<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): JUNE 6, 1997
---------------------------------------------
TRANSCRYPT INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-21681 47-0801192
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification Number)
4800 NW FIRST STREET, LINCOLN, NEBRASKA 68521
(Address of Principal Executive Offices and Zip Code)
Registrant's telephone number, including area code: (402) 474-4800
<PAGE> 2
Item 5. Other Events.
On June 6, 1997, Transcrypt International, Inc. (the "Registrant")
executed a letter of intent (the "Letter of Intent") with E.F. Johnson Company,
its sole stockholder (EFJ Partners), and its wholly-owned subsidiaries, E.F.
Johnson Communications, Inc. and E.F. Johnson International, Inc. (collectively,
"EFJ") relating to the Registrant's proposed acquisition of substantially all of
the assets and assumption of certain liabilities of EFJ for a combination of
cash and the possible assumption of additional indebtedness of EFJ totaling
$34,000,000 in the aggregate, which amount is subject to certain adjustments as
specified in the Letter of Intent. In connection with the Letter of Intent and
to support EFJ's operations, the Registrant has also agreed to deliver standby
letters of credit in favor of EFJ's bonding companies to secure the obligations
of EFJ under certain surety bonds. Under such arrangement, the maximum aggregate
face amount of all outstanding letters of credit of the Registrant plus all
outstanding reimbursement obligations under drawn letters of credit may not
exceed $2,000,000. Such letters of credit will be secured by perfected liens,
subject to the rights of the holder of certain of EFJ's senior indebtedness, on
all of EFJ's assets, and a license to use EFJ's intellectual property rights.
The letter of intent also contains a "no-shop" obligation by EFJ and its
stockholder and provides for a "topping fee" agreement whereby EFJ would pay to
the Registrant $1,500,000 if EFJ entered into an alternative transaction
involving the sale or merger of EFJ. On June 11, 1997, the First Amendment to
the Letter of Intent was entered into to provide for an extension of time to
complete the requirements set forth in paragraph 4(a) of the Letter of Intent.
The proposed acquisition remains subject to the negotiation and
execution of a definitive acquisition agreement, which will contain customary
representations and warranties and customary conditions, including, among other
things, approval of the transaction by the respective Boards of Directors of the
Registrant and EFJ, compliance with the Hart-Scott-Rodino Antitrust Improvements
Act and receipt of consents from certain of EFJ's lenders.
The foregoing description of the terms of the Letter of Intent and the
First Amendment does not purport to be a complete statement of the parties'
rights and obligations, and is qualified in its entirety by reference to the
Letter of Intent and the First Amendment, which are attached hereto as Exhibits
99.1 and 99.2, respectively, and the contents of which are incorporated herein
by reference. Certain additional matters relating to the proposed transaction
are more fully described in the Registrant's press release dated June 11, 1997,
which is attached hereto as Exhibit 99.3 and the contents of which are also
hereby incorporated herein by reference.
1
<PAGE> 3
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements.
None required.
(b) Pro Forma Financial Information.
None required.
(c) Exhibits.
99.1 Letter of Intent, dated June 6, 1997, between
Transcrypt International, Inc., on the one hand, and
E.F. Johnson Company, E.F. Johnson Communications,
Inc., E.F. Johnson International, Inc. and EFJ
Partners, as the sole stockholder of E.F. Johnson
Company, on the other hand.
99.2 First Amendment to Letter of Intent, dated June 11,
1997, between Transcrypt International, Inc., on the
one hand, and E.F. Johnson Company, E.F. Johnson
Communications, Inc., E.F. Johnson International,
Inc. and EFJ Partners, as the sole stockholder of
E.F. Johnson Company, on the other hand.
99.3 Press Release issued on June 11, 1997 by Transcrypt
International, Inc.
Annexes
Pursuant to Item 601(b)(2) of Regulation S-K, certain annexes to the
Letter Agreement and the First Amendment set forth above have been omitted.
Registrant hereby agrees to furnish such annexes upon request of the Securities
and Exchange Commission.
Annexes Omitted
Annex A Form of Termination and Topping Fee Agreement
Annex B Unaudited Balance Sheet of EFJ as of March 31, 1997
Annex C Form of Securicor Investor Agreement
Annex D Form of Noram Investor Agreement
Annex E Form of Subordinated Security Agreement
2
<PAGE> 4
Annex F Form of Subordinated Trademark Collateral Assignment and
Security Agreement
Annex G Form of Subordinated Patent Collateral Assignment and
Security Agreement
Annex H Form of Subordinated Copyright Collateral Assignment and
Security Agreement
Annex I Form of Consent
Annex J Form of Intercreditor Agreement
3
<PAGE> 5
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
TRANSCRYPT INTERNATIONAL, INC.
Date: June 11, 1997 By: /s/ John T. Connor
-----------------------
John T. Connor
Chief Executive Officer
(Principal executive officer and duly
authorized signatory)
4
<PAGE> 1
June 6, 1997
E.F. Johnson Company
E.F. Johnson Communications, Inc.
E.F. Johnson International, Inc.
438 Gateway Blvd.
Burnsville, MN 55337-2564
Attn: Mr. William Weksel
Mr. Robert H. Davies
Gentlemen:
Thank you for allowing us the opportunity to discuss with you the
acquisition by Transcrypt International, Inc. ("TRII") of the business and
assets of E.F. Johnson Company ("EFJ Co.") and its subsidiaries and for
providing us with certain financial and other information necessary to our
evaluation of such acquisition.
This letter of intent (the "Letter") outlines the understanding that
the undersigned and you have reached regarding the proposed acquisition (the
"Acquisition") by TRII or an entity controlled by TRII (the "Purchaser") of the
business (the "Business") and all of the assets, tangible and intangible,
reflected in the March 31, 1997 unaudited balance sheet other than those
disposed of in the ordinary course of business since such date and other than
those that are specifically excluded, as more particularly described herein of
EFJ Co., E.F. Johnson Communications, Inc. ("EFJ Communications") and E.F.
Johnson International, Inc. ("EFJ International") (collectively, the "Sellers").
William Weksel ("Weksel") and Robert H. Davies ("Davies") are the sole partners
of EFJ Partners ("Shareholder"). Shareholder owns beneficially and of record,
all of the issued and outstanding common stock of EFJ Co. EFJ Co. owns,
beneficially and of record, all of the issued and outstanding capital stock of
each of EFJ Communications and EFJ International.
This Letter does not constitute either an agreement to buy by Purchaser
or an agreement to sell by Sellers. Except as otherwise expressly provided
herein and except for the specific obligations as shall be set forth in
agreements to be entered into by the parties, including with respect to a
Termination and Topping Fee Agreement, substantially in the form of the
Termination and Topping Fee Agreement attached as Annex A hereto, to be entered
into subsequent to the date hereof, the
1
<PAGE> 2
mutual intentions of Purchaser, Sellers and Shareholder which are expressed
herein are subject in all respects to the negotiation, execution and delivery of
a definitive agreement between the parties relating to the subject matter hereof
(the "Definitive Agreement") as well as, in the case of the Purchaser, favorable
due diligence and the approval of Purchaser's Board of Directors. Subject to
these conditions, Purchaser, Sellers and Shareholder will in good faith endeavor
to reach agreement regarding the terms and conditions of the Definitive
Agreement as soon as practicable.
Set forth below are the principal terms and conditions of our
understanding:
1. Purchase of the Business and Purchased Assets. At the closing of the
proposed Acquisition (the "Closing"), Purchaser shall acquire the Business and
the assets, tangible and intangible, of the Sellers including all assets which
are reflected in the March 31, 1997 unaudited balance sheet (the "March 31st
Balance Sheet") (a copy of which is attached hereto as Annex B), including
without limitation all cash on hand at the Closing, interests in real property
and all improvements thereon, all machinery and equipment, vehicles, furniture
and fixtures, inventory, supplies, to the extent specified below, cash deposits
held by third parties, prepaid expenses, assignable contracts, computer hardware
and software, the name "E.F. Johnson" and all derivatives thereof, patents,
trademarks, trade names, know-how, unfilled orders, customer lists, account and
lease receivables (other than disclosed receivables due from Related Parties (as
defined below)), assignable permits and licenses and the 220 MHz inventory
(which will be valued at $1.00) (collectively, the "Purchased Assets"). The
Purchased Assets will not include any of the following: receivables due from
Related Parties to the extent identified as such in the Definitive Agreements,
contracts for which any required third party consent has not been obtained,
contracts with Related Parties and rights under the 220 MHz Manufacturing
License (collectively, "Potential Excluded Assets"). For purposes of this
Letter, "Related Parties" means the holders of the common and preferred stock of
EFJ Co., the holders of warrants in EFJ Co., Viking Mobile Communications, Inc.,
RadioSoft, Inc., Viking Dispatch Services, Inc. and any and all other entities
controlled by any shareholder of EFJ Co., other than any Seller.
2. Assumed Liabilities. At the Closing, Purchaser will assume from
Sellers only the following liabilities and obligations (collectively, the
"Assumed Liabilities"): (a) trade payables incurred in the ordinary course of
any of their respective businesses (other than any trade payables of any of the
Sellers owed to Related Parties) (trade payables shall be identified to
Purchaser as of a date not more than 3 days prior to the Closing for Purchaser's
due diligence purposes), (b) obligations under those contracts that constitute
Purchased Assets, but only to the extent not arising from any breach or default
thereunder occurring on or prior to the Closing, (c) at Purchaser's sole
discretion, obligations of any of the Sellers under the revolving and term loan
credit facility with Congress Financial Corporation ("Congress") ("Sellers'
Senior Credit Facility") and (d) accrued employee benefits which are expressly
disclosed to Purchaser in the Definitive Agreement, except for any accrued
benefits to officers of Sellers or Shareholder not set forth in the Definitive
Agreement.
2
<PAGE> 3
The Assumed Liabilities shall not include any other liabilities or obligations
of any Seller, including amounts due and owing by any Seller: (i) to any Related
Party; (ii) under those certain 9.79% Senior Subordinated Notes due July 31,
1997 ("EFJ Co.'s Senior Subordinated Notes"); (iii) under the Sellers' Senior
Credit Facility, unless Purchaser shall have elected to assume Sellers'
obligations thereunder, (iv) with respect to the Series A Redeemable Preferred
Stock or the Series I Class B Redeemable Preferred Stock of EFJ Co.; (v) in
connection with the terms of, or obligations under, the 220 MHz Manufacturing
License, if such license is to be an Excluded Asset (collectively, the "Retained
Liabilities") or (vi) in connection with any other obligations of Sellers to the
holders of EFJ Co.'s Senior Subordinated Notes, Sellers' Senior Credit Facility
(unless Purchaser shall have elected to assume Sellers' obligations thereunder)
or the holders of the Series A Redeemable Preferred Stock or the Series I Class
B Redeemable Preferred Stock of EFJ Co. At the Closing, the parties shall
establish a fund out of which indemnification payments, if any, as required
under the Definitive Agreement shall be made (the "Indemnification Fund") by
having Purchaser deposit between $1 million and $2 million in an
interest-bearing account to be agreed to by the parties, with the amount of such
Indemnification Fund to be determined based upon the extent to which the due
diligence conducted by Purchaser reveals the existence of potential liabilities
or diminution of value stemming from potential litigation, tax liabilities for
any prior fiscal periods, environmental issues, and accounting discrepancies
which fairly raise risk to Purchaser. Unless previously disclosed by Sellers and
accepted by Purchaser or reflected in the March 31, 1997 Balance Sheet, any
undisclosed liabilities, contingent or otherwise, shall be reimbursed out of the
Indemnification Fund up to the amount of the then-existing fund, in the event
the liability arises after the Closing. To the extent that claims are not made,
the principal amount of the Indemnification Fund shall be paid to Sellers in
four quarterly installments during the twelve month period following the
Closing, provided that if any valid claims shall be made, the quarterly payments
shall be made up of the then-existing amount left in the Indemnification Fund.
Upon the expiration of one year from the date of the Closing, any remaining
amounts shall be paid to Sellers in accordance with Seller's instructions,
including all accrued interest thereon.
3. Purchase Price and Certain Adjustments.
(a) The purchase price (the "Purchase Price") for the Business and
the Purchased Assets shall be $34,000,000 minus the amount that may be drawn
upon all Letters of Credit (as defined below) as of the Closing minus any
Reduction in Payment Obligations (as defined below) with such amounts payable as
follows:
(i) At the Closing, Purchaser shall pay the Purchase Price as
follows: (1) either pay to Congress cash in an amount equal to the total amount
outstanding as of the date of the Closing on Sellers' Senior Credit Facility
(the "Term/Revolver Pay-off Amount") or assume Sellers' obligations under
Sellers' Senior Credit Facility (Purchaser acknowledges that such amount
fluctuates but Sellers represent that the principal amount outstanding was
approximately $17,600,000 as at
3
<PAGE> 4
March 31, 1997), and (2) by federal wire transfer a cash amount equal to the
Purchase Price, minus (A) the aggregate amounts paid pursuant to clause (1)
above, and minus (B) any undisclosed liabilities not previously identified to
Purchasers by Sellers in the Financial Statement ("Reduction in Payment
Obligations") and minus (C) aggregate amounts to be deposited in the
Indemnification Fund as provided in Section 2 above.
(b) The Purchase Price shall be decreased by an amount equal to any
negative changes in the net asset formula of $844,000 as presented on the March
31 Balance Sheet and further elimination of the aggregate principal amount of
the Letters of Credit outstanding as of the Closing on the $844,000 net asset
value reflected in the March 31 Balance Sheet. A final calculation of the net
asset adjustment shall be made by Purchaser (subject to verification by Sellers)
within sixty (60) days after the Closing and an appropriate cash payment shall
be made by Sellers, within ten (10) days of Purchaser and Sellers agreeing on
such final Net Asset adjustment.
(c) The Purchase Price shall also be decreased by the sum of fifty
percent (50%) of the following: (i) any savings in the cash amount payable to
Noram Energy Corp. ("Noram") at the Closing below the sum of $6 million for the
obligations which are not being assumed in the Acquisition pursuant to
subparagraphs (ii) and (iv) of paragraph 2 above, and (ii) any savings in the
cash amount required to be paid out at Closing to the holders of the Series I
Class B Redeemable Preferred Stock (and in satisfaction for all obligations of
Sellers to such holders including all principal, accrued dividends and interest)
and cancellation of warrants below the sum of $7 million, including but not
limited to amounts required for totally redeeming the Preferred Stock.
4. Letters of Credit.
(a) Prior to 5:00 pm, e.s.t., on Wednesday, June 11, 1997, unless
such date is extended by mutual agreement of EFJ and TRII, Purchaser shall cause
to be delivered to EFJ's bonding companies standby letters of credit issued by
Norwest Bank Minnesota, National Association (the "Issuing Bank") in favor of
such bonding companies (the "Letters of Credit"); provided Securicor
Communications, Ltd. ("Securicor") and Noram shall have executed letters in form
and substance substantially as set forth on Annexes C and D hereto,
respectively, unless waived in writing by Purchaser. The Letters of Credit are
replacement collateral for cash heretofore delivered by Sellers to such bonding
companies to secure the obligations of Sellers to reimburse such bonding
companies should any of the surety bonds issued by them on behalf of Sellers be
called upon for performance. Upon the written request of any of Sellers from
time to time, Purchaser shall deliver such other Letters of Credit as Sellers
may request for the purpose of securing Sellers obligations under additional
surety bonds. At no time shall the sum of (i) the aggregate face amount of all
outstanding Letters of Credit plus (ii) all outstanding reimbursement
obligations under drawn Letters of Credit exceed $2,000,000. Sellers represent
and warrant that the contracts related to the bonds for which the Letters of
Credit are furnished as collateral security are to be fully performed by Sellers
4
<PAGE> 5
within one year after the date hereof and Sellers covenant that the contracts
related to the bonds for which Letters of Credit may hereafter be requested
shall be fully performed by Sellers within such one-year period.
(b) The obligations of Sellers to Purchaser in respect of the
Letters of Credit shall be secured by perfected liens on all of the Sellers'
assets (including, without limitation, all intellectual property rights,
patents, source codes, software, trade secrets, manufacturing rights and the
right to negotiate employment agreements), which liens shall be junior only to
the liens in favor of Congress. The perfection of such liens shall be a
condition precedent to Purchaser's obligations under this Section 4. It is
further agreed that Sellers shall make no withdrawals or collect payments from
EFJ in excess of their current retainer until the Letters of Credit are replaced
or released. As further security for such obligations of Sellers, Sellers shall
grant to Purchaser a license to use all of Seller's intellectual property rights
which license shall be expressly consented to in writing by Congress. All
documentation providing for the liens, licenses and intercreditor arrangements
described above shall be substantially in the form of Annexes E,F, G, H, I and J
attached hereto.
(c) In the event Sellers engage in an Alternative Transaction or
incur some other event of default (as defined in the Definitive Agreements),
Sellers shall take all such actions which are necessary to terminate any and all
obligations of Purchaser to the Issuing Bank in respect of the Letters of Credit
or cause the Letters of Credit to be released by Seller's bonding companies in
addition to whatever other remedies are available to Purchaser including without
limitation its rights under the Termination Agreement. In the event this Letter
is terminated and no Alternative Transaction shall occur, Sellers shall take all
such like actions so as to replace or release the Letters of Credit on the first
anniversary of the date hereof and shall repay Purchaser in full any amounts
theretofore drawn upon the Letters of Credit.
5. Due Diligence Investigation. Upon funding of the Letters of Credit,
Purchaser (and its prospective lenders) will have the right to conduct a due
diligence investigation of the Sellers, the Business and the Purchased Assets.
In connection with such investigation, Sellers will provide Purchaser, its
prospective lenders and their respective representatives with access to Sellers'
books and records, including auditors' work papers, manufacturing records,
supplier and customer lists, receivables records, equipment lists, personnel
records and all agreements. All information obtained by Purchaser (and its
prospective lenders) in such investigation will be kept confidential in
accordance with the terms of that certain Confidential Information Agreement
between EFJ Co. and TRII dated January 27, 1997. Sellers shall also allow
Purchaser to meet with (a) the key personnel and auditors of Sellers to evaluate
the needs and capabilities of the Business during normal business hours and upon
two days prior notice to Sellers, and (b) Sellers' lenders, banking
institutions, primary suppliers and customers to evaluate their plans for future
business and intentions with respect to the Business with 48 hour advance
notice.
5
<PAGE> 6
6. Operation of Business Pending Closing. From the date hereof until
the Closing, Sellers shall:
(a) conduct and carry on their respective Business only in the
ordinary and regular course consistent with past practices and will use all
commercially reasonable efforts to maintain good relationships with the present
officers, employees, suppliers, customers and government regulators of Sellers;
(b) neither declare, set aside or pay any dividends or
distributions in respect of any capital stock nor issue or redeem any equity
securities of any Seller nor pay any management fees or debt guarantee fees or
make any other payments to any Related Parties other than amounts payable in
respect of management fees, accrued at the rate of $100,000 per whole month to
Weksel Davies & Co., Inc.;
(c) not purchase, sell, lease, mortgage, pledge or otherwise
acquire, dispose of or encumber any interest in any of the properties or assets
used in the Business, other than certain TCXO equipment, automated insert line
equipment, inventory in the ordinary course consistent with past practices and
such other assets the net proceeds of which are used exclusively to reduce
Sellers' outstanding indebtedness to Congress;
(d) not change the terms of any receivable, or cancel any debt,
owed to any Seller or enter into, change, modify, cancel or terminate any
agreement or contract involving the payment by or to any Seller of more than
$100,000 in any twelve month period;
(e) not change any accounting principle or inventory practice of
any Seller without consent of the Purchaser;
(f) as soon as available but in any event no later than twenty (20)
days after the end of each month (beginning with the month in which this Letter
is executed), deliver to Purchaser an unaudited consolidated balance sheet and
statement of income and cash flows for such month;
(g) use commercially reasonable efforts to obtain any and all
consents required or advisable with respect to the assignment to Purchaser of
all contracts intended to constitute Purchased Assets and with respect to
contracts for which consent is not obtained by the Closing, Purchaser,
Shareholder and Sellers shall continue to seek such consents and will cooperate
with each other in any and all arrangements (e.g., subcontracting, etc.) that
confer on Purchaser the material benefits of the contracts and relieve Sellers
of the material obligations thereunder until such consents are obtained;
(h) not increase the compensation of any employee and not grant any
unusual or
6
<PAGE> 7
extraordinary bonuses, benefits or other forms of direct or indirect
compensation to any employee, officer, director or consultant except in amounts
consistent with past practices or written agreements in effect as of the date
hereof;
(i) not increase, terminate, amend or otherwise modify any plan for
the benefit of any employee other than as may be required by law;
(j) not amend their respective articles or certificates of
incorporation, by-laws or other comparable charter or organizational documents;
(k) not acquire or agree to acquire (i) by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by any other
manner, any portion of the assets of, or by any other manner, any business or
any corporation, partnership, joint venture, association or other business
organization or division thereof except in the ordinary course of business
consistent with past practice, or (ii) any assets that are material,
individually or in the aggregate, to any of the Sellers, except purchases of
inventory in the ordinary course of business consistent with past practice and
except capital assets, as contemplated by subsection (m) below;
(l) not (i) incur any indebtedness for borrowed money or guarantee
any such indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of any of the Sellers or
any of their respective securities, guarantee any debt securities of another
person, enter into any "keep well" or other agreement to maintain any financial
statement condition of another person or enter into any arrangement having the
economic effect of any of the foregoing, except for short-term borrowings
incurred in the ordinary course of business consistent with past practice, or
(ii) make any loans, advances or capital contributions to, or investments in,
any other person;
(m) not make or agree to make any new capital expenditure or
expenditures which, individually, is in excess of $10,000 or, in the aggregate,
are in excess of $100,000 without consent of the Purchaser; and
(n) authorize any of, or commit or agree to take any of, the
foregoing actions.
7. Conditions to Closing.
(a) The following shall be included as conditions to the obligation
of Purchaser to consummate the Acquisition at the Closing:
(1) Sellers shall have used their best efforts to assist the
Purchaser in obtaining two year employment commitments with Scott Bocklund, Fred
Hamer, Mike Gaul, Mark
7
<PAGE> 8
Allen, Dan Pritchett and Merv Grindahl, effective as of the Closing.
(2) No lawsuits which materially impact the Acquisition shall
be outstanding on the date of the Closing;
(b) The Definitive Agreement shall also contain such other
conditions to closing as are customary for an acquisition of this type.
8. Waseca Factory. EFJ Co. shall have assigned to Purchaser the
Agreement of Lease dated as of July 31, 1992 between EFJ Co. as tenant, and
Greene Street Capital Corporation, as landlord, and shall have used its best
efforts to enter into an amendment of such lease pursuant to which the purchase
option thereunder would be exercisable at the closing of the Acquisition and for
a reasonable period of time thereafter.
9. Expiration of Letter. If the parties have not executed the
Definitive Agreement within sixty (60) days after the date of this Letter (New
York time) (or such later date as Purchaser and Sellers may mutually agree),
either Purchaser or Sellers may thereafter terminate this Letter upon written
notice to the other.
10. Indemnification. The Definitive Agreement shall include
indemnification provisions and the establishment of an Indemnification Fund
pursuant to Section 2 above, whereby Sellers shall be required, subject to and
on the terms provided therein, to indemnify Purchaser from and against any
losses, claims or causes of action, including reimbursement of reasonable
attorneys' fees, incurred as a result of any breach of any representations,
warranties or covenants set forth in the Definitive Agreement including, without
limitation, any losses or claims stemming from any undisclosed or Retained
Liabilities.
11. Miscellaneous:
(a) Exclusivity: Shareholder will not, and will not permit any
Seller or any of its or their respective directors, officers, employees, agents'
partners or advisors to (i) initiate, pursue, enter into or continue any
discussions, negotiations or agreements (whether preliminary or definitive) with
any person or entity (other than the Purchaser) contemplating or providing for
any merger, acquisition, purchase or sale of all or substantially all of the
assets or a majority of the capital stock of any Seller or other business
combination or change in control of Sellers (any of the foregoing being
hereinafter referred to as an "Alternative Transaction") or (ii) provide any
information regarding any of the Sellers to any person or entity in connection
with any proposed Alternative Transaction. Shareholder and Sellers hereby
represent and warrant to Purchaser that neither Shareholder nor any Seller is a
party to or otherwise bound by any agreement of understanding in any way
relating to an Alternative Transaction, other than the transactions described in
this Letter.
8
<PAGE> 9
(b) Expenses: Each of Purchaser and Sellers will pay its own fees
and out-of-pocket expenses incurred in connection with the Acquisition and this
Letter. No obligation to pay fees or expenses of any broker, finder or similar
entity been or will be incurred by Sellers to the extent that such fees or
expenses would be payable out of the Purchased Assets or increase any assumed
liabilities.
(c) Non-Binding: It is the understanding of the parties that this
Letter is not binding upon any of the parties hereto (other than the provisions
set forth in paragraphs 4, 6, 7,10, 11(a), (b) and (d) hereof) and no party
hereto will detrimentally rely upon the actions of any other party hereto with
respect to the transactions proposed hereunder. Notwithstanding the foregoing,
upon Sellers' and Shareholder's acceptance of this Letter, Purchaser, Sellers
and Shareholder will be legally bound by the provision set forth in paragraph 4
and, after the timely delivery of the Letters of Credit pursuant to paragraph
4(a) hereof, the provisions of paragraphs 6, 7,10, 11(a), (b) and (d) hereof. If
the Letters of Credit are not timely delivered pursuant to paragraph 4(a)
hereof, this Letter shall become null and void.
(d) Counterparts: Each party represents that it has the requisite
authority to enter into this Agreement and to perform the transactions
contemplated hereby. This Letter may be executed in counterparts, each of which
will constitute an original and all of which together will constitute one and
the same agreement.
9
<PAGE> 10
(e) Compliance with Law: Notwithstanding anything to the contrary
provided in this Letter, or otherwise agreed to between the parties, Purchaser
will be entitled to comply with state and federal securities laws by making any
necessary disclosures.
We are very interested in pursuing the Acquisition. If the foregoing
accurately sets forth our understanding with you, please indicate your agreement
and desire to proceed by signing a copy of this Letter where indicated below and
forward an executed copy of the same to us by telecopy and regular U.S. mail.
Very truly yours,
TRANSCRYPT INTERNATIONAL, INC.
By: /s/ John T. Connor
-----------------------------------
Name: John T. Connor
Title: Chief Executive Officer
Agreed as of June 6, 1997
E.F. JOHNSON COMPANY
E.F. JOHNSON COMMUNICATIONS, INC.
E.F. JOHNSON INTERNATIONAL, INC.
By: /s/ William Weksel
-----------------------------------
Title: Chief Executive Officer
-----------------------------------
SOLE SHAREHOLDER OF
E.F. JOHNSON COMPANY
EFJ PARTNERS
By: /s/ William Weksel
-----------------------------------
Name: William Weksel
A general partner
10
<PAGE> 1
FIRST AMENDMENT TO
LETTER OF INTENT
This First Amendment (this "Amendment") to that certain letter of
intent, dated June 6, 1997, by and among TRANSCRYPT INTERNATIONAL, INC., EFJ
PARTNERS, E.F. JOHNSON COMPANY, E.F. JOHNSON COMMUNICATIONS, INC. AND E.F.
JOHNSON INTERNATIONAL, INC. (collectively, the "Parties") is dated as of June
11, 1997.
R E C I T A L S
WHEREAS, the Parties entered into a letter of intent dated June 6,
1997 (the "Letter");
WHEREAS, the Parties have determined that certain changes should be
made to provisions and certain annexes referenced in the Letter in order to
reflect the intentions of the Parties and otherwise effect its purposes; and
WHEREAS, the Parties now desire to modify certain provisions and
annexes referenced in the Letter in accordance herewith (all capitalized terms
used but not otherwise defined herein shall have the meanings ascribed to such
terms in the Letter).
NOW, THEREFORE, on the basis of the foregoing recitals and other
good and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the Letter is hereby amended as follows:
1. "Annex C" to the Letter shall be replaced in its entirety by the
attachment to this Amendment labeled "Annex C", and "Annex D" to the
Letter shall be replaced in its entirety by the attachment to this
Amendment labeled "Annex D." Therefore, all references in the Letter to
"Annex C" and "Annex D", including but not limited to the references
thereto contained in Section 4(a) of the Letter, shall refer to the
form of "Annex C" and "Annex D" attached hereto.
2. The first clause of the first sentence of paragraph 4(a) of the Letter
shall be replaced to read as follows: "Prior to 12 noon, e.s.t., on
Thursday, June 12, 1997, unless such date is extended by mutual
agreement of EFJ and TRII, Purchaser ..."
3. The Parties acknowledge that the amounts to be paid to Noram and Intek
in connection with the Acquisition have not yet been finally
determined. The Parties agree that, notwithstanding the amounts that
will eventually be paid to Noram and Intek in connection with the
Acquisition, the Purchase Price shall not increase above $34,000,000.
4 All other provisions of the Letter shall remain in full force and
effect. This Amendment,
1
<PAGE> 2
together with the Letter, contains the entire agreement of the parties
with respect to the subject matter contained in the Letter and no
waiver, modification or change of any of its provisions shall be valid
unless in writing and signed by the party against whom such claimed
waiver, modification or change is sought to be enforced.
5. In the event that there are any terms and conditions of the Letter
which conflict with the terms and conditions of this Amendment, the
terms and conditions of this Amendment shall supersede such terms and
conditions of the Letter.
IN WITNESS WHEREOF, the Parties have caused this Amendment to be duly
executed as of the date first above written.
TRANSCRYPT INTERNATIONAL, INC.
By: /s/ John T. Connor
-----------------------------------
Name: John T. Connor
Title: Chief Executive Officer
E.F. JOHNSON COMPANY
E.F. JOHNSON COMMUNICATIONS, INC.
E.F. JOHNSON INTERNATIONAL, INC.
By: /s/ William Weksel
-----------------------------------
Name: William Weksel
Title:
SOLE STOCKHOLDER OF
E.F. JOHNSON COMPANY
EFJ PARTNERS
By: /s/ William Weksel
-----------------------------------
A general partner
2
<PAGE> 1
PRESS RELEASE
FOR IMMEDIATE RELEASE
For Further Information:
Contact:
John T. Connor
Chairman of the Board
402-474-4800
or
Jeffery L. Fuller
President
402-474-4800
TRANSCRYPT ANNOUNCES LETTER OF INTENT
TO ACQUIRE EF JOHNSON COMPANY
JUNE 12, 1997....Transcrypt International, Inc. (NASDAQ symbol TRII) today
announced it has signed a letter of intent to acquire EF Johnson Company (EFJ),
a leading developer and manufacturer of wireless communications products. EFJ, a
privately-held Company with operations in Waseca, MN, had 1996 revenues of $79.3
million.
Transcrypt, which went public in January 1997 had 1996 revenues of $13.8
million. The Company based in Lincoln, is a fast growing developer/manufacturer
of information security and wireless communications products. The letter of
intent contemplates the acquisition of substantially all assets and the
assumption of certain liabilities of EFJ for total consideration of $34 million.
Among other terms, the proposed acquisition calls for total consideration of
approximately $34 million to be paid in cash or debt assumed at closing.
However, in connection with the letter of intent, Transcrypt and EFJ have
entered into arrangements which include:
Transcrypt providing a $2 million letter of credit, and
EFJ entering into a licensing agreement providing Transcrypt with
certain intellectual properties of EFJ as the first step toward
acquiring substantially all of EFJ's assets
"I am very pleased at the prospect of combining these two fine companies," said
John T. Connor, Chairman of Transcrypt. "We have great respect for EFJ's
dedicated management and personnel and believe they would make significant
contributions to the growth and development of the Company.
"However, at this time, we have only entered into a letter of intent and we must
work diligently toward achieving the proposed acquisition. The entire process is
subject to, among other things, completion of the due diligence process by both
firms, the negotiations and execution of the definitive acquisition agreement,
approval by the Board of Directors of both companies and, of course, government
approval," Connor pointed out.
<PAGE> 2
MORE...
Jeffery L. Fuller, President of Transcrypt added: "This combination would make
us a strong competitor in the Land Mobile Radio ("LMR") industry and
particularly the APCO 25 digital radio market segment where Transcrypt is
already playing a leading role.
"EF Johnson has a demonstrated expertise in wireless radio systems and a
long-standing well-deserved reputation among LMR users especially in the APCO
public safety radio market. The proposed acquisitions would give Transcrypt the
potential for significant growth in LMR sales, distribution and manufacturing
thanks to EFJ's 820 dealer sales and service locations and its large base of
loyal customers worldwide.
"The combined companies would enhance Transcrypt's ability to enter additional
markets and expand market penetration worldwide for its core voice privacy and
information security products.
In addition, our expertise in digital signal processing technology together with
EFJ's strengths in designing and building RF and trunking systems would expand
our ability to provide complete offerings of digital APCO 25 product lines and
systems," Fuller concluded.
EF JOHNSON COMPANY FOUNDED IN 1923 BY EDGAR F. JOHNSON IN WASECA,
MINNESOTA, WAS ONE OF THE FIRST DEVELOPERS OF TWO-WAY RADIO SYSTEMS.
TODAY, THE COMPANY HAS 650 EMPLOYEES, BASED AT ITS WASECA, MINNESOTA
MANUFACTURING, ADMINISTRATIVE AND RESEARCH AND DEVELOPMENT COMPLEX, AND
IN SALES AND MARKETING OFFICES IN BURNSVILLE, MINNESOTA, MIAMI,
FLORIDA, BUENOS AIRES, ARGENTINA, SAO PAULO, BRAZIL AND HONG KONG. IN
1996, EF JOHNSON HAD SALES OF $79.3 MILLION AND A LOSS FROM OPERATIONS
OF $9.2 MILLION. IN THE FIRST QUARTER OF 1997, THE COMPANY HAD SALES OF
$21.8 MILLION AND A PROFIT FROM OPERATIONS OF $102,000.
TRANSCRYPT INTERNATIONAL, INC., BASED IN LINCOLN, NEBRASKA, DESIGNS AND
MANUFACTURES SPECIALIZED SCRAMBLING AND ENCRYPTION DEVICES WHICH
PREVENT UNAUTHORIZED INTERCEPTION OF SENSITIVE VOICE AND DATA
COMMUNICATIONS FOR BOTH ANALOG AND DIGITAL TRANSMISSIONS. TRANSCRYPT
HAS RECENTLY LAUNCHED A NEW LINE OF DIGITAL APCO 25 RADIOS FOR PUBLIC
SAFETY USE THAT ARE ALSO COMPATIBLE WITH EXISTING ANALOG SYSTEMS.
TRANSCRYPT PROVIDES LAND MOBILE RADIO, TELEPHONY (INCLUDING CELLULAR
AND WIRELESS TELEPHONE) AND DATA SECURITY PRODUCTS TO GOVERNMENT
AGENCIES AND CORPORATIONS, WITH CUSTOMERS IN 108 COUNTRIES.
The subject of this press release includes forward looking statements concerning
a possible transaction. The forward looking statements are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
There are many factors that could cause the events in such forward looking
statements not to occur, including the inability of the parties to negotiate a
final agreement or obtain the necessary regulatory or shareholder approvals and
those factors discussed under "Summary of Business Considerations and Certain
Factors That May Affect Future Results of Operations And/Or Stock Price"
contained in the Company's Annual Report on 10-K for the year ended December 31,
1996 filed with the Securities and Exchange Commission.
