UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as
permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec240.14a-11(c) or
sec240.14a-12
___________________AYDIN CORPORATION______________________
(Name of Registrant as Specified in its Charter)
_______________________________________________________________
(Name of Person(s) Filing Proxy Statement if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computer on table below per Exchange Act Rules 14a-
6(i)(4) and 0-11.
1) Title of each class securities to which transaction
applies:
___________________________________
2) Aggregate number of securities to which transaction
applies:
___________________________________
3) Per unit price or other underlying value of
transaction computer 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
the 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:
___________________________________
<PAGE>
700 Dresher Road
Horsham, PA 19044
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
April 25, 1997
---------------------
TO THE STOCKHOLDERS OF AYDIN CORPORATION:
The Annual Meeting of Stockholders of AYDIN CORPORATION,
a Delaware corporation (the "Company"), will be held on Friday,
April 25, 1997, at 3:00 p.m. local time at the Company's
Corporate Offices, 700 Dresher Road, Horsham, Pennsylvania, for
the following purposes:
1. To elect six Directors, each to hold office for a
term of one year and until his successor has been
duly elected; and
2. To approve an amendment to the 1994 Incentive Stock
Option Plan; and
3. To approve the 1996 Equity Incentive Plan; and
4. To approve an amendment to outstanding Stock Options,
extending their expiration date by five years; and
5. To approve the Stock Bonus Plan; and
6. To transact such other business as may properly come
before the Annual Meeting and any adjournment
thereof.
The Board of Directors has fixed the close of business on
February 25, 1997, as the record date for the determination of
stockholders entitled to notice of and to vote at the Annual
Meeting.
A copy of the Company's Annual Report for its fiscal year
ended December 31, 1996, is being transmitted herewith.
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING IN
PERSON, PLEASE FILL IN, DATE, SIGN AND RETURN THE ENCLOSED FORM
OF PROXY IN THE ENVELOPE PROVIDED.
By Order of the Board of Directors,
Robert A. Clancy
Secretary
March 27, 1997
<PAGE>
AYDIN CORPORATION
--------------------
PROXY STATEMENT
--------------------
This Proxy Statement and the accompanying form of Proxy,
which are first being mailed to stockholders on March 27, 1997,
are furnished in connection with the solicitation by the Board
of Directors of Aydin Corporation (hereinafter called the
"Company") of proxies to be voted at the Annual Meeting of
Stockholders to be held Friday, April 25, 1997, at 3:00 p.m.
local time, and at any adjournment thereof (hereinafter the
"Annual Meeting"). The Company's principal executive offices
are located at 700 Dresher Road, Horsham, Pennsylvania 19044.
Shares represented by proxies in the accompanying form, if
properly signed and returned, will be voted in accordance with
the specifications made thereon by stockholders. Any proxy not
specifying to the contrary will be voted for the election of
the nominees for Directors named below and in favor of
proposals 2, 3, 4 and 5 referred to in the Notice of Annual
Meeting. A stockholder who signs and returns a proxy in the
accompanying form may revoke it at any time before it is voted
by giving written notice thereof to the Secretary of the
Company.
As of the close of business on February 25, 1997, the
Company had outstanding 5,173,400 shares of Common Stock, $1.00
par value, the record holders of which on such date are
entitled to one vote for each share held. A majority of the
outstanding shares will constitute a quorum at the Annual
Meeting. Only holders of Common Stock of record at the close
of business on February 25, 1997, will be entitled to notice of
and to vote at the Annual Meeting.
The cost of solicitation of proxies in the accompanying form
will be borne by the Company, including expenses in connection
with preparing and mailing this Proxy Statement. Such
solicitation will be made by mail and may also be made on
behalf of the Company by the Company's regular officers and
employees, without additional remuneration, personally or by
telephone or telegram. The Company will also, upon request,
reimburse brokers or persons holding shares in their name or in
the names of nominees for their reasonable expenses in sending
proxies and proxy material to beneficial owners.
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth, as of the dates indicated,
the name and address of each person known by the Company to be
the beneficial owner of more than 5% of the Company's
outstanding voting securities and the percentage of the shares
so owned:
<TABLE>
<CAPTION>
Title of Name and Address of Amount and Nature of Percent
Class Beneficial Owner Beneficial Ownership(1) of Class
<S> <C> <C> <C>
Common Stock, EA Industries, Inc. 596,927(2) 11.5%
$1.00 par 185 Monmouth Parkway
value West Long Branch,
New Jersey 07764
Common Stock, Franklin Resources, Inc. 467,800(3) 9.0%
$1.00 par 185 Parker Plaza
value Sixteenth Floor,
Ft. Lee, NJ 07024
Common Stock, Victor Posner 334,500(4) 6.5%
$1.00 par 6917 Collins Avenue
value Miami Beach, FL 33141
Common Stock, Dimensional Fund Advisors, Inc. 293,150(5) 5.7%
$1.00 par 1299 Ocean Avenue, 11th Floor
value Santa Monica, CA 90401
<FN>
_____________
(1) Based on information furnished by the stockholder.
(2) As of October 8, 1996. Sole voting and investment
power. On February 25, 1997, EA Industries, Inc.
granted Gary Bard and his assigns an option to
purchase the 596,927 shares at $11.00 per share. The
latest date on which such option may be exercised is
June 2, 1997. If such option is exercised in full
prior to the Annual Meeting, EA will grant proxies to
the transferees to vote the shares at the Annual
Meeting.
(3) As of February 12, 1997. According to the Schedule
13G filed by Franklin Resources, Inc., Charles B.
Johnson, Rupert H. Johnson, Jr. and Franklin Advisory
Services, Inc., these shares are beneficially owned by
one or more investment companies or other managed
accounts that are advised by investment advisory
subsidiaries of Franklin Resources, Inc. Sole voting
and dispositive power is held by Franklin Advisory
Services, Inc.
(4) As of December 29, 1993. Sole voting and investment
power.
(5) As of February 5, 1997. Dimensional Fund Advisors
Inc. ("Dimensional"), a registered investment advisor,
is deemed to have beneficial ownership of 293,150
shares of Aydin Corporation stock as of December 31,
1996, all of which shares are held in portfolios of
DFA Investment Dimensions Group Inc., a registered
open-end investment company, or in series of the DFA
Investment Trust Company, a Delaware business trust,
or the DFA Group Trust and DFA Participation Group
Trust, investment vehicles for qualified employee
benefit plans, all of which Dimensional Fund Advisors
Inc. serves as investment manager. Dimensional has
sole voting power as to 196,300 of these shares,
shared voting power as to 96,850 shares and sole
investment power as to 293,150 shares. Dimensional
disclaims Beneficial Ownership of all such shares.
</TABLE>
BENEFICIAL OWNERSHIP BY MANAGEMENT
The following table sets forth, as of March 20, 1997, the
amount and percentage of the Company's outstanding Common
Stock, $1.00 par value, beneficially owned by each Director,
the chief executive officers, the four other most highly
compensated executive officers, as identified in the Summary
Compensation Table herein, and all Directors and executive
officers as a group:
<TABLE>
<CAPTION>
Title of Name of Amount and Nature Percent
Class Beneficial Owner of Ownership (1)(2) of Class
<S> <C> <C> <C>
Common Stock I. Gary Bard 626,927 (3) 12.1%
Ayhan Hakimoglu 0 (4) -
Dr. Nev A. Gokcen 17,250 (7) -
Irwin L. Gross 0 (5) -
Gary Mozenter 0 -
Harry D. Train, II 250 -
John F. Vanderslice 5,028 (7) -
Klaus D. Oebel 10,000 (7) -
James R. Henderson 0 -
Demirhan Hakimoglu 6,685 (7) -
Dr. Donald S. Taylor 10,000 (6)(7)
All of the above and other
executive officers as a
group
(Includes 14 persons) 695,993 13.5%
<FN>
_____________________________
(1) Based on information furnished by the respective
directors and officers. Each person has sole voting
and investment power with respect to the shares
listed, except the shares of Dr. Gokcen are held
jointly with his spouse.
(2) Includes shares which may be acquired upon the
exercise of options granted by the Company currently
exercisable or that will become exercisable within
60 days as follows: Bard - 5,000, Gokcen - 250, Train
- 250, Vanderslice - 5,000, D. Hakimoglu - 1,500, and
the Group - 9,500.
(3) In addition to the option to buy 5,000 shares granted
by the Company (Note "2" above), these shares include
an option to purchase 596,927 shares at $11.00 per
share granted to Mr. Bard and his assigns by EA
Industries, Inc. on February 25, 1997. The latest
date on which such option may be exercised is June 2,
1997. If such option is exercised in full prior to
the Annual Meeting, EA will grant proxies to the
transferees to vote the shares at the Annual Meeting.
(4) Mr. Ayhan Hakimoglu resigned as Director and CEO on
May 3, 1996.
(5) Mr. Gross is Chairman of EA Industries, Inc. See
Beneficial Ownership of Common Stock table above.
(6) Dr. Taylor resigned as a Director and President of the
Company on September 13, 1996.
(7) Less than 1%.
</TABLE>
PROPOSAL 1. ELECTION OF DIRECTORS
Six Directors of the Company are to be elected at the
Annual Meeting. Each Director will serve one year and until
his successor has been duly elected. Unless otherwise
instructed, the proxy holders will vote the proxies received
by them for the election of the nominees listed below, all of
whom are currently Directors of the Company. If any nominee
should become unavailable for any reason, it is intended that
votes will be cast for a substitute nominee designated by the
Board of Directors. The Board of Directors has no reason to
believe that the nominees named will be unable to serve if
elected. Any vacancy occurring on the Board of Directors for
any reason may be filled by a majority of the Directors then
in office until the next annual meeting of stockholders.
Nominees for Directors shall be elected by a plurality of
the votes of the holders of the shares present in person or
represented by proxy at the Annual Meeting and entitled to
vote on the election of Directors. Cumulative voting rights
do not exist with respect to the election of Directors. With
regard to the election of directors, votes may be cast in
favor or withheld; votes that are withheld will be excluded
entirely from the vote and will have no effect. Under the
rules of the New York Stock Exchange, Inc., brokers who hold
shares in street name for customers have the authority to
vote on certain items when they have not received
instructions from beneficial owners. Brokers that do not
receive instructions are entitled to vote on the election of
directors. Under applicable Delaware law, a broker non-vote
will have no effect on the outcome of the election of
directors.
The names of the nominees for Director, all of whom are
currently Directors of the Company, and certain information
regarding them are as follows:
<TABLE>
<CAPTION>
Name Age Principal Occupation Director
for Past Five Years Since
<S> <C> <C> <C>
I. Gary Bard 59 Chairman of the Board of Directors and 1994
Executive Officer since May 6,1996.
President of the Company since October
8, 1996. Prior to that, Vice President
and General Manager, Federal Systems
solutions Integration Division
of Unisys Corporation, providing integration
Solutions to the Federal, State and
local marketplace, since October
1995. Consultant on software development from
February 1993 to October 1995. Chief
Operating Officer of Open Software Foundation,
from November 1992 to February 1993, and
President of Integrated Systems Division
of Computer Sciences Corporation, from
July 1984 to November 1992.
Dr. Nev A. Gokcen 75 Retired. Former thermodynamicist with the 1972
Department of the Interior, Bureau of
Mines, Albany, Oregon.
Irwin L. Gross 53 Chairman of the Board of EA Industries,Inc., 1996
providing contract electronic manufacturing
services, since April 1995. Chairman and
President of ICC Technologies, Inc., providing
desiccant air conditioning and climate control
systems, since May 1984.
Gary Mozenter 62 Retired. Former Partner, Vice Chairman and 1997
Executive Committee Member, Coopers &
Lybrand LLP from 1956 to 1994.
Harry D. Train, II 69 Manager, Hampton Roads Operations (defense 1984
studies and analysis) of Science Applications
International Corporation (SAIC), Norfolk,
Virginia, since October 1986.
John F. Vanderslice 55 Executive Vice President of the Company, 1994
President of its Products Group
(formerly the Vector Division) since 1982.
</TABLE>
The Company has had an Audit Committee since September
1978; and Directors Gokcen, Mozenter and Train are its
current members. Its powers and duties include the
following: (1) sole authority to retain and dismiss both
internal and independent auditors; (2) approval before
dissemination of any report which contains financial data;
and (3) consultation with the independent auditors quarterly
and before the Company decides any material accounting
policy. This Committee met six times in 1996.
The Company established an Oversight Committee in
April 1992, comprised of its outside Directors, currently
Gokcen, Gross and Train. Its powers and duties include the
review of the Company's policies and procedures and
recommendations to the Board of Directors of those measures
that the Committee believes necessary to strengthen and
ensure the effectiveness of Company policies relating
to (a) Division and Corporate Officer awareness of federal
laws and regulations affecting government contracts;
(b) compliance of outside consultants and sales
representatives with national and international regulations
involving the sale of Company products; and (c) compliance
with federal laws and regulations applicable to government
contract procurement and performance. This Committee met
three times in 1996.
The Company established the Executive Compensation
Committee in May 1996, now comprised of Directors Bard,
Gokcen and Train. The Committee consults generally with
management on matters concerning executive and outside
director compensation and incentive plans. It makes
recommendations to the Board of Directors on compensation
generally, including individual salary rates and bonus
awards. This Committee met three times in 1996.
There is no nominating committee of the Board of
Directors. The Board of Directors met 13 times in 1996.
During the year ended December 31, 1996, no director
attended fewer than 90% of all meetings of the Board of
Directors and Committees on which they served.
Each Director who is not also an employee of the Company
presently receives an annual director's fee of $9,000, plus
$1,000 for each meeting which he personally attends ($200 for
each meeting in which he participates by means of conference
telephone). Directors Gokcen, Gross and Train receive no
additional fees for serving on the Audit, Executive
Compensation and Oversight Committees. Commencing with the
election of the new Board of Directors at the Annual Meeting
on April 25, 1997, the compensation package for the Company's
non-employee Directors will be: Annual retainer - $12,000;
Board meeting fee - $1,500; Committee meeting fee - $1,000;
Committee Chairman annual retainer - $1,500; Telephone
meetings, Board or Committee - $500; Annual grant of option
to purchase 2,000 shares of the Company's Common Stock,
subject to an upward or downward 50% adjustment based upon
the Chairman's assessment of Board performance; and to be
established, annual grants of up to 1,000 shares of
restricted stock, based on performance goals, with the shares
remaining restricted until the Director leaves the Board. In
May 1996, Director Train agreed, when requested, to perform
consulting services for the Company over and above his normal
duties as a director of the Company, at the current per diem
rate for directors of $1,000 per day plus expenses. No fees
were paid to Director Train under this arrangement during
1996. Directors Gokcen and Train have been granted
Individual Non-Qualified Stock Options (the "Individual
Options"). These options were granted July 28, 1995, to
purchase up to 1,000 shares at $16.75 per share, the per
share market value of the Company's Common Stock on the date
of the grant. Under each of the Individual Options, 25% of
the option shares become exercisable on the first anniversary
of the grant and 25% each year thereafter on a cumulative
basis until the option expires five years after date of
grant. On December 16, 1996, the Board of Directors amended
all outstanding stock options, subject to stockholder
approval, including these Individual Options, to extend the
expiration date for an additional five years. As amended,
these Individual Options now expire 10 years from the date of
grant (see Proposal 4, page 17).
COMPENSATION OF EXECUTIVE OFFICERS
The following tabulation sets forth certain information
with respect to compensation paid or earned for services in
all capacities to the Company and its subsidiaries for its
fiscal years ended December 31, 1996, 1995 and 1994, of those
persons who were, at any time during the fiscal year ended
December 31, 1996, (i) the chief executive officer; (ii) the
four most highly compensated executive officers of the
Company serving at December 31, 1996; and (iii) one executive
officer of the Company who served during 1996 (the "Named
Executive Officers"):
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation Long-Term Compensation
Awards
Restricted Securities All Other
Stock Underlying Compens-
Name and Principal Position Year Salary($)(1) Bonus($) Award ($) Options (#) ation ($)
<S> <C> <C> <C> <C> <C> <C>
I. Gary Bard 1996 $195,638 (2) $166,267 $200,000 $ 150,000 --
Chairman of the Board, President 1995 -- -- -- -- --
and Chief Executive Officer 1994 -- -- -- 10,000(7) --
Ayhan Hakimoglu 1996 $ 91,032 (3) -- -- -- $350,000(10)
Chairman of the Board and Chief 1995 185,999 $200,000(5) -- -0- --
Executive Officer 1994 182,815 -- -- $ 20,000(8) --
Donald S. Taylor 1996 $158,374(4) $ 42,167 -- -- $119,688(11)
President of the Company and 1995 155,952 60,000 $120,000 70,900(9) --
President, Communications Systems 1994 -- -- -- -- --
Group
John F. Vanderslice
Executive Vice President and 1996 $157,406 $138,764 -- 40,000(7) --
President, Products Group 1995 130,000 113,176 -- -0- --
1994 128,925 99,598 -- 10,000(7) --
Klaus D. Oebel 1996 $ 66,547 $ 52,532 $102,500(6) $ 70,000(7) $ 3,323(12)
Vice President and President, 1995 -- -- -- -- --
Communications Systems Group 1994 -- -- -- -- --
James R. Henderson 1996 $ 62,328 $ 54,422 -- $ 35,000(7) $ 42,468(13)
Vice President, Treasurer and 1995 -- -- -- -- --
Chief Financial Officer 1994 -- -- -- -- --
Demirhan Hakimoglu 1996 $123,696 $ 9,695 -- -0- --
Vice President and Chief 1995 137,231 9,964 -- -0- --
Executive Officer, 1994 125,429 6.028 -- 3,000(6) --
Aydin-Yazilim, S. A.
<FN>
________________________
(1) Includes any sums deferred for the individual under the Company's
401(k) plan.
(2) Includes $5,750 Mr. Bard received as an outside Director before
being elected Chairman of the Board and Chief Executive Officer
on May 6, 1996.
(3) Mr. Hakimoglu resigned as Chairman and CEO on May 3, 1996.
(4) Dr. Taylor resigned as a Director and President of the Company on
September 13, 1996. As part of his severance package the Company
agreed to continue his salary at $3,000 per week for one year.
This sum includes $33,000 of that payout. See "Employment
Contract and Termination of Employment Arrangements" below.
(5) Of this total, $100,000 was accrued in 1994.
(6) An award of 10,000 restricted shares on October 8, 1996, valued
at the grant date closing price of $10.25, vesting over a three-
year period (3,333 shares per year commencing October 8, 1997).
At year-end 1996, the value of these restricted shares was
$93,750.
(7) On December 16, 1996, the Board of Directors amended all stock
options outstanding as of that date by extending their expiration
date by five years. All other terms (issued date, price,
vesting) remained unchanged.
(8) At the time Mr. Hakimoglu resigned, options to purchase the
remaining 11,250 shares of the Company's Common Stock expired
unexercised.
(9) Dr. Taylor's option to purchase 70,000 shares of the Company's
Common Stock expired unexercised upon the termination of his
employment with the Company.
(10) On May 3, 1996, the effective date of his resignation as Chairman
and CEO, Mr. Hakimoglu (i) was paid $150,000, the first of three
equal installments under a certain Consulting Agreement, dated
May 1, 1996, and (ii) was paid $200,000, the first of three equal
installments under a certain Restrictive Covenant Agreement, also
dated May 1, 1996. See "Employment Contracts and Termination of
Employment Arrangements" below.
(11) This sum includes the following payments of the Company as part
of Dr. Taylor's severance package: (i) $37,813 as the value of
2,500 shares that vested on January 3, 1996 of the 10,000 share
restricted stock award granted in 1995; (ii) $76,875 as the value
of the remaining 7,500 shares that vested on October 25, 1996
when the Board rescinded the pro-rata forfeiture provisions of
the Restricted Stock Agreement as part of Dr. Taylor's severance
package; and (iii) the cost of out-placement services. See
"Employment Contracts and Termination of Employment Arrangements"
below.
(12) Reimbursement of additional apartment rental expense.
(13) Relocation expenses paid by the Company.
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
Shown below is further information on grants of stock options
pursuant to the Company's 1994 Incentive and 1996 Equity Incentive
Stock Option Plans during the year ended December 31, 1996 to the
Named Executive Officers.
<TABLE>
<CAPTION>
Number of % of Total Potential Realizable Value
Securities Options at Assumed Annual Rates of
Underlying Granted to Exercise Stock Price Appreciation for
Options Employees Price Expiration Option Term
Name Granted (#)(1) in 1996 ($/Sh) Date 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C>
I. Gary Bard 150,000 39.7% $10.31 10-8-06 $972,000 $2,464,50
Ayhan Hakimoglu... - - - - - -
Donald S. Taylor.. - - - - - -
John F. Vanderslice 40,000 10.6% $10.25 10-25-06 $258,000 $653,600
Klaus D. Oebel 70,000 18.5% $10.31 10-8-06 $453,600 $1,150,100
James R. Henderson 35,000 9.3% $10.31 10-8-06 $226,800 $575,050
Demirhan Hakimoglu - - - - - -
<FN>
________________________
(1) All options now expire ten years from date of grant.
Twenty-five percent of the option shares become exercisable one
year from date of grant and an additional 25% each year
thereafter for three years on a cumulative basis.
</TABLE>
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
Shown below is information with respect to options exercised
during 1996 and the year-end value of unexercised options to purchase
the Company's Common Stock granted in prior years under the Company's
1983, 1994, or 1996 Incentive Plans, the 1984 Non-Qualified Plan or an
Individual Non-Qualified Stock Option to the Named Executive Officers
and held by them at December 31, 1996.
<TABLE>
<CAPTION>
Name Shares Acquired Number of Securities Value of Unexercised
on Underlying Unexercised In-the-Money Options At
Exercise Value Options Held At December 31, 1996 (2)
(#) Realized (1)($) December 31, 1996
Exercisable(#) Unexercisable(#) Exercisable($) Unexercisable($)
<S> <C> <C> <C> <C> <C> <C>
I. Gary Bard - 0 - - 5,000 155,000 $ 0 $ 0
Ayhan Hakimoglu 3,750 $14,550 0 0 - -
Donald S. Taylor - 0 - - 0 0 - -
John F. Vanderslice - 0 - - 5,000 45,000 0 0
Klaus D. Oebel - 0 - - 0 70,000 0 0
James R. Henderson - 0 - - 0 35,000 0 0
Demirhan Hakimoglu - 0 - - 750 1,500 0 0
<FN>
________________________
(1) The difference between the closing price of the securities
the date the option was exercised and exercise price of the
option.
(2) Based on the closing price on December 31, 1996, on the New
York Stock Exchange of $9.375 per share, none of the options
were "in-the-money" as of that date.
</TABLE>
REPORT ON EXECUTIVE COMPENSATION
The Executive Compensation Committee has furnished the following
report on executive compensation dated February 27, 1997:
The Executive Compensation Committee (the "Committee"),
established May 6, 1996 as an ad hoc Compensation Committee, was
initially assigned the responsibility to make a recommendation to the
full Board of a mutually acceptable compensation package for the newly
elected CEO, I. Gary Bard.
The Committee, composed of Directors Train and Gross at that
time, made an interim recommendation, which was adopted by the Board
on May 15, 1996, of an annual salary and the grant of stock as an
incentive for the CEO to enter into an employment agreement with the
Company, while the Committee continued to negotiate with Mr. Bard. In
addition, the Committee's mandate was expanded to develop a
recommended (i) salary, bonus and incentive compensation package
covering all officers of the Company, (ii) bonus and incentive package
covering all line managers of the Company and (iii) compensation
package for non-employee Directors of the Company. To assist the
Committee in formulating these recommendations, the Hay Group was
retained by the Committee to conduct a study and report their findings
and recommendations for a bonus and incentive plan. At that time the
Committee was made permanent and was expanded to three members. The
CEO was appointed as the new member of the Committee so that the
Committee could receive his input and recommendations on salary,
incentives and bonus for officers and line managers other than
himself. In June 1996, Mr. Gross withdrew from the Committee and Dr.
Gokcen was appointed by the Board to fill the vacancy.
In developing its proposal for a compensation package for the
CEO, the Committee's criteria was to stimulate and reward performance
for developing and implementing strategies to achieve the Board of
Director's objective to turn the Company around in the short-term and
to grow to Company in the long-term. To accomplish this, the
Committee recommended and the Board approved the following
compensation package for the CEO: a five-year employment agreement;
salary of $290,000 to be reviewed annually by the Board; confirmation
of the previous stock grant with a loan at prime rate for five years
in a sum sufficient to pay income taxes on the stock grant; a stock
option to purchase 150,000 shares of the Company's Common Stock;
participation in the bonus plan to be established by the Company and
pending adoption of that plan, an annual bonus of up to 80% of his
annual base salary upon satisfaction of Board-approved objectives;
continuation of salary in event of a "Change of Control" or
resignation for "Good Reason" for the lesser of three years from the
date of termination or the end of the initial five-year term; and in
the event of total disability, the continuation of the base salary for
six months.
In January 1997, the Committee received the recommendations of
the CEO and the Hay Group for 1996 bonus awards for executive
officers, a management incentive program for other than corporate
officers, changes to existing compensation agreements for all
corporate officers and the new Directors Compensation Plan. The
Committee also received the comments of the non-Committee Board
members. The recommendations of the Committee, which were approved by
the Board of Directors on February 27, 1997, are as follows:
For specific officers of the Company, including four of the Named
Executive Officers, the Committee determined that the new management
team had made concerted effort to correct and reverse the fall of
stockholder value of the Company's stock, had implemented a strategy
of effecting a builddown that management believes necessary to restore
the Company to profitability, had put a new marketing strategy in
place and had taken measures that management believes necessary to
project a profitable year for the Company, and therefore recommended a
bonus of 107.5% of their respective bonus opportunity, as set forth in
their employment agreements, pro-rated for the term of their
employment through February 28, 1997, that was approved by the Board
of Directors.
In addition, the Board of Directors approved, subject to
stockholder approval, the establishment of the Stock Bonus Plan (see
Proposal No. 5, page 19) to permit all officers and managers the
election to take their bonus compensation in cash or Company Common
Stock (at 85% of fair market value on date of issue) or any
combination of cash and stock.
Base Salary, Bonus and Stock Options
In December 1996, the Committee's recommendations for an increase
of the base salary for Mr. Vanderslice, a Named Executive Officer, was
approved by the Board retroactive to August 12, 1996. This increase
was to recognize that Mr. Vanderslice currently heads the largest
operations group in the Company and to bring his base compensation in
line with other senior corporate executives. In October 1996, the
Board had approved the grant of an additional stock option to Mr.
Vanderslice to purchase up to 40,000 shares of the Company's Common
Stock, vesting in four cumulative annual installments, priced at the
fair market value price of the shares on the date the option was
granted. In February 1997, The Committee recommended and the Board
approved a bonus award of 107.5% of Mr. Vanderslice's 70% bonus
opportunity pro-rated from September 1, 1996 through February 28,
1997.
In February 1997, the Committee's recommendations of a bonus
award of 107.5% of his 80% bonus opportunity for Mr. Bard, a Named
Executive Officer, was approved. In addition, Mr. Bard was granted an
additional option to purchase up to 25,000 shares of the Company
Common Stock, vesting in four cumulative annual installments, priced
at the fair market value of the shares on the date the option was
granted. The Board also approved the Committee's recommendation to
forgive 25% of the loan approved for Mr. Bard to pay his taxes on the
20,000 shares granted to him as part of his initial employment
contract.
Also, in February 1997, the Committee's recommendations for two
other Named Executive Officers were approved: (i) a bonus award of
107.5% of Mr. Oebel's 70% bonus opportunity, pro-rated from August 22,
1996; and (ii) a bonus award of 107.5% of Mr. Henderson's 50% bonus
opportunity, pro-rated form April 1, 1996, together with an increase
of his base salary effective February 28, 1997, and the grant of an
additional option to purchase up to 10,000 shares of the Company's
Common Stock, vesting in four cumulative annual installments, priced
at the fair market value of the shares on the date the option was
granted.
The foregoing report has been furnished by Messrs. Bard, Gokcen
and Train.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
AYHAN HAKIMOGLU
On April 26, 1996, the Board of Directors approved the terms of a
Consulting Agreement and a Restrictive Covenant Agreement, both dated
as of May 1, 1996, between the Company and Ayhan Hakimoglu, which
became effective on May 3, 1996, the date he sold all his capital
stock of the Company to EA Industries, Inc. and resigned as Chairman
and Chief Executive Officer of the Company, including all of its
subsidiaries.
Under the terms of the Consulting Agreement, the Company retained
the services of Mr. Hakimoglu for a term of three years to (a) assist
the Company in developing both long and short-term plans relating to
obtaining contracts for the Company in Turkey; (b) help the Company
identify and procure key employees or entities to supplement the
Company's management; and (c) assist the Company in the collection of
amounts due to the Company arising from contracts performed for the
Turkish Government. For these services, the Company would pay Mr.
Hakimoglu (a) $150,000 per year in advance, and (b) a fee of up to
0.5% for any contract entered into between the Company and the Turkish
Government during the term of this Agreement, provided that the
contract is secured by a letter of credit or by an advance cash
payment. In addition, the Company will reimburse Mr. Hakimoglu for
ordinary and reasonable expenses for office rental, secretarial
expense and travel expense incurred in connection with the services to
be provided. The Company will also provide automobile, life insurance
and health insurance coverage benefits comparable to that which Mr.
Hakimoglu received while an employee of the Company. The death of Mr.
Hakimoglu terminates the Company's obligations under the Agreement.
Under the terms of the Restrictive Covenant Agreement, Mr.
Hakimoglu agreed with the Company that he will not (a) during or after
the term of the Agreement use for his benefit or the benefit of any
other person or disclose any "Confidential Information" (as that term
is defined in the Agreement) to any party without the written consent
of the Company, and (b) he would not during the three-year term of the
Agreement compete with the Company in specific areas defined in the
Agreement. In consideration of this Agreement, the Company agreed to
pay Mr. Hakimoglu the sum of $600,000 in three equal annual
installments starting May 3, 1996.
I. GARY BARD
On July 25, 1996, the Board of Directors approved the
recommendations of the Executive Compensation Committee regarding an
Employment Agreement between the Company and Mr. Bard, effective as of
May 6, 1996, employing Mr. Bard as Chairman of the Board and Chief
Executive Officer of the Company. The term of the agreement is for
five years and, unless notice of termination is given by either party
within six months prior to its termination date, is automatically
extended for an additional one-year term. The Company has the right
to terminate the agreement during its term but only for "Cause" (as
defined in the Agreement), and Mr. Bard may terminate his employment
during its term for "Good Reason" (e.g., a change of his position as
Chairman and CEO without his consent) or in the event of a "Change in
Control" (e.g., merger, consolidation, reorganization, sale, lease,
exchange or other disposition of the Company assets or capital stock
of more than 50%, other than to or with EA Industries, Inc.).
The Company agreed to (i) pay an annual base salary of $290,000;
(ii) review the base salary at end of each fiscal year and increase it
as the Board may determine; (iii) pay a bonus of 20,000 shares of the
Company's Common Stock in consideration of Mr. Bard's execution of the
Agreement; (iv) loan Mr. Bard an amount sufficient to pay all income
taxes payable by him in respect to issuance of the 20,000 bonus shares
by the Company, with interest at the lesser of 10% or prime, repayable
in five years, secured by a pledge of the 20,000 shares; (v) grant him
a stock option to purchase up to 150,000 shares of the Company's
Common Stock, with an exercise price equal to the fair market value of
the Company's Stock on the date the option was granted by the Board;
(vi) permit him to participate in a bonus plan to be established by
the Company and, pending adoption of such a bonus plan, pay him a
bonus of up to 80% of his base salary upon satisfaction of Board-
approved objectives; (vii) permit him to participate in the Company's
insurance, health, stock option and other employee benefit plans; and
(viii) provide Mr. Bard with an automobile or a monthly car allowance
at the Company's option.
In the event the agreement is terminated by the Company, other
than for "Cause" or Mr. Bard terminates the agreement within one year
after an event that would constitute "Good Reason" or a "Change in
Control", the Company is obligated to pay (i) the pro-rata portion of
any bonus due and (ii) the then base salary for the shorter of three
years or until the initial term of the agreement expires. All
obligations of the Company terminate upon the death of Mr. Bard except
for the payment of any accrued and unpaid compensation at time of
death. In the event of his total disability, as determined under the
agreement, the Company's obligations under the agreement terminate
upon the payment to Mr. Bard of one-half of his then annual base
salary.
JAMES R. HENDERSON
On July 25, 1996, the Board of Directors approved the Employment
Agreement between the Company and Mr. Henderson, effective as of July
8, 1996, employing Mr. Henderson as Vice President and Chief Financial
Officer of the Company. The agreement provides (i) a term of two
years; (ii) an annual base salary of $135,000; (iii) review of base
salary at the end of each fiscal year; (iv) a grant of an option to
purchase Company Common Stock, the amount and terms as determined by
the Board of Directors; (v) participation is an incentive bonus plan
to be established by the Company, with the opportunity to earn up to
50% of his base salary, with a guarantee of at least $30,000 in the
first year; (vi) reimbursement of relocation expenses, including
closing costs on the sale of his out-of-state home and the purchase of
a similar home in Pennsylvania, mortgage placement points, real estate
transfer taxes and moving expenses; and (vii) permit him to
participate in the Company's insurance, health, stock option, and
other employee benefit plans. In the event the agreement is
terminated by the Company prior to the expiration of two years as a
result of any merger, acquisition diversification, reorganization or
similar circumstances, the Company is obligated to pay the then base
salary until the initial term of the agreement expires.
KLAUS D. OEBEL
On October 25, 1996, the Board of Directors approved the
Employment Agreement between the Company and Mr. Oebel, effective
August 22, 1996, employing Mr. Oebel as Vice President and, initially
as Director of Corporate Business Development, President of the
Company's Communications System Group upon Dr. Taylor's resignation on
September 13, 1996. The term of the agreement is for three years and,
unless notice of termination is given by either party within sixty
days prior to its termination date, is automatically extended for an
additional one-year term. The Company has the right to terminate the
agreement during its term but only for "Cause" (as defined in the
Agreement), and Mr. Oebel may terminate his employment during its term
for "Good Reason" (e.g., a change of his position or scope of his
responsibilities without his consent) or in the event of a "Change in
Control" (e.g., merger, consolidation, reorganization, sales, lease,
exchange or disposition of the Company assets or capital stock of more
than 50%, other than to or with EA Industries, Inc.).
The Company agreed to (i) pay an annual base salary of $195,000;
(ii) review the base salary at end of each fiscal year and increase it
as the Board may determine; (iii) pay a bonus of 10,000 shares of the
Company's Common Stock, vesting on a pro-rata basis over a three-year
period, in consideration of Mr. Oebel's execution of the Agreement;
(iv) grant him a stock option to purchase up to 70,000 shares of the
Company's Common Stock, with an exercise price equal to the fair
market value of the Company's Stock on the date the option was granted
by the Board; (v) permit him to participate in a bonus plan to be
established by the Company and, pending adoption of such a bonus plan,
pay him a bonus of up to 70% of his base salary upon satisfaction of
Board-approved objectives; (vi) permit him to participate in the
Company's insurance, health, stock option and other employee benefit
plans; (vii) provide Mr. Oebel with a monthly car allowance; and
(viii) provided Mr. Oebel with a monthly allowance of $1,000 during
the term of the agreement to defray the expense of the monthly rent of
an apartment for his use in the Horsham, Pennsylvania area.
In the event the agreement is terminated by the Company, other
than for "Cause" or Mr. Oebel terminates the agreement within one
month after an event that would constitute "Good Reason" or a "Change
in Control", the Company is obligated to pay (i) the pro-rata portion
of any bonus due and (ii) the then base salary until the initial term
of the agreement expires. All obligations of the Company terminate
upon the death of Mr. Oebel except for the payment of any accrued and
unpaid compensation at time of death. In the event of his total
disability, as determined under the agreement, the Company's
obligations under the agreement terminate upon the payment to Mr.
Oebel of one-half of his then annual base salary.
DONALD S. TAYLOR, PhD.
On September 13, 1996, the Company entered into an agreement with
Dr. Taylor regarding his resignation as President of the Company and a
member of the Board of Directors. Under the terms of the agreement,
the Company would: (i) continue his salary for one year; (ii) permit
him to continue in the Company's medical and dental plan until March
13, 1997; (iii) pay him a pro-rata share of his bonus through
September 13, 1996; (iv) remove the pro-rata forfeiture provisions of
a certain 10,000 shares restricted stock award granted to him January
3, 1995; (v) make available to him out-placement services and office
space for six months, not to exceed $5,000; and (vi) permit him until
October 14, 1996, to exercise all or any portion of a stock option to
purchase 17,500 shares of the Company's Common Stock pursuant to the
terms of the option granted him in January 1995. In the event of Dr.
Taylor's death prior to September 13, 1997, all obligations of the
Company under the agreement will terminate. Dr. Taylor agreed that
for a period of three years he will not compete with the Company in
specific areas defined in the agreement and entered into a general
release of all claims against the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Directors Bard and Vanderslice, members of the Board of Directors
voting on the compensation recommendations of the Executive
Compensation Committee for other executive officers of the Company
were, during the fiscal year, officers and employees of the Company.
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph comparing the five-year
cumulative total shareholder return on the Company's Common Stock
against the cumulative total return of the S&P 500 Stock Index and the
S&P High Technology Composite Index. The comparison of total return
on investment (change in year-end stock price plus reinvested
dividends) for the period assumes that $100 was invested on December
31, 1991 in each of the Company, the S&P 500 Stock Index and the S&P
High Technology Composite Index.
<TABLE>
<CAPTION>
Comparison of Five-Year Cumulative Total Return
Aydin Common, S&P 500 Stock & S&P High Technology Composite Indices
Measurement Period Aydin Corp. S&P 500 Index S&P Hi-Tech
(Fiscal Year Composite
Covered) Index
<S> <C> <C> <C>
Measurement Pt 12/31/91 $100.00 $100.00 $100.00
FYE 12/31/92 $ 72.00 $108.00 $104.00
FYE 12/31/93 $ 54.00 $118.00 $128.00
FYE 12/31/94 $ 55.00 $120.00 $149.00
FYE 12/31/95 $ 68.00 $165.00 $215.00
FYE 12/31/96 $ 42.00 $203.00 $305.00
<FN>
* Assumes $100 invested in Aydin Common Stock and each index on
December 31, 1991, and that all dividends were reinvested
</TABLE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's 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 of such securities
with the Securities and Exchange Commission and the New York Stock
Exchange. Officers, directors and greater than ten-percent beneficial
owners are required by applicable regulations to furnish the Company
with copies of all Section 16(a) forms they file. The Company is not
aware of any beneficial owner of more than ten percent of its Common
Stock other than EA Industries, Inc.
Based solely upon a review of the copies of the forms furnished
to the Company, or written representations from certain reporting
persons that no Form 5 reports were required, the Company believes
that all filing requirements applicable to its officers, directors and
EA Industries, Inc. were complied with during 1996.
PROPOSALS 2, 3, 4 AND 5 SUMMARY
There will be presented to the meeting four additional proposals
to be voted upon separately: (i) to amend the 1994 Incentive Stock
Option Plan (the "1994 Plan") to extend the expiration date from five
to ten years for stock options granted under the 1994 Plan; (ii) to
approve the new 1996 Equity Incentive Plan (the "1996 Plan") for which
500,000 shares have been reserved for the granting of stock options to
employees and non-employee directors of the Company; (iii) to amend
all outstanding stock options issued under the Company's 1996 Plan,
the 1994 Plan, the 1984 Non-Qualified Stock Option Plan (the "1984
Plan"), the 1983 Incentive Stock Option Plan (the "1983 Plan") and the
Individual Non-Qualified Stock Options (the "Individual Options"),
(collectively the "Plans") to extend the expiration date of options
granted thereunder for an additional five years; and (iv) to approve
the new Stock Bonus Plan (the "Bonus Plan") for which 500,000 shares
have been reserved for grants of stock to employees of the Company who
elect to be paid all or part of their bonus in shares of the Company's
Common Stock, as more fully described below.
The following table sets forth information on the stock options
granted and outstanding as of this date under the 1994 Plan, the 1996
Plan, all other Plans and the Bonus Plan (assuming for purposes of
this presentation, the issuance of shares that would have been issued
in payment of the full amount of the 1996 bonus had the Bonus Plan
been in effect) to (i) Named Executive Officers; (ii) all current
executive offices as a group ("Executive Group"); (iii) all current
Directors who are not executive officers as a group ("Non-Executive
Directors Group"); and (iv) all employees, including all current
offices who are not executive officers ("Non-Executive Officer
Employee Group").
<TABLE>
<CAPTION>
NEW PLAN BENEFITS
1994 1996
Incentive Equity
Stock Option Incentive All Other
Plan Shares Plan Shares Plan Shares Bonus
Granted and Granted and Granted and Plan
Name and Position Outstanding Outstanding Outstanding Shares
<S> <C> <C> <C> <C>
I. Gary Bard - 150,000 10,000 17,613
Chairman of the Board
and Chief Executive
Officer
Ayhan Hakimoglu - - - -
Chairman of the Board
and Chief Executive
Officer
Donald S. Taylor - - - -
President of the Company
and President, Communications
Systems Group
John F. Vanderslice - 40,000 10,000 13,290
Executive Vice President
and President, Products
Group
Klaus D. Oebel - 70,000 - 5,564
Vice President and
President, Communications
Systems Group
James R. Henderson 16,500 18,500 - 5,765
Vice President, Treasurer
and Chief Financial Officer
Demirhan Hakimoglu 2,250 - - 1,027
Vice President and Chief
Executive Officer,
Aydin-Yazilim, S.A.
Executive Group 26,250 328,500 30,000 45,605
Non-Executive Director Group - - 2,000 -
Non-Executive Officer 105,988 - 8,950 24,321
Employee Group
</TABLE>
Approval of Proposals 2, 3, 4 and 5 will require the affirmative
vote with respect to each such proposal by the holders of a majority
of the shares of the Company's Common Stock present or represented by
proxy and entitled to vote at the Annual Meeting and is a prerequisite
to continuing the listing or to list the shares issuable under the
plans referenced in such proposal on the New York Stock Exchange.
Abstentions will be deemed a vote cast on such proposal and therefore
will be treated the same as a negative vote. Broker non-votes are not
considered shares present in person or represented by proxy and
entitled to vote and will have no effect on the vote.
PROPOSAL 2. APPROVAL OF AN AMENDMENT TO THE
1994 INCENTIVE STOCK OPTION PLAN
Background
The Board of Directors adopted the 1994 Plan effective as of
January 3, 1994 providing for the grant to officers and key employees
of the Company of incentive stock options to purchase a maximum of
100,000 shares of the Company's Common Stock, $1.00 par value, at
option prices not less than the fair market value of the stock on the
date the option is granted. In October 1994 the Board amended the
Plan, increasing the maximum number of shares to be purchased under
the Plan from 100,000 to 150,000 shares. Both the original Plan and
the amended have been previously approved by the stockholders. On
December 16, 1996 the Board amended the Plan, subject to stockholder
approval, to extend the expiration date of the options to be granted
under the Plan from five years to ten years from the respective grant
dates of options granted under the 1994 Plan. As of that date, 6,450
shares remained available for new grants under the Plan before the
Plan expires on December 31, 2003. On March 14, 1997, the closing
price of the Company's Common Stock on the New York Stock Exchange was
$11.125. No option is exercisable prior to one year after the grant
date nor (if the amendment to the 1994 Plan is approved at the Annual
Meeting) after ten years from the date on which the option is granted
(the "Option Period"). Pursuant to the 1994 Plan, unless the Option
Agreement provides otherwise, 25% of each option is exercisable one
year from the date of grant, and an additional 25% becomes exercisable
each year in the three-year period thereafter during the Option Period
on a cumulative basis.
The 1994 Plan
If the employment of any optionee is terminated, options are
exercisable only to the following extent: (i) if the employment is
terminated for cause or if the optionee voluntarily quits, the
optionee shall have the right at any time within 30 days thereafter,
but in no event after the expiration of the Option Period, to exercise
the option with respect to all or any part of the number of shares
which the optionee could have purchased on the date of the termination
of employment; (ii) if the employment is terminated otherwise than for
cause, disability, death, or voluntary resignation, the optionee shall
have the right at any time within three months thereafter, but in no
event after the expiration of the Option Period, to exercise the
option with respect to all or any part of the number of shares which
the optionee could have purchased on the date of the termination of
employment; (iii) if the employment is terminated by death of the
optionee (while employed), or within the three-month period referred
to in subsection (ii) above or within the twelve-month period referred
to in subsection (iv) below, the person or persons to whom the
optionee's rights under the option shall have passed by will or by the
applicable laws of descent and distribution shall have the right at
any time within three months after the optionee's death, but in no
event after the expiration of the Option Period, to exercise the
option with respect to all or any part of the number of shares which
the optionee could have purchased on the date of death; (iv) if the
employment is terminated by the disability of the optionee, the
optionee shall have the right at any time within twelve months
thereafter, but in no event after the expiration of the Option Period,
to exercise the option with respect to all or any part of the number
of shares which the optionee could have purchased on the date of
termination of employment.
The optionee may pay for the purchase of the shares under an
option granted pursuant to the 1994 Plan by cash, or by delivering
already owned Company Stock, or by a combination of cash and Company
Stock. The optionee may not use already owned Company Stock to
purchase shares under an option granted pursuant to the 1994 Plan if
such Company Stock was acquired by the optionee pursuant to the
exercise of any "Incentive Stock Option" and the Company Stock so
acquired has not been held by the optionee for two years from the date
the option was granted and one year from the date of receipt of the
Company Stock upon exercise of the option.
If shares are purchased under an option granted pursuant to the
1994 Plan, and no disposition of the shares is made by the optionee
within two years from the date the option was granted nor within one
year after receipt of the shares upon exercise of the option, there is
no income recognized by the optionee or deduction by the Company in
the year in which the option is granted or exercised. If the optionee
disposes of shares within two years of the date an option was granted
or within one year of receipt of the shares pursuant to the 1994 Plan,
the optionee will recognize ordinary income, and the Company will be
entitled to a deduction, in an amount equal to the excess of the fair
market value of the shares on the date of the exercise over the option
price. The excess, if any, of the amount realized upon disposition of
such shares over the fair market value of the shares on the date of
exercise will be long or short-term capital gain, depending upon the
holding period of the shares, provided that the optionee holds the
shares as a capital asset at the time of disposition. If such
disposition of the shares by the optionee within two years of the date
of grant of the option is a sale or exchange with respect to which a
loss (if sustained) would be recognized by the optionee, then the
amount which is includable in the gross income of the optionee, and
the amount which the Company would be entitled to as a deduction,
shall not exceed the excess (if any) of the amount realized on the
sale or exchange over the adjusted basis of such shares. If the above
mentioned holding periods are met and the optionee later sells the
shares, assuming they constitute a capital asset in his or her hands,
any amount by which the sale proceeds exceed the option price on the
date of exercise will constitute capital gain, and any amount by which
the sale proceeds are less than the option price on the date of
exercise will constitute capital loss. At the present time, the
shares must be held for one year to be eligible for long-term gain
treatment.
The Company will be entitled to a tax deduction in connection
with an option under the 1994 Plan in an amount equal to the ordinary
income realized by the optionee and at the time such optionee
recognizes such income, subject to limitations of Section 162(m) of
the Code with respect to any covered executive officer whose total
compensation in any year exceeds $1 million.
The Board of Directors is authorized to interpret the 1994 Plan,
to define the terms used therein, to prescribe, amend, and rescind
rules and regulations for the administration thereof, and to take such
other action in the administration of the 1994 Plan as it shall deem
proper, provided such interpretation shall be in accordance with
Section 422 of the Internal Revenue Code and that the options granted
under the 1994 Plan constitute "Incentive Stock Options" within the
meaning of that Section. No Director is permitted to participate in
any determination or action in which such Director may have a personal
interest. To date, under the 1994 Plan as most recently amended,
options covering a total of 143,550 shares have been granted to 164
employees, leaving options for 6,450 shares available for grant in the
future. At the date the 1994 Plan was adopted, approximately 250
employees were eligible to participate.
If the amended 1994 Plan is not approved by the stockholders,
options granted on and after December 16, 1996 will expire five years
from the grant date of such options.
The Board of Directors recommends a vote FOR this proposal.
PROPOSAL 3. APPROVAL OF THE 1996 EQUITY
INCENTIVE PLAN
Background
The Board of Directors unanimously adopted the 1996 Plan on July
25, 1996 and amended the Plan on December 16, 1996, which provides for
the grant to directors, officers and key employees of the Company of
both "incentive" and "non-qualified" stock options to purchase a
maximum of 500,000 shares of the Company's Common Stock, $1.00 par
value, at per share exercise prices not less than the fair market
value of the stock on the date the option is granted. The 1996 Plan,
as amended, provides that options granted under the Plan shall be
exercisable for ten years from the date of grant. As of this date,
options totalling 328,500 shares had been granted to five employees
and 171,500 shares remain available for grant. On March 14, 1997, the
closing price of the Company's Common Stock on the New York Stock
Exchange was $11.125. No option is exercisable prior to one year nor
after ten years from the date on which the option is granted (the
"Option Period"). Pursuant to the 1996 Plan, unless the Option
Agreement provides otherwise, 25% of each option is exercisable one
year from the date of grant, and an additional 25% becomes exercisable
each year during the three-year period thereafter during the Option
Period on a cumulative basis.
The 1996 Plan
If the employment of any optionee is terminated, options are
exercisable only to the following extent: (i) if the employment is
terminated for cause or if the optionee voluntarily quits, the
optionee shall have the right at anytime within 30 days thereafter,
but in no event after the expiration of the Option Period, to exercise
the option with respect to all or any part of the number of shares
which the optionee could have purchased on the date of the termination
of employment; (ii) if the employment is terminated otherwise than for
cause, disability, death, or voluntary resignation, the optionee shall
have the right at any time within three months thereafter, but in no
event after the expiration of the Option Period, to exercise the
option with respect to all or any part of the number of shares which
the optionee could have purchased on the date of the termination of
employment; (iii) if the employment is terminated by death of the
optionee (while employed), or within the three-month period referred
to in subsection (ii) above or within the twelve-month period referred
to in subsection (iv) below, the person or persons to whom the
optionee's rights under the option shall have passed by will or by the
applicable laws of descent and distribution shall have the right at
any time within three months after the optionee's death, but in no
event after the expiration of the Option Period, to exercise the
option with respect to all or any part of the number of shares which
the optionee could have purchased on the date of death; (iv) if the
employment is terminated by the disability of the optionee, the
optionee shall have the right at any time within twelve months
thereafter, but in no event after the expiration of the Option Period,
to exercise the option with respect to all or any part of the number
of shares which the optionee could have purchased on the date of
termination of employment.
The optionee may pay for the purchase of the shares under an
option granted pursuant to the 1996 Plan by cash, or by delivering
already owned Company Stock, or by a combination of cash and Company
Stock. The optionee may not use already owned Company Stock to
purchase shares under an option granted pursuant to the 1996 Plan if
such Company Stock was acquired by the optionee pursuant to the
exercise of any "Incentive Stock Option" and the Company Stock so
acquired has not been held by the optionee for two years from the date
the option was granted and one year from the date of receipt of the
Company Stock upon exercise of the option.
If shares are purchased under an "incentive" option granted
pursuant to the 1996 Plan, and no disposition of the shares is made by
the optionee within two years from the date the option was granted or
within one year after receipt of the shares upon exercise of the
option, there is no income recognized by the optionee or deduction by
the Company in the year in which the option is granted or exercised.
If the optionee disposes of shares within two years of the date an
option was granted or within one year of receipt of the shares
pursuant to the 1996 Plan, the optionee will recognize ordinary
income, and the Company will be entitled to a deduction, in an amount
equal to the excess of the fair market value of the shares on the date
of the exercise over the option price. The excess, if any, of the
amount realized upon disposition of such shares over the fair market
value of the shares on the date of exercise will be long or short-term
capital gain, depending upon the holding period of the shares,
provided that the optionee holds the shares as a capital asset at the
time of disposition. If such disposition of the shares by the
optionee within two years of the date of grant of the option is a sale
or exchange with respect to which a loss (if sustained) would be
recognized by the optionee, then the amount which is includable in the
gross income of the optionee, and the amount which the Company would
be entitled to as a deduction, shall not exceed the excess (if any) of
the amount realized on the sale or exchange over the adjusted basis of
such shares. If the above mentioned holding periods are met and the
optionee later sells the shares, assuming they constitute a capital
asset in his or her hands, any amount by which the sale proceeds
exceed the option price on the date of exercise will constitute
capital gain, and any amount by which the sale proceeds are less than
the option price on the date of exercise will constitute capital loss.
The shares must be held for one year to be eligible for long-term
capital gain treatment.
If shares are purchased under a "nonqualified option" granted
pursuant to the 1996 Plan, the optionee, will realize income at the
time he exercises the nonqualified option in a total amount equal to
the sum of (i) in the case of an option with respect to which the
employee uses cash to pay the option price, the amount by which the
fair market value of the shares acquired pursuant to the exercise of
the option at the time of exercise exceeds the exercise price paid for
such shares; and (ii) in the case of an option with respect to which
an employee uses shares of Common Stock of the Company which he owns
to pay the exercise price, the total fair market value, at the time of
issuance, of the number of shares issued in excess of the number of
shares surrendered upon such exercise. If an optionee uses shares of
Common Stock of the Company which he owns to pay, in whole or in part,
the exercise price for the nonqualified option shares under the 1996
Plan, (i) the individual's holding period for the newly issued shares
of Common Stock equal in value and number to the old shares (the
"exchanged" shares) which were surrendered upon the exercise shall
include the period during which the old shares were held; (ii) the
employee's basis in such exchanged shares will be the same as his
basis in the old shares surrendered; and (iii) no gain or loss will be
recognized by the employee on the exchange of the old shares
surrendered for the exchanged shares. The employee's basis in the
shares received over and above the exchanged shares will be equal to
their fair market value at the time of exercise.
The Company will be entitled to a tax deduction in connection
with an option under the 1996 Plan in an amount equal to the ordinary
income realized by the optionee and at the time such optionee
recognizes such income, subject to limitations of Section 162(m) of
the Code with respect to any covered executive officer whose total
compensation in any year exceeds $1 million.
The Board of Directors is authorized to interpret the 1996 Plan,
to define the terms used therein, to prescribe, amend, and rescind
rules and regulations for the administration thereof, and to take such
other action in the administration of the 1996 Plan as it shall deem
proper, provided such interpretation as it relates to "incentive
shares" shall be in accordance with Section 422 of the Internal
Revenue Code and that the incentive options granted under the 1996
Plan constitute "Incentive Stock Options" within the meaning of that
section. No director is permitted to participate in any determination
or action in which such director may have a personal interest. At the
date the 1996 Plan was adopted, approximately 150 employees and
directors were eligible to participate.
If the 1996 Plan is not approved by the stockholders, options
granted under the Plan will be cancelled.
The Board of Directors recommends a vote FOR this proposal.
PROPOSAL 4. APPROVAL OF AMENDMENT TO EXTEND
EXPIRATION DATE OF OUTSTANDING STOCK OPTIONS FIVE YEARS
On December 16, 1996, the Board of Director's unanimously adopted
an amendment to all outstanding stock options, granted under all of
the Company's Plans that remain outstanding, extending the current
expiration date by five years. No other term of the stock option
(date of issue, option price, number of shares) was affected by this
amendment.
In light of the amendment to 1994 Plan (see, Proposal 2, page 15)
and the adoption of the new 1996 Plan (see, Proposal 3, page 17) the
Board of Directors believes it to be appropriate to conform all
outstanding stock options to the amendments made to the 1994 Plan and
the 1996 Plan and extend the expiration dates of such other options by
an additional five years. As of December 16, 1996, options to
purchase 452,438 shares under all the Plans are outstanding and held
by 112 employees of the Company.
If the amendment is not approved by the stockholders, the
outstanding options will expire five years from date of grant.
The Board of Directors recommends a vote FOR this proposal.
PROPOSAL 5. APPROVAL OF
THE STOCK BONUS PLAN
The Board of Directors of the Company adopted the Aydin
Corporation Stock Bonus Plan (the "Bonus Plan") on March 19, 1997,
subject to stockholder approval. The purpose of the Bonus Plan is to
provide additional incentive and reward to officers and other key
management employees who contribute materially to the success and
growth of the Company by their creativity, ability, industry and
loyalty and to provide a means to encourage stock ownership and
proprietary interest in the Company by such officers and key
management employees.
The Bonus Plan permits those participants who are awarded a bonus
under the Bonus Plan ("Plan Participants") to elect to be paid the
bonus in cash or in shares of the Company's Common Stock or a
combination of cash and stock. If the Plan Participant elects to be
paid the full amount or any portion of the bonus award in shares of
Common Stock, the number of shares to which the Plan Participant is
entitled will be determined by dividing (x) the dollar amount or such
portion, as the case may be, of the bonus award for which shares of
Common Stock are to be issued (y) by the Discounted Market Value. For
purposes of the Bonus Plan, "Discounted Market Value" is equal to 85%
of the average of the per share closing prices of the Common Stock on
the New York Stock Exchange on the 20 trading days immediately
preceding the date that the Board determines the dollar amount of the
bonus award for the Plan Participant.
Approximately 32 persons are eligible to participate in the Bonus
Plan, including executive officers of the Company. Directors of the
Company who are not also officers or employees of the Company are not
eligible to participate in the Bonus Plan.
The total number of shares of the Company's Common Stock that may
be awarded under the Bonus Plan may not exceed 500,000 shares in the
aggregate. The shares to be awarded under the Bonus Plan will be made
available from authorized and unissued shares or from the Company's
treasury shares.
The Bonus Plan will be administered by the Board of Directors of
the Company. The Board of Directors is authorized to interpret the
Bonus Plan and to adopt the rules for the administration,
interpretation and the application of the Bonus Plan as are consistent
therewith and to interpret, amend or revoke any such rules.
The Board has the exclusive right to name the officers and other
key management members to be designated as Plan Participants for
purposes of the Bonus Plan. The Board may delegate the right to name
Plan Participants to any person or committee whom it designates. The
Board has the sole discretion to determine the dollar amount of any
bonus to be awarded under the Bonus Plan. Recommendations for bonus
awards will be made to the Board pursuant to such procedures as may
from time to time be prescribed by the Board.
Upon the determination of the dollar amount of the bonus, the
Board will promptly notify each Plan Participant of (i) the dollar
amount of the bonus award; (ii) the Discounted Market Value per share
of the Company's Common Stock; (iii) the maximum number of shares to
which the Plan Participant is entitled if the Plan Participant elects
to be paid the bonus award in shares of Common Stock; and (iv) the
date by which the Plan Participant's written election to be paid the
bonus in stock is required to be sent to the Company. The Plan
Participant must make the election to be paid the bonus award in
shares of stock within 15 days following the date that such notice is
provided to the Plan Participant. Such election must be made in
writing to the Secretary of the Company. If no election is made by
the expiration of such period, the bonus award will be paid to the
Plan Participant in cash.
Contemporaneous with the transfer of any bonus shares, the Board,
in its sole discretion, may determine to pay to any Plan Participant
to whom bonus shares have been awarded a supplemental cash bonus.
Such supplemental cash bonus will in no event be greater than an
amount equal to (i) the product of the total fair market value of the
shares received in any calendar year and the highest marginal income
tax rate, (ii) divided by one minus the highest marginal income tax
rate. All bonus awards, including annual supplemental cash bonuses,
will be net of whatever amount is sufficient to satisfy federal, state
and local tax withholding requirements as a condition to the payment
of any bonus award under the Bonus Plan.
Amendment and Termination
The Bonus Plan will automatically terminate the earlier of (i)
December 31, 2007, (ii) the date when all of the shares available for
bonuses hereunder have been awarded or (iii) on any earlier date as
the Board may determine in its sole discretion. The Board may
discontinue or terminate the Bonus Plan in whole or in part at any
time, or the Board may from time to time change or amend the Bonus
Plan in such respects as the Board may deem advisable, in its sole
discretion, subject to any approval by stockholders that may be
required under applicable laws or the rules of the New York Stock
Exchange.
Federal Income Tax Consequences
The Bonus Plan is not a qualified plan under Section 401(a) of
the Code. The following description, which is based on existing laws,
sets forth generally certain of the federal income tax consequences of
the awards under the Bonus Plan. This description may differ from the
actual tax consequences of participation in the Bonus Plan.
If the bonus award is paid in cash, the amount paid to the
participant will be taxable as ordinary income to the participant. If
the bonus award is paid in stock, the fair market value of the shares
on the date the Plan Participant makes his election will be taxable as
ordinary income to the participant. Similarly, any supplemental cash
bonus paid to a participant will be taxed as ordinary income to the
participant.
The Company will be entitled to a tax deduction in connection
with bonus paid under the Bonus Plan only in an amount equal to the
ordinary income realized by the participant, subject to the
limitations of Section 162(m) of the Code with respect to any covered
executive officer whose total compensation in any year exceeds $1
million. The federal, state and local income tax consequences to any
particular taxpayer will depend upon his individual circumstances.
The Board of Directors recommends a vote FOR the approval of the
Plan.
INDEPENDENT AUDITORS
In June 1994, the Audit Committee of the Board of Directors
engaged the services of Grant Thornton LLP as the Company's
independent auditors through March 31, 1997. A representative of
Grant Thornton LLP will attend the Annual Meeting and will be given an
opportunity to make a statement if he so desires and will be available
to respond to appropriate questions.
THE SUBMISSION OF STOCKHOLDER PROPOSALS
FOR CONSIDERATION AT THE 1998 ANNUAL MEETING
Any stockholder who desires to submit a proposal for
consideration at the 1998 Annual Meeting and who desires that the
proposal be included in the Proxy Statement issued by the Board of
Directors in connection with such Annual Meeting may request that
inclusion by submitting such proposal in writing to the Secretary of
the Company on or before November 27, 1997, in accordance with Rule
14a-8 of the Securities and Exchange Commission.
OTHER MATTERS
The Board of Directors does not know of any matters to be
presented for consideration, other than the matters described in the
Notice of Annual Meeting. However, if other matters are properly
presented, it is the intention of the persons named in the
accompanying proxy to vote on such matters in accordance with their
judgment.
By Order of the Board of Directors,
I. GARY BARD
Chairman
March 27, 1997
<PAGE>
APPENDIX No. 1 (Form of Proxy Card)
Aydin Corporation AYDIN CORPORATION
700 Dresher Road PROXY FOR
Horsham, PA 19044 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 26, 1996
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned, having received the Notice of Annual Meeting and
Proxy Statement dated March 28, 1996, hereby constitutes and appoints
Ayhan Hakimoglu and Robert A. Clancy, and each of them acting
individually, as the undersigned's proxies, each with the power to
appoint his substitute and authorizes them to represent the
undersigned and to vote all the shares of common stock of AYDIN
CORPORATION held on record by the undersigned on February 28, 1996, at
the Annual Meeting of Stockholders to be held on April 26, 1996 or any
adjournment or postponement thereof, on the matters set forth on the
reverse side hereof.
THIS PROXY, WHEN PROPERLY EXECUTED AND RETURNED, WILL BE VOTED IN
THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO
DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE
DIRECTORS RECOMMENDED BY THE BOARD OF DIRECTORS, FOR PROPOSAL 2 AND IN
THE DISCRETION OF THE PROXIES ON ANY OTHER MATTERS THAT MAY PROPERLY
COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENT OR POSTPONEMENT
THEREOF.
(Continued and to be signed on the reverse side)
(Side 1)
<PAGE>
(Form of Proxy - Side 2)
Please mark
your votes as
indicated in
this example [ X ]
<TABLE>
<S> <C> <C>
To Vote for To Withhold 1. Board of Directors recommends and will vote FOR the election of
all nominees authority to the following as Directors unless otherwise directed:
check this box vote for all I.G. Bard, N.A. Gokcen, I.L.Gross, G. Mozenter, H.D. Train, II and J.F.
nominees Vanderslice.
check this box To withhold authority to vote for any individual nominee while voting
for the remainder, write this nominee's name in the space below:
FOR WITHHOLD
_______________________________________________
[ ] [ ]
<S> <C> <C> <C>
2. To approve Amending the FOR AGAINST ABSTAIN 3. To approve the FOR AGAINST ABSTAIN
1994 Incentive Stock Plan. [ ] [ ] [ ] 1996 Equity [ ] [ ] [ ]
Incentive Plan
<S> <C> <C>
4. To approve an amendment FOR AGAINST ABSTAIN 5. Subject to the limitation described in
to outstanding Stock Options [ ] [ ] [ ] the Proxy Statement relating to the Annual
Meeting of Stockholders, in their
discretion, the proxies or their substitutes
are authorized to vote upon such other
matters as may properly come before the
annual meeting or any adjournment or
postponement thereof. The Board of Directors
is not presently aware of any such matters.
<S> <C>
6. Subject to the limitation described in the Proxy PLEASE SIGN EXACTLY AS NAME APPEARS AT LEFT.
Statement relating to the Annual Meeting of Stockholders,
in their discretion, the proxies or their substitutes Dated: _____________________, 1997
are authorized to vote upon such other matters as may
properly come before the annual meeting or any adjournment Joint owners should each sign. When signing
or postponement thereof. The Board of Directors is not as attorney, executor, administrator, trustee
presently aware of any such other matters. or guardian, please give full title as such.
If a corporation, please sign full corporate
name by the president or other authorized
officer. If a partnership, please sign
partnership name by an authorized person.
____________________________________________
Signature
_____________________________________________
Signature if held jointly
PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN
THIS PROXY CARD USING THE ENCLOSED ENVELOPE
</TABLE>
<PAGE>
APPENDIX No. 2 (Proposal No. 2)
THE 1994 INCENTIVE STOCK OPTION PLAN
OF
AYDIN CORPORATION
150,000 Shares
(Last amended, December 16, 1996)
I. Purpose
The purpose of this Plan is to advance the interests of the
Corporation and its shareholders by strengthening the ability of
the Corporation to attract and retain in its employ key
individuals of training, experience and ability and to furnish
additional incentive to officers and valued key employees upon
whose judgement, initiative and efforts the successful conduct
and development of its business largely depends, by encouraging
them to purchase stock in the Corporation.
II. Definitions
As used in this Plan, "Corporation" means Aydin Corporation;
"Board of Directors" means the Board of Directors of Aydin
Corporation; "employee" includes officers and other key employees
of the Corporation and its subsidiaries but excludes members of
the Board of Directors who are not also officers or employees of
the Corporation; "Stock Option Committee" (the "Committee") means
the Board of Directors; "Common Stock" means the Corporation's
Common Stock of the par value of $1.00 per share; "Code" means
the Internal Revenue Code of 1986, as amended from time to time.
III. Eligible Personnel
A. All full-time salaried officers and key employees.
B. An employee who has been granted an option may, if he is
otherwise eligible, be granted an additional option or
options.
IV. Stock Option Committee
A. Subject to the provisions of the Plan, the Committee shall
administer the Plan. It shall have authority to construe and
interpret the Plan, to define the terms used therein, to
prescribe, amend and rescind rules and regulations for the
administration of the Plan and to take such other action in
the administration of the Plan as it shall deem proper. The
interpretation by the Committee of any provision of the Plan
or of any option agreement entered into hereunder shall be in
accordance with Section 422 of the Code and Regulations
issued thereunder as they may be amended from time to time,
in order that rights granted hereunder and under said option
agreements shall constitute "Incentive Stock Options" within
the meaning of that Section.
B. A majority of the members of the Committee shall constitute a
quorum and make all determinations, take all actions and
conduct all business. They shall keep minutes of their
respective meetings.
C. Any Committee action may be taken or determination made
without a meeting if all members of the respective committee
shall individually or collectively consent in writing to such
action or determination. Such written consent or consents
shall be filed with the minutes of the Corporation.
D. All interpretations, determinations and actions by the
respective committee shall be final, conclusive and binding
upon all parties.
E. No member of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or
any option agreement.
V. Granting of Options
A. The Committee may at any time and from time to time grant
options to eligible employees, to purchase shares of Common
Stock of the Corporation under this Plan, and determine the
specific employees to whom options may be granted, the number
of shares to be subject to each option, the terms and
provisions of the option agreements, and the time or times at
which such options shall be granted.
B. The date of grant shall be the date the Committee takes the
necessary action to make the grant; provided, however, that
if the minutes or appropriate resolutions of the Committee
provide than an option is to be granted as of a date in the
future, the date of grant shall be such future date. In any
event, the optionee must be an employee on the date of the
grant.
C. No option shall be granted under this Plan after the close of
business on December 31, 2003, but options theretofore
granted may extend beyond that date.
D. The options granted hereunder shall be "Incentive Stock
Options" as that term is used in Section 422 of the Code.
VI. Shares Subject to the Plan
The total number of shares of Common Stock that may be
purchased pursuant to options granted under this Plan shall not
exceed 150,000 subject to adjustment as provided in Section IX
and subject to amendment as provided in Section X. If any option
outstanding hereunder shall expire or terminate for any reason
without having been exercised in full, the unpurchased shares
subject to the option shall again be available for the grant of
options under this Plan. Upon the exercise of an option
outstanding hereunder, the Corporation may reissue Common Stock
held in its treasury or issue authorized but unissued Common
Stock.
VII. Terms of Options
A. Each option granted under the Plan shall include the
following provisions, or terms consistent with the following
provisions:
1. The purchase price (option price) of the shares subject
to option shall be not less than the fair market value
of the stock on the day the option is granted. Such
fair market value shall be established as the following,
in order of descending preference:
a. Mean between the highest and the lowest quoted
selling prices of the stock on an exchange.
b. Lacking a. above, the mean between the "bid" and
"asked" prices as provided to the Company by a
legitimate broker.
c. Lacking a. or b. for the date of grant, the mean
between the "bid" and "asked" prices for the most
recent date quoted, as obtained for the Company by a
legitimate broker.
d. Lacking a., b. or c., the last established
determinable price.
2. Except as provided in Section VIII herein, no option may
be exercised unless the optionee is at the time of such
exercise in the employ of the Corporation or of a
subsidiary and shall have been continuously so employed
since the granting of his option. For the purpose of
the Plan, an employee who is on leave of absence or who
is in the Armed Services or the civilian employment of
the United States will be considered in the employ of
the Corporation or its subsidiaries to the extent his
employment would be treated as continuing intact under
Sections 421 and 422 of the Code, and the Regulations
thereunder, as amended, from time to time.
3. No option may be exercised after ten years from the date
of its grant. Unless the option Agreement provides
otherwise, any time after one year from the date of
grant the employee may exercise his option in accordance
with the following schedule:
After: The optionee may purchase:
One year from date of grant...................25% of the total.
Two years from date of grant....An additional 25% of the total.
Three years from date of grant..An additional 25% of the total.
Four years from date of grant...An additional 25% of the total.
4. Upon each exercise of an option the purchase price shall
be payable in full in cash, (or its equivalent
acceptable to the Corporation), or Common Stock already
owned by the employee, or a combination of cash and
Common Stock.
5. No fractional shares shall be issued under this Plan or
under any option granted hereunder, nor shall any cash
payment be made in lieu thereof.
6. An option shall not be assignable or transferable by the
employee to whom granted otherwise than by will or by
the laws of descent and distribution, and may be
exercised, during his lifetime, only by such employee.
7. No person shall have the rights and privileges of a
shareholder with respect to shares subject to or
purchased under an option until the date appearing on
the certificates issued upon the exercise of the option.
B. The aggregate fair market value (determined as of the date
the option is granted) of the stock for which any employee
may be granted options first exercisable in any calendar year
under this Plan and all other "Incentive Stock Option Plans"
of the Corporation or its subsidiaries, shall not exceed
$100,000.
C. No option under this Plan may be granted to an employee who,
at the time the option is granted, owns stock possessing more
than 10 percent of the total combined voting power of all
classes of stock of the Corporation or of its subsidiaries,
provided, however, this limitation shall not apply if such
option is granted at an option price of at least 110 percent
of the fair market value of the stock on the date of the
grant and, by its terms, the option is not exercisable after
the expiration of five years from the date of grant.
D. Each option granted under this Plan may, but need not,
include other terms and conditions not inconsistent with the
provisions hereof, including a requirement that the optionee
represent at the time of each exercise of option that the
shares purchased are being acquired for investment and not
for resale.
E. Nothing in this Plan nor in any option granted hereunder
shall confer any rights to continue in the employ of the
Corporation or its subsidiaries or interfere in any way with
the rights of the Corporation or any subsidiary to terminate
the employee at any time.
VIII. Termination of Employment or Death of Employee
A. If the employment of an optionee is terminated for cause, or
if he voluntarily quits, his option shall expire forthwith,
but he may exercise any options that are exercisable as of
the date of termination or voluntary quit provided payment
for same is received within 30 days of the termination.
Retirement, including Early Retirement, under any retirement
plan of the Corporation or subsidiary is not deemed a
voluntary quit.
B. If the employment of an optionee terminates for any reason
other than termination for cause, a voluntary quit,
disability or death, the option shall expire three months
thereafter unless by its terms it expires sooner. During
said period, the option may be exercised in accordance with
its terms but only for the number of shares with respect to
which options could be exercised as of the date of
termination of employment.
C. If an optionee dies while he is employed by the Corporation
or a subsidiary or within the three month period referred to
in Section VIII(B) above or within the twelve month period
referred to in Section VIII(D) below, during said period, the
option may be exercised by his personal representatives or
the persons to whom his rights under the option shall pass by
will or the laws of descent and distribution in accordance
with terms of the option but only for that number of shares
with respect to which options could be exercised as of the
date of death. Such exercisable option must be exercised
within three months of death, unless, by its terms, it
expires sooner.
D. If the employment of an optionee terminates by reason of the
optionee's "disability" (within the meaning of Section
22(e)(3) of the Code), the option shall expire 12 months
thereafter unless by its terms it expires sooner. During
said period, the option may be exercised in accordance with
its terms but only for the number of shares with respect to
which options could be exercised as of the date of
termination of employment.
E. Notwithstanding the above, an option may not be exercised
after the expiration of ten years from the date the option is
granted.
IX. Adjustments Upon Changes in Capitalization
In the event of any recapitalization, stock dividend, stock
split, or combination affecting the stock subject to this Plan,
or in the event of any merger, consolidation, or reorganization
as a result of which the Corporation is the surviving
corporation, the Committee will make appropriate adjustments in
the aggregate number of kind of shares subject to the Plan, the
number of shares that may be granted to any one employee, and the
number of shares and the price per share subject to outstanding
options provided that such options remain or constitute incentive
stock options within the meaning of Section 422 of the Code. Any
such determination of adjustment shall be final and conclusive
upon the parties.
In the event of the dissolution or liquidation of the
Corporation, or in the event of a reorganization, merger, or
consolidation of the Corporation with one or more corporations as
a result of which the Corporation is not the surviving
corporation, or in the event of a sale of substantially all of
the property or stock of the Corporation to another corporation,
the Plan shall terminate; and any option then outstanding
hereunder shall terminate on the effective date of such
transaction; provided, however, that in the event of any such
transaction the Board of Directors may, but need not, modify all
outstanding options so as to make all such options exercisable in
full on a date sufficiently in advance of the effective date of
such transaction to permit the shares acquired pursuant to any
exercise of such options to be issued before the effective date
of such transaction.
X. Amendment and Termination
A. The Board of Directors shall have the power, in its
discretion, to amend, suspend or terminate this Plan at any
time. The Board of Directors shall not have the power except
as may be permitted in Section IX herein:
1. To change the class of employees eligible to receive
options under the Plan; or
2. To increase the number of shares subject to the Plan in
the aggregate unless such increase is submitted to the
shareholders of the Corporation for their approval; or
3. To increase the number of shares subject to an option
for any one individual; or
4. To reduce the option price below the fair market value
of the stock (or below the 110% fair market value when
required by Section VII (C) hereof) at the time the
option was granted; or
5. To increase the maximum terms of options provided
herein.
B. The Board of Directors may, with the consent of an optionee,
make such modifications of the terms and conditions of his
option as it shall deem advisable.
XI. Compliance with Rule 16b-3
The provisions of this Plan are intended to comply in all
respects with the provisions of Rule 16b-3 under the Securities
Exchange Act of 1934 and any amendments thereto, and, if this Plan
shall not so comply, whether on the date of adoption or by reason of
any later amendment to or interpretation of Rule 16b-3, the provisions
of this Plan shall be deemed to be automatically amended so as to
bring them into full compliance with such rule.
XII. Effective Date of Plan
This Plan shall become effective as of January 3, 1994 upon
approval of the shareholders of the Corporation and shall
terminate at the close of business on December 31, 2003.
<PAGE>
APPENDIX No. 3 (Proposal No. 3)
THE 1996 EQUITY INCENTIVE PLAN
OF
AYDIN CORPORATION
500,000 Shares
(Last Amended December 16, 1996)
1. Purpose. The purpose of the Aydin Corporation 1996 Equity
Incentive Plan (the "Plan") is to further the growth, development and
financial success of Aydin Corporation and its subsidiaries by
providing additional incentives to those officers and key employees
who are responsible for the management of the business affairs of the
Company, or its subsidiaries, which will enable them to participate
directly in the growth of the capital stock of the Company. The
Company intends that the Plan will facilitate securing, retaining and
motivating management employees of high caliber and potential. To
accomplish these purposes, the Plan provides a means whereby
management employees may receive stock options ("Options") to purchase
the Company's Common Stock.
2. Definitions. As used in this plan, "Corporation" or the
"Company" means Aydin Corporation; "Board of Directors" means the
Board of Directors of Aydin Corporation; "employee" includes
directors, officers and other key employees of the Corporation and its
subsidiaries; "Stock Option Committee" (the "Committee") means the
Board of Directors; "Common Stock" means the Corporation's Common
Stock of the par value of $1.00 per share; "Code" means the Internal
Revenue Code of 1986, as amended from time to time.
3. Administration. The Plan shall be administered by the
Committee who shall have full and final authority, in its sole
discretion, to interpret the provisions of the Plan and to decide all
questions of fact arising in its application; to determine the
employees to whom Options shall be granted and the type, amount, size
and terms of each such grant; to determine the time when Options shall
be granted; and to make all other determinations necessary or
advisable for the administration of the Plan. All decisions,
determinations and interpretations of the Committee shall be final and
binding on all optionees and all other holders of Options granted
under the Plan.
4. Stock Subject to the Plan. Subject to Section 17 hereof, the
shares that may be issued under the Plan shall not exceed in the
aggregate 500,000 shares of Common Stock. Such shares may be
authorized and unissued shares or shares issued and subsequently
reacquired by the Company. Except as otherwise provided herein, any
shares subject to an Option that for any reason expires or are
terminated unexercised as to such shares shall again be available
under the Plan.
5. Eligibility To Receive Options. Persons eligible to receive
Options under the Plan shall be limited to those officers and other
key employees of the Company, or any subsidiary of the Company (as
defined in Section 425 of the Code), who are in positions in which
their decisions, actions and counsel significantly impact upon the
profitability and success of the Company, or any subsidiary of the
Company. Directors of the Company who are not also officers or
employees of the Company, or any subsidiary of the Company shall be
eligible to participate in the Plan, provided that such persons shall
not be eligible to receive grants of Incentive Stock Options, as such
term is defined in Section 6 hereof.
6. Types of Options. Grants may be made at any time and from
time to time by the Committee in the form of stock options to purchase
shares of Common Stock. Options granted hereunder may be Options that
are intended to qualify as incentive stock options within the meaning
of Section 422 of the Code or any amendment or substitute thereto
("Incentive Stock Options") or Options that are not intended to so
qualify ("Nonqualified Stock Options").
7. Option Agreements. Options for the purchase of Common Stock
shall be evidenced by written agreements in such form not inconsistent
with the Plan as the Committee shall approve from time to time. The
Options granted hereunder may be evidenced by a single agreement or by
multiple agreements, as determined by the Committee in its sole
discretion. Each option agreement shall contain in substance the
following terms and conditions:
(a) Type of Option. Each option agreement shall identify
the Options represented thereby either as Incentive Stock Options or
Nonqualified Stock Options, as the case may be.
(b) Option Price. Each option agreement shall set forth the
purchase price of the Common Stock purchasable upon the exercise of
the Option evidenced thereby. Subject to the limitation set forth in
Section 7(d)(ii) off the Plan, the purchase price of the Common Stock
subject to an Incentive Stock Option shall be not less than 100% of
the fair market value of such stock on the date the Option is granted,
as determined by the Committee, but in no event less than the par
value of such stock. The purchase price of the Common Stock subject
to a Nonqualified Stock Option shall be not less than 100% of the fair
market value of such stock on the date the Option is granted, as
determined by the Committee. For this purpose, fair market value on
any date shall be the mean between the highest and the lowest quoted
selling prices of the stock on an exchange, or if the stock is not
traded that day, the fair market value shall be as determined by the
Committee pursuant to Section 422 of the Code.
(c) Exercise Term. No option may be exercised after ten
years from the date of its grant. Unless the option Agreement
provides otherwise, any time after one year from the date of grant the
employee may exercise his option in accordance with the following
schedule:
After: The optionee may purchase:
One year from date of grant.....................25% of the total.
Two years from date of grant......An additional 25% of the total.
Three years from date of grant....An additional 25% of the total.
Four years from date of grant.....An additional 25% of the total.
The Committee shall have the power to permit an acceleration of
previously established exercise terms, subject to the requirements set
forth herein, upon such circumstances and subject to such terms and
conditions as the Committee deems appropriate.
(d) Incentive Stock Options. In the case of an Incentive
Stock Option, each option agreement shall contain such other terms,
conditions and provisions as the Committee determines to be necessary
or desirable in order to qualify such Option as a tax-favored Option
(within the meaning of Section 422 of the Code or any amendment or
substitute thereto or regulation thereunder) including without
limitation, each of the following except that any of these provisions
may be omitted or modified if it is no longer required in order to
have an Option qualify as a tax-favored Option within the meaning of
Section 422 of the Code or any substitute therefor:
(i) The aggregate fair market value (determined as of
the date the Option is granted) of the Common Stock with respect to
which Incentive Stock Options are first exercisable by any employee
during any calendar year (under all plans of the Company) shall not
exceed $100,000.
(ii) No Incentive Stock Options shall be granted to
any employee if at the time the Option is granted to the individual
who owns stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or its subsidiaries
unless at the time such Option is granted the Option price is at least
110% of the fair market value of the stock subject to the Option and,
by its terms, the Option is not exercisable after the expiration of
five years from the date of grant.
(iii) No Incentive Stock Options shall be exercisable
more than 30 days (or three months, in the case where the employee is
placed on layoff, or one year, in the case of an employee who dies or
becomes disabled within the meaning of Section 22(e)(3) of the Code or
any substitute therefor) after termination of employment.
(e) Substitution of Options. Options may be granted under
the Plan from time to time in substitution for stock options held by
employees of other corporations who are about to become, and who do
concurrently with the grant of such options become, employees of the
Company, or a subsidiary of the Company as a result of a merger or
consolidation of the employing corporation with the Company, or a
subsidiary of the Company, or the acquisition by the Company, or a
subsidiary of the Company of the assets of the employing corporation,
or the acquisition by the Company, or a subsidiary of the Company of
stock of the employing corporation. The terms and conditions of the
substitute options so granted may vary from the terms and conditions
set forth in this Section 7 to such extent as the Committee at the
time of grant may deem appropriate to conform, in whole or in part, to
the provisions of the stock options in substitution for which they are
granted.
8. Date of Grant. The date on which an Option shall be deemed
to have been granted under the Plan shall be the date of the
Committee's authorization of the Option or such later date as may be
determined by the Committee at the time the Option is authorized.
Notice of the determination shall be given to each individual to whom
an Option is so granted within a reasonable time after the date of
such grant.
9. Exercise and Payment for Shares. Options may be exercised in
whole or in part, from time to time, by giving written notice of
exercise to the Secretary of the Company, specifying the number of
shares to be purchased, except that no Option may be exercised in
whole or in part during the first twelve months after such Option is
granted. The purchase price of the shares with respect to which an
Option is exercised shall be payable in full with the notice of
exercise in cash, Common Stock at fair market value, or a combination
thereof. The fair market value of Stock so delivered shall be the
mean of the high and the low prices on the principal exchange upon
which the Stock is traded on the trading day immediately preceding the
date of exercise.
10. Rights upon Termination of Employment. In the event
that an optionee ceases to be an employee of the Company, or any
subsidiary of the Company for any reason other than lay-off, death, or
disability (within the meaning of Section 22(e)(3) of the Code or any
substitute therefore), the optionee shall have the right to exercise
the Option during its term within a period of 30 days (three months in
the event of a lay-off) after such termination to the extent that the
Option was exercisable at the time of termination. In the event that
an optionee dies or becomes disabled prior to the expiration of his
Option and without having fully exercised his Option, the optionee or
his successor shall have the right to exercise the Option during its
term within a period of one year after termination of employment due
to death or disability to the extent that the Option was exercisable
at the time of termination unless, by its terms, it expires sooner.
11. General Restrictions. Each Option granted under the
Plan shall be subject to the requirement that if at any time the
Committee shall determine that (i) the listing, registration or
qualification of the shares of Common Stock subject or related thereto
upon any securities exchange or under any state or federal law, or
(ii) the consent or approval of any government regulatory body, or
(iii) an agreement by the recipient of an Option with respect to the
disposition of shares of Common Stock is necessary or desirable as a
condition of or in connection with the granting of such Option or the
issuance or purchase of shares of Common Stock thereunder, such Option
shall not be consummated in whole or in part unless such listing,
registration, qualification, consent, approval or agreement shall have
been effected or obtained free of any conditions not acceptable to the
Committee.
12. Rights of a Stockholder. The recipient of any Option
under the Plan, unless otherwise provided by the Plan, shall have no
rights as a stockholder unless and until certificates for shares of
Common Stock are issued and delivered to him.
13. Right to Terminate Employment. Nothing contained in the
Plan or in any option agreement entered into pursuant to the Plan
shall confer upon any optionee the right to continue in the employment
of the Company or any subsidiary of the Company or affect any right
that the Company or any subsidiary of the Company may have to
terminate the employment of such optionee.
14. Withholding. Whenever the Company proposes or is
required to issue or transfer shares of Common Stock under the Plan,
the Company shall have the right to require the recipient to remit to
the Company an amount sufficient to satisfy any federal, state or
local withholding tax requirements prior to the delivery of any
certificate or certificates for such shares. If and to the extent
authorized by the Committee in its sole discretion, an optionee may
make an election, by means of a form of election to be prescribed by
the Committee, to have shares of Common Stock that are acquired upon
exercise of an Option withheld by the Company or to tender other
shares of Common Stock or other securities of the Company owned by the
optionee to the Company at the time of exercise of an Option to pay
the amount of tax that would otherwise be required by law to be
withheld by the Company as a result of any exercise of an Option. Any
such election shall be irrevocable and shall be subject to termination
by the Committee, in its sole discretion, at any time. Any securities
so withheld or tendered will be valued by the Committee at the mean of
the high and the low prices the Common Stock traded on the trading day
immediately preceding the date exercised.
15. Non-Assignability. No Option under the Plan shall be
assignable or transferable by the recipient thereof except by will or
by the laws of descent and distribution. During the life of the
recipient, such Option shall be exercisable only by such person or by
such person's guardian or legal representative.
16. Non-Uniform Determinations. The Committee's
determination under the Plan (including without limitation
determinations of the persons to receive Options, the form, amount and
timing of such grants, the terms and provisions of Options, and the
agreements evidencing same) need not be uniform and may be made
selectively among persons who receive, or are eligible to receive,
grants of Options under the Plan whether or not such persons are
similarly situated.
17. Adjustments.
(a) Changes in Capitalization. Subject to any required
action by the stockholders of the Company, the number of shares of
Common Stock covered by each outstanding Option and the number of
shares of Common Stock that have been authorized for issuance under
the Plan but as to which no Options have yet been granted or which
have been returned to the Plan upon cancellation or expiration of an
Option, as well as the price per share of Common Stock covered by each
such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock
resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued shares of Common Stock
effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company
shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Committee, whose
determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of
stock of any class, shall affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of shares of Common
Stock subject to an Option.
(b) Dissolution or Liquidation. In the event of the
proposed dissolution or liquidation of the Company, all outstanding
Options will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Committee. The
Committee may, in the exercise of its sole discretion in such
instances, declare that any Option shall terminate as of a date fixed
by the Committee and give each Option holder the right to exercise his
Option as to all or any part of the shares of Common Stock covered by
the Option, including shares as to which the Option would not
otherwise be exercisable.
(c) Sale or Merger. In the event of a proposed sale of all
or substantially all of the assets of the Company, or the merger of
the Company with or into another corporation, the Committee, in the
exercise of its sole discretion, may take such action as it deems
desirable, including, but not limited to (i) causing an Option to be
assumed or an equivalent option to be substituted by such successor
corporation or a parent or subsidiary of such successor corporation,
(ii) providing that each Option holder shall have the right to
exercise his Option as to all of the shares of Common Stock covered by
the Option, including shares as to which the Option would not
otherwise be exercisable, or (iii) declare that an Option shall
terminate at a date fixed by the Committee provided that the Option
holder is given notice and opportunity to exercise his Option prior to
such date.
18. Amendment. The Committee may terminate or amend the Plan at
any time. The termination or any modification or amendment of the
Plan shall not, without the consent of a participant, affect his
rights under an Option previously granted.
19. Reservation of Shares. The Company, during the term of
the Plan, will at all times reserve and keep available such number of
shares as shall be sufficient to satisfy the requirement of the Plan.
Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any shares
hereunder, shall relieve the Company of any liability for the failure
to issue or sell such shares as to which such requisite authority
shall not have been obtained.
20. Effect on Other Plans. Participation in the Plan shall
not affect an employee's eligibility to participate in any other
benefit or incentive plan of the Company or any subsidiary of the
Company. Any Options granted pursuant to the Plan shall not be used
in determining the benefits provided under any other plan of the
Company or any subsidiary of the Company unless specifically provided.
21. Duration of the Plan. The Plan shall remain in effect
until all Options granted under the Plan have been satisfied by the
issuance of shares, but no Option shall be granted more than ten years
after the date the Plan is adopted by the Company's Board of
Directors.
22. Forfeiture for Dishonesty. Notwithstanding anything to
the contrary in the Plan, if the Committee finds, by a majority vote,
after full consideration of the facts presented on behalf of both the
Company and any optionee, that the optionee has been engaged in fraud,
embezzlement, theft, commission of a felony or dishonest conduct in
the course of his employment or retention by the Company or any
subsidiary of the Company that damaged the Company, or any subsidiary
of the Company or that the optionee has disclosed confidential
information of the Company or any subsidiary of the Company, the
optionee shall forfeit all unexercised Options and all exercised
Options under which the Company has not yet delivered the
certificates. The decision of the Committee in interpreting and
applying the provisions of this Section 22 shall be final. No decision
of the Committee however, shall affect the finality of the discharge
or termination of such optionee by the Company or any subsidiary of
the Company in any manner.
23. No Prohibition on Corporate Action. No provision of the
Plan shall be construed to prevent the Company or any officer or
director thereof from taking any action deemed by the Company or such
officer or director to be appropriate or in the Company's best
interests whether or not such action could have an adverse effect on
the Plan or any Options granted hereunder, and no optionee or
optionee's estate, personal representative or beneficiary shall have
any claim against the Company or any officer or director thereof as a
result of the taking of such action.
24. Indemnification. With respect to the administration of
the Plan, the Company shall indemnify each present and future member
of the Committee and the Board of Directors against, and each member
of the Committee and the Board of Directors shall be entitled without
further action on their part to indemnity from the Company for, all
expenses (including the amount of judgments and the amount of approved
settlements made with a view to the curtailment of costs of
litigation, other than amounts paid to the Company itself) reasonably
incurred by them in connection with or arising out of, any action,
suit or proceeding in which they may be involved by reason of they
being or having been a member of the Committee or the Board of
Directors, whether or not they continue to be such member at the time
of incurring such expenses; provided, however, that such indemnity
shall not include any expenses incurred by any such member of the
Committee or the Board of Directors (i) in respect of matters as to
which they shall be finally adjudged in any such action, suit or
proceeding to have been guilty of gross negligence or willful
misconduct in the performance of their duty as such member of the
Committee or the Board of Directors: or (ii) in respect of any matter
in which any settlement is affected for an amount in excess of the
amount approved by the Company on the advice of its legal counsel; and
provided further that no right of indemnification under the provisions
set forth herein shall be available to or enforceable by any such
member of the Committee or the Board of Directors unless, within 60
days after institution of any such action, suit or proceeding, they
shall have offered the Company in writing the opportunity to handle
and defend same at its own expense. The foregoing right of
indemnification shall inure to the benefit of the heirs, executors or
administrators of each such member of the Committee or the Board of
Directors and shall be in addition to all other rights to which such
member may be entitled as a matter of law, contract or otherwise.
25. Miscellaneous Provisions.
(a) Compliance with Plan Provisions. No optionee or other
person shall have any right with respect to the Plan, the Common Stock
reserved for issuance under the Plan or in any Option until a written
option agreement shall have been executed by the Company and the
optionee and all the terms, conditions and provisions of the Plan and
the Option applicable to such optionee (and each person claiming under
or through him) have been met.
(b) Approval of Counsel. In the discretion of the Committee,
no shares of Common Stock, other securities or property of the Company
or other forms of payment shall be issued hereunder with respect to
any Option unless counsel for the Company shall be satisfied that such
issuance will be in compliance with applicable federal, state, local
and foreign legal, securities exchange and other applicable
requirements.
(c) Compliance with Rule 16b-3. To the extent that Rule
16b-3 under the Exchange Act applies to Options granted under the
Plan, it is the intent of the Company that the Plan comply in all
respects with the requirements of Rule 16b-3, that any ambiguities or
inconsistencies in construction of the Plan be interpreted to give
effect to such intention and that if the Plan shall not so comply,
whether on the date of adoption or by reason of any later amendment to
or interpretation of Rule 16b-3, the provisions of the Plan shall be
deemed to be automatically amended so as to bring them into full
compliance with such rule.
(d) Effects of Acceptance of Option. By accepting any
Option or other benefit under the Plan, each optionee and each person
claiming under or through him shall be conclusively deemed to have
indicated his acceptance and ratification of, and consent to, any
action taken under the Plan by the Company, the Board of Directors,
the Committee or its delegates.
(e) Construction. The masculine pronoun shall include the
feminine and neuter, and the singular shall include the plural, where
the context so indicates.
26. Stockholder Approval. The exercise of any Option
granted under the Plan shall be subject to the approval of the Plan by
the affirmative vote of the holders of a majority of the outstanding
shares of the Common Stock present, or represented, and entitled to
vote at a meeting duly held.
<PAGE>
APPENDIX No. 4 (Proposal No. 5)
AYDIN CORPORATION
STOCK BONUS PLAN
1. Purpose. The purpose of this Stock Bonus Plan is to provide
additional incentive and reward to officers and other key management
employees who contribute materially to the success and growth of Aydin
Corporation (the "Company") by their creativity, ability, industry and
loyalty and to provide a means to encourage stock ownership and propri-
etary interest in the Company by such officers and key management
employees.
2. Administration. This Plan shall be administered by the
Company's Board of Directors (the "Board"). It shall be the duty of the
Board to conduct the general administration of this Plan in accordance
with its provisions. The Board shall have the power to interpret this
Plan and to adopt the rules for the administration, interpretation and
the application of this Plan as are consistent therewith and to inter-
pret, amend or revoke any such rules. The Board may act either by vote
of a majority of its members at a meeting or by a memorandum or other
written instrument signed by all members of the Board. All actions
taken and all interpretations and determinations made by the Board in
good faith shall be final and binding upon the Plan Participants (as
hereinafter defined) and all other interested persons. No member of the
Board shall be personally liable for any action, determination or
interpretation made in good faith with respect to this Plan, and all
members of the Board shall be protected by the Company with respect to
any such action, determination or interpretation.
3. Plan Participants. The Board shall possess the exclusive right
to name the officers and other key management members who shall be
designated as "Plan Participants" for purposes of this Plan. The Board
may delegate the right to name "Plan Participants" to any person or
committee whom it shall designate. Neither the adoption of this Plan
nor the selection of any Plan Participant for participation in this Plan
shall give a Plan Participant any right to be retained in the employ of
the Company, and the right and power of the Company to dismiss or
discharge any Plan Participant is specifically reserved. No Plan
Participant or any person claiming under or through him shall have any
right or interest, whether vested or otherwise, in this Plan or any
bonus hereunder, unless and until there has been compliance with all of
the terms and conditions of this Plan and rules of the Board that affect
the Plan Participant.
4. Amount of Bonus. The Board shall have the sole discretion to
determine the dollar amount of any bonus to be awarded under this Plan.
Recommendations for bonus awards shall be made to the Board pursuant to
such procedures as may from time to time be prescribed by the Board.
5. Form of Bonus; Election of Plan Participant. The Plan
Participant shall have the election to be paid the full amount of the
bonus awarded to such Plan Participant either (i) in cash or (ii) in
shares of the Company's $1.00 par value Common Stock ("Common Stock") or
a combination of cash and Common Stock. If the Plan Participant elects
to be paid the full amount or any portion of the bonus award in shares
of Common Stock, the number of shares to which the Plan Participant
shall be entitled shall be determined by dividing (x) the dollar amount
of the bonus award, or portion thereof, as the case may be, for which
shares of Common Stock are to be issued by (y) the Discounted Market
Value. For purposes of this Plan, "Discounted Market Value" shall be
equal to 85% of the average of the per share closing prices of the
Common Stock on the New York Stock Exchange on the 20 trading days
immediately preceding the date that the Board determines the dollar
amount of the bonus award for the Plan Participant.
(a) The Board shall promptly notify each Plan Participant of
(i) the dollar amount of the bonus award; (ii) the Discounted Market
Value per share of the Company's Common Stock; (iii) the maximum number
of shares to which the Plan Participant is entitled if the Plan
Participant elects to be paid the bonus award in shares of Common Stock;
and (iv) the date by which the Plan Participant's written election to be
paid the bonus in stock is required to be sent to the Company.
(b) The Plan Participant shall make the election to be paid the
bonus award within 15 days following the date of the notice provided to
the Plan Participant in accordance with the provisions of paragraph 5(a)
hereof. Such election shall be made in writing to the Secretary of the
Company. If no election is made by the expiration of such period, the
bonus award shall be paid to the Plan Participant in cash.
6. Supplemental Cash Tax Gross-Up Bonus. Contemporaneous with the
transfer of any bonus shares and subject to the limitation hereinafter
set forth, the Board, in its sole discretion, may determine to pay to
any Plan Participant to whom bonus shares have been awarded a
supplemental cash bonus. Such supplemental cash bonus shall in no event
be greater than an amount equal to (i) the product of the total fair
market value of the shares received in any calendar year and the highest
marginal income tax rate, (ii) divided by one minus the highest marginal
income tax rate. For this purpose, the term "highest marginal income
tax rate" of any Plan Participant shall mean the sum of the highest
marginal combined state and federal personal income tax rates (including
any surtax rate as well as the Medicare health insurance tax rate
imposed on employees under the Federal Insurance Contributions Act)
applicable to such Plan Participant, as in effect for the calendar year
in which the bonus is paid. In accordance with Section 8 hereof, the
Company shall withhold and remit from the tax gross-up bonus all
required tax withholdings with respect to the bonus shares and the tax
gross-up bonus itself. Notwithstanding the foregoing, a tax gross-up
bonus shall not be paid to a Plan Participant to the extent that the
payment of such bonus would cause the Plan Participant's total
compensation received from the Company to exceed the range of reasonable
compensation, as determined by an independent consultant retained by the
Board.
7. Common Stock Available for Bonuses. The shares to be awarded
under this Plan shall be made available from authorized and unissued
shares or from the Company's treasury shares. The total number of
shares that may be awarded under this Plan may not exceed 500,000
shares.
8. Withholding. All bonus awards of shares or cash, or combination
thereof made to a Plan Participant under this Plan shall be net of
whatever amount is sufficient to satisfy federal, state and local tax
withholding requirements or if that is not possible, the Plan
Participant shall otherwise provide for the satisfaction of such tax
withholding requirements as a condition to the payment of any bonus
award under this Plan.
a. In the event that a Plan Participant fails to satisfy the
withholding and employment tax obligations arising in connection with a
transfer of shares awarded under this Plan when requested by the Board,
the Board may, pursuant to such rules as the Board may establish, reduce
the number of shares to be transferred to the Plan Participant by such
number of shares as the Board may deem appropriate in its sole
discretion to satisfy such withholding and employment tax obligations or
make such other arrangements as it deems satisfactory.
b. Notwithstanding any other provision of this Plan, the Board
may impose such additional conditions on the payment of any withholding
or employment tax obligations as may be required to satisfy applicable
regulatory requirements, including, without limitation, Rule 16b-3 (or
any successor provision) promulgated by the Securities and Exchange
Commission.
9. Fringe Benefits. By acceptance of any bonus under this Plan,
each Plan Participant acknowledges that such bonus represents
supplemental incentive compensation and that such bonus shall not be
treated as base salary or other compensation for the purpose of the
calculation of retirement benefits, life insurance or other fringe
benefits provided by the Company, unless a written plan provision
specifically provides to the contrary.
10. Expenses. All expenses and costs in connection with the
administration of this Plan shall be borne by the Company, and no part
shall be charged to the Plan Participants.
11. Amendment. The Board may discontinue or terminate this Plan
in whole or in part at any time, or the Board may from time to time
change or amend the Plan in such respects as the Board may deem
advisable, in its sole discretion. The fact that a director is or had
been designated as a Plan Participant under this Plan shall not
disqualify him from voting as a director for or against the Plan or for
or against any change or amendment thereto.
12. Termination. The Plan shall automatically terminate on the
earliest of (A) December 31, 2007, (B) the date when all of the shares
available for bonuses hereunder have been awarded or (C) any earlier
date as the Board may determine in its sole discretion.
13. Securities and Other Laws. No shares shall be transferred
pursuant to this Plan unless and until all then applicable requirements
imposed by federal and state securities laws and other laws, rules and
regulations and by any regulatory agencies having jurisdiction and by
any stock exchanges upon which the shares may be listed have been fully
met.
14. Notices. Any notice required or permitted hereunder shall be
sufficiently given only if sent by first class mail, postage prepaid, or
by a nationally recognized overnight delivery service, charges prepaid,
addressed to the Company at its principal offices in Horsham, Pennsylva-
nia and to the Plan Participant at the address on file with the Company
on the date any bonus award is made hereunder, or to such other address
as either party may hereafter designate in writing by notice similarly
given by one party to the other.
15. Severability. If any part of this Plan shall be determined to
be invalid or void in any respect, such determination shall not affect,
impair, invalidate or nullify the remaining provisions of this Plan,
which shall continue in full force and effect, as if the invalid or void
provision had not been included in the Plan.
16. Additional Terms. The Board may impose such additional terms
and conditions upon the award of bonuses under this Plan as the Board
may determine, in its sole discretion, at the time it authorizes such
awards.
17. Effective Date. This Plan shall be effective on March 19,
1997, subject to Stockholder approval.
