UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. )*
NAME OF ISSUER: The Diana Corporation
TITLE OF CLASS OF SECURITIES: Common Stock, $1.00 Par Value
CUSIP NUMBER: 809180-10-2
NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE
NOTICES AND COMMUNICATIONS:
James J. Fiedler
26025 Mureau Road
Calabasas, CA 91302
(818) 878-7711
DATE OF EVENT WHICH REQUIRES FILING OF THIS STATEMENT: 9/04/97
If the filing person has previously filed a statement on Schedule
13G to report the acquisition which is the subject of this Schedule
13D, and is filing this schedule because of Rule 13d-l(b)(3) or
(4), check the following box ___.
Check the following box if a fee is being paid with the statement
___. (A fee is not required only if the reporting person: (1) has
a previous statement on file reporting beneficial ownership of more
than five percent of the class of securities described in Item 1;
and (2) has filed no amendment subsequent thereto reporting
beneficial ownership of five percent or less of such class.) (See
Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should
be filed with the Commission. See Rule l3d-l(a) for other parties
to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a
reporting person's initial filing on this form with respect to the
subject class of securities, and for any subsequent amendment
containing information which would alter disclosures provided in a
prior cover page.
The information required on the remainder of this cover page shall
not be deemed to be "filed" for the purpose of Section 18 of the
Securities Exchange Act of 1934 ("Act") or otherwise subject to the
liabilities of that section of the Act but shall be subject to all
other provisions of the Act (however, see the Notes).
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SCHEDULE l3D
CUSIP No. 809180-10-2 Page 2 of 5 Pages
1. NAME OF REPORTING PERSON: James J. Fiedler
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: ###-##-####
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) ___
(b) X
3. SEC USE ONLY
4. SOURCE OF FUNDS: PF
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) ____.
6. CITIZENSHIP OR PLACE OF ORGANIZATION: United States
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH:
7. SOLE VOTING POWER: 540,000
8. SHARED VOTING POWER: 0
9. SOLE DISPOSITIVE POWER: 540,000
10. SHARED DISPOSITIVE POWER: 0
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH
REPORTING PERSON: 540,000
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES ____.
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 7.17%
14. TYPE OF REPORTING PERSON: IN
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CUSIP No. 809180-10-2 Page 3 of 5 Pages
Item 1. Security and Issuer.
This statement relates to the shares of Common Stock,
$1.00 par value per share ("Shares"), of The Diana Corporation
("Diana"). The principal executive offices of Diana are located at
26025 Mureau Road, Calabasas, California 91302.
Item 2. Identity and Background.
This initial 13D is being filed by James J. Fiedler
("Fiedler"), Chairman of the Board and Chief Executive Officer of
Diana. Mr. Fiedler's business address is 26025 Mureau Road,
Calabasas, CA 91302. He is a U.S. citizen.
During the last five years, Mr. Fiedler has not been
convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors) or been a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a
result of such proceeding was or is subject to a judgment, decree
or final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws
or finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
As of the date hereof, the Reporting Person beneficially
owns 190,000 Shares and has used personal funds in connection with
his acquisition of Shares. In addition, the Reporting Person holds
175,000 warrants to purchase Diana common stock at $3.00 per share
and 350 Class B Units of Sattel, a subsidiary of Diana, which are
convertible into 175,000 shares of Diana common stock.
Item 4. Purpose of Transaction.
The Shares held by the above mentioned individual were
acquired for, and are being held for, investment purposes. The
acquisitions of the Shares described herein were made in the
ordinary course of Mr. Fiedler's business or investment activities,
as the case may be. Mr. Fiedler reserves the right to purchase
additional Shares or to dispose of the Shares in the open market or
in privately negotiated transactions or in any other lawful manner
in the future, or dispose of Shares on terms acceptable to Mr.
Fiedler from time to time.
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CUSIP No. 809180-10-2 Page 4 of 5 Pages
Item 5. Interest in Securities of the Issuer.
(a) (b) (c) As of the date hereof, the Reporting Person
beneficially owns in the aggregate 540,000 Shares. These Shares
represent approximately 7.17% of the Shares believed to be
outstanding. Information concerning Mr. Fiedler's beneficial
ownership of Shares is incorporated herein from Items 7-10, 11 and
13 of the cover page of this amendment. Mr. Fiedler's ownership
includes 350,000 shares covered by presently exercisable stock
warrants and convertible Sattel Class B Units.
On July 17, 1997, Mr. Fiedler purchased 175,000 shares of
common stock from the Company for $350,000. The transaction was
part of a private placement by the Company of an aggregate of
1,880,750 shares. In connection with the transaction, Mr. Fiedler
also received a 5 year warrant to purchase 175,000 shares at $3.00
per share.
On July 25, 1997, Mr. Fiedler's Class B Units were made
immediately convertible into an aggregate of 175,000 shares of
common stock.
Except as set forth above, Mr. Fiedler has not effected
any transactions in common stock of Diana in the last sixty days.
(d)-(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings and Relationships
with Respect to Securities of the Issuer.
As noted in Item 5, on July 17, 1997, Mr. Fiedler
purchased 175,000 shares of common stock and received a warrant for
an additional 175,000 shares. In connection with the transaction,
the holders of fifty percent (50%) or more of the Registrable Stock
sold by Diana on July 17, 1997 can require Diana to register such
stock under the Securities Act of 1933, as amended. The
Registration Rights Agreement contains customary registration
covenants and indemnification provisions.
Mr. Fiedler holds 350 Class B Units of Sattel
Communications LLC, a subsidiary of Diana. Such Class B Units are
immediately convertible into 175,000 shares of Diana common stock,
although the Class B Units have not yet been formally amended.
Item 7. Material to be Filed as Exhibits.
1. Stock and Warrant Purchase Agreement dated June 6,
1997 between Diana and Mr. Fiedler.
2. Warrant dated June 6, 1997 in favor of Mr. Fiedler.
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CUSIP No. 809180-10-2 Page 5 of 5 Pages
3. Registration Rights Agreement dated June 6, 1997
between Diana and Mr. Fiedler.
4. Employment Agreement dated September 4, 1997 between
Diana and Mr. Fiedler; includes convertibility of Class B Units
into Diana common stock.
Signature
After reasonable inquiry, to the best of my knowledge and
belief, I certify that the information set forth in this statement
is true, complete and correct.
September 10, 1997 /s/ James J. Fiedler
STOCK AND WARRANT PURCHASE AGREEMENT
THIS STOCK AND WARRANT PURCHASE AGREEMENT is made this 6th day
of June, 1997 by and between The Diana Corporation ("Diana") and
the person identified as "Buyer" on the signature page hereof
("Buyer").
1. Purchase and Sale of Stock. Buyer hereby purchases, and
Diana hereby sells and issues to Buyer, 175,000 shares of common
stock, $1.00 par value, of Diana (the "Purchased Stock"), and a
warrant (the "Warrant") to purchase 175,000 shares of common stock
(the "Warrant Stock") for an aggregate purchase price of $350,000
(the "Purchase Price"). The Warrant is being executed
contemporaneously herewith. Diana represents that each of the
Purchased Stock and the Warrant Stock has been duly authorized for
issuance and, upon issuance of the Purchased Stock in accordance
herewith against payment of the Purchase Price, and upon issuance
of the Warrant Stock against payment of the exercise price of the
Warrant, will be validly issued, fully paid and nonassessable.
2. Investment Representations and Covenants. (a) Buyer
represents that it is an "accredited investor" within the meaning
of Rule 501(a) under the Securities Act of 1933, as amended (the
"Securities Act"), and is a financially sophisticated financial or
institutional investor that purchases equity securities in the
ordinary course of business. Buyer is acquiring the Purchased
Stock for investment purposes only, for its own account, and not
with a view to the distribution thereof, other than pursuant to
Rule 144 under the Securities Act or other exemption from or
registration under the Securities Act. Buyer understands that the
offer and sale of the Purchased Stock and Warrant to Buyer have not
been registered under the Securities Act or under state securities
laws and, accordingly, may not be transferred unless so registered
or exemptions from such registration are available.
(b) Buyer has reviewed Diana's most recent Form 10-K,
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K filed
since the date of the Form 10-K, and Diana's 1996 Annual Report to
Stockholders and Proxy Statement. Buyer understands that an
investment in the Purchased Stock is speculative and involves a
high degree of risk. At this time, Diana is experiencing a severe
liquidity deficiency.
(c) Diana shall promptly deliver to Buyer a certificate
representing the Purchased Stock. The certificates representing
the Purchased Stock shall (unless registered under the Securities
Act and applicable state securities laws) have a legend in
substantially the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY
NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT (A)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH LAWS OR
(B) THE HOLDER HEREOF FURNISHES AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE DIANA CORPORATION TO THE EFFECT THAT AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
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(d) Buyer (if not James Fiedler) acknowledges and agrees that
it is requiring that James Fiedler also purchase Common Stock and
warrants of Diana on the same terms and conditions set forth
herein.
3. Miscellaneous. (a) This Agreement constitutes the entire
agreement between the parties and all prior agreements, discussions
and understandings of the parties are merged and made a part of
this Agreement.
(b) This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of
the which shall constitute one and the same instrument.
(c) Any notice required or permitted to be given or made by
either party to the other hereunder shall be deemed delivered if
hand delivered, five days after being mailed postage prepaid, one
business day after being sent prepaid by overnight courier or
delivery service, or after being sent by facsimile transmission and
received by receiving equipment to the parties at their respective
addresses set forth opposite the signatures hereto or to such
changed address as either party shall designate by proper notice to
the other.
(d) This Agreement shall be governed by and construed in
accordance with the laws of Delaware without regard to the
principles of conflicts of law thereunder.
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IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first above written.
Address for Notice:
THE DIANA CORPORATION
26025 Mureau Road
Calabasas, California 91302
Fax No. (818) 878-7633 By: /s/ Daniel W. Latham
President and Chief
Operating Officer
Address for Notice: BUYER
24905 Ariella Drive James J. Fiedler
Calabasas, California 91302
By: /s/ James J. Fiedler
Fax No. (818) 225-8746
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THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL, REASONABLY SATISFACTORY
TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT OF 1933.
No. B-1 WARRANT 175,000 Shares
To Purchase Shares of Common Stock of
The Diana Corporation
THIS CERTIFIES that, for value received, James J. Fiedler is
entitled, upon the terms and subject to the conditions hereinafter
set forth, to purchase from The Diana Corporation, a Delaware
corporation (the "Company"), that number of fully paid and
nonassessable shares of the Company's Common Stock, $1.00 par value
(the "Common Stock") at the purchase price per share as set forth
in Section 1 below ("Exercise Price"). The number of shares and
Exercise Price are subject to adjustment as provided in Section 10
hereof.
1. Number of Shares; Exercise Price; Term.
(a) Subject to adjustments as provided herein, this
Warrant is exercisable for 175,000 shares of Common Stock, at a
purchase price of $3.00 per share.
(b) Subject to the terms and conditions set forth
herein, this Warrant shall be exercisable during the term
commencing on the date hereof and ending on the fifth anniversary
of the date hereof and shall be void thereafter.
2. Title to Warrant. This Warrant and all rights hereunder
may be transferred, in whole or in part, by the Warrant holder to
any affiliate at any time without the written consent of the
Company, but may not be transferred to any third party without the
prior written consent of the Company, which will not be
unreasonably withheld. Transfers shall occur at the office or
agency of the Company by the holder hereof in person or by duly
authorized attorney, upon surrender of this Warrant together with
the Assignment Form annexed hereto properly endorsed.
3. Exercise of Warrant. The purchase rights represented by
this Warrant are exercisable by the registered holder hereof, in
whole or in part, at any time, or from time to time, during the
term hereof as described in Section 1 above, by the surrender of
this Warrant and the Notice of Exercise annexed hereto duly
completed and executed on behalf of the holder hereof, at the
office of the Company in Calabasas, California (or such other
office or agency of the Company as it may designate by notice in
writing to the registered holder hereof at the address of such
holder appearing on the books of the Company), upon payment in cash
or check acceptable
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to the Company of the purchase price of the shares thereby
purchased whereupon the holder of this Warrant shall be entitled to
receive a certificate for the number of shares so purchased and, if
this Warrant is exercised in part, a new Warrant for the
unexercised portion of this Warrant. The Company agrees that, upon
exercise of this Warrant in accordance with the terms hereof the
shares so purchased shall be deemed to be issued to such holder as
the record owner of such shares as of the close of business on the
date on which this Warrant shall have been exercised. Certificates
for shares purchased hereunder and, on partial exercise of this
Warrant, a new Warrant for the unexercised portion of this Warrant
shall be delivered to the holder hereof as promptly as practicable
after the date on which this Warrant shall have been exercised.
The Company covenants that all shares which may be issued upon
the exercise of rights represented by this Warrant will, upon
exercise of the rights represented by this Warrant and payment of
the Exercise Price, be fully paid and nonassessable and free from
all taxes, liens and charges in respect of the issue thereof (other
than taxes in respect of any transfer occurring contemporaneously
or otherwise specified herein).
4. No Fractional Shares or Scrip. No fractional shares or
scrip representing fractional shares shall be issued upon the
exercise of this Warrant. In lieu of any fractional share to which
such holder would otherwise be entitled, such holder shall be
entitled, at its option, to receive either (i) a cash payment equal
to the excess of fair market value for such fractional share above
the Exercise Price for such fractional share (as mutually
determined by the Company and the holder) or (ii) a whole share if
the holder tenders the Exercise Price for one whole share.
5. Charges, Taxes and Expenses. Issuance of certificates
for shares upon the exercise of this Warrant shall be made without
charge to the holder hereof for any issue or transfer tax or other
incidental expense in respect of the issuance of such certificates,
all of which taxes and expenses shall be paid by the Company, and
such certificates shall be issued in the name of the holder of this
Warrant or in such name or names as may be directed by the holder
of this Warrant (with the prior written consent of the Company,
which will not be unreasonably withheld); provided, however, that
in the event certificates for shares are to be issued in a name
other than the name of the holder of this Warrant, this Warrant
when surrendered for exercise shall be accompanied by an assignment
document in form and substance satisfactory to the Company duly
executed by the holder hereof and the Notice of Exercise duly
completed and executed and stating in whose name and certificates
are to be issued; and provided further, that such assignment shall
be subject to applicable laws and regulations. Upon any transfer
involved in the issuance or delivery of any certificates for shares
of the Company's securities, the Company may require, as a
condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.
6. No Rights as Shareholders. This Warrant does not entitle
the holder hereof to any voting rights or other rights as a
shareholder of the Company prior to the exercise hereof.
7. Exchange and Registry of Warrant. The Company shall
maintain a registry showing the name and address of the registered
holder of this Warrant. This Warrant may be surrendered for
exchange, transfer or exercise, in accordance with its terms, at
the office of the
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Company, and the Company shall be entitled to rely in all respects,
prior to written notice to the contrary, upon such registry.
8. Loss, Theft, Destruction or Mutilation of Warrant. Upon
receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant, and in
case of loss, theft or destruction, of indemnity or security
reasonably satisfactory to it, and upon reimbursement to the
Company of all reasonable expenses incidental thereto, and upon
surrender and cancellation of this Warrant, if mutilated, the
Company will make and deliver a new Warrant of like tenor and dated
as of such cancellation, in lieu of this Warrant.
9. Saturdays, Sundays, Holidays, etc. If the last or
appointed day for the taking of any action or the expiration of any
right required or granted herein shall be a Saturday or a Sunday or
shall be a legal holiday, then such action may be taken or such
right may be exercised on the next succeeding day not a Saturday or
a Sunday or a legal holiday.
10. Adjustments and Termination of Rights. The purchase
price per share and the number of shares purchasable hereunder are
subject to adjustment from time to time as follows:
(a) Merger. If at any time there shall be a merger or
consolidation of the Company with or into another corporation when
the Company is not the surviving corporation, then, as part of such
merger or consolidation, lawful provision shall be made so that the
holder of this Warrant shall thereafter be entitled to receive upon
exercise of this Warrant, during the period specified herein and
upon payment of the aggregate Exercise Price then in effect, the
number of shares of stock or other securities or property of the
successor corporation resulting from such merger or consolidation,
to which a holder of the stock deliverable upon exercise of this
Warrant would have been entitled in such merger or consolidation if
this Warrant had been exercised immediately before such merger or
consolidation. In any such case, appropriate adjustment shall be
made in the application of the provisions of this Warrant with
respect to the rights and interests of the holder after the merger
or consolidation.
(b) Reclassification, etc. If the Company at any time
shall, by subdivision, combination or reclassification of
securities or otherwise, change any of the securities as to which
purchase rights under this Warrant exist into the same or a
different number of securities of any other class or classes, this
Warrant shall thereafter represent the right to acquire such number
and kind of securities as would have been issuable as the result of
such change with respect to the securities which were subject to
the purchase rights under this Warrant immediately prior to such
subdivision, combination, reclassification or other change.
(c) Split, Subdivision or Combination of Shares. If the
Company at any time while this Warrant remains outstanding and
unexpired shall split, subdivide or combine the Common Stock as to
which purchase rights under this Warrant exist, the Exercise Price
shall be proportionately decreased in the case of a split or
subdivision or proportionately increased in the case of a
combination.
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(d) Common Stock Dividends. If the Company at any time
while this Warrant is outstanding and unexpired shall pay a
dividend with respect to Common Stock payable in, or make any other
distribution with respect to Common Stock of, shares of Common
Stock, then the Exercise Price shall be adjusted, from and after
the date of determination of the shareholders entitled to receive
such dividend or distribution, to that price determined by
multiplying the Exercise Price in effect immediately prior to such
date of determination by a fraction (i) the numerator of which
shall be the total number of shares of Common Stock outstanding
immediately prior to such dividend or distribution, and (ii) the
denominator of which shall be the total number of shares of the
Common Stock outstanding immediately after such dividend or
distribution.
(e) Other Dividends. If the Company at any time while
this Warrant is outstanding and unexpired shall pay a dividend
(other than dividends out of retained earnings), or make any other
distribution with respect to Common Stock payable in stock (other
than Common Stock) or other securities or property, then the
Company may, at its option, either (i) decrease the per share
Exercise Price of this Warrant by an appropriate amount based upon
the value distributed on each share of Common Stock as determined
in good faith by the Company's Board of Directors or (ii) provide
by resolution of the Company's Board of Directors that on exercise
of this Warrant, the holder hereof shall receive, in addition to
the shares of Common Stock otherwise receivable on exercise hereof,
the same number and kind of stock, other securities and property
which such holder would have received had the holder held the
shares of Common Stock receivable on exercise hereof on and before
the record date for such dividend or distribution.
(f) Adjustment of Number of Shares. Upon each
adjustment in the Exercise Price pursuant to 10(c) or 10(d) above,
the number of shares of Common Stock purchasable hereunder shall be
adjusted, to the nearest whole share, to the product obtained by
multiplying the number of shares purchasable immediately prior to
such adjustment in the Exercise Price by a fraction (i) the
numerator of which shall be the Exercise Price immediately prior to
such adjustment, and (ii) the denominator of which shall be the
Exercise Price immediately after such adjustment.
11. Notice of Adjustments; Notices. Whenever the Exercise
Price or number of shares purchasable hereunder shall be adjusted
pursuant to Section 10 hereof, the Company shall (within twenty
days) issue a certificate signed by its Chief Executive Officer
setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such
adjustment was calculated and the Exercise Price and number of
shares purchasable hereunder after giving effect to such
adjustment, and shall cause a copy of such certificate to be mailed
(by first class mail, postage prepaid) to the holder of this
Warrant. The Company shall notify the holder of this Warrant at
least twenty days prior to the date of any transaction referred to
in Section 10(a) or (b) or of the sale of all or substantially all
the assets of the Company.
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12. Miscellaneous.
(a) Governing Law. This Warrant shall be binding upon
any successors or assigns of the Company. This Warrant shall
constitute a contract under the laws of Delaware and for all
purposes shall be construed in accordance with and governed by the
laws of said state, without giving effect to the conflict of laws
principles.
(b) Restrictions. THESE SECURITIES HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
(c) Amendments. This Warrant may be amended and the
observance of any term of this Warrant may be waived only with the
written consent of the Company and the holders hereof.
(d) Notice. Any notice required or permitted hereunder
shall be deemed effectively given upon personal delivery to the
party to be notified or three business days after deposit with the
United States Post Office, by certified mail, postage prepaid and
addressed to the party to be notified at the address indicated
below for the Company, or at the address for a holder set forth in
the registry maintained by the Company pursuant to Section 7, such
party, or at such other address as such other party may designate
by ten-day advance written notice.
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IN WITNESS WHEREOF, The Diana Corporation has caused this
Warrant to be executed by its officer thereunto duly authorized.
Dated: June 6, 1997
THE DIANA CORPORATION
By: /s/ Daniel W. Latham, President
and Chief Operating Officer
Address: 26025 Mureau Road
Calabasas, California 91302
Acknowledged and Agreed:
By: /s/ James J. Fiedler
Name: James J. Fiedler
Title:
Address: 24905 Ariella Drive
Calabasas, CA 91302
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REGISTRATION RIGHTS AGREEMENT
AGREEMENT made as of the 6th day of June, 1997, by and among
The Diana Corporation, a Delaware corporation (the "Company"), and
the undersigned original holder of a portion of the Purchased Stock
(as defined below) and Warrants (as defined below).
W I T N E S S E T H:
WHEREAS, on this date, the Company has issued 175,000 shares
of Common Stock (the "Purchased Stock") and warrants (the
"Warrants) to purchase an aggregate of 350,000 shares of Common
Stock;
NOW, THEREFORE, in consideration of the mutual covenants
herein contained and other valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties
hereto hereby agree as follows:
1. Definitions. The following terms shall be used in this
Agreement with the following respective meanings:
"Affiliate" means (i) any Person directly or indirectly
controlling, controlled by or under common control with another
Person; (ii) any Person owning or controlling ten percent or more
of the outstanding voting securities of such other Person; (iii)
any officer, director or partner of such Person; and (iv) if such
Person is an officer, director or partner, any such company for
which such Person acts in such capacity.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's Common Stock, $1.00 par
value per share.
"Exchange Act" means the Securities Exchange Act of 1934, or
any successor Federal statute, and the rules and regulations of
the Commission (or of any other Federal agency then administering
the Exchange Act) thereunder, all as the same shall be in effect
at the time.
"Holder" means any holder of Registrable Stock.
"NASD" means the National Association of Securities Dealers,
Inc.
"Person" means any natural person, partnership, corporation
or other legal entity.
"Registrable Stock" means (a) the Purchased Stock, (b) the
Common Stock issued or issuable upon exercise of the Warrants,
and (c) any other shares of Common Stock issued in respect of
such shares by way of a stock dividend, or stock split or in
connection with a
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combination of shares, recapitalization, merger, consolidation,
share exchange or reorganization; provided, however, Common Stock
will cease to be Registrable Stock (i) following sale thereof
pursuant to a Registration Statement or (ii) two years or more
have elapsed since exercise or expiration of all of the Warrants.
"Registration Statement" means a registration statement
filed by the Company with the Commission for a public offering
and sale of securities of the Company (other than a registration
statement on Form S-8, Form S-4, or successor form).
"Securities Act" means the Securities Act of 1933, or any
successor Federal statute, and the rules and regulations of the
Commission (or of any other Federal agency then administering the
Securities Act) thereunder, all as the same shall be in effect at
the time.
2. Required Registration. (a) The Holder or Holders of at
least fifty percent of all Registrable Stock may by notice in
writing to the Company request the Company to register under the
Securities Act all or any portion of shares of Registrable Stock
held by or issuable to such requesting Holder or Holders for sale
in connection with nonunderwritten open market or privately
negotiated transactions. Notwithstanding anything to the
contrary contained herein, the Company shall not be required to
seek to cause a Registration Statement to become effective
pursuant to this Section 2: (A) within 120 days after the
effective date of a Registration Statement filed by the Company,
provided that the Company shall use its best efforts to achieve
effectiveness of a registration requested hereunder promptly
following such 120-day period if such request is made during such
120-day period; (B) if the Company shall furnish to holders a
certificate signed by the chief executive officer of the Company
stating that in the good faith judgment of the Company it would
be seriously detrimental to the Company or its shareholders for a
registration statement to be filed in the near future due to
pending Company events, or that it would require disclosure of
material non-public information relating to the Company which, in
the reasonable opinion of the Company, should not be disclosed,
then the Company's obligation to comply with this Section 2 shall
be deferred for a period not to exceed ninety (90) days from the
date of receipt of written request from such Holders.
(b) Following receipt of any notice given under this
Section 2 by Holders of Registrable Stock, the Company shall
promptly notify all Holders from whom notice has not been
received that such registration is to be effected and shall use
its reasonable best efforts to register under the Securities Act
the number of shares of Registrable Stock specified in such
notice (and in all notices received by the Company from other
Holders within twenty (20) days after the giving of such notice
by the Company to such other Holders). The Company shall be
obligated to register Registrable Stock pursuant to this Section
2 on one occasion only.
3. Registration Procedures. If and whenever the Company is
required by the provisions of Section 2 hereof to effect the
registration of shares of Registrable Stock under the Securities
Act, the Company will, at the expense of the Company, as
expeditiously as reasonably possible:
(a) In accordance with the Securities Act and the
rules and regulations of the Commission, prepare and file
with the Commission a Registration Statement with respect
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to such securities and use its reasonable best efforts to
cause such Registration Statement to become and remain
effective until the securities covered by such Registration
Statement have been sold, and prepare and file with the
Commission such amendments to such Registration Statement
(and use its reasonable best efforts to cause post-effective
amendments to become and remain effective) and supplements
to the prospectus contained therein as may be necessary to
keep such Registration Statement effective and such
Registration Statement and prospectus accurate and complete
until the Registrable Stock covered by such Registration
Statement has been sold or the securities are no longer
Registrable Stock;
(b) Furnish to the participating Holders such
reasonable number of copies of the Registration Statement
(including all exhibits thereto), preliminary prospectus,
final prospectus and such other documents as such
participating Holders may reasonably request in order to
facilitate the public offering of such securities;
(c) Use its reasonable best efforts to register or
qualify the securities covered by such Registration
Statement under such state securities or blue sky laws of
such jurisdictions (i) as shall be reasonably appropriate
for the distribution of the securities covered by such
Registration Statement or (ii) as such participating Holders
may reasonably request within twenty (20) days following the
original filing of such Registration Statement, except that
the Company shall not for any purpose be required to execute
a general consent to service of process, to subject itself
to taxation, or to qualify to do business as a foreign
corporation in any jurisdiction where it is not so
qualified;
(d) Notify the Holders participating in such
registration, promptly after it shall receive notice
thereof, of the date and time when such Registration
Statement and each post-effective amendment thereto has
become effective or a supplement to any prospectus forming a
part of such Registration Statement has been filed;
(e) Notify the Holders participating in such
registration promptly of any request by the Commission or
any state securities commission or agency for the amending
or supplementing of such Registration Statement or
prospectus or for additional information;
(f) Prepare and file within thirty days with the
Commission, and immediately notify such participating
Holders of the need to file and of the filing of, such
amendments or supplements to such Registration Statement or
prospectus as may be necessary to correct any statements or
omissions if, at the time when a prospectus relating to such
securities is required to be delivered under the Securities
Act, any event has occurred as the result of which any such
prospectus or any other prospectus as then in effect would
include an untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary to make the statements therein not misleading;
(g) In case any of such participating Holders or any
underwriter for any such Holders is required to deliver a
prospectus at a time when the prospectus then in
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circulation is not in compliance with the Securities Act or
the rules and regulations of the Commission, prepare
promptly upon request such amendments or supplements to such
Registration Statement and such prospectus as may be
necessary in order for such prospectus to comply with the
requirements of the Securities Act and such rules and
regulations;
(h) Advise such participating Holders, promptly after
it shall receive notice or obtain knowledge thereof, of the
issuance of any stop order by the Commission or any state
securities commission or agency suspending the effectiveness
of such Registration Statement or the initiation or
threatening of any proceeding for that purpose and promptly
use reasonable best efforts to prevent the issuance of any
stop order or to obtain its withdrawal if such stop order
should be issued; and
(i) Use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission and shall
make generally available as soon as practicable after the
effective date of the applicable Registration Statement an
earnings statement satisfying the provisions of Section
11(a) of the Securities Act.
4. Expenses.
(a) With respect to each registration effected
pursuant to Section 2 hereof, all fees, costs and expenses
of the Company incidental to such registration in connection
therewith shall be borne by the Company.
(b) The fees, costs and expenses of registration to be
borne as provided in paragraph (a) above, shall include,
without limitation, all registration, filing fees, printing
expenses, fees and disbursements of counsel and accountants
for the Company, and all legal fees and disbursements and
other expenses of complying with state securities or blue
sky laws of any jurisdictions in which the securities to be
offered are to be registered or qualified. The Holders
shall bear all of their own expenses, including without
limitation, brokerage expenses and their own usual and
customary legal fees and expenses.
5. Indemnification and Contribution.
(a) The Company will indemnify and hold harmless each
Holder of shares of Registrable Stock which are included in
a Registration Statement pursuant to the provisions of this
Agreement, the directors, officers, employees and agents of
such Holder, and any Person who controls such Holder within
the meaning of the Securities Act or the Exchange Act, and
each of their successors, from and against any and all
claims, actions, demands, losses, expenses, damages or
liabilities, joint or several, to which they or any of them
may become subject under the Securities Act, the Exchange
Act or other federal or state statutory law or regulation,
at common law or otherwise, insofar as such claims, actions,
demands, losses, expenses, damages or liabilities arise out
of or are based upon any untrue statement or alleged untrue
statement of any material fact
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contained in such Registration Statement (including all
documents incorporated therein by reference) as originally
filed or in any amendment thereto, any preliminary or final
prospectus contained therein or any amendment or supplement
thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein not misleading; provided, however, that the Company
will not be liable in any such case to the extent that any
such claim, action, demand, loss, expense, damage, or
liability arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission
so made in reliance upon and in conformity with information
furnished in writing by such Holder for use in the
preparation thereof; provided, further, that the foregoing
indemnity shall not inure to the benefit of any Holder and
the officers, directors, agents, employees of the Holder,
and each Person who controls the Holder, if the Holder shall
have sold Registrable Stock in violation of Section 6
hereof.
(b) Each Holder of shares of the Registrable Stock
which are included in a registration pursuant to the
provisions of this Agreement will, severally and not
jointly, indemnify and hold harmless the Company, the
directors, officers, employees and agents of the Company and
any person who controls the Company within the meaning of
the Securities Act or the Exchange Act from and against any
and all claims, actions, demands, losses, expenses, damages
or liabilities, joint or several, to which they or any of
them may become subject under the Securities Act, the
Exchange Act or other federal or state statutory law or
regulation, at common law or otherwise, insofar as such
claims, actions, demands, losses, expenses, damages or
liabilities arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact
contained in such Registration Statement (including all
documents incorporated therein by reference) as originally
filed or in any amendment thereto, any preliminary or final
prospectus contained therein or any amendment or supplement
thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only
to the extent that such untrue statement or alleged untrue
statement or omission or alleged omission was so made in
reliance upon and in conformity with information furnished
in writing by such Holder for use in the preparation
thereof.
(c) Promptly after receipt by a party to be
indemnified pursuant to the provisions of paragraph (a) or
(b) of this Section 5 (an "indemnified party") of notice of
the commencement of any action involving the subject matter
of the foregoing indemnity provisions, such indemnified
party will, if a claim thereof is to be made against the
indemnifying party pursuant to the provisions of paragraph
(a) or (b), notify the indemnifying party of the
commencement thereof; but the omission so to notify the
indemnifying party will not relieve it from any liability
which it may have to an indemnified party otherwise than
under this Section 5 and shall not relieve the indemnifying
party from liability under this Section 5 unless such
indemnifying party is prejudiced by such omission. The
indemnifying party shall be entitled to appoint counsel of
the indemnifying party's choice at the indemnifying party's
expense to represent the indemnified party in any action for
which indemnification is sought (in which case the
5
<PAGE>
indemnifying party shall not be responsible for the fees and
expenses of any separate counsel retained by the indemnified
party or parties except as set forth below); provided,
however, that such counsel shall be reasonably satisfactory
to the indemnified party. Notwithstanding the indemnifying
party's election to appoint counsel to represent the
indemnified party in an action, the indemnified party shall
have the right to employ separate counsel, and the
indemnifying party shall bear the reasonable fees, costs and
expenses of such separate counsel if (i) the use of counsel
chosen by the indemnifying party to represent the
indemnified party would present such counsel with a conflict
of interest that would make such representation
inappropriate in the circumstances, (ii) the indemnifying
party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within
a reasonable time after notice of the institution of such
action or (iii) the indemnifying party shall authorize the
indemnified party to employ separate counsel at the expense
of the indemnifying party. An indemnifying party will not,
without the prior written consent of the indemnified
parties, settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim,
action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder
unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or
proceeding.
(d) In order to provide for just and equitable
contribution to joint liability under the Securities Act in
any case in which either (i) any Holder exercising rights
under this Agreement, or any controlling Person of any such
Holder, makes a claim for indemnification pursuant to this
Section 5 but it is judicially determined (by the entry of a
final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such
indemnification may not be enforced in such case
notwithstanding the fact that this Section 5 provides for
indemnification is such case, or (ii) contribution under the
Securities Act may be required on the part of any such
selling Holder or any such controlling Person in
circumstances for which indemnification is provided under
this Section 5; then, and in each such case, the Company and
such Holder will contribute to the aggregate losses, claims,
damages or liabilities to which they may be subject
(including legal and other expenses reasonably incurred in
connection with or defending same) in such proportion as is
appropriate to reflect the relative fault of the
indemnifying party, on the one hand, and the indemnified
party, on the other. Relative fault shall be determined by
reference to whether any alleged untrue statement or
omission relates to information provided by the indemnifying
party, on the one hand, or by the indemnified party, on the
other hand. The parties agree that it would not be just and
equitable if contribution were determined by pro rata
allocation or any other method of allocation which does not
take account of the equitable considerations referred to
above. Notwithstanding the provisions of this paragraph
(d), no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
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<PAGE>
(e) The provisions of this Section 5 will remain in
full force and effect, regardless of any investigation made
by or on behalf of any Holder or the Company or any of the
officers, directors, employees or agents or controlling
persons referred to in Section 5 hereof, and will survive
the sale by a Holder of securities covered by a Registration
Statement.
(f) The liability of a Holder under this Section 5
shall not exceed an amount equal to the net proceeds
received by a Holder from the sale of Registrable Stock.
6. Holder Cooperation. Prior to any offers or sales under
the Registration Statement, each Holder agrees to obtain prior
confirmation from the Company that no "Blackout Condition"
exists. The Company shall provide such confirmation (if true)
within one business day of the request from a Holder. "Blackout
Condition" means (i) the existence of material, nonpublic
information, (ii) the unavailability of any required financial
information as the result of an actual or proposed acquisition or
disposition, or (iii) the existence of any financing or other
transaction, event or condition which would make it
disadvantageous, in the Company's reasonable opinion, for
Registrable Stock to be sold under the Registration Statement.
In connection with the registration and sale of the Registrable
Stock, each Holder will (i) cooperate with the Company in
preparing the Registration Statement and provide the Company with
all information, documents and agreements that the Company may
deem reasonably necessary, (ii) discontinue offers and sales of
the Registrable Stock under the Registration Statement upon
notification of a Blackout Condition or of any stop order or
suspension of effectiveness of the Registration Statement, (iii)
discontinue use of any prospectus following notice by the Company
that the prospectus must be amended or supplemented (iv) only use
the most recent prospectus included in the Registration
Statement, (v) upon presentation of the stock certificate
representing any Registrable Stock sold under the Registration
Statement, certify that the sale was made in accordance with the
terms hereof and the plan of distribution described in the
Registration Statement, and (vi) comply with applicable federal
and state securities laws including without limitation the
prospectus delivery requirements under the Securities Act and the
applicable requirements of Rule 10b-5 and Regulation M under the
Exchange Act.
7. Notices. Any notice required or permitted to be given
hereunder shall be in writing and shall be deemed to be properly
given when sent by registered or certified mail, return receipt
requested, by Federal Express, DHL or other guaranteed overnight
delivery service or by facsimile transmission, addressed as
follows:
If to the Company: The Diana Corporation
26025 Mureau Road
Calabasas, California 91302
Telecopy: (818) 878-7633
Attention: Daniel W. Latham
If to a Holder: at the address set forth on the
signature page hereof
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and if to any other Holder at such Holder's address for notice as
set forth in the register maintained by the Company, or, as to
any of the foregoing, to such other address as any such party may
give the others notice of pursuant to this Section, provided that
a change of address shall only be effective upon receipt.
8. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware.
9. Waivers; Amendments. No waiver of any right hereunder
by any party shall operate as a waiver of any other right, or of
the same right with respect to any subsequent occasion for its
exercise. This Agreement may not be amended except by a writing
executed by the Company and the Holders of at least two-thirds of
the Registrable Stock.
10. Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the respective
legal representatives, successors and assigns of the parties
hereto. A Holder may assign its rights hereunder in connection
with an assignment of a Warrant or Registrable Stock, provided
the disposition covers at least 50,000 shares of Common Stock and
the transferee agrees in writing to the terms hereof.
11. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
12. Prior Understandings. This Agreement represents the
complete agreement of the parties with respect to the
transactions contemplated hereby and supersedes all prior
agreements and understandings.
13. Headings. Headings in this Agreement are included for
reference only and shall have no effect upon the construction or
interpretation of any part of this Agreement.
14. Severability. If any provision of this Agreement shall
be held to be illegal, invalid or unenforceable, such illegality,
invalidity or unenforceability shall attach only to such
provision and shall not in any manner affect or render illegal,
invalid or unenforceable any other provision of this Agreement,
and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above recited.
THE DIANA CORPORATION
By: /s/ Daniel W. Latham, President
and Chief Operating Officer
By: /s/ James J. Fiedler
Address: 24905 Ariella Drive
Calabasas, CA 91302
Telecopy: (818) 225-8746
9
EMPLOYMENT AGREEMENT
THIS AGREEMENT, is made as of September 4, 1997, provided that the
employment hereunder shall be deemed to have commenced on April 1,
1997, by and between THE DIANA CORPORATION, a Delaware Corporation
(the "Company"), and JAMES J. FIEDLER (the "Executive").
R E C I T A L S
WHEREAS, Executive is willing to be employed by Company, and the
Company is willing to employ the Executive, upon the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in order to set forth the terms and conditions of
Executive's employment with Company and in consideration of the
covenants and agreements of the parties herein contained, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Employment Services. Subject to the terms and upon the
conditions hereinafter set forth, the Company hereby employs
Executive as Chairman and Chief Executive Officer.
Executive accepts such employment and agrees to devote his
full time and use his best efforts to perform his duties
pursuant to this Agreement and to further the business of
the Company. Executive shall not, without the prior written
consent of the Company as authorized by the Company's Board
of Directors ("Board of Directors"), engage directly or
indirectly in any other business or occupation during his
employment under this Agreement.
2. Term and Termination.
2.1 Term. Subject to Section 2.2 hereof, the employment of
Executive under this Agreement shall be deemed to have
commenced on April 1, 1997 and will continue until the
occurrence of the first of the following:
a) March 31, 1998 (i.e. a term of one year);
b) Executive's death; or
c) Executive's illness, physical or mental disability
or other incapacity resulting in Executive's
inability to effectively perform the essential
functions of his job, with or without reasonable
accommodation, for a cumulative period of twelve
(12) weeks during any period of twelve (12)
consecutive months.
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The term of this Agreement may only be extended by the
written agreement of both the Company (as approved by the
Board of Directors) and the Executive, as provided in
Section 11.1.
2.2 Termination. The employment of Executive under this
Agreement may also be terminated at the option of the Board
of Directors upon the occurrence of any of the following:
a) Executive's conduct involving fraud or moral
turpitude or Executive's dishonesty involving
Company's business,
b) Executive's chronic absence from work other than
by reason of illness or injury,
c) Executive's conviction of any felony,
d) Executive's conviction of any misdemeanor which is
substantially related to Executive's services
hereunder,
e) Executive's continuing use of illegal drugs or
other illegal substance (whether or not on the
job) after receiving a written notice from the
Company to halt such usage or Executive's
conviction of a crime involving illegal drugs or
other illegal substance,
f) Executive's continuing use of alcohol (whether or
not on the job) after receiving a written notice
from the Company to halt such usage or Executive's
conviction of a crime involving alcohol, which
impairs Executive's ability to perform Executive's
duties under this Agreement or has an adverse
effect (other than an insignificant effect) on the
reputation of the Company or its relationship with
any customer or supplier of the Company,
g) Executive's illegal conduct either within or
outside the scope of Executive's employment which
has an adverse effect (other than an insignificant
effect) on the reputation of the Company or its
relationship with any customer or supplier of the
Company,
h) Executive's breach of his obligations under
Sections 6, 7, 8 or 9 hereof, or
i) Executive's breach of any other provision of this
Agreement.
If the Board of Directors terminates the employment of the
Executive without any such reason as aforesaid, which
Executive agrees the Board of Directors is entitled to do
since Executive serves at the discretion of the Board of
Directors, then Executive shall nevertheless be entitled to
salary and medical benefits only hereunder until the earlier
of (i) the date specified in Section 2.1 and (ii) the first
anniversary of such termination. In the case of any other
termination of the Executive's employment, the salary and
benefits hereunder will terminate as of the date of such
termination. Reference is made to Section 11.1 of this
Agreement
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regarding the authority of the Board of Directors to make
determinations on behalf of the Company for purposes of this
Agreement.
2.3 Effect of Termination. Executive's obligations in Sections
6, 7, 8, and 9 hereof shall survive the termination of
Executive's employment hereunder for any reason. However,
if this Agreement is not renewed for at least one additional
year beyond the date specified in Section 2.1(a), then the
additional twelve month period of non-competition (i.e.
after termination of employment) provided in Section 9 shall
not be applicable to Executive.
3. Salary. During the term of his employment under this
Agreement, as compensation for his services hereunder and in
consideration of the covenants of Executive herein,
Executive shall be entitled to a salary at a rate of Two
Hundred Thousand Dollars ($200,000) per year. Such salary
will be paid in equal semi-monthly installments or with such
other frequency as Company shall elect (but not less
frequently than semi-monthly) and shall be subject to
withholding and other deductions by reason of federal or
state law.
4. Reimbursement for Expenses. Company agrees to reimburse
Executive for all reasonable business expenses incurred by
him in connection with the performance of his obligations
under this Agreement, subject to established reimbursement
policies of the Company in effect from time-to-time
regarding expense reimbursement.
5. Fringe Benefits. Executive shall be entitled to the
following fringe benefits during the term of his employment
under this Agreement. The Executive understands that he
will recognize income to the extent provided by law in
respect of certain of the benefits hereunder, including
cancellation of indebtedness income, and that these benefits
shall be subject to withholding and other deductions by
reason of federal or state law.
5.1 Vacation and Car Allowance. (a) Executive shall be allowed
four (4) weeks of vacation per year, with full pay and
without loss of any other compensation or benefits, during
the term of this Agreement. Executive shall coordinate the
schedule of his vacations with other executives and the
personnel of Company and its affiliates so as to avoid any
adverse effects on the Company's operations.
(b) Executive will receive a car allowance of $600 per month.
5.2 Bonuses.
a) With reasonable promptness after the end of each
half year included in each of the Company's fiscal
years covered by this
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Agreement, the Executive shall receive a bonus
equal to ten percent (10%) of the Company's
pre-tax profits for said half year but not to
exceed for such fiscal year as a whole one hundred
percent (100%) of the amount of Executive's annual
salary. The Company's pre-tax profits shall be
its income after all expenses, adjustments and
deductions except income taxes, but shall not
include the effects, if any, of extraordinary
items and accounting changes, as set forth in its
consolidated financial statements (audited, if
applicable) for such half year or year as included
in its second quarter report on Form 10-Q for such
fiscal year or in its annual report on Form 10-K
for such fiscal year as filed with the Securities
and Exchange Commission (in the absence of such
filing, to be based on the Company's financial
statements otherwise prepared). In any event, the
sum of the Company's pre-tax profits for the first
half of such fiscal year and the second half of
such fiscal year shall not exceed the total for
such full fiscal year as included in such annual
report on Form 10-K. For comparative purposes, in
the Company's 1996 annual report on Form 10-K/A,
the amount of such pre-tax profits in fiscal year
1996 was a loss of $3.365 million (i.e., a
negative amount) as captioned in the Company's
consolidated statements of operations as "net
earnings (loss)", since the Company reflected
neither taxes nor tax benefit in such year.
b) During the term of the Executive's employment
under this Agreement, with reasonable promptness
after the end of each month, commencing with the
month of April 1997, in order to emphasize sales
revenue growth for Sattel Communications LLC
("Sattel"), which is presently an 80% owned
indirect subsidiary of the Company, Executive
shall receive a bonus equal to one-half percent
(0.5%) of the sales revenues of Sattel for such
month, provided that: (i) the gross margin of
Sattel's sales for such month (defined as net
sales revenues less cost of sales) shall be at a
level of sixty-two percent (62%) or greater
(provided that such requirement shall instead be
fifty-five percent (55%) for months prior to and
including September 1997), (ii) such bonus based
on revenues of Sattel shall be payable only as and
when sales revenues are received by Sattel in the
form of cash, and (iii) for each fiscal year
covered by this Agreement, the aggregate amount
for all months of such bonus based on sales
revenues of Sattel shall not exceed thirty percent
(30%) of the amount of Executive's annual salary,
provided that, if the sales revenues of Sattel for
such fiscal year as a whole exceed $18 million,
then such percentage limitation shall instead be
fifty percent (50%) of the amount of
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Executive's annual salary, and if the sales
revenues of Sattel for such fiscal year as a whole
exceed $25 million, then such percentage
limitation shall instead be one hundred percent
(100%) of the amount of Executive's annual salary.
The Company may delay or limit the payment of any
bonus pursuant to this Section 5.2(b) until such
time as these requirements are met. If for any
reason an excess bonus is paid, for example
because sales revenues in a previous month are
reversed, due to a refund, then the Company shall
be entitled to a corresponding refund of bonus
and/or a credit against a future bonus, as
appropriate.
With respect to both paragraphs a) and b) above, (i)
the amounts of pre-tax profits of the Company and sales
revenues of Sattel shall be calculated based on
generally accepted accounting principles consistently
applied, except as specifically mentioned above and
(ii) such provisions have been agreed to in
contemplation of the Company's fiscal year ending on or
about March 31, 1998, and it is understood that such
provisions might be continued unchanged, or might be
amended or deleted or replaced with other provisions,
according to the mutual agreement of the parties, in
connection with the extension, if any, of this
Agreement. See Sections 2.1 and 11.1 of this
Agreement.
5.3 Other Fringe Benefits. Executive may receive such other
additional fringe benefits, if any, as the Board of
Directors may from time-to-time make available to Executive
at the Board of Directors' sole discretion. The parties
understand that the Company is in the process of arranging a
new equity financing, for which the efforts of the Executive
have been substantial, in the amount of $3.5 million or
greater. Subject to the closing of such additional equity
financing, Executive shall be entitled to the following:
a) Executive has a $300,000 note payable to the
Company. On the date of this Agreement (or, if
later, on the date such $3.5 million financing
condition is met), a portion of such note will be
forgiven in the amount of $100,000 of the unpaid
principal, and interest on such forgiven portion.
Thereafter, if this Agreement shall be renewed for
an additional year or years, pursuant to Sections
2.1 and 11.1 hereof, the Company agrees that
additional portions of such note in the principal
amounts of $100,000 and $100,000, respectively,
will be forgiven at the dates that are twelve (12)
months and twenty-four (24) months, respectively,
after the date of this Agreement. Such three
scheduled instances of forgiveness are each
subject to the conditions (i) that the Executive
remains as an employee of the Company at each such
forgiveness date and (ii)
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that the Company shall not be, or be rendered as a
consequence of such forgiveness, bankrupt or
insolvent at such respective dates.
b) The Company notes that the Class B units of Sattel
are convertible (the holders thereof having both
the right and the obligation to convert the same
into shares of the Company's common stock) upon,
among other things, Sattel achieving cumulative
pre-tax profits of at least $15 million over four
consecutive quarters in the future. Such
conversion is at a rate of 500 shares of the
Company's common stock for each Class B unit,
subject to adjustment. At such time as, among
other things, a majority of the Class B units are
so converted, then the Class A units of Sattel
shall also be converted on the same terms as the
Class B units, except with a possible upwards
adjustment to reflect the priority of distribution
associated with the Class A units. The Company
will waive the foregoing condition that Sattel
achieve cumulative pre-tax profits of at least $15
million over four consecutive quarters in order
for the Class B units, and the Class A units, to
be convertible. Instead, the Company will
establish terms permitting, but not requiring, the
Class B units to be converted at the election of
the holders following the date such $3.5 million
financing is achieved as referred to above or at
any time thereafter. The Class A units will also
become convertible, on the same terms as the Class
B units, at the option of the holders, at such
time as a majority of the Class B units have
actually been converted by the holders thereof or
at any time thereafter. These new terms for
conversion will apply only to holders of the Class
A and B units who are currently (or were as of
June 30, 1997) directors, officers or employees of
the Company and its subsidiaries. As to all other
holders, the previously existing terms and
conditions shall remain unchanged. The Executive
will be entitled to participate therein on the
same basis as all other holders of the Class B
units or Class A units, according to the units
held by the Executive. The Company does not
contemplate that any demand registration rights
under federal or state securities laws will be
applicable to any such conversion, and such
securities, including the shares of the Company's
common stock issuable upon conversion, will only
be available for resale in accordance with
applicable securities laws and exemptions
thereunder, including Rule 144 under the
Securities Act of 1933, as amended. However, as
soon as reasonably practicable, but not earlier
than the time the Company becomes current in its
reporting under the Securities Exchange Act of
1934, the Company intends to file a registration
statement on Form S-8 to
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cover such conversion to the extent registration
on such form for such conversion is then
available. Additionally, in case registration on
such form for such purpose is not reasonably
practicable or available, the Company will give
appropriate consideration to allowing a piggy-back
registration.
6. Definitions. As used in this Agreement, the following words
have the meanings specified:
a) "Proprietary Ideas" means ideas, suggestions,
inventions and work relating in any way to the
business and activities of Company which may be
subjects of protection under applicable laws,
including common law, including patents,
copyrights, trade secrets, trademarks, service
marks or other intellectual property rights.
b) "Inventions" means inventions, designs,
discoveries, improvements and ideas, whether or
not patentable, including without limitation,
novel or improved products, processes, machines,
software, promotional and advertising materials,
business data processing programs and systems, and
other manufacturing and sales techniques, which
either (a) relate to (i) the business of Company
as conducted from time-to-time or (ii) the
Company's actual or demonstrably anticipated
research or development, or (b) result from any
work performed by Executive for Company.
c) "Confidential Information" means Proprietary Ideas
and also information related to Company's
business, whether or not in written or printed
form, not generally known in the trade or industry
of which Executive has or will become informed
during the period of employment by the Company,
which may include but is not limited to product
specifications, manufacturing procedures, methods,
equipment, compositions, technology, formulas,
trade secrets, know-how, research and development
programs, sales methods, customer lists, mailing
lists, customer usages and requirements, software
and other confidential technical or business
information and data; provided, however, that
Confidential Information shall not include any
information which is in the public domain by means
other than disclosure by Executive.
d) As used in Sections 6, 7, 8, and 9 only, the term
"Company" shall include all entities affiliated
with the Company.
7. Disclosure and Assignment of Inventions. Executive agrees
to disclose to the Company (and, if requested to do so, to
provide a written description thereof to the Company), and
hereby assigns to Company all of Executive's rights in and
to, any Inventions conceived or reduced to practice at any
time during Executive's
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employment by Company, either solely or jointly with others
and whether or not developed on Executive's own time or with
Company's resources. Executive agrees that Inventions first
reduced to practice within one (1) year after termination of
Executive's employment by Company shall be treated as if
conceived during such employment unless Executive can
establish specific events giving rise to the conception
which occurred after such employment. Further, Executive
disclaims and will not assert any rights in Inventions as
having been made, conceived or acquired prior to employment
by Company except such as are specifically listed at the
conclusion of this Agreement. Executive shall cooperate
with Company and shall execute and deliver such documents
and do such other acts and things as Company may request, at
Company's expense, to obtain and maintain letters patent or
registrations covering any Inventions and to vest in Company
all rights therein free of all encumbrances and adverse
claims.
8. Confidential Information. Except as required by law or
regulatory agencies, Executive shall not disclose to Company
or induce Company to use any secret or confidential
information belonging to persons not affiliated with
Company, including any former employer of Executive. In
addition to all duties of loyalty imposed on Executive by
law, Executive shall maintain Confidential Information in
strict confidence and secrecy and shall not at any time,
during or at any time after termination of employment with
Company, directly or indirectly, use or disclose to others
any Confidential Information, or use it for the benefit of
any person or entity (including Executive) other than
Company, without the prior written consent of any duly
authorized officer of Company (except for disclosures to
persons acting on Company's behalf with a need to know such
information). Executive shall carefully preserve any
documents, records and tangible data relating to Inventions
or Confidential Information coming into Executive's
possession and shall deliver the same and any copies thereof
to Company upon request and, in any event, upon termination
of Executive's employment by Company.
9. Non-Competition.
a) At all times during Executive's employment by the
Company (whether pursuant to this Agreement or
otherwise) and, to the fullest extent permitted by
applicable law, for a period of twelve (12) months
following the termination of such employment,
Executive will not, in any capacity whatsoever, in
any state in the United States or in any other
country, directly or indirectly, participate in or
assist in the ownership, management, operation or
control of, or have any beneficial interest in, or
provide employment, consulting or other services
for, any corporation, partnership, association or
other person or entity ("Competitive
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Business") which is engaged in the development,
manufacture, marketing, distribution, service
and/or sale of voice or data switching equipment,
and which directly competes or is planning to
directly compete with the Company's products or
services (including products and services under
development). If the business is multi-faceted,
this restriction shall apply to only that part of
the business which is competitive to Company.
b) In furtherance of the foregoing, but as an
independent obligation of Executive, Executive
agrees that he will not, to the fullest extent
permitted by applicable law, during the one-year
period following termination of his employment
with Company, be connected in any way with the
solicitation of any then current or potential
customers or suppliers of Company if such
solicitation is likely to result in a loss of
business for Company.
c) In furtherance of the foregoing, but as an
independent obligation of the Executive, Executive
agrees that, to the fullest extent permitted by
applicable law, during the one year following
termination of his employment with the Company, he
will not solicit for employment, employ or engage
as a consultant any person who had been an
employee of the Company at any time in the
one-year period prior to termination of
Executive's employment with Company.
d) In the event the covenants set forth in this
Section 9 are found to be unenforceable or invalid
by reason of being overly broad, the parties
hereto intend that such covenants shall be limited
to such scope, geographic area and duration as
shall make such covenants valid and enforceable.
10. Government Laws, Regulations and Contracts. Executive
agrees to comply, and to do all things necessary for Company
to comply, with all federal, state, local and foreign laws
and regulations and government contracts which may be
applicable to the business and operations of Company.
11. Miscellaneous.
11.1 Amendment and Modification. Company (by action of its Board
of Directors) and Executive may amend, modify and supplement
this Agreement only in such manner as may be agreed upon by
Company and Executive in writing. This provision shall be
applicable to any extension of the term of this Agreement as
provided in Section 2.1. All determinations, waivers,
consents, approvals or other acts on the part of the Company
that are permitted or required by this Agreement shall
similarly require the approval of the Board of Directors.
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11.2 Entire Agreement. This instrument embodies the entire
agreement between the parties hereto with respect to
the employment relationship created hereby and
supersedes and discharges any prior agreements
pertaining to employment between Executive and the
Company. There have been and are no agreements,
representations or warranties between the parties other
than those set forth or provided for herein relating to
such employment relationship.
11.3 Assignment. This Agreement shall not be assigned by
either party without the written consent of the other
party. Inasmuch as this Agreement contemplates the
provision of personal services by the Executive,
ordinarily this Agreement shall not be assignable by
the Executive. This Agreement shall not be assigned by
the Company except with the prior written consent of
the Executive, which he shall not unreasonably
withhold. Any attempted assignment without such
written consent shall be null and void and without
legal effect.
11.4 Binding Effect; Specific Performance. Subject to
Section 11.3 hereof, this Agreement shall be binding
upon and inure to the benefit of the respective parties
hereto and their successors, assigns, heirs, executors,
administrators and personal representatives. The
parties hereto shall be entitled, at their option, to
the remedy of specific performance to the fullest
extent permitted by applicable law in enforcing the
provisions of this Agreement.
11.5 Arbitration. Any dispute, controversy or claim arising
out of or relating to this Agreement, or the breach
hereof, or the employment relationship hereunder, shall
be settled by binding arbitration in Los Angeles,
California administered by the American Arbitration
Association under its Commercial Arbitration Rules, and
judgment on the award rendered by the arbitrators may
be entered in any court having jurisdiction thereof.
11.6 Agreement Severable; Waiver. This is a severable
Agreement and in the event that any part of this
Agreement shall be held to be unenforceable, all other
parts of this Agreement shall remain valid and fully
enforceable as if the unenforceable part or parts had
not been included herein. No waiver of any provision
of this Agreement shall be binding unless executed in
writing by the party to be bound hereby. No waiver of
a breach of any of the provisions of this Agreement
shall be deemed to be or shall constitute a waiver of a
breach of any other provision of this Agreement,
whether or not similar, nor shall such waiver
constitute a continuing waiver of such breach unless
otherwise expressly provided. No failure or delay in
exercising any right, power or remedy hereunder shall
operate as a waiver thereof, nor shall any single or
partial exercise of any such right, power or remedy
preclude any other or further exercise thereof or the
exercise of any other right, power or remedy.
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11.7 Notices. For purposes of this Agreement, notices and
all other communications provided for in the Agreement
shall be in writing and shall be deemed to have been
duly given when actually delivered to the recipient or
when mailed by United States certified or registered
mail, return receipt requested, postage prepaid,
addressed as follows:
If to Executive, to: James J. Fiedler
26025 Mureau Rd.
Calabasas, CA 91302
If to Company, to: The Diana Corporation
Attn: Board of Directors
26025 Mureau Rd.
Calabasas, CA 91302
or to such other address as either party may have
furnished to the other in writing in accordance
herewith except that notices of a change of address
shall be effective only upon receipt.
11.8 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CALIFORNIA, WITHOUT REFERENCE TO THE CHOICE OF LAW
PRINCIPLES THEREOF.
EXECUTIVE ACKNOWLEDGES HAVING READ, EXECUTED AND RECEIVED A
COPY OF THIS AGREEMENT, INCLUDING THE FOLLOWING NOTICE, AND
AGREES THAT, WITH RESPECT TO THE SUBJECT MATTER HEREOF, IT
CONSTITUTES EXECUTIVE'S ENTIRE AGREEMENT WITH COMPANY,
SUPERSEDING ANY PREVIOUS ORAL OR WRITTEN COMMUNICATIONS,
REPRESENTATIONS, UNDERSTANDINGS OR AGREEMENTS WITH THE
COMPANY OR ANY OF ITS OFFICIALS OR REPRESENTATIVES.
Notwithstanding anything to the contrary in Section 7
hereof, this Agreement does not apply to an Invention for
which no equipment, supplies, facility, or trade secret
information of the Company was used and which was developed
entirely on Executive's own time, unless (a) the Invention
relates (i) to the business of the Company as conducted from
time-to-time or (ii) to the Company's actual or demonstrably
anticipated research or development, or (b) the Invention
results from any work performed by the Executive for the
Company.
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IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed as of the day and year first above written.
THE DIANA CORPORATION ("Company")
By: /s/ Jack E. Donnelly Date: September 4, 1997
JAMES J. FIEDLER ("Executive")
By: /s/ James J. Fiedler Date: September 4, 1997
List of Inventions Excepted From Section 7 Above:
None
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