<PAGE>
SCHEDULE 14C
(RULE 14c-101)
Information Statement Pursuant to Section 14(c) of the
Securities Exchange Act of 1934
Check the appropriate box:
/ / Preliminary Information Statement
/X/ Definitive Information Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
RADYNE CORP.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Charter)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii) or 14c-5(g).
/ / Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
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<PAGE>
RADYNE CORP.
DECEMBER 18, 1996
TO THE SHAREHOLDERS OF RADYNE CORP.
You are invited to attend a Special Meeting (the "Special Meeting") of the
Shareholders of Radyne Corp. (the "Company") to be held in lieu of an Annual
Meeting of the Shareholders of the Company on Wednesday, January 8, 1997 at
11:00 a.m., local time, at Tempe Mission Palms, 60 East Fifth Street, Tempe,
Arizona 85281.
Details of the business to be conducted at the Special Meeting are given in
the attached Notice of Special Meeting and Information Statement.
We look forward to seeing you at the Special Meeting.
Robert C. Fitting
President
December 18, 1996
<PAGE>
RADYNE CORP.
5225 SOUTH 37TH STREET
PHOENIX, ARIZONA 85040
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY 8, 1997
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the "Special
Meeting") of Radyne Corp. (the "Company"), a New York corporation, will be held
on Wednesday, January 8, 1997 at 11:00 a.m., local time, at Tempe Mission Palms,
60 East Fifth Street, Tempe, Arizona 85281, for the following purposes:
1. To elect directors to serve for the ensuing year and until their
successors are elected;
2. To approve an amendment and restatement of the Company's Certificate
of Incorporation providing (a) that the purpose for which the Company is
formed is generally to engage in any lawful activity for which corporations
may be organized; (b) for a reverse split of the Common Stock of the Company
on a 5-for-1 basis; (c) for the elimination of shareholders' preemptive
rights under Section 622 of the Business Corporation Law; (d) for the
removal of a paragraph which purports to govern the Company's choice of
accounting year; and (e) for an update of the address to which the Secretary
of State shall mail a copy of process against the Company;
3. To approve the adoption of the 1996 Incentive Stock Option Plan;
4. To ratify the selection of Deloitte & Touche LLP as the Company's
independent accountants for the fiscal year ending December 31, 1996; and
5. To act upon such other matters as may properly come before the
meeting or any adjournments or postponements thereof.
The foregoing items of business are more fully described in the Information
Statement accompanying this Notice.
Only Shareholders of record at the close of business on December 9, 1996 are
entitled to notice of and to vote at the meeting and at any adjournment thereof.
The stock transfer books will not be closed between the record date and the date
of the meeting. A list of Shareholders entitled to vote at the Special Meeting
will be available for inspection at the offices of the Company, 5225 South 37th
Street, Phoenix, Arizona 85040.
All shareholders are cordially invited to attend the meeting in person.
However, since it is anticipated that a single shareholder which holds a
majority of the Common Stock of the Company will vote in favor of the
aforementioned proposals, proxies are not being solicited.
<PAGE>
RADYNE CORP.
5225 SOUTH 37TH STREET
PHOENIX, ARIZONA 85040
------------------------
INFORMATION STATEMENT
PURSUANT TO SECTION 14
OF THE SECURITIES EXCHANGE ACT OF 1934
AND REGULATION 14C AND SCHEDULE 14C THEREUNDER
------------------------
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY
------------------------
INTRODUCTION
This Information Statement (the "Information Statement") is being furnished
pursuant to Sections 14(a) and 14(c) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), to the holders (the "Shareholders") of the common
stock, par value $.002 per share (the "Common Stock"), of Radyne Corp., a New
York corporation (the "Company"), in connection with certain proposals to be
voted on by the Shareholders at a Special Meeting to be held in lieu of an
Annual Meeting on January 8, 1997 at 11:00 a.m., local time, at Tempe Mission
Palms, 60 East Fifth Street, Tempe, Arizona 85281. This Information Statement
was first mailed to shareholders on or about December 18, 1996.
The Special meeting is being held for the following purposes:
1. To elect directors to serve for the ensuing year and until their
successors are elected;
2. To approve an amendment and restatement of the Company's Certificate
of Incorporation providing (a) that the purpose for which the Company is
formed is generally to engage in any lawful activity for which corporations
may be organized; (b) for a reverse split of the Common Stock of the Company
on a 5-for-1 basis; (c) for the elimination of shareholders' preemptive
rights under Section 622 of the Business Corporation Law; (d) for the
removal of a paragraph which purports to govern the Company's choice of
accounting year; and (e) for an update of the address to which the Secretary
of State shall mail a copy of process against the Company;
3. To approve the adoption of the 1996 Incentive Stock Option Plan;
4. To ratify the selection of Deloitte & Touche LLP as the Company's
independent accountants for the fiscal year ending December 31, 1996; and
5. To act upon such other matters as may properly come before the
meeting or any adjournments or postponements thereof.
The foregoing items of business are more fully described herein. The record
date for determining those shareholders who will be entitled to notice of, and
to vote at, the Special Meeting and at any adjournment thereof is December 9,
1996 (the "Record Date"). The stock transfer books will not be closed between
the record date and the date of the meeting. A list of shareholders entitled to
vote at the Special Meeting will be available for inspection at the offices of
the Company, 5225 South 37th Street, Phoenix, Arizona 85040.
Each share of Common Stock entitles the holder thereof to one vote. It is
anticipated that at the Special Meeting, a single shareholder which holds a
majority of the 18,798,605 shares of Common Stock outstanding as of the Record
Date will vote in favor of the aforementioned proposals. Since the proposals
will have been approved by the holders of the required majority of the Common
Stock issued and
1
<PAGE>
outstanding, and since the Company has no other outstanding class of stock, no
proxies are being solicited in connection with this Information Statement and
the accompanying Notice of Special Meeting of the Shareholders of the Company.
Pursuant to Rule 14c-2 under the Exchange Act, the proposals will not be
adopted until a date at least twenty (20) days after the date on which this
Information Statement has been mailed to the Shareholders. As this Information
Statement is being sent to the beneficial owners of the Common Stock on or about
December 18, 1996, or at least twenty (20) days before the date of the Special
Meeting, the Company anticipates that the actions contemplated by this
Information Statement will be effected on or about the close of business on the
date of the Special Meeting.
The Company has asked brokers and other custodians, nominees and fiduciaries
to forward this Information Statement to the beneficial owners of the Common
Stock held of record by such persons and will reimburse such persons for
out-of-pocket expenses incurred in forwarding such material.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed by the corporation with the Securities and
Exchange Commission pursuant to the Exchange Act are incorporated by reference
herein:
1. Annual Report on Form 10-KSB for the year ended June 30, 1996, filed
November 15, 1996.
2. Quarterly Report on Form 10-QSB for the quarter ended September 30, 1996,
filed November 26, 1996.
3. Current Report on Form 8-K, filed August 23, 1996 and September 23, 1996
(confirming copy)(date of event August 12, 1996).
THIS INFORMATION STATEMENT INCORPORATES BY REFERENCE DOCUMENTS RELATING TO
THE COMPANY WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. DOCUMENTS
RELATING TO THE COMPANY (OTHER THAN EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH
EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE) ARE AVAILABLE TO ANY
PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS INFORMATION STATEMENT IS
DELIVERED, ON WRITTEN OR ORAL REQUEST, WITHOUT CHARGE, BY WRITING TO THE COMPANY
AT RADYNE CORP., 5225 SOUTH 37TH STREET, PHOENIX, AZ 85040, ATTENTION: DIRECTOR
OF ADMINISTRATION, OR BY CALLING THE COMPANY AT (602) 437-9620. COPIES OF
DOCUMENTS SO REQUESTED WILL BE SENT BY FIRST CLASS MAIL, POSTAGE PAID, WITHIN
ONE BUSINESS DAY OF THE RECEIPT OF SUCH REQUEST.
BACKGROUND
The Company is engaged in the business of designing, manufacturing and
selling products and systems used for the transmission and reception of data
over satellite communication networks. Specifically, the Company designs,
develops, assembles and sells a proprietary line of satellite modems, frequency
converters and ancillary products.
The Company has developed proprietary technology which is employed in the
design and manufacture of its products.
The Company was organized as a New York Corporation on November 25, 1980.
The Company's principal executive offices are located at 5225 South 37th Street,
Phoenix, Arizona 85040 and its telephone number is (602) 437-9620.
On April 28, 1994, the Company filed a voluntary petition for relief under
Chapter 11 of the U.S. Bankruptcy Code with the United States Bankruptcy Court
for the Eastern District of New York.
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<PAGE>
On December 16, 1994, the Bankruptcy Court issued an order confirming the
Company's Second Amended Plan of Reorganization (the "Plan"). The Plan became
not subject to appeal on December 27, 1994 by virtue of the appeal period having
run with no appeal having been filed.
Pursuant to the Plan, Radyne Corp., a Florida corporation formerly known as
Radyne, Inc. ("Radyne Florida"), a wholly owned subsidiary of Engineering and
Technical Services, Inc. ("ETS") funded the Plan and acquired 17,000,000 shares
of the Common Stock of the Company. Radyne Florida thus acquired approximately
91% of the Common Stock of the Company.
On August 12, 1996, 100% of the outstanding stock of ETS was acquired by
Singapore Technologies Pte Ltd through its indirect wholly owned subsidiary,
Stetsys US, Inc. ("ST"). (Singapore Technologies Pte Ltd is an indirect wholly
owned subsidiary of Temasek Holdings (Private) Limited, which is in turn wholly
owned by the Minister for Finance (Incorporated) of Singapore.) ST acquired the
ETS stock from the individuals and entities who were ETS's shareholders for cash
constituting a portion of the working capital of the group of corporations of
which ST is a member. On October 22, 1996, Radyne Florida was merged into ETS.
The shares of the Company that had been owned by Radyne Florida were received by
ETS and subsequently distributed by ETS to ST. Accordingly, as of the date of
this Information Statement, ST possesses approximately 91% of the Common Stock
of the Company, and is expected to vote in favor of all the proposals to be
voted on at the Special Meeting.
Additional information regarding the Company and its operations is contained
in the Company's annual report for the year ended June 30, 1996 on Form 10-KSB,
filed on November 15, 1996, which is incorporated by reference and is being sent
to Shareholders along with this Information Statement.
3
<PAGE>
SECURITY OWNERSHIP BY PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table sets forth, as of the date of this Information
Statement, the ownership of the Common Stock by (i) each person who is known by
the Company to own of record or beneficially more than 5% of the outstanding
shares of Common Stock, (ii) each director of the Company, (iii) each of the
executive officers named in the table under "Executive Compensation and Related
Information--Executive Compensation--Summary Compensation Table" below , and
(iv) all directors and executive officers of the Company as a group. Except as
otherwise indicated, the shareholders listed in the table have sole voting and
investment powers with respect to the shares indicated.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME AND ADDRESS BENEFICIALLY
OF BENEFICIAL OWNER OWNED(1) PERCENTAGE OF CLASS
--------------------- -------------------- ---------------------
<S> <C> <C>
Stetsys US, Inc......................................................... 17,000,000 90.4%
c/o Singapore Technologies Pte Ltd
83 Science Park Drive #01-01/02
The Curie Singapore Science Park
Singapore 118258
Stetsys Pte Ltd......................................................... 17,000,000(2) 90.4%
c/o Singapore Technologies Pte Ltd
83 Science Park Drive #01-01/02
The Curie Singapore Science Park
Singapore 118258
Robert C. Fitting....................................................... 0 0
5225 S. 37th Street
Phoenix, Arizona 85040
Robert A. Grimes........................................................ 0 0
5225 S. 37th Street
Phoenix, Arizona 85040
Lee Yip Loi............................................................. 0 0
c/o Singapore Technologies Pte Ltd
83 Science Park Drive #01-01/02
The Curie Singapore Science Park
Singapore 118258
Chan Wee Piak........................................................... 0 0
c/o Singapore Technologies Pte Ltd
83 Science Park Drive #01-01/02
The Curie Singapore Science Park
Singapore 118258
Lim Ming Seong.......................................................... 0 0
c/o Singapore Technologies Pte Ltd
83 Science Park Drive #01-01/02
Singapore 118258
All executive officers and directors as a group (6 persons)............. 0 0
</TABLE>
- ------------------------
(1) Except as otherwise indicated, all of the referenced shares of Common Stock
are owned beneficially and of record. Beneficial ownership has been
determined in accordance with Rule 13d-3 promulgated under the Exchange Act.
(2) Includes the shares reported as beneficially owned by Stetsys US, Inc., of
which Stetsys Pte Ltd is the sole shareholder.
4
<PAGE>
SHAREHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING
Shareholder proposals that are intended to be presented at the Company's
annual meeting of Shareholders to be held in 1998 must be received by the
Company no later than December 15, 1997 in order to be included in the
information or proxy statement and related materials relating to that meeting.
PROPOSAL ONE
ELECTION OF DIRECTORS
GENERAL
A board of five (5) directors is to be elected at the Special Meeting. It is
expected that a majority of the Common Stock will be voted in favor of the five
(5) nominees named below, all of whom are presently directors of the Company. In
the event that any management nominee is unable or declines to serve as a
director at the time of the Special meeting, an alternate nominee shall be
designated by the present Board of Directors to fill the vacancy. The Company is
not aware of any nominee who will be unable or will decline to serve as a
director. The term of office for each person elected as a director will continue
until the next Annual Meeting of Shareholders or until his or her successor has
been elected and qualified.
VOTE REQUIRED
If a quorum is present and voting, the five nominees receiving the highest
number of votes will be elected to the Board of Directors.
INCREASED NUMBER OF DIRECTORS
At a special meeting of the Board of Directors of the Company (the "Board")
held on August 13, 1996, the Board voted to increase the size of the Board from
four to five members. To fill the newly created directorship and vacancies
created by the resignations of Denis Brown and Augustin Cueto, Messrs. Lim Ming
Seong, Lee Yip Loi and Chan Wee Piak were named directors of the Company. Lim
Ming Seong was elected Chairman of the Board of Directors of the Company. The
directors of the Company will hold such positions until their respective
successors are duly elected and qualified.
Due to financial and other constraints in recent years, the Company has not
held an annual meeting of Shareholders since February 20, 1990. All of the
current Directors have been elected by present or previously sitting Directors
to fill vacancies on the Board. Officers are appointed by, and serve at the
discretion of, the Board. There are no family relationships among the Directors
and executive officers.
NOMINEES
The names of the nominees, each of whom is currently a Director of the
Company, and certain information about them are set forth below:
<TABLE>
<CAPTION>
NAME OF NOMINEE AGE TITLE
- ------------------------------------------- --- -------------------------------------------
<S> <C> <C>
Lim Ming Seong............................. 49 Chairman of the Board of Directors
Lee Yip Loi................................ 52 Director
Chan Wee Piak.............................. 41 Director
Robert A. Grimes........................... 44 Director
Robert C. Fitting.......................... 61 Director and President
</TABLE>
Lim Ming Seong has been a Director and Chairman of the Board of the Company
since August 13, 1996 and is chairman of its Compensation Committee. He is the
Chairman of Vertex Management, Inc., a member of the Singapore Technologies
group, and he has been Group Director of Singapore Technologies Pte Ltd since
February 1995. From March 1992 to February 1995, he was Executive Director of
Singapore Technologies Ventures Pte Ltd and from February 1990 to March 1992, he
was Group President of
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<PAGE>
Singapore Technologies Holding Pte Ltd. Prior to that time he held various
corporate and government positions, including Deputy Secretary of the Singapore
Ministry of Defense from 1979 to 1986.
Lee Yip Loi has been a Director of the Company since August 13, 1996 and is
chairman of the Audit Committee and a member of the Compensation Committee of
the Board. He has been Regional Director (America) of Singapore Technologies Pte
Ltd since March 1994 and has been President of Metheus Corporation, another
member of the same group of companies, since May 1990. Prior to that time he
held a number of managerial positions with such companies as Morgan Guarantee
Trust and Singapore Technologies Pte Ltd and government positions with the
Singapore Ministries of Education, Defense, Culture and Home Affairs.
Chan Wee Piak has been a Director since August 13, 1996 and is a member of
the Compensation Committee of the Board. He has been General Manager of Agilis
Communication Technologies Pte Ltd, also a member of the Singapore Technologies
group, since January 1992. From November 1989 to February 1992, he was General
Manager of Chartered Microwave Pte Ltd. Prior to that time, he held various
managerial positions in the Singapore Ministry of Defense and Singapore
Electronic and Engineering.
Robert C. Fitting, a member of the Audit Committee of the Board, has been
President of the Company since February 1995, and became a Director of the
Company in March 1995. For 11 years prior to March 1995, Mr. Fitting served as
Chief Executive Officer and Chairman of the Board of Directors of EF Data
Corporation, which he co-founded. Mr. Fitting has also served as a Director of
California Microwave, Inc. and as a Director of Satellite Technology Management,
Inc.
Robert A. Grimes, a member of the Audit and Compensation Committees of the
Board, has served as a member of the Board of Directors since December 1994. For
the past seven years, Mr. Grimes has also served as the President and as a
member of the Board Directors of Engineering and Technical Services, Inc.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of three meetings during
the period from July 1, 1995 through December 9, 1996. No Director attended
fewer than 75% of the meetings of the Board of Directors and committees thereof,
if any, upon which such Director served. The Board of Directors has an Audit
Committee and a Compensation Committee.
The Audit Committee, which consists of Directors Lee, Grimes and Fitting,
met once during the fiscal year ending December 31, 1996. The Audit Committee
reviews and approves the scope of the audit performed by the Company's
independent auditors as well as the Company's accounting principles and internal
accounting controls. In the fiscal year ending December 31, 1996, the Board of
Directors as a whole recommended engagement of the Company's auditors.
The Compensation Committee, which consists of Directors Lim, Lee, Chan and
Grimes, met once during the fiscal year ending December 31, 1996. The Committee
reviews the performance of management and will at the appropriate times review
the structure of management and plans for management succession. The Committeee
also reviews and approves the Company's compensation policies and will
administer the 1996 Incentive Stock Option Plan.
The Company's policy during the periods ended June 30, 1996 and December 31,
1996 was to provide no compensation to directors for their services as such.
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<PAGE>
PROPOSAL TWO
APPROVAL TO AMEND THE CERTIFICATE OF INCORPORATION
OF THE COMPANY
GENERAL
On November 13, 1996, the Board of Directors authorized, subject to approval
by the Shareholders, a restatement of the Certificate of Incorporation of the
Company, including the following amendments:
(1) To provide that the purpose for which the Company is formed is
generally to engage in any lawful activity for which corporations may be
organized;
(2) A reverse split of the Common Stock of the Company on a 5-for-1
basis;
(3) The elimination of shareholders' preemptive rights under Section 622
of the Business Corporation Law;
(4) The removal of a paragraph which purports to govern the Company's
choice of accounting year; and
(5) An update of the address to which the Secretary of State shall mail
a copy of process against the Company.
Each of these proposed amendments is discussed in greater detail below.
Additionally, a proposed form of Restated Certificate of Incorporation of the
Company is included as Exhibit A of this Information Statement. A Restated
Certificate in substantially the form of Exhibit A will be filed with the New
York department of state promptly after the Special Meeting if, as expected, all
of the proposed amendments are adopted by the Shareholders.
The Board of Directors has determined that the adoption of the proposed
amendments will be in the best interests of the Company. In addition, because
the Certificate of Incorporation has been amended on numerous occasions since
the Company's formation, the Board considers it appropriate and most efficient
that the Certificate, as amended, be restated in its entirety.
PURPOSE FOR WHICH THE COMPANY IS FORMED
Paragraph SECOND of the Company's Certificate of Incorporation presently
consists of a purportedly exhaustive enumeration of the purposes for which the
Company is formed. The Board of Directors of the Company considers that it would
be be more in keeping with contemporary business practices, and less likely for
the Company to engage in an inadvertent ultra vires act, for the Certificate of
Incorporation to provide that the purpose for which the Company is formed is
generally to engage in any lawful activity for which corporations may be
organized. Moreover, the Board believes that a more expansive purpose clause, as
set forth in Paragraph SECOND of the form of proposed Restated Certificate
appearing at Exhibit A hereto, will be in the best interests of the Company in
that it will allow the Board to cause the Company to generally engage in any
activity which it considers will advance those interests. It is anticipated that
holders of a majority of the shares of Common Stock outstanding will vote in
favor of this proposal.
REVERSE SPLIT OF ISSUED AND OUTSTANDING SHARES OF COMMON STOCK
GENERAL. It is proposed that the Certificate of Incorporation be amended to
effect a 5-for-1 reverse split of the issued and outstanding shares of Common
Stock (the "Reverse Split"). It is anticipated that holders of a majority of the
shares of Common Stock outstanding will vote in favor of this proposal. The
effect of the Reverse Split upon the Shareholders will be that the total number
of shares of Common Stock of the Company held by each shareholder immediately
prior to the Reverse Split (the "Old Shares") will be automatically converted
into the number of whole shares of Common Stock (the "New Shares") equal
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<PAGE>
to the number of Old Shares owned divided by 5, adjusted, as described below,
for any fractional shares. Each Shareholder's percentage ownership interest in
the Company and proportional voting power will remain unchanged, except for
minor differences resulting from adjustments for fractional shares. The rights
and privileges of the holders of shares of Common Stock will be substantially
unaffected by the Reverse Split. No certificates or scrip representing
fractional shares of the Common Stock of the Company will be issued to
Shareholders because of the Reverse Split. In lieu of such fractional interest,
a Shareholder will receive cash equal to $2.50 multiplied by the fractional
interest.
PURPOSES OF THE PROPOSED REVERSE SPLIT. The Reverse Split is desirable for
several reasons. The Board of Directors of the Company has approved an incentive
stock option ("ISO") plan (discussed below) and a planned Common Stock rights
offering (the "Rights Offering"). It is anticipated that the Rights Offering
(which can only be made pursuant to, and complete details of which can be
provided only in, a prospectus which is expected to be distributed shortly after
the Special Meeting) will provide each shareholder (or transferee thereof) an
opportunity to purchase three shares of Common Stock for every five shares held
by such shareholder as of January 15, 1997 (after adjustment for the Reverse
Split), for a price of $2.50 per share. In order to issue the requisite number
of shares of Common Stock pursuant to the proposed ISO plan and the proposed
Rights Offering, the Company must either effect an increase in the number of
shares of Common Stock authorized or a decrease in the number of shares of
Common Stock outstanding. The Reverse Split will result in a decreased number of
shares of Common Stock outstanding, thus allowing the Board to issue additional
shares of Common Stock in connection with the proposed ISO plan and Rights
Offering.
The purpose of the Rights Offering would be to raise approximately
$5,640,000 through the sale of approximately 2,256,000 shares of Common Stock at
$2.50 per share. The net proceeds of the Rights Offering would be used by the
Company for working capital purposes, to satisfy short-term indebtedness and to
facilitate the opening of new lines of credit, all of which would facilitate the
continuation of the Company's new product development, the growth of its staff
and the acquisition of inventory needed to meet an increasing backlog of new
orders for Radyne products. (The price at which the shares of Common Stock would
be offered, as well as the exercise price for the outstanding employee stock
options discussed below under "Proposal Three--Approval of the 1996 Incentive
Stock Option Plan--Description of the Plan" and the above stated price for
fractional interests, has been independently established by the Board of
Directors at $2.50 per share (after adjustment for the Reverse Split), which the
Board determined to be the fair market value of the Common Stock. In making this
determination, the Board received the assistance of Corporate Capital
Consultants, Inc. ("CCC"). CCC is a specialty investment banking firm, which,
since its inception in 1974, has performed services in the areas of financial
consulting, corporate valuations, fairness opinions and mergers and
acquisitions. In the valuation area, CCC has provided valuations of corporate
securities in connection with pending purchase offers, plans to sell,
recapitalizations, going-private transactions, tender offers, the purchase of
minority interests, employee stock purchase plans and public offerings, for both
publicly and privately held companies in a broad range of industries. In
determining the value of the Common Stock, the Board and CCC considered a number
of factors, including the book value of the Common Stock, the Company's results
of operations, its business plan, the recent change in control, publicly
available information about companies considered comparable to Radyne in nature
of business, the Company's history and the limited trading activity in the
Common Stock since early 1996.)
Additionally, the Reverse Split is intended to enhance the acceptability of
the Common Stock by the financial community and investing public. The reduction
in the number of issued and outstanding shares of Common Stock caused by the
Reverse Split is expected to increase the per share market price of the Common
Stock. The proposed Reverse Split may thus result in a broader market for the
Common Stock than that which currently exists. A variety of brokerage house
policies and practices tend to discourage individual brokers within those firms
from dealing with lower priced stocks. Some of these policies and practices
pertain to the payment of broker's commissions and to time consuming procedures
that function
8
<PAGE>
to make the handling of lower priced stocks economically unattractive to
brokers. In addition, the structure of trading commissions also tends to have an
adverse impact upon holders of lower priced stock because the brokerage
commission on a sale of lower priced stock generally represents a higher
percentage of the sales price than the commission on a relatively higher priced
issue. The proposed Reverse Split may result in a price level for the Common
Stock that will reduce, to some extent, the effect of the above-referenced
policies and practices of brokerage firms and diminish the adverse impact of
trading commissions on the market for the Common Stock. The expected increased
per share sale price level may also encourage interest and trading in the Common
Stock and possibly promote greater liquidity for the Shareholders of the Common
Stock, although such liquidity could be adversely affected by the reduced number
of shares of Common Stock outstanding after the Reverse Split Effective Date (as
defined below). Finally, the anticipated increase in share price should further
the purpose of eventually requalifying the Common Stock for a NASDAQ listing,
which presently includes a minimum bid price requirement of $3.00. However,
additional steps would be necessary before that goal could be reached and The
Nasdaq Stock Market, Inc. has recently proposed a tightening of its listing
standards, including an increase in the minimum bid price requirement to $4.00.
There can be no assurance that any or all of these effects will occur. Given
the sporadic nature of trading in the Common Stock and the small percentage of
the Company's shares which is in the hands of the public, it is unlikely that
the market price per New Share of Common Stock immediately after the Reverse
Split will be as much as five times the market price per Old Share of Common
Stock before the Reverse Split. In fact, there is no assurance that such price
will either exceed or remain in excess of the current market price. Further,
there is no assurance that the market for the Common Stock will be improved.
The Reverse Split may result in some Shareholders owning "odd lots" of fewer
than 100 shares of Common Stock. Brokerage commissions and other costs of
transactions in odd lots are generally somewhat higher on a per share basis than
the costs of transactions in "round lots" of even multiples of 100 shares.
Shareholders who vote against the Reverse Split have no appraisal rights
under New York law or under the Company's Certificate of Incorporation or
By-Laws with respect to shares held by them or to dissent from the payment of
cash in lieu of the issuance of fractional shares.
EFFECTIVE DATE OF THE REVERSE SPLIT. The Reverse Split will be effected by
means of filing a Restated Certificate of Incorporation with the Secretary of
State of New York. The Restated Certificate of Incorporation will be filed with
the Secretary of State of New York on January 9, 1997 and the Reverse Split will
become effective as of 5:00 p.m., Eastern Daylight Time, on the date of such
filing (the "Reverse Split Effective Date"). Without any further action on the
part of the Company or the Shareholders, after the Reverse Split, the
certificates representing the Old Shares will be deemed to represent New Shares
in the appropriately reduced number.
NO CHANGE IN AUTHORIZED CAPITAL. The Company has authorized capital stock
of 20,000,000 shares of Common Stock. In connection with the Reverse Split, the
authorized capital stock of the Company will be unchanged. The following table
illustrates the principal effects of the proposed Reverse Split and the
associated decrease in outstanding Common Stock, prior to adjustment for the
payment in lieu of fractional shares and assuming no additional shares of Common
Stock are issued prior to the Reverse Split Effective Date as a result of the
exercise of any options or otherwise:
<TABLE>
<CAPTION>
PRIOR TO
PROPOSED AFTER PROPOSED
SHARES OF COMMON STOCK REVERSE SPLIT REVERSE SPLIT
- ------------------------------------------------------------ ---------------- --------------
<S> <C> <C>
Authorized.................................................. 20,000,000 20,000,000
Outstanding................................................. 18,798,605 3,759,721
</TABLE>
CHANGES AFFECTING CAPITAL STOCK. The Common Stock is currently registered
under Section 12(g) of the Securities Exchange Act of 1934 (the "Exchange Act")
and, as a result, the Company is subject to the
9
<PAGE>
periodic reporting and other requirements of the Exchange Act. The Reverse Split
will not affect the registration of the Common Stock under the Exchange Act.
After the Reverse Split Effective Date, trades of the New Shares will continue
in the over-the-counter market under the OTC Bulletin Board symbol "RDYN".
EXCHANGE OF STOCK CERTIFICATES. As soon as practicable after the Reverse
Split Effective Date, the Company will send a letter of transmittal to each
holder of record of Old Shares of Common Stock outstanding on the Reverse Split
Effective Date. The letter of transmittal will contain instructions for the
surrender of certificate(s) representing such Old Shares to Continental Stock
Transfer and Trust Co., the Company's exchange agent (the "Exchange Agent").
Upon proper completion and execution of the letter of transmittal and return
thereof to the Exchange Agent, together with the certificate(s) representing Old
Shares, a Shareholder will be entitled to receive a certificate representing the
number of New Shares of Common Stock into which his Old Shares have been
reclassified and changed as a result of the Reverse Split and cash for any
fractional share interest. Shareholders who fail to submit their Old Share
certificates for exchange will not be permitted to exercise stock purchase
rights distributed to them in the Rights Offering.
Shareholders should not submit any certificates until requested to do so. No
new certificate will be issued to a Shareholder until he has surrendered his
outstanding certificate(s) together with the properly completed and executed
letter of transmittal to the Exchange Agent.
OPTIONS. The Company has previously issued, and has outstanding, various
options to purchase shares of Common Stock. In general, both the exercise price
and the number of shares subject to each such option have been determined on the
basis of, and will not be further affected by, the Reverse Split.
FEDERAL INCOME TAX CONSEQUENCES OF THE REVERSE SPLIT. The Company has not
sought and will not seek an opinion of counsel or a ruling from the Internal
Revenue Service regarding the federal income tax consequences of the Reverse
Split. The Company, however, believes that because the Reverse Split is not part
of a plan to periodically increase a Shareholder's proportionate interest in the
assets or earnings and profits of the Company, the Reverse Split will have the
following federal income tax effects:
1. A Shareholder will recognize gain or loss on the exchange only to the
extent of any gain or loss recognized in connection with the receipt of cash
in lieu of a fractional share of Common Stock. Such gain or loss shall be
calculated by subtracting the Shareholder's basis in such fractional
interest from the amount of cash received. In the aggregate, the
Shareholder's basis in the New Shares will equal his basis in the Old
Shares, reduced by his basis in any fractional interest exchanged for cash.
2. A Shareholder's holding period for the New Shares will be the same as
the holding period of the Old Shares exchanged therefor.
3. The Reverse Split will constitute a reorganization within the meaning
of Section 368(a)(1)(E) of the Internal Revenue Code of 1986, as amended,
and the Company will not recognize any gain or loss as a result of the
Reverse Split.
The Board of Directors may abandon the proposed Reverse Split at any time
before filing of the Restated Certificate of Incorporation and prior to the
Reverse Split Effective Date if for any reason the Board of Directors deems it
advisable to abandon the proposal. The Board of Directors may consider
abandoning the proposed Reverse Split if it determines, in its sole discretion,
that the Reverse Split would adversely affect the ability of the Company to
raise capital or the liquidity of the Common Stock, among other things. In
addition, the Board of Directors may make any and all changes to the Restated
Certificate of Incorporation that it deems necessary to file the Restated
Certificate of Incorporation with the Secretary of State of New York and to give
effect to the Reverse Split.
10
<PAGE>
ELIMINATE SHAREHOLDERS' PREEMPTIVE RIGHTS UNDER SECTION 622 OF THE BUSINESS
CORPORATION LAW.
GENERAL. It is proposed that the Certificate of Incorporation be amended to
eliminate shareholders' preemptive rights under Section 622 of the Business
Corporation Law of New York. It is anticipated that holders of a majority of the
shares of Common Stock outstanding will vote in favor of this proposal. However,
in light of the dissenter rights discussed below, Shareholders will be accorded
the opportunity to vote for or against this proposal separately from the other
Certificate of Incorporation proposals discussed herein. See Paragraph FIFTH of
the form of proposed Restated Certificate of Incorporation attached hereto as
Exhibit A for the text of the proposed amendment.
Under Section 622 of the Business Corporation Law, the Shareholders have the
right to maintain their relative percentages of ownership of the Company by
buying a portion of any newly-issued shares of Common Stock, subject to certain
exceptions including issuances of stock for consideration other than cash and
issuances of stock pursuant to employee stock option plans. Accordingly, before
offering additional shares of Common Stock to the public, the Company must make
a rights offering to each existing shareholder, a complex, expensive procedure
which may not always be in the best interests of the Company. The Company can
eliminate such rights by amending the Certificate of Incorporation.
PURPOSE OF ELIMINATING PREEMPTIVE RIGHTS. The Board of Directors has
concluded that it is not in the Company's best interest to have preemptive
rights. A preemptive rights scheme will cause substantial delays in arranging
financing by requiring the Company to make a rights offering to each existing
Shareholder before offering shares to the public. This is a complex and
expensive procedure, made unnecessary by the fact that a Shareholder who wishes
to maintain his proportional share of the Company's equity can do so by buying
shares of Common Stock in the open market.
RIGHTS OF DISSENTING SHAREHOLDERS. A Shareholder who does not vote for, or
consent in writing to, the proposed elimination of preemptive rights will have
the right to dissent and receive payment for such Shareholder's shares, subject
to and by complying with Section 623 of the Business Corporation Law of New
York. In order to exercise this right, a Shareholder must, before the Special
Meeting or at the Special Meeting but before the vote is held, file with the
Company a written objection to the elimination of preemptive rights proposed
herein (a "Written Objection"). A mere vote against the proposal will not
suffice. The Written Objection must include a notice of the Shareholder's
election to dissent (a "Dissent Notice"), his name and residence address, the
number of shares of Common Stock as to which he dissents (which may not be less
than all of the shares held by him of record that he owns beneficially) and a
demand for payment of the fair value of his shares of Common Stock if the action
is taken.
If, as expected, the proposal is adopted at the Special Meeting, the Company
will, by registered mail within 10 days after the Special Meeting, notify each
Shareholder who has filed a Written Objection that the proposal has been
adopted.
Each Shareholder who files a Dissent Notice shall, at the time of such
filing or within one month thereafter, submit his share certificates to the
Company or the Exchange Agent, which will note conspicuously thereon that a
Dissent Notice has been filed and will then return the certificates to the
dissenting Shareholder or other person who submitted them on his behalf. Any
dissenting Shareholder who fails to timely submit his certificates for this
notation will, at the option of the Company exercised by written notice to him
within 45 days after the filing of the Dissent Notice, lose his dissenter's
rights unless a court, for good cause shown, shall otherwise direct. Upon
transfer of a certificate bearing such notation, each new certificate issued
therefor will bear a similar notation together with the name of the original
dissenting Shareholder and the transferee will acquire no rights except those
which the original dissenting Shareholder had at the time of the transfer.
Within 15 days after the Restated Certificate of Incorporation is filed with
the New York department of state, the Company will make an offer, by registered
mail to each Shareholder who has filed a Dissent Notice, to purchase his shares
for a specified cash price which the Company considers to be their fair value.
11
<PAGE>
If the Company fails to make such offer within such 15-day period or if any
dissenting Shareholder fails to agree, within 30 days after such offer, with the
Company upon the price to be paid for his shares, the Company may, within 20
days after the expiration of the just mentioned 15-day or 30-day period, as
applicable, commence a special judicial proceeding to determine the rights of
dissenting Shareholders and fix the fair value of their shares. If the Company
does not institute such a proceeding within such 20-day period, any dissenting
Shareholder may do so within 30 days after the expiration of such 20-day period.
If such proceeding is not instituted within such 30-day period, all dissenter's
rights will be lost unless the New York Supreme Court shall, for good cause
shown, otherwise direct.
REMOVAL OF THE PARAGRAPH PURPORTING TO GOVERN THE COMPANY'S CHOICE OF ACCOUNTING
YEAR
GENERAL. It is proposed that the Certificate of Incorporation be amended to
remove the paragraph stating that the Company's accounting year shall end on
October 31st. It is anticipated that holders of a majority of the shares of
Common Stock outstanding will vote in favor of this proposal.
PURPOSE OF AMENDMENT. The current provision, purportedly requiring a fiscal
year ending on October 31, may be viewed as needlessly interfering with the
Board of Directors' ability to choose an appropriate fiscal year for the
Company. The Company, which presently uses the calendar year, ceased to use a
year ending on October 31 many years ago. It is not required that the fiscal
year of a corporation be specified in its certificate of incorporation.
UPDATE OF THE ADDRESS TO WHICH THE SECRETARY OF STATE SHALL MAIL A COPY OF
PROCESS AGAINST THE COMPANY
It is proposed that the Certificate of Incorporation be amended to update
the post office address to which the Secretary of State shall mail a copy of any
process against the Company as set forth in Paragraph SIXTH of the form of
proposed Restated Certificate of Incorporation attached hereto as Exhibit A.
This change is within the authority of the Board of Directors and is being
included among the proposals submitted to vote of the Shareholders for
convenience. It is anticipated that holders of a majority of the shares of
Common Stock outstanding will vote in favor of this proposal.
REQUIRED VOTE
The adoption of the above described amendments and the Restated Certificate
of Incorporation requires the affirmative vote of not less than a majority of
the votes entitled to be cast by all shares of Common Stock issued and
outstanding on the Record Date. In light of the rights accorded dissenting
Shareholders as discussed under "Rights of Dissenting Shareholders" above, a
separate vote will be held on the proposal to amend the Certificate of
Incorporation so as to eliminate Shareholders' preemptive rights. See "Eliminate
Shareholders' Preemptive Rights Under Section 622 of the Business Corporation
Law" above.
PROPOSAL THREE
APPROVAL OF THE 1996 INCENTIVE STOCK OPTION PLAN
GENERAL
On November 13, 1996, the Board of Directors of the Company adopted, subject
to the Shareholders' approval, the 1996 Incentive Stock Option Plan (the "Plan")
as of November 13, 1996. It is anticipated that holders of a majority of the
shares of Common Stock outstanding will vote in favor of this proposal. The Plan
will become effective immediately upon such Shareholder approval as if such
approval had been given on November 13, 1996.
As of December 9, 1996, options for 964,395 shares of Common Stock were
outstanding, subject to obtaining approval of the holders of a majority of the
Common Stock of the Company at the Special Meeting and options for 317,647
shares remained available for future grant. Accordingly, the initial Common
Stock reserve available for issuance under the Plan will be 1,282,042.
12
<PAGE>
The Plan is designed to serve as a comprehensive equity incentive program to
attract and retain the services of individuals essential to the Company's
long-term growth and financial success. Accordingly, any officers or employees
of the Company or any subsidiary corporation can be accorded the opportunity to
acquire a meaningful equity interest through their participation in the Plan.
The following is a summary of the principal features of the Plan. A copy of
the proposed Plan will be furnished by the Company to any Shareholder upon
written request to the Corporate Secretary located at the Company's offices at
5225 South 37th Street, Phoenix, Arizona 85040.
DESCRIPTION OF THE PLAN
The Plan provides for the grant of options to purchase up to 1,282,042
shares of Common Stock to employees of the Company. Options may be either
"incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended, or non-qualified options.
The Plan will be administered by the Compensation Committee, "disinterested
members" of the Board of Directors (as defined by Rule 16b-3 under the Exchange
Act), who determine, among other things, the individuals who shall receive
options, the time period during which the options may be partially or fully
exercised, the number of shares of Common Stock issuable upon the exercise of
each option, and the option exercise price.
The exercise price per share of Common Stock subject to an option granted
under the Plan may not be less than the fair market value per share of Common
Stock on the date the option is granted. The aggregate fair market value
(determined as of the date the option is granted) of Common Stock for which any
person may be granted incentive stock options which first become exercisable in
any calendar year may not exceed $100,000. In certain cases any excess over the
$100,000 limit will be treated as a non-qualified option. No person who owns,
directly or indirectly, at the time of the granting of an option to such person,
10% or more of the total combined voting power of all classes of stock of the
Company (a "10% Stockholder") shall be eligible to receive any stock options
under the Plan unless the exercise price is at least 110% of the fair market
value of the shares of Common Stock subject to the option, determined on the
date of grant.
No stock option may be transferred by an optionee other than by will or the
laws of descent and distribution, and, during the lifetime of an optionee, the
option will be exercisable only by the optionee. In the event of termination of
employment other than by death or disability, the optionee will have no more
than three months after such termination during which the optionee shall be
entitled to exercise the option, unless otherwise determined by the Board of
Directors. Upon termination of employment of an optionee by reason of permanent
and total disability, such optionee's options will remain exercisable for one
year thereafter to the extent such options were exercisable on the date of such
termination. Upon termination by reason of death, such period shall be as
determined by the Board of Directors.
Options under the Plan must be issued within ten years from the effective
date of the Plan. The effective date of the Plan is November 13, 1996. Options
granted under the Plan cannot be exercised more than ten years from the date of
grant. Stock options issued to a 10% Stockholder are limited to five year terms.
Options granted under the Plan generally provide for the payment of the exercise
price in cash and may provide for the payment of the exercise price by delivery
to the Company of shares of Common Stock already owned by the optionee having a
fair market value equal to the exercise price of the options being exercised, or
by a combination of such methods. Therefore, if so provided in an optionee's
options, such optionee may be able to tender shares of Common Stock to purchase
additional shares of Common Stock and may theoretically exercise all of his
stock options with no additional investment other than the purchase of his
original shares.
Any unexercised options that expire or that terminate upon an employee's
ceasing to be employed by the Company become available again for issuance under
the Plan.
13
<PAGE>
At December 9, 1996, options to acquire 964,395 shares of Common Stock were
outstanding under the Plan. Such options are exercisable at a price of $2.50 per
share. (For information regarding the establishment of the exercise price, see
"Proposal Two--Approval to Amend the Certificate of Incorporation of the
Company--Reverse Split of Issued and Outstanding Shares of Common
Stock--Purposes of the Reverse Split" above.) 280,000 of these options ("Rights
Options") have been granted to Radyne employees as a counterpart to
participation in the Rights Offering described above under "Reverse Split of
Issued and Outstanding Common Stock--Purposes of the Proposed Reverse Split".
Accordingly, subject to Shareholder approval of the Plan, such options are
presently exercisable, but may not be exercised after March 14, 1997. Subject to
Shareholder approval of the Plan, another 16,000 options will become exercisable
at the rate of 25% on each of the first four anniversaries of their grant date
(November 13, 1996) and expire on the tenth anniversary of their grant date.
Subject to Shareholder approval of the Plan, the remaining 668,395 options
were allocated among a group of 30 key employees with the intent of giving them
the opportunity to purchase and retain up to 10% of the fully diluted common
equity of the Company (after giving effect to the Reverse Split and the Rights
Offering), if certain earnings milestones (described below) are reached. These
options also carry the right to a cash bonus of approximately $1.72 per
purchased share, payable upon exercise. Because the Company's shares are so
thinly traded at present, the grantees of these options will be accorded the
right to cause the Company to purchase at an appraisal price any shares acquired
upon exercise of these options if, as of the end of the calendar quarter when
such options become exercisable (or December 31, 1998, if later), ST and its
affiliates continue to own more than 80% of the Common Stock. Moreover, if the
Company sells additional shares of Common Stock in the future (other than
pursuant to the Rights Offering or employee stock options), these same optionees
will be granted additional options (which may or may not constitute incentive
stock options, in the discretion of the Board of Directors) to acquire a
sufficient number of Common Shares, at the then offering price, so that their
unexercised options will maintain their proportionate fully diluted common
equity. One-third of the 668,395 options will become exercisable, if and when
the Company's earnings before interest and taxes (calculated without regard to
the above described cash bonus) for a period of four calendar quarters ("EBIT")
exceeds $1,000,000. Another one-third of these options will become exercisable
if and when EBIT exceeds $2,500,000. The remaining one-third will become
exercisable if and when EBIT exceeds $6,000,000.
OPTION GRANTS
For each of the executive officers named in the Summary Compensation Table
below and the various indicated groups, the table below shows (i) the number of
shares of Common Stock subject to options granted under the Plan from November
13, 1996 to December 18, 1996 (after giving effect to the Reverse Split) and
(ii) the weighted average exercise price payable per share under such options.
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED AVERAGE EXERCISE
NAME AND POSITION OPTION SHARES PRICE OF GRANTED OPTIONS
- ------------------------------------------------------------------------ ------------- -------------------------
<S> <C> <C>
Robert C. Fitting....................................................... 279,085 $ 2.50
President
All current executive officers as a
group (2 persons)..................................................... 552,170 $ 2.50
All current directors (other than
executive officers) as a group
(4 persons)........................................................... 0 --
All employees, including current
officers who are not executive
officers, as a group (57 persons)..................................... 412,225 $ 2.50
</TABLE>
14
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES OF OPTIONS GRANTED UNDER THE PLAN
Options granted under the Plan may be either incentive stock options which
satisfy the requirements of Section 422 of the Internal Revenue Code or
non-qualified options which are not intended to meet such requirements. The
federal income tax treatment of the two types of options differs as follows:
INCENTIVE OPTIONS. No taxable income is recognized by the optionee (except
for alternative minimum tax purposes) at the time of the option grant, and no
taxable income is generally recognized at the time the option is exercised. The
optionee will, however, recognize taxable income in the year in which the
purchased shares are sold or otherwise made the subject of a taxable
disposition. For federal tax purposes, dispositions are divided into two
categories: (i) qualifying and (ii) disqualifying. A qualifying disposition
occurs if the sale or other disposition is made after the optionee has held the
shares for more than two (2) years after the option grant date and more than one
(1) year after the exercise date. If either of these two holding periods is not
satisfied, the disposition is a disqualifying disposition.
Upon a qualifying disposition of the shares, the optionee will recognize
long-term capital gain in an amount equal to the excess of (i) the amount
realized upon the sale or other disposition of the purchased shares over (ii)
the exercise price paid for those shares. If there is a disqualifying
disposition of the shares, the excess of (i) the fair market value of the shares
on the exercise date over (ii) the exercise price paid for those shares will be
taxable as ordinary income to the optionee. Any additional gain or loss
recognized upon the disposition will be taxable as a capital gain or loss.
If the optionee makes a disqualifying disposition of the purchased shares,
the Company will be entitled to an income tax deduction for the taxable year in
which such disposition occurs. Such income tax deduction will equal the excess
of (i) the fair market value of such shares on the option exercise date over
(ii) the exercise price paid for the shares. In no other instance will the
Company be allowed a deduction with respect to the optionee's disposition of the
purchased shares.
NON-QUALIFIED OPTIONS. No taxable income is recognized by an optionee upon
the grant of a non-qualified option. The optionee will generally recognize
ordinary income in the year in which the option is exercised, equal to the
excess of the fair market value of the purchased shares on the exercise date
over the exercise price paid for the shares and the optionee will be required to
satisfy the tax withholding requirements applicable to such income.
The Company will be entitled to an income tax deduction equal to the amount
of ordinary income recognized by the optionee with respect to the exercised
non-qualified option. The deduction will generally be allowed to the Company in
the taxable year in which such ordinary income is recognized by the optionee.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Company anticipates that any compensation (other than cash) deemed paid
by the Company in connection with disqualifying dispositions of incentive stock
option shares or exercises of non-qualified options will qualify as performance
based compensation for purposes of Section 162(m) of the Internal Revenue Code
and will not have to be taken into account for purposes of the $1 million
limitation per covered individual on the deductibility of the compensation paid
to certain executive officers of the Company. Accordingly all compensation
(other than cash) deemed paid with respect to those options will remain
deductible by the Company without limitation under Section 162(m) of the
Internal Revenue Code.
ACCOUNTING TREATMENT
Option grants at 100% of fair market value will generally not result in any
charge to the Company's earnings, but the Company must disclose, on a pro-forma
basis with the Company's financial statements, the impact those options would
have upon the Company's reported earnings were the value of those
15
<PAGE>
options treated as compensation expense at the time of grant. Whether or not
granted at a discount, the number of outstanding options is a factor used in
determining the Company's earnings per share.
REQUIRED VOTE
The affirmative vote of not less than a majority of the votes entitled to be
cast by all shares of Common Stock issued and outstanding on the Record Date is
required for approval of the Plan.
PROPOSAL FOUR
RATIFICATION OF INDEPENDENT ACCOUNTANTS
The Company is asking the Shareholders to ratify the selection of Deloitte &
Touche LLP as the Company's independent accountants for the fiscal year ending
December 31, 1996. It is anticipated that holders of a majority of the shares of
Common Stock outstanding will vote in favor of this proposal, which will be
sufficient for such ratification.
Even if the selection is ratified, as expected, the Board of Directors, in
its discretion, may direct the appointment of a different independent accounting
firm at any time during the year if the Board of Directors feels that such a
change would be in the Company's and the Shareholders' best interests.
Deloitte & Touche LLP has audited the Company's financial statements since
the fiscal year ended Decenber 16, 1994. It is not expected that a
representative of Deloitte & Touche LLP will be present at the Special Meeting.
EXECUTIVE COMPENSATION AND RELATED INFORMATION
EXECUTIVE COMPENSATION
The following table sets forth the compensation for services in all
capacities to the Company for the period from the commencement of his employment
on March 1, 1995 through December 31, 1996 of the Company's President. No other
executive officer or employee received total annual salary and bonus of more
than $100,000. The Company and its President have not entered into an employment
agreement. All options reflected in the table are subject to Shareholder
approval of the 1996 Incentive Stock Option Plan.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
YEAR
NAME AND PRINCIPAL POSITION ENDED(1) SALARY OPTIONS (#)
- ------------------------------------------------------------------------------ --------- --------- -----------
<S> <C> <C> <C>
Robert C. Fitting............................................................. 12/31/96 $ 40,000 279,085
President 06/30/96 $ 80,000 0
06/30/95 $ 29,231 0
</TABLE>
- ------------------------
(1) Mr. Fitting's employment with the Company commenced on March 1, 1995, so the
figures shown for the fiscal year ended June 30, 1995 reflect a four-month
period. The Company's fiscal year has been changed to the calendar year, so
the figures shown for the year ended December 31, 1996 reflect a period of
six months.
16
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1995, the Company acquired the assets of Merit Microwave, Inc. ("Merit"),
including the manufacturing rights to the Merit line of microwave products,
which include translators and frequency converters. The purchase price was
allocated to inventory, machinery and equipment, and designs and drawings, and
was paid by the issuance of 150,000 shares of the Company's Common Stock (prior
to adjustment by the Reverse Split), cash of $60,000, and the assumption of a
trade payable of $20,000. Under the terms of the agreement, Peter Weisskopf, the
principal shareholder and chief operating officer of Merit entered into a
one-year agreement with the Company to serve as president of the newly created
Radyne Microwave Products Division for annual compensation of $75,000. As long
as he remains in this position, the Company is committed to pay royalties to
Merit of 5-10% of sales of Merit products. Through December 15, 1996, the
Company has paid approximately $4,600 in royalties pursuant to this arrangement.
During July 1995, the Company sold $163,770 of inventory and $119,367 of
machinery and equipment to ETS, in exchange for a reduction in a loan payable to
ETS, to facilitate the commencement of subcontract manufacturing by ETS. During
September 1996, in order to recommence the related manufacturing operations at
its own Phoenix facility, the Company purchased from ETS $370,000 of inventory,
machinery and equipment. One of the Company's Directors, Robert A. Grimes, is
President and a Director of ETS. ETS is a wholly owned subsidiary of ST.
The Company has an informal marketing arrangement with Agilis Communication
Technologies Pte Ltd, an affiliate of ST, whereby Agilis acts as a sales agent
for Radyne products in a number of Asian countries, Australia and New Zealand.
During the first seven months of this arrangement, which predates the Company's
affiliation with ST, Agilis produced over $650,000 of orders for Radyne
products. The General Manager of Agilis, Chan Wee Piak, is a Director of the
Company.
Messrs. Lim Ming Seong, Lee Yip Loi, Chan Wee Piak and Robert A. Grimes are
all both Directors of the Company and officers of other corporations in the
Singapore Technologies Pte Ltd ("STPL") group, which includes ST. In addition,
on August 12, 1996, Singapore Technologies Electronics Pte Ltd, another member
of the group, made an unsecured loan of $4,500,000 to the Company, bearing
interest at 8% per annum and repayable on February 10, 1997. The proceeds from
that loan were used to pay down a loan payable by the Company to ETS. ST has
made subsequent advances to Radyne in the aggregate amount of $2,100,000,
bearing interest at 8% per annum and repayable on various dates between March 2
and March 31, 1997. In addition, STPL has guaranteed a $2 million bank line of
credit for the Company.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities to file reports of ownership
and changes in ownership with the Securities and Exchange Commission ("SEC").
Executive officers, directors and greater than ten percent stockholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file. Based solely on its review of the copies of such forms
received by it, or written representations from certain reporting persons, the
Company believes that, during the period from July 1, 1995 to June 30, 1996, its
executive officers and directors complied with all filing requirements.
17
<PAGE>
OTHER MATTERS
The Board knows of no other matters to be presented for Shareholder action
at the Special Meeting. However, other matters may properly come before the
Special Meeting or any adjournment or postponement thereof.
<TABLE>
<S> <C>
By order of the Board of Directors
/s/ GARRY KLINE
---------------------------------------------
Garry Kline
SECRETARY
</TABLE>
Phoenix, Arizona
December 18, 1996
18
<PAGE>
EXHIBIT A
RESTATED CERTIFICATE OF INCORPORATION
OF
RADYNE CORPORATION
UNDER SECTION 807 OF THE BUSINESS CORPORATION LAW
Pursuant to the provisions of Section 807 of the Business Corporation Law,
the undersigned, being the President and the Secretary of the corporation,
hereby certify as follows:
FIRST: The name of the corporation is: Radyne Corp.
SECOND: The date when the certificate of incorporation was filed by the
Department of State is the 25th day of November, 1980.
THIRD: The certificate of incorporation is amended to effect the following
amendments:
1. Paragraph SECOND of the certificate of incorporation, relating to the
purpose for which the corporation is formed, is hereby amended to read as
follows:
"SECOND: The purpose for which the Corporation is formed is to engage in
any lawful act or activity for which corporations may be organized under the
Business Corporation Law of the State of New York; provided, however, that
the Corporation is not formed to engage in any act or activity requiring the
consent or approval of any state official, department, board, agency or
other body without such consent or approval first being obtained."
2. Paragraph FIFTH of the certificate of incorporation, relating to the
corporation's accounting year, is hereby deleted and replaced with a new
paragraph FIFTH, relating to the elimination of shareholder's preemptive rights,
reading as follows:
"FIFTH: No holder of shares of the Corporation of any class shall be
entitled as such, as a matter of right, to subscribe for, purchase or
receive any shares of the Corporation of any class, or any securities
convertible into, exchangeable for, or carrying a right or option to
purchase its shares of any class, whether now or hereafter authorized and
whether issued, sold or offered for sale by the Corporation for cash or
other consideration or by way of dividend, split of shares or otherwise."
3. Paragraph SIXTH of the certificate of incorporation, regarding the
designation of the Secretary of State as agent upon whom any process against the
corporation may be served, is hereby amended to read as follows:
"SIXTH: The Secretary of State is designated as agent of the Corporation
upon which process against it may be served. The post office address to
which the Secretary of State shall mail a copy of any process against the
Corporation served upon him is c/o John B. Wade, III, Brock, Fensterstock,
Silverstein, McAuliffe & Wade, LLC, 153 East 53rd Street, 56th Floor, New
York, New York 10022."
4. Paragraph SEVENTH of the certificate of incorporation, regarding the
incorporator of the corporation, is hereby deleted, and Paragraphs EIGHTH and
NINTH of the certificate of incorporation, regarding respectively the limitation
of liability of directors and the indemnification of officers and directors, are
hereby redesignated as Paragraphs SEVENTH and EIGHTH.
The text of the certificate of incorporation, as amended heretofore, is
hereby restated as further amended to read as herein set forth in full:
"FIRST: The name of the Corporation is: Radyne Corp.
SECOND: The purpose for which the Corporation is formed is to engage in
any lawful act or activity for which corporations may be organized under the
Business Corporation Law of the State of
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New York; provided, however, that the Corporation is not formed to engage in
any act or activity requiring the consent or approval of any state official,
department, board, agency or other body without such consent or approval
first being obtained.
THIRD: The office of the Corporation in the State of New York shall be
located in the County of Suffolk.
FOURTH: The Corporation shall be authorized to issue twenty million
(20,000,000) shares of common stock, par value $.002 per share.
FIFTH: No holder of shares of the Corporation of any class shall be
entitled as such, as a matter of right, to subscribe for, purchase or
receive any shares of the Corporation of any class, or any securities
convertible into, exchangeable for, or carrying a right or option to
purchase its shares of any class, whether now or hereafter authorized and
whether issued, sold or offered for sale by the Corporation for cash or
other consideration or by way of dividend, split of shares or otherwise.
SIXTH: The Secretary of State is designated as agent of the Corporation
upon which process against it may be served. The post office address to
which the Secretary of State shall mail a copy of any process against the
Corporation served upon him is c/o John B. Wade, III, Brock, Fensterstock,
Silverstein, McAuliffe & Wade, LLC, 153 East 53rd Street, 56th Floor, New
York, New York 10022.
SEVENTH: A director of the Corporation shall not be personally liable to
the Corporation or its shareholders for damages for any breach of duty as a
director; provided that, except as hereinafter provided, this Article
SEVENTH shall neither eliminate nor limit liability: (a) if a judgment or
final adjudication adverse to the director establishes that (i) the
director's acts or omissions were in bad faith or involved intentional
misconduct or a knowing violation of law, (ii) the director personally
gained in fact a financial profit or other advantage to which the director
was not legally entitled, or (iii) the director's acts violated Section 719
of the New York Business Corporation Law; or (b) for any act or omission
prior to the effectiveness of this Article SEVENTH. If the Corporation
hereafter may by law be permitted to further eliminate or limit the personal
liability of directors, then pursuant hereto the liability of a director of
the Corporation shall, at such time, automatically be further eliminated or
limited to the fullest extent permitted by law. Any repeal of or
modification to the provisions of this Article SEVENTH shall not adversely
affect any right or protection of a director of the Corporation existing
pursuant to this Article SEVENTH immediately prior to such repeal or
modification.
EIGHTH: The Corporation may, to the fullest extent permitted by Section
721 through 726 of the Business Corporation Law of New York, indemnify any
and all directors and officers whom it shall have power to indemnify under
the said sections from and against any and all of the expenses, liabilities
or other matters referred to in or covered by such section of the Business
Corporation Law, and the indemnification provided for herein shall not be
deemed exclusive of any other rights to which the persons so indemnified may
be entitled under any By-Law, agreement, vote of shareholders or
disinterested directors or otherwise, both as to action in his/her official
capacity and as to action in another capacity by holding such office, and
shall continue as to a person who has ceased to be a director or officer and
shall inure to the benefit of the heirs, executors and administrators of
such a person."
FOURTH: The number of issued shares of the corporation's common stock, par
value $.002 per share, is hereby amended from 18,798,605 to 3,759,721 on a 5 for
1 basis. The authorized and unissued shares of the corporation's common stock,
par value $.002 per share, is hereby amended from 1,201,395 to 16,240,279, an
increase of 15,038,884.
FIFTH: This restatement of the certificate of incorporation was authorized
by an affirmative vote of the holders of a majority of all outstanding shares
entitled to vote thereon, at a meeting of shareholders subsequent to the
affirmative vote of the board of directors of the corporation.
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IN WITNESS WHEREOF, we hereunto sign our names and affirm that the
statements made herein are true under the penalties of perjury, this 8th day of
January, 1997.
<TABLE>
<S> <C>
RADYNE CORP.
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Robert C. Fitting, President
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Garry Kline, Secretary
</TABLE>
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