UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
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-(770) 263-9200
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.10 par value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days: Yes X No .
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or amendment to this Form
10-K: [X]
The aggregate market value of voting stock held by persons other
than directors or executive officers on March 8, 1996, was
$92,170,000, based on a closing price of $12.75 per share. The
basis of this calculation does not constitute a determination by
the registrant that all of its directors and executive officers
are affiliates as defined in Rule 405.
As of March 8, 1996, the number of shares of the registrant's
common stock outstanding was 7,465,646 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information contained in the Company's 1995 Annual Report
to Shareholders and definitive proxy statement for the 1996
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 operations of the Company are conducted through its wholly-owned
subsidiary, EMS Technologies, Inc. ("EMS"), a 74%-owned
subsidiary, CAL Corporation ("CAL"), a Canadian corporation
acquired in 1993, and an 81%-owned subsidiary, LXE Inc. ("LXE").
LXE began as a division of the Company, producing wireless data
communication systems for materials handling markets. In 1991,
LXE completed an initial public offering of its common stock,
which along with subsequent exercises of employee stock options
and the repurchase in February 1996 of 548,000 shares, resulted
in the Company's present ownership percentage.
The Company designs and produces a wide range of advanced
communications and signal processing products with an emphasis on
wireless networks. Antennas, microwave systems, subsystems, and
components are used in space and satellite communications,
cellular telecommunications, radar, surveillance, search and
rescue systems, and military countermeasures. The Company also
produces wireless logistics systems. These systems provide real
time, wireless data and transaction processing, mainly for
materials handling operations. Advanced communications and
signal processing products accounted for 52%, 46% and 54% of
consolidated net sales in 1995, 1994 and 1993, respectively,
while wireless logistics systems accounted for 48%, 54% and 46%
of consolidated sales in the same respective years.
ADVANCED COMMUNICATIONS AND SIGNAL PROCESSING PRODUCTS
The Company's advanced communications and signal processing
products 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 advanced communications and signal processing 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
The Company pro vides 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, and its local user terminal (LUT) determines
the location of marine or aviation beacons that transmit distress
signals to a satellite. CAL also produces aeronautical mobile
terminals (AMT) that provide worldwide voice/data
communications capabilities to private aircraft via a digital
satellite link; 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
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.
1995 CURRENT DEVELOPMENTS
Space electronics and satellite communications (SATCOM)
currently represent over 50% of total revenue generated from
advanced commu nications and signal processing products.
Significant programs in 1995 continued to be hardware
supplied for Milstar, a satellite communications project of
the combined armed services, and Space Station. In
addition, the Company is providing an array of hardware
for a global satellite communications system.
During 1995 CAL received several large orders for its SARSAT
technology. In its SATCOM business area, CAL entered into
an exclusive arrangement with American Mobile Satellite
Corporation (AMSC)to provide the aeronautical telephone
units for corporate, general aviation, and commercial
aircraft, which will provide digital satellite communications
with aircraft throughout North America. In addition, CAL will
manufacture a secure communications interface with AMSC's MSAT
satellite communications system.
Government electronics continued to provide profitable opportunities
for the Company in 1995. Substantial sales were generated from
radar related programs, including the JSTARS surveillance system
for real-time tracking of movement of ground forces, and the Army's
Advanced tactical Radar Jammer Program (ATRJ), which is designed to
protect helicopters. Substantial revenues were also generated from
a contract to provide Identify Friend or Foe (IFF)
technology for F-16 fighter planes.
Electronics developed for a number of defense industry programs
are being adapted for commercial uses. The Company expects
this trend to continue as commercial markets demand
higher data transmission rates for more sophisticated
communications of mobile users. For example,
during 1995, the Company successfully completed development
of a Ku-band phased array used to communicate via satellite
with an unmanned aerial vehicle developed by the military. A
variant of this antenna is being proposed for direct TV
transmission to commercial aircraft. Also in 1995, the Company
teamed with Technology Systems Intnational to supply microwave
hardware and antennas for its facility management systems which
will initially be marketed for use in prisons to facilitate
monitoring the activities of inmates, among other uses. It
is expected that eventually this same technology will have many
other applications from hospitals to amusement parks.
Sales of cellular and PCS antenna products increased in the
second half of 1995, to triple the 1994 sales level. In
addition, the Company announced several long-term agreements
to sell its cellular base station antennas in selected
markets of three major providers of cellular telecommunications
services - Nextel, AT&T Wireless, and a large company serving the
Midwest. The Company continued to enhance its product line with
the release late in the year of a new generation of dual polarized
micro-strip antennas, trade named DualPol, which combines the equivalent
of the three antennas now required for adequate coverage in
a conventional cellular installation into one compact enclosure.
These antennas significantly lower installation costs, are less visually
obtrusive, and are much more flexible in choice of installation sites
when compared to current hardware. The Company expects this
product to be very attractive to the emerging PCS antennas market.
In addition to base station antennas, EMS Wireless is working
with the Company's broad base of technology in wireless
data communications to develop wide area multimedia networks,
wireless local loop networks, and specialized wireless systems for
high-value inventory tracking.
WIRELESS LOGISTICS SYSTEMS
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. They have been installed at more than
3,500 sites worldwide, including the facilities of many Fortune
500 companies and some of the world's largest materials handling
installations.
Wireless logistics systems, which generally incorporate bar-code scanning
capabilities, are compatible with commonly used customer-owned
computers and can be configured for a variety of applications. A
typical system consists of terminals that incorporate radio
transmitters and receivers, a base station that communicates with
these terminals, a controller that provides an interface between
the base station and host computer, and software that manages and
facilitates the communications process.
TERMINALS
The Company offers several types of terminals, all of which
utilize radio frequency technology. 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 opererate 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. The Company's
controllers provide transparent connectivity to all widely
accepted computer architectures without modifications of
existing applications software and network structure.
Controllers also manage complex transmission traffic with
sophisticated programming algorithms.
OTHER PRODUCTS
In addition to the basic system hardware, the Company 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.
1995 DEVELOPMENTS
During 1995, the Company placed significant emphasis on
developing its capabilities to support DOS, Windows, and
client server networks. Two new DOS terminals with a 2.4 Ghz
backbone were introduced in the second half of the year.
These will be followed in the second half of 1996 with more
DOS/Windows based terminals. In addition, the Company added
an Access Point (wireless local bridge) to its product line
which allows both mobile industrial computers and standard
portable PC's to run a network designed for hardwired PC's. The
Company's mainstream 6200 product line introduced in 1993
continues to be a reliable choice for logistics operations
worldwide. Demand for these products
remains strong in Europe and other export markets where
systems have not been as prevalant as in the United States. Sales
to foreign customers were $23 million in 1995 compared with
$18 million in 1994. Major orders during 1995 were received
from 3M, Georgia Pacific, M&M Mars, Mercedes Benz, Nike,
Proctor and Gamble, Seimens and Wal Mart.
In addition to upgrading its traditional wireless logistics
product line, the Company has undertaken significant
development efforts aimed at "moving out of the warehouse"
into new markets by combining its networking expertise with its
rf technology to create indoor high-speed wireless LANs,
and with its cellular and SATCOM technologies for wide-area
communications. For example, in the health care field, the
Company is currently conducting field trials for wireless
electronic medical records retrieval in large hospital systems
where the need to provide data quickly to mobile users is important.
MARKETING
The marketing and sales efforts for advanced communications and
signal processing products are conducted by both internal
marketing staffs and through independent marketing representa-
tives. Wireless logistics systems are marketed, sold and
serviced through an internal staff, 21 regional sales offices (20
in the U.S. and one in Canada), five European sales subsidiaries,
and also through selected value-added retailers and international
distributors. The Company currently has 19 internatinoal
distributors in 40 countries. Several members of the Company's
senior management, engineering and administrative staffs are
significantly involved in sales activities.
During 1995 the Company had one customer in its advanced
communications and signal processing business segment that
accounted for 12.4% of consolidated net sales. During 1995,
approximately 69% of the Company's consolidated net sales were
from commercial and international markets and 31% were for U.S.
Government end-use. For further information concerning sales by
business segments and geographic areas, see Note 9 of
"Notes to Consolidated Financial Statements" included in Item 8
of this Report.
BACKLOG
The consolidated orders backlog at December 31, 1995 was $96.1
million, including $74.0 million in orders for advanced
communications and signal-processing products, and $22.1 million
for wireless logistics systems. These totals compare with a
consolidated orders backlog one year earlier of $75.0 million,
comprising $51.3 million for advanced communications and signal-
processing products, and $23.7 million for wireless logistics
systems. A significant portion of the 1995 backlog is expected
to be realized as sales in 1996.
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 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 logistics
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 in the Company's wireless logistics
business segment 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.
Principal customers for wireless logistics systems are medium and
large businesses that use data communications systems in complex
applications where the performance and quality of products and
services are believed to be more a important purchase criteria than
price , however, pricing is also an increasingly important
competitive factor.
RESEARCH AND DEVELOPMENT
The Company conducts a major portion of its research and
development 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 was $1.8 million in
1995, reflecting increased efforts to enhance cellular and PCS
antennas and develop other mobile communications technologies,
and exceeded $1.0 million in both 1994 and 1993. 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, a new generation of RF infrastructure
components, and terminals that support DOS, Windows and
client/server networks. In 1995, 1994 and 1993, the Company
invested a total of $10.4 million, $8.1 million and $8.2 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, 1995, the Company and its subsidiaries
employed a total of approximately 1,100 persons. Over 75% of the
Company's employees are directly involved in engineering or
manufacturing activities.
EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning the executive officers of the Company is
set forth below:
Thomas E. Sharon, age 50, 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 is the Chief Executive Officer of LXE
Inc.
Don T. Scartz, age 53, has served as Senior Vice President and
Chief Financial Officer of the Company since 1995; he has also
served as Treasurer since 1981, and as Vice President-Finance of
the Company from 1981 to 1995, and as Secretary from 1982 to
1991. He joined the Company as Controller in 1978. He also
serves as the Chief Financial Officer of each of the Company's
operating subsidiaries. He became a director of the Company in
1995.
William S. Jacobs, age 50, became General Counsel 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 55, 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 40, has served since July 1994 as President
of EMS Technologies, Inc. He joined the Company as an engineer
in September 1980.
John J. Farrell, age 44, joined LXE as President and Chief
Operating Officer in May 1995. Prior to joining LXE, he had been
Senior Vice-President and Chief Operating Officer of Oki Telecom,
a world-wide supplier of cellular telephones and base stations,
since 1993. During the three years prior to 1993, he directed
Oki's marketing and sales efforts.
ITEM 2. Properties.
The Company's Georgia operations, EMS and LXE, are conducted in
four buildings located in Technology Park, Norcross, Georgia, a
suburb of Atlanta. EMS is located in a company-owned 140,000
square foot building on 13.5 acres. It also rents 16,000 square
feet in another building under a lease which expires in 2000.
LXE is located primarily in a 110,000 square foot building which
it owns on 7.6 acres. In addition, LXE rents 36,000 square feet
in a fourth building under a lease which expires in February
1998, but which may be renewed at the Company's option for two
additional years. LXE currently rents 20,000 square feet of this
space to EMS.
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.
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 8,
1996 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:
1995 Price Range 1994 Price Range
High Low High Low
First Quarter $12-1/8 10 9-3/8 7-3/4
Second Quarter 15-3/8 10 9-1/4 7-7/8
Third Quarter 17-5/8 10-3/8 9-1/8 8
Fourth Quarter 12-1/8 9-1/2 12-1/8 8
The Company has never paid a cash dividend with respect to shares
of its common stock and has retained its earnings to provide cash
for the operation and expansion of its business. Future
dividends, if any, will be determined by the Board of Directors
in light of the circumstances then existing, including the
Company's earnings and financial requirements and general
business conditions.
ITEM 6. Selected Financial Data.
Information required for this item is incorporated herein by reference to
the Selected Financial Data contained in the Company's 1995 Annual Report
to Shareholders, and is included in Exhibit 13.1.
ITEM 7. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Information required for this item is incorporated herein by reference
to the Management's Discussion and Analysis of Results of Operations
and Financial Condition contained in the Company's 1995 Annual Report
to Shareholders, and is included in Exhibit 13.1.
ITEM 8. Financial Statements and Supplementary Data.
Information required for this item is incorporated herein by reference
to the Consolidated Financial Statements and Notes to Consolidated
Financial Statements contained in the Company's 1995 Annual Report
to Shareholders, and is included in Exhibit 13.1.
ITEM 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
Not applicable.
PART III
ITEM 10. Directors and Executive Officers of the Registrant.
The information concerning directors called for by this Item is
contained in the Company's definitive Proxy Statement for its
1996 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 1996 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 1996 Annual Meeting
of Shareholders and is incorporated herein by reference.
ITEM 13. Certain Relationships and Related Transactions.
Information concerning the Company's consulting arrangment with
John E. Pippin, Chairman of the Board, is contained in the
Company's definitive Proxy Statement for its 1996 Annual Meeting
of Shareholders and is incorporated herein by reference.
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 1995 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, 1995, 1994 and 1993.
Consolidated Balance Sheets - December 31, 1995 and 1994.
Consolidated Statements of Stockholders' Equity -
Years ended December 31, 1995, 1994 and 1993.
Consolidated Statements of Cash Flows -
Years ended December 31, 1995, 1994 and 1993.
Notes to Consolidated Financial Statements.
(a)2. Financial Statement Schedules
Page
Independent Auditors' Report 14
I. Condensed Financial Information of
Registrant 15-17
II. Valuation and Qualifying Accounts -
Years ended December 31, 1995, 1994
and 1993 18
All other schedules are omitted as the required information is
inapplicable, or the information is presented in the financial
statements or related notes.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Electromagnetic Sciences, Inc.:
Under date of January 27, 1996, we reported on the consolidated
balance sheets of Electromagnetic Sciences, Inc. and subsidiaries
as of December 31, 1995 and 1994, 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,
1995, as contained in the 1995 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 1995. In connection with our audits of the
aforementioned consolidated financial statements, we also audited
the related consolidated financial statement schedules as listed
in the accompanying index. These financial statement schedules
are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statement schedules based on our audits.
In our opinion, such financial statement schedules, when
considered in relation to the basic consolidated financial
statements taken as a whole, present fairly, in all material
respects, the information set forth therein.
KPMG Peat Marwick LLP
Atlanta, Georgia
January 27, 1996
Schedule I
Electromagnetic Sciences, Inc. And Subsidiaries
Condensed Financial Information of Registrant
(In thousands)
Balance Sheets
December 31
1995 1994
ASSETS
Cash and cash equivalents $ 3,577 4,903
Marketable securities - 400
Prepaid taxes 494 214
Total current assets 4,071 5,517
Land 900 900
Building 8,208 7,652
Accumulated depreciation (1,608) (1,410)
Net land and building 7,500 7,142
Intercompany receivables 15,875 13,203
Investment in subsidiaries 41,210 39,497
Other assets 410 333
Total assets $69,066 65,692
LIABILITIES
Current liabilities $ 1,496 2,227
Long-term debt 3,770 3,770
Deferred income taxes 3,591 3,264
Total liabilities 8,857 9,261
Stockholders' equity
Common stock 700 682
Additional paid-in capital 10,681 9,329
Foreign currency translation
adjustment (17) (115)
Retained earnings 48,845 46,535
Total stockholders' equity 60,209 56,431
Total liabilities and stockholders'
equity $69,066 65,692
Electromagnetic Sciences, Inc. And Subsidiaries
Condensed Financial Information of Registrant
(In thousands)
Statements of Earnings
Years Ended December 31
1995 1994 1993
Equity in earnings of subsidiaries $1,973 3,896 1,145
Intercompany charges and other,
net 701 667 461
Interest expense (157) (27) (66)
Earnings before income
taxes $2,517 4,536 1,540
Income taxes 207 273 149
Net earnings $2,310 4,263 1,391
Electromagnetic Sciences, Inc. And Subsidiaries
Condensed Financial Information of Registrant
(In thousands)
Statements of Cash Flows
Years Ended December 31
1995 1994 1993
Cash flows from operating activities:
Net earnings $ 2,310 4,263 1,391
Adjustment to reconcile net
earnings to cash
used in operating activities:
Equity in earnings of
subsidiaries (1,973) (3,896) (1,145)
Depreciation expense 198 191 192
Increase in intercompany
receivables (2,672) (1,613) (2,244)
Increase (decrease) in deferred
taxes and other 435 (931) 1,819
Cash used in operating
activities (1,702) (1,986) 13
Cash flows from investing activities:
Investment in building (556) - -
Investment in CAL - (191) (1,871)
Proceeds from marketable securities 400 790 1,210
Cash provided by (used in)
Investing activities (156) 599 (661)
Cash flows from financing activities:
Proceeds from long-term debt - - 3,670
Proceeds from exercise of
stock options 532 743 39
Cash provided by financing
activities 532 743 3,709
Net change in cash and cash
equivalents (1,326) (644) 3,061
Beginning cash and cash
equivalents 4,903 5,547 2,486
Ending cash and cash equivalents $ 3,577 4,903 5,547
Schedule II
Electromagnetic Sciences, Inc.
Valuation and Qualifying Accounts
(In thousands)
Years ended December 31,1995, 1994 and 1993
Additions
Balance at charged to Balance
beginning costs and at end
Classification of year expenses Deductions Other of year
Allowance for
Doubtful Accounts:
1993 $ 220 296 (196)(a) - 320
1994 $ 320 325 - - 645
1995 $ 645 390 (315)(a) - 720
Reserve for Deferred
Tax Assets:
1993 $ - - (34) 4,393(b) 4,359
1994 $ 4,359 969 - - 5,328
1995 $ 5,328 833 - - 6,161
(a) In 1993, deductions represented an LXE charge-off of an uncollectible
balance. In 1995, deductions represented a reduction of certain non-U.S.
receivables.
(b) Other additions relate to deferred tax assets established in connection
with the acquisition of CAL Corporation.
(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.
3.2 Bylaws of Electromagnetic Sciences, Inc., as amended through
March 20, 1995 (incorporated by reference to Exhibit 3.2 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1994).
4.1 Electromagnetic Sciences, Inc. Stockholder Rights Plan dated as of
July 3, 1989.
4.2 Agreement with respect to long-term debt pursuant to Item
601(b)(4)(iii)(A).
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 Amendment, 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 (incorporated by reference to Exhibit 10.3 to the
Company's annual Report on Form 10-K for the year ended December 31,
1994).
10.4 Separation Agreement between LXE Inc. and Malcolm M. Bibby,
effective December 13, 1994 (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 (incorporated by reference to Exhibit
10.5 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1994).
10.6 1981 Incentive Stock Option Plan, as amended and restated
February 6, 1987, and further amended through March 23, 1989.
10.7 Form of split-dollar life insurance agreement between the Company
and certain of its officers (incorporated by reference to
Exhibit 10.4 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 executive officer
(incorporated by reference to Exhibit 10.5 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.
10.10 Electromagnetic Sciences, Inc. 1986 Non-Qualified Stock Option
Plan, as amended through July 31, 1992.
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 1, 1991 and further amended March 6, 1992 (incorporated by
reference to Exhibit 19.2 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,
1993 and 1995 to certain executive officers under the
Electromagnetic Sciences, Inc. 1992 Stock Incentive Plan
(incorporated by reference to Exhibit 19.3 to the Company's Report
on Form 10-Q for the quarter ended June 30, 1992).
10.14 Form of Stock Option Agreement dated May 15, 1995, evidencing
option granted to John J. Farrell, Jr. under the 1992 Stock
Incentive Plan.
10.15 Form of Stock Option Agreement evidencing options granted
automatically under the 1992 Stock Incentive Plan to newly-elected
non-employee members of the Board of Directors.
10.16 Form of Stock Option Agreement evidencing option granted January 27,
1995, to John E. Pippin.
10.17 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
Company's Annual Report on Form 10-K for the year ended December 31,
1990).
10.18 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 Report on Form 10-Q of LXE Inc. for the quarter ended
June 30, 1991).
10.19 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
Report on Form 10-Q of LXE Inc. for the quarter ended June 30,
1991).
10.20 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).
10.21 Form of Stock Option Agreement dated May 15, 1995, evidencing
options granted to John J. Farrell, Jr. under the LXE Inc. 1989
Stock Incentive Plan (incorporated by reference to Exhibit 10.6 to
the LXE Inc. Annual Report on Form 10-K for the year ended December
31, 1995).
10.22 Form of Restricted Stock Award Restriction Agreement governing
awards of restricted stock made to the Company's executive officers
effective January 27, 1995 (incorporated by reference to Exhibit
10.19 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1994).
10.23 Forms of Amendments dated April 21, 1995 and January 26, 1996, to
Restricted Stock Award Restriction Agreements effective January 27,
1995.
10.24 Restricted Stock Award Restriction Agreement dated May 15, 1995,
between the company and John J. Farrell, Jr.
10.25 Form of Indemnification Agreement between the Company and its
directors (incorporated by reference to Exhibit 19.5 to the
Company's Report on Form 10-Q for the quarter ended June 30, 1992).
10.26 Form of Indemnification Agreement between the Company and its Vice
President 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).
10.27 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).
10.28 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 19.3 to the Report on
Form 10-Q of LXE Inc. for the quarter ended June 30, 1992).
10.29 Letters dated April 17, 1995 and April 19, 1995 between LXE Inc. and
John J. Farrell, Jr. concerning the terms of his employment as
President of LXE Inc. (incorporated by reference to Exhibit 10.1 to
Report on Form 10-Q of LXE Inc. for the quarter ended June 30,
1995).
11.1 Statement re: Computation of Per Share Earnings.
13.1 Those portions of the Company's 1995 Annual Report to Shareholders
incorporated by reference into this Annual Report on Form 10-K.
22.1 Subsidiaries of the registrant.
23.1 Independent Auditors' Consent to incorporation by reference in
Registration Statements Nos. 2-76455, 2-78442, 2-94049, 33-31216,
33-38829, 33-41041, 33-41042 and 33-50528, each 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, 1995.
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/ Thomas E. Sharon Date: 3/28/96
President and Chief Executive Officer
Pursuant to the requirements of the Securities and Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated.
By: /s/ Thomas E. Sharon Date: 3/28/96
President and Chief Executive
Officer and Director
(Principal Executive Officer)
By: /s/ John E. Pippin Date: 3/28/96
John E. Pippin, Chairman of the Board
By: /s/ Don T. Scartz Date: 3/28/96
Senior Vice President and Chief
Financial Officer, Treasurer and
Director
(Principal Financial and Accounting Officer)
By: /s/ Anthony J. Iorillo Date: 3/28/96
Director
By: /s/ Jerry H. Lassiter Date: 3/28/96
Director
By: /s/ John H. Levergood Date: 3/28/96
Director
By: /s/ John B. Mowell Date: 3/28/96
Director
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
1995 1994 1993
Common equivalent shares:
Common stock - weighted average
shares outstanding 6,929 6,766 6,716
Dilutive effect of outstanding
common stock options (as determined
by the treasury stock method using
the average market price for the
period) 232 277 140
Total common and common equivalent
shares 7,161 7,043 6,856
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 outstand-
ing stock options. Following is a
summary of net earnings applicable to
earnings per common and common equiva-
lent share:
Net earnings excluding LXE Inc. $2,431 1,226 1,142
Adjusted proportionate share of
net earnings (loss) of LXE Inc. (121) 2,841 233
Total net earnings applicable to
earnings per common and common
equivalent share $2,310 4,067 1,375
Net earnings per common and
common equivalent share $ .32 .58 .20
Exhibit 3.1
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
ELECTROMAGNETIC SCIENCES, INC.
A GEORGIA CORPORATION
ARTICLE ONE
NAME
The name of the corporation is Electromagnetic Sciences,
Inc.
ARTICLE TWO
CAPITALIZATION
The corporation shall have the authority, exercisable by its
Board of Directors, to issue up to 75,000,000 shares of Common
Stock, $.10 par value per share, and 10,000,000 shares of
Preferred Stock, $1.00 par value per share, which shall be
established and designated from time to time by the Board of
Directors in such series and with such preferences, limitations,
and relative rights as may be determined by the Board of
Directors. The holders of the outstanding shares of a class of
stock shall not be entitled to vote as a separate class upon a
proposed amendment to these articles of incorporation that is
solely for the reason of increasing or decreasing the aggregate
number of authorized shares of such class, and the number of such
shares may be increased or decreased without such a vote, subject
to such votes as shall otherwise be required by applicable law
for the amendment of these articles of incorporation.
ARTICLE THREE
INITIAL REGISTERED OFFICE AND AGENT
The initial registered office of the corporation shall be at
2 Peachtree Street, Atlanta, Georgia 30383 (Fulton County). The
initial registered agent of the corporation at such address shall
be CT Corporation System.
ARTICLE FOUR
INCORPORATOR
The name and address of the incorporator is as follows:
Stephen C. Whilhoit
20 Technology Parkway
Suite 160
Norcross, Georgia 30092
ARTICLE FIVE
MAILING ADDRESS
The mailing address of the initial principal office of the
corporation is as follows:
660 Engineering Drive
Technology Park/Atlanta
Norcross, Georgia 30092
ARTICLE SIX
LIMITATION ON DIRECTOR LIABILITY
No director of the corporation shall be personally liable to
the corporation or its shareholders for monetary damages for
breach of the duty of care or any other duty as a director,
except that such liability shall not be eliminated for:
(a) any appropriation, in violation of the director's
duties, of any business opportunity of the corporation;
(b) acts or omissions which involve intentional misconduct
or a knowing violation of law;
(c) the types of liability set forth in Section 14-2-831 (or
any successor or redesignation to this provision) of the Georgia
Business Corporation Code (the "Code"); or
(d) any transaction from which the director received an
improper personal benefit.
If at any time the Code is amended to authorize the further
limitation or elimination of the liability of a director, then
the liability of each director of the corporation shall be
limited or eliminated to the fullest extent permitted by the
Code, as amended, without further action by the shareholders,
unless the provisions of the Code, as amended, require further
action by the shareholders.
Any repeal or modification of the provisions of this Article Six
by the shareholders of this corporation shall not adversely
affect any right of a director or officer of the corporation
existing at the time of such repeal or modification.
Exhibit 4.1
ELECTROMAGNETIC SCIENCES, INC.
Stockholder Rights Plan
Dated as of JULY 3, 1989
Table of Contents
Section Page
1 Certain Definitions 1
2 Authority to Appoint Rights Agent 5
3 Issue of Rights Certificates 6
4 Form of Rights Certificates 8
5 Registration 9
6 Transfer, Split Up, Combination and
Exchange of Rights Certificates;
Mutilated, Destroyed, Lost or
Stolen Rights Certificates 10
7 Exercise of Rights; Purchase
Price; Expiration Date of Rights 11
8 Cancellation and Destruction of
Rights Certificates 13
9 Reservation and Availability of
Capital Stock 13
10 Record Date for Securities Issued
Upon Exercise 15
11 Adjustment of Purchase Price,
Number and Kind of Shares or
Number of Rights 16
12 Certificate of Adjusted Purchase
Price or Number of Shares 26
13 Consolidation, Merger or Sale
or Transfer of Assets or Earning
Power 27
14 Fractional Rights and Fractional
Shares 30
15 Rights of Action 31
16 Agreement of Rights Holders 31
17 Rights Certificate Holder Not Deemed
a Stockholder 32
18 Indemnification of Corporate Officers 32
19 Issuance of New Rights Certificates 33
20 Redemption and Termination 33
21 Notice of Certain Events 34
22 Notices 35
23 Supplements and Amendment; Substituted
Plan 36
24 Successors 37
25 Determinations and Actions
by the Board of Directors, etc. 37
26 Benefits of this Plan 37
27 Severability 37
28 Governing Law 38
29 Descriptive Headings 38
Exhibit A -- Form of Rights Certificate
Exhibit B -- Form of Summary of Rights
<PAGE>
STOCKHOLDER RIGHTS PLAN
Section 1. Certain Definitions For purposes of this
Plan, the following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person or group
of Persons acting together, directly or indirectly, through any
contract, arrangement, understanding, relationship or otherwise,
who or which, together with all Affiliates and Associates of such
Person(s), shall be the Beneficial Owner of 20% or more of the
shares of Common Stock then outstanding, but shall not include
(i) the Company, (ii) any Subsidiary of the Company, or (iii) any
employee benefit plan of the Company or any Subsidiary of the
Company, or any Person or entity organized, appointed or
established by the Company acting in accordance with and for or
pursuant to the terms of any such plan.
(b) "Act" shall mean the Securities Act of 1933.
as amended.
(c) "Adjustment Shares" shall have the meaning set
forth in Section ll(a)(ii) hereof.
(d) "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange Act
of 1934, as amended and in effect on the date of this Plan (the
"Exchange Act").
(e) A Person shall be deemed the "Beneficial Owner" of,
and shall be deemed to "beneficially own," any securities:
(i) which such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has the right to
acquire (whether such right is exercisable immediately or only
after the passage of time) pursuant to any agreement, arrangement
or understanding (whether or not in writing) or upon the exercise
of conversion rights, exchange rights, rights, warrants or options,
or otherwise; provided, however, that a Person shall not be deemed
the "Beneficial Owner" of, or to "beneficially own," (A) securities
tendered pursuant to a tender or exchange offer made by such Person
or any of such Person's Affiliates or Associates until such tendered
securities are accepted for purchase or exchange, (B) securities
issuable upon exercise of Rights at any time prior to the occurrence
of a Triggering Event, or (C) securities issuable upon exercise of
Rights from and after the occurrence of a Triggering Event which
Rights were acquired by such Person or any of such Person's Affiliates
or Associates prior to the Distribution Date or pursuant to Section
3(a) or Section 19 hereof (the "Original Rights") or pursuant to Section
11(a)(i) hereof in connection with an adjustment made with respect to any
Original Rights;
(ii) which such Person or any of such person's Affiliates
or Associates, directly or indirectly, has the right to vote or dispose of
or has "beneficial ownership" of (as determined pursuant to Rule 13d-3
of the General Rules and Regulations under the Exchange Act), including
pursuant to any agreement, arrangement or understan ding, whether or
not in writing; provided, however, that a Person shall not be deemed
the "Beneficial Owner" of, or to "beneficially own," any security under
this subparagraph (ii) as a result of an agreement, arrangement or
understanding to vote such security if such agreement, arrangement or
understanding: (A) arises solely from a revocable proxy given in response
to a public proxy or consent solicitation made pursuant to, and in
accordance with, the applicable provisions of the General Rules and
Regulations under the Exchange Act, and (B) is not also then reportable
by such Person on Schedule 13D under the Exchange Act (or any comparable
or successor report): or
(iii) which are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or Associate thereof)
with which such Person (or any of such Person's Affiliates or Associates)
has any agreement, arrangement or understanding (whether or not in writing)
for the purpose of acquiring, holding, voting (except pursuant to a
revocable proxy as described in the provision to subparagraph (ii) of
this paragraph (e)) or disposing of any voting securities of the
Company;
provided, however, that nothing in this paragraph (e) shall cause
a Person engaged in business as an underwriter of securities to
be the "Beneficial Owner" of, or to "beneficially own," any
securities acquired through such Person's participation in good
faith in a firm commitment underwriting until the expiration of
forty days after the date of such acquisition.
(f) "Board" shall mean the Board of Directors of the
Company.
(g) "Business Day" shall mean any day other than a
Saturday, Sunday or a day on which banking institutions in the
State of Georgia are authorized or obligated by law or executive
order to close.
(h) "Close of Business" on any given date shall mean
5:00 P.M. Eastern time on such date; provided, however, that if
such date is not a Business Day it shall mean 5:00 P.M. Eastern
time on the next succeeding Business Day.
(i) "Common Stock" shall mean the common stock, $.10
per share par value, of the Company, except that "Common Stock"
or "common stock" when used with reference to any Person other
than the Company shall mean the capital stock of such Person with
the greatest voting power, or the equity securities or other
equity interest having power to control or direct the management,
of such Person.
(j) "Common Stock Equivalent" shall have the meaning
set forth in Section 11(a))(iii) hereof.
(k) "Company" shall mean Electromagnetic Sciences,
Inc., a Georgia corporation, until a successor corporation shall
have become such or until a Principal Party shall assume, and
thereafter be liable for, all obligations and duties of the
Company hereunder, pursuant to the applicable provisions of this
Plan, and thereafter "Company" shall mean such successor
corporation or Principal Party.
(1) "Current Market Price" shall have the meaning set
forth in Section ll(d) hereof.
(m) "Current Value" shall have the meaning set forth in
Section ll(a)(iii) hereof.
(n) "Disinterested Director" shall mean any member of
the Board, while such Person is a member of the Board, who (i) is
not an Acquiring Person or an Affiliate or Associate of an
Acquiring Person, (ii) was not nominated by or is not in any
other manner representative of an Acquiring Person or of an
Affiliate or Associate of an Acquiring Person, (iii) does not
control and is not controlled by an Acquiring Person or an
Affiliate or Associate of an Acquiring Person, and (iv) does not
have a substantial interest (whether by beneficial ownership of
securities or otherwise) in an Acquiring Person or an Affiliate
or Associate of an Acquiring Person. An interest of less than 5%
shall not be considered "substantial" for purposes of this
definition.
(o) "Distribution Date" shall have the meaning set
forth in Section 3 (a) hereof.
(p) "Equivalent Common Stock" shall have the meaning
set forth in Section ll(b) hereof.
(q) "Exchange Act" shall have the meaning set forth in
Section l(d) hereof.
(r) "Expiration Date" shall have the meaning set forth
in Section 7(a) hereof.
(s) "Fair Value Offer" shall have the meaning set forth
in section ll(a)(ii)(A) hereof.
(t) "Final Expiration Date" shall mean the Close of
Business on April 6, 1999.
(u) "Original Rights" shall have the meaning set forth
in Section l(e)(i) hereof.
(v) "Person" shall mean any individual, firm,
corporation, partnership, unincorporated association, syndicate
or other entity.
(w) "Plan" shall mean this Stockholder Rights Plan as
originally adopted or as it may from time to time be supplemented
or amended pursuant to the applicable provisions hereof.
(x) "Principal Party" shall have the meaning set forth
in Section 13(b) hereof.
(y) "Purchase Price" shall have the meaning set forth
in Section 4(a) hereof.
(z) "Record Date" shall mean July 3, 1989.
(aa) "Redemption Price" shall have the meaning set
forth in Section 20(a).
(bb) "Right" shall mean the right to purchase one share
of Common Stock (subject to adjustment) as provided herein
(cc) "Rights Agent" shall have the meaning set forth in
Section 2 hereof.
(dd) "Rights Certificates" shall have the meaning set
forth in Section 3(a) hereof.
(ee) "Rights Dividend Declaration Date" shall mean July
3, 1989, the date that the Board declared a dividend distribution
of one Right for each outstanding share of Common Stock to
holders of record of Common Stock at the close of business on the
Record Date.
(ff) "Section ll(a)(ii) Event" shall mean any event
described in Section ll(a)(ii) hereof.
(gg) "Section ll(a)(ii) Trigger Date" shall have the
meaning set forth in Section ll(a)(iii) hereof.
(hh) "Section 13 Event" shall mean any event described
in clauses (x), (y) or (z) of Section 13(a) hereof.
(ii) "Spread" shall have the meaning set forth in
Section ll(a)(iii) hereof.
(jj) "Stock Acquisition Date" shall mean the first date
of public announcement (which, for purposes of this definition,
shall include, without limitation, a report filed pursuant to
Section 13(d) under the Exchange Act) by the Company or an
Acquiring Person that an Acquiring Person has become such without
the consent of a majority of the Disinterested Directors.
(kk) "Subsidiary" shall mean, with reference to any
Person, any corporation of which an amount of voting securities
sufficient to elect at least a majority of the directors of such
corporation is beneficially owned, directly or indirectly, by
such Person, or otherwise controlled by such Person.
(ll) "Substitute Consideration" shall have the meaning
set forth in Section ll(a)(iii) hereof.
(mm) "Substitution Period" shall have the meaning set
forth in Section ll(a)(iii) hereof.
(nn) "Summary of Rights" shall have the meaning set
forth in Section 3(b) hereof.
(oo) "Trading Day" shall have the meaning set forth in
Section ll(d) hereof.
(pp) "Triggering Event" shall mean any Section
ll(a)(ii) Event or any Section 13 Event.
Section 2. Authority to Appoint Rights Agent.
The Company may appoint a rights agent (or one or more co-rights agents)
to act as agent for the Company and the holders of
the Rights (who, in accordance with Section 3 hereof, shall prior
to the Distribution Date also be the holders of the Common Stock)
in accordance with the terms and conditions hereof (the "Rights
Agent"), and may amend or supplement this Plan in accordance with
Section 23 hereof in any manner necessary or desirable to induce
such Rights Agent to accept its appointment hereunder.
Section 3. Issue of Rights Certificates.
(a) Until the earliest of (i) the Close of Business on
the tenth day after the Stock Acquisition Date, (ii) the Close of
Business on the tenth day after the date that a tender or
exchange offer by any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the
Company or of any Subsidiary of the Company, or any person or
entity organized, appointed or established by the Company acting
in accordance with and for or pursuant to the terms of any such
plan) is first published or sent or given within the meaning of
Rule 14d-2(a) of the General Rules and Regulations under the
Exchange Act, if upon consummation thereof, such Person would be
the Beneficial Owner of 20% or more of the shares of Common Stock
then outstanding, (iii) the Close of Business on the tenth day
after the occurrence of any of the events described in Section
ll(a)(ii)(B), or (iv) the Close of Business on the tenth day
after the date that an offer to effect any of the transactions
described in Section 13(a) made, encouraged or supported by
Acquiring Person is first announced, published, sent or given
(the earliest of (i), (ii), (iii) and (iv) being herein referred
to as the "Distribution Date"), (x) the Rights will be evidenced
(subject to the provisions of paragraph (b) of this Section 3) by
the certificates for the Common Stock registered in the names of
the holders of the Common Stock (which certificates for Common
Stock shall be deemed also to be certificates for Rights) and not
by separate certificates, and (y) the Rights will be transferable
only in connection with the transfer of the underlying shares of
Common Stock (including a transfer to the Company). As soon as
practicable after the Distribution Date, the Company will send by
first class, insured, postage prepaid mail, to each record holder
of the Common Stock as of the Close of Business on the
Distribution Date, at the address of such holder shown on the
records of the Company, one or more rights certificates, in
substantially the form of Exhibit A hereto (the "Rights
Certificates"), evidencing one Right for each share of Common
Stock so held, subject to adjustment as provided herein. In the
event that an adjustment in the number of Rights per share of
Common Stock has been made pursuant to Section ll(p) hereof, at
the time of distribution of the Rights Certificates, the Company
shall make the necessary and appropriate rounding adjustments (in
accordance with Section 14(a) hereof) so that Rights Certificates
representing only whole numbers of Rights are distributed and
cash is paid in lieu of any fractional Rights. As of and after
the Distribution Date, the Rights will be evidenced solely by
such Rights Certificates.
(b) Upon the request of any record holder of the Common
Stock, the Company will send a copy of a Summary of Rights, in
substantially the form attached hereto as Exhibit B (the "Summary
of Rights"), by first class, postage prepaid mail, to such holder
at the address of such holder shown on the records of the
Company. With respect to certificates for the Common Stock
outstanding as of the Record Date, until the Distribution Date
the Rights will be evidenced by such certificates for the Common
Stock and the registered holders of the Common Stock shall also
be the registered holders of the associated Rights. Until the
earlier of the Distribution Date or the Expiration Date, the
transfer of any certificates representing shares of Common Stock
in respect of which Rights have been issued shall also constitute
the transfer of the Rights associated with such shares of Common
Stock.
(c) Except as may otherwise be determined by the Board,
Rights shall be issued in respect of all shares of Common Stock
which are issued (whether originally issued or from the Company's
treasury) after the Record Date but prior to the earlier of the
Distribution Date or the Expiration Date, and in the event of
such a determination by the Board, no other provisions of this
Plan shall apply to any shares of Common Stock which the Board
has determined to be issued without Rights. Certificates
representing such shares of Common Stock shall also be deemed to
be certificates for Rights, and shall bear the following legend:
This certificate also evidences and entitles the holder
hereof to certain Rights as set forth in the Stockholder
Rights Plan of Electromagnetic Sciences, Inc. (the
"Company") dated as of July 3, 1989, as it may be from time
to time amended (the "Plan"), the terms of which are hereby
incorporated herein by reference and a copy of which is on
file at the principal offices of the Company. Under certain
circumstances, as set forth in the Plan, such Rights will be
evidenced by separate certificates and wi ll no longer be
evidenced by this certificate. The Company will mail to the
holder of this certificate a copy of the Plan, as in effect
on the date of mailing, without charge promptly after
receipt of a written request therefor. Under certain
circumstances set forth in the Plan, Rights issued to or
held by any Person who is, was or becomes an Acquiring
Person or any Affiliate or Associate thereof (as such
terms are defined in the Plan), whether currently held
by or on behalf of such Person or by any subsequent holder,
may become null and void.
With respect to such certificates containing the foregoing
legend, until the earlier of (i) the Distribution Date or (ii)
the Expiration Date, the Rights associated with the Common Stock
represented by such certificates shall be evidenced by such
certificates alone and registered holders of Common Stock shall
also be the registered holders of the associated Rights, and the
transfer of any of such certificates shall also constitute the
transfer of the Rights associated with the Common Stock
represented by such certificates.
Section 4. Form of Rights Certificates.
(a) The Rights Certificates (and the forms of
election to purchase and of assignment to be printed on the
reverse thereof) shall each be substantially in the form set
forth in Exhibit A hereto and may have such marks of
identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate
and as are not inconsistent with the provisions of this Plan, or
as may be required to comply with any applicable law or with any
rule or regulation made pursuant thereto or with any rule or
regulation of any stock exchange on which the Rights may from
time to time be listed, or to conform to usage. Subject to the
provisions of Section 11 and Section 19 hereof, the Rights
Certificates, whenever distributed, shall be dated as of the
Record Date and on their face shall entitle the holders thereof
to purchase such number of shares of Common Stock as shall be set
forth therein at the price set forth therein (such exercise price
per share, the "Purchase Price"), but the amount and type of
securities purchasable upon the exercise of each Right and the
Purchase Price thereof shall be subject to adjustment as provided
herein.
(b) Any Rights Certificate issued pursuant to
Section 3(a) or Section 19 hereof that represents Rights
beneficially owned by: (i) an Acquiring Person or any Associate
or Affiliate of an Acquiring Person, (ii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee after the Acquiring Person becomes such, or
(iii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee prior to or
concurrently with the Acquiring Person becoming such and receives
such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity
interests in such Acquiring Person or to any Person with whom
such Acquiring Person has any continuing agreement, arrangement
or understanding regarding the transferred Rights or (B) a
transfer which a majority of the Disinterested Directors have
determined is part of a plan, arrangement or understanding which
has as a primary purpose or effect avoidance of Section 7(e)
hereof, and any Rights Certificate issued pursuant to Section 6
or Section 11 hereof upon transfer, exchange, replacement or
adjustment of any other Rights Certificate referred to in this
sentence, shall contain (to the extent feasible) the following
legend, modified as applicable to such Person:
The Rights represented by this Rights Certificate are
or were beneficially owned by a Person who was or became an
Acquiring Person or an Affiliate or Associate of an
Acquiring Person (as such terms are defined in the Plan).
Accordingly, this Rights Certificate and the Rights represented
hereby may become null and void in the circumstances specified
in Section 7(e) of such Plan.
Section 5. Registration.
(a) The Rights Certificates shall be executed on behalf
of the Company by its Chairman of the Board, its President or any
Vice President, either manually or by facsimile signature, and
shall have affixed thereto the Company's seal or a facsimile
thereof which shall be attested by the Secretary or an Assistant
Secretary of the Company, either manually or by facsimile
signature. In case any officer of the Company who shall have
signed any of the Rights Certificates shall cease to be such
officer of the Company before issuance and delivery by the
Company, such Rights Certificates, nevertheless, may be issued
and delivered by the Company with the same force and effect as
though the person who signed such Rights Certificates had not
ceased to be such officer of the Company; and any Rights
Certificates may be signed on behalf of the Company by any person
who, at the actual date of the execution of such Rights
Certificate, shall be a proper officer of the Company to sign
such Rights Certificate, although at the date of the execution of
this Plan any such person was not such an officer.
(b) Following the Distribution Date, the Company or the
Rights Agent, if any, will keep or cause to be kept, at the
principal executive office of the Company or at the principal
stockholder services office or offices of the Rights Agent
designated for such purposes, as the case may be, books for
registration and transfer of the Rights Certificates issued
hereunder. Such books shall show the names and addresses of the
respective holders of the Rights Certificates, the number of
Rights evidenced on its face by each of the Rights Certificates
and the date of each of the Rights Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of
Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights
Certificates.
(a) Subject to the provisions of Section 4(b), Section
7(e) and Section 14 hereof, at any time after the Close of
Business on the Distribution Date, and at or prior to the Close
of Business on the Expiration Date, any Rights Certificate or
Certificates may be transferred, split up, combined or exchanged
for another Rights Certificate or Certificates, entitling the
registered holder to purchase a like number of shares of Common
Stock (or, following a Triggering Event, other securities, cash
or other assets, as the case may be) as the Rights Certificate or
Certificates surrendered then entitle such holder (or former
holder in the case of a transfer) to purchase. Any registered
holder desiring to transfer, split up, combine or exchange any
Rights Certificate or Certificates shall make such request in
writing delivered to the Company or the Rights Agent, if any, and
shall surrender the Rights Certificate or Certificates to be
transferred, split up, combined or exchanged, with the form of
assignment and certificate duly executed, at the principal
executive office of the Company, or the principal stockholder
services office or offices of the Rights Agent designated for
such purposes, as the case may be. Neither the Company nor the
Rights Agent, if any, as the case may be, shall be obligated to
take any action whatsoever with respect to the transfer of any
such surrendered Rights Certificate until the registered holder
shall have completed and signed the certificate contained in the
form of assignment set forth on the reverse side of each such
Rights Certificate and shall have provided such additional
evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) or Affiliates or Associates thereof as the
Secretary of the Company or the Rights Agent, as the case may be,
shall reasonably request. Thereupon the Secretary of the Company
or the Rights Agent, as the case may be, shall, subject to
Section 4(b), Section 7(e) and Section 14 hereof, deliver to the
Person entitled thereto a Rights Certificate or Rights
Certificates, as the case may be, as so requested. The Company
may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any
transfer, Split up, combination or exchange of Rights
Certificates.
(b) Upon receipt by the Company or the Rights Agent, if
any, of evidence reasonably satisfactory to either of them of the
loss, theft, destruction or mutilation of a Rights Certificate,
and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to either of them, and
reimbursement to the Company or the Rights Agent, as the case may
be, of all reasonable expenses incidental thereto, and upon
surrender to the Company or the Rights Agent, as the case may be,
and cancellation of the Rights Certificate if mutilated,
the Company or the Rights Agent, as the case may be, will execute
and deliver a new Rights Certificate of like tenor to the
registered owner in lieu of the Rights Certificate so lost,
stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration
Date of Rights.
(a) Subject to Section 7(e) hereof, the registered
holder of any Rights Certificate may exercise the Rights
evidenced thereby (except as otherwise provided herein, including
without limitation the restrictions on exercisability set forth
in Section 9(c), Section ll(a)(iii) and Section 20(a) hereof) in
whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to
purchase and the certificate on the reverse side thereof duly
executed, to the Company or the Rights Agent, if any, at the
principal executive office of the Company or the principal
stockholder services office or offices of the Rights Agent
designated for such purposes, as the case may be, together with
payment of the aggregate Purchase Price with respect to the total
number of shares of Common Stock (or other securities, cash or
other assets, as the case may be) as to which such surrendered
Rights are then exercisable, at or prior to the earlier of (i)
the Final Expiration Date or (ii) the time at which the Rights
are redeemed as provided in Section 20 hereof (the earlier of (i)
or (ii) being herein referred to as the "Expiration Date").
(b) The Purchase Price for each share of Common Stock
pursuant to the exercise of a Right shall initially be $30.00,
and shall be subject to adjustment from time to time as provided
in Sections 11 and 13(a) hereof and shall be payable in
accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing
exercisable Rights, with the form of election to purchase and the
certificate duly executed, accompanied by payment, with respect
to each Right so exercised, of the Purchase Price per share of
Common Stock (or, following a Triggering Event, other securities,
cash or other assets, as the case may be) to be purchased as set
forth below and an amount equal to any applicable transfer tax,
the Company shall promptly (i)(A) requisition from any transfer
agent of the shares of Common Stock, if any (but only to the
extent such transfer agent expressly assumes such duty), or, if
none, from the Company's Secretary, as the case may be,
certificates for the total number of shares of Common Stock to be
purchased and the Company hereby irrevocably authorizes its
transfer agent to comply with all such requests, or (B) if the
Company shall have elected to deposit the total number of shares
of Common Stock issuable upon exercise of the Rights hereunder
with a depository agent, requisition from the depository agent
depository receipts representing such number of shares of Common
Stock as are to be purchased (in which case certificates for the
shares of Common Stock represented by such receipts shall be
deposited by the transfer agent (but only to the extent such
transfer agent expressly assumes such duty), or, if none, from
the Company's Secretary, as the case may be, with the depository
agent) and the Company will direct the depository agent to comply
with such request, (ii) when appropriate, requisition the amount
of cash, if any, to be paid in lieu of fractional shares of
Common Stock in accordance with Section 14 hereof, (iii) after
receipt of such certificates or depository receipts for shares of
Common Stock, cause the same to be delivered to or upon the order
of the registered holder of such Rights Certificate, registered
in such name or names as may be designated by such holder, and
(iv) after receipt thereof, deliver such cash, if any, to or upon
the order of the registered holder of such Rights Certificate.
The payment of the Purchase Price (as such amount may be reduced
pursuant to Section ll(a)(iii) hereof) may be made (x) in cash or
by certified check, cashier's check or bank draft payable to the
order of the Company or (y) if the Board so determines, by
delivery of a certificate or certificates (with appropriate stock
powers executed in blank attached thereto) evidencing a number of
shares of Common Stock equal to the then Purchase Price divided
by the closing price (as determined pursuant to Section ll(d)
hereof) per share of Common Stock on the Trading Day immediately
preceding the date of such exercise. In the event that the
Company is obligated to issue other securities of the Company,
pay cash and/or distribute other property pursuant to Section
ll(a) hereof, the Company will make all arrangements necessary so
that such other securities, cash and/or other property are
available for distribution, if and when appropriate. The Company
reserves the right to require, prior to the occurrence of a
Section ll(a)(ii) Event or a Section 13 Event, that upon exercise
of any Rights, an appropriate number of Rights be exercised so
that any Common Stock issuable hereunder shall only be issued as
whole share.
(d) In case the registered holder of any Rights
Certificate shall exercise less than all the Rights evidenced
thereby, a new Rights Certificate evidencing Rights equivalent to
the Rights remaining unexercised shall be issued by the Company
and delivered to, or upon the order of, the registered holder of
such Rights Certificate, registered in such name or names as may
be designated by such holder, subject to the provisions of
Section 14 hereof.
(e) Notwithstanding anything in this Plan to the
contrary, from and after the first occurrence of a Section
ll(a)(ii) Event, any Rights beneficially owned by (i) an
Acquiring Person or an Associate or Affiliate of an Acquiring
Person, (ii) a transferee of any such Acquiring Person (or of
any such Associate or Affiliate) who becomes a transferee after
such Acquiring Person becomes such, or (iii) a transferee of any
such Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee prior to or concurrently with such Acquiring
Person becoming such and receives such Rights pursuant to either
(A) a transfer (whether or not for consideration) from such
Acquiring Person to holders of equity interests in such Acquiring
Person or to any Person with whom such Acquiring Person has any
continuing agreement, arrangement or understanding regarding the
transferred Rights or (B) a transfer which a majority of the
Disinterested Directors have determined is part of a plan,
arrangement or understanding which has as a primary purpose or
effect the avoidance of this Section 7(e), shall become null and
void without any further action and no holder of such Rights
shall have any rights whatsoever with respect to such Rights,
whether under any provision of this Plan or otherwise. The
Company shall use all reasonable efforts to ensure that the
provisions of this Section 7(e) and Section 4(b) hereof are
complied with, but shall have no liability to any holder of
Rights Certificates or other Person as a result of its failure to
make any determinations with respect to an Acquiring Person or
any Affiliates, Associates or transferees of an Acquiring Person
hereunder.
(f) Notwithstanding anything in this Plan to the
contrary, the Company shall not be obligated to undertake any
action with respect to a registered holder upon the occurrence of
any purported exercise as set forth in this Section 7 unless such
registered holder shall have (i) completed and signed the
certificate following the form of election to purchase set forth
on the reverse side of the Rights Certificate surrendered for
such exercise, and (ii) provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Company shall reasonably
request.
Section 8. Cancellation and Destruction of Rights
Certificates. All Rights Certificates surrendered for the purpose
of exercise, transfer, Split up, combination or exchange shall,
upon surrender to the Company or any of its agents, be cancelled
by it, and no Rights Certificates shall be issued in lieu thereof
except as expressly permitted by any of the provisions of this
Plan. The Company shall cancel and retire any other Rights
Certificate purchased or acquired by the Company otherwise than
upon the exercise thereof.
Section 9. Reservation and Availability of Capital
Stock.
(a) The Company shall use reasonable efforts to cause
to be reserved and kept available out of its authorized and
unissued shares of Common Stock (and, following the occurrence of
a Triggering Event, other securities) or out of its authorized
and issued Common Stock held in its treasury, the number of
shares of Common Stock (and, following the occurrence of a
Triggering Event, other securities) that, as provided in this
Plan, including Section ll(a)(iii) hereof, will be sufficient to
permit the exercise in full of all outstanding Rights.
(b) So long as the shares of Common Stock (and,
following the occurrence of a Triggering Event, other securities)
issuable and deliverable upon the exercise of the Rights are
listed on any national securities exchange, the Company shall use
its best efforts to cause, from and after such time as the Rights
become exercisable, all shares reserved for such issuance to be
listed on such exchange upon official notice of issuance upon
such exercise.
(c) The Company shall use its best efforts to (i) file,
as soon as practicable following the earliest date after the
first occurrence of a Section ll(a)(ii) Event on which the
consideration to be delivered by the Company upon exercise of the
Rights has been determined in accordance with Section ll(a)(iii)
hereof, or as soon as is required by law following the
Distribution Date, as the case may be, a registration statement
under the Act with respect to the securities purchasable upon
exercise of the Rights on an appropriate form, (ii) cause such
registration statement to become effective as soon as practicable
after such filing, and (iii) cause such registration statement to
remain effective (with a prospectus at all times meeting the
requirements of the Act) until the earlier of (A) the date as of
which the Rights are no longer exercisable for such securities,
and (B) the date of the expiration of the Rights. The Company
will also take such action as may be appropriate under, or to
ensure compliance with, the securities or "blue sky" laws of the
various states in connection with the exercisability of the
Rights. The Company may temporarily suspend, for a period of time
not to exceed ninety (90) days after the date set forth in clause
(i) of the first sentence of this Section 9(c), the
exercisability of the Rights in order to prepare and file such
registration statement and permit it to become effective. Upon
any such suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has
been temporarily suspended, as well as a public announcement at
such time as the suspension is no longer in effect. In addition,
if the Company shall determine that a registration statement is
required following the Distribution Date, the Company may
temporarily suspend the exercisability of the Rights until such
time as a registration statement has been declared effective.
Notwithstanding any provision of this Plan to the contrary, the
Rights shall not be exercisable in any jurisdiction if the
requisite qualification in such jurisdiction shall not have been
obtained, the exercise thereof shall not be permitted under
applicable law or any necessary registration statement the
effectiveness of which in such jurisdiction is required to make
the offering not illegal, shall not have been declared effective.
(d) The Company shall take all such action as may be
necessary to ensure that all shares of Common Stock (and,
following the occurrence of a Triggering Event, other
securities), delivered upon exercise of Rights shall, at the time
of delivery of the certificates for such shares and of such other
securities (subject to payment of the Purchase Price), be duly
and validly authorized and issued and that all shares shall be
fully paid and nonassessable.
(e) The Company shall pay when due and payable any and
all federal and state transfer taxes and charges which may be
payable in respect of the issuance or delivery of the Rights
Certificates, any certificates for shares of Common Stock (or
other securities, as the case may be) issued upon the exercise of
Rights. The Company shall not, however, be required to pay any
transfer tax which may be payable in respect of any transfer or
delivery of Rights Certificates to a Person other than, or the
issuance or delivery of a number of shares of Common Stock (or
other securities, as the case may be) in respect of a name other
than that of the registered holder of the Rights Certificates
evidencing Rights surrendered for exercise or to issue or deliver
any certificates for a number of shares of Common Stock (or other
securities, as the case may be) in a name other than that of the
registered holder upon the exercise of any Rights until such tax
shall have been paid (any such tax being payable by the holder of
such Rights Certificate at the time of surrender) or until it has
been established to the Company's satisfaction that no such tax
is due.
Section 10. Record Date for Securities Issued Upon Exercise.
Each Person in whose name any certificate for a number of shares
of Common Stock (or other securities, as the case may be) is
issued upon the exercise of Rights shall for all purposes be
deemed to have become the holder of record of such shares of
Common Stock (or other securities, as the case may be)
represented thereby on, and such certificate shall be dated the
date upon which the Rights Certificate evidencing such Rights was
duly surrendered and payment of the Purchase Price (and all
applicable transfer taxes) was made; provided, however, that if
the date of such surrender and payment is a date upon which the
Common Stock (or other securities, as the case may be) transfer
books of the Company are closed, such Person shall be deemed to
have become the record holder of such stock (or other securities,
as the case may be) on, and such certificate shall be dated, the
next succeeding Business Day on which the Common Stock (or other
securities, as the case may be) transfer books of the Company are
open. Prior to the exercise of the Rights evidenced thereby, the
holder of a Rights Certificate shall not be entitled to any
rights of a stockholder of the Company with respect to stock for
which the Rights shall be exercisable, including, without
limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not
be entitled to receive any notice of any proceedings of the
Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of
Shares or Number of Rights. The Purchase Price, the number and
kind of securities covered by each Right and the number of Rights
outstanding are subject to adjustment from time to time as
provided in this Section 11.
(a)(i) In the event the Company shall at any time after
the date this Plan is adopted (A) declare a dividend on the
Common Stock payable in shares of Common Stock, (B) subdivide
the outstanding Common Stock, (C) combine the outstanding Common Stock
into a smaller number of shares, or (D) issue any shares of its
capital stock in a reclassification of the Common Stock
(including any such reclassification in connection with
a consolidation or merger in which the Company is the
continuing or surviving corporation), except as
otherwise provided in this Section ll(a) and Section 7(e)
hereof, the Purchase Price in effect at the time of the record
date for such dividend or of the effective
date of such subdivision, combination or reclassification, and
the number of shares of Common Stock (or the number and kind of
other securities, as the case may be), shall be proportionately
adjusted so that if a holder of Rights after such time were to
exercise that number of Rights which would result in the
aggregate amount of the Purchase Price payable upon such exercise
that the Purchase Price then in effect) being equal to the amount
of the Purchase Price that was payable prior to such time upon
exercise of a Right, the holder would be entitled to receive the
aggregate number of shares of Common Stock (or the number and
kind of other securities, as the case may be) which, if a Right
had been exercised immediately prior to such time and at a time
when the Common Stock (or other securities, as the case may be)
transfer books of the Company were open, the holder would have
owned upon such exercise and been entitled to receive by virtue
of such dividend, subdivision, combination or reclassification.
If an event occurs which would require an adjustment under both
this Section ll(a)(i) and Section ll(a)(ii) hereof, the
adjustment provided for in this Section ll(a)(i) shall be in
addition to, and shall be made prior to, any adjustment required
Pursuant to Section ll(a)(ii) hereof.
(ii) In the event:
(A) any Person (other than the Company, any Subsidiary
of the Company, any employee benefit plan of the Company or
of any Subsidiary of the Company, or any Person or entity
organized, appointed or established by the Company for or
pursuant to the terms of any such plan), alone or together
with its Affiliates and Associates, at any time after the
Rights Dividend Declaration Date, without the consent of a
majority of the Disinterested Directors, shall become the
Beneficial Owner of 20% or more of the shares of Common
Stock then outstanding, unless the event causing the 20%
threshold to be crossed is a transaction set forth in
Section 13(a) hereof, or is an acquisition of shares of
Common Stock pursuant to a tender offer or an exchange offer
for all outstanding shares of Common Stock at a price and on
terms determined by at least a majority of the Disinterested
Directors after receiving advice from one or more investment
banking firms, to be (a) at a price which is fair to
stockholders (taking into account all factors which such
members of the Board deem relevant including, without
limitation, prices which could reasonably be achieved if the
Company or its assets were sold on an orderly basis designed
to realize maximum value) and (b) otherwise in the best
interests of the Company and its stockholders (such offer
herein referred to as a "Fair Value Offer"), or
(B) any Acquiring Person whose acquisition of 20% or more
of the Company's Common Stock has been consented to by
a major ity of the Disinterested Directors, or any Associate
or Affiliate of any such Acquiring Person, shall, without
the consent of a majority of the Disinterested Directors,
(1) acquire, directly or indirectly, in one or a series of
transactions, an additional 2% or more of the Company's Common
Stock, (2) sell, purchase, lease, exchange, mortgage,
pledge, transfer or otherwise acquire or dispose of, in one
or a series of transactions, to, from or with the Company or
any of its Subsidiaries, assets on terms and conditions less
favorable to the Company than the Company would be able to
obtain in arm's length negotiation with an unaffiliated
third party, other than pursuant to a transaction set forth
in Section 13(a) hereof, (3) sell, purchase, lease,
exchange, mortgage, pledge, transfer or otherwise acquire
or dispose of, in one or a series of transactions, to, from or
with the Company or any of its Subsidiaries (other than incidental
to the lines of business, if any, engaged in as of the date of
this Plan between the Company and such Acquiring Person or
Associate or Affiliate thereof) assets having an aggregate
fair market value of more than $5,000,000, other than pursuant
to a transaction set forth in Section 13(a) hereof, (4)
receive any compensation from the Company or any of the
Company's Subsidiaries other than compensation for full-
time employment as a regular employee at rates in accordance
with the Company's or such Subsidiary's normal practices, or
(5) receive the benefit, directly or indirectly (except
resulting from a requirement of law or governmental regulation),
of any loans, advances, credits or other tax advantage provided
by the Company or any of its Subsidiaries.
then, ten days following the first occurrence of a Section
ll(a)(ii) Event (or such shorter or longer period as a majority
of the Disinterested Directors shall from time to time
determine), proper provision shall be made so that each holder of
a Right (except as provided below and in Section 7(e) hereof)
shall thereafter have the right to receive, upon exerovernmental
regulation), of any loans, advances, credits or other tax advantage
provided by the Company or any of its Subsidiaries.
then, ten days following the first occurrence of a Section
ll(a)(ii) Event (or such shorter or longer period as a majority
of the Disinterested Directors shall from time to time
determine), proper provision shall be made so that each holder of
a Right (except as provided below and in Section 7(e) hereof)
shall thereafter have the right to receive, upon exercise thereof
at the then current Purchase Price in accordance with the terms
of this Plan such number of shares of Common Stock of the Company
as shall equal the result obtained by (x) multiplying the then
current Purchase Price by the then number of shares of Common
Stock for which a Right was exercisable immediately prior to the
first occurrence of a Section ll(a)(ii) Event, and (y) dividing
that product (which, following such first occurrence, shall
thereafter be referred to as the "Purchase Price" for each Right
and for all purposes of this Plan) by 50% of the Current Market
Price per share of Common Stock on the date of such first
occurrence (such number of shares, the "Adjustment Shares");
provided that, in no event shall the Company issue or be
obligated to issue Common Stock at a Purchase Price per share of
Common Stock that is less than the per share par value of the
Common Stock as the same may be adjusted from time to time; and
provided further that after the occurrence of any Section
ll(a)(ii) event, the Company, by action of a majority of the
Disinterested Directors in office at the time, may permit the
Rights to be exercised, or may require and specify that the
Rights may only be exercised, for 50% of the shares of Common
Stock (or cash or other securities or assets to be substituted
for the Adjustment Shares pursuant to Section ll(a)(iii) below)
that would otherwise be purchasable pursuant to the preceding
clauses of this Section ll(a)(ii) in consideration of the
surrender to the Company of the Rights so exercised and without
payment of the Purchase Price, and all Rights so exercised under
this proviso without payment of the Purchase Price shall be
deemed to have been exercised in full and shall be cancelled; and
provided further that during the ten days following the first
occurrence of a Section ll(a)(ii) Event (or such shorter or
longer period as a majority of the Disinterested Directors shall
from time to time determine), the Rights may be redeemed only by
the vote of a majority of the Disinterested Directors who are
Directors of the Company on the day before the occurrence of such
Section ll(a)(ii) Event.
(iii) In the event that the number of shares of Common Stock
which are authorized by the Company's articles of incorporation
but not outstanding or reserved for issuance for purposes other
than upon exercise of the Rights is not sufficient to permit the
exercise in full of the Rights in accordance with the foregoing
subparagraph (ii) of this Section ll(a), the Company shall: (A)
determine the excess of (i) the value of the Adjustment Shares
issuable upon the exercise of a Right (the "Current Value") over
(2) the Purchase Price (such excess being referred to as the
"Spread"), and (B) with respect to each Right, make adequate
provision to substitute for the Adjustment Shares, upon payment
of the applicable Purchase Price, (1) cash, (2) a reduction in
the Purchase Price, (3) other equity securities of the Company
(including, without limitation, shares, or units of shares of
preferred stock, if any exists at such time), which the Board has
deemed to have the same value as shares of Common Stock (such
shares of preferred stock being referred to as "Common Stock
Equivalents")), (4) debt securities of the Company, (5) other
assets, or (6) any combination of the foregoing (whichever
substituted, the "Substitute Consideration"), having an aggregate
value equal to the Current Value, where such aggregate value has
been determined by the Board based upon the advice of a
nationally recognized investment banking firm selected by the
Board; provided, however, if the Company shall not have made
adequate provision to deliver value pursuant to clause (B) above
within thirty (30) days following the date of the first
occurrence of a Section ll(a)(ii) Event (such date being referred
to herein as the "Section ll(a)(ii) Trigger Date"), then, subject
to subsection (k) hereof, the Company shall be obligated to
deliver, upon the surrender for exercise of a Right and without
requiring payment of the Purchase Price, shares of Common Stock
(to the extent available) and then, if necessary, cash, which
shares and/or cash have an aggregate value equal to the Spread.
If the Board shall determine in good faith that it is likely that
sufficient additional shares of Common Stock could be authorized
for issuance upon exercise in full of the Rights, the thirty (30)
day period set forth above may be extended to the extent
necessary, but not more than ninety (90) days after the Section
ll(a)(ii) Trigger Date, in order that the Company may seek
stockholder approval for the authorization of such additional
shares (such period, as it may be extended, being referred to
herein as the "Substitution Period"). To the extent that the
Company determines that some action need be taken pursuant to the
first and/or second sentences of this Section ll(a)(iii), the
Company (x) shall provide, subject to Section 7(e) hereof, that
such action shall apply uniformly to all outstanding Rights, and
(y) may suspend the exercisability of the Rights until the
expiration of the Substitution Period in order to seek any
authorization of additional shares and/or to decide the
appropriate form of distribution to be made pursuant to such
first sentence and to determine the value thereof. In the event
of any such suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has
been temporarily suspended, as well as a public announcement at
such time as the suspension is no longer in effect. For purposes
of this Section ll(a)(iii), the value of the Common Stock shall
be the Current Market Price per share of the Common Stock on the
Section ll(a)(ii) Trigger Date and the value of any Common Stock
Equivalent shall be deemed to have the same value as the Common
Stock on such date.
(b) In case the Company shall fix a record date for
issuance of rights, options or warrants to all holders of Common
Stock, entitling them to subscribe for or purchase (for a period
expiring within forty-five (45) calendar days after such record
date) Common Stock (or shares having the same rights, privilege
and preferences as the shares of Common Stock ("Equivalent Common
Stock")) or securities convertible into Common Stock or
Equivalent Common Stock at a price per share of Common Stock or
per share of Equivalent Common Stock (or having a conversion
price per share, if a security convertible into Common Stock or
Equivalent Common Stock) less than the Current Market Price per
share of Common Stock on such record date, the Purchase Price to
be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to
such record date by a fraction, the numerator of which shall be
the number of shares of Common Stock outstanding on such record
date, plus the number of shares of Common Stock which the
aggregate offering price of the total number of shares of Common
Stock and/or Equivalent Common Stock so to be offered (and/or the
aggregate initial conversion price of the convertible securities
so to be offered) would purchase at such Current Market Price,
and the denominator of which shall be the number of shares of
Common Stock outstanding on such record date, plus the number of
additional shares of Common Stock and/or Equivalent Common Stock
to be offered for subscription or purchase (or into which the
convertible securities so to be offered are initially
convertible). In case such subscription price may be paid by
delivery of consideration part or all of which may be in a form
other than cash, the value of such consideration shall be as
determined in good faith by the Board whose determination shall
be conclusive for all purposes. Shares of Common Stock owned by
or held for the account of the Company shall not be deemed
outstanding for the purpose of any such computation. Such
adjustment shall be made successively whenever such a record date
is fixed, and in the event that such rights or warrants are not
so issued, the Purchase Price shall be adjusted to be the
Purchase Price which would then be in effect if such record date
had not been fixed.
(c) In case the Company shall fix a record date for a
distribution to all holders of Common Stock (including any such
distribution made in connection with a consolidation or merger in
which the Company is the continuing corporation) of evidences of
indebtedness, cash (other than a regular quarterly cash dividend
out of the earnings or retained earnings of the Company), assets
(other than a dividend payable in Common Stock, but including any
dividend payable in stock other than Common Stock) or
subscription rights or warrants (excluding those referred to in
Section ll(b) hereof), the Purchase Price to be in effect after
such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the Current Market
Price per share of Common Stock on such record date, less the
fair market value (as determined in good faith by the Board whose
determination shall be conclusive for all purposes) of the
portion of the cash, assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants applicable
to a share of Common Stock and the denominator of which shall be
such Current Market Price per share of Common Stock. Such
adjustments shall be made successively whenever such a record
date is fixed, and in the event that such distribution is not so
made, the Purchase Price shall be adjusted to be the Purchase
Price which would have been in effect if such record date had not
been fixed.
(d) For the purpose of any computation hereunder, other
than computations made pursuant to Section ll(a)(iii) hereof, the
"Current Market Price" per share of Common Stock on any date
shall be deemed to be the average of the daily closing prices per
share of such Common Stock for the thirty (30) consecutive
Trading Days immediately prior to such date, and for purposes of
computations made pursuant to Section ll(a)(iii) hereof, the
"Current Market Price" per share of Common Stock on any date
shall be deemed to be the average of the daily closing prices per
share of such Common Stock for the ten (10) consecutive Trading
Days immediately following such date; provided, however, that in
the event that the Current Market Price per share of the Common
Stock is determined during a period following the announcement by
the issuer of such Common Stock of (i) a dividend or distribution
on such Common Stock payable in shares of such Common Stock or
securities convertible into shares of such Common Stock (other
than the Rights), or (ii) any subdivision, combination or
reclassification of such Common Stock, and prior to the
expiration of the requisite thirty (30) Trading Day or ten (10)
Trading Day period, as set forth above, after the tax-dividend
date for such dividend or distribution, or the record date for
such subdivision, combination or reclassification, then, and in
each such case, the Current Market Price shall be properly
adjusted to take into account tax-dividend trading. The closing
price for each day shall be the last sale price, regular way, or,
in case no such sale takes place on such day, the average of the
closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal
national securities exchange on which the shares of Common Stock
are listed or admitted to trading or, if the shares of Common
Stock are not listed or admitted to trading on any national
securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-
the-counter market, as reported by the National Association of
Securities Dealers, Inc., Automated Quotation System or such
other system then in use, or, if on any such date the shares of
Common Stock are not quoted by any such organization, the average
of the Closing bid and asked prices as furnished by a
professional market maker making a market in the Common Stock
selected by the Board. If on any such date no market maker is
making a market in the Common Stock, the fair value of such stock
on such date as determined in good faith by the Board shall be
used. The term "Trading Day" shall mean a day on which the
principal national securities exchange on which the shares of
Common Stock are listed or admitted to trading is open for the
transaction of business or, if the shares of Common Stock are not
listed or admitted to trading on any national securities
exchange, a Business Day. If the Common Stock is not publicly
held or not so listed or traded, Current Market Price per share
shall mean the fair value per share as determined in good faith
by the Board whose determination shall be conclusive for all
purposes. The Current Market Price of any fraction of a share of
Common Stock hereunder shall be determined by multiplying the
Current Market Price per share of Common Stock, determined in
accordance with this paragraph, by such fraction.
(e) Anything herein to the contrary notwithstanding, no
adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least one
percent (1%) in the Purchase Price; provided, however, that any
adjustments which by reason of this Section ll(e) are not
required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this
Section 11 shall be made to the nearest cent or to the nearest
ten-thousandth of a share, as the case may be. Notwithstanding
the first sentence of this Section ll(e), any adjustment required
by this Section 11 shall be made no later than the earlier of (I)
three (3) years from the date of the transaction which mandates
such adjustment, or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section ll(a)(ii)
or Section 13(a) hereof, the holder of any Right thereafter
exercised shall become entitled to receive any shares of capital
stock other than Common Stock, thereafter the number of such
other shares so receivable upon exercise of any Right and the
Purchase Price thereof shall be subject to adjustment from time
to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Common Stock
contained in Sections ll(a), (b), (c), (e), (g), (h), (i), (j),
(k) and (m), and the provisions of Sections 7, 9, 10, 13 and 14
hereof with respect to the Common Stock shall apply on like terms
to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence
the right to purchase, at the adjusted Purchase Price, that
number of shares of Common Stock purchasable from time to time
hereunder (or, if applicable, preferred stock) upon exercise of
the Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election
as provided in Section ll(i), upon each adjustment of the
Purchase Price as a result of the calculations made in Sections
ll(b) and (c), each Right outstanding immediately prior to the
making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of shares
of Common Stock (calculated to the nearest ten-thousandth)
obtained by (i) multiplying (x) the number of shares covered by a
Right immediately prior to this adjustment, by (y) the Purchase
Price in effect immediately prior to such adjustment of the
Purchase Price, and (ii) dividing the product so obtained by the
Purchase Price in effect immediately after such adjustment of the
Purchase Price.
(i) The Company may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of Rights,
in lieu of any adjustment in the number of shares of Common Stock
purchasable upon the exercise of a Right. In that event, each of
the Rights outstanding after the adjustment in the number of
Rights shall be exercisable for that number of shares of Common
Stock for which a Right was exercisable immediately prior to such
adjustment; and each Right held of record prior to such
adjustment of the number of Rights shall become the number of
Rights (calculated to the nearest one-ten-thousandth) obtained by
dividing the Purchase Price in effect immediately prior to
adjustment of the Purchase Price by the Purchase Price in effect
immediately after adjustment of the Purchase Price. The Company
shall make a public announcement of its election to adjust the
number of Rights, indicating the record date for the adjustment,
and, if known at the time, the amount of the adjustment to be
made. This record date may be the date on which the Purchase
Price is adjusted or any day thereafter, but, if the Rights
Certificates have been issued, shall be at least ten (10) days
later than the date of the public announcement. If Rights
Certificates have been issued, upon each adjustment of the number
of Rights pursuant to this Section ll(i), the Company shall, as
promptly as practicable, cause to be distributed to holders of
record of Rights Certificates on such record date Rights
Certificates evidencing, subject to Section 14 hereof, the
additional Rights to which such holders shall be entitled as a
result of such adjustment, or, at the option of the Company,
shall cause to be distributed to such holders of record in
substitution and replacement for the Rights Certificates held by
such holders prior to the date of adjustment, and upon surrender
thereof, if required by the Company, new Rights Certificates
evidencing all the Rights to which such holders shall be entitled
after such adjustment. All costs associated with such
adjustments, including without limitation any taxes required to
be paid on account of such adjustment, shall be borne by the
Company. Rights Certificates so to be distributed shall be issued
and executed in the manner provided for herein (and may bear, at
the option of the Company, the adjusted Purchase Price) and shall
be registered in the names of the holders of record of Rights
Certificates on the record date specified in the public
announcement.
(j) Irrespective of any adjustment or change in the
Purchase Price or the stock issuable upon the exercise of the
Rights, the Rights Certificates theretofore and thereafter issued
may continue to express the Purchase Price per share of Common
Stock and the shares of Common Stock which were expressed in the
initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an
adjustment reducing the Purchase Price below the then par value,
if any, of the shares of Common Stock issuable upon exercise of
the Rights, the Company shall take any corporate action which
may, in the opinion of its counsel, be necessary in order that
the Company may validly and loyally issue fully paid and
nonassessable s hares of Common Stock at such adjusted Purchase
Price.
(1) In any case in which this Section 11 shall require
that an adjustment in the Purchase Price be made effective as of
a record date for a specified event, the Company may elect to
defer until the occurrence of such event the issuance to the
holder of any Right exercised after such record date the shares
of Common Stock and other capital stock or securities of the
Company, if any, issuable upon such exercise over and above the
shares of Common Stock and other capital stock or securities of
the Company, if any, issuable upon such exercise on the basis of
the Purchase Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to such holder a due bill
or other appropriate instrument evidencing such holder's right to
receive such additional shares (fractional or otherwise) or
securities upon the occurrence of the event requiring such
adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such
reductions in the Purchase Price, in addition to those
adjustments expressly required by this Section 11, as and to the
extent that in its good faith judgment the Board shall determine
to be advisable in order that any (i) consolidation or
subdivision of the Common Stock, (ii) issuance wholly for cash of
any shares of Common Stock at less than the Current Market Price,
(iii) issuance wholly for cash of shares of Common Stock or
securities which by their terms are convertible into or
exchangeable for shares of Common Stock, (iv) stock dividends or
(v) issuance of rights, options or warrants referred to in this
Section 11, hereafter made by the Company to holders of its
Common Stock shall not be taxable to such stockholders.
(n) The Company shall not, at any time after the
Distribution Date, (i) consolidate with any other Person (other
than a Subsidiary of the Company in a transaction which complies
with Section 11 hereof), (ii) merge with or into any other Person
(other than a Subsidiary of the Company in a transaction which
complies with Section 11 hereof), or (iii) sell or transfer (or
permit any Subsidiary to sell or transfer), in one transaction or
a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the
Company and its Subsidiaries (taken as a whole) to any other
Person or Persons (other than the Company and/or any of its
Subsidiaries in one or more transactions each of which complies
with Section 11 hereof), if (x) at the time of or immediately
after such consolidation, merger or sale there are any rights,
warrants or other instruments or securities outstanding or
agreements in effect which would substantially diminish or
otherwise eliminate the benefits intended to be afforded by the
Rights to the holders of the Rights or (y) prior
to, simultaneously with or immediately after such consolidation,
merger or sale, the stockholders of the Person who constitutes,
or would constitute, the "Principal Party" for purposes of
Section 13(a) hereof shall have received a distribution of Rights
previously owned by such Person or any of its Affiliates and
Associates.
(o) After the Distribution Date, the Company shall not,
except as permitted by Section 20 or Section 23 hereof, take (or
permit any Subsidiary to take) any action if at the time such
action is taken it is reasonably foreseeable that such action
will diminish substantially or otherwise eliminate the benefits
intended to be afforded by the Rights.
(p) Anything in this Plan to the contrary
notwithstanding, in the event that the Company shall at any time
after the Rights Dividend Declaration Date and prior to the
Distribution Date (i) declare a dividend on the outstanding
shares of Common Stock, (ii) subdivide the outstanding shares of
Common Stock, or (iii) combine the outstanding shares of Common
Stock into a smaller number of shares, the number of Rights
associated with each share of Common Stock then outstanding, or
issued or delivered thereafter but prior to the Distribution
Date, shall be proportionately adjusted so that the number of
Rights thereafter associated with each share of Common Stock
following any such event shall equal the result obtained by
multiplying the number of Rights associated with each share of
Common Stock immediately prior to such event by a fraction the
numerator of which shall be the total number of shares of Common
Stock outstanding immediately prior to the occurrence of the
event and the denominator of which shall be the total number of
shares of Common Stock outstanding immediately following the
occurrence of such event.
Section 12. Certificate of Adjusted Purchase Price or
Number of Shares.
Whenever an adjustment is made as provided in Section 11
and Section 13 hereof, the Company shall (a) promptly prepare a
certificate setting forth such adjustment and a brief statement
of the facts accounting for such adjustment, (b) promptly file
with the Rights Agent, if any, or if no Rights Agent has been
appointed, with the Company's Secretary, and with each transfer
agent for the Common Stock, a copy of such certificate, and
mail a brief summary thereof to each holder of a Rights
Certificate (or, if prior to the Distribution Date, to each
holder of a certificate representing shares of Common Stock) in
accordance with Section 22 hereof. The Rights Agent, if any,
shall be fully protected in relying on any such certificate and
on any adjustment therein contained and shall not be deemed to
have knowledge of any such adjustment unless and until it shall
have received such certificate.
Section 13. Consolidation, Merger or Sale or Transfer of
Assets or Earning Power.
(a) In the event that, following or simultaneously with
the Distribution Date, directly or indirectly, without the
consent of a majority of the Disinterested Directors, (x) the
Company shall consolidate with, or merge with and into, any other
Person (other than a Subsidiary of the Company in a transaction
which complies with Section 11 hereof), and the Company shall not
be the continuing or surviving corporation of such consolidation
or merger, (y) any Person (other than a Subsidiary of the Company
in a transaction which complies with Section 11 hereof) shall
consolidate with, or merge with or into, the Company, and the
Company shall be the continuing or surviving corporation of such
consolidation or merger and, in connection with such
consolidation or merger, all or part of the outstanding shares of
Common Stock shall be changed into or exchanged for stock or
other securities of any other Person or cash or any other
property, or (z) the Company shall sell or otherwise transfer (or
one or more of its Subsidiaries shall sell or otherwise
transfer), in one transaction or a series of related
transactions, assets or earning power aggregating more than 50%
of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any Person or Persons (other
than the Company or any Subsidiary of the Company in one or more
transactions, each of which complies with Section 11 hereof),
then, and in each such case (except as may be contemplated by
Section 13(d) hereof), proper provision shall be made so that:
(i) each holder of a Right, except as provided in Section 7(e)
hereof, shall thereafter have the right to receive, upon the
exercise thereof at the then current Purchase Price in accordance
with the terms of this Plan, such number of validly authorized
and issued, fully paid, non-assessable and freely traceable
shares of Common Stock of the Principal Party, not subject to any
liens, encumbrances, rights of first refusal or other adverse
claims, as shall be equal to the result obtained by (1)
multiplying the then current Purchase Price by the number of
shares of Common Stock (or, if applicable, preferred stock) for
which a Right is exercisable immediately prior to the first
occurrence of a Section 13 Event (or, if a Section ll(a)(ii)
Event has occurred prior to the first occurrence of a Section 13
Event, multiplying the number of shares of Common Stock (or, if
applicable, preferred stock) for which a Right was exercisable
immediately prior to the first occurrence of a Section ll(a)(ii)
Event by the Purchase Price in effect immediately prior to such
first occurrence), and dividing that product (which, following
the first occurrence of a Section 13 Event, shall be referred to
as the "Purchase Price" for each Right and for all purposes of
this Plan) by (2) 50% of the Current Market Price per share of
the Common Stock of such Principal Party on the date of
consummation of such Section 13 Event; (ii) such Principal Party
shall thereafter be liable for, and shall assume, by virtue of
such Section 13 Event, all the obligations and duties of the
Company pursuant to this Plan; (iii) the term "Company" shall
thereafter be deemed to refer to such Principal Party, it being
specifically intended that the provisions of Section 11 hereof
shall apply only to such Principal Party following the first
occurrence of a Section 13 Event; (iv) such Principal Party shall
take such steps (including, but not limited to, the reservation
of a sufficient number of shares of its Common Stock) in
connection with the consummation of any such transaction as may
be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in
relation to its shares of Common Stock thereafter deliverable
upon the exercise of the Rights; and (v) the provisions of
Section ll(a)(ii) hereof shall be of no effect following the
first occurrence of any Section 13 Event.
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in clause
(x) or (y) of the first sentence of Section 13(a), the Person
that is the issuer of any securities into which shares of Common
Stock of the Company are converted in such merger or
consolidation, and if no securities are so issued, the Person
that is the other party to such merger or consolidation; and
(ii) in the case of any transaction described in clause
(z) of the first sentence of Section 13(a), the Person that is
the party receiving the greatest portion of the assets or earning
power transferred pursuant to such transaction or transactions;
provided, however, that in any such case, (1) if the Common Stock
of such Person is not at such time and has not been continuously
over the preceding twelve (12) month period registered under
Section 12 of the Exchange Act, and such Person is a direct or
indirect Subsidiary of another Person the Common Stock of which
is and has been so registered, "Principal Party" shall refer to
such other Person; and (2) in case such Person is a Subsidiary,
directly or indirectly, of more than one Person, the Common
Stocks of two or more of which are and have been so registered,
"Principal Party" shall refer to whichever of such Persons is the
issuer of the Common Stock having the greatest aggregate market
value.
(c) The Company shall not consummate any such
consolidation, merger, sale or transfer unless the Principal
Party shall have a sufficient number of authorized shares of its
Common Stock which have not been issued or reserved for issuance
to permit the exercise in full of the Rights in accordance with
this Section 13 and unless prior thereto the Company and such
Principal Party shall have executed and delivered to the Rights
Agent, if any, or if no Rights Agent shall have been appointed,
to the Company's Secretary, a supplemental agreement,
satisfactory in form and substance to a majority of the
Disinterested Directors, providing for the terms set forth in
Paragraphs (a) and (b) of this Section 13 and further providing
that, as soon as practicable after the date of any consolidation,
merger or sale of assets mentioned in paragraph (a) of this
Section 13, the Principal Party:
(i) will prepare and file a registration statement under
the Act with respect to the Rights and the securities purchasable
upon exercise of the Rights on an appropriate form, and will use
its best efforts to cause such registration statement to (A)
become effective as soon as practicable after such filing and (B)
remain effective (with a prospectus at all times meeting the
requirements of the Act) until the Expiration Date; and
(ii) will deliver to holders of the Rights historical
financial statements for the Principal Party and each of its
Affiliates which comply in all respects with the requirements for
registration on Form 10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply to
successive mergers or consolidations or sales or other transfers.
In the event that a Section 13 Event shall occur at any time
after the occurrence of a Section ll(a)(ii) Event, the Rights
which have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a).
(d) Notwithstanding anything in this Plan to the
contrary, Section 13 shall not be applicable to a transaction
described in subparagraphs (x) and (y) of Section 13(a) if (i)
such transaction is consummated with a Person or Persons (or a
wholly owned subsidiary of any such Person or Persons) who
acquired shares of Common Stock pursuant to a Fair Value Offer,
(ii) the price per share of Common Stock offered in such
transaction is not less than the price per share of Common Stock
paid to all holders of shares of Common Stock whose shares were
purchased pursuant to such Fair Value Offer, and (iii) the form
of consideration being offered to the remaining holders of shares
of Common Stock pursuant to such transaction is cash. Upon
consummation of any such transaction contemplated by this Section
13(d), all Rights hereunder shall expire.
(e) The provisions of this Section 13 shall be
applicable to a transaction described in subparagraphs (x), (y),
and (z) of Section 13(a) regardless of the business form of the
Principal Party (e.g., corporation, partnership, or other form).
In the event that the Principal Party is an entity other than a
corporation, the term "Common Stock," as used in reference to the
Principal Party in this Section 13 or otherwise, shall be
construed to refer to the equity securities or other equity
interest having power to control or direct the management of, or
representing the fundamental economic interest in, such Principal
Party.
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions
of Rights or to distribute Rights Certificates which evidence
fractional Rights. In lieu of such fractional Rights, there may
be paid to the registered holders of the Rights Certificates with
regard to which such fractional Rights would otherwise be
issuable an amount in cash equal to the same fraction of the
current market value of a whole Right. For purposes of this
Section 14(a), the current market value of a whole Right shall be
the closing price of the Rights for the Trading Day immediately
prior to the date on which such fractional Rights would have been
otherwise issuable. The closing price of the Rights for any day
shall be the last sale price, regular way, or, in case no such
sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect
to securities listed on the principal national securities
exchange on which the Rights are listed or admitted to trading,
or if the Rights are not listed or admitted to trading on any
national securities exchange, the last quoted price or, if not so
quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association
of Securities Dealers, Inc. Automated Quotation System or such
other system then in use or, if on any such date the Rights are
not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker
selected by the Board making a market in the Rights. If on any
such date no such market maker is making a market in the Rights,
then the fair value of the Rights on such date as determined in
good faith by the Board shall be used.
(b) The Company shall not be required to issue fractions
of shares of Common Stock (or other securities) upon exercise of
the Rights or to distribute certificates which evidence
fractional shares of Common Stock (or other securities). In lieu
of fractional shares of Common Stock (or other securities), the
Company may pay to the registered holders of Rights Certificates
at the time such Rights are exercised as herein provided an
amount in cash equal to the same fraction of the current market
value of a share of Common Stock (or other securities). For
purposes of this Section 14(b), the current market value of one
share of Common Stock shall be the closing price per share of
Common Stock (as determined pursuant to Section ll(d) hereof) for
the Trading Day immediately prior to the date of such exercise,
and the current market value of any other securities shall be
determined utilizing the principles of Section ll(d) hereof as
applied by the Board in its sole discretion.
(c) The holders of Rights by the acceptance of the
Rights expressly waive any right to receive any fractional Rights
and/or any fractional shares upon exercise of a Right.
Section 15. Rights of Action.
All rights of action in respect of this Plan are vested
in the respective registered holders of the Rights Certificates
(and, prior to the Distribution Date, the registered holders of
the Common Stock); and any registered holder of any Rights
Certificate (or, prior to the Distribution Date, of the Common
Stock), without the consent of the holder of any other Rights
Certificate (or, prior to the Distribution Date, of the Common
Stock), may, in such holder's own behalf and for such holder's
own benefit, enforce, and may institute and maintain any suit,
action or, proceeding against the Company to enforce, or
otherwise act in respect of, such holder's right to exercise the
Rights evidenced by such Rights Certificate in the manner
provided in such Rights Certificate and in this Plan. Without
limiting the foregoing or any remedies available to the holders
of Rights, it is specifically acknowledged that the holders of
Rights would not have an adequate remedy at law for any breach of
this Plan and shall be entitled to specific performance of the
obligations hereunder and injunctive relief against actual or
threatened violations of the obligations hereunder of any Person
subject to this Plan.
Section 16. Agreement of Rights Holders.
Every holder of a Right by accepting the same consents
and agrees with the Company and with every other holder of a
Right that:
(a) Prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of Common
Stock;
(b) After the Distribution Date, the Rights Certificates
are transferable only on the registry books of the Company, if
surrendered at the principal office of the Company, or, if a
Rights Agent is appointed by the Company hereunder, only on the
registry books of said Rights Agent, if surrendered at the
principal stockholder services office or offices of the Rights
Agent designated for such purposes, in either case duly endorsed
or accompanied by a proper instrument of transfer and with the
appropriate forms and certificates fully executed;
(c) Subject to Section 6(a) and Section 7(f)) hereof,
the Company and the Rights Agent, if any, may deem and treat the
person in whose name a Rights Certificate (or, prior to the
Distribution Date, the associated Common Stock certificate) is
registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or
writing on the Rights Certificates or the associated Common Stock
certificate made by anyone other than the Company or any Rights
Agent) for all purposes whatsoever, and neither the Company nor
any Rights Agent appointed by the Company, subject to the last
sentence of Section 7(e) hereof, shall be required to be affected
by any notice to the contrary; and
(d) Notwithstanding anything in this Plan to the
contrary, neither the Company nor any Rights Agent appointed by
the Company shall have any liability to any holder of a Right or
other Person as a result of its inability to perform any of its
obligations under this Plan by reason of any preliminary or
permanent injunction or other order, decree or ruling issued by a
court of competent jurisdiction or by a governmental, regulatory
or administrative agency or commission, or any statute, rule,
regulation or executive order promulgated or enacted by any
governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company
must use its best efforts to have any such order, decree or
ruling lifted or otherwise overturned as soon as possible.
Section 17. Rights Certificate Holder Not Deemed a
Stockholder. No holder, as such, of any Rights Certificate shall
be entitled to vote, receive dividends or be deemed for any
purpose the holder of the number of shares of Common Stock or any
other securities of the Company which may at any time be issuable
on the exercise of the Rights represented thereby, nor shall
anything contained herein or in any Rights Certificate be
construed to confer upon the holder of any Rights Certificate, as
such, any of the rights of a stockholder or any right to vote for
the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold
consent to any corporate action, or to receive notice of meetings
or other actions affecting stockholders (except as provided in
Section 21 hereof), or to receive dividends or subscription
rights or otherwise, until the Right or Rights evidenced by such
Rights Certificate shall have been exercised in accordance with
the provisions hereof.
Section 18. Indemnification of Corporate Officers.
(a) The Company shall indemnify its officers for and
hold them harmless against any loss, liability, or expense
incurred without negligence, bad faith or willful misconduct on
the part of such officers for anything done or omitted by such
officers in connection with the acceptance and administration of
this Plan, including the costs and expenses of defending against
any claim of liability arising therefrom, directly or indirectly,
and will promptly reimburse such officers for any legal or other
expenses reasonably incurred in investigating or defending any
such 1066, expense, claim, damage or liability.
(b) The Company' 6 officers shall be protected by the
indemnity provided in this Section 18 and shall incur no
liability for or in respect of any action taken, suffered or
omitted by any of them in connection with their administration of
this Plan in reliance upon any Rights Certificate or certificate
for Common Stock or for other securities of the Company,
instrument or assignment of transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by
such officer to be genuine and to be signed, executed and, where
necessary, verified or acknowledged, by the proper Person or
Persons.
Section 19. Issuance of New Rights Certificates.
Notwithstanding any of the provisions of this Plan or of the
Rights to the contrary, the Company may, at its option, issue new
Rights Certificates evidencing Rights in such form as may be
approved by the Board to reflect any adjustment or change in the
Purchase Price and the number or kind or class of shares or other
securities or property purchasable under the Rights Certificates
made in accordance with the provisions of this Plan. In addition,
in connection with the issuance or sale of shares of Common Stock
following the Distribution Date and prior to the redemption or
expiration of the Rights, the Company (a) shall, with respect to
shares of Common Stock so issued or sold pursuant to the exercise
of stock options, or under any employee benefit plan or
arrangement, or upon the exercise, conversion or exchange of
securities hereinafter issued by the Company, and (b) may, in any
other case, if deemed necessary or appropriate by the Board,
issue Rights Certificates representing the appropriate number of
Rights in connection with such issuance or sale; provided,
however, that (i) no such Rights Certificate shall be issued if,
and to the extent that, the Company shall be advised by counsel
that such issuance would create a significant risk of material
adverse tax consequences to the Company or the Person to whom
such Rights Certificate would be issued, and (ii) no such Rights
Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of
the issuance thereof.
Section 20. Redemption and Termination.
(a) The Disinterested Directors then in office
may. at any time prior to the Final Expiration Date, at their
option, upon the affirmative vote or written consent of not less
than a majority of such Disinterested Directors, redeem all but
not less than all of the then outstanding Rights at a redemption
price of $.01 per Right, as such amount may be appropriately
adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such redemption
price being hereinafter referred to as the "Redemption Price").
The Company may, at its option, pay the Redemption Price in cash,
shares of Common Stock (based on the Current Market Price of the
Common Stock at the time of redemption) or any other form of
consideration deemed appropriate by a majority of the
Disinterested Directors.
(b) Immediately upon the taking of action by a majority
of the Disinterested Directors ordering the redemption of the
Rights, and without any further action and without any notice,
the right to exercise the Rights will terminate and the only
right thereafter of the holders of Rights shall be to receive the
Redemption Price (without the payment of any interest thereon)
for each Right so held. Promptly after the taking of action by a
majority of the Disinterested Directors ordering the redemption
of the Rights, the Company shall give notice of such redemption
to the holders of the then outstanding Rights by mailing such
notice to all such holders at each holder's last address as it
appears upon the registry books of the Company. Any notice which
is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice
of redemption will state the method by which the payment of the
Redemption Price will be made.
Section 21. Notice of Certain Events.
(a) In case the Company shall propose, at any time after
the Distribution Date, (i) to pay any dividend payable in shares
of any class to the holders of Common Stock or to make any other
distribution to the holders of Common Stock (other than a regular
quarterly cash dividend out of earnings or retained earnings of
the Company), or (ii) to offer to the holders of Common Stock
rights or warrants to subscribe for or to purchase any additional
shares of Common Stock or shares of stock of any class or any
other securities, rights or options, or (iii) to effect any
reclassification of its Common Stock (other than a
reclassification involving only the subdivision of outstanding
shares of Common Stock), or (iv) to effect any consolidation or
merger into or with any other Person (other than a Subsidiary of
the Company in a transaction which complies with Section ll(o)
hereof), or to effect any sale or other transfer (or to permit
one or more of its Subsidiaries to effect any sale or other
transfer), in one transaction or a series of related
transactions, of more than 50% of the assets or earning power of
the Company and its Subsidiaries (taken as a whole) to
any other Person or Persons (other than the Company and/or any of
its Subsidiaries in one or more transactions each of which
complies with Section ll(o) hereof), or (v) to effect the
liquidation, dissolution or winding up of the Company, then, in
each such case, the Company shall give to each holder of a Rights
Certificate, to the extent feasible and, in accordance with
Section 22 hereof, a notice of such proposed action, which shall
specify the record date for the purposes of such stock dividend,
distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution, or winding up is to take place and the
date of participation therein by the holders of the shares of
Common Stock, if any such date is to be fixed, and such notice
shall be so given in the case of any action covered by clause (I)
or (ii) above at least twenty (20) days prior to the record date
for determining holders of the shares of Common Stock for
purposes of such action, and in the case of any such other
action, at least twenty (20) days prior to the date of the taking
of such proposed action or the date of participation therein by
the holders of the shares of Common Stock, whichever shall be the
earlier.
(b) If any event set forth in Section ll(a)(ii) hereof
shall occur, then, (i) the Company shall as soon as practicable
thereafter give to each holder of a Rights Certificate, to the
extent feasible and in accordance with Section 22 hereof, a
notice of the occurrence of such event, which shall specify the
event and the consequences of the event to holders of Rights
under Section ll(a)(ii) hereof, and (ii) all references in the
preceding paragraph to Common Stock shall, to the extent
appropriate, also be deemed thereafter to refer to other
securities.
Section 22. Notices. Notices or demands authorized by
this Plan to be given or made to or on the Company shall be
sufficiently given or made if sent by first class mail, postage
prepaid, addressed (until another address is sent as provided
below to the holders of the Rights) as follows:
Electromagnetic Sciences, Inc.
660 Engineering Drive
Technology Park/Atlanta
Norcross, Georgia 30092
Attention: Chairman of the Board of Directors
Notices or demands authorized by this Plan to be given
or made to the holder of any Rights Certificate (or, if prior to
the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if
sent by first class mail, postage prepaid, addressed to such
holder at the address of such holder as shown on the registry
books of the Company.
Section 23. Supplements and Amendment; Substituted Plan.
Prior to the Distribution Date, the Company may supplement or
amend any provision of this Plan, terminate this Plan or adopt a
new rights plan in substitution for this Plan and all Rights
outstanding hereunder (in which case this Plan and all such
Rights shall thereafter become null and void), without the
approval of any holders of certificates representing shares of
Common Stock. From and after the Distribution Date, the
Disinterested Directors may supplement or amend this Plan, or
adopt a new rights plan in substitution for this Plan and all
Rights outstanding hereunder (in which case this Plan and all
such Rights shall thereafter become null and void), without the
approval of any holders of Rights Certificates in order (i) to
cure any ambiguity, (ii) to correct or supplement any provision
contained herein which may be defective or inconsistent with any
other provisions herein, (iii) to shorten or lengthen any time
period hereunder, (iv) to effect compliance with, or take
advantage of, any changes in law affecting the legality or
enforceability of plans or arrangements such as this Plan, or (v)
to change or supplement the provisions hereunder in any other
manner which the Disinterested Directors may deem necessary or
desirable, including without limitation the addition of other
events requiring adjustment to the Rights under Section ll(a)(ii)
or 13 or procedures relating to the redemption of the Rights,
which supplement or amendment shall not adversely affect the
interests of the holders of Rights Certificates (other than an
Acquiring Person or an Affiliate or Associate of an Acquiring
Person); provided, this Plan may not be supplemented or amended,
and a new rights plan may not be adopted in substitution for this
Plan, to lengthen, pursuant to clause (iii) of this sentence, any
time period unless such lengthening is for the purpose of
protecting, enhancing or clarifying the rights of, and/or the
benefits to, the holders of Rights (other than an Acquiring
Person or an Affiliate or Associate of an Acquiring Person).
Notwithstanding anything contained in this Plan to the contrary,
no supplement or amendment or substituted plan shall be made or
adopted which changes the Redemption Price, the Final Expiration
Date, the Purchase Price or the number of shares of Common Stock
for which a Right is exercisable, except that any such amendment
may substitute preferred stock for the Common Stock issuable upon
exercise of the Right if the value of the preferred stock so
substituted with respect to each Right shall equal, in the sole
discretion of a majority of the Disinterested Directors, the then
Current Market Value of the Common Stock then issuable upon
exercise of each Right, and any such amendment or substituted
plan effecting such substitution may amend any such provision of
this Plan, including without limitation the adjustment provisions
of Section 11, to reflect appropriately such substitution, or to
restate this Plan in its entirety to reflect appropriately such
substitution. Prior to the Distribution Date, the interests of
the holders of Rights shall be deemed coincident with the
interests of the holders of Common Stock.
Section 24. Successors. All the covenants and provisions
of this Plan by or for the benefit of the Company shall bind and
inure to the benefit of its successors and assigns hereunder.
Section 25. Determinations and Actions by the Board of
Directors, etc. For all purposes of this Plan, any calculation of
the number of shares of Common Stock outstanding at any
particular time, including for purposes of determining the
particular percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial Owner, shall be made in
accordance with the last sentence of Rule 13d-3(d)(1)(i) of the
General Rules and Regulations under the Exchange Act, subject in
all events to the provisions of Section l(e) hereof including
specifically, the last proviso thereof. The Board (or, as set
forth herein, certain specified members thereof) shall have the
exclusive power and authority to administer this Plan and to
exercise all rights and powers specifically granted to the Board
(or, as set forth herein, certain specified members thereof) or
to the Company, or as may be necessary or advisable in the
administration of this Plan, including, without limitation,- the
right and power to (i) interpret the provisions of this Plan, and
(ii) make all determinations deemed necessary or advisable for
the administration of this Plan (including but not limited to a
determination to redeem or not redeem the Rights, to consent to a
transaction in which a Person becomes an Acquiring Person, to
amend the Plan or to remit the Substitute Consideration or Spread
payable). All such actions, calculations, interpretations and
determinations (including, for purposes of clause (y) below, all
omissions with respect to the foregoing) which are done or made
by the Board (or, as set forth herein, certain specified members
thereof) in good faith, shall (x) be final, conclusive and
binding on the Company, the holders of the Rights and all other
parties, and (y) not subject the Board (or, as set forth herein,
certain specified members thereof) to any liability to the
holders of the Rights.
Section 26. Benefits of this Plan. Nothing in this Plan
shall be construed to give to any Person other than the Company
and the registered holders of the Rights Certificates (and, prior
to the Distribution Date, registered holders of the Common Stock)
any legal or equitable right, remedy or claim under this Plan;
but this Plan shall be for the sole and exclusive benefit of the
Company and the registered holders of the Rights Certificates
(and, prior to the Distribution Date, registered holders of the
Common Stock).
Section 27. Severability. If any term, provision,
covenant or restriction of this Plan is held by a court of
competent jurisdiction or other authority to be invalid, void or
unenforceable (including without limitation the last proviso to
Section l(e)), the remainder of the terms, provisions, covenants
and restrictions of this Plan shall remain in full force and
effect and shall in no way be affected, impaired or invalidated;
provided, however, that in the event of such a holding by such
court or authority, this Plan may be amended to take into account
such holding including by way of illustration but not limitation,
an amendment raising the percentage of beneficial ownership
specified in Section l(a) or Section ll(a)(ii). Without limiting
the foregoing provisions of this Section 27, if any provisions of
this Plan requiring that a determination be made by less than the
entire Board (or at a time or with the concurrence of a group of
directors consisting less than the entire Board) is held by a
court of competent jurisdiction or other authority to be invalid,
void or unenforceable, such determination shall no longer be
subject to determination by such directors constituting less than
the entire Board, but shall instead be made in the best interests
of the holders of the Rights and with a view to effecting the
purposes and intent of this Plan by a court of competent
jurisdiction, or, if such court determines it is impermissible or
inappropriate to discharge such function, then such determination
shall be made by the entire Board in good faith, in accordance
with applicable law and the Company's articles of incorporation
and by-laws, in the best interests of the holders of the Rights,
and with a view to effecting the purposes and intent of this
Plan.
Section 28. Governing Law. This Plan, each Right and
each Rights Certificate issued hereunder shall be deemed to be a
contract made under the laws of the State of Georgia and for all
purposes shall be governed by and construed in accordance with
the laws of such State applicable to contracts made and to be
performed entirely within such State.
Section 29. Descriptive Headings. Descriptive headings
of the several Sections of this Plan are inserted for convenience
only and shall not control or affect the meaning or construction
of any of the provisions hereof.
<PAGE>
EXHIBIT A
[Form of Face Side of Rights Certificate]
Certificate No. R- Rights
NOT EXERCISABLE AFTER APRIL 6, 1999, OR EARLIER IF REDEEMED BY
THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION
OF THE COMPANY, AT $.01 PER RIGHT ON THE TERMS SET FORTH IN THE
STOCKHOLDER RIGHTS PLAN. UNDER CERTAIN CIRCUMSTANCES, RIGHTS
BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH TERM IS
DEFINED IN THE RIGHTS PLAN) AND ANY SUBSEQUENT HOLDER OF SUCH
RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS
RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO
WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF
AN ACQUIRING PERSON (AS SUCH TERM IS DEFINED IN THE STOCKHOLDER
RIGHTS PLAN). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS
REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES
SPECIFIED IN SECTION 7(e) OF SUCH PLAN.]*
Rights Certificate
ELECTROMAGNETIC SCIENCES, INC.
This certifies that , or registered
assigns, is the registered owner of the number of Rights set
forth above, each of which entitles the owner thereof, subject to
the terms, provisions and conditions of the Stockholder Rights
Plan, dated as of July 3, 1989 (the "Rights Plan"), of
Electromagnetic Sciences, Inc., a Georgia corporation (the
"Company"), to purchase from the Company at any time prior to
5:00 P.M. Eastern time on April 6, 1999, at the principal
executive office of the Company or the offices of the Rights
Agent, if any, designated for such purpose, one fully paid and
nonassessable share of common stock, par value $.10 per share
(the "Common Stock"), of the Company, at a purchase price of
* The portion of the legend in brackets shall be inserted only if
applicable and shall replace the preceding sentence.
$30.00 per Right (the ''Purchase Price"), upon presentation and
surrender of this Rights Certificate with a Form of Election to
Purchase and related Certificate duly executed. The number of
Rights evidenced by this Rights Certificate (and the amount of
securities constituting a Right which may be purchased upon
exercise thereof) set forth above, and the Purchase Price set
forth above, are the amount of securities constituting a Right
and Purchase Price as of July 3, 1989, based on the Common Stock
an constituted as of such date.
As specified in the Rights Plan, the Company reserves
the right, at the sole discretion of its Board of Directors, to
substitute for a share of Common Stock, a share or fraction of a
share of preferred stock of the Company, in the event that the
stockholders of the Company authorize the creation of a class of
Company preferred stock and so long as the value of each such
share or fraction of a share of such preferred stock is equal, in
the sole discretion of the Company's Board of Directors, to the
then-current market value of a share of Common Stock.
Upon the occurrence of a Section ll(a)(ii) Event (as
defined in the Rights Plan), if the Rights evidenced by this
Rights Certificate are beneficially owned by (i) an Acquiring
Person or an Associate or Affiliate thereof (as such terms are
defined in the Rights Plan), (ii) a transferee of any such -
Acquiring Person (or Associate or Affiliate thereof) who becomes
a transferee after such Acquiring Person becomes such, or (iii)
under certain circumstances specified in the Rights Plan, a
transferee of any such Acquiring Person (or Associate or
Affiliate thereof), who becomes a transferee prior to or
concurrently with such Acquiring Person becoming such, such
Rights shall become null and void and no holder hereof shall have
any right with respect to such Rights from and after the
occurrence of such Section ll(a)(ii) Event.
As provided in the Rights Plan, the Purchase Price and
the number and kind of shares of Common Stock, securities or
other property, which may be purchased upon the exercise of the
Rights evidenced by this Rights Certificate are subject to
modification and adjustment upon the happening of certain events,
including Triggering Events (as defined in the Rights Plan).
This Rights Certificate is subject to all of the terms,
provisions and conditions of the Rights Plan, which terms,
provisions and conditions are hereby incorporated herein by
reference and made a part hereof and to which Rights Plan
reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities
hereunder of the Rights Agent, if any, the Company and the
holders of the Rights Certificates, which limitations of rights
include the temporary suspension of the exercisability of such
Rights under the specific circumstances set forth in the Rights
Plan. Copies of the Rights Plan are on file at the principal
executive office of the Company and are also available upon
written request to the Company.
This Rights Certificate, with or without other Rights
Certificates, upon surrender at the principal executive offices
of the Company or the stockholder services office or offices of
any Rights Agent designated for such purpose, as the case may be,
may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling
the holder to purchase a like aggregate number of shares of
Common Stock as the Rights evidenced by the Rights Certificate or
Rights Certificates surrendered shall have entitled such holder
to purchase. If this Rights Certificate shall be exercised in
part, the holder shall be entitled to receive upon surrender
hereof another Rights Certificate or Rights Certificates for the
number of whole Rights not exercised.
Subject to the provisions of the Rights Plan, the Rights
evidenced by this Certificate may be redeemed at any time prior
to the Final Expiration Date by the Company at its option at a
redemption price of $.01 per Right (payable in cash, Common Stock
or other consideration deemed appropriate by a majority of the
Disinterested Directors of the Company).
The Company is not required to issue fractional shares
of Common Stock upon the exercise of any Right or Rights
evidenced thereby, but in lieu thereof a cash payment will be
made, as provided in the Rights Plan.
No holder of this Rights Certificate shall be entitled
to vote or receive dividends or be deemed for any purpose the
holder of shares of Common Stock or any other securities of the
Company which may at any time be issuable on the exercise hereof,
nor shall anything contained in the Rights Plan or herein be
construed to confer upon the holder hereof, as such, any of the
rights of a stockholder of the Company or any right to vote for
the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold
consent to any corporate action, or to receive notice of meetings
or other actions affecting stockholders (except as provided in
the Rights Plan), or to receive dividends or subscription rights
until the Right or Rights evidenced by this Rights Certificate
shall have been exercised as provided in the Rights Plan.
This Rights Certificate shall not be valid or effective
for any purpose until it shall have been executed by the Company.
WITNESS the facsimile signature of the proper officers
of the company and its corporate seal.
Dated as of , 19
ATTEST: ELECTROMAGNETIC SCIENCES, INC.
Title By:
Title
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires
to transfer the Rights Certificate.)
FOR VALUE RECEIVED
hereby sells, assigns and transfers unto
(Please print name and address of transferee)
this Rights Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and
appoint Attorney, to transfer the within Rights Certificate on
the books of the within-named Company, with full power of
substitution.
Dated: , 19
Signature
Signature Guaranteed:
<PAGE>
Certificate
The undersigned hereby certifies by checking the
appropriate boxes that:
(1) this Rights Certificate [ ] is [ ] is not being
sold, assigned and transferred by or on behalf of a Person who is
or was an Acquiring Person or an Affiliate or Associate of any
such Person (as such terms are defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced
by this Rights Certificate from any person who is, was or
subsequently became an Acquiring Person or an Affiliate or
Associate of any such Person.
Dated: , 19
Signature
NOTICE
The signature to the foregoing Assignment and
Certificate must correspond to the name as written upon the face
of this Rights Certificate in every particular, without
alteration or enlargement or any change whatsoever.
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise Rights represented
by the Rights Certificate.)
To: ELECTROMAGNETIC SCIENCES, INC.:
The undersigned hereby irrevocably elects to exercise
Rights represented by this Rights Certificate to
purchase the number of shares of Common Stock issuable upon the
exercise of the Rights (or such other securities of the Company
or of any other person which may be issuable upon the exercise of
the Rights) and requests that the certificates for shares of
Common Stock (or such other securities) constituting such Rights
be issued in the name of and delivered to:
Please insert social security or other identifying number:
(Please print name and address)
If such number of Rights shall not be all the Rights
evidenced by this Rights Certificate, a new Rights Certificate
for the balance of such Rights shall be registered in the name of
and delivered to:
Please insert social security or other identifying number:
(Please print name and address)
Dated: , 19
Signature
Signature Guaranteed:
Certificate
The undersigned hereby certifies by checking the
appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate [ ]
are [ ] are not being exercised by or on behalf of a Person who
is or was an Acquiring Person or an Affiliate or Associate of any
such Person (as such terms are defined in the Rights Plan);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced
by this Rights Certificate from any Person who is, was or became
an Acquiring Person or an Affiliate or Associate of any such
Person.
Dated: , 19
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Election to Purchase and
Certificate must correspond to the name as written upon the face
of this Rights Certificate in every particular, without
alteration or enlargement or any change whatsoever.
EXHIBIT B
ELECTROMAGNETIC SCIENCES, INC.
SUMMARY OF RIGHTS TO PURCHASE COMMON STOCK
On July 3, 1989, the Board of Directors of
Electromagnetic Sciences, Inc. (the "Company") declared a
dividend distribution of one Right for each outstanding share of
Company Common Stock to stockholders of record at the close of
business on July 3, 1989. The description and terms of the Rights
are set forth in a Stockholder Rights Plan (the "Rights Plan")
adopted by the Board of Directors. Subject to becoming
exercisable as described below, each Right entitles its
registered holder to purchase from the Company one share of
Common Stock at a Purchase Price of $30.00, subject to
adjustment.
Initially, the Rights will be attached to all Common
Stock certificates representing shares then outstanding, and no
separate Rights Certificates will be distributed. The Rights will
separate from the Common Stock on the Distribution Date, and
separate Rights Certificates will be distributed as soon as
practicable thereafter to record holders of the Common Stock at
the close of business on the Distribution Date. As of and after
the Distribution Date, the separate Rights Certificates alone
will represent the Rights. Except as otherwise determined by the
Board of Directors, all shares of Common Stock issued prior to
the Distribution Date will be issued with Rights.
The Distribution Date will occur on the earliest of (i)
10 days following the date of a public announcement that a person
or group of affiliated or associated persons (an "Acquiring
Person") has acquired, or obtained the right to acquire, without
the consent of a majority of Disinterested Directors, beneficial
ownership of 20% or more of the outstanding shares of Common
Stock (the "Stock Acquisition Date"), (ii) 10 days following the
commencement of a tender offer or exchange offer that would
result in a person or group beneficially owning 20% or more of
such outstanding shares of Common Stock, (iii) with respect to
any Acquiring Person whose acquisition of 20% or more of the
outstanding shares of Common Stock of the Company was consented
to by a majority of the Disinterested Directors, 10 days
following the date that such person, without the consent of a
majority of the Disinterested Directors, thereafter acquires an
additional 2% of the outstanding shares of Common Stock of the
Company or engages in certain self-dealing transactions with the
Company, or (iv) 10 days following the date that an offer, made,
encouraged or supported by such Acquiring Person, to acquire the
Company in a merger or other business combination transaction in
which the Company is not the surviving corporation or to sell or
transfer 50% or more of the Company's assets or earning power is
first announced, published, sent or given.
Until the Distribution Date, (i) the Rights will be
evidenced by the Common Stock certificates and will be
transferred with and only with such Common Stock certificates,
(ii) new Common Stock certificates issued after July 3, 1989,
will contain a legend incorporating the Rights Plan by reference,
and (iii) the surrender for transfer of any certificate for
Common Stock outstanding will also constitute the transfer of the
Rights associated with the Common Stock represented by such
certificate.
The Rights are not exercisable until the Distribution
Date and will expire at the close of business on April 6, 1999,
unless earlier redeemed by the Company as described below.
If at any time after the Rights dividend is declared,
(1) a Person becomes the beneficial owner of 20% or more
of the then outstanding shares of Common Stock without the
consent of a majority of the Disinterested Directors (except
pursuant to an offer for all outstanding shares of Common Stock
which a majority of the Disinterested Directors determine to be
fair to and otherwise in the best interests of the Company and
its stockholders), or
(2) a Person who has become the beneficial owner of 20%
or more of the then outstanding shares of Common Stock with the
consent of a majority of the Disinterested Directors thereafter
acquires an additional 2% or more of the outstanding shares of
Common Stock of the Company without such consent or engages in
certain self-dealing transactions with the Company without such
consent,
then beginning ten days after such event (or such shorter or
longer period as a majority of the Disinterested Directors shall
from time to time determine), each holder of a Right will have
the right to receive, upon exercise of the Right and payment of
the Purchase Price, Common Stock (or, in certain circumstances
and subject to certain limitations, cash, property or other
securities of the Company) having a value equal to two times the
Purchase Price of the Right, but in no case exceeding one share
for each $.10 of Purchase Price paid by the holder.
Alternatively, in such event and with the approval of a majority
of the Disinterested Directors, each holder of a Right will have
the right, or may be permitted only, to receive shares of Common
Stock having a value equal to the Purchase Price upon surrender
of the Right to the Company and without payment of the Purchase
Price, subject to requirements as to the payment of par value.
Notwithstanding any of the foregoing, upon the occurrence of any
of the events set forth in this paragraph, all Rights that are,
or (under certain circumstances specified in the Rights Plan)
were, beneficially owned by any Acquiring Person will be null and
void.
For example, at a Purchase Price of $30.00 per Right,
each Right not owned by an Acquiring Person (or by certain
related parties) following an event set forth in the preceding
paragraph would entitle its holder to purchase $60.00 worth of
Common Stock (or other consideration, as noted above) for $30.00.
Assuming that the Common Stock had a per share value of $10.00 at
such time, the holder of each valid Right would be entitled to
purchase six shares of Common Stock for $30.00.
If at any time following or simultaneously with the
Distribution Date, without the consent of a majority of
Disinterested Directors, (i) the Company is acquired in a merger
or other business combination transaction in which the Company is
not the surviving corporation (other than a merger which follows
a fair offer for all outstanding shares, as described in the
second preceding paragraph), or (ii) 50% or more of the Company's
assets or earning power is sold or transferred, each holder of a
Right (except Rights which previously have been voided as set
forth above) will have the right upon exercise of the Right to
receive common stock (or other securities or property, as the
case may be) of the acquiring company having a value equal to two
times the Purchase Price of the Right.
The Purchase Price payable and the number of shares of
Common Stock (or the number and kind of other securities or
property, as the case may be) issuable upon exercise of the
Rights are subject to adjustment from time to time to prevent
dilution (i) in the event of a share dividend on, or a
subdivision, combination or reclassification of, the Common
Stock, (ii) if holders of the Common Stock are granted certain
rights or warrants to subscribe for Common Stock or convertible
securities at less than the current market price of the Common
Stock, or (iii) upon the distribution to holders of the Common
Stock of evidences of indebtedness or assets (excluding regular
quarterly cash dividends) or of subscription rights or warrants
(other than those referred to above).
With certain exceptions, no adjustment in the Purchase
Price will be required until cumulative adjustments amount to at
least 1% of the Purchase Price. The Company is not required to
issue fractional share of Common Stock and in lieu thereof an
adjustment in cash may be made based on the market price of the
Common Stock on the last trading date prior to the date of
exercise.
At any time prior to the Expiration Date, the
Disinterested Directors, by majority vote, may redeem the
outstanding Rights at a redemption price of $0.01 per Right (the
"Redemption Price") (payable in cash, Common Stock or other
consideration deemed appropriate by a majority of the
Disinterested Directors). Immediately upon the action of the
Disinterested Directors electing to redeem the outstanding
Rights, the right to exercise the outstanding Rights will
terminate and the holders of outstanding Rights will only have
the right to receive the Redemption Price. The Company shall
promptly give notice of such action to all Rights holders by
first-class mail.
A "Disinterested Director" is any member of the Board of
Directors of the Company who is not, does not control, is not
controlled by, is not affiliated with, has not been nominated by
or is not in any other manner representative of, and does not
have a substantial interest in (whether by beneficial ownership
of securities or otherwise), any Acquiring Person or associate or
affiliate thereof.
Until a Right is exercised, the holder thereof, as such,
will have no rights as a stockholder of the Company, including,
without limitation, the right to vote or to receive dividends.
Stockholders may, depending upon the circumstances, recognize
taxable income in the event that the Rights become exercisable
for Common Stock (or other consideration) of the Company or for
securities of an acquiring company as set forth above.
Prior to the Distribution Date, any of the provisions of
the Rights Plan may be amended by the Board of Directors, or the
Board of Directors may adopt a new rights plan in substitution
for the Rights Plan and all Rights outstanding thereunder. After
the Distribution Date, the provisions of the Rights Plan may be
amended, or a new rights plan may be adopted in substitution for
the Rights Plan and all rights outstanding thereunder, by a
majority of the Disinterested Directors to cure any ambiguity,
correct or supplement any provision of the Rights Plan that may
be defective or inconsistent with other provisions of the Rights
Plan, shorten or lengthen any time period under the Rights Plan,
effect compliance with, or take advantage of, changes in law
affecting the legality or enforceability of the Rights Plan, or
change or supplement the provisions of the Rights Plan in any
manner that the majority of the Disinterested Directors may deem
desirable (including, without limitation, the addition of other
events requiring adjustment to the Rights), which change,
supplement or substitution does not adversely affect the
interests of holders of Rights (other than those of an Acquiring
Person or an affiliate or associate of an Acquiring Person).
Copies of the Rights Plan will be filed with the
Securities and Exchange Commission as an Exhibit to an interim
report to be filed by the Company on Form 8-K dated July 3, 1989.
Copies of the Rights Plan are available free of charge from the
Company. This summary description of the Rights does not purport
to be complete and is qualified in its entirety by reference to
the Rights Plan, which is incorporated herein by reference.
Exhibit 4.2
AGREEMENT TO FILE INSTRUMENTS
WITH RESPECT TO LONG-TERM DEBT
Pursuant to Regulations S-K Item 601(b)(4)(iii)(A),
Electromagnetic Sciences, Inc. hereby agrees to cause to be filed
with the Securities and Exchange Commission, upon its request, a
copy of any instrument, not filed as an exhibit to the Report or
Registration Statement to which this Exhibit pertains, with
respect to long-term debt of Electromagnetic Sciences, Inc. or
any consolidated subsidiary of Electromagnetic Sciences, Inc.
ELECTROMAGNETIC SCIENCES, INC.
Date: March 25, 1996 By: /s/ William S. Jacobs
William S. Jacobs
Vice President and General Counsel
Exhibit 10.9
As Amended Through
January 29, 1988
ELECTROMAGNETIC SCIENCES, INC.
1986 DIRECTORS' STOCK OPTION PLAN
ARTICLE I
DEFINITIONS
As used herein, the following terms have the meanings
hereinafter set forth unless the context clearly indicates to the
contrary:
(a) "Board" shall mean the Board of Directors of the
Company.
(b) "Company" shall mean Electromagnetic Sciences,
Inc.
(c) "Date of Grant" shall mean each date after the
effective date of the Plan on which the stockholders of the
Company shall elect directors at an Annual Meeting of such
stockholders or any adjournment thereof.
(d) "Fair Market Value" shall mean the closing sales
price, or the mean between the closing high "bid" and low "asked"
prices, as the case may be, of the Stock in the over-the-counter
market on the day on which such value is to be determined, as
reported by the National Association of Securities Dealers
Automated Quotation System or successor national quotation
service. If the Stock is listed on a national securities
exchange, "Fair Market Value" shall mean the closing price of the
Stock on such national securities exchange on the day on which
such value is to be determined, as reported in the composite
quotations for securities traded on such exchange provided by the
National Association of Securities Dealers or successor national
quotation service. In the event no such quotations are available
for the day in question, "Fair Market Value" shall be determined
by reference to the appropriate prices on the next preceding day
for which such prices are reported.
(e) "Option" shall mean a Directors' Stock Option to
purchase Stock granted pursuant to the provisions of Article V
hereof.
(f) "Optionee" shall mean a person to whom an Option
has been granted hereunder.
(g) "Option Price" shall mean the price at which an
Optionee may purchase a share of stock under a Stock Option
Agreement.
(h) "Plan" shall mean the Electromagnetic Sciences,
Inc. 1986 Directors' Stock Option Plan, the terms of which are
set forth herein.
(i) "Stock" shall mean the $.10 par value common stock
of the Company or, in the event that the outstanding shares of
Stock are hereafter changed into or exchanged for different stock
or securities of the Company or some other corporation, such
other stock or securities.
(j) "Stock Option Agreement" shall mean an agreement
between the Company and the Optionee under which the Optionee may
purchase Stock in accordance with the Plan.
ARTICLE II
THE PLAN
2.1 Name. This plan shall be known as the "Electromagnetic
Sciences, Inc. 1986 Directors' Stock Option Plan."
2.2 Purpose. The purpose of the Plan is to advance the
interests of the Company and its stockholders by affording
elected directors of the Company an opportunity to acquire or
increase their proprietary interests in the Company, and thereby
to encourage their continued service as directors and to provide
them additional incentive to achieve the Company's growth
objectives.
2.3 Effective Date. The effective date of the Plan is
January 31, 1986, which is the date of its adoption (subject to
certain stated conditions) by the Board.
2.4 Termination Date. The Plan shall terminate and no
further Options shall be granted hereunder upon the tenth
anniversary of its effective date.
ARTICLE III
PARTICIPANTS
Each member of the Board, including each director who is an
employee of the Company or its subsidiaries, shall participate in
the Plan, provided that he is elected to a regular term as such a
member at an Annual Meeting of stockholders, or any adjournment
thereof.
ARTICLE IV
SHARES OF STOCK SUBJECT TO PLAN
4.1 Limitations. Subject to any antidilution adjustment
pursuant to the provisions of Section 4.2 hereof, the maximum
number of shares of Stock which may be issued and sold hereunder
shall not exceed 45,000 shares. Shares subject to an Option may
be either authorized and unissued shares or shares issued and
later acquired by the Company; provided, however, the shares of
Stock with respect to which an Option has been exercised shall
not again be available for option hereunder. If outstanding
Options granted hereunder shall terminate or expire for any
reason without being wholly exercised prior to the end of the
period during which Options may be granted hereunder, new Options
may be granted hereunder covering such unexercised shares.
4.2 Antidilution. In the event that the outstanding shares
of Stock are changed into or exchanged for a different number or
kind of shares or other securities of the Company or of another
corporation by reason of merger, consolidation, reorganization,
recapitalization, reclassification, combination of shares, stock
splitup or stock dividend:
(a) The aggregate number and kind of shares of Stock
for which Options may be granted hereunder shall be adjusted
appropriately;
(b) The rights under outstanding Options granted
hereunder, both as to the number of subject shares and the Option
Price, shall be adjusted appropriately; and
(c) Where dissolution or liquidation of the Company or
any merger or combination in which the Company is not a surviving
corporation is involved, each outstanding Option granted
hereunder shall terminate, but the Optionee shall have the right,
immediately prior to such dissolution, liquidation, merger or
combination, to exercise his Option, in whole or in part, to the
extent that it shall not have been exercised, without regard to
the date on which such Option would otherwise have become
exercisable pursuant to Sections 5.4 and 5.6.
The foregoing adjustments and the manner of application
thereof shall be determined solely by the Board, and any such
adjustment may provide for the elimination of fractional share
interests. The adjustments required under this Article shall
apply to any successor or successors of the Company and shall be
made regardless of the number or type of successive events
requiring adjustments hereunder.
ARTICLE V
OPTIONS
5.1 Option Grant, Number of Shares and Agreement. On each
Date of Grant, each person elected to a regular term as a
director at the respective Annual Meeting of stockholders (or any
adjournment thereof) shall automatically be granted an Option to
purchase the maximum number of shares having an aggregate fair
market value on the Date of Grant not exceeding the aggregate
compensation payable to such person for services as a director
during the forthcoming year, based solely on assumed attendance
at four regular Board Meetings and on rates of compensation in
effect on the March 1 immediately preceding the Date of Grant,
without reference to any additional compensation for committee
membership or meetings. Each Option so granted shall be
evidenced by a written Stock Option Agreement, dated as of the
Date of Grant and executed by the Company and the Optionee,
stating the Option's duration, times of exercise, and exercise
price. The terms and conditions of the Option shall be
consistent with the Plan.
5.2 Option Price. The Option Price of the Stock subject to
each Option shall be the Fair Market Value of the Stock on its
Date of Grant.
5.3 Exercise Period. The period for the exercise of each
Option shall expire on the sixth anniversary of the Date of
Grant.
5.4 Option Exercise.
(a) Subject to the effects of prior termination as
director as provided in Section 5.6, an Option shall become
exercisable in full on the first anniversary of the Date of
Grant, and shall remain exercisable thereafter at all times prior
to expiration of the Option, regardless of whether the Optionee
thereafter continues to serve as a member of the Board.
(b) An Option may be exercised at any time or from
time to time during the term of the Option as to any or all full
shares which have become exercisable in accordance with this
Section, but not as to less than 25 shares unless the remaining
shares that are so exercisable are less than 25 shares. The
Option Price is to be paid in full in cash upon the exercise of
the Option; provided, however, that in lieu of cash all or any
portion of the Option Price may be paid by tendering to the
Company shares of Stock duly endorsed for transfer and owned by
the Optionee, to be credited against the Option Price at their
Fair Market Value at the time of exercise. The holder of an
Option shall not have any of the rights of a stockholder with
respect to the shares of Stock subject to the Option until such
shares have been issued or transferred to him upon the exercise
of his Option.
(c) An Option shall be exercised by written notice of
exercise of the Option, with respect to a specified number of
shares of Stock, delivered to the Company at its principal
office, and by payment to the Company in accordance with the
preceding paragraph at said office of the full amount of the
Option Price for such number of shares. In addition to and at
the time of payment of the Option Price, the Optionee shall pay
to the Company in cash the full amount of any federal and state
withholding or other employment taxes applicable to the taxable
income of such Optionee resulting from such exercise; provided,
however, that all or any portion of such tax obligations,
together with additional taxes not exceeding the actual
additional taxes to be owed by the Optionee as a result of such
exercise, may, upon the irrevocable election of the Optionee, be
paid by tendering to the Company shares of Stock duly endorsed
for transfer and owned by the Optionee, or by authorization to
the Company to withhold shares of Stock otherwise issuable upon
exercise of the Option, in either case in that number of shares
having a Fair Market Value at the time of exercise equal to the
amount of such taxes thereby being paid, and subject, in the case
of any Optionee who is required to file reports under Section
16(a) of the Securities Exchange Act of 1934, as amended (the
"1934 Act"), to such restrictions as to the approval and timing
of any such election as the Company may from time to time
determine to be necessary or appropriate to satisfy the
conditions of the exemption set forth in Rule 16b-3 under the
1934 Act.
5.5 Nontransferability of Option. Options may not be
transferred by an Optionee otherwise than by will or the laws of
descent and distribution. During the lifetime of an Optionee,
his Option may be exercised only by him (or by his guardian or
legal representative, should one be appointed). In the event of
the death of an Optionee, any Option held by him may be exercised
by his legatee(s) or other distributee(s) or by his personal
representative.
5.6 Termination as a Director. In the event of an
Optionee's termination as a member of the Board (other than a
termination that is due either to death or disability) prior to
the earlier of the first anniversary of the Date of Grant or the
first Annual Meeting (or adjournment thereof), occurring after
the Date of Grant of an Option, at which the stockholders shall
elect directors, such Option shall not thereafter become
exercisable in whole or in part, and shall thereupon terminate.
ARTICLE VI
STOCK CERTIFICATES
The Company shall not be required to issue or deliver any
certificate for shares of Stock purchased upon the exercise of
any Option granted hereunder or any portion thereof, prior to
fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock
exchanges on which the Stock is then listed;
(b) The completion of any registration or other
qualification of such shares under any federal or state law or
under the rules or regulations of the Securities and Exchange
Commission or any other governmental regulatory body, which the
Company upon the advice of counsel shall determine to be
necessary or advisable;
(c) The obtaining of any approval or other clearance from
any federal or state governmental agency which the Company upon
the advice of counsel shall determine to be necessary or
advisable; and
(d) The lapse of such reasonable period of time following
the exercise of the Option as may be appropriate for reasons of
administrative convenience.
ARTICLE VII
TERMINATION, AMENDMENT AND MODIFICATION OF PLAN
The Board may at any time terminate the Plan, and may at any
time and from time to time and in any respect amend or modify the
Plan; provided, however, that if the Plan is approved by the
stockholders of the Company, the Board may not thereafter,
without further stockholder approval, amend the Plan:
(a) To materially increase the total number of shares
of Stock subject to the Plan, except as contemplated in Section
4.2 hereof;
(b) To materially modify the requirements as to
eligibility for participation in the Plan; or
(c) To otherwise materially increase the benefits
accruing to participants under the Plan.
No amendment of the Plan shall alter or impair any of the
rights or obligations under any Option theretofore granted under
the Plan without the consent of the Optionee.
ARTICLE VIII
RELATIONSHIP TO OTHER COMPENSATION PLANS
The adoption of the Plan shall not affect any other stock
option, incentive or other compensation plans in effect for the
Company or any of its subsidiaries, nor shall the adoption of the
Plan preclude the Company from establishing any other forms of
incentive or other compensation plan for directors of the
Company.
ARTICLE IX
MISCELLANEOUS
9.1 Plan Binding on Successors. The Plan shall be binding
upon the successors and assigns of the Company.
9.2 Singular, Plural; Gender. Whenever used herein, nouns
in the singular shall include the plural, and the masculine
pronoun shall include the feminine gender.
9.3 Headings, etc., No Part of Plan. Headings of articles
and paragraphs hereof are inserted for convenience and reference,
and do not constitute a part of the Plan.
Exhibit 10.6
As Amended and Restated
on February 6, 1987,
as Thereafter Amended
Through July 31, 1992
ELECTROMAGNETIC SCIENCES, INC.
1981 INCENTIVE STOCK OPTION PLAN
ARTICLE I
DEFINITIONS
As used herein, the following terms have the meanings
hereinafter set forth unless the context clearly indicates to the
contrary:
(a) "Board" shall mean the Board of Directors of the
Company.
(b) "Committee" shall mean the Stock Option Committee of
the Board.
(c) "Company" shall mean Electromagnetic Sciences, Inc.
(d) "Disabled Employee" shall mean an employee of the
Company or any Subsidiary who is unable to engage in any
substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected
to last for a continuous period of not less than twelve months.
(e) "Fair Market Value" at any time shall mean the closing
sales price, or the mean between the closing high "bid" and low
"asked" prices, as the case may be, of the Stock in the
over-the-counter market on the day on which such value is to be
determined, as reported by the National Association of Securities
Dealers Automated Quotation System or successor national
quotation service. If the Stock is listed on a national
securities exchange, "Fair Market Value" at any time shall mean
the closing sales price of the Stock on such national securities
exchange on the day on which such value is to be determined, as
reported in the composite quotations for securities traded on
such exchange provided by the National Association of Securities
Dealers or successor national quotation service. In the event no
such quotations are available for the day in question, "Fair
Market Value" at any time shall be determined by reference to the
appropriate prices on the next preceding day for which such
prices are reported.
(f) "Incentive Stock Option" shall mean an option that
complies with and is subject to the terms, limitations and
conditions of Section 422A of the Internal Revenue Code of 1986,
as it may be amended from time to time (the "Code"), and any
regulations promulgated with respect thereto (the "Regulations").
(g) "Non-Qualifying Stock Option" shall mean an option that
is not an Incentive Stock Option.
(h) "Option" shall mean an option, whether an Incentive
Stock Option or a Non-Qualifying Stock Option, to purchase Stock
granted pursuant to the provisions of Article VI hereof.
(i) "Optionee" shall mean a person to whom an Option has
been granted hereunder.
(j) "Option Price" shall mean the price at which an
Optionee may purchase a share of stock under a Stock Option
Agreement.
(k) "Parent" shall mean any corporation which owns,
directly or indirectly, the majority of the outstanding voting
stock of the Company.
(l) "Plan" shall mean the Electromagnetic Sciences, Inc.
1981 Incentive Stock Option Plan, the terms of which are set
forth herein.
(m) "Purchasable" shall refer to Stock which may be
purchased by an Optionee under the terms of this Plan after a
certain date specified in his Stock Option Agreement.
(n) "Stock" shall mean the $.10 par value common stock of
the Company or, in the event that the outstanding shares of Stock
are hereafter changed into or exchanged for shares of a different
stock or securities of the Company or some other corporation,
such other stock or securities.
(0) "Stock Option Agreement" shall mean an agreement
between the Company and the Optionee under which the Optionee may
purchase Stock hereunder.
(p) "Subsidiary" shall mean any corporation, the
majority of the outstanding voting stock of which is owned,
directly or indirectly, by the Company.
ARTICLE II
THE PLAN
2.1 Purpose. The purpose of the Plan is to advance the
interests of the Company and its shareholders by affording "key
employees", as defined in Article III hereof, of the Company and
its Subsidiaries an opportunity to acquire or increase their
proprietary interests in the Company by granting such persons
Options to purchase Stock. The Options will promote the growth
and profitability of the Company and its Subsidiaries because the
Optionees will be provided with an additional incentive to
achieve the objectives of the Company and its Subsidiaries
through participation in its success and growth and by
encouraging their continued employment.
2.2 Effective Date. The Plan became effective on October
16, 1981, which is the date of its adoption by the Board. The
Plan was approved by the holders of a majority of the shares of
capital stock of the Company represented at the annual meeting of
its stockholders held on April 23, 1982.
2.3 Termination Date. The Plan shall terminate and no
further Options shall be granted hereunder on October 16, 1991,
which is the earlier of the tenth anniversary of the date on
which the Plan was adopted by the Board or the date on which the
Plan was approved by the Company's stockholders.
ARTICLE III
PARTICIPANTS
Any "key employee," including executive personnel and
department heads (as well as officers who are also directors), of
the Company or a Subsidiary shall be eligible to participate in
the Plan, provided that they are full-time employees of the
Company or a Subsidiary. Members of the Committee who otherwise
qualify as "key employees" shall be eligible to participate.
ARTICLE IV
ADMINISTRATION
4.1 Duties and Powers of Committee. Subject to Section 4.4
hereof, the Plan shall be administered by the Committee. The
Committee shall select one of its members as its Chairman and
shall hold its meetings at such time and places as it may
determine. The Committee shall keep minutes of its meetings and
shall make such rules and regulations for the conduct of its
business as it may deem necessary. In administering the Plan,
the Committee's actions and determinations shall be binding on
all interested parties. Subject to the express provisions of the
Plan, the Committee shall have the sole discretion and authority
to determine the eligible "key employees," those key employees to
whom an Option will be granted, the time or times at which the
Option may be exercised, the number of shares of Stock subject to
the Option, whether the Option is an Incentive Stock Option or a
Non-Qualifying Stock Option, and the terms and conditions of the
Stock Option Agreement. Subject to the express provisions of the
Plan, the Committee shall also have complete authority to
interpret the Plan, to prescribe, amend and rescind rules and
regulations relating to it and to make all other determinations
necessary or advisable in the administration of the Plan,
including, without limitation, the amending or altering of the
Plan and any Option granted hereunder as may be required to
comply with or to conform to any federal, state or local laws or
regulations. The Committee shall have the power to authorize the
issuance of Stock in accordance with the provisions of the Plan.
No member of the Board or the Committee shall be liable to any
person for any determination made in good faith with respect to
the Plan or any Option granted hereunder.
4.2 Majority Rule. A majority of the members of the
Committee shall constitute a quorum, and any action taken by a
majority at a meeting at which a quorum is present or any action
taken without a meeting evidenced by a writing executed by all
the members of the Committee, shall constitute the action of the
Committee.
4.3 Company Assistance. The Company shall supply full and
timely information to the Committee on all matters relating to
eligible persons, their employment, death, retirement, disability
or other termination of employment, and such other pertinent
facts as the Committee may require. The Company shall furnish
the Committee with such clerical and other assistance as is
necessary in the performance of its duties.
4.4 Director and Officer Options. A committee of the Board,
consisting of two or more directors designated by the Board,
shall have sole authority and discretion to grant or modify, or
to otherwise exercise powers of the Committee with respect to,
Options to or held by employees who are directors of the Company,
or are officers of the Company for the purposes of Section 16 of
the Securities Exchange Act of 1934, as amended, provided that
no director who is not a "disinterested person," for the purposes
of Securities and Exchange Commission Rule 16b-3 or any
applicable successor thereto, shall serve on such committee.
References elsewhere in this Plan to the Board, in the context of
grants or modification of, or exercise of discretion with respect
to, Options to or held by employees who are directors or such
officers, shall be deemed to refer to such committee.
ARTICLE V
SHARES OF STOCK SUBJECT TO PLAN
5.1 Limitations. Subject to any adjustment pursuant to the
provisions of Section 5.2 hereof for transactions occurring after
February 6, 1987, the maximum number of shares of Stock which may
be issued and sold hereunder shall not exceed 1,500,000 shares.
Shares subject to an Option may be either authorized and unissued
shares or shares issued and later acquired by the Company;
provided, however, that shares of Stock with respect to which an
Option has been exercised shall not again be available for option
hereunder. If outstanding Options granted hereunder shall
terminate or expire for any reason without being wholly exercised
prior to the end of the period during which Options may be
granted hereunder, new Options may be granted hereunder covering
the unexercised shares of the terminated or expired Options.
5.2 Antidilution. In the event that the outstanding shares
of Stock are changed into or exchanged for a different number or
kind of shares or other securities of the Company or of another
corporation by reason of merger, consolidation, reorganization,
recapitalization, reclassification, combination of shares, stock
split-up or stock dividend:
(a) The aggregate number and kind of shares of Stock
as to which Options may be granted hereunder shall be adjusted
appropriately;
(b) The rights under outstanding Options granted
hereunder, both as to the number of subject shares and the Option
Price, shall be adjusted appropriately; and
(c) Where dissolution or liquidation of the Company or
any merger or combination in which the Company is not a surviving
corporation is involved, each outstanding Option granted
hereunder shall terminate, but the Optionee shall have the right,
immediately prior to such dissolution, liquidation, merger or
combination, to exercise his Option, in whole or in part, to the
extent that it shall not have been exercised, without regard to
any installment exercise provisions, subject, however, to the
proviso contained in the following paragraph and to the
limitations set forth in Article VI hereof.
The foregoing adjustments and the manner of application
thereof shall be determined solely by the Committee, and any such
adjustment may provide for the elimination of fractional share
interests; provided, however, that no adjustment shall be made in
a manner that will cause an Incentive Stock Option held by an
Optionee to become a Non-Qualifying Stock Option without the
consent of that Optionee. The adjustments required under this
Article shall apply to any successor or successors of the Company
and shall be made regardless of the number or type of successive
events requiring adjustments hereunder.
ARTICLE VI
OPTIONS
6.1 Option Grant and Agreement. Each Option granted
hereunder shall be evidenced by minutes of a meeting or the
written consent of either the Committee or the Board and by a
written Stock Option Agreement dated as of the date of grant and
executed by the Company and the Optionee. As to each grant
hereunder, the terms of the Option, including the Option's
duration, time or times of exercise, and Option Price, shall be
stated in the Stock Option Agreement or incorporated therein by
reference to the related resolution or written consent.
6.2 Optionee Limitations.
(a) Neither the Committee nor the Board shall grant an
Incentive Stock Option to any person who, at the time the Option
would be granted, (i) is not an employee of the Company or any
Subsidiary, or (ii) owns or is considered to own stock possessing
10% of the total combined voting power of all classes of stock of
the Company, its Parent or any Subsidiary, provided, however,
that the limitation in this clause (ii) shall not apply if, at
the time an Option is granted, the Option Price is at least 110%
of the Fair Market Value of the Stock subject to the Option and
such Option by its terms would not be exercisable after five
years from the date on which the Option is granted. For the
purpose of the foregoing clause (ii), a person shall be
considered to own (x)the stock owned, directly or indirectly, by
or for his brothers and sisters (whether by the whole or half
blood), spouse, ancestors and lineal descendants; (y)the stock
owned, directly or indirectly, by or for a corporation,
partnership, estate, or trust in proportion to such persons'
stock interest, partnership interest or beneficial interest
therein; and (z)the stock which such person may purchase under
any outstanding Options of the Company, its Parent or any
Subsidiary.
(b) (i) Years Prior to 1987. The aggregate Fair Market
Value (determined as of the time any Options are granted) of the
stock for which any Optionee may be granted Incentive Stock
Options in any calendar year prior to 1987 (under all Incentive
Stock Option plans of such Optionee's employer corporation, any
parent or subsidiary of such corporation or any predecessor of
such corporations, within the meaning of the regulations under
the Internal Revenue Code of 1954, as amended), shall not exceed
$100,000 plus any unused limit carryover as was permitted by
Section 422A of that Code and such regulations;
(ii) Years After 1986. No Incentive Stock Option shall
be granted to, nor shall the exercise provisions of any
outstanding Incentive Stock Option be amended if held by, any
individual who, at the time the Incentive Stock Option is to be
granted or amended, would thereby receive or hold Incentive Stock
Options pursuant to which the aggregate Fair Market Value
(determined at the time the Incentive Stock Options are granted
or are deemed to be granted) of the stock with respect to which
Incentive Stock Options granted after December 31, 1986, are
exercisable for the first time by such individual during any
calendar year (under any incentive stock option plan of such
Optionee's employer corporation, any parent or subsidiary of such
corporation or any predecessor of such corporation, within the
meaning of the Regulations) exceeds $100,000; provided, however,
that the foregoing restriction on amendment of outstanding
Incentive Stock Options shall not preclude an amendment of the
exercise provisions of an outstanding Incentive Stock Option if,
as a result of such amendment and with the consent of the
Optionee, such Option becomes a Non-Qualifying Stock Option.
6.3 Option Price. The Option Price of the Stock subject to
each Option shall be determined by the Committee or Board, but
shall not be less than the Fair Market Value of the Stock at the
time the Option is granted.
6.4 Exercise Period. The period for the exercise of each
Option shall be determined by the Committee or Board. With
respect to Incentive Stock Options, such period shall not exceed
ten years from the date of grant of the Option, and in no
instance shall such period exceed ten years plus one day from the
date of grant of the Option.
6.5 Option Exercise. Unless otherwise provided in the
Stock Option Agreement, an Option shall be exercisable in full or
in part at any time prior to expiration of the Option. The
Committee or Board shall have the authority in its sole
discretion to prescribe in any Stock Option Agreement that the
Option may be exercised in installments during the term of the
Option.
(a) An Option may be exercised at any time or from time to
time during the term of the Option as to any or all full shares
which have become Purchasable under the provisions of the Option,
provided that no exercise may be with respect to less than 25
shares unless the number of Purchasable Shares remaining under
that Option is less than 25. The Option Price is to be paid in
full in cash upon the exercise of the Option and the Company
shall not be required to deliver certificates for such shares
until such payment has been made; provided, however, that in lieu
of cash, all or any portion of the Option Price may be paid by
tendering to the Company shares of Stock duly endorsed for
transfer and owned by the Optionee, to be credited against the
Option Price at their Fair Market Value at the time of exercise.
The holder of an Option shall not have any of the rights of a
stockholder with respect to the shares of Stock subject to the
Option until such shares have been issued or transferred to him
upon the exercise of his Option.
(b) An Option shall be exercised by written notice of
intent to exercise the Option with respect to a specified number
of shares of Stock delivered to the Company at its principal
office, and by payment in full to the Company in accordance with
paragraph 6.5(a) at said office of the amount of the Option Price
for the number of shares of Stock with respect to which the
Option is then being exercised. In addition to and at the time
of payment of the Option Price, the Optionee shall pay to the
Company in cash the full amount of any federal and state
withholding or other employment taxes applicable to the taxable
income of such Optionee resulting from such exercise; provided,
however, that in the discretion of the Committee or Board, any
Stock Option Agreement may provide that all or any portion of
such tax obligations, together with additional taxes not
exceeding the actual additional taxes to be owed by the Optionee
as a result of such exercise, may, upon the irrevocable
election of the Optionee, be paid by tendering to the Company
shares of Stock duly endorsed for transfer and owned by the
Optionee, or by authorization to the Company to withhold shares
of Stock otherwise issuable upon exercise of the Option, in
either case in that number of shares having a Fair Market Value
at the time of exercise equal to the amount of such taxes thereby
being paid, and subject, in the case of any Optionee who is
required to file reports under Section 16(a) of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), to such
restrictions as to the approval and timing of any such election
as the Committee or Board may from time to time determine to be
necessary or appropriate to satisfy the conditions of the
exemption set forth in Rule 16b-3 under the 1934 Act.
6.6 Nontransferability of Option. No Option shall be
transferred by an Optionee otherwise than by will or the laws of
descent and distribution. During the lifetime of an Optionee,
his Option shall be exercisable only by him (or by his guardian
or legal representative, should one be appointed).
6.7 Termination of Employment. In the event of termination
of the employment by the Company or any Subsidiary of an
Optionee, other than a termination that is either (a) for cause
or (b) voluntary on the part of such person and without the
written consent of the Company or such Subsidiary, such person
may exercise his Option at any time within three months (or such
longer period not exceeding 27 months as shall be specified by
the Committee or Board) after such termination of employment, or
at any time within twelve months (or such longer period not
exceeding 36 months as shall be specified by the Committee or
Board) after such termination if such person was a Disabled
Employee upon termination, but in no event later than ten years
ten years plus one day in the case of a Non-Qualifying Stock
Option) from the date of grant thereof, to the extent of the
number of shares of Stock covered by his Option which were
Purchasable by him at the date of the termination of his
employment. As to shares of Stock not so Purchasable by him, the
Option shall terminate on that date. In the event of the
termination of the employment of an Optionee from the Company or
any Subsidiary, which termination is either (i) for cause or (ii)
voluntary on the part of such person and without the written
consent of the Company or such Subsidiary, any Option held by
him, to the extent not theretofore exercised, shall immediately
terminate and no longer be exercisable in whole or in part. Any
change in the employment of an Optionee shall not affect that
person's Options, so long as such person continues to be an
employee of the Company or any Subsidiary. Subject to the
foregoing, the Stock Option Agreement may contain such provisions
as the Committee or Board shall approve regarding the effect of
authorized leaves of absence. Nothing in the Plan or in any
Option shall confer on any person any right to continue in the
employ of the Company or any Subsidiary, or shall interfere in
any way with the right of the Company or any Subsidiary to
terminate his employment at any time.
6.8 Death of Holder of Option. In the event any Optionee
dies while he is employed by the Company or any Subsidiary, or
dies within three months (or such longer period not exceeding 27
months as shall be specified by the Committee or Board) after a
termination of employment that is neither (a) for cause nor (b)
voluntary on the part of such person and without the written
consent of the Company or such Subsidiary, any Option held by him
may be exercised (to the extent of the entire number of shares of
Stock covered by the Option, whether or not Purchasable by the
Optionee at the date of his death, unless the Optionee's
termination preceded his death, in which case the Option shall be
exercisable only to the extent of the number of shares that were
Purchasable thereunder on the date of the Optionee's termination)
by a legatee or legatees of such Option under the Optionee's
will, or by his personal representatives or distributees, at any
time after his death, but in no event after ten years (ten years
plus one day in the case of Non-Qualifying Stock Options) from
the date of the grant thereof, nor after 24 months (or such
longer period not exceeding 48 months as shall be specified by
the Committee or Board) subsequent to the death of such Optionee.
6.9 Certain Successor Options. To the extent not
inconsistent with the terms, limitations and conditions of
Section 422A of the Code and the Regulations thereunder, a Stock
Option Agreement issued to a key employee in respect of an option
held by such employee to acquire stock of any entity acquired, by
merger or otherwise, by the Company, may contain terms that
differ from those stated in this Article VI, but solely to the
extent necessary to preserve for any such employee the rights and
benefits contained in such predecessor option, or to satisfy the
requirements of Section 425(a) of the Code and the Regulations
thereunder.
ARTICLE VII
STOCK CERTIFICATES
The Company shall not be required to issue or deliver any
certificate for shares of Stock purchased upon the exercise of
any Option or any portion thereof, prior to fulfillment of all of
the following conditions:
(a) The admission of such shares to listing on all stock
exchanges on which the Stock is then listed;
(b) The completion of any registration or other
qualification of such shares under any federal or state law or
under the rulings or regulations of the Securities and Exchange
Commission or any other governmental regulatory body, which the
Committee or Board shall in its sole discretion deem necessary or
advisable;
(c) The obtaining of any approval or other clearance from
any federal or state governmental agency which the Committee or
Board shall in its sole discretion determine to be necessary or
advisable; and
(d) The lapse of such reasonable period of time following
the exercise of the Option as the Committee or Board from time to
time may establish for reasons of administrative convenience.
ARTICLE VIII
TERMINATION, AMENDMENT AND MODIFICATION OF PLAN
The Board may at any time, upon recommendation of the
Committee and notwithstanding Section 2.3 hereof, terminate the
Plan, and may at any time and from time to time and in any
respect amend or modify the Plan; provided, however, that the
Board, without approval of the shareholders of the Company, may
not amend the Plan to:
(a) Increase the total number of shares of Stock
subject to the Plan, except as contemplated in Section 5.2
hereof;
(b) Withdraw the administration of the Plan from the
Committee;
(c) Change or modify the class of employees that may
participate in the Plan; or
(d) Otherwise materially increase the benefits
accruing to participants under the Plan.
No amendment of the Plan shall alter or impair any of the
rights or obligations under any Option theretofore granted under
the Plan without the consent of the Optionee.
To the extent specified at the time each Option hereunder is
granted, such Options are intended to be Incentive Stock Options.
The Committee or the Board may from time to time, if necessary,
amend the Plan and with the consent of each Optionee, the
Committee or the Board, in their discretion, may amend each
Option, in each instance in order to comply with any law or
regulation of the Internal Revenue Service pertaining to
Incentive Stock Options.
ARTICLE IX
RELATIONSHIP TO OTHER COMPENSATION PLANS
The adoption of the Plan shall not affect any other stock
option, incentive or other compensation plans in effect for the
Company or any Subsidiary, nor shall the adoption of the Plan
preclude the Company or any Subsidiary from establishing any
other forms of incentive or other compensation plan for its
employees.
ARTICLE X
MISCELLANEOUS
10.1 Plan Binding on Successors. The Plan shall be binding
upon the successors and assigns of the Company.
10.2 Singular, Plural; Gender. Whenever used herein, nouns
in the singular shall include the plural, and the masculine
pronoun shall include the feminine gender.
10.3 Headings Not Part of Plan. Headings of articles and
paragraphs hereof are inserted for convenience and reference, and
they do not constitute a part of the Plan.
Exhibit 10.14
Officers/Non-ISO
04/24/92
ELECTROMAGNETIC SCIENCES, INC.
1992 STOCK INCENTIVE PLAN
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT, entered into as of the 15th day
of May, 1995 (the "Date of Grant"), by and between
ELECTROMAGNETIC SCIENCES, INC., a Georgia corporation
(hereinafter referred to as the "Corporation"), and John J.
Farrell, Jr. (hereinafter referred to as the "Employee").
W I T N E S S E T H
WHEREAS, the Board of Directors (the "Board") of the
Corporation has adopted a stock incentive plan for the
Corporation's and its subsidiary corporations' officers and
employees, known as the "Electromagnetic Sciences, Inc. 1992
Stock Incentive Plan" (hereinafter referred to as the "Plan");
WHEREAS, the Plan and the Board have authorized the
Compensation Committee of the Board (hereinafter referred to as
the "Committee") to grant to persons who are Officers (as defined
in the Plan) stock options enabling them to purchase the number
of shares of the Corporation's common stock allocated to them by
the Committee;
WHEREAS, the Committee has determined that the Employee is
eligible to participate in the Plan, and that it is in the best
interests of the Corporation that the Employee, through such
participation, be provided with additional incentive to achieve
the Company's objectives; and
WHEREAS, the Committee has accordingly granted the Employee
an option to purchase the number of shares of the Corporation's
common stock as hereinafter set forth, and the Corporation and
the Employee desire to enter into a written agreement with
respect to such option in accordance with the Plan.
NOW, THEREFORE, as an employment incentive and to encourage
stock ownership and in consideration of the mutual covenants
contained herein, the parties hereto agree as follows:
1. Incorporation of Plan. This option is granted pursuant
to the provisions of the Plan, and the terms of and definitions
set forth in the Plan are incorporated by reference into this
Stock Option Agreement and made a part hereof. A copy of the
Plan has been delivered to, and receipt is hereby acknowledged
by, the Employee.
2. Grant of Option. Subject to the terms, restrictions,
limitations and conditions stated herein, the Corporation hereby
evidences its grant to the Employee, not in lieu of salary or
other compensation, of the right and option (hereinafter referred
to as the "Option"), which is not an ISO, to purchase all or any
part of an aggregate of twenty thousand (20,000) shares of the
Corporation's $.10 par value common stock (the "Common Stock"),
this Option becoming exercisable and such shares becoming first
purchasable as follows:
As to Date First
Number of Purchasable
Shares
5,000 May, 15, 1998
5,000 May 15, 1999
5,000 May 15, 2000
5,000 May 15, 2001
The Option shall expire and is not exercisable after 5:00 p.m.,
Atlanta time, on May 15, 2004, (the "Expiration Date"), or such
other date as determined pursuant to Section 8, 9 or 10.
Notwithstanding the beginning date or dates for exercise set
forth in the preceding paragraph, but subject to the provisions
of such preceding paragraph with respect to expiration of this
Option, this Option may be exercised as to all or any portion of
the full number of shares subject thereto if: (a) a tender offer
or exchange offer has been made for shares of the Common Stock,
other than one made by the Corporation, provided that the
corporation, person or other entity making such offer purchases
or otherwise acquires shares of Common Stock pursuant to such
offer; or (b) any person or group (as such terms are defined in
Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended (the "Act")), becomes the holder of 50% or more of the
outstanding shares of Common Stock. If either of the events
specified in this paragraph has occurred, the Option shall be
fully exercisable: (x) in the event of (a) above, during the
period commencing on the date the tender offer or exchange offer
is commenced and ending on the date such offer expires and is not
extended; or (y) in the event of (b) above, during the 30-day
period commencing on the date upon which the Corporation is
provided a copy of a Schedule 13D or amendment thereto, filed
pursuant to Section 13(d) of the Act and the rules and
regulations promulgated thereunder, indicating that any person or
group has become the holder of 50% or more of the outstanding
shares of Common Stock. In the case of (a) above, if the
corporation, person or other entity making the offer does not
purchase or otherwise acquire shares of Common Stock pursuant to
such offer, then the Employee's right under this paragraph to
exercise this Option shall terminate, the Employee and the
Corporation shall rescind any exercise of this Option pursuant to
this paragraph, and this Option shall be reinstated as if such
exercise had not occurred.
3. Purchase Price. The price per share to be paid by the
Employee for the shares subject to this Option shall be Thirteen
and no/100 dollars ($13.00).
4. Exercise Terms. Beginning on the date or dates
specified in, and prior to the expiration of this Option as
provided in, Section 2, the Employee may exercise this Option as
to all such number of shares, or as to any part thereof, at any
time and from time to time during the remaining term of this
Option; provided that the Employee must exercise this Option for
at least the lesser of 100 shares or the unexercised portion of
the Option. In the event this Option is not exercised with
respect to all or any part of the shares subject to this Option
prior to its expiration, the shares with respect to which this
Option was not exercised shall no longer be subject to this
Option.
5. Option Non-Transferable. This Option and all rights
hereunder are neither assignable nor transferable by the Employee
otherwise than by will or under the laws of descent and
distribution, or pursuant to a Qualified Domestic Relations
Order, and during the Employee's lifetime this Option is
exercisable only by him or her (or by his or her guardian or
legal representative, should one be appointed, or qualified
transferee). More particularly (but without limiting the
generality of the foregoing), this Option may not be assigned,
transferred (except as aforesaid), pledged or hypothecated in any
way (whether by operation of law or otherwise) and shall not be
subject to execution, attachment or similar process. Any
attempted assignment, transfer, pledge, hypothecation or other
disposition of this Option contrary to the provisions hereof
shall be null and void and without legal effect.
6. Notice of Exercise of Option. This Option may be
exercised by the Employee, or by his administrator, executor,
personal representative or qualified transferee, by a written
notice (in substantially the form of the "Notice of Exercise"
attached hereto as Exhibit A) signed by the Employee, or by such
administrator, executor, personal representative or qualified
transferee, and delivered or mailed to the Corporation at its
principal office in Norcross, Georgia, to the attention of the
President, Treasurer or such other officer as the Corporation may
designate. Any such notice shall (a) specify the number of
shares of Common Stock which the Employee or such administrator,
executor, personal representative or qualified transferee, as the
case may be, then elects to purchase hereunder, and (b) be
accompanied by (i) a certified or cashier's check payable to the
Corporation, or personal check acceptable to the Corporation, in
payment of the total price applicable to such shares as provided
herein, or (ii) (subject to any restrictions referred to in
Exhibit A) shares of Common Stock, owned by him or her and duly
endorsed or accompanied by stock transfer powers, having a Fair
Market Value equal to the total purchase price applicable to such
shares purchased hereunder, or (iii) such a check, and the number
of such shares whose fair market value when added to the amount
of the check equals the total purchase price applicable to such
shares purchased hereunder. Such notice shall also be accompanied
by the Employee's check or shares of Common Stock in payment of
applicable withholding and employment taxes, or Employee shall
authorize the withholding of shares of Common Stock otherwise
issuable under this Option in payment of such taxes, all as set
forth on Exhibit A and subject to any restrictions referred to
therein. Upon receipt of any such notice and accompanying
payment, and subject to the terms hereof, the Corporation agrees
to cause to be issued to the Employee or to such administrator,
executor, personal representative or qualified transferee, as the
case may be, stock certificates for the number of shares
specified in such notice registered in the name of the person
exercising this Option.
7. Adjustment in Option. If, between the Date of Grant of
this Option and prior to the complete exercise thereof, there
shall be a change in the outstanding Common Stock by reason of
one or more stock splits, stock dividends, combinations or
exchanges of shares, recapitalizations or similar capital
adjustments, then the number, kind and option price of the shares
remaining subject to this Option shall be equitably adjusted in
accordance with the terms of the Plan, so that the proportionate
interest in the Corporation represented by the shares then
subject to the Option shall be the same as before the occurrence
of such event.
8. Termination of Employment. Except as set forth in
Section 10, if the Employee ceases to be employed as an employee
of the Corporation, any Parent or any of its Parent's
Subsidiaries (such event being hereinafter referred to as a
"Termination" and such corporation that employs the Employee
from time to time as the "Employer"), before the earliest date
for exercise of this Option set forth in Section 2, then this
Option shall forthwith terminate on the date of Termination and
shall not thereafter be or become exercisable.
In the event of a Termination after the earliest date for
exercise set forth in Section 2, which Termination is either (i)
voluntary on the part of the Employee and with the written
consent of the Employer, (ii) involuntary and without cause, or
(iii) the result of retirement at the normal retirement date, as
prescribed from time to time by the Employer, or at an earlier
date expressly approved by the Employer as an early retirement
date for the Employee, the Employee may exercise this Option at
any time within a period ending at the earlier of the Expiration
Date or 5:00 p.m., Atlanta time, on the third anniversary of such
Termination, to the extent of the number of shares that were
purchasable hereunder at the date of Termination.
In the event of a Termination that is either (i) for cause
or (ii) voluntary on the part of the Employee and not described
in the preceding paragraph, this Option, to the extent not
theretofore exercised, shall forthwith terminate and shall not
thereafter be or become exercisable.
This Option does not confer upon the Employee any right with
respect to continuance of employment by the Corporation, any
Parent or any of the Corporation's or its Parent's Subsidiaries.
This Option shall not be affected by any change of employment so
long as the Employee continues to be an employee of the
corporation, any Parent or any such Subsidiary. In the event the
Employer is not the Corporation, and such Employer ceases to be
the Corporation's Parent, or the Corporation's or its Parent's
Subsidiary, as a result of a sale of stock or assets or other
change of corporate status, then in the discretion of the
Committee (but subject to Section 5.2 of the Plan regarding
certain transactions affecting the Corporation) either: (i) this
Option shall remain in effect as if such sale of other change of
status had not occurred, for so long as Employee shall remain an
employee of the corporation that previously was such Parent or
Subsidiary, or of any successor or subsequent Parent of such
corporation, or of any Subsidiary of either such corporation or
any such Parent or successor; or (ii) concurrent with such sale
or other change of status, the Corporation shall redeem this
Option at a price equal to the number of shares then subject
hereto (whether or not then purchasable) multiplied by the excess
(if any) of the then Fair Market Value of each such share over
the purchase price per share specified in Section 3 (as adjusted
pursuant to Section 7).
9. Disabled Employee. In the event of a Termination
because the Employee becomes disabled, the Employee (or his
personal representative) may exercise this Option at any time
within a period ending at the earlier of the Expiration Date or
5:00 p.m., Atlanta time, on the first anniversary of such
Termination, to the extent of the number of shares that were
purchasable hereunder at the date of Termination.
For the purposes of this Agreement, the Employee shall be
considered "disabled" if he or she is unable to engage in any
substantial gainful activity by reason of any medically
determinable physical or mental impairment that can be expected
to last for a continuous period of not less than twelve months.
10. Death of Employee. In the event of the Employee's
death while employed by the Corporation, any Parent or any of its
Subsidiaries, or during a period in which the Employee may
exercise this Option notwithstanding an earlier Termination, the
persons described in Section 6 may exercise this Option at any
time within a period ending at the earlier of (i) 5:00 p.m.,
Atlanta time, on the third anniversary of the Employee's death,
or (ii) the Expiration Date, but in any event ending not earlier
than 5:00 p.m., Atlanta time, on the first anniversary of the
Employee's death. If the Employee was an employee of the
Corporation, any Parent or one of its Subsidiaries at the time of
the Employee's death, this Option may be so exercised to the
extent of the full number of shares covered by the Option. If a
Termination occurred prior to Employee's death, this Option may
be so exercised only to the extent of the number of shares that
were purchasable hereunder at the date of Termination.
11. Binding Agreement. This Agreement shall be binding
upon the parties hereto and their representatives, successors and
assigns.
IN WITNESS WHEREOF, the Compensation Committee of the Board
of Directors of the Corporation has caused this Stock Option
Agreement to be executed on behalf of the Corporation and the
Corporation's seal to be affixed hereto and attested by the
Secretary of the Corporation, and the Employee has executed this
Agreement under his seal, all as of the day and year first above
written.
ELECTROMAGNETIC SCIENCES, INC.
[CORPORATE SEAL]
ATTEST: By: /s/ Thomas E. Sharon
Chief Executive Officer
/s/ William S. Jacobs /s/ John J. Farrell, Jr.
Secretary Employee
EXHIBIT A
ELECTROMAGNETIC SCIENCES, INC.
1992 STOCK INCENTIVE PLAN
NOTICE OF EXERCISE
OF STOCK OPTION
The undersigned hereby notifies Electromagnetic Sciences,
Inc. (the "Corporation") of his or her election to exercise an
option to purchase _________ shares of the Corporation's common
stock, $.10 par value (the "Common Stock"), pursuant to that
Stock Option Agreement (the "Agreement") between _____________
(the "Employee") and the Corporation dated ______________.
Accompanying this Notice is (1) a certified or a cashier's check
(or other check acceptable to the Corporation) in the amount of
$________ payable to the Corporation and/or (2) (subject to such
restrictions as may be determined to be necessary or appropriate
to avoid earnings charges or other adverse consequences to the
Corporation under applicable accounting or tax rules or
regulations) ________ shares of the Common Stock presently owned
by the undersigned and duly endorsed or accompanied by stock
transfer powers, having an aggregate Fair Market Value (as
defined in the Electromagnetic Sciences, Inc. 1992 Stock
Incentive Plan (the "Plan")) as of the date hereof of $_______ ,
such amounts being equal, in the aggregate, to the purchase price
per share set forth in Section 3 of the Agreement multiplied by
the number of shares being hereby purchased (in each instance
subject to appropriate adjustment pursuant to Section 7 of the
Agreement).
Also accompanying this Notice is my check in the amount of
$__________ , in payment of federal and state income withholding
and employment taxes applicable to this exercise. The amount of
such payment is based on advice received from appropriate
officials of the Corporation responsible for the administration
of its payroll and employment tax obligations. Alternatively, or
in addition, and subject to such restrictions as may be
determined to be necessary or appropriate to comply with Rule
16b-3 under the Securities Exchange Act of 1934, or to avoid
earnings charges or other adverse consequences to the Corporation
under applicable accounting or tax rules or regulations, in full
or partial payment of such taxes:
(1) I deliver herewith an additional ________ shares
of the Common Stock presently owned by me, having an aggregate
Fair Market Value as of the date hereof of $ _________ ; and/or
(2) I hereby authorize the Corporation to withhold,
from the shares of Common stock otherwise issuable to me pursuant
to this exercise, ______ such shares having an aggregate Fair
Market Value at the date hereof of $_________.
The sum of (i) any such check plus (ii) the Fair Market Value at
the date hereof of any shares of Common Stock specified in the
foregoing clauses (1) and (2) is not less than the amount of
federal and state withholding and employment taxes applicable to
this exercise, and is not greater than the total of all federal
and state income and employment taxes to be owed by me as a
result of such exercise.
IN WITNESS WHEREOF, the undersigned has set his or her hand
and seal, this ____day of __________, 19__.
EMPLOYEE OR HIS OR HER ADMINISTRATOR,
EXECUTOR, PERSONAL REPRESENTATIVE OR
QUALIFIED TRANSFEREE
______________________________________
Exhibit 10.15
Outside Directors
4/24/92
ELECTROMAGNETIC SCIENCES, INC.
1992 STOCK INCENTIVE PLAN
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT, entered into as of the __th day
of _______, 199_ (the "Date of Grant"), by and between
Electromagnetic Sciences, Inc., a Georgia corporation
(hereinafter referred to as the "Corporation"), and
______________ (hereinafter referred to as the "Director").
W I T N E S S E T H
WHEREAS, the Board of Directors (the "Board") of the
Corporation has adopted a stock incentive plan for directors,
officers and employees of the Corporation or its subsidiary
corporations, which Plan, as amended, is known as the
"Electromagnetic Sciences, Inc. 1992 Stock Incentive Plan"
(hereinafter referred to as the "Plan");
WHEREAS, on the Date of Grant the Director has been elected
to serve as a member of the Board, to whom the Corporation's
success is closely tied, and has agreed to so serve; and
WHEREAS, the Plan provides for the automatic one-time grant,
to each director who is not an employee of the Company or of any
parent or subsidiary of the Company, of a stock option to
purchase shares of the Corporation's common stock as hereinafter
set forth, and the Corporation and the Director desire to enter
into a written agreement with respect to such option in
accordance with the Plan.
NOW, THEREFORE, as an incentive and to encourage stock
ownership, and in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
1. Incorporation of Plan. This option is granted pursuant to
the provisions of the Plan and the terms and definitions of the
Plan, as it may be amended from time to time, are incorporated
herein by reference in this Stock Option Agreement and made a
part hereof. A copy of the Plan has been delivered to, and
receipt is hereby acknowledged by, the Director.
2. Grant of Option. Subject to the terms, restrictions,
limitations and conditions stated herein, the Corporation hereby
evidences its grant to the Director of the right and option
(hereinafter referred to as the "Option") to purchase all or any
part of an aggregate of Ten Thousand (10,000) shares of the
Corporations's $.10 par value common stock (the "Common Stock")
beginning as follows:
First Date Number of
Exercisable Shares
__________, 199_ 2,000
__________, 199_ 2,000
__________, 199_ 2,000
__________, 199_ 2,000
__________, 199_ 2,000
This Option shall expire and is not exercisable after 5:00 p.m.,
Atlanta time, on ______, 200_ (the "Expiration Date"). This
option is not an incentive stock option as defined and
contemplated in Section 422 of the Internal Revenue Code of 1986,
as amended, and the regulations promulgated thereunder.
Notwithstanding the beginning date or dates for exercise set
forth in the preceding paragraph of this Section, but subject to
the provisions of such paragraph with respect to expiration of
this Option, this Option may be exercised as to all or any
portion of the full number of shares subject thereto if the
Corporation is registered under the Securities Exchange Act of
1934, as amended (the "Act"), and either (a) a tender offer or
exchange offer has been made for shares of the Common Stock,
other than one made by the Corporation, provided that the
corporation, person or other entity making such offer purchases
or otherwise acquires shares of Common Stock pursuant to such
offer, or (b) any person or group (as such terms are defined in
Section 13(d)(3) of the Act), becomes the holder of 50% or more
of the outstanding shares of Common Stock. If either of the
events specified in this paragraph have occurred, this Option
shall be fully exercisable: (x) in the event of (a) above, during
the period commencing on the date the tender offer or exchange
offer is commenced and ending on the date such offer expires and
is not extended; or (y) in the event of (b) above, during the 30
day period commencing on the date upon which the Corporation is
provided a copy of a Schedule 13D of amendment thereto filed
pursuant to Section 13(d) of the Act and the rules and
regulations promulgated thereunder, indicating that any person or
group has become the holder of 50% or more of the outstanding
shares of Common Stock. In the case of (a) above, if the
corporation, person or other entity making the offer does not
purchase or otherwise acquire shares of Common Stock pursuant to
such offer, then the Director's right under this paragraph to
exercise this Option shall terminate, the Director and the
Corporation shall rescind any exercise of this Option pursuant to
this paragraph, and this Option shall be reinstated as if such
exercise had not occurred.
3. Purchase Price. The price per share to be paid by the
Director for the shares subject to this Option shall be _____ and
__/100 Dollars ($ ).
4. Exercise Terms. Beginning on the dates specified above,
and prior to the expiration of this Option as provided in Section
2 hereof, the Director may exercise this Option as to all such
number of shares, or as to any part thereof, at any time and from
time to time during the remaining term of this Option; provided
that the Director must exercise this Option for at least the
lesser of 100 shares or the unexercised portion of this Option.
In the event this Option is not exercised with respect to all or
any part of the shares subject to this Option prior to its
expiration, the shares with respect to which this Option was not
exercised shall no longer be subject to this Option.
5. Option Non-Transferable. This Option and all rights
hereunder are neither assignable nor transferable by the Director
otherwise than by will or under the laws of descent and
distribution, or pursuant to a Qualified Domestic Relations
Order, and during the Director's lifetime this Option is
exercisable only by him (or by his guardian or legal
representative, should one be appointed, or qualified
transferee). More particularly (but without limiting the
generality of the foregoing), this Option may not be assigned,
transferred (except as aforesaid), pledged or hypothecated in any
way (whether by operation of law or otherwise) and shall not be
subject to execution, attachment or similar process. Any
attempted assignment, transfer, pledge, hypothecation or other
disposition of this Option contrary to the provisions hereof
shall be null and void and without legal effect.
6. Notice of Exercise of Option. This Option may be
exercised by the Director, or by his administrator, executor,
personal representative or qualified transferee, by a written
notice (in substantially the form of the "Notice of Exercise"
attached hereto as Exhibit A) signed by the Director, or by such
administrator, executor, personal representative or qualified
transferee, and delivered to the Corporation at its principal
office in Norcross, Georgia, to the attention of the Chief
Executive Officer, Treasurer or such other officer as the
Corporation may designate. Any such notice shall (a) specify the
number of shares of Common Stock which the Director or such
administrator, executor, personal representative or qualified
transferee, as the case may be, then elects to purchase
hereunder, and (b) be accompanied by (I) a certified or cashier's
check payable to the Corporation, or personal check acceptable to
the Corporation, in payment of the total price applicable to such
shares as provided herein, or (ii) (subject to any restrictions
referred to in Exhibit A) shares of Common Stock, owned by him or
her and-duly endorsed or accompanied by stock transfer powers,
having a Fair Market Value equal to the total purchase price
applicable to such shares purchased hereunder, or (iii) such a
check, and the number of such shares who Fair Market Value when
added to the amount of the check equals the total purchase price
applicable to such shares purchased hereunder. Such notice shall
also be accompanied by such a check or shares of Common Stock in
payment of applicable withholding and employment taxes, or the
person exercising this Option shall authorize the withholding of
shares of Common Stock otherwise issuable under this Option in
payment of such taxes, all as set forth on Exhibit A and subject
to any restrictions referred to therein. Upon receipt of any such
notice and accompanying payments, and subject to the terms
hereof, the Corporation agrees to cause to be issued to the
Director or to his administrator, executor, personal
representative or qualified transferee, as the case may be, stock
certificates for the number of shares specified in such notice
registered in the name of the person exercising this Option.
7. Adjustment in Option. If prior to the complete exercise
of this Option, there shall be a change in the outstanding Common
Stock by reason of one or more stock splits, stock dividends,
combinations or exchanges of shares, recapitalizations or similar
capital adjustments, the number, kind and option price of the
shares remaining subject to this Option shall be equitably
adjusted in accordance with the terms of the Plan, so that the
proportionate interest in the Corporation represented by the
shares then subject to the Option shall be the same as before the
occurrence of such event.
8. Termination as a Director. If the Director for any reason
ceases to be a member of the Board of Directors of the
Corporation (such event being hereinafter referred to as a
"Termination"), then:
(a) To the extent this option shall have become exercisable on or
prior to the date of Termination, it shall remain exercisable
until the Expiration Date; and
(b) Any portion of this Option that had not become exercisable on
or prior to the date of Termination shall immediately terminate
and shall not thereafter become exercisable.
This Option does not confer upon the Director any right with
respect to continuance as a member of the Board of Directors of
the Corporation.
9. Binding Agreement. This Agreement shall be binding upon
the parties hereto and their representatives, successors and
assigns.
IN WITNESS WHEREOF, the Corporation has caused this Stock
Option Agreement to be executed on behalf of the Corporation and
the Corporation's seal to be affixed hereto and attested by the
Secretary of the Corporation, and the Director has executed this
Agreement under his seal, all as of the day and year first above
written.
ELECTROMAGNETIC SCIENCES, INC.
[CORPORATE SEAL]
ATTEST: By:
Chief Executive Officer
Secretary DIRECTOR:
EXHIBIT A
ELECTROMAGNETIC SCIENCES, INC.
1992 STOCK INCENTIVE PLAN
NOTICE OF EXERCISE
OF STOCK OPTION
The undersigned hereby notifies Electromagnetic Sciences,
Inc. (the "Corporation") of his election to exercise his option
to purchase shares of the Corporation's common stock, $.10
par value (the "Common Stock"), pursuant to that Stock Option
Agreement (the "Agreement) between ("Director") and
the Corporation dated ________, 199_. Accompanying this Notice is
(1) a certified or a cashier's check (or other check acceptable
to the Corporation) in the amount of $ payable to the
Corporation, and/or (2) (subject to such restrictions as may be
determined to be necessary or appropriate to avoid earnings
charges or other adverse consequences to the Corporation under
applicable accounting or tax rules or regulations) shares
of the Common Stock presently owned by the undersigned and duly
endorsed or accompanied by stock transfer powers, having an
aggregate Fair Market Value (as defined in the Electromagnetic
Sciences, Inc. 1992 Stock Incentive Plan) on the date hereof of $
, such amounts being equal, in the aggregate, to the
purchase price per share set forth in Section 3 of the Agreement
multiplied by the number of shares being hereby purchased (in
each instance subject to appropriate adjustment pursuant to
Section 7 of the Agreement).
Also accompanying this Notice is my check in the amount of $
, in payment of federal and state income withholding
and employment taxes applicable to this exercise. The amount of
such payment is based on advice received from appropriate
officials of the Corporation responsible for the administration
of its payroll and employment tax obligations. Alternatively, or
in addition, and subject to such restrictions as may be
determined to be necessary or appropriate to comply with Rule
16b-3 under the Securities Exchange Act of 1934, or to avoid
earnings charges or other adverse consequences to the Corporation
under applicable accounting or tax rules or regulations, in full
or partial payment of such taxes:
(1) I deliver herewith an additional shares of the
Common Stock presently owned by me, having an aggregate Fair
Market Value on the date hereof of $ ; and/or
(2) I hereby authorize the Corporation to withhold, from the
shares of Common Stock otherwise issuable to me pursuant to this
exercise, such shares having an aggregate Fair
Market Value on the date hereof of $ .
The sum of (i) any such check plus (ii) the Fair Market Value on
the date hereof of any shares of Common Stock specified in the
foregoing clauses (1) and (2) is not less than the amount of
federal and state withholding and employment taxes applicable to
this exercise, and is not greater than the total of all federal
and state income and employment taxes to be owed by me as a
result of such exercise.
IN WITNESS WHEREOF, the undersigned has set his hand and
seal, this day of , .
DIRECTOR OR HIS ADMINISTRATOR, EXECUTOR,
PERSONAL REPRESENTATIVE OR QUALIFIED
TRANSFEREE
Exhibit 10.24
Electromagnetic Sciences, Inc.
1992 Stock Incentive Plan
Restricted Stock Award
Restriction Agreement
with
John J. Farrell, Jr.
May 15, 1995
Dear Jack:
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 May 15, 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 6,000 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 as to 2,000 of the Shares upon the first
anniversary of the date of this Agreement, as to an additional
2,000 of the Shares on the second anniversary of such date, and
as to the remaining 2,000 Shares on the third anniversary of such
date.
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 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 canceled 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 May 15, 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 canceled.
7. Withholding Taxes. You hereby authorize the Company to
withhold, at the time of lapse of the Restriction on all or a
portion of the Shares pursuant to Section 3 or 4 above, or at
such earlier date or dates 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.
Notwithstanding the foregoing, at your election the
foregoing withholding taxes, together with additional amounts not
exceeding the actual additional taxes to be owed by you with
respect to income resulting from such lapse or other taxable
event, may be paid by you by tendering to the Company whole
shares of the Company's common stock owned by you and duly
endorsed for transfer, or by authorizing the Company to withhold
and cancel a portion of the Shares otherwise deliverable to you,
in either case in that number of shares having a Fair Market
Value (as defined in the Company's 1992 Stock Incentive Plan) on
the date that taxable income is recognized equal to the amount of
such taxes thereby being paid. Such election shall be made on or
before such date, shall be irrevocable, and shall be submitted in
writing to the Treasurer of the Company.
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: /s/ Thomas E. Sharon
Thomas E. Sharon, President and
CEO
Accepted and Agreed:
/s/ John J. Farrell, Jr.
EMPLOYEE
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 10.23
ELECTROMAGNETIC SCIENCES, INC.
1992 STOCK INCENTIVE PLAN
AMENDMENT TO RESTRICTED STOCK AWARD
RESTRICTION AGREEMENT
DATED JANUARY 27, 1995
This Amendment is to the Restricted Stock Award Restriction
Agreement, dated January 27, 1995 (the "Agreement"), between
Electromagnetic Sciences, Inc. (the "Company"), and the
undersigned employee, and is authorized effective April 21, 1995,
by action taken on that date by the Committee identified in the
Agreement.
Section 7 of the Agreement is hereby amended by adding an
additional paragraph as follows:
Notwithstanding the foregoing, at your election the
foregoing withholding taxes, together with additional amounts
not exceeding the actual additional taxes to be owed by you
with respect to income resulting from such lapse or other
taxable event, may be paid by you by tendering to the Company
whole shares of the Company's common stock owned by you and
duly endorsed for transfer, or by authorizing the Company to
withhold and cancel a portion of the Shares otherwise
deliverable to you, in either case in that number of shares
having a Fair Market Value (as defined in the Company's 1992
Stock Incentive Plan) on the date that taxable income is
recognized equal to the amount of such taxes thereby being
paid. Such election shall be made on or before such date,
shall be irrevocable, and shall be submitted in writing to
the Treasurer of the Company.
IN WITNESS WHEREOF, the Company, acting through the
Committee, has caused this amendment to be duly executed and you
have hereunto set your hand and seal, all as of April 21, 1995
ELECTROMAGNETIC SCIENCES, INC.
By:
Thomas E. Sharon, President and CEO
Accepted and agreed:
Typed or printed name
ELECTROMAGNETIC SCIENCES, INC.
AMENDMENT TO
RESTRICTED STOCK AWARD
RESTRICTION AGREEMENT
The Restricted Stock Award Restriction Agreement between
Electromagnetic Sciences, Inc. and the undersigned Employee,
dated January 27, 1995 (the "Agreement"), is hereby amended by
modifying clause (a) of Section 3 to specify February 9, 1996 as
the date on which the restrictions specified in the Agreement
shall lapse and have no further force or effect.
IN WITNESS WHEREOF, the Employee has executed this Amendment
and Electromagnetic Sciences, Inc., acting through the Committee
identified in the Agreement, has caused this Amendment to be duly
executed, all as of January 26, 1996.
ELECTROMAGNETIC SCIENCES, INC.
_______________________ By _________________________
Thomas E. Sharon
______________________ President and Chief Executive
Typed or printed name Officer
Exhibit 10.10
As Amended Through March 23, 1989
as Thereafter Amended
Through July 31, 1992
ELECTROMAGNETIC SCIENCES, INC.
1986 NON-QUALIFIED STOCK OPTION PLAN
ARTICLE I
DEFINITIONS
As used herein, the following terms have the meanings
hereinafter set forth unless the context clearly indicates to the
contrary:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Committee" shall mean the Stock Option Committee of the
Board.
(c) "Company" shall mean Electromagnetic Sciences, Inc.
(d) "Disabled Employee" shall mean an employee of the Company or
any of its Subsidiaries who is unable to engage in any
substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected
to last for a continuous period of not less than twelve months.
(e) "Fair Market Value" shall mean the closing sales price, or
the mean between the closing high "bid" and low "asked" prices,
as the case may be, of the Stock in the over-the-counter market
on the day on which such value is to be determined, as reported
by the National Association of Securities Dealers Automated
Quotation System or successor national quotation service. If the
Stock is listed on a national securities exchange, "Fair Market
Value" shall mean the closing sales price of the Stock on such
national securities exchange on the day on which such value is to
be determined, as reported in the composite quotations for
securities traded on such exchange provided by the National
Association of Securities Dealers or successor national quotation
service. In the event no such quotations are available for the
day in question, "Fair Market Value" shall be determined by
reference to the appropriate prices on the next preceding day for
which such prices are reported.
(f) "Option" shall mean an option to purchase Stock granted
pursuant to the provisions of Article VI hereof.
(g) "Optionee" shall mean a person to whom an Option has been
qranted hereunder.
(h) "Option Price" shall mean the price at which an Optionee may
purchase a share of stock under a Stock Option Agreement.
(i) "Purchasable" shall refer to Stock which may be purchased by
an Optionee under the terms of this Plan after a certain date
specified in his Stock Option Agreement.
(j) "Stock" shall mean the $.10 par value common stock of the
Company or, in the event that the outstanding shares of Stock are
hereinafter changed into or exchanged for shares of a different
stock or securities of the Company or some other corporation,
such other stock or securities.
(k) "Stock Option Agreement" shall mean an agreement between the
Company and the Optionee under which the Optionee may purchase
Stock hereunder.
(1) "Subsidiary" shall mean any corporation, the majority of the
outstanding voting stock of which is owned, directly or
indirectly, by another entity.
ARTICLE II
THE PLAN
2.1 Name. This plan shall be known as the "Electromagnetic
Sciences. Inc. 1986 Non-Qualified Stock Option Plan."
2.2 Purpose. The purpose of the Plan is to advance the interests
of the Company, its Subsidiaries and its shareholders by
affording certain officers and other key employees of the Company
and its Subsidiaries an opportunity to acquire or increase their
proprietary interests in the Company by granting such persons
Options to purchase Stock in the Company. The Options will
promote the growth and profitability of the Company and its
Subsidiaries because the Optionees will be provided with an
additional incentive to achieve the Company's objectives through
participation in its success and growth and by encouraging their
continued employment with the Company.
2.3 Effective Date; Termination Date. The effective date of the
Plan is October 9, 1986. The Plan shall terminate, and no further
Options shall be granted hereunder, on October 9, 1996.
ARTICLE III
PARTICIPANTS
Any "key employee," as determined by the Board or Committee,
including executive personnel and department heads (as well as
officers who are also directors), of the company or its
Subsidiaries shall be eligible to participate in the Plan,
provided that they are full-time employees of the Company or any
of its Subsidiaries. Members of the Committee who otherwise
qualify as key employees shall be eligible to participate.
ARTICLE IV
ADMINISTRATION
4.1 Duties and Powers of Committee. Subject to section 4.3
hereof, the Plan shall be administered by the Board, which may
delegate such authority to the Committee. In administering the
Plan, the Board's or Committee's actions and determinations shall
be binding on all interested parties. Subject to the express
provisions of the Plan, the Board or Committee shall have the
sole discretion and authority to determine the eligible "key
employees," those key employees to whom an Option will be
granted, the time or times at which the Option may be exercised,
the number of shares of Stock subject to the Option, and the
terms and conditions of the Stock Option Agreement. Subject to
the express provisions of the Plan, the Board and Committee shall
also have complete authority to interpret the Plan, to prescribe,
amend and rescind rules and regulations relating to it, and to
make all other determinations necessary or advisable in the
administration of the Plan, including, without limitation, the
amending or altering of the Plan and any Option granted hereunder
as may be required to comply with or to conform to any federal,
state or local laws or regulations. The Board or Committee shall
have the power to authorize the issuance of Stock in accordance
with the provisions of the Plan. No member of the Board or the
Committee shall be liable to any person for any determination
made in good faith with respect to the Plan or any Option granted
hereunder.
4.2 Committee Procedures. If delegated authority hereunder, the
Committee may make such rules and regulations for the conduct of
its business as it may deem necessary or appropriate. A majority
of the members of the Committee shall constitute a quorum, and
any action taken by a majority at a meeting at which a quorum is
present or any action taken without a meeting evidenced by a
writing executed by all the members of the Committee, shall
constitute the action of the Committee. The Committee shall keep
minutes of its meetings.
The Company shall supply full and timely information to the
Committee on all matters relating to eligible persons, their
employment, death, retirement, disability or other termination of
employment, and such other pertinent facts as the Committee may
require. The Company shall furnish the Committee with such
clerical and other assistance as is necessary in the performance
of its duties.
4.3 Director and Officer Options. A committee of the
Board, consisting of two or more directors designated by the
Board, shall have the sole authority and discretion to grant or
modify, or to otherwise exercise powers of the Committee with
respect to, Options to or held by employees who are directors of
the Company, or are officers of the Company for the purposes of
Section 16 of the Securities Exchange Act of 1934, as amended,
provided that no director who is not a "disinterested person,"
for the purposes of Securities and Exchange Commission Rule 16b-3
or any applicable successor thereto, shall serve on such
committee. References elsewhere in this plan to the Board, in
the context of grants or modification of, or exercise of
discretion with respect to, Options to or held by employees who
are directors or such officers, shall be deemed to refer to such
committee.
ARTICLE V
SHARES OF STOCK SUBJECT TO PLAN
5.1 Limitations. Subject to any antidilution adjustment
pursuant to the provisions of Section 5.2 hereof, the maximum
number of shares of Stock which may be issued and sold hereunder
shall not exceed 150,000 shares. Shares subject to an Option may
be either authorized and unissued shares or shares issued and
later acquired by the Company; provided, however, that shares of
Stock with respect to which an Option has been exercised shall
not again be available for option hereunder. If outstanding
Options granted hereunder shall terminate or expire for any
reason without being wholly exercised prior to the end of the
period during which Options may be granted hereunder, new Options
may be granted hereunder covering the unexercised shares of the
terminated or expired Options.
5.2 Antidilution. In the event that the outstanding shares of
Stock are changed into or exchanged for a different number or
kind of shares or other securities of the Company or of another
corporation by reason of merger, consolidation, reorganization,
recapitalization, reclassification, combination of shares, stock
split up or stock dividend:
(a) The aggregate number and kind of shares of Stock on
which Options may be granted hereunder shall be adjusted
appropriately;
(b) The rights under outstanding Options granted hereunder,
both as to the number of subject shares and the Option Price,
shall be adjusted appropriately; and
(c) Where dissolution or liquidation of the Company or any
merger or combination in which the Company is not a surviving
corporation is involved, each outstanding Option granted
hereunder shall terminate, but the Optionee shall have the right,
immediately prior to such dissolution, liquidation, merger or
combination, to exercise his Option, in whole or in part, to the
extent that it shall not have been exercised, without regard to
any installment exercise provisions, subject, however, to the
limitations set forth in Article VI hereof.
The foregoing adjustments and the manner of application
thereof shall be determined solely by the Board or Committee, and
any such adjustment may provide for the elimination of fractional
share interests. The adjustments required under this Article
shall apply to any successor or successors of the Company and
shall be made regardless of the number or type of successive
events requiring adjustments hereunder.
ARTICLE VI
OPTIONS
6.1 Option Grant and Agreement. Each Option granted
hereunder shall be evidenced by minutes of a meeting or the
written consent of the Board or Committee, and by a written Stock
Option Agreement dated as of the date of grant and executed by
the Company and the Optionee. As to each grant hereunder, the
terms of the Option, including the Option's duration, time or
times of exercise, and exercise price, shall be stated in the
Stock Option Agreement or incorporated therein by reference to
the resolution or written consent of the Board or Committee
setting the terms of the Option. The terms and conditions of the
Option shall be consistent with the Plan.
6.2 Option Price. The Option Price of the Stock subject to
each Option shall be determined by the Board or Committee. The
Option Price shall not be less than 50% of the Fair Market Value
of the Stock on the date the Option is granted.
6.3 Exercise Period. The period for the exercise of each
Option shall be determined by the Board or Committee.
6.4 Option Exercise. Unless otherwise provided in the Stock
Option Agreement, an Option shall be exercisable in full or in
part at any time prior to expiration of the Option. The Board or
Committee shall have the authority in its sole discretion to
prescribe in any Stock Option Agreement that the Option may be
exercised in installments during the term of the Option.
An Option may be exercised at any time or from time to time
during the term of the Option as to any or all full shares which
have become Purchasable under the provisions of the Option, but
not at anytime as to less than 25 shares unless the remaining
shares that have become so Purchasable are less than 25 shares.
Option Price is to be paid in full in cash upon the exercise of
the Option and the Company shall not be required to deliver
certificates for such shares until such payment has been made;
provided, however, that in lieu of cash all or any portion of the
Option Price may be paid by tendering to the Company shares of
Stock duly endorsed for transfer and owned by the Optionee, to be
credited against the Option Price at their Fair Market Value on
the date of exercise. The holder of an Option shall not have any
of the rights of a stockholder with respect to the shares of
Stock subject to the Option until such shares have been issued or
transferred to him upon the exercise of his Option.
An Option shall be exercised by written notice of intent to
exercise the Option with respect to a specified number of shares
of Stock delivered to the Company at its principal office, and by
payment in full to the Company in accordance with the preceding
paragraph at said office of the Option Price for the number of
shares of Stock with respect to which the Option is then being
exercised. In addition to and at the time of payment of the
Option Price, the Optionee shall pay to the Company in cash the
full amount of any federal and state withholding or other
employment taxes applicable to the taxable income of such
Optionee resulting from such exercise provided, however, that in
the discretion of the Board or Committee, any Stock Option
Agreement may provide that all or any portion of such tax
obligations, together with additional taxes not exceeding the
actual additional taxes to be owed by the Optionee as a result of
such exercise, may, upon the irrevocable election of the
Optionee, be paid by tendering to the Company shares of Stock
duly endorsed for transfer and owned by the Optionee, or by
authorization to the Company to withhold shares of Stock
otherwise issuable upon exercise of the Option, in either case in
that number of shares having a Fair Market Value at the time of
exercise equal to the amount of such taxes thereby being paid,
and subject to such restrictions as to the approval and timing of
any such election as the Board or Committee may from time to time
determine to be necessary or appropriate to satisfy the
conditions of the exemption set forth in Rule 16b-3 under the
Securities Exchange Act of 1934, as amended.
6.5 Nontransferability of Option. No Option shall be
transferred by an Optionee otherwise than by will or the laws of
descent and distribution. During the lifetime of an Optionee, his
Option shall be exercisable only by him (or by his guardian or
legal representative, should one be appointed).
6.6 Termination of Employment. The Board or the Committee
shall have the power to specify, with respect to the Options
granted to particular Optionees, the effect upon such Optionee's
right to exercise an Option of termination of such Optionee's
employment under various circumstances, which effect may include
immediate or deferred termination of such Optionee's rights under
an Option, or acceleration of the date after which an Option may
be exercised in full.
ARTICLE VII
STOCK CERTIFICATES
The Company shall not be required to issue or deliver a
certificate for shares of Stock purchased upon the exercise of
any Option granted hereunder or any portion thereof, prior to
fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock
exchanges on which the Stock is then listed;
(b) The completion of any registration or other
qualification of such shares under any federal or state law or
under the rules or regulations of the Securities and Exchange
Commission or any other governmental regulatory body, which the
Company upon the advice of counsel shall determine to be
necessary or advisable;
(c) The obtaining of any approval or other clearance from
any federal or state governmental agency which the Company upon
the advice of counsel shall determine to be necessary or
advisable; and
(d) The lapse of such reasonable period of time following
the exercise of the Option as may be appropriate for reasons of
administrative convenience.
ARTICLE VIII
TERMINATION, AMENDMENT AND MODIFICATION OF PLAN
The Board may at any time terminate the Plan, and may at any
time and from time to time and in any respect amend or modify the
Plan; provided, however, that if the Plan is approved by the
stockholders of the Company, the Board may not thereafter,
without further stockholder approval, amend the Plan to:
(a) Increase the total number of shares of Stock subject to
the Plan except as contemplated in Section 5.2 hereof;
(b) Change or modify the class of employees that may
participate in the Plan; or
(c) Otherwise materially increase the benefits accruing to
participants under the Plan.
No termination, amendment or modification of the Plan shall
adversely affect any Option previously granted hereunder without
the written consent of the Optionee or his guardian, legal
representative or legatee.
ARTICLE IX
MISCELLANEOUS
9.1 Plan Binding on Successors. The Plan shall be binding
upon the successors and assigns of the Company.
9.2 Singular, Plural; Gender. Whenever used herein, nouns in
the singular shall include the plural, and the masculine pronoun
shall include the feminine gender.
9.3 Headings, etc., No Part of Plan. Headings of articles
and sections hereof are inserted for convenience and reference;
they constitute no part of the Plan.
Exhibit 10.16
JEP
1/27/95
ELECTROMAGNETIC SCIENCES, INC.
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT, entered into as of the 27th day
of January, 1995 (the "Date of Grant"), by and between
Electromagnetic Sciences, Inc., a Georgia corporation
(hereinafter referred to as the "Corporation"), and John E.
Pippin (hereinafter referred to as the "Director").
W I T N E S S E T H
WHEREAS, the Optionee serves the Corporation as a member and
Chairman of its Board of Directors; and
WHEREAS, the Board of Directors has granted the Optionee a
stock option to purchase the number of shares of the
Corporation's common stock as hereinafter set forth, and the
Corporation and the Optionee desire to enter into a written
agreement with respect to such option.
NOW, THEREFORE, as an incentive and to encourage stock
ownership, and in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
1. Grant of Option. Subject to the terms, restrictions,
limitations and conditions stated herein, the Corporation hereby
evidences its grant to the Director of the right and option
(hereinafter referred to as the "Option") to purchase all or any
part of an aggregate of Ten Thousand (10,000) shares of the
Corporation's $.10 par value common stock (the "Common Stock")
beginning as follows:
First Date Number of
Exercisable Shares
July 1,1995 3,334
July 1,1996 3,333
July 1,1997 3,333
This Option shall expire and is not exercisable after 5:00 p.m.,
Atlanta time, on December 31, 2004.
Notwithstanding the beginning date or dates for exercise set
forth in the preceding paragraph of this Section, but subject to
the provisions of such paragraph with respect to expiration of
this Option, this Option may be exercised as to all or any
portion of the full number of shares subject thereto if the
Corporation is registered under the Securities Exchange Act of
1934, as amended (the "Act"), and either (a) a tender offer or
exchange offer has been made for shares of the Common Stock,
other than one made by the Corporation, provided that the
corporation, person or other entity making such offer purchases
or otherwise acquires shares of Common Stock pursuant to such
offer, or (b) any person or group (as such terms are defined in
Section 13(d)(3) of the Act), becomes the holder of 50% or more
of the outstanding shares of Common Stock. If either of the
events specified in this paragraph have occurred, this Option
shall be fully exercisable: (x) in the event of (a) above, during
the period commencing on the date the tender offer or exchange
offer is commenced and ending on the date such offer expires and
is not extended; or (y) in the event of (b) above, during the 30-day
period commencing on the date upon which the Corporation is
provided a copy of a Schedule 13D or amendment thereto filed
pursuant to Section 13(d) of the Act and the rules and
regulations promulgated thereunder, indicating that any person or
group has become the holder of 50% or more of the outstanding
shares of Common Stock. In the case of (a) above, if the
corporation, person or other entity making the offer does not
purchase or otherwise acquire shares of Common Stock pursuant to
such offer, then the Director's right under this paragraph to
exercise this Option shall terminate, the Director and the
Corporation shall rescind any exercise of this Option pursuant to
this paragraph, and this Option shall be reinstated as if such
exercise had not occurred.
2. Purchase Price. The price per share to be paid by the
Director for the shares subject to this Option shall be Eleven
and 75/100 Dollars ($11.75).
3. Exercise Terms. Beginning on the dates specified above,
and prior to the expiration of this Option as provided in Section
1 hereof, the Director may exercise this Option as to all such
number of shares, or as to any part thereof, at any time and from
time to time during the remaining term of this Option; provided
that the Director must exercise this Option for at least the
lesser of 100 shares or the unexercised portion of this Option.
In the event this Option is not exercised with respect to all or
any part of the shares subject to this Option prior to its
expiration, the shares with respect to which this Option was not
exercised shall no longer be subject to this Option.
4. Option Non-Transferable. This Option and all rights
hereunder are neither assignable nor transferable by the Director
otherwise than by will or under the laws of descent and
distribution, or pursuant to a Qualified Domestic Relations
Order, and during the Director's lifetime this Option is
exercisable only by him (or by his guardian or legal
representative, should one be appointed, or qualified
transferee). More particularly (but without limiting the
generality of the foregoing), this Option may not be assigned,
transferred (except as aforesaid), pledged or hypothecated in any
way (whether by operation of law or otherwise) and shall not be
subject to execution, attachment or similar process. Any
attempted assignment, transfer, pledge, hypothecation or other
disposition of this Option contrary to the provisions hereof
shall be null and void and without legal effect.
5. Notice of Exercise of Option. This Option may be
exercised by the Director, or by his administrator, executor,
personal representative or qualified transferee, by a written
notice (in substantially the form of the "Notice of Exercise"
attached hereto as Exhibit A) signed by the Director, or by such
administrator, executor, personal representative or qualified
transferee, and delivered to the Corporation at its principal
office in Norcross, Georgia, to the attention of the Chief
Executive Officer, Treasurer or such other officer as the
Corporation may designate. Any such notice shall (a) specify the
number of shares of Common Stock which the Director or such
administrator, executor, personal representative or qualified
transferee, as the case may be, then elects to purchase
hereunder, and (b) be accompanied by (i) a certified or cashier's
check payable to the Corporation, or personal check acceptable to
the Corporation, in payment of the total price applicable to such
shares as provided herein, or (ii) (subject to any restrictions
referred to in Exhibit A) shares of Common Stock, owned by him or
her and duly endorsed or accompanied by stock transfer powers,
having a Fair Market Value (which for the purpose hereof shall
have the same meaning as in effect from time to time under the
Corporation's 1992 Stock Incentive Plan) equal to the total
purchase price applicable to such shares purchased hereunder, or
(iii) such a check, and the number of such shares whose Fair
Market Value when added to the amount of the check equals the
total purchase price applicable to such shares purchased
hereunder. Such notice shall also be accompanied by such a check
or shares of Common Stock in payment of applicable withholding
and employment taxes, or the person exercising this Option shall
authorize the withholding of shares of Common Stock otherwise
issuable under this Option in payment of such taxes, all as set
forth on Exhibit A and subject to any restrictions referred to
therein. Upon receipt of any such notice and accompanying
payments, and subject to the terms hereof, the Corporation agrees
to cause to be issued to the Director or to his administrator,
executor, personal representative or qualified transferee, as the
case may be, stock certificates for the number of shares
specified in such notice registered in the name of the person
exercising this Option.
6. Adjustment in Option. If prior to the complete exercise
of this Option, there shall be a change in the outstanding Common
Stock by reason of one or more stock splits, stock dividends,
combinations or exchanges of shares, recapitalizations or similar
capital adjustments, the number, kind and option price of the
shares remaining subject to this Option shall be equitably
adjusted in accordance with the terms of the Plan, so that the
proportionate interest in the Corporation represented by the
shares then subject to the Option shall be the same as before the
occurrence of such event.
7. Termination as a Director. If the Director for any
reason ceases to be a member of the Board of Directors of the
Corporation (such event being hereinafter referred to as a
"Termination"), then:
(a) To the extent this Option shall have become exercisable
on or prior to the date of Termination, it shall remain
exercisable until the Expiration Date; and
(b) Any portion of this Option that had not become
exercisable on or prior to the date of Termination shall
immediately terminate and shall not thereafter become
exercisable.
This Option does not confer upon the Director any right with
respect to continuance as a member of the Board of Directors of
the Corporation.
8. Investment Intention. Director is acquiring this Option
for his own account and not with any present intention to resell
or distribute this Option or any interests herein. Solely for
the purpose of enabling the Corporation to comply with the
Securities Act of 1933, as amended, and applicable state
securities laws (the "Acts"), it is agreed that at any time of
exercise of this Option, in whole or in part, the person
exercising this Option shall deliver to the Corporation an
appropriate investment letter prepared by counsel for the
Corporation stating that he is purchasing the shares to be issued
upon the exercise of this Option for investment purposes for his
own account and not with any present intention to resell or
distribute such shares. Such letter shall also set forth such
person's agreement not to resell or otherwise transfer such
shares except in transactions registered under the Acts or
established to the Corporation's satisfaction to be exempt from
such registration, and it is further agreed that the certificates
for such shares to be delivered to him may bear restrictive
legends to this effect. However, if the shares underlying this
Option shall at any time be registered under the Acts, or if it
is established to the Corporation's satisfaction that such shares
may be sold without registration under the Acts, the Corporation
shall release the person exercising this Option from this
investment representation, and shall not require the foregoing
investment letter and restrictive legend, or shall remove such
restrictive legend, as appropriate.
9. Binding Agreement. This Agreement shall be binding upon the
parties hereto and their representatives, successors and assigns.
IN WITNESS WHEREOF, the Corporation has caused this Stock
Option Agreement to be executed on behalf of the Corporation and
the Corporation's seal to be affixed hereto and attested by the
Secretary of the Corporation, and the Director has executed this
Agreement under his seal, all as of the day and year first above
written.
ELECTROMAGNETIC SCIENCES, INC.
[CORPORATE SEAL]
ATTEST: By: /s/Thomas E. Sharon
Chief Executive Officer
/s/William S. Jacobs
Secretary DIRECTOR:
/s/ John E. Pippin (SEAL)
John E. Pippin
EXHIBIT A
ELECTROMAGNETIC SCIENCES, INC.
NOTICE OF EXERCISE
OF STOCK OPTION
The undersigned hereby notifies Electromagnetic Sciences,
Inc. (the "Corporation") of his election to exercise his option
to purchase ___________ shares of the Corporation's common stock,
$.10 par value (the "Common Stock"), pursuant to that Stock
Option Agreement (the "Agreement") between John E. Pippin
("Director") and the Corporation dated January 27, 1995.
Accompanying this Notice is (1) a certified or a cashier's check
(or other check acceptable to the Corporation) in the amount of
$____________ payable to the Corporation, and/or (2) (subject to
such restrictions as may be determined to be necessary or
appropriate to avoid earnings charges or other adverse
consequences to the Corporation under applicable accounting or
tax rules or regulations) ___________ shares of the Common Stock
presently owned by the undersigned and duly endorsed or
accompanied by stock transfer powers, having an aggregate Fair
Market Value (as defined in the Electromagnetic Sciences, Inc.
1992 Stock Incentive Plan) on the date hereof of $_____________,
such amounts being equal, in the aggregate, to the purchase price
per share set forth in Section 2 of the Agreement multiplied by
the number of shares being hereby purchased (in each instance
subject to appropriate adjustment pursuant to Section 6 of the
Agreement).
Also accompanying this Notice is my check in the amount of
$_____________, in payment of federal and state income
withholding and employment taxes applicable to this exercise.
The amount of such payment is based on advice received from
appropriate officials of the Corporation responsible for the
administration of its payroll and employment tax obligations.
Alternatively, or in addition, and subject to such restrictions
as may be determined to be necessary or appropriate to comply
with Rule 16b-3 under the Securities Exchange Act of 1934, or to
avoid earnings charges or other adverse consequences to the
Corporation under applicable accounting or tax rules or
regulations, in full or partial payment of such taxes:
(1) I deliver herewith an additional _____________ shares
of the Common Stock presently owned by me, having an aggregate
Fair Market Value on the date hereof of $____________; and/or
(2) I hereby authorize the Corporation to withhold, from
the shares of Common Stock otherwise issuable to me pursuant to
this exercise, _____________ such shares having an aggregate Fair
Market Value on the date hereof of $_____________.
The sum of (i) any such check plus (ii) the Fair Market Value on
the date hereof of any shares of Common Stock specified in the
foregoing clauses (1) and (2) is not less than the amount of
federal and state withholding and employment taxes applicable to
this exercise, and is not greater than the total of all federal
and state income and employment taxes to be owed by me as a
result of such exercise.
IN WITNESS WHEREOF, the undersigned has set his hand and
seal, this ___ day of ______________, _______.
DIRECTOR OR HIS ADMINISTRATOR, EXECUTOR,
PERSONAL REPRESENTATIVE OR QUALIFIED
TRANSFEREE
___________________________________________
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, 1996, relating to the consolidated balance sheets of
Electromagnetic Sciences, Inc. and subsidiaries as of December
31, 1995 and 1994, 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, 1995, and all related
schedules, which reports appear in the December 31, 1995
annual report on Form 10-K of Electromagnetic Sciences, Inc.
KPMG Peat Marwick LLP
Atlanta, Georgia
March 28, 1996
Exhibit 22.1
ELECTROMAGNETIC SCIENCES, INC.
AND SUBSIDIARIES
Subsidiaries of the Registrant:
EMS Technologies, Inc.
660 Engineering Drive
Post Office Box 7700
Norcross, Georgia 30091-7700
LXE Inc.
303 Research Drive
Post Office Box 92600
Norcross, Georgia 30092-9600
CAL Corporation
1050 Morrison Drive
Ottawa, Ontario K2H 8K7
CANADA
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 5,766
<SECURITIES> 0
<RECEIVABLES> 40,118
<ALLOWANCES> 520
<INVENTORY> 15,829
<CURRENT-ASSETS> 63,076
<PP&E> 73,059
<DEPRECIATION> 43,794
<TOTAL-ASSETS> 104,954
<CURRENT-LIABILITIES> 20,074
<BONDS> 10,989
0
0
<COMMON> 700
<OTHER-SE> 59,509
<TOTAL-LIABILITY-AND-EQUITY> 104,954
<SALES> 128,950
<TOTAL-REVENUES> 128,950
<CGS> 83,865
<TOTAL-COSTS> 83,865
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 864
<INCOME-PRETAX> 3,668
<INCOME-TAX> 1,402
<INCOME-CONTINUING> 2,310
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,310
<EPS-PRIMARY> .32
<EPS-DILUTED> .32
</TABLE>
ELECTROMAGNETIC SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except net earnings per share)
Years ended December 31
1995 1994 1993
Net sales (note 9) $128,950 117,993 99,044
Cost of sales 83,865 73,375 61,771
Selling, general and administrative expenses 30,836 27,589 26,522
Research and development expenses 10,392 8,127 8,153
Operating income 3,857 8,902 2,598
Interest and other income 675 640 210
Interest expense (864) (482) (434)
Earnings before income taxes
and LXE minority interest 3,668 9,060 2,374
Income taxes (note 6) 1,402 3,712 896
LXE minority interest (44) 1,085 87
Net earnings $ 2,310 4,263 1,391
Net earnings per common and
common equivalent share (note 5) $ .32 .58 .20
Weighted average number of common
and common equivalent shares (note 5) 7,266 7,043 6,856
See accompanying notes to consolidated financial statements.
ELECTROMAGNETIC SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31
1995 1994
ASSETS
Current assets:
Cash, including interest-bearing deposits
of $1,998 in 1995 and $1,165 in 1994 $ 3,559 2,671
Reverse repurchase agreements 2,207 10,400
Total cash and cash equivalents 5,766 13,071
Marketable securities, at cost, which
approximates market - 400
Trade accounts receivable, net (note 3) 40,118 36,355
Inventories:
Work in process 5,701 4,905
Parts and materials 10,128 6,809
Total inventories 15,829 11,714
Deferred income taxes (note 6) 1,363 992
Total current assets 63,076 62,532
Property, plant and equipment (note 4):
Land 1,150 1,150
Building and leasehold improvements 14,690 13,626
Machinery and equipment 53,037 47,256
Furniture and fixtures 4,182 3,367
73,059 65,399
Less accumulated depreciation
and amortization 43,794 38,868
Net property, plant and equipment 29,265 26,531
Other assets 7,487 2,142
Goodwill, net of accumulated amortization
of $1,225 in 1995 and $805 in 1994 (note 2) 5,126 5,546
$104,954 96,751
See accompanying notes to consolidated financial statements.
ELECTROMAGNETIC SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, continued
(In thousands except share data)
December 31
1995 1994
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of
long-term debt (note 4) $ 3,546 3,830
Accounts payable 10,369 10,762
Income taxes - 1,490
Accrued compensation costs 3,402 3,656
Accrued retirement costs (note 7) 589 1,305
Deferred revenue 1,296 1,147
Other current liabilities 872 976
Total current liabilities 20,074 23,166
Long-term debt, excluding current
installments (note 4) 10,989 4,592
Deferred income taxes (note 6) 4,408 3,881
Total liabilities 35,471 31,639
Minority interest in LXE 9,274 8,681
Stockholders' equity (note 5):
Preferred stock of $1.00 par value
per share. Authorized 10,000,000
shares; none issued - -
Common stock of $.10 par value per
share. Authorized 75,000,000 shares,
issued and outstanding 7,004,000 in
1995 and 6,821,000 in 1994 700 682
Additional paid-in capital 10,681 9,329
Foreign currency translation adjustment (17) (115)
Retained earnings 48,845 46,535
Total stockholders' equity 60,209 56,431
Commitments and contingencies (notes 2
and 10)
$104,954 96,751
See accompanying notes to consolidated financial statements.
ELECTROMAGNETIC SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
Three years ended December 31, 1995
Foreign
currency
Addi- trans- Total
tional lation stock-
Common Stock paid-in adjust- Retained holders'
Shares Amount capital ment earnings equity
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
Net earnings - - - - 2,310 2,310
Income tax benefit from
exercise of non-
qualified stock options
(note 6) - - 695 - - 695
Exercise of common stock
options 248 25 1,594 - - 1,619
Redemption of shares upon
exercise of common stock
options (65) (7) (937) - - (944)
Foreign currency
translation adjustment - - - 98 - 98
Balance, December 31,
1995 7,004 $ 700 10,681 (17) 48,845 60,209
See accompanying notes to consolidated financial statements.
ELECTROMAGNETIC SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Years Ended December 31
1995 1994 1993
Cash flows from operating activities:
Net earnings $ 2,310 4,263 1,391
Adjustments to reconcile net earnings to net
cash from operating activities:
LXE minority interest (44) 1,085 87
Depreciation and amortization 5,587 5,526 5,396
Goodwill amortization 420 420 385
Deferred income taxes 93 (438) (213)
Changes in operating assets
and liabilities:
Trade accounts receivable (3,763) (7,118) (4,619)
Inventories (4,115) 765 (1,160)
Accounts payable (393) 2,015 (2,212)
Income taxes (501) 1,582 1,830
Accrued costs, deferred revenue,
and other current liabilities (954) 243 243
Other (864) (87) (122)
Net cash provided by (used in)
operating activities (2,224) 8,256 1,006
Cash flows from investing activities:
Purchase of property, plant and equipment (8,459) (5,573) (5,301)
Capitalized product software costs and
other market related investments (3,667) - -
Purchase of CAL common stock from
minority shareholders - - (537)
Proceeds from maturities of marketable
securities 400 1,590 2,421
Net cash used in
investing activities (11,726) (3,983) (3,417)
Cash flows from financing activities:
Proceeds from long-term debt 6,850 - 3,670
Repayment of long-term debt (737) (356) (1,154)
Proceeds from exercise of stock options 532 743 39
Net cash provided by
financing activities 6,645 387 2,555
Net change in cash and
cash equivalents (7,305) 4,660 144
Cash and cash equivalents at January 1 13,071 8,411 8,267
Cash and cash equivalents at December 31 $ 5,766 13,071 8,411
Supplemental disclosure of cash
flow information:
Cash paid in interest $ 864 482 434
Cash paid in income taxes $ 2,265 2,991 1,205
See accompanying notes to consolidated financial statements.
Electromagnetic Sciences, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1995, 1994 and 1993
(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:
Management's Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principals requires management to make estimates and
assumptions that affect the amounts of assets and liabilities and revenues
and expenses reported in the financial statements and accompanying notes,
including revenue recognition under long-term contracts. Actual results
could differ from those estimates.
Revenue Recognition
Revenues are derived from sales of the Company's products to end-users and
to other manufacturers or system integrators. Revenues under certain long-
term contracts, many of which provide for periodic payments, are recognized
under the percentage-of-completion method using the ratio of cost incurred
to total estimated cost as the measure of performance. Revenues under
cost-reimbursement contracts are recorded as costs are incurred and include
an estimate of fees earned. Revenues under all other contracts are
recognized when units are delivered or services are performed. Provisions
for estimated losses on uncompleted contracts are made in the period in
which 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 or other
government-backed debt securities as the underlying assets; these
marketable securities are classified as current or noncurrent depending
upon their respective maturity dates. Marketable debt securities are
carried at cost, which approximates market, because the Company has the
ability and intent to hold them until maturity. Securities underlying the
reverse repurchase agreements are book entry securities held in trust at a
bank. At December 31, 1995, 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 using the straight-line method over the following estimated
useful lives of the respective assets:
Buildings 40 years
Machinery and equipment 3 to 8 years
Furniture and fixtures 10 years
Leasehold improvements are amortized over the shorter of their estimated
useful lives or the terms of the respective leases.
The Company has adopted Statement of Financial Accounting Standards No. 121
(SFAS 121), "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of," which was issued in March 1995. The
adoption of SFAS 121 did not result in any adjustments to the carrying
value of property, plant and equipment or other long-lived assets.
Capitalized Software Costs
In 1995, the Company has capitalized $1,167,000 of certain costs to develop
software which will be licensed to customers. Capitalized software costs,
which are included in other assets, will be amortized using the greater of
the ratio of current gross revenues for the product to the total of current
and anticipated future gross revenues or the straight-line method over
three years.
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 as 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 remeasuring the foreign currency financial
statements of these subsidiaries are recognized in the consolidated
statement of earnings. Foreign currency transactions and remeasurement
resulted in a net gain of $550,000 in 1995 and $237,000 in 1994, but had no
material effect in 1993.
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.
(3) TRADE ACCOUNTS RECEIVABLE
Trade accounts receivable include the following (in thousands):
December 31
1995 1994
Amounts billed under contracts $ 27,774 27,221
Unbilled revenues (substantially all to
be billed during the following twelve
months) 13,873 11,112
Deferred revenue (1,009) (1,333)
Allowance for doubtful accounts (520) (645)
Trade accounts receivable, net $ 40,118 36,355
(4) LONG-TERM DEBT
The following is a summary of long-term debt (in thousands):
December 31
1995 1994
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 1995 and 1994) $ 350 594
Reducing revolving credit loan secured by land
and building, maturing in December 2000,
interest payable quarterly at a variable rate
(8.0% at the end of 1995 and 8.75% at the end
of 1994) 3,770 3,770
Revolving credit loan of LXE Inc., unsecured,
maturing in December 1998, interest payable
quarterly at a variable rate (7.67% at the end
of 1995) 6,850 -
Line of credit secured by the assets
of CAL Corporation, interest payable at a
prime rate plus 1.0% (8.5% at the end of
1995 and 8.0% at the end of 1994) 3,068 3,392
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% (10.0% at the end of 1995 and 10.5%
at the end of 1994) 423 565
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% (9.0% at the end of 1995 and 9.5% at the
end of 1994) 74 101
Total long-term debt 14,535 8,422
Less current installments of long-term debt 3,546 3,830
Long-term debt,
excluding current installments $10,989 4,592
In December 1995, the Company amended and restated its reducing revolving
credit agreement with a bank to increase available credit from $5,400,000
to $10,000,0000, and extend the loan maturity from January 1, 1997 to
December 29, 2000. Reductions in credit available under the agreement
occur annually on a fixed schedule over the loan term until credit
available reduces to $8,000,000 during the final year of the loan
agreement. Based on the level of borrowing at December 31, 1995, no
principal payments are required until maturity.
Also in December 1995, LXE Inc. entered into a $10,000,000 revolving credit
agreement with a bank that extends through December 1998. Under the credit
agreement, LXE must maintain certain ratios related to interest coverage
and leverage, and must maintain net worth of at least $25,000,000, among
other restrictions.
Interest under both of the revolving credit agreements is, at the Company's
option, a function of either the bank's prime rate or LIBOR. A commitment
fee equal to .20% per annum of the daily average unused credit available is
payable quarterly in arrears under both loans.
CAL's line of credit expired in July 1995, and CAL is in technical default
of certain financial covenants. CAL and its bank are currently negotiating
a new credit agreement that would extend the maturity and increase
available credit. The Company expects that the new agreement will be
completed in the first half of 1996.
The approximate principal maturities of long-term debt for each of the next
five years are $3,546 in 1996, $369 in 1997, $6,850 in 1998, $0 in 1999,
and $3,770 in 2000. At December 31, 1996 the Company has available four
immediate sources of credit: $6.2 million remaining under the reducing
revolving credit agreement; $3.1 million available under the LXE revolving
credit loan; a separate $5 million unused line of credit with a bank; and
$430,000 available under a CAL credit line.
(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 ten years after the
date of grant. Some nonqualified options are contingent upon continued
employment or noncompetition after retirement. Under all plans at December
31, 1995, options for a total of 518,168 shares of stock were exercisable,
and options for a total of 169,000 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, 1995 and 1994 (in thousands,
except price per share data):
Option Total
price option
Shares per share price
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
Granted 69 11.59-14.13 878
Canceled or expired (16) 6.13- 8.25 (117)
Exercised (248) 3.63-11.63 (1,619)
Options outstanding at
December 31, 1995 807 $ 3.63-14.13 $ 5,975
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, 1995,
options for 408,000 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 318,000 exercisable at December 31, 1995.
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.
The Company has accounted for the issuance of options to employees under
Accounting Principles Board Opinion No. 25 (APB 25), which recognizes
compensation cost from the issuance of options based upon the option's
"intrinsic value," the amount by which the quoted market price of an
option's underlying stock exceeds the amount an employee must pay to
acquire the stock. APB 25 specifies different dates for the pertinent
quoted market price, depending on whether the terms of an award are fixed
or variable. Substantially all of the options granted by the Company have
not resulted in compensation cost under APB 25. In October 1995, the
Financial Accounting Standards Board adopted Statement of Financial
Accounting Standards No. 123 (SFAS 123), "Accounting for Stock-Based
Compensation," effective for fiscal years beginning after December 15,
1995. SFAS 123 requires the recognition or disclosure of compensation cost
based upon the "fair value" of a stock option (estimated by an option-
pricing valuation model such as Black-Scholes) as of the grant date. The
Company intends to comply with the provisions of SFAS 123 beginning in
fiscal 1996 by continuing to recognize compensation cost from stock options
under the "intrinsic value" method of APB 25, with additional footnote
disclosures to be provided, including the pro forma effects of applying the
"fair value" method of SFAS 123. Based upon this accounting policy, the
Company wold not have recognized any compensation cost associated with
stock options granted in fiscal 1995, nor does the Company expect to
recognize any such cost in 1996.
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 a 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):
1995 1994 1993
Consolidated income tax expense $ 1,402 3,712 896
Income tax benefit resulting from
exercise of stock options credited
to stockholders' equity and
minority interest (1,316) (479) (14)
Total $ 86 3,233 882
The components of income tax expense were (in thousands):
1995 1994 1993
Current:
Federal $ 979 3,312 1,058
State 98 626 188
Foreign 232 212 -
Total current expense 1,309 4,150 1,246
Deferred:
Federal (153) (335) (44)
State (1) (70) (6)
Foreign 247 (33) (300)
Total deferred (benefit) expense 93 (438) (350)
Total income tax expense $ 1,402 3,712 896
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):
1995 1994 1993
Computed "expected" income
tax expense $ 1,247 3,080 807
Tax credits from
research activities (141) (150) (112)
State income taxes, net of
federal income tax benefit 64 330 119
Higher foreign tax rates 208 28 (121)
Change in deferred tax asset
valuation allowance (47) 69 (34)
Amortization of goodwill 143 143 131
Other (72) 212 106
Income tax expense $ 1,402 3,712 896
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 1995 and 1994 are presented below (in thousands):
1995 1994
Deferred tax assets:
Accounts receivable $ 269 442
Inventories 209 251
Accrued compensation costs 417 427
Foreign research expense and
tax credit carryforward 5,838 4,777
Foreign net operating loss
carryforward 239 241
Foreign note receivable 327 319
Other 225 13
Total gross deferred tax assets 7,524 6,470
Valuation allowance (6,161) (5,328)
Net deferred tax assets 1,363 1,142
Deferred tax liabilities:
Property, plant and equipment 1,866 1,802
Gain from issuance of LXE stock 2,229 2,229
Net gain from foreign transactions and
remeasurement 313 -
Total gross deferred tax liabilities 4,408 4,031
Net deferred tax liability $ 3,045 2,889
The valuation allowance for deferred tax assets at December 31, 1995,
includes $5,280,000 related to tax benefits from the operations of CAL
Corporation; which will be first allocated to goodwill when recognized.
Earnings before income taxes for U.S. operations were $2,460,000 in 1995,
$8,817,000 in 1994, and $3,185,000 in 1993. Foreign operations reported
earnings before income taxes of $1,208,000 in 1995, $243,000 in 1994, and a
loss before income taxes of $811,000 in 1993. The Company's deferred tax
assets at December 31, 1995, include $239,000 for a cumulative $725,000 net
operating loss incurred by certain foreign operations, which may be carried
forward through 2000; management believes that these operations will
generate adequate earnings within the next two years to fully realize this
deferred tax asset.
(7) RETIREMENT PLANS
The Company established a qualified defined contribution plan in 1993. All
U.S.-based employees that meet a minimum service requirement are eligible
to participate in the plan. Company contributions are allocated to each
participant based upon an age-weighted formula that discounts an equivalent
benefit at age 65 to each employee's current age. Accumulated
contributions are invested at each participant's discretion from among a
diverse range of investment options offered by an independent investment
firm selected by the Company.
The Company's contribution to this plan is determined each year by the
Board of Directors. There is no required minimum annual contribution, but
the target contribution has been approximately 5% of base payroll. The
Company accrued an expense for the defined contribution plan of $1,564,000
for 1995, $1,250,000 for 1994, and $1,031,000 for 1993.
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 $403,000 in 1995, $300,000 in 1994 and $218,000 in 1993.
(8) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following summarizes certain information regarding the fair value of
the Company's financial instruments at December 31, 1995:
Cash and cash equivalents, trade accounts receivable and accounts
payable - The carrying amount approximates fair value because of
the short maturity of these instruments.
Other assets - Included in other assets at December 31, 1995 is $2.5
million minority interest investment in a non-public U.S. company with
complimentary technologies. Based upon the discounted cash flows
expected to be derived from this investment, management estimates
that its carrying value approximates its fair value.
Long-term debt - Substantially all of the Company's long-term debt
bears interest at variable rates which management believes are
commensurate with rates currently available on similar debt.
Accordingly, the carrying value of long-term debt approximates
fair value.
(9) BUSINESS SEGMENT AND GEOGRAPHIC AREA INFORMATION
The Company designs and produces advanced communications and signal-
processing products with an emphasis on wireless networks; applications
include space and satellite communications; cellular telecommunications,
radar, surveillance, and military counter-measures. The Company also
designs and produces wireless logistics systems mainly for commercial
materials handling operations. Following is a summary of business segment
information (in thousands):
1995 1994 1993
Net sales:
Advanced communications and
signal-processing products $ 66,659 54,851 53,391
Wireless logistics systems 62,291 63,142 45,653
Total $ 128,950 117,993 99,044
Operating income:
Advanced communications and
signal-processing products $ 4,468 2,490 2,038
Wireless logistics systems (611) 6,412 560
Total $ 3,857 8,902 2,598
Identifiable assets:
Advanced communications and
signal-processing products $ 54,912 51,010 49,996
Wireless logistics systems 49,281 45,741 37,865
Total $ 104,193 96,751 87,861
Capital expenditures:
Advanced communications and
signal-processing products $ 4,200 2,845 2,690
Wireless logistics systems 4,259 2,728 2,611
Total $ 8,459 5,573 5,301
Depreciation and amortization:
Advanced communications and
signal-processing products $ 3,260 3,478 3,662
Wireless logistics systems 2,747 2,468 2,119
Total $ 6,007 5,946 5,781
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, 1995, 1994,
and 1993 (in thousands):
1995 1994 1993
Net sales:
United States $ 99,088 96,124 76,727
Canada 17,306 15,059 21,044
Europe 12,556 6,810 1,273
Total $ 128,950 117,993 99,044
Operating income (loss):
United States $ 2,763 8,639 2,315
Canada 816 (19) 474
Europe 278 282 (191)
Total $ 3,857 8,902 2,598
Identifiable assets:
United States $ 81,003 76,234 70,061
Canada 17,174 16,037 15,843
Europe 6,777 4,480 1,957
Total $ 104,954 96,751 87,861
Export sales from the U.S. to unaffiliated customers were approximately
$16.0 million, $18.1 million and $12.7 million in 1995, 1994 and 1993,
respectively. Exports to the U.S. by the Company's Canadian subsidiary to
non-affiliated U.S. customers were approximately $1.3 million in 1995, $1.1
million in 1994, and $1.8 million in 1993.
The Company had one domestic customer that accounted for 12.4% of 1995
consolidated net sales. No customers accounted for more than 10% of
consolidated net sales in 1994 and 1993.
(10) COMMITMENTS
The Company is committed under several non-cancelable operating leases for
office space, certain computer and office equipment and automobiles.
Minimum annual lease payments under such leases are $1,655,000 in 1996,
$1,216,000 in 1997, $563,000 in 1998, $401,000 in 1999, and $311,000 in
2000. The Company also has short-term leases for regional sales offices,
equipment and automobiles. Total rent expense under all operating leases
was approximately $2,425,000, $1,889,000, and $2,101,000 in 1995, 1994 and
1993, respectively.
(11) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Following is a summary of interim financial information for the years ended
December 31, 1995 and 1994 (in thousands, except per share data):
1995 Quarters ended
March 31 June 30 September 30 December 31
Net sales $ 32,757 33,006 28,135 35,052
Operating income(loss) 2,161 2,325 (2,210) 1,581
Net earnings (loss) 1,077 1,294 (937) 876
Net earnings (loss)per
share .15 .18 (.13) .12
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
(12) SUBSEQUENT EVENT (UNAUDITED)
On February 12, 1996, the Company increased its ownership of LXE Inc. from
72% to 81% by purchasing 548,000 shares of LXE Inc. in a private
transaction. The purchase price was paid with a combination of $500,000 in
cash and 457,000 newly issued shares of the Company's common stock. The
greater level of ownerhship will increase the Company's participation in
LXE's future operating results and will enable the Company to consolidate
LXE for corporate income tax purposes.
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, 1995 and
1994, 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, 1995. 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, 1995 and
1994, and the results of their operations and their cash flows for each of
the years in the three-year period ended December 31, 1995, in conformity
with generally accepted accounting principles.
KPMG Peat Marwick LLP
Atlanta, Georgia
January 27, 1996
<PAGE>
Selected Financial Data
(In thousands, except earnings per share)
Years ended December 31
1995 1994 1993 1992 1991
Net sales $128,950 117,993 99,044 71,822 75,340
Cost of sales 83,865 73,375 61,771 44,407 46,506
Selling, general and
administrative expenses 30,836 27,589 26,522 17,786 15,789
Research and development
expenses 10,392 8,127 8,153 7,518 6,609
Operating income 3,857 8,902 2,598 2,111 6,436
Gain on initial public
offering of LXE common stock - - - - 5,867
Interest and other income 675 640 210 776 831
Interest expense (864) (482) (434) (81) (164)
Earnings before
income taxes and
minority interest 3,668 9,060 2,374 2,806 12,970
Income tax expense 1,402 3,712 896 1,038 4,909
LXE minority interest (44) 1,085 87 844 605
Earnings from continu-
ing operations before
cumulative effect of
change in accounting
principle 2,310 4,263 1,391 924 7,456
Discontinued operations:
Loss from Gamma-f operations
(net of taxes) - - - - (75)
Loss on disposal of Gamma-f
(net of taxes) - - - - (1,350)
Loss from discontinued
operations - - - - (1,425)
Earnings before
cumulative effect of
change in accounting
principle 2,310 4,263 1,391 924 6,031
Cumulative effect at January 1,
1991 of change in accounting
for income taxes - - - - 370
Net earnings $ 2,310 4,263 1,391 924 6,401
Earnings per common
and common equivalent shares:
From continuing operations $ .32 .58 .20 .10 .98
From discontinued operations - - - - (.19)
From accounting change - - - - .05
Net earnings per
common and common
equivalent shares .32 .58 .20 .10 .84
Weighted average number of
common and common equivalent
shares 7,266 7,043 6,856 7,331 7,605
As of December 31
1995 1994 1993 1992 1991
Working capital $ 43,002 39,366 33,104 32,890 33,860
Total assets 104,954 96,751 87,861 72,970 75,147
Long-term debt (excluding
current installments) 10,989 4,592 5,060 927 1,104
Stockholders' equity 60,209 56,431 51,548 50,079 52,063
No cash dividends have been declared or paid during any of the periods
presented.
Management's Discussion and Analysis
RESULTS OF OPERATIONS
Consolidated net sales increased to $129 million in 1995 from $118 million
in 1994 and $99 million in 1993, reflecting changes in the Company's two
business segments. In the segment for advanced communications and signal
processing products, sales increased to $67 million in 1995 from $55
million in 1994 and $53 million in 1993. Space and satellite programs and
cellular antenna systems made significant contributions to the 1995
increase. The 1994 sales increase in this segment also included growth
from space and satellite programs, as well as from other core applications;
however, these increases were mostly offset by a reduction in revenues
resulting from disposal of the defense electronics group of the CAL
Corporation subsidiary late in 1993.
In the segment for wireless logistics systems (sold through the Company's
LXE Inc. subsidiary), revenues were $62 million in 1995 compared with $63
million in 1994 and $46 million in 1993. The 1995 change was especially
affected by a third quarter revenue shortfall associated with LXE beginning
the transition to an expanded product line. The 1994 increase was
attributable to sales growth through European sales subsidiaries and U.S.
- -based third party distributors.
Cost of sales increased to 65% of consolidated net sales in 1995 compared
with 62% in both 1994 and 1993. The increase was attributable to LXE
products, for which the cost of sales percentage has increased in each of
the last three years (56%, 50%, and 48% of net LXE sales in 1995, 1994 and
1993, respectively) due to increased distribution through indirect channels
that typically carry lower gross profit margins and to a more competitive
pricing environment. The LXE-related increases in the cost of sales
percentage were partially offset by improvement in the advanced
communication and signal processing business segment, which had a more
profitable mix of contracts.
Selling, general and administrative expenses were 24% of sales in 1995,
compared with 23% in 1994 and 27% in 1993. The growth from 1994 to 1995
related to expansion of European sales and marketing efforts for LXE
products, marketing support for the Company's new cellular antenna
products, and additional personnel to support management information
systems. The decrease from 1993 to 1994 in the selling, general and
administrative expense percentage resulted mainly from the benefit of a
higher sales base to absorb fixed costs.
Research and development expenses represent the cost of the Company's
internally funded efforts. Significant research and development costs are
also incurred with many specific customer orders for advanced
communications and signal processing equipment and, accordingly, are
included in cost of sales. The 1995 increase in internally funded
research and development related to new LXE products with DOS and Windows
capabilities that support client/server networks and emerging software
standards. The Company also increased its efforts to develop antennas,
aeronautical terminals and other products for advanced mobile
communications markets.
Interest and other income did not change significantly in 1995 compared
with 1994, because an increase in the gains from foreign currency
transactions and remeasurement associated with LXE's European subsidiaries
more than offset a decrease in interest income from lower cash available
for investment. In 1994, higher levels of cash available for investment as
well as gains from foreign currency transactions and remeasurement resulted
in higher interest and other income compared with 1993. Interest expense
increased in 1995 compared with 1994 and 1993 due to increased borrowing
during the year at LXE.
The effective income tax rate was 38% in 1995, 41% in 1994, and 38% in
1993. The change in 1995 reflected the effect of tax credits for research
and development. The increase in 1994 was related to profit growth from
certain LXE operations in Europe and to the reduced effect of tax credits
for research and development.
Liquidity and Capital Resources
Cash and cash equivalents decreased as a result of several factors during
1995, including an increase in inventory levels that resulted from lower
LXE sales in the second half of the year. Additionally, the timing of
billings on several long-term contracts for advanced communications
products resulted in higher unbilled receivables compared with the prior
year end. More cash was also used in investing activities in 1995 compared
with 1994 as a result of increases in capital expenditures for purchases of
equipment, facility expansion, development of product software, and the
acquisition of a minority interest in a strategic business partner.
Capital expenditures were financed by existing cash and cash equivalents
and by borrowing under the revolving credit agreements.
During 1995, the Company amended its existing revolving credit mortgage
agreement with a bank to extend the term five years to December 2000 and to
increase available borrowing under the agreement from $5.4 million to $10
million. In addition, the LXE subsidiary entered into a $10 million,
three-year revolving credit agreement with a bank, which replaced an
existing $5 million short-term line of credit.
At December 31, 1995, the Company had available four immediate sources of
credit: $6.2 million remaining under the revolving credit mortgage
agreement, an unused $5 million line of credit, $3.2 million remaining
under the LXE revolving credit agreement, and approximately $430,000
available under a CAL line of credit. 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 investment plans.
New Accounting Pronouncements
The Financial Accounting Standards Board has issued Statements of
Accounting Standards No. 123, "Accounting for Stock-Based Compensation,"
which will be effective for the Company's fiscal year ended December 31,
1996. Management believes that adoption of this new accounting standard
will not have a material effect on the Company's financial statements.
