ANNEX A
AYDIN CORPORATION
700 DRESHER ROAD
PO BOX 349
HORSHAM, PA 19044
INFORMATION STATEMENT PURSUANT TO SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
This Information Statement is being mailed on or about March 5, 1999 as
part of the Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") of Aydin Corporation, a Delaware Corporation (the "Company"),
to the holders of record of shares of common stock, par value $1.00 per share,
of the Company (the "Shares"). You are receiving this Information Statement in
connection with the possible election of persons designated by L-3
Communications Corporation, a Delaware corporation ("Parent"), to a majority of
the seats on the Board of Directors of the Company (the "Board" or "Board of
Directors").
Pursuant to an Agreement and Plan of Merger, dated as of March 1, 1999, by
and among Parent, Angel Acquisition Corp., a Delaware corporation and a wholly
owned subsidiary of L-3 ("Purchaser"), and the Company, Purchaser has commenced
a tender offer (the "Offer") for all of the issued and outstanding Shares at a
price of $13.50 per Share, net to the seller in cash, and following
consummation of the Offer, Purchaser will be merged with and into the Company
(the "Merger"), with the Company surviving as a wholly owned subsidiary of L-3.
The Merger Agreement provides that, promptly after the purchase of and
payment for a majority of the outstanding Shares pursuant to the Offer, Parent
will be entitled to designate such number of directors as will give Parent
representation on the Board proportionate to its ownership interest in the
Shares, rounded up to the next whole number. The Merger Agreement requires the
Company to use its best efforts to cause the Parent designees (the "Parent
Designees") to be elected to the Board under the circumstances described
therein. This Information Statement is being mailed to stockholders of the
Company pursuant to Section 14(f) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and Rule 14f-1 thereunder.
You are urged to read this Information Statement carefully. You are not,
however, required to take any action. Capitalized terms used herein and not
otherwise defined shall have the meanings set forth in the Schedule 14D-9.
The information contained in this Information Statement concerning Parent,
Purchaser and the Parent Designees has been furnished to the Company by Parent.
The Company assumes no responsibility for the accuracy or completeness of such
information.
CERTAIN INFORMATION REGARDING THE COMPANY
GENERAL
The Shares are the only class of voting securities of the Company
outstanding. Each issued and outstanding Share is entitled to one vote. As of
March 1, 1999, 5,220,936 Shares were issued and outstanding and 632,550 Shares
were reserved for issuance upon the exercise of certain options and warrants
outstanding.
RIGHT TO DESIGNATE DIRECTORS; THE PARENT DESIGNEES
The Merger Agreement provides that, subject to compliance with applicable
law, promptly upon the purchase of and payment by Purchaser for Shares pursuant
to the Offer which represent at least a majority of the outstanding Shares (on
a fully diluted basis), Purchaser will be entitled to designate such number of
directors on the Board as is equal to the product of the total number of
directors on the Board (after giving effect to the directors designated by
Purchaser pursuant to this sentence) multiplied by the
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percentage that the aggregate number of Shares beneficially owned by Purchaser,
Parent and any of their affiliates bears to the total number of Shares then
outstanding (such number being the "Board Percentage"). The Company shall, upon
request of Purchaser, cause Purchaser's designees to satisfy the Board
Percentage, including without limitation increasing the size of the Board and
securing resignations of such number of its incumbent directors as is necessary
to enable Parent's Designees to be so elected to the Company Board, and shall
cause Parent's Designees to be so elected. Notwithstanding the foregoing, until
the Effective Time (as defined in the Merger Agreement), the Company shall
retain as members of the Company Board at least two directors who are directors
of the Company on the date hereof (the "Company Designees"); provided, that
subsequent to the purchase of and payment for Shares pursuant to the Offer,
Parent shall always have its designees represent at least a majority of the
entire Company Board. If at any time prior to the Effective Time there are less
than two Company Designees on the Board, Parent, Purchaser and the Company
shall either (i) use their reasonable efforts to appoint successors who are not
affiliated with Parent or Purchaser or (ii) permit the resigning Company
Designee to appoint his or her successors in his or her reasonable discretion.
The Company will use its reasonable best efforts to cause persons designated by
Purchaser to constitute the same percentage as is on the Board of (i) each
Committee of the Board, (ii) each board of directors of each Subsidiary of the
Company and (iii) each committee of each such board, in each case only to the
extent permitted by law. The Company's obligations under the foregoing shall be
subject to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder. Parent or Purchaser will supply the Company any information with
respect to either of them and their nominees, officers, directors and
affiliates required by Section 14(f) and Rule 14f-1. Upon receipt of such
information from Parent or Purchaser, the Company shall include in the Schedule
14D-9 (as an annex or otherwise) the information required by Section 14(f) and
Rule 14f-1 as is necessary to enable Parent's Designees to be elected to the
Board.
Parent has informed the Company that it will choose the Parent Designees
from the directors and executive officers of Parent listed in Schedule I
attached hereto. Parent has advised the Company that each of the initial Parent
Designees has consented to serve on the Board of Directors of the Company and
that, to the best of its knowledge, none of the Parent Designees (i) has a
family relationship with any of the directors or executive officers of the
Company, (ii) beneficially owns any securities (or rights to acquire
securities) of the Company or (iii) has been involved in any transactions, or
has any business relationships with the Company or any of its directors,
executive officers or affiliates, of the type required to be disclosed pursuant
to Rule 14f-1 under the Exchange Act.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Certain information concerning the current Directors and executive
officers of the Company as of March 1, 1999 is set forth below:
DIRECTOR OR
NAME OF DIRECTOR OR EXECUTIVE OFFICER AGE OFFICER SINCE POSITION WITH THE COMPANY
- --------------------------------------- ----- --------------- -----------------------------------
Warren G. Lichtenstein ................ 33 1998 Chairman of the Board
James R. Henderson .................... 41 1996 President and Chief Operating
Officer
Herbert Welber ........................ 63 1986 Controller and Assistant Treasurer
Mark E. Schwarz ....................... 38 1998 Director
Keith Lane-Zucker ..................... 35 1998 Director
Harry D. Train, II .................... 71 1984 Director
I. Gary Bard .......................... 61 1994 Director
Warren Lichtenstein has been Chairman of the Board of the Company since
October 1998. Mr. Lichtenstein is Secretary and the Managing Member of Steel
Partners, L.L.C., the general partner of Steel Partners II, L.P. ("Steel")
since January 1, 1996. Prior to such time, Mr. Lichtenstein was the Chairman
and a Director of Steel Partners, Ltd., the general partner of Steel Partners
Associates, L.P., which was the general partner of Steel since 1993 and prior
to January 1, 1996. Mr. Lichtenstein was the acquisition/risk arbitrage analyst
at Ballantrae Partners, L.P., a private investment partnership formed to invest
in risk arbitrage, special situations and undervalued companies, from 1988 to
1990. Mr. Lichtenstein
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is a Director of the following publicly held companies: Gateway Industries,
Inc., Rose's Holdings, Inc. and Saratoga Beverage Group, Inc. The business
address of Mr. Lichtenstein is 150 E. 52nd Street, 21st Floor, New York, New
York 10022.
James R. Henderson has been the President and Chief Operating Officer of
the Company since October, 1998. Mr. Henderson previously served as the Vice
President, Treasurer and Chief Financial Officer of the Company from July 1996
to October 1998. Prior to joining the Company, he held various accounting and
financial positions with Unisys Corporation (services and computer
manufacturing): Director of Financial Planning and Accounting (1989-1991),
Controller of Defense Operations (1991-1993), Executive Assistant to the
President of the Defense Group (1993-1994), Director of Operations for Unisys
Services Division (1994-1995), and Controller of Unisys Outsourcing Division
(1995-1996).
Herbert Welber has been the Controller and Assistant Treasurer of the
Company since August 1986. Previously Mr. Welber was Controller and Vice
President of the Displays Division since August 1981.
Mark E. Schwarz has been a Director of the Company since October 1998. Mr.
Schwarz has served as the Vice President and Manager of Sandera Capital,
L.L.C., a private investment firm, since 1995. Prior to such time, Mr. Schwarz
was a securities analyst and portfolio manager for SCM Advisors, L.L.C., a
registered investment advisor, from 1993 to 1996. Mr. Schwarz has also served
as the sole general partner of Newcastle Partners, L.P., a private investment
firm, since 1993. The business address of Mr. Schwarz is 1601 Elm Street, Suite
4000, Dallas, Texas 75201.
Keith Lane-Zucker has been a Director of the Company since October 1998.
Mr. Lane-Zucker has served as the Senior Securities Analyst for Societe
Generale Asset Management Corp., investment advisor to SoGen International
Fund, a portfolio of SoGen Funds, Inc., since December 1996. Mr. Lane-Zucker is
responsible for managing investments in domestic and international
corporations. Mr. Lane-Zucker began his career in 1987 at Merrill Lynch Capital
Markets in the Mergers and Acquisitions Group. In 1992, Mr. Lane-Zucker joined
Booz-Allen & Hamilton as a management consultant. From January 1995 to December
1996, Mr. Lane-Zucker was a research analyst and portfolio manager for a
domestic small-cap fund with ABB Investment Management. The business address of
Mr. Lane-Zucker is 1221 Avenue of the Americas, 8th Floor, New York, NY 10020.
Harry D. Train, II has been a Director of the Company since 1984. Mr.
Train has served as Manager, Hampton Roads Operations (defense studies and
analysis) of Science Applications International Corporation (SAIC), Norfolk,
Virginia, since October 1986.
I. Gary Bard has been a Director of the Company since July 1994. Mr. Bard
served as the Company's Chairman of the Board of Directors and Chief Executive
Officer from May 1996 to October 1998 and as its President from October 1996 to
October 1997. Prior to such time, Mr. Bard served as Vice President and
General Manager, Federal Systems Solutions Integration Division of Unisys
Corporation, providing integration solutions to the federal, state and local
government marketplace, since October 1995. Mr. Bard served as a Consultant on
software development from February 1993 to October 1995, Chief Operating
Officer of Open Software Foundation from November 1992 to February 1993, and
President of Integrated Systems Division of Computer Sciences Corporation from
July 1984 to November 1992.
There are no family relationships between any of the Directors or
executive officers of the Company. The regular term of office for all Directors
and executive officers is one year. Except as provided in the Standstill and
Settlement Agreement dated September 18, 1998 (a copy of which is on file at
the offices of the Company) relating to the elections of Messrs. Lichtenstein,
Schwarz and Lane-Zucker to the Board, there are no arrangements or
understandings between any Director or executive officer and any other person
pursuant to which such director or officer was elected to be a Director or
officer.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has had an Audit Committee since September 1978; and Directors
Train, Lane-Zucker and Schwarz are its current members. Its powers and duties
include the following: (1) sole authority to
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retain and dismiss both internal and independent auditors; (2) approval before
dissemination of any report which contains financial data; and (3) consultation
with the independent auditors quarterly and before the Company decides any
material accounting policy. The Audit Committee met 5 times in 1998.
The Company established the Executive Compensation Committee in May 1996,
which in 1998 was comprised of Directors Bard and Train and former Directors
Brind and Gokcen. The Executive Compensation Committee consulted generally with
management on matters concerning executive and outside director compensation
and incentive plans and made recommendations to the Board of Directors on
compensation generally, including individual salary rates and bonus awards.
This Executive Compensation Committee met one time in 1998. Director Bard was
an officer and employee of the Company until October 1998. In November 1998,
the Executive Compensation Committee was terminated and the entire Board of
Directors assumed the responsibilities of the Executive Compensation Committee.
There is no nominating committee of the Board of Directors.
BOARD MEETINGS
The Board conducted 15 meetings in person or telephonically during 1998.
During 1998, all of the Directors attended, in person or by teleconference, at
least 75% of the total number of meetings of the Board and of the Committees on
which they serve.
COMPENSATION OF DIRECTORS
Each Director who is not also an employee of the Company presently
receives an annual Director's fee of $12,000, plus $1,500 for each meeting
which he personally attends ($500 for each meeting in which he participates by
means of conference telephone). In addition, non-employee Directors serving on
Committees receive a meeting fee of $1,000 ($500 for each meeting in which he
participates by means of conference telephone), except that if a Director
attends meetings of more than one Committee on a single day, only one Committee
meeting fee is paid for that day, and the Chairman of each Committee receives
an annual fee of $1,500. Mr. Lichtenstein was also paid $250,000 in 1999 for
services rendered as Chairman. Mr. Lichtenstein has been Chairman since October
19, 1998. Directors are eligible to receive annual grants of stock options to
purchase 2,000 shares of the Company's Common Stock, subject to an upward or
downward 50% adjustment based upon the Chairman's assessment of Board
performance; and annual grants of up to 1,000 shares of restricted stock, based
on performance goals, with the shares remaining restricted until the Director
leaves the Board.
In addition, in 1998 the Board of Directors approved the grant of 1,100
Retirement Shares to each of the non-employee Directors of the Company under
the Company's Director Retirement Plan.
The Company carries insurance providing indemnification, under certain
circumstances, to all the Directors and officers of the Company for claims
against them by reason of, among other things, any act or failure to act in
their capacities as Directors or officers. No sums have been paid to any past
or present Director or officer of the Company under this or any prior
indemnification insurance policy.
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STOCK OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS
The following table sets forth, as of the dates indicated, the name and
address of each person known by the Company to be the beneficial owner of more
than 5% of the Company's outstanding voting securities and the percentage of
the shares so owned:
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) SHARES(1)
- ------------------ ----------------------------------------- ------------------------- -----------
Common Stock, Steel Partners II, L.P. 492,600(2) 9.5%
$1.00 par value 150 East 52nd Street
21st Floor
New York, NY 10022
Common Stock, Franklin Resources, Inc. 480,000(3) 9.3%
$1.00 par value 777 Mariners Island Blvd.
San Mateo, CA 94404
Common Stock, Societe Generale Asset Management Corp. 372,100(4) 7.2%
$1.00 par value 1221 Avenue of the Americas
New York, NY 10020
Common Stock, Dimensional Fund Advisors, Inc. 300,650(5) 5.8%
$1.00 par value 1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Common Stock, The TCW Group, Inc. 267,400(6) 5.1%
$1.00 par value 865 South Figueroa Street
Los Angeles, CA 90017
- ----------
(1) Based on information furnished by the stockholder except as otherwise
provided.
(2) As of March 3, 1999. Sole voting and dispositive power.
(3) As of January 22, 1999. According to the Schedule 13D/A filed by Franklin
Resources, Inc., Charles B. Johnson, Rupert H. Johnson, Jr. and Franklin
Advisory Services, Inc., these shares are beneficially owned by one or
more investment companies or other managed accounts that are advised by
investment advisory subsidiaries of Franklin Resources, Inc. Sole voting
and dispositive power is held by Franklin Advisory Services, Inc.
(4) As of November 30, 1998. According to the Schedule 13D filed by Societe
Generale Asset Management Corp., investment advisor to SoGen
International Fund (the "Fund"), a portfolio of SoGen Funds, Inc., these
shares were acquired by the Fund as beneficial owner for investment only.
Shared voting and dispositive power.
(5) As of February 12, 1999. Dimensional Fund Advisors Inc. ("Dimensional"),
a registered investment advisor, is deemed to have beneficial ownership
of 300,650 shares of Aydin Corporation stock. Dimensional has sole voting
power as to all of such shares. Dimensional disclaims beneficial
ownership of all such shares.
(6) As of February 12, 1999. According to the Schedule 13G filed by the TCW
Group, Inc. and Robert Day, these shares were acquired for investment in
the ordinary course of business. Shared voting and dispositive power.
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SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 1, 1999, the amount and
percentage of the Company's outstanding Common Stock, $1.00 par value,
beneficially owned by each Director, the chief executive officer, the four
other most highly compensated executive officers, as identified in the Summary
Compensation Table herein, and all Directors and current executive officers as
a group:
AMOUNT AND NATURE OF PERCENT
TITLE OF CLASS NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1)(2) OF SHARES
- ----------------- ---------------------------------- ---------------------------- ----------
Common Stock, Warren G. Lichtenstein ........... 492,600(3) 9.4%
$1.00 par value I. Gary Bard* .................... 205,064(4) 3.8%
Mark E. Schwarz .................. 128,100 2.5%
Harry D. Train, II ............... 1,825 (5)
James R. Henderson ............... 20,000 (5)
Keith Lane-Zucker ................ 0 (5)
All of the above and other current
executive officers as a group
(includes 7 persons) ............. 847,589 15.7%
- ----------
* No longer an executive officer of the Company.
(1) Based on information furnished by the respective Directors and officers.
Each person has sole voting and investment power with respect to the
shares listed, except that Mr. Bard holds 36,700 shares jointly with his
wife.
(2) Includes shares which may be acquired upon the exercise of options
granted by the Company currently exercisable or that will become
exercisable within 60 days as follows: Bard - 10,000 shares, Train --
1,825 shares, Henderson -- 20,000 shares, and other executive officers in
the group -- 500 shares.
(3) Beneficially owned by Mr. Lichtenstein, but owned of record by Steel
Partners II, L.P.
(4) Includes a Warrant to purchase 133,334 shares: 66,667 shares at $12.10
and 66,667 shares at $13.20 per share.
(5) Less than 1%.
EXECUTIVE COMPENSATION
Until November 1998, the Company's executive compensation program was
administered by the Compensation Committee, which was empowered by the Company
Board to review the salaries paid to the Company's officers each year and
recommend to the Company Board any adjustments that it deemed appropriate. The
Compensation Committee also reviewed the nature and scope of the services
rendered each year by the participants in the 1994 Incentive Stock Option Plan
and 1996 Equity Incentive Plan of the Company and the corresponding benefits
derived by the Company from such services. Then, based on the review of
management recommendations, the Compensation Committee awarded bonuses to the
participants. Since November 1998, the entire Board of Directors has assumed
such responsibilities.
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SUMMARY COMPENSATION TABLE
The following table provides information on the compensation provided by
the Company to the Company's Chief Executive Officer and the next four most
highly paid executive officers who received compensation of at least $100,000
during 1998 (collectively, the "Named Executive Officers"):
ANNUAL COMPENSATION
---------------------------------------------------
OTHER
ANNUAL
COMPENS-
NAME AND PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($) ATION($)
- ----------------------------- ------ ----------------- ----------------- ---------------
James R. Henderson 1998 178,785 123,000 --
President and Chief 1997 146,285 79,750 --
Operating Officer 1996 62,328 66,516(3) --
I. Gary Bard 1998 276,637 -- (4) --
Former Chairman of the 1997 290,666 255,200 16,500(5)
Board and Chief 1996 195,638(7) 249,400(8) 44,105(5)
Executive Officer
John F. Vanderslice 1998 192,331 -- --
Former President and 1997 205,005 157,850 --
Chief Operating Officer 1996 157,406 138,764 8,250(5)
LONG-TERM COMPENSATION
AWARDS
-----------------------------------
RESTRICTED SECURITIES ALL OTHER
STOCK UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION AWARD($) OPTIONS(#) ($)
- ----------------------------- ---------------- ------------------ ------------------
James R. Henderson -- 65,000 --
President and Chief -- 10,000 3,432(2)
Operating Officer -- 35,000 42,468(2)
I. Gary Bard -- 15,000 88,985(4)
Former Chairman of the -- 25,000 23,585(6)
Board and Chief 200,000(9) 150,000 23,585(6)
Executive Officer
John F. Vanderslice -- 15,000(10) 11,825(11)
Former President and -- 25,000 --
Chief Operating Officer -- 40,000 --
- ----------
(1) Includes any sums deferred for the individual under the Company's 401(k)
plan.
(2) Relocation expenses paid by the Company.
(3) Of this total, $12,094 was awarded for 1996 and paid in 1997.
(4) On October 19, 1998, Mr. Bard was removed by the Board of Directors as
Chairman of the Board and Chief Executive Officer of the Company. There
is currently a dispute between Mr. Bard and the Company regarding the
nature and amount of compensation and other benefits to which Mr. Bard is
entitled pursuant to his employment agreement. The salary reflected for
1998 includes a payment of $10,675 for accrued vacation upon Mr. Bard's
termination. The $88,985 of All Other Compensation for 1998 includes (1)
$29,205 of loan forgiven by the Board of Directors for Mr. Bard, (2)
$55,000 of severance payments made to Mr. Bard with respect to the period
from October 19, 1998 through December 31, 1998, and (3) $4,780 of
non-employee Director fees or payable paid to Mr. Bard with respect to
the period from October 19, 1998 through December 31, 1998.
(5) The dollar value of the difference ($1.65 per share for both 1996 and
1997) between (i) the discounted market value ($9.33 for 1996 and $9.36
for 1997) at which the Named Executive Officer elected to receive a
portion or all of his bonus awards in shares of the Company's Common
Stock and (ii) the average fair market value of such shares on the 20
trading days immediately preceding the date the Board of Directors
determined the dollar amount of the bonus award under the Company's Stock
Bonus Plan.
(6) Dollar amount of loan forgiven by the Board of Directors for Mr. Bard.
(7) Includes $5,750 Mr. Bard received as an outside Director before being
elected Chairman of the Board and Chief Executive Officer on May 6, 1996.
(8) Of this total, $83,133 was awarded for 1996 and paid in 1997.
(9) An award of 20,000 shares, valued at date of issue, fully vested,
pursuant to the terms of the Employment Agreement dated as of May 6,
1996.
(10) The option to purchase 15,000 shares of Common Stock terminated upon Mr.
Vanderslice's resignation as an officer of the Company.
(11) Dollar amount of consulting fees paid to Mr. Vanderslice for consulting
work subsequent to his resignation as an officer of the Company.
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STOCK OPTION GRANTS 1998
Shown below is further information on grants of stock options pursuant to
the Company's 1994 Incentive and 1996 Equity Incentive Stock Option Plans
during the year ended December 31, 1998 to the Named Executive Officers.
POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM
OPTIONS EMPLOYEES IN PRICE EXPIRATION ---------------------------------
NAME GRANTED (#) 1998 ($/SH) DATE 5% ($) 10%($)
- ----------------------------- --------------- -------------- ---------- ----------- -------------- ----------------
James R. Henderson .......... 15,000(1) 3.4% 10.44 2-5-08 $255,085 $ 406,180
50,000(1) 11.4% 8.00 11-5-08 $651,558 $1,037,497
I. Gary Bard ................ 15,000(2) 3.4% 10.44 (2) (4) (4)
John F. Vanderslice ......... 15,000(3) 3.4% 10.44 (3) (4) (4)
- ----------
(1) Options expire ten years from the date of grant. Twenty-five percent of
the option shares become exercisable one year from date of grant and an
additional 25% each year thereafter for three years on a cumulative
basis.
(2) The option was terminated on October 19, 1998
(3) The option was terminated on September 4, 1998.
(4) Not meaningful, as option was terminated before becoming exercisable.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FOR YEAR-END OPTION/SAR VALUES
No options were executed during 1998 by the Named Executive Officers.
Shown below is information with respect to the year-end value of unexercised
options to purchase the Company's Common Stock granted in prior years under the
Company's 1994 Incentive or 1996 Equity Incentive Stock Option Plans, or an
Individual Non-Qualified Stock Option to the Named Executive Officers and held
by them at December 31, 1998.
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-THE-MONEY
UNEXERCISED OPTIONS HELD AT OPTIONS
DECEMBER 31, 1998 DECEMBER 31, 1998(1)
--------------------------------------- --------------------------------------
NAME EXERCISABLE (#) UNEXERCISABLE (#) EXERCISABLE ($) UNEXERCISABLE ($)
- ----------------------------- ----------------- ------------------- ----------------- ------------------
James R. Henderson .......... 20,000 90,000 $0 $109,375
I. Gary Bard ................ 10,000 0 0 0
John F. Vanderslice ......... 0 0 0 0
- ----------
(1) Based on the closing price on December 31, 1998, on the New York Stock
Exchange of $10.1875 per share.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT
AND CHANGE IN CONTROL AGREEMENTS
The Company entered into an employment agreement with Mr. Bard dated as of
May 6, 1996, pursuant to which Mr. Bard served as Chairman of the Board and
Chief Executive Officer of the Company until his termination on October 19,
1998. The term of the agreement was originally for five years and was
subsequently extended for an additional two years. The Company had the right to
terminate the agreement during its term but only for "Cause" (as defined in the
Agreement), and Mr. Bard had the right to terminate his employment during its
term for "Good Reason" (e.g., a change of his position as Chairman and Chief
Executive Officer) or in the event of a "Change in Control" (e.g., merger,
consolidation, reorganization, sale, lease, exchange or other disposition of
the Company assets or capital stock of more than 50%). The agreement provided
for a base salary of $290,000, which was reviewed annually by the Company
Board.
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The Company has received notice from Mr. Bard that it is currently in
default under his employment agreement resulting from his termination as
Chairman of the Board and Chief Executive Officer of the Company on October 19,
1998. The Company is currently in discussions with Mr. Bard with respect to its
obligations to him under the agreement. In the event that his agreement was
terminated by the Company other than for "Cause," the Company would be
obligated to pay his base salary for the shorter of three years or until the
initial term of the agreement expires.
The Company entered into executive retention agreements (collectively, the
"Retention Agreements") with certain key officers of the Company. Except for
Mr. Henderson, the Company has not entered into a Retention Agreement with any
other Named Executive Officer. The Retention Agreements, effective as of
September 16, 1998, provide, among other things, (i) for the payment of a
retention bonus if in the absence of a Change in Status Transaction (as defined
in the Retention Agreements) the executive remains continuously employed by the
Company for a period of one year from the date of the Retention Agreement or
for a period of six months following the date of a Change in Status Transaction
occurring during such one year period and (ii) for the payment of certain
severance benefits if the executive's employment is terminated by the Company
without Cause (as defined in the Retention Agreements) or by the executive for
Good Reason (as defined in the Retention Agreements) within the two year period
following the date of the Retention Agreement. The amount of the retention
bonus payable under the Retention Agreements is equal to twenty-five percent
(25%) of the executive's annual base salary. The severance benefits an
executive will receive under the Retention Agreements include the executive's
full base salary for the one year period subsequent to the date of his
termination, the full exercisability for one year of all options to purchase
shares of the Company's Common Stock granted to the executive, and the
continuance of all life insurance and medical plans until the end of the one
year period subsequent to the date of the executive's termination or, if
sooner, until his commencement of full-time employment with a new employer.
COMMON STOCK PERFORMANCE
Set forth below is a line graph comparing the five-year cumulative total
shareholder return on the Company's Common Stock against the cumulative total
return of the S&P 500 Stock Index and the S&P High Technology Composite Index.
The comparison of total return on investment (change in year-end stock price
plus reinvested dividends) for the period assumes that $100 was invested on
December 31, 1993 in each of the Company, the S&P 500 Stock Index and the S&P
High Technology Composite Index.
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COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AYDIN COMMON, S&P 500 STOCK &
S&P HIGH TECHNOLOGY COMPOSITE INDICES
[GRAPHIC OMITTED--DATA POINTS PRESENTED IMMEDIATELY BELOW]
TOTAL RETURN ANALYSIS
12/31/93 12/31/94 12/30/95 12/29/96 12/31/97 12/31/98
------------ ------------ ------------ ---------- ---------- -----------
Aydin Corporation .............. $ 100.00 $ 102.08 $ 126.04 $ 78.13 $ 98.44 $ 84.90
S&P Hi-Tech Composite .......... $ 100.00 $ 116.41 $ 167.55 $ 233.65 $ 299.09 $ 500.73
S&P 500 ........................ $ 100.00 $ 101.28 $ 138.88 $ 170.38 $ 226.78 $ 291.04
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's Directors and
executive officers, and persons who own more than 10% of the issued and
outstanding Shares, to file with the SEC and the New York Stock Exchange
initial reports of ownership and reports of changes in beneficial ownership of
Common Stock and other equity securities of the Company. Officers, Directors
and greater than 10% stockholders are required by SEC regulations to furnish
the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, all Section 16(a) filing requirements applicable to the
officers, directors and greater than 10% beneficial owners were complied with
during 1998.
A-10
SCHEDULE I TO ANNEX A
DIRECTORS AND EXECUTIVE OFFICERS OF
PARENT, PURCHASER AND HOLDINGS
As of the date of this Information Statement, Parent has not determined
who will be Parent Designees. However, such Parent Designees will be selected
from the following list of directors and executive officers of Parent and its
parent, L-3 Communications Holdings Inc., a Delaware corporation ("Holdings"),
upon the purchase by Purchaser pursuant to the Offer of Shares representing not
less than a majority of the outstanding shares of Common Stock on a fully
diluted basis. The information contained herein concerning Parent, Holdings and
Purchaser and their respective directors and executive officers has been
furnished by Parent, Holdings and Purchaser. The Company assumes no
responsibility for the accuracy or completeness of such information.
The name, present principal occupation or employment and five-year
employment history of each Director and executive officer of Parent and
Holdings and certain other information is set forth below. The business address
of each Director and executive officer is 600 Third Avenue, New York, New York
10016. Unless otherwise indicated, each occupation described below refers to
employment with Parent and Holdings. Except as noted, none of the persons
listed below owns any Shares or has engaged in any transactions with respect to
Shares during the past 60 days. During the last five years, neither Parent nor
Holdings, nor any Director or executive officer thereof indicated has been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) nor was such person a party to a civil proceeding of a judicial
or administrative body of competent jurisdiction, and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting activities subject to, federal or state
securities laws or finding any violation of such laws. Unless otherwise
indicated, all Directors and executive officers listed below are citizens of
the United States.
Directors and Executive Officers of the Purchaser. The name and position
with the Purchaser of each Director and executive officer of the Purchaser are
set forth below. The other required information with respect to each such
person is set forth under "Directors and Executive Officers of the Parent"
below. All Directors and executive officers listed below are citizens of the
United States.
NAME POSITION
- --------------------------------- ----------------------------------
Christopher C. Cambria .......... President, Secretary and Director
Lawrence W. O'Brien ............. Vice President and Treasurer
Directors and Executive Officers of Parent and Holdings. The name,
business address, present principal occupation or employment and material
occupations, positions, offices or employments during the last five years of
each Director and executive officer of Parent and Holdings and certain other
information are set forth below. The business address of each such Director and
executive officer is: c/o L-3 Communications Corporation, 600 Third Avenue, New
York, New York 10016. Unless otherwise indicated, each occupation set forth
opposite an individual's name refers to employment with Parent and Holdings.
All Directors and executive officers listed below are citizens of the United
States.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
AND MATERIAL OCCUPATIONS, POSITIONS, OFFICES
NAME OR EMPLOYMENT HELD DURING THE LAST FIVE YEARS
- ------------------------ ------------------------------------------------------------
DIRECTORS
David J. Brand ......... Director (since 4/97); Managing Director of Lehman Brothers
(since 1996); Senior Vice President of Lehman Brothers
(1994-1996); Vice President of Lehman Brothers (1991-1994).
A-11
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
AND MATERIAL OCCUPATIONS, POSITIONS, OFFICES
NAME OR EMPLOYMENT HELD DURING THE LAST FIVE YEARS
- ------------------------------- -------------------------------------------------------------------
Thomas A. Corcoran ............ Director (since 7/97); President and Chief Operating Officer of
the Space Sector of Lockheed Martin (since 8/98); President and
Chief Operating Officer of the Electronics Systems Sector of
Lockheed Martin (3/95-8/98); President of Electronics Group of
Martin Marietta Corporation (1993-1995).
Alberto M. Finali ............. Director (since 4/97); Managing Director of Lehman Brothers
(since 1997); Senior Vice President of Lehman Brothers
(1993-1997); Vice President of Lehman Brothers (1989-1993).
Eliot M. Fried ................ Director (since 4/97); Managing Director of Lehman Brothers
(since 1986).
Frank C. Lanza ................ Director; Chairman and Chief Executive Officer (since 4/97);
Executive Vice President of Lockheed Martin and President and
Chief Operating Officer of Lockheed Martin's C(3)I and
Systems Integration Sector (4/96-4/97); President and Chief
Operating Officer of Loral (since 1981).
Robert V. LaPenta ............. Director; President and Chief Financial Officer (since 4/97); Vice
President of Lockheed Martin and Vice President and Chief
Financial Officer of Lockheed Martin's C(3)I and Systems
Integration Sector (4/96-4/97); Senior Vice President and
Controller of Loral (1981-4/96).
Frank H. Menaker, Jr. ......... Director (since 4/97); Senior Vice President and General
Counsel of Lockheed Martin (since 7/96); Vice President and
General Counsel of Lockheed Martin (3/95-7/96); Vice President
of Martin Marietta Corporation (1982-1995); General Counsel of
Martin Marietta (1981-1995).
Robert B. Millard ............. Director (since 4/97); Managing Director of Lehman Brothers
(since 1983).
John E. Montague .............. Director (since 4/97); Vice President and Chief Financial Officer
of Lockheed Martin Global Telecommunications, Inc. (since
8/98); Vice President of Financial Strategies at Lockheed Martin
(since 3/95); Vice President of Corporate Development and
Investor Relations at Martin Marietta Corporation (1991-1995).
John M. Shalikashvili ......... Director (since 8/98); Senior Officer of the United States
Military and Principal Military Advisor to the President of the
United States, the Secretary of Defense and National Security
Council (1993-1997).
Alan H. Washkowitz ............ Director (since 4/97); Managing Director of Lehman Brothers
(since 1978).
OFFICERS
Jimmie V. Adams ............... Vice President -- Washington D.C. Operations (since 4/97); Vice
President of Lockheed Martin's Washington Operations for
C(3)I and Systems Integration Sector (4/96-4/97); Vice President
of Loral's Washington Operations for C(3)I and Systems
Integration Sector (since 1993).
A-12
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
AND MATERIAL OCCUPATIONS, POSITIONS, OFFICES
NAME OR EMPLOYMENT HELD DURING THE LAST FIVE YEARS
- -------------------------------- -----------------------------------------------------------------
Christopher C. Cambria ......... Vice President -- General Counsel and Secretary (since 6/97);
Associate at Fried, Frank, Harris, Shriver, and Jacobson
(1994-1997); Associate at Cravath, Swaine and Moore
( 1981-1993).
Frank C. Lanza ................. Chairman and Chief Executive Officer.
Robert V. LaPenta .............. President and Chief Financial Officer.
Robert F. Mehmel ............... Vice President -- Planning and Assistant Secretary (since 4/97);
Director of Financial Planning and Capital Review for Lockheed
Martin's C(3)I and Systems Integration Sector (4/96-4/97); held
several accounting and financial analysis positions at Loral
Electronic Systems (1984-1996).
Lawrence W. O'Brien ............ Vice President -- Treasurer (since 6/97); Vice President and
Treasurer of Pechiney Corporation (since 1981).
Joseph S. Paresi ............... Vice President -- Product Development (since 4/97); Corporate
Director of Technology for Lockheed Martin's C(3)I and
Systems Integration Sector (since 4/96); Corporate Director of
Technology for Loral (since 1993).
Robert Riscassi ................ Vice President -- Washington D.C. Operations (since 4/97); Vice
President of Land Systems for Lockheed Martin C(3)I and
Systems Integration Sector (4/96-4/97); Vice President of Land
Systems for Loral's C(3)I and Systems Integration Sector (since
1993).
Lawrence H. Schwartz ........... Vice President -- Business Development (since 5/97); Vice
President of Technology for Lockheed Martin's C(3)I and
Systems Integration Sector (4/96-5/97); Vice President of
Technology at Loral (since 1987).
Michael T. Strianese ........... Vice President -- Finance and Controller (since 4/97); Vice
President and Controller of Lockheed Martin's C(3)I and
Systems Integration Sector (4/96-4/97); Director of Special
Projects at Loral (1991-4/96).
Ownership of Shares by Directors and Executive Officers.
None.
A-13