UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1998
Commission File #0-6072
EMS TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Georgia 58-1035424
(State of incorporation) (IRS Employer ID No.)
or organization)
660 Engineering Drive
Norcross, Georgia 30092
(Address of principal (Zip Code)
executive offices)
Registrant's Telephone Number, Including Area Code - (770) 263-9200
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.10 par value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days: Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or amendment to this Form 10-K: [X]
The aggregate market value of voting stock held by persons other than
directors or executive officers on March 26, 1999 was $117.2 million,
based on a closing price of $13.75 per share. The basis of this
calculation does not constitute a determination by the registrant
that all of its directors and executive officers are affiliates as
defined in Rule 405.
As of March 12, 1999, the number of shares of the registrant's common
stock outstanding was 8,706,083 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information contained in the Company's 1998 Annual Report to
Shareholders and definitive proxy statement for the 1999 Annual Meeting
of Shareholders of the registrant is incorporated herein by reference in
Parts II, III and IV of this Annual Report on Form 10-K.
PART I
ITEM 1. Business.
GENERAL
SUMMARY
EMS Technologies, Inc. (formerly Electromagnetic Sciences, Inc.) (the
"Company") designs, manufactures and markets products that are important
to a wide range of wireless communications applications. The Company
focuses on the needs of the mobile information user. The Company is
organized around two reportable business segments: Space and Electronics,
and Wireless Products. Each segment is separately managed and comprises a
range of products and services that share distinct operating
characteristics.
(1) Space and Electronics
This segment manufactures custom-designed, highly engineered hardware.
Products perform subsystem functions within larger systems for use in space
and satellite communications, radar, surveillance and military counter-
measures. Orders typically involve schedules for development and production
that can extend a year or more. Most revenues are recognized under
percentage-completion accounting. Hardware is sold to prime contractors
or systems integrators rather than end-users. The Space and Electronics
segment accounted for 39%, 44% and 49% of consolidated net sales in 1998,
1997 and 1996.
(2) Wireless Products
The Wireless Products segment manufactures standardized antennas, terminals,
and other wireless network products. Uses are in logistics, healthcare
information management, and PCS/cellular communications. The manufacturing
cycle for each order is generally just a few days. Revenues are recognized
upon shipment of hardware. Hardware is marketed to end-users and to third-
parties who incorporate their products and services with the Company's
hardware for delivery to an end-user. The Wireless Products segment
accounted for 61%, 56% and 51% of consolidated net sales in 1998, 1997 and
1996.
The discussion of the Company's business set forth in this Item 1 is
qualified
by the materials appearing below under the heading "RISK FACTORS AND FORWARD-
LOOKING STATEMENTS."
BACKGROUND
In the space and electronics segment, the Company has a long history
of applying high-frequency microwave technology. In the mid-1970's, the
Company pioneered the use of electronic beam-forming networks ("BFNs").
A BFN allows a satellite to electronically adjust its antenna pattern in
orbit. BFN technology was originally used by defense communications
satellites to combat interference from the ground, but it has become
important in a wide range of modern communications satellites. BFN
technology allows commercial satellites to quickly adjust to changing
In wireless products, the Company has developed wireless local-area computer
networks that provide mobility and real-time data communications. These
products enhance productivity of mobile workers and improve accuracy of
transaction processing operations. The principal market is for material
management functions in warehouses and distribution centers (the "logistics"
market). Another important market relates to automation of patient care
records in the healthcare environment (the "healthcare" market). In
to the market for route-accounting; in this market, terminals are used by
mobile delivery personnel in tracking sales and inventory. Through
relationships with applications software providers that specialize in
specific markets, the Company's hardware is typically offered as part
of complete system solutions.
The Company's fastest growing wireless product over the past three years
has been a line of cellular/PCS base station antennas (marketed under the
"DualPol" trademark) that employ polarization-diversity technology. These
antennas allow cell-site tower structures that are much simpler and less
obtrusive than conventional antenna towers. In addition, these antennas
offer superior coverage and resistance to signal-fading, as compared with
networks with conventional vertical polarization antennas. The Company
also offers a full line of lower-priced, conventional antennas for both
cellular and PCS networks. These products, along with a family of accessory
products, are marketed to service providers and to original equipment
manufacturers ("OEMs") domestically and internationally.
MARKETS AND PRODUCTS
The Company has developed a broad portfolio of technologies and products.
The Company focuses on providing customer solutions particularly in the
markets for satellite communications, wireless communications infrastructure
and wireless local area data networks:
Space and Electronics Markets.
Historically, satellite technology was funded by the military for defense
applications. Commercial use was cost-effective only for specialized high-
capacity applications in the telecommunications and broadcast industries.
However, satellite-based voice and data networks are increasingly being used
for a variety of lower-cost, high-volume commercial applications as a result
of improvements in satellite technology. New commercial applications include
mobile telephony and data communications.
Satellites provide a number of advantages over terrestrial facilities for
many high-speed communications service applications:
(1) Satellites enable high-speed communications service where a terrestrial
alternative is not available or is not adequate.
(2) Unlike the cost of terrestrial networks, the cost to provide services by
satellite does not increase with the distance between sending and receiving
stations.
(3) Finally, in contrast to the installation of fiber optic cable, satellite
networks can be rapidly and cost-effectively deployed.
Demand for commercial satellites will be determined by several factors,
including:
(1) growth in demand for new satellite-based applications, such as mobile
telephone or data services,
(2) growth in business networking,
(3) growth in direct-to-home television and related voice, video and data
systems,
(4) development of new satellite-based communications architectures to
provide basic telephone and television services in developing regions of
the world, and
(5) replenishment of orbiting satellite constellations nearing the end of
their useful lives.
Several large-scale telecommunications projects are in various stages of
development and implementation. They are contributing to the projected
demand for commercial satellites. Satellite size and weight have a direct
effect on launch cost and capacity. As a result, for these new systems to
be commercially viable, the satellite designs must use systems and
components that are lighter, smaller, and more highly integrated than in
the past.
Proposed system architecture is also affecting the design of ground-based
terminals for future satellite networks. Low earth orbiting (LEO) systems
will operate at high frequencies and use a constellation of satellites,
each with its own complicated antenna system, to produce coverage patterns
on the earth that are similar to cellular telephone systems. Because of
the high frequencies and small cells used by LEO satellites, the ground
terminals will be much smaller and more affordable than their lower-
frequency predecessors, and will require smaller antennas with lower
transmitter power. Ground terminals will also need to include low-cost
scanning antennas to track the satellites as they move overhead,
handing-off from one satellite to the next as the constellation progresses.
Space and Electronics Products.
The Company designs and manufactures innovative satellite communications
products. These products include satellite systems, subsystems and ground
terminal products that address the need for reliable, high-speed
communications systems. The high-speed communications services that are
expected from the next generation of commercial satellites will involve
technologies, such as multiple spot-beam antennas and highly integrated
on-board switching, in which the Company has significant experience. The
Company's products are typically configured as subsystems, which are
complex collections of components that, together, perform a major function
or group of functions within a larger
satellite system. The subsystems developed by the Company for application
in space hardware products include:
- - Beam Forming Networks for Antenna Control.
Almost every next-generation Ka-Band satellite will use sophisticated antenna
systems to create a pattern of multiple coverage areas on the earth's
surface, similar to terrestrial cellular systems. The Company has already
developed and produced such systems, including the transmit and receive
beam-forming networks for NASA's Advanced Communications Technology (ACTS)
satellite system and the Defense Department's MILSTAR EHF satellite system,
both systems with operational satellites in orbit. Several of the key
features of the new "multi-media" satellites have been demonstrated by the
ACTS system, including switching of spot-beams for time-division multiple
access("TDMA") and on-board processing. For these two systems, the Company
has delivered over thirty electronic beam forming networks at both 20GHz
(transmit) and 44 GHz (receive).
- - Switches and Switch Matrixes.
The Company also provides a variety of microwave components that are
integrated into the equipment of other satellite equipment providers.
These components
typically perform complex switching or control functions. For example, the
Company has developed solid state, high-speed switch matrices that route
communications signals along multi-channel networks, for interconnectivity
of channels and efficient network operation. Other products include
redundancy switches used to switch on back-up equipment to replace a failed
on-board component.
- - Satellite Bus Products.
The Company designs and produces hardware for the satellite "bus," which is
the orbiting platform that provides positioning and power to the payload
equipment. The bus acts as the host platform for the mission-specific
payload equipment, and a common design is adaptable for many missions. The
Company utilizes its specialized design and manufacturing processes to
provide electronic power conditioning ("EPC") equipment and attitude
control equipment for several types of satellites. EPCs must be very
efficient in converting voltages generated by the solar arrays into power
supplies that can feed regulated voltages to the on-board equipment.
Another example of bus hardware is the Company's "CALTRAC (trademark)"
star tracker that uses high-speed optical technology to provide attitude
control information for stabilizing a satellite's orbit. The Company
believes that the "CALTRAC (trademark)" star tracker provides performance
that is superior to that of older generation units, and it is currently
under contract to complete development and supply its equipment to customers
who are developing next-generation LEO satellite buses.
- - Aeronautical Antennas.
The Company has developed an industry-leading INMARSAT aeronautical antenna
product, the AMT-50, which is a mechanically-steered antenna that is
connected to an aircraft's navigational system and automatically remains
directed toward a geostationary communications satellite for voice and
low data-rate communications. This antenna is mounted under a small,
unobtrusive radome atop an aircraft's tail stabilizer. The Company believes
that this product has the leading market share in the high-end corporate jet
developed its "CALQUEST (trademark)" product, which is a complete satellite
telephone system. This product is used on a wide range of turbo-prop and
jet aircraft for voice and data communications, is functional over North and
Central America, and provides a more affordable solution for satellite
communications than can be provided within the worldwide INMARSAT system.
The Company is also developing a steerable antenna system designed to
provide live television to jet aircraft by wireless link to a direct
broadcast satellite (DBS). The system includes a low-profile mechanically
steerable antenna system, mechanical positioner, and a beam steering unit
to keep the antenna properly pointed at the satellite during the motion
associated with flight.
- - Ground Terminal Products.
The Company is a leading provider of the ground station equipment associated
with satellite-based "search and rescue" systems, including the local-user
terminals that process information received from satellites. The local-user
terminal determines the location of the maritime or aviation beacons that
transmit distress signals to the satellite system, and typically displays
the results for intervention by emergency authorities. This terminal
technology can also be adapted for routine tracking and management of
aviation and maritime fleets.
The Company is also under contract to develop a new packet-data terminal.
Initial uses for the product are expected to be in fleet management and
communications for the transportation industry. The Company expects that
delivery of this product will begin in 1999.
Subsequent Event Affecting Space Operations.
In January 1999, the Company acquired the Satellite Products business
unit of Spar Aerospace Limited, located near Montreal, Quebec. As measured
in equivalent U.S. dollars, this business unit had 1998 revenues of
approximately $55 million and a backlog of orders at the end of 1998 totaling
$90 million.
The transaction was accounted for as an asset purchase valued at
approximately $20 million, subject to adjustment for actual versus
projected working capital
at the closing date, and no goodwill resulted. One-third of the purchase
price was financed under the Company's credit line with a U.S. bank, and the
remainder is being financed by the seller. The seller-financed amount is
payable in four equal installments, with the first installment due
approximately three months after the transaction's close and the other three
installments due, with annual interest of 5.5%, on December 31, 1999, 2000,
and 2001, respectively. All four installments are payable, at the Company's
option, either in cash or equivalent value of the Company's common stock.
This newly acquired operation has over 500 employees and a marketing
organization that is very experienced in international sales. The site has
world-class space manufacturing, integration and test facilities. The
operation's four major product lines for satellites - antennas, RF products,
power converters, and digital products for command, control and
communications - are believed to complement the Company's existing space
operations in Atlanta and Ottawa.
Included in the transaction was an equity investment in the SkyBridge
program. SkyBridge is one of the latest generation of broadband,
multi-media satellite
programs under development. The Company's present space operations had
already been supporting SkyBridge, and management believes that the addition
of the Montreal operations could increase the Company's potential to obtain
significant work on this international program.
Wireless Products and Markets.
The Company's wireless products are focused on the markets for (1) wireless
infrastructure and (2) wireless local-area computer networks for logistics
and healthcare.
Wireless Infrastructure
National and international infrastructure for wireless communications will
need to expand to support growing worldwide demand. This demand is being
fueled by
(1) decreasing prices for wireless handsets,
(2) a more favorable regulatory environment,
(3) greater competition among service providers, and
(4) more availability of services and RF spectrum.
In addition, several developing countries are installing wireless telephone
networks as an alternative to installing, expanding or upgrading traditional
hard-wired networks. Emerging wireless data applications may also expand
the market by allowing service providers to increase revenue-generating
traffic on their networks.
Specific technological trends are also affecting the wireless industry. For
example, the continuing growth of the wireless communications market has
strained the capacity of traditional analog cellular systems that can carry
only one call per channel of radio spectrum. As a result, many service
providers are installing new digital equipment to increase per-channel
capacity by factors ranging from three to eight. In addition, service
providers have begun to construct PCS digital networks that operate at twice
the frequency level of cellular systems; this provides the greater
bandwidth necessary for an expanded range of voice and data services. PCS
technology requires smaller cells than analog technology and, as a result,
approximately four times the number of base stations to complete its
geographical build-out.
Although existing systems have been almost exclusively devoted to the mobile
voice/paging market, several proposed systems would offer high-speed wireless
services to both businesses and consumers as an alternative to wireline
approaches. Initial system applications appear to be in point-to-multipoint
communications, where several service providers have licensed spectrum and
are conducting field tests. Base station antennas in point-to-multipoint
systems emulate the multiple-beam antennas designed for space, and TDMA
switching technology could be implemented with hardware very similar to
the Company's satellite technologies described previously in this document.
- - Dual Polarization Antenna Products.
The Company's "DualPol (trademark)" antenna utilizes polarization diversity
to combine the functionality of three vertically-polarized antennas (two
receive and one transmit) into a single, compact device. With fewer antennas
required, "DualPol (trademark)" technology allows the supporting antenna
tower to be much smaller and less expensive than a traditional cellular/PCS
antenna site, which must support the weight and wind-loading of a large
mounting structure atop the tower. An increasingly important factor in
establishingthe location of a cell site is the aesthetics of the tower
structure. Unlike traditional vertical polarization cellular antennas, the
Company's "DualPol(trademark)" antennas can be mounted in a very compact
configuration that can fit on top of existing utility poles, or be disguised,
for example, in a clock
tower. The mounting flexibility not only benefits the service provider in
obtaining site approvals, but also results in lower installation and
structure costs. Further, these antennas offer superior coverage and
resistance to signal-fading, as compared with networks with conventional
vertical polarization antennas.
The Company's "AcCELLerator (trademark)" antenna combines multiple "DualPol
(trademark)" antennas pre-packaged in a compact cylindrical enclosure that
provides the same multi-sector coverage as a large, nine-antenna,
spatially-diverse base station, yet with a much smaller, less
visually-obtrusive structure.
- - Vertical Polarization Antenna Products.
The Company's lower-cost vertical polarization antennas apply "beam-shaping"
techniques of amplitude and phase weighting to achieve the most effective
antenna performance for specific applications. The Company's "OptiFill
(trademark)" antennas are designed for use in a typical crowded coverage
area. These antennas utilize null filling, upper sidelobe suppression
and electronic down tilt to lower co-channel interference, reduce the
number of dropped calls, and improve sound quality. The Company's
"OptiRange (trademark)" antennas are designed to maximize "gain" and are
useful in systems that have large cells, such as rural areas or initial
urban system roll-outs with a small number of base stations.
The Company leases a 60,000 square foot facility specifically designed to
allow high-volume production of its wireless infrastructure antenna product,
as well as quick response to customer orders.
Wireless Local Area Networks.
Major technological advances and changes in the regulatory environment have
led to the development and proliferation of wireless computer networks that
extend the reach of existing wired networks. Wireless local area networks
(LAN's) now accommodate notebook computers, pen-based notepads and handheld
data collection terminals. By providing network connectivity for mobile
users, these products increase the accuracy, timeliness and convenience of
data collection and information access. Traditionally, these wireless LAN
systems were developed for operation using narrow band UHF radios at 450 MHz.
The current generation of wireless LAN systems typically operate at 900 MHz
with data rates in the range of 56-64 Kbps. The next generation of wireless
LAN systems operate at even higher speeds of 1 Mbps operating at 2.4 GHz.
Future video transmissions and conferencing systems will likely use the 5.7
GHz frequency band where transmission rates of up to 25 Mbps are foreseen.
The development of these advanced products has created new applications in
established industrial markets and in vertical markets, such as healthcare.
In healthcare, for example, wireless LANs now allow medical professionals
to access clinical data and input patient charting information at the
point-of-care anywhere in a hospital environment. Data-intensive applications
in markets such as healthcare require robust and scalable wireless networks
that can support an increasing number of applications and users over time.
Healthcare systems are typically sold by software providers that have the
direct relationship with end-user customers. To enhance its role with the
software providers, the Company provides other hardware and accessories
needed for complete wireless systems.
The Company has strategic alliances or VAR (value added re-seller)
arrangements with several of the leading healthcare information management
companies, including the HBO & Company ("HBOC"), which is the largest
in the U.S. The Company has completed wireless LAN installations in a
significant number of hospitals and healthcare facilities.
Wireless Local Area Network Products.
The Company's wireless LANs provide mobility and real-time data
communications to enhance productivity. The Company's wireless LANs
have been installed at more than 4,000 sites world wide, including the
facilities of many Fortune 500 companies and some of the world's largest
materials handling installations, such as distribution centers and seaports.
The Company's wireless logistics systems, which generally incorporate
bar-code scanning capabilities, are compatible with commonly used
customer-owned computers and can be configured for a variety of applications.
A typical system consists of terminals that incorporate radio transmitters
and receivers, a base station that communicates with these terminals, a
controller that provides an interface between the base station and host
computer, and software that manages and facilitates the communications
process.
- - Terminals.
The Company offers several types of terminals, all of which utilize radio
frequency technology:
(1) Hand-held terminals are small, lightweight and intended to be carried
by people,
(2) Vehicle-mounted terminals are larger, heavy-duty terminals for use on
fork-lifts, cranes and other mobile materials handling equipment,
(3) A table-top model is used for fixed positions where computer cabling
is not practical, and
(4) Wireless modems provide wireless communication capabilities for other
devices, such as small computers or process controllers.
All terminals incorporate built-in radios that operate either in a licensed,
narrow frequency band or in an unlicensed broader, "spread spectrum"
frequency band. The Company's terminals incorporate Intel (registered
trademark) processors that allow support for either terminal emulation or
client-server applications.
- - Radio Base Stations and Controllers.
The wireless communications link between the terminal and the host computer
or network is completed by a radio base station and controller. The radio
base station and controller may be integrated into a single unit for
smaller systems. A base station converts the radio signals from a terminal
to digital signals recognizable by the host computer, and also converts
data from the host computer into radio signals for transmission to the
terminals. Radio base stations can operate effectively in facilities of
many sisea and structural designs.
Controllers provide the critical interface between the radio base station a
nd the host computer. The Company's controllers provide transparent
connectivity to all widely accepted computer architectures without
modifications of existing applications software and network structure.
Controllers also manage complex transmission traffic with sophisticated
programming algorithms.
- - Healthcare Products and Services.
The Company designs and implements wireless networks for healthcare
information applications, which involve integration of its own products
with specialized terminals and radios from other manufacturers. The
Company's healthcare hardware includes its latest generation of handheld
terminals for materials management and the specially-designed "PenDock
(trademark)" docking station that provides constant battery charging and
secure access to keyboards in the healthcare environment. The Company
has also design a mobile clinical workstation as a "hands-free"
alternative to the use of handheld terminals.
- Other Products.
In addition to the basic system hardware, the Company offers
various accessories:
(1) Bar code scanners,
(2) Battery chargers,
(3) Portable printers,
(4) Software products for system communications, integrated applications
and terminal emulation, and
(5) Repair and maintenance services.
SALES AND MARKETING
The Company's sales and marketing strategy is focused on direct sales of
space and satellite communications and wireless infrastructure products.
Due to the technical nature of the Company's products, these direct sales
efforts are conducted primarily by internal personnel with a strong
engineering background. Particularly in the Space and Electronics group,
many of these personnel have other engineering or management
responsibilities within the Company. The Company also utilizes independent
marketing representatives, both in the U.S. and internationally. These
individuals are selected for their knowledge of the local market and
their ability to provide technical support and ongoing, direct contact
with the Company's current and potential customers.
In space and electronics, the development of major business opportunities
often involves significant bid and proposal effort; this work can include
complex engineering to determine the technical feasibility and cost
effectiveness of various design approaches. Most of the Company's bid and
proposal costs are reported in cost of sales, although a portion of these
costs is classified as selling, general and administrative expenses. Total
bid and proposal costs were $2.5 million in 1998, compared with $1.8
million in 1997 and $1.2 million in 1996, reflecting an increased number
of major business opportunities, especially in space communications.
The markets for space and satellite communications comprise a relatively
small number of customers, which are typically well-known large
corporations. The Company's marketing efforts rely on ongoing communications
with this base of potential customers, both to determine the customers'
future needs and to inform customers of the Company's capabilities. Because
the Company can often receive multiple orders from many of these customers,
technical support and service after the sale are also crucial to maintain
a strong supply relationship.
The Company's sales and marketing strategy for wireless products involves:
(1) direct sales to end users, and
(2) indirect sales through third parties who often incorporate their products
and services with the Company's hardware for delivery to an end-user. Third
parties include:
(a) strategic partners,
(b) value-added re-sellers,
(c) original equipment manufacturers, and
(d) distributors, including representatives in 35 countries.
For wireless infrastructure, sales and marketing are performed by internal
staff plus three regional sales offices in North America. Direct sales of
logistics systems are performed by an internal sales support staff, 20
regional sales persons in North America, and six European subsidiaries. For
healthcare, the Company relies solely on its strategic partners for their
sales efforts, and works closely with them to identify and meet customer
needs and to provide necessary customer support.
BACKLOG
The backlog of consolidated orders at December 31, 1998 was $49 million,
compared with $54 million one year earlier. The decrease was primarily in
the space and electronics segment, in which potential customers are proposing
and developing major new programs, but have not progressed to the point of
placing significant orders with suppliers.
MATERIALS
Materials used in the Company's space and electronics products consist
primarily of magnetic microwave ferrites, metals such as aluminum and brass,
permanent magnet materials, and electronic components such as transistors,
diodes, IC's, resistors, capacitors and printed circuit boards. Most of the
magnetic microwave ferrite materials are purchased from two suppliers, and
permanent magnet materials are purchased from a limited number of suppliers.
Electronic components and metals are available from a larger number of
suppliers and manufacturers.
The electronic components and supplies, printed circuit assemblies, keypad
assemblies and molded parts needed for the Company's wireless products are
generally available from a variety of sources. Bar code scanners are
included in almost all orders, and a significant number of the scanners are
purchased from Symbol Technologies, Inc., which is also a competitor of the
Company; however, there are alternative suppliers that manufacture and sell
bar code scanners under license agreements with Symbol. The Company believes
that its logistics competitors also rely on scanning equipment purchased from
or licensed by Symbol. In addition, Symbol and the Company have a license
agreement which allows the Company to utilize Symbol's patented integrated
scanning technology in certain future products.
The Company believes that its present sources of required materials are
adequate. The Company does not believe that the loss of any supplier or
subassembly manufacturer would have a material adverse effect on its business.
In the past, shortages of supplies and delays in the receipt of necessary
components have not had a material adverse effect on shipments of the Company's
products.
COMPETITION
The Company believes itself to be, in sales, a major independent supplier
of (1) microwave subsystems for satellite communications and other
specialized uses, (2) base station antennas and other wireless
infrastructure products for cellular and PCS mobile networks, and
(3) wireless local-area computer network products, mainly for logistics
systems. However, the Company's markets are highly competitive. Some of the
Company's competitors have substantial resources and facilities that exceed
those of the Company also competes against smaller, specialized firms.
In the space and electronics segment, the Company competes with divisions
of certain large U.S. industrial concerns, such as Raytheon, Hughes, Loral,
M/A-Com, Inc., and Rockwell, as well as non-U.S. companies such as COMDEV
and RACAL. Some of these companies, as well as others, are potential
competitors of the Company for certain contracts and potential customers
on other contracts. Certain major customers could also elect to internally
develop and manufacture the products that they presently purchase from
the Company.
In the wireless products segment, the Company competes with divisions of
certain large U.S. and international companies, including Allen Telecom
and Ericcson in the wireless infrastructure market, and Unova, Symbol
Technologies, Teklogix Corp. and Telxon Corporation in the logistics market.
The Company believes that the key competitive factors in both the space
and technology segment and the wireless products segment continue to be
product performance, technical expertise and support to customers, adherence
to delivery schedules, and price.
RESEARCH AND DEVELOPMENT
The Company conducts most of its research and development in the space
and electronics segment in direct response to the unique technical
requirements of a customer's order, and most of these costs are included with
the overall manufacturing costs for specific orders.
In 1998, 1997 and 1996, the Company spent $13.1 million, $9.1 million and
$12.1 million, respectively, in internally sponsored research and
development. The lower level of expenses in 1997 compared with 1996 was due
to the completion of several development projects in late 1996 and early 1997
related to new wireless technologies and SATCOM products. In addition,
the Company directed a higher proportion of its total research and
development effort in 1997 toward customer-funded projects, and the Company's
$677,000 settlement under a Canadian government technology program, resulting
from a claim for unreimbursed research and development expenses incurred in
years prior to 1991.
EMPLOYEES
As of December 31, 1998, the Company and its subsidiaries employed a total
of approximately 1,100 persons. Over 70% of the Company's employees are
directly involved in engineering or manufacturing activities.
RISK FACTORS
The business operations of EMS Technologies involve significant risks and
uncertainties that could adversely affect its financial condition, results
of operations, and future development. In addition to domestic economic
conditions, which can change unexpectedly and affect US businesses generally,
these risks and uncertainties include the following:
Competitive Technology Could be Superior. The markets in which EMS competes
are very sensitive to technological advances. As a result, technological
developments by competitors can cause our products to be less desirable to
customers, or even to become obsolete.
Competitors' Marketing Strategies Can Affect Our Results. EMS operates in
competitive markets. Its competitors may pursue aggressive marketing
strategies, such as significant price discounting. These competitive
activities can reduce EMS's sales and profit margins below expected levels.
Major Potential Sales Require that Customers Find Adequate Funding. Major
communications infrastructure programs, such as proposed constellations
of low-earth-orbiting satellites or PCS/cellular systems for large urban
areas, are important sources of our current and planned future revenues.
We also participate in a number of large defense programs. Programs of
this nature cannot proceed unless the customer can raise adequate funds,
from either governmental or private sources. As a result, our expected
revenues can be affected by political developments or by conditions in
private capital markets. They can also be affected by whether private
capital markets are receptive to a customer's proposed business plans.
Public Acceptance of New Communications Systems Affects Purchases by Our
Customers. Construction and expansion of new communications systems
depends on public demand for the new services. As a result, growth rates
in our revenues from wireless infrastructure products and proposed
high-speed satellite communications systems are likely to be heavily
affected by the timing and extent of public willingness to buy mobile
communications services.
We May Encounter Technical Problems. Technical difficulties can cause
delays and additional costs for EMS. We are particularly exposed to
this risk in product development efforts, and in fixed-price contracts
on technically advanced programs that require novel approaches and
solutions.
New Product Transitions Can Be Costly and Disruptive. Because our
businesses involve constant efforts to improve existing technology,
EMS regularly introduces new generations of products. During these
transitions, customers may reduce purchases of older equipment more
rapidly than we expect, which can cause lower revenues and excessive
inventories. In addition, product transitions create uncertainty
about both production costs and customer acceptance. These potential
problems are generally more severe if our product introduction schedule
is delayed by technical development problems.
Our Products May Unexpectedly Infringe on Third-Party Patents. As we
regularly develop and introduce new technology, we have a risk that our
new products or manufacturing techniques infringe on patents held or
currently being processed by others. The US Patent Office does not
publish patents that are in process, and its processing typically takes
at least two years and often even longer. Thus, we may be affected by
a patent granted well after EMS has introduced an infringing product.
In addition, questions of whether a particular product infringes a
particular patent can involve significant uncertainty. As a result of
these factors, third-party patents may interfere with marketing plans,
or may from time to time create significant expense to defend
infringement claims or respond to customer indemnification claims.
We Depend on Highly Skilled Employees. Because our products and programs
are technically sophisticated, EMS must attract and retain employees
with advanced technical and program-management skills. Other employers
also often recruit persons with these skills, both generally and in
focused engineering fields.
The Export License Process for Space Products Has Become Very Uncertain.
As a result of recent legislation, products for use on commercial
satellites are included on the US Munitions List and are subject to
State Department licensing requirements. We expect delays in processing
licenses because the State Department has announced that it has not added
staff to handle its increased workload and does not have Congressional
appropriations to do so. We also expect that political considerations
will increase the time and difficulty of obtaining licenses for export
of technically advanced products. The license process may prevent
particular sales, and in general will create schedle uncertainties that may
cause foreign customers, such as those in Western Europe, to develop
internal or other foreign sources rather than use US suppliers.
Conditions in Other Countries Affect Our Revenues. International sales
significantly affect EMS's financial performance. Economic conditions in
customer countries, and exchange rate movements that affect the local-
currency cost of our products, are particularly important in our wireless
local-area network and PCS/cellular infrastructure businesses.
In Some Markets, We Depend on Marketing Relationships with Other Companies.
In the healthcare, mobile satellite communications, and route accounting
markets, the Company does not have established distribution channels.
Rather, we are seeking to develop marketing relationships with other
companies that have, for example, specialized software and established
customer service systems. EMS's success in these markets will be heavily
affected by whether we can identify and structure effective relationships
with these other companies.
We are in the Process of Integrating a Major Acquisition in Our Space &
Electronics Business. EMS acquired the Montreal-based Space Products
division of Spar Aerospace Limited on January 29, 1999. This operation
has more than 500 employees, 330,000 square feet of facilities, and a
$90 million backlog at December 31, 1998. Particularly during 1999,
our financial performance will be affected by whether we can avoid
unexpected integration costs and by our success in identifying and
implementing potential operating efficiencies.
EMS's Quarterly Results Are Volatile and Difficult to Predict. The
quarterly earnings contributions of some of our product lines are heavily
dependent on customer orders or product shipments in the final weeks or
days of the quarter. This can create volatility in quarterly results,
and hinders our ability to determine in advance whether quarterly earnings
will meet prevailing analyst expectations.
FORWARD-LOOKING STATEMENTS
The discussions of the Company's business in this Report, and in other
public documents or statements that may from time to time incorporate or
refer to these disclosures, contain various statements that are or may be
deemed to be forward-looking. Forward-looking statements include, but are
not limited to:
(1) statements about what the Company or management believes or expects,
(2) statements about anticipated technological developments or anticipated
market response to or impact of current or future technological developments
or product offerings,
(3) statements about trends in markets that are served or pursued by the
Company,
(4) statements implying that the Company's technology or products are well
suited for particular emerging markets, and
(5) statements about the Company's plans for product developments or market
initiatives.
These forward-looking statements may differ materially from actual results
due to the variety of risks and uncertainties that affect the Company,
including those set forth under the foregoing "Risk Factors" heading.
EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning the executive officers of the Company is set forth
below:
Thomas E. Sharon, age 54, became Chairman of the Board in 1998, Chief
Executive Officer in July 1994, and had previously served as President
since 1987. He joined the Company as an engineer in 1971 and later served
as Executive Vice President from 1985 to 1987. He became a Director in 1984.
He also serves as a Director and officer of each of the Company's operating
subsidiaries.
Don T. Scartz, age 57, has served as Senior Vice President and Chief
Financial Officer of the Company since 1995; he has also served as Treasurer
since 1981, as Vice President-Finance from 1981 to 1995, and as Secretary
from 1982 to 1991. He joined the Company as Controller in 1978. He also
serves as the Chief Financial Officer of each of the Company's operating
subsidiaries. He became a director of the Company in 1995.
John J. Farrell, age 48, is Senior Vice President of the Company and
President of its Wireless Products Group. He joined the Company in
May 1995 as President and Chief Operating Officer of the LXE subsidiary
(which conducts the logistics and healthcare business). Previously, he
had been Senior Vice-President and Chief Operating Officer of Oki Telecom,
a world-wide supplier of cellular telephones and base stations, since 1993.
During the three years prior to 1993, he directed Oki's marketing and sales
efforts.
William S. Jacobs, age 53, became General Counsel and Secretary of the
Company in 1992, and Vice President in 1993. He is also responsible for
the legal affairs of the operating subsidiaries. Previously, he was engaged
in the private practice of law, and in such capacity had served as the
Company's principal corporate legal counsel since 1982.
Jeffrey A. Leddy, age 44, became Vice President in 1997 with responsibilities
inlcuding corporate strategic planning. Previously, he served since
July 1994 as President of the EMS Technologies, Inc. subsidiary, which
conducts much of the space and electronics business. He joined the
Company as an engineer in September 1980.
Gerald S. Bush, age 43, is Vice President and General Manager, Space and
Electronics, Canada. He joined the Company in January 1999, when the
Company acquired the Satellite Products business of Spar Aerospace Limited
(Spar) where Mr. Bush had been Vice President and General Manager since
1998. Mr. Bush joined Spar in 1981 as a structural and thermal analyst.
He served as a program manager until 1995, when he became Director of
Manufacturing for Spar's Satellite Products business, and in 1996 he
became Vice President of Operations for that business.
Paul R. Cox, age 40, has been Vice President and General Manager, Space and
Electronics, Atlanta since 1998. He joined the Company in 1985 as an
engineer, and prior to his current position he was Director, Space
Products until 1997, when he became Vice President, Space Systems.
James T. Grosch, age 41, has been Vice President and General Manager,
Infrastructure Products since 1998. He joined the Company in 1985 as an
engineer, and he has managed the Company's EMS Wireless business group,
which designs, manufactures and markets the Company's line of PCS/cellular
base station antennas, since that group's inception in 1993, first as
Vice President, Wireless Communications, and later (1997) as Vice
President and General Manager of EMS Wireless.
Neilson A. Mackay, age 59, is Vice President and General Manager, SATCOM
Products. He joined the Company in September 1992 as President of CAL
Corporation, an Ottawa, Ontario based subsidiary engaged in the Company's
space and technology business.
ITEM 2. Properties.
The Company's corporate headquarters and its Georgia operations are
located in two buildings owned by the Company (comprising 250,000
square feet of floor space on 21 acres), as well as in 119,000 square
feet of leased office space (leases to expire prior to 2004) in three
other buildings, all located in or near Technology Park, Norcross,
Georgia, a suburb of Atlanta. The combined Georgia facilities comprise
clean rooms, a microelectronics laboratory, materials storage and control
areas, assembly and test area, offices, engineering laboratories, a ferrites
laboratory, drafting and design facilities, a machine shop, a metals
finishing facility, dark rooms and painting facilities. The Company
leases approximately 63,000 square feet of office and manufacturing space
for its Canadian operations, located in Ottawa, Ontario; the lease
on this facility expires in 2007.
The Company's Montreal operations include a 330,000 square foot
facility surrounded by 34 acres of undeveloped land. One-fourth of
the facility comprises manufacturing, assembly and laboratory space,
including an advanced near-field and far-field test range area and a
subsystem and payload integration area. Three-fourths of the facility
is used for engineering and administrative office space. The facility's
location in the province of Quebec affords it significant tax incentives
and credits sponsored by the provincial government.
ITEM 3. Legal Proceedings.
Not Applicable
ITEM 4. Submission of Matters to a Vote of Security Holders.
Not Applicable
PART II
ITEM 5. Market for Registrant's Common Equity and Related
Stockholder Matters.
The common stock of EMS Technologies, Inc. is traded in the over-the-
counter market (Nasdaq symbol ELMG). At March 12, 1999 there were
approximately 1,000 shareholders of record, and the Company believes
that there were approximately 4,000 beneficial shareholders, based upon
broker requests for distribution of Annual Meeting materials. The price
range of the stock is shown below:
1998 Price Range 1997 Price Range
High Low High Low
---- --- ---- ---
First Quarter $ 24-3/4 17-1/2 25-1/4 17-1/4
Second Quarter 24-3/8 16-5/8 22-3/4 14-1/2
Third Quarter 21-1/4 11-1/8 29 17-1/4
Fourth Quarter 16-1/4 10-1/4 28-3/4 16
The Company has never paid a cash dividend with respect to shares of its
common stock and has retained its earnings to provide cash for the operation
and expansion of its business. Future dividends, if any, will be
determined by the Board of Directors in light of the circumstances then
existing, including the Company's earnings and financial requirements and
general business conditions.
ITEM 6. Selected Financial Data.
Information required for this item is incorporated herein by reference
to the Selected Financial Data contained in the Company's 1998 Annual
Report to Shareholders, and is included in Exhibit 13.1.
ITEM 7. Management's Discussion and Analysis of Results of Operations
and Financial Condition
ITEM 7a. Item 7a. Quantitative and Qualitative Disclosures About Market Risk
At December 31, 1998, the Company had the following market risk sensitive
instruments (in thousands):
Revolving credit loan, maturing in November 2003,
interest payable quarterly at a variable rate
(6.55% at the end of 1998) $ 19,150
Line of credit maturing in May 1999, interest
payable at a variable rate (7.5% at the end of 1998) 2,197
------
Total long-term debt $ 21,347
======
At December 31, 1998, the Company also had intercompany accounts that
eliminate in consolidation but that are considered market risk sensitive
instruments:
Short-Term Due to Parent, payable by European
subsidiaries in the following countries and
arising from purchase of the Parent's products
for sale in Europe:
Exchange Rate
($U.S. per unit $U.S. in thousands
of local currency) (Reporting Currency)
------------------ --------------------
Belgium .029 /Franc $ 586
Holland .179 /Guilder 3,881
Germany .599 /Mark 1,932
Sweden .532 /Krona 411
France .123 /Franc 2,129
------
Total short-term due to parent $ 8,939
======
Long-Term Debt to Parent, with unspecified
maturity, incurred by Canadian subsidiary to
provide working capital, with interest
accruing at an annual rate of 6% as of
December 31, 1998:
Exchange Rate ($U.S. per $Canadian) $.653 / Can. Dollar
Total long-term debt to parent ($U.S. in thousands) $ 9,738
======
Information required for this item is incorporated herein by reference to the
Management's Discussion and Analysis of Results of Operations and Financial
Condition contained in the Company's 1998 Annual Report to Shareholders, and
is included in Exhibit 13.1.
ITEM 8. Financial Statements and Supplementary Data.
Information required for this item is incorporated herein by reference
to the Consolidated Financial Statements and Notes to Consolidated Financial
Statements contained in the Company's 1998 Annual Report to Shareholders,
and is included in Exhibit 13.1.
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.
The information concerning directors called for by this Item is contained
in the Company's definitive Proxy Statement for its 1999 Annual Meeting of
Shareholders and is incorporated herein by reference. The information
concerning executive officers called for by this Item is set forth under
the caption "Executive Officers of the Registrant" in Item 1 hereof.
ITEM 11. Executive Compensation.
The information called for by this Item is contained in the Company's
definitive Proxy Statement for its 1999 Annual Meeting of Shareholders and
is incorporated herein by reference.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management.
The information called for by this Item is contained in the Company's
definitive Proxy Statement for its 1999 Annual Meeting of Shareholders and
is incorporated herein by reference.
ITEM 13. Certain Relationships and Related Transactions.
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.
(a)1. Financial Statements
The following consolidated financial statements are contained in the
Company's 1998 Annual Report to Shareholders, and are incorporated
herein by reference to Exhibit 13.1:
Independent Auditors' Report.
Consolidated Statements of Earnings -
Years ended December 31, 1998, 1997 and 1996.
Consolidated Balance Sheets - December 31, 1998 and 1997.
Consolidated Statements of Stockholders' Equity and Comprehensive
Income - Years ended December 31, 1998, 1997 and 1996.
Consolidated Statements of Cash Flows - Years ended December 31,
1998, 1997 and 1996.
Notes to Consolidated Financial Statements.
(a)2. Financial Statement Schedules
Independent Auditors' Report
II. Valuation and Qualifying Accounts -
Years ended December 31, 1998, 1997
and 1996
All other schedules are omitted as the required information is
inapplicable, or the information is presented in the financial statements
or related notes.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
EMS Technologies, Inc.:
Under date of February 5, 1999, we reported on the consolidated
balance sheets of EMS Technologies, Inc. (formerly known as Electromagnetic
Sciences, Inc.) and subsidiaries as of December 31, 1998 and 1997, and the
related consolidated statements of earnings, stockholders' equity and
comprehensive income, and cash flows for each of the years in the three-year
period ended December 31, 1998, as contained in the 1998 annual report to
stockholders. These consolidated financial statements and our report thereon
are incorporated by reference in the annual report on Form 10-K for the year
1998. In connection with our audits of the aforementioned consolidated
financial statements, we also audited the related consolidated financial
statement schedule as listed in the accompanying index. This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement schedule
based on our audits.
In our opinion, the financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
KPMG LLP
Atlanta, Georgia
February 5, 1999
Schedule II
EMS Technologies, Inc.
Valuation and Qualifying Accounts
(In thousands)
Years ended December 31, 1998, 1997 and 1996
-----------------------------------------------------
Additions
Balance at charged to Balance
beginning costs and at end
Classification of year expenses Deductions Other of year
- -------------- ---------- ---------- ---------- ----- -------
Allowance for
Doubtful Accounts:
1996 $ 720 - (450)(a) - 270
1997 $ 270 - - - 270
1998 $ 270 317(a) (277)(a) - 310
Reserve for Deferred
Tax Assets:
1996 $ 6,161 751(b) - - 6,912
1997 $ 6,912 - (920)(b) - 5,992
1998 $ 5,992 - (4,664)(b) - 1,328
(a) Deductions in 1996 and additions in 1998 represented adjustments of the
level of reserves determined to be necessary based upon the general aging
of receivables and the repayment of certain balances. In addition,
deductions in 1996 and 1998 included the write-off of certain receivables.
(b) Changes in the reserve for deferred tax assets related to the net
change in the underlying deferred tax assets associated with the Company's
Canadian subsidiary. These deferred tax assets had been fully reserved
when the subsidiary was acquired in 1993 due to uncertainty about realization.
As a result, these changes in reserves had no effect on the Company's 1996
or 1997 statement of earnings. In 1998, based upon the Canadian operation's
significantly improved profitability and management's revised assessment of
the subsidiary's business prospects, the valuation allowance related to these
deferred tax assets was decreased; the resulting benefit was allocated to
goodwill and there was no effect on the Company's 1998 statement of earnings.
(a)3. Exhibits
The following exhibits are filed as part of this report:
2.1 Asset Purchase Agreement, dated December 30, 1998, by and
between Electromagnetic Sciences, Inc. and Spar Aerospace
Limited, inlcuding Exhibits 1 and 2 but excluding all
Schedules. (The list of Schedules appears in Section 1.12
of the Agreement; (i) the registrant hereby agrees to furnish
supplementally a copy of any Schedule to the Commission
upon its request.) (Incorporated by reference to the Company's
Current Report on Form 8-K dated January 9, 1999.)
2.2 Letter of Amendment to Purchase Agreement, dated January 29,
1999 (incorporated by reference to the Company's Current
Report on Form 8-K dated January 9, 1999).
3.1 Second Amended and Restated Articles of Incorporation of EMS
Technologies, Inc., effective March 22, 1999.
3.2 Bylaws of EMS Technologies, Inc., as amended through
March 15, 1999.
4.1 Electromagnetic Sciences, Inc. Stockholder Rights Plan dated as
of July 3, 1989 (incorporated by reference to Exhibit 4.1 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1995).
4.2 Agreement with respect to long-term debt pursuant to Item
601(b)(4)(iii)(A) (incorporated by reference to Exhibit 4.2 to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1995).
4.3 Second Amended and Restated Loan Agreement, dated November 9, 1998,
between the Company and SunTrust Bank, Atlanta, together with
Amendment and Consent dated as of January 29, 1999, and Second
Amendment dated as of February 24, 1999.
10.1 Employment Agreement dated as of January 1, 1989, by and between
the Company and Thomas E. Sharon (incorporated by reference to
Exhibit 10.1 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1997).
10.2 Amendment, dated July 29, 1992, of Employment Agreement
dated as of January 1, 1989, by and between the Company and
Thomas E. Sharon.
10.3 Second Amendment, dated November 15, 1994, of Employment Agreement
dated as of January 1, 1989, by and between the Company and
Thomas E. Sharon (incorporated by reference to Exhibit 10.3 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1994).
10.4 Third Amendment, dated as of August 10, 1998, of Employment Agreement
dated as of January 1, 1989, by and between the Company and
Thomas E. Sharon.
10.5 Employment Agreement, dated as of August 10, 1998, by and between
the Company and John J. Farrell, Jr.
10.6 Employment Agreement, dated as of August 10, 1998, by and between
the Company and Don T. Scartz.
10.7 1981 Incentive Stock Option Plan, as amended and restated
February 6, 1987, and further amended through March 23, 1989
(incorporated by reference to Exhibit 10.6 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1995).
10.8 Form of split-dollar life insurance agreement between the Company
and certain of its officers (incorporated by reference to
Exhibit 10.7 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1997).
10.9 Form of split-dollar life insurance agreement effective
January 1, 1993, between the Company and William S. Jacobs.
10.10 Electromagnetic Sciences, Inc. 1986 Non-Qualified Stock Option
Plan, as amended through July 31, 1992 (incorporated by reference
to Exhibit 10.10 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995).
10.11 Electromagnetic Sciences, Inc. 1992 Stock Incentive Plan
as amended through October 3, 1996 (incorporated by reference to
Exhibit 10.11 to the Company's Registration Statement No. 333-14235
on Form S-4).
10.12 Amendments adopted May 2, 1997, to the Electromagnetic Sciences, Inc.
1992 Stock Incentive Plan (incorporated by reference to Exhibit 10.11
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1997).
10.13 EMS Technologies, Inc. 1997 Stock Incentive Plan, as adopted
January 24, 1997, and amended through February 19, 1999.
10.14 Form of Stock Option Agreement evidencing options granted to
executive officers under the EMS Technologies, Inc. 1997 Stock
Incentive Plan (incorporated by reference to Exhibit 10.13 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1997).
10.15 Form of Stock Option Agreement evidencing options granted
automatically to non-employee members of the Board of Directors upon
their initial election to the Board.
10.16 Form of Stock Option Agreement evidencing options granted
automatically to non-employee members of the Board of Directors,
following five years of service, under the Electromagnetic Sciences,
Inc. 1997 Stock Incentive Plan (incorporated by reference to Exhibit
10.14 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1997).
10.17 Form of Stock Option Agreement evidencing options granted to
executive officers under the Electromagnetic Sciences, Inc. 1992
Stock Incentive Plan (incorporated by reference to Exhibit 10.15 to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1997.)
10.18 Form of Stock Option Agreement dated May 15, 1995, evidencing
option granted to John J. Farrell, Jr. under the 1992 Stock
Incentive Plan (incorporated by reference to Exhibit 10.14 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1995).
10.19 Form of Stock Option Agreement evidencing options granted
automatically under the 1992 Stock Incentive Plan to newly-elected
non-employee members of the Board of Directors (incorporated by
reference to Exhibit 10.15 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995).
10.20 Form of Stock Option Agreement evidencing option granted
September 26, 1990 to an executive officer under the LXE Inc.
1989 Stock Incentive Plan, and thereafter converted into an option
for a reduced number of shares, at the same aggregate exercise price,
under the Company's 1992 Stock Incentive Plan (incorporated by
reference Exhibit 10.17 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1996).
10.21 Form of Stock Option Agreement evidencing option granted
September 26, 1990 to John B. Mowell under the LXE Inc. 1989
Stock Incentive Plan, and thereafter converted into an option
for a reduced number of shares, at the same aggregate exercise price,
under the Company's 1992 Stock Incentive Plan (incorporated by
reference to Exhibit 10.18 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1996).
10.22 Form of Stock Option Agreement dated May 15, 1995, evidencing
option granted to John J. Farrell, Jr. under the LXE Inc. 1989
Stock Incentive Plan, and thereafter converted into an option
for a reduced number of shares, at the same aggregate exercise price,
under the Company's 1992 Stock Incentive Plan (incorporated by
reference to Exhibit 10.6 to the LXE Inc. Annual Report on Form 10-K
for the year ended December 31, 1995).
10.23 Electromagnetic Sciences, Inc. Executive Annual Incentive
Compensation Plan, as amended on August 10, 1998.
10.24 Form of Indemnification Agreement between the Company and its
directors (incorporated by reference to Exhibit 10.24 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1997).
10.25 Form of Indemnification Agreement between the Company and its Vice
President and General Counsel (incorporated by reference to
Exhibit 10.25 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1997).
10.26 Letters dated April 17, 1995 and April 19, 1995 between LXE Inc.
and John J. Farrell, Jr. concerning the terms of his employment as
President of LXE Inc. (incorporated by reference to Exhibit 10.1
to Report on Form 10-Q of LXE Inc. for the quarter ended June 30,
1995).
10.27 Form of note evidencing indebtedness to the Company of its Chief
Executive Officer and certain other executive officers (incorporated
by reference to Exhibit 10.1 to the Company's Quarterly Report on
Form 10-Q for the quarter ended October 2, 1998).
10.28 Letter, dated February 24, 1999, governing credit facility between
EMS Technologies Canada, Ltd., a consolidated subsidiary of the
Company, and Canadian Imperial Bank of Commerce, including Schedule-
Standard Credit Terms.
13.1 Those portions of the Company's 1998 Annual Report to Shareholders
incorporated by reference into this Annual Report on Form 10-K.
22.1 Subsidiaries of the registrant.
23.1 Independent Auditors' Consent to incorporation by reference in
Registration Statements Nos. 2-76455, 2-78442, 2-94049, 33-31216,
33-38829, 33-41042, 33-50528, 333-20843 and 333-32425, each on Form
S-8.
27.1 Financial Data Schedule - 12 months ended December 31, 1998
(b). Reports on Form 8-K.
No Reports on Form 8-K were filed by the Company during the quarter ended
December 31, 1998.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
EMS TECHNOLOGIES, INC.
By: /s/ Date: 3/30/99
President and Chief Executive Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
By: /s/ Date: 3/30/99
Chairman of the Board, Chief Executive
Officer and Director
(Principal Executive Officer)
By: /s/ Date: 3/30/99
Don T. Scartz, Senior Vice President
and Chief Financial Officer, Treasurer
and Director
(Principal Financial and Accounting Officer)
By: /s/ Date: 3/30/99
Jerry H. Lassiter, Director
By: /s/ Date: 3/30/99
John B. Mowell, Director
By: /s/ Date: 3/30/99
Elvie L. Smith, Director
By: /s/ Date: 3/30/99
Norman E. Thagard, Director
Exhibit 3.1
SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
EMS TECHNOLOGIES, INC.
ARTICLE ONE
NAME
The name of the corporation is EMS Technologies, Inc.
ARTICLE TWO
CAPITALIZATION
The corporation shall have the authority, exercisable by its Board of
Directors, to issue up to 75,000,000 shares of Common Stock, $.10 par
value per share, and 10,000,000 shares of Preferred Stock, $1.00 par
value per share, which shall be established and designated from time to
time by the Board of Directors in such series and with such preferences,
limitations, and relative rights as may be determined by the Board of
Directors. The holders of the outstanding shares of a class of stock shall
not be entitled to vote as a separate class upon a proposed amendment to
these Articles of Incorporation that is solely for the reason of increasing
or decreasing the aggregate number of authorized shares of such class, and
the number of such shares may be increased or decreased without such a vote,
subject to such votes as shall otherwise be required by applicable law for
the amendment of these Articles of Incorporation.
ARTICLE THREE
LIMITATION OF DIRECTOR LIABILITY
No director of the corporation shall be personally liable to the
corporation or its shareholders for monetary damages for breach of the
duty of care or any other duty as a director, except that such liability
shall not be eliminated for:
(a) any appropriation, in violation of the director's duties, of any
business opportunity of the corporation;
(b) acts or omissions which involve intentional misconduct or a knowing
violation of law;
(c) the types of liability set forth in Section 14-2-832 (or any successor
or redesignation to this provision) of the Georgia Business Corporation Code
(the "Code"); or
(d) any transaction from which the director received an improper personal
benefit.
If at any time the Code is amended to authorize the further limitation or
elimination of the liability of a director, then the liability of each
director of the corporation shall be limited or eliminated to the fullest
extent permitted by the Code, as amended, without further action by the
shareholders, unless the provisions of the Code, as amended, require
further action by the shareholders.
Any repeal or modification of the provisions of this Article Three
by the shareholders of this corporation shall not adversely affect any
right of a director or officer of the corporation existing at the time
of such repeal or modification.
Exhibit 3.2
BYLAWS
OF
EMS TECHNOLOGIES, INC.
As Amended Through
March 15, 1999
TABLE OF CONTENTS PAGE
ARTICLE ONE - OFFICES
Section 1.1 Registered Office and Agent 1
Section 1.2 Principal Office 1
Section 1.3 Other Offices 1
ARTICLE TWO - SHAREHOLDERS' MEETINGS 1
Section 2.1 Place of Meetings 1
Section 2.2 Annual Meetings 1
Section 2.3 Special Meetings 2
Section 2.4 Notice of Meetings 2
Section 2.5 Waiver of Notice 2
Section 2.6 Quorum; Manager of Acting 2
Section 2.7 Voting of Shares 3
Section 2.8 Proxies 3
Section 2.9 Presiding Officer 3
Section 2.10 Adjournments 3
Section 2.11 Conduct of the Meeting 3
Section 2.12 Matters Considered at Annual Meetings 4
ARTICLE THREE - THE BOARD OF DIRECTORS 4
Section 3.1 General Powers 4
Section 3.2 Number, Election and Terms of Office 4
Section 3.3 Removal 4
Section 3.4 Vacancies 5
Section 3.5 Compensation 5
Section 3.6 Committees of the Board of Directors 5
Section 3.7 Certain Nomination Requirements 5
Section 3.8 Qualification of Directors 6
Section 3.9 Related-Party Transactions 6
ARTICLE FOUR - MEETINGS OF THE BOARD OF DIRECTORS 6
Section 4.1 Regular Meetings 6
Section 4.2 Special Meetings 6
Section 4.3 Place of Meetings 6
Section 4.4 Notice of Meetings 6
Section 4.5 Quorum 6
Section 4.6 Vote Required for Action 7
Section 4.7 Participation by Conference Telephone 7
Section 4.8 Action by Directors Without a Meeting 7
Section 4.9 Adjournments 7
Section 4.10 Waiver of Notice 7
ARTICLE FIVE - OFFICERS 7
Section 5.1 Offices 7
Section 5.2 Term 7
Section 5.3 Compensation 8
Section 5.4 Removal 8
Section 5.5 Chairman of the Board 8
Section 5.6 Chief Executive Officer 8
Section 5.7 President 8
Section 5.8 Vice Presidents 8
Section 5.9 Secretary 8
Section 5.10 Treasurer 8
Section 5.11 Assistant Secretaries and Assistant
Treasurers 9
Section 5.12 Bonds 9
ARTICLE SIX - DIVIDENDS 9
ARTICLE SEVEN - SHARES 9
Section 7.1 Authorization and Issuance of Shares 9
Section 7.2 Share Certificates 9
Section 7.3 Rights of Corporation with Respect to
Registered Owner 10
Section 7.4 Transfers of Shares 10
Section 7.5 Duty of Corporation to Register
Transfer 10
Section 7.6 Lost, Stolen or Destroyed Certificates 10
Section 7.7 Fixing of Record Date 10
Section 7.8 Record Date if None Fixed 11
ARTICLE EIGHT - INDEMNIFICATION 11
Section 8.1 Indemnification of Directors and
Officers 11
Section 8.2 Indemnification of Directors and
Officers for Derivative Actions 11
Section 8.3 Indemnification of Employees and Agents 11
Section 8.4 Subsidiaries and Other Organizations 12
Section 8.5 Determination 12
Section 8.6 Advances 12
Section 8.7 Non-Exclusivity 13
Section 8.8 Insurance 13
Section 8.9 Notice 13
Section 8.10 Security 13
Section 8.11 Amendment 13
Section 8.12 Agreements 14
Section 8.13 Continuing Benefits 14
Section 8.14 Sucessors 14
Section 8.15 Severability
Section 8.16 Additional Indemnification 14
ARTICLE NINE - MISCELLANEOUS 14
Section 9.1 Inspection of Books and Records 14
Section 9.2 Fiscal Year 14
Section 9.3 Seal 15
Section 9.4 Election of "Fair Price" Statute 15
Section 9.5 Election of "Business Combination"
Statute 15
Section 9.6 Notice 15
ARTICLE TEN - AMENDMENTS 15
BYLAWS
OF
EMS TECHNOLOGIES, INC.
All of these Bylaws are subject to contrary provisions, if any, of
the Corporation's Articles of Incorporation, of the Georgia Business
Corporation Code (the "Code") and of other applicable law.
References herein to "Articles of Incorporation" are to the articles
of incorporation of EMS Technologies, Inc., a Georgia corporation (the
"Corporation"), as the same may be amended and restated from time to time.
ARTICLE ONE
Offices
1.1 Registered Office and Agent. The Corporation shall maintain a
registered office and shall have a registered agent whose business
office is identical with such registered office.
1.2 Principal Office. The principal office of the Corporation shall
be at 660 Engineering Drive, Norcross, Georgia, or at such other place,
within or without the State of Georgia, as the Board of Directors may
from time to time determine or as the business of the Corporation may
require or make desirable.
1.3 Other Offices. In addition to its registered office and principal
office, the Corporation may have offices at such other place or places,
within or without the State of Georgia, as the Board of Directors may
from time to time appoint or as the business of the Corporation may
require or make desirable.
ARTICLE TWO
Shareholders' Meetings
2.1 Place of Meetings. Meetings of the shareholders may be held at any
place within or without the State of Georgia designated by the Board of
Directors and, if required, as set forth in the notice thereof, or if no
place is so specified, at the principal office of the Corporation.
2.2 Annual Meetings. Annual meetings of shareholders of such classes or
series of shares as are entitled to notice thereof and to vote thereat
shall be held on such dates as may be determined by the Board of Directors,
for the purpose of electing directors and transacting any and all other
business that may properly come before the meeting. The annual meeting
may be combined with any other meeting of shareholders, whether annual
or special.
2.3 Special Meetings. Special meetings of the shareholders of any class
or series or of all classes or series of the Corporation's shares may be
called at any time by the Chairman of the Board or the Board of Directors;
and shall be called by the Corporation upon the written request as required
by law (stating the purpose or purposes of such meeting) of the holders of
two-thirds or more of all the shares of capital stock of the Corporation
entitled to vote on any issue or issues proposed to be considered at such
special meeting. The date, time and place for the holding of any special
meeting of shareholders shall be determined by the Board of Directors. The
business that may be transacted at any special meeting of dshareholders
shall consist olyh of and be limited to the purpose or purposes stated in
the notice of such special meeting delivered to shareholders in accordance
with Section 2.4 of these Bylaws.
2.4 Notice of Meetings. The Corporation shall give written notice,
delivered in person or by mail, of the date, time and place of each annual
and special shareholders' meeting, no fewer than ten days nor more than 60
days before the meeting date, to each shareholder of record entitled to vote
at such meeting. In the case of an annual meeting, the notice of the meeting
need not state the purpose or purposes of the meeting unless the purpose or
purposes constitute a matter which these Bylaws or the Code require to be so
stated. In the case of a special meeting, the notice of meeting shall
state the purpose or purposes for which the meeting is called. If an annual
or special shareholders' meeting is adjourned to a different date, time
or place, the Corporation may but shall not be required to give notice
of the new date, time or place of such meeting if the new date, time and
place is announced at the meeting before adjournment thereof; provided,
however, that if a new record date is or must be fixed in accordance with
Section 7.7 of these Bylaws, notice of the adjourned meeting shall be given
by the Corporation to shareholders as of the new record date.
2.5 Waiver of Notice. A shareholder may waive any notice required by the
Code, the Corporation's Articles of Incorporation or these Bylaws, before or
after the date and time of the matter to which the notice relates, by
delivery to the Corporation of a waiver of such notice signed by the
shareholder entitled to such notice. In addition, a shareholder's
attendance at a meeting shall be
(i) a waiver of objection to lack of notice or defective notice of such
meeting unless such shareholder at the beginning of the meeting objects to
holding the meeting or transacting business at the meeting,
and (ii) a waiver of
objection to consideration of a particular matter at such meeting that
is not within the purpose or purposes stated in the meeting notice,
unless the shareholder objects to considering the matter when it
is presented. Except as otherwise required by the Code, none of the business
transacted, the purpose of the meeting or any other matter need be specified in
any waiver.
2.6 Quorum; Manner of Acting. (a) All classes or series
of the Corporation's shares entitled to vote generally on
a matter, shall for that purpose be considered a single
voting group (a "Voting Group"). At any meeting of
shareholders, action on a matter by a Voting Group may
be taken only if a quorum of such Voting Group exists
at such meeting. Unless the Articles of Incorporation,
these Bylaws, or the Code otherwise provide, a majority
of the votes entitled to be cast on a matter by a Voting
Group constitutes a quorum of that Voting Group with regard
to that matter once a share is represented at any meeting
other than solely to object to holding the meeting or
transacting business at the meeting, such share shall be
deemed present for quorum purposes for the remainder of
the meeting and for any adjournments of that meeting,
unless a new record date is or must be set pursuant to
Section 7.7 of these Bylaws for such adjourned meeting.
(b) If a quorum exists, action on a matter (other than the
election of directors) by a Voting Group is approved if the
votes cast within the Voting Group favoring the action
exceed the votes cast opposing the action, unless the
Articles of Incorporation, a Bylaw adopted by the shareholders
under the Code, or the Code requires a greater number of
affirmative votes. If voting by two or more Voting Groups
is required on a matter, action on that matter is approved
only when approved by each of such Voting Groups, voting
separately, as provided in the preceding sentence.
2.7 Voting of Shares. Subject to the provisions of any
Preferred Stock at the time outstanding, each outstanding
share of any class or series having voting rights shall be
entitled to one vote on each matter that such class or
series is entitled to vote on and that is submitted to a
vote at a meeting of shareholders.
2.8 Proxies. A shareholder entitled to vote pursuant on
a matter may vote in person or by a proxy appointed in writing
by the shareholder or by his attorney-in-fact. An appointment
of a proxy shall be valid for eleven months from the date of
its receipt by the Secretary or other officer or agent of the
Corporation authorized to tabulate votes, unless a longer period
is expressly stated therein. If the validity of any appointment
of a proxy is questioned, it must be submitted to the
secretary of the shareholders' meeting for examination
or to a proxy officer or committee appointed by the person
presiding at the meeting. The secretary of the meeting or,
if appointed, the proxy officer or committee shall determine,
consistent with requirements of the Code, the validity or
invalidity of any appointment of a proxy submitted. Reference
by the secretary in the minutes of the meeting to the regularity
of a proxy, or to the presence of shareholders or representation
of shares by proxy, shall be received as prima facie evidence of
the facts stated for the purpose of establishing the presence of
a quorum at such meeting and for all other purposes.
2.9 Presiding Officer. Except as otherwise provided in this
Section 2.9, the Chairman of the Board, and in his absence or
disability the Chief Executive Officer (if a different person,
and if not, the President), shall serve as the chairman of
every shareholders' meeting, if either of them is present
and willing to so serve. If neither the Chairman of the
Board nor the Chief Executive Officer is present at and willing
to serve as chairman of the meeting, and if the Chairman of the
Board has not designated another person who is present and
willing to so serve, then a majority of the Corporation's
directors present at the meeting shall be entitled to designate
a person to serve as chairman. If no directors of the Corporation
are present at such meeting or no majority of the directors can
be established, a chairman of the meeting shall be selected by
a majority vote of the shares present at the meeting and entitled
to vote in an election of directors. The chairman of the
meeting shall appoint such persons as he deems appropriate to
assist with the meeting.
2.10 Adjournments. Any meeting of the shareholders may be
adjourned by an affirmative vote of the holders of a majority
of the shares represented, entitled to vote and voting on the
matter to reconvene at a specific time and place, regardless of
whether a quorum is then present. It shall not be necessary to
give any notice of the reconvened meeting if the date, time and
place of the reconvened meeting are announced at the meeting
that was adjourned, unless required by the Code or Section 7.7
of these Bylaws. At any such reconvened meeting, only such
business may be transacted that could have been transacted at
the meeting that was adjourned.
2.11 Conduct of the Meeting. At any meeting of the shareholders
of the Corporation, the chairman of such meeting, as determined
in accordance with Section 2.9, shall be entitled to establish
conclusively the rules of order that shall govern the conduct
of business at the meeting, which rules may include, without
limitation, in the discretion of such presiding officer a
requirement that nominations of persons for election as directors
of the Corporation be made, seconded and voted upon one nominee
at a time.
2.12 Matters Considered at Annual Meetings. At any annual
meeting of shareholders, only matters shall be considered as
shall have been (a) brought before such meeting (i) by or at
the direction of the Board of Directors or (ii) by any
shareholder of the Corporation who is entitled to vote with
respect thereto and who complies with the notice procedures
set forth in this Section 2.12, and (b) seconded by any other
shareholder of the Corporation who is entitled to vote with
respect thereto. For business to be properly brought before
an annual meeting by a shareholder, the shareholder must have
given timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a shareholder's notice must be
delivered or mailed to and received at the principal executive
offices of the Corporation not less than 60 days prior to the
anniversary of the date on which the annual meeting of
shareholders was held in the prior year, except that if
the actual date of the annual meeting at issue is more
than 30 days earlier or later than such anniversary, such
shareholder's notice must be so delivered or received not
less than 60 days before such actual date. A shareholder's
notice to the Secretary shall set forth as to each matter
such shareholder proposes to bring before the meeting (i)
a brief description of the business desired to be brought
before the meeting and the reasons for conducting such
business at the meeting, (ii) the name and address, as
they appear on the Corporation's books, of the shareholder
proposing such business, (iii) the series or class and
number of shares of the Corporation's capital stock that
are beneficially owned by such shareholder, and (iv) any
material interest of such shareholder in such business.
Notwithstanding anything in the Bylaws to the contrary,
no business shall be brought before or conducted at an
annual meeting except in accordance with the provisions
of this Section 2.12. The person presiding over an annual
meeting shall, if the facts so warrant, determine and
declare to such meeting that business proposed to be
considered at an annual meeting in a manner inconsistent
with this Section 2.12 is out of order and that such
business shall not be transacted at such meeting.
ARTICLE THREE
The Board of Directors
3.1 General Powers. The business and affairs of the
Corporation shall be managed under the direction of the
Board of Directors. In addition to the power and
authority expressly conferred upon it by these Bylaws,
the Board of Directors may exercise all such powers of
the Corporation and do all such lawful acts and things
as are not by law, by any legal agreement among shareholders,
by the Articles of Incorporation or by these Bylaws directed
or required to be exercised or done by the shareholders.
3.2 Number, Election and Terms of Office. Subject to the
provisions of any Preferred Stock at the time outstanding,
the number of directors of the Corporation shall be fixed
by resolution adopted from time to time by the Board of
Directors or the shareholders, but no decrease in the
number of directors shall have the effect of shortening
the term of an incumbent director. Except as provided
in Section 3.4, and subject to the provisions of any
Preferred Stock at the time outstanding, election of
directors at any annual or special meeting shall be by
a plurality of votes cast by the shares of common stock
entitled to vote and represented in person or by proxy
at such meeting, if a quorum exists therefor. Each director,
except in case of death, resignation, retirement,
disqualification, or removal, shall serve until the
next succeeding annual meeting and thereafter until
his successor, if there is to be any, shall have been
elected and qualified.
3.3 Removal. The entire Board of Directors or any
individual director may be removed from office for cause,
but only by the affirmative vote of the holders of a
majority of all of the shares entitled to be cast by the
Voting Group entitled to elect any such director. Removal
action may be taken only at a shareholders' meeting called
expressly for that purpose and with respect to which notice
of such purpose has been given, and a removed director's
successor may be elected at the same meeting to serve the
unexpired term.
3.4 Vacancies. Subject to the terms of any Preferred
Stock at the time outstanding, a vacancy occurring in
the Board of Directors may be filled for the unexpired
term, unless and until the shareholders shall have elected
a successor, by the affirmative vote of a majority of the
directors remaining in office, though less than a quorum
of the Board of Directors; provided, however, that if the
vacant office was held by a director elected by a Voting
Group of shareholders, only the holders of shares of that
Voting Group shall be entitled to vote to fill the vacancy,
unless the Articles of Incorporation otherwise provide.
A vacancy or vacancies in the Board of Directors shall be
deemed to exist in case of the death, resignation, retirement
or removal of any director, or if the shareholders fail to
elect the fully authorized number of directors to be voted
for at an annual or special meeting of shareholders at which
any director or directors are elected, or if there are newly
created directorships resulting from any increase in the
authorized number of directors.
3.5 Compensation. Directors may receive such compensation
for their services as directors as may from time to time be
fixed by vote of the Board of Directors. A director may also
serve the Corporation in a capacity other than that of director
and receive compensation for services rendered in such other capacity.
3.6 Committees of the Board of Directors. The Board of
Directors by resolution adopted by a majority of the full
Board of Directors may designate from among its members an
executive committee and one or more other standing or ad
hoc committees, each consisting of one or more directors
who serve at the pleasure of the Board of Directors.
Except as prohibited by law, each committee shall have
the authority set forth in the resolution establishing
such committee or in any other resolution adopted by a
majority of the full Board of Directors specifying,
enlarging or limiting the authority of the committee.
3.7 Certain Nomination Requirements. No person may be
nominated for election as a director at any annual or
special meeting of the shareholders of the Corporation
unless (a) the nomination has been or is being made pursuant
to a recommendation or approval of the Board of Directors of
the Corporation or a properly constituted committee of the
Board of Directors previously delegated authority to recommend
or approve nominees for director; (b) the person is nominated
by a shareholder of the Corporation who is entitled to vote for
the election of such nominee at the subject meeting, and such
nominating shareholder has furnished written notice to the
Secretary of the Corporation, at the Corporation's principal
business address, not less than 60 days prior to the anniversary
of the date on which the annual meeting of shareholders was held
in the prior year, except that if the actual date of the annual
meeting at issue is more than 30 days earlier or later than such
anniversary, such shareholder's notice must be so furnished not
less than 60 days before such actual date, which notice must
(i) set forth with respect to the person to be nominated his
or her name, age, business and residence addresses, principal
business or occupation during the past five years, any
affiliation with or material interest in the Corporation or
any transaction involving the Corporation, and any affiliation
with or material interest in any person or entity having an
interest materially adverse to the Corporation, and (ii) be
accompanied by the sworn or certified statement of the
shareholder that the nominee has consented to being nominated
and that the shareholder believes the nominee will stand for
election and will serve if elected; or (c) (i) the person is
nominated to replace a person previously identified as a proposed
nominee (in accordance with the provisions of subpart (b) of
this Section 3.7) who has since become unable or unwilling to
be nominated or to serve if elected, (ii) the shareholder who
furnished such previous identification makes the replacement
nomination and delivers to the Secretary of the Corporation
(at the time of or prior to making the replacement nomination)
an affidavit or other sworn statement affirming that the
shareholder had no reason to believe the original nominee
would be so unable or unwilling, and (iii) such shareholder
also furnishes in writing to the Secretary of the Corporation
(at the time of or prior to making the replacement nomination)
the same type of information about the replacement nominee as
required by subpart (b) of this Section 3.7 to have been
furnished about the original nominee. The presiding officer
of any meeting of shareholders of the Corporation at which
one or more directors are to be elected, for good cause shown
and with proper regard for the orderly conduct of business at
the meeting, may waive in whole or in part the operation of
this Section 3.7.
3.8 Qualification of Directors. No person elected to serve
as a director of the Corporation shall assume such office and
commence such service unless and until such persons shall be
duly qualified therefor. Such a director-elect shall not be
deemed to be duly qualified to assume the office of and serve
as a director if such assumption or service by the person
would violate, or would cause the Corporation to be in violation
of, any applicable federal or state law or regulation.
3.9 Related-Party Transactions. All contracts or transactions
between the Corporation and one or more of its directors or
officers, or between the Corporation and any other corporation,
firm or association in which one or more of its directors or
officers are directors or officers, or have a material financial
interest, shall be reviewed by a committee of the Board of
Directors designated by the whole board as having such
responsibility.
ARTICLE FOUR
Meetings of the Board of Directors
4.1 Regular Meetings. Unless the Chairman of the Board shall
cause notice to be given of a different date and time, a regular
meeting of the Board of Directors shall be held at 10:00 a.m.
on the date of each annual meeting of shareholders or any meeting
held in lieu or substitute thereof. In addition, the Board of
Directors may schedule other meetings to occur at regular
intervals throughout the year.
4.2 Special Meetings. Special meetings of the Board of
Directors may be called by or at the request of the Chairman
of the Board or any two directors in office at that time.
4.3 Place of Meetings. Directors may hold their meetings at
any place within or without the State of Georgia as the
Chairman of the Board may from time to time establish. Unless
the Chairman of the Board shall cause notice to be given of a
different place, each regular meeting held on the date of an
annual meeting of shareholders (or of a meeting in lieu or
substitute thereof) shall be held at the location of such
annual meeting.
4.4 Notice of Meetings. No notice shall be required for any
regular scheduled meetings of the Board of Directors. Unless
waived as contemplated in Section 4.10, the Corporation shall
give not less than two days' notice to each director of the
date, time and place of each special meeting. Notice of a
subsequent meeting shall be deemed to have been given to any
director in attendance at any duly convened meeting at which
the date, time and place of each subsequent meeting is announced.
4.5 Quorum. At meetings of the Board of Directors, a majority
of the directors then in office shall be necessary to constitute
a quorum for the transaction of business. In no case shall less
than one-third of the minimum number of directors authorized at
that time, nor less than two directors, constitute a quorum.
4.6 Vote Required for Action. The act of a majority of the
directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors.
4.7 Participation by Conference Telephone. Members of the
Board of Directors, or members of any committee designated
by the Board of Directors, may participate in a meeting of
the Board or such committee by means of conference telephone
or similar communications equipment through which all persons
participating in the meeting can simultaneously hear each other.
Participation in a meeting pursuant to this Section 4.7 shall
constitute presence in person at such meeting.
4.8 Action by Directors Without a Meeting. Any action required
or permitted to be taken at any meeting of the Board of Directors
or any action that may be taken at a meeting of a committee of
directors may be taken without a meeting if one or more written
consents describing the action taken shall be signed by all the
directors, or all the members of the committee, as the case may
be, and delivered to the Corporation for inclusion in the
minutes or filing with the corporate records. Such consent
shall have the same force and effect as a unanimous vote of
the Board of Directors or the committee.
4.9 Adjournments. A meeting of the Board of Directors,
whether or not a quorum is present, may be adjourned by a
majority of the directors present. It shall not be necessary
to give notice of the reconvened meeting or of the business
to be transacted, other than by announcement at the meeting
that was adjourned. At any such reconvened meeting at which
a quorum is present, any business may be transacted that could
have been transacted at the meeting that was adjourned.
4.10 Waiver of Notice. A director may waive any notice
required by the Code, the Corporation's Articles of Incorporation
or these Bylaws before or after the date and time of the matter
to which the notice relates, by a written waiver signed by such
director and delivered to the Corporation for inclusion in the
minutes or filing with the corporate records. Attendance by a
director at a meeting shall constitute waiver of notice of such
meeting, except where a director at the beginning of the meeting
(or promptly upon his or her arrival ) objects to holding the
meeting or to the transacting of business at the meeting and does
not thereafter vote for or assent to action taken at the meeting.
ARTICLE FIVE
Officers
5.1 Offices. The officers of the Corporation shall be as
determined by the Board of Directors, and may include a Chief
Executive Officer, a President, a Secretary and a Treasurer,
each of whom shall be elected or appointed by the Board of
Directors. The Board of Directors may also elect or appoint
a Chairman of the Board from among its members. The Board of
Directors from time to time may, or may authorize the Chief
Executive Officer to, create and establish the duties of other
officers and elect or appoint other officers as it or he deems
necessary for the efficient management of the Corporation,
including one or more Vice Presidents, one or more Assistant
Secretaries and one or more Assistant Treasurers.
5.2 Term. Each officer shall serve at the will of the Board
of Directors (or, if the Chief Executive Officer appointed
such officer, at the will of the Board of Directors and the
Chief Executive Officer) or until his death, resignation,
retirement or disqualification.
5.3 Compensation. The compensation of all officers of the
Corporation shall be fixed by the Board of Directors or by a
committee or officer appointed by the Board of Directors.
5.4 Removal. Any officer (regardless of how elected or
appointed) may be removed by the Board of Directors whenever
in its judgment the best interests of the Corporation will
be served thereby, and any officer appointed by the Chief
Executive Officer may be removed by the appointing officer
whenever in his judgment the best interests of the Corporation
will be served thereby.
5.5 Chairman of the Board. The Chairman of the Board (if
there be one) shall call to order meetings of the shareholders
and of the Board of Directors, and shall act as chairman of
such meetings (unless another person is selected under
Section 2.9 to act as chairman). The Chairman of the
Board shall perform such other duties and have such other
authority as may from time to time be delegated by the
Board of Directors.
5.6 Chief Executive Officer. The Chief Executive Officer
shall be charged with the general and active management of
the business of the Corporation, shall see that all orders
and resolutions of the Board of Directors are carried into
effect, shall have the authority to select and appoint
employees and agents of the Corporation, and shall, in the
absence or disability of the Chairman of the Board, perform
the duties and exercise the powers of the Chairman of the
Board. The Chief Executive Officer shall perform such other
duties and have such other authority as shall be delegated
from time to time by the Board of Directors.
5.7 President. The President shall have general supervision
of the business of the corporation. The President shall
perform such other duties and have such other authority as
may from time to time be delegated by the Board of Directors
or the Chief Executive Officer.
5.8 Vice Presidents. The Vice President (if there be one)
shall, in the absence or disability of the President, or at
the direction of the President, perform the duties and exercise
the powers, whether such duties and powers are specified in
these Bylaws or otherwise, of the President. If the Corporation
has more than one Vice President, the one designated by the
Board of Directors or the Chief Executive Officer shall act
in lieu of the President. Vice Presidents shall perform
such other duties and have such other authority as may from
time to time be delegated by the Board of Directors, the
Chief Executive Officer or the President.
5.9 Secretary. The Secretary shall be responsible for
preparing minutes of the directors' and shareholders'
meetings and for authenticating records of the Corporation.
The Secretary shall have authority to give all notices
required by law or these Bylaws. The Secretary shall be
responsible for the custody of the corporate books, records,
contracts and other documents. The Secretary may affix the
corporate seal to any lawfully executed documents requiring
it and shall sign such instruments as may require the
Secretary's signature. The Secretary shall perform such
other duties and have such other authority as may from time
to time be delegated by the Board of Directors or the Chief
Executive Officer.
5.10 Treasurer. The Treasurer shall be responsible for the
custody of all funds and securities belonging to the
Corporation and for the receipt, deposit or disbursement
of such funds and securities in a manner consistent with
policies established by the Board of Directors or Chief
Executive Officer. The Treasurer shall cause full and
true accounts of all receipts and disbursements to be
maintained and shall make such reports of the same to
the Board of Directors, Chief Executive Officer and
President upon request. The Treasurer shall perform
such other duties and have such
other authority as may from time to time be delegated
by the Board of Directors or the Chief Executive Officer.
5.11 Assistant Secretaries and Assistant Treasurers.
The Board of Directors and Chief Executive officer each
may appoint one or more persons to serve as Assistant
Secretary or Assistant Treasurer, or both. The Assistant
Secretary and Assistant Treasurer (or if there be more than
one of either such officer, the one so designated by the
Board of Directors or Chief Executive Officer) shall, in
the absence or disability, or at the direction, of the
Secretary or the Treasurer, respectively, perform the
duties and exercise the authority of those offices. Each
Assistant Secretary may affix the corporate seal to any
corporate document and attest the signature of any officer
of the Corporation. Each Assistant Secretary and Assistant
Treasurer shall perform such other duties and have such other
authority as may from time to time be delegated by the Board
of Directors or the Chief Executive Officer.
5.12 Bonds. The Board of Directors may by resolution
require any or all of the officers, agents or employees
of the Corporation to give bonds to the Corporation, with
sufficient surety or sureties, conditioned on the faithful
performance of the duties of their respective offices or
positions, and to comply with such other conditions as may
from time to time be required by the Board of Directors.
ARTICLE SIX
Dividends
Dividends upon the capital stock of the Corporation
may be declared by the Board of Directors, payable in cash,
in property or in shares of the Corporation.
ARTICLE SEVEN
Shares
7.1 Authorization and Issuance of Shares. The maximum
number of shares of any class of stock of the Corporation
which may be issued and outstanding shall be set forth from
time to time in the Articles of Incorporation. The Board of
Directors may increase or decrease the number of issued and
outstanding shares of any class of stock of the Corporation
within the maximum authorized by the Articles of Incorporation
and the minimum requirements of the Articles of Incorporation
or the Code.
7.2 Share Certificates. The interest of each shareholder in
the Corporation shall be evidenced by a certificate or certificates
representing shares of the Corporation which shall be in such
form as the Board of Directors may from time to time adopt in
accordance with the Code. Share certificates shall be
consecutively numbered, in registered form, and indicate the
date of issue and state such other information as may be
required by the Code. Each certificate shall be signed by
the Chief Executive Officer, the President or a Vice President
and the Secretary or an Assistant Secretary and shall be sealed
with the seal of the Corporation or a facsimile thereof;
provided, however, that where such certificate is signed by a
transfer agent, or registered by a registrar, the signatures
of such officers may be facsimiles. In case any officer or
officers who shall have signed (or whose facsimile signature
has been placed upon) a share certificate has ceased for any
reason to be such officer or officers before such certificate
is issued, such certificate may be issued by the Corporation
with the same effect as if the person or persons who signed
such certificate or whose facsimile signatures has been used
thereon had not ceased to be such officer or officers.
7.3 Rights of Corporation with Respect to Registered Owner:
Prior to due presentation for transfer of registration of its
shares, the Corporation may treat the registered owner of the
shares (or the beneficial owner of the shares to the extent
of any rights granted by a nominee certificate on file with
the Corporation pursuant to any procedure that may be established
by the Corporation in accordance with the Code) as the person
exclusively entitled to vote such shares, to receive any dividend
or other distribution with respect to such shares, and for all
other purposes, and the Corporation shall not be bound to
recognize any equitable or other claim to or interest in
such shares on the part of any other person, whether or
not it has express or other notice thereof, except as
otherwise provided by law.
7.4 Transfers of Shares. Transfers of shares shall be made
upon the books of the Corporation kept at the office of the
transfer agent designated to transfer the shares, only upon
direction of the person named in the certificate or by an
attorney lawfully constituted in writing, and before a new
certificate is issued, the old certificate shall be
surrendered for cancellation or, in the case of a certificate
alleged to have been lost, stolen or destroyed, the provisions
of Section 7.6 of these Bylaws shall have been complied with.
7.5 Duty of Corporation to Register Transfer. Notwith-
standing any of the provisions of Section 7.4 of these
Bylaws, the Corporation is under a duty to register the
transfer of its shares only if:
(a) the share certificate is endorsed by the
appropriate person or persons;
(b) reasonable assurance is given that the
endorsements are genuine and effective;
(c) the Corporation has no duty to inquire into
adverse claims or has discharged any such duty;
(d) any applicable law relating to the collection
of taxes has been complied with; and
(e) the transfer is in compliance with applicable
provisions of any transfer restrictions of which the
Corporation shall have notice.
7.6 Lost, Stolen or Destroyed Certificates. Any person
claiming a share certificate to be lost, stolen or destroyed
shall make an affidavit or affirmation of the fact in such
manner as the Board of Directors may require and shall, if
the Board of Directors so requires, give the Corporation a
bond of indemnity in form and amount, and with one or more
sureties satisfactory to the Board of Directors, as the Board
of Directors may require, whereupon an appropriate new certificate
may be issued in lieu of the one alleged to have been lost,
stolen or destroyed.
7.7 Fixing of Record Date. For the purpose of determining
shareholders (i) entitled to notice of or to vote at any meeting
of shareholders or, if necessary, any adjournment thereof,
or (ii) entitled to receive payment of any dividend, and in
order to make a determination of shareholders for any other
proper purpose, the Board of Directors may fix in advance a
date as the record date, such date to be not more than 70
days prior to the date on which the particular action, requiring
such determination of shareholders, is to be taken. A
determination of shareholders of record entitled to notice
of or to vote at a meeting of shareholders shall apply to
any adjournment of such meeting, unless the Board of Directors
shall fix a new record date for the reconvened meeting; provided,
however, the Board of Directors shall set a new record date if
such meeting is adjourned to a date more than 120 days after
the date fixed for the original meeting.
7.8 Record Date if None Fixed. If no record date is fixed
as provided in Section 7.7, then the record date for any
determination of shareholders that may be proper or required
by law shall be: the close of business on the last business
day before notice is first delivered to shareholders, in
the case of a shareholders' meeting; the date on which the
Board of Directors adopts a resolution declaring a dividend,
in the case of a payment of a dividend; and the date on
which any other action is taken by the Corporation, in the
case of such other action requiring a determination of
shareholders.
ARTICLE EIGHT
Indemnification
8.1 Indemnification of Directors and Officers. The
Corporation shall indemnify and hold harmless any person
(an "Indemnified Person") who is or was a party, or is
threatened to be made a party, to any threatened, pending
or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an
action or suit by or in the right of the Corporation) by
reason of the fact that he is or was a director or officer
of the Corporation, against expenses (including, but not
limited to, attorneys' fees and disbursements, court costs
and expert witness fees), and against any judgments, fines,
and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or
proceeding, if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best
interests of the Corporation, and with respect to any
criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful; provided, in any case,
that no indemnification shall be made in respect of expenses,
judgments, fines and amounts paid in settlement attributable
to circumstances as to which, under applicable provisions of
the Code as in effect from time to time, such indemnification
may not be authorized by action of the Board of Directors,
the shareholders or otherwise.
8.2 Indemnification of Directors and Officers for Derivative
Actions. The Corporation shall indemnify and hold harmless
any Indemnified Person who is or was a party, or is threatened
to be made a party, to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal,
administrative or investigative, by or in the right of
the Corporation, by reason of the fact that he is or was
a director or officer of the Corporation, against expenses
(including, but not limited to, attorneys' fees and
disbursements, court costs and expert witness fees)
actually and reasonably incurred by him in connection
with such action, suit or proceeding, if he acted in good
faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the Corporation. No
indemnification shall be made pursuant to this Section 8.2
for any claim, issue or matter as to which an Indemnified
Person shall have been adjudged by a court of competent
jurisdiction, after exhaustion of all appeals therefrom,
to be liable to the Corporation, or for amounts paid in
settlement to the Corporation, unless and only to the
extent that the court in which such action or suit was
brought or other court of competent jurisdiction shall
determine upon application that such person is fairly and
reasonably entitled to indemnity for such expenses which
the court shall deem proper.
8.3 Indemnification of Employees and Agents. The Board
of Directors shall have the power to cause the Corporation
to provide to any person who is or was an employee or agent
of the Corporation all or any part of the right to
indemnification and other rights of the type provided
under Sections 8.1, 8.2, 8.6 and 8.12 of this Article
Eight (subject to the conditions, limitations, obligations
and other provisions specified herein), upon a resolution
to that effect identifying such employee or agent (by
position or name) and specifying the particular rights
provided, which may be different for each employee or
agent identified. Each employee or agent of the Corporation
so identified shall be an "Indemnified Person" for purposes
of the provisions of this Article Eight.
8.4 Subsidiaries and Other Organizations. The Board of
Directors shall have the power to cause the Corporation
to provide to any person who is or was a director,
officer, employee or agent of the Corporation who also
is or was a director, officer, trustee, partner, employee
or agent of a Subsidiary (as defined below), or is or
was serving at the Corporation's request in such a
position with any other organization, all or any part
of the right to indemnification and other rights of the
type provided under Sections 8.1, 8.2, 8.6 and 8.12 of
this Article Eight (subject to the conditions, limitations,
obligations and other provisions specified herein), with
respect to service by such person in such position with a
Subsidiary or other organization, upon a resolution
identifying such person, the Subsidiary or other organization
involved (by name or other classification), and the
particular rights provided, which may be different for
each person so identified. Each person so identified
shall be an "Indemnified Person" for purposes of the
provisions of this Article Eight. As used in this Article
Eight, "Subsidiary" shall mean (i) another corporation,
joint venture, trust, partnership or unincorporated
business association more than 20% of the voting capital
stock or other voting equity interest of which was, at or
after the time of the circumstances giving rise to such
action, suit or proceeding, owned, directly or indirectly,
by the Corporation, or (ii) a nonprofit corporation that
receives its principal financial support from the
Corporation or its Subsidiaries.
8.5 Determination. Notwithstanding any judgment, order,
settlement, conviction or plea in any action, suit or
proceeding of the kind referred to in Sections 8.1 and
8.2 of this Article Eight, an Indemnified Person shall
be entitled to indemnification as provided in such
Sections 8.1 and 8.2 if a determination that such
Indemnified Person is entitled to such indemnification
shall be made (i) by the Board of Directors by a majority
vote of a quorum consisting of directors who are not
at the time parties to the proceeding; or (ii) if a
quorum cannot be obtained under (i) above, by majority
vote of a committee duly designated by the Board of
Directors (in which designation interested directors
may participate), consisting solely of two or more
directors who are not at the time parties to the proceeding;
or (iii) in a written opinion by special legal counsel
selected as required by law. To the extent that an
Indemnified Person has been successful on the merits
or otherwise in defense of any action, suit or proceeding
of the kind referred to in Sections 8. 1 and 8. 2 of this
Article Eight, or in defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him
in connection therewith.
8.6 Advances. Expenses (including, but not limited to,
attorneys' fees and disbursements, court costs, and
expert witness fees) incurred by the Indemnified Person
in defending any action, suit or proceeding of the kind
described in Sections 8.1 and 8.2 hereof (or in Section
8.4 hereof if applicable to such Indemnified Person)
shall be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding as set
forth herein. The Corporation shall promptly pay the
amount of such expenses to the Indemnified Person, but
in no event later than ten days following the Indemnified
Person's delivery to the Corporation of a written request
for an advance pursuant to this Section 8. 6, together with
a reasonable accounting of such expenses; provided, however,
that the Indemnified Person shall furnish the Corporation
a written affirmation of his good faith belief that the
Indemnified Person shall furnish the Corporation a written
affirmation of his good faith belief that he has met the
standard of conduct set forth in the Code and a written
undertaking and agreement to repay to the Corporation any
advances made pursuant to this Section 8.6 if it shall be
determined that the Indemnified Person is not entitled to
be indemnified by the Corporation for such amounts. The
Corporation shall make the advances contemplated by this
Section 8.6 regardless of the Indemnified Person's financial
ability to make repayment. Any advances and undertakings
to repay pursuant to this Section 8.6 shall be unsecured
and interest-free.
8.7 Non-Exclusivity. Subject to any applicable limitation
imposed by the Code or the Articles of Incorporation, the
indemnification and advancement of expenses provided by or
granted pursuant to this Article Eight shall not be exclusive
of any other rights to which a person seeking indemnification
or advancement of expenses may be entitled under any Bylaw,
resolution or agreement specifically or in general terms
approved or ratified by the affirmative vote of holders
of a majority of the shares entitled to be cast thereon.
8.8 Insurance. The Corporation shall have the power to
purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of
the Corporation, or is or was serving as a director,
officer, trustee, general partner, employee or agent of
a Subsidiary or, at the request of the Corporation, of
any other organization, against any liability asserted
against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against
such liability under the provisions of this Article Eight.
8.9 Notice. If any expenses or other amounts are paid
by way of indemnification, otherwise than by court order
or action by the shareholders or by an insurance carrier
pursuant to insurance maintained by the Corporation, the
Corporation shall, not later than the next annual meeting
of shareholders, unless such meeting is held within three
months from the date of such payment, and in any event
within 15 months from the date of such payment, send by
first class mail to its shareholders of record at the
time entitled to vote for the election of directors a
statement specifying the persons paid, the amount paid
and the nature and status at the time of such payment
of the litigation or threatened litigation.
8.10 Security. The Corporation may designate certain
of its assets as collateral, provide self-insurance or
otherwise secure its obligations under this Article Eight,
or under any indemnification agreement or plan of
indemnification adopted and entered into in accordance
with the provisions of this Article Eight, as the Board
of Directors deems appropriate.
8.11 Amendment. Any amendment to this Article Eight
that limits or otherwise adversely affects the right of
indemnification, advancement of expenses, or other rights
of any Indemnified Person hereunder shall, as to such
Indemnified Person, apply only to claims, actions, suits
or proceedings based on actions, events or omissions
(collectively, "Post Amendment Events") occurring after
such amendment and after delivery of notice of such amendment
to the Indemnified Person so affected. Any Indemnified
Person shall, as to any claim, action, suit or proceeding
based on actions, events or omissions occurring prior to
the date of receipt of such notice, be entitled to the right
of indemnification, advancement of expenses and other rights
under this Article Eight to the same extent as if such
provisions had continued as part of the Bylaws of the
Corporation without such amendment. This Section 8.11
cannot be altered, amended or repealed in a manner effective
as to any Indemnified Person (except as to Post Amendment
Events) without the prior written consent of such Indemnified
Person. The Board of Directors may not alter, amend or
repeal any provision of this Article Eight in a manner
that extends or enlarges the right of any person to
indemnification or advancement of expenses hereunder,
except with the approval of the holders of a majority
of all the shares of capital stock of the Corporation
entitled to vote thereon at a meeting called for such
purpose.
8.12 Agreements. The provisions of this Article
Eight shall be deemed to constitute an agreement between
the Corporation and each person entitled to indemnification
hereunder. In addition to the rights provided in this
Article Eight, the Corporation shall have the power, upon
authorization by the Board of Directors, to enter into an
agreement or agreements providing to any person who is or
was a director, officer, employee or agent of the Corporation
indemnification rights substantially similar to those provided
in this Article Eight.
8.13 Continuing Benefits. The indemnification and
advancement of expenses provided by or granted pursuant to
this Article Eight shall, unless otherwise provided when
authorized or ratified, continue as to a person who has
ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs, executors and
administrators of such a person.
8.14 Successors. For purposes of this Article Eight,
the terms "the Corporation" or "this Corporation" shall
include any corporation, joint venture, trust, partnership
or unincorporated business association that is the successor
to all or substantially all of the business or assets of
this Corporation, as a result of merger, consolidation,
sale, liquidation or otherwise, and any such successor
shall be liable to the persons indemnified under this
Article Eight on the same terms and conditions and to
the same extent as this Corporation.
8.15 Severability. Each of the sections of this
Article Eight, and each of the clauses set forth herein,
shall be deemed separate and independent, and should any
part of any such section or clause be declared invalid or
unenforceable by any court of competent jurisdiction, such
invalidity or unenforceability shall in no way render
invalid or unenforceable any other part thereof or any
other separate section or clause of this Article Eight
that is not declared invalid or unenforceable.
8.1 Additional Indemnification. In addition to the
specific indemnification rights set forth herein, the
Corporation shall indemnify each of its directors and
officers to the full extent permitted by action of the
Board of Directors without shareholder approval under
the Code or other laws of the State of Georgia as in
effect from time to time.
ARTICLE NINE
Miscellaneous
9.1 Inspection of Books and Records. The Board of
Directors shall have power to determine which accounts,
books and records of the Corporation shall be opened to
the inspection of shareholders, except such as may by
law be specifically open to inspection, and shall have
power to fix reasonable rules and regulations not in
conflict with applicable law for the inspection of
accounts, books and records that by law or by determination
of the Board of Directors shall be open to inspection.
Unless required by the Code or otherwise provided by the
Board of Directors, a shareholder of the Corporation holding
two percent or less of the total shares of the Corporation
then outstanding shall have no right to inspect the books
and records of the Corporation.
9.2 Fiscal Year. The Board of Directors is authorized
to fix the fiscal year of the Corporation and to change the
same from time to time as it deems appropriate.
9.3 Seal. The corporate seal shall be in such form as
the Board of Directors may from time to time determine.
9.4 Election of "Fair Price" Statute. All the requirements
of Sections 14-2-1110 through 14-2-1113 of the Code, as they
may be amended from time to time, are hereby made applicable
to the Corporation, to the extent permitted thereby, effective
July 1, 1989.
9.5 Election of "Business Combination" Statute. All the
requirements of Sections 14-2-1131 through 14-2-1133 of the
Code, as they may be amended from time to time, are hereby
made applicable to the Corporation, to the extent permitted
thereby, effective July 1, 1989.
9.6 Notice. Whenever these Bylaws require notice to be
given to any shareholder, the notice shall be given as
prescribed in Section 2.4. Whenever these Bylaws require
notice to be given to any director, the notice may be given
as provided in Section 4.4, by mail, by personal or courier
delivery, by telephone or by telecopier, telegraph or similar
electronic means. Whenever notice is given to a shareholder
or director by mail, the notice shall be sent first class
mail by depositing the same in a post office or letter box
in a postage prepaid sealed envelope addressed to the
shareholder or director at his or her address as it appears
on the books of the Corporation. Such notice shall be deemed
to have been given at the time the same is deposited in the
United States mail, except in the case of a notice to a
director of a special meeting of the Board of Directors,
which shall be deemed to have been given five days after
the same is deposited in the United States mail. Whenever
notice is given to a shareholder or director by any means
other than mail, such notice shall be deemed given when
received.
ARTICLE TEN
Amendments
The Board of Directors shall have the power to alter,
amend or repeal these Bylaws or adopt new Bylaws. Any
Bylaws adopted by the Board of Directors may be altered,
amended or repealed and new Bylaws adopted by the shareholders.
The shareholders may prescribe that any Bylaws shall not be
altered, amended or repealed by the Board of Directors.
EXHIBIT 4.3
EXECUTION COPY
SECOND AMENDED AND RESTATED
LOAN AGREEMENT
Dated as of November 9, 1998
between
ELECTROMAGNETIC SCIENCES, INC.
and
SUNTRUST BANK, ATLANTA
SECOND AMENDED AND RESTATED LOAN AGREEMENT
THIS SECOND AMENDED AND RESTATED LOAN AGREEMENT, dated as of
November 9, 1998 by and between ELECTROMAGNETIC SCIENCES, INC.
("Borrower"), a Georgia corporation whose principal place of
business is at 660 Engineering Drive, Norcross, Georgia 30092,
and SUNTRUST BANK, ATLANTA ("Lender"), a Georgia banking
corporation whose principal place of business is at One Park
Place, Atlanta, Georgia 30303.
W I T N E S S E T H:
WHEREAS, Borrower and Lender entered into that certain Amended
and Restated Loan Agreement dated as of December 15, 1995, as
amended by the First Amendment to Amended and Restated Loan
Agreement dated as of December 31, 1997 (the "Original EMS
Agreement"), pursuant to which Lender established a five-year
reducing revolving credit facility in the original principal
amount of $10,000,000 which terminates on December 29, 2000
and which is secured by a first priority perfected
security interest in the real property, improvements
and fixtures described in the Deed To Secure Debt
and Security Agreement dated as of December 17,
1986, as amended by the First Amendment To Deed To
Secure Debt and Security Agreement dated as of
December 15, 1995;
WHEREAS, LXE Inc., a wholly-owned subsidiary of
Borrower, and Lender entered into a Revolving
Credit Agreement dated as of December 15, 1995
(the "LXE Agreement"), pursuant to which Lender
established a three-year unsecured revolving credit
facility in the original principal amount of $10,000,000
which terminates on December 15, 1998; and
WHEREAS, Borrower has requested, and Lender has agreed,
on the terms and conditions set forth herein, to amend
and restate the Original EMS Agreement in order to renew
and continue the existing secured revolving credit facility
in the principal amount of $10,000,000, to establish a new
$20,000,000 unsecured revolving credit facility to refinance
the indebtedness under the LXE Agreement, to extend the
termination date to November 31, 2003, to terminate the
LXE Agreement and to change the status of LXE from a
direct borrower to a guarantor, and to make certain
other changes agreed to between the parties.
NOW THEREFORE, for and in consideration of the sum of
$10.00 in hand paid by Lender to Borrower, and for other
good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound,
agree as follows:
ARTICLE I
AMOUNT AND TERMS OF BORROWINGS
Section 1.1. The Revolving Credit. (a) Lender hereby
establishes until November 30, 2003 (the "Commitment
Termination Date") two revolving credit facilities,
Facility A in the principal amount of $10,000,000 (the
"Facility A Commitment") and Facility B in the principal
amount of $20,000,000 (the "Facility B Commitment" and
together with the Facility A Commitment, the "Commitments")
in favor of Borrower as further provided herein.
Within the limits of the Commitments, Borrower may
borrow , repay and reborrow under the terms of this
Agreement; provided, that Borrower may neither borrow
nor reborrow under the Commitments should there exist
a Default or an Event of Default, other than a Default
or Event of Default arising solely from the breach of
any covenant in Article VI, in which case the prohibition
on borrowing and reborrowing will apply only to Facility B.
Borrowings and reborrowings under the Commitments shall
be evidenced by the records of Lender and by promissory
notes in the forms attached hereto as Exhibit "A-1" (the
"Facility A Revolving Credit Note") and Exhibit "A-2"
(the "Facility B Revolving Credit Note", and together
with the Facility A Revolving Credit Note, the "Revolving
Credit Notes"). The Revolving Credit Notes shall be dated
the date of the execution of this Agreement, shall be
payable to the order of Lender in the principal amount
of the Facility A Commitment in the case of the Facility A
Revolving Credit Note and in the amount of the Facility B
Commitment in the case of the Facility B Revolving Credit
Note, shall bear interest on the outstanding principal
balance from the date of such Revolving Credit Note to
final payment as further set forth herein, and shall
terminate on the Commitment Termination Date, or sooner
should Lender declare the principal and accrued interest
on the Revolving Credit Notes to be immediately due and
payable as provided for hereinafter. The principal amount
of each LIBOR Advance shall be $500,000 or a greater
integral multiple of $100,000, and the principal amount
of each Base Rate Advance shall be $50,000 or a greater
integral multiple of $10,000. In addition, no more than
five (5) LIBOR Advances under each Revolving Credit Note
shall be outstanding at any time.
(b) The Facility A Commitment shall be fully funded
prior to the making of any Advance under the Facility
B Commitment. The proceeds of an Advance under the
Facility B Commitment shall not be used to repay or
prepay an Advance under the Facility A Commitment.
(c) The Facility A Commitment will be secured by the
Premises and if the springing lien is exercised pursuant
to Section 4.12 hereof, by the Collateral. The Facility B
Commitment will be unsecured, but will become secured by
the Collateral if the springing lien is exercised pursuant
to Section 4.12 hereof.
(d) The Facility B Commitment shall have a $5,000,000
sublimit for the issuance of Letters of Credit (the "LC
Commitment"); provided, that at no time shall the
outstanding Advances and the outstanding Letters of
Credit under Facility B exceed the Facility B Commitment.
Section 1.2. Payment on Commitment Termination Date.
The entire unpaid principal balance of the
Revolving Credit Notes and all accrued and unpaid
interest thereunder shall be due and payable on the
Commitment Termination Date.
Section 1.3. Interest. Interest shall accrue on
the unpaid principal amount of each Advance under
the Commitments at the following per annum rates,
which may be selected by Borrower subject to and
in accordance with this Agreement:
(i) Base Rate, plus the Applicable Margin; or
(ii) LIBOR for an Interest Period of 1, 2, 3 or 6
months, plus the Applicable Margin.
Section 1.4. Method of Borrowing Under the Commitments
Section. Borrower shall give Lender written
(including by telecopy) or telephonic (promptly
confirmed in writing) notice of any requested
Advance under either Commitment (a "Notice of
Borrowing") specifying (a) the principal amount
of such Advance, (b) whether such Advance shall
be made under the Facility A Commitment or the
Facility B Commitment (subject to Section 1.1 (b)
hereof), (c) the date such Advance is to be made
(which shall be a Business Day), (d) whether such
Advance shall be a Base Rate Advance or a LIBOR
Advance, and (e) in the case of a LIBOR Advance,
the duration of the initial Interest Period
applicable thereto. Each Notice of Borrowing
shall be given to Lender (i) with respect to
any LIBOR Advance, not later than 1:00 P.M.
(Atlanta, Georgia time) on the second Business
Day preceding the date of such requested Advance,
and (ii) with respect to any Base Rate Advance,
not later than 11:00 A.M. (Atlanta, Georgia time)
on the day of such requested Advance. Lender
shall be entitled to rely on any telephonic Notice
of Borrowing which it believes in good faith to
have been given by a duly authorized officer or
employee of Borrower and any Advances made by
Lender based on such telephonic notice, when credited
to Borrower in accordance with Borrower's instructions,
shall be Advances for all purposes hereunder.
Section 1.5. Selection of Successive Interest Rates
and Interest Periods. Borrower may, on the last day
of the Interest Period relating thereto, convert any
LIBOR Advance into a Base Rate Advance or continue a
LIBOR Advance in the same aggregate principal amount.
Borrower may at any time convert a Base Rate Advance
into a LIBOR Advance (unless a Default or Event of
Default shall then exist). Borrower shall give Lender
telephonic notice (promptly confirmed in writing) at
least two (2) Business Days prior to a conversion or
continuation of any such Advance (other than the
continuation of a Base Rate Advance), such notice to
specify whether such Advance is to be continued as a
LIBOR Advance or converted to a LIBOR Advance or a
Base Rate Advance, as the case may be, and, if applicable,
the Interest Period selected by Borrower for such Advance.
If Lender does not receive timely notice with respect to
any LIBOR Advance of any succeeding interest rate and/or
Interest Period selected by Borrower as provided for herein
or if Borrower selects an interest rate for an Interest
Period which is not available under Section 1.3, or if a
Default or Event of Default shall exist at the end of
an Interest Period applicable thereto, any such
outstanding LIBOR Advance shall be converted to a Base
Rate Advance.
Section 1.6. Interest Payment Dates. Interest on
the Revolving Credit Notes shall be payable (a) on
the last day of the relevant Interest Period for
LIBOR Advances (except if any Interest Period is
longer than three (3) months, interest will be
payable at the end of every three (3) months);
(b) on the last day of each calendar quarter, in
arrears, for each Base Rate Advance; and (c) on
the Commitment Termination Date.
Section 1.7. Optional Prepayments. Borrower shall
have the right to prepay LIBOR Advances and Base
Rate Advances, in whole at any time or in part from
time to time, without premium or penalty but with
accrued interest on the principal amount prepaid to
the date of such prepayment; provided, that (a) Borrower
gives Lender at least two (2) Business Days' prior
written notice of such prepayment, specifying the date
such prepayment will occur and the Advance (including
the Commitment under which such Advance was made) to be
prepaid, (b) each partial prepayment of a LIBOR Advance
shall be in an amount of not less than $100,000 or a
greater integral multiple of $25,000 and each partial
prepayment of a Base Rate Advance shall be not less
than $50,000 or a greater integral multiple of $10,000,
(c) any prepayment of a LIBOR Advance prior to the
last day of the then current Interest Period with
respect thereto shall be subject to the payment of
breakage costs pursuant to Section 1.13 hereto; and
(d) prepayments shall apply first to outstanding
Advances under the Facility B Commitment and no
prepayment of any Advance under the Facility A Commitment
shall be permitted unless no Advances are outstanding
under the Facility B Commitment.
Section 1.8. Reduction or Termination of Commitments.
Borrower shall have the right to terminate in whole or
reduce in part the Commitments upon at least two (2)
Business Days prior notice (which notice shall be
irrevocable) to Lender specifying the effective date
thereof, whether a termination or reduction is being
made, and the amount of any partial reduction;
provided, that (i) each partial reduction shall be
in the amount of $100,000 or a greater integral
multiple of $25,000, (ii) Borrower shall simultaneously
prepay the amount by which the outstanding Advances
under each Facility exceed the Commitment related to
such Facility, plus accrued and unpaid interest on
the principal amount so prepaid, and (iii) the
Facility B Commitment shall be reduced or terminated
in full prior to any reduction or termination of the
Facility A Commitment. No Commitment may be
reinstated after it has been terminated or reduced.
Section 1.9. Use of Proceeds. The proceeds of the
Advances will be used by Borrower (i) to finance
its working capital and the working capital of the
Subsidiary Guarantors, (ii) to finance the purchase
of its common stock to retire or hold as "treasury
stock" and the purchase of the common stock of its
Subsidiaries, (iii) to refinance existing indebtedness
with Lender and (iv) for other general corporate
purposes. The proceeds of each loan under the Line
of Credit Note will be used by Borrower to finance
its working capital and the working capital of the
Subsidiary Guarantors; provided, that no such proceeds
will be used to finance the working capital of CAL
until the CAL Guaranty has been amended to include the
Line of Credit Note as a guaranteed obligation.
Each Letter of Credit shall be used for a legitimate
corporate purpose, including indemnity bonds or similar
types of arrangements.
Section 1.10. Commitment Fee; Letter of Credit Fees. From
and after the date hereof up to and including the Commitment
Termination Date, Borrower shall pay to Lender (i) a
commitment fee equal to 0.20% per annum on the average
daily aggregate amount of the unused Commitments (the
"Commitment Fee") and (ii) a letter of credit fee (the
"LC Fee") on the daily average amount of outstanding
Letters of Credit at the rate equal to the Applicable
Margin for LIBOR Advances. Each of the Commitment Fee
and the LC Fee shall be payable by Borrower quarterly
in arrears, commencing on the last day of the first
calendar quarter ending after the Closing Date, and
on the Commitment Termination Date.
Section 1.11. Illegality . Notwithstanding any other
provisions of this Agreement, if the introduction of,
or any change in, or in the interpretation or
application of, any applicable law, regulation or
directive shall make it unlawful or impossible for
Lender to make, maintain or fund any LIBOR Advance,
the obligation of Lender hereunder to make, maintain
or fund any such LIBOR Advance shall forthwith be
cancelled, and Borrower shall, at its option, if any
LIBOR Advances are then outstanding, prepay all such
LIBOR Advances or convert such LIBOR Advances to Base
Rate Advances, in either case without penalty
notwithstanding Section 1.13 hereof.
Section 1.12. Increased Costs. In the event that the
introduction of, or any change in or in the interpretation
of or application of, any applicable law, treaty or
governmental regulation, or the compliance by Lender
with any guideline, request or directive (whether or
not having the force of law) from any central bank or
other U.S. or foreign financial, monetary or other
governmental authority, shall: (a) subject Lender to
any tax of any kind whatsoever with respect to this
Agreement, any Advance under the Revolving Credit
Notes or change the basis of taxation of payments to
Lender of principal, interest, fees or any other amount
payable hereunder (except for changes in the rate of
tax on the overall net income of Lender); (b) impose,
modify, or hold applicable any reserve, special
deposit, assessment or similar requirement against
assets held by, or deposits in or for the account of,
advances or loans by, or other credit extended by or
committed to be extended by any office of Lender
(other than any change by way of imposition or increase
of reserve requirements under Regulation D of the Board
of Governors of the Federal Reserve System included in
the Reserve Percentage in the case of LIBOR Advances);
or (c) impose on Lender or on the London interbank
market any other condition with respect to this Agreement,
the Revolving Credit Notes or any LIBOR Advance; and
the result of any of the foregoing is to increase the
cost to Lender of making or committing to make,
renewing or maintaining any LIBOR Advance or to reduce
the amount of any payment (whether of principal, interest
or otherwise) in respect of any LIBOR Advance, THEN, IN
ANY SUCH CASE, Borrower shall promptly pay from time to
time, upon demand of Lender, such additional amounts as
will compensate Lender for such additional cost or such
reduction, as the case may be. Lender shall certify the
amount of such additional cost or reduced amount to Borrower,
including a description of the calculation thereof in
reasonable detail, and such certification shall be
conclusive absent manifest error; provided, that unless
such certificate is delivered to Borrower no later than
ninety (90) days after Lender receives actual notice of
or obtains actual knowledge of, the promulgation of any
such law, rule or regulation, or any such change therein,
or any such change in the interpretation or administration
thereof, Borrower shall not have any obligation to pay any
such additional compensation to Lender accruing prior to
the ninetieth (90th) day preceding the delivery of such
certificate; and provided further, that Borrower shall
not have any obligation to pay any such additional
compensation to Lender accruing prior to one (1) year
of Lender receiving actual notice of, or obtaining actual
knowledge of, any such promulgation.
Section 1.13. Indemnity. Borrower hereby agrees to
indemnify Lender and hold Lender harmless from any loss,
cost or expense it may sustain or incur as a consequence
of (a) the failure by Borrower to complete any LIBOR
Advance or the failure of Borrower to convert any
outstanding Base Rate Advance into a LIBOR Advance
pursuant to Section 1.5 hereof after notice thereof has
been given to Lender, or (b) the payment or conversion
of a LIBOR Advance on a day other than the last day of
the Interest Period applicable thereto, including,
without limitation, any loss, cost or expense incurred
by reason of the liquidation or reemployment of
deposits or other funds acquired or deemed acquired by
Lender to fund such LIBOR Advance, when such LIBOR
Advance, as result of such failure, is not made on such
date. Lender shall certify the amount of its loss or
expense to Borrower, and such certification shall be
conclusive absent manifest error.
Section 1.14. Capital Adequacy. If, after the date
of this Agreement, Lender shall have determined that
the adoption of any applicable law, rule or regulation
regarding capital adequacy, or any change therein, or
any change in the interpretation or administration
thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or
administration thereof, or compliance by Lender with
any request or directive regarding capital adequacy
whether or not having the force of law) of any such
authority, central bank or comparable agency, has or
would have the effect of reducing the rate of return
on Lender's capital (whether on the Revolving Credit
Notes or otherwise) as a consequence of its obligations
hereunder to a level below that which Lender could have
achieved but for such adoption, change or compliance
(taking into consideration Lender's policies with respect
to capital adequacy) by an amount deemed by Lender to
be material, then from time to time, promptly upon
demand by Lender, Borrower shall pay Lender such additional
amount or amounts as will compensate Lender for such
reduction. A certificate of Lender setting forth the
additional amount or amounts to be paid to it hereunder,
providing a description of the calculation thereof in
reasonable detail, shall be conclusive absent manifest
error; provided, that unless such certificate is
delivered to Borrower no later than ninety (90) days
after Lender receives actual notice of, or obtains
actual knowledge of, the promulgation of any such law,
rule or regulation, or any such change therein, or any
such change in the interpretation or administration
thereof, Borrower shall not have any obligation to pay
any such additional compensation to Lender accruing
prior to the ninetieth (90th) day preceding the delivery
of such certificate; and provided further, that Borrower
shall not have any obligation to pay any such additional
compensation to Lender accruing prior to one (1) year of
Lender receiving actual notice of, or obtaining actual
knowledge of, any such promulgation. In determining any
such amount, Lender may use any reasonable averaging and
attribution methods.
Section 1.15. Survival. The obligations of Borrower under
Sections 1.12, 1.13 and 1.14 shall survive the termination
of this Agreement and the payment of the Revolving Credit
Notes.
Section 1.16. Making of Payments. The Commitment Fee and
all payments of principal of, and interest on, the Revolving
Credit Notes shall be made in immediately available funds
to Lender at its principal office in Atlanta, Georgia.
All such payments shall be made not later than 11:00 A.M.
(Atlanta, Georgia time) and funds received after that hour
shall be deemed to have been received by Lender on the next
following Business Day.
Section 1.17. Default Rate of. If Borrower shall fail to
pay on the due date therefor, whether by acceleration or
otherwise, any principal owing under the Revolving Credit
Notes, then interest shall accrue on such unpaid principal
and, to the extent allowed by law, or other amounts due,
at the option of Lender, from the due date until and
including the date on which such principal or other
amount is paid in full at (i) the then applicable
interest rate with respect to LIBOR Advances until
the end of the Interest Period applicable thereto
plus an additional two percent (2%) per annum and
(ii)thereafter and with respect to Base Rate Advances,
a rate of interest equal to the Base Rate plus an
additional two percent (2%) per annum (the "Default
Rate").
Section 1.18. Calculation of Interest and Fees Section.
Interest payable on the Revolving Credit Notes and
both the Commitment Fee and the LC Fee shall be
calculated on the basis of a year of 360 days and
paid for the actual number of days elapsed.
Section 1.19. Letters of Credit. (a) Prior to the
Commitment Termination Date, the Bank, upon the terms
and conditions of this Agreement and each LC Application,
shall issue from time to time one or more Letters of
Credit for the account of the Borrower in an aggregate
amount not exceeding the LC Commitment as the Borrower
shall request in an LC Application; provided, that at
no time shall the aggregate face amount of outstanding
Letters of Credit and the aggregate principal amount
of outstanding Advances under the Facility B Note
exceed the Facility B Commitment. The Bank shall issue
Letters of Credit upon receipt at least two (2) Business
Days prior to the requested date of issuance of (i) a
properly completed and duly executed LC Application and
(ii) such other documents and materials as may be
required thereunder. All Letters of Credit shall terminate
on the Commitment Termination Date.
(b) The terms and conditions set forth on the reverse
side of each LC Application shall govern the issuance
of each Letter of Credit, except that, to the extent
such terms and conditions are inconsistent with the
terms of this Agreement applicable to Letters of Credit,
this Agreement shall control.
ARTICLE II
CONDITIONS PRECEDENT
The obligation of Lender to establish the Commitments,
to make Advances to Borrower under this Agreement, and
to issue Letters of Credit is subject to the strict
satisfaction by Borrower of the following conditions:
Section 2.1. Conditions Precedent to the Initial Advance
and the Initial Letter of Credit. At the time of the
making by Lender of its initial Advance or of the issuance
of its initial Letter of Credit, Lender shall have received
the following, each dated as of the Closing Date, in form
and substance satisfactory to Lender:
(a) Opinion of Borrower's Counsel. Borrower shall have
delivered to Lender, at Borrower's expense, a favorable
written opinion from William S. Jacobs, the general
counsel of Borrower and the Subsidiary Guarantors,
dated as of and delivered on the date hereof, satisfactory
to Lender, with respect to the matters set forth in
Sections 3.1, 3.2, 3.4, 3.6, 3.7, 3.13 and 3.16 hereof.
(b) Corporate Action and Authority; Incumbency Certificate.
Borrower shall have delivered to Lender a certificate
of the Secretary or an Assistant Secretary certifying
Borrower's articles of incorporation and by-laws
attached thereto (or a statement to the effect that
the articles of incorporation and by-laws delivered
to Lender pursuant to the Original Agreement have not
been amended or otherwise modified and remain in full
force and effect), the resolutions of the Board of
Directors of Borrower authorizing the execution and
delivery of, and the performance of the obligations
under, of this Agreement and the other Loan Documents
to which the Borrower is or is to be a party; the
names of the officers of the Borrower authorized to
sign this Agreement and each of the other Loan
Documents to which the Borrower is or is to be a
party (including the certificates contemplated herein)
together with specimen signatures of such officers.
(c) Delivery of Note(c) Delivery of Notes. As of the date
hereof, Borrower shall have executed and delivered to
Lender the Revolving Credit Notes and the Line of Credit
Note.
(d) Deed to Secure Debt Deed to Secure Debt. Borrower
shall have executed and delivered to Lender the Second
Amendment to the Deed dated the date hereof (the "Second
Amendment to the Deed") and an updated title insurance
policy, confirming that Lender has an unencumbered security
title to all right, title and interest of Borrower in
and to the Premises. Borrower further agrees to
execute and deliver to Lender such financing statements
as may be necessary to perfect or continue the security
interest of Lender, now or hereafter, in the Premises,
and to pay any and all costs incurred in recording the
Second Amendment to the Deed in the real property
records and in filing any financing statements in the
personal property records.
(e) Subsidiary Guaranties Subsidiary Guaranties
(i) The Domestic Subsidiary Guarantors shall have
executed and delivered to Lender the Domestic Subsidiary
Guaranty, and CAL shall have executed and delivered to
Lender the CAL Guaranty.
(ii) Each Subsidiary Guarantor shall have delivered
to Lender a certificate of the Secretary or an Assistant
Secretary certifying such Subsidiary Guarantor's
articles of incorporation and by-laws attached thereto
(or a statement to the effect that the articles of
incorporation and by-laws delivered to Lender pursuant
to the Original Agreement have not been amended or
otherwise modified and remain in full force and effect),
the resolutions of the Board of Directors of such
Subsidiary Guarantor authorizing the execution and
delivery of, and the performance of the obligations
under, of the Subsidiary Guaranty; the names of the
officers of such Subsidiary Guarantor authorized to
sign the Subsidiary Guaranty, together with specimen
signatures of such officers.
(f) Termination of LXE Agreement. LXE Inc. shall
deliver a letter to Lender agreeing to the termination
of the LXE Agreement and the commitment of Lender
thereunder, and Lender shall deliver the promissory note
delivered by LXE Inc. in connection therewith, marked
cancelled and paid.
(g) LC Application. The Borrower shall have delivered a
duly executed LC Application.
(h) Borrower's Affidavit. The Borrower shall have
delivered a duly executed Borrower's Affidavit in form
and substance satisfactory to Lender.
(i) Insurance Certificate. The Borrower shall have
delivered a certificate of insurance with respect to
the Premises naming Lender as an additional insured.
Section 2.2. Conditions Precedent to Each Advance and
each Letter of Credit. At the time of the making by
Lender of each Advance and the issuance of each Letter of
Credit hereunder (including the initial Advance under
the Facility A Commitment and the initial Letter of
Credit under Facility B), (a) the following statements
shall be true (and each of the giving by Borrower of a
Notice of Borrowing in accordance with Section 1.4
hereof and the acceptance by Borrower of the proceeds
of each Advance and the delivery of a duly executed LC
Application shall constitute a representation and
warranty by Borrower that on the date of such Advance
or such Letter of Credit, before and after giving
effect thereto, such statements are true):
(i) The representations and warranties contained
in Article III hereof are true and correct on and
as of the date of such Advance or such Letter of
Credit as though made on and as of such date,
other than those representations and warranties that,
by their terms, refer to a date other than the date
of such Advance or such Letter of Credit, as the
case may be, and
(ii) No Default or Event of Default exists or
would result from such Advance or from the
application of the proceeds therefrom or from
the issuance of such Letter of Credit, as the
case may be, and
(b) Lender shall have received such other approvals,
opinions or documents as it may reasonably request
(including without limitation a Federal Reserve Form
U-1 duly completed to the satisfaction of Lender).
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Lender that:
Section 3.1. Organization and Qualification Section.
Each of Borrower and its Material Subsidiaries (a) is a
corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of
its incorporation, with the power and authority
(corporate and other) to own its properties and to
carry on its business as now conducted, (b) is
qualified to transact business as a foreign corporation
and is in good standing in each jurisdiction where not
so qualifying would have a material adverse impact on
Borrower's consolidated business, and (c) has the
power and authority (corporate and other) to execute,
deliver and perform its obligations under the Loan
Documents to which it is a party.
Section 3.2. Corporate Authority (a) The execution
and delivery by Borrower of, and the performance by
Borrower of its obligations under, the Loan Documents
to which it is a party have been duly authorized by
all requisite shareholder and corporate action on the
part of Borrower and do not and will not (i) violate
any provision of any law, rule or regulation, any
judgment, order or ruling of any court or governmental
agency, the organizational papers or by-laws of
Borrower, or any indenture, material agreement or
other material instrument to which Borrower is a
party or by which Borrower or any of its properties
is bound or (ii) be in conflict with, result in a
breach of, or constitute with notice or lapse of time
or both a default under any such indenture, material
agreement or other material instrument.
(b) The execution and delivery by each Subsidiary
Guarantor of, and the performance by each Subsidiary
Guarantor of its obligations under, the Subsidiary
Guaranty have been duly authorized by all requisite
shareholder and corporate action on the part of such
Subsidiary Guarantor and do not and will not
(i) violate any provision of any law, rule or
regulation, any judgment, order or ruling of any
court or governmental agency, the organizational
papers or by-laws of such Subsidiary Guarantor,
or any indenture, material agreement or other
material instrument to which such Subsidiary Guarantor
is a party or by which such Subsidiary Guarantor or
any of its properties is bound or (ii) be in
conflict with, result in a breach of, or constitute
with notice or lapse of time or both a default
under any such indenture, material agreement or
other material instrument.
Section 3.3. Tax Returns. Borrower and each of
its Material Subsidiaries have filed all federal,
state and other income tax returns which are required
to be filed, and each such Person has paid all taxes
as shown on such returns and on all assessments
received by it to the extent that such taxes have
become due, except such as are being contested in
good faith by appropriate proceedings and for which
adequate reserves have been established in accordance
with generally accepted accounting principles.
Section 3.4. Litigation. (a) There are no actions,
suits, investigations or proceedings pending or overtly
threatened against or affecting Borrower or its
properties or any Material Subsidiary or its properties
before any court, arbitrator or administrative or
governmental body, which seeks damages or other remedies,
not otherwise reserved for in determining Consolidated
Net Worth, that, if awarded at the highest amount
believed (after consultation with independent counsel
reasonably acceptable to Lender) to be a reasonable
possibility, would, individually or in the aggregate,
reduce Borrower's Consolidated Net Worth to less than
the minimum required pursuant to Section 6.1 hereof.
(b) Neither Borrower nor any Material Subsidiary is
in default or in violation of any law, statute or
ordinance, or of any order of any court, the penalties
for which, or the costs of eliminating which would,
individually or in the aggregate, have a Material
Adverse Effect.
Section 3.5. Title to Properties Section. Each of
the Borrower and its Material Subsidiaries has good
and marketable title to its respective real properties
(other than real properties that it leases), including,
without limitation, the Premises, and good title to all
of its other respective material properties and assets,
including the properties and assets reflected on the
balance sheet as at December 31, 1997 described in
Section 3.10 hereof (other than properties and assets
disposed of in the ordinary course of business).
Each of the Borrower and its Material Subsidiaries
enjoys peaceful and undisturbed possession of all
properties held under leases to which it is a party,
none of which contains any unusual or burdensome
provision that might materially affect or impair the
operation of such properties and assets in the manner
intended to be operated by Borrower or such Material
Subsidiaries. All leases of Borrower and each of its
Material Subsidiaries, whether as lessor or lessee,
are valid and existing and are in full force and effect.
Section 3.6. Enforceability of Agreement. This
Agreement and the Deed are legal, valid and binding
agreements of Borrower enforceable against Borrower
in accordance with their terms; the Revolving Credit
Notes, the Line of Credit Note and all other Loan
Documents to which Borrower is a party, when executed
and delivered, will be similarly legal, valid, binding
and enforceable; and the Subsidiary Guaranty is a legal,
valid and binding agreement of each Subsidiary
Guarantor enforceable against each such Subsidiary
Guarantor in accordance with its terms, except in
each such case as the enforceability of any of them
may be limited by bankruptcy, insolvency, reorganization,
moratorium and other laws affecting creditors' rights
and remedies generally and by general principles of
equity, whether considered in a proceeding at law or
in equity.
Section 3.7. Consent. No consent, permission,
authorization, order or license of any governmental
authority which has not been obtained is necessary
in connection with the execution, delivery, performance
or enforcement of the Loan Documents.
Section 3.8. Use of Proceeds. The proceeds of each
Advance will be used solely for the purposes set forth
in Section 1.8 hereof. Although the Advances made under
the Facility A Commitment are secured by the Premises,
none of such proceeds have been or will be used for the
purchase of, investment in or development of real estate.
Section 3.9. Partnerships; Subsidiaries.
(a) As of the Closing Date, Borrower has no interests in
any partnership or joint venture.
(b) Except as set forth on Schedule 3.9(b) attached
hereto or as hereinafter amended, Borrower has no
Material Subsidiaries. Each of the Subsidiary
Guarantors constitutes a Material Subsidiary.
(c) All of the outstanding shares of each Subsidiary
Guarantor are owned of record and beneficially by
Borrower, free of any Lien or claim.
Section 3.10. Financial Statements. Borrower has
furnished Lender with the following financial statements,
identified by the chief financial officer of Borrower:
the consolidated balance sheets of Borrower and its
Subsidiaries as at December 31, 1997 and 1996 and the
related consolidated statements of income, stockholders'
equity and cash flows of Borrower and its Subsidiaries
for such years, all certified by KPMG Peat Marwick. All
such financial statements (including any related schedules
and/or notes) are true and correct in all material respects,
have been prepared in accordance with GAAP consistently
applied throughout the periods involved and show all
liabilities, direct and contingent, of Borrower and its
Subsidiaries required to be shown in accordance with
such principles. The balance sheets fairly present the
financial condition of Borrower and its Subsidiaries as
at the dates thereof and the statements of income,
stockholders' equity and cash flows fairly present the
results of their operations and their cash flows for the
periods indicated. There has been no material adverse
change in the business, operations, condition (financial
or otherwise) of Borrower, or of Borrower and its Material
Subsidiaries taken as a whole, since December 31, 1997.
Section 3.11. ERISA. Except as disclosed on Schedule
3.11 attached hereto or as hereafter amended:
(a) Identification of Plans. Neither Borrower nor any
ERISA Affiliate maintains or contributes to, or has
maintained or contributed to, any "employee pension
benefit plan" as defined in Section 3(2) of ERISA.
(b) Liabilities. Neither Borrower nor any Subsidiary
is currently or will become subject to any liability
(other than routine Plan expenses or contributions,
if timely paid), tax or penalty whatsoever to any Person
whomsoever, which liability, tax or penalty is directly
or indirectly related to any Plan including, but not
limited to, any penalty or liability arising under
Title I or Title IV of ERISA, any tax or penalty
resulting from a loss of deduction under Section
404 or 419 of the Code, or any tax or penalty under
Chapter 43 of the Code, except such liabilities,
taxes or penalties (when taken as a whole) as would
not have a Material Adverse Effect; and
(c) Funding. Borrower and each ERISA Affiliate have
made full and timely payment of all amounts (i)
required to be contributed under the terms of each
Plan and applicable law and (ii) required to be paid
as expenses of each Plan. No Plan would have an
"amount of unfunded benefit liabilities" (as defined
in Section 4001(a)(18) of ERISA) if such Plan were
terminated as of the date on which this representation
and warranty is made.
Section 3.12. Outstanding Indebtedness. As of the
Closing Date, there exists no default or any condition
or event which, with the lapse of time or giving of
notice or both, would constitute a default under the
provisions of any instrument evidencing or securing
Indebtedness of the Borrower or any Material Subsidiary
in excess of $1,000,000 or of any agreement otherwise
relating thereto.
Section 3.13. Pollution and Environmental Control.
Each of Borrower and its Material Subsidiaries has
obtained all permits, licenses and other authorizations
which are required under, and is in compliance with,
all Federal, state and local laws and regulations
relating to pollution, reclamation, or protection of
the environment, including laws relating to emissions,
discharges, releases or threatened releases of pollutants,
contaminants, or hazardous or toxic materials or wastes
into the environment (including without limitation ambient
air, surface water, ground water or land), or otherwise
relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, or handling
of pollutants, contaminants, chemical or industrial,
hazardous or toxic materials or wastes, and any and all
regulations, codes, plans, orders, decrees, judgments,
injunctions, notices or demand letters issued, entered,
promulgated or approved thereunder, except to the extent
that any failure to obtain any such permits, licenses and
other authorizations or any such non-compliance would not,
individually or in the aggregate, have a Material Adverse
Effect.
Section 3.14. Employee Relations. Each of Borrower and
its Material Subsidiaries has a stable work force in place
and is not a party to any collective bargaining agreement,
and no labor union has been recognized as a representative
of Borrower's or any such Subsidiary's employees. As of
the Closing Date, neither the Borrower nor any Subsidiary
knows of any pending, threatened or contemplated strikes
or work stoppage or any other labor dispute involving
its employees which would have a Material Adverse Effect.
Section 3.15. Solvency. After giving effect to the
execution and delivery of the Loan Documents and the
making of Advances under the Commitments, each of
Borrower and each Subsidiary Guarantor will be Solvent.
Section 3.16. Possession of Franchises, Licenses, Etc.
Except as disclosed on Schedule 3.16 attached hereto
or as hereafter amended, each of Borrower and its
Material Subsidiaries possesses all franchises,
certificates, licenses, permits and other authorization
from governmental subdivisions or regulatory authorities,
and all patents, trademarks, service marks, trade names,
copyrights, licenses and other rights that are used in
and are material to, the operations of Borrower or such
Material Subsidiaries as currently conducted, free from
burdensome restrictions, that are necessary for the
ownership, maintenance and operation of any of their
respective material properties and assets, and neither
Borrower nor any of its Material Subsidiaries is in
violation of any thereof.
Section 3.17. Disclosure. Neither this Agreement nor
any other document, certificate or statement furnished
to Lender (or to the Securities and Exchange Commission
in connection with Borrower's 10-Q, upon which Lender
may expressly rely) by or on behalf of Borrower in
connection herewith contains any untrue statement
of a material fact or omits to state a material fact
necessary in order to make the statements contained
herein and therein not misleading at the time such
document, certificate or statement was furnished to
Lender. There is no fact peculiar to Borrower or
any of its Material Subsidiaries, which has had, or
could have, a Material Adverse Effect which has not
been set forth or appropriately reflected in this
Agreement or in the other Loan Documents, certificates
and statements furnished to Lender by or on behalf of
Borrower or prior to the date hereof in connection
with the transactions contemplated hereby.
Section 3.18. Year 2000 Compliance. Borrower has
developed a comprehensive working plan (the "Y2K
Plan") to insure that Borrower's and each Subsidiary's
software and hardware systems which impact or affect
in any material way the business operations of Borrower
and its Subsidiaries will be Year 2000 Compliant and
Ready (defined below) by no later than March 31, 1999.
Upon the request of the Lender, Borrower will promptly
deliver to Lender a summary of such Y2K Plan and a
copy of any third party assessment of the Y2K Plan
(if available). Borrower and its Subsidiaries have
met all previous Y2K Plan milestones and will
hereafter meet all future Y2K Plan milestones so
that all hardware and software systems will be
Year 2000 Compliant and Ready in accordance with
the Y2K Plan, except where the failure to meet
such milestones has not had, or would not have,
a Material Adverse Effect. As used herein, "Year
2000 Compliant and Ready" means that Borrower's and
each Subsidiary's hardware and software systems with
respect to the operation of their business and their
general business plan will: (i) handle date information
involving any and all dates before, during and/or
after January 1, 2000, including accepting input,
providing output and performing date calculations
in whole or in part; (ii) operate accurately without
interruption on and in respect of any and all dates
before, during and/or after January 1, 2000 and without
any change in performance; (iii) respond to and process
two digit year input without creating any ambiguity as
to the century; and (iv) store and provide date input
information without creating any ambiguity as to the
century.
ARTICLE IV
AFFIRMATIVE COVENANTS
Borrower covenants and agrees that so long as any
Indebtedness remains outstanding under the Revolving
Credit Notes or any Letter of Credit or either Commitment
remains outstanding that:
Section 4.1. Maintenance of Books and Inspection of
Property and Records. Borrower shall, and shall cause
each of its Subsidiaries to, keep complete and accurate
books and records with respect to its business and assets,
consistent with good business practices and as may be
necessary to permit the preparation of Borrower's
consolidated financial statements in accordance with
GAAP. Borrower shall, and shall cause each of its
Subsidiaries to, maintain its properties, real and
personal, including, without limitation, the Premises,
in good condition for its intended use. Borrower will
permit, and cause each Subsidiary to permit, Lender or
any Person designated by Lender upon advance notice in
writing (except after the occurrence and continuation
of an Event of Default, in which case no advance notice
will be required) to visit and inspect its properties,
real and personal, including without limitation the
Premises, to examine the books and financial records
of Borrower and its Subsidiaries, and make reasonable
requests for copies thereof or extracts therefrom, and
to discuss the affairs, finances and accounts of Borrower
and its Subsidiaries with their executive officers,
all at such reasonable times and as often as Lender may
reasonably request.
Section 4.2. Taxes. Borrower shall, and shall cause
each of its Material Subsidiaries to, pay and discharge
all taxes, assessments, fees, withholdings and other
governmental charges or levies imposed upon it, or upon
its income and profits, or upon any property belonging
to it; provided, however, that neither Borrower or any
of its Material Subsidiaries shall be required to pay
and discharge any such tax, assessment, fee, withholding,
charge or levy so long as the legality thereof shall be
promptly and actively contested in good faith and by
appropriate proceedings.
Section 4.3. Corporate Existence and Status. Borrower
shall, and shall cause each of its Material Subsidiaries
to, maintain its corporate existence (subject to Section
5.2 hereof) and good standing in its jurisdiction of
incorporation and its qualification and good standing
as a foreign corporation in all jurisdictions where not
so qualifying would have a Material Adverse Effect, and
shall conduct its business in the manner in which it is
now conducted subject only to changes in the ordinary
course of business (which for the purposes of this
Section shall mean and include the right to enter into
businesses, operations and/or markets which are
functionally related to the existing businesses,
expertise, operations and/or markets of Borrower or
such Material Subsidiaries).
Section 4.4. Compliance with Law and Other Agreements.
Borrower shall, and shall cause each of its Material
Subsidiaries to, comply with all applicable Federal,
state and local laws, rules and regulations (including
without limitation all Federal, state and local laws
relating to pollution, reclamation or protection of the
environment), and all agreements, indentures and mortgages
to which it is a party or by which it or any of its
assets is bound, where the effect of noncompliance
would have a Material Adverse Effect or significantly
affect the use of the Property as an office, engineering
and production facility.
Section 4.5. Notice of Default. Borrower shall notify
Lender of the occurrence of any Default or Event of
Default and of any default under any agreement evidencing
any other Indebtedness of Borrower and any Subsidiary
Guarantor, said notices to be given within ten days
of the occurrence of such Default or Event of Default
or such default; provided, however, that the failure
of Borrower to give such notice shall not affect the
right and power of Lender to exercise any or all of
the remedies specified herein.
Section 4.6. Notice of Litigation. Borrower shall
notify Lender of (a) any actions, suits or proceedings
instituted by any Person against it or any of its
Material Subsidiaries claiming money damages in excess
of $1,000,000 and seeking relief that, if granted,
would have a Material Adverse Effect, said notice to
be given within ten days of the first notice to
Borrower or any such Material Subsidiary of the
institution of such action, suit or proceeding,
and (b) upon receipt of actual knowledge thereof
by either Borrower or any Material Subsidiary,
notice of the threat of any such action, suit or
proceeding, said notice to be given within ten days
after such receipt. Each such notice under this
Section 4.6 shall specify the amount of damages
being claimed or other relief being sought, the
nature of the claim, the Person instituting the
action, suit or proceeding, and any other
significant features of the claim.
Section 4.7. Maintenance of Insurance. Borrower
shall, and shall cause each of its Material
Subsidiaries to, maintain insurance in such
amounts and against such liabilities and hazards
as customarily is maintained by other companies
operating similar businesses. All policies of
insurance with respect to the Property shall name
Lender as an additional insured and loss payee and
shall provide for thirty days' prior written notice
to Lender in the event of cancellation, change,
alteration or modification. Borrower shall obtain
such policies of insurance with respect to the
Property from a company or companies reasonably
satisfactory to Lender.
Section 4.8. Financial Statements. Borrower shall
deliver to Lender: (a) as soon as practicable and
in any event within ninety (90) days after the end
of each fiscal year of Borrower, an audited consolidated
and an unaudited consolidating balance sheet of Borrower
and its Subsidiaries as of the end of such fiscal year
and the related audited consolidated and unaudited
consolidating statements of income, stockholders'
equity and cash flows for such fiscal year and setting
forth in each case in comparative form corresponding
figures for the preceding fiscal year, all in reasonable
detail and reasonably satisfactory in scope to Lender
and with respect to the audited consolidated financial
statements only, certified as correct by Borrower's
chief financial officer and accompanied by an unqualified
opinion from KPMG Peat Marwick or such other independent
certified public accountants of recognized standing
selected by Borrower and reasonably acceptable to
Lender; (b) as soon as practicable and in any event
within forty-five (45) days after the end of each
of the first three quarters of each fiscal year of
Borrower, an unaudited consolidated and consolidating
balance sheet of Borrower and its Subsidiaries as of
the end of such fiscal quarter and the related consolidated
and consolidating statements of income, stockholders'
equity and cash flows for such quarter and for the
portion of Borrower's fiscal year ended at the end
of such quarter, setting forth in the case of such
statements in comparative form the figures for
Borrower's corresponding periods in Borrower's
previous fiscal year; (c) promptly after filing,
copies of all statements and reports, if any,
filed with the Securities and Exchange Commission;
(d) simultaneously with the delivery of each set of
annual and quarterly financial statements prior to
April 1, 1999, a statement of the chief executive
officer, chief financial/ accounting officer, chief
technology officer or other officer responsible for
the Y2K Plan to the effect that nothing has come to
his/her attention to cause him/her to believe that
the Y2K Plan milestones have not been met in a manner
such that Borrower's and its Subsidiaries' hardware
and software systems will not be Year 2000 Compliant
and Ready on or before March 31, 1999 and (e) such
other financial data and information as Lender may
reasonably request. Lender is hereby authorized to
deliver a copy of any financial statement delivered
to it pursuant to this Section 4.8 to any regulatory
body having jurisdiction over it and having the
governmental authority to require delivery of the
same.
Section 4.9. Certificate of No Default. Together
with the financial statements delivered pursuant to
Section 4.8 (a) and Section 4.8 (b) hereof, Borrower
shall deliver to Lender an officer's certificate,
executed by the chief financial officer of Borrower,
evidencing the calculations necessary to establish
compliance with the financial covenants set forth in
Article VI hereof and with respect to the financial
statements delivered pursuant to Section 4.8 (a) only,
stating that, to the best of the knowledge of Borrower,
there exists no Default or Event of Default, or if
any Default or Event of Default exists, stating the
nature thereof, the period of existence thereof and
what action Borrower proposes to take with respect
thereto, provided no such proposal shall affect
Lender's recourse to any and all available
remedies.
Section 4.10. ERISA. Promptly after the occurrence
thereof with respect to any Plan, or any trust
established thereunder, Borrower shall deliver to
Lender (a) notice of (i) a "reportable event"
described in Section 4043 of ERISA and the regulations
issued from time to time thereunder (other than a
"reportable event" not subject to the provisions
for 30-day notice to the PBGC under such regulations),
and (ii) any other event which could subject
Borrower or any ERISA Affiliate to any tax, penalty
or liability under Title I or Title IV of ERISA or
Chapter 43 of the Code which would have a Material
Adverse Effect, and (b) at the same time and in the
same manner as such notice must be provided to the
PBGC, or to a Plan participant, beneficiary or
alternative payee, any notice required under
Section 101(d), 302(f)(4), 303, 307, 4041(b)(1)(A)
or 4041 (c)(1)(A) of ERISA or under Section 401
(a)(29) or 412 of the Code with respect to any
Plan.
Section 4.11 Ownership of Subsidiary Guarantors;
New Subsidiary Guarantors.
(a) Subject to Section 5.2 hereof, Borrower will at
all times own not less than a majority of the voting
stock of each Subsidiary Guarantor existing on the
Closing Date; provided, that such Subsidiary Guarantor
shall continue to guaranty on a several basis all of
the obligations and liabilities of the Borrower under
the Loan Documents .
(b) Borrower will not create any new Material
Subsidiaries, whether by incorporation, merger or
acquisition, unless (i) if such Material Subsidiary
is wholly-owned by Borrower, such Material Subsidiary
promptly executes a Domestic Subsidiary Guaranty or a
supplement to the Domestic Subsidiary Guaranty
substantially in the form of Exhibit C attached
hereto (a "Supplement") or (ii) if such Material
Subsidiary is not wholly-owned by Borrower and (A)
if Borrower's Investment in such Material Subsidiary
constitutes solely a purchase from a third Person of
the capital stock of, or the partnership or members'
interest in, such Material Subsidiary, Borrower will
use its best efforts to cause such Material Subsidiary
to promptly execute a Domestic Subsidiary Guaranty or
a Supplement in an amount limited to such Investment
outstanding as of the date on which such Subsidiary
Guaranty is enforced or (B) if Borrower's Investment
constitutes any other type of transaction referenced
in the definition of Investment, Borrower will cause
such Material Subsidiary to execute a Domestic Subsidiary
Guaranty or a Supplement in an amount limited to such
Investment outstanding as of the date on which such
Subsidiary Guaranty is enforced. In any such case in
which a new Material Subsidiary is not wholly-owned by
Borrower, Borrower will execute a pledge agreement in
form and content satisfactory to Lender pledging the
stock or other ownership interests held by Borrower
in such Material Subsidiary and any other documents
which Lender reasonably deems necessary, but only if
such pledge would not cause any Advance used to make
such Investment to be a "purpose" credit under, or to
otherwise violate, Regulation U of the Federal Reserve
Board. In addition, each new Material Subsidiary
becoming a Domestic Subsidiary Guarantor hereunder
shall deliver to Lender the documents required under
Section 2.1(e)(ii) hereof and if requested by Lender,
an opinion of counsel in form and content reasonably
satisfactory to Lender.
Section 4.12. Springing Lien. (a) (i) Upon the occurrence
and during the continuance of a Default or an Event of
Default or (ii) if at the end of any fiscal quarter
Borrower's Consolidated EBIT for such fiscal quarter
and the immediately preceding three fiscal quarters
is less than 2.0 times Consolidated Interest Expense
for such fiscal quarter and the immediately preceding
three fiscal quarters, Borrower and each Domestic
Subsidiary Guarantor shall promptly execute and deliver
to Lender a security agreement in a commercially
reasonable form acceptable to Lender, together with
such UCC-1 financing statements as Lender may request
to perfect its security interest in the Collateral,
and an opinion of counsel reasonably satisfactory to
Lender regarding the enforceability of the Security
Agreement, the perfection of the Liens granted pursuant
thereto and such other matters as Lender may reasonably
request. The Collateral shall secure all obligations of
Borrower under the Commitments and of the Domestic
Subsidiary Guarantors under the Domestic Subsidiary
Guaranty.
(b) If at any time following the grant of a Lien
pursuant to Section 4.12(a) hereof, a Material
Subsidiary becomes a Domestic Subsidiary Guarantor
pursuant to Section 4.11 (b) hereof, Borrower shall
cause such Material Subsidiary to deliver to Lender
a security agreement in a commercially reasonable
form acceptable to Lender, UCC financing statement(s)
and any other documents reasonable requested by Lender.
ARTICLE V
NEGATIVE COVENANTS
So long as the Revolving Credit Notes remain unpaid,
any Letter of Credit is outstanding or either
Commitment remains outstanding hereunder, Borrower
will not, without the prior written consent of Lender:
Section 5.1. Liens, Etc. Create, assume or suffer to
exist, or permit any Material Subsidiary to create,
assume or suffer to exist, any Lien upon any of its
property or assets, whether personal or real, tangible
or intangible, and whether now owned or hereafter
acquired, except:
(a) Liens created in favor of Lender pursuant to
the Deed and pursuant to any Security Agreement
or pledge agreement executed pursuant to Section
4.11 hereof ;
(b) Liens existing on the date hereof as set
forth on Schedule 5.1 attached hereto (other
than Liens permitted pursuant to subsection
(a) and subsections (c) through (l));
(c) A Lien on the real property and improvements
owned by LXE Inc. located at 125 Technology Park,
Atlanta, Georgia; provided, that the Indebtedness
secured thereby does not exceed $10,000,000 in
principal amount;
(d) purchase money Liens upon any personal
property constituting fixed assets acquired or
held by Borrower or any Material Subsidiary in
the ordinary course of business to secure the
purchase price of such fixed assets or to secure
Indebtedness incurred solely for the purpose of
financing the acquisition of such fixed assets,
provided that such Lien does not extend to any
other assets or property of Borrower or such
Material Subsidiary;
(e) Liens existing on any property or assets
held by Borrower or any Material Subsidiary
in the ordinary course of business at the time
of its acquisition (other than any such Lien
created in contemplation of such acquisition);
(f) Liens existing on any property or assets
of any Person acquired by Borrower or any Material
Subsidiary at the time of acquisition of such
Person (other than any such Lien created in
contemplation of such acquisition);
(g) Liens securing the Indebtedness of any Material
Subsidiary to Borrower or of any Material Subsidiary
to any other Subsidiary;
(h) Liens for taxes or assessments or other
governmental charges or levies not yet due or
which are being actively contested in good faith
by appropriate proceedings if adequate reserves
with respect thereto are maintained on the books
of Borrower or any Material Subsidiary in accordance
with GAAP;
(i) statutory Liens of landlords and Liens of
carriers, warehousemen, mechanics, materialmen and
other Liens imposed by law created in the ordinary
course of business for amounts not yet due or which
are being contested in good faith by appropriate
proceedings and with respect to which adequate
reserves are being maintained on the books of
Borrower or any Material Subsidiary in accordance
with GAAP;
(j) Liens (other than any Lien imposed by ERISA)
incurred or deposits made in the ordinary course
of business in connection with workmen's compensation,
unemployment insurance and other types of social
security, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids,
leases, government contracts, performance and return-
of-money bonds and other similar obligations (other
than obligations for the payment of borrowed money);
(k) easements, rights-of-way, restrictions and other
similar charges or encumbrances not interfering with
the ordinary conduct of the business of Borrower or
any of its Material Subsidiaries or any of their
respective properties;
(l) Liens on any common stock of Borrower purchased
and held by Borrower as "treasury stock"; and
(m) extensions, renewals or replacements of any
Lien referred to in clauses (a) through (l) of
this Section 5.1; provided, that the principal
amount of the Indebtedness or obligation secured
thereby is not increased (other than the Indebtedness
from the Borrower to LXE Inc. secured by the real
property and improvements listed on Schedule 5.1
which may be increased in any refinancing thereof)
and that any such extension, renewal or replacement
is limited to the property or assets originally
encumbered by the Lien.
Section 5.2. Consolidations and Mergers. Merge or
consolidate with or into any Person or sell all or
substantially all of its assets, and will not permit
any Material Subsidiary to merge or consolidate with
or into any Person or sell all or substantially all
of its assets, except (a) a merger in which Borrower
is the surviving corporation, (b) a merger of any
Material Subsidiary with any other Person (provided
that in a merger involving one or more Subsidiary
Guarantors, a Subsidiary Guarantor shall be the
surviving corporation) and (c) in all cases, so long
as, both immediately prior to and after giving effect
to such merger, no Default or Event of Default exists.
Section 5.3. Limitations on Investments. Make, and
will not permit any Subsidiary to make, any Investments,
except Investments (i) in a Subsidiary Guarantor,
(ii) in any other Person; provided, that (A) such
Person's businesses, operations and/or markets are
functionally related to the businesses, expertise,
operations and/or markets of Borrower and its Material
Subsidiaries taken as a whole existing on the date
hereof) and (B) such Investment is made only with
capital stock of Borrower or if such Investment is
made in cash, such Investment and all other Investments
under this clause (ii) made with cash do not exceed in
the aggregate 15% of Consolidated Net Worth; (iii)
in direct obligations of the United States of America
or any agency thereof maturing within one year; (iv)
in fully insured certificates of deposit with maturities
of one year or less from the date of acquisition issued
by any commercial bank operating in the United States of
America having capital and surplus in excess of
$100,000,000 and whose credit rating is reasonably
acceptable to Lender; and (v) commercial paper of a
domestic issuer if at the time of purchase such paper
is rated in one of the two highest rating categories
of Standard and Poor's Corporation or Moody's Investors
Service, Inc..
Section 5.4. Sale of Assets. Sell, transfer, lease
or otherwise dispose, and will not permit any Material
Subsidiary to sell, transfer, lease or otherwise dispose,
of any assets, except (i) inventory in the ordinary
course of business, (ii) assets which have been
determined to be obsolete by the board of directors
or the senior management of Borrower or such Material
Subsidiary and (iii) assets (other than the assets
subject to the Deed) with a book value not in excess
of 10% of Consolidated Total Assets in the aggregate.
Section 5.5. Indebtedness. Create, incur or permit
to exist, and will not permit any Material Subsidiary
to create, incur or permit to exist, any Indebtedness,
except (i) Indebtedness to Lender, (ii) Indebtedness of
LXE in a principal amount not in excess of $10,000,000
in the aggregate secured by the Lien referenced in
Section 5.1(c) hereof and any guaranty of Borrower
issued in connection therewith, and (iii) other
Indebtedness of the Borrower and any Material Subsidiary
not to exceed at any time in the aggregate $7,500,000.
Section 5.6. Compliance with ERISA. Take or fail to
take, or permit any ERISA Affiliate to take or fail to
take, any action with respect to a Plan, including but
not limited to (a) establishing any Plan, (b) amending
any Plan, (c) terminating or withdrawing from any Plan,
or (d) incurring an amount of unfunded benefit liabilities,
as defined in Section 4001(a)(18) of ERISA, or any
withdrawal liability under Title IV of ERISA, where
such action or failure would have a Material Adverse
Effect.
Section 5.7. Affiliate Transactions. At any time
engage in, and will not permit any Material Subsidiary
at any time to engage in, any transaction with an Affiliate
of Borrower or of any Material Subsidiary (excluding any
transaction between or among Borrower and/or its Material
Subsidiaries or between Borrower and its Material
Subsidiaries and their directors and officers in the
nature of compensation for their services as such),
unless such transaction is approved unanimously by
those members of the board of directors of Borrower or
such Material Subsidiary (or a committee of such members)
who have no material interest (whether through ownership
of stock, employment or otherwise) in such Affiliate,
such approval to occur not later than the next meeting
of such members or committee at which transactions of
such type are scheduled for review and consideration in
the ordinary course of discharge by Borrower's board of
directors of its responsibilities, but not less frequently
than annually.
ARTICLE VI
SPECIFIC FINANCIAL COVENANTSFINANCIAL COVENANTS
Borrower hereby covenants and agrees with Lender that,
during the term of this Agreement or for so long as the
Revolving Credit Notes remain unpaid or the Commitments
remain outstanding, it will:
Section 6.1. Consolidated Net Worth. Have on the Closing
Date Consolidated Net Worth of not less than $95,000,000 to
which shall be added at the end of each fiscal year
thereafter an amount equal to fifty percent (50%) of
positive Consolidated Net Income for such fiscal year,
commencing with the fiscal year ending December 31, 1998;
provided, that in no event shall the Consolidated Net Worth
required pursuant to this Section 6.1 be less than that
required on any previous date of determination. This
amount shall be calculated on an annual basis and shall
be tested at the end of each fiscal quarter of Borrower.
Section 6.2. Leverage. Maintain at the end of any
fiscal quarter of Borrower Consolidated Funded Debt
of less than 45% of Consolidated Capitalization.
Section 6.3. Interest Coverage. Have at the end of
each fiscal quarter Consolidated EBIT for any four of
the immediately preceding six fiscal quarters (which
have been identified by Borrower to Lender in its
officer's certificate delivered pursuant to Section
4.9 hereof) of greater than 2.0 times Consolidated
Interest Expense for such fiscal quarter and the
immediately preceding three fiscal quarters.
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.1. Events of Default. Any one or more
of the following shall constitute an Event of
Default hereunder:
(a) Borrower shall fail to pay when due any payment
of (i) principal due on the Revolving Credit Notes or
the Line of Credit Note, (ii) the face amount of any
Letter of Credit when due or (iii) interest due on the
Revolving Credit Notes or the Line of Credit Note or
any other amount due hereunder or under any other Loan
Document and such failure continues for more than five
(5) calendar days; or
(b) Any representation or warranty contained herein
or deemed to have been made hereunder or made by or
furnished on behalf of Borrower or any Material
Subsidiary in connection herewith or in any other
Loan Document shall be false or misleading in any
material respect as of the date made or deemed to
have been made; or
(c) Borrower shall fail to perform or observe
(i) any covenant or agreement contained in Article V
or Article VI of this Agreement, or (ii) any other
covenant or agreement contained in this Agreement
(other than the payment of the Revolving Credit Notes)
or in any other Loan Document, within thirty (30) days
from receipt of written notice from Lender; or
(d) Borrower, any Subsidiary Guarantor or any other
Material Subsidiary whose Indebtedness has been guaranteed
by Borrower or any Subsidiary Guarantor (i) shall default
in any payment of any amount on any Indebtedness (other
than the Indebtedness evidenced by the Revolving Notes,
the Line of Credit Note or the Subsidiary Guaranty)
which individually or in the aggregate exceeds $1,000,000
beyond any period of grace provided with respect thereto,
or (ii) shall fail to perform or observe any other
agreement, term or condition contained in any agreement
under which any such Indebtedness is created (or if any
other event shall occur and be continuing thereunder)
and the effect of such failure or other event is to
cause or to permit the holder or holders of such
Indebtedness (or a trustee on behalf of such holder
or holders) to cause such Indebtedness to become due
prior to any stated maturity;
(e) Borrower, any Subsidiary Guarantor or any other
Material Subsidiary whose Indebtedness has been
guaranteed by Borrower or any Subsidiary Guarantor
shall fail to pay its debts generally as they become
due or shall admit in writing its inability to pay
its debts generally; or
(f) Borrower, any Subsidiary Guarantor or any other
Material Subsidiary whose Indebtedness has been guaranteed
by Borrower or any Subsidiary Guarantor shall make or
take any action to make an assignment for the benefit
of creditors, petition or take any action to petition
any tribunal for the appointment of a custodian,
receiver or any trustee for it or a substantial part
of its assets, or shall commence or take any action
to commence any proceeding under any bankruptcy,
reorganization, arrangement, readjustment of debt,
dissolution, liquidation or debtor relief law or
statute of any jurisdiction, whether now or hereafter
in effect including, without limitation, the
Bankruptcy Code; or, if there shall have been filed
any such petition or application, or any such
proceeding shall have been commenced against it,
in which an order for relief is entered or which
remains unstayed and in effect for more than sixty
(60) days; or Borrower, any Subsidiary Guarantor
or any other Material Subsidiary whose Indebtedness
has been guaranteed by Borrower or any Subsidiary
Guarantor by any act or omission shall indicate its
consent to, approval of or acquiescence in any such
petition, application or proceeding or order for
relief or the appointment of a custodian, receiver
or any trustee for it or any substantial part of any
of its properties, or shall suffer to exist any such
custodianship, receivership or trusteeship; or any
corporate action is taken by Borrower or any Material
Subsidiary for the purpose of effecting any of the
foregoing; or
(g) Borrower, any Subsidiary Guarantor or any other
Material Subsidiary whose Indebtedness has been guaranteed
by Borrower or any Subsidiary Guarantor shall have
concealed, removed, or permitted to be concealed or
removed, any part of its property, with intent to
hinder, delay or defraud its creditors or any of them,
or made or suffered a transfer of any of its property
which may be fraudulent under any bankruptcy, fraudulent
conveyance or similar law; or shall have made any transfer
of its property to or for the benefit of a creditor at a
time when other creditors similarly situated have not
been paid; or shall have suffered or permitted, while
insolvent, any creditor to obtain a Lien upon any of
its property through legal proceedings or distraint
which is not vacated within thirty (30) days from the
date thereof; or
(h) Any order, judgment or decree is entered in any
proceeding against Borrower, any Subsidiary Guarantor
or any other Material Subsidiary whose Indebtedness
has been guaranteed by Borrower or any Subsidiary
Guarantor decreeing a split-up of Borrower, such
Subsidiary Guarantor or any such Material Subsidiary
and such order, judgment or decree remains unstayed
and in effect for more than thirty (30) days; or
(i) A judgment or order for the payment of money in
an amount in excess of $1,000,000 and which otherwise
would have a Material Adverse Effect shall have been
rendered against the Borrower, any Subsidiary Guarantor
or any other Material Subsidiary whose Indebtedness has
been guaranteed by Borrower or any Subsidiary Guarantor
and either (i) enforcement proceedings shall have been
commenced by any creditor upon such judgment or order
or (ii) there shall be any period of thirty (30)
consecutive days during which a stay of enforcement
of such judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect; or
(j) Any Subsidiary Guaranty, at any time after its
execution and delivery, for any reason shall cease
to be in full force and effect or shall be declared
null and void, or the validity or enforceability
thereof shall be contested by any Subsidiary Guarantor,
or any Subsidiary Guarantor shall deny that it has any
further liability or obligation, or shall fail to perform
its obligations, under the Subsidiary Guaranty (except
in each case where the Subsidiary Guarantor party to
such Subsidiary Guaranty is permitted to be merged into
another Person without being the surviving corporation
pursuant to Section 5.2 hereof) ; or
(k) Any Person or group of Persons (within the meaning
of Section 13 or 14 of the Securities Exchange Act of
1934, as amended) which does not own voting stock of
Borrower on the Closing Date shall have acquired
beneficial ownership (within the meaning of Rule 13d-3
promulgated by the Securities and Exchange Commission
under said Act) of 35% or more of the outstanding shares
of such voting stock; or Persons who are directors of
Borrower on the Closing Date (or who have been nominated
for election by a board of directors of which a majority
of the members are such current directors or were so
nominated) shall at any time cease to constitute a
majority of the board of directors of Borrower.
Section 7.2. Remedies on Default. (a) Upon the
occurrence and during the continuance of an Event
of Default (other than as specified in Section 6.1(f)),
Lender may (i) terminate all obligations of Lender to
Borrower including, without limitation, all obligations
to make Advances or issue Letters of Credit under the
Commitments or any other obligations or commitments to
Borrower, (ii) declare the Revolving Credit Notes,
including, without limitation, principal, accrued
interest and costs of collection (including, without
limitation, reasonable attorneys' fees if collected
by or through an attorney or in bankruptcy or in other
judicial proceedings) and all outstanding Letters of
Credit immediately due and payable, without presentment,
demand, protest or any other notice of any kind, all
of which are expressly waived.
(b) Upon the occurrence of an Event of Default under
Section 6.1(f), (i) all obligations to make Advances
and to issue Letters of Credit under the Commitments
shall terminate automatically and (ii) the Revolving
Credit Notes, including without limitation principal,
accrued interest and costs of collection (including
without limitation reasonable attorneys' fees incurred
if collected by or through an attorney at law or in
bankruptcy, receivership or other judicial proceedings)
and all outstanding Letters of Credit shall be
immediately due and payable, without presentment,
demand, protest or any other notice of any kind,
all of which are expressly waived.
(c) Upon the occurrence of an Event of Default and
acceleration of the Revolving Credit Notes and
outstanding Letters of Credit as provided in
subsection (a) or (b) above, Lender may pursue
any remedy available to it under this Agreement,
the Revolving Credit Notes, any LC Application or
any other Loan Document, or available at law or in
equity, all of which shall be cumulative.
ARTICLE VIII
DEFINITIONS
Section 8.1. Definitions. The following terms used
herein and in any other Loan Documents shall have
the meanings specified herein (such meanings to be
equally applicable to both the singular and the
plural forms of the terms defined):
"Accounts" shall have the meaning given to such
term in UCC 9-106.
"Advance" shall mean any advance of funds by Lender
to Borrower under this Agreement, which shall be
either a Base Rate Advance or a LIBOR Advance.
"Affiliate" shall mean, with respect to any Person
(the "Specified Person"), a Person other than the
Specified Person directly or indirectly controlling
or controlled by, or under direct or indirect common
control with, the Specified Person, other than a
Subsidiary of the Specified Person. For purposes
of this definition, the term "control", when used
with respect to any Specified Person, means the
possession, directly or indirectly, of the power
to direct or cause the direction of management and
policies of the Specified Person, whether through
the ownership of voting securities, by contract or
otherwise.
"Agreement" shall mean the Second Amended and
Restated Loan Agreement dated as of November 9, 1998,
either as originally executed or as it may be from
time to time supplemented, amended, amended and
restated, renewed, extended or otherwise modified.
"Applicable Margin" shall mean, with respect to a
LIBOR Advance or a Base Advance, the percentage
per annum determined by reference to the ratio of
Consolidated Funded Debt to Consolidated EBITDA
in effect at such time, as set forth below:
Consolidated Funded
Debt/Consolidated EBITDA LIBOR Base
Ratio Advances Rate Advances
.5 to 1.0 2.00% 0.00%
1.0 to 1.0
2.5 to 1.0 1.50% 0.50%
1.0 to 1.0 1.00% -0.75%
Lender shall determine the Applicable Margin on a quarterly
basis by calculating the ratio of Consolidated Funded Debt
to Consolidated EBITDA promptly after receipt of the
financial statements required to be delivered by Borrower
pursuant to Section 4.8 (a) or (b) hereof, as applicable.
Any adjustment to the Applicable Margin shall be effective
as of the first day (the "Adjustment Date") of the fiscal
quarter immediately following the fiscal quarter during
which the quarterly (or annual) financial statements are
required to be delivered to Lender; provided, that for the
purpose of determining the effective date of any change in
the Applicable Margin and notwithstanding the provisions
of Section 4.8 (a) hereof, the annual financial statements
shall be deemed to be delivered on the last day of the
fiscal quarter immediately following any fiscal year-end.
Notwithstanding the foregoing, for the period from the
Closing Date to November 30, 1998, the Applicable Margin
for LIBOR Advances shall equal 1% p. a. and the Applicable
Margin for Base Rate Advances shall equal -0.75% p. a..
Thereafter, the Applicable Margin shall be adjusted from
time to time as set forth herein. If at any time Borrower
fails to deliver the financial statements required to be
delivered hereunder, the Applicable Margin in the Adjustment
Date shall become 2.00% for LIBOR Advances and 0.00% for Base
Rate Advances until the date on which Borrower delivers such
financial statements and the calculation required to determine
the Applicable Margin.
"Bankruptcy Code" shall mean the Bankruptcy Code of 1978,
as amended.
"Base Rate" shall mean the higher of (i) the Prime Rate
and (ii) the Federal Funds Rate plus 0.50% per annum.
"Business Day" shall mean, with respect to any LIBOR
Advance, any day other than a Saturday, Sunday or a day
on which commercial banks are required or authorized to
close for domestic or international business, including
dealings in U.S. dollar deposits, in Atlanta, Georgia or
London, England and with respect to all other matters,
any day other than a Saturday, Sunday or a day on which
commercial banks are required or authorized to close in
Atlanta, Georgia.
"CAL" shall mean CAL Corporation, a Canadian corporation,
and its successors.
"CAL Guaranty" shall mean the guaranty agreement dated the
date hereof duly executed by CAL and substantially in the
form of Exhibit B attached hereto, as originally executed
and as it may be, from time to time, supplemented, amended,
amended and restated, renewed, extended or otherwise modified.
"Closing Date" shall mean the date that all of the
conditions precedent set forth in Article II have been
satisfied.
"Collateral" shall mean, with respect to Borrower and
all Domestic Subsidiary Guarantors, all Accounts and
all Inventory, now or hereafter created or owned, and
all Proceeds of the foregoing, a Lien in which has been
granted to Lender pursuant to Section 4.12 hereof,
and any capital stock pledged to Lender pursuant to
Section 4.11(b) hereof.
"Commitments" shall have the meaning set forth in
Section 1.1 hereof.
"Commitment Fee" shall have the meaning set forth in
Section 1.9 hereof.
"Commitment Termination Date" shall have the meaning
set forth in Section 1.1 hereof.
"Consolidated Capitalization" shall mean, for the
Borrower and its Subsidiaries as of any date of determination,
the sum of (i) Consolidated Funded Debt and (ii) Consolidated
Net Worth.
"Consolidated EBIT" shall mean for any period an amount
equal to the sum of (a) Consolidated Net Income plus (b)
to the extent deducted in determining Consolidated Net
Income, (i) Consolidated Tax Expense and (ii) Consolidated Interest Expense.
"Consolidated EBITDA" shall mean for any fiscal quarter an
amount equal to the sum for such fiscal quarter and the
immediately preceding three fiscal quarters of (a) Consolidated
Net Income, plus (b) to the extent deducted in determining Consolidated
Net Income, (i) Consolidated Tax Expense, (ii) Consolidated Interest
Expense and (iii) depreciation, amortization and other non-cash charges
determined on a consolidated basis in accordance with GAAP.
"Consolidated Funded Debt" shall mean for any fiscal quarter the
Funded Debt of the Borrower and its Subsidiaries on the last day
of such fiscal quarter determined on a consolidated basis in
accordance with GAAP.
"Consolidated Interest Expense" shall mean for any period all
interest expense (including all amortization of debt discount
and expenses and reported interest) on all Indebtedness of the
Borrower and its Subsidiaries determined on a consolidated basis
in accordance with GAAP.
"Consolidated Net Income" shall mean for any period the net income
(or loss), after deducting all operating expenses, provisions for
taxes and reserves (including reserves for deferred income taxes)
and all other proper deductions, of the Borrower and its Subsidiaries
determined on a consolidated basis in accordance with GAAP, excluding
(i) extraordinary items, (ii) any equity interest of the Borrower in
the unremitted earnings of any corporation not a Subsidiary and (iii)
the income (or loss) of any Person becomes a Subsidiary or is merged
with the Borrower or any of its subsidiaries or such Person's Assets
by the Borrower or any of its Subsidiaries.
"Consolidated Net Worth" shall mean for any period the sum of
capital stock (including any preferred stock but excluding
treasury stock and capital stock subscribed but unissued) and
surplus (including earned surplus, capital surplus and the balance
of the current profit and loss account not transferred to surplus)
accounts of the Borrower and its Subsidiaries determined on a consolidated
basis in accordance with GAAP.
"Consolidated Tax Expense" shall mean for any period the income tax
expense deducted in calculating Consolidated Net Income of the Borrower
and its Subsidiaries determined on a consolidated basis in accordance
with GAAP.
"Deed" shall mean the Deed to Secure Debt and Security Agreement
dated as of December 17, 1986, by Borrower in favor of Lender, as
amended by the First Amendment to Deed to Secure Debt and Security
Agreement dated as of December 15, 1995 and by the Second Amendment
to Deed to Secure Debt and Security Agreement dated as of the date
hereof, either as originally executed or as it may be from time to
time supplemented, amended, amended and restated, renewed, extended
or otherwise modified.
"Default" shall mean any event that, with notice or lapse of time or
both, would constitute an Event of Default.
"Default Rate" shall have the meaning set forth in Section 1.16 hereof.
"Domestic Subsidiary Guarantors" shall mean LXE Inc., a Georgia
corporation, and EMS Technologies, Inc., a Georgia corporation,
and their successors, and each other Material Subsidiary which is
added as a Domestic Subsidiary Guarantor in accordance with
Section 4.11(b) hereof.
"Domestic Subsidiary Guaranty" shall mean the Domestic Subsidiary
Guaranty dated as of the date hereof substantially in the form of
Exhibit B attached hereto, and each duly executed supplement to the
Domestic Subsidiary Guaranty in the form of Exhibit C attached hereto,
either as originally executed or as it may be from time to time
supplemented, amended, amended and restated, renewed, extended or
otherwise modified.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations promulgated and the
rulings issued thereunder.
"ERISA Affiliate" shall mean, as of any date, any trade or business
(whether or not incorporated) which together with Borrower is treated
as a single employer under Section 414(b), (c), (m), or (o) of the Code.
"Facility A Commitment" shall have the meaning set forth in Section 1.1
hereof.
"Facility B Commitment shall have the meaning set forth in Section 1.1 hereof.
"Facility A Revolving Credit Note" shall have the meaning set forth in
Section 1.1 hereof.
"Facility B Revolving Credit Note" shall have the meaning set forth in
Section 1.1 hereof.
Federal Funds Rate shall mean, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100 of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members
of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business
Day next succeeding such day, provided that (i) if such day is not a
Business Day, the Federal Funds Rate for such day shall be such rate on
such transactions on the next preceding Business Day as so published on
the next succeeding Business Day, and (ii) if no such rate is so published
on such next succeeding Business Day, the Federal Funds Rate for such day
shall be the average rate quoted to Lender on such day on such transactions.
"Funded Debt" shall mean, with respect to any Person, all Indebtedness of
such Person of the types listed in clauses (i), (ii), and (iv) of the
definition of Indebtedness.
"GAAP" shall mean Generally Accepted Accounting Principles consistently
applied and maintained throughout the period indicated and consistent with
the prior financial practice of Borrower and any predecessor, as reflected
in the financial stously furnished to Lender pursuant to Section 3.10 hereof
and the financial statements to be provided to Lender pursuant to Section
4.8 hereof; provided, that if Borrower notifies Lender that the Borrower
wishes to amend any of the covenants set forth in Article VI hereof
to eliminate the effect of any change in GAAP mandated by the Financial
Accounting Standards Board or similar accounting authority of comparable
standing or shall be recommended by Borrower's independent public
accountants on the operation of such covenant(s), then Borrower's
compliance with such covenant(s) shall be determined on the basis of
GAAP in effect immediately before the relevant change in GAAP became
effective, until such covenant(s) are amended in a manner satisfactory
to Borrower and Lender.
"Indebtedness" shall mean, with respect to any Person as of any date of
determination and without duplication, (i) all obligations for money
borrowed (whether on a senior or subordinated basis) or evidenced by
bonds, debentures, notes or other similar instruments of such Person;
(ii) all obligations of such Person for the deferred purchase price of
property or services other than trade payables incurred in the ordinary
course of business and not overdue by more than ninety (90) days; (iii)
all obligations of such Person created or arising under any conditional
sale or other title retention agreement with respect to property acquired
by such Person (even though the rights and remedies of the seller or lender
days; (iii)
notes or other similar instruments of such Person;
(ii) all obligations of such Person for the deferred purchase price of
property or services other than trade payables incurred in the ordinary
course of business and not overdue by more than ninety (90) days; (iii)
all obligations of such Person created or arising under any conditional
sale or other title retention agreement with respect to property acquired
by such Person (even though the rights and remedies of the seller or lender
days; (iii)
all obligations of such Person created or arising under any conditional
sale or other title retention agreement with respect to property acquired
by such Person (even though the rights and remedies of the seller or lender
under such agreement in the event of a default are limited to repossession
or sale of such property); (iv) all capital lease obligations of such Person;
(v) all obligations of such Person to purchase, redeem, retire, defease or
otherwise make any payment in respect of any capital stock of or other
ownership or profit interest in such Person to purchase, redeem, retire,
defease or otherwise make any payment in respect of any capital stock of
or other ownership or profit interest in such Person or any warrants,
rights or options to acquire such capital stock (other than
obligations under employee option and restricted stock programs
maintained by such Person in the ordinary course of business);
(vi) all obligations of other Persons (other than a Subsidiary
of such Person) which such Person has guaranteed, directly or
indirectly, contingent or otherwise (including by the issuance
of a letter of credit or similar instrument for the account of
such Person) and the obligation of such Person to purchase or
otherwise acquire, or otherwise insure any creditor
against loss in respect of, indebtedness referred to in clauses
(i) through (v) above of any other Person, or with respect to all
obligations of such Person consisting of recourse liability with
respect to accounts receivable sold or otherwise disposed of by
such Person; (vii) Indebtedness of others secured by any Lien upon
Property owned by such Person, whether or not assumed; (viii) all
obligations of such Person under letters of credit on which it is
the account party; (ix) all obligations of such Persons under
"synthetic leases" or similar types of transactions;
and (ii) all obligations of such Person under Interest Rate Risk Agreements.
"Interest Period" shall mean, with respect to any LIBOR Advance, a period
of 1, 2, 3 or 6 months, as Borrower may elect as provided in this Agreement;
provided, that (i) the first day of an Interest Period must be a Business Day,
(ii) any Interest Period that would otherwise end on a day that is not a
Business Day shall be extended to the next succeeding Business Day, unless
such Business Day falls in the next calendar month, in which case the
Interest Period shall end on the next preceding Business Day, (iii) any
Interest Period which begins on the last Business Day of a calendar month
(or on a day for which there is no numerically corresponding day in the
calendar month at the end of an Interest Period) shall end on the last
Business Day of a calendar month, and (iv) no Interest Period shall extend
beyond the Commitment Termination Date.
"Interest Rate Risk Agreement" shall mean an interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or similar
arrangement entered into by the Borrower with the Lender for the purpose
of reducing its exposure to interest rate fluctuations and not for
speculative purposes, as it may be, from time to time, amended, modified,
restated or supplemented
"Inventory" shall have the meaning given to such term in UCC Subsection
9-109(4).
"Investment" shall me rate so determined in accordance herewith shall be
rounded upwards to the nearest multiple of 1/100th of 1% "Page 3750" shall
mean the display designated as "Page 3750" on the Dow Jones Markets (or such
other page as may replace Page 3750 on that service or another service as may
be nominated by the British Bankers' Association as the information vendor
for the purpose of displaying British Bankers' Association Interest
Settlement Rate for U. S. dollars).
"Letter of Credit" shall mean any standby letter of
credit issued by Lender for the account of Borrower under the LC Commitment
pursuant to an LC Application, and any extension, renewal or amendment of
the same.
"LIBOR" shall mean, with respect to any Interest Period for any LIBOR
Advance, the rate per annum equal to the quotient of (i) the offered
rate for deposits in U. S. dollars of amounts equal or comparable to
the principal amount of such LIBOR Advance offered for a term comparable
to such Interest Period, which rate appears on Page 3750 as of 11:00 A.M.
(London, England) time, two (2) Business Days prior to the first day of
such Interest Period; provided, that if no such offered rates appear on
such page, the rate used for such Interest Period will be the arithmetic
average (rounded upward, if necessary, to the next higher 1/16th of 1%)
of rates offered to Lender by not less than two major banks in London,
England at approximately 10:00 A.M. (Atlanta, Georgia time), two (2)
Business Days prior to the first day of such Interest Period for deposits
in U.S. dollars in the London interbank market for a period comparable to
such Interest Period in an amount comparable to the principal amount of such
advance, divided by a number equal to 1.00 minus the Reserve Percentage.
The rate so determined in accordance herewith shall be rounded upwards to
the nearest multiple of 1/100th of 1% "Page 3750" shall mean the display
designated as "Page 3750" on the Dow Jones Markets (or such other page as
may replace Page 3750 on that service or another service as may be nominated
by the British Bankers' Association as the information vendor for the
purpose of displaying British Bankers' Association Interest Settlement
Rate for U. S. dollars).
"LIBOR Advance" shall mean any Advance hereunder which bears interest
based on LIBOR.
"Material Subsidiary" shall mean at any time any Subsidiary of Borrower
having, together with its Subsidiaries, consolidated assets in excess of
10% of the total assets of Borrower and its Subsidiaries, determined on a
consolidated basis as of such time.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
section 4001(a)(3) of ERISA.
"Notice of Borrowing" shall have the meaning set forth in Section 1.4 hereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any
successor thereto.
"Person" shall mean and shall include an individual, a partnership,
a joint venture, a corporation, a limited liability company, a trust,
an unincorporated association, a government or any department or agency
thereof and any other entity whatsoever.
"Plan" shall mean any "employee benefit plan" as defined in
Section 3(3) of ERISA maintained by or on behalf of Borrower
or any ERISA Affiliate, including, but not limited to, any
defined benefit pension plan, profit sharing plan, money purchase
pension plan, savings or thrift plan, stock bonus plan, employee
stock ownership plan, Multiemployer Plan, or any plan, fund, program,
arrangement or practice providing for medical (including post-retirement
medical), hospitalization, accident, sickness, disability, or life
insurance benefits.
"Prime Rate" shall mean the per annum rate of interest designated
from time to time by Lender to be its prime rate, with any change
in the rate of interest resulting from a change in the Prime Rate
to be effective as of the opening of business of Lender on the day
of such change. The Prime Rate is a reference rate and does not
necessarily represent the lowest or best rate actually charged to
any customer. Lender may make commercial loans or any other loan
at rates of interest at, above or below the Prime Rate.
"Proceeds" shall have the meaning given to such term in UCC 9-306(1).
"Premises" shall have the meaning ascribed to it in the Deed.
"Reserve Percentage" shall mean, for any day, the stated maximum rate
(expressed as a decimal) of all reserves required to be maintained with
respect to liabilities or assets consisting of or including "eurocurrency
liabilities", as prescribed by Regulation D of the Board of Governors of
the Federal Reserve System (or by any other governmental body having
jurisdiction with respect thereto), including without limitation any
basic, marginal, emergency, supplemental, special, transitional or other
reserves, the rate so determined to be roundedd upward to the nearest
whole multiple of 1/100 of 1%.
"Revolving Credit Notes" shall have the meaning set forth in Section 1.1
hereof.
"Solvent" shall mean, as to any Person, such Person (i) owns real and
personal property and assets whose fair saleable value is greater than
the amount required to pay all of such Person's liabilities (including
contingent liabilities), (ii) is able to pay all of its liabilities as
such liabilities mature and (iii) has capital sufficient to carry on its
business and transactions and all business and transactions in which it
is about to engage.
"Subsidiary" shall mean, with respect to Borrower, any Person of
which securities or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other Persons
performing similar functions are at the time directly or indirectly
owned by Borrower.
"Subsidiary Guarantors" shall mean the Domestic Subsidiary Guarantors
and CAL, and their successors.
"Subsidiary Guaranty" shall mean, together, the Domestic Subsidiary
Guaranty and the CAL Guaranty, either as originally executed or as it
may be from time to time supplemented, amended, amended and restated,
renewed, extended or otherwise modified.
"UCC" shall mean the "Uniform Commercial Code - Secured Transactions"
in effect in the State of Georgia.
Section 8.2. Use of Defined Terms; Accounting Terms; Interpretation.
All terms defined in this Agreement shall have the same defined meanings
when used in any other Loan Documents, unless the context shall require
otherwise. All accounting terms not specifically defined herein shall be
construed as having the respective meanings customary under GAAP. All
personal pronouns used in this Agreement, whether used in the masculine,
feminine or neuter gender, shall include all genders; the singular shall
include the plural, and the plural shall include the singular; "hereunder",
"hereof", "hereto" and words
of similar import shall be deemed references to this Agreement and not to
any particular Article, Section or other provision hereof; "or" is not
exclusive; and relative to any determination of any period of time,
"from" means "from and including", "to" means "to but not including"
and "through" means "through and including". All Exhibits and Schedules
attached hereto are by reference made a part hereof.
ARTICLE IX
MISCELLANEOUS
Section 9.1. No Waiver. No delay or failure on the part of Lender
or on the part of any holder of the Revolving Credit Note in the
exercise of any right, power or privilege granted under this Agreement,
under any other Loan Document, or available at law or in equity, shall
impair any such right, power or privilege or be construed as a waiver of
any Event of Default or any acquiescence therein. No single or partial
exercise of any such right, power or privilege shall preclude the further
exercise of such waiver shall be valid against Lender unless made in
writing and signed by Lender, and then only to the extent expressly
specified therein.
Section 9.2. Notices. All notices and communications provided for
hereunder shall be in writing (including telecopy or similar tele
transmission or writing), delivered by hand or sent by first-class,
registered or certified mail, postage prepaid, to the following addresses:
(1) If to Lender: SunTrust Bank, Atlanta
P.O. Box 4418/Mail Code 127
Atlanta, Georgia 30302
Attention: R. Michael Dunlap
Telephone: (404) 724-3890
Telecopier: (404) 588-8833
(2) If to Borrower: Electromagnetic Sciences, Inc.
660 Engineering Drive
Norcross, Georgia 30092
Attention: Chief Financial Officer
Telephone: (770) 263-9200
Telecopier: (770) 447-4397
Any such notices or other communications shall be effective
(i) if given by mail, upon the earlier of receipt or the
third Business Day after such notice or other communication
is deposited first class, postage prepaid, in the United
States mail, (ii) if given by telecopy, upon receipt during
regular business hours on a Business Day or if received at
any other time, on the next succeeding Business Day or
(iii) if given by any other means (including without
limitation by air courier) when delivered at the address
specified herein. Either Borrower or Lender, or both,
may change its address for notice purposes by notice to
the other party in the manner provided herein.
Section 9.3. Governing Law. THIS AGREEMENT AND ALL
OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY AND INTERPRETED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA UNLESS
THE INDIVIDUAL DOCUMENT SPECIFICALLY PROVIDES OTHERWISE.
Section 9.4. Survival of Representations and Warranties.
All representations and warranties contained herein or
made by or furnished on behalf of Borrower in connection
herewith shall survive the execution and delivery of this
Agreement and all other Loan Documents.
Section 9.5. Descriptive Headings. The descriptive
headings of the several sections of this Agreement are
inserted for convenience only and do not constitute a
part of this Agreement.
Section 9.6. Severability. If any part of any provision
contained in this Agreement or in any other Loan Document
shall be invalid or unenforceable under applicab le law,
said part shall be ineffective to the extent of such
invalidity only, without in any way affecting the
remaining parts of said provision or the remaining
provisions.
Section 9.7. Time is of the Essence. Time is of the
essence in interpreting and performing this Agreement
and all other Loan Documents.
Section 9.8. Counterparts. This Agreement may be
executed in any number of counterparts, each of which
shall be deemed to be an original and all of which,
taken together, shall constitute one and the same
instrument.
Section 9.9. Successors and Assigns. This Agreement
shall bind and inure to the benefit of Borrower and
Lender, and their respective successors and assigns;
provided, however, Borrower shall have no right to
assign its rights or obligations hereunder to any
Person. Notwithstanding anything in this Agreement
to the contrary, Lender shall have the right, but
shall not be obligated, to sell participations in,
or assign its rights, title and interest in, any
Advances, the Commitment or the Revolving Credit
Note to other banks, financial institutions and
investors.
Section 9.10. Amendments; No Implied Waiver. This
Agreement may be amended or modified, and Borrower
may take any action herein prohibited, or omit to
perform any act herein required to be performed by
it, only if Borrower shall obtain the prior written
consent of Lender to such amendment, modification,
action or omission to act, and no course of dealing
between Borrower and Lender shall operate as a waiver
of any right, power or privilege granted under this
Agreement, under any other Loan Document, or available
at law or in equity.
Section 9.11. Rights Cumulative. All rights, powers
and privileges granted hereunder shall be cumulative
to and shall not be exclusive of any other rights,
powers and privileges granted by any other Loan
Document or available at law or in equity.
Section 9.12. Set-Off. Upon the occurrence and
during the continuation of an Event of Default,
Borrower authorizes Lender, without notice or demand,
to apply any indebtedness due or to become due to
Borrower from Lender in satisfaction of any of the
indebtedness, liabilities or obligations of Borrower
under this Agreement, under any other Loan Document
or under any other note, instrument, agreement, document
or writing of Borrower held by or executed in favor of
Lender including, without limitation, the right to
set-off against any deposits or other cash collateral
of Borrower held by Lender.
Section 9.13. Indemnity. Borrower agrees to protect,
indemnify, and save harmless Lender, and all directors,
officers, employees and agents of Lender, from and against
any and all (a) claims, demands and causes of action of
any nature whatsoever not resulting from the gross
negligence or willful misconduct of Lender or such
Person brought by any Person not a party to this
Agreement and arising from or related or incident
to this Agreement or any other Loan Document,
(b) costs and expenses incident to the defense of
such claims, demands and causes of action, including,
without limitation, attorneys' fees, and (c) liabilities,
judgments, settlements, penalties and assessments
arising from such claims, demands and causes of action.
The indemnity contained in this section shall survive
the termination of this Agreement.
Section 9.14. Usury. It is the intent of the parties
hereto not to violate any federal or state law, rule
or regulation pertaining either to usury or to the
contracting for or charging or collecting of interest,
and Borrower and Lender agree that, should any provision
of this Agreement or of the Revolving Credit Note, or any
act performed hereunder or thereunder, violate any such
law, rule or regulation, then the excess of interest
contracted for or charged or collected over the maximum
lawful rate of interest shall be applied to the
outstanding principal indebtedness due to Lender by
Borrower under this Agreement.
Section 9.15. Construction. Should any provision of
this Agreement require judicial interpretation, the
parties hereto agree that the court interpreting or
construing the same shall not apply a presumption that
the terms hereof shall be more strictly construed against
one party by reason of the rule of construction that a
document is to be more strictly construed against the
party who itself or through its agents prepared the
same, it being agreed that Borrower, Lender and their
respective agents have participated in the preparation
hereof.
Section 9.16. Holidays. In any case where the date
for any action required to be performed under this
Agreement or under any other Loan Document shall be,
in the city where the performance is to be made, a
Saturday, a Sunday, a legal holiday or a day on which
banking institutions are authorized by law to close,
then such performance may be made on the next succeeding
Business Day not a Saturday, a Sunday, a legal holiday
or a day on which banking institutions are authorized
by law to close.
Section 9.17. Entire Agreement. This Agreement and the
other Loan Documents executed and delivered contemporaneously
herewith, together with the exhibits and schedules attached
hereto and thereto, constitute the entire understanding of
the parties with respect to the subject matter hereof, and
any other prior or contemporaneous agreements, whether
written or oral, with respect thereto including, without
limitation, the loan commitment from Lender to Borrower,
are expressly superseded hereby. The execution of this
Agreement and the other Loan Documents by Borrower was
not based upon any facts or materials provided by Lender,
nor was Borrower induced to execute this Agreement or
any other Loan Document by any representation, statement
or analysis made by Lender.
Section 9.18. WAIVER OF JURY TRIAL. EACH OF BORROWER
AND LENDER HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING
OUT OF OR RELATING TO ANY LOAN DOCUMENT TO WHICH IT IS
A PARTY OR ANY INSTRUMENT OR DOCUMENT DELIVERED THEREUNDER
TO THE EXTENT PERMITTED BY APPLICABLE LAW.
Section 9.19. No Novation. The parties hereto have
entered into this Agreement and the other Loan Documents
solely to amend, restate and restructure the terms of,
and obligations owing under and in connection with, the
Original EMS Agreement. The parties do not intend this
Agreement or the other Loan Documents nor the transactions
contemplated hereby or thereby to be, and this Agreement
and the other Loan Documents and the transactions
contemplated hereby or thereby shall not be, construed
to be a novation of any of the obligations owing by
Borrower under or in connection with the Original EMS
Agreement or the Deed.
WITNESS the hand and seal of the parties hereto through
their duly authorized officers, as of the date first
above written, this 9th day of November, 1998.
ELECTROMAGNETIC SCIENCES, INC.
By
---------------------------
Name: Don T. Scartz
Title: Senior Vice President
& Chief Financial Officer
Attest
-----------------------
Name: William S. Jacobs
Title: Secretary
[CORPORATE SEAL]
SUNTRUST BANK, ATLANTA
By
------------------------
Name: R. Michael Dunlap
Title: First Vice President
By
-------------------------
Name: Jonathan H. James
Title: Banking Officer
Schedule 3.9(b)
Material Subsidiary
Name Jurisdiction of
Incorporation % Ownership
1. LXE Inc. Georgia 100%
2. EMS Technologies, Inc. Georgia 100%
3. CAL Corporation Canada 100%
Schedule 3.11
ERISA
1. Electromagnetic Sciences, Inc. Retirement Program
2. Electromagnetic Sciences, Inc. Retirement Income Plan
(terminated December 15, 1993)
Schedule 3.16
Franchises, Licenses, etc.
License Agreement between LXE Inc. and Symbol Technologies,
Inc., dated March 4, 1991, licensing LXE Inc. to use certain
patented bar-code scanning technology in handheld computer
terminals, requires royalty payments equal to 7% of the
net sales value to LXE of terminals using such technology.
Schedule 5.1
Outstanding Liens
1. Lien created under Deed to Secure Debt and Security
Agreement from LXE Inc. to Electromagnetic Sciences, Inc.,
dated December 31, 1991, recorded in Deed Book 7015, Page 1,
Gwinnett County, Georgia.
2. Lien on accounts and other personal property of CAL
Corporation, securing amounts owed from time to time under
the Credit Facility in maximum principal amount of
Can.$11,050,000 established June 19, 1998, with Canadian
Imperial Bank of Commerce.
EXHIBIT A-1
FACILITY A REVOLVING CREDIT NOTE
November [ ], 1998 $10,000,000.00
Atlanta, Georgia
FOR VALUE RECEIVED, the undersigned, ELECTROMAGNETIC SCIENCES,
INC., a corporation organized and existing under the laws of
the State of Georgia (the "Borrower"), promises to pay to the
order of SUNTRUST BANK, ATLANTA (the "Bank"), a Georgia
banking corporation, at its principal office at One Park
Place, Atlanta, Georgia 30303, or at such other place as
the holder hereof may designate, in immediately available
funds in lawful money of the United States of America, on
the Commitment Termination Date as set forth in that
certain Amended and Restated Loan Agreement dated of even
date herewith (the "Agreement") by and between the Borrower
and the Bank, the principal sum of TEN MILLION AND NO/100
DOLLARS ($10,000,000.00) or so much thereof as may be from
time to time disbursed hereunder in accordance with the
Agreement.
In addition to principal, the Borrower agrees to pay
interest on the principal amounts disbursed hereunder
from time to time from the date of each disbursement
until paid at such rates of interest per annum and upon
such dates as provided for in the Agreement. Interest
shall accrue on the outstanding principal balance from
the date hereof up to and through the date on which all
principal and interest hereunder is paid in full, and
shall be computed on the basis of the actual number of
days elapsed in a 360-day year. Such interest is to be
paid to the Bank at its main office in Atlanta, Georgia.
This Revolving Credit Note evidences the Advances made
under the Facility A Commitment pursuant to the terms
and conditions of the Agreement, to which reference is
hereby made for a full and complete description of such
terms and conditions. All capitalized terms used in this
Revolving Credit Note shall have the same meanings as set
forth in the Agreement.
The Borrower at its option at any time and from time
to time may prepay the Advances in whole or in part
without penalty or premium but with accrued interest
to the date of such prepayment on the principal amount
prepaid in accordance with the terms and conditions
governing prepayments in the Agreement.
Upon the occurrence and during the continuance of any
Event of Default (other than an Event of Default under
Article VI of the Agreement) by the Borrower under the
terms of this Revolving Credit Note or the Agreement,
the Bank may declare the entire unpaid principal balance
hereof, together with all accrued and unpaid interest,
immediately due and payable.
Upon the occurrence and during the continuance of any
Event of Default the Bank shall have a right of set-off
against any indebtedness due or to become due to the
Borrower from the Bank and the Bank may apply the same
against payment of this Revolving Credit Note or any
other indebtedness of the Borrower to the Bank. The
payment of any indebtedness evidenced by this Revolving
Credit Note shall not affect the enforceability of this
Revolving Credit Note as to any future, different or
other indebtedness evidenced hereby. In the event the
indebtedness evidenced by this Revolving Credit Note is
collected by legal action or through an attorney-at-law,
the Bank shall be entitled to recover from the Borrower
all costs of collection, including, without limitation,
reasonable attorneys' fees if collected by or through
an attorney-at-law. The Borrower acknowledges that the
actual crediting of the amount of any Advance under the
Agreement to an account of the Borrower shall, in the
absence of manifest error, constitute presumptive
evidence of such Advance, the rate of interest and that
such Advance was made and borrowed under the Agreement
applicable thereto. Such account records shall constitute,
in the absence of manifest error, presumptive evidence of
principal amounts outstanding of Advances, and the
payments made under the Agreement at any time and from
time to time, provided that the failure of the Bank to
record in such account the amount of any Advance shall
not affect the obligation of the undersigned to repay
such amount together with interest thereon in accordance
with this Revolving Credit Note and the Agreement.
Failure or forbearance of the Bank to exercise any
right hereunder, or otherwise granted by the Agreement
or by law, shall not affect or release the liability
of the Borrower hereunder, and shall not constitute a
waiver of such right unless so stated by the Bank in
writing. This Revolving Credit Note shall be deemed
to be made under, and shall be construed in accordance
with and governed by, the laws of the State of Georgia.
Time is of the essence of this Revolving Credit Note.
Presentment for payment, notice of dishonor and protest
are hereby waived.
Executed under hand and seal of the Borrower on the day
and year first above written.
ELECTROMAGNETIC SCIENCES, INC.
By
--------------------------
Name: Don T. Scartz
Title: Senior Vice President
& Chief Financial Officer
Attest
----------------------
Name: William S. Jacobs
Title: Secretary
[CORPORATE SEAL]
EXHIBIT A-2
FACILITY B REVOLVING CREDIT NOTE
November [ ], 1998 $20,000,000.00
Atlanta, Georgia
FOR VALUE RECEIVED, the undersigned, ELECTROMAGNETIC
SCIENCES, INC., a corporation organized and existing
under the laws of the State of Georgia (the "Borrower"),
promises to pay to the order of SUNTRUST BANK, ATLANTA
(the "Bank"), a Georgia banking corporation, at its
principal office at One Park Place, Atlanta, Georgia
30303, or at such other place as the holder hereof may
designate, in immediately available funds in lawful
money of the United States of America, on the Commitment
Termination Date as set forth in that certain Amended
and Restated Loan Agreement dated of even date herewith
(the "Agreement") by and between the Borrower and the
Bank, the principal sum of TWENTY MILLION AND NO/100
DOLLARS ($20,000,000.00) or so much thereof as may be
from time to time disbursed hereunder in accordance
with the Agreement.
In addition to principal, the Borrower agrees to pay
interest on the principal amounts disbursed hereunder
from time to time from the date of each disbursement
until paid at such rates of interest per annum and upon
such dates as provided for in the Agreement. Interest
shall accrue on the outstanding principal balance from
the date hereof up to and through the date on which all
principal and interest hereunder is paid in full, and
shall be computed on the basis of the actual number of
days elapsed in a 360-day year. Such interest is to be
paid to the Bank at its main office in Atlanta, Georgia.
This Revolving Credit Note evidences the Advances made
under the Facility B Commitment pursuant to the terms
and conditions of the Agreement, to which reference is
hereby made for a full and complete description of such
terms and conditions. All capitalized terms used in this
Revolving Credit Note shall have the same meanings as set
forth in the Agreement.
The Borrower at its option at any time and from time to
time may prepay the Advances in whole or in part without
penalty or premium but with accrued interest to the date
of such prepayment on the principal amount prepaid in
accordance with the terms and conditions governing prepayments
in the Agreement.
Upon the occurrence and during the continuance of any Event
of Default by the Borrower under the terms of this Revolving
Credit Note or the Agreement, the Bank may declare the
entire unpaid principal balance hereof, together with
all accrued and unpaid interest, immediately due and
payable.
Upon the occurrence and during the continuance of any
Event of Default the Bank shall have a right of set-off
against any indebtedness due or to become due to the
Borrower from the Bank and the Bank may apply the same
against payment of this Revolving Credit Note or any
other indebtedness of the Borrower to the Bank. The
payment of any indebtedness evidenced by this Revolving
Credit Note shall not affect the enforceability of this
Revolving Credit Note as to any future, different or other
indebtedness evidenced hereby. In the event the indebtedness
evidenced by this Revolving Credit Note is collected by
legal action or through an attorney-at-law, the Bank shall
be entitled to recover from the Borrower all costs of
collection, including, without limitation, reasonable
attorneys' fees if collected by or through an attorney-at
- -law. The Borrower acknowledges that the actual crediting
of the amount of any Advance under the Agreement to an
account of the Borrower shall, in the absence of manifest
error, constitute presumptive evidence of such Advance,
the rate of interest and that such Advance was made and
borrowed under the Agreement applicable thereto. Such
account records shall constitute, in the absence of manifest
error, presumptive evidence of principal amounts outstanding
of Advances, and the payments made under the Agreement at
any time and from time to time, provided that the failure
of the Bank to record in such account the amount of any
Advance shall not affect the obligation of the undersigned
to repay such amount together with interest thereon in or
with this Revolving Credit Note and the Agreement.
Failure or forbearance of the Bank to exercise any right
hereunder, or otherwise granted by the Agreement or by
law, shall not affect or release the liability of the
Borrower hereunder, and shall not constitute a waiver
of such right unless so stated by the Bank in writing.
This Revolving Credit Note shall be deemed to be made
under, and shall be construed in accordance with and
governed by, the laws of the State of Georgia. Time
is of the essence of this Revolving Credit Note.
Presentment for payment, notice of dishonor and protest
are hereby waived.
Executed under hand and seal of the Borrower on the day
and year first above written.
ELECTROMAGNETIC SCIENCES, INC.
By
---------------------------
Name: Don T. Scartz
Title: Senior VicePresident
& Chief Financial Officer
Attest
-----------------------
Name: William S. Jacobs
Title: Secretary
[CORPORATE SEAL]
EXHIBIT B
FORM OF SUBSIDIARY GUARANTY
THIS SUBSIDIARY GUARANTY, dated as of November 9, 1998,
of [EMS TECHNOLOGIES, INC., a Georgia corporation
("EMS") and LXE INC., a Georgia corporation ("LXE")
(EMS and LXE, collectively, the "Initial Guarantors")
and each Subsidiary Guarantor which executes and
delivers an Additional Subsidiary Guarantor Supplement
pursuant to Section 4.11 (b) of the Loan Agreement
(as hereinafter defined) (the "Additional Guarantors";
and together with the Initial Guarantors, the
"Guarantors")] [CAL CORPORATION, a Canadian corporation,
and its successors (the "Guarantor")] in favor of
SUNTRUST BANK, ATLANTA, a Georgia banking corporation
("Bank").
W I T N E S S E T H:
WHEREAS, Bank has entered into a $30,000,000 Second
Amended and Restated Loan Agreement dated as of
November 9, 1998 (the "Loan Agreement") between
Electromagnetic Sciences, Inc. ("Borrower") and
Bank, to provide revolving credit facilities to
finance working capital, the purchase of common
stock of Subsidiaries, the purchase of its own
common stock to retire or hold as "treasury stock",
acquisitions and other general corporate purposes
of Borrower and the Guarantors;
[WHEREAS, Bank has also established a separate 364-day
unsecured and uncommitted line of credit in the
principal amount of $5,000,000 for working capital
purposes to Borrower which is evidenced by the Line
of Credit Note;]
WHEREAS, the Guarantors and Borrower are members of
the same consolidated group of companies and are
engaged in similar or related businesses, and the
Guarantors will receive direct and indirect economic
benefits from the Advances under the Commitments
pursuant to the Loan Agreement [and any loans made
under the Line of Credit Note;]
WHEREAS, Bank has required that, as a condition to
entering into the Loan Agreement and making Advances
thereunder [and to making loans under the Line of
Credit Note,] the Guarantors shall have executed and
delivered this Guaranty;
NOW, THEREFORE, in consideration of the premises and
the covenants hereinafter contained, and to induce
Bank to make the Advances under the Commitment [and
loans under the Line of Credit Note,] it is agreed
as follows:
1. DEFINITIONS. Capitalized terms used herein
shall have the meanings assigned to them in the
Loan Agreement, unless the context otherwise requires
or unless otherwise defined herein.
References to this "Guaranty" shall mean this Guaranty,
including all amendments, modifications and supplements
and any exhibits or schedules to any of the foregoing,
and shall refer to this Guaranty as the same may be
in effect at the time such reference becomes operative.
2. THE GUARANTY. The guaranty of the Guarantors
hereunder is as follows:
2.01. Guaranty of Obligations of Borrower. (a)
Each of the Guarantors hereby jointly and severally
guarantees to Bank, and its successors, endorsees,
transferees and assigns, the prompt payment (whether
at stated maturity, by acceleration or otherwise)
and performance of all present and future obligations
of Borrower under the Loan Agreement, the Revolving
Credit Notes, [the Line of Credit Note,] any Interest
Rate Risk Agreement and any other Loan Document,
whether due or to become due, matured or unmatured,
liquidated or unliquidated, or contingent or non-
contingent, including obligations of performance
as well as payment and including to the extent
permitted by the Bankruptcy Code, interest that
accrues after the commencement of any proceeding
against Borrower under the Bankruptcy Code or other
debtor relief laws (the "Obligations"); provided,
that the maximum liability of each Guarantor herein
as of any date shall in no event exceed the Maximum
Guaranty Liability (as hereinafter defined) of such
Guarantor as of such date. It is the intention of
the parties hereto that in no event shall any
Guarantor's obligations under this Guaranty constitute
or result in a violation of any applicable fraudulent
conveyance or similar law of any relevant jurisdiction.
Therefore, in the event that this Guaranty would, but
for the preceding sentence, constitute or result in
such violation, then the liability of such Guarantor
under this Guaranty shall be reduced to the maximum
amount permissible under the applicable fraudulent
conveyance or similar laws. Any and all payments by
the Guarantors hereunder shall be made free and clear
of and without deduction for any set-off or counterclaim.
(b) "Maximum Guaranty Liability" of a Guarantor as of
any date shall mean the greater of the following amounts
as of such date: (i) the sum of the following amounts
as of such date: (A) the outstanding amount of all
loans, advances, capital contributions or other
investments made by Borrower to or in such Guarantor
with the proceeds of Advances under the Loan
Agreement and the Revolving Credit Notes [and with
proceeds of any loans made under the Line of Credit
Note] (such proceeds being referred to herein as
"Senior Financing Proceeds"), plus (without duplication)
(B) the fair market value of all property acquired
with Senior Financing Proceeds transferred to such
Guarantor, plus (C) with respect to each transfer
of Senior Financing Proceeds referred to in the
foregoing clauses (A) and (B), an amount equal to
the amount of interest under the Loan Agreement and
the Revolving Credit Notes [and under the Line of
Credit Note] allocable to such Senior Financing Proceeds
until the same is repaid to Borrower; and (ii) the
greatest of the Fair Value Net Worth (as hereinafter
defined) of such Guarantor as of the Closing Date,
each fiscal quarter-end of such person thereafter
occurring on or prior to any date of determination
of the Maximum Guaranty Liability, the date on which
enforcement of this Guaranty is sought, and the date
on which a case under the Bankruptcy Code is commenced
with respect to Borrower or such Guarantor. "Fair
Value Net Worth" of a Guarantor as of any date shall
mean (i) the fair value or fair saleable value
(as the case may be, determined in accordance with
the Bankruptcy Code and applicable state laws
affecting creditors' rights and governing determinations
of insolvency of debtors (collectively, "Insolvency Laws"))
of such Guarantor's assets as of such date, minus (ii)
the amount of all liabilities of such Guarantor
(determined in accordance with the Insolvency Laws)
as of such date, excluding this Guaranty and liabilities
under the Loan Agreement effectively assumed by such
Guarantor by hypothecation of such Guarantor's assets,
minus (iii) $1.00.
(c) Each Guarantor agrees that the Obligations may at
any time and from time to time exceed the Maximum
Guaranty Liability of such Guarantor, and may exceed
the aggregate Maximum Guaranty Liability of all
Guarantors, without impairing this Guaranty or
affecting the rights and remedies of Bank hereunder.
2.02. Guaranty Absolute. The Guarantors agree
that this Guaranty is a guaranty of payment and
performance and not of collection, and that their
obligations under this Guaranty shall be primary,
absolute and unconditional, joint and several,
irrespective of, and unaffected by:
(a) the genuineness, validity, regularity,
enforceability or any future amendment of,
or change in this Guaranty, any other Loan
Document or any other agreement, document or
instrument to which Borrower and/or the
Guarantors is or are or may become a party;
(b) the absence of any action to enforce this
Guaranty or any other Loan Document or the
waiver or consent by Bank with respect to any
of the provisions thereof;
(c) the existence, value or condition of, or
failure to perfect its Lien against, any security
for the Obligations or any action, or the absence
of any action, by Bank in respect thereof (
including, without limitation, the release
of any such security); or
(d) any other action or circumstances which
might otherwise constitute a legal or equitable
discharge or defense of a surety or guarantor;
it being agreed by each of the Guarantors that its obligations
under this Guaranty shall not be discharged until the payment
and performance, in full, of the Obligations. Each of the
Guarantors shall be regarded, and shall be in the same position,
as principal debtor with respect to the Obligations.
Each of the Guarantors expressly waives all rights it may
now or in the future have under any statute, or at common
law, or at law or in equity, or otherwise, to compel Bank
to proceed in respect of the Obligations against Borrower
or any other party or against any security for the payment
and performance of the Obligations before proceeding against,
or as a condition to proceeding against, any of the
Guarantors. Each of the Guarantors further expressly
waives and agrees not to assert or take advantage of
any defense based upon the failure of Bank to commence
an action in respect of the Obligations against Borrower
or any other party or any security for the payment and
performance of the Obligations, including, without limitation,
the provisions of O.C.G.A. 10-7-24. Each of the Guarantors
agrees that any notice or directive given at any time to Bank
which is inconsistent with the waivers in the preceding two
sentences shall be null and void and may be ignored by Bank,
and, in addition, may not be pleaded or introduced as
evidence in any litigation relating to this Guaranty
for the reason that such pleading or introduction would
be at variance with the written terms of this Guaranty,
unless Bank has specifically agreed otherwise in writing.
It is agreed between each of the Guarantors and Bank that
the foregoing waivers are of the essence of the transaction
contemplated by the Loan Documents and that, but for this
Guaranty and such waivers, Bank would decline to make the
Advances under the Loan Agreement.
Notwithstanding any of the foregoing, and in
addition thereto, and in no manner composing
any limitation thereon, each of the Guarantors
expressly understands and agrees that, if the
then outstanding principal amount of the Obligations
(together with accrued interest thereon) is
declared to be immediately due and payable,
then the Guarantors shall, on a joint and several
basis, upon demand in writing from Bank, pay to
Bank or any other holder of the Revolving Credit
Notes and/or the Line of Credit Note, the entire
outstanding Obligations due and owing to Bank or
such holder.
2.03. Enforcement of Guaranty. In no event
shall Bank have any obligation (although it is
entitled, at its option) to proceed against
Borrower or any other person or any real or
personal property pledged to secure the Obligations
before proceeding against the Guarantors or any of
them and may proceed, prior or subsequent to, or
simultaneously with, the enforcement of Bank's
rights hereunder, to exercise any right or remedy
which it may have against the property, real or
personal, as a result of any Lien it may have as
security for all or any portion of the Obligations.
2.04. Waivers. In addition to the waivers
contained in Section 2.01 hereof, each of the
Guarantors waives, and agrees that it shall not
at any time insist upon, plead or in any manner
whatever claim or take the benefit or advantage
of, any appraisal, valuation, stay, extension,
marshalling of assets or redemption laws, or
exemption, whether now or at any time hereafter
in force, which may delay, prevent or otherwise
affect the performance by the Guarantors of their
obligations under, or the enforcement by Bank of,
this Guaranty. Each of the Guarantors further
hereby waives diligence, presentment, notice and
demand (whether for non-payment or protest or of
acceptance, maturity, extension of time, change
in nature or form of the Obligations, acceptance
of further security, release of further security,
composition or agreement arrived at as to the
amount of, or the terms of, the Obligations,
notice of adverse change in Borrower's financial
condition or any other fact which might materially
increase the risk to such Guarantor) with respect
to any of the Obligations or all other demands
whatsoever and waives the benefit of all provisions
of law which are or might be in conflict with the
terms of this Guaranty. Each of the Guarantors
represents, warrants and agrees that, as of the
date of this Guaranty, its obligations under this
Guaranty are not subject to any offset or defense
against Bank or Borrower of any kind. Each of the
Guarantors further agrees that its obligations
under this Guaranty shall not be subject to any
counterclaims, offsets or defenses against Bank
or Borrower of any kind which may arise in the
future.
2.05. Benefits of Guaranty. The provisions
of this Guaranty are for the benefit of Bank and
its respective successors, transferees, endorsees
and assigns, and nothing herein contained shall
impair, as between Borrower and Bank, the obligations
of Borrower under the Loan Documents. In the event
all or any part of the Obligations are transferred,
endorsed or assigned by Bank to any Person, any
reference to "Bank" herein shall be deemed to refer
equally to such Person.
2.06. Modification of Obligations, etc. If Bank
or any other Person shall at any time or from time
to time, with or without the consent of, or notice
to, the Guarantors or any of them:
(a) change or extend the manner, place or terms
of payment of, or renew or alter all or any portion
of, the Obligations;
(b) take any action under or in respect of the
Loan Documents in the exercise of any remedy,
power or privilege contained therein or available
to it at law, equity or otherwise, or waive or
refrain from exercising any such remedies, powers
or privileges;
(c) amend or modify, in any manner whatsoever,
the Loan Documents;
(d) extend or waive the time for any of Guarantors',
Borrower's or other Person's performance of, or
compliance with, any term, covenant or agreement
on its part to be performed or observed under the
Loan Documents, or waive such performance or
compliance or consent to a failure of, or departure
from, such performance or compliance;
(e) take and hold security or collateral for the
payment of the Obligations guaranteed hereby or
sell, exchange, release, dispose of, or otherwise
deal with, any property pledged, mortgaged or
conveyed, or in which Bank has been granted a Lien,
to secure any indebtedness of the Guarantors or
Borrower to Bank;
(f) release any Person (including another Guarantor)
which may be liable in any manner for the payment of
any amounts owed by the Guarantors or Borrower to
Bank;
(g) modify or terminate the terms of any
intercreditor or subordination agreement pursuant
to which claims of other creditors of the
Guarantors or Borrower are subordinated to the
claims of Bank; and/or
(h) apply any sums by whomever paid or
however realized to any amounts owing by
the Guarantors or Borrower to Bank in such
manner as Bank shall determine in its
discretion;
then Bank shall not incur any liability to the Guarantors
pursuant hereto as a result thereof, and no such action
shall impair or release the obligations of the Guarantors
or any of them under this Guaranty.
2.07. Reinstatement. This Guaranty shall remain
in full force and effect and continue to be effective
in the event any petition be filed by or against
Borrower or any Guarantor for liquidation or
reorganization, in the event Borrower or any such
Guarantor becomes insolvent or makes an assignment
for the benefit of creditors or in the event a
receiver or trustee be appointed for all or any
significant part of assets of Borrower or any such
Guarantor, and shall continue to be effective or be
reinstated, as the case may be, if at any time
payment and performance of the Obligations, or any
part thereof, is, pursuant to applicable law,
rescinded or reduced in amount, or must otherwise
be restored or returned by Bank, whether as a
"voidable preference", "fraudulent conveyance", or
otherwise, all as though such payment or performance
had not been made. In the event that any payment,
or any part thereof, is rescinded, reduced, restored
or returned, the Obligations shall be reinstated and
deemed reduced only by such amount paid and not so
rescinded, reduced, restored or returned.
2.08. Election of Remedies, etc. Any election
of remedies which results in the denial or impairment
of the right of Bank to seek a deficiency judgment
against Borrower shall not impair each Guarantor's
obligation to pay the full amount of the Obligations.
In the event Bank shall bid at any foreclosure or
trustee's sale or at any private sale permitted by
law or the Loan Documents, Bank may bid all or less
than the amount of the Obligations and the amount of
such bid need not be paid by Bank but shall be
credited against the Obligations. The amount of the
successful bid at any such sale, whether Bank or any
other party is the successful bidder, shall be
conclusively deemed to be the fair market value
of the collateral and the difference between such
bid amount and the remaining balance of the
Obligations shall be conclusively deemed to be the
amount of the Obligations guaranteed under this
Guaranty, notwithstanding that any present or future
law or court decision or ruling may have the effect
of reducing the amount of any deficiency claim to
which Bank might otherwise been entitled but for
such bidding at any such sale.
2.09. Continuing Guaranty. The Guarantors agree
that this Guaranty is a continuing guaranty and shall
remain in full force and effect until the payment and
performance in full of the Obligations.
2.10. Withholding Taxes. All payments made by CAL
and any other Subsidiary Guarantor which is incorporated
in a jurisdiction which would impose Taxes (as
hereinafter defined) on any payments made pursuant
to or under this Guaranty shall be made free and
clear of, and without deduction or withholding for
or on account of, any present or future income,
stamp or other taxes, levies, imposts, duties,
charges, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or
assessed by any governmental authority, excluding
net income taxes and franchise taxes (imposed in
lieu of net income taxes) imposed on the Bank, as
a result of a present or former connection between
the jurisdiction of the government or taxing authority
imposing such tax and the Bank (excluding a connection
arising solely from the Bank having executed, delivered
or performed its obligations or received a payment under,
or enforced, this Guaranty) or any political subdivision
or taxing authority thereof or therein (all such non-
excluded taxes, levies, imposts, duties, charges, fees,
deductions and withholdings being hereinafter called
"Taxes"). If any Taxes are required to be withheld
from any amounts payable to the Bank hereunder, the
amounts so payable to the Bank shall be increased to
the extent necessary so that the Bank receives (after
payment of all Taxes) the same amount of interest owed
to it by the Borrower. Whenever any Taxes are payable
by CAL or any other such Subsidiary Guarantor, as
promptly as possible thereafter such Person shall send
to the Bank a certified copy of an original official
receipt received by such Person showing payment thereof.
If such Person fails to pay any Taxes when due to the
appropriate taxing authority or fails to remit to the
Bank the required receipts or other required documentary
evidence, such Person shall indemnify the Bank for any
incremental taxes, interest or penalties that may become
payable by the Bank as a result of any such failure.
The agreements in this Section shall survive the
termination of this Guaranty.
3. DELIVERIES. In a form satisfactory to Bank, the
Guarantors shall deliver to Bank such of the Loan Documents
and other instruments, certificates and documents as are
required to be delivered by the Guarantors to Bank under
the Loan Agreement.
4. REPRESENTATIONS AND WARRANTIES. To induce Bank to
make the Advances under the Revolving Credit Notes and
the Loan Agreement [and/or any loans under the Line of
Credit Note], each Guarantor hereby reaffirms each
representation and warranty in the Loan Agreement
applicable to it.
[5. SECURITY INTEREST. Each Guarantor hereby agrees
that it shall grant a Lien to Bank in its Accounts and
Inventory, now or hereafter created or owned, and the
Proceeds thereof, and shall execute the Security Agreement
or a security agreement substantially similar to the
Security Agreement and any UCC-1 financing statements
requested by Bank pursuant to, and subject to, Section
4.12 of the Loan Agreement.]
6. PERMITTED ASSIGNMENT BY BANK. Bank may freely
assign its rights and delegate its duties under this
Guaranty to the extent permitted under the Loan Agreement,
but no such assignment or delegation shall increase or
diminish any Guarantor's obligations hereunder.
7. FURTHER ASSURANCES. Each Guarantor agrees, upon the
written request of Bank, to execute and deliver to Bank,
from time to time, any additional instruments or documents
reasonably considered necessary by Bank to cause this
Guaranty to be, become or remain valid and effective in
accordance with its terms.
8. MISCELLANEOUS.
8.01. Entire Agreement; Amendments. This Guaranty
constitutes the entire agreement between the parties with
respect to the subject matter hereof and supersedes all
prior agreements relating to a guaranty of the Obligations
and may not be amended or supplemented except by a writing
signed by the Guarantors and Bank.
8.02. Severability. In the event that any one or more
of the provisions contained in this Guaranty shall be
determined to be invalid, illegal or unenforceable in any
respect for any reason, the validity, legality and
enforceability of any such provision or provisions in
every other respect and the remaining provisions of this
Guaranty shall not be in any way impaired.
8.03. Notices. Whenever it is provided herein that
any notice, demand, request, consent, approval,
declaration or other communication shall or may be given
to or served upon any of the parties by another, or
whenever any of the parties desires to give or serve
upon another any such communication with respect to
this Guaranty, each such notice, demand, request,
consent, approval, declaration or other communication
shall be in writing and shall be delivered in accordance
with Section 9.2 of the Loan Agreement, addressed as
follows:
(a) If to Bank:
SunTrust Bank, Atlanta
25 Park Place/Mail Code 127
Atlanta, Georgia 30303
Attention: R. Michael Dunlap
Vice President
Telephone: (404) 724-3890
Telecopy: (404) 588-8833
(b) If to Guarantors:
c/o Electromagnetic Sciences, Inc.
660 Engineering Drive
Norcross, Georgia 30092
Attention: Chief Financial Officer
Telephone: (770) 263-9200
Telecopy: (770) 447-4397
or at such other address as may be substituted by notice given as
herein provided. The giving of any notice required hereunder may
be waived in writing by the party entitled to receive such notice.
8.04. Binding Effect. This Guaranty shall bind each
Guarantor and shall inure to the benefit of Bank and its
successors and assigns. The Guarantors may not assign
this Guaranty.
8.05. Non-Waiver. The failure of Bank to enforce any
right or remedy hereunder, or promptly to enforce any such
right or remedy hereunder, or promptly to enforce any such
right or remedy, shall not constitute a waiver thereof, nor
give rise to any estoppel against Bank, nor excuse the
Guarantors or any of them from their obligations hereunder.
8.06. Governing Law and Submission to Jurisdiction.
(a) THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH
AND BE GOVERNED BY THE LAWS OF THE STATE OF GEORGIA (WITHOUT
GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF)
AND THE LAWS OF THE UNITED STATES.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
GUARANTY MAY BE BROUGHT IN THE SUPERIOR COURT OF FULTON
COUNTY, GEORGIA, OR ANY OTHER COURT OF COMPETENT JURISDICTION
IN THE STATE OF GEORGIA OR OF THE UNITED STATES OF
AMERICA FOR THE NORTHERN DISTRICT OF GEORGIA, AND BY
EXECUTION AND DELIVERY OF THIS GUARANTY, EACH
GUARANTOR HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION
OF THE AFORESAID COURTS. THE GUARANTORS HEREBY IRREVOCABLY
WAIVE TRIAL BY JURY TO THE EXTENT PERMITTED BY APPLICABLE
LAW, AND THE GUARANTORS HEREBY IRREVOCABLY WAIVE ANY OBJECTION,
INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING
OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS,
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS.
8.07. Expenses. The Guarantors, jointly and severally,
agree that, with or without notice or demand, they will
reimburse Bank for all costs and expenses (including
reasonable attorney's fees) incurred by Bank in connection
with the Obligations of Borrower to Bank under the Loan
Agreement or any of the Loan Documents and all costs and
expenses (including reasonable attorney's fees) incurred
by Bank in connection with the enforcement of this Guaranty.
8.08. Counterparts. This Guaranty may be executed
in any number of counterparts which shall individually
and collectively constitute one agreement.
IN WITNESS WHEREOF, each Initial Guarantor has executed
and delivered this Guaranty under seal through their
duly authorized officers as of the date first above written.
"GUARANTOR"
EMS TECHNOLOGIES, INC.
By
---------------------------
Name: Don T. Scartz
Title: Treasurer
Attest
-------------------------
Name: William S. Jacobs
Title: Secretary
[CORPORATE SEAL]
LXE INC.
By
----------------------------
Name: Don T. Scartz
Title: Treasurer
Attest
------------------------
Name: William S. Jacobs
Title: Secretary
[CORPORATE SEAL]
[CAL CORPORATION]
By
----------------------------
Name:
Title:
Attest
------------------------
Name:
Title:
[CORPORATE SEAL]
EXHIBIT C
ADDITIONAL SUBSIDIARY GUARANTOR SUPPLEMENT
SunTrust Bank, Atlanta
25 Park Place, Mail Code 127
Atlanta, Georgia 30303
Attention: Mr. R. Michael Dunlap
Vice President
Dear Sirs:
Reference is made to the Second Amended and Restated Loan Agreement
dated as of November [ ], 1998 (the "Agreement") between
Electromagnetic Sciences, Inc. (the "Borrower") and SunTrust
Bank, Atlanta (the "Bank"). Terms not defined herein which
are defined in the Agreement shall have for the purposes
hereof the meaning provided therein.
The undersigned, [name of Domestic Subsidiary Guarantor],
a [jurisdiction of incorporation] corporation, hereby
elects to become an "Additional Guarantor" under the Domestic
Subsidiary Guaranty and to become a "Domestic Subsidiary
Guarantor" for all purposes under the Agreement, effective
from the date hereof. The undersigned confirms that the
representations and warranties set forth in Article III
of the Agreement applicable to it as a Material Subsidiary
of the Borrower are true and correct as to the undersigned
as of the date hereof.
Without limiting the generality of the foregoing, the
undersigned hereby agrees to perform all of the obligations
of a Guarantor under, and to be bound in all respects by the
terms of, the Subsidiary Guaranty to the same extent and with
the same force and effect as if the undersigned were a
signatory party thereto. [additional language applicable
to non wholly-owned Material Subsidiary: ;provided, that
the guaranty of the undersigned Subsidiary Guarantor shall
be limited to the amount of the Investment of the Borrower
in the undersigned Subsidiary Guarantor as of the date on
which the Subsidiary Guaranty shall be enforced by the Bank.]
This Agreement shall be construed in accordance with and
governed by the internal laws of the State of Georgia and
the laws of the United States.
Very truly yours,
[NAME OF SUBSIDIARY GUARANTOR]
By
----------------------------
Name:
Title:
Dated:
Schedule 3.9(b) Material Subsidiaries
Schedule 3.11 ERISA
Schedule 3.16 Franchises, Licenses, etc.
Schedule 5.1 Outstanding Liens
Exhibit A-1 Facility A Revolving Credit Note
Exhibit A-2 Facility B Revolving Credit Note
Exhibit B Form of Subsidiary Guaranty
FIRST AMENDMENT AND CONSENT
THIS FIRST AMENDMENT AND CONSENT dated as of January 29, 1999
between ELECTROMAGNETIC SCIENCES, INC.., a Georgia corporation
(the "Borrower"), and SUNTRUST BANK, ATLANTA, a Georgia banking
corporation (the "Lender").
WITNESSETH:
WHEREAS, the Borrower and the Lender have entered into the
Second Amended and Restated Loan Agreement dated as of November 9,
1998 (as amended, the "Agreement");
WHEREAS, the Borrower has entered into that certain asset
purchase agreement dated December 30, 1998 (the "Asset
Purchase Agreement") with Spar Aerospace Limited, a
Canadian corporation ("Spar"), pursuant to which EMS
Technologies Canada, Ltd. f/k/a CAL Corporation ("EMS
Canada"), a wholly-owned subsidiary of the Borrower and
the assignee of all rights and obligations of the Borrower
under the Asset Purchase Agreement, will purchase those
assets constituting the Space Products business unit of
Spar (the "Acquisition");
WHEREAS, the Borrower hereby requests the Lender to consent
to use of proceeds of Advances under the Agreement to
finance a portion of the purchase price for the Acquisition
and to amend certain provisions of the Agreement in connection
with the Acquisition;
WHEREAS, the Lender is willing to consent to such use of
proceeds and to amend the Agreement on the terms and conditions
as hereinafter set forth;
NOW, THEREFORE, for and in consideration of the mutual
premises, covenants and conditions contained herein, and
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
Subsection 1. Defined Terms. Capitalized terms which are used
herein without definition and which are defined in the Agreement
shall have the same meanings herein as in the Agreement.
Subsection 2. Consent. The Lender hereby consents to the
Borrower using proceeds of Advances under the Facility B
Commitment to finance a portion of the purchase price of the
Acquisition not to exceed the U. S. dollar equivalent of
Canadian dollars 10,000,000.
Subsection 3. Amendments to Agreement. The Agreement is hereby
amended as follows:
(a) Section 3.14, "Employee Relations" shall be amended by
deleting the first sentence thereof and substituting the
following therefor:
"Each of Borrower and its Material Subsidiaries has a
stable work force in place and is not a party to any
collective bargaining agreement (except those certain
collective bargaining agreements assumed by EMS Technologies
Canada, Ltd. f/k/a CAL Corporation ("EMS Canada") in
connection with the purchase of certain assets from Spar
Aerospace Limited, a Canadian corporation ("Spar"), and
(with such exception) no labor union has been recognized
as a representative of Borrower's or such Subsidiary's
employees.
(b) Section 5.1, entitled "Liens, Etc.", shall be amended by
deleting the existing clause (b) and substituting the following
therefor:
(b) Liens existing on January 29, 1999 as set forth on
Schedule 5.1 attached to the First Amendment and Consent
dated as of January 29, 1999 (other than Liens permitted
pursuant to subsection (a) and subsections (c) through (l));
(c) Section 5.5, entitled "Indebtedness", shall be amended by
adding a new clause (iv) at the end thereof as follows:
; and (iv) Indebtedness to Spar in an aggregate principal
amount not to exceed Can.$20,000,000 to finance the remaining
purchase price of certain assets from Spar pursuant to that
certain Asset Purchase Agreement dated December 30, 1998.
Subsection 4. Acknowledgment of Subsidiary Guarantors.
The Domestic Subsidiary Guarantors under the Domestic Subsidiary
Guaranty and EMS Canada under the CAL Corporation Guaranty, by
their execution of this First Amendment and Consent, hereby
acknowledge and agree to the terms and conditions hereof and
hereby confirm that each of the Domestic Subsidiary Guaranty
and the CAL Corporation Guaranty dated November 9, 1998 remains
in full force and effect.
Subsection 5. Representations and Warranties. The Borrower
represents and warrants as follows:
(a) The execution and delivery by Borrower of this First
Amendment and Consent are within the corporate authority
of Borrower, have been duly authorized by all requisite
shareholder and corporate action on the part of Borrower
and do not and will not (i) violate any provision of any
law, rule or regulation, any judgment, order or ruling of
any court or governmental agency, the organizational papers
or by-laws of Borrower, or any indenture, material agreement
or other material instrument to which Borrower is a party or
by which Borrower or any of its properties is bound or (ii)
be in conflict with, result in a breach of, or constitute
with notice or lapse of time or both a default under any
such indenture, material agreement or other material
instrument. This First Amendment and Consent has been duly
executed by the Borrower.
(b) The Agreement, as amended by this First Amendment and
Consent, remains in full force and effect and constitutes
the legal, valid and binding obligations of the Borrower,
enforceable in accordance with its terms, except as limited
by bankruptcy, insolvency, reorganization, moratorium or
similar laws relating to or affecting generally the
enforcement of creditor's rights.
Subsection 6. Miscellaneous Provisions.
(a) Ratification. The Borrower hereby restates, ratifies
and reaffirms each and every term, covenant and condition
set forth in the Agreement, as hereby amended, effective
as of the date hereof.
(b) Counterparts. This First Amendment and Consent may
be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when
so executed and delivered shall be deemed to be an original,
and all counterparts, taken together, shall constitute but
one and the same document.
(c) Governing Law. THIS FIRST AMENDMENT AND CONSENT SHALL
BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH THE LAW OF THE STATE OF GEORGIA.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
IN WITNESS WHEREOF, the parties have duly executed and
delivered this First Amendment and Consent as of the date
first above written.
ELECTROMAGNETIC SCIENCES, INC.
By
---------------------------------
Name:
Title:
SUNTRUST BANK, ATLANTA
By
--------------------------------
Name:
Title:
By
--------------------------------
Name:
Title:
Acknowledged and agreed to this
29th day of January, 1999.
"SUBSIDIARY GUARANTORS"
LXE Inc.
By
------------------------------
Name:
Title:
EMS Technologies, Inc.
By
-----------------------------
Name:
Title:
EMS Technologies Canada, Ltd. f/k/a CAL Corporation
By
-----------------------------
Name:
Title:
Schedule 5.1
Outstanding Liens
1. Liens on all assets (both real and personal) of EMS Technologies
Canada, Ltd. f/k/a CAL Corporation in favor of (i) Canadian Imperial
Bank of Commerce securing amounts owed from time to time under the
Credit Facility in an aggregate principal amount not to exceed
Can.$11,050,000 established June 19, 1998 and (ii) Spar Aerospace
Limited securing amounts owed from time to time in an aggregate
principal amount no to exceed Can.$20,000,000 executed in connection
with the purchase of the Space Products business unit of Spar
Aerospace Limited.
EXECUTION COPY
SECOND AMENDMENT TO SECOND AMENDED
AND RESTATED LOAN AGREEMENT
THIS SECOND AMENDMENT to the SECOND AMENDED AND
RESTATED LOAN AGREEMENT dated as of February [ ],
1999 between ELECTROMAGNETIC SCIENCES, INC., a
Georgia corporation (the "Borrower"), and SUNTRUST
BANK, ATLANTA, a Georgia banking corporation (the
"Lender").
WITNESSETH:
WHEREAS, the Borrower and the Lender have entered
into the Second Amended and Restated Loan Agreement
dated as of November 9, 1998, as amended by the First
Amendment and Consent dated as of January 29, 1999
(as further amended, the "Agreement");
WHEREAS, the Borrower and the Lender have agreed on the
terms and conditions as hereinafter set forth, to amend
the Agreement to permit the Borrower's wholly-owned
Subsidiary, EMS Technologies Canada, Ltd. f/k/a CAL
Corporation ("EMS Canada"), to incur indebtedness to
Canadian Imperial Bank of Commerce ("CIBC") in an
aggregate principal amount up to Canadian $33,810,000
plus an additional U.S. $600,000 for foreign exchange
contracts and to grant a lien on its assets in favor
of CIBC to secure such indebtedness;
NOW, THEREFORE, for and in consideration of the mutual
premises, covenants and conditions contained herein, and
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
Subsection 1. Defined Terms. Capitalized terms which are
used herein without definition and which are defined in the
Agreement shall have the same meanings herein as in the
Agreement.
Subsection 2. Amendments to Agreement. The Agreement is
hereby amended as follows:
(a) Section 3.8, entitled "Use of Proceeds", shall be
amended by deleting the first sentence thereof and
substituting the following therefor:
"The proceeds of each Advance will be used solely
for the purposes set forth in Section 1.9 hereof."
(b) Section 5.1, entitled "Liens, Etc.", shall be amended
by deleting the existing clause (b) and substituting the
following therefor:
(b) Liens existing on February [ ], 1999 as set
forth on Schedule 5.1 attached to the Second
Amendment to the Second Amended and Restated Loan
Agreement dated as of February [ ], 1999 (other
than Liens permitted pursuant to subsection (a) and
subsections (c) through (l));
(c) Section 5.5, entitled "Indebtedness", shall be
amended by deleting the existing clause (iii) and
substituting the following therefor:
"(iii) other Indebtedness of the Borrower and any
Material Subsidiary not to exceed at any time in
the aggregate $25,000,000;"
Subsection 3. Acknowledgment of Subsidiary Guarantors. The
Domestic Subsidiary Guarantors under the Domestic Subsidiary
Guaranty and EMS Canada under the CAL Corporation Guaranty,
by their execution of this Second Amendment, hereby acknowledge
and agree to the terms and conditions hereof and hereby
confirm that each of the Domestic Subsidiary Guaranty and
the CAL Corporation Guaranty dated November 9, 1998 remains
in full force and effect.
Subsection 4. Representations and Warranties. The Borrower
represents and warrants as follows:
(a) The execution and delivery by Borrower of this
Second Amendment are within the corporate authority
of Borrower, have been duly authorized by all requisite
shareholder and corporate action on the part of Borrower
and do not and will not (i) violate any provision of any
law, rule or regulation, any judgment, order or ruling of
any court or governmental agency, the organizational
papers or by-laws of Borrower, or any indenture, material
agreement or other material instrument to which Borrower
is a party or by which Borrower or any of its properties
is bound or (ii) be in conflict with, result in a breach
of, or constitute with notice or lapse of time or both a
default under any such indenture, material agreement or
other material instrument. This Second Amendment has
been duly executed by the Borrower.
(b) The Agreement, as amended by this Second Amendment,
remains in full force and effect and constitutes the
legal, valid and binding obligations of the Borrower,
enforceable in accordance with its terms, except as
limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or affecting
generally the enforcement of creditor's rights.
Subsection 5. Miscellaneous Provisions.
(a) Ratification. The Borrower hereby restates,
ratifies and reaffirms each and every term, covenant
and condition set forth in the Agreement, as hereby
amended, effective as of the date hereof.
(b) Counterparts. This Second Amendment may be
executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which
when so executed and delivered shall be deemed to be an
original, and all counterparts, taken together, shall
constitute but one and the same document.
(c) Governing Law. THIS SECOND AMENDMENT SHALL BE
GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH THE LAW OF THE STATE OF GEORGIA.
IN WITNESS WHEREOF, the parties have duly executed and
delivered this Second Amendment as of the date first
above written.
ELECTROMAGNETIC SCIENCES, INC.
By
--------------------------------
Name:
Title:
SUNTRUST BANK, ATLANTA
By
--------------------------------
Name:
Title:
By
--------------------------------
Name:
Title:
Acknowledged and agreed to this
[ ] day of February, 1999.
"SUBSIDIARY GUARANTORS"
LXE Inc.
By
---------------------------
Name:
Title:
EMS Technologies, Inc.
By
---------------------------
Name:
Title:
EMS Technologies Canada, Ltd. f/k/a CAL Corporation
By
---------------------------
Name:
Title:
Schedule 5.1
Outstanding Liens
1. Liens on all assets (both real and personal) of
EMS Technologies Canada, Ltd. f/k/a CAL Corporation in
favor of (a) Canadian Imperial Bank of Commerce securing
amounts owed from time to time under the Credit Facility
in an aggregate principal amount not to exceed Can.$33,810,000
plus and additional U. S. $600,000 for foreign exchange
contracts established February [ ], 1999 and (b) Spar
Aerospace Limited securing amounts owed from time to time
in an aggregate principal amount not to exceed Can.$20,000,000
executed in connection with the purchase of the Space Products
business unit of Spar Aerospace Limited.
Exhibit 10.4
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment is made effective as of the 29th day of July,
1992, between Thomas E. Sharon ("Employee" and Electromagnetic
Sciences, Inc., a Georgia corporation ("Employer").
WHEREAS, Employee and Employer have previously entered into
that certain Employment Agreement (the "Agreement") effective as
of January 1, 1989; and
WHEREAS, the Board of Directors of Employer has authorized
the extension and amendment of the Agreement as set forth herein,
and Employee agrees to such extension and amendment.
NOW, THEREFORE, in consideration of the mutual agreements
hereinafter set forth, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged,
Employer and Employee agree as follows:
1. BASE DATE. The Base Date, for the purposes of the
Agreement, shall mean December 31, 1996, or such later date
as may be agreed to in writing by the Employer, by act of the
Board, and the Employee; provided, however, no such later date
may be more than five years from the date of any such agreement
with respect thereto.
2. BASE SALARY. Section 4.1 of the Agreement is amended
to provide that the minimum base salary specified therein shall
be $167,550 per calendar year.
IN WITNESS WHEREOF, the parties have executed this Amendment on
the 17th day of August, 1992, effective as of July 29, 1992.
EMPLOYER
ELECTROMAGNETIC SCIENCES, INC. EMPLOYEE:
/s/ /s/
- -------------------------------- ----------------------(Seal)
John E. Pippin, Chairman - CEO Thomas E. Sharon
Exhibit 10.5
EMPLOYMENT AGREEMENT
This Agreement ("Agreement.") is made effective as of the
10th day of August, 1998, between JOHN J. FARRELL, JR.
("Employee") and ELECTROMAGNETIC SCIENCES, INC., a Georgia
corporation ("Employer").
RECITALS
The Board of Directors (the "Board") of Employer has offered
Employee continued employment in consideration for the
compensation and other benefits hereinafter set forth, and
Employee is willing to accept employment on the terms
memorialized below.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises
hereinafter contained and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged,
Employer and Employee agree as follows:
1. Certain Defined Terms. For the purposes of this Agreement:
(a) "Base Date" shall mean December 31, 2000, or such
later date as may be agreed to in writing by the Employer,
by act of the Board, and the Employee; provided,
however, that no such later date may be more than
five years from the date of any such agreement with
respect thereto.
(b) "Change of Control" shall mean (i) the acquisition
by any individual, corporation, partnership or other
entity, or by two or more thereof acting together, of
50% or more of Employer's outstanding voting stock,
other than pursuant to a transaction that shall have
been approved prior to the completion thereof by the
Board, or (ii) the election of members of the Board
such that a majority of such members following any
such election shall not have been nominated or recommended
for election by a majority of the members of the Board
who were serving immediately prior to such election.
(c) "Employment Term" shall have the meaning set
forth in Section 3.
(d) "Good Cause" means any act of dishonesty or
material breach of duty by Employee against the best
interests of the Company.
(e) "Scheduled Expiration Date" shall mean the later
of (i) the Base Date, and (ii) the third anniversary
of the date on which a Change of Control occurs, if
such Change of Control occurs during the Employment Term.
(f) "Total Disability" means the inability of Employee
to perform his normal required services hereunder by
reason of mental or physical illness or incapacity,
which illness or incapacity is expected to be permanent
and continuous for a period of not less than one year,
as determined by a licensed physician selected by
Employee and reasonably satisfactory to the Board.
2. Employment Duties. During the Employment Term,
Employee shall provide services as an executive officer
of Employer and shall have such duties as are specified
in the Employer's bylaws, as amended from time to time,
or as the Board or the Chief Executive Officer shall direct
from time to time, provided that the nature of Employee's
powers and duties shall be those of a person serving as an
executive officer in a similar capacity in a corporation
conducting a business comparable to that of Employer. During
the Employment Term, Employee shall devote his best efforts
to the furtherance of the interests of Employer and the
performance of his duties hereunder. Employee's location of
employment shall be at Employer's principal executive offices
in Norcross, Georgia, and Employer may not transfer Employee
to any other location without Employee's prior written consent,
unless such transfer results from the relocation of Employer's
principal executive offices.
3. Employment Term. For purposes of this Agreement,
the phrase "Employment Term" shall mean the period beginning
on the date hereof and expiring upon the first to occur of
the following events:
(a) the effective date of Employee's resignation;
(b) the death or Total Disability of Employee;
(c) Employer's termination of Employee's employment,
by act of the Board, upon written notice to Employee,
(i) for Good Cause, or (ii)based on the breach by Employee
of any provision of Sections 6 or 7 or of any agreement
specified in Section 6;
(d) Employer's termination of Employee's employment,
based on any other reasons or considerations; or
(e) the close of Employer's business on the Scheduled
Expiration Date.
Notwithstanding any expiration of the Employment Term, the
term of this Agreement shall continue in effect until the
full and complete performance of all obligations, whether
affirmative or negative, imposed by this Agreement, shall
have occurred.
4. Compensation and Benefits.
4.1 Base Salary. During the Employment Term Employer
shall pay, by cash or check, to Employee an amount equal
to not less than $215,000.00 per calendar year, which
amount is payable in equal installments (not less frequently
than monthly) in accordance with the payroll practices from
time to time adopted by Employer.
4.2 Bonuses or Salary Increases. Employer may pay to
Employee such additional amounts of compensation, either
as bonuses or as an increase in regular salary, as the
Board, in its discretion, shall determine is appropriate.
4.3 Payments Following Termination.
(a) Disability. If the Employment Term shall expire prior
to the Scheduled Expiration Date because of Employee's
Total Disability, Employer shall continue to pay the
amounts specified in Section 4.1 to Employee or his duly
appointed guardian or legal representative, if any,
through the earlier to occur of the Scheduled Expiration
Date or any other event specified in paragraphs (b) and
(c) of Section 3 (provided, however, that any such payments
shall be reduced, dollar-for-dollar, by the amount of any
payments made to or for the benefit of Employee pursuant
to any Employer-sponsored disability plan, program or
arrangement), and, in the case of death prior to the
Scheduled Expiration Date, shall thereafter make such
payments as would have been made under paragraph 4.3(b)
had the Employment Term expired as a result of such death.
(b) Death. If the Employment Term shall expire prior
to the Scheduled Expiration Date because of Employee's
death, Employer shall thereafter through the Scheduled
Expiration Date make payments equal to 50% of the amount
specified in Section 4.1. The payments described in this
paragraph 4.3(b) shall be made to Employee's spouse if
the Employee is married at the time of his death, but if
Employee is not married at that time, or if Employee is
so married but such spouse dies after this paragraph
4.3(b) becomes applicable and before the Scheduled
Expiration Date, the remaining payments shall be made
to Employee's estate.
(c) Resignation. Except as provided in paragraph
4.3(f), if the Employment Term shall expire prior to
the Base Date for the reason specified in paragraph
3(a), Employer shall promptly pay to Employee the
salary and benefits accrued and unpaid through the
last day of the Employment Term, which payment shall
release Employer from any further obligations under
this Agreement.
(d) Termination by Employer for Cause. If the
Employment Term shall expire prior to the Scheduled
Expiration Date pursuant to paragraph 3(c), Employer
shall promptly pay to Employee the salary and benefits
accrued and unpaid through the last day of the
Employment Term, which payment shall release Employer
from any further obligations under this Agreement.
(e) Termination by Employer Without Cause. Except
as provided in paragraph 4.3(f), if the Employment
Term shall expire prior to the Base Date pursuant to
paragraph 3(d), Employer shall pay to Employee (or
his estate or personal representative) the amounts
specified in Section 4.1, at the time or times they
would have become payable if the Employment Term had
not so expired, such amounts to be paid through the
Base Date.
(f) Certain Terminations Following Change of Control.
If, following a Change of Control, the Employment Term
shall expire prior to the Scheduled Expiration Date
pursuant to paragraphs 3(a) or 3(d), Employer shall,
within thirty days following such expiration of the
Employment Term, pay to Employee in one lump sum an
amount equal to three times the greater of (i)
Employee's
aggregate taxable compensation reportable on
Employee's Form W-2 for the calendar year preceding
the calendar year in which the Employment Term so
expires, and (ii) Employee's annualized salary for
the calendar year in which the Employment Term so
expires plus the greater of the aggregate bonuses
paid to Employee during either such calendar year
or the prior calendar year; provided, however, that
the amount so paid to Employee shall not exceed the
maximum amount that Employer may deduct as a
compensation expense for federal income tax purposes
as determined by reference to the restrictions set
forth in Section 280G of the Internal Revenue Code
of 1986, or successor sections thereto, as the same
is in effect on the effective date of this Agreement.
4.4 Other Benefits. Except as otherwise provided
in this Agreement, during the Employment Term, and
thereafter for so long as Employee shall receive
payments pursuant to paragraph 4.3(a) or 4.3(e),
Employer shall provide Employee with the benefits
and privileges provided to Employer's other executive
officers.
5. Out-of-Pocket Expenses. Employer shall reimburse
Employee for all reasonable out-of-pocket expenses
incurred by Employee in connection with the performance
of his duties hereunder, upon presentation of appropriate
documentation.
6. Intellectual Property. Employee shall execute and
be bound by all such forms of Invention, Non-Disclosure
and Non-Solicitation Agreement, or similar agreements
governing rights to and protection of intellectual
property and non-solicitation of Employer's customers
and employees, as Employer shall from time to time
require to be executed by other executive officers.
For the purposes of this Agreement, a breach by Employee
of any provision of any such agreement shall be deemed
to be a breach by Employee of his obligations under this
Agreement.
7. Noncompetition.
(a) During Employment and While Receiving Certain
Payments. During the Employment Term, and thereafter
for so long as Employee shall receive payments
pursuant to paragraph 4.3(a) or 4.3(e), Employee
shall not, directly or indirectly, design, manufacture
or sell, or provide management or advisory services,
of a nature similar to those provided to the Employer
during the Employment Term, to others engaged in
designing, manufacturing or selling, electronic
products of the type designed and marketed by the
Company prior to the expiration of the Employment
Term.
(b) Resignation and Termination for Cause. In the
event the Employment Term expires pursuant to
paragraphs 3(a) or 3(c), Employee shall not, for
a period ending on the earlier of the Base Date or
two years after the expiration of the Employment
Term, within the United States, directly or indirectly,
design, manufacture or sell, or provide management or
advisory services, of a nature similar to those provided
to the Employer during the Employment Term, to others
engaged in designing, manufacturing or selling,
electronic products of the type designed and marketed
by the Company on or prior to the later of the date
of execution of this Agreement or the date of any
amendment to this Agreement most recently executed
by Employee. Employee agrees that the restrictions
under this Section 7 on his activities following his
termination as an employee are reasonable and appropriate
in view of the responsibilities entrusted to Employee
by Employer, of the benefits provided to Employee during
the term of these restrictions, and of the unique
circumstances of the current relationship of and dealings
between Employer and Employee.
(c) Termination Without Cause Following a Change
of Control. In the event the Employment Term expires
pursuant to paragraph 3(d) following a Change of Control,
Employee shall be entitled to the payment specified in
paragraph 4.3(f) and shall not be subject following such
expiration to any restrictions on his activities pursuant
to this Section 7.
8. Enforcement. Employee acknowledges that damages at law
alone would be an insufficient remedy to Employer if Employee
breaches any provision of Sections 6 or 7, and that Employer
would suffer irreparable damage as a result of any such breach.
Accordingly, in the event of such a breach or threatened breach,
Employer shall be entitled, upon application to a court of
competent jurisdiction, to obtain injunctive relief to enforce
the provisions of Sections 6 and 7. Employer shall also be
entitled to recover its reasonable attorneys' fees incurred
in enforcing any provision of Sections 6 or 7, whether at
law or in equity. Injunctive relief shall be in addition
to any other rights or remedies available to Employer,
including damages at law.
9. Compliance with Other Agreements. Employee represents
and warrants that the execution of this Agreement by him and
the performance of his obligations hereunder will not conflict
with, result in the breach of any provision of, cause the
termination of, or constitute a default under any agreement
to which Employee is a party or by which Employee is or may
be bound.
10. Waiver of Breach. The waiver by either party of a
breach of any of the provisions of this Agreement by the
other shall not be construed as a waiver of any subsequent
breach.
11. Binding Effect; Assignment. The rights and obligations
of Employer under this Agreement shall inure to the benefit
of and shall be binding upon the successors and assigns of
Employer. This Agreement is a personal employment contract
and Employee's rights may not be sold, assigned, transferred,
pledged as collateral, or otherwise encumbered or alienated
by Employee, except as provided herein with respect to
payments to Employee's spouse or estate.
12. Invalid Provisions. In the event any paragraph,
provision or clause of this Agreement or any combination
thereof is found to be unenforceable for any reason, such
finding shall not in any way affect the other paragraphs,
provisions or clauses in this Agreement, which shall continue
in full force and effect, and the unenforceable provision
shall be interpreted in a manner that imposes the maximum
restriction or obligation permitted by applicable law.
13. Governing Law. This Agreement shall be construed
and enforced in accordance with the laws of the State
of Georgia.
14. Entire Agreement. This Agreement contains the
entire agreement of the parties and supersedes all
prior agreements and understandings, oral or written,
with respect to the subject matter hereof. This Agreement
may be changed only by an agreement in writing signed by
the party against whom any waiver, change, amendment,
modification or discharge is sought.
15. Headings. The headings contained in this Agreement
are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
16. Notices. Any notice required or permitted to be
given under this Agreement to Employer shall be sufficient
if in writing and if personally delivered, or sent by
certified or registered mail, first class, return receipt
requested, to the principal executive offices of Employer.
Any notice required or permitted to be given under this
Agreement to Employee shall be sufficient if in writing
and if personally delivered, or sent by certified or
registered mail, first class, return receipt requested,
to Employee at his last known address as shown on Employer's
personnel records. Notices so given shall be deemed effective
upon actual receipt if personally delivered and on the
fourth business day after mailing, if so mailed. Employee
shall be solely responsible for notifying Employer of any
changes of address.
IN WITNESS WHEREOF, the parties have executed this
Agreement on the 28th day of August, 1998, effective
as of August 10, 1998.
ELECTROMAGNETIC SCIENCES, INC. EMPLOYEE:
By:
------------------------- -------------------------
Thomas E. Sharon John J. Farrell, Jr.
Chairman, President and
Chief Executive Officer
Exhibit 10.6
EMPLOYMENT AGREEMENT
This Agreement ("Agreement.") is made effective as of the
10th day of August, 1998, between DON T. SCARTZ ("Employee")
and ELECTROMAGNETIC SCIENCES, INC., a Georgia corporation
("Employer").
RECITALS
The Board of Directors (the "Board") of Employer has offered
Employee continued employment in consideration for the
compensation and other benefits hereinafter set forth, and
Employee is willing to accept employment on the terms
memorialized below.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises
hereinafter contained and other good and valuable
consideration, the receipt and sufficiency of which are
hereby acknowledged, Employer and Employee agree as follows:
1. Certain Defined Terms. For the purposes of this Agreement:
(a) "Base Date" shall mean December 31, 2000, or such later
date as may be agreed to in writing by the Employer, by act
of the Board, and the Employee; provided, however, that no
such later date may be more than five years from the date
of any such agreement with respect thereto.
(b) "Change of Control" shall mean (i) the acquisition by
any individual, corporation, partnership or other entity,
or by two or more thereof acting together, of 50% or more
of Employer's outstanding voting stock, other than pursuant
to a transaction that shall have been approved prior to the
completion thereof by the Board, or (ii) the election of
members of the Board such that a majority of such members
following any such election shall not have been nominated
or recommended for election by a majority of the members of
the Board who were serving immediately prior to such election.
(c) "Employment Term" shall have the meaning set forth in
Section 3.
(d) "Good Cause" means any act of dishonesty or material
breach of duty by Employee against the best interests of
the Company.
(e) "Scheduled Expiration Date" shall mean the later of
(i) the Base Date, and (ii) the third anniversary of the
date on which a Change of Control occurs, if such Change
of Control occurs during the Employment Term.
(f) "Total Disability" means the inability of Employee to
perform his normal required services hereunder by reason of
mental or physical illness or incapacity, which illness or
incapacity is expected to be permanent and continuous for
a period of not less than one year, as determined by a
licensed physician selected by Employee and reasonably
satisfactory to the Board.
2. Employment Duties. During the Employment Term, Employee
shall provide services as an executive officer of Employer and
shall have such duties as are specified in the Employer's bylaws,
as amended from time to time, or as the Board or the Chief
Executive Officer shall direct from time to time, provided that
the nature of Employee's powers and duties shall be those of a
person serving as an executive officer in a similar capacity in
a corporation conducting a business comparable to that of
Employer. During the Employment Term, Employee shall devote
his best efforts to the furtherance of the interests of Employer
and the performance of his duties hereunder. Employee's location
of employment shall be at Employer's principal executive offices
in Norcross, Georgia, and Employer may not transfer Employee to
any other location without Employee's prior written consent,
unless such transfer results from the relocation of Employer's
principal executive offices.
3. Employment Term. For purposes of this Agreement, the
phrase "Employment Term" shall mean the period beginning on
the date hereof and expiring upon the first to occur of the
following events:
(a) the effective date of Employee's resignation;
(b) the death or Total Disability of Employee;
(c) Employer's termination of Employee's employment,
by act of the Board, upon written notice to Employee,
(i) for Good Cause, or (ii)based on the breach by
Employee of any provision of Sections 6 or 7 or of any
agreement specified in Section 6;
(d) Employer's termination of Employee's employment,
based on any other reasons or considerations; or
(e) the close of Employer's business on the Scheduled
Expiration Date.
Notwithstanding any expiration of the Employment Term, the
term of this Agreement shall continue in effect until the
full and complete performance of all obligations, whether
affirmative or negative, imposed by this Agreement, shall
have occurred.
4. Compensation and Benefits.
4.1 Base Salary. During the Employment Term Employer
shall pay, by cash or check, to Employee an amount equal
to not less than $180,000.00 per calendar year, which
amount is payable in equal installments (not less
frequently than monthly) in accordance with the payroll
practices from time to time adopted by Employer.
4.2 Bonuses or Salary Increases. Employer may pay to
Employee such additional amounts of compensation, either
as bonuses or as an increase in regular salary, as the
Board, in its discretion, shall determine is appropriate.
4.3 Payments Following Termination.
(a) Disability. If the Employment Term shall expire
prior to the Scheduled Expiration Date because of
Employee's Total Disability, Employer shall continue
to pay the amounts specified in Section 4.1 to Employee
or his duly appointed guardian or legal representative,
if any, through the earlier to occur of the Scheduled
Expiration Date or any other event specified in
paragraphs (b) and (c) of Section 3 (provided, however,
that any such payments shall be reduced, dollar-for-dollar,
by the amount of any payments made to or for the benefit
of Employee pursuant to any Employer-sponsored disability
plan, program or arrangement), and, in the case of death
prior to the Scheduled Expiration Date, shall thereafter
make such payments as would have been made under
paragraph 4.3(b) had the Employment Term expired as a
result of such death.
(b) Death. If the Employment Term shall expire prior to
the Scheduled Expiration Date because of Employee's death,
Employer shall thereafter through the Scheduled Expiration
Date make payments equal to 50% of the amount specified in
Section 4.1. The payments described in this paragraph 4.3
(b) shall be made to Employee's spouse if the Employee is
married at the time of his death, but if Employee is not
married at that time, or if Employee is so married but such
spouse dies after this paragraph 4.3(b) becomes applicable
and before the Scheduled Expiration Date, the remaining
payments shall be made to Employee's estate.
(c) Resignation. Except as provided in paragraph 4.3(f),
if the Employment Term shall expire prior to the Base Date
for the reason specified in paragraph 3(a), Employer shall
promptly pay to Employee the salary and benefits accrued
and unpaid through the last day of the Employment Term,
which payment shall release Employer from any further
obligations under this Agreement.
(d) Termination by Employer for Cause. If the Employment
Term shall expire prior to the Scheduled Expiration Date
pursuant to paragraph 3(c), Employer shall promptly pay
to Employee the salary and benefits accrued and unpaid
through the last day of the Employment Term, which
payment shall release Employer from any further obligations
under this Agreement.
(e) Termination by Employer Without Cause. Except as
provided in paragraph 4.3(f), if the Employment Term
shall expire prior to the Base Date pursuant to paragraph
3(d), Employer shall pay to Employee (or his estate or
personal representative) the amounts specified in Section
4.1, at the time or times they would have become payable
if the Employment Term had not so expired, such amounts
to be paid through the Base Date.
(f) Certain Terminations Following Change of Control.
If, following a Change of Control, the Employment Term
shall expire prior to the Scheduled Expiration Date
pursuant to paragraphs 3(a) or 3(d), Employer shall,
within thirty days following such expiration of the
Employment Term, pay to Employee in one lump sum an
amount equal to three times the greater of (i) Employee's
aggregate taxable compensation reportable on Employee's
Form W-2 for the calendar year preceding the calendar
year in which the Employment Term so expires, and
(ii) Employee's annualized salary for the calendar
year in which the Employment Term so expires plus the
greater of the aggregate bonuses paid to Employee during
either such calendar year or the prior calendar year;
provided, however, that the amount so paid to Employee
shall not exceed the maximum amount that Employer may
deduct as a compensation expense for federal income
tax purposes as determined by reference to the
restrictions set forth in Section 280G of the Internal
Revenue Code of 1986, or successor sections thereto,
as the same is in effect on the effective date of this
Agreement.
4.4 Other Benefits. Except as otherwise provided in
this Agreement, during the Employment Term, and
thereafter for so long as Employee shall receive payments
pursuant to paragraph 4.3(a) or 4.3(e), Employer shall
provide Employee with the benefits and privileges provided
to Employer's other executive officers.
5. Out-of-Pocket Expenses. Employer shall reimburse
Employee for all reasonable out-of-pocket expenses incurred
by Employee in connection with the performance of his duties
hereunder, upon presentation of appropriate documentation.
6. Intellectual Property. Employee shall execute and be
bound by all such forms of Invention, Non-Disclosure and
Non-Solicitation Agreement, or similar agreements governing
rights to and protection of intellectual property and
non-solicitation of Employer's customers and employees,
as Employer shall from time to time require to be executed
by other executive officers. For the purposes of this
Agreement, a breach by Employee of any provision of any
such agreement shall be deemed to be a breach by Employee
of his obligations under this Agreement.
7. Noncompetition.
(a) During Employment and While Receiving Certain
Payments. During the Employment Term, and thereafter
for so long as Employee shall receive payments pursuant
to paragraph 4.3(a) or 4.3(e), Employee shall not,
directly or indirectly, design, manufacture or sell,
or provide management or advisory services, of a nature
similar to those provided to the Employer during the
Employment Term, to others engaged in designing,
manufacturing or selling, electronic products of the
type designed and marketed by the Company prior to the
expiration of the Employment Term.
(b) Resignation and Termination for Cause. In the
event the Employment Term expires pursuant to paragraphs
3(a) or 3(c), Employee shall not, for a period ending on
the earlier of the Base Date or two years after the
expiration of the Employment Term, within the United
States, directly or indirectly, design, manufacture or
sell, or provide management or advisory services, of a
nature similar to those provided to the Employer during
the Employment Term, to others engaged in designing,
manufacturing or selling, electronic products of the
type designed and marketed by the Company on or prior
to the later of the date of execution of this Agreement
or the date of any amendment to this Agreement most
recently executed by Employee. Employee agrees that
the restrictions under this Section 7 on his activities
following his termination as an employee are reasonable
and appropriate in view of the responsibilities
entrusted to Employee by Employer, of the benefits
provided to Employee during the term of these restrictions,
and of the unique circumstances of the current relationship
of and dealings between Employer and Employee.
(c) Termination Without Cause Following a Change of
Control. In the event the Employment Term expires
pursuant to paragraph 3(d) following a Change of Control,
Employee shall be entitled to the payment specified in
paragraph 4.3(f) and shall not be subject following such
expiration to any restrictions on his activities pursuant
to this Section 7.
8. Enforcement. Employee acknowledges that damages at law
alone would be an insufficient remedy to Employer if Employee
breaches any provision of Sections 6 or 7, and that Employer
would suffer irreparable damage as a result of any such breach.
Accordingly, in the event of such a breach or threatened breach,
Employer shall be entitled, upon application to a court of
competent jurisdiction, to obtain injunctive relief to enforce
the provisions of Sections 6 and 7. Employer shall also be
entitled to recover its reasonable attorneys' fees incurred in
enforcing any provision of Sections 6 or 7, whether at law or
in equity. Injunctive relief shall be in addition to any other
rights or remedies available to Employer, including damages at
law.
9. Compliance with Other Agreements. Employee represents
and warrants that the execution of this Agreement by him and
the performance of his obligations hereunder will not conflict
with, result in the breach of any provision of, cause the
termination of, or constitute a default under any agreement
to which Employee is a party or by which Employee is or may
be bound.
10. Waiver of Breach. The waiver by either party of a breach
of any of the provisions of this Agreement by the other shall
not be construed as a waiver of any subsequent breach.
11. Binding Effect; Assignment. The rights and obligations
of Employer under this Agreement shall inure to the benefit
of and shall be binding upon the successors and assigns of
Employer. This Agreement is a personal employment contract
and Employee's rights may not be sold, assigned, transferred,
pledged as collateral, or otherwise encumbered or alienated by
Employee, except as provided herein with respect to payments to
Employee's spouse or estate.
12. Invalid Provisions. In the event any paragraph, provision
or clause of this Agreement or any combination thereof is found
to be unenforceable for any reason, such finding shall not in
any way affect the other paragraphs, provisions or clauses in
this Agreement, which shall continue in full force and effect,
and the unenforceable provision shall be interpreted in a manner
that imposes the maximum restriction or obligation permitted by
applicable law.
13. Governing Law. This Agreement shall be construed and
enforced in accordance with the laws of the State of Georgia.
14. Entire Agreement. This Agreement contains the entire
agreement of the parties and supersedes all prior agreements
and understandings, oral or written, with respect to the subject
matter hereof. This Agreement may be changed only by an agreement
in writing signed by the party against whom any waiver, change,
amendment, modification or discharge is sought.
15. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
16. Notices. Any notice required or permitted to be given under
this Agreement to Employer shall be sufficient if in writing and
if personally delivered, or sent by certified or registered mail,
first class, return receipt requested, to the principal executive
offices of Employer. Any notice required or permitted to be given
under this Agreement to Employee shall be sufficient if in writing
and if personally delivered, or sent by certified or registered
mail, first class, return receipt requested, to Employee at his
last known address as shown on Employer's personnel records.
Notices so given shall be deemed effective upon actual receipt
if personally delivered and on the fourth business day after
mailing, if so mailed. Employee shall be solely responsible
for notifying Employer of any changes of address.
IN WITNESS WHEREOF, the parties have executed this Agreement
on the [ ] day of August, 1998, effective as of August
10, 1998.
ELECTROMAGNETIC SCIENCES, INC. EMPLOYEE:
By: /s/ Thomas E. Sharon /s/ Don T. Scartz
-------------------------- -------------------------
Thomas E. Sharon Don T. Scartz
Chairman, President and
Chief Executive Officer
Exhibit 10.9
SPLIT DOLLAR INSURANCE AGREEMENT
THIS AGREEMENT made as of the 1st day of January, 1993, by and between
WILLIAM S. JACOBS (the "Owner") and ELECTROMAGNETIC SCIENCES, INC.
(the "Corporation"), a Georgia corporation.
WHEREAS, the Corporation recognizes the unique and essential services of
the Owner as an employee of the Corporation and his contributions to the
Corporation; and
WHEREAS, the Corporation has determined that its best interests would be
served by entering into a split dollar life insurance arrangement with the
Owner whereby the Corporation will assist the Owner in maintaining certain
life insurance by contributing from time to time toward the payment of
premiums due on the policy on the Owner's life; and
WHEREAS, the Corporation enters into the following Agreement subject to the
condition that such policy be assigned to the Corporation as security for
repayment of any amounts which the Corporation may contribute toward the
payment of any premiums due on such policy.
Now, therefore, for and in consideration of the mutual and reciprocal
covenants hereinafter captained and for other good and valuable
consideration, the receipt, adequacy, and sufficiency of which are hereby
acknowledged, it is hereby agreed between the parties as follows:
ARTICLE I
APPLICATION FOR INSURANCE
1.1 Owner has applied to The Northwestern Mutual Life Insurance Company
(the "Insurer") for an insurance policy (the "Policy") on the life of the
Owner, which Policy has been issued to and is owned by the Owner. The Policy
number is 12379824 and the Policy is subject to the terms of this Agreement.
The term "Policy" includes any supplemental contracts of insurance issued
by the Insurer in conjunction with the Policy.
ARTICLE II
OWNERSHIP OF POLICY
2.1 The Owner shall retain and may exercise all rights and privileges of
ownership with respect to the Policy, except as otherwise hereinafter
provided and as provided in the Collateral Assignment (as hereinafter
defined) of the Policy by the Owner. The Owner's rights shall include all
the rights of the "Owner" under the terms of the Policy, including, but
not limited to, the right to designate beneficiaries, select settlement
options, borrow on the security of the Policy and to surrender the Policy.
2.2 Other than as set forth herein and in the Collateral Assignment, the
Corporation shall have no rights of ownership with respect to the Policy.
In exchange for the Corporation's promise to pay the insurance premium on
the Policy as provided in Article IV of this Agreement, the Owner hereby
assigns to the Corporation the following limited ownership rights in the
Policy:
(a) The right to obtain one or more loans or advances on the Policy to
the extent of the Net Amount (as hereinafter defined) which has been
contributed by the Corporation toward the payment of the premiums due
on the Policy under paragraph 4.1 of Article IV of this Agreement, and
to pledge or assign the Policy for such loans or advances. If such loans
are for the purpose of paying premiums or otherwise to purchase or carry
the Policy, the Corporation agrees to adhere to the requirements of
Section 264 of the Internal Revenue Code of 1986, as amended, so that
interest on such loans remains deductible for federal income tax purposes.
(b) The right to realize against the cash value of the Policy to the
extent of the Net Amount in the event of the termination of this Agreement
or the death of the Owner as provided in Articles VIII, IX, and X of this
Agreement.
2.3 It is agreed by the parties hereto that the benefits to be paid under
the Policy may be paid by the Insurer, either by separate checks to the
parties entitled thereto or by a joint check. In the latter instance, the
Owner and the Corporation agree that the benefits paid under the Policy
shall be divided as provided herein.
2.4 The Owner shall have the right to assign any part or all of the Owner's
interest in the Policy and this Agreement to any person, entity, or trust by
execution of a written assignment delivered to the Corporation and the
Insurer.
ARTICLE III
ELECTION OF DIVIDEND OPTION
3.1 All dividends declared by the Insurer on the Policy shall be applied to
purchase additional paid up insurance on the life of the Owner.
3.2 The Owner has elected the dividend option described in the foregoing
paragraph 3.1 of this ARTICLE III and agrees to give the Corporation sixty
(60) days advance written notice prior to any change or termination of the
dividend option an selected by the Owner hereunder. In the event the
Corporation determines that such change or termination of the dividend
option adversely affects the security interest of the Corporation
hereunder or under the Collateral Assignment, this Agreement may be
terminated by the Corporation upon thirty (30) days advance written
notice to the Owner, in which event the provisions of ARTICLE IX and
ARTICLE X hereinafter set forth shall become effective and operative.
In the event the Corporation determines that such change or termination
does not affect its security interest hereunder or under the Collateral
Assignment, a conforming amendment shall be made to this Agreement to
reflect such change or termination.
ARTICLE IV
PAYMENT OF PREMIUMS ON POLICY
4.1 On or before the due date of each annual premium on the Policy, the
Corporation will pay to the Insurer the entire premium on the Policy and
will so advise the Owner. Within a reasonable period of time thereafter,
the Owner will pay to the Corporation an amount (the "P.S. 58 Cost") equal
to that portion of such annual premium which equals the cost (calculated by
application of the lower of the Internal Revenue Service Table P.S. 58 rates
or the insurer's annual term insurance rates) of the portion of the
insurance which the beneficiary or beneficiaries named by the Owner would
be entitled to receive if the Owner died during the policy year for which
the annual premium is paid.
ARTICLE V
OWNER'S OBLIGATION TO CORPORATION
5.1 The Owner shall be obligated and hereby agrees to repay to the
Corporation the net amount (the "Net Amount") which the Corporation has
paid pursuant to paragraph 4.1 of ARTICLE IV of this Agreement;
for purposes of this Agreement,
the "Net Amount" shall equal the amount of the premiums paid by the
Corporation reduced by the P.S. 58 Cost paid to the Corporation by the
Owner as provided under paragraph 4.1. This obligation of the Owner to the
Corporation shall be payable as provided in ARTICLE VIII and ARTICLE X of
this Agreement.
ARTICLE VI
ASSIGNMENT OR TERMINATION OF POLICY
6.1 The Owner will collaterally assign the Policy to the corporation as
security for the repayment of the Net Amount. The collateral assignment
will be in the form attached as Schedule "A" the "Collateral Assignment")
and will not be altered or changed without the consent of the Corporation.
6.2 While this Agreement is in force and effect, the Owner
will neither sell, surrender nor otherwise terminate the Policy without
first giving sixty (60) days advance written notice to the Corporation.
In the event the Corporation determines that such sale, surrender or
termination of the Policy adversely affects the security interest of the
Corporation hereunder or under the Collateral Assignment, this Agreement
may be terminated by the Corporation upon thirty (30) days advance written
notice to the Owner, in which event the provisions of ARTICLE IX and
ARTICLE X hereinafter set forth shall become effective and operative.
In the event the Corporation determines that such sale, surrender or
termination does not affect its security interest hereunder or under the
Collateral Assignment, a conforming amendment shall be made to this
Agreement to reflect such sale, surrender or termination.
ARTICLE VII
ADDITIONAL POLICY BENEFITS AND RIDERS
7.1 The Owner may apply for and secure such additions and riders to the
Policy
as are provided by the Insurer for the benefit of the Owner.
7.2 Upon written request by the Corporation, the owner will apply for and
secure such additions and riders to the Policy as are provided by the
Insurer for the benefit of the Corporation.
7.3 The cost or additional premium attributable to any such addition or
rider shall be paid by the party which will benefit from or be entitled to
receive the proceeds of such addition or rider.
ARTICLE VIII
DEATH CLAIMS
8.1 When the Owner dies, the Corporation shall be entitled to receive a
portion of the death benefits payable under the Policy. The amount which
the Corporation will be entitled to receive shall equal the Net Amount.
The receipt of the Net Amount by the Corporation shall constitute
satisfaction of the owner's obligation under ARTICLE V of this Agreement.
8.2 When the Owner dies, the beneficiary or beneficiaries named by the Owner
and designated in the Policy shall be entitled to receive the amount of the
death benefits provided under the Policy in excess of the Net Amount. The
Net Amount shall be paid under the settlement option in the Policy elected
by the Owner.
ARTICLE IX
TERMINATION OF AGREEMENT
9.1 This Agreement shall terminate on the occurrence of any of the following
events:
(a) Cessation of the Corporation's business.
(b) Thirty (30) days after written notice is given by either party to
the other.
(c) Termination of employment of the Owner with the Corporation for
any reason other than death.
(d) Bankruptcy, receivership or dissolution of the Corporation.
(e) Upon the election of the aggrieved party if either the Corporation
fails to pay the premium or if the Owner fails to pay the P.S. 58 Cost
to the Corporation as required by ARTICLE IV of this Agreement, provided
that any election to terminate this Agreement under this clause must be
made within so days after the failure to make such payment occurs.
(f) Repayment to the Corporation in full by the Owner of the Net Amount.
The Corporation agrees that, upon receipt of the Net Amount, the
Corporation will release the Collateral Assignment of the Policy made
by the Owner pursuant to ARTICLE VI of this Agreement.
(g) Upon the surrender of the Policy by the Owner.
(h) The fifteenth (15th) anniversary of this Agreement.
ARTICLE X
DISPOSITION OF POLICY ON TERMINATION OF AGREEMENT
10.1 In the event this Agreement is terminated pursuant to paragraph 9.1
of ARTICLE IX of this Agreement, the Owner shall have 90 days in which to
repay to the Corporation the Net Amount. upon receipt of the Net Amount, the
Corporation shall release the Collateral Assignment. In the event the Owner
does not repay the Net Amount within this 90-day period, the Corporation
may enforce any rights which it has under the Collateral Assignment and may
take whatever other action it deems appropriate, at law or in equity, to
collect, or to cause the Owner to repay to the Corporation, the Net Amount.
The Owner agrees, promptly upon any such termination, to surrender the
Policy to the Insurer for cancellation and to direct the Insurer to apply
the proceeds of such cancellation to the repayment of the Net Amount.
ARTICLE XI
INSURER NOT A PARTY
11.1 The Insurer (a) shall not be deemed to be a party to this Agreement for
any purpose nor in any way responsible to the parties to this Agreement for
any purpose nor in any way responsible for its validity; (b) shall not be
obligated to inquire as to the distribution of any monies payable or paid
by it under the Policy pursuant to the terms of this Agreement; and
(c) shall be fully discharged from any and all liability under the terms
of any policy issued by it, which is subject to the terms of this Agreement,
upon payment or other performance of its obligations in accordance with the
terms of such policy. The Insurer shall be bound only by the provisions of
and endorsements on the Policy, and the Insurer shall in no way be bound by
or be deemed to have notice of 'he provisions of this Agreement.
ARTICLE XII
AMENDMENT OF AGREEMENT
12.1 This Agreement shall not be modified or amended except by a writing
signed by the Corporation and the Owner. This Agreement shall inure to the
benefit of and shall be binding upon the heirs, personal representatives,
successors and assigns of each party to this Agreement.
ARTICLE XIII
AGREEMENT OF FURTHER PERFORMANCE
13.1 Each of the parties, for itself and its heirs, personal representatives,
successors and assigns, agrees to take such further action, do such other
things, and execute such other writings as shall be necessary and proper to
carry out the terms and provisions of this Agreement.
ARTICLE XIV
STATE LAW
14.1 This Agreement shall be subject to and shall be construed under the
laws of the State of Georgia.
ARTICLE XV
NO WAIVER
15.1 No waiver of a breach or any provision of this Agreement shall be
construed to be a waiver of any breach of any other provisions of this
Agreement or of any succeeding breach of the same provision. No delay in
acting with regard to any breach of any provision of this Agreement shall
be construed to be a waiver of such breach.
ARTICLE XVI
COUNTERPARTS
16.1 This Agreement may be executed in multiple counterparts, each of which
shall be deemed an original and together shall constitute one and the same
agreement.
ARTICLE XVII
SPECIAL PROVISIONS
17.1 The parties to this Agreement acknowledge that this Agreement is an
individually negotiated arrangement with a highly compensated management
employee. For purposes of any provision of the Employee Retirement Income
Security Act of 1974, as amended, that may be applicable, the following
provisions apply:
(a) The Corporation is the named fiduciary:
(b) The funding policy of this Agreement is that the Corporation will,
as provided in this Agreement, remit all premiums on the Policy when
due.
(c) A claim shall be deemed filed when a written request is presented
by the Owner or his beneficiary to the Claims Manager designated by the
Corporation;
(d) If a claim is wholly or partially denied, the Claims Manager shall
furnish the owner or his beneficiary with written notice of the denial
within ninety (90) days of the date that the original claim was filed.
This notice of denial shall provide: (1) the reason is) for denial:
(2) specific reference to pertinent provisions of this Agreement on
which the denial is based: (3) a description of any additional
information needed to perfect the claim and an explanation of why such
information is necessary; and (4) an explanation of the applicable claims
review procedure;
(e) The Owner or his beneficiary shall have sixty (60) days from receipt
of the denial notice in which to make written application for review by
the Claims Manager. With respect to such review, the owner or his
beneficiary may review pertinent documents and submit written issues and
comments; and
(f) Within sixty (60) days of the Claims Manager's receipt of a written
application for review, together with any related written comments, the
Claims Manager shall issue a written decision on such review, a copy of
which shall be furnished to the owner or his beneficiary. Such decision
on review shall include specific reasons for the decision and specific
references to the pertinent provisions of this Agreement on which the
decision is based. If a copy of the decision on review is not furnished
to the Owner or his beneficiary within sixty (60) days, the claim shall
be deemed denied on review.
IN TESTIMONY WHEREOF, the Corporation, pursuant to the proper corporate
authority, has caused this Agreement to be signed on its behalf and its
seal to be affixed and attested by its proper officers and the Owner has
hereunto subscribed his name and seal, all as of the day and year first
above set forth.
OWNER
/s/ William S. Jacobs
ELECTROMAGNETIC SCIENCES, INC.
By: /s/ Don T. Scartz
Duly Authorized Officer
Exhibit 10.13
As adopted January 24, 1997
and amended through
February 19, 1999
EMS TECHNOLOGIES, INC.
1997 STOCK INCENTIVE PLAN
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS 1
(a) "Award" 1
(b) "Board" 1
(c) "Code" 1
(d) "Committee" 1
(e) "Company" 1
(f) "Director" 2
(g) "Disinterested Person" 2
(h) "Employee" 2
(i) "Employer" 2
(j) "Fair Market Value" 3
(k) "Grantee" 3
(l) "ISO" 3
(m) "1934 Act" 3
(n) "Officer" 3
(o) "Option" 3
(p) "Option Agreement" 4
(q) "Optionee" 4
(r) "Option Price" 4
(s) "Parent" 4
(t) "Plan" 4
(u) "Purchasable" 4
(v) "Qualified Domestic Relations Order" 4
(w) "Reload Option" 4
(x) "Restricted Stock" 5
(y) "Restriction Agreement" 5
(z) "Stock" 5
(aa) "Subsidiary" 5
ARTICLE II THE PLAN 5
Section 2.1 Name 5
Section 2.2 Purpose 5
Section 2.3 Effective Date 5
Section 2.4 Termination Date 5
TABLE OF CONTENTS (Cont'd)
Page
ARTICLE III ELIGIBILITY 6
ARTICLE IV ADMINISTRATION 6
Section 4.1 Duties and Powers of the Committee 6
Section 4.2 Interpretation; Rules 6
Section 4.3 No Liability 7
Section 4.4 Majority Rule 7
Section 4.5 Company Assistance 7
ARTICLE V SHARES OF STOCK SUBJECT TO PLAN 7
Section 5.1 Limitations 7
Section 5.2 Antidilution 8
ARTICLE VI OPTIONS 9
Section 6.1 Types of Options Granted 9
Section 6.2 Option Grant and Agreement 10
Section 6.3 Optionee Limitations 10
Section 6.4 $100,000 Limitation 11
Section 6.5 Option Price 11
Section 6.6 Exercise Period 11
Section 6.7 Option Exercise 12
Section 6.8 Nontransferability of Option 13
Section 6.9 Termination of Employment 14
Section 6.10 Employment Rights 14
Section 6.11 Certain Successor Options 14
Section 6.12 Conditions to Issuing Option Stock 15
Section 6.13 Automatic Option Grants to Certain
Directors 15
ARTICLE VII RESTRICTED STOCK 17
Section 7.1 Awards of Restricted Stock 17
Section 7.2 Non-Transferability 18
Section 7.3 Lapse of Restrictions 18
Section 7.4 Termination of Employment 18
Section 7.5 Treatment of Dividends 18
Section 7.6 Delivery of Shares 18
Section 7.7 Payment of Withholding Taxes 19
ARTICLE VIII TERMINATION, AMENDMENT AND MODIFICATION OF PLAN 20
ARTICLE IX MISCELLANEOUS 20
Section 9.1 Replacement or Amended Grants 20
Section 9.2 Forfeiture for Competition 20
Section 9.3 Plan Binding on Successors 21
Section 9.4 Headings Not a Part of Plan 21
EMS TECHNOLOGIES, INC.
1997 STOCK INCENTIVE PLAN
ARTICLE I
DEFINITIONS
As used herein, the following terms have the meanings hereinafter
set forth unless the context clearly indicates to the contrary:
(a) "Award" shall mean a grant of Restricted Stock.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Code" shall mean the United States Internal Revenue Code of
1986, as amended, including effective date and transition rules (whether or
not codified). Any reference herein to a specific section or sections of
the Code shall be deemed to include a reference to any corresponding
provision of future law.
(d) "Committee" shall mean a committee of at least two Directors
appointed from time to time by the Board, having the duties and authority
set forth herein in addition to any other authority granted by the Board;
provided, however, that with respect to any Options or Awards granted to
an individual who is also an Officer or Director, the Committee shall
consist of at least two Non-Employee Directors (who need not be members
of the Committee with respect to Options or Awards granted to any other
individuals), and all authority and discretion shall be exercised by such
Non-Employee Directors, and references herein to the "Committee" shall
mean such Non-Employee Directors insofar as any actions or determinations
of the Committee shall relate to or affect Options or Awards made to or
held by any Officer or Director.
(e) "Company" shall mean EMS Technologies, Inc., a Georgia
corporation.
(f) "Director" shall mean a member of the Board.
(g) "Employee" shall mean any employee of the Company or any
Subsidiary of the Company.
(h) "Employer" shall mean the corporation that employs a Grantee.
(i) "Fair Market Value" of the shares of Stock on any date
shall mean
(i) the closing sales price, regular way, or in the absence
thereof the mean of the last reported bid and asked quotations, on such
date on the exchange having the greatest volume of trading in the shares
during the thirty-day period preceding such date (or if such exchange was
not open for trading on such date, the next preceding date on which it was
open); or
(ii) if there is no price as specified in (i), the final
reported sales price, or if not reported in the following manner, the
mean of the closing high bid and low asked prices, in the over-the-counter
market for the shares as reported by the National Association of Securities
Dealers Automatic Quotation System or, if not so reported, then as reported
by the National Quotation Bureau Incorporated, or if such organization is
not in existence, by an organization providing similar services, on such
date (or if such date is not a date for which such system or organization
generally provides reports, then on the next preceding date for which it
does so); or
(iii) if there also is no price as specified in (ii), the
price determined by the Committee by reference to bid-and-asked quotations
for the shares provided by members of an association of brokers and dealers
registered pursuant to subsection 15(b) of the 1934 Act, which members make
a market in the shares, for such recent dates as the Committee shall
determine to be appropriate for fairly determining current market value;
or
(iv) if there also is no price as specified in (iii), the
amount determined in good faith by the Committee based on such relevant
facts, which may include opinions of independent experts, as may be
available to the Committee.
(j) "Grantee" shall mean an Employee, former employee or other
person who is an Optionee or who has received an Award of Restricted Stock.
(k) "ISO" shall mean an Option that complies with and is subject
to the terms, limitations and conditions of Code section 422 and any
regulations promulgated with respect thereto.
(l) "1934 Act" shall mean the Securities Exchange Act of 1934,
as amended from time to time.
(m) "Non-Employee Director" shall have the meaning set forth
for such term or corresponding concept in Rule 16b-3 under the 1934 Act,
as the same may be in effect from time to time, or in any successor rule
thereto, and shall be determined for all purposes under the Plan according
to interpretative or "no-action" positions with respect thereto issued by
the Securities and Exchange Commission or its staff; provided, however,
that to the extent it is determined and intended that Options qualify as
"performance-based compensation" within the meaning of section 162(m) of
the Code, a person shall be a "Non-Employee Director" only if he or she is
also an "outside director" within the meaning of such section 162(m).
(n) "Officer" shall mean a person who constitutes an officer of
the Company for the purposes of Section 16 of the 1934 Act, as determined
by reference to such Section 16 and to the rules, regulations, judicial
decisions, and interpretative or "no-action" positions with respect thereto
of the Securities and Exchange Commission or its staff, as the same may be
in effect or set forth from time to time.
(o) "Option" shall mean a contractual right to purchase Stock
granted pursuant to the provisions of Article VI hereof.
(p) "Option Agreement" shall mean an agreement between the
Company and an Optionee setting forth the terms of an Option.
(q) "Optionee" shall mean a person to whom an Option has been
granted hereunder.
(r) "Option Price" shall mean the price at which an Optionee may
purchase a share of Stock pursuant to an Option.
(s) "Parent", when used with respect to any subject corporation,
shall mean any other corporation that owns stock possessing 50% or more of
the total combined voting power of all classes of stock of the subject
corporation or that owns such stock of another corporation in an unbroken
chain of corporations having such ownership of the stock of another
corporation and ending with the subject corporation.
(t) "Plan" shall mean the 1997 Stock Incentive Plan of the
Company.
(u) "Purchasable," when used to describe Stock, shall refer to
Stock that may be purchased by an Optionee under the terms of this Plan on
or after a certain date specified in the applicable Option Agreement.
(v) "Qualified Domestic Relations Order" shall have the meaning
set forth in the Code or in the Employee Retirement Income Security Act of
1974, as amended, or the rules and regulations promulgated under the Code
or such Act.
(w) "Reload Option" shall mean an Option that is granted, without
further action of the Committee, (i) to an Optionee who surrenders or
authorizes the withholding of shares of Stock in payment of amounts
specified in paragraphs 6.7(c) or 6.7(d) hereof, (ii) for the same number
of shares as is so paid, (iii) as of the date of such payment and at an
Option Price equal to the Fair Market Value of the Stock on such date, and
(iv) otherwise on the same terms and conditions as the Option whose exercise
has occasioned such payment, subject to such contingencies, conditions
or other terms as the Committee shall specify at the time such exercised
Option is granted.
(x) "Restricted Stock" shall mean Stock issued, subject to
restrictions, to an Employee pursuant to Article VII hereof.
(y) "Restriction Agreement" shall mean the agreement setting
forth the terms of an Award, and executed by a Grantee as provided in
Section 7.1 hereof.
(z) "Stock" shall mean the $.10 par value common stock of the
Company or, in the event that the outstanding shares of such stock are
hereafter changed into or exchanged for shares of a different class of
stock or securities of the Company or some other corporation, such other
stock or securities.
(aa) "Subsidiary", when used with respect to any subject
corporation, shall mean any other corporation as to which the subject
corporation is a Parent.
ARTICLE II
THE PLAN
2.1 Name. This plan shall be known as the "Electromagnetic Sciences,
Inc. 1997 Stock Incentive Plan."
2.2 Purpose. The purpose of the Plan is to advance the interests of
the Company, its shareholders, and any Subsidiary of the Company, by
offering certain Employees and Directors an opportunity to acquire or
increase their proprietary interests in the Company. Options and Awards
will promote the growth and profitability of the Company and any Subsidiary
of the Company, because Grantees will be provided with an additional
incentive to achieve the Company's objectives through participation in its
success and growth.
2.3 Effective Date. The Plan shall become effective on January 24,
1997.
2.4 Termination Date. No further Options or Awards shall be granted
hereunder on or after January 24, 2007, but all Options or Awards granted
prior to that time shall remain in effect in accordance with their terms.
ARTICLE III
ELIGIBILITY
The persons eligible to participate in this Plan shall consist only of
Directors and those Employees whose participation the Committee determines
is in the best interests of the Company. However, no ISO's may be granted,
and no Options or Awards may be granted to any Director or Officer, prior
to the approval of this Plan by the Company's shareholders. Persons who
are not Employees but who serve as directors of any Subsidiary of the
Company shall also be eligible to participate in this Plan, and references
herein to "Employee" shall be deemed to include any such persons to the
extent appropriate for him or her to become a Grantee.
ARTICLE IV
ADMINISTRATION
4.1 Duties and Powers of the Committee. The Plan shall be
administered by the Committee. The Committee shall select one of its
members as its Chairman and shall hold its meetings at such times and
places as it may determine. The Committee shall keep minutes of its
meetings and shall make such rules and regulations for the conduct of
its business as it may deem necessary. The Committee shall have the
power to act by unanimous written consent in lieu of a meeting, and shall
have the right to meet telephonically. In administering the Plan, the
Committee's actions and determinations shall be binding on all interested
parties. The Committee shall have the power to grant Options or Awards in
accordance with the provisions of the Plan. Subject to the provisions of
the Plan, the Committee shall have the discretion and authority to
determine those individuals to whom Options or Awards will be granted and
whether such Options shall be accompanied by the right to receive Reload
Options, the number of shares of Stock subject to each Option or Award,
such other matters as are specified herein, and any other terms and
conditions of an Option Agreement or Restriction Agreement. To the extent
not inconsistent with the provisions of the Plan, the Committee shall have
the authority to amend or modify an outstanding Option Agreement or
Restriction Agreement, or to waive any provision thereof, provided that
the Grantee consents to such action.
4.2 Interpretation; Rules. Subject to the express provisions of the
Plan, the Committee also shall have complete authority to interpret the
Plan, to prescribe, amend and rescind rules and regulations relating to
it, and to make all other determinations necessary or advisable in the
administration of the Plan, including, without limitation, the amending
or altering of any Options or Awards granted hereunder as may be required
to comply with or to conform to any federal, state or local laws or
regulations.
4.3 No Liability. Neither any member of the Board nor any member of
the Committee shall be liable to any person for any act or determination
made in good faith with respect to the Plan or any Option or Award granted
hereunder.
4.4 Majority Rule. A majority of the members of the Committee shall
constitute a quorum, and any action taken by a majority at a meeting at
which a quorum is present, or any action taken without a meeting evidenced
y a writing executed by all the members of the Committee, shall constitute
the action of the Committee.
4.5 Company Assistance. The Company shall supply full and timely
information to the Committee on all matters relating to eligible persons,
their employment, death, retirement, disability or other termination of
employment, and such other pertinent facts as the Committee may require.
The Company shall furnish the Committee with such clerical and other
assistance as is necessary in the performance of its duties.
ARTICLE V
SHARES OF STOCK SUBJECT TO PLAN
5.1 Limitations. Shares subject to an Option or issued as an Award
may be either authorized and unissued shares or shares issued and later
acquired by the Company. Subject to any antidilution adjustment pursuant
to the provisions of Section 5.2 hereof, the maximum number of shares of
Stock that may be issued hereunder shall be 400,000 (of which a maximum of
80,000 shares may be issued as Restricted Stock). Shares (i) covered by
any unexercised portion of an Option that has terminated for any reason;
(ii) covered by any forfeited portion of an Award (except any portion as to
which the Grantee has received, and not forfeited, dividends or other
benefits of ownership other than voting rights); (iii) withheld in payment
of the Option Price or withholding taxes; or (iv) issued hereunder but
equal to the number of shares surrendered in payment of the Option Price or
withholding taxes or purchased by the Company for an aggregate price not
exceeding the aggregate cash received from Grantees in payment of Option
Prices or withholding taxes, may each again be optioned or awarded under
the Plan, and such shares shall not be considered as having been optioned
or issued in computing the number of shares of Stock remaining available
for option or award hereunder.
5.2 Antidilution.
(a) In the event that the outstanding shares of Stock are changed
into or exchanged for a different number or kind of shares or other
securities of the Company by reason of merger, consolidation,
reorganization, recapitalization, reclassification, combination or exchange
of shares, stock split or stock dividend, or in the event that any
spin-off, spin-out or other distribution of assets materially affects the
price of the Company's stock:
(i) The aggregate number and kind of shares of Stock for
which Options or Awards may be granted hereunder shall be adjusted
proportionately by the Committee; and
(ii) The rights of Optionees (concerning the number of
shares subject to Options and the Option Price) under outstanding Options
and the rights of the holders of Awards (concerning the terms and
conditions of the lapse of any then-remaining restrictions), shall be
adjusted proportionately by the Committee.
(b) If the Company shall be a party to any reorganization in
which it does not survive, involving merger, consolidation, or acquisition
of the stock or substantially all the assets of the Company, the Committee,
in its discretion, may:
(i) notwithstanding other provisions hereof, declare that
all Options granted under the Plan shall become exercisable immediately
notwithstanding the provisions of the respective Option Agreements
regarding exercisability, that all such Options shall terminate a specified
period of time after the Committee gives written notice of the immediate
right to exercise all such Options and of the decision to terminate all
Options not exercised within such period, and that all then-remaining
restrictions pertaining to Awards under the Plan shall immediately lapse;
or
(ii) notify all Grantees that all Options or Awards granted
under the Plan shall be assumed by the successor corporation or substituted
on an equitable basis with options or restricted stock issued by such
successor corporation.
(c) If the Company is to be liquidated or dissolved in connection
with a reorganization described in paragraph 5.2(b), the provisions of
such paragraph shall apply. In all other instances, the adoption of a
plan of dissolution or liquidation of the Company shall, notwithstanding
other provisions hereof, cause all then-remaining restrictions pertaining
to Awards under the Plan to lapse, and shall cause every Option outstanding
under the Plan to terminate to the extent not exercised prior to the
adoption of the plan of dissolution or liquidation by the shareholders,
provided that, notwithstanding other provisions hereof, the Committee may
declare all Options granted under the Plan to be exercisable at any time on
or before the fifth business day following such adoption notwithstanding
the provisions of the respective Option Agreements regarding exercisability.
(d) The adjustments described in paragraphs (a) through (c) of
this Section 5.2, and the manner of their application, shall be determined
solely by the Committee, and any such adjustment may provide for the
elimination of fractional share interests. The adjustments required under
this Article V shall apply to any successors of the Company and shall be
made regardless of the number or type of successive events requiring such
adjustments.
ARTICLE VI
OPTIONS
6.1 Types of Options Granted. Within the limitations provided herein,
Options may be granted to one Employee at one or several times or to
different Employees at the same time or at different times, in either
case under different terms and conditions, as long as the terms and
conditions of each Option are consistent with the provisions of the Plan.
Without limitation of the foregoing, Options may be granted subject to
conditions based on the financial performance of the Company or any other
factor the Committee deems relevant.
6.2 Option Grant and Agreement. Each Option granted or modified
hereunder shall be evidenced (a) by either minutes of a meeting or a
written consent of the Committee, and (b) by a written Option Agreement
executed by the Company and the Optionee. The terms of the Option,
including the Option's duration, time or times of exercise, exercise price,
whether the Option is intended to be an ISO, whether the Option is
transferable under paragraph 6.8(b), and whether the Option is to be
accompanied by the right to receive a Reload Option, shall be stated in
the Option Agreement. Separate Option Agreements shall be used for
Options intended to be ISO's and those not so intended, but any failure
to use such separate Agreements shall not invalidate, or otherwise
adversely affect the Optionee's rights under and interest in, the
Options evidenced thereby.
6.3 Optionee Limitations. The Committee shall not grant an ISO to
any person who, at the time the ISO would be granted:
(a) is not an Employee; or
(b) owns or is considered to own stock possessing more than
10% of the total combined voting power of all classes of stock of the
Employer, or any Parent or Subsidiary of the Employer; provided, however,
that this limitation shall not apply if at the time an ISO is granted the
Option Price is at least 110% of the Fair Market Value of the Stock
subject to such Option and such Option by its terms would not be
exercisable after the expiration of five years from the date on which
the Option is granted. For the purpose of this paragraph (b), a person
shall be considered to own (i) the stock owned, directly or indirectly,
by or for his brothers and sisters (whether by the whole or half blood),
spouse, ancestors and lineal descendants, (ii) the stock owned, directly
or indirectly, by or for a corporation, partnership, estate, or trust in
proportion to such person's stock interest, partnership interest or
beneficial interest therein, and (iii) the stock which such person may
purchase under any outstanding options of the Employer or of any Parent
or Subsidiary of the Employer.
6.4 Certain Limitations
(a) Limitation on Number of Shares. No Optionee shall be
granted, during any calendar year, Options to purchase in excess of
50,000 shares of stock.
(b) $100,000 Limitation on ISO's. Except as provided below,
the Committee shall not grant an ISO to, or modify the exercise provisions
of outstanding ISO's held by, any person who, at the time the ISO is
granted (or modified), would thereby receive or hold any incentive stock
options (as described in Code section 422) of the Employer and any Parent
or Subsidiary of the Employer, such that the aggregate Fair Market Value
(determined as of the respective dates of grant or modification of each
option) of the stock with respect to which such incentive stock options
are exercisable for the first time during any calendar year is in excess
of $100,000; provided, that the foregoing restriction on modification of
outstanding ISO's shall not preclude the Committee from modifying an
outstanding ISO if, as a result of such modification and with the consent
of the Optionee, such Option no longer constitutes an ISO; and provided
that, if the $100,000 limitation described in this Section 6.4 is exceeded,
an Option that otherwise qualifies as an ISO shall be treated as an ISO up
to the limitation and the excess shall be treated as an Option not
qualifying as an ISO. The preceding sentence shall be applied by taking
options intended to be ISO's into account in the order in which they were
granted.
6.5 Option Price. The Option Price under each Option shall be
determined by the Committee. However, the Option Price shall not be
less than the Fair Market Value of the Stock on the date that the Option
is granted (or, in the case of an ISO that is subsequently modified, on
the date of such modification).
6.6 Exercise Period. The period for the exercise of each Option
granted hereunder shall be determined by the Committee, but the Option
Agreement with respect to each Option intended to be an ISO shall provide
that such Option shall not be exercisable after a date not more than ten
years from the date of grant (or modification) of the Option. In addition,
no Option granted to an Employee who is also an Officer or Director shall
be exercisable prior to the expiration of six months from the date such
Option is granted, other than in the case of the death or disability of
such Employee.
6.7 Option Exercise.
(a) Unless otherwise provided in the Option Agreement, an
Option may be exercised at any time or from time to time during the
term of the Option as to any or all whole shares that have become
Purchasable under the provisions of the Option, but not at any time
as to less than 100 shares unless the remaining shares that have become
so Purchasable are less than 100 shares. The Committee shall have the
authority to prescribe in any Option Agreement that the Option may be
exercised only in accordance with a vesting schedule during the term of
the Option.
(b) An Option shall be exercised by (i) delivery to the
Treasurer of the Company at its principal office of written notice
of exercise with respect to a specified number of shares of Stock,
and (ii) payment to the Company at that office of the full amount of
the Option Price for such number of shares.
(c) The Option Price shall be paid in full upon the exercise
of the Option. The Committee may provide in an Option Agreement that,
in lieu of cash, all or any portion of the Option Price may be paid by
(i) tendering to the Company shares of Stock duly endorsed for transfer
and owned by the Optionee, or (ii) delivering to the Company an
attestation of the Optionee's then-current ownership of a number of
shares equal to the number thereby authorized to be withheld by the
Company from the shares otherwise deliverable upon exercise of the
Option, in each case to be credited against the Option Price at the
Fair Market Value of such shares on the date of exercise (however, no
fractional shares may be so transferred, and the Company shall not be
obligated to make any cash payments in consideration of any excess of
the aggregate Fair Market Value of shares transferred over the aggregate
Option Price).
(d) In addition to and at the time of payment of the Option
Price, the Optionee shall pay to the Company in cash the full amount
of any federal, state and local income, employment or other taxes
required to be withheld from the income of such Optionee as a result
of such exercise. However, in the discretion of the Committee any Option
Agreement may provide that all or any portion of such tax obligations,
together with additional taxes not exceeding the actual additional taxes
to be owed by the Optionee as a result of such exercise, may, upon the
irrevocable election of the Optionee, be paid by (i) tendering to the
Company whole shares of Stock duly endorsed for transfer and owned by
the Optionee, (ii) delivering to the Company an attestation of the
Optionee's then-current ownership of a number of shares equal to the
number thereby authorized to be withheld by the Company from the shares
otherwise deliverable upon exercise of the Option, or (iii) authorizing
the Company to withhold shares of Stock otherwise issuable upon exercise
of the Option, in either case in that number of shares having a Fair
Market Value on the date of exercise equal to the amount of such taxes
thereby being paid, in all cases subject to such restrictions as the
Committee may from time to time determine, including any such restrictions
as may be necessary or appropriate to satisfy the conditions of the
exemption set forth in Rule 16b-3 under the 1934 Act.
(e) The holder of an Option shall not have any of the rights
of a shareholder with respect to the shares of Stock subject to the
Option until such shares have been issued upon exercise of the Option.
6.8 Nontransferability of Option.
(a) Except as provided in paragraph 6.8(b), no Option or any
rights therein shall be transferable by an Optionee other than by will
or the laws of descent and distribution, or (except for an ISO) pursuant
to a Qualified Domestic Relations Order. During the lifetime of an
Optionee, an Option granted to that Optionee shall be exercisable only
by such Optionee, by such Optionee's guardian or other legal representative,
should one be appointed, or by such Optionee's transferee permitted
under paragraph 6.8(b).
(b) The Committee may, in its discretion, provide that all or
a portion of an Option (other than an ISO) may be transferred by the
Optionee to (i) the spouse, children or grandchildren of the Optionee
("Immediate Family Members"), (ii) a trust or trusts for the exclusive
benefit of such Immediate Family Members, or (iii) a partnership in
which the Optionee and or such Immediate Family Members are the only
partners. Following transfer, any such Option shall continue to be
subject to the same terms and conditions as were applicable immediately
prior to transfer, including those terms and conditions governing transfer
and the effect on such Option of the termination of employment of the
Optionee. The Company shall have no obligation to any transferee to
provide notice of any termination of an Option as a result of termination
of the Optionee's employment. The Committee may specify as a condition
of any such transfer the manner in which the Optionee shall remain
responsible for the payment of taxes required to be withheld as a
result of the exercise of such transferred Option.
6.9 Termination of Employment. The Committee shall have the power
to specify, with respect to the Options granted to any particular Optionee,
the effect upon such Optionee's right to exercise an Option of the
termination of such Optionee's employment under various circumstances,
which effect may include (but is not limited to) immediate or deferred
termination of such Optionee's rights under an Option, or acceleration
of the date at which an Option may be exercised in full. With respect
to an ISO, such effects shall be consistent with applicable requirements
for treatment as an ISO.
6.10 Employment Rights. Options granted under the Plan shall not be
affected by any change of employment so long as the Optionee continues to
be an Employee. Nothing in the Plan or in any Option Agreement shall
confer on any person any right to continue in the employ of the Company or
any Subsidiary of the Company, or shall interfere in any way with the right
of the Company or any such Subsidiary to terminate such person's employment
at any time.
6.11 Certain Successor Options. To the extent not inconsistent with
the terms, limitations and conditions of Code section 422, and any
regulations promulgated with respect thereto, an Option issued in respect
of an option held by an employee to acquire stock of any entity acquired,
by merger or otherwise, by the Company (or by any Subsidiary of the Company)
may contain terms that differ from those stated in this Article VI, but
solely to the extent necessary to preserve for any such employee the rights
and benefits contained in such predecessor option, or to satisfy the
requirements of Code section 424(a).
6.12 Conditions to Issuing Option Stock. The Company shall not be
required to issue or deliver any Stock upon the full or partial exercise of
any Option prior to fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock
exchanges on which the Stock is then listed;
(b) The completion of any registration or other qualification
of such shares that the Company shall determine to be necessary or
advisable under any federal or state law or under the rulings or
regulations of the Securities and Exchange Commission or any other
governmental regulatory body, or the Company's determination that an
exemption is available from such registration or qualification;
(c) The obtaining of any approval or other clearance from any
federal or state governmental agency that the Company shall determine to
be necessary or advisable; and
(d) The lapse of such reasonable period of time following
exercise as shall be appropriate for reasons of administrative convenience.
Unless the shares of Stock covered by the Plan shall be the subject
of an effective registration statement under the Securities Act of 1933,
as amended, stock certificates issued and delivered to Optionees shall
bear such restrictive legends as the Company shall deem necessary or
advisable pursuant to applicable federal and state securities laws.
6.13 Automatic Option Grants to Certain Directors.
(a) Options for New Directors. Each person who is not an
Employee, or an employee of any Parent of the Company, shall automatically,
and without any action of the Board or the Committee, be granted, on the
first day on which such person serves as a Director, an Option for the
purchase of 10,000 shares of Stock (subject to automatic proportionate
adjustment for stock splits or stock dividends, and otherwise to
proportionate adjustment by the Committee as provided in Section 5.2).
Each such Option shall become exercisable as to 2,000 shares on the date
that is six months after the date of grant, and as to an additional 2,000
shares on each of the first, second, third and fourth anniversaries of
such six-month date.
(b) Additional Options for Continuing Service. Each person who
is not at that time an Employee, or an employee of any Parent of the
Company, shall automatically and without any action of the Board or the
Committee, be granted, on the date on which such person is elected to a
new one-year term of service beginning after such person has completed
five one-year terms of service following the grant (whether under this
Plan or otherwise)to such person of options for 10,000 shares that become
exercisable based on continued service as a Director, and on each
subsequent date on which such person is elected to a further term of
service as a Director, an Option for the purchase of 2,500 shares of
Stock (subject to automatic proportionate adjustment for stock splits or
stock dividends, and otherwise to proportionate adjustment by the Committee
as provided in Section 5.2). Each such Option shall become exercisable on
the date that is six months after the date of grant.
(c) Other Terms of Automatic Options. Each Option automatically
granted under this Section 6.13 shall not be an ISO, shall not include the
right to receive a Reload Option, and shall have an Option Price equal to
the Fair Market Value of the Stock on the date of grant. Each such Option
shall become immediately exercisable in the event a party other than the
Company or any Parent or Subsidiary of the Company purchases or otherwise
acquires shares of Stock pursuant to a tender offer or exchange offer for
such shares, or any person or group becomes the beneficial owner (for the
purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended) of 50% or more of the outstanding shares of the Stock. To the
extent such an Option shall have become exercisable, it shall be
non-forfeitable and shall remain exercisable until the tenth anniversary
of its date of grant, but if the Grantee ceases to be a Director for any
reason, any portion of such Option that is not at that time exercisable
shall immediately terminate and shall not thereafter become exercisable.
The Option Price for each such Option may be paid in cash or in the manners
specified in the second sentence of paragraph 6.7(c) hereof. In addition,
any taxes related to the exercise of each such Option may be paid in the
manner contemplated in the second sentence of paragraph 6.7(d) hereof.
ARTICLE VII
RESTRICTED STOCK
7.1 Awards of Restricted Stock. The Committee may grant Awards of
Restricted Stock upon determination by the Committee, acting pursuant to
the delegation hereby of the Board's authority to make such determinations,
that the value or other benefit to the Company of the services of a Grantee
theretofore performed or to be performed as a condition of the lapse of
restrictions applicable to such Restricted Stock, or the benefit to the
Company of the incentives created by the issuance thereof, is adequate
consideration for the issuance of such shares. Each such Award shall be
governed by a Restriction Agreement between the Company and the Grantee.
Each Restriction Agreement shall contain such restrictions, terms and
conditions as the Committee shall, in its discretion, determine, and may
require that an appropriate legend be placed on the certificates
evidencing the subject Restricted Stock.
Shares of Restricted Stock granted pursuant to an Award hereunder
shall be issued in the name of the Grantee as soon as reasonably practicable
after the Award is granted, provided that the Grantee has executed the
Restriction Agreement governing the Award, the appropriate blank stock
powers and, in the discretion of the Committee, an escrow agreement and
any other documents which the Committee may require as a condition to the
issuance of such shares. If a Grantee shall fail to execute the foregoing
documents, within any time period prescribed by the Committee, the Award
shall be null and void. At the discretion of the Committee, shares of
Restricted Stock issued in connection with an Award shall be held by the
Company or deposited together with the stock powers with an escrow agent
designated by the Committee. Unless the Committee determines otherwise and
as set forth in the Restriction Agreement, upon issuance of such shares,
the Grantee shall have all of the rights of a shareholder with respect to
such shares, including the right to vote the shares and to receive all
dividends or other distributions paid or made with respect to them.
7.2 Non-Transferability. Until any restrictions upon Restricted
Stock awarded to a Grantee shall have lapsed in a manner set forth in
Section 7.3, such shares of Restricted Stock shall not be transferable
other than by will or the laws of descent and distribution, or pursuant
to a Qualified Domestic Relations Order, nor shall they be delivered to
the Grantee.
7.3 Lapse of Restrictions. Restrictions upon Restricted Stock
awarded hereunder shall lapse at such time or times (but, with respect
to any award to an Employee who is also a Director or Officer, not less
than six months after the date of the Award) and on such terms and
conditions as the Committee shall, in its discretion, determine at the
time the Award is granted or thereafter.
7.4 Termination of Employment. The Committee shall have the power
to specify, with respect to each Award granted to any particular Employee,
the effect upon such Grantee's rights with respect to such Restricted Stock
of the termination of such Grantee's employment under various circumstances,
which effect may include (but is not limited to) immediate or deferred
forfeiture of such Restricted Stock or acceleration of the date at which
any then-remaining restrictions shall lapse.
7.5 Treatment of Dividends. At the time an Award of Restricted
Stock is made the Committee may, in its discretion, determine that the
payment to the Grantee of any dividends, or a specified portion thereof,
declared or paid on such Restricted Stock shall be (i) deferred until the
lapsing of the relevant restrictions, and (ii) held by the Company for the
account of the Grantee until such time. In the event of such deferral,
there shall be credited at the end of each year (or portion thereof)
interest on the amount of the account at the beginning of the year at a
rate per annum determined by the Committee. Payment of deferred dividends,
together with interest thereon, shall be made upon the lapsing of
restrictions imposed on such Restricted Stock, and any dividends deferred
(together with any interest thereon) in respect of Restricted Stock shall
be forfeited upon any forfeiture of such Restricted Stock.
7.6 Delivery of Shares. Within a reasonable period of time
following the lapse of the restrictions on shares of Restricted Stock,
the Committee shall cause a stock certificate or certificates to be
delivered to the Grantee with respect to such shares. Such shares shall
be free of all restrictions hereunder, except that if the shares of stock
covered by the Plan shall not be the subject of an effective registration
statement under the Securities Act of 1933, as amended, such stock
certificates shall bear such restrictive legends as the Company shall deem
necessary or advisable pursuant to applicable federal and state securities
laws.
7.7 Payment of Withholding Taxes.
(a) The Restriction Agreement may authorize the Company to
withhold from compensation otherwise due to the Grantee the full amount
of any federal, state and local income, employment or other taxes required
to be withheld from the income of such Grantee as a result of the lapse of
the restrictions on shares of Restricted Stock, or otherwise as a result of
the recognition of taxable income with respect to an Award. At the time of
and as a condition to the delivery of a stock certificate or certificates
pursuant to Section 7.6, the Grantee shall pay to the Company in cash any
balance owed with respect to such withholding requirements.
(b) In the discretion of the Committee, any Restriction Agreement
may provide that all or any portion of the tax obligations otherwise
payable in the manner set forth in paragraph 7.7(a), together with
additional taxes not exceeding the actual additional taxes to be owed
by the Grantee with respect to the Award, may, upon the irrevocable
election of the Grantee, be paid by tendering to the Company whole
shares of Stock duly endorsed for transfer and owned by the Grantee,
or by authorizing the Company to withhold and cancel shares of Stock
otherwise deliverable pursuant to Section 7.6, in either case in that
number of shares having a Fair Market Value on the date that taxable
income is recognized equal to the amount of such taxes thereby being
paid, in all cases subject to such restrictions as the Committee may
from time to time determine.
ARTICLE VIII
TERMINATION, AMENDMENT AND MODIFICATION OF PLAN
The Board may at any time, (i) cause the Committee to cease
granting Options and Awards, (ii) terminate the Plan, or (iii) in any
respect amend or modify the Plan. However, the Board (unless its actions
are approved or ratified by the shareholders of the Company within twelve
months of the date the Board amends the Plan) may not amend the Plan to
materially increase the number of shares of Stock available under the
Plan to Directors or Officers.
No termination, amendment or modification of the Plan shall affect
adversely a Grantee's rights under an Option Agreement or Restriction
Agreement without the consent of the Grantee or his or her legal
representative.
From and after the first date on which an Option is automatically
granted pursuant to Section 6.13, the provisions of such Section 6.13
may not be amended in any manner more frequently than once every six
months, other than to comport with changes in the Code, the Employee
Retirement Income Security Act of 1974, as amended, or the rules and
regulations promulgated under the Code or such Act.
ARTICLE IX
MISCELLANEOUS
9.1 Replacement or Amended Grants. At the sole discretion of the
Committee, and subject to the terms of the Plan, the Committee may modify
outstanding Options or Awards or accept the surrender of outstanding
Options or Awards on terms specified by the Committee, which terms may
include the grant of new Options or Awards in substitution for them.
However no modification of an Option or Award shall adversely affect a
Grantee's rights under an Option Agreement or Restriction Agreement
without the consent of the Grantee or his or her legal representative.
9.2 Forfeiture for Competition. If a Grantee provides services to
a competitor of the Company or any of its Subsidiaries, whether as an
employee, officer, director, independent contractor, consultant, agent
or otherwise, such services being of a nature that can reasonably be
expected to involve the skills and experience used or developed by the
Grantee while a Director or an Employee, then that Grantee's rights under
any Options outstanding hereunder shall be forfeited and terminated, and
any shares of Restricted Stock held by such Grantee subject to remaining
restrictions shall be forfeited, subject in each case to a determination
to the contrary by the Committee.
9.3 Plan Binding on Successors. The Plan shall be binding upon the
successors of the Company.
9.4 Headings Not a Part of Plan. Headings of Articles and Sections
hereof are inserted for convenience and reference, and do not constitute a
part of the Plan.
Exhibit 10.15
Outside Directors
(New) 5/1/98
ELECTROMAGNETIC SCIENCES, INC.
1997 STOCK INCENTIVE PLAN
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT, entered into as of the [ ] day
of [ ] (the "Date of Grant"), by and between
ELECTROMAGNETIC SCIENCES, INC., a Georgia corporation
(hereinafter referred to as the "Corporation"), and [ ]
(hereinafter referred to as the "Director").
W I T N E S S E T H
WHEREAS, the Board of Directors (the "Board") of the Corporation
has adopted a stock incentive plan for the directors, officers
and employees of the Corporation or its subsidiary corporations,
which Plan is known as the "Electromagnetic Sciences, Inc. 1997
Stock Incentive Plan" (hereinafter referred to as the "Plan");
WHEREAS, on the Date of Grant the Director was elected to serve
as a member of the Board for the forthcoming year; and
WHEREAS, the Plan provides for the automatic grant to the
Director, in the circumstances of such election, of a stock
option to purchase shares of the Corporation's common stock
as hereinafter set forth, and the Corporation and the Director
desire to enter into a written agreement with respect to such
option in accordance with the Plan.
NOW, THEREFORE, as an incentive and to encourage stock
ownership, and in consideration of the mutual covenants
contained herein, the parties hereto agree as follows:
1. Incorporation of Plan. This option is granted pursuant
to the provisions of the Plan and the terms and definitions
of the Plan, as it may be amended from time to time, are
incorporated by reference into this Stock Option Agreement
and made a part hereof. A copy of the Plan has been
delivered to, and receipt is hereby acknowledged by, the
Director.
2. Grant of Option. Subject to the terms, restrictions,
limitations and conditions stated herein, the Corporation
hereby evidences its grant to the Director of the right
and option (hereinafter referred to as the "Option"),
which is not an ISO, to purchase all or any part of an
aggregate of Ten Thousand (10,000) shares of the
Corporation's $.10 par value common stock (the "Common
Stock") beginning as follows:
First Date Number of
Exercisable Shares
---------------- -------------
2,000
2,000
2,000
2,000
2,000
This Option shall expire and is not exercisable after
5:00 p.m., Atlanta time, on [ ](the "Expiration
Date").
Notwithstanding the beginning date for exercise set
forth in the second preceding paragraph, but subject
to the provisions of the preceding paragraph with
respect to expiration of this Option, this Option may
be exercised as to all or any portion of the full number
of shares subject thereto if: (a) a tender offer or
exchange offer has been made for shares of the Common
Stock, other than one made by the Corporation, provided
that the corporation, person or other entity making such
offer purchases or otherwise acquires shares of Common
Stock pursuant to such offer; or (b) any person or group
(as such terms are defined in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "Act")),
becomes the holder of 50% or more of the outstanding shares
of Common Stock. If either of the events specified in this
paragraph has occurred, the Option shall be fully exercisable:
(x) in the event of (a) above, during the period commencing
on the date the tender offer or exchange offer is commenced
and ending on the date such offer expires and is not extended;
or (y) in the event of (b) above, during the 30-day period
commencing on the date upon which the Corporation is provided
a copy of a Schedule 13D or amendment thereto, filed pursuant
to Section 13(d) of the Act and the rules and regulations
promulgated thereunder, indicating that any person or group
has become the holder of 50% or more of the outstanding
shares of Common Stock. In the case of (a) above, if the
Corporation, person or other entity making the offer does
not purchase or otherwise acquire shares of Common Stock
pursuant to such offer, then the Director's right under
this paragraph to exercise this Option shall terminate, the
Director and the Corporation shall rescind any exercise of
this Option pursuant to this paragraph, and this Option
shall be reinstated as if such exercise had not occurred.
3. Purchase Price. The price per share to be paid by the
Director for the shares subject to this Option shall be
[ ] Dollars ( ).
4. Exercise Terms. Beginning on the date specified
above, and prior to the expiration of this Option as provided
in Section 2 hereof, the Director may exercise this Option as
to all such number of shares, or as to any part thereof, at any
time and from time to time during the remaining term of this
Option; provided that the Director must exercise this Option
for at least the lesser of 100 shares or the unexercised portion
of the Option. In the event this Option is not exercised
with respect to all or any part of the shares prior to its
expiration, the shares with respect to which this Option was
not exercised shall no longer be subject to this Option.
5. Option Non-Transferable. This Option and all rights
hereunder are neither assignable nor transferable by the
Director otherwise than by will or under the laws of descent
and distribution, or pursuant to a Qualified Domestic
Relations Order, and during the Director's lifetime this
Option is exercisable only by him (or by his guardian or
legal representative, should one be appointed, or qualified
transferee). More particularly (but without limiting the
generality of the foregoing), this Option may not be assigned,
transferred (except as aforesaid), pledged or hypothecated
in any way (whether by operation of law or otherwise) and
shall not be subject to execution, attachment or similar
process. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of this Option contrary
to the provisions hereof shall be null and void and without
legal effect.
6. Notice of Exercise of Option. This Option may be
exercised by the Director, or by his administrator, executor,
personal representative or qualified transferee, by a written
notice (in substantially the form of the "Notice of Exercise"
attached hereto as Annex A) signed by the Director, or by such
administrator, executor, personal representative or qualified
transferee, and delivered or mailed to the Corporation at its
principal office in Norcross, Georgia, to the attention of the
President, Treasurer or such other officer as the Corporation
may designate. Any such notice shall (a) specify the number
of shares of Common Stock which the Director or such administrator,
executor, personal representative or qualified transferee,
as the case may be, then elects to purchase hereunder, and
(b) be accompanied by (i) a certified or cashier's check
payable to the Corporation, or personal check acceptable
to the Corporation, in payment of the total price applicable
to such shares as provided herein, or (ii) (subject to any
restrictions referred to in Annex A) shares of Common Stock,
owned by him and duly endorsed or accompanied by stock
transfer powers, or in lieu thereof, the form of Attestation
of Share Ownership attached as Annex B executed with respect
to such number of such shares, having a Fair Market Value
equal to the total purchase price applicable to the shares
purchased hereunder, or (iii) such a check, and the number
of such shares (or attestation with respect thereto) whose
Fair Market Value when added to the amount of the check
equals the total purchase price applicable to such shares
purchased hereunder. Such notice shall also be accompanied
by such a check or shares of Common Stock in payment of
applicable withholding and employment taxes, or the person
exercising this Option shall authorize (by use of Annex B
or otherwise) the withholding of shares of Common Stock
otherwise issuable under this Option in payment of such taxes,
all as set forth on Annex A and subject to any restrictions
referred to therein. Upon receipt of any such notice and
accompanying payment, and subject to the terms hereof, the
Corporation agrees to cause to be issued to the Director or
to such administrator, executor, personal representative or
qualified transferee, as the case may be, stock certificates
for the number of shares specified in such notice registered
in the name of the person exercising this Option.
7. Adjustment in Option. If prior to the complete exercise
of this Option, there shall be a change in the outstanding
Common Stock by reason of one or more stock splits, stock
dividends, combinations or exchanges of shares, recapitalizations
or similar capital adjustments, then the number, kind and option
price of the shares remaining subject to this Option shall be
equitably adjusted in accordance with the terms of the Plan,
so that the proportionate interest in the Corporation represented
by the shares then subject to the Option shall be the same as
before the occurrence of such event.
8. Termination as a Director. If the Director for any reason
ceases to be a member of the Board of Directors of the Corporation
(such event being hereinafter referred to as a "Termination"), then:
(a) To the extent this Option shall have become
exercisable on or prior to the date of Termination,
it shall remain exercisable until the Expiration Date; and
(b) Any portion of this Option that had not become
exercisable on or prior to the date of Termination
shall immediately terminate and shall not thereafter
become exercisable.
This Option does not confer upon the Director any right
with respect to continuance as a member of the Board of
Directors of the Corporation.
9. Competitive Activities. This Option is subject to
Section 9.2 of the Plan, which provides that if the Director
provides services to a competitor of the Corporation or any
of its Subsidiaries, whether as an employee, officer, director,
independent contractor, consultant, agent or otherwise, such
services being of a nature that can reasonably be expected to
involve the skills and experience used or developed by the
Director while an employee or Director of the Corporation or
any such Subsidiary, then the Director's rights under this
Option shall thereupon be forfeited and terminated, subject
to a determination to the contrary by the Committee.
10. Binding Agreement. This Agreement shall be binding
upon the parties hereto and their representatives, successors
and assigns.
IN WITNESS WHEREOF, the Corporation has caused this Stock
Option Agreement to be executed on behalf of the Corporation
and the Corporation's seal to be affixed hereto and attested
by the Secretary of the Corporation, and the Director has
executed this Agreement under his seal, all as of the day and
year first above written.
ELECTROMAGNETIC SCIENCES, INC.
[CORPORATE SEAL]
ATTEST By:
Chief Executive Officer
Secretary
DIRECTOR:
- ------------------------(SEAL)
ANNEX A
ELECTROMAGNETIC SCIENCES, INC.
1997 STOCK INCENTIVE PLAN
Notice of Exercise
of Stock Option
The undersigned hereby notifies Electromagnetic Sciences, Inc.
(the "Corporation") of his or her election to exercise an
option to purchase shares of the Corporation's
common stock, $.10 par value (the "Common Stock"), pursuant
to that Stock Option Agreement (the "Agreement") between
(the "Director") and the Corporation dated 199 .
Accompanying this Notice is (1) a certified or cashier's check
(or other check acceptable to the Corporation) in the amount of
$ payable to the Corporation and/or (2) (subject to
such restrictions as may be determined to be necessary or
appropriate to avoid earnings charges or other adverse
consequences to the Corporation under applicable accounting
or tax rules or regulations) shares of the
Common Stock presently owned by the undersigned and duly
endorsed or accompanied by stock transfer powers, or in
lieu thereof, the form of Attestation of Share Ownership
attached as Annex B to the Agreement, executed with respect
to the number of such shares, having an aggregate Fair Market
Value (as defined in the Electromagnetic Sciences, Inc. 1997
Stock Incentive Plan (the "Plan")) as of the date hereof of
$ , such amounts being equal, in the aggregate,
to the purchase price per share set forth in Section 3 of
the Agreement multiplied by the number of shares being hereby
purchased (in each instance subject to appropriate adjustment
pursuant to Section 7 of the Agreement).
Also accompanying this Notice is my check in the amount of
$ in payment of federal and state income withholding
and employment taxes applicable to this exercise. The amount
of such payment is based on advice received from appropriate
officials of the Corporation responsible for the administration
of its payroll and employment tax obligations. Alternatively,
or in addition, and subject to such restrictions as may be
determined to be necessary or appropriate to comply with
Rule 16b-3 under the Securities Exchange Act of 1934, or to
avoid earnings charges or other adverse consequences to the
Corporation under applicable accounting or tax rules or
regulations, in full or partial payment of such taxes:
(1) I deliver herewith an additional
shares of the Common Stock (or the form of Attestation
of Share Ownership with respect thereto) presently
owned by me, having an aggregate Fair Market Value as
of the date hereof of $ and/or
(2) I hereby authorize the Corporation to withhold,
from the shares of Common stock otherwise issuable to
me pursuant to this exercise, such shares
having an aggregate Fair Market Value at the date hereof
of $
The sum of (i) any such check plus (ii) the Fair Market Value at
the date hereof of any shares of Common Stock specified in the
foregoing clauses (1) and (2) is not less than the amount of
federal and state withholding and employment taxes applicable to
this exercise, and is not greater than the total of all federal
and state income and employment taxes to be owed by me as a result
of such exercise.
IN WITNESS WHEREOF, the undersigned has set his or her hand
and seal, this of , .
DIRECTOR OR HIS OR HER ADMINISTRATOR,
EXECUTOR, PERSONAL REPRESENTATIVE OR
QUALIFIED TRANSFEREE
- ---------------------------------------
ANNEX B
ELECTROMAGNETIC SCIENCES, INC.
1997 Stock Incentive Plan
Attestation of Share Ownership
Pursuant to the Notice of Exercise submitted herewith, I
have elected to purchase [ ] shares of the
common stock of Electromagnetic Sciences, Inc. (the "Company"),
pursuant to the Stock Option Agreement dated [ ]
(the "Option"), at an aggregate exercise price of $[ ]
(the "Option Price"). I hereby attest to ownership of the
shares specified below (the "Shares") and hereby tender the
Shares in payment of (i) $[ ] of the Option Price, and
(ii) $[ ] of withholding and related taxes due upon
exercise of the Option, in each case based on their Fair Market
Value on the date hereof (as determined under the Plan) of
$[ ] per share).
I certify that I either (i) have held the Shares that I am
tendering for at least one year after acquiring such Shares
through the exercises of an Incentive Stock Option, or (ii)
did not obtain such Shares through the exercise of an ISO.
Although the Company has not required me to make actual
delivery of certificates evidencing the Shares, as a result
of which I (and the co-owner, if any of the Shares) will
retain ownership of such Shares, I represent that I, with
the consent and agreement of the co-owner (if any) of the
Shares, have full power to deliver and convey such certificates
to the Company, and therefore could have caused the Company to
become sole owner of such Shares. The co-owner of the Shares,
by signing this form, consents to these representations and the
exercise of the Option by this notice.
Common Stock Certificate(s) Number of Number of Shares Subject
No. or Brokerage Account Shares Represented to this Attestation
You are hereby instructed to apply towards the Option Price:
(check one)
- -- The maximum number of whole shares necessary to pay the
Option Price and specified taxes, or, if fewer, the total
number of listed Shares, with any remaining amount to be
paid by check accompanying the Notice of Exercise.
- -- [ ] of the listed Shares with the remaining amount
to be paid by check accompanying the Notice of Exercise.
In each case, the balance of the Shares for which the Option is
being exercised will be issued as specified in the Notice of Exercise.
Name
Date Signature
Co-Owner's Name (if any)
Date Co-Owner'Signature
Exhibit 10.23
August 10, 1998
ELECTROMAGNETIC SCIENCES, INC.
Executive Annual Incentive Compensation Plan
1. PURPOSE
The purpose of this Plan is to attract and retain in
the employ of the Company executives of outstanding experience
and ability, and to incentivize them to superior performance.
Under this Plan, annual incentive compensation (or "bonuses")
will be based upon performance against financial and non-financial
objectives that are consistent with the objectives of the Company
and its shareholders. Thus, the Plan provides a means of rewarding
those who contribute through their individual performance to the
objectives of the Company.
2. DEFINITIONS
Unless the context otherwise requires, the words which
follow shall have the following meaning:
(a) Plan - This Annual Incentive Compensation Plan for
executives.
(b) Business Unit - A principal subsidiary, business
division or group of the Company as identified for the purposes
of the Plan by the Committee.
(c) Board - The Board of Directors of the Company.
(d) Company - Electromagnetic Sciences, Inc.
(e) Committee - The Compensation Committee of the
Board, which has the exclusive authority to interpret
and make awards under the Plan.
(f) Plan Year - A fiscal year of the Company.
(g) Base Compensation - A Participant's annual
salary compensation, before reduction for Cafeteria Plan,
Savings Incentive Plan, Stock Purchase Plan or other elective
reductions or deductions, and before deduction of any taxes.
(h) Participant - A person selected in accordance
with Section 4 to be eligible to receive a bonus in accordance
with this Plan.
(i) Target Incentive - The bonus payable under the
Plan in the event 100% of financial objectives are met and
the Participant's normalized Performance Score is 100%.
3. ADMINISTRATION AND INTERPRETATION OF THE PLAN
The Committee shall have the power to (i) approve
eligible Participants, (ii) approve payments under the
Plan, (iii) interpret the Plan, (iv) adopt, amend and
rescind rules and regulations relating to the Plan, and
(v) make all other determinations and take all other
actions necessary or desirable for the Plan's administration.
The decision of the Committee on any question
concerning the interpretation and administration of
the Plan shall be final and conclusive. The Committee's
determinations may differ in the Committee's sole discretion
between different Participants, irrespective of whether they
are similarly situated. Subject to Section 7, nothing in the
Plan shall give any employee or his or her legal representative
or assigns any right to a bonus or otherwise to participate
in the Plan except as the Committee may determine.
4. ELIGIBLE PARTICIPANTS
Participants will be those executives who are designated
by the Chief Executive Officer as being in a position to have
a significant impact on profits and Company performance and
are approved by the Committee to receive a bonus under the
Plan. However, if a Change in Control (as defined in
Section 7) occurs prior to the time Participants are
determined for the Plan Year in which the Change in
Control occurs, all persons who were Participants in the
prior Plan Year and who are active employees of the Company
as of the date of the Change in Control shall be Participants
for such Plan Year.
Except as the Committee may otherwise determine or as
provided in Section 7, each Participant for any Plan Year
must serve during that Year as an executive of the Company
and be an active employee of the Company when the Committee
approves bonuses after the end of the Plan Year.
The Committee may decide to award a pro-rated bonus to
a Participant who is newly promoted or hired during a Plan
Year. Pro-rated bonuses may also be awarded to Participants
who retire with the Company's approval during a Plan Year
and to the estates of Participants who die during a Plan Year.
5. DETERMINATION OF INCENTIVE COMPENSATION AWARDS
Incentive compensation awards shall be determined as set
forth in this Section 5.
(a) Determination of Targets. During the first calendar
quarter of each Plan Year, the Target Incentive for each
Participant shall be determined by the Committee. The
Target Incentive shall equal the Participant's Base
Compensation multiplied by a percentage that is based
on the Committee's evaluation of the individual Participant's
level of responsibility and potential to affect Company
profits and performance. The Committee shall also specify
the portions of each individual's Target that are dependent
on the Company's and/or relevant Business Unit's financial
performance during the Year.
(b) Determination of Company and Business Unit Financial
Targets. During the first calendar quarter of each Plan
Year, the Committee shall set for the Company and for each
Business Unit the target financial parameters against which
actual financial performance will be elevated. At a minimum,
these parameters will include Profit Before Taxes (PBT).
The Committee shall also determine a formula outlining how
the Target Incentives in 5(a) will be affected if actual
performance for PBT is not at the 100% level, and may
establish such formulas for other specified financial
performance parameters.
(c) Determination of Participant Performance Objectives/
Performance Scores. During the first calendar quarter of
each Plan Year, individual performance objectives shall
be determined for each Participant. Such objectives shall
be established by agreement of each Participant and his
or her superior, must be specific and in writing, and must
be approved by the Chief Executive Officer and provided
to the Committee. Modifications may be made during a
Plan Year, based on revised circumstances and Company
objectives, but must be developed and approved as set
forth in the preceding sentence. Achievement of these
objectives, combined with an overall assessment of the
Participant's contribution to Company performance, will
be used by the Committee, after consultation with the CEO,
to establish an overall Performance Score for each Participant.
The Performance Score guidelines will be:
less than 80% for Needs Improvement
90% for Generally Meets Expectation (3.0 Performance)
100% for Nominal Performance (Meets Expectations)
125% for Outstanding Performance
For the purposes of this Plan:
Any excess over 100% will be doubled - for example,
a raw score of 108% will be increased to 116%.
Any deficit below 90% will be increased by a factor
of 8, such that at 80% the Performance Score becomes
0 and the Participant is ineligible for an Incentive
Award - for example, a raw score of 85% will be
reduced to 45% (85-5*8 = 45).
In the event the average of all Performance Ratings of
all Participants, as determined based on the foregoing
guidelines and rules, exceeds 100%, the Score of all
Participants shall be normalized by proportionate
reduction such that the average shall equal 100% (the
rules appearing immediately before this sentence shall
not be further applied after or as a result of such
normalization).
(d) Determination of Award Based on Financial Objectives.
Following the close of each Plan Year, the Chief Financial
Officer shall prepare a report setting forth the extent to
which the Company and/or relevant Business Unit achieved
the various financial objectives described in Section 5(b).
The Target Incentive for each Participant shall first be
adjusted for the weighting and actual performance against
Company and relevant Business Unit targets as described
in 5(a) and 5(b). The Committee shall then determine,
based on an assessment of other financial parameters believed
relevant in light of the Company's financial performance
during the year, whether the calculated Target Incentive
(as adjusted pursuant to the preceding sentence) shall be
further adjusted.
(e) Preliminary Determination of Each Participants Award.
A preliminary determination of each Participant's award
shall be made by multiplying his or her adjusted Target
Incentive, as determined in paragraph (d), by his or her
normalized individual Performance Score.
(f) Final Approval. All awards shall be subject to final
approval by the Committee, which shall have the authority
in its judgment to adjust awards based on non-financial
objectives, as well as, in unusual circumstances as
determined by the Committee, to adjust the awards based
on financial objectives.
6. PAYMENT OF INCENTIVE COMPENSATION AWARDS
Except as provided in Section 7, bonuses awarded under
this Plan will be fully paid in cash and/or shares of the
Company's common stock (which may be subject to restrictions
specified by the Committee), as determined by the Committee,
within 90 days after the end of the Plan Year.
Any amounts paid under this Plan shall be considered as
compensation to the Participant for the purpose of disability
and life insurance programs, unless and to the extent such
compensation is expressly excluded by the provisions of such
programs, but such amounts shall not be considered as
compensation for purposes of any other incentive plan or
other benefit unless such other plan or benefit expressly
includes compensation paid under this Plan.
7. CHANGE IN CONTROL OF THE COMPANY
(a) Contrary Provisions. The provisions of this
Section 7 shall govern and supersede any inconsistent terms
or provisions of the Plan.
(b) Change in Control. For purposes of the Plan,
"Change in Control" shall mean any of the following events:
(1) The acquisition in one or more
transactions by any person or group (as such terms are
defined in Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended (the "1934 Act")), of "Beneficial
Ownership" (within the meaning of Rule 13d-3 under 1934 Act)
of 50% or more of the combined voting power of the Company's
then-outstanding voting securities; or
(2)The individuals who are members of
the Incumbent Board (as defined below), cease for any reason
to constitute at least two-thirds of the Board. The "Incumbent
Board" consists of the individuals who as of January 23, 1997,
are members of he Board and any individual becoming a director
subsequent to January 23, 1997, whose election, or nomination
for election by the Company's shareholders, was approved by a
vote of at least two-thirds of the directors then composing
the Incumbent Board; provided, however, that any individual
who is not a member of the Incumbent Board at the time he or
she becomes a member of the Board shall become a member of the
Incumbent Board upon the completion of two full years as a
member of the Board, except that no individual shall be
considered a member of the Incumbent Board if such individual
initially assumed office (i) as a result of either an actual
or threatened "election contest" (within the meaning of
Rule 14a-11 under the 1934 Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a
person other than the Board (a "Proxy Contest"), or (ii)
with the approval of the other Board members, but by reason
of any agreement intended to avoid or settle a Proxy Contest; or
(3) Approval by shareholders of the
Company of (i) a merger or consolidation involving the
Company if such shareholders do not, immediately following
such merger or consolidation, own, directly or indirectly,
more than 50% of the combined voting power of the outstanding
voting securities of the corporation resulting from such
merger or consolidation in substantially the same proportion
as their ownership of the Company's voting securities
immediately before such merger or consolidation, or
(ii) a complete liquidation or dissolution of the Company
or an agreement for the sale or other disposition of all
or substantially all of the assets of the Company.
If a Participant's employment is terminated
prior to a Change in Control and the Participant
reasonably demonstrates that such termination
(i) was at the request of a third party who has
indicated an intention or taken steps reasonably
calculated to effect a Change in Control and who
thereafter effects a Change in Control, or (ii)
otherwise occurred in connection with or in
anticipation of a Change in Control which actually
occurs, then for all purposes of this Plan the
date of a Change in Control in respect of such
Participant shall mean the date immediately prior
to the date of termination of such Participant's
employment.
(c) Payment Upon a Change in Control. Upon a Change
in Control, the bonus for a Plan Year ending prior to the date
of the Change in Control for which payment has not previously
been made shall be unconditionally payable to each Participant.
The portion based on financial objectives shall be determined
as specified in paragraph 5(c), and the portion based on non-
financial objectives shall be at not less than the Target level
related to such objectives.
If a Change in Control occurs with prior approval of
the Board, bonuses for the Plan Year during which the
Change in Control occurs shall be unconditionally payable
to each Participant, such bonuses to be at the Target
level or at such higher percentage of Base Compensation
as may be approved by the Committee.
If a Change in Control occurs without prior approval of
the Board, bonuses for the Plan Year during which the
Change in Control occurs shall be unconditionally payable
to each Participant, such bonuses to be equal to the
Target level. If such a Change in Control occurs before
Targets shall have been established for a Plan Year,
the Targets for such Plan Year shall be no less favorable
to each of the Participants than the Targets for the prior
Plan Year.
Bonuses payable in accordance with this paragraph 7(c)
shall be paid in cash on or before the fifth day following
the date of the Change of Control.
(d) Amendment or Termination.
(i) This Section 7 shall not be amended or terminated
as to any Participant who has not given his or her
written consent.
(ii) Any amendment or termination of the Plan prior to
a Change in Control which (1) was at the request of a
third party who has indicated an intention or taken steps
reasonably calculated to effect a Change in Control, or
(2) otherwise arose in connection with or in anticipation
of a Change in Control, shall be null and void as to any
Participant who has not given his or her written consent.
(e) Trust Arrangement. All benefits under the Plan shall
be paid by the Company. The Plan shall be unfunded and the benefits
hereunder shall be paid only from the general assets of the Company.
However, in the discretion of the Committee the Company may
establish a trust or other arrangement for the purpose of
funding the benefits payable under the Plan.
8. NON-ASSIGNABILITY
No bonus or other right or benefit under this Plan shall
be subject to anticipation, alienation, sale, assignment,
pledge, encumbrance or charge, and any attempt to anticipate,
alienate, sell, assign, pledge, encumber or charge the same
shall be void and shall not be recognized or given effect by
the Company.
9. NO RIGHT TO EMPLOYMENT
Nothing in this Plan or in any notice of award pursuant
hereto shall confer any right to continue in the employment
of the Company nor affect the Company's right to terminate
the employment of any Participant.
10. AMENDMENT OR TERMINATION
The Board may amend or terminate the Plan, without the
consent of any Participant, at any time prior to the end of
the first calendar quarter of the Plan Year for which such
amendment or termination becomes effective.
Exhibit 10.28
February 24, 1999
EMS Technologies Canada, Ltd.
C/O Electromagnetic Sciences, Inc.
660 Engineering Drive
Technology Park/Atlanta
P.O. Box 7700
Norcross, GA 30091-7700
Attention: Don Scartz, Senior Vice President
and Chief Financial Officer
Dear Mr. Scartz:
We, Canadian Imperial Bank of Commerce ("CIBC"), are pleased
to confirm authorization to establish the credits described in this
letter. This letter amends, restates and replaces the terms letter
between CIBC and EMS Technologies Canada, Ltd. ("EMS Canada") formerly
CAL Corporation ("CAL") dated June 19, 1998.
Overall Credit Limit
Overall Credit Limit:
The total use of Credits:
Operating Line
Term Financing
Letters of Credits/Guarantees
Corporate VISA
Foreign Exchange Facility
Cheque Credit
is not at any time to exceed $33,810,000 plus US$600,000
in respect of the Foreign Exchange Facility only.
Credit : Operating Line
Credit Limit: The lesser at any time of:
(a) $20,000,000; and
(b) Operating Loans net of hypothecated U.S. dollar
balances will not exceed: the sum of: 95% of the EDC insured
value of accounts receivable; 85% of North American Government
receivables under 90 days; 85% of corporate receivables, under
90 days, from companies of Investment Grade BBB+ or better from
a country rated "Satisfactory" by CIBC's Economic Division; 75%
of other Receivable Value under 90 days; plus
* 50% of the Inventory Value to a maximum of the lesser
of $3,000,000 or 25% of the Operating Line utilization.
Description and Rate: A revolving credit facility, payable on demand,
to be used only for general business purposes, having the following parts:
(1) Canadian dollar loans and overdrafts and L/C Acceptances. The
Interest Rate is as follows: Prime Rate plus 0.45% per year.
If we sign an L/C Acceptance, the available Credit Limit will be
reduced by the amount of the L/C Acceptance.
(2) U.S. dollar loans and overdrafts and L/C Acceptances. Loans and
overdrafts under this part of Credit A may not at any time exceed the
U.S. dollar equivalent of C$20,000,000. The Interest Rate is as follows:
U.S. Base Rate plus 0.45% per year.
If we sign an L/C Acceptance, the available Credit Limit will be
reduced by the amount of the L/C Acceptance.
(3) Canadian dollar or foreign currency L/Cs. The total amount of
L/Cs outstanding at any time under Credit A may not exceed $2,000,000.
L/Cs may not have terms to expiry of more than 12 months. Fees are 1.0%
per year, minimum $150, plus out of pocket expenses. Our standard L/C
documentation is also required.
If there is a drawing under any L/C, we will pay it by drawing
on your Operating Account, unless you have made other arrangements with
us which have been agreed to by both of us.
(4) U.S. dollar LIBOR loans, which may not at any time exceed US$10,000,000.
Interest is payable at the LIBO Rate for the loan term, plus 1.50% per year.
Credit : Committed Installment Loan Facility
Loan Amount: $5,000,000.
Purpose: Committed Instalment Loan financing secured by property
and plant located at Ste Anne, Quebec, for use for general
business purposes.
Interest Rate: Prime Rate plus 1.10% per year.
Drawdown: One drawdown will be permitted under this facility and will
be equal to the lessor of $5,000,000 or 60% of the appraised
value for the property and plant at Ste. Anne, Quebec. The
drawdown must occur within 120 days of acceptance of this
agreement.
Amortization: 5 years.
Repayment: Unless there is an Event of Default, repayment will be made in
equal quarterly payments of 5% of the principal plus interest
beginning 90 days from the date of drawdown.
Conditions Precedent: Appraisal to be completed by a certified appraiser
approved by the Bank and found to be satisfactory to
CIBC at its sole discretion;
Confirmation by CIBC that it has reviewed the environmental assessment prepared
by Golder Associates in December, 1998 and that such assessment is satisfactory
to CIBC in its sole discretion.
Credit : Letters of Credit/Guarantee
Credit Limit: $8,000,000.
Purpose: To support advance payment guarantees on off-shore
contracts, bid bonds, etc.
Fees: Fees are 1.0% per year, minimum $150, plus out of pocket
expenses.
Documentation: Our standard L/C documentation.
Conditions: All Letters of Credit and/or Guarantee under this facility
are to be supported by Export Development Corporation
insurance for rightful or wrongful call.
Credit : Foreign Exchange Contracts
Credit Limit: U.S.$600,000.
Description: You may, at our discretion, enter into one or more spot,
forward or other foreign exchange rate transactions with us.
Your ability to make use of this Credit will depend upon your
outstanding obligations under such transactions, as determined
by us. This is a demand Credit.
At present, this facility would permit up to US$8,000,000 in foreign exchange
spot and/or forward contracts up to 12 months.
Documentation: Our standard Foreign Exchange documentation.
Credit: Corporate VISA.
Credit Limit: $200,000.
Documentation: Our standard VISA documentation.
Credit : Cheque Credit.
Credit Limit: $10,000.
Documentation: Our standard documentation.
Security
Security: The following security has or shall be provided to secure
the aggregate of your indebtedness and liabilities to CIBC from time to time:
(GAA): General Assignments of Accounts, one each in the name of
CAL and EMS Canada.
(GSA): Security Agreements securing all personal property of the
business now owned (which includes among other things inventory, equipment
and receivables), and all personal property acquired in the future, one
each in the name of CAL and EMS Canada.
Hypothec: Moveable Hypothec to be registered in Quebec.
Mortgage: Immoveable Hypothec to be registered against the property and
plant in Ste. Anne, Quebec.
Bank Act Security: Security under section 427 of the Bank Act, one each
in the name of CAL and EMS Canada.
Assignment and Postponement of Claim:
Assignment and postponement of claim
from Electromagnetic Sciences, Inc. in the amount of $12,000,000 Cdn. to
replace the existing $8,000,000 Cdn assignment and postponement.
Hypothecation: Floating hypothecation of U.S. balances.
Guarantee: Guarantee from Electromagnetic Sciences, Inc. in an amount
that is limited to $5,000,000 Cdn. to replace the existing $3,000,000 Cdn
guarantee. Electromagnetic Sciences, Inc. shall also agree with CIBC that
it shall remain fully and soley responsible for payment of all amounts
owing to Spar Aerospace Limited pursuant to the Asset Purchase Agreement,
dated December 30, 1998, unless CIBC agrees in writing to the contrary.
Guarantee: Guarantee in an amount that is unlimited from Spar Holdings,
Inc. (a Delaware Company), now known as EMS Holdings, Inc.
Pledge: A pledge of all issued and outstanding shares in the capital
of Spar Holdings, Inc. (a Delaware Company), now known as EMS Holdings,
Inc., together with delivery to CIBC of the original share certificates.
Other: All other security, other documentation and agreements granted
or to be granted in favour of CIBC from time to time.
All of the above security shall enjoy first priority to the assets secured
thereunder.
Conditions Precedent to Drawdown
Conditions Precedent: The form and content of the security and all
documents, agreements and other deliveries requested by CIBC in support
of or relating to the security shall be to the satisfaction of CIBC.
Receipt of 1999 forecast balance sheet, income statement and statement
of cashflow along with a listing of key assumptions, prepared on a
quarterly basis.
Covenants: Measured quarterly, you will ensure that:
Current Ratio: Your Current Ratio is not less than 1.50:1.
Effective Equity: Your Effective Equity shall be a minimum of $20,000,000
plus 50% of future net income. For clarity, effective equity shall include
postponed loans but shall not include intangibles such as the Skybridge
equity investment.
Funded Debt plus non-postponed intercompany Debt to Effective Equity Ratio:
Your Funded Debt plus non-postponed intercompany debt to Effective Equity
Ratio does not exceed 1.50:1.
Fixed Charge Ratio: Your Fixed Charge Ratio shall not be less than 2.0:1.
Repayment of shareholder loans or other amounts owing to Electromagnetic
Sciences, Inc. as of the date hereof will not occur without the prior
written consent of CIBC, and in any event, shall not occur during the
first year of this agreement.
Where the previous four quarters do not reflect cumulative positive net
income, you will not have more than two consecutive quarters of non
profitability, as measured by net income, unless offset by a corresponding
shareholder loan or equity injection.
You shall not have any changes in effective ownership or control without
our prior written consent.
Other Requirements: You provide an undertaking to conduct business
substantially in accordance with the business plan provided to CIBC.
Reporting Requirements
Reporting Requirements:
(1) Within 30 days of each calendar month-end, a summary of Receivable
Value, Inventory Value, together with an aged list of receivables and a
Monthly Statement of Available Credit Limit, as of that month-end.
(2) Within 30 days of the end of each month, financial statemetns for
that month.
(3) within 90 days of each fiscal year-end, financial statements for
that fiscal year on an audited basis.
(4) Within 90 days of each fiscal year-end, a business plan/forecast
for the next fiscal year, including quarterly projected balance sheets,
income statements and cash flow projections.
Fees
Fees
Loan Administration: $500. per month.
Standby: For the Credit A: Operating Line, 0.20% per year of the
undrawn portions, payable monthly.
Set-up: A fee of $100,000, payable and deemed earned upon acceptance
of this Agreement.
Legal Fees: All legal fees, including those incurred by CIBC, are for
the account of EMS Canada.
Other Provisions
Default Interest Rate: Currently 21% per year. If the Credit Limit
of a Credit, or the Credit
Limit of part of a Credit, or the Overall
Credit Limit, is exceeded at any time, interest at the Default Rate is
calculated on that excess amount. In connection with any amounts in
foreign currency, see "Foreign Currency Conversion" in the Attached
Schedule.
Announcement: It is agreed that a standard tombstone announcement
of financing may be made by CIBC, and published in appropriate business/
trade publications.
Currency: Unless otherwise stated, all amounts referred to herein are
in Canadian dollars.
Next Scheduled
Review Date: February 28, 2001
Amended Agreement: Upon acceptance, this Agreement replaces the
existing credit agreement dated June 19, 1998, between you and CIBC.
Outstanding amounts (and security) under that Agreement will be covered
by this Agreement.
Standard Credit Terms: The attached Schedule - Standard Credit Terms
forms part of this Agreement.
Please indicate your acceptance of these terms by returning a
signed copy of this Agreement. If we do not receive a signed copy by
February 26, 1999, then this offer will expire.
Yours truly,
Canadian Imperial Bank of Commerce
by:
Christopher B. Lever
Director, Knowledge-Based Business
Phone no.: (613) 564-8902
Fax no.: (613) 563-9600
Acknowledgement: The undersigned certifies that all information
provided to CIBC is true, and acknowledges receipt of a copy of
this Agreement (including any Schedules referred to above).
Accepted this [ ] day of [ ], [ ]
EMS Technologies Canada, Ltd.
By:
Name:
Title:
By:
Name:
Title:
Form 6326-95/06
(WP51CRED)
Schedule - Standard Credit Terms
1. Article - General
1.1 Interest Rate. You will pay interest on each Credit at nominal
rates per year equal to:
1.2
(a) for amounts above the Credit Limit of a Credit or a part of a
Credit or the Overall Credit Limit, as described in section 1.4, or
for amounts that are not paid when due, the Default Interest Rate, and
(b)
(c) for any other amounts, the rate specified in this Agreement.
(d)
1.3 Variable interest. Each variable interest rate provided for under
this Agreement will change automatically, without notice, whenever the
Prime Rate or the U.S. Base Rate, as the case may be, changes.
1.4
1.5 Payment of interest. Interest is calculated on the daily balance
of the Credit at the end of each day. Interest is due once a month,
unless the Agreement states otherwise. Unless you have made other
arrangements with us, we will automatically debit your Operating Account
for interest amounts owing. If your Operating Account is in overdraft
and you do not deposit to the account an amount equal to the monthly
interest payment, the effect is that we will be charging interest on
overdue interest (which is known as compounding). Unpaid interest
continues to compound whether or not we have demanded payment from you
or started a legal action, or get judgment, against you.
1.6
1.7 Default Interest. To determine whether Default Interest is to
be charged, the following rules apply:
1.8
(a) Default Interest will be charged on the amount that exceeds the
Credit Limit of any particular Credit. That will happen even if the
Overall Credit Limit has not been exceeded.
(b)
(c) If there are several parts of a Credit, Default Interest will be
charged if the Credit Limit of a particular part is exceeded. For example,
if Credit A's limit is $250,000, and the limit of one part is $100,000
and the limit of that part is exceeded by $25,000, Default Interest will
be charged on that $25,000 excess, even if the total amount outstanding
under Credit A is less than $250,000.
(d)
(e) To determine if the Overall Credit Limit has been exceeded, the
outstanding principal amount of each Credit is totalled, and any amounts
in foreign currency are converted to Canadian dollars. If that total
exceeds the Overall Credit Limit, Default Interest will be charged on
that excess amount. For example, if there are three Credits, each with
a Credit Limit of $100,000 and an Overall Credit Limit of $250,000, if
each of those Credits is at $90,000, they are each under their own Credit
Limits, but the Overall Credit Limit has been exceeded by $20,000, and
Default Interest will be charged on that excess amount.
(f)
1.9 Fees. You will pay CIBC's fees for each Credit as out lined in the
Letter. You will also reimburse us for all reasonable fees (including
legal fees) and out-of-pocket expenses incurred in registering any security,
and in enforcing our rights under this Agreement or any security. We will
automatically debit your Operating Account for fee amounts owing.
1.10
1.11 Our rights re demand Credits. At CIBC, we believe that the banker-
customer relationship is based on mutual trust and respect. It is important
for us to know all the relevant information (whether good or bad) about your
business. CIBC is itself a business. Managing risks and monitoring our
customers' ability to repay is critical to us. We can only continue to
lend when we feel that we are likely to be repaid. As a result, if you
do something that jeopardizes that relationship, or if we no longer feel
that you are likely to repay all amounts borrowed, we may have to act.
We may decide to act, for example, because of something you have done,
information we receive about your business, or changes to the economy that
affect your business. Some of the actions that we may decide to take
include requiring you to give us more financial information, negotiating
a change in the interest rate or fees, or asking you to get further
accounting assistance, put more cash into the business, provide more
security, or produce a satisfactory business plan. It is important to
us that your business succeeds. We may, however, at our discretion,
demand immediate repayment of any outstanding amounts under any demand
Credit. We may also, at any time and for any cause, cancel the unused
portion of any demand Credit. Under normal circumstances, however, we
will give you 30 days' notice of any of these actions.
1.12
1.13 Payments. If any payment is due on a day other than a Business
Day, then the payment is due on the next Business Day.
1.14
1.15 Applying money received. If you have not made payments as required
by this Agreement, or if you have failed to satisfy any term of this
Agreement (or any other agreement you have that relates to this Agreement),
or at any time before default but after we have given you appropriate notice,
we may decide how to apply any money that we receive. This means that we
may choose which Credit to apply the money against, or what mix of principal,
interest, fees and overdue amounts within any Credit will be paid.
1.16
1.17 Information requirements. We may from time to time reasonably require
you to provide further information about your business. We may require
information from you to be in a form acceptable to us.
1.18
1.19 Insurance. You will keep all your business assets and property
insured (to the full insurable value) against loss or damage by fire and
all other risks usual for property such as yours (plus for any other risks
we may reasonably require). If we request, these policies will include a
loss payee clause (and if you are giving us mortgage security, a mortgagee
clause). As further security, you assign all insurance proceeds to us.
If we ask, you will give us either the policies themselves or adequate
evidence of their existence. If your insurance coverage for any reason
stops, we may (but do not have to) insure the property. We will automatically
debit your Operating Account for these amounts. Finally, you will notify us
immediately of any loss or damage to the property.
1.20
1.21 Environmental. You will carry on your business, and maintain your
assets and property, in accordance with all applicable environmental laws
and regulations. If (a) there is any release, deposit, discharge or disposal
of pollutants of any sort (collectively, a "Discharge") in connection with
either your business or your property, and we pay any fines or for any clean-up
or (b) we suffer any loss or damage as a result of any Discharge, you will
reimburse CIBC, its directors, officers, employees and agents for any and
all losses, damages, fines, costs and other amounts (including amounts spent
preparing any necessary environmental assessment or other reports, or defending
any lawsuits) that result. If we ask, you will defend any lawsuits,
investigations or prosecutions brought against CIBC or any of its directors,
officers, employees and agents in connection with any Discharge. Your
obligation to us under this section continues even after all Credits have
been repaid and this Agreement has terminated.
1.22
1.23 Consent to release information. We may from time to time give any
credit or other information about you to, or receive such information from,
(a) any financial institution, credit reporting agency, rating agency or
credit bureau, (b) any person, firm or corporation with whom you may have or
propose to have financial dealings, and (c) any person, firm or corporation
in connection with any dealings you have or propose to have with us. You
agree that we may use that information to establish and maintain your
relationship with us and to offer any services as permitted by law,
including services and products offered by our subsidiaries when it is
considered that this may be suitable to you.
1.24
1.25 Our pricing policy: Fees, interest rates and other charges for your
banking arrangements are dependent upon each other. If you decide to cancel
any of these arrangements, you will have to pay us any increased or added
fees, interest rates and charges we determine and notify you of. These
increased or added amounts are effective from the date of the changes that
you make.
1.26
1.27 Proof of debt. This Agreement provides the proof, between CIBC
and you, of the credit made available to you. There may be times when
the type of Credit you have requires you to sign additional documents.
Throughout the time that we provide you credit under this Agreement, our
loan accounting records will provide complete proof of all terms and
conditions of your credit (such as principal loan balances, interest
calculations, and payment dates).
1.28
1.29 Renewals of this Agreement. This Agreement will remain in effect
for your Credits for as long as they remain unchanged. We have shown a
Next Scheduled Review Date in the Letter. If there are no changes to the
Credits this Agreement will continue to apply, and you will not need to
sign anything further. If there are any changes, we will provide you with
either an amending agreement, or a new replacement Letter, for you to sign.
1.30
1.31 Confidentiality: The terms of this Agreement are confidential
between you and CIBC. You therefore agree not to disclose the contents
of this Agreement to anyone except affiliates and your or their
professional advisors, or as required by applicable Canadian or U.S. laws.
1.32
1.33 Pre-conditions. You may use the Credits granted to you
under this Agreement only if:
1.34
(a) we have received properly signed copies of all documentation that
we may require in connection with the operation of your accounts and your
ability to borrow and give security;
(b)
all the required security has been received and registered to
our satisfaction;
(c) any special provisions or conditions set forth in the Letter
have been complied with; and
(d) if applicable, you have given us the required number of days
notice for a drawing under a Credit.
(e)
1.35 Notices. We may give you any notice in person or by telephone,
or by letter that is sent either by fax or by mail.
1.36
1.37 Use of the Operating Line. You will use your Operating Line only
for your business operating cash needs. You are responsible for all debits
from the Operating Account that you have either initiated (such as cheques,
loan payments, pre-authorized debits, etc.) or authorized us to make.
Payments are made by making deposits to the Operating Account. You may
not at any time exceed the Credit
Limit. We may, without notice to you, return any debit from the Operating
Account that, if paid, would result in the Credit Limit being exceeded,
unless you have made prior arrangements with us. If we pay any of these
debits, you must repay us immediately the amount by which the Credit
Limit is exceeded.
1.38
1.39 Margin Requirements. If your Operating Line is margined against
Inventory and/or Receivable Value, the available Credit Limit of that
Credit is the lesser of the Credit Limit stated in the Letter and the
amount calculated using the Monthly Statement of Available Credit Limit.
1.40
1.41 Foreign Currency Conversion. If this Agreement includes foreign
currency Credits, then currency changes may affect whether either the
Credit Limit of any Credit or the Overall Credit Limit has been exceeded.
1.42
(a) See section 1.4 for the general rules on how Default Interest is
calculated.
(b)
(c) To determine the Overall Credit Limit, all foreign currency amounts
are converted to Canadian dollars, even if the Credit Limits of any
particular Credits are quoted directly in a foreign currency (such as U.S.
dollars). No matter how the Credit Limit of a particular Credit is quoted,
therefore, currency fluctuations can affect whether the Overall Credit Limit
has been exceeded. For example, if Credits X and Y have Credit Limits of
C$100,000 and US$50,000, respectively, with an Overall Credit Limit of
C$175,000, if Credit X is at C$90,000 and Credit Y is at US$45,000, Default
Interest will be charged only if, after converting the US dollar amount,
the Overall Credit Limit is exceeded.
(d)
(e) Whether the Credit Limit of a particular Credit has been exceeded
will depend on how the Credit Limit is quoted, as described below.
(f)
(g) If the Credit Limit is quoted as, for example, the U.S. dollar
equivalent of a Canadian dollar amount, daily exchange rate fluctuations
may affect whether that Credit Limit has been exceeded. If, on the other
hand, the Credit Limit is quoted in a foreign currency (for example,
directly in US dollars), whether that Credit Limit has been exceeded
is determined by reference only to the closing balance of that Credit
in that currency.
(h)
(i) For example, assume an outstanding balance of a Credit on a
particular day of US$200,000. If the Credit Limit is stated as "the
US dollar equivalent of C$275,000", then whether the Credit Limit of
that Credit has been exceeded will depend on the value of the Canadian
dollar on that day. If the conversion calculations determine that the
outstanding balance is under the Credit Limit, a drop in the value of the
Canadian dollar the next day (without any change in the balance) may have
the effect of putting that Credit over its Credit Limit. If, on the
other hand, the Credit Limit is stated as "US$200,000", the Credit
Limit is not exceeded, and a drop in the value of the dollar the next
day will not change that (although the Overall Credit Limit may be
affected).
(j)
(k) Conversion calculations are done on the closing daily balance
of the Credit. The conversion factor used is the mid-point between
the buying and selling rate offered by CIBC for that currency on the
conversion date.
(l)
1.43 Instalment Loans. The following terms apply to each Instalment
Loan.
1.44
(a) Non-revolving loans. Unless otherwise stated in the Letter,
any Instalment Loan is non-revolving. This means that any principal
payment made permanently reduces the available Loan Amount. Any
payment we receive is applied first to overdue interest, then to
current interest owing, then to overdue principal, then to any fees
and charges owing, and finally to current principal.
(b)
(c) Floating Rate Instalment Loans. Floating Rate Instalment
Loans may have either (i) blended payments or (ii) payments of
fixed principal amounts, plus interest, as described below.
(d)
(i) Blended payments. If you have a Floating Rate Loan that
has blended payments, the amount of your monthly payment is fixed
for the term of the loan, but the interest rate varies with changes
in the Prime or U.S. Base Rate (as the case may be). If the Prime
or U.S. Base Rate during any month is lower than what the rate was
at the outset, you may end up paying off the loan before the
scheduled end date. If, however, the Prime or U.S. Base Rate
is higher than what it was at the outset, the amount of
principal that is paid off is reduced. As a result, you
may end up still owing principal at the end of the term
because of these changes in the Prime or U.S. Base Rate.
(ii) Payments of principal plus interest. If you have a
Floating Rate Loan that has regular principal payments, plus
interest, the principal payment amount of your Loan is due
on each payment date specified in the Letter. The interest
payment is also due on the same date, but it is debited from
your Operating Account one or two banking days later. Although
the principal payment amount is fixed, your interest payment
will usually be different each month, for at least one and
possibly more reasons, namely: the reducing principal balance
of your loan, the number of days in the month, and changes to
the Prime Rate or U.S. Base Rate (as the case may be).
(e) Prepayment. Unless otherwise agreed, the following
terms apply to prepayment of any Instalment Loan:
(f)
(i) Floating Rate Instalment Loans. You may prepay all or
part of a Floating Rate Instalment Loan (whether it is a
Demand or a Committed Loan) at any time without notice or
penalty.
(ii) Fixed Rate Instalment Loans. You may prepay all or part
of a Fixed Rate Instalment Loan, on the following condition.
You must pay us, on the prepayment date, a prepayment fee equal
to the interest rate differential for the remainder of the term
of the Loan, in accordance with the standard formula used by CIBC
in these situations.
(iii) Demand of Fixed Rate Demand Instalment Loans. If you
have a Fixed Rate Demand Instalment Loan and we make demand for
payment, you will owe us (i) all outstanding principal, (ii)
interest, (iii) any other amount due under this Agreement, and
(iv) a prepayment fee. The prepayment fee is equal to the interest
rate differential for the remainder of the term of the loan, in
accordance with the standard formula used by CIBC in these situations.
(b)
(c) "Event of Default" means, in connection with any Committed
Instalment Loan (even if that Loan has not yet been drawn), the
occurrence of any of the following events (or the occurrence of
any other event of default described in this Agreement, in any
of the security documents or in any other agreement or document
you have signed with us):
(d)
(e) (1) You do not pay, when due, any amount that you are
required to pay us under this Agreement or otherwise, or you do
not perform any of your other obligations to us under this
Agreement or otherwise.
(f)
(g) (2) Any part of the security terminates or is no longer
in effect, without our prior written consent.
(h)
(i) (3) You cease to carry on your business in the normal
course, or it reasonably appears to us that that may happen.
(j)
(k) (4) A representation that you have made (or deemed to
have made) in this Agreement or in any security agreement is
incorrect or misleading in any material respect.
(l)
(m) (5) (i) An actual or potential default or event of default
occurs in connection with any debt owed by you, with the result
that the payment of the debt has become, or is capable of becoming,
accelerated, or (ii) you do not make a payment when due in connection
with any such debt. (This subsection (5), however, applies only to
amounts and in circumstances that we reasonably consider to be material.)
(n)
(o) (6) If you are a corporation, there is, in our reasonable
opinion, a change in effective control of the corporation, or if you
are a partnership, there is a change in the partnership membership.
(p)
(q) (7) We believe, in good faith and upon commercially reasonable
grounds, that all or part of the property subject to any of the security
is or is about to be placed in jeopardy or that a material adverse change
in your business operations or financial affairs has occurred.
(r)
(s) (8) The holder of a Lien takes possession of all or any material
part of your property; or a distress, execution or other similar process
is levied against any such property.
(t)
(u) (9) You (i) become insolvent; (ii) are unable generally to pay
your debts as they become due; (iii) make a proposal in bankruptcy, or
file a notice of intention to make such a proposal; (iv) make an assignment
in bankruptcy; or (v) bring a court action to have yourself declared
insolvent or bankrupt; or someone else brings an action for such a
declaration.
(v)
(W) (10) If you are a corporation, (i) you are dissolved; (ii) your
shareholders or members pass a resolution for your winding-up or
liquidation; (iii) someone goes to court seeking your winding-up or
liquidation, or the appointment of an administrator, conservator,
receiver, trustee, custodian or other similar official for you or
for all or substantially all your assets; or (iv) you seek protection
under any statute offering relief against the company's creditors.
(x)
(y)
2Article - LIBO Rate Provisions
1.1 Definitions. In this Agreement, the following terms have
the following meanings:
"LIBO Rate" for any LIBOR Period means a rate of interest per
year equal to the rate at which we are prepared to offer, as at
11:00 a.m. (London, England time) on the second LIBOR Business
Day before the start of that LIBOR Period, deposits to leading
banks in London, England interbank eurocurrency market in an
amount of U.S. dollars similar to the amount of the applicable
LIBOR Loan and for a deposit period comparable to that LIBOR
Period; except that, if we do not receive proper or timely notice
as required below but we permit your request, then the LIBOR Rate
for such LIBOR Period means the rate of interest per year as
determined by us (in our absolute discretion) and offered to you
and immediately accepted by you.
"LIBOR Business Day" means a Business Day on which U.S. dollar
transactions can be carried out between leading banks in the
interbank eurocurrency market in London, England and between
CIBC and other leading banks in New York City.
"LIBOR Loan" means a Fixed Rate Loan in U.S. dollars in whole
multiples of US$1,000,000 on which interest is calculated by
reference to a LIBO Rate.
"LIBOR Period" means the period selected by you in accordance
with this Agreement for computing interest from time to time
on a LIBOR Loan.
1.1 Availability. LIBOR Loans are available only in whole
multiples of US$1,000,000 each, for terms of one to six months.
1.2
1.3 Required Notice.
1.4
(a) You may draw down or roll over a LIBOR Loan, or convert
another type of Credit under this Agreement to a LIBOR Loan,
or repay a LIBOR Loan, but only as provided in this Article.
Any such action must be done on a LIBOR Business Day. Also,
you must give notice (in the form we require) to the CIBC Branch/
Centre before 10:00 a.m. (local time where the CIBC Branch/Centre
is located). The notice must be given on the third LIBOR Business
Day before the requested date of drawdown, rollover, conversion
or repayment. You may roll over or convert an existing LIBOR
Loan only on the expiry of its LIBOR Period.
(b)
(c) If we do not receive proper or timely notice as required by
the preceding paragraph, we may (but we are not obliged to) decide
what you are permitted to do for that LIBOR Loan. We may, on the
other hand, simply roll over an existing LIBOR Loan at the end of
its LIBOR Period for a new LIBOR Loan with a new LIBOR Period determined by us.
(d)
1.5 Maturity Limitation. The expiry date of a LIBOR Period for
any LIBOR Loan may not (a) be after a scheduled or required maturity
or termination date for that Credit or (b) conflict, in our opinion,
with any scheduled or mandatory repayment for that Credit.
1.6
1.7 Repayments. You may only repay all (but not part) of a LIBOR
Loan, and only on the last day of the LIBOR Period for that LIBOR
Loan.
1.8
1.9 Interest Calculation and Payment. Interest at a LIBO Rate
will be calculated on the daily balance of each LIBOR Loan for the
actual number of days elapsed, on the basis of a 360 day year.
You will pay interest on each LIBOR Loan in arrears at the end of
each LIBOR Period. If a LIBOR Period is greater than three months,
you will pay interest at the end of each three month period during
that LIBOR Period, except that overdue interest will be payable
immediately on demand. Overdue amounts in respect of a LIBOR Loan
(including any overdue interest) may at our option be either
converted to another type of loan (if available) under any Credit
or considered to be a LIBOR Loan for one or more LIBOR Periods as
we may determine.
1.10
1.11 Interest Act. Each nominal rate of interest referenced to
a LIBO Rate, expressed as an annual rate for purposes of the Interest
Act (Canada), is that rate multiplied by the actual number of days
in the calendar year in which the rate is to be ascertained, and
divided by 360.
1.12
1.13 Lack of LIBO Rate. At any time before the start of any LIBOR
Period, we might determine that (a) by reason of circumstances
affecting the London, England interbank eurocurrency market generally,
adequate and fair means do not exist for determining the LIBO Rate
applicable for that LIBOR Period, or (b) deposits in U.S. dollars are
not in the ordinary course of business available to CIBC in that market
for deposit periods comparable to that LIBOR Period in a total amount
similar to that LIBOR Loan bearing interest at a rate no greater than
the LIBO Rate applicable to that LIBOR Loan. If we do, then from and
after that date, you may not roll over any existing LIBOR Loan at the
end of its LIBOR Period, or obtain any new LIBOR Loan. Our
determination of any events under this paragraph will be conclusive.
1.14
1.15 Illegality. If at any time we determine in good faith that any
legal requirement or any official directive or request (whether or not
having the force of law) by a central bank or other governmental
authority will make it unlawful or impossible for us to make, maintain
or fund any LIBOR Loan, we will notify you accordingly. Upon receiving
such a notice, you will either (a) on the last day of the LIBOR Period
of any LIBOR Loan, if we can continue to maintain that loan, or (b)
mmediately, if we cannot legally maintain that loan,
1.16
(1) pay us in full the then outstanding principal amount of each such
LIBOR Loan, together with all accrued interest, or
(2)
(3) convert that loan into another type of loan allowed under this
Agreement.
(4)
(5) For clarification, upon a payment or conversion of a LIBOR Loan
made under this section in the middle of its LIBOR Period, you will
immediately on demand compensate us as provided elsewhere in this
Agreement. Our determination of any matters under this paragraph
will be conclusive.
(6)
(7)
1ARTICLE - DEFINITIONS
1.1 Definitions. In this Agreement, the following terms have the
following meanings:
1.2
"Base Rate Loan" means a U.S. dollar loan on which interest is
calculated by reference to the U.S. Base Rate.
"Business Day" means any day (other than a Saturday or a Sunday)
that the CIBC Branch/Centre is open for business.
"CIBC Branch/Centre" means the CIBC branch or banking centre noted
on the first page of this Agreement, as changed from time to time
by agreement between the parties.
"Credit" means any credit referred to in the Letter, and if there
are two or more parts to a Credit, "Credit" includes reference to
each part.
"Credit Limit" of any Credit means the amount specified in the Letter
as its Credit Limit, and if there are two or more parts to a Credit,
"Credit Limit" includes reference to each such part.
"Current Assets" are cash, accounts receivable, inventory and other
assets that are likely to be converted into cash, sold, exchanged or
expended in the normal course of business within one year or less,
excluding amounts due from related parties.
"Current Liabilities" means debts that are or will become payable
within one year or one operating cycle, whichever is longer, excluding
amounts due to related parties, and which will require Current Assets
to pay. They usually include accounts payable, accrued expenses,
deferred revenue and the current portion of long-term debt.
"Current Ratio" means the ratio of Current Assets to Current
Liabilities.
"Debt to Effective Equity Ratio" means the ratio of X to Y, where
X is the total of all liabilities, less all Postponed Debt,
and less (i) amounts due from/investments in related parties and
(ii) Intangibles.
"Default Interest Rate", unless otherwise defined in the Letter,
means the Standard Overdraft Rate.
"Demand Instalment Loan" means an Instalment Loan that is payable
upon demand. Such a Loan may be either at a fixed or a floating
rate of interest.
"Effective Equity" means the total Shareholders' Equity, plus all
Postponed Debt, less (i) amounts due from/investments in related
parties and (ii) Intangibles.
"Fixed Charge Ratio" means the ratio EBITDA, less approved capital
expenditures divided by the total of principal payments, unfunded
capital expense and cash interest expense.
"Fixed Rate Instalment Loan" means an Instalment Loan that is also
a Fixed Rate Loan.
"Fixed Rate Loan" means any loan drawn down, converted or extended
under a Credit at an interest rate which was fixed for a term,
instead of referenced to a variable rate such as the Prime Rate or
U.S. Base Rate, at the time of such drawdown, conversion or extension.
For purposes of certainty, a Fixed Rate Loan includes a LIBOR Loan.
"Floating Rate Instalment Loan" means either an Instalment Loan that
is either a Prime Rate Loan or a Base Rate Loan.
"Funded Debt" means the sum of all loans provided by a secured
creditor.
"Instalment Loan" means a loan that is repayable either in fixed
instalments of principal, plus interest, or in blended instalments
of both principal and interest. A Demand Instalment Loan is repayable
on demand. A Committed Instalment Loan is repayable only upon the
occurrence of an Event of Default.
"Intangibles" means assets of the business that have no value in
themselves but represent value. They include such things as copyright,
patents and trademarks; franchises; licences; leases; research and
development costs; and deferred development costs.
"Inventory Value" means the total value (based on the lower of cost
or market) of your inventories (other than (i) inventories supplied
by trade creditors who at that time have not been fully paid and
would have a right to repossess all or part of such inventories if
you were then either bankrupt or in receivership,(ii) work in process,
and (iii) those inventories we may from time to time reasonably designate.
"Letter" means the letter agreement between you and CIBC to which
this Schedule and any other Schedules are attached.
"Letter of Credit" or "L/C" means a documentary or stand-by letter
of credit, a letter of guarantee, or a similar instrument in form
and substance satisfactory to us.
"L/C Acceptance" means a draft (as defined under the Bills of
Exchange Act (Canada)) payable to the beneficiary of a documentary
L/C which the L/C applicant or beneficiary, as the case may be,
has presented to us for acceptance under the terms of the L/C.
"Monthly Statement of Available Credit Limit" means the CIBC form
by that name, as it may from time to time be changed.
"Operating Account" means the account that you normally use for the
day-to-day cash needs of your business, and may be either or both of
a Canadian dollar and a U.S. dollar account.
"Postponed Debt" means any debt owed by you that has been formally
postponed to CIBC.
"Prime Rate" means the variable reference rate of interest per year
declared by CIBC from time to time to be its prime rate for Canadian
dollar loans made by CIBC in Canada.
"Prime Rate Loan" means a Canadian dollar loan on which interest is
calculated by reference to Prime Rate.
"Priority Payable" means any amount owing to a creditor that ranks,
or may rank, equal to or in priority to our security. These may
include unremitted source deductions and taxes; other amounts owing
to governments and governmental bodies; and amounts owing to creditors
who may claim priority under the Bankruptcy and Insolvency Act or under
a purchase money security interest in inventory or equipment.
"Receivable Value" means, at any time of determination, the total value
of those of your trade accounts receivable, including accounts domiciled
in the United States, that are subject to the security (other than those
accounts: (i) outstanding for 90 days or more, (ii) owing by persons,
firms or corporations affiliated to you, and (iii) that we may from time
to time reasonably designate).
"Shareholders' Equity" means paid-in capital, retained earnings and
attributed or contributed surplus.
"Standard Overdraft Rate" means the variable reference interest rate
per year declared by CIBC from time to time to be its standard overdraft
rate on overdrafts in Canadian or U.S. dollar accounts maintained with
CIBC in Canada.
"U.S. Base Rate" means the variable reference interest rate per year as
declared by CIBC from time to time to be its base rate for U.S. dollar
loans made by CIBC in Canada.
MONTHLY STATEMENT OF AVAILABLE CREDIT LIMIT
The undersigned, being an authorized officer of the Customer noted
below, certifies to CIBC that, in accordance with margin requirements
established by agreement with CIBC, and based on the attached report in
respect of inventory and trade account receivables which is true and
complete as at ______________________, the Credit Limit available to the
Customer in respect of the operating line margined to such inventory and
receivables is, as of that date, as follows:
RECEIVABLES:
1. Total trade account receivables (aged list attached)
Less the following amounts:
2. Receivables outstanding for [ ] days or more
3. receivables/holdbacks excluded from margin provisions
4. Receivables due from affiliated persons, firms or corporations
5. Receivables due from or claims owed to suppliers on receivable list
6. Sub total of lines (2) through (5) inclusive
7. Receivable Value
8. Margin percentage of Receivable Value
9. Credit Limit attributed to Receivable Value
INVENTORY:
10. Raw materials value based on "lower of cost or market"
11. Finished goods value (excluding work in process) based on "lower
of cost or
market"
12. Sub-total of lines (10) and (11)
Less the following amounts:
13. Inventories subject to unpaid suppliers' rights to repossess if
the Customer
were bankrupt or in receivership (including consignment)
14. Other claims on inventory
15. Sub-total of lines (13) and (14)
16. Inventory Value
17. Margin percentage of Inventory Value
18. Credit Limit attributed to Inventory Value (before application
of line (19)
19. Maximum Credit Limit attributed to Inventory Value (if applicable)
20. Credit limit attributed to Inventory Value (insert the lesser
of line (18)
and line (19)
CREDIT LIMIT CALCULATION
21. Credit Limit attributed to receivable Value and Inventory Value
Less the following amounts:
22. Claims for wages and employee deductions having or purporting
to have
priority to CIBC over the receivables represented on line (1)
23. Claims having priority to CIBC for [ ]
24. Claims having priority to CIBC for [ ]
25. Claims having priority to CIBC for [ ]
26. Sub-total of lines (22) through (25) inclusive
27. Net credit limit attributed to Receivable Value and Inventory
Value
28. Maximum Credit Limit
29. Credit Limit as of the date noted above (insert the lesser of
line (25) and
line (26)
The Customer represents and warrants to CIBC that the information set
out and certified in this Statement and on any accompanying reports
is true and complete in all respects, and acknowledges that CIBC is
relying upon these representations and warranties and this certification.
- ---------------------------------------
Signature
Name of Customer:
Name of Authorized Officer:
Title:
Date of Signature:
EXHIBIT 13.1
EMS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except net earnings per share)
Years ended December 31
1998 1997 1996
---- ---- ----
Net sales (note 10) $177,163 171,230 149,758
Cost of sales 115,127 111,925 97,258
Selling, general and administrative expenses 38,666 35,758 31,070
Research and development expenses 13,140 9,134 12,121
Loss on investment in software - - 1,645
------- ------- -------
Operating income 10,230 14,413 7,664
Non-operating income (expense), net (note 2) 1,602 (249) (304)
Interest expense (1,729) (1,849) (1,113)
------- ------- -------
Earnings before income taxes
and LXE minority interest 10,103 12,315 6,247
Income tax expense (note 7) (3,927) (4,924) (1,484)
Minority interest in LXE net loss - - 264
------- ------- -------
Net earnings $ 6,176 7,391 5,027
======= ======= =======
Net earnings per share (note 6):
Basic $ .71 .87 .68
Diluted .70 .84 .66
Weighted average number of shares (note 6):
Common 8,675 8,544 7,403
Common and dilutive common equivalent 8,871 8,820 7,631
See accompanying notes to consolidated financial statements.
EMS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31
--------------------
1998 1997
------- -------
ASSETS
Current assets:
Cash and cash equivalents (note 9) $ 4,384 4,300
Trade accounts receivable, net (notes 4
and 9) 57,455 58,431
Inventories:
Work in process 5,164 5,994
Parts and materials 19,657 16,330
------- -------
Total inventories 24,821 22,324
------- -------
Deferred income taxes (note 7) 6,620 2,697
------- -------
Total current assets 93,280 87,752
------- -------
Property, plant and equipment (note 5):
Land 1,150 1,150
Building and leasehold improvements 15,493 15,332
Machinery and equipment 54,351 55,150
Furniture and fixtures 4,735 5,134
------- -------
75,729 76,766
Less accumulated depreciation
and amortization 40,849 44,179
------- -------
Net property, plant and equipment 34,880 32,587
------- -------
Other assets 7,684 6,602
Goodwill, net of accumulated amortization
of $3,294 in 1998 and $2,580 in 1997 (note 3) 11,542 16,713
------- -------
$147,386 143,654
======= =======
See accompanying notes to consolidated financial statements.
EMS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, continued
(In thousands, except share data) December 31
-------------------
1998 1997
------- ------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of
long-term debt (notes 5 and 9) $ 2,197 4,521
Accounts payable (note 9) 11,815 14,436
Income taxes 1,580 2,474
Accrued compensation costs 4,503 4,150
Accrued retirement costs (note 8) 959 700
Deferred revenue 2,895 1,558
Other current liabilities 1,154 1,357
------- -------
Total current liabilities 25,103 29,196
------- -------
Long-term debt, excluding current
installments (notes 5 and 9) 19,150 17,160
Deferred income taxes (note 7) 2,473 2,078
------- -------
Total liabilities 46,726 48,434
------- -------
Stockholders' equity (note 6):
Preferred stock of $1.00 par value
per share. Authorized 10,000,000
shares; none issued - -
Common stock of $.10 par value per
share. Authorized 75,000,000 shares,
issued and outstanding 8,689,000 in
1998 and 8,626,000 in 1997 869 863
Additional paid-in capital 34,615 34,487
Accumulated other comprehensive income -
foreign currency translation adjustment (2,263) (1,393)
Retained earnings 67,439 61,263
------- -------
Total stockholders' equity 100,660 95,220
------- -------
Commitments and contingencies (notes 5,8 and 11)
$147,386 143,654
======= =======
See accompanying notes to consolidated financial statements.
EMS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
(In thousands)
Three years ended December 31, 1998
-------------------------------------------------------------
Accum-
ulated
Addi- Annual other Total
Common Stock tional compre- compre- stock-
-------------- paid-in hensive hensive Retained holders'
Shares Amount capital income income earnings equity
------ ------ ------- ------- -------- -------- -------
Balance, December 31, 1995 7,004 $ 700 10,681 (17) 48,845 60,209
Net earnings - - - 5,027 - 5,027 5,027
Income tax benefit from
exercise of non-qualified
stock options (note 7) - - 1,000 - - - 1,000
Exercise of common stock
options 279 28 1,832 - - - 1,860
Redemption of shares upon
exercise of common
stock options (69) (7) (1,165) - - - (1,172)
Foreign currency trans-
lation adjustment expense - - - (30) (30) - (30)
Acquisition of LXE
minority shares (note 3) 1,231 123 20,233 - - - 20,356
----- ---- ------ ------ ---- ------ -------
Comprehensive income
for 1996 4,997
======
Balance, December 31, 1996 8,445 844 32,581 (47) 53,872 87,250
Net earnings - - - 7,391 - 7,391 7,391
Income tax benefit from
exercise of non-qualified
stock options (note 7) - - 1,142 - - - 1,142
Exercise of common stock
options 229 24 1,878 - - - 1,902
Redemption of shares upon
exercise of common
stock options (48) (5) (1,114) - - - (1,119)
Foreign currency trans-
lation adjustment expense - - - (1,346) (1,346) - (1,346)
----- ---- ------ ------ ----- ------ -------
Comprehensive income
for 1997 6,045
======
Balance, December 31, 1997 8,626 863 34,487 (1,393) 61,263 95,220
Net earnings - - - 6,176 - 6,176 6,176
Income tax benefit from
exercise of non-qualified
stock options (note 7) - - 600 - - - 600
Exercise of common stock
options 141 14 839 - - - 853
Redemption of shares upon
exercise of common
stock options (46) (5) (878) - - - (883)
Foreign currency trans-
lation adjustment expense - - - (870) (870) - (870)
Repurchase and retirement
of common stock (32) (3) (433) - - - (436)
----- ---- ------ ------ ----- ------ -------
Comprehensive income
for 1998 5,306
======
Balance, December 31, 1998 8,689 $ 869 34,615 (2,263) 67,439 100,660
===== ==== ====== ===== ====== =======
See accompanying notes to consolidated financial statements.
EMS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Years ended December 31
1998 1997 1996
------ ------ ------
Cash flows from operating activities:
Net earnings $ 6,176 7,391 5,027
Adjustments to reconcile net earnings to
net cash from operating activities:
LXE minority interest - - (264)
Depreciation and amortization 6,734 5,705 5,909
Goodwill amortization 714 885 470
Gain on involuntary conversion of
insured assets (472) - -
Loss on investment in software - - 1,645
Deferred income taxes 403 (648) (3,097)
Changes in operating assets
and liabilities:
Trade accounts receivable 1,381 (13,813) (5,334)
Inventories (2,497) (2,199) (4,407)
Accounts payable (2,621) 24 4,279
Income taxes (894) 3,643 2,026
Accrued costs, deferred revenue,
and other current liabilities 1,746 1,582 (33)
Other (1,257) 702 (312)
------- ------ ------
Net cash provided by
operating activities 9,413 3,272 5,909
------- ------ ------
Cash flows from investing activities:
Purchase of property, plant and equipment (7,740) (7,857) (7,329)
Repurchase and retirement of common stock (436) - -
Capitalized product software costs and
licensing costs - - (738)
Equity and debt investments in a software
company - - (950)
Purchase of subsidiary common stock from
minority shareholders - (772) (1,158)
------- ------- ------
Net cash used in
investing activities (8,176) (8,629) (10,175)
------ ------- ------
Cash flows from financing activities:
Proceeds from long-term debt 698 5,546 3,075
Repayment of long-term debt (1,032) (592) (883)
Proceeds from exercise of stock options,
net of withholding taxes paid (30) 783 629
Proceeds from insurance claim 632 - -
------- ------- ------
Net cash provided by
financing activities 268 5,737 2,821
------- ------- ------
Net change in cash and
cash equivalents 1,505 380 (1,445)
Effect of exchange rates on cash (1,421) (401) -
Cash and cash equivalents at January 1 4,300 4,321 5,766
------- ------- ------
Cash and cash equivalents at December 31 $ 4,384 4,300 4,321
======= ======= ======
Supplemental disclosure of cash
flow information:
Cash paid in interest $ 1,729 1,849 1,113
Cash paid in income taxes $ 3,866 2,573 2,918
See accompanying notes to consolidated financial statements.
EMS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 and 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include the accounts of EMS
Technologies, Inc. (formerly known as Electromagnetic Sciences, Inc.)
and its wholly-owned subsidiaries, LXE Inc., and EMS Technologies Canada,
Ltd. (formerly known as CAL Corporation) (collectively, "the Company").
All significant intercompany balances and transactions have been eliminated
in consolidation. Following is a summary of the Company's significant
accounting policies:
- - Management's Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principals requires management to make estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities in the financial statements and accompanying
notes, including revenue recognition under long-term contracts. Actual
future results could differ from those estimates.
- - Revenue Recognition
Revenues are derived from sales of the Company's products to end-users
and to other manufacturers or system integrators. Revenues under certain
long-term contracts, many of which provide for periodic payments, are
recognized under the percentage-of-completion method using the ratio of
cost incurred to total estimated cost as the measure of performance.
Revenues under cost-reimbursement contracts are recorded as costs are
incurred and include an estimate of fees earned. Revenues under all
other contracts are recognized when units are delivered or services are
performed. Provisions for estimated losses on uncompleted contracts are
made in the period in which the probable amounts of such losses are
determined.
Revenues collected in advance under service contracts are recognized
over the term of the contract. To properly match revenues with costs,
certain contracts may have revenue recognized in excess of billings, and
other contracts may have billings in excess of revenue recognized.
- - Cash Equivalents
Cash equivalents included $37,000 and $280,000 at December 31, 1998
and 1997, respectively, of overnight repurchase agreements and interest-
bearing deposits with an initial term of less than three months. The
Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents.
- - Inventories
Inventories are valued at the lower of cost (first-in, first-out) or
market (net realizable value). Work in process consists of raw material
and production costs, including indirect manufacturing costs.
- - Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is
provided primarily using the straight-line method over the following
estimated useful lives of the respective assets:
Buildings 40 years
Machinery and equipment 3 to 8 years
Furniture and fixtures 10 years
Leasehold improvements are amortized over the shorter of their
estimated useful lives or the terms of the respective leases.
The Company reviews long-lived assets and certain identifiable
intangibles for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets to he held and used is measured by a comparison
of the carrying amount of an asset to future net cash flows expected to
be generated by the asset. If such assets are considered to be impaired,
the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceed the fair value of the assets. If
assets are to be disposed of, such assets are reported at the lower of
carrying amount or fair value less costs to sell.
- - Capitalized Software Costs
The Company has capitalized certain costs to develop software that will
be licensed to customers. The carrying value of each software product
is the lower of total costs incurred or the net realizable value of the
product. Capitalization of internally developed software begins upon
the establishment of technological feasibility. Costs incurred prior
to the establishment of technological feasibility are expensed as
incurred. Capitalized software costs are evaluated for impairment
at each balance sheet date by comparing the unamortized capitalized
costs with net realizable value (i.e., future gross revenues less
estimated future costs of completing and disposing of the product,
including maintenance and customer support costs to satisfy the Company's
responsibility at the time of sale); any excess of the cost over its net
realizable value would be written off. Capitalized software costs are
amortized on a product-by-product basis, beginning when the product is
ready for sale. Annual amortization is based upon the greater of the
ratio of current gross revenues for the product to the total of current
and anticipated future gross revenues, or the straight-line method over
four years. Unamortized software
costs are included in other assets and totaled $2.5 million and
$3.2 million as of December 31, 1998 and 1997, respectively.
Amortization of capitalized software costs was $690,000 in 1998,
$265,000 in 1997, and $70,000 in 1996.
In 1996, the Company recognized software-related writedowns of
$1.6 million, substantially all of which were associated with a
loss on a minority investment in a private software development
firm. When the investee encountered substantial financial difficulties
late in 1996, the investee transferred unrestricted software rights
in exchange for return of the Company's ownership interest, as well
as satisfaction of loans (secured by the software) to the investee.
A loss resulted from this exchange because the Company's investment
of $3.4 million exceeded the fair value attributed to the software
of $2.0 million, which was based upon the net present value of expected
future cash flows to be derived software licensing and related hardware
sales.
- - Income Taxes
The Company provides for income taxes using the asset and liability
method. Under the asset and liability method, deferred tax assets
and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected
to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled.
- - Earnings Per Share
Basic earnings per share is the per share allocation of income
available to common stockholders based only on the weighted average
number of common shares actually outstanding during the period. Diluted
earnings per share represents the per share allocation of income
attributable to common stockholders based on the weighted average
number of common shares actually outstanding plus all dilutive potential
common shares outstanding during the period. For purposes of calculating
earnings per share for periods prior to 1997, the Company's proportionate
share of the net earnings of LXE was adjusted to reflect the dilutive
effect of LXE's outstanding stock options.
- - Goodwill
Goodwill represents the excess of purchase price over fair value of net
assets acquired and is amortized on a straight-line basis over twenty-
five years. The Company assesses the recoverability of this intangible
asset by determining whether the amortization of the goodwill balance
over its remaining life can be recovered through undiscounted future
operating cash flows of the acquired operation.
The amount of goodwill impairment, if any, is measured based on projected
discounted future operating cash flows using a discount rate reflecting
the Company's average cost of funds. The assessment of the recoverability
of goodwill will be impacted if estimated future operating cash flows are
not achieved.
- - Stock Option Plan
Prior to January 1, 1996, the Company accounted for its stock option
plan in accordance with the provisions of Accounting Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to Employees,"
and related interpretations. As such, compensation expense would be
recorded on the date of grant only if the current market price of the
underlying stock exceeded the exercise price. On January 1, 1996, the
Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 123, "Accounting for Stock-Based Compensation," which permits entities
to recognize as expense, over the vesting period, the fair value of all
stock-based awards on the date of grant. Alternatively, SFAS No. 123
also allows entities to continue to apply the provisions of APB Opinion
No. 25 and provide pro forma net earnings and pro forma earnings per
share disclosures for employee stock option grants made in 1995 and
future years as if the fair-value-based method defined in SFAS No. 123
had been applied. The Company has elected to continue to apply the
provisions of APB Opinion No. 25 and provide the pro forma disclosure
required by SFAS No. 123.
- - Foreign Currency Translation
Assets and liabilities of the Company's foreign subsidiaries are
translated into U.S. dollars at current exchange rates. Income and
expenses of the foreign subsidiaries are translated into U.S. dollars
at the approximate average exchange rates which prevailed during the
year presented. The functional currency of all subsidiaries is considered
to be the local currency; consequently, adjustments resulting from the
translation of the subsidiaries' financial statements (including long-term
financing from the parent) are reflected in accumulated other comprehensive
income in stockholders' equity and not as a part of the results of
operations. The Company accrues foreign currency exchange gains or
losses on direct export activity and on the LXE European subsidiaries'
short-term intercompany liabilities that arise from the purchase of the
parent's products for resale. The Company recognized in net non-operating
income (expense) a $482,000 foreign currency exchange net gain in 1998,
and foreign currency exchange net losses of $449,000 in 1997 and $66,000
in 1996.
Prior to 1997, the functional currency for LXE's wholly owned European
subsidiaries was considered to be the U.S. dollar. The effects of
remeasuring the foreign currency financial statements of these European
subsidiaries was recognized in the consolidated statement of earnings.
The change in functional currency in 1997 from the U.S. dollar to the
local currency reflected the continued
growth, greater operational autonomy and expanding business activity of
the LXE subsidiaries in Europe. Non-operating income (expense) in 1996
included a $60,000 remeasurement loss under the prior accounting policy.
- - Comprehensive Income
On January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income." SFAS No. 130 establishes standards for the
reporting and presentation of comprehensive income and its components
in a full set of financial statements. Comprehensive income consists
of net income and foreign currency translation adjustments and is
presented in the consolidated statements of stockholders' equity and
comprehensive income. SFAS No. 130 requires only additional disclosures
in the consolidated financial statements; it does not affect the Company's
financial position or results of operations. Prior year financial
statements have been reclassified to conform to the requirements of
SFAS No. 130.
(2) NON-OPERATING INCOME (EXPENSE)
For the years 1998, 1997 and 1996, the most significant recurring
item within non-operating income (expense) was net gains and losses
from foreign currency transactions and remeasurement; the Company
reported a consolidated net foreign currency gain of $482,000 in
1998 and net losses of $449,000 in 1997 and $126,000 in 1996.
Other significant items in non-operating income (expense) included
in 1998 were a $472,000 tornado-related gain on involuntary conversion
of insured assets, a $331,000 gain from collection on a note receivable
that had previously been reserved, and a $245,000 gain on disposal of
a minority investment. In 1997, non-operating income included
approximately $667,000 for interest income related to settlement
with the Canadian government for a research and development claim,
and a $419,000 loss on disposal of a business unit within the Company's
Canadian operations. In 1996, non-operating income included charges of
$249,000 for a loss on disposal of a business unit and expenses related
to the acquisition of minority shares in the Company's LXE subsidiary.
(3) ACQUISITION OF MINORITY SHARES IN SUBSIDIARIES
In March 1997, the Company increased its ownership of its EMS Technologies
Canada subsidiary, then known as CAL Corporation (CAL), from 74% to 92%
with the purchase of shares held by the former principal shareholders of
CAL. The terms of this purchase were set forth in the Company's 1993
agreement to purchase a majority interest in CAL. In September 1997,
the CAL Board of Directors approved an offer by the Company to acquire
the remaining minority shares in CAL for $CAN .35 per share, subject to
a favorable vote of the CAL minority shareholders. The shareholders
approved the transaction on September 25, 1997, and the Company thereafter
accomplished the acquisition through pre-amalgamation
direct purchases from certain minority shareholders, and through the
amalgamation. The Company purchased the minority shares in CAL for a
total of $772,000, all of which was attributed to goodwill. This
additional goodwill was to be amortized on a straight-line basis over
the eight years remaining under the original 15-year term of amortization
for the goodwill incurred in the initial purchase of a majority interest
in CAL; however in 1998, all of the goodwill associated with the acquisition
of CAL was eliminated as a result of a decrease in the valuation allowance
for deferred tax assets, as further described in Note 7, "Income Taxes."
On October 3, 1996, the Company announced its offer to exchange .75 shares
of its common stock (ELMG) for each of the 1.0 million outstanding shares
of the common stock of LXE Inc. The exchange offer expired on December 30,
1996, at which time approximately 800,000 shares had been tendered; upon
acceptance of those shares, the Company held 96% of the outstanding LXE
shares. On December 31, 1996, the Company exercised its right, as the
holder of at least 90% of the LXE shares, to cause a merger in which all
remaining LXE shares not held by the Company were each converted into .75
ELMG shares. As a result of the exchange offer and merger, the Company
issued approximately 774,000 additional shares valued for financial reporting
purposes at $17 per share, which was based upon the average closing price for
the Company's shares for the period including the three trading days before
and the three trading days after the October 4, 1996 announcement of the
exchange offer.
Also as part of the LXE merger, the Company converted all outstanding
LXE stock options into ELMG stock options at the rate of .75 ELMG shares
for each LXE share subject to option. The per-share price was increased
by one-third, so that the aggregate exercise price of each new ELMG option
was the same as for the previous LXE option. All other terms and conditions
of the new ELMG options, including vesting dates and expiration dates, were
unchanged from the previous LXE options. As a result, the Company issued
options to purchase a total of 275,000 ELMG shares at prices ranging from
$5.03 to $24.33 per share, of which, options to purchase 220,000 shares
were exercisable. The total value of the exercisable ELMG options, as
determined under the Black-Scholes option pricing model, was approximately
$2.5 million.
In February 1996, the Company completed a private purchase of 548,000
shares of LXE stock, paid for with $500,000 of cash and 457,000 shares
of ELMG stock. The value attributed to these ELMG shares was based upon
the total market value of the LXE stock received, according to the LXE
closing share price on the date that the transaction was completed, less
the $500,000 paid to the seller in cash. The implicit value per share,
$10.30, of the new ELMG shares represented an approximate 15% discount
to market in recognition of the accompanying restrictions, including a
required holding period before the shares could be sold.
The acquisition of LXE shares was accounted for as a purchase
transaction, resulting in additional goodwill of approximately
$12.5 million that will be amortized on the straight-line method over
twenty-five years. The Company does not expect to issue additional
LXE stock in the future; however, should the Company issue additional
LXE stock, it will not recognize any related future gain until such
time as it has issued shares in an amount equivalent to the number of
repurchased shares.
(4) TRADE ACCOUNTS RECEIVABLE
Trade accounts receivable include the following (in thousands):
December 31
1998 1997
---- ----
Amounts billed under contracts $ 35,148 36,499
Unbilled revenues (substantially all to
be billed during the following twelve
months) 26,336 23,912
Deferred revenue (3,719) (1,710)
Allowance for doubtful accounts (310) (270)
------ ------
Trade accounts receivable, net $ 57,455 58,431
====== ======
(5) LONG-TERM DEBT
The following is a summary of long-term debt (in thousands):
December 31
1998 1997
---- ----
Revolving credit loan, $10 million secured
by land and building and the remainder
unsecured, maturing in November 2003,
interest payable quarterly at a variable
rate (6.55% at the end of 1998 and 8.0%
at the end of 1997) $ 19,150 11,850
Revolving credit loan of LXE Inc.,
unsecured, maturing in December 1999,
interest payable quarterly at a variable
rate (8.0% at the end of 1997) - 6,975
Line of credit secured by the assets of
EMS Technologies Canada, Ltd., maturing
in May 1999, interest payable at a variable
rate (7.5% at the end of 1998 and 6.0% at
the end of 1997) 2,197 1,824
Financing agreement for the purchase of
integrated application software, due in
monthly installments through February 1999,
interest payable at 8.85% - 1,032
------ ------
Total long-term debt 21,347 21,681
Less current installments of long-term debt 2,197 4,521
------ ------
Long-term debt, excluding current
installments $ 19,150 17,160
====== ======
In November 1998, the Company amended and restated its revolving
credit agreement with a bank to increase available credit to $35
million. The first $30 million borrowed under this agreement is
due November 2003, with no principal payments required until maturity,
and borrowings in excess of $30,000,000 are due on demand. As part
of this new agreement, the previous LXE debt agreement was terminated.
The first $10 million of this debt is secured by land and building
with a carrying value at December 31, 1998 of approximately $7 million.
Interest under the revolving credit agreement is, at the Company's
option, a function of either the bank's prime rate or LIBOR. A
commitment fee equal to .20% per annum of the daily average unused
credit available is payable quarterly in arrears.
The revolving credit agreement includes a covenant that annually
establishes a minimum required net worth. The minimum net worth
required at December 31, 1998 was approximately $98 million, as
compared with the reported net worth of approximately $101 million.
Other covenants limit the amount of debt as compared with total
capitalization, or set a minimum ratio by which earnings before
interest and income taxes must exceed interest expense; at December 31,
1998, the Company was in compliance with these covenants.
The line of credit for EMS Technologies Canada was renewed in June
1998 and extends to May 1999. The total available credit under this
agreement is $4.6 million.
The approximate principal maturities of long-term debt are $2.2 million
in 1999, none in 2000, 2001 or 2002, and $19.1 million in 2003. At
December 31, 1998, the Company has available two immediate sources
of credit: $15.9 million remaining under the reducing revolving credit
agreement and $2.4 million available under the EMS Technologies
Canada credit line.
(6) STOCK PLANS
The Company has granted incentive and nonqualified stock options
to key employees and directors under several stock option plans.
All outstanding options have been granted at 100% of fair market
value on each option's grant date. All outstanding options become
exercisable from one to three years after the date of grant and
expire from six to ten years after the date of grant. Under all plans
at December 31, 1998, options for a total of 328,000 shares of stock
were exercisable, and there were no options available for future
grants, although the Company will seek shareholder approval in 1999
for authorization of additional options for future grants.
Prior to becoming a wholly-owned subsidiary of the Company at the
end of 1996, LXE maintained a separate stock incentive plan for
grants of restricted shares or options to directors and employees.
Immediately prior to the merger on December 31, 1996, options for
367,000 shares of LXE stock were outstanding at prices per share
ranging from $3.77 to $18.25.
Following is a summary of activity in all of the Company's stock option
plans for the three years ended December 31, 1998, 1997 and 1996
(shares in thousands):
Weighted Average
Exercise Price
Shares Per Share
------ ---------
Options outstanding at December 31, 1995 807 $ 7.40
Granted 95 11.96
Canceled or expired (22) 7.92
Exercised (279) 6.67
Issued to replace LXE options
pursuant to merger 275 9.11
--- -----
Options outstanding at December 31, 1996 876 8.66
Granted 272 21.63
Canceled or expired (27) 13.00
Exercised (229) 8.27
--- -----
Options outstanding at December 31, 1997 892 12.59
Granted 291 20.42
Canceled or expired (45) 20.12
Exercised (141) 6.02
--- -----
Options outstanding at December 31, 1998 997 $15.47
=== =====
The weighted average fair value of options granted in 1998, 1997
and 1996, excluding options issued pursuant to the LXE merger,
was $12.52, $14.17 and $7.12, respectively. These fair values
were based on the Black-Scholes option pricing model and a weighted
average risk-free rate of return of 4.8% in 1998, 5.7% in 1997 and
6.3% in 1996, terms from six to ten years, expected volatility of
60% in 1998 and 1997 and 49% in 1996, and no expected dividend yield.
The weighted average fair value of options issued pursuant to the
LXE merger as replacement for LXE options was $11.31. This fair
value was based on a weighted average risk-free return of 6.0%, a
2.7-year term, expected volatility of 49%, and no expected dividend
yield.
Following is a summary of options outstanding at December 31, 1998
(shares in thousands):
Outstanding Exercisable
------------------------- ------------------------
Weighted Weighted Average Weighted
Range of Average Price Remaining Years In Average Price
Exercise Prices Shares Per Share Contractual Life Shares Per Share
- --------------- ------ ------------- ------------------ ------ -------------
$ 3.63 - 6.38 160 $ 5.20 3.8 160 $ 5.20
7.55 - 8.50 124 8.04 2.6 92 8.22
11.13 - 15.25 187 12.41 4.1 64 12.04
17.00 - 18.63 218 18.52 5.8 5 18.25
20.00 - 23.50 171 23.10 5.5 3 20.00
23.75 - 27.63 137 24.02 5.9 4 23.75
------------- --- ----- --- --- -----
$ 3.63 - 27.63 997 $15.47 4.7 328 $ 7.97
============= === ===== === === =====
In the Company's capital structure, stock options are the only securities
that are potentially dilutive in the future to basic earnings per share,
summarized as follows (shares in thousands):
1998 1997 1996
------ ------ ------
Dilutive stock options,
included in earnings
per share calculations:
Shares 438 706 600
Average price per share $ 8.33 $9.65 $ 8.46
Antidilutive stock options,
excluded from earnings
per share calculations:
Shares 559 186 -
Average price per share $21.06 $23.71 $ -
Following is a reconciliation of the denominator for basic and diluted
earnings per share calculations (shares in thousands):
1998 1997 1996
---- ---- ----
Basic earnings per
share denominator 8,675 8,544 7,403
Common equivalent shares
from dilutive stock options 196 276 228
----- ----- -----
Diluted earnings per
share denominator 8,871 8,820 7,631
===== ===== =====
Under Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation," the Company is permitted
to continue accounting for the issuance of stock options in accordance
with Accounting Principles Board ("APB") Opinion No. 25, which does
not require recognition of compensation expense for option grants
unless the exercise price is less than the market price on the date
of grant. As a result, the Company has not recognized any compensation
cost for stock options. If the Company had recognized compensation
cost for the "fair value" of option grants under the provisions of
SFAS No. 123, the pro forma financial results for 1998, 1997 and 1996
would have differed from the actual results as follows (net earnings
in thousands):
1998 1997 1996
---- ---- ----
Net earnings:
As reported $6,176 7,391 5,027
Pro forma 4,899 6,731 4,876
Basic net earnings per share:
As reported .71 .87 .68
Pro forma .57 .79 .66
Diluted net earnings per share:
As reported .70 .84 .66
Pro forma .54 .78 .64
Under SFAS No. 123, the fair value of stock options issued in any
given year is expensed as compensation over the vesting period,
which for substantially all of the Company's options is three years;
therefore, the pro forma net earnings and net earnings per share do
not reflect the total compensation cost for options granted in the
respective years. Furthermore, the pro forma results only include
the effect of options granted since 1995; options granted prior to
1995 were not considered.
In 1989, the Company adopted a Shareholder Rights Plan, under which
each outstanding share of common stock carries a contingent right to
purchase additional common stock. These rights are triggered by any
of the following: (i) the acquisition of at least a 20% beneficial
ownership in the Company, (ii) the acquisition of an additional 2%
beneficial interest by an existing 20% holder, or (iii) certain merger,
consolidation or asset sale transactions, in each case without the consent
of a majority of the members of the Company's Board of Directors not
having an interest in the acquiror. Upon being triggered, each right
entitles its holder (other than the acquiror and certain related
parties) to buy for $30 shares having at that time a market value of
$60. The rights expire on April 6, 1999, are subject to redemption
by vote of the disinterested directors at a price of $.01 per right,
and do not have voting power. Prior to becoming exercisable, they
are not separately tradable and do not have a dilutive effect on
earnings per share. The Board of Directors may also issue up to
10,000,000 shares of preferred stock, with such preferences, limitations
and relative rights as may be determined by the Board.
(7) INCOME TAXES
Total income tax expense (benefit) provided for in the Company's
consolidated financial statements consists of the following (in thousands):
1998 1997 1996
---- ---- ----
Consolidated income tax expense $ 3,927 4,924 1,484
Income tax benefit resulting from
exercise of stock options credited
to stockholders' equity and
minority interest (600) (1,142) (1,042)
Income tax benefit resulting from
initial recognition of acquired
tax benefits credited to goodwill (4,458) (405) -
------ ------ ------
Total $(1,131 3,377 442
====== ====== ======
The components of income tax expense were (in thousands):
1998 1997 1996
---- ---- ----
Current:
Federal $ 3,239 4,311 2,975
State 606 803 535
Foreign (663) 517 548
------ ------ ------
Total current expense 3,182 5,631 4,058
------ ------ ------
Deferred:
Federal 496 (368) 1,862)
State 23 (76) (378)
Foreign 226 (263) (334)
------ ------ ------
Total deferred (benefit) expense 745 (707) (2,574)
------ ------ ------
Total income tax expense $ 3,927 4,924 1,484
====== ====== ======
Income tax expense differed as follows from the amounts computed by
applying the U.S. federal income tax rate of 34% to earnings before
income taxes and LXE minority interest (in thousands):
1998 1997 1996
---- ---- ----
Computed "expected" income
tax expense $ 3,435 4,187 2,123
Tax credits from
research activities (284) (82) (175)
State income taxes, net of
federal income tax benefit 423 481 342
Higher foreign tax rates 13 106 158
Change in deferred tax asset
valuation allowance (206) - 751
Write-off of deferred tax liability
related to gain on issuance of
LXE stock - - (2,229)
Amortization of goodwill 243 301 150
Benefit from foreign sales
corporation (254) (252) (76)
Other 557 183 440
----- ----- -----
Income tax expense $ 3,927 4,924 1,484
===== ===== =====
Income tax expense includes benefits recognized from foreign net
operating loss carryforwards of $314,000, $263,000 and $288,000
in 1998, 1997 and 1996, respectively.
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 1998 and 1997 are presented below (in thousands):
1998 1997
---- ----
Deferred tax assets:
Accounts receivable $ 104 79
Inventories 296 363
Accrued compensation costs 560 511
Capital loss carryforward 473 566
Foreign research expense and
tax credit carryforward 3,702 4,262
Foreign net operating loss
carryforward 1,937 2,014
Foreign note receivable 150 313
Gain on sales to foreign subsidiaries 515 415
Other 211 166
----- -----
Total gross deferred tax assets 7,948 8,689
Valuation allowance (1,328) (5,992)
----- -----
Net deferred tax assets 6,620 2,697
----- -----
Deferred tax liabilities:
Property, plant and equipment 2,190 1,985
Net gain from foreign transactions and
remeasurement 283 93
----- -----
Total gross deferred tax liabilities 2,473 2,078
----- -----
Net deferred tax assets $ 4,147 619
===== =====
Most of the 1998 decrease in the valuation allowance for deferred
tax assets related to a change in estimate concerning the potential
realization of deferred tax assets associated with the Company's
Canadian subsidiary. These deferred tax assets had been fully
reserved when the subsidiary was acquired in 1993, due to uncertainty
about the realization. Based upon the Canadian operation's significantly
improved profitability in 1998 and management's revised assessment of the
subsidiary's business prospects, the valuation allowance related to these
deferred tax assets was decreased by approximately $4.5 million; the
resulting benefit was allocated to goodwill.
Earnings before income taxes for U.S. operations were $10,103,000 in
1998, $12,315,000 in 1997, and $6,842,000 in 1996. The combined
foreign operations reported net losses before income taxes of $809,000
in 1998 and $595,000 in 1996, and breakeven results in 1997. The
Company's net deferred tax assets at December 31, 1998 include
$1,090,000 related to a cumulative $3,285,000 net operating loss
incurred by certain European operations, $2,452,000 of which may
be carried forward through 2003, with the remainder allowed to be
carried forward indefinitely. Management believes that the expected
performance of these operations and the utilization of tax planning
strategies will generate adequate earnings to fully realize this
deferred tax asset.
(8) RETIREMENT PLANS
The Company established a qualified defined contribution plan in 1993.
All U.S.-based employees that meet a minimum service requirement are
eligible to participate in the plan. Company contributions are allocated
to each participant based upon an age-weighted formula that discounts
an equivalent benefit at age 65 to each employee's current age.
Accumulated contributions are invested at each participant's discretion
from among a diverse range of investment options offered by an independent
investment firm selected by the Company.
The Company's contribution to this plan is determined each year by the
Board of Directors. There is no required minimum annual contribution,
but the target contribution has been approximately 5% of base payroll.
The Company accrued an expense for the defined contribution plan of
$1,950,000 for 1998, $1,900,000 for 1997, and $1,650,000 for 1996.
The Company also sponsors qualified retirement savings plans in the
U.S. and Canada, in which the Company matches a portion of each
eligible employee's contributions. The Company's matching contributions
to these plans were $599,000 in 1998, $535,000 in 1997 and $417,000
in 1996.
(9) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following summarizes certain information regarding the fair
value of the Company's financial instruments at December 31, 1998
and 1997:
Cash and cash equivalents, trade accounts receivable and accounts
payable -- The carrying amount approximates fair value because of
the short maturity of these instruments.
Long-term debt -- The Company's long-term debt bears interest at
variable rates that management believes are commensurate with rates
currently available on similar debt. Accordingly, the carrying value
of long-term debt approximates fair value.
(10) BUSINESS SEGMENT AND GEOGRAPHIC AREA INFORMATION
The Company is organized into two reportable segments: Space and
Electronics, and Wireless Products. Each segment is separately
managed and comprises a range of products and services that share
distinct operating characteristics. The Company evaluates each
segment primarily upon operating profit.
The Space and Electronics segment manufactures custom-designed,
highly engineered hardware to perform subsystem functions within
larger systems for use in space and satellite communications, radar,
surveillance and military counter-measures. Orders typically involve
development and production schedules that can extend a year or more,
and most revenues are recognized under percentage-completion accounting.
Hardware is sold to prime contractors or systems integrators rather
than end-users.
The Wireless Products segment manufactures standardized antennas,
terminals, and other wireless network products for use in logistics,
healthcare information management, and PCS/cellular communications.
The manufacturing cycle for each order is generally just a few days,
and revenues are recognized upon shipment of hardware. Hardware is
marketed to end-users and to third-parties who incorporate their
products and services with the Company's hardware for delivery to
an end-user.
Accounting policies for segments are the same as those described in
the summary of significant accounting policies, except that deferred
income tax assets and liabilities are provided for only at the
consolidated level. Inter-segment activity is not significant.
(In thousands)
1998 1997 1996
---- ---- ----
Net sales:
Space and electronics $ 68,641 74,905 73,379
Wireless products 108,522 96,325 76,379
------- ------- -------
Total $ 177,163 171,230 149,758
======= ======= =======
Operating income:
Space and electronics $ 1,334 8,017 7,367
Wireless products 8,896 6,396 297
------- ------- -------
Total $ 10,230 14,413 7,664
======= ======= =======
Non-operating income (expense), net:
Space and electronics $ 415 257 (204)
Wireless products 914 (506) (187)
Corporate 273 - 87
------- ------- -------
Total $ 1,602 (249) (304)
======= ======= =======
Interest expense:
Space and electronics $ (1,360) (1,316) (490)
Wireless products (973) (1,063) (958)
Corporate 604 530 335
------- ------- -------
Total $ (1,729) (1,849) (1,113)
======= ======= =======
Income tax expense:
Space and electronics $ (152) (2,723) (3,127)
Wireless products (3,541) (2,109) (372)
Corporate (234) (92) (214)
Write-off of deferred tax
liability related to gain on
issuance of LXE stock - - 2,229
------- ------- -------
Total $ (3,927) (4,924) (1,484)
======= ======= =======
Net earnings (loss):
Space and electronics $ 236 4,235 5,775
Wireless products 5,297 2,718 (1,220)
Corporate 643 438 472
------- ------- -------
Total $ 6,176 7,391 5,027
======= ======= =======
Assets:
Space and electronics $ 77,803 65,811 56,203
Wireless products 61,781 75,146 68,776
Corporate 7,802 2,697 2,098
------- ------- -------
Total $ 147,386 143,654 127,077
======= ======= =======
Capital expenditures:
Space and electronics $ 5,083 2,806 3,575
Wireless products 2,657 5,051 3,754
------- ------- -------
Total $ 7,740 7,857 7,329
======= ======= =======
Depreciation and amortization:
Space and electronics $ 3,006 3,268 3,303
Wireless products 4,442 3,322 3,076
------- ------- -------
Total $ 7,448 6,590 6,379
======= ======= =======
Following is a summary of enterprise-wide information for the years
ended December 31, 1998, 1997 and 1996 (in thousands):
1998 1997 1996
---- ---- ----
Revenues from the following
products and services:
Space and electronics $ 68,641 74,905 73,379
Network products and systems
integration 85,303 82,323 70,942
Wireless infrastructure 23,219 14,002 5,437
------- ------- -------
Total $ 177,163 171,230 149,758
======= ======= =======
Net sales to customers in
the following countries:
United States $ 127,590 121,978 110,261
France 13,657 11,680 2,739
Canada 6,550 8,345 8,116
Other foreign countries 29,366 29,227 28,642
------- ------- -------
Total $ 177,163 171,230 149,758
======= ======= =======
Long-lived assets located in
the following countries:
United States $ 49,471 50,689 50,619
Canada 3,927 4,529 3,152
Other foreign countries 708 684 1,199
------- ------- -------
Total $ 54,106 55,902 54,970
======= ======= =======
No customers accounted for more than 10% of consolidated net sales
in 1998, 1997 or 1996.
(11) COMMITMENTS AND CONTINGENCIES
The Company is committed under several non-cancelable operating leases
for office space, computer and office equipment, and automobiles.
Minimum annual lease payments under such leases are $2,808,000 in 1999,
$2,580,000 in 2000, $1,883,000 in 2001, $1,641,000 in 2002, $1,307,000
in 2003 and $3,569,000 thereafter.
The Company also has short-term leases for regional sales offices,
equipment and automobiles. Total rent expense under all operating
leases was approximately $3,624,000, $2,710,000, and $3,193,000 in
1998, 1997 and 1996, respectively.
In April 1998, some of the Company's Norcross facilities suffered
tornado damage. The Company has, as of the end of the year, been
reimbursed by its insurer for all but approximately $1.8 million of
tornado-related costs, which have been reported in Other Assets on
the Company's balance sheet as of December 31, 1998. The Company
expects to settle these remaining claims with its insurer in 1999
and to be fully reimbursed for these costs, as well as for reimbursable
damages allowable under business-interruption coverage.
(12) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Following is a summary of interim financial information for the years
ended December 31, 1998 and 1997 (in thousands, except per share data):
1998 Quarters ended
April 3 July 3 October 2 December 31
------- ------ --------- -----------
Net sales $ 42,676 46,231 47,393 40,863
Operating income (loss) 3,246 3,796 4,172 (984)
Net earnings 1,743 2,038 2,351 44
Net earnings per share:
Basic .20 .24 .27 .01
Dilutive .20 .23 .27 -
1997 Quarters ended
March 28 June 27 October 3 December 31
-------- ------- --------- -----------
Net sales $ 39,631 41,046 42,306 48,247
Operating income 2,611 3,119 3,831 4,852
Net earnings 1,303 1,746 1,952 2,390
Net earnings per share:
Basic .15 .20 .23 .28
Dilutive .15 .20 .22 .27
Net sales decreased in the fourth quarter of 1998 as a result of delays
in orders for wireless infrastructure and space products.
(13) SUBSEQUENT EVENT (UNAUDITED)
In January 1999, the Company acquired the Satellite Products business
unit of Spar Aerospace Limited, located near Montreal, Quebec. As measured
in equivalent U.S. dollars, this business unit had 1998 revenues of
approximately $55 million and a backlog of orders at the end of 1998
totaling $90 million.
The transaction was accounted for as an asset purchase valued at
approximately $20 million, subject to adjustment for actual versus
projected working capital at the closing date, and no goodwill resulted.
One-third of the purchase price was financed under the Company's credit
line with a U.S. bank, and the remainder is being financed by the seller.
The seller-financed amount is payable in four equal installments,
with the first installment due approximately three months after the
transaction's close and the other three installments due, with annual
interest of 5.5%, on December 31, 1999, 2000 and 2001, respectively.
All four installments are payable, at the Company's option, either in
cash or equivalent value of the Company's common stock.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
EMS Technologies, Inc.:
We have audited the accompanying consolidated balance sheets of EMS
Technologies, Inc. (formerly known as Electromagnetic Sciences, Inc.)
and subsidiaries as of December 31, 1998 and 1997, and the related
consolidated statements of earnings, stockholders' equity and comprehensive
income, and cash flows for each of the years in the three-year period
ended December 31, 1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of EMS
Technologies, Inc. and subsidiaries as of December 31, 1998 and 1997,
and the results of their operations and their cash flows for each of
the years in the three-year period ended December 31, 1998, in conformity
with generally accepted accounting principles.
KPMG LLP
Atlanta, Georgia
February 5, 1999
Selected Financial Data
(In thousands, except earnings per share)
Years ended December 31
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Net sales $177,163 171,230 149,758 128,950 117,993
Cost of sales 115,127 111,925 97,258 83,865 73,375
Selling, general and
administrative expenses 38,666 35,758 31,070 30,836 27,589
Research and development
expenses 13,140 9,134 12,121 10,392 8,127
Loss on investment
in software - - 1,645 - -
------- ------- ------- ------- -------
Operating income 10,230 14,413 7,664 3,857 8,902
Non-operating (expense)
income, net 1,602 (249) (304) 675 640
Interest expense (1,729) (1,849) (1,113) (864) (482)
------- ------- ------- ------- -------
Earnings before
income taxes and
minority interest 10,103 12,315 6,247 3,668 9,060
Income tax expense (3,927) (4,924) (1,484) (1,402) (3,712)
Minority interest in LXE
net (earnings) loss - - 264 44 (1,085)
------- ------- ------- ------- -------
Net earnings $ 6,176 7,391 5,027 2,310 4,263
======= ======= ======= ======= =======
Net earnings per common
share:
Basic .71 .87 .68 .33 .63
Diluted .70 .84 .66 .32 .59
Weighted average number of
shares:
Common 8,675 8,544 7,403 6,929 6,766
Common and dilutive
common equivalent 8,871 8,820 7,631 7,141 6,966
As of December 31
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Working capital $ 68,177 58,556 46,637 43,002 39,366
Total assets 147,386 143,654 127,077 104,954 96,751
Long-term debt (excluding
current installments) 19,150 17,160 12,230 10,989 4,592
Stockholders' equity 100,660 95,220 87,250 60,209 56,431
No cash dividends have been declared or paid during any of the periods
presented.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
- ---------------------
Consolidated net sales increased to $177 million in 1998 from $171
million in 1997 and $150 million in 1996. A predominant percentage
of revenues was derived from commercial and international markets
(79% in 1998, 74% in 1997, and 70% in 1996), as compared with sales
for U.S. government end-use. More revenues were derived from sales
to system integrators, third-party manufacturers and distributors
than sales directly to end-user customers. Management places a strong
emphasis on product-related information for analyzing its business.
The growth in consolidated net sales during this three-year period is
attributable to the wireless products segment, for which sales increased
to $108 million in 1998, compared with $96 million in 1997 and $76 million
in 1996. This segment's revenue growth was led by sales of base station
antennas for PCS/cellular telecommunications and other infrastructure
products; there was also growth in the North American markets for wireless
logistics networks and healthcare information management products. Revenues
in the space and electronics segment were $69 million in 1998, compared
with $75 million in 1997 and $73 million in 1996. International sales
by this segment, especially in the area of space products, have grown
over the past three years, but this growth has been more than offset
by lower sales of hardware for U.S. government end-use.
Cost of sales has remained at 65% of consolidated net sales in 1998,
1997, and 1996, but the components of cost of sales have varied over
that period. For wireless products, the cost of sales percentage was
57% in 1998, compared with 60% in 1997 and 58% in 1996. The decrease
in 1998 compared with 1997 was due to proportionally greater sales of
PCS/cellular antennas and other infrastructure products, which have a
lower cost of sales percentage than other wireless products. The net
increase in the 1997 cost of sales percentage compared with 1996 was
due mainly to greater distribution of wireless logistics products through
indirect channels that involve sales discounts, and to a more competitive
pricing environment; the effect in 1997 of these factors was partially
offset by higher sales of wireless infrastructure products. In the
space and electronics segment, the cost of sales percentage was 78%
in 1998, compared with 72% in 1997 and 71% in 1996. The change in
1998 from 1997 related to lower sales over which to absorb fixed
overhead expenses; as a result, the Company reduced the size of
this segment's workforce in the second half of 1998, with the associated
costs recorded in cost of sales.
Selling, general and administrative expenses increased over the
three-year period, but as a percentage of consolidated net sales,
these expenses were relatively stable at 22% in 1998, and 21% in
1997 and 1996.
Research and development expenses represent the cost of the Company's
internally funded efforts. Significant research and development
effort also occurs under many specific customer orders in the space
and electronics segment and, accordingly, is reflected in cost of
sales. The increase in research and development expenses in 1998
related to specific products being developed for new wireless
applications in space, satellite communications, and private local-
area networks. Management expects that internally funded research
and development expenses will increase in 1999 compared with 1998.
The decrease in 1997 compared with 1996 was due to the completion of
several development projects in late 1996 and early 1997 related to
new wireless technologies and SATCOM products. In addition, the
Company directed a higher proportion of its total research and
development effort in 1997 toward customer-funded projects, and
the Company's Canadian operations received a $677,000 settlement
under a Canadian government technology program, resulting from a
claim for unreimbursed research and development expenses incurred
in years prior to 1991.
In 1996, the Company recognized a $1.6 million operating charge to
write down certain acquired software, approximately $1.4 million of
which related to certain software acquired in the fourth quarter of
1996 in exchange for the Company's minority interest in a privately
held software development company. This transaction resulted in a
loss because the Company's $3.4 million minority interest investment
exceeded the acquired software's estimated fair value of $2 million,
which was based upon the present value of net future cash flows expected
from the licensing of this product to customers. Capitalized software
costs are amortized using the greater of the ratio of current gross
revenues for the product to the total of current and anticipated future
gross revenues or the straight-line method over four years.
The most significant recurring item within non-operating income
(expense) was net gains or losses resulting from foreign currency
transactions and from translation of the European subsidiaries'
short-term intercompany liabilities that arise from the purchase
of the parent's products for resale in Europe. The Company recognized
a foreign currency gain of $482,000 in 1998, and net losses of $449,000
and $66,000 in 1997 and 1996, respectively. Under Statement of
Accounting Standards (SFAS) No. 52, "Foreign Currency Exchange,"
the functional currency of the Company's foreign subsidiaries is
the local currency, and adjustments resulting from the translation
of the subsidiaries' financial statements (including long-term financing
from the parent) are reported as accumulated other comprehensive income
within stockholders' equity. Prior to 1997, the functional currency for
the European subsidiaries was considered to be the U.S. dollar under
SFAS No. 52, due to the subsidiaries' limited operations and dependence
upon the parent during those earlier periods. The Company recognized a
$60,000 loss in 1996 from remeasuring the foreign currency financial
statements of the European subsidiaries into U.S. dollars. At the
beginning of 1997, the European subsidiaries' operational characteristics
had changed substantially as compared with previous years. The subsidiaries
had significantly increased the size of their sales, marketing and
administrative staffs, they had established a central management group
on the continent, as well as financial, engineering and service support
staffs, and cash flow generated from European operations was sufficient
to support these expanded business activities. As a result of these
significant changes in operational characteristics, the functional
currency of the European subsidiaries was redetermined under SFAS No. 52
in 1997 to be the local foreign currency. At the end of 1998, the
consolidated foreign currency translation adjustment (representing
all of accumulated other comprehensive income) was a $2.3 million
expense, substantially all of which resulted from changes in exchange
rates during 1998 and 1997.
The remaining non-operating income in 1998 included a $472,000 tornado-
related gain on involuntary conversion of insured assets, a $331,000
gain from collection on a note receivable that had previously been
reserved, and a $245,000 gain on disposal of a minority investment.
Non-operating income in 1997 included $667,000 of interest income
related to settlement of the Canadian research and development claim,
and a $419,000 net loss on disposal of a business unit within the
Company's Canadian operations. In 1996, non-operating income included
net charges of $249,000 for a loss on disposal of a business unit and
for certain expenses related to the acquisition of minority shares in
the Company's LXE subsidiary.
Interest expense in 1998 decreased in comparison with 1997 due to more
favorable interest terms under a new debt agreement. The increase in
1997 compared with 1996 was the result of higher levels of debt.
The effective income tax rate was 39% in 1998, 40% in 1997 and 24% in
1996. The effective rate in 1996 included a non-recurring $2.2 million
benefit for the write-off of a deferred income tax liability arising
from the initial public issuance of LXE stock in 1991. The Company
expects that the effective income tax rate in 1999 will be comparable
with the rates in 1998 and 1997.
Liquidity and Capital Resources
- -------------------------------
Cash provided by operating activities in 1998 was sufficient to fund
expenditures for property, plant and equipment, as well as reduce
long-term debt from the levels reported at the beginning of the year,
and the Company expects similar developments in 1999. Management
believes that the Company's present liquidity, together with cash from
operations and sources of external financing, will support its current
business activities and near-term capital investment plans. Additional
sources of liquidity will be needed over the next few years if the
Company and its markets continue to grow.
During 1998, the Company amended its existing revolving credit agreement
with a bank to increase available borrowings to a total of $35 million,
with $30 million maturing in November 2003 and the remaining $5 million
financed under a demand note. In addition, the Company has a revolving
credit agreement with a bank in Canada to fund Canadian operations, and
during 1998 this agreement was extended to May 1999. At December 31, 1998,
the Company had two immediate sources of credit: $15.9 million remaining
under the revolving credit agreement, and $2.4 million available under a
line of credit in Canada.
One month after the close of fiscal 1998, the Company acquired the Satellite
Products business unit of Spar Aerospace Limited, located near Montreal,
Quebec. As measured in equivalent U.S. dollars, this business unit had
1998 revenues of approximately $55 million and a backlog of orders at
the end of 1998 totaling $90 million. The transaction was accounted for
as an asset purchase valued at approximately $20 million, subject to
adjustment for actual versus projected working capital at the closing
date, and no goodwill resulted. One-third of the purchase price was
financed under the Company's credit line with a U.S. bank, and the
remainder is being financed by the seller. The seller-financed amount
is payable in four equal installments, with the first installment due
approximately three months after the transaction's close and the other
three installments due, with annual interest of 5.5%, on December 31,
1999, 2000 and 2001, respectively. All four installments are payable,
at the Company's option, either in cash or equivalent value of the
Company's common stock.
Year 2000
- ---------
For the past two years, the Company has pursued a plan to modify
existing information systems or implement new systems, as necessary,
to become "Year 2000" compliant in a timely manner. This plan involved
identification and remediation of potential problems, as well as testing
of new systems and processes and the development of contingency plans.
Efforts encompassed not only the hardware and software that support the
Company's information technologies, but also manufacturing hardware and
other equipment and processes that may rely on embedded software. The
Company has completed the main phase of the plan, which focused on internal
operations; only one minor software program for tracking fixed assets
is not yet compliant, but it is scheduled to be replaced before mid-year.
In addition, the Company's new Canadian-based operations (acquired shortly
after the end of 1998) are still in the process of implementing new
enterprise software that will be Year 2000 compliant, and this process
is also expected to be completed prior to the end of 1999. The Company's
Year 2000 efforts are currently focused on communications with suppliers,
to confirm that the Year 2000 issue will not have a significant effect
on the Company's supply chain.
The Company believes that neither (1) the cost of addressing Year 2000,
nor (2) the consequences of untimely resolution of remaining Year 2000
issues, will have a material effect on the Company's results of operations;
however, management believes that the Company could be affected,
particularly late in 1999, if potential customers delay purchases
until after the end of the year due to the Year 2000 efforts required
of their own information technology personnel.
Business Risk Factors
- ---------------------
Forward-looking statements with respect to the potential development
of expected cash flows are included in management's discussion and
analysis of financial condition and results of operations. Actual
results could differ materially from those suggested in any
forward-looking statements as a result of several factors, including,
but not limited to, the Company's ability to achieve product development
and manufacturing objectives within the cost and timing parameters
created by customers and end-users, and timeliness of orders and payments
from customers, and availability of funding for major new space programs,
and the strength and timing of end-user acceptance of new communications
services, such as high-data-rate mobile services.
Effect of New Accounting Pronouncements
- ---------------------------------------
In 1997, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 131, "Disclosure about
Segments of an Enterprise and Related Information," which supersedes
SFAS No. 14, "Financial Reporting for Segments of a Business Enterprise."
This statement, which the Company was required to adopt in fiscal year
998, requires that public companies report certain financial and
descriptive information about their reportable operating segments,
including related disclosures about products and services, geographic
areas and major customers.
EXHIBIT 22.1
EMS TECHNOLOGIES, INC.
AND SUBSIDIARIES
Subsidiaries of the Registrant
LXE Inc.
125 Technology Parkway
P. O. Box 926000
Norcross, GA 30092-9600
EMS Technologies Canada, Ltd.
1725 Woodward Drive
Ottawa, Ontario K2C 0P9
CANADA
Exhibit 23.1
The Board of Directors
EMS Technologies, Inc.
We consent to incorporation by reference in the registration statements
(Nos. 2-76455, 2-78442, 2-94049, 33-31216, 33-38829, 33-41042, 33-50528,
333-20843 and 333-32425) on Form S-8 of EMS Technologies, Inc. of our
reports dated February 5, 1999, relating to the consolidated balance
sheets of EMS Technologies, Inc. as of December 31, 1998 and 1997 and
the related consolidated statements of earnings, stockholders' equity
and comprehensive income, and cash flows for each of the years in the
three-year period ended December 31, 1998, and the related schedule,
which reports appear or are incorporated by reference in the December 31,
1998 annual report on Form 10-K of EMS Technologies, Inc.
KPMG LLP
Atlanta, Georgia
March 30, 1999