[Aydin Letterhead]
March 23, 1998
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, DC 20549
Gentlemen:
On behalf of Aydin Corporation (the "Company"), the
undersigned is transmitting for filing via Edgar a preliminary
copy of the Company's Notice of Annual Meeting of Stockholders,
Proxy Statement and form of proxy in connection with the
Company's 1998 Annual Meeting of Stockholders. The Company
intends to release these proxy materials to its stockholders on
or about April 2, 1998.
The Company is also transmitting as an appendix to this
filing the form of 1996 Equity Incentive Plan, as proposed to be
amended under Proposal 5 and the form of Director Retirement Plan
that is being submitted to stockholders under Proposal 6. The
Company intends to file a Form S-8 registration statement to
register the shares issuable under the Director Retirement Plan
and the increased number of shares that will be issuable under
the 1996 Equity Incentive Plan, if such increase is approved at
the annual meeting under Proposal 5, promptly after the annual
meeting if such proposals are approved.
Please contact the undersigned regarding this filing.
Sincerely,
/s/ Robert A. Clancy
Robert A. Clancy
Secretary and Corporate Counsel
<PAGE>
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:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as
permitted by Rule 14a-6(e)(2))
[ ] 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>
AYDIN CORPORATION
700 Dresher Road
Horsham, PA 19044
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 1, 1998
---------------------
TO THE STOCKHOLDERS OF AYDIN CORPORATION:
The Annual Meeting of Stockholders of AYDIN CORPORATION, a
Delaware corporation (the "Company"), will be held on Friday, May 1,
1998, at 3:00 p.m. local time at the Company's Corporate Offices, 700
Dresher Road, Horsham, Pennsylvania, for the following purposes:
1. To amend the Company's By-laws to establish a classified
Board of Directors; and
2. (a) If Proposal 1 is approved, to elect a classified Board
of Directors consisting of three classes to serve
initial for one-, two- and three-year terms, converting
to three-year terms upon expiration of the initial
terms, and until their successors are duly elected; or
(b) If Proposal 1 is not approved, to elect six Directors,
each to hold office for a term of one year and until
his successor has been duly elected; and
3. To amend the Restated Certificate of Incorporation to
increase the authorized shares of Common Stock from
7,500,000 shares to 20,000,000 shares; and
4. To amend the Restated Certificate of Incorporation to
authorize a new class of Series Preferred Stock, consisting
of 2,000,000 shares; and
5. To approve an amendment to the 1996 Equity Incentive Plan;
and
6. To approve the Director Retirement Plan; and
7. 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
March 3, 1998, 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, 1997, 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
April 2, 1998
<PAGE>
AYDIN CORPORATION
--------------------
PROXY STATEMENT
--------------------
This Proxy Statement and the accompanying form of Proxy, which
are first being mailed to stockholders on April 2, 1998, 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, May 1, 1998, 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 1,
3, 4, 5 and 6 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 March 3, 1998, the Company had
outstanding 5,216,300 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 March 3, 1998,
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 may also retain the services of outside
agencies to assist in the solicitation of proxies and will
reimburse such agencies for their fee and costs. 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, Franklin Resources, Inc. 499,400(2) 9.6%
$1.00 par 777 Mariners Island Blvd.
value San Mateo, CA 94404
Common Stock, SoGen International Fund, Inc. 375,000(3) 7.2%
$1.00 par 1221 Avenue of the Americas
value New York, NY 10020
Common Stock, The TCW Group, Inc. 373,100(4) 7.2%
$1.00 par 865 South Figueroa Street
value Los Angeles, CA 90017
Common Stock, Victor Posner 334,500(5) 6.4%
$1.00 par 6917 Collins Avenue
value Miami Beach, FL 33141
Common Stock, Dimensional Fund Advisors, Inc. 299,150(6) 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 January 16, 1998. 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.
(3) As of January 29, 1998. According to the Schedule 13G filed by SoGen
International Fund, Inc. (the Fund ) and its investment advisor, Societe
Generale Asset Management Corporation, these shares were acquired by the
Fund as beneficial owner for investment only. Shared voting and
dispositive power.
(4) As of February 12, 1998. According to the Schedule 13G filed by The TCW
Group, Inc. and Robert Day, these shares were acquired for investment in
the ordinary course of business. Sole voting and dispositive power.
(5) As of December 29, 1993. Sole voting and investment power.
(6) As of February 9, 1998. Dimensional Fund Advisors Inc. ("Dimensional"),
a registered investment advisor, is deemed to have beneficial ownership of
299,150 shares of Aydin Corporation stock as of December 31, 1997, 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 198,600 of
these shares, shared voting power as to 100,550 shares and sole investment
power as to 299,150 shares. Dimensional disclaims Beneficial Ownership of
all such shares.
</TABLE>
BENEFICIAL OWNERSHIP BY MANAGEMENT
The following table sets forth, as of March 3, 1998, the
amount and percentage of the Company's outstanding Common Stock,
$1.00 par value, beneficially owned by each Director, the chief
executive officer, 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 236,314 (3) 4.5%
Ira Brind 10,000 (5)
Dr. Nev A. Gokcen 18,037 (5)
Gary Mozenter 0 -
Harry D. Train, II 1,037 (5)
John F. Vanderslice 89,194 (4) 1.7%
H. Barry Maser 23,599 (5)
James R. Henderson 11,250 (5)
Demirhan Hakimoglu 7,435 (5)
All of the above and other
executive officers as
a group
(Includes 10 persons) 398,366 7.6%
<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 that Mr. Bard
holds 36,700 shares jointly with his wife and Dr. Gokcen hold
all of his shares jointly with his wife.
(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 -
51,250 shares, Gokcen - 1,037 shares, Train - 1,037 shares,
Vanderslice - 17,500 shares, Maser - 12,499 shares; Hakimoglu
- 2,250 shares, Henderson - 11,250 shares, and the Group -
1,500 shares.
(3) Includes a Warrant to purchase 133,334 shares: 66,667 shares
at $12.10 and 66,667 shares at $13.20 per share.
(4) Includes a Warrant to purchase 66,666 shares: 33,333 shares
at $12.10 and 33,333 shares at $13.20 per share.
(5) Less than 1%
</TABLE>
PROPOSAL 1. AMEND THE COMPANY'S BY-LAWS TO
ESTABLISH A CLASSIFIED BOARD OF DIRECTORS
The stockholders are being asked to approve at the Annual
Meeting an amendment to Article III, Section 1 of the Company's
By-laws to provide for classification of the Board of Directors
into three classes, Class A, Class B and Class C, each class
consisting of a number of directors equal as nearly as
practicable to one-third of the total number of directors. After
initial implementation, each class of directors would be subject
to election every third year and would serve for a three-year
term. Currently, all of the Company's directors are elected each
year for a one-year term.
The Board of Directors has unanimously approved the
classification of the Board and recommends that the stockholders
approve this proposal. The Board believes that such
classification will promote stability in the management of the
Company and in its long-term planning, strategies and policies,
which the Board believes is in the best interests of the Company
and its stockholders.
If the proposal is approved, the Board of Directors will be
divided into three classes: Class A directors will serve
initially for a one-year term, until the Company's 1999 Annual
Meeting of Stockholders and until the respective successors to
directors of Class A are duly elected, and thereafter for
three-year terms; Class B directors will serve initially for a
two-year term, until the Company's 2000 Annual Meeting of
Stockholders and until the respective successors to directors of
Class B are duly elected, and thereafter for three-year terms;
and Class C directors will immediately commence service for a
three-year term and serve until the Company's 2001 Annual Meeting
of Stockholders and until the respective successors to directors
of Class C are duly elected.
If the nominees of the Board of Directors herein are elected
to the Board of Directors at the Annual Meeting and this Proposal
1 is adopted by the stockholders, Nev. A. Gokcen and Harry D.
Train, II will be designated as Class A directors, to serve for a
term ending as of the Company's 1999 Annual Meeting of
Stockholders; Gary Mozenter and John F. Vanderslice will be
designated as Class B directors, to serve for a term ending as of
the Company's 2000 Annual Meeting of Stockholders; and Ira Brind
and I. Gary Bard will be designated as Class C directors, to
serve for a term ending as of the Company's 2001 Annual Meeting
of Stockholders. Information concerning these nominees for
director is set forth above under "Election of Directors." If
the proposal to adopt a classified Board of Directors is not
approved and implemented, all of the directors elected at the
Annual Meeting will serve for a one-year term and until their
respective successors are duly elected and qualified.
Article III, Section 1, as amended, will also provide that:
(i) any vacancies in the Board of Directors, and any newly
created directorships resulting from any increase in the number
of directors, may be filled only by the Board of Directors,
acting by vote of 80% of the directors then in office, although
less than a quorum; (ii) the term of office for a director so
chosen will expire at the next annual meeting at which members of
the class for which such director is chosen are elected; and
(iii) a director may be removed only for cause and only by either
(a) the affirmative vote of a majority of the Continuing
Directors, as defined in such section, and the affirmative vote
of a majority of the Board of Directors or (b) the affirmative
vote of holders of 80% or more of the outstanding Common Stock of
the Company.
If adopted, the provisions of Article III, Section 1 may not
be amended, altered, changed or repealed without the affirmative
vote of 80% of the Continuing Directors or an 80% vote of the
holders of the Company's Common Stock.
Proposed Amendment to Certificate of Incorporation
The text of the proposed amendment to Article III, Section 1
of the Company's By-laws to implement a classified Board of
Directors is as follows:
"Section 1. (a) The business and affairs of the
Corporation shall be managed by or under the direction of the
Board of Directors. The number of directors of the Corporation
that shall constitute the Board of Directors shall be six.
Directors need not be stockholders of the Corporation.
(b) If approved by a majority of the stockholders at the
annual meeting of stockholders to be held in 1998 and subject
to applicable law, the Directors shall be divided into three
classes, Class A, Class B and Class C, each class to be as
nearly equal in number as possible. The initial term of office
of Directors of Class A shall expire at the annual meeting of
stockholders to be held in 1999 and when their respective
successors are duly elected. The initial term of office of
Directors of Class B shall expire at the annual meeting of
stockholders to be held in 2000 and when their respective
successors are duly elected. The initial term of office of
Directors of Class C shall expire at the annual meeting of
stockholders to be held in 2001 and when their respective
successors are duly elected. Subject to the foregoing, at each
annual meeting of stockholders, commencing at the annual
meeting to be held in 1999, the successors to the class of
directors whose term shall then expire shall be elected to hold
office for a term expiring at the third succeeding annual
meeting of stockholders and when their successors shall be duly
elected. Any vacancies in the Board of Directors for any
reason, and any newly created directorships resulting from any
increase in the number of directors, may be filled only by the
Board of Directors, acting by vote of 80% of the directors then
in office, although less than a quorum. The term of office of
any director so chosen shall expire at the next annual meeting
of stockholders at which members of the class for which such
director shall have been chosen are elected and when his
respective successor shall be duly elected. No decrease in the
number of directors shall shorten the term of any incumbent
director.
(c) Notwithstanding any other provisions of the By-laws
of the Corporation, and notwithstanding the fact that some
lesser percentage may be specified by law or by the By-laws of
the Corporation, any one or more directors of the Corporation
may be removed at any time, but only for cause and only by
either (1) the affirmative vote of a majority of the Continuing
Directors (as defined in subsection (e) of this Section 1) and
the affirmative vote of a majority of the Board of Directors or
(2) the affirmative vote, at a meeting of the stockholders
called for that purpose, of the holders of 80% or more of the
outstanding Common Stock of the Corporation.
(d) Notwithstanding any other provisions of the By-laws
of the Corporation, this Section 1 of Article III of the By-
laws shall not be amended, altered, changed or repealed without
the affirmative vote of a majority of the Board of Directors
and the affirmative vote of 80% of the Continuing Directors (as
defined in subsection (e) of this Section 1 of Article III) or
an 80% vote of the holders of the Corporation's Common Stock.
(e) A "Continuing Director" shall mean:
(1) An individual who was a member of the Board of
Directors of the Corporation first elected by the
stockholders or appointed by the Board of Directors prior
to the date on which this Section 1 of Article III was
adopted;
(2) An individual who was a member of the Board of
Directors of the Corporation first elected by the
stockholders or appointed by the Board of Directors prior
to the time that any Related Person (other than any
person who was already a Related Person at the time this
Section 1 of Article III was adopted) became the
beneficial owner of in excess of 10% of the Common Stock
of the Corporation; or
(3) An individual designated, before such individual's
initial election as a director, as a Continuing Director
by a majority of the then Continuing Directors.
(f) A "Related Person" shall mean any person or entity
who or which is the beneficial owner of 10% or more of the
Common Stock of the Corporation."
Certain Effects of Classification of Board
If adopted, the classification of directors will apply to
every future election of directors; it would not be triggered by
the occurrence of a particular event, such as a "change in
control." Under the proposed By-law amendment, the Board of
Directors would be divided into three classes. Directors would
serve for a term of three years rather than one year, and
one-third of the directors, or as near to one-third as
practicable, would be elected each year. Initially, the Class A
directors would serve for a term of one year, the Class B
directors for a term of two years, and the Class C directors for
term of three years in order to implement the tri-annual
elections. In each year commencing with the 1999 Annual
Meeting, one class of directors, consisting of approximately one-
third of the directors, will be considered for election for a
three-year term.
The proposed amendment would significantly extend the time
required to make any change in the majority of the Board and
would thus tend to render more difficult or discourage any
attempt to remove incumbent management of the Company, by means
of a merger, a tender offer for the Common Stock, a proxy
contest, the acquisition of a large block of Common Stock or
other "change in control" transaction, even if such actions would
be favorable to the interests of the Company's stockholders.
Presently, a change in the Board majority can be effected at a
single annual meeting. By contrast, if the proposed amendment is
adopted, absent intervening vacancies, it would take at least two
annual meetings to effect a change in majority of directors on
the Board, since only a minority of the directors will be elected
at each meeting.
Because of the additional time required to change the overall
composition of the Board, the proposed amendment could tend to
perpetuate the present Company management in office and
discourage certain activities that could affect the market price
of the Common Stock, such as the accumulation of large blocks of
stock through a tender offer or otherwise. Therefore,
stockholders could be deprived of the opportunity to sell their
shares at a premium over prevailing market prices. The proposed
amendment would also make it more difficult for the Company's
stockholders to change the composition of the Board and
management, even if the only reason for such change is the
performance of the incumbent Board and management.
In addition, under Delaware law, any director of the entire
Board of Directors of the Company may currently be removed, with
or without cause, by the holders of a majority of the shares of
Common Stock then outstanding. If the classification proposal is
approved by the shareholders and effected, stockholders may
effect such removal only "for cause." There is little guidance
under Delaware law as to the kind of conduct which would justify
the removal of a director for cause. As a result, any effort to
remove a director in any but egregious cases of misconduct would
probably be the subject of protracted litigation.
The proposal to adopt a classified Board of Directors is not
the result of management's knowledge of any specific effort by a
stockholder or group of stockholders to attain representation on
the Board of Directors or otherwise to acquire control of the
Company or greater influence in its management.
Vote Required
The affirmative vote of the holders of a majority of the
shares of the Company's Common Stock outstanding as of the record
date of the Annual Meeting will be required to approve the
proposed By-law amendment set forth in this Proposal 1. Thus,
shareholders who do not vote or who vote to abstain will in
effect be voting against the proposal. A broker who is the
record owner of shares Common Stock beneficially owned by a
customer will not have discretionary authority to vote such
shares if the broker has not received voting instructions from
the beneficial owner, and broker non-votes will in effect be
deemed a vote against the proposal.
The Board of Directors recommends a vote FOR this proposal.
PROPOSAL 2. ELECTION OF DIRECTORS
Six Directors of the Company are to be elected at the Annual
Meeting. If Proposal 1 is approved, the nominees for each class
of directors, if elected, will serve as follows: Nev. A. Gokcen
and Harry D. Train, II will serve as Class A directors to serve
for a term ending as of the Company's 1999 Annual Meeting and
until their successors are duly elected; Gary Mozenter and John
F. Vanderslice will serve as Class B directors to serve for a
term ending as of the Company's 2000 Annual Meeting and until
their successors are duly elected; and Ira Brind and I. Gary Bard
will serve as Class C directors to serve for a term ending as of
the Company's 2001 Annual Meeting and until their successors are
duly elected. If Proposal 1 is not adopted, 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 60 Chairman of the Board of Directors and 1994
(Class C director*) Chief Executive Officer since May 6, 1996.
President of the Company from October 8, 1996
to October 23, 1997. 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 government
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.
Ira Brind , 57 President and co-founder of Brind-Lindsay & 1997
(Class C director*) Co., Inc., a private investment firm, since
1987.
Dr. Nev A. Gokcen 76 Retired. Former thermodynamicist with the 1972
(Class A director*) Department of the Interior, Bureau of Mines,
Albany, Oregon.
Gary Mozenter 63 Retired. Former Partner, Vice Chairman 1997
(Class B director*) and Executive Committee Member, Coopers
& Lybrand LLP from 1956 to 1994.
Harry D. Train, II 70 Manager, Hampton Roads Operations (defense 1984
(Class A director*) studies and analysis) of Science Applications
International Corporation (SAIC), Norfolk,
Virginia, since October 1986.
John F. Vanderslice 56 President and Chief Operating Officer of 1994
(Class B director*) the Company since October 1997, President of
its Telemetry Division (formerly the Vector
Division) since 1982.
<FN>
- ------------
* If Proposal 1 is adopted at the Annual Meeting
</TABLE>
The Company has had an Audit Committee since September 1978;
and Directors Brind, 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
1997.
The Company established an Oversight Committee in April 1992,
comprised of outside Directors, currently Gokcen, Mozenter 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 four times in 1997.
The Company established the Executive Compensation Committee in
May 1996, now comprised of Directors Bard, Brind, 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 two times in 1997.
In October 1997 the Company established the Strategic Planning
Committee, now comprised of Directors Bard, Brind, Mozenter and
Vanderslice. This Committee's purpose is to consult with
management on matters concerning proposed acquisitions and
similar new ventures and to advise management with regard to the
expansion or disposition of the Company's business through
mergers, acquisitions, sales and similar transactions. This
Committee met once in 1997
There is no nominating committee of the Board of Directors.
The Board of Directors met nine times in 1997.
During the year ended December 31, 1997, the directors attended
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 $12,000, plus
$1,500 for each meeting which he personally attends ($500 for
each meeting in which he participates by means of conference
telephone). In addition, non-employee Directors serving on
Committees receive a meeting fee of $1,000 ($500 for each meeting
in which he participates by means of conference telephone) and
the Chairman of each Committee receives an annual fee of $1,500.
These Directors are eligible to receive annual grant of stock
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 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 1997. Directors Gokcen and Train have been
granted Individual Non-Qualified Stock Options (the "Individual
Options") and options under the Company's 1996 Equity Incentive
Plan (the 1996 Plan ). The Individual 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. On February 27, 1997, they were granted options
under the 1996 Plan to purchase up to 2,150 shares at $11.31 per
share. Under both of the options, 25% of the option shares become
exercisable on the first anniversary of the grant and 25% each
year thereafter on a cumulative basis until the option expires
ten years after date of grant.
In addition, the Board of Directors approved, subject to
stockholder approval of the Director Retirement Plan at the
Annual Meeting, the grant of 1,100 Retirement Shares each to the
non-employee Directors of the Company under the Company's
Director Retirement Plan (see Proposal No. 6, page 21)
COMPENSATION OF EXECUTIVE OFFICERS
The following tabulation sets forth certain information with
respect to compensation paid or earned for services in all
capacities to the Company and its subsidiaries for its fiscal
years ended December 31, 1997, 1996 and 1995, of those persons
who were, at any time during the fiscal year ended December 31,
1997, (i) the chief executive officer; and (ii) the four most
highly compensated executive officers of the Company serving at
December 31, 1997 (the "Named Executive Officers"):
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation Awards
---------------------------------- ---------------------
Other All
Annual Restricted Securities Other
Compens- Stock Underlying Compens-
Name and Principal Position Year Salary($)(1) Bonus($) ation ($) Award ($) Options (#) ation ($)
<S> <C> <C> <C> <C> <C> <C> <C>
I. Gary Bard 1997 $286,916 $255,200 $16,500(5) -- $ 25,000 $23,585(7)
Chairman of the Board and 1996 $195,638(2) $249,400(3) $44,105(5) $200,000 $150,000 $23,585(7)
Chief Executive Officer 1995 -- -- -- -- -- --
John F. Vanderslice 1997 $205,005 $157,850 -- -- 25,000 --
President and Chief 1996 157,406 138,764 $ 8,250(5) -- 40,000 --
Operating Officer 1995 130,000 113,176 -- -- -0- --
James R. Henderson 1997 $146,285 $ 79,750 -- -- 10,000 $ 3,432(8)
Vice President, Treasurer 1996 62,328 66,516(4) -- -- 35,000 42,468(8)
and Chief Financial 1995 -- -- -- -- -- --
Officer
H. Barry Maser 1997 $176,800 $ 63,288 $ 1,650(5) -- -- --
Vice President of 1996 24,158 11,712 -- $93,750(6) -- --
Business Development 1995 -- -- -- -- -- --
Demirhan Hakimoglu 1997 $157,687 $ 46,282 -- -- -0- --
Vice President and Chief 1996 123,696 9,695 -- -- -0- --
Executive Officer, 1995 137,231 9,964 -- -- -0- --
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) Of this total, $83,133 was awarded for 1996 and paid in 1997.
(4) Of this total, $12,094 was awarded for 1996 and paid in 1997.
(5) The dollar value of the difference ($1.65 for both 1996 and
1997) between (i) the discounted market value ($9.33 for 1996
and $9.36 for 1997) at which the Named Executive Officer
elected to receive a portion or all of his bonus awards in
shares of the Company s Common Stock and (ii) the average
fair market value of such shares on the 20 trading days
immediately preceding the date the Board of Directors
determined the dollar amount of the bonus award under the
Company's Stock Bonus Plan.
(6) An award of 10,000 restricted shares on December 16, 1996,
valued at the grant date closing price of $9.375, vesting
over a four-year period (2,500 shares per year commencing
December 16, 1997).
(7) Dollar amount of loan forgiven by the Board of Directors for
Mr. Bard.
(8) Relocation expenses paid by the Company.
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
Shown below is further information on grants of stock options
pursuant to the Company's 1994 Incentive and 1996 Equity
Incentive Stock Option Plans during the year ended
December 31, 1997 to the Named Executive Officers.
<TABLE>
<CAPTION>
Number of % of Total Potential Realizable Value
Securities Options at Assumed Annual Rates of
Underlying Granted to Exercise Stock Price Appreciation for
Options Employees Price Expiration Option Term
Name Granted (#)(1) in 1996 ($/Sh) Date 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C>
I. Gary Bard 25,000 20.4% $11.31 2-27-07 $177,820 $450,631
John F. Vanderslice 25,000 20.4% $12.84 10-23-07 $201,875 $511,591
James R. Henderson 10,000 8.2% $11.31 2-27-07 $ 71,128 $180,250
H. Barry Maser -- -- -- -- -- --
Demirhan Hakimoglu -- -- -- -- -- --
<FN>
________________________
(1) All options expire ten years from date of grant. Twenty-five
percent of the option shares become exercisable one year from
date of grant and an additional 25% each year thereafter for
three years on a cumulative basis.
</TABLE>
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
No options were exercised during 1997 by the Named
Executive Officers. Shown below is information with respect to
options exercised during 1997 and the year-end value of
unexercised
options to purchase the Company's Common Stock granted in prior
years under the Company's 1994 or 1996 Incentive Plans, or an
Individual Non-Qualified Stock Option to the Named Executive
Officers and held by them at December 31, 1997.
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Unexercised Options Held At In-the-Money Options At
December 31, 1997 December 31, 1997 (1)
Name Exercisable(#) Unexercisable(#) Exercisable($) Unexercisable($)
<S> <C> <C> <C> <C>
I. Gary Bard 45,000 140,000 $65,625 $184,375
John F. Vanderslice 17,500 57,500 $24,975 $ 49,925
James R. Henderson 8,750 36,250 $13,125 $ 39,375
H. Barry Maser 12,499 37,501 $30,373 $ 91,127
Demirhan Hakimoglu 1,500 750 0 0
<FN>
________________________
(1) Based on the closing price on December 31, 1997, on the New
York Stock Exchange of $11.81 per share.
</TABLE>
REPORT ON EXECUTIVE COMPENSATION
The Executive Compensation Committee has furnished the
following report on executive compensation dated February 6,
1998:
The Committee took up consideration of whether there should be
any changes in types of incentives for all or any of the senior
executive management team. The incentives considered were
changes to base compensation, changes to bonus eligibility,
percent of eligible bonus earned, additional stock options,
change in contract terms and conditions, and others as
appropriate (insurance, deferred compensation, SERP).
The Committee measured the executive team's performance
against the four major objectives established for 1997: Return
the Company to profitability; improve the financial structure of
the Company; improve the culture in the Company and upgrade the
skills in the organization; and position the Company for revenue
growth and sustained profitability going forward.
Against this criteria, the senior management team was
successful in meeting all of those objectives. The Company
returned to profitability in the third and fourth quarter 1997
and as reported in year-end publications of the results of
stock traded on the New York Stock Exchange, the Company's
stockholders realized an increase of 26% in shareholder value for
the year.
Improvement in the financial structure of the Company occurred
in two areas. First, cost of goods sold was lowered with a
slight decrease to revenue. This occurred through combining
three manufacturing lines into one; moving the West Coast
operations into a smaller facility and downsizing the operation
to meet revenue targets; reduced losses in the radio product line
of the West Coast by transitioning programs, production and
management responsibilities to the East Coast; growing the ground
telemetry product line revenue; selling the non-profitable South
American product line; and doubling sales in the rugged product
line and turning the line towards profitability. Second,
operating expenses were decreased through implementing controls
to monitor R&D expenses; establishing a bid and proposal policy
to lower cost and increase the probability of a win; and
developed a risk management policy and reduced insurance
premiums.
Improvement in the culture in the Company and upgrading the
skills in the organization was accomplished through the hiring of
new presidents for the Raytor, Telecom and Displays divisions;
creating a new sales and marketing operations for the Displays
Division, including the hiring a Vice President of Sales for that
Division; establishing the Chief Operating Officer position to
improve client focus and business results; replaced four
controllers with two senior financial people and implemented a
financial forecast model; and upgraded direct marketing personnel
to change the culture from being engineering driven to marketing
driven for the Company's rugged, displays and telemetry
businesses.
To position the Company for revenue growth and sustained
profitability going forward, the senior management team
accomplished this by the sale of two properties; negotiated a new
bank relationship to secure a new facility for letters of credit;
established a bank facility with AT&T capital; lowered accounts
payable; booked major projects for the Company's rugged business;
restructured the Turkish subsidiary into a diversified
communications company; created a new OEM model product line for
the Company's display business; implemented a plan to OEM
commercial radios; and strengthened the Board of Directors by
adding two new members.
The Committee received the recommendations of the CEO for 1997
bonus awards, compensation adjustments and stock option grants
for the senior management team and received the comments of the
non-Committee Board members. The recommendations of the
Committee, which were approved by the Board of Directors on
February 6, 1998, are as follows:
For Mr. Bard, a named Executive Officer, a base salary
increase, effective February 9, 1998; a bonus award of 110% of
Mr.Bard's 80% bonus opportunity for 1997; an additional stock
option to Mr. Bard to purchase up to 15,000 shares of the
Company's Common Stock, vesting in four cumulative annual
installment, priced at the fair market value price of the shares
on the date the option is granted; the forgiveness of an
additional 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; and an extension of his current employment
contract by two years, now to expire May 6, 2003. In addition,
Mr. Bard's years of service with the Company prior to May 6,
1996, have been bridged.
For two other named Executive Officers, Mr. Vanderslice and
Mr. Henderson, an increase in the base compensation, effective
February 9, 1998; a bonus award for 1997 of 110% for Mr.
Vanderslice of his 70% bonus opportunity and for Mr. Henderson of
his 50% bonus opportunity; that Mr. Henderson's bonus opportunity
for 1998 be increased from 50% to 60% of his base compensation;
and they each be granted an additional stock option to purchase
up to 15,000 shares of the Company's Common Stock, vesting in
four cumulative annual installment, priced at the fair market
value of the shares on the date the option was granted.
In addition, the Board of Directors approved, subject to
stockholder approval of the Director Retirement Plan at the
Annual Meeting, the grant of 1,100 Retirement Shares each to the
non-employees Directors of the company under the Company's
Director Retirement Plan (see Proposal No. 6, page 21).
The foregoing report has been furnished by Messrs. Bard,
Brind, Gokcen and Train.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT
ARRANGEMENTS
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.
On February 6, 1998, the Board of Directors approved the
recommendation of the Executive Compensation Committee and
extended Mr. Bard's contract for an additional two years.
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.
H. BARRY MASER
On October 25, 1996, the Board of Directors approved the
Employment Agreement between the Company and Mr. Maser, effective
November 4, 1996, employing Mr. Maser as Vice President of
Business Development of the Company. The agreement provides (i) a
term of two years; (ii) an annual base salary of $175,000; (iii)
a grant of an option to purchase up to 50,000 shares of the
Company's Common Stock, with an exercise price equal to the fair
market value of the Company Stock on the date the option is
granted; (iv) participation in an incentive bonus plan with the
opportunity to earn up to 70% of his base salary, with a
guarantee of at least $75,000 in the first year; (v) pay a bonus
of 10,000 shares of the Company's Common Stock, vesting on a
pro-rata basis over a four-year period, in consideration of Mr.
Maser's execution of the agreement; (vi) a monthly car allowance;
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 any other similar
circumstances, the Company is obligated to pay the then base
salary until the initial term of the Agreement expires or 12
months from the date of termination, whichever is longer.
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, 1992 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 12/31/92 $100.00 $100.00 $100.00
FYE 12/31/93 $ 75.00 $110.00 $123.00
FYE 12/31/94 $ 77.00 $111.00 $143.00
FYE 12/31/95 $ 95.00 $153.00 $207.00
FYE 12/31/96 $ 59.00 $189.00 $293.00
FYE 12/31/97 $ 74.00 $251.00 $375.00
<FN>
* Assumes $100 invested in Aydin Common Stock and each index on
December 31, 1992, 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
during 1997 other than EA Industries, Inc., who disposed of their
holdings by June 25, 1997.
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 1997, except for former Director Irwin L. Gross, who has
not furnished the Company a copy of his Form 5 or a statement
that no such filing was required, and EA Industries, Inc., who
has not filed a Form 4 for the months of May and June 1997 to
report the sale of 596,927 shared of the Company's equity
securities.
PROPOSAL 3. APPROVAL OF AN AMENDMENT TO THE
RESTATED CERTIFICATE OF INCORPORATION
The Company seeks the approval of its Stockholders to amend
Article Fourth of its Restated Certificate of Incorporation (the
Certificate ) to increase its authorized shares of Common Stock,
$1.00 par value, from 7,500,00 shares to 20,000,000 shares. The
Company is now authorized to issue 7,500,000 shares of Common
Stock, of which 5,216,300 were outstanding as of March 3, 1998,
and 1,906,276 shares have been reserved for issuance upon the
exercise of outstanding stock options, Warrants and the Stock
Bonus Plan, leaving 377,424 shares authorized and unissued.
On March 16, 1998, the Company announced that it had entered
into a letter of intent with Veridian Corporation and its
subsidiary, Veda Systems Incorporated, to acquire the telemetry
business of Veda Systems. While the purchase price was not
disclosed and the transaction is subject to a number of
conditions, including execution of a definitive purchase
agreement, satisfactory due diligence review, and receipt of any
governmental, regulatory and third party consents, the Company
did state that the purchase price would be payable through a
combination of assumption of liabilities, cash and Company stock.
An increase of the shares of Common Stock authorized for issuance
by the Company will be necessary to complete the anticipated
purchase of Veda Systems telemetry business by the Company and
will be beneficial to meet future contingencies and needs of the
Company. There is no assurance, however, that a definitive
agreement will be reached or that the proposed transaction will
be consummated.
Authorized but unissued Common Stock will be subject to
issuance at such times and for such considerations and under such
circumstances as the Company's Board of Directors shall determine
without further action by the Stockholders. Holders of Common
Stock have no preemptive rights.
At a meeting of the Board of Directors held February 6, 1998,
resolutions were duly adopted setting forth the proposed
amendment to the Certificate, declaring said amendment to be
advisable and calling for the proposed amendment to be submitted
for consideration at the Annual Meeting of the stockholders. The
amendment would replace the words "Seven Million Five Hundred
Thousand (7,500,000)" with the words "Twenty Million
(20,000,000)" in the first sentence of Article Fourth of the
Restated Certificate of Incorporation. If Proposal 4 below is
adopted, the amended and restated Article Fourth will also
include the provisions authorizing the new Series Preferred
Stock, as more fully discussed below in Proposal 4. If Proposal 4
is not adopted, and Proposal 3 is adopted, then Article Fourth
will be amended solely to reflect the increase in authorized
Common Stock shares from 7,500,000 shares to 20,000,000 shares.
The Board of Directors believes that the amendment described
above is in the best interests of the Company and recommends
approval thereof. Approval of Proposal 3 will require the
affirmative vote by the holders of a majority of the shares of
the Company's Common Stock outstanding as of the record date of
the Annual Meeting. Abstentions will be deemed a vote cast on
such proposal and therefore will be treated the same as a
negative vote. Broker non-votes will also be deemed a vote
against the proposal.
The Board of Directors recommends a vote FOR this proposal.
PROPOSAL 4: PROPOSAL TO AMEND THE COMPANY'S RESTATED
CERTIFICATE OF INCORPORATION TO AMEND ARTICLE FOURTH
TO AUTHORIZE 2,000,000 SHARES OF SERIES PREFERRED STOCK
The Board of Directors has adopted a resolution approving an
amendment to Article Fourth of the Certificate to authorize
2,000,000 shares of Series Preferred Stock (the "Preferred
Stock"). The Company's Board of Directors will be authorized to
issue the Preferred Stock in one or more series. As to each
series of the Preferred Stock, the Board of Directors will have
the power to fix the designations, powers, preferences, dividend
rights, dividend rate, conversion rights, cumulative, relative,
participating, optional or other rights, including voting rights,
qualifications, limitations or restrictions thereof, rights upon
liquidation or distribution of assets of the Company, conversion
or exchange rights, redemption provisions, sinking fund
provisions, and the number of shares constituting the series, all
without further approval of the stockholders, except as may be
required by law or applicable stock exchange rules. The rights
of the Company's Common Stock will be subject to any dividend and
liquidation preferences and other rights of the Preferred Stock
as fixed by the Board of Directors.
The Board of Directors considers the increasing complexity of
modern business finance as requiring greater flexibility in the
Company's capital structure than now exists. In the Board of
Directors' opinion, the authorization of the Preferred Stock will
assist the Company in meeting these requirements. Authorization
of the Preferred Stock will allow the issuance, at various times,
of shares specifically adapted to a wide variety of situations,
thus enabling the Company to operate more effectively in
negotiating acquisitions or financings, and enhancing the
Company's ability to effectuate other corporate programs.
One of the primary purposes of authorizing the Board of
Directors to designate and issue shares of Preferred Stock is to
eliminate delays associated with a stockholder vote on specific
issuances. The Board of Directors may, however, subject to their
duties to existing stockholders, issue Preferred Stock with
voting and conversion rights which could adversely affect the
voting power of the holders of Common Stock, and which could,
among other things, have the effect of delaying, deferring or
preventing a change of control of the Company. This could
include the future adoption of a stockholder rights plan or
similar plan. The Board of Directors is required to make any
determination to issue shares of Preferred Stock based on its
judgment as to the best interests of the stockholders of the
Company; however, the Board of Directors could issue shares of
Preferred Stock or rights to purchase Preferred Stock that could,
depending on the terms of such series, make more difficult an
attempt to obtain control of the Company by merger, tender offer,
proxy contest or other means. While the proposed amendment
authorizing the Preferred Stock is not designed to prevent a
change in control of the Company, under certain circumstances,
the Company could use the Series Preferred Stock to create voting
impediments or to frustrate persons seeking to effect
a takeover or otherwise gain control of the Company and thereby
to protect the continuity of the Company's management. Also, the
issuance of Preferred Stock at below market rates would dilute
the value of the outstanding securities of the Company, and the
issuance of Preferred Stock with dividend and liquidation
preferences could diminish the amount that would otherwise be
available for these purposes to holders of Common Stock.
While the Company may consider effecting an equity offering of
Preferred Stock or otherwise issuing such stock or rights to
purchase such stock in the future for purposes of raising
additional capital or for acquisitions, the Company has no
agreements or understandings as of the date hereof with any third
party to effect any such offering or acquisitions, or to purchase
any shares offered in connection therewith, or to vote any such
shares, and no assurances are given that any offering will in
fact be effected or that an acquisition pursuant to which such
shares may be issued will be proposed and consummated.
Therefore, the terms of any Preferred Stock subject to this
proposal cannot be stated or estimated with respect to any or all
of the securities authorized.
Vote Required
The affirmative vote of the holders of a majority of the
shares of the Company's Common Stock outstanding as of the record
date of the meeting will be required to approve the proposed
amendment to the Company's Restated Certificate of Incorporation
to authorize the Series Preferred Stock. Thus, stockholders who
do not vote or who vote to abstain will in effect be voting
against the proposal. Broker non-votes will in effect be deemed a
vote against the proposal.
The Board of Directors believes that approval of Proposal 4 is
in the best interests of the Company and its stockholders.
The Board of Directors recommends a vote FOR this proposal.
PROPOSALS 5 AND 6 SUMMARY
There will be presented to the meeting two additional
proposals to be voted upon separately: (i) Proposal 5--to amend
the 1996 Equity Incentive Plan (the "1996 Plan") to increase the
number of shares of Common Stock by 500,000 shares reserved for
the granting of stock options to employees and non-employee
directors of the Company; and (ii) Proposal 6--to approve the new
Director Retirement Plan (the "Director Retirement Plan") for
which 50,000 shares of Common Stock have been reserved for the
award of stock to non-employee Directors of the Company, 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, the shares issued under the
Stock Bonus Plan and the Director Retirement Plan (assuming for
purposes of this presentation, the allocation of shares to the
Directors retirement account) 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").
NEW PLAN BENEFITS
<TABLE>
<CAPTION>
1994 1996
Incentive Equity
Stock Option Incentive All Other Stock Director
Plan Shares Plan Shares Plan Shares Bonus Retirement
Granted and Granted and Granted and Plan Plan
Name and Position Outstanding Outstanding Outstanding Shares Shares
<S> <C> <C> <C> <C> <C>
I. Gary Bard - 190,000 10,000 36,730 -
Chairman of the Board
and Chief Executive
Officer
John F. Vanderslice - 80,000 10,000 5,000 -
President and Chief
Operating Officer
James R. Henderson 16,500 43,500 - - -
Vice President, Treasurer
and Chief Financial Officer
H. Barry Maser - 50,000 - 1,000 -
Vice President of
Business Development
Demirhan Hakimoglu 2,250 - - - -
Vice President and former
Chief Executive Officer,
Aydin-Yazilim, S.A.
Executive Group 20,250 363,500 20,000 42,730 -
Non-Executive Director Group - 4,300 2,000 - 4,400
Non-Executive Officer 97,638 114,000 3,950 - -
Employee Group
</TABLE>
Vote Required
Approval of Proposals 5 and 6 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 proposals 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 5. APPROVAL OF AN AMENDMENT TO
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. As of February 5, 1998 the Board amended the
Plan, subject to stockholder approval, increasing the maximum
number of shares to purchased under the Plan from 500,000 to
1,000,000 shares, also subject to approval of the increase in the
Company's authorized shares of Common Stock from 7,500,000 shares
to 20,000,000 shares under Proposal 3 above. 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 totaling 499,300 shares had been granted to 16
employees and 700 shares remain available for grant. On March
18, 1998, the closing price of the Company's Common Stock on the
New York Stock Exchange was $11.25. 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 last
amended, approximately 150 employees and directors were eligible
to participate.
If the amendment to the 1996 Plan is not approved by the
stockholders, options granted to purchase shares in excess of
500,000 under the Plan will be cancelled.
The Board of Directors recommends a vote FOR this proposal.
PROPOSAL 6. APPROVAL OF
THE DIRECTOR RETIREMENT PLAN
The Board of Directors of the Company believes that the
long-term growth of the Company can be promoted by offering
long-term incentives to the Company's directors and by attracting
and retaining highly qualified and capable directors. The Aydin
Corporation Director Retirement Plan is designed to achieve this
goal. The Director Retirement Plan was approved by the Board on
March 19, 1998, subject to stockholder approval at the Annual
Meeting. If Proposal 6 is not approved at the Annual Meeting, the
Director Retirement Plan will be null and void, and all awards
previously granted by the Board of Directors under the Director
Retirement Plan will be cancelled. A description of the material
terms of the Director Retirement Plan follows.
The Director Retirement Plan awards certain deferred
compensation to any Director who is not an officer or employee of
the Company. The Board of Directors has reserved 50,000 shares
of Common Stock for issuance under the Director Retirement Plan.
Under the Director Retirement Plan, the Company will establish a
retirement share account for each eligible Director, which is
credited annually with that number of shares of Common Stock of
the Company as determined by the Company's Board of Directors
(the "Retirement Shares"). The award is not in the form of
actual shares of Common Stock at the time the Retirement Shares
are credited to the Director's account. The number of Retirement
Shares in each retirement account is subject to adjustment for
dilution and otherwise as set for in the Director Retirement
Plan.
Awards made under the Directors Retirement Plan are
distributed solely in cash equal to the fair market value, as
such term is defined under the Directors Retirement Plan, of the
shares of Common Stock represented by the Retirement Shares, or
solely in shares of Common Stock, or a combination of cash and
shares of Common Stock, as shall be determined by the Board of
Directors in its sole discretion, upon the first to occur of: (i)
the eligible Director's resignation from the Board; (ii) the
eligible Director's failure to be elected or re-elected to the
Board; (iii) the retirement of the eligible Director from the
Board or (iv) death or permanent disability of the eligible
Director; provided, however, that, in the case of resignation or
retirement, the Director must have served on the Board of
Directors for at least three full years in order to receive a
distribution under the Director Retirement Plan. As of March 1,
1998, in accordance with the Director Retirement Plan, the
retirement accounts of Messrs. Brind, Gokcen, Mozenter and Train
were each credited with 1,100 Retirement Shares of Common Stock.
The Board of Directors is authorized to interpret the
Director Retirement 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 Director Retirement Plan as it shall deem
proper.
The Board of Directors recommends a vote FOR the approval of
the Director Retirement Plan.
INDEPENDENT AUDITORS
In October 1997, the Audit Committee of the Board of Directors
engaged the services of Grant Thornton LLP as the Company's
independent auditors through March 31, 1998. 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 1999 ANNUAL MEETING
Any stockholder who desires to submit a proposal for
consideration at the 1999 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 December 3, 1998, 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
April 2, 1998
<PAGE>
EXHIBIT A
Article Fourth of the Company's Restated Certificate of
Incorporation is proposed to be amended in its entirety as
follows:
FOURTH. (a) The total number of shares which the
corporation shall have authority to issue is Twenty Million
(20,000,000) shares of Common Stock, par value $1.00 per share
(the "Common Stock"), and Two Million (2,000,000) shares of
Series Preferred Stock, par value $.01 per share (the "Preferred
Stock"). These shares shall have no preemptive rights of
subscription concerning further issuance or authorization of the
corporation's shares.
(b) The Preferred Stock may be issued from time to time by
the Board of Directors as herein provided in one or more series.
The designations, relative rights, preferences and limitations of
the Preferred Stock, and particularly of the shares of each
series thereof, may, to the extent permitted by law, be similar
to or may differ from those of any other series. The Board of
Directors of the Corporation is hereby expressly granted
authority, subject to the provisions of this Article Fourth, to
issue from time to time Preferred Stock in one or more series and
to fix from time to time before issuance thereof, by filing a
certificate pursuant to the General Corporation Law, the number
of shares in each such series and all designations, relative
rights (including the right, to the extent permitted by law, to
convert into shares of any class or into shares of any series of
any class), preferences and limitations of the shares in each
such series, including, but without limiting the generality of
the foregoing, the following:
(i) The number of shares to constitute such series
(which number may at any time, or from time to time, be
increased or decreased by the Board of Directors,
notwithstanding that shares of the series may be outstanding
at the time of such increase or decrease, unless the Board of
Directors shall have otherwise provided in creating such
series) and the distinctive designation thereof;
(ii) The dividend rate, if any, on the shares of such
series, whether or not dividends on the shares of such series
shall be cumulative and the date or dates, if any, from which
dividends thereon shall be cumulative;
(iii) Whether or not the shares of such series shall be
redeemable, and, if redeemable, the date or dates upon or
after which they shall be redeemable and the amount or amounts
per share (which shall be, in the case of each share, not less
than its preference upon involuntary liquidation, plus an
amount equal to all dividends thereon accrued and unpaid,
whether or not earned or declared) payable thereon in the case
of the redemption thereof, which amount may vary at different
redemption dates or otherwise as permitted by law;
(iv) The right, if any, of holders of shares of such
series to convert the same into, or exchange the same for,
Common Stock or other stock as permitted by law, and the terms
and conditions of such conversion or exchange, as well as
provisions for adjustment of the conversion rate in such
events as the Board of Directors shall determine;
(v) The rights and preferences, if any, of the
holders of Preferred Stock, and each series thereof, upon
voluntary and involuntary liquidation, dissolution or winding
up of the Corporation;
(vi) Whether the holders of shares of such series
shall have voting power, full or limited, in addition to the
voting powers provided by law, and, in case additional voting
powers are accorded, to fix the extent thereof; and
(vii) Generally to fix the other rights and privileges
and any qualifications, limitations or restrictions of such
rights and privileges of such series, provided, however, that
no such rights, privileges, qualifications, limitations or
restrictions shall be in conflict with the Restated
Certificate of Incorporation of the Corporation or with the
resolution or resolutions adopted by the Board of Directors
providing for the issue of any series of which there are
shares then outstanding.
<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 MAY 1, 1998
This Proxy is Solicited on Behalf of the Board of
Directors
The undersigned, having received the Notice of Annual Meeting
and Proxy Statement dated April 2, 1998, hereby constitutes and
appoints I. Gary Bard 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 March 3,
1998, at the Annual Meeting of Stockholders to be held on May 1,
1998 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
PROPOSALS 1, 3, 4, 5 AND 6 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)
1. To approve Amending the Company's By-laws.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
To Vote for all nominees check this box
FOR [ ]
To Withhold authority to vote for all nominees check this box
WITHHOLD [ ]
2. Board of Directors recommends and will vote FOR the election
of the following as Directors unless otherwise directed (with
designation as to Class if Proposal 1 is approved):
I.G. Bard (Class C), I. Brind (Class C), N.A. Gokcen (Class A),
G. Mozenter (Class B), H.D. Train, II (Class A) and
J. F. Vanderslice (Class B).
To withhold authority to vote for any individual nominee while
voting for the remainder, write this nominee's name in the space
below:
_________________________________________________
3. To approve Amending the Restated Certificate of Incorporation
to increase authorized shares of Common Stock.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. To approve the Amendment to Article Fourth of the Restated
Certificate of Incorporation to authorize the new class of
Series Preferred Stock.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
5. To approve an amendment to the 1996 Equity Incentive Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
6. To approve the Director Retirement Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
7. Subject to the limitation described in 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 other
matters.
PLEASE SIGN EXACTLY AS NAME APPEARS AT LEFT.
Dated: _________________________________________, 1998
Joint owners should each sign. When signing as attorney,
executor, administrator, trustee 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
(side 2)
<PAGE>
APPENDIX No. 2 (Proposal No. 5)
THE 1996 EQUITY INCENTIVE PLAN
OF
AYDIN CORPORATION
1,000,000 Shares
(Last Amended February 5, 1998)
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 1,000,000 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. 3 (Proposal No. 6)
AYDIN CORPORATION
DIRECTOR RETIREMENT PLAN
1. Purpose. The purpose of the Aydin Corporation Director
Retirement Plan (the "Plan") is to promote the long-term growth
of Aydin Corporation (the "Company") by offering long-term
incentives to Directors in the Company and to attract and retain
highly qualified and capable Directors.
2. Definitions. Unless the context clearly indicates
otherwise, the following terms shall have the following meanings:
2.1 "Award" means an award granted to a Director under the
Plan in the form of Retirement Shares.
2.2 "Board" means the Board of Directors of the Company.
2.3 "Director" means a director of the Company.
2.4 "Fair Market Value" means, with respect to any date, the
mean between the highest and lowest sale prices per Share on the
New York Stock Exchange on such date, provided that is there
shall be no sale of Shares reported on such date, the Fair Market
Value of a Share on such date shall be deemed to be equal to the
average between the highest and lowest sale prices per Share on
the New York Stock Exchange for the last preceding date on which
sales of Shares were reported.
2.5 "Retirement Shares" means any Shares credited to a
Directors book account in accordance with Article 6 of this
Plan.
2.6 "Shares" means shares of the Common Stock, par value
$1.00 per share, of the Company.
2.7 "Total Disability" means complete and permanent
inability by reason of illness or accident to perform the duties
of a Director when such disability commenced. All determination
as of the date and extent of the disability of any participant
shall be made by the Committee, upon the basis of such evidence
as the Committee (as defined below) deems necessary and
desirable.
3. Administration of the Plan. The Plan shall be administered
by the Company's Board of Directors ("Board").
- -- 3.1 The Board shall have full power and authority to:
(i) interpret and construe the Plan and adopt such rules and
regulations as it shall deem necessary and advisable to implement
and administer the Plan, and (ii) designate persons other than
members of the Board to carry out its responsibilities, subject
to such limitations, restrictions and conditions as it may
prescribe, such determinations to be made in accordance with the
Board's best business judgment as to the best interests of the
Company and its stockholders and in accordance with the purposes
of the Plan. The Board may delegate administrative duties under
the Plan to one or more agents as it shall deem necessary or
advisable.
3.2 A majority of the Board shall constitute a quorum at any
meeting of the Board and all determinations of the Board shall be
made by a majority of its members present at such meeting. Any
determination of the Board under the Plan may be made without
notice or a meeting of the Board by a written consent signed by
all members of the Board.
3.3 No member of the Board shall be personally liable for
any action or determination made in good faith with respect to
the Plan or any Award or to any settlement of any dispute between
a Director and the Company. Any decision or action taken by the
Board with respect to an Award or the administration or
interpretation of the Plan shall be conclusive and binding upon
all persons.
4. Eligibility. Directors of the Company who are not
executive officers or employees of the Company on the effective
date of the Plan shall be eligible to participate in the Plan in
accordance with Article 6 of this Plan and any director elected
or appointed as director on or after the effective date shall be
eligible to participate provided they have served as a Director
of the Company for at least three full years.
5. Retirement Shares. Awards under this Plan shall be granted
to a participant in the form of Retirement Shares, which shall be
credited to a Retirement Share Account to be maintained for such
participant.
5.1 Each Retirement Share shall be deemed to be equivalent
in value to one Share. The award of Retirement Shares under the
Plan shall not entitle the recipient to any dividend or voting
rights or any other rights of a stockholder with respect to such
Retirement Shares.
5.2 The maximum number of Retirement Shares that may be
awarded under the Plan shall not exceed an aggregate of 50,000
Retirement Shares. If any Retirement Shares awarded under the
Plan shall be forfeited or canceled, such Retirement Shares may
again be awarded under the Plan.
5.3 The Board may in its sole discretion substitute other
forms of awards (such as restricted stock) for Retirement Shares.
Notwithstanding the foregoing provisions of this section, the
Board shall not substitute any other form of award for Retirement
Shares unless, in the opinion of the Board such substitution
would not result in any significant increase in the cost of the
Plan to the Company, or otherwise adversely affect it.
6. Time of Grant of Retirement Shares and Number of Retirement
Shares Granted. On the first business day of March of each year,
each Director shall become entitled to Retirement Shares in such
amount as shall be determined by the Board of Directors to be
determined by the Board of Directors at its meeting held in
February of such year.
7. Timing and Right to Payment of Retirement Shares. A
Director shall have no right to receive payment for any part of
his or her Retirement Shares until the earlier to occur of the
following events (the "Distribution Date"): such Director's (a)
retirement from the Board after having served at least three full
years as a Director; (b) failure to be elected or re-elected to
the Board; (c) death or (d) Total Disability. If such director
leaves the Company prior to the occurrence of such event, such
Director's Retirement Shares shall be forfeited. The Board may,
if in the opinion of the Board circumstances warrant such action,
approve payment of any or all of Retirement Shares that would
otherwise be forfeited as a result of a participant failing to
remain as a Director for the required period.
8. Form of Payment. Payments shall be made to the holder of
Retirement Shares (a) wholly in cash, in an amount equal to the
number of Shares represented by the Retirement Shares times the
Fair Market Value on the Distribution Date, or (b) wholly in an
equal number of Shares, or (c) partly in cash and partly in
Shares in such proportion as the Board deems appropriate. Shares
issued upon payment of Retirement Shares may be either treasury
Shares, or authorized and unissued Shares, or both. Payment in
respect of Retirement Shares shall be made as soon as practicable
after the Distribution Date; provided, however, that before the
distribution of any award, a Director may elect that the payment
of his Retirement Shares should be made in a specified number of
installments.
9. Designation of Beneficiaries. Each Director shall have the
right to designate beneficiaries who are to succeed to such
Director's contingent right to receive future payments hereunder
in the event of death. In case of the failure of a Director to
make a designation or the death of a designated beneficiary
without the Director having designated a successor, distribution
shall be made to the Director's estate. No designation of
beneficiaries shall be valid unless it is in writing, signed by
the Director, dated, and filed with the Board. Beneficiaries may
be changed without the consent of any prior beneficiaries.
10. Amendment and Termination. 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, subject
to any required stockholder approval or any stockholder approval
that the Board may deem advisable for any reason, such as for the
purpose of obtaining or retaining any statutory or regulatory
benefits under tax, securities or other laws or satisfying any
applicable stock exchange listing requirements. The fact that a
director is or had been designated as a 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. However, no action authorized by this Article shall
adversely change the number of Retirement Shares outstanding.
11. Adjustment Provisions. If the Company shall at any time
change the number of issued Shares without new consideration to
the Company (such as by stock dividend, stock split,
recapitalization, reorganization, exchange of shares,
liquidation, combination or other change in corporate structure
affecting the Shares) or make a distribution of cash or property
which has a substantial impact on the value of issued Shares, the
total number of Retirement Shares outstanding under the Plan
shall be appropriately adjusted so that the value of each such
Retirement Share shall not be changed.
11.1 Notwithstanding any other provision of the Plan, and
without affecting the number of Retirement Shares reserved or
available hereunder, the Board shall authorize continuance or
assumption of outstanding Retirement Shares or provide for other
equitable adjustments after changes in the Shares resulting from
any merger, consolidation, sale of assets, acquisition of
property or stock, recapitalization, reorganization or similar
occurrence in which the Company is the continuing or surviving
corporation, upon such terms and conditions as it may deem
necessary to preserve Directors' rights under the Plan.
11.2 In the case of the sale of substantially all of the
assets, merger, consolidation or combination of the Company with
or into another entity, other than a transaction in which the
Company is the continuing or surviving corporation, and which
does not result in the outstanding Retirement Shares being
converted into or exchanged for different securities, cash or
other property, or any combination thereof (an "Acquisition"),
any Director granted Retirement Shares shall have the right
(subject to the provisions of the Plan) thereafter to receive the
Acquisition Consideration (as defined below) receivable upon the
Acquisition by a holder of the number of Shares equal to the
number of Retirement Shares granted to the Director. The term
"Acquisition Consideration" shall mean the kind and amount of
shares of the surviving or new corporation, cash, securities,
evidence of indebtedness, other property or any combination
thereof receivable in respect of one Share of the Company upon
consummation of an Acquisition.
12. Effective Date. The Plan shall be submitted to the
stockholders of the Company for approval and, if approved at the
next annual meeting of stockholders, shall become effective as of
January 1, 1998. If stockholder approval is not obtained at such
annual meeting stockholders, the Plan shall be nullified.
13. Forfeiture for Dishonesty. Notwithstanding anything to
the contrary in the Plan, if the Board finds, by a majority vote,
after full consideration of the facts presented on behalf of both
the Company and any Director, that the Director has been engaged
in fraud, embezzlement, theft, commission of a felony or
dishonest conduct in the course of his service or retention by
the Company or any subsidiary of the Company that damaged the
Company or any subsidiary of the Company or that the Director has
disclosed confidential information of the Company or any subsid-
iary of the Company, the Director shall forfeit all Retirement
Shares. The decision of the Board in interpreting and applying
the provisions of this Section 13 shall be final.
14. Miscellaneous Provisions.
14.1 A Director's rights and interests under the Plan may
not be assigned or transferred. In the case of a Director's
death, the distribution of Shares or cash due under this Plan
shall be made to his designated beneficiary, or in the absence of
such designation, to the Director's estate.
14.2 No Director shall have any claim or right to be granted
an Award under this Plan. Neither this Plan nor any action taken
hereunder shall be construed as giving any person any right to be
retained as a Director.
14.3 Unless earlier terminated in accordance with the
provisions of this Plan, the Plan shall remain in effect until
all Shares reserved under the Plan have been issued.
14.4 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 requirements 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.
14.5 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 interest, whether or not
such action could have an adverse effect on the Plan or any
Retirement Shares granted hereunder, and no Director or
Director'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.
14.6 With respect to the administration of the Plan, the
Company shall indemnify each present and future member of the
Board against, and each member of the Board shall be entitled
without further action on his 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 cur-
tailment of costs of litigation, other than amounts paid to the
Company itself) reasonably incurred by him in connection with or
arising out of, any action, suit or proceeding in which he may be
involved by reason of his being or having been a member of the
Board, whether or not he continues 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 Board (i) in respect of matters as to which he
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 his duty as such member of the Board; or (ii)
in respect of any matter in which any settlement is effected 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 Board
unless, within 60 days after institution of any such action, suit
or proceeding, he 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
Board and shall be in addition to all other rights to which such
member may be entitled as a matter of law, contract or otherwise.
14.6 In the discretion of the Board, no Shares, other
securities or property of the Company or other forms of payment
shall be issued hereunder with respect to any Retirement Shares
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.
14.7 To the extent that Rule 16b-3 under the Securities
Exchange Act of 1934, as amended, applies to Shares or Retirement
Shares granted under the Plan, it is the intention 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.
