-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GsstYLgjCDuG8oMvLa6GWvT2MrP9jl/BhETELZJmqrhhf/mOQ+B3jXnhoyGX3z7k pO7p3jg+rh5VUlHqwNWwXQ== 0000950134-95-003340.txt : 19951219 0000950134-95-003340.hdr.sgml : 19951219 ACCESSION NUMBER: 0000950134-95-003340 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951218 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: VERTEX COMMUNICATIONS CORP /TX/ CENTRAL INDEX KEY: 0000780416 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 751982974 STATE OF INCORPORATION: TX FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-15277 FILM NUMBER: 95602302 BUSINESS ADDRESS: STREET 1: 2600 N LONGVIEW ST STREET 2: PO BOX 1277 CITY: KILGORE STATE: TX ZIP: 75662 BUSINESS PHONE: 9039840555 10-K 1 FORM 10-K FOR YEAR ENDED SEPTEMBER 30, 1995 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------- FORM 10-K (MARK ONE) [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____________ TO ________________ COMMISSION FILE NUMBER: 0-15277 ---------------------------------------- VERTEX COMMUNICATIONS CORPORATION (Exact name of Registrant as specified in its charter) TEXAS 75-1982974 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2600 N. LONGVIEW STREET, KILGORE, TEXAS 75662 (Address of principal executive offices) (Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (903) 984-0555 ------------------------------ SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED - ------------------- --------------------- None None SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: COMMON STOCK, $.10 PAR VALUE (Title of Class) ------------------------------ Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] As of December 1, 1995, 4,423,256 shares of the Registrant's Common Stock, $.10 par value, were outstanding. The aggregate market value of the Registrant's Common Stock held by non-affiliates based on the closing sales price on December 1, 1995, as reported by The Nasdaq Stock Market (National Market System), was approximately $45,000,000. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's Annual Report to Shareholders for the fiscal year ended September 30, 1995, are incorporated by reference into Items 5, 6, 7, and 8 under Part II and Item 14 of Part IV hereof. Portions of the Registrant's definitive Proxy Statement to be filed in connection with the solicitation of proxies for its 1996 Annual Meeting of Shareholders are incorporated by reference into Items 10, 11, 12, and 13 under Part III hereof. ================================================================================ 2 VERTEX COMMUNICATIONS CORPORATION ANNUAL REPORT ON FORM 10-K For the Fiscal Year Ended September 30, 1995 =================================================== PART I ITEM 1. BUSINESS. GENERAL Vertex Communications Corporation (the "Registrant," the "Company," or "Vertex") designs, develops, and manufactures an extensive line of precision earth station antennas for satellite communications. The Company's antennas range in size from 1.8 to 34 meters in diameter and operate in all relevant commercial and military frequency bands, including C-band, X-band and Ku-band. The Company also manufactures antenna control systems that control the movement and tracking capabilities of antennas, related electronic components used to amplify radio frequency ("RF") signals, as well as precision microwave waveguide components for application as component parts of communications systems. To complement its antenna products, the Company also provides custom engineering, turnkey field installation, spare and replacement parts, site testing, and after-sale and maintenance services. The Company's strategy is to provide a wide variety of technologically advanced satellite communications earth station antenna products to satisfy an expanding range of customer and industry requirements. To accomplish its objectives, the Company engages in ongoing efforts to introduce, in a timely manner, products that are designed to meet applicable domestic and international specifications. The Company believes that it offers a more diverse line of products than any of its principal competitors. Due to the exacting design and engineering requirements necessary to produce satellite communications antennas, quality control and precision engineering are central to the manufacturing process. The Company believes it has developed a reputation as a leader in quality control procedures which has enhanced its position in the marketplace. The Company markets its products to systems integrators and to end users who combine the Company's products with other communication equipment to form complete communications systems. In the United States, Vertex markets its products through a direct sales force; while in international markets, the Company utilizes a direct sales force, supplemented by independent foreign sales representatives. Vertex's customers include the television broadcast industry, international telecommunications companies, communications common carriers, private communications networks, and government agencies, including certain agencies of the U. S. Government and various foreign governments. The Company was organized pursuant to Texas law in 1984. The Company's wholly-owned subsidiaries include: Gamma-f Corp., a Nevada corporation headquartered in Torrance, California; Vertex Antennentechnik GmbH, a corporation organized pursuant to the laws of the Federal Republic of Germany, with its headquarters in Duisburg, Germany; Vertex International, Ltd., formed under the laws of England, with its headquarters near London;Vertex Foreign Sales Corporation, organized pursuant to the laws of The Virgin Islands, with its office in St. Thomas, The Virgin Islands; and Maxtech, Inc., a Pennsylvania corporation which is located in State College, Pennsylvania. As used herein, the terms the "Registrant," the "Company," and "Vertex" refer to Vertex Communications Corporation and its wholly-owned subsidiaries, unless otherwise indicated. The Company's principal executive offices are located at 2600 North Longview Street, Kilgore, Texas 75662, and its telephone number is (903) 984-0555. -1- 3 EARTH STATION ANTENNA INDUSTRY An increase in demand for transmission and reception capacity to support high-speed voice, video, and data communications has resulted in significant demand for additional satellite and earth station equipment. Communications satellites, once placed in orbit above the earth, relay microwave radio signals from one or more earth stations to one or more other earth stations at various geographical locations. The primary function of an earth station is to transmit or receive a microwave radio signal via satellite in order to efficiently facilitate the telecommunications process. (Telecommunication is the process of communication through electronic means such as radio, telegraph, television, and computer.) Each earth station is interconnected to a local communications network which distributes and/or collects the desired information to or from the users of such information. A typical earth station consists of several components, including an antenna and associated electronic components, some of which amplify RF signals and others that control the movement and tracking capabilities of the antenna. A principal advantage of satellite communications systems over terrestrial communications systems is that once a satellite has been launched, the incremental cost of adding new transmission and reception points is limited to the cost of the earth station. With a terrestrial communications system, each transmission route must receive a right- of-way clearance and incur additional costs attendant to laying connecting cable or erecting microwave towers and repeater stations. As a result, a satellite communications system frequently offers advantages as a cost-effective medium for long-distance communications, as compared to the cost of a terrestrial communications system which is usually higher. Communications satellites use the C-band, X-band and Ku-band for transmission in the radio frequency spectrum. The Company designs and manufactures satellite communications earth station antennas that operate in each of these frequency bands. C-band antennas are capable of receiving and transmitting information in the radio frequency band of four to six gigahertz. The C-band frequency spectrum is also used for terrestrial microwave transmissions. Due to the increasing use of the C-band frequency, the Ku-band frequency (12 to 14 gigahertz) has been reserved exclusively for satellite transmission by the Federal Communications Commission ("FCC") and an international agreement. Since wavelengths in the Ku-band are relatively short, they can be gathered and concentrated by a smaller antenna dish than is required with longer wavelength C-band transmissions. Therefore, Ku-band transmission enables earth station vendors and voice, video, and data communications service providers to bring satellite communications directly to customers' facilities. The X-band frequency spectrum (seven to eight gigahertz) is reserved for utilization in worldwide military satellite communications. THE VERTEX STRATEGY The Company's strategy is to provide a wide variety of advanced earth station antennas and associated products to satisfy evolving customer requirements. The Company believes its experience in refining current products and developing new products will enable it to expand distribution and gain market share. The Company believes this strategy has been, and will continue to be, successful because of the following key elements: TECHNICAL EXPERTISE. Vertex believes its technical expertise, together with its ability to comply with exacting engineering and design specifications, has contributed to its ability to increase sales. The ability of its engineering and design staff to respond rapidly to detailed customer requirements has enhanced the Company's competitive position. BROAD PRODUCT LINE. The Company's product strategy is to establish and maintain a prominent market share by emphasizing the development and distribution of a wide array of quality products. The Company believes its telecommunications products comprise one of the industry's broadest product lines. This -2- 4 extensive product line positions the Company to respond to a variety of customer requirements and to gain market share by expanding penetration into new and existing markets. SKILLED SALES FORCE. The Company's distribution strategy focuses on the needs of systems integrators and large end users that require a sales force possessing advanced technical knowledge and expertise. The Company believes its sales force is qualified to differentiate and promote the benefits of its products from those offered by competitors, to respond promptly to solve customers' communications problems, and to address customers' future communications requirements as their needs evolve and organizational functions change. INTERNATIONAL OPERATIONS. Emerging demand has created the need for substantial investment in telecommunications infrastructures in many international markets. The Company believes that a significant opportunity exists in the market for satellite earth station antennas and associated products outside of the United States. The Company adapts its product development, marketing and distribution strategies to comply with the unique requirements of specific international markets. The Company expects its international sales volume will continue to grow. ACQUISITIONS AND GROWTH. The Company expects that planned sales growth will be largely dependent on its ability to expand its existing plant facilities and increase personnel or to implement selected, strategic acquisitions which will complement existing business and enhance market share in the industry. Consistent with this strategic objective, Vertex acquired Maxtech, Inc. of State College, Pennsylvania in January 1995. Maxtech's products and capabilities are an excellent fit within Vertex's product line and are an integral part of a typical earth station communications system. PRODUCT DEVELOPMENT. The Company works closely with its customers to identify market needs and define product specifications early in the development process. This approach results in a thorough understanding of end user requirements prior to commencement of the design process and often positions the Company to develop and deliver new products or refinements of existing products in response to its customers' needs more rapidly than many of its competitors. The Company believes that the flexibility of its product designs and the capabilities of its engineering staff, combined with its adherence to superior quality control standards, have enabled it to be consistently among the first-to-market with competitive new products or innovative refinements of existing products. VERTEX PRODUCTS EARTH STATION ANTENNAS AND ASSOCIATED PRODUCTS. The Company manufactures an extensive line of earth station antennas capable of operating in the commercial and military frequency bands from one to 30 gigahertz, which range in size from 1.8 to 34 meters in diameter, as well as the related electronic components used to control the movement and tracking capabilities of antennas. These products require exacting engineering skills and detailed standards or specifications as established by each customer, involving not only antenna design, but the complete integration of other components acquired from the Company or other sources. Through its subsidiary, Gamma-f Corp., the Company designs and manufactures precision microwave waveguide components such as filters, diplexers, and radio frequency feed subsystems. These products are sold directly to end users and suppliers who integrate such products with other components in telecommunications systems. The Company also utilizes these products as component parts of certain of its antenna products. Through its subsidiary, Vertex Antennentechnik GmbH, the Company designs and supplies products which complement its existing broad line of antenna products such as precision antenna reflectors, -3- 5 multi-axis pedestals (antenna support structures), controller drive systems, radio telescopes, and optical telescopes. Through its subsidiary, Maxtech, Inc., the Company designs and manufactures a variety of Low Noise Amplifiers (LNAs), Solid State Power Amplifiers (SSPAs), and other related high performance products used in telecommunications systems. The Company's products are utilized by its customers principally for telecommunications applications with certain products used in radio astronomy. CUSTOM ENGINEERING. The Company provides custom engineering services and believes it is among the industry leaders in developing related custom-engineered products. Significant examples of Vertex's ability to design and deliver non-standard antenna products developed in recent years include: a 30-meter full-motion, high-speed, multi-feed antenna; a 20 meter multi-frequency, extended broadband antenna; an antenna array wall chamber; and an 11-meter mobile antenna. CUSTOMER SERVICES. In addition to the manufacture and supply of a broad line of telecommunication antennas and related products, the Company also offers a wide range of related services, including consulting; design and configuration; turnkey field installation; site testing and performance analysis; and after-sale maintenance services. MARKETING, SALES, AND CUSTOMERS GENERAL. The Company's marketing strategy is to offer a complete line of high-technology antenna products, rather than to market complete communications systems. The Company believes that this approach enables Vertex to satisfy the needs of systems integrators (companies which sell complete communications systems, but do not manufacture antennas or the particular antenna needed). This approach also enables the Company to sell antenna products directly to end users (ultimate customers) who combine the antennas and associated products with other systems components to form complete communications systems. The Company markets and supports its products through a distribution system comprised of a direct sales force, supplemented in international markets by independent sales representatives. Vertex augments these sales methods by advertising certain products in trade magazines and by displaying certain products at trade shows. The marketing and sales activities of the Company focus on domestic and international markets for commercial, governmental, and military applications. Vertex's marketing plan contemplates sales growth through increasing market share and continued development of new markets for its products. SALES. The Company maintains a direct sales force in the United States and Germany, and a staffed sales office in England. In addition to providing product and pricing information, Vertex's sales personnel provide customers and potential customers value-added solutions and detailed explanations of the benefits and advantages of the Company's products and services as compared to those of its competitors. The Company's sales force includes sales managers, engineers, sales representatives, and technical support personnel. The Company's worldwide marketing and sales efforts are directed and coordinated from its headquarters in Kilgore, Texas. The Company believes that the rapidly evolving international market will continue to be an important source of sales. The Company's international sales are comprised of products manufactured in the United States and Germany, and services performed on-site by its engineers and technical support personnel. To enhance its foreign sales, the Company also engages the services of foreign independent sales representatives to supplement its direct sales force. These foreign sales representatives also offer products of other manufacturers which are complementary to, but not competitive with, the Company's products. Sales to foreign customers involving products or services originating in the United States are typically contracted for in U. S. dollars. Foreign sales of products or services originating in Germany are -4- 6 usually conducted in the German mark. International sales are subject to certain government controls and other risks, including export licensing, currency exchange rate fluctuations, political instability, trade restrictions, and changes in tariffs and freight rates. Should any of these factors prove onerous or change in a material unfavorable manner, the Company's delivery or completion of a sales contract could be adversely affected. To date, the Company has not experienced any material difficulties related to these factors. International sales accounted for 68%, 73%, and 63% of net sales in 1995, 1994, and 1993, respectively. Sales in Western Europe were 16%, 18%, and 23% of net sales in 1995, 1994, and 1993, respectively. Sales in the Far Eastern countries amounted to 28%, 22%, and 14% of net sales in 1995, 1994, and 1993, respectively. Export sales were 64%, 63%, and 57% of net sales in 1995, 1994, and 1993, respectively. CUSTOMERS. Typical users of the Company's products include the broadcast industry, international telecommunications companies, communications common carriers, universities, private communications networks, and government agencies. The Company's customers include a number of major companies and government agencies throughout the world, including certain agencies of the U. S. Government and various foreign governments. Although the Company sells its products to many customers, one customer, Satellite Transmission Systems, Inc. ("STS"), and various agencies of the U. S. Government (aggregated as one), have each accounted for 10% or more of sales in any one of the past three fiscal years, except as otherwise indicated in the following schedule.
==================================================================================================== Percent of Total Net Sales ---------------------------------------------------------------------------------------------------- Customer 1995 1994 1993 ---------------------------------------------------------------------------------------------------- STS . . . . . . . . . . . . . . . . . . 16% 19% 21% ---------------------------------------------------------------------------------------------------- U. S. Government . . . . . . . . . . . Below 10% Below 10% 12% ====================================================================================================
No other customer accounted for as much as 10% of the Company's net sales in 1995, 1994, or 1993, respectively. Vertex does not seek to maintain a specific level of sales to the various agencies of the U. S. Government, but rather targets certain types of projects where the Company's existing products and/or expertise will enable it to submit competitive bid proposals. Accordingly, the Company does not attach any particular significance to the fact that sales to these customers (aggregated as one) have declined since 1993 as depicted in the table above. The history of the Company's business reflects that, due to large contracts which may occur from time to time, one or more different customers may represent a material part of the Company's net sales or unfilled backlog of orders in any given year or at any point in time. As an example, unfilled order backlog to one customer, GTE Corporation, represented approximately 25% of the Company's total unfilled order backlog at October 31, 1995 (due to over $12 million of contract awards received from GTE in the fourth quarter of fiscal 1995). The Company believes that its relationships with its customers are excellent and that it will continue to be a major supplier of satellite communications earth station antenna products to its major customers. In addition, the Company has been successful in recent years in diversifying its customer base by increasing its penetration of existing and emerging markets and developing new markets for its products, and believes that it could maintain sales of its products at current levels to other customers if current relationships were interrupted. Although a large number of these relationships has existed for multiple years, there can be -5- 7 no assurance that such relationships will continue. The loss of any of such customers could have a material adverse effect on the Company and its business. Most of the Company's business with the U. S. Government is on a fixed-price basis. Contracts with the U. S. Government customarily include provisions which provide for cancellation at the convenience of the Government. In addition, upon cancellation by the Government, the Company would be entitled to reimbursement of costs incurred, plus a pro rata share of profit. The Company has never received a cancellation of a material Government contract and has no reason to anticipate any such cancellation. Products sold, characteristics, and business risks associated with U. S. Government business do not differ materially from those associated with sales of the Company's products to its commercial customers. CUSTOMER SUPPORT AND SERVICE. The Company services, repairs, and provides technical support for its products. Through its sales network and design and support services, the Company is constantly made aware of customers' needs and their use of its products and services. Accordingly, a superior level of continuing customer service and support is integral to the Company's objective of developing and maintaining long-term relationships with its customers. The majority of the Company's service and support activities are provided by its field engineering team, systems engineers, and sales and administrative support personnel, both on-site at the customer's location and by telephone. FOREIGN OPERATIONS In fiscal 1993, the Company organized its wholly-owned subsidiary, Vertex Antennentechnik GmbH, headquartered in Duisburg, Germany, and acquired through this subsidiary all of the assets and ongoing business of the Antenna Group of Krupp Industrietechnik GmbH of Germany, effective December 31, 1992. Financial information relating to these foreign operations for the past three years is shown below:
(In thousands) 1995 1994 1993 ---- ---- ---- Sales to Unaffiliated Customers . . . . . . . . . . . . $3,724 $5,922 $3,417 Transfers between Geographic Areas . . . . . . . . . . . 889 1,059 21 Operating Income (Loss) . . . . . . . . . . . . . . . . (263) 1,186 107 Identifiable Assets . . . . . . . . . . . . . . . . . . . 2,366 4,002 3,482
The Company translates the financial statements of its German subsidiary from its functional currency, the German mark, into U. S. dollars in accordance with applicable financial accounting standards. Assets and liabilities are translated at the exchange rate in effect at each fiscal year end. Sales and expenses are translated at the weighted average exchange rate in effect for the period reported. Any resulting gains or losses are recorded in shareholders' equity and excluded from net income. MANUFACTURING AND ENGINEERING The Company's products are manufactured from standard components and parts that are either built by the Company or by other manufacturers pursuant to the Company's specifications. Vertex considers these components and related materials to be commercially available in sufficient volume in the industry and expects to experience no difficulty in obtaining any materials or components needed in its manufacturing activities. However, should any of these materials or components become unavailable for a significant period, the result could have an adverse effect on the Company's business. The Company's products require substantial engineering, design, and technical support. In addition, although many of the Company's products are standardized, custom engineering is frequently required to accomplish the antenna modifications necessary for a particular application or installation. The Company's engineering staff is also important to its research and development activities. The Company has been successful in attracting and retaining well- qualified engineering personnel and does not anticipate a shortage of qualified personnel in the future. -6- 8 The Company believes that its current manufacturing facilities provide adequate manufacturing space for the foreseeable future. See Item 2 - "Properties." PRODUCT DEVELOPMENT The Company's product research and development efforts are directed primarily toward development, design, engineering, and implementation activities rather than pure research. These activities are generally undertaken in response to specific customer requests or anticipated requirements of the U. S. Government for programs that have been identified by the Company. Funding for these activities is derived from internally generated sources and, from time to time, customers. For the years 1995, 1994, and 1993, the Company expended $2,165,000, $2,637,000, and $2,203,000, respectively, on research and development. Costs associated with product development work funded by customers are included in the Company's cost of sales and the related revenues are included in net sales. The Company strives to continually upgrade its existing products and develop new products to meet changing customer requirements and to keep pace with evolving technology in the industry. COMPETITION The Company experiences substantial competition from a number of established companies which provide a broad range of products to the satellite communications earth station antenna market, including Andrew Corporation, Comsat RSI SatCom Technologies, and Scientific-Atlanta, Inc. Certain of these companies have substantially greater financial and personnel resources than those available to the Company. The Company's products may not be proprietary or patentable, and may be subject to duplication and exploitation by its competitors. Although many of these competitors offer antenna products which are among the types or sizes produced by the Company, the Company believes that no single competitor offers the diversity of antenna products produced by the Company. The Company believes that the most important competitive factors are technical performance, capabilities, product performance, dependable delivery, and price. Maintenance and service capabilities and manufacturing experience in the industry are also important factors to a customer. Accordingly, the Company strives to price its products competitively while stressing its custom engineering and servicing capabilities based upon the years of experience and technical expertise of its personnel in designing and manufacturing antenna products and the Company's precision metal manufacturing methods. The Company believes that its expertise in custom engineering and its ability to meet customers' relatively short-lead time requirements provide it with a distinct competitive advantage. Due to competition in the industry where the Company competes, periodic advances in technology can be expected. Therefore, the Company's ability to maintain and improve in its existing markets and to enter new markets is partially dependent upon its ability to evaluate advances in technology and incorporate such advances where appropriate into its products in a timely and effective manner. INTELLECTUAL PROPERTY The Company holds patents for certain products and processes. The Company does not, however, consider patents important to its business but instead relies principally upon innovative management, technical expertise, and marketing skills to develop, enhance, and market its products. The Company believes it is less dependent on the protection of proprietary product information than on its ability to timely and effectively develop, enhance, and market its products to maintain the competitiveness of its products with those of others. The Company protects its proprietary product information through the selective use of nondisclosure agreements with customers, suppliers, and industry partners and by limiting access to sensitive information. -7- 9 The Company has no reason to believe that its products and proprietary rights infringe on the proprietary rights of any third parties. There can be no assurance, however, that third parties will not assert infringement claims in the future. BACKLOG AND SEASONALITY At October 31, 1995 and 1994, the Company's backlog of unfilled orders believed to be firm was approximately $44 million and $31 million, respectively. The backlog of unfilled orders at October 31, 1995, included approximately $1.0 million of contracts with the U. S. Government. As is customary, these contracts include provisions which allow for cancellation at the convenience of the Government or prime contractor. Upon exercise of these provisions, the Company would be entitled to reimbursement of costs incurred and a pro rata share of profit. The Company has never received a cancellation of a material government contract and believes no such event is threatened. The Company expects that a substantial portion of the October 31, 1995, backlog will be completed in fiscal year 1996. The levels of net sales and net income of the Company fluctuate moderately on a quarterly basis. The variability in recent years has been demonstrated by typically higher net sales and net income in the fiscal quarters ending in June and September of each fiscal year. The primary reason for this pattern is the need for customers to complete installations during warm weather months. The fiscal quarter ending in September can also be affected by the timing of sales to U. S. Government agencies. Other factors which have caused quarterly fluctuations in net sales and net income include variability of shipments under large contracts and variations in product mix and in profitability of individual orders. The Company believes these aberrations may continue to have similar impact on future results of operations, but their timing and placement within particular quarterly periods on an ongoing basis cannot be predicted. Consequently, the Company believes it is more meaningful to focus on annual rather than interim results. In addition, due to the timing differences from year to year in the receipt of large nonrecurring sales contracts, year-to-year comparisons of backlog can be misleading and are not necessarily indicative of future revenues. ENVIRONMENTAL COMPLIANCE Due to the nature of the Company's products, it has not been materially affected to date by environmental laws. The Company does not anticipate its business will be materially affected by any current or expected environmental laws. GOVERNMENT REGULATION Although the Company is not directly regulated by any governmental agency, most of its United States customers, and the telecommunications industry in general, are subject to regulation by the Federal Communications Commission (the "FCC"). In recent years, FCC decisions permitting greater competition among common carriers have had a favorable impact on the Company. In addition, the FCC controls the allocation of transmission frequencies and the performance characteristics of earth station antennas. As a result of these controls, the Company's antenna design specifications must conform on an ongoing basis to meet FCC or other regulatory requirements. These regulations are not expected to adversely affect the operations of the Company. Outside the United States, where some of the customers of the Company have been government owned and operated entities, changes in government economic policy and communications regulation have affected in the past, and may be expected to affect in the future, the volume of foreign business. However, the effect of regulation in countries other than the United States in which the Company does business has generally not been detrimental to the international activities of the Company taken as a whole and is not expected to be detrimental to such activities in the foreseeable future. -8- 10 EMPLOYEES As of October 31, 1995, the Company employed approximately 600 full-time employees. None of the Company's employees is represented by a labor organization and the Company is not a party to any collective bargaining agreement. The Company has never had an employee strike or a work stoppage and considers its relations with its employees to be good. The Company has not experienced any difficulty in attracting and retaining qualified employees. ITEM 2. PROPERTIES. The Company owns and maintains executive and administrative offices at its headquarters at 2600 N. Longview Street, Kilgore, Texas. The following is a listing of the properties owned or leased by Vertex and its subsidiaries as of October 31, 1995.
Approximate Area Owned Location Principal Use in Square Feet or Leased -------- ------------- ---------------- --------- Kilgore, Texas Engineering, administrative, and 231,000 floor space on Owned in fee manufacturing 55 acres of land Longview, Texas Engineering, administrative, and 30,000 floor space Leased to manufacturing October 1997 Torrance, California Engineering, administrative, and 37,000 floor space* Leased to manufacturing June 1997 State College, Pa. Engineering, administrative, and 18,000 floor space Leased to March manufacturing 1998 Duisburg, Germany Engineering and administrative 4,000 floor space Leased to February 1996 Surrey, England Administrative 1,000 floor space Leased to January 1996
- ----------------------- * Approximately 15,000 square feet of the total floor space is subleased to a third party. The Company believes its facilities are adequate and will be suitable to meet its requirements for the foreseeable future. ITEM 3. LEGAL PROCEEDINGS. The Company is not a party to any legal proceedings which would have a material, adverse effect on the Company or its business and does not believe that any such legal proceedings are threatened. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There were no matters submitted during the fourth quarter of the fiscal year covered by this report to a vote of security holders of the Company, through solicitation of proxies or otherwise. -9- 11 PART II The information required by Items 5 through 8, inclusive, of this report is contained in the Registrant's Annual Report to Shareholders for its fiscal year ended September 30, 1995 (the "1995 Annual Report"), selected portions of which are incorporated herein by reference, as described below. With the exception of the material incorporated by reference herein, the 1995 Annual Report is not deemed filed as a part of this Annual Report on Form 10-K. ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The information appearing under the caption "Market for Common Stock" on page 20 of the 1995 Annual Report is hereby incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA. The information appearing in the "Selected Financial Data" table on page 1 of the 1995 Annual Report is hereby incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The information appearing under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 10 and 11 of the 1995 Annual Report is hereby incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The Consolidated Financial Statements of Vertex Communications Corporation and Subsidiaries and Notes thereto, appearing on pages 12 through 19, inclusive, together with the Report of Arthur Andersen LLP, Independent Public Accountants, thereon, appearing at page 20 of the 1995 Annual Report, are hereby incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not applicable. -10- 12 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. DIRECTORS The information regarding directors of the Registrant in response to Item 7 of Schedule 14A promulgated pursuant to the Securities Exchange Act of 1934 (the "Exchange Act"), which will appear in the Registrant's definitive Proxy Statement in connection with the solicitation of proxies for its 1996 Annual Meeting of Shareholders, is hereby incorporated herein by reference. EXECUTIVE OFFICERS The following table sets forth the names and ages of all executive officers of the Registrant, their respective positions and offices with the Registrant, and the period during which each has served as an executive officer.
SERVED AS EXECUTIVE NAME AGE POSITION(S)(1) OFFICER SINCE ---- --- ----------- ------------- J. Rex Vardeman . . . . . . . . . 56 Chairman of the Board, October, 1984 President, Chief Executive Officer and Director A. Don Branum . . . . . . . . . . 58 Senior Vice President, Assistant October, 1984 Secretary and Director of the Company; and Vice President/General Manager, Vertex Antenna Division James D. Carter . . . . . . . . . 48 Vice President-Finance, October, 1984 Treasurer and Director Bill R. Womble(2) . . . . . . . . 57 Secretary and Director October, 1984 William L. Anton . . . . . . . . 57 Vice President of the Company; and December, 1984 Vice President - Marketing, Vertex Antenna Division Helmut E. Schwarz . . . . . . . . 54 Vice President of the Company; and December, 1984 Vice President/General Manager, VISAT Division H. Dean Bunnell . . . . . . . . . 48 Vice President of the Company; and January, 1995 President and Chief Executive Officer, Maxtech, Inc. Manfred Stupnik . . . . . . . . 53 Vice President of the Company; and January, 1995 President, Gamma-f Corp.
- --------------- (1) All executive officers of the Registrant are elected annually by the Board of Directors and serve at the discretion of the Board. There are no family relationships between any director or executive officer of the Registrant and any other such person. (2) Mr. Womble is not an employee of the Registrant. -11- 13 The following information, as furnished by each of the persons named, relates to the business experience of each executive officer of the Registrant named above. J. Rex Vardeman is a co-founder of the Company and has served as Chairman of the Board, President, Chief Executive Officer and a director since its inception in October 1984. Prior to founding the Company, Mr. Vardeman served as Vice President of Harris Antenna Operations ("Harris Antenna Operations"), a unit of the Satellite Communications Division of Harris Corporation ("Harris"), until the acquisition in 1984 of the Harris Antenna Operations by the Company. In 1973, Mr. Vardeman co-founded Radio Mechanical Structures, Inc. ("RMS"), the predecessor to the Harris Antenna Operations, and served as its Vice President and General Manager and a director until the acquisition of RMS by Harris in 1977. For more than ten years prior thereto, he was employed by E-Systems, Inc., a major electronics company, in various engineering and management positions. A. Don Branum, a co-founder of the Company, has served as Senior Vice President, Assistant Secretary, and a director since its inception in October 1984 and as Vice President/General Manager of the Company's Vertex Antenna Division since April 1994. Prior to joining the Company, Mr. Branum served as Vice President of the Harris Antenna Operations, with responsibility for product marketing. Mr. Branum served as President of Dallas Telecommunications, Inc., a communications marketing and consulting firm which he founded from 1981 through 1984. From 1978 through 1981, Mr. Branum served as Vice President and General Manager of the Satellite Communications Division of Harris, of which the Harris Antenna Operations were a part. Mr. Branum was a co-founder of RMS in 1973 and served as its President and a director until its acquisition by Harris in 1977. James D. Carter has served the Company as Vice President - Finance and Treasurer and a director since its inception in October 1984. Prior to joining the Company, Mr. Carter was employed by Harris as Controller of the Harris Antenna Operations since 1978. For more than six years prior thereto, Mr. Carter was employed by Harris in various accounting positions. Bill R. Womble has served as Secretary and a director of the Company since October 1984. He has been continuously engaged in the private practice of law since 1963 and is a member of the firm of Thompson & Knight, P.C. (attorneys), Dallas, Texas. Mr. Womble is not an employee of the Company. William L. Anton has served as Vice President of the Company since October 1984 and as Vice President - Marketing of Vertex Antenna Division since September 1995. Prior to appointment to his current positions, Mr. Anton previously served in the position of Vice President - International Marketing since 1987 and as Vice President - Operations from December 1984 through October 1987. From April 1984 through December 1984 and from August 1977 until April 1984, Mr. Anton served as Director of Operations and Program Director, respectively, of the Harris Antenna Operations. Helmut E. Schwarz has served as Vice President of the Company and Vice President/General Manager of Vertex Integrated Satellite Antenna Technology Division since September 1995. Prior thereto, Mr. Schwarz served as Vice President - Engineering and Technology of the Company since joining the Company in December 1984. Mr. Schwarz served for more than six years in various senior engineering management positions with Harris, including Director of Feed Production from July 1983 through December 1984. H. Dean Bunnell has served as Vice President of the Company since January 1995, immediately following the acquisition of Maxtech, Inc. ("Maxtech") as a wholly-owned subsidiary of the Company. Mr. Bunnell is a co-founder of Maxtech and has served as its President and Chief Executive Officer since its inception in 1989 and has continued to serve in such positions since the Company's acquisition of Maxtech. Manfred Stupnik has served as Vice President of the Company since January 1995 and as President of Gamma-f Corp., a wholly-owned subsidiary of the Company, since 1991. Prior thereto, Mr. Stupnik held -12- 14 positions as Vice President of Operations and Vice President-Commercial Products during his 24 years of continuous tenure with Gamma-f Corp. EMPLOYMENT AGREEMENTS J. Rex Vardeman, A. Don Branum and James D. Carter, in their capacities as (i) Chairman of the Board, President and Chief Executive Officer, (ii) Senior Vice President, and (iii) Vice President - Finance and Treasurer of the Company, respectively, have each executed employment agreements with the Company. These employment agreements are each for three-year terms which automatically renew on a daily basis. Among other provisions, these agreements provide that, in consideration for remaining in the employ of the Company, each officer is entitled, subject to certain conditions, to receive benefits in the event of termination of employment under certain circumstances, including, among other reasons, a change of control of the Company. If such an officer is terminated for a reason other than (a) his death, disability or retirement, (b) for cause, or (c) his voluntary termination other than for good reason, such officer would be entitled to receive from the Company, except as otherwise indicated below, a lump-sum severance payment equal to the sum of the following payments: (i) the officer's full base salary through the effective date of his termination at the rate then in effect, (ii) any authorized but unreimbursed business expenses and any vacation benefits which have accrued but are unpaid or unused as of the effective date of termination, (iii) any accrued but unpaid annual bonus compensation to the effective date of termination, but without accelerating the bonus payment date, (iv) an amount equal to three times the average aggregate direct annual compensation (salary and bonus) of the officer for the five fiscal years of the Company ended immediately prior to the effective date of his termination, and (v) in the event such officer is subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), resulting from any "excess parachute payment" received by such officer as described in Section 280G(b) of the Code, an amount sufficient to ensure that after payment of such excise tax, plus interest or penalties thereon, if any, as the result of such "excess parachute payment," such officer will retain free and clear of all claims, taxes, and impositions an amount equal to such excise tax, interest and penalties, if any, imposed upon the excess payment received. In the event that any such officer receives a parachute payment as a result of termination of employment, such officer would be deemed to receive an "excess parachute payment" if it equals or exceeds 300% of the officer's "base amount," generally the average annual compensation received by such officer over the five most recent tax years. The "excess parachute payment" is computed as that portion of the "parachute payment" which exceeds the "base amount." COMPLIANCE WITH SECTION 16 OF THE EXCHANGE ACT. Section 16(a) of the Exchange Act requires the Registrant's directors and officers, and persons who own more than 10% of a registered class of the Registrant's equity securities, to file initial reports of ownership and reports of changes in ownership of the Registrant's securities with the Securities and Exchange Commission (the "Commission") on Forms 3, 4, or 5, as applicable. Such persons are required by regulations promulgated by the Commission pursuant to the Exchange Act to furnish the Registrant with copies of all such Section 16(a) report forms they file with the Commission. Based solely on its review of the copies of such report forms received by it with respect to fiscal year 1995, or written representations from certain reporting persons, the Registrant believes that all filing requirements applicable to its directors, officers, and persons who own more than 10% of a registered class of the Registrant's equity securities have been timely complied with in accordance with Section 16(a) of the Exchange Act. -13- 15 ITEM 11. EXECUTIVE COMPENSATION. The information regarding executive compensation in response to Item 8 of Schedule 14A which will appear in the Registrant's definitive Proxy Statement in connection with the solicitation of proxies for its 1996 Annual Meeting of Shareholders is hereby incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information regarding security ownership of certain beneficial owners and management in response to Item 6 of Schedule 14A which will appear in the Registrant's definitive Proxy Statement in connection with the solicitation of proxies for its 1996 Annual Meeting of Shareholders is hereby incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information regarding certain relationships and related transactions in response to Item 7 of Schedule 14A which will appear in the Registrant's definitive Proxy Statement in connection with the solicitation of proxies for its 1996 Annual Meeting of Shareholders is hereby incorporated herein by reference. -14- 16 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
PAGE IN 1995 (a)1. CONSOLIDATED FINANCIAL STATEMENTS. ANNUAL REPORT ------------- Report of Independent Public Accountants . . . . . . . . . . . . . . . . . . . . . . 20 Consolidated Statements of Income For the years ended September 30, 1995, 1994, and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Consolidated Balance Sheets As of September 30, 1995, and 1994 . . . . . . . . . . . . . . . . . . . . . . . . 13 Consolidated Statements of Cash Flows For the years ended September 30, 1995, 1994, and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Consolidated Statements of Shareholders' Equity For the years ended September 30, 1995, 1994, and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . 16 2. FINANCIAL STATEMENT SCHEDULES. PAGE NO. -------- Report of Independent Public Accountants on Schedule . . . . . . . . . . . . . . . . S-1 SCHEDULE -------- II - Valuation and Qualifying Accounts . . . . . . . . . . . . . . . . . . . . . . S-2
All other schedules are omitted because they are either not required or not applicable or the required information is shown in the Consolidated Financial Statements or Notes thereto. (b) REPORTS ON FORM 8-K. The Registrant did not file any reports on Form 8-K during the last quarter of the period covered by this report, and none was required. -15- 17 (c) EXHIBITS. The following Exhibits are filed herewith pursuant to Item 601 of Regulation S-K or are incorporated herein by reference to previous filings as noted, as applicable:
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------ ---------------------- 3.1 . . Restated Articles of Incorporation of the Registrant filed as Exhibit 3-A to the Registrant's Statement on Form S-18 (File No. 33-1094-FW). 3.2 . . Bylaws of the Registrant filed as Exhibit 3-B to the Registrant's Registration Statement on Form S-18 (File No. 33-1094-FW). 3.3 . . Articles of Amendment to the Restated Articles of Incorporation of the Registrant filed as Exhibit 3-C to the Registrant's Annual Report on Form 10-K for the fiscal year ended September 30, 1988 (File No. 0-15277). 3.4 . . Articles of Amendment to the Restated Articles of Incorporation, as amended, of the Registrant. 3.5 . . First Amendment to the Bylaws of the Registrant filed as Exhibit 3-D to the Registrant's Annual Report on Form 10-K for the fiscal year ended September 30, 1988 (File No. 0-15277). 3.6 . . Second Amendment to the Bylaws of the Registrant adopted October 29, 1991 filed as Exhibit 3-E to the Registrant's Annual Report on Form 10-K for the fiscal year ended September 30, 1991 (File No. 0-15277). 10.1 . . Savings/Profit Sharing Plan of the Registrant, as amended and restated, effective as of June 1, 1991 filed as Exhibit 10-A to the Registrant's Annual Report on Form 10-K for the fiscal year ended September 30, 1991 (File No. 0-15277). 10.2 . . Stock Option Plan for Key Employees of the Registrant filed as Exhibit A to the Registrant's definitive Proxy Statement in connection with the solicitation of proxies for its 1987 Annual Meeting of Shareholders (File No. 0-15277). 10.3 . . First Amendment to the Stock Option Plan for Key Employees filed as Exhibit 10-E to the Registrant's Annual Report on Form 10-K for the fiscal year ended September 30, 1988 (File No. 0-15277). 10.4 . . Second Amendment to the Stock Option Plan for Key Employees - Filed as Exhibit A to the Registrant's definitive Proxy Statement in connection with the solicitation of proxies for its 1992 Annual Meeting of Shareholders (File No. 0-15277). 10.5 . . 1995 Stock Compensation Plan of the Registrant filed as Exhibit A to the Registrant's definitive Proxy Statement in connection with the solicitation of proxies for its 1995 Annual Meeting of Shareholders (File No. 0-15277). 10.6 . . Management Incentive Compensation Plan of the Registrant filed as Exhibit 10-F to the Registrant's Registration Statement on Form S-18 (File No. 33-1094-FW).
-16- 18
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------ ---------------------- 10.7 . . Qualified Employee Stock Purchase Plan of the Registrant filed as Exhibit 10-G to the Registrant's Registration Statement on Form S-18 (File No. 33-1094-FW). 10.8 . . Outside Directors Stock Option Plan of the Registrant filed as Exhibit B to the Registrant's definitive Proxy Statement in connection with the solicitation of proxies for its 1987 Annual Meeting of Shareholders (File No. 0-15277). 10.9 . . Executive Employment Agreement, dated November 10, 1994, by and between the Registrant and J. Rex Vardeman, Chairman of the Board, President and Chief Executive Officer of the Registrant. 10.10 . . Executive Employment Agreement, dated November 10, 1994, by and between the Registrant and A.Don Branum, Senior Vice President of the Registrant. 10.11 . . Executive Employment Agreement, dated November 10, 1994, by and between the Registrant and James D. Carter, Vice President - Finance and Treasurer of the Registrant. 10.12* . . Management Incentive Compensation Plan of the Registrant, as amended and restated effective October 1, 1995. 10.13* . . Management Incentive Compensation Plan for Divisions of the Registrant, as amended and restated effective October 1, 1995. 10.14* . . Management Incentive Compensation Plan of Gamma-f Corp., a wholly-owned subsidiary of the Registrant, as amended and restated effective October 1, 1995. 10.15* . . Management Incentive Compensation Plan of Maxtech, Inc., a wholly-owned subsidiary of the Registrant, as amended and restated effective October 1, 1995. 10.16* . . Employee Profit Sharing Bonus Plan of the Registrant, as amended and restated effective October 1, 1995. 10.17* . . Employee Profit Sharing Bonus Plan of Gamma-f Corp., a wholly-owned subsidiary of the Registrant, as amended and restated effective as of October 1, 1995. 10.18 . . Indemnification Agreement, dated October 26, 1994, by and between the Registrant and J. Rex Vardeman; and schedule of other officers and directors of the Registrant, each of whom has entered into a similar agreement with the Registrant. 11* . . Computation of Net Income Per Share. 13* . . Annual Report to Shareholders of the Registrant for the year ended September 30, 1995, to the extent specified in Parts II, III and IV hereof. 22* . . Subsidiaries of the Registrant. 24* . . Consent of Independent Public Accountants. 27* . . Financial Data Schedule.
- -------------------------- *Filed herewith. -17- 19 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. Dated: December 18, 1995 Vertex Communications Corporation (Registrant) By: /s/ J. REX VARDEMAN J. Rex Vardeman Chairman of the Board, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ J. REX VARDEMAN Chairman of the Board, December 18, 1995 J. Rex Vardeman President, Chief Executive Officer (Principal Executive Officer) and Director /s/ A. DON BRANUM Director December 18, 1995 A. Don Branum /s/ JAMES D. CARTER Vice President - Finance December 18, 1995 James D. Carter (Principal Financial and Accounting Officer), Treasurer and Director /s/ BILL R. WOMBLE Director December 18, 1995 Bill R. Womble /s/ DON R. HEITZMAN, SR Director December 18, 1995 Donald E. Heitzman, Sr.
-18- 20 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE To Vertex Communications Corporation: We have audited, in accordance with generally accepted auditing standards, the consolidated financial statements included in Vertex Communications Corporation's 1995 annual report to shareholders incorporated by reference in this Form 10-K, and have issued our report thereon dated October 27, 1995. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The supplemental schedule II is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. Arthur Andersen LLP Dallas, Texas October 27, 1995 S-1 21 (In thousands) SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
ADDITIONS --------------------------- BALANCE AT CHARGES TO CHARGES TO BALANCE BEGINNING COST AND OTHER AT END DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD - ----------- ---------- ---------- ---------- ---------- --------- ALLOWANCE FOR DOUBTFUL ACCOUNTS Year Ended 9/30/95 $263 $(22) $ -- $ -- $241 Year Ended 9/30/94 263 60 -- 60(1) 263 Year Ended 9/30/93 386 (55) -- 68(1) 263 ALLOWANCE FOR INVENTORY OBSOLESCENCE Year Ended 9/30/95 $451 $ (34) $ -- $ -- $417 Year Ended 9/30/94 330 121 -- -- 451 Year Ended 9/30/93 202 128 -- -- 330 ALLOWANCE FOR WARRANTY CLAIMS Year Ended 9/30/95 $460 $303 $ -- $172(2) $591 Year Ended 9/30/94 433 310 -- 283(2) 460 Year Ended 9/30/93 384 375 -- 326(2) 433
(1) Doubtful accounts written off, less recoveries. (2) Warranty claims processed. S-2 22 INDEX OF EXHIBITS
Number DESCRIPTION - ------ ----------- 10.12 Management Incentive Compensation Plan of the Registrant, as amended and restated effective October 1, 1995. 10.13 Management Incentive Compensation Plan for Divisions of the Registrant, as amended and restated effective October 1, 1995. 10.14 Management Incentive Compensation Plan of Gamma-f Corp., a wholly-owned subsidiary of the Registrant, as amended and restated effective October 1, 1995. 10.15 Management Incentive Compensation Plan of Maxtech, Inc., a wholly-owned subsidiary of the Registrant, as amended and restated effective October 1, 1995. 10.16 Employee Profit Sharing Bonus Plan of the Registrant, as amended and restated effective October 1, 1995. 10.17 Employee Profit Sharing Bonus Plan of Gamma-f Corp., a wholly-owned subsidiary of the Registrant, as amended and restated effective as of October 1, 1995. 11 Computation of Net Income Per Share. 13 Annual Report to Shareholders of the Registrant for the year ended September 30, 1995, to the extent specified in Parts II, III and IV hereof. 22 Subsidiaries of the Registrant. 24 Consent of Independent Public Accountants. 27 Financial Data Schedule.
EX-10.12 2 MANAGEMENT INCENTIVE COMPENSATION PLAN 1 Exhibit 10.12 MANAGEMENT INCENTIVE COMPENSATION PLAN OF VERTEX COMMUNICATIONS CORPORATION (AS AMENDED AND RESTATED EFFECTIVE OCTOBER 1, 1995) 1. PURPOSE OF PLAN. This Management Incentive Compensation Plan is intended to attract and retain key employees of outstanding competence and to promote the growth and development of the Company by providing incentive compensation as a reward to those officers, managers, and other key employees who contribute by their ability, industry, and ingenuity to the management, development, and successful operations of the Company. 2. DEFINITIONS. For purposes of the Plan, the following terms shall have the ascribed meanings unless otherwise clearly apparent from the context: "Annual Operating Plan" (AOP) - shall mean the projected plan of operations of the Company as approved by the Board of Directors for a designated Fiscal Year. "Annual Performance Objectives" - shall mean the financial objectives of the Company which the Compensation Committee shall promulgate and define as applicable for each Fiscal Year relative to various degrees of achievement of Awards under the Plan at various levels of Net Income After Tax achieved by the Company for such Fiscal Year and such other measurements of financial accomplishment by the Company as it shall in its sole discretion authorize and approve as conditions precedent to full realization by Participants of Awards under the Plan, which Annual Performance Objectives shall be communicated annually in a comprehensive memorandum from the Compensation Committee to all Participants in the Plan. "Award" - shall mean a cash distribution to be made to a Participant for a Fiscal Year as determined in accordance with the provisions of the Plan. "Board of Directors" - shall mean the Board of Directors of the Company. "Company" - shall mean Vertex Communications Corporation. "Compensation Committee" - shall mean the Compensation Committee of the Board of Directors. "Employee" - shall mean a person who is in the regular full-time employment of the Company as determined by the personnel policies and practices of the Company. "Fiscal Year" - shall mean the taxable year of the Company ending September 30. "Net Income After Tax" - shall mean for each Fiscal Year the net income of the Company after federal and state taxes determined in accordance with generally accepted accounting principles consistently applied and as approved by the independent public accountants who have examined the financial accounts and records of the Company for such Fiscal Year; provided, however, that any such determination of the Net Income After Tax shall be adjusted to include the effect of the amount of any Award paid or to be paid to a Participant pursuant to the Plan. 2 "Participant" - shall mean any Employee who is eligible to receive an Award during a Fiscal Year, as designated and approved for such Fiscal Year by the Compensation Committee. "Plan" - shall mean the Management Incentive Compensation Plan of the Company. "Projected Net Income After Tax" - shall mean for each Fiscal Year the level of Net Income After Tax projected and approved by the Board of Directors to be achieved by the Company for such Fiscal Year pursuant to the Annual Operating Plan for such Fiscal Year. "Target Bonus Fund" - shall mean the target fund established from time to time by the Board of Directors to fund the payment of the Awards for a designated Fiscal Year hereunder. 3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the Compensation Committee appointed by the Board of Directors. The Compensation Committee shall consist of not less than two (2) members of the Board of Directors. The Board of Directors may from time to time appoint members of the Compensation Committee in substitution for or in addition to members previously appointed and may fill vacancies, however caused, in the Compensation Committee. The Compensation Committee shall select one of its members as its Chairman and shall hold its meetings at such times and places as it shall deem advisable. A majority of the members of the Compensation Committee shall constitute a quorum. All action of the Compensation Committee shall be taken by a majority of its members. Any action may be taken by written instrument signed by a majority of the members, and any action so taken shall be deemed fully as effective as if it had been taken by a vote of the majority of the members at the meeting duly called and held. The Compensation Committee may appoint a Secretary, shall keep minutes of its meetings, and shall make such rules and regulations for the conduct of its business as it shall deem advisable. The Compensation Committee shall have the sole authority and power, subject to the express provisions and limitations of the Plan, to construe the Plan and to adopt, prescribe, amend, and rescind rules and regulations relating to the Plan, and to make all determinations necessary or advisable for administering the Plan. No member of the Board of Directors or the Compensation Committee shall be liable for any action or determination made in good faith with respect to the Plan. All determinations, decisions, and directions made or given by the Board of Directors or the Compensation Committee under the Plan shall be final and conclusive. The decision of the Board of Directors or the Compensation Committee on any question concerning or involving the interpretation or administration of the Plan shall be final and conclusive, and no provision of the Plan shall be deemed to give any Employee, his/her legal representative or assigns, any right to participate in the Plan, except to such extent, if any, as the Compensation Committee may have determined or approved pursuant to the provisions of the Plan. 4. PARTICIPATION IN THE PLAN. During the existence of the Plan, the Compensation Committee shall designate for each Fiscal Year the Employees eligible to participate in the Plan for such Fiscal Year. The Compensation Committee shall give consideration to the recommendations and suggestions submitted to it by officers, managers, and department heads of the Company, with respect to Employees who are mainly responsible in an executive, administrative, professional, technical, or advisory capacity for the management of the operations of the Company. 3 5. DETERMINATION OF INCENTIVE COMPENSATION. Prior to the commencement of each Fiscal Year, the Board of Directors shall determine the Target Bonus Fund that will be available for payment of Awards for such Fiscal Year, subject to the achievement and satisfaction of certain Annual Performance Objectives by the Company for such Fiscal Year. Within thirty (30) days thereafter, the Compensation Committee in its discretion shall determine the amount of the targeted Award for each of the Participants in the Plan for such Fiscal Year by determining the share of the Target Bonus Fund that each Participant will be eligible to receive for such Fiscal Year, subject to the terms of the Plan, including without limitation, compliance and satisfaction by the Company with the Annual Performance Objectives established by the Compensation Committee for such Fiscal Year and set forth in a comprehensive memorandum from the Compensation Committee to the Participants of the Plan for such Fiscal Year. The payment schedule will be delineated annually by the Compensation Committee in a memo from the Chairman of the Compensation Committee as soon as practical after the determination thereof. The Compensation Committee shall notify each Participant of his/her selection to participate in the Plan and the share of such Participant in and to the Target Bonus Fund for such Fiscal Year, including the Annual Performance Objectives applicable for such Fiscal Year. 6. AWARD OF INCENTIVE COMPENSATION. Within forty-five (45) days after completion of the Company's Fiscal Year, the Compensation Committee shall determine the amount of the Award to be paid to each Participant for such Fiscal Year. The amount of the Award of each Participant for each Fiscal Year shall be determined by measuring (i) the actual Net Income After Tax achieved for such Fiscal Year compared to the Projected Net Income After Tax reflected in the Annual Operating Plan for such Fiscal Year and (ii) the degree of accomplishment by the Company of the Annual Performance Objectives for such Fiscal Year set forth in the comprehensive memorandum to Plan Participants referred to in Section 5 hereof as related to the projected objectives contained in the Annual Operating Plan for such Fiscal Year. The amount of each Award thus determined shall be distributed by the Company to the Participants as soon as practical after the determination thereof. Unless the Participant has filed with the Company written instructions to the contrary, any Award payable with respect to a deceased Participant shall be paid to such Participant's surviving spouse, if any; otherwise, such Award shall be paid to such Participant's estate. 7. FORFEITURE OF INCENTIVE COMPENSATION. A Participant shall be entitled to and shall receive the full amount of his/her Award for a Fiscal Year, provided such Participant remains in the full-time employ of the Company for such Fiscal Year. A Participant whose employment is terminated for any reason shall forfeit participation in the Plan and shall not be entitled to any Award for such Fiscal Year. Notwithstanding the preceding, in the event of the death or permanent disability of a Participant during any Fiscal Year, the Compensation Committee shall have the power and authority to determine whether an Award should be paid to such Participant during any Fiscal Year. The determination of the Compensation Committee in the exercise of such power and authority in its sole discretion shall be final and binding upon each Participant and anyone claiming by or through such Participant. 8. AMENDMENT OR TERMINATION. The Board of Directors may, from time to time, amend, modify, change, suspend, or terminate, in whole or in part, any or all of the provisions of the Plan, except that: (a) No amendment, modification, change, suspension, or termination may affect any right of any Participant to receive Awards made to such Participant prior to the effective date of such amendment, modification, change, suspension, or termination; and, (b) No amendment, modification, or change may withdraw the obligation and right of interpretation and administration of the Plan from the Compensation Committee. 4 9. NO RIGHT TO EMPLOYMENT. Nothing in the Plan shall be deemed to give any Employee or his/her legal representative or assigns, or any other person or entity claiming under or though the Employee, any contract or other right to participate in the benefits of the Plan other than as expressly set forth herein. Nothing in the Plan shall be construed as constituting a commitment, guarantee, agreement, or understanding of any kind or nature that the Company will continue to employ any individual (whether or not an Employee or a Participant); nor shall the Plan affect in any way the right of the Company to terminate the employment of any individual (whether or not an Employee or a Participant) at any time. 10. INDEMNIFICATION OF COMPENSATION COMMITTEE. In addition to such other rights of indemnification as they may have as members of the Board of Directors or as members of the Compensation Committee, the members of the Compensation Committee shall be indemnified by the Company against the reasonable expenses, including attorneys' fees, actually and necessarily incurred in connection with the defense of any action, suit, or proceedings, or in connection with any appeal thereof, to which they or any of them may be party by reason of any action taken or failure to act under or in connection with the Plan, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any such action, suit, or proceedings, except in relation to matters as to which it shall be adjudged in such action, suit, or proceedings that such Compensation Committee member is liable for negligence or misconduct in the performance of his/her duties, provided that within thirty (30) days after institution of any such action, suit, or proceedings a Compensation Committee member shall in writing offer the Company the opportunity, at its own expense, to pursue and defend the same. 11. EFFECTIVE DATE AND TERM. This Plan (as hereby amended and restated) supersedes all prior management incentive compensation plans applicable to the Company, and shall be effective commencing as of October 1, 1995, and shall remain in effect until terminated by the Board of Directors. Executed this 26th day of September, 1995. VERTEX COMMUNICATIONS CORPORATION By: /s/ J. Rex Vardeman J. REX VARDEMAN, President ATTEST: By: /s/ Bill R. Womble BILL R. WOMBLE, Secretary EX-10.13 3 MANAGEMENT INCENTIVE COMPENSATION PLAN 1 Exhibit 10.13 MANAGEMENT INCENTIVE COMPENSATION PLAN FOR DIVISIONS OF VERTEX COMMUNICATIONS CORPORATION (AS AMENDED AND RESTATED EFFECTIVE OCTOBER 1, 1995) 1. PURPOSE OF PLAN. This Management Incentive Compensation Plan is intended to attract and retain key employees of outstanding competence and to promote the growth and development of the Divisions by providing incentive compensation as a reward to those officers, managers, and other key employees who contribute by their ability, industry, and ingenuity to the management, development, and successful operations of the Divisions. 2. DEFINITIONS. For purposes of the Plan, the following terms shall have the ascribed meanings unless otherwise clearly apparent from the context: "Annual Operating Plan" (AOP) - shall mean the projected plan of operations of a Division, as approved for such Division by the Board of Directors for a designated Fiscal Year. "Annual Performance Objectives" - shall mean the financial objectives of the respective Division which the Compensation Committee shall promulgate and define as applicable for each Division for each Fiscal Year relative to various degrees of achievement of Awards under the Plan at various levels of Pretax Income achieved by the respective Divisions for such Fiscal Year and such other measurements of financial accomplishment by the Divisions, respectively, as it shall in its sole discretion authorize and approve as conditions precedent to full realization by Participants of Awards under the Plan, which Annual Performance Objectives shall be communicated annually in a comprehensive memorandum from the Compensation Committee to all Participants in the Plan. "Award" - shall mean a cash distribution to be made to a Participant for a Fiscal Year as determined in accordance with the provisions of the Plan. "Board of Directors" - shall mean the Board of Directors of the Company. "Company - shall mean Vertex Communications Corporation. "Compensation Committee" - shall mean the Compensation Committee of the Board of Directors. "Division" - shall mean a Division of the Company including Vertex Antenna Division, Vertex Controls Systems Division, Vertex Integrated Satellite Antenna Technology Division, and any other Division of the Company to which this Plan shall become hereafter applicable by action of the Board of Directors. "Employee" - shall mean a person who is in the regular full-time employment of a Division as determined by the personnel policies and practices of such Division. "Fiscal Year" - shall mean the taxable year of the Division ending September 30. 2 "Participant" - shall mean any Employee who is eligible to receive an Award during a Fiscal Year, as designated and approved for such Fiscal Year by the Compensation Committee. "Plan" - shall mean the Management Incentive Compensation Plan for the Divisions of Vertex Communications Corporation. "Pretax Income" - shall mean for each Fiscal Year the net income of each Division before federal and state taxes determined in accordance with generally accepted accounting principles consistently applied and as approved by the independent public accountants who have examined the financial accounts and records of each Division for such Fiscal Year; provided, however, that such Pretax Income determination shall be adjusted to include the effect of the amount of any Award paid or to be paid to a Participant pursuant to the Plan. "Projected Pretax Income" - shall mean for each Fiscal Year the level of Pretax Income projected and approved by the Board of Directors to be achieved by the Divisions, respectively, for such Fiscal Year pursuant to the Annual Operating Plan as related to such Divisions, respectively, for such Fiscal Year. "Target Bonus Fund" - shall mean the target fund established from time to time by the Board of Directors for each Division, respectively, to fund the payment of the Awards to Employees of such Division for a designated Fiscal Year hereunder. 3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the Compensation Committee appointed by the Board of Directors. The Compensation Committee shall consist of not less than two (2) members of the Board of Directors. The Board of Directors may from time to time appoint members of the Compensation Committee in substitution for or in addition to members previously appointed and may fill vacancies, however caused, in the Compensation Committee. The Compensation Committee shall select one of its members as its Chairman and shall hold its meetings at such times and places as it shall deem advisable. A majority of the members of the Compensation Committee shall constitute a quorum. All action of the Compensation Committee shall be taken by a majority of its members. Any action may be taken by written instrument signed by a majority of the members, and any action so taken shall be deemed fully as effective as if it had been taken by a vote of the majority of the members at the meeting duly called and held. The Compensation Committee may appoint a Secretary, shall keep minutes of its meetings, and shall make such rules and regulations for the conduct of its business as it shall deem advisable. The Compensation Committee shall have the sole authority and power, subject to the express provisions and limitations of the Plan, to construe the Plan and to adopt, prescribe, amend, and rescind rules and regulations relating to the Plan, and to make all determinations necessary or advisable for administering the Plan. No member of the Board of Directors or the Compensation Committee shall be liable for any action or determination made in good faith with respect to the Plan. All determinations, decisions, and directions made or given by the Board of Directors or the Compensation Committee under the Plan shall be final and conclusive. The decision of the Board of Directors or the Compensation Committee on any question concerning or involving the interpretation or administration of the Plan shall be final and conclusive, and no provision of the Plan shall be deemed to give any Employee, his/her legal representative or assigns, any right to participate in the Plan, except to 3 such extent, if any, as the Compensation Committee may have determined or approved pursuant to the provisions of the Plan. 4. PARTICIPATION IN THE PLAN. During the existence of the Plan, the Compensation Committee shall designate for each Fiscal Year the Employees of each Division who shall be eligible to participate in the Plan for such Fiscal Year. The Compensation Committee shall give consideration to the recommendations and suggestions submitted to it by officers, managers, and department heads of the respective Divisions, with respect to Employees of each such Division who are mainly responsible in an executive, administrative, professional, technical, or advisory capacity for the management of the operations of the Divisions. 5. DETERMINATION OF INCENTIVE COMPENSATION. Prior to the commencement of each Fiscal Year, the Board of Directors shall determine the Target Bonus Fund for each Division that will be available for payment of Awards to employees of each such Division for such Fiscal Year. Within thirty (30) days thereafter, the Compensation Committee in its discretion shall determine the amount of the targeted Award for each of the Participants in the Plan for such Fiscal Year by determining the share of the Target Bonus Fund applicable to each Participant that each such Participant will be eligible to receive for such Fiscal Year, subject to the terms of the Plan, including, without limitation, compliance and satisfaction by the respective Divisions with the Annual Performance Objectives established by the Compensation Committee for each such Division for such Fiscal Year and set forth in a comprehensive memorandum from the Compensation Committee to the Participants of the Plan for such Fiscal Year. The payment schedule will be delineated annually by the Compensation Committee in a memo from the Chairman of the Compensation Committee to the Vice President/General Manager of each Division as soon as practical after the determination thereof. The Compensation Committee, through the Vice President/General Manager of each Division, shall notify each Participant of his/her selection to participate in the Plan and the share of each such Participant in and to the Target Bonus Fund applicable to the Division which employs or employed such Participant for such Fiscal Year, including the Annual Performance Objectives applicable for such Fiscal Year. 6. AWARD OF INCENTIVE COMPENSATION. Within forty-five (45) days after completion of the Company's Fiscal Year, the Compensation Committee shall determine the amount of the Award to be paid to each Participant for such Fiscal Year. The amount of the Award of each Participant employed by a particular Division for each Fiscal Year shall be determined by measuring (i) the actual Pretax Income achieved by such Division for such Fiscal Year compared to the Projected Pretax Income of such Division reflected in the Annual Operating Plan for such Fiscal Year and (ii) the degree of accomplishment by each respective Division of the Annual Performance Objectives for each such Division for such Fiscal Year set forth in a comprehensive memorandum to Plan Participants referred to in Section 5 hereof as related to the projected objectives for each Division as contained in the Annual Operating Plan for each such Division for such Fiscal Year. The amounts of each Award thus determined shall be distributed by the Division to the Participants as soon as practical after the determination thereof. Unless the Participant has filed with the Division written instructions to the contrary, any Award payable with respect to a deceased Participant shall be paid to such Participant's surviving spouse, if any; otherwise, such Award shall be paid to such Participant's estate. 7. FORFEITURE OF INCENTIVE COMPENSATION. A Participant shall be entitled to and shall receive the full amount of his/her Award for a Fiscal Year, provided such Participant remains in the full-time employ of the Division for such Fiscal Year. A Participant whose employment is terminated for any reason shall forfeit participation in the Plan and shall not be entitled to any Award for such Fiscal Year. Notwithstanding the preceding, in the event of the death or permanent disability of a Participant during any Fiscal Year, the Compensation Committee shall have the power and authority to determine whether an 4 Award should be paid to such Participant for such Fiscal Year. The determination of the Compensation Committee in the exercise of such power and authority in its sole discretion shall be final and binding upon each Participant and anyone claiming by or through such Participant. 8. AMENDMENT OR TERMINATION. The Board of Directors may, from time to time, amend, modify, change, suspend, or terminate, in whole or in part, any or all of the provisions of the Plan, except that: (a) No amendment, modification, change, suspension, or termination may affect any right of any Participant to receive Awards made to such Participant prior to the effective date of such amendment, modification, change, suspension, or termination; and, (b) No amendment, modification, or change may withdraw the obligation and right of interpretation and administration of the Plan from the Compensation Committee. 9. NO RIGHT TO EMPLOYMENT. Nothing in the Plan shall be deemed to give any Employee or his/her legal representative or assigns, or any other person or entity claiming under or though the Employee, any contract or other right to participate in the benefits of the Plan other than as expressly set forth herein. Nothing in the Plan shall be construed as constituting a commitment, guarantee, agreement, or understanding of any kind or nature that the Division will continue to employ any individual (whether or not an Employee or a Participant); nor shall the Plan affect in any way the right of the Division to terminate the employment of any individual (whether or not an Employee or a Participant) at any time. 10. INDEMNIFICATION OF COMPENSATION COMMITTEE. In addition to such other rights of indemnification as they may have as members of the Board of Directors or as members of the Compensation Committee, the members of the Compensation Committee shall be indemnified by the Company against the reasonable expenses, including attorneys' fees, actually and necessarily incurred in connection with the defense of any action, suit, or proceedings, or in connection with any appeal thereof, to which they or any of them may be party by reason of any action taken or failure to act under or in connection with the Plan, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any such action, suit, or proceedings, except in relation to matters as to which it shall be adjudged in such action, suit, or proceedings that such Compensation Committee member is liable for negligence or misconduct in the performance of his/her duties, provided that within thirty (30) days after institution of any such action, suit, or proceedings a Compensation Committee member shall in writing offer the Company the opportunity, at its own expense, to pursue and defend the same. 11. EFFECTIVE DATE AND TERM. This Plan (as hereby amended and restated) supersedes all prior management incentive compensation plans applicable to Divisions of the Company, and shall be effective commencing as of October 1, 1995, and shall remain in effect until terminated by the Board of Directors. Executed this 26th day of September, 1995. VERTEX COMMUNICATIONS CORPORATION By: /s/ J. Rex Vardeman J. REX VARDEMAN, President ATTEST: By: /s/ Bill R. Womble BILL R. WOMBLE, Secretary EX-10.14 4 MANAGEMENT INCENTIVE COMPENSATION PLAN 1 Exhibit 10.14 MANAGEMENT INCENTIVE COMPENSATION PLAN OF GAMMA-F CORP (AS AMENDED AND RESTATED EFFECTIVE OCTOBER 1, 1995) 1. PURPOSE OF PLAN. This Management Incentive Compensation Plan is intended to attract and retain key employees of outstanding competence and to promote the growth and development of the Company by providing incentive compensation as a reward to those officers, managers, and other key employees who contribute by their ability, industry, and ingenuity to the management, development, and successful operations of the Company. 2. DEFINITIONS. For purposes of the Plan, the following terms shall have the ascribed meanings unless otherwise clearly apparent from the context: "Annual Operating Plan" (AOP) - shall mean the projected plan of operations of the Company as approved by the Board of Directors for a designated Fiscal Year. "Annual Performance Objectives" - shall mean the financial objectives of the Company which the Compensation Committee shall promulgate and define as applicable for each Fiscal Year relative to various degrees of achievement of Awards under the Plan at various levels of Pretax Income achieved by the Company for such Fiscal Year and such other measurements of financial accomplishment by the Company as it shall in its sole discretion authorize and approve as conditions precedent to full realization by Participants of Awards under the Plan, which Annual Performance Objectives shall be communicated annually in a comprehensive memorandum from the Compensation Committee to all Participants in the Plan. "Award" - shall mean a cash distribution to be made to a Participant for a Fiscal Year as determined in accordance with the provisions of the Plan. "Board of Directors" - shall mean the Board of Directors of Vertex Communications Corporation, the corporate parent of the Company, unless otherwise clearly indicated. "Compensation Committee" - shall mean the Compensation Committee of the Board of Directors. "Company" - shall mean Gamma-f Corp., a Subsidiary of Vertex Communications Corporation (Vertex). "Employee" - shall mean a person who is in the regular full-time employment of the Company as determined by the personnel policies and practices of the Company. "Fiscal Year" - shall mean the taxable year of the Company ending September 30. "Participant" - shall mean any Employee who is eligible to receive an Award during a Fiscal Year, as designated and approved for such Fiscal Year by the Compensation Committee. "Plan" - shall mean the Management Incentive Compensation Plan of the Company. 2 "Pretax Income" - shall mean for each Fiscal Year the net income of the Company before federal and state taxes determined in accordance with generally accepted accounting principles consistently applied and as approved by the independent public accountants who have examined the financial accounts and records of the Company for such Fiscal Year; provided, however, that such Pretax Income determination shall be adjusted to include the effect of the amount of any Award paid or to be paid to a Participant pursuant to the Plan. "Projected Pretax Income" - shall mean for each Fiscal Year the level of Pretax Income projected and approved by the Board of Directors to be achieved by the Company for such Fiscal Year pursuant to the Annual Operating Plan for such Fiscal Year. "Target Bonus Fund" - shall mean the target fund established from time to time by the Board of Directors to fund the payment of the Awards for a designated Fiscal Year hereunder. 3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the Compensation Committee appointed by the Board of Directors. The Compensation Committee shall consist of not less than two (2) members of the Board of Directors. The Board of Directors may from time to time appoint members of the Compensation Committee in substitution for or in addition to members previously appointed and may fill vacancies, however caused, in the Compensation Committee. The Compensation Committee shall select one of its members as its Chairman and shall hold its meetings at such times and places as it shall deem advisable. A majority of the members of the Compensation Committee shall constitute a quorum. All action of the Compensation Committee shall be taken by a majority of its members. Any action may be taken by written instrument signed by a majority of the members, and any action so taken shall be deemed fully as effective as if it had been taken by a vote of the majority of the members at the meeting duly called and held. The Compensation Committee may appoint a Secretary, shall keep minutes of its meetings, and shall make such rules and regulations for the conduct of its business as it shall deem advisable. The Compensation Committee shall have the sole authority and power, subject to the express provisions and limitations of the Plan, to construe the Plan and to adopt, prescribe, amend, and rescind rules and regulations relating to the Plan, and to make all determinations necessary or advisable for administering the Plan. No member of the Board of Directors or the Compensation Committee shall be liable for any action or determination made in good faith with respect to the Plan. All determinations, decisions, and directions made or given by the Board of Directors or the Compensation Committee under the Plan shall be final and conclusive. The decision of the Board of Directors or the Compensation Committee on any question concerning or involving the interpretation or administration of the Plan shall be final and conclusive, and no provisions of the Plan shall be deemed to give any Employee, his/her legal representative or assigns, any right to participate in the Plan, except to such extent, if any, as the Compensation Committee may have determined or approved pursuant to the provisions of the Plan. 4. PARTICIPATION IN THE PLAN. During the existence of the Plan, the Compensation Committee shall designate for each Fiscal Year the Employees eligible to participate in the Plan for such Fiscal Year. The Compensation Committee shall give consideration to the recommendations and suggestions submitted to it by officers, managers, and department heads of the Company, with respect to Employees who are mainly responsible in an executive, administrative, professional, technical, or advisory capacity for the management of the operations of the Company. 3 5. DETERMINATION OF INCENTIVE COMPENSATION. Prior to the commencement of each Fiscal Year, the Board of Directors shall determine the Target Bonus Fund that will be available for payment of Awards for such Fiscal Year, subject to the achievement and satisfaction of certain Annual Performance Objectives by the Company for such Fiscal Year. Within thirty (30) days thereafter, the Compensation Committee in its discretion shall determine the amount of the targeted Award for each of the Participants in the Plan for such Fiscal Year by determining the share of the Target Bonus Fund that each Participant will be eligible to receive for such Fiscal Year, subject to the terms of the Plan, including, without limitation, compliance and satisfaction by the Company with the Annual Performance Objectives established by the Compensation Committee for such Fiscal Year and set forth in a comprehensive memorandum from the Compensation Committee to the Participants of the Plan for such Fiscal Year. The payment schedule will be delineated annually by the Compensation Committee in a memo from the Chairman of the Compensation Committee to the President of the Company as soon as practical after the determination thereof. The Compensation Committee, through the President of the Company, shall notify each Participant of his/her selection to participate in the Plan and the share of such Participant in and to the Target Bonus Fund for such Fiscal Year, including the Annual Performance Objectives applicable for such Fiscal Year. 6. AWARD OF INCENTIVE COMPENSATION. Within forty-five (45) days after completion of the Company's Fiscal Year, the Compensation Committee shall determine the amount of the Award to be paid to each Participant for such Fiscal Year. The amount of the Award of each Participant for each Fiscal Year shall be determined by measuring (i) the actual Pretax Income achieved for such Fiscal Year compared to the Projected Pretax Income reflected in the Annual Operating Plan for such Fiscal Year and (ii) the degree of accomplishment by the Company of the Annual Performance Objectives for such Fiscal Year set forth in the comprehensive memorandum to the Plan Participants referred to in Section 5 hereof as related to the projected objectives contained in the Annual Operating Plan for such Fiscal Year. The amount of each Award thus determined shall be distributed by the Company to the Participants as soon as practical after the determination thereof. Unless the Participant has filed with the Company written instructions to the contrary, any Award payable with respect to a deceased Participant shall be paid to such Participant's surviving spouse, if any; otherwise, such Award shall be paid to such Participant's estate. 7. FORFEITURE OF INCENTIVE COMPENSATION. A Participant shall be entitled to and shall receive the full amount of his/her Award for a Fiscal Year, provided such Participant remains in the full-time employ of the Company for such Fiscal Year. A Participant whose employment is terminated for any reason shall forfeit his/her participation in the Plan and shall not be entitled to any Award for such Fiscal Year. Notwithstanding the preceding, in the event of the death or permanent disability of a Participant during any Fiscal Year, the Compensation Committee shall have the power and authority to determine whether an Award should be paid to such Participant for such Fiscal Year. The determination of the Compensation Committee in the exercise of such power and authority in its sole discretion shall be final and binding upon each Participant and anyone claiming by or through such Participant. 8. AMENDMENT OR TERMINATION. The Board of Directors of the Company may, from time to time, amend, modify, change, suspend, or terminate, in whole or in part, any or all of the provisions of the Plan, except that: (a) No amendment, modification, change, suspension, or termination may affect any right of any Participant to receive Awards made to such Participant prior to the effective date of such amendment, modification, change, suspension, or termination; and, (b) No amendment, modification, or change may withdraw the obligation and right of interpretation and administration of the Plan from the Compensation Committee. 4 9. NO RIGHT TO EMPLOYMENT. Nothing in the Plan shall be deemed to give any Employee or his/her legal representative or assigns, or any other person or entity claiming under or though the Employee, any contract or other right to participate in the benefits of the Plan other than as expressly set forth herein. Nothing in the Plan shall be construed as constituting a commitment, guarantee, agreement, or understanding of any kind or nature that the Company will continue to employ any individual (whether or not an Employee or a Participant); nor shall the Plan affect in any way the right of the Company to terminate the employment of any individual (whether or not an Employee or a Participant) at any time. 10. INDEMNIFICATION OF COMPENSATION COMMITTEE. In addition to such other rights of indemnification as they may have as members of the Board of Directors or as members of the Compensation Committee, the members of the Compensation Committee shall be indemnified by the Company and Vertex against the reasonable expenses, including attorneys' fees, actually and necessarily incurred in connection with the defense of any action, suit, or proceedings, or in connection with any appeal thereof, to which they or any of them may be party by reason of any action taken or failure to act under or in connection with the Plan, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company and Vertex) or paid by them in satisfaction of a judgment in any such action, suit, or proceedings, except in relation to matters as to which it shall be adjudged in such action, suit, or proceedings that such Compensation Committee member is liable for negligence or misconduct in the performance of his/her duties, provided that within thirty (30) days after institution of any such action, suit, or proceedings a Compensation Committee member shall in writing offer Vertex the opportunity, at its own expense, to pursue and defend the same. 11. EFFECTIVE DATE AND TERM. This Plan (as hereby amended and restated) supersedes all prior management incentive compensation plans applicable to the Company, and shall be effective commencing as of October 1, 1995, and shall remain in effect until terminated by the Board of Directors of the Company. Executed this 26th day of September, 1995. GAMMA-f CORP By: /s/ J. Rex Vardeman J. REX VARDEMAN, Chairman of the Board ATTEST: By: /s/ Joe A. Ylitalo JOE A. YLITALO, Secretary EX-10.15 5 MANAGEMENT INCENTIVE COMPENSATION PLAN 1 Exhibit 10.15 MANAGEMENT INCENTIVE COMPENSATION PLAN OF MAXTECH, INC. 1. PURPOSE OF PLAN. This Management Incentive Compensation Plan is intended to attract and retain key employees of outstanding competence and to promote the growth and development of the Company by providing incentive compensation as a reward to those officers, managers, and other key employees who contribute by their ability, industry, and ingenuity to the management, development, and successful operations of the Company. 2. DEFINITIONS. For purposes of the Plan, the following terms shall have the ascribed meanings unless otherwise clearly apparent from the context: "Annual Operating Plan" (AOP) - shall mean the projected plan of operations of the Company as approved by the Board of Directors for a designated Fiscal Year. "Annual Performance Objectives" - shall mean the financial objectives of the Company which the Compensation Committee shall promulgate and define as applicable for each Fiscal Year relative to various degrees of achievement of Awards under the Plan at various levels of Pretax Income achieved by the Company for such Fiscal Year and such other measurements of financial accomplishment by the Company as it shall in its sole discretion authorize and approve as conditions precedent to full realization by Participants of Awards under the Plan, which Annual Performance Objectives shall be communicated annually in a comprehensive memorandum from the Compensation Committee to all Participants in the Plan. "Award" - shall mean a cash distribution to be made to a Participant for a Fiscal Year as determined in accordance with the provisions of the Plan. "Board of Directors" - shall mean the Board of Directors of Vertex Communications Corporation, the corporate parent of the Company, unless otherwise clearly indicated. "Compensation Committee" - shall mean the Compensation Committee of the Board of Directors. "Company" - shall mean MAXTECH, Inc., a Subsidiary of Vertex Communications Corporation (Vertex). "Employee" - shall mean a person who is in the regular full-time employment of the Company as determined by the personnel policies and practices of the Company. "Fiscal Year" - shall mean the taxable year of the Company ending September 30. "Participant" - shall mean any Employee who is eligible to receive an Award during a Fiscal Year, as designated and approved for such Fiscal Year by the Compensation Committee. "Plan" - shall mean the Management Incentive Compensation Plan of the Company. 2 "Pretax Income" - shall mean for each Fiscal Year the net income of the Company before federal and state taxes determined in accordance with generally accepted accounting principles consistently applied and as approved by the independent public accountants who have examined the financial accounts and records of the Company for such Fiscal Year; provided, however, that such Pretax Income determination shall be adjusted to include the effect of the amount of any Award paid or to be paid to a Participant pursuant to the Plan. "Projected Pretax Income" - shall mean for each Fiscal Year the level of Pretax Income projected and approved by the Board of Directors to be achieved by the Company for such Fiscal Year pursuant to the Annual Operating Plan for such Fiscal Year. "Target Bonus Fund" - shall mean the target fund established from time to time by the Board of Directors to fund the payment of the Awards for a designated Fiscal Year hereunder. 3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the Compensation Committee appointed by the Board of Directors. The Compensation Committee shall consist of not less than two (2) members of the Board of Directors. The Board of Directors may from time to time appoint members of the Compensation Committee in substitution for or in addition to members previously appointed and may fill vacancies, however caused, in the Compensation Committee. The Compensation Committee shall select one of its members as its Chairman and shall hold its meetings at such times and places as it shall deem advisable. A majority of the members of the Compensation Committee shall constitute a quorum. All action of the Compensation Committee shall be taken by a majority of its members. Any action may be taken by written instrument signed by a majority of the members, and any action so taken shall be deemed fully as effective as if it had been taken by a vote of the majority of the members at the meeting duly called and held. The Compensation Committee may appoint a Secretary, shall keep minutes of its meetings, and shall make such rules and regulations for the conduct of its business as it shall deem advisable. The Compensation Committee shall have the sole authority and power, subject to the express provisions and limitations of the Plan, to construe the Plan and to adopt, prescribe, amend, and rescind rules and regulations relating to the Plan, and to make all determinations necessary or advisable for administering the Plan. No member of the Board of Directors or the Compensation Committee shall be liable for any action or determination made in good faith with respect to the Plan. All determinations, decisions, and directions made or given by the Board of Directors or the Compensation Committee under the Plan shall be final and conclusive. The decision of the Board of Directors or the Compensation Committee on any question concerning or involving the interpretation or administration of the Plan shall be final and conclusive, and no provisions of the Plan shall be deemed to give any Employee, his/her legal representative or assigns, any right to participate in the Plan except to such extent, if any, as the Compensation Committee may have determined or approved pursuant to the provisions of the Plan. 4. PARTICIPATION IN THE PLAN. During the existence of the Plan, the Compensation Committee shall designate for each Fiscal Year the Employees eligible to participate in the Plan for such Fiscal Year. The Compensation Committee shall give consideration to the recommendations and suggestions submitted to it by officers, managers, and department heads of the Company, with respect to Employees who are mainly responsible in an executive, administrative, professional, technical, or advisory capacity for the management of the operations of the Company. 3 5. DETERMINATION OF INCENTIVE COMPENSATION. Prior to the commencement of each Fiscal Year, the Board of Directors shall determine the Target Bonus Fund that will be available for payment of Awards for such Fiscal Year, subject to the achievement and satisfaction of certain Annual Performance Objectives by the Company for such Fiscal Year. Within thirty (30) days thereafter, the Compensation Committee in its discretion shall determine the amount of the targeted Award for each of the Participants in the Plan for such Fiscal Year by determining the share of the Target Bonus Fund that each Participant will be eligible to receive for such Fiscal Year, subject to the terms of the Plan, including, without limitation, compliance and satisfaction by the Company with the Annual Performance Objectives established by the Compensation Committee for such Fiscal Year and set forth in a comprehensive memorandum from the Compensation Committee to the Participants of the Plan for such Fiscal Year. The payment schedule will be delineated annually by the Compensation Committee in a memo from the Chairman of the Compensation Committee to the President of the Company as soon as practical after the determination thereof. The Compensation Committee, through the President of the Company, shall notify each Participant of his/her selection to participate in the Plan and the share of such Participant in and to the Target Bonus Fund for such Fiscal Year, including the Annual Performance Objectives applicable for such Fiscal Year. 6. AWARD OF INCENTIVE COMPENSATION. Within forty-five (45) days after completion of the Company's Fiscal Year, the Compensation Committee shall determine the amount of the Award to be paid to each Participant for such Fiscal Year. The amount of the Award of each Participant for each Fiscal Year shall be determined by measuring (i) the actual Pretax Income achieved for such Fiscal Year compared to the Projected Pretax Income reflected in the Annual Operating Plan for such Fiscal Year and (ii) the degree of accomplishment by the Company of the Annual Performance Objectives for such Fiscal Year set forth in the comprehensive memorandum to the Plan Participants referred to in Section 5 hereof as related to the projected objectives contained in the Annual Operating Plan for such Fiscal Year. The amount of each Award thus determined shall be distributed by the Company to the Participants as soon as practical after the determination thereof. Unless the Participant has filed with the Company written instructions to the contrary, any Award payable, with respect to a deceased Participant, shall be paid to such Participant's surviving spouse, if any; otherwise, such Award shall be paid to such Participant's estate. 7. FORFEITURE OF INCENTIVE COMPENSATION. A Participant shall be entitled to and shall receive the full amount of his/her Award for a Fiscal Year, provided such Participant remains in the full-time employ of the Company for such Fiscal Year. A Participant whose employment is terminated for any reason shall forfeit his/her participation in the Plan and shall not be entitled to any Award for such Fiscal Year. Notwithstanding the preceding, in the event of the death or permanent disability of a Participant during any Fiscal Year, the Compensation Committee shall have the power and authority to determine whether an Award should be paid to such Participant for such Fiscal Year. The determination of the Compensation Committee in the exercise of such power and authority in its sole discretion shall be final and binding upon each Participant and anyone claiming by or through such Participant. 8. AMENDMENT OR TERMINATION. The Board of Directors of the Company may, from time to time, amend, modify, change, suspend, or terminate, in whole or in part, any or all of the provisions of the Plan, except that: (a) No amendment, modification, change, suspension, or termination may affect any right of any Participant to receive Awards made to such Participant prior to the effective date of such amendment, modification, change, suspension, or termination; and, (b) No amendment, modification, or change may withdraw the obligation and right of interpretation and administration of the Plan from the Compensation Committee. 4 9. NO RIGHT TO EMPLOYMENT. Nothing in the Plan shall be deemed to give any Employee or his/her legal representative or assigns, or any other person or entity claiming under or though the Employee, any contract or other right to participate in the benefits of the Plan other than as expressly set forth herein. Nothing in the Plan shall be construed as constituting a commitment, guarantee, agreement, or understanding of any kind or nature that the Company will continue to employ any individual (whether or not an Employee or a Participant); nor shall the Plan affect in any way the right of the Company to terminate the employment of any individual (whether or not an Employee or a Participant) at any time. 10. INDEMNIFICATION OF COMPENSATION COMMITTEE. In addition to such other rights of indemnification as they may have as members of the Board of Directors or as members of the Compensation Committee, the members of the Compensation Committee shall be indemnified by the Company and Vertex against the reasonable expenses, including attorneys' fees, actually and necessarily incurred in connection with the defense of any action, suit, or proceedings, or in connection with any appeal thereof, to which they or any of them may be party by reason of any action taken or failure to act under or in connection with the Plan, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company and Vertex) or paid by them in satisfaction of a judgment in any such action, suit, or proceedings, except in relation to matters as to which it shall be adjudged in such action, suit, or proceedings that such Compensation Committee member is liable for negligence or misconduct in the performance of his/her duties, provided that within thirty (30) days after institution of any such action, suit, or proceedings a Compensation Committee member shall in writing offer Vertex the opportunity, at its own expense, to pursue and defend the same. 11. EFFECTIVE DATE AND TERM. This Plan shall be effective commencing as of October 1, 1995, and shall remain in effect until terminated by the Board of Directors of the Company. Executed this 26th day of September, 1995. MAXTECH, INC. By: /s/ J. Rex Vardeman J. REX VARDEMAN, Chairman of the Board ATTEST: By: /s/ James D. Carter JAMES D. CARTER, Secretary EX-10.16 6 EMPLOYEE PROFIT SHARING BONUS PLAN 1 Exhibit 10.16 EMPLOYEE PROFIT SHARING BONUS PLAN OF VERTEX COMMUNICATIONS CORPORATION (AS AMENDED AND RESTATED EFFECTIVE OCTOBER 1, 1995) 1. PURPOSE OF PLAN. The Employee Profit Sharing Bonus Plan is intended to promote the growth and development of the Company by providing bonus compensation as a reward to those employees who contribute by their ability, industry, and longevity to the growth, development, and profitability of the Company. 2. DEFINITIONS. For purposes of the Plan, the following terms shall have the ascribed meanings unless otherwise clearly apparent from the context: "Annual Operating Plan" (AOP) - shall mean the projected plan of operations of the Company or each of its Divisions, as applicable, as approved by the Board of Directors for a designated Fiscal Year. "Board of Directors" - shall mean the Board of Directors of Vertex Communications Corporation. "Bonus" - shall mean a cash distribution to be made to a Participant for a Fiscal Year as determined in accordance with the provisions of the Plan. "Bonus Fund" - shall mean the targeted amount established each Fiscal Year for the Company and each of its Divisions by the Board of Directors to fund the payment of the Bonuses for such Fiscal Year hereunder. "Bonus Share" - shall mean the share of the Bonus Fund allotted to each Participant in accordance with the provisions of the Plan. "Company" - shall mean Vertex Communications Corporation. "Compensation Committee" - shall mean the Compensation Committee of the Board of Directors. "Division" - shall mean any Division of the Company, including Vertex Antenna Division, Vertex Control Systems Division, and Vertex Integrated Satellite Antenna Technology Division, and any other Division of the Company to which this Plan shall hereafter become applicable by action of the Board of Directors.. "Employee" - shall mean a person who is in the regular full-time employment of the Company or a Division as determined by the personnel policies and practices of the Company or such Division for the entire Fiscal Year applicable to the Plan, except, however, any such person who is an officer or director of the Company or a participant pursuant to the Management Incentive Compensation Plan of the Company or a Division thereof for such Fiscal Year. 2 "Fiscal Year" - shall mean the taxable year of the Company or its Divisions, as applicable, ending September 30. "Participant" - shall mean any employee who is eligible to receive a Bonus during the Fiscal Year. "Plan" - shall mean the Employee Profit Sharing Bonus Plan of the Company and its Divisions as amended and restated effective as of October 1, 1995. "Pretax Income" - shall mean for each Fiscal Year the net incomes of the Company or such Division, as applicable, before federal and state taxes determined in accordance with generally accepted accounting principles consistently applied and as approved by the independent public accountants who have examined the financial accounts and records of the Company and each of its Divisions for such Fiscal Year; provided, however, that such Pretax Income determination shall be adjusted to include the effect of the amount of any Bonus paid or to be paid to a Participant pursuant to the Plan. "Projected Pretax Income" - shall mean for each Fiscal Year the level of Pretax Income projected and approved by the Board of Directors to be achieved by the Company and each of its Divisions, respectively, for such Fiscal Year pursuant to the Annual Operating Plan as related to the Company or its appropriate Divisions, as applicable, for such Fiscal Year. 3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the Compensation Committee appointed by the Board of Directors. The Compensation Committee shall consist of not less than two (2) members of the Board of Directors. The Board of Directors may from time to time appoint members of the Compensation Committee in substitution for or in addition to members previously appointed and may fill vacancies, however caused, in the Compensation Committee. The Compensation Committee shall select one of its members as its Chairman and shall hold its meetings at such times and places as it shall deem advisable. A majority of the members of the Compensation Committee shall constitute a quorum. All action of the Compensation Committee shall be taken by a majority of its members. Any action may be taken by written instrument signed by a majority of the members, and any action so taken shall be deemed fully as effective as if it had been taken by a vote of the majority of the members at the meeting duly called and held. The Compensation Committee may appoint a Secretary, shall keep minutes of its meetings, and shall make such rules and regulations for the conduct of its business as it shall deem advisable. The Compensation Committee shall have the sole authority and power, subject to the express provisions and limitations of the Plan, to construe the Plan and to adopt, prescribe, amend, and rescind rules and regulations relating to the Plan, and to make all determinations necessary or advisable for administering the Plan. No member of the Board of Directors or the Compensation Committee shall be liable for any action or determination made in good faith with respect to the Plan. All determinations, decisions, and directions made or given by the Board of Directors or the Compensation Committee under the Plan shall be final and conclusive. The decision of the Board of Directors or the Compensation Committee on any question concerning or involving the interpretation or administration of the Plan shall be final and conclusive, and no provision of the Plan shall be deemed to give any Employee, his/her legal representative or assigns, any right to participate in the Plan, except to such extent, if any, as the Compensation Committee may have determined or approved pursuant to the provisions of the Plan. 3 4. PARTICIPATION IN THE PLAN. All Employees in the regular employ of the Company or a Division as of the beginning of each Fiscal Year (October 1) are eligible to participate in the Plan. 5. DETERMINATION OF THE BONUS FUND. Prior to the commencement of each Fiscal Year, the Board of Directors shall determine the Projected Pretax Income of the Company and each Division, respectively, for such Fiscal Year and the amount of the Bonus Share of each Participant in and to the Bonus Fund for such Fiscal Year, subject to the terms of the Plan. Within thirty (30) days thereafter, the Compensation Committee shall determine the Bonus Share of the Bonus Fund to be allocated to each Participant for such Fiscal Year pursuant to the following procedures: Step One: The aggregate number of years of employment service of each Participant with the Company or the Division, as applicable, shall be multiplied by the hourly rate of compensation of each such Participant on October 1 of such Fiscal Year. Step Two: The mathematical products thus determined in Step One above for all Participants employed by the Company or Division, as applicable, shall be aggregate in a total sum. Step Three: The quotient (expressed as a percentage) obtained by dividing the amount determined in Step One above as to each Participant by the aggregate amount determined in Step Two above shall constitute the Bonus Share of each respective Participant in and to the Bonus Fund for such Fiscal Year. Step Four: The amount of the Bonus Share of each Participant (expressed in dollars) in and to the Bonus Fund for each Fiscal Year shall be determined by multiplying the bonus Fund for such Fiscal Year applicable to the Company or Division, as appropriate, by the quotient obtained in Step Three above as to such Participant. Adjustments: In the event the Pretax Income actually achieved by the Company or Division, as applicable, for a Fiscal Year is less than the Projected Pretax Income for the Company or such Division, as applicable, pursuant to the Annual Operating Plan for such Fiscal Year, the amounts of the Bonus Fund and the respective Bonum Shares of the Participants for such Fiscal Year shall each be decreased proportionately by the percentage decrease represented by the amount such Pretax Income achieved is less than such Projected Pretax Income for such Fiscal Year. Conversely, in the event the Pretax Income actually achieved by the Company or Division, as applicable, for a Fiscal Year is more than the Projected Pretax Income for the Company or such Division, as applicable, pursuant to the Annual Operating Plan for such Fiscal Year, the amounts of the Bonus Fund and the respective Bonus Shares of the Participants for such Fiscal Year shall each be increased proportionately by the percentage increase represented by the amount such Pretax Income achieved exceeds such Projected Pretax Income for such Fiscal Year. The Compensation Committee shall notify each Participant in the Plan of his/her Bonus Share for such Fiscal Year as soon as practical after the projected amount thereof has been determined in accordance with the provisions of the Plan. 4 6. AWARD OF BONUS COMPENSATION. Within sixty (60) days after completion of the Company's Fiscal Year, the Compensation Committee shall determine the amount of the Bonus to be paid to each Participant for such Fiscal Year by dividing the audited Pretax Income of the Company or Division, as applicable, actually achieved by the Projected Pretax Income of the Company or Division, as applicable, for such Fiscal Year as determined by the Board of Directors pursuant to the Annual Operating Plan for such Fiscal Year for each entity, respectively. The percentage thus determined shall then be multiplied by each Participant's approved Bonus Share to determine individual Bonuses payable to Participants for such Fiscal Year. The amount of bonus compensation thus determined shall be distributed by the Company and each Division, as applicable, to the Participants within sixty (60) days following the close of such Fiscal Year. 7. FORFEITURE OF INCENTIVE COMPENSATION. A Participant shall be entitled to and shall receive the full amount of his/her Bonus for a Fiscal Year, provided such Participant remains in the full-time employ of the Company or the Division, as applicable, for such entire Fiscal Year. A Participant whose employment is terminated for any reason shall forfeit his/her participation in the Plan and shall not be entitled to any Bonus for such Fiscal Year. Notwithstanding the preceding, in the event of the death, retirement, permanent disability, or any extended absence of a Participant, the Compensation Committee shall have the power and authority to determine whether an award should be paid to such Participant for such Fiscal Year. The determination of the Compensation Committee in the exercise of such power and authority in its sole discretion shall be final and binding upon each Participant and anyone claiming by or through such Participant. 8. AMENDMENT OR TERMINATION. The Board of Directors may, from time to time, amend, modify, change, suspend, or terminate, in whole or in part, any or all of the provisions of the Plan, except that: (a) No amendment, modification, change, suspension, or termination may affect any right of any Participant to receive a Bonus made to him/her prior to the effective date of such amendment, modification, change, suspension, or termination; and, (b) No amendment, modification, or change may withdraw the obligation and right of interpretation and administration of the Plan from the Compensation Committee. 9. NO RIGHT TO EMPLOYMENT. Nothing in the Plan shall be deemed to give any Employee or his/her legal representative or assigns, or any other person or entity claiming under or though him/her, any contract or other right to participate in the benefits of the Plan other than as expressly set forth herein. Nothing in the Plan shall be construed as constituting a commitment, guarantee, agreement, or understanding of any kind or nature that the Company or any Division will continue to employ any individual (whether or not an Employee or a Participant); nor shall the Plan affect in any way the right of the Company or its Divisions to terminate the employment of any individual (whether or not an Employee or a Participant) at any time. 10. INDEMNIFICATION OF COMPENSATION COMMITTEE. In addition to such other rights of indemnification as they may have as members of the Board of Directors or as members of the Compensation Committee, the members of the Compensation Committee shall be indemnified by the Company against the reasonable expenses, including attorneys' fees, actually and necessarily incurred in connection with the defense of any action, suit, or proceedings, or in connection with any appeal thereof, to which they or any of them may be party by reason of any action taken or failure to act under or in connection with the Plan, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company) or paid by them in 5 satisfaction of a judgment in any such action, suit, or proceedings, except in relation to matters as to which it shall be adjudged in such action, suit, or proceedings that such Compensation Committee member is liable for negligence or misconduct in the performance of his/her duties, provided that within thirty (30) days after institution of any such action, suit, or proceedings a Compensation Committee member shall in writing offer the Company the opportunity, at its own expense, to pursue and defend the same. 11. EFFECTIVE DATE AND TERM. This Plan (as hereby amended and restated) supersedes all prior employee profit sharing bonus plans of the Company or a respective Division, and shall be effective commencing as of October 1, 1995, and shall remain in effect until terminated by the Board of Directors. Executed this 26th day of September, 1995. VERTEX COMMUNICATIONS CORPORATION By: /s/ J. Rex Vardeman J. REX VARDEMAN, President ATTEST: By: /s/ Bill R. Womble BILL R. WOMBLE, Secretary EX-10.17 7 EMPLOYEE PROFIT SHARING BONUS PLAN 1 Exhibit 10.17 EMPLOYEE PROFIT SHARING BONUS PLAN OF GAMMA-F CORP (AS AMENDED AND RESTATED EFFECTIVE OCTOBER 1, 1995) 1. PURPOSE OF PLAN. The Employee Profit Sharing Bonus Plan is intended to promote the growth and development of the Company by providing bonus compensation as a reward to those employees who contribute by their ability, industry, and longevity to the growth, development, and profitability of the Company. 2. DEFINITIONS. For purposes of the Plan, the following terms shall have the ascribed meanings unless otherwise clearly apparent from the context: "Annual Operating Plan" (AOP) - shall mean the projected plans of operations of the Company as approved by the Board of Directors for a designated Fiscal Year. "Board of Directors" - shall mean the Board of Directors of Vertex Communications Corporation, the corporate parent of the Company, unless otherwise clearly indicated. "Bonus" - shall mean a cash distribution to be made to a Participant for a Fiscal Year as determined in accordance with the provisions of the Plan. "Bonus Fund" - shall mean the targeted amount established each Fiscal Year by the Board of Directors to fund the payment of the Bonuses for such Fiscal Year hereunder. "Bonus Share" - shall mean the share of the Bonus Fund allotted to each Participant in accordance with the provisions of the Plan. "Company" - shall mean Gamma-f Corp, a Subsidiary of Vertex Communications Corporation. "Compensation Committee" - shall mean the Compensation Committee of the Board of Directors. "Employee" - shall mean any person in the regular full-time employment of the Company as determined by the personnel policies and practices of the Company for the entire Fiscal Year applicable to the Plan, except, however, any such person who is an officer or director of the Company or a participant pursuant to the Management Incentive Compensation Plan of the Company for such Fiscal Year. "Fiscal Year" - shall mean the taxable year of the Company ending September 30. "Participant" - shall mean any Employee who is eligible to receive a Bonus during the Fiscal Year. "Plan" - shall mean the Employee Profit Sharing Bonus Plan of the Company, as amended and restated effective as of October 1, 1995. 2 "Pretax Income" - shall mean for each Fiscal Year the net income of the Company before federal and state taxes determined in accordance with generally accepted accounting principles consistently applied and as approved by the independent public accountants who have examined the financial accounts and records of the Company for such Fiscal Year; provided, however, that such Pretax Income determination shall be adjusted to include the effect of the amount of any Bonus paid or to be paid to a Participant pursuant to the Plan. "Projected Pretax Income" - shall mean for each Fiscal Year the level of Pretax Income projected and approved by the Board of Directors to be achieved by the Company for such Fiscal Year pursuant to the Annual Operating Plan for such Fiscal Year. 3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the Compensation Committee appointed by the Board of Directors. The Compensation Committee shall consist of not less than two (2) members of the Board of Directors. The Board of Directors may from time to time appoint members of the Compensation Committee in substitution for or in addition to members previously appointed and may fill vacancies, however caused, in the Compensation Committee. The Compensation Committee shall select one of its members as its Chairman and shall hold its meetings at such times and places as it shall deem advisable. A majority of the members of the Compensation Committee shall constitute a quorum. All action of the Compensation Committee shall be taken by a majority of its members. Any action may be taken by written instrument signed by a majority of the members, and any action so taken shall be deemed fully as effective as if it had been taken by a vote of the majority of the members at the meeting duly called and held. The Compensation Committee may appoint a Secretary, shall keep minutes of its meetings, and shall make such rules and regulations for the conduct of its business as it shall deem advisable. The Compensation Committee shall have the sole authority and power, subject to the express provisions and limitations of the Plan, to construe the Plan and to adopt, prescribe, amend, and rescind rules and regulations relating to the Plan, and to make all determinations necessary or advisable for administering the Plan. No member of the Board of Directors or the Compensation Committee shall be liable for any action or determination made in good faith with respect to the Plan. All determinations, decisions, and directions made or given by the Board of Directors or the Compensation Committee under the Plan shall be final and conclusive. The decision of the Board of Directors or the Compensation Committee on any question concerning or involving the interpretation or administration of the Plan shall be final and conclusive, and no provision of the Plan shall be deemed to give any Employee, his/her legal representative or assigns, any right to participate in the Plan, except to such extent, if any, as the Compensation Committee may have determined or approved pursuant to the provisions of the Plan. 4. PARTICIPATION IN THE PLAN. All Employees in the regular employ of the Company as of the beginning of each Fiscal Year (October 1) are eligible to participate in the Plan. 5. DETERMINATION OF THE BONUS FUND. Prior to the commencement of each Fiscal Year, the Board of Directors shall determine the Projected Pretax Income of the Company for such Fiscal Year and the amount of the Bonus Share of each Participant in and to the Bonus Fund for such Fiscal Year, subject to the terms of the plan. Within thirty (30) days thereafter, the Compensation Committee shall determine the Bonus Share of the Bonus Fund to be allocated to each Participant for such Fiscal Year pursuant to the following procedures: 3 Step One: The aggregate number of years of employment service of each Participant with the Company shall be multiplied by the hourly rate of compensation of each such Participant on October 1 of such year. Step Two: The mathematical products thus determined in Step One above for all Participants shall be aggregate in a total sum. Step Three: The quotient (expressed as a percentage) obtained by dividing the amount determined in Step One above as to each Participant by the aggregate amount determined in Step Two above shall constitute the Bonus Share of each respective Participant in and to the Bonus Fund for such Fiscal Year. Step Four: The amount of the Bonus Share of each Participant (expressed in dollars) in and to the Bonus Fund for each Fiscal Year shall be determined by multiplying the Bonus Fund for such Fiscal Year by the quotient obtained in Step Three above as to such Participant. Adjustments: In the event the Pretax Income actually achieved for a Fiscal Year is less than the Projected Pretax Income pursuant to the Annual Operating Plan for such Fiscal Year, the amounts of the Bonus Fund and the respective Bonus Shares of the Participants for such Fiscal Year shall each be decreased proportionately by the percentage decrease represented by the amount the Pretax Income achieved is less than the Projected Pretax Income for such Fiscal Year. Conversely, in the event the Pretax Income actually achieved for a Fiscal Year is more than the Projected Pretax Income pursuant to the Annual Operating Plan for such Fiscal Year, the amounts of the Bonus Fund and the respective Bonus Shares of the Participants for such Fiscal Year shall each be increased proportionately by the percentage increase represented by the amount the Pretax Income achieved exceeds the Projected Pretax Income for such Fiscal Year. The Compensation Committee shall notify each Participant in the Plan of his/her Bonus Share for each Fiscal Year as soon as practical after the projected amount thereof has been determined in accordance with the provisions of the Plan. 6. AWARD OF BONUS COMPENSATION. Within sixty (60) days after completion of the Company's Fiscal Year, the Compensation Committee shall determine the amount of the Bonus to be paid to each Participant for such Fiscal Year by dividing the audited Pretax Income actually achieved by the Projected Pretax Income for such Fiscal Year, as determined by the Board of Directors for such Fiscal Year. The percentage thus determined shall then be multiplied by each Participant's approved Bonus Share to determine individual Bonuses payable to Participants for such Fiscal Year. The amount of bonus compensation thus determined shall be distributed by the Company to the Participants within sixty days following the close of such Fiscal Year. 7. FORFEITURE OF INCENTIVE COMPENSATION. A Participant shall be entitled to and shall receive the full amount of his/her Bonus for a Fiscal Year, provided such Participant remains in the full-time employ of the Company for such entire Fiscal Year. A Participant whose employment is terminated for any reason shall forfeit his/her participation in the Plan and shall not be entitled to any Bonus for such 4 Fiscal Year. Notwithstanding the preceding, in the event of the death, retirement, permanent disability, or any extended absence of a Participant, the Compensation Committee shall have the power and the authority to determine whether a Bonus should be paid to such Participant for such Fiscal Year. The determination of the Compensation Committee in the exercise of such power and authority in its sole discretion shall be final and binding upon each Participant and anyone claiming by or through such Participant. 8. AMENDMENT OR TERMINATION. The Board of Directors of the Company may, from time to time, amend, modify, change, suspend, or terminate, in whole or in part, any or all of the provisions of the Plan, except that: (a) No amendment, modification, change, suspension, or termination may affect any right of any Participant to receive a Bonus made to him/her prior to the effective date of such amendment, modification, change, suspension, or termination; and, (b) No amendment, modification, or change may withdraw the obligation and right of interpretation and administration of the Plan from the Compensation Committee. 9. NO RIGHT TO EMPLOYMENT. Nothing in the Plan shall be deemed to give any Employee or his/her legal representative or assigns, or any other person or entity claiming under or though him/her, any contract or other right to participate in the benefits of the Plan other than as expressly set forth herein. Nothing in the Plan shall be construed as constituting a commitment, guarantee, agreement, or understanding of any kind or nature that the Company will continue to employ any individual (whether or not an Employee or a Participant); nor shall the Plan affect in any way the right of the Company to terminate the employment of any individual (whether or not an Employee or a Participant) at any time. 10. INDEMNIFICATION OF COMPENSATION COMMITTEE. In addition to such other rights of indemnification as they may have as members of the Directors or as members of the Compensation Committee, the members of the Compensation Committee shall be indemnified by the Company against the reasonable expenses, including attorneys' fees, actually and necessarily incurred in connection with the defense of any action, suit, or proceedings, or in connection with any appeal thereof, to which they or any of them may be party by reason of any action taken or failure to act under or in connection with the Plan, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any such action, suit, or proceedings, except in relation to matters as to which it shall be adjudged in such action, suit, or proceedings that such Compensation Committee member is liable for negligence or misconduct in the performance of his/her duties, provided that within thirty (30) days after institution of any such action, suit, or proceedings a Compensation Committee member shall in writing offer the Company the opportunity, at its own expense, to pursue and defend the same. 11. EFFECTIVE DATE AND TERM. This Plan (as hereby amended and restated) supersedes all prior employee profit sharing bonus plans of the Company, and shall be effective commencing as of October 1, 1995, and shall remain in effect until terminated by the Board of Directors of the Company. Executed this 26th day of September, 1995. GAMMA-f CORP By: /s/ J. Rex Vardeman J. REX VARDEMAN, Chairman of the Board ATTEST: By: /s/ Joe A. Ylitalo JOE A. YLITALO, Secretary EX-11 8 COMPUTATION OF NET INCOME PER SHARE 1 EXHIBIT 11 VERTEX COMMUNICATIONS CORPORATION AND SUBSIDIARIES COMPUTATION OF NET INCOME PER SHARE (In thousands, except per share data)
For the year ended September 30, -------------------------------------- 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------- PRIMARY - ------- Weighted average number of shares outstanding during the period 4,454 4,610 4,107 Assume exercise of warrants and options at beginning of the period or issue date 459 274 299 Shares assumed to be repurchased under treasury stock method (332) (155) (161) ------- ------- ------- TOTAL 4,581 4,729 4,245 ======= ======= ======= Net Income $ 5,195 $ 4,625 $ 4,001 ======= ======= ======= PRIMARY NET INCOME PER SHARE $ 1.13 $ .98 $ .94 ======= ======= ======= FULLY DILUTED - ------------- Weighted average number of shares outstanding during the period 4,454 4,610 4,107 Assume exercise of warrants and options at beginning of the period or issue date 459 274 299 Shares assumed to be repurchased under treasury stock method (283) (155) (160) ------- ------- ------- TOTAL 4,630 4,729 4,246 ======= ======= ======= Net Income $ 5,195 $ 4,625 $ 4,001 ======= ======= ======= FULLY DILUTED NET INCOME PER SHARE $ 1.12 $ .98 $ .94 ======= ======= =======
EX-13 9 ANNUAL REPORT TO SHAREHOLDERS 1 Exhibit 13 Annual Report to Stockholders (pages incorporated by reference) Vertex Communications Corporation and Subsidiaries SELECTED FINANCIAL DATA
As of September 30, 1995 1994 1993 1992 1991 - --------------------------------------------------------------------------------------------------------------- (In thousands, except per share amounts) Net sales $ 65,024 $ 56,549 $ 53,869 $ 48,768 $ 39,710 Costs and expenses 58,547 50,880 48,564 44,585 36,309 Income before income taxes 7,015 6,294 5,601 4,282 3,466 Net income 5,195 4,625 4,001 2,902 2,376 Earnings per share 1.12 .98 .94 .84 .70 Working capital $ 33,396 $ 36,035 $ 32,937 $ 13,503 $ 11,731 Long-term debt 1,312 -- -- -- 500 Total assets 63,854 58,457 52,381 30,755 27,624 Total liabilities 14,168 11,272 10,060 9,650 9,581 Total shareholders' equity 49,686 47,185 42,321 21,105 18,043 Orders booked $ 79,132 $ 55,226 $ 58,476 $ 44,306 $ 50,322 Backlog of unfilled orders 44,136 30,028 31,351 26,744 31,205
No cash dividends have been declared or paid 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Overview of Vertex's Marketplace Vertex sells its products to commercial concerns and government entities. However, the telecommunications business climate and industry in which Vertex operates is generally driven by private consumer needs and demands (except for product sales to government entities or those related to government business). A few common examples of such needs and demands are numerous forms of communication by telephone, television programming sent via cable, and on-line transaction execution by securities trading and brokerage firms of transactions by individuals and businesses. As these private consumer needs increase or are made available to a wider range of consumers, sales of Vertex's products can benefit. The Company's international sales, particularly in Western Europe and the Far East, have grown in the last several years directly as a result of increased consumer demand and more telecommunication services being made accessible in regions or countries where these types of services were absent or limited. Management also attributes sales growth in these geographic areas to the Company's physical presence overseas. Vertex maintains a fully staffed sales office in the United Kingdom and a subsidiary in Germany. Management expects that the international markets will continue to be the major source of future sales growth because of these favorable factors. On the other hand, future sales growth domestically is not expected to be as great as international sales growth because of some of these same factors. The Company believes the domestic market is much more mature than currently prevails in international markets and the competition is more intense. Fiscal 1995 Compared to Fiscal 1994 The Company acquired Maxtech, Inc. (Maxtech) of State College, Pennsylvania, at the beginning of the second quarter of fiscal 1995 for a purchase price of approximately $5.5 million. Maxtech is engaged in the design, manufacture, and distribution of precision radio frequency and microwave telecommunications components and subsystems, with particular emphasis on earth station antennas and point-to-point radio applications. Maxtech's operating results are included in the Company's Consolidated Financial Statements as of January 1, 1995. Consolidated net sales were $65.0 million in 1995 compared to $56.5 million in 1994, an increase of $8.5 million or 15.0 percent. The increase in net sales was principally due to the Maxtech acquisition and increased international sales. Within international sales, Western Europe sales were 16 percent and 18 percent of total sales in 1995 and 1994, respectively. Sales in the Far East amounted to 28 percent and 22 percent of total sales in 1995 and 1994, respectively. The Company believes sales in these two geographic regions represent a significant portion of total sales because of the factors discussed above. Cost of sales expressed as a percent of total sales was 74.3 percent in 1995 compared to 74.6 percent in 1994. The Company continues to follow the strict cost control program implemented several years ago but competitive pricing pressures have prevented any meaningful improvement in this statistical measurement. Research and development spending of $2.2 million in 1995 decreased by 17.9 percent from $2.6 million in 1994 due to certain product development projects that were successfully completed in 1994. Marketing expenditures increased 26.8 percent from $2.8 million in 1994 to $3.6 million in 1995 primarily as a result 3 of the Maxtech acquisition. General and administrative expenses were $4.5 million in 1995 compared to $3.3 million in 1994. This increase of $1.3 million or 39.5 percent was due to the inclusion of Maxtech's operating results since January 1995 and reassignment of certain personnel. Vertex's effective tax rate was lower than the prescribed statutory rates in 1995 mainly due to tax incentives available from export shipments and certain investment income that was nontaxable. Net income of $5.2 million in 1995 compared to $4.6 million in 1994 increased by $.6 million or 12.3 percent because of the aforementioned factors. The Company ended fiscal 1995 with a record order backlog of $44.1 million compared to $30.0 million one year earlier. Fiscal 1994 Compared to Fiscal 1993 Consolidated net sales of $56.5 million increased by $2.7 million or 5 percent. International sales as a percent of total sales were 73 percent in 1994 and 63 percent in 1993, respectively. Sales to the Far East increased to 22 percent of total sales in 1994 compared to 14 percent of total sales in 1993. Western Europe accounted for 18 percent of the Company's sales total in 1994 and 23 percent in 1993. Foreign sales were concentrated in these particular geographic regions reflecting the above discussion of Vertex's marketplace. Cost of sales declined slightly as a percentage of sales to 74.6 percent in 1994 from 74.8 percent in 1993. The cost-reduction and containment program implemented by the Company continued to yield favorable results, however, those gains were all but eliminated due to discounts the Company offered as a direct result of competitive pricing pressures on certain products. Research and development costs were $2.6 million in 1994 or $.4 million greater than the 1993 cost level. Engineering design work was successfully completed during 1994 on the new 16.4-meter antenna. Marketing and general and administrative spending of $2.8 million and $3.3 million, respectively, remained unchanged in 1994 when compared to the 1993 levels. Income from investments increased 111.1 percent to $.6 million in 1994 over 1993, primarily due to higher prevailing interest rates and increased cash balances available for investment. The effective tax rate was 27.6 percent of income before taxes for 1994 compared to 28.6 percent in 1993 mainly due to higher R&D credits and increased benefit from export sales but partially offset by a foreign tax adjustment. The Company adopted SFAS No. 109 as of the beginning of fiscal 1994 which resulted in a cumulative benefit of $65,000. Net income of $4.6 million in 1994 increased 15.6 percent over net income of $4.0 million in 1993 principally due to increased sales. IMPACT OF INFLATION Generally, inflationary trends do not materially impact the Company's operations. However, because the Company's sales contracts are negotiated on a fixed-price basis prior to actual purchase of certain raw materials and purchased parts, rapid unforeseen price increases in any of these items could adversely affect profit margins for short periods. The Company has experienced no significant difficulties in this regard 4 over the recent past five years, and none is currently anticipated for the foreseeable future. IMPACT OF RATE CHANGES The Company has two foreign subsidiaries whose operations are subject to the effects of currency rate fluctuations. One subsidiary located in London, England serves as a marketing and sales support office. Should the British pound currency as related to the U.S. dollar turn materially unfavorable, the Company's marketing expenses could increase accordingly. The second subsidiary located in Duisburg, Germany is a complete operating entity. Daily operations (sales, costs and expenses, and income taxes) are conducted in its functional currency, the German mark. If this currency as related to the U.S. dollar should change in a material adverse manner, consolidated results of operations could be impacted. In addition, to the extent taxable income is generated by the German subsidiary, the consolidated effective tax rate is unfavorably impacted. The German statutory tax rate is approximately 50 percent compared to the present U.S. statutory tax rate of 34 percent on taxable income up to $10 million. The Company has not suffered any material losses or adverse effects due to currency rate changes in the British pound or the German mark relative to the U.S. dollar. LIQUIDITY AND CAPITAL RESOURCES The Company's financing activities over the past three years were largely a result of the following: (1) in fiscal 1993 the Company completed its second public stock offering where 1,150,000 shares of common stock were sold for $16.6 million or approximately $14.42 per share net of underwriting discounts and offering expenses; and (2) during fiscal 1995, the Company repurchased 252,500 shares of its common stock for $3.2 million or an average price per share of $12.62. An analysis of total net cash provided by operating activities during the past three years reflects that $10.8 million in cash was provided. Net income, depreciation, and amortization over these three years totaled $19.2 million. The difference between these two factors of $8.4 million was principally caused by increased levels of accounts receivable of $4.5 million and inventories of $3.5 million which were necessary to support higher sales. Investing activities in 1995 of $8.0 million involved the acquisition of Maxtech, Inc. and capital expenditures for equipment and facilities expansion. In 1994 the Company invested $3.6 million in capital assets mainly for building additions and production equipment in its Kilgore, Texas, facility. In 1993 the Company acquired its German subsidiary for a cost of approximately $1.1 million and spent $1.6 million for capital asset additions. Management believes the Company's financial condition is excellent as is evidenced by the ratio of current assets to current liabilities of 3.8 to 1. The Company is not aware of any demands which are likely to affect its financial condition in an adverse manner in the foreseeable future. Based on the Company's strong financial condition, forecasted growth, and expected future cash flows, management does not maintain a credit line facility. 5 Vertex Communications Corporation and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME
Year Ended September 30, 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------ (In thousands, except per share amounts) NET SALES $ 65,024 $ 56,549 $ 53,869 COSTS AND EXPENSES: Cost of sales 48,287 42,185 40,287 Research and development 2,165 2,637 2,203 Marketing 3,560 2,808 2,823 General and administrative 4,535 3,250 3,251 - ------------------------------------------------------------------------------------------------------------ 58,547 50,880 48,564 - ------------------------------------------------------------------------------------------------------------ Operating income 6,477 5,669 5,305 OTHER INCOME (EXPENSE): Income from investments 633 625 296 Interest expense (95) -- -- - ------------------------------------------------------------------------------------------------------------ Income before income taxes and effect of accounting change 7,015 6,294 5,601 PROVISION FOR INCOME TAXES 1,820 1,734 1,600 Income before effect of accounting change 5,195 4,560 4,001 Cumulative effect of accounting change -- 65 -- - ------------------------------------------------------------------------------------------------------------ NET INCOME $ 5,195 $ 4,625 $ 4,001 ============================================================================================================ EARNINGS PER SHARE: Earnings before effect of accounting change $ 1.12 $ .97 $ .94 Cumulative effect of accounting change -- .01 -- - ------------------------------------------------------------------------------------------------------------ $ 1.12 $ .98 $ .94 ============================================================================================================ AVERAGE SHARES AND EQUIVALENT SHARES OUTSTANDING 4,630 4,729 4,246 ============================================================================================================
See Notes to Consolidated Financial Statements 6 Vertex Communications Corporation and Subsidiaries CONSOLIDATED BALANCE SHEETS
As of September 30, 1995 1994 - ------------------------------------------------------------------------------------------------------------ (In thousands, except share amounts) ASSETS Current assets: Cash and cash equivalents $ 14,870 $ 20,527 Accounts receivable, less allowance for doubtful accounts of $241 in 1995 and $263 in 1994 16,295 16,371 Inventories 14,324 8,940 Prepaid income taxes -- 668 - ------------------------------------------------------------------------------------------------------------ 45,489 46,506 - ------------------------------------------------------------------------------------------------------------ Property and equipment: Land 418 418 Buildings and improvements 6,925 6,331 Equipment 12,538 10,606 Construction in progress 917 708 Less: accumulated depreciation (8,400) (6,967) - ------------------------------------------------------------------------------------------------------------ 12,398 11,096 - ------------------------------------------------------------------------------------------------------------ Goodwill, net of accumulated amortization of $268 5,149 -- Other assets, less accumulated amortization of $694 in 1995 and $361 in 1994 818 855 - ------------------------------------------------------------------------------------------------------------ TOTAL ASSETS $ 63,854 $ 58,457 ============================================================================================================ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 2,883 $ 2,396 Accrued liabilities: Accrued compensation 1,799 2,381 Other 4,935 3,875 Customers' advances 2,015 1,186 Deferred income taxes 461 633 - ------------------------------------------------------------------------------------------------------------ 12,093 10,471 - ------------------------------------------------------------------------------------------------------------ Acquisition indebtedness 1,312 -- Deferred income taxes 763 801 Commitments and contingencies (Note 11) Shareholders' equity: Common stock, $.10 par value, 20,000,000 shares authorized, 4,661,402 issued 466 466
7 Capital in excess of par value 24,963 25,212 Retained earnings 26,758 21,563 Treasury stock, at cost, 230,146 shares in 1995 and 37,746 shares in 1994 (2,700) (109) Translation adjustment 199 53 - ------------------------------------------------------------------------------------------------------------ 49,686 47,185 - ------------------------------------------------------------------------------------------------------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 63,854 $ 58,457 ============================================================================================================ See Notes to Consolidated Financial Statements
8 Vertex Communications Corporation and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended September 30, 1995 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------ (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 5,195 $ 4,625 $ 4,001 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,391 1,650 1,353 Cumulative effect of change in accounting for income taxes -- (65) -- Changes in operating assets and liabilities, net of acquisitions: Accounts receivable 746 (5,529) 333 Inventories (3,404) (1,274) 1,159 Prepaid income taxes 668 (668) 280 Other assets (224) 332 (304) Accounts payable and accrued liabilities (882) 2,054 (1,535) Customers' advances 829 (1,216) 336 Deferred income taxes (210) 639 (265) Other liabilities -- (200) -- - ------------------------------------------------------------------------------------------------------------ Net cash provided by oprating activities 5,109 348 5,358 - ------------------------------------------------------------------------------------------------------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (2,488) (3,571) (1,592) Acquisitions, net of cash acquired (5,524) -- (1,125) - ------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (8,012) (3,571) (2,717) - ------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from sale of common stock -- -- 16,583 Purchase of treasury stock (3,186) -- -- Proceeds from exercise of stock options 220 186 393 Other 126 -- 239 - ------------------------------------------------------------------------------------------------------------ Net cash provided by (used in) financing activities (2,840) 186 17,215 - ------------------------------------------------------------------------------------------------------------ Effect of exchange rate changes on cash 86 27 -- Net increase (decrease) in cash and cash equivalents (5,657) (3,010) 19,856 Cash and cash equivalents at beginning of year 20,527 23,537 3,681 - ------------------------------------------------------------------------------------------------------------
9 Cash and cash equivalents at end of year $ 14,870 $ 20,527 $ 23,537 ============================================================================================================ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year for: Interest $ -- $ -- $ -- Income taxes 1,174 1,855 1,293 ============================================================================================================
See Notes to Consolidated Financial Statements 10 Vertex Communications Corporation and Subsidiaries CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Capital in Common Excess of Retained Treasury Translation Stock Par Value Earnings Stock Adjustment Total - ------------------------------------------------------------------------------------------------------------- (In thousands, except share amounts) Balance at September 30, 1992 $ 351 $ 8,411 $ 12,937 $ (594) $ -- $ 21,105 - ------------------------------------------------------------------------------------------------------------ Exercise of stock options (114,300) shares) -- 63 -- 330 -- 393 Sale of common stock (1,150,000 shares) 115 16,468 -- -- -- 16,583 Tax benefit related to stock options exercised by employees -- 239 -- -- -- 239 Net income -- -- 4,001 -- -- 4,001 - ------------------------------------------------------------------------------------------------------------ 1993 $ 466 $ 25,181 $ 16,938 $ (264) $ -- $ 42,321 - ------------------------------------------------------------------------------------------------------------ Exercise of stock options (53,000 shares) -- 31 -- 155 -- 186 Translation adjustment -- -- -- -- 53 53 Net income -- -- 4,625 -- -- 4,625 - ------------------------------------------------------------------------------------------------------------ 1994 $ 466 $ 25,212 $ 21,563 $ (109) $ 53 $ 47,185 - ------------------------------------------------------------------------------------------------------------ Exercise of stock options (60,100 shares) -- (375) -- 595 -- 220 Purchase of treasury stock (252,500 shares) -- -- -- (3,186) -- (3,186) Tax benefit related to stock options exercised by employees -- 126 -- -- -- 126 Translation adjustment -- -- -- -- 146 146 Net income -- -- 5,195 -- -- 5,195 - ------------------------------------------------------------------------------------------------------------ 1995 $ 466 $ 24,963 $ 26,758 $(2,700) $ 199 $ 49,686 ============================================================================================================
See Notes to Consolidated Financial Statements 11 Vertex Communications Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 1995 The Company is engaged in the engineering, design, manufacture, and field installation of satellite communications earth station antennas which operate in the domestic, international, and military radio frequencies and range in size from 1.8 meters to 34 meters in diameter. 1. SUMMARY OF ACCOUNTING PRACTICES PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include the accounts of the Company and its wholly- owned subsidiaries after elimination of all signficant intercompany transactions. RECOGNITION OF REVENUES, COSTS AND EXPENSES. Revenues from sales other than long-term construction contracts are recognized when the earnings process has been completed. The earnings process is considered complete upon shipment or upon completion and storage of the equipment, if shipment is delayed at the customer's request. Service revenues are recorded when the services are rendered. Sales contracts which extend beyond one year are accounted for using the percentage of completion method. Under this method, revenues are recognized based upon costs incurred compared to total costs expected. Continual revisions of estimated total contract costs are made during the life of the contracts based on the best information available and may result in current period adjustments to contract revenues previously reported. Revenues include contract costs and related profits. Amounts billed in excess of contract costs and related profits are included in current liabilities and were $1,791,000 and $1,155,000 at September 30, 1995 and 1994, respectively. Unbilled costs and related profits included in accounts receivable at September 30, 1995 and 1994, were $468,000 and $4,704,000, respectively. Sales recognized on long-term construction contracts and the related cost of sales were as follows: (In thousands)
1995 1994 1993 -------------------------------------------- Sales $ 11,484 $ 15,670 $ 13,899 Cost of Sales $ 10,126 $ 13,233 $ 12,278
RESEARCH AND DEVELOPMENT. Company-funded research and development expenditures are expensed as incurred, including costs relating to patents or rights which may result from such expenditures. Costs generated by research and development work funded by customers are expensed as cost of sales in the period when the related revenues are recorded. Revenues are recorded in the period in which the customer-funded work is completed. The Company has no obligation to repay any funds provided by customers regardless of the outcome of research and development work. CASH EQUIVALENTS. The Company considers cash equivalents to be liquid investments with original maturities of three months or less. INVENTORIES. Inventories are valued at the lower of cost or market and include the cost of raw materials, labor, plant overhead, and purchased parts. Cost is determined using the first-in, first-out method. The components of inventory consisted of the following: 12
(In thousands) 1995 1994 ------------------------ Raw materials $ 4,476 $ 3,364 Work-in-process 8,661 5,070 Finished goods 1,187 506 ------------------------ $14,324 $ 8,940 ========================
PROPERTY AND EQUIPMENT. Property and equipment are stated at cost and are depreciated over their estimated useful lives using the straight-line method. The estimated useful lives of buildings are 25 years and equipment are 5 to 7 years. Expenditures for maintenance and repairs are charged to expense when incurred; betterments and major renewals are capitalized. GOODWILL. Goodwill represents the excess of purchase price over the fair market value of net assets acquired. Goodwill is being amortized on a straight-line basis over 15 years. The Company periodically reviews the carrying value of this intangible asset and will make any necessary adjustment if the related facts and circumstances suggest that its carrying value is impaired or is not recoverable. NON-CASH TRANSACTIONS. As part of the acquisition of the assets and ongoing business of the Antenna Group of Krupp Industrietechnik GmbH of Germany in fiscal 1993, and the acquisition of Maxtech, Inc. in fiscal 1995, the Company assumed certain liabilities as follows:
(In thousands) Antenna Group of Krupp Maxtech, Inc. --------------------------------- Fair value of assets acquired $ 2,999 $8,683 Cash paid (1,125) (5,524) ---------------------------- Liabilities assumed $ 1,874 $ 3,159 ============================
EARNINGS PER SHARE. Earnings per share have been computed based upon the weighted average number of shares of common stock outstanding and the dilutive common stock equivalents assumed outstanding. CONCENTRATION OF CREDIT RISK. The Company sells its products to certain customers under specified credit terms in the normal course of business. These customers can generally be classified as governmental agencies, communications concerns, or other commercial entities. As of September 30, 1995, one customer's account balance amounted to 21 percent of the Company's accounts receivable. Management believes no significant credit risks exist as of September 30, 1995. RECLASSIFICATIONS. Certain prior year amounts have been reclassified in order to conform with the current year presentation. 2. FOREIGN OPERATIONS Financial information relating to the Company's foreign operations that were acquired in fiscal 1993 (see Note 3) is shown below: 13
(In thousands) 1995 1994 1993 ------------------------------------------ Sales to Unaffiliated Customers $3,724 $5,922 $3,417 Transfers between Geographic Areas 889 1,059 21 Operating Income (Loss) (263) 1,186 107 Identifiable Assets 2,366 4,002 3,482
The Company translates the financial statements of its German subsidiary from its functional currency, the German mark, into U. S. dollars in accordance with the Financial Accounting Standards Board SFAS No. 52. Assets and liabilities are translated at the exchange rate in effect at each fiscal year end, and sales and expenses are translated at the weighted average exchange rate in effect for the period reported upon. Any resulting gains or losses are recorded in shareholders' equity and excluded from net income. 3. ACQUISITIONS In December 1992, the Company organized a new wholly-owned subsidiary, Vertex Antennentechnik GmbH, headquartered in Duisburg, Germany. Through this subsidiary, the Company purchased the assets and ongoing business of the Antenna Group of Krupp Industrietechnik GmbH of Germany for cash consideration of approximately $1.1 million, effective December 31, 1992. This transaction was accounted for under the purchase method and, accordingly, the results of operations have been included in the consolidated financial statements from the acquisition date. On January 25, 1995 (effective January 1, 1995), the Company acquired all of the outstanding common stock of Maxtech, Inc. for cash paid at closing of $4,049,000, four-year unsecured promissory notes in the aggregrate principal sum of $1,750,000, payable to former shareholders, all except one, who were employed by the Company as of September 30, 1995, and direct acquisition costs incurred of approximately $150,000. An additional sum of $1,650,000 was paid at closing to pay off certain promissory notes of Maxtech to an unrelated third party. The Maxtech acquisition was accounted for under the purchase method and, accordingly, the assets acquired and liabilities assumed were recorded at their fair values on the acquisition date. The excess purchase price over the assets acquired was approximately $5,417,000. In connection with the purchase of Maxtech, contingent consideration is due for the amount equal to 50 percent of the net pre-tax income above $3,500,000 that Maxtech earns for the cumulative period of three years and nine months ending September 30, 1998, not to exceed $2,250,000. The contingent consideration, if any, will be recorded as additional goodwill and amortized over the remaining life of the intangible asset as discussed above. Maxtech's results of operations have been included in the Company's consolidated financial statements from the effective date of the acquisition. Below are the unaudited pro forma results of operations as if Maxtech had been acquired on October 1, 1993.
(In thousands) 1995 1994 ------------------------- Net Sales $66,390 $62,831 Net Income 5,004 4,733 Earnings Per Share 1.08 1.00
14 4. SHAREHOLDERS' EQUITY STOCK OPTION PLAN FOR KEY EMPLOYEES. The Company has a Stock Option Plan for Key Employees, which provides for the granting of options to purchase the Company's common stock to certain officers and key employees. Five hundred fifty thousand (550,000) shares of common stock have been reserved for issuance under this plan. The options are initially exercisable in equal pro rata increments over a five-year period beginning one year after the grant date and extend for terms of seven years. The option price is equal to at least 100 percent of fair market value on the date of the grant (110 percent in the case of an option holder who owns stock representing more than 10 percent of the combined voting power of the Company). The following is a summary of the transactions under this plan for the years ended September 30, 1995 and 1994:
Number of shares Option Price ----------------------- Per Share 1995 1994 --------------------------------------------------------------- Balance outstanding Oct. 1 $2.00-$15.50 271,600 308,600 Granted $10.00-$15.50 -- 20,000 Cancelled $10.00-$15.50 (2,000) (4,000) Exercised $2.00-$10.00 (60,100) (53,000) ------------------------- Balance outstanding Sept. 30 $3.00-$14.50 209,500 271,600 Exercisable Sept. 30 $3.00-$14.50 101,400 111,600 ------------------------ Available for grant Sept. 30 25,000 23,000 =========================
OUTSIDE DIRECTORS STOCK OPTION PLAN. The Company has an Outside Directors Stock Option Plan whereby an outside director (any director not otherwise employed by the Company) may be granted options to purchase the Company's common stock. The maximum number of shares which may be covered by options granted to any single director each year is 7,500, and the option price must equal at least 100 percent of fair market value at the date of grant. Seventy-five thousand (75,000) shares of common stock have been reserved for this plan. Once granted, the options expire in ten years. Following is a table which summarizes the transactions under this plan for the years ended September 30, 1995 and 1994. 15
Number of Shares Option Price --------------------- Per Share 1995 1994 --------------------------------------------------------- Balance outstanding Oct. 1 $10.00 9,000 9,000 Granted $12.00 10,000 -- Exercised -- -- ------------------------ Balance outstanding Sept. 30 $10.00-$12.00 19,000 9,000 Exercisable Sept. 30 $10.00-$12.00 19,000 9,000 ------------------------ Available for Grant Sept. 30 40,000 50,000
1995 STOCK COMPENSATION PLAN. In 1995, the Company adopted "The 1995 Stock Compensation Plan" for key employees and advisors. This plan allows the Company to grant options to purchase the Company's stock and stock appreciation rights to officers, key employees, and advisors at an option price equal to market value on the date of grant (110 percent in the case of an option holder who owns more than 10 percent of the combined voting power of the Company's common stock). The options are initially exercisable in equal pro rata portions over a five-year period beginning one year after the grant date and extend for terms of ten years. The plan allows for a total of five hundred thousand (500,000) options to be granted. Following is a summary of the activity under the plan since its inception:
Option Price Per Share Number of Shares ---------------------------------------------- Granted in Fiscal 1995 $12.00-$12.25 309,000 Balance outstanding Sept. 30, 1995 $12.00-$12.25 309,000 Exercisable Sept. 30, 1995 -- ---------- Available for Grant Sept. 30 191,000 ==========
5. ACQUISITION INDEBTEDNESS As part of the purchase price of Maxtech, Inc., the Company incurred four-year unsecured promissory notes in aggregate principal sum of $1,750,000. The notes are payable annually in four equal principal payments, including accrued interest at 7.92 percent per annum with the initial payment due October 1, 1995. See Note 3 for further information. 6. INCOME TAXES The Company adopted Financial Accounting Standards Board Statement No. 109 "Accounting for Income Taxes" effective October 1, 1993. This Standard required the Company to change accounting for income taxes from the prior deferral method to the liability method for financial reporting. The adoption of SFAS No. 109 resulted in a one-time cumulative benefit in fiscal 1994 of $65,000 or $.01 per share with a corresponding reduction in deferred income taxes. The differences between the prescribed statutory income tax rates and the Company's effective income tax rates were as follows: 16
1995 1994 1993 ---------------------------------------- Federal statutory rate 34.0% 34.0% 34.0% State income taxes 2.1 .5 .9 Effect of nontaxable investment income (2.6) (2.8) (1.5) Benefit from nontaxable FSC income (4.6) (4.0) (3.1) Tax benefit from increased R&D activity (1.9) (3.4) (1.8) Foreign tax adjustment (.6) 2.7 .3 Other, net (.5) .6 (.2) ---------------------------------------- 25.9% 27.6% 28.6% ========================================
Income (loss) before income taxes from foreign operations was $(400,000), $1,200,000 and $107,000 in fiscal 1995, 1994, and 1993, respectively. Income before income taxes from domestic operations was $7,415,000, $5,094,000, and $5,494,000 in fiscal 1995, 1994, and 1993, respectively. The provision for income taxes consists of the following significant components:
(In thousands) 1995 1994 1993 ------------------------------------------ Current: Federal $ 1,661 $ 877 $1,808 Foreign 224 153 -- State 145 20 50 ----------------------------------------- Total Current 2,030 1,050 1,858 Deferred: Federal 214 296 (258) Foreign (424) 388 -- State -- -- -- ----------------------------------------- Total Deferred (210) 684 (258) ----------------------------------------- Total provision for income taxes $ 1,820 $ 1,734 $1,600 =========================================
Deferred income taxes are a result of certain income and expenses being recognized in different periods for financial reporting and tax reporting purposes. Below is a table which shows the components of deferred income taxes:
(In thousands) 1995 1994 ---------------------------------- Deferred tax assets: Accrued liabilities and reserves $ 647 $ 586 Other 29 22 ---------------------------------- Deferred tax liabilities: Property and equipment (782) (690) Revenue recognition differences (888) (1,221) Other (230) (131) ---------------------------------- Net deferred tax liability $(1,224) $ (1,434) ==================================
17 7. EMPLOYEE BENEFIT PLANS The Company has a qualified Savings/Profit-Sharing Plan (the "Plan"), which covers substantially all employees. Company contributions to the Plan, if any, are determined at the discretion of the Board of Directors. The Company's contributions to the Plan for fiscal years 1995, 1994, and 1993 were $228,000, $223,000, and $203,000, respectively. The Company has two cash incentive compensation plans which are based upon results of annual operations compared to planned results. The Management Incentive Compensation Plan's participants are key employees and officers, but not outside directors. Compensation under the plan was $275,000, $787,000, and $841,000 for fiscal 1995, 1994, and 1993, respectively. The Employee Profit Sharing Bonus Plan's participants include substantially all employees except officers. Compensation under this plan was $168,000, $232,000, and $236,000, for fiscal 1995, 1994, and 1993, respectively. 8. RELATED PARTY TRANSACTIONS A shareholder and member of the Board of Directors is a shareholder in a firm retained by the Company for legal counsel. The Company paid fees to his firm during the years ended September 30, 1995, 1994, and 1993 of $315,000, $186,000, and $295,000, respectively. 9. SALES AND INDUSTRY SEGMENT INFORMATION Sales to one customer in fiscal 1995, 1994, and 1993 were 1 percent, 19 percent, and 21 percent, respectively, of total sales. The Company was a prime or subcontractor to various agencies of the United States Government. Sales to these agencies were 12 percent of total sales in fiscal 1993. Export sales were 64 percent, 63 percent, and 57 percent, in fiscal 1995, 1994, and 1993, respectively, of total sales. International sales expressed as a percent of total sales were 68 percent, 73 percent, and 63 percent, in fiscal 1995, 1994, and 1993, respectively. Sales in Western Europe were 16 percent, 18 percent, and 23 percent of total sales in fiscal 1995, 1994, and 1993, respectively. Sales in the Far Eastern countries amounted to 28 percent, 22 percent, and 14 percent of the sales total in fiscal 1995, 1994 and 1993, respectively. The Company operates primarily in a single industry segment, as a manufacturer and supplier of microwave antennas and related equipment. 10. SELECTED QUARTERLY FINANCIAL DATA (unaudited)
(In thousands, except per share amounts) 1995 FISCAL QUARTERS FIRST SECOND THIRD FOURTH ------------------------------------------------------------- NET SALES $ 14,707 $16,258 $ 15,934 $18,125 GROSS PROFIT 3,679 4,529 4,348 4,181 NET INCOME 1,225 1,268 1,245 1,457 EARNINGS PER SHARE .26 .28 .28 .30
18
1994 Fiscal Quarters First Second Third Fourth ------------------------------------------------------------- Net Sales $13,885 $14,160 $12,404 $16,100 Gross Profit 3,466 3,850 3,437 3,611 Net Income 1,128 1,193 981 1,323 Earnings Per Share .24 .25 .21 .28
11. COMMITMENTS AND CONTINGENCIES The Company rents certain equipment and facilities under operating leases. Rent expense under these leases for fiscal 1995, 1994, and 1993 was $380,000, $268,000, and $265,000, respectively. Below are the future rent payments due under these lease obligations and the amounts of rental income due to be received under subleases as of September 30, 1995.
Fiscal Year Rent Expense Payments Due - ------------ ------------------------- 1996 $ 502,000 1997 347,000 1998 59,000 1999 9,000 2000 5,000 ---------- $ 922,000 Less: Sublease Income 213,000 ---------- $ 709,000 ==========
The Company indemnifies its directors and officers, but does not maintain directors' and officers' liability insurance. No claims against directors or officers have been asserted. 19 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Vertex Communications Corporation: We have audited the accompanying consolidated balance sheets of Vertex Communications Corporation (a Texas Corporation) and subsidiaries as of September 30, 1995 and 1994, and the related consolidated statements of income, cash flows, and shareholders' equity for each of the three years in the period ended September 30, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Vertex Communications Corporation and subsidiaries as of September 30, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 1995, in conformity with generally accepted accounting principles. As explained in Note 6 to the Financial Statements, effective October 1, 1993, the Company changed its method of accounting for income taxes. Arthur Andersen LLP Dallas, Texas October 27, 1995 MARKET FOR COMMON STOCK The Company's common stock is traded on The Nasdaq Stock Market (National Market System) under the symbol VTEX. At December 1, 1995, there were approximately 1,500 holders of record of Vertex's common stock. The table below sets forth, for the periods indicated, the high and low sales prices of the Company's common stock, as reported by The Nasdaq Stock Market.
Quarter Ended High Low Quarter Ended High Low - ----------------------------------------------------------------------------------------------------------- September 30, 1995 $19 1/4 $13 1/4 September 30, 1994 $13 $ 9 5/8 June 30, 1995 14 1/2 13 July 1, 1994 15 11 1/2 March 31, 1995 14 1/8 12 April 1, 1994 15 1/2 13 December 30, 1994 14 1/4 10 5/8 December 31, 1993 18 12 3/4
The Company has never declared nor paid a cash dividend on its common stock and does not expect that dividends will be declared or paid in the foreseeable future. The Company currently intends to retain all of its available funds for the operation and expansion of its business. EX-22 10 SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 22 VERTEX COMMUNICATIONS CORPORATION AND SUBSIDIARIES AS OF SEPTEMBER 30, 1995 Vertex Communications Foreign Sales Corporation 100% - Owned Subsidiary Incorporated in the United States Virgin Islands Gamma-f Corp. 100% - Owned Subsidiary Incorporated in the State of Nevada Vertex Antennentechnik GmbH 100% - Owned Subsidiary Incorporated in the Federal Republic of Germany Vertex International, Ltd. 100% - Owned Subsidiary Incorporated in England Maxtech, Inc. 100% - Owned Subsidiary Incorporated in the State of Pennsylvania EX-24 11 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS 1 EXHIBIT 24 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report by reference into this Form 10-K and into the Company's previously filed Registration Statement File No. 33-27012 on Form S-8. Arthur Andersen LLP Dallas, Texas December 18, 1995 EX-27 12 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 U.S. DOLLARS 12-MOS SEP-30-1995 OCT-01-1994 SEP-30-1995 1 14,870 0 16,295 241 14,324 45,489 20,798 8,400 63,854 12,093 0 466 0 0 49,220 63,854 65,024 65,024 48,287 48,287 10,260 0 95 7,015 1,820 5,195 0 0 0 5,195 1.12 1.12
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