<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 1, 1996
REGISTRATION NO. 33-06337
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
AMENDMENT NO. 1
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
GIGA-TRONICS, INCORPORATED
(Exact name of Registrant as specified in its charter)
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CALIFORNIA 38252 94-2656341
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
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4650 NORRIS CANYON ROAD
SAN RAMON, CALIFORNIA 94583
(510) 328-4650
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
----------------
GEORGE H. BRUNS, JR.
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
GIGA-TRONICS, INCORPORATED
4650 NORRIS CANYON ROAD
SAN RAMON, CALIFORNIA 94583
(510) 328-4650
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
----------------
With copies to:
WILLIAM L. HUDSON, ESQ.
JON C. PERRY, ESQ.
BROBECK, PHLEGER & HARRISON
ONE MARKET
SPEAR STREET TOWER
SAN FRANCISCO, CALIFORNIA 94105
(415) 442-0900
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF
THE SECURITIES TO THE PUBLIC:
As promptly as practicable after this Registration Statement becomes
effective and the effective time of the proposed merger (the "Merger") of a
wholly owned subsidiary of Giga-tronics, Incorporated ("Giga-tronics") with and
into ASCOR, Inc. ("ASCOR"), as described in the Agreement and Plan of
Reorganization, dated as of May 2, 1996, as amended (the "Reorganization
Agreement"), attached as Appendix C to the Joint Proxy Statement/Prospectus
forming a part of this Registration Statement.
----------------
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box.
----------------
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE AMOUNT TO OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED BE REGISTERED(1) PER SHARE(2) OFFERING PRICE(3) FEE(4)
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Common Stock, no par value
per share .................. 724,986 $0.33-1/3 $4,409,356 $1,521
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(1) Represents the maximum number of shares of common stock, no par value per
share of Giga-tronics ("Giga-tronics Common Stock") issuable in connection
with the Merger in exchange for all outstanding securities of ASCOR.
(2) Estimated pursuant to Rule 457(f)(2) under the Securities Act of 1933, as
amended (the "Securities Act"), based on the par value per share of the
stock of ASCOR outstanding on June 11, 1996, to be received by
Giga-tronics in the Merger.
(3) Calculated as the total number of shares of ASCOR stock outstanding on
June 11, 1996, which was 13,228,069 multiplied by one-third of the
(deemed) par value per share of $1.00.
(4) The Registration Fee has been calculated pursuant to Rule 457(f) under the
Securities Act as follows: 1/29th of one percent of the proposed aggregate
maximum offering price. An aggregate filing fee of $1,521 was paid in
connection with the filing of Giga-tronics preliminary proxy statement and
initial registration statement filing.
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CROSS-REFERENCE SHEET SHOWING LOCATION
IN PROSPECTUS OF INFORMATION REQUIRED BY
ITEMS IN FORM S-4
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FORM S-4 REGISTRATION STATEMENT ITEM AND HEADING LOCATION IN PROSPECTUS
------------------------------------------------ ----------------------
(Information About the Transaction)
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1. Forepart of Registration Statement and Outside Front
Cover Page of Prospectus.......................................... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus........................................................ Inside Front and Outside Back Cover
Pages
3. Risk Factors, Ratio of Earnings to Fixed Charges and
Other Information................................................. Summary; Risk Factors; Summary
Historical and Pro Forma Financial
Information; Comparative Per Share
Data; Comparable Market Price Data;
Information Concerning Giga-tronics,
Incorporated; Information Concerning
ASCOR, Inc.
4. Terms of the Transaction............................................ Summary; The Merger; Description of
the Merger; The Reorganization
Agreement and Related Agreements;
Description of Giga-tronics Capital
Stock; Comparison of Rights of
Shareholders of Giga-tronics and
ASCOR Securities
5. Pro Forma Financial Information..................................... Summary; Summary Historical and Pro
Forma Financial Information--Pro
Forma Combined Financial
Information
6. Material Contacts with the Company Being Acquired................... The Merger; Background of the Merger
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to be Underwriters..................... Not Applicable
8. Interests of Named Experts and Counsel.............................. Legal Matters; Experts
9. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities.................................... Not Applicable
(Information About the Registrant)
10. Information with Respect to S-3 Registrants......................... Not Applicable
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FORM S-4 REGISTRATION STATEMENT ITEM AND HEADING LOCATION IN PROSPECTUS
------------------------------------------------ ----------------------
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11. Incorporation of Certain Information by Reference................... Not Applicable
12. Information with Respect to S-2 or S-3 Registrants.................. Not Applicable
13. Incorporation of Certain Information by Reference................... Not Applicable
14. Information with Respect to Registrants Other than S-2
or S-3 Registrants................................................ Information Concerning Giga-tronics,
Incorporated; Summary; Risk Factors;
The Merger; Voting and
Proxies--Giga-tronics; Background of
the Merger; Interests of Certain
Persons in the Merger; Employee
Benefit Plan; Summary Historical and
Pro Forma Financial Information; Pro
Forma Combined Financial
Information; Description of Giga-
tronics and ASCOR Securities;
Comparison of Rights of Shareholders
of Giga-tronics and ASCOR
(Information About the Company Being Acquired)
15. Information with Respect to S-3 Companies........................... Not Applicable
16. Information with Respect to S-2 or S-3 Companies.................... Not Applicable
17. Information with Respect to Companies Other than S-2
or S-3 Companies.................................................. Information Concerning ASCOR, Inc.;
Summary; Risk Factors; The Merger;
ASCOR Shareholder Consent
Solicitation--Vote Required;
Background of the Merger; Interests
of Certain Persons in the Merger;
Employee Benefit Plan; Summary
Historical and Pro Forma Financial
Information; Pro Forma Combined
Financial Information; Description of
Giga-tronics and ASCOR Securities;
Comparison of Rights of Shareholders
of Giga-tronics and ASCOR
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FORM S-4 REGISTRATION STATEMENT ITEM AND HEADING LOCATION IN PROSPECTUS
------------------------------------------------ ----------------------
(Voting and Management Information)
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18. Information if Proxies, Consents or Authorizations Are
to be Solicited................................................... Summary; Voting and Proxies--Giga-
tronics; ASCOR Shareholder Consent
Solicitation--Vote Required; The
Merger; The Reorganization
Agreement and Related Agreements;
Interests of Certain Persons in the
Merger; Compensation of Directors
and Executive Officers by Giga-tronics
and ASCOR; Structure of Board of
Directors After the Merger;
Management and Security Ownership
After the Merger; Stock Ownership of
Certain Beneficial Owners and
Management; Description of Giga-
tronics and ASCOR Securities
19. Information if Proxies, Consents or Authorizations Are
Not to be solicited in an Exchange Offer.......................... Not Applicable
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AVAILABLE INFORMATION
Giga-tronics is subject to the informational reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, each file reports, proxy statements and other information
with the Securities and Exchange Commission (the "SEC"). Such reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the SEC at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's regional offices
located at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511 and at Seven World Trade Center (13th Floor), New York, New
York 10019. Copies of such material may be obtained by mail from the Public
Reference Section of the SEC at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Each of Giga-tronics' Common Stock
is quoted on the Nasdaq National Market, and such reports, proxy statements and
other information can also be inspected at the offices of Nasdaq Operations,
1735 K Street, N.W., Washington, D.C. 20006.
Giga-tronics has filed with the SEC a registration statement on Form
S-4, including this Joint Proxy Statement/Prospectus and other information
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act, with respect to the shares
of Giga-tronics Common Stock to be issued to holders of ASCOR Securities in the
Merger. This Joint Proxy Statement/Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the SEC. For further
information, reference is hereby made to the Registration Statement. Copies of
the Registration Statement and the exhibits and schedules thereto may be
inspected, without charge, at the offices of the SEC, or obtained at prescribed
rates from the Public Reference Section of the SEC at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549.
<PAGE> 6
GIGA-TRONICS
Giga-tronics Incorporated
4650 Norris Canyon Road
San Ramon, California 94583
Confidential, For Use Of
The Commission Only
Preliminary Copy July 1, 1996
To Our Shareholders:
I cordially invite you to attend the special meeting of Giga-tronics
Incorporated ("Giga-tronics") shareholders to be held at 10:00 a.m. on
Wednesday, July 24, 1996, at the Giga-tronics facility, 4650 Norris Canyon Road,
San Ramon, California.
At such meeting, Giga-tronics shareholders will be asked to consider
and approve the issuance of 724,986 shares of Giga-tronics Common Stock in
connection with the proposed Merger of Giga-tronics and ASCOR, Inc. ("ASCOR"),
as described in the attached Joint Proxy Statement/Prospectus. As a result of
the "Merger," and subject to the approval of the Merger by the shareholders of
ASCOR, a newly created wholly owned subsidiary of Giga-tronics would be merged
into ASCOR, whereby ASCOR would become a wholly owned subsidiary of Giga-tronics
and continue operating as a separate company, and each ASCOR shareholder would
receive Giga-tronics common stock as consideration for his or her ASCOR stock.
The Merger Agreement provides that each share of ASCOR stock and other
securities convertible into ASCOR stock would be converted into the right to
receive the quotient of (i) 724,986 shares of Giga-tronics common stock, divided
by (ii) the total number of ASCOR shares and such convertible securities
outstanding at the time the Merger shall become effective. Cash will be paid in
lieu of issuance of any fractional shares. If the merger is consummated, the
percentage of outstanding stock of Giga-tronics held by ASCOR shareholders would
be approximately 21.5%.
Your Board of Directors has determined, after due deliberation and
discussion, that the consideration to be given to the ASCOR shareholders in the
Merger is fair from a financial point of view to, and in the best interests of,
Giga-tronics and the shareholders of Giga-tronics. The Board of Directors, by
unanimous vote, has approved the terms of the Merger Agreement, and recommends
that Giga-tronics shareholders vote FOR the proposed Merger and the issuance of
724,986 shares of Giga-tronics Common Stock in connection with the proposed
Merger. It should be noted that two of the four members of the Giga-tronics
Board of Directors also participate on the ASCOR Board of Directors.
Additionally, three of the four members of the Giga-tronics Board hold varying
amounts of ASCOR stock and stock equivalents. Each shareholder is urged to read
the attached Joint Proxy Statement/Prospectus accompanying this letter for more
details.
Approval of the Merger and issuance of Giga-tronics Common Stock
requires the approval of a majority of the outstanding shares held by
Giga-tronics shareholders. For more details with respect to all of the
foregoing, each shareholder is urged to read the Joint Proxy
Statement/Prospectus accompanying this letter.
The Company counts on your continued interest, and I hope you will be
able to attend the meeting. However, regardless of whether you plan to attend in
person, it is important that your vote be counted. I urge you to vote your
shares by signing and returning the accompanying proxy card.
Sincerely,
George H. Bruns, Jr.
Chairman and Chief Executive Officer
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GIGA-TRONICS
Giga-tronics Incorporated
4650 Norris Canyon Road
San Ramon, California 94583
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders:
Notice is hereby given that a special meeting of the Shareholders of
Giga-tronics Incorporated, a California corporation ("Giga-tronics"), will be
held at 10:00 a.m., local time, on Wednesday, July 24, 1996, at the Giga-tronics
facility, 4650 Norris Canyon Road, San Ramon, California, for the purpose of
considering and voting upon:
1. The approval of the transactions contemplated by the Agreement
and Plan of Reorganization ("Reorganization Agreement"), dated
as of May 2, 1996, between Giga-tronics, ASCOR Acquisition
Corp., a California corporation and wholly owned subsidiary of
Giga-tronics ("Acquisition Corp.") and ASCOR, Inc., a California
corporation ("ASCOR"), which provides, among other things, that:
a) Acquisition Corp. will merge with and into ASCOR with
ASCOR as the surviving corporation (the "Merger") and
ASCOR will thereby become a wholly owned subsidiary
of Giga-tronics.
b) Giga-tronics will issue an aggregate of 724,986
shares of Giga-tronics Common Stock to be exchanged
for all outstanding shares of ASCOR stock, and
certain securities exercisable for the purchase of
ASCOR stock.
A vote to approve the Merger will constitute a vote to approve
the terms of and transactions contemplated by the Reorganization
Agreement including the Merger and the issuance of 724,986
shares of Giga-tronics Common Stock.
2. Such other matters as may properly come before the Special
Meeting, as long as these matters are the subject of the
meeting or incidental to the meeting.
Only shareholders of record at the close of business on June 14, 1996
are entitled to notice of and to vote at the Special Meeting or any adjournment
thereof. Your attention is directed to the accompanying Joint Proxy
Statement/Prospectus for greater detail concerning the proposal described above.
Consummation of the Merger requires the affirmative vote of at least a
majority of the outstanding shares held by Giga-tronics shareholders.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE SPECIAL MEETING
REGARDLESS OF THE NUMBER YOU HOLD. PLEASE VOTE, SIGN, DATE AND RETURN YOUR PROXY
PROMPTLY IN THE ENCLOSED PREPAID ENVELOPE. IF YOU ATTEND THE MEETING, YOU MAY
VOTE IN PERSON EVEN IF YOU HAVE PREVIOUSLY RETURNED A PROXY.
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The Giga-tronics Incorporated Board of Directors unanimously recommends
that shareholders vote for the proposal to approve the Merger Agreement. It
should be noted that two of the four members of the Giga-tronics Board of
Directors also participate on the ASCOR Board of Directors. Additionally, three
of the four members of the Giga-tronics Board hold varying amounts of ASCOR
stock and stock equivalents. Each shareholder is urged to read the attached
Joint Proxy Statement/Prospectus accompanying this letter for more details.
Management has no present intention to bring any other business before the
Giga-tronics Incorporated shareholders at the Special Meeting.
The transactions contemplated by the Merger do not require that any
Giga-tronics shareholders send in his or her stock certificates for surrender
and exchange.
By Order of the Board of Directors,
Gregory L. Overholtzer, Secretary
San Ramon, California
July 1, 1996
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<PAGE> 9
ASCOR
ASCOR, Inc.
47790 Westinghouse Drive
Fremont, California 94539
July 1, 1996
To Our Shareholders:
The Board of Directors requests that you review the attached Joint Proxy
Statement/Prospectus and return your vote by written consent.
ASCOR shareholders will be asked to consider and approve the Reorganization
Agreement between Giga-tronics Incorporated and ASCOR, Inc., as described in the
attached Joint Proxy Statement/Prospectus. As a result of the "Merger," and
subject to the approval of the Merger by the shareholders of Giga-tronics
Incorporated, a newly created wholly owned subsidiary of Giga-tronics would be
merged into ASCOR, whereby ASCOR would continue to operate as a wholly owned
subsidiary of Giga-tronics, and each ASCOR shareholder would receive
Giga-tronics Incorporated common stock as consideration for his or her ASCOR
stock. The Reorganization Agreement provides that each share of ASCOR common
stock would be converted into the right to receive the quotient of (i)724,986
shares of Giga-tronics common stock, divided by (ii) the total number of ASCOR
shares outstanding at the time the merger shall be come effective. Cash will be
paid in lieu of any fractional shares.
Your Board of Directors has determined, after due deliberation and discussion,
that the consideration to be given to the ASCOR shareholders in the Merger is
fair, from a financial point of view, to the shareholders of ASCOR, Inc.. The
Board of Directors, by unanimous vote, has approved the terms of the
Reorganization Agreement, and recommends that ASCOR shareholders vote FOR the
proposal to approve the Merger. It was noted by the ASCOR Board that two of the
five members of the ASCOR Board also participate on the Giga-tronics Board, and
that three of the members of the Giga-tronics Board hold varying amounts of
ASCOR stock and stock equivalents. Each shareholder is urged to read the
attached Joint Proxy Statement/Prospectus accompanying this letter for more
details.
Approval of the Merger requires the approval of a majority of outstanding shares
held by ASCOR shareholders. For more details with respect to all of the
foregoing, each shareholder is urged to read the Joint Proxy
Statement/Prospectus accompanying this letter.
It is important that your vote be counted. I urge you to vote your shares by
returning your written consent.
Sincerely, Sincerely,
George H. Bruns, Jr. Jeffrey Lum
Chairman of the Board President
<PAGE> 10
ASCOR
ASCOR, Inc.
47790 Westinghouse Drive
Fremont, California 94539
NOTICE OF WRITTEN CONSENT BY SHAREHOLDERS
To the Shareholders:
Notice is hereby given that a written consent of the Shareholders of ASCOR, Inc.
is needed for the purpose of considering and voting upon:
1. The approval and adoption of the Agreement and Plan of Merger
("Reorganization Agreement"), dated as of May 2, 1996, between
Giga-tronics Incorporated and ASCOR, Inc., and all the other
transactions contemplated thereby;
Only shareholders of record at the close of business on June 14, 1996 are
entitled to notice of and to vote by written consent. Your attention is directed
to the accompanying Joint Proxy Statement/Prospectus for greater detail
concerning the proposal described above.
IT IS IMPORTANT THAT YOUR SHARES BE VOTED BY WRITTEN CONSENT REGARDLESS OF THE
NUMBER YOU HOLD. PLEASE VOTE, SIGN, DATE AND RETURN YOUR CONSENT IN THE ENCLOSED
PREPAID ENVELOPE.
The ASCOR, Inc. Board of Directors unanimously recommends that shareholders vote
for the proposal to approve the Reorganization Agreement. It was noted by the
ASCOR Board that two of the five members of the ASCOR Board also participate on
the Giga-tronics Board, and that three of the members of the Giga-tronics Board
hold varying amounts of ASCOR stock and stock equivalents. Each shareholder is
urged to read the attached Joint Proxy Statement/Prospectus accompanying this
letter for more details.
The transactions contemplated by the Merger will require that all ASCOR
shareholders send in his or her stock certificates for surrender and exchange.
By Order of the Board of Directors,
Fred Chu, Secretary
Fremont, California
July 1, 1996
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GIGA-TRONICS INCORPORATED
PROSPECTUS
-----------------------------------------
GIGA-TRONICS INCORPORATED
ASCOR, INC.
JOINT PROXY STATEMENT FOR
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 24, 1996
This Joint Proxy Statement/Prospectus is being furnished to the holders
of shares of Common Stock, no par value ("Giga-tronics Common Stock") of
Giga-tronics Incorporated, a California corporation ("Giga-tronics"), in
connection with the solicitation of proxies by the Board of Directors of
Giga-tronics for use at the Special Meeting of Shareholders of Giga-tronics (the
"Special Meeting") to be held on July 24, 1996 at 10:00 a.m., local time, at the
Company's facilities at 4650 Norris Canyon Road, San Ramon, California 94583 and
at any postponements or adjournments thereof.
This Joint Proxy Statement/Prospectus also constitutes the Proxy
Statement of ASCOR, Inc., a California corporation ("ASCOR") relating to the
solicitation of the consent of its shareholders for approval of the Merger (as
hereinafter defined). This Joint Proxy Statement/Prospectus also constitutes the
prospectus of Giga-tronics with respect to shares of Giga-tronics Common Stock
to be issued in the Merger. Giga-tronics has filed a registration statement with
the Securities and Exchange Commission (the "Commission") with respect to the
shares of Giga-tronics Common Stock to be so issued.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS IN CONNECTION WITH THE SOLICITATION OF PROXIES OR THE
OFFERING OF SECURITIES MADE BY THIS JOINT PROXY STATEMENT/PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY GIGA-TRONICS OR ASCOR. NEITHER THE DELIVERY OF THIS
JOINT PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN SINCE THE DATE OF THIS JOINT
PROXY STATEMENT/PROSPECTUS. THIS JOINT PROXY STATEMENT/PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES, OR THE SOLICITATION OF A PROXY, BY ANYONE IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING
SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS
UNLAWFUL TO MAKE SUCH SOLICITATION.
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SEE "RISK FACTORS" BEGINNING ON PAGE 17 FOR A DISCUSSION OF CERTAIN
MATTERS THAT SHOULD BE CONSIDERED BY THE SHAREHOLDERS OF GIGA-TRONICS AND ASCOR
WITH RESPECT TO THE MERGER.
----------------------------------
NEITHER THE MERGER NOR THESE SECURITIES HAVE BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS JOINT PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
At the Special Meeting, Giga-tronics shareholders will be asked to
consider and vote upon a proposal to approve the Merger of Giga-tronics and
ASCOR pursuant to the Agreement and Plan of Reorganization, dated as of May 2,
1996 (the "Reorganization Agreement"), by and among Giga-tronics, ASCOR
Acquisition Corp., a California corporation and wholly owned subsidiary of
Giga-tronics ("Acquisition Corp.") and ASCOR and the transactions contemplated
thereby. A copy of the Reorganization Agreement is attached to this Joint Proxy
Statement/Prospectus as Annex A. The Reorganization Agreement provides for the
merger of Acquisition Corp. with and into ASCOR (the "Merger") whereby ASCOR
will become a wholly owned subsidiary of Giga-tronics.
This solicitation of proxies is made by and on behalf of the Board of
Directors of Giga-tronics. In addition to mailing copies of this Joint Proxy
Statement/Prospectus and the accompanying Notice of Special Meeting of
Shareholders and proxy to all shareholders of record on June 14, 1996 (the
"Record Date"), Giga-tronics will request brokers, custodians, nominees and
other fiduciaries to forward copies of this material to persons for whom they
hold Giga-tronics Common Stock in order that such shares may be voted.
Solicitation may also be made by Giga-tronics' officers and regular employees
personally or by telephone. In addition, while Giga-tronics has no present
intention to retain anyone to assist in soliciting proxies, Giga-tronics may do
so if it deems such action necessary. The cost of solicitation of proxies will
be borne by Giga-tronics.
The information contained in this Joint Proxy Statement/Prospectus is
qualified in its entirety by the Annexes hereto and the documents referred to
and incorporated by reference herein, each of which is important and should be
carefully reviewed in its entirety.
This Joint Proxy Statement/Prospectus, the accompanying Notice of
Special Meeting of Shareholders and the accompanying proxy are being mailed to
shareholders of Giga-tronics on or about July 5, 1996.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER
OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
The date of this Joint Proxy Statement/Prospectus is July 1, 1996
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TABLE OF CONTENTS
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I. Summary................................................................................ 8
II. Risk Factors........................................................................... 17
III. Giga-tronics Incorporated.............................................................. 20
IV. ASCOR, Inc............................................................................. 21
V. The Merger............................................................................. 22
Description of the Merger.............................................................. 22
Voting and Proxies..................................................................... 22
Background of the Merger............................................................... 24
Reasons for the Merger; Recommendation of the Board of Directors....................... 25
Opinion of Financial Advisor........................................................... 28
Conflicts of Interest.................................................................. 29
Employee Benefit Plan.................................................................. 33
Structure of Board of Giga-tronics After Merger........................................ 34
Management and Security Ownership of Giga-tronics after the Merger..................... 34
Accounting Treatment................................................................... 38
Certain Federal Income Tax Consequences................................................ 38
Dissenters' Appraisal Rights........................................................... 39
VI. The Reorganization Agreement and Related Agreements.................................... 43
VII. Summary Historical and Pro Forma Financial Information................................. 52
VIII. Comparative Per Share Data............................................................. 54
IX. Pro Forma Combined Financial Information............................................... 55
X. Information Concerning Giga-tronics Incorporated....................................... 60
General and Business.............................................................. 60
Management's Discussion and Analysis of Financial
Condition and Results of Operations........................................... 64
XI. Information Concerning ASCOR, Inc...................................................... 66
General and Business.............................................................. 66
Management's Discussion and Analysis of Financial
Condition and Results of Operations........................................... 69
XII. Description of Giga-tronics and ASCOR Securities....................................... 71
XIII. Comparison of Rights of Shareholders of Giga-tronics and ASCOR......................... 73
XIV. Shareholder Proposals.................................................................. 74
XV. Experts................................................................................ 75
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XVI. Legal Matters............................................................................ 76
XVII. Other Business at the Special Meeting.................................................... 77
XVIII. Annexes.................................................................................. 78
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(A) Giga-tronics Financial Statements
(B) ASCOR Financial Statements
(C) Reorganization Agreement and Exhibits
(D) Articles of Incorporation for ASCOR Acquisition Corporation
(E) Giga-tronics Financial Advisor Opinion Letter
(F) State of California Code for Dissenter's Rights
(G) Articles of Incorporation of Giga-tronics
(H) Bylaws of Giga-tronics
(I) Tender Instructions
(J) Letter Agreement
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<PAGE> 15
SECTION I
SUMMARY
The following is a brief summary of certain information contained
elsewhere in this Joint Proxy Statement/Prospectus. This summary does not
purport to be complete and is qualified in its entirety by reference to the full
text of this Joint Proxy Statement/Prospectus, the Annexes hereto and the
documents referred to herein. Shareholders are urged to read carefully this
Joint Proxy Statement/Prospectus and the attached Annexes in their entirety.
Capitalized terms used but not defined in this Summary have the meaning given to
them elsewhere in this Joint Proxy Statement/Prospectus.
The Companies
Giga-tronics. Giga-tronics designs, manufactures, and markets microwave
and radio frequency signal generation and power measurement instruments for the
electronics test and measurement industry. These products are used in the
design, production, repair, and maintenance of telecommunications, radar,
electronic warfare, and transportation systems. The Company books a mixture of
commercial and government-related orders to both domestic and international
customers. The Company's only location is at 4650 Norris Canyon Road, San Ramon,
California 94583, and its telephone number is (510) 328-4650.
ASCOR. ASCOR designs, manufactures and markets an extensive line of
switching and connecting devices that link together many specific purpose
instruments that comprise a portion of automatic test systems. ASCOR offers a
family of Switching and Interface Test Adapters as standard VXI configured
products, as well as complete system integration services to the Automatic Test
Equipment (ATE) market. The Company books primarily government-related orders,
with all sales being domestic. The Company's only location is at 47790
Westinghouse Drive, Fremont, California 94539, and its telephone number is (510)
490-8819.
Risk Factors
Giga-tronics. The issuance of Giga-tronics Common Stock to ASCOR
shareholders and consummation of the Merger involves a degree of risk. In
addition to other information included elsewhere in this Joint Proxy
Statement/Prospectus, holders of Giga-tronics Common Stock should consider the
following: (i) dependence on key ASCOR personnel, (ii) potential distribution
channel risks and dropping of Giga-tronics products by "sales reps," (iii) the
reliance of ASCOR's revenue stream on a single family of products, (iv) ASCOR's
reliance on major defense contracts and a relatively small number of customers,
(v) facility and personnel issues related to ASCOR sales growth, and (vi)
potential effects on the Giga-tronics stock price of ASCOR's large shareholders
wishing to become liquid over a short time period. Before voting on the Merger,
shareholders of Giga-tronics should carefully consider the information set forth
in "Risk Factors - Giga-tronics," beginning on page 17, as well as other
information in the entire Proxy.
ASCOR. The Merger of ASCOR into Giga-tronics involves a degree of risk
for ASCOR shareholders. In addition to other information included elsewhere in
this Joint Proxy Statement/Prospectus, holders of ASCOR common stock and common
stock equivalents should consider the following: (i) limited liquidity for ASCOR
shareholders, (ii) softness in recent order bookings and low sales order backlog
at Giga-tronics, and (iii) succession of Giga-tronics Chief Executive Officer.
Before voting on the Merger, shareholders of ASCOR should carefully consider the
information set forth in "Risk Factors - ASCOR," beginning on page 18, as well
as other information in the entire Proxy.
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<PAGE> 16
The Special Meeting and Votes Required
The Special Meeting of Giga-tronics Shareholders will be held at 10:00
a.m. on July 17, 1996, at the Giga-tronics facilities at 4650 Norris Canyon
Road, San Ramon, California 94583. The holders of record of Giga-tronics Common
Stock as of the close of business on June 14, 1996, will be entitled to notice
of and to vote at the Special Meeting. At this Special Meeting Giga-tronics'
shareholders will be asked to vote upon a proposal to approve the Merger to be
effected pursuant to the Reorganization Agreement. Approval of the Merger
requires the affirmative vote of at least a majority of the outstanding shares
of Common Stock held by Giga-tronics shareholders. At the close of business on
June 14, 1996, directors and officers of Giga-tronics and their affiliates, in
the aggregate were entitled to vote 438,538 shares of Giga-tronics Common Stock,
representing 16.5% of the total shares entitled to vote at the Special Meeting.
ASCOR will be soliciting the approval of its shareholders by delivery
of this Joint Proxy Statement/Prospectus with a request that the shareholders
entitled to vote with respect to approval of the Merger give their written
consent to the Merger. Approval of the Merger by ASCOR's shareholders requires
the written consent of persons holding a majority of the votes entitled to be
cast by holders of outstanding (a) ASCOR Common Stock voting as a class, (b)
ASCOR Preferred Stock voting as a separate class and (c) ASCOR Common Stock and
ASCOR Preferred Stock voting together as a single class. Each share of ASCOR
Common Stock is entitled to one vote and each share of ASCOR Preferred Stock is
entitled to such number of votes as the number of shares of ASCOR Common Stock
into which such share of ASCOR Preferred Stock is convertible, At the close of
business on June 14, 1996, directors and officers of ASCOR and their affiliates,
in the aggregate held approximately 5,741,368 shares of ASCOR Common Stock and
shares of ASCOR Preferred Stock entitled to cast approximately 4,164,023 votes,
representing approximately 73% of the outstanding shares of ASCOR Common Stock,
approximately 78% of the total votes entitled to be voted by ASCOR Preferred
Stock and approximately 75% of the total votes entitled to be voted by ASCOR
Common Stock and ASCOR Preferred Stock voting together as a single class, by
written consent with respect to the Merger.
Description of the Merger
At the effective time of the Merger (the "Effective Time"), (i)
Acquisition Corp. will be merged with and into ASCOR and ASCOR will become a
wholly owned subsidiary of Giga-tronics; (ii) each (a) share of ASCOR no par
value Common Stock ("ASCOR Common Stock") and no par value preferred stock
("ASCOR Preferred Stock" and, together with ASCOR Common Stock, the "ASCOR
Shares") outstanding immediately prior to the Merger (other than ASCOR Shares
held by shareholders who have perfected and not withdrawn their right to seek
appraisal of their shares under applicable California law) and (b) outstanding
options for the purchase of ASCOR Shares ("ASCOR Option") and warrants
exercisable for the purchase of ASCOR Shares ("ASCOR Warrant" and, together with
any ASCOR Options, the "ASCOR Convertible Securities") will be converted into
the right to receive a pro rata portion of an aggregate of 724,986 Shares of
Giga-tronics Common Stock to be issued in the Merger (the "Merger
Consideration"). In determining the fraction of a Giga-tronics Stock (the
"Exchange Ratio") which holders of ASCOR Shares and ASCOR Convertible Securities
(collectively "ASCOR Securities") will be entitled to receive, all ASCOR
Convertible Securities will be treated as having been converted or exercised
into ASCOR Shares. Any ASCOR Convertible Securities which are considered
"out-of-the-money" will be assumed by Giga-tronics and will be exercisable for
Giga-tronics Common Stock as adjusted by the Merger. Shares of Giga-tronics
Common Stock attributable to ASCOR Convertible Securities which are assumed by
Giga-tronics will be retained by Giga-tronics from the Merger Consideration
pending their exercise. See "THE REORGANIZATION AGREEMENT AND RELATED AGREEMENTS
- - The Exchange Ratio and ASCOR Convertible Securities." See "THE MERGER -
Description of the Merger" and "Dissenter's Appraisal Rights."
-9-
<PAGE> 17
A maximum of 724,986 shares of Giga-tronics Common Stock will be
issuable in the Merger, including (a) shares issuable in respect of ASCOR
Convertible Securities which are assumed, which shares will be retained by
Giga-tronics if such securities expire unexercised, (b) fractional shares, (c)
shares issuable in respect of ASCOR Shares for which dissenters' appraisal
rights (see "THE MERGER - Dissenters' Appraisal Rights") are perfected, and (d)
shares deemed surrendered upon exercise of ASCOR Convertible Securities for
which a deemed net exercise has occurred. The Merger will be effective at the
time an Agreement of Merger is filed with the Secretary of State of the State of
California. Assuming all conditions to the Merger are met or waived prior
thereto, it is anticipated that the Effective Time will occur not later than
June 28, 1996. See "THE REORGANIZATION AGREEMENT AND RELATED AGREEMENTS - The
Reorganization Agreement - The Exchange Ratio."
Other Matters Related to the Merger
Background of the Merger: The terms of the Merger (including the Merger
Consideration) were determined through negotiations between Giga-tronics and
ASCOR. For a description of these negotiations, see "THE MERGER - Background of
the Merger."
Giga-tronics' Reasons for the Merger; Recommendations of the
Giga-tronics Board: The Board of Directors of Giga-tronics believes that the
issuance of Common Stock in connection with the Merger of Giga-tronics and ASCOR
is fair to and in the best interests of Giga-tronics and its shareholders. The
proposed Reorganization Agreement has been approved by the Board by unanimous
vote, noting that two of the four Board members are also members of the ASCOR
Board of Directors. Additionally, three of the four Giga-tronics Board members
hold varying amounts of ASCOR Shares and ASCOR Convertible Securities. In
evaluating the Merger, the Board considered the following factors as important:
(i) ASCOR's business prospects and recent results of operations and financial
position, (ii) the benefit of having access to certain of ASCOR's technology and
technical resources, (iii) the potential synergistic benefits derived from the
coordination of sales and marketing strategies, and (iv) the ease of integration
and exchange of ideas due to long-term familiarity. The Giga-tronics Board of
Directors, in making its recommendation to shareholders, considered the positive
and negative factors as a whole.
THE BOARD OF DIRECTORS OF GIGA-TRONICS UNANIMOUSLY RECOMMENDS THAT
GIGA-TRONICS SHAREHOLDERS VOTE FOR APPROVAL OF THE PROPOSAL REGARDING THE MERGER
TO BE EFFECTED PURSUANT TO THE REORGANIZATION AGREEMENT.
ASCOR's Reasons; Recommendations of the ASCOR Board: The Board of
Directors of ASCOR believes that terms of the Reorganization Agreement is fair
to and in the best interest of ASCOR and its shareholders. The Reorganization
Agreement has been approved by the Board of Directors of ASCOR by unanimous
vote, noting that two of the five members of the ASCOR Board of Directors are
also members of the Giga-tronics Board. Additionally, two of the members of the
ASCOR Board of Directors hold varying amounts of Giga-tronics stock and stock
equivalents. In evaluating the Reorganization Agreement, the Board considered
the following important factors: (i) Giga-tronics' business prospects and recent
results of operations and financial position, (ii) the benefit of having access
to certain of Giga-tronics' sales and marketing resources, (iii) the ease of
integration and exchange of ideas due to long-term familiarity between the
companies, (iv) the benefit of having access to certain management resources to
help sustain ASCOR's possible sales growth, and (v) increased liquidity for
holders of ASCOR stock and stock equivalents. The ASCOR Board of Directors, in
making its recommendation to shareholders, considered the positive and negative
factors as a whole. THE BOARD OF DIRECTORS OF ASCOR RECOMMENDS THAT ASCOR
SHAREHOLDERS VOTE FOR APPROVAL OF THE PROPOSAL REGARDING THE MERGER TO BE
EFFECTED PURSUANT TO THE REORGANIZATION AGREEMENT.
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<PAGE> 18
Opinion of Giga-tronics Financial Advisor: Wood, Warren & Co. has
rendered to the Board of Directors of Giga-tronics its written opinion dated as
of May 2, 1996 that, as of such date and based upon and subject to the matters
set forth therein the Exchange Ratio to be applied in the Merger is fair, from a
financial point of view, to Giga-tronics. See "Giga-tronics Financial Advisor's
Opinion." Giga-tronics' Shareholders are urged to read this opinion carefully in
its entirety for assumptions made, matters considered and the limits of the
review undertaken by Wood, Warren & Co.
Conflicts of Interest: Mr. George H. Bruns, Jr. is Chairman of the
Board of Directors of both Giga-tronics and ASCOR. Two of the four Giga-tronics
Directors (including Mr. Bruns) participate on the Board of Directors of ASCOR.
Likewise, two of the five ASCOR Directors (including Mr. Bruns) participate on
the Giga-tronics Board. Additionally, Mr. George H. Bruns, Jr. is the Chief
Executive Officer of Giga-tronics. It also should be noted that three of the
four Giga-tronics Board members (which includes Mr. George H. Bruns, Jr., the
Giga-tronics Chief Executive Officer and Chairman of both Boards) beneficially
own shares of ASCOR Common or Preferred Stock or ASCOR warrants. These three
members hold approximately 33% of the ASCOR outstanding stock and approximately
17% of the Giga-tronics Common Stock as of the record date of June 14, 1996.
Additionally, since the ASCOR warrants may be converted into shares of
Giga-tronics Common Stock in connection with the Merger, these three members may
hold approximately 20% of the combined Company Common Stock if the Merger is
consummated.
Conditions to Merger; Termination and Expenses: Consummation of the
Merger is subject to the satisfaction of various conditions, including among
other things approval of the Merger Agreement by Giga-tronics shareholders and
by ASCOR shareholders, the absence of any material adverse change in the
business or financial condition of Giga-tronics or ASCOR, the ability of
Giga-tronics to account for the Merger as a pooling of interests, the absence of
the perfection of dissenters' appraisal rights by Giga-tronics Shareholders with
respect to 5% or more of the Giga-tronics Common Stock Outstanding on the date
of the Special Meeting and the requirement that all outstanding ASCOR Preferred
Stock be tendered for exchange into Giga-tronics Common Stock at the Closing in
accordance with the provisions of tender instructions (the "Tender
Instructions") which will stipulate such ASCOR Preferred Stock tendered
therewith be exchanged for Giga-tronics Common Stock in accordance with the
terms of the Reorganization Agreement, notwithstanding any other rights the
ASCOR Preferred Stock may have or which might arise in a transaction such as the
Merger. See 'DESCRIPTION OF GIGA-TRONICS AND ASCOR SECURITIES - ASCOR - ASCOR
Preferred Stock" and "THE REORGANIZATION AGREEMENT AND RELATED AGREEMENTS - The
Reorganization Agreement - Conditions to the Merger." Except as to any condition
the satisfaction of which is required by law, the Boards of Directors of ASCOR
and Giga-tronics have the authority to waive satisfaction of the respective
conditions to such Company's obligations to consummate the Merger. See "THE
REORGANIZATION AGREEMENT AND RELATED AGREEMENTS - The Reorganization Agreement
Conditions to the Merger". The Reorganization Agreement may be terminated at any
time prior to consummation of the Merger by mutual consent of the Boards of
Directors of Giga-tronics and ASCOR and by the Board of Directors of
Giga-tronics in certain circumstances. The Reorganization Agreement may be
amended by mutual consent of the Boards of Directors of Giga-tronics and ASCOR
at any time, except that, after approval of the Merger by Giga-tronics and ASCOR
shareholder, respectively, no amendment that would have a material adverse
effect on such shareholders will be made without obtaining the further approval
of said shareholders. See "THE REORGANIZATION AGREEMENT AND RELATED AGREEMENTS -
The Reorganization Agreement - Termination."
Summary of Income Tax Consequences: It is a condition to the Merger
that Giga-tronics and ASCOR receive tax opinions to the effect that the Merger
will constitute a tax-free reorganization for federal income tax purposes. The
Merger has been structured with the intent that
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<PAGE> 19
ASCOR shareholders will recognize no gain or loss on the exchange of ASCOR
Common Stock into Giga-tronics Common Stock, except for gain or loss
attributable to cash received in lieu of fractional shares. ASCOR shareholders
are advised to consult their own tax advisors regarding all tax consequences of
the Merger. See "THE MERGER - Certain Federal Income Tax Consequences."
Accounting Treatment: The Merger is intended to qualify as a
pooling-of-interests for accounting and financial reporting purposes. Under this
method of accounting, the assets and liabilities of Giga-tronics and ASCOR will
be carried forward to the combined company at their recorded historical amounts,
income of the combined company will include income of Giga-tronics and ASCOR for
the entire fiscal period in which the combination occurs and the reported income
of the separate companies for prior periods will be combined and restated as
income of the combined company. See "THE MERGER - Accounting Treatment."
Management of Giga-tronics and ASCOR Following the Merger: ASCOR will
be a wholly owned subsidiary of Giga-tronics after the Merger. The Board of
Directors of the combined Giga-tronics Company after the Merger will be the same
as the current Giga-tronics Board. The current President of ASCOR, Mr. Jeffrey
Lum, will report to Mr. George Bruns, Jr., Chief Executive Officer of
Giga-tronics, after the Merger. Mr. Lum will be an officer of Giga-tronics, as
well as remain President of the ASCOR subsidiary. The other four remaining
Giga-tronics officers (including Mr. George Bruns, Jr. as Chief Executive
Officer) will remain the same after the Merger. The four officers of ASCOR
currently (including Mr. Jeffrey Lum) will remain officers of the ASCOR
subsidiary after the Merger.
Dissenters' Rights: Under the California General Corporation Law (the
"California Corporate Law") ASCOR Shareholders will be entitled to dissenters'
rights of appraisal in connection with the Merger. Giga-tronics Shareholders
will also be entitled to such rights under certain circumstances. (See "THE
MERGER - Appraisal Rights.") In the event that shareholders of Giga-tronics
exercise their rights to dissent with respect to 5% or more of the outstanding
shares of Giga-tronics Common Stock, or if holders of ASCOR Shares exercise
dissenters' rights with respect to such number of shares of ASCOR stock such
that the Merger cannot be accounted for as a pooling of interests, the Board of
Directors of Giga-tronics may elect not to proceed with implementation of the
Merger, notwithstanding the approval of the Merger by ASCOR's and Giga-tronics'
shareholders. See "THE REORGANIZATION AGREEMENT AND RELATED AGREEMENTS - The
Reorganization Agreement - Conditions to the Merger."
Comparison of Shareholders' Rights: There are no material differences
between the rights of holders of ASCOR Common Stock and the rights of holder of
Giga-tronics Common Stock, as both corporations are organized in the State of
California and have similar Articles of Incorporation and By-Laws. See
"COMPARISON OF RIGHTS OF SHAREHOLDERS OF GIGA-TRONICS and ASCOR AND DESCRIPTION
OF GIGA-TRONICS AND ASCOR SECURITIES."
Exchange Procedures: Promptly after the consummation of the Merger,
Chemical Mellon Shareholder Services of California (the "Exchange Agent") will
mail a letter of transmittal with instructions to all holders of record of ASCOR
Securities as of the Effective Time of the Merger regarding the exchange of
their ASCOR share certificates for certificates representing shares of
Giga-tronics Common Stock. ASCOR Shareholders should not surrender any
Certificates until the letter of transmittal is received. A holder of ASCOR
Securities will not be entitled to any rights of a holder of Giga-tronics Common
Stock until such holder exchanges the ASCOR Securities for certificates
representing Giga-tronics Common Stock. See "THE REORGANIZATION AGREEMENT AND
RELATED AGREEMENTS - The Reorganization Agreement - Exchange of Certificates"
for more details.
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<PAGE> 20
Certain Related Agreements:
Letter Agreement. Pursuant to a letter agreement among Giga-tronics and
ASCOR dated May 20, 1996 (the "Letter Agreement"), Giga-tronics has agreed to
use its best faith efforts to effect the registration pursuant to federal
securities laws of the Giga-tronic Common Stock to be issued in the Merger on a
Form S-4 registration statement. See "THE REORGANIZATION AGREEMENT AND RELATED
AGREEMENTS - Letter Agreement."
Registration Rights Agreement. The Reorganization Agreement
contemplates that the Giga-tronics Common Stock to be issued in the Merger would
not be issued pursuant to a registration statement under federal securities law,
but rather pursuant to exemption from such registration requirements as a
private placement. If Giga-tronics is unable to effect the registration of such
Giga-tronics Common Stock as contemplated by the Letter Agreement, at the
Effective Time Giga-tronics will enter into a Registration Rights Agreement with
holders of ASCOR Securities who receive Giga--tronics Common Stock pursuant to
which they will be granted certain demand and piggyback registration rights with
respect to such Giga-tronics Common Stock. See "THE REORGANIZATION AGREEMENT AND
RELATED AGREEMENTS - The Reorganization Agreement - Registration of Merger
Consideration and The Registration Rights Agreement."
Summary Historical and Pro Forma Financial Information:
The following historical financial information of Giga-tronics and
ASCOR has been derived from their respective historical consolidated financial
statements, and should be read in conjunction with such consolidated financial
statements and the notes thereto, which are included as Annexes to this Joint
Proxy Statement/Prospectus. The selected pro forma financial information of
Giga-tronics and ASCOR is derived from the unaudited pro forma combined
condensed financial statements and should be read in conjunction with such pro
forma statements and notes thereto, which are included elsewhere in this Joint
Proxy Statement/Prospectus. For pro forma purposes, ASCOR financial data covers
the approximate comparable financial reporting periods used by Giga-tronics.
The pro forma financial information does not purport to represent what
Giga-tronics' financial position or results of operations would actually have
been had the Merger occurred at the beginning of the earliest period presented
or to project Giga-tronics' financial position or results of operations for any
future date or period.
Neither Giga-tronics or ASCOR has declared or paid any dividends on its
capital stock during the periods presented.
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<PAGE> 21
<TABLE>
<CAPTION>
Historical Giga-tronics Fiscal Year Ended
- ----------------------- -------------------------------------------------------------------------
(In thousands except per share data) March 30, March 25, March 26, March 27, March 28,
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net sales $ 24,898 $ 21,937 $ 19,890 $ 23,085 $ 16,181
Net earnings (loss) 901 (1,576) 231 1,327 878
Net earnings (loss) per share 0.34 (0.61) 0.09 0.52 0.34
At Period End-
Working capital $ 15,830 $ 13,242 $ 14,209 $ 15,370 $ 16,588
Total assets 23,027 22,225 23,580 23,597 19,817
Long-term debt -- -- -- -- --
Shareholders' equity 19,101 18,018 19,671 19,440 18,113
</TABLE>
<TABLE>
<CAPTION>
Historical ASCOR Fiscal Year Ended
- ---------------- -------------------------------------------------------------------------
(In thousands except per share data) March 30, March 25, March 26, March 27, March 28,
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net sales $ 5,913 $ 4,032 $ 3,577 $ 1,803 $ 1,935
Net earnings 839 709 1,074 (600) (477)
Net earnings per share 0.15 0.12 0.22 (0.07) (0.05)
At Period End-
Working capital $ (1,222) $ (796) $ 19 $ (249) $ 50
Total assets 3,557 3,601 2,135 1,579 1,113
Long-term debt 30 40 -- -- --
Redeemable Preferred Stock 3,442 3,182 2,922 2,662 2,532
Shareholders' equity (1,726) (2,317) (2,766) (3,580) (3,177)
</TABLE>
<TABLE>
<CAPTION>
Giga-tronics and ASCOR Fiscal Year Ended
---------------------------------------
Pro Forma Combined March 30, March 25, March 26,
(In thousands except per share data) 1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Net sales $ 30,811 $ 25,969 $ 23,467
Net earnings (loss) 1,865 (867) 1,305
Net earnings (loss) per share 0.55 (0.26) 0.40
At Period End-
Working capital $ 17,081 $ 13,940 $ 15,040
Total assets 26,584 25,826 25,690
Long-term debt 30 -- --
Shareholders' equity 20,692 18,883 19,827
</TABLE>
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<PAGE> 22
Comparative Per Share Data:
Set out below are income and book value per common share data of
Giga-tronics and ASCOR on both a historical and unaudited pro forma condensed
combined basis and on a per share equivalent unaudited pro forma basis for
ASCOR. Unaudited pro forma condensed combined per share information is derived
from the unaudited pro forma condensed combined information presented elsewhere
herein which gives effect to the Merger under the pooling of interests
accounting method at the beginning of the earliest period presented, and assumes
the issuance of 724,986 shares of Giga-tronics Common Stock in 1995 and 1994.
Expenses directly attributable to the consummation of the Merger are expected to
approximate $250,000. The pro forma adjustment to retained earnings is
$125,000 while the total estimated costs are $250,000 because $125,000 of costs
are already included in the fiscal 1996 financial statements. The estimated
$250,000 of merger costs are not included in the pro forma statements of
operations since they will be nonrecurring. The expenses have been deducted in
calculating the pro forma combined book value per share, but are not reflected
in the pro forma earnings (loss) per share amounts. Neither Giga-tronics or
ASCOR has declared or paid any dividends on its capital stock during the periods
presented.
The pro forma information is presented for illustrative purposes only
and is not necessarily indicative of the operating results or financial position
that would have occurred if the Merger had been consummated, nor is it
necessarily indicative of future operating results or financial position.
<TABLE>
<CAPTION>
Twelve Months Ended
------------------------------------------------------
March 30, March 25, March 26,
Net earnings (loss) per share 1996 1995 1994
- ----------------------------- ------------ ----------- -----------
<S> <C> <C> <C>
Historical Giga-tronics $ 0.34 $ (0.61) $ 0.09
Historical ASCOR 0.15 0.12 0.22
</TABLE>
<TABLE>
<CAPTION>
Twelve Months Ended
------------------------------------------------------
March 30, March 25, March 26,
Net earnings (loss) per share 1996 1995 1994
- ----------------------------- ------------ ----------- -----------
<S> <C> <C> <C>
Pro forma combined $ 0.55 $ (0.26) $ 0.40
Pro forma equivalent per ASCOR share 0.03 (A) (0.01)(A) 0.02(A)
</TABLE>
<TABLE>
<CAPTION>
Book value per share At March 30, 1996
- -------------------- -----------------
<S> <C>
Historical Giga-tronics $ 7.34
Historical ASCOR (0.44)
Pro forma combined per Giga-tronics share 6.22
Pro forma combined per ASCOR share 0.34(B)
</TABLE>
(A) Determined by multiplying pro forma combined net earnings per share by
the estimated Exchange Ratio of 1 to 18.246 (.0548). The 18.246 ratio
equals 13,228,069 ASCOR securities as of June 14, 1996 divided by
724,986 Giga-tronics shares issued.
(B) Determined by multiplying pro forma combined book value per share by the
estimated Exchange Ratio of 1 to 18.246 (.0548). The 18.246 ratio
equals 13,228,069 ASCOR securities as of June 14, 1996 divided by
724,986 Giga-tronics shares issued.
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<PAGE> 23
Comparable Market Price Data:
Giga-tronics. Giga-tronics Common Stock is traded over-the-counter in
the National Market System of the National Association of Securities Dealers,
Inc. Automatic Quotation ("NASDAQ") System. The following table sets forth, for
the fiscal quarters indicated, the high and low bid prices of Giga-tronics as
reported by the NASDAQ National Market System.
<TABLE>
<CAPTION>
Giga-tronics Common Stock High Low
- ------------------------- ---- ---
<S> <C> <C>
Fiscal Year Ended March 26, 1994
June Quarter 8 1/2 5 3/4
September Quarter 8 5 1/2
December Quarter 7 3/4 6
March Quarter 7 1/2 5 1/4
Fiscal Year Ended March 25, 1995
June Quarter 7 1/4 5 7/8
September Quarter 6 4 3/4
December Quarter 6 3/8 5
March Quarter 6 1/4 4
Fiscal Year Ended March 30, 1996
June Quarter 7 7/8 6
September Quarter 10 1/2 6 3/4
December Quarter 9 6 7/8
March Quarter 8 6 5/8
</TABLE>
As of May 14, 1996 (the day preceding public announcement)
<TABLE>
<CAPTION>
Share Market
Price Value
----- ------
<S> <C> <C>
Market Value of ASCOR on equivalent per share basis $0.44 (1) $ 5,820,000 (2)
Market Value of Giga-tronics $8.00 $20,827,360 (3)
</TABLE>
(1) Based on $8.00 Giga-tronics share price divided by 18.246 conversion ratio.
(2) Based on 13,228,069 ASCOR securities.
(3) Based on 2,603,420 Giga-tronics shares outstanding.
On June 14, 1996, the last reported sales price of Giga-tronics Common
Stock was 11 1/4.
Giga-tronics has never paid a dividend on Giga-tronics Common Stock. The
Payment of any dividend is at the discretion of Giga-tronics' Board of Directors
and depends on Giga-tronics earnings, financial position, capital requirements
and such other factors as Giga-tronics' Board of Directors deems relevant.
As of June 14, 1996 there were 1,089 holders of record of Giga-tronics
Common Stock.
ASCOR. ASCOR is a privately held company, and its Securities are not listed
on any exchange and does not trade. ASCOR has never paid a dividend on its
common stock. As of June 14, 1996 there were 26 holders of record of ASCOR
Securities that are entitled to vote with respect to the Merger.
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<PAGE> 24
SECTION II
RISK FACTORS
GIGA-TRONICS
In addition to the other information included in this Joint Proxy
Statement/Prospectus, the following information should be considered carefully
by holders of Giga-tronics Common Stock in evaluating the Merger.
Dependence On Key Personnel and Ability to Hire Technical Staff to
Support Growth
ASCOR's future success is highly dependent on certain key management and
technical personnel. The loss of any one of these key personnel could have a
material adverse impact on ASCOR's results of operation. In addition, there will
be no employment contracts awarded to any of these personnel during the Merger.
Stock options in the combined Company may be granted in the normal course of
business, and the key personnel will have a significant equity interest in the
combined Company. ASCOR has "key-executive" life insurance for Mr. Jeffrey Lum,
President of ASCOR. See "THE MERGER - Management and Security Ownership After
the Merger."
ASCOR employs technical staff with a need for a precise set of engineering
skills. Given the short supply and high demand on engineers in general since
1994 (due to business expansion in Silicon Valley), rapid growth could put a
strain on the Company's ability to hire technical personnel at a pace fast
enough to support the higher sales volume.
Distribution Channel Conflicts
Some of the sales representatives which currently sell Giga-tronics
products also sell the Racal Dana VXI product line which competes with ASCOR's
products. Since historically, Racal Dana has generated significantly more volume
than ASCOR, and since some representatives may have a conflict of interest with
Racal Dana by carrying ASCOR products as well as Giga-tronics (post-Merger)
products, many of such sales representatives may have to be convinced that it is
in their best interest to also represent ASCOR products and to continue to
represent Giga-tronics products. There are eight major Giga-tronics sales
representatives which also market Racal Dana products. These representatives
currently sell approximately $13 million of Giga-tronics products annually.
Giga-tronics may be required to develop new sales representatives should current
ones resign. There can be no assurance that any loss of sales of Giga-tronics
products due to the loss of such sales representatives will be offset by sales
of ASCOR products or that Giga-tronics would be successful in developing
additional sales representatives to replace any lost sales due to the
above-described conflicts.
Reliance on A Single Family of Products That Are Military-Dependent
All of ASCOR's revenues are associated with the VXI architecture. The
future expansion of the Company is dependent on increased acceptance of this
type of architecture by customers. To date, acceptance has been primarily by the
military, and military orders have generally been soft across most markets in
recent years. If military orders declined in the future and if ASCOR is unable
to gain acceptance by civilian customers, ASCOR's sales might suffer, which may
result in a material adverse effect on the combined companies.
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Reliance On Major Contracts and A Few Number of Customers
ASCOR relies on a relatively small number of large government contracts and
government related orders comprise most of its sales. Though ASCOR's few
customers are large companies, they also are few in number. The contracts are
usually awarded following a competitive bidding process which can begin well
before the contract is awarded. The timing and likelihood of any particular
contract is difficult to predict. Revenue and earnings are therefore subject to
significant fluctuations between quarterly and annual periods depending on the
number of contracts awarded.
Management Of Growth and Potential Higher Overhead Cost of New Facility
ASCOR currently is utilizing all of the available space in its leased
Fremont facility. In addition, the lease on the facility is due to expire on
January 31, 1998. If sales volume grows significantly over the next year or two,
a larger facility will need to be secured. Since current lease rates being paid
by ASCOR are substantially below market, a new larger facility at market rates
would add significantly to the Company's overhead costs. Higher overhead costs
would increase the sales volume break-even point and cause potential volume
fluctuations to have a bigger impact on profit. Given the small number of
contracts and customers in the current sales mix (See " - Reliance on Major
Contracts and A Few Number of Customers"), the Company's vulnerability would be
enhanced.
Future Sales of Giga-tronics Common Stock Issued in Merger Could Adversely
Impact Stock Price
In the event that the ASCOR shareholders wish to sell all or a portion of
their Giga-tronics Common Stock after consummation of the Merger, their effort
to do so could result in a depression of the Giga-tronics share price traded on
NASDAQ due to the historically thin trading volume of Giga-tronics stock.
ASCOR
In addition to the foregoing risk factors which would affect them as
shareholders of Giga-tronics and the other information included in this Joint
Proxy Statement/Prospectus, the following information should also be considered
carefully by holders of ASCOR common stock and common stock equivalents in
evaluating the Merger.
Limited Liquidity for ASCOR Shareholders and Potential Adverse Impact on
Giga-tronics Stock Price
Giga-tronics stock has historically traded on thin volume on NASDAQ. The
ASCOR shareholders receiving Giga-tronics stock may not be able to sell a
significant volume of stock if they wished to increase their liquidity after the
Merger. In addition, their effort to sell significant volume of their newly
acquired stock could result in a depression of the Giga-tronics share price. In
any circumstance, such shareholdings will certainly be subject to the vagaries
of the market place.
Giga-tronics Revenues Could Decrease Due to Declining Order Intake
Current softness in the market for Giga-tronics products has resulted in a
substantial decline in backlog. If this trend cannot be reversed in the near
term, Giga-tronics shipments in the current year could fall short of plan with a
concurrent decline in earnings.
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Succession of Chief Executive Officer at Giga-tronics Could Result In a Less
Supportive Management Perspective for ASCOR
Mr. George H. Bruns, Jr. may decide over the next year or two to bring
in a new Chief Executive Officer to manage Giga-tronics. Mr. Bruns joined the
Company in January of 1995, originally with the intention to just stay a short
time period. Due to Mr. Bruns many other business interests he may need to
reduce his time spent at Giga-tronics. Since Mr. Bruns has been associated with
ASCOR since its inception, a new Chief Executive Officer at Giga-tronics may not
be as effective at managing the combined entities.
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SECTION III
GIGA-TRONICS INCORPORATED
Giga-tronics designs, manufactures and markets microwave and radio
frequency signal generation and power measurement instruments for the
electronics test and measurement equipment industry. These products are used in
the design, production, repair, and maintenance of telecommunications, radar,
electronic warfare, and transportation systems. Giga-tronics has approximately
145 employees and all functions of the Company operate out of a 47,000 square
foot facility in San Ramon, California. The Company books a mixture of
commercial and government-related orders. In the past three fiscal years, sales
related to U.S. Government agencies accounted for 31%, 26%, and 27% of total net
sales. It is anticipated that sales to U.S. Government agencies will remain
significant in fiscal 1997, even though the outlook for defense-related orders
continues to be soft. Shipments are realized to domestic and international
customers.
On March 30, 1996, Giga-tronics had a backlog of approximately $6,112,000
compared to $10,154,000 at March 25, 1995. The Company shares the market with
competitors that are larger and that have greater financial, engineering and
marketing resources than the Company. The future success of the Company is
dependent on its ability to steadily incorporate advancements in semiconductor
and related microwave component technologies into its new products.
The Company was incorporated in 1980, and operated previously out of
locations in Pleasant Hill, California and Sunnyvale, California. Currently, the
San Ramon facility is the only location, which is occupied under a lease with
ten years remaining.
Two of the fours members of the Giga-tronics Board of Directors, Mr.
George H. Bruns, Jr., and Mr. James A. Cole, are also members of the ASCOR Board
of Directors. Additionally, Mr. Bruns, Mr. Cole, and Mr. Robert C. Wilson (also
on the Giga-tronics Board) hold varying amounts of ASCOR Shares and ASCOR
Convertible Securities. Each shareholder is urged to read this Proxy in its
entirety for more details.
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SECTION IV
ASCOR, INC.
ASCOR designs, manufactures and markets an extensive line of switching and
connecting devices that link together many specific purpose instruments that are
part of automatic test systems. ASCOR offers a family of Switching and Interface
Test Adapters as standard VXI configured products. Additionally, it provides
complete systems integration services to the Automatic Test Equipment (ATE)
market.
In the past three fiscal years, defense-related orders accounted for 87%,
87%, and 100% of net sales in the twelve-month periods ending March, 1996, 1995,
and 1994, respectively. Management anticipates that sales to defense contractors
will remain significant in fiscal 1997, even though the outlook for
defense-related orders continues to be soft. Shipments are realized only to
domestic customers.
On March 30, 1996, ASCOR had a backlog of approximately $2,742,000 compared
to $3,023,000 at March 25, 1995. The Company shares the market with competitors
that are larger and that have greater financial, engineering, and marketing
resources than the Company. The future success of the Company is dependent on
its ability to steadily incorporate advancements in semiconductor and related
microwave component technologies into its new products.
ASCOR was founded and incorporated in 1987. It has approximately 50
employees and all functions of the Company operate out of a leased facility with
12,160 square feet in Fremont, California. The lease for the facility expires on
January 31, 1998.
Two of the five members of the ASCOR Board of Directors, Mr. George H.
Bruns, Jr., and Mr. James A. Cole, are also members of the Giga-tronics Board of
Directors. Additionally, Mr. Bruns, Mr. Cole and Mr. Robert C. Wilson (also on
the Giga-tronics Board) hold varying amounts of ASCOR Shares and ASCOR
Convertible Securities. Each shareholder is urged to read this Proxy in its
entirety for more details.
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SECTION V
THE MERGER
Description of the Merger
At the Effective Time, (i) Acquisition Corp. will be merged with and into
ASCOR and ASCOR will become a wholly owned subsidiary of Giga-tronics; (ii) each
(a) share of ASCOR Common Stock and ASCOR Preferred Stock outstanding
immediately prior to the Merger (other than ASCOR Shares held by shareholders
who have perfected and not withdrawn their right to seek appraisal of their
shares under applicable California law) and (b) outstanding ASCOR Convertible
Security will be converted into the right to receive a pro rata portion of an
aggregate of 724,986 Shares of Giga-tronics Common Stock to be issued in the
Merger. In determining the Exchange Ratio which holders of ASCOR Securities will
be entitled to receive, all ASCOR Convertible Securities will be treated as
having been converted or exercised into ASCOR Shares. Any ASCOR Convertible
Securities which are considered "out-of-the-money" will be assumed by
Giga-tronics and will be exercisable for Giga-tronics Common Stock as adjusted
by the Merger. Shares of Giga-tronics Common Stock attributable to ASCOR
Convertible Securities which are assumed by Giga-tronics will be retained by
Giga-tronics from the Merger Consideration pending their exercise. See "THE
REORGANIZATION AGREEMENT AND RELATED AGREEMENTS - The Reorganization Agreement -
The Exchange Ratio and ASCOR Convertible Securities." See "DISSENTERS' APPRAISAL
RIGHTS."
A maximum of 724,986 shares of Giga-tronics Common Stock will be issuable
in the Merger, including (a) shares issuable in respect of ASCOR Convertible
Securities which are assumed, which shares will be retained by Giga-tronics if
such securities expire unexercised, (b) fractional shares, (c) shares issuable
in respect of ASCOR Shares for which dissenters' appraisal rights (see " -
DISSENTERS' APPRAISAL RIGHTS") are perfected, and (d) shares deemed surrendered
upon exercise of ASCOR Convertible Securities for which a deemed net exercise
has occurred. See "THE REORGANIZATION AGREEMENT AND RELATED AGREEMENTS - The
Reorganization Agreement - The Exchange Ratio." The Merger will be effective at
the time the agreement of merger (the "Agreement of Merger" the form of which is
attached to the Reorganization Agreement as Exhibit 1.01 - See Annex C) is filed
with the Secretary of State of the State of California. Assuming all conditions
to the Merger are met or waived prior thereto, it is anticipated that the
Effective Time will occur not later than July 30, 1996.
Voting and Proxies - Giga-tronics
Date, Time and Place of Special Meeting. The Special Meeting is scheduled
to be held at 10:00 a.m., local time, on Wednesday, June 26, 1996, at the
Giga-tronics facilities at 4650 Norris Canyon Road, San Ramon, California 94583.
Record Date and Outstanding Shares. Only holders of record of shares of
Giga-tronics Common Stock at the close of business on June 14, 1996 (the "Record
Date") may vote at the Special Meeting or at any adjournments or postponements
thereof. As of the Record Date, there were 2,642,970 shares of Giga-tronics
Common Stock outstanding, the only class of securities of the Company entitled
to vote at the Special Meeting, held by approximately 1,089 shareholders of
record. Each shareholder is entitled to one vote for each share registered in
the shareholder's name on the Record Date.
Voting Proxies. Many of the Company's shareholders may be unable to attend
the Special Meeting. Therefore, Giga-tronics' Board of Directors is soliciting
proxies so that each shareholder has the opportunity to vote on the proposals to
be considered at the Special Meeting. When a proxy card is returned properly
signed and dated, the shares represented thereby will be voted in
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accordance with the instructions on the proxy card. However, if a shareholder
does not return a signed proxy card, his or her shares will not be voted by the
proxies. Shareholders are urged to mark the boxes on the proxy card to indicate
how their shares are to be voted. If a shareholder returns a signed proxy card
and a choice is not specified, the shares represented by that proxy card will be
voted in favor of the Merger and may also be voted in the proxy holder's
discretion on such other business as may properly come before the meeting or any
adjournments or postponements thereof, except that shares represented by proxies
which have been voted "against" the Reorganization Agreement and the Merger will
not be used to vote "for" postponement or adjournment of the Special Meeting for
the purpose of allowing additional time for soliciting additional votes "for"
the Reorganization Agreement and the Merger. See " - Vote Required.".
Shareholders of Giga-tronics who execute proxies retain the right to revoke
them at any time before they are voted. Any proxy given by a shareholder may be
revoked (i) by duly executing and delivering a later proxy prior to the exercise
of such proxy, (ii) by giving notice of revocation in writing to the Secretary
of the Company prior to the meeting, at 4650 Norris Canyon Road, San Ramon,
California 94583, or (iii) by attending the Special Meeting and voting in
person.
Vote Required. A quorum for the transaction of business at the meeting
consists of holders of the majority of the outstanding shares of the
Giga-tronics' Common Stock, present in person or by proxy. For purposes of
determining the presence of a quorum, abstentions, but not broker non-votes,
will be counted. In the event that less than a majority of the outstanding
shares are present at the Special Meeting, either in person or by proxy, a
majority of the shares so represented may vote to adjourn the Special Meeting
from time to time without further notice, other than announcement at the Special
Meeting, until a quorum shall be present or represented.
The affirmative vote of holders of at least a majority of the outstanding
shares of Common Stock of Giga-tronics as of the Record Date is required to
approve and adopt the Reorganization Agreement and the transactions contemplated
thereby. Under the California Corporate Law, in determining whether the proposal
regarding the adoption of the Reorganization Agreement has received the
requisite number of affirmative votes, abstentions will be counted and will
have the same effect as a vote against such proposal. Broker non-votes which
are not counted for any purpose will have no effect on the proposal.
At the Close of Business on June 14, 1996 directors and officers of
Giga-tronics were entitled to vote 438,538 shares of Giga-tronics' Common Stock
representing 16.5% of the total shares entitled to vote at the Special Meeting.
Solicitation of Proxies; Expenses. The cost of solicitation, including the
cost of preparing and mailing the Notice of Special Meeting of Shareholders and
this Joint Proxy Statement/Prospectus, will be paid by Giga-tronics.
Solicitation will be made primarily by mailing this Joint Proxy
Statement/Prospectus to all shareholders entitled to vote at the Special
Meeting. Proxies may be solicited by officers and regular employees, but at no
compensation in addition to their regular compensation as employees.
Giga-tronics may reimburse brokers, banks and others holding shares in their
names for third parties for the cost of forwarding Joint Proxy
Statement/Prospectus to and obtaining proxies from third parties. In addition,
while Giga-tronics has no present intention to retain anyone to assist in
soliciting proxies, Giga-tronics may do so if it deems such action necessary.
ASCOR Shareholder Consent Solicitation - Vote Required
Consent Solicitation. ASCOR will deliver copies of this Joint Proxy
Statement/Prospectus to all of its shareholders with a request that they execute
a written consent approving the Merger. Pursuant to California Corporate Law,
the Merger will be deemed approved by ASCOR's shareholders at such time as there
have been filed with the secretary of ASCOR consents relating to the vote of
ASCOR shareholders required to approve the Merger. See " - Vote Required." Under
California Corporate Law ASCOR shareholders who have previously delivered a
written consent
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approving the Merger may revoke the consent by a writing received by ASCOR prior
to the time that written consents of the number of votes required to authorize
the Merger are received by the secretary of ASCOR. Such revocation is effective
upon receipt by the secretary of ASCOR.
Vote Required. Approval of the Merger by ASCOR's shareholders requires the
written consent of persons holding a majority of the votes entitled to be cast
by holders of outstanding (a) ASCOR Common Stock voting as a class, (b) ASCOR
Preferred Stock voting as a separate class and (c) ASCOR Common Stock and ASCOR
Preferred Stock voting together as a single class. Each share of ASCOR Common
Stock is entitled to one vote and each share of ASCOR Preferred Stock is
entitled to such number of votes as the number of shares of ASCOR Common Stock
into which such share of ASCOR Preferred Stock is convertible. At the close of
business on May 20, 1996, directors and officers of ASCOR and their affiliates,
in the aggregate held ASCOR Common Stock and ASCOR Preferred Stock entitled to
cast 10,546,254 votes, representing 75.0% of the total votes entitled to be
voted by ASCOR Common Stock and ASCOR Preferred Stock voting together as a
single class, by written consent with respect to the Merger.
Background of the Merger
Since two of the four Giga-tronics Directors (Mr. George H. Bruns, Jr.,
and Mr. James A. Cole) are also Directors of ASCOR, Giga-tronics has known about
ASCOR since its incorporation in 1987. However, discussion of the proposed
merger was initiated by Mr. Jeff Lum, President of ASCOR, and Mr. Bliss McCrum,
an ASCOR investor and ASCOR Board member. For Mr. Jeff Lum, primary reasons
included the need for capital, the advantage of being associated with a larger
company, and the need for access to international markets. For Bliss McCrum, and
the other venture capitalists (ASCOR investors), there is a need for medium term
liquidity.
Over the past two years, the Giga-tronics Board has discussed the pursuit
of various acquisition candidates which would potentially be synergistic with
the Giga-tronics product line, but never reached any agreements on a
transaction. There also were no formal negotiations conducted or offers made or
rejected for any acquisition candidates. There was significant contact and
discussions with three companies, but negotiations were not initiated due to
various negative factors associated with one or all of the candidates, including
but not limited to geography (too far from Giga-tronics), inconsistent financial
performance, limited history, and the potential purchase price not appearing
financially justifiable. Due to the extremely high costs of completing
acquisitions, only strong acquisition targets are pursued, and only one
acquisition is contemplated at a given time. In September and October of 1995,
the idea of a Giga-tronics/ASCOR merger was discussed at both Companys'
respective Board meetings. It was felt that if such a merger were otherwise
possible, it would substantially broaden the product base and strengthen the
technical capability of Giga-tronics while providing marketing leverage and
added financial resources for ASCOR.
The discussions at the September 27, 1995 ASCOR Board meeting included
general discussion concerning Giga-tronics compatibility in the areas of
technology, products, and markets. These discussions were held among Mr. George
H. Bruns, Jr., Mr. James A. Cole, Mr. Jeffrey Lum, Mr. Bliss McCrum, and Mr.
Steven Herrick. There was a brief review of the historical financials for
Giga-tronics, as well as the projections for fiscal year 1996 ending March 30,
1996. The discussions held at the October 23, 1995 Giga-tronics Board meeting
included general discussion concerning ASCOR compatibility in the areas of
technology, products and markets. These discussions were held among Mr. George
H. Bruns, Jr., Mr. James A. Cole, Mr. Edward D. Sherman, and Mr. Robert C.
Wilson. There was never any discussion or consideration given to the option of
contracting for or seeking to enter into a licensing agreement for the
desired VXI architecture.
In subsequent discussions between the two companies, it was felt that the
commonality of interests and purpose suggested a Merger based upon relative,
rather than absolute values.
At the November 15, 1995 ASCOR Board meeting, there was a more detailed
discussion about the advantages of a merger with Giga-tronics. These discussions
included the need for cash by ASCOR to re-pay debt, while Giga-tronics was in a
cash surplus position. While Giga-tronics had a very strong balance sheet, the
earnings stream of Giga-tronics would benefit from a merger with ASCOR. The
future growth potential of both companies was discussed. It was decided that a
group representing ASCOR (Mr. Jeffrey Lum, Mr. Fred Chu, Mr. James A. Cole, and
Mr. Bliss McCrum) would formulate a set of relative values for ASCOR and
Giga-tronics after the Merger. Meanwhile, Giga-tronics (represented by Mr.
George H. Bruns, Jr.) would also formulate a
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proposal. Shortly thereafter, Mr. Jeffrey Lum submitted an ASCOR proposal
including post-merger values of 69% Giga-tronics and 31% ASCOR. Mr. Bruns
indicated that this proposal would not be acceptable because the recent history
(3 years) of the two companies had been given too much weight. Since the recent
earnings history of ASCOR had been stronger than Giga-tronics, but Giga-tronics
had very strong earnings prior to the most recent 3 years through fiscal 1995,
more work was needed to reach an equitable ratio of post-merger ownership.
At the December 6, 1995 Giga-tronics Board meeting, Mr. George H. Bruns,
Jr., Mr. James A. Cole, Mr. Edward D. Sherman, Mr. Robert C. Wilson and Mr.
Gregory L. Overholtzer (Chief Financial Officer and Secretary of Giga-tronics)
reviewed in detail the five-year history of Giga-tronics and ASCOR, one-year
projections for both companies, projected ASCOR cash flow for fiscal 1996, the
capitalization of ASCOR, and the positive/negative attributes of both companies.
While ASCOR had good technology, good growth, excellent management, and was in a
good market, it also was dependent on large contracts, had a large concentration
of its sales with a few customers, its sales were all related to the U.S.
defense industry, it was going to need cash over the next year, and the ratio of
earnings to sales were projected to decline somewhat in the fiscal year 1996
ending September 30. Though Giga-tronics had some product lines which were aging
with poor profit margins, it also had a broad market base, more commercial
accounts than defense oriented, a strong field organization, a very strong
balance sheet and cash position, and a strong earnings history if at least the
prior 5 years were included. A post-combination value ratio of ASCOR to
Giga-tronics of 22% to 78% was approved by the Giga-tronics Board. On December
7, this proposal was communicated by Mr. George H. Bruns to the ASCOR
negotiating team. Mr. Bruns communicated to ASCOR that the Board of Giga-tronics
believed that this ratio was equitable and fair to ASCOR, as well as to
Giga-tronics Shareholders for all the reasons outlined above, and that if ASCOR
was not in agreement, Giga-tronics would seek other synergistic acquisitions to
pursue.
Over the next few weeks, various proposals with different post-combination
value ratios were presented to Mr. George H. Bruns, Jr. by Mr. James A. Cole and
Mr. Bliss McCrum. These proposals were reviewed and rejected by Giga-tronics. By
mid-December, after due consideration of past and potential future growth,
profitability, technical strengths, financial strength and organizational
compatibility, it was mutually agreed that a post combination value ratio of
ASCOR to Giga-tronics would be 22% to 78%. Based upon the number of outstanding
shares of Giga-tronics common stock of 2,569,920 as of December 1, 1995, the
preceding ratios suggested that ASCOR thus had an equivalent value of 724,986
Giga-tronics shares.
The Board of Directors of Giga-tronics felt it was important that the
proposed merger be accounted for as a pooling-of-interests. In late December,
the Giga-tronics finance group and the Giga-tronics auditors, KPMG Peat Marwick
LLP ("KPMG") began financial due diligence and an analysis of poolability. Upon
satisfactory completion of these tasks in late March, 1996, an audit of ASCOR by
KPMG was arranged and conducted in April 1996. Upon completion of the audit, the
"Reorganization Agreement" was executed on May 2, 1996.
On May 20, 1996 Giga-tronics and ASCOR executed the Letter Agreement
pursuant to which Giga-tronics agreed to sue its best faith efforts to effect
the registration pursuant to federal securities laws of the Giga-tronics Common
Stock to be issued in the Merger on a Form S-4 registration statement. See "THE
REORGANIZATION AGREEMENT AND RELATED AGREEMENTS - Letter Agreement."
Giga-tronics' Reasons for the Merger; Recommendations of Giga-tronics' Board of
Directors
The Board of Directors of Giga-tronics believes that the terms of the
Reorganization Agreement and the transactions contemplated thereby are fair to,
and in the best interest of, Giga-tronics Incorporated and its shareholders. In
making that determination, the Giga-tronics Board of Directors considered the
following factors: (i) ASCOR's business prospects and recent results of
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operations and financial position, (ii) the benefit of having access to certain
of ASCOR's technology and technical resources, (iii) the potential synergistic
benefits derived from the coordination of sales and marketing strategies, and
(iv) the ease of integration and exchange of ideas due to long-term familiarity.
Mr. George H. Bruns also had numerous meetings with Wood Warren & Co., the
financial advisor, to discuss their analysis of the proposed merger and their
findings regarding the fairness of the merger consideration, which findings were
considered by the Board of Directors in approving the merger.
The Board of Directors of Giga-tronics considered ASCOR's working capital
position, anticipated cash flow from operations, available cash balances and the
quality of ASCOR's customer base.
The Giga-tronics Board also considered the impact that access to ASCOR's
engineering personnel could have on advancing Giga-tronics products and
technology. The Board noted that Giga-tronics and ASCOR technology was
complementary and that ASCOR possessed certain VXI and switching capabilities
required by Giga-tronics in developing new products for its markets.
ASCOR's understanding of high bandwidth electronic switching could help
broaden the Giga-tronics microwave product line by allowing Giga-tronics to
incorporate the ASCOR switch technology into its products. ASCOR's products
could help Giga-tronics realize new market potential for its microwave products
through the use of its VXI architecture. The signal generator product offering
of the combined Company could enable the combined Giga-tronics to be a more
powerful force in the microwave test instrument marketplace. ASCOR has
established strong relationships with some very large companies that may also be
potential customers for signal generators and power measurement devices produced
by Giga-tronics. In summary, the acquisition of ASCOR by Giga-tronics offers the
opportunity to expand one of its oldest product lines by infusing new technical
concepts into the product and providing market synergy with an important
customer base. Notwithstanding certain distribution channel risks (see "RISK
FACTORS - Distribution Channel Conflicts"), the Giga-tronics sales reps may also
enable the ASCOR product line to realize more sales domestically, and establish
an international customer base as well (currently there are no direct
international sales).
While the pre-Merger Giga-tronics balance sheet is very strong,
Giga-tronics' earnings as a percentage of sales are lower than ASCOR's earnings
as a percentage of sales because Giga-tronics generally has more mature
products with relatively lower margins. ASCOR's earnings as a percent of sales
are relatively high. With the income streams of the entities combined, and the
realization of product, market, and technical synergies noted above, the
combined Giga-tronics company could realize an improved earnings stream while
maintaining a very strong balance sheet.
The Board of Directors of Giga-tronics also believes that Mr. George H.
Bruns, Jr. and Mr. James A. Cole can, because of their long-term familiarity
with both organizations, ease integration and the exchange of ideas between the
two companies.
In approving the Merger, Giga-tronics also took into account the potential
conflicts of interest of Mr. George H. Bruns, Jr., Mr. James A. Cole, and Mr.
Robert C. Wilson because of their shareholdings in both Giga-tronics and ASCOR.
The Board considered the opinion of the financial advisor in the following
respects: (a) to confirm, deny, or modify its own conclusions regarding
compatibility of the two companies (related to technology and markets),
enhancement of overall fiscal performance and benefits to the Company's
shareholders; (b) to point out any oversight in the Board's reasoning; and (c)
to provide an independent analysis of relative values and fairness of the
transaction in economic terms.
The Board of Directors of Giga-tronics considered the positive and negative
factors as a whole and concluded that the negative factors were outweighed by
the positive factors as a whole and accordingly determined that the Merger is
fair to, and in the best interests of, the shareholders of Giga-tronics. The
negative factors considered included the dependence on key personnel,
distribution channel risks, reliance on a single family of products, reliance on
major contracts and a few number of customers, growth management, and future
sales of common stock after the Merger.
In view of the wide variety of factors considered by the Giga-tronics Board
of Directors, it did not find it practicable to quantify, or otherwise attempt
to assign relative weights to the specific factors considered in making its
determination. Consequently the Giga-tronics' Board of Directors did not
quantify the assumptions and results of its analysis in reaching its
determination that the Merger is fair to, and in the best interests of,
Giga-tronics' shareholders.
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THE BOARD OF DIRECTORS OF GIGA-TRONICS UNANIMOUSLY RECOMMENDS THAT
GIGA-TRONICS SHAREHOLDERS VOTE FOR APPROVAL OF THE MERGER AND ISSUANCE OF
724,986 SHARES OF GIGA-TRONICS COMMON STOCK PURSUANT TO THE TERMS OF THE
REORGANIZATION AGREEMENT.
ASCOR Reasons for the Merger - Recommendations of ASCOR's Board of Directors
The Board of Directors of ASCOR believes that the terms of the proposed
Reorganization Agreement and the transactions contemplated thereby are fair to,
and in the best interest of, ASCOR, Inc. and its shareholders. In making that
determination, the ASCOR Board of Directors considered the following factors:
(i) Giga-tronics' business prospects and recent results of operations and
financial position, (ii) the benefit of having access to certain of
Giga-tronics' sales and marketing resources, (iii) the ease of integration and
exchange of ideas due to long-term familiarity, (iv) the benefit of having
access to certain management resources to help sustain ASCOR's potential sales
growth, and (v) increased liquidity for holders of ASCOR stock and stock
equivalents.
The Board of Directors of ASCOR considered Giga-tronics' working capital
position, anticipated cash flow from operations, available cash balances and the
quality of Giga-tronics' customer base. They believed that Giga-tronics' strong
balance sheet would permit available cash to assist in funding potential growth
of ASCOR.
The ASCOR Board believed that, notwithstanding the distribution channel
risks discussed above (see "RISK FACTORS - Distribution Channel Conflicts"), the
Giga-tronics sales reps and Giga-tronics sales and marketing group could enable
the ASCOR product line to realize more sales domestically, and establish an
international customer base as well (currently there are no direct international
sales).
The Board of Directors of ASCOR believes that Mr. George H. Bruns, Jr., and
Mr. James A. Cole can, because of their long-term familiarity with both
organizations, ease integration and the exchange of ideas between the two
companies. With two Board members being common to ASCOR and Giga-tronics, ASCOR
will have the benefit of Board familiarity with ASCOR after the merger. This
familiarity will prevent short-term decisions being made after the merger that
might have poor long-term consequences for ASCOR. Two of the four post-merger
Giga-tronics Directors already understand the ASCOR business, and have the
product knowledge to immediately implement post-merger decisions that would
benefit ASCOR as well as Giga-tronics. These Board members have an in-depth
perspective on ASCOR operations.
If ASCOR experiences a high sales growth rate, the senior management of
Giga-tronics (a Company with five times the revenue) can be helpful in
identifying and solving risks and issues related to larger companies. These
benefits accrue to ASCOR with no incremental cost being incurred.
Since Giga-tronics is publicly traded on NASDAQ, the holders of ASCOR stock
and stock equivalents would have increased liquidity after the merger has been
consummated and their stock is tradeable after expiration of holding periods
required under federal securities law or sold in a registered offering of
Giga-tronics stock pursuant to their rights under the Registration Rights
Agreement.
The Board of Directors of ASCOR considered the positive and negative
factors as a whole and concluded that the negative factors were outweighed by
the positive factors as a whole and accordingly determined that the Merger is
fair to, and in the best interest of, the shareholders of ASCOR. The negative
factors considered included the limited liquidity for ASCOR shareholders
(historically thin Giga-tronics trading volume), the softness in recent
Giga-tronics order intake, and the future succession of the Chief Executive
Officer at Giga-tronics. In approving the Merger, the Board of Directors of
ASCOR also took into account the potential conflicts of interest of Mr. George
H. Bruns. Jr., and Mr. James A. Cole because of their shareholdings and Board
positions in both ASCOR and Giga-tronics.
THE BOARD OF DIRECTORS OF ASCOR RECOMMENDS THAT ASCOR SHAREHOLDERS VOTE FOR
APPROVAL OF THE MERGER AND EXCHANGE OF ALL OUTSTANDING ASCOR COMMON STOCK FOR
GIGA-TRONICS COMMON STOCK PURSUANT TO THE TERMS OF THE REORGANIZATION AGREEMENT.
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<PAGE> 35
Opinion of Financial Advisor
On April 12, 1996, the Giga-tronics Board of Directors retained Wood,
Warren and Company to render a fairness opinion. On May 3, 1996, the
Giga-tronics Board of Directors received Wood, Warren & Co.'s Opinion dated May
2, 1996, which provided that as of such date that the Exchange Ratio to be
applied in the Merger is fair, from a financial point of view, to Giga-tronics.
Wood, Warren & Co.'s opinion is directed only to the financial terms of the
Reorganization Agreement and does not constitute a recommendation to any
shareholder of Giga-tronics as to how such shareholder should vote at the
Giga-tronics Special Meeting. No limitations were placed on Wood, Warren & Co.
by the Board of Directors of Giga-tronics with respect to the investigation made
or the procedures followed in preparing and rendering its opinion. A copy of
Wood, Warren & Co.'s written opinion and summary of significant analysis is
attached as Annex E hereto and should be read in its entirety for a description
of the procedures followed, matters considered, assumptions made and methods
employed by Wood, Warren & Co.
In arriving at its opinion, Wood, Warren & Co.: (i) reviewed the Merger
Agreement and the Joint Proxy Statement/Prospectus dated May 2, 1996 and such
other information that was publicly available or was furnished to it by the
Company or ASCOR, (ii) reviewed financial statements for the five years ending
March 30, 1996 and other financial information, including forecasts, and
operating data of Giga-tronics and ASCOR furnished to Wood, Warren & Co. by the
companies, (iii) considered the historical stock prices and trading volumes of
the common stock of the Company, (iv) reviewed the prices and premiums paid in
other business combinations, (v) and prepared a discounted cash flow analysis of
ASCOR. In addition, Wood, Warren & Co. held discussions with the senior
management of Giga-tronics and ASCOR regarding the strategic rationale for, and
benefits of, the Merger and the past and current business operations, financial
condition and future prospects of the respective companies on a stand alone
basis and as combined in the Merger, and undertook such other financial analyses
as it deemed appropriate for purposes of this opinion.
The following paragraphs summarize all of the material analyses performed
by Wood, Warren & Co. in arriving at its opinion. The information presented
below is based on the financial condition of the Company and ASCOR as of a date
or dates shortly before the date of its opinion (May 2, 1996). The closing price
of Giga-tronics common stock on May 2, 1996, as reported by NASDAQ National
Marketing System, was $8.25. Based on that price and the assumption that
Giga-tronics will issue the maximum 724,986 shares of its common stock in the
Merger, the enterprise value of ASCOR was approximately $5.6 million.
Analysis of Selected Transactions Analysis. Wood, Warren & Co. compared the
proposed Merger with selected merger and acquisition transactions. This analysis
included 32 technology company transactions. In examining these transactions,
Wood, Warren & Co. analyzed certain income statement and balance sheet
parameters of the acquired company relative to the consideration offered.
Multiples analyzed included consideration offered to historical revenue, to
historical cash flow from operations, to historical earnings before interest and
taxes, to historical net income, and to historical book value. Based on the
analysis of the selected merger and acquisition transactions, ASCOR's implied
equity value ranged from approximately $5.0 million to approximately $16.7
million.
Discounted Cash Flow Analysis. Wood, Warren & Co. analyzed the theoretical
valuation of ASCOR based on projections prepared by the managements of
Giga-tronics and ASCOR. To estimate the total present value of ASCOR's business,
Wood, Warren & Co. discounted to present value the business as reflected in the
financial performance estimates using discount rates ranging from 25% to 40%.
The terminal value was based on multiples of 5.5 and 7.5 times projected
earnings before interest and taxes for fiscal 2001. Based on the discounted cash
flow analysis, ASCOR's enterprise value ranged from approximately $4.4 million
to approximately $9.2 million.
Pro Forma Analysis. Wood, Warren & Co. analyzed the pro forma impact of the
proposed Merger on Giga-tronics earnings per share. In conducting its analysis,
Wood, Warren & Co. relied upon the financial projections for the fiscal years
ending March, 1997 through 2001 provided by the management of Giga-tronics and
ASCOR, respectively. The analysis indicated that earnings per share of the pro
forma combined company would be higher in the first fiscal year after the Merger
and higher thereafter through fiscal 2001 than comparable projections for
Giga-tronics as a stand-alone company.
Stock Trading History Analysis. Wood, Warren & Co. examined the trading
history in terms of both price and volume for periods of time ranging from six
months, one year, three years and five years. Wood, Warren & Co. noted that the
Giga-tronics' average price per share was $7.76,
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<PAGE> 36
$7.65, $6.64, and $6.84, respectively. In addition, Wood, Warren & Co. analyzed
the volume of Giga-tronics shares traded at different prices over the same time
periods. Wood, Warren & Co. noted that, for each period analyzed, approximately
48% to 64% of the trading volume was at prices below the six month average price
per share of $7.76.
Contribution Analysis. Wood, Warren & Co. analyzed the contribution of each
of Giga-tronics and ASCOR to certain financial statement categories of the pro
forma combined company, including revenue, gross profit, operating income, and
net income. The review was made for the three years ended March 30, 1996. This
contribution analysis was then compared to the pro forma ownership percentage of
ASCOR's shareholders (approximately 22%) in the pro forma combined company. In
gross profits and earnings, ASCOR's contribution exceeded that of its
approximate ownership in the pro forma combined company.
The preparation of a fairness opinion involves various determinations as to
the most appropriate and relevant quantitative and qualitative methods of
financial analyses and the application of those methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to
summary description. No company or transaction used in the above analysis is
closely comparable to Giga-tronics or ASCOR or the Merger. Accordingly, Wood,
Warren & Co., believes its analyses must be considered as a whole and that
considering any portion of such analyses and of the factors considered, without
considering all analyses and current factors, could create a misleading or
incomplete view of the process underlying the opinion. Any estimates contained
in these analyses are not necessarily indicative of actual values or predictive
of future results or values, which may be significantly more or less favorable
than as set forth therein. In addition, analyses relating to the value of
businesses do not purport to be appraisals or to reflect the prices at which
businesses actually may be sold.
Conflicts of Interest
In considering the recommendations of the Board of Directors of
Giga-tronics with respect to the issuance of shares of Giga-tronics Common Stock
pursuant to the Reorganization Agreement, shareholders of Giga-tronics should be
aware that certain members of Giga-tronics' Board of Directors and the Chief
Executive Officer of Giga-tronics have certain interests in the Merger that are
in addition to the interests of shareholders of Giga-tronics generally. In
particular, three of the four Giga-tronics Board members, including Mr. George
H. Bruns, Jr., Chairman and Chief Executive Officer, beneficially own shares of
ASCOR Common or Preferred Stock or ASCOR
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<PAGE> 37
warrants (which shares shall or warrants may be converted into shares of
Giga-tronics Common Stock in connection with the Merger), as set out in the
table below. Two of the four Giga-tronics Board members, Mr. George H. Bruns,
Jr., and Mr. James A. Cole, also participate on the ASCOR Board of Directors
(which is comprised of five members in total).
These interests were considered, among other matters, in approving the
Reorganization Agreement and the transactions completed thereby.
ASCOR Securities and Giga-tronics Securities Jointly Held by Giga-tronics
Directors and ASCOR Directors
Set out below are the individual shares and warrants jointly held in ASCOR
and Giga-tronics by the Giga-tronics' Directors and the Chief Executive Officer
as of June 7, 1996. (No ASCOR non-Giga-tronics Directors hold any Giga-tronics
stock).
<TABLE>
<CAPTION>
Beneficially Owned Beneficially Owned
ASCOR Giga-tronics
Common Stock Common Stock
-------------------------------- -------------------------
Percent Percent
Name Shares of Shares Shares of Shares (5)
- ---- --------- --------- ------- ---------
<S> <C> <C> <C> <C>
George H. Bruns, Jr. (1) 454,377 3.4% 357,650 13.5%
James A. Cole (2) 3,731,453 28.2% 55,638 2.1%
Robert C. Wilson 100,000 (3) 0.8% 25,000 (4) 0.9%
</TABLE>
Notes to Table
(1) Represents shares held by the Bruns Trust and shares registered in the
name of his son and daughter. The 357,650 Giga-tronics shares include
187,650 shares owned by the Bruns Trust and 170,000 registered in the
names of son and daughter. The ASCOR shares and warrants are owned by the
Bruns Company, a venture investment partnership.
(2) James A. Cole is the Managing General Partner of Spectra Enterprise
Associates. Spectra is a Venture Partnership which beneficially owns the
shares and warrants over which Mr. Cole has shared voting and power to
determine the disposition of shares.
(3) Represents ASCOR shares held by Venturn, which is a venture partnership
in which Robert C. Wilson is a partner and has shared voting and power to
determine the disposition of shares.
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<PAGE> 38
(4) Excludes 24,000 common stock options which are not exercisable within the
next 60 days.
(5) Percentages based on 2,642,970 total shares outstanding as of June 7,
1996, plus 7,050 exercisable options for Giga-tronics shares.
Compensation of Directors
Each of Giga-tronics' Directors who is not employed by Giga-tronics
receives an annual director's fee of $6,000 and $750 for attendance at each
Board meeting. Outside Directors serving on committees of the Board receive $500
for attendance at each committee meeting. These amounts were effective January,
1995. Each of ASCOR's Directors who is not employed by ASCOR receives
reimbursement of travel expenses. There are no annual fees or meeting
compensation for ASCOR Directors.
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<PAGE> 39
Compensation of Directors and Executive Officers by Giga-tronics and ASCOR
The following table provides information concerning compensation paid
or accrued by Giga-tronics or ASCOR, to or on behalf of each Company's Chief
Executive Officer and each of the four other most highly compensated executive
officers who earned more than $100,000 annual compensation during the last
fiscal year, for the fiscal years ended March 30, 1996, March 25, 1995, and
March 26, 1994:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long -Term Compensation
-----------------------
Annual Compensation Awards Payouts
------------------- ---------------
NUMBER OF
SECURITIES
OTHER RESTRICTED UNDERLYING ALL OTHER
NAME AND ANNUAL STOCK OPTIONS/ LTIP COMPEN-
PRINCIPAL FISCAL COMPEN- AWARDS SARS PAYOUTS SATION
POSITION YEAR SALARY($) BONUS($) SATION($) ($) (#)(1) ($)(2) ($)(3)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
George H. Bruns 1996 $ 148,000 -- $ 7,200 (5) -- -- -- --
Chairman and 1995 $ 37,000 (4) -- $ 9,050 (6) -- -- -- --
Chief Executive
Officer, Giga-tronics
Fred Chu 1996 (7) $ 93,675 $18,099 $ 5,393 (8) -- -- -- $ 924
Vice President, 1995 $ 82,358 $23,449 $10,367 (8) -- -- -- $ 693
Manufacturing,
ASCOR
Jeffrey Lum 1996 $ 100,300 $22,999 $ 5,032 (8) -- -- -- $ 924
President, ASCOR 1995 $ 87,150 $33,344 $10,329 (8) -- -- -- $ 693
1994 $ 79,750 $19,442 $ 1,040 -- -- -- --
Gregory Overholtzer 1996 (7) $104,885 -- -- -- -- -- $3,392
Vice President,
Finance and
Chief Financial Officer,
Giga-tronics
Brad C. Stribling 1996 (7) $111,126 -- -- -- -- -- $2,015
Vice President, 1995 $116,462 $10,000 -- -- 40,000 -- $1,558
Engineering, Giga-tronics
David L. White 1996 $119,627 -- -- -- -- -- --
Vice President, 1995 $108,696 -- -- -- -- -- $ 742
Marketing & 1994 $102,019 $10,000 -- -- -- -- $ 385
Sales, Giga-tronics
</TABLE>
(1) Stock options granted under the Company's 1990 Stock Option Plan.
(2) Long Term Incentive Payment (LTIP): none were made.
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<PAGE> 40
(3) Represents contributions made by the Company to the Company's 401 (k)
Plan which match in part the pre-tax elective deferral contributions
(included under Salary) made to such plan by the executive officers.
(4) In January, 1995, Mr. George H. Bruns, Jr. assumed the role of Chief
Executive Officer. Annualized fiscal 1995 salary was $148,000.
(5) Other compensation for Mr. George H. Bruns, Jr. represents a car
allowance in 1996.
(6) Other compensation for Mr. George H. Bruns, Jr. includes a car allowance
of $1,800 for three months and board compensation of $7,250. The Board
compensation was earned prior to the assumption of the Chief Executive
Officer position in January, 1995.
(7) Pursuant to regulations issued by the Commission, no data is reportable
for prior fiscal years because annual compensation was below the $100,000
requirement.
(8) Other compensation for Mr. Chu and Mr. Lum includes $4,500 car allowance
in 1996 and $9,000 car allowance in 1995.
Employee Benefit Plan
The current ASCOR benefit plan, which is fairly similar to the current
Giga-tronics benefit plan, will be retained. In the future, both companies may
operate under the current Giga-tronics benefit plan if that is desirable from a
cost-benefit trade-off. The differences in the two plans are as follows. Medical
and Dental insurance costs and providers are different for the companies. Cost
to the Giga-tronics' employees is somewhat higher, though there are more
coverage options to choose from. Both companies have 401K plans with company
contributions based on employee participation. The rate of corporate matching
for Giga-tronics is higher, but the cap on employer matching is lower, than the
ASCOR Plan.
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<PAGE> 41
Structure of Board of Directors After the Merger
The Board of Directors of the combined Giga-tronics Company after the
merger will be the same as the current Giga-tronics Board.
<TABLE>
<CAPTION>
DIRECTOR
NAME AND PRINCIPAL OCCUPATION SINCE: AGE
- ----------------------------- ------ ---
<S> <C> <C>
George H. Bruns, Jr. 1980 78
Chief Executive Officer since January, 1995, Chairman of the Board and a
director of Giga-tronics since its inception. Founded Giga-tronics in 1980 and
has been a director since inception. Mr. Bruns is General Partner of The Bruns
Company, a private venture investment and management consulting firm. Director
of Peninsula Wireless Communications Inc., ASCOR Inc. and Testronics Inc.
James A. Cole 1994 54
Managing General Partner of Spectra Enterprise Associates and a Partner of New
Enterprise Associates. Founder and President of Amplica, Inc. and presently a
Director of Vitesse Semi-Conductor Corp., and Spectrian Corp.
Edward D. Sherman 1993 62
Served as Product Line Manager of Giga-tronics from May, 1995 through March,
1996. President and Chief Executive Officer at 3dbm, Inc. from January, 1994
through March, 1995. Prior to that time, and from 1990, Mr. Sherman served as
President and Chief Executive Officer of Peninsula Engineering.
Robert C. Wilson 1991 76
Chairman of Wilson & Chambers, a private investment firm. Mr. Wilson is also
currently a director of Storage Technology Corporation, SyQuest Technology,
Inc., Southwall Technologies Inc., ReSound Corp., Andros Inc., and Carco
Electronics.
</TABLE>
Management and Security Ownership After the Merger
ASCOR will be a wholly owned subsidiary of Giga-tronics after the Merger.
The current President of ASCOR, Mr. Jeffrey Lum, will report to Mr. George
Bruns, Chief Executive Officer of Giga-tronics, after the Merger. Mr. Lum's
title will be "President of ASCOR, A Giga-tronics Company." All current direct
reports of Mr. Jeff Lum at ASCOR will remain as such after the Merger. Mr. Jeff
Lum will become an officer of Giga-tronics, thereby resulting in five officers
of Giga-tronics, as noted below.
George H. Bruns, Jr. - Chairman and Chief Executive Officer
Mr. Jeffrey Lum - President of ASCOR, A Giga-tronics Company
Mr. Gregory L. Overholtzer - VP, Finance and Chief Financial Officer
Mr. Bradley C. Stribling - VP, Engineering
Mr. David L. White - VP, Sales and Marketing
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<PAGE> 42
As a wholly owned subsidiary of Giga-tronics Incorporated, ASCOR will
retain the following officers.
Jeffrey Lum - President
Fred Chu - VP, Manufacturing
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<PAGE> 43
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning (i) persons
or entities anticipated to hold 5% or more of Giga-tronics Common Stock after
the Merger, (ii) anticipated ownership of Giga-tronics by each anticipated
director and executive officer of Giga-tronics individually, and by all
directors and executive officers of Giga-tronics as a group, (iii) anticipated
ownership of Giga-tronics by each current ASCOR director and executive officer,
in each case based upon ownership by such person of Giga-tronics Common Stock
and ASCOR Common Stock/Common Stock Equivalents as of June 14, 1996 and after
giving effect to the Merger. The estimated ASCOR to Giga-tronics exchange ratio
of 18.246 to 1 was determined by dividing the Merger Consideration by the number
of ASCOR Common Shares and equivalents outstanding as of the date of this Joint
Proxy Statement/Prospectus. The actual Exchange Rate at the Effective Time
should be approximately the same figure.
<TABLE>
<CAPTION>
Giga-tronics Percent
Common of Total
Name and Percent Giga-tronics Percent Stock at Outstanding
Address of ASCOR of Out- Common of Out- Effective Common
Beneficent Owner Securities standing(1) Stock standing Time Stock(2)
- ---------------- ---------- -------- ----- -------- ---- -----
<S> <C> <C> <C> <C> <C> <C>
George H. Bruns, Jr. (3) 454,377 3.4 357,650 13.5 382,553(4) 11.3
James A. Cole (3) 3,731,453 28.2 55,638 2.1 260,146(5) 7.7
Fred Chu (11) 897,500 6.8 -0- -0- 49,189(6) 1.5
Steve Herrick (11) 857,486 6.5 -0- -0- 46,995(7) 1.4
Jeffrey Lum (11) 1,429,821 10.8 -0- -0- 78,364(8) 2.3
Bliss McCrum (11) 2,434,754 18.4 -0- -0- 133,441(9) 4.0
Gregory L. Overholtzer (3) -0- 0.0 -0- 0.0 -0- 0.0
Bradley C. Stribling (3) -0- 0.0 -0- 0.0 -0- 0.0
Edward D. Sherman (3) -0- 0.0 -0- 0.0 -0- 0.0
David L. White (3) -0- 0.0 250 0.0 250 0.0
Robert C. Wilson (3) 100,000 0.8 25,000 0.9 30,481(10) 0.9
All officers and
directors as a group
(11 persons including the above) 9,905,391 74.9 438,538 16.5 981,419 29.1
The Robertson Stephens -0- 0.0 253,672 9.6 253,672 7.5
Orphan Fund
555 California Street
San Francisco, CA 94104
</TABLE>
- --------------------
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<PAGE> 44
(1) Total ASCOR securities of 13,228,069 as of June 14, 1996 based on
7,910,144 Common shares, 5,249,516 Preferred shares, and 68,409 Preferred
warrants.
(2) Total shares of 3,375,006 based on 2,642,970 Giga-tronics shares (as of
June 14, 1996) plus 7,050 exercisable options for Giga-tronics shares
plus 724,986 shares to be issued in connection with the Merger.
(3) Address of all Directors and Officers is c/o Giga-tronics Incorporated,
4650 Norris Canyon Road, San Ramon, CA 94583.
(4) Includes 357,650 Giga-tronics shares as of June 14 and 24,903 estimated
Giga-tronics shares to be issued in connection with the Merger in respect
to 454,377 ASCOR stock shares converted at a conversion ratio of 18.246
to 1.
(5) Includes 55,638 Giga-tronics shares as of June 14 and 204,508 estimated
Giga-tronics shares to be issued in connection with the Merger in respect
to 3,731,453 ASCOR stock shares converted at a conversion ratio of
18.246 to 1.
(6) Includes 49,189 estimated Giga-tronics shares to be issued in connection
with the Merger in respect to 897,500 ASCOR stock shares converted at a
conversion ratio of 18.246 to 1.
(7) Includes 46,995 estimated Giga-tronics shares to be issued in connection
with the Merger in respect to 857,486 ASCOR stock shares converted at a
conversion ratio of 18.246 to 1.
(8) Includes 78,304 estimated Giga-tronics shares to be issued in connection
with the Merger in respect to 1,429,821 ASCOR stock shares converted at
a conversion ratio of 18.246 to 1.
(9) Includes 133,441 estimated Giga-tronics shares to be issued in connection
with the Merger in respect to 2,434,754 ASCOR stock shares converted at
a conversion ratio of 18.246 to 1.
(10) Excludes 24,000 Giga-tronics common stock options which are not
exercisable within the next 60 days; includes 25,000 Giga-tronics shares
and 5,481 estimated Giga-tronics shares to be issued in connection with
the Merger in respect to 100,000 ASCOR shares converted at a conversion
ratio of 18.246 to 1.
(11) Address of all Directors and Officers is c/o ASCOR, Inc., 47790
Westinghouse Drive, Fremont, CA 94539.
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<PAGE> 45
Accounting Treatment
The Merger is intended to qualify as a pooling-of-interests for accounting
and financial reporting purposes. Under this method of accounting, the assets
and liabilities of Giga-tronics and ASCOR will be carried forward to the
combined company (combined Giga-tronics) at their recorded amounts, income of
the combined company will include income of Giga-tronics and ASCOR for the
entire fiscal period in which the combination occurs (fiscal 1997 ending March
29, 1997) and the reported income of the separate companies for prior periods
will be combined and restated as income of the combined company. Expenses of the
Merger, which are estimated to be $250,000, will be charged to expense as
incurred in fiscal years 1996 and 1997.
Pursuant to the Reorganization Agreement, Giga-tronics and ASCOR are
required to exercise their best efforts to cause each of their respective
affiliates to execute a written agreement as of the Effective Time of the Merger
to the effect that such person has not transferred shares of Common Stock of
Giga-tronics and Common or Preferred Stock of ASCOR within the preceding 30 days
and will not transfer any shares of combined Giga-tronics Common Stock prior to
the date that combined Giga-tronics publishes results covering at least 30 days
of combined operations of Giga-tronics and ASCOR. See "THE REORGANIZATION
AGREEMENT AND RELATED AGREEMENTS - The Reorganization Agreement and Affiliates
Agreements."
Certain Federal Income Tax Consequences
In the opinion of Brobeck Phleger & Harrison LLP ("Brobeck") , the
following discussion describes the material Federal Income tax considerations of
the Merger to ASCOR and to the shareholders of ASCOR under existing federal
income tax law, which is subject to change, possibly retroactively. This
discussion does not describe all aspects of federal Income taxation which may be
relevant to particular stockholders in light of their personal circumstances,
such as holders whose stock was acquired pursuant to the exercise of an employee
stock option or otherwise as compensation, nor to stockholders who are subject
to special treatment under the Federal income tax laws (for example, financial
institutions, insurance companies, tax-exempt organizations, broker-dealers and
foreign taxpayers); nor does it discuss any aspects of state, local, or foreign
tax law. THIS DISCUSSION DOES NOT ADDRESS THE TAX CONSEQUENCES OF THE MERGER TO
HOLDERS OF ASCOR OPTIONS OR WARRANTS WHICH HAVE NOT BEEN ACTUALLY EXERCISED FOR
ASCOR STOCK PRIOR TO THE MERGER, AND SUCH HOLDERS ARE ADVISED TO CONSULT THEIR
TAX ADVISORS REGARDING THE FEDERAL, STATE, LOCAL, AND FOREIGN INCOME AND OTHER
TAX CONSEQUENCES OF THE MERGER. THIS DISCUSSION ALSO DOES NOT DISCUSS THE TAX
CONSEQUENCES OF ANY TRANSACTION OTHER THAN THE MERGER (INCLUDING OTHER
TRANSACTIONS UNDERTAKEN IN CONNECTION W/OR PURSUANT TO THE MERGER).
The Merger has been structured with the intent that it be tax-free to ASCOR
and shareholders of ASCOR for federal income tax purposes. In the opinion
of Brobeck, based upon certain facts and representations as set forth in such
opinion, the Merger will generally constitute a tax-free reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended,
for federal income tax purposes.
Assuming the Merger qualifies as a reorganization, the following will be
the general federal income tax consequences of the Merger to the shareholders
of ASCOR:
1. No gain or loss will be recognized by holders of ASCOR stock
who exchange their ASCOR stock for Giga-tronics Common Stock,
except for any cash received by such stockholders in lieu of
fractional shares of such common stock. A holder of ASCOR
stock who receives cash in lieu of fractional shares will
recognize gain or loss to the extent of the difference
between the holder's basis allocable to the fractional share
and the amount of cash received for the fractional share
(assuming the fractional shares are held as capital assets).
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<PAGE> 46
2. The aggregate tax basis of Giga-tronics Common Stock
received by holders of ASCOR stock in the Merger will equal
the aggregate tax basis of the ASCOR stock exchanged
therefor, reduced by any amount allocable to any fractional
share interest for which cash is received.
3. Provided that ASCOR stock is held by a holder as a capital as
set at the Effective Time, the holding period of the
Giga-tronics Common Stock received by the holder of ASCOR
stock in the Merger will include the holding period of ASCOR
stock.
4. No gain or loss will be recognized by ASCOR upon the Merger.
The opinion of Brobeck expressed herein represents such counsel's best
legal judgment based on existing authorities and is not binding on the Service.
The Service might successfully assert upon an audit of either ASCOR or its
stockholders that different tax consequences result. In addition, this opinion
is based on certain representations made by Giga-tronics, ASCOR and certain
ASCOR shareholders. In the event that such representations are inaccurate,
counsel's opinion could be altered.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT APPLY TO PARTICULAR CATEGORIES OF HOLDERS OF ASCOR
STOCK SUBJECT TO SPECIAL TREATMENT UNDER THE FEDERAL INCOME TAX LAWS, SUCH AS
FOREIGN HOLDERS AND HOLDERS WHOSE ASCOR STOCK WAS ACQUIRED PURSUANT TO THE
EXERCISE OF AN EMPLOYEE STOCK OPTION OR OTHERWISE AS COMPENSATION. IN ADDITION,
THERE MAY BE RELEVANT STATE, LOCAL OR OTHER TAX CONSEQUENCES, NONE OF WHICH ARE
DESCRIBED ABOVE. ASCOR SHAREHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS TO
DETERMINE THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO THEM INCLUDING THE
APPLICABILITY AND EFFECT OF FOREIGN, STATE, LOCAL AND OTHER TAX LAWS AND THE
EFFECT OF PROPOSED CHANGES IN THE TAX LAWS.
Dissenters' Appraisal Rights
General. Giga-tronics shareholders and ASCOR shareholders who follow
certain procedures will be entitled, as dissenting shareholders, to have the
"fair value" of their Giga-tronics shares or ASCOR Common Stock or ASCOR
Preferred Stock determined by a court and to be paid in cash therefor pursuant
to California Corporate Law.
In the event Giga-tronics shareholders holding more than 5% of outstanding
Giga-tronics Common Stock exercise their right of dissent to the Merger (which
percentage is the minimum required for such rights to be executable), preventing
the transaction from being accounted for as a pooling of interests, the
Giga-tronics Board of Directors may elect not to proceed and consummate the
Merger. If ASCOR shareholders exercise their right to dissent to the Merger and
perfect such rights with respect to such amounts of ASCOR Securities as would be
exchanged for 10% or more of the number of shares of Giga-tronics Common Stock
to be issued in the Merger, the transaction will not qualify as a pooling of
interest and the Giga-tronics Board of Directors may elect not to proceed and
consummate the Merger. See "THE REORGANIZATION AGREEMENT AND RELATED AGREEMENTS
- - The Reorganization Agreement - Conditions to the Merger."
Giga-tronics Shareholders. Pursuant to California Corporate Law, as shares
of Giga-tronics Common Stock are traded on NASDAQ, no dissenters' rights of
appraisal are available to any Giga-tronics shareholders unless demands for
payment are filed with respect to 5% or more of the outstanding number of shares
of Giga-tronics Common Stock. If the Merger is approved by the required vote of
the Giga-tronics shareholders and is not abandoned or terminated, any holder of
Giga-tronics Common Stock may, by complying with the provisions of Sections 1300
to and
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including 1312 of the California Corporate Law, require Giga-tronics to purchase
for cash at fair market value the shares owned by such holder which were voted
against the Merger. The fair market value shall be determined as of the day
before the first announcement of the terms of the proposed Merger (which
announcement was made on May 12, 1996) excluding any appreciation or
depreciation in consequence of the proposed Merger.
THE FOLLOWING IS A BRIEF SUMMARY OF SECTIONS 1300 TO AND INCLUDING 1312,
WHICH SETS FORTH THE PROCEDURES FOR DISSENTING FROM THE MERGER BY GIGA-TRONICS
SHAREHOLDERS AND DEMANDING STATUTORY APPRAISAL RIGHTS UNDER CALIFORNIA LAW. THIS
SUMMARY DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE PROVISIONS OF
CALIFORNIA LAW RELATING TO THE RIGHTS OF GIGA-TRONICS SHAREHOLDERS TO AN
APPRAISAL OF THE VALUE OF THEIR SHARES AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SECTIONS 1300 TO AND INCLUDING 1312 OF THE CALIFORNIA CORPORATE
LAW, THE FULL TEXT OF WHICH IS ATTACHED HERETO AS ANNEX F. FAILURE TO FOLLOW
SUCH PROCEDURES EXACTLY COULD RESULT IN THE LOSS OF APPRAISAL RIGHTS.
The dissenting shareholder wishing to require Giga-tronics to purchase his
shares of Giga-tronics Common Stock must:
(a) vote any of the shares the shareholder wishes to be dissenting
shares against the Merger;
(b) make written demand upon Giga-tronics not later than the date of
the Special Meeting setting forth in the demand such shareholder's
name and address, and the number and class of shares which the
shareholder demands that Giga-tronics purchase and a statement as
to what the shareholder believes the fair market value of such
shares to have been, based upon the standard set forth above; and
(c) submit for endorsement, within 30 days after the date on which the
notice of approval of the Merger by the Giga-tronics shareholders
is mailed to such shareholder (which notice must be mailed within
10 days after the date of approval), at the principal office of
Giga-tronics, the certificates representing any shares in regard
to which demand for purchase is being made, with a statement
regarding which of the shares are dissenting shares.
Simply voting against approval of the Merger will not be sufficient to
constitute the demand described in clause (b) above.
Within 10 days after the date of the approval of the Merger, Giga-tronics
will mail to each shareholder who has voted against the Merger and made a proper
written demand for dissenter's rights with respect to Giga-tronics Common Stock
a notice of approval of the Merger together with a statement of the price
determined by Giga-tronics to represent the fair market value of dissenting
shares, and a brief description of the procedure to be followed if the
shareholder desires to exercise dissenters' rights under the California General
Corporation Law. The statement of the price of the shares will constitute an
offer by Giga-tronics to purchase at the price stated therein any dissenting
shares. If Giga-tronics and the dissenting shareholder agree that the shares are
dissenting shares and agree upon the price of the shares, the dissenting
shareholder will be entitled to the agreed price plus interest thereon at the
legal rate on judgments from the date of such agreement. Subject to the
provisions of the California General Corporation Law, payment of the fair market
value of the dissenting shares will be made within 30 days after such agreement
or after satisfaction of any statutory or contractual condition, whichever is
later, and upon surrender of the certificates therefor.
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If Giga-tronics denies that the shares are dissenting shares or if
Giga-tronics and the dissenting shareholder fail to agree upon the fair market
value of the shares, then the dissenting shareholder, within six months after
the date on which notice of approval of the Merger by the Giga-tronics
shareholders is mailed to such shareholder, and not thereafter, may file a
complaint in the Superior Court of Contra Costa County, Martinez, California
requesting the court to determine whether the shares are dissenting shares, or
the fair market value of the dissenting shares, or both, or may intervene in any
pending action for the appraisal of any shares of Giga-tronics Common Stock.
To the extent that the provisions of Chapter 5 of the California General
Corporation Law (which generally prohibits certain payments to shareholders by
insolvent companies) prevent the payment to any holders of dissenting shares of
the fair market value of such shares, such shareholders will become creditors of
Giga-tronics for the amount that they otherwise would have received in
repurchase of their dissenting shares, plus interest at the legal rate on
judgments until the date of payment, but subordinate to all other creditors in
any liquidation proceeding, such debt to be payable when permissible under the
provisions of Chapter 5 of the California General Corporation Law.
ASCOR Shareholders. Pursuant to California Corporate Law, if the Merger is
approved by the required vote of the ASCOR shareholders and is not abandoned or
terminated, any holder of ASCOR Common Stock may, by complying with the
provisions of Sections 1300 to and including 1312 of the California Corporate
Law, require ASCOR to purchase for cash at fair market value the shares owned by
such holder for which a written consent to the Merger was not given. The fair
market value shall be determined as of the day before the first announcement of
the terms of the proposed Merger (which announcement was made on May 12, 1996)
excluding any appreciation or depreciation in consequence of the proposed
Merger.
THE FOLLOWING IS A BRIEF SUMMARY OF SECTIONS 1300 TO AND INCLUDING 1312,
WHICH SETS FORTH THE PROCEDURES FOR DISSENTING FROM THE MERGER BY ASCOR
SHAREHOLDERS AND DEMANDING STATUTORY APPRAISAL RIGHTS UNDER CALIFORNIA LAW. THIS
SUMMARY DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE PROVISIONS OF
CALIFORNIA LAW RELATING TO THE RIGHTS OF ASCOR SHAREHOLDERS TO AN APPRAISAL OF
THE VALUE OF THEIR SHARES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SECTIONS 1300 TO AND INCLUDING 1312 OF THE CALIFORNIA CORPORATE LAW, THE FULL
TEXT OF WHICH IS ATTACHED HERETO AS ANNEX F. FAILURE TO FOLLOW SUCH PROCEDURES
EXACTLY COULD RESULT IN THE LOSS OF APPRAISAL RIGHTS.
The dissenting shareholder wishing to require ASCOR to purchase his shares
of ASCOR Common Stock must:
(a) not vote any of the shares the shareholder wishes to be dissenting
shares in favor of the Merger;
(b) make written demand upon ASCOR not later than thirty days after
the date on which the notice of approval of the Merger by ASCOR
shareholders is mailed to such shareholder (which notice must be
mailed within 10 days after the date of approval), setting forth
in the demand such shareholder's name and address, and the number
and class of shares which the shareholder demands that ASCOR
purchase and a statement as to what the shareholder believes the
fair market value of such shares to have been, based upon the
standard set forth above; and
(c) submit for endorsement, within 30 days after the date on which the
notice of approval of the Merger by the ASCOR shareholders is
mailed to such shareholder, at the principal office of ASCOR, the
certificates representing any shares in regard to which demand for
purchase is being made, with a statement regarding which of the
shares are dissenting shares.
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Simply not voting to approve the Merger by not executing the written
consent will not be sufficient to constitute the demand described in clause (b)
above.
Within 10 days after the date of the approval of the Merger, ASCOR will
mail to each shareholder who did not vote in favor of the Merger with respect
ASCOR Common Stock a notice of approval of the Merger together with a statement
of the price determined by ASCOR to represent the fair market value of
dissenting shares, and a brief description of the procedure to be followed if
the shareholder desires to exercise dissenters' rights under the California
General Corporation Law. The statement of the price of the shares will
constitute an offer by ASCOR to purchase at the price stated therein any
dissenting shares. If ASCOR and the dissenting shareholder agree that the shares
are dissenting shares and agree upon the price of the shares, the dissenting
shareholder will be entitled to the agreed price plus interest thereon at the
legal rate on judgments from the date of such agreement. Subject to the
provisions of the California General Corporation Law, payment of the fair market
value of the dissenting shares will be made within 30 days after such agreement
or after satisfaction of any statutory or contractual condition, whichever is
later, and upon surrender of the certificates therefor.
If ASCOR denies that the shares are dissenting shares or if ASCOR and the
dissenting shareholder fail to agree upon the fair market value of the shares,
then the dissenting shareholder, within six months after the date on which
notice of approval of the Merger by the ASCOR shareholders is mailed to such
shareholder, and not thereafter, may file a complaint in the Superior Court of
Contra Costa County, Martinez, California requesting the court to determine
whether the shares are dissenting shares, or the fair market value of the
dissenting shares, or both, or may intervene in any pending action for the
appraisal of any shares of ASCOR Common Stock.
To the extent that the provisions of Chapter 5 of the California General
Corporation Law prevent the payment to any holders of dissenting shares of the
fair market value of such shares, such shareholders will become creditors of
ASCOR for the amount that they otherwise would have received in repurchase of
their dissenting shares, plus interest at the legal rate on judgments until the
date of payment, but subordinate to all other creditors in any liquidation
proceeding, such debt to be payable when permissible under the provisions of
Chapter 5 of the California General Corporation Law.
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SECTION VI
THE REORGANIZATION AGREEMENT AND RELATED AGREEMENTS
The Reorganization Agreement
The following is a brief summary of certain provisions of the
Reorganization Agreement, a copy of which is attached as Annex C to this Joint
Proxy Statement/Prospectus and is incorporated herein by reference. This summary
is qualified in its entirety by reference to the full text of the Reorganization
Agreement.
The Reorganization Agreement provides that, subject to the terms and
conditions of the Reorganization Agreement, at the Effective Time, Acquisition
Corp. will be merged with and into ASCOR, and the separate corporate existence
of Acquisition Corp. will thereupon cease. ASCOR will be the surviving
corporation in the Merger (sometimes hereinafter referred to as the "Surviving
Corporation") and will continue to be governed by the laws of the State of
California, and the separate corporate existence of ASCOR with all its rights,
privileges, immunities, powers and franchises will continue unaffected by the
Merger, except as set forth in the Reorganization Agreement. The Merger will
have the effects specified in California Corporate Law.
As soon as practicable following the closing of the Merger, and provided
that the Reorganization Agreement has not been terminated or abandoned, ASCOR
and Acquisition Corp. will cause the Agreement of Merger to be executed,
acknowledged and filed with the Secretary of State of the State of California.
The Merger will become effective at such time as the Agreement of Merger (the
form of which is attached as Exhibit 1.01 to the Reorganization Agreement) has
been duly filed with the Secretary of State of the State of California.
The Exchange Ratio. At the Effective Time, by virtue of the Merger and
without any action on the part of the holder of any ASCOR Securities, (i) each
(a) share of ASCOR Common Stock and ASCOR Preferred Stock outstanding
immediately prior to the Merger (other than ASCOR Shares held by shareholders
who have perfected and not withdrawn their right to seek appraisal of their
shares under applicable California law) and (b) outstanding ASCOR Convertible
Security will be converted into the right to receive a pro rata portion of the
Merger Consideration (a maximum aggregate of 724,986 Shares of Giga-tronics
Common Stock) and (ii) any ASCOR Convertible Securities which are considered
"out-of-the-money" will be assumed by Giga-tronics and will be exercisable for
Giga-tronics Common Stock as adjusted by the Merger. (See " - ASCOR Convertible
Securities.") In determining the Exchange Ratio of Giga-tronics Common Stock for
ASCOR Securities which holders of ASCOR Shares and ASCOR Convertible Securities
will be entitled to receive, all ASCOR Convertible Securities will be treated as
having been converted or exercised into ASCOR Shares. Shares of Giga-tronics
Common Stock attributable to ASCOR Convertible Securities which are assumed by
Giga-tronics will be retained by Giga-tronics from the Merger Consideration
pending their exercise.
A maximum of 724,986 shares of Giga-tronics Common Stock will be issuable
in the Merger, including (a) shares issuable in respect of ASCOR Convertible
Securities which are assumed, which shares will be retained by Giga-tronics if
such securities expire unexercised, (b) fractional shares, (c) shares issuable
in respect of ASCOR Shares for which dissenters' appraisal rights (see "THE
MERGER - Dissenters' Appraisal Rights") are perfected, and (d) shares deemed
surrendered upon exercise of ASCOR Convertible Securities for which a deemed net
exercise has occurred.
The Agreement of Merger to be filed will contain the final exchange ratio
(the "Exchange Ratio") for ASCOR Shares into Giga-tronics Common Stock which
will be equal to 724,986
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divided by the fully diluted number of ASCOR Shares outstanding at the Effective
Time (the "ASCOR Outstanding Equivalent Number"). The ASCOR Outstanding
Equivalent Number will be equal to the sum of (1) the number of ASCOR Shares
outstanding at the Effective Time; plus (2) the total number of ASCOR Shares
which would be issuable on the exercise of any ASCOR Convertible Securities. All
ASCOR Shares will be exchangeable into Giga-tronics Common Stock at the same
Exchange Ratio.
ASCOR Convertible Securities. Except as discussed below Giga-tronics will
not assume any ASCOR Convertible Securities. At the Effective Time, outstanding
ASCOR Convertible Securities will be deemed exercised for such number of shares
of Giga-tronics Common Stock as would be exchanged in the Merger for the ASCOR
Shares which would have been issued had such ASCOR Convertible Securities been
exercised in full immediately prior to the Effective Time, subject to the
following provisions. Such deemed exercise of ASCOR Convertible Securities will
be on a "net exercise" basis. The full number of shares issuable on exercise of
such ASCOR Convertible Securities (including such number of shares as are deemed
surrendered in the net exercise) will be included in the number of ASCOR Shares
used in calculating the Exchange Ratio. The value of the ASCOR Shares issuable
on the exercise of any ASCOR Convertible Security for purposes of determining
the number of ASCOR Shares to be surrendered in the deemed net exercise shall be
equal to the number of ASCOR Shares issuable on exercise of such ASCOR
Convertible Security, multiplied by the Exchange Ratio, multiplied by the
average closing price of a share of Giga-tronics Stock on such stock exchange as
Giga-tronics Stock is then traded for the five (5) business days immediately
preceding the Closing Date. Shares of Giga-tronics Common Stock which would
otherwise be issuable in respect of the ASCOR Shares deemed surrendered upon
such net exercise will be retained by Giga-tronics and not otherwise issued.
Notwithstanding the foregoing, any ASCOR Warrant which, based upon the
foregoing determination of the value of ASCOR Shares issuable on its exercise,
would be "out-of-the-money" will be assumed by Giga-tronics. For purpose of the
forgoing determination, an ASCOR Warrant will be deemed out-of-money if its
exercise price per share is greater than the value of such share as determined
as described in the immediately preceding paragraph. Any assumed ASCOR Warrant
will remain outstanding and exercisable in accordance with its terms except that
(1) it will be exercisable for such number of shares of Giga-tronics Common
Stock as equals the number of ASCOR Shares for which it was exercisable
multiplied by the Exchange Ratio and (2) the exercise price per share of such
warrant will be the exercise price as stated on such warrant divided by the
Exchange Ratio. The number of shares of Giga-tronics Common Stock as would be
issuable on exercise of any ASCOR Warrants so assumed will be reserved out of
the Merger Consideration. If any ASCOR Warrant assumed by Giga-tronics expires
unexercised the Giga-tronics Common Stock which would have been issuable on its
exercise will be retained by Giga-tronics and not otherwise issued.
Registration of Merger Consideration. As amended by the Letter Agreement
the Reorganization Agreement contemplates that Giga-tronics will use its best
faith efforts to secure the registration of the Giga-tronics Common Stock to be
issued pursuant to the Merger. As registered securities, such shares of
Giga-tronics Common Stock held by former shareholders of ASCOR who were not
affiliates of ASCOR or Giga-tronics will generally be freely tradable. If the
Giga-tronics Common Stock to be issued pursuant to the Merger are not so
registered, they will be issued pursuant to a transaction not involving a public
offering and therefore will be characterized as "restricted securities" under
federal securities laws. Pursuant to the Securities Act of 1933, as amended (the
"Securities Act") any Giga-tronics Common Stock so issued may be resold without
registration under the Securities Act only in certain limited circumstances. The
Certificates issued pursuant to the Merger without registration would bear the
following legend relating to their status as restricted securities:
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"These securities have not been registered under the Securities
Act of 1993, as amended. They may not be sold, offered for sale,
pledged or hypothecated in the absence of a registration
statement in effect with respect to the securities under such Act
or an opinion of counsel satisfactory to the Company that such
registration is not required or unless sold pursuant to Rule 144
of such Act."
Other than as provided by the Letter Agreement if the Giga-tronics Common
Stock issued in the Merger is not registered, Giga-tronics will be under no
obligation to effect a registration statement with respect to Giga-tronics
Common Stock issued in the Merger other than as required pursuant to the
Registration Rights Agreement.
If such stock is issued pursuant to an effective registration statement,
the Registration Rights Agreement will be of no force and the Giga-tronics stock
issued will not be legended as above. See " - Registration Rights Agreement" and
"Letter Agreement."
Exchange of Certificates. Prior to the Effective Time, Giga-tronics shall
appoint a bank or trust company to act as exchange agent (the "Exchange Agent")
in the Merger.
As soon as practicable after the Effective Date, the Exchange Agent will
mail to each holder of record of a stock certificate that, immediately prior to
the Effective Time, represented outstanding of ASCOR Shares (a "Certificate")
whose shares are being converted into Giga-tronics Common Stock (i) a letter of
transmittal, and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for certificates evidencing Giga-tronics Common Stock.
Upon surrender of a Certificate for cancellation to the Exchange Agent, together
with such letter of transmittal, duly executed, the holder of such Certificate
will be entitled to receive in exchange therefor a certificate for the number of
whole shares of Giga-tronics Common Stock to which the holder of such ASCOR
Shares is entitled pursuant to the Reorganization Agreement (and an amount of
cash in lieu of any fractional shares of Giga-tronics Common Stock as discussed
below). The Certificate so surrendered will forthwith be canceled. Until
surrendered, each Certificate will be deemed at any time after the Effective
Time to represent the right to receive upon such surrender such whole number of
shares of Giga-tronics Common Stock as provided by the Reorganization Agreement
and an amount of cash in lieu of any fractional shares of Giga-tronics Common
Stock as discussed below.
The Exchange Procedures for ASCOR Preferred Stock will differ from the
foregoing as described below.
It is a condition for Giga-tronics' obligation to consummate the Merger
that all ASCOR Preferred Stock be tendered at the closing for exchange for
Giga-tronics Common Stock. See " - Conditions to the Merger." The ASCOR
Preferred Stock so tendered must be accompanied by the Tender Instructions, in
the Form of Annex I, pursuant to which the holder of ASCOR Preferred Stock will
agree to accept Giga-tronics Common Stock at the exchange ratio described above
and waive any rights to different or additional consideration to which they may
be entitled in a transaction such as the Merger. Such rights to additional
consideration may arise due to accrual of dividends on the ASCOR Preferred
Stock, exercise of liquidation preference rights or conversion of the ASCOR
Preferred Stock into ASCOR Common Stock prior to the Merger. See "DESCRIPTION OF
GIGA-TRONICS" AND ASCOR SECURITIES - ASCOR - ASCOR PREFERRED STOCK."
No dividends on the Giga-tronics Common Stock to be issued in the Merger
will be paid to the holder of any unsurrendered Certificate until the holder of
record of such Certificate will surrender such Certificate; provided, however,
that upon surrender of a Certificate which immediately prior to the Effective
Time represented shares of ASCOR Common Stock, there will be paid to the
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holder of such Certificate the amount of dividends, if any, without interest,
which theretofore became payable, but which were not paid by reason of the
foregoing, with respect to the number of whole shares of Giga-tronics Common
Stock represented by the Certificate or Certificates issued upon such surrender.
Subject to the effect, if any, of applicable escheat and other laws, following
surrender of any Certificate, there will be delivered to the person entitled
thereto, without interest,the amount of dividends so withheld as of any date
subsequent to the Effective Time of the Merger and prior to such date of
delivery.
All Giga-tronics Common Stock delivered, and cash in lieu of any fractional
shares of Giga-tronics Common Stock paid, upon the surrender for exchange of
shares of ASCOR Common Stock will be deemed to have been delivered and paid in
full satisfaction of all rights pertaining to such shares. If, after the
Effective Time, Certificates are presented for any reason, they will be canceled
and exchanged pursuant to the Reorganization Agreement.
No fractional shares of Giga-tronics Common Stock will be issued in
connection with the Merger. All shares of Giga-tronics Common Stock to which a
holder of ASCOR Shares is entitled immediately prior to the Effective Time will
be aggregated. If a fractional share results from such aggregation, in lieu of
any such fractional share, each holder of ASCOR Shares who would otherwise have
been entitled to receive a fraction of a share of Giga-tronics Common Stock upon
surrender of Certificates for exchange will be entitled to receive from the
Exchange Agent a cash payment equal to such fraction multiplied by the closing
sale price per share of Giga-tronics Common Stock on the last business day on
which Giga-tronics Common Stock is traded on the NASD prior to the Effective
Time.
Representations and Warranties. The Reorganization Agreement contains
various customary representations and warranties relating to, among other
things: (a) the organization of ASCOR, Giga-tronics and their subsidiaries and
similar corporate matters; (b) authorization, execution, delivery, performance
and enforceability of the Reorganization Agreement and related matters; (c)
certain consents or approvals; (d) conflicts under charters, regulations or
by-laws and violations of any instruments or law; (e) the capital structure of
ASCOR, Giga-tronics and Acquisition Corp.; (f) certain documents filed by
Giga-tronics with the Securities and Exchange Commission and the accuracy of
information contained therein; (g) financial statements of ASCOR and
Giga-tronics; (h) conduct of business in the ordinary course and absence of
certain changes or material adverse effects; (i) insurance, liabilities,
litigation and taxes; (j) employee benefit plans and matters relating to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"); (k)
material agreements and leases; (l) title to assets; (m) intellectual property;
(n) absence of guaranties of ASCOR; (o) absence of certain business practices by
ASCOR; (p) information provided by the parties for inclusion in this Joint Proxy
Statement/Prospectus; (q) brokers and finders fees, and (r) the opinion of
Giga-tronics' financial advisor.
Certain Covenants. Pursuant to the Reorganization Agreement, ASCOR and
Giga-tronics have agreed that, from the date of the Reorganization Agreement
until the Effective Time, each will (a) conduct its business in the ordinary
course; (b) not adopt or propose any change in its Articles of Incorporation or
Bylaws; (c) not pay any dividend or make any other distribution to holders of
its capital stock nor redeem or otherwise acquire any its securities; (d) not
directly or indirectly, merge or consolidate with another entity or dispose of
or acquire any material properties or assets except in the ordinary course of
business; (e) not, except in the ordinary course of business consistent with
past practices, sell, license or otherwise transfer to any person any
intellectual property rights; (f) in the case of Giga-tronics call a meeting of
shareholders to be held as soon as reasonably practicable for the purpose of
voting on, and in the case of ASCOR seek the consent of shareholders for, the
approval and adoption of the Reorganization Agreement and ASCOR's Board of
Directors will recommend approval and adoption of the Reorganization Agreement
and Merger; (g) use its best efforts to carry on its business and preserve its
relationship with customers, suppliers, employees and others; (h) comply with
applicable federal, state, local and foreign laws,
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as well as all material agreements and obligations, provide notice of any
consent that may be required in connection with the Merger, of any
communications from governmental or regulatory agency in connection with the
Merger, of any action, suit or claim commenced a threatened relating to the
Merger; (i) keep confidential for a period of three years following the
termination of the Reorganization Agreement confidential information of each
other; (j) use its best efforts to cause each person who is an affiliate (as
defined in the Reorganization Agreement) to execute an Affiliates Agreement (see
"Affiliates Agreements").
In addition ASCOR has further agreed (i) not enter into or amend any
employment agreements, or increase the compensation payable to any of its
officers, directors or employees except in the ordinary course of business or as
provided by the Reorganization Agreement; (ii) not adopt or amend any employee
benefit plan; (iii) not issue any ASCOR securities; (iv) keep in full force and
effect existing directors' and officers' liability insurance and will not modify
or reduce coverage thereunder; (v) not enter into any transaction that would
require the Joint Proxy Statement/Prospectus to be delayed or recirculated; and
(vi) provide access to financial and operating information to each other and
their respective legal counsel and advisors.
Both Giga-tronics and ASCOR have further agreed, as to themselves and their
subsidiaries: (a) to promptly notify each other in writing of any event
occurring subsequent to the date of the Reorganization Agreement that would
cause any representation or warranty to be untrue, inaccurate or misleading; (b)
to promptly notify each other of any material adverse change in its business
conditions; (c) to execute and file all documents necessary to obtain all
authorizations, consents and approvals to consummate the Merger; (d) not to take
any action that would prevent the Merger from qualifying as a reorganization
under Section 368 of the Code; (e) to cooperate in the preparation of the Joint
Proxy Statement/Prospectus and any other filing required in connection with the
Merger; (f) not to furnish any written communications if the subject matter
pertains to the transactions contemplated by the Reorganization Agreement
without first obtaining the prior approval of the other party; and (g) to use
their best efforts to satisfy all conditions precedent to the Merger as
applicable to each other.
No Solicitation of Transactions. Pursuant to the Reorganization Agreement,
from the date of the Reorganization Agreement until the earlier of the Effective
Time of the Merger or termination of the Reorganization Agreement, ASCOR and the
officers, directors, employees or other agents of ASCOR have agreed they will
not, directly or indirectly, (i) take any action to solicit, initiate or
encourage the making of any Acquisition Proposal (as hereinafter defined); or
(ii) engage in negotiations with, or disclose any nonpublic information relating
to ASCOR or afford access to the properties, books or records of ASCOR to, any
person or entity that informs the Board of Directors that it is considering
making, or has made, an Acquisition Proposal. Until such time as the
Reorganization Agreement is terminated in accordance with its terms, ASCOR has
agreed not to enter into any agreement to merge or consolidate with, or sell a
substantial portion of its assets to, any person or entity. ASCOR has agreed to
promptly notify Giga-tronics after receipt of any Acquisition Proposal or any
request for nonpublic information relating to ASCOR in connection with an
Acquisition Proposal or for access to the properties, books or records of ASCOR
by any person or entity that informs the Board of Directors that it is
considering making, or has made, an Acquisition Proposal. The term "Acquisition
Proposal" means (i) any merger, consolidation, tender offer or other similar
transaction or related transactions pursuant to which the holders of the voting
securities of ASCOR prior to the transaction hold following the consummation of
such transaction less than 80% of the voting securities of the surviving entity,
(ii) a sale of a material portion of the assets of ASCOR, or (iii) any equity or
convertible debt transaction or related transactions in which any person or
group of affiliated persons other than current security holders of ASCOR acquire
securities of ASCOR representing more than 20% of the aggregate voting power of
ASCOR's outstanding securities, other than in each case the transactions
contemplated by the Reorganization Agreement or such transactions as occur via
unsolicited purchases in the open market. For purposes of the foregoing
definition, one person is deemed to be affiliated with a
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<PAGE> 55
second person if such first person controls, is controlled by or is under common
control with the second person, and control, for purposes hereof, is deemed to
exist only in the event there exists ownership of or the right to vote, in
either case directly or indirectly, securities representing more than 50% of the
aggregate voting power of an entity's outstanding securities.
Conditions to the Merger. The respective obligations of ASCOR, Giga-tronics
and Acquisition Corp. to consummate the Merger are subject to the fulfillment of
each of the following conditions, among others: (a) the accuracy of warranties
and representations; (b) covenants shall have been complied with in all material
respects on or before the Effective Time and a Certificate of a respective
officer of Giga-tronics and ASCOR as the case may be, shall have been received
by the other party; (c) there shall have been no Material Adverse Effect (as
defined in the Reorganization Agreement) and no material adverse change; (d)
Giga-tronics shall have received executed Affiliate Agreements; (e) the
shareholders of ASCOR and Giga-tronics shall have approved and adopted the
Reorganization Agreement and the transactions contemplated thereby; (f)
Giga-tronics and ASCOR shall have received a written opinion from Brobeck that
the Merger will constitute a reorganization within the meaning of Section 368 of
the Code; (g) no statute, rule or regulation by any court or governmental
authority shall prohibit the consummation of the Merger; (h) all written
consents or authorizations that are required shall have been obtained; and (i)
Giga-tronics shall have completed a due diligence review of ASCOR and such
review shall not have revealed any facts or circumstances which could have a
material adverse effect on ASCOR; and (j) it is a condition of Giga-tronics'
obligations that Giga-tronics' shareholders shall not have perfected Dissenters'
Rights with respect to 5% or more of the Giga-tronics Common Stock outstanding
on the date of the Special Meeting.
It is a condition of Giga-tronics obligations under the Reorganization
Agreement that as of the Closing Date all shares of ASCOR Preferred Stock
outstanding as of the date the Reorganization Agreement was executed shall (i)
have remained outstanding, (ii) shall have been tendered at the Closing with the
Tender Instructions which provides that such shares are to be exchanged at the
Effective Time for Giga-tronics Common Stock in accordance with the terms of the
Reorganization agreement, and (iii) not have been transferred by the owners of
such shares as of the date of the Reorganization Agreement to any other person.
The Reorganization Agreement further provides that it is a condition of
Giga-tronics obligations to consummate the Merger that in Giga-tronics' sole
discretion the Merger qualifies for accounting treatment as a pooling of
interests in accordance with Accounting Principles Board Release No. 16. In
making the determination of whether the Merger so qualifies Giga-tronics may
consider the impact of ASCOR Shares which are voted against the Merger or which
have abstained from voting with respect to the Merger.
Termination. The Reorganization Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, before or after the
approval by the ASCOR shareholders: (a) by the mutual consent of the ASCOR,
Giga-tronics and Acquisition Corp. Board of Directors; (b) by Giga-tronics and
Acquisition Corp. or by ASCOR if the Reorganization Agreement is not approved
and adopted by Giga-tronics and ASCOR's shareholders prior to December 31, 1996;
(c) by the parties to the Reorganization Agreement if there has been a breach of
any representation and warranty, or a breach of any covenant or agreement
contained in the Reorganization Agreement that has not been cured or waived and
which has a material adverse effect on the breaching party; (d) by the parties
to the Reorganization Agreement at any time after December 31, 1996, unless the
delay is caused by the failure of the terminating party to fulfill its
obligations; (e) by Giga-tronics or Acquisition Corp. if such party is not in
material breach of its obligations and if the Board of Directors of ASCOR
withdraws its recommendation of the Merger or recommends, or approves,
acceptance by ASCOR shareholders of any Acquisition Proposal by any other party;
(f) by ASCOR, if it is not in material breach of its obligations and if the
Board of Directors of either Giga-tronics or Acquisition Corp. withdraw its
recommendation of the Merger,
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<PAGE> 56
or recommend or approve acceptance by Giga-tronics shareholders of any
Acquisition Proposal by any other party; (g) by Giga-tronics if the conditions
described above regarding absence of pooling-of-interest issues and perfection
of dissenters' rights by Giga-tronics' shareholders with respect to dissenters'
rights are not fulfilled; and (h) by Giga-tronics if ASCOR has issued any ASCOR
Securities between the date of the Reorganization Agreement and the Closing Date
without Giga-tronics' prior consent.
Governance. The Certificate of Incorporation and Bylaws of Acquisition
Corp. in effect immediately prior to the Effective Time will be the Certificate
of Incorporation and Bylaws of the Surviving Corporation. At the Effective Time,
the initial directors of the Surviving Corporation and the officers of ASCOR
will become the initial directors and officers, respectively of the Surviving
Corporation.
Expenses. Whether or not the Merger is consummated, each party will pay all
fees and expenses incurred by such party specifically identifiable to such party
in connection with the transactions contemplated thereby. Any other costs and
expenses not specifically identified as applicable to either party will be
shared equally.
Amendment and Waiver. Subject to the applicable provisions of California
law, the parties may modify or amend the Reorganization Agreement by written
agreement at any time prior to the Effective Time. The conditions to each
party's obligations to consummate the Merger may be waived by such party in
whole or in part to the extent permitted by applicable law.
LETTER AGREEMENT
Pursuant to the Letter Agreement between Giga-tronics and ASCOR dated May
20, 1996 (attached as Annex J) Giga-tronics has agreed to use its best faith
efforts to file with the Securities and Exchange Commission, and cause the
effectiveness under federal securities law of, a registration statement on Form
S-4 (or such other form as may be applicable) covering the shares of
Giga-tronics Common Stock to be issued in the Merger. ASCOR agreed that upon the
issuance of such Giga-tronics Common Stock pursuant to an effective registration
statement the Registration Rights Agreement would be of no force and effect and
would therefore not be delivered at the Closing.
REGISTRATION RIGHTS AGREEMENT
Pursuant to the Reorganization Agreement, Giga-tronics will enter into the
Registration Rights Agreement at the Effective Time with ASCOR Shareholders. The
following is a summary of the Registration Rights Agreement. This summary is
qualified in its entirety by reference to the complete text of such agreement, a
form of which is filed as an exhibit to the Registration Rights Agreement.
If at any time after results covering at least thirty (30) days of combined
operations of the Company and ASCOR have been published by the Company in the
form of a quarterly earnings report, an effective registration statement filed
with the Securities and Exchange Commission (the "Commission"), a report to the
Commission on Form 10-K, 10-Q or 8-K, or any other public filing or announcement
which includes the combined results of operation, "Holders" (as that term is
defined below) request in writing that Giga-tronics file a registration
statement under the Securities Act covering the registration of at least 200,000
Registrable Securities (as such number may be adjusted from time to time for
stock dividends, splits or other changes in the capitalization of Giga-tronics)
or a lesser number if the anticipated aggregate offering price, net of
underwriting discounts and commissions, would exceed $1,000,000, then
Giga-tronics will, subject to certain provisos, use all reasonable efforts to
file and cause the effectiveness of, within 90 days of the
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<PAGE> 57
receipt of such request, the registration under the Securities Act of all
Registrable Securities which the Holders request to be registered. Giga-tronics
will have the right to defer requested registrations in certain circumstances.
Giga-tronics is obligated to effect only one (1) such registration pursuant
to the Registration Rights Agreement. Giga-tronics will be obligated to maintain
the effectiveness of any registration statement filed pursuant to the Holders'
request for no more than 180 days subsequent to declaration of its effectiveness
by the Commission.
If Giga-tronics proposes to register (including for this purpose a
registration effected by the Company for shareholders other than the Holders)
any of Giga-tronics Common Stock or other securities under the Securities Act in
connection with the public offering of such securities solely for cash (other
than a registration relating either to the sale of securities to participants in
a Giga-tronics stock option, stock purchase or similar plan or to an SEC Rule
145 transaction, or a registration on any form which does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of the Registrable Securities),
Giga-tronics will subject to certain provisos be required to cause to be
registered under the Securities Act all of the Registrable Securities that each
Holder requests be registered.
All expenses other than underwriting discounts and commissions incurred in
connection with registrations, filings or qualifications, including (without
limitation), all registration, filing and qualification fees, printers and
accounting fees, fees and disbursements of counsel for Giga-tronics and the
reasonable fees and disbursements of up to $25,000 for one (but only one)
counsel for the selling Holders will be borne by Giga-tronics.
The registration rights of any Holder expire (a) if the Registrable
Securities were issued by Giga-tronics to the Holder pursuant to a registration
statement filed with the SEC or (b) at and after such time as such Holder holds
Registrable Securities equal to 1% or less of the outstanding stock of the
Company (calculated on an as-converted basis) and is able to dispose of all the
Registrable Securities held by such Holder under Rule 144 of the Securities Act
during any 90-day period.
Under the Registration Rights Agreement "Registrable Securities" means (a)
the shares of Giga-tronics Common Stock issuable to the ASCOR Shareholders upon
consummation of the Merger and any other shares of Giga-tronics Common Stock
issued as (or issuable upon the conversion or exercise of any warrant, right or
other security which is issued as) a dividend or other distribution with respect
to, or in exchange for or in replacement of, the Registrable Securities with
certain exclusions. "Holder" is defined as any person owning of record
Registrable Securities who acquired such Registrable Securities in a transaction
or series of transactions not involving any registered public offering.
As amended by the Letter Agreement, the Reorganization Agreement
contemplates that if the Giga-tronics Common Stock to be issued in the merger
has been issued under federal securities law pursuant to an effective
registration statement on Form S-4 (or such other form as may be applicable),
that the Registration Rights Agreement would be of no force or effect (due to
such event triggering the termination of registration rights thereunder) and
that the Registration Rights Agreement would therefore not be delivered at the
Closing.
AFFILIATE AGREEMENTS
The following is a brief summary of the terms of the Affiliate Agreements,
copies of which are attached as exhibits to the Reorganization Agreement which
is attached as Annex C to the Joint Proxy Statement/Prospectus. This summary is
qualified in its entirety by reference to the full text of the Affiliate
Agreements.
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<PAGE> 58
Pursuant to the Reorganization Agreement, certain shareholders of ASCOR and
Giga-tronics have or will executed Affiliate Agreements. Each Affiliate
Agreement provides, among other things, the following representations,
warranties and covenants: (a) the party will not sell, transfer, exchange or
otherwise dispose of any shares of Giga-tronics Common Shares acquired in the
Merger unless such transaction is permitted under Rule 144 or Rule 145 under the
1933 Act or counsel representing the party shall have advised Giga-tronics that
no registration under the 1933 Act is required; and (b) the party has, and as of
the Effective Time will have, no plan or intention to sell, transfer, exchange
or otherwise dispose of more than fifty percent of the shares of Giga-tronics
Common Stock acquired in connection with the Merger. The Affiliate Agreement
will terminate upon the termination of the Reorganization Agreement.
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<PAGE> 59
SECTION VII
SUMMARY HISTORICAL AND
PRO FORMA FINANCIAL INFORMATION
The following historical financial information of Giga-tronics and ASCOR
has been derived from their respective historical consolidated financial
statements, and should be read in conjunction with such consolidated financial
statements and the notes thereto, which are included as Annexes to this Joint
Proxy Statement/Prospectus. The selected pro forma financial information of
Giga-tronics and ASCOR is derived from the pro forma combined condensed
financial statements and should be read in conjunction with such pro forma
statements and notes thereto, which are included elsewhere in this Joint Proxy
Statement/Prospectus. For pro forma purposes, ASCOR financial data covers the
approximate comparable financial reporting periods used by Giga-tronics.
The pro forma financial information does not purport to represent what
Giga-tronics' financial position or results of operations would actually have
been had the Merger occurred at the beginning of the earliest period presented
or to project Giga-tronics' financial position or results of operations for any
future date or period.
<TABLE>
<CAPTION>
Historical - Giga-tronics Fiscal Year Ended
- ------------------------- -------------------------------------------------------------------------
(In thousands except per share data) March 30, March 25, March 26, March 27, March 28,
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net sales $ 24,898 $ 21,937 $ 19,890 $ 23,085 $ 16,181
Earnings (loss) before income taxes 1,202 (2,220) 293 1,954 1,070
Net earnings (loss) 901 (1,576) 231 1,327 878
Net earnings (loss) per share 0.34 (0.61) 0.09 0.52 0.34
Working capital $ 15,830 $ 13,242 $ 14,209 $ 15,370 $ 16,588
Total assets 23,027 22,225 23,580 23,597 19,817
Long-term debt -- -- -- -- --
Shareholders' equity 19,101 18,018 19,671 19,440 18,113
</TABLE>
<TABLE>
<CAPTION>
Historical - ASCOR Fiscal Year Ended
- ------------------ ---------------------------------------------------------------------
(In thousands except per share data) March 30, March 25, March 26, March 27, March 28,
1996 1995 1994 1993 1992
-------- -------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net sales $ 5,913 $ 4,032 $ 3,577 $ 1,803 $ 1,935
Earnings (loss) before income taxes 780 761 1,099 (600) (477)
Net earnings (loss) 839 709 1,074 (600) (477)
Net earnings (loss) per share 0.15 0.12 0.22 (0.07) (0.05)
Working capital $ (1,222) $ (796) $ 19 $ (249) $ 50
Total assets 3,557 3,601 2,135 1,579 1,113
Long-term debt 30 40 -- 1 42
Redeemable Preferred Stock 3,442 3,182 2,922 2,662 2,532
Shareholders' equity (deficit) (1,726) (2,317) (2,766) (3,580) (3,177)
</TABLE>
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<PAGE> 60
<TABLE>
<CAPTION>
Pro Forma - Giga-tronics and ASCOR Twelve Months Ended
- ---------------------------------- -----------------------------------------
(In thousands except per share data) March 30, March 25, March 26,
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Net sales $ 30,811 $ 25,969 $ 23,467
Earnings (loss) before income taxes 2,107 (1,459) 1,392
Net earnings (loss) 1,865 (867) 1,305
Net earnings (loss) per share 0.55 (0.26) 0.40
Working capital $ 17,081 $ 13,940 $ 14,228
Total assets 26,584 25,826 25,715
Long-term debt 30 -- --
Shareholders' equity 20,692 18,883 19,827
</TABLE>
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<PAGE> 61
SECTION VIII
COMPARATIVE PER SHARE DATA
Set out below are income and book value per common share data of
Giga-tronics and ASCOR on both a historical and a pro forma condensed combined
basis and on a per share equivalent pro forma basis for ASCOR. Pro forma
condensed combined per share information is derived from the pro forma condensed
combined information presented elsewhere herein which gives effect to the Merger
under the pooling of interests accounting method at the beginning of the
earliest period presented, and assumes the issuance of 724,986 shares of
Giga-tronics Common Stock in 1995 and 1994. Expenses directly attributable to
the consummation of the Merger are expected to approximate $250,000. The pro
forma adjustment to retained earnings is $125,000 while the total estimated
costs are $250,000 because $125,000 of costs are already included in the fiscal
1996 financial statements. The estimated $250,000 of merger costs are not
included in the pro forma statements of operations since they will be
nonrecurring. The expenses have been deducted in calculating the pro forma
combined book value per share, but are not reflected in the pro forma earnings
(loss) per share amounts. Neither Giga-tronics or ASCOR has paid any dividends
on its capital stock during the periods presented.
The pro forma information is presented for illustrative purposes only and
is not necessarily indicative of the operating results or financial position
that would have occurred if the Merger had been consummated, nor is it
necessarily indicative of future operating results or financial position.
<TABLE>
<CAPTION>
Twelve Months Ended
-----------------------------------------------------
Net earnings (loss) per share March 30, March 25, March 26,
- -----------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Giga-tronics historical net earnings $ 0.34 $ (0.61) $ 0.09
(loss) per share
ASCOR historical net earnings per share 0.15 0.12 0.22
Pro forma combined net earnings 0.55 (0.26) 0.40
(loss) per share
ASCOR equivalent pro forma net 0.03(A) (0.01)(A) 0.02(A)
earnings (loss) per share
</TABLE>
<TABLE>
<CAPTION>
Book value per share At March 30, 1996
- -------------------- -----------------
<S> <C>
Giga-tronics historical book value per share $ 7.34
ASCOR historical book value per share $ (0.44)
Pro forma combined book value per Giga-tronics share $ 6.22
ASCOR equivalent pro forma book value per share $ 0.34(B)
</TABLE>
(A) Determined by multiplying pro forma combined net earnings per share by the
estimated Exchange Ratio of 1 to 18.246 (.0548). The 18.246 ratio equals
13,228,069 ASCOR securities as of June 14, 1996 divided by 724,986
Giga-tronics shares issued.
(B) Determined by multiplying pro forma combined book value per share by the
estimated Exchange Ratio of 1 to 18.246 (.0548). The 18.246 ratio equals
13,228,069 ASCOR securities as of June 14, 1996 divided by 724,986
Giga-tronics shares issued.
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<PAGE> 62
SECTION IX
PRO FORMA COMBINED
FINANCIAL INFORMATION
The following pro forma condensed combined financial information should be
read in conjunction with the audited financial statements of ASCOR and
Giga-tronics that appear as Annexes to this Joint Proxy Statement/Prospectus
The pro forma combined balance sheet information as of March 30, 1996
combines the balance sheet information of Giga-tronics as of March 30, 1996 and
ASCOR as of March 31, 1996. The pro forma combined statement of income
information for the fiscal years 1996, 1995, and 1994 combines the results of
Giga-tronics for the fiscal years ended March 30, 1996, March 25, 1995, and
March 26, 1994 with the results of ASCOR for twelve months ended March 31, 1996,
March 31, 1995, and March 31, 1994. Pro forma combined per share data gives
effect to the assumed issuance of 724,986 shares of Giga-tronics Common Stock in
exchange for the ASCOR Common Stock in the Merger.
The pro forma financial information is presented for illustrative purposes
only and is not necessarily indicative of the operating results or financial
position that would have occurred if the Merger had been consummated, nor is it
necessarily indicative of future operating results or financial position.
The pro forma condensed combined financial information set forth below
gives effect to the Merger under the pooling of interests accounting method at
the beginning of the earliest period presented. The pro forma condensed combined
statements of operations assume the issuance of 724,986 shares of Giga-tronics
Common Stock in 1995 and 1994, and do not give effect to the estimated costs
associated with the consummation of the Merger. Total expenses directly
attributable to the consummation of the Merger are expected to approximate
$250,000. The pro forma condensed combined balance sheet reflects the $250,000
estimated costs of the Merger as a reduction of retained earnings.
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<PAGE> 63
Giga-tronics and ASCOR
Pro Forma Condensed Combined Balance Sheet
March 30, 1996
(In thousands)
<TABLE>
<CAPTION>
Assets Giga-tronics ASCOR Adjustments Combined
- ------ ------------ ----- ------------- ------------
<S> <C> <C> <C> <C>
Current assets
Cash, and cash equivalents $ 5,772 $ 151 $ -- $ 5,923
Investments 5,013 300 -- 5,313
Accounts receivable, net 2,715 943 -- 3,658
Inventories 4,660 1,633 -- 6,293
Other current assets 1,373 160 -- 1,533
----------- ----------- ----------- -----------
Total current assets 19,533 3,187 -- 22,720
Property and equipment, net 1,758 364 -- 2,122
Other assets $ 1,736 $ 6 $ -- $ 1,742
----------- ----------- ----------- -----------
$ 23,027 $ 3,557 $ -- $ 26,584
=========== =========== =========== ===========
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable 1,540 380 -- 1,920
Other current liabilities 2,163 4,029 (2,473) 3,719
----------- ----------- ----------- -----------
Total current liabilities 3,703 4,409 (2,473) 5,639
Deferred income taxes 223 -- -- 223
Long-term debt, net of current portion -- 30 -- 30
Redeemable Preferred Stock -- 844 (844) --
Shareholders' equity (deficit)
Common stock 7,925 86 3,442 11,453
Unrealized loss on investments (47) -- -- (47)
Retained earnings 11,223 (1,812) (125) 9,286
----------- ----------- ----------- -----------
Total shareholders' equity (deficit) $ 19,101 $ (1,726) $ 3,317 $ 20,692
----------- ------------ ----------- -----------
$ 23,027 $ 3,557 $ -- $ 26,584
=========== =========== =========== ===========
</TABLE>
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<PAGE> 64
Giga-tronics and ASCOR
Pro Forma Condensed Combined Statement of Operations
Year Ended March 30, 1996
(In thousands expect per share data)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Giga-tronics ASCOR Adjustments Combined
------------ ----- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 24,898 $ 5,913 $ -- $ 30,811
Cost of sales 15,616 3,752 -- 19,368
----------- ----------- ----------- -----------
Gross margin 9,282 2,161 -- 11,443
Cost and expenses
Product development expense 2,512 214 -- 2,726
Selling, general & admin. expense 5,488 1,159 (125) 6,522
Interest and other expense 560 -- -- 560
Interest and other income (480) 8 -- (472)
Income taxes 301 (59) -- 242
----------- ----------- ----------- -----------
Total costs and expenses $ 8,381 $ 1,322 $ (125) $ 9,578
----------- ----------- ------------ -----------
Net earnings $ 901 $ 839 $ 125 $ 1,865
=========== =========== =========== ===========
Net earnings per share $ 0.34 $ 0.15 $ 0.06 (A) $ 0.55
=========== =========== =========== ===========
Shares used in computing net
earnings per share 2,639 3,947 (3,222)(A) 3,364
=========== =========== =========== ===========
</TABLE>
(A) Adjustment to earnings per share and outstanding shares as a result of
the Merger and the assumed issuance of 724,986 shares of Giga-tronics
Common Stock in exchange for all issued and outstanding shares of ASCOR
Common Stock, including exercised ASCOR warrants and converted ASCOR
Preferred Stock.
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<PAGE> 65
Giga-tronics and ASCOR
Pro Forma Condensed Combined Statement of Operations
Year Ended March 25, 1995
(In thousands except per share data)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Giga-tronics ASCOR Adjustments Combined
------------ ----- ----------- --------
<S> <C> <C> <C> <C>
Net sales $ 21,937 $ 4,032 $ -- $ 25,969
Cost of sales 15,019 2,377 -- 17,396
----------- ----------- ----------- -----------
Gross margin 6,918 1,655 -- 8,573
Costs and expenses
Product development expense 2,700 228 -- 2,928
Selling, general and admin. expense 6,104 664 -- 6,768
Interest and other expenses 560 -- -- 560
Interest and other income (226) 2 -- (224)
Income taxes (benefit) (644) 52 -- (592)
----------- ----------- ----------- -----------
Total costs and expenses $ 8,494 $ 946 $ -- $ 9,440
----------- ----------- ----------- -----------
Net earnings (loss) $ (1,576) $ 709 $ -- $ (867)
============ =========== =========== ===========
Net earnings (loss) per share $ (0.61) $ 0.12 $ 0.23 (A) $ (0.26)
=========== =========== =========== ===========
Shares used in computing net
earnings per share 2,570 3,774 (3,049)(A) 3,295
=========== =========== =========== ===========
</TABLE>
(A) Adjustment to earnings per share and outstanding shares as a result of
the Merger and the assumed issuance of 724,986 shares of Giga-tronics
Common Stock in exchange for all issued and outstanding shares of ASCOR
Common Stock, including exercised ASCOR warrants and converted ASCOR
Preferred Stock.
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<PAGE> 66
Giga-tronics and ASCOR
Pro Forma Codensed Combined Statement of Operations
Year Ended March 26, 1994
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Giga-tronics ASCOR Adjustments Combined
------------ ----- ----------- --------
<S> <C> <C> <C> <C>
Net sales $ 19,890 $ 3,577 $ -- $ 23,467
Cost of sales 11,947 1,974 -- 13,921
----------- ----------- ---------- -----------
Gross margin 7,943 1,603 -- 9,546
Costs and expense4
Product development expense 2,569 130 -- 2,699
Selling, general and admin. expense 4,984 462 -- 5,446
Interest and other expenses 410 -- -- 410
Interest and other income (313) (88) -- (401)
Income taxes (benefit) 62 25 -- 87
----------- ----------- ---------- -----------
Total costs and expenses $ 7,712 $ 529 $ -- $ 8,241
----------- ----------- ---------- -----------
Net earnings (loss) $ 231 $ 1,074 $ -- $ 1,305
=========== =========== ========== ===========
Net earnings (loss) per share $ 0.09 $ 0.22 $ 0.09 (A) $ 0.40
=========== =========== ========== ===========
Shares used in computing net 2,570 3,774 (3,049)(A) 3,295
=========== =========== ========== ===========
earnings per share
</TABLE>
(A) Adjustment to earnings per share and outstanding shares as a result of
the Merger and the assumed issuance of 724,986 shares of Giga-tronics
Common Stock in exchange for all issued and outstanding shares of ASCOR
Common Stock, including exercised ASCOR warrants and converted ASCOR
Preferred Stock.
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<PAGE> 67
SECTION X
INFORMATION CONCERNING
GIGA-TRONICS INCORPORATED
General and Business
Giga-tronics designs, manufactures and markets microwave and radio
frequency (RF) signal generation and power measurement instruments. These
products are used primarily in the design, production, repair and maintenance of
telecommunications, radar, electronic warfare, and transportation systems.
Industry Segments
Giga-tronics operates in one industry segment: electronic test and
measurement equipment.
Products and Markets
Giga-tronics produces signal sources, generators and sweepers, and
power measurement instruments for use in the microwave and RF frequency range
(10 Khz to 75 GHz). Within each product line are a number of different models
and options allowing customers to select frequency range and specialized
capabilities, features and functions.
The end-user markets can be divided into three broad segments:
telecommunications, radar and electronic warfare. Giga-tronics' instruments are
used in the design, production, repair and maintenance and calibration of other
manufacturers' products, from discrete components to complex systems.
Sources and Availability of Raw Materials and Components
Substantially all of the components required by Giga-tronics to make
its assemblies are available from more than one source. Giga-tronics
occasionally uses sole source arrangements to obtain leading-edge technology,
favorable pricing or supply terms. Although extended delays in delivering
components could result in longer product delivery schedules, Giga-tronics
believes that its protection against this possibility stems from its practice of
dealing with well-established suppliers and maintaining good relationships with
such suppliers.
Patents and Licenses
Giga-tronics attempts to obtain patents when appropriate. In addition,
Giga-tronics has acquired numerous patents in the course of its two recent
acquisitions. However, Giga-tronics believes that its competitive position
depends on the creative ability and technical competence of its personnel and
the timely introduction of new products rather than on the ownership or
development of patents.
Giga-tronics licenses certain instrument operating system software from
third parties. Other than such software licenses, Giga-tronics is not aware that
the manufacture and sale of its products requires licenses from others.
Giga-tronics believes, based on industry practice, that any necessary licenses
could be obtained on conditions which would not have a materially adverse
financial effect on Giga-tronics.
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Seasonal Nature of Business
The business of Giga-tronics is not seasonal.
Working Capital Practices
Giga-tronics does not believe that it has any special practices or
special conditions affecting working capital items that are significant for an
understanding of its business.
Importance of Limited Number of Customers
Since its inception, Giga-tronics has been a leading supplier of test
instruments to various U.S. Government defense agencies, as well as to their
prime contractors. U.S. Government agencies accounted for 31%, 26%, and 27% of
net sales in fiscal 1996, 1995, and 1994, respectively. Management anticipates
sales to U.S. Government agencies will remain significant in fiscal 1997, even
though the outlook for defense-related orders continues to be soft.
Backlog of Orders
On March 30, 1996, Giga-tronics had a backlog of approximately
$6,112,000 compared to $10,154,000 at March 25, 1995. Orders for Giga-tronics'
products include large program orders, from both the U.S. Government and defense
contractors, with extended delivery dates. Accordingly, the backlog of orders
may vary substantially from quarter to quarter and the backlog entering any
single quarter may not necessarily be indicative of sales for any period.
Backlog includes only those customer orders for which a delivery
schedule has been agreed upon between Giga-tronics and the customer and, in the
case of U.S. Government orders, for which funding has been appropriated.
Giga-tronics believes that essentially all of the year ending backlog will be
shipped within the next twelve months.
A substantial portion of the year-end backlog consisted of U.S.
Government contracts. These contracts contain customary provisions permitting
termination at the convenience of the Government upon payment of a negotiated
cancellation charge. Giga-tronics never has experienced a significant contract
termination.
Competition
The principal competitive factors in the marketing of microwave and RF
test instruments include product functionality, reliability and price.
Giga-tronics competes mainly with Hewlett-Packard, Anritsu, Marconi and Rohde &
Schwarz. These competitors are larger and have greater financial, engineering
and marketing resources than the Company. Nonetheless, Giga-tronics believes
that within its chosen markets and applications, its products are fully
competitive with those of other manufacturers.
Product Development
Microwave and RF test instruments of the type manufactured by
Giga-tronics historically have had relatively long product life cycles. However,
the electronics industry is subject to rapid technological changes at the
component level. The future success of Giga-tronics is dependent on its ability
to steadily incorporate advancements in semiconductor and related microwave
component technologies into its new products.
Product development expense was approximately $2,512,000, $2,700,000
and $2,569,000 in fiscal 1996, 1995 and 1994, respectively. Activities included
the development of
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new products and the improvement of existing products. It is management's
intention to maintain expenditures for product development at levels required to
sustain its competitive position. All of Giga-tronics' product development
activities are internally funded and expensed as incurred.
Manufacturing
The assembly and testing of Giga-tronics' microwave, RF and power
measurement products is done at its relatively new San Ramon facility. The
Sunnyvale manufacturing operations (performing assembly and test of power
measurement products) relocated to the San Ramon facility in July, 1995.
Environment
To the best of its knowledge, Giga-tronics is in compliance with all
federal, state and local laws and regulations involving the protection of the
environment.
Employees
As of March 30, 1996, Giga-tronics employed 146 persons. Management
believes that the future success of Giga-tronics depends on its ability to
attract and retain skilled personnel. None of Giga-tronics' employees is
represented by a labor union and Giga-tronics considers its employee relations
to be excellent.
Information about Foreign Operations
Giga-tronics sells to its international customers through a network of
foreign technical sales representative organizations. Sales to foreign customers
were approximately $6,791,000, $4,458,000, and $4,544,000 in fiscal 1996, 1995
and 1994, respectively.
Giga-tronics has no foreign-based operations or material amount of
identifiable assets in foreign countries. Its gross margins on foreign and
domestic sales are similar. Management does not believe that foreign sales are
subject to materially greater risks than domestic sales.
Outlook
Even though Giga-tronics has now achieved more balance between its
defense and commercial businesses, defense related orders remain very important
to Giga-tronics. The outlook for such orders continues to be soft. Giga-tronics
believes that some growth can be realized by sustaining an effective new product
development program, aggressively pursuing new markets, vigorously competing for
defense business, and making synergistic acquisitions.
Property
As of March 30, 1996, Giga-tronics' executive, marketing, sales and
engineering offices and manufacturing facilities are located in approximately
47,000 square feet in San Ramon, California, which Giga-tronics occupies under a
lease agreement expiring December 31, 2006. The 30,000 square foot facility in
Pleasant Hill, California, which formerly housed all of the signal generator
operations, was vacated at the end of April, 1994. The Pleasant Hill lease
agreement expired April 30, 1994. The 40,000 square foot facility in Sunnyvale,
California, which formerly housed all of the power measurement instrument
operations, was vacated in July, 1994. The Sunnyvale lease agreement expired
July 31, 1994.
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Legal Proceedings
As of March 30, 1996, Giga-tronics has no pending legal proceedings,
other than routine litigation incidental to the Company's business, to which
Giga-tronics is a party or to which any of its property is subject.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF GIGA-TRONICS FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FOR FISCAL 1996, 1995, 1994
New orders received in 1996 were $20,856,000, a decrease of 21% from
1995, which increased 30% over 1994. In 1996, the decrease reflects large order
decreases in both the microwave signal generator (SG) and radio frequency signal
generator (RF) product line. In 1995, the increase in orders resulted from
additional orders in both the microwave signal generator and RF product line.
Overall, the approximate proportion of net sales coming from defense-related
customers was 31% in 1996 and less than 30% in 1995 and 1994. Continuing the
focus of a business better balanced between commercial and defense markets has
been and remains a major strategic priority. At year-end 1996, Giga-tronics'
backlog of unfilled orders was $6,112,000, compared to $10,154,000 at the end of
1995 and $5,800,000 at the end of 1994. The decrease in backlog from 1995 to
1996 resulted mostly from a decline in SG product line defense-related orders.
Due to the softness in order intake, fiscal 1997 revenues excluding ASCOR will
likely be less than fiscal 1996. However, it is projected at this time that
continued improvement in manufacturing efficiencies and other cost reduction
activities will largely offset any unfavorable impact caused by the decline in
revenues.
Net sales for 1996 were $24,898,000, a 13% increase from 1995, which
follows a 10% increase in 1995 from 1994. Somewhat greater sales volume for SG
products was the major factor. Average selling prices were stable. Gross profit
as a percentage of sales increased to 37% in 1996, from 32% in 1995, due to
better factory efficiencies. Gross profit as a percentage of sales decreased
from 40% to 32% from 1994 to 1995 due to factory inefficiencies associated with
the acquired RF signal generator product lines, manufacturing scaleup of new
microwave products, inventory reserve increases related to the above product
lines, and certain costs for upgrading Giga-tronics' management information
system. Giga-tronics continues to implement programs to improve manufacturing
efficiencies and reduce costs.
While there is a small percentage of product lines (less than 10% of
sales) with poor profit margins due to aging of product, potential inventory
obsolescence has been carefully analyzed and fully reserved for. There is no
expected impact on future results of operations for these product lines. More
over, there is a plan for designing and bringing to market new products, which
will replace products reaching the end of their life cycle. Since potential
inventory obsolescence is constantly being scrutinized, and new product launches
are being planned for fiscal 1997 and fiscal 1998, future results of operations
are not expected to deteriorate due to these factors.
Operating expenses decreased 9% in 1996 over 1995. Costs were tightly
controlled in many areas despite higher sales. In 1995, operating expenses
increased 17% from 1994 due to personnel severance costs (including those
associated with the resignation of Mr. Donald F. Bogue as President and Chief
Executive Officer) and additional inventory reserves taken for customer
demonstration equipment utilized by sales and marketing.
Amortization expense, relating to the intellectual property and
non-compete convenants associated with two prior acquisitions, amounted to
$560,000, the same as 1995 and increasing from $410,000 in fiscal 1994. The
increase from 1994 to 1995 is due to 1995 being the first fiscal year with the
full 12 month effect of the two acquisitions (the RF product line in fiscal 1994
and the power measurement product line in fiscal 1993).
Interest income increased by 43% to $323,000 in 1996, following a
decrease of 28% from 1994 to 1995. The increase in 1996 interest income from
1995 was due primarily to an increase in cash, resulting from an earnings
increase and much lower inventory levels. The decrease in 1995 was due to the
earnings decline in 1995 and higher inventory balances in fiscal 1995 relative
to the inventory level in fiscal 1994. Giga-tronics continues to invest
principally in securities which are exempt from federal taxes.
The provision for income taxes in 1996 was $301,000. In 1995, income tax
expense was a benefit due to a pretax loss of approximately $2,220,000.
Giga-tronics recorded net earnings of $901,000, or $0.34 per share, in
1996, an increase in earnings per share from a $0.61 loss in 1995, and $0.09
earnings per share in 1994. The improved results in 1996 were due to a sales
increase of 13%, an improved gross profit margin, a decrease in operating
expenses of 9%, and an increase in interest income. The loss in 1995 was largely
a result of delayed product shipments, depressed manufacturing margins in
certain microwave and RF signal generator product lines, related inventory
reserve increases, personnel severance costs, and certain costs for upgrading
Giga-tronics' management information system, all of which are not expected
to recur. The after-tax effect of non-recurring adjustments was approximately
$1,200,000, or $0.46 per share. The pre-tax cost was approximately $1,700,000,
which included $1.0 million of inventory reserves, $0.2 million of costs
related to production of new products, $0.4 million of severance costs for the
Chief Executive Officer and other staff, and $0.1 million for inventory
write-offs. The inventory reserve of $1.0 million was comprised of slow-moving
production inventory. Additionally, although delayed product shipments effected
the 1995 sales revenue, the impact of this delay is not included in the above
numbers. The delays were due to manufacturing and MIS (Management Information
System) problems early in the year.
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Financial Condition and Liquidity
At year-end 1996, Giga-tronics had $10,785,000 in cash, cash equivalents
and investments, compared to $5,768,000 at the beginning of the year. Most of
the increase resulted from the higher earnings, lower inventories and lower
receivables in 1996. Inventories have decreased $2 million ($2M) in 1996 due
largely to the completed implementation of the MIS system installed early in
fiscal 1995. It took almost two years to successfully install and effectively
use all of the MIS management tools. Production management now procures
inventory closer to shipment time. The receivables declined by $800,000 in 1996
due to a $200,000 increase in the allowance for doubtful accounts and a $600,000
decrease in gross receivables. In an effort to grow the business in fiscal 1996,
the Company made sales to customers that it historically did not make sales to
in the past. As a result of these sales, the allowance for doubtful accounts was
increased by $200,000. The Company intends to limit these types of sales to a
very small percentage of overall sales. The gross receivables have decreased due
to more effective collection efforts on the part of Giga-tronics. Cash provided
from operations amounted to $5,161,000 in 1996, compared to cash provided from
operations of $158,000 in 1995, and cash used by operations of $932,000 in 1994.
In 1995, cash provided by operations was negligible, as the small favorable
change in balance sheet accounts and "the depreciation add-back" was mostly
offset by a $1.6M loss. In 1994, a $2.1M increase in inventories was the major
factor in the negative cash flow from operations. This increase was due to a
deteriorating MIS system (replaced in early fiscal 1995) and the acquisition of
two Fluke Company product lines and related inventory in June of 1993.
Giga-tronics continues to maintain a strong financial position, with
working capital at year-end of $15,830,000, compared to $13,242,000 and
$14,209,000 at the end of 1995 and 1994, respectively. Giga-tronics' current
ratio of 5.3 increased somewhat from the 1995 and 1994 figures.
Additions to property and equipment were $356,000 in 1996, compared to
$670,000 and $673,000 in 1995 and 1994, respectively. This spending reflects
continuing investments to support new product development, increase productivity
and improve product quality. Other cash outflows for investing activities
included $1.3M in 1996 and $3.7M in 1994 for purchases of short-term
investments. These are marketable securities, which are available for sale on
short notice. In 1994, there was a $1.1M outflow for the acquisition of two
product lines from the Fluke Company. Financing cash inflow in 1996 was due to
exercise of stock options.
Management believes that Giga-tronics has adequate resources to meet
its operating and capital expenditure needs for the foreseeable future.
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SECTION XI
INFORMATION CONCERNING
ASCOR, INC.
General and Business
ASCOR was founded and incorporated in California in 1987. ASCOR
designs, manufacturers and markets high frequency and high density switches.
These switches are used in support of Automated Test Equipment (ATE) or any
other application where VXI bus (VME extensions for Instrumentation)
architecture is utilized.
Industry Segments
ASCOR operates in one industry segment: electronic test and measurement
equipment.
Products and Markets
ASCOR produces switch modules which meet the need for low noise and
high density switching within the VXI chassis. Switch matrices and scanners
utilize over 1,600 relays in a single VXI bus module. Additionally, ASCOR offers
switch modules that operate with a bandwidth from DC to in excess of 18
Gigahertz. ASCOR also offers Interface Adapters, which allow multiple pieces of
equipment to be tested using the same test instruments. Within the product line,
there are a number of different modules and options allowing customers to select
frequency range and specialized capabilities, features and functions.
The end-user markets are primarily related to electronic warfare,
though there will likely be an increasing demand from the telecommunications
market if the VXI bus architecture becomes more readily accepted.
Sources and Availability of Raw Materials and Components
Substantially all of the components required by ASCOR to make its
assemblies are available from more than one source. ASCOR occasionally uses sole
source arrangements to obtain leading-edge technology, favorable pricing or
supply terms. Although extended delays in delivering components could results in
longer product delivery schedules, ASCOR believes that its protection against
this possibility stem from its practice of dealing with well-established
suppliers and maintaining good relationships with such suppliers.
Patents and Licenses
ASCOR has an exclusive arrangement with GDE Systems for the use and
manufacture of a high speed digital pin driver and receiver device. This is a
high density semiconductor device used for the output stage of a digital test
system. This device contains all the circuitry to drive, receive, or load
digital circuits that is being tested. It has an advantage in that it is
packaged in one silicon chip and saves circuit board space. The device will give
ASCOR the advantage of designing more complex digital VXI modules than possible
with current techniques used by competitors.
Seasonal Nature of Business
The business of ASCOR is not seasonal in nature.
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Working Capital Practices
ASCOR does not believe that it has any special practices or special
conditions affecting working capital items that are significant for an
understanding of its business. It can be noted, moreover, that most inventory is
procured on the basis of confirmed customer sales orders.
Importance of Limited Number of Customers
Since its inception, ASCOR has been a leading supplier of test
instruments to various defense-related contractors. Defense-related orders
accounted for 87%, 87%, and 100% of net sales in the twelve-month periods ending
March, 1996, March, 1995, and March, 1994. Management anticipates sales to
defense contractors will remain significant in fiscal 1997.
Backlog of Orders
On March 30, 1996, ASCOR had a backlog of approximately $2,742,000
compared to $3,023,000 on March 25, 1995. Orders for ASCOR included large
program orders, from both commercial and defense contractors.
Backlog includes only those customer orders for which a delivery
schedule has been agreed upon between ASCOR and the customer, and in the case of
defense-related orders, for which funding has been appropriated. ASCOR believes
that essentially all of the March period end backlog will be shipped within the
next twelve months.
A majority of the March 30, 1996 backlog is related to defense-related
contracts. These contracts contain customary provisions permitting termination
at the convenience of the customer upon payment of a negotiated cancellation
charge. ASCOR never has experienced a significant contract termination.
Competition
The principal competitive factors in the marketing of VXI switching
interface adapters include product modularity, density factor, quality, and
price. ASCOR competes mainly with Racal Dana, Hewlett Packard and Tektronix.
These competitors are larger and have greater financial, engineering and market
resources than ASCOR. However, ASCOR's product line has superior performance
over equivalent competitors' models. In addition, the modular design approach of
ASCOR's product lends itself to more flexible configuration in order to meet the
needs of the customers. ASCOR's products are therefore technically superior to
those of other manufacturers while being competitive in price.
Product Development
The electronics and communications industry is subject to rapid
technological changes at the component level. The future success of ASCOR is
dependent on its ability to steadily incorporate advancements in semiconductor
and related microwave component technologies into its new products.
Product development expense was approximately $214,000, $228,000, and
$130,000 for the twelve month periods ending March, 1996, March 1995, and March
1994, respectively. Activities included the development of new products and the
improvement of existing products. It is management's' intention to maintain
expenditures for product development at levels required to sustain its
competitive position. All of ASCOR's recent product development activities are
internally funded. All product development costs are expensed as incurred.
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Manufacturing
The assembly and testing of ASCOR's products is done at its Fremont
facility. Manufacturing operations have been performed in this facility since
1987.
Environment
To the best of its knowledge, ASCOR is in compliance with all federal,
state and local laws and regulations involving the protection of the
environment.
Employees
As of March 30, 1996, ASCOR employed 48 persons. Management believes
that the future success of ASCOR depends on its ability to attract and retain
skilled personnel. None of ASCOR's employees is represented by a labor union and
ASCOR considers its employee relations to be excellent.
Information About Foreign Operations
ASCOR has no formal organization for sales to international customers.
Currently, all of its products that ultimately are shipped overseas have been
sold to domestic prime contractors who have sold a complete automatic test
system overseas.
Outlook
Since ASCOR focuses on system integration needs for low noise and high
density switching within the VXI chassis, growth would likely be realized on the
assumption that a growing number of instruments available in VXI bus
architecture would be demanded.
Property
As of March 30, 1996, ASCOR's executive, marketing, sales and
engineering offices and manufacturing facilities are located in approximately
12,160 square feet in Fremont, California, which ASCOR occupies under a lease
expiring on January 31, 1998, including the exercise of three one-year options
to renew (original lease expired January 31, 1995).
Legal Proceedings
As of March 30, 1996, ASCOR has no pending legal proceedings, other
than routine litigation incidental to ASCOR's business, to which ASCOR is a
party or to which any of its property is subject.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF ASCOR FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FOR FISCAL 1996, 1995, 1994
New orders received in 1996 were $5,173,000, an increase of 190% from
1995, which decreased 78% over 1994. In 1996, the increase reflects an increase
in commercial related orders. In 1995, the decrease in orders resulted from a
reduction in defense related activity. Overall, the approximate proportion of
net sales coming from defense-related customers was 87% in 1996 and greater than
90% in 1995 and 1994. At year-end 1996, ASCOR's backlog of unfilled orders was
$2,356,000, compared to $3,023,000 at the end of 1995 and $5,223,000 at the end
of 1994. The decrease in backlog from 1995 to 1996 resulted mostly from an
increase in shipments against large orders placed in 1994.
Net sales for 1996 were $5,913,000, a 47% increase from 1995, which
follows a 13% increase in 1995 from 1994. Gross profit as a percentage of sales
decreased to 37% in 1996, from 41% in 1995, due to lower margins earned on
commercial orders. Commercial sales are more price competitive, whereas
defense-related sales are typically sole source. In addition, the large
contract orders in 1995 allowed for greater manufacturing efficiencies and
lower material costs due to a higher volume of repetitive business. Gross
profit as a percentage of sales decreased from 45% to 41% from 1994 to 1995
due to increased material costs.
Operating expenses increased 54% in 1996 over 1995. In an effort to
increase market share, additional marketing personnel were added and the use of
regional US sales reps were increased, causing an increase in sales commission
expense. In 1995, operating expenses increased 51% from 1994 due to the addition
of a Director of Sales & Marketing, a Controller and an increase in national
advertising.
Interest expense in 1995 and 1996 were similar, but more than $40,000
favorable to interest expense in 1994 due to a larger proportion of customer
advance payments received against orders (resulting in higher average cash
balances).
The provision for income taxes in 1996 was a tax benefit of $59,000. In
1995, income tax expense was $52,000. In 1996 the Company reduced its deferred
tax valuation allowance to recognize operating loss carryforwards that are
realizable this year and set up an asset that it believes will be realized in
the future.
Other income decreased by $11,000 in 1996 from 1995. In 1995, other
income decreased by $135,000 from 1994 due to the sale of a licensing agreement
in 1994.
ASCOR recorded profits of $839,000, or $0.15 per share, in 1996, an
increase in income per share from $0.12 per share in 1995, and a decrease in
income from $0.22 per share in 1994. The improved results in 1996 were due to
increased sales of 47% and the tax benefit. The decrease from 1995 to 1994 was
primarily due to the 1994 licensing agreement sale, decreased gross margins and
an increase in operating expenses resulting from additions to ASCOR's management
team.
Financial Condition and Liquidity
At year-end 1996, ASCOR had $451,000 in cash, cash equivalents and
investments, compared to $1,265,000 at the beginning of the year. Most of the
decrease resulted from a decrease in customer advances, additional capital
expenditures and higher receivables. The higher receivables in 1996 were due to
a 72 percent increase in shipments from the fourth quarter of fiscal 1995 to the
fourth quarter of fiscal 1996, and a relatively large portion of the Q4
shipments were recorded in March. The accounts receivable allowance, which was
zero at previous year-ends amounted to $13,000 because of one invoice deemed to
be potentially uncollectible. Cash used in operations amounted to $514,000 in
1996, compared to cash provided from operations of $428,000 in 1995, and cash
provided from operations of $1,085,000 in 1994. The 1995 cash provided from
operations was due to earnings and customer advances, offset primarily by an
increase in inventories. The 1994 cash provided by operations was due to
earnings.
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The working capital position at year-end of ($1,222,000) compared
unfavorably to ($796,000) at the end of 1995 due to the redeemable preferred
stock.
Additions to property and equipment were $277,000 in 1996, compared to
$75,000 and $65,000 in 1995 and 1994, respectively. This spending reflects
continuing investments to support new product development, increase productivity
and improve product quality. Other cash outflows for investing activities
included $100,000 in 1996 and $200,000 in 1995 for purchases of short-term
investments. Cash outflows from financing activities were negligible.
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SECTION XII
DESCRIPTION OF
GIGA-TRONICS AND ASCOR
SECURITIES
Giga-tronics
The authorized capital stock of Giga-tronics consists of 1,000,000
shares of convertible Preferred Stock of no par value and 40,000,000 shares of
Common Stock of no par value. At the Effective Time of the Merger, there will be
approximately 2,642,970 shares of Giga-tronics Common Stock, issued and
outstanding, assuming no additional issuance of common shares. There will be no
shares of Giga-tronics Preferred Stock issued and outstanding at the Effective
Time of the Merger.
Giga-tronics Common Stock. Holders of Giga-tronics Common Stock are
entitled to one vote for each share held of record by them on all matters
submitted to a vote of the shareholders. Subject to any declarations of
dividends on shares of Preferred Stock (if any) holders of Giga-tronics' Common
Stock are entitled to receive dividends when and as declared by the Board of
Directors out of funds legally available therefore. The Giga-tronics Common
Stock is not entitled to any preemptive or other subscription rights, and does
not have any conversion rights or redemption or sinking fund provisions.
Giga-tronics Preferred Stock. No shares of Preferred Stock are
currently outstanding. The Board of Directors of Giga-tronics is authorized to
determine the designation of each series and authorized number of shares in each
series of Preferred Stock. The Board of Directors is authorized to determine and
alter the rights, preferences, privileges and restrictions granted to or imposed
upon any wholly unissued series of shares of Preferred Stock and to increase or
decrease (but not below the number of shares of such series then outstanding)
the number of shares of any such series subsequent to the issue of share of such
series. Such rights granted to any such series of Preferred Stock may create
stock which ranks senior to Giga-tronics Common Stock with respect to the
payment of dividends and the distribution of assets on liquidation. The
Giga-tronics Board of Directors, without shareholder approval can issue
Preferred Stock with voting and conversion rights which could adversely affect
the voting power of the holders of Giga-tronics Common Stock. The issuance of
Preferred Stock could have the effect of delaying, deferring or preventing a
change in control of Giga-tronics.
General Rights. Voting on the election of directors is cumulative. Upon
any voluntary or involuntary liquidation, the holders of Giga-tronics Common
Stock are entitled to share in all net assets of Giga-tronics remaining
available for distribution to shareholders after payment of all liabilities and
the payment of amounts equal to the respective liquidation preferences of each
series of Preferred Stock.
All outstanding shares of Giga-tronics are, and the shares of Common
Stock issued in the Merger will be validly issued, fully paid and
non-assessable. The initial transfer agent will be Chemical Trust Company, San
Francisco, California.
The outstanding shares of Giga-tronics will be traded in the
over-the-counter market in the United States.
ASCOR
The authorized capital stock of ASCOR consists of 30,000,000 shares of
Common Stock,
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no par value and 5,712,283 shares of Preferred Stock, no par value. Immediately
prior to the Effective Time of the Merger, there will be approximately 7,910,144
shares of ASCOR Common Stock and 5,249,516 shares of ASCOR Preferred Stock
issued and outstanding.
ASCOR Common Stock. Holders of ASCOR Common Stock are entitled to
receive dividends when and as declared by the ASCOR Board of Directors out of
funds legally available therefor. The ASCOR Common Stock is not entitled to any
preemptive or other subscription rights, and does not have any conversion rights
or redemption or sinking fund provisions.
ASCOR Preferred Stock. ASCOR Preferred Stock is entitled to accruing
and cumulative dividends at the per annum rate of 10% of the respective series
purchase price beginning September 30, 1992 with payment to be made on a
quarterly basis beginning September 31, 1992, when and as declared by the ASCOR
Board of Directors. The ASCOR Board has never declared any dividends on
Preferred Stock. ASCOR Preferred Stock possesses liquidation preferences over
ASCOR Common Stock in the amount of each series respective original issuance
price plus accrued but unpaid dividends. ASCOR Preferred Stock is subject to
mandatory redemption by ASCOR at its original issuance price plus accrued
dividends beginning on September 30, 1995 in three annual installments. ASCOR
Preferred Stock is convertible into ASCOR Common Stock, at the election of its
holder at any time and mandatory upon a qualifying initial public offering of
stock of ASCOR, on a one-for-one basis (subject to adjustment for capital
structure changes and certain delusive issuances of ASCOR securities not
accepted from such adjustment provisions). ASCOR Preferred Stock has voting
rights on an as converted to common basis in all matters other than election of
directors. So long as at least 25% of number of shares of Preferred Stock
originally issued remain outstanding, the holders of ASCOR Preferred Stock are
entitled to elect three ASCOR directors (voting together as a single class).
Holders of ASCOR Common Stock are entitled to elect two directors and any
additional directors (the ASCOR Board of Directors is currently fixed at five
directors) would be elected by the holders of ASCOR Common Stock and ASCOR
Preferred Stock voting together as a single class.
General
Voting on the election of directors is cumulative. Upon liquidation,
the holders of ASCOR Common Stock are entitled to share ratably in the entire
net assets of ASCOR remaining available for distribution of shareholders after
payment of all liabilities and after payment of such liquidation preferences as
are provided to ASCOR Preferred Shares. All outstanding shares of ASCOR are
validly issued, fully paid and nonassessable.
Pursuant to the terms of the Reorganization Agreement it is a condition
of the obligation of Giga-tronics to consummate the Merger that all holders of
ASCOR Preferred Stock tender their shares of ASCOR Preferred Stock at the
closing accompanied by the Tender Instructions, in the form of Annex I hereto,
thereby agreeing to accept Giga-tronics Common Stock in exchange for such shares
in the amounts provided by the terms of the Reorganization Agreement and waiving
any rights to additional or different consideration as may be provided by the
ASCOR Articles of Incorporation. See "The Reorganization Agreement and Related
Agreements - The Reorganization Agreement - Conditions to the Merger."
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SECTION XIII
COMPARISON OF RIGHTS OF SHAREHOLDERS
OF GIGA-TRONICS AND ASCOR
ASCOR is incorporated under California corporate law. Upon consummation
of the Merger, the shareholders of ASCOR will become shareholders of
Giga-tronics, a corporation also incorporated under the California corporate
law. Accordingly, there are no differences in the laws governing ASCOR and
Giga-tronics. Except for the rights and preferences afforded to ASCOR Preferred
Stock (See 'DESCRIPTION OF GIGA-TRONICS AND ASCOR SECURITIES - ASCOR - ASCOR
Preferred Stock") there are no material differences between the rights and
obligations of ASCOR Shareholders and Giga-tronics Shareholders.
-73-
<PAGE> 81
SECTION XIV
SHAREHOLDER PROPOSALS
The next shareholder's meeting for Giga-tronics will be the 1996 Annual
Meeting on Tuesday, August 6, 1996. Giga-tronics Shareholders' proposals must be
directed to the Company Secretary of Giga-tronics and received no later than
June 25, 1996 to be considered for inclusion in the Proxy Statement and form of
proxy for the 1996 Annual Meeting of Shareholders.
-74-
<PAGE> 82
SECTION XV
EXPERTS
The financial statements and schedules of Giga-tronics Incorporated and
ASCOR, Inc. as of March 30, 1996, and for each of the three years then ended,
included in this Joint Proxy Statement/Prospectus have been audited by KPMG Peat
Marwick LLP, independent accountants, as stated in their reports appearing
elsewhere herein, and are included in reliance upon such reports and upon the
authority of such firm as experts in auditing and accounting.
It is expected that representatives from KPMG Peat Marwick LLP will be
present at the Special Meeting to respond to appropriate questions of
shareholders and to make a statement if they desire.
-75-
<PAGE> 83
SECTION XVI
LEGAL MATTERS
The validity of the shares of Giga-tronics Incorporated to be issued in
connection with the Merger will be passed upon by Brobeck, Phleger and Harrison
in San Francisco, California.
-76-
<PAGE> 84
SECTION XVII
OTHER BUSINESS AT THE SPECIAL MEETING
The Board of Directors knows of no other business which will be
presented for consideration at the Special Meeting of Giga-tronics Shareholders
other than as stated in the Notice of Special Meeting of Shareholders. However,
if any other matters are properly brought before the Special Meeting or any
adjournment thereof (as long as those matters are the subject of the meeting or
incidental to the meeting), the proxy holders will have the discretionary
authority to vote the shares they represent in accordance with their best
judgment.
-77-
<PAGE> 85
ANNEX A
Giga-tronics, Incorporated
Financial Statements
<PAGE> 86
INDEPENDENT AUDITOR'S REPORT
The Board of Directors and Shareholders
Giga-tronics Incorporated:
We have audited the accompanying balance sheets of Giga-tronics
Incorporated as of March 30, 1996, and March 25, 1995, and the related
statements of operations, shareholders' equity and cash flows for the
fifty-three week period ended March 30, 1996, and for each of the fifty-two week
periods in the two-year period ended March 25, 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 Giga-tronics
Incorporated as of March 30, 1996, and March 25, 1995, and the results of its
operations and its cash flows for the fifty-three week period ended March 30,
1996, and for each of the fifty-two week periods in the two-year period ended
March 25, 1995, in conformity with generally accepted accounting principles.
/s/
KPMG Peat Marwick LLP
San Jose, California
April 18, 1996
except as to note 10, which is as of May 2, 1996
A-1
<PAGE> 87
<TABLE>
<CAPTION>
Balance Sheets
- ----------------------------------------------------------------------------------------------------
YEARS ENDED MARCH 30, MARCH 25,
(IN THOUSANDS, EXCEPT SHARE DATA) 1996 1995
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 5,772 $ 2,137
Investments 5,013 3,631
Trade accounts receivable, less allowance for doubtful
accounts of $222 and $32, respectively 2,715 3,524
Inventories 4,660 6,701
Prepaid expenses 188 588
Deferred income taxes 1,185 868
-------- ---------
Total current assets 19,533 17,449
Property and Equipment
Machinery and equipment 6,518 6,095
Office furniture and fixtures 322 411
Leasehold improvements 103 93
-------- ---------
6,943 6,599
Accumulated depreciation and amortization (5,185) (4,212)
--------- ----------
Net property and equipment 1,758 2,387
Patents and licenses 1,590 2,150
Other assets 146 239
-------- ---------
Total assets $ 23,027 $ 22,225
======== =========
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable $ 1,540 $ 1,477
Accrued commissions 156 318
Accrued payroll and benefits 474 778
Accrued warranty 480 417
Accrued earnout payment 393 472
Accrued expenses 660 745
-------- ---------
Total current liabilities 3,703 4,207
Deferred income taxes 223 --
-------- ---------
Total liabilities 3,926 4,207
Commitments and contingencies -- --
Shareholders' Equity
Convertible preferred stock of no par value;
1,000,000 shares authorized; no shares
outstanding in 1996 and 1995 -- --
Common stock of no par value;
40,000,000 shares authorized;
2,602,420 shares in 1996 and 2,569,920
shares in 1995 issued and outstanding 7,925 7,773
Unrealized loss on securities (47) (77)
Retained earnings 11,223 10,322
-------- ---------
Total shareholders' equity 19,101 18,018
-------- ---------
Total liabilities and shareholders' equity $ 23,027 $ 22,225
======== =========
</TABLE>
See accompanying notes to financial statements.
A-2
<PAGE> 88
<TABLE>
<CAPTION>
Giga-tronics, Incorporated
Statements of Operations
- ----------------------------------------------------------------------------------------------------
53 WEEKS ENDED 52 WEEKS ENDED
-------------- ------------------------
MARCH 30, MARCH 25, MARCH 26,
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1996 1995 1994
<S> <C> <C> <C>
Net sales $ 24,898 $ 21,937 $ 19,890
Cost of sales 15,616 15,019 11,947
--------- -------- ---------
Gross profit 9,282 6,918 7,943
--------- -------- ---------
Product development expense 2,512 2,700 2,569
Selling, general and administrative expenses 5,488 6,104 4,984
--------- -------- ---------
Operating expenses 8,000 8,804 7,553
--------- -------- ---------
Net operating income (loss) 1,282 (1,886) 390
Amortization of intangibles (560) (560) (410)
Interest income, net 323 226 313
Other income 157 -- --
--------- -------- ---------
Earnings (loss) before income taxes 1,202 (2,220) 293
Provision for income taxes (benefit) 301 (644) 62
--------- --------- ---------
Net earnings (loss) $ 901 $ (1,576) $ 231
========= ========= =========
Net earnings (loss) per share of common stock $ 0.34 $ (0.61) $ 0.09
========= ========= =========
Weighted average common shares outstanding 2,639 2,570 2,570
========= ======== =========
</TABLE>
See accompanying notes to financial statements.
A-3
<PAGE> 89
<TABLE>
<CAPTION>
Giga-tronics, Incorporated
Statement of Shareholders' Equity
- ---------------------------------------------------------------------------------------------------------------
COMMON STOCK UNREALIZED
(IN THOUSANDS, EXCEPT SHARE DATA) ----------------------- RETAINED LOSS ON
SHARES AMOUNT EARNINGS SECURITIES TOTAL
<S> <C> <C> <C> <C> <C>
Balances as of March 27, 1993 2,569,920 $ 7,773 $ 11,667 $ -- $ 19,440
Net earnings -- -- 231 -- 231
--------- ---------- --------- --------- ----------
Balances as of March 26, 1994 2,569,920 7,773 11,898 -- 19,671
Unrealized loss on securities net
of income tax credit of $41 -- -- -- (77) (77)
Net loss -- -- (1,576) -- (1,576)
--------- ---------- --------- --------- ----------
Balances as of March 25, 1995 2,569,920 7,773 10,322 (77) 18,018
Repurchase of stock (12,500) (94) (94)
Exercise of stock options 45,000 246 -- -- 246
Unrealized gain on investments
net of income tax expense of $16 -- -- -- 30 30
Net earnings -- -- 901 -- 901
--------- ---------- --------- --------- ----------
Balances as of March 30, 1996 2,602,420 $ 7,925 $ 11,223 $ (47) $ 19,101
========= ========== ========= ========= ==========
</TABLE>
See accompanying notes to financial statements.
A-4
<PAGE> 90
<TABLE>
<CAPTION>
Giga-tronics, Incorporated
Statements of Cash Flows
- ---------------------------------------------------------------------------------------------------
53 WEEKS ENDED 52 WEEKS ENDED
-------------- -------------------
(IN THOUSANDS) MARCH 30, MARCH 25, MARCH 26,
1996 1995 1994
<S> <C> <C> <C>
Cash flows from operations:
Net earnings (loss) $ 901 $ (1,576) $ 231
Adjustments to reconcile net earnings (loss) to
net cash provided by (used in) operations:
Depreciation and amortization 1,608 1,527 1,263
Deferred income taxes, net (94) (296) (119)
Changes in operating assets and liabilities
Trade accounts receivable 809 (126) 410
Inventories 2,041 625 (2,104)
Prepaid expenses 400 (434) 111
Accounts payable 63 (68) (3)
Accrued commissions (162) (45) 97
Accrued payroll and benefits (304) 237 (181)
Accrued warranty 63 55 38
Accrued earnout and other expenses (164) 292 (506)
Income taxes payable -- (33) (169)
--------- -------- ---------
Net cash provided by (used in) operations 5,161 158 (932)
--------- -------- ---------
Cash flows from investing activities:
Patents and licenses, other assets 30 (31) (335)
Purchases of investments (1,352) -- (3,749)
Acquisitions -- -- (1,123)
Additions to property and equipment (356) (670) (673)
---------- -------- ---------
Net cash used in investing activities (1,678) (701) (5,880)
---------- -------- ---------
Cash flows from financing activities:
Issuance of common stock 246 -- --
Repurchase of common stock (94) -- --
---------- -------- ---------
Net cash provided by financing activities 152 -- --
--------- -------- ---------
Increase (decrease) in cash and cash equivalents 3,635 (543) (6,812)
Beginning cash and cash equivalents 2,137 2,680 9,492
--------- -------- ---------
Ending cash and cash equivalents $ 5,772 $ 2,137 $ 2,680
========= ======== =========
Supplementary disclosure of cash flow information:
Cash paid for income taxes $ 340 $ 255 $ 22
========= ======== =========
</TABLE>
See accompanying notes to financial statements.
A-5
<PAGE> 91
Giga-tronics, Incorporated
Notes to Financial Statements
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Operations The Company designs, manufacturers and
markets microwave and radio frequency (RF) signal generation and power
measurement instruments. The market for the Company is the test and
measurement industry. These products are used primarily in the design,
production, repair and maintenance of wireless communications, radar
and electronic warfare systems. The Company has no foreign operations,
and all non-U.S. sales are made in U.S. dollars, and therefore there is
no currency risk on these transactions.
Use of Estimates Management of the Company has made a number of
estimates and assumptions relating to the reporting of assets and
liabilities and the disclosure of contingent assets and liabilities to
prepare these financial statements in conformity with generally
accepted accounting principles. Actual results could differ from these
estimates.
Revenue Recognition Revenues are recognized when products are shipped.
Interest income is recognized when earned.
Cash Equivalents For purposes of the accompanying statements of cash
flows, the Company considers all highly liquid debt instruments with
maturity dates of 90 days or less from date of purchase to be cash
equivalents.
Inventories Inventories are stated at the lower of cost or market. Cost
is determined on a first-in, first-out basis.
Property and Equipment Property and equipment are stated at cost.
Depreciation is calculated using the straight-line method over the
estimated useful lives of the respective assets, which range from 3 to
10 years. Leasehold improvements are amortized using the straight-line
method over the shorter of the estimated useful lives of the respective
improvements or the lease term.
Income Taxes The Company accounts for income taxes in accordance with
SFAS No. 109, "Accounting for Income Taxes." SFAS No. 109 prescribes an
asset and liability approach that results in the recognition of
deferred tax assets and liabilities for the expected future tax
consequences of events that have been recognized in the Company's
financial statements or tax returns. In estimating future tax
consequences, SFAS No. 109 generally considers all expected future
events other than enactment of changes in tax laws or rates.
Patents and Licenses Patents and licenses are being amortized using the
straight-line method over periods of five to seven years. As of March
30, 1996 and March 25, 1995, accumulated amortization on patents and
licenses was $1,741,000 and $1,180,000, respectively.
Earnings (Loss) Per Share Earnings (loss) per common and common
equivalent share is based on the weighted average number of shares of
common stock and dilutive common stock equivalent shares outstanding
during the year.
Investments During fiscal 1995, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." The effect of adopting
FAS 115 was not material to the Company's financial position. This
statement addresses the accounting and reporting for investments in
equity securities that have readily determinable fair values and for
all investments in debt securities. The Company's investments have
been classified as available-for-sale securities and are reported at
fair value. Unrealized gains and losses have been reported as a
separate component of shareholders' equity.
Concentration of Credit Risk and Financial Instruments Financial
instruments, which potentially subject the Company to credit risk,
consist principally of investments and trade accounts receivable. The
Company's investments consist principally of variable and fixed rate
bonds issued by state and local governmental agencies. The Company
individually evaluates the creditworthiness of its customers and
generally does not require collateral or other security. Historically,
the Company has not incurred any significant credit related losses.
Fair Market Value of Financial Instruments The carrying amount for the
Company's trade accounts receivable, accounts payable and other accrued
expenses approximates fair market value because of the short maturity
of these financial instruments.
Recent Accounting Pronouncements In October, 1995 the Financial
Accounting Standards Board issued SFAS No. 123, "Accounting for
Stock-Based Compensation." SFAS No. 123 will be effective for fiscal
years beginning after December 15, 1995, and will require that the
Company either recognize in its financial statements costs related to
its employee stock-based compensation plans, such as stock option
A-6
<PAGE> 92
Giga-tronics, Incorporated
Notes to Financial Statements
and stock purchase plans, or make pro forma disclosures of such costs
in a footnote to the financial statements.
The Company expects to continue to use the intrinsic value-based method
of Accounting Principles Board Opinion No. 25, as allowed under SFAS
No. 123, to account for all of its employee stock-based compensation
plans. Therefore, in its financial statements for fiscal 1997, the
Company will make the required pro forma disclosures in a footnote to
the financial statements. SFAS No. 123 is not expected to have a
material effect on the Company's results of operations or financial
position.
2 CASH, CASH EQUIVALENTS AND INVESTMENTS
Cash and cash equivalents consist of bank and money market accounts,
variable and fixed rate bonds, and fixed rate municipal notes which are
stated at cost. Investments consist of municipal notes and bonds and
U.S. Treasury Bills of varying maturities. The cash equivalents and
investments mature or are marketable within 30 days, thus being
available for current operating cash needs. As of March 30, 1996, the
interest rates on cash, cash equivalents and investments ranged from
3.5% to 6.6%.
As of March 30, 1996 and March 25, 1995, the Company had $3,822,000 and
$4,249,000, respectively, invested in variable and fixed rate bonds and
fixed rate notes issued by governmental agencies. The portfolio is
diversified, consisting of five and six different governmental agencies
located in various geographic regions of the United States as of March
30, 1996 and March 25, 1995, respectively.
3 ESTIMATED VALUE OF INVESTMENTS
Certain cash equivalents and all investments have been classified as
available-for-sale securities, and as of March 30, 1996 consisted of
the following.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
MARCH 30, 1996
(IN THOUSANDS) AVAILABLE-FOR-SALE SECURITIES
--------------------------------------------------------
GROSS GROSS ESTIMATED
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Bills $ 429 $ 1 $ -- $ 430
U.S. Treasury Notes 498 -- 1 497
Municipal securities 4,158 -- 72 4,086
--------- -------- -------- ---------
Total debt securities $ 5,085 $ 1 $ 73 $ 5,013
========= ======== ======== =========
</TABLE>
There were no realized gains (losses) on sales of available-for-sale
securities in fiscal 1996. Unrealized losses on available-for-sale
securities are included as a separate component of shareholders' equity
net of a tax benefit of $25,000.
The Company's investments are classified as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
MARCH 30,
1996
<S> <C>
Short-term investments $ 5,013
=========
</TABLE>
The amortized cost and estimated fair value of debt securities as of
March 30, 1996 are shown below, by contractual maturity.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
MARCH 30, 1996
(IN THOUSANDS) AVAILABLE-FOR-SALE
---------------------------
ESTIMATED
FAIR
COST VALUE
---------------------------
<S> <C> <C>
Due in 90 days or less $ 2,689 $ 2,693
Due after 90 days through one year 2,396 2,320
-------- ---------
$ 5,085 $ 5,013
======== =========
</TABLE>
Certain cash equivalents and all investments have been classified as
available-for-sale securities, and as of March 25, 1995 consisted of
the following.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
MARCH 25, 1995
(IN THOUSANDS) AVAILABLE-FOR-SALE SECURITIES
--------------------------------------------------------
GROSS GROSS ESTIMATED
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------------------------------------------------------
<S> <C> <C> <C> <C>
Municipal securities 4,249 -- 118 4,131
--------- -------- -------- ---------
Total debt securities $ 4,249 $ -- $ 118 $ 4,131
========= ======== ======== =========
</TABLE>
There were no realized gains (losses) on sales of available-for-sale
securities in fiscal 1995. Unrealized losses on available-for-sale
securities are included as a separate component of shareholders' equity
net of a tax benefit of $41,000.
The Company's investments are classified as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
MARCH 25,
1995
<S> <C>
Cash equivalents $ 500
Short-term investments 3,749
---------
$ 4,249
=========
</TABLE>
A-7
<PAGE> 93
Giga-tronics, Incorporated
Notes to Financial Statements
4 SALES TO SIGNIFICANT CUSTOMERS AND EXPORT SALES
Sales on contracts with offices and agencies of the U.S. government
accounted for 31%, 26%, and 27% of the Company's sales in fiscal 1996,
1995 and 1994, respectively. Export sales accounted for 27%, 20%, and
23% of the Company's sales in fiscal 1996, 1995 and 1994, respectively.
The disaggregated listing of export sales by geographical area is shown
below.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
YEARS ENDED MARCH 30, MARCH 25, MARCH 26,
(IN THOUSANDS) 1996 1995 1994
<S> <C> <C> <C>
Americas $ 935 $ 337 $1,013
Europe 2,354 1,441 1,422
Asia 2,833 2,357 1,776
Rest of World 669 323 333
------ ------ -----
$6,791 $4,458 $4,544
====== ====== ======
</TABLE>
5 INVENTORIES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
MARCH 30, MARCH 25,
(IN THOUSANDS) 1996 1995
<S> <C> <C>
Raw materials $ 1,705 $ 2,489
Work-in-progress 2,022 3,347
Finished goods 933 865
-------- ---------
$ 4,660 $ 6,701
======== =========
</TABLE>
6 SELLING EXPENSES
Selling expenses consist primarily of commissions paid to various
marketing agencies. Commission expense totaled $1,598,000, $1,564,000,
and $1,420,000 in fiscal 1996, 1995 and 1994, respectively. Advertising
costs totaled $583,000, $663,000, and $520,000 for fiscal 1996, 1995
and 1994, respectively.
7 INCOME TAXES
Following are the components of the provision for income taxes:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
YEARS ENDED MARCH 30, MARCH 25, MARCH 26,
(IN THOUSANDS) 1996 1995 1994
<S> <C> <C> <C>
Current:
Federal $ 319 $ (307) $ 114
State 91 -- 67
--------- --------- --------
410 (307) 181
Deferred:
Federal (104) (337) (154)
State (5) -- 35
--------- --------- --------
(109) (337) (119)
--------- --------- --------
Provision for income taxes (benefit) $ 301 $ (644) $ 62
========= ========= ========
</TABLE>
A-8
<PAGE> 94
Giga-tronics, Incorporated
Notes to Financial Statements
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
YEARS ENDED MARCH 30, MARCH 25,
(IN THOUSANDS) 1996 1995
<S> <C> <C>
Current tax assets, net $ 1,185 $ 868
Noncurrent tax liabilities, net (223) --
------- -------
Net deferred taxes $ 962 $ 868
======= =======
Future state tax effect $ 29 $ (133)
Allowance for doubtful accounts 96 14
Fixed asset depreciation (223) (91)
Inventory reserves and additional costs capitalized 1,059 936
Inventory purchase accounting difference -- (11)
Deferred revenue 71 58
Alternative minimum federal tax credit carryforward 16 47
Accrued vacation 92 118
Accrued warranty 170 152
Other accrued liabilities 59 130
General business credit carryforward 115 184
State net operating loss carryforward -- 37
Unrealized loss on equity securities 25 --
Valuation allowances (547) (573)
------- -------
$ 962 $ 868
======= =======
</TABLE>
A-9
<PAGE> 95
Giga-tronics, Incorporated
Notes to Financial Statements
Income tax expense differs from the amounts computed by applying the
U.S. federal income tax rate to pretax income as a result of the following:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
YEARS ENDED MARCH 30, MARCH 25, MARCH 26,
(IN THOUSANDS, EXCEPT PERCENTAGES) 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Statutory federal income tax $ 409 34% $(755) (34.0)% $ 99 34.0%
Beginning of year change in deferred
tax asset valuation allowance (26) (2.2) 236 10.6 -- --
State income tax, net of
federal benefit 56 4.7 -- -- 68 23.1
Nontax deductible expenses 20 1.6 34 1.5 -- --
Interest income exempt
from federal tax (52) (4.3) (66) (3.0) (92) (31.4)
Tax credits (106) (8.8) (122) (5.5) (27) (9.3)
Other -- -- 29 1.3 14 6.2
----- ----- ----- ----- ----- -----
Effective income tax $ 301 25% $(644) (29.1)% $ 62 22.6%
===== ===== ===== ===== ===== =====
</TABLE>
8 STOCK OPTION AND EMPLOYEE BENEFIT PLANS
Stock Option Plans In March 1990, the Company established a stock
option plan which provided for the granting of up to 300,000 shares of
common stock at 100% of fair market value at the date of grant, with
each grant needing approval by the Board of Directors of the Company.
Options granted vest in one or more installments as set forth in the
option agreement and must be exercised while the grantee is employed by
the Company or within a certain period after termination of employment.
Options granted to employees shall not have terms in excess of 10 years
from the grant date. In May 1994, the Company amended the 1990 Stock
Option Plan to allow the total number of shares of common stock
available for issuance to be increased by 100,000 shares to 400,000
shares. During fiscal 1995, the Company offered option holders the
opportunity to have outstanding options repriced to current fair value,
with the related vesting period starting over. The Company cancelled
and reissued (repriced) 77,900 options pursuant to the repricing.
Options granted vest in annual installments and must be exercised while
the grantee is employed by the Company, or within a certain period
after termination of employment. During fiscal 1996, 45,000 options
were exercised. As of March 30, 1996, the total number of shares of
common stock available for issuance is 355,000. As of March 30, 1996,
157,900 options for shares have been granted, all of which have a term
of 5 years.
Holders of options may be granted stock appreciation rights
which entitle them to surrender outstanding options for a cash
distribution under certain changes in ownership of the Company, as
defined in the stock option plan.
A-10
<PAGE> 96
Giga-tronics, Incorporated
Notes to Financial Statements
Following is a summary of stock option activity:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
SHARES OPTION PRICE
<S> <C> <C>
Outstanding as of March 27, 1993 361,000 5.50-8.50
Cancelled (41,750) 5.88-8.50
Granted 30,000 6.25
--------
Outstanding as of March 26, 1994 349,250 5.50-8.50
Cancelled (260,900) 5.50-8.50
Granted 124,800 4.00-5.50
--------
Outstanding as of March 25, 1995 213,150 4.00-7.25
Exercised (45,000) 4.00-5.87
Cancelled (37,250) 4.00-7.25
Granted 27,000 7.75
--------
Outstanding as of March 30, 1996 157,900 4.00-7.75
========
</TABLE>
As of March 30, 1996, options to purchase 48,350 shares were
exercisable at prices ranging from $4.00 to $7.00 per share.
401(k) Plan The Company has adopted a 401(k) plan which covers substantially all
employees. Participants may make voluntary contributions to the plan up to 15%
of their defined compensation. The Company is required to match 50% of the first
5% contributed by plan participants. The Company added a discretionary match of
20% of the first 5% contributed by plan participants for calendar 1995.
Participants vest ratably in the Company contribution over a four-year period.
Company contributions to the plan for fiscal 1996, 1995, and 1994 were
approximately $127,000, $101,100, and $86,800, respectively.
A-11
<PAGE> 97
ANNEX A
Giga-tronics, Incorporated
Financial Statements
<PAGE> 98
Giga-tronics, Incorporated
Notes to Financial Statements
9 COMMITMENTS AND CONTINGENCIES
On December 6, 1993, the Company entered into an agreement to lease a
47,300 square foot facility located in San Ramon, California, for a
period of 10 years commencing April 15, 1994, and ending April 14,
2004. On June 22, 1995, the Company renegotiated the lease. The revised
expiration date is December 31, 2006. The facility accommodates all of
the Company's present operations. The future minimum lease payments are
shown below:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
FISCAL YEARS
<S> <C>
1997 $ 561,737
1998 568,368
1999 568,368
2000 625,678
2001 630,888
Remaining six years 3,858,742
------------
$ 6,813,781
============
</TABLE>
The aggregate rental expense was $637,000, $568,000 and $595,000 in
fiscal 1996, 1995 and 1994, respectively.
The Company maintains a $2,000,000 line of credit collateralized by all
of the Company's assets. This line of credit bears interest at prime
plus 2.25% and expires on July 31, 1996. As of March 30, 1996, none of
this line has been utilized.
10 SUBSEQUENT EVENT
On May 2, 1996 the Company entered into an agreement to merge with
ASCOR, Inc., a private company that designs, manufactures and markets a
line of switching and connecting devices. The merger will be accounted
for as a pooling-of-interests. Accordingly the historical accounts of
ASCOR will be combined with those of the Company as if they had always
been merged. The merger is expected to be effective in June 1996. The
merger is subject to final approval of the transaction by Giga-tronics
and ASCOR shareholders.
If the merger had been effective as of March 30, 1996 revenues, net
earnings (loss) and earnings (loss) per share would have been as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Revenues (000's) $ 30,811 $ 25,969 $ 23,467
Net earnings (loss) (000's) 1,865 (867) 1,305
Earnings (loss) per share $ 0.55 $ (0.26) $ 0.40
</TABLE>
A-12
<PAGE> 99
Giga-tronics, Incorporated
Information for Shareholders
<TABLE>
<CAPTION>
Summary of Operations:
- ----------------------------------------------------------------------------------------------------------
53 WEEKS ENDED 52 WEEKS ENDED
-------------- -------------------------------------------------
MARCH 30, MARCH 25, MARCH 26, MARCH 27, MARCH 28,
(IN THOUSANDS) 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Net sales $ 24,898 $ 21,937 $ 19,890 $ 23,085 $ 16,181
Gross profit 9,282 6,918 7,943 9,287 5,503
Operating expenses 8,000 8,804 7,553 7,367 4,847
Interest income, net 323 226 313 244 414
Earnings (loss) before income taxes 1,202 (2,220) 293 1,954 1,070
Net earnings (loss) 901 (1,576) 231 1,327 878
Net earnings (loss) per share $ 0.34 $ (0.61) $ 0.09 $ 0.52 $ 0.34
<CAPTION>
Financial Position:
- ----------------------------------------------------------------------------------------------------------
53 WEEKS ENDED 52 WEEKS ENDED
-------------- -------------------------------------------------
MARCH 30, MARCH 25, MARCH 26, MARCH 27, MARCH 28,
(IN THOUSANDS, EXCEPT RATIO) 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Current ratio 5.3 4.1 4.8 4.9 11.7
Working capital $ 15,830 $ 13,242 $ 14,209 $ 15,370 $ 16,588
Total assets 23,027 22,225 23,580 23,597 19,817
Shareholders' equity 19,101 18,018 19,671 19,440 18,113
Shares of common stock 2,602 2,570 2,570 2,570 2,570
<CAPTION>
Percentage Data:
- ----------------------------------------------------------------------------------------------------------
53 WEEKS ENDED 52 WEEKS ENDED
-------------- -------------------------------------------------
MARCH 30, MARCH 25, MARCH 26, MARCH 27, MARCH 28,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Percent of net sales:
Gross profit 37.3% 31.5% 39.9% 40.2% 34.0%
Operating expenses 32.1 40.1 38.0 31.9 30.0
Interest income, net 1.3 1.0 1.6 1.1 2.6
Earnings (loss) before income taxes 4.8 (10.1) 1.5 8.5 6.6
Net earnings (loss) 3.6 (7.2) 1.2 5.7 5.4
</TABLE>
A-13
<PAGE> 100
Giga-tronics, Incorporated
Information for Shareholders
<TABLE>
<CAPTION>
Quarterly Financial Information (Unaudited)
- ----------------------------------------------------------------------------------------------------
(IN THOUSANDS EXCEPT PER SHARE DATA) 1996
----------------------------------------------------
FIRST SECOND THIRD FOURTH YEAR
<S> <C> <C> <C> <C> <C>
Net sales $ 6,261 $ 6,212 $ 6,171 $ 6,254 $ 24,898
Gross profit 2,285 2,314 2,264 2,419 9,282
Operating expenses 2,112 2,036 1,862 1,990 8,000
Interest income, net 52 76 91 104 323
Earnings before income taxes 157 287 360 398 1,202
Net earnings 118 215 270 298 901
Net earnings per share $ 0.05 $ 0.08 $ 0.10 $ 0.11 $ 0.34
Shares of common stock 2,570 2,570 2,570 2,602 2,602
- ----------------------------------------------------------------------------------------------------
<CAPTION>
(IN THOUSANDS EXCEPT PER SHARE DATA) 1995
----------------------------------------------------
FIRST SECOND THIRD FOURTH YEAR
<S> <C> <C> <C> <C> <C>
Net sales $ 5,547 $ 5,606 $ 5,853 $ 4,931 $ 21,937
Gross profit 2,205 2,103 2,298 312 6,918
Operating expenses 1,954 1,858 2,033 2,959 8,804
Interest income, net 35 52 48 91 226
Earnings (loss) before income taxes 147 157 173 (2,697) (2,220)
Net earnings (loss) 93 102 129 (1,900) (1,576)
Net earnings (loss) per share $ 0.04 $ 0.04 $ 0.05 $ (0.74) $ (0.61)
Shares of common stock 2,570 2,570 2,570 2,570 2,570
</TABLE>
Common Stock Market Prices
The Company's common stock is traded over the counter on NASDAQ/NMS National
Market System using the symbol "GIGA." The number of record holders of the
Company's common stock as of March 30, 1996 exceeded 300. The table below shows
the high and low closing bid quotations for the common stock during the
indicated fiscal periods.
<TABLE>
<CAPTION>
1996 HIGH LOW 1995 HIGH LOW
---------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C>
First Quarter (3/26-6/24) 7-7/8 6 (3/27-6/25) 7-1/4 5-7/8
Second Quarter (6/25-9/30) 10-1/2 6-3/4 (6/26-9/24) 6 4-3/4
Third Quarter (10/1-12/30) 9 6-7/8 (9/25-12/24) 6-3/8 5
Fourth Quarter (12/31-3/30) 8 6-5/8 (12/25-3/25) 6-3/16 4
</TABLE>
A-14
<PAGE> 101
ANNEX B
ASCOR
FINANCIAL
STATEMENTS
<PAGE> 102
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
ASCOR Incorporated:
We have audited the accompanying balance sheets of ASCOR Incorporated (the
Company) as of March 31, 1996, and 1995, and the related statements of
operations, shareholders' deficit and cash flows for the each of the years in
the three-year period ended March 31, 1996. 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.
As discussed in Note 14 to these financial statements, the Company is
expected to merge with Giga-tronics Incorporated, a publicly held company, early
in fiscal year 1997, subject to final approval of the transaction by
Giga-tronics and ASCOR shareholders.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of ASCOR Incorporated
as of March 31, 1996, and 1995, and the results of its operations and its cash
flows for each of the years in the three-year period ended March 31, 1996, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
San Jose, California
April 25, 1996
except as to note 14, which is as of May 2, 1996
B-1
<PAGE> 103
ASCOR, Inc.
Balance Sheets
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
March 31, March 31,
(In thousands, except share data) 1996 1995
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 151 $ 1,065
Investments 300 200
Trade accounts receivable, less allowance for doubtful
accounts of $13 and $0, respectively 943 400
Inventories 1,633 1,704
Prepaid expenses 40 25
Deferred income taxes 120 --
------- -------
Total current assets 3,187 3,394
Property and Equipment
Machinery and equipment 759 520
Office furniture and fixtures 196 162
Leasehold improvements 3 3
------- -------
958 685
Accumulated depreciation and amortization (594) (484)
------- -------
Net property and equipment 364 201
Deposits 6 6
------- -------
Total assets $ 3,557 $ 3,601
======= =======
Liabilities and Shareholders' Equity
Current Liabilities
Line of credit $ 55 $ --
Accounts payable 380 96
Accrued commissions 121 --
Accrued payroll and benefits 192 107
Accrued warranty 100 50
Accrued expenses 176 150
Current obligation under capital lease 10 9
Notes payable 730 811
Customer advances -- 1,453
Income taxes payable 47 20
Redeemable Preferred Stock--Series A 1,101 633
Redeemable Preferred Stock--Series B 998 574
Redeemable Preferred Stock--Series C 499 287
------- -------
Total current liabilities 4,409 4,190
Obligation under capital lease, less current obligation 30 40
------- -------
Total liabilities 4,439 4,230
Commitments and contingencies -- --
Redeemable Preferred Stock
Series A of no par value; 2,553,192 shares
authorized; 2,340,425 shares issued
and outstanding in 1996 and 1995 358 716
Series B of no par value; 2,000,000 shares
authorized; 2,000,000 shares issued
and outstanding in 1996 and 1995 325 649
Series C of no par value; 1,159,091 shares
authorized; 909,091 shares issued
and outstanding in 1996 and 1995 161 323
Shareholders' Deficit
Common stock of no par value;
30,000,000 shares authorized;
3,947,375 shares in 1996 and 3,773,875
shares in 1995 issued and outstanding 86 74
Retained deficit (1,812) (2,391)
------- -------
Total shareholders' deficit (1,726) (2,317)
------- -------
Total liabilities and shareholders' deficit $ 3,557 $ 3,601
======= =======
</TABLE>
See accompanying notes to financial statements.
B-2
<PAGE> 104
ASCOR, Inc.
Statement of Operations
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Years Ended March 31, March 31, March 31,
(In thousands, except per share data) 1996 1995 1994
<S> <C> <C> <C>
Net sales $ 5,913 $ 4,032 $ 3,577
Cost of sales 3,752 2,377 1,974
------- ------- -------
Gross profit 2,161 1,655 1,603
------- ------- -------
Product development expense 214 228 130
Selling, general and administrative expenses 1,159 664 462
------- ------- -------
Operating expenses 1,373 892 592
------- ------- -------
Net operating income 788 763 1,011
Interest income 43 33 --
Interest expense (57) (52) (64)
Other income 6 17 152
------- ------- -------
Earnings before income taxes 780 761 1,099
Provision for income taxes (benefit) (59) 52 25
------- ------- -------
Net earnings $ 839 $ 709 $ 1,074
======= ======= =======
Net earnings per share of common stock $ .15 $ .12 $ .22
======= ======= =======
Weighted average common shares outstanding 3,947 3,774 3,774
======= ======= =======
</TABLE>
See accompanying notes to financial statements.
B-3
<PAGE> 105
ASCOR, Inc.
Statement of Shareholders' Deficit
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
Common Stock
Years Ended ------------ Retained
(In thousands, except share data) Shares Amount (Deficit) Total
<S> <C> <C> <C> <C>
Balances as of March 31, 1993 3,773,875 $ 74 $ (3,654) $ (3,580)
Accruable Dividends -- -- (260) (260)
Net earnings -- -- 1,074 1,074
--------- --------- --------- ---------
Balances as of March 31, 1994 3,773,875 74 (2,840) (2,766)
Accruable Dividends -- -- (260) (260)
Net earnings -- -- 709 709
--------- --------- --------- ---------
Balances as of March 31, 1995 3,773,875 74 (2,391) (2,317)
Exercise of stock options 173,500 12 -- 12
Accruable Dividends -- -- (260) (260)
Net earnings -- -- 839 839
--------- --------- --------- ---------
Balances as of March 31, 1996 3,947,375 $ 86 $ (1,812) $ (1,726)
========= ========= ========= =========
</TABLE>
See accompanying notes to financial statements.
B-4
<PAGE> 106
ASCOR, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Years Ended March 31, March 31, March 31,
1996 1995 1994
<S> <C> <C> <C>
Cash flows from operations:
Net earnings $ 839 $ 709 $ 1,074
Adjustments to reconcile net earnings to net
cash provided by (used in) operations:
Depreciation 114 60 68
Loss on disposal of assets -- -- 3
Deferred income taxes, net (120) -- --
Changes in operating assets and liabilities
Trade accounts receivable (543) (118) 435
Inventories 71 (952) (107)
Prepaid expenses (15) 20 7
Accounts payable 284 18 (119)
Accrued commissions 121 -- --
Accrued payroll and benefits 85 15 (1)
Accrued warranty 50 2 48
Accrued expenses 26 (78) 181
Customer advances (1,453) 732 (188)
Deferred revenue -- -- (316)
Income taxes payable 27 20 --
-------- -------- --------
Net cash (used in) provided by operations (514) 428 1,085
-------- -------- --------
Cash flows from investing activities:
Purchases of investments (100) (200) --
Additions to property and equipment (277) (75) (65)
-------- -------- --------
Net cash used in investing activities (377) (275) (65)
-------- -------- --------
Cash flows from financing activities:
Proceeds from line of credit 55 -- --
Repayment of line of credit -- -- (32)
Principal payments on note payable (81) -- (84)
Principal payment on obligation, capital lease (9) (7) (7)
Proceeds from sale of common stock 12 -- --
-------- -------- --------
Net cash used in financing activities (23) (7) (123)
-------- -------- --------
Increase (decrease) in cash and cash equivalents (914) 146 897
Beginning cash and cash equivalents 1,065 919 22
-------- -------- --------
Ending cash and cash equivalents $ 151 $ 1,065 $ 919
======== ======== ========
Supplementary disclosure of cash flow information:
Cash paid for income taxes $ 36,326 $ 14,700 $ 83,300
======== ======== ========
Cash paid for interest $ 50,169 $ 51,381 $ 67,424
======== ======== ========
Noncash transactions:
Purchases under capital lease obligations -- 55 --
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
B-5
<PAGE> 107
ASCOR, Inc.
Notes to Financial Statements
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Operations The Company designs and manufactures modular,
computer-based automatic test system equipment used for testing
computer assemblies. The Company's customer base is primarily defense
related companies located in the United States.
Use of Estimates Management of the Company has made a number of
estimates and assumptions relating to the reporting of assets and
liabilities and the disclosure of contingent assets and liabilities to
prepare these financial statements in conformity with generally
accepted accounting principles. Actual results could differ from these
estimates.
Revenue Recognition The Company receives advances from its major
customers for the purchase of inventory and funding of production to
fulfill purchase order requirements. Sales are recognized when the
products are shipped. In 1996 there were very few advances from
customers.
Cash Equivalents For purposes of the accompanying statements of cash
flows, the Company considers all highly liquid debt instruments with
maturity dates of 90 days or less from date of purchase to be cash
equivalents.
Investments Investments consist of certificates of deposit with
original maturities greater than 90 days.
Inventories Inventories consist of raw materials and work-in-process
and are stated at the lower of cost or market. Cost is determined on a
first-in, first-out basis.
Property and Equipment Property and equipment are stated at cost.
Depreciation is calculated using the straight-line method over the
estimated useful lives of the respective assets, which range from 3 to
7 years.
Capital Leases Assets and liabilities are recorded at amounts equal to
the lesser of the present value of the minimum lease payments on the
lease obligations or the fair market value of the leased equipment at
the beginning of the lease terms. Interest expensed relating to the
lease liabilities is recorded to effect a constant rate of interest
over the terms of the leases.
Income Taxes The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards (SFAS) No. 109, Accounting
for Income Taxes. SFAS No. 109 prescribes an asset and liability
approach that results in the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that
have been recognized in the Company's financial statements or tax
returns. In estimating future tax consequences, SFAS No. 109 generally
considers all expected future events other than enactment of changes in
tax laws or rates.
Earnings Per Share Earnings per common and common equivalent share is
based on the weighted average number of shares of common stock and
dilutive common stock equivalent shares outstanding during the year.
Net earnings available to common shareholders is reduced by the
accruable, but undeclared, dividends due on Series A, Series B, and
Series C preferred stock.
Product Development Costs Product development costs are charged to
operations in the year incurred.
Concentration of Credit Risk and Financial Instruments The Company
maintains its cash in commercial checking and money market accounts and
certificates of deposit.
Fair Market Value of Financial Instruments The carrying amount for the
Company's investments, trade accounts receivable, accounts payable,
notes payable and other accrued expenses approximates fair market value
because of the short maturity of these financial instruments.
Recent Accounting Pronouncements In October, 1995 the Financial
Accounting Standards Board issued SFAS No. 123, Accounting for
Stock-Based Compensation. SFAS No. 123 will be effective for fiscal
years beginning after December 15, 1995, and will require that the
Company either recognize in its financial statements costs related to
its employee stock-based compensation plans, such as stock option and
stock purchase plans, or make pro forma disclosures of such costs in a
footnote to the financial statements.
B-6
<PAGE> 108
ASCOR, Inc.
Notes to Financial Statements
The Company expects to continue to use the intrinsic value-based method
of Accounting Principles Board Opinion No. 25, as allowed under SFAS
No. 123, to account for all of its employee stock-based compensation
plans. Therefore, in its financial statements for fiscal 1997, the
Company will make the required pro forma disclosures in a footnote to
the financial statements. SFAS No. 123 is not expected to have a
material effect on the Company's results of operations or financial
position.
2 CASH, CASH EQUIVALENTS AND INVESTMENTS
Cash and cash equivalents consist of bank accounts and certificates of
deposit. The certificates of deposits have maturity dates between 90
and 180 days, maturing in April and May 1996, and bear interest from
5.45% to 5.6%. Certificates of deposit which have original maturities
greater than 90 days are considered short-term investments and are
stated at cost which approximates market value.
3 SALES TO SIGNIFICANT CUSTOMERS
The Company had sales to two customers in 1996, three customers in
1995, and three customers in 1994, which amounted to approximately
$3,758,000, $3,027,000, and $2,970,000 of gross revenues for the years
ended March 31, 1996, 1995, and 1994, respectively.
<TABLE>
<CAPTION>
Year Ended March 31, 1996 Government Sales Commercial Sales
------------------------- ---------------- ----------------
<S> <C> <C>
Customer A $2,836,000 --
Customer B 922,000 --
---------- ---------
$3,758,000 --
Year Ended March 31, 1995
-------------------------
Customer A $1,902,000 --
Customer C 642,000 --
Customer D 483,000 --
---------- ---------
$3,027,000 --
Year Ended March 31, 1994
-------------------------
Customer A $1,498,000 --
Customer E 605,000 --
Customer D -- 867,000
---------- ---------
$2,103,000 $867,000
</TABLE>
4 INVENTORIES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
March 31, March 31,
(In thousands) 1996 1995
<S> <C> <C>
Raw materials $ 683 $ 430
Work-in-progress 950 1,274
------ ------
$1,633 $1,704
====== ======
</TABLE>
5 SELLING EXPENSES
Selling expenses consist primarily of commissions paid to various
distributors. Commission expense totaled $237,000, $79,000, and $52,000
in fiscal 1996, 1995 and 1994, respectively. Advertising costs totaled
$42,000, $28,000, and $2,000 for fiscal 1996, 1995 and 1994,
respectively.
6 BANK BORROWINGS
The Company has a $750,000 line of credit agreement with Imperial Bank
that provides for interest at prime plus 1.5% (currently at 9.75%)
expiring on January 31, 1997. Borrowing is secured by accounts
receivable, inventory and equipment. The balance on the credit line is
not to exceed $750,000 or 75% of eligible accounts receivables,
whichever is less. (The effective borrowing limit was approximately
$750,000 on March 31, 1996.) As a condition of the Company's loan with
Imperial Bank, management has agreed to subordinate their present
stockholders' debt to Imperial Bank. As of March 31, 1996, the Company
had $ 55,000 outstanding under the line of credit agreement.
7 NOTES PAYABLE
The Company entered into three bridge financing agreements during the
period of April, 1991 through December, 1991. All notes are due on
demand, provide for interest at 6% per annum and are secured by the
assets of the Company. Unpaid interest on the notes payable was
approximately $46,645 at the March 31, 1996.
The notes payable also offer the holders an option to exercise stock
warrants issued with each note payable which expire through December,
1996. At March 31, 1996, there were 6,096,545 warrants outstanding at
an exercise price of $0.07.
8 OBLIGATION UNDER CAPITAL LEASE
A summary of the obligation under capital lease is as follows:
B-7
<PAGE> 109
ASCOR, Inc.
Notes to Financial Statements
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
March 31, March 31,
1996 1995
<S> <C> <C>
OCE - Bruning, Inc., payable in monthly
installments of $1,077 for the first three
months, then $1,155 for the following
57 months, including interest at 9.75%
per annum through August, 1999, secured
by equipment. $ 40 $ 49
Less current obligation 10 9
----- -----
$ 30 $ 40
===== =====
</TABLE>
The aggregate maturities of the obligation under capital lease for the
next four years are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Fiscal Years
<S> <C>
1997 $ 14
1998 14
1999 14
2000 5
----
47
Less amounts representing interest (7)
----
$ 40
====
</TABLE>
9 INCOME TAXES
Following are the components of the provision for income taxes:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Years Ended March 31, March 31, March 31,
(In thousands) 1996 1995 1994
<S> <C> <C> <C>
Current:
Federal $ 3 $ 9 $ 17
State 58 43 8
----- ----- -----
61 52 25
Deferred:
Federal (107) -- --
State (13) -- --
----- ----- -----
(120) -- --
Provision for income taxes (benefit) $ (59) $ 52 $ 25
===== ===== =====
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities are as follows:
B-8
<PAGE> 110
ASCOR, Inc.
Notes to Financial Statements
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Years Ended March 31, March 31,
(In thousands) 1996 1995
<S> <C> <C>
Current tax assets, net $ 120 $ --
===== =====
Future state tax effect $ 15 $ 15
Allowance for doubtful accounts 6 --
Fixed asset depreciation (59) (36)
Inventory reserves and additional costs capitalized 43 129
Alternative minimum federal tax credit carryforward 29 25
Accrued vacation 26 17
Accrued warranty 43 22
General business credit carryforward 34 34
Federal, net operating loss carryforward 239 434
Valuation allowances (256) (640)
----- -----
$ 120 $ --
===== =====
</TABLE>
Income tax expense differs from the amounts computed by applying the
U.S. federal income tax rate to pretax income as a result of the
following:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Years Ended March 31, March 31, March 31,
(In thousands) 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Statutory federal income tax $ 265 34% $ 259 34% $ 374 34%
Beginning of year change in
deferred tax asset valuation
allowance (355) (45.5) (236) (31.1) (357) (32.4)
State income tax, net of
federal benefit 30 3.8 28 3.7 5 .5
Nontax deductible expenses 1 .2 1 .2 3 .2
----- ----- ----- ----- -----
Effective income tax $ (59) (7.5)% $ 52 6.8% $ 25 2.3%
===== ===== ===== ===== ===== =====
</TABLE>
10 STOCK OPTION AND EMPLOYEE BENEFIT PLANS
Stock Option Plans In June 1988, the Company established a stock option
plan which provided for the granting of up to 1,500,000 shares of
common stock at 100% of fair market value at the date of grant, with
each grant needing approval by the Board of Directors of the Company.
Options granted vest in one or more installments as set forth in the
option agreement and must be exercised while the grantee is employed by
the Company or within a certain period after termination of employment.
Options granted to employees shall not have terms in excess of 10 years
from the grant date. During fiscal 1996, 173,500 options were
exercised. As of March 31,1996, the total number of shares of common
stock available for issuance was 612,625. There were no options granted
or exercised in the 2 year period ended March 31, 1995. As of March 31,
1996, no options for shares were outstanding.
B-9
<PAGE> 111
ASCOR, Inc.
Notes to Financial Statements
Following is a summary of stock option activity:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
Shares Option Price
<S> <C> <C>
Outstanding as of March 31, 1993, 1994, 1995 53,500 $.05 - .07
Granted 120,000 .07
Exercised (173,500) .05 - .07
--------
Outstanding as of March 31, 1996 --
========
</TABLE>
401(k) Plan The Company has adopted a 401(k) plan which covers
substantially all employees. Participants may make voluntary
contributions to the plan up to 15% of their defined compensation. The
Company is required to match 10% of the amount contributed by plan
participants. Participants vest ratably in the Company contribution
over a four-year period. Company contributions to the plan for fiscal
1996,1995 and 1994 were approximately $9,231, $5,586, and $ 0,
respectively.
11 COMMITMENTS AND CONTINGENCIES
The Company leases its facilities under an operating lease agreement
which expires in January, 1997, with a one-year renewal option. Future
minimum lease payments for the operating leases at March 31, 1996 are
as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Fiscal Years
<S> <C>
1997 $ 74
1998 67
------
$ 141
======
</TABLE>
Under the lease, the Company is required to pay monthly operating
expenses in addition to the monthly rent payments. Rent expense,
including related occupancy costs, was approximately $97,757, $93,951,
and $89,620 for the years ended March 31, 1996, 1995 and 1994.
12 REDEEMABLE PREFERRED STOCK
Dividends The holders of each series of preferred stock are entitled to
receive cumulative dividends, out of any available funds, accruing
quarterly beginning September 30, 1992 of $.047 per share of Series A
preferred stock per year, $.05 per share of Series B preferred stock
per year, and $.055 per share of Series C preferred stock per year
payable in preference and priority to any payment of any dividend on
common stock of the Company. As of March 31, 1996, accumulated but
undeclared dividends on cumulative Series A, Series B, and Series C
preferred stock was approximately $910,000. In 1994, 1995 and 1996,
dividends accrued amounted to $260,000 in each year for Series A, B and
C preferred stock.
Conversion Each share of Series A, Series B and Series C preferred
stock is convertible into the number of shares of common stock that
results from dividing the original issue price by the "conversion
price" in effect at that time. As of March 31, 1996, the conversion
price was $0.47, $0.50, and $0.55 for Series A, Series B, and Series C
preferred stock, respectively. Each share of preferred stock will be
automatically converted upon the effectiveness of a registration
statement under the Securities Act of 1933, if the public offering is
at least $2.75 per share and total proceeds equal or exceed $5,000,000.
Voting Rights Each share of preferred stock has voting rights equal to
its common stock equivalents.
Liquidation Preference In the event of liquidation, the holders of the
Series B preferred and Series C preferred are entitled to receive
distributions on a prorata basis, in preference to the holders of the
Series A preferred and the holders of common stock.
Redemption To the extend of legally available funds, the Company shall
redeem on each of September 30, 1995, September 30, 1996, and September
30, 1997 one third of the Series A, Series B and Series C preferred
shares at the original issue price, plus any accrued but unpaid
dividends.
B-10
<PAGE> 112
ASCOR, Inc.
Notes to Financial Statements
Warrants In conjunction with an equipment lease agreement signed in
1990 and a facility lease amendment signed in 1992, warrants to
purchase 68,409 and 53,364 shares of Series C preferred stock were
issued, respectively. These warrants are exercisable at $.55 a share.
The warrants granted in 1992 expired in February, 1995. The remaining
warrants expire in September, 1997.
No preferred stock has been redeemed or converted to common stock.
Additionally, no dividends have been paid or declared by the Company.
<TABLE>
<CAPTION>
Preferred Stock Preferred Stock Preferred Stock
Series A Series B Series C
-------- -------- --------
Shares Amount Shares Amount Shares Amount
<S> <C> <C> <C> <C> <C> <C>
Balances as of March 31, 1993 2,340,425 $ 1,129 2,000,000 $ 1,023 909,091 $ 510
Accruable Dividends 110 100 50
--------- --------- --------- --------- --------- ---------
Balances as of March 31, 1994 2,340,425 1,239 2,000,000 1,123 909,091 560
Accruable Dividends 110 100 50
--------- --------- --------- --------- --------- ---------
Balances as of March 31, 1995 2,340,425 1,349 2,000,000 1,223 909,091 610
Accruable Dividends 110 100 50
--------- --------- --------- --------- --------- ---------
Balances as of March 31, 1996 2,340,425 $ 1,459 2,000,000 $ 1,323 909,091 $ 660
========= ========= ========= ========= ========= =========
Common Stock Issuable If 3,756,334 3,136,319 1,437,656
Preferred Stock ========= ========= =========
Converted as of 3/31/96
</TABLE>
Proposed Merger As a result of the proposed merger, (see footnote 14),
it is expected that the preferred shareholders will exchange their
preferred stock interests for common stock of ASCOR prior to the
Merger, and will subsequently receive Giga-tronics stock in exchange
for these interests. None of the redeemable preferred stock will be
redeemed prior to the Merger. There are no plans to pay the dividends
prior to the Merger, since no dividends have been declared. The
Giga-tronics common stock, which the ASCOR preferred shareholders
will receive, will not include any consideration for undeclared
dividends.
13 RESERVED COMMON STOCK
As of March 31, 1996, the Company has reserved 11,346,061 shares of
common stock for future issuance upon the exercise of stock warrants
and the conversion of preferred stock.
Additionally, in conjunction with bridge financing agreements entered
into during the period of April through December, 1991, warrants to
purchase 6,096,545 shares of common stock were issued. These warrants,
which are exercisable at $.07 per share, expire five years from the
date of issuance between April and December, 1996.
14 OTHER INCOME
Other income of $152K in 1994 was recorded for a technology license
agreement. This agreement is nonrecurring, though there was some
potential of negligible royalty collections through the year 2003.
15 SUBSEQUENT EVENT
On May 2, the Company entered into an agreement to merge with
Giga-tronics Inc., a publicly held company. It is intended that the
transaction will be accounted for as a pooling of interests.
B-11
<PAGE> 113
ANNEX C
REORGANIZATION AGREEMENT
<PAGE> 114
================================================================================
AGREEMENT AND PLAN OF REORGANIZATION
dated as of
May 2, 1996
by and among
GIGA-TRONICS INCORPORATED
ASCOR ACQUISITION CORP.
and
ASCOR, INC.
<PAGE> 115
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
RECITALS ....................................................................... 1
ARTICLE I THE MERGER............................................................. 2
1.01 The Merger..................................................... 2
1.02 Conversion of Shares........................................... 2
1.03 Exchange of Certificates....................................... 3
1.04 Dissenting Shares.............................................. 4
1.05 Fractional Shares.............................................. 5
1.06 ASCOR Stock Options and Warrants............................... 5
1.07 No Registration of Giga-tronics Common Stock................... 6
ARTICLE II THE SURVIVING CORPORATION.............................................. 6
2.01 Certificate of Incorporation................................... 6
2.02 Bylaws......................................................... 6
2.03 Directors and Officers......................................... 6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF ASCOR................................ 7
3.01 Corporate Existence and Power.................................. 7
3.02 Corporate Authorization........................................ 7
3.03 Governmental Authorization..................................... 7
3.04 Non-Contravention.............................................. 8
3.05 Capitalization................................................. 8
3.06 Subsidiaries and Investments................................... 9
3.07 Financial Statements........................................... 9
3.08 Absence of Changes or Events................................... 9
3.09 No Undisclosed Liabilities..................................... 11
3.10 Litigation..................................................... 12
3.11 Taxes.......................................................... 12
3.12 Insurance...................................................... 13
3.13 Employee Benefit Plans; ERISA.................................. 13
3.14 Material Agreements............................................ 13
3.15 Real Property; Leases.......................................... 14
3.16 Title to Assets................................................ 14
3.17 Environmental Matters.......................................... 15
3.18 Intellectual Property.......................................... 16
3.19 No Guaranties.................................................. 16
3.20 Absence of Certain Business Practices.......................... 16
3.21 Compliance with Laws and Other Instruments..................... 16
</TABLE>
i.
<PAGE> 116
<TABLE>
<CAPTION>
PAGE
<S> <C>
3.22 Disclosure Documents........................................... 17
3.23 Tax Matters.................................................... 17
3.24 Accounting Matters............................................. 17
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF GIGA-TRONICS......................... 17
4.01 Corporate Existence and Power.................................. 17
4.02 Corporate Authorization........................................ 18
4.03 Governmental Authorization..................................... 18
4.04 Non-Contravention.............................................. 19
4.05 Capitalization of Giga-tronics................................. 19
4.06 Capitalization of Merger Sub; Subsidiaries..................... 20
4.07 SEC Filings.................................................... 20
4.08 Financial Statements........................................... 21
4.09 Disclosure Documents........................................... 21
4.10 Absence of Certain Changes..................................... 21
4.11 Litigation..................................................... 22
4.12 Advisor's Fees................................................. 22
ARTICLE V COVENANTS OF ASCOR..................................................... 22
5.01 Conduct of ASCOR............................................... 22
5.02 Shareholders' Meeting; Proxy Material.......................... 24
5.03 Access to Financial and Operation Information.................. 24
5.04 Other Offers................................................... 24
5.05 Maintenance of Business........................................ 25
5.06 Compliance with Obligations.................................... 25
5.07 Notices of Certain Events...................................... 25
5.08 Confidentiality................................................ 26
5.09 Compliance with the Securities Act............................. 26
ARTICLE VI COVENANTS OF GIGA-TRONICS AND MERGER SUB............................... 26
6.01 Conduct of Giga-tronics........................................ 26
6.02 Shareholders' Meeting; Proxy Material.......................... 27
6.03 Maintenance of Business........................................ 27
6.04 Compliance with Obligations.................................... 27
6.05 Notices of Certain Events...................................... 28
6.06 Confidentiality................................................ 28
6.07 Obligations of Merger Sub...................................... 28
6.08 Compliance with the Securities Act............................. 29
</TABLE>
ii.
<PAGE> 117
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE VII OTHER COVENANTS OF THE PARTIES......................................... 29
7.01 Advice of Changes.............................................. 29
7.02 Regulatory Approvals........................................... 29
7.03 Actions Contrary to Stated Intent.............................. 29
7.04 Certain Filings................................................ 29
7.05 Communications................................................. 30
7.06 Satisfaction of Conditions Precedent........................... 30
ARTICLE VIII CONDITIONS TO THE MERGER............................................... 30
8.01 Conditions to Obligations of Giga-tronics and Merger Sub....... 30
8.02 Conditions to Obligations of ASCOR............................. 31
8.03 Conditions to Obligations of Each Party........................ 32
ARTICLE IX TERMINATION OF AGREEMENT............................................... 33
9.01 Termination.................................................... 33
9.02 Effect of Termination.......................................... 34
ARTICLE X ADDITIONAL AGREEMENTS OF THE PARTIES................................... 35
10.01 Registration Rights Agreement.................................. 35
ARTICLE XI MISCELLANEOUS.......................................................... 35
11.01 Further Assurances............................................. 35
11.02 Fees and Expenses.............................................. 35
11.03 Nonsurvival of Representations and Warranties.................. 35
11.04 Notices........................................................ 35
11.05 Governing Laws................................................. 36
11.06 Binding upon Successors and Assigns; Assignment................ 36
11.07 Severability................................................... 37
11.08 Entire Agreement............................................... 37
11.09 Other Remedies................................................. 37
11.10 Amendment and Waivers.......................................... 37
11.11 No Waiver...................................................... 37
11.12 Construction of Agreement; Knowledge........................... 37
11.13 Counterparts................................................... 38
GLOSSARY ....................................................................... 40
</TABLE>
iii.
<PAGE> 118
SCHEDULES
ASCOR Disclosure Schedule
Giga-tronics Disclosure Schedule
EXHIBITS
Exhibit 1.01 Form of Agreement of Merger
Exhibit 5.09 Form of ASCOR Affiliates Agreement
Exhibit 6.08 Form of Giga-tronics Affiliates Agreement
Exhibit 10.01 Form of Registration Rights Agreement
iv.
<PAGE> 119
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement")
is entered into as of the 2nd day of May, 1996, by and among Giga-tronics
Incorporated, a California corporation ("Giga-tronics"), ASCOR Acquisition
Corp., a California corporation and a wholly owned subsidiary of Giga-tronics
("Merger Sub"), and ASCOR, Inc., a California corporation ("ASCOR").
RECITALS
A. The Boards of Directors of Giga-tronics, Merger Sub and
ASCOR have each determined to engage in the transactions contemplated hereby,
pursuant to which (i) Merger Sub will merge (the "Merger") with and into ASCOR,
(ii) each share of common stock, no par value, of ASCOR ("ASCOR Common Stock")
and any other shares of ASCOR stock which shall have previously been converted
into Ascor Common Stock (except for shares of ASCOR stock as to which
dissenters' rights, if available, shall have been perfected) shall be converted
into the right to receive a fraction of a share of common stock, no par value,
of Giga-tronics ("Giga-tronics Common Stock"), in the manner and amount herein
described, and (iii) the capital stock of Merger Sub shall be converted into
shares of ASCOR Common Stock, all upon the terms and subject to the conditions
set forth herein.
B. The Board of Directors of ASCOR has approved, and has
resolved to recommend that the shareholders of ASCOR approve, the Merger and
this Agreement.
C. The respective Boards of Directors of Giga-tronics and
Merger Sub have approved the Merger and this Agreement. The Board of Directors
of Giga-tronics has resolved to recommend that the shareholders of Giga-tronics
approve the Merger and this Agreement. Giga-tronics, as the sole shareholder of
Merger Sub, has approved the Merger and this Agreement.
D. The parties intend for the transactions contemplated by
this Agreement to qualify as a tax-free reorganization in accordance with the
provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), and to be accounted for as a pooling of interests transaction.
NOW, THEREFORE, in consideration of the foregoing and the
mutual representations, warranties, covenants and agreements set forth herein,
the parties agree as follows:
1.
<PAGE> 120
ARTICLE I
THE MERGER
SECTION 1.01 THE MERGER.
(a) Subject to the terms and conditions hereof, and in
accordance with the General Corporation Law of California, Merger Sub will be
merged with and into ASCOR (the "Merger"), as soon as practicable following the
satisfaction or waiver of the conditions set forth in Article VI hereof.
Following the Merger, ASCOR shall continue as the surviving corporation (the
"Surviving Corporation"), and the separate corporate existence of Merger Sub
shall cease.
(b) Concurrent with the Closing (as defined in subsection
(d) below), Giga-tronics, and ASCOR and Merger Sub shall file an agreement of
merger in the form attached hereto as Exhibit 1.01 (the "Agreement of Merger")
in the Office of the Secretary of State of the State of California in accordance
with California Law. The Merger shall become effective at such time as the
Agreement of Merger is duly filed in the Office of the Secretary of State of the
State of California (the date of such filing being hereinafter referred to as
the "Effective Date" and the time of such filing being hereinafter referred to
as the "Effective Time").
(c) From and after the Effective Time, the Surviving
Corporation shall possess all the rights, privileges, powers and franchises and
be subject to all of the restrictions, disabilities and duties of ASCOR and
Merger Sub, all as provided under California Law.
(d) The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place on June 27, 1996 at the offices of
Brobeck Phleger & Harrison LLP, One Market Plaza, San Francisco, CA 94105, or at
such other date and place as Giga-tronics and ASCOR may agree. The date of the
Closing determined pursuant to this Section 1.01(d) is referred to as the
"Closing Date."
SECTION 1.02 CONVERSION OF SHARES.
(a) At the Effective Time:
(i) Subject to Section 1.05 hereof, at the
Effective Time each issued and outstanding share of ASCOR Common Stock,
Series A Preferred Stock of ASCOR (the "ASCOR Series A Shares"), Series
B Preferred Stock of ASCOR (the "ASCOR Series B Shares") and Series C
Preferred Stock of ASCOR (the "ASCOR Series C Shares" and collectively
with the ASCOR Series A Shares and the ASCOR Series B Shares, the
"ASCOR Preferred Shares") issued and outstanding immediately prior to
the Effective Time (other than Dissenting ASCOR Shares (as defined in
Section 1.04 hereof)) shall automatically, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into
a right to
2.
<PAGE> 121
receive the number of shares of Giga-tronics Common Stock as is
determined pursuant to this Section 1.02. The ASCOR Common Stock and
ASCOR Preferred Shares are collectively referred to herein as the
"ASCOR Shares." A maximum total of 724,986 shares of Giga-tronics
Common Stock (the "Merger Consideration") will be issued in the Merger,
including (1) shares issuable in respect of any warrants for the
purchase of ASCOR Common Shares ("ASCOR Common Warrants") and warrants
for the purchase of any series of ASCOR preferred stock ("ASCOR
Preferred Warrants") (the ASCOR Common Warrants and the ASCOR Preferred
Warrants are referred to collectively as the "ASCOR Warrants") which
remain outstanding at the Effective Time, (2) shares deemed surrendered
on exercise of any ASCOR Warrant for which a deemed net exercise
pursuant to Section 1.06 below has been made; (3) shares that would
have been issued to holders of Dissenting ASCOR Shares; and (4)
fractional shares that would have been issuable but for Section 1.05
below.
(ii) The Agreement of Merger to be filed shall
contain the final exchange ratio (the "Exchange Ratio") for ASCOR
Shares into Giga-tronics Common Stock and shall be equal to 724,986
divided by the fully diluted number of ASCOR Shares outstanding at the
Effective Time (the "ASCOR Outstanding Equivalent Number"). The ASCOR
Outstanding Equivalent Number shall be equal to the sum of (1) the
number of ASCOR Shares outstanding at the Effective time; plus (2) the
total number of ASCOR Shares which would be issuable on the exercise of
any ASCOR Warrants or ASCOR Options (as such terms are defined below).
All ASCOR Shares shall be exchangeable into Giga-tronics Common Stock
at the same Exchange Ratio.
(b) If between the date of this Agreement and the
Effective Time, the number of outstanding ASCOR Shares or shares of Giga-tronics
Common Stock shall have been changed into a different number of shares or a
different class, by reason of any stock dividend, subdivision, reclassification,
recapitalization, split-up, combination, exchange of shares or the like, the
Exchange Ratio shall be correspondingly adjusted.
SECTION 1.03 EXCHANGE OF CERTIFICATES.
(a) Giga-tronics (or such third party as Giga-tronics
shall appoint) shall act as Exchange Agent (the "Exchange Agent") for delivery
of the Merger Consideration to the ASCOR shareholders and, if applicable, the
cash to which holders of ASCOR shares shall be entitled pursuant to Section 1.05
hereof.
(b) As soon as practicable after the Effective Time, the
Exchange Agent shall mail to each holder of record (other than Giga-tronics or
Merger Sub or any other subsidiary of Giga-tronics) of a certificate or
certificates which immediately prior to the Effective Time represented issued
and outstanding ASCOR Shares (individually a "Certificate" and collectively the
"Certificates"), a letter of transmittal for return to the Exchange Agent which
shall specify that delivery shall be effected, and risk of loss and the
3.
<PAGE> 122
title to the Certificates shall pass, only upon receipt of the Certificates in
exchange for the Merger Consideration. Upon surrender of a Certificate for
cancellation to the Exchange Agent, together with and in accordance with such
letter of transmittal, the holder of such Certificate shall be entitled to
receive in exchange therefor the Merger Consideration that such holder is
entitled to receive pursuant to Section 1.02(a) hereof. Upon such surrender the
Exchange Agent shall promptly deliver such Merger Consideration.
(c) Until surrendered, each Certificate shall be deemed
for all purposes to evidence only the right to receive the Merger Consideration
into which ASCOR Shares formerly represented thereby shall have been converted
pursuant to Section 1.02(a) hereof. No dividends or other distribution declared
after the Effective Time with respect to Giga- tronics Common Stock shall be
paid to the holders of any unsurrendered Certificate until the holder thereof
surrenders such Certificate.
(d) After the Effective Time there shall be no transfers
on the stock transfer books of either ASCOR (the stock transfer books of which
shall be closed) or the Surviving Corporation of ASCOR Shares which were
outstanding immediately prior to the Effective Time. If after the Effective Time
Certificates are presented for transfer to the Exchange Agent, together and in
accordance with the letter of transmittal from the Exchange Agent, they shall be
cancelled and exchanged for the Merger Consideration.
SECTION 1.04 DISSENTING SHARES. ASCOR Shares that have not been voted
for approval of this Agreement and with respect to which a demand for payment
and appraisal shall have been properly made in accordance with Chapter 13 of the
General Corporation Law of California ("Dissenting ASCOR Shares") shall not be
converted into the right to receive the Merger Consideration at or after the
Effective Time but shall be converted into the right to receive such
consideration as may be determined to be due with respect to such Dissenting
ASCOR Shares pursuant to the law of the State of California. If a holder of
Dissenting ASCOR Shares ("Dissenting Shareholder"), shall withdraw his or her
demand for such payment and appraisal or shall become ineligible for such
payment and appraisal, then, as of the Effective Time of the occurrence of such
event of withdrawal or ineligibility, whichever last occurs, such holder's
Dissenting ASCOR Shares shall cease to be Dissenting ASCOR Shares and shall be
converted into the right to receive, and shall be exchangeable for, the Merger
Consideration into which such Dissenting ASCOR Shares would have been converted
pursuant to Section 1.02(a) hereof. ASCOR shall give Giga-tronics prompt notice
of any demand received by ASCOR from a holder of Dissenting ASCOR Shares for
appraisal of ASCOR Shares, and Giga-tronics shall have the right to participate
in all negotiations and proceedings with respect to such demand. ASCOR agrees
that, except with the prior written consent of Giga-tronics, or as required
under the General Corporation Law of California, it will not voluntarily make
any payment with respect to, or settle or offer to settle, any such demand for
appraisal. Each Dissenting Shareholder who, pursuant to the provisions of
Chapter 13 of the General Corporation Law of California, becomes entitled to
payment of the value of shares of ASCOR stock shall receive payment therefor
(but only after the value therefor shall have been agreed upon or finally
determined pursuant to such provisions). Any Merger Consideration which would
have been issuable with respect to Dissenting ASCOR Shares shall be retained by
Giga-tronics.
4.
<PAGE> 123
SECTION 1.05 FRACTIONAL SHARES. Notwithstanding any other provision of
this Agreement to the contrary, no fractional shares of Giga-tronics Common
Stock shall be issued in connection with the Merger. All shares of Giga-tronics
Common Stock to which a holder of ASCOR Shares is entitled immediately prior to
the Effective Time shall be aggregated. If a fractional share results from such
aggregation, in lieu of any such fractional share, each holder of ASCOR Shares
who would otherwise have been entitled to receive a fraction of a share of
Giga-tronics Common Stock upon surrender of Certificates for exchange pursuant
to Section 1.03 shall be entitled to receive from the Exchange Agent a cash
payment equal to such fraction multiplied by the closing sale price per share of
Giga-tronics Common Stock on the last business day on which Giga-tronics Common
Stock is traded on the NASD, prior to the Effective Time.
SECTION 1.06 ASCOR STOCK OPTIONS AND WARRANTS.
(a) Except as described below in Section 1.06(b),
Giga-tronics will not assume any options for the purchase of ASCOR Shares (an
"ASCOR Option") or ASCOR Warrants. At the Effective Time, outstanding ASCOR
Options and ASCOR Warrants shall be deemed exercised for such number of shares
of Giga-tronics Common Stock as would be exchanged in the Merger for the ASCOR
Shares which would have been issued had such ASCOR Options or ASCOR Warrants
been exercised in full and such ASCOR Shares been outstanding immediately prior
to the Effective Time, subject to the following provisions of this Section 1.06.
Such deemed exercise of ASCOR Options and ASCOR Warrants shall be on a "net
exercise" basis. The full number of shares issuable on exercise of such ASCOR
Warrant or ASCOR Option (including such number of shares as are deemed
surrendered in the net exercise) shall be added to the ASCOR Outstanding
Equivalent Number as described in Section 1.02 above. The value of the ASCOR
Shares issuable on the exercise of any ASCOR Warrant or ASCOR Option for
purposes of determining the number of ASCOR Shares to be surrendered in the
deemed net exercise shall be equal to the number of ASCOR Shares issuable on
exercise of such ASCOR Warrant or ASCOR Option, multiplied by the Exchange
Ratio, multiplied by the average closing price of a share of Giga-tronics Stock
on such stock exchange as Giga-tronics Stock is then traded for the five (5)
business days immediately preceding the Closing Date. Shares of Giga-tronics
Common Stock which would otherwise be issuable in respect of the ASCOR Shares
deemed surrendered upon such net exercise shall be retained by Giga-tronics.
(b) Notwithstanding the foregoing, any ASCOR Warrant
which, based upon the foregoing determination of the value of ASCOR Shares
issuable on its exercise, would be "out-of-the-money" shall be assumed by
Giga-tronics. An ASCOR Warrant shall be deemed out-of-the-money if its exercise
price per share is greater than the value of such share as determined in Section
1.06(a) above. Any assumed ASCOR Warrant shall remain outstanding and
exercisable in accordance with its terms except that (1) it shall be exercisable
for such number of shares of Giga-tronics Common Stock as equals the number of
ASCOR Shares for which it was exercisable multiplied by the Exchange Ratio and
(2) the exercise price per share of such warrant shall be the exercise price as
stated on such warrant divided by the Exchange Ratio. The number of shares of
Giga-tronics Common Stock as would be issuable on exercise in full of any ASCOR
Warrants assumed shall be
5.
<PAGE> 124
reserved out of the Merger Consideration. If any ASCOR Warrant assumed by
Giga-tronics pursuant to this Section 1.06 shall expire unexercised in full or
in part, the Giga-tronics Common Stock which would have been issuable on
exercise shall be retained by Giga-tronics and not otherwise issued.
SECTION 1.07 NO REGISTRATION OF GIGA-TRONICS COMMON STOCK. The parties
acknowledge and agree that the Giga-tronics Common Stock to be issued pursuant
to the Merger will be issued pursuant to a transaction not involving a public
offering and therefore will be characterized as "restricted securities" under
federal securities laws. The parties further acknowledge and agree that pursuant
to the Securities Act of 1933, as amended (the "Securities Act") the
Giga-tronics Common Stock so issued may be resold without registration under the
Securities Act only in certain limited circumstances. It is understood that the
Certificates issued pursuant to the Merger will bear the following legend:
"These securities have not been registered under the
Securities Act of 1993, as amended. They may not be sold,
offered for sale, pledged or hypothecated in the absence
of a registration statement in effect with respect to the
securities under such Act or an opinion of counsel
satisfactory to the Company that such registration is not
required or unless sold pursuant to Rule 144 of such Act."
Giga-tronics shall be under no obligation to effect a
registration statement with respect to Giga-tronics Common Stock received in the
Merger other than as required pursuant to the Registration Rights Agreement (as
such term is defined in Section 10.01 below).
ARTICLE II
THE SURVIVING CORPORATION
SECTION 2.01 CERTIFICATE OF INCORPORATION. The Certificate of
Incorporation of the Surviving Corporation shall be amended at the Effective
Time to conform to the Certificate of Incorporation of Merger Sub, as in effect
immediately prior to the Effective Time.
SECTION 2.02 BYLAWS. The Bylaws of Merger Sub, as in effect immediately
prior to the Effective Time, shall be the Bylaws of the Surviving Corporation,
until thereafter amended in accordance with applicable law.
SECTION 2.03 DIRECTORS AND OFFICERS. From and after the Effective Time,
until successors are duly elected or appointed and qualified in accordance with
applicable law, the directors of Merger Sub at the Effective Time shall become
the initial directors of the Surviving Corporation, and the officers of ASCOR at
the Effective Time shall become the initial officers of the Surviving
Corporation.
6.
<PAGE> 125
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ASCOR
Except as disclosed in a document referring specifically to this
Agreement (the "ASCOR Disclosure Schedule") which is delivered by ASCOR to
Giga-tronics no less than five days prior to the execution of this Agreement
(which shall contain appropriate and reasonably detailed references to each
representation and warranty to which any item there disclosed pertains), ASCOR
represents and warrants to Giga-tronics as set forth below:
SECTION 3.01 CORPORATE EXISTENCE AND POWER. ASCOR is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of California, and has all corporate powers and all material governmental
licenses, authorizations, consents and approvals (collectively, "Governmental
Authorizations") required to carry on its business as now conducted. ASCOR is
duly qualified to do business as a foreign corporation and is in good standing
in each jurisdiction where the character of the property owned or leased by it
or the nature of its activities makes such qualification necessary. ASCOR has
delivered to Giga-tronics true and complete copies of ASCOR's Articles of
Incorporation and Bylaws as currently in effect.
SECTION 3.02 CORPORATE AUTHORIZATION. The execution, delivery and
performance by ASCOR of this Agreement, the ASCOR and Giga-tronics Affiliates
Agreements (as defined in Sections 5.09 and 6.08 respectively, hereof) and the
consummation by ASCOR of the transactions contemplated hereby and thereby are
within ASCOR's corporate powers and have been duly authorized by all necessary
corporate action, except for the approval by ASCOR's shareholders in connection
with the consummation of the Merger. The ASCOR and Giga-tronics Affiliates
Agreement are collectively referred to herein as the "ASCOR Ancillary
Agreements." This Agreement and the ASCOR Ancillary Agreements constitute, or
upon execution will constitute, valid and binding agreements of ASCOR,
enforceable against ASCOR in accordance with their respective terms.
SECTION 3.03 GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by ASCOR of this Agreement, the ASCOR Ancillary Agreements and the
Agreement of Merger and the consummation of the Merger by ASCOR require no
action by or in respect of, or filing with, any governmental body, agency,
official or authority other than:
(a) the filing of the Agreement of Merger in accordance
with California Law;
(b) compliance with any applicable requirements of the
Hart-Scott- Rodino Antitrust Improvements Act of 1976 (the "HSR Act");
(c) compliance with any applicable requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations promulgated thereunder;
7.
<PAGE> 126
(d) compliance with any applicable foreign or state
securities or "blue sky" laws; and
(e) such other filings or registrations with, or
authorizations, consents or approvals of, governmental bodies, agencies,
officials or authorities, the failure of which to make or obtain would not
materially adversely affect the ability of ASCOR, Giga-tronics or Merger Sub to
consummate the transactions contemplated hereby and operate their businesses as
heretofore operated.
SECTION 3.04 NON-CONTRAVENTION. The execution, delivery and performance
by ASCOR of this Agreement, the ASCOR Ancillary Agreements and the Certificate
of Merger and the consummation by ASCOR of the transactions contemplated hereby
and thereby do not and will not:
(a) contravene or conflict with the Articles of
Incorporation or Bylaws of ASCOR;
(b) assuming compliance with the matters referred to in
Section 3.03 and assuming the requisite approval of ASCOR's shareholders of the
Merger, contravene or conflict with or constitute a violation of any provision
of any law, regulation, judgment, injunction, order or decree binding upon or
applicable to ASCOR;
(c) conflict with or result in a breach or violation of,
or constitute a default under, or result in the termination or cancellation of,
or right to accelerate, any agreement, contract or other instrument binding upon
ASCOR or any license, franchise, permit or other similar authorization held by
ASCOR; or
(d) result in the creation or imposition of any Lien (as
defined below) on any asset of ASCOR.
For purposes of this Agreement, the term "Lien" means, with respect to any
asset, any mortgage, lien, pledge, charge, security interest or encumbrance of
any kind in respect of such asset.
SECTION 3.05 CAPITALIZATION. The authorized capital stock of ASCOR
consists of 30,000,000 shares of ASCOR Common Stock and 5,712,283 shares of
ASCOR Preferred Stock. As of the date hereof, there are outstanding:
(a) 3,947,375 shares of ASCOR Common Stock;
(b) 2,340,425 ASCOR Series A Shares, 2,000,000 ASCOR
Series B Shares and 909,091 ASCOR Series C Shares;
(c) ASCOR Preferred Warrants for the purchase of 68,409
ASCOR Preferred Shares and ASCOR Common Warrants for the purchase of 5,119,395
shares of
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ASCOR Common Stock. The exercise prices of said warrants is $0.55 per warrant
for the ASCOR Preferred Warrants and $0.07 per warrant for the ASCOR Common
Warrants;
(d) No ASCOR Options for the purchase of any ASCOR Shares;
and
5,119,395 shares of ASCOR Common Stock reserved for
issuance upon exercise of outstanding ASCOR Warrants and ASCOR Options. All
outstanding ASCOR Common Shares have been duly authorized and validly issued and
are fully paid and nonassessable and free from any preemptive rights. Except as
set forth in this Section and as otherwise contemplated by this Agreement, there
are outstanding (i) no shares of capital stock or other voting securities of
ASCOR, (ii) no securities of ASCOR convertible into or exchangeable for shares
of capital stock or voting securities of ASCOR and (iii) no options or other
rights to acquire from ASCOR, and no obligation of ASCOR to issue, any capital
stock, voting securities or securities convertible into or exchangeable for
capital stock or other voting securities of ASCOR (the items in clauses (i),
(ii) and (iii) being referred to collectively as the "ASCOR Securities"). There
are no outstanding obligations of ASCOR to repurchase, redeem or otherwise
acquire any ASCOR Securities. No holder of ASCOR Securities has, as of the date
hereof, any contractual right to include any such securities in any registration
statement proposed to be filed by Giga-tronics under the Securities Act.
SECTION 3.06 SUBSIDIARIES AND INVESTMENTS. ASCOR does not own, directly
or indirectly, any outstanding capital stock or equity interest in any
corporation, partnership, joint venture or other entity.
SECTION 3.07 FINANCIAL STATEMENTS. ASCOR has delivered to Purchaser
copies (initialled by ASCOR's Secretary and identified with a reference to this
Section of this Agreement) of financial statements (hereinafter collectively
called the "Financial Statements"), all of which are complete and correct, have
been prepared in accordance with generally accepted accounting principles
consistently applied and maintained throughout the periods indicated and fairly
present the financial condition of ASCOR as at their respective dates and the
results of its operations for the periods covered thereby, as follows: balance
sheets of ASCOR as at March 30, 1996 and March 25, 1995 and March 26, 1994 and
the related audited statements of earnings and cash flows for the years then
ended, audited by KPMG Peat Marwick LLP, independent certified public
accountants. The audited balance sheet of ASCOR as at March 30, 1996 (the "ASCOR
Balance Sheet Date") is referred to herein as the "ASCOR Balance Sheet."
Such statements of earnings do not contain any items of special or nonrecurring
income or any other income not earned in the ordinary course of business except
as expressly specified therein, and such interim financial statements include
all adjustments, which consist only of normal recurring accruals, necessary for
such fair presentation.
SECTION 3.08 ABSENCE OF CHANGES OR EVENTS. Since the ASCOR Balance
Sheet Date ASCOR has conducted its business only in the ordinary course
consistent with its prior practices and has not:
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(a) incurred any obligation or liability, absolute,
accrued, contingent or otherwise, whether due or to become due, except current
liabilities for trade or business obligations incurred in connection with the
purchase of goods or services in the ordinary course of business and consistent
with its prior practice, none of which liabilities, in any case or in the
aggregate, materially and adversely affects the business, liabilities or
financial condition of ASCOR;
(b) discharged or satisfied any lien, charge or
encumbrance other than those then required to be discharged or satisfied, or
paid any obligation or liability, absolute, accrued, contingent or otherwise,
whether due or to become due, other than current liabilities shown on the
Balance Sheet and current liabilities incurred since the Balance Sheet Date in
the ordinary course of business and consistent with its prior practice;
(c) declared or made any payment of dividends or other
distribution to its shareholders or upon or in respect of any shares of its
capital stock, or purchased, retired or redeemed, or obligated itself to
purchase, retire or redeem, any of its shares of capital stock or other
securities;
(d) mortgaged, pledged or subjected to lien, charge,
security interest or any other encumbrance or restriction any of its property,
business or assets, tangible or intangible;
(e) sold, transferred, leased to others or otherwise
disposed of any of its assets, except for inventory sold in the ordinary course
of business, or cancelled or compromised any debt or claim, or waived or
released any right of substantial value;
(f) received any notice of termination of any contract,
lease or other agreement or suffered any damage, destruction or loss (whether or
not covered by insurance) which in any case or in the aggregate, has had a
materially adverse effect on the assets, operations or prospects of ASCOR;
(g) encountered any labor union organizing activity, had
any actual or threatened employee strikes, work stoppages, slow-downs or
lock-outs, or had any material change in its relations with its employees,
agents, customers or suppliers or with any governmental authorities or
self-regulatory organizations;
(h) transferred or granted any rights under, or entered
into any settlement regarding the breach or infringement of, any United States
or foreign license, patent, copyright, trademark, trade name, invention or
similar rights, or modified any existing rights with respect thereto;
(i) made any change in the rate of compensation,
commission, bonus or other direct or indirect remuneration payable, or paid or
agreed or orally promised to pay, conditionally or otherwise, any bonus, extra
compensation, pension or severance or vacation pay, to any shareholder,
director, officer, employee, salesman, distributor or agent of ASCOR;
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(j) issued or sold any shares of its capital stock or
other securities, or issued, granted or sold any options, rights or warrants
with respect thereto, or acquired any capital stock or other securities of any
corporation or any interest in any business enterprise, or otherwise made any
loan or advance to or investment in any person, firm or corporation;
(k) made any capital expenditures or capital additions or
betterments in excess of an aggregate of $50,000;
(l) changed its banking or safe deposit arrangements;
(m) instituted, settled or agreed to settle any
litigation, action or proceeding before any court or governmental body relating
to ASCOR or its property;
(n) failed to replenish its inventories and supplies in a
normal and customary manner consistent with its prior practice and prudent
business practices prevailing in the industry, or made any purchase commitment
in excess of the normal, ordinary and usual requirements of its business or at
any price in excess of the then current market price or upon terms and
conditions more onerous than those usual and customary in the industry, or made
any change in its selling, pricing, advertising or personnel practices
inconsistent with its prior practice and prudent business practices prevailing
in the industry;
(o) suffered any change, event or condition which, in any
case or in the aggregate, has had or may have a materially adverse effect on
ASCOR's condition (financial or otherwise), properties, assets, liabilities,
operations or prospects, including, without limitation, any change in ASCOR's
revenues, costs, backlog or relations with its employees, agents, customers, or
suppliers;
(p) entered into any transaction, contract or commitment
other than in the ordinary course of business or paid or agreed to pay any
legal, accounting, brokerage, finder's fee, taxes or other expenses in
connection with, or incurred any severance pay obligations by reason of, this
Agreement or the transactions contemplated hereby; or
(q) entered into any agreement or made any commitment to
take any of the types of action described in subparagraphs (a) through (p)
above.
SECTION 3.09 NO UNDISCLOSED LIABILITIES. There are no liabilities of
ASCOR or any of its Subsidiaries, including contingent liabilities, of the type
required to be reflected in financial statements (including the notes thereto)
under generally accepted accounting principles that are material to ASCOR, other
than:
(a) liabilities disclosed or provided for in the ASCOR
Balance Sheet (including the notes thereto);
(b) liabilities incurred in the ordinary course of
business consistent with past practice since the ASCOR Balance Sheet Date and
which do not exceed $100,000 in the aggregate;
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(c) liabilities incurred other than in the ordinary course
of business and which do not exceed $25,000 in the aggregate; and
(d) liabilities under this Agreement.
SECTION 3.10 LITIGATION. There is no action, suit, proceeding, claim or
investigation pending or, to the best of ASCOR's knowledge, overtly threatened,
against ASCOR or any of its assets or against or involving any of its officers,
directors or employees in connection with the business or affairs of ASCOR,
including, without limitation, any claims for indemnification arising under any
agreement to which ASCOR is a party, which could, individually or in the
aggregate, have a Material Adverse Effect on ASCOR or which in any manner
challenges or seeks to prevent, enjoin, alter or materially delay any of the
transactions contemplated hereby. ASCOR is not subject to or in default with
respect to any writ, order, judgment, injunction or decree, which would have a
Material Adverse Effect on ASCOR.
SECTION 3.11 TAXES.
(a) For purposes of this Agreement, "Tax" or "Taxes" means
any and all taxes, fees, levies, duties, tariffs, imposts, and other charges of
any kind (together with any and all interest, penalties, additions to tax and
additional amounts imposed with respect thereto) imposed by any governmental or
taxing authority including, without limitation: taxes or other charges on or
with respect to income, franchises, windfall or other profits, gross receipts,
property, sales, use, capital stock, payroll, employment, social security,
workers' compensation, unemployment compensation, or net worth; taxes or other
charges in the nature of excise, withholding, ad valorem, stamp, transfer, value
added, or gains taxes; license, registration and documentation fees; and
customs' duties, tariffs, and similar charges.
(b) Except as described in Schedule 3.11 of the ASCOR
Disclosure Schedule, (i) ASCOR has filed all federal, state, local and foreign
tax returns and reports required to be filed by it and has paid and discharged
all Taxes shown as due thereon and has paid all of such other Taxes as are due,
other than (a) such filings, payments or other occurrences that would not have a
Material Adverse Effect; (ii) neither the IRS nor any other taxing authority or
agency, domestic or foreign, is now asserting or, to the best knowledge of ASCOR
after due inquiry, threatening to assert against ASCOR any deficiency or claim
for additional Taxes or interest thereon or penalties in connection therewith;
(iii) ASCOR has not granted any waiver of any statute of limitations with
respect to, or any extension of a period for the assessment of, any federal,
state, county, municipal or foreign income Tax; (iv) the accruals and reserves
for Taxes reflected in the ASCOR Balance Sheet and the most recent quarterly
financial statements are adequate to cover all Taxes accruable through the date
thereof (including interest and penalties, if any, thereon) in accordance with
generally accepted accounting principals; (v) ASCOR has not made an election
under Section 341(f) of the Code; (vi) ASCOR has withheld or collected and paid
over to the appropriate governmental authorities or is properly holding for such
payment all Taxes required by law to be withheld or collected, except for such
failures to have so withheld or collected and paid over or to be so holding for
payment which would not have a Material
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Adverse Effect and (vii) there are no material liens for Taxes upon the assets
of ASCOR, other than liens for Taxes that are being contested in good faith by
appropriate proceedings.
(c) ASCOR is not party to or bound by, nor has any
obligation under any Tax sharing, Tax indemnity or Tax allocation or similar
agreement.
SECTION 3.12 INSURANCE. ASCOR maintains the policies of fire,
liability, use and occupancy and other forms of insurance covering its
properties and businesses set forth in the ASCOR Disclosure Schedule. Such
policies are in full force and effect.
SECTION 3.13 EMPLOYEE BENEFIT PLANS; ERISA. Schedule 3.13 of the ASCOR
Disclosure Schedule lists (i) all the employee benefit plans, programs and
arrangements maintained for the benefit of any current or former employee,
officer or director of ASCOR (the "Plans") and (ii) all contracts and agreements
relating to employment that provide for annual compensation in excess of $75,000
and all severance agreements, with any of the directors, officers or employees
of ASCOR (other than, in each case, any such contract or agreement that is
terminable by ASCOR at will without penalty or other adverse consequence) (the
"Employment Contracts"). Giga-tronics has been furnished with a copy of each
Plan, any summary plan descriptions, annual reports, actuarial reports,
registration statements or other securities law filings and determination
letters produced or filed with respect thereto, and each Employment Contract.
Except as set forth in Section 3.13 of the ASCOR Disclosure Schedule: (i) none
of the Plans is a multiemployer plan within the meaning of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"); (ii) none of the
Plans promises or provides retiree medical or life insurance benefits to any
person; (iii) each Plan intended to be qualified under Section 401(a) of the
Code has received a favorable determination letter from the Internal Revenue
Service (the "IRS") that it is so qualified and nothing has occurred since the
date of such letter to affect the qualified status of such Plan; (iv) none of
the Plans promises or provides severance benefits or benefits contingent upon a
change in ownership or control, within the meaning of Section 280G of the Code;
(v) each Plan has been operated in all material respects in accordance with its
terms and the requirements of applicable law; (vi) no Plan is or has been
covered by Title IV of ERISA or Section 412 of the Code; (vii) ASCOR has not
incurred any direct or indirect liability under, arising out of or by operation
of Title IV of ERISA in connection with the termination of, or withdrawal from,
any Plan or other retirement plan or arrangement, and no fact or event exists
that could give rise to any such liability; and (viii) ASCOR has not incurred
any liability under, and has complied in all respects with, the Worker
Adjustment Retraining Notification Act, and no fact or event exists that could
give rise to liability under such act.
SECTION 3.14 MATERIAL AGREEMENTS.
(a) The ASCOR Disclosure Schedule includes a complete and
accurate list of all contracts, agreements, leases and instruments to which
ASCOR is a party or by which it or its properties or assets are bound which
individually involve payments or receipts in excess of $25,000, inclusive of
contracts entered into with customers and suppliers in the ordinary course of
business, or that pertain to employment or severance benefits for any
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officer, director or employee of ASCOR, whether written or oral (each a
"Material ASCOR Agreement").
(b) Neither ASCOR nor, to the knowledge of ASCOR, any
other party is in default under any Material ASCOR Agreement and no event has
occurred which (after notice or lapse of time or both) would become a breach or
default under, or would permit modification, cancellation, acceleration or
termination of any Material ASCOR Agreement or result in the creation of any
security interest upon, or any person obtaining any right to acquire, any
properties, assets or rights of ASCOR.
(c) Each Material ASCOR Agreement is in full force and
effect and is valid and legally binding, there are, to the knowledge of ASCOR,
no unresolved disputes involving or with respect to any Material ASCOR
Agreement, and no party to a Material ASCOR Agreement has advised ASCOR that it
intends either to terminate a Material ASCOR Agreement or to refuse to renew a
Material ASCOR Agreement upon the expiration of the term thereof.
(d) ASCOR is not in violation of, or in default with
respect to, any term of its Certificate of Incorporation or any material term of
its Bylaws.
SECTION 3.15 REAL PROPERTY; LEASES.
(a) The ASCOR Disclosure Schedule includes a correct and
complete list of all items of real property, including leased property, and any
material buildings, structures and improvements located thereon or therein,
which are owned or leased by ASCOR.
(b) To ASCOR's knowledge, with respect to any real
property of ASCOR, including any leased property, and any material buildings,
structures and improvements located thereon or therein, such buildings, fixtures
and improvements, and the present use thereof, are not the subject of any
official complaint or notice of violation of any applicable zoning ordinance,
building code or environmental laws, and such premises are not affected or
threatened by any condemnation or eminent domain proceeding.
(c) All leases of real property and all material leases of
personal property by ASCOR are in full force and effect and, to ASCOR's
knowledge, there exists no default on the part of ASCOR which would interfere
with the use made and proposed to be made of such real and personal property,
and, except for leases of personal property terminated in the ordinary course of
business, upon consummation of the Merger, will continue to entitle ASCOR to the
use and possession of the real or personal property purported to be covered
thereby for the terms specified in such leases and for the purposes for which
such real or personal property is now used.
SECTION 3.16 TITLE TO ASSETS. ASCOR has good, marketable and insurable
title to all the properties and assets it owns or uses in its business or
purports to own, including, without limitation, those reflected in its books and
records and in the Balance Sheet (except
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inventory sold after the Balance Sheet Date in the ordinary course of business).
None of such properties and assets are subject to any mortgage, pledge, lien,
charge, security interest, encumbrance, restriction, lease, license, easement,
liability or adverse claim of any nature whatsoever, except (i) mortgages or
security interests shown on the Balance Sheet as securing specific liabilities
or obligations or (ii) those imperfections of title and encumbrances, if any,
which, individually or in the aggregate, (A) are not substantial in character,
amount or extent and do not materially detract from the value of the properties
subject thereto, (B) do not interfere with either the present and continued use
of such property or the conduct of ASCOR's normal operations and (C) have arisen
only in the ordinary course of business. All of the properties and assets owned,
leased or used by ASCOR are in good operating condition and repair, are suitable
for the purposes used, are adequate and sufficient for all current operations of
ASCOR and are directly related to the business of ASCOR.
SECTION 3.17 ENVIRONMENTAL MATTERS.
(a) For purposes of this Agreement, the following terms
shall have the following meanings: (i) "Hazardous Substances" means (A) those
substances defined in or regulated under the following United States federal
statutes and their state or foreign counterparts, as each may be amended from
time to time, and all regulations thereunder: the Hazardous Materials
Transportation Act, the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability Act, the Clean
Water Act, the Safe Drinking Water Act, the Atomic Energy Act, the Federal
Insecticide, Fungicide, and Rodenticide Act and the Clean Air Act; (B) petroleum
and petroleum products including crude oil and any fractions thereof; (C)
natural gas, synthetic gas, and any mixtures thereof; (D) radon; (E) asbestos;
(F) any other pollutant or contaminant; and (G) any substance with respect to
which a federal, state or local agency requires environmental investigation,
monitoring, reporting or remediation; and (ii) "Environmental Laws" means any
United States or foreign, federal, state or local law relating to (A) releases
or threatened releases of Hazardous Substances or materials containing Hazardous
Substances; (B) the manufacture, handling, transport, use, treatment, storage or
disposal of Hazardous Substances or materials containing Hazardous Substances;
or (C) otherwise relating to pollution of the environment or the protection of
human health.
(b) Except as would not have a Material Adverse Effect:
(i) ASCOR has not violated and is not in violation of any Environmental law;
(ii) there has been no contamination, disposal, spilling, dumping, incineration,
discharge, storage, treatment or handling of any Hazardous Substance, on or from
any of the properties owned or leased by ASCOR (including, without limitation,
soils and surface and ground waters); (iii) ASCOR is not liable for any off-site
contamination; (iv) ASCOR is not liable under any Environmental Law; (v) ASCOR
has all permits, licenses and other authorizations required under any
Environmental Law ("Environmental Permits"); (vi) ASCOR has been and is in
compliance with its Environmental Permits; and (vii) there are no pending, or,
to the best knowledge of ASCOR after due inquiry, threatened claims against
ASCOR relating to any Environmental Law or Hazardous Substance.
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SECTION 3.18 INTELLECTUAL PROPERTY. No claim is pending or, to the
knowledge of ASCOR, threatened to the effect that the present or past operations
of ASCOR infringes upon or conflicts with the rights of others with respect to
any intellectual property (including, without limitation, licenses, patents,
patent rights, patent applications, trademarks, trademark applications, trade
names, copyrights, drawings, trade secrets, know-how and computer software)
necessary to permit ASCOR to conduct its business as now operated (the "ASCOR
Intellectual Property"), except as disclosed in the ASCOR Disclosure Schedule,
no claim is pending or, to the best knowledge of ASCOR, threatened to the effect
that any of the ASCOR Intellectual Property is invalid or unenforceable. ASCOR
has provided Giga-tronics with a list of all licenses, patents, patent rights,
patent applications, trademarks, trademark applications, trade names, copyrights
and service marks of ASCOR and each of its subsidiaries. Except as set forth in
the ASCOR Disclosure Schedule, no contract, agreement or understanding between
ASCOR or any of its subsidiaries and any other party exists which would impede
or prevent the continued use by ASCOR and its subsidiaries of the entire right,
title and interest of ASCOR and its subsidiaries in and to the ASCOR
Intellectual Property.
SECTION 3.19 NO GUARANTIES. None of the obligations or liabilities of
ASCOR is guaranteed by, or subject to a similar contingent liability of, any
other person, firm or corporation, nor has ASCOR guaranteed, or otherwise become
contingently liable for, the obligations or liabilities of any other person,
firm or corporation.
SECTION 3.20 ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither ASCOR nor
any officer, employee or agent of ASCOR, nor any other person acting on its
behalf, has, directly or indirectly, within the past five years given or agreed
to give any gift or similar benefit to any customer, supplier, governmental
employee or other person who is or may be in a position to help or hinder the
business of ASCOR (or assist ASCOR in connection with any actual or proposed
transaction) which (a) might subject ASCOR to any damage or penalty in any
civil, criminal or governmental litigation or proceeding, (b) if not given in
the past, might have had an adverse effect on the assets, business or operations
of ASCOR as reflected in the Financial Statements or (c) if not continued in the
future, might adversely affect ASCOR's assets, business, operations or prospects
or which might subject ASCOR to suit or penalty in any private or governmental
litigation or proceeding.
SECTION 3.21 COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS. ASCOR had
complied with all existing laws, rules, regulations, ordinances, orders,
judgments and decrees now applicable to its business, properties or operations
as presently conducted. Neither the ownership nor use of ASCOR's properties nor
the conduct of its business conflicts with the rights of any other person, firm
or corporation or violates, or with or without the giving of notice or the
passage of time, or both, will violate, conflict with or result in a default,
right to accelerate or loss of rights under, any terms or provisions of its
certificate of incorporation or by-laws as presently in effect, or any lien,
encumbrance, mortgage, deed of trust, lease, license, agreement, understanding,
law, ordinance, rule or regulation, or any order, judgment or decree to which
ASCOR is a party or by which it may be bound or affected. Neither ASCOR nor any
Shareholder is aware of any proposed laws, rules, regulations, ordinances,
orders, judgments, decrees, governmental takings, condemnations
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or other proceedings which would be applicable to its business, operations or
properties and which might adversely affect its properties, assets, liabilities,
operations or prospects, either before or after the Closing.
SECTION 3.22 DISCLOSURE DOCUMENTS. None of the information supplied or
to be supplied by ASCOR for inclusion in the proxy statement relating to the
meeting of Giga-tronics's shareholders to be held in connection with the Merger
(the "Proxy Statement") at the time of mailing of the Proxy Statement to
shareholders of Giga-tronics, and at the time of the meeting of Giga-tronics
shareholders to be held in connection with the Merger, contain any untrue
statement of a material fact or omits or will omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Proxy Statement will comply as to form in all material respects
with the provisions of the Exchange Act and the rules and regulations
thereunder, except that no representation is made by ASCOR with respect to
information supplied by Giga-tronics or Merger Sub for inclusion therein.
SECTION 3.23 TAX MATTERS. Neither ASCOR nor any of its affiliates has
taken or agreed to take any action that would prevent the Merger from being
effected as a pooling of interests or would prevent the Merger from constituting
a transaction qualifying under Section 368(a) of the Code. Neither ASCOR nor any
of its affiliates or agents is aware of any agreement, plan or other
circumstances that would prevent the Merger from qualifying under Section 368(a)
of the Code and to their best knowledge after due inquiry, the Merger will so
qualify.
SECTION 3.24 ACCOUNTING MATTERS. Schedule 3.24 of the ASCOR Disclosure
Schedule sets forth all persons who, as of the date of this Agreement, may be
deemed to be affiliates of ASCOR under Rule 145 of the Securities Act or
otherwise under applicable SEC accounting releases with respect to
pooling-of-interests accounting treatment. Prior to the date hereof, ASCOR has
advised such persons of the resale restrictions imposed by applicable securities
Laws and required to cause the Merger to qualify for pooling-of-interests
accounting treatment.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF GIGA-TRONICS
Except as disclosed in a document referring specifically to this
Agreement (the "Giga- tronics Disclosure Schedule) which is delivered by
Giga-tronics to ASCOR concurrently with the execution of this Agreement or as
disclosed in public filings made by Giga-tronics with the SEC prior to the date
hereof, Giga-tronics represents and warrants to ASCOR as set forth below:
SECTION 4.01 CORPORATE EXISTENCE AND POWER. Giga-tronics and Merger Sub
are corporations duly incorporated, validly existing and in good standing under
the laws of the State of California. Each of Giga-tronics and Merger Sub has all
corporate powers and all
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material Governmental Authorizations required to carry on its business as now
conducted. Giga-tronics is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the character of
the property owned or leased by it or the nature of its activities makes such
qualification necessary. Giga-tronics has delivered to ASCOR true and complete
copies of Giga-tronics's Articles of Incorporation and Bylaws and Merger Sub's
Articles of Incorporation and Bylaws, each as currently in effect.
SECTION 4.02 CORPORATE AUTHORIZATION. The execution, delivery and
performance by Giga-tronics and Merger Sub of this Agreement, the ASCOR and the
Giga-tronics Affiliates Agreements and the consummation by Giga-tronics and
Merger Sub of the transactions contemplated hereby and thereby are within the
corporate powers of Giga-tronics and Merger Sub and have been duly authorized
by all necessary corporate action. The ASCOR and Giga-tronics Affiliates
Agreements are collectively referred to herein as the "Giga-tronics Ancillary
Agreements." This Agreement and the Giga-tronics Ancillary Agreements
constitute, or upon execution will constitute, valid and binding agreements of
Giga-tronics and Merger Sub, enforceable in each case against each in accordance
with their respective terms.
SECTION 4.03 GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by Giga-tronics and Merger Sub of this Agreement and the
Giga-tronics Ancillary Agreements and the consummation of the Merger by
Giga-tronics and Merger Sub, require no action by or in respect of, or filing
with, any governmental body, agency, official or authority other than:
(a) the filing of an agreement of merger in accordance
with California Law;
(b) compliance with any applicable requirements of the HSR
Act;
(c) compliance with any applicable requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations promulgated thereunder;
(d) compliance with any applicable requirements of the
Securities Act and the rules and regulations promulgated thereunder;
(e) compliance with any applicable foreign or state
securities or "blue sky" laws; and
(f) such other filings or registrations with, or
authorizations, consents or approvals of, governmental bodies, agencies,
officials or authorities, the failure of which to make or obtain would not
materially adversely affect the ability of ASCOR, Giga-tronics or Merger Sub to
consummate the transactions contemplated hereby and operate their businesses as
heretofore operated.
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SECTION 4.04 NON-CONTRAVENTION. The execution, delivery and performance
by Giga-tronics and Merger Sub of this Agreement and the Giga-tronics Ancillary
Agreements and the consummation by Giga-tronics and Merger Sub of the
transactions contemplated hereby and thereby do not and will not:
(a) contravene or conflict with the respective Articles of
Incorporation or Bylaws of Giga-tronics or Merger Sub;
(b) assuming compliance with the matters referred to in
Section 4.03, contravene or conflict with or constitute a violation of any
provision of any law, regulation, judgment, injunction, order or decree binding
upon or applicable to Giga-tronics, Merger Sub or any Subsidiary of
Giga-tronics;
(c) conflict with or result in a breach or violation of,
or constitute a default under, or result in the termination or cancellation of,
or right to accelerate, any agreement, contract or other instrument binding upon
Giga-tronics or Merger Sub or any such Subsidiary or any material license,
franchise, permit or other similar authorization held by Giga-tronics, Merger
Sub or any such Subsidiary; or
(d) result in the creation or imposition of any Lien on
any asset of Giga-tronics, Merger Sub or any Subsidiary of Giga-tronics.
SECTION 4.05 CAPITALIZATION OF GIGA-TRONICS.
(a) The authorized capital stock of Giga-tronics consists
of 40,000,000 shares of Giga-tronics Common Stock and 1,000,000 shares of
preferred stock. As of the date hereof, there were outstanding:
(i) 2,603,420 shares of Giga-tronics Common Stock;
and
(ii) employee and director stock options to
purchase an aggregate of 156,150 shares of Giga-tronics Common Stock.
Giga-tronics has authorized the issuance of employee rights to purchase 400,000
shares of Giga-tronics Common Stock under Giga-tronics's 1990 Restated Stock
Option Plan (the "Giga-tronics Stock Option Plan"). All outstanding shares of
Giga-tronics Common Stock have been duly authorized and validly issued and are
fully paid and nonassessable and free from any preemptive rights. Except as set
forth in this Section and as otherwise contemplated by this Agreement, there are
outstanding (i) no shares of capital stock or other voting securities of
Giga-tronics, (ii) no securities of Giga-tronics convertible into or
exchangeable for shares of capital stock or voting securities of Giga-tronics
and (iii) no options or other rights to acquire from Giga-tronics, and no
obligation of Giga-tronics to issue, any capital stock, voting securities or
securities convertible into or exchangeable for capital stock or other voting
securities of Giga-tronics (the items in clauses (i), (ii) and (iii) being
referred to collectively as the "Giga-tronics Securities"). There are no
outstanding obligations of Giga-tronics or any of its Subsidiaries to
repurchase, redeem or otherwise
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acquire any Giga-tronics Securities. No holder of Giga-tronics Securities has,
as of the date hereof, any contractual right to include any such securities in
any registration statement proposed to be filed by Giga-tronics under the
Securities Act.
(b) All shares of Giga-tronics Common Stock issued in the
Merger shall, upon issuance, be fully paid, validly issued and nonassessable.
Giga-tronics has reserved sufficient shares of Giga-tronics Common Stock for
issuance in the Merger based on the number of ASCOR Shares outstanding on the
date hereof.
SECTION 4.06 CAPITALIZATION OF MERGER SUB; SUBSIDIARIES. The authorized
capital stock of Merger Sub consists of 1,000 shares of common stock, no par
value, all of which are outstanding. All the issued and outstanding capital
stock of Merger Sub is owned by Giga-tronics. Merger Sub has not conducted any
business prior to the date hereof and has no assets, liabilities or obligations
of any nature other than those incident to its formation and pursuant to this
Agreement. Giga-tronics does not own, directly or indirectly, any outstanding
capital stock or equity interest in any corporation, partnership, joint venture
or other entity other than Merger Sub.
SECTION 4.07 SEC FILINGS.
(a) Giga-tronics has since March 27, 1993 filed all proxy
statements, schedules and reports required to be filed by it with the SEC
pursuant to the Exchange Act.
(b) Giga-tronics has delivered to ASCOR:
(i) its annual reports on Form 10-K for its fiscal
years ended March 26, 1994 and March 25, 1995;
(ii) its quarterly report on Form 10-Q for its
fiscal quarter ending June 24, September 30 and December 30, 1995;
(iii) its proxy or information statements relating
to meetings of, or actions taken without a meeting by, the shareholders of
Giga-tronics held since March 31, 1994; and
(iv) all of its other reports, statements,
schedules and registration statements filed with the SEC since March 31, 1994.
(c) As of its filing date, no such report or statement
filed pursuant to the Exchange Act contained any untrue statement of a material
fact or omitted to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading.
(d) No such registration statement, as amended or
supplemented, if applicable, filed pursuant to the Securities Act, as of the
date such statement or amendment became effective, contained any untrue
statement of a material fact or omitted to state any
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material fact required to be stated therein or necessary to make the statements
therein not misleading.
SECTION 4.08 FINANCIAL STATEMENTS. The audited financial statements
Giga-tronics included in its annual reports on Form 10-K and the unaudited
financial statements of Giga-tronics included in its quarterly reports on Form
10-Q referred to in Section 4.07 present fairly, in conformity with generally
accepted accounting principles applied on a consistent basis (except as may be
indicated in the notes thereto), the consolidated financial position of
Giga-tronics as of the dates thereof and its results of operations,
shareholders' equity and cash flows for the periods then ended (subject to
normal year-end adjustments in the case of any interim financial statements).
For purposes of this Agreement, "Giga-tronics Balance Sheet" means the balance
sheet of Giga-tronics as of December 30, 1995, and the notes thereto, contained
in Giga-tronics's quarterly report on Form 10-Q filed for its fiscal quarter
then ended, and "Giga-tronics Balance Sheet Date" means December 30, 1995.
SECTION 4.09 DISCLOSURE DOCUMENTS. None of the information supplied or
to be supplied by Giga-tronics or Merger Sub for inclusion in the Proxy
Statement and the Registration Statement, will, in the case of the Proxy
Statement, at the time of mailing of the Proxy Statement to shareholders of
Giga-tronics and at the time of the meeting of such shareholders to be held in
connection with the Merger, contain any untrue statement of a material fact or
omits or will omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading or will, in the case of the
Registration Statement, at the time the Registration Statement becomes effective
under the Securities Act, contain any 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. The Registration Statement and Proxy
Statement will comply as to form in all material respects with the provisions of
the Securities Act and Exchange Act, respectively, and the rules and regulations
thereunder, except that no representation is made by Giga-tronics with respect
to information supplied by ASCOR for inclusion therein.
SECTION 4.10 ABSENCE OF CERTAIN CHANGES. Since the Giga-tronics Balance
Sheet Date Giga-tronics and its Subsidiaries have in all material respects
conducted their business in the ordinary course and there has not been:
(a) any Material Adverse Change with respect to
Giga-tronics;
(b) any declaration, setting aside or payment of any
dividend or other distribution in respect of any shares of capital stock of
Giga-tronics;
(c) any repurchase, redemption or other acquisition by
Giga-tronics or any of its Subsidiaries of any outstanding shares of capital
stock or other securities of, or other ownership interests in, Giga-tronics or
any such Subsidiary;
(d) any amendment of any material term of any outstanding
Giga-tronics Securities or any Giga-tronics Subsidiary Securities;
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(e) any damage, destruction or other casualty loss
(whether or not covered by insurance) materially and adversely affecting the
business, assets, liabilities, earnings or prospects of Giga-tronics or any of
its Subsidiaries;
(f) any new (or amendment to or alteration of any
existing) bonus, incentive compensation, severance, stock option, stock
appreciation right, pension, matching gift, profit-sharing, employee stock
ownership, retirement, pension group insurance, death benefit, or other fringe
benefit plan, arrangement or trust agreement adopted or implemented by
Giga-tronics which would result in a material increase in cost to Giga-tronics;
(g) the entering into of any agreement by Giga-tronics or
any person on behalf of Giga-tronics to take any of the foregoing actions.
SECTION 4.11 LITIGATION. There is no action, suit, proceeding, claim or
investigation pending or, to the best of Giga-tronics's knowledge, overtly
threatened, against Giga-tronics or any of its assets or against or involving
any of its officers, directors or employees in connection with the business or
affairs of Giga-tronics, including, without limitation, any claims for
indemnification arising under any agreement to which Giga-tronics is a party,
which could, individually or in the aggregate, have a Material Adverse Effect on
Giga-tronics or which in any manner challenges or seeks to prevent, enjoin,
alter or materially delay any of the transactions contemplated hereby.
Giga-tronics is not subject to or in default with respect to any writ, order,
judgment, injunction or decree, which would have a Material Adverse Effect on
Giga-tronics.
SECTION 4.12 ADVISOR'S FEES. Except for an investment banking firm
which may be selected by Giga-tronics (the "Giga-tronics Financial Advisor")
following the date hereof to render a fairness opinion in connection with the
transactions contemplated by the terms of this Agreement, whose fees will be
disclosed in writing to ASCOR and whose fees will be paid by Giga-tronics, there
is no investment banker, broker, finder or other intermediary which has been
retained by or is authorized to act on behalf of Giga-tronics or any of its
Subsidiaries who is entitled to any fee or commission from Giga-tronics or any
of its affiliates upon consummation of the transactions contemplated by this
Agreement.
ARTICLE V
COVENANTS OF ASCOR
ASCOR agrees that:
SECTION 5.01 CONDUCT OF ASCOR. From the date hereof until the Effective
Time, ASCOR shall in all material respects conduct its business in the ordinary
course. Without limiting the generality of the foregoing, from the date hereof
until the Effective Time, except as contemplated hereby or previously disclosed
by ASCOR to Giga-tronics in writing, without the prior written consent of
Giga-tronics:
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(a) ASCOR will not adopt or propose any change in its
Articles of Incorporation or Bylaws;
(b) ASCOR will not enter into or amend any employment
agreements, oral or written or increase the compensation payable or to become
payable by it to any of its officers, directors, or consultants over the amount
payable as of December 31, 1995, or increase the compensation payable to any
other employees (other than (A) increases in the ordinary course of business
which are not in the aggregate material to ASCOR, or (B) pursuant to plans
disclosed in ASCOR Disclosure Schedule), or adopt or amend any employee benefit
plan or arrangement (oral or written);
(c) Except pursuant to the exercise of ASCOR Options or
ASCOR Warranties already outstanding, ASCOR will not issue any ASCOR Securities;
(d) ASCOR will keep in full force and effect its existing
directors' and officers' liability insurance and will not modify or reduce the
coverage thereunder;
(e) ASCOR will not pay any dividend or make any other
distribution to holders of its capital stock nor will ASCOR redeem or otherwise
acquire any ASCOR Securities;
(f) ASCOR will not, directly or indirectly, merge or
consolidate with another entity or dispose of or acquire any material properties
or assets except in the ordinary course of business;
(g) ASCOR will not incur any additional indebtedness for
borrowed money in excess of $50,000 in the aggregate, except pursuant to
existing arrangements which have been disclosed to Giga-tronics prior to the
date hereof;
(h) ASCOR will not amend or change the period of
exercisability or accelerate the exercisability of any outstanding options or
warrants to acquire shares of capital stock, or accelerate, amend or change the
vesting period of any outstanding restricted stock;
(i) Except as provided in Section 5.04, ASCOR will not
enter into any transaction that would require the Proxy Statement to be delayed
or recirculated under circumstances which would in the reasonable judgment of
Giga-tronics delay the occurrence of the Effective Date beyond the date
specified in Section 9.01(viii);
(j) ASCOR will not, except in the ordinary course of
business consistent with past practices, sell, license or otherwise transfer to
any person any ASCOR intellectual property rights; and
(k) ASCOR will not agree or commit to do any of the
foregoing.
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SECTION 5.02 SHAREHOLDERS' MEETING; PROXY MATERIAL. ASCOR shall cause a
meeting of its shareholders to be duly called and held as soon as reasonably
practicable or shall seek the written consent of its shareholders following the
approval of the Proxy Statement for the purpose of voting on (or in the case of
a written consent, consenting to) the approval and adoption of this Agreement
and the Merger. The Board of Directors of ASCOR shall, subject to their
fiduciary duties, recommend approval and adoption of this Agreement and the
Merger by ASCOR's shareholders. In connection with such meeting or seeking of
written consent, ASCOR:
(a) will, together with Giga-tronics and Merger Sub,
promptly prepare and file with the SEC, will use all reasonable efforts to have
cleared by the SEC and will thereafter deliver to its shareholders as promptly
as practicable the Proxy Statement and all other proxy materials for such
meeting;
(b) will use all reasonable efforts to obtain the
necessary approvals by its shareholders of this Agreement and the transactions
contemplated hereby; and
(c) will otherwise comply with all legal requirements
applicable to such meeting.
SECTION 5.03 ACCESS TO FINANCIAL AND OPERATION INFORMATION. From the
date hereof until the Effective Time, ASCOR will give Giga-tronics, its counsel,
financial advisors, auditors and other authorized representatives reasonable
access during normal business hours to the offices, properties, books and
records of ASCOR, will furnish to Giga- tronics, its counsel, financial
advisors, auditors and other authorized representatives such financial and
operating data as such persons may reasonably request and will instruct ASCOR's
employees, counsel and financial advisors to cooperate with Giga-tronics in its
investigation of the business of ASCOR and in the planning for the combination
of the businesses of ASCOR and Giga-tronics following the consummation of the
Merger; provided that no investigation pursuant to this Section shall affect any
representation or warranty given by ASCOR to Giga-tronics hereunder. In
addition, ASCOR will cooperate in arranging joint meetings among representatives
of ASCOR and Giga-tronics and persons with whom ASCOR maintains business
relationships. All requests for information made pursuant to this Section shall
be directed to the Controller of ASCOR or such person as may be designated by
him. All information obtained pursuant to this Section 5.03 shall be governed by
any confidentiality agreements currently in effect between Giga-tronics and
ASCOR as well as the terms of Section 5.08 of this Agreement.
SECTION 5.04 OTHER OFFERS. From the date hereof until the earlier of
the Effective Date or the termination of this Agreement in accordance with the
terms hereof, ASCOR and the officers, directors, employees or other agents of
ASCOR will not, directly or indirectly, (i) take any action to solicit, initiate
or encourage the making of any Acquisition Proposal (as hereinafter defined); or
(ii) engage in negotiations with, or disclose any nonpublic information relating
to ASCOR or afford access to the properties, books or records of ASCOR to, any
person or entity that informs the Board of Directors that it is considering
making, or has made, an Acquisition Proposal. Until this Agreement shall be
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terminated in accordance with the terms hereof, ASCOR will not enter into any
agreement to merge or consolidate with, or sell a substantial portion of its
assets to, any person or entity. ASCOR will promptly notify Giga-tronics after
receipt of any Acquisition Proposal or any request for nonpublic information
relating to ASCOR in connection with an Acquisition Proposal or for access to
the properties, books or records of ASCOR by any person or entity that informs
the Board of Directors that it is considering making, or has made, an
Acquisition Proposal. The term "Acquisition Proposal" shall mean (i) any merger,
consolidation, tender offer or other similar transaction or related transactions
pursuant to which the holders of the voting securities of ASCOR prior to the
transaction hold following the consummation of such transaction less than 80% of
the voting securities of the surviving entity, (ii) a sale of a material portion
of the assets of ASCOR, or (iii) any equity or convertible debt transaction or
related transactions in which any person or group of affiliated persons other
than current security holders of ASCOR acquire securities of ASCOR representing
more than 20% of the aggregate voting power of ASCOR's outstanding securities,
other than in each case the transactions contemplated by this Agreement. For
purposes of the foregoing definition, one person shall be deemed to be
affiliated with a second person if such first person controls, is controlled by
or is under common control with the second person, and control, for purposes
hereof, shall be deemed to exist only in the event there exists ownership of or
the right to vote, in either case directly or indirectly, securities
representing more than 50% of the aggregate voting power of an entity's
outstanding securities.
SECTION 5.05 MAINTENANCE OF BUSINESS. ASCOR will use its best efforts
to carry on its business, keep available the services of its officers and
employees and preserve its relationships with those of its customers, suppliers,
licensors and others having business relationships with it that are material to
its business in substantially the same manner as it has prior to the date
hereof. If ASCOR becomes aware of a material deterioration or facts which are
likely to result in a material deterioration in the relationship with any
material customer, supplier, licensor or others having business relationships
with it, it will promptly bring such information to the attention of the
Giga-tronics in writing.
SECTION 5.06 COMPLIANCE WITH OBLIGATIONS. Prior to the Effective Date,
ASCOR shall comply with (i) all applicable federal, state, local and foreign
laws, rules and regulations, (ii) all material agreements and obligations,
including its Articles of Incorporation and Bylaws, by which it, its properties
or its assets may be bound, and (iii) all decrees, orders, writs, injunctions,
judgments, statutes, rules and regulations applicable to ASCOR and its
properties or assets.
SECTION 5.07 NOTICES OF CERTAIN EVENTS. ASCOR shall, upon obtaining
knowledge of any of the following, promptly notify Giga-tronics of:
(a) any notice or other communication from any person
alleging that the consent of such person is or may be required in connection
with the Merger;
(b) any notice or other communication from any
governmental or regulatory agency or authority in connection with the Merger;
and
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(c) any actions, suits, claims, investigations or other
judicial proceedings commenced or threatened against ASCOR which, if pending on
the date of this Agreement, would have been required to have been disclosed
pursuant to Sections 3.10 or 3.20 or which relate to the consummation of the
Merger.
SECTION 5.08 CONFIDENTIALITY. ASCOR agrees that for a period of three
years following any termination of this Agreement ASCOR shall not (a) disclose
to any person, association, firm, corporation or other entity in any manner,
directly or indirectly, any confidential information or data relevant to the
operations of Giga-tronics whether of a technical or commercial nature, nor (b)
use, or permit or assist, by acquiescence or otherwise, any person, association,
firm, corporation or other entity to use, directly or indirectly, any such
information or data in any manner which reasonably would be deemed to be
competitive with the operations of Giga-tronics excepting only use of (i)
information in the public domain at the time of disclosure to ASCOR (ii)
information subsequently coming into the public domain by means other than
disclosure by ASCOR or any of its agents (iii) information ASCOR can establish
and document was in its possession or was known to it prior to its disclosure to
ASCOR by Giga-tronics; (iv) information disclosed to ASCOR by a third party not
in violation of any obligation of confidentiality or nondisclosure known to
ASCOR or of which ASCOR should reasonably have known; or (v) information which
was independently developed by ASCOR or which is generally known in ASCOR's
industry.
SECTION 5.09 COMPLIANCE WITH THE SECURITIES ACT. ASCOR shall prior to
15 days after signing but in any event prior to mailing of the Proxy Statement
cause each person who is an "affiliate," as that term is used in paragraphs (c)
and (d) of Rule 145 under the Securities Act, of ASCOR to deliver to
Giga-tronics an Affiliates Agreement in substantially the form attached hereto
as Exhibit 5.09 (an "ASCOR Affiliates Agreement").
ARTICLE VI
COVENANTS OF GIGA-TRONICS AND MERGER SUB
Giga-tronics and Merger Sub agree that:
SECTION 6.01 CONDUCT OF GIGA-TRONICS. From the date hereof until the
Effective Time, Giga-tronics and its Subsidiaries shall in all material respects
conduct their business in the ordinary course. Without limiting the generality
of the foregoing, from the date hereof until the Effective Time, except as
contemplated hereby or previously disclosed by Giga-tronics to ASCOR in writing,
without the prior written consent of ASCOR:
(a) Giga-tronics will not adopt or propose any changes in
its Certificate of Incorporation or Bylaws (other than those contemplated by the
Giga-tronics Reincorporation);
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(b) Except pursuant to the exercise of options described
in Section 4.05 or stock purchase rights under Giga-tronics's Stock Option Plan
and except the granting of stock options in the ordinary course of business
consistent with past practice, Giga-tronics will not issue any Giga-tronics
Securities;
(c) Giga-tronics will not pay any dividend or make any
other distribution to holders of its capital stock nor will Giga-tronics or any
of its Subsidiaries redeem or otherwise acquire any Giga-tronics Securities;
(d) Giga-tronics will not, directly or indirectly, merge
or consolidate with another entity or dispose of or acquire any material
properties or assets except in the ordinary course of business;
(e) Giga-tronics shall take no extraordinary actions
affecting its capital structure (e.g., declaration of stock dividends or stock
splits);
(f) Giga-tronics will not except, in the ordinary course
of business consistent with past practices, sell, license or otherwise transfer
to any person any Giga-tronics intellectual property rights or any intellectual
property rights of any of its Subsidiaries; and
(g) Giga-tronics will not, and will not permit any of its
Subsidiaries to, agree or commit to do any of the foregoing.
SECTION 6.02 SHAREHOLDERS' MEETING; PROXY MATERIAL. Giga-tronics shall
promptly prepare and file with the SEC under the Securities Act the Proxy
Statement and shall use all reasonable efforts to cause the Proxy Statement to
be approved as promptly as practicable. Giga-tronics shall cause a meeting of
its shareholders (the "Giga-tronics Shareholders' Meeting") to be duly called
and held as soon as reasonably practicable following the approval of the Proxy
Statement for the purpose of voting on the approval and adoption of this
Agreement and the Merger. Giga-tronics shall take any action required to be
taken under foreign or state securities or "blue sky" laws in connection with
the issuance of Giga-tronics Common Stock in the Merger.
SECTION 6.03 MAINTENANCE OF BUSINESS. Giga-tronics will use its best
efforts to carry on its business, keep available the services of its officers
and employees and preserve its relationships with those of its customers,
suppliers, licensors and other persons having business relationships with it
that are material to its business in substantially the same manner as it has
prior to the date hereof. If Giga-tronics becomes aware of a material
deterioration or facts which are likely to result in a material deterioration in
the relationship with any customer, supplier, licensor or others having business
relationships with it, it will promptly bring such information to the attention
of ASCOR in writing.
SECTION 6.04 COMPLIANCE WITH OBLIGATIONS. Prior to the Effective Date,
Giga-tronics and its Subsidiaries shall each comply with (i) all applicable
federal, state, local and foreign laws, rules and regulations, (ii) all material
agreements and obligations, including
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its respective certificate or articles of incorporation and bylaws, by which it,
its properties or its assets may be bound, and (iii) all decrees, orders, writs,
injunctions, judgments, statutes, rules and regulations applicable to
Giga-tronics and its Subsidiaries and their respective properties or assets.
SECTION 6.05 NOTICES OF CERTAIN EVENTS. Giga-tronics shall, upon
obtaining knowledge of any of the following, promptly notify ASCOR of:
(a) any notice or other communication from any person
alleging that the consent of such person is or may be required in connection
with the Merger;
(b) any notice or other communication from any
governmental or regulatory agency or authority in connection with the Merger;
and
(c) any actions, suits, claims, investigations or other
judicial proceedings commenced or threatened against Giga-tronics or any of its
Subsidiaries which, if pending on the date of this Agreement, would have been
required to have been disclosed pursuant to Section 4.11 or which relate to the
consummation of the Merger.
SECTION 6.06 CONFIDENTIALITY. Giga-tronics agrees that for a period of
three years following any termination of this Agreement Giga-tronics shall not
(a) disclose to any person, association, firm, corporation or other entity in
any manner, directly or indirectly, any confidential information or data
relevant to the operations of ASCOR, whether of a technical or commercial
nature, nor (b) use, or permit or assist, by acquiescence or otherwise, any
person, association, firm, corporation or other entity to use, directly or
indirectly, any such information or data in any manner which reasonably would be
deemed to be competitive with the operations of ASCOR excepting only use of (i)
information in the public domain at the time of disclosure to Giga-tronics (ii)
information subsequently coming into the public domain by means other than
disclosure by Giga-tronics or any of its agents (iii) information Giga-tronics
can establish and document was in its possession or was known to it prior to its
disclosure to Giga-tronics by ASCOR; (iv) information disclosed to Giga-tronics
by a third party not in violation of any obligation of confidentiality or
nondisclosure known to Giga-tronics or of which Giga-tronics should reasonably
have known; or (v) information which was independently developed by Giga-tronics
or which is generally known in ASCOR's industry.
SECTION 6.07 OBLIGATIONS OF MERGER SUB. Giga-tronics will take all
action necessary to cause Merger Sub to perform its obligations under this
Agreement and to consummate the Merger on the terms and conditions set forth in
this Agreement. Merger Sub will not issue any shares of its capital stock, any
securities convertible into or exchangeable for its capital stock, or any
option, warrant or other right to acquire its capital stock to any Person other
than Giga-tronics or a wholly owned Subsidiary of Giga-tronics. Merger Sub shall
not incur any indebtedness or liabilities of any kind except pursuant to this
Agreement.
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SECTION 6.08 COMPLIANCE WITH THE SECURITIES ACT. Giga-tronics shall use
its best efforts to cause each person who is an "affiliate," as that term is
used in paragraphs (c) and (d) of Rule 145 under the Securities Act, of
Giga-tronics to enter on or prior to the Effective Date an Affiliates Agreement
in substantially the form attached hereto as Exhibit 6.08 (a "Giga-tronics
Affiliates Agreement").
ARTICLE VII
OTHER COVENANTS OF THE PARTIES
The Parties agree that:
SECTION 7.01 ADVICE OF CHANGES. Each party will promptly advise each
other party in writing (i) of any event known to its executive officers
occurring subsequent to the date of this Agreement that would render any
representation or warranty of such party contained in this Agreement, if made on
or as of the date of such event or the Effective Date, untrue, inaccurate or
misleading in any material respect (other than an event so affecting a
representation or warranty which is expressly limited to a state of facts
existing at a time prior to the occurrence of such event) and (ii) of any
Material Adverse Change in the business condition of the party and its
Subsidiaries, taken as a whole.
SECTION 7.02 REGULATORY APPROVALS. Prior to the Effective Time, each
party shall execute and file, or join in the execution and filing of, any
application or other document that may be necessary in order to obtain the
authorization, approval or consent of any governmental body, federal, state,
local or foreign, which may be reasonably required, or that the other company
may reasonably request, in connection with the consummation of the Merger. Each
party shall use its reasonable best efforts to obtain all such authorizations,
approvals and consents.
SECTION 7.03 ACTIONS CONTRARY TO STATED INTENT. No party hereto shall,
from or after the date hereof and either before or after the Effective Time,
take any action that would prevent the Merger from qualifying as a
reorganization under Section 368 of the Code.
SECTION 7.04 CERTAIN FILINGS. The Parties shall cooperate with one
another:
(a) in connection with the preparation of the Proxy
Statement;
(b) in connection with the preparation of any filing
required by the HSR Act;
(c) in determining whether any action by or in respect of,
or filing with, any governmental body, agency or official, or authority is
required, or any actions, consents, approvals or waivers are required to be
obtained from parties to any material contracts, in connection with the
consummation of the transactions contemplated by this Agreement; and
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(d) in seeking any such actions, consents, approvals or
waivers or making any such filings, furnishing information required in
connection therewith or with the Proxy Statement and seeking timely to obtain
any such actions, consents, approvals or waivers.
SECTION 7.05 COMMUNICATIONS. Between the date hereof and the Effective
Time, no party will furnish any written communication to its shareholders or to
the public generally if the subject matter thereof relates to the transactions
contemplated by this Agreement without the prior approval of ASCOR and
Giga-tronics as to the content thereof, which approval shall not be unreasonably
withheld; provided that the foregoing shall not be deemed to prohibit any
disclosure required by any applicable law or by any competent governmental
authority.
SECTION 7.06 SATISFACTION OF CONDITIONS PRECEDENT. The parties will use
their reasonable best efforts to satisfy or cause to be satisfied all the
conditions precedent that are set forth in Article VIII, as applicable to each
of them, and to cause the transactions contemplated by this Agreement to be
consummated, and, without limiting the generality of the foregoing, to obtain
all consents and authorizations of third parties and to make all filings with,
and give all notices to, third parties that may be necessary or reasonably
required on its part in order to effect the transactions contemplated hereby.
ARTICLE VIII
CONDITIONS TO THE MERGER
SECTION 8.01 CONDITIONS TO OBLIGATIONS OF GIGA-TRONICS AND MERGER SUB.
The obligations of Giga-tronics and Merger Sub hereunder are subject to the
fulfillment or satisfaction, on and as of the Effective Date, of each of the
following conditions (any one or more of which may be waived by Giga-tronics,
but only in a writing signed by Giga-tronics):
(a) Accuracy of Representations and Warranties. The
representations and warranties of ASCOR contained in Article III shall be true
and accurate in all material respects on and as of the Effective Date with the
same force and effect as if they had been made on the Effective Date (except to
the extent a representation or warranty speaks only as of an earlier date) and
ASCOR shall have provided Giga-tronics with a certificate executed by the
President and the Chief Financial Officer of ASCOR, dated as of the Effective
Date, to such effect; provided, however, that any inaccuracy of a representation
or warranty, on the date hereof or on the Effective Date, shall not result in
the non-satisfaction of this Section 8.01(a) unless any such inaccuracy or
inaccuracies, either (i) individually or in the aggregate, represent a Material
Adverse Effect on ASCOR or (ii) are willful and intentional misrepresentations
of a material matter that constitute common law fraud. For purposes of this
Agreement, a "Material Adverse Effect," with respect to any person or entity,
means a material adverse effect on the financial condition, business,
liabilities (including contingent liabilities) or results of operations of such
person or entity and its
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subsidiaries, taken as a whole; and "Material Adverse Change" shall mean a
change or a development involving a prospective change which would have a
Material Adverse Effect.
(b) Covenants. ASCOR shall have performed and complied
with all of its covenants contained in Articles V and VII in all material
respects on or before the Effective Date, and Giga-tronics shall receive a
certificate to such effect signed by ASCOR's President and Chief Financial
Officer.
(c) No Material Adverse Change. There shall have been no
Material Adverse Change in ASCOR since the ASCOR Balance Sheet Date.
(d) Affiliates Agreements. Giga-tronics shall have
received from each person or entity who may be deemed pursuant to Section 5.09
to be an affiliate of ASCOR a duly executed Affiliates Agreement, and such
Affiliates Agreements shall remain in full force and effect.
(e) Satisfactory Completion of Due Diligence Review.
Giga-tronics shall have completed its due diligence review of the business,
operations and financial condition of ASCOR by May 24, 1996 and such review
shall not have revealed any facts or circumstances which in the reasonable
judgment of Giga-tronics could have a Material Adverse Effect on ASCOR. If such
due diligence review shall reveal facts or circumstances which in the reasonable
judgement of Giga-tronics could have a Material Adverse Effect on ASCOR,
Giga-tronics shall promptly notify ASCOR of its determination or shall be deemed
to have waived compliance with this condition.
(f) Pooling of Interests Matters. In the sole discretion
of Giga-tronics, the Merger shall qualify for accounting treatment as a pooling
of interests in accordance with Accounting Principles Board Release No. 16. In
determining whether the Merger so qualifies Giga-tronics may consider the impact
on such qualification of ASCOR Shares which are voted against the Merger or
which have abstained from voting with respect to the Merger.
(g) Giga-tronics Dissenters' Rights. Shareholders of
Giga-tronics shall not have perfected dissenters' rights with respect to
Giga-tronics Common Stock with respect to five percent (5%) or more of the
Giga-tronics Common Stock outstanding on the date of the Giga-tronics
Shareholder Meeting.
(h) ASCOR Preferred Stock. As of the Closing Date all
shares of ASCOR Preferred Stock outstanding as of the date of this Agreement
shall (i) have remained outstanding (ii) shall have been tendered at the Closing
with instructions that such shares are to be exchanged at the Effective Time for
Giga-tronics Common Stock in accordance with the terms of this Agreement, and
(iii) not have been transferred by the owners of such shares as of the date of
this Agreement to any other person.
SECTION 8.02 CONDITIONS TO OBLIGATIONS OF ASCOR. ASCOR's obligations
hereunder are subject to the fulfillment or satisfaction, on and as of the
Effective Date, of
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each of the following conditions (any one or more of which may be waived by
ASCOR, but only in a writing signed by ASCOR):
(a) Accuracy of Representations and Warranties. The
representations and warranties of Giga-tronics set forth in Article IV shall be
true and accurate in all material respects on and as of the Effective Date with
the same force and effect as if they had been made on the Effective Date (except
to the extent a representation or warranty speaks only as of an earlier date and
except for changes contemplated by this Agreement) and Giga-tronics shall have
provided ASCOR with a certificate executed by the President and the Chief
Financial Officer of Giga-tronics, dated as of the Effective Date, to such
effect; provided, however, that any inaccuracy of a representation or warranty,
on the date hereof or on the Effective Date, shall not result in the
non-satisfaction of this Section 8.02(a) unless any such inaccuracy or
inaccuracies, either (i) individually or in the aggregate, represent a Material
Adverse Effect on Giga-tronics or (ii) are willful and intentional
misrepresentations that constitute common law fraud of a material matter.
(b) Covenants. Giga-tronics shall have performed and
complied with all of its covenants contained in Section 2.03 and Articles VI and
VII in all material respects on or before the Effective Date, and ASCOR shall
receive a certificate to such effect signed by Giga-tronics's President and
Chief Financial Officer.
(c) No Material Adverse Change. There shall have been no
Material Adverse Change in Giga-tronics since the Giga-tronics Balance Sheet
Date.
SECTION 8.03 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective
obligations of ASCOR and Giga-tronics hereunder are subject to the fulfillment,
on and as of the Effective Date, of each of the following conditions (any one or
more of which may be waived by such parties, but only in a writing signed by
such parties):
(a) Shareholder Approval. Each of ASCOR's shareholders and
Giga-tronics' shareholders shall have duly approved this Agreement, the Merger
Agreement and the Merger, all in accordance with applicable laws and regulatory
requirements.
(b) Tax-Free Reorganization. Each of ASCOR and
Giga-tronics shall have received a written opinion from Brobeck, Phleger &
Harrison LLP ("Brobeck") to the effect that the Merger will constitute a
reorganization within the meaning of Section 368 of the Code, which opinions
shall be substantially identical in form and substance. In preparing ASCOR and
the Giga-tronics tax opinions, Brobeck may rely on (and to the extent reasonably
required, the parties and ASCOR's shareholders shall make) reasonable
representations related thereto.
(c) Illegality or Legal Constraint. No statute, rule,
regulation, executive order, decree, injunction or restraining order shall have
been enacted, promulgated or enforced (and not repealed, superseded or otherwise
made inapplicable) by any court or governmental authority which prohibits the
consummation of the Merger (each party
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agreeing to use its reasonable best efforts to have any such order, decree or
injunction lifted).
(d) Consents. All written consents, assignments, waivers
or authorizations ("Consents"), other than Governmental Authorizations, that are
required as a result of the Merger for the continuation in full force and effect
of any material contracts or leases of ASCOR or Giga-tronics shall have been
obtained, other than those Consents the failure of which to obtain would not
have a Material Adverse Effect on ASCOR or Giga-tronics.
(e) Governmental Authorizations. There shall have been
obtained any and all Governmental Authorizations, permits, approvals and
consents of securities or "blue sky" commissions of any jurisdiction and of any
other governmental body or agency, that may reasonably be deemed necessary so
that the consummation of the Merger will be in compliance with applicable laws,
the failure to comply with which would have a Material Adverse Effect on
Giga-tronics, ASCOR or the Surviving Corporation or would be reasonably likely
to subject any of Giga-tronics, Merger Sub, ASCOR or any of their respective
directors or officers to substantial penalties or criminal liability.
(f) HSR Act. The waiting period (and any extension
thereof) applicable to the consummation of the Merger under the HSR Act shall
have expired or been terminated.
ARTICLE IX
TERMINATION OF AGREEMENT
SECTION 9.01 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time whether before or after the approval by the
shareholders of ASCOR or Giga-tronics:
(i) by mutual consent of the Boards of Directors
of Giga-tronics, Merger Sub and ASCOR;
(ii) by either Giga-tronics and Merger Sub or
ASCOR, if the requisite vote of the shareholders of Giga-tronics shall
not have been obtained or the written consent of shareholders of ASCOR
shall not be obtained by December 31, 1996;
(iii) by Giga-tronics, if it is not in material
breach of its obligations under this Agreement and if the Board of
Directors of ASCOR shall have:
(A) withdrawn its recommendation of the
Merger, or
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(B) recommended or approved any
acceptance by shareholders of any Acquisition Proposal (other than an
Acquisition Proposal made by Giga-tronics or an affiliate of
Giga-tronics); or
(iv) by ASCOR, if it is not in material breach of
its obligations under this Agreement and if the Board of Directors of
Giga-tronics shall have:
(A) withdrawn its recommendation of the
Merger, or
(B) recommended or approved any
acceptance by shareholders of any Acquisition Proposal (other than an
Acquisition Proposal made by ASCOR or an affiliate of ASCOR); or
(v) by either Giga-tronics and Merger Sub or
ASCOR, respectively, (A) if there has been a breach of any
representation and warranty such that Section 8.01(a) or 8.02(a),
respectively, cannot be satisfied or (B) if there has been the willful
breach on the part of ASCOR or Giga-tronics and Merger Sub,
respectively, of any covenant or agreement contained in this Agreement
such that Sections 8.01(b) or 8.02(b) cannot be satisfied, and in both
case (A) and case (B) such breach has not been promptly cured after
notice to the breaching party; or
(vi) by Giga-tronics, if the conditions contained
in Section 8.02(f), (g) or (h) are not satisfied; or
(vii) by Giga-tronics, if ASCOR shall have issued
any ASCOR Securities between the date of this Agreement and the Closing
Date without the prior consent of Giga-tronics; or
(viii) by either Giga-tronics and Merger Sub or
ASCOR, respectively, at any time after December 31, 1996, unless the
delay is caused by the failure of the terminating party to fulfill its
obligations hereunder.
SECTION 9.02 EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided above, this Agreement shall forthwith become void, and
there shall be no liability on the part of either Giga-tronics, Merger Sub or
ASCOR, except that each of the agreements contained or referred to in Sections
5.08, 6.06 and 11.02 shall survive the termination hereof; provided, however,
that each party shall be entitled to any remedies at law or in equity in the
event of a breach of this Agreement by the other party, except as provided in
Sections 11.02(b) and (c).
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ARTICLE X
ADDITIONAL AGREEMENTS OF THE PARTIES
SECTION 10.01 REGISTRATION RIGHTS AGREEMENT. Concurrent with the
Effective Time Giga-tronics will execute and deliver to the ASCOR Share holders
a Registration Rights Agreement substantially in the form of Exhibit 10.01
hereto.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01 FURTHER ASSURANCES. Each party agrees to cooperate fully
with the other parties and to execute such further instruments, documents and
agreements and to give such further written assurances as may be reasonably
requested by any other party to better evidence and reflect the transactions
described herein and contemplated hereby and to carry into effect the intents
and purposes of this Agreement.
SECTION 11.02 FEES AND EXPENSES. Whether or not the Merger is
consummated, each party shall pay all fees and expenses incurred by such party,
including counsel fees and fees of accountants and investment bankers contracted
by such party, and any other expenses specifically identifiable to such party in
connection with the transactions contemplated hereby. Any other costs and
expenses not specifically identified as applicable to either ASCOR or
Giga-tronics shall be shared equally.
SECTION 11.03 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made herein, and in any instrument delivered
pursuant hereto, shall be deemed to be conditions to the Merger and shall not
survive the Merger.
SECTION 11.04 NOTICES. Any notice or communication required or
permitted by this Agreement shall be deemed sufficiently given if in writing
and, if delivered personally, when it is delivered or, if delivered in another
manner, the earlier of when it is actually received by the party to whom it is
directed or when the period set forth below expires (whether or not it is
actually received):
(a) if deposited with the U.S. Postal Service, postage
prepaid, and addressed to the party to receive it as set forth below, 48 hours
after such deposit as registered or certified mail; or
(b) if accepted by Federal Express or a similar delivery
service in general usage for delivery to the address of the party to receive it
as set forth next below, 24 hours after the delivery time promised by the
delivery service.
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Giga-tronics and Merger Sub:
Giga-tronics Incorporated
4650 Norris Canyon Road
San Ramon, CA 94583
Attention: George H. Bruns, Jr.
Chief Executive Officer
Facsimile: (510) 328-4700
With copy to:
Brobeck, Phleger & Harrison LLP
Spear Street Tower
One Market Plaza
San Francisco, CA 94105
Attention: William L. Hudson, Esq.
Facsimile: (415) 442-1010
ASCOR:
ASCOR, Inc.
47790 Westinghouse Drive
Fremont, CA 94539
Attention: Jeffrey Lum
President
Facsimile: (510) 490-8493
With copy to:
Brian Fraser, Esq.
Attorney at Law
6114 La Salle Avenue, Suite 646
Oakland, CA 94611
Facsimile: (510) 839-3461
Such communications shall be effective when they are
received by the addressee thereof. Any party may change its address for such
communications by giving notice thereof to the other parties in conformity with
this Section.
SECTION 11.05 GOVERNING LAWS. The laws of the State of California
(irrespective of its choice of law principles) shall govern all issues
concerning the Merger and all other issues concerning the validity of this
Agreement, the construction of its terms, and the interpretation and enforcement
of the rights and duties of the parties.
SECTION 11.06 BINDING UPON SUCCESSORS AND ASSIGNS; ASSIGNMENT. This
Agreement and the provisions hereof shall be binding upon each of the parties,
their permitted successors and assigns. This Agreement may not be assigned by
any party without the prior consent of the other.
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SECTION 11.07 SEVERABILITY. If any provision of this Agreement, or the
application thereof, shall for any reason or to any extent be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances shall continue in full force and effect and in
no way be affected, impaired or invalidated.
SECTION 11.08 ENTIRE AGREEMENT. This Agreement and the other agreements
and instruments referenced herein constitute the entire understanding and
agreement of the parties with respect to the subject matter hereof and supersede
all prior and contemporaneous agreements or understandings, inducements or
conditions, express or implied, written or oral, between the parties with
respect hereto other than the Confidentiality Agreement.
SECTION 11.09 OTHER REMEDIES. Except as otherwise provided herein, any
and all remedies herein expressly conferred upon a party shall be deemed
cumulative with and not exclusive of any other remedy conferred hereby or by law
on such party, and the exercise of any one remedy shall not preclude the
exercise of any other.
SECTION 11.10 AMENDMENT AND WAIVERS. Any term or provision of this
Agreement may be amended, and the observance of any term of this Agreement may
be waived (either generally or in a particular instance and either retroactively
or prospectively) only by a writing signed by the party to be bound thereby. The
waiver by a party of any breach hereof or default in the performance hereof
shall not be deemed to constitute a waiver of any other default or any
succeeding breach or default. At any time before or after approval of this
Agreement and the Merger by the shareholders of ASCOR and prior to the Effective
Time, this Agreement may be amended or supplemented by ASCOR or Giga-tronics
with respect to any of the terms contained in this Agreement, except that
following approval by the shareholders of ASCOR there shall be no amendment or
change to the provisions hereof with respect to the Exchange Ratio without
further approval by the shareholders of ASCOR, and no other amendment shall be
made which by law requires further approval by such shareholders without such
further approval.
SECTION 11.11 NO WAIVER. The failure of any party to enforce any of the
provisions hereof shall not be construed to be a waiver of the right of such
party thereafter to enforce such provisions.
SECTION 11.12 CONSTRUCTION OF AGREEMENT; KNOWLEDGE. A reference to an
Article, Section or an Exhibit shall mean an Article of, a Section in, or
Exhibit to, this Agreement unless otherwise explicitly set forth. The titles and
headings herein are for reference purposes only and shall not in any manner
limit the construction of this Agreement which shall be considered as a whole.
The words "include," "includes" and "including" when used herein shall be deemed
in each case to be followed by the words "without limitation." For purposes of
this Agreement, "knowledge" of any party shall mean the knowledge of the
executive officers of such party after such officers shall have made inquiry
that is customary and appropriate under the circumstances to which reference is
made.
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SECTION 11.13 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be an original as against any party
whose signature appears thereon and all of which together shall constitute one
and the same instrument. This Agreement shall become binding when one or more
counterparts hereof, individually or taken together, shall bear the signatures
of all of the paries reflected hereon as signatories.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
GIGA-TRONICS INCORPORATED R. HATCH
By:___________________________________ _________________________________
Name: George H. Bruns, Jr.
Title: Chief Executive Officer
ASCOR ACQUISITION CORP. DOMINION PARTNERS
By:___________________________________ By:______________________________
Name:_________________________________ Name:____________________________
Title:________________________________ Firm:____________________________
ASCOR, INC. SBH ASSOCIATES, INC.
By:___________________________________ By:______________________________
Name:_________________________________ Name:____________________________
Title:________________________________ Firm:____________________________
[CONTINUES ON NEXT PAGE]
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CONTINENTAL CAPITAL EUCLID PARTNERS III L.P.
CORPORATION
By:___________________________________ By:______________________________
Name:_________________________________ Name:____________________________
Firm: ________________________________ Title:___________________________
SPECTRA ENTERPRISES INTERVEN II, S.A.
ASSOCIATES
By:___________________________________ By:______________________________
Name:_________________________________ Name:____________________________
Firm: ________________________________ Title:___________________________
THE BRUNS COMPANY
By:___________________________________
Name:_________________________________
Title:________________________________
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GLOSSARY
PAGE
Acquisition Proposal ......................................................25
Agreement .......................................................1
Agreement of Merger .......................................................2
Ascor .......................................................1
Ascor Affiliates Agreement..................................................26
Ascor Ancillary Agreements...................................................7
Ascor Balance Sheet .......................................................9
Ascor Balance Sheet Date.....................................................9
Ascor Common Stock .......................................................1
Ascor Common Warrants .......................................................3
Ascor Disclosure Schedule....................................................7
Ascor Intellectual Property.................................................16
Ascor Option .......................................................5
Ascor Outstanding Equivalent Number..........................................3
Ascor Preferred Shares.......................................................2
Ascor Preferred Warrants.....................................................3
Ascor Securities .......................................................9
Ascor Series A Shares .......................................................2
Ascor Series B Shares .......................................................2
Ascor Series C Shares .......................................................2
Ascor Shares .......................................................3
Ascor Warrants .......................................................3
Brobeck ......................................................32
Certificate .......................................................3
Certificates .......................................................3
Closing .......................................................2
Closing Date .......................................................2
Code .......................................................1
Consents ......................................................33
Dissenting Ascor Shares......................................................4
Dissenting Shareholder.......................................................4
Effective Date .......................................................2
Effective Time .......................................................2
Employment Contracts ......................................................13
Environmental Laws ......................................................15
Environmental Permits ......................................................15
ERISA ......................................................13
Exchange Act ...................................................7, 18
Exchange Agent .......................................................3
Exchange Ratio .......................................................3
Financial Statements .......................................................9
Giga-tronics .......................................................1
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PAGE
Giga-tronics Affiliates Agreement...........................................29
Giga-tronics Ancillary Agreements...........................................18
Giga-tronics Balance Sheet..................................................21
Giga-tronics Balance Sheet Date.............................................21
Giga-tronics Common Stock....................................................1
Giga-tronics Disclosure Schedule............................................17
Giga-tronics Financial Advisor..............................................22
Giga-tronics Securities.....................................................19
Giga-tronics Shareholders' Meeting..........................................27
Giga-tronics Stock Option Plan..............................................19
Governmental Authorizations..................................................7
Hazardous Substances ......................................................15
HSR Act .......................................................7
IRS ......................................................13
Lien .......................................................8
Material Adverse Change.....................................................31
Material Adverse Effect.....................................................30
Material Ascor Agreement....................................................14
Merger ....................................................1, 2
Merger Consideration .......................................................3
Merger Sub .......................................................1
Plans ......................................................13
Proxy Statement ......................................................17
Securities Act .......................................................6
Surviving Corporation .......................................................2
Tax ......................................................12
Taxes ......................................................12
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AGREEMENT AND PLAN OF REORGANIZATION
EXHIBIT 1.01
AGREEMENT OF MERGER
This Agreement of Merger, dated as of ______________, 1996 ("Merger
Agreement"), is made and entered into by ASCOR Acquisition Corporation, a
California corporation ("AAC"), ASCOR Inc., a California corporation ("ASCOR")
(AAC and ASCOR being collectively referred to as the "Constituent Corporations")
and Giga- tronics, Inc., a California Corporation ("Giga-tronics").
WITNESSETH:
WHEREAS, the Constituent Corporations and Giga-tronics previously have
entered into an Agreement and Plan of Reorganization (the "Agreement and Plan of
Reorganization") providing for certain representations, warranties and
agreements in connection with the transactions contemplated; and
WHEREAS, the Boards of Directors of the Constituent Corporations deem
it advisable and in the best interests of the Constituent Corporations and in
the best interests of the shareholders of the Constituent Corporations that AAC
merge (the "Merger") with and into ASCOR.
NOW, THEREFORE, the Constituent Corporations and Giga-tronics hereby
agree as follows:
ARTICLE I.
The Constituent Corporations
1.01 (a) ASCOR was incorporated under the laws of the State of
California on ______________________________.
(b) ASCOR is authorized to issue an aggregate of
30,000,000 Common Shares (the "ASCOR Common Stock") and 5,712,293 Preferred
Shares (the "ASCOR Preferred Stock").
(c) As of the date and time immediately prior to the
consummation of the Merger, there will be an aggregate of 3,947,375 shares of
ASCOR Common Stock, 2,340,425 shares of ASCOR Series A Preferred Stock,
2,000,000 shares of ASCOR Series B Preferred Stock outstanding and 909,091
shares of ASCOR Series C Preferred Stock outstanding. The outstanding shares of
ASCOR Common Stock and ASCOR Preferred Stock are referred to herein as the
"ASCOR Shares."
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1.02 (a) AAC was incorporated under the laws of the State of
California on May ___, 1996.
(b) AAC is authorized to issue an aggregate of 1,000
shares of common stock ("AAC Common Stock").
(c) As of the date and time immediately prior to the
consummation of the Merger, an aggregate of 1,000 shares of AAC Common Stock
were outstanding and owned by Giga-tronics.
ARTICLE II.
The Merger
2.01 (a) This Merger Agreement shall be submitted to the
shareholders of ASCOR and AAC. If adopted and approved by the written consent of
the shareholders of ASCOR and AAC and if all of the conditions precedent to the
consummation of the Merger specified in the Agreement and Plan of Reorganization
shall have been satisfied or duly waived by the party entitled to satisfaction
thereof, then, unless terminated as provided in the Agreement and Plan of
Reorganization, this Merger Agreement, along with certificates meeting the
requirements of the California General Corporation Law, shall be filed with the
Secretary of State of California. Upon such filing, the Merger shall become
effective ("Effective Time of the Merger").
(b) At the Effective Time of the Merger, AAC shall be
merged into ASCOR and the separate corporate existence of AAC shall thereupon
cease. ASCOR shall be the surviving corporation in the Merger (the "Surviving
Corporation") and the separate corporate existence of ASCOR, with all of its
purposes, objects, rights, privileges, powers, immunities and franchises, shall
continue unaffected and unimpaired by the Merger.
2.02 (a) The Surviving Corporation shall succeed to all of the
rights, privileges, powers, immunities and franchises of AAC, all of the
properties and assets of AAC and all of the debts, choices in action and other
interests due or belonging to AAC and shall be subject to, and responsible for,
all of the debts, liabilities and obligations of AAC with the effect set forth
in the California General Corporation Law.
(b) If, at any time after the Effective Time of the
Merger, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of AAC acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Merger or to otherwise
carry out this Merger Agreement, the officers and directors of the
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Surviving Corporation shall and will be authorized to execute and deliver, in
the name and on behalf of the Constituent Corporations or otherwise, all such
deeds, bills of sale, assignments and assurances and to take and do, in the name
and on behalf of the Constituent Corporations or otherwise, all such other
actions and things as may be necessary or desirable to vest, perfect or confirm
any and all right, title and interest in, to and under such rights, properties
or assets in the Surviving Corporation or to otherwise carry out this Merger
Agreement.
ARTICLE III.
Articles of Incorporation
3.01 The Articles of Incorporation of ASCOR in effect immediately
prior to the Effective Time of the Merger shall be amended and restated to read
as attached at Exhibit A.
ARTICLE IV.
Manner And Basis Of Converting Shares
Of The Constituent Corporations
4.01 At the Effective Time of the Merger:
(a) Each share of AAC Stock which is outstanding
immediately prior to the Effective Time of the Merger shall be converted at the
Effective Time of the Merger into one share of ASCOR Common Stock.
(b) Each share of ASCOR Common Stock, each share of ASCOR
Series A Preferred Stock, each share of ASCOR Series B Preferred Stock and each
share of ASCOR Series C Preferred Stock (except for shares, if any, which shall
then or thereafter constitute "dissenting shares" within the meaning of Section
1300 of the California General Corporations Law and those shares of AAC common
stock converted to shares of ASCOR Common Stock pursuant to Section 4.01(a)
above) which is outstanding immediately prior to the Effective Time of the
Merger shall be converted at the Effective Time of the Merger into
[__________________ FINAL NUMBER TO BE INSERTED AT CLOSING PURSUANT TO
CALCULATION CONTAINED IN REORGANIZATION AGREEMENT] shares (the "Exchange Ratio")
of Giga-tronics Common Stock.
4.02 Giga-tronics shall not be required to issue or deliver any
fractional shares of Giga-tronics Giga-tronics Common Stock or any Giga-tronics
certificates
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representing fractional shares of Giga-tronics Common Stock in connection with
any exchange of ASCOR certificates for Giga-tronics certificates; however,
Giga-tronics shall pay to each person who would otherwise be entitled to receive
a Giga-tronics certificate representing a fractional share of Giga-tronics
Common Stock an amount in cash (rounded to the nearest whole cent) equal to such
fraction multiplied by the closing sale price per share of Giga-tronics Common
Stock on the last business day on which Giga- tronics Common Stock is traded on
the NASD prior to the Effective Time.
4.03 Immediately after the Effective Time of the Merger and after
surrender to Giga-tronics or such other party designated by Giga-tronics (the
"Exchange Agent") of any certificate which prior to the Effective Time of the
Merger shall have represented any ASCOR Shares, Giga-tronics shall cause to be
distributed to the person in whose name such certificate shall have been issued
a certificate registered in the name of such person representing the whole
shares of Giga-tronics Common Stock into which any shares previously represented
by the surrendered certificate shall have been converted at the Effective Time
of the Merger, along with the check representing the value of any fractional
share as determined in Section 4.02 above. Until surrendered to the Exchange
Agent, each certificate which immediately prior to the Effective Time of the
Merger shall have represented any ASCOR Share shall be deemed at and after the
Effective Time of the Merger to represent only the right to receive upon
surrender the certificate and payment contemplated above. Upon such surrender,
there shall be paid to the person in whose name the certificate representing
such shares of Giga-tronics Ordinary Shares shall be issued and without interest
any dividends which shall have become payable with respect to such shares of
Giga-tronics Common Stock between the Effective Time of the Merger and the time
of such surrender.
ARTICLE V.
General
5.01 This Merger 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.
5.02 Notwithstanding approval of this Merger Agreement by the
shareholders of either of the Constituent Corporations, this Merger Agreement
shall terminate forthwith in the event that the Agreement and Plan of
Reorganization shall be terminated as therein provided.
5.03 This Merger Agreement may be amended by the parties hereto at
any time before or after approval hereof by the shareholders of the Constituent
Corporations and Giga-tronics, but, after any such approval, no amendment shall
be made which would have a material adverse effect on the shareholders of either
of the
4
<PAGE> 164
Constituent Corporations or Giga-tronics, or change any of the principal terms
of the Merger Agreement, without the further approval of such shareholders. This
Merger Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto. Without limiting the foregoing, the
parties hereto acknowledge and agree that any modification of the manner or
basis of converting ASCOR Shares into Giga-tronics Common Stock shall require
further approval of the Board of Directors (or appropriate committee thereof
empowered to so act) of Giga-tronics and the shareholders of ASCOR.
5
<PAGE> 165
IN WITNESS WHEREOF, the parties have duly executed this Merger
Agreement as of the date first written above.
ASCOR ACQUISITION CORP.
By ________________________________
George H. Bruns, Jr.
President
By ________________________________
Greg Overholtzer
Secretary
ASCOR, INC.
By ________________________________
Jeffrey Lum
President
By ________________________________
____________________
Secretary
GIGA-TRONICS, INC.
By ________________________________
George H. Bruns, Jr.
Chief Executive Officer
By ________________________________
Greg Overholtzer
Secretary
<PAGE> 166
EXHIBIT A
TO
AGREEMENT OF MERGER
ONE. The name of the Corporation is ASCOR, Inc.
TWO. The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code.
THREE. The Corporation is authorized to issue One Thousand (1,000)
shares of Common Stock of one class.
FOUR. The liability of the directors of the Corporation for monetary
damages shall be eliminated to the fullest extent permissible under California
law.
FIVE. The Corporation is authorized to indemnify the directors and
officers of the Corporation to the fullest extent permissible under California
law.
<PAGE> 167
AGREEMENT AND PLAN OF REORGANIZATION
EXHIBIT 5.09
FORM OF ASCOR AFFILIATES AGREEMENT
THIS AFFILIATES AGREEMENT (the "Agreement") is entered into as
of this __ day of May, 1996 among GIGA-TRONICS, INC., a California corporation
("Giga- tronics"), the undersigned shareholder ("Shareholder") of ASCOR, INC., a
California corporation ("ASCOR"), ASCOR ACQUISITION CORP., a California
corporation and wholly owned subsidiary of Giga-tronics ("MERGER SUB") and
ASCOR.
This Agreement is entered into in connection with that certain
Agreement and Plan of Reorganization dated as of May __, 1996 (the
"Reorganization Agreement") among Giga-tronics, Merger Sub, and ASCOR. The
Reorganization Agreement provides for the merger (the "Merger") of Merger Sub
with and into ASCOR in a transaction in which issued and outstanding shares of
common stock, no par value, and preferred stock, no par value, of ASCOR (the
"ASCOR Stock") will be exchanged for shares of common stock, no par value of
Giga-tronics (the "Giga-tronics Stock") on the terms and conditions set forth in
the Reorganization Agreement. Capitalized terms used herein and not defined
herein shall have their defined meanings as set forth in the Reorganization
Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
mutual representations, warranties and covenants set forth herein, the parties
agree as follows:
1. TAX AND ACCOUNTING TREATMENT. Shareholder understands
and agrees that it is intended that the Merger will be treated as a
"reorganization" for federal income tax purposes and as a "pooling of interests"
in accordance with generally accepted accounting principals and the applicable
General Rules and Regulations published by the Securities and Exchange
Commission (the "SEC"). Shareholder further understands and agrees that
Shareholder may be deemed to be an "Affiliate" of ASCOR within the meaning of
Rule 145 ("Rule 145") promulgated under the Securities Act of 1933, as amended
(the "Securities Act"), although nothing contained herein should be construed as
an admission of such fact.
2. RELIANCE UPON REPRESENTATIONS, WARRANTIES AND
COVENANTS. Shareholder has been informed that the treatment of the Merger as a
reorganization for federal income tax purposes requires that a sufficient number
of former stockholders of ASCOR maintain a meaningful continuing equity
ownership interest in Giga-tronics after the Merger. Shareholder understands
that the representations, warranties and covenants of the Shareholder set forth
herein will be relied upon by Giga-tronics, ASCOR, and agrees that their
respective counsel and accounting firms and other stockholders of ASCOR shall be
entitled to rely thereon.
1.
<PAGE> 168
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF
SHAREHOLDER. Share- holder represents, warrants and covenants as follows:
(a) Shareholder has full power and authority to
execute this Agreement, to make the representations, warranties and
covenants herein contained and to perform Shareholder's obligations
hereunder.
(b) Appendix A attached hereto sets forth all
shares of ASCOR Stock owned by Shareholder, including all ASCOR Stock
as to which Shareholder has sole or shared voting or investment power
and all rights and options to acquire ASCOR Stock.
(c) Shareholder will not sell, transfer,
exchange, pledge, or otherwise dispose of, or make any offer or
agreement relating to any of the foregoing with respect to, any shares
of Giga-tronics Stock that Shareholder may acquire in connection with
the Merger, or any securities that may be paid as a dividend or
otherwise distributed thereon or with respect thereto or issued or
delivered in exchange or substitution therefor (all such shares and
other securities of Giga-tronics being herein sometimes collectively
referred to as "Restricted Securities"), or any option, right or other
interest with respect to any Restricted Securities, unless (i) such
transaction is permitted pursuant to Rule 144 and 145(d) under the
Securities Act, (ii) counsel representing Shareholder shall have
advised Giga-tronics in a written opinion letter satisfactory to
Giga-tronics and Giga-tronics's legal counsel, and upon which
Giga-tronics and its legal counsel may rely, that no registration under
the Securities Act would be required in connection with the proposed
sale, transfer or other disposition, (iii) a registration statement
under the Securities Act covering the Giga-tronics Stock proposed to be
sold, transferred or otherwise disposed of, describing the manner and
terms of the proposed sale, transfer or other disposition, and
containing a current prospectus, shall have been filed with the SEC and
made effective under the Securities Act, or (iv) an authorized
representative of the SEC shall have rendered written advice to
Shareholder (sought by Shareholder or counsel to Shareholder, with a
copy thereof and all other related communications delivered to
Giga-tronics) to the effect that the SEC would take no action, or that
the staff of the SEC would not recommend that the SEC take action, with
respect to the proposed disposition if consummated.
(d) Notwithstanding any other provision of this
Agreement to the contrary, Shareholder will not sell, transfer,
exchange, pledge or otherwise dispose of, or in any other way reduce
Shareholder's risk of ownership or investment in, or make any offer or
agreement relating to any of the foregoing with respect to any ASCOR
Stock or any rights, options or warrants to purchase ASCOR Stock, or
any Restricted Securities or other securities of Giga-tronics (i)
during the 30-day period immediately preceding the Effective Time of
the Merger and (ii) until such time after the Effective Time of the
Merger as Giga-tronics has publicly released a report
2.
<PAGE> 169
including the combined financial results of Giga-tronics and ASCOR for
a period of at least 30 days of combined operations of Giga-tronics and
ASCOR within the meaning of Accounting Series Release No. 130, as
amended, of the SEC. Giga- tronics agrees to publish such financial
results expeditiously in a manner consistent with its prior practices;
provided that nothing contained herein shall obligate Giga- tronics to
publish its financial results other than on a quarterly basis.
(e) Shareholder has, and as of the Effective
Time of the Merger will have, no plan or intention (a "Plan") to sell,
transfer, exchange, pledge (other than in a pre-existing bona fide
margin account) or otherwise dispose of (any of the foregoing, a
"Sale"), more than fifty percent (50%) of the shares of Giga-tronics
Stock that Shareholder may acquire in connection with the Merger, or
any securities that may be paid as a dividend or otherwise distributed
thereon or with respect thereto or issued or delivered in exchange or
substitution therefor. Sale shall also be deemed to include a
distribution by a partnership to its partners, or a corporation to its
stockholders, or any other transaction which results in a reduction in
the risk of ownership. Shareholder is not aware of, or participating
in, any Plan on the part of ASCOR stockholders to engage in Sales of
the shares of Giga-tronics Stock to be issued in the Merger such that
the aggregate fair market value, as of the Effective Time of the
Merger, of the shares subject to such Sales would exceed fifty percent
(50%) of the aggregate fair market value of all shares of outstanding
ASCOR Stock immediately prior to the Merger. For purposes of the
preceding sentence, shares of ASCOR Stock (i) with respect to which
dissenters' rights are exercised, (ii) which are exchanged for cash in
lieu of fractional shares of Giga-tronics Stock or (iii) with respect
to which a pre-Merger Sale occurs in a transaction that is in
contemplation of, or related or pursuant to, the Merger or the
Reorganization Agreement, shall be considered to be shares of ASCOR
Stock that are exchanged for Giga-tronics Stock in the Merger and then
disposed of pursuant to a Plan. If any of Shareholder's representations
in this Section 3(e) ceases to be true at any time prior to the
Effective Time of the Merger, Shareholder will deliver to each of ASCOR
and Giga- tronics, prior to the Effective Time of the Merger, a written
statement to that effect, signed by Shareholder.
4. RULE 144 AND 145. From and after the Effective Time
of the Merger and for so long as is necessary in order to permit Shareholder to
sell the Giga-tronics Stock held by and pursuant to Rule 144 under the
Securities Act, Giga-tronics will use its best efforts to file on a timely basis
all reports required to be filed by it pursuant to Section 13 of the Securities
Exchange Act of 1934, as amended, referred to in paragraph (c)(1) of Rule 144
under the Securities Act, in order to permit Shareholder to sell the
Giga-tronics Stock held by it pursuant to the terms and conditions of Rule 144.
Shareholder understands that, except as set forth in the Reorganization
Agreement and the Registration Rights Agreement, Giga-tronics is under no
obligation to register the sale, transfer or other disposition of any Restricted
Securities by or on behalf of Shareholder or to take any other action necessary
in order to make compliance with an exemption from registration available.
3.
<PAGE> 170
5. NOTICES. Any notice or communication required or
permitted by this Agreement shall be deemed sufficiently given if in writing
and, if delivered personally, when it is delivered or, if delivered in another
manner, the earlier of when it is actually received by the party to whom it is
directed or when the period set forth below expires (whether or not it is
actually received):
A. if deposited with the U.S. Postal Service, postage
prepaid, and addressed to the party to receive it as set forth below, 48 hours
after such deposit as registered or certified mail; or
B. if accepted by Federal Express or a similar delivery
service in general usage for delivery to the address of the party to receive it
as set forth next below, 24 hours after the delivery time promised by the
delivery service.
Giga-tronics and Merger Sub:
Giga-tronics, Inc.
4650 Norris Canyon Road
San Ramon, CA 94583
Attention: George H. Bruns, Jr.
Chief Executive Officer
Facsimile: (510) 328-4700
With copy to:
Brobeck, Phleger & Harrison
Spear Street Tower
One Market Plaza
San Francisco, CA 94105
Attention: William L. Hudson, Esq.
Facsimile: (415) 442-1010
ASCOR:
ASCOR, Inc.
47790 Westinghouse Drive
Fremont, CA 94539
Attention: Jeffrey Lum
President
Facsimile: (510) 490-8493
4.
<PAGE> 171
With copy to:
Brian Fraser
Attorney-at-Law
6114 La Salle Avenue, Suite 646
Oakland, CA 94611
Facsimile: (510) 839-3461
If to Shareholder:
At the address set forth beneath the Shareholder's signature
below.
or to such other address as any party may designate for itself by notice given
as provided in this Agreement.
6. TERMINATION. This Agreement shall be terminated and
shall be of no further force and effect upon the termination of the
Reorganization Agreement pursuant to Article IX thereof.
7. BINDING AGREEMENT. This Agreement will inure to the
benefit of and be binding upon and enforceable against the parties and their
successors and assigns, including administrators, executors, representatives,
heirs, legatees and devisees of Shareholder and any pledgee holding Restricted
Securities as collateral.
8. WAIVER. No waiver by any party hereto of any
condition or of any breach of any provision of this Agreement shall be effective
unless in writing and signed by each party hereto.
9. GOVERNING LAW. This Agreement shall be governed by
and construed, interpreted and enforced in accordance with the laws of the State
of California (irrespective of its choice of law provisions).
10. ATTORNEYS' FEES. In the event of any legal action or
proceeding to enforce or interpret the provisions hereof, the prevailing party
shall be entitled to reasonable attorneys' fees, whether or not the proceeding
results in a final judgment.
11. EFFECT OF HEADINGS. The section headings herein are
for convenience only and shall not affect the construction or interpretation of
this Agreement.
12. COUNTERPARTS. This Agreement shall be executed in one
or more counterparts, each of which shall be deemed an original, and all of
which together shall constitute one instrument.
5.
<PAGE> 172
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed as of the day and year first above written.
GIGA-TRONICS, INC.
By: __________________________
Name:
Title: Chief Executive Officer
SHAREHOLDER:
________________________________
Name:
Address:
________________________________
________________________________
ASCOR ACQUISITION CORP.
By: __________________________
Name:
Title: Chief Executive Officer
ASCOR, INC.
By: __________________________
Name:
Title: President
6.
<PAGE> 173
APPENDIX A
RESTRICTED SECURITIES
<TABLE>
<CAPTION>
Number of Shares
----------------
<S> <C>
ASCOR Common Stock .................................... _______________________
ASCOR Preferred Stock.................................. _______________________
</TABLE>
________________________________________________________________________________
Options or Warrants to Purchase ASCOR Stock
__________________________________________________ __________________
__________________________________________________ __________________
__________________________________________________ __________________
7.
<PAGE> 174
AGREEMENT AND PLAN OF REORGANIZATION
EXHIBIT 6.08
FORM OF GIGA-TRONICS AFFILIATES AGREEMENT
THIS AFFILIATES AGREEMENT (the "Agreement") is entered into as
of this __ day of May, 1996 among GIGA-TRONICS, INC., a California corporation
("Giga-tronics"), the undersigned shareholder ("Shareholder") of GIGA-TRONICS,
ASCOR ACQUISITION CORP., a California corporation and wholly owned subsidiary of
Giga-tronics ("MERGER SUB") and ASCOR, INC., a California corporation ("ASCOR").
This Agreement is entered into in connection with that certain
Agreement and Plan of Reorganization dated as of May __, 1996 (the
"Reorganization Agreement") among Giga-tronics, Merger Sub, and ASCOR. The
Reorganization Agreement provides for the merger (the "Merger") of Merger Sub
with and into ASCOR in a transaction in which issued and outstanding shares of
common stock, no par value, and preferred stock, no par value of ASCOR (the
"ASCOR Stock") will be exchanged for shares of common stock, no par value of
Giga-tronics (the "Giga-tronics Stock") on the terms and conditions set forth in
the Reorganization Agreement. Capitalized terms used herein and not defined
herein shall have their defined meanings as set forth in the Reorganization
Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
mutual representations, warranties and covenants set forth herein, the parties
agree as follows:
1. TAX AND ACCOUNTING TREATMENT. Shareholder understands
and agrees that it is intended that the Merger will be treated as a
"reorganization" for federal income tax purposes and as a "pooling of interests"
in accordance with generally accepted accounting principals and the applicable
General Rules and Regulations published by the Securities and Exchange
Commission (the "SEC"). Shareholder further understands and agrees that
Shareholder may be deemed to be an "Affiliate" of Giga-tronics within the
meaning of Rule 145 ("Rule 145") promulgated under the Securities Act of 1933,
as amended (the "Securities Act"), although nothing contained herein should be
construed as an admission of such fact.
2. RELIANCE UPON REPRESENTATIONS, WARRANTIES AND
COVENANTS. Shareholder has been informed that the treatment of the Merger as a
reorganization for federal income tax purposes requires that a sufficient number
of shareholders of Giga-tronics maintain a meaningful continuing equity
ownership interest in Giga-tronics after the Merger. Shareholder understands
that the representations, warranties and covenants of the Shareholder set forth
herein will be relied upon by Giga-tronics, ASCOR, and agrees that their
respective counsel and accounting firms and other shareholders of ASCOR shall be
entitled to rely thereon.
1.
<PAGE> 175
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF
SHAREHOLDER. Shareholder represents, warrants and covenants as follows:
(a) Shareholder has full power and authority to
execute this Agreement, to make the representations, warranties and
covenants herein contained and to perform Shareholder's obligations
hereunder.
(b) Appendix A attached hereto sets forth all
shares of Giga-tronics stock owned by Shareholder, including all
Giga-tronics stock as to which Shareholder has sole or shared voting or
investment power and all rights and options to acquire Giga-tronics
stock.
(c) Shareholder will not sell, transfer,
exchange, pledge, or otherwise dispose of, or make any offer or
agreement relating to any of the foregoing with respect to, any shares
of Giga-tronics Stock that Shareholder may acquire in connection with
the Merger, or any securities that may be paid as a dividend or
otherwise distributed thereon or with respect thereto or issued or
delivered in exchange or substitution therefor (all such shares and
other securities of Giga-tronics being herein sometimes collectively
referred to as "Restricted Securities"), or any option, right or other
interest with respect to any Restricted Securities, unless (i) such
transaction is permitted pursuant to Rule 144 and 145(d) under the
Securities Act, (ii) counsel representing Shareholder shall have
advised Giga-tronics in a written opinion letter satisfactory to
Giga-tronics and Giga-tronics's legal counsel, and upon which
Giga-tronics and its legal counsel may rely, that no registration under
the Securities Act would be required in connection with the proposed
sale, transfer or other disposition, (iii) a registration statement
under the Securities Act covering the Giga-tronics Stock proposed to be
sold, transferred or otherwise disposed of, describing the manner and
terms of the proposed sale, transfer or other disposition, and
containing a current prospectus, shall have been filed with the SEC and
made effective under the Securities Act, or (iv) an authorized
representative of the SEC shall have rendered written advice to
Shareholder (sought by Shareholder or counsel to Shareholder, with a
copy thereof and all other related communications delivered to
Giga-tronics) to the effect that the SEC would take no action, or that
the staff of the SEC would not recommend that the SEC take action, with
respect to the proposed disposition if consummated.
(d) Notwithstanding any other provision of this
Agreement to the contrary, Shareholder will not sell, transfer,
exchange, pledge or otherwise dispose of, or in any other way reduce
Shareholder's risk of ownership or investment in, or make any offer or
agreement relating to any of the foregoing with respect to any
Giga-tronics stock or any rights, options or warrants to purchase
Giga-tronics stock, or other securities of Giga-tronics (i) during the
30-day period immediately preceding the Effective Time of the Merger
and (ii) until such time after the Effective Time of the Merger as
Giga-tronics has publicly released a report including the combined
2.
<PAGE> 176
financial results of Giga-tronics and ASCOR for a period of at least 30
days of combined operations of Giga-tronics and ASCOR within the
meaning of Accounting Series Release No. 130, as amended, of the SEC.
Giga-tronics agrees to publish such financial results expeditiously in
a manner consistent with its prior practices; provided that nothing
contained herein shall obligate Giga-tronics to publish its financial
results other than on a quarterly basis.
(e) Shareholder has, and as of the Effective
Time of the Merger will have, no plan or intention (a "Plan") to sell,
transfer, exchange, pledge (other than in a pre-existing bona fide
margin account) or otherwise dispose of (any of the foregoing, a
"Sale"), more than fifty percent (50%) of the shares of Giga-tronics
Stock that Shareholder may acquire in connection with the Merger, or
any securities that may be paid as a dividend or otherwise distributed
thereon or with respect thereto or issued or delivered in exchange or
substitution therefor. Sale shall also be deemed to include a
distribution by a partnership to its partners, or a corporation to its
shareholders, or any other transaction which results in a reduction in
the risk of ownership. Shareholder is not aware of, or participating
in, any Plan on the part of ASCOR shareholders to engage in Sales of
the shares of Giga-tronics Stock to be issued in the Merger such that
the aggregate fair market value, as of the Effective Time of the
Merger, of the shares subject to such Sales would exceed fifty percent
(50%) of the aggregate fair market value of all shares of outstanding
ASCOR Stock immediately prior to the Merger. For purposes of the
preceding sentence, shares of ASCOR Stock (i) with respect to which
dissenters' rights are exercised, (ii) which are exchanged for cash in
lieu of fractional shares of Giga-tronics Stock or (iii) with respect
to which a pre-Merger Sale occurs in a transaction that is in
contemplation of, or related or pursuant to, the Merger or the
Reorganization Agreement, shall be considered to be shares of ASCOR
Stock that are exchanged for Giga-tronics Stock in the Merger and then
disposed of pursuant to a Plan. If any of Shareholder's representations
in this Section 3(e) ceases to be true at any time prior to the
Effective Time of the Merger, Shareholder will deliver to each of ASCOR
and Giga- tronics, prior to the Effective Time of the Merger, a written
statement to that effect, signed by Shareholder.
4. RULE 144 AND 145. From and after the Effective Time
of the Merger and for so long as is necessary in order to permit Shareholder to
sell the Giga-tronics Stock held by and pursuant to Rule 144 under the
Securities Act, Giga-tronics will use its best efforts to file on a timely basis
all reports required to be filed by it pursuant to Section 13 of the Securities
Exchange Act of 1934, as amended, referred to in paragraph (c)(1) of Rule 144
under the Securities Act, in order to permit Shareholder to sell the
Giga-tronics Stock held by it pursuant to the terms and conditions of Rule 144.
Shareholder understands that, except as set forth in the Reorganization
Agreement and the Registration Rights Agreement, Giga-tronics is under no
obligation to register the sale, transfer or other disposition of any Restricted
Securities by or on behalf of Shareholder or to take any other action necessary
in order to make compliance with an exemption from registration available.
3.
<PAGE> 177
5. NOTICES. Any notice or communication required or
permitted by this Agreement shall be deemed sufficiently given if in writing
and, if delivered personally, when it is delivered or, if delivered in another
manner, the earlier of when it is actually received by the party to whom it is
directed or when the period set forth below expires (whether or not it is
actually received):
A. if deposited with the U.S. Postal Service, postage
prepaid, and addressed to the party to receive it as set forth below, 48 hours
after such deposit as registered or certified mail; or
B. if accepted by Federal Express or a similar delivery
service in general usage for delivery to the address of the party to receive it
as set forth next below, 24 hours after the delivery time promised by the
delivery service.
Giga-tronics and Merger Sub:
Giga-tronics, Inc.
4650 Norris Canyon Road
San Ramon, CA 94583
Attention: George H. Bruns, Jr.
Chief Executive Officer
Facsimile: (510) 328-4700
With copy to:
Brobeck, Phleger & Harrison
Spear Street Tower
One Market Plaza
San Francisco, CA 94105
Attention: William L. Hudson, Esq.
Facsimile: (415) 442-1010
ASCOR:
ASCOR, Inc.
47790 Westinghouse Drive
Fremont, CA 94539
Attention: Jeffrey Lum
President
Facsimile: (510) 490-8493
4.
<PAGE> 178
With copy to:
Brian Fraser
Attorney-at-Law
6114 La Salle Avenue, Suite 646
Oakland, CA 94611
Facsimile: (510) 839-3461
If to Shareholder:
At the address set forth beneath the Shareholder's signature
below.
or to such other address as any party may designate for itself by notice given
as provided in this Agreement.
6. TERMINATION. This Agreement shall be terminated and
shall be of no further force and effect upon the termination of the
Reorganization Agreement pursuant to Article IX thereof.
7. BINDING AGREEMENT. This Agreement will inure to the
benefit of and be binding upon and enforceable against the parties and their
successors and assigns, including administrators, executors, representatives,
heirs, legatees and devisees of Shareholder and any pledgee holding Restricted
Securities as collateral.
8. WAIVER. No waiver by any party hereto of any
condition or of any breach of any provision of this Agreement shall be effective
unless in writing and signed by each party hereto.
9. GOVERNING LAW. This Agreement shall be governed by
and construed, interpreted and enforced in accordance with the laws of the State
of California (irrespective of its choice of law provisions).
10. ATTORNEYS' FEES. In the event of any legal action or
proceeding to enforce or interpret the provisions hereof, the prevailing party
shall be entitled to reasonable attorneys' fees, whether or not the proceeding
results in a final judgment.
11. EFFECT OF HEADINGS. The section headings herein are
for convenience only and shall not affect the construction or interpretation of
this Agreement.
12. COUNTERPARTS. This Agreement shall be executed in one
or more counterparts, each of which shall be deemed an original, and all of
which together shall constitute one instrument.
5.
<PAGE> 179
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed as of the day and year first above written.
GIGA-TRONICS, INC.
By: ___________________________
Name:
Title: Chief Executive Officer
SHAREHOLDER:
__________________________________
Name:
Address:
__________________________________
__________________________________
ASCOR ACQUISITION CORP.
By: ___________________________
Name:
Title: Chief Executive Officer
ASCOR, INC.
By: ___________________________
Name:
Title: President
6.
<PAGE> 180
APPENDIX A
RESTRICTED SECURITIES
<TABLE>
<CAPTION>
Number of Shares
----------------
<S> <C>
ASCOR Common Stock .................................... _______________________
ASCOR Preferred Stock.................................. _______________________
</TABLE>
________________________________________________________________________________
Options or Warrants to Purchase ASCOR Stock
__________________________________________________ __________________
__________________________________________________ __________________
__________________________________________________ __________________
7.
<PAGE> 181
AGREEMENT AND PLAN OF REORGANIZATION
EXHIBIT 10.01
GIGA-TRONICS, INC.
REGISTRATION RIGHTS AGREEMENT
JUNE ___, 1996
<PAGE> 182
TABLE OF CONTENTS
PAGE
SECTION 1. Amendment..................................................... 1
1.1 Amendment and Waiver.......................................... 1
1.2 Effect of Amendment or Waiver................................. 1
SECTION 2. Registration Rights........................................... 2
2.1 Definitions................................................... 2
2.2 Requested Registration........................................ 2
2.3 Company Registration.......................................... 4
2.4 Obligations of the Company.................................... 4
2.5 Furnish Information........................................... 5
2.6 Expenses of Demand Registration............................... 5
2.7 Expenses of Company Registration.............................. 6
2.8 Underwriting Requirements..................................... 6
2.9 Delay of Registration......................................... 7
2.10 Indemnification............................................... 7
2.11 Reports Under Securities Exchange Act of 1934................. 9
2.12 Assignment of Registration Rights............................. 9
2.13 Limitations on Subsequent Registration Rights................. 9
2.14 Termination of Registration Rights............................ 10
SECTION 3. Miscellaneous................................................. 10
3.1 Assignment.................................................... 10
3.2 Third Parties................................................. 10
3.3 Governing Law................................................. 10
3.4 Counterparts.................................................. 10
3.5 Notices....................................................... 10
3.6 Severability.................................................. 11
3.7 Rights of Holders............................................. 11
3.8 Delays or Omissions........................................... 11
3.9 Attorney's Fees............................................... 11
i.
<PAGE> 183
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into as
of the ____ day of [June] 1996, by and among Giga-tronics, Inc., a California
corporation (the "Company") and the shareholders who are former shareholders
(the "Ascor Shareholders") of Ascor, Inc., a California corporation ("Ascor") .
RECITALS
WHEREAS, as of the date hereof each of the Ascor Shareholders
owns the number of shares of the Company's Common Stock (the "Common Stock") set
forth opposite its name on Exhibit A hereto;
WHEREAS, the Ascor Shareholders received such Company Common
Stock pursuant to the Merger of Ascor with Ascor Acquisition Corporation, a
wholly-owned subsidiary of the Company pursuant to the terms of that certain
Agreement and Plan of Reorganization dated as of May ___, 1996 (the "Merger
Agreement") by and among the Company Ascor Acquisition Corp. And Ascor; and
WHEREAS, the execution of this Agreement by the Company is a
condition to the obligations of Ascor under the Merger Agreement and the Company
has agreed to execute this Agreement and grant to the Ascor Shareholders the
rights contained herein in order to fulfill such condition.
NOW, THEREFORE, the parties agree as follows:
SECTION 1. Amendment
1.1 Amendment and Waiver. Except as expressly provided in this
Agreement, neither this Agreement nor any term hereof may be amended, waived,
discharged or terminated other than upon the written consent of all of (i) the
Company and (ii) the Holders of at least a majority of the Registrable
Securities. Any amendment or waiver effected in accordance with this paragraph
shall be binding upon each Holder of Registrable Securities and the Company. In
the event that an underwriting agreement is entered into between the Company and
any Holder, and such underwriting agreement contains terms differing from this
Agreement as to any such Holder, the terms of such underwriting agreement shall
govern.
1.2 Effect of Amendment or Waiver. Without limiting the provisions
of Section 1.1 hereof, the Investors and their successors and assigns
acknowledge that by the operation of Section 3.7 hereof the holders of a
majority of the outstanding Registrable Securities, acting in conjunction with
the Company, will have the right and power to diminish or eliminate all rights
pursuant to this Agreement
1.
<PAGE> 184
SECTION 2. Registration Rights
2.1 Definitions. As used in this Agreement:
(a) The terms "register," "registered," and
"registration" refer to a registration effected by preparing and filing a
registration statement in compliance with the Securities Act of 1933, as amended
(the "Securities Act") and the subsequent declaration or ordering of the
effectiveness of such registration statement.
(b) The term "Registrable Securities" means:
(i) the shares of Common Stock issuable to the
Ascor Shareholder upon consummation of the Merger; and
(ii) any other shares of Common Stock issued as
(or issuable upon the conversion or exercise of any warrant, right or other
security which is issued as) a dividend or other distribution with respect to,
or in exchange for or in replacement of, the Registrable Securities, excluding
in all cases, however, any Registrable Securities sold by a person in a
transaction in which his or her rights under this Agreement are not assigned;
provided, however, that Common Stock or other securities shall only be treated
as Registrable Securities if and so long as they have not been (A) sold to or
through a broker or dealer or underwriter in a public distribution or a public
securities transaction, or (B) sold, assigned or otherwise transferred in a
transaction in which the rights under this Section 2 have not been assigned in
accordance with Section 2.13.
(c) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities.
(d) The term "Holder" means any person owning of record
Registrable Securities who acquired such Registrable Securities in a transaction
or series of transactions not involving any registered public offering.
(e) Capitalized terms used but not defined in this
Agreement shall have the meanings attributed to them in the Merger Agreement.
2.2 Requested Registration.
(a) If the Company shall receive at any time after
results covering at least thirty (30) days of combined operations of the Company
and Ascor have been published by the Company in the form of a quarterly earnings
report, an effective registration statement filed with the Securities and
Exchange Commission (the "Commission"), a report to the Commission on Form 10-K,
10-Q or 8-K, or any other
2.
<PAGE> 185
public filing or announcement which includes the combined results of operation,
a written request from one or more Holders that the Company file a registration
statement under the Securities Act covering the registration of at least 200,000
Registrable Securities (as such number may be adjusted from time to time for
stock dividends, splits or other changes in the capitalization of the Company)
or a lesser number if the anticipated aggregate offering price, net of
underwriting discounts and commissions, would exceed $1,000,000, then the
Company shall, within ten (10) days of the receipt thereof, give written notice
of such request to all Holders and shall, subject to the limitations of
subsection 2.2(b), use all reasonable efforts to file and cause the
effectiveness of, within 90 days of the receipt of such request, the
registration under the Securities Act of all Registrable Securities which the
Holders request to be registered within twenty (20) days of the mailing of such
notice by the Company in accordance with Section 3.5.
(b) If the Holders initiating the registration request
hereunder ("Initiating Holders") intend to distribute the Registrable Securities
covered by their request by means of an underwriting, they shall so advise the
Company as a part of their request made pursuant to this Section 2.2 and the
Company shall include such information in the written notice referred to in
subsection 2.2(a). The underwriter will be selected by the Company and shall be
reasonably acceptable to a majority in interest of the Initiating Holders;
provided, however, that if the Company is not also intending to sell any shares
under such Registration Statement, then the underwriter will be selected by a
majority in interest of the Initiating Holders and shall be reasonably
acceptable to the Company. In such event, the right of any Holder to include his
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall (together with the Company as provided in subsection
2.4(e)) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting. Notwithstanding any
other provision of this Section 2.2, if the underwriter advises the Initiating
Holders in writing that marketing factors require a limitation of the number of
shares to be underwritten, then the Initiating Holders shall so advise all
Holders of Registrable Securities which would otherwise be underwritten pursuant
hereto, and the number of shares of Registrable Securities that may be included
in the underwriting shall be allocated among all Holders thereof, including the
Initiating Holders, in proportion (as nearly as practicable) to the amount of
Registrable Securities of the Company owned by each Holder.
(c) The Company is obligated to effect only one (1) such
registration pursuant to this Section 2.2. The Company shall be obligated to
maintain the effectiveness of any registration statement filed pursuant to this
Section 2.2 for no more than 180 days subsequent to declaration of its
effectiveness by the Commission.
3.
<PAGE> 186
(d) Notwithstanding the foregoing, if the Company shall
furnish to Holders requesting a registration statement pursuant to this Section
2.2, a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its shareholders for such registration
statement to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer such filing
for a period of not more than one hundred and twenty (120) days after receipt of
the request of the Initiating Holders; provided, however, that the Company may
not utilize this right more than twice in total.
2.3 Company Registration. If (but without any obligation to do so
under this Agreement) the Company proposes to register (including for this
purpose a registration effected by the Company for shareholders other than the
Holders) any of its Common Stock or other securities under the Securities Act in
connection with the public offering of such securities solely for cash (other
than a registration relating either to the sale of securities to participants in
a Company stock option, stock purchase or similar plan or to an SEC Rule 145
transaction, or a registration on any form which does not include substantially
the same information as would be required to be included in a registration
statement covering the sale of the Registrable Securities), the Company shall,
at such time, promptly give each Holder written notice of such registration.
Upon the written request of each Holder given within twenty (20) days after
mailing of such notice by the Company in accordance with Section 3.5, the
Company shall, subject to the provisions of Section 2.8, cause to be registered
under the Securities Act all of the Registrable Securities that each such Holder
has requested to be registered.
2.4 Obligations of the Company. Whenever required under this
Section 2 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become effective, and, upon the request
of the Holders of a majority of the Registrable Securities registered
thereunder, keep such registration statement effective for up to one hundred
eighty (180) days.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
4.
<PAGE> 187
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or, except as required under
the Securities Act, to file a general consent to service of process in any such
states or jurisdictions.
(e) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered
by such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Cause all such Registrable Securities registered
pursuant hereunder to be listed on each securities exchange or automated
quotation system on which similar securities issued by the Company are then
listed.
2.5 Furnish Information.
(a) It shall be a condition precedent to the obligations
of the Company to take any action pursuant to this Section 2 with respect to the
Registrable Securities of any selling Holder that such Holder shall furnish to
the Company such information regarding itself, the Registrable Securities held
by it, and the intended method of disposition of such securities as shall be
required to effect the registration of such Holder's Registrable Securities.
(b) The Company shall have no obligation with respect to
any registration requested pursuant to Section 2.2 or Section 2.12 if, due to
the failure of sufficient Holders to satisfy the condition precedent set forth
in subsection 2.5(a), the number of shares or the anticipated aggregate offering
price of the Registrable Securities to be included in the registration does not
equal or exceed the number of shares or the anticipated aggregate offering price
required to originally trigger the Company's obligation to initiate such
registration as specified in subsection 2.2(a) or subsection 2.12(b)(2),
whichever is applicable.
2.6 Expenses of Demand Registration. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or
5.
<PAGE> 188
qualifications pursuant to Section 2.2, including (without limitation), all
registration, filing and qualification fees, printers and accounting fees, fees
and disbursements of counsel for the Company, and the reasonable fees and
disbursements of up to $25,000 for one (but only one) counsel for the selling
Holders shall be borne by the Company.
2.7 Expenses of Company Registration. The Company shall bear and
pay all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 2.3 for each Holder (which right may be assigned as provided
in Section 2.13), including (without limitation) all registration, filing, and
qualification fees, printers and accounting fees relating or apportionable
thereto, but excluding the fees and disbursements of counsel for the selling
Holders and underwriting discounts and commissions relating to Registrable
Securities.
2.8 Underwriting Requirements. In connection with any offering
involving an underwriting of shares being issued by the Company, the Company
shall not be required under Section 2.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it, and then
only in such quantity as will not, in the opinion of the underwriters,
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by shareholders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters reasonably believe compatible with the success
of the offering, then the Company shall be required to include in the offering
only that number of such securities, including Registrable Securities, which the
underwriters believe will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata among the selling shareholders
according to the total amount of securities entitled to be included therein
owned by each selling shareholder or in such other proportions as shall mutually
be agreed to by such selling shareholders, provided that the number of shares of
Registrable Securities to be included in any such offering shall not be reduced
unless all other securities held by persons other than the Holders or the
Company are first entirely excluded from the underwriting); but in no event
shall the amount of securities of the selling Holders included in the offering
be reduced below twenty percent (20%) of the total amount of securities included
in such offering. For purposes of the preceding parenthetical concerning
apportionment, for any selling shareholder which is a holder of Registrable
Securities and which is a partnership or corporation, the partners, retired
partners and shareholders of such holder, or the estates and family members of
any such partners and retired partners and any trusts for the benefit of any of
the foregoing persons shall be deemed to be a single "selling shareholder," and
any pro rata reduction with respect to such "selling shareholder" shall be based
upon the aggregate amount of shares carrying registration rights owned by all
entities and individuals included in such "selling shareholder," as defined in
this sentence.
6.
<PAGE> 189
2.9 Delay of Registration. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 2.
2.10 Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 2:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, any underwriter (as defined in the
Securities Act) for such Holder and each person, if any, who controls such
Holder or underwriter within the meaning of the Securities Act or the Securities
Exchange Act of 1934, as amended (the "1934 Act"), against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the Securities Act, the 1934 Act or other federal or state law, insofar as
such losses, claims, damages, or liabilities (or actions in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"): (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) 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, or (iii) any violation or alleged
violation by the Company of the Securities Act, the 1934 Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the 1934 Act or any state securities law; and the Company will pay as incurred
to each such Holder, underwriter or controlling person, any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this subsection 2.10(a) shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability,
or action if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld), nor shall the Company be
liable in any such case for any such loss, claim, damage, liability, or action
to the extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by any such Holder, underwriter or
controlling person.
(b) To the extent permitted by law, each selling Holder
will indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Securities Act, any underwriter,
any other Holder selling securities in such registration statement and any
controlling person of any such underwriter or other Holder, against any losses,
claims, damages, or liabilities (joint or several) to which any of the foregoing
persons may become subject, under the Securities Act, the 1934 Act or other
federal or state law, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereto) arise out of or are based upon any Violation, in
each case to
7.
<PAGE> 190
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such Holder expressly
for use in connection with such registration; and each such Holder will pay, as
incurred, any legal or other expenses reasonably incurred by any person intended
to be indemnified pursuant to this subsection 2.10(b), in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this subsection
2.10(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Holder, which consent shall not be unreasonably withheld.
(c) Promptly after receipt by an indemnified party under
this Section 2.10 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 2.10, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 2.10, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section
2.10.
(d) No indemnifying party, in the defense of any claim
arising out of a Violation shall, except with the consent of each indemnified
party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation and, in the event the terms of such judgment or
settlement include any term other than the payment by the indemnifying party of
money damages, the indemnifying party shall not so consent or enter into such a
settlement without the consent of each indemnified party (which will not be
unreasonably withheld) whether or not the terms thereof include such a release.
(e) The obligations of the Company and Holders under this
Section 2.10 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 2, and otherwise.
8.
<PAGE> 191
(f) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
2.11 Reports Under Securities Exchange Act of 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Securities Act and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the Company to the public without
registration the Company agrees to file with the SEC in a timely manner all
reports and other documents required of the Company under the Securities Act and
the 1934 Act.
2.12 Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Section 2 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of such securities who, after such assignment or transfer, holds (i) at
least 1% of the Registrable Securities then outstanding (subject to appropriate
adjustment for stock splits, stock dividends, combinations and other
recapitalizations), or (ii) all of the shares of Registrable Securities held by
such Holder, provided that, within a reasonable time after such transfer, the
Company is furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned; and provided, further, that such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the Securities Act. For the purposes of determining the number
of shares of Registrable Securities held by a transferee or assignee, the
holdings of transferees and assignees of a partnership who are partners or
retired partners of such partnership (including spouses and ancestors, lineal
descendants and siblings of such partners or spouses who acquire Registrable
Securities by gift, will or intestate succession) shall be aggregated together
and with the partnership; provided that all assignees and transferees who would
not qualify individually for assignment of registration rights shall have a
single attorney-in-fact for the purpose of exercising any rights, receiving
notices or taking any action under this Section 2.
2.13 Limitations on Subsequent Registration Rights. From and after
the date of this Agreement, the Company shall not, without the prior written
consent of the Holders of a majority of the outstanding Registrable Securities,
enter into any agreement with any holder or prospective holder of any securities
of the Company which would allow such holder or prospective holder (a) to
include such securities in any registration filed under Section 2.2 hereof,
unless under the terms of such agreement, such holder or prospective holder may
include such securities in any such registration only to the extent that the
inclusion of his securities will not reduce the amount of the Registrable
Securities of the Holders which is included or (b) to make a demand registration
which could result in such registration statement being declared effective prior
to the earlier of
9.
<PAGE> 192
the date set forth in subsection 2.2(a) or within one hundred twenty (120) days
of the effective date of any registration effected pursuant to Section 2.2.
2.14 Termination of Registration Rights. No Holder shall be
entitled to exercise any right provided for in this Section 2:
(a) if the Registrable Securities were issued by
Giga-tronics to the Holder pursuant to a registration statement filed with the
SEC; or
(b) at and after such time as such Holder holds
Registrable Securities equal to 1% or less of the outstanding stock of the
Company (calculated on an as-converted basis) and is able to dispose of all the
Registrable Securities held by such Holder under Rule 144 during any 90-day
period.
SECTION 3. Miscellaneous
3.1 Assignment. Subject to the provisions of Section 2.13 hereof,
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties hereto.
3.2 Third Parties. Nothing in this Agreement, express or implied,
is intended to confer upon any party, other than the parties hereto, and their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
herein.
3.3 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of California in the United States of
America as applied to agreements among California residents entered into and to
be performed entirely within California.
3.4 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.
3.5 Notices. Any notice or communication required or permitted by
this Agreement shall be deemed sufficiently given if in writing and, if
delivered personally, when it is delivered or, if delivered in another manner,
the earlier of when it is actually received by the party to whom it is directed
or when the period set forth below expires (whether or not it is actually
received):
A. if deposited with the U.S. Postal Service, postage
prepaid, and addressed to the party to receive it as set forth below their
signatures, 48 hours after such deposit as registered or certified mail; or
10.
<PAGE> 193
B. if accepted by Federal Express or a similar delivery
service in general usage for delivery to the address of the party to receive it
as set forth next below their signatures, 24 hours after the delivery time
promised by the delivery service.
3.6 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, portions of such provisions, or
such provisions in their entirety, to the extent necessary, shall be severed
from this Agreement, and the balance of this Agreement shall be enforceable in
accordance with its terms.
3.7 Rights of Holders. Each holder of Registrable Securities shall
have the absolute right to exercise or refrain from exercising any right or
rights that such holder may have by reason of this Agreement, including, without
limitation, the right to consent to the waiver or modification of any obligation
under this Agreement, and such holder shall not incur any liability to any other
holder of any securities of the Company as a result of exercising or refraining
from exercising any such right or rights.
3.8 Delays or Omissions. No delay or omission to exercise any
right, power or remedy accruing to any party to this Agreement, upon any breach
or default of the other party, shall impair any such right, power or remedy of
such non-breaching party nor shall it be construed to be a waiver of any such
breach or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any party of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be made in writing and shall be effective
only to the extent specifically set forth in such writing. All remedies, either
under this Agreement, or by law or otherwise afforded to any holder, shall be
cumulative and not alternative.
3.9 Attorney's Fees. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorney's fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.
11.
<PAGE> 194
IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights Agreement as of the day and year first above written.
GIGA-TRONICS, INC.
By: __________________________
Chief Executive Officer
Address: Giga-tronics, Inc.
4650 Norris Canyon Road
San Ramon, CA 94583
Attention: George H. Bruns, Jr.
Facsimile: (510) 328-4700
ASCOR, INC.
By: ________________________
President
Address: Ascor, Inc.
47790 Westinghouse Drive
Fremont, CA 94539
Attention: Jeffrey Lum
Facsimile: (510) 490-8493
ASCOR SHAREHOLDER
_______________________
Name
_______________________
By
Address: _______________________
_______________________
<PAGE> 195
ANNEX D
Articles of Incorporation
of
ASCOR Acquisition Corp.
<PAGE> 196
ARTICLES OF INCORPORATION
OF
Ascor Acquisition Corp.
The undersigned incorporator, for the purpose of forming a
corporation under the General Corporation Law of the State of California, hereby
declares:
ONE. The name of the Corporation is Ascor Acquisition Corp.
TWO. The purpose of the Corporation is to engage in any lawful act
or activity for which a corporation may be organized under the General
Corporation Law of California other than the banking business, the trust company
business or the practice of a profession permitted to be incorporated by the
California Corporations Code.
THREE. The name and complete business address in this state of the
Corporation's initial agent for service of process is:
Mr. Greg Overholzer
c/o Giga-Tronics Incorporated
4650 Norris Canyon Road
San Ramon, California 94583
FOUR. The Corporation is authorized to issue One Thousand (1,000)
shares of Common Stock of one class.
<PAGE> 197
FIVE. The liability of the directors of the Corporation for monetary
damages shall be eliminated to the fullest extent permissible under California
law.
SIX. The Corporation is authorized to indemnify the directors and
officers of the Corporation to the fullest extent permissible under California
law.
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Incorporation.
_________________________________________
, Incorporator
2.
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ANNEX E
GIGA-TRONICS
FINANCIAL ADVISOR
OPINION LETTER
<PAGE> 199
ANNEX E
WOOD, WARREN & CO.
May 2, 1996
Board of Directors
Giga-tronics Incorporated
4650 Norris Canyon Road
San Ramon, CA 94583
Dear Sirs:
You have requested our opinion as to the fairness from a financial
point of view to Giga-tronics Incorporated ("Giga-tronics" or the "Company") of
the Exchange Ratio (defined below) to be applied in connection with the proposed
merger of Giga-tronics and ASCOR Incorporated ("ASCOR") (the "Merger").
Giga-tronics and ASCOR have entered into an Agreement and Plan of Merger
("Merger Agreement") pursuant to which a newly created wholly owned subsidiary
of the Company would be merged into ASCOR, whereby ASCOR would continue to
operate as a wholly owned subsidiary of the Company, and each share of ASCOR
common stock would be converted into the right to receive Giga-tronics common
stock based on the quotient of (i) 724,986 shares of Giga-tronics common stock,
divided by (ii) the total number of ASCOR shares outstanding at the time the
Merger shall become effective, which is expected to be approximately 14,500,000
shares. The quotient based on 14,500,000 ASCOR shares outstanding would be
.0500, and will change less than 1/100th based on the actual number of ASCOR
shares outstanding when the Merger becomes effective. The terms and conditions
of the Merger are set forth in more detail in the Giga-tronics proxy statement
dated May 2, 1996 ("Proxy Statement").
In arriving at our opinion, we: (1) reviewed the Merger Agreement and
the Proxy Statement dated May 2, 1996 and such other information that was
publicly available or was furnished to us by the Company or ASCOR which we
believe to be relevant to our inquiry, (2) reviewed financial and operating
information with respect to the business operations and prospects of the Company
and ASCOR furnished to us by the Company and ASCOR, (3) prepared a discounted
cash flow analysis of ASCOR, (4) considered the historical stock prices and
trading volumes of the common stock of the Company from calendar 1993 to the
present, and (5) reviewed the prices and premiums paid in other business
combinations. In addition, Wood, Warren & Co. held discussions with senior
management of Giga-tronics and ASCOR regarding the strategic rationale for, and
benefits of, the Merger and the past and current business operations, financial
condition and future prospects of the respective companies on a stand alone
basis and as combined in the Merger, and undertook such other financial
analyses and investigations as we deemed appropriate for purposes of this
opinion.
In rendering our opinion, we have relied upon and assumed, without
independent verification, the accuracy, completeness and fairness of all the
financial and other information that was available to us from public sources,
that was provided to us by the Company and ASCOR or that was otherwise reviewed
by us. We are not qualified to and did not evaluate the technical capabilities
of ASCOR's products or services. We have not
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assumed any responsibility for making any independent evaluation of the assets
or liabilities of the Company or ASCOR or for making any independent
verification of any of the information supplied to or reviewed by us.
Our opinion is necessarily based on economic, market, financial and
other conditions as they exist on, and on the information made available to us
as of, the date of this letter. Our opinion does not constitute a recommendation
to any shareholder as to how such shareholder should vote on the proposed
Merger. Our opinion does not address the underlying business decision of the
Company to enter into the Merger.
We are expressing no opinion as to what the value of Giga-tronics
common stock will actually be when issued pursuant to the Merger or the prices
at which the common stock will actually trade at any time.
Wood, Warren & Co., as part of its investment banking services, is
regularly engaged in the valuation of businesses and securities in connection
with mergers, acquisitions, private placements and valuations for corporate and
other purposes.
Based upon the foregoing and such factors as we deem relevant, we are
of the opinion that the Exchange Ratio to be applied in the Merger is fair to
the Company from a financial point of view.
Very truly yours,
Wood, Warren & Co.
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ANNEX E
FINANCIAL ADVISOR ANALYSIS
FOR OPINION LETTER
Giga-tronics engaged Wood, Warren & Co. to render an opinion as to the
fairness from a financial point of view to Giga-tronics of the Exchange Ratio
used in connection with the Merger. Wood, Warren & Co. rendered its written
opinion on May 2, 1996 to the Board of Directors of Giga-tronics that, as of
such date, the Exchange Ratio is fair from a financial point of view. Wood,
Warren & Co.'s opinion is directed only to the financial terms of the Merger
Agreement and does not constitute a recommendation to any stockholder of
Giga-tronics as to how such stockholder should vote at the Giga-tronics Special
Meeting. A copy of Wood, Warren & Co.'s opinion dated May 2, 1996 and the
procedures followed by Wood, Warren & Co., is attached hereto as Annex E pages
E-1 and E-2, and the summary of the complete opinion set forth in this Joint
Proxy Statement is qualified in its entirety by reference to the opinion.
Giga-tronics stockholders are advised to read the opinion in its entirety. No
limitations were placed on Wood, Warren & Co. by the Board of Directors of
Giga-tronics with respect to the investigation made or the procedures followed
in preparing and rendering its opinion.
In arriving at its opinion, Wood, Warren & Co.: (i) reviewed the Merger
Agreement and the Proxy Statement dated May 2, 1996 and such other information
that was publicly available or was furnished to it by the Company or ASCOR, (ii)
reviewed financial statements for the five years ending March 30, 1996 and other
financial information, including forecasts, and operating data of Giga-tronics
and ASCOR furnished to Wood, Warren & Co. by the companies, (iii) considered the
historical stock prices and trading volumes of the common stock of the Company,
(iv) reviewed the prices and premiums paid in other business combinations, (v)
and prepared a discounted cash flow analysis of ASCOR. In addition, Wood,
Warren & Co. held discussions with senior management of Giga-tronics and ASCOR
regarding the strategic rationale for, and benefits of, the Merger and the past
and current business operations, financial condition and future prospects of the
respective companies on a stand alone basis and as combined in the Merger, and
undertook such other financial analyses as it deemed appropriate for purposes of
this opinion.
The following paragraphs summarize the significant analyses performed
by Wood, Warren & Co. in arriving at its opinion. The information presented
below is based on the financial condition of the Company and ASCOR as of a date
or dates shortly before the date of its opinion (May 2, 1996). The closing price
of Giga-tronics common stock on May 2, 1996, as reported by NASDAQ National
Marketing System, was $8.25. Based on that price and the assumption that
Giga-tronics will issue the maximum 724,986 shares of its common stock in the
Merger, the enterprise value of ASCOR was approximately $5.6 million.
Analysis of Selected Transactions Analysis. Wood, Warren & Co.
compared the proposed Merger with selected merger and acquisition transactions.
This analysis included 32 technology company transactions. In examining these
transactions, Wood, Warren & Co. analyzed certain income statement and balance
sheet parameters of the acquired company relative to the consideration offered.
Multiples analyzed included consideration offered to historical revenue, to
historical earnings before interest and taxes, to historical net income, and to
historical book value. Based on the analysis of the selected merger and
acquisition transactions, ASCOR's implied enterprise value ranged from
approximately $5.0 million to approximately $16.7 million.
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Discounted Cash Flow Analysis. Wood, Warren & Co. analyzed the
theoretical valuation of ASCOR based on projections prepared by the managements
of Giga-tronics and ASCOR. To estimate the total present value of ASCOR's
business, Wood, Warren & Co. calculated a net present value of the free cash
flows for the fiscal years ended March 31, 1997 through 2001 using discount
rates ranging from 25% to 40%. The terminal value was based on multiples of 5.5
and 7.5 times projected earnings before interest and taxes for fiscal 2001.
Based on the discounted cash flow analysis, ASCOR's enterprise value ranged from
approximately $4.4 million to approximately $9.2 million.
Pro Forma Analysis. Wood, Warren & Co. analyzed the pro forma impact of
the proposed Merger on Giga-tronics earnings per share. In conducting its
analysis, Wood, Warren & Co. relied upon the financial projections for the
fiscal years ending March, 1997 through 2001 provided by the management of
Giga-tronics and ASCOR, respectively. The analysis indicated that earnings per
share of the pro forma combined company would be higher in the first fiscal year
after the Merger and higher thereafter through fiscal 2001 than comparable
projections for Giga-tronics as a stand-alone company.
Stock Trading History Analysis. Wood, Warren & Co. examined the trading
history in terms of both price and volume for periods of time ranging from six
months, one year, three years and five years. Wood, Warren & Co. noted that the
Giga-tronics' average price per share was $7.76, $7.65, $6.64, and $6.84,
respectively. In addition, Wood, Warren & Co. analyzed the volume of
Giga-tronics shares traded at different prices over the same time periods. Wood,
Warren & Co. noted that, for each period analyzed, approximately 48% to 64% of
the trading volume was at prices below the six month average price per share of
$7.76.
Contribution Analysis. Wood, Warren & Co. reviewed the contribution of
each of Giga-tronics and ASCOR to certain financial statement categories of the
pro forma combined company, including revenue, gross profit, earnings before
interest and taxes, and net income. The review was made for the three years
ended March 30, 1996. This contribution analysis was then compared to the pro
forma ownership percentage of ASCOR's shareholders (approximately 22%) in the
pro forma combined company. For the year ended March 1996 and the average of the
three year period, ASCOR contributed approximately 19% and 17% to revenues, 19%
and 18% to gross profit, 52% and 102% (based on the two fiscal years 1994 and
1996 because Giga-tronics had a loss in 1995) to earnings before interest and
taxes, and 45% and 64% to net income.
The preparation of a fairness opinion involves various determinations
as to the most appropriate and relevant quantitative and qualitative methods of
financial analyses and the application of those methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to
summary description. No company or transaction used in the above analysis is
closely comparable to Giga-tronics or ASCOR or the Merger. Accordingly, Wood,
Warren & Co., believes its analyses must be considered as a whole and that
considering any portion of such analyses and of the factors considered, without
considering all analyses and current factors, could create a misleading or
incomplete view of the process underlying the opinion. Any estimates contained
in these
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analyses are not necessarily indicative of actual values or predictive of future
results or values, which may be significantly more or less favorable than as set
forth therein. In addition, analyses relating to the value of businesses do not
purport to be appraisals or to reflect the prices at which businesses actually
may be sold.
In arriving at its opinion, Wood, Warren & Co. relied, without
independent verification, solely on the aforementioned information and
activities and did not obtain any independent appraisal of the properties or
assets of the Company or ASCOR. With respect to the financial projections
supplied to it, Wood, Warren & Co. assumed that such projections were reasonably
prepared on a basis reflecting the best currently available estimates and
judgments of management of Giga-tronics and ASCOR as to the future financial
performance of the companies. Wood, Warren & Co.'s opinion is necessarily based
upon market, financial, economic and other conditions existing, and the
information available to it, as of the date of its opinion. It should be
understood that, although subsequent developments may affect its opinion, Wood,
Warren & Co. does not have any obligation to update, review or reaffirm its
opinion.
Wood, Warren & Co. was formally engaged by the Board of Directors on
April 12, 1996 to render an opinion as to the fairness from a financial point of
view to Giga-tronics of the proposed Merger Exchange Ratio. Pursuant to the
engagement letter, Giga-tronics agreed to pay Wood, Warren & Co. a fee of
$29,950 of which $8,000 was to be paid upon the execution of the engagement
letter and $10,000 became due at the time the Proxy Statement was mailed to
stockholders and the balance is payable upon consummation of the Merger. The
obligation of the Company to pay such fees to Wood, Warren & Co. was not
contingent on whether the opinion of Wood, Warren & Co. was favorable or
unfavorable. In addition, the Company agreed to indemnify Wood, Warren & Co.,
against certain liabilities, including liabilities under the federal securities
laws, related to or arising out of its engagement. Wood, Warren & Co., as part
of its investment banking services, is regularly engaged in the valuation of
businesses and their securities in connection with mergers, acquisitions,
private placements and valuations for corporate reorganizations and other
purposes.
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ANNEX F
STATE OF
CALIFORNIA CODE
FOR DISSENTER'S RIGHTS
<PAGE> 205
1300. REORGANIZATION OR SHORT-FORM MERGER; DISSENTING SHARES; CORPORATE PURCHASE
AT FAIR MARKET VALUE; DEFINITIONS.
(a) If the approval of the outstanding shares (Section 152) of a
corporation is required for a reorganization under subdivisions (a) and (b) or
subdivision (e) or (f) of Section 1201, each shareholder of the corporation
entitled to vote on the transaction and each shareholder of a subsidiary
corporation in a short-form merger may, by complying with this chapter, require
the corporation in which the shareholder holds shares to purchase for cash at
their fair market value the shares owned by the shareholder which are dissenting
shares as defined in subdivision (b). The fair market value shall be determined
as of the day before the first announcement of the terms of the proposed
reorganization or short-form merger, excluding any appreciation or depreciation
in consequence of the proposed action, but adjusted for any stock split, reverse
stock split, or share dividend which becomes effective thereafter.
(b) As used in this chapter, "dissenting shares" means shares which
come within all of the following descriptions:
(1) Which were not immediately prior to the reorganization or
short-form merger either (A) listed on any national securities exchange
certified by the Commissioner of Corporations under subdivision (o) of Section
25100 or (B) listed on the list of OTC margin stocks issued by the Board of
Governors of the Federal Reserve System, and the notice of meeting of
shareholders to act upon the reorganization summarizes this section and Sections
1301, 1302, 1303 and 1304; provided, however, that this provision does not apply
to any shares with respect to which there exists any restriction on transfer
imposed by the corporation or by any law or regulation; and provided, further,
that this provision does not apply to any class of shares described in * * *
subparagraph (A) or (B) if demands for payment are filed with respect to 5
percent or more of the outstanding shares of that class.
(2) Which were outstanding on the date for the determination of
shareholders entitled to vote on the reorganization and (A) were not voted in
favor of the reorganization or, (B) if described in * * * subparagraph (A) or
(B) of paragraph (1) (without regard to the provisos in that paragraph), were
voted against the reorganization, or which were held of record on the effective
date of a short-form merger; provided, however, that * * * subparagraph (A)
rather than * * * subparagraph (B) of this paragraph applies in any case where
the approval required by Section 1201 is sought by written consent rather than
at a meeting.
(3) Which the dissenting shareholder has demanded that the corporation
purchase at their fair market value, in accordance with Section 1301.
(4) Which the dissenting shareholder has submitted for endorsement, in
accordance with Section 1302.
(c) As used in this chapter, "dissenting shareholder" means the
recordholder of dissenting shares and includes a transferee of record.
1301. NOTICE TO HOLDERS OF DISSENTING SHARES IN REORGANIZATIONS; DEMAND FOR
PURCHASE; TIME; contents.
(a) If, in the case of a reorganization, any shareholders of a
corporation have a right under Section 1300, subject to compliance with
paragraphs (3) and (4) of subdivision (b) thereof, to require the corporation to
purchase their shares for cash, such corporation
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shall mail to each such shareholder a notice of the approval of the
reorganization by its outstanding shares (Section 152) within 10 days after the
date of such approval, accompanied by a copy of Sections 1300, 1302, 1303, 1304
and this section, a statement of the price determined by the corporation to
represent the fair market value of the dissenting shares, and a brief
description of the procedure to be followed if the shareholder desires to
exercise the shareholder's right under such sections. The statement of price
constitutes an offer by the corporation to purchase at the price stated any
dissenting shares as defined in subdivision (b) of Section 1300, unless they
lose their status as dissenting shares under Section 1309.
(b) Any shareholder who has a right to require the corporation to
purchase the shareholder's shares for cash under Section 1300, subject to
compliance with paragraphs (3) and (4) of subdivision (b) thereof, and who
desires the corporation to purchase such shares shall make written demand upon
the corporation for the purchase of such shares and payment to the shareholder
in cash of their fair market value. The demand is not effective for any purpose
unless it is received by the corporation or any transfer agent thereof (1) in
the case of shares described in clause (i) or (ii) or paragraph (1) of
subdivision (b) of Section 1300 (without regard to the provisos in that
paragraph), not later than the date of the shareholders' meeting to vote upon
the reorganization, or (2) in any other case within 30 days after the date on
which the notice of the approval by the outstanding shares pursuant to
subdivision (a) or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder.
(c) The demand shall state the number and class of the shares held of
record by the shareholder which the shareholder demands that the corporation
purchase and shall contain a statement of what such shareholder claims to be the
fair market value of those shares as of the day before the announcement of the
proposed reorganization or short-form merger. The statement of fair market value
constitutes an offer by the shareholder to sell the shares at such price.
1302. SUBMISSION OF SHARE CERTIFICATES FOR ENDORSEMENT; UNCERTIFICATED
SECURITIES.
Within 30 days after the date on which notice of the approval by the
outstanding shares or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder, the shareholder shall submit to the corporation at
its principal office or at the office of any transfer agent thereof, (a) if the
shares are certificated securities, the shareholder's certificates representing
any shares which the shareholder demands that the corporation purchase, to be
stamped or endorsed with a statement that the shares are dissenting shares or to
be exchanged for certificates of appropriate denomination so stamped or endorsed
or (b) if the shares are uncertificated securities, written notice of the number
of shares which the shareholder demands that the corporation purchase. Upon
subsequent transfers of the dissenting shares on the books of the corporation,
the new certificates, initial transaction statement, and other written
statements issued therefor shall bear a like statement, together with the name
of the original dissenting holder of the shares.
1303. PAYMENT OF AGREED PRICE WITH INTEREST; AGREEMENT FIXING FAIR MARKET VALUE;
FILING; TIME OF PAYMENT.
(a) If the corporation and the shareholder agree that the shares are
dissenting shares and agree upon the price of the shares, the dissenting
shareholder is entitled to the agreed price with interest thereon at the legal
rate on judgments from the date of the agreement. Any agreements fixing the fair
market value of any dissenting shares as
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between the corporation and the holders thereof shall be filed with the
secretary of the corporation.
(b) Subject to the provisions of Section 1306, payment of the fair
market value of dissenting shares shall be made within 30 days after the amount
thereof has been agreed or within 30 days after any statutory or contractual
conditions to the reorganization are satisfied, whichever is later, and in the
case of certificated securities, subject to surrender of the certificates
therefor, unless provided otherwise by agreement.
1304. ACTION TO DETERMINE WHETHER SHARES ARE DISSENTING SHARES OR FAIR MARKET
VALUE; LIMITATION; JOINDER; CONSOLIDATION; DETERMINATION OF ISSUES; APPOINTMENT
OF APPRAISERS.
(a) If the corporation denies that the shares are dissenting shares, or
the corporation and the shareholder fail to agree upon the fair market value of
the shares, then the shareholder demanding purchase of such shares as dissenting
shares or any interested corporation, within six months after the date on which
notice of the approval by the outstanding shares (Section 152) or notice
pursuant to subdivision (i) of Section 1110 was mailed to the shareholder, but
not thereafter, may file a complaint in the superior court of the proper county
praying the court to determine whether the shares are dissenting shares or the
fair market value of the dissenting shares or both or may intervene in any
action pending on such a complaint.
(b) Two or more dissenting shareholders may join as plaintiffs or be
joined as defendants in any such action and two or more such actions may be
consolidated.
(c) On the trial of the action, the court shall determine the issues.
If the status of the shares as dissenting shares is in issue, the court shall
first determine that issue. If the fair market value of the dissenting shares is
in issue, the court shall determine, or shall appoint one or more impartial
appraisers to determine, the fair market value of the shares.
1305. REPORT OF APPRAISERS; CONFIRMATION; DETERMINATION BY COURT; JUDGMENT;
PAYMENT; APPEAL; COSTS.
(a) If the court appoints an appraiser or appraisers, they shall
proceed forthwith to determine the fair market value per share. Within the time
fixed by the court, the appraisers, or a majority of them, shall make and file a
report in the office of the clerk of the court. Thereupon, on the motion of any
party, the report shall be submitted to the court and considered on such
evidence as the court considers relevant. If the court finds the report
reasonable, the court may confirm it.
(b) If a majority of the appraisers appointed fail to make and file a
report within 10 days from the date of their appointment or within such further
time as may be allowed by the court or the report is not confirmed by the court,
the court shall determine the fair market value of the dissenting shares.
(c) Subject to the provisions of Section 1306, judgment shall be
rendered against the corporation for payment of an amount equal to the fair
market value of each dissenting share multiplied by the number of dissenting
shares which any dissenting shareholder who is a party, or who has intervened,
is entitled to require the corporation to purchase, with interest thereon at the
legal rate from the date on which judgment was entered.
3.
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(d) Any such judgment shall be payable forthwith with respect to
uncertificated securities and, with respect to certificated securities, only
upon the endorsement and delivery to the corporation of the certificates for the
shares described in the judgment. Any party may appeal from the judgment.
(e) The costs of the action, including reasonable compensation to the
appraisers to be fixed by the court, shall be assessed or apportioned as the
court considers equitable, but, if the appraisal exceeds the price offered by
the corporation, the corporation shall pay the costs (including in the
discretion of the court attorneys' fees, fees of expert witnesses and interest
at the legal rate on judgments from the date of compliance with Sections 1300,
1301, and 1302 if the value awarded by the court for the shares is more than 125
percent of the price offered by the corporation under subdivision (a) of Section
1301).
1306. PREVENTION OF IMMEDIATE PAYMENT; STATUS AS CREDITORS; INTEREST.
To the extent that the provisions of Chapter 5 prevent the payment to
any holders of dissenting shares of their fair market value, they shall become
creditors of the corporation for the amount thereof together with interest at
the legal rate on judgments until the date of payment, but subordinate to all
other creditors in any liquidation proceeding, such debt to be payable when
permissible under the provisions of Chapter 5.
1307. DIVIDENDS ON DISSENTING SHARES.
Cash dividends declared and paid by the corporation upon the dissenting
shares after the date of approval of the reorganization by the outstanding
shares (Section 152) and prior to payment for the shares by the corporation
shall be credited against the total amount to be paid by the corporation
therefor.
1308. RIGHTS OF DISSENTING SHAREHOLDERS PENDING VALUATION; WITHDRAWAL OF DEMAND
FOR PAYMENT.
Except as expressly limited in this chapter, holders of dissenting
shares continue to have all the rights and privileges incident to their shares,
until the fair market value of their shares is agreed upon or determined. A
dissenting shareholder may not withdraw a demand for payment unless the
corporation consents thereto.
1309. TERMINATION OF DISSENTING SHARE AND SHAREHOLDER STATUS.
Dissenting shares lose their status as dissenting shares and the
holders thereof cease to be dissenting shareholders and cease to be entitled to
require the corporation to purchase their shares upon the happening of any of
the following:
(a) The corporation abandons the reorganization. Upon abandonment of
the reorganization, the corporation shall pay on demand to any dissenting
shareholder who has initiated proceedings in good faith under this chapter all
necessary expenses incurred in such proceedings and reasonable attorney's fees.
(b) The shares are transferred prior to their submission for
endorsement in accordance with Section 1302 or are surrendered for conversion
into shares of another class in accordance with the articles.
(c) The dissenting shareholder and the corporation do not agree upon
the status of the shares as dissenting shares or upon the purchase price of the
shares, and neither files a complaint or intervenes in a pending action as
provided in Section 1304, within six
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<PAGE> 209
months after the date on which notice of the approval by the outstanding shares
or notice pursuant to subdivision (i) of Section 1110 was mailed to the
shareholder.
(d) The dissenting shareholder, with the consent of the corporation,
withdraws the shareholder's demand for purchase of the dissenting shares.
1310. SUSPENSION OF RIGHT TO COMPENSATION OR VALUATION PROCEEDINGS; LITIGATION
OF SHAREHOLDERS' APPROVAL.
If litigation is instituted to test the sufficiency or regularity of
the votes of the shareholders in authorizing a reorganization, any proceedings
under Sections 1304 and 1305 shall be suspended until final determination of
such litigation.
1311. EXEMPT SHARES.
This chapter, except Section 1312, does not apply to classes of shares
whose terms and provisions specifically set forth the amount to be paid in
respect to such shares in the event of a reorganization or merger.
1312. RIGHT OF DISSENTING SHAREHOLDER TO ATTACK, SET ASIDE OR RESCIND MERGER OR
REORGANIZATION; RESTRAINING ORDER OR INJUNCTION; CONDITIONS.
(a) No shareholder of a corporation who has a right under this chapter
to demand payment of cash for the shares held by the shareholder shall have any
right at law or in equity to attack the validity of the reorganization or
short-form merger, or to have the reorganization or short-form merger set aside
or rescinded, except in an action to test whether the number of shares required
to authorize or approve the reorganization have been legally voted in favor
thereof; but any holder of shares of a class whose terms and provisions
specifically set forth the amount to be paid in respect to them in the event of
a reorganization or short-form merger is entitled to payment in accordance with
those terms and provisions or, if the principal terms of the reorganization are
approved pursuant to subdivision (b) of Section 1202, is entitled to payment in
accordance with the terms and provisions of the approved reorganization.
(b) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, subdivision (a) shall not
apply to any shareholder of such party who has not demanded payment of cash for
such shareholder's shares pursuant to this chapter; but if the shareholder
institutes any action to attack the validity of the reorganization or short-form
merger or to have the reorganization or short-form merger set aside or
rescinded, the shareholder shall not thereafter have any right to demand payment
of cash for the shareholder's shares pursuant to this chapter. The court in any
action attacking the validity of the reorganization or short-form merger or to
have the reorganization or short-form merger set aside or rescinded shall not
restrain or enjoin the consummation of the transaction except upon 10 days prior
notice to the corporation and upon a determination by the court that clearly no
other remedy will adequately protect the complaining shareholder or the class of
shareholders of which such shareholder is a member.
(c) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, in any action to attack the
validity of the reorganization or short-form merger or to have the
reorganization or short-form merger set aside or rescinded, (1) a party to a
reorganization or short-form merger which controls another party to the
reorganization or short-form merger shall have the burden of proving that the
transaction is
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just and reasonable as to the shareholders of the controlled party, and (2) a
person who controls two or more parties to a reorganization shall have the
burden of proving that the transaction is just and reasonable as to the
shareholders of any party so controlled.
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ANNEX G
ARTICLES OF
INCORPORATION
OF GIGA-TRONICS
<PAGE> 212
ARTICLES OF INCORPORATON
OF
GIGATRONICS, INC.
I.
The name of this corporation is GIGATRONICS, INC.
11.
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code.
III.
The name and address in the State of California of this corporation's
initial agent for service of process is:
Mr John Scheck
5 Garden Estates Court
Alamo, CA 94507
1.
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IV
This corporation is authorized to issue only one class of shares of
stock; and the total number of shares which this corporation is authorized to
issue is 250,000.
DATED: March 3, 1980
/S/
-----------------------------------
Harold C. Nachtrieb
I hereby declare that I am the person who executed the foregoing Articles
of Incorporation, which execution is my act and deed.
-----------------------------------
Harold C. Nachtrieb
2.
<PAGE> 214
CERTIFICATE OF AMENDMENT OF
ARTICLES OF INCORPORATION
OF
GIGATRONICS, INC.
John Scheck and Stanley Keller certify that:
1. They are the President and Secretary, respective ly, of GIGATRONICS,
INC., a California corporation (the "Corpora tion").
2. Article FOURTH of the Articles of Incorporation of the Corporation
is hereby amended to read in full as follows:
"FOURTH: This Corporation is authorized to issue two classes of shares,
which shall be known as Common Stock and Preferred Stock. The total number of
shares of Common Stock which this Corporation is authorized to issue is
1,000,000 and the total number of shares of Preferred Stock which this
Corporation is authorized to issue is 25O,000. Upon the Amendment of this
Article to read as herein above set forth, each outstandinq share is converted
into or reconstitut Common Share."
3. Article FIFTH is added to the Articles of Incorpora- tion and reads
as follows:
"FIFTH: Shares of Preferred Stock may be issued from time to time in
one or more series. The Board of Directors shall determine the designation of
each series and the authorized number of shares in each series. The Board of
Directors is authorized to determine and alter the rights, preferences,
privileges, and restrictions granted to or imposed upon any wholly unissued
series of shares of Preferred Stock and to increase or decrease (but not below
the number of shares of such series then outstanding) the number of shares of
any such series subsequent to the issue of shares of that series."
<PAGE> 215
"If the number of shares of any series of Preferred Stock shall be
so decreased, the shares constituting such decrease shall resume the
status which they had prior to the adoption of the resolution initially
fixing the number of shares of such series."
4. The foregoing Amendment of Articles of Incorporsation has been duly
approved by the Board of Directors.
5. The foregoing Amendment of Articles of Incorporation has been duly
approved by the required vote of shareholders in accordance with Section 902 of
the Corporations Code. The total number of outstanding shares of the Corporation
is 37,000. The number of shares voting in favor of Amendment equaled or exceeded
the vote required. The percentage vote required was more than fifty percent
(50%)
/S/
-----------------------------------
John Scheck, President
/S/
-----------------------------------
Stanley Keller, Secretary
The undersigned declare under penalty of perjury that the matters set
forth in the foregoing Certificate are true of their own knowledge.
Executed at Pleasant Hill, California on this 14 day of January, 1981.
/S/
-----------------------------------
John Scheck, President
/S/
-----------------------------------
Stanley Keller, Secretary
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<PAGE> 216
CERTIFICATE OF DETERMINATION
OF PREFERENCES OF PREFERRED STOCK
SERIES A OF
GIGATRONICS, INC.
The undersigned, John Scheck and Stanley Keller, do hereby certify:
1. That said John Scheck is, and at all times herein mentioned was, the
duly elected and acting President of GIGA- TRONICS, INC., a California
corporation, and that said Stanley Keller is, and at all times herein mentioned
was, the duly elected and acting-Secretary of said corporation:
2. That at a meeting held January 7, 1981, the following resolutions
were duly adopted by the Board of Directors of said corporation:
WHEREAS, Articles Fourth and Fifth of the Articles of
Incorporation of this corporation provide for a class of its authorized
shares known as Preferred Stock, comprising 250,000 shares of no par
value, issuable from time to time in one or more series, and authorize
the Board of Directors to fix or alter the dividend rights, dividend
rate, conversion rights, voting rights, rights in terms of redemption
(including sinking fund provisions), the redemption price or prices,
the liquidation preferences of any wholly unissued class, or of a
wholly unissued series of any class of shares, or the number of shares
constituting any unissued series of any class and the designation of
such series, or any of them; and to increase or decrease (but not below
the number of shares of such series then outstanding) the number of
shares of any such series subsequent to the issuance of shares of that
series; and
<PAGE> 217
WHEREAS, it is the desire of the Board of Directors of this
corporation pursuant to its authority as aforesaid, to fix the rights,
preferences, restrictions and other matters relating to a first series
of said Preferred Stock;
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does
hereby provide, pursuant to Article Fifth of the Articles of
Incorporation, for the issuance of a first series of Preferred Stock of
the Corporation, and it does hereby fix and determine the rights,
preferences, restrictions and other matters relating to said series of
Preferred Stock as follows:
I. Title of Series
The-first series of Preferred Stock shall be designated and known
as "Preferred Stock, Series A".
II. Number of Shares
The number of shares constituting the Preferred Stock, Series A
shall be 35,500 shares.
III. Dividend Rights
The holders of the Preferred Stock, Series A shall be
entitled to receive, out of funds legally available therefor,
dividends at the rate of One Dollar Forty Cents ($1.40) per annum
per share, payable in cash quarterly on the fifteenth (15th) day
of March, June, September and December in each year, commencing
March 15, 1981, when and as declared by the Board of Directors of
the Corporation. Such dividends shall not be cumulative;
provided, however, that if the Corporation's independent
certified public accountant determines, for any fiscal year, that
the Corporation had after-tax earnings for such year, legally
available for the payment of dividends, dividends will cumulate
in an amount equal to the lesser of dividends payable but not
declared during such fiscal year and after-tax earnings for such
fiscal year. Dividends so cumulative will be paid or set apart
for payment, but without interest, before the payment of any
dividend on the common stock of the Corporation (the "Common
Stock').
Dividends shall be paid by forwarding a check, postage prepaid,
to the address of each holder (or, in the
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case of joint holders, to the address of either such holder) of Preferred Stock,
Series A as shown on the books of the Corporation, unless such holder specifies
another address by written notice to the Corporation. The forwarding of such
check shall satisfy all obligations of the Corporation with respect to such
dividends, unless such check is not paid upor timely presentation.
The holders of the Preferred Stock, Series A shall be entitled to
dividends as set forth in this Section III and no more. At any time after all
dividends on the Preferred Stock, Series A shall have been declared and paid or
set apart for payment in accordance with the provisions of this Section III,
dividends may be paid on outstanding Common Stock out of any funds legally
available therefor.
IV. Liquidation Riqhts.
In the event of any liquidation, dissolution and winding up of
the Corporation, whether voluntary or not, the holders of Preferred Stock,
Series A shall be entitled to receive an amount per share equal to Twenty
Dollars ($20) plus all dividends to which they are entitled before any amount
shall be paid to holders of the Common Stock, and shall not be entitled to
receive any portion of the remaining assets of the Corporation.
V. Voting Rights
The holders of the Preferred Stock, Series A shall have one vote
for each full share of Common Stock into which their respective shares of
Preferred Stock, Series A, are convertible on all matters on which holders of
Common Stock are entitled to vote, and, except as expressly provided by law,
shall have no other rights to vote with respect to any matter.
VI. - Conversion to Common Stock
The Preferred Stock, Series A shall be convertible into Common
Stock as follows:
A. Definitions. For purposes of this Section VI, the following
definitions shall apply:
(1) "Series A Issuance Date" shall mean the first date on which
the Corporation issues any shares of Preferred Stock, Series A.
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<PAGE> 219
(2) "Conversion Price" shall mean the price, determined pursuant to
this Section VI, at which shares of Common Stock shall be deliverable
upon conversion of Preferred Stock, Series A.
(3) "Current Conversion Price" shall mean the Conversion Price
immediately before the occurrence of any event, which, pursuant to
Section VI.C, causes a redetermination of the Conversion Price.
(4) "Convertible Securities" shall mean any indebtedness or shares of
stock convertible into or exchangeable for Common Stock.
(5) "Options" shall mean any rights or options to subscribe for or
purchase Common Stock or Convertible Securities.
(6) "Common Stock Outstanding" shall include all Common Stock issuable
upon exercise of all outstanding Options and conversion of all
outstanding Convertible Securities.
(7) "Distribution" shall have the meaning of the term "distribution to
its shareholders" in the California Corporations Code as in effect on
the date of this certificate.
B. Right to Convert; Initial Conversion Price. Each holder of the
Preferred Stock, Series A may, at any time, upon surrender of the
certificates therefor, convert any or all of his Preferred Stock,
Series A into fully paid and non-assessable shares of Common Stock at
the Conversion Price, each share of Preferred Stock, Series A being
taken at Twenty Dollars ($20) for the purpose of such conversion. The
Conversion Price shall initially be Twenty Dollars ($20) per share of
Common Stock. Such initial Conversion Price shall be subject to
adjustment from time to time in certain instances as hereinafter
provided. No adjustments with respect to conversion shall be made on
account of any dividends that may be cumulated but unpaid on the
Preferred Stock, Series A surrendered for conversion, but no dividends
shall thereafter be paid on the Common Stock unless such cumulated but
unpaid dividends have first been paid to the holders at the time of
conversion of the Preferred Stock, Series A.
Before any holder of Preferred Stock, Series A shall be entitled
to convert the same into Common Stock, he shall surrender the
certificate or certificates therefor, duly
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<PAGE> 220
endorsed, to the office of the Corporation or any transfer agent for
such Preferred Stock, Series A, and shall give written notice to the
Corporation at such office that he elects to convert the same. The
Corporation shall, as soon as practicable thereafter, issue and deliver
at such office to such holder of Preferred Stock, Series A, or to his
nominee or nominees, certificates for the number of full shares of
Common Stock to which he shall be entitled, together with cash in lieu
of any fraction of a share as hereinafter provided, and, if ' less than
all of the shares of Preferred Stock, Series A represented by such
certificate are converted, a certificate representing the shares of
Preferred Stock, Series A not converted. Such conversion shall be
deemed to have been made as of the date of such surrender of the
Preferred Stock, Series A to be converted, and the person or persons
entitled to receive the Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of
such Common Stock on such date.
C. Adjustments to Conversion Price. Subject to Section VI.C.9, the
Conversion Price in effect from time to time shall be subject to
adjustment in certain cases as follows:
1. Issuance of Securities. In case the Corporation shall at any
time after the Series A Issuance Date (i) issue or sell any Common
Stock without consideration, or for a consideration per share less than
the Current Conversion price, or (ii) pay or make a dividend or other
Distribution on the Common Stock (other than in cash out of its
retained earnings, in Common Stock, in Convertible Securities, or in
Options) then, and thereafter successively upon each such issuance,
sale, dividend or other Distribution, the Current Conversion Price
shall simultaneously with such issuance, sale, dividend or other
Distribution be adjusted to a Conversion Price (calculated to the
nearest cent) determined by dividing
(a) an amount equal to (i) the total number of shares of
Common Stock Outstanding when the Current Conversion Price became
effective multiplied by the Current Conversion Price, plus (ii)
the aggregate of the amount of all consideration, if any,
received by the Corporation for the issuance or sale of Common
Stock since the Current Conversion Price became effective, minus
(iii) the aggregate amount of all dividends or Distributions on
Common Stock (other than in cash out of its retained earnings, in
shares of Common Stock, in Convertible Securities, or in
Options), paid by the Corporaton since the Current Conversion
Price became effective, by
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<PAGE> 221
(b) the total number of shares of Common Stock Outstanding
immediately after such issuance, sale, dividend, or other
Distribution,
except that the Current Conversion Price shall not be reduced if
the amount of such reduction would be less than fifty cents
($.50), and in no event shall the Conversion Price exceed the
Initial Conversion Price.
For the purposes of this subsection VI.C.1, the following provisions
shall also be applicable:
(i) Cash Consideration. In case of the issuance or sale of
additional Common Stock for cash, the consideration received by the
Corporation therefor shall be deemed to be the amount of cash received
by the Corporation for such shares (or, if such shares are offered by
the Corporation for subscription, the subscription price, or, if such
shares are sold to underwriters or dealers for public offering without
a subscription offering, the initial public offering price), without
deducting there from any compensation or discount paid or allowed to
underwriters or dealers or others performing similar services or for
any expenes incurred in connection therewith.
(ii) Non-Cash Consideration. In case of the issuance (Otherwise
than upon conversion or exchange of Convertible Securities) or sale of
additional Common Stock, Options or Convertible Securities for a
consideration other than cash or a consideration a part of which shall
be other than cash, the fair value of such consideration as determined
by the Board of Directors of the Corporation in the good faith exercise
of its business judgment, irrespective of the accounting treatment
thereof, shall be deemed to be the value, for purposes of this Section
VI, of the consideration other than cash received by the Corporation
for such securities.
(iii) Options and Convertible Securities. In case the Corporation
shall in any manner issue or grant any Options or any Convertible
Securities, the total maximum number of shares
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<PAGE> 222
of Common Stock issuable upon the exercise of such Options or upon
conversion or exchange of the total maximum amount of such Convertible
Securities at the time such Convertible Securities first become
convertible or exchangeable shall (as of the date of issue or grant of
such Options or, in the case of the issue or sale of Convertible
Securities other than where the same are issuable upon the exercise of
Options, as of the date of such issue or sale) be deemed to be issued
and to be outstanding for the purpose of this subsection VI.C.1 and to
have been issued for the price per share for which shares of Common
Stock are issuable upon the exercise of such Options or upon conversion
or exchange of such Convertible Securities at the time such Convertible
Securities first become convertible or exchangeable; provided that,
subject to the provisions of subsection VI.C.2, no further adjustment
of the Conversion Price shall be made upon the actual issuance of any
such Common Stock or Convertible Securities or upon the conversion or
exchange of any such Convertible Securities.
(iv) Dividends in Common Stock, Options, or Convertible
Securities. In the case of the issuance of additional Common Stock,
Options, or Convertible Securities as a dividend or as a Distribution
on Common Stock, the aggregate number of shares of Common Stock issued
(or deemed issued pursuant to Section VI.C.1(iii)) in payment of such
dividend or Distribution shall be deemed to have been issued on the
record date for such dividend or Distribution and shall be deemed to
have been issued without consideration.
(v) Other Dividends. In case of the payment or making of a
dividend or other Distribution on Common Stock in property (excluding
Common Stock, Convertible Securities and Options, but including all
other securities), such dividend or other Distribution shall be deemed
to have been paid or made on the record date for such dividend or other
Distribution and in the amount of such dividend or other Distribution
in property on such record date, as determined by the Board of
Directors of the Corporation.
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<PAGE> 223
(vi) Reclassification. The reclassification of securities other
than Common Stock into securities including Common Stock shall be
deemed to involve the issuance for a consideration other than cash of
such Common Stock at the close of business on the date fixed for the
determination of shareholders entitled to receive such Common Stock.
(vii) Record Date. In the event that there shall be no record
date for the determination of shareholders entitled to any dividend or
Distribution declared by the Corporation, the first business day during
which the stock transfer books of the Corporation shall be closed for
the purpose of such determination shall be deemed to be the record date
for the determination of shareholders entitled to such dividend or
Distribution.
2. Change in Option Price or Conversion Rate. In the event that the
purchase price provided for in any Option referred to in subsection
VI.C.1(iii), or the rate at which any Convertible Securities referred
to in subsection VI.C.1(iii) are convertible into or exchangeable for
shares of Common Stock shall change at any time (other than under or by
reason of provisions designed to protect against dilution), the Current
Conversion Price in effect at the time of such event shall forthwith be
readjusted to the Conversion Price that would have been in effect at
such time had such Options or Convertible Securities still outstanding
provided for such changed purchase price, additional consideration or
conversion rate, as the case may be, at the time initially granted,
issued or sold. In the event that the purchase price provided for in
any such Option referred to in subsection VI.C.1(iii), or the
additional consideration (if any) payable upon the conversion or
exchange of any Convertible Securities referred to in subsection
VI.C.1(iii), or the rate at which any Convertible Securities referred
to in subsection VI.C.1(iii) are convertible into or exchangeable for
shares of Common Stock, shall be reduced at any time under or by reason
of provisions with respect thereto designed to protect against
dilution, then in case of the delivery of shares of Common Stock upon
the exercise of any such Option or upon conversion or exchange of any
such Convertible Security, the Current Conversion Price then in effect
hereunder shall, upon issuance of such shares of Common Stock, be
adjusted to such amount as would have
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<PAGE> 224
obtained had such Option or Convertible Security never been issued and
had adjustments been made only upon the issuance of the shares of
Common Stock delivered as aforesaid.
3. Termination of Option or Conversion Rights. In the event of
the termination or expiration of any right to purchase Common Stock
under any Option or of any right to convert or exchange Convertible
Securities, the Current Conversion Price shall, upon such termination,
be changed to the Conversion Price that would have been in effect at
the time of such expiration or termination had such Option or
Convertible Security, to the extent outstanding immediately prior to
such expiration or termination, never been issued, and the shares of
Common Stock issuable thereunder shall no longer be deemed to be Common
Stock Outstanding.
4. Stock Splits. In the event the out standing Common Stock shall
be subdivided into a greater number of shares of Common Stock, the
Current Conversion Price shall, simultaneously with the effectiveness
of such subdivision, be proportionately reduced, and conversely,in case
the outstanding Common Stock shall be combined into a smaller number of
shares of Common Stock, the Current Conversion Price shall,
simultaneously with the effectiveness of such combination, be
proportionately increased. For the purposes of subsections VI.C.1 and
VI.C.4, a distribution of Common Stock to holders of Common Stock in
which the number of shares distributed is 25 percent (25%) or more of
the number of shares of Common Stock upon which the distribution is to
be made shall be deemed to be a subdivision of Common Stock, and a
distribution of a lesser number of shares of Common Stock shall be
deemed to be a stock dividend.
5. Successive Changes. The above provisions of this Section VI
shall similarly apply to successive issuances, sales, dividends or
other Distributions,subdivisions and combinations on or of the Common
Stock after the Series A Issuance Date.
6. Merger; Sale of Corporation. Subject to Section IV, in the
event, after the Series A Issuance Date, of any consolidation of the
Corporation with, or merger of the Corporation with or into another
corporation (other than a consolidation or merger in which the
Corporation is the continuing corporation and which does
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<PAGE> 225
not result in any reclassification of, or change in, the outstanding
shares of Common Stock), or in case of any sale or transfer to another
corporation of all or substantially all of the assets of the
Corporation, each share of Preferred Stock, Series A shall be treated
for all purposes as if it had been converted into Common Stock on the
earlier of (i) the record date, if any, for voting by holders of Common
Stock on such event and (ii) the date of such event.
7. Other Events Altering Conversion Price. Upon the occurrence of
any event not specifically denominated in this Section VI as altering
the Conversion Price that, in the reasonable exercise of the business
judgment of the Board of Directors of the Corporation requires, on
equitable principles, the alteration of the Conversion Price, the
Conversion Price will be equitably altered.
8. Miscellaneous Conversion Price Matters. The Corporation shall
at all times reserve and keep available out of its authorized but
unissued Common Stock the full number of shares of Common Stock
deliverable upon conversion of all the then outstanding Preferred
Stock, Series A, and shall, at its own expense, take all such actions
and obtain all such permits and orders as may be necessary to enable
the Corporation lawfully to issue such Common Stock upon the conversion
of such Preferred Stock. No fractions of Common Stock shall be issued
upon the conversion of Preferred Stock, Series A, and in lieu thereof
the Corporation shall pay the holder an amount in cash equal to the
fair market value of such fractional interest as determined by the
Board of Directors of the Corporation in the exercise of its good faith
business judgment.
9. Excluded Events. Notwithstanding anything in this Section VI
to the contrary, the Conversion Price shall not be adjusted by virtue
of the issuance or sale of an aggregate of not more than 20,000 shares
of Common Stock to employees of the Corporation at a price,which is
less than the Conversion Price at the time of such issuance or sale
(all as determined in accordance with this Section VI).
D. Mandatory Conversion. At any time on or after the earlier of
(a) the date on which any Common Stock is sold to the public by the
Corporation (or selling shareholders, if any) in a public offering
registered under the Securities Act of 1933 at a per share public
offering price of not less
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<PAGE> 226
than twice the Conversion Price (as defined in Section VI.A(2) hereof)
then in effect, or (b) the expiration of three (3) years after the
Series A Issuance Date (as defined in Section VI.A.(3), then, in either
case, the Corporation, may, at its election, cause all or any portion
of the Preferred Stock, Series A to be converted at the Conversion
Price then in effect.
The Corporation shall give notice of its election to cause conversion
under this Section VI.D by mail, postage prepaid, at least 15 days
prior to the date specified for conversion, to each holder of record of
the Preferred Stock, Series A at the address of such holder as the same
shall appear on the books of the Corporation, which notice shall
specify said conversion date, the Conversion Price, the number of
shares of Common Stock to be issued upon such conversion, the amount of
the cash adjustment to be paid in respect of a fractional share of
Common Stock and the amount of any dividends cumulated Sand unpaid
prior to such conversion date. On and after said conversion date,
notwithstanding that any certificates for the Preferred Stock, Series A
shall not have been surrendered for conversion, the shares of Preferred
Stock, Series A evidenced thereby shall be deemed to be no longer
outstanding, and all rights with respect thereto shall forthwith cease
and terminate, except only the rights of the holder (i) to receive the
shares of Common Stock to which he shall be entitled upon conversion
thereof, (ii) to receive the amount of cash payable in respect of any
fractional share of Common Stock to which he shall be entitled, and
(iii) with respect to dividends cumulated but unpaid on such Preferred
Stock, Series A prior to such conversion date.
VII. Warrant.
Subject to the terms and conditions hereinafter set forth, each
holder of Preferred Stock, Series A, is hereby granted the right (a
"Warrant"), to purchase, upon (but only upon and in no event after)
conversion into Common Stock of the shares of Preferred Stock, Series A
to which such Warrant relates, one share of Common Stock for each five
share of Preferred Stock, Series A, held, at a price ("Exercise Price")
of Twenty Dollars ($20.00) per share of Common Stock.
The Warrants are exercisable at the office of the Corporation, or
such other office or agency as the Corporation may from time to time
designate, upon surrender of the certificate for the holder's Preferred
Stock, Series A for conversion into shares of Common Stock and payment
of the Exercise Price for the shares of Common Stock to be purchased
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<PAGE> 227
on such exercise, in United States currency, either in cash, or by
certified or official bank check payable to the order of the
Corporation.
A Warrant may be exercised only in full, only upon conversion of
all Preferred Stock, Series A held by the holder making such exercise,
and only upon exercise of all Warrants relating to such holder's shares
of Preferred Stock, Series A.
Shares of Common Stock sufficient to provide for the exercise of
the Warrants shall at all times be reserved by the Corporation for
issuance upon exercise. All shares of Common Stock issuable upon the
exercise of the Warrants shall be validly issued, full paid and
non-assessable.
VIII. Certain Taxes
The Corporation shall pay any and all issuance and other taxes
(excluding any federal or state income taxes) that may be payable in
respect of any issuance or delivery of shares of Common Stock on
conversion of Preferred Stock, Series A, or on exercise of any Warrant.
The Corporation shall not, however, be required to pay any tax that may
be payable in respect of any transfer involved in the issuance and
delivery of shares of Common Stock in a name other than that in which
the shares of Preferred Stock, Series A to which such issuance relates
were registered, and no such issuance or delivery shall be made unless
and until the person requesting such issuance has paid to the
Corporation the amount of any such tax, or it is established to the
satisfaction of the Corporation that such tax has been paid.
RESOLVED FURTHER, that the President or any Vice President and
the Secretary or any Assistant Secretary of this Corporation be, and
they hereby are, authorized and directed to prepare and file a
Certificate of Determination of Preferences in accordance with the
foregoing resolution and the provisions of California law and to take
such actions as they may deem necessary or appropriate to carry out the
intent of the foregoing resolution.
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3. That the authorized number of shares of Preferred Stock of said
corporation is 250,000 and that no such Preferred Stock has been
issued.
IN WITNESS WHEREOF, the undersigned have executed this Certificate this
14 day of January, 1981.
/S/
---------------------------
John Scheck, President
/S/
---------------------------
Stanley Keller, Secretary
Each of the undersigned declares under penalty of perjury that the
matters set forth in the foregoing Certificate of Determination are
true and correct.
Executed at Pleasant Hill, California, on January l4, 1981.
/S/
---------------------------
John Scheck
/S/
---------------------------
Stanley Keller
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<PAGE> 229
CERTIFICATE OF AMENDMENT
OF CERTIFICATE OF DETERMINATION OF
PREFERENCES OF PREFERRED STOCK,
SERIES A OF GIGATRONICS, INC.
JOHN SCHECK and STANLEY KELLER certify that:
1. They are the President and the Secretary, respectively, of GIGATRONICS, INC.,
a California corporation.
2. On January 15, 1981, the Corporation filed with the Secretary of State a
Certificate of Determination of Preferences of Preferred Stock, Series A, as
amended by an amendment thereto filed on January 27, 1981 (the "Certificate").
3. Clause VII of the Certificate is amended to read in its entirety as follows:
" VII. Warrant.
Subject to the terms and conditions hereinafter set forth, each holder of
Preferred Stock, Series A, is hereby granted the right (a "Warrant"), to
purchase at any time prior to conversion into Common Stock of the shares of
Preferred Stock, Series A to which such Warrant relates, one share of Common
Stock for each five shares of Preferred Stock, Series A, held, at a price
("Exercise Price") of Twenty Dollars ($20.00) per share of Common Stock.
The Warrants are exercisable at the office of the Corporation, or such other of
office or agency as the Corporation may from time to time designate, upon
delivery or the certificate for the holder's Preferred Stock, Series A to be
marked by the Corporation indicating exercise of the Warrants and payment of the
Exercise Price for the shares of Common Stock to be purchased on such exercise,
in United States currency, either in cash, or by certified or official bank
check payable to the order of the Corporation.
A Warrant may be exercised only in full and only upon exercise of all Warrants
relating to such holder's shares of Preferred Stock, Series A.
Shares of Common Stock sufficient to provide for the exercise of the Warrants
shall at all times be reserved by the Corporation for issuance upon exercise.
All shares of Common Stock issuable upon the exercise of the Warrants shall be
validly issued, full paid and non-assessable."
<PAGE> 230
4. The foregoing amendment of the Certificate has been duly approved by the
Board of Directors.
5. The foregoing amendment of the Certificate has been duly approved by the
required vote of shareholders in accordance with Sections 902 and 903 of the
Corporations Code. The total number of outstanding shares of the Common Stock of
the Corporation is 51,798. The total number of outstanding shares of Preferred
Stock of the Corporation is 25,500. The number of shares voting in favor of the
amendment exceeded the vote required. The percentage vote required was more than
fifty percent (50%) of the Common Stock and more than fifty percent (50%) of the
Preferred Stock.
/S/
---------------------------
John Scheck, President
/S/
---------------------------
Stanley Keller, Secretary
The undersigned declare under penalty of perjury that the matters set forth in
the foregoing certificate are true of their own knowledge. Executed at Pleasant
Hill California on June 7, 1982.
/S/
---------------------------
John Scheck
/S/
---------------------------
Stanley Keller
<PAGE> 231
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
GIGA-TRONICS INCORPORATED
The undersigned, John W. Scheck and Stanley S.
Keller, hereby certify that:
1. They are duly elected and acting President and Secretary, respectively, of
Giaa-tronics Incornorated, a California corporation.
2. A new Article VI is added to the Articles of Incorporation, reading in full
as follows:
"VI.
Section 1. The liability of the directors of this corporation for
monetary damages shall be eliminated to the fullest extent permissible under
California law.
Section 2 This corporation is authorized to provide indemnification of
agents (as defined in Section 317 of the California Corporations Code) through
bylaw provisions, agreements with agents, vote of shareholders or disinterested
directors or otherwise, in excess of the indemnification otherwise permitted by
Section 317 of the California Corporations Code, subject only to applicable
limits set forth in Section 204 of the California Corporations Code with respect
to actions for breach of duty to the corporation and its shareholders."
3. The foregoing amendment has been duly approved by resolution of the
Board of Directors of this corporation.
<PAGE> 232
4. The foregoing amendment has been approved by the holders of the
requisite number of shares of this corporation in accordance with Section 902
and 903 of the California General Corporation Law. The total number of
outstanding shares entitled to vote with respect to the foregoing amendment was
3,154,020 shares of Common Stock. The number of shares voting in favor of the
foregoing amendment equaled or exceeded the vote required, such required vote
being a majority of the outstanding shares of Common Stock.
IN WITNESS WHEREOF, the undersigned have executed this certificate on August 12,
1988.
/S/
---------------------------
John Scheck, President
/S/
---------------------------
Stanley Keller, Secretary
Each.of the undersigned declares under penalty of perjury that the
matters set forth in the foregoing certificate are true and correct. Executed at
Pleasant Hill, California, on August l2 1988.
/S/
---------------------------
John Scheck, President
/S/
---------------------------
Stanley Keller, Secretary
<PAGE> 233
ANNEX H
BYLAWS OF
GIGA-TRONICS
<PAGE> 234
BYLAWS OF
GIGATRONICS, INC.
A California Corporation
ARTICLE I
Offices
Section l. Principal Executive Office: The princpal executive office of
the corporation shall be at 2495 Estand Way, Pleasant Hill, California.
The board of directors is granted full power and authority to change
the principal executive office from one location to another in California.
Section 2. Other Offices. Other offices may at any time be established
by the board of directors at any place or places where the corporation is
qualified to do business.
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ARTICLE II
Meetings of Shareholders
Section l. Place of Meetings. All meetings of shareholders shall be
held at the principal executive office of the corporation, or at such other
p1ace within or without the State of California which may be designated by the
board of directors pursuant to the authority hereby granted to said board. or by
the written consent of all persons entitled to vote thereat and not present at
the meeting, given either before or after the meeting and filed with the
secretary of the corporation.
Section 2. Annual Meeting. The annual meeting of shareholders shall be
held at 2:00 p.m. on the second Tuesday in July provided, however, that should
said day fall upon a legal holiday, then any such annual meeting of shareholders
shall be neld at the same time and place on the next day thereafter ensuing
which is not a legal holiday. At such meeting; directors sha1i be elected,
reports of the affairs of the corporation shall be considered, and any other
business may be transacted which is within the powers on the shareholders.
Section 3. Notice - Annual meeting written notice of each each annual
meeting shall be given to each shareholder entitled to vote, either personally
or by first class mail or other means of written communication, charges prepaid,
addressed to such shareholder at the shareholder's address appearing on the
books of the corporation or provided to the corporation for the purpose of
notice. All such notices shall be sent to each shareholder entitled thereto not
less than ten (l0) days nor more than sixty (60) days before each annual
meetings and shall specify:
(a) the place, date and hour of such meeting;
(b) those matters which the board, at the time oL the mailing of the
notice, intends to present for action be the shareholders;
(c) if directors are to be elected, the names of nominees intended, at
the time of the notice, to be presented by management for election;
(d) the general nature of a proposal, if any, to take action with
respect to approval of: (i) a contract or other transaction with an interested
director, (ii) amendment of the articles of incorporation, (iii) a
reorganization of the corporation as defined in Section 181 of the General
Corporation Law, (iv) voluntary dissolution of the corporation, or (v) a
distribution in dissolution other than in accordance with the rights of
preferred shares, if any; and
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the articles of incorportion, (iii) a reorganization of the corporation as
defined in Section 181 of the General Corporation Law, (iv) voluntary
dissolution of the corporation, or (v) a distribution in dissolution other than
in accordance with the rights of preferred shares, if any; and
(e) such other matters, if any, as may be expressly required by statute
Section 4. Special Meetings. Special meetings of the shareholders, for
the purpose-of taking any action permitted by the shareholders under the
California General Corporation Laws and the articles of incorporation of this
corporation, may be called at any time by the chairman of the board, president
or by the board of directors, or by one or more shareholders holding not less
than ten percent (10%) of the voting power of the corporation, by written
request to the chairman of the board, the president, a vice president or the
secretary, who shall forthwith cause notice to be given to the shareholders
entitled to vote that a meeting will be held at the time requested by the person
or persons calling the meeting, not less than thirty five (35) nor more than
sixty (60) days after receipt of the request Except in special cases cohere
other express provision is made by statute, notice of special meetings shall be
given in the same manner as for annual meetings of shareholders. Notices of any
special meeting shall, in addition to the matters required by item (a), and if
applicable, item (c) of the preceding section, specify the general nature of the
business to be transacted and no business other than that specified in the
notate may be transacted at said special meeting.
Section 5. Adjourned Meeting and Notice Thereof. Any annual or special
shareholders' meeting, whether or not a quorum is present, may be adjourned from
time to time by majority vote of the shares present in person or represented by
proxy, but in the absence of a quorum, no business (except as provided in
Section 8(d) below "Quorum") may be transacted at such meeting. No notice of an
adjourned meeting need be given other than by announcement of the time and place
thereof at the meeting at which such adjournment is taken unless the meeting is
adjourned for 45 days or more or unless a new record date for the adjourned
meeting is fixed after adjournment.
Section 6. Validation of Defectively Called or Noticed Meetings. The
transactions at any meeting of shareholders, however called and noticed, shall
be as valid as though had at a meeting held after regular call and notice, if a
quorum is present and
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if either before or after the meeting, each of the persons entitled to vote, not
present in person or by proxy, or who, though present, has, at the beginning of
the meeting, properly objected to the transaction of any business because the
meeting was not lawfully called or convened, or to particular matters of
business legally required to be included in the notice, but not so included,
signs a written waiver of notice, or a consent to the holding of such meeting,
or an approval of the minutes thereof. All such waivers, consents or approvals
shall be filed with the corporate records or made a part of the minutes of the
meeting.
Section 7. Action Without Meeting.
(a) Election of Directors. Directors may be elected, without a meeting
by written consent, setting forth the action so taken, signed by all of the
persons entitled to vote for the election of directors. A director may be
elected at any time to fill a vacancy not filled by the directors by the written
consent of persons holding a majority of the shares entitled to vote for the
election of directors.
(b) Other Action. Any other action which, under any provision of the
General Corporation Law, may be taken at a meeting of the shareholders, may be
taken without a meeting, and, except as hereinafter set forth, without notice,
by written consent, setting forth the action so taken, signed by the holders of
not less than the number of shares necessary to take such action at a meeting at
which all shares entitled to vote thereon were present and voted. If the
consents of all of the shareholders entitled to vote have been solicited in
writing, no notice need be given of the action so taken. If consents were not
solicited in writing and the written consents of all of the shareholders
entitled to vote were not obtained, prompt notice of the action taken shall be
given to the shareholders not consenting. As to proposed shareholder approval of
any of the following matters, notice to the shareholders not consenting in
writing shall be given in the manner provided in Article II, Section 3, of these
bylaws at least ten (10) days before consummation of the action authorized by
such approval:
(i) a contract or other transaction with an interested director, (ii)
indemnification of an agent of the corporation as authorized by Section
6, Article V, of these Bylaws, (iii) a reorganization the corporation
as defined in Section 181 of the General Corpora tion Law, or (iv) a
distribution in dissolution other than in accordance with the rights of
outstanding preferred shares, if any.
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(c) Notice of Action by Consent of Majority. Prompt notice of the
taking of any corporate action approved by the shareholders without a meeting by
less then unanimous written consent shall be given to the shareholders entitled
to vote who have not consented in writing. Such notice shall be given in the
manner provided in Section 3, Article II, of these Bylaws.
(d) Record Date. Unless the board of directors has fixed a record date
for the determination of shareholders entitled to notice of and to give such
written consent, the record date for such determination shall be the date on
which such written consent is first given.
(e) Revocation of Written Consent. A written consent may be revoked by
the shareholder by writing received by the corporation prior to the time that
the written consents of the number of shares required to authorize the proposed
action have been received by the secretary of the corporation. Such a revocation
shall be effective upon receipt by the secretary.
Section 8. Voting.
(a) Record Date. Unless a record date for voting purposes be fixed, as
provided in Section 7, Article V, of these Bylaws, then, subject to the
provisions of California General Corporation Law Sections 702 and 704, only
persons in whose names shares entitled to vote stand on the stock records of the
corporation at the close of business on the business day next preceding the day
on which notice of the meeting is given, or if such notice is waived, at the
close of business on the business day next preceding the day on which the
meeting of shareholders is held, shall be entitled to vote at such meeting, and
such day shall be the record date for such meeting.
(b) Manner of Voting. Vote may be via voice or by ballot; provided
however, at all elections for directors, vote must be by ballot upon demand by a
shareholder made at any election before the voting begins.
(c) Cumulative Voting. Every shareholder entitled to vote at any
election for directors shall have the right to cumulate his or her votes
provided that the name of the candidate has been placed in nomination prior to
voting and that any shareholder, at the meeting, prior to voting, has given
notice of his or her intention to cumulate his or her votes.
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If votes for directors are cumulated, each shareholder may give one
candidate the number of votes equal to the number of directors to be elected
multiplied by the number of votes to which that shareholder's shares are
entitled, or to distribute the votes on the same principle among as many
candidates as the shareholder desires. The candidates receiving the highest
number of votes, up to the number of directors to be elected, shall be elected.
(d) Quorum. The presence in person or by proxy of persons entitled to
vote a majority of the voting shares at any meeting shall constitute a quorum
for the transaction of business. The shareholder's present at a duly called or
held meeting at which a quorum is present may continue to do business until
adjournment, notwithstanding the withdrawal of enough shareholders to leave less
than a quorum, if any action taken, other than adjournment, is approved by at
least a majority of the shares required to constitute a quorum.
(e) Proxies. Persons entitled to vote or execute consents shall have
the right to do so either in person or by one or more agents authorized by
written proxy executed by the person or that person's authorized agent and filed
with the secretary of the corporation; provided, however, no proxy shall be
valid after 11 months from the date of its execution unless the proxy provides
the length of time for which the proxy is to continue in force, which in no case
shall exceed the duration permitted by law.
(f) Revocation of Proxy. A duly executed proxy continues in full force
and effect until: (i) an instrument revoking it, or a duly executed proxy
bearing a later date is filed with the secretary of the corporation, prior to
the vote pursuant thereto, (ii) the person executing the proxy attends the
meeting and votes in person, or (iii) written notice of the death or incapacity
of the maker of such proxy is received by the corporation before the vote
pursuant thereto is counted.
Section 9. Inspectors of Election. In advance of any meeting of
shareholders, the board of directors may appoint any persons other than nominees
for office as inspectors of election to act at such meeting or any adjournment
thereof. If inspectors of election be not so appointed, the chairman of any such
meeting may, and on the request of any shareholder or his proxy shall, make such
appointment at the meeting. The number of inspectors shall be either one or
three. If appointed at a meeting on the request of one or more shareholders or
proxies, the majority of shares represented in person or by proxy shall
determine whether one or three inspectors are to be nominated. In case any
person
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appointed as inspector fails to appear or fails or refuses to act, the vacancy
may, and on the request of any shareholder or a shareholder's proxy shall, be
filled by appointment by the board of directors in advance of the meeting, or at
the meeting by the chairman of the meeting.
The duties of such inspectors shall be as prescribed by Section 707 of
the General Corporation Law and shall include: determining the number of shares
outstanding and the voting power of each, the shares represented at the meeting,
the existence of a quorum, the authenticity, validity and effect of proxies;
receiving votes, ballots or consents; hearing and determining all challenges and
questions in any way arising in connection with the right to vote; counting and
tabulating all votes or consents; determining when the polls shall close;
determining the result; and such acts as may be proper to conduct the election
or vote with fairness to all shareholders. In the determination of the validity
and effect of proxies the dates contained on the forms of proxy shall
presumptively determine the order of execution of the proxies, regardless of the
postmark dates on the envelopes in which they are mailed.
The inspectors of election shall perform their duties impartially, in
good faith, to the best of their ability and as expeditiously as is practical.
If there are three inspectors of election, the decision, act or certificate of a
majority is effective in all respects as the decision, act or certificate of
all. Any report or certificate made by the inspectors of election is prima facie
evidence of the facts stated therein.
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ARTICLE III
Directors
Section 1. Powers. Subject to limitations of the articles of
incorporation and of the California General Corporation Law as to action to be
authorized or approved by the shareholders, and subject to the duties of
directors as prescribed by the bylaws, all corporate powers shall be exercised
by or under the authority of, and the business and affairs of the corporation
shall be controlled by, the board of directors. Without prejudice to such
general powers, but subject to the same limitations, it is hereby expressly
declared that the directors shall have the following powers, to wit:
(a) To select and remove all the officers, agents and employees of the
corporation, prescribe such powers and duties for them as may not be
inconsistent with law, with the articles of incorporation or the bylaws, fix
their compensation and require from them security for faithful service.
(b) To conduct, manage and control the affairs and business of the
corporation, and to make such rules and regulations therefor not inconsistent
with law, or with the articles of incorporation or the bylaws, as they may deem
best.
(c) To change the principal executive office and principal office for
the transaction of the business of the corporation from one location to another
as provided in Article I, Section 1, hereof; to fix and locate from time to time
one or more subsidiary offices of the corporation within or without the State of
California, as provided in Article I, Section 2, hereof; to designate any place
within or without the State of California for the holding of any shareholders'
meeting or meetings; and to adopt, make and use a corporate seal; to prescribe
the forms of certificates of stock; to alter the form of such seal and of such
certificates from time to time, as in their judgment they may deem best,
provided such seal and such certificates shall at all times comply with the
provisions of law.
(d) To authorize the issuance of shares of stock of the corporation
from time to time, upon such terms as may be lawful.
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(e) To borrow money and incur indebtedness for the purposes of the
corporation, and to cause to be executed and delivered therefor, in the
corporate name, promissory notes, bonds, debentures, deeds of trust, mortgages,
pledges, hypothecations or other evidences of debt and securities therefor.
(f) By resolution adopted by a majority of the authorized number of
directors, to designate an executive and other committees, each consisting of
two or more directors, to serve at the pleasure of the board, and to prescribe
the manner in which proceedings of such committee shall be conducted. Unless the
board of directors shall otherwise prescribe the manner of proceedings of any
such committee, meetings of such committee may be regularly scheduled in advance
and may be called at any time by any two members thereof; otherwise, the
provisions of these bylaws with respect to notice and conduct of meetings of the
board shall govern. Any such committee, to the extent provided in a resolution
of the board, shall have all of the authority of the board, except with respect
to:
(i) the approval of any action for which the General Corporation
Law or the articles of incorporation also require shareholder approval;
(ii) the filling of vacancies on the board or in any committee;
(iii) the fixing of compensation of the directors for serving on
the board or on any committee;
(iv) the adoption, amendment or repeal of bylaws;
(v) the amendment or repeal of any resolution of the board;
(vi) any distribution to the shareholders, except at a rate or in
a periodic amount or within a price range determined by the board; and
(vii) the appointment of other committees of the board or the
members thereof.
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Section 2. Number and Qualification of Directors. The number of
directors of the corporation shall not be less than three (3) nor more than five
(5) until changed by amendment of the articles of incorporation or by a bylaw
amending this Section 2 duly adopted by the vote or written consent of holders
of a majority of the outstanding shares entitled to vote, provided that a bylaw
specifying or changing the minimum number or changing from a variable to a fixed
board, or vice versa, may only be adopted by approval of the outstanding shares
and provided further that a bylaw or amendment of the articles reducing the
authorized number or the minimum number of directors below five cannot be
adopted if the votes cast against its adoption at a meeting or the shares not
consenting in the case of action by written consent, are equal to more than
16-2/3 percent of the outstanding sharesentitled to vote. The exact number of
directors shall be fixed from time to time, within the limits specified in the
articles of incorporation or in this Section 2, by a bylaw or amendment thereof
duly adopted by the vote of a majority of the shares entitled to vote
represented at a duly held meeting at which a quorum is present, or by the
written consent of the holders of a majority of the outstanding shares entitled
to vote, or by the board of directors.
Section 3. Election and Term of Office. The directors shall be elected
at each annual meeting of shareholders but, if any such annual meeting is not
held or the directors are not elected thereat, the directors may be elected at
any special meeting of shareholders held for that purpose. All directors shall
hold office until their respective successors are elected, subject to the
General Corporation Law and the provisions of these bylaws with respect to
vacancies on the board.
Section 4. Vacancies. A vacancy in the board of directors shall be
deemed to exist in case of the death, resignation or removal of any director, if
a director has been declared of unsound mind by order of cours or convicted of a
felony, if the authorized number of directors be increased, or if the
shareholders fail, at any annual or special meeting of shareholders at which any
director or directors are elected, to elect the full authorized number of
directors to be voted for at that meeting.
(a) Filling Vacancies. Vacancies in the board of directors, including a
vacancy created by the removal of a director, may be filled by a majority of the
remaining directors, though less than a quorum, or by a sole remaining director.
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(b) The shareholders may elect a director at any time to fill any
vacancy not filled by the directors. Any such election by written consent other
than to fill a vacancy created by removal requires the consent of a majority of
the outstanding shares entitled to vote.
(c) If, after the filling of any vacancy by the directors, the
directors then in office who have been elected by the shareholders shall
constitute less than a majority of the directors then in office, (i) any holder
or holders of an aggregate of 5 percent or more of the total number of shares at
the time outstanding having the right to vote for such directors may call a
special meeting of shareholders, or (ii) the superior court of the proper county
shall, upon application of such shareholder or shareholders, summarily order a
special meeting of shareholders, to be held to elect the entire board. The term
of office of any directors shall terminate upon such election of a successor.
Section 5. Resignation of Director. Any director may resign effective
upon giving written notice to the chairman of the board, the president, the
secretary of the board of directors of the corporation, unless the notice
specifies a later time for the effectiveness of such resignation. If the board
of directors accept the resignation of a director tendered to take effect at a
future time, the board or the shareholders shall have power to elect a successor
to take office when the resignation is to become effective.
Section 6. Effect of Reduction in Number. No reduction of the
authorized number of directors shall have the effect of removing any director
prior to the expiration of his term of office.
Section 7. Place of Meeting. Regular meetings of the board of directors
shall be held at any place within or without the state which has been designated
from time to time by resolution of the board or by written consent of all
members of the board. In the absence of such designation, regular meetings shall
be held at the principal executive office of the corporation. Special meetings
of the board may be held either at a place so designated or at the principal
executive office.
Section 8. Meetings.
(a) Organization Meeting. Immediately following each annual meeting of
shareholders, the board of directors shall hold a regular meeting at the place
of said annual meeting or at such other place as shall be fixed by the board of
directors, for the purpose of organization, election of officers, and the
transaction of other business. Call and notice of such meetings are hereby
dispensed with.
(b) Regular Meetings. Regular meetings of the board of directors shall
be held, without call, at the time and place fixed by the board. Notice of all
regular meetings is hereby dispensed with except as provided hereinbelow.
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(c) Special Meetings. Special meetings of the board of directors for
any purpose or purposes shall be called at any time by the chairman of the
board, the president, any vice president, the secretary or by any two directors
and shall be held upon four days' notice by mail or 48 hours' notice delivered
personally or by telephone or telegraph. A notice or waiver of notice need not
specify the purpose of any special meeting of the board. Notice of a meeting
need not be given to any director who signs a waiver of notice or a consent to
holding the meeting or an approval of the minutes thereof, whether before or
after the meeting, or who attends the meeting without protesting, prior thereto
or at its commencement, the lack of notice to such director. All such waivers,
consents and approvals shall be filed with the corporate records or made a part
of the minutes of the meeting.
(d) Adjourned Meetings. A majority of the directors present, whether or
not a quorum is present, may adjourn any meeting to another time and place. If
the meeting is adjourned for more than 24 hours, notice of any adjournment to
another time or place shall be given prior to the time of the adjourned meeting
to the directors who were not present at the time of the adjournment.
(e) Place of Meeting. Meetings of the board may be held at any place
within or without the state which has been designated in the notice of the
meeting or, if not stated in the notice or there is no notice, designated in the
bylaws or by resolution of the board.
(f) Participation by Conference Call. Members of the board may
participate in a meeting through use of conference telephone or similar
communications equipment, so long as all members participating in such meeting
can hear one another. Participation in a meeting pursuant to this subdivision
constitutes presence in person at such meeting.
(g) Quorum. A majority of the authorized number of directors
constitutes a quorum of the board for the transaction of business.
Section 9. Notice of Meeting. Written notice of the time and place of
special meetings shall be delivered personally to each director or communicated
to each director by telephone, or by telegraph or mail, charges prepaid,
addressed to him at his address as it is shown upon the records of the
corporation or, if it is not so shown on such records or is not readily
ascertainable, at the place at which the meetings of the directors are
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regularly held. In case such notice is mailed, it shall be deposited in the
United States mail at least four (4) days prior to the time of the holding of
the meeting. In case such notice is delivered, personally or by telephone or
telegraph, as above provided, it shall be so delivered at least 48 hours prior
to the time of the holding of the meeting. Such mailing, telegraphing or
delivery, personally or by telephone, as above provided, shall be due, legal and
personal notice to such director.
Section 10. Action Without Meeting. Any action required or permitted to
be taken by the board of directors may be taken without a meeting if all members
of the board shall individually or collectively consent in writing to such
action. Such written consent or consents shall be filed with the minutes of the
proceedings of the board and shall have the same force and effect as a unanimous
vote of such directors.
Section 11. Action at a Meeting - Required Vote. Every act or decision
done or made by a majority of the directors present at a meeting duly held at
which a quorum is present shall be regarded as the act of the board of
directors, unless a greater number, or the same number after disqualifying one
or more directors from voting, is required by law, by the articles of
incorporation, or by these bylaws. A meeting at which a quorim is initially
present may continue to transact business notwithstanding the withdrawal of
director, provided that any action taken is approved by at least a majority of
the required quorum for such meeting.
Section 12. Fees and Compensation. Directors and members of committees
may receive such compensation, if any, for their services, and such
reimbursement for expenses, as may be fixed or determined by resolution of the
board.
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ARTICLE IV
Officers
Section 1. Officers. The officers of the corporation shall be a
president, a vice-president, a secretary and a treasurer. The corporation may
also have, at the discretion of the board of directors, a chairman of the board,
one or more additional vice-presidents, one or more assistant secretaries, one
or more assistant treasurers, and such other officers as may be appointed in
accordance with the provisions of Section 3 of this Article. One person may hold
two or more offices, except that the offices of president and secretary shall
not be held by the same person.
Section 2. Election. The officers of the corporation, except such
officers as may be appointed in accordance with the provisions of Section 3 or
Section 5 of this Article, shall be chosen annually by the board of directors,
and each shall hold his office until he shall resign or shall be removed or
otherwise disqualified to serve, or his successor shall be elected and
qualified.
Section 3. Subordinate Officers, Etc. The board of directors may
appoint, and may empower the chairman of the board or the president, whichever
of such officers is serving as the chief executive officer of the corporation,
to appoint such other officers as the business of the corporation may require,
each of whom shall hold office, for such period, have such authority and perform
such duties as are provided in the bylaws or as the board of directors may from
time to time determine.
Section 4. Removal and Resignation. Any officer may be removed, either
with or without cause, by the board of directors, at any regular or special
meeting thereof, or, except in case of an officer chosen by the board of
directors, by any officer upon whom such power of removal may be conferred by
the board of directors (subject, in each case, to the rights, if any, of an
officer under any contract of employments).
Any officer may resign at any time by giving written notice to the
board of directors or to the chairman of the board or the president, whichever
of such officers is serving as the chief executive officer of the corporation,
or to the secretary of the corporation, without prejudice however, to the
rights, if any, of the corporation under any contract to which such officer is a
party. Any such resigation shall take effect at the date of the receipt of such
notice or at any later time specified therein; and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
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Section 5. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in the bylaws,for regular appointments to such office.
Section 6. Chairman of the Board. If there shall be a chairman of the
board, who is not a full-time employee of the corporation, such officer shall,
if present, preside at all meetings of the board of directors and exercise and
perform such other powers and duties as may be from time to time assigned to him
by the board of directors. If such officer is a full-time employee of the
corporation, he shall be the chief executive officer of the corporation, and
shall, subject to the control of the board of directors, have general
supervision, direction and control of the business and officers of the
corporation. He shall preside at all meetings of the shareholders and at all
meetings of the board of directors. He shall be ex-officio a member of all the
standing committees, including the executive committee, if any, and shall have
the general powers, and duties of management usually vested in the office of
president of a corporation, and shall have such other powers and duties as may
be prescribed by the board of directors or the bylaws.
Section 7. President. If there shall be no chairman of the board or if
such officer is not a full-time employee of the corporation, the president shall
be the chief executive officer of the corporation and shall, subject to the
control of the board of directors, have the powers and duties set forth
hereinabove for a chairman of the board who is a full-time employee of the
corporation. If there shall be a chairman of the board who is full-time employee
of the corporation, the president, in the absence or disability of the chairman
of the board, shall if present, preside at all meetings of the board of director
and shall exercise and perform such other powers and duties as may be from time
to time assigned to him by the board.
Section 8. Vice-President. In the absence or disability of the
president, the vice-presidents in order of their rank as fixed by the board of
directors or, if not ranked, the vice-president designated by the board of
directors, shall perform all the duties of the president, and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
president. The vice-presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
board of directors or the bylaws.
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Section 9. Secretary. The secretary shall record or cause to be
recorded, and shall keep or cause to be kept, at the principal executive office
and such other place as the board of directors may order, a book of minutes of
actions taken at all meetings of directors and shareholders, with the time and
place of holding, whether regular or special, and, if special, how authorized,
the notice thereof given, the names of those present at directors' meetings, the
number of shares present or represented at shareholders' meetings, and the
proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the corporation's transfer agent, a share
register, or a duplicate share register, showing the names of the shareholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates issued for the same, and the number and date of
cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all the
meetings of the shareholders and of the board of directors required by the
bylaws or by law to be given, and shall keep the seal of the corporation in safe
custody, and shall have such other powers and perform such other duties as may
be prescribed by the board of directors or by the bylaws.
Section 10. Treasurer. The treasurer shall be the chief financial
officer of the corporation and shall keep and maintain, or cause to be kept and
maintained, adequate and correct accounts of the properties and business
transactions of the corporation, including accounts of its assets, liabilities,
receipts, disbursements, gains, losses, capital, surplus and shares. Any
surplus, including earned surplus, paid-in surplus and surplus arising from a
reduction of stated capital, shall be classified according to source and shown
in a separate account. The books of account shall at all reasonable times be
open to inspection by any director.
The treasurer shall deposit all moneys and other valuables in the name
and to the credit of the corporation with such depositaries as may be designated
by the board of directors. He shall disburse the funds of the corporation as may
be ordered by the board of directors, shall render to the chairman of the board,
the president and directors, whenever they request it, an account of all of his
transactions as treasurer and of the financial condition of the corporation, and
shall have such other powers and perform such other duties as may be prescribed
by the board of directors or the bylaws.
IV-3
<PAGE> 250
ARTICLE V
Miscellaneous
Section 1. Inspection of Corporate Records.
(a) Shareholder. The accounting books and records, the record of
shareholders, and minutes of proceedings of the shareholders and the board and
committees of the board of this corporation and any subsidiary of this
corporation shall be open to inspection upon the written demand on the
corporation of any shareholder at any reasonable time during usual business
hours, for a purpose reasonably related to such holder's interests as a
shareholder. Such inspection by a shareholder may be made in person or by agent
or attorney, and the right of inspection includes the right to copy and make
extracts.
(b) Director. Every director shall have the absolute right at any
reasonable time to inspect and copy all books, records and documents of every
kind and to inspect the physical properties of the corporation. Such inspection
by a director may be made in person or by agent or attorney and the right of
inspection includes the right to copy and make extracts.
Section 2. Waiver of Annual Reports to Shareholders. As provided by
Section 1501(a) of the California General Corporation Law, the annual report to
shareholders is hereby expressly waived.
Section 3. Contracts, Etc., How Executed. The board of directors,
except as in the bylaws otherwise provided, may authorize any officer or
officers, agent or agents, to enter into any contract or execute any instrument
in the name of and on behalf of the corporation, and such authority may be
general or confined to specific instances; and, unless so authorized by the
board of directors, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or to any amount.
Section 4. Certificate for Shares. Every holder of shares in the
corporation shall be entitled to have a certificate signed in the name of the
corporation by the chairman or vice chairman of the board or the president or a
vice president and by the chief financial officer or an assistant treasurer or
the secretary or any assistant secretary, certifying the number of shares and
the class or series of shares owned by the shareholder.
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<PAGE> 251
Any of the signatures on the certificate may be facsimile, provided that in such
event at least one signature, including that of either officer or the
corporation's registrar or transfer agent, if any, shall be manually signed. In
case any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the corporation with the same effect as if such person were an
officer, transfer agent or registrar at the date of issue.
(a) Legend Stock. Any such certificate shall also contain such legend
or other statement as may be required by Section 418 of the General Corporation
Law, the Corporate Securities Law of 1968, the federal securities laws, and any
agreement between the corporation and the issuee thereof.
(b) Issuance Before Full Payment. Certificates for shares may be issued
prior to full payment under such restrictions and for such purposes as the board
of directors or the bylaws may provide; provided, however, that any such
certificate so issued prior to full payment shall state on the face thereof the
amount remaining unpaid and the terms of payment thereof.
(c) Lost or Destroyed Certificates. No new certificate for shares shall
be issued in lieu of an old certificate unless the latter is surrendered and
cancelled at the same time; provided, however, that a new certificate will be
issued without the surrender and cancellation of the old certificate if (1) the
old certificate is lost, apparently destroyed or wrongfully taken; (2) the
request for the issuance of the new certificate is made within a reasonable time
after the owner of the old certificate has notice of its loss, destruction, or
theft; (3) the request for the issuance of a new certificate is made prior to
the receipt of notice by the corporation that the old certificate has been
acquired by a bona fide purchaser; (4) the owner of the old certificate files a
sufficient indemnity bond with or provides other adequate security to the
corporation; and (5) the owner satisfies any other reasonable requirements
imposed by the corporation. In the event of the issuance of a new certificate,
the rights and liabilities of the corporation, and of the holders of the old and
new certificates, shall be governed by the provisions of Section 8104 and 8405
of the California Commercial Code.
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<PAGE> 252
Section 5. Representation of Shares of Other Corporations. The
president or any vice-president and the secretary or any assistant secretary of
this corporation are authorized to vote, represent and exercise on behalf of
this corporation all rights incident to any and all shares of any other
corporation or corporations standing in the name of this corporation. The
authority herein granted to said officers to vote or represent on behalf of this
corporation any and all shares held by this corporation in any other corporation
or corporations may be exercised either by such officers in person or by any
other person authorized so to do by proxy or power of attorney duly executed by
said officers.
Section 6. Indemnification of Agents of the Corporation; Purchase of
Liability Insurance.
(a) Definitions: Agent; Proceeding; Expenses. For the purposes of this
section, "agent" means any person who is or was a director, officer, employee or
other agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another foreign or
domestic corporation, partnership, joint venture, trust or other enterprise;
"proceeding" means any threatened, pending or completed action or proceeding
whether civil, criminal, administrative or investigative; and "expenses"
includes without limitation attorneys' fees and any expenses of establishing a
right to indemnification under subdivision (d) or paragraph (3) of subdivision
(e).
(b) Power to Indemnify Agent.
(i) The corporation shall have power to indemnify any person who was or
is a party or is threatened to be made a party to any proceeding (other than an
action by or in the right of the corporation to procure a judgment in its favor)
by reason of the fact that such person is or was an agent of the corporation,
against expenses, judgments, fines, settlements and other amounts actually and
reasonably incurred in connection with such proceeding if such person acted in
good faith and in a manner such person reasonably believed to be in the best
interests of the corporation and, in the case of a criminal proceeding, had no
reasonable cause to believe the conduct of such person was unlawful. The
termination of any proceeding by judgment, order, settlement
V-3
<PAGE> 253
conviction or upon a plea of nolo contendere or its equivalent shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which the person reasonably believed to be in the best interests of the
corporation or that the person had reasonable cause to believe that the person's
conduct was unlawful.
(ii) A corporation shall have power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action by or in the right of the corporation to procure a judgment in
its favor by reason of the fact that such person is or was an agent of the
corporation, against expenses actually and reasonably incurred by such person in
connection with the defense or settlement of such action if such person acted in
good faith, in a manner such person believed to be in the best interests of the
corporation and with such care, including reasonable inquiry, as an ordinarily
prudent person in a like position would use under similar circumstances. No
indemnification shall be made under this subdivision (b):
(A) In respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the corporation in the performance of
such person's duty to the corporation, unless and only to the extent that the
court in which such proceeding is or was pending shall determine upon
application that, in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for the expenses which such court
shall determine;
(B) Of amounts paid in settling or otherwise disposing of a threatened
or pending action, with or without court approval; or
(C) Of expenses incurred in defending a threatened or pending action
which is settled or otherwise disposed of without court approval.
(c) Expenses. To the extent that an agent of a corporation has been
successful on the merits in defense of any proceeding referred to in subdivision
(b) or in defense of any claim, issue or matter therein, the agent shall be
indemnified against expenses actually and reasonably incurred by the agent in
connection therewith.
V-4
<PAGE> 254
(d) Vote Authorizing Indemnification. Except as provided in subdivision (c), any
indemnification under this section shall be made by the corporation only if
authorized in the specific case, upon a determination that indemnification of
the agent is proper in the circumstances because the agent has met the
applicable standard of conduct set forth in subdivision (b) or (c), by:
(i) A majority vote of a quorum consisting of directors who are not parties to
such proceeding;
(ii) Approval of the shareholders by majority vote, with the shares owned by the
person to be indemnified not being entitled to vote thereon; or
(iii) The court in which such proceeding is or was pending upon application made
by the corporation or the agent or the attorney or other person rendering
services in connection with the defense, whether or not such application by the
agent, attorney or other person is opposed by the corporation.
(e) Advancement of Expenses. Expenses incurred in defending any proceeding may
be advanced by the corporation prior to the final disposition of such proceeding
upon receipt of an undertaking by or on behalf of the agent to repay such amount
unless it shall be determined ultimately that the agent is entitled to be
indemnified as authorized in this section.
(f) Validity and Limitation. No provision made by a corporation to indemnify its
or its subsidiary's directors or officers for the defense of any proceeding,
whether contained in the articles, bylaws, a resolution of shareholders or
directors, an agreement or otherwise, shall be valid unless consistent with this
section. Nothing contained in this section shall affect any right to
indemnification to which persons other than such directors and officers may be
entitled by contract or otherwise.
(g) No indemnification or advance shall be made under this section, except as
provided in subdivision (c) or paragraph (iii) of subdivision (d), in any
circumstance where it appears:
V-5
<PAGE> 255
(i) That it would be inconsistent with a provision of the articles, bylaws, a
resolution of the shareholders or an agreement in effect at the time of accrual
of the alleged cause of action asserted in the proceeding in which the expenses
were incurred or other amounts were paid, which prohibits or otherwise limits
indemnification; or
(ii) That it would be inconsistent witn any condition expressly imposed by a
court in approving a settlement.
(h) Purchase o,f Insurance. The corporation shall have power to purchase and
maintain insurance on behalf of any agent of the corporation against any
liability asserted against or incurred by the agent in such capacity or arising
out of the agent's status as such whether or not the corporation would have the
power to indemnify the agent against such liability under the provisions of this
section.
(i) Trustee, Etc. Excluded. This section does not apply to any proceeding
against any trustee, investment manager or other fiduciary of an employee
benefit plan in such person's capacity as such, even though such person may also
be an agent as defined in subdivision (a) of the employer corporation. A
corporation shall have power to indemnify such a trustee, investment manager or
other fiduciary to the extent permitted by General Corporation Law subdivision
(f) of Section 207.
Section 7. Record Date. In order that the corporation may determine the
shareholders entitled to notice of any meeting or to vote or entitled to receive
payment of any dividend or other distribution or allotment of any rights or
entitled to exercise any rights in respect of any other lawful action, the board
may fix, in advance, a record date, which shall not be more than 60 nor less
than 10 days prior to the date of such meeting nor more than 60 days prior to
any other action.
Section 8. Construction and Definitions. Unless the context otherwise requires,
the general provisions, rules of constructions and definitions contained in the
California General Corporation Law shall govern the construction of these
bylaws.
V-6
<PAGE> 256
ARTICLE VI
Amendments
Section 1. Power of Shareholders. New bylaws may , be adopted or these
bylaws may be amended or repealed by the affirmative vote of a majority of the
outstanding shares entitled to vote, or by the written assent of shareholders
entitled to vote such shares except as otherwise provided by law or by the
articles of incorporation.
Section 2. Power of Directors. Subject to the right of shareholders as provided
in Section l of this Article VI to adopt, amend or repeal bylaws, bylaws may be
adopted, amended or repealed by the board of directors provided, however, that
the board of directors may adopt a bylaw or amendment thereof changing the
authorized number of directors only for the purpose of fixing the exact number
of directors within the limits specified in Section 2 of Article III of these
bylaws.
VI-1
<PAGE> 257
CERTIFICATE OF SECRETARY
I, the undersigned, do hereby certify:
1. That I am the duly elected and acting secretary of GIGATRONICS, INC. a
California corporation; and
2. That the foregoing bylaws, comprising 23 pages, constitute the bylaws of said
Corporation duly taken on March 26, 1980.
IN WITNESS WHEREOF, I have hereunto subscribe my name and affixed the seal of
said corporation this 30 day of April, 1980.
/S/
-------------------------
Arthur Bjerlie
Secretary
<PAGE> 258
ANNEX I
Tender Instructions
<PAGE> 259
ANNEX I
TENDER INSTRUCTIONS
WHEREAS, Giga-tronics Incorporated, a California corporation
("Giga-tronics") and ASCOR, Inc., a California corporation ("ASCOR") are parties
to that certain AGREEMENT AND PLAN OF REORGANIZATION (the "Reorganization
Agreement") entered into as of the 2nd day of May, 1996, by and among
Giga-tronics ASCOR Acquisition Corp., a California corporation and a wholly
owned subsidiary of Giga-tronics ("Merger Sub"), and ASCOR, which Reorganization
Agreement the undersigned holder ("Shareholder") of preferred stock of ASCOR
("ASCOR Preferred Stock") has previously executed; and
WHEREAS, pursuant to Section 8.02(h) of the Reorganization Agreement it
is a condition to the obligations of Giga-tronics to consummate the Merger that
all shares of ASCOR Preferred Stock be tendered to Giga-tronics as of the
Closing Date in accordance with the terms contained hereinafter; and
NOW, THEREFORE, in consideration of the foregoing, Shareholder hereby
tenders the shares of ASCOR Preferred Stock, in such amounts and of such series
as are listed below (which amounts represent all ASCOR Preferred Stock owned by
the undersigned and all ASCOR Preferred Stock which was owned by Shareholder as
of May 2, 1996, the date of the Reorganization Agreement) in exchange for shares
of Giga-tronics Common Stock pursuant to the terms of the Reorganization
Agreement.
Shareholder acknowledges and agrees that pursuant to Section 1.02 of
the Reorganization Agreement, and as provided in the Agreement of Merger
attached as Exhibit 1.01 to the Reorganization Agreement, all shares of ASCOR
Preferred Stock and Common Stock of ASCOR will be exchanged for Giga-tronics
Common Stock at the same Exchange Rate.
Shareholder agrees that the Giga-tronics Common Stock to be received
pursuant to the exchange described herein pursuant to the terms of the
Reorganization Agreement (and any cash in lieu of fractional shares of
Giga-tronics Common Stock) represents the full amount of consideration due to
the undersigned upon consummation of the Merger. Shareholder hereby waives any
(a) rights to receipt of accrued dividends on such Preferred Stock provided by
Article Fourth, Section 1 of the Articles of Incorporation of ASCOR (the "ASCOR
Articles"), (b) liquidation rights pertaining to ASCOR Preferred Stock as such
may be provided by Article Fourth, Section 2 of the ASCOR Articles, (c) rights
to convert into common stock as provided by Article Fourth, Section 6 of the
ASCOR Articles, and (d) any other rights which the ASCOR Preferred Stock may
possess whether pursuant to the ASCOR Articles or otherwise.
<PAGE> 260
Shareholder has have executed this Tender Instructions as of the
Closing Date as such term is defined in the Reorganization Agreement.
SHAREHOLDER
By:_______________________________
Name:_____________________________
Title:____________________________
ASCOR Preferred Shares Held and
Tendered Herewith
Series A _______________________
Series B _______________________
Series C _______________________
<PAGE> 261
ANNEX J
Letter Agreement
<PAGE> 262
May 20, 1996
ASCOR, Incorporated.
47790 Westinghouse Drive
Fremont, CA 94539
Attention: Jeffrey Lum, President
ASCOR, Incorporated ("ASCOR") and Giga-tronics, Incorporated
("Giga-tronics") are parties to that certain AGREEMENT AND PLAN OF
REORGANIZATION (the "Reorganization Agreement") entered into as of the 2nd day
of May, 1996, by and among Giga-tronics , ASCOR Acquisition Corp., a California
corporation and a wholly owned subsidiary of Giga-tronics ("Merger Sub"), and
ASCOR. All capitalized terms used but not defined herein shall have the meaning
ascribed to them in the Reorganization Agreement.
Pursuant to the terms of the Reorganization Agreement
Giga-tronics is to issue a maximum of 724,986 shares of Giga-tronics Common
Stock in the Merger. Further pursuant to the terms of the Reorganization
Agreement, such issuance is to be not pursuant to a registration under federal
securities laws, rather pursuant to an exemption therefrom. The Reorganization
Agreement also contemplates that at the Closing of the Merger Giga-tronics will
enter into a Registration Rights Agreement (in the form of Exhibit 10.01 to the
Reorganization Agreement) with the former shareholders of ASCOR. Pursuant to
Section 2.14 of the Registration Rights Agreement the registration rights
granted thereunder will not be available if the Giga-tronics Common Stock issued
in the merger was "issued by Giga-tronics to the Holder pursuant to a
registration statement filed with the SEC".
Giga-tronics believes it is in the interests of Giga-tronics
and the combined companies to issue the Giga-tronics Common Stock pursuant to
such a registration statement. Therefore, Giga-tronics now agrees to use its
best faith efforts to file with the Securities and Exchange Commission, and
cause the effectiveness under federal securities law of, a registration
statement on Form S-4 (or such other form as may be applicable) covering the
shares of Giga-tronics Common Stock to be issued in the Merger.
The undersigned hereby agree that upon the issuance of such
Giga-tronics Common Stock pursuant to an effective registration statement the
Registration Rights Agreement will be of no force and effect and will therefore
not be delivered at the Closing.
<PAGE> 263
Please acknowledge your acceptance and agreement to the
foregoing by signing and returning a copy of this letter.
Very truly yours,
GIGA-TRONICS, INCORPORATED
By:________________________________
Name:
Title:
ACCEPTED AND AGREED
ASCOR, INCORPORATED
By:________________________
Name:
Title:
<PAGE> 264
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Giga-tronics is incorporated in California. Under Section 317 of the
California Corporation Code (the "CCC"), a California corporation generally has
the power to indemnify its present and former directors and officers against
expenses, judgments, fines, settlements and other amounts actually paid and
reasonably incurred by them in connection with any threatened, pending or
completed action or proceeding so long as they acted in good faith and in a
manner they reasonably believed to be in the best interests of the company, and
with respect to any criminal action, they had no reasonable cause to believe
their conduct was unlawful.
The Articles of Incorporation of Giga-tronics (the "Articles") and the
Bylaws of Giga-tronics (the "Bylaws") provide that Giga-tronics has the powers
of indemnification as specified in Section 317 of the CCC. The Bylaws provide to
the extent an agent of Giga-tronics has been successful on the merits in defense
of a proceeding relating to which Giga-tronics has the power to indemnify them,
the agent shall be indemnified against expenses actually and reasonably incurred
by the agent in connection therewith. The Bylaws further provide that except in
such cases where an agent is successful on the merits in such defense,
indemnification is to be made only upon a determination that indemnification is
proper in the circumstances because the agent met standards of conduct as
determined by (i) a majority vote of a quorum consisting of directors who are
not parties to such proceeding; (ii) approval of the shareholders by majority
vote, with the shares owned by the person to be indemnified not being entitled
to vote thereon; or (iii) the court in which such proceeding is or was pending
upon application made by the corporation or the agent or the attorney or other
person rendering services in connection with the defense, whether or not such
application by the agent, attorney or other person is opposed by the
corporation.
Section 204(a)(10) of the CCC provides that Articles of Incorporation
may, subject to certain provisos, contain a provision eliminating or limiting
the personal liability of a director for monetary damages in an action brought
by or in the right of the company for breach of a director's duty to the company
and its shareholders. The Articles provide that the liability of the directors
of Giga-tronics for monetary damages will be eliminated to the fullest extent
permissible under California law.
<PAGE> 265
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
2.1 - Agreement and Plan of Reorganization dated as of May 2, 1996 among the Registrant,
ASCOR, Acquisition Corp. and ASCOR, Inc. ( "ASCOR ") (included as Annex C to the
Joint Proxy Statement/Prospectus included in Part I of this Registration Statement).
2.2 - Letter Agreement dated May 20, 1996 between the Registrant and ASCOR (included as
Annex J to the Joint Proxy Statement/Prospectus included in Part I of this Registration
Statement).
2.3 - Form of Agreement of Merger (included as Exhibit 1.01 to the Agreement and Plan of
Reorganization included as Annex C to the Joint Proxy Statement/Prospectus included in
Part I of this Registration Statement).
3.1 - Articles of Incorporation of Giga-tronics Incorporated (included as Annex G to the Joint Proxy
Statement/Prospectus included in Part I of this Registration Statement).
3.2 - Bylaws of Giga-tronics Incorporated (included as Annex A to the Joint Proxy Statement/
Prospectus included in Part I of this Registration Statement).
4.1 - Specimen certificate of the Registrant's Common Stock.
5.1 - Opinion of Brobeck, Phleger & Harrison, counsel to the Registrant.
8.1 - Tax Opinion of Brobeck, Phleger & Harrison, counsel to the Registrant.
10.1 - 1990 Restated Stock Option Plan and form of Incentive Stock Option Agreement.
10.2 - Standard form Indemnification Agreement for Directors and Officers.
10.3 - Lease between Giga-tronics Incorporated and Calfront Associates for 4650 Norris Canyon
Road, San Ramon, CA, dated December 6, 1993.
19.1 - Fairness Opinion of Wood, Warren & Co. (included as Annex E to the Joint Proxy
Statement/Prospectus included in Part I of this Registration Statement).
23.1 - Consent of Brobeck, Phleger & Harrison (included in Exhibit 5.1).
23.2 - Consent of KPMG Peat Marwick LLP.
23.3 - Consent of KPMG Peat Marwick LLP.
23.4 - Consent of Wood, Warren & Co.
24.1 - Power of Attorney (see Signature Page included in Registration Statement).
</TABLE>
<PAGE> 266
(b) Financial Statement Schedules
Giga-tronics, Incorporated
Schedule II. Valuation and Qualifying Accounts
ASCOR, Inc.
Schedule II. Valuation and Qualifying Accounts
ITEM 22. UNDERTAKINGS
(a) The undersigned registrants hereby undertake:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1993;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement;
(iii) To include any material information with
respect to the plan of distribution not previously disclosed
in the registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) (1) The undersigned Registrant hereby undertakes as follows:
that prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this
Registration Statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), the issuer undertakes
that such reoffering prospectus will contain the information called for
by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information
called for by the other items of the applicable form.
(2) The Registrant undertakes that every prospectus (i) that
is filed pursuant to the immediately preceding paragraph b.(1), or (ii)
that purports to meet the requirements of Section 10(a)(3) of the Act
and is used in connection with an offering of securities subject to
Rule 415, will be filed as a part of an amendment to the Registration
Statement and will not be used until such amendment is effective, and
that, for purposes of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the
<PAGE> 267
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
(d) The undersigned Registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction,
and the company being acquired involved therein, that was not the
subject of and included in the Registration Statement when it became
effective.
<PAGE> 268
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Amendment No. 1 to its Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of San Ramon, State of California, on July 1, 1996.
GIGA-TRONICS, INCORPORATED
By: /s/ GEORGE H. BRUNS, JR.
-----------------------------------------------
George H. Bruns, Jr., Chairman of the Board
and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints, jointly and severally, George H. Bruns,
Jr. and Gregory L. Overholtzer, and each one of them, his attorneys-in-fact,
each with the power of substitution, for him in any and all capacities, to sign
this Registration Statement and any and all amendments hereto (including
post-effective amendments), and to file the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be dome
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/s/ GEORGE H. BRUNS, JR. Chairman of the Board and July 1, 1996
- ---------------------------------- Chief Executive Officer
George H. Bruns, Jr. (Principal Executive Officer
and Director)
/s/ GREGORY L. OVERHOLTZER Vice President, Finance and July 1, 1996
- ---------------------------------- Chief Financial Officer
Gregory L. Overholtzer (Principal Accounting
Officer)
* Director July 1, 1996
- ----------------------------------
James A. Cole
* Director July 1, 1996
- ----------------------------------
Edward D. Sherman
* Director July 1, 1996
- ----------------------------------
Robert S. Wilson
*BY: /s/ GEORGE H. BRUNS, JR.
-----------------------------
George H. Bruns, Jr.
Attorney-in-Fact
</TABLE>
<PAGE> 269
REPORT OF INDEPENDENT AUDITORS ON SCHEDULES
The Board of Directors
Giga-tronics Incorporated
Under date of April 18, 1996, except for Note 10, which is as of May 2,
1996 we reported on the balance sheets of Giga-tronics Incorporated as of March
30, 1996 and the related statements of operations, shareholders' equity and
cash flows for the fifty-three week period ended March 30, 1996, and for the
fifty two week periods in the two-year period ended March 25, 1995 included in
the Registration Statement. In connection with our audits of the aforementioned
financial statements, we also audited the related financial statement Schedule
II, Valuation and Qualifying Accounts. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly,
in all material respects, the information set forth therein.
/s/ KPMG Peat Marwick LLP
-------------------------
KPMG Peat Marwick LLP
San Jose, California
April 18, 1996
except as to note 10,
which is as of May 2, 1996
S-1
<PAGE> 270
GIGA-TRONICS INCORPORATED
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ------------------------- ------------ -------------------------- ---------- ----------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING OF COST AND OTHER END OF
DESCRIPTION PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- ------------------------- ------------ ---------- ---------- ---------- ----------
$ $ $ $ $
<S> <C> <C> <C> <C> <C>
Year ended March 30, 1996
- -------------------------
Allowances deducted from
assets:
Accounts receivable:
For doubtful accounts(1) 31,676 209,907 -- 19,824 221,759
------ ------- ------ ------ -------
Total 31,676 209,907 -- 19,824 221,759
====== ======= ====== ====== =======
Year ended March 25, 1995
- -------------------------
Allowances deducted from
assets:
Accounts receivable:
For doubtful accounts(1) 87,065 13,775 -- 69,164 31,676
------ ------- ------ ------ -------
Total 87,065 13,775 -- 69,164 31,676
====== ======= ====== ====== =======
Year ended March 26, 1994
- -------------------------
Allowances deducted from
assets:
Accounts receivable:
For doubtful accounts(1) 43,265 45,000 -- 1,200 87,065
------ ------- ------ ------ -------
Total 43,265 45,000 -- 1,200 87,065
====== ======= ====== ====== =======
</TABLE>
- ---------------
(1) Reserve for accounts receivable collection exposure.
S-2
<PAGE> 271
REPORT OF INDEPENDENT AUDITORS ON SCHEDULES
The Board of Directors
ASCOR, Incorporated
Under date of April 25, 1996, except for Note 14, which is as of May 2,
1996, we reported on the balance sheet of ASCOR, Incorporated as of March 31,
1996 and 1995, and the related statements of operations, shareholders' deficit
and cash flows for each of the years in the three-year period ended March 31,
1996 included in the Registration Statement. In connection with our audits of
the aforementioned financial statements, we also audited the related financial
statement Schedule II, Valuation and Qualifying Accounts. This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement schedule
based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
/s/ KPMG Peat Marwick LLP
-------------------------
KPMG Peat Marwick LLP
San Jose, California
April 18, 1996
except as to note 14,
which is as of May 2, 1996
S-3
<PAGE> 272
ASCOR INCORPORATED
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ------------------------- ------------ -------------------------- ---------- ----------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING OF COST AND OTHER END OF
DESCRIPTION PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- ------------------------- ------------ ---------- ---------- ---------- ----------
$ $ $ $ $
<S> <C> <C> <C> <C> <C>
Year ended March 30, 1996
- -------------------------
Allowances deducted from
assets:
Accounts receivable:
For doubtful accounts(1) -- 13,123 -- -- 13,123
------ ------ ------ ------ ------
Total -- 13,123 -- -- 13,123
====== ====== ====== ====== ======
Year ended March 25, 1995
- -------------------------
Allowances deducted from
assets:
Accounts receivable:
For doubtful accounts(1) -- -- -- -- --
------ ------ ------ ------ ------
Total -- -- -- -- --
====== ====== ====== ====== ======
Year ended March 26, 1994
- -------------------------
Allowances deducted from
assets:
Accounts receivable:
For doubtful accounts(1) -- -- -- -- --
------ ------ ------ ------ ------
Total -- -- -- -- --
====== ====== ====== ====== ======
</TABLE>
- ---------------
(1) Reserve for accounts receivable collection exposure.
S-4
<PAGE> 273
PROXY
GIGA-TRONICS INCORPORATED
SPECIAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
George H. Bruns and Greg Overholtzer, or either of them, are hereby constituted
and appointed the lawful attorneys and proxies of the undersigned, each with
full power of substitution, to vote and act as proxy with respect to all shares
of Common Stock of Giga-tronics Incorporated ("Giga-tronics") standing in the
name of the undersigned on the books of Giga-tronics at the close of business on
June 14, 1996, at the Special Meeting of Shareholders to be held at 10:00 A.M.,
on July 17, 1966, at Giga-tronics' Facilities at 4650 Norris Canyon Road, San
Ramon, CA 94583, or at any adjournment or postponement thereof.
THE POWERS HEREBY GRANTED MAY BE EXERCISED BY BOTH OF SAID ATTORNEYS OR PROXIES
OR THEIR SUBSTITUTES PRESENT AND ACTING AT THE SPECIAL MEETING OF SHAREHOLDERS
OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF OR, IF ONLY ONE BE PRESENT AND
ACTING, THEN BY THAT ONE. THE UNDERSIGNED HEREBY REVOKES ANY AND ALL PROXIES
HERETOFORE GIVEN BY THE UNDERSIGNED TO VOTE AT SAID MEETING.
Shares of Giga-tronics Common Stock represented by properly executed proxies
will be voted and such shares will be voted in accordance with the specification
indicated. If no specifications are made this properly executed proxy will be
voted FOR Proposal No. 1
(CONTINUED AND TO BE SIGNED ON OTHER SIDE)
<PAGE> 274
This Proxy when properly executed will be voted in the manner directed herein.
If no election is made, this Proxy will be voted FOR Proposal 1.
1. Proposal to approve and adopt the
Agreement and Plan of Reorganization
dated as of May 2, 1996 (the
"Reorganization Agreement") by and
among Giga-tronics, ASCOR
Acquisition Corp., a California
corporation ("Merger Sub") and
ASCOR, Incorporated ("ASCOR") and
the transactions contemplated by the
Reorganization Agreement.
FOR AGAINST ABSTAIN
/ / / / / /
Receipt is acknowledged of the Notice
of Special Meeting and Joint Proxy
Statement/Prospectus (with all
enclosures and attachments) relating to
the Special Meeting. Whether or not you
expect to attend the meeting, you are
urged to execute and return this proxy,
which may be revoked at any time prior
to its use.
Signature______________________________
Signature______________________________
Date___________________________________
Please sign your name exactly as it
appears printed hereon. Executors
administrators, guardians, officers of
corporations and others signing in a
fiduciary capacity should sign their
full title as such.
<PAGE> 275
WRITTEN CONSENT OF SHAREHOLDER
OF
ASCOR, INC.
The undersigned, a shareholder of ASCOR, Inc., a California
corporation ("ASCOR" and the "Corporation"), does by this writing consent to the
following actions and adopt the following resolutions.
APPROVAL OF MERGER AGREEMENT
WHEREAS, there has been presented to this shareholder a copy of the
Joint Proxy Statement/Prospectus of Giga-tronics, Incorporated ("Giga-tronics")
and ASCOR (the "Proxy Statement"); and
WHEREAS, there has been presented to this shareholder a copy of the
AGREEMENT AND PLAN OF REORGANIZATION (the "Reorganization Agreement") entered
into as of the 2nd day of May, 1996, by and among Giga-tronics , ASCOR
Acquisition Corp., a California corporation and a wholly owned subsidiary of
Giga-tronics ("Merger Sub") and ASCOR, as amended by that certain Letter
Agreement dated May 20, 1996 between Giga-tronics and ASCOR pursuant to which,
among other things, (a) Merger Sub is to be merged with and into ASCOR, (b)
ASCOR will become a wholly owned subsidiary of Giga-tronics and (c) Giga-tronics
is to issue a maximum of 724,986 shares of Giga-tronics Common Stock in the
Merger in exchange for all of the outstanding shares of stock of ASCOR and
outstanding securities of ASCOR in the manner and in such exchange ratios as is
described in the Reorganization Agreement;
NOW THEREFORE RESOLVED, the Reorganization Agremeent and all
transactions contemplated therein be, and hereby are approved;
RESOLVED, that the Agreement of Merger in the form attached to the
Reorganization Agreement as Exhibit 1.01, be and hereby is, approved;
RESOLVED, that each officer of this Corporation be, and hereby is,
authorized to perform such acts and execute such agreements, documents and
certificates as may be required in such officer's discretion to effectuate the
purposes of the foregoing resolutions; and
RESOLVED, that all actions of the officers of this Corporation taken
to date relating to the matters covered by the foregoing resolutions be, and
hereby are, ratified and affirmed;
<PAGE> 276
This consent is executed pursuant to Section 603(a) of the California
Corporations Code and Section 2.10 of Article II of the Bylaws of the
Corporation, which authorize the taking of action by the shareholders of the
Corporation by written consent without a meeting.
Dated: _____________, 1996
SHAREHOLDER
By:____________________________
Name:
ASCOR STOCK HELD Number of Shares
ASCOR Common Stock ________________
ASCOR Preferred Stock
Series A ________________
Series B ________________
Series C ________________
<PAGE> 277
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
2.1 - Agreement and Plan of Reorganization dated as of May 2, 1996 among the Registrant,
ASCOR, Acquisition Corp. and ASCOR, Inc. ( "ASCOR ") (included as Annex C to the
Joint Proxy Statement/Prospectus included in Part I of this Registration Statement).
2.2 - Letter Agreement dated May 20, 1996 between the Registrant and ASCOR (included as
Annex J to the Joint Proxy Statement/Prospectus included in Part I of this Registration
Statement).
2.3 - Form of Agreement of Merger (included as Exhibit 1.01 to the Agreement and Plan of
Reorganization included as Annex C to the Joint Proxy Statement/Prospectus included in
Part I of this Registration Statement).
3.1 - Articles of Incorporation of Giga-tronics Incorporated (included as Annex G to the Joint
Proxy Statement/Prospectus included in Part I of this Registration Statement).
3.2 - Bylaws of Giga-tronics Incorporated (included as Annex A to the Joint Proxy Statement/
Prospectus included in Part I of this Registration Statement).
4.1 - Specimen certificate of the Registrant's Common Stock.
5.1 - Opinion of Brobeck, Phleger & Harrison, counsel to the Registrant.
8.1 - Tax Opinion of Brobeck, Phleger & Harrison, counsel to the Registrant.
10.1 - 1990 Restated Stock Option Plan and form of Incentive Stock Option Agreement.
10.2 - Standard form Indemnification Agreement for Directors and Officers.
10.3 - Lease between Giga-tronics Incorporated and Calfront Associates for 4650 Norris Canyon
Road, San Ramon, CA, dated December 6, 1993.
19.1 - Fairness Opinion of Wood, Warren & Co. (included as Annex E to the Joint Proxy
Statement/Prospectus included in Part I of this Registration Statement).
23.1 - Consent of Brobeck, Phleger & Harrison (included in Exhibit 5.1).
23.2 - Consent of KPMG Peat Marwick LLP.
23.3 - Consent of KPMG Peat Marwick LLP.
23.4 - Consent of Wood, Warren & Co.
24.1 - Power of Attorney (see Signature Page included in Registration Statement).
</TABLE>
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Giga-tronics Incorporated
We consent to the use of our reports included herein and to the
reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
-------------------------
KPMG Peat Marwick LLP
San Jose, California
June 28, 1996
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
ASCOR Incorporated
We consent to the use of our reports included herein and to the
reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
-------------------------
KPMG Peat Marwick LLP
San Jose, California
June 28, 1996
