent with the changing size and mix of our business. AYDIN's
sales in 1996 were $116,578,000 versus $140,607,000 in 1995, a
decrease of 17%. Our net loss was $14,780,000 versus a net income
of $3,930,000 in 1995. Loss per share in 1996 was $2.88.
AYDIN's sales were down for several reasons. We have stopped
selling several products that were not profitable, and we sold one
non-profitable product line. Our Systems Division did not win any
large projects, reducing both sales and backlog in the systems area.
(page 2)
During the latter part of 1996, the Company made significant
restructuring changes which helped us to realign our business
structure to be consistent with our long term goals. We
discontinued non-profitable product lines, stopped the development
of products that no longer fit our business objectives, and
reestimated the costs required to complete our major systems jobs,
resulting in inventory write downs, severance and related charges.
While all of these charges negatively impacted 1996 profits, they do
improve our ability to operate profitably in 1997 and in the future.
AYDIN had both marketing and financial accomplishments in 1996. We
gained initial customer acceptance on two large projects: TMRC
(Turkish Mobile Radar Complexes) and RIS (a NATO Radar Integration
System). We built backlog for our new TDMA INTELSAT Earth Station
Terminal and expect to build sales and backlog in 1997. Our asset
management improved as we lowered unbilled revenue by $8,934,000 or
19%, and accounts receivable by $28,060,000 or 53%. We have
dramatically improved cash provided from operating activities,
generating a positive cash flow of $189,000 in 1996 versus a cash
drain of $7,979,000 in 1995. AYDIN Vector maintained its long
record of outstanding performance, maintaining growth and
profitability.
MOVING FORWARD . . . . AYDIN enters 1997 with an aggressive plan to
improve growth and profitability. We have already begun to build a
profitable foundation on which to expand our business. We
simplified our organizational structure, helping us to better take
advantage of our existing resources. AYDIN now has two main revenue
producing organizations: Products Group and Communications Systems
Group. Each of these groups is described in the following pages of
this Annual Report to Stockholders.
We have cut costs where possible and have several additional cost
cutting efforts well underway. We anticipate annual savings of
approximately $11,000,000 as a result of these actions. Specific
actions taken include:
- Restructuring our business into two primary divisions saving
overhead.
- Combining three manufacturing lines into a single facility,
cutting overhead and creating the opportunity to reduce costs by
increasing buying leverage.
- Securing agreements of sale for two buildings and placing a
third underutilized building on the market.
- Selling the unprofitable High Power Amplifier product line.
(page 3)
[Photo]
The AYDIN Management Team:
(left to right)
John F. Vanderslice (seated), James R. Henderson,
Barry Maser, Gary Bard,
Klaus D. Oebel
MANAGEMENT CHANGES. . . . . The year 1996 was one of significant
change in AYDIN's management team. In May, Ayhan Hakimoglu, AYDIN's
founder, CEO and Chairman of the Board resigned. We thank him for
his contributions over the years and wish him the best in his new
endeavors.
I succeeded him, but am no newcomer to AYDIN. I was a young manager
when the Company started, and later a division president. I
rejoined AYDIN with three decades of experience in high technology
electronics and information systems as founder of Delta Data Systems
and Division President at Computer Sciences Corporation. I helped
these high technology businesses to achieve growth and
profitability. I returned to AYDIN's Board of Directors two years
ago and in May of this year was elected Chairman of the Board and
appointed CEO.
Immediately after my appointment, I set out to find additional
leadership to guide our company into its new future. In July, Jim
Henderson joined us as Chief Financial Officer. He brings to our
team many years of successful experience in finance and financial
controls at Unisys. In August, Klaus Oebel, with twenty-five years
experience in international business development and strategic
planning, became President of AYDIN Communication Systems Group and
corporate Vice President. In November, Barry Maser joined us as
Vice President of Business Development and International Sales.
Barry's experience includes developing and running an international
sales and marketing organization for Delta Data Systems as well as
being the principal of a regional communications and computer
peripheral products sales company.
(page 4)
One of AYDIN's outstanding performing divisions has been and will
continue to be our Vector Products operation. Under the leadership
of John Vanderslice it has shown growth, profits and has a
significant market share in the avionics electronics business. As
Executive Vice President of AYDIN and President of AYDIN Products,
John completes a senior executive team that is committed to success.
FUTURE GOALS. . . . . AYDIN's management is committed to achieving
solid growth and returns. Our financial goals for 1997 are to
ensure that all product lines are profitable, to increase sales and
to grow backlog. We will continue our efforts to reduce costs. We
will continue our efforts to improve the quantity and quality of
sales. We will continue to seek new opportunities to maximize sales
of developed products and expand our systems business.
We will focus on sustaining and growing our core global defense
business and our industrial and military display business. We have
narrowed our focus in the systems business by only prosecuting
opportunities in communications systems and in air defense and radar
modernization projects. It is these opportunities that will utilize
the know-how and skill we have gained in successfully executing
programs like TMRC and RIS. We believe that using our related
experience as a basis for selecting systems opportunities to bid,
both improves our ability to win projects and allows us to deliver
greater value to our customers.
Our future efforts will be on building a telecommunications business
where we can anticipate more rapid growth. The market for telephony
equipment and systems is growing rapidly both in the United States
and overseas. We see an opportunity for companies like AYDIN to
provide complete information systems. Starting with basic
telephony, we will be in a position to add information products,
systems and services to take sources of data and provide useful
information to users.
Management's job in 1997 is to continue our efforts to position our
Company to achieve our long range vision, and as a result, continue
to add value to our stockholders. I close this letter with a
personal thank you to each of you for your continuing confidence in
AYDIN and for your support.
/s/ I. Gary Bard
I. Gary Bard
Chairman of the Board, President and Chief Executive Officer
(page 5)
AYDIN PRODUCTS GROUP
In line with the company's new market driven focus, AYDIN product
divisions have been grouped to maximize the synergy of our people,
products, systems and technical expertise. The airborne telemetry
(AYDIN Vector) and ground telemetry product lines have been combined
to form AYDIN Telemetry. AYDIN Displays, formerly AYDIN Controls,
serves commercial, marine and military command and control and
display markets. AYDIN Microwave includes microwave components and
microwave radios for sophisticated commercial and military
customers.
AYDIN TELEMETRY
AYDIN telemetry's airborne and avionics products gather and process
critical information on board spacecraft, aircraft, missiles, guided
weapons and ground vehicles. Data is recorded and/or transmitted by
radio links to fixed or mobile receiving stations. AYDIN airborne
and ground station products receive, analyze, distribute and display
information collected. These products are ruggedized for extreme
environments.
AYDIN Telemetry products are used in defense and aerospace programs
such as aircraft and weapons development, flight test and satellite
communications for space agencies including NASA.
AYDIN DISPLAYS
AYDIN Displays provides a complete line of high-resolution color CRT
monitors, flat panel displays, and work stations. Our display
products are packaged to meet industrial, ruggedized and military
environments. AYDIN displays are used on factory floors, especially
in process control industries (chemicals, food and beverage,
electric utilities); in ship board information centers; in military
Command and Control Systems; in air traffic control centers and at
NASA Mission Control.
(page 6)
AYDIN MICROWAVE
AYDIN Microwave combines digital and analog microwave radios and
microwave components for commercial and military applications.
AYDIN digital radios incorporate modern modulation and coding
techniques to efficiently handle North American and International
data rates. The Company's data multiplexers and channel banks
complement these radios.
AYDIN Microwave provides thin and thick film RF (Radio Frequency) ,
microwave and digital micro-circuits. Our hybrid devices are
suitable for use in extreme environments. They are used in
commercial and military telecommunications products for satellite
and microwave systems. AYDIN communications amplifiers have become
a standard for performance and reliability in the telecommunications
industry.
AYDIN COMMUNICATIONS SYSTEMS GROUP
Like our product divisions, the AYDIN systems divisions are grouped
to better take advantage of our design, development and installation
expertise. AYDIN Government Systems designs turnkey integrated
systems for air defense, and command, control & communications
applications. AYDIN Telecom provides products and systems for
government and commercial users.
(page 7)
AYDIN GOVERNMENT SYSTEMS
AYDIN's Government Systems specializes in providing turnkey air
defense, C3 (Command, Control & Communications) and backbone
communications systems. Our systems aid in: flight plan
processing, data recording-reduction-playback, simulation &
training; and air traffic control. In Turkey, AYDIN provides turnkey
communications systems capability, including design, site survey,
civil works, shelterization, test, installation and training.
Our customers include NATO, defense agencies in the US and around
the world, major aerospace corporations and private commercial
businesses. Major projects currently include RIS (radar
integration) for NATO countries and TMRC (Turkish Mobile Radar
Complexes). Both projects integrate radar inputs, process the radar
data and provide Command and Control information to system
operators.
AYDIN TELECOM
AYDIN Telecom provides both digital and analog products and systems
for telecommunications service providers and private network
operators such as satellite networks, and railroad & utility
communications. AYDIN also engineers, manufactures and sells
telephone infrastructure equipment. Our product line includes
network access, data compression and satellite earth station
equipment.
In cooperation with COMSAT Laboratories, AYDIN is currently
marketing a second generation TDMA (Satellite Time Division Multiple
Access) terminal for the INTELSAT satellite network.
Aydin provides systems, products and services all along the
information and communications spectrum. The company continues to
keep pace with changing technology, serving an expanding world wide
customer base. The company's focus is to help people communicate.
AYDIN's products and systems help our customers manage the link
between raw data and useful information.
(page 8)
FINANCIAL STATEMENTS
(page 9)
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31,
1996 1995 1994
----------------------------------------------
Net sales $116,578,000 $140,607,000 $142,441,000
________________________________________________________________________________
Costs and expenses:
Cost of sales 94,363,000 102,391,000 104,270,000
Selling, general, and
administrative 29,833,000 25,660,000 26,080,000
Research and development 8,315,000 6,603,000 5,159,000
Interest expense, net 189,000 45,000 5,000
Restructuring costs 3,730,000 - -
________________________________________________________________________________
136,430,000 134,699,000 135,514,000
________________________________________________________________________________
Income (loss) before income taxes
and minority interest (19,852,000) 5,908,000 6,927,000
Income tax provision (recovery) (4,979,000) 1,971,000 1,880,000
________________________________________________________________________________
Income (loss) before minority
interest (14,873,000) 3,937,000 5,047,000
Less minority interest (93,000) 7,000 -
________________________________________________________________________________
Net income (loss) $(14,780,000) $3,930,000 $5,047,000
________________________________________________________________________________
________________________________________________________________________________
Earnings (loss) per common and
common equivalent share $ (2.88) $ .77 $ 1.01
________________________________________________________________________________
________________________________________________________________________________
See notes to consolidated financial statements
(page 10)
CONSOLIDATED BALANCE SHEETS
December 31,
1996 1995
--------------------------------
Assets
Current Assets
Cash and cash equivalents:
1996-$1,584,000; 1995-$3,569,000 $ 5,495,000 $ 4,638,000
Restricted cash 7,571,000 11,672,000
Accounts receivable 25,156,000 53,216,000
Unbilled revenue 37,993,000 46,927,000
Inventories 16,415,000 22,780,000
Prepaid expenses 2,331,000 1,577,000
________________________________________________________________________________
Total Current Assets 94,961,000 140,810,000
Property, Plant and Equipment,
at cost, net of accumulated
depreciation and amortization 22,739,000 25,624,000
Other assets 2,622,000 426,000
________________________________________________________________________________
________________________________________________________________________________
$120,322,000 $166,860,000
________________________________________________________________________________
________________________________________________________________________________
Liabilities and Stockholder's Equity
Current Liabilities
Current maturities of long-term debt $ - $ 342,000
Short-term bank debt 2,800,000 5,486,000
Accounts payable 14,865,000 29,222,000
Accrued liabilities:
Compensation 3,836,000 3,405,000
Department of Justice settlement 119,000 2,064,000
Other 1,872,000 1,901,000
Advance payments and contract billings
in excess of recognized revenue 2,278,000 2,843,000
Accrued and deferred income taxes 426,000 9,932,000
________________________________________________________________________________
Total Current Liabilities 26,196,000 55,195,000
Long-Term Debt, less current maturities - 770,000
Other Liabilities 1,134,000 -
Deferred Income Taxes 2,665,000 6,232,000
Minority Interest - 90,000
Stockholder's Equity
Common stock, par value $1-authorized,
7,500,000 shares; issued and outstanding,
1996-5,133,400 shares; 1995-5,112,127 shares 5,133,000 5,112,000
Additional paid-in capital 2,436,000 2,188,000
Retained earnings 83,103,000 97,883,000
Foreign currency translation effects (345,000) (610,000)
________________________________________________________________________________
90,327,000 104,573,000
________________________________________________________________________________
$120,322,000 $166,860,000
________________________________________________________________________________
________________________________________________________________________________
See notes to consolidated financial statements
(page 11)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
1996 1995 1994
----------------------------------------------
Operating Activities
Net income (loss) $ (14,780,000) $ 3,930,000 $ 5,047,000
Adjustments to reconcile net
income (loss) to net cash
provided (used) by operating
activities:
Depreciation and amortization 3,008,000 3,032,000 4,101,000
Deferred income taxes (3,891,000) 833,000 (7,444,000)
Minority interest (93,000) 7,000 -
Gain on sale of facility (216,000)
Changes in other operating assets
and liabilities, net:
Accounts receivable 28,060,000 (17,865,000) (1,826,000)
Unbilled revenue 8,934,000 7,982,000 11,650,000
Advance payments and contract
billings in excess of
recognized revenue (565,000) (1,326,000) 2,606,000
Inventories 6,365,000 (2,216,000) (2,967,000)
Prepaid expenses (754,000) (227,000) 120,000
Accounts payable (14,357,000) 2,167,000 5,324,000
Accrued liabilities (1,543,000) (3,230,000) (4,695,000)
Other long-term liabilities 1,134,000 - -
Accrued income taxes (9,182,000) (1,269,000) 10,800,000
Other non-current assets (2,196,000) - -
Other 265,000 203,000 118,000
________________________________________________________________________________
Cash provided (used) by
operating activities 189,000 (7,979,000) 22,834,000
Investing Activities
Proceeds from sale of facility 1,159,000 - -
Purchase of property, plant,
and equipment (1,066,000) (3,170,000) (4,377,000)
________________________________________________________________________________
Cash provided (used) by
investing activities 93,000 (3,170,000) (4,377,000)
Financing Activities
Release of collateral on
restricted cash 4,101,000 6,498,000 1,685,000
Principal payments on
long-term debt (1,112,000) (839,000) (348,000)
Purchase of treasury stock - (248,000) -
Minority investment in
consolidated subsidiary 3,000 83,000 (105,000)
Proceeds from exercise of
stock options 269,000 1,522,000 96,000
Net short-term borrowings
(repayments) (2,686,000) (1,000,000) (15,039,000)
________________________________________________________________________________
Cash provided (used)
by financing activities 575,000 6,016,000 (13,711,000)
Increase (decrease) in cash
and cash equivalents 857,000 (5,133,000) 4,746,000
Cash and cash equivalents at
beginning of year 4,638,000 9,771,000 5,025,000
________________________________________________________________________________
Cash and cash equivalents
at end of year $ 5,495,000 $ 4,638,000 $ 9,771,000
________________________________________________________________________________
________________________________________________________________________________
See notes to consolidated financial statements
(page 12)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A-LIQUIDITY, CASH FLOWS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Liquidity and Cash Flows:
The Company has financed its operations over the past two years
from internal cash sources because of the limited availability
of outside cash borrowing sources. At December 31, 1996 there
was $2.8 million of short-term cash borrowings outstanding with
no current availability for further cash borrowings. Also at
December 31, 1996 there was a letter of credit balance of $13.9
million issued against a $49 million advance payment received
in 1990 in connection with a contract from the Government of
Turkey. Offsetting the $13.9 million balance was $7.6 million
of cash collateral. This letter of credit is currently being
renewed in four month intervals or until it reaches zero,
whichever comes first. The Company anticipates that the letter
of credt will reach zero during the second half of 1998.
Although there can be no assurance that this letter of credit
will continue to be renewed, management is confident that the
letter of credit will be renewed upon its current expiration
and thereafter. The Company is currently seeking new banking
arrangements on terms acceptable to the Company to supplement
internally generated cash flows in meeting future potential
operating requirements.
The Company anticipates that its near-term cash requirements
(in addition to renewed short-term financing requirements) can
be financed through internally generated cash flows.
Substantial amounts of cash flows are expected from certain of
the Company's largest current long-term type contracts on which
significant progress toward completion is expected in 1997.
Performance in accordance with the contracts will permit the
Company to bill and collect a significant portion of the $38
million of unbilled revenues at December 31, 1996 as well as
additional amounts to be earned in 1997. However, if the
Company is unable to meet delivery deadlines, cash flow will be
negatively impacted.
During 1996, management initiated a restructuring plan to
consolidate operations and develop marketing strategies which
are expected to increase sales and reduce operating costs. Full
implementation of these operational changes is expected to
take effect in 1997. As part of the restructuring and
consolidation, three Company-owned buildings have been offered
for sale. Two of these facilities are under contract for sale
and an offer has been received on the third facility. Net
proceeds from these sales are expected to generate
approximately $10 million of available cash during 1997. There
can be no assurances that the anticipated effects of
management's restructuring, consolidation and other plans will
result in the cash flows as expected and described above.
Summary of Significant Accounting Policies:
Principles of Consolidation
The consolidated financial statements include the accounts of
the Company and its majority-owned subsidiaries. All
significant inter-company transactions and balances are
eliminated in consolidation. At December 31, 1996, the Company
disposed of all but 19% of its prior 80% ownership in Aydin
S.A. (Argentina). Accordingly, the assets and liabilities of
Aydin S.A. are no longer included in the December 31, 1996
consolidated balance sheet but 80% of the operating results (a
$600,000 net loss) are included in the Consolidated Statement
of Operations.
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.
(page 13)
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. Progress billing
balances at December 31, 1996 and 1995 amounted to $4,649,000
and $6,152,000, respectively. Contract billings for partial
shipments where product title passes to the customer are not
considered progress billings. Progress billings are netted
against unbilled revenue on the consolidated balance sheet.
Contracts may provide for customer retainage of a portion of
amounts billed until contract completion. All contract
retainage of $687,000 at December 31, 1996 matures in 1997.
Contract retainage is included on the consolidated balance
sheet as part of accounts receivable. Substantially all of the
unbilled revenue balance at December 31, 1996 of $37,993,000 is
expected to be billed during 1997 although this is dependent
upon the Company meeting performance milestones.
Claims from a customer of approximately $1.0 million for work
performed outside the scope of a contract for which the Company
anticipates recovery were included in unbilled revenue at
December 31, 1995. This claim was settled in 1997 with no
negative impact on operations.
Use of Estimates
In preparing its financial statements in accordance with
generally accepted accounting principles, management is
required to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and revenues and expense during the reported
periods. Actual results could differ from those estimates. One
such area where the use of estimates could have a significant
impact on future results is estimated costs at completion and,
in some cases, contract value on the company's larger long-term
type contracts. During 1996, changes to these estimates on the
Company's larger long-term type contracts had no significant
aggregate impact, except for the TMRC contract with the
Government of Turkey. For TMRC, there was a negative impact of
approximately $5.7 million pre-tax resulting from revisions of
contract values and estimates of costs to complete, of which
$2.6 million represented negotiations with the customer which
extended performance milestones. Other areas where use of
estimates could have a significant impact on future results are
inventory obsolescence reserves, accounts receivable bad debt
reserves and warranties.
Cash and Cash Equivalents
The Company considers all highly-liquid investments with a
maturity of three months or less when purchased to be cash
equivalents. The Company's bank balances (including cash
equivalents and short-term investments in commercial
paper) in excess of the Federally insured limit ($100,000) per
bank, amounted to $14.3 million at December 31, 1996. All of
this cash is in high quality banks. Approximately $2.6 million
of the Company's total cash balances at December 31, 1996 was
in foreign banks.
Restricted cash at December 31, 1996 and 1995 represents
interest bearing cash collateral required to be maintained
against letters of credit.
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.
(page 14)
Depreciation and Amortization
Depreciation is provided by the straight-line method over 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. Buildings are depreciated over lives ranging up to 35
years. Machinery and equipment is depreciated over useful lives
ranging from 3 to 5 years.
Capitalized Software
The Company wrote off approximately $1.2 million of
capitalized software development costs related to
telecommunication products in 1996, of which $586,000 had been
capitalized at December 31, 1995 in accordance with FASB 86.
The costs were written off in 1996 because the Company decided
not to pursue this development for the future. At December 31,
1996 there were no remaining capitalized software development
costs on the balance sheet.
Advertising and Research and Development Costs
The Company expenses advertising costs and research and
development costs as incurred. Advertising costs were $441,000,
$371,000 and $255,000 for 1996, 1995 and 1994, respectively.
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 statements of operations as
required by FAS No. 52 because of the high inflation in the
Turkish economy. Pretax income includes foreign currency
translation gains relating to the Turkish subsidiary of
$274,000 for 1996 and $516,000 for 1995.
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 per share calculations was
5,123,622 for 1996, 5,114,642 for 1995, and 4,998,701 for 1994.
Warranty Costs
The usual warranty period on the Company's contracts and
products is one year, which is provided for in warranty
accruals.
NOTE B-INVENTORIES
Inventories consist of:
1996 1995
---------------------------------
Raw materials $ 7,938,000 $ 11,581,000
Work in process 5,957,000 7,965,000
Finished product 2,520,000 3,234,000
________________________________________________________________________________
$ 16,415,000 $ 22,780,000
________________________________________________________________________________
________________________________________________________________________________
(page 15)
NOTE C-PROPERTY, PLANT, AND EQUIPMENT
The Company's investment in property, plant, and equipment is
shown below. The net book value at December 31, 1996 of land
and buildings which are held for sale pursuant to the Company
restructuring plans amounts to $8,682,000.
1996 1995
---------------------------------
Land $ 5,074,000 $ 5,264,000
Buildings 18,987,000 20,519,000
Machinery and equipment 57,939,000 58,896,000
________________________________________________________________________________
82,000,000 84,679,000
Less accumulated depreciation and amortization 59,261,000 59,055,000
________________________________________________________________________________
$ 22,739,000 $ 25,624,000
________________________________________________________________________________
________________________________________________________________________________
Financial Accounting Standard No. 121, regarding the
"Accounting for Impairment of Long-Lived Assets and for
Long-Lived Assets to be disposed of", became
effective for 1996 with no resulting impact on income.
NOTE D-CREDIT ARRANGEMENTS
The Company has borrowing arrangements with certain banks
aggregating $31.5 million at December 31, 1996 for short-term
borrowings and letters of credit. At December 31, 1996 and
1995, $2.8 million and $5.5 million of cash borrowings
were outstanding against the agreements, respectively. At
December 31, 1996, $1.4 million remains available, principally
for issuance of letters of credit. The Company is seeking new
banking arrangements to cover its potential future
operating needs on terms that are acceptable to the Company.
In addition to the short-term cash borrowings outstanding
under the lines of credit with banks at December 31, 1996,
$27.3 million of letters of credit was also outstanding. The
letters of credit have been issued to foreign entities
principally to guarantee performance under contracts or the
return of unearned advanced payments in the event that the
Company's performance is not in accordance with its contracts.
Of the amount of letters of credit outstanding, $13.9 million
relates to the Company's contract with the Government of Turkey
and extends to June 4, 1997 or until the contract is completed,
whichever occurs first. Although the contract will not be
completed by June 4, 1997, the letter of credit agreement is
renewable every four months. Management expects the letters of
credit to be renewed until the completion date of the contract
which is expected during the second half of 1998, although
there are no contractual assurances of renewal.
Interest on cash borrowings accrues at the annual rate of
10%. Commission rates on letters of credit range from .5% to
2.0%
The letters of credit and short-term borrowing agreements
require various collateral to be maintained. At December 31,
1996, collateral held includes most of the Company-owned
buildings, a security interest in personal and intellectual
properties (excluding machinery and equipment) in the United
States, and cash and/or short-term investments amounting to
$7.6 million. In addition, certain financial covenants apply to
these agreements as well as a limitation on the payment of
dividends and/or the purchase of treasury stock to 50% of net
income for the prior four fiscal quarters.
(page 16)
NOTE E-LONG-TERM DEBT
All long-term debt was paid off during 1996. Long-term debt
at December 31, 1995 consisted of the following:
1996 1995
---------------------------------
Variable-rate mortgage bearing interest at
70% of the prime rate (5.95% at December 31, 1995),
quarterly principal payments of $55,000 plus
interest through November 30, 1997 $ - $ 437,000
Variable-rate mortgage bearing interest at
70% of the prime rate (5.95% at December 31, 1995),
quarterly principal payments of $31,000 plus
interest through May 1, 2001 - 675,000
________________________________________________________________________________
- 1,112,000
Less current maturities - 342,000
________________________________________________________________________________
$ - $ 770,000
________________________________________________________________________________
________________________________________________________________________________
Interest expense for the years 1996, 1995, and 1994 amounted
to $988,000, $1,243,000, and $1,142,000, respectively. Interest
paid for the years 1996, 1995, and 1994 amounted to $1,416,733,
$832,000, and $1,226,000, respectively.
NOTE F-STOCKHOLDERS' EQUITY
The changes in common stock, additional paid-in capital,
treasury stock, retained earnings, and foreign currency
translation effects during the years 1994, 1995, and 1996 were
as follows:
Foreign
Common Additional Currency
Stock Paid-In Treasury Retained Translation
Par $1 Capital Stock Earnings Effects
-----------------------------------------------------------------
Balance, January 1, 1994
(4,981,273 common shares) $ 4,981,000 $ 697,000 $ - $ 88,906,000 $(625,000)
Issuance of 9,127 shares on
exercise of stock options 9,000 87,000
Tax benefit related to shares acquired
by employees under stock options 3,000
Foreign currency translation adjustment 112,000
Net income 5,047,000
________________________________________________________________________________________________________
Balance, December 31, 1994
(4,990,400 common shares) 4,990,000 787,000 - 93,953,000 (513,000)
Issuance of 136,716 shares on
exercise of stock options 137,000 1,385,000
Tax benefit related to shares acquired
by employees under stock options 249,000
Acquisition of 14,991 shares of treasury stock
received from employees as payment for
stock options exercises (248,000)
Retirement of 14,991 treasury shares (15,000) (233,000) 248,000
Foreign currency translation adjustment (97,000)
Net income 3,930,000
________________________________________________________________________________________________________
Balance, December 31, 1995
(5,112,127 common shares) 5,112,000 2,188,000 - 97,883,000 (610,000)
Issuance of 21,273 shares on
exercise of stock options 21,000 237,000
Tax benefit related to shares
acquired by employees
under stock options 11,000
Foreign currency translation adjustment 265,000
Net loss (14,780,000)
______________________________________________________________________________________________________________
______________________________________________________________________________________________________________
Balance, December 31, 1996
(5,133,400 common shares) $ 5,133,000 $ 2,436,000 $ - $ 83,103,000 $(345,000)
______________________________________________________________________________________________________________
______________________________________________________________________________________________________________
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 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
1994, 1995, and 1996 follows:
Shares Weighted Average Shares
Under Exercise Available
Option Price for Option
--------------------------------------------------
At January 1, 1994 323,293 $ 13.28 47,235
Options granted:
Option plan 164,600 11.56 (164,600)
Individual options 30,000 10.56 (30,000)
Options exercised (9,127) 10.55 -
Options cancelled (185,648) 15.27 185,648
Authorization of 1994 options - - 150,000
Cancellations of authorization - - (97,000)
________________________________________________________________________________
At December 31, 1994 323,118 $ 11.66 91,283
Options granted:
Option plan 22,900 12.11 (22,900)
Individual options 72,000 11.37 (72,000)
Options exercised (136,716) 11.13 -
Options (22,639 12.34 22,639
Authorization of individual
options - - 72,000
________________________________________________________________________________
At December 31, 1995 258,663 $12.02 91,022
Options granted:
Option plan 378,000 10.39 (378,000)
Options exercised (10,275) 12.69 -
Options cancelled (113,300) 9.89 113,300
Authorization of 1996 options - - 500,000
Cancellations of authorization - - (70,000)
________________________________________________________________________________
At December 31, 1996
(59,487 exercisable) 513,088 $10.81 256,322
________________________________________________________________________________
________________________________________________________________________________
(page 18)
These options, with an exercise price range of $10.16 to
$15.34, expire on various dates beginning February 1998 and
ending December 2001. The weighted average remaining
contractual life is 4.27 years. The weighted average option
price of shares exercisable at December 31, 1996 was $12.11.
Financial Accounting Standard No. 123 regarding "Accounting for
Stock-Based Compensation" became effective for 1996. The
Company has chosen to disclose the impact of stock-based
compensation in its notes and will not include such impact on
its recorded earnings. Had compensation cost been determined
based on the fair value of options at the grant dates
consistent with the method of SFAS 123, the Company's net
income (loss) and earnings (loss) per share would have been as
follows:
1996 1995
--------------------------------------------------
Net income (loss) As reported $ (14,780,000) $ 3,930,000
Pro-forma $ (15,128,000) $ 3,855,000
Earnings (loss) per share As reported $ (2.88) $ .77
Pro-forma $ (2.95) $ .76
The fair value of each option grant is estimated on the date
of grant using the Black-Sholes options-pricing model with the
following weighted-average assumptions used for grants in 1996
and 1995, respectively: dividend yield of 0 percent for all
years; expected volatility of 27.3 and 29.9 percent; risk-free
interest rates of 6.23 and 7.60 percent; and expected lives of
5 years.
NOTE H-TAXES ON INCOME
The provision (recovery) for income taxes is shown below. The
recoveries shown on the current lines for each year represent
tax loss carrybacks to earlier years.
Federal State Foreign Total
--------------------------------------------------------
1996
Current $(5,019,000) $ (3,000) $3,923,000 $(1,099,000)
Deferred 21,000 (344,000) (3,568,000) (3,891,000)
Charge equivalent to
tax benefit related to
shares acquired by
employees under
stock options 11,000 - - 11,000
________________________________________________________________________________
$(4,987,000) $(347,000) $ 355,000 $(4,979,000)
________________________________________________________________________________
________________________________________________________________________________
1995
Current $ (877,000) $(130,000) $ 1,896,000 $ 889,000
Deferred 533,000 173,000 127,000 833,000
Charge equivalent to
tax benefit related to
shares acquired by
employees under
stock options 249,000 - - 249,000
________________________________________________________________________________
$ (95,000) $ 43,000 $ 2,023,000 $ 1,971,000
________________________________________________________________________________
________________________________________________________________________________
1994
Current $ 5,799,000 $ 973,000 $ 2,549,000 $ 9,321,000
Deferred (5,929,000) (1,418,000) (97,000) (7,444,000)
Charge equivalent to
tax benefit related to
shares acquired by
employees under
stock options 2,000 1,000 - 3,000
________________________________________________________________________________
$ (128,000) $ (444,000) $ 2,452,000 $ 1,880,000
________________________________________________________________________________
________________________________________________________________________________
(page 19)
The components of deferred income tax balances follow. No
valuation allowances were required.
Year Ended December 31,
1996 1995 1994
--------------------------------------------
Contract accounting $ 2,271,000 $ 7,353,000 $ 7,169,000
Excess tax over book depreciation 2,755,000 2,811,000 2,765,000
Inventory valuation (829,000) (677,000) (1,141,000)
State deferred taxes (211,000) (328,000) (269,000)
Other, net 847,000 (435,000) (633,000)
________________________________________________________________________________
$ 4,833,000 $ 8,724,000 $ 7,891,000
________________________________________________________________________________
________________________________________________________________________________
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:
Year Ended December 31,
1996 1995 1994
---------------------------------
Federal statutory rate (34.0%) 34.0% 34.0%
State income taxes net of federal tax benefit (.5) .5 (3.7)
Benefit from nontaxable FSC income (1.0) (2.1) (7.1)
Effects of higher foreign income taxes 4.5 1.3 2.5
Dividends of a foreign subsidiary 1.6 - -
Other, net 4.3 (.3) 1.4
________________________________________________________________________________
Effective income tax rate (25.1%) 33.4% 27.1%
________________________________________________________________________________
________________________________________________________________________________
Income tax payments, net of refunds, amounted to $1,614,000
in 1995 and $6,989,000 in 1996. Income tax refunds, net of
payments, amounted to $940,000 in 1994. As of December 31, 1996
there were no unpaid income taxes including interest owed to
the IRS.
The Company has not provided deferred income taxes on
cumulative unremitted earnings of foreign subsidiaries
amounting to $8.0 million because of the availability of
foreign tax credits which would eliminate the U.S. tax
liability related to the inclusion of the foreign earnings.
During 1996, $1.0 million of dividends was received from the
Company's Turkish subsidiary.
Pre-tax income from foreign operations is shown under Note I
below.
NOTE I-NATURE OF OPERATIONS, EXPORT SALES, MAJOR CUSTOMERS, AND
FOREIGN OPERATIONS
The Company operates predominantly in the electronics
manufacturing industry. Aydin designs, manufactures and markets
a wide range of telecommunications equipment, defense
electronic systems and computer equipment and software, which
are sold worldwide. Aydin generates approximately one-half of
its sales from standard products and systems and the balance of
its sales from custom-designed systems and equipment based on
customers' specific requirements. Aydin offers a broad range of
products due to its ability to combine analog microwave
engineering methods with digital techniques and software.
(page 20)
Export sales by geographic area are as follows:
1996 1995 1994
-----------------------------------------------
Asia $ 4,259,000 $ 6,224,000 $ 6,788,000
Africa 3,203,000 4,003,000 2,553,000
Europe 10,767,000 18,273,000 27,137,000
North America 1,273,000 1,605,000 1,852,000
South America 435,000 376,000 1,005,000
Other 573,000 263,000 384,000
________________________________________________________________________________
Total export sales $20,510,000 30,744,000 $39,719,000
________________________________________________________________________________
________________________________________________________________________________
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 $38,728,000, $44,309,000 and $42,015,000
in 1996, 1995 and 1994, respectively. Sales to the Government
of Turkey amounted to $15,116,000, $16,549,000 and $24,888,000
in 1996, 1995 and 1994, respectively. Sales to CTI (Argentina)
amounted to $15,739,000 in 1994.
Foreign assets included in the consolidated balance sheet
amounted to $21.7 million, $25.6 million and $25.2 million at
December 31, 1996, 1995 and 1994, respectively. Of these
amounts, $2.5 million, $.4 million and $6.7 million, at
December 31, 1996, 1995 and 1994, respectively, are cash and
short-term investments of the Company's Turkish subsidiary
consisting primarily of U.S. dollar denominated
interest-bearing time deposits. Foreign sales
and pretax income for 1996 was $27.0 million and $.9 million,
respectively, of which substantially all of the income comes
from the Company's Turkish subsidiary. Foreign sales and pretax
income for 1995 amounted to $28.9 million and $5.4 million,
respectively, of which substantially all of the income was from
the Turkish subsidiary. Foreign sales and pretax income for
1994 amounted to $37.2 million and $6.7 million, respectively.
On December 31, 1996, the company disposed of the Argentina
subsidiary. Accordingly, these assets are excluded from the
December 31, 1996 foreign assets totals.
NOTE J-COMMITMENTS AND CONTINGENCIES
The Company, along with others, is responsible for the costs
of cleanup under an order of the State of California at a site
leased by the Company prior to 1984. Cleanup of the site has
been completed. Costs incurred to date and future expected
monitoring costs amount to $9.7 million. Of the total amount,
$3.1 million are costs to be expended over the next thirty (30)
years to monitor the cleanup. Those costs have been included in
the accompanying consolidated balance sheet as liabilities
discounted at 7% for the time value of money to the expected
payment dates. Expected payments for the years following
December 31, 1996 are $105,000 annually.
In 1993 the Company reached settlement with three insurance
carriers (with which the Company maintained environmental
coverage on this site) for the payment of $6.7 million of
costs. A court granted a declaratory judgement requiring the
fourth carrier to pay cleanup costs in excess of the $6.7
million. That carrier is currently appealing that judgement.
Amounts paid by the Company in excess of the $6.7 million
recovered from the three insurance carriers, $1.5 million, plus
the discounted future costs of monitoring the site, $1.1
million, have been recorded as Other Assets in the accompanying
consolidated balance sheet at December 31, 1996. Management
believes that it is probable that the Company will be
successful in recovering these amounts from the insurer and
that the resolution of this matter will not have an adverse
affect on the financial position or results of operations of
the Company.
(page 21)
During 1995 a subcontractor to the Company in the TMRC
program with the Government of Turkey filed a demand for
arbitration alleging a breach of contract and equitable
adjustment of $12.4 million. This claim was amended in 1996 and
increased to $18.4 million. The Company has filed a claim
against the subcontractor for an amount in excess of the
subcontractor's claim. Based on discussions with its outside
counsel, management believes that it has meritorious defenses
and counterclaims and expects the outcome to have no material
adverse impact on the Company's financial position.
The IRS is currently conducting field examinations of certain
years' income tax filings. Management does not believe there
will be any adverse effect from these examinations on financial
position or results of operations.
The Company's fixed price U.S. Government contracts are
subject to audit by the government and price redetermination
under certain circumstances.
NOTE K-RESTRUCTURING COSTS
During the third quarter of 1996 the Company announced a plan
to consolidate and restructure its domestic operations. The
Company recorded a charge of $3.7 million in the third quarter
for the restructuring of which approximately $1.5 million was
for cash outlays and $2.2 million was for non-cash asset
write-offs. The major charges consisted of: severance benefits
for 150 terminated employees ($600,000); loss on sale of a
product line ($500,000); inventory write-offs ($1,000,000) and
capital equipment ($300,000) write-offs in connection with the
cutback of product lines; and write-off of goodwill in
connection with the sale of a product line ($400,000). The
restructuring has proceeded through the fourth quarter as
planned with only minor changes. At December 31, 1996, $586,000
of the $3.7 million remains accrued to complete the
restructuring which is expected to be completed during the
second quarter of 1997.
(page 22)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This section represents a review of the Company's
consolidated financial condition and results of operations. In
addition to historical information, this discussion and
analysis contains forward-looking statements. The
forward-looking statements contained herein are subject to
certain risks and uncertainties that could cause actual results
to differ materially from those projected. Readers are
cautioned not to place undue reliance on these forward-looking
statements, which reflect management's analysis only as of the
date hereof. The Company undertakes no obligation to publicly
revise or update these forward-looking statements to reflect
events and circumstances that arise after the date hereof.
Liquidity and Sources of Capital
The Company has financed its operations over the past two
years from internal cash sources because of the limited
availability of outside cash borrowing sources. At December 31,
1996 there was $2.8 million of short-term cash borrowings
outstanding with no current availability for further cash
borrowings. Also at December 31, 1996 there was a letter of
credit balance of $13.9 million issued against a $49 million
advance payment received in 1990 in connection with a contract
from the Government of Turkey. Offsetting the $13.9 million
balance was $7.6 million of cash collateral. This letter of
credit is currently being renewed in four month intervals or
until it reaches zero, whichever comes first. The Company
anticipates that the letter of credit will reach zero during
the second half of 1998. Although there can be no assurance
that this letter of credit will continue to be renewed,
management is confident that the letter of credit will
be renewed upon its current expiration and thereafter. The
Company is currently seeking new banking arrangements on terms
acceptable to the Company to supplement internally generated
cash flows in meeting future potential operating requirements.
The Company anticipates that its near-term cash requirements
(in addition to renewed short-term financing requirements) can
be financed through internally generated cash flows.
Substantial amounts of cash flows are expected from certain of
the Company's largest current long-term type contracts on which
significant progress toward completion is expected in 1997.
Performance in accordance with the contracts will permit the
Company to bill and collect a significant portion of the $38
million of unbilled revenues at December 31, 1996 as well as
additional amounts to be earned in 1997. However, if the
Company is unable to meet delivery deadlines, cash flow will be
negatively impacted.
During 1996, management initiated a restructuring plan to
consolidate operations and develop marketing strategies which
are expected to increase sales and reduce operating costs. Full
implementation of these operational changes is expected to
take effect in 1997. As part of the restructuring and
consolidation, three Company-owned buildings have been offered
for sale. Two of these facilities are under contract for sale
and an offer has been received on the third facility. Net
proceeds from these sales are expected to generate
approximately $10 million of available cash during 1997. There
can be no assurances that the anticipated effects of
management's restructuring, consolidation and other plans will
result in the cash flows as expected and described above.
Cash provided by operations was $189,000 compared to a
negative cash flow from operations of $8.0 million last year.
Cash collected during 1996 was approximately $153 million
compared to net sales of $117 million. The excess of
collections versus sales is reflected as a $37 million
reduction on the consolidated balance sheet at December 31,
1996 compared to 1995 in accounts receivable and unbilled
revenue. Most of these decreases relate to two large contracts
(TMRC and RIS). Further reductions in unbilled revenue of
approximately $15 million are expected during 1997 on these two
contracts, which should generate significant positive cash
flow. The year 1996 included two significant uses of cash, one
being approximately $7 million of payments to the IRS and the
other was a $9 million payment to a TMRC software
subcontractor.
(page 23)
Cash used by operations during 1995 was $8.0 million. The
primary reason for the negative cash flow had been delays of in
excess of one year in obtaining delivery from the software
subcontractor of the software for the TMRC-C3 contract with the
Government of Turkey. These delays had held up collection from
the customer of approximately $26 million, of which
approximately $8 million was payable to the software
subcontractor. The software was accepted by the customer during
1996.
The major component of the $8.0 million of cash used by
operations during 1995 was a net increase of $9.9 million in
the aggregate of accounts receivable and unbilled revenue of
which $1.7 million related to the TMRC-C3 program and $8.2
million related to non-TMRC activity reflecting increased sales
volume during 1995 in contracts other than TMRC.
Results of Operations
1996 versus 1995
Net sales for 1996 of $117 million declined by 17% from 1995
sales of $141 million. Approximately $10 million of this
decline was in the company's non-TMRC systems type business
where no new large contracts were won during 1996 although the
company has bid and is hopeful of winning at least one such
large ($30 to $40 million) contract during the first half of
1997. In addition, sales (and pre-tax profits) on the TMRC
contract for 1996 were negatively impacted by $5.7 million
because of prior years' delays in reaching contract
performance milestones which required increases in estimated
costs at completion during 1996 and resulted in the customer
imposing liquidated damages. Negotiations with the customer
concluded in the third quarter of 1996 resulted in contract
modifications which extended performance milestones and should
have a positive effect on maintaining contract profitability.
U.S. Government sales, although still depressed, increased
slightly to 33% of total sales from 32% last year. Export and
foreign sales were 41% of total sales in both 1996 and 1995.
Domestic industrial (commercial) sales were 26% of total sales
compared to 27% last year.
Backlog at December 31, 1996 was approximately $84 million as
compared to $106 million a year ago, a decline of $22 million.
Most of this decline was from the TMRC backlog which declined
by $14 million, from $41 million to $27 million. Probable
production options are not included in these backlog numbers.
Cost of sales as a percentage of sales was 80.9% in 1996
compared to 72.8% in 1995. Approximately 50% of the increase
resulted from the 1996 negative TMRC sales impact referred to
above. The balance of the increase results from a combination
of (1) inventory write-offs caused by discontinued or
de-emphasized product lines; and (2) a higher proportion of
fixed overhead costs in relationship to the reduced 1996 sales.
Selling, general and administrative (SG&A) expenses increased
by $4,173,000 (16%) in 1996 to $29,833,000 because of certain
unusual operating expenses incurred in 1996 which are part of
SG&A. These included: (1) $1.3 million of costs related to the
Argentine subsidiary for which we disposed of our majority
interest during 1996; (2) $750,000 of proposal costs; and (3)
$1 million of bad debts write-offs involving mostly foreign
receivables. The balance of the increase was from increased
selling costs in the telecommunications area, added corporate
infrastructure costs and costs related to a potential business
combination which was abandoned.
Research and development costs increased by $1.7 million
(26%) during 1996 because of expanded developments in
telecommunications systems.
(page 24)
During the third quarter of 1996, the Company announced a
plan to consolidate and restructure its domestic operations.
The Company recorded a charge of $3.7 million in the third
quarter for expected restructuring costs of which approximately
$1.5 million was for cash outlays and $2.2 million for non-cash
asset write-offs. The major components of the charge were:
severance benefits for 150 terminated employees ($600,000);
loss on sale of a product line ($500,000); inventory write-offs
($1,000,000) and capital equipment ($300,000) write-offs in
connection with the discontinuation of product lines; and write
off of goodwill associated with the sale of a product line
($400,000). The restructuring has proceeded throughout the
remainder of 1996 as planned with no significant changes from
the original plan. The Company anticipated annual cash savings
of approximately $4.3 million as a result of lower labor and
facility costs emanating from the restructuring.
The original restructuring plan anticipated the termination
of 150 employees. At December 31, 1996, 90 of these
terminations had occured and termination benefits were paid to
those individuals. The remainder of the terminations, and
payment of the related termination benefits of $331,000, are
expected to occur during the first half of 1997.
Restructuring charges and their application during 1996 are
as follows:
Total Activity
Amount in 1996 Remainder
-----------------------------------------------
Employee termination benefits $ 600,000 $ 269,000 $ 331,000
Loss on sale of product line 500,000 500,000 -
Inventory and equipment write-off 1,300,000 1,300,000 -
Goodwill write-off 400,000 400,000 -
Other costs 900,000 645,000 255,000
________________________________________________________________________________
Totals $3,700,000 $3,114,000 $ 586,000
________________________________________________________________________________
________________________________________________________________________________
The effective income tax rate decreased to 25.1% for 1996
compared to 33.4% for 1995 primarily because the effects of
higher foreign income taxes and dividends from a foreign
subsidiary reduced the tax benefit from the U.S. losses.
1995 versus 1994
Net sales for 1995 declined by 1% from 1994. U.S. Government
sales, although still depressed, increased to 32% of total
sales from 29% in 1994. Export and foreign sales decreased to
41% of total sales from 53% in 1994 primarily because of lower
sales of the Argentine subsidiary compared to 1994's unusually
high level and a slow-down in sales on the TMRC-C3 contract.
Domestic industrial sales increased to 27% of total sales from
18% in 1994 because of higher commercial color CRT monitors and
telecommunication sales.
Backlog at December 31, 1995 was approximately $106 million
as compared to $134 million in 1994. The Company has
additional production options not included in the above
figures. The TMRC-C3 contract backlog amounted to $41 million
and $52 million, respectively, at December 31, 1995 and 1994.
Research and Development costs increased by $1.4 million
(28%) during 1995 because of expanded development efforts in
telecommunication systems. Additionally, $586,000 of software
development costs related to the telecommunication R&D was
capitalized during 1995 in accordance with Financial Accounting
Standard 86.
(page 25)
REPORT OF INDEPENDENT AUDITORS
Report of Grant Thornton LLP
Independent Auditors
Stockholders and Board of Directors
Aydin Corporation
We have audited the consolidated balance sheets of Aydin
Corporation and subsidiaries as of December 31, 1996 and 1995
and the related consolidated statements of operations and cash
flows for each of the three years in the period ended December
31, 1996. 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 audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the
consolidated financial position of Aydin Corporation and
subsidiaries as of December 31, 1996 and 1995 and the
consolidated results of their operations and their consolidated
cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted
accounting principles.
/s/ Grant Thornton LLP
Philadelphia, Pennsylvania
March 7, 1997
(page 26)
SELECTED FINANCIAL DATA
($000 omitted except for per share amounts)
1996* 1995 1994 1993 1992
----------------------------------------------------
For the Year
Net sales $116,578 $140,607 $142,441 $141,475 $145,221
Cost of sales 94,363 102,391 104,270 118,554 101,452
Income (loss) before
income taxes and
minority interest (19,852)* 5,908 6,927 (7,312) 12,281
Net income (loss) (14,780) 3,930 5,047 (4,967) 7,062
Earnings (loss) per share (2.88) .77 1.01 (1.00) 1.40
Cash dividend per share - - - - .5
Return on average
stockholders equity (16%) 4% 5% (5%) 7%
At Year End
Total Assets $120,322 $166,860 $166,078 $169,721 $172,332
Working Capital 68,765 85,615 81,786 76,506 80,578
Long-term debt - 770 1,549 1,902 2,295
Stockholders' equity 90,327 104,573 99,217 93,959 98,421
Stockholders' equity
per share 17.60 20.46 19.88 18.86 19.93
<FN>
* Income (loss) before income taxes and minority interest
includes a $3,730,000 restructuring charge in the third quarter.
Quarterly Financial Data
($000 omitted except for per share amounts)
1st 2nd 3rd 4th Year
----------------------------------------------------
1996
Net sales $ 36,283 $ 26,706 $ 25,249 $ 28,340 $116,578
Cost of sales 25,308 25,228 20,425 23,402 94,363
Income (loss) before
income taxes and
minority interest 1,441 (9,352) (7,756) (4,185) (19,852)
Net income (loss) 963 (7,024) (5,467) (3,252) (14,780)
Earnings (loss) per share .19 (1.37) (1.07) (.63) (2.88)
1995
Net sales $ 35,588 $ 36,494 $ 32,932 $ 35,593 $140,607
Cost of sales 25,937 26,661 24,014 25,779 102,391
Income before income
taxes and minority
interest 1,835 1,665 1,077 1,331 5,908
Net income 1,191 1,073 774 892 3,930
Earnings per share .24 .21 .15 .17 .77
Common Stock Prices
1996 High Low 1995 High Low
- ------------------------------------ -------------------------------------
Fourth Quarter $11.0 $ 8.5 Fourth Quarter $17.75 $14.75
Third Quarter 13.75 9.75 Third Quarter 19.75 14.125
Second Quarter 17.5 13.0 Second Quarter 15.75 14.125
First Quarter 15.5 12.875 First Quarter 15.0 11.5
Stockholder and Dividend Information
Aydin has approximately 6,000 stockholders of record and
individual partipants in security position listings. Aydin has
no present plans to pay any special cash dividends.
(page 27)
[FLYLEAF]
AYDIN CORPORATE HEADQUARTERS
Horsham, PA
AYDIN PRODUCTS GROUP
AYDIN TELEMETRY
Newtown, PA
Airborne Data Acquisition Equipment and Systems (Telemetry),
Ground Data Receive & Processing, Transmitters, Transponders,
Receivers, Power Amplifiers, Digital Recorders, Data Links,
Avionics, Bus Products, Ground to Air UHF/VHF Transceivers &
Multiplexers, Special Microcircuits
AYDIN DISPLAYS
Horsham, PA
High Resolution Color Monitors, Flat Panels & Workstation
Products Military Display Processors, Ruggedized Monitors &
Workstations, SPECTRUM AUTOSYNC(R) Color Monitors, Color
Display
Terminals, Workstations, X-Terminals
AYDIN MICROWAVE
San Jose, CA; Newtown, PA
Thin Film Solid State Amplifiers & Microwave Integrated Circuit
Components for the Wireless Telecommunications OEM industry,
Digital & Analog Microwave Radios
AYDIN COMMUNICATIONS SYSTEMS GROUP
AYDIN GOVERNMENT SYSTEMS
Horsham, PA; San Jose, CA
System Integration, Command, Control & Communications (C3), Air
Traffic Control, Modernization and Integration of Radars,
Troposcatter Terminals, Turnkey Communications Systems
AYDIN TELECOM
Horsham, PA
Digital Wireless Telephony Equipment & Systems, Cell Extender,
Network Access Equipment, Transcoders, Multiplexers, Telecom
Systems, Microcell, DACS, Satellite Modems, Satellite TDMA Next
Generation Equipment
AYDIN GOVERNMENT SYSTEMS
Belgium
NATO Program Support
OTHER
AYDIN EUROPE LIMITED
United Kingdom
European Operations (All products, systems & support)
AYDIN YAZILIM VE ELEKTRONIK SANAYI A.S.
Turkey
Software, Command, Control and Communications Systems (C3), Air
Defense, Digital Microwave Radios, Air-to-Ground VHF and UHF
Radios, Telecom Equipment & Systems, Computer Equipment &
Systems, Display Terminals
AYDIN ELECTRO FAB
Croydon, PA
Single-sided, Double-sided, & Multilayer Printed Circuit Boards
AYDIN RAYTOR
Montgomeryville, PA
Precision Metal Fabrications
AYDIN MOLDED DEVICES
Rancho Dominguez, CA
Vinyl Components
[INSIDE BACK COVER]
CORPORATE INFORMATION AND DIRECTORY
Board of Directors
I. Gary Bard
Chairman of the Board
AYDIN
Dr. Nev A. Gokcen
Retired. Former Thermodynamicist, Department of the Interior
Bureau of Mines
Irwin L. Gross
Chairman of the Board
EA Industries
Admiral Harry D. Train, II
United States Navy (Retired)
Former Commander-In-Chief, US Atlantic Command. Manager,
Hampton
Roads Operations,
Science Applications International Corporation
John F. Vanderslice
Executive Vice President, AYDIN
President, AYDIN Products Group
Corporate Officers
I. Gary Bard (*)
Chairman
President and Chief Executive Officer
John F. Vanderslice (*)
Executive Vice President, AYDIN
President, AYDIN Products Group
James R. Henderson (*)
Vice President
Treasurer and Chief Financial Officer
Klaus D. Oebel (*)
Vice President
President, AYDIN Communications Systems Group
H. Barry Maser (*)
Vice President of Business Development and International Sales
Demirhan Hakimoglu (*)
Vice President
Chief Executive Officer, AYDIN Yazilim ve Elektronik Sanayi
A.S.,
Turkey
Thomas M. LoCasale (*)
Vice President
Chief Scientist
Robert A. Clancy
Secretary
Herbert Welber (*)
Controller
Assistant Treasurer
(*) Executive Officer
Corporate Headquarters:
AYDIN
700 Dresher Road
Horsham, Pennsylvania 19044
Telephone (215) 657-7510
FAX: (215) 657-3830
Independent Auditors
Grant Thornton, L.L.P.
Philadelphia, Pennsylvania
Registrar & Transfer Agent
ChaseMellon Shareholder Services, L.L.C.
Overpeck Centre
85 Challenger Road
Ridgefield Park, New Jersey 07660
1-800-526-0801
Stock Data
AYDIN shares (ticker symbol AYD) are traded on the New York
Stock
Exchange
Form 10-K
A copy of the AYDIN 1996 Annual Report on Form 10-K to the
Securities and Exchange Commission is available without charge
upon written request to:
Investor Relations
AYDIN
700 Dresher Road
P.O. Box 349
Horsham, Pennsylvania 19044
(215) 657-7510
Annual Meeting
Shareholders are invited to attend our annual meeting:
Friday, April 25, 1997 at 3:00 pm
AYDIN Corporate Headquarters
700 Dresher Road
Horsham, Pennsylvania 19044
Get More Information Online
Chat with the CEO and learn more about AYDIN on the Internet
at:
http://www.aydin.com
Exhibit 21
SUBSIDIARIES OF REGISTRANT
NAME (and name under which JURISDICTION PERCENTAGE
they do business-same) OF INCORPORATION OWNED
- -------------------------- ----------------- ----------
Aydin Europe Limited United Kingdom 100%
Aydin, S.A. Argentina 19%
Aydin Foreign Sales Limited Guam 100%
Aydin Investments, Inc. Delaware 100%
Aydin Yazilim ve Elektronik
Sanayi A.S. Turkey 100% (1)
<FN>
- --------------
(1) Ninety nine (99%) percent of the 100% is owned by
registrant's wholly owned subsidiary, Aydin Investments,
Inc.
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Aydin Corporation:
We consent to incorporation by reference in Registration
Statement Numbers: 33-61537, 33-53549, 33-34863, 33-22016, 33-
14284, 2-97645, 2-93603, 2-77623, and 2-64093 on Form S-8 of
Aydin Corporation of our reports dated March 7, 1997, relating
to the consolidated balance sheet of Aydin Corporation and
subsidiaries as of December 31, 1996 and the related
consolidated statements of operations and cash flows, and
related schedules for the year ended December 31, 1996, which
reports appear in or incorporated by reference in the 1996
annual report on Form 10-K of Aydin Corporation.
/s/ Grant Thornton LLP
Grant Thornton LLP
Philadelphia, Pennsylvania
March 28, 1997
Exhibit 99
INDEPENDENT AUDITORS' REPORT
Under date of March 7, 1997, we reported on the consolidated
balance sheet of Aydin Corporation and subsidiaries as of
December 31, 1996, and the related consolidated statements of
operations and cash flows for the year ended December 31, 1996,
as contained in the 1996 Annual Report to stockholders. These
consolidated financial statements and our reports thereon are
incorporated by reference in the annual report on Form 10-K for
the year 1996. In connection with our audit of the
aforementioned consolidated financial statements, we also have
audited the related financial statement schedules as listed in
the accompanying index. These financial statement schedules
are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statement schedules based on our audit.
In our opinion, such financial statement schedules, when
considered in relation to the basic consolidated financial
statements taken as a whole, present fairly, in all material
respect, the information set forth therein.
/s/ Grant Thornton LLP
Grant Thornton LLP
Philadelphia, Pennsylvania
March 7, 1997