UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K 405
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, 1994
Commission File #0-6072
ELECTROMAGNETIC SCIENCES, INC.
(Exact name of registrant as specified in its charter)
Georgia 58-1035424
(State of incorporation) (IRS Employer ID #)
or organization)
660 Engineering Drive
Norcross, Georgia 30092
(Address of principal (Zip Code)
executive offices)
Registrant's Telephone Number,
Including Area Code - (404) 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 10, 1995, was
$69,757,000, based on a closing price of $10.56 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 10, 1995, the number of shares of the registrant's
common stock outstanding was 6,837,953 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information contained in the Company's 1994 Annual Report
to Shareholders and definitive proxy statement for the 1995
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
Electromagnetic Sciences, Inc. (the "Company") was organized in
1968 by a group of scientists, engineers and technicians led by
Dr. John E. Pippin, now Chairman of the Company's Board of
Directors. The Company is organized under Georgia law, and its
headquarters and principal operating facilities are in Technology
Park, Norcross, Georgia.
The Company operates in two business segments and produces a wide
range of advanced communications and signal processing
electronics and wireless data communications systems (see Note 8
of "Notes to Consolidated Financial Statements" included in Item
8 of this Report). The Company's advanced communications and
signal processing electronics operations are conducted by a
wholly-owned subsidiary, EMS Technologies, Inc. (EMS), and a 74%-owned
subsidiary, CAL Corporation (CAL), which was acquired in
January 1993. EMS and CAL's microwave systems, antennas,
subsystems and components are used in space applications mainly
for communications and remote sensing; in surface and airborne
applications, these products are used in a variety of electronic
systems, such as radar, electronic countermeasures, search and
rescue systems and mobile communications. The Company's wireless
data communications systems are produced principally for
materials handling markets by a subsidiary, LXE Inc. (LXE), which
is also based in Norcross, Georgia. In April 1991, LXE completed
an initial public offering of its common stock, which, together
with subsequent exercise of LXE stock options by employees,
reduced the Company's ownership of LXE from 100% to 73%. EMS and
CAL products have accounted for 46%, 54% and 38% of consolidated
net sales in the respective years 1994, 1993 and 1992, while LXE
products have accounted for 54%, 46% and 62% in the same
respective years.
ADVANCED COMMUNICATIONS AND SIGNAL PROCESSING ELECTRONICS
The Company's advanced communications and signal processing
electronics require expertise in microwave and mechanical design,
analog and digital electronics, microelectronics, and materials
science. More than 50% of the revenues from this product area
are currently derived from space or satellite-related
applications. Following is a description of the Company's
principal microwave and antenna products.
COMPONENTS
The Company manufactures a variety of microwave components
including phase shifters, switches, circulators, and
isolators. Phase shifters control how a signal will combine
with others to form a wavefront. These devices allow very
fast changes of phase, and many thousands of changes can be
made per second. Electronically variable phase shifters are
used in such applications as beam-steering in radar.
Electronically controlled switches change the direction of
microwave signals and connect various elements of a system.
High speed microwave switches are used to control signal
paths in satellite communications and other systems.
Circulators are usually three-port devices that route
microwave signals along specific channels. One of the ports
may be terminated to an absorber of microwaves, and the
resulting two-port device becomes an isolator. Circulators
and isolators are used in a variety of ways in many
microwave systems.
MICROWAVE SUBSYSTEMS
Subsystems are complex collections of components (such as
phase shifters, switches, circulators and isolators) and
electronic circuits that are designed to perform a major
function within a microwave system, such as beam-forming
networks for satellite communications systems, which allow
antenna patterns to be electronically changed. Other
subsystems include phase shifter subsystems for beam
steering radar, complex switching assemblies for electronic
countermeasures systems, amplifier and power converter
assemblies for remote sensing satellites, and solid state
power amplifiers for satellite communications.
SPACE AND SATELLITE-BASED SYSTEMS
Through its CAL subsidiary, the Company provides a variety
of specialized systems for applications in space, including
scientific instruments, spacecraft antennas, microgravity
facilities, and satellite power conditioning equipment. CAL
is a leading provider of the ground station component for
satellite-based search and rescue (SARSAT) systems; the
Company's local user terminal (LUT) determines the location
of marine or aviation beacons that transmit distress signals
to a satellite. CAL also produces an aeronautical mobile
terminal (AMT) that provides worldwide voice/data
communications capabilities to private jets via a digital
link with the Inmarsat constellation of satellites; a
distinctive component of the AMT system is an antenna which
automatically remains directed toward a geostationary
communications satellite, yet is small enough to be located
under a low-profile radome in the optimally effective
position atop the jet's tail.
ANTENNA SYSTEMS
The Company provides entire antenna systems for certain
applications. These antennas include phased array and
multiple beam technologies, and encompass electronically and
mechanically steered applications.
CELLULAR BASE-STATION ANTENNAS
The Company's antennas for cellular telecommunications base
stations utilize microstrip radiating elements for a very
uniform coverage pattern as compared with conventional
antennas. The Company believes that this antenna design,
which was developed by CAL, minimizes interference of other
cells, reduces dead spots within a cell, and improves signal
hand-off as a user moves from one cell to another. The
cellular antennas are manufactured and marketed by EMS.
1994 DEVELOPMENTS
In the satellite communication (SATCOM) market, the
Company's products connect mobile end-users to a space
network. Several SATCOM programs begun in 1994 will require
a connection between aircraft and satellite, such as the
antenna to be developed for a NASA program that tests
commercial uses for space technology. For another airborne
program, the Company will provide a space link to an
unmanned reconnaissance aircraft. A third airborne program
is an exclusive supply contract between the subsidiary, CAL
Corporation, and a leading satellite services company --
American Mobile Satellite Corporation (AMSC). AMSC will use
CAL's hardware to offer voice/data service between private
aircraft and the new MSAT satellite. CAL also remained a
world leader in the niche SATCOM market for search and
rescue systems, with a multi-million dollar order received
in 1994 from Saudi Arabia to build a system of ground
stations for a search and rescue network.
The Company remained very active on radar programs such as
JSTARS (an airborne system for real-time tracking of the
movement of ground forces). Substantial sales were also
recognized from contracts to produce compact antenna systems
and broadband phased-array subsystems for airborne use. One
of the larger orders in 1994 was for work on the Army's
Advanced Tactical Radar Jammer (ATRJ) program to protect
helicopters. Many products rely on electronically scanned
antenna technology, which allows transmission of data at
very high rates. The Company believes that this phased
array technology will find more commercial markets in
the future, because high data rates will be important to the
next generation of products and services for commercial
wireless communications. Space systems remained a
significant business area for the Company. Substantial
revenues resulted from efforts on the MILSTAR defense
communications program and the Space Station. Equipment for
commercial communications and remote sensing satellites
(which monitor the earth's environment) also provided
significant orders.
Exports of advanced antenna and signal-processing equipment
were $7 million in 1994, more than double the total in 1993,
reflecting direct international marketing efforts and
participation in European satellite programs, such as the
ENVISAT remote sensing satellite.
The Company formed an "EMS Wireless" division, which has a
line of base station antennas that can improve network
performance for cellular telephone service-providers. Some
of the largest companies in the U.S. cellular industry
became customers last year, including Nextel, BellSouth and
AirTouch. EMS Wireless also plans to develop high-speed
networks and "smart antennas" that steer beams to follow
each end-user in a cell. These future products will have
their own markets, but they will also be integrated with
other Company products.
WIRELESS DATA COMMUNICATIONS PRODUCTS
One of the Company's strategic moves to diversify its business
base has been the development, beginning in the early 1980's, of
wireless data communications systems for materials handling
operations. These systems, which are designed, manufactured,
sold and supported by LXE, permit both mobility and real-time
transaction processing. LXE systems have been installed at more
than 3,000 sites worldwide, including the facilities of many
Fortune 500 companies and some of the world's largest materials
handling installations.
LXE 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 LXE 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
LXE offers several types of terminals, all of which utilize
radio frequency technology. Hand-held terminals are small,
lightweight and intended to be carried by people. Vehicle-
mounted terminals are larger, heavy duty terminals for use
on fork-lifts, cranes and other mobile materials handling
equipment. Other terminals include a table-top model for
fixed positions where computer cabling is not practical, and
wireless modems which 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.
RADIO BASE STATIONS AND CONTROLLERS
The wireless communications link between the terminal and
the computer is completed by a radio base station and
controller, which 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 sizes
and structural designs.
Controllers provide the critical interface between the radio
base station and the host computer. LXE 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.
OTHER PRODUCTS
In addition to the basic system hardware, LXE offers various
accessories, such as bar code scanners and battery chargers,
portable printers, software products for system
communications, integrated applications and terminal
emulation, and repair and maintenance services.
1994 DEVELOPMENTS
A new terminal was introduced last year for the materials
handling market. The device has a unique ergonomic design:
there is a built-in laser scanner for easy handling, an auto
on/off to save battery power, and the display screen and
keyboard are angled for the operator's view, to cut down on
tiring or inefficient motion. Another product line
innovation to help the operator is an option for entering
data: a voice recognition system. With this new system,
the operator can enter data simply by speaking into a
lightweight headset, which leaves the hands and eyes free
for other tasks.
LXE's radio technology also helped bring in new orders in
1994. Last year, LXE was awarded a contract for narrowband
wireless modems and base station products. These products
will be installed overseas in U.S. Government bases, supply
depots, and hospitals under the Automated Identification
Technology program. Chrysler's Mopar Division ordered new
systems for all 15 field parts distribution warehouses.
Other major new orders and installations included Ralston
Purina, Wal-Mart, Sara Lee, Federal Express and Sony.
A new initiative was begun in 1994 called the "Mobile
Enterprise". This initiative will combine LXE's expertise
in wireless local area networks with the expertise of LXE's
affiliates in satellite communications, and advanced antenna
systems. The Mobile Enterprise also includes strategic
partners that have complementary strengths in satellite
communication. services, application software, and radio
design. The goal of the Mobile Enterprise is to provide
wireless, high-speed communication networks for a
variety of business applications.
MARKETING
The marketing and sales efforts for the respective products of
EMS and CAL are conducted by internal marketing staffs; these
companies also have agreements with independent marketing
representatives. LXE products are marketed, sold and serviced
through an internal staff, 18 regional sales offices (17 in the
U.S. and one in Canada), five European sales subsidiaries, and
also through selected value added retailers and international
distributors. Several members of the Company's senior
management, engineering and administrative staffs are
significantly involved in sales activities.
The Company did not have a major domestic customer accounting for
10% or more of consolidated net sales in 1994. During 1994,
approximately 70% of the Company's consolidated net sales were
from commercial and international markets and 30% were for U.S.
Government end-use. For further information on sales concerning
business segments, geographic areas, and exports, see Note 8 of
"Notes to Consolidated Financial Statements" included in Item 8
of this Report.
BACKLOG
The consolidated orders backlog at December 31, 1994 was $75.0
million, including $51.3 million in orders for advanced
communications and signal-processing equipment (EMS and CAL), and
$23.7 million for wireless data communications equipment (LXE).
These totals compare with a consolidated orders backlog one year
earlier of $62.4 million, comprising $36.3 million for for EMS
and CAL, and $26.1 million for LXE. A significant portion of the
1994 backlog is expected to be realized as sales in 1995.
MATERIALS
Materials used in the Company's advanced communications and
signal-processing 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 LXE products are generally available from a variety of
sources. Bar code scanners are included in almost all of LXE's
orders, and a significant number of the scanners are purchased
from Symbol Technologies, Inc. (Symbol), which is also 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 LXE's other competitors
also rely on scanning equipment purchased from or licensed by
Symbol. In addition, Symbol and LXE have a license agreement
which allows the Company to utilize Symbol's patented integrated
scanning technology in future products.
The Company believes that its present sources of its required
materials are adequate. The Company does not believe that the
loss of any supplier or subassembly manufacturer would have a
material adverse affect 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 microwave subsystems and of wireless data
communications systems for materials handling operations.
However, the Company's markets are highly competitive. Some of
the Company's competitors have substantial resources and
facilities that may exceed those of the Company; the Company also
competes against smaller, specialized firms.
In microwave and antenna markets, the Company's EMS and CAL
subsidiaries compete with divisions of certain large U.S.
industrial concerns such as Raytheon Company, M/A-Com, Inc and
Rockwell, as well as non-U.S. companies such as Spar, COMDEV and
RACAL. There are larger companies which are potential
competitors of EMS or CAL for certain contracts but are potential
customers on other contracts. Certain major customers could also
elect to develop and manufacture the products that they presently
purchase from the Company.
Principal competitors of the Company's LXE business include
Norand Corporation, Symbol Technologies, Litton Industries,
Teklogix Corp. and Telxon Corporation.
The Company believes that the key competitive factors within the
Company's advanced communications and signal processing markets
continue to be product performance, technical expertise and
support to customers, adherence to delivery schedules, and price.
LXE's principal customers are medium and large businesses that
use data communications systems in complex applications where the
performance and quality of LXE products and services are believed
to be more important purchase criteria than price.
RESEARCH AND DEVELOPMENT
The Company conducts a major portion of its research and
development at the EMS and CAL subsidiaries 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. Nevertheless, internally sponsored research
and development in the microwave and antenna area has exceeded
$1.0 million in each of the past three years. Most of the
Company's internally sponsored research and development has been
conducted by LXE, which has delivered significant new product
designs and performance enhancements during the past three years,
including spread spectrum radios, expanded host computer
connectivity options, and a new generation of RF infrastructure
components. In 1994, 1993 and 1992, the Company invested a total
of $8.1 million, $8.2 million and $7.5 million, respectively, in
internally sponsored research and development. The Company holds
several patents and licenses and several patents are pending for
proprietary technologies developed by the Company.
EMPLOYEES
As of December 31, 1994, the Company and its subsidiaries
employed a total of approximately 1,000 persons. Over 75% of the
Company's employees are directly involved in engineering or
manufacturing activities.
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning the executive officers of the Company is
set forth below:
Thomas E. Sharon, age 49, became 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 of each of the Company's
operating subsidiaries, and as President of LXE Inc.
Don T. Scartz, age 52, has served as Vice President, Finance and
Treasurer of the Company since 1981, 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.
William S. Jacobs, age 49, became General Counsel, Director of
Corporate Administration, and Secretary of the Company in 1992,
and Vice President in 1993. He also serves as General Counsel
and Secretary of EMS Technologies, Inc. and LXE Inc. Previously,
he was engaged in the private practice of law with Trotter Smith
& Jacobs, Atlanta, Georgia, and in such capacity had served as
the Company's principal corporate legal counsel since 1982.
Neilson A. Mackay, age 54, has served since September 1992 as
President of CAL Corporation, a controlling interest in which was
acquired by the Company in January 1993. Prior to joining CAL,
he had served since 1988 as President of Innotech Aviation
Limited, a Montreal, Quebec-based privately held aerospace
company with approximately 650 employees. Innotech is active in
all post-manufacturing sectors of the corporate aviation market,
including aircraft sales, flight management, maintenance, and
interior and avionics modifications.
Jeffrey A. Leddy, age 39, has served since July 1994 as President
of EMS Technologies, Inc. He joined the Company as an engineer
in September 1980.
ITEM 2. Properties.
The Company's Georgia operations are conducted in two owned
buildings, one of 112,000 square feet on 7.6 acres, the other of
140,000 square feet on 13.5 acres. The Company also lease 37,000
square feet in another building (the lease to expire in February
1998, unless extended for an additional two years to February
2000 at the option of the Company). All three buildings are
located in Technology Park, Norcross, Georgia, a suburb of
Atlanta. At December 31, 1994, the two buildings owned by the
Company were subject to an outstanding industrial development
revenue bond indebtedness of $0.6 million and a revolving credit
loan of $3.8 million.
The combined Georgia facilities comprise clean rooms, a
microelectronics laboratory, materials control areas, assembly
and test areas, offices, engineering laboratories, a ferrites
laboratory, drafting and design facilities, machine shops, a
metals finishing area, dark rooms and painting facilities. The
Company has consolidated most of its EMS operations into the
130,000 square foot building and LXE occupies the 112,000 square
foot building.
CAL Corporation operates in approximately 52,700 square feet of
leased space in a single building located outside Ottawa, Canada.
The lease expires in August 1997.
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 Electromagnetic Sciences, Inc. Is traded in
the over-the-counter market (Nasdaq symbol ELMG). At March 10,
1995, there were approximately 1,000 shareholders of record, and
the Company believes that there were approximately 3,000
beneficial shareholders, based upon broker requests for
distribution of annual meeting materials. The price range of the
stock is shown below:
1994 Price Range 1993 Price Range
High Low High Low
First Quarter $ 9-3/8 7-3/4 9-1/8 6-1/8
Second Quarter 9-1/4 7-7/8 7-1/4 5-7/8
Third Quarter 9-1/8 8 7-1/2 6
Fourth Quarter 12-1/8 8 8-3/8 5-3/4
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 contained in the Company's
1994 Annual Report to Shareholders, and is incorporated herein by
reference to Exhibit 13.1.
<PAGE>
ITEM 7. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Information required for this item is contained in the Company's
1994 Annual Report to Shareholders, and is incorporated herein by
reference to Exhibit 13.1.
ITEM 8. Financial Statements and Supplementary Data.
Information required for this item is contained in the Company's
1994 Annual Report to Shareholders, and is incorporated herein by
reference to 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
1995 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 1995 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 1995 Annual Meeting
of Shareholders and is incorporated herein by reference.
ITEM 13. Certain Relationships and Related Transactions.
Not applicable.
<PAGE>
**** 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 1994 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, 1994, 1993 and 1992.
Consolidated Balance Sheets - December 31, 1994 and 1993.
Consolidated Statements of Stockholders' Equity -
Years ended December 31, 1994, 1993 and 1992.
Consolidated Statements of Cash Flows -
Years ended December 31, 1994, 1993 and 1992.
Notes to Consolidated Financial Statements.
(a)2. Financial Statement Schedules
Independent Auditors' Report
II. Valuation and Qualifying Accounts - Years ended
December 31, 1994, 1993 and 1992
All other schedules are omitted as the required information is
inapplicable, or the information is presented in the financial
statements or related notes.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Electromagnetic Sciences, Inc.
Under date of January 27, 1995, we reported on the consolidated
balance sheets of Electromagnetic Sciences, Inc. and subsidiaries
as of December 31, 1994 and 1993, and the related consolidated
statements of earnings, stockholders' equity, and cash flows for
each of the years in the three-year period ended December 31,
1994, as contained in the 1994 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 1994. 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, such 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 Peat Marwick LLP
Atlanta, Georgia
January 27, 1995
<PAGE>
Schedule II
Electromagnetic Sciences, Inc.
Valuation and Qualifying Accounts
(In thousands)
Years ended December 31,1994, 1993 and 1992
Additions
Balance at charged to Balance
beginning costs and at end
Classification of year expenses Deductions Other of year
Allowance for
Doubtful Accounts:
1992 $ 170 50 - - 220
1993 $ 220 296 (196)(a) - 320
1994 $ 320 325 - - 645
Reserve for Deferred
Tax Assets:
1993 $ - - (34) 4,393(b) 4,359
1994 $ 4,359 69 - 900(b) 5,328
(a) In 1993, deductions represented an LXE charge-off of an uncollectible
balance.
(b) Other additions relate to deferred tax assets established in connection
with the acquisition of CAL Corporation and subsequent adjustments of acquired
research expense and tax credit carryforwards.
<PAGE>
(a)3. Exhibits
The following exhibits are filed as part of this report:
3.1 Amended and restated Articles of Incorporation of Electromagnetic
Sciences, Inc., effective July 3, 1989 (incorporated by reference to
Exhibit 3.2 to the Company's Report on Form 8-K filed July 17,
1989).
3.2 Bylaws of Electromagnetic Sciences, Inc. as amended through
March 20, 1995.
4.1 Agreement with respect to long-term debt pursuant to Item
601(b)(4)(iii)(A) (incorporated by reference to Exhibit 19.3 to the
Company's Report on Form 10-Q for the quarter ended June 30, 1989).
4.2 Revolving Credit Note between Electromagnetic Sciences, Inc. and
Trust Company Bank (incorporated by reference to exhibit 4.2 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1991).
4.3 Electromagnetic Sciences, Inc. Stockholder Rights Plan dated as of
July 3, 1989 (incorporated by reference to Exhibit 19.5 to the
Company's Report on Form 10-Q for the quarter ended June 30, 1989).
10.1 Employment Agreement dated as of January 1, 1989, by and between the
Company and Thomas E. Sharon (incorporated by reference to
Exhibit 19.9 to the Company's Report on Form 10-Q for the quarter
ended June 30, 1992).
10.2 Employment Agreement, dated July 29, 1992, of Employment Agreement
dated as of January 1, 1989, by and between the Company and Thomas
E. Sharon. (incorporated by reference to Exhibit 10.4 to the
Company's Report on Form 10-K for the year ended December 31, 1993).
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.
10.4 Separation Agreement between LXE Inc. And Malcolm M. Bibby,
effective December 13, 1995 (incorporated by reference to
Exhibit 10.12 to the Annual Report on Form 10-K of LXE Inc. For the
year ended December 31, 1994).
10.5 Consulting Agreement, effective January 1, 1995, by and between the
Company and John E. Pippin.
10.6 1981 Incentive Stock Option Plan, as amended and restated
February 6, 1987, and further amended through July 31, 1992
(incorporated by reference to Exhibit 19.1 to the Company's Report
on Form 10-Q for the quarter ended June 30, 1992).
10.7 Form of split-dollar life insurance agreement between the Company
and certain of its officers (incorporated by reference to
Exhibit 10.3 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1991).
10.8 Form of split-dollar life insurance agreement effective
January 1, 1993, between the Company and an officer (incorporated
by reference to Exhibit 10.4 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1993).
10.9 Electromagnetic Sciences, Inc. 1986 Directors' Stock Option Plan as
amended through July 31, 1992 (incorporated by reference to
Exhibit 19.2 to the Company's Report on Form 10-Q for the quarter
ended June 30, 1992).
10.10 Electromagnetic Sciences, Inc. 1986 Non-Qualified Stock Option
Plan as 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, 1990).
10.11 Electromagnetic Sciences, Inc. 1992 Stock Incentive Plan
(incorporated by reference to Exhibit 19.1 to the Company's Report
on Form 10-Q for the quarter ended March 31, 1992).
10.12 LXE Inc. 1989 Stock Incentive Plan, as amended and restated
March 6, 1992 (incorporated by reference to Exhibit 19.1 to the
Report on Form 10-Q of LXE Inc. for the quarter ended March 31,
1992).
10.13 Form of Stock Option Agreement evidencing options granted in 1992 to
certain executive officers under the Electromagnetic Sciences, Inc.
1992 Stock Incentive Plan (incorporated by reference to the
Company's Report on Form 10-Q for the quarter ended June 30, 1992).
10.14 Form of Stock Option Agreement evidencing options granted January 1,
1989 to certain executive officers under the LXE Inc. 1989 Stock
Incentive Plan (incorporated by reference to Exhibit 10.8 to the
Annual Report on Form 10-K of Electromagnetic Sciences, Inc. for the
year ended December 31, 1990).
10.15 Form of Stock Option Agreement evidencing options granted
September 26, 1990 to an executive officer under the LXE Inc. 1989
Stock Incentive Plan (incorporated by reference to Exhibit 19.2 to
the Company's Report on Form 10-Q for the quarter ended
September 30, 1991).
10.16 Form of Stock Option Agreement evidencing options granted
September 26, 1990 to John B. Mowell under the LXE Inc. 1989 Stock
Incentive Plan (incorporated by reference to Exhibit 19.3 to the
Company's Report on Form 10-Q for the quarter ended September 30,
1991).
10.17 Form of Stock Option Agreement evidencing option granted
automatically to one of the Company's directors as a newly elected
non-employee Member of the Board of Directors of LXE Inc.
(incorporated by reference to Exhibit 10.5 to the Annual Report on
Form 10-K for LXE Inc. for the year ended December 31, 1991).
10.18 Form of Stock Option Agreement evidencing options granted in 1992 to
certain executive officers under the LXE Inc. 1989 Stock Incentive
Plan (incorporated by reference to Exhibit 19.1 to the Report on
Form 10-Q of LXE Inc. for the quarter ended June 30, 1992).
10.19 Form of Restricted Stock Award Restriction Agreement governing
awards of restricted stock made to the Company's executive officers
effective January 27, 1995.
10.20 Form of Indemnification Agreement between the Company and its
directors incorporated by reference to Exhibit 19.5 to the Company's
Report on From 10-Q for the quarter ended June 30, 1992).
10.21 Form of Indemnification Agreement between the Company and each of
its Chief Financial Officer and General Counsel (incorporated by
reference to Exhibit 19.6 to the Company's Report on Form 10-Q for
the quarter ended June 30, 1992).
10.22 Form of Indemnification Agreement between LXE Inc. and certain
of the Company's officers and directors in their capacity as
directors of LXE Inc. (incorporated by reference to Exhibit 19.2
to the Report on Form 10-Q of LXE Inc. for the quarter ended
June 30, 1992).
10.23 Form of Indemnification Agreement between LXE Inc. and certain
officers of the Company in their capacity as officers of LXE Inc.
(incorporated by reference to Exhibit No. 19.3 to the Report on
Form 10-Q of LXE Inc. for the quarter ended June 30, 1992).
11.1 Statement re: Computation of Per Share Earnings.
13.1 Those portions of the 1994 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 No. 2-76455, No. 2-78442, No. 2-94049,
No. 33-31216, No. 33-38829, No. 33-41041, No. 33-41042 and
No. 33-50528 on Form S-8.
(b). Reports on Form 8-K.
No reports on Form 8-K were filed by the Registrant during the quarter ended
December 31, 1994.
<PAGE>
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.
ELECTROMAGNETIC SCIENCES, INC.
By: /s/ John E. Pippin Date: 3/30/95
John E. Pippin, Chairman of the Board
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/ Thomas E. Sharon Date: 3/30/95
Chief Executive Officer and Director
(Principal Executive Officer)
By: /s/ Don T. Scartz Date: 3/30/95
Vice President - Finance & Treasurer
(Principal Financial & Accounting Officer)
By: /s/ Charles J. Cunningham Date: 3/30/95
Director
By: /s/ William F. Evans Date: 3/30/95
Director
By: /s/ Jerry H. Lassiter Date: 3/30/95
Director
By: /s/ John B. Mowell Date: 3/30/95
Director
Exhibit 3.2
BYLAWS
OF
ELECTROMAGNETIC SCIENCES, INC.
As Amended Through
March 20, 1995
BYLAWS
OF
ELECTROMAGNETIC SCIENCES, INC.
TABLE OF CONTENTS
Page
ARTICLE ONE - OFFICES 1
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
(i)
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 Secretar 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
(ii)
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
(iii)<PAGE>
BYLAWS
OF
ELECTROMAGNETIC SCIENCES, 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 Electromagnetic Sciences, 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 shareholders shall consist only
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
the 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 14
days prior to the annual meeting or 5 days after notice is given
pursuant to Section 9.6, whichever is later. 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 later than 14 days
before the date of such meeting or 5 days after notice is given
pursuant to Section 9.6, whichever is later, which notice (i) sets
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) is
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. Notwithstanding 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 10.3
SECOND AMENDMENT TO EMPLOYMENT
AGREEMENT
This Second Agreement is made 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, as thereafter amended effective as of July
29, 1992; 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, 1998, 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 $200,000 per calendar year.
3. Employment Duties. Section 2 of the Agreement is
amended such that the first sentence thereof shall
provide in its entirety as follows:
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 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.
4. Non-Competition. Paragraph 7 (a) of the Agreement is
amended to provide in its entirety as follows:
(a) During Employment and While Receiving Certain
Payments. During the Employment Term, and
thereafter for so long as Employee shall receive<PAGE>
payments pursuant to paragraph 4.3 (a) or 4.3 (e),
Employee shall not, directly or indirectly,
design, manufacture or sell, or manage or advise
others in designing, manufacturing or selling,
electronic products of the types designed and
marketed by the Company or any of its subsidiaries
prior to the expiration of the Employment Term.
Paragraph 7 (b) of the Agreement is amended such that
the first sentence thereof shall provide in its
entirety as follows:
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 manage or advise others in designing,
manufacturing or selling, electronic products of
the types designed and marketed by the Company or
any of its subsidiaries on or prior to the date of
execution of the amendment to this Employment
Agreement most recently executed by Employee.
IN WITNESS WHEREOF, the parties have executed this Second
Amendment on the day of November, 1994.
EMPLOYER: EMPLOYEE:
ELECTROMAGNETIC SCIENCES, INC.
John E. Pippin, Chairman Thomas E. Sharon
Exhibit 10.5
CONSULTING AGREEMENT
BETWEEN
ELECTROMAGNETIC SCIENCES, INC. AND
JOHN E. PIPPIN
Electromagnetic Sciences, Inc. ("ELMG") will utilize John E.
Pippin ("Consultant") as a business consultant during the period
beginning January 1, 1995, and continuing through December 31,
1997. Consultant's consulting services, which shall utilize
Consultant's unique expertise and experience in the Company's
business activities, and shall generally relate to its strategic
planning, proposed acquisitions, restructuring and integration of
acquired businesses, and management organization and personnel,
will be provided to the Company's Chief Executive Officer.
Compensation will be $5,000 per month, plus $1,000 per day
for any days of services in excess of one day per week as
requested by the Chief Executive Officer or Board of Directors.
On the last business day of the first and second months of each
calendar quarter, ELMG shall make payments to Consultant of
$5,000, plus $1,000 per day for any days of services in excess of
four in each such month. On the last business day of the third
month of each calendar quarter, ELMG shall make a payment to
Consultant of $5,000 plus $1,000 per day for any days of services
in excess of five during such month. If during any month
Consultant fails to provide the specified minimum number of days
of services for any reason other than illness or incapacity as
specified below, Consultant agrees to provide during subsequent
months of the term of this Agreement an equal number of excess
days of services for which he would not receive the additional
per-diem compensation. All payments to Consultant shall be
subject to his submission of documentation reasonably requested
by ELMG and satisfactorily reflecting the performance of
requested services.
All authorized expenses incurred by Consultant associated
with business travel or other bona fide business purposes will be
reimbursed by ELMG, and ELMG will provide Consultant with office
space and secretarial services comparable to those provided to
Consultant as an executive employee during the fourth quarter of
1994.
If during the term of this Agreement Consultant shall die,
or shall become unable to provide requested services due to
mental or physical illness or incapacity (as determined by a<PAGE>
licensed physician selected by Consultant and reasonably
satisfactory to ELMG), ELMG shall continue to pay to Consultant
or his guardian or estate, as the case may be, fees at the rate
of $5,000 per month, as if Consultant was continuing to provide
the minimum services hereunder.
As an independent contractor, Consultant will not be
eligible for the benefit programs afforded to regular ELMG
employees, except that Consultant: (i) will participate in the
group life and health insurance plans (including the executive
supplementary health insurance plan) as in effect from time to
time for ELMG executive officers, (ii) will be provided an
automobile of the nature and on terms in effect for Consultant as
an executive employee during 1994, and (iii) will be provided tax
planning and return services of the nature provided to Consultant
as an executive employee during 1994.
This Agreement may not be terminated by ELMG other than for
good cause. For these purposes, "good cause" means any act of
dishonesty or material breach of duty by Consultant against the
best interests of ELMG.
As a consultant, Consultant will execute and deliver the
standard form of ELMG Consultant's Non-Disclosure Agreement,
which provides for the protection of proprietary and/or
competition-sensitive confidential information to which
Consultant has access in the course of providing services to
ELMG.
All intellectual property rights, including trade secrets,
copyrights and patentable inventions, that relate to the business
of ELMG (including its research and experimental activities), or
to products or services provided to its customers, and that
Consultant develops or conceives at any time in connection with
his services as a consultant, whether during or outside normal
working hours, in or away from ELMG facilities, and whether or
not requested by ELMG, or are otherwise developed or conceived
with the use of ELMG's material, facilities or employee time,
shall be considered work made by Consultant for hire and shall be
the exclusive property of ELMG. If for any reason ownership of
all right, title and interest in and to any such intellectual
property rights does not otherwise automatically vest exclusively
in ELMG, Consultant agrees to assign, and upon creation thereof
automatically assigns, without further consideration, the
ownership thereof to ELMG, its successors and assigns, free of
any shop right, moral right or other residual interest of
Consultant. All expenses of copyrighting, patenting or otherwise
perfecting or protecting such intellectual property rights shall
be borne by ELMG.<PAGE>
Except with the prior written consent of ELMG,
or acting at the request and on behalf of ELMG, Consultant will not, during
the term of this Agreement, provide services as an employee,
consultant or other independent contractor to any company or
person reasonably determined by ELMG to be a competitor or
potential competitor.
IN WITNESS WHEREOF, the parties have executed this Agreement
effective as of the date first set forth above.
ELECTROMAGNETIC SCIENCES, INC.
BY:
Thomas E. Sharon
President and Chief Executive
Officer
ACCEPTED:
John E. Pippin
December , 1994
Exhibit 10.9
Electromagnetic Sciences, Inc.
1992 Stock Incentive Plan
Restricted Stock Award
Restriction Agreement
with
(Date of Meeting)
Dear :
The ELMG 1992 Stock Incentive Plan (the "Plan") is intended
as an incentive to achieve the objectives of Electromagnetic
Sciences, Inc. (the "Company"), through employee participation in
the Company's success and growth. The Plan provides an
opportunity for eligible employees to acquire or increase their
proprietary interest in the Company, and, as to officers is
administered by the Compensation Committee of the Board of
Directors (the "Committee"). The Committee has selected you to
receive an award of Restricted stock (as defined in the Plan)
effective as of the close of business on January 27, 1995, and
has instructed me to prepare and enter into this Restriction
Agreement with you.
In consideration of the mutual covenants herein contained
and for other good and valuable consideration, the Company and
you as an employee of the Company do hereby agree as follows:
1. Grant of Shares. Pursuant to action of the Committee,
the Company has granted to you shares of
Restricted Stock (the "Shares"). This award is in all respects
made subject to the terms and conditions of the Plan, a copy of
which has been provided to you. By signing and returning a copy
of this Agreement to the Secretary of the Company, you agree to
all of the terms and conditions of the Plan for yourself, any
designated beneficiary and your heirs, executors, administrators
or personal representative. Terms used in this Agreement which
are defined in the Plan shall have the meanings set forth in the
Plan. In the event of any conflict between the Plan and this
Agreement, the Plan shall control.
As soon as practicable following your execution of this
Agreement, a certificate or certificates representing the Shares
and bearing the legend described below in Section 6 will be
issued in your name. Upon issuance of the certificates
representing the Shares, you shall have all rights of a
stockholder with respect to the Shares, including the right to
vote and, subject to Section 10 of this Agreement, to receive all
dividends or other distributions paid or made with respect to the
Shares; provided, however, that the Shares (and any securities of
the Company which may be issued with respect to the Shares by
virtue of any dividend reinvestment, stock split, combination,
stock dividend or recapitalization, which securities shall be
deemed to be "Shares" hereunder) shall be subject to the terms
and all of the restrictions set forth in this Agreement.
2. Restriction. Until this restriction (the
"Restriction") has lapsed pursuant to Section 3 or 4 below, you
may not sell, exchange, assign, transfer, pledge or otherwise
dispose of the Shares, and the Shares shall be subject to
forfeiture as set forth in Section 5 below.
3. Lapse of Restriction by Passage of Time or at
Retirement. The Restriction shall lapse and have no further
force or effect upon the earlier of (a) the first anniversary of
the date of this Agreement, or (b) your retirement at or after
your normal retirement date (but not earlier than July 27, 1995)
as determined under the retirement plan of the Company then in
effect ("Normal Retirement").
4. Lapse of Restriction by Death or Disability. The
Restriction shall lapse, and shall have no further force or
effect, upon your death or disability (as defined in the Plan).
You may provide to the Company a written designation in a form
approved by counsel for the Company naming a person or persons
who shall receive the Shares in the event of your death. If
there is no such designation in effect at the time of your death,
the Shares shall be delivered to and become an asset of your
estate.
5. Forfeiture of Shares. Except as may otherwise
hereafter be determined by the Committee, in the event of
termination of your employment with the Company due to your
voluntary resignation (other than Normal Retirement) or
involuntary discharge prior to lapse of the Restriction under
Section 3 or 4, or in the event you provide services to a
competitor of the Company or any Subsidiary of the nature
described in Section 9.2 of the Plan prior to such lapse (whether
or not known to the Company at that time), you shall immediately
forfeit all right, title and interest to the Shares, regardless
of whether unrestricted certificates evidencing the Shares shall
have theretofore been delivered to you, and such Shares shall be
cancelled or transferred to the Company by you, without
consideration to you or your executor, administrator, personal
representative or heirs.
6. Endorsement and Retention of Certificates. All
certificates representing the Shares shall be endorsed on the
reverse thereof with the following legend:
"The shares of stock represented by this
certificate and the sale, transfer or other
disposition of such shares are restricted by
and subject to a Restriction Agreement dated
January 27, 1995, between the registered
holder and the Company, a copy of which is on
file with the Secretary of the Company."
All certificates for Shares shall be held by the Company until
the restrictions thereon shall have lapsed. As a condition to
this award, you shall execute and deliver to the Company a stock
power in the form attached hereto, endorsed in blank, relating to
the Shares, as set forth in the Plan.
Upon lapse of the Restriction pursuant to Section 3 or 4 of
this Agreement without a prior forfeiture of the Shares, a
certificate or certificates for an appropriate number of
unrestricted Shares shall be delivered to you and the certificate
with the legend indicated above shall be cancelled.
7. Withholding Taxes. You hereby authorize the Company to
withhold, at the time of lapse of the Restriction on the Shares
pursuant to Section 3 or 4 above, or at such earlier date as the
award of the Shares shall become taxable to you, from
compensation otherwise owing to you, an amount equal to any taxes
required to be withheld by federal, state or local law with
respect to income resulting from such lapse or other taxable
event. In the event the compensation otherwise due to you at
that time is for any reason insufficient to provide for such
payment, you agree that, as a condition of the delivery to you of
certificates evidencing the Shares, you will deliver to the
Company a cashier's check, or personal check satisfactory to the
Company, in an amount equal to such withholding taxes or any
balance thereof.
8. No Rights to Continued Employment. Nothing herein
confers on you any right to continue in the employ of the Company
or of any parent or subsidiary.
9. Succession. This Agreement shall be binding upon and
operate for the benefit of the Company and its successors and
assigns, and you and your executor, administrator, personal
representative and heirs.
10. Dividends. Any cash dividends which may become payable
on the Shares shall be held by the Company for your account until
the Restriction lapses. In such event the Company shall pay
interest on the amount so held as determined by the Committee,
and the accumulated amount of such dividends and interest shall
be paid to you upon the lapse of the Restriction. Any such cash
shall be governed by the Restriction; the Restriction with
respect to any such cash shall lapse as provided in Sections 3
and 4 of this Agreement; and any such cash shall be forfeited
pursuant to Section 5 to the extent that the Shares on which such
dividends were paid shall be so forfeited.
This Agreement has been prepared in duplicate. Please
indicate your acceptance by signing in the space provided below,
and return an original for the Company's records.
IN WITNESS WHEREOF, the Company, acting through the
Committee, has caused this agreement to be duly executed and you
have hereunto set your hand and seal, all as of the day and year
first written above.
ELECTROMAGNETIC SCIENCES, INC.
By:
Thomas E. Sharon,
President and CEO
Accepted and Agreed:
EMPLOYEE
<PAGE>
STOCK TRANSFER POWER
The undersigned,
, hereby sells, assigns and transfers unto
, and hereby irrevocably
constitutes and appoints Electromagnetic Sciences, Inc. as his or
her true and lawful attorney-in-fact, with full power of
substitution, to transfer on the stock records of Electromagnetic
Sciences, Inc., all right, title and interest of the undersigned
in and to, shares of the Common Stock of
Electromagnetic Sciences, Inc. evidenced by certificate number
, dated , 1995.
, 1995
Witness:
Exhibit 11.1
ELECTROMAGNETIC SCIENCES, INC.
AND SUBSIDIARIES
Statement re: Computation of Per Share Earnings
(In thousands, except net earnings per share)
Years Ended December 31
1994 1993 1992
Common equivalent shares:
Common stock - weighted average
shares outstanding 6,766 6,716 7,106
Dilutive effect of outstanding common
stock options (as determined by the
treasury stock method using the average
market price for the period) 277 140 225
Total common and common equivalent shares 7,043 6,856 7,331
For purposes of calculating primary
earnings per share, the Company's
proportionate share of the net earnings of
LXE Inc. has been adjusted to reflect the
dilutive effect of LXE's outstanding stock
options. Following is a summary of net
earnings applicable to earnings per common
and common equivalent share:
Net earnings (loss)
excluding LXE Inc. $ 1,226 1,142 (1,541)
Adjusted proportionate share
of net earnings of LXE Inc. 2,841 233 2,241
Total net earnings applicable to
earnings per common and common
equivalent share $ 4,067 1,375 700
Net earnings per common and common
equivalent share $ .58 .20 .10
ELECTROMAGNETIC SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except net earnings per share)
Years ended December 31
1994 1993 1992
Net sales (note 8) $117,993 99,044 71,822
Cost of sales 73,375 61,771 44,407
Selling, general and administrative expenses 27,589 26,522 17,786
Research and development expenses 8,127 8,153 7,518
Operating income 8,902 2,598 2,111
Interest and other income 640 210 776
Interest expense (482) (434) (81)
Earnings before income taxes
and LXE minority interest 9,060 2,374 2,806
Income taxes (note 6) 3,712 896 1,038
LXE minority interest 1,085 87 844
Net earnings $ 4,263 1,391 924
Net earnings per common and
common equivalent share (note 5) $ .58 .20 .10
Weighted average number of common
and common equivalent shares (note 5) 7,043 6,856 7,331
See accompanying notes to consolidated financial statements.
<PAGE>
ELECTROMAGNETIC SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31
1994 1993
ASSETS
Current assets:
Cash, including interest-bearing deposits
of $1,165 in 1994 and $2,393 in 1993 $ 2,671 4,711
Marketable securities (reverse repurchase
agreements) 10,400 3,700
Total cash and cash equivalents 13,071 8,411
Marketable securities, at cost, which
approximates market 400 1,590
Trade accounts receivable, net (note 3) 36,355 29,237
Inventories:
Work in process 4,905 3,547
Parts and materials 6,809 8,932
Total inventories 11,714 12,479
Deferred income tax benefit (note 6) 992 1,079
Total current assets 62,532 52,796
Marketable securities, at cost, which
approximates market - 400
Property, plant and equipment (note 4):
Land 1,150 1,150
Building and leasehold improvements 13,626 13,519
Machinery and equipment 47,256 43,188
Furniture and fixtures 3,367 3,052
65,399 60,909
Less accumulated depreciation
and amortization 38,868 34,308
Net property, plant and equipment 26,531 26,601
Other assets 2,142 2,098
Goodwill, net of accumulated amortization
of $805 in 1994 and $385 in 1993 (note 2) 5,546 5,966
$ 96,751 87,861
See accompanying notes to consolidated financial statements.
<PAGE>
ELECTROMAGNETIC SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, continued
(In thousands except share data)
December 31
1994 1993
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of
long-term debt (note 4) $ 3,830 3,718
Accounts payable 10,762 8,747
Income taxes 1,490 386
Accrued compensation costs 3,656 3,352
Accrued retirement costs (note 7) 1,305 1,365
Deferred revenue 1,147 1,020
Other current liabilities 976 1,104
Total current liabilities 23,166 19,692
Long-term debt, excluding current
installments (note 4) 4,592 5,060
Deferred income taxes (note 6) 3,881 4,406
Total liabilities 31,639 29,158
Minority interest in LXE 8,681 7,155
Stockholders' equity (note 5):
Preferred stock of $1.00 par value
per share. Authorized 10,000,000
shares; none issued or outstanding - -
Common stock of $.10 par value per
share. Authorized 75,000,000 shares,
issued and outstanding 6,821,000 in
1994 and 6,715,000 in 1993 682 671
Additional paid-in capital 9,329 8,582
Foreign currency translation adjustment (115) 23
Retained earnings 46,535 42,272
Total stockholders' equity 56,431 51,548
Commitments and contingencies (notes 2 and 7)
$ 96,751 87,861
See accompanying notes to consolidated financial statements.
<PAGE>
ELECTROMAGNETIC SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
****** Three years ended December 31, 1994 ********
Foreign
currency
Addi- trans- Total
tional lation stock-
Common Stock paid-in adjust- Retained holders'
Shares Amount capital ment earnings equity
Balance, December 31,
1991 7,200 $ 720 11,386 - 39,957 52,063
Net earnings - - - - 924 924
Exercise of common
stock options 226 22 1,453 - - 1,475
Income tax benefit from
exercise of non-
qualified stock options
(note 6) - - 630 - - 630
Redemption of shares upon
exercise of common
stock options (64) (6) (913) - - (919)
Repurchase and retirement
of common stock (658) (66) (4,028) - - (4,094)
Balance, December 31,
1992 6,704 670 8,528 - 40,881 50,079
Net earnings - - - - 1,391 1,391
Income tax benefit from
exercise of non-
qualified stock options
(note 6) - - 14 - - 14
Exercise of common stock
options 17 2 78 - - 80
Redemption of shares upon
exercise of common
stock options (6) (1) (38) - - (39)
Foreign currency
translation adjustment - - - 23 - 23
Balance, December 31,
1993 6,715 671 8,582 23 42,272 51,548
Net earnings - - - - 4,263 4,263
Income tax benefit from
exercise of non-
qualified stock options
(note 6) - - 124 - - 124
Exercise of common stock
options 106 11 623 - - 634
Foreign currency
translation adjustment - - - (138) - (138)
Balance, December 31,
1994 6,821 $ 682 9,329 (115) 46,535 56,431
See accompanying notes to consolidated financial statements.
<PAGE>
ELECTROMAGNETIC SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Years Ended December 31
1994 1993 1992
Cash flows from operating activities:
Net earnings $ 4,263 1,391 924
Adjustments to reconcile net earnings to net
cash provided by operating activities:
LXE minority interest 1,085 87 844
Depreciation and amortization 5,526 5,396 5,108
Goodwill amortization 420 385 -
Deferred income taxes (438) (213) (1,123)
Changes in operating assets
and liabilities:
Trade accounts receivable (7,118) (4,619) (778)
Inventories 765 (1,160) (2,961)
Accounts payable 2,015 (2,212) 248
Income taxes 1,582 1,830 2,342
Accrued costs, deferred revenue,
and other current liabilities 243 243 (1,207)
Other (87) (122) (364)
Net cash provided by
operating activities 8,256 1,006 3,033
Cash flows used in investing activities:
Purchase of property, plant and equipment (5,573) (5,301) (3,537)
Purchase of CAL common stock from
minority shareholders - (537) -
Purchase of marketable securities - - (2,390)
Proceeds from maturities of marketable
securities 1,590 2,421 2,084
Net cash used in
investing activities (3,983) (3,417) (3,843)
Cash flows from financing activities:
Proceeds from long-term debt - 3,670 -
Repayment of long-term debt (356) (1,154) (158)
Proceeds from exercise of stock options 743 39 933
Repurchase and retirement of common stock - - (4,094)
Net cash provided by (used in)
financing activities 387 2,555 (3,319)
Net change in cash and
cash equivalents 4,660 144 (4,129)
Cash and cash equivalents at January 1 8,411 8,267 12,396
Cash and cash equivalents at December 31 $13,071 8,411 8,267
Supplemental disclosure of cash
flow information:
Cash paid in interest $ 482 434 81
Cash paid in income taxes $ 2,991 1,205 387
See accompanying notes to consolidated financial statements.
Electromagnetic Sciences, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1994, 1993 and 1992
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include the accounts of
Electromagnetic Sciences, Inc., its wholly-owned subsidiary, EMS
Technologies, Inc., and its majority-owned subsidiaries, LXE Inc. and 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:
** 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
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 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.
** 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.
** Marketable Securities **
Marketable securities consist of municipal general obligation bonds and
reverse repurchase agreements with a bank, with U.S. Government securities
as the underlying assets; these marketable securities are classified as
current or noncurrent depending upon their respective maturity dates.
Marketable securities are carried at cost, which approximates market,
because the Company intends to hold them until maturity. Securities
underlying the reverse repurchase agreements are book entry securities held
in trust at a bank. At December 31, 1994, all reverse repurchase
agreements matured within three days. For purposes of the consolidated
statements of cash flows, the Company considers all highly liquid debt
instruments with original maturities of three months or less to be cash
equivalents.
** Property, Plant and Equipment **
Property, plant and equipment are stated at cost. Depreciation is provided
primarily on the straight-line method over the estimated useful lives of
the respective assets. Leasehold improvements are amortized over the
shorter of their estimated useful lives or the terms of the respective
leases.
** 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 **
Earnings per common and common equivalent share are based on the weighted
average number of shares outstanding and equivalent shares derived from
dilutive stock options. For purposes of calculating primary earnings per
share, the Company's proportionate share of the net earnings of LXE Inc.
has been adjusted to reflect the dilutive effect of LXE's outstanding stock
options. Fully diluted earnings per share are not significantly different
from the primary earnings per share presented.
** Goodwill **
Goodwill represents the excess of purchase price over fair value of net
assets acquired and is amortized on a straight-line basis over fifteen
years.
** 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. CAL
Corporation conducts a material portion of the Company's overall business
operations, and the effects of translating CAL's Canadian currency
financial statements are accumulated and reported in a separate component
of stockholder's equity. LXE Inc.'s wholly owned European subsidiaries
are sales and marketing organizations with no other material business
operations, and the effects of translating the foreign currency financial
statements of these subsidiaries are recognized in the consolidated
statement of earnings.
** Common Stock Issued by LXE Inc. **
In the event that LXE issues shares of common stock, the Company has
elected to recognize in the consolidated statements of earnings the gain or
loss resulting from the Company's share of the change in LXE's book value.
The Company will also provide for deferred income taxes on any such gain or
loss.
(2) ACQUISITION OF CAL CORPORATION
In January 1993, the Company acquired an approximately 74% interest in CAL
Corporation, a privately-held company headquartered in Ottawa, Canada, that
provides a range of electronic systems for space programs and satellite-
based communications networks. The cost of the Company's equity position
was approximately $1.7 million in cash, of which $1.2 million was invested
directly in CAL; the Company also made a $2.0 million intercompany loan to
CAL. The Company agreed to provide CAL with additional financing through
intercompany loans. If CAL's earnings exceed certain target levels over
the four years ended December 31, 1996, the Company is obligated to offer
to purchase all outstanding CAL shares held by other shareholders, at a
formula price based on actual earnings during the four-year period;
regardless of whether such target earnings are achieved, the Company will
have, subject to certain conditions, the right to acquire approximately 69%
of the remaining shares at a formula price that generally would be higher
than the price at which the Company is obligated to offer to purchase all
remaining shares. The acquisition was accounted for as a purchase
transaction and, accordingly, the assets and liabilities were recorded at
their estimated fair value at the date of acquisition. The operations of
CAL have been included in the consolidated statement of earnings since the
acquisition date.
The following pro-forma (unaudited) combined results for 1992 are as if the
acquisition had occurred on January 1 of that year (in thousands except
loss per share):
Net sales $ 95,769
Net loss (986)
Net loss per share $ (.17)
The pro-forma results, which are based upon certain assumptions and
estimates which the Company believes are reasonable, are not purported to
be indicative of results that actually would have occurred had the
acquisition occurred on January 1, 1992; further, these results are not
intended to be a projection of future results.
(3) TRADE ACCOUNTS RECEIVABLE
Trade accounts receivable include the following (in thousands):
December 31
1994 1993
Amounts billed under contracts $ 27,221 21,123
Unbilled revenues (substantially all to
be billed during the following twelve
months) 11,112 10,044
Deferred revenue (1,333) (1,610)
Allowance for doubtful accounts (645) (320)
Trade accounts receivable, net $ 36,355 29,237
<PAGE>
4) LONG-TERM DEBT
The following is a summary of long-term debt (in thousands):
December 31
1994 1993
Industrial development revenue bond secured by
land, building and equipment, due in varying
monthly installments to March 1997, including
interest at a rate of 79% of a prime rate not
to exceed 13.5% and not less than 7% (7% at
the end of 1994 and 1993) $ 594 811
Revolving credit loan secured by land and
building, maturing in January 1997, interest
payable monthly at a prime rate (8.5% at the
end of 1994 and 6% at the end of 1993) 3,770 3,770
Line of credit loan secured by the assets
of CAL Corporation, maturing July 1995,
interest payable at a prime rate plus 1.0%
(8.0% at the end of 1994 and 6% at the end
of 1993) 3,392 3,296
Term loan secured by certain fixed assets
of CAL Corporation, due in installments to
March 1997, interest payable at a prime rate
plus 2.5% (10.5% at the end of 1994 and 8%
at the end of 1993) 565 759
Term loan secured by certain fixed assets of
CAL Corporation, due in installments to April
1997, interest payable at a prime rate plus
1.5% (9.5% at the end of 1994 and 7% at the
end of 1993) 101 142
Total long-term debt 8,422 8,778
Less current installments of long-term debt 3,830 3,718
Long-term debt,
excluding current installments $ 4,592 5,060
At the December 31, 1994 level of borrowing under the revolving credit
loan, no repayments of principal are required until 1997. The approximate
principal maturities of long-term debt for each of the next three years are
$3,830,000 in 1995, $467,000 in 1996 and $4,125,000 in 1997.
<PAGE>
At December 31, 1994, the Company had available four immediate sources of
credit: $4.4 million remaining under a revolving credit mortgage loan
agreement, an unused $5.0 million line of credit, a separate unused $5.0
million line of credit for LXE Inc., and a separate line of credit for CAL
Corporation with approximately $900,000 remaining available, subject to
satisfying certain covenants.
(5) STOCK OPTION 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 twenty years after the
date of grant. Some nonqualified options are contingent upon continued
employment or noncompetition after retirement. Under all plans at December
31, 1994, options for a total of 752,000 shares of stock were exercisable,
and options for a total of 225,000 shares were available for future grants.
Following is a summary of activity in all of the Company's stock option
plans for the two years ended December 31, 1994 and 1993 (in thousands,
except price per share data):
Option Total
price option
Shares per share price
Options outstanding at
December 31, 1992 953 $ 3.63-17.00 $ 6,315
Granted 138 5.88- 6.38 881
Canceled or expired (59) 6.38-17.00 (424)
Exercised (17) 3.63- 6.63 (80)
Options outstanding at
December 31, 1993 1,015 3.63-12.62 6,692
Granted 108 8.25- 9.00 893
Canceled or expired (15) 6.38-12.62 (178)
Exercised (106) 3.63- 8.00 (574)
Options outstanding at
December 31, 1994 1,002 $ 3.63-11.50 $ 6,833
LXE Inc. maintains a separate stock incentive plan which, as amended,
provides 1,000,000 shares of LXE common stock for grants of restricted
shares or options to directors and employees. At December 31, 1994,
options for 579,000 shares of LXE stock were outstanding at prices per
share ranging from $3.77 to $18.25. These options become exercisable at
various dates through 2001, with 453,000 exercisable at December 31, 1994.
Certain options are subject to possible acceleration to earlier exercise
dates based on achievement of criteria expected to be specified in the
future. All outstanding LXE options expire by 2002.
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
outside 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 tradeable and do not have dilutive
effect on earnings per share. In addition to the common shares issuable
under the Shareholder Rights Plan, the Board of Directors may issue up to
10,000,000 shares of preferred stock, with such preferences, limitations
and relative rights as may be determined by the Board.
(6) INCOME TAXES
Total income tax expense (benefit) provided for in the Company's
consolidated financial statements consists of the following (in thousands):
1994 1993 1992
Consolidated income tax expense $ 3,712 896 1,038
Income tax benefit resulting from
exercise Of stock options credited
to stockholders' equity and
minority interest (479) (14) (696)
Total $ 3,233 882 342
The components of income tax expense were (in thousands):
1994 1993 1992
Current:
Federal $ 3,312 1,058 829
State 626 188 194
Foreign 212 - -
Total current expense 4,150 1,246 1,023
Deferred:
Federal (335) (44) 201
State (70) (6) (186)
Foreign (33) (300) -
Total deferred (benefit) expense (438) (350) 15
Total income tax expense $ 3,712 896 1,038
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):
1994 1993 1992
Computed "expected" income
tax expense $ 3,080 807 954
Tax credits from
research activities (150) (112) (98)
State income taxes, net of
federal income tax benefit 330 119 5
Higher foreign tax rates 28 (121) -
Change in deferred tax asset
valuation allowance 69 (34) -
Amortization of goodwill 143 131 -
Other 212 106 177
Income tax expense $ 3,712 896 1,038
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 1994 and 1993 are presented below (in thousands):
1994 1993
Deferred tax assets:
Accounts receivable $ 442 55
Inventories 251 208
Accrued compensation costs 427 385
Accrued pension costs - 9
Accrued restructuring charge - 78
Foreign research expense and
tax credit carryforward 4,777 3,565
Foreign net operating loss
carryforward 241 377
Foreign note receivable 319 337
Other 13 424
Total gross deferred tax assets 6,470 5,438
Valuation allowance (5,328) (4,359)
Net deferred tax assets 1,142 1,079
Deferred tax liabilities:
Property, plant and equipment 1,802 2,177
Gain from issuance of LXE stock 2,229 2,229
Total gross deferred tax liabilities 4,031 4,406
Net deferred tax liability $ 2,889 3,327
The valuation allowance for deferred tax assets at December 31, 1994
included $5,280,000 for tax benefits relating to the operations of CAL
Corporation; any of these benefits that are subsequently recognized will be
first allocated to goodwill.
Earnings before income taxes for U.S. operations were $8,817,000 in 1994
and $3,185,000 in 1993. Foreign operations reported earnings before income
taxes of $243,000 in 1994 and a loss before income taxes of $811,000 in
1993. The Company's deferred tax assets include $241,000 for a cumulative
$562,000 net operating loss by certain foreign operations, which may be
carried forward indefinitely; management believes that these operations
will generate adequate earnings within the next two years to fully realize
this deferred tax asset. CAL Corporation has investment tax credits of
$792,000 available to offset future Canadian taxes; these credits expire
within ten years.
The Company has not recognized a deferred tax liability of approximately
$510,000 for undistributed earnings totaling $9,313,000 of its 73%-owned
domestic subsidiary, LXE Inc., that arose in 1992 and prior years, because
the Company currently does not expect those undistributed earnings to
reverse and become taxable to the Company in the foreseeable future. A
deferred tax liability will be recognized when the Company expects that it
will recover those undistributed earnings in a taxable manner, such as
through receipt of dividends or sale of its investment.
(7) RETIREMENT PLANS
The Company terminated its defined benefit pension plan in 1993 and
established a qualified defined contribution plan. 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 $1,250,000
for 1994 and $1,031,000 for 1993. For the defined benefit pension plan
which was terminated, no cost was incurred in 1993 and $1,100,000 was
incurred in 1992.
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 $300,000 in 1994, $218,000 in 1993 and $166,000 in 1992.
<PAGE>
(8) BUSINESS SEGMENT AND GEOGRAPHIC AREA INFORMATION
Through its EMS Technologies and CAL Corporation subsidiaries, the Company
designs and produces advanced communications and signal-processing
electronics, with an emphasis on satellite programs; products are also
produced for cellular telecommunications, radar, and military surveillance
and counter-measures. Through its LXE Inc. subsidiary, the Company designs
and produces wireless data communications systems for commercial materials
handling operations. Following is a summary of business segment
information (in thousands):
1994 1993 1992
Net sales:
Advanced communications and
signal-processing electronics $ 54,851 53,391 27,421
Wireless data
communications systems 63,142 45,653 44,401
Total $ 117,993 99,044 71,822
Operating income:
Advanced communications and
signal-processing electronics $ 2,490 2,038 (3,024)
Wireless data
communications systems 6,412 560 5,135
Total $ 8,902 2,598 2,111
Identifiable assets:
Advanced communications and
signal-processing electronics $ 51,010 49,996 35,855
Wireless data
communications systems 45,741 37,865 37,115
Total $ 96,751 87,861 72,970
Capital expenditures:
Advanced communications and
signal-processing electronics $ 2,845 2,690 878
Wireless data
communications systems 2,728 2,611 2,659
Total $ 5,573 5,301 3,537
Depreciation and amortization:
Advanced communications and
signal-processing electronics $ 3,478 3,662 3,350
Wireless data
communications systems 2,468 2,119 1,758
Total $ 5,946 5,781 5,108
In 1993, the Company established operations outside the U.S. Following is
a summary of geographic area information, as measured by the locale of
revenue-producing operations, for the years ended December 31, 1994 and
1993 (in thousands):
1994 1993
Net sales:
United States $ 95,715 76,727
Canada 15,059 21,044
Europe 7,219 1,273
Total $ 117,993 99,044
Operating income:
United States $ 8,458 2,315
Canada (19) 474
Europe 463 (191)
Total $ 8,902 2,598
Identifiable assets:
United States $ 81,780 76,027
Canada 10,491 9,877
Europe 4,480 1,957
Total $ 96,751 87,861
Export sales from the U.S. to unaffiliated customers were approximately
$18.1 million, $12.7 million and $9.9 million in 1994, 1993 and 1992,
respectively. Exports to the U.S. by the Company's Canadian subsidiary to
non-affiliated U.S. customers were approximately $1.1 million in 1994 and
$1.8 million in 1993.
(9) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Following is a summary of interim financial information for the years ended
December 31, 1994 and 1993 (in thousands, except per share data):
*********** 1994 Quarters ended **************
March 31 June 30 September 30 December 31
Net sales $ 26,240 27,389 31,076 33,288
Operating income 1,574 1,884 2,505 2,939
Net earnings 665 751 1,145 1,702
Net earnings per share .09 .10 .16 .23
*********** 1993 Quarters ended **************
March 31 June 30 September 30 December 31
Net sales $ 24,226 25,883 20,956 27,979
Operating income (loss) 1,072 1,419 (1,781) 1,888
Net earnings (loss) 500 704 (767) 954
Net earnings
(loss) per share .07 .10 (.11) .14
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Electromagnetic Sciences, Inc.:
We have audited the accompanying consolidated balance sheets of
Electromagnetic Sciences, Inc. and subsidiaries as of December 31, 1994 and
1993, and the related consolidated statements of earnings, stockholders'
equity and cash flows for each of the years in the three-year period ended
December 31, 1994. 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
Electromagnetic Sciences, Inc. and subsidiaries as of December 31, 1994 and
1993, and the results of their operations and their cash flows for each of
the years in the three-year period ended December 31, 1994, in conformity
with generally accepted accounting principles.
KPMG Peat Marwick LLP
Atlanta, Georgia
January 27, 1995
<PAGE>
Selected Financial Data
(In thousands, except earnings (loss) per share)
******* Years ended December 31 ********
1994 1993 1992 1991 1990
Net sales $117,993 99,044 71,822 75,340 65,342
Cost of sales 73,375 61,771 44,407 46,506 46,372
Selling, general and
administrative expenses 27,589 26,522 17,786 15,789 12,320
Research and development
expenses 8,127 8,153 7,518 6,609 4,531
Restructuring charge - - - - 3,400
Operating income (loss) 8,902 2,598 2,111 6,436 (1,281)
Gain on initial public
offering of LXE common stock - - - 5,867 -
Interest and other income 640 210 776 831 399
Interest expense (482) (434) (81) (164) (195)
Earnings (loss) before
income taxes and
minority interest 9,060 2,374 2,806 12,970 (1,077)
Income tax expense (benefit) 3,712 896 1,038 4,909 (408)
LXE minority interest 1,085 87 844 605 -
Earnings (loss) from
continuing operations
before cumulative effect
of change in accounting
principle 4,263 1,391 924 7,456 (669)
Discontinued operations:
Loss from Gamma-f operations
(net of taxes) - - - (75) (210)
Loss on disposal of Gamma-f
(net of taxes) - - - (1,350) -
Loss from discontinued
operations - - - (1,425) (210)
Earnings (loss) before
cumulative effect of
change in accounting
principle 4,263 1,391 924 6,031 (879)
Cumulative effect at January 1,
1991 of change in accounting
for income taxes - - - 370 -
Net earnings (loss) $ 4,263 1,391 924 6,401 (879)
Earnings (loss) per common
and common equivalent shares:
From continuing operations $ .58 .20 .10 .98 (.09)
From discontinued operations - - - (.19) (.03)
From accounting change - - - .05 -
Net earnings (loss) per
common and common
equivalent shares .58 .20 .10 .84 (.12)
Weighted average number of
common and common equivalent
shares 7,043 6,856 7,331 7,605 7,069
<PAGE>
*********** As of December 31 ***********
1994 1993 1992 1991 1990
Working capital $ 39,366 33,104 32,890 33,860 30,502
Total assets 96,751 87,861 72,970 75,147 68,157
Long-term debt (excluding
current installments) 4,592 5,060 927 1,104 8,277
Stockholders' equity 56,431 51,548 50,079 52,063 44,093
No cash dividends have been declared or paid during any of the periods
presented.
<PAGE>
Management's Discussion and Analysis of Results of Operations
and Financial Condition
RESULTS OF OPERATIONS
The Company operates in two business segments. One segments designs and
produces advanced communications and signal processing electronics, with
emphasis on satellite programs. This segment comprises two subsidiaries:
EMS Technologies, Inc. And CAL Corporation. Net sales of advanced
communications and signal processing electronics were $54.9 million in
1994, $53.4 million in 1993 and $27.4 million in 1992. The other segment
of the business relates to the LXE Inc. Subsidiary, which provides wireless
data communications systems for commercial materials handling markets. Net
sales of LXE systems and services increased to $63.1 million in 1994 from
$45.6 million in 1993 and $44.4 million in 1992.
Consolidated net sales increased in 1994 from 1993 mainly because of LXE's
revenue growth from European sales subsidiaries and U.S. based third-party
distributors. EMS Technologies also achieved a substantial sales increase
due to revenue recognized in space communications programs and other core
applications; this increase was mostly offset by a decline in CAL's 1994
revenues related to the disposal of CAL's defense electronics business
group in late 1993.
Consolidated net sales increased in 1993 from 1992 primarily due to the
Company's acquisition in January 1993 of its 74% interest in CAL, which had
1993 net sales of $21 million; however, CAL's financial results did not
materially affect consolidated net earnings. Sales for 1993 also benefited
from higher revenues at EMS Technologies, particularly from space markets.
Cost of sales has remained at 62% of consolidated net sales for each of the
past three years, although variations within business segments have
occurred. During the period from 1992 through 1994, a more profitable
contract mix at EMS and the acquisition of CAL (with its relatively lower
cost-of-sales percentage) have offset the emergence of a more competitive
pricing environment for LXE and higher costs associated with the initial
production of LXE's current generation of products.
Selling, general and administrative expenses as a percentage of net sales
decreased to 23% in 1994 from 27% in 1993 and 25% in 1992. The decrease
from 1993 to 1994 resulted mainly from the benefit of a higher sales base
to absorb fixed costs. A significant portion of these fixed costs relate
to the Company's sales and marketing organization (including LXE's European
sales subsidiaries), which had been expanded during 1993 and contributed to
the higher expense percentage in 1993 compared with 1992.
Research and development expenses represent the cost of the Company's
internally funded efforts. For the EMS Technologies and CAL subsidiaries,
most of the research and development efforts is related to specific
customer orders and is accordingly reported in cost of sales. Late in
1993, LXE substantially completed efforts on its current generation of
products, which caused consolidated research and development expenses to
decrease slightly in 1994 after having increased in 1993.
Interest and other income increased in 1994 compared with 1993 due to
rising interest rates, favorable cash flow and a resulting higher level of
cash available for investment; also contributing to the increase was a
foreign currency translation gain associated with LXE's European
operations. Interest income decreased in 1993 compared with 1992 due to
less cash available for investment and lower interest rates. Interest
expense increased in 1993 due to long-term debt owed by CAL, which was
acquired in 1993.
The effective income tax rate was 41% in 1994, 38% in 1993 and 37% in 1992.
The increase in the tax rate related to higher marginal tax rates on
European earnings by LXE and to the reduced effect of tax credits for
research and development.
LIQUIDITY AND CAPITAL RESOURCES
Higher sales and profitability in 1994 helped increase the total of cash,
cash equivalents and marketable securities to $13.5 million at December 31,
1994 compared to $10.4 million at the beginning of the year. The 1994
sales growth also caused an increase in the level of accounts receivable.
The Company made additions to plant and equipment of $5.6 million,
$5.3 million and $3.5 million in 1994, 1993 and 1992, respectively. These
additions were financed mainly by existing cash and cash equivalents and by
cash flows from operating activities. Additions were higher in 1993
compared to 1992 due to expansion of computer capabilities and production
of demo equipment for marketing LXE's current generation of products.
At December 31, 1994, the Company had available four immediate sources of
credit: $4.4 million remaining under a revolving credit mortgage loan
agreement, an unused $5.0 million line of credit, a separate unused
$5.0 million line of credit for LXE Inc., and a separate line of credit for
CAL Corporation with approximately $900,000 remaining available, subject to
satisfying certain covenants. 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
capital investments plans.
Exhibit 22.1
ELECTROMAGNETIC SCIENCES, INC.
AND SUBSIDIARIES
Subsidiaries of the Registrant
EMS Technologies, Inc.
660 Engineering Drive
P.O. Box 7700
Norcross, Georgia 30091-7700
LXE Inc.
303 Research Drive
P.O. Box 92600
Norcross, Georgia 30092-9600
CAL Corporation
1050 Morrison Drive
Ottawa, Ontario K2H 8K7
CANADA
Exhibit 23.1
ELECTROMAGNETIC SCIENCES, INC.
AND SUBSIDIARIES
Independent Auditors' Consent
The Board of Directors and Stockholders
Electromagnetic Sciences, Inc.:
We consent to incorporation by reference in the Registration
Statements (No. 2-76455, No. 2-78442, No. 2-94049, No. 33-31216,
No. 33-38829, No. 33-41041, No. 33-41042, and No. 33-50528) on
Form S-8 of Electromagnetic Sciences, Inc. of our reports dated
January 27, 1995, relating to the consolidated balance sheets of
Electromagnetic Sciences, Inc. and subsidiaries as of December
31, 1994 and 1993, and the related consolidated statements of
earnings, stockholders' equity, and cash flows and related
schedule for each of the years in the three-year period ended
December 31, 1994, which reports appear in the December 31, 1994
annual report on Form 10-K of Electromagnetic Sciences, Inc.
KPMG Peat Marwick LLP
Atlanta, Georgia
March 30, 1995
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