-----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, EpQaLYks098Imug3gbTN5IoFtb4pjuNF6/WNECHRQ31D0V5OXS6wvNtc+1P6OpQz RypgkYQ5f+h+X5doR9dgbQ== 0000730255-04-000075.txt : 20041012 0000730255-04-000075.hdr.sgml : 20041011 20041012161356 ACCESSION NUMBER: 0000730255-04-000075 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20040831 FILED AS OF DATE: 20041012 DATE AS OF CHANGE: 20041012 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CalAmp Corp. 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-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-12182 FILM NUMBER: 041074963 BUSINESS ADDRESS: STREET 1: 1401 N. RICE AVENUE CITY: OXNARD STATE: CA ZIP: 93030 BUSINESS PHONE: 8059879000 MAIL ADDRESS: STREET 1: 1401 N. RICE AVENUE CITY: OXNARD STATE: CA ZIP: 93030 FORMER COMPANY: FORMER CONFORMED NAME: CALIFORNIA AMPLIFIER INC DATE OF NAME CHANGE: 19920703 10-Q 1 fy05-10q_q2.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10 - Q (Mark One) [X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended: August 31, 2004 _________________ [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to __________ ____________ Commission File Number: 0-12182 Exact Name of Registrant as Specified in Its Charter: CalAmp Corp. _______________________ DELAWARE 95-3647070 _______________________________ _______________ State or Other Jurisdiction of I.R.S. Employer Incorporation or Organization Identification No. Address of Principal Executive Offices: 1401 N. Rice Avenue Oxnard, CA 93030 Registrant's Telephone Number: (805) 987-9000 California Amplifier, Inc. __________________________________________ Former name, Former Address and Former Fiscal Year, if Changed since Last Report 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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X] The registrant had 23,197,245 shares of Common Stock outstanding as of October 7, 2004. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CALAMP CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands except par value amounts) August 31, February 28, 2004 2004 Assets -------- -------- Current assets: Cash and cash equivalents $ 25,268 $ 22,885 Accounts receivable, less allowance for doubtful accounts of $845 and $211, respectively 25,621 18,579 Inventories, net 25,208 20,253 Deferred income tax assets 1,814 2,404 Prepaid expenses and other current assets 3,915 3,244 -------- -------- Total current assets 81,826 67,365 Equipment and improvements, at cost, net of accumulated depreciation and amortization 5,125 4,381 Deferred income tax assets, less current portion 3,292 4,359 Goodwill 100,942 20,938 Other intangible assets, net 4,800 200 Deposits and other assets 2,346 399 -------- -------- $198,331 $ 97,642 ======== ======== Liabilities and Stockholders' Equity Current liabilities: Bank line of credit payable $ 3,000 $ - Current portion of long-term debt 2,946 3,603 Accounts payable 23,428 17,395 Accrued payroll and employee benefits 3,820 1,513 Other current liabilities 4,787 2,078 Deferred revenue 1,647 - -------- -------- Total current liabilities 39,628 24,589 -------- -------- Long-term debt, less current portion 6,116 7,690 -------- -------- Commitments and contingencies Stockholders' equity: Preferred stock, $.01 par value; 3,000 shares authorized; no shares issued or outstanding - - Common stock, $.01 par value; 40,000 shares authorized; 23,194 and 14,910 shares issued and outstanding, respectively 232 149 Additional paid-in capital 138,145 44,486 Less common stock held in escrow (9,594) - Retained earnings 24,605 21,550 Accumulated other comprehensive loss (801) (822) -------- -------- Total stockholders' equity 152,587 65,363 -------- -------- $198,331 $ 97,642 ======== ======== See notes to unaudited consolidated financial statements. CALAMP CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands except per share amounts) Three Months Ended Six Months Ended August 31, August 31, ------------------- ------------------- 2004 2003 2004 2003 ------- ------- ------- ------- Revenues: Product sales $45,094 $24,197 $86,750 $42,763 Service revenues 5,733 - 9,074 - ------- ------- ------- ------- Total revenues 50,827 24,197 95,824 42,763 ------- ------- ------- ------- Cost of revenues: Cost of product sales 36,138 20,997 70,262 38,257 Cost of service revenues 4,365 - 6,937 - ------- ------- ------- ------- Total cost of revenues 40,503 20,997 77,199 38,257 ------- ------- ------- ------- Gross profit 10,324 3,200 18,625 4,506 ------- ------- ------- ------- Operating expenses: Research and development 2,068 1,236 3,875 2,598 Sales and marketing 1,732 549 2,804 1,043 General and administrative 3,179 843 5,624 1,661 Amortization of intangibles 461 26 721 52 In-process research and development write-off - - 471 - ------- ------- ------- ------- Total operating expenses 7,440 2,654 13,495 5,354 ------- ------- ------- ------- Operating income (loss) 2,884 546 5,130 (848) Non-operating expense, net (75) (129) (139) (182) ------- ------- ------- ------- Income (loss) before income taxes 2,809 417 4,991 (1,030) Income tax (provision) benefit (1,063) (27) (1,936) 318 ------- ------- ------- ------- Net income (loss) $ 1,746 $ 390 $ 3,055 $ (712) ======= ======= ======= ======= Net income (loss) per share: Basic $ 0.08 $ 0.03 $ 0.15 $ (0.05) Diluted $ 0.08 $ 0.03 $ 0.14 $ (0.05) Shares used in per share calculations: Basic 22,292 14,747 20,524 14,746 Diluted 22,809 14,916 21,224 14,746 See notes to unaudited consolidated financial statements. CALAMP CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Six months ended August 31, --------------------- 2004 2003 ------- ------- Cash flows from operating activities: Net income (loss) $ 3,055 $ (712) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 2,075 1,613 Write-off of in-process research and development 471 - Equipment impairment writedowns 201 575 Gain on sale of equipment (36) (117) Increase in equity associated with tax benefit from exercise of stock options 179 - Deferred tax assets, net 1,657 (289) Changes in operating assets and liabilities: Accounts receivable (1,960) 3,169 Inventories (4,278) 1,162 Prepaid expenses and other assets 1,537 (278) Accounts payable 3,802 (222) Accrued payroll and other accrued liabilities (1,092) (1,786) Deferred revenue 116 - ------- ------- Net cash provided by operating activities 5,727 3,115 ------- ------- Cash flows from investing activities: Capital expenditures (1,243) (978) Proceeds from sale of property and equipment 627 285 Acquisition of Vytek Corporation, net of cash acquired (1,727) - ------- ------- Net cash used in investing activities (2,343) (693) ------- ------- Cash flows from financing activities: Proceeds from debt borrowings 2,000 - Debt repayments (3,557) (1,301) Proceeds from exercise of stock options 556 12 ------- ------- Net cash used in financing activities (1,001) (1,289) ------- ------- Net change in cash and cash equivalents 2,383 1,133 Cash and cash equivalents at beginning of period 22,885 21,947 ------- ------- Cash and cash equivalents at end of period $25,268 $23,080 ======= ======= See notes to unaudited consolidated financial statements. CALAMP CORP. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Six Months Ended August 31, 2004 and 2003 Note 1 - DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION CalAmp Corp. ("CalAmp" or the "Company"), formerly known as California Amplifier, Inc., designs, manufactures and markets microwave equipment used in the reception of television programming transmitted from satellites and wireless terrestrial transmission sites, and two-way transceivers used for wireless high-speed Internet (broadband) service. The Company's principal business is the design and sale of outdoor reception equipment used in the U.S. Direct Broadcast Satellite ("DBS") subscription television market. On April 12, 2004, the Company completed the acquisition of Vytek Corporation ("Vytek"), a privately held company. The operations of Vytek are included in the Company's consolidated financial statements since that date. See Notes 2 and 13 for additional information concerning Vytek. Effective with the acquisition of Vytek, the Company realigned its operations into a divisional structure. The legacy operations of CalAmp, previously segregated into the Satellite and Wireless Access business units, have been combined and are now referred to as the Products Division. The operations of Vytek, which are principally service oriented, comprise the Company's Solutions Division. All intercompany transactions and accounts have been eliminated in consolidation. In the opinion of the Company's management, the accompanying consolidated financial statements reflect all adjustments necessary to present fairly the Company's financial position at August 31, 2004 and its results of operations for the three and six months ended August 31, 2004 and 2003. The results of operations for such periods are not necessarily indicative of results to be expected for the full fiscal year. The Company uses a 52-53 week fiscal year ending on the Saturday closest to February 28, which for fiscal year 2004 fell on February 28, 2004. The actual interim periods ended on August 28, 2004 and August 30, 2003. In the accompanying consolidated financial statements, the 2004 fiscal year end is shown as February 28 and the interim period end for both years is shown as August 31 for clarity of presentation. Certain notes and other information are condensed or omitted from the interim financial statements presented in this Quarterly Report on Form 10-Q. Therefore, these financial statements should be read in conjunction with the Company's 2004 Annual Report on Form 10-K as filed with the Securities and Exchange Commission on May 28, 2004. Certain prior year amounts have been reclassified to conform to the current year presentation. Note 2 - VYTEK ACQUISITION On April 12, 2004, the Company completed the acquisition of Vytek, a privately held company headquartered in San Diego, California, pursuant to a merger agreement entered into and announced on December 23, 2003. The transaction was approved by the stockholders of both companies during special meetings held on April 8, 2004. Vytek is a provider of technology integration solutions involving a mix of professional services and proprietary software and hardware products, serving the needs of enterprise customers and original equipment manufacturers. This acquisition was motivated primarily by the strategic goals of increasing the Company's presence in markets which offer higher growth and profit margin potential, and diversifying the Company's business and customer base beyond its current dependence on the two major U.S. DBS system operators. Pursuant to the Agreement, the Company issued approximately 8,123,400 shares of common stock as the purchase consideration, of which 854,700 share were placed into an escrow account and approximately 7,268,700 shares were issued to the selling shareholders of Vytek. The Company also assumed all unexercised Vytek stock options and stock purchase warrants that were outstanding at the time of the merger. The Company entered into an escrow agreement with a designated representative of the selling stockholders of Vytek and an independent escrow agent. Under the terms of the escrow agreement, the 854,700 shares of the CalAmp's common stock deposited into the escrow fund serve as security for potential indemnity claims by the Company under the acquisition agreement. The acquisition agreement provides that in the event Vytek's balance sheet as of the acquisition date reflects working capital (as defined in the acquisition agreement) of less than $4 million, then CalAmp can recover such deficiency from the escrow fund (the "Working Capital Adjustment"). Vytek's stockholder representative may direct the sale of some or all of the escrow shares for a price of at least $11.00 per share, and deposit the proceeds received from such sale into the escrow fund. Subject to any claims by the Company for indemnification or for the Working Capital Adjustment, except for an amount equal in value to $2 million, all shares of the Company's common stock and any cash in the escrow fund would be released to the selling stockholders of Vytek, in accordance with their pro rata interests, 15 months after the April 12, 2004 closing date. All remaining shares of the Company's common stock, if any, and any remaining cash in the escrow fund would be released to the Vytek selling stockholders two years after the April 12, 2004 closing date, subject to any then pending and unresolved claims for indemnification or the Working Capital Adjustment. Based on the information currently available, the Company estimates that Vytek's working capital (as defined in the acquisition agreement) as of the April 12, 2004 closing date was approximately $5 million below the required working capital amount of $4 million. This deficiency amount has not yet been agreed to by the selling stockholders of Vytek. The Company is currently in discussions with the designated representative of Vytek's selling stockholders to determine the final amount of the Working Capital Adjustment. For purchase accounting purposes, the fair market value per share used to value the approximately 7,269,000 shares issued to the Vytek selling stockholders is $11.26 per share, which is the average closing price of the Company's common stock on the NASDAQ National Market for the period beginning two trading days before and ending two trading days after December 23, 2003, the day that the merger terms were agreed to and announced. Also for purchase accounting purposes, the fair value of the Vytek options and warrants assumed by the Company in the merger was calculated using the Black-Scholes option pricing model. The fair value of options and warrants assumed was estimated using the Black-Scholes option pricing model with an interest rate of 3.3%, a dividend yield of 0%, a volatility factor of 134.8%, and an expected life of 5 years in the case of stock options and 2.25 years to 9.25 years in the case of warrants. Following is the calculation of the recorded value of common stock issued and options and warrants assumed in the Vytek acquisition (in thousands): Deposited Issued to to escrow sellers account Total ------ ------- ----- Number of common stock shares issued 7,268.7 854.7 8,123.4 Fair market value per share $ 11.26 $ 11.26 ------ ------ Value of shares issued $81,846 $ 9,624 $91,470 Less stock registration costs (270) (30) (300) ------ ------ ------ Fair value of shares issued net of registration costs 81,576 9,594 91,170 Fair value of fully vested Vytek stock options and warrants assumed by CalAmp 1,837 - 1,837 ------ ------ ------ Recorded value of common stock issued and assumed options and warrants $83,413 $ 9,594 $93,007 ====== ====== ====== The common stock shares deposited to the escrow account are, for accounting purposes, treated as contingent consideration, and accordingly are excluded from the purchase price determination until such time as the shares are released from escrow. The Company has not yet obtained all information required to complete the purchase price allocation related to the Vytek acquisition. The final allocation is expected to be completed by the end of fiscal 2005. Following is a preliminary purchase price allocation for the Vytek acquisition (in thousands): Recorded value of common stock issued to sellers and assumed options and warrants (excluding shares deposited to escrow account) ............................... $83,413 Direct costs of acquisition including legal, accounting and financial advisory fees ..................... 2,580 ------ Total cost of Vytek acquisition (excluding common stock deposited to escrow account) ......................... 85,993 Fair value of net assets acquired: Current assets .................................... $ 9,266 Property and equipment ............................ 1,185 Intangible assets: Developed/core technology ............. $3,349 Customer lists ........................ 1,127 Contracts backlog ..................... 845 In-process research and development ... 471 ----- Total intangible assets........................ 5,792 Other assets ...................................... 2,066 Current liabilities ............................... (12,024) Long-term liabilities ............................. (296) ------ Total fair value of net assets acquired ................... 5,989 ------ Goodwill ..................................................... $80,004 ====== The goodwill arising from this acquisition is not expected to be deductible for income tax purposes. The $471,000 allocated to in-process research and development in the preliminary purchase price allocation above was charged to expense immediately following the acquisition. The Company expects to incur approximately $300,000 to complete the in-process technology. The following is supplemental pro forma information presented as if the acquisition of Vytek had occurred at the beginning of each of the respective periods (in thousands): Six months Ended Six Months Ended August 31, 2004 August 31, 2003 -------------------- ------------------ As Pro As Pro reported forma reported forma -------- -------- -------- ------- Revenues $95,824 $99,985 $42,763 $67,090 Net income (loss) $ 3,055 $ 2,967 $ (712) $(2,006) Net income (loss) per share: Basic $ 0.15 $ 0.13 $ (0.05) $ (0.09) Diluted $ 0.14 $ 0.13 $ (0.05) $ (0.09) The pro forma adjustments for the six months ended August 31, 2004 consist of adding Vytek's estimated results of operations for the six weeks ended April 12, 2004, because Vytek is included in the "As reported" amounts for the 20 week period from the April 12 acquisition date to August 31, 2004. The pro forma adjustments for the six months ended August 31, 2003 consist of adding Vytek's results of operations for the six months ended September 30, 2003. Note 3 - INVENTORIES Inventories include the cost of material, labor and manufacturing overhead, are stated at the lower of cost (determined on the first-in, first-out method) or market, and consist of the following (in thousands): August 31, February 28, 2004 2004 ------ ------ Raw materials and subassemblies $18,867 $11,671 Work in process 666 417 Finished goods 5,675 8,165 ------ ------ $25,208 $20,253 ====== ====== Note 4 - GOODWILL AND OTHER INTANGIBLE ASSETS As a result of adopting Statement of Financial Accounting Standards No. 142, "Accounting for Goodwill and Intangible Assets", at the beginning of fiscal 2003, the Company no longer records amortization on goodwill. Instead, goodwill is tested periodically for impairment. Annual goodwill impairment tests were conducted as of December 31, 2003 and 2002. These tests indicated that there was no impairment of goodwill as of those dates. Because of the write-down of certain assets in the Products Division in the three months ended May 31, 2003, the Company conducted an interim goodwill impairment test as of May 31, 2003. This test also indicated that there was no impairment of goodwill. The Company used a discounted cash flow approach to estimate the fair value of its Products Division in these impairment tests. The change in the carrying amount of goodwill for the six months ended August 31, 2004 is as follows: Balance as of February 28, 2004 $ 20,938 Estimated goodwill arising from the acquisition of Vytek in April 2004 80,004 ------- Balance as of August 31, 2004 $100,942 ======= The goodwill arising from the Vytek transaction is an estimated amount based on the preliminary purchase price allocation, and is subject to change. The goodwill balance at February 28, 2004 is associated with the Company's Products Division. Substantially all goodwill arising from the Vytek acquisition is associated with the Company's Solutions Division. Intangible assets are comprised as follows at August 31, 2004 and February 28, 2004 (in thousands): August 31, 2004 February 28, 2004 ------------------------ ------------------------- Amorti- Gross Accum. Gross Accum. zation Carrying Amorti- Carrying Amorti- Period Amount zation Net Amount zation Net ----- ------ ------ ----- ------ ------ ----- Developed/core technology 5 yrs. $3,349 $ 257 $3,092 $ - $ - $ - Customer lists 5 yrs. 1,127 87 1,040 - - - Contracts backlog 1 yr. 845 325 520 - - - Covenants not to compete 4.1 yrs. 400 252 148 400 200 200 ------ ----- ----- ----- ----- ----- $5,721 $ 921 $4,800 $ 400 $ 200 $ 200 ====== ====== ===== ===== ===== ===== All intangible assets in the table above resulted from the acquisition of Vytek in April 2004 except for the covenants not to compete, which arose from the acquisition of the satellite dish manufacturing business of Kaul- Tronics in April 2002. Amortization expense of intangible assets was $721,000 and $52,000 in the six months ended August 31, 2004 and 2003, respectively. The weighted average amortization period of the intangible assets at August 31, 2004 was 4.3 years. Estimated amortization expense for the fiscal years ending February 28 is as follows: 2005 $1,644,000 2006 $1,087,000 2007 $ 895,000 2008 $ 895,000 2009 $ 895,000 2010 $ 105,000 Note 5 - FINANCING ARRANGEMENTS AND CONTRACTUAL CASH OBLIGATIONS Bank credit facility The Company has a $10 million working capital line of credit with a commercial bank. Borrowings under this line of credit bear interest at LIBOR plus 2.0% or the bank's prime rate, and are secured by substantially all of the Company's assets. The maturity date of the line of credit is August 3, 2005. At August 31, 2004, there were outstanding borrowings of $3 million on the line of credit and $2,479,000 was reserved under the line for issued letters of credit. The $3 million outstanding balance on the line of credit is classified as a current liability at August 31, 2004 because the line of credit matures within 12 months of that date. The Company also has two bank term loans which had an aggregate outstanding principal balance of $8,876,000 at August 31, 2004, of which $2,823,000 is classified as current at that date. The bank credit agreement which encompasses the line of credit and the two term loans contains a subjective acceleration clause which enables the bank to call the loans in the event of a material adverse change (as defined) in the Company's business. Based on the Company's history of profitable operations and positive operating cash flow over the past several years, and based on the Company's internal financial forecasts for the next several quarters, the Company does not believe it is probable that the bank will assert the material adverse change clause in the next 12 months. At the time it was acquired by the Company on April 12, 2004, Vytek had $2 million outstanding on a line of credit with another commercial bank. Shortly after the acquisition was consummated, the Company borrowed $2 million on its bank line of credit and paid off Vytek's bank line of credit. Vytek's bank line of credit was then terminated. Other long-term debt Vytek had capital lease obligations of $185,000 at August 31, 2004, of which $123,000 was classified as current at that date. Contractual cash obligations Following is a summary of the Company's contractual cash obligations as of August 31, 2004 (in thousands): Future Cash Payments Due by Fiscal Year ---------------------------------------------- Contractual 2005 There- Obligations (remainder) 2006 2007 2008 2009 after Total - --------------- ------ ------ ------ ------ ------ ------ ------ Bank debt $ 1,412 $5,823 $2,139 $2,503 $ - $ - $11,877 Capital leases 67 80 30 8 - - 185 Operating leases 1,279 2,170 1,802 1,862 1,924 3,756 12,793 Purchase obligations 23,450 422 - - - - 23,872 ------- ------ ------ ------ ------ ------ ------ Total contractual cash obligations $26,208 $8,495 $3,971 $4,373 $1,924 $3,756 $48,727 ====== ====== ====== ====== ====== ====== ====== Note 6 - INCOME TAXES Deferred income tax assets reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A deferred income tax asset is recognized if realization of such asset is more likely than not, based upon the weight of available evidence which includes historical operating performance and the Company's forecast of future operating performance. The Company evaluates the realizability of its deferred income tax assets on a quarterly basis, and a valuation allowance is provided, as necessary, in accordance with the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes". During this evaluation, the Company reviews its forecasts of future operating performance in conjunction with the positive and negative evidence surrounding the realizability of its deferred income tax asset to determine if a valuation allowance is needed. At February 28, 2004, the deferred tax asset valuation allowance was $630,000, and the deferred tax asset net of this valuation allowance was $6,763,000. The $630,000 valuation allowance relates to foreign tax credits which can be utilized only after tax loss carryforwards and other tax benefits have been fully utilized. Because these foreign tax credits have a remaining carryforward period of only two to four years, management believes that it is more likely than not that these foreign tax credits will expire unutilized, and accordingly a full valuation allowance against these credits was established. During the six months ended August 31, 2004, the deferred tax asset was reduced by $1,657,000 reflecting the utilization of tax loss carryforwards and other tax assets as a result of the taxable income generated in the period. There was no change in the $630,000 deferred tax asset valuation allowance during the six months ended August 31, 2004. The effective income tax rate was 38.1% and 30.9% in the six months ended August 31, 2004 and 2003, respectively. The increase in effective tax rate is attributable primarily to the fact that during the fiscal year ended February 28, 2004 reductions of the deferred tax asset valuation allowance caused a reduction in the overall effective income tax rate. In the six months ended August 31, 2004, there was no reduction in the valuation allowance. Vytek, which was acquired by the Company effective April 12, 2004, has tax loss carryforwards and other tax assets that the Company believes will be utilizable to some extent in the future, subject to change of ownership limitations pursuant to Section 382 of the Internal Revenue Code and to the ability of the combined post-merger company to generate sufficient taxable income to utilize the benefits before the expiration of the applicable carryforward periods. In the preliminary purchase price allocation described in Note 2 herein, no value has been assigned to Vytek's deferred tax assets, pending completion by the Company of its analysis of the estimated future realizability of these tax assets. Once this analysis is completed, to the extent value is allocated to Vytek's deferred tax assets in the final purchase price allocation, there will be a corresponding reduction in the value ascribed to goodwill. Note 7 - EARNINGS PER SHARE Basic earnings per share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects the potential dilution, using the treasury stock method, that could occur if securities or other contracts to issue Common Stock were exercised or converted into Common Stock or resulted in the issuance of Common Stock that then shared in the earnings of the Company. In computing diluted earnings per share, the treasury stock method assumes that outstanding options are exercised and the proceeds are used to purchase common stock at the average market price during the period. Options will have a dilutive effect under the treasury stock method only when the Company reports income and the average market price of the common stock during the period exceeds the exercise price of the options. The following is a summary of the calculation of weighted average shares used in the computation of basic and diluted earnings per share (in thousands): Three months ended Six months ended August 31, August 31, ---------------- ---------------- 2004 2003 2004 2003 ------ ------ ------ ------ Basic weighted average number of common shares outstanding 22,292 14,747 20,524 14,746 Effect of dilutive securities: Stock options 517 169 700 - ------ ------ ------ ------ Diluted weighted average number of common shares outstanding 22,809 14,916 21,224 14,746 ====== ====== ====== ====== Options outstanding at August 31, 2004 to purchase approximately 1,302,000 shares of Common Stock at exercise prices of $6.88 and above were excluded from the computation of diluted earnings per share for the three and six months then ended because the exercise price of these options was greater than the average market price of the common stock and accordingly the effect of inclusion would be antidilutive. Because the Company had a net loss for the six months ended August 31, 2003, outstanding stock options to purchase approximately 2,590,000 shares of common stock at exercise prices ranging from $2.76 to $50.56 would have been anti-dilutive and were therefore not included in the computation of diluted earnings per share for 2003 period. In connection with the acquisition of Vytek, 854,700 shares of common stock were issued and are held in escrow pending the resolution of certain matters as further described in Note 2 herein. All shares held in escrow have been excluded from the basic weighted average number of common shares outstanding. Of the common stock shares held in escrow, the Company estimates that all 854,700 shares would have been subject to reversion to the Company if the Working Capital Adjustment discussed in Note 2 had been finalized on August 31, 2004. For this reason, all shares held in escrow have also been excluded from diluted weighted average number of common shares outstanding. Note 8 - COMPREHENSIVE INCOME (LOSS) Comprehensive income (loss) is defined as the total of net income (loss) and all non-owner changes in equity. The following table details the components of comprehensive income (loss) for the three and six months ended August 31, 2004 and 2003 (in thousands): Three months ended Six months ended August 31, August 31, ---------------- ---------------- 2004 2003 2004 2003 ------ ------ ------ ------ Net income (loss) $1,746 $ 390 $3,055 $ (712) Unrealized holding gain (loss) on available-for-sale investments - (25) 21 (24) ------ ------ ------ ------ Comprehensive income (loss) $1,746 $ 365 $3,076 $ (736) ====== ====== ====== ====== Note 9 - STOCK OPTIONS In December 2002, the FASB issued Statement of Financial Accounting Standards No. 148, "Accounting for Stock Based Compensation - Transition and Disclosure" ("FAS No. 148"). FAS No. 148 amends Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("FAS No. 123"), to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock based employee compensation. In addition, FAS No. 148 amends the disclosure requirements of FAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. As allowed by Statement of FAS No. 123, the Company has elected to continue to measure compensation cost under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB No. 25"). Under APB No. 25, compensation expense is measured on the first date at which both the number of shares and the exercise price are known. Under the Company's stock option plans, this would typically be the grant date. To the extent that the exercise price equals or exceeds the market value of the stock on the grant date, no compensation expense is recognized. Because all of the options granted by the Company are at exercise prices not less than the market value on the date of grant, no compensation expense is recognized under this accounting treatment in the accompanying unaudited consolidated statements of operations. The fair value of options at date of grant was estimated using the Black-Scholes option pricing model with the following assumptions: Options granted during the six months ended August 31, ------------------- 2004 2003 ------ ------ Expected life (years) 5 5 Dividend yield 0% 0% The range for interest rates is 2.58% to 3.96%, and the range for volatility is 131% to 135%. The following table illustrates the effect on net income (loss) and earnings (loss) per share if the Company had applied the fair value recognition provisions of FAS 123 to stock-based employee compensation (in thousands except per share amounts): Three months ended Six months ended August 31, August 31, ---------------- ---------------- 2004 2003 2004 2003 ------ ------ ------ ------ Net income (loss) as reported $1,746 $ 390 $ 3,055 $ (712) Less total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects (596) (539) (1,168) (1,193) ----- ----- ----- ------ Pro forma net income (loss) $1,150 $ (149) $ 1,887 $(1,905) ===== ===== ===== ====== Earnings (loss) per share: Basic - As reported $ 0.08 $ 0.03 $ 0.15 $(0.05) Pro forma $ 0.05 $(0.01) $ 0.09 $(0.13) Diluted - As reported $ 0.08 $ 0.03 $ 0.14 $(0.05) Pro forma $ 0.05 $(0.01) $ 0.09 $(0.13) Note 10 - CONCENTRATION OF RISK Because the Company sells into markets dominated by a few large service providers, a significant percentage of consolidated revenue and consolidated accounts receivable relate to a small number of customers. Sales to customers which accounted for 10% or more of consolidated sales for the three and six months ended August 31, 2004 or 2003, as a percent of consolidated revenue, are as follows: Three months ended Six months ended August 31, August 31, ---------------- ---------------- Customer 2004 2003 2004 2003 -------- ------ ------ ------ ------ A 33.6% 35.5% 35.1% 34.0% B 12.8% 21.5% 14.5% 19.6% C 14.5% - 14.2% - D 6.4% 13.5% 5.4% 8.8% Accounts receivable from these customers as a percent of consolidated net accounts receivable are as follows: August 31, Feb. 28, Customer 2004 2004 -------- ------ ------ A 21.0% 49.4% B 14.9% 22.0% C 20.5% 8.2% D 2.1% 3.0% Customers A, B, C and D are customers of the Company's Products Division. Note 11 - PRODUCT WARRANTIES The Company generally warrants its products against defects over periods ranging from 3 to 24 months. An accrual for estimated future costs relating to products returned under warranty is recorded as an expense when products are shipped. At the end of each quarter, the Company adjusts its liability for warranty claims based on its actual warranty claims experience as a percentage of sales for the preceding three years plus an additional reserve amount, as required, for specific situations in which estimated warranty costs are in excess of that historical claims rate. Activity in the warranty liability for the six months ended August 31, 2004 and 2003 is as follows (in thousands): Six months ended August 31, ----------------- 2004 2003 ------ ------ Balance at beginning of period $159 $491 Charged (credited) to costs and expenses 584 (26) Deductions (254) (73) ---- ---- Balance at end of period $489 $392 ==== ==== Note 12 - OTHER FINANCIAL INFORMATION "Net cash provided by operating activities" in the consolidated statements of cash flows includes cash payments for interest and income taxes as follows (in thousands): Six months ended August 31, ------------------- 2004 2003 ------ ------ Interest paid $ 232 $ 281 Income taxes paid (net refunds received) $ 70 (93) Following is the supplemental schedule of non-cash investing and financing activities (in thousands): Six months ended August 31, ------------------- 2004 2003 ------ ------ Decrease in valuation allowance for available-for-sale investment $ 21 $ - Issuance of common stock and assumption of stock options and warrants as consideration for acquisition of Vytek Corporation, net of common stock issued and held in escrow $83,413 $ - Note 13 - SEGMENT INFORMATION Effective with the acquisition of Vytek on April 12, 2004, the Company realigned its operations into a divisional structure. The legacy operations of CalAmp, previously segregated into the Satellite and Wireless Access business units, have been combined and are now referred to as the Products Division. The operations of Vytek, which are principally service oriented, comprise the Company's new Solutions Division. Segment information for the three and six months ended August 31, 2004 and 2003 is as follows (dollars in thousands): Three months ended Three months ended August 31, 2004: August 31, 2003: ------------------------------------ ------------------------------------ Operating Segments Operating Segments ------------------- ------------------- Products Solutions Products Solutions Division Division Corporate Total Division Division Corporate Total ------- ------ ------- ----- ------- ------ ------- ----- Revenues: Products $43,056 $ 2,038 $45,094 $24,197 $ - $24,197 Services - 5,733 5,733 - - - ------ ----- ------ ------ ----- ------ Total $43,056 $ 7,771 $50,827 $24,197 $ - $24,197 ====== ===== ====== ====== ===== ====== Gross profit: Products $ 8,503 $ 453 $ 8,956 $ 3,200 $ - $ 3,200 Services - 1,368 1,368 - - - ------ ----- ------ ------ ----- ------ Total $ 8,503 $ 1,821 $10,324 $ 3,200 $ - $ 3,200 ====== ===== ====== ====== ===== ====== Gross margin: Products 19.7% 22.2% 19.9% 13.2% - 13.2% Services - 23.9% 23.9% - - - Total 19.7% 23.4% 20.3% 13.2% - 13.2% Operating income (loss) $ 6,036 $(2,083) $(1,069) $ 2,884 $ 1,040 $ - $ (494) $ 546 ====== ===== ===== ====== ====== ===== ===== ====== Six months ended Six months ended August 31, 2004: August 31, 2003: ------------------------------------ ------------------------------------ Operating Segments Operating Segments ------------------- ------------------- Products Solutions Products Solutions Division Division Corporate Total Division Division Corporate Total ------- ------ ------- ----- ------- ------ ------- ----- Revenues: Products $83,555 $ 3,195 $86,750 $42,763 $ - $42,763 Services - 9,074 9,074 - - - ------ ------ ------ ------ ----- ------ Total $83,555 $12,269 $95,824 $42,763 $ - $42,763 ====== ====== ====== ====== ===== ====== Gross profit: Products $15,769 $ 719 $16,488 $ 4,506 $ - $ 4,506 Services - 2,137 2,137 - - - ------ ----- ------ ------ ----- ------ Total $15,769 $ 2,856 $18,625 $ 4,506 $ - $ 4,506 ====== ===== ====== ====== ===== ====== Gross margin: Products 18.9% 22.5% 19.0% 10.5% - 10.5% Services - 23.6% 23.6% - - - Total 18.9% 23.3% 19.4% 10.5% - 10.5% Operating income (loss) $10,670 $(3,592) $(1,948) $ 5,130 $ 74 $ - $ (922) $ (848) ====== ===== ===== ====== ====== ===== ===== ======
Product revenue of the Solutions Division represents primarily hardware that is bundled with software applications. Included in cost of revenue for the Products Division were asset impairment writedowns of $201,000 and $575,000 during the six months ended August 31, 2004 and 2003, respectively, on plant and equipment which became idled due to increased outsourcing to contract manufacturers. Also included in Product Division cost of revenue were lower of cost or market inventory writedowns of $504,000 and $242,000 in the six months ended August 31, 2004 and 2003, respectively. As further discussed in Note 15 below, Product Division cost of revenue for the three and six months ended August 31, 2004 includes a credit of $200,000 resulting from settling a lawsuit for an amount less than the previously established reserve. The Company considers operating income (loss) to be the primary measure of profit or loss of its business segments. The amount shown for each period in the "Corporate" column above for operating income (loss) consists of corporate expenses not allocated to the business segments. Non-allocated corporate expenses include salaries and wages for the CEO and CFO, and corporate expenses such as audit fees, investor relations, stock listing fees, director and officer liability insurance, and director fees and expenses. Note 14 - COMMITMENTS AND CONTINGENCIES The Company leases its corporate office and manufacturing plant in Ventura County, California under an operating lease that expires June 30, 2011. The lease agreement requires the Company to pay all maintenance, property taxes and insurance premiums associated with the building. In addition, the Company leases office space in California, New Jersey, Virginia, New York, Minnesota and France under non-cancelable operating leases, which expire at various dates through July 2010. Some of the leases require the Company to pay maintenance, utilities and insurance costs and contain renewal options (for periods ranging from two to five years) and escalation clauses. Certain manufacturing equipment and office equipment is also leased under operating lease agreements. A summary of future operating lease commitments is included in the contractual cash obligations table in Note 5. At August 31, 2004, the Company had restricted cash in the aggregate amount of $1,805,000 securing two irrevocable letters of credit for a facility lease security deposit and a performance bond for a long-term design and engineering contract. This restricted cash amount is included in Deposits and Other Assets in the consolidated balance sheet at that date. Note 15 - LEGAL MATTERS Wage-related class action lawsuit: On April 21, 2004, the Company was served with a complaint alleging certain violations of the California labor code. Among other charges, the class action complaint alleges that from October 2000 to the present time certain hourly employees did not take their lunch break within the time period prescribed by state law. The Company established a reserve in its financial statements for the year ended February 2004 that was included in Product Division cost of revenue in the consolidated income statement. In September 2004, the Company entered into a settlement agreement with the plaintiffs that is subject to review and approval by the court. As a result of the settlement agreement, the Company lowered its reserve by $200,000 in the quarter ended August 31, 2004, which reduced Product Division cost of revenue by the same amount. Property lease lawsuit and cross-complaint On May 21, 2004, the Company was served with a lawsuit filed by the owner of a building in Camarillo, California that was formerly used as the Company's corporate offices and principal manufacturing plant under a 15-year lease agreement that expired on February 28, 2004. The lawsuit seeks damages for facility repairs that are allegedly required in the range of $520,000 to $700,000. The Company believes the lawsuit is without merit and intends to defend itself vigorously against all allegations. On May 27, 2004, the Company filed a cross-complaint, seeking payment by the building owner of approximately $180,000 in deposits and other amounts which the Company believes it is owed. The Company believes that the ultimate resolution of this matter will not have a material adverse effect on the Company's results of operations. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Critical Accounting Policies The Company's discussion and analysis of its financial condition and results of operations are based upon the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements 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 sales and expenses during the reporting periods. Areas where significant judgments are made include, but are not limited to: allowance for doubtful accounts, inventory valuation, product warranties, the deferred tax asset valuation allowance, and the valuation of long-lived assets and goodwill. Actual results could differ materially from these estimates. Allowance for Doubtful Accounts The Company establishes an allowance for estimated bad debts based upon a review and evaluation of specific customer accounts identified as known and expected collection problems, based on historical experience, due to insolvency, disputes or other collection issues. As further described in Note 10 to the accompanying consolidated financial statements, the Company's customer base is quite concentrated, with three customers accounting for approximately 64% of the Company's total revenue for the six months ended August 31, 2004. Changes in either a key customer's financial position, or the economy as a whole, could cause actual write-offs to be materially different from the recorded allowance amount. Inventories The Company evaluates the carrying value of inventory on a quarterly basis to determine if the carrying value is recoverable at estimated selling prices. To the extent that estimated selling prices do not exceed the associated carrying values, inventory carrying amounts are written down. In addition, the Company generally treats inventory on hand or committed with suppliers, which is not expected to be sold within the next 12 months, as excess and thus appropriate writedowns of the inventory carrying amounts are established through a charge to cost of revenues. Estimated usage in the next 12 months is based on firm demand represented by orders in backlog at the end of the quarter and management's estimate of sales beyond existing backlog, giving consideration to customers' forecasted demand, ordering patterns and product life cycles. Significant reductions in product pricing, or changes in technology and/or demand may necessitate additional writedowns of inventory carrying value in the future. Product Warranties The Company provides for the estimated cost of product warranties at the time revenue is recognized. While it engages in extensive product quality programs and processes, including actively monitoring and evaluating the quality of its component suppliers, the Company's warranty obligation is affected by product failure rates and material usage and service delivery costs incurred in correcting a product failure. Should actual product failure rates, material usage or service delivery costs differ from management's estimates, revisions to the estimated warranty liability would be required. Deferred Income Tax Asset Valuation Allowance The deferred income tax asset reflects the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and for income tax purposes. A deferred income tax asset is recognized if realization of such asset is more likely than not, based upon the weight of available evidence that includes historical operating performance and the Company's forecast of future operating performance. The Company evaluates the realizability of its deferred income tax asset on a quarterly basis, and a valuation allowance is provided, as necessary. During this evaluation, the Company reviews its forecasts of income in conjunction with the positive and negative evidence surrounding the realizability of its deferred income tax asset to determine if a valuation allowance is needed. At August 31, 2004 the Company's net deferred income tax asset was $5,106,000, which amount is net of a valuation allowance of $630,000. If in the future a portion or all of the $630,000 valuation allowance is no longer deemed to be necessary, reductions of the valuation allowance will decrease the income tax provision. Conversely, if in the future the Company were to change its realization probability assessment to less than 50%, the Company would provide an additional valuation allowance for all or a portion of the net deferred income tax asset, which would increase the income tax provision. Vytek, which was acquired by the Company in April 2004, has tax loss carryforwards and other tax assets that the Company believes will be utilizable to some extent in the future, subject to change of ownership limitations pursuant to Section 382 of the Internal Revenue Code and to the ability of the combined post-merger company to generate sufficient taxable income to utilize the benefits before the expiration of the applicable carryforward periods. In the preliminary purchase price allocation described in Note 2 herein, no value has been assigned to Vytek's deferred tax assets, pending completion by the Company of its analysis of the estimated future realizability of these tax assets. Once this analysis is completed, to the extent value is allocated to Vytek's deferred tax assets in an updated purchase price allocation, there will be a corresponding reduction in the value ascribed to goodwill. Valuation of Long-lived Assets and Goodwill The Company accounts for long-lived assets other than goodwill in accordance with the provisions of Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment and Disposal of Long Lived Assets" ("SFAS 144"), which supersedes Statement of Financial Accounting Standards No. 121 and certain sections of Accounting Principles Board Opinion No. 30 specific to discontinued operations. SFAS 144 classifies long-lived assets as either: (1) to be held and used; (2) to be disposed of by other than sale; or (3) to be disposed of by sale. This standard introduces a probability-weighted cash flow estimation approach to address situations where alternative courses of action to recover the carrying amount of a long-lived asset are under consideration or a range is estimated for the amount of possible future cash flows. The Company has adopted this statement, which has not had a material impact on our financial position or results of operations. SFAS 144 requires, among other things, that an entity review its long-lived assets and certain related intangibles for impairment whenever changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. During the six months ended August 31, 2004 and 2003, the Company recorded asset impairment writedowns of $201,000 and $575,000, respectively, on plant and equipment which became idled due to increased outsourcing to contract manufacturers. The Company also adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets", in March 2002. As a result, goodwill is no longer amortized, but instead is tested for impairment on an annual basis, or more frequently as impairment indicators arise. The test for impairment involves the use of estimates related to the fair values of the business operations with which goodwill is associated and is usually based on projected cash flows or a market value approach. The Company believes the estimate of its valuation of long-lived assets and goodwill is a "critical accounting estimate" because if circumstances arose that led to a decrease in the valuation it could have a material impact on the Company's results of operations. RESULTS OF OPERATIONS Effective with the acquisition of Vytek on April 12, 2004, the Company realigned its operations into a divisional structure. The legacy operations of CalAmp, previously segregated into the Satellite and Wireless Access business units, have been combined and are now referred to as the Products Division. The operations of Vytek, which are principally service oriented, comprise the Company's new Solutions Division. The operations of Vytek's products manufacturing subsidiary Vytek Products, Inc. have been combined with the Company's Products division effective at the April 12, 2004 acquisition date. The Company's revenue and gross profit by business segment are as follows: SALES BY SEGMENT Three months ended August 31, Six months ended August 31, ------------------------------- ------------------------------- 2004 2003 2004 2003 -------------- -------------- ------------- -------------- Segment % of % of % of % of (Division) $000s Total $000s Total $000s Total $000s Total - --------- ------- ----- ------- ----- ------- ----- ------- ----- Products $43,056 84.7% $24,197 100.0% $83,555 87.2% $42,763 100.0% Solutions 7,771 15.3% - - 12,269 12.8% - - ------- ----- ------- ----- ------- ----- ------- ----- Total $50,827 100.0% $24,197 100.0% $95,824 100.0% $42,763 100.0% ======= ===== ======= ===== ======= ===== ======= ===== GROSS PROFIT BY SEGMENT Three months ended August 31, Six months ended August 31, ------------------------------- ------------------------------- 2004 2003 2004 2003 -------------- -------------- ------------- -------------- Segment % of % of % of % of (Division) $000s Total $000s Total $000s Total $000s Total - --------- ------- ----- ------- ----- ------- ----- ------- ----- Products $ 8,503 82.4% $ 3,200 100.0% $15,769 84.7% $ 4,506 100.0% Solutions 1,821 17.6% - - 2,856 15.3% - - ------- ----- ------- ----- ------- ----- ------- ----- Total $10,324 100.0% $ 3,200 100.0% $18,625 100.0% $ 4,506 100.0% ======= ===== ======= ===== ======= ===== ======= ===== OPERATING INCOME (LOSS) BY SEGMENT Three months ended August 31, Six months ended August 31, ------------------------------- ------------------------------- 2004 2003 2004 2003 -------------- -------------- ------------- -------------- Segment % of % of % of % of (Division) $000s Sales $000s Sales $000s Sales $000s Sales - --------- ------- ----- ------- ----- ------- ----- ------- ----- Products $ 6,036 14.0% $ 1,040 4.3% $10,670 12.8% $ 74 0.2% Solutions (2,083) (26.8%) - - (3,592) (29.3%) - - Corporate expense (1,069) (2.1%) (494) (2.0%) (1,948) (2.0%) (922) (2.2%) ------- ------- ------- ------- Total $ 2,884 5.7% $ 546 2.3% $ 5,130 5.4% $ (848) (2.0%) ======= ======= ======= ======= Revenue Products Division revenue increased $18,859,000, or 78%, in the three months ended August 31, 2004 from the same period in the previous fiscal year. This increase resulted primarily because revenue in the second quarter of last fiscal year was adversely affected by substantially reduced orders from key customers that began in the first quarter of last fiscal year as a result of the customers' overstocked inventories of certain satellite television reception products. The satellite products impacted by this order slowdown were predominantly the more technologically advanced products that have higher selling prices. Products Division revenue rebounded strongly beginning in the third quarter of last fiscal year. On a sequential quarter basis, Products Division revenue for the most recent four quarters (beginning with the earliest) was $44.2 million, $41.6 million, $40.5 million and $43.1 million, respectively. The Company's principal satellite product line consists of low noise block feed downconverter/ amplifier units ("LNBFs") used for satellite television reception. The number of LNBF units sold in the three months ended August 31, 2004 was twice the LNBF unit volume in the same period of last year, while the average selling price for LNBFs was relatively unchanged between these two periods. For the six months ended August 31, 2004, Products Division revenue increased $40,792,000, or 95%, over the same period of the prior year, primarily for the same reason explained in the preceding paragraph. LNBF units sold in the latest six month period was approximately 130% higher than the same period of the prior year, while the average selling price was relatively unchanged between these two periods. The Solutions Division revenue represents the operations of Vytek which was acquired effective April 12, 2004. Gross Profit and Gross Margins Products Division gross profit increased by $5,303,000, or 166%, in the latest quarter compared to the prior year, and gross margin improved from 13.2% in last year's second quarter to 19.7% in the latest quarter. Gross margin was depressed in last year's second quarter principally because of the lower than normal sales volume, which resulted in less absorption of fixed manufacturing costs. For the six months ended August 31, 2004, Products Division gross profit increased $11,263,000, or 250%, and gross margin improved from 10.5% to 18.9%. The increased gross profit is attributable principally to the revenue increase of $40,792,000 in the latest six month period over the comparable period of the prior year. The gross margin improvement in the current year is due mainly to the fact that gross margin in the first six months of last year was adversely affected by manufacturing inefficiencies caused by the need to rapidly reduce production capability in the first quarter of last year in response to significant order cutbacks by key customers for the Company's satellite products. Also contributing to the lower Products Division gross margin last year were the inclusion in cost of revenue of lower of cost or market inventory writedowns of $242,000 and asset impairment writedowns of $575,000 on surface mount machines and other manufacturing equipment which had become idled due to increased outsourcing to contract manufacturers. Gross margin of the Solutions Division in the three and six month periods ended August 31, 2004 was 23.4% and 23.3%, respectively. See also Note 13 to the accompanying unaudited consolidated financial statements for additional operating data by business segment. Operating Expenses Consolidated research and development expense increased by $832,000 to $2,068,000 in the latest quarter from $1,236,000 last year. This increase was due to the inclusion of Vytek's operations for the quarter, which accounted for $581,000 of the increase. The remaining increase is attributable to higher salaries and wages ($86,000), higher incentive compensation expense ($81,000), higher consulting expenses ($37,000), and increased expenses for R&D materials ($36,000). For the six month year-to- date periods, R&D expense increased $1,277,000 from $2,598,000 last year to $3,875,000 this year. The inclusion of Vytek's operations for the 20-week period from the April 12, 2004 acquisition date to August 31, 2004 accounted for $1,021,000 of the increase in R&D expense, and the remaining increase in the six month year-to-date periods is attributable to the same factors described above that contributed to increased R&D expense in the latest quarter. Consolidated sales and marketing expenses increased by $1,183,000 in the second quarter, of which $1,194,000 results from the inclusion of Vytek in the quarter. For the six month year-to-date periods, sales and marketing expenses increased by $1,761,000, of which $1,700,000 is attributable to the inclusion of Vytek's operations. Consolidated general and administrative expense increased from $843,000 in the second quarter of last year to $3,179,000 in the latest quarter. Of this $2,336,000 increase, $1,739,000 is attributable to the inclusion of Vytek's operations in the latest quarter. The remaining increase is primarily due to higher accounting and auditing expense in the latest quarter ($255,000) attributable to the requirements of Section 404 of the Sarbanes Oxley Act, higher incentive compensation expense ($162,000), and higher legal expense ($55,000). For the six month year-to- date periods, general and administrative expense increased from $1,661,000 last year to $5,624,000 this year. The $3,963,000 increase is primarily explained by the inclusion of Vytek's operations in the current year, which accounted for $2,780,000 of the increase. The remaining increase is attributable to increased auditing and accounting fees ($305,000), increased incentive compensation expense ($254,000), increased legal expense ($157,000), increased consulting fees ($65,000), and the expensing in the current year of costs associated with a software implementation project ($160,000). Amortization expense of intangible assets in the three months ended August 31, 2004 and 2003 was $461,000 and $26,000, respectively, and in the six months ended August 31, 2004 and 2003 was $721,000 and $52,000, respectively. These increases in the latest three- and six-month periods compared to the prior year are attributable to the intangible assets arising from the acquisition of Vytek in April 2004. Operating Income (Loss) Operating income (loss) was $5,130,000 and ($848,000) during the six months ended August 31, 2004 and 2003, respectively. The increased profitability is attributable to the improvement in the satellite products portion of the Company's Products Division, as discussed above under the headings Revenue and Gross Profit and Gross Margins. Operating income of $5,130,000 in the latest six month period is comprised of operating income of the Products Division of $10,670,000, an operating loss for the Solutions Division (Vytek) of $3,592,000, and corporate expense of $1,948,000 that is not allocated to the division operating results. The Company has taken recent steps to reduce the losses of the Solutions Division by strengthening the sales and marketing organization and by reducing overhead costs. Management intends to closely monitor the performance of this business unit with the objective of achieving profitable results for the Solutions Division as soon as possible. Income Tax Provision The effective income tax rate was 38.1% and 30.9% in the six months ended August 31, 2004 and 2003, respectively. The increase in effective tax rate is attributable primarily to the fact that during the fiscal year ended February 28, 2004 reductions of the deferred tax asset valuation allowance caused a reduction in the overall effective income tax rate. In the six months ended August 31, 2004, there was no reduction in the valuation allowance. LIQUIDITY AND CAPITAL RESOURCES The Company's primary sources of liquidity are its cash and cash equivalents, which amounted to $25,268,000 at August 31, 2004, and its working capital line of credit with a bank. During the six months ended August 31, 2004, cash and cash equivalents increased by $2,383,000. This increase was attributable primarily to increased net income in the current six month period compared to the prior year (higher by $3.8 million), offset by $1.7 million of cash used for the acquisition of Vytek. Components of operating working capital increased by $1,875,000 during the six months ended August 31, 2004, comprised of an increase of $1,960,000 in accounts receivable, an increase of $4,278,000 in inventories, a decrease of $1,537,000 in prepaid expenses and other assets, an increase of $3,802,000 in accounts payable, a decrease of $1,092,000 in accrued payroll and other accrued liabilities, and an increase in deferred revenue of $116,000. The Company believes that inflation and foreign currency exchange rates have not had a material effect on its operations. The Company believes that fiscal year 2005 will not be impacted significantly by foreign exchange since a significant portion of the Company's sales are to U.S. markets, or to international markets where its sales are denominated in U.S. dollars. The Company has a $10 million working capital line of credit with a commercial bank. Borrowings under this line of credit bear interest at LIBOR plus 2.0% or the bank's prime rate, and are secured by substantially all of the Company's assets. The maturity date of the line of credit is August 3, 2005. At August 31, 2004, there were outstanding borrowings of $3 million on the line of credit and $2,479,000 was reserved under the line for issued letters of credit. The $3 million outstanding balance on the line of credit is classified as a current liability at August 31, 2004 because the line of credit matures within 12 months of that date. The Company also has two bank term loans which had an aggregate outstanding principal balance of $8,876,000 at August 31, 2004, of which $2,823,000 is classified as current at that date. The bank credit agreement which encompasses the line of credit and the two term loans contains a subjective acceleration clause which enables the bank to call the loans in the event of a material adverse change (as defined) in the Company's business. Based on the Company's history of profitable operations and positive operating cash flow over the past several years, and based on the Company's internal financial forecasts for the next several quarters, the Company does not believe it is probable that the bank will assert the material adverse change clause in the next 12 months. At the time it was acquired by the Company on April 12, 2004, Vytek had $2 million outstanding on a line of credit with another commercial bank. Shortly after the acquisition was consummated, the Company borrowed $2 million on its bank line of credit and paid off Vytek's bank line of credit. Vytek's bank line of credit was then terminated. See Note 5 to the accompanying consolidated financial statements for a summary of the Company's contractual cash obligations as of August 31, 2004. The Company believes that cash flow from operations, together with amounts available under its working capital line of credit, are sufficient to support operations, fund capital equipment requirements and discharge contractual cash obligations over the next twelve months. FORWARD LOOKING STATEMENTS Forward looking statements in this Form 10-Q which include, without limitation, statements relating to the Company's plans, strategies, objectives, expectations, intentions, projections and other information regarding future performance, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The words "may" "could", "plans", "believes," "anticipates," "expects," and similar expressions are intended to identify forward-looking statements. These forward-looking statements reflect the Company's current views with respect to future events and financial performance and are subject to certain risks and uncertainties, including, without limitation, product demand, market growth, new competition, competitive pricing and continued pricing declines in the DBS market, supplier constraints, manufacturing yields, the ability to manage cost increases in inventory materials including raw steel, timing and market acceptance of new product introductions, new technologies, the ability to successfully integrate the acquisition of Vytek Corporation that was completed on April 12, 2004, and other risks and uncertainties that are set forth under the heading "Risk Factors" in the Company's registration statement on Form S-4 (number 333- 112851) as filed with the Securities and Exchange Commission on February 13, 2004. Such risks and uncertainties could cause actual results to differ materially from historical results or those anticipated. Although the Company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that its expectations will be attained. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's financial instruments include cash equivalents, accounts receivable, accounts payable and bank term loans payable. At August 31, 2004, the carrying values of cash equivalents, accounts receivable and accounts payable approximate fair values given the short maturity of these instruments. The carrying value of bank term loans payable approximates fair value since the interest rates on these loans approximate the interest rates which are currently available to the Company for the issuance of debt with similar provisions and maturities. Based on the amount of bank debt outstanding at August 31, 2004, a change in interest rates of one percent would result in an annual impact of approximately $100,000, net of tax, on the Company's consolidated statement of income. A portion of the Company's operations consists of an investment in a foreign subsidiary. As a result, the consolidated financial results have been and could continue to be affected by changes in foreign currency exchange rates. However, the Company believes that it does not have material foreign currency exchange rate risk since a significant portion of the Company's sales are to U.S. markets, or to international markets where its sales are denominated in U.S. dollars, and material purchases from foreign suppliers are typically also denominated in U.S. dollars. Additionally, the functional currency of the Company's foreign subsidiary is the U.S. dollar. It is the Company's policy not to enter into derivative financial instruments for speculative purposes. Furthermore, the Company generally does not enter into foreign currency forward exchange contracts. There are no foreign currency forward exchange contracts outstanding at August 31, 2004. ITEM 4. CONTROLS AND PROCEDURES The Company's principal executive officer and principal financial officer have concluded, based on their evaluation of disclosure controls and procedures (as defined in Regulations 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this Report, that the Company's disclosure controls and procedures are effective to ensure that the information required to be disclosed in reports that are filed or submitted under the Exchange Act is accumulated and communicated to management, including the principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure and that such information is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities Exchange Commission. There have been no significant changes in the Company's internal controls or in other factors which could significantly affect internal controls subsequent to the date that the evaluation was carried out. Additionally, no significant deficiencies or material weaknesses in such internal controls requiring corrective actions were identified. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS See Note 15 to the accompanying consolidated financial statements for a description of pending legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At the 2004 Annual Meeting of Stockholders held on July 30, 2004, seven directors stood for reelection to a one year term expiring at the fiscal 2005 Annual Meeting. All seven of the director nominees were reelected. Following is a summary of the results of the director voting: Votes Against or Votes For Withheld Unvoted -------- ------- ------- Richard Gold 18,485,500 1,471,158 3,115,366 Arthur Hausman 18,102,564 1,854,094 3,115,366 A.J. "Bert" Moyer 18,662,824 1,293,834 3,115,366 James E. Ousley 18,837,027 1,119,631 3,115,366 Frank Perna 18,646,842 1,309,816 3,115,366 Thomas Ringer 18,653,786 1,302,872 3,115,366 Fred Sturm 18,530,770 1,425,888 3,115,366 In addition to the election of directors, the stockholders voted on three other proposals. Following is a summary of the voting results on these three proposals, all of which were approved by the stockholders: Votes Against or Votes Votes For Withheld Abstained Unvoted -------- ------- ------- ------- Increase in authorized shares of Common Stock from 30 million to 40 million shares 18,977,815 949,457 29,386 3,115,366 Change in Company's name from California Amplifier, Inc. to CalAmp Corp. 19,656,200 263,617 36,841 3,115,366 Adoption of 2004 Stock Incentive Plan 10,292,686 1,887,235 40,936 10,851,167 The 2004 Stock Incentive Plan was approved because this proposal received the affirmative vote of a majority of the total votes cast on the proposal, excluding the unvoted shares. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits Exhibit 3.1 - Amended and Restated Certificate of Incorporation reflecting the change in the Company's name to CalAmp Corp. and the increase in authorized Common Stock from 30 million to 40 million shares (1) Exhibit 4.1 - Amended and Restated Rights Agreement, amended and restated as of September 5, 2001, by and between Registrant and Mellon Investor Services LLC, as Rights Agent, filed as Exhibit 4.1 to the Registrant's Current Report on Form 8-K filed on September 6, 2001, and incorporated herein by reference. Exhibit 4.2 - Registration Rights agreement dated February 11, 2004, as Exhibit H to the Agreement and Plan of Merger and Reorganization dated December 23, 2003 among the Registrant, Mobile Acquisition Sub, Inc., Vytek Corporation, and James E. Ousley, as Stockholder Representative, filed as Exhibit 2.1 to the Registrant's Registration Statement on Form S-4 filed on February 13, 2004, and incorporated herein by reference. Exhibit 10.1 - Stipulation of Settlement and Release by and between plaintiff Kenneth Schnebly on behalf of himself and other class plaintiffs and CalAmp Corp. entered into effective September 29, 2004 (1) Exhibit 10.2 - CalAmp Corp. 2004 Stock Incentive Plan approved by stockholders at the 2004 annual meeting on July 30, 2004 (1) Exhibit 31.1 - Chief Executive Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (1) Exhibit 31.2 - Chief Financial Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (1) Exhibit 32 - Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (1) (1) Filed herewith. b. Reports on Form 8-K During the three months ended August 31, 2004 the Company filed the following reports on Form 8-K: 1. On June 1, 2004, the Company filed a report on Form 8-K with a press release announcing the nomination of Richard Gold to become Chairman of the Board at the 2004 annual stockholders meeting, upon the retirement of Ira Coron from the Board of Directors. 2. On April 27, 2004, a Form 8-K was filed which disclosed the acquisition of Vytek Corporation effective April 12, 2004. This Form 8-K was amended by the filing of a Form 8-K/A on June 28, 2004 to provide the required audited financial statements of Vytek Corporation and the unaudited pro forma financial information for this acquisition. 3. On July 13, 2004, the Company filed a report on Form 8-K that furnished a copy of its press release announcing the financial results for the Company's first quarter ended May 31, 2004. 8 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. October 12, 2004 /s/ Richard K. Vitelle - ------------------------------ --------------------------------- Date Richard K. Vitelle Vice President Finance & CFO (Principal Financial Officer and Chief Accounting Officer) EX-3 2 exhibit_3-1.txt EX. 3.1 - CERTIFICATE OF INCORPORATION Exhibit 3.1 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF CALIFORNIA AMPLIFIER, INC. a Delaware Corporation Richard K. Vitelle, Secretary of California Amplifier, Inc., a corporation organized and existing under the laws of the State of Delaware (the "Corporation") does hereby certify as follows: 1. The name of the Corporation is California Amplifier, Inc. 2. The original Certificate of Incorporation of the Corporation was filed with the Secretary of State of the State of Delaware on September 8, 1987. Such certificate was amended pursuant to an Amendment to Certificate of Incorporation of the Corporation filed with the Secretary of State of the State of Delaware on September 19, 1996. 3. This Amended and Restated Certificate of Incorporation amends, restates and integrates the certificate of incorporation of said corporation and has been duly adopted in accordance with the provisions of Sections 242 and 245 of the General Corporation Law of the State of Delaware by the favorable vote of the holders of a majority of the outstanding stock entitled to vote thereon. 4. That the Certificate of Incorporation of the Corporation, as so amended, is hereby amended and restated in its entirety to that the same shall read as follows ARTICLE I The name of the corporation is CalAmp Corp. ARTICLE II A. The address of the registered office of the Corporation in the State of Delaware is 15 East North Street, Dover, Delaware 19901 in the County of Kent. The name of its registered agent at that address is Paracorp Incorporated. B. The Corporation shall have a perpetual existence. ARTICLE III The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of the State of Delaware as set forth in Title 8 of the Delaware Code (the "GCL"). ARTICLE IV The Corporation is authorized to issue two classes of capital stock, designated Common Stock and Preferred Stock. The amount of total authorized capital stock of the Corporation is 43,000,000 shares, divided into 40,000,000 shares of Common Stock, par value $0.01 per share, and 3,000,000 shares of Preferred Stock, par value $0.01 per share. The Preferred Stock may be issued in one or more series. The Board of Directors is hereby authorized to issue the shares of Preferred Stock in such series and to fix from time to time before issuance the number of shares to be included in any series and the designation, relative powers, preferences and rights and qualifications, limitations or restrictions of all shares of such series. The authority of the Board of Directors with respect to each series shall include, without limiting the generality of the foregoing, the determination of any or all of the following: (a) The number of shares constituting that series and the distinctive designation of that series; (b) The dividend rate on the shares of that series, whether dividends shall be cumulative, and, if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends on shares of that series; (c) Whether that series shall have voting rights, in addition to the voting rights provided by law, and if so, the terms of such voting rights; (d) Whether that series shall have conversion privileges, and, if so, the terms and conditions of such conversion, including provision for adjustment of the conversion rate upon the happening of certain specified events; (e) Whether or not the shares of that series shall be redeemable, and, if so, the terms and conditions of such redemption including the date or dates upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates; (f) Whether that series shall have a sinking fund for the redemption or purchase of shares of that series, and, if so, the terms and amount of such sinking fund; (g) The rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the Company, and the relative rights of priority, if any, of payment on shares of that series; and (h) Such other designations, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof as it may deem advisable; all as shall be determined from time to time by the Board of Directors and shall be stated in a resolution or resolutions providing for the issuance of such Preferred Stock (a "Preferred Stock Designation"). The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares then outstanding) by the affirmative vote of the holders of a majority of the capital stock of the Corporation entitled to vote, with all such holders voting as a single class. ARTICLE V A. Each holder of Common Stock of the Corporation entitled to vote shall have one vote for each share thereof held. B. Except as may be provided by the Board of Directors in a Preferred Stock Designation or by law, the holders of Common Stock shall have the exclusive right to vote for the election of directors and for all other purposes, and holders of Preferred Stock shall not be entitled to receive notice of any meeting of stockholders at which they are not entitled to vote or consent. C. The Corporation shall be entitled to treat the person in whose name any shares of its capital stock is registered as the owner thereof, for all purposes, and shall not be bound to recognize any equitable or other claim to, or interest in, such shares on the part of any other person, whether or not the Corporation shall have notice thereof, except as expressly provided by applicable law. D. No vote at any meeting of stockholders need be by written ballot unless the Board of Directors, in its discretion, or the officer of the Corporation presiding at the meeting, in his discretion, specifically directs the use of a written ballot. E. Special meetings of the stockholders of the Corporation for any purpose or purposes may be called at any time by the Board of Directors, the Chairman of the Board of Directors, the President or the holders of 10% or more of the combined voting power of all classes of the Corporation's capital stock. ARTICLE VI A. The business and affairs of the Corporation shall be managed by or under the direction of a Board of Directors consisting of no fewer than four and no more than seven directors. The exact number of directors of the Corporation shall be fixed from time to time, within the limits specified, solely by resolution of the Board. At each annual meeting of shareholders the directors shall be elected to hold office until the next annual meeting. Each director shall hold office after the annual meeting at which his term is scheduled to end until his successor shall be elected and shall qualify, subject to prior death, resignation, disqualification, or removal from office. Any director elected to fill a vacancy not resulting from an increase in the number of directors shall have the same term as the remaining term of his predecessor. In no case may a decrease in the number of directors shorten the term of any incumbent director. Any newly-created directorship resulting from an increase in the number of directors may be filled by a majority of the Board of Directors then in office, provided that a quorum is present, and any other vacancy on the Board of Directors may be filled by a majority of the directors then in office, even if less than a quorum, or by a sole remaining director. Notwithstanding anything to the contrary, the holders of a majority of the shares then entitled to vote at an election of directors may remove any director with or without cause. Notwithstanding the foregoing, whenever the holders of any one or more classes or series of Preferred Stock issued by the Corporation shall have the right, voting separately by class or series, to elect directors at an annual or special meeting of stockholders, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the terms of the Preferred Stock Designation applicable thereto, and such directors so elected shall be in addition to the number of directors provided by this Certificate of Incorporation. B. The directors shall have the power to adopt, amend or repeal the Bylaws of the Corporation. ARTICLE VII A. RIGHT TO INDEMNIFICATION. Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was a director or officer of the Corporation or of California Amplifier, Inc., a California corporation ("CalAmp"), or is or was serving at the request of the Corporation or CalAmp as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise (including service with respect to employee benefit plans), whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the GCL against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith; and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; PROVIDED, HOWEVER, that except as provided in Paragraph B of this Article VI, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) which is initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors. The right to indemnification conferred in this Article VII shall be a contract right and shall include the right to have paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition; PROVIDED, HOWEVER, that, if the GCL so requires, the payment of such expense incurred by a director of officer in his or her capacity as a director or officer in advance of the final disposition of a proceeding, shall be made upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director of officer is not entitled to be indemnified under this Article VII or otherwise. The Corporation may, by action of the Board of Directors, provide indemnification to employees and agents of the Corporation with the same scope and effect as the foregoing indemnification of directors and officers. B. RIGHT OF CLAIMANT TO BRING SUIT. If a claim under Paragraph A of this Article VII is not paid in full by the Corporation within 30 days after a written claim has been received by the Corporation, the Claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the Claimant shall also be entitled to have paid the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the Claimant has not met the standards of conduct which make it permissible under the GCL for the Corporation to indemnify the Claimant for the amount claimed, but the burden of providing such defense shall be on the Corporation. Neither the failure of the Corporation (including the Board of Directors, independent legal counsel or the stockholders) to have made a determination prior to the commencement of such action that indemnification of the Claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the GCL, nor an actual determination by the Corporation (including the Board of Directors, independent legal counsel or the stockholders) that the Claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the Claimant has not met the applicable standard of conduct. C. INSURANCE. The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the GCL. ARTICLE VIII A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except that this Article VIII shall not eliminate or limit a director's liability (i) for any breach of such director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the GCL, or (iv) for any transaction from which such director derived an improper personal benefit. Any repeal or modification of this Article VIII shall not increase the personal liability of any director of the Corporation for any act or occurrence taking place prior to such repeal or modification, or otherwise adversely affect any right to protection of a director of the Corporation existing at the time of such repeal or modification. The provisions of this Article VIII shall not be deemed to limit or preclude indemnification of a director by the Corporation for any liability of a director which has not been eliminated by the provisions of this Article VIII. ARTICLE IX The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred on stockholders herein are granted subject to this reservation. ARTICLE X Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws of the Corporation may provide. The books of the Corporation may be kept (subject to any provisions contained in applicable law) outside the State of Delaware at such place as may be designated from time to time by the Board of Directors or the Bylaws of the Corporation. IN WITNESS WHEREOF, the undersigned, being the incorporated named herein, has executed this Amended and Restated Certificate of Incorporation this 30th day of July, 2004. CALIFORNIA AMPLIFIER, INC. By: /s/ Richard K. Vitelle Richard K. Vitelle Secretary EX-10 3 exhibit_10-1.txt EX. 10.1 - LAWSUIT SETTLEMENT Exhibit 10.1 KINGSLEY & KINGSLEY, APC GEORGE R. KINGSLEY, ESQ. SBN-38022 ERIC B. KINGSLEY, ESQ. SBN-185123 16133 VENTURA BL., SUITE 700 ENCINO, CA 91436 (818) 990-8300, FAX (818) 990-2903 ATTORNEYS FOR PLAINTIFFS NORDMAN, CORMANY, HAIR & COMPTON JOEL MARK 1000 TOWN CENTER DRIVE, SIXTH FLOOR OXNARD, CA 93036-1132 (805) 485-1000 ATTORNEYS FOR DEFENDANT SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF VENTURA KENNETH SCHNEBLY on behalf of himself and on behalf of others similarly situated, ) CASE NO.: CIV 226265 ) CLASS ACTION Plaintiffs, ) JOINT STIPULATION OF ) SETTLEMENT AND RELEASE BETWEEN ) PLAINTIFFS AND DEFENDANT ) v ) ) CALIFORNIA AMPLIFIER, INC. ) et al., ) ) Defendants. ) __________________________________________) This Joint Stipulation of Settlement and Release (hereinafter "Stipulation of Settlement" or "Settlement") is made and entered into by and between plaintiff KENNETH SCHNEBLY on behalf of himself and on behalf of others similarly situated ("Plaintiff") and CalAmp Corp., sued herein as California Amplifier, Inc. (collectively "Defendant" or "CalAmp."). This Settlement shall be binding on plaintiff and the class he purports to represent, and defendant and its present and former parent companies, subsidiaries, related or affiliated companies, shareholders, officers, directors, employees, agents, attorneys, insurers, successors and assigns, and any individual or entity which could be jointly liable with Defendant, and their respective counsel, subject to the terms and conditions hereof and the approval of the Court. THE PARTIES STIPULATE AND AGREE as follows: 1. Plaintiff and Defendant are collectively referred to herein as "the parties." 2. On April 1, 2004 Plaintiff filed a proposed Class Action Complaint against Defendant in the Ventura County Superior Court on behalf of themselves and all other employees similarly situated. The Complaint alleged various wage and hour violations including causes of action for time shaving, failure to allow meal periods and rest breaks to hourly paid employees pursuant to California Labor Code Sec. 226.7, waiting time penalties pursuant to Labor Code Sec. 203, unfair business practices under Business & Professions Code Sec. 17200, and penalties pursuant to Labor Code Sec. 2699. Among other allegations, the Complaint alleged that hourly paid employees who worked one or more shifts in Defendant's facility were not allowed to take meal periods as required by Labor Code Sec. 226.7 and that, consequently, such employees were entitled to be paid one hour of pay per missed meal period. The Complaint sought recovery of compensatory damages, penalties for missed meal periods time shaving/rounding, waiting time penalties, penalties pursuant to Labor Code Sec. 2699, prejudgment and post-judgment interest, issuance of an injunction, restitution, attorneys' fees and costs. 3. Plaintiffs have not filed a motion for class certification in this action, nor has a date been set by the Court for the filing of such a motion. 4. For purposes of this Settlement, the "Settlement Class" shall consist of all nonexempt employees who worked at any time for Defendant in California from April 1, 2000 through August 31, 2004. 5. Solely for purposes of settling this case, the parties stipulate and agree that the requisites for establishing class certification with respect to the Settlement Class have been met and are met. More specifically, the parties stipulate and agree that: a. The Settlement Class is ascertainable and so numerous as to make it impracticable to join all Class Members. b. There are common questions of law and fact including, but not limited to, the following: i. Whether or not Defendant allowed its hourly employees to take meal periods in accordance with California law; ii. Whether or not Defendant improperly rounded or shaved time that was illegal in accordance with California law; iii. Whether or not Defendant's business practices affecting the Settlement Class violated Business & Professions Code Sec. 17200, et seq.; iv. Whether or not Plaintiffs and the Class they purport to represent are entitled to meal period premium under Labor Code Sec. 226.7; v. Whether or not Plaintiffs and the Class they represent are entitled to penalties under Labor Code Sec. 2699; and vi. Whether or not Class Members who are former employees of defendant are entitled to waiting time penalties under Labor Code Sec. 203. c. Plaintiffs believe their claims are typical of the claims of the members of the Settlement Class with respect to the foregoing claims. d. Plaintiffs and Class Counsel will fairly and adequately protect the interests of the Settlement Class. e. The prosecution of separate actions by individual members of the Settlement Class would create the risk of inconsistent or varying adjudications, which would establish incompatible standards of conduct. f. With respect to the Settlement Class, Plaintiffs believe that questions of law and fact common to the members of the Settlement Class predominate over any questions affecting any individual member in such Class, and a class action is superior to other available means for the fair and efficient adjudication of the controversy. 6. Defendant denies any liability or wrongdoing of any kind whatsoever associated with the claims alleged in Plaintiff's Complaint. Defendant denies that, for any purpose other than settling this lawsuit, this action is appropriate for class or representative treatment. Defendant contends that, with respect to all of its employees at all times, including with respect to all members of the alleged class in this action, it has complied with all applicable sections of the California Labor Code, all applicable sections of the California Business and Professions Code, all Orders of the Industrial Welfare Commission, and all other applicable laws and regulations. Defendant further contends that it has meritorious defenses to each and all of the claims asserted by plaintiff individually and on behalf of all others allegedly similarly situated. 7. It is the desire of the parties to fully, finally, and forever settle, compromise, and discharge all disputes and claims arising from or related to Plaintiffs' Complaint in this case. In order to achieve a full and complete release of Defendant, each Settlement Class Member acknowledges that this Stipulation of Settlement is intended to include in its effect all claims of any nature arising from or related to this case, and all wage and hour claims of any nature including claims for alleged denial of meal periods and time shaving/rounding under any federal, state or local law, including any such claims which the Class Member does not know or suspect to exist in his or her favor against Defendant as of the date of the Court's final approval of this Settlement. 8. It is the intention of the parties that this Stipulation of Settlement shall constitute a full and complete settlement and release of all claims arising from or related to the allegations of this class action case against Defendant, which release includes in its effect all present and former parent companies, subsidiaries, related or affiliated companies, shareholders, officers, directors, employees, agents, attorneys, insurers, and successors and assigns of Defendant, and any individual or entity which could be jointly liable with Defendant. 9. Counsel for the Settlement Class have conducted a thorough investigation into the facts of this class action case, including an extensive review of relevant documents, and have diligently pursued an investigation of Class Members' claims against Defendant. Based on their own independent investigation and evaluation, Class Counsel are of the opinion that the Settlement with Defendant for the consideration and on the terms set forth in this Stipulation of Settlement is fair, reasonable, and adequate and is in the best interest of the Settlement Class in light of all known facts and circumstances, including the risk of significant delay, the risk the Settlement Class will not be certified by the Court, defenses asserted by Defendant, and numerous potential appellate issues. Defendant and Defendant's counsel also agree that the Settlement is fair and in the best interest of the Settlement Class. 10. The parties agree to cooperate and take all steps necessary and appropriate to dismiss this case with prejudice. 11. It is understood and agreed that Defendant's maximum total liability under this Settlement shall not exceed the sum of Six hundred and Fifty thousand Dollars ($650,000.00). TERMS OF SETTLEMENT 12. NOW THEREFORE, in consideration of the mutual covenants, promises and agreements set forth herein, the parties agree, subject to the Court's approval, as follows: a. It is agreed by and among Plaintiffs and Defendant that this case and any claims, damages, or causes of action arising out of the disputes which are the subject of this case, be settled and compromised as between the Settlement Class and Defendant, subject to the terms and conditions set forth in this Stipulation of Settlement and the approval of the Ventura County Superior Court. b. Settlement Date: The settlement embodied in this Stipulation of Settlement shall become effective when all of the following events have occurred: (i) this Stipulation of Settlement has been executed by all parties and by counsel for the Class and Defendant; (ii) the Court has given preliminary approval to the settlement; (iii) notice has been given to the putative members of the Class, providing them with an opportunity to participate in the settlement, or to opt out of the settlement; (iv) the Court has held a formal fairness hearing and entered a final order and judgment certifying the Class, dismissing this case with prejudice, and approving this Stipulation of Settlement; and (v) in the event there are written objections filed prior to the formal fairness hearing which are not later withdrawn, the later of the following events: when the period for filing any appeal, writ or other appellate proceeding opposing the Settlement has elapsed without any appeal, writ or other appellate proceeding having been filed; or any appeal, writ or other appellate proceeding opposing the Settlement has been dismissed finally and conclusively with no right to pursue further remedies or relief; or any appeal, writ or other appellate proceeding has upheld the Court's final order with no right to pursue further remedies or relief. In this regard, it is the intention of the parties that the Settlement shall not become effective until the Court's order approving the Settlement is completely final, and there is no further recourse by an appellant or objector who seeks to contest the Settlement. c. Settlement Payments: The Net Settlement Fund shall be calculated by deducting from Defendant's maximum liability of Six Hundred and Fifty Thousand Dollars ($650,000.00) the sums approved by the Court under this Settlement for attorneys' fees (not to exceed $195,000.00), attorneys' costs (not to exceed $5,000.00), the Claims Administrator's fees (estimated to be $25,000.00), service payments to the Class Representatives (not to exceed $10,000.00), and Labor Code Sec. 2699 claims to be allocated to Labor Workforce Development Agency of $20,000.00 (based on a value of $26,666.66). Settlement awards will be calculated by the Claims Administrator and paid out of the Net Settlement Fund as set forth below. i. Settlement Awards to Class Members: Settlement awards to Class Members will be based on the length of service for defendant during the class period from April 1, 2000 until August 31, 2004. In determining the length of service of each Class Member the Claims Administrator shall rely on defendant's records. Defendant's data will be presumed to be correct. The Claims Administrator will calculate the total number of days in service of the defendant for each class member. $45,000 of the fund will be allocated to Labor Code Sec. 203 penalties and will be distributed to former employees on an equal basis. In order to qualify for the award a class member had to be an employee on or after April 1, 2001 and no longer be employed on August 31, 2004. The remaining settlement fund will then be allocated on a pro-rata basis based upon days in service. The parties have allocated 17% to the time shaving issues, 33% to the meal period issues and 50% to interest and penalties. ii. Attorneys' Fees and Attorneys' Costs: Subject to Court approval and/or modification, Defendant further agrees to pay Class Counsel attorneys' fees and attorneys' costs as set forth in Paragraph 14 below. iii. Class Representatives: Subject to Court approval, Defendant further agrees to pay Plaintiffs service payments of not more than the following amounts for their service as Class Representatives: KENNETH SCHNEBLY: Ten Thousand Dollars ($10,000.00). As a condition to receiving the service payments, each Class Representative must execute a General Release, in a form acceptable to Defendant, of all claims against Defendant. Defendant will not object to Class Counsel's application for Court Approval of the service payments to the Class Representatives as defined herein. It is understood that the service payments are in addition to each Plaintiff's claim share to which he is entitled along with other claiming Class Members. Defendant or the Claims Administrator will issue Forms 1099 for the service payments to the Plaintiffs for their service as Class Representatives, and the Class Representatives will be responsible for correctly characterizing this compensation for tax purposes and for paying any taxes on the amounts received. The Class Representatives agree to indemnify Defendant for any liability it incurs to any tax authority on account of the Class Representatives' failure to pay all taxes due on the service payments. Should the Court approve service payments to the Class Representatives in amounts less than those set forth above, the difference between the lesser amounts approved by the Court and the maximum service payments set forth above shall be added to the Net Settlement Fund. iv. Claims Administrator: The fees of the Claims Administrator shall be paid out of the Settlement. The parties estimate the fees of the Claims Administrator will be Twenty Thousand Dollars $20,000.00). The Claims Administrator will be Rosenthal & Company LLC or such other claims administrator as may be mutually agreeable to the parties. The fees of the Claims Administrator for work done shall be paid regardless of the outcome of this Settlement. v. Mailing of Settlement Awards: Defendant or the Claims Administrator shall cause the settlement awards to be mailed to the Class Members within approximately twenty-one (21) calendar days following the Court's final approval of the settlement or, if there is any objection to the settlement or appeal, within approximately twenty-one (21) calendar days after the Settlement becomes effective as defined in Paragraph 12 (b). d. Resolution of Disputes Relating to Number of Days Worked by a Class Member During the Class Period: If a Class Member, challenges the accuracy of Defendant's records, and the parties' counsel cannot resolve the dispute informally, the matter will be referred to the Claims Administrator, who will expeditiously investigate the facts, and issue a non-appealable decision as to the number of days the Class Member worked in an hourly position during the Class Period. e. Service Payments to Plaintiffs for their Service as Class Representatives: Defendant will pay the service payments approved by the Court to the Plaintiffs on the same date Class Counsel are paid their attorneys' fees, provided the Plaintiffs have met the conditions set forth above in Paragraph 12 (c) (vi). f. Right to Rescission: If more than ten percent (10.0%) of the putative Class Members opt out of the Settlement Class by submitting valid and timely Request for Exclusion Forms, Defendant shall have the right in its sole discretion to rescind and void the parties' settlement prior to final approval by the Court by giving written notice to Class Counsel. If Defendant exercises its right to rescission, Defendant shall be responsible for paying the fees incurred by the Claims Administrator. g. Residue: If for any reason , there should be a residue of unclaimed funds after all payments provided by this Settlement have been made, such funds will be paid to a nonprofit organization. Each side will allocate 50% to a nonprofit of its choosing, subject to the consent of the other that shall not be unreasonably withheld or, if the parties cannot agree, to a nonprofit organization selected by the Court. CLAIMS ADMINISTRATION 13. The parties have agreed to the appointment of Rosenthal & Company LLC to perform the customary duties of Claims Administrator; provided, however, the parties shall have the right to select or substitute a different Claims Administrator by mutual agreement. The Claims Administrator will send out to the Class Members the Notice of Pendency of Class Action and Proposed Settlement. The Claims Administrator will independently review Defendant's records, as to the number of days in service of defendant by the Class Members and will calculate the amounts due to Class Members in accordance with this Stipulation of Settlement. The Claims Administrator shall report, in summary or narrative form, the substance of its findings. The Claims Administrator shall be granted reasonable access to Defendant's records in order to perform its duties. At the request of Defendant, and upon receipt of funds from Defendant, the Claims Administrator will issue and send out settlement award checks to Class Members, and will issue Forms W-2/1099 in accordance with this Stipulation of Settlement. All disputes relating to the Claims Administrator's performance of its duties shall be referred to the Court, if necessary, which will have continuing jurisdiction over the terms and conditions of this Stipulation of Settlement until all payments and obligations contemplated by this Stipulation of Settlement have been fully carried out. ATTORNEYS' FEES AND COSTS 14. In consideration of this settlement, and in exchange for the release of all claims by the Settlement Class, and subject to final approval and/or modification by the Court, defendant agrees that Class Counsel may be paid out of the $650,000.00 Settlement Fund attorneys' fees of up to the total sum of One Hundred and Ninety-Five Thousand Dollars ($195,000.00) and attorneys' costs and expenses of up to the total sum of Five Thousand Dollars ($5,000.00). Defendant will not object to Class Counsel's application for attorneys' fees and costs up to these amounts. The amounts set forth above will cover all work performed and all fees and costs incurred to date, and all work to be performed and all fees and costs to be incurred in connection with the approval by the Court of this Stipulation of Settlement, the administration of the Settlement, and obtaining dismissal with prejudice of this case. Should Class Counsel request a lesser amount and/or the Court approve a lesser amount of attorneys' fees and/or attorneys' costs, the difference between the lesser amount and the maximum amount set forth above shall be added to the Net Settlement Fund. 15. The attorneys' fees approved by the Court shall be paid to Class Counsel within approximately twenty-one (21) calendar days following the Court's final approval of the settlement or, if there is any objection to the Settlement, within approximately twenty-one (21) calendar days after the settlement becomes effective as defined in Paragraph 12(b). NOTICE TO THE PLAINTIFF CLASS 16. A Notice of Pendency of Class Action, Proposed Settlement and Hearing Date for Court Approval ("Notice of Pendency of Class Action and Proposed Settlement") in approximately the form attached hereto as Exhibit "A," and as approved by the Court, shall be sent by the Claims Administrator to the Class Members, by first class mail. Any returned envelopes from this mailing with forwarding addresses will be utilized by the Claims Administrator to forward the Notice to the Class Members. a. Within five (5) business days following preliminary approval of this Settlement by the Court, Defendant shall provide to the Claims Administrator a database, which will list for each Class Member the Class Member's name, last known address, social security number, and number of days worked during the Class Period. This database shall be based on Defendant's payroll, benefits, and other business records and in a format acceptable to the Claims Administrator. Defendant agrees to consult with the Claims Administrator prior to the production date to ensure that the format will be acceptable to the Claims Administrator. The Claims Administrator will run a check of the Class Members' addresses against those on file with the U.S. Postal Service's National Change of Address List; this check will be performed only once per Class Member by the Claims Administrator. Within ten (10) days of receipt of the database from Defendant, the Claims Administrator will mail the Notice, Claim Form and Exclusion Form to the Class Members. b. Notices and Claim Forms returned to the Claims Administrator as non-delivered during the forty-five (45) day period for the filing of claims shall be resent to the forwarding address, if any, on the returned envelope. A returned Notice and Claim Form will be forwarded only once per Class Member by the Claims Administrator. If there is no forwarding address, the Claims Administrator may do a computer search for a new address using the Class Member's social security number; this search will be performed only once per Class Member by the Claims Administrator. Upon completion of these steps by the Claims Administrator, Defendant shall be deemed to have satisfied its obligation to provide the Notice of Pendency of Class Action and Settlement to the affected member of the Settlement Class. The affected member of the Settlement Class shall remain a member of the Settlement Class and shall be bound by all the terms of the Stipulation of Settlement and the Court's Order and Final Judgment. c. Class Counsel shall provide to the Court, at least five (5) days prior to the final fairness hearing, a declaration by the Claims Administrator of due diligence and proof of mailing with regard to the mailing of the Notice of Pendency of Class Action and Proposed Settlement. RELEASE BY THE CLASS 17. Upon the final approval by the Court of this Stipulation of Settlement, and except as to such rights or claims as may be created by this Stipulation of Settlement, the Settlement Class and each member of the Class who has not submitted a valid Request for Exclusion, fully releases and discharges Defendant, its present and former parent companies, subsidiaries, related or affiliated companies, shareholders, officers, directors, employees, agents, attorneys, insurers, successors and assigns, and any individual or entity which could be jointly liable with Defendant, from any and all claims, debts, liabilities, demands, obligations, guarantees, costs, expenses, attorneys' fees, damages, action or causes of action which relate to wage and hour claims including the failure of Defendant to provide Class Members meal periods and rest breaks as required by California law, the failure to pay compensation or penalties under the California Labor Code including without limitation Sec. 203, 226.7 and 558, the failure to pay compensation or penalties for split shifts, reporting time pay, uniforms, overtime, and any other wage and hour violations, and any other claims whatsoever alleged in this case, including without limitation all claims for restitution and other equitable relief, liquidated damages, punitive damages, waiting time penalties, penalties of any nature or type under the California Labor Code and those relating to wage and hour law, whatsoever, other compensation or benefits, including 401K benefits or matching benefits, retirement or deferred compensation benefits, interest, attorneys' fees and costs, whether known or unknown, from April 1, 2004 up to and including the date of final approval of this Settlement, arising from employment by Defendant within California. In addition, the Settlement Class and each member of the Class who has not submitted a valid Request for Exclusion forever agrees that it, he or she shall not institute, nor accept back pay, penalties or compensation for failure to provide meal periods for claims relating to rounding practices and/or penalties under the Labor Code including without limitation penalties under Labor Code Sec. 203, 226.7 and 558, 2699 attorneys' fees and costs, or any other relief from any other suit, class or collective action, administrative claim or other claim of any sort or nature whatsoever against Defendant, for any period from April 1, 2000 up to and including the date of final approval of this settlement, arising from employment by Defendant within California. DUTIES OF THE PARTIES PRIOR TO COURT APPROVAL 18. The parties shall promptly submit this Stipulation of Settlement to the Ventura County Superior Court in support of Plaintiffs' Motion for Preliminary Approval and determination by the Court as to its fairness, adequacy, and reasonableness. Promptly upon execution of this Stipulation of Settlement, the parties shall apply to the Court for the entry of an order substantially in the following form: a. Scheduling a fairness hearing on the question of whether the proposed settlement, including payment of attorneys' fees and costs, and the Class Representatives' service payments, should be finally approved as fair, reasonable and adequate as to the members of the Settlement Class; b. Certifying a Settlement Class; c. Approving as to form and content the proposed Notice of Pendency of Class Action and Proposed Settlement; d. Directing the mailing of the Notice of Pendency of Class Action and Proposed Settlement, Claim Form and Request for Exclusion Form by first class mail to the Class Members; e. Preliminarily approving the settlement subject only to the objections of Class Members and final review by the Court; and f. Enjoining Plaintiffs and all Class Members from filing or prosecuting any claims, suits or administrative proceedings (including filing claims with the California Division of Labor Standards Enforcement) regarding claims released by the Settlement unless and until such Class Members have filed valid Exclusion Forms with the Claims Administrator and the time for filing claims with the Claims Administrator has elapsed. DUTIES OF THE PARTIES FOLLOWING FINAL COURT APPROVAL 19. Following final approval by the Court of the settlement provided for in this Stipulation of Settlement, Counsel for the Class will submit a proposed final order and judgment: a. Approving the Settlement, adjudging the terms thereof to be fair, reasonable and adequate, and directing consummation of its terms and provisions; b. Approving Class Counsel's application for an award of attorneys' fees and costs; c. Approving the service payments to the Class Representatives; and d. Dismissing this action on the merits and with prejudice and permanently barring and enjoining all members of the Settlement Class from prosecuting against Defendant, its present or former parent companies, subsidiaries, related or affiliated companies, shareholders, officers, directors, employees, agents, attorneys, insurers, and successors and assigns, and any individual or entity which could be jointly liable with Defendant, any individual or class or collective claims released herein pursuant to paragraphs 19 and 20 above, upon satisfaction of all payments and obligations hereunder. PARTIES' AUTHORITY 20. The signatories hereto hereby represent that they are fully authorized to enter into this Stipulation of Settlement and bind the parties hereto to the terms and conditions thereof. MUTUAL FULL COOPERATION 21. The parties agree to fully cooperate with each other to accomplish the terms of this Stipulation of Settlement, including but not limited to, execution of such documents and taking such other action as reasonably may be necessary to implement the terms of this Stipulation of Settlement. The parties to this Stipulation of Settlement shall use their best efforts, including all efforts contemplated by this Stipulation of Settlement and any other efforts that may become necessary by order of the Court, or otherwise, to effectuate this Stipulation of Settlement and the terms set forth herein. As soon as practicable after execution of this Stipulation of Settlement, Class Counsel shall, with the assistance and cooperation of Defendant and its counsel, take all necessary steps to secure the Court's final approval of this Stipulation of Settlement. 22. Defendant and its counsel agree that they will not attempt to encourage or discourage Class Members from filing Claim Forms or Exclusion Forms. Plaintiffs and their counsel agree they will not attempt to encourage or discourage Class Members from filing Claim Forms or Exclusion Forms. NO PRIOR ASSIGNMENTS 23. The parties and their counsel represent, covenant, and warrant that they have not directly or indirectly, assigned, transferred, encumbered, or purported to assign, transfer, or encumber to any person or entity any portion of any liability, claim, demand, action, cause of action or rights herein released and discharged except as set forth herein. NO ADMISSION 24. Nothing contained herein, nor the consummation of this Stipulation of Settlement, is to be construed or deemed an admission of liability, culpability, negligence, or wrongdoing on the part of Defendant. Each of the parties hereto has entered into this Stipulation of Settlement solely with the intention to avoid further disputes and litigation with the attendant inconvenience and expenses. ENFORCEMENT ACTIONS 25. In the event that one or more of the parties to this Stipulation of Settlement institutes any legal action or other proceeding against any other party or parties to enforce the provisions of this Stipulation of Settlement or to declare rights and/or obligations under this Stipulation of Settlement, the successful party or parties shall be entitled to recover from the unsuccessful party or parties reasonable attorneys' fees and costs, including expert witness fees incurred in connection with any enforcement actions. NOTICES 26. Unless otherwise specifically provided herein, all notices, demands or other communications given hereunder shall be in writing and shall be deemed to have been duly given as of the third business day after mailing by United States registered or certified mail, return receipt requested, addressed as follows: TO PLAINTIFFS AND THE SETTLEMENT CLASS: TO THE DEFENDANT: Eric B. Kingsley Joel Mark Kingsley & Kingsley, APC Nordman, Cormany, Hair & Compton 16133 Ventura Blvd., Suite 700 1000 Town Center Drive, 6th Floor Encino, California 91436 Oxnard, CA 93036 CONSTRUCTION 27. The parties hereto agree that the terms and conditions of this Stipulation of Settlement are the result of lengthy, intensive arms-length negotiations between the parties, and this Stipulation of Settlement shall not be construed in favor of or against any party by reason of the extent to which any party or his, her or its counsel participated in the drafting of this Stipulation of Settlement. CAPTIONS AND INTERPRETATIONS 28. Paragraph titles or captions contained herein are inserted as a matter of convenience and for reference, and in no way define, limit, extend, or describe the scope of this Stipulation of Settlement or any provision hereof. Each term of this Stipulation of Settlement is contractual and not merely a recital. MODIFICATION 29. This Stipulation of Settlement may not be changed, altered, or modified, except in writing and signed by the parties hereto, and approved by the Court. This Stipulation of Settlement may not be discharged except by performance in accordance with its terms or by a writing signed by the parties hereto. INTEGRATION CLAUSE 30. This Stipulation of Settlement contains the entire agreement between the parties relating to the settlement and transaction contemplated hereby, and all prior or contemporaneous agreements, understandings, representations, and statements, whether oral or written and whether by a party or such party's legal counsel, are merged herein. No rights hereunder may be waived except in writing. BINDING ON ASSIGNS 31. This Stipulation of Settlement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, trustees, executors, administrators, successors and assigns. CLASS COUNSEL SIGNATORIES 32. It is agreed that because the members of the Class are so numerous, it is impossible or impractical to have each member of the Class execute this Stipulation of Settlement. The Notice of Pendency of Class Action and Proposed Settlement, Exhibit "A" hereto, will advise all Class Members of the binding nature of the release, and the release shall have the same force and effect as if this Stipulation of Settlement were executed by each member of the Class. COUNTERPARTS 33. This Stipulation of Settlement may be executed in counterparts, and when each party has signed and delivered at least one such counterpart, each counterpart shall be deemed an original, and, when taken together with other signed counterparts, shall constitute one Stipulation of Settlement, which shall be binding upon and effective as to all parties. CLASS REPRESENTATIVE DATED: 9/17/04 PLAINTIFF KENNETH SCHNEBLY By: /s/KENNETH SCHNEBLY KENNETH SCHNEBLY CLASS COUNSEL DATED: 9/29/04 KINGSLEY & KINGSLEY By: /s/ ERIC B. KINGSLEY ERIC B. KINGSLEY Attorneys for Plaintiffs and Class Counsel DEFENDANT DATED: 9/27/04 CALIFORNIA AMPLIFIER By:/s/ Fred Sturm Its:President and Chief Executive Officer DEFENDANT'S COUNSEL DATED: 9/23/04 NORDMAN, CORMANY, HAIR & COMPTON By:/s/ Joel Mark JOEL MARK Attorneys for Defendant EX-10 4 exhibit_10-2.txt EX. 10.2 - 2004 STOCK INCENTIVE PLAN Exhibit 10.2 CALAMP CORP. 2004 INCENTIVE STOCK PLAN 1. PURPOSE OF THE PLAN The purpose of the CalAmp Corp. 2004 Stock Incentive Plan (the "Plan") is to provide a flexible framework that will permit the Board of Directors to develop and implement a variety of stock-based programs based on changing needs of CalAmp Corp. (together with its subsidiaries, the "Company"), its competitive market, and regulatory climate. The Board of Directors and senior management of the Company believe it is in the best interest of the Company's stockholders for officers, employees, and members of the Board of Directors of the Company to own stock in the Company and that such ownership will enhance the Company's ability to attract highly qualified personnel, to strengthen its retention capabilities, to enhance the long-term performance of the Company and its subsidiaries, to vest in Participants a proprietary interest in the success of the Company and its subsidiaries, and to provide certain "performance-based compensation" within the meaning of Section 162(m)(4)(C) of the Code. Upon its Effective Date, as defined herein, the Plan replaces the Company's 1999 Stock Option Plan. Beginning on such date, the 1999 Stock Option Plan becomes frozen and stock options can no longer be granted thereunder. 2. DEFINITIONS As used in the Plan, the following definitions apply to the terms indicated below: (a) "Award Agreement" shall mean the written agreement between the Company and a Participant or other document approved by the Committee evidencing an Incentive Award. (b) "Board of Directors" shall mean the Board of Directors of the Company. (c) "Cause" means the occurrence or existence of any of the following with respect to a Participant, as determined by the Committee: (i) unsatisfactory performance of duties or responsibilities, provided that the Company has given the participant written notice specifying the unsatisfactory performance of his or her duties and responsibilities and afforded the participant reasonable opportunity for cure, all as determined by the Committee; (ii) a material breach by the participant of any of his or her material obligations under any employment agreement between the participant and the Company of which the Company has given participant written notice; (iii) willful failure to follow any lawful directive of the Company consistent with the participant's position and duties, after written notice and reasonable opportunity to cure, all as determined by the Committee; (iv) a material breach by the participant of his or her duty not to engage in any transaction that represents, directly or indirectly, self- dealing with the Company (or any Subsidiary) that has not been approved by a majority of the disinterested directors of the Board or of the terms of his or her employment; (v) commission of any willful or intentional act by the participant that reasonably could be expected to injure materially the property, reputation, business or business relationships of the Company or its customers; (vi) the conviction or the plea of nolo contendere or the equivalent in respect of a felony involving moral turpitude; or (vii) the abuse of any controlled substance or the abuse of alcohol or any other non- controlled substance which the Committee reasonably determines renders the participant unfit to serve in his or her capacity as an officer or employee of the Company (or any Subsidiary). (d) "Change of Control" shall mean the consummation of the first to occur of (i) the sale, lease or other transfer of all or substantially all of the assets of the Company to any person or group (as such term is used in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended); (ii) the adoption by the stockholders of the Company of a plan relating to the liquidation or dissolution of the Company; (iii) the merger or consolidation of the Company with or into another entity or the merger of another entity into the Company or any Subsidiary thereof with the effect that immediately after such transaction the stockholders of the Company immediately prior to such transaction (or their Related parties) hold less than 50% of the total voting power of all securities generally entitled to vote in the election of directors, managers or trustees of the entity surviving such merger of consolidation; or (iv) the acquisition by any person or group of more than 50% of the voting power of all securities of the Company generally entitled to vote in the election of directors of the Company. (e) "Code" shall mean the Internal Revenue Code of 1986, as amended. (f) "Committee" shall mean the Compensation Committee of the Board of Directors or such other committee as the Board of Directors shall appoint from time to time to administer the Plan; provided, that the Committee shall at all times consist of two or more persons, each of whom shall be a member of the Board of Directors. To the extent required for transactions under the Plan to qualify for the exemptions available under Rule 16b-3 (as defined herein), members of the Committee (or any subcommittee thereof) shall be "non-employee directors" within the meaning of Rule 16b-3. To the extent required for compensation realized from Incentive Awards (as defined herein) under the Plan to be deductible by the Company pursuant to Section 162(m) of the Code, members of the Committee (or any subcommittee thereof) shall be "outside directors" within the meaning of such section. (g) "Company Stock" shall mean the common stock, par value $.01 per share, of the Company. (h) "Disability" shall mean: (1) any physical or mental condition that would qualify a Participant for a disability benefit under the long-term disability plan maintained by the Company and applicable to him or her or (2) when used in connection with the exercise of an Incentive Stock Option (as defined herein) following termination of employment, disability within the meaning of Section 422(e)(3) of the Code. (i) "Division" shall mean a portion of the Company's overall business that is organized and managed as a separate operating unit or business segment of the Company. (j) "Effective Date" shall mean July 30, 2004. (k) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (l) The "Fair Market Value" of a share of Company Stock with respect to any day shall be the closing price of Company Stock on the immediately preceding business day as reported on the Nasdaq National Market or on such other securities exchange or reporting system as may be designated by the Committee. In the event that the price of a share of Company Stock shall not be so reported, the Fair Market Value of a share of Company Stock shall be determined by the Committee in its absolute discretion. (m) "Incentive Award" shall mean an Option, SAR, share of Restricted Stock, share of Phantom Stock or Stock Bonus (each as defined herein) granted pursuant to the terms of the Plan. (n) "Incentive Stock Option" shall mean an Option that is an "incentive stock option" within the meaning of Section 422 of the Code. (o) "Issue Date" shall mean the date established by the Committee on which Certificates representing shares of Restricted Stock shall be issued by the Company pursuant to the terms of Section 9(e). (p) "Non-Qualified Stock Option" shall mean an Option that is not an Incentive Stock Option. (q) "Option" shall mean an option to purchase shares of Company Stock granted pursuant to Section 7. (r) "Participant" shall mean an employee, member of the Board of Directors, or consultant of the Company to whom an Incentive Award is granted pursuant to the Plan and, upon his or her death, his or her successors, heirs, executors and administrators, as the case may be. (s) "Performance Goal" shall mean vesting targets which may be established by the Committee from time to time and documented in writing in connection with an Incentive Award. Such Performance Goals include targets expressed in terms of: revenue; earnings before interest, taxes, depreciation and amortization (EBITDA); operating income; pre-or after-tax income; earnings per share, net cash flow; net cash flow per share; net income; return on sales; return on equity; return on total capital; return on assets; return on net assets employed; economic value added; share price performance; total shareholder return; improvement in or attainment of specified cost and expense levels; and improvement in or attainment of specified working capital levels, applied to the Company (or any Subsidiary or Division) as a whole, or any unit thereof, or as compared against a peer group of companies as determined by the Committee. (t) A share of "Phantom Stock" shall mean the right, granted pursuant to Section 10, to receive in cash the Fair Market Value of a share of Company Stock. (u) A share of "Restricted Stock" shall mean a share of Company Stock which is granted pursuant to the terms of Section 9 hereof and which is subject to the restrictions set forth in Section 9(c). (v) "Retirement" means termination of employment from the Company or, in the case of a member of the Board of Directors, termination of service to the Company, by a Participant whose: (i) age plus years of service with the Company equal at least 65; and (ii) years of service with the Company equal at least five (5). (w) "Rule 16b-3" shall mean the rule thus designated as promulgated under the Exchange Act. (x) "SAR" shall mean a stock appreciation right granted pursuant to Section 8. (y) "Stock Bonus" shall mean a bonus payable in shares of Company Stock granted pursuant to Section 11. (z) "Subsidiary" shall mean any corporation or other entity in which, at the time of reference, the Company owns, directly or indirectly, stock or similar interests comprising more than 50 percent of the combined voting power of all outstanding securities of such entity. (aa) "Units" shall mean the aggregate number of Options, SARS, shares of Restricted Stock, shares of Phantom Stock and Stock Bonuses awarded to an individual Participant in an annual period, except that each share of Restricted Stock, Phantom Stock or Bonus Stock awarded shall count as one and two-tenths (1.2) Units. (bb) "Vesting Date" shall mean the date established by the Committee on which a share of Restricted Stock or Phantom Stock may vest. 3. STOCK SUBJECT TO THE PLAN (a) Shares Available for Awards Subject to adjustment as provided in Section 3(c), the total number of shares of Company Stock with respect to which Incentive Awards may be granted shall not exceed 3,000,000 shares. Such shares may be authorized but unissued Company Stock or authorized and issued Company Stock held in the Company's treasury or acquired by the Company for the purposes of the Plan. The Committee may direct that any stock certificate evidencing shares issued pursuant to the Plan shall bear a legend setting forth such restrictions on transferability as may apply to such shares pursuant to the Plan. The grant of an SAR that by its terms is to be settled in cash shall not reduce the number of shares of Company Stock with respect to which Incentive Awards may be granted pursuant to the Plan. Any Company Stock issued in connection with an award of Restricted Stock, Phantom Stock, or Bonus Stock shall be counted against the 3,000,000 share limit described in the preceding paragraph as one and two-tenths (1.2) shares of Common Stock for every one share of Common Stock issued in connection with such award. (b) Individual Limitation Subject to adjustment as provided in Section 3(c) hereof, the total number of Incentive Awards awarded to any one employee during any fiscal year of the Company, shall not exceed 300,000 Units. Determinations under the preceding sentence shall be made in a manner that is consistent with Section 162(m) of the Code and regulations promulgated thereunder. The provisions of this Section 3(b) shall not apply in any circumstance with respect to which the Committee determines that compliance with Section 162(m) of the Code is not necessary. (c) Adjustment for Change in Capitalization If there is any change in the outstanding shares of Company Stock by reason of a stock dividend or distribution, stock split-up, recapitalization, combination or exchange of shares, or by reason of any merger, consolidation, spinoff or other corporate reorganization in which the Company is the surviving corporation, the number of shares available for issuance both in the aggregate and with respect to each outstanding Incentive Award, the price per share under each outstanding Incentive Award, and the limitation set forth in Section 3(b), shall be proportionately adjusted by the Committee, whose determination shall be final and binding. After any adjustment made pursuant to this Section 3(c), the number of shares subject to each outstanding Incentive Award shall be rounded to the nearest whole number. (d) Re-use of Shares The following shares of Company Stock shall again become available for Incentive Awards: any shares subject to an Incentive Award that remain unissued upon the cancellation or termination of such Award for any reason whatsoever; any shares of Restricted Stock forfeited; and, if allowed by the Committee as a form of payment of the Option exercise price or the required tax withholding thereon, any shares delivered by a Participant to the Company and any shares withheld and retained by the Company. (e) No Repricing Absent prior stockholder approval, neither the Committee nor the Board of Directors shall have any authority, with or without the consent of the affected holders of Incentive Awards, to "reprice" an Incentive Award after the date of its initial grant with a lower exercise price in substitution for the original exercise price. This paragraph may not be amended, altered or repealed by the Board of Directors or the Committee without approval of the stockholders of the Company. 4. ADMINISTRATION OF THE PLAN The Plan shall be administered by the Committee. The Committee shall from time to time designate the employees of the Company who shall be granted Incentive Awards. The Committee shall have full authority to administer the Plan, including authority to interpret and construe any provision of the Plan and the terms of any Incentive Award issued under it and to adopt such rules and regulations for administering the Plan as it may deem necessary or appropriate. The Committee shall determine whether an authorized leave of absence shall constitute termination of employment. Decisions of the Committee shall be final and binding on all parties. The Committee's determinations under the Plan may, but need not, be uniform and may be made on a Participant-by-Participant basis (whether or not two or more Participants are similarly situated). Notwithstanding anything to the contrary contained herein, the Board of Directors may, in its sole discretion, at any time and from time to time, resolve to administer the Plan, in which case the term "Committee" as used herein shall be deemed to mean the Board of Directors. The Committee may, in its absolute discretion, without amendment to the Plan, (i) accelerate the date on which any Option or SAR granted under the Plan becomes exercisable, (ii) waive or amend the operation of Plan provisions respecting exercise after termination of employment or otherwise adjust any of the terms of such Option or SAR and (iii) accelerate the Vesting Date or Issue Date, or waive any condition imposed hereunder, with respect to any share of Restricted Stock or Phantom Stock or otherwise adjust any of the terms applicable to such share. No member of the Committee shall be liable for any action, omission or determination relating to the Plan, and the Company shall indemnify and hold harmless each member of the Committee and each other director or employee of the Company to whom any duty or power relating to the administration or interpretation of the Plan has been delegated against any cost or expense (including counsel fees) or liability (including any sum paid in settlement of a claim with the approval of the Committee) arising out of any action, omission or determination relating to the Plan, unless, in either case, such action, omission or determination was taken or made by such member, director or employee in bad faith and without reasonable belief that it was in the best interests of the Company. 5. ELIGIBILITY The persons who shall be eligible to receive Incentive Awards pursuant to the Plan shall be such officers and salaried employees of the Company and its Subsidiaries (including employees who are also directors and prospective salaried employees conditioned on their becoming salaried employees), non-employee members of the Board of Directors, and such consultants to the Company and its Subsidiaries as the Committee shall select in its discretion. 6. AWARDS UNDER THE PLAN; AWARD AGREEMENTS The Committee may grant Options, SARS, shares of Restricted Stock, shares of Phantom Stock and Stock Bonuses, in such amounts and with such terms and conditions as the Committee shall determine, subject to the provisions of the Plan. Each Incentive Award granted under the Plan (except an unconditional Stock Bonus) shall be evidenced by an Award Agreement which shall contain such provisions as the Committee may in its sole discretion deem necessary or desirable. By accepting an Incentive Award, a Participant thereby agrees that the Incentive Award shall be subject to all of the terms and provisions of the Plan and the applicable Award Agreement. 7. OPTIONS (a) Identification of Options Each Option shall be clearly identified in the applicable Award Agreement as either a Non-Qualified Stock Option or an Incentive Stock Option. In the absence of such identification, an Option shall be deemed to be a Non-Qualified Stock Option. (b) Exercise Price Each Award Agreement with respect to an Option shall set forth the amount (the "exercise price") payable by the holder to the Company upon exercise of the Option. The exercise price per share shall be determined by the Committee but shall in no event be less than the Fair Market Value of a share of Company Stock on the date the Option is granted, except as permitted in connection with the issuance of Options in a transaction to which Section 424(a) of the Code applies, or to the extent any compensation payable in respect of an Option is intended to qualify as performance-based compensation under Section 162(m)(4)(C) of the Code. (c) Term and Exercise of Options (1) Unless the applicable Award Agreement provides otherwise, an Option shall become cumulatively exercisable as to 25% of the shares covered thereby on each of the first, second, third and fourth anniversaries of the date of grant. By way of example and not by way of limitation, the Committee may require, as a condition to the vesting of any Option, that the Participant or the Company achieves such Performance Goals as the Committee may specify. The Committee shall determine the expiration date of each Option; provided, however, that each Option shall be subject to earlier termination, expiration or cancellation as provided in the Plan, and further provided that no Option shall be exercisable more than ten (10) years after the date of grant. (2) An Option may be exercised for all or any portion of the shares as to which it is exercisable; provided, that no partial exercise of an Option shall be for an aggregate exercise price of less than $1,000 unless such partial exercise represents the entire unexercised portion of the Option or the entire portion of the Option that is then exercisable. The partial exercise of an Option shall not cause the expiration, termination or cancellation of the remaining portion thereof. (3) An Option shall be exercised by delivering notice to the Company's principal office, to the attention of its Secretary (or the Secretary's designee), no less than one business day in advance of the effective date of the proposed exercise. Such notice shall be accompanied by the applicable Award Agreement, shall specify the number of shares of Company Stock with respect to which the Option is being exercised and the effective date of the proposed exercise and shall be signed by the Participant or other person then having the right to exercise the Option. Such notice may be withdrawn at any time prior to the close of business on the business day immediately preceding the effective date of the proposed exercise. Payment for shares of Company Stock purchased upon the exercise of an Option shall be made on the effective date of such exercise by one or a combination of the following means: (i) in cash, by certified check, bank cashier's check or wire transfer; (ii) through a broker-assisted transaction whereby a broker selected and engaged by the Participant sells shares of Company Stock in an open market transaction and remits to the Company from the sales proceeds on behalf of the Participant the Option exercise price and the required tax withholding amounts; (iii) subject to the approval of the Committee, and at the direction of the Participant, through shares retained by the Company in an amount whose aggregate Fair Market Value is equal on the date of exercise to the exercise price, thereby surrendering as payment the portion of the Option that covers the retained shares; (iv) subject to the approval of the Committee, in shares of Company Stock owned by the Participant and valued at their Fair Market Value on the effective date of such exercise; or (v) subject to the approval of the Committee, by such other provision as the Committee may from time to time authorize. (4) Notwithstanding the foregoing, in the case of an Incentive Stock Option exercised pursuant to (3)(iii) above, the number of shares deemed to be used to satisfy the exercise price will not be treated as having been purchased through the exercise of an Incentive Stock Option. (5) No shares of Company Stock will be issued until full payment has been made. Any payment in shares of Company Stock shall be effected by the delivery of such shares to the Secretary (or the Secretary's designee) of the Company, duly endorsed in blank or accompanied by stock powers duly executed in blank, together with any other documents and evidences as the Secretary (or the Secretary's designee) of the Company shall require. Certificates for shares of Company Stock purchased upon the exercise of an Option shall be issued in the name of the Participant or other person entitled to receive such shares, and delivered to the Participant or such other person as soon as practicable following the effective date on which the Option is exercised. (d) No Reload Rights Options granted under this Plan shall not contain any provision entitling the optionee to the automatic grant of additional options in connection with any exercise of the original option. (e) No Loans The Company may not make loans to individual Participants for the purpose of financing the exercise of an Option. (f) Limitations on Incentive Stock Options (1) To the extent that the aggregate Fair Market Value of shares of Company Stock with respect to which Incentive Stock Options are exercisable for the first time by a Participant during any calendar year under the Plan and any other stock option plan of the Company (or any "subsidiary corporation" of the Company within the meaning of Section 424 of the Code) shall exceed $100,000, or such higher value as may be permitted under Section 422 of the Code, such Options shall be treated as Non-Qualified Stock Options. Such Fair Market Value shall be determined as of the date on which each such Incentive Stock Option is granted. (2) No Incentive Stock Option may be granted to an individual if, at the time of the proposed grant, such individual owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company (or any "subsidiary corporation" of the Company within the meaning of Section 424 of the Code), unless (i) the exercise price of such Incentive Stock Option is at least 110% of the Fair Market Value of a share of Company Stock at the time such Incentive Stock Option is granted and (ii) such Incentive Stock Option is not exercisable after the expiration of five years from the date such Incentive Stock Option is granted. (g) Effect of Termination of Employment (1) Unless the applicable Award Agreement provides or the Committee shall determine otherwise, in the event that the employment or service of a Participant with the Company shall terminate for any reason other than Cause, Disability, Retirement or death: (i) Options granted to such Participant, to the extent that they were exercisable at the time of such termination, shall remain exercisable until the date that is 90 days after such termination, on which date they shall expire; and (ii) Options granted to such Participant, to the extent that they were not exercisable at the time of such termination, shall expire at the close of business on the date of such termination. The 90-day period described in this Section 7(g)(1) shall be extended to one year in the event of the Participant's death during such 90-day period. Notwithstanding the foregoing, no Option shall be exercisable after the expiration of its term. (2) Unless the applicable Award Agreement provides or the Committee shall determine otherwise, in the event that the employment or service of a Participant with the Company shall terminate on account of the Disability or death of the Participant: (i) Options granted to such Participant, to the extent that they were exercisable at the time of such termination, shall remain exercisable until the date that is one year after such termination, on which date they shall expire; and (ii) Options granted to such Participant, to the extent that they were not exercisable at the time of such termination, shall expire at the close of business on the date of such termination. Notwithstanding the foregoing, no Option shall be exercisable after the expiration of its term. (3) Unless the applicable Award Agreement provides or the Committee shall determine otherwise, in the event that the employment or service of a Participant with the Company shall terminate on account of the Retirement of the Participant: (i) Options granted to such Participant, to the extent that they were exercisable at the time of such termination, shall remain exercisable for a period of two years from the date of termination, on which date they shall expire; and (ii) Options granted to such Participant, to the extent that they were not exercisable at the time of such termination, shall expire at the close of business on the date of such termination. Notwithstanding the foregoing, no Option shall be exercisable after the expiration of its term. (4) Unless the applicable Award Agreement provides or the Committee shall determine otherwise, if a Participant's employment by or service with the Company (or any Subsidiary) is terminated for Cause, any unexercised Stock Option granted to such participant shall be cancelled on the date of such termination, whether or not exercisable on such date. See also Section 19, Cancellation and Rescission of Incentive Awards. (h) Acceleration of Exercise Date Upon Change in Control In the event of a Change in Control, the Committee as constituted immediately before such Change in Control may, in its sole discretion, take action to make each Option granted under the Plan and outstanding at such time fully and immediately exercisable upon such Change in Control, and if so accelerated each Option shall remain exercisable until its expiration, termination or cancellation pursuant to the terms of the Plan. In addition, in the event of a potential Change in Control, the Committee may in its discretion cancel any outstanding Options and pay to the holders thereof, in cash or stock, or any combination thereof, the value of such Options based upon the price per share of Common Stock to be received by other shareholders of the Company in the Change in Control less the exercise price of each Option. 8. SARS (a) Exercise Price The exercise price per share of an SAR shall be determined by the Committee at the time of grant, but shall in no event be less than the Fair Market Value of a share of Company Stock on the date of grant. (b) Benefit Upon Exercise At the time of granting an SAR, the Committee, in its sole and absolute discretion, shall specify whether the benefit payable upon exercise of the SAR will be paid in shares of Company Stock or in cash, and such form of payment will be made a part of the applicable Award Agreement. The exercise of an SAR with respect to any number of shares of Company Stock shall entitle the Participant to a payment, for each such share, equal to the excess of (i) the Fair Market Value of a share of Company Stock on the exercise date over (ii) the exercise price of the SAR. Payment will be made in shares of Company Stock, valued at their Fair Market Value on the date of exercise, or in cash, as specified in the applicable Award Agreement. Payments shall be made as soon as practicable following exercise of the SAR. (c) Term and Exercise of SARS (1) Unless the applicable Award Agreement provides otherwise, an SAR shall become cumulatively exercisable as to 25 percent of the shares covered thereby on each of the first, second, third and fourth anniversaries of the date of grant. By way of example and not by way of limitation, the Committee may require, as a condition to the vesting of any SAR, that the Participant or the Company achieves such Performance Goals as the Committee may specify. The Committee shall determine the expiration date of each SAR. Unless the applicable Award Agreement provides otherwise, no SAR shall be exercisable prior to the first anniversary of the date of grant. (2) An SAR may be exercised for all or any portion of the shares as to which it is exercisable; provided, that no partial exercise of an SAR shall be for an aggregate exercise price of less than $1,000. The partial exercise of an SAR shall not cause the expiration, termination or cancellation of the remaining portion thereof. (3) An SAR shall be exercised by delivering notice to the Company's principal office, to the attention of its Secretary (or the Secretary's designee), no less than one business day in advance of the effective date of the proposed exercise. Such notice shall be accompanied by the applicable Award Agreement, shall specify the number of shares of Company Stock with respect to which the SAR is being exercised, and the effective date of the proposed exercise, and shall be signed by the Participant. The Participant may withdraw such notice at any time prior to the close of business on the business day immediately preceding the effective date of the proposed exercise. (d) Effect of Termination of Employment The provisions set forth in Section 7(g) with respect to the exercise of Options following termination of employment shall apply as well to such exercise of SARS. (e) Acceleration of Exercise Date Upon Change in Control In the event of a Change in Control, the Committee as constituted immediately before such Change in Control may, in its sole discretion, take action to make each SAR granted under the Plan and outstanding at such time fully and immediately exercisable upon such Change in Control, and if so accelerated each SAR shall remain exercisable until its expiration, termination or cancellation pursuant to the terms of the Plan. 9. RESTRICTED STOCK (a) Issue Date and Vesting Date At the time of the grant of shares of Restricted Stock, the Committee shall establish an Issue Date or Issue Dates and a Vesting Date or Vesting Dates with respect to such shares. The Committee may divide such shares into classes and assign a different Issue Date and/or Vesting Date for each class. If the grantee is employed by the Company on an Issue Date (which may be the date of grant), the specified number of shares of Restricted Stock shall be issued in accordance with the provisions of Section 9(e). Provided that all conditions to the vesting of a share of Restricted Stock imposed pursuant to Section 9(b) are satisfied, and except as provided in Section 9(g), upon the occurrence of the Vesting Date with respect to a share of Restricted Stock, such share shall vest and the restrictions of Section 9(c) shall cease to apply to such share. (b) Conditions to Vesting At the time of the grant of shares of Restricted Stock, the Committee may impose such restrictions or conditions to the vesting of such shares as it, in its absolute discretion, deems appropriate. By way of example and not by way of limitation, the Committee may require, as a condition to the vesting of any class or classes of shares of Restricted Stock, that the Participant or the Company achieves such Performance Goals as the Committee may specify. The Committee may, in its discretion, also make grants of Restricted Stock which vest over a period of time of at least one year. (c) Restrictions on Transfer Prior to Vesting Prior to the vesting of a share of Restricted Stock, no transfer of a Participant's rights with respect to such share, whether voluntary or involuntary, by operation of law or otherwise, shall be permitted. Immediately upon any attempt to transfer such rights, such share, and all of the rights related thereto, shall be forfeited by the Participant. (d) Dividends on Restricted Stock The Committee in its discretion may require that any dividends paid on shares of Restricted Stock shall be held in escrow until all restrictions on such shares have lapsed. (e) Issuance of Certificates (1) Reasonably promptly after the Issue Date with respect to shares of Restricted Stock, the Company shall cause to be issued a stock certificate, registered in the name of the Participant to whom such shares were granted, evidencing such shares; provided, that the Company shall not cause such a stock certificate to be issued unless it has received a stock power duly endorsed in blank with respect to such shares. Each such stock certificate shall bear the following legend: The transferability of this certificate and the shares of stock represented hereby are subject to the restrictions, terms and conditions (including forfeiture provisions and restrictions against transfer) contained in the CalAmp Corp. 2004 Stock Incentive Plan and related Award Agreement, and such rules, regulations and interpretations as the CalAmp Corp. Compensation Committee may adopt. Copies of the Plan, Award Agreement and, if any, rules, regulations and interpretations are on file in the office of the Secretary of CalAmp Corp., 1401 North Rice Avenue, Oxnard, California 93030. Such legend shall not be removed until such shares vest pursuant to the terms hereof. (2) Each certificate issued pursuant to this Section 9(e), together with the stock powers relating to the shares of Restricted Stock evidenced by such certificate, shall be held in escrow by the Company until (i) the restrictions have lapsed and (ii) the income tax and employment tax withholding amounts have been satisfied, as provided for in Section 16 hereof. (f) Consequences of Vesting Upon the vesting of a share of Restricted Stock pursuant to the terms of the Plan and the applicable Award Agreement, the restrictions of Section 9(c) shall cease to apply to such share. Reasonably promptly after a share of Restricted Stock vests, the Company shall cause to be delivered to the Participant to whom such shares were granted, a certificate evidencing such share, free of the legend set forth in Section 9(e). Notwithstanding the foregoing, such share still may be subject to restrictions on transfer as a result of applicable securities laws. (g) Effect of Termination of Employment (1) Unless the applicable Award Agreement or the Committee provides otherwise, during the 90 days following termination of a Participant's employment for any reason other than Cause, the Company shall have the right to require the return of any shares to which restrictions on transferability apply, in exchange for which the Company shall repay to the Participant (or the Participant's estate) any amount paid by the Participant for such shares. In the event that the Company requires such a return of shares, it also shall have the right to require the return of all dividends paid on such shares, whether by termination of any escrow arrangement under which such dividends are held or otherwise. (2) In the event of the termination of a Participant's employment for Cause, all shares of Restricted Stock granted to such Participant which have not vested as of the date of such termination shall immediately be returned to the Company, together with any dividends paid on such shares, in return for which the Company shall repay to the Participant any amount paid for such shares. See also Section 19, Cancellation and Rescission of Incentive Awards. (h) Effect of Change in Control In the event of a Change in Control, the Committee as constituted immediately before such Change in Control may, in its sole discretion, take action to immediately vest upon such Change in Control all outstanding shares of Restricted Stock which have not theretofore vested. 10. PHANTOM STOCK (a) Vesting Date At the time of the grant of shares of Phantom Stock, the Committee shall establish a Vesting Date or Vesting Dates with respect to such shares. The Committee may divide such shares into classes and assign a different Vesting Date for each class. Provided that all conditions to the vesting of a share of Phantom Stock imposed pursuant to Section 10(c) are satisfied, and except as provided in Section 10(d), upon the occurrence of the Vesting Date with respect to a share of Phantom Stock, such share shall vest. (b) Benefit Upon Vesting Upon the vesting of a share of Phantom Stock, the Participant shall be entitled to receive in cash, within 30 days of the date on which such share vests, an amount equal to the sum of (i) the Fair Market Value of a share of Company Stock on the date on which such share of Phantom Stock vests and (ii) the aggregate amount of cash dividends paid with respect to a share of Company Stock during the period commencing on the date on which the share of Phantom Stock was granted and terminating on the date on which such share vests. (c) Conditions to Vesting At the time of the grant of shares of Phantom Stock, the Committee may impose such restrictions or conditions to the vesting of such shares as it, in its absolute discretion, deems appropriate. By way of example and not by way of limitation, the Committee may require, as a condition to the vesting of any class or classes of shares of Phantom Stock, that the Participant or the Company achieves such Performance Goals as the Committee may specify. The Committee may, in its discretion, also make grants of Phantom Stock which vest over a period of time of at least one year. (d) Effect of Termination of Employment (1) Unless the applicable Award Agreement or the Committee provides otherwise, shares of Phantom Stock that have not vested, together with any dividends credited on such shares, shall be forfeited upon the Participant's termination of employment for any reason other than Cause. (2) In the event of the termination of a Participant's employment for Cause, all shares of Phantom Stock granted to such Participant which have not vested as of the date of such termination shall immediately be forfeited, together with any dividends credited on such shares. See also Section 19, Cancellation and Rescission of Incentive Awards. (e) Effect of Change in Control In the event of a Change in Control, the Committee as constituted immediately before such Change in Control may, in its sole discretion, take action to immediately vest upon such Change in Control all outstanding shares of Phantom Stock which have not theretofore vested. 11. STOCK BONUSES In the event that the Committee grants a Stock Bonus, a certificate for the shares of Company Stock comprising such Stock Bonus shall be issued in the name of the Participant to whom such grant was made and delivered to such Participant as soon as practicable after the date on which such Stock Bonus is payable. 12. NON-EMPLOYEE DIRECTOR AWARDS Each year, on the first business day following the date of the annual meeting of the stockholders of the Company at which directors of the Company are elected (and, in the case that a person becomes a Non-Employee Director other than at an annual meeting, on such date that the person first becomes a Non-Employee Director), each Non-Employee Director shall receive Incentive Awards in an amount not to exceed 10,000 Units. The specific amount of Incentive Award Units to be granted to each Non-Employee Director on such dates will be as determined by the Board of Directors from time to time, subject to this limitation of 10,000 Units on each such date. If, on any date upon which Incentive Awards are to be granted pursuant to this Section 12, the number of shares of Company Stock remaining available for issuance under the Plan is less than the total number of shares of Company Stock that otherwise would be covered by such Incentive Awards, in the aggregate, then Incentive Awards for a pro rata amount of the remaining shares of Company Stock available for issuance (rounded to the nearest whole share) shall be awarded to each Non-Employee Director on such date. Options granted pursuant to this Section 12 shall become exercisable one (1) year from the date of grant or over such longer period as the Board of Directors may from time to time establish. 13. RIGHTS AS A STOCKHOLDER No person shall have any rights as a stockholder with respect to any shares of Company Stock covered by or relating to any Incentive Award until the date of issuance of a stock certificate with respect to such shares. Except as otherwise expressly provided in Section 3(c), no adjustment to any Incentive Award shall be made for dividends or other rights for which the record date occurs prior to the date such stock certificate is issued. 14. NO SPECIAL EMPLOYMENT RIGHTS; NO RIGHT TO INCENTIVE AWARD Nothing contained in the Plan or any Award Agreement shall confer upon any Participant any right with respect to the continuation of employment by the Company or interfere in any way with the right of the Company, subject to the terms of any separate employment agreement to the contrary, at any time to terminate such employment or to increase or decrease the compensation of the Participant. No person shall have any claim or right to receive an Incentive Award hereunder. The Committee's granting of an Incentive Award to a Participant at any time shall neither require the Committee to grant any other Incentive Award to such Participant or other person at any time nor preclude the Committee from making subsequent grants to such Participant or any other person. 15. SECURITIES MATTERS (a) The Company shall be under no obligation to affect the registration pursuant to the Securities Act of 1933 of any interests in the Plan or any shares of Company Stock to be issued hereunder or to effect similar compliance under any state laws. Notwithstanding anything herein to the contrary, the Company shall not be obligated to cause to be issued or delivered any certificates evidencing shares of Company Stock pursuant to the Plan unless and until the Company is advised by its counsel that the issuance and delivery of such certificates is in compliance with all applicable laws, regulations of governmental authority and the requirements of the Nasdaq National Market and any other securities exchange on which shares of Company Stock are traded. Certificates evidencing shares of Company Stock issued pursuant to the terms hereof, may bear such legends, as the Committee or the Company, in its sole discretion, deems necessary or desirable to insure compliance with applicable securities laws. (b) The transfer of any shares of Company Stock hereunder shall be effective only at such time as counsel to the Company shall have determined that the issuance and delivery of such shares is in compliance with all applicable laws, regulations of governmental authority and the requirements of the Nasdaq National Market and any other securities exchange on which shares of Company Stock are traded. The Committee may, in its sole discretion, defer the effectiveness of any transfer of shares of Company stock hereunder in order to allow the issuance of such shares to be made pursuant to registration or an exemption from registration or other methods for compliance available under federal or state securities laws. The Company shall inform the Participant in writing of the Committee's decision to defer the effectiveness of a transfer. During the period of such a deferral in connection with the exercise of an Option, the Participant may, by written notice, withdraw such exercise and obtain the refund of any amount paid with respect thereto. 16. WITHHOLDING TAXES Whenever cash is to be paid pursuant to an Incentive Award, the Company shall have the right to deduct therefrom an amount sufficient to satisfy any federal, state and local withholding tax requirements related thereto. Whenever shares of Company Stock are to be delivered pursuant to an Incentive Award, the amount of any federal, state and local tax withholding requirements must be satisfied by the Participant prior to the issuance of shares by the Company (or, in the case of Restricted Stock, before the release of such shares from escrow). The Company shall have the right to require the Participant to remit to the Company in cash an amount sufficient to satisfy any federal, state and local withholding tax requirements related thereto. With the approval of the Committee, which it shall have sole discretion to grant, a Participant may satisfy the foregoing requirement by (i) electing to have the Company withhold and retain from delivery shares of Company Stock having a value equal to the amount of the tax withholding requirement, or (ii) delivering to the Company already vested and owned shares of Common Stock having a value equal to the amount of the tax withholding requirement. Such shares shall be valued at their Fair Market Value on the date as of which the amount of tax to be withheld is determined (the "Tax Date"). Fractional share amounts shall be settled in cash. Such a withholding election may be made with respect to all or any portion of the shares to be delivered pursuant to an Incentive Award. To the extent required for such a withholding of stock to qualify for the exemption available under Rule 16b-3, such an election by a grantee whose transactions in Company Stock are subject to Section 16(b) of the Exchange Act shall be: (i) subject to the approval of the Committee in its sole discretion; (ii) irrevocable; (iii) made no sooner than six months after the grant of the award with respect to which the election is made; and (iv) made at least six months prior to the Tax Date unless such withholding election is in connection with exercise of an Option and both the election and the exercise occur prior to the Tax Date in a "window period" of twenty business days beginning on the third day following release of the Company's quarterly or annual summary statement of sales and earnings. 17. NOTIFICATION OF ELECTION UNDER SECTION 83(b) OF THE CODE If any Participant shall, in connection with the award of Restricted Stock under the Plan, make the election permitted under Section 83(b) of the Code (i.e., an election to include in gross income in the year of award the amounts specified in Section 83(b)), such Participant shall notify the Company of such election at the time of entering into the Award Agreement pertaining to the Restricted Stock award, and shall concurrently make a payment to the Company of the aggregate income tax and employment tax withholding amount, such payment to be made in cash, by certified check, bank cashier's check or wire transfer. 18. NOTIFICATION UPON DISQUALIFYING DISPOSITION Each Award Agreement with respect to an Incentive Stock Option shall require the Participant to notify the Company of any disposition of shares of Company Stock issued pursuant to the exercise of such Option under the circumstances described in Section 421(b) of the Code (relating to certain disqualifying dispositions) within ten days of such disposition. 19. CANCELLATION AND RESCISSION OF INCENTIVE AWARDS Unless the Award Agreement specifies otherwise, the Committee may cancel, rescind, suspend, withhold or otherwise limit or restrict any unexpired, unpaid, or deferred Incentive Awards at any time if the Participant is not in compliance with all applicable provisions of the Award Agreement, or if the Participant engages in any "Detrimental Activity." For purposes of this Section 19, "Detrimental Activity" shall include: (i) the rendering of services for any organization or engaging directly or indirectly in any business which is or becomes competitive with the Company, or which organization or business, or the rendering of services to such organization or business, is or becomes otherwise prejudicial to or in conflict with the interests of the Company; (ii) the disclosure to anyone outside the Company, or the use in other than the Company's business, without prior written authorization from the Company, of any confidential information or material, as defined in the Company's Agreement Regarding Confidential Information and Intellectual Property, relating to the business of the Company, acquired by the Participant either during or after employment with the Company; (iii) the failure or refusal to disclose promptly and to assign to the Company, pursuant to the Company's "Confidentiality, Company Property, and Non- Solicitation Agreement" (formerly known as the Company's "Confidential Invention Agreement"), all right, title and interest in any invention or idea, patentable or not, made or conceived by the Participant during employment by the Company, relating in any manner to the actual or anticipated business, research or development work of the Company or the failure or refusal to do anything reasonably necessary to enable the Company to secure a patent where appropriate in the United States and in other countries; (iv) activity that results in termination of the Participant's employment for Cause; (v) a violation of any rules, policies, procedures or guidelines of the Company, including but not limited to the Company's Code of Business Conduct and Ethics policy; (vi) any attempt directly or indirectly to induce any employee of the Company to be employed or perform services elsewhere or any attempt directly or indirectly to solicit the trade or business of any current or prospective customer, supplier or partner of the Company; (vii) the Participant being convicted of, or entering a guilty plea with respect to, a crime, whether or not connected with the Company; or (viii) any other conduct or act determined to be injurious, detrimental or prejudicial to any interest of the Company. 20. AMENDMENT OR TERMINATION OF THE PLAN The Board of Directors may, at any time, suspend or terminate the Plan or revise or amend it in any respect whatsoever; provided, however, that stockholder approval shall be required if and to the extent required by Rule 16b-3 or by any comparable or successor exemption under which the Board of Directors believes it is appropriate for the Plan to qualify, or if and to the extent the Board of Directors determines that such approval is appropriate for purposes of satisfying Section 162(m) or Section 422 of the Code. Nothing herein shall restrict the Committee's ability to exercise its discretionary authority pursuant to Section 4, which discretion may be exercised without amendment to the Plan. No action hereunder may, without the consent of a Participant, reduce the Participant's rights under any outstanding Incentive Award. 21. NO OBLIGATION TO EXERCISE The grant to a Participant of an Option or SAR shall impose no obligation upon such Participant to exercise such Option or SAR. 22. TRANSFERS UPON DEATH; NONASSIGNABILITY Upon the death of a Participant outstanding Incentive Awards granted to such Participant may be exercised only by the executor or administrator of the Participant's estate or by a person who shall have acquired the right to such exercise by will or by the laws of descent and distribution. No transfer of an Incentive Award by will or the laws of descent and distribution shall be effective to bind the Company unless the Company shall have been furnished with (a) written notice thereof and with a copy of the will and/or such evidence as the Committee may deem necessary to establish the validity of the transfer and (b) an agreement by the transferee to comply with all the terms and conditions of the Incentive Award that are or would have been applicable to the Participant and to be bound by the acknowledgments made by the Participant in connection with the grant of the Incentive Award. During a Participant's lifetime, the Committee may, in its discretion, permit the transfer, assignment or other encumbrance of an outstanding Option or outstanding shares of Restricted Stock; provided that, in the case of an Incentive Stock Option, transferability may be permitted during the Participant's lifetime only to the extent that the Incentive Stock Option retains its qualified status, unless the Committee and the Participant agree otherwise. 23. EXPENSES AND RECEIPTS The expenses of the Plan shall be paid by the Company. Any proceeds received by the Company in connection with any Incentive Award will be used for general corporate purposes. 24. FAILURE TO COMPLY In addition to the remedies of the Company elsewhere provided for herein, failure by a Participant (or beneficiary) to comply with any of the terms and conditions of the Plan or the applicable Award Agreement, unless such failure is remedied by such Participant (or beneficiary) within ten days after notice of such failure by the Committee, shall be grounds for the cancellation and forfeiture of such Incentive Award, in whole or in part, as the Committee, in its sole discretion, may determine. 25. EFFECTIVE DATE AND TERM OF PLAN The Plan shall be effective as of the Effective Date. Unless earlier terminated by the Board of Directors, the right to grant Incentive Awards under the Plan will terminate on the tenth anniversary of the Effective Date. Incentive Awards outstanding at Plan termination will remain in effect according to their terms and the provisions of the Plan. 26. APPLICABLE LAW Except to the extent preempted by any applicable federal law, the Plan will be construed and administered in accordance with the laws of the State of Delaware, without reference to the principles of conflicts of laws thereunder. EX-31 5 exhibit_31-1.txt EX. 31.1 - OFFICER'S SEC. 302 CERTIFICATION EXHIBIT 31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER I, Fred M. Sturm, Chief Executive Officer of CalAmp Corp. (the "registrant"), certify that: 1. I have reviewed this quarterly report on Form 10-Q of the registrant; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors: a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. October 12, 2004 /s/ Fred M. Sturm ------------------------ ----------------------------- Date Fred M. Sturm Chief Executive Officer EX-31 6 exhibit_31-2.txt EX. 31.1 - OFFICER'S SEC. 302 CERTIFICATION EXHIBIT 31.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER I, Richard K. Vitelle, Chief Financial Officer of CalAmp Corp. (the "registrant"), certify that: 1. I have reviewed this quarterly report on Form 10-Q of the registrant; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors: a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. October 12, 2004 /s/ Richard K. Vitelle ------------------------ ----------------------------- Date Richard K. Vitelle Chief Financial Officer EX-32 7 exhibit_32.txt EX. 32 - OFFICERS' SEC. 906 CERTIFICATION EXHIBIT 32 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of CalAmp Corp. (the "Company") on Form 10-Q for the period ended August 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), we, Fred M. Sturm, President and Chief Executive Officer of the Company, and Richard K. Vitelle, Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of our knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Fred M. Sturm ----------------------------- Fred M. Sturm President and Chief Executive Officer /s/ Richard K. Vitelle ----------------------------- Richard K. Vitelle Vice President and Chief Financial Officer October 12, 2004 -----END PRIVACY-ENHANCED MESSAGE-----