1
EXHIBIT 10.18
STOCK REPURCHASE AGREEMENT
This Stock Repurchase Agreement ("Agreement") is entered into as
of this 7th day of March, 1997 by and among California Microwave, Inc., a
Delaware corporation ("CMI"), California Microwave Navigation System, Inc., a
Delaware corporation, Xxxxx X. Xxxxxxx, Xxxxxxx Xxxxxxx, Xxxxxx International
Associates, and Xx. X. Xxxxxx. All of the parties hereto, other than CMI and
California Microwave Navigation System, Inc., are collectively referred to
herein as the "Shareholders." Xxxxx X. Xxxxxxx and Xxxxxxx Xxxxxxx are
collectively referred to herein as the "Eustace Group." Xxxxxx International
Associates and Xx. X. Xxxxxx are collectively referred to herein as the "Xxxxxx
Group."
R E C I T A L S
A. CMI, the Shareholders and Cornix Systems entered into that
certain Shareholders' Agreement as of the 8th day of March, 1994 (the
"Shareholders' Agreement"), pursuant to which, among other things, the parties
formed California Microwave Navigation Systems, Inc. and the Shareholders and
Cornix Systems purchased shares of Common Stock of California Microwave
Navigation Systems, Inc. Cornix Systems subsequently transferred its shares of
Common Stock of California Microwave Navigation Systems, Inc. to the Eustace
Group. As of the date of this Agreement, the Common Stock of California
Microwave Navigation Systems, Inc. (other than shares of Common Stock owned by
CMI) is owned by the Shareholders in the amounts set forth opposite their names
on Exhibit A hereto.
B. The Shareholders desire to sell their shares of Common Stock
of California Microwave Navigation Systems, Inc. to CMI and CMI desires to
purchase such shares, all on the terms and conditions stated hereinafter.
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereby agree as follows:
1. Certain Definitions. In addition to certain terms defined
elsewhere herein, the following defined terms have the meaning stated below:
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EXHIBIT 10.18
After Tax Cash Flow in any given period prior to the end of
Fiscal Year 2000 means the cash receipts of the Company from Ukraine Projects or
Non-Ukraine Projects (including, for this purpose, all cash receipts earned by
CMI business units other than the Company that are performing services in
connection with Ukraine Projects or Non-Ukraine Projects), as applicable, minus
the cash payments paid by or on behalf of the Company (including, for this
purpose, cash payments made by CMI business units other than the Company that
are performing services in connection with Ukraine Projects or Non-Ukraine
Projects) with respect to such projects. Cash receipts shall include success
fees, interest received in CMI sponsor loans and repayments of CMI sponsor loans
or guarantees. Cash payments shall include direct cost expenditures, direct
operating expenses, standard overhead, capital expenditures (net of
depreciation) of the Company, financing and bonding costs, CMI sponsor loan
disbursements, direct material costs, other direct costs of sales and income
taxes paid. The parties have agreed that After Tax Cash Flow for the period
March 8, 1994 through June 30, 1996 was $(2,080,000). The parties further agreed
that the $300,000 TDA Grant, recorded as an offset to expenses in Fiscal Year
1996, shall be considered as part of After Tax Cash Flow from a Ukraine Project.
Beginning in Fiscal Year 2001, After Tax Cash Flow shall only include cash
receipts from collections of receivables of the Company outstanding at June 30,
2000, cash receipts from loan repayments, cash receipts of interest payments,
cash payments of accounts payable at June 30, 2000 and cash payments for
associated income taxes; i.e., operating results are excluded. General
allocations of CMI or group expenses and goodwill amortization shall not be
reflected in calculating After Tax Cash Flow. Guarantees issued by CMI, whether
in the form of standby letter of credit, surety bonds or corporate guarantee,
shall be treated as CMI sponsor loan disbursements and elimination of such
guarantees shall be accounted as CMI sponsor loan repayments. All After Tax Cash
Flows of the Company in Fiscal Years 1994, 1995 and 1996 shall be considered as
After Tax Cash Flow for Ukraine Projects. Calculation of After Tax Cash Flow
shall be made by the controller of CMI, whose determination shall be final.
Backlog means, at any point in time, the cumulative amount of
orders which have not been converted into sales, as determined by the controller
of CMI based on the then-current accounting policies of CMI.
Booked Amount means the amount of new orders which have
been added to the Backlog in any given Fiscal Year for Ukraine Projects or
Non-Ukraine Projects, as determined by the controller of CMI based on the
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EXHIBIT 10.18
then-current accounting policies of CMI. Bookings shall be recorded in
accordance with then-current CMI accounting policies.
CMI sponsor loans means loans made by CMI to specia purpose
entities responsible for completing a Ukraine Project or a Non-Ukraine
Project (or CMI guarantees of loans made by third parties to such entities for
such purposes).
Company means California Microwave Navigation Systems,
Inc., a Delaware corporation, unless and until that corporation or substantially
all of its assets are liquidated, sold or merged into CMI, after which Company
means the business unit which conducts the business operations formerly
conducted by California Microwave Navigation Systems, Inc.
Eustace Factor means 0.833333 (i.e., 4000 divided by 4800).
Final Determination Date means the later of June 30, 2000, or
the date when all CMI sponsor loans, if any, have been repaid and all CMI
sponsor guarantees, if any, have been discharged.
Fiscal Year means each period commencing July 1 and ending
on June 30 of the next calendar year. CMI's 1997 Fiscal Year ends June 30,
1997.
Xxxxxx Factor means 0.166667 (i.e., 800 divided by 4800).
Non-Ukraine Projects means all projects of the Company other
than Ukraine Projects.
Operating Profit in any given period means the gross margin of
the Company from Ukraine Projects or Non-Ukraine Projects (including, for this
purpose, all gross margin earned by CMI business units other than the Companies
that are performing services in connection with Ukraine or non-Ukraine
Projects) plus success fee receipts (such as the Rockwell success fee) minus the
operating expenses (direct cost expenditures, direct operating expenses,
standard overhead, direct material costs and other direct costs of sale) of the
Company. Operating Profit shall exclude interest income and expense and
non-recurring revenues (e.g., revenues from the sale of a product line).
Insurance and other employee benefits provided to the Company by CMI and letter
of credit charges shall be charged to the Company on the same
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EXHIBIT 10.18
basis as is applicable to other subsidiaries of CMI, provided that there shall
be no allocation of general and administrative expenses of CMI to the Company.
Calculation of Operating Profit shall be made by the controller of CMI, whose
determination shall be final.
Ukraine Projects means any project in the Country of Ukraine
booked by the Company.
2. Acquisition of Shares of the Eustace Group. Subject to the
terms and conditions stated in this Agreement, at the Closing CMI shall purchase
from the Eustace Group, and the Eustace Group shall sell to CMI, all of the
outstanding shares, options or warrants or other rights to acquire shares of
Common Stock of the Company owned of record or beneficially by the Eustace
Group. The purchase price shall be one dollar per share plus the contingent
payments provided for in Section 2(a) herein.
(a) Subject to the provisions of Sections 2(c) and 4(c)
below, CMI shall pay the Eustace Group contingent payments equal, in the
aggregate, to the amount determined by the following formula:
PAYMENT = Eustace Factor x ((0.25 x After Tax
Cash Flow from Non-Ukraine Projects)
+ (0.1625 x After Tax Cash Flow from
Ukraine Projects)).
(b) Subject to the provisions of Section 4(c) below, CMI
shall pay the Eustace Group the following advance payments:
i) for each of CMI's Fiscal Years 1997, 1998 or 1999, the
amount determined by the following formula:
PAYMENT = Eustace Factor X ((0.02 X Booked
Amount for Non-Ukraine Projects
booked in that Fiscal Year) + (0.012
X Booked Amount for Ukraine Projects
booked in that Fiscal Year)).
Of each amount payable under this subsection, 50% shall be paid
in cash by the end of the month following the month in which the
particular project was booked and the remainder shall be paid in
cash within sixty days following the end of the CMI Fiscal Year
in which the particular project was booked.
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EXHIBIT 10.18
ii) for each of CMI's Fiscal Years 1997, 1998, 1999
and 2000, the amount determined by the following formula:
PAYMENT = Eustace Factor X ((0.06 X Operating
Profit for Non-Ukraine Projects in
that Fiscal Year) + (0.038 X
Operating Profit for Ukraine Projects
in that Fiscal Year)).
Of each amount payable under this subsection for each respective
CMI Fiscal Year, 50% shall be paid in cash within sixty days
after the end of such Fiscal Year and the remainder of each such
amount shall be paid in cash within sixty days following the end
of the following CMI Fiscal Year, together with 8% simple
interest on such latter amount.
iii) for each Fiscal Year up to and including the
Fiscal Year ending on the Final Determination Date, the amount
determined by CMI's controller at the end of each Fiscal Year to
be payable with respect to such Fiscal Year using the following
formula:
PAYMENT = (Eustace Factor X ((0.25 X A) +
(0.1625 X B))) - C, where
A = the cumulative After Tax Cash Flow for Non-Ukraine
Projects through the end of the relevant Fiscal Year, plus
X.
B = the sum of $300,000 plus the cumulative After Tax Cash
Flow for Ukraine Projects through the end of the relevant
Fiscal Year, plus Y.
C = the cumulative amount advanced to the Eustace Group
through the end of such Fiscal Year pursuant to
subsections 2(b) i) and ii) above and this subsection 2(b)
iii), after giving effect to any payments required to be
made by CMI (but not yet made) for such Fiscal Year
pursuant to subsections 2(b) i) and ii), but prior to
giving effect to any payment required to be made by CMI
for the current Fiscal Year pursuant to this subsection
2(b) iii).
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EXHIBIT 10.18
X = 0.0 during Fiscal Years 1997, 1998 and 1999. Beginning
in Fiscal Year 2000, X = 0.06 times Backlog for
Non-Ukraine Projects as of June 30, 2000.
Y = 0.0 during Fiscal Years 1997, 1998 and 1999. Beginning
in Fiscal Year 2000, Y =0.039 times Backlog for Ukraine
Projects as of June 30, 2000.
Amounts payable under this subsection for each respective CMI
Fiscal Year shall be paid in cash or CMI Common Stock within
sixty days after the end of such Fiscal Year. If, as of the end
of any Fiscal Year the amount determined to be the amount payable
under this subsection would be a negative number, no payment
shall be made under this subsection iii) in respect of such
Fiscal Year. All advance payments made by CMI under this Section
2(b) shall be credited against the aggregate amount required to
be paid by CMI pursuant to Section 2(a).
(c) Each member of the Eustace Group agrees that CMI may
offset any advance payment otherwise required to be made under Section 2
against any amount due under the existing promissory notes in favor of
CMI, until such notes have been repaid in full. Each member of the
Eustace Group agrees that, upon termination of this Agreement, CMI's
controller shall calculate the aggregate amount payable under Section
2(a) and the Eustace Group shall promptly repay CMI on demand the
excess, if any, of the amount previously advanced to the Eustace Group
under Section 2(b) over the aggregate amount payable under Section 2(a).
3. Acquisition of Shares of the Xxxxxx Group. Subject to the
terms and conditions stated in this Agreement, at the Closing CMI shall purchase
from the Xxxxxx Group, and the Xxxxxx Group shall sell to CMI, all of the
outstanding shares, options or warrants or other rights to acquire shares of
Common Stock of the Company owned of record or beneficially by the Xxxxxx Group.
The purchase price shall be one dollar per share plus the contingent payments
provided for in Section 3(a) herein. Of the contingent payments, 62.5% shall be
allocated to Xxxxxx International Associates and the remaining 37.5% of the
contingent payments shall be allocated to Xx. X. Xxxxxx.
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EXHIBIT 10.18
(a) Subject to the provisions of Section 4(c) below, CMI
shall pay the Xxxxxx Group contingent payments equal, in the aggregate,
to the amount determined by the following formula:
PAYMENT = Xxxxxx Factor X ((0.25 X After Tax
Cash Flow from Non-Ukraine Projects)
+ (0.1625 X After Tax Cash Flow from
Ukraine Projects)) + (0.0875 X After
Tax Cash Flow from Ukraine Projects).
(b) Subject to the provisions of Sections 3(c) and 4(c)
below, CMI shall pay the Xxxxxx Group the following advance payments:
i) for each of CMI's Fiscal Years 1997, 1998 or 1999,
the amount determined by the following formula:
PAYMENT = Xxxxxx Factor X ((0.02 X Booked
Amount for Non-Ukraine Projects
booked in that Fiscal Year) + (0.012
X Booked Amount for Ukraine Projects
booked in that Fiscal Year)) + (0.008
X Booked Amount for Ukraine Projects
booked in that Fiscal Year).
Of each amount payable under this subsection, 50% shall be paid
in cash by the end of the month following the month in which the
particular project was booked and the remainder shall be paid in
cash within sixty days following the end of the CMI Fiscal Year
in which the particular project was booked.
ii) for each of CMI's Fiscal Years 1997, 1998, 1999
and 2000, the amount determined by the following formula:
PAYMENT = Xxxxxx Factor X ((0.06 X Operating
Profit for Non-Ukraine Projects in
that Fiscal Year) + (0.038 X
Operating Profit for Ukraine Projects
in that Fiscal Year)) + (0.022 X
Operating Profit for Ukraine Projects
in that Fiscal Year).
Of each amount payable under this subsection for each respective
CMI Fiscal Year, 50% shall be paid in cash within sixty days
after
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EXHIBIT 10.18
the end of such Fiscal Year and the remainder of each such amount
shall be paid in cash within sixty days following the end of the
following CMI Fiscal Year, together with 8% simple interest on
such latter amount.
iii) for each Fiscal Year up to and including the
Fiscal Year ending on the Final Determination Date, the amount
determined by CMI's controller at the end of each Fiscal Year to
be payable with respect to such Fiscal Year using the following
formula:
PAYMENT = (Xxxxxx Factor X ((0.25 X A) +
(0.1625 X B))) + (0.0875 X C) - D,
where
A = the cumulative After Tax Cash Flow for Non-Ukraine
Projects through the end of the relevant Fiscal Year, plus
X.
B = the sum of $300,000 plus the cumulative After Tax Cash
Flow for Ukraine Projects through the end of the relevant
Fiscal Year, plus Y.
C = the sum of $300,000 plus the cumulative After Tax Cash
Flow for Ukraine Projects through the end of the relevant
Fiscal Year, plus Z.
D = the cumulative amounts advanced to the Xxxxxx Group
through the end of such Fiscal Year pursuant to
subsections 3(b) i) and ii) above and this subsection 3(b)
iii), after giving effect to any payments required to be
made by CMI for such Fiscal Year pursuant to subsections
3(b) i) and ii) but not yet paid, but prior to giving
effect to any payment required to be made by CMI for the
current Fiscal Year pursuant to this subsection 3(b) iii).
X = 0.0 during Fiscal Years 1997, 1998 and 1999. Beginning
in Fiscal Year 2000, X = 0.06 times Backlog for
Non-Ukraine Projects as of June 30, 2000.
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EXHIBIT 10.18
Y = 0.0 during Fiscal Years 1997, 1998 and 1999. Beginning
in Fiscal Year 2000, Y = 0.039 times Backlog for Ukraine
Projects as of June 30, 2000.
Z = 0.0 during Fiscal Years 1997, 1998 and 1999. Beginning
in Fiscal Year 2000, Z = 0.021 times Backlog for Ukraine
Projects as of June 30, 2000.
Amounts payable under this subsection for each respective CMI
Fiscal Year shall be paid in cash or CMI Common Stock within
sixty days after the end of such Fiscal Year. If, as of the end
of any Fiscal Year the amount determined to be the amount payable
under this subsection would be a negative number, no payment
shall be made under this subsection iii) in respect of such
Fiscal Year. All advance payments made under this Section 3(b)
shall be credited against the aggregate amount required to be
paid by CMI pursuant to Section 3(a).
(c) Each member of the Xxxxxx Group agrees that CMI may
offset any advance payment otherwise required to be made under Section 3
against any amount due under the existing promissory notes in favor of
CMI, until such notes have been repaid in full. Each member of the
Xxxxxx Group agrees that, upon termination of this Agreement, CMI's
controller shall calculate the aggregate amount payable under Section
3(a) and the Xxxxxx Group shall promptly repay CMI on demand the excess,
if any, of the aggregate amount previously advanced to the Xxxxxx Group
under Section 3(b) over the amount payable under Section 3(a).
4. Certain Matters Applicable to the Stock Repurchases and
Payments. For purposes of Sections 2 and 3 above:
(a) After Tax Cash Flow, Operating Profit and Backlog
shall be determined in accordance with generally accepted accounting
principles and CMI accounting policies by CMI's controller. The $267,000
advanced by CMI prior to March 8, 1994, shall be disregarded in making
the calculations under the formulas contained in this Agreement. The
Company shall keep accounting records sufficient to calculate bookings,
Backlog, sales, expenses, After Tax Cash Flow and Operating Profit for
Ukraine Projects and Non-Ukraine Projects. All operations of the
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EXHIBIT 10.18
Company through the end of Fiscal Year 1996 shall be attributed to
Ukraine Projects.
(b) With respect to payments required to be made under
Sections 2(b)iii) and 3(b)iii), CMI has the right to make payment in
cash or in CMI Common Shares or in a combination of cash and CMI Common
Shares. If CMI uses CMI Common Shares, the value of such shares shall be
the average closing sales price for CMI Common Shares in the Nasdaq
National Market as reported in the Wall Street Journal (or if listed,
the closing sales price on the largest exchange on which CMI Common
Shares are listed) for the ten (10) trading days immediately succeeding
the date of the event giving rise to the required payment. The CMI
Common Shares to be so used shall, within four months of delivery, be
covered by an effective registration statement on form X-0, X- 0 or S-4
(or other equivalent forms) filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended. No fractional
CMI Common Shares shall be issued; any fractional interest shall be
rounded off to the nearest whole share.
(c) Notwithstanding anything in this Agreement to the
contrary, CMI's obligation to make any further payments to the Eustace
Group under Section 2 hereof shall terminate under the circumstances
provided in Section 12. Similarly, and notwithstanding anything in this
Agreement to the contrary, CMI's obligation to make any further payments
to the Xxxxxx Group under Section 3 hereof shall terminate under the
circumstances provided in Section 12. There shall be no payments made
under Section 2 or Section 3 with respect to orders which are booked
after the date of termination of this Agreement, but termination shall
not affect any rights to payment with respect to orders booked before
termination. Any dispute over whether CMI's obligation to make such
payments has been properly terminated shall be submitted to and
determined by binding arbitration pursuant to Section 17 below.
(d) Sample calculations of potential contingent payments
and advances under Sections 2 and 3 are attached as Exhibit B. These
samples are merely illustrative and do not constitute projections or
likely scenarios. No party makes any representation or warranty
whatsoever to any other party about the validity of the samples or the
likelihood that actual results will resemble the samples.
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EXHIBIT 10.18
5. Closing and Closing Procedure. The closing of the transaction
contemplated by this Agreement shall take place at the corporate headquarters of
CMI, or at such other place as is agreed to by the parties, on March 14, 1997,
at 10:00 a.m. The date and time of the closing are herein called the "Closing
Date." At the closing on the Closing Date:
(a) Each Shareholder shall deliver to CMI stock
certificates of the Company owned by such Shareholder as indicated on
Exhibit A, duly endorsed for transfer and blank; and
(b) CMI shall deliver to each Shareholder $1 for each
share of Common Stock of the Company sold to CMI pursuant to this
Agreement.
6. Representations and Warranties of CMI. CMI represents and
warrants that the following facts and circumstances are, and, as at the Closing
Date shall be, true and correct and acknowledges that such facts and
circumstances constitute the basis upon which the Shareholders are induced to
enter into this Agreement:
(a) Organization, Standing, Etc. CMI is a corporation duly
organized and validly existing and in good standing under the laws of
the State of Delaware. It has all requisite corporate power and
authority to carry on its business, to enter into this Agreement, to
loan money as contemplated hereby, and to carry out the provisions
hereof.
(b) Authorization. All corporate action on the part of CMI
necessary for the performance of its obligations hereunder has been
taken. This Agreement is a valid and binding obligation of CMI,
enforceable against it in accordance with its terms.
7. Representations and Warranties of Shareholders. Each
Shareholder represents and warrants that the following facts and circumstances
are, and, as at the Closing Date shall be, true and correct and acknowledges
that such facts and circumstances constitute the basis upon which CMI is induced
to enter into this Agreement:
(a) Shares. The number of shares of Common Stock of the
Company set forth opposite such Shareholder's name on Exhibit A are
owned of record and beneficially by such Shareholder free and clear of
any and all covenants, conditions, restrictions, voting trust
arrangements,
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EXHIBIT 10.18
liens, pledges, charges, claims, encumbrances, options and rights
whatsoever. Upon the Closing, CMI shall own, of record and beneficially,
all of such shares of Common Stock, free and clear of any and all
covenants, conditions, restrictions, voting trust arrangements, liens,
pledges, charges, claims, encumbrances, options and rights whatsoever.
(b) Authorization. This Agreement is a valid and binding
obligation of such Shareholder, enforceable in accordance with its
terms.
(c) Independent Decision. CMI has made no representations
or warranties whatsoever as to the legal, financial or tax consequences
to the Shareholder arising from or in connection with this Agreement.
Such Shareholder has consulted with his own attorneys and financial and
tax advisors and independently decided to enter into this Agreement.
8. Covenants of the Shareholders. Each Shareholder agrees that
prior to the Final Determination Date or December 31, 2001, whichever is later:
(a) Such Shareholder shall not, in the geographic areas
where the Company does business or plans to do business, on behalf of
other than the Company or CMI (or its subsidiaries), engage or be
interested, directly or indirectly, for himself or herself or for any
other person, as principal, agent, employer, employee, officer,
director, partner, salesman, supervisor, consultant or otherwise, in any
business or activity which is competitive with the principal business
conducted by the Company, namely, manufacturing and selling equipment
for airways modernization and vessel traffic navigation. The provisions
of this paragraph (a) shall expire as to the Eustace Group if the active
involvement in the business of the Company of Xxxxx X. Xxxxxxx is
terminated other than for cause (as defined hereinafter). Similarly, the
provisions of this paragraph (a) shall expire as to the Xxxxxx Group if
the active involvement in the business of the Company of Xx. X. Xxxxxx
is terminated other than for cause (as defined hereinafter).
(b) All trade secrets, confidential or proprietary
information with respect to products, plans, marketing, and internal
business and financial matters (collectively "Trade Secrets") which were
learned by him or her in the course of his or her involvement with the
Company or CMI, and any other Trade Secrets received, developed or
learned in the course
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EXHIBIT 10.18
of such employment, or received, developed or learned hereafter in the
course of his or her future employment by or in association with the
Company or CMI (or its subsidiaries) shall be treated as confidential
and shall never be disclosed, other than as expressly authorized by CMI
or the Company, or if the same become generally available to the public
otherwise than by disclosure by him or her.
(c) He or she shall not induce any person who is an
employee of CMI (or its subsidiaries) or the Company on this date or who
shall become or continue as an employee of the Company or CMI (or its
subsidiaries) hereafter to leave said employ for the period of this
Covenant.
Each Shareholder acknowledges that the remedy at law for any breach of this
Covenant is inadequate and CMI and the Company shall be entitled to
injunctive relief. This Covenant may be assigned by CMI to, or devolve upon,
any successor in interest to all or substantially all of its business and
assets. It is the intent of the parties hereto that in the event one or more
provisions, or any part thereof of this Covenant shall be held unenforceable
for any reason, this Covenant shall be construed to the maximum extent permitted
by law in a manner consistent with the intent of the parties as herein
expressed.
9. No Brokerage Fee. No party to this Agreement has committed or
agreed on behalf of itself or himself, or any other party hereto, to pay any
brokerage or finder's fees or commissions. Each party hereto agrees to indemnify
and hold the other parties hereto harmless against and in respect of any
obligations or liabilities such party may have incurred, contingent or
otherwise, for brokerage or finders' fees or agents commissions or other like
payment in connection with this Agreement or the transactions contemplated
hereby.
10. Expenses. CMI, the Company, the Xxxxxx Group and the Eustace
Group shall pay all their own respective expenses in connection herewith,
including, without limiting the foregoing, legal and accounting fees.
11. Survival of Representations and Warranties. All
representations, warranties, and agreements contained herein or made in writing
by or on behalf of any of the parties in connection with the transaction
contemplated hereby shall survive the execution and delivery of this
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EXHIBIT 10.18
Agreement, any investigation at any time made by or on behalf of any party, and
the closing of the transaction contemplated hereby.
12. Termination.
(a) CMI may terminate all of its obligations under this
Agreement effective upon written notice at any time from and after the
occurrence of either of the following: (i) the Company fails to have
Booked Amounts of an aggregate of $10,000,000 or more on or before June
30, 1997; or (ii) Backlog falls below $500,000 at any time from and
after July 1, 1998. Upon termination pursuant to this paragraph (a),
there shall be no further payments under either Section 2 or Section 3
of this Agreement.
(b) CMI may terminate its obligations to the Eustace Group
under this Agreement effective upon written notice if Xxxxx X. Xxxxxxx'x
active involvement in the business of the Company (as an employee or
consultant) is terminated by the Company (or CMI) "for cause." Upon
termination pursuant to this paragraph (b), there shall be no further
payments under Section 2 of this Agreement.
(c) CMI may terminate its obligations to the Xxxxxx Group
under this Agreement effective upon written notice if Xx. X. Xxxxxx'x
active involvement in the business of the Company (as an employee or
consultant) is terminated by the Company (or CMI) "for cause." Upon
termination pursuant to this paragraph (b), there shall be no further
payments under Section 3 of this Agreement.
(d) For purposes of this Agreement, the following shall
constitute grounds to terminate the active involvement in the business
of the Company of Xx. Xxxxxxx or Xx. Xxxxxx, as the case may be, "for
cause":
i) his death, disability for 90 or more days, or
voluntary resignation as an employee or a consultant;
ii) his failure, refusal or neglect to perform his
duties or obligations to the Company or CMI, provided he is given
written notice of intent to terminate and fails to cure the same
within 30 days after such written notice is given;
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EXHIBIT 10.18
iii) his gross negligence in the performance of his
duties to the Company or CMI in a manner which is materially
adverse, monetarily or otherwise, to CMI or its subsidiaries or
affiliates;
iv) a finding by a court or other governmental body
that one or more of his acts constituted a felony or other crime
involving theft, fraud or dishonesty under the laws of the United
States, any state thereof or any other country;
v) his violation of any law or regulation, or his
engaging in dishonesty intended to cause personal enrichment at
the expense of CMI or its subsidiaries, and in either case a good
faith determination by CMI that his continued involvement in the
business of the Company would be seriously detrimental to the
company or CMI and its business or reputation; or
vi) his material breach of any provision of Section 8.
If there is a dispute about whether a termination "for cause" is proper
or improper and the parties fail to resolve the dispute, either involved
party may submit the matter to binding arbitration pursuant to Section
17.
(e) CMI covenants that until the earliest to occur of (i)
the Final Determination Date, (ii) the date on which Backlog of the
Company falls below $250,000, or (iii) the date, if any, on which the
active involvement of Xxxxx X. Xxxxxxx or Xx. X. Xxxxxx, as the case may
be, has been terminated "for cause," CMI may not terminate the rights of
the Eustace Group or Xxxxxx Group, respectively, to additional payments
provided for in Sections 2 and 3 above, as the case may be. However, and
notwithstanding anything to the contrary, the Company or CMI may
terminate the active involvement in the business of the Company of Xx.
Xxxxxxx, Xx. Xxxxxx or both, without cause; provided that, and in either
such event, termination would not affect the rights of the Eustace Group
or Xxxxxx Group, respectively, to the additional payments provided for
in Sections 2 and 3 above, as the case may be.
13. Notices. All notices, requests, demands and other
communications which are required to be given or which may be given under this
Agreement shall be in writing and shall be deemed to have been duly given if
delivered or mailed, first class mail, postage prepaid:
-15-
16
EXHIBIT 10.18
(a) if to Xxxxx X. Xxxxxxx or the Eustace Group, to Xxxxx X.
Xxxxxxx, 0000 Xxxxxxxxxx Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000;
(b) if to Xx. X. Xxxxxx or the Xxxxxx Group, to Xx. X. X.
Xxxxxx, 0000 Xxxxxxxx Xxxx, Xxxxx 000, Xxxxxxxxxx, XX 00000;
(c) if to CMI, to the attention of President, Government
Group, California Microwave, Inc., 000 Xxxx Xxxxxxx Xxxxx, Xxxxxxx Xxxx,
XX 00000; or
(d) to such other address as any other party shall have
specified by notice in writing to the other party.
14. Entire Agreement. This writing contains the entire agreement
of the parties hereto and expressly supersedes the Shareholders' Agreement, the
terms of which are hereby terminated and extinguished. This Agreement may not be
modified, altered or changed in any manner whatsoever, except by a written
agreement signed by the parties hereto.
15. Binding Effect, Benefits. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns; nothing in this Agreement, expressed or
implied, is intended to confer on any other person other than the parties hereto
or their respective successors and permitted assigns, any rights, remedies,
obligations or liabilities under or by reasons of this Agreement.
16. Assignability. Notwithstanding anything in Section 15 above
to the contrary, this Agreement shall not be assignable by any party hereto
without the prior written consent of the other parties, provided that this
Agreement shall be assignable to any person or entity that acquires
substantially all of the assets of CMI, the Government Group of CMI or the
Company.
17. Arbitration. Any dispute, controversy or claim between the
parties arising out of or in connection with Section 4(c) or Section 12 of this
Agreement which the parties fail to resolve by negotiation shall be resolved in
accordance with the provisions of this Section 17. Any party may demand, by
written notice to the other parties, that any covered dispute be submitted to
arbitration conducted according to the provisions of this Section. If the
parties mutually agree upon one or more individual(s) to arbitrate the dispute,
such
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EXHIBIT 10.18
individuals shall arbitrate the dispute. If the parties mutually agree upon the
rules for conducting the arbitration, such rules shall govern the arbitration.
If, however, the parties cannot agree upon the identity of the arbitrators
and/or the rules for conducting the arbitration within fifteen (15) days after
the notice demanding arbitration, either parties may request the American
Arbitration Association (the "AAA"), to appoint, on an expedited basis, an
arbitrator who shall have substantial experience as an arbitrator, be
experienced in the subject matter of the dispute and be able to commence the
arbitration proceedings (with at least an initial hearing), according to the
requirements of this Section and other complimentary rules of the American
Arbitration Association, within thirty (30) days after appointment. The parties
shall exchange demands for relief and responses thereto, and may serve their
requests for production of documents pursuant to the Uniform Arbitration Act,
prior to the initial hearing. The arbitration proceedings shall be completed
within thirty (30) days after the initial hearing and the arbitrator's decision
shall be provided to the parties within thirty (30) days thereafter. The
decision of the arbitrator shall be final and binding provided such decision is
set forth in a writing by the arbitrator which recites the decision and all
findings and orders relative to the implementation thereof including, without
limitation, the amount and/or nature of any awards and the allocation of
responsibility among the parties to pay the AAA fees and the fees of the
attorneys and other professionals incurred by the parties, in accordance with
this Section. The arbitrator's decision may be enforced by any court of
competent jurisdiction. The place of arbitration shall be San Francisco,
California.
18. Paragraph and Other Headings. The paragraph and other
headings contained in this Agreement are for reference purposes only and shall
not affect the meaning or interpretation of this Agreement.
19. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
20. California Law. This Agreement shall be construed and
interpreted in accordance with the laws of the State of California.
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EXHIBIT 10.18
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
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EXHIBIT 10.18
21. Attorneys Fees. In the event of any dispute under this
Agreement, the prevailing party shall be entitled to recovery of reasonable
attorneys fees.
IN WITNESS WHEREOF, this Agreement was executed as of the date
first above written.
CALIFORNIA MICROWAVE, INC.
By:_____________________________
Title:__________________________
CALIFORNIA MICROWAVE
NAVIGATION SYSTEMS, INC.
By:_____________________________
Title:__________________________
XXXXXX INTERNATIONAL
ASSOCIATES
By:_____________________________
Title:__________________________
________________________________
XXXXX X. XXXXXXX
________________________________
XXXXXXX XXXXXXX
________________________________
XX. X. XXXXXX
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EXHIBIT 10.18
EXHIBIT A
Name Shares
---- ------
Xxxxx X. Xxxxxxx and Xxxxxxx Xxxxxxx 4,000
Xxxxxx International Associates 500
Xx. X. Xxxxxx 300
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21
EXHIBIT 10.18
EXHIBIT B
(Page 1 of 2)
EXAMPLE - UKRAINE PROJECTS
($Millions)
FY96 FY97 FY98 FY99 FY00 FY01 FY02 TOTAL
---- ---- ---- ---- ---- ---- ---- -----
UKRAINE PROJECTS
----------------
BOOKINGS 22.00 0.00 0.00 0.00 22.00
ENDING BACKLOG 22.00 10.00 0.00 0.00
SALES 0.00 12.00 10.00 0.00 22.00
GROSS MARGIN 0.00 3.00 2.50 0.00 5.50
EXPENSES -2.00 -0.63 -0.60 -0.60 0.00 -3.83
SUCCESS FEES 1.60 0.00 0.00 0.00 1.60
----- ----- ----- ----- ----
OPERATING PROFIT -2.00 0.97 2.40 1.90 0.00 0.00 3.27
SPONSOR LOAN -4.00 -4.00 2.00 3.00 3.00 0.00
INTEREST INCOME 0.00 0.00 0.85 0.63 1.32 2.80
----- ----- ----- ----- ----- ----
PRETAX PROFIT -2.00 0.97 -1.60 -2.1 2.85 3.63 4.32 6.07
CUMM PRETAX -2.00 -1.03 -2.63 -4.73 -1.88 1.75 6.07
TAX PAYMENTS 0.61 1.51 2.12
NET ASSETS 0.08 1.65 2.60 1.00 0.00 0.00 0.00
CASH FLOW -2.08 -0.60 -2.55 -0.50 3.85 3.02 2.81 3.95
XXXX XXXX XXXX -0.00 -0.00 -0.00 -0.00 1.14 3.95
PAYMENTS EARNED
FY96 FY97 FY98 FY99 FY00 FY01 FY02 TOTAL
---- ---- ---- ---- ---- ---- ---- -----
2b[i] Eustace 0.220 0.000 0.000 0.220
3b[i] Xxxxxx 0.220 0.000 0.000 0.220
2b[ii] Eustace 0.031 0.076 0.060 0.000 0.167
3b[ii] Xxxxxx 0.027 0.068 0.054 0.000 0.149
2b[iii] Eustace 0.147 0.147
3b[iii] Xxxxxx 0.083 0.083
----- -----
Year Total 0.498 0.144 0.114 0.000 0.000 0.230 0.986
TOTAL EUSTACE 0.251 0.076 0.060 0.000 0.000 0.147 0.534
TOTAL XXXXXX 0.247 0.068 0.054 0.000 0.000 0.083 0.452
22
EXHIBIT 10.18
EXHIBIT B
(Page 2 of 2)
EXAMPLE - NON-UKRAINE PROJECTS
($Millions)
FY96 FY97 FY98 FY99 FY00 FY01 TOTAL
---- ---- ---- ---- ---- ---- -----
NON-UKRAINE
PROJECTS
-----------
BOOKINGS 2.00 8.00 10.00 12.00 32.00
ENDING BACKLOG 0.00 5.00 7.00 9.00
SALES 2.00 3.00 8.00 10.00 23.00
GROSS MARGIN 0.50 0.75 2.00 2.50 5.75
XXXXXXXX -0.00 -0.00 -0.00 -0.00 -0.00
SUCCESS FEES 0.00 0.00 0.00 0.00 0.00
----- ----- ----- ----- ----
OPERATING PROFIT 0.35 0.20 1.30 1.30 3.15
SPONSOR LOAN 0.00 0.00 0.00 0.00 0.00 0.00
INTEREST INCOME 0.00 0.00 0.00 0.00 0.00
------ ------ ------ ----- ----
PRETAX PROFIT 0.35 0.20 1.30 1.30 0.00 3.15
CUMM PRETAX 0.35 0.55 1.85 3.15 3.15
TAX PAYMENTS 0.12 0.07 0.46 0.46 0.00 1.10
NET ASSETS 0.00 1.50 1.30 2.60 1.00 0.00
CASH FLOW 0.00 -1.27 0.33 -0.46 2.45 1.00 2.05
XXXX XXXX XXXX -0.00 -0.00 -0.00 1.05 2.05
CCF + 6% BACKLOG 2.59
PAYMENTS EARNED
FY96 FY97 FY98 FY99 FY00 FY01 TOTAL
---- ---- ---- ---- ---- ---- -----
2b[i] Eustace 0.033 0.133 0.167 0.333
3b[i] Xxxxxx 0.007 0.027 0.033 0.067
2b[ii] Eustace 0.017 0.010 0.065 0.065 0.157
3b[ii] Xxxxxx 0.004 0.002 0.013 0.013 0.032
2b[iii] Eustace 0.048 0.048
3b[iii] Xxxxxx 0.010 0.010
----- -----
Year Total 0.061 0.172 0.278 0.078 0.058 0.647
TOTAL EUSTACE 0.051 0.143 0.232 0.065 0.048 0.539
TOTAL XXXXXX 0.010 0.029 0.046 0.013 0.010 0.108
