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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): APRIL 19, 1999
CALIFORNIA AMPLIFIER, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
DELAWARE 0-12182 95-3647070
(STATE OR OTHER JURISDICTION OF (COMMISSION FILE NUMBER) (IRS EMPLOYER
INCORPORATION) IDENTIFICATION NO.)
460 CALLE SAN PABLO 93012
CAMARILLO, CALIFORNIA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (805) 987-9000
NONE
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On April 19, 1999, the Registrant consummated the acquisition (the
"Acquisition") of certain assets, properties and rights of Gardiner
Communications Corp., a Delaware corporation ("Gardiner"), used or held for
use primarily in the business of designing and manufacturing microwave
components for home satellite systems known as Television Receive only,
including single and dual Ku-Band Low Noise Block Downconverter products,
Ku-Universal, C-Band products and other products under development (the
"Business"), pursuant to the Asset Purchase Agreement (the "Agreement") dated
as of April 19, 1999 by and among the Registrant, Gardiner, James M. Harris,
Frances A. Jensen Harris and O'Donnell & Masur, L.P. The aggregate purchase
price consisted of (1) a cash payment of $1,497,480 by the Registrant to
Gardiner at the closing of the transaction, (2) the delivery by the
Registrant of a Convertible Promissory Note in the amount of $3,100,000 (the
"Note") to Gardiner at the closing of the transaction, (3) a cash payment of
$1,250,000 by the Registrant to James M. Harris at the closing of the
transaction, (4) the assumption by the Registrant of certain of Gardiner's
liabilities relating to the Business, and (5) an additional cash payment to
be paid by the Registrant to Gardiner of up to $2,525,000 approximately five
months after the closing of the transaction. The source of funds for the
initial cash payments to Gardiner and Mr. Harris was the Registrant's cash on
hand. The source of funds for the additional cash payment will be the
Registrant's cash on hand or availability under the Registrant's $3,000,000
working capital credit facility with Santa Monica Bank, Santa Monica,
California.
The Acquisition was accomplished in the following manner: (1) the
Registrant acquired Gardiner's assets, properties and rights relating to the
Business, (2) Gardiner received the initial cash payment of $1,497,480, and (3)
the Registrant delivered a Convertible Promissory Note in the amount of
$3,100,000 to Gardiner. The terms of the Acquisition are set forth in the
Agreement. The description of the Agreement set forth herein is qualified in its
entirety by reference to the full text of the Agreement, which is attached as
Exhibit 2.1.
Pursuant to the terms of the Agreement, the Registrant and Gardiner
executed a Transition Services Agreement under which Gardiner will provide the
Registrant with services for manufacturing certain products during a transition
period of four months. Thereafter, the Registrant will pay Gardiner up to
$2,525,000 for additional inventory, as described above. Additionally, James M.
Harris and Robert Hicks each entered into an Employment Agreement with the
Registrant.
The Note is a one year note that pays interest at 8% per annum.
Approximately $2,200,000 of the debt can be converted into 525,000 shares of the
Registrant's common stock at $4.25 per share on April 19, 2000. If the average
closing sales price of the Registrant's common stock for the immediate twenty
trading days prior to April 19, 2000 is less than $4.25 per share, Gardiner can
elect to extend the Note for at least an additional six months, but not more
than one year, with the right to convert a portion of the debt into 525,000
shares of the Registrant's common stock at the lower per share conversion price
equal to $4.25 or the average closing sales price of the Registrant's common
stock for the immediate twenty trading days prior to conversion.
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Prior to the Acquisition, Gardiner used the assets, properties and
rights used or held for use primarily in the Business to design and manufacture
microwave components for home satellite systems known as Television Receive
only, including single and dual Ku-Band Low Noise Block Downconverter products,
Ku-Universal, C-Band products and other products under development. The
Registrant presently intends to continue to conduct the Business in a manner
substantially unchanged from the conduct of the Business by Gardiner prior to
the Acquisition.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired.
It is impracticable to provide the audited financial statements for the
Business required by Item 7 at this time. The Registrant will filed the required
audited financial statements on or before July 2, 1999.
(b) PRO FORMA Financial Information.
It is impracticable to provide the pro forma financial information
required by Item 7 at this time. The Registrant will file the required pro forma
financial information on or before July 2, 1999.
(c) Exhibits.
The following exhibits are filed with this report on Form 8-K:
EXHIBIT NO. DESCRIPTION
2.1 Asset Purchase Agreement dated as of April 19, 1999 by and
among the Registrant, Gardiner Communications Corp., James M.
Harris, Frances A. Jensen Harris and O'Donnell & Masur, L.P.*
10.1 Convertible Promissory Note made by the Registrant in favor of
Gardiner Communications Corp. dated April 19, 1999.
10.2 Transition Services Agreement dated as of April 19, 1999 by
and between the Registrant and Gardiner Communications Corp.*
10.3 Employment Agreement dated April 19, 1999 by and between James
M. Harris and the Registrant.
10.4 Employment Agreement dated April 19, 1999 by and between
Robert Hicks and the Registrant.
27.1 Financial Data Schedule (to be filed by amendment with the
financial statements)
99.1 Press Release of the Registrant dated as of April 19, 1999.
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* Copies of the schedules have been omitted from this Current Report
on Form 8-K. However, the Registrant agrees to furnish
supplementally a copy of any omitted schedule to the Commission
upon request.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CALIFORNIA AMPLIFIER, INC.
Date: April 30, 1999 By: /s/ Michael R. Ferron
--------------------------------------------------
Michael R. Ferron
Vice President Finance and Chief Financial
Officer
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INDEX TO EXHIBITS
Exhibit No. Description
- ----------- -----------
2.1 Asset Purchase Agreement dated as of April 19, 1999 by and
among the Registrant, Gardiner Communications Corp., James M.
Harris, Frances A. Jensen Harris, and O'Donnell & Masur, L.P.*
10.1 Convertible Promissory Note of the Registrant dated as of
April 19, 1999.
10.2 Transition Services Agreement dated as of April 19, 1999 by
and between the Registrant and Gardiner Communications Corp.*
10.3 Employment Agreement dated as of April 19, 1999 by and between
James M. Harris and the Registrant.
10.4 Employment Agreement dated as of April 19, 1999 by and between
Robert Hicks and the Registrant.
27.1 Financial Data Schedule (to be filed by amendment with the
financial statements)
99.1 Press Release of the Registrant dated as of April 19, 1999.
* Copies of the schedules have been omitted from this Current
Report on Form 8-K. However, the Registrant agrees to furnish
supplementally a copy of any omitted schedule to the
Commission upon request.
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EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
Dated April 19, 1999
By and Among
California Amplifier, Inc.,
Gardiner Communications Corp.,
James M. Harris,
Frances A. Jensen Harris
and
O'Donnell & Masur, L.P.
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TABLE OF CONTENTS
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1. Agreement to Sell and Agreement to Purchase...............................1
1.1 Assets to be Conveyed................................................1
1.1.1 Assets to be Conveyed at the Closing...........................1
1.1.2 Assets to be Conveyed Post-Closing.............................2
1.2 Excluded Assets......................................................3
1.3 Further Assurances...................................................4
2. Consideration to be Paid by the Buyer.....................................4
2.1 Purchase Price for Acquisition Assets................................4
2.1.1 Initial Payment................................................4
2.1.2 Additional Payment.............................................4
2.1.3 Adjustments....................................................5
2.1.4 Audit Right....................................................5
2.2 Assumed Liabilities..................................................5
2.3 Liabilities Not Assumed by the Buyer.................................6
2.4 Allocation of Purchase Price.........................................6
2.5 Transition Services Agreement........................................7
2.6 Employment of James M. Harris and Robert E. Hicks....................7
3. Representations and Warranties............................................7
3.1 Representations and Warranties of the Stockholders Regarding the
Stockholders.........................................................7
3.1.1 Authority to Execute and Perform Agreements....................7
3.1.2 No Conflict....................................................7
3.1.3 Actions and Proceedings........................................8
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3.1.4 No Brokers.....................................................8
3.1.5 Receipt of California Amplifier, Inc. Reports..................8
3.2 Representations and Warranties of the Stockholders Regarding the
Company..............................................................8
3.2.1 Organization and Good Standing.................................8
3.2.2 Authorization of Agreement.....................................9
3.2.3 Ownership of Acquisition Assets................................9
3.2.4 Financial Condition............................................9
3.2.5 Property of the Company.......................................10
3.2.6 No Conflict...................................................11
3.2.7 Labor and Employment Matters..................................12
3.2.8 Litigation and Compliance with Laws...........................12
3.2.9 Contracts and Other Instruments...............................14
3.2.10 Insurance....................................................15
3.2.11 No Brokers...................................................15
3.2.12 Inventories..................................................16
3.2.13 Approvals....................................................16
4. Representations and Warranties of the Buyer..............................16
4.1 Organization; Good Standing; and Corporate Authority................16
4.2 No Conflict.........................................................16
4.3 Regulatory Approvals................................................17
4.4 Brokerage...........................................................17
4.5 Year 2000...........................................................17
4.6 Board Approval......................................................17
5. Closing..................................................................17
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6. Certain Understandings and Agreements of the Parties.....................17
6.1 Access .............................................................17
6.2 Noncompetition; Confidentiality and Public Announcements............18
6.2.1 Non-Competition...............................................18
6.2.2 Public Announcements..........................................18
6.2.3 Confidentiality...............................................18
6.3 Conduct of Business.................................................19
6.4 Preservation of Organization........................................19
6.5 Current Information.................................................19
6.6 Contracts...........................................................20
6.7 Completion of Transaction...........................................20
6.8 Condition to Transfer of Certain Contracts..........................20
6.9 Waiver of Compliance with Bulk Sales Laws...........................20
6.10 Employees...........................................................20
6.11 Taxes ..............................................................21
6.12 Purchase of Products from Hong Kong.................................21
7. Conditions to Obligations of the Stockholders and the Company............21
7.1 Correctness of Representations and Warranties.......................21
7.2 Performance of Covenants and Agreements.............................21
7.3 Additional Closing Documents........................................21
7.4 No Legal Bar........................................................21
7.5 Other Agreements....................................................22
8. Conditions to Obligations of the Buyer...................................22
8.1 Correctness of Representations and Warranties.......................22
8.2 Performance of Covenants and Agreements.............................22
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8.3 Additional Closing Documents........................................22
8.4 No Legal Bar........................................................22
8.5 Material Adverse Effect.............................................22
8.6 Third-Party Consents and Approvals..................................22
8.7 Other Agreements....................................................23
8.8 Transfer Documents..................................................23
9. Survival; Indemnification................................................23
9.1 Survival............................................................23
9.2 Indemnification By the Company and the Stockholders.................23
9.3 Indemnification By the Buyer........................................23
9.4 General Indemnification Limitations.................................24
9.5 Notice of Claims....................................................24
9.6 Third Party Claims..................................................24
9.7 Payments............................................................25
9.8 Remedies Exclusive..................................................25
10. Termination of Agreement.................................................25
10.1 Events of Termination...............................................25
10.2 Rights and Obligations on Termination...............................25
11. Miscellaneous Provisions.................................................25
11.1 Construction........................................................26
11.2 Notices ............................................................26
11.3 Assignment..........................................................27
11.4 Amendments and Waivers..............................................27
11.5 Remedies............................................................27
11.6 Attorneys' Fees.....................................................27
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11.7 Binding Nature of Agreement.........................................27
11.8 Expenses............................................................28
11.9 Entire Agreement....................................................28
11.10 Severability.......................................................28
11.11 Counterparts.......................................................28
11.12 Section Headings...................................................28
12. Arbitration..............................................................28
12.1 Agreement to Arbitrate..............................................28
12.2 Selection of Arbitrator.............................................29
12.3 Expenses............................................................29
12.4 Aid to Arbitration..................................................29
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EXHIBITS
Exhibit A Form of Transition Services Agreement
Exhibit B Form of Convertible Promissory Note
Exhibit C Form of James M. Harris Employment Agreement
Exhibit D Form of Robert Hicks Employment Agreement
SCHEDULES
Schedule 1.1(b) Contracts, Leases, Sales Orders, Purchase
Orders, Etc.
Schedule 1.1(c) Machinery and Equipment
Schedule 1.1(d) Intangible Personal Property
Schedule 2.1.2 Cash Value of Additional Inventory
Schedule 2.2(a) Contract Liabilities
Schedule 2.2(c) Severance Costs
Schedule 2.4 Purchase Price Allocation
Schedule 3.2.3 Ownership of Acquisition Assets
Schedule 3.2.5.1(b) Leased Real Property
Schedule 3.2.5.2 Tangible Personal Property
Schedule 3.2.7 Retention Plan
Schedule 3.2.8.1 Litigation
Schedule 3.2.8.2 Licenses, Permits and Authorizations
Schedule 3.2.8.3 Environmental Matters
Schedule 3.2.9.2 Contracts
Schedule 3.2.9.3 Clients
Schedule 3.2.9.4 Outstanding Bids and Proposals
Schedule 3.2.10 Insurance
Schedule 6.8 Contracts Requiring Consent
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of this 19th day of April, 1999 by and among California Amplifier, Inc., a
Delaware corporation (the "Buyer"), Gardiner Communications Corp., a Delaware
corporation (the "Company"), and James M. Harris, Frances A. Jensen Harris and
O'Donnell & Masur, L.P. (collectively, the "Stockholders").
R E C I T A L S
A. The Company is engaged in the business of designing and manufacturing
microwave components for home satellite systems known as Television Receive
only, including single and dual Ku-Band Low Noise Block Downconverter products,
Ku-Universal, C-Band products and other products under development (the
"Business").
B. The Buyer desires to acquire, and the Company and the Stockholders
desire to sell, certain of the assets (tangible and intangible), properties and
goodwill of the Company used or held for use primarily in the Business, on the
terms and conditions hereinafter set forth.
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and agreements contained herein, the parties hereto agree as follows:
1. AGREEMENT TO SELL AND AGREEMENT TO PURCHASE.
1.1 ASSETS TO BE CONVEYED.
1.1.1 ASSETS TO BE CONVEYED AT THE CLOSING. On the Closing Date
(as hereinafter defined) the Company shall convey, transfer, assign, sell and
deliver to the Buyer, and the Buyer shall acquire, accept and purchase, certain
of the assets, properties and rights of the Company used or held for use
primarily in the Business (hereinafter collectively referred to as the "Closing
Date Acquisition Assets") as follows:
(a) Inventories of good commercial quality raw material,
work-in-process and finished goods of the Company relating to:
(i) C-Band products, whether located at the premises of the
Company or elsewhere, including, without limitation, inventory of the Company
held by third parties on consignment (collectively, the "C-Band Inventory"), all
of which are not in excess of 12 months supply;
(ii) Ku-Universal products, located at the premises of the
Company in Barcelona, Spain, including, without limitation, such Ku-Universal
inventory of the Company held by third parties on consignment in Spain
(collectively, the "Barcelona Inventory"), all of which are not in excess of 12
months supply; and
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(iii) Single and Dual Ku-Band and Low Noise Block
Downconverter products, located at the premises of the Company in Hong Kong,
including, without limitation, inventory of the Company held by third parties on
consignment in Hong Kong (collectively the "Hong Kong Inventory"), all of which
are not in excess of 12 months supply;
(b) Subject to Sections 1.2(c) and 6.8 hereof, licenses,
contracts, agreements, purchases or sales orders or commitments, written or oral
(collectively, the "Contracts") relating to the Single and Dual Ku-Band Low
Noise Block Downconverter products, Ku-Universal, C-Band products and any other
products developed or under development (the "Product Lines"), including,
without limitation, those set forth on SCHEDULE 1.1.1(B);
(c) Machinery, equipment, tooling, dies, tools, fixtures and
supplies, owned or used by the Business on the Closing Date relating to the
Product Lines and necessary to produce Single and Dual Ku-Band Low Noise Block
Downconverter products at a rate of 150,000 units per month, C-Band products at
a rate of 80,000 per month and Ku-Universal products at a rate of 60,000 units a
month, whether or not fully depreciated on the books and records of the Company,
limited solely to those assets set forth in SCHEDULE 1.1.1(c) attached hereto;
(d) Domestic and foreign patents, patent applications,
copyrights, copyright applications, trademarks, trademark applications, service
marks, service mark applications, trade names (including without limitation the
name "Gardiner," and all derivatives and variants thereof) and trade name
registrations (in any such case, whether registered or to be registered in the
United States of America or elsewhere) and processes, drawings, procedures,
bills of material, inventions, trade secrets, trade names, computer programs,
formulae, know how and other intangible personal property (all of the foregoing
in this Section 1.1.1(d) being hereinafter referred to collectively as
"Intangible Personal Property") used or held for use primarily in the Business
and relating to the Product Lines, including, without limitation, those items
set forth in SCHEDULE 1.1.1(d) attached hereto;
(e) All goodwill of the Business relating to the Product Lines,
customer and supplier lists, sales brochures, computer software, books, records
and accounts, correspondence, production records and any confidential
information, in each case, only to the extent directly related to the Product
Lines; and
(f) All rights of the Company under express or implied
warranties from the suppliers of the Company with respect to the Closing Date
Acquisition Assets.
1.1.2 ASSETS TO BE CONVEYED POST-CLOSING. Within thirty (30) days from
the date of the expiration of the Transition Services Agreement attached hereto
as EXHIBIT A (the "Post-Closing Transfer Date"), the Company shall convey,
transfer, assign, sell and deliver to the Buyer, and the Buyer shall acquire,
accept and purchase, certain of the assets, properties and rights of the Company
used or held for use primarily in the Business (hereinafter
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collectively referred to as the "Post-Closing Acquisition Assets" and, together
with the Closing Date Acquisition Assets, the "Acquisition Assets") as follows:
(a) Inventories of good commercial quality raw material,
work-in-process and finished goods of the Company relating to Single and Dual
Ku-Band Low Noise Block Downconverter products, Ku-Universal and other products
under development, whether located at the premises of the Company or elsewhere,
including, without limitation, inventory of the Company held by third parties on
consignment, other than the Barcelona Inventory or the Hong Kong Inventory
(collectively, the "Additional Inventory" and, together with the C-Band
Inventory, the Barcelona Inventory and the Hong Kong Inventory, the
"Inventory"), all of which are not in excess of 12 months supply; and
(b) All rights of the Company under express or implied
warranties from the suppliers of the Company with respect to the Post-Closing
Acquisition Assets.
1.2 EXCLUDED ASSETS. Notwithstanding Section 1.1 hereof, the Company is
not selling and the Buyer is not purchasing, pursuant to this Agreement, any of
the following (the "Excluded Assets"), all of which shall be retained by the
Company:
(a) Cash, cash equivalents and marketable securities;
(b) Prepaid items and deposits of the Company;
(c) Accounts receivable, notes and notes receivable arising from
the conduct of the Business, and purchase orders for any of the products of the
Product Lines with delivery completed or scheduled to be completed prior to the
Closing Date;
(d) Office supplies, drums, containers, tote bins and other
packaging material, spare parts, safety equipment, maintenance supplies and
other similar items of the Company;
(e) Motor vehicles, printed circuit board manufacturing and pick
and place machines used by the Company, but not otherwise purchased by Buyer
hereunder;
(f) All federal, state, local and foreign licenses, permits and
other governmental authorizations relating to the Company, including without
limitation those listed in SCHEDULE 3.2.8.2;
(g) Rights of the Company under this Agreement and the
agreements, instruments and certificates delivered in connection with this
Agreement;
(h) The Company's minute books, tax returns, employment records
and other corporate documents; and
(i) Computer programs, systems, equipment, intangible personal
property and any other assets, properties or rights of the Company used
generally in the conduct
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of the Company's business and not used or held for use primarily in the Business
relating to the Product Lines.
1.3 FURTHER ASSURANCES. On the Closing Date and from time to time
thereafter, the Company and the Stockholders will execute and deliver to the
Buyer such instruments of sale, transfer, conveyance, assignment and delivery,
consents, assurances, powers of attorney and other instruments as may be
reasonably requested by the Buyer in order to vest in the Buyer all right, title
and interest in and to the Acquisition Assets and otherwise in order to carry
out the purpose and intent of this Agreement. Without limiting the foregoing,
after the Closing Date, if the Buyer shall receive any amounts in respect of the
Excluded Assets or the Company shall receive any amounts in respect of the
Acquisition Assets, the Buyer or the Company, as the case may be, shall promptly
pay all such amounts to the appropriate party.
2. CONSIDERATION TO BE PAID BY THE BUYER.
2.1 PURCHASE PRICE FOR ACQUISITION ASSETS. The aggregate purchase
price for the Acquisition Assets (the "Purchase Price") will consist of the
components set forth in Sections 2.1.1 and 2.1.2 as adjusted by Section 2.1.3 as
follows:
2.1.1 INITIAL PAYMENT. The Buyer shall make an initial payment
(the "Initial Payment") at the Closing in the aggregate amount of $4,597,480 of
which $1,497,480 shall be in cash and $3,100,000 shall be in the form of
Convertible Promissory Note (the "Convertible Promissory Note") attached hereto
as EXHIBIT B. The cash portion of the Initial Payment shall be paid by wire
transfer to the Company on the Closing Date to an account designated by the
Company at least three (3) days prior to the Closing Date.
2.1.2 ADDITIONAL PAYMENT. On or prior to the Post-Closing
Transfer Date, the Company and the Buyer shall conduct a physical inventory of
the remaining Additional Inventory. During the physical inventory, the Buyer
shall review the Additional Inventory to determine if any items of the
Additional Inventory are obsolete. Following completion of the taking of the
inventory, the Company shall prepare an inventory list (the "Inventory List")
setting forth all of the Additional Inventory and the cash value of each item of
Additional Inventory. The cash value of each raw material comprising Additional
Inventory shall equal the actual cost of such raw material. The cash value of
any other items of Additional Inventory shall be calculated as set forth on
SCHEDULE 2.1.2. The Buyer shall make an additional payment (the "Additional
Payment") in an amount equal to the total value of the Additional Inventory set
forth on the Inventory List to the Company, but not to exceed an aggregate of
$2,525,000 in cash, within five (5) days from the date the Company delivers such
Inventory List to the Buyer. Such Additional Payment shall be paid to the
Company by wire transfer to an account designated by the Company at least one
(1) business day prior to the payment date.
2.1.3 ADJUSTMENTS. If the Buyer determines that Inventory valued
at more than $25,000 is obsolete, the Company shall pay the Buyer within five
(5) days of the written demand therefor, on a dollar for dollar basis, each
dollar over $25,000 of obsolete Inventory on hand. Further, if within 12 months
of the date hereof, the cost of products returned for replacement or exchange
exceeds $100,000, the Company shall pay to the Buyer within five
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(5) days of the written demand therefor, on a dollar for dollar basis, each
dollar over $100,000 of the cost of return, replacement or exchange expended by
the Company.
2.1.4 AUDIT RIGHT. In the event of a dispute between the parties
as to the cost of products returned for replacement or exchange set forth above,
the parties shall jointly designate Arthur Anderson LLP to resolve the dispute.
The results of such audit shall be used as the basis for determining the amount
of the costs payable. Any expenses related to such audit shall be paid by the
non-prevailing party.
2.2 ASSUMED LIABILITIES. As further consideration for consummation of
the transactions contemplated hereby, subject to Section 2.3 hereof, at the
Closing, the Buyer shall assume and agree to thereafter pay when due, and
discharge, indemnify and hold harmless the Company and the Stockholders with
respect to the following liabilities (the "Assumed Liabilities"):
(a) subject to Section 2.1.3, all obligations and liabilities in
respect of any and all claims of product defects pertaining to any products
manufactured by the Company relating to the Product Lines and shipped by the
Company to customers within one (1) year prior to the Closing Date or, with
respect to the Additional Inventory only, within one (1) year prior to the
Post-Closing Transfer Date, including obligations and liabilities for refunds,
adjustments, allowances for any and all repairs, exchanges, returns and warrants
of merchantability and other claims, that are returned under existing warranty
agreements with customers (the cost of return, replacement or exchange shall be
computed by the number of units returned multiplied by the then standard unit
cost plus shipping, handling and other costs associated with returns, exchanges
or replacements);
(b) all obligations and liabilities of in respect of the Contracts on
or after the Closing Date, including, without limitation, the remaining purchase
price with respect to certain tooling for which the Company has made a deposit
as set forth on SCHEDULE 2.2(b); and
(c) all severance obligations of the Company in respect of its seven
(7) employees in the Company's Hong Kong office on the Closing Date, as set
forth on SCHEDULE 2.2(c).
2.3 LIABILITIES NOT ASSUMED BY THE BUYER. The Buyer shall not be
deemed by anything contained in this Agreement to have assumed and the Company
and the Stockholders hereby severally (but not jointly) agree to fully pay and
perform in a prompt and timely manner and to indemnify the Buyer and hold the
Buyer harmless with respect to the following excluded liabilities (the "Excluded
Liabilities"):
(a) Any liability of the Company or a Stockholder to any person
or entity the existence of which constitutes a breach of any covenant,
agreement, representation or warranty of the Company or a Stockholder contained
in this Agreement;
(b) Any liability of the Company for any federal, state, local,
foreign or other income taxes;
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(c) Any liability of the Company for any obligation for benefits
accrued prior to the Closing Date under employee benefit plans;
(d) All obligations and liabilities in respect of any and all
claims of product defects pertaining to any products, including obligations and
liabilities for refunds, adjustments, allowances, repairs, exchanges, returns
and warrants of merchantability and other claims (collectively, the "Claims"),
other than as set forth in Section 2.2 hereof;
(e) Except as provided in the Transition Services Agreement, all
obligations and liabilities relating to the employment or termination of
employment of any employee of the Company;
(f) All obligations or liabilities arising under or in
connection with any bonus, pension, profit sharing, deferred compensation,
retirement, vacation, severance pay, disability benefits, death benefits,
hospitalization, insurance or other similar plan or arrangement or understanding
providing benefits, including post-retirement benefits, to the Company's
employees;
(g) All obligations and liabilities in respect of lawsuits,
actions and proceedings, pending or threatened, and claims, whether or not
presently asserted, arising out of, relating to or otherwise in any way in
respect of the Company for the operation of the Business at any time, other than
as set forth in Section 2.2 hereof;
(h) All obligations and liabilities of the Company arising prior
to the Closing Date under Contracts that are to be acquired by the Buyer
pursuant to the provisions of this Agreement; and
(i) All accounts payable owed by the Company arising out of
operations of the Business or otherwise in respect of the Business.
2.4 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be
allocated among the Acquisition Assets in accordance with SCHEDULE 2.4. The
Company and the Buyer shall jointly complete and separately file Form 8594 with
their respective federal income tax returns for the tax year in which the
Closing Date occurs in accordance with such allocation, and each of the parties
shall refrain from taking a position on any income, transfer or gains tax
return, before any governmental agency charged with the collection of any such
tax or in any judicial proceeding that is in any manner inconsistent with the
terms of any such allocation without written consent of the other in each
instance.
2.5 TRANSITION SERVICES AGREEMENT. Upon the Closing, the Company and
the Buyer will enter into the Transition Services Agreement in the form attached
hereto as EXHIBIT A.
2.6 EMPLOYMENT OF JAMES M. HARRIS AND ROBERT E. HICKS. Upon the
Closing, the Buyer will enter into employment agreements in the forms attached
hereto as EXHIBIT C and EXHIBIT D with James M. Harris and Robert E. Hicks,
respectively.
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3. REPRESENTATIONS AND WARRANTIES.
3.1 REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS REGARDING THE
STOCKHOLDERS. Each of the Stockholders severally (but not jointly) represents
and warrants to the Buyer, as of the date hereof and as of the Closing Date, as
follows:
3.1.1 AUTHORITY TO EXECUTE AND PERFORM AGREEMENTS. Each
Stockholder has full legal right and power to execute and deliver this Agreement
and to perform in full such Stockholder's obligations hereunder and the
execution and delivery of this Agreement shall constitute such Stockholder's
approval of this Agreement and the transactions contemplated hereunder including
the sale of the Acquisition Assets. The execution, delivery and performance of
this Agreement and any other agreements or instruments required to be delivered
hereunder (the "Other Agreements" and together with the Agreement, the
"Transaction Documents") by each Stockholder require no consent, approval,
waiver or other action by or in respect of, or filing with, any governmental
authority or other Person (as defined below), other than actions, approvals and
filings which will have been taken, obtained or made on or before the Closing
Date or the Post-Closing Transfer Date, as the case may be. This Agreement and
any of the Other Agreements (where applicable) has been duly executed and
delivered by each Stockholder and constitutes the legal, valid and binding
obligation of each Stockholder, enforceable against each Stockholder in
accordance with its terms. "Person" as used in this Agreement means any
individual, partnership, corporation, association, joint stock company, trust,
joint venture, unincorporated organization or governmental entity (or any
department, agency or political subdivision thereof).
3.1.2 NO CONFLICT. The execution, delivery and performance of
this Agreement and the Other Agreements and the consummation of the transactions
contemplated hereby and thereby will not violate, conflict with, or contravene
any order, judgment, injunction, award or decree or other requirement of any
court, arbitrator or governmental or regulatory body against, or binding upon,
each Stockholder or violate, contravene or conflict with any statute, law,
ordinance or regulation of any jurisdiction binding upon or applicable to each
Stockholder.
3.1.3 ACTIONS AND PROCEEDINGS. There are no actions,
investigations, proceedings, suits or claims or legal, administrative or
arbitration proceedings pending against or, to the knowledge of each
Stockholder, threatened against or affecting such Stockholder (or to the
knowledge of any Stockholder, any basis therefor) that have or may have (a) the
effect of restraining, modifying or preventing the consummation of the
transactions contemplated by this Agreement or (b) a material adverse effect on
the assets, properties, business, operations, prospects or condition, financial
or otherwise, of the Business ("Material Adverse Effect").
3.1.4 NO BROKERS. There are no brokerage commissions, finders'
fees or similar fees or commissions payable in connection with the transactions
contemplated by this Agreement based on any agreement, arrangement or
understanding with any Stockholder or any action taken by any Stockholder, the
liability for which is or will be on the Buyer.
3.1.5 RECEIPT OF CALIFORNIA AMPLIFIER, INC. REPORTS. Each
Stockholder acknowledges receipt of (a) the Annual Report on Form 10-K of the
Buyer for its fiscal year
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ended February 28, 1998, (b) the Quarterly Reports on Form 10-Q of the Buyer for
the quarters ended May 30, 1998, August 29, 1998 and November 28, 1998, and (c)
any current reports on Form 8-K of the Buyer filed with the Securities and
Exchange Commission since November 28, 1998.
3.2 REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS REGARDING THE
COMPANY. Each of the Stockholders severally (but not jointly) represents and
warrants to the Buyer, as of the date hereof and as of the Closing Date, as
follows:
3.2.1 ORGANIZATION AND GOOD STANDING. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, has all corporate power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby, to carry
its business as it is now conducted and to own, lease or operate the Acquisition
Assets and is duly licensed or qualified to do business and in good standing as
a foreign corporation under the laws of every jurisdiction in which the name of
the activities conducted by the Company and/or the character of the assets owned
or leased by the Company makes such qualification or license necessary, except
for those jurisdictions where the failure to be so qualified would not have a
Material Adverse Effect.
3.2.2 AUTHORIZATION OF AGREEMENT. The Company has all requisite
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. This Agreement and the Other Agreements have
been (or upon execution will have been) duly executed and delivered by the
Company, have been effectively authorized by all necessary action, corporate or
otherwise, and constitute (or upon execution will constitute) legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally or the
availability of equitable remedies.
3.2.3 OWNERSHIP OF ACQUISITION ASSETS. Except as set forth on
SCHEDULE 3.2.3, the Company is the lawful owner of or, in the case of leased
assets, has the right to use and transfer to the Buyer each of the Acquisition
Assets, and the Acquisition Assets are free and clear of all mortgages, pledges,
liens, security interests, adverse claims, encumbrances and restrictions of
every kind and nature (collectively, "Liens"), other than Liens arising by
operation of law which are not material. The delivery to the Buyer of the
instruments of transfer of ownership contemplated by this Agreement will vest
good and marketable title to the Acquisition Assets in the Buyer, free and clear
of all Liens, except as referred to in the preceding sentence. The Acquisition
Assets include all assets, rights and interests necessary for the conduct of the
Business, as presently conducted, except as disclosed in SCHEDULE 3.2.3. All of
the Acquisition Assets are in good operating condition for their intended use,
ordinary wear and tear excepted.
3.2.4 FINANCIAL CONDITION.
3.2.4.1 FINANCIAL STATEMENTS. The Company has furnished to
the Buyer true and complete copies of the audited balance sheets and related
statements of income, stockholders' equity and cash flows for the Company for
the years ended December 31,
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1998, 1997 and 1996, together with the notes thereto and the reports thereon of
Weaver & Tidwell, LLP, certified public accountants (the "Financial
Statements"). Each of the Financial Statements has been prepared based on the
books and records of the Company in accordance with generally accepted
accounting principles and the Company's normal accounting practices, consistent
with past practice and with each other, and present fairly the financial
condition, results of operations and statements of cash flow of the Company as
of the dates indicated or for the periods indicated.
3.2.4.2 ABSENCE OF CERTAIN CHANGES. Since December 31, 1998,
there has not been relating to the Business:
(a) any material transaction by the Company not in
the ordinary and usual course of business;
(b) any Material Adverse Effect;
(c) any damage, destruction or loss, whether or not
covered by insurance related to the Business, which has a Material Adverse
Effect;
(d) any material alteration in the manner in which
the Company keeps its books, accounts or records or in the accounting practices
therein reflected, including the recognition and computation of accrued
expenses;
(e) the incurrence of any indebtedness for borrowed
money or any commitment to borrow money or any guaranty, direct or indirect, of
indebtedness of others, or any prepayment of long-term debt; or
(f) any change in the operations, business or
manner of conducting the Business, other than changes in the ordinary and usual
course of business consistent with prior practice, none of which, individually
or in the aggregate, has had or is expected to have a Material Adverse Effect.
3.2.5 PROPERTY OF THE COMPANY.
3.2.5.1 REAL PROPERTY.
(a) The Company does not own any real property in
fee.
(b) SCHEDULE 3.2.5.1(b) sets forth a true and
complete list of all leases or licenses of real property (the "Leases") entered
into by the Company. The Company does not have a leasehold interest in any real
property used in the conduct of the Business other than the real property
subject to the Leases (the "Leased Real Property"), which constitutes all of the
real property used in the Business.
(c) The Company has a good, valid and enforceable
leasehold interest in the Leased Real Property. The Company holds its title or
its interest in the
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Leased Real Property free and clear of all Liens, easements, rights of way,
servitudes, zoning or building restrictions, or any other rights of others or
other adverse interests of any kind, including chattel mortgages, conditional
sales contracts, collateral security arrangements and other title or interest
retention arrangements, other than Liens arising by operation of law which are
not material. With respect to the Leased Real Property, there exist no defaults
by the Company, or, to the knowledge of the Company, any default or threatened
default by any lessor or third party thereunder, that has affected or could
reasonably be expected to affect the rights and privileges thereunder of the
Company, and there has not been any failure to perform any covenant or agreement
which constitutes an event of default (with the giving of notice or passage of
time or otherwise) pursuant to any Lease.
3.2.5.2 TANGIBLE PERSONAL PROPERTY. SCHEDULE 1.1.1(c) lists
each item of tangible personal property (other than Inventory) owned by the
Company or in the possession of the Company which is to be transferred to the
Buyer pursuant hereto; and an identification of the owner of, and any agreement
relating to the use of, each item of tangible personal property the rights to
which are to be transferred to the Buyer pursuant hereto under leases or other
similar agreements included in the Contracts. Except as otherwise indicated on
SCHEDULE 3.2.5.2, the Company owns all of the tangible personal property used in
the Business free and clear of all Liens, and except as set forth in Section
1.2, all such property will be transferred to the Buyer at the Closing free and
clear of all Liens. Each item of such tangible personal property is located on
the Real Property and is in satisfactory repair and operating condition for its
intended use subject to normal wear and tear.
3.2.5.3 INTANGIBLE PERSONAL PROPERTY. SCHEDULE 1.1.1(d)
lists (i) an identification of each domestic and foreign patent, patent
application, copyright, copyright application, trademark, trademark application,
service mark, service mark application and trade name (the "Intellectual
Property") owned or used by the Company primarily in the Business relating to
Product Lines and (ii) a true and complete list of all licenses or similar
agreements or arrangements to which the Company is a party either as licensee or
licensor for each such item of Intellectual Property. Except as otherwise
indicated on SCHEDULE 1.1.1(d), the Company owns all of such Intellectual
Property free and clear of all Liens, and, all such Intellectual Property will
be transferred to the Buyer at the Closing free and clear of all Liens.
(a) There have not been any actions or other
judicial or adversary proceedings involving the Company concerning any of the
Intangible Personal Property included in the Acquisition Assets, nor, to the
knowledge of such Stockholder, is any such action or proceeding threatened;
(b) The Company has the right and authority to use
all items of Intangible Personal Property included in the Acquisition Assets in
connection with the conduct of the Business in the manner presently conducted
and to convey such right and authority to the Buyer, and such use does not, to
the knowledge of such Stockholder, conflict with, infringe upon or violate any
patent, copyright, trademark, service mark, trade secret, trade name or other
right of any other person, firm or corporation;
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(c) There are no outstanding, nor, to the knowledge
of such Stockholder, are there any threatened, disputes or disagreements with
respect to any licenses or similar agreements or arrangements included in the
Intangible Personal Property included in the Acquisition Assets; and
(d) The conduct of the Business related to the
Product Lines does not, to the knowledge of such Stockholder, conflict with any
patent, copyright, trademark, service mark, trade secret, trade name or other
similar rights of others.
3.2.6 NO CONFLICT. The execution, delivery and performance of
this Agreement and the Other Agreements and the consummation of the transactions
contemplated hereby and thereby will not violate, conflict with, or contravene
any order, judgment, injunction, award or decree or other requirement of any
court, arbitrator or governmental or regulatory body against, or binding upon,
the Company or the Certificate of Incorporation or Bylaws of the Company, or
violate, contravene or conflict with any statute, law, ordinance or regulation
of any jurisdiction binding upon or applicable to the Company.
3.2.7 LABOR AND EMPLOYMENT MATTERS.
(a) Except for such items that would not in the aggregate
reasonably be expected to have a Material Adverse Effect, there is no: (i)
unfair labor practice complaint against the Company pending before the National
Labor Relations Board or any state or local agency or any basis for any such
complaint; (ii) pending labor strike affecting the Company; (iii) labor
grievance pending against the Company or, to the knowledge of the Company and
each Stockholder, any basis for any such grievance; (iv) pending representation
question respecting the employees of the Company; (v) pending arbitration
proceedings arising out of or under any collective bargaining agreement to which
the Company is a party; (vi) to the knowledge of the Company and each
Stockholder, basis for which a claim may be made under any collective bargaining
agreement to which the Company is a party; or (vii) pending or, to the knowledge
of the Company and each Stockholder, threatened claim against the Company
regarding the discharge or dismissal of any employee and, to the knowledge of
the Company there is no basis for any such claim.
(b) SCHEDULE 3.2.7 sets forth the amounts the Company shall pay
its employees in connection with its retention plan related to the transactions
contemplated hereunder.
3.2.8 LITIGATION AND COMPLIANCE WITH LAWS.
3.2.8.1 LITIGATION PENDING OR THREATENED. Except as set
forth in SCHEDULE 3.2.8.1, there is no action, suit, arbitration, proceeding,
grievance or investigation, pending or (to the knowledge of such Stockholder)
threatened, before any court, tribunal, panel, master or governmental agency,
authority or body in which the Company is a party or to which the Business or
the Leased Real Property is subject, nor is the Company, or any officer or
employee of the Company enjoined from any action or subject to any continuing
restriction which may adversely affect the Business or the Leased Real Property.
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3.2.8.2 VIOLATION OF LAW. The Company is not in material
violation of any provision of any law, decree, order or regulation (including,
without limitation, those relating to antitrust or prohibiting other
anti-competitive business practices, those relating to employment practices,
such as discrimination, health and safety, and those relating to minority
business enterprises), applicable to the Business, except for violations which
in the aggregate would not reasonably be expected to have a Material Adverse
Effect. The Company has all material federal, state, local, foreign and other
licenses, permits and other governmental authorizations required in the conduct
of the Business, except for such licenses, permits or governmental
authorizations which the failure of which to obtain would not in the aggregate
reasonably be expected to have a Material Adverse Effect. Such licenses, permits
and other governmental authorizations, including those obtained under applicable
Environmental Laws (as hereinafter defined) are listed in SCHEDULE 3.2.8.2.
Except as provided by this Agreement, no notice to, filing with, or approval or
consent of, any governmental agency or body issuing any of the permits, licenses
or other governmental authorizations, or otherwise having jurisdiction over the
Company or the Business or the operations or properties of the Business, is
required in order to permit the execution, delivery or performance of this
Agreement, the consummation of the transactions contemplated hereby or the sale,
transfer and delivery of the Acquisition Assets or the continuation of the
Business after the Closing, except for such notices, filings, approvals or
consents that would not in the aggregate reasonably be expected to have a
Material Adverse Effect. The Company is not a party to any consent decree issued
by any governmental agency, authority or body.
3.2.8.3 ENVIRONMENTAL MATTERS. Except as set forth in
SCHEDULE 3.2.8.3 attached hereto:
(a) the Company is in compliance with all
Environmental Laws (as defined below), except for violations of Environmental
Laws that would not in the aggregate reasonably be expected to have a Material
Adverse Effect;
(b) the Company holds, and is in compliance with,
all permits, licenses, franchises, approvals and authorizations by governmental
or regulatory authorities or bodies (collectively, "Permits") required under
Environmental Laws for the Company to conduct its business, except for the
absence of, or noncompliance with, such Permits that would not in the aggregate
reasonably be expected to have a Material Adverse Effect;
(c) Prior to the date of this Agreement, (i) to the
Company's and each Stockholder's knowledge, there are no events, conditions,
actions, or omissions relating to the conduct of its business that have given or
will give rise to any Environmental Liability (as defined below) based on or
related to the use, processing, generation, treatment, storage, disposal,
transport, emission, discharge, release or threatened release of any Hazardous
Substance (as defined below), and (ii) the Company has not received any written
notice of the institution or pendency of any lawsuit, action, proceeding,
investigation or claim by any person alleging any Environmental Liability
arising from or relating to the conduct of its business, except for all such
cases under (i) and (ii) that would not in the aggregate reasonably be expected
to have a Material Adverse Effect;
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(d) As used herein:
"Environmental Laws" means any domestic or foreign,
federal, state, interstate or local statute, law or regulation having the force
of law and in effect and promulgated as such as of the Closing Date
(collectively, "Pre-Closing Environmental Laws and Regulations") or any order,
injunction, judgment, decree, common law or other enforceable requirement of any
governmental entity, except to the extent that it sets forth more stringent or
additional requirements than those authorized by Pre-Closing Environmental Laws
and Regulations, and relating to the protection of human health, safety or the
environment, including any of the foregoing related to: (i) Remedial Actions (as
defined below); (ii) the reporting, licensing, permitting, or investigating of
the emission, discharge, release or threatened release of Hazardous Substances
into the air, surface water, groundwater or land; (iii) the manufacture,
release, distribution, use, generation, treatment, storage, disposal, transport
or handling of Hazardous Substances; or (iv) the protection of the health and
safety of employees or the public;
"Environmental Liability" means any liability or
obligation arising under Environmental Laws in connection with the Acquired
Assets or the business or operation of the Company to the extent arising from
any condition existing or any act or omission of the Company at or prior to the
Closing Date, including claims, demands, assessments, judgments, orders, causes
of action (including toxic tort suits), notices of actual or alleged violations
or liability (including such notices regarding the disposal or release of
Hazardous Substances on the premises or elsewhere), proceedings and any
associated costs, assessments, losses, damages (except consequential damages),
obligations, liabilities, awards, fines, sanctions, penalties, or amounts paid
in settlement (including reasonable costs, fees and expenses of attorneys,
accountants, consultants and other agents of such person);
"Hazardous Substance" means any substance or
material: (i) that is defined as a "hazardous waste" or "hazardous substance"
under any Environmental Law; (ii) that is considered toxic, explosive,
corrosive, flammable, infectious, radioactive, carcinogenic or mutagenic or
otherwise regulated under any Environmental Law; or (iii) that contains
gasoline, diesel fuel or other petroleum hydrocarbons, polychlorinated biphenyls
or asbestos; and
"Remedial Action" means any response action,
removal action, remedial action, corrective action, monitoring program, sampling
program, investigation or other cleanup activity required by any Environmental
Law to clean up, remove, remediate, treat or abate any Hazardous Substance in
the environment.
3.2.9 CONTRACTS AND OTHER INSTRUMENTS.
3.2.9.1 There has not occurred any material default under
any Contract on the part of the Company or, to the knowledge of such
Stockholder, on the part of the other parties thereto, and no event has occurred
which, would constitute any default under any Contract, except for such defaults
that would not in the aggregate reasonably be expected to have a Material
Adverse Effect. No consent of any party to any Contract is required in order to
permit
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the execution, delivery or performance of this Agreement, the consummation of
the transactions contemplated hereby, or the sale, transfer or delivery of the
Acquisition Assets or the assumption of the liabilities to be assumed by the
Buyer under Section 2.3, nor will the execution, delivery or performance of this
Agreement, the consummation of the transactions contemplated hereby or the sale,
transfer and delivery of the Acquisition Assets or the assumption of the
liabilities to be assumed by the Buyer, result in a material breach of any of
the terms and provisions of, or constitute a material default under, or material
conflict with, or result in a material modification of, any Contract of the
Company, except for such breaches, defaults, conflicts or modifications that
would not in the aggregate reasonably be expected to have a Material Adverse
Effect.
3.2.9.2 SCHEDULE 1.1.1(b) sets forth with respect to the
Business a list of (i) all client contracts (including, without limitation, oral
contracts) for the Company's fiscal year ending December 31, 1998 which account
for not less than 90% of the Company's revenue for such fiscal year; (ii) all
written or oral contracts with consultants or subcontractors regardless of
amount, with respect to which the Company has any remaining obligation; and
(iii) any other written or oral current contracts involving payments of $25,000
or more in any 12-month period material to the assets, properties, liabilities,
financial condition, results of operations, business or prospects of the
Business. A true and complete copy of each written Contract has been made
available to the Buyer at the Company's offices. A description of the material
terms of each oral Contract is set forth on SCHEDULE 3.2.9.2. The Contracts were
entered into in the ordinary course of business and the Company (i) has not
received any notice of default by the Company with respect to such Contracts,
and (ii) to such Stockholder's knowledge, there is no material default, or
existing circumstances which, with notice or the passage of time, would be a
material default in the Company's obligations with respect to such Contracts.
3.2.9.3 SCHEDULE 3.2.9.3 sets forth, for each of the
12-month periods ended December 31, 1998 and 1997, the names of all of the
Company's clients related to the Business which have paid the Company at least
$50,000, together with the approximate dollar amount of revenues generated by
the Company's services to each such client during said periods. No current
client of the Company has informed the Company of any material deficiency in the
Company's performance of services for such client or of its intention to
terminate, or substantially to reduce the scope of, its current business
relationship with the Company.
3.2.9.4 SCHEDULE 3.2.9.4 lists each outstanding bid or
proposal for a contract related to the Business under which the value of
services to be performed or goods to be provided by the Company or the cost of
goods to be sold by the Company is expected to exceed $25,000 and a description
of and projected dollar value of each such bid or proposal.
3.2.10 INSURANCE. SCHEDULE 3.2.10 sets forth a true and correct
list of all insurance policies of any nature whatsoever maintained by the
Company relating solely to the Business at any time during the three (3) years
prior to the date of this Agreement and the annual or other premiums payable
thereunder. There are no outstanding requirements or recommendations by any
insurance company that issued any policy of insurance applicable, in whole or in
part, to the properties or operations of the Company or by any Board of Fire
Underwriters or other similar body exercising similar functions or by any
governmental authority
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exercising similar functions which requires or recommends any changes in the
conduct of the business of, or any repairs or other work to be done on or with
respect to any of the properties or assets of, the Company. The Company has not
received any notice or other communication from any such insurance company
within the two (2) years preceding the date hereof canceling or materially
amending or materially increasing the annual or other premiums payable under any
of said insurance policies, and to the knowledge of the Company, no such
cancellation, amendment or increase of premiums is threatened.
3.2.11 NO BROKERS. There are no brokerage commissions, finders'
fees or similar fees or commissions payable in connection with the transactions
contemplated by this Agreement based on any agreement, arrangement or
understanding with the Company or any action taken by the Company, the liability
for which is or will be on the Buyer.
3.2.12 INVENTORIES. The Company's Inventory is of good commercial
quality and is not in excess of twelve (12) months supply, subject to the
allowance of $25,000 for obsolete inventory as set forth in Section 2.1.3
hereof.
3.2.13 APPROVALS. The Company's Board of Directors has approved
this Agreement and the consummation of the transactions contemplated hereby.
Each of the Stockholders has been provided copies of this Agreement and has been
afforded the opportunity to read this Agreement and all Exhibits and Schedules
hereto, understands the terms hereof and thereof and by signing this Agreement,
acknowledges that he/she or it agrees to all of the terms hereof and thereof.
Each of the Stockholders understands and acknowledges that James M. Harris will
receive $1,250,000 on the Closing Date for his covenant not to compete contained
in Section 6.2 herein.
4. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents and
warrants to the Company that:
4.1 ORGANIZATION; GOOD STANDING; AND CORPORATE AUTHORITY. The Buyer is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. The Buyer has the full corporate power and
authority to conduct all of the business and activities conducted by it and to
own or license all of the assets owned or leased by it, and is duly licensed or
qualified to do business and in good standing as a foreign corporation under the
laws of every jurisdiction in the United States in which the nature of the
activities conducted by the Buyer, and/or the character of the assets owned or
leased by the Buyer, makes such qualification or license necessary, except for
those jurisdictions where the failure to be so qualified would not have a
Material Adverse Effect on the Buyer. The Buyer has all requisite power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. This Agreement and the Other Agreements have been (or upon
execution will have been) duly executed and delivered by the Buyer, have been
effectively authorized by all necessary action, corporate or otherwise, and
constitute (or upon execution will constitute) legal, valid and binding
obligations of the Buyer, enforceable against the Buyer in accordance with their
respective terms.
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4.2 NO CONFLICT. The execution, delivery and performance of this
Agreement and the Other Agreements and the consummation of the transactions
contemplated hereby and thereby will not violate, conflict with, or contravene
any order, judgment, injunction, award or decree or other requirement of any
court, arbitrator or governmental or regulatory body against, or binding upon,
the Buyer or the Certificate of Incorporation or Bylaws of the Buyer, or
violate, contravene or conflict with any statute, law, ordinance or regulation
of any jurisdiction binding upon or applicable to the Buyer.
4.3 REGULATORY APPROVALS. All consents, approvals, authorizations and
other requirements prescribed by any law, rule or regulation which must be
obtained or satisfied by the Buyer and which are necessary for the consummation
of the transactions contemplated by this Agreement have been obtained and
satisfied.
4.4 NO BROKERS. There are no brokerage commissions, finders' fees or
similar fees or commissions payable in connection with the transactions
contemplated by this Agreement based on any agreement, arrangement or
understanding with the Buyer or any action taken by the Buyer, the liability for
which is or will be on the Company or the Stockholders.
4.5 YEAR 2000. Buyer hereby acknowledges that it has been told that
some of the Company's operations are not Year 2000 Compliant (as defined below),
including some of the Acquired Assets. As used in this paragraph, "Year 2000
Compliant" shall mean, in regard to any entity, that all software, hardware,
firmware, equipment, goods or systems utilized by or material to the business
operations or financial conditions of such entity, will properly perform date
sensitive functions before, during and after the Year 2000.
4.6 BOARD APPROVAL. The Buyer's Board of Directors shall have approved
this Agreement and the consummation of the transactions contemplated hereby.
5. CLOSING. The closing of the transactions herein contemplated (the
"Closing") shall, unless another date, time or place is agreed to in writing by
the parties hereto, take place at the offices of Gibson, Dunn & Crutcher LLP,
333 South Grand Avenue, Los Angeles, California 90071 at 10:00 a.m., Los Angeles
time, on April 19, 1999 or such other date as the parties shall hereafter
mutually designate (the "Closing Date").
6. CERTAIN UNDERSTANDINGS AND AGREEMENTS OF THE PARTIES.
6.1 ACCESS. Between the date hereof and the Closing Date, (i) the
Buyer's authorized representatives shall have reasonable access during normal
business hours to all properties, operations, books, records, contracts, and
documents of the Company relating to the Business, (ii) the Company will furnish
and request its accountants and outside legal counsel to furnish to the Buyer
all information with respect to its affairs and the business of the Company that
the Buyer may reasonably request and (iii) the Buyer shall have the right to
discuss the affairs and the business of the Company with the directors, officers
and employees of the Company.
6.2 NONCOMPETITION; CONFIDENTIALITY AND PUBLIC ANNOUNCEMENTS.
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6.2.1 NON-COMPETITION. The Company and Stockholders hereby
severally (but not jointly) covenant that each of them shall not and it shall
not cause its officers and/or affiliates:
(a) At any time prior to the fifth anniversary of the
Closing Date, anywhere in the world, directly or indirectly, own, manage,
operate, join or control, or participate in the ownership, management, operation
or control of any business, entity, firm or corporation (other than the Buyer
and its affiliates and their respective successors) which engages in the
business of the manufacturing satellite transmission or reception components or
otherwise competes with the Business as conducted on the date hereof or as it
has been conducted during the 24 months prior to the date hereof.
(b) Without the written consent of the Buyer, directly or
indirectly, use, in connection with the operation or conduct of any satellite
transmission or reception business generally, or in any business similar to
those in which the Business is engaged on the date hereof, the name "Gardiner"
or any title or name similar to or likely to be confused with the name
"Gardiner."
(c) At any time prior to the fifth anniversary of the
Closing Date, solicit, directly or indirectly (whether through Stockholders or
otherwise), any director or officer or employee of the Buyer to discontinue that
individual's status or employment with the Buyer, as the case may be.
(d) At any time prior to the fifth anniversary of the
Closing Date, solicit or cause to be solicited or authorize, directly or
indirectly, for or on its own behalf or on behalf of any third party, any
business competitive with the Business as conducted on the date hereof or as it
has been conducted during the 24 months prior to the date hereof from others who
are or were at any time customers, clients, advertisers, suppliers or
distributors of the Company.
6.2.2 PUBLIC ANNOUNCEMENTS. Any public announcement or similar
publicity with respect to this Agreement or the transactions contemplated hereby
will be issued, if at all, at such time and in such manner as the parties
jointly determine. The Company will consult with the Buyer concerning the means
by which the Company's employees, customers and suppliers and others having
dealings with the Company will be informed of the transactions contemplated by
this Agreement, and the Buyer shall have the right to be present for any such
communication.
6.2.3 CONFIDENTIALITY. The Buyer, on one hand, and the Company
and each of the Stockholders, on the other hand, covenant and agree that none of
them shall at any time use or disclose to any third party any information with
respect to the other party, other than information which (i) is currently
generally available to the public, (ii) hereafter becomes generally available to
the public other than as a result of a disclosure by such other party, (iii)
becomes available after the Closing Date to such other party on a
nonconfidential basis; provided, however, that the source of such information is
not known by such other party to be bound by a confidentiality agreement or (iv)
is otherwise required by applicable law.
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6.3 CONDUCT OF BUSINESS. The Business of the Company shall be
conducted from the date hereof through the Closing Date in accordance with prior
practice and in the ordinary course of business, and without limiting the
generality of the foregoing, the Company shall not (except with the prior
written consent of the Buyer) do or cause or permit to occur any act, event or
other occurrence which is represented or warranted not to have occurred since
December 31, 1998 in Section 3.2.4.2 hereof. Not later than five (5) days prior
to Closing, the Company shall update all Schedules hereto to reflect changes
occurring subsequent to signing this Agreement.
6.4 PRESERVATION OF ORGANIZATION; RETENTION.
(a) The Company shall use its reasonable best efforts to preserve the
business and the organization of the Company, to keep available to the Buyer the
services of the Company's present employees, and to preserve for the Buyer the
Company's favorable business relationships with its suppliers, its customers and
others with whom business relationships exist.
(b) For retention purposes, the Company shall pay cash from the
Purchase Price to the employees listed on SCHEDULE 3.2.7 in the amounts set
forth thereon. Of the total amount payable to each employee listed on SCHEDULE
3.2.7, twenty-five percent (25%) shall be paid by the Company to each respective
employee within thirty (30) days after the Closing Date, and seventy-five
percent (75%) shall be paid by the Company to each respective employee on the
date one year after the Closing Date, provided that such employee remains an
employee of the Company for such one-year period. The Company shall pay
employees of the Company not listed on SCHEDULE 3.2.7 $1,000 each pursuant to a
retention policy of the Company at a time to be determined by the Company.
6.5 CURRENT INFORMATION. Each of the Stockholders and/or the Company
will advise the Buyer in writing immediately, but in any event prior to the
Closing, of:
(a) the occurrence of any event which renders any of the
representations or warranties set forth herein inaccurate in any material
respect or the awareness of the Stockholders or the Company that any
representation or warranty set forth herein was not accurate in all material
respects when made; and
(b) the failure of the Stockholders or the Company to comply with
or accomplish any of the covenants or agreements set forth herein in any
material respect. The Company will also provide the Buyer, promptly on becoming
available, copies of all operating and financial reports prepared by, or in the
normal conduct of business of, the Business.
6.6 CONTRACTS. Between the date hereof and the Closing Date, the
Company will not, without the prior written consent of the Buyer, (a) amend in
any material respect or terminate any Contract listed on SCHEDULE 1.1.1(b), or
(b) enter into or become a party to or submit any bid or proposal for any
contract, agreement, instrument, arrangement, purchase order or commitment with
any customer of the Business under which the reasonably anticipated costs and
expenses of the Business will exceed its anticipated receipts.
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6.7 COMPLETION OF TRANSACTION. The Buyer, the Company and the
Stockholders shall use all necessary efforts to complete the transactions
contemplated in this Agreement and the Other Agreements.
6.8 CONDITION TO TRANSFER OF CERTAIN CONTRACTS.
(a) The Company shall use its best efforts to procure all
consents, approvals or waivers which must be obtained by the Company and which
are necessary for completion of the transactions described herein, including all
required consents from third parties under the Contracts or otherwise and all
required consents of any governmental agency or body issuing any permits,
licenses or other governmental authorizations affecting the Company or its
businesses or properties so that the Business may continue to be operated by the
Buyer without interruption or any material adverse effect following the Closing.
As provided in Section 8.6 hereof, it is a condition precedent to the
obligations of the Buyer to close the transactions contemplated hereby that all
required consents be obtained for each of the Contracts listed in SCHEDULE 6.8
attached hereto (collectively, the "Contracts Requiring Consents"); and
(b) Notwithstanding anything herein to the contrary, the parties
hereto acknowledge and agree that at the Closing the Company will not assign to
the Buyer any such Contract which by its terms requires the consent of any other
contracting party thereto unless each such consent has been obtained prior to
the Closing Date. With respect to each such unassigned Contract, after the
Closing Date the Company shall continue to deal with the other contracting
party(ies) to such Contract as the prime contracting party and shall use its
best efforts to obtain the consent of all required parties to the assignment of
such Contract, but the Buyer shall be entitled to the benefits of such Contract
accruing after the Closing Date to the extent that the Company may provide the
Buyer with such benefits without violating the terms of such Contract. The Buyer
agrees to perform at its sole expense all of the obligations of the Company to
be performed under any such Contract the benefits of which Buyer is receiving
after the Closing Date.
6.9 WAIVER OF COMPLIANCE WITH BULK SALES LAWS. The Buyer and the
Company hereby waive compliance with the requirements of the California Bulk
Transfer Law and any other applicable bulk sales laws of any other jurisdiction.
6.10 EMPLOYEES. The Buyer may, but is not obligated to, offer
employment commencing on the Closing Date to any individual who is actively
employed by the Company as of the Closing Date. Nothing herein shall limit the
right of the Buyer to make such changes in compensation, position, or
responsibilities of employees of the Company as it may deem appropriate
following the Closing.
6.11 TAXES. The Company shall pay any transfer, sales or use or
similar taxes relating to the transactions contemplated hereby upon the
consummation of such transactions.
6.12 PURCHASE OF PRODUCTS FROM HONG KONG. The Company shall purchase
such products necessary for manufacturing products under the Transition Services
Agreement
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from the Buyer's Hong Kong facility during the duration of the Transition
Services Agreement. The Company shall pay Buyer no later than thirty (30) days
from the date Buyer invoices the Company for such products.
7. CONDITIONS TO OBLIGATIONS OF THE STOCKHOLDERS AND THE COMPANY. The
obligations of the Stockholders and the Company to make the deliveries
contemplated at the Closing shall, in addition to the conditions set forth
elsewhere herein, be subject to satisfactory completion on or prior to the
Closing Date of each of the following conditions, any of which may be waived by
the Stockholders and the Company:
7.1 CORRECTNESS OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the Buyer contained in this Agreement shall
have been true and complete in all material respects on the date hereof and
shall be true and complete in all material respects on the Closing Date with the
same effect as if made on the Closing Date, and the Buyer shall have executed
and delivered to the Company at Closing a certificate to such effect.
7.2 PERFORMANCE OF COVENANTS AND AGREEMENTS. All of the covenants and
agreements of the Buyer contained in this Agreement and required to be performed
by the Buyer on or before the Closing Date shall have been performed in all
material respects, and the Buyer shall have executed and delivered to the
Company at Closing a certificate to such effect.
7.3 ADDITIONAL CLOSING DOCUMENTS. The Buyer shall have delivered to
the Company at or prior to the Closing such documents (including a certificate
of officers of the Buyer) as the Company may reasonably request in order to
enable the Company to determine whether the conditions to the Company's
obligations under this Agreement have been met and otherwise to carry out the
provisions of this Agreement.
7.4 NO LEGAL BAR. None of the parties hereto shall be prohibited by
any order, writ, injunction or decree of any governmental body of competent
jurisdiction from consummating the transactions contemplated by this Agreement,
and no action or proceeding shall then be pending which questions the validity
of this Agreement, any of the transactions contemplated hereby or any action
which has been taken by any of the parties or any corporate entity, in
connection herewith, or in connection with any of the transactions contemplated
hereby.
7.5 OTHER AGREEMENTS. The Buyer shall have executed the Transition
Services Agreement.
8. CONDITIONS TO OBLIGATIONS OF THE BUYER. The obligations of the Buyer to
make the deliveries contemplated at the Closing shall, in addition to conditions
set forth elsewhere herein, be subject to the satisfactory completion on or
prior to the Closing Date of each of the following conditions, any of which may
be waived by the Buyer:
8.1 CORRECTNESS OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties of the Company and the Stockholders contained in this Agreement
shall have been true and complete in all material respects on the date hereof
and shall be true and complete in all material respects on the Closing Date with
the same effect as if made on the Closing Date, and
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the Company and the Stockholders shall have executed and delivered to the Buyer
at Closing a certificate to that effect.
8.2 PERFORMANCE OF COVENANTS AND AGREEMENTS. All of the covenants and
agreements of the Company and the Stockholders contained in this Agreement and
required to be performed on or before the Closing Date shall have been performed
in all material respects, and the Company and each of the Stockholders shall
have delivered to the Buyer at Closing a certificate to that effect.
8.3 ADDITIONAL CLOSING DOCUMENTS. The Company and the Stockholders
shall have delivered to the Buyer at or prior to the Closing such additional
documents as the Buyer may reasonably request in order to enable the Buyer to
determine whether the conditions to its obligations under this Agreement have
been met and otherwise to carry out the provisions of this Agreement.
8.4 NO LEGAL BAR. None of the parties hereto shall be prohibited by
any order, writ, injunction or decree of any governmental body of competent
jurisdiction from consummating the transactions contemplated by this Agreement
and no action or proceeding shall then be pending which questions the validity
of this Agreement, any of the transactions contemplated hereby or any action
which has been taken by any of the parties in connection herewith or in
connection with any of the transactions contemplated hereby.
8.5 MATERIAL ADVERSE EFFECT. The Company shall not have experienced a
Material Adverse Effect since December 31, 1998.
8.6 THIRD-PARTY CONSENTS AND APPROVALS. The Company shall have
obtained all material consents and approvals of third parties required under the
Contracts Requiring Consent or otherwise in connection with the consummation of
the transactions contemplated hereby, which consents and approvals shall be in
forms reasonably satisfactory to the Buyer.
8.7 OTHER AGREEMENTS. The Company shall have executed the Transition
Services Agreement.
8.8 TRANSFER DOCUMENTS. The Company and each of the Stockholders shall
have executed and delivered to the Buyer such bills of sale, assignment and
assumption agreements and other instruments of sale, transfer, conveyance,
assignment and delivery covering the Acquisition Assets or any part thereof as
the Buyer may reasonably require to assure the full and effective sale,
transfer, conveyance, assignment and delivery to the Buyer of the Acquisition
Assets.
9. SURVIVAL; INDEMNIFICATION.
9.1 SURVIVAL. The representations and warranties contained in this
Agreement and in any document delivered in connection herewith shall survive the
Closing Date solely for the purposes of this Section 9 and shall terminate at
the close of business two (2) years following the Closing Date; provided, that
the representations and warranties contained in Sections 3.1.2
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and 3.1.3 shall survive until the applicable statute of limitations runs. No
claim may be asserted by the Buyer for any breach of representation or warranty
herein after the survival period therefor.
9.2 INDEMNIFICATION BY THE COMPANY AND THE STOCKHOLDERS. The Company
and the Stockholders shall severally (but not jointly) indemnify and hold
harmless the Buyer and its directors, officers, employees, agents, successors,
affiliates and assigns (the "Buyer Parties") from and against, and reimburse the
Buyer Parties on demand with respect to, any and all loss, damage (including any
decrease in the value of property or securities acquired hereunder), liability,
claims, cost and expense, including reasonable attorneys', accountants',
consultants' and engineers' fees (in each case net of any insurance proceeds
received by the party to be indemnified and any net tax benefit or savings to
which the party to be indemnified is entitled as a result thereof based upon the
maximum marginal tax rate applicable to such party) (collectively, "Damages"),
incurred by a Buyer Party by reason of or arising out of or in connection with
(a) the breach of any representation or warranty contained in Section 3; (b) the
failure of the Company to perform any agreement or covenant required by this
Agreement to be performed by it; or (c) any failure of the Company to pay,
perform or discharge any of the Excluded Liabilities in accordance with the
terms thereof.
9.3 INDEMNIFICATION BY THE BUYER. Buyer agrees to indemnify and hold
harmless the Stockholders, the Company and its directors, officers, employees,
agents, successors, affiliates and assigns (the "the Company Parties") from and
against, and to reimburse the Company Parties on demand with respect to, any and
all Damages incurred by a the Company Party by reason of or arising out of or in
connection with (a) the breach of any representation or warranty contained in
Section 4; (b) the failure of the Buyer to perform any agreement or covenant
required by this Agreement to be performed by it; or (c) the failure of the
Buyer to pay, perform or discharge any of the Assumed Liabilities in accordance
with the terms thereof.
9.4 GENERAL INDEMNIFICATION LIMITATIONS. No claim for indemnification
by a Buyer Party pursuant to Section 9.2 or a Company Party pursuant to Section
9.3, shall be asserted until the aggregate amount of all Damages incurred by the
Buyer Parties or the Company Parties, respectively, under such indemnification
provisions exceeds $100,000 (at which point only Damages in excess of such first
$100,000 of Damages shall be paid if a single claim or aggregate claims exceed
$100,000. Each of the Buyer Parties and the Company Parties respective liability
in respect of their indemnification obligations hereunder shall not exceed
$8,372,480 in the aggregate. Damages incurred by the Buyer Parties shall first
be offset first against the non-convertible portion of the Convertible
Promissory Note.
9.5 NOTICE OF CLAIMS. Promptly, whenever any claim shall arise for
indemnification hereunder, the party entitled to indemnification (the
"indemnified person") shall promptly notify the other party (the "indemnifying
person") of the claim, such notice to be in writing and to describe (a) the
Damages allegedly incurred, (b) the amount thereof, if known, (c) any
complaints, subpoena or other documents served against the indemnified person in
connection with such Damages, and (d) the method of computation of such Damages
(but the
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failure so to notify an indemnifying person shall not relieve it from any
liability which it may have under this Section 9 except to the extent that it
has been prejudiced in any material respect by such failure or from any
liability which it might otherwise have). An indemnified person shall not settle
or compromise any claim by a third party for which such indemnified person is
entitled to indemnification hereunder without the prior written consent (not to
be unreasonably withheld) of the indemnifying person.
9.6 THIRD PARTY CLAIMS. In the case of any third party claim, action
or suit as to which indemnification is sought, the indemnifying person shall
have the right at any time to notify the indemnified person that it elects to
conduct and control such action or suit. If the indemnifying person does not
give the foregoing notice and/or until the indemnifying party gives such notice,
the indemnified party shall have the right to defend and contest such action or
suit in the exercise of its exclusive discretion and settle or compromise such
suit, subject to the provisions of the last sentence of Section 9.5. The
indemnifying person shall, upon request from any indemnified person, promptly
pay to such indemnified person in accordance with the other terms of this
Section 9 the amount of any Damages. If the indemnifying person gives the
foregoing notice, the indemnifying person shall have the right to undertake,
conduct and control, through counsel of its own choosing and at the sole expense
of the indemnifying person, the conduct and settlement of such action or suit
(other than a settlement which requires or prohibits any action on the part of,
or involves any admission by, the indemnified person, in which event the consent
of such indemnified person shall be required, but shall not be unreasonably
withheld), and the indemnified person shall cooperate with the indemnifying
person in connection with any such action or suit; provided, that (a) the
indemnifying person shall permit the indemnified person to participate in such
conduct or settlement through counsel chosen by the indemnified person, but the
fees and expenses of such counsel shall be borne, after the indemnifying person
has given notice that it elects to conduct and control such action or suit, by
the indemnified person and (b) the indemnifying person shall agree promptly to
reimburse to the extent required under this Section 9 the indemnified person for
the full amount of any Damages resulting from such action or suit, except fees
and expenses of counsel for the indemnified person incurred after the assumption
of the conduct and control of such action or suit by the indemnifying person. So
long as the indemnifying person is contesting any such action or suit in good
faith, the indemnified person shall not pay or settle any such action or suit.
9.7 PAYMENTS. All payments made under this Section 9 shall be made by
wire transfer in immediately available funds in U.S. dollars.
9.8 REMEDIES EXCLUSIVE. If the Closing occurs, the remedies provided
in this Section 9 shall be the exclusive remedy for monetary damages (whether at
law or in equity) with respect to this Agreement and the transactions
contemplated herein.
10. TERMINATION OF AGREEMENT.
10.1 EVENTS OF TERMINATION. This Agreement may be terminated and the
transactions contemplated by it abandoned at any time prior to the Closing: (a)
by mutual written consent of the Stockholders and the Buyer; or (b) by the
Buyer, if the conditions set forth
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in Section 8 shall not have been complied with or performed in any material
respect and such noncompliance or nonperformance shall not have been cured or
eliminated (or by its nature cannot be cured or eliminated) or if the Closing
has not occurred within 75 days of the date of this Agreement; or(c) by the
Company or the Stockholders, if the conditions set forth in Section 7 shall not
have been complied with or performed in any material respect and such
noncompliance or nonperformance shall not have been cured or eliminated (or by
its nature cannot be cured or eliminated) or if the Closing has not occurred
within 75 days of the date of this Agreement.
10.2 RIGHTS AND OBLIGATIONS ON TERMINATION. If this Agreement is
terminated and abandoned as provided in this Section 10, each party will
redeliver all documents, work papers and other materials of any other party
relating to the transactions contemplated by this Agreement, whether so obtained
before or after the execution of this Agreement, to the party furnishing the
same, and all information received by any party to this Agreement with respect
to the business of any other party shall not at any time be used for the
advantage of, or disclosed to third parties by, such party to the detriment of
the party furnishing such information; provided, however, that the foregoing
restriction shall not apply to any documents, work papers, material or
information which is a matter of public knowledge or is otherwise in the public
domain.
11. MISCELLANEOUS PROVISIONS.
11.1 CONSTRUCTION. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Delaware, without
giving effect to the conflicts of laws provisions thereof.
11.2 NOTICES. All notices, requests, demands and other communications
called for or contemplated hereunder shall be in writing and shall be deemed to
have been duly given when delivered to the party to whom addressed or when sent
by telecopy, telegram, telex or wire (if promptly confirmed by registered or
certified mail, return receipt requested, prepaid and addressed) to the parties,
their successors in interest, or their assignees at the following addresses, or
at such other addresses as the parties may designate by written notice in the
manner aforesaid:
If to the Buyer: California Amplifier, Inc.
460 Calle San Pablo
Camarillo, California 93012
Fax: (805) 987-2655
Attention: Fred Sturm
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With copies to: Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Suite 4800
Los Angeles, California 90071
Fax: (213) 229-7520
Attention: Peter F. Ziegler, Esq.
If to the Company: Gardiner Communications Corp.
3505 Security Street
Garland, Texas 75042
Fax: (214) 341-1933
Attention: James M. Harris
With copies to: Vinson & Elkins L.L.P.
2001 Ross Avenue
Suite 3700
Dallas, Texas 75201
Fax: (214) 999-7994
Attention: William D. Young, Esq.
If to the Stockholders: James M. Harris
3505 Security Street
Garland, Texas 75042
Fax: (214) 341-1933
Frances A. Jensen Harris
3505 Security Street
Garland, Texas 75042
Fax: (214) 341-1933
O'Donnell & Masur L.P.
c/o GCW Southeast Partners
12 Piedmont Center
Atlanta, Georgia 30305
Fax: (404) 816-3258
Attn: Mr. Jim O'Donnell
11.3 ASSIGNMENT. Neither this Agreement nor any right, remedy,
obligation or liability arising hereunder or by reason hereof nor any of the
documents executed in connection herewith may be assigned by any party without
the consent of the other parties. Nothing contained herein, express or implied,
is intended to confer upon any person or entity other than the parties hereto
and their successors in interest any rights or remedies under or by reason of
this Agreement unless so stated herein to the contrary.
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11.4 AMENDMENTS AND WAIVERS. This Agreement and all Exhibits and
Schedules hereto may be modified only by a written instrument duly executed by
each party. No condition to any party's obligations and no breach of any
covenant, agreement, warranty or representation shall be deemed waived unless
expressly waived in writing by the party whose obligations are subject to such
condition or who might assert such breach. No waiver of any right hereunder
shall operate as a waiver of any other right or of the same or a similar right
on another occasion.
11.5 REMEDIES. No remedy conferred by any of the specific provisions
of this Agreement is intended to be exclusive of any other remedy. Each and
every remedy shall be cumulative and shall be in addition to every other remedy
given hereunder now or hereafter existing at law or in equity or by statute or
otherwise, and the election by a party of one or more remedies shall not
constitute a waiver of the party's right to pursue any other available remedies.
11.6 ATTORNEYS' FEES. In the event that any action or proceeding,
including arbitration, is commenced by any party hereto for the purpose of
enforcing any provision of this Agreement, the parties to such action,
proceeding or arbitration may receive as part of any award, judgment, decision
or other resolution of such action, proceeding or arbitration their costs and
reasonable attorneys' fees as determined by the person or body making such
award, judgment, decision or resolution. Should any claim hereunder be settled
short of the commencement of any such action or proceeding, including
arbitration, the parties in such settlement shall be entitled to include as part
of the damages alleged to have been incurred reasonable costs of attorneys or
other professionals in investigating or counseling on such claim.
11.7 BINDING NATURE OF AGREEMENT. The Agreement includes each of the
Schedules and Exhibits which are referred to herein or attached hereto, all of
which are incorporated by reference herein. All the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective executors, heirs, legal representatives, successors and
assigns.
11.8 EXPENSES. The costs and expenses of the Company and the
Stockholders, including the legal fees and disbursements of Vinson & Elkins
L.L.P., shall be borne by the Company and the Stockholders. The costs and
expenses of the Buyer, including the legal fees and disbursements of Gibson,
Dunn & Crutcher LLP, shall be borne by the Buyer.
11.9 ENTIRE AGREEMENT. The Agreements contain the entire understanding
of the parties and supersede all prior agreements and understandings relating to
the subject matter hereof.
11.10 SEVERABILITY. Any provision of this Agreement which is invalid,
illegal or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability,
without affecting in any way the remaining provisions hereof in such
jurisdiction or rendering that or any other provision of this Agreement invalid,
illegal or unenforceable in any other jurisdiction.
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11.11 COUNTERPARTS. This Agreement may be executed by the parties in
separate counterparts and the signatures delivered by telecopy, each of which
when so executed and delivered shall be an original with the same effect as if
the signatures thereto and hereto were upon the same instrument and delivered in
person. This Agreement shall become effective when each party hereto shall have
received a counterpart hereof signed by the other parties hereto.
11.12 SECTION HEADINGS. The headings of each Section, subsection or
other subdivision of this Agreement are for reference only and shall not limit
or control the meaning thereof.
12. ARBITRATION.
12.1 AGREEMENT TO ARBITRATE. Except as provided in Section 12.4, any
controversy, dispute or claim arising out of, in connection with, or in relation
to the interpretation, performance or breach of this Agreement, including any
claim based on contract, tort or statute, shall be settled, at the request of
either party, by arbitration conducted in Los Angeles, California, or such other
location upon which the parties may mutually agree, before and in accordance
with the then existing Rules of Commercial Arbitration of the American
Arbitration Association ("AAA"), and judgment upon any award rendered by the
arbitrator may be entered by any State or Federal court having jurisdiction
thereof. Any controversy concerning whether a dispute is an arbitrable dispute
shall be determined by the arbitrator. The parties intend that this agreement to
arbitrate be valid, specifically enforceable and irrevocable. The designation of
a situs or specifically a governing law for this agreement or the arbitration
shall not be deemed an election to preclude application of the Federal
Arbitration Act, if it would be applicable.
12.2 SELECTION OF ARBITRATOR. The sole arbitrator shall be selected
in accordance with the procedures of the AAA.
12.3 EXPENSES. The arbitrator shall award to the prevailing party in
any arbitration proceeding commenced hereunder, and the court shall include in
its judgment for the prevailing party in any claim arising under this Agreement
or relating to the transactions contemplated hereby, the prevailing party's
costs and expenses (including expert witness expenses and reasonable attorneys'
fees) of investigating, preparing and presenting such arbitration claim or cause
of action.
12.4 AID TO ARBITRATION. Any party hereto may request a court of
competent jurisdiction to grant provisional injunctive relief to such party
solely for the purpose of maintaining the status quo until an arbitrator can
render an award on the matter in question and such award can be confirmed by a
court having jurisdiction thereof.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first above written.
COMPANY: Gardiner Communications Corp.,
a Delaware corporation
By: /s/ James M. Harris
--------------------------------------------
Name: James M. Harris
Title: President
BUYER: California Amplifier, Inc.,
a Delaware corporation
By: /s/ Fred Sturm
--------------------------------------------
Name: Fred Sturm
Title: President and Chief Executive Officer
STOCKHOLDERS: /s/ James M. Harris
-------------------------------------------------
James M. Harris
/s/ Frances A. Jensen Harris
-------------------------------------------------
Frances A. Jensen Harris
O'Donnell & Masur, L.P.
O'Donnell & Masur, its General Partner
By: /s/ James A. O'Donnell
--------------------------------------------
James A. O'Donnell, General Partner
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EXHIBIT 10.1
TRANSITION SERVICES AGREEMENT
This Transition Services Agreement (this "Agreement") is made and entered
into as of the 19th day of April 1999, by and between CALIFORNIA AMPLIFIER,
INC., a Delaware corporation ("Buyer"), and GARDINER COMMUNICATIONS CORP., a
Delaware corporation ("Seller").
R E C I T A L S
WHEREAS, Buyer, Seller and Seller's shareholders have entered into an Asset
Purchase Agreement dated as of April 19, 1999 (the "Asset Purchase Agreement")
providing for the purchase by Buyer of certain assets of Seller;
WHEREAS, Buyer and Seller desire to enter into this Agreement pursuant to
which Seller will provide Buyer with certain Transition Services (as defined
herein) for a limited period of time as specified herein;
WHEREAS, the execution and delivery of this Agreement is a condition
precedent to each of Buyer's and Seller's obligation to consummate the
transactions contemplated by the Asset Purchase Agreement; and
WHEREAS, the parties hereto each recognize and acknowledge that the
performance by Seller of the Transition Services is an integral component of
Buyer's decision to enter into the Asset Purchase Agreement and that the failure
of Seller to provide the Transition Services as contemplated by this Agreement
would cause Buyer substantial hardship;
NOW, THEREFORE, in consideration of the covenants and agreements set forth
in the Purchase Agreement and in further consideration of the mutual covenants
and agreement contained herein, the parties hereto agree as follows:
A G R E E M E N T
ARTICLE I
TRANSITION SERVICES
1.1 PERFORMANCE OF TRANSITION SERVICES.
(a) Subject to the terms and conditions set forth herein and in SCHEDULE A
hereto, Seller shall provide Buyer with certain services set forth in SCHEDULE A
hereto (the "Transition Services").
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(b) Seller shall provide the Transition Services in accordance with the
terms and conditions set forth in SCHEDULE A and shall provide such Transition
Services with that degree of skill, attention and care that Seller exercises and
has heretofore exercised with respect to furnishing comparable services to
itself.
(c) All employees and representatives of Seller providing the Transition
Services hereunder to Buyer during the term of this Agreement (collectively, the
"Transition Services Employees") shall be deemed for all purposes (including
compensation and employee benefits) to be employees or representatives solely of
Seller and not to be employees or representatives of Buyer or to be independent
contractors thereof. In performing their respective duties hereunder, all such
employees and representatives of Seller shall be under the direction, control
and supervision of Seller (and not of Buyer) and Seller shall have the sole
right to exercise all authority with respect to the employment (including
termination of employment), assignment and compensation of such employees and
representatives, subject to compliance with the terms and provisions contained
in this Agreement including, without limitation, the provision of the Transition
Services.
1.2 COOPERATION. Any and all of the Transition Services provided by
Seller pursuant to this Agreement shall be performed in cooperation with Buyer.
1.3 REASONABLE EFFORTS. During the term of this Agreement, Seller shall
use commercially reasonable efforts to assist Buyer in taking over the
Transition Services upon the expiration or earlier termination of this Agreement
in a reasonably expeditious manner and consistent with the purpose and intent of
this Agreement.
1.4 CONFIDENTIALITY.
(a) Buyer and Seller agree to hold, and to cause their respective
employees and representatives to hold, in strictest confidence all information
concerning the other party hereto furnished to or obtained by Buyer or Seller in
the course of receiving or providing the Transition Services contemplated hereby
(except to the extent that such information either has entered the public domain
through no fault of Buyer or Seller, as the case may be, or has been lawfully
acquired from sources other than Buyer or Seller, as the case may be), and
neither party shall disclose or release any such confidential information to any
person, except its employees, representatives and agents who have a need to know
such information in connection with such party's performance hereunder, unless
such disclosure or release is compelled by judicial or administrative process,
or in the opinion of counsel to such party, such disclosure or release is
necessary or desirable in light of other requirements of law.
(b) Without limiting the right of either party to pursue all other legal
and equitable remedies for a violation of this Section 1.4 by the other party,
Buyer and Seller agree that other remedies cannot fully compensate Buyer or
Seller, as the case may be, for such a violation and that Buyer or Seller, as
the case may be, shall be entitled to injunctive relief to prevent a violation
or continuing violation hereof.
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1.5 RELATIONSHIP OF PARTIES. Nothing in this Agreement contained shall be
deemed or construed by the parties or any other person as creation the
relationship of principal and agent or of partnership or joint venture between
Buyer and Seller.
ARTICLE II
PAYMENT FOR TRANSITION SERVICES
2.1 PRODUCTS. As payment to Seller for products that Seller produces on
Buyer's behalf, Buyer shall pay Seller the price per unit as set forth on
SCHEDULE B multiplied by the number of units produced no later than ten
(10) days from the date Seller invoices Buyer of such production. The parties
hereto acknowledge and agree that the price per unit paid for such products
shall include all manufacturing costs of Seller in connection with the
production of such products and that Buyer will not separately be responsible
for such costs except as provided in Section 3.3 of this Agreement. Buyer shall
be responsible for all shipping or freight costs except as provided in
SCHEDULE A. Buyer shall reimburse Seller no later than ten (10) days from the
date Seller invoices Buyer of such shipment for operating costs in connection
with the production and shipping of such products on an as incurred basis,
PROVIDED, that Buyer approves such costs in advance in writing and, PROVIDED
FURTHER, that the initial operating costs shall be as set forth on SCHEDULE C.
Seller shall invoice Buyer on a monthly basis.
ARTICLE III
TERM; TERMINATION
3.1 TERM. Seller shall provide the Transition Services for a term
commencing on the date hereof and ending on the date that is four (4) months
from the date hereof, unless terminated by Buyer in accordance with Section 3.2
hereof; PROVIDED, HOWEVER, that Buyer and Seller may extend the term of this
Agreement by mutual agreement.
3.2 TERMINATION. This Agreement shall terminate upon the expiration of
the term of this Agreement. Notwithstanding the foregoing, Buyer may terminate
this Agreement at any time upon written notice to Seller at least fifteen (15)
days prior to the date of termination of this Agreement; PROVIDED, HOWEVER, that
Buyer shall promptly pay Seller for the Transition Services rendered up to and
through the date of termination of this Agreement in accordance with Section 2.1
hereof.
3.3 EFFECT OF TERMINATION. Upon expiration or earlier termination of this
Agreement, Buyer shall have the option to assume management and control of the
Garland, Texas production facility immediately upon written notice to Seller,
which option shall expire ten (10) days after the expiration or earlier
termination of this Agreement. In the event Buyer exercises such option, Buyer
shall immediately (i) purchase all applicable inventories from Seller, (ii)
assume responsibility for purchasing ongoing manufacturing supplies and (iii)
hire all Transition Services Employees remaining at the Garland, Texas
production facility (the "Facility") at the expiration or earlier termination of
this Agreement and deemed necessary by Buyer. In addition,
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to the extent permitted by Seller's lease for the Facility, Buyer shall enter
into a short-term sublease for the Facility with Seller.
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ARTICLE IV
GENERAL TERMS AND CONDITIONS
4.1 CONSTRUCTION. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Delaware, without
giving effect to the conflicts of laws provisions thereof.
4.2 NOTICES. All notices, requests, demands and other communications
called for or contemplated hereunder shall be in writing and shall be deemed to
have been duly given when delivered to the party to whom addressed or when sent
by telecopy, telegram, telex or wire (if promptly confirmed by registered or
certified mail, return receipt requested, prepaid and addressed) to the parties,
their successors in interest, or their assignees at the following addresses, or
at such other addresses as the parties may designate by written notice in the
manner aforesaid:
If to Buyer: California Amplifier, Inc.
460 Calle San Pablo
Camarillo, California 93012
Fax: (805) 987-2655
Attention: Fred Sturm
With copies to: Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Suite 4800
Los Angeles, California 90071
Fax: (213) 229-7520
Attention: Peter F. Ziegler, Esq.
If to Seller: Gardiner Communications Corp.
3505 Security Street
Garland, Texas 75042
Fax: (214) 341-1933
Attention: James M. Harris
With copies to: Vinson & Elkins L.L.P.
2001 Ross Avenue
Suite 3700
Dallas, Texas 75201
Fax: (214) 999-7994
Attention: William D. Young, Esq.
4.3 ASSIGNMENT. Neither this Agreement nor any right, remedy, obligation
or liability arising hereunder or by reason hereof nor any of the documents
executed in connection herewith may be assigned by any party without the consent
of the other parties. Nothing contained herein, express or implied, is intended
to confer upon any person or entity other than the parties hereto
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and their successors in interest any rights or remedies under or by reason of
this Agreement unless so stated herein to the contrary.
4.4 AMENDMENTS AND WAIVERS. This Agreement and all Schedules hereto may
be modified only by a written instrument duly executed by each party. No
condition to any party's obligations and no breach of any covenant, agreement,
warranty or representation shall be deemed waived unless expressly waived in
writing by the party whose obligations are subject to such condition or who
might assert such breach. No waiver of any right hereunder shall operate as a
waiver of any other right or of the same or a similar right on another occasion.
4.5 REMEDIES. No remedy conferred by any of the specific provisions of
this Agreement is intended to be exclusive of any other remedy. Each and every
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder now or hereafter existing at law or in equity or by statute or
otherwise, and the election by a party of one or more remedies shall not
constitute a waiver of the party's right to pursue any other available remedies.
4.6 ATTORNEYS' FEES. In the event that any action or proceeding,
including arbitration, is commenced by any party hereto for the purpose of
enforcing any provision of this Agreement, the parties to such action,
proceeding or arbitration may receive as part of any award, judgment, decision
or other resolution of such action, proceeding or arbitration their costs and
reasonable attorneys' fees as determined by the person or body making such
award, judgment, decision or resolution. Should any claim hereunder be settled
short of the commencement of any such action or proceeding, including
arbitration, the parties in such settlement shall be entitled to include as part
of the damages alleged to have been incurred reasonable costs of attorneys or
other professionals in investigating or counseling on such claim.
4.7 BINDING NATURE OF AGREEMENT. The Agreement includes each of the
Schedules which are referred to herein or attached hereto, all of which are
incorporated by reference herein. All the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective executors, heirs, legal representatives, successors and
assigns.
4.8 EXPENSES. The costs and expenses of Seller, including the legal fees
and disbursements of Vinson & Elkins L.L.P., shall be borne by Seller. The
costs and expenses of Buyer, including the legal fees and disbursements of
Gibson, Dunn & Crutcher LLP, shall be borne by Buyer.
4.9 ENTIRE AGREEMENT. The Agreements contain the entire understanding of
the parties and supersede all prior agreements and understandings relating to
the subject matter hereof.
4.10 SEVERABILITY. Any provision of this Agreement which is invalid,
illegal or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability,
without affecting in any way the remaining provisions hereof in such
jurisdiction or rendering that or any other provision of this Agreement invalid,
illegal or unenforceable in any other jurisdiction.
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4.11 COUNTERPARTS. This Agreement may be executed by the parties in
separate counterparts and the signatures delivered by telecopy, each of which
when so executed and delivered shall be an original with the same effect as if
the signatures thereto and hereto were upon the same instrument and delivered in
person. This Agreement shall become effective when each party hereto shall have
received a counterpart hereof signed by the other parties hereto.
4.12 SECTION HEADINGS. The headings of each Section, subsection or other
subdivision of this Agreement are for reference only and shall not limit or
control the meaning thereof.
4.13 ARBITRATION.
(a) Except as provided in subparagraph (d), any controversy, dispute
or claim arising out of, in connection with, or in relation to the
interpretation, performance or breach of this Agreement, including any
claim based on contract, tort or statute, shall be settled, at the request
of either party, by arbitration conducted in Los Angeles, California, or
such other location upon which the parties may mutually agree, before and
in accordance with the then existing Rules of Commercial Arbitration of the
American Arbitration Association ("AAA"), and judgment upon any award
rendered by the arbitrator may be entered by any State or Federal court
having jurisdiction thereof. Any controversy concerning whether a dispute
is an arbitrable dispute shall be determined by the arbitrator. The
parties intend that this agreement to arbitrate be valid, specifically
enforceable and irrevocable. The designation of a situs or specifically a
governing law for this agreement or the arbitration shall not be deemed an
election to preclude application of the Federal Arbitration Act, if it
would be applicable.
(b) The sole arbitrator shall be selected in accordance with the
procedures of the AAA.
(c) The arbitrator shall award to the prevailing party in any
arbitration proceeding commenced hereunder, and the court shall include in
its judgment for the prevailing party in any claim arising under this
Agreement or relating to the transactions contemplated hereby, the
prevailing party's costs and expenses (including expert witness expenses
and reasonable attorneys' fees) of investigating, preparing and presenting
such arbitration claim or cause of action.
(d) Any party hereto may request a court of competent jurisdiction to
grant provisional injunctive relief to such party solely for the purpose of
maintaining the status quo until an arbitrator can render an award on the
matter in question and such award can be confirmed by a court having
jurisdiction thereof.
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IN WITNESS WHEREOF, the parties to this Agreement hereby indicate their
acceptance of the terms and conditions stated herein by the signatures of their
authorized representatives as of the date first stated above.
GARDINER COMMUNICATIONS CORP.
By: /s/ James M. Harris
----------------------------------------
Name: James M. Harris
Title: President
CALIFORNIA AMPLIFIER, INC.
By: /s/ FRED STURM
----------------------------------------
Name: Fred Sturm
Title: President and Chief Executive Officer
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EXHIBIT 10.2
CONVERTIBLE PROMISSORY NOTE
$3,100,000 Dated: April 19, 1999
FOR VALUE RECEIVED, California Amplifier, Inc., a Delaware corporation (the
"Corporation"), hereby promises to pay to the order of Gardiner Communications
Corp., a Delaware corporation (the "Holder"), at such place as the Holder of
this promissory note (this "Note") may designate from time to time, the
principal sum of Three Million One Hundred Thousand Dollars and 00/100
($3,100,000) together with interest thereon computed from the date of this Note,
in accordance with the terms and conditions herein set forth.
1. From the date hereof until the entire principal sum hereunder has been
paid or converted into common stock of the Corporation, as hereinafter provided,
interest shall accrue on the unpaid principal balance of this Note at an
interest rate of eight percent (8.0%) per annum, compounded monthly. All accrued
interest shall be due and payable on the last business day of each month
beginning on April 30, 1999. The full amount of balance of principal remaining
unpaid together with all accrued and unpaid interest under this Note shall be
due and payable on April 19, 2000, unless extended at the Holder's option as set
forth in Section 2(a) below. The Corporation reserves the right to prepay any
part of the unpaid principal, up to Eight Hundred Sixty-Eight Thousand Seven
Hundred Fifty Dollars and 00/100 ($868,750), or interest at any time without
penalty.
2. (a) Subject to and upon compliance with the provisions of this Section
2, at the option of the Holder, a portion of the aggregate principal sum
outstanding hereunder may on the date of the maturity of this Note be converted
into Five Hundred Twenty-Five Thousand (525,000) fully paid and non-assessable
shares of common stock of the Corporation (the "Common Stock") at a conversion
price per share (the "Conversion Price") equal to the lower of (i) Four Dollars
and 25/100 ($4.25) or (ii) the average of the daily closing sales prices of a
share of the Corporation's Common Stock on the Nasdaq National Market
("NASDAQ"), as reported in THE WALL STREET JOURNAL, during the twenty (20)
consecutive trading days on which trades in the Corporation's Common Stock
occurred, ending on the day prior to the maturity date of this Note, provided
that such price shall not be less than Three Dollars ($3.00); or, if any
adjustment of the price in (i) or (ii) is required pursuant to Section 3, then
the price as adjusted. If the Conversion Price on April 19, 2000, is less than
Four Dollars and 25/100 ($4.25) per share, then the Holder may, at its option,
extend the maturity date of this Note, including all principal amounts due and
payable on the non-convertible portions hereof, for a minimum of six months from
April 19, 2000, but to no later than April 19, 2001.
(b) In order to exercise the conversion rights set forth in this
Section 2 hereof, the Holder shall surrender this Note at the principal place of
business of the Corporation with written instructions as to the manner in which
shares of Common Stock are to be issued and the portion
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of the principal amount to be converted. The Corporation shall issue or cause to
be issued to the Holder, upon receipt of the Note, a certificate evidencing the
number of shares of Common Stock so acquired in accordance with the Holder's
instructions and, to the extent that principal amount of the Note remains
outstanding, a new Note in such reduced principal amount.
(c) No fractional shares of Common Stock shall be issued upon conversion of
this Note. In the event the Holder is entitled to a fractional share upon
conversion of this Note, the Corporation shall, in lieu of issuance of such
fractional share, pay the Holder, on or before the date it delivers to the
Holder shares of Common Stock upon such conversion, a sum in cash equal to the
percentage of a whole share represented by such fractional share multiplied by
the Conversion Price.
(d) The Corporation covenants that it shall at all times until the maturity
of this Note reserve and keep available out of its authorized shares of Common
Stock for transfer to the Holder such number of shares of Common Stock as shall
then be issuable upon conversion of this Note.
(e) Unless otherwise required by law, the transfer of shares of Common
Stock upon conversion of this Note shall be made without charge to the Holder
for such certificate or for any tax in respect of the issuance of such
certificate, but nothing herein shall obligate the Corporation to pay any tax or
other charge imposed in connection with any transfer involved in the issue of
any certificate for shares of Common Stock in any name other than that of the
Holder.
(f) The exercise by the Holder of the conversion rights set forth herein,
in whole or in part, and issuance of the shares of Common Stock pursuant to this
Section 2, shall not extinguish any unpaid interest which may have accrued
hereunder prior to the date of conversion. Such accrued but unpaid interest
shall be paid to Holder as provided herein in the same manner as if this Note
had not been so converted.
(g) If this Note is transferred pursuant to Section 13 hereof to the
Stockholders (as defined herein), the rights of this Section 2 shall be vested
in each of the Stockholders severally and not jointly.
3. The Corporation shall deliver to the Holder all reports, if any,
relating to the Company filed with the Securities and Exchange Commission,
including, without limitation, the Company's Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any definitive
proxy or information statements no later than two (2) days after such reports
are filed with the SEC.
4. (a) In case the Corporation shall, at any time prior to the maturity of
this Note, declare or pay to the holders of Common Stock, a dividend payable in
any kind of shares of stock or other securities of the Corporation, or in
property, or otherwise than in cash, the Holder of this Note upon conversion of
the same as herein provided shall be entitled to receive for the Conversion
Price per share of Common Stock stated in the Note, in addition to one share of
Common Stock, such additional share or shares of stock or scrip representing
fractions of a share or other securities or property as the Holder would have
received in the form of such dividend if
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it had been the holder of record of such Common Stock on the record date for the
determination of common stockholders entitled to receive such dividend.
(b) In case the Corporation shall, during the term of this Note, effect a
recapitalization of such character that the shares of Common Stock receivable
upon the conversion of this Note shall be changed into or become exchangeable
for a larger or smaller number of shares, then thereafter, the number of shares
of Common Stock of the Corporation which the Holder shall be entitled to receive
upon conversion hereof, shall be increased or decreased, as the case may be, in
direct proportion to the increase or decrease in the number of shares of Common
Stock of the Corporation, by reason of such recapitalization, and the Conversion
Price hereunder, per share, of such recapitalized Common Stock shall in the case
of an increase in the number of shares be proportionately reduced, and in the
case of a decrease in the number of shares be proportionately increased.
(c) In case the Corporation shall, at any time prior to the maturity of
this Note, consolidate or merge with, or transfer its property to, or
substantially to, any other corporation, the Holder upon conversion of the same
as herein provided shall be entitled to receive, for the Conversion Price per
share of Common Stock stated in this Note, that number of shares of stock or
other securities or property of the corporation resulting from such
consolidation or merger or transfer to which each share of Common Stock
deliverable upon conversion of this Note would have been entitled, upon such
consolidation or merger or transfer, had the Holder exercised his right to
convert and had said share of Common Stock been issued and outstanding, and had
the Holder been the holder of record of such share of Common Stock at the time
of such consolidation or merger or transfer.
(d) In case the Corporation shall, at any time prior to the maturity of
this Note make any distribution of its assets to holders of its Common Stock by
liquidating or partial liquidating dividend or by way of return of capital, or
other than as dividend payable out of earnings or any surplus legally available
for dividends under the laws of the state of its incorporation, then the Holder,
of this Note upon conversion of the same as herein provided after the date of
record for the determination of those holders of Common Stock entitled to such
distribution of assets, shall be entitled to receive for the Conversion Price,
in addition to each share of Common Stock, the amount of such assets (or at the
option of the Corporation a sum equal to the value thereof at the time of such
distribution to Holders of Common Stock as such value is determined by the Board
of Directors of the Corporation in good faith) which would have been payable to
the Holder had the Holder been the holder of record of such share of Common
Stock on the record date for the determination of those entitled to such
distribution.
(e) In case of the dissolution, liquidation or winding-up of the
Corporation, all conversion rights under this Note shall terminate on a date
fixed by the Corporation, such date so fixed to be not earlier than the date of
the commencement of the proceedings for such dissolution, liquidation or
winding-up and not later than thirty (30) days after such commencement date. In
any such case of termination of conversion rights the Corporation shall give
thirty (30) days prior notice of such termination date to the Holder.
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(f) Upon any adjustment of the Conversion Price and/or any increase or
decrease in the number of shares of Common Stock purchasable upon the conversion
of this Note, then, and in each case, the Corporation, within thirty (30) days
thereafter, shall give written notice thereof to the Holder which notice shall
state the adjusted Conversion Price and/or the increased or decreased number of
shares purchasable upon the conversion of this Note, setting forth in reasonable
detail the method of calculation and the facts upon which such calculation is
based.
5. This Note and the shares of Common Stock issuable upon conversion of
this Note have not been registered under the Securities Act of 1933, as amended
(the "Act"), or the securities laws of any state, and are being sold and will be
sold in reliance upon the exceptions afforded thereunder for transactions not
involving any public offering. The Holder, by acceptance of this Note,
represents that it is acquiring this Note, and that it will acquire the shares
of Common Stock issuable upon conversion of this Note, for its own account for
investment and not with a view to the distribution thereof. Notwithstanding any
other provision of this Note, no sale, offer to sell or transfer of this Note or
the shares of Common Stock issuable upon conversion thereof shall be made unless
(a) a registration statement under the Act with respect to this Note or such
shares is then in effect or an exemption from the registration requirements of
the Act is then applicable to such sale, offer to sell or transfer; and (b) the
Note or the shares of Common Stock issuable upon conversion thereof are
qualified or registered in accordance with all applicable state blue sky or
securities laws, or exemptions from such qualification or registration
requirements are then applicable to such sale, offer to sell or transfer. Such
sale, offer to sell or transfer shall, in all instances, be subject to the
consent of the Corporation, except as set forth in Section 13 below, and, among
other things, to the Corporation first having received a written opinion in form
and substance satisfactory to the Corporation of counsel experienced in
securities law matters indicating such proposed sale, offer to sell or transfer
will not be in violation of any of the registration provisions of the Act, or
similar successor laws, and the rules and regulations promulgated thereunder,
and the qualification or registration requirements of applicable state blue sky
or securities laws. The certificates for shares of Common Stock issuable upon
conversion of this Note shall have appropriate legends evidencing the
restrictions mentioned in this Section 5. The Holder is able to bear the
economic risk of an investment in the sharesof Common Stock issuable upon
conversion of this Note and can afford to sustain a total loss in such
investment. The Holder has knowledge and experience in financial and business
matters that the Holder is capable of evaluating the merits and risks of the
purchase of the shares of Common Stock issuable upon conversion of this Note,
and therefore, has the capacity to protect the Holder's own interests in
connection with the purchase of the shares of Common Stock upon conversion of
this Note.
6. Except as provided herein, the Holder shall not be entitled to vote or
receive dividends or distributions or be considered a stockholder of the
Corporation for any purposes, nor shall anything in this Note be construed to
confer upon the Holder, as such, any rights of a stockholder of the Corporation
or any right to vote, to give or without consent to any corporate action, to
receive notice of meetings of stockholders or to receive dividends,
distributions or subscription rights or otherwise.
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7. This Note has been delivered in California and shall be deemed to be a
contract made under the laws of the State of California and for all purposes
shall be governed by and construed in accordance with the laws of the State of
California, without giving effect to the principles of conflicts of laws.
8. The Corporation expressly waives any presentment, protest and demand,
notice of protest, demand and dishonor and nonpayment of this Note, now or
hereafter, required by applicable law.
9. All agreements between the Corporation and the Holder are expressly
limited so that in no event shall the amount paid or agreed to be paid to the
Holder exceed the highest lawful rate permissible under applicable usury laws.
If, through any circumstances whatsoever, performance of any provision of this
Note, at the time such performance is due, shall involve transcending a limit of
validity prescribed by applicable law, then IPSO FACTO, the obligation to be
performed shall be reduced to the limit of such validity, and if through any
circumstances the Holder shall ever receive as interest an amount which would
exceed the highest lawful rate, such amount which would be excessive interest
shall be applied to the reduction of the unpaid principal balance due hereunder
and not to the payment of interest.
10. This Note and any of its terms may be changed only by a written
instrument signed by the Corporation and the Holder.
11. All notices, requests, demands and other communications called for or
contemplated hereunder shall be in writing and shall be deemed to have been duly
given when delivered to the party to whom addressed or when sent by telecopy,
telegram, telex or wire (if promptly confirmed by registered or certified mail,
return receipt requested, prepaid and addressed) to the parties, their
successors in interest, or their assignees at the following addresses, or at
such other addresses as the parties may designate by written notice in the
manner aforesaid:
If to Corporation: California Amplifier, Inc.
460 Calle San Pablo
Camarillo, California 93012
Fax: (805) 987-2655
Attention: Fred Sturm
If to Holder: Gardiner Communications Corp.
3505 Security Street
Garland, Texas 75042
Fax: (214) 341-1933
Attention: James M. Harris
12. The Corporation shall arrange for Santa Monica Bank to issue a
$3,100,000 Standby Letter of Credit (the "LC") to the Holder and O'Donnell &
Masur, L.P., James M. Harris and Frances A. Jensen Harris (collectively, the
"Stockholders") in the form and substance reasonably satisfactory to Holder
within twenty-one (21) days
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from the date hereof. The Holder shall be solely responsible for payment of any
fees and expenses incurred in connection with obtaining the LC.
13. This Note is non-negotiable and shall not be assigned, transferred or
endorsed by either party hereto without the written consent of the other party,
except that the Holder may transfer this Note to the Stockholders without the
Corporation's written consent; provided, that any of such transferees sign a
representation similar to that set forth below.
CALIFORNIA AMPLIFIER, INC.,
a Delaware corporation
By: /s/ Fred Sturm
-----------------------------------------
Name: Fred Sturm
Title: President and Chief Executive Officer
The undersigned Holder agrees and accepts this Note, acknowledges that it
has read and confirms its representations contained in Section 5 of this Note.
GARDINER COMMUNICATIONS CORP.
By: /s/ James M. Harris
-----------------------------------------
Name: James M. Harris
Title: President
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EXHIBIT 10.3
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is entered into on the 19th
day of April 1999, by and between James M. Harris, an individual ("Executive"),
and California Amplifier, Inc., a Delaware corporation (the "Company").
R E C I T A L S
WHEREAS, the Company, Gardiner Communications Corp., a Delaware corporation
("Gardiner"), Executive and other stockholders of Gardiner have entered into a
certain Asset Purchase Agreement dated as of April 19, 1999 (the "Asset Purchase
Agreement") providing for the purchase by the Company of certain assets of
Gardiner;
WHEREAS, the Company and Gardiner have entered into a certain Transition
Services Agreement dated as of April 19, 1999 (the "Transition Services
Agreement") pursuant to which Gardiner shall provide the Company with certain
services for a limited period of time (such period of time, the "Transition
Period"); and
WHEREAS, the Company and Executive desire to enter into this Agreement
pursuant to which Executive will provide the Company with certain services
during the Transition Period and for a period of time thereafter;
NOW, THEREFORE, in consideration of the covenants and agreement contained
herein, the parties hereto agree as follows:
A G R E E M E N T
1. EMPLOYMENT BY THE COMPANY AND TERM.
(a) FULL TIME AND BEST EFFORTS. Subject to the terms set forth herein, the
Company agrees to employ Executive as Director of Operations, Gardiner during
the Transition Period and as Director, Satellite Technology after the Transition
Period, and in such other capacities as may be requested from time to time by
the Board of Directors of the Company (the "Board") or a duly authorized
committee thereof, and Executive hereby accepts such employment. Executive shall
render such other services for the Company and corporations controlled by, under
common control with or controlling, directly or indirectly, the Company, and to
successor entities and assignees of the Company as the Company may from time to
time reasonably request and as shall be consistent with the duties Executive is
to perform for the Company and with Executive's stature and experience. During
the term of his employment with the Company, Executive will devote his full time
and attention exclusively to, and use his best efforts to advance, the business
and welfare of the Company.
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(b) DUTIES. Executive shall serve in an executive capacity and shall
perform such duties as are customarily associated with his title of Director of
Operations, Gardiner during the Transition Period and of Director, Satellite
Technology after the Transition Period, as required by the Board.
(c) COMPANY POLICIES. The employment relationship between the parties shall
be governed by the general employment policies and practices of the Company,
including but not limited to those relating to protection of confidential
information, except that when the terms of this Agreement differ from or are in
conflict with the Company's general employment policies or practices, this
Agreement shall control.
(d) TERM. The term of employment of Executive under this Agreement (the
"Term") shall be one (1) year commencing on April 19, 1999, unless earlier
terminated; PROVIDED, HOWEVER, that the Term may be renewed on terms and
conditions mutually agreeable to both parties. The Company shall not have any
express or implied obligation under any circumstances to extend Executive's
employment beyond the end of the Term.
2. COMPENSATION AND BENEFITS.
(a) NON-COMPETE. As consideration for Executive's covenant not to compete
contained herein and in the Asset Purchase Agreement, Executive shall receive
One Million Two Hundred Fifty Thousand Dollars ($1,250,000) on the date hereof.
(b) SALARY. During the Transition Period, Executive shall receive for
services to be rendered hereunder a salary at the rate of Two Hundred Fifty
Thousand Dollars ($250,000) per year payable at least as frequently as monthly
and subject to payroll deductions as may be necessary or customary in respect of
the Company's salaried employees (the "Base Salary"). After the Transition
Period, the Base Salary shall be reduced to One Hundred Fifty Thousand Dollars
($150,000) per year.
(c) BONUSES. Executive's eligibility to receive bonuses during the Term,
and the amount of any such bonuses, shall be determined in the sole and absolute
discretion of the Board or a duly authorized committee thereof.
(d) ROYALTIES. After the Transition Period, Executive shall receive royalty
payments based on the Company's revenues from sales occuring after the
Transition Period for new products designed principally by Executive. Such
royalty payments shall equal (i) one percent (1.0%) of revenues on such products
if the Company's standard gross margin on such products at such time is thirty
percent (30%) or less, (ii) one and one-half percent (1.5%) of revenues on such
products if the Company's standard gross margin on such products at such time is
forty percent (40%) or less but over thirty percent (30%) or (iii) one and
three-fourths percent (1.75%) of revenues on such products if the Company's
standard gross margin on such products at such time is greater than forty
percent (40%). For each new product designed principally by Executive, such
royalty payments shall continue for a period of three (3) years from the date of
product qualification by the Company.
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(e) PARTICIPATION IN BENEFIT PLANS. During the Term, Executive shall be
entitled to participate, on the same terms and conditions generally applicable
to members of senior management of the Company, in any group insurance,
hospitalization, medical, dental, health and accident, disability, pension or
similar plan or program of the Company now existing or established hereafter to
the extent that he is eligible under the general provisions thereof. The Company
may, in its sole discretion and from time to time, establish additional or
eliminate or modify existing benefit programs as it deems appropriate.
3. REASONABLE BUSINESS EXPENSES AND SUPPORT. Executive shall be reimbursed
for documented and reasonable business expenses in connection with the
performance of his duties hereunder within the limits of the annual budget for
such expenses approved by the Board. Executive shall be furnished reasonable
office space, assistance and facilities.
4. TERMINATION OF EMPLOYMENT. The date on which Executive's employment by
the Company ceases, under any of the following circumstances, shall be defined
herein as the "Termination Date."
(a) TERMINATION FOR CAUSE.
(i) TERMINATION; PAYMENT OF ACCRUED SALARY. The Board may terminate
Executive's employment with the Company at any time for cause, immediately upon
notice to Executive of the circumstances leading to such termination for cause
or, in the event that paragraph (ii) below provides for a cure period, upon
notice and the expiration of such cure period. In the event that Executive's
employment is terminated for cause, Executive shall receive payment for all
accrued salary through the Termination Date, which in this event shall be the
date upon which notice of termination is given. The Company shall have no
further obligation to pay severance of any kind nor to make any payment in lieu
of notice.
(ii) DEFINITION OF CAUSE. "CAUSE" means the occurrence or existence of
any of the following with respect to Executive, as determined by a majority of
the disinterested directors of the Board:
(A) Executive's conviction by, or entry of a plea of guilty or
nolo contendere in, a court of competent and final jurisdiction for
any crime involving moral turpitude or any felony punishable by
imprisonment in the jurisdiction involved;
(B) Executive's commission of an act of fraud upon the Company,
whether prior to or subsequent to the date hereof;
(C) Executive's failure or refusal to perform his duties as
reasonably required by this Agreement, provided that termination of
Executive's employment pursuant to this subparagraph (C) shall not
constitute valid termination for cause unless Executive shall have
first received written notice from the Company stating with
specificity the nature of such failure or refusal and
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affording Executive at least five (5) days to correct the act or omission
complained of;
(D) gross negligence, insubordination, material violation by
Executive of any duty of loyalty to the Company, or any other material
misconduct on the part of Executive, provided that termination of
Executive's employment pursuant to this subparagraph (D) shall not
constitute valid termination for cause unless Executive shall have
first received written notice from the Company stating with
specificity the nature of such failure or refusal and affording
Executive at least five (5) days to correct the act or omission
complained of;
(E) the repeated non-prescription use of any controlled
substance, or the repeated use of alcohol or any other non-controlled
substance which in the Board's reasonable determination renders
Executive unfit to serve in his capacity as an officer or employee of
the Company;
(F) Executive's failure to report to work for any consecutive
five-day period, other than for excused absences or reasonable medical
or personal reasons;
(G) sexual harassment by Executive that has been reasonably
substantiated and investigated;
(H) Executive's physical destruction of substantial property or
assets of the Company; or
(I) Executive's death.
(b) TERMINATION UPON DISABILITY. The Company may terminate Executive's
employment in the event Executive suffers a disability that renders Executive
unable to perform the essential functions of his position, even with reasonable
accommodation, for three (3) months within any six (6) month period. After the
Termination Date, which in this event shall be the date upon which notice of
termination is given, no further compensation will be payable under this
Agreement.
(c) TERMINATION WITHOUT CAUSE; SEVERANCE PAYMENTS. In the event that during
the Term, Executive's employment is terminated by the Company other than
pursuant to paragraph 4(a) or 4(b), then the Company shall pay Executive as
severance an amount (the "Severance Payment") equal to the greater of (i)
one-half of Executive's Base Salary for the remainder of the Term or (ii) two
months of Executive's Base Salary, in either case payable in cash in a lump sum
not later than thirty (30) days following the Termination Date (subject to
applicable withholding); provided, however, that the Company shall continue to
make royalty payments to Executive pursuant to paragraph 2(c) hereof.
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(d) BENEFITS UPON TERMINATION. In the event that during the Term
Executive's employment is terminated by the Company other than pursuant to
paragraph 4(a) or 4(b), all benefits provided under paragraph 2(d) hereof shall
be extended, at Executive's election and at the same cost to Executive as when
employed, to the extent permitted by the Company's insurance policies and
benefit plans, for a period following Executive's Termination Date equal to the
remainder of the Term, except as required by law (e.g., COBRA health insurance
continuation election). In the event that during the Term Executive's employment
is terminated (1) by the Company pursuant to paragraph 4(a) or 4(b) or (2)
otherwise, such benefits shall not be extended under any circumstances, except
(x) as required by law (e.g., COBRA health insurance continuation election) and
(y) if Executive is terminated pursuant to paragraph 4(a)(ii)(I), in which case
the Company shall continue coverage of Executive's dependents, if any, under all
benefit plans or programs of the type listed in paragraph 2(c) for a period of
three (3) months.
5. PROPRIETARY INFORMATION OBLIGATIONS. During the Term, Executive will
have access to and become acquainted with the Company's confidential and
proprietary information, including but not limited to information or plans
regarding the Company's personnel, or sales, marketing, and financial operations
and methods; relationships with its customers, subcontractors, suppliers and
redevelopment agencies and other governmental agencies (the "Relationships");
trade secrets; formulas; devices; secret inventions; processes; and other
compilations of information, records, and specifications (collectively, the
"Proprietary Information"). Executive shall not (a) disclose any of the
Proprietary Information directly or indirectly, or use it in any way, either
during the Term or at any time thereafter, except as required in the course of
his employment for the Company or as authorized in writing by the Company, or
(b) intentionally jeopardize or abuse the Relationships to the detriment of the
Company. All files, records, documents, computer-recorded information, drawings,
specifications, equipment and similar items relating to the business of the
Company, whether prepared by Executive or otherwise coming into his possession,
shall remain the exclusive property of the Company and shall not be removed from
the premises of the Company under any circumstances whatsoever without the prior
written consent of the Company, except when (and only for the period) necessary
to carry out Executive's duties hereunder, and if removed shall be immediately
returned to the Company upon any termination of his employment and no copies
thereof shall be kept by Executive.
6. NONINTERFERENCE. In accordance with the terms and conditions set forth
in the Asset Purchase Agreement, Executive agrees not to interfere with the
business of the Company by directly or indirectly soliciting, attempting to
solicit, inducing or otherwise causing any employee of the Company to terminate
his or her employment in order to become an employee, consultant or independent
contractor to or for any other employer.
7. NON-COMPETITION. In accordance with the terms and conditions set forth
in the Asset Purchase Agreement, Executive agrees that during the Term, he will
not, without the prior written consent of the Company, directly or indirectly,
possess an interest in, be employed by, or be connected with, as an employee,
consultant, officer, director, partner, member, stockholder or joint venturer,
any person or entity owning, managing, controlling, operating or otherwise
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participating or assisting in any business which is similar to or in competition
with the business of the Company in any location; PROVIDED, HOWEVER, that the
foregoing shall not prevent Executive from being a stockholder of less than one
percent (1%) of the issued and outstanding securities of any class of a
corporation listed on a national securities exchange or designated as national
market system securities on an interdealer quotation system by the National
Association of Securities Dealers, Inc.
8. MISCELLANEOUS.
(a) NOTICES. Any notices provided hereunder must be in writing and shall be
deemed effective upon the earlier of personal delivery (including personal
delivery by telecopy or telex) or the third day after mailing by first class
mail to the recipient at the address indicated below:
To the Company:
California Amplifier, Inc.
460 Calle San Pablo
Camarillo, California 93012
Attention: Fred Sturm
Telephone: (805) 987-9000
Facsimile: (805) 987-2655
To Executive:
James M. Harris
3505 Security Street
Garland, Texas 75042
Telephone: (214) 341-4747
Facsimile: (214) 341-1933
or to such other address or to the attention of such other person as the
recipient party will have specified by prior written notice to the sending
party.
(b) SEVERABILITY. Any provision of this Agreement which is deemed invalid,
illegal or unenforceable in any jurisdiction shall, as to that jurisdiction and
subject to this paragraph be ineffective to the extent of such invalidity,
illegality or unenforceability, without affecting in any way the remaining
provisions hereof in such jurisdiction or rendering that or any other provisions
of this Agreement invalid, illegal, or unenforceable in any other jurisdiction.
If any covenant should be deemed invalid, illegal or unenforceable because its
scope is considered excessive, such covenant shall be modified so that the scope
of the covenant is reduced only to the minimum extent necessary to render the
modified covenant valid, legal and enforceable.
(c) ENTIRE AGREEMENT. This Agreement by and between Executive and the
Company constitute the final, complete, and exclusive embodiment of the entire
agreement and understanding between the parties related to the subject matter
hereof and supersede and preempt
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any prior or contemporaneous understandings, agreements or representations by or
between the parties, written or oral.
(d) COUNTERPARTS. This Agreement may be executed by the parties in separate
counterparts and the signatures delivered by telecopy, each of which when so
executed and delivered shall be an original with the same effect as if the
signatures thereto and hereto were upon the same instrument and delivered in
person. This Agreement shall become effective when each party hereto shall have
received a counterpart hereof signed by the other parties hereto.
(e) SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and inure to
the benefit of and be enforceable by Executive and the Company, and their
respective successors and assigns, except that Executive may not assign any of
his duties hereunder and he may not assign any of his rights hereunder without
the prior written consent of the Company.
(f) ATTORNEYS' FEES. If any legal proceeding is necessary to enforce or
interpret the terms of this Agreement, or to recover damages for breach
therefore, the prevailing party shall be entitled to reasonable attorneys' fees,
as well as costs and disbursements, in addition to any other relief to which he
or it may be entitled.
(g) AMENDMENTS. No amendments or other modifications to this Agreement may
be made except by a writing signed by both parties. No amendment or waiver of
this Agreement requires the consent of any individual, partnership, corporation
or other entity not a party to this Agreement. Nothing in this Agreement,
express or implied, is intended to confer upon any third person any rights or
remedies under or by reason of this Agreement.
(h) CHOICE OF LAW. All questions concerning the construction, validity and
interpretation of this Agreement will be governed by the internal law, and not
the law of conflicts, of the State of California.
(i) ARBITRATION.
(1) Except as provided in subparagraph (4) hereof, any controversy,
dispute or claim arising out of, in connection with, or in relation to the
interpretation, performance or breach of this Agreement, including any
claim based on contract, tort or statute, shall be settled, at the request
of either party, by arbitration conducted in Los Angeles, California, or
such other location upon which the parties may mutually agree, before and
in accordance with the then existing Rules of the American Arbitration
Association ("AAA"), and judgment upon any award rendered by the arbitrator
may be entered by any State or Federal court having jurisdiction thereof.
Any controversy concerning whether a dispute is an arbitrable dispute shall
be determined by the arbitrator. The parties intend that this agreement to
arbitrate be valid, specifically enforceable and irrevocable. The
designation of a situs or specifically a governing law for this agreement
or the arbitration shall not be deemed an election to preclude application
of the Federal Arbitration Act, if it would be applicable.
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(2) The sole arbitrator shall be selected in accordance with the
procedures of the AAA.
(3) The arbitrator shall award to the prevailing party in any
arbitration proceeding commenced hereunder, and the court shall include in
its judgment for the prevailing party in any claim arising under this
Agreement or relating to the transactions contemplated hereby, the
prevailing party's costs and expenses (including expert witness expenses
and reasonable attorneys' fees) of investigating, preparing and presenting
such arbitration claim or cause of action.
(4) Any party hereto may request a court of competent jurisdiction to
grant provisional injunctive relief to such party solely for the purpose of
maintaining the status quo until an arbitrator can render an award on the
matter in question and such award can be confirmed by a court having
jurisdiction thereof.
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IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the date and year first written above.
EXECUTIVE
/s/ James M. Harris
--------------------------------------------------
James M. Harris
CALIFORNIA AMPLIFIER, INC.
By: /s/ Fred Sturm
---------------------------------------------
Fred Sturm
President and Chief Executive Officer
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EXHIBIT 10.4
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is entered into on the 19th
day of April 1999, by and between Robert Hicks, an individual ("Executive"), and
California Amplifier, Inc., a Delaware corporation (the "Company").
1. EMPLOYMENT BY THE COMPANY AND TERM.
(a) FULL TIME AND BEST EFFORTS. Subject to the terms set forth herein, the
Company agrees to employ Executive as Director, Satellite Sales, and in such
other capacities as may be requested from time to time by the Board of Directors
of the Company (the "Board") or a duly authorized committee thereof, and
Executive hereby accepts such employment. Executive shall render such other
services for the Company and corporations controlled by, under common control
with or controlling, directly or indirectly, the Company, and to successor
entities and assignees of the Company as the Company may from time to time
reasonably request and as shall be consistent with the duties Executive is to
perform for the Company and with Executive's stature and experience. During the
term of his employment with the Company, Executive will devote his full time and
attention exclusively to, and use his best efforts to advance, the business and
welfare of the Company. Executive shall render such services primarily in the
Dallas, Texas area.
(b) DUTIES. Executive shall serve in an executive capacity and shall
perform such duties as are customarily associated with his title of Director,
Satellite Sales, as required by the Board.
(c) COMPANY POLICIES. The employment relationship between the parties shall
be governed by the general employment policies and practices of the Company,
including but not limited to those relating to protection of confidential
information, except that when the terms of this Agreement differ from or are in
conflict with the Company's general employment policies or practices, this
Agreement shall control.
(d) TERM. The term of employment of Executive under this Agreement (the
"Term") shall be one (1) year commencing on April 19, 1999, unless earlier
terminated; PROVIDED, HOWEVER, that the Term may be renewed on terms and
conditions mutually agreeable to both parties. The Company shall not have any
express or implied obligation under any circumstances to extend Executive's
employment beyond the end of the Term.
2. COMPENSATION AND BENEFITS.
(a) SALARY. During the first four months of the Term, Executive shall
receive for services to be rendered hereunder a salary at the rate of Nine
Thousand Dollars ($9,000) per month payable at least as frequently as monthly
and subject to payroll deductions as may be
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necessary or customary in respect of the Company's salaried employees (the "Base
Salary"). After the first four months of the Term, the Base Salary shall be
reduced to Four Thousand Dollars ($4,000) per month.
(b) BONUSES. Executive's eligibility to receive bonuses during the Term,
and the amount of any such bonuses, shall be determined in the sole and absolute
discretion of the Board or a duly authorized committee thereof.
(c) COMMISSIONS. After the first four months of the Term, Executive shall
receive commission payments on a quarterly basis equal to one-half of one
percent (0.5%) ("Commissions) of the Company's revenues from sales occurring
during the remainder of the Term of United States Direct Broadcasting System
products purchased or developed by Gardiner Communications Corp., a Delaware
corporation (the "Products"). Upon the expiration of this Agreement, as renewed
if applicable (the "Expiration"), the Company shall pay Executive Commissions
for any shipments of the Products arranged for by Executive and made within
ninety (90) days after the Expiration, payable in cash not later than one
hundred twenty (120) days following the Expiration (subject to applicable
withholding).
(d) PARTICIPATION IN BENEFIT PLANS. During the Term, Executive shall be
entitled to participate, on the same terms and conditions generally applicable
to members of senior management of the Company, in any group insurance,
hospitalization, medical, dental, health and accident, disability, pension or
similar plan or program of the Company now existing or established hereafter to
the extent that he is eligible under the general provisions thereof. The Company
may, in its sole discretion and from time to time, establish additional or
eliminate or modify existing benefit programs as it deems appropriate.
3. REASONABLE BUSINESS EXPENSES AND SUPPORT. Executive shall be reimbursed
for documented and reasonable business expenses in connection with the
performance of his duties hereunder within the limits of the annual budget for
such expenses approved by the Board. Executive shall be furnished reasonable
office space, assistance and facilities in the Dallas, Texas area.
4. TERMINATION OF EMPLOYMENT. The date on which Executive's employment by
the Company ceases, under any of the following circumstances, shall be defined
herein as the "Termination Date."
(a) TERMINATION FOR CAUSE.
(i) TERMINATION; PAYMENT OF ACCRUED SALARY. The Board may
terminate Executive's employment with the Company at any time for cause,
immediately upon notice to Executive of the circumstances leading to such
termination for cause or, in the event that paragraph (ii) below provides for a
cure period, upon notice and the expiration of such cure period. In the event
that Executive's employment is terminated for cause, Executive shall receive
payment for all accrued salary and accrued Commissions through the Termination
Date, which in this event shall be the date upon which notice of termination is
given. The Company
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shall have no further obligation to pay severance of any kind nor to make any
payment in lieu of notice.
(ii) DEFINITION OF CAUSE. "CAUSE" means the occurrence or
existence of any of the following with respect to Executive, as determined by a
majority of the disinterested directors of the Board:
(A) Executive's conviction by, or entry of a plea of guilty
or nolo contendere in, a court of competent and final jurisdiction for
any crime involving moral turpitude or any felony punishable by
imprisonment in the jurisdiction involved;
(B) Executive's commission of an act of fraud upon the
Company, whether prior to or subsequent to the date hereof;
(C) Executive's failure or refusal to perform his duties as
reasonably required by this Agreement, provided that termination of
Executive's employment pursuant to this subparagraph (C) shall not
constitute valid termination for cause unless Executive shall have
first received written notice from the Company stating with
specificity the nature of such failure or refusal and affording
Executive at least five (5) days to correct the act or omission
complained of;
(D) gross negligence, insubordination, material violation by
Executive of any duty of loyalty to the Company, or any other material
misconduct on the part of Executive, provided that termination of
Executive's employment pursuant to this subparagraph (D) shall not
constitute valid termination for cause unless Executive shall have
first received written notice from the Company stating with
specificity the nature of such failure or refusal and affording
Executive at least five (5) days to correct the act or omission
complained of;
(E) the repeated non-prescription use of any controlled
substance, or the repeated use of alcohol or any other non-controlled
substance which in the Board's reasonable determination renders
Executive unfit to serve in his capacity as an officer or employee of
the Company;
(F) Executive's failure to report to work for any
consecutive five-day period, other than for excused absences or
reasonable medical or personal reasons;
(G) sexual harassment by Executive that has been reasonably
substantiated and investigated;
(H) Executive's physical destruction of substantial property
or assets of the Company; or
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(I) Executive's death.
(b) TERMINATION UPON DISABILITY. The Company may terminate Executive's
employment in the event Executive suffers a disability that renders Executive
unable to perform the essential functions of his position, even with reasonable
accommodation, for three (3) months within any six (6) month period. After the
Termination Date, which in this event shall be the date upon which notice of
termination is given, no further compensation will be payable under this
Agreement.
(c) TERMINATION WITHOUT CAUSE; SEVERANCE PAYMENTS. In the event that during
the Term, Executive's employment is terminated by the Company other than
pursuant to paragraph 4(a) or 4(b), then the Company shall pay Executive as
severance (i) an amount (the "Severance Payment") equal to the greater of (A)
one-half of Executive's Base Salary for the remainder of the Term or (B) two
months of Executive's Base Salary, in either case payable in cash in a lump sum
not later than thirty (30) days following the Termination Date (subject to
applicable withholding) and (ii) Commissions for any shipments of the Products
arranged for by Executive and made within ninety (90) days after the Termination
Date, payable in cash not later than one hundred twenty (120) days following the
Termination Date (subject to applicable withholding).
(d) BENEFITS UPON TERMINATION. In the event that during the Term
Executive's employment is terminated by the Company other than pursuant to
paragraph 4(a) or 4(b), all benefits provided under paragraph 2(d) hereof shall
be extended, at Executive's election and at the same cost to Executive as when
employed, to the extent permitted by the Company's insurance policies and
benefit plans, for a period following Executive's Termination Date equal to the
remainder of the Term, except as required by law (e.g., COBRA health insurance
continuation election). In the event that during the Term Executive's employment
is terminated (1) by the Company pursuant to paragraph 4(a) or 4(b) or (2)
otherwise, such benefits shall not be extended under any circumstances, except
(x) as required by law (e.g., COBRA health insurance continuation election) and
(y) if Executive is terminated pursuant to paragraph 4(a)(ii)(I), in which case
the Company shall continue coverage of Executive's dependents, if any, under all
benefit plans or programs of the type listed in paragraph 2(c) for a period of
three (3) months.
5. PROPRIETARY INFORMATION OBLIGATIONS. During the Term, Executive will
have access to and become acquainted with the Company's confidential and
proprietary information, including but not limited to information or plans
regarding the Company's personnel, or sales, marketing, and financial operations
and methods; relationships with its customers, subcontractors, suppliers and
redevelopment agencies and other governmental agencies (the "Relationships");
trade secrets; formulas; devices; secret inventions; processes; and other
compilations of information, records, and specifications (collectively, the
"Proprietary Information"). Executive shall not (a) disclose any of the
Proprietary Information directly or indirectly, or use it in any way, either
during the Term or at any time thereafter, except as required in the course of
his employment for the Company or as authorized in writing by the Company, or
(b) intentionally jeopardize or abuse the Relationships to the detriment of the
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Company. All files, records, documents, computer-recorded information, drawings,
specifications, equipment and similar items relating to the business of the
Company, whether prepared by Executive or otherwise coming into his possession,
shall remain the exclusive property of the Company and shall not be removed from
the premises of the Company under any circumstances whatsoever without the prior
written consent of the Company, except when (and only for the period) necessary
to carry out Executive's duties hereunder, and if removed shall be immediately
returned to the Company upon any termination of his employment and no copies
thereof shall be kept by Executive.
6. NONINTERFERENCE. While employed by the Company and until one (1) year
from the expiration of the Term or the termination of this Agreement by the
Company, as the case may be, Executive agrees not to interfere with the business
of the Company by directly or indirectly soliciting, attempting to solicit,
inducing or otherwise causing any employee of the Company to terminate his or
her employment in order to become an employee, consultant or independent
contractor to or for any other employer.
7. NON-COMPETITION. Executive agrees that during the Term, he will not,
without the prior written consent of the Company, directly or indirectly,
possess an interest in, be employed by, or be connected with, as an employee,
consultant, officer, director, partner, member, stockholder or joint venturer,
any person or entity owning, managing, controlling, operating or otherwise
participating or assisting in any business which is similar to or in competition
with the business of the Company in any location; PROVIDED, HOWEVER, that the
foregoing shall not prevent Executive from being a stockholder of less than one
percent (1%) of the issued and outstanding securities of any class of a
corporation listed on a national securities exchange or designated as national
market system securities on an interdealer quotation system by the National
Association of Securities Dealers, Inc.
8. MISCELLANEOUS.
(a) NOTICES. Any notices provided hereunder must be in writing and
shall be deemed effective upon the earlier of personal delivery (including
personal delivery by telecopy or telex) or the third day after mailing by first
class mail to the recipient at the address indicated below:
To the Company:
California Amplifier, Inc.
460 Calle San Pablo
Camarillo, California 93012
Attention: Fred Sturm
Telephone: (805) 987-9000
Facsimile: (805) 987-2655
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To Executive:
Robert Hicks
3505 Security Street
Garland, Texas 75042
Telephone: (214) 348-4747
Facsimile: (214) 341-1933
or to such other address or to the attention of such other person as the
recipient party will have specified by prior written notice to the sending
party.
(b) SEVERABILITY. Any provision of this Agreement which is deemed invalid,
illegal or unenforceable in any jurisdiction shall, as to that jurisdiction and
subject to this paragraph be ineffective to the extent of such invalidity,
illegality or unenforceability, without affecting in any way the remaining
provisions hereof in such jurisdiction or rendering that or any other provisions
of this Agreement invalid, illegal, or unenforceable in any other jurisdiction.
If any covenant should be deemed invalid, illegal or unenforceable because its
scope is considered excessive, such covenant shall be modified so that the scope
of the covenant is reduced only to the minimum extent necessary to render the
modified covenant valid, legal and enforceable.
(c) ENTIRE AGREEMENT. This Agreement by and between Executive and the
Company constitute the final, complete, and exclusive embodiment of the entire
agreement and understanding between the parties related to the subject matter
hereof and supersede and preempt any prior or contemporaneous understandings,
agreements or representations by or between the parties, written or oral.
(d) COUNTERPARTS. This Agreement may be executed by the parties in separate
counterparts and the signatures delivered by telecopy, each of which when so
executed and delivered shall be an original with the same effect as if the
signatures thereto and hereto were upon the same instrument and delivered in
person. This Agreement shall become effective when each party hereto shall have
received a counterpart hereof signed by the other parties hereto.
(e) SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and inure to
the benefit of and be enforceable by Executive and the Company, and their
respective successors and assigns, except that Executive may not assign any of
his duties hereunder and he may not assign any of his rights hereunder without
the prior written consent of the Company.
(f) ATTORNEYS' FEES. If any legal proceeding is necessary to enforce or
interpret the terms of this Agreement, or to recover damages for breach
therefore, the prevailing party shall be entitled to reasonable attorneys' fees,
as well as costs and disbursements, in addition to any other relief to which he
or it may be entitled.
(g) AMENDMENTS. No amendments or other modifications to this Agreement may
be made except by a writing signed by both parties. No amendment or waiver of
this Agreement requires the consent of any individual, partnership, corporation
or other entity not a party to this
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Agreement. Nothing in this Agreement, express or implied, is intended to confer
upon any third person any rights or remedies under or by reason of this
Agreement.
(h) CHOICE OF LAW. All questions concerning the construction, validity and
interpretation of this Agreement will be governed by the internal law, and not
the law of conflicts, of the State of California.
(i) ARBITRATION.
(1) Except as provided in subparagraph (4) hereof, any
controversy, dispute or claim arising out of, in connection with, or
in relation to the interpretation, performance or breach of this
Agreement, including any claim based on contract, tort or statute,
shall be settled, at the request of either party, by arbitration
conducted in Los Angeles, California, or such other location upon
which the parties may mutually agree, before and in accordance with
the then existing Rules of the American Arbitration Association
("AAA"), and judgment upon any award rendered by the arbitrator may be
entered by any State or Federal court having jurisdiction thereof. Any
controversy concerning whether a dispute is an arbitrable dispute
shall be determined by the arbitrator. The parties intend that this
agreement to arbitrate be valid, specifically enforceable and
irrevocable. The designation of a situs or specifically a governing
law for this agreement or the arbitration shall not be deemed an
election to preclude application of the Federal Arbitration Act, if it
would be applicable.
(2) The sole arbitrator shall be selected in accordance with
the procedures of the AAA.
(3) The arbitrator shall award to the prevailing party in
any arbitration proceeding commenced hereunder, and the court shall
include in its judgment for the prevailing party in any claim arising
under this Agreement or relating to the transactions contemplated
hereby, the prevailing party's costs and expenses (including expert
witness expenses and reasonable attorneys' fees) of investigating,
preparing and presenting such arbitration claim or cause of action.
(4) Any party hereto may request a court of competent
jurisdiction to grant provisional injunctive relief to such party
solely for the purpose of maintaining the status quo until an
arbitrator can render an award on the matter in question and such
award can be confirmed by a court having jurisdiction thereof.
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IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the date and year first written above.
EXECUTIVE
/s/ Robert Hicks
--------------------------------------------------
Robert Hicks
CALIFORNIA AMPLIFIER, INC.
By: /s/ Fred Sturm
---------------------------------------------
Fred Sturm
President and Chief Executive Officer
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EXHIBIT 99.1
FOR: CALIFORNIA AMPLIFIER, INC.
APPROVED BY: Fred Sturm, Chief Executive Officer
CONTACTS: Fred Sturm, Chief Executive Officer
Michael Ferron, Chief Financial Officer
(805) 987-9000
Morgen-Walke Associates
Chris Danne, Jennifer Jarman
(415) 296-7383
Patricia Walsh / Mark Owen
(212) 850-5600/(212) 850-5698
FOR IMMEDIATE RELEASE
CALIFORNIA AMPLIFIER PURCHASES SATELLITE PRODUCT LINES
FROM GARDINER COMMUNICATIONS CORP.
ACQUISITION ALLOWS IMMEDIATE ENTRY INTO U.S. DBS MARKET
CAMARILLO, CA/APRIL 20, 1999 --- California Amplifier, Inc. (Nasdaq: CAMP)
announced that it has acquired the technology and product rights to
substantially all of Gardiner Communications Corp.'s products. Gardiner designs,
manufactures, and markets satellite television downconverters, including
Ku-band, Single/Dual output, United States Direct Broadcast Satellite (DBS)
products, a Ku-band universal for European markets, and a C-Band for Asian
markets. In addition, the Company purchased manufacturing and development
related equipment and inventory from Gardiner to support these product lines.
The total purchase price, including related costs, is approximately $9.1
million, of which $3.5 million relates to the acquisition of product and
technology rights
Gardiner, a privately held company headquartered in Garland, Texas sells
DBS products to, among others, Echostar Communications (Nasdaq: DISH), Thomson
Consumer Electronics, and Hughes Network Systems (NYSE: GMH) and had worldwide
sales of approximately $21.0 million and operating income of approximately
$800,000 for the year ended December 31, 1998. These results are
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unaudited. California Amplifier expects the acquisition to contribute slightly
to its consolidated operating results in the current quarter ending May 29,
1999.
Under the arrangement, the companies have agreed that Gardiner will
continue to manufacture U.S. DBS products in its Texas manufacturing facility,
under a sub-contract arrangement. California Amplifier will hire certain
Gardiner employees to coordinate the manufacturing efforts on current DBS
products and to develop future DBS products for the United States and Europe.
Fred Sturm, Chief Executive Officer of California Amplifier, commenting on
the acquisition stated, "We are very pleased that we were able to acquire
Gardiner's satellite television product lines. This acquisition provides
California Amplifier an immediate and significant entry into the mainstream
United States and European Direct Broadcast Satellite markets, which are
integral to our strategic plan for our Satellite business unit. We believe
California Amplifier and Gardiner are combining their individual strengths to
better serve our customer product and volume requirements in a rapidly growing
worldwide satellite television market."
Mr. Sturm continued, "This acquisition, which strengthens our position in
the satellite television market, does not change our commitment to wireless
video, voice and data markets where we believe there are significant
opportunities, particularly in telephony and high speed Internet access. In
fact, this arrangement should benefit us in both markets as we more effectively
utilize and leverage our manufacturing and design infrastructure."
The Company will pay $6.0 million in cash and Gardiner stockholders will
receive a $3.1 million 8% one year note payable, of which approximately $2.2
million can be converted into 525,000 shares of the Company's common stock at
$4.25 per share on April 19, 2000. The $4.25 per share conversion price is
approximately 150% of the average closing price for the twenty-day trading
period prior to the acquisition. However, if the average closing price of the
Company's common stock for the immediate twenty trading days prior to April 19,
2000 is less than $4.25 per share, Gardiner stockholders can elect to extend the
note for at least an additional six months, but not more than one year, with the
right to convert a portion of the debt into 525,000 shares of the Company's
common stock
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at a lower per share conversion price equal to the average closing price for the
twenty day trading period prior to April 19, 2000.
In conjunction with the acquisition the Company has obtained a $6.0 million
credit facility from a bank.
Mr. Sturm commented, "The combination of seller financing and the
availability of funds under the bank arrangement allows us to make this
acquisition and maintain the cash liquidity position we have worked hard to
achieve over the last year."
The statements discussed in this press release with respect to sales,
operating results, markets, and new products may be forward looking statements
that involve risk and uncertainties, including without limitation, product
demand, competitive products, market acceptance of new product introductions,
and other risks and uncertainties that are detailed from time to time in the
Company's SEC reports, including Quarterly Reports on Form 10-Q and Annual
Reports of Form 10-K. Copies of the Company's most recent Form10-Q and Form 10-K
can be obtained from the Company on request.
California Amplifier, an ISO 9001 certified company, designs and
manufactures a broad line of amplifiers, downconverters, antennas, and
integrated products for the reception of microwave signals used primarily in
conjunction with broadband communications worldwide. The Company's Satellite
business unit produces reception components for worldwide DBS/DTH transmissions
as well as consumer and commercial grade products for both C and Ku band
applications. The Wireless business unit provides reception solutions for the
Wireless Cable (MMDS) industry and markets MultiCipher-Registered Trademark-, a
proprietary broadband encryption technology for conditional access of
multichannel television systems. The Voice & Data business unit produces two-way
wireless solutions for innovative voice, video, telephony, interactive, and
networking applications. Micro Pulse, a consolidated subsidiary with 50.5%
ownership investment, designs and manufactures components for a broad range of
antennas, primarily for GPS and wireless applications.
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