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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1998
Commission File #0-6072
EMS TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Georgia 58-1035424
(State of incorporation) (IRS Employer ID No.)
or organization)
660 Engineering Drive
Norcross, Georgia 30092
(Address of principal (Zip Code)
executive offices)
Registrant's Telephone Number, Including Area Code - (770) 263-9200
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.10 par value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days: Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or amendment to this Form 10-K: [X]
The aggregate market value of voting stock held by persons other than
directors or executive officers on March 26, 1999 was $117.2 million,
based on a closing price of $13.75 per share. The basis of this
calculation does not constitute a determination by the registrant
that all of its directors and executive officers are affiliates as
defined in Rule 405.
As of March 12, 1999, the number of shares of the registrant's common
stock outstanding was 8,706,083 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information contained in the Company's 1998 Annual Report to
Shareholders and definitive proxy statement for the 1999 Annual Meeting
of Shareholders of the registrant is incorporated herein by reference in
Parts II, III and IV of this Annual Report on Form 10-K.
PART I
ITEM 1. Business.
GENERAL
SUMMARY
EMS Technologies, Inc. (formerly Electromagnetic Sciences, Inc.) (the
"Company") designs, manufactures and markets products that are important
to a wide range of wireless communications applications. The Company
focuses on the needs of the mobile information user. The Company is
organized around two reportable business segments: Space and Electronics,
and Wireless Products. Each segment is separately managed and comprises a
range of products and services that share distinct operating
characteristics.
(1) Space and Electronics
This segment manufactures custom-designed, highly engineered hardware.
Products perform subsystem functions within larger systems for use in space
and satellite communications, radar, surveillance and military counter-
measures. Orders typically involve schedules for development and production
that can extend a year or more. Most revenues are recognized under
percentage-completion accounting. Hardware is sold to prime contractors
or systems integrators rather than end-users. The Space and Electronics
segment accounted for 39%, 44% and 49% of consolidated net sales in 1998,
1997 and 1996.
(2) Wireless Products
The Wireless Products segment manufactures standardized antennas, terminals,
and other wireless network products. Uses are in logistics, healthcare
information management, and PCS/cellular communications. The manufacturing
cycle for each order is generally just a few days. Revenues are recognized
upon shipment of hardware. Hardware is marketed to end-users and to third-
parties who incorporate their products and services with the Company's
hardware for delivery to an end-user. The Wireless Products segment
accounted for 61%, 56% and 51% of consolidated net sales in 1998, 1997 and
1996.
The discussion of the Company's business set forth in this Item 1 is
qualified
by the materials appearing below under the heading "RISK FACTORS AND FORWARD-
LOOKING STATEMENTS."
BACKGROUND
In the space and electronics segment, the Company has a long history
of applying high-frequency microwave technology. In the mid-1970's, the
Company pioneered the use of electronic beam-forming networks ("BFNs").
A BFN allows a satellite to electronically adjust its antenna pattern in
orbit. BFN technology was originally used by defense communications
satellites to combat interference from the ground, but it has become
important in a wide range of modern communications satellites. BFN
technology allows commercial satellites to quickly adjust to changing
In wireless products, the Company has developed wireless local-area computer
networks that provide mobility and real-time data communications. These
products enhance productivity of mobile workers and improve accuracy of
transaction processing operations. The principal market is for material
management functions in warehouses and distribution centers (the "logistics"
market). Another important market relates to automation of patient care
records in the healthcare environment (the "healthcare" market). In
to the market for route-accounting; in this market, terminals are used by
mobile delivery personnel in tracking sales and inventory. Through
relationships with applications software providers that specialize in
specific markets, the Company's hardware is typically offered as part
of complete system solutions.
The Company's fastest growing wireless product over the past three years
has been a line of cellular/PCS base station antennas (marketed under the
"DualPol" trademark) that employ polarization-diversity technology. These
antennas allow cell-site tower structures that are much simpler and less
obtrusive than conventional antenna towers. In addition, these antennas
offer superior coverage and resistance to signal-fading, as compared with
networks with conventional vertical polarization antennas. The Company
also offers a full line of lower-priced, conventional antennas for both
cellular and PCS networks. These products, along with a family of accessory
products, are marketed to service providers and to original equipment
manufacturers ("OEMs") domestically and internationally.
MARKETS AND PRODUCTS
The Company has developed a broad portfolio of technologies and products.
The Company focuses on providing customer solutions particularly in the
markets for satellite communications, wireless communications infrastructure
and wireless local area data networks:
Space and Electronics Markets.
Historically, satellite technology was funded by the military for defense
applications. Commercial use was cost-effective only for specialized high-
capacity applications in the telecommunications and broadcast industries.
However, satellite-based voice and data networks are increasingly being used
for a variety of lower-cost, high-volume commercial applications as a result
of improvements in satellite technology. New commercial applications include
mobile telephony and data communications.
Satellites provide a number of advantages over terrestrial facilities for
many high-speed communications service applications:
(1) Satellites enable high-speed communications service where a terrestrial
alternative is not available or is not adequate.
(2) Unlike the cost of terrestrial networks, the cost to provide services by
satellite does not increase with the distance between sending and receiving
stations.
(3) Finally, in contrast to the installation of fiber optic cable, satellite
networks can be rapidly and cost-effectively deployed.
Demand for commercial satellites will be determined by several factors,
including:
(1) growth in demand for new satellite-based applications, such as mobile
telephone or data services,
(2) growth in business networking,
(3) growth in direct-to-home television and related voice, video and data
systems,
(4) development of new satellite-based communications architectures to
provide basic telephone and television services in developing regions of
the world, and
(5) replenishment of orbiting satellite constellations nearing the end of
their useful lives.
Several large-scale telecommunications projects are in various stages of
development and implementation. They are contributing to the projected
demand for commercial satellites. Satellite size and weight have a direct
effect on launch cost and capacity. As a result, for these new systems to
be commercially viable, the satellite designs must use systems and
components that are lighter, smaller, and more highly integrated than in
the past.
Proposed system architecture is also affecting the design of ground-based
terminals for future satellite networks. Low earth orbiting (LEO) systems
will operate at high frequencies and use a constellation of satellites,
each with its own complicated antenna system, to produce coverage patterns
on the earth that are similar to cellular telephone systems. Because of
the high frequencies and small cells used by LEO satellites, the ground
terminals will be much smaller and more affordable than their lower-
frequency predecessors, and will require smaller antennas with lower
transmitter power. Ground terminals will also need to include low-cost
scanning antennas to track the satellites as they move overhead,
handing-off from one satellite to the next as the constellation progresses.
Space and Electronics Products.
The Company designs and manufactures innovative satellite communications
products. These products include satellite systems, subsystems and ground
terminal products that address the need for reliable, high-speed
communications systems. The high-speed communications services that are
expected from the next generation of commercial satellites will involve
technologies, such as multiple spot-beam antennas and highly integrated
on-board switching, in which the Company has significant experience. The
Company's products are typically configured as subsystems, which are
complex collections of components that, together, perform a major function
or group of functions within a larger
satellite system. The subsystems developed by the Company for application
in space hardware products include:
- - Beam Forming Networks for Antenna Control.
Almost every next-generation Ka-Band satellite will use sophisticated antenna
systems to create a pattern of multiple coverage areas on the earth's
surface, similar to terrestrial cellular systems. The Company has already
developed and produced such systems, including the transmit and receive
beam-forming networks for NASA's Advanced Communications Technology (ACTS)
satellite system and the Defense Department's MILSTAR EHF satellite system,
both systems with operational satellites in orbit. Several of the key
features of the new "multi-media" satellites have been demonstrated by the
ACTS system, including switching of spot-beams for time-division multiple
access("TDMA") and on-board processing. For these two systems, the Company
has delivered over thirty electronic beam forming networks at both 20GHz
(transmit) and 44 GHz (receive).
- - Switches and Switch Matrixes.
The Company also provides a variety of microwave components that are
integrated into the equipment of other satellite equipment providers.
These components
typically perform complex switching or control functions. For example, the
Company has developed solid state, high-speed switch matrices that route
communications signals along multi-channel networks, for interconnectivity
of channels and efficient network operation. Other products include
redundancy switches used to switch on back-up equipment to replace a failed
on-board component.
- - Satellite Bus Products.
The Company designs and produces hardware for the satellite "bus," which is
the orbiting platform that provides positioning and power to the payload
equipment. The bus acts as the host platform for the mission-specific
payload equipment, and a common design is adaptable for many missions. The
Company utilizes its specialized design and manufacturing processes to
provide electronic power conditioning ("EPC") equipment and attitude
control equipment for several types of satellites. EPCs must be very
efficient in converting voltages generated by the solar arrays into power
supplies that can feed regulated voltages to the on-board equipment.
Another example of bus hardware is the Company's "CALTRAC (trademark)"
star tracker that uses high-speed optical technology to provide attitude
control information for stabilizing a satellite's orbit. The Company
believes that the "CALTRAC (trademark)" star tracker provides performance
that is superior to that of older generation units, and it is currently
under contract to complete development and supply its equipment to customers
who are developing next-generation LEO satellite buses.
- - Aeronautical Antennas.
The Company has developed an industry-leading INMARSAT aeronautical antenna
product, the AMT-50, which is a mechanically-steered antenna that is
connected to an aircraft's navigational system and automatically remains
directed toward a geostationary communications satellite for voice and
low data-rate communications. This antenna is mounted under a small,
unobtrusive radome atop an aircraft's tail stabilizer. The Company believes
that this product has the leading market share in the high-end corporate jet
developed its "CALQUEST (trademark)" product, which is a complete satellite
telephone system. This product is used on a wide range of turbo-prop and
jet aircraft for voice and data communications, is functional over North and
Central America, and provides a more affordable solution for satellite
communications than can be provided within the worldwide INMARSAT system.
The Company is also developing a steerable antenna system designed to
provide live television to jet aircraft by wireless link to a direct
broadcast satellite (DBS). The system includes a low-profile mechanically
steerable antenna system, mechanical positioner, and a beam steering unit
to keep the antenna properly pointed at the satellite during the motion
associated with flight.
- - Ground Terminal Products.
The Company is a leading provider of the ground station equipment associated
with satellite-based "search and rescue" systems, including the local-user
terminals that process information received from satellites. The local-user
terminal determines the location of the maritime or aviation beacons that
transmit distress signals to the satellite system, and typically displays
the results for intervention by emergency authorities. This terminal
technology can also be adapted for routine tracking and management of
aviation and maritime fleets.
The Company is also under contract to develop a new packet-data terminal.
Initial uses for the product are expected to be in fleet management and
communications for the transportation industry. The Company expects that
delivery of this product will begin in 1999.
Subsequent Event Affecting Space Operations.
In January 1999, the Company acquired the Satellite Products business
unit of Spar Aerospace Limited, located near Montreal, Quebec. As measured
in equivalent U.S. dollars, this business unit had 1998 revenues of
approximately $55 million and a backlog of orders at the end of 1998 totaling
$90 million.
The transaction was accounted for as an asset purchase valued at
approximately $20 million, subject to adjustment for actual versus
projected working capital
at the closing date, and no goodwill resulted. One-third of the purchase
price was financed under the Company's credit line with a U.S. bank, and the
remainder is being financed by the seller. The seller-financed amount is
payable in four equal installments, with the first installment due
approximately three months after the transaction's close and the other three
installments due, with annual interest of 5.5%, on December 31, 1999, 2000,
and 2001, respectively. All four installments are payable, at the Company's
option, either in cash or equivalent value of the Company's common stock.
This newly acquired operation has over 500 employees and a marketing
organization that is very experienced in international sales. The site has
world-class space manufacturing, integration and test facilities. The
operation's four major product lines for satellites - antennas, RF products,
power converters, and digital products for command, control and
communications - are believed to complement the Company's existing space
operations in Atlanta and Ottawa.
Included in the transaction was an equity investment in the SkyBridge
program. SkyBridge is one of the latest generation of broadband,
multi-media satellite
programs under development. The Company's present space operations had
already been supporting SkyBridge, and management believes that the addition
of the Montreal operations could increase the Company's potential to obtain
significant work on this international program.
Wireless Products and Markets.
The Company's wireless products are focused on the markets for (1) wireless
infrastructure and (2) wireless local-area computer networks for logistics
and healthcare.
Wireless Infrastructure
National and international infrastructure for wireless communications will
need to expand to support growing worldwide demand. This demand is being
fueled by
(1) decreasing prices for wireless handsets,
(2) a more favorable regulatory environment,
(3) greater competition among service providers, and
(4) more availability of services and RF spectrum.
In addition, several developing countries are installing wireless telephone
networks as an alternative to installing, expanding or upgrading traditional
hard-wired networks. Emerging wireless data applications may also expand
the market by allowing service providers to increase revenue-generating
traffic on their networks.
Specific technological trends are also affecting the wireless industry. For
example, the continuing growth of the wireless communications market has
strained the capacity of traditional analog cellular systems that can carry
only one call per channel of radio spectrum. As a result, many service
providers are installing new digital equipment to increase per-channel
capacity by factors ranging from three to eight. In addition, service
providers have begun to construct PCS digital networks that operate at twice
the frequency level of cellular systems; this provides the greater
bandwidth necessary for an expanded range of voice and data services. PCS
technology requires smaller cells than analog technology and, as a result,
approximately four times the number of base stations to complete its
geographical build-out.
Although existing systems have been almost exclusively devoted to the mobile
voice/paging market, several proposed systems would offer high-speed wireless
services to both businesses and consumers as an alternative to wireline
approaches. Initial system applications appear to be in point-to-multipoint
communications, where several service providers have licensed spectrum and
are conducting field tests. Base station antennas in point-to-multipoint
systems emulate the multiple-beam antennas designed for space, and TDMA
switching technology could be implemented with hardware very similar to
the Company's satellite technologies described previously in this document.
- - Dual Polarization Antenna Products.
The Company's "DualPol (trademark)" antenna utilizes polarization diversity
to combine the functionality of three vertically-polarized antennas (two
receive and one transmit) into a single, compact device. With fewer antennas
required, "DualPol (trademark)" technology allows the supporting antenna
tower to be much smaller and less expensive than a traditional cellular/PCS
antenna site, which must support the weight and wind-loading of a large
mounting structure atop the tower. An increasingly important factor in
establishingthe location of a cell site is the aesthetics of the tower
structure. Unlike traditional vertical polarization cellular antennas, the
Company's "DualPol(trademark)" antennas can be mounted in a very compact
configuration that can fit on top of existing utility poles, or be disguised,
for example, in a clock
tower. The mounting flexibility not only benefits the service provider in
obtaining site approvals, but also results in lower installation and
structure costs. Further, these antennas offer superior coverage and
resistance to signal-fading, as compared with networks with conventional
vertical polarization antennas.
The Company's "AcCELLerator (trademark)" antenna combines multiple "DualPol
(trademark)" antennas pre-packaged in a compact cylindrical enclosure that
provides the same multi-sector coverage as a large, nine-antenna,
spatially-diverse base station, yet with a much smaller, less
visually-obtrusive structure.
- - Vertical Polarization Antenna Products.
The Company's lower-cost vertical polarization antennas apply "beam-shaping"
techniques of amplitude and phase weighting to achieve the most effective
antenna performance for specific applications. The Company's "OptiFill
(trademark)" antennas are designed for use in a typical crowded coverage
area. These antennas utilize null filling, upper sidelobe suppression
and electronic down tilt to lower co-channel interference, reduce the
number of dropped calls, and improve sound quality. The Company's
"OptiRange (trademark)" antennas are designed to maximize "gain" and are
useful in systems that have large cells, such as rural areas or initial
urban system roll-outs with a small number of base stations.
The Company leases a 60,000 square foot facility specifically designed to
allow high-volume production of its wireless infrastructure antenna product,
as well as quick response to customer orders.
Wireless Local Area Networks.
Major technological advances and changes in the regulatory environment have
led to the development and proliferation of wireless computer networks that
extend the reach of existing wired networks. Wireless local area networks
(LAN's) now accommodate notebook computers, pen-based notepads and handheld
data collection terminals. By providing network connectivity for mobile
users, these products increase the accuracy, timeliness and convenience of
data collection and information access. Traditionally, these wireless LAN
systems were developed for operation using narrow band UHF radios at 450 MHz.
The current generation of wireless LAN systems typically operate at 900 MHz
with data rates in the range of 56-64 Kbps. The next generation of wireless
LAN systems operate at even higher speeds of 1 Mbps operating at 2.4 GHz.
Future video transmissions and conferencing systems will likely use the 5.7
GHz frequency band where transmission rates of up to 25 Mbps are foreseen.
The development of these advanced products has created new applications in
established industrial markets and in vertical markets, such as healthcare.
In healthcare, for example, wireless LANs now allow medical professionals
to access clinical data and input patient charting information at the
point-of-care anywhere in a hospital environment. Data-intensive applications
in markets such as healthcare require robust and scalable wireless networks
that can support an increasing number of applications and users over time.
Healthcare systems are typically sold by software providers that have the
direct relationship with end-user customers. To enhance its role with the
software providers, the Company provides other hardware and accessories
needed for complete wireless systems.
The Company has strategic alliances or VAR (value added re-seller)
arrangements with several of the leading healthcare information management
companies, including the HBO & Company ("HBOC"), which is the largest
in the U.S. The Company has completed wireless LAN installations in a
significant number of hospitals and healthcare facilities.
Wireless Local Area Network Products.
The Company's wireless LANs provide mobility and real-time data
communications to enhance productivity. The Company's wireless LANs
have been installed at more than 4,000 sites world wide, including the
facilities of many Fortune 500 companies and some of the world's largest
materials handling installations, such as distribution centers and seaports.
The Company's wireless logistics systems, which generally incorporate
bar-code scanning capabilities, are compatible with commonly used
customer-owned computers and can be configured for a variety of applications.
A typical system consists of terminals that incorporate radio transmitters
and receivers, a base station that communicates with these terminals, a
controller that provides an interface between the base station and host
computer, and software that manages and facilitates the communications
process.
- - Terminals.
The Company offers several types of terminals, all of which utilize radio
frequency technology:
(1) Hand-held terminals are small, lightweight and intended to be carried
by people,
(2) Vehicle-mounted terminals are larger, heavy-duty terminals for use on
fork-lifts, cranes and other mobile materials handling equipment,
(3) A table-top model is used for fixed positions where computer cabling
is not practical, and
(4) Wireless modems provide wireless communication capabilities for other
devices, such as small computers or process controllers.
All terminals incorporate built-in radios that operate either in a licensed,
narrow frequency band or in an unlicensed broader, "spread spectrum"
frequency band. The Company's terminals incorporate Intel (registered
trademark) processors that allow support for either terminal emulation or
client-server applications.
- - Radio Base Stations and Controllers.
The wireless communications link between the terminal and the host computer
or network is completed by a radio base station and controller. The radio
base station and controller may be integrated into a single unit for
smaller systems. A base station converts the radio signals from a terminal
to digital signals recognizable by the host computer, and also converts
data from the host computer into radio signals for transmission to the
terminals. Radio base stations can operate effectively in facilities of
many sisea and structural designs.
Controllers provide the critical interface between the radio base station a
nd the host computer. The Company's controllers provide transparent
connectivity to all widely accepted computer architectures without
modifications of existing applications software and network structure.
Controllers also manage complex transmission traffic with sophisticated
programming algorithms.
- - Healthcare Products and Services.
The Company designs and implements wireless networks for healthcare
information applications, which involve integration of its own products
with specialized terminals and radios from other manufacturers. The
Company's healthcare hardware includes its latest generation of handheld
terminals for materials management and the specially-designed "PenDock
(trademark)" docking station that provides constant battery charging and
secure access to keyboards in the healthcare environment. The Company
has also design a mobile clinical workstation as a "hands-free"
alternative to the use of handheld terminals.
- Other Products.
In addition to the basic system hardware, the Company offers
various accessories:
(1) Bar code scanners,
(2) Battery chargers,
(3) Portable printers,
(4) Software products for system communications, integrated applications
and terminal emulation, and
(5) Repair and maintenance services.
SALES AND MARKETING
The Company's sales and marketing strategy is focused on direct sales of
space and satellite communications and wireless infrastructure products.
Due to the technical nature of the Company's products, these direct sales
efforts are conducted primarily by internal personnel with a strong
engineering background. Particularly in the Space and Electronics group,
many of these personnel have other engineering or management
responsibilities within the Company. The Company also utilizes independent
marketing representatives, both in the U.S. and internationally. These
individuals are selected for their knowledge of the local market and
their ability to provide technical support and ongoing, direct contact
with the Company's current and potential customers.
In space and electronics, the development of major business opportunities
often involves significant bid and proposal effort; this work can include
complex engineering to determine the technical feasibility and cost
effectiveness of various design approaches. Most of the Company's bid and
proposal costs are reported in cost of sales, although a portion of these
costs is classified as selling, general and administrative expenses. Total
bid and proposal costs were $2.5 million in 1998, compared with $1.8
million in 1997 and $1.2 million in 1996, reflecting an increased number
of major business opportunities, especially in space communications.
The markets for space and satellite communications comprise a relatively
small number of customers, which are typically well-known large
corporations. The Company's marketing efforts rely on ongoing communications
with this base of potential customers, both to determine the customers'
future needs and to inform customers of the Company's capabilities. Because
the Company can often receive multiple orders from many of these customers,
technical support and service after the sale are also crucial to maintain
a strong supply relationship.
The Company's sales and marketing strategy for wireless products involves:
(1) direct sales to end users, and
(2) indirect sales through third parties who often incorporate their products
and services with the Company's hardware for delivery to an end-user. Third
parties include:
(a) strategic partners,
(b) value-added re-sellers,
(c) original equipment manufacturers, and
(d) distributors, including representatives in 35 countries.
For wireless infrastructure, sales and marketing are performed by internal
staff plus three regional sales offices in North America. Direct sales of
logistics systems are performed by an internal sales support staff, 20
regional sales persons in North America, and six European subsidiaries. For
healthcare, the Company relies solely on its strategic partners for their
sales efforts, and works closely with them to identify and meet customer
needs and to provide necessary customer support.
BACKLOG
The backlog of consolidated orders at December 31, 1998 was $49 million,
compared with $54 million one year earlier. The decrease was primarily in
the space and electronics segment, in which potential customers are proposing
and developing major new programs, but have not progressed to the point of
placing significant orders with suppliers.
MATERIALS
Materials used in the Company's space and electronics products consist
primarily of magnetic microwave ferrites, metals such as aluminum and brass,
permanent magnet materials, and electronic components such as transistors,
diodes, IC's, resistors, capacitors and printed circuit boards. Most of the
magnetic microwave ferrite materials are purchased from two suppliers, and
permanent magnet materials are purchased from a limited number of suppliers.
Electronic components and metals are available from a larger number of
suppliers and manufacturers.
The electronic components and supplies, printed circuit assemblies, keypad
assemblies and molded parts needed for the Company's wireless products are
generally available from a variety of sources. Bar code scanners are
included in almost all orders, and a significant number of the scanners are
purchased from Symbol Technologies, Inc., which is also a competitor of the
Company; however, there are alternative suppliers that manufacture and sell
bar code scanners under license agreements with Symbol. The Company believes
that its logistics competitors also rely on scanning equipment purchased from
or licensed by Symbol. In addition, Symbol and the Company have a license
agreement which allows the Company to utilize Symbol's patented integrated
scanning technology in certain future products.
The Company believes that its present sources of required materials are
adequate. The Company does not believe that the loss of any supplier or
subassembly manufacturer would have a material adverse effect on its business.
In the past, shortages of supplies and delays in the receipt of necessary
components have not had a material adverse effect on shipments of the Company's
products.
COMPETITION
The Company believes itself to be, in sales, a major independent supplier
of (1) microwave subsystems for satellite communications and other
specialized uses, (2) base station antennas and other wireless
infrastructure products for cellular and PCS mobile networks, and
(3) wireless local-area computer network products, mainly for logistics
systems. However, the Company's markets are highly competitive. Some of the
Company's competitors have substantial resources and facilities that exceed
those of the Company also competes against smaller, specialized firms.
In the space and electronics segment, the Company competes with divisions
of certain large U.S. industrial concerns, such as Raytheon, Hughes, Loral,
M/A-Com, Inc., and Rockwell, as well as non-U.S. companies such as COMDEV
and RACAL. Some of these companies, as well as others, are potential
competitors of the Company for certain contracts and potential customers
on other contracts. Certain major customers could also elect to internally
develop and manufacture the products that they presently purchase from
the Company.
In the wireless products segment, the Company competes with divisions of
certain large U.S. and international companies, including Allen Telecom
and Ericcson in the wireless infrastructure market, and Unova, Symbol
Technologies, Teklogix Corp. and Telxon Corporation in the logistics market.
The Company believes that the key competitive factors in both the space
and technology segment and the wireless products segment continue to be
product performance, technical expertise and support to customers, adherence
to delivery schedules, and price.
RESEARCH AND DEVELOPMENT
The Company conducts most of its research and development in the space
and electronics segment in direct response to the unique technical
requirements of a customer's order, and most of these costs are included with
the overall manufacturing costs for specific orders.
In 1998, 1997 and 1996, the Company spent $13.1 million, $9.1 million and
$12.1 million, respectively, in internally sponsored research and
development. The lower level of expenses in 1997 compared with 1996 was due
to the completion of several development projects in late 1996 and early 1997
related to new wireless technologies and SATCOM products. In addition,
the Company directed a higher proportion of its total research and
development effort in 1997 toward customer-funded projects, and the Company's
$677,000 settlement under a Canadian government technology program, resulting
from a claim for unreimbursed research and development expenses incurred in
years prior to 1991.
EMPLOYEES
As of December 31, 1998, the Company and its subsidiaries employed a total
of approximately 1,100 persons. Over 70% of the Company's employees are
directly involved in engineering or manufacturing activities.
RISK FACTORS
The business operations of EMS Technologies involve significant risks and
uncertainties that could adversely affect its financial condition, results
of operations, and future development. In addition to domestic economic
conditions, which can change unexpectedly and affect US businesses generally,
these risks and uncertainties include the following:
Competitive Technology Could be Superior. The markets in which EMS competes
are very sensitive to technological advances. As a result, technological
developments by competitors can cause our products to be less desirable to
customers, or even to become obsolete.
Competitors' Marketing Strategies Can Affect Our Results. EMS operates in
competitive markets. Its competitors may pursue aggressive marketing
strategies, such as significant price discounting. These competitive
activities can reduce EMS's sales and profit margins below expected levels.
Major Potential Sales Require that Customers Find Adequate Funding. Major
communications infrastructure programs, such as proposed constellations
of low-earth-orbiting satellites or PCS/cellular systems for large urban
areas, are important sources of our current and planned future revenues.
We also participate in a number of large defense programs. Programs of
this nature cannot proceed unless the customer can raise adequate funds,
from either governmental or private sources. As a result, our expected
revenues can be affected by political developments or by conditions in
private capital markets. They can also be affected by whether private
capital markets are receptive to a customer's proposed business plans.
Public Acceptance of New Communications Systems Affects Purchases by Our
Customers. Construction and expansion of new communications systems
depends on public demand for the new services. As a result, growth rates
in our revenues from wireless infrastructure products and proposed
high-speed satellite communications systems are likely to be heavily
affected by the timing and extent of public willingness to buy mobile
communications services.
We May Encounter Technical Problems. Technical difficulties can cause
delays and additional costs for EMS. We are particularly exposed to
this risk in product development efforts, and in fixed-price contracts
on technically advanced programs that require novel approaches and
solutions.
New Product Transitions Can Be Costly and Disruptive. Because our
businesses involve constant efforts to improve existing technology,
EMS regularly introduces new generations of products. During these
transitions, customers may reduce purchases of older equipment more
rapidly than we expect, which can cause lower revenues and excessive
inventories. In addition, product transitions create uncertainty
about both production costs and customer acceptance. These potential
problems are generally more severe if our product introduction schedule
is delayed by technical development problems.
Our Products May Unexpectedly Infringe on Third-Party Patents. As we
regularly develop and introduce new technology, we have a risk that our
new products or manufacturing techniques infringe on patents held or
currently being processed by others. The US Patent Office does not
publish patents that are in process, and its processing typically takes
at least two years and often even longer. Thus, we may be affected by
a patent granted well after EMS has introduced an infringing product.
In addition, questions of whether a particular product infringes a
particular patent can involve significant uncertainty. As a result of
these factors, third-party patents may interfere with marketing plans,
or may from time to time create significant expense to defend
infringement claims or respond to customer indemnification claims.
We Depend on Highly Skilled Employees. Because our products and programs
are technically sophisticated, EMS must attract and retain employees
with advanced technical and program-management skills. Other employers
also often recruit persons with these skills, both generally and in
focused engineering fields.
The Export License Process for Space Products Has Become Very Uncertain.
As a result of recent legislation, products for use on commercial
satellites are included on the US Munitions List and are subject to
State Department licensing requirements. We expect delays in processing
licenses because the State Department has announced that it has not added
staff to handle its increased workload and does not have Congressional
appropriations to do so. We also expect that political considerations
will increase the time and difficulty of obtaining licenses for export
of technically advanced products. The license process may prevent
particular sales, and in general will create schedle uncertainties that may
cause foreign customers, such as those in Western Europe, to develop
internal or other foreign sources rather than use US suppliers.
Conditions in Other Countries Affect Our Revenues. International sales
significantly affect EMS's financial performance. Economic conditions in
customer countries, and exchange rate movements that affect the local-
currency cost of our products, are particularly important in our wireless
local-area network and PCS/cellular infrastructure businesses.
In Some Markets, We Depend on Marketing Relationships with Other Companies.
In the healthcare, mobile satellite communications, and route accounting
markets, the Company does not have established distribution channels.
Rather, we are seeking to develop marketing relationships with other
companies that have, for example, specialized software and established
customer service systems. EMS's success in these markets will be heavily
affected by whether we can identify and structure effective relationships
with these other companies.
We are in the Process of Integrating a Major Acquisition in Our Space &
Electronics Business. EMS acquired the Montreal-based Space Products
division of Spar Aerospace Limited on January 29, 1999. This operation
has more than 500 employees, 330,000 square feet of facilities, and a
$90 million backlog at December 31, 1998. Particularly during 1999,
our financial performance will be affected by whether we can avoid
unexpected integration costs and by our success in identifying and
implementing potential operating efficiencies.
EMS's Quarterly Results Are Volatile and Difficult to Predict. The
quarterly earnings contributions of some of our product lines are heavily
dependent on customer orders or product shipments in the final weeks or
days of the quarter. This can create volatility in quarterly results,
and hinders our ability to determine in advance whether quarterly earnings
will meet prevailing analyst expectations.
FORWARD-LOOKING STATEMENTS
The discussions of the Company's business in this Report, and in other
public documents or statements that may from time to time incorporate or
refer to these disclosures, contain various statements that are or may be
deemed to be forward-looking. Forward-looking statements include, but are
not limited to:
(1) statements about what the Company or management believes or expects,
(2) statements about anticipated technological developments or anticipated
market response to or impact of current or future technological developments
or product offerings,
(3) statements about trends in markets that are served or pursued by the
Company,
(4) statements implying that the Company's technology or products are well
suited for particular emerging markets, and
(5) statements about the Company's plans for product developments or market
initiatives.
These forward-looking statements may differ materially from actual results
due to the variety of risks and uncertainties that affect the Company,
including those set forth under the foregoing "Risk Factors" heading.
EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning the executive officers of the Company is set forth
below:
Thomas E. Sharon, age 54, became Chairman of the Board in 1998, Chief
Executive Officer in July 1994, and had previously served as President
since 1987. He joined the Company as an engineer in 1971 and later served
as Executive Vice President from 1985 to 1987. He became a Director in 1984.
He also serves as a Director and officer of each of the Company's operating
subsidiaries.
Don T. Scartz, age 57, has served as Senior Vice President and Chief
Financial Officer of the Company since 1995; he has also served as Treasurer
since 1981, as Vice President-Finance from 1981 to 1995, and as Secretary
from 1982 to 1991. He joined the Company as Controller in 1978. He also
serves as the Chief Financial Officer of each of the Company's operating
subsidiaries. He became a director of the Company in 1995.
John J. Farrell, age 48, is Senior Vice President of the Company and
President of its Wireless Products Group. He joined the Company in
May 1995 as President and Chief Operating Officer of the LXE subsidiary
(which conducts the logistics and healthcare business). Previously, he
had been Senior Vice-President and Chief Operating Officer of Oki Telecom,
a world-wide supplier of cellular telephones and base stations, since 1993.
During the three years prior to 1993, he directed Oki's marketing and sales
efforts.
William S. Jacobs, age 53, became General Counsel and Secretary of the
Company in 1992, and Vice President in 1993. He is also responsible for
the legal affairs of the operating subsidiaries. Previously, he was engaged
in the private practice of law, and in such capacity had served as the
Company's principal corporate legal counsel since 1982.
Jeffrey A. Leddy, age 44, became Vice President in 1997 with responsibilities
inlcuding corporate strategic planning. Previously, he served since
July 1994 as President of the EMS Technologies, Inc. subsidiary, which
conducts much of the space and electronics business. He joined the
Company as an engineer in September 1980.
Gerald S. Bush, age 43, is Vice President and General Manager, Space and
Electronics, Canada. He joined the Company in January 1999, when the
Company acquired the Satellite Products business of Spar Aerospace Limited
(Spar) where Mr. Bush had been Vice President and General Manager since
1998. Mr. Bush joined Spar in 1981 as a structural and thermal analyst.
He served as a program manager until 1995, when he became Director of
Manufacturing for Spar's Satellite Products business, and in 1996 he
became Vice President of Operations for that business.
Paul R. Cox, age 40, has been Vice President and General Manager, Space and
Electronics, Atlanta since 1998. He joined the Company in 1985 as an
engineer, and prior to his current position he was Director, Space
Products until 1997, when he became Vice President, Space Systems.
James T. Grosch, age 41, has been Vice President and General Manager,
Infrastructure Products since 1998. He joined the Company in 1985 as an
engineer, and he has managed the Company's EMS Wireless business group,
which designs, manufactures and markets the Company's line of PCS/cellular
base station antennas, since that group's inception in 1993, first as
Vice President, Wireless Communications, and later (1997) as Vice
President and General Manager of EMS Wireless.
Neilson A. Mackay, age 59, is Vice President and General Manager, SATCOM
Products. He joined the Company in September 1992 as President of CAL
Corporation, an Ottawa, Ontario based subsidiary engaged in the Company's
space and technology business.
ITEM 2. Properties.
The Company's corporate headquarters and its Georgia operations are
located in two buildings owned by the Company (comprising 250,000
square feet of floor space on 21 acres), as well as in 119,000 square
feet of leased office space (leases to expire prior to 2004) in three
other buildings, all located in or near Technology Park, Norcross,
Georgia, a suburb of Atlanta. The combined Georgia facilities comprise
clean rooms, a microelectronics laboratory, materials storage and control
areas, assembly and test area, offices, engineering laboratories, a ferrites
laboratory, drafting and design facilities, a machine shop, a metals
finishing facility, dark rooms and painting facilities. The Company
leases approximately 63,000 square feet of office and manufacturing space
for its Canadian operations, located in Ottawa, Ontario; the lease
on this facility expires in 2007.
The Company's Montreal operations include a 330,000 square foot
facility surrounded by 34 acres of undeveloped land. One-fourth of
the facility comprises manufacturing, assembly and laboratory space,
including an advanced near-field and far-field test range area and a
subsystem and payload integration area. Three-fourths of the facility
is used for engineering and administrative office space. The facility's
location in the province of Quebec affords it significant tax incentives
and credits sponsored by the provincial government.
ITEM 3. Legal Proceedings.
Not Applicable
ITEM 4. Submission of Matters to a Vote of Security Holders.
Not Applicable
PART II
ITEM 5. Market for Registrant's Common Equity and Related
Stockholder Matters.
The common stock of EMS Technologies, Inc. is traded in the over-the-
counter market (Nasdaq symbol ELMG). At March 12, 1999 there were
approximately 1,000 shareholders of record, and the Company believes
that there were approximately 4,000 beneficial shareholders, based upon
broker requests for distribution of Annual Meeting materials. The price
range of the stock is shown below:
1998 Price Range 1997 Price Range
High Low High Low
---- --- ---- ---
First Quarter $ 24-3/4 17-1/2 25-1/4 17-1/4
Second Quarter 24-3/8 16-5/8 22-3/4 14-1/2
Third Quarter 21-1/4 11-1/8 29 17-1/4
Fourth Quarter 16-1/4 10-1/4 28-3/4 16
The Company has never paid a cash dividend with respect to shares of its
common stock and has retained its earnings to provide cash for the operation
and expansion of its business. Future dividends, if any, will be
determined by the Board of Directors in light of the circumstances then
existing, including the Company's earnings and financial requirements and
general business conditions.
ITEM 6. Selected Financial Data.
Information required for this item is incorporated herein by reference
to the Selected Financial Data contained in the Company's 1998 Annual
Report to Shareholders, and is included in Exhibit 13.1.
ITEM 7. Management's Discussion and Analysis of Results of Operations
and Financial Condition
ITEM 7a. Item 7a. Quantitative and Qualitative Disclosures About Market Risk
At December 31, 1998, the Company had the following market risk sensitive
instruments (in thousands):
Revolving credit loan, maturing in November 2003,
interest payable quarterly at a variable rate
(6.55% at the end of 1998) $ 19,150
Line of credit maturing in May 1999, interest
payable at a variable rate (7.5% at the end of 1998) 2,197
------
Total long-term debt $ 21,347
======
At December 31, 1998, the Company also had intercompany accounts that
eliminate in consolidation but that are considered market risk sensitive
instruments:
Short-Term Due to Parent, payable by European
subsidiaries in the following countries and
arising from purchase of the Parent's products
for sale in Europe:
Exchange Rate
($U.S. per unit $U.S. in thousands
of local currency) (Reporting Currency)
------------------ --------------------
Belgium .029 /Franc $ 586
Holland .179 /Guilder 3,881
Germany .599 /Mark 1,932
Sweden .532 /Krona 411
France .123 /Franc 2,129
------
Total short-term due to parent $ 8,939
======
Long-Term Debt to Parent, with unspecified
maturity, incurred by Canadian subsidiary to
provide working capital, with interest
accruing at an annual rate of 6% as of
December 31, 1998:
Exchange Rate ($U.S. per $Canadian) $.653 / Can. Dollar
Total long-term debt to parent ($U.S. in thousands) $ 9,738
======
Information required for this item is incorporated herein by reference to the
Management's Discussion and Analysis of Results of Operations and Financial
Condition contained in the Company's 1998 Annual Report to Shareholders, and
is included in Exhibit 13.1.
ITEM 8. Financial Statements and Supplementary Data.
Information required for this item is incorporated herein by reference
to the Consolidated Financial Statements and Notes to Consolidated Financial
Statements contained in the Company's 1998 Annual Report to Shareholders,
and is included in Exhibit 13.1.
ITEM 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
Not applicable.
PART III
ITEM 10. Directors and Executive Officers of the Registrant.
The information concerning directors called for by this Item is contained
in the Company's definitive Proxy Statement for its 1999 Annual Meeting of
Shareholders and is incorporated herein by reference. The information
concerning executive officers called for by this Item is set forth under
the caption "Executive Officers of the Registrant" in Item 1 hereof.
ITEM 11. Executive Compensation.
The information called for by this Item is contained in the Company's
definitive Proxy Statement for its 1999 Annual Meeting of Shareholders and
is incorporated herein by reference.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management.
The information called for by this Item is contained in the Company's
definitive Proxy Statement for its 1999 Annual Meeting of Shareholders and
is incorporated herein by reference.
ITEM 13. Certain Relationships and Related Transactions.
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.
(a)1. Financial Statements
The following consolidated financial statements are contained in the
Company's 1998 Annual Report to Shareholders, and are incorporated
herein by reference to Exhibit 13.1:
Independent Auditors' Report.
Consolidated Statements of Earnings -
Years ended December 31, 1998, 1997 and 1996.
Consolidated Balance Sheets - December 31, 1998 and 1997.
Consolidated Statements of Stockholders' Equity and Comprehensive
Income - Years ended December 31, 1998, 1997 and 1996.
Consolidated Statements of Cash Flows - Years ended December 31,
1998, 1997 and 1996.
Notes to Consolidated Financial Statements.
(a)2. Financial Statement Schedules
Independent Auditors' Report
II. Valuation and Qualifying Accounts -
Years ended December 31, 1998, 1997
and 1996
All other schedules are omitted as the required information is
inapplicable, or the information is presented in the financial statements
or related notes.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
EMS Technologies, Inc.:
Under date of February 5, 1999, we reported on the consolidated
balance sheets of EMS Technologies, Inc. (formerly known as Electromagnetic
Sciences, Inc.) and subsidiaries as of December 31, 1998 and 1997, and the
related consolidated statements of earnings, stockholders' equity and
comprehensive income, and cash flows for each of the years in the three-year
period ended December 31, 1998, as contained in the 1998 annual report to
stockholders. These consolidated financial statements and our report thereon
are incorporated by reference in the annual report on Form 10-K for the year
1998. In connection with our audits of the aforementioned consolidated
financial statements, we also audited the related consolidated financial
statement schedule as listed in the accompanying index. This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement schedule
based on our audits.
In our opinion, the financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
KPMG LLP
Atlanta, Georgia
February 5, 1999
Schedule II
EMS Technologies, Inc.
Valuation and Qualifying Accounts
(In thousands)
Years ended December 31, 1998, 1997 and 1996
-----------------------------------------------------
Additions
Balance at charged to Balance
beginning costs and at end
Classification of year expenses Deductions Other of year
- -------------- ---------- ---------- ---------- ----- -------
Allowance for
Doubtful Accounts:
1996 $ 720 - (450)(a) - 270
1997 $ 270 - - - 270
1998 $ 270 317(a) (277)(a) - 310
Reserve for Deferred
Tax Assets:
1996 $ 6,161 751(b) - - 6,912
1997 $ 6,912 - (920)(b) - 5,992
1998 $ 5,992 - (4,664)(b) - 1,328
(a) Deductions in 1996 and additions in 1998 represented adjustments of the
level of reserves determined to be necessary based upon the general aging
of receivables and the repayment of certain balances. In addition,
deductions in 1996 and 1998 included the write-off of certain receivables.
(b) Changes in the reserve for deferred tax assets related to the net
change in the underlying deferred tax assets associated with the Company's
Canadian subsidiary. These deferred tax assets had been fully reserved
when the subsidiary was acquired in 1993 due to uncertainty about realization.
As a result, these changes in reserves had no effect on the Company's 1996
or 1997 statement of earnings. In 1998, based upon the Canadian operation's
significantly improved profitability and management's revised assessment of
the subsidiary's business prospects, the valuation allowance related to these
deferred tax assets was decreased; the resulting benefit was allocated to
goodwill and there was no effect on the Company's 1998 statement of earnings.
(a)3. Exhibits
The following exhibits are filed as part of this report:
2.1 Asset Purchase Agreement, dated December 30, 1998, by and
between Electromagnetic Sciences, Inc. and Spar Aerospace
Limited, inlcuding Exhibits 1 and 2 but excluding all
Schedules. (The list of Schedules appears in Section 1.12
of the Agreement; (i) the registrant hereby agrees to furnish
supplementally a copy of any Schedule to the Commission
upon its request.) (Incorporated by reference to the Company's
Current Report on Form 8-K dated January 9, 1999.)
2.2 Letter of Amendment to Purchase Agreement, dated January 29,
1999 (incorporated by reference to the Company's Current
Report on Form 8-K dated January 9, 1999).
3.1 Second Amended and Restated Articles of Incorporation of EMS
Technologies, Inc., effective March 22, 1999.
3.2 Bylaws of EMS Technologies, Inc., as amended through
March 15, 1999.
4.1 Electromagnetic Sciences, Inc. Stockholder Rights Plan dated as
of July 3, 1989 (incorporated by reference to Exhibit 4.1 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1995).
4.2 Agreement with respect to long-term debt pursuant to Item
601(b)(4)(iii)(A) (incorporated by reference to Exhibit 4.2 to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1995).
4.3 Second Amended and Restated Loan Agreement, dated November 9, 1998,
between the Company and SunTrust Bank, Atlanta, together with
Amendment and Consent dated as of January 29, 1999, and Second
Amendment dated as of February 24, 1999.
10.1 Employment Agreement dated as of January 1, 1989, by and between
the Company and Thomas E. Sharon (incorporated by reference to
Exhibit 10.1 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1997).
10.2 Amendment, dated July 29, 1992, of Employment Agreement
dated as of January 1, 1989, by and between the Company and
Thomas E. Sharon.
10.3 Second Amendment, dated November 15, 1994, of Employment Agreement
dated as of January 1, 1989, by and between the Company and
Thomas E. Sharon (incorporated by reference to Exhibit 10.3 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1994).
10.4 Third Amendment, dated as of August 10, 1998, of Employment Agreement
dated as of January 1, 1989, by and between the Company and
Thomas E. Sharon.
10.5 Employment Agreement, dated as of August 10, 1998, by and between
the Company and John J. Farrell, Jr.
10.6 Employment Agreement, dated as of August 10, 1998, by and between
the Company and Don T. Scartz.
10.7 1981 Incentive Stock Option Plan, as amended and restated
February 6, 1987, and further amended through March 23, 1989
(incorporated by reference to Exhibit 10.6 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1995).
10.8 Form of split-dollar life insurance agreement between the Company
and certain of its officers (incorporated by reference to
Exhibit 10.7 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1997).
10.9 Form of split-dollar life insurance agreement effective
January 1, 1993, between the Company and William S. Jacobs.
10.10 Electromagnetic Sciences, Inc. 1986 Non-Qualified Stock Option
Plan, as amended through July 31, 1992 (incorporated by reference
to Exhibit 10.10 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995).
10.11 Electromagnetic Sciences, Inc. 1992 Stock Incentive Plan
as amended through October 3, 1996 (incorporated by reference to
Exhibit 10.11 to the Company's Registration Statement No. 333-14235
on Form S-4).
10.12 Amendments adopted May 2, 1997, to the Electromagnetic Sciences, Inc.
1992 Stock Incentive Plan (incorporated by reference to Exhibit 10.11
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1997).
10.13 EMS Technologies, Inc. 1997 Stock Incentive Plan, as adopted
January 24, 1997, and amended through February 19, 1999.
10.14 Form of Stock Option Agreement evidencing options granted to
executive officers under the EMS Technologies, Inc. 1997 Stock
Incentive Plan (incorporated by reference to Exhibit 10.13 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1997).
10.15 Form of Stock Option Agreement evidencing options granted
automatically to non-employee members of the Board of Directors upon
their initial election to the Board.
10.16 Form of Stock Option Agreement evidencing options granted
automatically to non-employee members of the Board of Directors,
following five years of service, under the Electromagnetic Sciences,
Inc. 1997 Stock Incentive Plan (incorporated by reference to Exhibit
10.14 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1997).
10.17 Form of Stock Option Agreement evidencing options granted to
executive officers under the Electromagnetic Sciences, Inc. 1992
Stock Incentive Plan (incorporated by reference to Exhibit 10.15 to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1997.)
10.18 Form of Stock Option Agreement dated May 15, 1995, evidencing
option granted to John J. Farrell, Jr. under the 1992 Stock
Incentive Plan (incorporated by reference to Exhibit 10.14 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1995).
10.19 Form of Stock Option Agreement evidencing options granted
automatically under the 1992 Stock Incentive Plan to newly-elected
non-employee members of the Board of Directors (incorporated by
reference to Exhibit 10.15 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995).
10.20 Form of Stock Option Agreement evidencing option granted
September 26, 1990 to an executive officer under the LXE Inc.
1989 Stock Incentive Plan, and thereafter converted into an option
for a reduced number of shares, at the same aggregate exercise price,
under the Company's 1992 Stock Incentive Plan (incorporated by
reference Exhibit 10.17 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1996).
10.21 Form of Stock Option Agreement evidencing option granted
September 26, 1990 to John B. Mowell under the LXE Inc. 1989
Stock Incentive Plan, and thereafter converted into an option
for a reduced number of shares, at the same aggregate exercise price,
under the Company's 1992 Stock Incentive Plan (incorporated by
reference to Exhibit 10.18 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1996).
10.22 Form of Stock Option Agreement dated May 15, 1995, evidencing
option granted to John J. Farrell, Jr. under the LXE Inc. 1989
Stock Incentive Plan, and thereafter converted into an option
for a reduced number of shares, at the same aggregate exercise price,
under the Company's 1992 Stock Incentive Plan (incorporated by
reference to Exhibit 10.6 to the LXE Inc. Annual Report on Form 10-K
for the year ended December 31, 1995).
10.23 Electromagnetic Sciences, Inc. Executive Annual Incentive
Compensation Plan, as amended on August 10, 1998.
10.24 Form of Indemnification Agreement between the Company and its
directors (incorporated by reference to Exhibit 10.24 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1997).
10.25 Form of Indemnification Agreement between the Company and its Vice
President and General Counsel (incorporated by reference to
Exhibit 10.25 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1997).
10.26 Letters dated April 17, 1995 and April 19, 1995 between LXE Inc.
and John J. Farrell, Jr. concerning the terms of his employment as
President of LXE Inc. (incorporated by reference to Exhibit 10.1
to Report on Form 10-Q of LXE Inc. for the quarter ended June 30,
1995).
10.27 Form of note evidencing indebtedness to the Company of its Chief
Executive Officer and certain other executive officers (incorporated
by reference to Exhibit 10.1 to the Company's Quarterly Report on
Form 10-Q for the quarter ended October 2, 1998).
10.28 Letter, dated February 24, 1999, governing credit facility between
EMS Technologies Canada, Ltd., a consolidated subsidiary of the
Company, and Canadian Imperial Bank of Commerce, including Schedule-
Standard Credit Terms.
13.1 Those portions of the Company's 1998 Annual Report to Shareholders
incorporated by reference into this Annual Report on Form 10-K.
22.1 Subsidiaries of the registrant.
23.1 Independent Auditors' Consent to incorporation by reference in
Registration Statements Nos. 2-76455, 2-78442, 2-94049, 33-31216,
33-38829, 33-41042, 33-50528, 333-20843 and 333-32425, each on Form
S-8.
27.1 Financial Data Schedule - 12 months ended December 31, 1998
(b). Reports on Form 8-K.
No Reports on Form 8-K were filed by the Company during the quarter ended
December 31, 1998.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
EMS TECHNOLOGIES, INC.
By: /s/ Date: 3/30/99
President and Chief Executive Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
By: /s/ Date: 3/30/99
Chairman of the Board, Chief Executive
Officer and Director
(Principal Executive Officer)
By: /s/ Date: 3/30/99
Don T. Scartz, Senior Vice President
and Chief Financial Officer, Treasurer
and Director
(Principal Financial and Accounting Officer)
By: /s/ Date: 3/30/99
Jerry H. Lassiter, Director
By: /s/ Date: 3/30/99
John B. Mowell, Director
By: /s/ Date: 3/30/99
Elvie L. Smith, Director
By: /s/ Date: 3/30/99
Norman E. Thagard, Director
Exhibit 3.1
SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
EMS TECHNOLOGIES, INC.
ARTICLE ONE
NAME
The name of the corporation is EMS Technologies, Inc.
ARTICLE TWO
CAPITALIZATION
The corporation shall have the authority, exercisable by its Board of
Directors, to issue up to 75,000,000 shares of Common Stock, $.10 par
value per share, and 10,000,000 shares of Preferred Stock, $1.00 par
value per share, which shall be established and designated from time to
time by the Board of Directors in such series and with such preferences,
limitations, and relative rights as may be determined by the Board of
Directors. The holders of the outstanding shares of a class of stock shall
not be entitled to vote as a separate class upon a proposed amendment to
these Articles of Incorporation that is solely for the reason of increasing
or decreasing the aggregate number of authorized shares of such class, and
the number of such shares may be increased or decreased without such a vote,
subject to such votes as shall otherwise be required by applicable law for
the amendment of these Articles of Incorporation.
ARTICLE THREE
LIMITATION OF DIRECTOR LIABILITY
No director of the corporation shall be personally liable to the
corporation or its shareholders for monetary damages for breach of the
duty of care or any other duty as a director, except that such liability
shall not be eliminated for:
(a) any appropriation, in violation of the director's duties, of any
business opportunity of the corporation;
(b) acts or omissions which involve intentional misconduct or a knowing
violation of law;
(c) the types of liability set forth in Section 14-2-832 (or any successor
or redesignation to this provision) of the Georgia Business Corporation Code
(the "Code"); or
(d) any transaction from which the director received an improper personal
benefit.
If at any time the Code is amended to authorize the further limitation or
elimination of the liability of a director, then the liability of each
director of the corporation shall be limited or eliminated to the fullest
extent permitted by the Code, as amended, without further action by the
shareholders, unless the provisions of the Code, as amended, require
further action by the shareholders.
Any repeal or modification of the provisions of this Article Three
by the shareholders of this corporation shall not adversely affect any
right of a director or officer of the corporation existing at the time
of such repeal or modification.
Exhibit 3.2
BYLAWS
OF
EMS TECHNOLOGIES, INC.
As Amended Through
March 15, 1999
TABLE OF CONTENTS PAGE
ARTICLE ONE - OFFICES
Section 1.1 Registered Office and Agent 1
Section 1.2 Principal Office 1
Section 1.3 Other Offices 1
ARTICLE TWO - SHAREHOLDERS' MEETINGS 1
Section 2.1 Place of Meetings 1
Section 2.2 Annual Meetings 1
Section 2.3 Special Meetings 2
Section 2.4 Notice of Meetings 2
Section 2.5 Waiver of Notice 2
Section 2.6 Quorum; Manager of Acting 2
Section 2.7 Voting of Shares 3
Section 2.8 Proxies 3
Section 2.9 Presiding Officer 3
Section 2.10 Adjournments 3
Section 2.11 Conduct of the Meeting 3
Section 2.12 Matters Considered at Annual Meetings 4
ARTICLE THREE - THE BOARD OF DIRECTORS 4
Section 3.1 General Powers 4
Section 3.2 Number, Election and Terms of Office 4
Section 3.3 Removal 4
Section 3.4 Vacancies 5
Section 3.5 Compensation 5
Section 3.6 Committees of the Board of Directors 5
Section 3.7 Certain Nomination Requirements 5
Section 3.8 Qualification of Directors 6
Section 3.9 Related-Party Transactions 6
ARTICLE FOUR - MEETINGS OF THE BOARD OF DIRECTORS 6
Section 4.1 Regular Meetings 6
Section 4.2 Special Meetings 6
Section 4.3 Place of Meetings 6
Section 4.4 Notice of Meetings 6
Section 4.5 Quorum 6
Section 4.6 Vote Required for Action 7
Section 4.7 Participation by Conference Telephone 7
Section 4.8 Action by Directors Without a Meeting 7
Section 4.9 Adjournments 7
Section 4.10 Waiver of Notice 7
ARTICLE FIVE - OFFICERS 7
Section 5.1 Offices 7
Section 5.2 Term 7
Section 5.3 Compensation 8
Section 5.4 Removal 8
Section 5.5 Chairman of the Board 8
Section 5.6 Chief Executive Officer 8
Section 5.7 President 8
Section 5.8 Vice Presidents 8
Section 5.9 Secretary 8
Section 5.10 Treasurer 8
Section 5.11 Assistant Secretaries and Assistant
Treasurers 9
Section 5.12 Bonds 9
ARTICLE SIX - DIVIDENDS 9
ARTICLE SEVEN - SHARES 9
Section 7.1 Authorization and Issuance of Shares 9
Section 7.2 Share Certificates 9
Section 7.3 Rights of Corporation with Respect to
Registered Owner 10
Section 7.4 Transfers of Shares 10
Section 7.5 Duty of Corporation to Register
Transfer 10
Section 7.6 Lost, Stolen or Destroyed Certificates 10
Section 7.7 Fixing of Record Date 10
Section 7.8 Record Date if None Fixed 11
ARTICLE EIGHT - INDEMNIFICATION 11
Section 8.1 Indemnification of Directors and
Officers 11
Section 8.2 Indemnification of Directors and
Officers for Derivative Actions 11
Section 8.3 Indemnification of Employees and Agents 11
Section 8.4 Subsidiaries and Other Organizations 12
Section 8.5 Determination 12
Section 8.6 Advances 12
Section 8.7 Non-Exclusivity 13
Section 8.8 Insurance 13
Section 8.9 Notice 13
Section 8.10 Security 13
Section 8.11 Amendment 13
Section 8.12 Agreements 14
Section 8.13 Continuing Benefits 14
Section 8.14 Sucessors 14
Section 8.15 Severability
Section 8.16 Additional Indemnification 14
ARTICLE NINE - MISCELLANEOUS 14
Section 9.1 Inspection of Books and Records 14
Section 9.2 Fiscal Year 14
Section 9.3 Seal 15
Section 9.4 Election of "Fair Price" Statute 15
Section 9.5 Election of "Business Combination"
Statute 15
Section 9.6 Notice 15
ARTICLE TEN - AMENDMENTS 15
BYLAWS
OF
EMS TECHNOLOGIES, INC.
All of these Bylaws are subject to contrary provisions, if any, of
the Corporation's Articles of Incorporation, of the Georgia Business
Corporation Code (the "Code") and of other applicable law.
References herein to "Articles of Incorporation" are to the articles
of incorporation of EMS Technologies, Inc., a Georgia corporation (the
"Corporation"), as the same may be amended and restated from time to time.
ARTICLE ONE
Offices
1.1 Registered Office and Agent. The Corporation shall maintain a
registered office and shall have a registered agent whose business
office is identical with such registered office.
1.2 Principal Office. The principal office of the Corporation shall
be at 660 Engineering Drive, Norcross, Georgia, or at such other place,
within or without the State of Georgia, as the Board of Directors may
from time to time determine or as the business of the Corporation may
require or make desirable.
1.3 Other Offices. In addition to its registered office and principal
office, the Corporation may have offices at such other place or places,
within or without the State of Georgia, as the Board of Directors may
from time to time appoint or as the business of the Corporation may
require or make desirable.
ARTICLE TWO
Shareholders' Meetings
2.1 Place of Meetings. Meetings of the shareholders may be held at any
place within or without the State of Georgia designated by the Board of
Directors and, if required, as set forth in the notice thereof, or if no
place is so specified, at the principal office of the Corporation.
2.2 Annual Meetings. Annual meetings of shareholders of such classes or
series of shares as are entitled to notice thereof and to vote thereat
shall be held on such dates as may be determined by the Board of Directors,
for the purpose of electing directors and transacting any and all other
business that may properly come before the meeting. The annual meeting
may be combined with any other meeting of shareholders, whether annual
or special.
2.3 Special Meetings. Special meetings of the shareholders of any class
or series or of all classes or series of the Corporation's shares may be
called at any time by the Chairman of the Board or the Board of Directors;
and shall be called by the Corporation upon the written request as required
by law (stating the purpose or purposes of such meeting) of the holders of
two-thirds or more of all the shares of capital stock of the Corporation
entitled to vote on any issue or issues proposed to be considered at such
special meeting. The date, time and place for the holding of any special
meeting of shareholders shall be determined by the Board of Directors. The
business that may be transacted at any special meeting of dshareholders
shall consist olyh of and be limited to the purpose or purposes stated in
the notice of such special meeting delivered to shareholders in accordance
with Section 2.4 of these Bylaws.
2.4 Notice of Meetings. The Corporation shall give written notice,
delivered in person or by mail, of the date, time and place of each annual
and special shareholders' meeting, no fewer than ten days nor more than 60
days before the meeting date, to each shareholder of record entitled to vote
at such meeting. In the case of an annual meeting, the notice of the meeting
need not state the purpose or purposes of the meeting unless the purpose or
purposes constitute a matter which these Bylaws or the Code require to be so
stated. In the case of a special meeting, the notice of meeting shall
state the purpose or purposes for which the meeting is called. If an annual
or special shareholders' meeting is adjourned to a different date, time
or place, the Corporation may but shall not be required to give notice
of the new date, time or place of such meeting if the new date, time and
place is announced at the meeting before adjournment thereof; provided,
however, that if a new record date is or must be fixed in accordance with
Section 7.7 of these Bylaws, notice of the adjourned meeting shall be given
by the Corporation to shareholders as of the new record date.
2.5 Waiver of Notice. A shareholder may waive any notice required by the
Code, the Corporation's Articles of Incorporation or these Bylaws, before or
after the date and time of the matter to which the notice relates, by
delivery to the Corporation of a waiver of such notice signed by the
shareholder entitled to such notice. In addition, a shareholder's
attendance at a meeting shall be
(i) a waiver of objection to lack of notice or defective notice of such
meeting unless such shareholder at the beginning of the meeting objects to
holding the meeting or transacting business at the meeting,
and (ii) a waiver of
objection to consideration of a particular matter at such meeting that
is not within the purpose or purposes stated in the meeting notice,
unless the shareholder objects to considering the matter when it
is presented. Except as otherwise required by the Code, none of the business
transacted, the purpose of the meeting or any other matter need be specified in
any waiver.
2.6 Quorum; Manner of Acting. (a) All classes or series
of the Corporation's shares entitled to vote generally on
a matter, shall for that purpose be considered a single
voting group (a "Voting Group"). At any meeting of
shareholders, action on a matter by a Voting Group may
be taken only if a quorum of such Voting Group exists
at such meeting. Unless the Articles of Incorporation,
these Bylaws, or the Code otherwise provide, a majority
of the votes entitled to be cast on a matter by a Voting
Group constitutes a quorum of that Voting Group with regard
to that matter once a share is represented at any meeting
other than solely to object to holding the meeting or
transacting business at the meeting, such share shall be
deemed present for quorum purposes for the remainder of
the meeting and for any adjournments of that meeting,
unless a new record date is or must be set pursuant to
Section 7.7 of these Bylaws for such adjourned meeting.
(b) If a quorum exists, action on a matter (other than the
election of directors) by a Voting Group is approved if the
votes cast within the Voting Group favoring the action
exceed the votes cast opposing the action, unless the
Articles of Incorporation, a Bylaw adopted by the shareholders
under the Code, or the Code requires a greater number of
affirmative votes. If voting by two or more Voting Groups
is required on a matter, action on that matter is approved
only when approved by each of such Voting Groups, voting
separately, as provided in the preceding sentence.
2.7 Voting of Shares. Subject to the provisions of any
Preferred Stock at the time outstanding, each outstanding
share of any class or series having voting rights shall be
entitled to one vote on each matter that such class or
series is entitled to vote on and that is submitted to a
vote at a meeting of shareholders.
2.8 Proxies. A shareholder entitled to vote pursuant on
a matter may vote in person or by a proxy appointed in writing
by the shareholder or by his attorney-in-fact. An appointment
of a proxy shall be valid for eleven months from the date of
its receipt by the Secretary or other officer or agent of the
Corporation authorized to tabulate votes, unless a longer period
is expressly stated therein. If the validity of any appointment
of a proxy is questioned, it must be submitted to the
secretary of the shareholders' meeting for examination
or to a proxy officer or committee appointed by the person
presiding at the meeting. The secretary of the meeting or,
if appointed, the proxy officer or committee shall determine,
consistent with requirements of the Code, the validity or
invalidity of any appointment of a proxy submitted. Reference
by the secretary in the minutes of the meeting to the regularity
of a proxy, or to the presence of shareholders or representation
of shares by proxy, shall be received as prima facie evidence of
the facts stated for the purpose of establishing the presence of
a quorum at such meeting and for all other purposes.
2.9 Presiding Officer. Except as otherwise provided in this
Section 2.9, the Chairman of the Board, and in his absence or
disability the Chief Executive Officer (if a different person,
and if not, the President), shall serve as the chairman of
every shareholders' meeting, if either of them is present
and willing to so serve. If neither the Chairman of the
Board nor the Chief Executive Officer is present at and willing
to serve as chairman of the meeting, and if the Chairman of the
Board has not designated another person who is present and
willing to so serve, then a majority of the Corporation's
directors present at the meeting shall be entitled to designate
a person to serve as chairman. If no directors of the Corporation
are present at such meeting or no majority of the directors can
be established, a chairman of the meeting shall be selected by
a majority vote of the shares present at the meeting and entitled
to vote in an election of directors. The chairman of the
meeting shall appoint such persons as he deems appropriate to
assist with the meeting.
2.10 Adjournments. Any meeting of the shareholders may be
adjourned by an affirmative vote of the holders of a majority
of the shares represented, entitled to vote and voting on the
matter to reconvene at a specific time and place, regardless of
whether a quorum is then present. It shall not be necessary to
give any notice of the reconvened meeting if the date, time and
place of the reconvened meeting are announced at the meeting
that was adjourned, unless required by the Code or Section 7.7
of these Bylaws. At any such reconvened meeting, only such
business may be transacted that could have been transacted at
the meeting that was adjourned.
2.11 Conduct of the Meeting. At any meeting of the shareholders
of the Corporation, the chairman of such meeting, as determined
in accordance with Section 2.9, shall be entitled to establish
conclusively the rules of order that shall govern the conduct
of business at the meeting, which rules may include, without
limitation, in the discretion of such presiding officer a
requirement that nominations of persons for election as directors
of the Corporation be made, seconded and voted upon one nominee
at a time.
2.12 Matters Considered at Annual Meetings. At any annual
meeting of shareholders, only matters shall be considered as
shall have been (a) brought before such meeting (i) by or at
the direction of the Board of Directors or (ii) by any
shareholder of the Corporation who is entitled to vote with
respect thereto and who complies with the notice procedures
set forth in this Section 2.12, and (b) seconded by any other
shareholder of the Corporation who is entitled to vote with
respect thereto. For business to be properly brought before
an annual meeting by a shareholder, the shareholder must have
given timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a shareholder's notice must be
delivered or mailed to and received at the principal executive
offices of the Corporation not less than 60 days prior to the
anniversary of the date on which the annual meeting of
shareholders was held in the prior year, except that if
the actual date of the annual meeting at issue is more
than 30 days earlier or later than such anniversary, such
shareholder's notice must be so delivered or received not
less than 60 days before such actual date. A shareholder's
notice to the Secretary shall set forth as to each matter
such shareholder proposes to bring before the meeting (i)
a brief description of the business desired to be brought
before the meeting and the reasons for conducting such
business at the meeting, (ii) the name and address, as
they appear on the Corporation's books, of the shareholder
proposing such business, (iii) the series or class and
number of shares of the Corporation's capital stock that
are beneficially owned by such shareholder, and (iv) any
material interest of such shareholder in such business.
Notwithstanding anything in the Bylaws to the contrary,
no business shall be brought before or conducted at an
annual meeting except in accordance with the provisions
of this Section 2.12. The person presiding over an annual
meeting shall, if the facts so warrant, determine and
declare to such meeting that business proposed to be
considered at an annual meeting in a manner inconsistent
with this Section 2.12 is out of order and that such
business shall not be transacted at such meeting.
ARTICLE THREE
The Board of Directors
3.1 General Powers. The business and affairs of the
Corporation shall be managed under the direction of the
Board of Directors. In addition to the power and
authority expressly conferred upon it by these Bylaws,
the Board of Directors may exercise all such powers of
the Corporation and do all such lawful acts and things
as are not by law, by any legal agreement among shareholders,
by the Articles of Incorporation or by these Bylaws directed
or required to be exercised or done by the shareholders.
3.2 Number, Election and Terms of Office. Subject to the
provisions of any Preferred Stock at the time outstanding,
the number of directors of the Corporation shall be fixed
by resolution adopted from time to time by the Board of
Directors or the shareholders, but no decrease in the
number of directors shall have the effect of shortening
the term of an incumbent director. Except as provided
in Section 3.4, and subject to the provisions of any
Preferred Stock at the time outstanding, election of
directors at any annual or special meeting shall be by
a plurality of votes cast by the shares of common stock
entitled to vote and represented in person or by proxy
at such meeting, if a quorum exists therefor. Each director,
except in case of death, resignation, retirement,
disqualification, or removal, shall serve until the
next succeeding annual meeting and thereafter until
his successor, if there is to be any, shall have been
elected and qualified.
3.3 Removal. The entire Board of Directors or any
individual director may be removed from office for cause,
but only by the affirmative vote of the holders of a
majority of all of the shares entitled to be cast by the
Voting Group entitled to elect any such director. Removal
action may be taken only at a shareholders' meeting called
expressly for that purpose and with respect to which notice
of such purpose has been given, and a removed director's
successor may be elected at the same meeting to serve the
unexpired term.
3.4 Vacancies. Subject to the terms of any Preferred
Stock at the time outstanding, a vacancy occurring in
the Board of Directors may be filled for the unexpired
term, unless and until the shareholders shall have elected
a successor, by the affirmative vote of a majority of the
directors remaining in office, though less than a quorum
of the Board of Directors; provided, however, that if the
vacant office was held by a director elected by a Voting
Group of shareholders, only the holders of shares of that
Voting Group shall be entitled to vote to fill the vacancy,
unless the Articles of Incorporation otherwise provide.
A vacancy or vacancies in the Board of Directors shall be
deemed to exist in case of the death, resignation, retirement
or removal of any director, or if the shareholders fail to
elect the fully authorized number of directors to be voted
for at an annual or special meeting of shareholders at which
any director or directors are elected, or if there are newly
created directorships resulting from any increase in the
authorized number of directors.
3.5 Compensation. Directors may receive such compensation
for their services as directors as may from time to time be
fixed by vote of the Board of Directors. A director may also
serve the Corporation in a capacity other than that of director
and receive compensation for services rendered in such other capacity.
3.6 Committees of the Board of Directors. The Board of
Directors by resolution adopted by a majority of the full
Board of Directors may designate from among its members an
executive committee and one or more other standing or ad
hoc committees, each consisting of one or more directors
who serve at the pleasure of the Board of Directors.
Except as prohibited by law, each committee shall have
the authority set forth in the resolution establishing
such committee or in any other resolution adopted by a
majority of the full Board of Directors specifying,
enlarging or limiting the authority of the committee.
3.7 Certain Nomination Requirements. No person may be
nominated for election as a director at any annual or
special meeting of the shareholders of the Corporation
unless (a) the nomination has been or is being made pursuant
to a recommendation or approval of the Board of Directors of
the Corporation or a properly constituted committee of the
Board of Directors previously delegated authority to recommend
or approve nominees for director; (b) the person is nominated
by a shareholder of the Corporation who is entitled to vote for
the election of such nominee at the subject meeting, and such
nominating shareholder has furnished written notice to the
Secretary of the Corporation, at the Corporation's principal
business address, not less than 60 days prior to the anniversary
of the date on which the annual meeting of shareholders was held
in the prior year, except that if the actual date of the annual
meeting at issue is more than 30 days earlier or later than such
anniversary, such shareholder's notice must be so furnished not
less than 60 days before such actual date, which notice must
(i) set forth with respect to the person to be nominated his
or her name, age, business and residence addresses, principal
business or occupation during the past five years, any
affiliation with or material interest in the Corporation or
any transaction involving the Corporation, and any affiliation
with or material interest in any person or entity having an
interest materially adverse to the Corporation, and (ii) be
accompanied by the sworn or certified statement of the
shareholder that the nominee has consented to being nominated
and that the shareholder believes the nominee will stand for
election and will serve if elected; or (c) (i) the person is
nominated to replace a person previously identified as a proposed
nominee (in accordance with the provisions of subpart (b) of
this Section 3.7) who has since become unable or unwilling to
be nominated or to serve if elected, (ii) the shareholder who
furnished such previous identification makes the replacement
nomination and delivers to the Secretary of the Corporation
(at the time of or prior to making the replacement nomination)
an affidavit or other sworn statement affirming that the
shareholder had no reason to believe the original nominee
would be so unable or unwilling, and (iii) such shareholder
also furnishes in writing to the Secretary of the Corporation
(at the time of or prior to making the replacement nomination)
the same type of information about the replacement nominee as
required by subpart (b) of this Section 3.7 to have been
furnished about the original nominee. The presiding officer
of any meeting of shareholders of the Corporation at which
one or more directors are to be elected, for good cause shown
and with proper regard for the orderly conduct of business at
the meeting, may waive in whole or in part the operation of
this Section 3.7.
3.8 Qualification of Directors. No person elected to serve
as a director of the Corporation shall assume such office and
commence such service unless and until such persons shall be
duly qualified therefor. Such a director-elect shall not be
deemed to be duly qualified to assume the office of and serve
as a director if such assumption or service by the person
would violate, or would cause the Corporation to be in violation
of, any applicable federal or state law or regulation.
3.9 Related-Party Transactions. All contracts or transactions
between the Corporation and one or more of its directors or
officers, or between the Corporation and any other corporation,
firm or association in which one or more of its directors or
officers are directors or officers, or have a material financial
interest, shall be reviewed by a committee of the Board of
Directors designated by the whole board as having such
responsibility.
ARTICLE FOUR
Meetings of the Board of Directors
4.1 Regular Meetings. Unless the Chairman of the Board shall
cause notice to be given of a different date and time, a regular
meeting of the Board of Directors shall be held at 10:00 a.m.
on the date of each annual meeting of shareholders or any meeting
held in lieu or substitute thereof. In addition, the Board of
Directors may schedule other meetings to occur at regular
intervals throughout the year.
4.2 Special Meetings. Special meetings of the Board of
Directors may be called by or at the request of the Chairman
of the Board or any two directors in office at that time.
4.3 Place of Meetings. Directors may hold their meetings at
any place within or without the State of Georgia as the
Chairman of the Board may from time to time establish. Unless
the Chairman of the Board shall cause notice to be given of a
different place, each regular meeting held on the date of an
annual meeting of shareholders (or of a meeting in lieu or
substitute thereof) shall be held at the location of such
annual meeting.
4.4 Notice of Meetings. No notice shall be required for any
regular scheduled meetings of the Board of Directors. Unless
waived as contemplated in Section 4.10, the Corporation shall
give not less than two days' notice to each director of the
date, time and place of each special meeting. Notice of a
subsequent meeting shall be deemed to have been given to any
director in attendance at any duly convened meeting at which
the date, time and place of each subsequent meeting is announced.
4.5 Quorum. At meetings of the Board of Directors, a majority
of the directors then in office shall be necessary to constitute
a quorum for the transaction of business. In no case shall less
than one-third of the minimum number of directors authorized at
that time, nor less than two directors, constitute a quorum.
4.6 Vote Required for Action. The act of a majority of the
directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors.
4.7 Participation by Conference Telephone. Members of the
Board of Directors, or members of any committee designated
by the Board of Directors, may participate in a meeting of
the Board or such committee by means of conference telephone
or similar communications equipment through which all persons
participating in the meeting can simultaneously hear each other.
Participation in a meeting pursuant to this Section 4.7 shall
constitute presence in person at such meeting.
4.8 Action by Directors Without a Meeting. Any action required
or permitted to be taken at any meeting of the Board of Directors
or any action that may be taken at a meeting of a committee of
directors may be taken without a meeting if one or more written
consents describing the action taken shall be signed by all the
directors, or all the members of the committee, as the case may
be, and delivered to the Corporation for inclusion in the
minutes or filing with the corporate records. Such consent
shall have the same force and effect as a unanimous vote of
the Board of Directors or the committee.
4.9 Adjournments. A meeting of the Board of Directors,
whether or not a quorum is present, may be adjourned by a
majority of the directors present. It shall not be necessary
to give notice of the reconvened meeting or of the business
to be transacted, other than by announcement at the meeting
that was adjourned. At any such reconvened meeting at which
a quorum is present, any business may be transacted that could
have been transacted at the meeting that was adjourned.
4.10 Waiver of Notice. A director may waive any notice
required by the Code, the Corporation's Articles of Incorporation
or these Bylaws before or after the date and time of the matter
to which the notice relates, by a written waiver signed by such
director and delivered to the Corporation for inclusion in the
minutes or filing with the corporate records. Attendance by a
director at a meeting shall constitute waiver of notice of such
meeting, except where a director at the beginning of the meeting
(or promptly upon his or her arrival ) objects to holding the
meeting or to the transacting of business at the meeting and does
not thereafter vote for or assent to action taken at the meeting.
ARTICLE FIVE
Officers
5.1 Offices. The officers of the Corporation shall be as
determined by the Board of Directors, and may include a Chief
Executive Officer, a President, a Secretary and a Treasurer,
each of whom shall be elected or appointed by the Board of
Directors. The Board of Directors may also elect or appoint
a Chairman of the Board from among its members. The Board of
Directors from time to time may, or may authorize the Chief
Executive Officer to, create and establish the duties of other
officers and elect or appoint other officers as it or he deems
necessary for the efficient management of the Corporation,
including one or more Vice Presidents, one or more Assistant
Secretaries and one or more Assistant Treasurers.
5.2 Term. Each officer shall serve at the will of the Board
of Directors (or, if the Chief Executive Officer appointed
such officer, at the will of the Board of Directors and the
Chief Executive Officer) or until his death, resignation,
retirement or disqualification.
5.3 Compensation. The compensation of all officers of the
Corporation shall be fixed by the Board of Directors or by a
committee or officer appointed by the Board of Directors.
5.4 Removal. Any officer (regardless of how elected or
appointed) may be removed by the Board of Directors whenever
in its judgment the best interests of the Corporation will
be served thereby, and any officer appointed by the Chief
Executive Officer may be removed by the appointing officer
whenever in his judgment the best interests of the Corporation
will be served thereby.
5.5 Chairman of the Board. The Chairman of the Board (if
there be one) shall call to order meetings of the shareholders
and of the Board of Directors, and shall act as chairman of
such meetings (unless another person is selected under
Section 2.9 to act as chairman). The Chairman of the
Board shall perform such other duties and have such other
authority as may from time to time be delegated by the
Board of Directors.
5.6 Chief Executive Officer. The Chief Executive Officer
shall be charged with the general and active management of
the business of the Corporation, shall see that all orders
and resolutions of the Board of Directors are carried into
effect, shall have the authority to select and appoint
employees and agents of the Corporation, and shall, in the
absence or disability of the Chairman of the Board, perform
the duties and exercise the powers of the Chairman of the
Board. The Chief Executive Officer shall perform such other
duties and have such other authority as shall be delegated
from time to time by the Board of Directors.
5.7 President. The President shall have general supervision
of the business of the corporation. The President shall
perform such other duties and have such other authority as
may from time to time be delegated by the Board of Directors
or the Chief Executive Officer.
5.8 Vice Presidents. The Vice President (if there be one)
shall, in the absence or disability of the President, or at
the direction of the President, perform the duties and exercise
the powers, whether such duties and powers are specified in
these Bylaws or otherwise, of the President. If the Corporation
has more than one Vice President, the one designated by the
Board of Directors or the Chief Executive Officer shall act
in lieu of the President. Vice Presidents shall perform
such other duties and have such other authority as may from
time to time be delegated by the Board of Directors, the
Chief Executive Officer or the President.
5.9 Secretary. The Secretary shall be responsible for
preparing minutes of the directors' and shareholders'
meetings and for authenticating records of the Corporation.
The Secretary shall have authority to give all notices
required by law or these Bylaws. The Secretary shall be
responsible for the custody of the corporate books, records,
contracts and other documents. The Secretary may affix the
corporate seal to any lawfully executed documents requiring
it and shall sign such instruments as may require the
Secretary's signature. The Secretary shall perform such
other duties and have such other authority as may from time
to time be delegated by the Board of Directors or the Chief
Executive Officer.
5.10 Treasurer. The Treasurer shall be responsible for the
custody of all funds and securities belonging to the
Corporation and for the receipt, deposit or disbursement
of such funds and securities in a manner consistent with
policies established by the Board of Directors or Chief
Executive Officer. The Treasurer shall cause full and
true accounts of all receipts and disbursements to be
maintained and shall make such reports of the same to
the Board of Directors, Chief Executive Officer and
President upon request. The Treasurer shall perform
such other duties and have such
other authority as may from time to time be delegated
by the Board of Directors or the Chief Executive Officer.
5.11 Assistant Secretaries and Assistant Treasurers.
The Board of Directors and Chief Executive officer each
may appoint one or more persons to serve as Assistant
Secretary or Assistant Treasurer, or both. The Assistant
Secretary and Assistant Treasurer (or if there be more than
one of either such officer, the one so designated by the
Board of Directors or Chief Executive Officer) shall, in
the absence or disability, or at the direction, of the
Secretary or the Treasurer, respectively, perform the
duties and exercise the authority of those offices. Each
Assistant Secretary may affix the corporate seal to any
corporate document and attest the signature of any officer
of the Corporation. Each Assistant Secretary and Assistant
Treasurer shall perform such other duties and have such other
authority as may from time to time be delegated by the Board
of Directors or the Chief Executive Officer.
5.12 Bonds. The Board of Directors may by resolution
require any or all of the officers, agents or employees
of the Corporation to give bonds to the Corporation, with
sufficient surety or sureties, conditioned on the faithful
performance of the duties of their respective offices or
positions, and to comply with such other conditions as may
from time to time be required by the Board of Directors.
ARTICLE SIX
Dividends
Dividends upon the capital stock of the Corporation
may be declared by the Board of Directors, payable in cash,
in property or in shares of the Corporation.
ARTICLE SEVEN
Shares
7.1 Authorization and Issuance of Shares. The maximum
number of shares of any class of stock of the Corporation
which may be issued and outstanding shall be set forth from
time to time in the Articles of Incorporation. The Board of
Directors may increase or decrease the number of issued and
outstanding shares of any class of stock of the Corporation
within the maximum authorized by the Articles of Incorporation
and the minimum requirements of the Articles of Incorporation
or the Code.
7.2 Share Certificates. The interest of each shareholder in
the Corporation shall be evidenced by a certificate or certificates
representing shares of the Corporation which shall be in such
form as the Board of Directors may from time to time adopt in
accordance with the Code. Share certificates shall be
consecutively numbered, in registered form, and indicate the
date of issue and state such other information as may be
required by the Code. Each certificate shall be signed by
the Chief Executive Officer, the President or a Vice President
and the Secretary or an Assistant Secretary and shall be sealed
with the seal of the Corporation or a facsimile thereof;
provided, however, that where such certificate is signed by a
transfer agent, or registered by a registrar, the signatures
of such officers may be facsimiles. In case any officer or
officers who shall have signed (or whose facsimile signature
has been placed upon) a share certificate has ceased for any
reason to be such officer or officers before such certificate
is issued, such certificate may be issued by the Corporation
with the same effect as if the person or persons who signed
such certificate or whose facsimile signatures has been used
thereon had not ceased to be such officer or officers.
7.3 Rights of Corporation with Respect to Registered Owner:
Prior to due presentation for transfer of registration of its
shares, the Corporation may treat the registered owner of the
shares (or the beneficial owner of the shares to the extent
of any rights granted by a nominee certificate on file with
the Corporation pursuant to any procedure that may be established
by the Corporation in accordance with the Code) as the person
exclusively entitled to vote such shares, to receive any dividend
or other distribution with respect to such shares, and for all
other purposes, and the Corporation shall not be bound to
recognize any equitable or other claim to or interest in
such shares on the part of any other person, whether or
not it has express or other notice thereof, except as
otherwise provided by law.
7.4 Transfers of Shares. Transfers of shares shall be made
upon the books of the Corporation kept at the office of the
transfer agent designated to transfer the shares, only upon
direction of the person named in the certificate or by an
attorney lawfully constituted in writing, and before a new
certificate is issued, the old certificate shall be
surrendered for cancellation or, in the case of a certificate
alleged to have been lost, stolen or destroyed, the provisions
of Section 7.6 of these Bylaws shall have been complied with.
7.5 Duty of Corporation to Register Transfer. Notwith-
standing any of the provisions of Section 7.4 of these
Bylaws, the Corporation is under a duty to register the
transfer of its shares only if:
(a) the share certificate is endorsed by the
appropriate person or persons;
(b) reasonable assurance is given that the
endorsements are genuine and effective;
(c) the Corporation has no duty to inquire into
adverse claims or has discharged any such duty;
(d) any applicable law relating to the collection
of taxes has been complied with; and
(e) the transfer is in compliance with applicable
provisions of any transfer restrictions of which the
Corporation shall have notice.
7.6 Lost, Stolen or Destroyed Certificates. Any person
claiming a share certificate to be lost, stolen or destroyed
shall make an affidavit or affirmation of the fact in such
manner as the Board of Directors may require and shall, if
the Board of Directors so requires, give the Corporation a
bond of indemnity in form and amount, and with one or more
sureties satisfactory to the Board of Directors, as the Board
of Directors may require, whereupon an appropriate new certificate
may be issued in lieu of the one alleged to have been lost,
stolen or destroyed.
7.7 Fixing of Record Date. For the purpose of determining
shareholders (i) entitled to notice of or to vote at any meeting
of shareholders or, if necessary, any adjournment thereof,
or (ii) entitled to receive payment of any dividend, and in
order to make a determination of shareholders for any other
proper purpose, the Board of Directors may fix in advance a
date as the record date, such date to be not more than 70
days prior to the date on which the particular action, requiring
such determination of shareholders, is to be taken. A
determination of shareholders of record entitled to notice
of or to vote at a meeting of shareholders shall apply to
any adjournment of such meeting, unless the Board of Directors
shall fix a new record date for the reconvened meeting; provided,
however, the Board of Directors shall set a new record date if
such meeting is adjourned to a date more than 120 days after
the date fixed for the original meeting.
7.8 Record Date if None Fixed. If no record date is fixed
as provided in Section 7.7, then the record date for any
determination of shareholders that may be proper or required
by law shall be: the close of business on the last business
day before noti