-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PIdSdcJ9V/OAVHVM+q3ykGRmKvtTrJGaP+729xWwhpWA8CnmMIhh7fWUhPZl+AQE qzryphSeNniZmSeHfDZ5TA== 0000912057-96-011148.txt : 19960531 0000912057-96-011148.hdr.sgml : 19960531 ACCESSION NUMBER: 0000912057-96-011148 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19960302 FILED AS OF DATE: 19960530 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CALIFORNIA AMPLIFIER INC CENTRAL INDEX KEY: 0000730255 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 953647070 STATE OF INCORPORATION: DE FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-12182 FILM NUMBER: 96574718 BUSINESS ADDRESS: STREET 1: 460 CALLE SAN PABLO CITY: CAMARILLO STATE: CA ZIP: 93012 BUSINESS PHONE: 8059879000 MAIL ADDRESS: STREET 1: 460 CALLE SAN PABLO CITY: CAMARILLO STATE: CA ZIP: 93012 10-K405 1 FORM 10-K405 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934 (FEE REQUIRED) FOR THE FISCAL YEAR ENDED MARCH 2, 1996 COMMISSION FILE NUMBER 0-12182 CALIFORNIA AMPLIFIER, INC. (Exact name of Registrant as specified in its Charter) DELAWARE 95-3647070 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 460 CALLE SAN PABLO, CAMARILLO, CALIFORNIA 93012 (Address of principal executive offices) (Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (805) 987-9000 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: Title of each class Name of each exchange - ------------------- --------------------- None None SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: $.01 PAR VALUE COMMON STOCK (Title of Class) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. /X/ The aggregate market value of the voting stock of the Registrant held by non-affiliates of the Registrant as of May 24, 1996 was approximately $430.0 million. There were 11,564,384 shares of the Registrant's Common Stock outstanding as of May 24, 1996. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's definitive Proxy Statement for the Annual Meeting of Stockholders to be held on July 19, 1996 is incorporated by reference into Part III, Items 10, 11, 12 and 13 of this Form 10-K. This Proxy Statement will be filed within 120 days after the end of the fiscal year covered by this report. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART I ITEM 1. BUSINESS THE COMPANY California Amplifier, Inc. (the "Company") was incorporated in 1981. Since its inception, the Company has been involved in the design, manufacture and marketing of microwave components and subsystems for defense, commercial and consumer applications. In 1989, the Company discontinued its involvement in defense related products and began to focus its resources on consumer and commercial applications for products used in conjunction with the delivery of multichannel television. The Company currently operates in two product segments: Wireless Cable and Satellite Television products. WIRELESS CABLE TELEVISION Wireless Cable television uses well established technologies in many ways similar to coaxial cable multichannel television transmission. The key difference is that Wireless Cable does not have cable connecting the headend/transmission site to each home but uses a microwave frequency band to transmit programming to subscribers. A wireless system is composed of a headend/transmission site, a transmission tower, and at each subscriber's home, a reception antenna, downconverter and a decoder or set-top converter. The headend equipment receives programming from satellites and other programming sources such as local UHF television stations and sends them to a transmission tower for transmission to subscribers via microwave signals. The signal can generally be received by subscribers within a 25-35 mile radius of the transmission tower depending on the transmitter power; however, the subscriber must have a direct line-of-sight or "view" between the tower and the receive antenna. Typically, 65%-80% of the homes within the service area will be able to receive the wireless signal, with the remainder shadowed from the transmitter. The percentage of line-of-sight homes is affected by the tower elevation, local topography and antenna height. The history of Wireless Cable in the United States and traditional hardwire cable are intertwined. Wireless Cable was initially used to provide educational or premium video programming in cities where cable was not available. In 1974, the Federal Communications Commission (FCC) authorized the use of spectrum in the 2150-2162 MHz frequency range for transmission of two video signals in the 50 largest markets. In 1983, the 2500-2686 MHz frequency range was reallocated and commercial Wireless Cable was given eight of the 31 resulting channels. At the same time, however, various FCC regulations made it very difficult to aggregate channels with the 2500-2686 MHz bandwidth, thereby limiting the number of channels Wireless Cable operators were able to offer. In addition, because subscriber numbers were low at most Wireless Cable operations, program networks, often owned by cable operators, charged higher programming fees to Wireless operators or simply refused to provide programming. These factors, accompanied by the fact that most Wireless Cable operators had limited capital, made it difficult for Wireless Cable to be a viable delivery alternative to hardwire cable In the late 1980's and early 1990's, as public dissatisfaction with cable's monopoly status grew, the FCC and Congress gave further attention to ways in which they could foster competition. In 1990 and 1991, the FCC made a series of rulings which made it easier for the Wireless Cable operators to consolidate channel frequency licenses, thereby increasing the channel capacity to 33 channels. In addition, the Cable Television Consumer Protection and Competition Act of 1992 was passed into law on October 5, 1992. Industry experts believe this legislation was the single biggest boost for the Wireless Cable industry. It essentially requires that programmers must make their service available to all at fair and reasonable prices, and that cable operators cannot price its services differently in various areas of the system. This prevents larger cable companies from pricing differently in regional areas where Wireless Cable is attracting customers. In February 1996, Congress passed the 1996 Telecommunications Act which the Company expects also should significantly benefit the Wireless Cable industry generally. One key provision of the legislation was in removing cross-ownership restrictions for telecommunications companies, allowing them to directly compete in the video distribution market, and vice versa for cable companies to provide voice and data communication services. This legislative development allows the telecommunications companies, such as Bell Atlantic, NYNEX, and Pacific 2 Telesis, to use Wireless Cable technology as a deployment tool in delivering digital video programming to selected major markets. Additionally, Section 303 of the 1996 Telecommunications Act has authorized the FCC to issue a Notice of Proposed Rule Making (NPRM), calling for the preemption of state, local, and non-governmental restrictions (such as homeowners associations) on DBS satellite antennas, and Wireless Cable antennas under one meter in diameter, except in reasonable cases involving public safety or historical heritage. This provision is intended to foster full and fair competition among different types of video programming services. If enacted, the NPRM would expand the marketability of Wireless Cable service to households which were subject to zoning codes, covenants, and homeowners association restrictions. No assurances can be made, however, as to whether the FCC will issue such a rule. In the United States there are over 100 million television households of which approximately 60% receive its programming from cable companies. Currently there are approximately 200 Wireless Cable operations in the United States, serving approximately 900,000 subscribers, with line of sight access to approximately 30 million television households. Industry analysts estimate that a fully-financed wireless system could reach penetration levels of 12%-25% of line-of-sight homes. These penetration levels could be accomplished because of various factors: additional capital availability to finance growth, inherent cost advantages of Wireless Cable when compared to cable, the adoption of digital compression which would eliminate constraints with respect to channel capacity. In recent years Wireless Cable operators have been very successful in raising capital to expand and consolidate systems. This is evidenced by capital infusions from public equity markets and, most recently, by larger business entities, such as Bell Atlantic, NYNEX, and Pacific Telesis, entering into strategic investment alliances with Wireless Cable operators. These entities have formed a programming and equipment consortium, TeleTV, which has announced its intention to deploy digital Wireless Cable systems in certain geographical areas of the United States in late 1996 or early 1997. This has focused significant interest on Wireless Cable and the possibilities of future growth for this industry. Going forward, the key issues for Wireless Cable to be successful in the United States will be the ability of Wireless Cable operators throughout the United States to deliver comparable video services to a broad base of consumers at competitive rates. Internationally, the Wireless Cable industry has experienced significant growth in response to increasing worldwide demand for multichannel television and the increased availability of a variety of programming such as HBO, CNN, MTV, ESPN and Disney. The Company believes that Wireless Cable technology, in many instances, is better suited than traditional cable in providing multichannel television to the consumer, especially in less developed countries and in areas that are not densely populated. The lack of a need for a cable network allows Wireless Cable operators to commence broadcasting more quickly and with less of an initial investment than for traditional cable, and to quickly expand throughout a service area. To date, Wireless Cable systems have been launched throughout Latin America, including major systems in Mexico, Venezuela, Brazil, Argentina, Uruguay and Chile, as well as other countries such as Qatar, Thailand, Malaysia, Nigeria, Australia, Czech Republic and Ireland. Similar launches in these countries, and other geographical areas, are expected to continue as programming is made available to these areas. Because the international markets are not dominated by a single method of delivery, as cable is in the United States, the potential for Wireless Cable as a programming delivery method internationally, is significant. SATELLITE TELEVISION Satellite dishes are used for the reception of video, audio and data transmitted from orbiting satellites. The Company's products are used both in commercial satellite dish applications and home satellite dishes. The Company's Satellite Television product sales, however, are primarily generated from sales of downconverters, amplifiers and integrated feedhorns and amplifiers used in home satellite dish applications. The satellite dish is a parabolic reflector antenna. Microwaves are transmitted from orbiting satellites toward the earth's surface. The dish reflects the microwaves back to a focal point where a feedhorn collects the microwaves transferring the frequencies into a amplifier/downconverter. The microwave amplifier literally amplifies the microwave signal millions of times for further processing. The downconverter changes the frequency into an intermediate frequency so that the receiver and television can process the signal and create a picture. 3 The home satellite industry has undergone substantial changes over the past several years. During the early 1980's, home satellite systems in the United States were capable of receiving a wide variety of television broadcast signals, including those delivered to pay television and cable television operators, without charge since the transmission signals were not scrambled. In 1986, certain broadcasters began to scramble their signal, and today virtually all premium programmers in the U.S. scramble their programming. To view scrambled programs, the viewer is required to purchase a decoder and pay a periodic fee to the programmer or program reseller. Initially, scrambling caused a significant decline in the number of ongoing home satellite dish installations in the United States. However, during the past few years the U.S. consumer dish market has begun to regain momentum because of lower cost equipment and the availability of a variety of programming. According to Satellite Broadcasting and Communications Association statistics, approximately 300,000, 550,000, and 375,000 C-Band "backyard" satellite systems, excluding the Ku-DBS small dish systems discussed below, were shipped in the United States in 1995, 1994, and 1993, respectively, with a current installed base of over 4.0 million households. In 1994, the Direct Broadcast System (DBS) was introduced in the United States. The DBS system uses high powered satellites and digital Ku-Band to transmit programming to subscribers. As a result of the satellite transmission power and the Ku frequency, the satellite dish requirement is only about eighteen inches in diameter. This compares to C-Band dishes, which make up the majority of the current installations in the United States, that range from five to twelve feet in diameter. The Ku-DBS system has been very well accepted since its introduction and installations total almost 2.0 million television households. A small dish with the capability of receiving a significant number of channels, primarily because the DBS satellite transmits digital signals at high power levels, offers a consumer an alternative to the big, C-Band backyard dish. As a result, C-Band installations since the DBS launch have been negatively affected. This trend is likely to continue in the United States even though a movable C-Band dish offers a consumer a much broader variety of programming from a number of different satellites. The international market for Satellite Television has taken place primarily in Europe, the Middle East, Asia and Latin America where cable penetration is substantially less than in the United States. The Company believes the international market for Satellite Television, which has an installed base of over 20 million dishes, will continue to grow in response to increased worldwide demand for television spurred, in part, by an increase in the availability and variety of programming. Certain United States cable television networks such as CNN, MTV and ESPN have expanded their programming coverage internationally. The availability of highly desirable programming such as HBO, CNN, MTV, ESPN and Disney has led to the growth of the various methods of multichannel television delivery in the many international markets. As previously stated, both C-Band and Ku-Band dishes will be used by consumers depending upon how the programmers choose to transmit such signals. Both Ku-Band and C-Band satellite launches are scheduled over the next several years. Because DBS, Ku-Band products are becoming a more significant market, the Company is focusing some of its research and development resources on the development of Ku-DBS products to sustain its position in the Satellite Television market. INVESTMENT IN MICRO PULSE, INC. In January 1993, the Company purchased a 50% ownership interest in Micro Pulse, Inc. ("Micro Pulse") for $100,000 in cash and a $400,000 convertible note payable. In April 1995, the note was converted into 100,000 shares of the Company's common stock. Micro Pulse designs, manufactures and markets antennas and amplifiers used principally in global positioning systems ("GPS"). Such products are used in surveying applications, vehicle tracking and marine and airborne navigation. See Note 1 and Note 4 of Notes to Consolidated Financial Statements. PRODUCTS The Company designs a broad line of amplifiers, downconverters, antennas and integrated products used in the reception, conversion and amplification of microwave signals used in conjunction with the reception of audio, video and data transmitted from satellites or earth-based transmitters using microwave signals. Products serve both the Wireless Cable (S-Band) industry and the Satellite Television industry (C-Band and Ku-Band). In 4 addition, the Company has recently introduced a broadband scrambling system called MultiCipher-Registered Trademark-, to be used by Wireless Cable operators to protect its signals from unauthorized viewing. Because MultiCipher is a broadband scrambling system, it decodes all channels transmitted simultaneously. This allows a "whole-house" solution for the Wireless Cable operator and eliminates the requirement of installing a conventional set-top box on each television in the subscribers home. The Company most recently has introduced MultiCipher Plus-TM-, a broadband, whole-house scrambling system with the additional feature of tiering. Tiering allows the operator to offer premium or pay per view programming to individual subscribers, a feature MultiCipher basic did not have. In addition, the Company's MultiCipher decoder units will be available in outdoor units as well as indoor units. During fiscal years 1996, 1995 and 1994, Wireless Cable products contributed 70.0%, 45.9% and 32.8% of the Company's sales, respectively, and Satellite Television products contributed 29.3%, 53.4% and 66.9% of the Company's sales. For certain information regarding the Company's sales by product line and geographical areas, see Note 11 of Notes to Consolidated Financial Statements. MANUFACTURING The Company manufactures its products exclusively in its Camarillo, California, USA, facility. Manufacturing operations consist principally of assembling, microwave tuning and testing of electronic components built from fabricated parts, printed circuit boards and electronic devices. The Company is currently evaluating other manufacturing operations in other countries. Electronic devices, components and raw materials used in the Company's products are generally obtained from a number of suppliers, although certain materials are obtained from a limited number of sources. Some devices or components are standard items while others are manufactured to the Company's specifications by its suppliers. The Company attempts to operate without substantial levels of raw materials by depending on certain key suppliers to provide material on a "just-in-time" basis. The Company believes that most raw materials are available from alternative suppliers. However, any significant interruption in the delivery of such items could have an adverse effect on the Company's operations. ISO 9001 INTERNATIONAL CERTIFICATION In August 1995, the Company became registered to ISO 9001, the international standard for conformance to quality excellence in meeting market needs in all areas including product design, manufacturing, quality assurance and marketing. The registration assessment was performed by Underwriter's Laboratory, Inc., according to the ISO 9001:1994 International Standard. Continuous assessments to maintain certification will be performed semi-annually by Underwriter's Laboratory, Inc. RESEARCH AND DEVELOPMENT Both the Wireless Cable and Satellite Television markets are characterized by technological change, new product introductions and evolving industry standards resulting from ongoing research and development. During the last three years, the Company has focused its research and development resources on three primary areas: broadening it Wireless Cable reception product line, development of the MultiCipher "whole-house" broadband scrambling system, and the development of a Ku-DBS product line. In addition, resources were allocated to reducing product costs and improving performance by product redesign efforts. Research and development costs have increased significantly over the past three fiscal years consistent with this strategy. Research and development expenses were $4,376,000, $3,155,000 and $2,045,000 for fiscal years 1996, 1995 and 1994, respectively. SALES AND MARKETING The Company's sales and marketing functions are located in: Camarillo, California, U.S.A.; Paris, France; Sao Paulo, Brazil; and Bangkok, Thailand. The Company sells its Wireless Cable products directly to Wireless Cable operators, but will occasionally utilize a distributor for certain geographical regions. The Company sells its Satellite Television products through satellite equipment distributors, but, from time to time, sells certain products to manufacturers for incorporation into complete satellite dish systems. 5 The Company may, from time to time, add additional employees as market conditions warrant, in market areas that require additional sales and customer support not adequately served by a major distributor or reseller. See also Note 11 of Notes to Consolidated Financial Statements for major customer and geographical sales information. COMPETITION The markets in which the Company participates are highly competitive. In addition, if the markets for the Company's products continue to grow, the Company anticipates increased competition from new companies entering such markets, some of whom may have financial and technical resources substantially greater than those of the Company. Furthermore, because some of the Company's products may not be proprietary, they may be duplicated by low-cost producers, resulting in price and margin pressures. The Company believes that competition in its markets is based primarily on price, performance, reputation, product reliability and technical support. In the Wireless Cable market, the Company has supplier relationships with major Wireless Cable operators in various regions of the world, and believes that its pricing, accompanied by product performance, low field failure rate, and its technical support, are currently competitive advantages to the Company. In the Satellite Television market, where the Company has participated for over fifteen years, its reputation for performance and quality allows the Company a competitive advantage if pricing of its products is comparable to its competitors. The Company's continued success in these markets, however, will depend upon its ability to continue to design and manufacture quality products at competitive prices. BACKLOG The Company's products are sold to customers that do not usually enter into long-term purchase agreements, and as a result, the Company's backlog at any date is not significant. As the Company's sales shift from Satellite Television products to Wireless Cable products, however, the Company is emphasizing long- term arrangements with Wireless Operators to increase backlog and sales visibility. Because of customer order modifications, cancellations, or awaiting wire transfers or letters of credit from international customers, the Company's backlog as of any particular date, may not be indicative of sales for any future period. PATENTS, TRADEMARKS AND LICENSES The Company's timely application of its technology and its design, development and marketing capabilities have been of substantially greater importance to its business than patents or licenses. The Company currently has seven patents ranging from design features for downconverter and antenna products, to its MultiCipher broadband scrambling system. Those that relate to its downconverter products do not give the Company any significant advantage since other manufacturers using different design approaches can offer similar microwave products in the marketplace. The Company does believe, however, that certain Wireless Cable antenna patented designs, and the broadband scrambling patent for MultiCipher are significant and may result in a competitive advantage for the Company. The Company currently has four other patents pending. California Amplifier-Registered Trademark- and MultiCipher are federally registered trademarks of the Company. The Company has also filed for trademark protection for its MultiCipher Plus product line. EMPLOYEES At March 2, 1996, the Company had 441 employees. None of the Company's employees are represented by a labor union. 6 ITEM 2. PROPERTIES The Company's corporate headquarters and manufacturing facility is located in Camarillo, California (approximately 60 miles north of Los Angeles) and consists of approximately 64,000 square feet located on approximately four acres of land. The facility is leased under a lease agreement which expires in 2004. In addition, the Company leases approximately 11,000 square feet of space across from its existing facility which is used for storage. The Company also leases offices in Paris, France; Sao Paulo, Brazil; and Bangkok, Thailand. See also Note 10 to Consolidated Financial Statements. ITEM 3. LEGAL PROCEEDINGS The Company is currently not a defendant in any legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS During the three months ended March 2, 1996, no matters were submitted to a vote of the Company's security holders. 7 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS The Company's Common Stock is traded on the Nasdaq National Market ("NNM") under the trading symbol "CAMP." The following table sets forth for each fiscal period indicated the high and low closing sale prices for the Company's Common Stock, as reported by the NNM: HIGH LOW FISCAL YEAR ENDED MARCH 2, 1996: 1st Quarter 5-3/8 3-1/8 2nd Quarter 7-1/2 4-3/4 3rd Quarter 12-1/2 7-3/16 4th Quarter 24-3/16 12-1/8 FISCAL YEAR ENDED MARCH 4, 1995: 1st Quarter 3-1/2 1-9/16 2nd Quarter 2-5/8 1-5/8 3rd Quarter 3-1/2 2-1/8 4th Quarter 3-9/16 2-13/16 On March 22, 1996, the Company effected a two-for-one stock split. All per share amounts contained herein have been retroactively adjusted to reflect the stock split. At May 24, 1996 the number of stockholders of record of the Company's Common Stock was 305. The number of stockholders of record does not include the number of persons having beneficial ownership held in "street name" which are estimated to approximate 7,500. The Company has never paid a cash dividend and has no current plans to pay cash dividends on its Common Stock. 8 ITEM 6. SELECTED FINANCIAL DATA The following table sets forth certain selected financial data which has been derived from the audited financial statements of the Company for each of the respective years. The selected financial data should be read in conjunction with the consolidated financial statements and related notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations contained herein. CONSOLIDATED STATEMENTS OF INCOME DATA: (in thousands, except per share data) FISCAL YEARS ENDED - ------------------------------------------------------------------------ MAR 2, MAR 4, FEB 26, FEB 27, FEB 29, 1996 1995 1994 1993 1992 - ------------------------------------------------------------------------ Sales $61,590 $45,656 $40,664 $35,785 $20,634 Income before taxes 7,638 3,770 2,279 4,204 1,901 Net income 4,958 2,451 1,556 3,050 1,581 Net income per share .41 .22 .14 .30 .16 - ------------------------------------------------------------------------ CONSOLIDATED BALANCE SHEET DATA: (in thousands) AS OF EACH FISCAL YEAR END - ------------------------------------------------------------------------ 1996 1995 1994 1993 1992 - ------------------------------------------------------------------------ Total assets $32,573 $22,087 $19,599 $16,037 $9,064 Working capital 15,743 8,552 6,093 2,472 1,696 Long-term debt 767 782 773 400 134 Stockholders' equity 22,924 14,899 12,163 7,288 3,664 - ------------------------------------------------------------------------ 9 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, the percentage of sales represented by items included in the Company's Consolidated Statements of Income: FISCAL YEAR ENDED - --------------------------------------------------------------------------- MARCH 2, MARCH 4, FEBRUARY 26, 1996 1995 1994 - --------------------------------------------------------------------------- Sales: Wireless Cable 70.0% 45.9% 32.8% Satellite Television 29.3 53.4 66.9 Other .7 .7 .3 - --------------------------------------------------------------------------- Total sales 100.0 100.0 100.0 Gross profit 34.0 31.2 29.1 Research and development 7.1 6.9 5.0 Selling 8.1 8.1 8.9 General and administrative 6.6 7.9 8.6 - --------------------------------------------------------------------------- Income from operations 12.2 8.3 6.6 Interest and other, net - - (1.0) - --------------------------------------------------------------------------- Income before provision for income taxes 12.2 8.3 5.6 Provision for income taxes 4.3 2.9 1.8 - --------------------------------------------------------------------------- Net income 7.9% 5.4% 3.8% - --------------------------------------------------------------------------- FISCAL YEARS 1996 AND 1995 Sales increased by $15.9 million, or 34.8%, from $45.7 million in fiscal year 1995 to $61.6 million in fiscal year 1996. The fiscal year 1996 sales increase is primarily a result of increases in Wireless Cable sales offset by decreases in Satellite Television sales. Sales of Wireless Cable products increased $22.2 million, or 105.8%, from $21.0 million to $43.2 million, while sales of Satellite Television products decreased $6.3 million, or 25.9%, from $24.4 million to $18.1 million. Total domestic sales decreased $3.4 million, or 16.6%, from $20.6 million to $17.2 million, and foreign sales increased $19.3, or 77%, from $25.1 million to $44.4 million. The increase in Wireless Cable sales resulted from strong international demand for the Company's Wireless Cable reception products, and the introduction of the Company's broadband scrambling system, MultiCipher. Wireless Cable sales in the United States remained relatively flat with the sales of the prior year. This is a result of ordering patterns by domestic operators as they more closely monitor inventory levels to growth projections, increased competition, and the decision by some operators to limit their growth plans awaiting the availability of digital equipment. The decrease in Satellite Television product sales resulted from continued pressure domestically on C-Band satellite dish sales as the market shifts to the Ku-DBS alternative, and increased competition in Latin America for C-Band products. The Company has recently introduced a Ku-Band, DBS type downconverter and feedhorn. The Company believes this product, if accepted in the marketplace, should help offset some of the softness in the C-Band product line. Gross profits increased by $6.7 million, or 47.3%, from $14.2 million to $21.0 million. Gross margins increased from 31.2% to 34%. The increase in gross profit resulted from increased sales volumes of Wireless 10 Cable products, and an increase in gross margins over the prior year. In a focused effort to increase gross margins, the Company has emphasized the following: a sales shift from Satellite Television products to Wireless Cable products, lower cost designs, new product introductions and manufacturing process improvement and cost reduction programs. Research and development expenses increased by $1.2 million, from $3.2 million to $4.4 million. As a percentage of sales, research and development increased from 6.9% to 7.1%. The increases result from additional resources, primarily personnel and equipment, to focus on the design and development of: a broader line of Wireless Cable reception products, the MultiCipher "whole-house" scrambling system, and Ku-DBS products for Satellite Television. Selling expenses increased by $1.3 million, from $3.7 million to $5.0 million, but as a percentage of sales remained constant at 8.1%. Selling expenses increased due to increased sales to foreign markets, and the Company's focus on expanding its sales and marketing presence in these markets. General and administrative expenses increased by $494,000, from $3.6 million to $4.1 million, but decreased as a percentage of sales, from 7.9% to 6.6%. The increase in expenses resulted primarily from increased personnel in administration and information services, and increased incentive bonuses based upon fiscal year 1996 operating performance. Income from operations increased by $3.7 million, or 98.6%, from $3.8 million to $7.5 million. The principal reasons for the increase were increased sales and increased gross margins, offset by increases in operating expenses. The $100,000 loss attributable to non-consolidated subsidiary relates to the Company's 50% equity investment in Micro Pulse. The Company recognized $125,000 in income which represented 50% of Micro Pulse's fiscal year 1996 net income of $250,000, offset by $225,000 in amortization expense relating to the Company's initial investment in excess of 50% of Micro Pulse's net equity. The provision for income taxes increased by $1.4 million, from $1.3 million to $2.7 million. Income taxes as a percentage of income before taxes was 35% in fiscal years 1996 and 1995. The 35% rate is a result of taxes based upon a statutory rate offset by benefits relating to its foreign sales corporation and research and development tax credits. Net income increased $2.5 million, or 102%, from $2.5 million to $5.0 million. FISCAL YEARS 1995 AND 1994 Sales increased by $5.0 million, or 12.3%, from $40.7 million in fiscal year 1994 to $45.7 million in fiscal year 1995. The fiscal year 1995 sales increase was primarily a result of increases in Wireless Cable sales offset by decreases in Satellite Television sales. Sales of Wireless Cable products increased $7.7 million, or 57.1%, from $13.3 million to $21.0 million, while sales of Satellite Television products decreased $2.8 million, or 10.3%, from $27.2 million to $24.4 million. Total domestic sales increased $4.6 million, or 28.9%, from $16.0 million to $20.6 million, and foreign sales increased $400,000, or 1.6%, from $24.7 million to $25.1 million. The increase in Wireless Cable sales was a result of market growth in both the domestic and foreign markets, and the Company's successful penetration into these markets with a broader line of Wireless Cable products. The decrease in Satellite Television sales was a result of various factors: the Company's decision to offer its products in markets where customer requirements place an emphasis on performance and quality; softness in the Middle East markets; and the introduction of the Direct Broadcast Satellite (DBS) in the United States. Gross profits increased by $2.4 million, or 20.3%, from $11.8 million to $14.2 million. Gross margins increased from 29.1% to 31.2%. The increase in gross profit resulted from increased sales volumes and an increase in gross margins over the prior year. 11 Research and development expenses increased by $1.2 million, from $2.0 million to $3.2 million. As a percentage of sales, research and development increased from 5.0% to 6.9%. The increases resulted primarily from personnel additions, salary increases and increased depreciation expense on equipment additions. Selling expenses increased by $88,000, from $3.6 million to $3.7 million, but decreased as a percentage of sales, from 8.9% to 8.1%. Selling expenses remained relatively the same, in terms of dollars, from year-to-year primarily as a result of economies of scale achieved on sales increases to existing customers and additional customer concentration in certain geographical areas. General and administrative expenses increased by $90,000, from $3.5 million to $3.6 million, but decreased as a percentage of sales, from 8.6% to 7.9%. The dollar increase resulted primarily from increased incentive bonus awards based upon fiscal year 1995 operating performance, and additions to the allowance for doubtful accounts. Income from operations increased by $1.1 million, from $2.7 million to $3.8 million. The principal reasons for the increase were increased sales and increased gross margins offset by significant increases in operating expenses. The $50,000 loss attributable to non-consolidated subsidiary relates to the Company's 50% equity investment in Micro Pulse. The Company recognized $50,000 in income which represented 50% of Micro Pulse's fiscal year 1995 net income of $100,000, offset by $100,000 in amortization expense relating to the Company's initial investment in excess of 50% of Micro Pulse's net equity. The provision for income taxes increased by $596,000, from $723,000 to $1.3 million. Income taxes as a percentage of income before taxes was 35% in fiscal year 1995, compared to 31.7% in fiscal year 1994 when the Company utilized its remaining State of California loss carryforwards. The 35% rate is a result of taxes based upon a statutory rate offset by benefits relating to its foreign sales corporation and research and development tax credits. Net income increased $895,000, or 57.5%, from $1.6 million to $2.5 million. LIQUIDITY AND CAPITAL RESOURCES As of March 2, 1996 the Company had cash on hand of $11.6 million and working capital of $15.7 million. In addition, the Company has a $5.0 million working capital facility with California United Bank, a $2.0 million capital equipment facility with NationsBank and California Amplifier s.a.r.l., its foreign subsidiary, has an informal arrangement with a French Bank to borrow up to $600,000. As of March 2, 1996, no amounts were outstanding under any of these arrangements, except for approximately $1.8 million in term debt due to NationsBank, borrowed under prior capital equipment agreements. The $5.0 million credit facility with California United Bank expires on August 1, 1996, however, the Company has verbal assurances from the Bank that the agreement will be renewed for an additional year at similar or more favorable terms. The equipment facility with NationsBank expires in December 1996, at which time the Company will decide whether to renew such arrangement. The Company believes that cash flow from operations, together with the funds available under its credit facilities, are sufficient to support operations and capital equipment requirements over the next twelve months. The Company believes that inflation has not had a material effect on its operations. 12 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements and related financial information required to be filed hereunder are indexed on page 17 of this report and are incorporated herein by reference. ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS The directors and executive officers of the Company are as follows: NAME AGE POSITION ---------------------- --- ---------------------------------------------- Ira Coron 67 Chairman, Chief Executive Officer and Director David R. Nichols 37 Executive Vice President, Operations and Director Kris Kelkar 32 Senior Vice President, Sales and Marketing Michael R. Ferron 41 Vice President, Finance, Chief Financial Officer and Corporate Secretary Arthur H. Hausman (1) 72 Director William E. McKenna (1) 76 Director - ------------ (1) Member of Compensation Committee and Audit Committee. Ira Coron was elected Chairman and Chief Executive Officer in March 1994. From 1989 to 1994 he was an independent management consultant to several companies and venture capital firms. He retired from TRW, Inc., after serving in numerous senior management positions from June 1967 to July 1989 among which was Vice President and General Manager of TRW's Electronic Components Group. He also serves on the Board of Directors of the Wireless Cable Association and Made 2 Manage Systems, Inc. David R. Nichols, a co-founder of the Company, has been President and Chief Operating Officer since March 1989. In March 1995, Mr. Nichols' title was changed to Executive Vice President, Operations, to more accurately reflect his responsibilities. Kris Kelkar was appointed Senior Vice President of Sales and Marketing in April 1995. Since 1988 he held various positions with General Instrument Corporation, more recently he held the position of Vice President of International Marketing for General Instrument's Communications Division. Michael R. Ferron was appointed Vice President, Finance and Chief Financial Officer in October 1990 and Corporate Secretary in March 1991. Prior to October 1990, Mr. Ferron was employed by the accounting firms of Deloitte & Touche and Arthur Young & Company, respectively. Arthur H. Hausman has been a director of the Company since 1987. Mr. Hausman is Chairman Emeritus of the Board of Ampex Corporation. He served as Chairman of the Board of Directors and Chief Executive Officer of 13 Ampex, having been with Ampex for 27 years until his retirement in 1988. He currently serves as a director of Drexler Technology Corporation, California Microwave, Inc., and director emeritus of TCI, Inc. He was appointed by President Reagan to the President's Export Council, to the Council's Executive Committee and to the Chairmanship of the Export Administration Subordinate Committee of the Council for the period 1985 to 1989. William E. McKenna has been a director of the Company since October 1983. Mr. McKenna has been general partner of MCK Investment Company (a private investment company) since December 1977. He is also a director of LDB Corporation, Calprop Corporation, Drexler Technology Corporation, Midlantic Corporation, Midlantic National Bank, Safeguard Health Enterprises, Inc., WMS Industries, Inc. and Williams Hospitality Group, Inc. Officers are appointed by and serve at the discretion of the Board of Directors. Each director holds office until the next annual meeting of stockholders or until his successor has been duly elected and qualified. Each non-employee director receives an annual stock option grant to purchase 8,000 shares at the fair-market-value at time of grant which vest over a one-year period, a monthly fee of $1,250, and reimbursement of out-of-pocket expenses in attending the Company's Board of Directors meetings. There are no family relationships among any directors or executive officers of the Company. The Company has a Compensation Committee which reviews and makes recommendations to the Board of Directors with respect to the compensation of the Company's officers and to administer the Company's Key Employee Stock Option Plans. The Company also has an Audit Committee which reviews the scope of audit procedures employed by the Company's independent auditors, reviews the audit reports rendered by the Company's independent auditors and approves the audit fee charged by the independent auditors. The Audit Committee reports to the Board of Directors with respect to such matters and recommends the selection of independent auditors. ITEM 11. EXECUTIVE COMPENSATION Incorporated by reference from the information under the captions "Executive Compensation" in the Company's definitive proxy statement for the Annual Meeting of Stockholders to be held on July 19, 1996. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Incorporated by reference from the information under the caption "Stock Ownership" in the Company's definitive proxy statement for the Annual Meeting of Stockholders to be held on July 19, 1996. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Incorporated by reference from the information contained under the caption "Certain Relationships and Related Transactions" in the Company's definitive proxy statement for the Annual Meeting of Stockholders to be held on July 19, 1996. 14 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) FINANCIAL STATEMENTS. Reference is made to the Index to Consolidated Financial Statements on page 17 of this report. (b) FORM 8-K. The Company made no filings on Form 8-K during the three months ended March 2, 1996. (c) EXHIBITS. Reference is made to the Index to Exhibits on pages 32-34 of this report. 15 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CALIFORNIA AMPLIFIER, INC. By: /s/ Ira Coron Chairman of the Board and Chief Executive Officer Dated: May 29, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated. CAPACITIES SIGNATURES IN WHICH SERVED DATES ---------- --------------- ----- /s/ Ira Coron Chairman, Chief Executive May 29, 1996 Officer and Director (Principal Executive Officer) /s/ David R. Nichols Executive Vice President, Operations May 29, 1996 and Director /s/ Arthur H. Hausman Director May 29, 1996 /s/ William E. McKenna Director May 29, 1996 /s/ Michael R. Ferron Vice President, Finance May 29, 1996 and Chief Financial Officer (Principal Accounting Officer) 16 CALIFORNIA AMPLIFIER, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES Page ---- REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS . . . . . . . . . . . . . . . 18 FINANCIAL STATEMENTS: Consolidated Balance Sheets. . . . . . . . . . . . . . . . . . . . . . 19 Consolidated Statements of Income. . . . . . . . . . . . . . . . . . . 20 Consolidated Statements of Stockholders' Equity. . . . . . . . . . . . 21 Consolidated Statements of Cash Flows. . . . . . . . . . . . . . . . . 22 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . 23-31 17 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of California Amplifier, Inc.: We have audited the accompanying consolidated balance sheets of California Amplifier, Inc. (a Delaware corporation) and subsidiaries as of March 2, 1996, and March 4, 1995, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended March 2, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of California Amplifier, Inc. and subsidiaries as of March 2, 1996 and March 4, 1995, and the results of their operations and their cash flows for each of the three years in the period ended March 2, 1996 in conformity with generally accepted accounting principles. /s/ ARTHUR ANDERSEN LLP ARTHUR ANDERSEN LLP Los Angeles, California April 22, 1996 18 CALIFORNIA AMPLIFIER, INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT PAR VALUE)
MARCH 2, MARCH 4, 1996 1995 - --------------------------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents $11,637 $ 1,654 Accounts receivable 4,645 6,039 Inventories 6,744 6,029 Deferred tax asset 1,200 800 Prepaid expenses and other current assets 399 436 - --------------------------------------------------------------------------------------- Total current assets 24,625 14,958 Property and equipment -- at cost, net of accumulated depreciation and amortization 6,160 5,457 Investment in non-consolidated subsidiary 852 977 Note receivable 225 250 Other assets 711 445 - --------------------------------------------------------------------------------------- $32,573 $22,087 - --------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 3,230 $ 2,475 Accrued liabilities 4,659 2,940 Current portion of long-term debt 993 991 - --------------------------------------------------------------------------------------- Total current liabilities 8,882 6,406 Long-term debt 767 782 Commitments Stockholders' equity: Preferred stock, 3,000 shares authorized; no shares outstanding --- --- Common stock, $.01 par value; 15,000 shares authorized; 11,519 shares outstanding in March 1996 and 10,816 in March 1995 115 108 Additional paid-in capital 13,274 10,214 Retained earnings 9,535 4,577 - --------------------------------------------------------------------------------------- Total stockhodlers' equity 22,924 14,899 - --------------------------------------------------------------------------------------- $32,573 $22,087 - ---------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 19 CALIFORNIA AMPLIFIER, INC. CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT NET INCOME PER SHARE)
FISCAL YEAR ENDED - --------------------------------------------------------------------------------------------- MARCH 2, MARCH 4, FEBRUARY 26, 1996 1995 1994 - --------------------------------------------------------------------------------------------- Sales $ 61,590 $ 45,656 $ 40,664 Cost of sales 40,637 31,432 28,838 - --------------------------------------------------------------------------------------------- Gross profit 20,953 14,224 11,826 Research and development 4,376 3,155 2,045 Selling 5,003 3,712 3,624 General and administrative 4,077 3,583 3,493 - --------------------------------------------------------------------------------------------- Income from operations 7,497 3,774 2,664 Interest and other income 460 247 94 Interest expense (219) (201) (228) Loss attributable to non-consolidated subsidiary (100) (50) (251) - --------------------------------------------------------------------------------------------- Income before provision for income taxes 7,638 3,770 2,279 Provision for income taxes 2,680 1,319 723 - --------------------------------------------------------------------------------------------- Net income $ 4,958 $ 2,451 $ 1,556 - --------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------- Net income per share $ .41 $ .22 $ .14 - --------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------- Weighted average shares outstanding 12,182 11,182 11,114 - --------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 20 CALIFORNIA AMPLIFIER, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (IN THOUSANDS)
COMMON STOCK ADDITIONAL RETAINED ---------------- PAID-IN EARNINGS SHARES AMOUNT CAPITAL (DEFICIT) TOTAL - ------------------------------------------------------------------------------------------ Balances at February 27, 1993 9,482 $ 95 $6,623 $570 $7,288 Public sale of common stock, net of offering costs of $450 1,800 18 6,192 --- 6,210 Retirement of shares (910) (9) (3,177) --- (3,186) Exercise of stock options 204 2 293 --- 295 Net income --- --- --- 1,556 1,556 - ------------------------------------------------------------------------------------------ Balances at February 26, 1994 10,576 106 9,931 2,126 12,163 Exercise of stock options 240 2 283 --- 285 Net income --- --- --- 2,451 2,451 - ------------------------------------------------------------------------------------------ Balances at March 4, 1995 10,816 108 10,214 4,577 14,899 Exercise of stock options 603 6 2,661 --- 2,667 Conversion of debt 100 1 399 --- 400 Net income --- --- --- 4,958 4,958 - ------------------------------------------------------------------------------------------ Balances at March 2, 1996 11,519 $115 $13,274 $9,535 $22,924 - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 21 CALIFORNIA AMPLIFIER, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
FISCAL YEAR ENDED - --------------------------------------------------------------------------------------------- MARCH 2, MARCH 4, FEBRUARY 26, 1996 1995 1994 - --------------------------------------------------------------------------------------------- Cash flows from operating activities: Net income $4,958 $2,451 $1,556 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,693 2,363 1,425 Loss on sale of property and equipment 12 19 3 Loss attributable to non-consolidated subsidiary 100 50 251 (Increase) decrease in: Accounts receivable 1,394 (773) (634) Inventories (715) (389) (1,226) Deferred tax asset (400) (200) --- Prepaid expenses and other assets (229) 284 (278) Increase (decrease) in: Accounts payable 755 (1,329) (755) Accrued liabilities 1,719 972 (322) - --------------------------------------------------------------------------------------------- Net Cash Provided by operating activities 10,287 3,448 20 - --------------------------------------------------------------------------------------------- Cash flows from investing activities: Purchases of property and equipment (3,408) (3,005) (2,759) Proceeds from note receivable 25 105 --- Payments from (advances to) non-consolidated subsidiary 25 (27) (450) - --------------------------------------------------------------------------------------------- Net cash used in investing activities (3,358) (2,927) (3,209) - --------------------------------------------------------------------------------------------- Cash flows from financing activities: Repayments under line of credit arrangements --- (666) (834) Debt borrowings 1,304 1,273 620 Debt repayments (917) (498) (22) Issuances of common stock, net of retirements 2,667 285 3,319 - --------------------------------------------------------------------------------------------- Net cash provided by financing activities 3,054 394 3,083 - --------------------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents 9,983 915 (106) Cash and cash equivalents at beginning of year 1,654 739 845 - --------------------------------------------------------------------------------------------- Cash and cash equivalents at end of year $11,637 $ 1,654 $ 739 - --------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 22 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. GENERAL California Amplifier, Inc. (the "Company") designs, manufactures and markets a broad line of microwave amplifiers, downconverters, antennas, integrated microwave reception products, and a broadband scrambling system used in conjunction with the delivery of multichannel television. The Company also has a 50% ownership interest in Micro Pulse, Inc. ("Micro Pulse"), a company that designs, manufactures and markets antennas and amplifiers used principally in global positioning systems. Such products are used in surveying applications, vehicle tracking, and marine and airborne navigation (see Note 4). 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, California Amplifier s.a.r.l., the Company's subsidiary in France, and Cal Amp FSC, Inc., a foreign sales corporation established for tax purposes. All significant intercompany transactions have been eliminated. The Company's 50% ownership interest in Micro Pulse is accounted for using the equity method. FISCAL YEAR The Company reports results on the basis of a 52/53 week accounting calendar ending on the last Saturday of February or the first Saturday of March. STOCK SPLIT On February 16, 1996, the Board of Directors approved a two-for-one stock split distributed in the form of a stock dividend on March 22, 1996. All per share amounts have been retroactively adjusted to reflect this stock split. REVENUE RECOGNITION Revenue on product sales is recognized at the time of shipment. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. ALLOWANCE FOR DOUBTFUL ACCOUNTS The Company has established a reserve for potential write-offs relating to noncollectibility of accounts receivable. As of March 2, 1996, and March 4, 1995, the allowance for doubtful accounts was $1,217,000 and $756,000, respectively. Amounts charged to expense were $473,000, $601,000 and $58,000 in fiscal years 1996, 1995 and 1994, respectively. Amounts charged to the allowance account for bad debt write-offs were $12,000, $153,000 and $169,000 in fiscal years 1996, 1995 and 1994, respectively. 23 WARRANTY The Company warrants its products against defects over periods ranging from one to five years. An accrual for estimated future costs relating to products returned under warranty is recorded as an expense when products are shipped. Warranty expense was $969,000, $578,000 and $395,000 in fiscal years 1996, 1995, and 1994, respectively. Amounts charged to accrued warranty for the actual costs of maintaining the Company's warranty program were $469,000, $578,000 and $495,000, in fiscal years 1996, 1995 and 1994, respectively. INVENTORIES Inventories include costs of materials, labor and manufacturing overhead and are stated at the lower of cost (first-in, first-out) or market, and consist of the following (in 000's): March 2, March 4, 1996 1995 - ----------------------------------------------------- Raw materials $2,480 $2,087 Work in process 562 346 Finished goods 3,702 3,596 - ----------------------------------------------------- $6,744 $6,029 - ----------------------------------------------------- PROPERTY AND EQUIPMENT Property and equipment is stated at cost and consists of the following (in 000's): March 2, March 4, 1996 1995 - ----------------------------------------------------- Machinery and equipment $ 7,516 $ 5,317 Furniture and computers 3,731 3,226 Tooling 2,620 2,393 Leasehold improvements 580 475 - ----------------------------------------------------- 14,447 11,411 Less accumulated depreciation and amortization (8,287) (5,954) - ----------------------------------------------------- $ 6,160 $ 5,457 - ----------------------------------------------------- The Company follows the policy of capitalizing expenditures which materially increase asset lives, and charging ordinary maintenance and repairs to operations, as incurred. Amounts expensed as maintenance and repairs were approximately $375,000, $143,000 and $227,000 for fiscal years 1996, 1995 and 1994, respectively. When assets are sold or disposed of, the cost and related depreciation are removed from the accounts and any resulting gain or loss is included in income. Depreciation and amortization is based upon the estimated useful lives of the related assets using the straight-line method. Useful lives range from two to five years. 24 STATEMENTS OF CASH FLOWS The Company considers all liquid investments with an original maturity of less than three months to be cash equivalents. The Company paid interest of $219,000, $196,000 and $173,000 in fiscal years 1996, 1995 and 1994, respectively. The Company paid income taxes of $1,103,000, $780,000 and $339,000 in fiscal years 1996, 1995 and 1994, respectively. Non-cash transactions excluded from the consolidated statements of cash flows are as follows: In fiscal year 1996, the Company exchanged $400,000 of debt into 100,000 shares of its common stock as part of a convertible debt arrangement (see Notes 4 and 7). NET INCOME PER SHARE Net income per share is based upon the weighted average number of shares outstanding during each of the respective years, including the dilutive effects of stock options and warrants using the treasury stock method. The number of shares used in the computation of net income per share for fiscal years 1996, 1995 and 1994 were increased by 996,000, 466,000 and 764,000 shares, respectively, for the dilutive effects of stock options and warrants. Primary earnings per share were not materially different from fully diluted earnings per share. NEW AUTHORITATIVE PRONOUNCEMENTS In March 1995, the Financial Accounting Standards Board (FASB) issued SFAS No. 121, "Accounting for the Impairment of Long-lived Assets and Long-Lived Assets to be Disposed Of" (SFAS 121), which requires impairment losses to be recorded on long-lived assets used in operations when indications of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. The Company adopted SFAS 121 in fiscal 1996, the adoption of which had no impact on the Company's financial position or results of operations. In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based Compensation" (SFAS 123). SFAS 123 encourages, but does not require, a fair value based method of accounting for employee stock options or similar equity instruments. It also allows an entity to elect to continue to measure compensation cost under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees (APB 25), but requires pro forma disclosure of net income and earning per share as if the fair value based method had been applied. The Company will be required to adopt this standard effective in fiscal 1997. While the Company is still evaluating SFAS 123, it currently expects to elect to measure compensation cost under APB 25 and comply with the pro forma disclosure requirements of SFAS 123 only. If the Company makes this election, SFAS 123 will have no impact on the Company's financial position or results of operations. RECLASSIFICATIONS Certain reclassifications have been made to prior years' amounts to conform to the current year presentation. 3. NOTE RECEIVABLE In conjunction with the sale and leaseback of the Company's corporate and manufacturing facility in fiscal 1989, the Company received a promissory note from the buyer of the facility for $355,000. The note bears interest at 10%, payable quarterly. In conjunction with an extension of the lease in February 1995 (see Note 10), the Company received a principal reduction payment on this note of $105,000. In addition, annual principal reduction payments of $25,000 will be received beginning February 1996 and each year thereafter until the note receivable is reduced to $100,000. The balance of the note will be paid in February 2004, at the expiration of the lease term. 25 4.INVESTMENT IN NON-CONSOLIDATED SUBSIDIARY In January 1993, the Company purchased a 50% ownership interest in Micro Pulse for $500,000. Under the terms of the agreement, the Company paid $100,000 in cash to the principal stockholders of Micro Pulse and issued a $400,000 convertible subordinated note bearing interest at 8% due in January 1996. In April 1995, the holders of the note chose to convert the note, and received 100,000 shares of the Company's common stock. The investment in Micro Pulse is accounted for using the equity method of accounting. The investment is increased (reduced) by a credit (charge) to income for 50% of the Micro Pulse income (loss). In addition, the portion of the investment that exceeds 50% of Micro Pulse's net equity is being amortized over ten years. For financial statement presentation purposes, the Company considers all amounts advanced to Micro Pulse as part of its investment. A summary of the activity in the investment for fiscal years 1996, 1995 and 1994 is as follows (in 000's): 1996 1995 1994 - -------------------------------------------------------------------------------- Beginning balance $ 977 $1,000 $ 801 Net advances (payments) to/from Micro Pulse (25) 27 450 Amortization of investment in excess of 50% of Micro Pulse net equity (225) (100) (151) 50% of Micro Pulse income (loss) 125 50 (100) - -------------------------------------------------------------------------------- Ending balance $ 852 $ 977 $ 1,000 - -------------------------------------------------------------------------------- Summary information relating to the results of operations and the financial condition of Micro Pulse for fiscal years 1996, 1995 and 1994 is as follows (in 000's): 1996 1995 1994 - -------------------------------------------------------------------------------- Sales $3,500 $2,400 $1,000 Net income (loss) 250 100 (200) Total assets 1,100 600 405 Net deficit (145) (395) (495) - -------------------------------------------------------------------------------- The Company recognized sales to Micro Pulse of $377,000 in fiscal year 1996 and $302,000 in fiscal year 1995. The Company recognized interest income of $75,000 in fiscal year 1996 and $78,000 in fiscal year 1995 relating to the receivable due from Micro Pulse. The Company recognized interest expense of $5,000 in fiscal year 1996 and $33,000 in fiscal year 1995, relating to the $400,000 note payable prior to its conversion in April 1995. 5. ACCRUED LIABILITIES Accrued liabilities consist of the following (in 000's): March 2, March 4, 1996 1995 - ----------------------------------------------------- Payroll and related expenses $1,547 $1,134 Warranty 1,100 600 Income taxes 987 733 Other accrued liabilities 1,025 473 - ----------------------------------------------------- $4,659 $2,940 - ----------------------------------------------------- 26 6. SHORT-TERM BORROWINGS The Company has a $5.0 million working capital credit facility with a bank. Borrowings outstanding bear interest at the bank's prime rate (8.25% at March 2, 1996) and are secured by substantially all of the Company's assets, excluding the assets secured by other debt arrangements. The credit facility expires on August 1, 1996. At March 2, 1996, no amounts were outstanding under this credit facility, and $5.0 million was available for borrowing. The Company's foreign subsidiary has a $600,000 borrowing facility with a French bank. The borrowings are unsecured and bear interest at rates ranging from 6% to 8%. At March 2, 1996, no amounts were outstanding under the credit arrangement, and $600,000 was available for borrowing. The facility can be withdrawn by the bank at any time. Selected information regarding short-term borrowings for fiscal years 1996, 1995 and 1994 is as follows (in 000's, except percentages): 1996 1995 1994 - -------------------------------------------------------------------------------- Average amount outstanding - $ 339 $1,658 Maximum amount outstanding - $ 800 $2,450 Weighted average interest rate during the period - 7.75% 6.75% - -------------------------------------------------------------------------------- 7. LONG-TERM DEBT Long-term debt consists of the following (in 000's): March 2, March 4, 1996 1995 - -------------------------------------------------------------------------------- Note payable to a bank, secured by equipment, bearing interest at rates ranging from 6.76% to 7.92% payable monthly through June 1998 $1,760 $1,373 Note payable to the principal stockholders of Micro Pulse bearing interest at 8% converted to equity in April 1995 --- 400 Less portion due within one year (993) (991) - -------------------------------------------------------------------------------- $767 $782 - -------------------------------------------------------------------------------- Annual maturities on long-term debt as of March 2, 1996, are as follows (in 000's): 1997 $ 993 1998 626 1999 141 - -------------------------------------------------------------------------------- $1,760 - -------------------------------------------------------------------------------- The Company has a $2.0 million equipment arrangement with a bank. No amounts have been borrowed against this arrangement since its issuance in December 1995. The facility expires in December 1996. 27 8. INCOME TAXES The Company accounts for income taxes in accordance with the provisions of the Financial Accounting Standards Board Statement No. 109 "Accounting for Income Taxes" (SFAS No. 109). Under SFAS No. 109, deferred income tax assets or liabilities are computed based on the temporary difference between the financial statement and income tax bases of assets and liabilities using the enacted marginal income tax rate in effect for the year in which the differences are expected to reverse. Deferred income tax expenses or credits are based on changes in the deferred income tax assets or liabilities from period to period. The provision for income taxes for fiscal years 1996, 1995 and 1994 are as follows (in 000's): 1996 1995 1994 - -------------------------------------------------------------------------------- Current - Federal $2,512 $1,211 $484 - State 443 214 100 - Foreign 125 94 139 Deferred - Federal (340) (170) --- - State (60) (30) --- - -------------------------------------------------------------------------------- $2,680 $1,319 $723 - -------------------------------------------------------------------------------- Differences between the provision for income taxes and income taxes computed using the statutory federal income tax rate for fiscal years 1996, 1995 and 1994 are as follows (in 000's): 1996 1995 1994 - -------------------------------------------------------------------------------- Income tax at statutory federal rate (34%) $2,597 $1,282 $610 State income taxes (9.3%), net of federal income tax effect 458 226 188 Foreign taxes 125 94 139 Utilization of net operating loss carryforwards --- --- (58) Research and development credit (102) (418) (210) AMT credit (83) --- --- Other, net (315) 135 54 - -------------------------------------------------------------------------------- $2,680 $1,319 $723 - -------------------------------------------------------------------------------- The components of the net deferred income tax asset are as follows (in 000's): March 2, March 4, 1996 1995 - -------------------------------------------------------------------------------- Depreciation $(280) $(271) Warranties 430 240 Inventory valuation 325 200 Allowance for doubtful accounts 420 300 Other, net 305 331 - -------------------------------------------------------------------------------- $1,200 $800 - -------------------------------------------------------------------------------- 28 9.COMMON STOCK CAMP ACQUISITION CORP. On February 4, 1993, the Company signed an agreement with Charles Ergen, the sole stockholder of CAMP Acquisition Corp., the holder of 910,170 shares of the Company's common stock. Under the terms of the option agreement, the Company advanced to Mr. Ergen non-refundable deposits aggregating $300,000 for the right to purchase CAMP Acquisition Corp. for $3,185,595 until May 31, 1993. The option payments were non-refundable but would reduce the $3,185,595 purchase price if the option was exercised. In April 1993, with part of the proceeds from the sale of 1,800,000 shares of common stock, the Company purchased CAMP Acquisition Corp. and retired the 910,170 shares of California Amplifier, Inc. stock it owned. SALE OF COMMON STOCK In April 1993, the Company sold 1,800,000 shares of its common stock in a public offering at $4.00 per share, generating net proceeds of approximately $6.2 million. In conjunction with this stock offering, the Company granted the underwriter warrants to purchase 100,000 shares at $4.80 per share, or 120% of the offering price. The warrants are outstanding at March 2, 1996 and expire in April 1998. STOCK OPTION PLANS The Company currently has one option plan: The 1989 Key Employee Stock Option Plan ("1989 Plan"). Under the 1989 Plan, incentive and nonqualified stock options can be granted at prices not less than 100% of the fair market value at the date of grant. Option grants are exercisable at the discretion of the Compensation Committee, but usually over a four year vesting period. Option information for each of the three fiscal years in the period ended March 2, 1996 is as follows (in 000's except dollar amounts): 1996 1995 1994 - -------------------------------------------------------------------------------- Options outstanding at beginning of year: 1,464 1,298 1,022 Granted 562 458 478 Canceled (109) (52) --- Exercised (603) (240) (202) - -------------------------------------------------------------------------------- Options outstanding at end of year: 1,314 1,464 1,298 - -------------------------------------------------------------------------------- As of March 2, 1996, the following relates to options outstanding: Exercisable options 340,155 Option exercise prices $0.69 to $14.94 Average exercise price of all outstanding options $4.83 Options available for future grant 299,400 - -------------------------------------------------------------------------------- 29 10.COMMITMENTS The Company leases its corporate and manufacturing facility as part of an operating lease through February 2004. The Company pays annual rents of $462,000 through July 2001, at which time the annual rent will increase to $480,000 until February 2004 when the lease expires. The lease agreement also requires the Company to pay all property taxes and any insurance premiums associated with the coverage of the facility. The Company also leases a storage facility in Camarillo, California, U.S.A. and offices in Paris, France; Sao Paulo, Brazil; and Bangkok, Thailand, under certain lease arrangements. In addition, the Company leases equipment used in the manufacturing operation. The following table represents the future minimum rent payments required under all operating leases with terms in excess of one year as of March 2, 1996 (in 000's): Fiscal Year: 1997 $ 680 1998 496 1999 462 2000 462 Thereafter 1,914 - -------------------------------------------------------------------------------- $4,014 - -------------------------------------------------------------------------------- Rent expense for fiscal years 1996, 1995 and 1994 was $1,200,000, $1,186,000 and $1,114,000 respectively. 11. MAJOR CUSTOMERS AND FOREIGN SALES INFORMATION The Company operates in a single business segment: the design, manufacture and sale of microwave components and subsystems. In fiscal year 1996, one customer accounted for 13% of the Company's sales. In fiscal years 1995 and 1994, no customer accounted for more than 10% of the Company's sales. Sales information by product line, by domestic and foreign sales, and by geographical area are as follows (unaudited in 000's): 1996 1995 1994 - -------------------------------------------------------------------------------- Wireless Cable $43,155 $20,965 $13,343 Satellite Television 18,058 24,389 27,213 Other 377 302 108 - -------------------------------------------------------------------------------- $61,590 $45,656 $40,664 - -------------------------------------------------------------------------------- Domestic $17,136 $20,565 $15,956 Foreign 44,454 25,091 24,708 - -------------------------------------------------------------------------------- $61,590 $45,656 $40,664 - -------------------------------------------------------------------------------- U.S. & Canada $18,113 $20,822 $16,161 Latin America 9,673 13,544 12,171 Europe 10,871 2,064 4,910 Middle East 245 2,331 3,913 Africa 3,085 4,546 2,141 Asia 17,343 2,223 1,259 Australia 2,260 126 109 - -------------------------------------------------------------------------------- $61,590 $45,656 $40,664 - -------------------------------------------------------------------------------- 30 12. QUARTERLY FINANCIAL INFORMATION The following summarizes certain quarterly unaudited statements of income data for each of the quarters in fiscal years 1996 and 1995 (in 000's, except percentages and per share data): - ------------------------------------------------------------------------- First Second Third Fourth Quarter Quarter Quarter Quarter Fiscal 1996 - ------------------------------------------------------------------------- Sales $12,665 $14,505 $16,314 $18,106 $61,590 Gross profits 4,204 4,876 5,562 6,311 20,953 Gross margins 33.2% 33.6% 34.1% 34.9% 34.0% Net income 852 1,071 1,357 1,678 4,958 Income per share .07 .09 .11 .14 .41 - ------------------------------------------------------------------------- First Second Third Fourth Quarter Quarter Quarter Quarter Fiscal 1995 - ------------------------------------------------------------------------- Sales $11,184 $11,321 $11,661 $11,490 $45,656 Gross profits 3,230 3,397 3,787 3,810 14,224 Gross margins 28.9% 30.0% 32.5% 33.2% 31.2% Net income 406 550 714 781 2,451 Income per share .04 .05 .06 .07 .22 - ------------------------------------------------------------------------- 31 INDEX TO EXHIBITS 3.1 Certificate of Incorporation of the Registrant, as amended, filed as Exhibit 3.1 to the Registrant's Registration Statement on Form S-1 (33- 59702) and by this reference is incorporated herein and made a part hereof. 3.2 Bylaws of the Registrant, as amended, filed as Exhibit 3.2 to the Registrant's Form 8-K dated February 27, 1992 and by this reference is incorporated herein and made a part hereof. 10.1 1984 Key Employee Stock Option Plan filed as Exhibit 10.1 to the Registrant's Registration Statement on Form S-1 (2-87042) and by this reference is incorporated herein and made a part hereof. 10.2 Form of Incentive Stock Option Agreement filed as Exhibit 10.2 to the Registrant's Registration Statement on Form S-1 (2-87042) and by this reference is incorporated herein and made a part hereof. 10.3 Form of Nonqualified Stock Option Agreement filed as Exhibit 10.3 to the Registrant's Registration Statement on Form S-1 (2-87042) and by this reference is incorporated herein and made a part hereof. 10.4 1989 Key Employee Stock Option Plan filed as Exhibit 4.4 to the Registrant's Registration Statement on Form S-8 (33-31427) and by this reference is incorporated herein and made a part hereof. 10.4.1 Amendment No. 1 to the 1989 Key Employee Stock Option Plan filed as Exhibit 4.7 to the Registrant's Registration Statement on Form S-8 (33-36944) and by this reference is incorporated herein and made a part hereof. 10.4.2 Amendment No. 2 to the 1989 Key Employee Stock Option Plan filed as Exhibit 4.8 to the Registrant's Registration Statement on Form S-8 (33-72704) and by this reference is incorporated herein and made a part hereof. 10.4.3 Amendment No. 3 to the 1989 Key Employee Stock Option Plan filed as Exhibit 4.10 to the Registrant's Registration Statement on Form S-8 (33-60879) and by this reference is incorporated herein and made a part hereof. 10.5 Form of Incentive Stock Option Agreement filed as Exhibit 4.6 to the Registrant's Registration Statement on Form S-8 (33-31427) and by this reference is incorporated herein and made a part hereof. 10.6 Form of Nonqualified Stock Option Agreement filed as Exhibit 4.6 to the Registrant's Registration Statement on Form S-8 (33-31427) and by this reference is incorporated herein and made a part hereof. 10.7 Form of Option Agreement for Non-Employee Directors filed as Exhibit 4.9 to the Registrant's Registration Statement on Form S-8 (33-36944) and by this reference is incorporated herein and made a part hereof. 10.8 Letter Agreements regarding sale of the building dated July 18, 1988, filed as an exhibit to Form 8-K, dated February 27, 1989, filed as an exhibit to the Registrant's Annual Report on Form 10-K for the fiscal year ended February 28, 1989 and by this reference is incorporated herein and made a part hereof. 32 10.9 Building Lease and Rider on building between the Registrant and Calle San Pablo Property Co. dated January 31, 1989, filed as an exhibit to the Registrant's Annual Report on Form 10-K for the fiscal year ended February 28, 1989 and by this reference is incorporated herein and made a part hereof. 10.9.1 Amendment of Lease on building between the Registrant and Calle San Pablo Property Co. dated February 9, 1995, filed as an exhibit to this Annual Report on Form 10-K for the fiscal year ended March 4, 1995. 10.10 Form of Indemnity Agreement filed as an exhibit to the Registrant's Annual Report on Form 10-K for the fiscal year ended February 29, 1988 and by this reference is incorporated herein and made a part hereof. 10.11 Stockholder Rights Plan filed as an exhibit to the Registrant's Form 8-K dated September 5, 1991 and by this reference is incorporated herein and made a part hereof. 10.12 Distribution Agreement between Registrant and Pan Asian Systems, Ltd., dated July 3, 1992 filed as Exhibit 10.17 to the Company's Registration Statement on Form S-1 (33-59702) and by this reference is incorporated herein and made a part hereof. 10.13 Stock Purchase Agreement dated December 31, 1992 by and among Registrant, Peter J. Connolly, Steven G. Ow and Toni Ow, and The Peter J. Connolly Charitable Remainder Unitrust dated June 15, 1992 filed as Exhibit 10.20 to the Company's Registration Statement on Form S-1 (33-59702) and by this reference is incorporated herein and made a part hereof. 10.14 8% Convertible Subordinated Note dated January 20, 1993 by Registrant payable to The Peter J. Connolly Charitable Remainder Unitrust dated June 15, 1992 filed as Exhibit 10.21 to the Registrant's Registration Statement on Form S-1 (33-59702) and by this reference is incorporated herein and made a part hereof. 10.15 8% Convertible Subordinated Note dated January 20, 1993 by Registrant payable to Steven G. Ow and Toni Ow dated June 15, 1992 filed as Exhibit 10.22 to the Registrant's Registration Statement on Form S-1 (33-59702) and by this reference is incorporated herein and made a part hereof. 10.16 Promissory Note dated January 20, 1993 by Micro Pulse Incorporated, payable to Registrant filed as Exhibit 10.23 to the Registrant's Registration statement on Form S-1 (33-59702) and by this reference is incorporated herein and made a part hereof. 10.17 Option Agreement entered into as of February 4, 1993 by and among CAMP Acquisition Corp., Mr. Charles W. Ergen and the Registrant filed as Exhibit 10.24 to the Registrant's Registration Statement on Form S-1 (33-59702) and by this reference is incorporated herein and made a part hereof. 10.18 Promissory Note Agreement between Registrant and California United Bank dated April 5, 1993, filed as Exhibit 10.18 to the Registrant's Annual Report on Form 10-K for the fiscal year ended February 27, 1993 and by this reference is incorporated herein and made part hereof. 33 10.19 Change in Terms Agreement between Registrant and California United Bank, dated July 22, 1994, and filed as an exhibit to this Annual Report on Form 10-K for the fiscal year ended March 4, 1995. 10.20 First Amendment to Business Loan Agreement between Registrant and California United Bank, dated July 22, 1994, filed as an exhibit to this Annual Report on Form 10-K for the fiscal year ended March 4, 1995. 10.21 Second Amendment to Business Loan Agreement between Registrant and California United Bank, dated September 13, 1994, filed as an exhibit to this Annual Report on Form 10-K for the fiscal year ended March 4, 1995. *10.22 Business Loan Agreement between Registrant and California United Bank, dated July 26, 1995. *10.23 Promissory Note between Registrant and California United Bank dated July 26, 1995. *10.24 Commercial Security Agreement between Registrant and California United Bank dated July 26, 1995. *10.25 First Amendment to Business Loan Agreement between Registrant and California United Bank, dated July 26, 1995. *27 Financial Data Schedule ___________________ *Filed herewith 34 EX-10.22 2 EXHIBIT 10.22 EXHIBIT 10.22 BUSINESS LOAN AGREEMENT BORROWER: CALIFORNIA AMPLIFIER, INC. 460 CALLE SAN PABLO CAMARILLO, CA 93012 LENDER: CALIFORNIA UNITED BANK, N. A. ENCINO 16030 VENTURA BLVD. ENCINO, CA 91436 ================================================================================ THIS BUSINESS LOAN AGREEMENT BETWEEN CALIFORNIA AMPLIFIER, INC. ("BORROWER") AND CALIFORNIA UNITED BANK, N. A. ("LENDER") IS MADE AND EXECUTED ON THE FOLLOWING TERMS AND CONDITIONS. BORROWER HAS RECEIVED PRIOR COMMERCIAL LOANS FROM LENDER OR HAS APPLIED TO LENDER FOR A COMMERCIAL LOAN OR LOANS AND OTHER FINANCIAL ACCOMMODATIONS, INCLUDING THOSE WHICH MAY BE DESCRIBED ON ANY EXHIBIT OR SCHEDULE ATTACHED TO THIS AGREEMENT. ALL SUCH LOANS AND FINANCIAL ACCOMMODATIONS, TOGETHER WITH ALL FUTURE LOANS AND FINANCIAL ACCOMMODATIONS FROM LENDER TO BORROWER, ARE REFERRED TO IN THIS AGREEMENT INDIVIDUALLY AS THE "LOAN" AND COLLECTIVELY AS THE "LOANS." BORROWER UNDERSTANDS AND AGREES THAT: (A) IN GRANTING, RENEWING, OR EXTENDING ANY LOAN, LENDER IS RELYING UPON BORROWER'S REPRESENTATIONS, WARRANTIES, AND AGREEMENTS, AS SET FORTH IN THIS AGREEMENT; (B) THE GRANTING, RENEWING, OR EXTENDING OF ANY LOAN BY LENDER AT ALL TIMES SHALL BE SUBJECT TO LENDER'S SOLE JUDGMENT AND DISCRETION; AND (C) ALL SUCH LOANS SHALL BE AND SHALL REMAIN SUBJECT TO THE FOLLOWING TERMS AND CONDITIONS OF THIS AGREEMENT. TERM. This Agreement shall be effective as of JULY 26, 1995, and shall continue thereafter until all Indebtedness of Borrower to Lender has been performed in full and the parties terminate this Agreement in writing. DEFINITIONS. The following words shall have the following meanings when used in this Agreement. Terms not otherwise defined in this Agreement shall have the meanings attributed to such terms in the Uniform Commercial Code. All references to dollar amounts shall mean amounts in lawful money of the United States of America. AGREEMENT. The word "Agreement" means this Business Loan Agreement, as this Business Loan Agreement may be amended or modified from time to time, together with all exhibits and schedules attached to this Business Loan Agreement from time to time. BORROWER. The word "Borrower" means California Amplifier, Inc.. The word "Borrower" also includes, as applicable, all subsidiaries and affiliates of Borrower as provided below in the paragraph titled "Subsidiaries and Affiliates." CERCLA. The word "CERCLA" means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended. COLLATERAL. The word "Collateral" means and includes without limitation all property and assets granted as collateral security for a Loan, whether real or personal property, whether granted directly or indirectly, whether granted now or in the future, and whether granted in the form of a security interest, mortgage, deed of trust, assignment, pledge, chattel mortgage, chattel trust, factor's lien, equipment trust, conditional sale, trust receipt, lien, charge, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever, whether created by law, contract, or otherwise. ERISA. The word "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. EVENT OF DEFAULT. The words "Event of Default" mean and include without limitation any of the Events of Default set forth below in the section titled "EVENTS OF DEFAULT." GRANTOR. The word "Grantor" means and includes without limitation each and all of the persons or entities granting a Security Interest in any Collateral for the Indebtedness, including without limitation all Borrowers granting such a Security Interest. GUARANTOR. The word "Guarantor" means and includes without limitation each and all of the guarantors, sureties, and accommodation parties in connection with any Indebtedness. INDEBTEDNESS. The word "Indebtedness" means and includes without limitation all Loans, together with all other obligations, debts and liabilities of Borrower to Lender, or any one or more of them, as well as all claims by Lender against Borrower, or any one or more of them; whether now or hereafter existing, voluntary or involuntary, due or not due, absolute or contingent, liquidated or unliquidated; whether Borrower may be liable individually or jointly with others; whether Borrower may be obligated as a guarantor, surety, or otherwise; whether recovery upon such Indebtedness may be or hereafter may become barred by any statute of limitations; and whether such Indebtedness may be or hereafter may become otherwise unenforceable. LENDER. The word "Lender" means California United Bank, N. A., its successors and assigns. LOAN. The word "Loan" or "Loans" means and includes without limitation any and all commercial loans and financial accommodations from Lender to Borrower, whether now or hereafter existing, and however evidenced, including without limitation those loans and financial accommodations described herein or described on any exhibit or schedule attached to this Agreement from time to time. NOTE. The word "Note" means and includes without limitation Borrower's promissory note or notes, if any, evidencing Borrower's Loan obligations in favor of Lender, as well as any substitute, replacement or refinancing note or notes therefor. PERMITTED LIENS. The words "Permitted Liens" mean: (a) liens and security interests securing Indebtedness owed by Borrower to Lender; (b) liens for taxes, assessments, or similar charges either not yet due or being contested in good faith; (c) liens of materialmen, mechanics, warehousemen, or carriers, or other like liens arising in the ordinary course of business and securing obligations which are not yet delinquent; (d) purchase money liens or purchase money security interests upon or in any property acquired or held by Borrower in the ordinary course of business to secure indebtedness outstanding on the date of this Agreement or permitted to be incurred under the paragraph of this Agreement titled "Indebtedness and Liens"; (e) liens and security interests which, as of the date of this Agreement, have been disclosed to and approved by the Lender in writing; and (f) those liens and security interests which in the aggregate constitute an immaterial and insignificant monetary amount with respect to the net value of Borrower's assets. RELATED DOCUMENTS. The words "Related Documents" mean and include without limitation all promissory notes, credit agreements, loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Indebtedness. SECURITY AGREEMENT. The words "Security Agreement" mean and include without limitation any agreements, promises, covenants, arrangements, understandings or other agreements, whether created by law, contract, or otherwise, evidencing, governing, representing, or creating a Security Interest. SECURITY INTEREST. The words "Security Interest" mean and include without limitation any type of collateral security, whether in the form of a lien, charge, mortgage, deed of trust, assignment, pledge, chattel mortgage, chattel trust, factor's lien, equipment trust, conditional sale, trust receipt, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever, whether created by law, contract, or otherwise. SARA. The word "SARA" means the Superfund Amendments and Reauthorization Act of 1986 as now or hereafter amended. 07-26-1995 BUSINESS LOAN AGREEMENT PAGE 2 LOAN NO 4707 (CONTINUED) ================================================================================ CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial Loan Advance and each subsequent Loan Advance under this Agreement shall be subject to the fulfillment to Lender's satisfaction of all of the conditions set forth in this Agreement and in the Related Documents. LOAN DOCUMENTS. Borrower shall provide to Lender in form satisfactory to Lender the following documents for the Loan: (a) the Note, (b) Security Agreements granting to Lender security interests in the Collateral, (c) Financing Statements perfecting Lender's Security Interests; (d) evidence of insurance as required below; and (e) any other documents required under this Agreement or by Lender or its counsel. BORROWER'S AUTHORIZATION. Borrower shall have provided in form and substance satisfactory to Lender properly certified resolutions, duly authorizing the execution and delivery of this Agreement, the Note and the Related Documents, and such other authorizations and other documents and instruments as Lender or its counsel, in their sole discretion, may require. PAYMENT OF FEES AND EXPENSES. Borrower shall have paid to Lender all fees, charges, and other expenses which are then due and payable as specified in this Agreement or any Related Document. REPRESENTATIONS AND WARRANTIES. The representations and warranties set forth in this Agreement, in the Related Documents, and in any document or certificate delivered to Lender under this Agreement are true and correct. NO EVENT OF DEFAULT. There shall not exist at the time of any advance a condition which would constitute an Event of Default under this Agreement. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as of the date of this Agreement, as of the date of each disbursement of Loan proceeds, as of the date of any renewal, extension or modification of any Loan, and at all times any Indebtedness exists: ORGANIZATION. Borrower is a corporation which is duly organized, validly existing, and in good standing under the laws of the State of California and is validly existing and in good standing in all states in which Borrower is doing business. Borrower has the full power and authority to own its properties and to transact the businesses in which it is presently engaged or presently proposes to engage. Borrower also is duly qualified as a foreign corporation and is in good standing in all states in which the failure to so qualify would have a material adverse effect on its businesses or financial condition. AUTHORIZATION. The execution, delivery, and performance of this Agreement and all Related Documents by Borrower, to the extent to be executed, delivered or performed by Borrower, have been duly authorized by all necessary action by Borrower; do not require the consent or approval of any other person, regulatory authority or governmental body; and do not conflict with, result in a violation of, or constitute a default under (a) any provision of its articles of incorporation or organization, or bylaws, or any agreement or other instrument binding upon Borrower or (b) any law, governmental regulation, court decree, or order applicable to Borrower. FINANCIAL INFORMATION. Each financial statement, and tax returns of Borrower supplied to Lender truly and completely disclosed Borrower's financial condition as of the date of the statement, and there has been no material adverse change in Borrower's financial condition subsequent to the date of the most recent financial statement supplied to Lender. Borrower has no material contingent obligations except as disclosed in such financial statements. Said financial statements shall (including the disclosure of all liabilities as hereinabove mentioned) have been prepared in accordance with generally accepted accounting principles ("GAAP"), consistently applied (provided, however, that tax returns may be prepared using a basis of accounting other than GAAP). LEGAL EFFECT. This Agreement constitutes, and any instrument or agreement required hereunder to be given by Borrower when delivered will constitute, legal, valid and binding obligations of Borrower enforceable against Borrower in accordance with their respective terms. PROPERTIES. Except as contemplated by this Agreement or as previously disclosed in Borrower's financial statements or in writing to Lender and as accepted by Lender, and except for property tax liens for taxes not presently due and payable, Borrower owns and has good title to all of Borrower's properties free and clear of all Security Interests, and has not executed any security documents or financing statements relating to such properties. All of Borrower's properties are titled in Borrower's legal name, and Borrower has not used, or filed a financing statement under, any other name for at least the last five (5) years. HAZARDOUS SUBSTANCES. The terms "hazardous waste," "hazardous substance," "disposal," "release," and "threatened release," as used in this Agreement, shall have the same meanings as set forth in the "CERCLA," "SARA," the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., Chapters 6.5 through 7.7 of Division 20 of the California Health and Safety Code, Section 25100, et seq., or other applicable state or Federal laws, rules, or regulations adopted pursuant to any of the foregoing. Except as disclosed to and acknowledged by Lender in writing, Borrower represents and warrants that: (a) During the period of Borrower's ownership of the properties, there has been no use, generation, manufacture, storage, treatment, disposal, release or threatened release of any hazardous waste or substance by any person on, under, about or from any of the properties. (b) Borrower has no knowledge of, or reason to believe that there has been (i) any use, generation, manufacture, storage, treatment, disposal, release, or threatened release of any hazardous waste or substance on, under, about or from the properties by any prior owners or occupants of any of the properties, or (ii) any actual or threatened litigation or claims of any kind by any person relating to such matters. (c) Neither Borrower nor any tenant, contractor, agent or other authorized user of any of the properties shall use, generate, manufacture, store, treat, dispose of, or release any hazardous waste or substance on, under, about or from any of the properties; and any such activity shall be conducted in compliance with all applicable federal, state, and local laws, regulations, and ordinances, including without limitation those laws, regulations and ordinances described above. Borrower authorizes Lender and its agents to enter upon the properties to make such inspections and tests as Lender may deem appropriate to determine compliance of the properties with this section of the Agreement. Any inspections or tests made by Lender shall be at Borrower's expense and for Lender's purposes only and shall not be construed to create any responsibility or liability on the part of Lender to Borrower or to any other person. The representations and warranties contained herein are based on Borrower's due diligence in investigating the properties for hazardous waste and hazardous substances. Borrower hereby (a) releases and waives any future claims against Lender for indemnity or contribution in the event Borrower becomes liable for cleanup or other costs under any such laws, and (b) agrees to indemnify and hold harmless Lender against any and all claims, losses, liabilities, damages, penalties, and expenses which Lender may directly or indirectly sustain or suffer resulting from a breach of this section of the Agreement or as a consequence of any use, generation, manufacture, storage, disposal, release or threatened release occurring prior to Borrower's ownership or interest in the properties, whether or not the same was or should have been known to Borrower. The provisions of this section of the Agreement, including the obligation to indemnify, shall survive the payment of the Indebtedness and the termination or expiration of this Agreement and shall not be affected by Lender's acquisition of any interest in any of the properties, whether by foreclosure or otherwise. LITIGATION AND CLAIMS. No litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes) against Borrower is pending or threatened, and no other event has occurred which may materially adversely affect Borrower's financial condition or properties, other than litigation, claims, or other events, if any, that have been disclosed to and acknowledged by Lender in writing. TAXES. To the best of Borrower's knowledge, all tax returns and reports of Borrower that are or were required to be filed, have been filed, and all taxes, assessments and other governmental charges have been paid in full, except those presently being or to be contested by Borrower in good faith in the ordinary course of business and for which adequate reserves have been provided. 07-26-1995 BUSINESS LOAN AGREEMENT PAGE 3 LOAN NO 4707 (CONTINUED) ================================================================================ LIEN PRIORITY. Unless otherwise previously disclosed to Lender in writing, Borrower has not entered into or granted any Security Agreements, or permitted the filing or attachment of any Security Interests on or affecting any of the Collateral directly or indirectly securing repayment of Borrower's Loan and Note, that would be prior or that may in any way be superior to Lender's Security Interests and rights in and to such Collateral. BINDING EFFECT. This Agreement, the Note, all Security Agreements directly or indirectly securing repayment of Borrower's Loan and Note and all of the Related Documents are binding upon Borrower as well as upon Borrower's successors, representatives and assigns, and are legally enforceable in accordance with their respective terms. COMMERCIAL PURPOSES. Borrower intends to use the Loan proceeds solely for business or commercial related purposes. EMPLOYEE BENEFIT PLANS. Each employee benefit plan as to which Borrower may have any liability complies in all material respects with all applicable requirements of law and regulations, and (i) no Reportable Event nor Prohibited Transaction (as defined in ERISA) has occurred with respect to any such plan, (ii) Borrower has not withdrawn from any such plan or initiated steps to do so, (iii) no steps have been taken to terminate any such plan, and (iv) there are no unfunded liabilities other than those previously disclosed to Lender in writing. LOCATION OF BORROWER'S OFFICES AND RECORDS. Borrower's place of business, or Borrower's Chief executive office, if Borrower has more than one place of business, is located at 460 Calle San Pablo, Camarillo, CA 93012. Unless Borrower has designated otherwise in writing this location is also the office or offices where Borrower keeps its records concerning the Collateral. INFORMATION. All information heretofore or contemporaneously herewith furnished by Borrower to Lender for the purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all information hereafter furnished by or on behalf of Borrower to Lender will be, true and accurate in every material respect on the date as of which such information is dated or certified; and none of such information is or will be incomplete by omitting to state any material fact necessary to make such information not misleading. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Borrower understands and agrees that Lender, without independent investigation, is relying upon the above representations and warranties in extending Loan Advances to Borrower. Borrower further agrees that the foregoing representations and warranties shall be continuing in nature and shall remain in full force and effect until such time as Borrower's Indebtedness shall be paid in full, or until this Agreement shall be terminated in the manner provided above, whichever is the last to occur. AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while this Agreement is in effect, Borrower will: LITIGATION. Promptly inform Lender in writing of (a) all material adverse changes in Borrower's financial condition, and (b) all existing and all threatened litigation, claims, investigations, administrative proceedings or similar actions affecting Borrower or any Guarantor which could materially affect the financial condition of Borrower or the financial condition of any Guarantor. FINANCIAL RECORDS. Maintain its books and records in accordance with generally accepted accounting principles, applied on a consistent basis, and permit Lender to examine and audit Borrower's books and records at all reasonable times. ADDITIONAL INFORMATION. Furnish such additional information and statements, lists of assets and liabilities, agings of receivables and payables, inventory schedules, budgets, forecasts, tax returns, and other reports with respect to Borrower's financial condition and business operations as Lender may request from time to time. INSURANCE. Maintain fire and other risk insurance, public liability insurance, and such other insurance as Lender may require with respect to Borrower's properties and operations, in form, amounts, coverages and with insurance companies reasonably acceptable to Lender. Borrower, upon request of Lender, will deliver to Lender from time to time the policies or certificates of insurance in form satisfactory to Lender, including stipulations that coverages will not be cancelled or diminished without at least ten (10) days' prior written notice to Lender. Each insurance policy also shall include an endorsement providing that coverage in favor of Lender will not be impaired in any way by any act, omission or default of Borrower or any other person. In connection with all policies covering assets in which Lender holds or is offered a security interest for the Loans, Borrower will provide Lender with such loss payable or other endorsements as Lender may require. INSURANCE REPORTS. Furnish to Lender, upon request of Lender, reports on each existing insurance policy showing such information as Lender may reasonably request, including without limitation the following: (a) the name of the insurer; (b) the risks insured; (c) the amount of the policy; (d) the properties insured; (e) the then current property values on the basis of which insurance has been obtained, and the manner of determining those values; and (f) the expiration date of the policy. In addition, upon request of Lender (however not more often than annually), Borrower will have an independent appraiser satisfactory to Lender determine, as applicable, the actual cash value or replacement cost of any Collateral. The cost of such appraisal shall be paid by Borrower. OTHER AGREEMENTS. Comply with all terms and conditions of all other agreements, whether now or hereafter existing, between Borrower and any other party and notify Lender immediately in writing of any default in connection with any other such agreements. LOAN PROCEEDS. Use all Loan proceeds solely for Borrower's business operations, unless specifically consented to the contrary by Lender in writing. TAXES, CHARGES AND LIENS. Pay and discharge when due all of its indebtedness and obligations, including without limitation all assessments, taxes, governmental charges, levies and liens, of every kind and nature, imposed upon Borrower or its properties, income, or profits, prior to the date on which penalties would attach, and all lawful claims that, if unpaid, might become a lien or charge upon any of Borrower's properties, income, or profits. Provided however, Borrower will not be required to pay and discharge any such assessment, tax, charge, levy, lien or claim so long as (a) the legality of the same shall be contested in good faith by appropriate proceedings, and (b) Borrower shall have established on its books adequate reserves with respect to such contested assessment, tax, charge, levy, lien, or claim in accordance with generally accepted accounting practices. Borrower, upon demand of Lender, will furnish to Lender evidence of payment of the assessments, taxes, charges, levies, liens and claims and will authorize the appropriate governmental official to deliver to Lender at any time a written statement of any assessments, taxes, charges, levies, liens and claims against Borrower's properties, income, or profits. PERFORMANCE. Perform and comply with all terms, conditions, and provisions set forth in this Agreement and in the Related Documents in a timely manner, and promptly notify Lender if Borrower learns of the occurrence of any event which constitutes an Event of Default under this Agreement or under any of the Related Documents. OPERATIONS. Maintain executive and management personnel with substantially the same qualifications and experience as the present executive and management personnel; provide written notice to Lender of any change in executive and management personnel; conduct its business affairs in a reasonable and prudent manner and in compliance with all applicable federal, state and municipal laws, ordinances, rules and regulations respecting its properties, charters, businesses and operations, including without limitation, compliance with the Americans With Disabilities Act and with all minimum funding standards and other requirements of ERISA and other laws applicable to Borrower's employee benefit plans. INSPECTION. Permit employees or agents of Lender at any reasonable time to inspect any and all Collateral for the Loan or Loans and Borrower's other properties and to examine or audit Borrower's books, accounts, and records and to make copies and memoranda of Borrower's books, accounts, and records. If Borrower now or at any time hereafter maintains any records (including without limitation computer generated records and computer software programs for the generation of such records) in the possession of a third party, Borrower, upon request of Lender, shall 07-26-1995 BUSINESS LOAN AGREEMENT PAGE 4 LOAN NO 4707 (CONTINUED) ================================================================================ notify such party to permit Lender free access to such records at all reasonable times and to provide Lender with copies of any records it may request, all at Borrower's expense. ENVIRONMENTAL COMPLIANCE AND REPORTS. Borrower shall comply in all respects with all environmental protection federal, state and local laws, statutes, regulations and ordinances; not cause or permit to exist, as a result of an intentional or unintentional action or omission on its part or on the part of any third party, on property owned and/or occupied by Borrower, any environmental activity where damage may result to the environment, unless such environmental activity is pursuant to and in compliance with the conditions of a permit issued by the appropriate federal, state or local governmental authorities; shall furnish to Lender promptly and in any event within thirty (30) days after receipt thereof a copy of any notice, summons, lien, citation, directive, letter or other communication from any governmental agency or instrumentality concerning any intentional or unintentional action or omission on Borrower's part in connection with any environmental activity whether or not there is damage to the environment and/or other natural resources. ADDITIONAL ASSURANCES. Make, execute and deliver to Lender such promissory notes, mortgages, deeds of trust, security agreements, financing statements, instruments, documents and other agreements as Lender or its attorneys may reasonably request to evidence and secure the Loans and to perfect all Security Interests. RECOVERY OF ADDITIONAL COSTS. If the imposition of or any change in any law, rule, regulation or guideline, or the interpretation or application of any thereof by any court or administrative or governmental authority (including any request or policy not having the force of law) shall impose, modify or make applicable any taxes (except U.S. federal, state or local income or franchise taxes imposed on Lender), reserve requirements, capital adequacy requirements or other obligations which would (a) increase the cost to Lender for extending or maintaining the credit facilities to which this Agreement relates, (b) reduce the amounts payable to Lender under this Agreement or the Related Documents, or (c) reduce the rate of return on Lender's capital as a consequence of Lender's obligations with respect to the credit facilities to which this Agreement relates, then Borrower agrees to pay Lender such additional amounts as will compensate Lender therefor, within five (5) days after Lender's written demand for such payment, which demand shall be accompanied by an explanation of such imposition or charge and a calculation in reasonable detail of the additional amounts payable by Borrower, which explanation and calculations shall be conclusive in the absence of manifest error. NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this Agreement is in effect, Borrower shall not, without the prior written consent of Lender: INDEBTEDNESS AND LIENS. (a) Except for trade debt incurred in the normal course of business and indebtedness to Lender contemplated by this Agreement, create, incur or assume indebtedness for borrowed money, including capital leases, (b) except as allowed as a Permitted Lien, sell, transfer, mortgage, assign, pledge, lease, grant a security interest in, or encumber any of Borrower's assets, or (c) sell with recourse any of Borrower's accounts, except to Lender. CONTINUITY OF OPERATIONS. (a) Engage in any business activities substantially different than those in which Borrower is presently engaged, (b) cease operations, liquidate, merge, transfer, acquire or consolidate with any other entity, change ownership, change its name, dissolve or transfer or sell Collateral out of the ordinary course of business, (c) pay any dividends on Borrower's stock (other than dividends payable in its stock), provided, however that notwithstanding the foregoing, but only so long as no Event of Default has occurred and is continuing or would result from the payment of dividends, if Borrower is a "Subchapter S Corporation" (as defined in the Internal Revenue Code of 1986, as amended), Borrower may pay cash dividends on its stock to its shareholders from time to time in amounts necessary to enable the shareholders to pay income taxes and make estimated income tax payments to satisfy their liabilities under federal and state law which arise solely from their status as Shareholders of a Subchapter S Corporation because of their ownership of shares of stock of Borrower, or (d) purchase or retire any of Borrower's outstanding shares or alter or amend Borrower's capital structure. LOANS, ACQUISITIONS AND GUARANTIES. (a) Loan, invest in or advance money or assets, (b) purchase, create or acquire any interest in any other enterprise or entity, or (c) incur any obligation as surety or guarantor other than in the ordinary course of business. CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to Borrower, whether under this Agreement or under any other agreement, Lender shall have no obligation to make Loan Advances or to disburse Loan proceeds if: (a) Borrower or any Guarantor is in default under the terms of this Agreement or any of the Related Documents or any other agreement that Borrower or any Guarantor has with Lender; (b) Borrower or any Guarantor becomes insolvent, files a petition in bankruptcy or similar proceedings, or is adjudged a bankrupt; (c) there occurs a material adverse change in Borrower's financial condition, in the financial condition of any Guarantor, or in the value of any Collateral securing any Loan; (d) any Guarantor seeks, claims or otherwise attempts to limit, modify or revoke such Guarantor's guaranty of the Loan or any other loan with Lender; or (e) Lender in good faith deems itself insecure, even though no Event of Default shall have occurred. FINANCIAL REPORTING REQUIREMENTS. Borrower agrees to provide to Lender all of the following, in form and detail satisfactory to Lender: (a) not later than 90 days after and as of the end of each fiscal year, certified financial statements and 10K's of Borrower, audited by certified public accountants acceptable to Lender, to include a balance sheet, income statement, statement of cash flows and appropriate footnotes; (b) not later than 45 days after and as of the end of each fiscal quarter, 10Q's and financial statement of Borrower, prepared by Borrower, to include a balance sheet, income statement, and appropriate schedules and footnotes; (c) not later than 20 days after the close of each quarter, agings of Borrower's accounts receivable and accounts payable, in such form and detail as Lender may require; (d) not later than 20 days after the close of each quarter, inventory listing of Borrower, in such form and detail as Lender may require; (e) annual business plan and projections prepared by Borrower. All financial statements of Borrower to be delivered by Borrower to Lender will be complete and correct and present fairly the financial condition of Borrower as of the date thereof; will disclose all liabilities of Borrower that are required to be reflected or reserved under genarally accepted accounting principles, whether liquidated or unliquidated, fixed or contingent; and will have been prepared in accordance with generally accepted accounting principles consistently applied. All tax returns submitted to Lender by Borrower will be true and correct to the best knowledge of Borrower. Borrower hereby agrees that each time a financial statement or tax return is submitted by it to Lender, Borrower shall be deemed to have been represented and warranted to Lender that such financial statement or tax return compiles with all the requirements set forth above. FINANCIAL COVENANTS AND RATIOS. Borrower shall maintain its financial condition as follows, calculated using generally accepted accounting principles consistently applied and used consistently with prior practices: (a) EFFECTIVE TANGIBLE NET WORTH. (defined as total assets excluding all intangible assets, i.e, goodwill, trademarks, patents, copyrights, organizational expenses, but including investments in affiliate companies, Micro Pulse, Inc. and Cal Amp Communications S.A.R.L. less total debt) not less than $15,000,000.00. 07-26-1995 BUSINESS LOAN AGREEMENT PAGE 5 LOAN NO 4707 (CONTINUED) ================================================================================ (b) RATIO OF TOTAL DEBT TO EFFECTIVE TANGIBLE NET WORTH. (defined as current liabilities and non-current liabilities less subordinated debt divided by Effective Tangible Net Worth) not at any time greater than 1.00 to 1.00. (c) CURRENT RATIO. (defined as current assets divided by current liabilities) not at any time less than 1.25 to 1.00. (d) DEBT SERVICE COVERAGE RATIO. (defined as the aggregate of net income after taxes plus depreciation and other non-cash expenses and interest expense, less gain of sale of assets, dividends, distributions, withdrawals and treasury stock purchases divided by the aggregate of current portion of long-term debt plus interest expense) not at any time less than 4.80 to 1.00. (e) Borrower shall not have two consecutive quarterly losses. (f) CAPITAL EXPENDITURES. Borrower will not, without prior written consent of Lender, make any new investment in fixed assets in any fiscal year in excess of aggregate of $3,000,000.00. RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security interest in, and hereby assigns, conveys, delivers, pledges, and transfers to Lender all Borrower's right, title and interest in and to, Borrower's accounts with Lender (whether checking, savings, or some other account), including without limitation all accounts held jointly with someone else and all accounts Borrower may open in the future, excluding however all IRA and Keogh accounts, and all trust accounts for which the grant of a security interest would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the Indebtedness against any and all such accounts. EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default under this Agreement: DEFAULT ON INDEBTEDNESS. Failure of Borrower to make any payment when due on the Loans. OTHER DEFAULTS. Failure of Borrower or any Grantor to comply with or to perform when due any other term, obligation, covenant or condition contained in this Agreement or in any of the Related Documents, or failure of Borrower to comply with or to perform any other term, obligation, covenant or condition contained in any other agreement between Lender and Borrower. DEFAULT IN FAVOR OF THIRD PARTIES. Should Borrower or any Grantor default under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower's property or Borrower's or any Grantor's ability to repay the Loans or perform their respective obligations under this Agreement or any of the Related Documents. FALSE STATEMENTS. Any warranty, representation or statement made or furnished to Lender by or on behalf of Borrower or any Grantor under this Agreement or the Related Documents is false or misleading in any material respect at the time made or furnished, or becomes false or misleading at any time thereafter. DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related Documents ceases to be in full force and effect (including failure of any Security Agreement to create a valid and perfected Security Interest) at any time and for any reason. INSOLVENCY. The dissolution or termination of Borrower's existence as a going business, the insolvency of Borrower, the appointment of a receiver for any part of Borrower's property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower. CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower, any creditor of any Grantor against any collateral securing the Indebtedness, or by any governmental agency. This includes a garnishment, attachment, or levy on or of any of Borrower's deposit accounts with Lender. EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with respect to any Guarantor of any of the Indebtedness or any Guarantor dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any Guaranty of the Indebtedness. CHANGE IN OWNERSHIP. Any change in ownership of twenty-five percent (25%) or more of the common stock of Borrower. ADVERSE CHANGE. A material adverse change occurs in Borrower's financial condition, or Lender believes the prospect of payment or performance of the Indebtedness is impaired. INSECURITY. Lender, in good faith, deems itself insecure. EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where otherwise provided in this Agreement or the Related Documents, all commitments and obligations of Lender under this Agreement or the Related Documents or any other agreement immediately will terminate (including any obligation to make Loan Advances or disbursements), and, at Lender's option, all Indebtedness immediately will become due and payable, all without notice of any kind to Borrower, except that in the case of an Event of Default of the type described in the "Insolvency" subsection above, such acceleration shall be automatic and not optional. In addition, Lender shall have all the rights and remedies provided in the Related Documents or available at law, in equity, or otherwise. Except as may be prohibited by applicable law, all of Lender's rights and remedies shall be cumulative and may be exercised singularly or concurrently. Election by Lender to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of Borrower or of any Grantor shall not affect Lender's right to declare a default and to exercise its rights and remedies. MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Agreement: AMENDMENTS. This Agreement, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Agreement. No alteration of or amendment to this Agreement shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment. APPLICABLE LAW. THIS AGREEMENT HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY LENDER IN THE STATE OF CALIFORNIA. IF THERE IS A LAWSUIT, BORROWER AGREES UPON LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS OF LOS ANGELES COUNTY, THE STATE OF CALIFORNIA SUBJECT TO THE PROVISIONS ON ARBITRATION, THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA. ARBITRATION. LENDER AND BORROWER AGREE THAT ALL DISPUTES, CLAIMS AND CONTROVERSIES BETWEEN THEM, WHETHER INDIVIDUAL, JOINT, OR CLASS IN NATURE, ARISING FROM THIS AGREEMENT OR OTHERWISE, INCLUDING WITHOUT LIMITATION CONTRACT AND TORT DISPUTES, SHALL BE ARBITRATED PURSUANT TO THE RULES OF THE AMERICAN ARBITRATION ASSOCIATION, UPON REQUEST OF EITHER PARTY. No act to take or dispose of any Collateral shall constitute a waiver of this arbitration agreement or be prohibited by this arbitration agreement. This includes, without limitation, obtaining injunctive relief or a temporary restraining order; invoking a power of sale under any deed of trust or mortgage; obtaining a writ of attachment or imposition of a receiver; or exercising any rights relating to personal property, including taking or disposing of such property with or without judicial process pursuant to Article 9 of the Uniform Commercial Code. Any disputes, claims, or controversies concerning the lawfulness or reasonableness of any act, or exercise of any right, concerning any Collateral, including any claim to rescind, reform, or otherwise modify any agreement relating to the Collateral, shall also be arbitrated, provided however that no arbitrator shall have the right or the power to enjoin or restrain any act of any party. 07-26-1995 BUSINESS LOAN AGREEMENT PAGE 6 LOAN NO 4707 (CONTINUED) ================================================================================ Lender and Borrower agree that in the event of an action for judicial foreclosure pursuant to California Code of Civil Procedure Section 726, or any similar provision in any other state, the commencement of such an action will not constitute a waiver of the right to arbitrate and the court shall refer to arbitration as much of such action, including counterclaims, as lawfully may be referred to arbitration. Judgment upon any award rendered by any arbitrator may be entered in any court having jurisdiction. Nothing in this Agreement shall preclude any party from seeking equitable relief from a court of competent jurisdiction. The statute of limitations, estoppel, waiver, laches, and similar doctrines which would otherwise be applicable in an action brought by a party shall be applicable in any arbitration proceeding, and the commencement of an arbitration proceeding shall be deemed the commencement of an action for these purposes. The Federal Arbitration Act shall apply to the construction, interpretation, and enforcement of this arbitration provision. CAPTION HEADINGS. Caption headings in this Agreement are for convenience purposes only and are not to be used to interpret or define the provisions of this Agreement. MULTIPLE PARTIES; CORPORATE AUTHORITY. All obligations of Borrower under this Agreement shall be joint and several, and all references to Borrower shall mean each and every Borrower. This means that each of the Borrowers signing below is responsible for ALL obligations in this Agreement. CONSENT TO LOAN PARTICIPATION. Borrower agrees and consents to Lender's sale or transfer, whether now or later, of one or more participation interests in the Loans to one or more purchasers, whether related or unrelated to Lender. Lender may provide, without any limitation whatsoever, to any one or more purchasers, or potential purchasers, any information or knowledge Lender may have about Borrower or about any other matter relating to the Loan, and Borrower hereby waives any rights to privacy it may have with respect to such matters. Borrower additionally waives any and all notices of sale of participation interests, as well as all notices of any repurchase of such participation interests. Borrower also agrees that the purchasers of any such participation interests will be considered as the absolute owners of such interests in the Loans and will have all the rights granted under the participation agreement or agreements governing the sale of such participation interests. Borrower further waives all rights of offset or counterclaim that it may have now or later against Lender or against any purchaser of such a participation interest and unconditionally agrees that either Lender or such purchaser may enforce Borrower's obligation under the Loans irrespective of the failure or insolvency of any holder of any interest in the Loans. Borrower further agrees that the purchaser of any such participation interests may enforce its interests irrespective of any personal claims or defenses that Borrower may have against Lender. COSTS AND EXPENSES. Borrower agrees to pay upon demand all of Lender's expenses, including without limitation attorneys' fees, incurred in connection with the preparation, execution, enforcement, modification and collection of this Agreement or in connection with the Loans made pursuant to this Agreement. Lender may pay someone else to help collect the Loans and to enforce this Agreement, and Borrower will pay that amount. This includes, subject to any limits under applicable law, Lender's attorneys' fees and Lender's legal expenses, whether or not there is a lawsuit, including attorneys' fees for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. Borrower also will pay any court costs, in addition to all other sums provided by law. NOTICES. All notices required to be given under this Agreement shall be given in writing, may be sent by telefacsimilie, and shall be effective when actually delivered or when deposited with a nationally recognized overnight courier or deposited in the United States mail, first class, postage prepaid, addressed to the party to whom the notice is to be given at the address shown above. Any party may change its address for notices under this Agreement by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the party's address. To the extent permitted by applicable law, if there is more than one Borrower, notice to any Borrower will constitute notice to all Borrowers. For notice purposes, Borrower will keep Lender informed at all times of Borrower's current address(es). SEVERABILITY. If a court of competent jurisdiction finds any provision of this Agreement to be invalid or unenforceable as to any person or circumstance, such finding shall not render that provision invalid or unenforceable as to any other persons or circumstances. If feasible, any such offending provision shall be deemed to be modified to be within the limits of enforceability or validity; however, if the offending provision cannot be so modified, it shall be stricken and all other provisions of this Agreement in all other respects shall remain valid and enforceable. SUBSIDIARIES AND AFFILIATES OF BORROWER. To the extent the context of any provisions of this Agreement makes it appropriate, including without limitation any representation, warranty or covenant, the word "Borrower" as used herein shall include all subsidiaries and affiliates of Borrower. Notwithstanding the foregoing however, under no circumstances shall this Agreement be construed to require Lender to make any Loan or other financial accommodation to any subsidiary or affiliate of Borrower. SUCCESSORS AND ASSIGNS. All covenants and agreements contained by or on behalf of Borrower shall bind its successors and assigns and shall inure to the benefit of Lender, its successors and assigns. Borrower shall not, however, have the right to assign its rights under this Agreement or any interest therein, without the prior written consent of Lender. SURVIVAL. All warranties, representations, and covenants made by Borrower in this Agreement or in any certificate or other instrument delivered by Borrower to Lender under this Agreement shall be considered to have been relied upon by Lender and will survive the making of the Loan and delivery to Lender of the Related Documents, regardless of any investigation made by Lender or on Lender's behalf. TIME IS OF THE ESSENCE. Time is of the essence in the performance of this Agreement. WAIVER. Lender shall not be deemed to have waived any rights under this Agreement unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Agreement shall not prejudice or constitute a waiver of Lender's right otherwise to demand strict compliance with that provision or any other provision of this Agreement. No prior waiver by Lender, nor any course of dealing between Lender and Borrower, or between Lender and any Grantor, shall constitute a waiver of any of Lender's rights or of any obligations of Borrower or of any Grantor as to any future transactions. Whenever the consent of Lender is required under this Agreement, the granting of such consent by Lender in any instance shall not constitute continuing consent in subsequent instances where such consent is required, and in all cases such consent may be granted or withheld in the sole discretion of Lender. 07-26-1995 BUSINESS LOAN AGREEMENT PAGE 7 LOAN NO 4707 (CONTINUED) ================================================================================ BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF JULY 26, 1995. BORROWER: CALIFORNIA AMPLIFIER, INC.| X_______________________________________________________________________________ AUTHORIZED OFFICER LENDER: CALIFORNIA UNITED BANK, N. A. BY:_____________________________________________________________________________ AUTHORIZED OFFICER ================================================================================ LASER PRO, Reg. U.S. Pat. & T.M. Off., Ver. 3.21 (c) 1995 CFI ProServices, Inc. All rights reserved. [CA-C40 CAAMP.LN C8.OVL] EX-10.23 3 EXHIBIT 10.23 EXHIBIT 10.23 PROMISSORY NOTE BORROWER: CALIFORNIA AMPLIFIER, INC. 460 CALLE SAN PABLO CAMARILLO, CA 93012 LENDER: CALIFORNIA UNITED BANK, N. A. ENCINO 16030 VENTURA BLVD. ENCINO, CA 91436 ================================================================================ PRINCIPAL AMOUNT: $5,000,000.00 INITIAL RATE: 8.750% DATE OF NOTE: JULY 26, 1995 PROMISE TO PAY. CALIFORNIA AMPLIFIER, INC. ("BORROWER") PROMISES TO PAY TO CALIFORNIA UNITED BANK, N. A. ("LENDER"), OR ORDER, IN LAWFUL MONEY OF THE UNITED STATES OF AMERICA, THE PRINCIPAL AMOUNT OF FIVE MILLION & 00/100 DOLLARS ($5,000,000.00) OR SO MUCH AS MAY BE OUTSTANDING, TOGETHER WITH INTEREST ON THE UNPAID OUTSTANDING PRINCIPAL BALANCE OF EACH ADVANCE. INTEREST SHALL BE CALCULATED FROM THE DATE OF EACH ADVANCE UNTIL REPAYMENT OF EACH ADVANCE. PAYMENT. BORROWER WILL PAY THIS LOAN ON DEMAND, OR IF NO DEMAND IS MADE, IN ONE PAYMENT OF ALL OUTSTANDING PRINCIPAL PLUS ALL ACCRUED UNPAID INTEREST ON AUGUST 1, 1996. IN ADDITION, BORROWER WILL PAY REGULAR MONTHLY PAYMENTS OF ACCRUED UNPAID INTEREST BEGINNING SEPTEMBER 1, 1995, AND ALL SUBSEQUENT INTEREST PAYMENTS ARE DUE ON THE SAME DAY OF EACH MONTH AFTER THAT. Interest on this Note is computed on a 365/360 simple interest basis; that is, by applying the ratio of the annual interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding. Borrower will pay Lender at Lender's address shown above or at such other place as Lender may designate in writing. Unless otherwise agreed or required by applicable law, payments will be applied first to any unpaid collection costs and any late charges, then to any unpaid interest, and any remaining amount to principal. The receipt of any wire transfer of funds, check or other item of payment by the bank shall be immediately applied to conditionally reduce Borrower's obligations, but shall not be considered a payment on account unless such wire transfer is of immediately available federal funds and is made to the appropriate deposit account of Bank or unless and until such check or other item of payment is honored when presented for payment. VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from time to time based on changes in an index which is the highest rate published on a daily basis as the "Prime Rate" in the "Money Rates" Section of the Western Edition of the Wall Street Journal (the "Index"). If no rate is published for a day, California United Bank, N.A. reserves the right to determine the established rate which shall not be unreasonable. Lender will tell Borrower the current Index rate upon Borrower's request. Borrower understands that Lender may make loans based on other rates as well. The interest rate change will not occur more often than each day. THE INDEX CURRENTLY IS 8.250% PER ANNUM. THE INTEREST RATE TO BE APPLIED TO THE UNPAID PRINCIPAL BALANCE OF THIS NOTE WILL BE AT A RATE OF 0.500 PERCENTAGE POINTS OVER THE INDEX, RESULTING IN AN INITIAL RATE OF 9.250% PER ANNUM. NOTICE: Under no circumstances will the interest rate on this Note be more than the maximum rate allowed by applicable law. PREPAYMENT; MINIMUM INTEREST CHARGE. Borrower agrees that all loan fees and other prepaid finance charges are earned fully as of the date of the loan and will not be subject to refund upon early payment (whether voluntary or as a result of default), except as otherwise required by law. In any event, even upon full prepayment of this Note, Borrower understands that Lender is entitled to a MINIMUM INTEREST CHARGE OF $250.00. Other than Borrower's obligation to pay any minimum interest charge, Borrower may pay without penalty all or a portion of the amount owed earlier than it is due. Early payments will not, unless agreed to by Lender in writing, relieve Borrower of Borrower's obligation to continue to make payments of accrued unpaid interest. Rather, they will reduce the principal balance due. LATE CHARGE. If a payment is 10 DAYS OR MORE LATE, Borrower will be charged 5.000% OF THE UNPAID PORTION OF THE REGULARLY SCHEDULED PAYMENT. DEFAULT. Borrower will be in default if any of the following happens: (a) Borrower fails to make any payment when due. (b) Borrower breaks any promise Borrower has made to Lender, or Borrower fails to comply with or to perform when due any other term, obligation, covenant, or condition contained in this Note or any agreement related to this Note, or in any other agreement or loan Borrower has with Lender. (c) Borrower defaults under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower's property or Borrower's ability to repay this Note or perform Borrower's obligations under this Note or any of the Related Documents. (d) Any representation or statement made or furnished to Lender by Borrower or on Borrower's behalf is false or misleading in any material respect either now or at the time made or furnished. (e) Borrower becomes insolvent, a receiver is appointed for any part of Borrower's property, Borrower makes an assignment for the benefit of creditors, or any proceeding is commenced either by Borrower or against Borrower under any bankruptcy or insolvency laws. (f) Any creditor tries to take any of Borrower's property on or in which Lender has a lien or security interest. This includes a garnishment of any of Borrower's accounts with Lender. (g) Any guarantor dies or any of the other events described in this default section occurs with respect to any guarantor of this Note. (h) A material adverse change occurs in Borrower's financial condition, or Lender believes the prospect of payment or performance of the Indebtedness is impaired. (i) Lender in good faith deems itself insecure. LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal balance on this Note and all accrued unpaid interest immediately due, without notice, and then Borrower will pay that amount. Upon Borrower's failure to pay all amounts declared due pursuant to this section, including failure to pay upon final maturity, Lender, at its option, may also, if permitted under applicable law, do one or both of the following: (a) increase the variable interest rate on this Note to 5.500 percentage points over the Index, and (b) add any unpaid accrued interest to principal and such sum will bear interest therefrom until paid at the rate provided in this Note (including any increased rate). Lender may hire or pay someone else to help collect this Note if Borrower does not pay. Borrower also will pay Lender that amount. This includes, subject to any limits under applicable law, Lender's attorneys' fees and Lender's legal expenses whether or not there is a lawsuit, including attorneys' fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. Borrower also will pay any court costs, in addition to all other sums provided by law. THIS NOTE HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY LENDER IN THE STATE OF CALIFORNIA. IF THERE IS A LAWSUIT, BORROWER AGREES UPON LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS OF LOS ANGELES COUNTY, THE STATE OF CALIFORNIA SUBJECT TO THE PROVISIONS ON ARBITRATION, THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA. RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security interest in, and hereby assigns, conveys, delivers, pledges, and transfers to Lender all Borrower's right, title and interest in and to, Borrower's accounts with Lender (whether checking, savings, or some other account), including without limitation all accounts held jointly with someone else and all accounts Borrower may open in the future, excluding however all IRA and Keogh accounts, and all trust accounts for which the grant of a security interest would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on this Note against any and all such accounts. LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under this Note may be requested orally by Borrower or by an authorized person. Lender may, but need not, require that all oral requests be confirmed in writing. All communications, instructions, or directions by telephone or otherwise to Lender are to be directed to Lender's office shown above. The following party or parties are authorized to request advances under the line of credit until Lender receives from Borrower at Lender's address shown above written notice of revocation of their authority: IRA CORON, CHAIRMAN OF THE BOARD; MICHAEL FERRON, VICE PRESIDENT, FINANCE; AND GLENDA BLUM, CONTROLLER. Borrower agrees to be liable for all sums either: (a) advanced in accordance with the instructions of an authorized person or (b) credited to any of Borrower's accounts with Lender. The unpaid principal balance 07-26-1995 PROMISSORY NOTE PAGE 2 LOAN NO 4707 (CONTINUED) ================================================================================ owing on this Note at any time may be evidenced by endorsements on this Note or by Lender's internal records, including daily computer print-outs. Lender will have no obligation to advance funds under this Note if: (a) Borrower or any guarantor is in default under the terms of this Note or any agreement that Borrower or any guarantor has with Lender, including any agreement made in connection with the signing of this Note; (b) Borrower or any guarantor ceases doing business or is insolvent; (c) any guarantor seeks, claims or otherwise attempts to limit, modify or revoke such guarantor's guarantee of this Note or any other loan with Lender; (d) Borrower has applied funds provided pursuant to this Note for purposes other than those authorized by Lender; or (e) Lender in good faith deems itself insecure under this Note or any other agreement between Lender and Borrower. ARBITRATION. LENDER AND BORROWER AGREE THAT ALL DISPUTES, CLAIMS AND CONTROVERSIES BETWEEN THEM, WHETHER INDIVIDUAL, JOINT, OR CLASS IN NATURE, ARISING FROM THIS NOTE OR OTHERWISE, INCLUDING WITHOUT LIMITATION CONTRACT AND TORT DISPUTES, SHALL BE ARBITRATED PURSUANT TO THE RULES OF THE AMERICAN ARBITRATION ASSOCIATION, UPON REQUEST OF EITHER PARTY. No act to take or dispose of any collateral securing this Note shall constitute a waiver of this arbitration agreement or be prohibited by this arbitration agreement. This includes, without limitation, obtaining injunctive relief or a temporary restraining order; invoking a power of sale under any deed of trust or mortgage; obtaining a writ of attachment or imposition of a receiver; or exercising any rights relating to personal property, including taking or disposing of such property with or without judicial process pursuant to Article 9 of the Uniform Commercial Code. Any disputes, claims, or controversies concerning the lawfulness or reasonableness of any act, or exercise of any right, concerning any collateral securing this Note, including any claim to rescind, reform, or otherwise modify any agreement relating to the collateral securing this Note, shall also be arbitrated, provided however that no arbitrator shall have the right or the power to enjoin or restrain any act of any party. Lender and Borrower agree that in the event of an action for judicial foreclosure pursuant to California Code of Civil Procedure Section 726, or any similar provision in any other state, the commencement of such an action will not constitute a waiver of the right to arbitrate and the court shall refer to arbitration as much of such action, including counterclaims, as lawfully may be referred to arbitration. Judgment upon any award rendered by any arbitrator may be entered in any court having jurisdiction. Nothing in this Note shall preclude any party from seeking equitable relief from a court of competent jurisdiction. The statute of limitations, estoppel, waiver, laches, and similar doctrines which would otherwise be applicable in an action brought by a party shall be applicable in any arbitration proceeding, and the commencement of an arbitration proceeding shall be deemed the commencement of an action for these purposes. The Federal Arbitration Act shall apply to the construction, interpretation, and enforcement of this arbitration provision. COLLATERAL. This Loan is secured by all Borrower's assets as evidenced by that certain Commercial Security Agreement dated July 26, 1995 executed by Grantor in favor of Lender. BUSINESS LOAN AGREEMENT. Reference is hereby made to that certain Business Loan Agreement dated July 26, 1995, for additional terms and conditions. BORROWER'S ACKNOWLEDGEMENT. Borrower hereby acknowledges that this is an increased renewal of Note Number 4707 as evidenced by that certian Promissory Note date April 5, 1993 in the original principal amount of $4,000,000.00, as amended by that certain Change in Terms Agreement dated July 22, 1994. ADDITIONAL MATTERS. Lender reserves the right to sell, assign, transfer, negotiate or grant participations in all or any part of, or any interest in Lender's rights and benefits hereunder. In connection therewith, Lender may disclose all documents and information which Lender now or hereafter may have relating to Borrower. GENERAL PROVISIONS. This Note is payable on demand. The inclusion of specific default provisions or rights of Lender shall not preclude Lender's right to declare payment of this Note on its demand. Lender may delay or forgo enforcing any of its rights or remedies under this Note without losing them. Borrower and any other person who signs, guarantees or endorses this Note, to the extent allowed by law, waive any applicable statute of limitations, presentment, demand for payment, protest and notice of dishonor. Upon any change in the terms of this Note, and unless otherwise expressly stated in writing, no party who signs this Note, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability. All such parties agree that Lender may renew or extend (repeatedly and for any length of time) this loan, or release any party or guarantor or collateral; or impair, fail to realize upon or perfect Lender's security interest in the collateral; and take any other action deemed necessary by Lender without the consent of or notice to anyone. All such parties also agree that Lender may modify this loan without the consent of or notice to anyone other than the party with whom the modification is made. INTEGRATION; AMENDMENT. This Note and the other written documents and instruments between Borrower and Lender set forth in full the terms of agreement between the parties and are intended as the full, complete and exclusive agreement governing the relationship between the parties. This Note supersedes all prior discussions, promises, representations, warranties, agreements and understandings between the parties. This Note may not be modified or amended, nor may any rights hereunder be waived, except in a writing signed by the party against whom enforcement of the modification, amendment or waiver is sought. No course of dealing between the parties, no usage of trade, and no parol or extrinsic evidence of any nature shall be used or be relevant to supplement, explain or modify any term or provision of this Note or any supplement or amendment hereto. There are no oral agreements or understandings between Borrower and Lender regarding any extension of the maturity of this Note or making any modifications to this Note, or regarding any other matter. MUTUAL WAIVER OF RIGHT TO JURY TRIAL. Lender and Borrower each hereby waive the right to trial by jury in any action or proceeding based upon, arising out of, or in any way relating to: (i) this Note; or (ii) any other present or future instrument or agreement between Lender and Borrower; or (iii) any conduct, acts or omissions of Lender or Borrower or any of their directors, officers, employees, agents, attorneys or any other persons affiliated with Lender or Borrower; in each of the foregoing cases, whether sounding in contract or tort or otherwise. 07-26-1995 PROMISSORY NOTE PAGE 3 LOAN NO 4707 (CONTINUED) ================================================================================ PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE. BORROWER: CALIFORNIA AMPLIFIER, INC.| X_______________________________________ AUTHORIZED OFFICER LENDER: CALIFORNIA UNITED BANK, N. A. BY:_____________________________________ AUTHORIZED OFFICER ================================================================================ Variable Rate. Line of Credit. LASER PRO, Reg. U.S. Pat. & T.M. Off., Ver. 3.21 (c) 1995 CFI ProServices, Inc. All rights reserved. [CA-D20 CAAMP.LN C8.OVL] EX-10.24 4 EXHIBIT 10.24 EXHIBIT 10.24 COMMERCIAL SECURITY AGREEMENT BORROWER: CALIFORNIA AMPLIFIER, INC. 460 CALLE SAN PABLO CAMARILLO, CA 93012 LENDER: CALIFORNIA UNITED BANK, N. A. ENCINO 16030 VENTURA BLVD. ENCINO, CA 91436 ================================================================================ THIS COMMERCIAL SECURITY AGREEMENT IS ENTERED INTO BETWEEN CALIFORNIA AMPLIFIER, INC. (REFERRED TO BELOW AS "GRANTOR"); AND CALIFORNIA UNITED BANK, N. A. (REFERRED TO BELOW AS "LENDER"). FOR VALUABLE CONSIDERATION, GRANTOR GRANTS TO LENDER A SECURITY INTEREST IN THE COLLATERAL TO SECURE THE INDEBTEDNESS AND AGREES THAT LENDER SHALL HAVE THE RIGHTS STATED IN THIS AGREEMENT WITH RESPECT TO THE COLLATERAL, IN ADDITION TO ALL OTHER RIGHTS WHICH LENDER MAY HAVE BY LAW. DEFINITIONS. The following words shall have the following meanings when used in this Agreement. Terms not otherwise defined in this Agreement shall have the meanings attributed to such terms in the Uniform Commercial Code. All references to dollar amounts shall mean amounts in lawful money of the United States of America. AGREEMENT. The word "Agreement" means this Commercial Security Agreement, as this Commercial Security Agreement may be amended or modified from time to time, together with all exhibits and schedules attached to this Commercial Security Agreement from time to time. COLLATERAL. The word "Collateral" means the following described property of Grantor, whether now owned or hereafter acquired, whether now existing or hereafter arising, and wherever located: ALL INVENTORY, RAW MATERIAL, WORK-IN-PROCESS, FINISHED GOODS HELD FOR SALE OR LEASE, GOODS UNDER LEASE OR CONSIGNMENT HELD BY OTHERS AND MATERIALS USED OR CONSUMED IN DEBTOR'S BUSINESS, NOW OWNED OR HEREAFTER ACQUIRED, AND ALL ACCOUNTS, CONTRACT RIGHTS, CHATTEL PAPER, INSTRUMENTS, GENERAL INTANGIBLES, AND RIGHTS TO PAYMENT OF EVERY KIND NOW EXISTING OR HEREAFTER ARISING, TOGETHER WITH ALL REPOSSESSIONS AND RETURNS THEREUNDER. ALL EQUIPMENT NOW OWNED OR HEREAFTER ACQUIRED, TOGETHER WITH ALL PROCEEDS THEREOF. ALL PROCEEDS AND PRODUCTS OF THE FOREGOING, INCLUDING BUT NOT LIMITED TO MONEY, DEPOSIT ACCOUNTS, GOODS, EQUIPMENT, INSURANCE PROCEEDS AND OTHER TANGIBLE OR INTANGIBLE PROPERTY RECEIVED UPON THE SALE OR DISPOSITION OF THE FOREGOING. ALL PRESENT AND FUTURE BOOKS AND RECORDS RELATING TO THE FOREGOING. In addition, the word "Collateral" includes all the following, whether now owned or hereafter acquired, whether now existing or hereafter arising, and wherever located: (a) All attachments, accessions, accessories, tools, parts, supplies, increases, and additions to and all replacements of and substitutions for any property described above. (b) All products and produce of any of the property described in this Collateral section. (c) All accounts, general intangibles, instruments, rents, monies, payments, and all other rights, arising out of a sale, lease, or other disposition of any of the property described in this Collateral section. (d) All proceeds (including insurance proceeds) from the sale, destruction, loss, or other disposition of any of the property described in this Collateral section. (e) All records and data relating to any of the property described in this Collateral section, whether in the form of a writing, photograph, microfilm, microfiche, or electronic media, together with all of Grantor's right, title, and interest in and to all computer software required to utilize, create, maintain, and process any such records or data on electronic media. EVENT OF DEFAULT. The words "Event of Default" mean and include without limitation any of the Events of Default set forth below in the section titled "Events of Default." GRANTOR. The word "Grantor" means California Amplifier, Inc., its successors and assigns GUARANTOR. The word "Guarantor" means and includes without limitation each and all of the guarantors, sureties, and accommodation parties in connection with the Indebtedness. INDEBTEDNESS. The word "Indebtedness" means the indebtedness evidenced by the Note, including all principal and interest, together with all other indebtedness and costs and expenses for which Grantor is responsible under this Agreement or under any of the Related Documents. In addition, the word "Indebtedness" includes all other obligations, debts and liabilities, plus interest thereon, of Grantor, or any one or more of them, to Lender, as well as all claims by Lender against Grantor, or any one or more of them, whether existing now or later; whether they are voluntary or involuntary, due or not due, direct or indirect, absolute or contingent, liquidated or unliquidated; whether Grantor may be liable individually or jointly with others; whether Grantor may be obligated as guarantor, surety, accommodation party or otherwise; whether recovery upon such indebtedness may be or hereafter may become barred by any statute of limitations; and whether such indebtedness may be or hereafter may become otherwise unenforceable. LENDER. The word "Lender" means California United Bank, N. A., its successors and assigns. NOTE. The word "Note" means the Borrower's promissory notes or credit agreements, if any, evidencing Borrower's loan obligations, together with all renewals of, extensions of, modifications of, refinancings of, consolidations of and substitutions for the notes or credit agreements. RELATED DOCUMENTS. The words "Related Documents" mean and include without limitation all promissory notes, credit agreements, loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Indebtedness. RIGHT OF SETOFF. Grantor hereby grants Lender a contractual possessory security interest in and hereby assigns, conveys, delivers, pledges, and transfers all of Grantor's right, title and interest in and to Grantor's accounts with Lender (whether checking, savings, or some other account), including all accounts held jointly with someone else and all accounts Grantor may open in the future, excluding, however, all IRA and Keogh accounts, and all trust accounts for which the grant of a security interest would be prohibited by law. Grantor authorizes Lender, to the extent permitted by applicable law, to charge or setoff all Indebtedness against any and all such accounts. OBLIGATIONS OF GRANTOR. Grantor warrants and covenants to Lender as follows: PERFECTION OF SECURITY INTEREST. Grantor agrees to execute such financing statements and to take whatever other actions are requested by Lender to perfect and continue Lender's security interest in the Collateral. Upon request of Lender, Grantor will deliver to Lender any and all of the documents evidencing or constituting the Collateral, and Grantor will note Lender's interest upon any and all chattel paper if not delivered to Lender for possession by Lender. Grantor hereby appoints Lender as its irrevocable attorney-in-fact for the purpose of executing any 07-26-1995 COMMERCIAL SECURITY AGREEMENT PAGE 2 LOAN NO 4707 (CONTINUED) ================================================================================ documents necessary to perfect or to continue the security interest granted in this Agreement. Lender may at any time, and without further authorization from Grantor, file a carbon, photographic or other reproduction of any financing statement or of this Agreement for use as a financing statement. Grantor will reimburse Lender for all expenses for the perfection and the continuation of the perfection of Lender's security interest in the Collateral. Grantor promptly will notify Lender before any change in Grantor's name including any change to the assumed business names of Grantor. THIS IS A CONTINUING SECURITY AGREEMENT AND WILL CONTINUE IN EFFECT EVEN THOUGH ALL OR ANY PART OF THE INDEBTEDNESS IS PAID IN FULL AND EVEN THOUGH FOR A PERIOD OF TIME GRANTOR MAY NOT BE INDEBTED TO LENDER. NO VIOLATION. The execution and delivery of this Agreement will not violate any law or agreement governing Grantor or to which Grantor is a party, and its certificate or articles of incorporation and bylaws do not prohibit any term or condition of this Agreement. ENFORCEABILITY OF COLLATERAL. To the extent the Collateral consists of accounts, chattel paper, or general intangibles, the Collateral is enforceable in accordance with its terms, is genuine, and complies with applicable laws concerning form, content and manner of preparation and execution, and all persons appearing to be obligated on the Collateral have authority and capacity to contract and are in fact obligated as they appear to be on the Collateral. LOCATION OF THE COLLATERAL. Grantor, upon request of Lender, will deliver to Lender in form satisfactory to Lender a schedule of real properties and Collateral locations relating to Grantor's operations, including without limitation the following: (a) all real property owned or being purchased by Grantor; (b) all real property being rented or leased by Grantor; (c) all storage facilities owned, rented, leased, or being used by Grantor; and (d) all other properties where Collateral is or may be located. Except in the ordinary course of its business, Grantor shall not remove the Collateral from its existing locations without the prior written consent of Lender. REMOVAL OF COLLATERAL. Grantor shall keep the Collateral (or to the extent the Collateral consists of intangible property such as accounts, the records concerning the Collateral) at Grantor's address shown above, or at such other locations as are acceptable to Lender. Except in the ordinary course of its business, including the sales of inventory, Grantor shall not remove the Collateral from its existing locations without the prior written consent of Lender. To the extent that the Collateral consists of vehicles, or other titled property, Grantor shall not take or permit any action which would require application for certificates of title for the vehicles outside the State of California, without the prior written consent of Lender. TRANSACTIONS INVOLVING COLLATERAL. Except for inventory sold or accounts collected in the ordinary course of Grantor's business, Grantor shall not sell, offer to sell, or otherwise transfer or dispose of the Collateral. While Grantor is not in default under this Agreement, Grantor may sell inventory, but only in the ordinary course of its business and only to buyers who qualify as a buyer in the ordinary course of business. A sale in the ordinary course of Grantor's business does not include a transfer in partial or total satisfaction of a debt or any bulk sale. Grantor shall not pledge, mortgage, encumber or otherwise permit the Collateral to be subject to any lien, security interest, encumbrance, or charge, other than the security interest provided for in this Agreement, without the prior written consent of Lender. This includes security interests even if junior in right to the security interests granted under this Agreement. Unless waived by Lender, all proceeds from any disposition of the Collateral (for whatever reason) shall be held in trust for Lender and shall not be commingled with any other funds; provided however, this requirement shall not constitute consent by Lender to any sale or other disposition. Upon receipt, Grantor shall immediately deliver any such proceeds to Lender. TITLE. Grantor represents and warrants to Lender that it holds good and marketable title to the Collateral, free and clear of all liens and encumbrances except for the lien of this Agreement. No financing statement covering any of the Collateral is on file in any public office other than those which reflect the security interest created by this Agreement or to which Lender has specifically consented. Grantor shall defend Lender's rights in the Collateral against the claims and demands of all other persons. COLLATERAL SCHEDULES AND LOCATIONS. Insofar as the Collateral consists of inventory, Grantor shall deliver to Lender, as often as Lender shall require, such lists, descriptions, and designations of such Collateral as Lender may require to identify the nature, extent, and location of such Collateral. Such information shall be submitted for Grantor and each of its subsidiaries or related companies. MAINTENANCE AND INSPECTION OF COLLATERAL. Grantor shall maintain all tangible Collateral in good condition and repair. Grantor will not commit or permit damage to or destruction of the Collateral or any part of the Collateral. Lender and its designated representatives and agents shall have the right at all reasonable times to examine, inspect, and audit the Collateral wherever located. Grantor shall immediately notify Lender of all cases involving the return, rejection, repossession, loss or damage of or to any Collateral; of any request for credit or adjustment or of any other dispute arising with respect to the Collateral; and generally of all happenings and events affecting the Collateral or the value or the amount of the Collateral. TAXES, ASSESSMENTS AND LIENS. Grantor will pay when due all taxes, assessments and liens upon the Collateral, its use or operation, upon this Agreement, upon any promissory note or notes evidencing the Indebtedness, or upon any of the other Related Documents. Grantor may withhold any such payment or may elect to contest any lien if Grantor is in good faith conducting an appropriate proceeding to contest the obligation to pay and so long as Lender's interest in the Collateral is not jeopardized in Lender's sole opinion. If the Collateral is subjected to a lien which is not discharged within fifteen (15) days, Grantor shall deposit with Lender cash, a sufficient corporate surety bond or other security satisfactory to Lender in an amount adequate to provide for the discharge of the lien plus any interest, costs, attorneys' fees or other charges that could accrue as a result of foreclosure or sale of the Collateral. In any contest Grantor shall defend itself and Lender and shall satisfy any final adverse judgment before enforcement against the Collateral. Grantor shall name Lender as an additional obligee under any surety bond furnished in the contest proceedings. COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. Grantor shall comply promptly with all laws, ordinances, rules and regulations of all governmental authorities, now or hereafter in effect, applicable to the ownership, production, disposition, or use of the Collateral. Grantor may contest in good faith any such law, ordinance or regulation and withhold compliance during any proceeding, including appropriate appeals, so long as Lender's interest in the Collateral, in Lender's opinion, is not jeopardized. HAZARDOUS SUBSTANCES. Grantor represents and warrants that the Collateral never has been, and never will be so long as this Agreement remains a lien on the Collateral, used for the generation, manufacture, storage, transportation, treatment, disposal, release or threatened release of any hazardous waste or substance, as those terms are defined in the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499 ("SARA"), the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., Chapters 6.5 through 7.7 of Division 20 of the California Health and Safety Code, Section 25100, et seq., or other applicable state or Federal laws, rules, or regulations adopted pursuant to any of the foregoing. The terms "hazardous waste" and "hazardous substance" shall also include, without limitation, petroleum and petroleum by-products or any fraction thereof and asbestos. The representations and warranties contained herein are based on Grantor's due diligence in investigating the Collateral for hazardous wastes and substances. Grantor hereby (a) releases and waives any future claims against Lender for indemnity or contribution in the event Grantor becomes liable for cleanup or other costs under any such laws, and (b) agrees to indemnify and hold harmless Lender against any and all claims and losses resulting from a breach of this provision of this Agreement. This obligation to indemnify shall survive the payment of the Indebtedness and the satisfaction of this Agreement. MAINTENANCE OF CASUALTY INSURANCE. Grantor shall procure and maintain all risks insurance, including without limitation fire, theft and liability coverage together with such other insurance as Lender may require with respect to the Collateral, in form, amounts, coverages and basis 07-26-1995 COMMERCIAL SECURITY AGREEMENT PAGE 3 LOAN NO 4707 (CONTINUED) ================================================================================ reasonably acceptable to Lender and issued by a company or companies reasonably acceptable to Lender. Grantor, upon request of Lender, will deliver to Lender from time to time the policies or certificates of insurance in form satisfactory to Lender, including stipulations that coverages will not be cancelled or diminished without at least ten (10) days' prior written notice to Lender and not including any disclaimer of the insurer's liability for failure to give such a notice. Each insurance policy also shall include an endorsement providing that coverage in favor of Lender will not be impaired in any way by any act, omission or default of Grantor or any other person. In connection with all policies covering assets in which Lender holds or is offered a security interest, Grantor will provide Lender with such loss payable or other endorsements as Lender may require. If Grantor at any time fails to obtain or maintain any insurance as required under this Agreement, Lender may (but shall not be obligated to) obtain such insurance as Lender deems appropriate, including if it so chooses "single interest insurance," which will cover only Lender's interest in the Collateral. APPLICATION OF INSURANCE PROCEEDS. Grantor shall promptly notify Lender of any loss or damage to the Collateral. Lender may make proof of loss if Grantor fails to do so within fifteen (15) days of the casualty. All proceeds of any insurance on the Collateral, including accrued proceeds thereon, shall be held by Lender as part of the Collateral. If Lender consents to repair or replacement of the damaged or destroyed Collateral, Lender shall, upon satisfactory proof of expenditure, pay or reimburse Grantor from the proceeds for the reasonable cost of repair or restoration. If Lender does not consent to repair or replacement of the Collateral, Lender shall retain a sufficient amount of the proceeds to pay all of the Indebtedness, and shall pay the balance to Grantor. Any proceeds which have not been disbursed within six (6) months after their receipt and which Grantor has not committed to the repair or restoration of the Collateral shall be used to prepay the Indebtedness. INSURANCE RESERVES. Lender may require Grantor to maintain with Lender reserves for payment of insurance premiums, which reserves shall be created by monthly payments from Grantor of a sum estimated by Lender to be sufficient to produce, at least fifteen (15) days before the premium due date, amounts at least equal to the insurance premiums to be paid. If fifteen (15) days before payment is due, the reserve funds are insufficient, Grantor shall upon demand pay any deficiency to Lender. The reserve funds shall be held by Lender as a general deposit and shall constitute a non-interest-bearing account which Lender may satisfy by payment of the insurance premiums required to be paid by Grantor as they become due. Lender does not hold the reserve funds in trust for Grantor, and Lender is not the agent of Grantor for payment of the insurance premiums required to be paid by Grantor. The responsibility for the payment of premiums shall remain Grantor's sole responsibility. INSURANCE REPORTS. Grantor, upon request of Lender, shall furnish to Lender reports on each existing policy of insurance showing such information as Lender may reasonably request including the following: (a) the name of the insurer; (b) the risks insured; (c) the amount of the policy; (d) the property insured; (e) the then current value on the basis of which insurance has been obtained and the manner of determining that value; and (f) the expiration date of the policy. In addition, Grantor shall upon request by Lender (however not more often than annually) have an independent appraiser satisfactory to Lender determine, as applicable, the cash value or replacement cost of the Collateral. GRANTOR'S RIGHT TO POSSESSION. Until default, Grantor may have possession of the tangible personal property and beneficial use of all the Collateral and may use it in any lawful manner not inconsistent with this Agreement or the Related Documents, provided that Grantor's right to possession and beneficial use shall not apply to any Collateral where possession of the Collateral by Lender is required by law to perfect Lender's security interest in such Collateral. If Lender at any time has possession of any Collateral, whether before or after an Event of Default, Lender shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral if Lender takes such action for that purpose as Grantor shall request or as Lender, in Lender's sole discretion, shall deem appropriate under the circumstances, but failure to honor any request by Grantor shall not of itself be deemed to be a failure to exercise reasonable care. Lender shall not be required to take any steps necessary to preserve any rights in the Collateral against prior parties, nor to protect, preserve or maintain any security interest given to secure the Indebtedness. EXPENDITURES BY LENDER. If not discharged or paid when due, Lender may (but shall not be obligated to) discharge or pay any amounts required to be discharged or paid by Grantor under this Agreement, including without limitation all taxes, liens, security interests, encumbrances, and other claims, at any time levied or placed on the Collateral. Lender also may (but shall not be obligated to) pay all costs for insuring, maintaining and preserving the Collateral. All such expenditures incurred or paid by Lender for such purposes will then bear interest at the rate charged under the Note from the date incurred or paid by Lender to the date of repayment by Grantor. All such expenses shall become a part of the Indebtedness and, at Lender's option, will (a) be payable on demand, (b) be added to the balance of the Note and be apportioned among and be payable with any installment payments to become due during either (i) the term of any applicable insurance policy or (ii) the remaining term of the Note, or (c) be treated as a balloon payment which will be due and payable at the Note's maturity. This Agreement also will secure payment of these amounts. Such right shall be in addition to all other rights and remedies to which Lender may be entitled upon the occurrence of an Event of Default. EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default under this Agreement: DEFAULT ON INDEBTEDNESS. Failure of Grantor to make any payment when due on the Indebtedness. OTHER DEFAULTS. Failure of Grantor to comply with or to perform any other term, obligation, covenant or condition contained in this Agreement or in any of the Related Documents or in any other agreement between Lender and Grantor. DEFAULT IN FAVOR OF THIRD PARTIES. Should Borrower or any Grantor default under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower's property or Borrower's or any Grantor's ability to repay the Loans or perform their respective obligations under this Agreement or any of the Related Documents. FALSE STATEMENTS. Any warranty, representation or statement made or furnished to Lender by or on behalf of Grantor under this Agreement, the Note or the Related Documents is false or misleading in any material respect, either now or at the time made or furnished. DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related Documents ceases to be in full force and effect (including failure of any collateral documents to create a valid and perfected security interest or lien) at any time and for any reason. INSOLVENCY. The dissolution or termination of Grantor's existence as a going business, the insolvency of Grantor, the appointment of a receiver for any part of Grantor's property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Grantor. CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Grantor or by any governmental agency against the Collateral or any other collateral securing the Indebtedness. This includes a garnishment of any of Grantor's deposit accounts with Lender. EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with respect to any Guarantor of any of the Indebtedness or such Guarantor dies or becomes incompetent. ADVERSE CHANGE. A material adverse change occurs in Grantor's financial condition, or Lender believes the prospect of payment or performance of the Indebtedness is impaired. INSECURITY. Lender, in good faith, deems itself insecure. RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this Agreement, at any time thereafter, Lender shall have all the rights of a secured party under the California Uniform Commercial Code. In addition and without limitation, Lender may exercise any one or more of the 07-26-1995 COMMERCIAL SECURITY AGREEMENT PAGE 4 LOAN NO 4707 (CONTINUED) ================================================================================ following rights and remedies: ACCELERATE INDEBTEDNESS. Lender may declare the entire Indebtedness, including any prepayment penalty which Grantor would be required to pay, immediately due and payable, without notice. ASSEMBLE COLLATERAL. Lender may require Grantor to deliver to Lender all or any portion of the Collateral and any and all certificates of title and other documents relating to the Collateral. Lender may require Grantor to assemble the Collateral and make it available to Lender at a place to be designated by Lender. Lender also shall have full power to enter upon the property of Grantor to take possession of and remove the Collateral. If the Collateral contains other goods not covered by this Agreement at the time of repossession, Grantor agrees Lender may take such other goods, provided that Lender makes reasonable efforts to return them to Grantor after repossession. SELL THE COLLATERAL. Lender shall have full power to sell, lease, transfer, or otherwise deal with the Collateral or proceeds thereof in its own name or that of Grantor. Lender may sell the Collateral at public auction or private sale. Unless the Collateral threatens to decline speedily in value or is of a type customarily sold on a recognized market, Lender will give Grantor reasonable notice of the time after which any private sale or any other intended disposition of the Collateral is to be made. The requirements of reasonable notice shall be met if such notice is given at least ten (10) days, or such lesser time as required by state law, before the time of the sale or disposition. All expenses relating to the disposition of the Collateral, including without limitation the expenses of retaking, holding, insuring, preparing for sale and selling the Collateral, shall become a part of the Indebtedness secured by this Agreement and shall be payable on demand, with interest at the Note rate from date of expenditure until repaid. APPOINT RECEIVER. To the extent permitted by applicable law, Lender shall have the following rights and remedies regarding the appointment of a receiver: (a) Lender may have a receiver appointed as a matter of right, (b) the receiver may be an employee of Lender and may serve without bond, and (c) all fees of the receiver and his or her attorney shall become part of the Indebtedness secured by this Agreement and shall be payable on demand, with interest at the Note rate from date of expenditure until repaid. COLLECT REVENUES, APPLY ACCOUNTS. Lender, either itself or through a receiver, may collect the payments, rents, income, and revenues from the Collateral. Lender may at any time in its discretion transfer any Collateral into its own name or that of its nominee and receive the payments, rents, income, and revenues therefrom and hold the same as security for the Indebtedness or apply it to payment of the Indebtedness in such order of preference as Lender may determine. Insofar as the Collateral consists of accounts, general intangibles, insurance policies, instruments, chattel paper, choses in action, or similar property, Lender may demand, collect, receipt for, settle, compromise, adjust, sue for, foreclose, or realize on the Collateral as Lender may determine, whether or not Indebtedness or Collateral is then due. For these purposes, Lender may, on behalf of and in the name of Grantor, receive, open and dispose of mail addressed to Grantor; change any address to which mail and payments are to be sent; and endorse notes, checks, drafts, money orders, documents of title, instruments and items pertaining to payment, shipment, or storage of any Collateral. To facilitate collection, Lender may notify account debtors and obligors on any Collateral to make payments directly to Lender. OBTAIN DEFICIENCY. If Lender chooses to sell any or all of the Collateral, Lender may obtain a judgment against Grantor for any deficiency remaining on the Indebtedness due to Lender after application of all amounts received from the exercise of the rights provided in this Agreement. Grantor shall be liable for a deficiency even if the transaction described in this subsection is a sale of accounts or chattel paper. OTHER RIGHTS AND REMEDIES. Lender shall have all the rights and remedies of a secured creditor under the provisions of the Uniform Commercial Code, as may be amended from time to time. In addition, Lender shall have and may exercise any or all other rights and remedies it may have available at law, in equity, or otherwise. CUMULATIVE REMEDIES. All of Lender's rights and remedies, whether evidenced by this Agreement or the Related Documents or by any other writing, shall be cumulative and may be exercised singularly or concurrently. Election by Lender to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of Grantor under this Agreement, after Grantor's failure to perform, shall not affect Lender's right to declare a default and to exercise its remedies. MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Agreement: AMENDMENTS. This Agreement, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Agreement. No alteration of or amendment to this Agreement shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment. APPLICABLE LAW. This Agreement has been delivered to Lender and accepted by Lender in the State of California. If there is a lawsuit, Grantor agrees upon Lender's request to submit to the jurisdiction of the courts of Los Angeles County, State of California. Subject to the provisions on arbitration, this Agreement shall be governed by and construed in accordance with the laws of the State of California. ARBITRATION. LENDER AND GRANTOR AGREE THAT ALL DISPUTES, CLAIMS AND CONTROVERSIES BETWEEN THEM, WHETHER INDIVIDUAL, JOINT, OR CLASS IN NATURE, ARISING FROM THIS AGREEMENT OR OTHERWISE, INCLUDING WITHOUT LIMITATION CONTRACT AND TORT DISPUTES, SHALL BE ARBITRATED PURSUANT TO THE RULES OF THE AMERICAN ARBITRATION ASSOCIATION, UPON REQUEST OF EITHER PARTY. No act to take or dispose of any Collateral shall constitute a waiver of this arbitration agreement or be prohibited by this arbitration agreement. This includes, without limitation, obtaining injunctive relief or a temporary restraining order; invoking a power of sale under any deed of trust or mortgage; obtaining a writ of attachment or imposition of a receiver; or exercising any rights relating to personal property, including taking or disposing of such property with or without judicial process pursuant to Article 9 of the Uniform Commercial Code. Any disputes, claims, or controversies concerning the lawfulness or reasonableness of any act, or exercise of any right, concerning any Collateral, including any claim to rescind, reform, or otherwise modify any agreement relating to the Collateral, shall also be arbitrated, provided however that no arbitrator shall have the right or the power to enjoin or restrain any act of any party. Lender and Grantor agree that in the event of an action for judicial foreclosure pursuant to California Code of Civil Procedure Section 726, or any similar provision in any other state, the commencement of such an action will not constitute a waiver of the right to arbitrate and the court shall refer to arbitration as much of such action, including counterclaims, as lawfully may be referred to arbitration. Judgment upon any award rendered by any arbitrator may be entered in any court having jurisdiction. Nothing in this Agreement shall preclude any party from seeking equitable relief from a court of competent jurisdiction. The statute of limitations, estoppel, waiver, laches, and similar doctrines which would otherwise be applicable in an action brought by a party shall be applicable in any arbitration proceeding, and the commencement of an arbitration proceeding shall be deemed the commencement of an action for these purposes. The Federal Arbitration Act shall apply to the construction, interpretation, and enforcement of this arbitration provision. ATTORNEYS' FEES; EXPENSES. Grantor agrees to pay upon demand all of Lender's costs and expenses, including attorneys' fees and Lender's legal expenses, incurred in connection with the enforcement of this Agreement. Lender may pay someone else to help enforce this Agreement, and Grantor shall pay the costs and expenses of such enforcement. Costs and expenses include Lender's attorneys' fees and legal expenses whether or not there is a lawsuit, including attorneys' fees and legal expenses for bankruptcy proceedings (and including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. Grantor also shall pay all court costs and such additional fees as may be directed by the court. CAPTION HEADINGS. Caption headings in this Agreement are for convenience purposes only and are not to be used to interpret or define the provisions of this Agreement. 07-26-1995 COMMERCIAL SECURITY AGREEMENT PAGE 5 LOAN NO 4707 (CONTINUED) ================================================================================ MULTIPLE PARTIES; CORPORATE AUTHORITY. All obligations of Grantor under this Agreement shall be joint and several, and all references to Grantor shall mean each and every Grantor. This means that each of the Borrowers signing below is responsible for ALL obligations in this Agreement. NOTICES. All notices required to be given under this Agreement shall be given in writing, may be sent by telefacsimilie, and shall be effective when actually delivered or when deposited with a nationally recognized overnight courier or deposited in the United States mail, first class, postage prepaid, addressed to the party to whom the notice is to be given at the address shown above. Any party may change its address for notices under this Agreement by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the party's address. To the extent permitted by applicable law, if there is more than one Grantor, notice to any Grantor will constitute notice to all Grantors. For notice purposes, Grantor will keep Lender informed at all times of Grantor's current address(es). POWER OF ATTORNEY. Grantor hereby appoints Lender as its true and lawful attorney-in-fact, irrevocably, with full power of substitution to do the following: (a) to demand, collect, receive, receipt for, sue and recover all sums of money or other property which may now or hereafter become due, owing or payable from the Collateral; (b) to execute, sign and endorse any and all claims, instruments, receipts, checks, drafts or warrants issued in payment for the Collateral; (c) to settle or compromise any and all claims arising under the Collateral, and, in the place and stead of Grantor, to execute and deliver its release and settlement for the claim; and (d) to file any claim or claims or to take any action or institute or take part in any proceedings, either in its own name or in the name of Grantor, or otherwise, which in the discretion of Lender may seem to be necessary or advisable. This power is given as security for the Indebtedness, and the authority hereby conferred is and shall be irrevocable and shall remain in full force and effect until renounced by Lender. PREFERENCE PAYMENTS. Any monies Lender pays because of an asserted preference claim in Borrower's bankruptcy will become a part of the Indebtedness and, at Lender's option, shall be payable by Borrower as provided above in the "EXPENDITURES BY LENDER" paragraph. SEVERABILITY. If a court of competent jurisdiction finds any provision of this Agreement to be invalid or unenforceable as to any person or circumstance, such finding shall not render that provision invalid or unenforceable as to any other persons or circumstances. If feasible, any such offending provision shall be deemed to be modified to be within the limits of enforceability or validity; however, if the offending provision cannot be so modified, it shall be stricken and all other provisions of this Agreement in all other respects shall remain valid and enforceable. SUCCESSOR INTERESTS. Subject to the limitations set forth above on transfer of the Collateral, this Agreement shall be binding upon and inure to the benefit of the parties, their successors and assigns. WAIVER. Lender shall not be deemed to have waived any rights under this Agreement unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Agreement shall not prejudice or constitute a waiver of Lender's right otherwise to demand strict compliance with that provision or any other provision of this Agreement. No prior waiver by Lender, nor any course of dealing between Lender and Grantor, shall constitute a waiver of any of Lender's rights or of any of Grantor's obligations as to any future transactions. Whenever the consent of Lender is required under this Agreement, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sole discretion of Lender. WAIVER OF CO-OBLIGOR'S RIGHTS. If more than one person is obligated for the Indebtedness, Borrower irrevocably waives, disclaims and relinquishs all claims against such other person which Borrower has or would otherwise have by virtue of payment of the Indebtedness or any part thereof, specifically including but not limited to all rights of indemnity, contribution or exoneration. GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY AGREEMENT, AND GRANTOR AGREES TO ITS TERMS. THIS AGREEMENT IS DATED JULY 26, 1995. GRANTOR: CALIFORNIA AMPLIFIER, INC.| X_______________________________________ AUTHORIZED OFFICER LENDER: CALIFORNIA UNITED BANK, N. A. BY:_____________________________________ AUTHORIZED OFFICER ================================================================================ LASER PRO, Reg. U.S. Pat. & T.M. Off., Ver. 3.21 (c) 1995 CFI ProServices, Inc. All rights reserved. [CA-E40 CAAMP.LN C8.OVL] EX-10.25 5 EXHIBIT 10.25 EXHIBIT 10.25 FIRST AMENDMENT TO BUSINESS LOAN AGREEMENT THIS AGREEMENT, dated as of March 11, 1996, is entered into by and between CALIFORNIA AMPLIFIER, INC., ("Borrower"), and CALIFORNIA UNITED BANK, N.A., a national banking association ("Lender"). RECITALS: A. The Borrower and the Lender are parties to a Business Loan Agreement, dated as of July 26, 1995, (the "Agreement"). B. Borrower and Lender have agreed to amend certain terms and conditions of the Agreement in certain respects. AGREEMENT: Borrower and Lender agree as follows: 1. Each of the terms defined in the Agreement, unless otherwise defined herein, shall have the same meaning when used herein. 1 2. The following section is hereby added to the Agreement: LETTER OF CREDIT SUBLIMIT. As a sublimit under the Line of Credit, Borrower may obtain commercial and standby letters of credit (each individually a "Letter of Credit" and collectively the "Letters of Credit"), in form and substance satisfactory to Lender, in an aggregate amount not to exceed at any one time $100,000.00. No Letter of Credit may expire later than sixty (60) days after the maturity date of the Line of Credit. For purposes of calculating the amount of advances available under the Line of Credit, 100% of the face amount of the outstanding Letters of Credit shall be deemed outstanding advances under the Line of Credit and therefore subtracted from the amount available under the Line of Credit. Borrower shall execute Lender's standard form letter of credit application and agreement, and such other documents as Lender may reasonable require, in connection with the Letter of Credit. Borrower shall pay to Lender for each Letter of Credit, fees equal to Lender's fees as determined by Lender. Borrower agrees and acknowledges that Lender, may from time to time, without notice to Borrower, increase such fees, and that Borrower shall be obligated to pay such increased fees upon receipt of an invoice from Lender relative thereto. 3. Except as specifically amended above, the Agreement shall remain in full force and effect and is hereby ratified and confirmed. This Amendment and the Agreement shall be read together, as one document. 4. Borrower represents and warrants as follows: (a) Each of the representations and warranties contained in the Agreement, as amended hereby, is hereby reaffirmed as of the date hereof; 2 (b) The execution, delivery and performance of this Amendment and any note required hereunder are within the Borrower's powers, have been duly authorized by all necessary action, have received all necessary governmental approvals, if any, and do not contravene any law or any contractual restriction binding on Borrower; and (c) No event has occurred and is continuing or would result from this Amendment that constitutes an Event of Default under the Agreement, or would constitute an Event of Default but for the requirement that notice be given or time elapse or both. WITNESS the due execution hereof as of the date first written above. CALIFORNIA AMPLIFIER, INC. BY: /s/ Michael R. Ferron ----------------------------------- Authorized Officer CALIFORNIA UNITED BANK, N.A. BY: ----------------------------------- Karen Brown, Vice President 3 EX-27 6 EXHIBIT 27 (FDS)
5 EXHIBIT 27 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENTS OF INCOME FOR THE YEAR-ENDED MARCH 2, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR MAR-02-1996 MAR-05-1995 MAR-02-1996 11,637 0 5,862 1,217 6,744 24,625 14,447 8,287 32,573 8,882 0 0 0 13,389 9,535 32,573 61,590 61,590 40,637 13,456 (360) 0 219 7,638 2,680 0 0 0 0 4,958 .41 0 RETAINED EARNINGS NO FULL DILUTED EPS PRESENTED
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