10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended October 2, 2010

Commission file number 0-6072

EMS TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

Georgia	58-1035424
(State or other jurisdiction of incorporation or	(IRS Employer ID Number)
organization)
660 Engineering Drive, Norcross, Georgia	30092
(Address of principal executive offices)	(Zip Code)

Registrant’s Telephone Number, Including Area Code: (770) 263-9200

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 þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer o Accelerated filer þ Non-accelerated filer o Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

The number of shares outstanding of each of the issuer’s classes of common stock, as of the close of business on November 5, 2010:

Class	Number of Shares
Common Stock, $0.10 par value	15,310,524

TABLE OF CONTENTS

	Page
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations (unaudited)		2
Consolidated Balance Sheets (unaudited)		3
Consolidated Statements of Cash Flows (unaudited)		5
Notes to Consolidated Financial Statements (unaudited)		6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		16
Item 3. Quantitative and Qualitative Disclosures about Market Risk		30
Item 4. Controls and Procedures		33
PART II — OTHER INFORMATION
Item 1A. Risk Factors		34
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		34
Item 5. Other information		35
Item 6. Exhibits		36
SIGNATURES		37
Exhibit 3.2
Exhibit 10.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

EMS Technologies, Inc. and Subsidiaries

Consolidated Statements of Operations (Unaudited)

(in thousands, except per share data)

	Three Months Ended						Nine Months Ended
	October 2			October 3			October 2			October 3
	2010			2009			2010			2009
Product net sales	$	69,913			65,766			209,896			210,464
Service net sales		15,810			19,965			47,206			64,483
Net sales		85,723			85,731			257,102			274,947
Product cost of sales		47,098			46,892			140,664			141,014
Service cost of sales		7,463			10,843			23,299			45,391
Cost of sales		54,561			57,735			163,963			186,405
Selling, general and administrative expenses		21,996			20,496			65,797			65,468
Research and development expenses		4,898			5,149			15,028			13,788
Impairment loss on goodwill related charges		—			—			384			—
Acquisition-related items		—			(215	)		563			5,307
Operating income		4,268			2,566			11,367			3,979
Interest income		60			14			341			179
Interest expense		(467	)		(549	)		(1,486	)		(1,837	)
Foreign exchange gain (loss), net		18			(154	)		(431	)		(386	)
Earnings from continuing operations before income taxes		3,879			1,877			9,791			1,935
Income tax (expense) benefit		(408	)		4,112			(1,861	)		4,272
Earnings from continuing operations		3,471			5,989			7,930			6,207
Discontinued operations:
Loss from discontinued operations before income taxes		—			(1,143	)		—			(1,143	)
Income tax benefit		—			434			—			434
Loss from discontinued operations		—			(709	)		—			(709	)
Net earnings	$	3,471			5,280			7,930			5,498
Net earnings (loss) per share:
Basic:
From continuing operations	$	0.23			0.39			0.52			0.41
From discontinued operations		—			(0.05	)		—			(0.05	)
Net earnings	$	0.23			0.34			0.52			0.36
Diluted:
From continuing operations	$	0.23			0.39			0.52			0.41
From discontinued operations		—			(0.05	)		—			(0.05	)
Net earnings	$	0.23			0.34			0.52			0.36
Weighted-average number of common shares outstanding:
Basic		15,197			15,175			15,189			15,161
Diluted		15,251			15,258			15,229			15,250

See accompanying notes to interim unaudited consolidated financial statements.

2

EMS Technologies, Inc. and Subsidiaries

Consolidated Balance Sheets (Unaudited)

(in thousands)

	October 2		December 31
	2010		2009
ASSETS
Current assets:
Cash and cash equivalents	$	49,671		47,174
Trade accounts receivable, net of allowance for doubtful accounts of $1,456 in 2010 and $1,208 in 2009		65,264		60,959
Costs and estimated earnings in excess of billings on long-term contracts		17,418		25,290
Inventories		48,779		40,655
Deferred income taxes		4,426		4,306
Other current assets		10,122		19,117
Total current assets		195,680		197,501
Property, plant and equipment:
Land		1,150		1,150
Buildings and leasehold improvements		18,879		18,792
Machinery and equipment		115,097		107,712
Furniture and fixtures		10,750		10,542
Total property, plant and equipment		145,876		138,196
Less accumulated depreciation		97,785		90,256
Net property, plant and equipment		48,091		47,940
Deferred income taxes		9,436		9,421
Goodwill		60,476		60,336
Other intangible assets, net of accumulated amortization of $25,399 in 2010 and $18,817 in 2009		43,504		49,256
Costs and estimated earnings in excess of billings on long-term contracts		15,156		7,771
Other assets		1,535		1,920
Total assets	$	373,878		374,145

See accompanying notes to interim unaudited consolidated financial statements.

3

EMS Technologies, Inc. and Subsidiaries
Consolidated Balance Sheets (Unaudited), continued
(in thousands, except share data)

	October 2		December 31
	2010		2009
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current installments of long-term debt	$	1,477		1,398
Accounts payable		28,468		27,333
Billings in excess of contract costs and estimated earnings on long-term contracts		12,204		9,380
Accrued compensation and related costs		15,500		13,946
Deferred revenue		10,333		9,805
Contingent consideration arrangement liability		6,833		13,729
Other current liabilities		10,546		23,763
Total current liabilities		85,361		99,354
Long-term debt, excluding current installments		28,234		26,352
Deferred income taxes		4,933		5,757
Other liabilities		7,261		5,591
Total liabilities		125,789		137,054
Shareholders’ equity:
Preferred stock of $1.00 par value per share; Authorized 10,000 shares; none issued		—		—
Common stock of $0.10 par value per share; Authorized 75,000 shares; issued and outstanding 15,311 in 2010 and 15,249 in 2009		1,531		1,525
Additional paid-in capital		137,487		136,112
Accumulated other comprehensive income — foreign currency translation adjustment		7,753		6,066
Retained earnings		101,318		93,388
Total shareholders’ equity		248,089		237,091
Commitments and contingencies
Total liabilities and shareholders’ equity	$	373,878		374,145

See accompanying notes to interim unaudited consolidated financial statements.

4

EMS Technologies, Inc. and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

	Nine Months Ended
	October 2			October 3
	2010			2009
Cash flows from operating activities:
Net earnings	$	7,930			5,498
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		14,434			15,050
Deferred income taxes		(959	)		(2,865	)
Loss on sale of assets		—			68
Loss from discontinued operations		—			709
Stock-based compensation expense		1,425			1,662
Change in fair value of contingent consideration liability		304			1,510
Payment for acquisition of business under contingent consideration arrangement		(1,248	)		—
Changes in operating assets and liabilities, net of effects of acquisitions:
Trade accounts receivable		(4,243	)		12,624
Costs and estimated earnings in excess of billings on long-term contracts		1,003			2,625
Billings in excess of costs and estimated earnings on long-term contracts		2,747			976
Inventories		(7,808	)		2,467
Accounts payable		(254	)		(1,479	)
Income taxes		555			(541	)
Accrued compensation and retirement costs		1,453			(2,433	)
Deferred revenue		2,556			151
Other		3,844			(3,062	)
Net cash provided by operating activities in continuing operations		21,739			32,960
Net cash used in operating activities in discontinued operations		(8,824	)		(484	)
Net cash provided by operating activities		12,915			32,476
Cash flows from investing activities:
Purchases of property, plant and equipment		(7,091	)		(10,689	)
Payments for acquisitions of businesses, net of cash acquired		—			(87,264	)
Proceeds from sales of assets		222			58
Net cash used in investing activities		(6,869	)		(97,895	)
Cash flows from financing activities:
Net borrowings under revolving credit facility		3,000			18,500
Repayment of other debt		(1,037	)		(961	)
Deferred financing costs paid		(28	)		(251	)
Payment for acquisition of business under contingent consideration arrangement		(5,952	)		—
Payments for repurchase and retirement of common shares		(61	)		(125	)
Proceeds from exercises of stock options		15			620
Net cash (used in) provided by financing activities		(4,063	)		17,783
Effect of changes in exchange rates on cash and cash equivalents		514			1,343
Net change in cash and cash equivalents		2,497			(46,293	)
Cash and cash equivalents at beginning of period		47,174			86,979
Cash and cash equivalents at end of period	$	49,671			40,686

See accompanying notes to interim unaudited consolidated financial statements.

5

EMS Technologies, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

October 2, 2010 and October 3, 2009

1. Basis of Presentation

EMS Technologies, Inc. (“EMS”) is a leading provider of wireless connectivity solutions over satellite and terrestrial networks. EMS keeps people and systems connected, wherever they are — on land, at sea, in the air or in space. Serving the aeronautical, asset-tracking, defense, and mobile computing industries, EMS products and services enable universal mobility, visibility and intelligence.

The consolidated financial statements include the accounts of EMS Technologies, Inc. and its subsidiaries, each of which is a wholly owned subsidiary of EMS (collectively, the “Company”). All significant intercompany balances and transactions have been eliminated in consolidation. There are no other entities controlled by the Company, either directly or indirectly. Certain reclassifications have been made to the 2009 consolidated financial statements to conform to the 2010 presentation.

The accompanying unaudited consolidated financial statements included herein have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial statements and are based on the Securities and Exchange Commission’s (“SEC”) Regulation S-X and its instructions to Form 10-Q. They do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, the accompanying unaudited consolidated financial statements reflect all adjustments, consisting of normal recurring items, necessary to present fairly the financial condition, results of operations and cash flows for the interim periods presented. We have performed an evaluation of subsequent events through the date the financial statements were issued. These interim consolidated financial statements should be read in conjunction with the financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

— Management’s Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities as of the balance sheet date and reporting of revenue and expenses during the period. Actual future results could differ materially from those estimates.

— Recently Adopted Pronouncements

In January 2010, the Financial Accounting Standards Board (“FASB”) issued guidance amending and clarifying requirements for fair value measurements and disclosures in the FASB issued Accounting Standards Update (“ASU”) 2010-06, Improving Disclosures About Fair Value Measurements. The new guidance requires disclosure of transfers in and out of Level 1 and Level 2 and a reconciliation of all activity in Level 3. The guidance also requires detailed disaggregation disclosure for each class of assets and liabilities in all levels, and disclosures about inputs and valuation techniques for Level 2 and Level 3. The guidance was effective for the Company in the first quarter of 2010 and the disclosure reconciliation of all activity in Level 3 is effective for the Company in the first quarter of 2011. The adoption of ASU 2010-06 did not have a material impact on the Company’s consolidated financial statements.

— Recently Issued Pronouncements Not Yet Adopted

In October 2009 the FASB issued two accounting standards updates that could result in revenue being recognized earlier in certain revenue arrangements with multiple deliverables. Both updates are effective for the Company in the first quarter of 2011. Early adoption is permitted. If the Company adopts this standard in a period other than the beginning of its fiscal year, the Company will be required to apply this standard retrospectively to the beginning of its fiscal year, and disclose certain financial information as revised for all interim periods previously reported in the fiscal year adopted. The Company is evaluating when to adopt the updates and the effect the adoption will have on its consolidated financial statements.

6

ASU 2009-13, Revenue Recognition — Multiple-Deliverable Revenue Arrangements, amends the accounting for revenue arrangements with multiple deliverables. Among other things, ASU 2009-13:

• Eliminates the requirement for objective evidence of fair value of an undelivered item for treatment of the delivered item as a separate unit of accounting;

• Requires use of the relative selling price method for allocating total consideration to elements of the arrangement instead of the relative-fair-value method or the residual method;

• Allows the use of an estimated selling price for any element within the arrangement to allocate consideration to individual elements when vendor-specific objective evidence or other third-party evidence of selling price do not exist; and

• Expands the required disclosures.

ASU 2009-14, Software — Certain Revenue Arrangements That Include Software Elements, amends the guidance for revenue arrangements that contain tangible products and software elements. ASU 2009-14 redefines the scope of arrangements that fall within software revenue recognition guidance by specifically excluding tangible products that contain software components that function together to deliver the essential functionality of the tangible product.

Under current guidance, products that contain software that is more than incidental to the product as a whole fall within the scope of software revenue recognition guidance, which requires, among other things, the existence of vendor-specific objective evidence of fair value of all undelivered items to allow a delivered item to be treated as a separate unit of accounting. Such tangible products excluded from the requirements of software revenue recognition requirements under ASU 2009-14 would follow the revenue recognition requirements for other revenue arrangements, including the new requirements for multiple-deliverable arrangements contained in ASU 2009-13.

In April 2010, the FASB issued ASU 2010-17, Milestone Method of Revenue Recognition, which provides guidance on defining a milestone and determining when it may be appropriate to apply the milestone method of revenue recognition for research and development arrangements in which one or more payments are contingent upon achieving uncertain future events or circumstances. This update is effective for the Company in the first quarter of 2011. Early adoption is permitted. If the Company adopts this standard in a period other than the beginning of its fiscal year, the Company will be required to apply this standard retrospectively to the beginning of its fiscal year, and disclose certain financial information as revised for all interim periods previously reported in the fiscal year adopted. The Company is evaluating when to adopt the updates and the effect, if any, the adoption will have on its consolidated financial statements.

In July 2010, the FASB issued ASU 2010-20, Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses. ASU 2010-20 requires a greater level of disaggregation in disclosures relating to the credit quality of financing receivables and the allowance for doubtful accounts, and also requires enhanced disclosures around nonaccrual and past due financing receivables, impaired loans and loan modifications. The provisions of this ASU are effective for the Company for the annual reporting period ending December 31, 2010. Except for the expanded disclosure requirements, the adoption of this ASU is not expected to have a material impact on the Company’s consolidated financial statements.

2. Business Combinations

During the nine months ended October 3, 2009, the Company completed the acquisitions of two businesses that expanded its technology base. The Company completed the acquisition of all of the equity interest in Formation, Inc. (“Formation”), of Moorestown, New Jersey, and Satamatics Global Limited (“Satamatics”), of Tewkesbury, UK, on January 9, 2009 and February 13, 2009, respectively.

The Company was required to adopt Statement of Financial Accounting Standards (“SFAS”) No. 141(R), Business Combinations, which is included in FASB Accounting Standards Codification^TM (“ASC”) Topic 805, Business Combinations, effective January 1, 2009, and these acquisitions were reflected in the consolidated financial statements in accordance with these revised standards.

7

The aggregate cash purchase price for these two entities was approximately $90.7 million. In addition, one of the purchase agreements included a contingent consideration arrangement of up to $15 million. The final payment amount under the contingent consideration arrangement has been determined to be $14.0 million, of which $7.2 million was paid in the second quarter of 2010. The remaining $6.8 million is due December 31, 2010. Of the $7.2 million paid in the second quarter of 2010, $6.0 million is reflected in the financing activities section of the consolidated statement of cash flows since that amount was included in the estimated fair value of the contingent consideration liability as of the acquisition date. The remaining $1.2 million, which is reflected as an acquisition-related charge in the consolidated statement of operations since the acquisition date, is reflected as an operating activity in the consolidated statement of cash flows. In the third quarter 2010, $4.8 million of cash that had been previously distributed into an escrow account for the purchase of these two businesses was released to the sellers.

For the acquired companies, the results for the three and nine months ended October 2, 2010 included net sales of $9.9 million and $36.0 million, respectively, and a loss before income taxes from continuing operations of $2.2 million and $2.6 million, respectively. The results for the three and nine months ended October 3, 2009 included net sales of $13.3 million and $44.9 million, and a loss before income taxes from continuing operations of $1.6 million and $0.5 million respectively. During the nine months ended October 3, 2009, the Company recognized net acquisition-related charges of $5.3 million. These net charges were principally a result of the adoption of SFAS No. 141(R), including transaction costs, accretion of the contingent consideration arrangement liability, and a net charge related to an increase in the contingent consideration liability. The Company recognized a credit of $0.2 million in acquisition-related items in the three months ended October 3, 2009, mainly due to a decrease in the estimated fair value of the contingent consideration liability, reflecting a change in the expected probability of paying the projected amounts, net of accretion. The nine months ended October 3, 2009 also included a $1.4 million foreign exchange loss related to the funding of one of the acquisitions, which was required to be paid in British pounds sterling. The loss resulted from changes in foreign currency exchange rates from the date the Company funded the transaction to the date the acquisition was completed.

3. Goodwill and Other Intangible Assets

The following table presents the changes in the carrying amount of goodwill by reportable operating segment during the nine months ended October 2, 2010 (in thousands):

			Global
	Aviation		Tracking		LXE		Total
Balance as of December 31, 2009	$	35,108		23,429		1,799		60,336
Foreign currency translation adjustment		—		—		140		140
Balance as of October 2, 2010	$	35,108		23,429		1,939		60,476

The Company had $20.2 million of accumulated impairment losses recorded on LXE’s goodwill as of October 2, 2010.

The following table presents the gross carrying amounts and accumulated amortization, in total and by major intangible asset class, for the Company’s intangible assets subject to amortization as of October 2, 2010 and December 31, 2009 (in thousands):

	As of October 2, 2010
	Gross				Net
	Carrying		Accumulated		Carrying
	Amount		Amortization		Amount
Developed technology	$	41,039		17,514		23,525
Customer relationships		19,167		4,224		14,943
Trade names and trademarks		6,269		1,744		4,525
Other		2,428		1,917		511
	$	68,903		25,399		43,504

8

	As of December 31, 2009
	Gross				Net
	Carrying		Accumulated		Carrying
	Amount		Amortization		Amount
Developed technology	$	40,385		13,460		26,925
Customer relationships		19,052		2,493		16,559
Trade names and trademarks		6,208		1,052		5,156
Other		2,428		1,812		616
	$	68,073		18,817		49,256

Amortization expense related to these intangible assets for the three months and nine months ended October 2, 2010 was $2.0 million and $6.1 million, respectively, and for the three months and nine months ended October 3, 2009 was $2.1 million and $7.3 million, respectively. Expected amortization expense for the remainder of 2010 and for each of the five succeeding years is as follows: 2010 — $1.9 million, 2011 — $7.7 million, 2012 — $7.9 million, 2013 — $7.3 million, 2014 - - $3.8 million and 2015 — $3.6 million.

As of October 2, 2010, we had approximately $60.5 million of goodwill and $43.5 million of other intangible assets on our consolidated balance sheet, collectively representing approximately 28% of our total assets. We test goodwill for impairment on an annual basis in the fourth quarter of the year. We are also required to test goodwill and other long-lived assets on an interim basis if an event occurs or circumstances change which indicate that an asset might be impaired. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include a sustained, significant decline in our share price and market capitalization, a decline in expected future cash flows for one or more of our business units (including our recently acquired businesses), a significant adverse change in legal factors or in the business climate, unanticipated competition and/or slower-than-expected growth rates, among others. If we are required to recognize an impairment loss related to goodwill or long-lived assets, the related charge, although a noncash charge, could materially reduce reported earnings or result in a loss for the period in which the impairment loss is recognized.

4. Fair Value Measurements

The Company measures financial and non-financial assets and liabilities in accordance with ASC Topic 820, Fair Value Measurements and Disclosures. This guidance states that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, this guidance establishes a three-tier fair-value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

• Level 1 — Observable inputs consisting of quoted prices in active markets;

• Level 2 — Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and

• Level 3 — Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The carrying amounts of cash and cash equivalents, trade accounts receivable, accounts payable and accrued expenses approximate their fair values because of the short-term maturity of these instruments.

9

The Company uses derivative financial instruments, primarily in the form of foreign currency forward contracts, in order to mitigate the risks associated with currency fluctuations on future fair values of foreign denominated assets and liabilities. The fair values of foreign currency contracts of $336,000 net asset at October 2, 2010 and $39,000 net asset at December 31, 2009 are based on quoted market prices for similar instruments using the income approach (a level 2 input per the provisions of ASC Topic 820) and are recorded in other current assets and other current liabilities, respectively, in the consolidated balance sheets. Gains and losses related to these forward contracts are included in foreign exchange gain (loss), net, in the consolidated statements of operations.

The Company has two fixed-rate mortgages and has borrowings under its revolving credit facility. One mortgage has an 8.0% interest rate and a carrying amount as of October 2, 2010 and December 31, 2009 of $5.8 million and $6.4 million, respectively. The other mortgage has a 7.1% interest rate and a carrying amount as of October 2, 2010 and December 31, 2009 of $2.4 million and $2.9 million, respectively. The Company’s outstanding borrowings under its revolving credit facility were $21.5 million and $18.5 million as of October 2, 2010 and December 31, 2009, respectively. The estimated fair value of the Company’s total debt was $29.4 million at October 2, 2010 and is based on quoted market prices for similar instruments (a level 2 input).

Management believes that these assets and liabilities can be liquidated without restriction.

5. Interim Segment Disclosures

The Company is organized into four reportable operating segments: Aviation, LXE, Defense & Space and Global Tracking. The Company determines operating segments in accordance with the Company’s internal management structure, which is organized based on products and services that share distinct operating characteristics. Each segment is separately managed and is evaluated primarily upon operating income and earnings before interest, taxes, depreciation and amortization (“EBITDA”).

The Aviation segment designs and develops satellite-based communications solutions through a broad array of terminals and antennas for the aeronautical market that enable end-users in aircraft and other mobile platforms to communicate over satellite and air-to-ground links. This segment also designs equipment to process data on board aircraft, including rugged data storage, cabin-wireless connectivity, and air-to-ground connectivity equipment.

The LXE segment manufactures mobile terminals and wireless data collection equipment for logistics management systems. LXE operates mainly in three markets: the Americas market, which is comprised of North, South and Central America; the International market, which is comprised of all other geographic areas with the highest concentration in Europe; and direct sales to original equipment manufacturers (“OEM”).

The Defense & Space segment manufactures custom-designed, highly engineered subsystems for defense electronics and satellite applications. These applications include products from military communications, radar, surveillance and countermeasures to high-definition television, satellite radio, and live TV for commercial airlines. Orders typically involve development and production schedules that can extend a year or more.

The Global Tracking segment provides satellite-based machine-to-machine mobile communications equipment and services to track, monitor and control remote assets, regardless of whether they are fixed, semi-fixed or mobile. Additionally, Global Tracking provides equipment for the Cospas-Sarsat search-and-rescue system and incident-management solutions for rescue coordination worldwide.

Prior to 2010, the Company operated under three reportable operating segments: Communications & Tracking, D&S and LXE. The Aviation and Global Tracking segments were previously included in our Communications & Tracking segment. The Company’s historical financial data has been recast in this Quarterly Report on Form 10-Q to conform to its 2010 segment presentation.

10

Following is a summary of the Company’s interim segment data (in thousands):

	Three Months Ended						Nine Months Ended
	October 2			October 3			October 2			October 3
	2010			2009			2010			2009
Net sales:
Aviation	$	24,161			25,669		$	75,685			93,589
LXE		35,613			26,237			102,551			79,988
Defense & Space		16,784			23,056			50,076			75,153
Global Tracking		9,399			10,769			29,785			26,217
Less intercompany sales		(234	)		—			(995	)		—
Global Tracking external sales		9,165			10,769			28,790			26,217
Total	$	85,723			85,731		$	257,102			274,947
Operating income (loss):
Aviation	$	1,479			(451	)	$	3,604			8,415
LXE		2,096			(1,348	)		5,065			(6,195	)
Defense & Space		1,655			2,140			4,267			7,333
Global Tracking		68			883			906			119
Corporate & Other		(1,030	)		1,342			(2,475	)		(5,693	)
Total	$	4,268			2,566		$	11,367			3,979
Earnings (loss) from continuing operations before income taxes:
Aviation	$	1,382			(479	)	$	3,187			9,077
LXE		2,434			(1,213	)		5,267			(6,373	)
Defense & Space		1,660			2,218			4,276			7,411
Global Tracking		(80	)		647			855			478
Corporate & Other		(1,517	)		704			(3,794	)		(8,658	)
Total	$	3,879			1,877		$	9,791			1,935

The results before income taxes for Corporate & Other for the first nine months of 2009 includes $5.3 million of acquisition-related charges, (which includes a $1.4 million foreign exchange loss related to the funding of the Satamatics acquisition) and other expenses that are not allocated to operating segments in the financial data reviewed by the chief operating decision maker.

11

	October 2		December 31
	2010		2009
Assets:
Aviation	$	146,994		144,483
LXE		80,101		71,632
Defense & Space		47,725		53,883
Global Tracking		79,551		75,922
Corporate & Other		19,507		28,225
Total	$	373,878		374,145
Concentration of net assets by geographic region:
United States	$	69,166		72,826
Canada		67,577		62,239
Europe		103,223		97,216
Other		8,123		4,810
Total	$	248,089		237,091

Sales to no individual customer exceeded 10% of our net sales during the three and nine months ended October 2, 2010, or October 3, 2009.

6. Earnings Per Share

Following is a reconciliation of the denominators for basic and diluted earnings per share calculations (in thousands):

	Three Months Ended				Nine Months Ended
	October 2		October 3		October 2		October 3
	2010		2009		2010		2009
Basic weighted-average number of common shares outstanding		15,197		15,175		15,189		15,161
Dilutive potential shares using the treasury share method		54		83		40		89
Diluted weighted-average number of common shares outstanding		15,251		15,258		15,229		15,250
Shares that were not included in computation of diluted earnings per share that could potentially dilute future basic earnings per share because their effect on the periods were antidilutive		1,005		526		1,031		557

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7. Comprehensive Income

Following is a summary of comprehensive income (in thousands):

	Three Months Ended				Nine Months Ended
	October 2		October 3		October 2		October 3
	2010		2009		2010		2009
Net earnings	$	3,471		5,280		7,930		5,498
Other comprehensive income:
Foreign currency translation adjustment		4,932		5,922		1,687		8,818
	$	8,403		11,202		9,617		14,316

8. Inventories

Inventories as of October 2, 2010 and December 31, 2009 include the following (in thousands):

	October 2		December 31
	2010		2009
Parts and materials	$	29,493		25,221
Work-in-process		6,406		5,142
Finished goods		12,880		10,292
	$	48,779		40,655

Costs included in inventories related to long-term programs or contracts are primarily for materials and work performed on programs that are awaiting funding, or on contracts not yet finalized. Such costs were $2.1 million at October 2, 2010, and $1.1 million at December 31, 2009.

9. Revolving Credit Facility

As of October 2, 2010, the Company had $21.5 million of borrowings outstanding under its revolving credit facility.
The Company has $2.1 million of standby letters of credit to satisfy performance guarantee requirements under certain customer contracts. While these obligations are not normally called, they could be called by the beneficiaries at any time before the expiration date should the Company fail to meet certain contractual requirements. After deducting outstanding letters of credit, at October 2, 2010 the Company had $38.5 million available for borrowing in the U.S. and $12.9 million available for borrowing in Canada under the revolving credit agreement.

10. Warranty Liability

The Company provides a limited warranty for a variety of its products. The specific terms and conditions of the warranties vary depending upon the specific products and markets. The Company records a liability at the time of sale for the estimated costs to be incurred under warranties, which is included in other current liabilities on the consolidated balance sheets. The amount of this liability is based upon historical, as well as expected, experience.

13

The warranty liability is periodically reviewed for adequacy and adjusted as necessary. Following is a summary of the activity for the periods presented related to the Company’s liability for limited warranties (in thousands):

	Three Months Ended						Nine Months Ended
	October 2			October 3			October 2			October 3
	2010			2009			2010			2009
Balance at beginning of the period	$	4,524			3,796			4,085			2,789
Additions at dates of acquisition for businesses acquired during period		—			—			—			516
Accruals for warranties issued during the period		831			734			2,887			2,987
Settlements made during the period		(679	)		(694	)		(2,296	)		(2,456	)
Balance at end of period	$	4,676			3,836			4,676			3,836

11. Stock-Based Compensation

The Company has granted nonvested restricted stock and nonqualified stock options to key employees and directors under several stock award plans. The Company granted stock awards with an aggregate fair value of approximately $2.6 million during the first nine months of 2010, and $2.5 million during the first nine months of 2009. The Company recognized expense in the third quarter and first nine months of $0.5 million and $1.4 million in 2010, and $0.6 million and $1.7 million in 2009, respectively, before income tax benefits for all the Company’s stock plans.

12. Income Taxes

The Company’s effective income tax rate is generally less than the amounts computed by applying the U.S. federal income tax rate of 34% due to a portion of earnings being earned in Canada, where the Company’s effective rate is much lower than the rate in the U.S. due to research-related tax benefits. In the three and nine months ended October 2, 2010, the rate was impacted by tax benefits for certain loss jurisdictions that have not been recognized. In the three and nine months ended October 3, 2009, the Company recognized a benefit of $1.9 million for its prior-year research and development credits in the U.S. after completion of an Internal Revenue Service examination. Furthermore, a benefit of $2.2 million and $2.4 million was recognized in the third quarter and first nine months of 2009, respectively, related to the year-to-date loss before income taxes in certain jurisdictions since a loss had been projected for the full year in those jurisdictions. Of this benefit, $0.4 million was allocated to discontinued operations.

The Company is under audit in Canada at the federal level for the years 2008 and 2009. The Company expects the audits to be completed in the next twelve months. Any related unrecognized tax benefits could be adjusted based on the results of the audits. The Company cannot estimate the range of the change that is reasonably possible at this time.

13. Discontinued Operations

Prior to 2009, the Company disposed of its S&T/Montreal, SatNet, and EMS Wireless divisions. The sales agreements for each of these disposals contained standard indemnification provisions for various contingencies that could not be resolved before the dates of closing and for various representations and warranties provided by the Company and the purchasers. The purchaser of EMS Wireless asserted claims under such representations and warranties. The parties agreed to arbitration, which commenced in the third quarter of 2009. In March of 2010, the Company received an interim decision from the arbitrator on these claims awarding the purchaser a total of approximately $9.2 million under the warranty provisions of the purchase agreement. As a result, the Company accrued a liability for the award costs, based on the interim decision, in discontinued operations in the fourth quarter of 2009. On April 30, 2010, the arbitrator issued the final decision awarding the purchaser of the Company’s former EMS Wireless division $8.6 million. Based on this final award, the Company reduced its estimated liability by $0.6 million in the first quarter of 2010. This favorable adjustment in discontinued operations in the three months ended April 3, 2010 was offset by additional charges related to estimated contingent liabilities associated with other divisions disposed of prior to 2009.

14

In conjunction with the sale of S&T/Montreal in 2005, an existing contractual requirement for the Company to post approximately $3 million to secure in-orbit incentive performance of the Radarsat-2 payload was eliminated, but the Company continues to warrant that amount in the event of specified in-orbit payload failures. Based upon the available information, management believes that the outcome for this particular contingency is not probable and cannot be estimated. As a result, the Company has not incurred any costs to date, and has not recorded a liability as of October 2, 2010, with respect to this contingency. The Company incurred no additional costs related to this disposition through the third quarter of 2010.

The Company has an agreement with the purchaser of the former S&T/Montreal division to acquire a license for $8 million in payments over a seven-year period, beginning in December 2008, for the rights to a certain satellite territory. The Company and the purchaser have a corresponding sublicense agreement that granted the territory rights back to the purchaser, under which the Company is to receive a portion of the satellite service revenues from the specific market territory over the same period. The purchaser had previously guaranteed that the revenues derived under the sublicense would equal or exceed the acquisition cost of the license. As part of the agreement to sell the net assets of S&T/Montreal, the Company released the purchaser from this guarantee. Without the guarantee, the Company estimates that its portion of the satellite service revenues will be less than the acquisition cost, and the Company has accordingly reflected a liability for the net cost in its consolidated balance sheet. As of October 2, 2010, no payments have been made by the Company under this license agreement. The satellite service revenues from the specific market territory included under the sublicense agreement are considerably lower than expected. The Company believes that sufficient efforts are not being made by the purchaser of the former S&T/Montreal division to market this satellite service. The parties are finalizing a settlement under these agreements. The Company believes that the net liability recorded in its consolidated balance sheet is its best estimate of the settlement amount. If a settlement is reached, it is expected to be paid in the following twelve months, and therefore the net liability is recorded as a current liability in the Company’s consolidated balance sheet as of October 2, 2010.

14. Repurchases of Common Shares

On July 29, 2008, the Company’s Board of Directors authorized a stock repurchase program for up to $20 million of the Company’s common shares. As of October 2, 2010, the Company had repurchased 495,000 common shares for approximately $10.1 million. Further repurchases are no longer permitted under the terms of the Company’s principal credit agreements. There were no repurchases of common shares under this program during the nine months ended October 2, 2010.

15. Litigation

The Company is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

15

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes included in Item 1 of Part 1 of this Quarterly Report and the audited consolidated financial statements and notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2009.

We are a leading provider of wireless connectivity solutions over satellite and terrestrial networks. We keep people and systems connected, wherever they are — on land, at sea, in the air or in space. Serving the aeronautical, asset-tracking, defense, and mobile computing industries, our products and services enable universal mobility, visibility and intelligence. Our operations include the following four reportable operating segments:

• Aviation — Designs and develops satellite-based communications solutions through a broad array of terminals and antennas for the aeronautical market that enable end-users in aircraft and other mobile platforms to communicate over Inmarsat and Iridium satellites and air-to-ground links. This segment also designs and builds aircraft cabin equipment to process data on board aircraft, including rugged data storage, cabin-wireless connectivity, and air-to-ground connectivity equipment;

• LXE — Provides rugged mobile terminals and wireless data networks used for logistics applications such as distribution centers, warehouses and container ports. LXE operates mainly in three markets: the Americas market, which is comprised of North, South and Central America; the International market, which is comprised of all other geographic areas, with the highest concentration in Europe; along with direct sales to original equipment manufacturers (“OEM”);

• Defense & Space (“D&S”) — Supplies highly engineered subsystems for defense electronics and satellite applications from military communications, radar, surveillance and countermeasures to high-definition television, satellite radio, and live TV for commercial airlines; and

• Global Tracking — Provides satellite-based machine-to-machine mobile communications equipment and services to track, monitor and control remote assets, regardless of whether they are fixed, semi-fixed or mobile. Additionally, Global Tracking provides equipment for the Cospas-Sarsat search-and-rescue system and incident-management solutions for rescue coordination worldwide.

Following is a summary of significant factors affecting or related to our results of operations for the three months and nine months ended October 2, 2010:

• Consolidated net sales from continuing operations were $85.7 million and $257.1 million in third quarter and first nine months of 2010, reflecting another quarter of strong sales, though down by 7% compared with the first nine months of 2009. Net sales in 2010 reflect a recovery in our logistics business and the additional net sales from the acquisitions made in 2008 and 2009.

• Operating profits were contributed by each of the four operating segments in the third quarter and the first nine months of 2010, respectively. In total, operating profits improved by $1.7 million and $7.4 million from the third quarter and first nine months of 2009, respectively, mainly from the higher volume of logistics products shipped, the lower cost-of-sales percentages reported by our operating segments, and lower acquisition-related charges and amortization expense in 2010. For the first nine months of 2010, acquisition-related charges were lower by $4.7 million and amortization expense was lower by $1.2 million compared with the same period of 2009.

• As certain of our markets continue to be impacted by the economy, they may face continuing pressures and risks. We expect that we will continue to be faced with these economic pressures at least through the middle of 2011. These and other factors could cause a decline in expected future cash flows for one or more of our business units (including our recently acquired businesses), and as a result it is reasonably possible that we may be required to recognize an impairment loss related to goodwill or other long-lived assets in the future.

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Results of Operations

The following table sets forth items from the consolidated statements of operations as reported and as a percentage of net sales (or product net sales and service net sales for product cost of sales and service cost of sales, respectively) for each period (in thousands, except percentages):

	Three Months Ended										Nine Months Ended
	October 2					October 3					October 2					October 3
	2010					2009					2010					2009
Product net sales	$	69,913		81.6	%	$	65,766		76.7	%	$	209,896		81.6	%	$	210,464		76.5	%
Service net sales		15,810		18.4			19,965		23.3			47,206		18.4			64,483		23.5
Net sales		85,723		100.0			85,731		100.0			257,102		100.0			274,947		100.0
Product cost of sales		47,098		67.4			46,892		71.3			140,664		67.0			141,014		67.0
Service cost of sales		7,463		47.2			10,843		54.3			23,299		49.4			45,391		70.4
Cost of sales		54,561		63.6			57,735		67.4			163,963		63.9			186,405		67.8
Selling, general and administrative expenses		21,996		25.7			20,496		23.9			65,797		25.6			65,468		23.8
Research and development expenses		4,898		5.7			5,149		6.0			15,028		5.8			13,788		5.0
Impairment loss on goodwill related charges		—		—			—		—			384		0.1			—		—
Acquisition-related items		—		—			(215	)	(0.3	)		563		0.2			5,307		1.9
Operating income		4,268		5.0			2,566		3.0			11,367		4.4			3,979		1.5
Interest income		60		—			14		—			341		0.2			179		0.1
Interest expense		(467	)	(0.5	)		(549	)	(0.6	)		(1,486	)	(0.6	)		(1,837	)	(0.7	)
Foreign exchange gain (loss), net		18		—			(154	)	(0.2	)		(431	)	(0.2	)		(386	)	(0.2	)
Earnings from continuing operations before income taxes		3,879		4.5			1,877		2.2			9,791		3.8			1,935		0.7
Income tax (expense) benefit		(408	)	(0.5	)		4,112		4.8			(1,861	)	(0.7	)		4,272		1.6
Earnings from continuing operations		3,471		4.0			5,989		7.0			7,930		3.1			6,207		2.3
Loss from discontinued operations		—		—			(709	)	(0.8	)		—		—			(709	)	(0.3	)
Net earnings	$	3,471		4.0	%	$	5,280		6.2	%	$	7,930		3.1	%	$	5,498		2.0	%

Three Months ended October 2, 2010 and October 3, 2009:

Net sales of $85.7 million in the third quarter of 2010 were the same level as the net sales in 2009. Higher net sales from our LXE segment were offset by lower net sales from our D&S, Aviation and Global Tracking segments. LXE’s net sales in the third quarter of 2010 were $9.4 million higher than in the same period in 2009, an increase of 35.7%, driven primarily by higher product shipments in the Americas market. LXE’s product sales were also higher, but to a lesser extent, in the International market, and from a new source of revenue from direct sales to OEMs. Net sales were lower at D&S mainly due to the conclusion of work performed on a significant military communications research project in the fourth quarter of 2009, and therefore not included in the 2010 results. Net sales were lower at Aviation primarily due to a lower volume of shipments of air-to-ground in-cabin connectivity products into the air transport market due to a change in the airline’s rollout schedule of connectivity, partially offset by an increase in Inmarsat high-speed-data and antenna product shipments to the military market. The decrease in net sales at Global Tracking was primarily a result of the completion of a significant emergency management project in the third quarter of 2009 that triggered revenue recognition in that period, partially offset by an increase in airtime revenue from a higher number of terminals in use from our asset-tracking product lines.

Product net sales of $69.9 million in the third quarter of 2010 were 6.3% higher than product net sales in the third quarter of 2009. These higher product net sales were primarily due to a higher volume of terminals shipped by LXE, partially offset by lower product net sales at Aviation, Global Tracking and D&S. The lower product net sales at Aviation were mainly due to a lower volume of shipments of air-to-ground connectivity products. The lower product net sales at Global Tracking were primarily due to the timing of revenue recognized on emergency management projects as described above. The lower sales level at D&S was mainly due to the timing of revenue recognized on long-term contracts. Service net sales of $15.8 million in the third quarter of 2010 were 20.8% lower than service net sales in the same period in 2009, mainly due to the conclusion of significant work performed on a military communications research project by D&S partially offset by an increase in airtime revenue at Global Tracking generated from our asset-tracking product line acquired during the first quarter of 2009. As a result, product net sales comprised a higher percentage of total net sales in the third quarter of 2010 compared with the third quarter of 2009.

17

Overall cost of sales as a percentage of consolidated net sales was lower in the third quarter of 2010 compared with the same period of 2009 due to lower cost-of-sales percentages reported by each of our four reportable operating segments and a higher percentage of net sales generated from our LXE segment, which has a lower cost-of-sales percentage than the consolidated group. Product cost of sales and service cost of sales as a percentage of their respective net sales were lower in the third quarter of 2010 compared with the same period in 2009. The product cost-of-sales percentage was lower in all four of our segments due to a more favorable product mix, cost reduction efforts targeted at reducing product costs at Aviation and Global Tracking, a higher production volume at LXE, and improved program execution at D&S. The decrease in the service cost-of-sales percentage was mainly due to a lower proportion of service revenues generated from our D&S segment, which has a higher service cost-of-sales percentage than our other three reportable operating segments.

Selling, general and administrative expenses were $1.5 million higher in the third quarter of 2010 compared with the same period in 2009 mainly due to additional marketing and selling costs related to the higher sales at LXE which has a higher commission structure than our other operating segments, higher incentive compensation costs due to the improved performance projected for the Company in 2010 as compared with 2009, and an increase in outside service expense mainly for tax related services.

Research and development expenditures were slightly lower in the third quarter of 2010 compared with the third quarter of 2009. Expenditures during the third quarter 2010 were higher than the third quarter in 2009 from the development of new product offerings in 2010. However, a higher proportion of these expenditures were recoverable in the third quarter of 2010 compared with the same period in 2009 from the Canadian government and certain commercial contracts.

We recognized income tax expense of $0.4 million in the third quarter of 2010 equal to 11% of earnings from continuing operations before income taxes. The Company’s effective income tax rate is generally less than the amounts computed by applying the U.S. federal income tax rate of 34% due to a portion of earnings being earned in Canada, where the Company’s effective rate is much lower than the rate in the U.S. due to research-related tax benefits. In the three months ended October 2, 2010, the rate was higher than it otherwise would have been since tax benefits for certain loss jurisdictions have not been recognized. We recognized an income tax benefit of $4.1 million in the third quarter of 2009. During the quarter we recognized a benefit of $1.9 million for prior-year R&D credits in the U.S. after completion of an Internal Revenue Service examination. Furthermore, a benefit of $2.2 million was recognized related to the year-to-date losses before income taxes in certain jurisdictions in which losses had been projected for the full year. The effective rate in 2010 was also higher than 2009 since the earnings in Canada in 2010 are expected to be subject to higher rates due to provincial taxes, and the rate used for U.S. taxable income is higher since certain key provisions of the U.S. tax law, including the research and development credit, have not been extended to be in effect for 2010 as of the end of the third quarter. If these provisions are extended, our effective tax rate will be lower than the year-to-date rate for the remainder of 2010. However, we can make no assurances that these provisions will be extended to be in effect for 2010.

Nine Months ended October 2, 2010 and October 3, 2009:

Net sales of $257.1 million in the first nine months of 2010 were 6.5% lower than the $274.9 million in the same period in 2009. Lower net sales from our D&S and Aviation segments were partially offset by higher net sales from our LXE and Global Tracking segments. Net sales were lower at D&S mainly due to the conclusion of work performed on a significant military communications research project in the fourth quarter of 2009, and therefore not included in the 2010 results. Net sales were lower at Aviation primarily due to a lower volume of shipments of connectivity products and Inmarsat high-speed-data and antenna products reflecting the slow-down in the Aviation commercial business since the third quarter of 2009. LXE’s net sales in the first nine months of 2010 were $22.6 million higher than in the same period in 2009, an increase of 28.2%, mainly due to higher product shipments in the Americas market. LXE’s product sales were also higher, but to a lesser extent, in the International market, and from a new source of revenue from direct sales to OEMs. The increase in net sales at Global Tracking was primarily a result of the timing of the acquisition of our asset-tracking product line February 2009 and additional airtime revenues.

18

Product net sales of $209.9 million in the first nine months of 2010 were relatively unchanged from the same period in 2009. A higher volume of terminals shipped by LXE, and the additional product net sales generated from our asset-tracking product lines acquired in February 2009, were offset by lower product net sales at Aviation and D&S. The lower product net sales at Aviation were mainly due to a lower volume of shipments of our connectivity products and Inmarsat high-speed-data and antenna products to the commercial markets. The lower product net sales at D&S were mainly due to the timing of revenue recognized on long-term contracts. Service net sales of $47.2 million in the first nine months of 2010 were 26.8% lower than service net sales in the same period in 2009, mainly due to the conclusion of significant work performed on a military communications research project by D&S partially offset by an increase in airtime revenue at Global Tracking and Aviation generated from our new lines of business acquired during the first quarter of 2009. As a result, product net sales comprised a higher percentage of total net sales in the first nine months of 2010 compared with the first nine months of 2009.

Overall cost of sales as a percentage of consolidated net sales was lower in the first nine months of 2010 compared with the same period of 2009 due to lower cost-of-sales percentages reported by three of our four reportable operating segments and a higher percentage of net sales generated from our LXE and Global Tracking segments which have lower cost-of-sales percentages than our other two segments. Product cost of sales and service cost of sales as a percentage of their respective net sales were lower in the first nine months of 2010 compared with the same period in 2009. Product cost of sales was lower in three of our four segments due to a more favorable product mix, and cost reduction efforts targeted at reducing product costs at Aviation and Global Tracking, a higher production volume at LXE, and improved program execution at D&S. The lower service cost-of-sales percentage was mainly due to a lower proportion of service revenues generated from our D&S segment, which has a higher service cost-of-sales percentage than our other three reportable operating segments.

Selling, general and administrative expenses as a percentage of consolidated net sales increased for the first nine months of 2010 compared with the first nine months in 2009. Actual expenses were only $0.3 million higher in the first nine months of 2010 compared with the same period in 2009 mainly due to additional marketing and selling costs related to the higher sales at LXE which has a higher commission structure than our other operating segments, additional costs related to the acquired product lines, and higher incentive compensation costs due to the improved performance projected for the Company in 2010 as compared with 2009. These increased costs were partially offset by management’s cost reduction efforts at our Aviation and D&S segments, and the net favorable effect of changes in foreign currency exchange rates on our international operations. The first nine months of 2009 also included higher severance charges of approximately $1.1 million.

Research and development expenses were $1.2 million higher in the first nine months of 2010 than in the comparable period in 2009 mainly for the development of new product offerings, and the expansion of our technology base in 2010. Research and development expenses also increased in the first nine months of 2010 due to the unfavorable effects of changes in foreign currency exchange rates on our Canadian operations. A higher proportion of these expenditures were recoverable in the first nine months of 2010 compared with the same period in 2009 from the Canadian government and certain commercial contracts which partially offset the higher research and development expenditures.

Acquisition-related items included charges of $0.6 million in the first nine months of 2010. These costs were primarily for professional fees related to acquired research and development tax credits and an adjustment in the earn-out liability for changes in payments to be made for one of the acquisitions completed in the first quarter of 2009. Acquisition-related charges were $5.3 million in the first nine months of 2009. These costs were primarily related to professional fees for legal, due-diligence, valuation, and integration services for the acquisition of our Formation and Satamatics businesses (see Note 2 to the consolidated financial statements in this Quarterly Report for additional information on these business acquisitions).

We recognized income tax expense of $1.9 million in the first nine months of 2010 equal to 19% of earnings from continuing operations before income taxes. The Company’s effective income tax rate is generally less than the amounts computed by applying the U.S. federal income tax rate of 34% due to a portion of earnings being earned in Canada, where the Company’s effective rate is much lower than the rate in the U.S. due to research-related tax benefits. In the nine months ended October 2, 2010, the rate was higher than it otherwise would have been since tax benefits for certain loss jurisdictions have not been recognized. We recognized an income tax benefit of $4.3 million in the first nine months of 2009. This benefit was primarily realized during the third quarter, an explanation for which is included in the quarterly comparisons section of our management’s discussion and analysis section of this Quarterly Report. In addition, the effective rate in 2010 was higher than 2009 since the earnings in Canada in 2010 are expected to be subject to higher rates due to provincial taxes and the rate used for U.S. taxable income is higher since certain key provisions of the U.S. tax law, including the research and development credit, have not been extended to be in effect for 2010 as of the end of the third quarter.

19

Segment Analysis

Our segment net sales, cost of sales as a percentage of respective segment net sales, segment operating income (loss) and Adjusted EBITDA were as follows (in thousands, except percentages):

													Percentage
	Three Months Ended						Nine Months Ended						Increase (Decrease)
	October 2			October 3			October 2			October 3			Three			Nine
	2010			2009			2010			2009			Months			Months
Net sales:
Aviation	$	24,161			25,669			75,685			93,589			(5.9)	%		(19.1	)
LXE		35,613			26,237			102,551			79,988			35.7			28.2
Defense & Space		16,784			23,056			50,076			75,153			(27.2	)		(33.4	)
Global Tracking		9,399			10,769			29,785			26,217			(12.7	)		13.6
Less intercompany sales		(234	)		—			(995	)		—			—			—
Global Tracking external sales		9,165			10,769			28,790			26,217			(14.9	)		9.8
Total	$	85,723			85,731			257,102			274,947			—			(6.5	)
Cost of sales percentage:
Aviation		65.4	%		67.2			65.1			63.3			(1.8	)		1.8
LXE		60.1			62.9			59.4			63.5			(2.8	)		(4.1	)
Defense & Space		75.4			79.6			75.8			79.5			(4.2	)		(3.7	)
Global Tracking		46.0			52.7			50.0			61.8			(6.7	)		(11.8	)
Total		63.6			67.3			63.9			67.8			(3.7	)		(3.9	)
Operating income (loss):
Aviation	$	1,479			(451	)		3,604			8,415				2		(57.2	)
LXE		2,096			(1,348	)		5,065			(6,195	)			2			2
Defense & Space		1,655			2,140			4,267			7,333			(22.7	)		(41.8	)
Global Tracking		68			883			906			119			(92.3	)		661.3
Corporate & Other		(1,030	)		1,342			(2,475	)		(5,693	)			2			2
Total	$	4,268			2,566			11,367			3,979			66.2			185.7
Adjusted EBITDA (1)
Aviation	$	3,418			1,755			9,290			15,586			94.8			(40.4	)
LXE		3,229			(361	)		8,012			(3,348	)			2			2
Defense & Space		2,343			3,047			6,790			10,028			(23.1	)		(32.3	)
Global Tracking		863			1,514			3,626			3,252			(43.0	)		11.5
Corporate & Other		(352	)		1,738			365			1,642				2		(77.8	)
Total	$	9,501			7,693			28,083			27,160			23.5			3.4

(1)	Adjusted EBITDA is a financial measure that is not defined with generally accepted accounting principles (“GAAP”) in the United States. See section entitled “Adjusted EBITDA” for an explanation of this measure and a reconciliation to net earnings.
(2)	The percentage change is not calculable.

Aviation: Net sales decreased by $1.5 million and $17.9 million in the third quarter and first nine months of 2010, respectively, as compared with the same periods in 2009, mainly due to a lower volume of shipments of Aviation’s air-to-ground connectivity products. Shipments were lower for Aviation’s air-to-ground in-cabin connectivity products into the air transport market due to delays in customer orders resulting from changes in the airline’s rollout schedule of connectivity, and to a transition to a new buying pattern by our customer to acquire inventory as needed to meet scheduled installations instead of maintaining a stock of inventory of on-hand. The lower shipments of air-to-ground connectivity products in the third quarter of 2010 compared with the same period of 2009 were partially offset by an increase in Aviation’s Inmarsat high-speed-data terminal and antenna products, mainly to the military market, indicating continued strength in the demand for Aviation products in that market. The decrease in net sales in the first nine months of 2010 were also due to a lower volume of shipment of Aviation’s Inmarsat high-speed-data terminal and antenna products reflecting the slow-down in the Aviation commercial business beginning in the third quarter of 2009.

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Cost of sales as a percentage of net sales was lower in the third quarter 2010 as compared with the third quarter of 2009 mainly due to a more favorable mix of Inmarsat products partially offset by the unfavorable effect of changes in foreign currency exchange rates that affected our reported international costs, and the negative impact of a net increase in estimated costs on long-term projects in the third quarter of 2010. The cost-of-sales percentage was higher in the first nine months of 2010 as compared with the same period of 2009 mainly due to a lower production volume over which fixed costs were absorbed, the unfavorable effect of changes in foreign currency exchange rates, and the negative impact of a net increase in estimated costs on long-term projects. These increases in the cost-of-sales percentage were partially offset by lower amortization costs of intangible assets and a more favorable mix of Inmarsat products in the first nine months of 2010.

Operating income increased by $1.9 million in the third quarter of 2010 compared with the third quarter of 2009 due to a lower cost-of-sales percentage, and lower selling, general and administrative and research and development expenses in the third quarter of 2010. These lower selling, general and administrative expenses were mainly due to staff reductions made in the second quarter of 2010, and from certain cost centers that supported the Aviation segment in 2009 that began supporting Global Tracking in 2010. The lower research and development expenses were primarily a result of additional funding received from the Canadian government under a program to encourage technology development in areas such as satellite communications. Operating income decreased by $4.8 million in the first nine months of 2010 compared with the same period in 2009 mainly as a result of lower net sales in 2010. Operating income as a percentage of net sales was 6.1% and a negative 1.8% in the third quarters of 2010 and 2009, respectively, and was 4.8% and 9.0% in the first nine months of 2010 and 2009, respectively.

Adjusted EBITDA increased by $1.7 million in the third quarter of 2010 compared with the same period in 2009 mainly due to an increase in operating income in the third quarter of 2010. Adjusted EBITDA decreased by $6.3 million in the first nine months of 2010 compared with the same period in 2009 due to a decrease in operating income and an unfavorable swing in foreign currency gains and losses.

LXE: Net sales exceeded $35 million in both the second and third quarters of 2010, and were higher than the net sales of each of the preceding five quarters, indicating a recovery in the North American markets for our logistics business. Net sales were higher by $9.4 million in the third quarter of 2010, and by $22.6 million in the first nine months of 2010 compared with the same periods of 2009 mainly due to an increase in net sales in the Americas market, and to a lesser extent in the International market in the third quarter and first nine months of 2010. The increase in net sales in the Americas market resulted primarily from a higher volume of terminals shipped in that market in response to a higher demand for rugged handheld computer products. The increase in net sales in the International market was mainly due to a higher volume of terminals shipped in that market partially offset by the unfavorable effect of changes in foreign currency exchange rates on the reported net sales. Sales generated from handheld computer products introduced in the fourth quarter of 2009 to the OEM market gained acceptance in certain service industries in 2010 and represents $1.7 million, or 4.7%, and $6.1 million, or 5.9%, of net sales in the third quarter and first nine months of 2010, respectively.

Cost of sales as a percentage of net sales was lower in the third quarter and first nine months of 2010 compared with the same periods in 2009 mainly due to management’s cost reduction efforts, and a higher production volume over which fixed costs were absorbed. Another factor impacting the cost of sales as a percentage of net sales in the first nine months of 2010 was a $0.9 million reduction in cost of sales for purchased items previously included in accounts payable that were determined to no longer be liabilities. The effects of these reductions in cost of sales as a percentage of net sales were partially offset by an unfavorable effect of changes in foreign currency exchange rates that affected our reported International net sales in the first nine months of 2010. Revenues are generally denominated in the local functional currency but product costs are denominated in the U.S. dollar, which was stronger relative to the foreign currencies in the first nine months of 2010 compared with the same period in 2009.

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LXE’s operating income improved in each of the first three quarters of 2010 compared with the previous quarter mainly due to the strength of the recovering North American markets. LXE generated operating income of $2.1 million and $5.1 million in the third quarter and first nine months of 2010 compared with operating losses of $1.3 million and $6.2 million in the third quarter and the first nine months of 2009, respectively. These increases in operating income in 2010 were mainly a result of the margin contributed by the higher net sales and more favorable cost-of-sales percentages. These increases in operating income were partially offset by higher research and development expenses reflecting the development of three new products to be released in early 2011 and higher selling, general and administrative expenses mainly due to increased commissions and other selling expenses as a result of higher sales. These higher selling, general and administrative expenses were partially offset by the favorable effect of changes in foreign currency exchange rates on reported costs and lower severance charges. Severance charges were lower by approximately $1.4 million in the first nine months of 2010 compared with the same period in 2009. Operating income as a percentage of net sales was 5.9% and negative 5.1% in the third quarter of 2010 and 2009, respectively, and was 4.9% and negative 7.7% in the first nine months of 2010 and 2009, respectively.

Adjusted EBITDA increased by $3.6 million and $11.4 million in the third quarter and first nine months of 2010, respectively, compared with the third quarter and first nine months of 2009, in line with the increases in operating income in 2010.

Defense & Space: Net sales were $6.3 million and $25.1 million lower in the third quarter and first nine months of 2010, respectively, compared with the same periods in 2009 mainly due to work performed on military programs that were included in the third quarter and first nine months of 2009, including a large military satellite communications research project, but were completed in the fourth quarter of 2009 and will not contribute to net sales in future quarters. Order backlog of long-term contracts was $71.2 million at October 2, 2010, a decrease of $18.4 million from December 31, 2009. Orders for long-term defense contracts slowed during the third quarter of 2010 as a result of delays in customer funding.

Cost of sales as a percentage of net sales was lower in the third quarter and first nine months of 2010 compared with the same periods in 2009. These lower cost-of-sale percentages were mainly due to a net decrease in estimated costs to complete long-term programs resulting from improved program execution, and production efficiencies gained on certain long-term defense-related projects in the third quarter and first nine months of 2010. Cost of sales for the first nine months of 2009 included approximately $0.7 million of severance changes.

Operating income was lower by $0.5 million and $3.1 million in the third quarter and first nine months of 2010, respectively, compared with the third quarter and first nine months of 2009. The lower operating income was mainly due to the decrease in net sales generated in the third quarter and first nine months of 2010. The lower operating income in the first nine months of 2010 was also due to higher research and development expenses, partially offset by lower selling, general and administrative expenses. The lower selling, general and administrative costs reflect the impact of management’s cost reduction efforts initiated in 2009. Operating income as a percentage of net sales was 9.9% and 9.3% in the third quarter of 2010 and 2009, respectively, and was 8.5% and 9.8% in the first nine months of 2010 and 2009, respectively.

Adjusted EBITDA decreased by $0.7 million and $3.2 million in the third quarter and first nine months of 2010, respectively, compared with the third quarter and first nine months of 2009, in line with the decrease in operating income in 2010.

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Global Tracking: Net sales were $1.4 million lower in the third quarter of 2010 compared with the third quarter of 2009 mainly due to the completion of a significant emergency management project in the third quarter of 2009 that triggered revenue recognition in that period, partially offset by an increase in airtime revenue in the third quarter of 2010. The increase in airtime revenue in the third quarter 2010 was mainly a result of a higher number of terminals in use by customers. Net sales were $3.6 million higher in the first nine months of 2010 compared with the same period in 2009. The increase in net sales in the first nine months of 2010 was mainly due to timing of the acquisition of our new asset-tracking product line (acquired on February 13, 2009), and higher airtime revenue, which contributed $3.3 million of additional net sales in the first nine months of 2010 compared to the same period in 2009. The increase in airtime revenue in the first nine months of 2010 was a result of a higher number of terminals in use, and a more favorable mix of airtime contracts reflecting the migration of existing customers to current network platforms which yield higher airtime rates. As a result, the average revenue being generated per terminal by the new asset-tracking product line has grown in the first nine months of 2010 compared with the first nine months of 2009. Net sales also included a higher concentration of product shipments to the security market in the third quarter and first nine months of 2010 compared with the third quarter and first nine months of 2009, reflecting growth in that market.

Cost of sales as a percentage of net sales was lower for the third quarter and first nine months of 2010 as compared with the same periods in 2009. The cost-of-sales percentage for the third quarter and first nine months of 2010 included a more favorable product mix, the effects of management’s efforts to lower costs on certain hardware products targeted for improvement, and a higher proportion of airtime revenue, which has a lower cost-of-sales percentage than product net sales. The cost-of-sales percentage comparison was also affected by lower intangible asset amortization expense in 2010.

Operating income was $0.8 million lower in the third quarter of 2010 compared with the third quarter of 2009, mainly due to higher selling, general and administrative and research and development expenses. The lower net sales in the third quarter of 2010 were offset by the lower cost of sales in that period compared with the same period in 2009. Operating income was $0.8 million higher in the first nine months of 2010, compared with the same period in 2009 primarily as a result of the increased gross margin contributed from higher net sales and the lower cost-of-sales percentage, partially offset by higher selling, general and administrative and research and development expenses. These higher selling, general and administrative costs were mainly from certain cost centers that supported the Aviation segment in 2009 that began supporting Global Tracking in 2010, and the timing of the acquisition of our new line of business in the first quarter of 2009; the costs related to the newly acquired business were included in the operating results of our Global Tracking segment for the first nine months in 2009 from the date of acquisition, but were included in the full nine months of 2010. Research and development expenses were higher for the third quarter and first nine months of 2010 compared with the same period of 2009 due to increased efforts on development projects for next generation products. Operating income as a percentage of net sales was 0.7% and 8.2% in the third quarter of 2010 and 2009, respectively and was 3.1% and 0.5% in the first nine months of 2010 and 2009, respectively.

Adjusted EBITDA decreased by $0.7 million in the third quarter of 2010 compared with the third quarter of 2009, primarily due to a decrease in operating income in 2010. Adjusted EBITDA increased by $0.4 million in the first nine months of 2010 compared with the first nine months of 2009 mainly due to an increase in operating income in 2010. The increase in Adjusted EBITDA for the first nine months of 2010 as compared with the same period of 2009 was partially offset by an unfavorable change in foreign currency gains year over year.

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Adjusted EBITDA

In addition to traditional GAAP financial measures, we also measure our performance based on the non-GAAP financial measure of earnings before interest expense, income taxes, depreciation and amortization, and before impairment loss on goodwill related charges, stock-based compensation, acquisition-related items and acquisition-related foreign exchange adjustments (“Adjusted EBITDA”). The following table is a reconciliation of net earnings (which is the most directly comparable GAAP operating performance measure) and earnings (loss) from continuing operations before income taxes by segment to Adjusted EBITDA for the three and nine months ended October 2, 2010 and October 3, 2009 (in thousands):

													Corp &
	Aviation			LXE			D&S			GT			Other			Total
Three Months Ended October 2, 2010
Net earnings																$	3,471
Income tax expense																	408
Earnings (loss) from continuing operations before income taxes	$	1,382			2,434			1,660			(80	)		(1,517	)		3,879
Interest expense		—			(21	)		—			2			486			467
Depreciation and amortization		1,972			762			638			923			320			4,615
Stock-based compensation		64			54			45			18			359			540
Adjusted EBITDA	$	3,418			3,229			2,343			863			(352	)	$	9,501
Nine Months Ended October 2, 2010
Net earnings																$	7,930
Income tax expense																	1,861
Earnings (loss) from continuing operations before income taxes	$	3,187			5,267			4,276			855			(3,794	)		9,791
Interest expense		4			(3	)		—			3			1,482			1,486
Depreciation and amortization		5,892			2,551			2,348			2,716			927			14,434
Impairment loss on goodwill related charges		—			—			—			—			384			384
Stock-based compensation		207			197			166			52			803			1,425
Acquisition-related items		—			—			—			—			563			563
Adjusted EBITDA	$	9,290			8,012			6,790			3,626			365		$	28,083
Three Months Ended October 3, 2009
Net earnings																$	5,280
Loss from discontinued operations																	709
Income tax benefit from continuing operations																	(4,112	)
Earnings (loss) from continuing operations before income taxes	$	(479	)		(1,213	)		2,218			646			705			1,877
Interest expense		(2	)		63			(78	)		—			566			549
Depreciation and amortization		2,190			728			838			858			276			4,890
Stock-based compensation		46			61			69			10			406			592
Acquisition-related items		—			—			—			—			(215	)		(215	)
Adjusted EBITDA	$	1,755			(361	)		3,047			1,514			1,738		$	7,693
Nine Months Ended October 3, 2009
Net earnings																$	5,498
Loss from discontinued operations																	709
Income tax benefit from continuing operations																	(4,272	)
Earnings (loss) from continuing operations before income taxes	$	9,077			(6,373	)		7,411			478			(8,658	)		1,935
Interest expense		68			205			(78	)		—			1,642			1,837
Depreciation and amortization		6,322			2,636			2,493			2,758			841			15,050
Stock-based compensation		119			184			202			16			1,140			1,661
Acquisition-related items		—			—			—			—			5,307			5,307
Acquisition-related foreign exchange adjustment		—			—			—			—			1,370			1,370
Adjusted EBITDA	$	15,586			(3,348	)		10,028			3,252			1,642		$	27,160

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We believe that earnings that are based on this non-GAAP financial measure provide useful information to investors, lenders and financial analysts because (i) this measure is more comparable with the results for prior fiscal periods, and (ii) by excluding the potential volatility related to the timing and extent of nonoperating activities, such as acquisitions or revisions of the estimated value of post-closing earn-outs, such results provide a useful means of evaluating the success of our ongoing operating activities. Also, we use this information, together with other appropriate metrics, to set goals for and measure the performance of our operating businesses, and to assess our compliance with debt covenants. Management further considers Adjusted EBITDA an important indicator of operational strengths and performance of our businesses. EBITDA measures are used historically by investors, lenders and financial analysts to estimate the value of a company, to make informed investment decisions and to evaluate performance. Management believes that Adjusted EBITDA facilitates comparisons of our results of operations with those of companies having different capital structures. In addition, a measure similar to Adjusted EBITDA is a component of our bank lending agreement, which requires certain levels of Adjusted EBITDA to be achieved. This information should not be considered in isolation or in lieu of our operating and other financial information determined in accordance with GAAP. In addition, because EBITDA and adjustments to EBITDA are not determined consistently by all entities, Adjusted EBITDA as presented may not be comparable to similarly titled measures of other companies.

Backlog

Backlog is very important for our D&S segment due to the long delivery cycles for its projects. Many customers of our LXE segment typically require short delivery cycles. As a result, LXE usually converts orders into revenues within a few weeks, and it generally does not build up an order backlog that extends substantially beyond one fiscal quarter except for annual or multi-year maintenance service agreements. Our Aviation and Global Tracking businesses have customer arrangements with both short delivery cycles and delivery cycles that extend beyond the next twelve months. Our segment backlog levels as of October 2, 2010 and December 31, 2009 were as follows (in millions):

	October 2		December 31
	2010		2009
Aviation	$	45.8		49.4
LXE		23.1		22.0
Defense & Space		71.2		89.6
Global Tracking		18.5		17.2
Total	$	158.6		178.2

Included in the backlog of firm orders for our D&S segment were approximately $2.6 million and $22.5 million of unfunded orders, mainly for military contracts, as of October 2, 2010, and December 31, 2009, respectively. Of the orders in backlog as of October 2, 2010, the following are expected to be filled in the following twelve months: Aviation — 84%; LXE — 73%; D&S — 52%; and Global Tracking — 72%.

Liquidity and Capital Resources

During the first nine months of 2010, net cash and cash equivalents increased by $2.5 million to $49.7 million as of October 2, 2010. Of the $49.7 million of cash as of October 2, 2010, $45.8 million is held by subsidiaries outside of the U.S. and is not available for our use in the U.S. since the undistributed earnings of these subsidiaries are considered to be permanently reinvested.

The primary cash flow activities during the period included the following:

• Operating activities from continuing operations contributed $21.7 million in positive cash flow;

• We paid the final award of $8.6 million to the purchaser of our former EMS Wireless division in the second quarter of 2010 related to claims made by the purchaser;

• We made a payment of $7.2 million for the contingent consideration agreement related to one of the acquisitions completed in 2009; and

• We invested $7.7 million in property, plant and equipment.

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Operating activities from continuing operations contributed $21.7 million in positive cash flows in the first nine months of 2010, through net earnings for the period of $7.9 million and noncash charges of $14.4 million, primarily for depreciation and amortization.

During 2009, we completed acquisitions of two entities. Of the total purchase price of these businesses, $4.8 million of cash was held in escrow and payable to the sellers within specified periods following the respective dates of acquisition, subject to claims made against the sellers. This amount was released to the sellers in the third quarter of 2010.

During the first nine months of 2009, cash and cash equivalents decreased by $46.3 million to $40.7 million at October 3, 2009. The primary factor contributing to the decrease during the period was cash utilized for our Formation and Satamatics acquisitions.

Operating activities from continuing operations contributed $33.0 million in positive cash flows in the first nine months of 2009. We generated positive cash flow during the period mainly due to net earnings of $5.5 million, noncash charges of $15.1 million for depreciation and amortization, and decreases in working capital. We experienced good customer collections during the period and were able to lower inventory levels. Acquisition-related charges of $3.0 million paid in the first nine months of 2009 are included as reductions of cash provided by operating activities in the consolidated statement of cash flows. Discontinued operations used cash of $0.5 million mainly for legal fees to defend the Company against claims asserted by the purchaser of our EMS Wireless division, net of tax benefits.

During the first nine months of 2009, we used $87.3 million of cash to acquire our Formation and Satamatics businesses. These acquisitions were partially funded with approximately $33.8 million of borrowings under our revolving credit facility. We subsequently repaid approximately $15.3 million of borrowings under our revolving credit facility. We spent $10.7 million on capital expenditures during the first nine months of 2009.

We have a revolving credit facility under an agreement with a syndicate of banks with a $60 million total capacity for borrowing in the U.S. and $15 million total capacity for borrowing in Canada. The agreement also has a provision permitting an increase in the total borrowing capacity of up to an additional $50 million, subject to additional commitments from the current lenders or from new lenders. The existing lenders have no obligation to increase their commitments. The credit facility provides for borrowings through February 28, 2013, with no principal payments required prior to that date. The credit facility is secured by substantially all of our tangible and intangible assets, with certain exceptions for real estate that secures existing mortgages, for other permitted liens, and for certain assets outside the U.S.

As of October 2, 2010, we had $21.5 million of borrowings outstanding, $2.1 million of outstanding letters of credit, and $51.4 million available borrowing capacity under the revolving credit facility. At October 2, 2010, we were in compliance with all the covenants under the credit agreement.

We expect that capital expenditures in 2010 will range from $10 million to $12 million, excluding acquisitions of businesses. These expenditures are being used to purchase equipment that increases or enhances capacity and productivity, and to upgrade the enterprise reporting system of our LXE division.

Management believes that existing cash and cash equivalent balances, cash provided from operations, and borrowings available under our credit facility will provide sufficient liquidity to meet the operating and capital expenditure needs for existing operations during the next twelve months.

Our Board of Directors has authorized a stock repurchase program for up to $20 million of our common shares. As of October 2, 2010, we had repurchased approximately 495,000 of our common shares for approximately $10.1 million. Further repurchases are no longer permitted under the terms of the Company’s credit agreement. There were no repurchases under the program during the nine months ended October 2, 2010.

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A cash payment of $7.2 million was made in the first nine months of 2010 related to an acquisition completed in 2009 based upon the achievement of performance targets in 2009, and an additional $6.8 million is due December 31, 2010 based on an agreement to settle the 2010 earn-out amount. Refer to Note 2 of the consolidated financial statements for additional information on these acquisitions.

On April 30, 2010, the arbitrator issued the final award related to claims made by the purchaser of our former EMS Wireless division. The final award of $8.6 million was paid by EMS to the purchaser in the first nine months of 2010.

Off-Balance Sheet Arrangements

We have $2.1 million of standby letters of credit outstanding under our revolving credit facility to satisfy performance guarantee requirements under certain customer contracts. While these obligations are not normally called, they could be called by the beneficiaries at any time before the expiration date if we failed to meet certain contractual requirements. After deducting the outstanding letters of credit, at October 2, 2010 we had $38.5 million available for borrowing in the U.S. and $12.9 million available for borrowing in Canada under the revolving credit facility.

We have an agreement with the purchaser of our former S&T/Montreal division to warrant approximately $3 million in the event of specified in-orbit failures of the Radarsat-2 payload. Based upon the available information, management believes that the outcome for this particular contingency is not probable and cannot be estimated. As a result, we have not incurred any costs to date, and have not recorded a liability as of October 2, 2010, with respect to this contingency.

We also have an agreement with the purchaser of our former S&T/Montreal division to acquire a license for $8 million in payments over a seven-year period, beginning in December 2008, for the rights to a certain satellite territory. We have a corresponding sublicense agreement with the purchaser that granted the territory rights back to the purchaser, under which we are to receive a portion of the satellite service revenues from the specific market territory over the same period. The purchaser had previously guaranteed that the revenues derived under the sublicense would equal or exceed the acquisition cost of the license. As part of the agreement to sell the net assets of S&T/Montreal, we released the purchaser from this guarantee. Without the guarantee, we estimate that our portion of the satellite service revenues will be less than the acquisition cost, and we have accordingly reflected a liability for the net cost in our consolidated balance sheet. As of October 2, 2010, we have made no payments under this license agreement. The satellite service revenues from the specific market territory included under the sublicense agreement are considerably lower than expected. We believe that sufficient efforts are not being made by the purchaser of the former S&T/Montreal division to market this satellite service. The parties are finalizing a settlement under these agreements. We believe that the net liability recorded in our consolidated balance sheet is our best estimate of the settlement amount. If a settlement is reached, it is expected to be paid in the following twelve months, and therefore the net liability is recorded as a current liability in our consolidated balance sheet as of October 2, 2010.

Commitments and Contractual Obligations

As of October 2, 2010, our material contractual cash commitments and material other commercial commitments have not changed significantly from those disclosed in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the year ended December 31, 2009, other than an increase in purchase commitments of $16.1 million and a decrease of $7.2 million in our obligation of acquisition costs for earn-out provisions. Longer-term purchase commitments required by certain suppliers to maintain minimum stock levels of materials for our products as a result of current market conditions, and additional materials needed to support higher production levels anticipated in the fourth quarter of 2010, and the launch of new product offerings in the fourth quarter of 2010 and in early 2011, have resulted in a higher level of purchase commitments outstanding as of October 2, 2010 compared with December 31, 2009. In addition, purchase commitments are higher due to a significant order placed by D&S in the third quarter of 2010 for a key component needed for a significant commercial airborne antenna program that is ready for production. Our obligation of acquisition costs for earn-out provisions decreased as a result of earnout amounts paid in the second quarter of 2010.

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Critical Accounting Policies

Our consolidated financial statements have been prepared in accordance with U.S. GAAP, which often require the judgment of management in the selection and application of certain accounting principles and methods. We discuss our critical accounting policies in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the year ended December 31, 2009. There have been no significant changes in our critical accounting policies since the end of 2009.

Risk Factors and Forward-Looking Statements

We have included forward-looking statements in management’s discussion and analysis of financial condition and results of operations. All statements, other than statements of historical fact, included in this report that address activities, events or developments that we expect or anticipate will or may occur in the future, or that necessarily depend upon future events, including such matters as our expectations with respect to future financial performance, future capital expenditures, business strategy, competitive strengths, goals, expansion, market and industry developments, and the growth of our businesses and operations, are forward-looking statements. Actual results could differ materially from those suggested in any forward-looking statements as a result of a variety of factors. Such factors include, but are not limited to:

• economic conditions in the U.S. and abroad and their effect on capital spending in our principal markets;

• difficulty predicting the timing of receipt of major customer orders, and the effect of customer timing decisions on our results;

• our successful completion of technological development programs and the effects of technology that may be developed by, and patent rights that may be held or obtained by, competitors;

• U.S. defense budget pressures on near-term spending priorities and contract-award schedules;

• uncertainties inherent in the process of converting contract awards into firm contractual orders in the future;

• volatility of foreign currency exchange rates relative to the U.S. dollar and their effect on purchasing power by international customers, and on the cost structure of our operations outside the U.S., as well as the potential for realizing foreign exchange gains and losses associated with assets or liabilities denominated in foreign currencies;

• successful resolution of technical problems, proposed scope changes, or proposed funding changes that may be encountered on contracts;

• changes in our consolidated effective income tax rate caused by the extent to which actual taxable earnings in the U.S., Canada and other taxing jurisdictions may vary from expected taxable earnings, changes in tax laws, including the provisions of the U.S. tax law that have not been extended for 2010, such as the research and development credit, and the extent to which deferred tax assets are considered realizable;

• successful transition of products from development stages to an efficient manufacturing environment;

• changes in the rate at which our products are returned for repair or replacement under warranty;

• customer response to new products and services, and general conditions in our target markets (such as logistics, space-based communications and commercial and private aviation), and whether these responses and conditions develop according to our expectations;

• the increased potential for asset impairment charges as unfavorable economic or financial market conditions, or other developments might affect the estimated fair value of one or more of our business units;

28

• the success of certain of our customers in marketing our line of high-speed commercial airline communications products as a complementary offering with their own lines of avionics products;

• the availability of financing for various mobile and high-speed data communications systems;

• risk that unsettled conditions in the credit markets may make it more difficult for some customer to obtain financing and adversely affect their ability to pay, which in turn could have an adverse impact on our business, operating results, and financial condition;

• development of successful working relationships with local business and government personnel in connection with the distribution and manufacture of products in foreign countries;

• the demand growth for various mobile and high-speed data communications services;

• our ability to attract and retain qualified senior management and other personnel, particularly those with key technical skills;

• our ability to effectively integrate our acquired businesses, products or technologies into our existing businesses and products, and the risk that any such acquired businesses, products or technologies do not perform as expected, are subject to undisclosed or unanticipated liabilities, or are otherwise dilutive to our earnings;

• the potential effects, on cash and results of discontinued operations, of final resolution of potential liabilities under warranties and representations that we made, and obligations assumed by purchasers, in connection with our dispositions of discontinued operations;

• the availability, capabilities and performance of suppliers of basic materials, electronic components and sophisticated subsystems on which we must rely in order to perform according to contract requirements, or to introduce new products on the desired schedule;

• uncertainties associated with U.S. export controls and the export license process, which restrict our ability to hold technical discussions with customers, suppliers and internal engineering resources and can reduce our ability to obtain sales from customers outside the U.S. or to perform contracts with the desired level of efficiency or profitability; and

• our ability to maintain compliance with the requirements of the Federal Aviation Administration and the Federal Communications Commission, and with other government regulations affecting our products and their production, service and functioning.

Further information concerning relevant factors and risks are identified under the caption “Risk Factors” in Part II Item 1A. of this Quarterly Report on Form 10-Q, and in our Annual Report on Form 10-K for the year ended December 31, 2009.

Effect of New Accounting Pronouncements

— Recently Issued Pronouncements Not Yet Adopted

In October 2009 the Financial Accounting Standards Board (“FASB”) issued two accounting standards updates that could result in revenue being recognized earlier in certain revenue arrangements with multiple deliverables. Both updates will become effective for us in the first quarter of 2011. Early adoption is permitted. If we adopt this standard in a period other than the beginning of its fiscal year, we will be required to apply this standard retrospectively to beginning of its fiscal year, and disclose certain financial information as revised for all interim periods previously reported in the fiscal year adopted. We are evaluating when to adopt the updates and the effect the adoption will have on its consolidated financial statements.

29

ASU 2009-13, Revenue Recognition — Multiple-Deliverable Revenue Arrangements, amends the accounting for revenue arrangements with multiple deliverables. Among other things, ASU 2009-13:

• Eliminates the requirement for objective evidence of fair value of an undelivered item for treatment of the delivered item as a separate unit of accounting;

• Requires use of the relative selling price method for allocating total consideration to elements of the arrangement instead of the relative-fair-value method or the residual method;

• Allows the use of an estimated selling price for any element within the arrangement to allocate consideration to individual elements when vendor-specific objective evidence or other third party evidence of selling price do not exist; and

• Expands the required disclosures.

ASU 2009-14, Software — Certain Revenue Arrangements That Include Software Elements, amends the guidance for revenue arrangements that contain tangible products and software elements. ASU 2009-14 redefines the scope of arrangements that fall within software revenue recognition guidance by specifically excluding tangible products that contain software components that function together to deliver the essential functionality of the tangible product.

Under current guidance, products that contain software that is more than incidental to the product as a whole fall within the scope of software revenue recognition guidance, which requires, among other things, the existence of vendor-specific objective evidence of fair value of all undelivered items to allow a delivered item to be treated as a separate unit of accounting. Such tangible products excluded from the requirements of software revenue recognition requirements under ASU 2009-14 would follow the revenue recognition requirements for other revenue arrangements, including the new requirements for multiple-deliverable arrangements contained in ASU 2009-13.

In April 2010, the FASB issued ASU 2010-17, Milestone Method of Revenue Recognition, which provides guidance on defining a milestone and determining when it may be appropriate to apply the milestone method of revenue recognition for research and development arrangements in which one or more payments are contingent upon achieving uncertain future events or circumstances. This update is effective for us in the first quarter of 2011. Early adoption is permitted. If we adopt this standard in a period other than the beginning of its fiscal year, we will be required to apply this standard retrospectively to beginning of its fiscal year, and disclose certain financial information as revised for all interim periods previously reported in the fiscal year adopted. We are evaluating when to adopt the updates and the effect, if any, the adoption will have on its consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

As of October 2, 2010, we had the following market-risk sensitive instruments (in thousands):

Government-obligations money market funds, other money market instruments, and interest-bearing time deposits, with maturity dates of less than 3 months interest payable monthly at variable rates (a weighted-average rate of 0.62% at October 2, 2010)	$	8,234
Revolving credit facility with U.S. and Canadian banks, maturing in February 2013, interest payable quarterly at a variable rate (4.0% at October 2, 2010)	$	21,500

A 100 basis-point change in the interest rates of our market-risk sensitive instruments would have changed interest income by approximately $36,000 for the third quarter of 2010 based upon their respective average outstanding balances.

Our revolving credit agreement includes variable interest rates based on the lead bank’s prime rate or the then-published LIBOR for the applicable borrowing period. As of October 2, 2010, we had approximately $21.5 million of borrowings outstanding in the U.S., and no borrowings outstanding in Canada under our revolving credit agreement. A 100 basis-point change in the interest rate on our revolving credit facility would have changed interest expense by approximately $59,000 for the third quarter of 2010 based upon the average outstanding borrowings under these obligations.

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At October 2, 2010, we also had intercompany accounts that eliminate in consolidation but that are considered market-risk sensitive instruments because they are denominated in a currency other than the local functional currency. These include short-term amounts due to the parent (payable by international subsidiaries arising from purchase of the parent’s products for sale), intercompany sales of products from foreign subsidiaries to a U.S. subsidiary, and cash advances to foreign subsidiaries as follows:

	Exchange Rate	USD
	(USD per unit of	in thousands
	local currency)	(reporting currency)
Australia	0.9730 /AUD	$	3,253
Canada	0.9799 /CAD		1,772
Sweden	0.1490 /SEK		1,490
Belgium	1.3780 /EUR		509
Netherlands	1.3780 /EUR		307
France	1.3780 /EUR		251
Italy	1.3780 /EUR		107
United Kingdon	1.5836 /GBP		33
Germany	1.3780 /EUR		(35	)
Total amount subject to foreign currency risk		$	7,687

We had accounts receivable and accounts payable balances denominated in currencies other than the functional currency of the local entity at October 2, 2010 as follows:

		Exchange Rate
		Functional
		Currency per		USD
Currency	Functional	Denominated		Equivalent
Denomination	Currency	Currency		(in thousands)
Accounts Receivable
USD	CAD		1.0205	$	17,752
USD	EUR		0.7257		664
EUR	CAD		1.4049		392
GBP	CAD		1.6167		287
GBP	EUR		1.1508		240
Other currencies					84
				$	19,419
Accounts Payable
USD	CAD		1.0205	$	1,029
EUR	USD		1.3780		271
GBP	USD		1.5836		226
Other currencies					129
				$	1,655

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We also had cash accounts denominated in currencies other than the functional currency of the local entity at October 2, 2010 as follows:

		Exchange Rate
		Functional
		Currency per		USD
Currency	Functional	Denominated		Equivalent
Denomination	Currency	Currency		(in thousands)
USD	CAD		1.0205	$	8,250
GBP	CAD		1.6167		1,325
GBP	USD		1.5836		446
AUD	CAD		0.9919		436
USD	GBP		0.6315		292
Other currencies					802
				$	11,551

We enter into foreign currency forward contracts in order to mitigate the risks associated with currency fluctuations on future fair values of foreign denominated assets and liabilities. At October 2, 2010, we had forward contracts as follows (in thousands, except average contract rate):

		Average		Fair
	Notional	Contract		Value
	Amount	Rate		(USD)
Foreign currency forward contracts:
U.S. dollars (sell for Canadian dollars)	19,000 USD		1.0380	$	340
Euros (sell for U.S. dollars)	850 EUR		1.3741		(4	)
				$	336

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Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

The Company has established and maintains disclosure controls and procedures (as defined in Securities Exchange Act Rules 13a-15(e)). The objective of these controls and procedures is to ensure that information relating to the Company, including its consolidated subsidiaries, and required to be filed by it in reports under the Securities Exchange Act, as amended, is effectively communicated to the Company’s CEO and CFO, and is recorded, processed, summarized and reported on a timely basis.

The CEO and CFO have evaluated the Company’s disclosure controls and procedures as of the end of the period covered in this report. Based upon this evaluation, the CEO and CFO have concluded that the Company’s disclosure controls and procedures were effective as of October 2, 2010 to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms and is accumulated and communicated to the Company’s management including its CEO and CFO as appropriate to allow timely decisions regarding required disclosure.

(b) Changes in Internal Control Over Financial Reporting

During the third quarter of 2010, there were no changes that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting (as defined in Rule 13a — 15(f) under the Exchange Act).

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PART II

OTHER INFORMATION

Item 1A. Risk Factors

In addition to the other information set forth in this Quarterly Report on Form 10-Q, carefully consider the factors discussed in Part I, Item 1A. “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2009, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K, and this Quarterly Report on Form 10-Q, are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently believe are immaterial also may materially adversely affect our business, financial condition and/or operating results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table summarizes the Company’s purchases of its common shares for the three months ended October 2, 2010:

ISSUER PURCHASES OF EQUITY SECURITIES

							(d) Maximum Number
					(c) Total Number		(or Approximate
					of Shares		Dollar Value) of
					Purchased as		Shares that May Yet
					Part of Publicly		Be Purchased
	(a) Total Number		(b) Average		Announced		Under the Plans or
	of Shares		Price Paid		Plans or		Programs (3)
Period	Purchased (1)		Per Share		Program (2)		(in millions)
Period 7 2010 (July 4 to July 31)		635	$	16.18		—
Period 8 2010 (August 1 to August 28)				—		—
Period 9 2010 (August 29 to October 2)		—		—		—
Total		635	$	16.18		—	$	—

(1)	The category includes 635 shares delivered to us by employees to pay withholding taxes due upon vesting of restricted share awards.
(2)	During the period covered by this Quarterly Report on Form 10-Q, no shares were repurchased under the Company’s $20 million repurchase program (the Program) which was initially announced on July 30, 2008. Further repurchases are no longer permitted under the terms of the Company’s credit agreement.
(3)	This balance represents the value of shares that could be repurchased under the Program as of October 2, 2010.

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Item 5. Other Information

On November 5, 2010, the Board of Directors (the “Board”) of EMS Technologies, Inc. (the “Company”) voted to amend and restate the Company’s Bylaws (the “Bylaws”), effective immediately, to update the Company’s advance notice provisions applicable to proposals for nominations of directors or other business at shareholder meetings. The amended Bylaws change the period for shareholders to provide notice of proposals for nominations of directors or other business at an annual meeting to not less than 90 days and not more than 120 days before the anniversary of the Company’s prior annual meeting. However, if the annual meeting is not held within 30 days of the anniversary of the prior year’s annual meeting, notice must be provided by the later of (i) the tenth day after the public announcement of the annual meeting date or (ii) 90 days before the annual meeting. As a result, for the Company’s 2011 annual meeting, notices of proposals for nominations of directors or other business must be delivered to the corporate secretary not before the close of business on Tuesday, January 11, 2011 and not after the close of business on Thursday, February 10, 2011.

The amended Bylaws require shareholders (and certain of their affiliates) proposing nominations or other business to disclose additional information, including hedging and derivative positions relating to the Company’s stock, whether they intend to appear in person or by proxy at the annual meeting, whether they intend to solicit proxies in support of the nomination or proposal and any other information related to such shareholder or affiliate (or any proposed nominee) required to be disclosed in a proxy statement for a contested solicitation or election of directors. The amended Bylaws also require shareholders to update the information disclosed with any changes, as of the record date and shortly before the meeting date. In addition, the amended Bylaws apply the informational disclosure requirements described above to shareholders requesting a special meeting and conform certain of the Bylaws’ previously-existing provisions applicable to proposals of director nominations to those applicable to proposals of other business.

The foregoing summary of the amendments to the Bylaws is not complete and is qualified in its entirety by reference to the full text of the Bylaws, as amended and restated, a copy of which is filed as Exhibit 3.1 to this report and incorporated herein by reference.

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Item 6. Exhibits

The following exhibits are filed as part of this report:

3.1	Second Amended and Restated Articles of Incorporation of EMS Technologies, Inc., effective March 22, 1999 (incorporated by reference to Exhibit 3.1 to our Quarterly Report on Form 10-Q for the quarter ended July 4, 2009).
3.2	Bylaws of EMS Technologies, Inc. as amended and restated through November 5, 2010. *
10.1	Letter dated July 30, 2010 between the Company and Marion Van Fosson concerning the terms of his employment as General Manager of D&S. *
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
32	Certification of the Company’s Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *

* Filed herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

EMS TECHNOLOGIES, INC.
By:	/s/ Neilson A. Mackay	Date: November 8, 2010
	Neilson A. Mackay
	President, and Chief Executive Officer
	(Principal Executive Officer)
By:	/s/ Gary B. Shell	Date: November 8, 2010
	Gary B. Shell
	Senior Vice President, Chief Financial
	Officer and Treasurer (Principal Financial Officer)

AVAILABLE INFORMATION

EMS Technologies, Inc. makes available free of charge, on or through its website at www.ems-t.com, its annual, quarterly and current reports, and any amendments to those reports, as soon as reasonably practicable after electronically filing such reports with the Securities and Exchange Commission. Information contained on the Company’s website is not part of this report.

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EX-3.2

Exhibit 3.2

BYLAWS

OF

EMS TECHNOLOGIES, INC.

As Amended and Restated

November 5, 2010

TABLE OF CONTENTS

ARTICLE 1 OFFICES	1
1.1 Registered Office and Agent	1
1.2 Principal Office	1
1.3 Other Offices	1
ARTICLE 2 SHAREHOLDERS’ MEETINGS	1
2.1 Place of Meetings	1
2.2 Annual Meetings	1
2.3 Special Meetings	1
2.4 Notice of Meetings	2
2.5 Waiver of Notice	2
2.6 Quorum; Manner of Acting	3
2.7 Voting of Shares	3
2.8 Proxies	3
2.9 Presiding Officer	3
2.10 Adjournments	4
2.11 Conduct of the Meeting	4
2.12 Proposals and Nominations	4
ARTICLE 3 THE BOARD OF DIRECTORS	11
3.1 General Powers	11
3.2 Number, Election and Terms of Office	11
3.3 Removal	11
3.4 Vacancies	11
3.5 Compensation	11
3.6 Committees of the Board of Directors	12
3.7 Qualification of Directors	12
3.8 Related-Party Transactions	12
ARTICLE 4 MEETINGS OF THE BOARD OF DIRECTORS	12
4.1 Regular Meetings	12
4.2 Special Meetings	12
4.3 Place of Meetings	12
4.4 Notice of Meetings	12
4.5 Quorum	12
4.6 Vote Required for Action	13
4.7 Participation by Conference Telephone	13
4.8 Action by Directors Without a Meeting	13
4.9 Adjournments	13
4.10 Waiver of Notice	13

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ARTICLE 5 OFFICERS	13
5.1 Offices	13
5.2 Term	14
5.3 Compensation	14
5.4 Removal	14
5.5 Chairman of the Board	14
5.6 Executive Director and Chief Executive Officer	14
5.7 President	14
5.8 Vice Presidents	14
5.9 Secretary	15
5.10 Treasurer	15
5.11 Assistant Secretaries and Assistant Treasurers	15
5.12 Bonds	15
ARTICLE 6 DIVIDENDS	15
ARTICLE 7 SHARES	16
7.1 Authorization and Issuance of Shares	16
7.2 Share Certificates	16
7.3 Rights of Corporation with Respect to Registered Owner	17
7.4 Transfers of Shares	17
7.5 Duty of Corporation to Register Transfer	17
7.6 Lost, Stolen or Destroyed Certificates	17
7.7 Fixing of Record Date	17
7.8 Record Date if None Fixed	18
ARTICLE 8 INDEMNIFICATION	18
8.1 Indemnification of Directors and Officers	18
8.2 Indemnification of Directors and Officers for Derivative Actions	18
8.3 Indemnification of Employees and Agents	19
8.4 Subsidiaries and Other Organizations	19
8.5 Determination	19
8.6 Advances	20
8.7 Non-Exclusivity	20
8.8 Insurance	20
8.9 Notice	20
8.10 Security	20
8.11 Amendment	21
8.12 Agreements	21
8.13 Continuing Benefits	21
8.14 Successors	21
8.15 Severability	21
8.16 Additional Indemnification	21

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ARTICLE 9 MISCELLANEOUS	22
9.1 Inspection of Books and Records	22
9.2 Fiscal Year	22
9.3 Seal	22
9.4 Election of “Fair Price” Statute	22
9.5 Election of “Business Combination” Statute	22
9.6 Notice	22
ARTICLE 10 AMENDMENTS	22

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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 1
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 2
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.

(a) 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 shareholders shall consist only 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.

(b) A written request provided pursuant to Section 2.3(a) shall be signed by the shareholder or shareholders holding the requisite percentage of the voting power to demand a special meeting and shall also set forth (i) a brief description of each matter of business or director nomination desired to be brought before the special meeting; (ii) the reasons for conducting such business or making such nomination at the special meeting and (iii), for each shareholder making such request, the information required to be included in a notice provided pursuant to Section 2.12(b)(iii), in the case of a nomination of directors, or the information required to be included in a notice provided pursuant to Section 2.12(a)(iii), in the case of a proposal of other business, as applicable. Such shareholder or shareholders shall also update and supplement such information pursuant to Section 2.12(d).

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.

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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.

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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 Proposals and Nominations.

(a) Business at Annual Meetings of Shareholders.

(i) Only such business (other than nominations of persons for election to the Board of Directors, which must be made in compliance with and is governed exclusively by Section 2.12(b) of these Bylaws) shall be conducted at an annual meeting of the shareholders as shall have been brought before the meeting (A) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (B) by or at the direction of the Board of Directors, or (C) by any shareholder of the Corporation who (1) was a shareholder of record at the time of giving of notice provided for in this Section 2.12(a) and at the time of the meeting, (2) is entitled to vote at the meeting and (3) complies with the notice procedures set forth in this Section 2.12(a). For the avoidance of doubt, the foregoing clause (C) of this Section 2.12(a)(i) shall be the exclusive means for a shareholder to propose such business (other than business included in the Corporation’s proxy materials pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended) before an annual meeting of shareholders.

(ii) For business (other than nominations of persons for election to the Board of Directors, which must be made in compliance with and is governed exclusively by Section 2.12(b) of these Bylaws) to be properly brought before an annual meeting by a shareholder, the shareholder must have given timely notice thereof in proper written form as described in Section 2.12(a)(iii) to the Secretary of the Corporation and such business must otherwise be appropriate for shareholder action under the provisions of the Code. To be timely, a shareholder’s notice for such business must be delivered to the Secretary of the Corporation at the principal executive offices of the Corporation in proper written form not less than ninety (90) days and not more than one hundred twenty (120) days prior to the first anniversary of the preceding year’s annual meeting of shareholders; provided, however, that if and only if the annual meeting is not scheduled to be held within a period that commences thirty (30) days before such anniversary date and ends thirty (30) days after such anniversary date, such shareholder’s notice must be delivered by the later of (A) the tenth day following the day of the Public Announcement (as defined in Section 2.12(f) below) of the date of the annual meeting or (B) the date which is ninety (90) days prior to the date of the annual meeting. In no event shall any adjournment, deferral or postponement of an annual meeting or the announcement thereof commence a new time period for the giving of a shareholder’s notice as described above.

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(iii) To be in proper written form, a shareholder’s notice to the Secretary of the Corporation shall set forth as to each matter of business the shareholder proposes to bring before the annual meeting (A) a brief description of the business desired to be brought before the annual meeting (including the specific text of any resolutions or actions proposed for consideration) and the reasons for conducting such business at the annual meeting, (B) the name and address of the shareholder proposing such business, as they appear on the Corporation’s books, the residence name and address (if different from the Corporation’s books) of such proposing shareholder, and the name and address of any Shareholder Associated Person (as defined in Section 2.12(f) below) covered by clauses (C), (D), (F) and (G) below, (C) the class and number of shares of stock of the Corporation which are directly or indirectly held of record or beneficially owned by such shareholder or by any Shareholder Associated Person with respect to the Corporation’s securities, a description of any Derivative Positions (as defined in Section 2.12(f) below) directly or indirectly held or beneficially held by the shareholder or any Shareholder Associated Person, and whether and the extent to which a Hedging Transaction (as defined in Section 2.12(f) below) has been entered into by or on behalf of such shareholder or any Shareholder Associated Person, (D) a description of all arrangements or understandings between such shareholder or any Shareholder Associated Person and any other person or entity (including their names) in connection with the proposal of such business by such shareholder and any material interest of such shareholder, any Shareholder Associated Person or such other person or entity in such business, (E) a representation that such shareholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting, (F) any other information related to such shareholder or any Shareholder Associated Person that would be required to be disclosed in a proxy statement or other filing required to be made in connection with the solicitation of proxies or consents (even if a solicitation is not involved) by such shareholder or Shareholder Associated Person in support of the business proposed to be brought before the meeting pursuant to Section 14 of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder and (G) a representation as to whether such shareholder or any Shareholder Associated Person intends to deliver a proxy statement or form of proxy to holders of at least the percentage of the Corporation’s outstanding shares required to approve the proposal or otherwise to solicit proxies from shareholders in support of the proposal. In addition, any shareholder who submits a notice pursuant to this Section 2.12(a) is required to update and supplement the information disclosed in such notice, if necessary, in accordance with Section 2.12(d).

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(iv) Notwithstanding anything in these Bylaws to the contrary, no business (other than nominations of persons for election to the Board of Directors, which must be made in compliance with and is governed exclusively by Section 2.12(b) of these Bylaws) shall be conducted at an annual meeting except in accordance with the procedures set forth in this Section 2.12(a). At an annual meeting, the chairman of the meeting shall determine, if the facts warrant, that business was not properly brought before the meeting and in accordance with the provisions prescribed by these Bylaws, and if the chairman should so determine, the chairman shall so declare to the meeting, and any such business not properly brought before the meeting shall not be transacted.

(b) Nominations at Annual Meetings of Shareholders.

(i) Only persons who are nominated in accordance and compliance with the procedures set forth in this Section 2.12(b) of these Bylaws shall be eligible for election to the Board of Directors at an annual meeting of shareholders.

(ii) Nominations of persons for election to the Board of Directors may be made at an annual meeting of shareholders only (A) by or at the direction of the Board of Directors or (B) by any shareholder of the Corporation who (1) was a shareholder of record at the time of giving of notice provided for in this Section 2.12(b)(ii) and at the time of the meeting, (2) is entitled to vote at the meeting and (3) complies with the notice procedures set forth in this Section 2.12(b)(ii). For the avoidance of doubt, clause (B) of this Section 2.12(b)(ii) shall be the exclusive means for a shareholder to make nominations of persons for election to the Board of Directors at an annual meeting of shareholders. Any nominations by shareholders at an annual meeting of shareholders shall be made pursuant to timely notice in proper written form as described in Section 2.12(b)(iii) to the Secretary of the Corporation. To be timely, a shareholder’s notice for the nomination of persons for election to the Board of Directors must be delivered to the Secretary of the Corporation at the principal executive offices of the Corporation in proper written form not less than ninety (90) days and not more than one hundred twenty (120) days prior to the first anniversary of the preceding year’s annual meeting of shareholders; provided, however, that if and only if the annual meeting is not scheduled to be held within a period that commences thirty (30) days before such anniversary date and ends thirty (30) days after such anniversary date, such shareholder’s notice must be delivered by the later of (C) the tenth day following the day of the Public Announcement of the date of the annual meeting or (D) the date which is ninety (90) days prior to the date of the annual meeting. In no event shall any adjournment, deferral or postponement of an annual meeting or the announcement thereof commence a new time period for the giving of a shareholder’s notice as described above.

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(iii) To be in proper written form, a shareholder’s notice to the Secretary of the Corporation shall set forth (A) as to each person whom the shareholder proposes to nominate for election or re-election as a director of the Corporation, (1) the name, age, business address and residence address of the person, (2) the principal occupation or employment of the person, (3) the class or series and number of shares of capital stock of the Corporation which are directly or indirectly owned beneficially or of record by the person, (4) the date such shares were acquired and the investment intent of such acquisition and (5) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with the solicitation of proxies or consents for a contested election of directors (even if an election contest or proxy solicitation is not involved), or is otherwise required, pursuant to Section 14 of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (including such person’s written consent to being named in the proxy statement as a nominee, if applicable, and to serving if elected); and (B) as to the shareholder giving the notice (1) the name and address of such shareholder, as they appear on the Corporation’s books, the residence name and address (if different from the Corporation’s books) of such proposing shareholder, and the name and address of any Shareholder Associated Person covered by clauses (2), (3), (5) and (6) below, (2) the class and number of shares of stock of the Corporation which are directly or indirectly held of record or beneficially owned by such shareholder or by any Shareholder Associated Person with respect to the Corporation’s securities, a description of any Derivative Positions directly or indirectly held or beneficially held by the shareholder or any Shareholder Associated Person, and whether and the extent to which a Hedging Transaction has been entered into by or on behalf of such shareholder or any Shareholder Associated Person, (3) a description of all arrangements or understandings (including financial transactions and direct or indirect compensation) between such shareholder or any Shareholder Associated Person and each proposed nominee and any other person or entity (including their names) pursuant to which the nomination(s) are to be made by such shareholder, (4) a representation that such shareholder intends to appear in person or by proxy at the meeting to nominate the persons named in its notice, (5) any other information relating to such shareholder or any Shareholder Associated

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Person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with the solicitation of proxies or consents for a contested election of directors (even if an election contest or proxy solicitation is not involved), or otherwise required, pursuant to Section 14 of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, and (6) a representation as to whether such shareholder or any Shareholder Associated Person intends to deliver a proxy statement or form of proxy to the holders of a sufficient number of the Corporation’s outstanding shares to elect each proposed nominee or otherwise to solicit proxies from shareholders in support of the nomination. In addition, any shareholder who submits a notice pursuant to this Section 2.12(b) is required to update and supplement the information disclosed in such notice, if necessary, in accordance with Section 2.12(d). At an annual meeting, the chairman of the meeting shall determine, if the facts warrant, that a nomination was not made in accordance with the procedures prescribed by these Bylaws, and if the chairman should so determine, the chairman shall so declare to the meeting, and the defective nomination shall be disregarded.

(iv) Notwithstanding anything in the fourth sentence of Section 2.12(b)(ii) of these Bylaws to the contrary, if the number of directors to be elected to the Board of Directors is increased and there is no Public Announcement naming all of the nominees for director or specifying the size of the increased Board of Directors made by the Corporation at least 100 days prior to the first anniversary of the preceding year’s annual meeting, a shareholder’s notice required by Section 2.12(b)(ii) of these Bylaws shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary of the Corporation at the principal executive offices of the Corporation not later than the close of business on the tenth day following the day on which such Public Announcement is first made by the Corporation.

(c) Special Meetings of Shareholders. Only persons who are nominated in accordance and compliance with the procedures set forth in this Section 2.12(c) shall be eligible for election to the Board of Directors at a special meeting of shareholders. Nominations of persons for election to the Board of Directors may be made at a special meeting of shareholders at which directors are to be elected pursuant to the Corporation’s notice of meeting only (i) by or at the direction of the Board of Directors or (ii) provided that the Board of Directors has determined that directors are to be elected at such special meeting, by any shareholder of the Corporation who (A) was a shareholder of record at the time of giving of notice provided for in this Section 2.12(c) and at the time of the special meeting, (B) is entitled to vote at the meeting and (C) complies with the notice procedures provided for in this Section 2.12(c). For the avoidance of doubt, the foregoing clause (ii) of this Section 2.12(c) shall be the exclusive means for a shareholder to propose nominations of persons for election to the Board of Directors at a special meeting of shareholders. Any nominations by shareholders at a special meeting of shareholders

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shall be made pursuant to timely notice in proper written form as described in this Section 2.12(c) to the Secretary of the Corporation. To be timely, a shareholder’s notice for the nomination of persons for election to the Board of Directors must be delivered to the Secretary of the Corporation at the principal executive offices of the Corporation not earlier than the 120^th day prior to such special meeting and not later than the close of business on the later of the 90^th day prior to such special meeting or the tenth day following the day on which a Public Announcement is made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall any adjournment, deferral or postponement of a special meeting or the announcement thereof commence a new time period for the giving of a shareholder’s notice as described above. To be in proper written form, such shareholder’s notice shall set forth all of the information required by, and otherwise be in compliance with, Section 2.12(b)(iii) of these Bylaws. In addition, any shareholder who submits a notice pursuant to this Section 2.12(c) is required to update and supplement the information disclosed in such notice, if necessary, in accordance with Section 2.12(d). At a special meeting, the chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a proposal or nomination was not made in accordance with the procedures prescribed by these Bylaws, and if the chairman should so determine, the chairman shall so declare to the meeting, and the defective proposal or nomination shall be disregarded.

(d) Update and Supplement of Shareholder’s Notice. Any shareholder who submits a notice of proposal for business or nomination for election pursuant to this Section 2.12 is required to update and supplement the information disclosed in such notice, if necessary, so that the information provided or required to be provided in such notice shall be true and correct as of the record date for the meeting of shareholders and as of the date that is ten (10) business days prior to such meeting of the shareholders or any adjournment or postponement thereof, and such update and supplement shall be delivered to the Secretary of the Corporation at the principal executive offices of the Corporation not later than five (5) business days after the record date for the meeting of shareholders (in the case of the update and supplement required to be made as of the record date), and not later than eight (8) business days prior to the date for the meeting of shareholders or any adjournment or postponement thereof (in the case of the update and supplement required to be made as of ten (10) business days prior to the meeting of shareholders or any adjournment or postponement thereof).

(e) Requirements of Exchange Act. In addition to the foregoing provisions of this Section 2.12, a shareholder shall also comply with all applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder with respect to the matters set forth in these Bylaws; provided, however, that any references in these Bylaws to the Securities Exchange Act of 1934, as amended, or the rules and regulations promulgated thereunder are not intended to and shall not limit the requirements of these Bylaws applicable to nominations or proposals as to any other business to be considered pursuant to these Bylaws regardless of the shareholder’s intent to utilize Rule 14a-8 promulgated under the Securities Exchange Act of 1934, as amended. Nothing in this Section 2.12 shall be deemed to affect any rights (i) of shareholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 promulgated under the Securities Exchange Act of 1934, as amended, or (ii) of the holders of any series of preferred stock if and to the extent provided for under law, the Articles of Incorporation or these Bylaws.

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(f) Definitions. For purposes of Section 2.12 of these Bylaws, the term:

(i) “Derivative Positions” means, with respect to a shareholder or any Shareholder Associated Person, any derivative positions including, without limitation, any short position, profits interest, option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of shares of the Corporation or with a value derived in whole or in part from the value of any class or series of shares of the Corporation, whether or not such instrument or right shall be subject to settlement in the underlying class or series of capital stock of the Corporation or otherwise and any performance-related fees to which such shareholder or any Shareholder Associated Person is entitled based, directly or indirectly, on any increase or decrease in the value of shares of capital stock of the Corporation;

(ii) “Hedging Transaction” means, with respect to a shareholder or any Shareholder Associated Person, any hedging or other transaction (such as borrowed or loaned shares) or series of transactions, or any other agreement, arrangement or understanding, the effect or intent of which is to increase or decrease the voting power or economic or pecuniary interest of such shareholder or any Shareholder Associated Person with respect to the Corporation’s securities;

(iii) “Public Announcement” means disclosure in a press release reported by the Dow Jones News Service, Associated Press, Business Wire, PR Newswire or comparable news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended; and

(iv) “Shareholder Associated Person” of any shareholder means (A) any person controlling, directly or indirectly, or acting in concert with, such shareholder, (B) any beneficial owner of shares of stock of the Corporation owned of record or beneficially by such shareholder or (C) any person directly or indirectly controlling, controlled by or under common control with such Shareholder Associated Person.

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ARTICLE 3
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.

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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 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.

3.8 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 4
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.

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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 5
OFFICERS

5.1 Offices. The officers of the Corporation shall be as determined by the Board of Directors, and may include an Executive Director, 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 Executive Director or 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.

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5.2 Term. Each officer shall serve at the will of the Board of Directors (or, if the Executive Director or Chief Executive Officer appointed such officer, at the will of the Board of Directors and the Executive Director or Chief Executive Officer, as the case may be) or until his or her 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 Executive Director or Chief Executive Officer may be removed by the appointing officer whenever in the judgment the appointing officer 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, but in the absence of specific authorization to the contrary shall not be responsible for the management of the Corporation or its business operations.

5.6 Executive Director and Chief Executive Officer. If there be an Executive Director, he or she shall be the most senior management official in the Corporation, 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, 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, and shall have the authority of the Senior Management Official as specified in these Bylaws. If there be no Executive Director, the preceding duties, powers and authority shall be held by the Chief Executive Officer, but if there be an Executive Director the duties, powers and authority of the Chief Executive Officer shall be as specified by the Board of Directors. The Executive Director and 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 responsibility for the general supervision of the business operations of the Corporation, subject to the supervision of the Senior Management Official. 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 Senior Management Official.

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 Senior Management Official 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 Senior Management Official or the President.

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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 Senior Management Official.

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 Senior Management Official. 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, Senior Management Official 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 Senior Management Official.

5.11 Assistant Secretaries and Assistant Treasurers. The Board of Directors and Senior Management Official 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 Senior Management Official) 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 Senior Management Official.

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 6
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.

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ARTICLE 7
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.

(a) Except as otherwise provided by the Board of Directors pursuant to paragraph (b) of this Section 7.2, 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.

(b) If authorized by resolution of the Board of Directors, the Corporation may issue some or all of the shares of any or all of its classes or series without certificates. Such authorization, and the issuance of such shares, shall not affect shares already represented by certificates until they are surrendered to the Corporation. Within a reasonable time after the issuance or transfer of any shares not represented by certificates, the Corporation shall send to the holder of such shares a written statement setting forth, with respect to such shares, (i) the name of the Corporation as issuer and that the Corporation is incorporated under the laws of the State of Georgia, (ii) the name of the person to whom such shares are issued, (iii) the number of shares and class of shares and series, if any, (iv) the terms of any restrictions on the transfer or registration of transfer which, were such shares represented by a stock certificate, would be required to be noted on such certificate by the Code, and (v) any statements required by the terms of the Corporation’s Stockholder Rights Plan, as in effect from time to time, to be included on any certificates evidencing the shares of the Corporation.

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7.3 Rights of Corporation with Respect to Registered Owner: Until transferred on the books of the Corporation in accordance with the requirements of these Bylaws, the Corporation may treat the registered owner of the shares 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 registered owner of such shares or by an attorney lawfully constituted in writing. In the case of shares represented by a certificate, such shares shall not be transferred until such 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. Notwithstanding 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 transfer is authorized by the appropriate person or persons;

(b) reasonable assurance is given that all authorizing signatures 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, or such shares shall be registered in uncertificated form.

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.

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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 notice is first delivered to shareholders, in the case of a shareholders’ meeting; the date on which the Board of Directors adopts a resolution declaring a dividend, in the case of a payment of a dividend; and the date on which any other action is taken by the Corporation, in the case of such other action requiring a determination of shareholders.

ARTICLE 8
INDEMNIFICATION

8.1 Indemnification of Directors and Officers. The Corporation shall indemnify and hold harmless any person (an “Indemnified Person”) who is or was a party, or is threatened to be made a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action or suit by or in the right of the Corporation) by reason of the fact that he is or was a director or officer of the Corporation, against expenses (including, but not limited to, attorneys’ fees and disbursements, court costs and expert witness fees), and against any judgments, fines, and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful; provided, in any case, that no indemnification shall be made in respect of expenses, judgments, fines and amounts paid in settlement attributable to circumstances as to which, under applicable provisions of the Code as in effect from time to time, such indemnification may not be authorized by action of the Board of Directors, the shareholders or otherwise.

8.2 Indemnification of Directors and Officers for Derivative Actions. The Corporation shall indemnify and hold harmless any Indemnified Person who is or was a party, or is threatened to be made a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by or in the right of the Corporation, by reason of the fact that he is or was a director or officer of the Corporation, against expenses (including, but not limited to, attorneys’ fees and disbursements, court costs and expert witness fees) actually and reasonably incurred by him in connection with such action, suit or proceeding, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation. No indemnification shall be made pursuant to this Section 8.2 for any claim, issue or matter as to which an Indemnified Person shall have been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the Corporation, or for amounts paid in settlement to the Corporation, unless and only to the extent that the court in which such action or suit was brought or other court of competent jurisdiction shall determine upon application that such person is fairly and reasonably entitled to indemnity for such expenses which the court shall deem proper.

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8.3 Indemnification of Employees and Agents. The Board of Directors shall have the power to cause the Corporation to provide to any person who is or was an employee or agent of the Corporation all or any part of the right to indemnification and other rights of the type provided under Sections 8.1, 8.2, 8.6 and 8.12 of this Article Eight (subject to the conditions, limitations, obligations and other provisions specified herein), upon a resolution to that effect identifying such employee or agent (by position or name) and specifying the particular rights provided, which may be different for each employee or agent identified. Each employee or agent of the Corporation so identified shall be an “Indemnified Person” for purposes of the provisions of this Article Eight.

8.4 Subsidiaries and Other Organizations. The Board of Directors shall have the power to cause the Corporation to provide to any person who is or was a director, officer, employee or agent of the Corporation who also is or was a director, officer, trustee, partner, employee or agent of a Subsidiary (as defined below), or is or was serving at the Corporation’s request in such a position with any other organization, all or any part of the right to indemnification and other rights of the type provided under Sections 8.1, 8.2, 8.6 and 8.12 of this Article Eight (subject to the conditions, limitations, obligations and other provisions specified herein), with respect to service by such person in such position with a Subsidiary or other organization, upon a resolution identifying such person, the Subsidiary or other organization involved (by name or other classification), and the particular rights provided, which may be different for each person so identified. Each person so identified shall be an “Indemnified Person” for purposes of the provisions of this Article Eight. As used in this Article Eight, “Subsidiary” shall mean (i) another corporation, joint venture, trust, partnership or unincorporated business association more than 20% of the voting capital stock or other voting equity interest of which was, at or after the time of the circumstances giving rise to such action, suit or proceeding, owned, directly or indirectly, by the Corporation, or (ii) a nonprofit corporation that receives its principal financial support from the Corporation or its Subsidiaries.

8.5 Determination. Notwithstanding any judgment, order, settlement, conviction or plea in any action, suit or proceeding of the kind referred to in Sections 8.1 and 8.2 of this Article Eight, an Indemnified Person shall be entitled to indemnification as provided in such Sections 8.1 and 8.2 if a determination that such Indemnified Person is entitled to such indemnification shall be made (i) by the Board of Directors by a majority vote of a quorum consisting of directors who are not at the time parties to the proceeding; or (ii) if a quorum cannot be obtained under (i) above, by majority vote of a committee duly designated by the Board of Directors (in which designation interested directors may participate), consisting solely of two or more directors who are not at the time parties to the proceeding; or (iii) in a written opinion by special legal counsel selected as required by law. To the extent that an Indemnified Person has been successful on the merits or otherwise in defense of any action, suit or proceeding of the kind referred to in Sections 8. 1 and 8. 2 of this Article Eight, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by him in connection therewith.

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8.6 Advances. Expenses (including, but not limited to, attorneys’ fees and disbursements, court costs, and expert witness fees) incurred by the Indemnified Person in defending any action, suit or proceeding of the kind described in Sections 8.1 and 8.2 hereof (or in Section 8.4 hereof if applicable to such Indemnified Person) shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as set forth herein. The Corporation shall promptly pay the amount of such expenses to the Indemnified Person, but in no event later than ten days following the Indemnified Person’s delivery to the Corporation of a written request for an advance pursuant to this Section 8. 6, together with a reasonable accounting of such expenses; provided, however, that the Indemnified Person shall furnish the Corporation a written affirmation of his good faith belief that the Indemnified Person shall furnish the Corporation a written affirmation of his good faith belief that he has met the standard of conduct set forth in the Code and a written undertaking and agreement to repay to the Corporation any advances made pursuant to this Section 8.6 if it shall be determined that the Indemnified Person is not entitled to be indemnified by the Corporation for such amounts. The Corporation shall make the advances contemplated by this Section 8.6 regardless of the Indemnified Person’s financial ability to make repayment. Any advances and undertakings to repay pursuant to this Section 8.6 shall be unsecured and interest-free.

8.7 Non-Exclusivity. Subject to any applicable limitation imposed by the Code or the Articles of Incorporation, the indemnification and advancement of expenses provided by or granted pursuant to this Article Eight shall not be exclusive of any other rights to which a person seeking indemnification or advancement of expenses may be entitled under any Bylaw, resolution or agreement specifically or in general terms approved or ratified by the affirmative vote of holders of a majority of the shares entitled to be cast thereon.

8.8 Insurance. The Corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving as a director, officer, trustee, general partner, employee or agent of a Subsidiary or, at the request of the Corporation, of any other organization, against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article Eight.

8.9 Notice. If any expenses or other amounts are paid by way of indemnification, otherwise than by court order or action by the shareholders or by an insurance carrier pursuant to insurance maintained by the Corporation, the Corporation shall, not later than the next annual meeting of shareholders, unless such meeting is held within three months from the date of such payment, and in any event within 15 months from the date of such payment, send by first class mail to its shareholders of record at the time entitled to vote for the election of directors a statement specifying the persons paid, the amount paid and the nature and status at the time of such payment of the litigation or threatened litigation.

8.10 Security. The Corporation may designate certain of its assets as collateral, provide self-insurance or otherwise secure its obligations under this Article Eight, or under any indemnification agreement or plan of indemnification adopted and entered into in accordance with the provisions of this Article Eight, as the Board of Directors deems appropriate.

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8.11 Amendment. Any amendment to this Article Eight that limits or otherwise adversely affects the right of indemnification, advancement of expenses, or other rights of any Indemnified Person hereunder shall, as to such Indemnified Person, apply only to claims, actions, suits or proceedings based on actions, events or omissions (collectively, “Post Amendment Events”) occurring after such amendment and after delivery of notice of such amendment to the Indemnified Person so affected. Any Indemnified Person shall, as to any claim, action, suit or proceeding based on actions, events or omissions occurring prior to the date of receipt of such notice, be entitled to the right of indemnification, advancement of expenses and other rights under this Article Eight to the same extent as if such provisions had continued as part of the Bylaws of the Corporation without such amendment. This Section 8.11 cannot be altered, amended or repealed in a manner effective as to any Indemnified Person (except as to Post Amendment Events) without the prior written consent of such Indemnified Person. The Board of Directors may not alter, amend or repeal any provision of this Article Eight in a manner that extends or enlarges the right of any person to indemnification or advancement of expenses hereunder, except with the approval of the holders of a majority of all the shares of capital stock of the Corporation entitled to vote thereon at a meeting called for such purpose.

8.12 Agreements. The provisions of this Article Eight shall be deemed to constitute an agreement between the Corporation and each person entitled to indemnification hereunder. In addition to the rights provided in this Article Eight, the Corporation shall have the power, upon authorization by the Board of Directors, to enter into an agreement or agreements providing to any person who is or was a director, officer, employee or agent of the Corporation indemnification rights substantially similar to those provided in this Article Eight.

8.13 Continuing Benefits. The indemnification and advancement of expenses provided by or granted pursuant to this Article Eight shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

8.14 Successors. For purposes of this Article Eight, the terms “the Corporation” or “this Corporation” shall include any corporation, joint venture, trust, partnership or unincorporated business association that is the successor to all or substantially all of the business or assets of this Corporation, as a result of merger, consolidation, sale, liquidation or otherwise, and any such successor shall be liable to the persons indemnified under this Article Eight on the same terms and conditions and to the same extent as this Corporation.

8.15 Severability. Each of the sections of this Article Eight, and each of the clauses set forth herein, shall be deemed separate and independent, and should any part of any such section or clause be declared invalid or unenforceable by any court of competent jurisdiction, such invalidity or unenforceability shall in no way render invalid or unenforceable any other part thereof or any other separate section or clause of this Article Eight that is not declared invalid or unenforceable.

8.16 Additional Indemnification. In addition to the specific indemnification rights set forth herein, the Corporation shall indemnify each of its directors and officers to the full extent permitted by action of the Board of Directors without shareholder approval under the Code or other laws of the State of Georgia as in effect from time to time.

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ARTICLE 9
MISCELLANEOUS

9.1 Inspection of Books and Records. The Board of Directors shall have power to determine which accounts, books and records of the Corporation shall be opened to the inspection of shareholders, except such as may by law be specifically open to inspection, and shall have power to fix reasonable rules and regulations not in conflict with applicable law for the inspection of accounts, books and records that by law or by determination of the Board of Directors shall be open to inspection. Unless required by the Code or otherwise provided by the Board of Directors, a shareholder of the Corporation holding two percent or less of the total shares of the Corporation then outstanding shall have no right to inspect the books and records of the Corporation.

9.2 Fiscal Year. The Board of Directors is authorized to fix the fiscal year of the Corporation and to change the same from time to time as it deems appropriate.

9.3 Seal. The corporate seal shall be in such form as the Board of Directors may from time to time determine.

9.4 Election of “Fair Price” Statute. All the requirements of Sections 14-2-1110 through 14-2-1113 of the Code, as they may be amended from time to time, are hereby made applicable to the Corporation, to the extent permitted thereby, effective July 1, 1989.

9.5 Election of “Business Combination” Statute. All the requirements of Sections 14-2-1131 through 14-2-1133 of the Code, as they may be amended from time to time, are hereby made applicable to the Corporation, to the extent permitted thereby, effective July 1, 1989.

9.6 Notice. Whenever these Bylaws require notice to be given to any shareholder, the notice shall be given as prescribed in Section 2.4. Whenever these Bylaws require notice to be given to any director, the notice may be given as provided in Section 4.4, by mail, by personal or courier delivery, by telephone or by telecopier, telegraph or similar electronic means. Whenever notice is given to a shareholder or director by mail, the notice shall be sent first class mail by depositing the same in a post office or letter box in a postage prepaid sealed envelope addressed to the shareholder or director at his or her address as it appears on the books of the Corporation. Such notice shall be deemed to have been given at the time the same is deposited in the United States mail, except in the case of a notice to a director of a special meeting of the Board of Directors, which shall be deemed to have been given five days after the same is deposited in the United States mail. Whenever notice is given to a shareholder or director by any means other than mail, such notice shall be deemed given when received.

ARTICLE 10
AMENDMENTS

The Board of Directors shall have the power to alter, amend or repeal these Bylaws or adopt new Bylaws. Any Bylaws adopted by the Board of Directors may be altered, amended or repealed and new Bylaws adopted by the shareholders. The shareholders may prescribe that any Bylaws shall not be altered, amended or repealed by the Board of Directors.

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EX-10.1

Exhibit 10.1

July 30, 2010

Marion H. Van Fosson
1111 Muckey Road
Marathon, NY 13803

Dear Marion:

On behalf of EMS Technologies, Inc. I am pleased to offer you the position of Vice President and General Manager, Defense & Space division reporting to John B. Mowell, Executive Director, Chairman of the Board. We believe your skills and background will be valuable assets to our organization and we look forward to having you join our team.

Compensation Program

In this position, your initial salary will be $8,846.15 per pay period, payable as earned. You will be paid on a bi-weekly basis. We would like you to start work on or before 8/23/2010.

Incentive Compensation:

This position participates in our Annual Incentive Compensation Plan. Your position is scheduled for a target award of 40% of your annual base pay upon achievement of company, divisional and individual performance targets. Awards, if earned, are granted in cash and/or stock in the first quarter of the year following each Plan year. You will be eligible for a pro rata award payment in 2011 for the 2010 Plan year. Your participation will be subject to the terms of the Plan, which is available for your review upon request.

The Company may modify the Plan at any time. Relevant participation levels and targets are reviewed annually and revised by the Company, in its discretion. The incentive awards are based on Company performance against specified targets, and the Company’s evaluation of your contributions, performance and level of responsibility. Amounts paid are likely to vary from year to year.

EMS Performance Bonus:

This position participates in our EMS Performance Bonus (EPB) program, a compensation program that allows EMS to share the rewards of successful business unit and corporate performance results with our employees. Your target EPB bonus is 4% of your actual base pay for the plan year, which is January 1^st through December 31^st. EPB bonus payments are determined by operating profit results compared to business unit and corporate plans, and will be paid, if earned, in the Spring following the end of the plan year. Program terms are available for your review upon request.

Stock Options: Within three months of your start date you will be granted a formal option to purchase 5,000 shares of EMS Technologies, Inc. Common Stock. This option requires approval by the appropriate committee of the Board of Directors and will be issued at a price equal to the market value of the stock on the date such approval is received. Options in this grant will become exercisable 33% per year after one year of continued employment. All options will expire after six years or upon termination of employment. Further details will be provided at the time of the grant.

Sign On Bonus:

To demonstrate our commitment to having you join our team, this offer includes a $10,000 sign-on bonus. The bonus will be paid during your first two weeks of employment. Specifics about this bonus are attached as Schedule A.

Relocation:

This position requires your relocation to the Atlanta, GA metro area. To assist you with your relocation expenses, EMS agrees to provide relocation assistance as described in the attached Schedule B.

Benefits:

During the interview process, you received a summary of our benefit plans. In addition to the plans described in the summary, you are eligible for a supplemental medical insurance plan through Exec-U-Care. Detailed information regarding your benefits will be provided during New Employee Orientation. Your New Employee Orientation will be held on your first day of employment.

Offer Conditions:

The offer described above is conditioned upon successful reference and background checks. In addition, you will be required to complete a negative-results drug screening test before your start date. Pre-employment drug screening is conducted in accordance with EMS’s Drug-Free Workplace Policy (enclosed). You will receive an email with an eScreen ePassport™ outlining the location and instructions for your pre-employment drug screen. If you have any questions regarding our policy or the test, please contact the Human Resources Department as soon as possible.

This offer is also conditioned upon your signing and returning the enclosed employee agreement dealing with inventions and non-disclosure, and is subject in all respects to the Terms of Employment which you previously agreed to. Your employment relationship with EMS will be governed by and determined in accordance with the laws of the State of Georgia.

Defense & Space (D&S) Employment:

Employees of the D&S division are required to provide proof of U.S. citizenship in order to obtain access to controlled areas. You must provide proof of U.S. citizenship before your start date. Acceptable proof of citizenship is an original of any of the following documents:

1.	U.S. Birth Certificate
2.	Certificate of Naturalization
3.	A current or expired U.S. passport
4.	A record of military Processing-Armed forces of the United States (DD Form 1966) indicating U.S. citizenship

Security Clearance:

The position for which are being hired requires that you obtain and maintain a US government security clearance. Should you be unable to obtain the required security clearance, it will not be possible for you to work in this position.

Acceptance:

The offer made by this letter is available for your acceptance (by signature below and return to us) during the seven-day period following the date of this letter written above. After that date, the offer is withdrawn and will no longer be open for acceptance.

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Marion — congratulations in advance on the beginning of what we trust will be a long and rewarding employment relationship with EMS. We look forward to your meaningful contributions to EMS Technologies.

If you have any questions, please feel free to contact Laura Fincher at 770-263-9200 x6817.

Sincerely,
EMS Technologies, Inc.

/s/ Matthew Carlomagno

Matthew Carlomagno
Corporate Director, People and Infrastructure

Enclosures

Accepted By:	/s/ Maion H. Van Fosson	Date: August 3, 2010
Start Date:	August 23, 2010

3

Schedule A

Sign On Bonus:

Your $10,000 signing bonus will be paid within two weeks of hire as follows:

Thirty-five percent (35%) of the bonus will be withheld against applicable income taxes. Should you leave within the first two years of your new assignment through voluntary resignation or termination for cause, you will be required to reimburse the Company for the amount paid to you. The amount due will be prorated monthly. In the event of termination through change of control of the business, involuntarily without cause, death or disability during this period, reimbursement is not expected.

At the end of your second year the amount of the signing bonus will be reported to the IRS and reflected on your W-2 as income for the year, and the thirty-five percent (35%) withheld portion will be applied at that time against withholding taxes that the Company must submit on your behalf.

Schedule B:

Relocation

You will receive an allowance of $50,000 to assist with your relocation. Relocation expenses will be reimbursed from this allowance based on receipts submitted. Any amount not reimbursed via receipts by the end of 2010 will be paid out in a lump sum, grossed up for taxes.

Should you leave within the first two years of your new assignment through voluntary resignation or termination for cause, you will be required to reimburse the Company for the funds provided for your move. The amount due will be prorated monthly. In the event of termination through change of control of the business, involuntarily without cause, death or disability during this period, reimbursement is not expected.

Initials: MHV Date: August 23, 2010

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EX-31.1

EXHIBIT 31.1

SECTION 302 CERTIFICATION OF THE CEO

I, Neilson A. MacKay, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of EMS Technologies, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an Annual Report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

By:	/s/ Neilson A. Mackay	Date: 11/08/10
	Neilson A. Mackay
	President and Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

SECTION 302 CERTIFICATION OF THE CFO

I, Gary B. Shell, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of EMS Technologies, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

By:	/s/ Gary B. Shell Gary B. Shell	Date: 11/08/10
	Senior Vice President,
	Chief Financial Officer and Treasurer
	(Principal Financial Officer)

EX-32

EXHIBIT 32

SECTION 906 CERTIFICATION OF THE CEO/CFO

EMS TECHNOLOGIES, INC.

CERTIFICATION OF
CHIEF EXECUTIVE OFFICER
AND
CHIEF FINANCIAL OFFICER

Each of the undersigned Chief Executive Officer and Chief Financial Officer of EMS Technologies, Inc. hereby individually certifies that the Quarterly Report on Form 10-Q of the Company for the period ended October 2, 2010, to which this Certification is attached, fully complies with the requirements of Section 15(d) of the Securities Exchange Act of 1934, as amended, and that the information contained in such Report fairly presents, in all material respects, the financial condition and results of operations of EMS Technologies, Inc.

In witness whereof, each of the undersigned has executed and delivered this Certification on this 8th day of November, 2010.

/s/ Neilson A. Mackay Neilson A. Mackay	/s/ Gary B. Shell Gary B. Shell
President and Chief Executive Officer	Senior Vice President,
EMS Technologies, Inc.	Chief Financial Officer and Treasurer EMS Technologies, Inc.