SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Sections 13 or 15 (d) of the Securities Exchange Act of
1934
Date of Report (Date of earliest event reported) January 5, 1994
AYDIN CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 1-7203 23-1686808
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
700 Dresher Road, Horsham, PA 19044
(Address of principal executive offices) (Zip Code)
(215) 657-7510
(Registrant's telephone number, including area code)
<PAGE>
Item 5. Other Events
On January 5, 1994, Registrant reached settlement agreements
with the United States Army Communications-Electronics Command
("CECOM") and the Department of Justice ("DOJ") with reference to the
AN/GRC-222 microwave radio contract. The specific terms of the two
settlements are set forth in the Plea Agreement and the Settlement
Agreement and Contract Modification (Exhibit 99) and incorporated
herein as if set forth in detail.
Under the terms of the agreement, CECOM will reinstate the
Registrant's radio contract by withdrawing its previous termination
for default issued November 30, 1993. Further, the investigation and
all possible charges against the Registrant by the DOJ are settled.
On January 6, 1994, pursuant to the terms of settlement with
DOJ, Registrant entered a plea of guilty to the falsification of
testing data, charges which two of its low level employees previously
pled guilty to in March of this year, and the plea was accepted by the
court (U. S. District Court for the Northern District of California
at San Jose, No. CR-94-2001).
Registrant will be reinstated on its AN/GRC-222 microwave radio
contract will all of its previous terms and conditions. Further,
Registrant will withdraw its contract claims, will do additional work
for the Army at no additional cost, and will pay $1 million to settle
civil claims and $1 million as a fine and penalty. The total impact
on income of this settlement is estimated to be approximately $9
million net, after taxes, which will be charged to the 1993 fourth
quarter earnings of the Registrant. The additional work and the
related expenditures will be spread over a period of three years or
longer. In addition, Registrant will dismiss with prejudice its suit
for declaratory relief filed against CECOM and DOJ in the U.S.
District Court, Eastern District of PA (Civil Section No. 93-CV-6232).
Item 7. Financial Statement, Pro Forma]
Financial Information and Exhibits
(c) Exhibits
(99) Plea Agreement (with Settlement Agreement and Contract
Modification) filed in the United States District
Court for the Northern District of California on
January 6, 1994.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized
AYDIN CORPORATION
Dated: January 13, 1994 By: /s/ Robert A. Clancy
Robert A. Clancy
Secretary
<PAGE>
AYDIN CORPORATION
Form 8-K Current Report
EXHIBIT INDEX
Exhibit
No. Description of Exhibit
99.1 Plea Agreement filed January 6, 1994.
99.2 Settlement Agreement and Contract Modification (the
"Settlement Agreement") (Exhibit 1 to Plea Agreement)
99.3 Appendix A to the Settlement Agreement ("Outstanding
ECP's").
99.4 Appendix C to the Settlement Agreement ("ESS, PRAT, &
Failure Analysis Package" and "PRAT Profile and
Parameters").
99.5 (P) Figure 1 of Appendix C ("Proposed PRAT Profile")
99.6 Appendix D to the Settlement Agreement ("Contract Schedule
For New Radio/Module Deliveries" and "FLSC Schedule").
<PAGE>
MICHAEL J. YAMAGUCHI Exhibit 99.1
United States Attorney
CHARLES B. BURCH
Chief, Criminal Division
LELAND B. ALTSCHULER
MICHAEL L. ZIGLER
Assistant United States Attorneys
280 South First Street, Suite 371
San Jose, California 95113
Telephone: (408) 291-7221
Attorneys for Plaintiff
United States of America
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF CALIFORNIA
UNITED STATES OF AMERICA, )
)
Plaintiff, )
) PLEA AGREEMENT
v. ) (Rule 11, F.R.Cr.P)
)
AYDIN CORPORATION, )
)
Defendant. )
___________________________________)
Plaintiff United States of America and defendant Aydin
Corporation, by their respective counsel of record, hereby agree upon
the following terms and conditions in complete settlement of criminal
liability as of the date this agreement is signed in conjunction with
the performance of Aydin Corporation, its divisions, officers, and
employees in connection with the contract to design, manufacture and
deliver to the Army AN/GRC-222 radios.
This agreement is made pursuant to Rule 11(e)(1)(C) and
11(e)(3), Fed.R.Crim.P. This Agreement shall have no force or effect
at all if the district court imposes a sentence either more severe or
less severe than the sentence stipulated in this Agreement. The
parties agree that the Agreement is and shall be effective only if the
disposition provided for by this Agreement is embodied in the judgment
and sentence. Neither party shall be bound by any term of this Plea
Agreement if it is rejected by the Court, and no statements made in
connection with this Agreement shall be admissible against either
party in any proceeding.
Aydin's Promises
1. Aydin Corporation will plead guilty to Counts One, Two,
Three, Four, Five and Six of the Information. Aydin is pleading
guilty because it is guilty and further acknowledges the facts set
forth in the charging instrument to be true.
2. Aydin Corporation understands that each Count carries
a maximum penalty of a $500,000 fine, restitution to the United
States, and a $50 special assessment. The defendant further
understands that acceptance or rejection of this plea agreement is
within the sole discretion of the Court.
3. No later than the day of sentencing, Aydin Corporation
will pay a fine to the United States in the amount of one million
($1,000,000.00) dollars, and $1,200.00 in penalty assessments.
4. As restitution and global resolution of various
disputes with the United States, Aydin Corporation will perform its
promises under that agreement between it and the United States Army
Communications and Electronic Command, a copy of which is attached
hereto as Exhibit 1 and incorporated herein by reference as though
fully set forth.
5. Aydin Corporation agrees that it will take no
position if, when, and as the United States Attorney's Office for the
Northern District of California seeks leave of court to disclose to
CECOM the following:
a) All relevant information relating to PCB's obtained
from execution of a search warrant on November 9, 1989
at Aydin Corporation;
b) All relevant information relating to PCB's in response
to a federal grand jury investigation, as well as
United States Attorney's Office work product derived
from said documents.
Aydin's Representations
6. Aydin Corporation acknowledges and ratifies that James
Walsh is the President and Chief Executive Officer of Aydin
Corporation and is fully authorized to act on behalf of, and to bind,
Aydin Corporation in connection with the entry of its pleas of guilty
as well as the entry and implementation of this Plea Agreement.
7. Aydin Corporation also agrees to waive any right to
appeal any sentence imposed as set forth in the stipulations in this
agreement.
8. Aydin Corporation acknowledges that its attorney has
advised it of the nature of the charges, its possible defenses to the
charges, and the nature and range of possible sentences. The
defendant is satisfied that its attorney has represented it in a
competent manner.
9. Aydin Corporation is entering its guilty plea freely
and voluntarily, and not as the result of force, threats, assurances,
or promises other than the promises contained in this agreement.
Government's Promises
10. The Agreement represents complete and final settlement
by the United States Attorney's Office of all criminal investigations
relating to performance of the AN/GRC-222 contract by Aydin
Corporation, its divisions, officers and employees.
11. The Agreement by Aydin Corporation to pay fines, other
money and restitution as specified above is a fair, just and
reasonable disposition. It is an appropriate disposition in light of
the conduct at issue, the facts known to the United States Attorney's
Office, and the public interest, and the United Stated Attorney will
so inform the Court if asked by the Court.
12. Any commitment regarding the United States' sentencing
recommendation applies only to the sentencing upon this Information
and does not apply to any future conduct or proceedings. This
agreement binds only the United States Attorney's Office for the
Northern District of California and does not bind any other local,
state or federal prosecuting authority. This agreement is intended
to foreclose any civil proceeding which may be brought by the United
States Department of Justice, including the United States Attorney's
Office for the Northern District of California, against Aydin, its
divisions, officers and employees arising out of the performance of
the AN/GRC-222 contract, and pertains to all criminal charges which
have been or could be brought as of the date this agreement is signed
against those parties arising out of that contract.
<PAGE>
Other Terms
13. The United States and the defendant understand and
acknowledge that the Court may accept or reject this agreement or may
defer its decision as to the acceptance or rejection until there has
been an opportunity for the Court to consider a presentence report.
14. The defendant acknowledges that no threats have been
made against it or anyone else and that it is pleading guilty freely
and voluntarily.
15. Defendant acknowledges that it has discussed each of
the following rights, among other, with its counsel, that he
understands each of the following rights, and that it understands that
by pleading guilty it is waiving each of the following rights, among
others:
a. the right to plead not guilty;
b. the right to a speedy and public trial by jury
which a verdict of guilty could only be returned
by unanimous jury;
c. the right to make the government prove its case
beyond a reasonable doubt;
d. the right to assistance of counsel at trial;
e. the right to have trial counsel provided at no
expense if counsel cannot otherwise be afforded;
f. the right to confront and cross examine adverse
witnesses;
g. the right to testify in its own defense at trial
or remain silent and not testify at trial;
h. the right to have no adverse comment made
regarding the failure to testify should it decide
not to testify;
i. the right to subpoena witnesses to appear on its
behalf at trial;
j. the right to bring and appeal adverse
determinations of pre-trial motions;
k. the right to appeal a verdict of guilty if the
matter were to go to trial.
16. If Aydin Corporation commits any crimes, violates any
term of this agreement between signing this agreement and the date of
sentencing, or fails to appear for sentencing, or if the defendant
provides information to the probation officer or the court that is
misleading, intentionally incomplete or untruthful, the United States
will be free to prosecute any and all criminal charges, including
charges for any new offenses.
17. This agreement constitutes all the terms of the plea
bargain between the United States and Aydin Corporation, and the
government has made no other representations to the defendant or its
<PAGE>
attorneys. All promises here made by each party are made dependent
on full performance of the promises made by the other party.
DATED:______JANUARY 6, 1994_______________
Respectfully submitted.
/s/ Leland B. Altschuler
LELAND B. ALTSCHULER
Assistant United States Attorney
/s/ Michael L. Zigler
MICHAEL L. ZIGLER
Assistant United States Attorney
<PAGE>
Aydin Corporation has consulted with its attorney and fully
understands all its rights with respect to the offenses charged in the
pending Information. Aydin Corporation has read this plea agreement
and carefully reviewed every part of it with its attorney. Aydin
Corporation understands this agreement and voluntarily agrees to it.
DATED: January 6, 1994 /s/ James Walsh
James Walsh
Aydin Corporation
I am Aydin Corporation's attorney. I have fully explained
to the defendant its rights with respect to the offenses charged in
the pending Information. I have carefully reviewed every part of this
Plea Agreement with Aydin Corporation. To my knowledge, its decision
to enter into this agreement is an informed and voluntary one, and I
believe there exists a factual and legal basis for its plea of guilty.
DATED: January 6, 1994 /s/ Ronald F. Kidd
Ronald Kidd
Attorney for Aydin Corporation
<PAGE>
Exhibit 99.2
SETTLEMENT AGREEMENT AND CONTRACT MODIFICATION
I. PARTIES
This Settlement Agreement is entered into between the
United States of America ("United States" or "Government") and
Aydin Corporation (Aydin), through their undersigned counsel
and/or authorized representatives.
II. RECITALS
As a preamble to this Settlement Agreement, the United
States and Aydin agree to the following recital of facts:
1. This matter arises from the Government's purchase of
AN/GRC-222 radios, under contract number DAAB07-86-C-J007, sold
by Aydin Corporation (West), a division of Aydin Corporation.
2. Aydin Corporation is a corporation chartered under the laws
of Delaware, with corporate headquarters in Horsham,
Pennsylvania.
3. Aydin Corporation (West) has its principal place of
business in San Jose, California. Aydin Corporation (West) is
engaged in the manufacture and sale of digital and analog
microwave radios and other communications equipment.
4. Since the late 1980's, Aydin Corporation (West) has been
engaged in the manufacture, assembly, and sale to the United
States of (among other things) radios designed for combat signal
units, designated AN/GRC-222.
5. The contract for the AN/GRC-222 contained an Operational
Requirements Document (ORD) delineating performance, testing,
reliability and quality assurance requirements. The ORD
specified that the radio set must be capable of being transported
over degraded road surfaces and cross-country terrain without
sustaining any permanent physical damage or experiencing
performance degradation, and be able to withstand the conditions
experienced during loading, unloading, and transport over air,
water, and rail.
6. The contract contains a manufacturer's warranty assuring
that the radio will meet the requirements of intended use, be
free of defects in materials and workmanship, and remain free
from such defects for the two year warranty period beginning on
the date of final acceptance.
7. The contract contained certain testing, evaluation and
inspection requirements, including an Acceptance Test Procedure
(ATP) designed to detect deficiencies in workmanship, material,
and quality. This ATP was Environmental Stress Screening (ESS),
a special screening designed to precipitate and surface infant
mortality failures in the radio sets.
8. In addition, the ORD specified that Aydin Corporation would
perform reliability testing, in accordance with test plans to be
developed by Aydin Corporation. Reliability testing consisted of
operating a sample set of radios in a test chamber at specified
temperatures in accordance with testing standards.
9. Aydin maintained a Manufacturing and Test Department within
its production facilities located in San Jose, California. Two
critical employees of that department were Patrick Huveldt, the
department manager, and Sharon Favinger, who was responsible for
conducting the required tests in conformance with the contract
requirements.
10. On 12 February 1992, a Grand Jury in the Northern District
of California returned an indictment against Patrick Huveldt and
Sharon Favinger, charging that, between January 1988 and November
1989, Huveldt and Favinger "permitted, encouraged, instructed and
directed" Aydin test technicians responsible for monitoring the
ESS test conditions and recording test data for contract number
DAAB07-86-C-J007 to record test results in pencil and later
erasing those entries showing test failures and substituting ink
entries reflecting passing scores on 200 tests, all in violation
of 18 U.S.C. sec. 371, 1001, and 1002. Count Eighteen of the
Indictment returned against each of these individuals charged a
falsification of test results for one radio during the August to
October 1988 Special Production Reliability Acceptance Test
(PRAT). This PRAT served as the basis of the First Article
Reliability Test.
11. On 5 March 1993, after trial on the merits of the
prosecution commenced, Huveldt pleaded guilty to Counts One,
Three, Ten, and Eighteen of the original indictment. Also on 5
March 1993, Favinger pleaded guilty to Counts One, Nine, Sixteen,
and Eighteen of the original indictment. Included in the pleas
of guilty, specifically Count Eighteen, were Admissions that the
above-named employees falsified test data for one radio tested in
the Special PRAT test conducted from August 1988 to October 1988.
12. The United States believes that it has certain causes of
action against Aydin Corporation relating to alleged testing,
inspection, quality, and/or performance irregularities or
defects, including but not limited to causes of action arising
under the False Claims Act, 31 U.S.C. sec. 3279 et seq.; contracts
(including revocation of acceptance); and the common law.
13. The United States and Aydin Corporation desire to reach an
agreement that would settle, compromise, and resolve all civil
and administrative liability issues and disputes relating to
alleged testing, inspection, quality, and/or performance issues
between the United States and Aydin Corporation concerning the
AN/GRC-222 radio.
III. TERMS OF AGREEMENT
Now Therefore, recognizing that Aydin has reached
agreement with the United States Attorney for the Northern
District of California, subject to court approval, resolving all
outstanding criminal matters regarding the testing and delivery
of the AN/GRC-222 radio, the United States and United States Army
(including its Contracting Officer and Chief Trial Attorney) and
Aydin enter into an agreement and contract modification for the
purpose of resolving all civil and administrative monetary claims
as set forth in the terms below:
a. Aydin Corporation will pay by cashiers check made pay-
able to the Treasurer of the United States in the sum of
$1,000,000, to be delivered to Stanley E. Alderson, Esq.,
Commercial Litigation Branch, Civil Division, Department of
Justice, Main Justice Building, 10th & Pennsylvania Avenue, N.W.,
Washington, D.C. 20530, within five days of the execution of
this agreement. The instrument by which such payment is made
shall contain the following identifying information: "Aydin
Corporation, D.J. No. 46-11-2801.
b. Aydin shall, at no expense to the Government,
institute a Recall, Inspection, Repair, Retrofit, and Testing
program, under which all existing AN/GRC-222 radios and modules
are brought to an agreed baseline, to consist of the
encorporation of all Engineering Change Proposals (ECPs) as
identified in Appendix A to this agreement, and the elimination
of manufacturing and workmanship defects. Under this program all
AN/GRC-222 radios and modules will be returned to Aydin's
facility for inspection and retrofit. Aydin will open each radio
and module, and will perform a visual mechanical and electrical
inspection for the purpose of identifying defects of workmanship,
as well as any other fault or deficiency, at Aydin's expense. It
shall not be necessary to remove the motherboard from the radio
chassis in order to accomplish the nacessary screening, unless
necessary to repair or correct any damage or defect discovered.
Aydin shall not be required to open any hermetically or solder
sealed modules. Any faults or defects will be repaired or
corrected and any defective parts replaced at Aydin's expense,
excepting missing components, cosmetic repairs, and damage caused
by field misuse, abuse, or unauthorized repair, as finally and
conclusively determined by the Government Quality Assurance
Representative (QAR). The decision of the QAR as to whether
Aydin is responsible for a particular no-cost repair, pursuant to
this paragraph shall be final. Aydin will retrofit all radios
and modules to incorporate all ECPs as identified in Appendix A
to this Agreement, at no charge to the Government. Aydin shall
further retrofit all transmitter and receiver modules with the
series 4000 Voltage Controlled Oscillator (VCO) at no charge to
the Government. Aydin shall bear all expenses involved in or
related to shipping all effected radios and modules, worldwide,
to and from the Aydin facility. Commercial modes of shipment are
permissible for use by Aydin for this effort. Should a radio be
located in a remote site where commercial packing and
transportation services are not readily available (within 100
miles), then the Government will provide packing and shipping of
the radios. Any reasonable expenses to the Government for the
packing and shipping of the radios (as determined by the
Administrative Contracting Officer) will be reimbursed by Aydin.
All newly produced transmitter and receiver modules will be
fitted with the series 4000 VCO at the existing contract price.
Aydin shall assume all risk and expense associated with this
recall, inspection, repair and retrofit effort. This effort
shall be conducted in accordance with procedures as provided by
Aydin in paragraph l below and incorporated into this agreement
as Appendix B.
c. Aydin shall perform, in place of the current
contractually required ESS and PRAT, the alternate screening and
testing program as described in Appendix C of this Agreement,
which is hereby incorporated into the contract. All other
contract testing requirements, including Group A, B, and C
testing shall remain unchanged. All radios, subsequent to the
inspection and retrofit effort described in paragraph b above,
will be subjected to the substituted ESS. All radios will then
be batched into lots and subjected, by sample, to the revised
PRAT. Lots will be determined by the order in which the radios
complete retrofit and will not exceed 100 radios per lot. New
radios and modules presented for Government acceptance will also
be subjected to the alternate screening and testing program, in
accordance with Appendix C, and the revised delivery schedule
contained in Appendix D.
d. The Administrative Contracting Officer shall resolve
any dispute which shall arise regarding the application and
coverage of paragraphs b and c above. Contractor relief from
such determinations shall be in accordance with the disputes
clause.
e. Aydin shall provide a warranty on all previously
delivered radios, for a period of two years from the date of
acceptance by the Government. Such Warranty shall commence for a
given retrofitted radio with the successful completion of the
retrofit/testing effort (including successful completion of PRAT)
for that specific radio. Such warranty shall be at the same
terms as the warranty originally provided under Clause H.133 of
the contract, and shall be in addition to all warranties previ-
ously granted under the contract. Nothing in this agreement
shall be interpreted as expanding the scope of any warranty
rights of the Government, express of implied, other than the
duration of those rights.
f. The contract is hereby modified so that, Aydin may
deliver to the Government, for conditional acceptance, a total of
eighty four radios over and above those radios that were
conditionally accepted prior to the issuance of the show cause
letter on 25 March 1993. (Such radios shall be applied to the
total quantities to be delivered under the schedule attached as
appendix D.) The Government may, at its option, also
conditionally accept spare modules as follows: transmitter-72,
receiver-89, power supply-29, duplexer-2, Mixer (NSN 5895-01-270-
5093)-13, Mixer (NSN 5895-01-270-5094)-6. These radios and
modules will have completed the revised ESS in accordance with
Appendix C. Subsequent to the conditional acceptance of these
radios, no further radios will be conditionally accepted prior to
successful completion of PRAT. All further deliveries of radios,
including radios returned to Aydin for inspection, repair and
retrofit under paragraphs b and c above, will successfully
complete ESS and PRAT before being offered for delivery.
g. Aydin agrees to withdraw the four claims currently on
appeal before the Armed Services Board of Contract Appeals
(ASBCA), docketed As ASBCA Numbers 43273, 44156, 44157, and 44901
(the Claims), with prejudice. Aydin agrees to request dismissal
of the above mentioned actions with prejudice within ten (10)
days after court approval of the plea agreement between Aydin and
the United States Attorney for the Northern District of Califor-
nia.
h. Aydin agrees to implement a new configuration
management system which will comprehensively track the status of
ECPs for all radios and modules.
i. Within 30 days of the execution of this agreement,
Aydin will provide the Government with complete level 3 (less
ECP incorporation) drawings and data for the current
configuration of the radio, including completely detailed (as
differentiated from form, fit and function) drawings and data for
components that are proprietary to Aydin or any of its
subsidiaries or divisions. Aydin may deliver level 2 drawing(s)
in place of the level 3 drawings only if (1) no level 3 drawing
exists, (2) the level 2 drawing(s) are of the current version of
the radio, and (3) the level 2 drawings are of such detail and
clarity that they may readily be used, without modification, for
fabrication of the radio by the Government, and/or a qualified
third party. Aydin shall provide the Government, within 120 days
of the execution of this agreement, with revised versions of all
the drawings and data provided above, to include the
incorporation of all ECP's. Upon execution of this agreement,
Aydin grants the Government unlimited rights in all technical
data owned by Aydin or any of its subsidiaries or divisions
pertaining to the current, and all previous configurations of the
radio and all of its components, including the components
previously identified by Aydin as proprietary. This grant of
data rights will be prospective to include full data rights to
encompass any engineering changes or modifications to the
existing radio design made pursuant to this contract, or any
other contract with the Army for the production, maintenance,
modification, or support of the AN/GRC-222 radio, unless such
other contract shall specifically state otherwise. Contractual
FLSC deliverable item(s) will be expanded to encompass data
related to the proprietary components. Proprietary rights of
companies other than Aydin and its divisions and subsidiaries and
which Aydin may not legally transfer without the consent of the
owner, are specifically excluded.
j. Within 210 days of the execution of this agreement,
Aydin will provide the Government with current and complete level
3 drawings and data in completely detailed format with unlimited
rights, to include test data and revised operating instructions,
for the Phase 2 (production) version of the AM orderwire modifi-
cation, in accordance with Aydin letter ANGRC-91-025, dated 13
February 1991. Such drawings will be proven through the
modification of two each transmitter, receiver, and control
monitor modules (a total of six modules) to contain the AM
orderwire, and the successful testing of those modules, including
successful over-the-air link testing in shelter mounted radios.
This over-the-air link testing will be conducted by Government
personnel at a Government facility. An Aydin representtive will
be in attendence, at Aydin's expense, at the over-the-air link
testing to provide technical support. The Government will pro-
vide the modules for incorporation of the AM orderwire
modification. At the successful completion of the testing, the
six modules containing the AM orderwire modification will be
provided to the Government. Aydin shall provide the Government
with the same complete data rights as shall be provided on other
radio components as described in paragraph i above. All work
performed pursuant to this paragraph shall be at no cost to the
Government.
k. A revised delivery schedule, covering the delivery of
radios, spare modules, logistical support items, and other data
items, is attached as Appendix D, and is hereby incorporated into
the Contract. Aydin expressly warrants that it is capable of
achieving said schedule.
l. Within 30 days of the effective date of this
agreement, Aydin will provide to the contracting officer a
comprehensive procedure and schedule for completion of the
recall, inspection, retrofit, and testing effort, to include PRAT
testing. Such procedure and schedule, upon approval, will be
incorporated into this agreement as Appendices B and E
respectively, by contract modification. In no case shall the
total recall, inspection, retrofit and testing effort be
completed in more than three (3) years from the effective date of
this agreement. The Government shall make fielded radios
available to Aydin at a rate sufficient to allow the retrofit
effort to be completed within the three year period. Should
there be delays in the recall, screening, retrofit and testing
effort, such that total effort is not completed in the three year
period, then, to the extent such dellay is attributable to the
Government, Aydin shall be entitled to an extention in the three
year period. Aydin may submit a request for an equitable
adjustment should it believe that any such Government delay in
the completion date has caused the contractor additional expense.
m. Within 10 days of the execution of this agreement,
Aydin shall provide the Government with proposed revised ESS
proceedures.
n. A "float" lot of radios shall be created from radios
and spare modules that have successfully completed the
substituted test plan detailed in paragraph c above and
Appendices B and C. This "float" lot of radios shall be used to
replace radios recalled from the field. These radios shall
initially be drawn from the quantity of previously accepted
radios held in bonded storage at the Aydin (West) facility as of
30 November 1993 (following screening, repair, retrofit and
testing). No radios shall be shipped to Aydin's plant for in-
spection, repair, retrofit and testing until replacement radios
have been supplied to the effected units. Aydin will provide all
necessary on site personnel and support required to accomplish
this recall effort. Aydin personnel will accomplish all aspects
of this effort, including, but not limited to the unpacking,
exchange, installation and shelter check-out (including loopback,
but not over-the-air testing) of retrofitted radios and modules,
as well as the removal, packing and shipping of recalled radios
and modules. Aydin will coordinate with the Government to insure
radios are made available for recall as appropriate. The
Government will use its best efforts to make radios available so
as to minimize the number of trips made by Aydin personnel to
the field, as well as the duration of those trips.
o. Aydin agrees to a downward adjustment in the price to
compensate the Government for costs expended for Government
testing of the radio, as well as those expended to put into
effect the Termination for default (including the recovery of
progress payment inventory.) The amount of such an adjustment
will be determined by the contracting officer based on the actual
expenses incurred by the Government, not to exceed price of
$100,000.
p. Aydin agrees to submit, within 20 working days of the
execution of this agreement, a Joint Management Plan to the
Government. Aydin further agrees to make such revisions to said
management plan, as are necessary to make the plan acceptable to
the Government, within 60 working days of the execution of this
agreement. In said plan, Aydin will describe in detail those
steps it intends to take to assure successful completion of the
AN/GRC-222 program. The Joint Management Plan shall be prepared
at no expense to the Government and will be submitted to the con-
tracting officer for approval. The Government considers the
submission of an acceptable Joint Management Plan to be a
material condition of this agreement. Should Aydin fail to
submit an acceptable Joint Management Plan within the prescribed
time, the Army may, at its discretion, declare this agreement to
be null and void. At such time as the Joint Management Plan is
originally submitted, Aydin's President will personally brief an
executive summary of the Plan to the Commanding General, U.S.
Army Communications Electronics Command.
q. Aydin is hereby advised of the Army's intent to create
a Joint Oversight Committee. This committee will be charged with
maintaining oversight of Aydin's progress toward completion of
the contract and the retrofit effort, and shall consist of
members from the program manager's office, the CECOM Acquisition
Center, and the CECOM Logistics and Readiness Center. The Joint
Oversight Committee shall not assume any of the management func-
tions or authority of the Program Manager, nor shall it assume
any of the contractual authority of the Contracting Officer.
Aydin hereby agrees to provide the committee access to the Aydin
facility and to make available to the committee any and all
reports, documents, or other data necessary to carry out its
function.
r. The Contracting Officer hereby finds, in accordance
with FAR 49.102, that the circumstances that led to the
termination for default have substantially changed, that the
items to be procured under the contract are still required by the
Government and that reinstatement of the contract is clearly
advantageous to the Government. Therefore, the Contracting
Officer, with the concurrence of the contractor, hereby withdraws
her final decision terminating the contract for default dated 30
November 1993. Aydin and the Army hereby agree that the contract
is reinstated at all of its previous terms except as noted in
this modification and its appendices. Nothing in this agreement
shall be deemed to supersede any right or obligation of the
original contract or any modification thereto, unless
specifically stated herein. The radios and modules for which
acceptance was revoked by the contracting officer's final
decision of 30 November 1993, shall be deemed reaccepted when
said radios shall have successfully completed the screening,
repair, retrofit and testing program (including PRAT), as
identified in Appendices B and C.
s. Aydin shall withdraw with prejudice, the action filed
against the United States Army Communications - Electronics
Command and the Department of Justice, in the United States
District Court for the Eastern District of Pennsylvania, CA
Docket #93-6232.
t. Aydin Corporation agrees to disclose to the
contracting officer, upon execution of this agreement, all
relevant information regarding the printed circuit boards
manufactured by Aydin Corporation's Electro Fab Division.
u. AYDIN RELEASE Aydin hereby releases the Government,
its officers, officials, agents, employees, successors, and
assigns, from any and all claims, demands, damages, liabilities,
actions, attorney's fees, interest, and causes of action of
whatsoever kind, in law or equity, administrative or judicial,
known or unknown, in contract or otherwise,
(1) that it had, may now have , or may subsequently
discover, arising out of or in any way connected, directly or
indirectly, with any matter addressed in this document which
relates to incidents occurring prior to and as of the date of
this Settlement Agreement, including, but not limited to ASBCA
Appeals Nos. 43273, 44156, 44157 and 44901:
(2) those it had, or may now have, arising out of
or in any way connected, directly or indirectly, with Contract
No. DAAB07-86-C-J007;
(3) relating to mobilization and start-up costs for
re-entry into production of the radio, including any claim for
damages or other costs related to or accruing from the action
taken by the Government to inventory, secure, package, ship,
store, or return the progress payment inventory between 1
December 1993 and the date such progress payment inventory shall
be returned to the Aydin facility, provided that the total
quantity of inventory taken by the Government is returned to
Aydin.
(4) any and all claims or requests for equitable
adjustment related to Environmental Stress Screening (hereinafter
"ESS"), Production Reliability Acceptance Testing (hereinafter
"PRAT") or any other contractually required screening or testing
performed or required to be performed through the present date.
Aydin further waives and relinquishes forever, all rights to
pursue any challenge, claim or request for equitable adjustment,
legal or administrative, to the validity of the contractual
screening and testing plan as stated in Appendix C. This shall
include all costs or adjustments related to the implementation of
the alternate screening and testing program as defined in
Appendix C.
v. GOVERNMENT RELEASE In consideration of the
obligations of Aydin Corporation set forth in this Agreement, the
United States hereby fully releases and discharges Aydin
Corporation, its present or former officers, directors,
employees, and agents from all civil and administrative monetary
claims and causes of action which it had or may now have under
the False Claims Act, 31 U.S.C. sec. 3729 et seq., the Contract
Disputes Act, the common law theories of civil recovery, or any
other statute creating causes of action for civil and adminis-
trative monetary claims arising out of the AN/GRC-222 program
with respect to all issues relating to testing, inspection,
quality, and performance except as provided in Paragraph x below.
w. Subject to the exceptions in Paragraph x below, the
United States shall have no further civil or administrative
monetary claim or cause of action under the contract at issue
against Aydin Corporation, its present or former officers,
directors, or employees under the False Claims Act, 31 U.S.C. sec.
3729 et seq., the Contracts Disputes Act, the common law theories
of recovery or payment for mistake or unjust enrichment, or any
other statute creating causes of action for civil and
administrative monetary claims arising out of the AN/GRC-222
contract with respect to all issues relating to testing,
inspection, quality, and performance of such radios, delivered as
of the date of this Settlement Agreement, under the foregoing
contract. Nothing in this provision shall be interpreted as
affecting the rights of the parties regarding future deliveries
under the AN/GRC-222 contract.
x. Notwithstanding any term of this Settlement Agreement,
specifically excluded and reserved from the scope and terms of
this Settlement Agreement are any and all:
(1) claims that arise or may arise under Title 26
United States Code (Internal Revenue Code) or under the Internal
Revenue regulations,
(2) suspension and debarment rights of any federal
agency,
(3) any claims based on such obligations as are
created by this Agreement,
(4) claims for personal or property injury or for
other consequential damages arising from the sale or delivery by
Aydin of defective products or parts, or for breach of any
express or implied warranty for products, parts or services.
y. It is agreed that all costs (as defined in FAR
31.205-47) incurred by or on behalf of Aydin Corporation and its
officers, directors, and employees (to include, but not limited
to attorney's and paralegal fees, accounting fees, consultant
fees, expert fees, copying fees, as well as Aydin Corporation and
Aydin Corporation (West) employee costs) in connection with 1)
the matters covered by this Settlement Agreement, 2) the
Government's civil and/or administrative investigation of the
matters covered by this Settlement Agreement, 3) Aydin
Corporation's investigation, defense of the matters, and
corrective actions with respect to the issues covered by this
Agreement, 4) the negotiation of this Settlement Agreement, 5)
the lump sum payments of $1,000,000 made to the United States by
Aydin Corporation pursuant to this Settlement Agreement, 6) any
payments made by Aydin, pursuant to its agreement with the United
States Attorney's Office for the Northern District of California
related to its production of the GRC-222, and 7) the conduct of
the program covering the recall, screening, repair, and testing
of all AN/GRC-222 radios shall be unallowable costs for
Government contract accounting purposes. These amounts shall be
separately accounted for by Aydin Corporation and subject to
audit by the DCAA at DCAA's discretion. Aydin Corporation shall
accumulate and report costs of the program, using its disclosed
cost accounting practices, to final cost objectives that
separately identify recall, screening, repair, and testing.
z. Any individual executing this Settlement Agreement on
behalf of Aydin Corporation represents that he has been duly
authorized to execute this agreement on behalf of said corpo-
ration.
aa. The parties have executed four identical copies of
the Agreement, each of which shall be deemed an original.
ab. The provisions of this Settlement Agreement shall be
binding upon the United States and Aydin Corporation and their
heirs, successors, and assigns.
ac. The effective date of this Settlement Agreement
between the United States and Aydin Corporation is the date when
the Settlement Agreement is executed by all the representatives
of Aydin Corporation and the United States.
ad. This Agreement is intended to be for the benefit of
the United States and Aydin Corporation (including its present or
former officers, directors, employees, and/or agents) only, and
by this instrument the Parties do not waive, compromise or
release any claims or causes of action against any other person
or entity.
ae. All other terms of and conditions contract DAAB07-86-
C-J007 remain unchanged.
af. The failure of Aydin to fulfill any of its obli-
gations under this agreement shall constitute a material breach
and will be grounds for termination of the contract within the
meaning and under the provisions of the default clause of the
contract and the applicable Federal Acquisition Regulations (FAR
52.249).
ag. The parties recognize and agree that this Agreement
is contingent upon and subject to the approval of the United
States District Court for the Northern District of California of
the plea agreement between Aydin and the United States Attorney
for the Northern District of California. In the event that said
plea agreement is rejected by the Court, this agreement shall be
null and void. The parties will be returned to the status quo as
it existed at the time of the execution of this Agreement; all
monies paid will be returned; and no statements made in
connection with this agreement shall be admissible against any
party in any proceeding.
ah. To the greatest extent possible, all program manager
and CECOM personnel involved in the AN/GRC-222 program will be
notified that past contractual disputes between the Army and
Aydin have been resolved, and that inquiries from other
Government agencies should be answered accordingly. The Army and
its personnel, are not limited in their responses to specific
questions regarding Aydin's past contract performance.
FOR THE UNITED STATES FOR AYDIN CORPORATION:
OF AMERICA:
__________________________ ________________________
STANLEY E. ALDERSON (date) JAMES WALSH (date)
Trial Attorney President
Civil Division Aydin Corporation
Department of Justice 700 Dresher Rd
10th and Pennsylvania Ave NW Horsham, PA 19044
Washington, DC 20530
MICHAEL J. YAMAGUCHI
United States Attorney for the
Northern District of California
____________________________ ________________________
JOANN M. SWANSON (date) RONALD F. KIDD (date)
Assistant United States Attorney DUANE, MORRIS & HECKSCHER
450 Golden Gate Ave, 10th Fl One Liberty Pl
San Francisco, CA 94102 Philadelphia, PA 19103
Counsel for Aydin Corp.
____________________________
STEPHANIE J. ALLEN (date)
Contracting Officer
United States Army Communications-
Electronics Command
Fort Monmouth, NJ 07703
<PAGE>
APPENDIX A Exhibit 99.3
AN/GRC-222
OUTSTANDING ECP'S
<TABLE>
<CAPTION>
ECP No. Effective Units
Unmod.
E6GJ007 ECO No. Module/Unit Change Date Shipped
Bal. Warranty
<S> <C> <C> <C> <C> <C>
<C> <C>
240 G2496 Rx Synth Replace IC U1 5/29/89 N/A
None N/A
G2497 Tx Synth Replace IC U1 5/29/89 N/A
None N/A
- ---------------------------------------------------------------------------------
- ------------
255 G2519 Tx Synth Removed C6 from circuit 6/9/89 N/A
None N/A
G2521 Rx Synth Removed C6 from circuit 6/9/89 N/A
None N/A
- ---------------------------------------------------------------------------------
- ------------
310 G2607 ACGIF Replace EPROM Assembly 5/12/89 260
60 Yes
- ---------------------------------------------------------------------------------
- ------------
Cuts & Jumpers, Add C75 &
332 G2624 WLD R44. Change value of R27 2/9/90 409
229 Yes
- ---------------------------------------------------------------------------------
- ------------
368 G2672 Xmtr Replace Synth EPROM Assy 9/19/90 480
197 Yes
- ---------------------------------------------------------------------------------
- ------------
369 G2673 Rcvr Replace Synth EPROM Assy 9/19/90 477
158 Yes
- ---------------------------------------------------------------------------------
- ------------
385 G2697 Demod Chg. Value of R169 & R172 12/1/90 553
500 Yes
- ---------------------------------------------------------------------------------
- ------------
397 G2725 WLD Cuts & Jumpers 10/10/91 Part of ECP
332
- ---------------------------------------------------------------------------------
- ------------
Add Zener Diode. Change
399 G2736 WLR Diode CR13 rating. 6/14/91 631
560 No
- ---------------------------------------------------------------------------------
- ------------
Add Zener Diode. Change
400 G2733 Comb Diode CR13 rating. 6/14/91 647
580 No
- ---------------------------------------------------------------------------------
- ------------
Change 5V DC-DC
406 G2775 Pwr P Converter wattage rating 9/12/91 674
674 No
- ---------------------------------------------------------------------------------
- ------------
407 G2777 Comb Add Capacitor C82 9/19/91 67
580 No
- ---------------------------------------------------------------------------------
- ------------
Change value of R4, R5, R6,
408 G2780 DemodR13. Change U1. 9/19/91 671
650 No
- ---------------------------------------------------------------------------------
- -----------
Yes, if
413 G2789 Demod Add Heatsink to U22 6/3/92 671
575 failure
- ---------------------------------------------------------------------------------
- ------------
Add C101, R63 & CR9.
419 G2799 Sep Cuts & Jumpers 11/25/92 681
620 Yes
- ---------------------------------------------------------------------------------
- ------------
421 G2802 WLR Cuts & Jumps, add Buffer 11/25/92 661
600 Yes
stage to TCXO Output
- ---------------------------------------------------------------------------------
- ------------
395 Pwr Sup Add Surge Protection 10/27/92 674
674 No
Circuit to Power Supply
- ---------------------------------------------------------------------------------
- ------------
G2934,
G2935,
G2937, Modified Surge Protection Not
448 G2939 Pwr Sup circuit Approved 674
674 No
NOTE: ECP's 395 and 448 are retrofired on shipped units only at CECOM direction
- ---------------------------------------------------------------------------------
- ----------
ATP 14- RSL Verification and
A3088236 Rcvr Calibration 5/1/93 673
673 Yes
- ---------------------------------------------------------------------------------
- -----------
Corr.Action 1st Upconv Replace Harness 5/1/93 673
673 Yes
- ---------------------------------------------------------------------------------
- -----------
N/A Xmtr Replace VCO with 4000 8/22/91 617
589 See
Note
N/A Rcvr Replace VCO with 4000 8/22/91 617
589 See
Note
Note: In accordance with contract modification P00063, as of 1 July 1993, 149
radios
are under a one year extension to the original 2 year warranty. The VCO is to be
replaced under warranty in these radios only if
it fails. Replacement of all other VCO's would be at Government request and at
Government cost.
- ---------------------------------------------------------------------------------
- ----------
</TABLE>
<PAGE>
APPENDIX C Exhibit 99.4
ESS, PRAT, & Failure Analysis Package
1. Failure analysis, to determine root cause and the appropriate
corrective action, will be performed on all
failures/specification non-compliances for both ESS and PRAT.
This definitive failure analysis shall minimally address all the
issued/concerns as delineated in the current contractual SOW,
CDRL(s) and Data Item Description (s) including DI-R-7040 and DI-
R-7039. Failure analysis reports shall be submitted to the
government as part of the quarterly ESS reports and PRAT Failed
Item Analysis Reports (FIARs) and PRAT final report.
2. ESS will be performed on all products submitted for
acceptance as noted below.
3. All new radios and retrofitted radios will be subject to 12
complete cycles (hot & cold) between -10 and 40 degrees Celsius
with transition gradient rates of 10 degrees Celsius/minute with
each radio continuously operated. The performance test (ATP
A3088251) will be performed after stabilization at the extreme
temperature 8 times during the test to determine operational
compliance. Stabilization or dwell time at the temperature
extremes is the period of time required, for the radio part with
the greatest thermal mass, to reach 85% of the desired
temperature extreme.
4. A total of five radios from the lot of radios to be
represented by each PRAT will be continuously monitored through
the transition period between each test period of ESS, except
during periods of radio testing for each chamber, as per
paragraph 3 above. The five radios to be monitored shall be from
the first ten groups of radios to be subjected to ESS (one radio
per group). A group is the number of radios being screened in
one test chamber. The radio continuously monitored will be
selected at random by the Government QAR, and shall not be the
radios subjected to PRAT. Any faults observed during these
transition periods will be recorded and reported by Aydin within
24 hours of the occurrence to the cognizant Government technical
activity. If the results of this continuous monitoring
demonstrate a failure or failures that indicate a pattern, Aydin
will perform failure analysis to determine the root cause of the
failure. If the same fault type, as evidenced by the failure
symptoms, occurs three or more times, the fault will be
considered a trend. If the trends are design/workmanship
related, they shall be corrected at Aydin's expense per current
contractual provisions. This includes retrofitting shipped
radios and modules if systemic problems are identified. If this
analysis determines that the failure is not due to a design or
workmanship defect, but rather is due to the inherent charac-
teristics of solid state electronics during temperature
gradients, then no further analysis of similar faults shall be
required. Faults detected during the during the continuous
monitoring of transitional gradients, not at a specified testing
point, shall not be considered in determining whether a radio has
successfully completed ESS, and paragraph 5 below shall not
apply.
5. When a failure/specification noncompliance occurs during ESS
the affected module can be replaced with a module which had
already successfully completed ESS. The replacement module and
the balance of the radio shall continue ESS from the beginning of
the cycle a which the failure occurred until successful
completion of ESS. The replaced module, after being repaired,
will be subjected to a complete ESS again, prior to acceptance.
6. PRAT will be performed in accordance with the attached
sheets.
7. Acceptance of radios will occur only after the successful
completion of all contractual actions to include ESS and all
applicable tests for each applicable radio/lot.
8. Aydin shall prepare, and submit for government approval, a
revised ESS procedure and a revised PRAT plan and procedure
delineating the above changes.
<PAGE>
Appendix C
PRAT PROFILE AND PARAMETERS
The new proposed PRAT procedure is identical to the
current procedure except the temperature/voltage profile is
changed as shown on the attached Figure 1.
The profile changes are:
- Cycle time is extended from 48 hours/cycle to 486 hours.
- Cold Soak is included in the first cycle only. Same for
Hot Soak.
- Chamber temperate rate of change is 0.5 degrees C per
minute, instead of 5 degrees C minute for all temperature
transitions.
The following salient features of the test procedure
remain the same:
- Total operating time: 5,180 hours.
- The test plan, discrimination ratio, etc., remain
unchanged.
- Accept criteria: no more than two chargeable relevant
failures during the 5,180 hour operating period.
- Only those adjustments called out in the maintenance
manual can be used during the test.
- Radio Monitoring Test, ATP 14-A3088251, to be performed
on each test radio every twenty-four hours.
- The MTBF of 2,800 (upper test figure)/1,400 (lower test
figure) as delineated in the approved C2b radio
specification applies.
<PAGE>
FIGURE 1. PROPOSED PRAT PROFILE Exhibit 99.5
(Filed under cover of Form SE)
<PAGE>
APPENDIX D
Exhibit 99.6
CONTRACT SCHEDULE FOR
NEW RADIO/MODULE DELIVERIES
DATE RADIO XMTR RCVR DEMOD P.S.
T* 0 0 0 0 0
T+30 8 10 10
T+60 24 15 15 1
T+90 20 20 20 2
T+150 20 17 20 3
T+180 20 11
T+210 20
T+240 20
T+270 20
T+300 20
T+330 20
T+360 20
T+390 20
T+420 20
T+450 20
T+450 20
T+480 8
*T= The later of the return of assets to the plant and the
approval of the proposed revised ESS proceedure by the Gov-
ernment. First delivery starts 30 days after the later of these
two events.
It is expressly agreed that Aydin, at its option, may deliver new
radios on dates prior to those set forth on this schedule. In no
case, however, shall more than 100 radios be represented by a
single PRAT
<PAGE>
APPENDIX D
FLSC SCHEDULE
Completion Date
Prototype Peculiar Support Equipment (PSE)
(Government review) 1 Apr 94
Production PSE Deliveries
1 of each type 1 Sep 94
2 of each type 1 Oct 94
8 additional power supply test fixtures 1 Oct 94
Balance of power supply text fixtures 1 Nov 94
Depot Maintenance Work Requirement and
-13 Technical Manual Changes Completion Dates
Contractor validation 3 Jun 94
Validated manuals to CECOM 6 Jun 94
Government review/comments 8 Jul 94
Government verification 9 Sep 94
Incorporate verification comments 28 Oct 94
Corrected verified manuals to CECOM 31 Oct 94
Government pre-publication review 10 Nov 94
Final camera-ready (including any
revisions/corrections resulting from
conduct of the training) 1 Jan 95
GSERD/GSESD Completion Dates
GSERD/GSESD update submittal 18 Mar 94
Government response 18 Apr 94
Final 20 May 94
Training Completion Dates
Draft training plan and
program of instruction 2 May 94
Conduct training course 14 Nov 94
<PAGE>
APPENDIX
Exhibit No. 99.5 - Figure 1 of Appendix C
Figure 1. Proposed Product Reliability Acceptance Test (PRAT)
Profile.
The proposed PRAT Profile (graph) is a time line depicting the
variations in operating temperatures and voltages over a 486 hour
cycle. At specific times, temperatures and voltages of the
AN/GRC-222 radio is tested using an Environmental Stress
Screening (ESS) Acceptance Test Procedure (ATP).
