WAVETEK WANDEL & GOLTERMANN INC, 10-K, 1999-12-22

WAVETEK WANDEL & GOLTERMANN INC
10-K, 1999-12-22
INSTRUMENTS FOR MEAS & TESTING OF ELECTRICITY & ELEC SIGNALS

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the Fiscal Year ended September 30, 1999.

[ ] 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 333-32195
WAVETEK WANDEL GOLTERMANN, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)

DELAWARE 33-0457664
------------------------------- -------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)

1030 SWABIA COURT
RESEARCH TRIANGLE PARK, NC 27709-3585
- ---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)

(919) 941-5730
--------------------------------------------------
Registrant's Telephone Number, Including Area Code

Securities registered pursuant to Section 12(b) of the Act:

Title of each class: Name of each exchange on which registered:
-------------------- ------------------------------------------
Not applicable. Not applicable.

Securities registered pursuant to section 12(g) of the Act:

10.125% Senior Subordinated Notes Due 2007
------------------------------------------
(Title of class)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (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 if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 299.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K [ ].

Aggregate market value of the voting and non-voting common equity held by
non-affiliates of the registrant as of December 20, 1999:
Not applicable.

As of December 20, 1999, issuer had only one class of common stock, of which
there were 13,268,323 shares outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
None.

<PAGE>

PART I.

ITEM 1. BUSINESS

HISTORICAL DEVELOPMENT OF BUSINESS

Wavetek was founded in San Diego, California in 1962, and was acquired by an
investment group led by Dr. Terence J. Gooding in 1991. After Dr. Gooding
acquired Wavetek, and prior to the consummation of the Exchange Transaction,
Wavetek completed two strategic acquisitions: (1) the instrumentation
products division of Beckman Industrial in 1992 and (2) the wireless and
fiber optics test businesses of Schlumberger S.A. in 1994. In June 1997,
Wavetek completed a recapitalization of the Company involving the repurchase
of equity from existing investors, the issuance of equity to new investors
and the incurrence of debt.

WG was founded in Eningen, Germany in 1923. Prior to entering into the
Exchange Transaction, WG was majority owned by the families of the founders.
In October 1997, WG completed a phased acquisition of Switching Test
Solutions AG, a Swiss joint venture formed by WG and Alcatel, a telephone
switch testing company. Also, in September 1998, WG completed the
acquisition of the shares of its U.S. subsidiary, Wandel & Goltermann
Technologies, Inc., that it did not previously own.

Although WG became a subsidiary of Wavetek, the Exchange Transaction was
treated, for accounting and financial reporting purposes, as a purchase of
Wavetek by WG. Accordingly, the consolidated financial statements of the
Company as of any date or for any period prior to September 30, 1998, are the
historical consolidated financial statements of WG.

The executive offices of the Company are located at 1030 Swabia Court,
Research Triangle Park, North Carolina 27709-3585, and its telephone number
is (919) 941-5730.

BUSINESS

The Company is a leading global designer, manufacturer and marketer of a
broad range of communications test instruments used to develop, manufacture,
install and maintain communications networks and equipment. The Company's
products provide comprehensive testing solutions to a wide range of end
users. The Company's high-end instruments are used during the product
development phase to stress test product functionality and performance.
Other products are used during the production process to verify conformance
to manufacturing specifications, while the Company's enhanced portable field
service tools enable field technicians to quickly install, repair and
maintain complex network infrastructure as well as validate service levels.
The Company also provides distributed remote test systems to many of its
service provider customers, which allow such customers to more efficiently
utilize their network engineers to monitor and test service levels. The
Company conducts its business in two principal business areas, communications
test business and other test products.

COMMUNICATIONS TEST BUSINESS - The Company's communications test business,
which addresses most sectors of the communications test market, primarily
operates in four product areas: (1) Telecom Networks (traditional voice/data
transmissions and new multi-service networks), (2) Enterprise Networks
(local and wide-area network infrastructures), (3)

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Multimedia (cable television and digital video broadcast) and (4) Wireless
(mobile telephony and data). The business also includes a small group of
other non-test products, including value-added professional services such as
consulting, training and rental services on a worldwide basis. The Company's
communications test business accounted for approximately 94% of the Company's
consolidated sales in fiscal 1999.

TELECOM NETWORKS - The Company is a leading global designer and manufacturer
of test solutions for use in the development, manufacture, installation and
maintenance of public voice, data and image communications systems worldwide.
Specific testing applications for the Company's Telecom Networks products
address the local loop, switches and the backbone transport network, as
described below. The Company provides a comprehensive range of portable test
products for all three testing applications as well as dedicated test
instruments for product development, systems for manufacturing test and
distributed remote test systems for operations and maintenance.

The local loop provides the "final mile" of the network for traditional
voice-line services such as voice, data over modem, leased lines, and newer
digital services such as Integrated Services Digital Network ("ISDN"), Frame
Relay and Asynchronous Transfer Mode ("ATM") packet switching. Technology is
constantly evolving in this field, as exemplified by new high-speed data
access to the Internet, which is being introduced using Digital Subscriber
Loop ("xDSL") technology. The Company's test products help customers
economically install and verify copper and fiber cabling, test the
multi-service network equipment that connects the customer premises with the
central office and verify service availability and performance to the service
end-user. An example is the Company's PA/PF/PFA-x family, a market leader in
handheld multi-technology, multi-protocol testers. Remote operation software
products for certain test instruments allow remote test systems to be
constructed using the Company's existing test products.

Switches send communications to a desired location and provide an increasing
array of intelligent services such as Call Waiting and Caller ID. Switches
also provide packet and internet routing and work with wireless and cable
network telephony equipment for seamless communication services. All of these
applications require functional and performance testing as well as monitoring
operational Quality of Service. The Company's switching test products include
testing systems and portable equipment used in the development, manufacture,
installation and verification of switches.

The backbone transport network provides high bandwidth connectivity for the
multiple services offered by telecommunications service providers. Specific
applications of the Company's transport products test fiber optic systems,
including Dense Wavelength Divisional Multiplex ("DWDM") systems, as well as
SDH/Synchronous Optical Network ("SONET")/ATM digital transport systems, and
the Telecommunications Management Network ("TMN") systems. The Company
believes its ANT-20 product family is the worldwide market leader in SDH
field testing. The ANT-20, the seventh generation of digital transport
testers, exemplifies the Company's extensive experience and long-term
commitment to this market.

The Company's Telecom Networks customers include Alcatel, AT&T, Deutsche
Telecom, Lucent Technologies, and Siemens.

ENTERPRISE NETWORKS - The Company is a global designer and manufacturer of
test instruments for the Enterprise Networks market. The Company's Enterprise
Networks products are used to develop, install, and maintain local area
networks ("LAN") and wide area networks ("WAN") and to evaluate the
performance and functionality of complex internetworks and the
internetworking devices that connect them. The Company's products also can be
used to maintain the business applications that use the LAN/WAN
infrastructure as well as test the integrity of the LAN physical layer. The
Company's Enterprise Networks products are used by manufacturers of LAN
communications equipment, value-added resellers of network

<PAGE>

equipment, information systems departments of companies and governmental
entities, and providers of public Internet access, ISDN and Frame Relay
services.

The Company seeks to develop new products in the Enterprise Networks market
by anticipating the future needs of its customers. For example, the Company
believes it has developed the industry's first product family of LAN cable
testers which are fully upgradable to anticipated future standards and higher
frequencies. The Company had introduced platform extensions to the Domino
family of protocol analyzers including a test solution for Gigabit Ethernet
and the Mentor expert analysis system.

The Company's Enterprise Networks customers include BellSouth, Boeing, 3Com,
Cisco Systems, DaimlerChrysler, IBM, NCR Corporation and the U.S. Navy, and
the Company's LAN cable test products are marketed through its worldwide
network of distributors.

MULTIMEDIA - The Company manufacturers test instruments for the Multimedia
market and is the global leader in developing and manufacturing test
equipment used for commissioning and maintaining broadband cable networks.
Major cable network products include: sweep systems, signal level meters,
leakage meters, network monitoring systems and related software. These
products test and monitor the quality of signals transmitted over a cable
network and monitor network availability. The Company also believes that the
deployment by cable network operators of advanced services, including two-way
data paths to provide telephony or Internet services, has created new product
opportunities for the Company. For example, the Company's close customer
relationships gave the Company early indication of the need for return path
testing capability. The Company used this information to create the world's
first two-way sweep system designed to assist cable network technicians in
the installation and servicing of the return path of two-way cable networks.

One of the primary technical problems inhibiting deployment of two-way cable
networks is interference (noise commonly know as ingress) on the return path.
If the return path is not securely installed with tight connectors and
well-maintained cable, ingress from external sources such as computers, home
appliances and motors can enter the cable network system and interfere with
customer data on the return path. In order to reduce the time and difficulty
in locating the source of noise, the Company has developed a family of
leakage meters including the CLI 1750, 1450 and 950, a return path ingress
monitoring system, the PathTrak, and an advanced ingress capable sweep system
known as StealthTrak. These products are specifically designed to assist
installers in detecting ingress in cable networks.

The Company entered the digital video broadcast ("DVB") test market in 1997
by introducing the DTS-A transport stream analyzer, and subsequently a
companion test generator, the DTS-G, for product development, installation
and operation of Moving Picture Expert Group ("MPEG-2")/DVB systems.

Significant Multimedia customers of the Company include Continental
Cablevision, Deutsche Telekom, AT&T/TCI and Time Warner Cable.

WIRELESS - The Company is a significant supplier of test instruments for
mobile phones, base stations and mobile radio network switches. The Company
manufactures instruments to test wireless systems at the Radio Frequency
("RF") interface between cellular base stations and mobile phones, the
land-lines of cellular base stations and telephony switching systems and the
switching systems that provide mobile services. The Company's products
address most analog and digital formats used worldwide, including PCS,
Digital Enhanced Cordless Telecommunications ("DECT"), Groupe Speciale Mobile
("GSM"), Time Division Multiple Access ("TDMA") and Code Division Multiple
Access ("CDMA"). The Company's mobile phone test products are used during the
manufacturing process, at service facilities and at the point-of-sale for
cellular and cordless phones. Test tools for cellular base station RF and
land-line interfaces are used by base station manufacturers for product

<PAGE>

development, manufacturing test and are also used in the field by wireless
service providers for installation and maintenance. The Company also produces
a distributed remote test system for continuous monitoring and testing of
basic services and roaming functionality for telephony switches that support
mobile services.

The Company's point-of-sale, application-specific product for the Wireless
market, the 4100 GSM Tester, was designed to address the increasing demand
for testing GSM telephones. The shift in phone repair from local repair shops
or retail stores to high volume service facilities, combined with the high
cost to process, ship and test a phone at a service facility, is creating a
need for testing at retail sites to minimize the number of properly
functioning phones that are mistakenly returned to the manufacturer for
repair. The 4100 GSM Tester family provides accurate testing at a price point
substantially lower than traditional service testers, allowing economical
sorting of phones at the point--of-sale. The Company was able to bring the
4100 GSM Tester family to market quickly, innovating the repair process, due
in part to the application of technology from its LAN products and existing
Wireless products.

Significant Wireless customers of the Company include AT&T, Ericsson, Lucent
Technologies, Motorola, Nortel, Nokia and Siemens.

SERVICE - The Company's service business provides traditional product-based
technical service as well as value-added professional services. The Company
provides traditional services such as repair, calibration and upgrade through
service centers and a network of independent representatives worldwide. The
Company's products are generally sold with warranties included in the product
price. In addition, the Company offers extended warranties and software
update subscriptions on certain of its products for additional charges. The
Company's professional services, such as consulting, training and rental, are
generally offered at the regional or local level through the Company's own
sales companies. Customized products and test systems are available from the
Company's product design and manufacturing units.

To complement its support services, the Company sponsors both free and
for-fee educational programs in various countries to train its customers in
advanced communications technologies and the application of its products to
solve communication network problems. These programs not only provide product
training but also serve as a forum for user suggestions for product
development and enhancements.

OTHER TEST PRODUCTS - The Company's other test products consist primarily of
portable electronic testing tools ("Test Tools"), instruments used to
calibrate electronic equipment ("Precision Measurement Instruments"), and
electromagnetic measurement instruments. The Company's other test products
business accounted for approximately 6% of the Company's consolidated sales
in fiscal 1999.

TEST TOOLS - The Company's Test Tools business develops and distributes
portable measurement instruments that are used to measure and service a broad
range of electrical and electronic equipment including wiring, appliances,
computer equipment and consumer electronics. The Company's Test Tools
products are used by the electronic and electro-mechanical maintenance and
service industries. Hand-held digital multi-meters ("DMMs") are a key
instrument in this market and range from simple volt meters to advanced tools
for professional electrical and electronic technicians, as well as wire and
cable installers. The Test Tools business also provides a wide range of
low-cost communications test products, from tone generators and optical fault
finders to cable verifiers.

Significant Test Tools customers of the Company include Farnell/Newark
Electronics, RS Components and W.W. Grainger.

PRECISION MEASUREMENT INSTRUMENTS - The Company's Precision Measurement
Instruments products are used in metrology, engineering and manufacturing
environments worldwide to calibrate electronic equipment and certify
compliance with

<PAGE>

international standards. The Company believes it is the second largest global
manufacturer of Calibration Sources and Transfer Standards. The Company also
produces precision DMMs. The Company believes that it successfully competes
in the Precision Measurement Instruments market by capitalizing on its
technical expertise, relationships with national laboratories and product
reputation.

Because the need to calibrate electronic equipment is universal across a wide
range of industries, the list of customers includes a large number of well
known names in aerospace, defense, communications, semiconductor, automotive,
industrial electronic and instrumentation industries. Examples of Precision
Measurement Instruments customers of the Company include Kodak, Nokia,
Northrop Grumman Corporation, Samsung, Tektronix, the U.K. and German
military, the U.S. Army and Navy and Yokogawa Electric Corporation.

ELECTROMAGNETIC MEASUREMENT INSTRUMENTS - The Company's electromagnetic
measurement instruments, which the Company created to leverage its
competencies in high frequency radio frequency testing to address the
environmental test market, represent a family of hand-held products that
measure electric and magnetic fields produced by most electronic and radio
devices. Due to increased worldwide regulation of permissible levels of
electromagnetic radiation, these products have application in the servicing
of high power lines, high electric power consumption equipment such as
melting machines, telecommunications equipment, radar, radio and television
broadcasting, cellular base stations and many others, including microwave
cooking equipment.

GEOGRAPHIC AND SEGMENT INFORMATION

Based on its organizational structure, the Company operates in two reportable
segments: communications test and other test products. The Company's
reportable segments represent business units that primarily offer similar
products and services. The Company's communications test business includes
Telecom Networks, Enterprise Networks, Multimedia, Wireless and the service
business. Other Test Products include Test Tools, Precision Measurement
Instruments and electromagnetic measurement instruments.

<PAGE>

Information about the Company's operating segments for the fiscal year ended
September 30, 1999 is as follows (in thousands):

<TABLE>
<CAPTION>
COMMUNICATIONS OTHER TEST
TEST PRODUCTS CORPORATE TOTAL
----------------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
REVENUES:
Revenues from external customers...................... $ 468,231 $ 29,011 $ 16 $ 497,258
Intersegment revenues................................. 225,662 32,282 -- 257,944
Elimination of intersegment revenues.................. (225,662) (32,282) -- (257,944)
------------- --------- --------- ------------
Total revenues...................................... $ 468,231 $ 29,011 $ 16 $ 497,258
============= ========= ========= ============
OPERATING INCOME (LOSS):
Operating income (loss) on reportable segments(1)..... $ 36,486 $ 2,261 $ (5,837) $ 32,910
Amortization of intangible assets..................... 2,488 154 17,325 19,967
Restructuring and other non-recurring charges......... -- -- 2,379 2,379
Elimination of intersegment profits................... -- -- 285 285
------------- --------- --------- ------------
Operating income (loss) (2)......................... 33,998 2,107 (25,826) 10,279
Net interest expense:
Interest (revenue).................................. (615) (38) (24) (677)
Interest expense.................................... 4,682 290 15,993 20,965
------------- --------- --------- ------------
Net interest expense.............................. 4,067 252 15,969 20,288
Other expense, net.................................... -- 1,368 (299) 1,069
------------- --------- --------- ------------
Income (loss) before provision (benefit) for income
taxes and minority interest in income (loss).......... $ 29,931 $ 487 $ (41,496) $ (11,078)
============= ========= ========= ============

ASSETS:
Total assets from reportable segments................. $ 187,502 $ 10,351 $ 154,905 $ 352,758
Elimination of receivables from corporate............. (58,076) (3,602) -- (61,678)
------------- --------- --------- ------------
129,426 6,749 154,905 291,080
Unallocated goodwill.................................. -- -- 53,860 53,860
Unallocated acquired core technologies................ -- -- 74,290 74,290
Unallocated other intangibles......................... -- -- 15,503 15,503
------------- --------- --------- ------------
Total assets........................................ $ 129,426 $ 6,749 $ 298,558 $ 434,733
============= ========= ========= ============
</TABLE>
- ------------------------
Notes:

(1) Operating income (loss) on reportable segments is defined by management as
operating income (loss), including intersegment profits, and excluding
amortization of intangible assets and restructuring and other non-recurring
charges.

(2) Per consolidated statement of operations.

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Information about the Company's operating segments for the fiscal year ended
September 30, 1998 is as follows (in thousands):

OPERATING INCOME (LOSS):
Operating income (loss) on reportable segments(1)..... $ 28,464 $ (200) $ 1,972 $ 30,236
Amortization of intangible assets..................... 1,182 -- -- 1,182
Acquired in-process research and development.......... 21,125 -- 11,800 32,925
Restructuring and other non-recurring charges......... 9,369 -- -- 9,369
Elimination of intersegment profits................... -- -- 1,116 1,116
------------- --------- --------- ------------
Operating income (loss) (2)......................... (3,212) (200) (10,944) (14,356)
Net interest expense:
Interest (revenue).................................. (580) (16) (381) (977)
Interest expense.................................... 3,938 112 3,579 7,629
------------- --------- --------- ------------
Net interest expense.............................. 3,358 96 3,198 6,652
Other (income) expense, net........................... (1,969) (126) 6,909 4,814
------------- --------- --------- ------------
Income (loss) before provision (benefit) for income
taxes and minority interest in income (loss).......... $ (4,601) $ (170) $ (21,051) $ (25,822)
============= ========= ========= ============

ASSETS:
Total assets from reportable segments................. $ 218,421 $ 9,856 $ 145,335 $ 373,612
Elimination of receivables from corporate............. (43,759) (1,242) -- (45,001)
------------- --------- --------- ------------
174,662 8,614 145,335 328,611
Unallocated goodwill.................................. -- -- 56,789 56,789
Unallocated acquired core technologies................ -- -- 84,100 84,100
Unallocated other intangibles......................... -- -- 15,024 15,024
------------- --------- --------- ------------
Total assets........................................ $ 174,662 $ 8,614 $ 301,248 $ 484,524
============= ========= ========= ============
</TABLE>
- ------------------------
Notes:

(1) Operating income (loss) on reportable segments is defined by management as
operating income (loss), including intersegment profits, and excluding
amortization of intangible assets, acquired in-process research and
development and restructuring and other non-recurring charges.

(2) Per consolidated statement of operations.

<PAGE>

Information about the Company's operating segments for the fiscal year ended
September 30, 1997 is as follows (in thousands):

<TABLE>
<CAPTION>
COMMUNICATIONS OTHER TEST
TEST PRODUCTS TOTAL
----------------- ----------- -----------
<S> <C> <C> <C>
REVENUES:
Revenues from external customers................................... $ 274,135 $ 7,752 $ 281,887
Intersegment revenues.............................................. 29,944 847 30,791
Elimination of intersegment revenues............................... (29,944) (847) (30,791)
------------- --------- -----------
Total revenues................................................... $ 274,135 $ 7,752 $ 281,887
============= ========= ===========
OPERATING INCOME (LOSS):
Operating income (loss) on reportable segments(1).................. $ 23,233 $ 570 $ 23,803
Amortization of intangible assets.................................. 1,346 -- 1,346
Acquired in-process research and development....................... 1,743 -- 1,743
------------- --------- -----------
Operating income (loss) (2)...................................... 20,144 570 20,714
Net interest expense:
Interest (revenue)............................................... (1,566) (44) (1,610)
Interest expense................................................. 8,275 234 8,509
------------- --------- -----------
Net interest expense........................................... 6,709 190 6,899
Other (income) expense, net........................................ (768) (22) (790)
------------- --------- -----------
Income (loss) before provision (benefit) for income taxes and
minority interest in income (loss)................................. $ 14,203 $ 402 $ 14,605
============= ========= ===========

ASSETS:
Total assets from reportable segments.............................. $ 211,752 $ 5,988 $ 217,740
Unallocated goodwill............................................... -- -- 4,468
------------- --------- -----------
Total assets..................................................... $ 211,752 $ 5,988 $ 222,208
============= ========= ===========
</TABLE>
- ------------------------
Notes:

(2) Per consolidated statement of operations.

<PAGE>

Information about the Company's operations by geographic areas is shown in the
table below. The Company manages its operations in two primary geographic areas:
(i) North American operations which includes the United States, Canada, Mexico,
Central and South America, and (ii) European Operations which includes Europe
and Asia-Pacific.

Net sales represents the locations of sales to the Company's customers. Income
(loss) before provision (benefit) for income taxes and total assets is reported
based on the location of the Company's facilities. Intercompany transfers are
made at arm's length between the various geographic areas.

<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
---------------------------------------
1999 1998 1997
------------ ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Net sales:
Europe................................................................. $ 231,494 $ 176,437 $ 148,037
Canada, Mexico, Central and South America.............................. 76,281 69,725 62,922
Asia-Pacific........................................................... 71,933 44,258 40,417
United States.......................................................... 117,550 37,468 30,511
------------ ----------- ------------
Consolidated net sales................................................... $ 497,258 $ 327,888 $ 281,887
============ =========== ============
Income (loss) before provision (benefit) for income taxes and minority
interest in income (loss):
Europe................................................................. $ 17,361 $ 14,871 $ 28,056
Canada, Mexico, Central and South America.............................. (232) 131 1,668
Asia-Pacific........................................................... 726 864 (203)
United States.......................................................... (28,090) (38,495) (1,329)
Eliminations........................................................... (843) (3,193) (13,587)
------------ ----------- ------------
Consolidated income (loss) before provision (benefit) for income taxes
and minority interest in income (loss)............................... $ (11,078) $ (25,822) $ 14,605
============ =========== ============
Total assets:
Europe................................................................. $ 421,078 $ 515,203 $ 364,722
Canada, Mexico, Central and South America.............................. 24,927 26,174 12,786
Asia-Pacific........................................................... 21,493 14,341 14,095
United States.......................................................... 424,741 263,101 42,432
Eliminations........................................................... (457,506) (334,295) (211,827)
------------ ----------- ------------
Consolidated total assets................................................ $ 434,733 $ 484,524 $ 222,208
============ =========== ============
</TABLE>

CUSTOMERS

The Company sells its products to a broad base of over 5,000 customers
worldwide. The largest group of users of the Company's products are
communications equipment manufacturers, public network operators and information
service departments of corporations and government entities. The Company's
customers include (1) global communications equipment manufacturers such as
Alcatel, Cisco Systems, Ericsson, IBM, Lucent Technologies, Motorola, Nortel,
NCR and Siemens, (2) communications service providers such as AT&T, TCI,
Deutsche Telekom, France Telecom, Embratel, China Telecom and Time Warner Cable
and (3) the information service departments of corporations and governmental
entities such as Boeing, DaimlerChrysler and the U.S. Navy.

For fiscal 1999, no one customer accounted for more than 5% of the Company's
sales, and the top ten customers, each of which is a global company with global
affiliates, represented approximately 18% of the Company's sales.

10
<PAGE>

SALES AND MARKETING

The Company sells its products through (1) its global sales and service
organization of approximately 850 employees in over 30 countries and (2) a
global network of over 250 distributors, resellers and independent
representatives, which together provide the Company with a sales and service
presence in over 85 countries. The Company has design and manufacturing
capabilities through 11 major facilities located in the United States,
Germany, France, the United Kingdom, Switzerland and Brazil.

The Company leverages its comprehensive product offering and global
distribution capabilities with a global key account program which targets
many of the world's largest equipment vendors and service providers. The
Company believes these customers seek to form strategic alliances with those
communications test equipment vendors that can provide total life cycle
solutions for a wide range of communications networks and equipment. The
global key account program offers these customers a high level of service in
order to help pre-determine their testing requirements. In addition, the key
account representatives coordinate with the Company's worldwide design,
manufacturing, sales and service resources to offer a package of
comprehensive testing solutions.

Other customers with application-specific testing needs are addressed by a
broad network of technical distributors and independent representatives,
which are supported by the Company's own indirect sales management
organization. The Company's contracts with these distributors and
independent representatives are generally short-term in nature and typically
can be terminated by either party with 30 to 90 days notice. The
multipurpose Test Tools and certain LAN products are marketed by a dedicated
general distribution sales force working with a large network of specialized
distributors and catalog sales companies.

The Company markets its products through advertisements, direct mail,
seminars, the Internet, participation in trade shows and the publication of
quarterly newsletters for customers highlighting the Company's products and
describing industry trends. The Company engages in worldwide marketing
activities, and tailors its marketing message to meet the distinct needs of
region and culture. The Company believes its products have developed high
visibility, including favorable recognition in several significant trade
publications.

PRODUCT DEVELOPMENT

The Company seeks to develop and introduce products that are responsive to
market needs on a timely basis. The Company designs products for global
markets and often deploys market research and product definition teams
worldwide to meet and work with major customers in order to determine and
address their needs. The Company invested $71.4 in fiscal 1999 in research
and development activities. As of September 30, 1999, the Company had
approximately 530 research and development employees, many of whom have
advanced degrees in electrical engineering, computer engineering or computer
science. The Company has made a significant effort in recent years to
supplement its engineering staff with engineers skilled in key technology
areas, as well as emerging technology areas such as digital communications
and advanced signal processing. The Company also makes selective use of
outside technical consulting companies to supplement internal capabilities.

In order to access information about new technologies and standards in the
communications industry, the Company is an active member of several
international standards bodies, such as American National Standards Institute
("ANSI"), European Telecommunications Standards Institute ("ETSI"),
International Telecommunications Union-Telecommunications Standardization
Sector ("ITU-T"), Internet Engineering Task Force ("IETF"), Institute of
Electrical and Electronic Engineers ("IEEE"), Frame Relay Forum and ATM Forum.

<PAGE>

MANUFACTURING AND SUPPLIERS

The Company has five manufacturing facilities worldwide: Indianapolis,
Indiana; Research Triangle Park, North Carolina; Eningen, Germany; Norwich,
United Kingdom and Plymouth, United Kingdom. In addition, the Company has
final assembly and testing facilities in St. Etienne, France; Munich, Germany
and Sao Paulo, Brazil. The Company has product design facilities at each of
its manufacturing and assembly facilities, as well as in San Diego,
California; Rennes, France and Zurich, Switzerland. The Company outsources
certain of its manufacturing to subcontractors, including certain printed
circuit boards and total manufacturing for its Test Tools products, which are
primarily manufactured by third party suppliers in Taiwan.

Although the Company attempts to use common, multi-sourced components
throughout its design, certain technological requirements may necessitate the
use of single-sourced, unique components. The Company attempts to minimize
its exposure on these components through careful vendor qualification and
purchasing, though risk exists that these parts may become obsolete,
necessitating redesign or withdrawal of the product from the market. Although
the Company has not experienced any significant problems in obtaining
sole-sourced components, it may experience certain problems from time to time
and typically carries extra inventory of critical sole-sourced components.
The inability to develop alternative sources, if required, or a reduction or
interruption in supply or a significant increase in the price of one or more
sole-sourced components would adversely affect the Company's business,
financial condition and results of operations.

All of the Company's manufacturing and final assembly facilities are
certified under ISO 9002, and five of the Company's facilities have received
certification under ISO 9001, the highest available certification for a
development and manufacturing company. The Company's certifications under ISO
9001 and 9002 certify that its product development, manufacturing,
installation and maintenance practices meet certain predetermined standards.
In addition, the Company received certification under ISO 14001, which
relates to environmental compliance for Germany, in 1996.

BACKLOG

As of September 30, 1999 and 1998, the Company had a firm order backlog of
$89.2 million and $76.9 million. Backlog reflects firm customer orders for
products and services, a majority of which is scheduled for shipment within
12 months. The level of backlog at any particular time is not necessarily
indicative of future operating performance of the Company. Delivery schedules
may be extended, and orders may be cancelled at any time; subject to certain
cancellation penalties.

COMPETITION

The Company operates in markets that are highly competitive, and the Company
expects that competition will increase in the future. Some of the industries
in which the Company operates are characterized by rapid technological
advances and emerging industry standards. Failure to keep pace with
technological advances would adversely affect the Company's competitive
position and results of operations. The Company competes primarily on the
basis of technology, performance, price, brand identity, quality,
reliability, distribution and customer service and support. To remain
competitive, the Company must continue to develop new products, periodically
enhance its existing products and compete effectively in the areas described
above. Although the Company believes its products are competitive in each of
these areas, there can be no assurance that existing or future competitors,
some of which have greater financial resources than the Company, will not
introduce comparable or superior products incorporating more advanced
technology at lower prices.

The Company's competitors are numerous, ranging from some of the world's
largest corporations to many relatively small and highly specialized firms.
The Company believes that Agilent Technologies (formerly a part of Hewlett
Packard) is the

<PAGE>

only company other than the Company that offers a comprehensive
communications test product line with global sales coverage. Major
competitors which compete in individual product markets or geographic areas
include Anritsu, Dynatech Microtest, Network Associates, Rohde & Schwarz, IFR
Systems, GN Nettest and Tektronix. Some of these competitors have more
extensive engineering, manufacturing and marketing capabilities and
substantially greater financial, technological and personnel resources than
the Company.

INTELLECTUAL PROPERTY

The Company's success and ability to compete depends in part upon protecting
its proprietary technology. The Company relies upon a combination of patents,
trademark and trade secret laws, together with licenses, confidentiality
agreements and other contractual covenants, to establish and protect its
technology and other intellectual property rights.

There can be no assurance that the steps taken by the Company to protect its
proprietary rights will be adequate to deter misappropriation or independent
third-party development of its technology, or that its intellectual property
can be successfully enforced or defended if challenged. Given the rapid
development of technology, there can be no assurance that certain aspects of
the Company's products do not or will not infringe upon the existing or
future proprietary rights of others or that, if licenses or rights are
required to avoid infringement, such licenses or rights could be obtained on
terms that would not have a material adverse effect on the Company. In any
event, because of the rapid pace of technological change in many of the
Company's product industries, the Company believes that patent protection for
its products is less significant to its success than the knowledge, ability
and experience of its employees and the frequent introduction and market
acceptance of new products and product enhancements.

EMPLOYEES

As of September 30, 1999, the Company employed approximately 2,700 people, of
which approximately 530 were engaged in product development activities, 650
in manufacturing operations and quality control, 310 in marketing, 850 in
sales and service, and the remainder in management and administrative
capacities. Most of the Company's employees are highly skilled and the
Company's continued success will depend in part upon its ability to attract
and retain highly skilled employees. Certain of the Company's employees in
Europe are members of standard unions. The Company believes its relationship
with its employees is good.

<PAGE>

ITEM 2. PROPERTIES

The information included below reflects the Company's current operating and
administrative facilities:

<TABLE>
<CAPTION>
LEASE
LOCATION FACILITY TYPE/USE SIZE OF FACILITY TITLE EXPIRATION
- --------------------- ------------------------------------------ ---------------- ----- ----------
<S> <C> <C> <C> <C>
Eningen, Germany Corporate offices; German sales/service 779,000 sq. ft. Owned N/A
headquarters; design, manufacturing and
marketing for Telecom Networks transport
products and certain Wireless test products

Research Triangle Corporate offices; US sales/service 50,800 sq. ft. Leased 9/30/2005
Park, North Carolina headquarters; design, manufacturing and 93,100 sq. ft. Leased 9/30/2010
marketing for Enterprise Networks products (1)

Indianapolis, Indiana Design, manufacturing and marketing for 206,000 sq. ft. (2) Leased 10/21/2014
Multimedia and certain Wireless
products; manufacturing for certain Enterprise
Networks products

Plymouth, United Design, manufacturing and marketing for 86,400 sq. ft. Owned N/A
Kingdom Telecom Networks local loop products

San Diego, California U.S. distribution center for Test Tools; 70,000 sq. ft. Leased 6/30/2006
design and marketing for Enterprise
Networks LAN cable products and certain
Multimedia products (3)

Munich, Germany Design, final assembly and marketing for 51,000 sq. ft. Leased 12/31/2001
certain Wireless products

Norwich, United Design, manufacturing and marketing for 40,000 sq. ft. Owned N/A
Kingdom Precision Measurement Instruments; 3.2 acres-land Leased 3/17/2103
European distribution center for Test Tools

Sao Paulo, Brazil Manufacturing and design for the Brazilian 32,400 sq. ft. Owned N/A
market, service

St. Etienne, France Design, final assembly and marketing for 23,400 sq. ft. Leased 9/30/2005
Telecom Networks fiber optics products

Rennes, France Design and marketing for Multimedia digital 16,200 sq. ft. Owned N/A
video and Telecom Network ISDN products

Zurich, Switzerland Design and marketing for Telecom Networks 15,700 sq. ft. Leased 9/30/2000
switching products

Milan, Italy Sales/Service office 11,200 sq. ft. Owned N/A

Baden, Austria Sales/Service office 10,800 sq. ft. Owned N/A

Bern, Switzerland Sales/Service office 9,800 sq. ft. Owned N/A

Scarborough, Ontario, Sales/Service office 8,200 sq. ft. Owned N/A
Canada

Buenos Aires, Sales/Service office 3,400 sq. ft. Owned N/A
Argentina

</TABLE>

(SEE NOTES ON THE FOLLOWING PAGE)

<PAGE>

- ------------------
Notes:

(1) The Company leases this facility from a partnership owned by the
Goltermann family. The Company has a right of first refusal to purchase
this property in the event the lessor proposes to sell it during the
initial or any renewal term.

(2) 120,739 sq. ft. of this facility are subleased to unrelated parties
through October 31, 2004.

(3) The Company leases this facility from a company controlled by Terence J.
Gooding, Co-Chairman of the Company.

The Company also leases sales/service offices in 33 countries: Argentina,
Australia, Austria, Brazil (two small offices are owned), Canada, China,
Colombia, France, Germany, Guatemala, Hungary, India, Indonesia, Italy,
Japan, Malaysia, Mexico, Netherlands, New Zealand, Pakistan, Philippines,
Poland, Russia, Singapore, Slovakia, South Korea, Spain, Sweden (own building
on leasehold), Switzerland, Turkey, United Kingdom, United States and
Venezuela.

ITEM 3. LEGAL PROCEEDINGS

In the ordinary course of its business, the Company from time to time is
subjected to legal claims. The Company does not believe that the likely
outcome of any such known claims or related lawsuits would have a material
adverse effect on the Company's results of operations, financial condition,
cash flows or its ability to develop new products.

The Company hired a new chief financial officer as of October 1, 1999 and
terminated his employment on December 14, 1999. The individual has disputed
the basis for his termination and is claiming that he is entitled to his
compensation for the remainder of the two year term of his employment
contract. The Company does not believe the magnitude of this dispute is
material to the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS

There is no established market for the Company's common stock. The Company
currently has no restrictions on the payment of dividends. Dividends of $3.6
million were paid during fiscal year ended September 30, 1998. No dividends
were paid during the fiscal year ended September 30, 1999 and the Company
does not plan to pay any dividends in the foreseeable future.

As of December 20, 1999, there were approximately 40 holders of record.

<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

The selected consolidated financial data should be read in conjunction with
the consolidated financial statements of the Company included in Item 8
herein and the information contained in "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included in Item 7 herein.
Although WG became a subsidiary of Wavetek, the Exchange Transaction was
treated, for accounting and reporting purposes, as a purchase of Wavetek by
WG. Accordingly, the selected consolidated financial data of the Company as
of any date or for any period prior to September 30, 1998, are the historical
consolidated selected financial data of WG.

<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-----------------------------------------------------
1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................................. $ 497,258 $ 327,888 $ 281,887 $ 242,984 $ 227,455
Cost of goods sold........................................ 204,733 130,863 113,812 98,466 92,336
--------- --------- --------- --------- ---------
Gross margin.............................................. 292,525 197,025 168,075 144,518 135,119
Operating expenses:
Marketing and selling................................... 146,387 95,338 82,687 68,938 70,815
Research and development................................ 71,439 47,730 37,322 34,528 37,044
General and administrative.............................. 42,074 24,837 24,263 27,003 27,287
Amortization of intangible assets....................... 19,967 1,182 1,346 -- --
Acquired in-process research and development (1)........ -- 32,925 1,743 362 --
Provisions for restructuring operations and other non-
recurring charges (2)................................. 2,379 9,369 -- -- 6,855
--------- --------- --------- --------- ---------
282,246 211,381 147,361 130,831 142,001
--------- --------- --------- --------- ---------
Operating income (loss)................................... 10,279 (14,356) 20,714 13,687 (6,882)
Other (income) expense, net:
Interest income......................................... (677) (977) (1,610) (1,172) (1,332)
Interest expense........................................ 20,965 7,629 8,509 9,340 10,591
Other, net.............................................. 1,069 4,814 (790) (861) 602
--------- --------- --------- --------- ---------
Other (income) expense, net........................... 21,357 11,466 6,109 7,307 9,861
--------- --------- --------- --------- ---------
Income (loss) before provision (benefit) for income
taxes................................................... (11,078) (25,822) 14,605 6,380 (16,743)
Provision (benefit) for income taxes...................... (3,082) 6,541 7,362 (250) (10,667)
Minority interest in income (loss)........................ -- (5,096) 185 2,273 536
--------- --------- --------- --------- ---------
Net income (loss)......................................... $ (7,996) $ (27,267) $ 7,058 $ 4,357 $ (6,612)
========= ========= ========= ========= =========

Basic and diluted earnings (loss) per share............... $ (0.61) $ (3.28) $ 0.85 $ 0.52 $ (0.79)

OTHER FINANCIAL DATA:
EBITDA (3)................................................ $ 50,826 $ 38,152 $ 32,161 $ 23,366 $ 9,288
Depreciation and amortization expenses.................... 35,468 10,214 9,704 9,317 9,315
EBITDA as a percentage of sales........................... 10.2% 11.6% 11.4% 9.6% 4.1%
Ratio of earnings to fixed charges (4).................... 0.5x (1.7)x 2.5x 1.6x (0.2)x

BALANCE SHEET DATA (5):
Cash and cash equivalents (6)............................. $ 17,089 $ 6,635 $ 9,400 $ 14,416 $ 8,857
Total assets.............................................. 434,733 484,524 222,208 235,935 232,395
Total debt (7)............................................ 262,516 248,328 93,901 116,232 123,540
Stockholders' equity...................................... 17,937 25,414 18,607 9,408 2,225
Dividends paid (8)........................................ -- 3,593 1,987 -- --
Dividends paid per share.................................. -- 0.43 0.24 -- --
</TABLE>

(SEE NOTES ON FOLLOWING PAGE)

<PAGE>

- ------------------------
Notes:

(1) In connection with the Exchange Transaction and its acquisitions of Wandel &
Goltermann Technologies, Inc. ("WGTI"), Switching Test Solutions AG, Tinwald
Networking Technologies Inc., and Network Intelligence, Inc., the Company
recorded acquired in-process research and development of $32.9 million in
fiscal 1998, $1.7 million in fiscal 1997 and $0.4 million in fiscal 1996.

(2) In fiscal 1999, the Company implemented a restructuring program to reduce
expenses and recorded provisions for restructuring of $2.4 million,
primarily for severance costs. In connection with the Exchange Transaction,
the acquisition of WGTI and related restructuring activities, the Company
recorded provisions for restructuring operations and other non-recurring
charges of $9.4 million in fiscal 1998. In fiscal 1995, the Company
initiated activities to restructure certain German and U.S. manufacturing,
research and development and marketing activities in order to reduce the
level of expenses in relation to net sales. As a result, the Company
recorded provisions for restructuring of $6.9 million in fiscal 1995,
primarily for employee severance and inventory write-offs. These
restructuring activities were completed during fiscal 1996.

(3) EBITDA, as defined in the Indenture related to the Company's 10.125% Senior
Subordinated Notes due June 15, 2007 (the "Indenture"), is operating income
plus depreciation and amortization expense, acquired in-process research and
development and provisions for restructuring operations and other
non-recurring charges. While EBITDA should not be construed as a substitute
for income from operations, net income or cash flows from operating
activities in analyzing the Company's operating performance, financial
position or cash flows, the Company has included EBITDA because it may be
viewed as an indicator of compliance with certain covenants in the Indenture
and is commonly used by certain investors and analysts to analyze and
compare companies on the basis of operating performance, leverage and
liquidity and to determine a Company's ability to service debt. EBITDA, as
presented by the Company herein, may not be comparable to similarly titled
measures reported by other companies. In addition, the amount reported by
the Company as EBITDA may not be fully available for management's
discretionary use due to the Company's needs to conserve funds for debt
service, capital expenditures and other commitments.

(4) For purposes of computing this ratio, earnings consist of income (loss)
before provision (benefit) for income taxes plus fixed charges. Fixed
charges consist of interest expense and one-third of the rent expense from
operating leases, which management believes is a reasonable approximation of
the interest factor of the rent.

(5) The consolidated balance sheet data of the Company as of September 30, 1998
reflects the Exchange Transaction.

(6) Cash and cash equivalents includes short-term investments, which are
comprised primarily of investment grade commercial paper, U.S. Treasury
securities and guaranteed obligations of the U.S. government or its agencies
with original maturities of less than 90 days. In fiscal 1998, cash and cash
equivalents was reduced by $28.9 million, received on September 30, 1998,
for the purpose of repaying in full on October 2, 1998, the debt outstanding
under the Wavetek New Credit Agreement. This was an agreement with a group
of five lending banks (the "Lenders") including DLJ Capital Funding, Inc.,
as Syndication Agent and Fleet National Bank as Administrative Agent (the
"New Credit Agreement"), which was also acquired through the Exchange
Transaction.

(7) Total debt includes notes payable to banks, long-term obligations including
current maturities and long-term obligations to related parties including
current maturities. Total debt at September 30, 1998 has been reduced by
$28.9 million which was received on September 30, 1998, for the purpose of
repaying in full on October 2, 1998, the debt outstanding under the Wavetek
New Credit Agreement.

<PAGE>

(8) Dividends in fiscal 1998 were comprised of cash dividends paid of $2.0
million, a decrease in notes receivable from related parties of $0.7
million, and an increase in long-term obligations to related parties of
$0.9 million. Dividends in fiscal 1997 were comprised of cash dividends
paid of $1.2 million, a decrease in notes receivable from related parties
of $0.4 million, and an increase in long-term obligations to related
parties of $0.4 million.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion should be read in conjunction with the Company's
consolidated financial statements included in Item 8 herein.

OVERVIEW

On September 30, 1998, Wavetek and WG consummated the Exchange Transaction
whereby the stockholders of WG became stockholders of Wavetek, and WG became a
subsidiary of Wavetek. Following the Exchange Transaction, Wavetek was renamed
Wavetek Wandel Goltermann, Inc. Although WG became a subsidiary of Wavetek, the
Exchange Transaction was treated, for accounting and financial reporting
purposes, as a purchase of Wavetek by WG. Accordingly, the consolidated
financial statements of the Company and the results of operations of the Company
as of any date or for any period prior to September 30, 1998, are the historical
consolidated financial statements of WG. The consolidated balance sheets of the
Company as of September 30, 1999 and 1998 reflect the Exchange Transaction and
the related purchase accounting adjustments. The Company's net sales, cost of
goods sold, gross margin, operating expenses and interest expense have increased
significantly in fiscal 1999 as a result of the Exchange Transaction. The
Company's operating expenses also have increased as a result of Wavetek's
acquisition of Digital Transport Systems Inc., effective September 30, 1998. In
the following discussion, all references to "pro forma" financial information
mean the combined historical results of operations of Wavetek and WG for the
period indicated, as if the Exchange Transaction had been consummated as of
October 1, 1997.

GENERAL

The Company is a leading global designer, manufacturer and marketer of a broad
range of communications test instruments used to develop, manufacture, install
and maintain communications networks and equipment. The Company conducts its
communications test business, which addresses most sectors of the communications
test market, in four product areas: (1) Telecom Networks (traditional voice/data
transmissions and new multi-service networks), (2) Enterprise Networks (local
and wide-area network infrastructures), (3) Multimedia (cable television and
digital video broadcast) and (4) Wireless (mobile telephony and data). These
products provide comprehensive testing solutions to a wide range of end users.
The Company's high-end instruments are used during the product development phase
to stress test product functionality and performance. Other products are used
during the production process to verify conformance to manufacturing
specifications, while the Company's enhanced portable field service tools enable
field technicians to quickly install, repair and maintain complex network
infrastructure as well as validate service levels. The Company also provides
distributed remote test systems to many of its service provider customers, which
allow such customers to more efficiently utilize their network engineers to
monitor and test service levels, and designs, manufactures and sells precision
measurement instruments and general-purpose handheld test tools. In addition,
the Company provides repair, upgrade and calibration services, as well as
value-added professional services such as consulting, training and rental
services on a worldwide basis.

<PAGE>

and trade show activities and (4) the number of new products launched in the
period. In recent periods, the Company has increased its spending on research
and development activities primarily to accelerate the timing of new product
introductions. General and administrative expenses primarily include costs
associated with the Company's administrative employees, facilities and
functions. The Company incurs expenses in foreign countries primarily in the
functional currencies of such locations. As a result of the Company's
substantial international operations, the United States dollar amount of its
expenses is impacted by changes in foreign currency exchange rates. The
Company's ability to maintain and grow its sales depends on a variety of factors
including its ability to maintain its competitive position in areas such as
technology, performance, price, brand identity, quality, reliability,
distribution and customer service and support, and its ability to continue to
introduce new products that respond to technological change and market demand in
a timely manner.

RESULTS OF OPERATIONS

The following table sets forth selected financial information as a percentage of
net sales for the periods indicated:

<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Net sales................................... 100.0% 100.0% 100.0%
Cost of goods sold.......................... 41.2 39.9 40.4
----- ----- -----
Gross margin.............................. 58.8 60.1 59.6
Operating expenses.......................... 56.7 64.5 52.3
----- ----- -----
Operating income (loss)................... 2.1 (4.4) 7.3
Other (income) expense, net................. 4.3 3.5 2.2
Provision (benefit) for income taxes........ (0.6) 2.0 2.6
Minority interest in income (loss).......... -- (1.6) --
----- ----- -----
Net income (loss)........................... (1.6)% (8.3)% 2.5%
===== ===== =====
</TABLE>

FISCAL YEAR ENDED SEPTEMBER 30, 1999 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 30,
1998

NET SALES. Net sales in fiscal 1999 increased $169.4 million, or 51.7%, to
$497.3 million from $327.9 million in the comparable fiscal 1998 period. This
reflects an increase primarily due to the addition of sales from Wavetek
following the Exchange Transaction. As a result, there was an increase in sales
in all geographical areas, including an increase of $55.0 million, or 31.2% in
European sales and an increase of $80.1 million, or 213.7% in sales to customers
in the United States. Sales to international customers increased $89.3 million,
or 30.7%, to $379.7 million and sales to customers in the United States
increased $80.1 million, or 213.7%, to $117.6 million. The Company's sales to
customers outside the United States decreased to 76.4% of total sales in fiscal
1999 from 88.6% in the comparable fiscal 1998 period. Changes in certain foreign
exchange rates had a $12 million or 2.4% unfavorable impact on the United States
dollar equivalent of the Company's sales denominated in foreign currencies
during fiscal 1999. Sales of the Company's communications test products in
fiscal 1999 increased $149.5 million, or 46.9%, from the comparable fiscal 1998
period to $468.2 million also primarily due to the addition of sales from
Wavetek following the Exchange Transaction. Sales for the year for Other Test
products increased $20.0 million, or 222.2%, from the comparable fiscal 1998
period to $29.0 million.

The Company's net sales in fiscal 1999 increased $27.6 million, or 5.9%, to
$497.3 million from pro forma net sales of $469.7 million in the comparable
fiscal 1998 period. Sales of Communication Test products on a pro forma basis
increased by $35.9 million. Sales increased primarily in the Cable TV,
Optical Fiber and Switching Test product lines. The increase in CATV occurred
primarily in the U.S. market as a result of strong infrastructure investment
by CATV operators. The increase in Optical Fiber and Switching test equipment
can be attributed to new product introductions, such as the MTS 5000 Series
OTDR and the SS7 switching tester for mobile operators. The increases were
offset by Local Loop and Transport test products due to decreased sales of
primarily older products. Sales of the ANT-20 remained high due to the
introduction of

<PAGE>

new software and hardware options, and although sales decreased because to the
timing of shipments, orders remained stable. Sales of Other Test products on a
pro forma basis decreased by $8.2 million.

GROSS MARGIN. The Company's gross margin in fiscal 1999 increased $95.5
million, or 48.5%, to $292.5 million from $197.0 million in the comparable
fiscal 1998 period due to the added gross margin on the Wavetek sales following
the Exchange Transaction. Gross margin for Communication Test products, on a pro
forma basis, marginally decreased from 60.0% to 58.5%. The decrease in the gross
margin percentage during fiscal 1999 resulted primarily from increased price
competition in certain markets in which the Company sells and from the impact of
the change in the mix of products sold. Gross margin in fiscal 1999 was also
impacted by a one-time increase in cost of goods sold resulting from the
adjustment of inventories to fair value in connection with the Exchange
Transaction. Changes in foreign exchange rates had a small unfavorable impact on
the United States dollar equivalent of gross margins related to international
sales denominated in foreign currencies in fiscal 1999. On a pro forma basis,
the gross margin for Other Test products increased from 46.2% in fiscal 1998 to
64.5% in fiscal 1999, primarily due to an increased gross margin in precision
measurement and EMF products.

OPERATING EXPENSES. Operating expenses in fiscal 1999 increased $70.9
million, or 33.5%, to $282.2 million from $211.4 million in the comparable
fiscal 1998 period due primarily to the addition of expenses from Wavetek
following the Exchange Transaction. In addition, the increase is also
attributable to $2.4 million restructuring and non-recurring costs primarily
related to the reorganization of the sales organizations in South America and
Europe. Operating expenses as a percentage of sales decreased to 56.7% in fiscal
1999 from 64.5% in the comparable fiscal 1998 period. Marketing and selling
expenses increased $51.1 million, or 53.6%, to $146.4 million (29.4% of sales)
in fiscal 1999 from $95.3 million (29.1% of sales) in the comparable fiscal 1998
period due primarily to the addition of marketing and selling expenses from
Wavetek following the Exchange Transaction. On a pro forma basis, marketing and
selling expenses increased from 27.1% to 29.4% of sales. Increases resulted from
strategic investments in the sales organization, such as the establishment of a
marketing development organization, the development of indirect sales channels
and increased technical support for the systems business. In addition, Wavetek
invested in the establishment of a business development organization for their
specific operations. Spending for research and development activities increased
$23.7 million, or 49.7%, to $71.4 million (14.4% of sales) in fiscal 1999 from
$47.7 million (14.6% of sales) in the comparable fiscal 1998 period due
primarily to the addition of research and development expenses from Wavetek
following the Exchange Transaction and from the acquisition of Digital Transport
Systems, Inc., effective September 30, 1998. On a pro forma basis, research and
development expenses increased from $64.7 million in fiscal 1998 to $71.4
million in fiscal 1999. The Company increased research and development spending
in order to accelerate the timing and number of new product introductions,
primarily in the areas of Transport, Local Loop and Switching products. General
and administrative expenses increased $17.3 million, or 69.8%, to $42.1 million
(8.5% of sales) in fiscal 1999 from $24.8 million (7.6 % of sales) in the
comparable fiscal 1998 period due to the addition of general and administrative
expenses from Wavetek following the Exchange Transaction and from the
acquisition of Digital Transport Systems, Inc., effective September 30, 1998. On
a pro forma basis, general and administrative expenses increased from $40.3
million in fiscal 1998 to $42.1 in fiscal 1999. This increase was attributed to
certain retention expenses and other acquisition compensation expenses related
to the Exchange Transaction. In addition, during fiscal 1999 the Company
increased its general and administrative spending related to its management
information systems and certain other fixed administrative costs. Operating
expenses for fiscal 1999 also reflect an increase in amortization of intangible
assets of $18.8 million, due primarily to the Exchange Transaction. In addition,
expenses for acquired in-process research and development and provisions for
non-recurring charges aggregating $42.3 million in fiscal 1998 that arose in
relation to the Exchange Transaction, were lower by $39.9 million in fiscal
1999. Changes in foreign exchange rates had a small favorable impact on the
United States dollar equivalent of operating expenses denominated in foreign
currencies in fiscal 1999.

OTHER (INCOME) EXPENSE, NET. Other (income) expense, net, in fiscal 1999
increased by $9.9 million over the comparable fiscal 1998 period to $21.4
million. The increase was primarily due to an increase in the Company's net
interest expense to $20.3 million during fiscal 1999 from $6.7 million in the
comparable fiscal 1998 period, reflecting the addition of Wavetek's

<PAGE>

interest expense because of the Exchange Transaction. On a pro forma basis,
net interest expense increased $1.7 million from fiscal 1998 to fiscal 1999
due to an increase in the Company's outstanding debt. Additionally, on a pro
forma basis, other net expenses decreased by $4.1 million, primarily due to
lower foreign currency exchange losses in fiscal 1999 as compared to fiscal
1998.

PROVISION (BENEFIT) FOR INCOME TAXES. The Company's effective tax rate
takes into account the expected annual mix of income and related tax rates by
taxing jurisdictions. Such effective rate also reflects the non-deductibility of
the amortization expense related to certain intangible assets and other expenses
related to the Exchange Transaction and other acquisitions that occurred during
fiscal 1998. The Company's effective tax rate of 27.8% (as compared to the
statutory tax rate of 35%) in fiscal 1999, or a benefit of $3.1 million, is due
to the recognition of tax loss carryforward benefits of $2.2 million related to
the write-down of stock, the amortization of non-deductible goodwill for tax
purposes of $3.2 million, and foreign and state tax rate differentials. In
fiscal 1998, although the Company incurred a loss before income taxes and
minority interest of $25.8 million, the Company recorded a provision for income
taxes of $6.5 million since $32.9 million of the pre-tax loss was related to
write-offs of acquired in-process research and development, which is not
deductible for income tax purposes. Additionally, in fiscal 1998 the Company
recorded certain valuation allowances against certain credits for income taxes
which would otherwise have reduced the Company's provision for income taxes.

MINORITY INTEREST IN INCOME (LOSS). There was no loss from minority interest
in fiscal 1999 due to the purchase of the portion of the shares of WGTI in
September 1998 that was not previously owned by WG. Loss from minority
interest in WGTI was $5.1 million in fiscal 1998 as a result of losses
related to the portion of WGTI that was not owned by WG for the majority of
fiscal 1998.

NET INCOME (LOSS). As a result of the above factors, the net loss was $8.0
million in fiscal 1999 as compared to a net loss of $27.3 million in the
comparable fiscal 1998 period. On a comparative basis, the net loss was $8.0
million in fiscal 1999 compared to a pro forma loss of $35.6 million in fiscal
1998.

FISCAL YEAR ENDED SEPTEMBER 30, 1998 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 30,
1997

NET SALES. Net sales in fiscal 1998 increased $46.0 million, or 16.3%, to
$327.9 million from $281.9 million in fiscal 1997. This reflects an increase
in sales in all geographic areas, including an increase of $28.4 million, or
19.2%, in European sales and an increase of $7.0 million, or 22.8%, in sales
to customers in the United States. Changes in certain foreign exchange rates
during fiscal 1998 had the effect of reducing the U.S. dollar equivalent of
the Company's foreign currency sales by $19.3 million from the U.S. dollar
equivalent amount that would have been reported if the average exchange rates
in effect for fiscal 1997 had remained in effect for fiscal 1998. Sales of
the Company's communications test products increased $44.7 million, or 16.4%,
from fiscal 1997 primarily due to the acquisition of Switching Test Solutions
AG ('STS'), increased revenues from sales of the Company's ANT-20 product and
continued growth in the markets for the Company's products.

Sales from repair, upgrade and other services increased $1.3 million, or 13.4%,
from fiscal 1997 primarily due to an emphasis on value-added services in
addition to traditional repair and calibration services, increases in the
installed base of the Company's products and growth in the markets for the
Company's products.

GROSS MARGIN. The Company's gross margin in fiscal 1998 increased $28.9
million, or 17.2%, to $197.0 million from $168.1 million in fiscal 1997.
Gross margin as a percentage of net sales increased slightly to 60.1% in
fiscal 1998 as compared to 59.6% in fiscal 1997 primarily due to increased
sales of products with higher software content or unique product features
that generate higher margins and cost reduction programs in the Company's
manufacturing operations, partially offset by competitive pressures on
pricing. Changes in certain exchange rates had an unfavorable impact of $9.0
million on the U.S.

<PAGE>

dollar equivalent of gross margin in fiscal 1998 from the U.S. dollar
equivalent amount that would have been reported if the average exchange rates
in effect for fiscal 1997 had remained in effect for fiscal 1998.

OPERATING EXPENSES. Operating expenses in fiscal 1998 increased $64.0
million, or 43.4%, to $211.4 million from $147.4 million in fiscal 1997.
Operating expenses as a percentage of sales increased to 64.5% in fiscal 1998
from 52.3% in fiscal 1997. The increase in operating expenses in fiscal 1998
was primarily due to charges for acquired in-process research and development
and provisions for restructuring and other non-recurring charges. In 1998,
the Company recorded charges for acquired in-process research and development
of $11.8 million related to the Exchange Transaction and $21.1 million
related to acquisitions of Wandel & Goltermann Technologies, Inc. ("WGTI"),
STS, Tinwald Networking Technologies, Inc. ("Tinwald") and Network
Intelligence, Inc. ("NI"). The Company also recorded provisions of $4.5
million for restructuring and other non-recurring charges related to the
Exchange Transaction and related restructuring activities and provisions of
$4.8 million in connection with the acquisition of WGTI and related
restructuring activities.

Spending for marketing and selling activities increased $12.6 million to $95.3
million, or 29.1% of net sales, in fiscal 1998 from $82.7 million, or 29.3% of
net sales, in fiscal 1997 primarily due to increased personnel costs to support
higher net sales levels and the acquisition of STS, partially offset by the
favorable impact of changes in foreign exchange rates on the U.S. dollar
equivalent of selling and marketing expenses denominated in foreign currencies.
Spending for research and development activities increased $10.4 million to
$47.7 million, or 14.6% of net sales, in fiscal 1998 from $37.3 million, or
13.2% of net sales, in fiscal 1997 reflecting increases resulting from the
acquisition of STS, Tinwald and NI partially offset by the favorable impact of
changes in foreign exchange rates on the U.S. dollar equivalent of research and
development expenses dominated in foreign currencies. Spending for general and
administrative activities increased $0.4 million, to 7.9% of net sales in fiscal
1998 from 9.1% of net sales in fiscal 1997. General and administrative spending
increased to support higher net sales levels but decreased as a percentage of
net sales primarily reflecting the Company's efforts to spread certain fixed
administrative costs over a higher level of net sales.

OTHER (INCOME) EXPENSE, NET. Other non-operating expense, net, in fiscal
1998 increased by $5.4 million over fiscal 1997 to $11.5 million. The
increase was primarily due to foreign currency losses recognized on certain
forward exchange contracts as the U.S. dollar weakened significantly against
the German Deutsche mark during fiscal 1998. Interest expense decreased to
$7.6 million in fiscal 1998 compared to $8.5 million in fiscal 1997
reflecting lower average outstanding debt balances. Interest income decreased
to $1.0 million in 1998 from $1.6 million in fiscal 1997 reflecting lower
average cash balances for the year.

PROVISION (BENEFIT) FOR INCOME TAXES. In fiscal 1998, although the Company
incurred a loss before income taxes and minority interest of $25.8 million, the
Company recorded a provision for income taxes of $6.5 million since $32.9
million of the pre-tax loss was related to write-offs of acquired in-process
research and development, which is not deductible for income tax purposes.
Additionally, in fiscal 1998 the Company recorded certain valuation allowances
against certain credits for income taxes which would otherwise have reduced the
Company's provision for income taxes. In fiscal 1997, the Company recorded a
provision for income taxes of $7.4 million, or 50.4%, of income before provision
for income taxes and minority interest.

MINORITY INTEREST IN INCOME (LOSS). Loss from minority interest in WGTI was
$5.1 million in fiscal 1998 compared to income of $0.2 million in fiscal 1997.
In September 1998, the portion of WGTI that was not previously owned by WG was
purchased by WG. In fiscal 1998, prior to the acquisition of the minority
interest, WGTI incurred losses which resulted in a loss from minority interest
for the portion of WGTI that was not owned by WG for the majority of fiscal
1998.

NET INCOME (LOSS). As a result of the above factors, net loss was $27.3
million in fiscal 1998 as compared to net income of $7.1 million in fiscal 1997.

22
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

The Company had cash and cash equivalents at September 30, 1999 of $17.1
million.

The Company's cash provided by operating activities of $5.3 million in fiscal
1999 included a net loss of $8.0 million, increased by non-cash charges of
$35.5 million in depreciation and amortization expense and $2.4 million in
accrued restructuring and other non-recurring charges, and decreased by $12.4
million in deferred income taxes. In addition, the changes in operating
assets and liabilities between fiscal 1999 and fiscal 1998 produced a
negative cash flow of $12.1 million. This was primarily due to a substantial
increase in receivables during the last quarter of fiscal 1999 because of the
increase in revenue during this quarter and a decrease in accounts payable
and accrued expenses, only partly compensated by positive cash flow from
reduced inventory levels.

The Company's net cash used in investing activities was $14.8 million in
fiscal 1999, which included $16.8 million in capital expenditures and was
offset by proceeds from the sale of property, plant and equipment of $2.0
million. On a pro forma basis, capital expenditures increased by $0.8
million from fiscal 1998 to fiscal 1999 which was primarily due to the
introduction of new information technology equipment and the refurbishment of
the Company's facility in Eningen, Germany.

The Company's net cash used in financing activities was $6.6 million in
fiscal 1999, of which $5.9 million was the net effect of payments on
borrowings of $218.7 million and new borrowings of $212.7 million under the
Bank Pooling Agreement, the New Credit Agreement and the Credit Facility, as
defined in Note 5 of the Notes to Consolidated Financial Statements.

The Company invests its excess cash in highly liquid money market funds, U.S.
Treasury obligations and investment grade commercial paper. In recent years,
the Company has funded its business through operating cash flow, has not
relied on sales of equity to provide cash and has used short--term debt
primarily for cash management purposes. The Company had borrowings
outstanding of $166.8 million at September 30, 1999, including amounts
borrowed for working capital requirements, of which $17.5 million was
classified as short-term. The Company also has contingent obligations
outstanding totaling approximately $7.4 million in the form of letters of
credit and bank guarantees. The Company's total credit lines provide for
total availability of $200.0 million. At September 30, 1999, the Company had
approximately $33.2 million available under these facilities.

The Company believes that its cash and cash equivalents of $17.1 million,
cash flow from operations, as well as the remaining borrowings under its
existing credit agreements and the Credit Facility will be sufficient to fund
the Company's debt service obligations and working capital requirements, as
well as implement the Company's growth strategy over the next twelve months.

FOREIGN OPERATIONS

As discussed above, a significant portion of the Company's sales and expenses
are denominated in currencies other than the United States dollar. In order
to maintain access to such foreign currencies, the Company and certain of its
foreign subsidiaries have credit facilities providing for borrowings in local
currency. Adjustments made in translating the balance sheet accounts of the
foreign subsidiaries from their respective functional currencies at
appropriate exchange rates are included as a separate component of
stockholders' equity. In addition, the Company periodically uses forward
exchange contracts and collars to hedge certain known foreign exchange
exposures. Gains or losses from such contracts are included in the Company's
consolidated statements of operations to offset gains and losses from the
underlying foreign currency transactions.

<PAGE>

The Indenture under which the Company's 10.125% Senior Subordinated Notes,
due June 15, 2007, were issued permits the Company and its subsidiaries to
make investments in, and intercompany loans to, its foreign subsidiaries.
Payments to the Company or its other subsidiaries by such foreign
subsidiaries, including the payment of dividends, redemption of capital stock
or repayment of such intercompany loans, may be restricted by the credit
agreements of the foreign subsidiaries.

On January 1, 1999, eleven of the fifteen member countries of the European
Union established fixed conversion rates between their existing currencies
and a new common currency (the "EURO"). The participating countries have
adopted the EURO as their common legal currency on that date. The Company is
assessing the potential impact from the EURO conversion in a number of areas,
including the competitive impact of cross--border price transparency, which
may make it more difficult for businesses to charge different prices for the
same products on a country--by--country basis, and the impact on currency
exchange costs and currency exchange rate risk. At this stage of its
assessment, the Company believes most of the impact has been absorbed in the
Company's pricing and currency policies.

PERIODIC FLUCTUATIONS

The Company's fiscal 1999 net sales occurred in the following percentages in
each of the last four quarters: 25% for the quarter ended December 31, 1998,
23% for the quarter ended March 31, 1999, 23% for the quarter ended June 30,
1999 and 29% for the quarter ended September 30, 1999. A variety of factors
may cause period--to--period fluctuations in the operating results of the
Company. Such factors include, but are not limited to, product mix, European
summer holidays and other seasonal influences, competitive pricing pressures,
materials costs, currency fluctuations, revenues and expenses related to new
products and enhancements of existing products, as well as delays in customer
purchases in anticipation of the introduction of new products or product
enhancements by the Company or its competitors. The majority of the
Company's revenues in each quarter results from orders received in that
quarter. As a result, the Company establishes its production, inventory and
operating expenditure levels based on anticipated revenue levels. Thus, if
sales do not occur when expected, expenditure levels could be
disproportionately high and operating results for that quarter, and
potentially future quarters, would be adversely affected.

RESTRUCTURING OF OPERATIONS AND SUBSIDIARIES

To improve the Company's competitive position in the marketplace, the Company
implemented a restructuring program in fiscal 1999 to reduce costs and
streamline operations. During fiscal 1999, the Company recorded
approximately $2.4 million in restructuring charges. The Company expects to
continue its restructuring program, and incur additional restructuring
charges during fiscal 2000.

IMPACT OF YEAR 2000

Many computer programs and applications define the applicable year using two
digits rather than four in order to save memory and enhance the speed of
repeated date-based calculations. The "Year 2000 Issue" refers to the
inability of these computer programs on and after January 1, 2000 to
recognize that "00" refers to "2000" rather than "1900." The term "Year
2000-compliant" means a computer or a computer system that has been designed
or modified to recognize dates on and after January 1, 2000. Many of the
Company's computer programs that have time-sensitive software may not be Year
2000-compliant. If the Company's systems are not Year 2000-compliant, they
could malfunction or fail altogether, causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.

WG and Wavetek, prior to the Exchange Transaction, independently addressed
the issues involved in the Year 2000 Issue. The Company determined that it
was required to modify or replace significant portions of its hardware and
software so that those systems would properly utilize dates beyond December
31, 1999. The Company has modified or replaced existing

<PAGE>

hardware and software to mitigate the Year 2000 Issue. Management believes
there will be no material impact on the operations of the Company.

THE COMPANY'S STATE OF READINESS - The Company established programs to
coordinate its year 2000 ("Y2K") compliance efforts across all business
functions and geographic areas. Starting in 1995, both WG and Wavetek began
to evaluate their internal business and information systems for Year 2000
compliance. The scope of the programs included addressing the risks
associated with the Company's (i) information technology (IT) systems
(including the Company's products and services), (ii) non-IT systems that
include embedded technology (e.g., equipment and other infrastructure), (iii)
products, and (iv) significant vendors and their Y2K readiness. The Company
utilized the following steps in executing its Y2K compliance program: (1)
awareness, (2) assessment, (3) remediation and renovation, (4) validation and
testing, and (5) implementation.

IT SYSTEMS. The Company's most significant renovation effort involved the
upgrading or replacing certain hardware, embedded chips and software programs
it employs in the normal course of business, including its manufacturing,
accounting applications and certain other administrative hardware and
software systems. The Company believes it has completed its validation,
testing and implementation for all IT Systems as of September 30, 1999 and
that there will not be any material impact on the Company's ability to
deliver products and services.

NON-IT SYSTEMS. The Company believes that all of its mission critical non-IT
systems are Y2K compliant. The Company is performing final testing for its
mission critical non-IT systems to validate the Company's compliance.

PRODUCTS - All Company products now being delivered are Year 2000 compliant.
Information has also been provided to address customer inquiries concerning
previously delivered products, including those no longer manufactured.
Nearly all expenditures for product correction have been incurred.

SIGNIFICANT VENDORS - As part of the Company's Y2K compliance program, the
Company has contacted its significant vendors to assess their Y2K readiness.
For all mission critical third party software embedded in or specified for
use in conjunction with the Company's IT systems and products, the Company's
communications with the vendors indicates that the vendors believe they are
substantially Y2K compliant. Such third party software has been tested in
conjunction with the testing of the IT systems and products discussed above.
There can be no assurance that (i) the Company's significant vendors will
succeed in their Y2K compliance efforts, or (ii) the failure of vendors to
address year 2000 compliance will not have a material adverse effect on the
Company's business or results of operations.

THE COSTS TO ADDRESS THE COMPANY'S YEAR 2000 ISSUES - Since inception of its
program through September 30, 1999, the costs related to the Company's Y2K
compliance efforts totaled approximately $2.0 million, substantially all of
which has already been incurred, including costs associated with the
implementation of certain new core information systems. Much of this
expenditure would have been necessary in any case as part of the regular
process of maintaining and updating systems. In some instances, the
expenditures have been accelerated in order to comply with Year 2000
requirements. The total estimated costs to complete the Company's Y2K
compliance effort are approximately $2.2 million.

THE RISKS OF THE COMPANY'S YEAR 2000 ISSUES - The Company's failure to
adequately resolve the Y2K risks could result in system failures, the
generation of erroneous information, and other significant disruptions of
business activities. Although the Company believes it will be successful in
its Y2K compliance efforts, there can be no assurance that the Company's
systems and products contain all necessary date code changes. In addition,
the Company's operations may be at risk if its vendors and other third
parties fail to adequately address the Y2K issue or if software conversions
result in system incompatibilities with these third parties. To the extent
that either the Company or a third-party vendor or service provider on which
the Company relies does not achieve Y2K compliance, the Company's results of
operations could be materially adversely affected.

<PAGE>

Furthermore, it has been widely reported that a significant amount of
litigation surrounding business interruption will arise out of Y2K issues. It
is uncertain whether, or to what extent, the Company may be affected by such
litigation.

THE COMPANY'S CONTINGENCY PLAN - The Company has not developed a
comprehensive contingency plan to address the situation that may result if
the Company or its vendors are unable to achieve Y2K compliance for its
critical operations. The Company is aware of the potential risks associated
with the failure to adequately resolve any Y2K disruptions that may affect
future results of operations.

The Company is relying upon suppliers to provide Year 2000 compliant upgrades
in a timely manner. The Company has a program in place to assess the extent
to which the Company's systems or business processes may be vulnerable to
third party non-compliance and the ability of its suppliers and business
partners to continue normal operations beyond Year 2000. However, there can
be no assurance that the systems of other companies on which the Company's
systems rely will be timely converted and will not have an adverse effect on
the Company's systems.

CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS - Except for
statements of existing or historical facts, the foregoing discussion of Y2K
consists of forward-looking statements and assumptions relating to
forward-looking statements, including without limitation the statements
relating to future costs, the timetable for completion of Y2K compliance
efforts, potential problems relating to Y2K, the Company's state of
readiness, third party representations, and the Company's plans and
objectives for addressing Y2K problems. Certain factors could cause actual
results to differ materially from the Company's expectations, including
without limitation (i) the failure of vendors and service providers to timely
achieve Y2K compliance, (ii) system incompatibilities with third parties
resulting from software conversions, (iii) the Company's systems and products
not containing all necessary date code changes, (iv) the failure of existing
or future clients to achieve Y2K compliance, (v) potential litigation arising
out of Y2K issues, the risk of which may be greater for information
technology based service providers such as the Company, (vi) the failure of
the Company's validation and testing phase to detect operational problems
internal to the Company, in the Company's products or services or in the
Company's interface with service providers, vendors or clients, whether such
failure results from the technical inadequacy of the Company's validation and
testing efforts, the technological infeasibility of testing certain non-IT
systems, the perceived cost-benefit constraints against conducting all
available testing, or the unavailability of third parties to participate in
testing, or (vii) the failure to timely implement a contingency plan to the
extent Y2K compliance is not achieved.

CAUTIONARY STATEMENTS

Certain of the information contained herein may contain "forward-looking
statements" within the meaning of the Private Securities Litigation Reform
Act of 1995, as the same may be amended from time to time ("the Act") and in
releases made by the Securities and Exchange Commission ("SEC") from time to
time. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance, or achievements expressed or implied by such forward-looking
statements. The words "estimate," "believes," "project," "intend," "expect"
and similar expressions when used in connection with the Company, are
intended to identify forward-looking statements. Any such forward-looking
statements are based on various factors and derived utilizing numerous
important assumptions and other important factors that could cause actual
results to differ materially from those on the forward-looking statements.
These cautionary statements are being made pursuant to the Act, with the
intention of obtaining benefits of the "Safe Harbor" provisions of the Act.
The Company cautions investors that any forward-looking statements made by
the Company are not guarantees of future performance and that actual results
may differ materially from those in the forward-looking statements as a
result of various factors, including but not limited to those set forth
below. Important assumptions and other important

<PAGE>

factors that could cause actual results to differ materially from those in
the forward-looking statements include, but are not limited to: (i) risks
associated with leverage, including cost increases due to rising interest
rates; (ii) risks associated with the possibility of the Company not meeting
its debt covenant requirements, including financial covenants, in accordance
with various debt agreements; (iii) risks associated with changes in domestic
and/or foreign laws and regulations, including changes in tax laws,
accounting standards, environmental laws, occupational, health and safety
laws; (iv) risks associated with access to foreign markets together with
foreign economic conditions, including currency fluctuations and trade,
monetary and/or tax policies; (v) risks associated with the Company's ability
to continue its strategy of increasing market share of existing business,
incremental market penetration, and growth through acquisitions; (vi) the
Company's ability to make effective acquisitions in the future and to
successfully integrate newly acquired businesses into existing operations and
the risks associated with such newly acquired businesses; (vii) uncertainty
as to the effect of competition in existing and potential future lines of
business; (viii) risks associated with the failure of the Company to properly
address Year 2000 issues; (ix) risk associated with the failure of the
Company's vendors, customers or other parties with which the Company
transacts business to timely complete the remediation of computer systems to
effectively process Year 2000 information; (x) effective implementation of
the Company's restructuring programs; (xi) economic uncertainty in various
countries throughout the world; (xii) changes in laws and regulations,
including changes in tax rates, accounting standards, environmental laws,
occupational, health and safety laws; (xiii) access to foreign markets
together with foreign economic conditions, including currency fluctuations;
(xiv) the effect of, or changes in, general economic conditions; and (xv) the
outcome of litigation, claims and assessments involving the Company. Other
factors and assumptions not identified above may also be involved in the
derivation of forward-looking statements, and the failure of such other
assumptions to be realized as well as other factors may also cause actual
results to differ materially from those projected. The Company assumes no
obligation to update these forward-looking statements to reflect actual
results, changes in assumptions or changes in other factors affecting such
forward-looking statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company uses financial instruments, including fixed and variable rate
debt, to finance its operations. The information below summarizes the
Company's market risks associated with debt obligations outstanding as of
September 30, 1999. The following table presents principal cash flows and
related weighted average interest rates by fiscal year of maturity. Variable
interest rate obligations under the Credit Facility and other revolving bank
credit agreements, capital lease obligations and notes payable to related
parties are not included in the table. The information is presented in U.S.
dollar equivalents, which is the Company's reporting currency. The actual
cash flows of the instruments are denominated in U.S. dollars ("US$"), German
Deutsche marks ("DM") and other currencies ("other") as indicated.

Expected Maturity Date
----------------------------------------------------------------------------------
2000 2001 2002 2003 2004 Thereafter Total
-------- -------- -------- -------- -------- -------------- ----------
(US$ equivalent in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Long-term Obligations:
Fixed Rate (US$).............. $ 685 $ 633 $ 585 $ 541 $ 500 $ 85,000 $ 87,944
Average interest rate 8.2% 8.2% 8.2% 8.2% 8.2% 10.1% 10.1%
Fixed Rate (DM) $ 5,077 $ 4,152 $ 3,550 $ 3,551 $ 2,353 $ 10,424 $ 29,107
Average interest rate....... 5.9% 5.9% 5.9% 5.9% 5.5% 5.9% 5.9%
Fixed Rate (other) $ 362 $ 97 $ 100 $ 70 $ 74 $ 2,136 $ 2,839
Average interest rate....... 9.4% 6.1% 6.2% 6.6% 6.6% 5.5% 6.1%
</TABLE>

The carrying amounts of the Company's debt instruments approximate their fair
values. At September 30, 1999, the Company had interest rate cap agreements and
swap agreements in an aggregate notional amount of $10.9 million to limit its
exposure

<PAGE>

on interest rate changes related to certain variable interest rate debt
instruments. The carrying values of the interest rate caps and swaps
approximate fair value.

The Company uses forward exchange contracts and collars in the ordinary
course of business to mitigate its exposure to changes in foreign currency
exchange rates relating to cash, accounts receivable, accounts payable,
significant transactions and anticipated future sales denominated in foreign
currencies. The terms of these contracts are generally less than one year.
The Company's risk management policies do not provide for the utilization of
financial instruments for trading purposes.

Gains and losses on financial instruments that qualify as hedges of existing
assets or liabilities or firm commitments are recognized in income or as
adjustments of carrying amounts when the hedged transaction occurs.
Financial instruments which are not designated as hedges of specific assets,
liabilities, firm commitments or anticipated transactions are marked to
market and any resulting unrealized gains or losses are recorded in "Other
(Income) Expense, net" in the accompanying consolidated statements of
operations. At September 30, 1999, the Company had foreign exchange
contracts outstanding in an aggregate notional amount of $18.4 million.
While it is not the Company's intention to terminate any of these contracts,
the estimated fair value of these contracts indicated that termination of the
forward currency exchange contracts at September 30, 1999 would have resulted
in a gain of $0.1 million. Due to the volatility of currency exchange rates,
these estimated results may or may not be realized.

ITEM 8. FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF WAVETEK WANDEL GOLTERMANN, INC.

PAGE
<S> <C>
Report of Independent Public Accountants................................................... 29
Consolidated Balance Sheets as of September 30, 1999 and 1998.............................. 30
Consolidated Statements of Operations for each of the three years in the period ended
September 30, 1999..................................................................... 31
Consolidated Statements of Stockholders' Equity for each of the three years in the period
ended September 30, 1999............................................................... 32
Consolidated Statements of Cash Flows for each of the three years in the period ended
September 30, 1999.................................................................... 33
Notes to Consolidated Financial Statements................................................. 34
</TABLE>

<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders
Wavetek Wandel Goltermann, Inc.

We have audited the accompanying consolidated balance sheets of
Wavetek Wandel Goltermann, Inc. (a Delaware corporation) and subsidiaries as
of September 30, 1999 and 1998, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years
in the period ended September 30, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Wavetek Wandel
Goltermann, Inc. and subsidiaries as of September 30, 1999 and 1998, and the
results of their operations and their cash flows for each of the three years
in the period ended September 30, 1999, in conformity with generally accepted
accounting principles.

/S/ ARTHUR ANDERSEN LLP

Raleigh, North Carolina,
December 2, 1999.

<PAGE>

WAVETEK WANDEL GOLTERMANN, INC.

CONSOLIDATED BALANCE SHEETS
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------
1999 1998
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 17,089 $ 35,544
Accounts receivable (less allowance for doubtful accounts
of $4,608 in 1999 and $4,432 in 1998)................... 102,532 92,281
Inventories............................................... 62,515 74,886
Deferred income taxes..................................... 8,922 17,095
Other current assets...................................... 13,636 12,736
-------- --------
Total current assets........................................ 204,694 232,542
Property, plant and equipment, net.......................... 60,575 66,597
Intangible assets, net...................................... 162,482 178,675
Other non-current assets.................................... 6,982 6,710
-------- --------
Total assets................................................ $434,733 $484,524
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable............................................. $ 17,510 $113,085
Current portion of long--term obligations................. 6,202 30,222
Current portion of long--term obligations to related
parties................................................. 10,721 11,746
Trade payables............................................ 31,549 37,612
Accrued compensation...................................... 26,626 25,907
Income taxes payable...................................... 4,250 5,956
Other current liabilities................................. 38,838 41,848
-------- --------
Total current liabilities................................... 135,696 266,376
Long-term obligations, net of current portion............... 228,083 121,595
Pension liabilities......................................... 35,671 35,511
Deferred income taxes....................................... 7,957 25,582
Other non-current liabilities............................... 9,389 10,046
-------- --------
Total liabilities........................................... 416,796 459,110
-------- --------
Commitments and contingencies (Notes 1, 3, 4, 5, 6, and 11)
Stockholders' equity:
Common stock, par value $.01, 50,000 shares authorized,
13,202 shares issued and outstanding.................... 132 132
Additional paid--in capital............................... 72,948 72,948
Accumulated deficit....................................... (65,641) (57,645)
Other comprehensive income................................ 10,498 9,979
-------- --------
Total stockholders' equity.................................. 17,937 25,414
-------- --------
Total liabilities and stockholders' equity.................. $434,733 $484,524
======== ========
</TABLE>

See Notes to Consolidated Financial Statements.

<PAGE>

WAVETEK WANDEL GOLTERMANN, INC.

CONSOLIDATED DBALANCE SHEETS
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Net sales................................................... $497,258 $327,888 $281,887
Cost of goods sold.......................................... 204,733 130,863 113,812
-------- -------- --------
Gross margin................................................ 292,525 197,025 168,075

Operating expenses:
Marketing and selling..................................... 146,387 95,338 82,687
Research and development.................................. 71,439 47,730 37,322
General and administrative................................ 42,074 24,837 24,263
Amortization of intangible assets......................... 19,967 1,182 1,346
Acquired in--process research and development............. -- 32,925 1,743
Provisions for restructuring operations and other
non--recurring charges.................................. 2,379 9,369 --
-------- -------- --------
Total operating expenses............................ 282,246 211,381 147,361
-------- -------- --------
Operating income (loss)................................... 10,279 (14,356) 20,714
Other (income) expense, net:
Interest income.......................................... (677) (977) (1,610)
Interest expense......................................... 20,965 7,629 8,509
Other, net............................................... 1,069 4,814 (790)
-------- -------- --------
Other (income) expense, net........................... 21,357 11,466 6,109
-------- -------- --------
Income (loss) before provision (benefit) for income taxes
and minority interest in income (loss).................... (11,078) (25,822) 14,605
Provision (benefit) for income taxes........................ (3,082) 6,541 7,362
Minority interest in income (loss).......................... -- (5,096) 185
-------- -------- --------
Net income (loss)........................................... $ (7,996) $(27,267) $ 7,058
======== ======== ========
Basic and diluted earnings (loss) per share................. $ (0.61) $ (3.28) $ 0.85
======== ======== ========
Weighted average number of shares outstanding............... 13,202 8,317 8,317
======== ======== ========
</TABLE>

See Notes to Consolidated Financial Statements.

<PAGE>

WAVETEK WANDEL GOLTERMANN, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1997, 1998 AND 1999
(DOLLARS AND SHARES IN THOUSANDS)

Common Stock Additional Other Total
------------------- Paid-in Accumulated Comprehensive Stockholders'
Shares Amount Capital Deficit Income Equity
-------- -------- ---------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1996... 8,317 $ 83 $32,930 $(31,856) $ 8,251 $ 9,408
Sales of stock by
subsidiaries.............. -- -- 505 -- -- 505
Dividends................... -- -- -- (1,987) -- (1,987)
Net income.................. -- -- -- 7,058 -- 7,058
Foreign currency translation
adjustments............... -- -- -- -- 3,623 3,623
------ ---- ------- -------- ------- -------
Balance, September 30, 1997... 8,317 83 33,435 (26,785) 11,874 18,607
Sales of stock by
subsidiaries.............. -- -- 662 -- -- 662
Shares issued in connection
with the Exchange
Transaction with Wavetek
Corporation............... 4,885 49 38,851 -- -- 38,900
Dividends................... -- -- -- (3,593) -- (3,593)
Net loss.................... -- -- -- (27,267) -- (27,267)
Foreign currency translation
adjustments............... -- -- -- -- (1,895) (1,895)
------ ---- ------- -------- ------- -------
Balance, September 30, 1998... 13,202 132 72,948 (57,645) 9,979 25,414
Net loss.................... -- -- -- (7,996) -- (7,996)
Foreign currency translation
adjustments............... -- -- -- -- 519 519
------ ---- ------- -------- ------- -------
Balance, September 30, 1999... 13,202 $132 $72,948 $(65,641) $10,498 $17,937
====== ==== ======= ======== ======= =======
</TABLE>

See Notes to Consolidated Financial Statements.

<PAGE>

WAVETEK WANDEL GOLTERMANN, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)......................................... $(7,996) $(27,267) $ 7,058
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Minority interest in net income (loss).................. -- (5,096) 185
Depreciation and amortization expense................... 35,468 10,214 9,704
Acquired in-process research and development........... -- 32,925 1,743
Restructuring and other non-recurring charges........... 2,379 2,937 --
Deferred income taxes................................... (12,985) 1,978 4,600
Changes in operating assets and liabilities, net of
effect of purchased businesses:
Accounts receivable................................... (14,083) (4,415) (6,520)
Inventories........................................... 16,995 2,282 (8,239)
Other current assets.................................. (1,610) 1,876 (3,643)
Accounts payable and accrued expenses................. (15,024) 2,174 10,051
Income taxes payable, net............................. (2,342) 1,572 2,383
Pension liabilities................................... 484 3,180 698
Other, net............................................ 3,025 (438) (507)
------- -------- -------
Net cash provided by operating activities........... 4,311 21,922 17,513

INVESTING ACTIVITIES:
Purchase of businesses, net of cash acquired of $1,363 and
$1,312 in 1998 and 1997, respectively................... -- (45,207) (6,658)
Cash acquired in connection with Exchange Transaction.... -- 31,329 --
Proceeds from sale of investments in affiliates........... -- 1,757 1,890
Purchase of property, equipment, and intangibles.......... (16,760) (10,416) (9,356)
Proceeds from sale of property, plant and equipment....... 1,977 -- 3,999
Purchase of short-term investments, available for sale... -- (41,100) (76,160)
Sale of short-term investments, available for sale....... -- 41,100 76,160
Payments received for notes receivable from related
parties.................................................. -- 6,042 740
Increases in notes receivable from related parties........ -- (1,081) (1,607)
------- -------- -------
Net cash used in investing activities................ (14,783) (17,576) (10,992)

FINANCING ACTIVITIES:
Proceeds from revolving lines of credit and long-term
obligations............................................. 212,711 56,241 1,961
Principal payments on revolving lines of credit and
long-term obligations................................... (218,659) (35,647) (12,084)
Cash dividends paid to stockholders...................... -- (2,043) (1,188)
Proceeds from long-term obligations to related parties.. -- 3,364 63
Principal payments on long-term obligations to related
parties................................................. -- (258) --
Other, net............................................... (672) -- --
------- -------- -------
Net cash provided by (used in) financing
activities........................................ (6,620) 21,657 (11,248)
Effect of exchange rate changes on cash and cash
equivalents............................................. (1,363) 141 (289)
------- -------- -------
Increase (decrease) in cash and cash equivalents.......... (18,455) 26,144 (5,016)
Cash and cash equivalents at beginning of year............ 35,544 9,400 14,416
------- -------- -------
Cash and cash equivalents at end of year.................. $17,089 $ 35,544 $ 9,400
======= ======== =======

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest.................................... $14,028 $ 7,103 $ 8,314
======= ======== =======
Cash paid for income taxes, net of income tax refunds
received................................................. $ 5,444 $ 2,038 $ 3,346
======== ======== =======
</TABLE>

See Notes to Consolidated Financial Statements.

33
<PAGE>

WAVETEK WANDEL GOLTERMANN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND BASIS OF PRESENTATION

On September 30, 1998, Wavetek Corporation, a Delaware corporation
("Wavetek"), and Wandel & Goltermann Management Holding GmbH, a German
limited liability company ("WG"), consummated an exchange transaction whereby
the stockholders of WG became stockholders of Wavetek, and WG became a
subsidiary of Wavetek (the "Exchange Transaction"). Following the Exchange
Transaction, Wavetek was ultimately renamed Wavetek Wandel Goltermann, Inc.
(the "Company"). The Exchange Transaction was accounted for as a purchase of
Wavetek by WG in accordance with Accounting Principles Board Opinion ("APB")
No. 16, Business Combinations. Accordingly, the financial statements of the
Company included herein as of any date or for any period prior to September
30, 1998, are the historical financial statements of WG.

The Company is a leading global designer, manufacturer and marketer of a
broad range of communications test instruments used to develop, manufacture,
install and maintain communications networks and equipment. The Company
conducts its business in two principle business areas, communications test
business and other test products. The Company conducts its communications
test business, which addresses most sectors of the communications test
market, in four product areas: (1) Telecom Networks (traditional voice/data
transmissions and new multi-service networks), (2) Enterprise Networks (local
and wide-area network infrastructures), (3) Multimedia (cable television and
digital video broadcast) and (4) Wireless (mobile telephony and data). These
products provide comprehensive testing solutions to a wide range of end
users. The Company's high-end instruments are used during the product
development phase to stress test product functionality and performance.
Other products are used during the production process to verify conformance
to manufacturing specifications, while the Company's enhanced portable field
service tools enable field technicians to quickly install, repair and
maintain complex network infrastructure as well as validate service levels.
The Company also provides distributed remote test systems to many of its
service provider customers, which allow such customers to more efficiently
utilize their network engineers to monitor and test service levels, and
designs, manufactures and sells precision measurement instruments and
general-purpose handheld test tools. In addition, the Company provides
repair, upgrade and calibration services, as well as value-added professional
services such as consulting, training and rental services on a worldwide
basis.

The Company's operating expenses are substantially impacted by marketing and
selling activities as well as by research and development activities.
Marketing and selling expenses are primarily driven by: (1) sales volume,
with respect to sales force expenses and commission expenses; (2) the extent
of market research activities for new product design efforts; (3) advertising
and trade show activities and (4) the number of new products launched in the
period. In recent periods, the Company has increased its spending on research
and development activities primarily to accelerate the timing of new product
introductions. General and administrative expenses primarily include costs
associated with the Company's administrative employees, facilities and
functions. The Company incurs expenses in foreign countries primarily in the
functional currencies of such locations. As a result of the Company's
substantial international operations, the United States dollar amount of its
expenses is impacted by changes in foreign currency exchange rates. The
Company's ability to maintain and grow its sales depends on a variety of
factors including its ability to maintain its competitive position in areas
such as technology, performance, price, brand identity, quality, reliability,
distribution and customer service and support, and its ability to continue to
introduce new products that respond to technological change and market demand
in a timely manner.

<PAGE>

WAVETEK WANDEL GOLTERMANN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The accompanying consolidated financial statements include the operations of
the Company and its wholly-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation. Certain
items in the prior years have been reclassified to conform with the current
year presentation.

FOREIGN CURRENCY

The accounts of foreign subsidiaries consolidated herein have been translated
from their respective functional currencies into U.S. dollars based on the
current exchange rates at the end of the period for the balance sheet and an
average rate for the period on the statements of operations. Cumulative
translation adjustments are included as a separate component of stockholders'
equity as "Other Comprehensive Income." Exchange gains and losses from
foreign currency transactions are included in "Other (income) expense, net"
in the accompanying consolidated statements of operations.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. These estimates include, among other things, assessing the
collectibility of accounts receivable, the use and recoverability of
inventory, costs of future product returns under warranty and provisions for
contingencies expected to be incurred. Actual results could differ from
those estimates.

CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS, AVAILABLE FOR SALE

The carrying amounts reported in the consolidated balance sheets for cash and
cash equivalents approximate their fair values. As part of the Company's
cash management program, the Company invests in highly liquid investments,
primarily investment grade commercial paper, U.S. Treasury Securities,
guaranteed obligations of the U.S. government or its agencies, mutual funds
which invest in U.S. Treasury Securities, preferred stock and municipal
bonds. The interest and dividend rates on these securities are reset on a
frequent basis. In accordance with Statement of Financial Accounting
Standards ("SFAS") No. 115, ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND
EQUITY SECURITIES, these securities are classified as "available-for-sale"
securities. The Company held no available-for-sale securities as of
September 30, 1999 and 1998. For purposes of financial statement
presentation, the Company considers all highly liquid investments with
original maturities of three months or less to be cash equivalents. The
Company evaluates the financial strength of the institutions in which
significant investments are made and believes that related credit risk is
limited to an acceptable level.

INVENTORIES

Inventories are valued at cost determined on the first-in, first-out basis,
not in excess of market. Costs include direct material, labor and
manufacturing overhead.

Inventories consist of the following:

SEPTEMBER 30,
---------------------------
1999 1998
---------- --------
(IN THOUSANDS)
<S> <C> <C>
Materials....................... $13,997 $19,217
Work-in-progress................ 18,172 21,469
Finished goods.................. 30,346 34,200
------- -------
$62,515 $74,886
======= =======
</TABLE>

<PAGE>

WAVETEK WANDEL GOLTERMANN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are recorded at cost. Depreciation for
financial statement purposes is computed using the straight-line method based
upon the estimated useful lives of the various classes of assets which range
from 3 to 50 years for buildings and improvements and from 3 to 10 years for
fixtures and equipment.

Property, plant and equipment consists of the following:

SEPTEMBER 30,
---------------------------
1999 1998
---------- --------
(IN THOUSANDS)
<S> <C> <C>
Land........................... $ 4,750 $ 6,073
Building and improvements...... 47,468 52,699
Fixtures and equipment......... 104,178 107,626
-------- --------
156,396 166,398
Less: accumulated depreciation
and amortization.............. (95,821) (99,801)
-------- -------
$ 60,575 $ 66,597
======== ========
</TABLE>

INTANGIBLE ASSETS

The Company has various intangible assets which include the excess of
purchase price over net tangible assets of businesses acquired (goodwill),
acquired core technologies, as well as other intangible assets. All the
values and lives were based on independent appraisals.

Goodwill represents the amount by which the purchase price of businesses
acquired exceeds the fair market value of the net tangible and identifiable
intangible assets acquired under the purchase method of accounting associated
with three acquisitions: the Exchange Transaction, WGTI (See Note 3), and STS
(See Note 3). Goodwill associated with these acquisitions is being amortized
on a straight-line basis over fifteen (15) years for the Exchange Transaction
and five (5) years for WGTI and STS.

Acquired core technologies was recorded in connection with the acquisitions
of WGTI ($3.3 million) and STS ($2.6 million) as well as the Exchange
Transaction ($84.1 million). The amortization period in connection with the
acquisitions of WGTI and STS is five (5) years and for the Exchange
Transaction is ten (10) years.

Other intangible assets include assembled work force associated with the
Exchange Transaction and WGTI, deferred financing costs associated with the
multi-currency and senior subordinated notes described in Note 5, and a
patent license. These intangible assets are being amortized over five (5)
to fifteen (15) years.

<PAGE>

WAVETEK WANDEL GOLTERMANN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Intangible assets consist of the following:

SEPTEMBER 30,
---------------------------
1999 1998
---------- --------
(IN THOUSANDS)
<S> <C> <C>
Goodwill............................ $ 71,016 $ 69,802
Less accumulated amortization...... (7,187) (739)
Acquired core technologies.......... 90,032 90,032
Less accumulated amortization...... (10,277) (660)
Other............................... 36,648 29,537
Less accumulated amortization...... (17,750) (9,297)
--------- ---------
$162,482 $178,675
========= =========
</TABLE>

The Company, at each balance sheet date, evaluates the recoverability of the
carrying amount of its intangible assets if circumstances suggest that it has
been impaired. If this review indicates that the value of the intangible
assets is not recoverable, as principally determined based on the estimated
undiscounted cash flows of the entity which gave rise to the intangible
asset, over the remaining amortization period, then the Company's carrying
value of the intangible asset would be reduced by the estimated shortfall in
cash flows.

IMPAIRMENT OF LONG-LIVED ASSETS

The Company, at each balance sheet date, evaluates the recoverability of the
carrying amount of its long-lived assets in accordance with SFAS no. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of." If this review indicates that the value of such assets
is not recoverable over the remaining amortization period, then the Company's
carrying value of the asset would be reduced based upon the estimated fair
value.

DEBT INSTRUMENTS

The carrying amounts of the Company's debt instruments approximate their fair
values. The fair value of the Company's debt instruments is estimated using
discounted cash flow analyses, based on the Company's current incremental
borrowing rates for similar types of borrowing arrangements.

REVENUE AND CREDIT RISK

The Company recognizes revenues when the following four criteria are met as
specified in the AICPA's Statement of Position No. 97-2, "Software Revenue
Recognition": (1) Persuasive evidence of an arrangement exists, (2) Delivery
has occurred, (3) The vendor's fee is fixed or determinable, and (4)
Collectibility is probable. These criteria are normally met at the time of
shipment to the customer. Service revenues are recognized as services are
performed. The Company accrues related product return reserves and warranty
expenditures, as products shipped include a one-year warranty, at the time of
sale.

The Company grants credit to its customers based on an evaluation of the
customers' financial condition and generally collateral is not required.
Credit losses have traditionally been minimal and within management's
expectations.

<PAGE>

WAVETEK WANDEL GOLTERMANN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NET INCOME (LOSS) PER SHARE

Effective October 1, 1997 the Company adopted SFAS No. 128, EARNINGS PER
SHARE. SFAS No. 128 replaced the calculation of primary and fully diluted
net income (loss) per share with basic and diluted net income (loss) per
share. Net income (loss) per share - basic is based only on net income (loss)
of the Company and the weighted average number of common shares outstanding.
Net income (loss) per share - diluted includes the dilutive effect of the
Company's outstanding stock options in the calculation of the number of
weighted average number of common shares outstanding. The Company has a
simple capital structure and, accordingly, the only difference in the
Company's computations of basic and diluted net income (loss) per share is
the dilutive effect of outstanding stock options. For the fiscal year ended
September 30, 1999, the effect of outstanding stock options would have been
anti-dilutive and, therefore, was not considered in the computation of
diluted loss per share for such periods. All net income (loss) per share
amounts for all periods have been presented, and where necessary, restated to
conform to the requirements of SFAS No. 128.

STOCK-BASED COMPENSATION

In 1996, the Company adopted SFAS No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION, which allows companies to either account for stock-based
compensation under the new provisions of SFAS No. 123 or under the provisions
of APB No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, but requires pro
forma disclosure in the footnotes to the consolidated financial statements as
if the measurement provisions of SFAS No. 123 had been adopted. The Company
has continued accounting for its stock-based compensation in accordance with
the provisions of APB 25. See Note 6 for discussion of SFAS No. 123
disclosures.

DERIVATIVE FINANCIAL INSTRUMENTS

The Company uses derivative financial instruments, primarily forward exchange
contracts and collars, in the ordinary course of business to mitigate its
exposure to changes in foreign currency exchange rates relating to cash,
accounts receivable, accounts payable, significant transactions and
anticipated future sales denominated in foreign currencies. The terms of
these contracts are generally less than one year. The Company also uses
interest rate cap agreements to mitigate its exposure to changes in interest
rates on variable interest rate debt instruments. The terms of such
agreements are generally in excess of one year. The Company's risk
management policies prohibit financial instruments to be used for trading
purposes. Gains and losses on financial instruments that qualify as hedges of
existing assets or liabilities or firm commitments are recognized in income
as adjustments of carrying amounts when the hedged transaction occurs.
Financial instruments that are not designated as hedges of specific assets,
liabilities, firm commitments or anticipated transactions are marked to
market and any resulting unrealized gains or losses are recorded in "other
(income) expense, net" in the accompanying consolidated statements of
operations. At September 30, 1999 and 1998, the Company had foreign exchange
contracts outstanding in an aggregate notional amount of $18.4 million and
$25.8 million, respectively. While it is not the Company's intention to
terminate any of these contracts, the estimated fair value of these contracts
indicated that termination of the forward currency exchange contracts at
September 30, 1999 and 1998 would have resulted in a gain of $0.1 million and
a loss of $0.6 million, respectively. Due to the volatility of currency
exchange rates, these estimated results may or may not be realized. At
September 30, 1999 and 1998, the Company had interest rate cap agreements
outstanding with notional values of $10.9 million and $8.9 million,
respectively, which had carrying values that approximated fair value.

<PAGE>

WAVETEK WANDEL GOLTERMANN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, as amended by
SFAS No. 137, an amendment to SFAS No. 133. This statement requires
companies to record derivatives on the balance sheet as assets and
liabilities, measured at fair value. Gains or losses resulting from changes
in the values of those derivatives would be accounted for depending on the
use of the derivative and whether it qualifies for hedge accounting. These
statements are not expected to have a material impact on the Company's
consolidated financial statements. This statement is effective for fiscal
years beginning after June 15, 2000, with earlier adoption encouraged. The
Company will adopt this accounting standard in fiscal 2001.

2. EXCHANGE TRANSACTION

On September 30, 1998, Wavetek and WG consummated the Exchange Transaction
whereby the stockholders of WG received 8,317,463 shares of Common Stock of
Wavetek valued by an independent appraisal at $38.7 million plus cash of 2.0
million Deutsche marks ($1.2 million) and WG became a subsidiary of Wavetek.
Following the Exchange Transaction, Wavetek was ultimately renamed Wavetek
Wandel Goltermann, Inc. The Exchange Transaction was accounted for as a
purchase of Wavetek by WG. Accordingly, the financial statements of the
Company included herein as of any date or for any period prior to September
30, 1998, are the historical financial statements of WG. In addition, the
historical stockholders' equity of the Company has been retroactively
restated to reflect the equivalent number of shares issued in connection with
the Exchange Transaction.

The purchase price of Wavetek, including expenses of the transaction, was
deemed to be $41.5 million and was allocated to the assets acquired and
liabilities assumed, based on their estimated fair values as determined by an
independent valuation. The fair value of assets acquired was $271.1 million,
including $56.7 million of goodwill which is being amortized over 15 years,
and liabilities assumed was $229.6 million. The Company allocated $11.8
million of the purchase price to in-process research and development projects
that had not reached technological feasibility, which the Company expensed at
the date of the Exchange Transaction.

In connection with the Exchange Transaction and related restructuring
activities, the Company recorded approximately $4.5 million of restructuring
and other non-recurring charges in fiscal 1998. This expense included
elimination of one duplicate product line, costs of consolidation of certain
sales and service operations, accounting and tax consulting charges and
severance payments.

3. ACQUISITIONS

PURCHASE OF THE MINORITY INTEREST IN WANDEL & GOLTERMANN TECHNOLOGIES, INC.

During fiscal 1997, the Company's ownership interests in its then
publicly-traded U.S. subsidiary, Wandel & Goltermann Technologies, Inc.
("WGTI"), was increased by the repurchases of common shares of WGTI on the
open market. The Company's ownership interest was increased from 57% as of
September 30, 1996, to 62% as of September 30, 1997. The total purchase cost
of shares acquired was $4.5 million and was accounted for as a purchase. The
Company allocated $1.4 million of the purchase price to in-process research
and development projects that had not reached technological feasibility,
which the Company expensed at the date of acquisition. In addition, $1.2
million of the purchase price was allocated to goodwill and other intangibles
and is being amortized over five years.

<PAGE>

WAVETEK WANDEL GOLTERMANN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On September 18, 1998, the Company purchased the remaining outstanding
minority interest in WGTI for $15.90 per share, or $32.3 million. The Company
allocated $14.3 million of the purchase price to in-process research and
development projects that had not reached technological feasibility, which
the Company expensed at the date of acquisition. In addition, $11.5 million
of the purchase price was allocated to goodwill and other intangibles and is
being amortized over five years. In connection with the acquisition of WGTI,
the Company incurred non-recurring charges of $4.8 million in fiscal 1998.
These costs included $3.4 million of stock option compensation, $0.9 million
of severance expenses and $0.5 million of legal and consulting expenses
incurred by WGTI.

PURCHASE OF DIGITAL TRANSPORT SYSTEMS, INC.

On September 30, 1998, Wavetek U.S. Inc., a U.S. subsidiary of the Company,
acquired privately-held Digital Transport Systems, Inc. ("DTS"), a digital
broadcast test equipment company based in San Diego, California. Under the
terms of the acquisition, Wavetek U.S. Inc. acquired all of the outstanding
stock of DTS for an initial payment of $1.1 million, plus subsequent fixed
and contingent payments for four years after the acquisition. The Company
accounted for the transaction as a purchase and the assets acquired and the
liabilities assumed were recorded at their estimated fair values aggregating
$0.5 million and $0.9 million, respectively. In addition, $1.5 million of
the purchase price was allocated to in-process research and development
projects that had not reached technological feasibility, which the Company
charged to expense on the acquisition date. Fixed payments are due November
15, 1999, 2000, 2001 and 2002 of $0.5 million, $0.4 million, $0.4 million and
$0.4 million, respectively. Contingent payments, based upon future annual
sales of DTS, are also due annually for the next four years in amounts
between $0.2 million and $0.5 million. All subsequent payments are being
expensed as incurred and are not material to the Company.

PURCHASE OF SWITCHING TEST SOLUTIONS AG

In fiscal 1997, the Company purchased 40% of the outstanding capital stock of
Switching Test Solutions AG, ("STS") for $2.0 million. The Company allocated
$0.3 million of the purchase price to in-process research and development
projects that had not reached technological feasibility, which the Company
expensed at the date of acquisition. In addition, $0.6 million of the
purchase price was allocated to goodwill and other intangibles and is being
amortized over five years. This investment was accounted for using the equity
method of accounting in fiscal 1997.

At the beginning of fiscal 1998, the Company purchased the remaining 60%
interest in STS for a purchase price of $6.5 million. The Company allocated
$1.4 million of the purchase price to in-process research and development
projects that had not reached technological feasibility, which the Company
expensed at the date of acquisition. In addition, $3.3 million of the
purchase price was allocated to goodwill and other intangibles and is being
amortized over five years. The accounts and results of STS have been included
in the Company's consolidated financial statements from the date of the
acquisition of the remaining 60% interest.

In February 1998, the Company sold 400 shares, or 10%, of the common stock of
STS to the new CEO of the Company for a purchase price of $0.8 million, which
was paid in April 1998. In connection with this transaction, the CEO and two
principal owners and directors of the Company entered into put and call
options related to the shares sold to the CEO. In September 1998, the two
shareholders exercised the call options and purchased the shares of common
stock of STS held by the CEO. Subsequently, the Company purchased these
shares from the two principal owners for $0.8 million in cash. The Company
allocated $0.1 million of the purchase price to in-process research and
development projects that had not reached

<PAGE>

WAVETEK WANDEL GOLTERMANN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

technological feasibility, which the Company expensed at the date of
acquisition. In addition, $0.3 million of the purchase price has been
allocated to goodwill and other intangibles and is being amortized over five
years.

OTHER ACQUISITIONS

In January 1998, the Company acquired privately-held Tinwald Networking
Technologies Inc. ("Tinwald"), an Ontario Canada-based developer of software
analysis tools. Under the terms of the transaction, the Company acquired all
of the outstanding common stock of Tinwald for an initial payment of
approximately $5.0 million, plus the possibility of contingent payments for
up to three years after the acquisition. The Company accounted for the
transaction as a purchase. The purchase price was allocated to the assets
acquired and liabilities assumed based on their estimated fair values as
determined by an independent valuation. The fair value of tangible assets
acquired was approximately $1.6 million and liabilities assumed was
approximately $0.3 million. In addition, approximately $3.9 million of the
purchase price was allocated to in-process research and development projects
that had not reached technological feasibility, which the Company expensed at
the date of the acquisition. The remainder of the purchase price, including
expenses related to the purchase, of $0.3 million has been allocated to
goodwill and is being amortized over five years.

In March 1998, the Company acquired the assets of privately held Network
Intelligence, Inc. ("NI"), a California-based developer of network
performance management software. Under the terms of the transaction, the
Company acquired all of the assets of NI for an initial payment of $1.3
million. The Company accounted for the transaction as a purchase. The total
purchase price of approximately $1.5 million, including expenses related to
the purchase, was allocated to in-process research and development projects
that had not reached technological feasibility, which the Company expensed at
the date of the acquisition.

The following unaudited pro forma information presents a summary of
consolidated results of operations as if the Exchange Transaction and the
acquisitions of WGTI, STS, Tinwald and NI had all occurred as of the
beginning of each period presented:

FOR THE YEAR ENDED
SEPTEMBER 30,
-------------------
1998 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Revenues............................... $469,773 $437,485
Loss before extraordinary items........ (51,542) (45,781)
Net loss............................... (56,053) (50,292)
Net loss per share..................... $ (4.25) $ (3.81)
</TABLE>

The unaudited pro forma results have been prepared for comparative purposes
only and include certain adjustments, such as additional amortization expense
as a result of goodwill and other intangible assets. They do not purport to
be indicative of the results of operations which would have resulted had the
combinations been consummated on the first day of each period presented. In
addition, the pro forma results are not intended to be a projection of future
results of operations of the consolidated entities.

<PAGE>

WAVETEK WANDEL GOLTERMANN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. NOTES PAYABLE

Notes payable are as follows:

<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------
1998 1997
------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Notes payable - banks............... $17,148 $112,685
Notes payable - other............... 362 400
------- --------
Total............................. $17,510 $113,085
======= ========
</TABLE>

At September 30, 1998, $59.6 million of the notes payable to banks was
outstanding, as described in Note 5 below, in connection with the Bank
Pooling Agreement. These amounts were repaid in January 1999.

On September 30, 1998, the Company borrowed money from two German banks,
aggregating $29.7 million, at interest rates ranging from 5.0625% to 6.7%, on
an unsecured basis in order to repay the New Credit Agreement, as defined
below. These amounts were repaid on January 4, 1999.

Certain of the Company's foreign subsidiaries have agreements with banks
providing for short-term revolving advances and overdraft facilities in an
aggregate total amount of approximately $17.9 million. At September 30, 1999
and 1998, aggregate amounts of $6.0 million and $19.0 million, respectively,
had been borrowed under these facilities. Revolving borrowings under these
agreements bear interest at variable rates ranging from 2.1875% to 7.0% as of
September 30, 1999. Certain of these bank agreements also provide for
long-term borrowings and are generally secured by the assets of the local
subsidiary and the guarantee of the Company. Most of these agreements do not
have stated expiration dates, but are cancelable by the banks at any time. At
September 30, 1999, the Company was contingently liable for outstanding
letters of credit and bank guarantees aggregating $7.4 million.

<PAGE>

WAVETEK WANDEL GOLTERMANN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5. LONG-TERM BORROWINGS

Long-term obligations are as follows:

<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------
1998 1997
------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Senior Subordinated Notes; total principal
balance due June 15, 2007; interest payable
semi-annually on June 15 and December 15
at 10.125%......................................... $ 85,000 $ 85,000

Multi-Currency Revolving Credit Facility and
Bilateral Ancillary Facilities due December 2000;
interest payable over variable periods at LIBOR
plus 1.5% (7.58% and 7.46% for three and six
month loans, respectively, at September 30,
1999)............................................... 118,352 -

Term loan payable to banks, interest was payable
at LIBOR plus 2.5% (8.125%)......................... - 24,000

Term loans payable to banks under Bank Pooling
Agreement; payable in quarterly installments
through 2011; interest payable at rates set on
dates of borrowing ranging from 5.5% to 7.75%;
secured by certain inventories, trade
Receivables, fixed assets and other assets of
the Company and the share capital of certain
subsidiaries.......................................... - 20,906

Term loans payable to banks; payable in semi-annual
installments through 2007; interest ranging from
3.5% to 6.95%; secured by mortgages on certain
facilities............................................ 23,840 12,617

Credit facilities with banks with various maturity
dates; interest rates ranging from 4.12% to 10.5%
payable semi-annually................................. 3,524 4,735

Unsecured non-interest bearing promissory note
recorded at present value on issuance date at
implied interest rate of 8.1875%; issued in
connection with license of technology; payable in
six annual installments of $0.8 million commencing
January 1999.......................................... 2,944 3,685

Other obligations..................................... 625 874
-------- --------
Total long-term obligations........................... 234,285 151,817
Less: current maturities.............................. (6,202) (30,222)
-------- --------
Long-term obligations, less current maturities........ $228,083 $121,595
======== ========
</TABLE>

43
<PAGE>
WAVETEK WANDEL GOLTERMANN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of September 30, 1999, the future annual principal payments on long-term
obligations outstanding at September 30, 1999, were as follows (in thousands):

<S> <C>
2000........................................................ $ 6,202
2001........................................................ 118,049
2002........................................................ 4,326
2003........................................................ 4,259
2004........................................................ 3,029
Thereafter.................................................. 98,422
--------
Total long-term obligations................................. 234,285
Less: current portion....................................... (6,202)
--------
$228,083
========
</TABLE>

On June 11, 1997, Wavetek issued $85.0 million in aggregate principal amount of
Senior Subordinated Notes (the "Notes") pursuant to an Indenture (the
"Indenture") between the Company and the Bank of New York, as trustee. The Notes
bear interest at 10.125%, payable semi-annually on each June 15 and December 15.
The total principal balance of the Notes is due June 15, 2007. On or after June
15, 2002, the Notes will be redeemable at the option of the Company, in whole or
in part, at the following redemption prices (expressed as percentages of
principal amount) plus accrued and unpaid interest and liquidated damages, if
any; 105.063% if redeemed during the twelve-month period beginning on June 15,
2002; 103.375% if redeemed during the twelve-month period beginning on June 15,
2003; 101.688% if redeemed during the twelve month period beginning of June 15,
2004, and 100% thereafter. Notwithstanding the foregoing, during the first three
years following the issue date of the Notes, the Company may redeem up to 33
1/3% of the aggregate principal amount of the Notes with the proceeds of one or
more public equity offerings, as defined in the Indenture, at a redemption price
of 110.125% of the principal amount thereof, in each case plus accrued and
unpaid interest and liquidated damages, if any. The Notes are guaranteed on a
senior subordinated basis by the Company's current and future subsidiaries in
the United States. The Indenture requires the Company to comply with various
affirmative and negative covenants. The Company believes it was in compliance
with all such covenants at September 30, 1999. The fair market value of the
Notes was $71.0 million as of December 20, 1999.

In June 1997, Wavetek also entered into a credit agreement with a group of five
lending banks (the "Lenders") including DLJ Capital Funding Inc. as Syndication
Agent and Fleet National Bank as Administrative Agent. The Company had $24.0
million outstanding under the term facility and $4.8 million outstanding under
the revolving credit facility at September 30, 1998; which was repaid on October
2, 1998 with the proceeds from the proceeds of unsecured short-term loans from
two German banks (see Note 4). Accordingly, all such amounts were classified as
current liabilities in the accompanying consolidated balance sheet as of
September 30, 1998. This facility was superceded by the Credit Facility
described below.

In November 1997, WG and one of its German subsidiaries entered into a
collateral pooling agreement with six banks (the "Bank Pooling Agreement"). The
collateral pooling agreement had an indefinite term, however, it could be
terminated by either party with a notice period of three months prior to the end
of any calendar quarter, but not before December 31, 1998. In January 1999, the
Company repaid the outstanding amounts with proceeds from the issuance of the
Credit Facility, defined below. The Bank Pooling Agreement provided for term
loans and revolving credit facilities up to a maximum of approximately $116
million at terms and interest rates negotiated at the date of each borrowing.
Under the Bank Pooling Agreement, the Company had short-term borrowings
outstanding of $59.6 million at September 30, 1998 which has been classified as
"Notes payable to banks." The short-term borrowings bore interest rates ranging
from 5.5% to 7.75% at

<PAGE>

WAVETEK WANDEL GOLTERMANN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 1998. The Bank Pooling Agreement was secured by certain
inventories, trade receivables, fixed assets and other assets of WG and the
share capital of certain of its subsidiaries. This facility was superceded by
the Credit Facility described below.

In December 1998, the Company entered into a Facilities Agreement, due December
2000, in relation to a Multi-Currency Revolving Credit Facility and Bilateral
Ancillary Facilities (the "Credit Facility") with a syndicate of four German
banks, providing for revolving borrowings, letters of credit and bank guarantees
aggregating up to a maximum amount of 280 million Deutsche marks ($152.7 million
at September 30, 1999). The Credit Facility, which was amended on May 28, 1999
to reduce the interest coverage ratio, as defined in the Credit Facility,
includes a commitment fee of 0.25% of the daily average unutilized portion of
the Credit Facility, and requires proceeds from certain transactions to repay
the Exceeding Amount, as defined in the Credit Facility. The Credit Facility has
a two-year term and all borrowings thereunder bear interest at LIBOR plus 0.9%
through May 31, 1999 and at LIBOR plus 1.5% thereafter. Borrowings under the
Credit Facility are secured by the pledge of 65% of the shares of Wavetek Wandel
Goltermann GmbH, a subsidiary of the Company. In addition, a $45.0 million
tranche of the Credit Facility, which refinanced and replaced the previously
existing bank credit facility of Wavetek, is guaranteed by a U.S. subsidiary of
the Company. The Credit Facility, as amended, requires the Company to comply
with certain covenants and maintain certain minimum financial ratios. The
Company was in compliance with all requirements of the Credit Facility, as
amended, at September 30, 1999. The Company pledged 65% of WG shares and $45.0
million related to WGTI as guarantees. At September 30, 1999, the Company had
drawn $118.3 million under the Credit Facility, as amended, and $33.2 million
was available for future borrowings. In January 1999, additional amounts were
borrowed under the Credit Facility to refinance certain bank debt at the
Company's subsidiaries, and certain bank guarantees were provided under the
Credit Facility to secure other subsidiary bank borrowings.

6. STOCKHOLDERS' EQUITY

In September 1998, the Company increased its authorized capital stock to 55
million shares, of which 50 million shares were designated as Common Stock and 5
million shares were designated as Preferred Stock. Previously, the Company had
authorized capital stock of 15 million shares, all of which was designated as
Common Stock. All authorized shares have a par value of $.01 per share. No
preferred stock has been issued by the Company.

No dividends were declared or paid in fiscal 1999. In fiscal 1998, the Company
declared dividends of $3.6 million of which $2.0 million was paid in cash, $0.7
million was paid as a decrease to notes receivable from related parties and $0.9
million was paid as an increase to long-term obligations to related parties. In
fiscal 1997, the Company declared dividends of $2.0 million of which $1.2
million was paid in cash, $0.4 million was paid as a decrease to notes
receivable from related parties and $0.4 million was paid as an increase to
long-term obligations to related parties.

Prior to the Exchange Transaction, Wavetek had, and immediately following the
Exchange Transaction, the Company had 513,298 options outstanding under the
Company's Amended and Restated Stock Option Plan ("the Stock Option Plan") at
prices ranging from $1.25 to $17.91 per share and which expire through 2009.
Under the Stock Option Plan, options to purchase an aggregate of up to 1,320,232
shares of Common Stock may be issued at an exercise price equal to the fair
value of the shares at the date of grant. The Stock Option Plan provides for the
issuance of both incentive and non-qualified stock options. Options may be
granted under the Stock Option Plan through August 1, 2008, generally vest and
become exercisable over three to four years, and have a ten (10) year term.

<PAGE>

WAVETEK WANDEL GOLTERMANN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A summary of stock option activity is as follows:

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
SHARES EXERCISE PRICE
-------- --------------
<S> <C> <C>
Outstanding at September 30, 1997........................... -- --
Options of Wavetek.......................................... 513,298 $10.48
Grants...................................................... -- --
Exercises................................................... -- --
Cancellations............................................... -- --
-------
Outstanding at September 30, 1998........................... 513,298 10.48
Grants...................................................... 477,263 14.50
Exercises................................................... -- --
Cancellations............................................... (110,352) 13.51
-------
Outstanding at September 30, 1999........................... 880,209 12.28
=======
Weighted average fair value of options granted during
1999...................................................... $ 2.92
</TABLE>

Exercise prices and weighted average remaining contractual lives for the options
outstanding under the Stock Option Plan as of September 30, 1999 are as follows:

OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- --------------------------------------------------------------------------- ---------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
NUMBER OF REMAINING AVERAGE NUMBER OF AVERAGE
OPTIONS CONTRACTUAL EXERCISE OPTIONS EXERCISE
EXERCISABLE PRICES OUTSTANDING LIFE (YEARS) PRICE EXERCISABLE PRICE
- ----------------------------- ------------ ------------ --------- ----------- --------
<S> <C> <C> <C> <C> <C>
$1.25 -- $2.57 121,750 3.86 $ 1.71 121,750 $ 1.71
$5.21 105,750 5.77 $ 5.21 60,500 $ 5.21
$12.50 -- $14.50 472,493 9.24 $14.44 82,752 $14.31
$17.91 180,216 7.95 $17.91 93,658 $17.91
----------- -----------
$1.25 -- $17.91 880,209 7.82 $12.28 358,660 $ 9.44
=========== ===========
</TABLE>

As of September 30, 1999, options have a weighted average remaining contractual
life of approximately 7.82 years. Options to purchase 358,660 shares were
exercisable and 420,023 shares are available for future grant under the Stock
Option Plan.

The Company uses APB Opinion No. 25 to account for all stock-based employee
compensation arrangements, however, SFAS No. 123 requires pro forma
information to be disclosed regarding the amount of net income (loss)
determined as if the Company had accounted for its employee stock options
under the fair value method prescribed by SFAS No. 123. For the purpose of
determining such pro forma net income, the fair value of these options was
estimated as of the date of grant using the Black-Scholes option pricing
model with the following assumptions for 1999: risk-free interest rate of
4.49%, no annual dividends and an expected option life of five years. The pro
forma effects of applying SFAS No. 123 to options granted in fiscal 1999 on
the Company's net loss and basic and diluted net loss per share, are $(0.3)
million and $(0.02), respectively. There are no pro forma effects of applying
SFAS No. 123 to net income (loss) and net income (loss) per share in fiscal
1998 and 1997.

<PAGE>

WAVETEK WANDEL GOLTERMANN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. OTHER COMPREHENSIVE INCOME (LOSS)

On October 1, 1998, the Company adopted SFAS No. 130, REPORTING COMPREHENSIVE
INCOME, which established standards for reporting and displaying comprehensive
loss and its components in a financial statement that is displayed with the same
prominence as other financial statements. Comprehensive loss includes net loss
and other comprehensive income (loss). The Company's current and accumulated
other comprehensive income (loss) as of the year ended September 30, 1999, 1998
and 1997 is comprised solely of foreign currency translation adjustments and is
included in the Statements of Stockholders' Equity.

Comprehensive income (loss) is as follows:

<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
------------------------------
1999 1998 1997
-------- -------- --------
(IN THOUSANDS)

<S> <C> <C> <C>
Net income (loss)........................................... $(7,996) $(27,267) $ 7,058
Foreign currency translation adjustments.................... 519 (1,895) 3,623
------- -------- -------
Comprehensive income (loss)................................. $(7,477) $(29,162) $10,681
======= ======== ========
</TABLE>

8. INCOME TAXES

The provision (benefit) for income taxes is comprised as follows:

<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
------------------------------
1999 1998 1997
-------- -------- --------
(IN THOUSANDS)

<S> <C> <C> <C>
Federal:
Current................................................... $ - $ (866) $ (123)
Deferred.................................................. (3,818) (2,151) 57
------- ------ ------
(3,818) (3,017) (66)
------- ------ ------

State:
Current.................................................. 191 -- 73
Deferred................................................. 132 -- (7)
------- ------ ------
323 -- 66
------- ------ ------

Foreign:
Current................................................... 6,179 5,429 2,812
Deferred.................................................. (5,766) 4,129 4,550
------- ------ ------
413 9,558 7,362
------- ------ ------

Total provision (benefit) for income taxes.................. $(3,082) $6,541 $7,362
======= ====== ======
</TABLE>

<PAGE>

WAVETEK WANDEL GOLTERMANN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The reconciliation of income taxes computed at the U.S. federal statutory tax
rate to income tax provision (benefit) is as follows:

<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER
30,
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Federal income tax at statutory rate........................ (35.0)% (35.0)% 35.0%
State income taxes, net of federal tax benefit.............. 7.8 -- 0.5
Foreign tax rate differential............................... (10.2) 6.3 10.3
Benefit from foreign sales corporation...................... -- -- (1.1)
Acquired in--process research and development and
amortization of goodwill.................................. 28.5 45.8 --
Recognition of tax loss carryforwards....................... (19.8) -- --
Other, net.................................................. 4.3 (1.6) (0.5)
----- ----- -----
(24.4) 15.5 44.2
Changes in valuation allowance.............................. (3.4) 9.8 6.2
----- ----- -----
Effective income tax rate................................... (27.8)% 25.3% 50.4%
===== ===== =====
</TABLE>

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities as of September 30, 1999 and
1998 are set forth in the following table.

The significant components of deferred tax assets and liabilities at September
30, 1999 and 1998 result from:

<TABLE>
<CAPTION>
1999 1998
-------- --------
(IN THOUSANDS)

<S> <C> <C>
Deferred tax assets:
Inventories............................................... $ 5,908 $ 6,845
Accrued and unpaid expenses............................... 2,426 6,508
Property, plant and equipment............................. 2,641 1,138
Intangible assets......................................... 1,870 3,089
Pension plans............................................. 2,414 3,253
Tax credit carryforwards.................................. 3,562 3,179
Net operating loss carryforwards.......................... 32,543 24,707
Other..................................................... 377 946
------- -------
Total deferred tax assets................................... 51,741 49,665
Deferred tax liabilities:
Intangible assets......................................... (34,847) (39,736)
Property, plant and equipment............................. (1,157) (1,480)
Pension plans............................................. -- (1,551)
Other..................................................... -- (233)
------- -------
Total deferred tax liabilities.............................. (36,004) (43,000)
------- -------
Valuation allowance......................................... (14,772) (15,152)
------- -------
Net deferred tax assets (liabilities)....................... $ 965 $(8,487)
======= =======
</TABLE>

<PAGE>

WAVETEK WANDEL GOLTERMANN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of September 30, 1999, the Company's German subsidiaries had net operating
loss carryforwards of approximately $56.2 million, which can be used
indefinitely. The Company's U.S. subsidiaries had net operating loss
carryforwards of approximately $16.2 million and tax credit carryforwards of
approximately $2.6 million which can be used through 2019, subject to certain
restrictions on amounts which may be used in each year. The Company's French
subsidiaries had net operating loss carryforwards of approximately $4.4 million
which expire on various dates during the next five years. The Company's other
various worldwide subsidiaries have net operating loss carryforwards of
approximately $8.6 million which expire on various dates beyond the next five
years.

The Company establishes valuation allowances in accordance with the provisions
of SFAS No. 109, ACCOUNTING FOR INCOME TAXES. Management believes sufficient
uncertainty exists regarding the realizability of deferred tax assets that a
valuation allowance is required. The Company continually reviews the adequacy of
the valuation allowance and is recognizing these benefits only as reassessment
indicates that it is more likely than not that the benefits will be realized.

9. RETIREMENT BENEFITS

DEFINED BENEFIT PLANS

The Company sponsors several qualified and non-qualified pension plans for its
employees. For those Company employees participating in defined benefit plans,
benefits are generally based upon years of service and compensation or stated
amounts for each year of service. Assets of the various pension plans consist
primarily of managed funds that have underlying investments in stocks and bonds.
The Company's policy for funded plans is to make contributions equal to or
greater than the requirements prescribed by law in each country.

The following table provides a reconciliation of the changes in the plans'
benefits obligations for the years ended September 30, 1999 and 1998:

<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------
1999 1998
-------- --------
(DOLLARS IN THOUSANDS)

<S> <C> <C>
Obligation at October 1................................... $49,743 $40,557
Service cost.............................................. 1,688 3,116
Interest cost............................................. 3,024 2,739
Actuarial gain/loss....................................... 2,656 912
Foreign currency exchange rate changes.................... 111 2,466
Benefits paid............................................. (2,204) (1,785)
Plan amendments........................................... -- 1,738
Business combinations..................................... 72 --
------- -------
Obligation at September 30................................ $55,090 $49,743
======= =======
</TABLE>

<PAGE>

WAVETEK WANDEL GOLTERMANN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table provides a reconciliation of the changes in the fair value
of assets under the benefits plans for the years ended September 30, 1999 and
1998:

<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------------
1999 1998
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Fair value of plan assets at October 1.................... $10 ,984 $ 11,603
Actual return on plan assets.............................. 3,462 (623)
Foreign currency exchange rate changes.................... 113 (384)
Employer contributions.................................... 775 640
Benefits paid............................................. (347) (252)
Business combinations..................................... 73 --
Divestitures.............................................. (101) --
-------- --------
Fair value of plan assets at September 30................. $ 14,959 $ 10,984
======== ========
</TABLE>

The following table represents a statement of the funded status for the years
ended September 30, 1999 and 1998:

<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------------
1999 1998
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net amount recognized..................................... $(35,671) $(35,511)
Unrecognized net gain/loss................................ (4,459) (3,248)
---------- ----------
Funded status............................................. $(40,130) $(38,759)
========== ==========
</TABLE>

The following table provides the amounts recognized in the consolidated balance
sheets as of September 30, 1999 and 1998:

<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------------
1999 1998
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Prepaid benefit cost...................................... $ 805 $ 736
Accrued benefit liability................................. (36,476) (36,247)
-------- --------
Net amount recognized..................................... $(35,671) $(35,511)
======== ========
</TABLE>

The following table provides the components of the net periodic benefit cost for
the plans for the years ended September 30, 1999 and 1998:

<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------------
1999 1998
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Service cost.............................................. $ 1,688 $ 3,116
Interest cost............................................. 3,024 2,739
Expected return of plan assets............................ (1,097) (623)
Amortization of net gain/loss............................. 179 --
-------- --------
Net periodic pension cost................................. $ 3,794 $ 5,232
======== ========
</TABLE>

<PAGE>

WAVETEK WANDEL GOLTERMANN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The assumptions used in the measurement of the Company's benefit obligation are
shown in the following table as of September 30, 1999 and 1998:

Weighted average assumptions as of:

<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------
1999 1998
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Discount rate............................................. 6.5% 6.3%
Expected return on plan assets............................ 7.5 7.5
Rate of compensation increase............................. 1.0 3.9
</TABLE>

DEFINED CONTRIBUTION PLANS

In certain countries, the Company's employees participate in Company sponsored
defined contribution plans. Contributions by the Company to these plans were
$1.4 million, $0.8 million and $0.7 million in fiscal 1999, 1998 and 1997,
respectively.

10. SEGMENT AND GEOGRAPHIC INFORMATION

The Company adopted SFAS No. 131, "DISCLOSURE ABOUT SEGMENTS OF AN ENTERPRISE
AND RELATED INFORMATION," as of September 30, 1999. SFAS No. 131 establishes
annual and interim reporting standards for an enterprise's operating segment and
related disclosures about its products, services, geographic areas and major
customers.

Based on its organizational structure, the Company operates in two reportable
segments: communications test and other test products. The Company's reportable
segments represent business units that primarily offer similar products and
services. The Company's communications test business includes Telecom Networks,
Enterprise Networks, Multimedia, Wireless and the Service business. Other test
products include Test Tools, Precision Measurement Instruments and
electromagnetic measurement instruments.

The Company's chief operating decision makers utilize revenue and operating
income (loss) information, as defined below, in assessing performance and making
overall operating decisions and resource allocations.

The accounting policies of the segments are the same as those described in the
summary of significant accounting policies.

51
<PAGE>

WAVETEK WANDEL GOLTERMANN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Information about the Company's operating segments for the fiscal year ended
September 30, 1999 is as follows (in thousands):

ASSETS:
Total assets from reportable segments................... $ 187,502 $ 10,351 $ 154,905 $ 352,758
Elimination of receivables from corporate............... (58,076) (3,602) -- (61,678)
----------- --------- --------- ---------
129,426 6,749 154,905 291,080
Unallocated goodwill.................................... -- -- 53,860 53,860
Unallocated acquired core technologies.................. -- -- 74,290 74,290
Unallocated other intangibles........................... -- -- 15,503 15,503
----------- --------- --------- ---------
Total assets.......................................... $ 129,426 $ 6,749 $ 298,558 $ 434,733
=========== ========= ========= =========
Capital expenditures...................................... $ 15,382 $ 954 $ 424 $ 16,760

DEPRECIATION AND AMORTIZATION:
Depreciation............................................ 11,596 719 686 13,002
Amortization of intangible assets....................... 5,306 329 16,830 22,466
</TABLE>

- ------------------------
Notes:

(2) Per consolidated statement of operations.

52
<PAGE>

WAVETEK WANDEL GOLTERMANN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Information about the Company's operating segments for the fiscal year ended
September 30, 1998 is as follows (in thousands):

<TABLE>
<CAPTION>
COMMUNICATIONS OTHER TEST
TEST PRODUCTS CORPORATE TOTAL
----------------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Revenues from external customers........................ $ 318,745 $ 9,061 $ 82 $ 327,888
Intersegment revenues................................... 37,289 -- -- 37,289
Elimination of intersegment revenues.................... (37,289) -- -- (37,289)
----------- --------- --------- ---------
Total revenues........................................ $ 318,745 $ 9,061 $ 82 $ 327,888
=========== ========= ========= =========
OPERATING INCOME (LOSS):
Operating income (loss) on reportable segments(1)....... $ 28,464 $ (200) $ 1,972 $ 30,236
Amortization of intangible assets....................... 1,182 -- -- 1,182
Acquired in-process research and development............ 21,125 -- 11,800 32,925
Restructuring and other non-recurring charges........... 9,369 -- -- 9,369
Elimination of intersegment profits..................... -- -- 1,116 1,116
----------- --------- --------- ---------
Operating income (loss) (2)........................... (3,212) (200) (10,944) (14,356)
Net interest expense:
Interest (revenue).................................... (580) (16) (381) (977)
Interest expense...................................... 3,938 112 3,579 7,629
----------- --------- --------- ---------
Net interest expense.................................. 3,358 96 3,198 6,652
Other (income) expense, net............................. (1,969) (126) 6,909 4,814
----------- --------- --------- ---------
Income (loss) before provision (benefit) for income taxes
and minority interest in income (loss).................. $ (4,601) $ (170) $ (21,051) $ (25,822)
=========== ========= ========= =========
ASSETS:
Total assets from reportable segments................... $ 218,421 $ 9,856 $ 145,335 $ 373,612
Elimination of receivables from corporate............... (43,759) (1,242) -- (45,001)
----------- --------- --------- ---------
174,662 8,614 145,335 328,611
Unallocated goodwill.................................... -- -- 56,789 56,789
Unallocated acquired core technologies.................. -- -- 84,100 84,100
Unallocated other intangibles........................... -- -- 15,024 15,024
----------- --------- --------- ---------
Total assets.......................................... $ 174,662 $ 8,614 $ 301,248 $ 484,524
=========== ========= ========= =========
Capital expenditures...................................... $ 9,902 $ 514 $ -- $ 10,207

DEPRECIATION AND AMORTIZATION:
Depreciation............................................ 7,434 211 -- 7,645
Amortization of intangible assets....................... 1,182 -- -- 1,182
</TABLE>

- ------------------------
Notes:

(1) Operating income (loss) on reportable segments is defined by management as
operating income (loss), including intersegment profits, and excluding
amortization of intangible assets, acquired in-process research and
development and restructuring and other non-recurring charges.

(2) Per consolidated statement of operations.

<PAGE>

WAVETEK WANDEL GOLTERMANN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Information about the Company's operating segments for the fiscal year ended
September 30, 1997 is as follows (in thousands):

<TABLE>
<CAPTION>
COMMUNICATIONS OTHER TEST
TEST PRODUCTS TOTAL
----------------- ----------- ---------
<S> <C> <C> <C>
REVENUES:
Revenues from external customers..................................... $ 274,135 $ 7,752 $ 281,887
Intersegment revenues................................................ 29,944 847 30,791
Elimination of intersegment revenues................................. (29,944) (847) (30,791)
----------- --------- ---------
Total revenues..................................................... $ 274,135 $ 7,752 $ 281,887
=========== ========= =========

OPERATING INCOME (LOSS):
Operating income (loss) on reportable segments(1).................... $ 23,233 $ 570 $ 23,803
Amortization of intangible assets.................................... 1,346 -- 1,346
Acquired in-process research and development......................... 1,743 -- 1,743
----------- --------- ---------
Operating income (loss) (2)........................................ 20,144 570 20,714
Net interest expense:
Interest (revenue)................................................. (1,566) (44) (1,610)
Interest expense................................................... 8,275 234 8,509
----------- --------- ---------
Net interest expense............................................. 6,709 190 6,899
Other (income) expense, net.......................................... (768) (22) (790)
----------- --------- ---------
Income (loss) before provision (benefit) for income taxes and minority
interest in income (loss)............................................ $ 14,203 $ 402 $ 14,605
=========== ========= =========

ASSETS:
Total assets from reportable segments................................ $ 211,752 $ 5,988 $ 217,740
Unallocated goodwill................................................. -- -- 4,468
----------- --------- ---------
Total assets....................................................... $ 211,752 $ 5,988 $ 222,208
=========== ========= =========
Capital expenditures................................................... $ 9,099 $ 257 $ 9,356

DEPRECIATION AND AMORTIZATION:
Depreciation......................................................... 8,689 246 8,935
Amortization of intangible assets.................................... 1,346 -- 1,346
</TABLE>

- ------------------------
Notes:

(1) Operating income (loss) on reportable segments is defined by management as
operating income (loss), excluding amortization of intangible assets and
acquired in-process research and development.

(2) Per consolidated statement of operations.

<PAGE>

WAVETEK WANDEL GOLTERMANN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
----------------------------------------
1999 1998 1997
------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net sales:
Europe................................................................ $ 231,494 $ 176,437 $ 148,037
Canada, Mexico, Central and South America............................. 76,281 69,725 62,922
Asia-Pacific.......................................................... 71,933 44,258 40,417
United States......................................................... 117,550 37,468 30,511
------------ ------------ ------------
Consolidated net sales.................................................. $ 497,258 $ 327,888 $ 281,887
============ ============ ============
Income (loss) before provision (benefit) for income taxes and
minority interest in income (loss):
Europe................................................................ $ 17,361 $ 14,871 $ 28,056
Canada, Mexico, Central and South America............................. (232) 131 1,668
Asia-Pacific.......................................................... 726 864 (203)
United States......................................................... (28,090) (38,495) (1,329)
Eliminations.......................................................... (843) (3,193) (13,587)
------------ ------------ ------------
Consolidated income (loss) before provision (benefit) for income
taxes and minority interest in income (loss)........................ $ (11,078) $ (25,822) $ 14,605
============ ============ ============
Total assets:
Europe................................................................ $ 421,078 $ 515,203 $ 364,722
Canada, Mexico, Central and South America............................. 24,927 26,174 12,786
Asia-Pacific.......................................................... 21,493 14,341 14,095
United States......................................................... 424,741 263,101 42,432
Eliminations.......................................................... (457,506) (334,295) (211,827)
------------ ------------ ------------
Consolidated total assets............................................... $ 434,733 $ 484,524 $ 222,208
============ ============ ============
</TABLE>

<PAGE>

WAVETEK WANDEL GOLTERMANN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11. COMMITMENTS AND CONTINGENCIES

LEASE COMMITMENTS

The Company rents certain facilities under operating leases. The leases
generally provide that the Company pay the taxes, insurance and maintenance
expenses related to the leased property. Certain leases include renewal options
and/or options to purchase the leased property. The Company also rents equipment
and other facilities on a month-to-month basis. Total rent expense was $8.2
million, $5.8 million, and $4.4 million for fiscal 1999, 1998 and 1997,
respectively.

In 1991, Wavetek entered into a sale/leaseback arrangement for its San Diego
manufacturing facility with an affiliate of a major stockholder. The lease runs
through June 2006 with the minimum annual rental of $0.6 million, subject to
annual consumer price index adjustments. The original gain on the transaction
was deferred and is being amortized over the original ten-year lease term.

The Company's U.S. corporate headquarters located in North Carolina and the
office and manufacturing facilities of two of the Company's U.S. subsidiaries
are leased from a partnership affiliated with certain major stockholders of the
Company. Under these leases, which expire on September 30, 2005 and 2010, annual
rent of $1.2 million is payable in monthly installments and is adjusted annually
for changes in the consumer price index.

At September 30, 1999, the annual future minimum lease payments under
noncancelable operating leases and the future minimum annual lease receipts
under noncancelable subleases are as follows:

<TABLE>
<CAPTION>
LEASE LEASE
PAYMENTS RECEIPTS
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
2000.................................... $ 8,989 $ 484
2001.................................... 7,890 492
2002.................................... 5,084 492
2003.................................... 4,420 492
2004.................................... 4,306 492
Later years............................. 18,872 82
--------- ---------
Total minimum lease payments............ $ 49,561 $ 2,534
========= =========
</TABLE>

LITIGATION AND OTHER CLAIMS

The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. It is management's opinion that the likely
outcome of any such proceedings and claims would not have a material adverse
effect on the Company's future results of operations or financial position.

In May 1999, the Company resolved its dispute with certain beneficial owners of
the Company's 10.125% Senior Subordinated Notes due 2007 arising from the
Exchange Transaction. The Company made a cash payment to the holders of the
Notes and entered into a supplemental indenture with the Trustee providing for
amendments to the Indenture under which the Notes were issued. In connection
with such agreement, the Company will become obligated to pay $2.125 million to

<PAGE>

WAVETEK WANDEL GOLTERMANN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

certain holders of the Notes on June 30, 2000, in cash or additional notes, in
the event that the Company does not consummate an initial public offering
producing gross cash proceeds in excess of $75 million by such date.

12. RELATED PARTY TRANSACTIONS

At September 30, 1999 and 1998, the Company had unsecured notes payable to
stockholders of $10.7 million and $12.3 million, respectively. These
obligations bear interest at 7.75%, payable quarterly, and are due at the
earlier of an initial public offering of the Company's Common Stock or
December 2000. The Company recorded interest expense related to these
obligations of $0.8 million, $0.8 million and $0.9 million, in 1999, 1998 and
1997, respectively.

The Company leases its facility in Research Triangle Park, North Carolina,
including its corporate headquarters and the facilities of its subsidiaries
Wandel & Goltermann Technologies, Inc. and Wandel & Goltermann ATE Systems,
Inc., from a partnership which is owned by a member of the Company's board of
directors and his children, who are all also shareholders of the Company, and
certain other family members. Under the leases, which expire in September
2005 and September 2010, annual rent of $1.5 million is payable in monthly
installments and is adjusted annually for changes in the consumer price index.

The Company leases its headquarters for its local area network and Test Tools
business in San Diego, California from a corporation controlled by the
co-chairman of the Company's board of directors for an annual rent of $0.6
million, plus annual consumer price index adjustments, not to exceed 3% per
annum. The lease expires in June 2006.

The Company leases certain offices and manufacturing facilities in Eningen,
Germany for one of its German subsidiaries from the mother of the co-chairman
of the Company's board of directors. The Company paid annual rent of $0.3
million under the lease, which was terminated in July 1999.

In February 1998, the Company sold 400 shares, or 10%, of the common stock of
its then wholly-owned subsidiary Switching Test Solutions AG ("STS") to the
Company's president and chief executive officer for a purchase price of $0.8
million, which was paid in April 1998. In connection with this transaction,
the president and chief executive officer, a member of the Company's board of
directors, and a co-chairman of the Company's board of directors and
shareholder, entered into put and call options related to the shares sold to
the president and chief executive officer. In September 1998, a member of the
Company's board of directors and a co-chairman of the Company's board of
directors exercised the call options and purchased the shares of STS held by
the Company's president and chief executive officer. Subsequently, the
Company purchased these shares from a member of the Company's board of
directors and a co-chairman of the Company's board of directors for $0.8
million.

<PAGE>

WAVETEK WANDEL GOLTERMANN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA

The Company's payment obligations under the Notes are guaranteed by all of the
Company's current and future domestic subsidiaries (collectively, the
"Subsidiary Guarantors"). WGTI and Wandel & Goltermann ATE Systems, Inc., which
became Subsidiary Guarantors upon completion of the Exchange Transaction, are
shown as Subsidiary Guarantors for all periods presented. Wavetek U.S. Inc. and
its subsidiary, Digital Transport Systems, Inc., are also Subsidiary Guarantors.
Such guarantees are full and unconditional and joint and several. Separate
financial statements of the Subsidiary Guarantors are not presented because the
Company's management has deemed that they would not be material to investors.
The following supplemental condensed consolidating financial data sets forth, on
an unconsolidated basis, balance sheets, statements of operations and statements
of cash flows data for (i) the Company (Wavetek Wandel Goltermann, Inc.,
formerly Wavetek Corporation, issuer of the Notes), (ii) the current Subsidiary
Guarantors and (iii) the Company's foreign subsidiaries (the "Foreign
Subsidiaries"). The supplemental financial data reflects the investments of the
Company in the Subsidiary Guarantors and the Foreign Subsidiaries using the
equity method of accounting.

58
<PAGE>
WAVETEK WANDEL GOLTERMANN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATING BALANCE SHEETS
AS OF SEPTEMBER 30, 1999
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
WAVETEK
WANDEL
GOLTERMANN, SUBSIDIARY FOREIGN
INC. GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------ ----------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............. $ 11 $ 4,578 $ 12,500 $ -- $ 17,089
Accounts receivable (less allowance for
doubtful accounts of $4,608)......... 42,956 46,715 87,312 (74,451) 102,532
Inventories............................ -- 13,884 52,388 (3,757) 62,515
Deferred income taxes.................. 561 4,482 3,879 -- 8,922
Other current assets................... 156 1,917 11,563 -- 13,636
---------- --------- ---------- ---------- ---------
Total current assets..................... 43,684 71,576 167,642 (78,208) 204,694
Property, plant and equipment, net....... 1,361 8,013 51,201 -- 60,575
Intangible assets, net................... 5,617 110,170 46,695 -- 162,482
Investment in subsidiaries............... 167,992 -- -- (167,992) --
Other non-current assets................. 6 1,988 4,988 -- 6,982
---------- --------- ---------- ---------- ---------
Total assets............................. $ 218,660 $ 191,747 $ 270,526 $ (246,200) $ 434,733
========== ========= ========== ========== =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable.......................... $ -- $ -- $ 17,510 $ -- $ 17,510
Long-term obligations - current........ -- 685 5,517 -- 6,202
Long-term obligations to related
parties - current.................... -- -- 10,721 -- 10,721
Trade payables......................... 17,236 17,322 61,873 (64,882) 31,549
Accrued compensation................... 396 6,734 19,496 -- 26,626
Income taxes payable................... (18,986) 18,978 4,258 -- 4,250
Other current liabilities.............. 4,516 5,786 28,536 -- 38,838
---------- --------- ---------- ---------- ---------
Total current liabilities................ 3,162 49,505 147,911 (64,882) 135,696
Long-term obligations - non-current...... 198,080 7,784 31,695 (9,476) 228,083
Pension liabilities...................... -- -- 35,671 -- 35,671
Deferred income taxes.................... (519) 19,953 (11,477) -- 7,957
Other non-current liabilities............ -- 4,088 5,301 -- 9,389
---------- --------- ---------- ---------- ---------
Total liabilities........................ 200,723 81,330 209,101 (74,358) 416,796
---------- --------- ---------- ---------- ---------
Commitments and contingencies
Stockholders' equity:
Common stock........................... 132 -- -- -- 132
Additional paid-in capital............. 72,948 171,121 87,187 (258,308) 72,948
Accumulated deficit.................... (65,641) (60,682) (36,282) 96,964 (65,641)
Other comprehensive income (loss)...... 10,498 (22) 10,520 (10,498) 10,498
---------- --------- ---------- ---------- ---------
Total stockholders' equity............... 17,937 110,417 61,425 (171,842) 17,937
---------- --------- ---------- ---------- ---------
Total liabilities and stockholders'
equity................................. $ 218,660 $ 191,747 $ 270,526 $ (246,200) $ 434,733
========== ========= ========== ========== =========
</TABLE>

59
<PAGE>
WAVETEK WANDEL GOLTERMANN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATING BALANCE SHEETS
AS OF SEPTEMBER 30, 1998
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
WAVETEK
WANDEL
GOLTERMANN, SUBSIDIARY FOREIGN
INC. GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------ ----------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............. $ 19 $ 31,143 $ 4,382 $ -- $ 35,544
Accounts receivable (less allowance for
doubtful accounts of $4,432)......... 8,710 27,364 81,907 (25,700) 92,281
Inventories............................ -- 18,033 59,942 (3,089) 74,886
Deferred income taxes.................. 3,592 4,408 9,095 -- 17,095
Other current assets................... 1,244 1,884 9,608 -- 12,736
---------- --------- ---------- ---------- ---------
Total current assets..................... 13,565 82,832 164,934 (28,789) 232,542
Property, plant and equipment, net....... 1,611 8,015 56,971 -- 66,597
Intangible assets, net................... 7,953 120,428 50,294 -- 178,675
Investment in subsidiaries............... 143,579 -- 29,932 (173,511) --
Other assets............................. 213 2,763 3,794 (60) 6,710
---------- --------- ---------- ---------- ---------
Total assets............................. $ 166,921 $ 214,038 $ 305,925 $ (202,360) $ 484,524
========== ========= ========== ========== =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable.......................... $ 34,463 $ 373 $ 78,249 $ -- $ 113,085
Long-term obligations - current........ 24,000 741 5,481 -- 30,222
Long-term obligations to related
parties - current.................... -- -- 11,746 -- 11,746
Trade payables......................... 4,003 20,322 35,845 (22,558) 37,612
Accrued compensation................... 714 5,478 19,715 -- 25,907
Income taxes payable................... (10,839) 9,978 6,817 -- 5,956
Other current liabilities.............. 3,683 8,967 30,986 (1,788) 41,848
---------- --------- ---------- ---------- ---------
Total current liabilities................ 56,024 45,859 188,839 (24,346) 266,376
Long-term obligations - non-current...... 85,000 4,299 33,711 (1,415) 121,595
Pension liabilities...................... -- -- 35,511 -- 35,511
Deferred income taxes.................... 238 25,156 188 - 25,582
Other non-current liabilities............ 245 2,142 7,659 - 10,046
---------- --------- ---------- ---------- ---------
Total liabilities........................ 141,507 77,456 265,908 (25,761) 459,110
---------- --------- ---------- ---------- ---------
Commitments and contingencies
Stockholders' equity:
Common stock........................... 132 -- -- -- 132
Additional paid-in capital............. 72,948 168,071 85,153 (253,224) 72,948
Accumulated deficit.................... (57,645) (31,463) (55,115) 86,578 (57,645)
Other comprehensive income (loss)...... 9,979 (26) 9,979 (9,953) 9,979
---------- --------- ---------- ---------- ---------
Total stockholders' equity............... 25,414 136,582 40,017 (176,599) 25,414
---------- --------- ---------- ---------- ---------
Total liabilities and stockholders'
equity................................. $ 166,921 $ 214,038 $ 305,925 $ (202,360) $ 484,524
========== ========= ========== ========== =========
</TABLE>

60
<PAGE>
WAVETEK WANDEL GOLTERMANN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1999
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
WAVETEK
WANDEL
GOLTERMANN, SUBSIDIARY FOREIGN
INC. GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------ ----------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Net sales................................ $ -- $ 158,576 $ 392,999 $ (54,317) $ 497,258
Cost of goods sold....................... 39 76,419 181,924 (53,649) 204,733
---------- --------- ---------- ---------- ---------
Gross margin............................. (39) 82,157 211,075 (668) 292,525
Operating expenses:
Marketing and selling.................. 1,801 38,574 106,012 -- 146,387
Research and development............... -- 22,506 48,933 -- 71,439
General and administrative............. 2,809 11,218 28,047 -- 42,074
Amortization of intangible assets...... 136 12,189 7,642 -- 19,967
Provisions for restructuring and other
non-recurring charges................ 286 296 1,797 -- 2,379
---------- --------- ---------- ---------- ---------
Total operating expenses............. 5,032 84,783 192,431 -- 282,246
---------- --------- ---------- ---------- ---------
Operating income (loss).................. (5,071) (2,626) 18,644 (668) 10,279
Other (income) expense, net:
Interest income........................ (1,187) (227) (450) 1,187 (677)
Interest expense....................... 14,468 737 6,947 (1,187) 20,965
Equity in net income (loss) of
subsidiaries......................... (4,866) -- -- 4,866 --
Other, net............................. (563) 79 1,553 -- 1,069
---------- --------- ---------- ---------- ---------
Total other (income) expense, net 7,852 589 8,050 4,866 21,357
---------- --------- ---------- ---------- ---------
Income (loss) before provision
(benefit) for income taxes........... (12,923) (3,215) 10,594 (5,534) (11,078)
Provision (benefit) for income taxes..... (4,927) 3,745 (1,633) (267) (3,082)
---------- --------- ---------- ---------- ---------
Net income (loss)........................ $ (7,996) $ (6,960) $ 12,227 $ (5,267) $ (7,996)
========== ========= ========== ========== =========
</TABLE>

61
<PAGE>
WAVETEK WANDEL GOLTERMANN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1998
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
WAVETEK WANDEL SUBSIDIARY FOREIGN
GOLTERMANN, INC. GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------------- ----------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Net sales................................ $ -- $ 59,261 $ 305,916 $ (37,289) $ 327,888
Cost of goods sold....................... -- 32,278 137,680 (39,095) 130,863
--------- --------- ---------- ---------- ---------
Gross margin............................. -- 26,983 168,236 1,806 197,025
Operating expenses:
Marketing and selling.................. -- 17,181 78,157 -- 95,338
Research and development............... -- 13,891 33,839 -- 47,730
General and administrative............. -- 5,281 19,556 -- 24,837
Amortization of intangible assets...... -- -- 1,182 -- 1,182
Acquired in-process research and
development.......................... -- 24,342 8,583 -- 32,925
Provisions for restructuring and other
non-recurring charges................ -- 4,820 4,549 -- 9,369
--------- --------- ---------- ---------- ---------
Total operating expenses............. -- 65,515 145,866 -- 211,381
--------- --------- ---------- ---------- ---------
Operating income (loss).................. -- (38,532) 22,370 1,806 (14,356)
Other (income) expense, net: --
Interest income........................ -- (351) (807) 181 (977)
Interest expense....................... -- 181 7,629 (181) 7,629
Other, net............................. -- 133 4,681 -- 4,814
--------- --------- ---------- ---------- ---------
Total other (income) expense, net -- (37) 11,503 -- 11,466
--------- --------- ---------- ---------- ---------
Income (loss) before provision
(benefit) for income taxes and
minority interest in income (loss)... -- (38,495) 10,867 1,806 (25,822)
Provision (benefit) for income taxes..... -- (3,017) 9,558 -- 6,541
Minority interest in income (loss)....... -- -- 124 (5,220) (5,096)
--------- --------- ---------- ---------- ---------
Net income (loss)........................ $ -- $ (35,478) $ 1,185 $ 7,026 $ (27,267)
========= ========= ========== ========== =========
</TABLE>

62
<PAGE>
WAVETEK WANDEL GOLTERMANN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
WAVETEK WANDEL SUBSIDIARY FOREIGN
GOLTERMANN, INC. GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------------- ----------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Net sales................................ $ -- $ 61,302 $ 258,945 $ (38,360) $ 281,887
Cost of goods sold....................... -- 27,311 125,944 (39,443) 113,812
--------- --------- ---------- ---------- ---------
Gross margin............................. -- 33,991 133,001 1,083 168,075
Operating expenses:
Marketing and selling.................. -- 15,870 66,817 -- 82,687
Research and development............... -- 12,510 24,812 -- 37,322
General and administrative............. -- 5,324 18,939 -- 24,263
Amortization of intangible assets...... -- -- 1,346 -- 1,346
Acquired in-process research and
development.......................... -- 1,401 342 -- 1,743
--------- --------- ---------- ---------- ---------
Total operating income............... -- 35,105 112,256 -- 147,361
--------- --------- ---------- ---------- ---------
Operating income (loss).................. -- (1,114) 20,745 1,083 20,714
Other (income) expense, net:
Interest income........................ -- (639) (1,094) 123 (1,610)
Interest expense....................... -- 123 8,509 (123) 8,509
Other, net............................. -- 217 (1,007) -- (790)
--------- --------- ---------- ---------- ---------
Total other (income) expense, net.... -- (299) 6,408 -- 6,109
--------- --------- ---------- ---------- ---------
Income (loss) before provision for
income taxes and minority interest in
income............................... -- (815) 14,337 1,083 14,605
Provision for income taxes............... -- -- 7,362 -- 7,362
Minority interest in income.............. -- -- -- 185 185
--------- --------- ---------- ---------- ---------
Net income (loss)........................ $ -- $ (815) $ 6,975 $ 898 $ 7,058
========= ========= ========== ========== =========
</TABLE>

63
<PAGE>
WAVETEK WANDEL GOLTERMANN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, 1999
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
WAVETEK
WANDEL
GOLTERMANN, SUBSIDIARY FOREIGN
INC. GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------ ----------- ------------ ----------------- -------------
<S> <C> <C> <C> <C> <C>
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES............................. $ (26,343) $ 20,955 $ 9,700 $ -- $ 4,311
INVESTING ACTIVITIES
Purchase of property, plant and
equipment............................ (483) (3,928) (12,349) -- (16,760)
Proceeds from sale of property, plant
and equipment........................ -- -- 1,977 -- 1,977
Transfer of subsidiaries............... (28,536) -- 28,536 -- --
---------- --------- ---------- --------- -----------
Net cash provided by (used in)
investing activities............... (29,019) (3,928) 18,164 -- (14,783)
FINANCING ACTIVITIES
Proceeds from revolving lines of credit
and long-term obligations............ 126,475 6,464 79,772 -- 212,711
Principal payments on revolving lines
of credit and long-term
obligations.......................... (71,859) (6,837) (139,963) -- (218,659)
Dividend from subsidiary to Wavetek
Wandel Goltermann, Inc............... 22,000 (22,000) -- -- --
Capital contribution from Wavetek
Wandel Goltermann, Inc. to
subsidiary........................... (4,215) -- 4,215 -- --
Loans to subsidiaries from Wavetek
Wandel Goltermann, Inc............... (62,195) 8,738 53,457 -- --
Repayment of loan from subsidiary to
Wavetek Wandel Goltermann, Inc....... 53,320 (29,196) (24,124) -- --
Repayment of loans from subsidiaries... (7,500) (1,818) 9,318 -- --
Other, net............................. (672) 1,057 (1,057) -- (672)
---------- --------- ---------- --------- -----------
Net cash provided by (used in)
financing activities............... 55,354 (43,592) (18,382) -- (6,620)
Effect of exchange rate changes on cash
and cash equivalents................... -- -- (1,363) -- (1,363)
---------- --------- ---------- --------- -----------
Increase (decrease) in cash and cash
equivalents............................ (8) (26,565) 8,118 -- (18,455)
Cash and cash equivalents at beginning of
period................................. 19 31,143 4,382 -- 35,544
---------- --------- ---------- --------- -----------
Cash and cash equivalents at end of
period................................. $ 11 $ 4,578 $ 12,500 $ -- $ 17,089
========== ========= ========== ========= ===========
</TABLE>

64
<PAGE>
WAVETEK WANDEL GOLTERMANN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, 1998
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
WAVETEK WANDEL SUBSIDIARY FOREIGN
GOLTERMANN, INC. GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES............................. $ -- $ (7,100) $ 20,522 $ 8,500 $ 21,922
INVESTING ACTIVITIES:
Purchases of businesses, net of cash
acquired............................. -- (39,182) (6,025) -- (45,207)
Cash acquired in connection with the
Exchange Transaction................. 19 30,438 872 -- 31,329
Purchase of short-term investments..... -- (41,100) -- -- (41,100)
Proceeds from sale of short-term
investments.......................... -- 41,100 -- -- 41,100
Purchase of property, plant and
equipment............................ -- (1,779) (8,637) -- (10,416)
Other, net............................. -- 302 6,416 -- 6,718
--------- --------- --------- --------- ---------
Net cash provided by (used in)
investing activities............... 19 (10,221) (7,374) -- (17,576)
FINANCING ACTIVITIES:
Proceeds from revolving lines of credit
and long-term obligations............ -- 1,455 54,786 -- 56,241
Principal payments on revolving lines
of credit and long-term
obligations.......................... -- (1,087) (34,560) -- (35,647)
Capital contributions from the Company
to subsidiaries...................... -- 34,695 (34,695) -- --
Cash dividends paid to stockholders.... -- -- (2,043) -- (2,043)
Other, net............................. -- -- 3,106 -- 3,106
--------- --------- --------- --------- ---------
Net cash provided by (used in)
financing activities............... -- 35,063 (13,406) -- 21,657
Effect of exchange rate changes on cash
and cash equivalents................. -- -- 141 -- 141
--------- --------- --------- --------- ---------
Increase (decrease) in cash and cash
equivalents.......................... 19 17,742 (117) 8,500 26,144
Cash and cash equivalents at beginning
of year.............................. -- 13,401 4,499 (8,500) 9,400
--------- --------- --------- --------- ---------
Cash and cash equivalents at end
of year.............................. $ 19 $ 31,143 $ 4,382 $ -- $ 35,544
========= ========= ========= ========= =========
</TABLE>

65
<PAGE>
WAVETEK WANDEL GOLTERMANN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
WAVETEK WANDEL SUBSIDIARY FOREIGN
GOLTERMANN, INC. GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
NET CASH PROVIDED BY OPERATING
ACTIVITIES............................. $ -- $ 3,411 $ 22,602 $ (8,500) $ 17,513
INVESTING ACTIVITIES:
Purchase of businesses, net of cash
acquired............................. (6,658) (6,658)
Purchase of short-term investments..... -- (76,160) -- -- (76,160)
Proceeds from sale of short-term
investments.......................... -- 76,160 -- -- 76,160
Purchase of property, plant and
equipment............................ -- (1,728) (7,628) -- (9,356)
Other, net............................. -- 1,413 3,609 -- 5,022
--------- --------- --------- --------- ---------
Net cash used in investing
activities......................... -- (315) (10,677) -- (10,992)
FINANCING ACTIVITIES:
Proceeds from revolving lines of credit
and long-term obligations............ -- -- 1,961 -- 1,961
Principal payments on revolving lines
of credit and long-term
obligations.......................... -- -- (12,084) -- (12,084)
Cash dividends paid to stockholders.... -- (1,188) -- (1,188)
Other, net............................. -- -- 63 -- 63
--------- --------- --------- --------- ---------
Net cash used in financing
activities......................... -- -- (11,248) -- (11,248)
Effect of exchange rate changes on cash
and cash equivalents................... -- -- (289) -- (289)
--------- --------- --------- --------- ---------
Increase (decrease) in cash and cash
equivalents............................ -- 3,096 388 (8,500) (5,016)
Cash and cash equivalents at beginning of
year................................... -- 10,305 4,111 -- 14,416
--------- --------- --------- --------- ---------
Cash and cash equivalents at end of
year................................... $ -- $ 13,401 $ 4,499 $ (8,500) $ 9,400
========= ========= ========= ========= =========
</TABLE>

66
<PAGE>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES

There were no changes in and disagreements with Accountants on Accounting and
Financial Disclosures during the fiscal year ended September 30, 1999.

PART III

ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT

Set forth below is certain information regarding each director and executive
officer of the Company:

NAME AGE POSITION
- ----------------------------- ----- ---------------------------------------------------------------------------
<S> <C> <C>
Terence J. Gooding (1)(3) 65 Co-Chairman of the Board
Albrecht Wandel (1)(2)(3) 55 Co-Chairman of the Board
Peter M. Wagner (1) 46 President, Chief Executive Officer and Director
Ben J. Constantini 56 Executive Vice President, Sales
Joseph A. Budano 38 Senior Vice President - North American Operations
Wolfgang Schuster 49 Senior Vice President - European Operations
Jean-Philippe Dara 44 Senior Vice President - Human Resources
Karl-Heinz Eisemann 49 Executive Vice President, Chief Financial Officer, Treasurer and Secretary
Sir Malcolm Bates (2) 65 Director
Frank Goltermann 71 Director
Peter J. Nolan (3) 41 Director
Susan C. Schnabel (2) 37 Director
Joachim Simmross 58 Director
Gerhard Zeidler 63 Director
</TABLE>

- ----------------
Notes:
(1) Member of the Executive Committee; Mr. Gooding is Chairman of this
committee
(2) Member of the Audit Committee; Sir Malcolm Bates is Chairman of this
committee.
(3) Member of the Compensation Committee; Mr. Wandel is Chairman of this
committee

The following are biographies of the Company's executive officers and directors:

TERENCE J. GOODING, CO-CHAIRMAN OF THE BOARD. In June 1991, Dr. Gooding
formed a holding company to acquire Wavetek. Dr. Gooding served as Chairman
and Chief Executive Officer of Wavetek until September 30, 1998. Dr. Gooding
became Co--Chairman of the Company following the completion of the Exchange
Transaction on September 30, 1998. Dr. Gooding is also Chairman and Chief
Executive Officer of Grass Valley Group, Inc., a video production equipment
company since September 1999. Dr. Gooding has been involved in the
management of technology companies since 1965 when he formed Maxwell
Laboratories, which today is a successful defense contractor. Dr. Gooding
was President of Kratos (1971--1979), Chairman of the Board of Cambridge
Instruments and Leica plc (1979--1990), and President of Picker International
(1981--1986).

<PAGE>

ALBRECHT WANDEL, CO-CHAIRMAN OF THE BOARD. Albrecht Wandel became a director
and Co--Chairman of the Company on September 30, 1998. Mr. Wandel served as
a Managing Director of WG from October 1974 to September 1998 and as
President and Chief Executive Officer from October 1990 to February 1998.
Mr. Wandel has been a member of the Supervisory Board of WG since March 1998.

PETER M. WAGNER, PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR. Peter M.
Wagner was named President, Chief Executive Officer and director of the
Company on September 30, 1998. Mr. Wagner served as President, Chief
Executive Officer and Managing Director of WG from February 1998 to September
1998, as Executive Vice President, Chief Operating Officer and Managing
Director of WG from October 1995 to February 1998 and as Vice President,
Sales and Marketing from March 1995 to October 1995. From January 1990 to
February 1995, Mr. Wagner was General Manager of the Line Transmission
Systems Division of Alcatel SEL AG in Stuttgart, Germany.

BEN J. CONSTANTINI, EXECUTIVE VICE PRESIDENT, SALES. Ben J. Constantini
joined Wavetek in June 1991 with responsibility for worldwide sales and
customer service. Prior to joining Wavetek, Mr. Constantini was President of
North American Operations for Leica, plc. Mr. Constantini was also Senior
Vice President, Sales for Picker International, District Sales Manager for
Siemens Medical Systems, Inc. and spent ten years with General Motors in
various management positions.

JOSEPH A. BUDANO, SENIOR VICE PRESIDENT - NORTH AMERICAN OPERATIONS - Joseph
A. Budano was named Vice-President - North American Operations of the Company
on August 1, 1999. Mr. Budano joined Wavetek in April 1994 as the General
Manager of the Cable TV Division in Indianapolis. In June 1996, Mr. Budano
was promoted to Senior Vice-President, North American Operations with
responsibility for Wavetek's Cable TV, LAN and Test Tools Division. Prior to
joining Wavetek, Mr. Budano worked at The Boston Consulting Group as a
Management Consultant (1991-1994) and Motorola in engineering and
engineering management for the Land Mobile Products Sector (1983-1990).

WOLFGANG SCHUSTER, SENIOR VICE PRESIDENT - EUROPEAN OPERATIONS - Wolfgang
Schuster was named Vice-President - European Operations on August 1, 1999.
Beginning in October 1995 to the present, Wolfgang Schuster is also the
Managing Director of the Commercial Center Eningen and the General Manager
for the Transport Division for the Company. From October 1992 to September
1995, Mr. Schuster was the Managing Director of Schiemann & Ruwel in
Pfullingen, Germany. Prior to that date, Mr. Schuster held various
management positions within WG, including the areas of engineering and
manufacturing.

JEAN-PHILIPPE DARA, SENIOR VICE PRESIDENT - HUMAN RESOURCES - Jean-Philippe
Dara joined WWG in February 1999. From September 1994 to January 1999, Mr.
Jean-Philippe Dara was employed by Disney Consumer Products, Europe Middle
East and Africa, first a Director, Human Resources (September 1994-October
1995) and then as Vice President, Human Resources.

KARL-HEINZ EISEMANN, EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER,
TREASURER AND SECRETARY. Mr. Eisemann was appointed Executive Vice President
and Chief Financial Officer in December 1999. Prior to that he was Senior
Vice-President - Controlling, Logistics and Information Technology,
Treasurer, Secretary and acting Chief Financial Officer since July 1999.
From September 1998 to July 1999, Mr. Eisemann was Senior Vice
President--Finance and Assistant Secretary. Mr. Eisemann served as Vice
President and Managing Director, Controlling, Logistics and Information
Technologies of WG from October 1997 through September 1998. From October
1995 to September 1997, Mr. Eisemann was the Chief Financial Officer of the
German division of WG. Prior to joining WG, Mr. Eisemann spent 22 years with
Alcatel SEL AG in Stuttgart, Germany serving in various financial positions.

SIR MALCOLM BATES, DIRECTOR. Sir Malcolm Bates became a director of the
Company in July 1997. Sir Malcolm Bates has been Chairman of Pearl Group
Ltd., an insurance company, since March 1996, Chairman of Premier Farnell
plc, a distributor of electronic components, since January 1997, and Chairman
of London Transport, a public transport business, since February

<PAGE>

1999. Sir Malcolm Bates was Deputy Managing Director of The General Electric
Company, p.l.c. ("GEC"), a position he held for twelve years until his
retirement in March 1997, having joined GEC as Senior Commercial Director in
January 1976. Sir Malcolm Bates serves on the board of directors of several
companies and is a member of the Advisory Board of Phoenix Equity Partners II
and III. Sir Malcolm Bates is also Deputy Chairman and Governor of The
University of Westminster.

FRANK GOLTERMANN, DIRECTOR. Frank Goltermann became a director of the
Company on September 30, 1998. Mr. Goltermann joined WG in 1966 and served
as a Managing Director of WG from 1980 until 1990, at which time he became
Chairman of the Advisory Board of WG. From October 1995 to February 1998,
Mr. Goltermann served as Vice--Chairman of the Supervisory Board of WG.

PETER J. NOLAN, DIRECTOR. Peter J. Nolan became a director of the Company in
June 1997. Mr. Nolan has been an executive officer and partner of Leonard
Green & Partners, L.P., a merchant banking firm which manages Green Equity
Investors, since April 1997. Since 1990, Mr. Nolan had previously been a
Managing Director of Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ") and Co--Head of DLJ's Los Angeles Investment Banking Division. Prior
to that date, Mr. Nolan was a First Vice President in corporate finance at
Drexel Burnham Lambert and a Vice President at Prudential Securities Inc.
Mr. Nolan is also a director of M2 Automotive, Inc. and Liberty Group
Publishing, Inc.

SUSAN C. SCHNABEL, DIRECTOR. Susan C. Schnabel became a director of the
Company on September 30, 1998. Ms. Schnabel has served as a Managing Director
of DLJ Merchant Banking Partners in the Los Angeles office of Donaldson,
Lufkin & Jenrette Securities Corporation since January 1998. From February
1997 to December 1997, Ms. Schnabel served as Chief Financial Officer of
PETsMART, a high growth specialty retailer of pet products and supplies.
From February 1990 to January 1997, Ms. Schnabel served in various capacities
at DLJ, including as a Managing Director of DLJ Securities Corporation. Ms.
Schnabel also serves as a Director of Dick's Clothing and Sporting Goods,
DeCrane Aircraft Holdings and Environmental Systems Products Holdings.

JOACHIM SIMMROSS, DIRECTOR. Joachim Simmross became a director of the
Company on September 30, 1998. Mr. Simmross has served as a director of
Hannover Finanz GmbH since 1984 and has served as a member of the Supervisory
Board of WG since October 1995. Mr. Simmross has also served as a director
of Hannover Finanz W&G Beteiligungsgesellschaft mbH since October 1995.

GERHARD ZEIDLER, DIRECTOR. Gerhard Zeidler became a director of the Company
on September 30, 1998. Prof. Zeidler has been Chairman and Chief Executive
Officer of DEKRA e.V. and DEKRA Holding AG, engineering service companies,
since January 1996. Since December 1995, Prof. Zeidler has served as Chairman
and Chief Executive Officer of Perot Systems Corp. Central Europe, an
information technology company. From 1989 to December 1995, Prof. Zeidler
was President and Chairman of the Board of Management of Alcatel SEL AG in
Stuttgart, Germany and a Vice President and Member of the Executive Committee
of Alcatel N.V.

BOARD OF DIRECTORS

Members of the Board of Directors serve until the next annual meeting of
Stockholders and until a successor has been elected and qualified. Pursuant
to the Stockholders Agreement, the members are designated as follows: (i)
one Director shall be appointed by the Wandel Stockholders (initially Mr.
Wandel); (ii) one Director shall be appointed by the Goltermann Stockholders
(initially Mr. Goltermann); (iii) one Director shall be appointed by Hannover
Finanz (initially Mr. Simmross); provided that if Hannover Finanz
beneficially owns less than 4% of the outstanding shares of Common Stock and
the Wandel Stockholders and the Goltermann Stockholders collectively
beneficially own at least 12% of the outstanding shares of Common Stock, such
Director shall be appointed jointly by the Wandel Stockholders and the
Goltermann Stockholders; (iv) one Independent Director shall be appointed
jointly by the Wandel Stockholders, the Goltermann Stockholders and Hannover
Finanz so long as either the Wandel Stockholders or the Goltermann
Stockholders beneficially own at least 4% of the outstanding shares of Common
Stock (initially Mr. Zeidler); (v) one Director and one Independent Director
shall be appointed by Dr. Gooding (initially Dr. Gooding and Mr. Bates); (vi)
one Director shall be appointed by DLJMB (initially Ms. Schnabel); (vii) one
Director shall be appointed by GEI (initially Mr. Nolan); and (viii) one
Director shall be the Chief Executive Officer (initially Mr. Wagner). There
are currently nine directors of the Company, each of whom is named under
"--Executive Officers and Directors."

The Company's Certificate of Incorporation contains a provision permitted
under the Delaware General Corporation Law (the "DGCL") eliminating each
director's personal liability for monetary damages for breach of fiduciary
duty as a director, except to the extent that such exemption from liability
or limitation thereof is not permitted under the DGCL as currently in effect
at the time. The Company's Bylaws authorize the Company to indemnify its
present and former directors, officers and employees against expenses,
judgements, fines and amounts paid in settlement if such person is or was a
director, officer, employee or agent of the Company, or was serving in such
position at another company at the request of the Company. Such
indemnification is mandatory in certain circumstances and permissive in
others, subject to authorization by the Company's Board of Directors. In
addition, the Bylaws authorize the Company to advance litigation expenses to
such person prior to the final disposition of the legal proceeding.

Pursuant to the Stockholders Agreement, Hannover Finanz is entitled to have a
non-voting observer at each Board of Directors meeting and Messrs. Wagner,
Goltermann, Simmross, Wandel and Zeidler are entitled to have an attorney
present.

BOARD COMMITTEES

The Board of Directors has three standing committees: an Executive Committee,
an Audit Committee and a Compensation Committee (together, the "Committees").
The Executive Committee, currently consisting of Messrs. Gooding (Chairman),
Wandel and Wagner, has the power to exercise all of the powers and authority
of the Board of Directors in the management of the business of the Company,
with certain exceptions. The Audit Committee, currently consisting of Messrs.
Bates (Chairman) and Wandel and Ms. Schnabel meets with the Company's
financial management and its independent auditors at various times during
each year, reviews internal control conditions, audit plans and results, and
makes recommendations to the Board of Directors concerning the Company's
engagement of independent auditors. The Compensation Committee,

<PAGE>

currently consisting of Messrs. Gooding, Nolan and Wandel (Chairman), reviews
and proposes to the Board of Directors compensation arrangements for directors
and officers of the Company.

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth the compensation paid in fiscal 1999, 1998 and
1997 to the Company's Chief Executive Officer, the Company's four other most
highly compensated executive officers (the "Named Executive Officers"), as well
as one additional individual, who left the Company prior to September 30, 1999,
who would have been a Named Executive Officer based upon his compensation:

SUMMARY COMPENSATION TABLE

ANNUAL COMPENSATION
----------------------------------- SECURITIES
OTHER UNDERLYING
ANNUAL OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION SARS (#) COMPENSATION(1)
- ------------------------------------------- ---------- --------- ------------ ---------- ---------------
<S> <C> <C> <C> <C> <C>
Peter M. Wagner............................ 1999 $ 376,800 $ 177,351 $ 7,898 132,023 $ 171
President and Chief Executive Officer 1998 247,614 153,767 6,337 -- 42,626
Officer 1997 214,567 115,651 8,248 -- 41,935

Ben J. Constantini......................... 1999 245,000 124,250 25,038 -- 50,067
Executive Vice President, Sales 1998 191,692 -- 5,820 -- 8,551
1997 184,616 37,000 5,820 33,250 521,597

Joseph A. Budano........................... 1999 176,000 61,600 9,000 12,350 12,856
Senior Vice President - North 1998 160,000 56,000 5,820 -- 11,760
American Operations 1997 150,000 26,250 5,820 17,900 237,780

Wolfgang Schuster.......................... 1999 176,668 87,000 7,725 32,900 171
Senior Vice President -European 1998 152,353 109,196 7,953 -- 176
Operations 1997 178,621 177,736 7,851 -- 207

Karl-Heinz Eisemann(2)..................... 1999 205,714 48,857 12,360 19,740 171
Executive Vice President, Chief 1998 168,190 52,223 13,008 -- 176
Financial Officer, Treasurer and Secretary 1997 126,336 72,540 13,829 -- 103

Derek T. Morikawa(3)....................... 1999 285,600 -- 11,400 -- 302,633
Former Chief Operating Officer 1998 244,231 -- 5,820 -- 13,814
1997 223,462 50,625 5,820 33,750 931,109
</TABLE>

(1) In fiscal 1998 and 1997, other compensation for Mr. Wagner includes fees
received in connection with his participation on the boards of directors of
the Company's subsidiaries in the U.S. and the United Kingdom. In fiscal
1999, other compensation for Mr. Constantini includes an expatriate cost of
living adjustment of $21,057 and $16,218 in moving costs. In fiscal 1999,
1998 and 1997, other compensation for Mr. Constantini includes employer
contributions for the Company's defined contribution plan of $6,600, $3,201
and $5,018, respectively. In fiscal 1997, other compensation for Mr.
Constantini includes $511,468 in payments to stock option holders as
compensation for the surrender of all or a portion of vested stock options
related to certain recapitalization transactions of Wavetek consummated in
June 1997. In fiscal 1999, 1998 and 1997, other compensation for Mr. Budano
includes employer contributions for the Company's defined contribution plan
of $4,800, $4,800 and $4,800, respectively. In fiscal 1997, other
compensation for Mr. Budano also includes payments to stock option holders as
compensation for the surrender of all or a portion of vested

<PAGE>

stock options related to certain recapitalization transactions of Wavetek
consummated in June 1997 of $226,331. In fiscal 1999, other compensation
for Mr. Morikawa includes a severance payment of $292,200. In fiscal 1999,
1998 and 1997, other compensation for Mr. Morikawa includes employer
contributions for the Company's defined contribution plan of $6,600, $4,800
and $5,575, respectively. In fiscal 1997, other compensation to Mr.
Morikawa includes payments to stock option holders as compensation for the
surrender of all or a portion of vested stock options related to certain
recapitalization transactions of Wavetek consummated in June 1997.

(2) Mr. Eisemann was appointed Executive Vice President and Chief Financial
Officer in December 1999.

(3) The Company terminated Mr. Morikawa's employment as of September 30, 1999.

The following table sets forth information concerning individual grants of
stock options made during the fiscal year ended September 30, 1999 to the
Named Executive Officers:

OPTIONS GRANTED IN LAST FISCAL YEAR
--------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE
NUMBER OF TOTAL VALUE AT ASSUMED
SECURITIES OPTIONS EXERCISE ANNUAL RATES OF STOCK PRICE
UNDERLYING GRANTED TO OR BASE APPRECIATION FOR OPTION TERM
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION ---------------------------
NAME GRANTED (#) FISCAL YEAR SHARE DATE 5% 10%
- --------------------------- ----------- ------------ --------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Peter M. Wagner............ 132,023 36.19% $ 14.50 1/1/09 $ 1,203,914 $ 3,050,955
Joseph A. Budano........... 12,350 3.39 $ 14.50 8/1/09 112,619 285,399
Wolfgang Schuster.......... 13,160 3.61 $ 14.50 1/1/09 120,006 304,118
Wolfgang Schuster.......... 19,740 5.41 $ 14.50 8/1/09 180,009 456,177
Karl-Heinz Eisemann........ 19,740 5.41 $ 14.50 1/1/09 180,009 456,177
</TABLE>

The following table sets forth information with respect to each of the Named
Executive Officers concerning the exercise of stock options and unexercised
stock options held at September 30, 1999.

AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR AND FISCAL YEAR--END OPTION VALUES

NUMBER OF SECURITIES VALUE OF UNEXERCISED
NUMBER OF UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FISCAL YEAR-END (#) AT FISCAL YEAR-END (S)
ACQUIRED VALUE ----------------------------- -----------------------------
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE*
- --------------------------- --------------- ------------ ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Peter M. Wagner............ -- -- -- 132,023 $ -- $ --
Ben J. Constantini......... -- -- 22,624 22,626 71,580 55,740
Joseph A. Budano........... -- -- 48,950 26,300 437,600 46,450
Wolfgang Schuster.......... -- -- 32,900 -- -- --
Karl-Heinz Eisemann........ -- -- -- 19,740 -- --
Derek T. Morikawa.......... -- -- 96,874 -- 968,920 --
</TABLE>

* The value of the unexercised in--the--money options is based on a fair
value of the Company's Common Stock on September 30, 1999, of $14.50 per
share for those options which are "in-the-money."

EMPLOYMENT AGREEMENTS

The Company has employment agreements with each of its Named Executive
Officers other than Derek Morikawa, whose employment with the Company was
terminated in September 1999. The Company's executive employment agreements
typically provide for total compensation, including base salary and bonus
compensation. In the event the Company terminates an executive without cause,
the Company's employment agreements generally provide for the payment of lump
sum termination benefits equal to the greater of the base salary payable
during the period of employment

<PAGE>

remaining under the employment agreement or one year's base salary. The
Company's executive employment agreements generally contain noncompetition
agreements and confidentiality agreements.

Mr. Wagner's employment agreement provides for Mr. Wagner to serve as an
employee of the Company through September 29, 2001, with current target total
compensation at an annual rate of 990,000 Deutsche marks (approximately
$540,000 as of September 30, 1999), of which 66-2/3% is base salary and
33-1/3% is target bonus compensation, payable in accordance with the
Company's annual bonus plan. Mr. Wagner is also entitled to receive certain
special pension benefits from the Company.

Mr. Constantini's employment agreement provides for Mr. Constantini to serve
as an employee of the Company through September 29, 2000, with current target
total compensation at an annual rate of $350,000, of which 70% is base salary
and 30% is target bonus compensation, payable in accordance with the
Company's annual bonus plan. In addition to standard termination payment
benefits, in exchange for continuing his employment though September 28,
2000, Mr. Constantini is entitled to receive a special bonus equal to one
year's base salary on September 28, 2000 or such earlier date as the Company
terminates his employment without cause. In addition, if the Company
terminates his employment without cause, certain stock options held by Mr.
Constantini would become immediately and fully vested on such termination
date.

Mr. Eisemann's employment agreement provides for Mr. Eisemann to serve as an
employee of the Company through September 30, 2000, with current target total
compensation at an annual rate of 450,000 Deutsche marks (approximately
$245,000 as of September 30, 1999), of which 80% is base salary and 20% is
target bonus compensation, payable in accordance with the Company's annual
bonus plan.

Mr. Budano's employment agreement provides for Mr. Budano to serve as an
employee of the Company through July 31, 2000, with current target total
compensation at an annual rate of $300,000, of which 70% is base salary and
30% is target bonus compensation, payable in accordance with the Company's
annual bonus plan.

Mr. Dara's employment agreement provides for Mr. Dara to serve as an employee
of the Company through February 14, 2002, with current target total
compensation at an annual rate of 420,000 Deutsche marks (approximately
$229,000 as of September 30, 1999), of which approximately 70% is base salary
and 30% is target bonus compensation, payable in accordance with the
Company's annual bonus plan.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

As of September 30, 1999, Messrs. Gooding, Nolan and Wandel are the members
of the Compensation Committee. Other than Mr. Gooding, none of the members of
the Compensation Committee has served as an officer or employee of the
Company. Prior to the establishment of the Compensation Committee, all
decisions relating to compensation of executive officers were made by the
Company's Board of Directors. For a description of the transactions between
the Company and members of the Compensation Committee and entities affiliated
with such members, see "Certain Relationships and Related Transactions"
included as Item 13 herein. No executive officer of the Company serves as a
member of the board of directors or compensation committee of any entity
which employs one or more members of the Company's Board of Directors or
Compensation Committee.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The Compensation Committee is responsible for recommending salaries,
incentives and benefits for the Company's senior officers, awarding all
employee stock options, reviewing overall compensation policies and
evaluating the performance of management. The Compensation Committee reviews
with the Board of Directors in detail all aspects of compensation for senior
officers.

<PAGE>

The Company's executive compensation package is typically comprised of three
components: base compensation, annual cash bonus and stock options. Base
compensation consists of fixed salaries and employee benefits. Base salaries
and benefits for each of the Company's executive officers are based on
industry norms and an individual's experience. Annual cash bonuses are based
on the Company's overall orders, operating profit, cash flow and on meeting
the Company's business objectives and goals.

Stock options are utilized as an important component of executive
compensation to motivate executives to improve the long--term performance and
value of the Company and to promote loyalty and equity ownership in the
Company by such individuals. The Compensation Committee bases awards of stock
options principally on an individual's job grade, performance and length of
service. Option grants are made annually at the fair market value of the
Company's Common Stock, as determined by the Board of Directors, and vest
over a four--year period.

In reviewing 1999 executive compensation and making recommendations for 2000,
the Compensation Committee reviewed reports prepared by the Company's Human
Resources Managers, which compared the base salary and total cash
compensation package for each of the Company's Named Executive Officers and
other senior officers of the Company with data compiled from independent
compensation surveys providing general and industry--specific ranges and
averages. The Compensation Committee also took into account the Company's
performance during the period and such individual's contribution to the
Company's performance. The Compensation Committee has generally proposed
moderate increases in base salary and target bonuses for the Company's
executive officers for 2000.

The Compensation Committee report was completed by Messrs. Gooding, Nolan and
Wandel during a series of telephone meetings in October, November and
December 1999.

COMPENSATION OF DIRECTORS

The Co-Chairmen of the Board of Directors receive $60,000 per year. As an
executive officer of the Company, Mr. Wagner does not receive any
compensation for serving on the Board of Directors. Other directors receive
$20,000 per year, plus a fee of $2,500 per Board meeting attended and are
reimbursed for their expenses incurred in connection with attendance of
meetings of, and other activities relating to serving on, the Board of
Directors. Such other directors who are Members of the Committees of the
Board of Directors also receive $10,000 per year for their membership and
participation in the meetings of such Committees.

The Company also instituted a stock option plan for its directors in fiscal
year 1999. In fiscal 1999, all directors other than Mr. Wagner, Mr. Bates and
Mr. Zeidler were granted options with respect to 15,000 shares under the
directors' stock option plan. All options vest by September 30, 2000 and will
automatically vest if a director is asked to step down.

The Company also established an Advisory Committee, made up of three members
who receive $10,000 per annum plus an option to purchase 7,500 shares of the
Company's common stock. Members of the Advisory Committee are also eligible
for additional compensation with respect to extraordinary or unusual
activities that are agreed upon in advance by the chief executive officer.

<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information known to the Company with respect
to the beneficial ownership of the common stock of the Company as of December
20, 1999, in each case as of such date, by (i) each of the current Directors
of the Company, (ii) each Executive Officer, (iii) all Directors and
executive officers as a group, and (iv) each person known by the Company to
be the "beneficial owner" of more than five percent (5%) of such common
stock. "Beneficial ownership" is a technical term broadly defined by the
Securities and Exchange Commission to mean more than ownership in the usual
sense. For example, you "beneficially" own common stock not only if you hold
it directly, but also if you indirectly (through a relationship, a position
as a director or trustee, or a contract or understanding) have (or share the
power to vote the stock, or sell it) the right to acquire it within 60 days.
Except as disclosed in the footnotes below, each of the Directors and
executive officers listed have sole voting and investment power over his or
her shares. As of December 20, 1999, there were 13,268,323 shares of common
stock outstanding and approximately 40 holders of record.

SHARES PERCENTAGE
BENEFICIALLY BENEFICIALLY
NAME AND ADDRESS OWNED (1) OWNED
- ----------------------------------------------------------------- ------------- ------------
<S> <C> <C>
Hannover Finanz W&G Beteiligungsgesellschaft mbH (2)............. 2,524,350 19.0%
DLJ Merchant Banking Partners II, L.P. (3)....................... 1,681,476 12.7
Terence J. Gooding (4)(5)........................................ 1,530,811 11.5
Burkhard Goltermann (6)(7)....................................... 1,508,580 11.4
Albrecht Wandel (7).............................................. 1,301,570 9.8
Renate Wandel (7)................................................ 1,052,430 7.9
Frank Goltermann (7)............................................. 972,719 7.3
Ulrike Goltermann (7)............................................ 787,622 5.9
Green Equity Investors II, L.P (8)............................... 760,326 5.7
Peter J. Nolan (9)............................................... 760,326 5.7
Peter M. Wagner (7).............................................. 282,529 2.1
Ben J. Constantini (7)........................................... 63,624 *
Joseph A. Budano (10)............................................ 53,950 *
Sir Malcolm Bates (11)........................................... 20,000 *
Gerhard Zeidler (14)............................................. 10,000 *
Joachim Simmross (13)............................................ 6,666 *
Jean-Philippe Dara (7)........................................... 5,000 *
Karl--Heinz Eisemann (7)......................................... 4,935 *
Wolfgang Schuster (7)............................................ 3,290 *
Susan C. Schnabel (12)........................................... -- --

All directors and executive officers as a group (15)......... 5,015,420 37.3
</TABLE>

* Less than 1%.
___________
Notes:
(1) Computed in accordance with Rule 13d-3(d)(1) of the Securities Exchange
Act of 1934, as amended.

(2) Address is Gunter-Wagner-Allee 13, D-30177 Hannover, Federal Republic of
Germany.

(3) Consists of shares pursuant to 6,666 vested options to be assigned to
DLJ Merchant Banking II, Inc. from Ms. Schnabel and shares held directly by
the following investors related to DLJ Merchant Banking Partners II, L.P.

<PAGE>

("DLJMB"); DLJ Merchant Banking Partners II - A ("DLJMB-A"); DLJ Diversified
Partners, L.P. ("DLJ Diversified"); DLJ Diversified Partners - A, L.P. ("DLJ
Diversified - A"); DLJ Offshore Partners II, C.V. ("DLJOP"); DLJMB Funding II,
Inc. ("DLJ Funding"); DLJ EAB Partners, L.P. ("DLJ EAB"); DLJ First ESC L.P.
("DLJ ESC"); DLJ Millenium Partners ("Millenium"); DLJ Millenium Partners - A,
("Millenium - A") and UK Investment Plan 1997 Partners ("UK Investment"). The
address of each of DLJMB, DLJMB - A, DLJ Diversified, DLJ Diversified - A, DLJ
Funding, DLJ EAB, DLJ ESC, Millenium and Millenium - A is 277 Park Avenue, New
York, New York 10172. The address of DLJOP is c/o John B. Gorsiraweg, 14
Willemstad, Curacao, Netherlands Antilles. The address of UK Investment is 2121
Avenue of the Stars, Los Angeles, California 90067.

(4) Includes 1,050,000 shares held by Dr. Gooding's spouse, children and
grandchildren and trusts for the benefit thereof over which Dr. Gooding has
investment and voting control.

(5) Address is P.O. Box 675517, Rancho Santa Fe, CA 92067

(6) Includes 189,222 shares held by his spouse.

(7) Address is c/o Wavetek Wandel Goltermann GmbH, Box 1262, D--72795 Eningen
u.A., Federal Republic of Germany.

(8) Address is 11111 Santa Monica Boulevard, Suite 2000, Los Angeles, CA
90025.

(9) Address is c/o Green Equity Investors II, L.P., 11111 Santa Monica
Boulevard, Suite 2000, Los Angeles, CA 90025. The shares shown as
beneficially owned by Mr. Nolan include all of the shares owned of record by
Green Equity Investors ("GEI"). GEI is a Delaware limited partnership managed
by Leonard Green & Partners, L.P. ("LGP"), which is an affiliate of the
general partner of GEI. Mr. Nolan, either directly (whether through
ownership interest or position) or through one or more intermediaries, may be
deemed to control LGP and such general partner. LGP and such general partner
may be deemed to control the voting and disposition of the shares of Common
Stock of the Company owned by GEI. As such, Mr. Nolan may be deemed to have
shared voting and investment power with respect to all shares held by GEI.
However, Mr. Nolan disclaims beneficial ownership of the securities held by
GEI except to the extent of his respective pecuniary interests therein.

(10) Address is c/o Wavetek U.S. Inc., 5808 Churchman Bypass, Indianapolis,
IN 46203.

(11) Address is Mulberry Close, Croft Road, Goring--on--Thames, RG8 9ES,
England, U.K.

(12) Address is c/o Donaldson, Lufkin & Jenrette Securities Corporation,
2121 Avenue of the Stars, Los Angeles, CA 90067. Ms. Schnabel is a Managing
Director of DLJ. Beneficial ownership for Ms. Schnabel excludes shares shown
as held by DLJMB and its affiliates, as to which Ms. Schnabel disclaims
beneficial ownership.

(13) Address is c/o Hannover Finanz W&G Beteiligungsgesellschaft mbH,
Gunter-Wagner -Allee 13, D-30177 Hannover, Federal Republic of Germany.
Share data for Mr. Simmross excludes shares shown as held by Hannover Finanz,
as to which Mr. Simmross disclaims beneficial ownership.

(14) Address is c/o Dekra e.V., Handwerkerstr. 15, D-70565 Stuttgart,
Federal Republic of Germany.

(15) Consists of 13 persons.

<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company leases its headquarters for its LAN and Test Tools business in
San Diego from a corporation controlled by Dr. Gooding for an annual rent of
$586,000, plus annual consumer price index adjustments, not to exceed 3% per
annum. The lease expires in June 2006. See "Item 2. - Properties."

The Company leases its facility in Research Triangle Park, North Carolina,
including its corporate headquarters and the facilities of its subsidiaries
Wandel & Goltermann Technologies, Inc. and Wandel & Goltermann ATE Systems,
Inc., from a partnership which is owned by Burkhard Goltermann, Frank
Goltermann, Ulrike Goltermann and certain other family members. Under the
leases, which expire in September 2005 and September 2010, annual rent of
$1,203,000 is payable in monthly installments and is adjusted annually for
changes in the consumer price index. See "Item 2. - Properties."

The Company leases certain offices and manufacturing facilities in Eningen,
Germany for one of its German subsidiaries from Else Wandel, the mother of
Albrecht Wandel and Renate Wandel. The Company pays annual rent of $262,000
under the lease, which was terminated in July 1999.

In February 1998, the Company sold 400 shares, or 10%, of the common stock of
its then wholly-owned subsidiary Switching Test Solutions AG ("STS") to Peter
Wagner for a purchase price of $817,000, which was paid in April 1998. In
connection with this transaction, Mr. Wagner, Frank Goltermann and Albrecht
Wandel entered into put and call options related to the shares sold to Mr.
Wagner. In September 1998, Messrs. Goltermann and Wandel exercised the call
options and purchased the shares of STS held by Mr. Wagner. Subsequently,
the Company purchased these shares from Messrs. Goltermann and Wandel for
$840,000.

The Company has unsecured notes payable to stockholders at September 30, 1999
as follows: Frank Goltermann - $3,933,045; Hannover Finanz - $2,726,727;
Albrecht Wandel - $1,636,036; Renate Wandel - $1,636,036; Burkhard Goltermann
- - $508,197 and Ulrike Goltermann - $280,488. On September 30, 1999, interest
was payable on these notes at 7.75%, payable quarterly. The notes are due at
the earlier of an initial public offering of the Company's common stock or
December 31, 2000. The Company recorded interest expense related to these
obligations of $0.8 million, $0.8 million and $0.9 million, in 1999, 1998 and
1997, respectively.

On October 1, 1998, the Company entered into a consulting agreement with Mr.
Wandel under which Mr. Wandel received fees of approximately $27,000, plus
certain expenses. The consulting agreement was terminated on March 31, 1999.

Burkhard Goltermann is employed by the Company as Director of Corporate
Treasury and received employment compensation from the Company in the amount
of $84,000 in 1999.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K

(a) The following documents are filed as part of this report:

(1) Financial Statements

<PAGE>

The following consolidated financial statements of Wavetek Wandel
Goltermann, Inc. are included in Item 8 of this report:

Report of Arthur Andersen LLP, Independent Public Accountants
Consolidated Balance Sheets as of September 30, 1999 and 1998
Consolidated Statements of Operations for each of the three years in the
period ended September 30, 1999
Consolidated Statements of Stockholders' Equity for each of the three years
in the period ended September 30, 1999
Consolidated Statements of Cash Flows for each of the three years in the
period ended September 30, 1999
Notes to Consolidated Financial Statements

(2) Financial Statement Schedules

Schedule II, Valuation and Qualifying Accounts, is included
herein.

(3) Index to Exhibits

EXHIBIT NO. DESCRIPTION OF EXHIBIT
<S> <C>
2.1 Exchange and Merger Agreement, dated as of June 12, 1998, by and among Wavetek
Corporation, Wandel & Goltermann Management Holding GmbH and the Stockholders
listed on the signature pages thereto (1)

2.2 First Amendment to Exchange and Merger Agreement and Stockholders Agreement
dated September 25, 1998 (2)

2.3 Agreement and Plan of Merger by and among Wandel & Goltermann Technologies,
Inc., Wandel & Goltermann Management Holding, GmbH and WG Merger Corp. dated
March 28, 1998 (3)

3.1 Restated Certificate of Incorporation of Wavetek Wandel Goltermann, Inc. (2)

3.2 Bylaws of Wavetek Corporation (4)

3.3 Amendment No. 1 to the Bylaws of Wavetek Wandel & Goltermann, Inc., dated
September 30, 1998 (2)

4.1 Indenture, dated as of June 11, 1997, among Wavetek Corporation, Wavetek U.S.
Inc. and The Bank of New York, as Trustee (5)

4.2 Form of Notes (see Exhibit 4.1) (6)

4.3 Form of Subsidiary Guarantee (see Exhibit 4.1) (7)

4.4 First Supplemental Indenture, dated as of September 30, 1998, among Wandel &
Goltermann Technologies, Inc., Wandel & Goltermann A.T.E. Systems, Inc., Wandel
& Goltermann, Inc., W&G Equities, Inc. and The Bank of New York. (8)

4.5 Second Supplemental Indenture, dated as of October 30, 1998, among Wavetek
Wandel Goltermann, Inc., Digital Transport Systems, Inc. and The Bank of New
York. (8)

<PAGE>

<S> <C>
4.6 Stockholders Agreement, dated as of June 12, 1998 and effective as of the
effective time by and among Wavetek Corporation and the Stockholders listed on
the signature pages thereto.

4.7 Third Supplemental Indenture, dated as of May 25, 1999, among Wavetek Wandel
Goltermann, Inc. and The Bank of New York.

4.8 Wavetek Corporation Executive Benefits Plan, dated June 1, 1997.

4.9 Wavetek Wandel Goltermann, Inc. Amended and Restated Stock Option Plan.

10.1 Facilities Agreement in relation to a Multi-Currency Revolving Credit Facility
and Bilateral Ancillary Facilities between Wavetek Wandel & Goltermann, Inc. as
Borrower, Wandel & Goltermann Technologies, Inc., as Guarantor, Commerzbank
Aktiengesellschaft and Deutsche Bank AG as Joint-Arrangers, Commerzbank
International S.A. as Agent and Others, dated December 23, 1998.

10.2 Amendment Agreement, dated May 28, 1999, to a DEM 280,000,000 Facilities
Agreement in relation to a Multi-Currency Revolving Credit Facility and
Bilateral Ancillary Facilities, dated December 23, 1998, between Wavetek Wandel
Goltermann, Inc., as borrower, and Wandel & Goltermann Technologies, Inc., as
guarantor, and Commerzbank Aktiengesellschaft and Deutsche Bank AG, as joint
arrangers, and Commerzbank International S.A., as Agent, and Others (11)

10.8 Employment Agreement, dated as of September 30, 1998, by and between Wavetek
Wandel Goltermann, Inc. and Peter Wagner. (8)

10.9 Employment Agreement, dated as of September 30, 1998, by and between Wavetek
Wandel Goltermann, Inc. and Ben Constantini. (8)

10.11 Contract of Employment, dated as of October 1, 1997, between Wandel & Goltermann
Management Holding GmbH and Karl-Heinz Eisemann. (8)

10.15 Lease Agreement, dated October 1, 1984, between W&G Associates and W&G
Instruments, Incorporated (9)

10.16 Lease Agreement, dated May 18, 1994, between W&G Associates and Wandel &
Goltermann Technologies, Inc. (10)

10.17 Employment Agreement dated as of August 1, 1999, by and between Wavetek Wandel
Goltermann, Inc. and Joe Budano.

10.18 Employment Agreement dated as of January 14, 1999, by and between Wavetek Wandel
& Goltermann Management Holding GmbH and Jean-Philippe Dara.

12 Schedule Re: Computation of Ratio of Earnings to Fixed Charges

21 Subsidiaries of Registrant

27 Financial Data Schedule
</TABLE>

<PAGE>

______________________
Notes:
(1) Incorporated by reference from Exhibit 10.1 to Wavetek
Corporation's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1998 filed with the Commission on August 14, 1998.

(2) Incorporated by reference from the Company's Current Report on
Form 8-K dated October 6, 1998 filed with the Commission on
October 6, 1998.

(3) Incorporated by reference from Appendix A of Exhibit (d) (3) of
Schedule 13E-3 of Wandel & Goltermann Technologies, Inc. and
Wandel & Goltermann Management Holding, GmbH, file number 0-25176
filed with the Commission on June 1, 1999.

(4) Incorporated by reference from exhibit 3-7 to Registration
Statement of Wavetek Corporation on Form S-4 filed with the
Commission on July 27, 1997.

(5) Incorporated by reference from exhibit 4.1 to Registration
Statement of Wavetek Corporation on Form S-4 filed with the
Commission on July 27, 1997.

(6) Incorporated by reference from exhibit 4.2 to Registration
Statement of Wavetek Corporation on Form S-4 filed with the
Commission on July 27, 1997.

(7) Incorporated by reference from exhibit 4.3 to Registration
Statement of Wavetek Corporation on Form S-4 filed with the
Commission on July 27, 1997.

(8) Incorporated by reference from the Company's Annual Report on Form
10-K filed with the Securities and Exchange Commission on
December 14, 1998.

(9) Incorporated by reference from exhibit 10.3 to Registration
Statement of Wandel & Goltermann Technologies, Inc. on Form S-1,
file number 33-74564.

(10) Incorporated by reference from Quarterly Report of Wandel &
Goltermann Technologies, Inc. on Form 10-Q for the quarter ended
June 30, 1994, file number 0-23742.

(11) Incorporated by reference from Quarterly Report on Form 10-Q of
the Company filed with the Commission on August 13, 1999.

(b) Reports on Form 8-K

None.

(d) Schedule II, Valuation and Qualifying Accounts, is included herein.

<PAGE>

WAVETEK WANDEL GOLTERMANN, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)

Balance at Fiscal Balance at Fiscal Balance at
September 30, 1998 September 30, 1999 September 30,
Description 1997 activity 1998 activity 1999
----------- ---- -------- ---- -------- ----
<S> <C> <C> <C> <C> <C>
Allowances for doubtful accounts 1,938 2,494 4,432 176 4,608
------ ----- ------ ------ ------
Warranty reserves 1,306 2,833 4,139 (98) 4,041
------ ----- ------ ------ ------
Valuation allowance 10,889 4,263 15,152 (380) 14,772
------ ----- ------ ------ ------
Restructuring reserves -- 2,937 2,937 (2,253) 684
------ ----- ------ ------ ------
</TABLE>

Note: All reserves are reflected as a reduction of the balance in the
corresponding asset or liability accounts on the Consolidated Balance Sheet.

<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

WAVETEK WANDEL GOLTERMANN, INC.

/S/ Karl-Heinz Eisemann
--------------------------------
Karl-Heinz Eisemann
Executive Vice President, Chief
Financial Officer, Treasurer and
Secretary (principal financial
officer and principal accounting
officer)
Dated: December 23, 1999

Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

SIGNATURE DATE

/S/ Peter Wagner December 23, 1999
- ------------------------------------------------
Peter Wagner, President, Chief Executive Officer
and Director

/S/ Terence J. Gooding December 23, 1999
- ------------------------------------------------
Terence J. Gooding, Co-Chairman of the Board

/S/ Albrecht Wandel December 23, 1999
- ------------------------------------------------
Albrecht Wandel, Co-Chairman of the Board

/S/ Karl-Heinz Eisemann December 23, 1999
- ------------------------------------------------
Karl-Heinz Eisemann, Executive Vice President,
Chief Financial Officer, Treasurer and Secretary

/S/ Malcolm Bates December 23, 1999
- ------------------------------------------------
Sir Malcolm Bates, Director

/S/ Susan C. Schnabel December 23, 1999
- ------------------------------------------------
Susan C. Schnabel, Director

<PAGE>

STOCKHOLDERS AGREEMENT

THIS STOCKHOLDERS AGREEMENT, dated as of this 11th day of June, 1997,
is by and among Wavetek Corporation, a Delaware corporation (the "COMPANY"), DLJ
Merchant Banking Partners II, L.P. ("DLJMB"), DLJ Offshore Partners II, C.V.,
DLJ Diversified Partners, L.P., DLJMB Funding II, Inc., UK Investment Plan 1997
Partners, DLJ First ESC L.L.C, DLJ EAB Partners, L.P. and DLJ Millennium
Partners, L.P. (collectively, and together with DLJMB, the "DLJ INVESTORS"),
Green Equity Investors II, L.P. ("GEI"), Schroder UK Venture Fund III, L.P.,
Schroder UK Venture Fund III, L.P.2, Schroder UK Venture Fund III Trust
(collectively, "SCHRODER"), Yokogawa Electric Corporation ("YOKOGAWA", and
together with the DLJ Investors, GEI and Schroder, the "INSTITUTIONAL
INVESTORS"), Dr. Terence J. Gooding ("GOODING"), and the management Stockholders
listed on Schedule I hereto (the "MANAGEMENT STOCKHOLDERS" and together with the
Institutional Investors and Gooding, the "STOCKHOLDERS").

RECITALS

A. WHEREAS, pursuant to the terms of the Stock Purchase and
Recapitalization Agreement dated as of May 23, 1997 (the "RECAPITALIZATION
AGREEMENT") by and among the Company, the DLJ Investors, GEI, and certain
stockholders of the Company, the DLJ Investors and GEI will purchase from the
Company 1,674,810 and 753,660 shares, respectively, of Common Stock (as defined
below) representing 34.28% and 15.43%, respectively, of the outstanding shares
of Common Stock immediately after the transactions contemplated by the
Recapitalization Agreement.

B. WHEREAS, the Company and the Stockholders are concurrently
entering into a Registration Rights Agreement to provide for piggy-back and
demand registration rights for the benefit of the Stockholders (the
"REGISTRATION RIGHTS AGREEMENT").

C. WHEREAS, the Company and the Stockholders desire to enter into
this Agreement for the purpose of regulating certain aspects of the
Stockholders' relationships with regard to each other and the Company.

AGREEMENT

NOW THEREFORE, in consideration of the mutual covenants herein
contained and for other good and valuable consideration, the parties agree as
follows:

<PAGE>

ARTICLE 1

DEFINITIONS

As used herein, the terms below shall have the following meanings.
Any such term, unless the context otherwise requires, may be used in the
singular or plural, depending upon reference.

"ACT" shall mean the Securities Act of 1933, as amended.

"AFFILIATE" shall mean, with respect to any Person, any Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person. For purposes of this definition, ownership of 10% or
more of the voting common equity of a Person shall be deemed to be control of
such Person.

"COMMISSION" shall mean the Securities and Exchange Commission.

"COMMON STOCK" shall mean the Common Stock, $.01 par value per share, of
the Company.

"DLJSC" shall mean Donaldson, Lufkin & Jenrette Securities Corporation.

"EXEMPT TRANSFER" shall mean (i) transfers by a Stockholder to its
Permitted Transferees; or (ii) transfers by a Stockholder who is an employee of
the Company of his or her Shares to the Company in connection with the
termination of employment by such employee; PROVIDED, HOWEVER, that no such
transfer pursuant to the foregoing clause (i) shall be an Exempt Transfer unless
the transferee agrees in writing to be bound by this Agreement as if such
transferee were a Stockholder with respect to such transferred Shares, after
which such transferee shall be deemed a "Stockholder" for all purposes under
this Agreement.

"PERMITTED TRANSFEREE" means any of the following who agrees to be bound by
and become a party to this Agreement: (i) with respect to transfers by the
Institutional Investors, any Affiliates thereof, and (ii) with respect to
transfers by Gooding or the Management Stockholders, a spouse, child,
grandchild, stepchild or a child of a stepchild thereof or a trust as to which
Gooding, the Management Stockholder or such spouse, child, grandchild, stepchild
or child of a stepchild thereof exercises substantial control over the
investment of the trust assets. Upon (i) execution and delivery by a Permitted
Transferee of this Agreement and (ii) receipt of Shares of Common Stock from the
transferring Stockholder, the Permitted Transferee shall be deemed to be a
"Stockholder" for all purposes under this Agreement.

"PERSON" shall be construed broadly and shall include an individual, a
partnership, a corporation, an association, a joint stock company, a limited
liability company, a trust, a joint venture, an unincorporated organization and
a governmental entity or any department, agency or political subdivision
thereof.

"PROPOSED SALE" shall have the meaning set forth in Section 4.1.

<PAGE>

"QUALIFIED IPO" shall mean the initial underwritten offering by the Company
of Common Stock registered with the Commission under the Act (i) after which the
Common Stock is included for quotation on the Nasdaq National Market or listed
on a national securities exchange and (ii) having an aggregate offering price to
the public (before underwriters' discounts and commissions) of at least
$20,000,000.

"SELLING STOCKHOLDER" shall have the meaning set forth in Section 4.1.

"SECURITIES" shall have the meaning set forth in Section 4.3.

"SHARES" shall mean the shares of Common Stock now owned and hereafter
acquired by the Stockholders.

"STOCKHOLDER'S PERCENTAGE SHARE" shall mean, as applied to any transaction
covered by Section 4.1, a fraction, the numerator of which is the number of
shares of Common Stock held by such Stockholder, and the denominator of which is
the number of shares of Common Stock held by all Stockholders other than the
Stockholder(s) participating in the transaction which gave rise to the
first-offer right contained in Section 4.1.

"TAG-ALONG NOTICE" shall have the meaning set forth in Section 4.2.

"TAG-ALONG RIGHT" shall have the meaning set forth in Section 4.2.

"TAG-ALONG STOCKHOLDERS" shall have the meaning set forth in Section 4.2.

ARTICLE 2

GOVERNANCE

2.1 BOARD OF DIRECTORS.

(a) The Stockholders hereby agree to take, at any time and from time
to time, all action necessary (including, without limitation, voting the Shares
owned by them, calling special meetings of stockholders and executing and
delivering written consents) such that the Board of Directors of the Company
shall consist of up to nine directors, who shall be designated as follows: (i)
two (or three if an additional director is designated pursuant to the last
sentence of this Section 2.1(a)) of such members shall be persons designated by
DLJMB for as long as the DLJ Investors and/or their Permitted Transferees shall
own at least 20% of the outstanding Common Stock of the Company; (ii) one of
such members shall be a person designated by GEI for as long as GEI and/or its
Permitted Transferees shall own at least 5% of the outstanding Common Stock of
the Company; (iii) three (or four if an additional director is designated
pursuant to the last sentence of this Section 2.1(a)) of such members shall be
persons designated by Gooding for as long as Gooding and/or his Permitted
Transferees shall own at least 10% of the outstanding Common Stock of the
Company; and (iv) one of such members shall be a person designated by Gooding
for as long as Gooding and/or his Permitted Transferees shall own at

<PAGE>

least 10% of the outstanding Common Stock of the Company, subject to approval
by DLJMB for as long as the DLJ Investors and/or their Permitted Transferees
own at least 20% of the outstanding Common Stock of the Company. It is
agreed that, as of the effective date of this Agreement, the directors
initially designated in clause (i) shall be Kenneth D. Moelis and David B.
Wilson; the director initially designated in clause (ii) shall be Peter J.
Nolan; the directors initially designated in clause (iii) shall be Gooding,
Derek T. Morikawa and Ben J. Constantini;

and the director initially designated in clause (iv) shall be Kenneth Baker. In
the event the DLJ Investors and/or their Permitted Transferees own at least 10%
but less than 20% of the outstanding Common Stock of the Company, DLJMB shall
have the right to appoint only two directors. In the event the DLJ Investors
and/or their Permitted Transferees own at least 5% but less than 10% of the
outstanding Common Stock of the Company, DLJMB shall have the right to appoint
only one director. In the event Gooding and/or his Permitted Transferees own at
least 5% but less than 10% of the outstanding Common Stock of the Company,
Gooding shall have the right to appoint only two directors. Prior to a
Qualified IPO, each of DLJMB and Gooding may designate an additional director
pursuant to clause (i) or (iii) above.

(b) Upon the consummation of a Qualified IPO, the parties hereto
agree that the size of the Board of Directors shall consist of nine members, at
least two of which shall be "independent directors" (or the legal equivalent)
under the rules and regulations of the New York Stock Exchange, Inc. or other
principal securities exchange on which the Common Stock is listed or traded.

(c) If a director has been designated by a Stockholder and elected
pursuant to this Section 2.1 and if such Stockholder requests that such director
be removed (with or without cause) by written notice thereof to the other
Stockholders of the Company, then such director shall be removed, upon the
affirmative vote of holders of a majority of the outstanding shares of Common
Stock, and each Stockholder hereby agrees to vote all Shares owned or held of
record by such persons or entities to effect such removal upon such request.

(d) In the event a vacancy is created on the Board of Directors at
any time by the death, disability, retirement, resignation or removal of a
director or otherwise, the Stockholder who originally designated such director
shall nominate a replacement director, and each Stockholder agrees to cause the
director(s) designated by such Stockholder to vote for such nominated individual
to fill such vacancy.

(e) If neither DLJMB, GEI nor Gooding has the right to designate any
one of the directors, the right to designate such director shall devolve on all
holders of the Common Stock.

2.2 APPROVAL OF CERTAIN TRANSACTIONS. In addition to any approval of the
Board of Directors required by applicable law, the following transactions shall
require the specific approval of (i) DLJMB for as long as the DLJ Investors
and/or their Permitted Transferees shall own at least 20% of the outstanding
Common Stock of the Company and (ii) Gooding for as long as Gooding and/or his
Permitted Transferees shall own at least 20% of the outstanding Common Stock of
the Company:

<PAGE>

(a) any direct or indirect investment by the Company in, or purchase
or other acquisition by the Company of, in one or a series of transactions, any
business, assets, securities or other property of another person, which
transaction or series of transactions has an aggregate value in excess of
$10,000,000;

(b) any sale, lease, exchange or other disposition of any material
asset or assets of the Company having an aggregate fair market value in excess
of $10,000,000;

(d) any incurrence by the Company or its subsidiaries of indebtedness
in excess of $10,000,000 other than the incurrence of debt to finance working
capital in the ordinary course of business and other than refinancing of
indebtedness existing at the date of this Agreement;

(e) any issuance by the Company of equity securities other than (i)
pursuant to agreements in existence as of the date of this Agreement (ii)
pursuant to any stock option or other incentive-based plan for employees of the
Company and (iii) in connection with a transaction described in clause (a) or
(b) above with a value of $10,000,000 or less;

(f) the engagement of any investment banking firm by the Company in
connection with an offering of securities or any other transaction;

(g) any significant change in or expansion of the Company's business
outside of the test instrument industry or any business reasonably related
thereto;

(h) the appointment of any chief executive officer who succeeds
Gooding to such position;

(i) any agreement or transaction between the Company and any
Affiliate of the Company involving the transfer of any consideration (whether
cash, securities, property or otherwise) between the Company and such Affiliate;
PROVIDED, HOWEVER, that the foregoing shall not restrict (A) transactions
between the Company and any of its subsidiaries, or among any of such
subsidiaries, (B) payments or advances to employees of the Company or its
subsidiaries in the ordinary course of business, (C) transactions pursuant to
any stock option or other incentive-based plan for employees of the Company or
its subsidiaries that is approved by the Board of Directors, (D) transactions
contemplated by this Agreement or agreements entered into in connection with the
closing of the Recapitalization Agreement and (E) transactions pursuant to any
arrangements existing on the date hereof; and

(j) any action to amend or repeal any provision of the Company's
Articles of Incorporation or By-laws.

2.3 QUORUM. For so long as DLJMB shall have the right under this
Agreement to designate any directors, in regard to a meeting of the Board of
Directors, a quorum of the Board

<PAGE>

shall not be deemed to exist unless there is a majority of the members of the
Board of Directors present and at least one director designated by DLJMB is a
part of such quorum; PROVIDED, HOWEVER, if there would have otherwise been a
quorum but for the absence of all of the directors designated by DLJMB, a
majority of directors present for such meeting may adjourn the meeting and
send a special notice to the directors designated by DLJMB and the other
directors not in attendance at the meeting setting a date for reconvening the
meeting of the Board of Directors at least three business days after the
meeting as to which no quorum existed by virtue of the absence of all of the
directors designated by DLJMB was adjourned, and the Board of Directors may
reconvene at such time and conduct business if a quorum is otherwise present,
regardless of whether a director designated by DLJMB is in attendance.

2.4 NOTICE. The Stockholders agree to cause the Bylaws of the Company to
provide that the Board of Directors will not take any action at a meeting unless
notice of such meeting shall have been given to each director at least ten days
prior thereto.

ARTICLE 3

TRANSFER RESTRICTIONS

3.1 FIRST YEAR ANNIVERSARY. Prior to the earlier of the first anniversary
of this Agreement and the consummation of a Qualified IPO, no Stockholder may
transfer or pledge any Shares other than in connection with an Exempt Transfer.

3.2 SECOND THROUGH FIFTH YEAR ANNIVERSARIES. From and after the first
anniversary of this Agreement until the earlier of the fifth year anniversary of
this Agreement and the consummation of a Qualified IPO:

(a) the Institutional Investors may transfer their Shares subject to
the other Stockholders' rights of first offer under Section 4.1 and Tag-Along
Rights under Section 4.2;

(b) the Management Stockholders (other than Gooding) may transfer
their Shares only pursuant to exercise of the Tag-Along Rights granted to them
in Sections 4.2;

(c) Gooding may transfer (i) such number of Shares of Common Stock
such that, after such transfer, Gooding owns Shares representing not less than
20% of the number of Shares outstanding at the time of this Agreement, subject
to the other Stockholders' rights of first offer under Section 4.1 and Tag-Along
Rights under Section 4.2 and (ii) the remainder of his Shares only pursuant to
exercise of the Tag-Along Rights granted to him in Sections 4.2; PROVIDED,
HOWEVER, that in the event Gooding is no longer the chief executive officer of
the Company, Gooding may transfer all of his Shares of Common Stock pursuant to
clause (i) of this Section 3.2(c); and

(d) any Stockholder may transfer its Shares in an Exempt Transfer.

3.3 FIFTH THROUGH TENTH YEAR ANNIVERSARIES. From and after the fifth
anniversary of this Agreement until the earlier of the tenth year anniversary of
this and the consummation of

<PAGE>

a Qualified IPO, any Stockholder may transfer its Shares subject to the other
Stockholders' rights of first offer under Section 4.1 and Tag-Along Rights
under Section 4.2.

3.4 RELEASE OF TRANSFER RESTRICTIONS IN CONNECTION WITH QUALIFIED IPO.

In addition, Stockholders may transfer Shares in connection with a
Qualified IPO in accordance with the following provisions:

(a) If the Company elects to offer Common Stock pursuant to a
Qualified IPO

or is required to make a registration that would constitute a Qualified IPO, the
Board of Directors shall deliver a written notice to each of the Stockholders at
least 30 days prior to the filing of the initial registration statement in
connection with such Qualified IPO (the "IPO Notice"). Within 10 days of
receipt of such notice, the DLJ Investors may elect to participate in such
Qualified IPO as a selling Stockholder by delivering to the Company and each
other Stockholder, a notice stating (i) the DLJ Investors' bona fide intention
of participating in such Qualified IPO and (ii) and the number of Shares the DLJ
Investors wish to sell in such Qualified IPO. The number of Shares that the DLJ
Investors may include in the Qualified IPO will be determined in accordance with
the Registration Rights Agreement.

(b) If the DLJ Investors elect to participate in the Qualified IPO in
accordance with Section 3.4(a) above, the other Institutional Investors may also
elect to participate in such Qualified IPO by delivering a notice to the Company
and each of the other Stockholders within 20 days of receipt of the IPO Notice,
which notice shall state (i) such Stockholder's bona fide intention of
participating in such Qualified IPO and (ii) and the number of Shares such
Stockholder wishes to sell in such Qualified IPO; PROVIDED, HOWEVER, that the
maximum number of Shares a Stockholder may sell in a Qualified IPO is the total
number of Shares owned by such Stockholder MULTIPLIED BY a fraction, the
numerator of which is the number of Shares to be sold by the DLJ Investors in
the Qualified IPO and the denominator of which is the total number of Shares
owned by the DLJ Investors, subject to the provisions of Sections 2(d) and 3(b)
of the Registration Rights Agreement (the "IPO PORTION").

(c) If the DLJ Investors elect to participate in the Qualified IPO in
accordance with Section 3.4(a) above, Gooding and the Management Stockholders
may sell such number of Shares, if any, in the Qualified IPO as the managing
underwriter for such Qualified IPO approve; PROVIDED, HOWEVER, that the maximum
number of Shares Gooding and each Management Stockholder may sell in a Qualified
IPO is such Stockholder's IPO Portion; PROVIDED, further, that if Gooding is no
longer Chief Executive Officer of the Company, he shall have the rights of an
Institutional Investor pursuant to Section 3.4(b) above.

(d) If the DLJ Investors do not elect to participate in a Qualified
IPO, no other Stockholder may participate in the offering unless such Qualified
IPO has been demanded by the Stockholders holding at least 40% of the
outstanding Common Stock of the Company in accordance with the provisions of
Section 2(c) of the Registration Rights Agreement. If the Offering has been
demanded in accordance with such provisions of the Registration Rights
Agreement, the Stockholders demanding such registration shall have the right to
participate in the Qualified IPO.

<PAGE>

3.5 NO FURTHER TRANSFER RESTRICTIONS. The Stockholders shall no longer be
bound by the transfer restrictions of this Article III following the first to
occur of (i) the consummation of a Qualified IPO, (ii) the later of the date
upon which the DLJ Investors and their Permitted Transferees own less than 5% of
the outstanding Shares of Common Stock or the date on which Gooding and his
Permitted Transferees own less than 5% of the outstanding shares of Common
Stock, or (iii) the ten year anniversary of this Agreement.

ARTICLE 4

RIGHT OF FIRST OFFER; TAG-ALONG RIGHTS;
CERTAIN PURCHASE RIGHTS; SHARES SUBJECT TO THIS AGREEMENT

4.1. RIGHT OF FIRST OFFER.

(a) GENERAL. If, prior to the consummation of a Qualified IPO, a
Stockholder ("Selling Stockholder") proposes to sell Shares to a third party
other than pursuant to an Exempt Transfer (a "PROPOSED SALE"), the Selling
Stockholder must first comply with the procedures set forth in this Section 4.1
and in Section 4.2.

(i) The consideration for the Proposed Sale shall consist
solely of cash.

(ii) The Selling Stockholder shall deliver a notice (the
"OFFERING NOTICE") to the Company and to each of the Stockholders
stating (1) the Selling Stockholder's bona fide intention to sell
Shares in the Proposed Sale; (2) the number of Shares it proposes to
sell; and (3) the price and terms of the Proposed Sale.

(iii) Within 20 days after the Offering Notice is given, the
Company may elect by written notice to the Selling Stockholder to
purchase from the Selling Stockholder, at the price and on the terms
specified in the Offering Notice, any or all of the Shares proposed to
be sold in the Proposed Sale; PROVIDED, HOWEVER, that in the event the
Company elects to purchase some but not all of the Shares proposed to
be sold in the Proposed Sale, the Company's right to purchase such
Shares will be conditioned upon the purchase of the remainder of such
Shares by the Stockholders pursuant to Section 4.1(a)(v) and (vi).

(iv) Subject to Subsection 4.1(a)(vi), the purchase of such
Shares by the Company shall take place within 20 days after the date
of the Company's notice.

(v) In the event the Company does not elect to purchase all of
the Shares offered in the Offering Notice, the Company shall give
written notice to each of the Stockholders (the "REOFFER NOTICE"), of
the number of Shares available for purchase (the "REOFFERED SHARES")
on or before the final day of such 20-day period and the right to
purchase such Reoffered Shares shall pass automatically to each of
such Stockholders. Each such Stockholder shall initially

<PAGE>

be entitled to purchase such Stockholder's Percentage Share of the
Reoffered Shares. In the event that any Shares remain after such
allocation and Stockholders remain who desire to purchase additional
Shares in excess of their Stockholder's Percentage Share, all of the
remaining Shares which such Stockholders have elected to purchase shall
be allocated to them PRO RATA based on the number of Shares held by
them, or otherwise as agreed to among such remaining Stockholders.
Each Stockholder will have 20 days from receipt of the Reoffer Notice
to exercise its purchase rights under this Section 4.1 by written
notice to the Selling Stockholder and to the Company. The closing of
any purchase and sale under this subsection shall be held within 20
days following the exercise by such Stockholder of the purchase
rights hereunder.

(vi) Such purchase rights shall only apply if the Company and
the Stockholders, collectively, acquire all, but not less than all,
of the Shares proposed to be sold in the Offering Notice. In the
event the Company elects to acquire some but not all of the Shares
proposed to be sold in the Offer Notice, the Company's purchase of
Shares shall occur simultaneously with the purchase of Shares by the
Stockholders.

(vii) In the event that the rights of first offer set forth in
Section 4.1 are not exercised, and the Selling Stockholder, to the
extent applicable, has complied with Section 4.2 below, the Selling
Stockholder may sell, at any time within 120 days from the date of
the Reoffer Notice, the number of Shares it proposed to sell in the
Proposed Sale on price and terms no less favorable to the purchaser
than those of the Proposed Sale, provided that the Selling
Stockholder may not sell such Shares to a Person if the Board of
Directors has determined that such Person is reasonably likely to be
a competitor of the Company or a person whose interests would be
adverse to the Company.

4.2. TAG-ALONG RIGHT. In the event that the rights of first offer set
forth in Section 4.1 are not exercised, each of the other Stockholders (the
"TAG-ALONG STOCKHOLDERS") shall have the right (the "TAG-ALONG RIGHT") to
include up to the following number of its Shares in the Proposed Sale: the
total number of Shares proposed to be sold by the Selling Stockholder in the
Proposed Sale MULTIPLIED BY a fraction the numerator of which is the number of
Shares owned by such Tag-Along Stockholder and the denominator of which is the
aggregate number of Shares owned by such Selling Stockholder and by all
Tag-Along Stockholders exercising their Tag-Along Rights hereunder. Any Shares
purchased from such Stockholders pursuant to this Section 4.2 shall be at the
same price per Share and upon the same terms and conditions as such Proposed
Sale. The Selling Stockholder shall, not less than 30 days prior to each
Proposed Sale, notify, or cause to be notified, each Stockholder in writing of
each such Proposed Sale. Such notice shall set forth: (A) the name of the
Selling Stockholder and the number of Shares proposed to be sold, (B) the name
and address of the proposed purchaser, (C) the proposed per share purchase price
(which must be payable in cash) and the terms and conditions of payment offered
by such proposed purchaser, and (D) that the proposed purchaser has been
informed of the Tag-Along Right provided for in this Section 4.2 and has agreed
to purchase Shares in accordance with the terms hereof.

9
<PAGE>

The Tag-Along Right may be exercised by any Stockholder by delivery
of a written notice to the Selling Stockholder (the "TAG-ALONG NOTICE") within
15 business days following its receipt of the notice specified in the last
sentence of the preceding paragraph. The Tag-Along Notice shall state the
number of Shares that such Stockholder proposes to include in such transfer to
the proposed purchaser determined as aforesaid.

The Company agrees not to effect any transfer of Shares by any
Stockholder until it has received evidence reasonably satisfactory to it that
the Tag-Along Right, if applicable to such transfer, has been complied with.

Notwithstanding the foregoing, (i) only GEI is entitled to exercise
Tag-Along Rights with respect to the first 335,000 Shares transferred by the DLJ
Investors and (ii) only the DLJ Investors are entitled to exercise Tag-Along
Rights with respect to the first 150,000 Shares transferred by GEI.

4.3. CERTAIN PREEMPTIVE RIGHTS. If prior to a Qualified IPO the Company
proposes to issue, sell, or grant securities convertible into shares of Common
Stock (collectively, the "Securities"), then the Company shall, no later than
30 days prior to the consummation of such issuance, give written notice to all
Stockholders of such proposed issuance. Such notice shall describe the proposed
issuance, and contain an offer to each of the Stockholders to sell to such
Stockholder, at the same price and for the same consideration to be paid by the
proposed purchasers, such Stockholder's pro rata portion (which shall be a
percentage equal to the percentage of the outstanding Common Stock held by such
Stockholder before such proposed issuance; PROVIDED, HOWEVER, that if the use of
proceeds of such Securities issuance shall include the repurchase of Common
Stock, then such percentage shall be calculated assuming the consummation of
such repurchase) of the Securities to be sold. If any such Stockholder fails to
accept such offer by written notice within 25 days after its receipt of the
Company's notice, the Company may proceed with such proposed issuance, free of
any right on the part of such Stockholder under this Section 4.3 in respect
thereof. This Section 4.3 shall not apply to: (i) issuances to employees or
pursuant to employee benefit or stock option plans which shall not exceed 10% in
the aggregate of the shares of capital stock of the Company, on a fully diluted
basis; (ii) Securities distributed or set aside to all holders of Common Stock
on a per share equivalent basis; (iii) any other issuance of Securities pursuant
to or as a result of the transactions contemplated by the Recapitalization
Agreement or issuance of Securities upon the conversion, exercise or exchange of
such Securities or (iv) Securities issued in a business combination or
acquisition approved pursuant to Section 2.2.

4.4 SHARES SUBJECT TO THIS AGREEMENT. If, prior to a Qualified IPO, the
Company shall issue any Securities in a transaction as to which the rights under
Section 4.3 apply, or any Stockholder shall transfer Shares in a transaction
subject to Sections 4.1 and 4.2, the purchaser of such Securities shall execute
a copy of this Agreement and such purchaser shall be subject to this Agreement.

<PAGE>

ARTICLE 5

MISCELLANEOUS

5.1 LEGEND. The certificates representing the Common Stock to be
purchased by each of the Stockholders shall bear the following legend:

"THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
(A "TRANSFER") EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF A STOCKHOLDERS
AGREEMENT DATED AS OF JUNE 11, 1997. SUCH SECURITIES ARE ALSO SUBJECT TO
A REGISTRATION RIGHTS AGREEMENT DATED JUNE 11, 1997. ANY TRANSFEREE OF
THESE SECURITIES TAKES SUBJECT TO THE TERMS OF SUCH AGREEMENTS, COPIES OF
WHICH ARE ON FILE WITH THE COMPANY.

"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR UNDER ANY STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF AN EXEMPTION THEREFROM UNDER THE ACT OR LAW OR THE RULES AND
REGULATIONS PROMULGATED THEREUNDER."

Each of the parties hereto agrees that it will not transfer any Shares
without complying with each of the restrictions set forth herein and agrees that
in connection with any such transfer it will, if requested by the Company,
deliver at its expense to the Company an opinion of counsel (including in-house
or special counsel), in form and substance reasonably satisfactory to the
Company and counsel for the Company, that such transfer is not in violation of
the securities laws of the United States of America or any state thereof;
PROVIDED, HOWEVER, that in case of any sale or other transfer of Shares to any
person or entity who is an "accredited investor" (as such term is defined and
used in Rule 501 of Regulation D under the Act), no opinion of counsel shall be
required if the transferor obtains a representation from such person or entity
that it is an accredited investor and is acquiring such Shares for its own
account and with no intention of distributing or reselling said Shares or any
part thereof, or interest therein, in any transaction that would violate the
securities laws of the United States of America or any state thereof, without
prejudice, however, to such person's or entity's right at all times to sell or
otherwise dispose of all or any part of said Shares pursuant to an effective
registration statement under the Act or any exemption from such registration
available under the Act, and subject, nevertheless, to such person's or entity's
disposition of its property being at all times within its control.

5.2 TERMINATION OF SUCCESSION PLAN. Upon the effective date of this
Agreement, the succession plan in the event of Gooding's death adopted by the
Company pursuant to a Board resolution dated as of June 27, 1994 shall terminate
and be of no further effect.

<PAGE>

5.3 SUCCESSORS, ASSIGNS AND TRANSFEREES. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective legal
representatives, heirs, legatees, successors and assigns including any party to
which any Stockholder has transferred or sold his or its Shares. Except as
provided herein, each transferee of Shares from a party hereto or a Permitted
Transferee thereof shall take such Shares subject to the same restrictions as
existed in the hands of the transferor; PROVIDED that if Gooding or an
Institutional Investor transfers Shares, the transferee shall only have rights
as a Stockholder hereunder and not the rights of Gooding or such Institutional
Investor.

5.4 NOTICES. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given when received if personally delivered;
when transmitted if transmitted by telecopy, electronic or digital transmission
method; the day after it is sent, if sent for next day delivery to a domestic
address by recognized overnight delivery service (E.G., Federal Express);
and upon receipt, if sent by certified or registered mail, return receipt
requested. In each case notice shall be sent to:

If to the Company addressed to:

Wavetek Corporation
11995 El Camino Real, Suite 301
San Diego, California 92130
Telecopy No.: (619) 793-2310
Attention: Chief Executive Officer

If to any Stockholder to such Stockholder at the address indicated on
Schedule II hereto.

5.5 RECAPITALIZATIONS, ETC. The provisions of this Agreement shall
apply, to the full extent set forth herein with respect to the Shares, to any
and all shares of capital stock of the Company or any capital stock, partnership
units or any other security evidencing ownership interests in any successor or
assign of the Company (whether by merger, consolidation, sale of assets or
otherwise) that may be issued in respect of, in exchange for, or in substitution
of the Common Stock by reason of any stock dividend, split, reverse split,
combination, recapitalization, liquidation, reclassification, merger,
consolidation or otherwise.

5.6 LEAD UNDERWRITER. As long as the DLJ Investors own 5% or more of the
outstanding Shares, DLJSC shall have the right but not the obligation to act as
the lead underwriter in a Qualified IPO. If requested, the Stockholders agree
to vote in favor of such engagement.

5.7 INSPECTION AND COMPLIANCE WITH LAW. Copies of this Agreement will be
available for inspection or copying by any Stockholder at the offices of the
Company through the Secretary of the Company.

<PAGE>

5.8 CHOICE OF LAW. THIS AGREEMENT SHALL BE CONSTRUED, INTERPRETED AND
THE RIGHTS OF THE PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE (WITHOUT REFERENCE TO THE CHOICE OF LAW PROVISIONS OF DELAWARE LAW).

5.9 ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This Agreement constitutes
the entire agreement among the parties pertaining to the subject matter hereof
and supersedes all prior agreements, understandings, negotiations and
discussions, whether oral or written, of the parties. This Agreement may not be
amended except by an instrument in writing signed on behalf of the Stockholders
holding at least two-thirds of the outstanding Shares. However, no amendment,
supplement, modification or waiver of this Agreement diminishing a Stockholder's
right of first offer pursuant to Section 4.1 or Tag-Along Rights pursuant to
Section 4.2 hereof shall be binding unless executed in writing by each such
Stockholder affected. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision hereof
(whether or not similar), nor shall such waiver constitute a continuing waiver
unless otherwise expressly provided.

5.10 MULTIPLE COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

5.11 INVALIDITY. In the event that any one or more of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, then to the maximum extent permitted by
law, such invalidity, illegality or unenforceability shall not affect any other
provision of this Agreement.

5.12 TITLES. The titles, captions or headings of the Articles and
Sections herein are for convenience of reference only and are not intended to be
a part of or to affect the meaning or interpretation of this Agreement.

5.13 CUMULATIVE REMEDIES. All rights and remedies of either party hereto
are cumulative of each other and of every other right or remedy such party may
otherwise have at law or in equity, and the exercise of one or more rights or
remedies shall not prejudice or impair the concurrent or subsequent exercise of
other rights or remedies.

5.14 WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW
WHICH CANNOT BE WAIVED, EACH OF THE PARTIES HERETO HEREBY WAIVES, AND COVENANTS
THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT, OR OTHERWISE), ANY
RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND,
CAUSE OF ACTION, ACTION, SUIT OR PROCEEDING ARISING OUT OF OR BASED UPON THIS
AGREEMENT OR THE SUBJECT MATTER HEREOF, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING AND WHETHER IN CONTRACT OR TORT OR OTHERWISE. ANY OF THE
PARTIES HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 5.13
WITH ANY COURT AS WRITTEN

<PAGE>

EVIDENCE OF THE CONSENT OF EACH OF THE PARTIES HERETO TO THE WAIVER OF HIS OR
ITS RIGHT TO TRIAL BY JURY.

5.15 ASSUMPTION OF THIS AGREEMENT. In the event any Stockholder sells,
transfers or otherwise disposes of any of his or its Shares to a Permitted
Transferee such transferee shall execute an assumption agreement in the form of
Exhibit A hereto pursuant to which such transferee agrees to assume the rights
and obligations of such transfer pursuant to this Agreement. In addition, in
the event any Stockholder or any of his or its Permitted Transferees sells,
transfers or otherwise disposes of his or its Shares to a person or entity other
than a Permitted Transferee, such person or entity shall execute an assumption
agreement pursuant to which such person or entity agrees to assume the
obligations of such or such Permitted Transferee.

5.16 TERM. Unless earlier terminated by mutual agreement among the
parties hereto, the provisions of Articles 3 and 4 shall terminate upon the
earlier to occur of a Qualified IPO or upon the tenth year anniversary of this
Agreement and all other provisions of this Agreement shall terminate upon the
tenth year anniversary of this Agreement. Notwithstanding the foregoing, this
Agreement shall in any event terminate with respect to any Stockholder and its
Permitted Transferees when such Stockholder and its Permitted Transferees no
longer own any shares of Registrable Securities (except if such shares are
transferred in violation of this Agreement).

5.17 TERMINATION OF OLD STOCKHOLDERS AGREEMENTS. This Agreement
supersedes and replaces the following agreements, which as of this date shall be
deemed null and void and without further effect: (i) the Stockholders' Agreement
dated April 23, 1996 and the Supplemental Stockholders' Agreement dated April
23, 1996 with Yokogawa Electric Corporation and (ii) the Stock Purchase
Agreement dated June 26, 1991, the Supplemental Stockholders' Agreement dated
October 25, 1994 and Addenda Number One to the Stockholders Agreement dated
April 23, 1996 with Schroder UK Venture Fund III L.P., Schroder UK Venture Fund
III L.P. 2 and Schroder UK Venture Fund III Trust.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this
Stockholders Agreement as of the date first written above.

WAVETEK CORPORATION

By: /s/ Terence J. Gooding
---------------------------------------------
Name: Dr. Terence J. Gooding
Title: Chief Executive Officer

DLJ MERCHANT BANKING PARTNERS II, L.P.

By: DLJ Merchant Banking II, Inc.
Managing General Partner

By: /s/ David B. Wilson
---------------------------------------------
Name:
Title:

DLJ OFFSHORE PARTNERS II, C.V.

By: DLJ Merchant Banking II, L.P.
Managing General Partner

By: /s/ David B. Wilson
---------------------------------------------
Name:
Title:

DLJ DIVERSIFIED PARTNERS, L.P.

By: DLJ Diversified Partners, Inc.

By: /s/ David B. Wilson
---------------------------------------------
Name:
Title:

<PAGE>

DLJMB FUNDING II, INC.

By: /s/ David B. Wilson
---------------------------------------------
Name:
Title:

UK INVESTMENT PLAN 1997 PARTNERS

By: Donaldson, Lufkin & Jenrette, Inc.
General Partner

By: /s/ David B. Wilson
---------------------------------------------
Name:
Title:

DLJ FIRST ESC L.L.C.

By: DLJ LBO Plans Management Corporation
As Manager

By: /s/ David B. Wilson
---------------------------------------------
Name:
Title:

DLJ EAB PARTNERS, L.P.

By: DLJ Merchant Banking II, Inc.
Managing General Partner

By: /s/ David B. Wilson
---------------------------------------------
Name:
Title:

<PAGE>

DLJ MILLENNIUM PARTNERS, L.P.

By: DLJ Merchant Banking II, Inc.
Managing General Partner

By: /s/ David B. Wilson
---------------------------------------------
Name:
Title:

GREEN EQUITY INVESTORS II, L.P.

By: Grand Avenue Capital Partners, L.P.
Grand Avenue Capital Corporation,
its general partner

By: /s/ Peter Nolan
---------------------------------------------
Name:
Title:

DR. TERENCE J. GOODING

/s/ Terence J. Gooding
-------------------------------------------------
Dr. Terence J. Gooding

SCHRODER UK VENTURE FUND III
A Group consisting of three entities:
Schroder UK Venture Fund III Trust
Schroder UK Venture Fund III L.P.
Schroder UK Venture Fund III L.P. 2
By: SCHRODER VENTURE MANAGERS LIMITED,
Manager

By: /s/ Peter L. Everson
---------------------------
Peter L. Everson, Director of
the Manager of each of the
three entities comprising the
Fund

<PAGE>

YOKOGAWA ELECTRIC CORPORATION

By: /s/ Tetsuji Ishizuka
---------------------------------------------
Name: Tetsuji Ishizuka
Title: General Counsel

BARBARA A. GOODING
TERENCE J. AND BARABARA A. GOODING CRUT
TERENCE J. GOODING GRAT 1
TERENCE J. GOODING GRAT 2
BARBARA A. GOODING GRAT
GOODING FAMILY FOUNDATION
GOODING INVESTMENTS, INC.
ANTHONY P. GOODING
ANTHONY P. GOODING CRUT
TERENCE J. GOODING, JR.

TERENCE J. GOODING, JR. CRUT
PAUL L. GOODING
PAUL L. GOODING CRUT
KATHRYN A. VALVERDE
KATHRYN A. VALVERDE CRUT
MATTHEW T. LONDON
MATTHEW T. LONDON CRUT
REBECCA J. BELLATI
REBECCA J. BELLATI CRUT
VICTORIA L. GOODING
VICTORIA L. GOODING CRUT
KYLE L. GOODING INTER VIVOS TRUST
AMANDA L. GOODING INTER VIVOS TRUST
PATRICK A. GOODING INTER VIVOS TRUST
AMANDA N. MCPHERSON INTER VIVOS TRUST
CODY C. MCPHERSON INTER VIVOS TRUST
TERENCE M. LONDON INTER VIVOS TRUST
TERENCE J. GOODING 1994 TRUST
BARBARA A. GOODING 1994 TRUST
IVERNA REDMOND
MAUREEN WISCHHUSEN
MARGARET GOODING
MARY J. OLSON
YVONNE DUGGER
DARREL WEBLEY
DUANE WEBLEY
DEBORAH SPARKS
SNOW HILL TRUSTEES
RICHARD J. BERRY

<PAGE>

GERALDINE MARY BERRY
PAUL STEVENSON
SUZANNE EVE STEVENSON
PHILIP J. COOKE

By: /s/ Terence J. Gooding
----------------------------------------
Terence J. Gooding, as Attorney-in-Fact

BEN J. CONSTANTINI

By: /s/ Ben J. Constantini
----------------------------------------
Ben J. Constantini

DEREK T. MORIKAWA
/s/ Derek T. Morikawa
-----------------------------
Derek T. Morikawa

MEGAN MORIKAWA INTER VIVOS TRUST
EVAN MORIKAWA INTER VIVOS TRUST

By: /s/ Derek T. Morikawa
-------------------------------------------
Derek T. Morikawa, Attorney-in-Fact

ROD BALLARD
KEITH BARGROFF
RICHARD BERRY
PAT BONFILS
JOSEPH A. BUDANO
VICKIE L. CAPPS
CHARLES CITRON
BEN J. CONSTANTINI
DANIEL FISH
BRUCE GOULD
MICHAEL HUFF
RICHARD JAWORSKI
RONALD JENT
BARRY KITAEN
MICHAEL LATHAM
ANN LITTLE
JOSEPH MATIBAG
NORMAN MILLER
DEREK T. MORIKAWA
ERNEY NIKOU
JEFFREY PERRIN

<PAGE>

MICHAEL RICHARDSON
MICHAEL SCIULLI
BRYAN WHATLEY
PAUL ASHTIANI
ANTHON EDWARD BAYLY
DAVID COOPER
PAUL ROBERTS
RICHARD RODDIS
PAUL STEVENSON
DAVID WALKER
STEVEN MANNING
KOON ENG TAN
YONG CHANG YANG
ULRICH DIEHL
ROL KAINDL
WINFRIED LENNE
PETER MASSAM
JOUKE RIJPSTRA
KLAUS ROMANEK
SOREN SCHNAPKA
DIETER SCHWEISTHAL
NORBERT STADHOUDERS
WIELAND WEIGLER
MICHEL BOUQUAIN
ENZO DI LUIGI
OLIVIER MASSELIN
FRANCOIS PLAZANET
FREDERICK TROJANI
LUKA RADOMIROV

By: /s/ Terence J. Gooding
-----------------------------------------------
Terence J. Gooding, as Attorney-in-Fact

<PAGE>

EXHIBIT 4.7

THIRD SUPPLEMENTAL INDENTURE

THIRD SUPPLEMENTAL INDENTURE, dated as of May 25, 1999 (this "THIRD
SUPPLEMENTAL INDENTURE"), among Wavetek Wandel Goltermann, Inc. (the
"COMPANY") and The Bank of New York, as trustee (the "TRUSTEE").

W I T N E S S E T H:

WHEREAS, the Company, Wandel & Goltermann Technologies, Inc., Wandel
& Goltermann A.T.E. Systems, Inc., Wandel & Goltermann, Inc., W&G Equities,
Inc., Digital Transport Systems, Inc. and the Trustee are parties to an
Indenture, dated as of June 11, 1997 and supplemented as of September 30,
1998 and October 30, 1998 (the "INDENTURE"), providing for the issuance of
$85,000,000 of the Company's 10-1/8% Senior Subordinated Notes due June 15,
2007 (the "NOTES"); and

WHEREAS, the Company and the holders of Notes have agreed to make
certain amendments to the Indenture as set forth herein;

NOW, THEREFORE, each party agrees as follows for the benefit of each
other and for the equal ratable benefit of the holders of the Notes:

1. CHANGE OF CONTROL. The definitions of "Change of Control" and
"Principals" in the Indenture shall be amended to read in their entirety as
follows:

"Change of Control" means the occurrence of any of
the following: (i) the sale, lease, transfer, conveyance or
other disposition, in one or a series of related transactions,
of all or substantially all of the assets of the Company and
its Subsidiaries, taken as a whole, to any "person" (as such
term is used in Section 13(d)(3) of the Exchange Act), (ii)
unless clause (iv) is applicable, any "person" (as such term
is used in Section 13(d)(3) of the Exchange Act), other than
the Principals or their Related Parties, becoming the
beneficial owner (as determined by Rule 13d-3 and Rule 13d-5
under the Exchange Act), directly or indirectly, of more than
40% of the Voting Stock of the Company (measured by voting
power rather than number of shares), (iii) the first day on
which a majority of the members of the Board of Directors of
the Company are not Continuing Directors or (iv) (A) any
transaction (including one or a series or related
transactions),

<PAGE>

including, without limitation, a merger, consolidation,
recapitalization, exchange or reclassification,
the consummation of which would result in the shareholders of
the Company immediately before the occurrence of such
transaction owning, in the aggregate, less than 50% of the
Voting Stock of the surviving entity immediately following the
occurrence of such transaction and (B) on or after the date of
any transaction described in clause (A), any "person" (as such
term is used in Section 13(d)(3) of the Exchange Act), other
than the Principals or their Related Parties, becoming the
beneficial owner (as determined by Rule 13d-3 and Rule 13d-5
under the Exchange Act), directly or indirectly, of more than
10% of the Voting Stock of the Company (measured by voting
power rather than number of shares).

"Principals" means Gooding, DLJMB Funding II, Inc.,
DLJ Merchant Banking Partners II, L.P., DLJ Diversified
Partners, L.P., UK Investment Plan 1997 Partners, DLJ First
ESC L.P., DLJ Offshore Partners II, C.V., DLJ EAB Partners,
L.P., DLJ Millennium Partners, L.P., DLJ Merchant Banking
Partners II- A, L.P., DLJ Diversified Partners-A, L.P., DLJ
Millennium Partners-A, L.P., Green Equity Investors II, L.P.,
Albrecht Wandel, Renate Wandel, Burkhard Goltermann, Frank
Goltermann, Ulrike Goltermann, Roberta Agosto Goltermann,
Peter Wagner, Yokogawa Electric Corporation, Schroder UK
Venture Fund III and Hannover Finanz W&G
Beteiligungsgessellschaft mbH.

2. INCURRENCE OF INDEBTEDNESS. The first paragraph of
Section 4.09 of the Indenture shall be amended by inserting before the phrase
"if the Fixed Charge Coverage Ratio" in the seventh line the following phase:

, and the Foreign Subsidiaries may incur Indebtedness
(including Acquired Debt) in an aggregate principal amount not
to exceed $40,000,000 less any amounts incurred pursuant to
paragraphs (iii) or (iv) below.

3. FOREIGN SUBSIDIARIES. Section 4.14 of the Indenture shall be
amended to read in its entirety as follows:

100% of the Capital Stock of all Foreign Subsidiaries
must be owned directly or indirectly by the Company.

4. CONFIRMATION OF INDENTURE. The Indenture, as supplemented
by this Third Supplemental Indenture, is in all respects ratified and
confirmed, and the Indenture, this Third Supplemental Indenture and all
indentures supplemental thereto shall be read, taken and construed as one and
the same instrument.

5. CONCERNING THE TRUSTEE. The Trustee assumes no duties,
responsibilities or liabilities by reason of this Third Supplemental Indenture
other than as set

-2-

<PAGE>

forth in the Indenture and, in carrying out its responsibilities hereunder,
shall have all of the rights, protections and immunities which it possesses
under the Indenture.

6. GOVERNING LAW. This Third Supplemental Indenture shall be
governed by and construed in accordance with the law of the State of New York.

7. COUNTERPARTS. This Third Supplemental Indenture may be
executed in any number of counterparts each of which shall be an original,
but such counterparts shall together constitute but one and the same
instrument.

IN WITNESS WHEREOF, the parties hereto have caused this Third
Supplemental Indenture to be duly executed as of the day and year first above
written.

WAVETEK WANDEL GOLTERMANN, INC.

By:_/s/ Vickie Capps________________________
Name: Vickie Capps
Title: Senior Vice President - Finance

Attest:

_/s/ Terence J. Gooding_____
Name: Terence J. Gooding
Title: Co-Chairman

THE BANK OF NEW YORK

By:_/s/ Thomas C. Knight______________
Name: Thomas C. Knight
Title: Assistant Vice President

-3-

<PAGE>

WAVETEK CORPORATION EXECUTIVE BENEFITS PLAN - FINAL
JUNE 1, 1997

Purpose:

To provide additional benefits for employees who, in the execution of their
responsibilities, are in a position to significantly influence the performance
level of the Company.

Eligibility:

All employees in Grade 19 and above.

Benefits:

- - Enhanced short-term compensation through participation in the Wavetek
Executive Bonus Plan.

- - Long-term compensation through participation in Wavetek's Stock Option
Plan.

- - Additional vacation (for employees in countries where standard vacation is
less than 4 weeks).

Grade 19 - 3 weeks per annum for the first 4 years of employment; 4 weeks
thereafter.
Grade 20 and above - 4 weeks per annum from date of employment.

- - Additional severance pay in the event of termination (subject to signing
Wavetek's Severance and General Release Agreement):

Grade 19 - 13 weeks of base salary - cash payment.

Grade 20 - at the discretion of the Company either (a) a cash payment equal
to 26 weeks of base salary, or (b) continuation of employee's base salary
until the employee obtains employment for a period not to exceed 26 months.

Grade 21 and above - at the discretion of the Company either (a) a cash
payment equal to 52 weeks of base salary, or (b) continuation of employee's
base salary until the employee obtains employment for a period not to
exceed 52 weeks.

- - Automobile allowance:

Grade 20 and above, amount in accordance with country standard.

<PAGE>

EXECUTIVE BONUS PLAN - FINAL

Grade 18:

25% of base salary - based on meeting personal objectives, divisional
objectives and financial results.

Grade 19:

30% of base salary - based on personal objectives and divisional (for
divisional employees) or corporate (for corporate employees) objectives and
financial results.

Grade 20:

30% of base salary - based on personal objectives, divisional objectives
and financial results, and corporate objectives and financial results.

Grade 21:

35% of base salary - based on personal objectives, divisional objectives
and financial results, and corporate objectives and financial results.

Grade 22:

40% of base salary - based on personal objectives, corporate objectives and
corporate financial results.

Grade 23:

45% of base salary - based on personal objectives, corporate objectives and
corporate financial results.

Grade 24:

50% of base salary - based on personal objectives, corporate objectives and
corporate financial results.

<PAGE>

WAVETEK WANDEL & GOLTERMANN, INC.

AMENDED AND RESTATED STOCK OPTION PLAN

SECTION 1. ESTABLISHMENT, PURPOSE AND EFFECTIVE DATE

1.1 ESTABLISHMENT AND PURPOSE OF PLAN. Wavetek Wandel &
Goltermann, Inc. (the "Company") has adopted this Amended and Restated Stock
Option Plan (the "Plan") in order to enable the Company and its subsidiaries to
attract, retain and provide equity incentives to key employees, to stimulate the
efforts of such employees toward the achievement of objectives established by
the Company to encourage such employees to identify their long-term interests
with those of the Company's stockholders.

1.2 EFFECTIVE DATE OF THE PLAN. The effective date of this
amendment and restatement of the Plan is October 1, 1998. The original
effective date of the Plan was April 29, 1992.

SECTION 2. ADMINISTRATION

2.1 ADMINISTRATION. The Plan shall be administered by a committee
(the "Committee") consisting of two or more members appointed by the Board of
Directors of the Company (the "Board"). In the event any class of the Company's
shares are required to be registered under Section 12 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), the Committee shall consist of two
or more non-employee members of the Board who shall be "outside directors" under
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"),
and "non-employee directors" under Rule 16b-3 under the Exchange Act.

<PAGE>

2.2 AUTHORITY OF THE COMMITTEE. The Committee shall have full
power and authority to interpret the Plan, to establish, amend and rescind rules
and regulations relating to the Plan, to determine the form, terms and
conditions of the options (the "Options") to purchase the Company's Common
Stock, par value $.01 per share (the "Stock"), to be issued pursuant to the
Plan, to provide for such conditions and assurances as the Committee deems
necessary or advisable to protect the interests of the Company and to make all
other determinations necessary or advisable in connection with the
administration of the Plan.

The Committee shall determine the employees ("Optionees") to whom and
the time or times at which Options shall be granted, the number of shares of
Stock to be subject to each Option, the duration of each Option, the exercise
price of each Option (the "Option Price"), whether the Option will be an
incentive stock option within the meaning of Section 422 of the Code and the
time or times within which (during the term of such Options) all or portions of
each Option may be exercised, except as otherwise provided herein.

2.3 DECISIONS FINAL AND CONCLUSIVE. The determination of the
Committee as to any question arising under the Plan, including questions of
construction and interpretation, shall be final, binding and conclusive upon all
persons, including the Company, its stockholders and persons having any
interests in the Options.

-2-
<PAGE>

SECTION 3. ELIGIBILITY

3.1 ELIGIBILITY. Key employees of the Company or its subsidiaries
who are involved in the attainment of long-range and overall Company objectives,
members of the Board who are neither employees nor members of the Committee and
members of the Company's advisory board established by the Board shall be
eligible to receive Options.

3.2 RIGHTS OF OPTIONEES. Nothing in this Plan or in any Option
shall interfere with or limit in any way the right of the Company, any of its
subsidiaries or any other corporation to terminate the employment of an Optionee
at any time or shall confer upon any Optionee any right to continue in the
employ of the Company, any of its subsidiaries or any other corporation.

SECTION 4. STOCK SUBJECT TO THE PLAN

4.1 NUMBER. The maximum number of shares of Stock that may be
issued pursuant to Options granted pursuant to the Plan is 1,320,232, subject to
adjustment as provided in Section 4.2. Such shares may consist, in whole or in
part, of authorized but unissued Stock or treasury Stock of the Company which is
not reserved for issuance for any other purpose. In the event that any Option,
for any reason, is terminated unexercised as to all or any portion of the shares
of Stock subject thereto, such shares nay be subjected to another Option issued
pursuant to the Plan. At all times during the term of the Plan, the Company
shall reserve and keep available such number of shares of Stock as shall be
required to enable the Company to issue shares upon the exercise of all
outstanding Options to the extent then exercisable.

-3-
<PAGE>

4.2 ANTIDILUTION ADJUSTMENTS. In the event of any increase or decrease
in the outstanding shares of Stock by reason of a stock dividend, stock split,
combination of shares or distribution payable in shares of capital stock of the
Company of any class, then the aggregate number of shares of Stock available for
issuance under the Plan, the number and class of shares subject to each
outstanding Option and the Option Price thereof shall be adjusted by the
Committee, whose determination shall be conclusive, so that Optionees shall be
entitled to receive the number and kind of shares at an Option Price
corresponding to what they would have received if they exercised their Options
prior to the occurrence of such event; provided, however, that except with the
approval of the Committee no fractional shares shall be issued upon the exercise
of Options and no payment shall be made in lieu thereof.

SECTION 5. OPTIONS

5.1 GRANT OF OPTIONS. The Committee may from time to time, at its
discretion, grant Options pursuant to the Plan to such key employees of the
Company or its subsidiaries as it shall determine. In no event may any employee
receive Options with respect to more than 150,000 shares of Stock in any
calendar year.

5.2 OPTION AGREEMENT. Each Option granted under the Plan shall be
evidenced by a written stock option agreement (the "Option Agreement"), to be
executed by the Company and the Optionee, in such form (which need not be the
same for each Option) as the Committee shall approve. Each Option Agreement
shall state the number of shares of Stock that may be purchased upon the
exercise of such Option, the Option

-4-
<PAGE>

Price and the duration thereof. More than one Option may be granted to an
eligible employee. The Option Agreement evidencing the Option will be
delivered to the Optionee within a reasonable time after the grant of the
Option.

5.3 DATE OF GRANT. The date of grant of an Option shall be the
date on which the Committee determines to grant such Option, unless otherwise
specified by Committee.

5.4 OPTION PRICE. The Option Price for each Option shall not be
less than 100% of the fair market value of one share of Stock on the date the
Option is granted, as determined by the Board; provided, however, in the event
the Company's Stock becomes Publicly Traded (as defined below), fair market
value shall be the closing price of one share of Stock on the principal stock
exchange on which the Stock trades on the date the Option is granted or, if
there was no sale of Stock on such stock exchange on such date, the closing
price of the Stock on the last previous day on which a sale occurred shall be
used. For purposes of the Plan, "Publicly Traded" means that the Stock is
traded on any internationally recognized stock exchange.

5.5 DURATION OF OPTIONS. Each Option shall have a duration
determined by the Committee, but in no event more than ten years from the date
of grant.

5.6 OTHER TERMS AND PROVISIONS. Options may contain such other
terms and provisions, not inconsistent with the Plan, as the Committee shall
deem appropriate, including with respect to Options intended to be incentive
stock options,

-5-
<PAGE>

such provisions as the Committee determines are necessary to comply with
Section 422 of the Code.

SECTION 6. EXERCISE OF OPTIONS

6.1 WRITTEN NOTICE. An Optionee who wishes to exercise an Option
in whole or in part shall give written notice of such exercise to the Company.
The date on which the Company receives such notice shall be considered the date
such Option was exercised as to the shares specified in such notice.

6.2 PAYMENT. Simultaneously with the delivery to the company of
notice of the exercise of any Option, the Optionee shall: (a) pay to the
Company the sum of (i) the aggregate Option Price for all shares to be purchased
upon the exercise of the Option or, if the Committee shall permit, by delivering
an interest-bearing full recourse promissory note (subject to any limitations of
applicable law), and (ii) an amount equal to all federal, state and local income
taxes, if any, required to be withheld and paid by the Company as a result of
such exercise; and (b) if the Stock is not Publicly Traded, execute and deliver
to the Company (i) a representation that the Optionee is acquiring such shares
for his or her own account for investment and not with a view to, or for resale
in connection with, any distribution thereof, and (ii) a counterpart of the
Stockholders' Agreement in the form provided by the Company to which other
stockholders of the Company are parties. All payments shall be made by check
payable to the order of the Company or, if the Stock is Publicly Traded, such
other method permitted by the Committee, including (i) tendering shares of Stock
owned by the Optionee,

-6-
<PAGE>

(ii) authorizing a third party to sell the shares (or a sufficient portion
thereof) acquired upon exercise of a stock option and assigning the delivery
to the Company of a sufficient amount of the sale proceeds to pay for all the
shares acquired through such exercise, or (iii) any combination of the above.
The Committee may if the Stock is Publicly Traded, in its discretion and
subject to such rules as it may adopt, permit participants to elect to
satisfy the required income tax withholding by having the Company retain the
number of shares of Stock, the fair market value of which (as determined in a
manner consistent with Section 5.4) equals the amount required to be withheld.

6.3 ISSUANCE OF STOCK CERTIFICATES. As soon as practicable after
receipt of notice of exercise, payment and satisfaction of any other conditions
set forth in the Option Agreement, the Company shall deliver to the Optionee a
certificate or certificates for the number of shares of Stock purchased upon
such exercise.

6.4 PRIVILEGES OF A STOCKHOLDER. No Optionee shall be deemed a
stockholder with respect to any shares of Stock covered by an Option until a
stock certificate has been issued to such Optionee.

SECTION 7 TRANSFER AND EXERCISE OF OPTIONS

Options shall be transferable only by will or the laws of descent and
distribution and shall be exercisable, during the Optionee's lifetime, only by
the Optionee.

-7-
<PAGE>

SECTION 8 TERMINATION OF EMPLOYMENT.

8.1 Prior to the date the Stock is Publicly Traded:

(a) If an Optionee's employment is terminated for cause by the
Company or any of its subsidiaries:

(i) An Optionee's Options are terminated effective on the date of
such resignation or termination; and

(ii) Within ninety days after the date of such termination, the
Company shall have the right but not the obligation to purchase any Stock
acquired upon exercise of any Options by Optionee at the employees cost.

(b) If an Optionee's employment is terminated other than for cause
by the Company or any of its subsidiaries, or if the Optionee resigns from
employment, then within ninety days after the date of such termination:

(i) The Optionee shall have the right to exercise all Options held
by such Optionee, to the extent exercisable on the date of termination of
employment, but in no event later than the expiration date of such Options;
and

(ii) The Company shall have the right but not the obligation to
purchase any Stock acquired upon exercise of any Options by Optionee at the
fair market value of the Stock on the date of such termination of
employment, as determined by the Board in its sole discretion.

8.2 On or after the date the Stock is Publicly Traded, if an
Optionee ceases to be employed by the Company or any of its subsidiaries for any
reason, such

-8-
<PAGE>

Optionee may exercise all Options held by such Optionee, to the extent
exercisable on the date of termination, but in no event later than the
expiration date of such Options, unless termination was for cause (as defined
below), in which event all Options held by such Optionee are terminated
effective with the termination of employment.

8.3 Termination "for cause" shall mean termination of Optionee's
employment because of Optionee's (i) involvement in fraud, misappropriation or
embezzlement related to the business or property of the Company, (ii) conviction
for, or plea of guilt or NOLO CONTENDERE to, a felony, (iii) habitual abuse of
any substance, (iv) breach of confidentiality or disclosure of trade secrets.

SECTION 9 DURATION OF PLAN

The Plan shall remain in effect for a period of ten years from and
after the effective date of the amendment and restatement of the Plan, but
Options granted pursuant to the Plan may extend beyond termination of the Plan
in accordance with the terms of such Options. All Options pursuant to the Plan
shall be granted while the Plan is in effect.

SECTION 10 AMENDMENT OF PLAN

The Board may amend the Plan from time to time in such respects as
it deems advisable, provided that no amendment shall adversely affect the
rights of any Optionee without such Optionee's consent, and no amendment
shall be made unless approved by the stockholders of the Company if such
amendment would materially increase the benefits accruing to employees
participating in the Plan, materially increase

-9-
<PAGE>

the number of shares of Stock which may be issued pursuant to the
Plan (other than by operation of Section 4.2), or materially modify the
eligibility requirements of Section 3.1.

SECTION 11 LAWS, RULES AND REGULATIONS

The Plan, the grant and exercise of Options pursuant thereto and the
obligation of the Company to issue and deliver shares of Stock upon exercise of
such Options shall be subject to all applicable laws, rules and regulations and
to any required approvals by any governmental agencies or national securities
exchanges on which the Stock may from time to time be listed. No Option shall
be exercisable unless such exercise is in compliance with the Securities Act of
1933, as amended, and applicable state securities laws as in effect on the date
of exercise. The Company shall have no obligation to register or qualify the
Stock under any such law. This Plan will be governed by the laws of the State
of Delaware, without reference to principles of conflict of laws.

-10-

<PAGE>

CONFORMED COPY

DM 280,000,000

FACILITIES AGREEMENT
in relation to a
MULTI-CURRENCY REVOLVING CREDIT FACILITY
and
BILATERAL ANCILLARY FACILITIES

between

WAVETEK WANDEL & GOLTERMANN, INC.
as Borrower

and

WANDEL & GOLTERMANN TECHNOLOGIES, INC.
as Guarantor

and

COMMERZBANK AKTIENGESELLSCHAFT
and
DEUTSCHE BANK AG
as Joint-Arrangers

and

COMMERZBANK INTERNATIONAL S.A.

as Agent

and

OTHERS

<PAGE>

TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE PAGE
- ------- ----
<S> <C>
1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. THE FACILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3. PURPOSE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4. CONDITIONS PRECEDENT, NOTICE OF BORROWING AND. . . . . . . . . . . . . . . . . 14
DETERMINATION OF TRANCHE B . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5. TERM OF ADVANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6. INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7. CURRENCY OPTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8. SUBSTITUTE BASIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
9. REPAYMENT AND PREPAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
10. MAINTENANCE OF DLJ LOAN REFINANCING. . . . . . . . . . . . . . . . . . . . . . 20
11. CANCELLATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
12. EVIDENCE OF DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
13. PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14. DEFAULT INTEREST AND INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . 25
15. SET-OFF AND REDISTRIBUTION OF PAYMENTS . . . . . . . . . . . . . . . . . . . . 26
16. CHANGE OF CIRCUMSTANCES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
17. THE GUARANTEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
18. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . 32
19. UNDERTAKINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
20. FINANCIAL COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
21. EVENTS OF EARLY REPAYMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . 43
22. FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
23. EXPENSES AND STAMP DUTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . 47
24. THE AGENT, THE ARRANGERS AND THE BANKS . . . . . . . . . . . . . . . . . . . . 48
25. CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
26. NO WAIVER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
27. PARTIAL INVALIDITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
28. AMENDMENTS AND WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
29. CHANGE OF LENDING OFFICE AND ASSIGNMENTS . . . . . . . . . . . . . . . . . . . 54
30. LANGUAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
31. APPOINTMENT OF WGMH AS REPRESENTATIVE. . . . . . . . . . . . . . . . . . . . . 56
32. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
33. APPLICABLE LAW AND JURISDICTION. . . . . . . . . . . . . . . . . . . . . . . . 57
34. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
THE FIRST SCHEDULE - Banks and Commitments . . . . . . . . . . . . . . . . . . 61
THE SECOND SCHEDULE - Conditions Precedent . . . . . . . . . . . . . . . . . . 62
THE THIRD SCHEDULE - Notice of Borrowing . . . . . . . . . . . . . . . . . . . 64
THE FOURTH SCHEDULE - Form of Transfer Certificate . . . . . . . . . . . . . . 66
THE FIFTH SCHEDULE - Share Pledge Agreement. . . . . . . . . . . . . . . . . . 69
THE SIXTH SCHEDULE - Ancillary Facilities. . . . . . . . . . . . . . . . . . . 81
</TABLE>

<PAGE>

This Facilities Agreement (the "AGREEMENT") is made the 23rd day of December,
1998 between

(1) Wavetek Wandel & Goltermann, Inc., a Delaware Corporation, Research
Triangle Park, North Carolina, USA as borrower (hereinafter referred
to as the "BORROWER") ,

(2) Wandel & Goltermann Technologies, Inc., a North Carolina Corporation,
Research Triangle Park, North Carolina, USA as guarantor (hereinafter
referred to as the "GUARANTOR"),

(3) Commerzbank Aktiengesellschaft and Deutsche Bank AG as Joint-Arrangers
(hereinafter referred to in such capacity as the "ARRANGERS" and each
individually as an "ARRANGER"),

(4) the financial institutions named inthe First Schedule (hereinafter
referred to collectively as the "BANKS"),

(5) Deutsche Bank AG, Reutlingen Branch, as additional party under an
Ancillary Facility to be made between Deutsche Bank AG, Reutlingen
Branch and the Borrower in accordance with this Agreement (hereinafter
referred to as "DEUTSCHE BANK AG, REUTLINGEN BRANCH" or the
"ADDITIONAL LENDER"),

(6) Commerzbank International S.A. as agent for the Banks (hereinafter
referred to in such capacity as the "AGENT").

Now it is hereby agreed as follows:

1. DEFINITIONS

(A) In this Agreement the following terms have the following meanings:

"ACQUIRED FINANCIAL INDEBTEDNESS" means the financial indebtedness refered to
under Article 19 (I)(8).

"ADVANCE" means the principal amount of each advance made or to be made by
the Banks to the Borrower under the Revolving Credit Facility (as from time
to time reduced by prepayment or repayment).

<PAGE>

"ANCILLARY COMMITMENTS" means in relation to any Bank its commitment with
respect to the Ancillary Facilities as set out in the Sixth Schedule.

"ANCILLARY FACILITIES" means all ancillary facilities referred to in Article
2 (B).

"ATE" means Wandel & Goltermann ATE Systems, Inc.

"BILATERAL FACILITIES" means all existing bilateral facilities of the
Borrower or its subsidiaries set out in the Disclosure Letters.

"BORROWING AMOUNT" means DM 10 million (or following the Commencement Date
EURO 5 million) or, if more, an integral multiple of DM 5 million (or
following the Commencement Date EURO 2.5 million) or the remainder of Tranche
A or Tranche B respectively (or the equivalent of any such amount in an
Optional Currency).

"BUSINESS DAY" means (a) a day (other than a Saturday or Sunday) on which
banks are open for business as required in connection herewith (other than in
relation to a payment of or rate fixing to EUROs), in London, Luxembourg and
Frankfurt, and if such reference relates to the date for the payment or
purchase of any sum denominated in any Optional Currency in the principal
financial centre of the country of such Optional Currency and (b) in relation
to a payment of or rate fixing relating to EUROs, a TARGET Day.

"CODE" means the United States Internal Revenue Code of 1986, as amended,
from time to time, and the regulations promulgated and rulings issued
thereunder. Section references to the Code are to the Code, as in effect at
the date of this Agreement and any subsequent provisions of the Code,
amendatory thereof, supplemental thereto or substituted therefor.

"COMMENCEMENT DATE" means the date of the third stage of EMU as contemplated
by the Treaty (at the date of this Agreement expected to be 1 January, 1999).

"COMMITMENT PERIOD" means the period commencing on the date hereof and ending
on the Final Maturity Date (both dates inclusive).

"DEUTSCHE MARK" or "DM" means the lawful currency for the time being of the
Federal Republic of Germany.

<PAGE>

"DISCLOSURE LETTERS" means the letters from the Borrower to the Agent dated
22nd day of December, 1998 setting out details of certain existing
encumbrances and existing long-term facilities.

"DLJ LOAN" means the credit facilities in the amount of USD 45,000,000 made
available to the Borrower under a credit agreement dated June 11, 1997, and
made between the Borrower (at that time named Wavetek Corporation), DLJ
Capital Funding Inc. and the banks named therein.

"ECU" means the European Currency Unit.

"EMU" means the Economic and Monetary Union as contemplated in the Treaty.

"EMU LEGISLATION" means legislative measures of the European Council for the
introduction of, changeover to, or operation of, a single or unified European
currency.

"ERISA" means the United States Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder. Section references to ERISA are to ERISA, as in
effect at the date of this Agreement and any subsequent provisions of ERISA,
amendatory thereof, supplemental thereto or substituted therefor.

"ERISA AFFILIATE" means, at any time, each person (as defined in Section 3
(9) of ERISA) that would, at the time, be treated together with a member of
the Group as a "single employer" (i) within the meaning of Section 414 (b),
(c), (m) or (o) of the Code or (ii) as a result of such member of the Group
being or having been a general partner of such person.

"EURIBOR" means the percentage rate per annum equal to the rate for deposits
in EUROs for a period equal to the period for which an interest rate has to
be determined hereunder (hereinafter referred to as the "Relevant Period")
which appears on the page of the Bridge Telerate Screen which displays for
spot value (D+2) and on an actual/360 day-count convention basis the average
EURIBOR rate as agreed with Euribor FBE (anticipated to be page 248) at or
about 11:00 a.m. Brussels time on the Interest Determination Date.

"EURO OR EUROS" means the single currency to be introduced on the
Commencement Date but, prior to the Commencement Date, references to the
"EURO" or to "EUROs" shall be read as references to ECU.

"EURO UNIT" means a unit of the EURO as defined in EMU legislation.

<PAGE>

"EVENT OF EARLY REPAYMENT" means any of the events described in Article 21.

"FACILITIES" means the Revolving Credit Facility and the Ancillary Facilities
and "FACILITY" shall mean one of them granted to the Borrower under Article 2
as from time to time reduced pursuant to the terms hereof.

"FACILITY AMOUNT" means the amount in DM set out with respect to the
Revolving Credit Facility in Article 2 (A) adjusted, as the case may be, to
take into account any reduction in accordance with the terms hereof.

"FACILITY DOCUMENTS" means this Agreement, the Share Pledge Agreement and any
document evidencing the terms of any other agreement or document that may be
entered into or executed pursuant to or in connection with any of the
foregoing by the Obligors or either of them or entered into by any person
creating or evidencing security for the obligations of the Borrower hereunder
whether by way of personal covenant, charge, security interest, mortgage,
pledge or otherwise or regulating the priorities of such security, and any
other agreement or document designated in writing as a "Facility Document" by
the Borrower and the Agent.

"FINAL MATURITY DATE" means, subject to any cancellation or other termination
of all Banks' Commitments in accordance with the terms hereof, the date which
falls on the second anniversary of the date hereof.

"GAAP" means, in relation to an Obligor the accounting principles generally
accepted in the United States.

"GBP" means the lawful currency for the time being of the United Kingdom.

"GROUP" means the Borrower and all of its subsidiaries.

"GUARANTEED AMOUNT" means the amount set out in Article 17 (A).

"IMMATERIAL SUBSIDIARIES" means for the purposes of Article 18 (A) (8) and
Article 21 (F) and (J) (i) any subsidiary the annual turnover of which is
less than DM 2 million and the total assets of which amount for not more than
DM 2 million as of the end of the most recent fiscal quarter and (ii) Wandel
& Goltermann Inc., Canada as long as its annual turnover is not higher than
in its financial statements of September 30, 1998.

<PAGE>

"INTERBANK MARKET" means the European Interbank euro-currency Market.

"INTERBANK RATE" means in relation to any Advance

(i) in the case of EUROs EURIBOR, or

(ii) in the case of any other currency (other than Sterling LIBOR), meaning
the per annum rate of interest for the relevant term appearing on
Telerate Screen page 3750 or 3740, as the case may be, or any
equivalent successor to any such page at or about 11:00 a.m. on the
Interest Determination Date for the relevant term, as being the
interest rate offered in the Interbank Market for deposits in the
currency of the Advance for delivery on the first day of such term and
for a period approximately equal to such term, or

(iii) in the case of Sterling or if the relevant rate does not appear on the
relevant Telerate Screen or the Agent determines that no rate for a
period of comparable duration to the relevant term appears on the
relevant Telerate Screen for the currency of the Advance, the rate per
annum determined by the Agent to be the arithmetic mean (rounded
upwards, if necessary to the nearest whole multiple of one sixteenth
of one per cent (1/16 %)) of the rates at which each of the Reference
Banks was offered by prime banks in the Interbank Market deposits in
the currency in which such Advance is to be denominated at or about
11:00 a.m. on the Interest Determination Date for the relevant term.

"INTEREST DETERMINATION DATE" means in relation to any Advance the Business
Day which is two Business Days prior to the making of such Advance.

"LENDING OFFICE" means in relation to a Bank, the office identified with its
signature below or such other office as notified by such Bank to the Agent
pursuant to Article 29 (B).

"LOAN" means the aggregate principal amount for the time being advanced and
outstanding pursuant to this Agreement.

"MAJORITY BANKS" means whilst there are no Advances outstanding a group of
Banks whose aggregate Revolving Credit Facility Commitments at the relevant
time exceed 66 2/3 per cent. of the Facility Amount and, whilst (an)
Advance(s) is/are outstanding, a group of Banks to whom in aggregate more
than 66 2/3 per cent. of the Loan is owing.

"MARGIN" means (i) in any case 0.9 per cent. per annum and (ii) following
September 30, 1999 1.5 per cent. per annum if and as long as the Revolving
Credit Facility Commitments have not

<PAGE>

been reduced in the minimum amount of DM 100,000,000 in accordance with
Article 9 and Article 11.

"MATERIAL ADVERSE EFFECT" means, for the purposes of Articles 18 (A)(7) and
(11) and 19 (G) and 21 (R), a material adverse affect on the business or
financial condition of either Obligor and / or the Group taken as a whole or
on the ability of either of the Obligors to perform its obligations hereunder.

"MATERIAL MEMBER OF THE GROUP" means any member of the Group other than
Immaterial Subsidiaries.

"MATURITY DATE" means in relation to any Advance, the last day of the term of
such Advance.

"MERGER AGREEMENT" means the Exchange and Merger Agreement, dated as of June
12, 1998, by and among the Borrower, WGMH and the stockholders listed
therein, as amended.

"MULTIEMPLOYER PLAN" means any multiemployer plans defined in Section 4001 of
ERISA, which is contributed to by (or which there is an obligation to
contribute) the Borrower, the Guarantor or any of their subsidiaries or an
ERISA Affiliate, each such plan for the five year period immediately
following the latest date on which the Borrower, the Guarantor or any of
their subsidiaries or an ERISA Affiliate maintained, contributed to or had an
obligation to contribute to such plan.

"NATIONAL CURRENCY UNIT" means the unit of currency (other than a EURO unit)
of a Treaty Country.

"NOTICE OF BORROWING" means the written notice of borrowing to be given by
the Borrower to the Agent in the form of the Third Schedule.

"OBLIGORS" means the Borrower and the Guarantor and "OBLIGOR" means each and
either of the Obligors.

"OPTIONAL CURRENCY" means any lawful euro-currency (including for the
avoidance of doubt INTER ALIA USD, YEN, SFR, GBP) other than the Original
Currency (excluding ECU and, following the Commencement Date, the National
Currency Units of the member states of the European Union participating in
the third stage of EMU), which is freely transferable and convertible into
the Original Currency and of which deposits are freely available to each Bank
in the Interbank Market.

<PAGE>

"ORIGINAL CURRENCY" means DM or, following the Commencement Date, EURO.

"ORIGINAL CURRENCY AMOUNT" in relation to an Advance means the amount in the
Original Currency which would have been outstanding if such Advance had been
made available in the Original Currency.

"ORIGINAL CURRENCY EQUIVALENT" in relation to an Advance means the amount in
the relevant Optional Currency ascertained by converting the Original
Currency Amount of the Advance into such Optional Currency at the spot rate
of exchange (as conclusively determined by the Agent) for the purchase by the
Agent in the relevant foreign exchange market of such Optional Currency at or
about 11:00 a.m. one Business Day prior to the Interest Determination Date.

"ORIGINAL FINANCIAL STATEMENTS" means

(i) in relation to the Borrower its audited consolidated and
unconsolidated financial statements for the business year ending
September 30, 1998; and

(ii) in relation to the Guarantor its unaudited consolidated and
unconsolidated financial statements for the business year ending
September 30, 1998; and

"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.

"PLAN" shall mean any multiemployer or single-employer plan as defined in
Section 4001 of ERISA, which is maintained or contributed to by (or to which
there is an obligation to contribute of) the Borrower the Guarantor or any of
their subsidiaries or an ERISA Affiliate, and each such plan for the five yer
period immediately following the latest date on which the Company, or a
Subsidiary of the Company or an ERISA Affiliate maintained, contributed to or
had an obligation to contribute to such plan.

"REFERENCE BANKS" means Baden Wurttembergische Bank AG, Commerzbank
International S.A., Deutsche Bank Luxembourg S.A. or such other Bank or Banks
as may be substituted therefor with the consent of the Borrower in accordance
with this Agreement.

"RELEVANT JURISDICTION" means in relation to any Obligor the jurisdiction in
which it is incorporated.

<PAGE>

"REPORTABLE EVENT" means a "reportable event" as defined in Section 4043 (b)
of ERISA with respect to a Plan other than those events as to which the
30-day notice period is waived under sub-section .3, 14, 16, 18, 19 or 20 of
PBGC Regulation Section 2615.

"REVOLVING CREDIT FACILITY " means the revolving loan facility referred to in
Article 2 (A).

"REVOLVING CREDIT FACILITY COMMITMENT" means the amount set out under the
heading "REVOLVING COMMITMENT" for each Bank the First Schedule.

"REVOLVING LOAN" means the aggregate amount of the Advances outstanding.

"SHARE PLEDGE AGREEMENT" means the share pledge agreement between the
Borrower and the Banks to be made in accordance with the form set forth in
the Fifth Schedule.

"STERLING" means the lawfull currency for the time being of the United
Kingdom.

"TARGET" means the Trans-European Automated Real-time Gross Settlement
Express Transfer System.

"TARGET DAY" means a day on which payments in EUROs are settled in the TARGET
system.

"TOTAL COMMITMENTS" means in relation to any Bank the aggregate of its
Revolving Credit Facility Commitment and its Ancillary Commitment.

"TRANCHE A" means the Tranche A of the Revolving Credit Facility referred to
in Article 2 (A).

"TRANCHE A OUTSTANDINGS" means the aggregated USD-countervalue of all
Advances made under Tranche A provided that the USD-countervalue of such
Advances is determined by the Agent for each of such Advances separately at
the spot rate of exchange (as conclusively determined by the Agent) for the
purchase by the Agent in the relevant foreign exchange market of the currency
of such Advances at or about 11:00 a.m. one Business Day prior to the
Interest Determination Date for each such Advance.

"TRANCHE B" means the Tranche B of the Revolving Credit Facility referred to
in Article 2 (A).

"TRANCHE B AMOUNT" means the amount available under Tranche B from time to
time as determined under Article 2 (A).

<PAGE>

"TRANSFER CERTIFICATE" means a certificate substantially in the form of the
Fourth Schedule.

"TREATY" means the Treaty Establishing the European Community being the
Treaty of Rome of 25 March, 1957, as amended by the Single European Act 1986
and the Maastricht Treaty (which was signed at Maastricht on 7 February, 1992
and came into force on 1 November, 1993), as amended from time to time.

"TREATY COUNTRY" means each state described as a participating member state
in any EMU legislation.

"UNFUNDED CURRENT LIABILITY" of any Plan means the amount, if any, by which
the actuarial present value of the accumulated plan benefits under the Plan
as of the close of its most recent plan year exceeds the fair market value of
the assets allocable thereto, each determined in accordance with Statement of
Financial Accounting Standards No. 35, based upon the actuarial assumptions
used by the Plan's actuary in the most recent annual valuation of the Plan.

"USD" means the lawful currency for the time being of the United States of
America.

"WAVETEK BOND" means the USD 85 million 10 1/8 % Senior Subordinated Notes
due June 15, 2007 of Wavetek Wandel & Goltermann, Inc. (formerly named
Wavetek Corporation) as borrower and Wavetek U.S., Inc., Wandel & Goltermann
Technologies, Inc., ATE, W & G Equities, Inc. and Digital Transport Systems,
Inc as guarantors.

"WGMH" means Wandel & Goltermann Holding GmbH.

(B) Any reference in this Agreement to:

(i) an "AFFILIATE" of any person is a reference to a holding company or a
subsidiary, or a subsidiary of a holding company of such person;

(ii) the "BANKS" shall also be construed as a reference to their respective
successors and permitted assignees;

(iii) "CURRENCY OF THE ADVANCE" shall be construed as a reference to
Deutsche Mark or, as the case may be, such other currency in which the
relevant Advance may be outstanding pursuant to the provisions hereof;

<PAGE>

(iv) "ENCUMBRANCE" shall be construed as a reference to a mortgage, pledge,
lien, charge (whether fixed or floating), assignment, hypothecation,
security interest, title retention, preferential right or trust
arrangement and any other security agreement or arrangement whether to
existing or future assets or revenues;

(v) "EQUIVALENT", on any date in one currency (the "FIRST CURRENCY") of an
amount denominated in another currency (the "SECOND CURRENCY"), is a
reference to the amount of the first currency which could be purchased
with the amount of the second currency at the spot rate of exchange
quoted by the Agent at or about 11.00 a.m. (or such other time as may
be appropriate) on such date for the purchase of the first currency
with the second currency;

(vi) "FINANCIAL INDEBTEDNESS" shall be construed so as to include any
obligation for the payment or repayment of money, whether present or
future, of any person for or in respect of:

(a) any indebtedness for monies borrowed and debit balances at banks;
(b) any indebtedness (actual or contingent) under a guarantee, bond,
security indemnity or other commitment designed to assure any
creditor against any loss in respect of any financial indebtedness
of any third party;
(c) any indebtedness under any acceptance credit;
(d) any indebtedness under any debenture, note, bond, bill of exchange
or commercial paper instrument issued for borrowing purposes;
(e) any indebtedness for monies owing in respect of any interest rate
swap or cross-currency swap or forward sale or purchase contract
or other form of interest or currency hedging transaction; and
(f) any other payment obligation under any capital lease
(FINANZIERUNGSLEASING) entered into for the purpose of obtaining
or raising finance and reflected or to be reflected in accordance
with GAAP on the consolidated balance sheet of the Borrower;

(vii) "INDEBTEDNESS" shall be construed so as to include any obligation for
the payment or repayment of money, whether present or future, actual
or contingent (including contingent obligations by reason of any
guarantee or other assumption of liability for obligations of third
parties);

(viii) a "LIQUIDATION" shall be construed so as to include any winding-up and
dissolution and "LIQUIDATION LAW" shall be construed accordingly;

<PAGE>

(ix) a "PERSON" shall be construed as a reference to any person, firm,
company, corporation, government, state or agency of a state or any
association or partnership (whether or not having separate legal
personality) of two or more of the foregoing;

(x) a "SUBSIDIARY" of a company or corporation shall be construed as a
reference to any company or corporation:

(a) which is controlled by the firstmentioned company or corporation
in the meaning of Section 15 et. seq. of the German Stock
Corporation Act (AKTG); or
(b) which is a subsidiary of another subsidiary of the first-mentioned
company or corporation;

(xi) "TAXES" shall be construed so as to include all present and future
taxes, levies, imposts, duties, charges, fees, deductions and
withholdings, and any restrictions or conditions resulting in a
charge, and "TAX" and "TAXATION" shall be construed accordingly;

(xii) an Article or a Schedule or a Part is a reference to an article
hereof, a schedule hereto or a part hereof, respectively;

(xiii) a paragraph is, unless otherwise stated, a reference to a paragraph of
the Article in which the reference appears;

(xiv) a sub-paragraph is, unless otherwise stated, a reference to a
sub-paragraph of the paragraph in which the reference appears;

(xv) a time of day shall, save where the contrary is indicated, be
construed as a reference to London time.

(D) Unless the context otherwise requires, words importing the singular
number shall include the plural and vice versa.

(E) Any provision of this Agreement that states that it will come into
effect as from the Commencement Date shall, to the extent that any such
provision related to any currency of a state which is not a Treaty Country on
the Commencement Date, come into effect in relation to the currency of such
state on and from the date on which such state becomes a Treaty Country.

<PAGE>

2. THE FACILITIES

(A) The Banks agree to make available through their respective Lending
Offices to the Borrower upon the terms and subject to the conditions hereof a
revolving credit facility in the maximum aggregate principal amount of DM
195,000,000 (Deutsche Mark one hundred and ninety five million) or its
equivalent from time to time in Optional Currencies which is divided in (i) a
Tranche A in the amount of the DM-equivalent of USD 45,000,000 (or if lower,
the USD-equivalent of DM 195,000,000), and (ii) a Tranche B in the amount
equal to the difference between DM 195,000,000 and the Amount of Tranche A as
determined by the Agent in accordance with Article 4 (B) reduced by the
amount of the Acquired Financial Indebtedness (if any).

(B) Each Bank (except Deutsche Bank Luxembourg S.A.) and Deutsche Bank AG,
Reutlingen Branch, agrees to make available an Ancillary Facility to the
Borrower in the amount set out for each Bank individually in the Sixth
Schedule and the aggregate amount of all such Ancillary Facilities will at no
time exceed an amount of DM 85,000,000 or its equivalent. The Ancillary
Facilities may only comprise facilities for the issue of guarantees, security
indemnity (or other commitment designed to assure any creditor against any
loss), trade or stand-by letters of credit, overdrafts, short term loans,
automated payment, cheque drawing and other current account facilities,
interest rate swaps or cross-currency swaps or forward sale or purchase
contracts or other form of interest or currency hedging transactions and each
Bank undertakes and warrants to the other Banks that the terms and conditions
governing the respective Ancillary Facility to which it is party shall have
to the extent legally possible the same terms and conditions as the terms and
conditions hereof.

(C) The Facilities shall be made available severally by each Bank (and
Deutsche Bank AG, Reutlingen Branch respectively) in the amount of its Total
Commitment (and in the case of Deutsche Bank AG, Reutlingen Branch, its
commitment set out in the Sixth Schedule) and each Bank shall participate in
each Advance to be made under the Revolving Credit Facility in the proportion
which its Revolving Credit Facility Commitment bears to the amount of the
Revolving Credit Facility.

(D) The failure of any Bank (and Deutsche Bank AG, Reutlingen Branch
respectively) to perform its obligations hereunder shall neither affect the
obligations of the Agent or the other Banks (and Deutsche Bank AG, Reutlingen
Branch respectively) towards the Borrower nor the obligations of the Borrower
towards the Agent or any other Bank (and Deutsche Bank AG, Reutlingen Branch
respectively), nor shall the Agent or any other Bank (and Deutsche Bank AG,

<PAGE>

Reutlingen Branch respectively) be liable for the failure of such Bank (and
Deutsche Bank AG, Reutlingen Branch respectively) to perform its obligations
hereunder.

(E) The obligations of the Banks (and Deutsche Bank AG, Reutlingen Branch
respectively) hereunder, and the rights of the Agent and the Banks (and
Deutsche Bank AG, Reutlingen Branch respectively) hereunder, shall be
several. The amounts outstanding at any time hereunder from the Borrower to
any of the Banks (and Deutsche Bank AG, Reutlingen Branch respectively), the
Arrangers or the Agent shall be a separate and independent debt and each such
party shall be entitled to protect and enforce its rights arising out of this
Agreement and the Ancillary Facilities independently of any other party and
it shall not be necessary for any other party hereto to be joined by an
additional party in any proceedings for this purpose.

(F) Immediately following the Commencement Date the Facilities shall be
re-denominated in EURO and all DM-amounts set out in paragraphs A and B shall
be the countervalue of such DM-amount. Each such EURO-countervalue shall be
determined by the Agent on the basis of the official DM/EURO conversion rate
set by the European Council on the Commencement Date pursuant to Article 109L
sub-paragraph 4 first sentence of the Treaty. The First Schedule, the Sixth
Schedule and sub-paragraphs (A) and (B) shall be adjusted accordingly

(G) In the case that any bank chosen by the Borrower shall be willing to
become a bank hereunder the parties hereto will consider an amendment of this
Agreement to the effect that such bank shall become a Bank hereunder bearing
a Revolving Credit Facility Commitment in the maximum amount of DM 15,000,000
and an Ancillary Facilities Commitment of a maximum of DM 5,000,000.

3. PURPOSE

(A) Save to the provisions of Article 4 (A) the Borrower shall apply the
amounts raised by it under the Revolving Credit Facility and/or the Ancillary
Facilities (a) to the extent raised under Tranche A, for the refinancing and
replacement of the DLJ Loan or any other facility that has refinanced or
replaced such DLJ Loan in accordance with the provisions thereof, and (b) in
any case other than pursuant to subclause (a) above, an amount of
approximately DM 51,000,000 or its equivalent for the acquisition of all
shares in the Guarantor and ATE from WGMH and (c) for the refinancing of the
Bilateral Facilities and (d) for the general financing requirements of it and
any of its subsidiaries.

<PAGE>

(B) Without prejudice to the obligations of the Borrower under paragraph (A),
neither the Arrangers, the Agent and the Banks nor any of them shall be
obliged to concern themselves with the application of amounts advanced or
raised hereunder.

4. CONDITIONS PRECEDENT, NOTICE OF BORROWING AND
DETERMINATION OF TRANCHE B

(A) Subject to:

(1) all representations and warranties listed in Article 18 being true and
correct on and as of the date on which an Advance is to be made
hereunder; and

(2) no Event of Early Repayment or an event which with the giving of
notice, lapse of time or fulfilment of any other condition (all as
provided for herein) would constitute an Event of Early Repayment
having occurred; and

(3) the receipt by the Agent of a Notice of Borrowing duly completed, such
Notice of Borrowing to be received by the Agent not later than at
11.00 a.m. on the fourth Business Day prior to the date on which the
relevant Advance is to be made hereunder and not later than one month
before the Final Maturity Date; and

(4) the total number of Advances which have been made hereunder and have
not, or will have not as of the proposed drawdown date of the relevant
Advance, fallen due for repayment is not more than fifteen; and

(5) the proposed amount of the Advances being an amount which when
aggregated with the amounts of all previous Advances then outstanding
(including any other Advances to be made on or before the proposed
date for the making of such Advances but excluding any Advances
respectively to be repaid on or before the proposed date for the
making of such Advances) shall not be such as to cause the aggregate
of all outstanding Advances to exceed the maximum amounts set out in
Article 2 (A); and

(6) the Loan not being outstanding in more than seven different currencies
if the Advance is made; and

(7) in the case of any Advance to be made under Tranche B the amount of
the Tranche A Outstandings is 45,000,000 USD;

<PAGE>

the Borrower may draw Borrowing Amounts on any Business Day during the
Commitment Period, provided that the Borrower may not deliver a Notice of
Borrowing unless the Agent has confirmed to the Borrower and the Banks that
it has received within a period of six weeks after the date hereof all of the
documents listed in the Second Schedule and that each is, in form and
substance, satisfactory to the Agent.

(B) If a drawdown shall be made under Tranche B the Agent shall determine
the Tranche B Amount one Business Day prior to the Interest Determination
Date by deducting the DM-equivalent of USD 45,000,000 and the Acquired
Financial Indebtedness (if any) from the amount of DM 195,000,000. If the
proposed Amount of the Advance does exceed the undrawn part of the Tranche B
Amount the Agent shall reduce the amount of such Advance accordingly and the
Agent shall notify the Borrower by 4:00 p.m. about such reduction.

(C) Each Notice of Borrowing shall be irrevocable and the Borrower shall
be bound to borrow in accordance with such notice.

(D) The Borrower shall not make any borrowings under the Ancillary
Facilities and none of the Banks and Deutsche Bank AG, Reutlingen Branch will
allow the Borrower to make such borrowings as long as the amount of the
Tranche A Outstandings is below USD 45,000,000. If the Revolving Credit
Facility Commitment is reduced in an amount of DM 100,000,000 in accordance
with Article 9 (D) and/or Article 11 (C) following an initial public offering
the parties will enter into negotiations with respect to the restrictions of
any borrowings under the Ancillary Facilities pursuant to this paragraph (D).

5. TERM OF ADVANCES

(A) Each Advance shall have a term of one, two, three or six months or
such other period as may be agreed between the Borrower and the Agent (with
consent of the Banks), in each case as the Borrower shall select in the
Notice of Borrowing.

(B) Notwithstanding the provisions of paragraph (A),

(1) if the term of any Advance would otherwise end on a day which is not a
Business Day, then such term or such interest period shall be extended
to the next succeeding day which is a Business Day unless such next
succeeding Business Day falls in another calendar month in which event
such term shall end upon the immediately preceding Business Day;

<PAGE>

(2) if the term of any Advance commences on the last Business Day in a
calendar month or if there is no numerically corresponding day in the
month in which that term ends, that term shall end on the last
Business Day in that later month; and

(3) if the term of any Advance would otherwise extend beyond the Final
Maturity Date, it shall end on the Final Maturity Date.

6. INTEREST

(A) The Borrower shall pay to the Agent for account of the Banks on the
Maturity Date of any Advance the interest on the amount of such Advance
accrued for the respective period (unless the term is longer than six months,
then interest shall be payable in semi-annual intervals and at the end of the
relevant term).

(B) The rate of interest applicable to each Advance during its term shall
be the Interbank Rate increased by the Margin.

(C) Interest payable pursuant to this Agreement shall be calculated on the
basis of the actual number of days elapsed and a 360-day-year or, where
market practice differs, 365 days or otherwise in accordance with market
practice.

(D) Each determination of an interest rate made by the Agent under this
Agreement shall be promptly notified by the Agent to the Borrower and each
Bank.

7. CURRENCY OPTION

(A) The Borrower may request in any Notice of Borrowing that the Advance
to which such Notice of Borrowing relates be denominated in a specified
Optional Currency and, if the Borrower shall so request and subject to the
following provisions of this Article, the relevant Advance shall be
denominated in the Optional Currency so specified.

(B) Notwithstanding the provisions of paragraph (A), if any Bank
determines that deposits in the specified Optional Currency (other than USD)
are not or will not be available to it in the relevant amount and for the
relevant period in the Interbank Market, it may give notice thereof to the
Agent not later than 1:00 p.m. on the third Business Day preceding the date
of the proposed Advance.

<PAGE>

(1) if the Borrower has given instruction to that effect in the Notice of
Borrowing, not be made in the specified Optional Currency but shall
instead be made available in DM (or, after the Commencement Date,
EURO), the amount of DM or EURO to be so advanced by the Banks being
the Original Currency Amount specified in the relevant Notice of
Borrowing; or

(2) if the Borrower has given instruction to that effect in the Notice of
Borrowing, not be made in the specified Optional Currency but shall
instead be made available in USD, the amount of USD to be so advanced
by the Banks being the Original Currency Equivalent; or

(3) if the Borrower has failed to give any instruction as referred to in
(1) or (2) above, not be made.

The Agent shall notify each Bank and the Borrower by 4:00 p.m. on the third
Business Day preceding the date of the proposed Advance of the receipt of any
such notice from a Bank as is referred to in paragraph (B) and, in the case
of (1) or (2) above, of the amount in DM, EURO, or, as the case may be, USD,
to be advanced by each Bank or in case of (3) above that such proposed
Advance shall not be made.

(D) Notwithstanding the foregoing provisions of this Article, if any such
event as is described in paragraph (E) shall occur the Agent may (and shall,
if so instructed by the Majority Banks), at any time before, or not later
than 9:00 a.m. on the date on which an Advance would otherwise fall to be
made in an Optional Currency, give notice to the Borrower to the effect that
in consequence of such event it will not be possible for such Advance to be
denominated in the Optional Currency in question, in which case such Advance
shall then not be made at all and the Borrower shall pay to each Bank such
amount as is necessary to compensate such Bank for any and all losses and
costs incurred by it in liquidating and/or employing amounts borrowed or
contracted for, and/or in terminating or unwinding any contract entered into,
in order to fund its participation in the proposed Advance.

(E) The events referred to in paragraph (D) are such changes in national
or international financial, political or economic conditions or currency
exchange rates or exchange controls as (in any such case) would, in the
reasonable opinion of the Agent (if feasible, after consultation with the
Borrower and the Reference Banks), make it impracticable for the Advance (or
the relevant part thereof) to be denominated in the Optional Currency in
question.

<PAGE>

(F) If an Advance is to be made available in an Optional Currency, each
Bank through the Agent will make available to the Borrower the Original
Currency Equivalent of such Advance.

8. SUBSTITUTE BASIS

(A) If, in relation to an Advance:

(1) the Agent determines that at or about 11:00 a.m. on the Interest
Determination Date for the relevant term in respect of such Advance
(a) none or only one of the Reference Banks was being offered by prime
banks in the Interbank Market deposits in the relevant currency for
the proposed duration of such term or (b) by reason of circumstances
affecting the Interbank Market generally such deposits are not
available to banks in such market; or

(2) before the close of business in Luxembourg on the Interest
Determination Date for such term the Agent has been notified in
writing by each Bank of a group of Banks to whom in aggregate
thirty-five per cent. or more of the Original Currency Amount of the
Loan is (or, if such Advance were then made, would be) owed that the
Interbank Rate as determined by the Agent does not reflect its cost of
obtaining such deposits;

then the Agent shall as soon as practicable give notice of such determination
to the Borrower and each Bank.

(B) If the Agent gives notice pursuant to paragraph (A) (1) then if such
notice is given with respect to an Advance to be made, such Advance shall not
be made and in any case the Agent shall negotiate with the Borrower with a
view to agreeing an alternative basis (whether an alternative method of
fixing the rate of interest or (in the case of Advances to be made) an
alternative term or an alternative currency) for such Advance. Any
alternative basis agreed in writing within 30 days of the Agent's
notification of the event in question by the Agent (with the consent of all
the Banks) and the Borrower shall take effect in accordance with its terms
and the Borrower may make further requests for the making of Advances on such
alternative basis (subject as herein provided) whilst the circumstances
referred to under paragraph (A) (1) continue to exist. After the Agent has
determined that the circumstances referred to under paragraph (A) (1) have
ceased to exist, the rate of interest in respect of subsequent Advances or
(as the case may be) subsequent Interest Periods shall be the Interbank Rate
plus the Margin calculated in accordance with the provisions of this
Agreement.

<PAGE>

(C) If the Agent gives notice pursuant to paragraph (A) (2), the Advance
shall be made and the Agent shall then negotiate with the Borrower with a
view to agreeing an alternative basis for fixing the rate of interest payable
on the relevant Advance. Any alternative basis agreed in writing within 10
days of the Agent's notification of the event in question by the Agent (with
the consent of all the Banks) and the Borrower shall take effect in
accordance with its terms and the Borrower may make further requests for the
making of Advances on such alternative basis (subject as herein provided)
whilst the circumstances referred to under paragraph (A) (2) continue to
exist, provided that if such alternative basis is not agreed, each Bank's
share of the relevant Advance(s) shall bear interest at the rate per annum
determined by the Agent as being the sum of (i) the cost to such Bank (as
certified to the Agent with a copy to the Borrower) of funding its share of
such Advance from whatever sources it may, in the ordinary course of its
business, reasonably select (expressed as a rate per annum) and (ii) the
Margin. After the Agent has determined that the circumstances referred to
under paragraph (A) (2) have ceased to exist, the rate of interest in respect
of subsequent Advances shall be the Interbank Rate plus the Margin calculated
in accordance with the provisions of this Agreement.

9. REPAYMENT AND PREPAYMENT

(A) The amount of each Revolving Credit Advance shall be repaid by the
Borrower on its Maturity Date. Any amount repaid pursuant to this paragraph
(A) may, subject to the provisions of this Agreement, be reborrowed.

(B) The Borrower shall not repay or prepay all or any part of the Advances
except in accordance with the terms of this Agreement.

(C) The Borrower may, by notice to the Agent not later than on the tenth
Business Day before the proposed date for the making of such prepayment,
prepay the whole of any Advance or any part (being a Borrowing Amount) on a
day other than the Maturity Date relating thereto provided that such
prepayment is made together with the payment of accrued interest on such
Advance or part thereof to be prepaid and any amount payable by the Borrower
under Article 14 (D).

(D) To the extent the Revolving Loan exceeds the amount of DM 95,000,000
(the "EXCEEDING AMOUNT") the Borrower shall apply any net proceeds from any
monies raised by the Group in the national or international equity or capital
markets (via an IPO, a private equity placement, a public or private bond
offering or otherwise) to prepay the Exceeding Amount. Any such amounts to be
applied towards the prepayment of the Revolving Loan shall be paid to the
Agent and the Agent shall deposit such amounts on behalf of the Banks in an
interest bearing account and shall (save to the provisions of Article 10) be
applied (including accrued interest

<PAGE>

thereon) on the last day of the then relevant current Interest Period towards
the prepayment of any outstanding Advances PRO RATA.

(E) The Borrower shall apply an amount equal to the net proceeds resulting
from (i) a disposal of assets made under a sale and lease back transaction by
any member of the Group permitted under Article 19 (D) (other than proceeds
from sale-lease-back transactions applied towards the repayment of existing
debt in accordance with Article 19 (D)(4)) and (ii) the sale of a certain
subsidiary to be agreed upon with the Banks permitted under Article 19 (E)
towards the repayment of the Revolving Loan.

(F) Any amount prepaid pursuant to paragraph (C) may, subject to the
provisions of this Agreement, be reborrowed. Amounts prepaid pursuant to
paragraph (D) or repaid pursuant to paragraph (E) may not be reborrowed and
any such payment shall reduce the Revolving Credit Facility Commitment of
each Bank rateably.

10. MAINTENANCE OF DLJ LOAN REFINANCING

Any prepayment made hereunder shall be made in a manner that any amount
raised by the Borrower under Tranche A for the repayment, replacement and /or
refinancing of the DLJ Loan or any loans the proceeds of which were used for
the repayment, replacement and/or refinancing of the DLJ Loan shall save to
make any agreement between parties hereto following any negations in
accordance with Article 4 (D) only be prepaid if (i) there are no other
outstandings under this Agreement and the Ancillary Facilities and (ii) the
Borrower has cancelled (a) any commitment of the Banks for future borrowings
under this Agreement and (b) any commitment of the relevant Banks and
Deutsche Bank AG, Reutlingen Branch respectively for future borrowings under
the Ancillary Facilities.

11. CANCELLATION

(A) Unless otherwise agreed between the Borrower and the Banks (and
Deutsche Bank AG, Reutlingen Branch respectively), any Commitment of any Bank
(and Deutsche Bank AG, Reutlingen Branch respectively) made hereunder will
automatically cease to exist if the Agent has not received all of the
documents listed in the Second Schedule within a period of six weeks after
the date hereof;

(B) The Borrower may, by giving to the Agent not less than ten Business
Days' prior written notice to that effect, cancel the whole or any part
(being a Borrowing Amount) of the then

<PAGE>

undrawn part of the Revolving Credit Facility Commitments. Any such
cancellation shall reduce the Revolving Credit Facility Commitment of each
Bank rateably.

(C) The Borrower shall cancel the then undrawn part of the Revolving
Credit Facility Commitment in an amount equal to (i) the amount of any
proceeds resulting from a disposal of assets made under a sale and lease back
transaction by any member of the Group permitted under Article 19 (D) (other
than proceeds from sale-lease-back transactions applied towards the repayment
of existing debt in accordance with Article 19 (D)(4)) and the sale of the
certain subsidiary permitted in accordance with Article 19 (E) if any such
amount is not applied for repayment in accordance with Article 9 (E), and/or
(ii) an amount of up to DM 100,000,000 out of any net proceeds from any
monies raised by the Group in the national or international equity or capital
markets (via an IPO, a private equity placement, a public or private bond
offering or otherwise) if any such amount is not applied for prepayment in
accordance with Article 9 (D).

(D) If any Bank claims a payment or indemnification from the Borrower
under Article 13 (A)(1), Article 16 (A) or Article 16 (B), the Borrower may,
within thirty days thereafter and by not less than fifteen days' prior notice
to the Agent, cancel such Bank's Commitment whereupon such Bank shall cease
to be obliged to participate in further Advances and its Commitment shall be
reduced to zero.

(E) Any notice of cancellation given by the Borrower pursuant to
paragraphs (A) through (D) shall be irrevocable and shall specify the date
upon which such cancellation is to be made and (in case of a cancellation
pursuant to paragraph (B) and (C)) the amount of such cancellation and in any
case Tranche B is deemed to be cancelled first.

12. EVIDENCE OF DEBT

(A) Each Bank shall maintain, in accordance with its usual practice,
accounts evidencing the amounts from time to time lent by and owing to it
hereunder.

(B) The Agent shall maintain in its books a control account or accounts in
which shall be recorded (i) the amounts outstanding under Tranche A and
Tranche B and each Bank's share therein, (ii) the amount of the Tranche A
Outstandings, and (iii) the amount of any principal or interest or other sums
due or to become due from the Borrower to the Banks hereunder and each Bank's
share therein and (iv) the amount of any sum received or recovered by the
Agent hereunder and each Bank's share therein.

<PAGE>

(C) In any legal action or proceedings arising out of or in connection
with this Agreement the entries made in the accounts maintained pursuant to
paragraphs (A) and (B) shall save for manifest errors give PRIMA FACIE
evidence of the existence and amounts of the obligations of each of the
Obligors therein recorded.

13. PAYMENTS

(A) All amounts payable under this Agreement by either Obligor including
amounts payable under this paragraph (A), shall be paid in full without
set-off or counterclaim or right of retention or other restrictions and free
and clear of and without any deduction or withholding for or on account of
any taxes or any charges or otherwise. In the event that either of the
Obligors is required by law to make any such deduction or withholding from
any payment hereunder then:

(1) such Obligor shall, save where a Bank has failed to comply with
paragraph (G) due to reasons not beyond such Bank's control, forthwith
pay to the Agent for account of the respective Bank or, as the case
may be, the Agent such additional amount as will result in the
immediate receipt by such Bank or, as the case may be, the Agent of
the full amount (free from any liability in respect of any such
deduction or withholding) which would have been received hereunder had
no such deduction or withholding been made; and

(2) such Obligor shall pay the full amount required to be deducted or
withheld to the relevant taxation or other authority within the time
allowed for such payment and shall promptly, but in any case within 20
days, forward to the Agent official receipts of the relevant taxation
or other authority or other evidence acceptable to such Bank to the
extent available from such relevant authority or, as the case may be,
the Agent of the amount deducted or withheld as aforesaid.

(B) All payments of principal and/or interest in respect of an Advance to
be made by either of the Obligors under this Agreement shall be made in the
currency of that Advance in mmediately available funds not later than 10:00
a.m. (local time at the place of payment) on the date upon which the relevant
payment is due (i) in case such amount is denominated in DM to the account
no. 400/8716961 of the Agent with Commerzbank Aktiengesellschaft, Frankfurt
am Main (or to such other account as the Agent may from time to time
designate by timely written notice to the relevant Obligor) or (ii) in case
such amount is denominated in any other currency to such account of the Agent
with such bank as the Agent may have timely specified for this purpose.

(C) All payments to be made by the Agent under this Agreement to the
Borrower shall be made in the currency of the Advance not later than 10:00
a.m. (local time at the place of

<PAGE>

payment) on the date upon which the relevant payment is due and be remitted
to such account and bank as the Borrower may from time to time designate by
written notice to the Agent.

(D) Each Bank shall make available to the Agent its portion of an Advance
to be made to the Borrower hereunder prior to 10:00 a.m. (local time at the
place of payment) on the date of the proposed borrowing by payment in the
currency of the Advance and in immediately available funds to such account as
the Agent may from time to time designate.

(E) Except for payments received by the Agent for its account or for the
account of a specific Bank in accordance with this Agreement, the Agent shall
forthwith distribute in like funds and currency each payment received by it
for the account of the Banks rateably in proportion to their respective share
of the Revolving Loan respectively or, as the case may be, their respective
Revolving Credit Facility Commitment.

(F) Where a sum is to be paid hereunder to the Agent for account of
another person pursuant to the provisions hereof, the Agent shall not be
obliged to make the same available to that other person until it has been
able to establish to its satisfaction that it has actually received such sum,
but if it makes the same sum available to that other person before it has
been able to establish to its satisfaction that it has actually received such
sum and it proves to be the case that it has not actually received such sum,
then the person to whom such sum was so made available shall on request
(which shall be made as soon as practicable after the Agent has established
that it has not actually received that sum) refund the same to the Agent
together with an amount sufficient to indemnify the Agent against any
reasonable cost or loss it may have suffered or incurred by reason of its
having paid out such sum prior to its having received such sum.

(G) Each Bank agrees that, upon request by the Obligor affected, it shall
deliver, as soon as it can do so in the ordinary course of business, to such
Obligor such relevant tax form(s) as may be required under the laws of the
Relevant Jurisdiction or under an applicable double taxation treaty to avoid
or reduce a deduction or withholding on payments as described in paragraph (A).

(H) If and to the extent that any Obligor pays any additional amount under
paragraph (A), and any Bank receives or has been granted a credit against or
relief or remission for or repayment of any tax paid or payable by it (the
"TAX CREDIT") in respect of or calculated with reference to the deduction or
withholding in respect of which such additional amount has been paid, then
such Bank shall - to the extent that it can do so without prejudice to the
retention of such Tax Credit - pay to the relevant Obligor such amount as it
shall, in its opinion, determine to be attributable to the relevant deduction
or withholding, and any such payment to the relevant Obligor shall constitute
full and final settlement of any rights of reimbursement in respect of such
Tax Credit.

<PAGE>

It shall be each Bank's sole discretion (to be exercised in good faith) to
decide as to whether and how and when and to what extent to claim any Tax
Credit and no Bank shall be obliged to disclose any information as to its tax
affairs which it regards as proprietary or confidential and each Bank shall
be entitled to arrange and organize its tax and other affairs in any way it
thinks fit.

(I) If, in respect of any Bank, circumstances arise which result or would
result in a claim for payment or a payment of an additional amount to it or
for its account pursuant to paragraph (A) (1), then, without in any way
limiting, reducing or otherwise qualifying the obligations of the Obligors
hereunder, such Bank shall promptly upon becoming aware of the same notify
the Agent thereof and shall, in consultation with the Agent and the Obligors
to the extent that it can do so without prejudice to its own position, take
such reasonable steps as may be open to it to mitigate or avoid the effects
of such circumstances, including the change of its Lending Office or the
transfer of its rights and obligations hereunder to another bank acceptable
to the Obligors and willing to participate in the Facilities provided that
such Bank shall be under no obligations to take any such action if, in such
Bank's BONA FIDE opinion, to do so may have any adverse effect upon its
business, operations or financial condition. No Bank shall be obliged to
disclose any information as to its tax affairs which it regards as
proprietary or confidential and each Bank shall be entitled to arrange and
organize its tax and other affairs in any way it thinks fit.

(J) Save to the provisions of Article 10 the Agent may (notwithstanding
any appropriation of that payment by such Obligor) apply any payment received
from either Obligor towards the obligations of the Obligors hereunder in the
following order:

FIRST, in or towards payment of any unpaid costs and expenses of each of the
Agent and the Arrangers;

SECONDLY, in or towards payment pro rata of any accrued fees due but unpaid;

THIRDLY, in or towards payment pro rata of any accrued interest due but
unpaid;

FOURTHLY, in or towards payment pro rata of any principal due but unpaid; and

FIFTHLY, in or towards payment pro rata of any other sum due but unpaid.

(K) Any payment hereunder falling due on a day which is not a Business Day
shall be payable on the next succeeding day which is a Business Day, unless
such next succeeding

<PAGE>

Business Day falls in another calendar month in which event such payment
shall be due on the immediately preceding Business Day.

14. DEFAULT INTEREST AND INDEMNITY

(A) In the event of a failure of either of the Obligors to pay any sum
other than interest on the date on which such sum is due and payable pursuant
to this Agreement and irrespective of any notice by the Agent to such Obligor
in respect of such failure, such Obligor shall pay interest on such sum on
demand from the date of such failure up to the date of actual payment (as
well after as before judgement) at the rate, increased by the Margin plus one
per cent. (1 %), determined by the Agent to be the arithmetic mean (rounded
upwards, if necessary, to the nearest multiple of one sixteenth of one per
cent (1/16 %)) of the per annum rates, notified to the Agent by the Banks to
be those at which deposits in the currency of the unpaid sum for such period
as the Agent may select in its discretion (after consultation with the Banks)
are offered to each Bank by prime banks in the Interbank Market for value two
Business Days later as at 11:00 a.m. on the Business Day immediately
succeeding that on which the Agent becomes aware of the failure and, so long
as the failure continues, such rate shall be calculated on the same basis
thereafter. Interest accruing under this paragraph shall be due and payable
at the end of each period by reference to which it is calculated.

(B) Without prejudice to the foregoing and irrespective of any notice by
the Agent to either of the Obligors in respect of such Obligor's failure to
make any payment when due, such Obligor shall indemnify the Agent and the
Banks against any other damages, losses or expenses (including losses
incurred in paying overdraft interest or in liquidating or employing deposits
from third parties acquired to make, fund or maintain the Loan or any part
thereof) which any of them may sustain or incur as a consequence of (i) the
failure by such Obligor to pay any sum when due and payable under this
Agreement, (ii) the occurrence of any Event of Early Repayment, or (iii) an
Advance requested in a Notice of Borrowing given by the relevant Obligor but
not being made by reason of the operation of any one or more of the
provisions hereof.

(C) If any sum due from either of the Obligors under this Agreement or any
order or judgment given or made in relation hereto has to be converted from
the currency (the "FIRST CURRENCY") in which the same is payable hereunder
into another currency (the "SECOND CURRENCY") for the purpose of (i) making
or filing a claim or proof against such Obligor, (ii) obtaining an order or
judgement in any court or other tribunal or (iii) enforcing any order or
judgement given or made in relation hereto, such Obligor shall indemnify and
hold harmless each of the persons to whom such sum is due from and against
any damages or losses suffered as a result of any discrepancy between (a) the
rate of exchange used for such purpose to convert the

<PAGE>

sum in question from the first currency into the second currency and (b) the
rate or rates of exchange at which such person may in the ordinary course of
business purchase the first currency with the second currency upon receipt of
a sum paid to it in satisfaction, in whole or in part, of any such order,
judgement, claim or proof. The above indemnity shall constitute an
independent obligation of the Obligors separate from each of their other
obligations hereunder and shall apply irrespective of any indulgence granted
by the Agent or the Banks.

(D) Any prepayment or repayment of principal made under this Agreement
shall, if made otherwise than on the Maturity Date relative to the amounts
prepaid or repaid, be made together with accrued interest thereon and such
additional amount as each Bank may certify as necessary to compensate it for
any damages or losses incurred or to be incurred by it in connection with
such prepayment or repayment (including loss of Margin and losses on account
of funds borrowed in order to make, fund or maintain its portion of the Loan
or any part thereof prepaid or repaid).

15. SET-OFF AND REDISTRIBUTION OF PAYMENTS

(A) Each of the Obligors authorizes each Bank to apply any credit balance
to which such Obligor is entitled on any account of such Obligor with that
Bank in satisfaction of any sum due and payable from such Obligor to such
Bank hereunder but (following the termination of a grace period (if any))
unpaid; for this purpose, each Bank is authorized to purchase with the monies
standing to the credit of any such account such other currencies as may be
necessary to effect such application. No Bank shall be obliged to exercise
any right given to it by this paragraph (A) but if it does so it shall notify
the Agent and the relevant Obligor of such exercise.

(B) If at any time the proportion received or recovered by any Bank or
Deutsche Bank AG, Reutlingen Branch (a "RECOVERING BANK") by way of set-off
or otherwise (other than through the Agent in accordance with Article 13 (E))
in respect of its portion of any amounts due from an Obligor to the Banks
under this Agreement or an Ancillary Facility to which such Recovering Bank
is a party is greater than the proportion thereof which the relevant
Recovering Bank would have received through the Agent if distributed in
accordance with Article 13 (E) or which such Recovering Bank is entitled to
receive under the relevant Ancillary Facility (the difference between the
amount received or recovered by the Recovering Bank and the amount which the
Recovering Bank would have received or recovered had the recovery been
received through the Agent if distributed in accordance with Article 13 (E)
or under the relevant Ancillary Facility respectively hereinafter called the
"EXCESS AMOUNT"), then:

<PAGE>

(1) such Recovering Bank shall promptly notify the Agent and pay to the
Agent an amount equal to the Excess Amount (the "SHARING PAYMENT")
within three Business Days of such notification;

(2) the Agent shall account for such payment to the Banks and Deutsche
Bank AG, Reutlingen Branch respectively (excluding the Recovering Bank
having received the Excess Amount) as if it were a payment by the
relevant Obligor on account of the sum owed to the Banks under this
Agreement and the Ancillary Facilities; and

(3) to the extent that amounts received or recovered by a Recovering Bank
resulted in the satisfaction of a Recovering Bank's claim hereunder or
under the Ancillary Facility to which such Bank is party, but are
allocated in accordance with this Article 15 to another Bank and
Deutsche Bank AG, Reutlingen Branch respectively, the latter shall
assign to the Recovering Bank the claims (or the part thereof) to
which the amount is allocated.

(4) If any part of the Sharing Payment received or recovered by a
Recovering Bank becomes repayable and is repaid by such Recovering
Bank, then each party which has received a share of such Sharing
Payment pursuant to paragraph (2) shall, upon request of the Agent,
pay to the Agent for account of such Recovering Bank an amount equal
to its share of such Sharing Payment together with its proportionate
share of any interest or other sum paid to such Obligor by the
Recovering Bank in respect of the Sharing Payment and such Recovering
Bank shall re-assign to the relevant Bank any claim assigned to it by
such Bank pursuant to paragraph (3).

(5) This Article 15 shall not apply if the Recovering Bank would not,
after making any payment pursuant hereto, have a valid and enforceable
claim against the relevant Obligor and sums recovered as a result of
litigation started by a Bank to enforce its rights under this
Agreement and resulting in an Excess Amount shall only be shared with
such Banks that have joined in such litigation or commenced and
diligently pursued separate litigation to enforce their rights under
this Agreement and/or the Ancillary Facility to which such Bank is
party.

16. CHANGE OF CIRCUMSTANCES

(A) If:

(1) by reason of any change or coming into force after the date hereof of
law, regulation, treaty or official directive which any Bank or any
holding company of such Bank is

<PAGE>

required to comply with (whether or not having the force of law
provided that in case of an official directive not having the force of
law compliance must be customary in the ordinary course of business)
or any change of the interpretation thereof by any authority charged
with the administration or application thereof (including, for the
avoidance of doubt, any such change or compliance in connection with
the introduction of, changeover to or operation of the Euro):

(a) subjects any Bank (or any holding company of such Bank) to any
tax with respect to payments of principal of or interest on its
portion of any Advance or any other amount payable hereunder
(other than a tax imposed or calculated by reference to the net
income of such Bank or holding company); or

(b) changes the basis of taxation of payments to any Bank (or any
holding company of such Bank) of principal of or interest on
its portion of any Advance or of any other amount payable
hereunder (other than a change in the rate of any tax imposed
on or calculated by reference to the net income of such Bank or
holding company of such Bank); or

(c) imposes, modifies or deems applicable any reserve and/or
special deposit requirements against or in respect of assets or
liabilities of, or deposits with or for the account of, or
loans or credit extended by, any Bank (or any holding company
of such Bank); or

(d) affects the manner in which a Bank (or any holding company of
such Bank) allocates capital resources to its obligations
hereunder; or

(2) any Bank (or any holding company of such Bank) complies with any law,
regulation or binding official request or directive from any applicable
fiscal or monetary authority (whether or not having the force of law);

and as a result of any of the foregoing:

(a) the cost to such Bank (or such holding company) of making, funding or
maintaining its portion of any Advance or of maintaining its
Commitment is increased; or

(b) the amount of principal, interest or other amount payable hereunder to
such Bank or the effective return to such Bank (or such holding
company) hereunder is reduced; or

<PAGE>

(c) such Bank (or any holding company of such Bank) makes any payment or
forgoes any interest or other return on or calculated by reference to
the gross amount of any sum receivable by such Bank from any of the
Obligors hereunder,

then and in any such case:

(i) upon demand from time to time the Borrower shall pay to the Agent for
account of such Bank such amount as shall compensate such Bank or any
such holding company for such increased cost (or such proportion of
such cost as is, in such Bank's BONA FIDE opinion, attributable to the
relevant Advance and its term respectively to such Bank's Revolving
Credit Facility Commitment hereunder), reduction, payment or forgone
interest or other return. A Bank entitled to make a claim pursuant to
this paragraph shall notify the Agent of the event by reason of which
it is so entitled whereupon the Agent shall notify the Borrower
thereof. Such Bank shall submit to the Agent a certificate setting out
reasonable details of the event giving rise to such compensation, the
amount thereof and the manner in which it has been calculated and such
certificate shall be forwarded promptly by the Agent to the Borrower,
provided, however, that nothing herein shall require such Bank to
disclose any confidential information relating to the organisation of
its or its holding company's affairs; and

(ii) the Borrower may prepay such Bank's portion of such Advance together
with all interest accrued thereon and all fees and other amounts
(including amounts payable under sub-paragraph (i) and Article 14 (D))
payable to such Bank hereunder, on giving not less than fifteen days'
prior written irrevocable notice to the Agent.

Notwithstanding the foregoing provisions of this Article 16, no Bank shall be
entitled to claim under paragraph (A) in respect of any amount which is
compensated for by the operation of paragraph (B).

(B) If any sum payable by any Obligor hereunder whether in respect of
principal, interest or otherwise or any recipient of any such sum by reason
of its receiving such sum is or becomes subject at any time to taxation in
the Relevant Jurisdiction, such Obligor will indemnify such recipient in
respect of such tax liability so that such recipient receives or retains a
net sum equal to the sum it would have received or retained had there been no
such tax liability. In addition, such Obligor shall indemnify the Agent and
each Bank, respectively, against any present or future claim or liability for
taxes in the Relevant Jurisdiction imposed on any of them or on any agent,
branch, employee, intermediary, representative or representative office of
any of them

<PAGE>

only by virtue of the negotiation, preparation or execution of this
Agreement, the performance of any obligation hereunder or any entitlement to
or receipt of any payment hereunder.

(C) Notwithstanding anything to the contrary herein contained, if any
change in law, regulation or treaty or in the binding and official
interpretation or application thereof by any authority charged with the
administration or application thereof shall make it unlawful for any Bank to
make, fund or maintain all or any of its portion of the Advances made or to
be made hereunder or to give effect to its obligations through its Lending
Office as contemplated hereby, such Bank may, by written notice thereof to
the Agent to be forwarded by the Agent to the Borrower declare that such
Bank's obligations shall be terminated forthwith (or if permitted on the
latest day allowed by such law, regulation or treaty) whereupon the Borrower
shall prepay forthwith (or if permitted by such law, regulation or treaty on
the next following Maturity Date in relation to such outstanding Advance)
such Bank's portion in any Advance outstanding together with all interest
accrued thereon and all fees and other amounts payable by it to such Bank
hereunder. Such Bank's obligations hereunder and its Revolving Credit
Facility Commitment shall be cancelled upon the Agent's receipt of such
notice.

(D) If, in respect of any Bank, circumstances arise which result in an
increase in the amount of any payment to be made to it or for its account
pursuant to paragraph (A) or a claim for indemnification under paragraph (B),
then, without in any way limiting, reducing or otherwise qualifying the
obligations of the Obligors hereunder, such Bank shall promptly upon becoming
aware of the same notify the Agent thereof and shall, in consultation with
the Agent and the Borrower and to the extent that it can do so without
prejudice to its own position, take all reasonable steps as may be open to it
to mitigate or avoid the effects of such circumstances, including the change
of its Lending Office or the transfer of its rights and obligations hereunder
to another bank acceptable to the Borrower and willing to participate in the
Facility provided that such Bank shall be under no obligation to take any
such action if, in such Bank's BONA FIDE opinion, to do so may have any
adverse effect upon its business, operations or financial condition.

(E) The provisions of Article 13 (I) shall apply MUTATIS MUTANDIS in
respect of or in relation to any payment made or to be made by any Obligor
pursuant to the provisions of paragraph (B).

17. THE GUARANTEE

(A) The Guarantor irrevocably and unconditionally guarantees by way of an
independent guarantee ("GARANTIE AUF ERSTES ANFORDERN") to the Agent and each
Bank the due and punctual payment by the Borrower, under and in connection
with the terms of this Agreement, and

<PAGE>

covenants to pay or cause to be paid to the person entitled thereto in the
currency in which the same is for the time being due and payable under this
Agreement (and which remain for the time being unpaid) of (i) any amount up
to USD 45,000,000 or its equivalent borrowed under Tranche A, and (ii) any
the sum of principal, interest and all other monies which are now or may at
any time hereafter be due and payable by the Borrower under or pursuant to
this Agreement with respect to the said amount.

(B) The Guarantor shall effect payment hereunder promptly upon demand of
the Agent (or any Bank through the Agent) and confirmation that the amount
claimed from the Guarantor is equal to the Guaranteed Amount which the
Borrower has not paid when due.

(C) The obligations of the Guarantor hereunder (i) shall be separate and
independent from the obligations of the Borrower, (ii) shall exist
irrespective of the legality, validity, binding effect and enforceability of
any obligation of the Borrower under this Agreement, (iii) shall not be
affected by any event, condition or circumstance of whatever nature, whether
factual or legal, save the full, definite and irrevocable satisfaction of any
and all payment obligations expressed to be assumed under this Agreement and
(iv) shall be deemed "Senior Debt" under the indenture governing the Wavetek
Bond.

(D) The Agent and each Bank may at any time without thereby discharging,
impairing or otherwise affecting the obligations of the Guarantor hereunder
(i) give or agree to give any time or other indulgence to the Borrower in
respect of its obligations under this Agreement or any of them, (ii) (with
the consent of the Guarantor) offer or agree to or enter into any agreement
for any variation of this Agreement, or (iii) prove or abstain from proving,
in respect of the obligations of the Borrower under this Agreement, in a
bankruptcy, winding-up, liquidation or reorganization of the Borrower.

(E) The obligations of the Guarantor hereunder are (and are intended to
be) a continuing and independent security to the Agent and each Bank, as the
case may be, for the due and punctual payment by the Borrower, under and in
accordance with the terms of this Agreement, of the Guaranteed Amount and
interest thereon and all other monies related thereto which are now or may at
any time hereafter be due and payable by the Borrower under or pursuant to
this Agreement and accordingly the said obligations (i) shall be in addition
to and not in substitution for or derogation from any other encumbrance,
guarantee or other security now or at any time hereafter held by or on behalf
of the Agent or such Bank in respect of the obligations of the Borrower under
this Agreement or any of them, (ii) shall not be or be construed to be
satisfied by any discharge of or payment of or on account of the obligations
of the Borrower under this Agreement or any of them which has not resulted in
a final and irrevocable settlement of the

<PAGE>

respective obligation, and (iii) shall at all times extend to cover the
balance of principal, interest and all other monies which are now or may at
any time hereafter be due and payable by the Borrower under or pursuant to
this Agreement.

(F) Neither the Agent nor any Bank shall be obliged before asserting or
enforcing the obligations of the Guarantor hereunder (i) to take action or
obtain judgement against the Borrower in any court, (ii) to make or file any
claim or proof in any bankruptcy, winding-up, liquidation or reorganization
of the Borrower or (iii) to enforce or seek to enforce any other encumbrance,
guarantee or other security now or at any time hereafter held by or on behalf
of the Agent or such Bank in respect of the obligations of the Borrower under
this Agreement or any of them.

(G) Where any payment has been made by the Guarantor to the Agent or any
Bank hereunder the Guarantor shall not take the benefit of subrogation (if
any) of any rights of any such person or any encumbrance, guarantee or other
security now or any time hereafter held by or on behalf of such person in
respect of the obligations of the Borrower under this Agreement or any of
them until and unless all obligations of the Borrower under this Agreement
have been discharged in full.

(H) The guarantee given under this Agreement may be enforced against the
Guarantor by each Bank or by the Agent as agent for the Banks in any
proceedings, including enforcement proceedings.

(I) The Agent and the Banks confirm that it is the intention of all
parties that the guarantee by the Guarantor not constitute a fraudulent
transfer or conveyance for purposes of the Bankruptcy Law, the Uniform
Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar
federal or state law. To effectuate the foregoing intention, the Banks and
the Guarantor hereby irrevocably agree that the obligations of the Guarantor
under this Article 17 shall be limited to the maximum amount as will, after
giving effect to all other contingent and fixed liabilities of such
Guarantor, result in the obligations of the Guarantor under the guarantee not
constituting a fraudulent transfer or conveyance.

18. REPRESENTATIONS AND WARRANTIES

(A) Each of the Obligors represents and warrants to the Agent and the
Banks that:

(1) It has the power and authority to own its assets and carry on its
business in each jurisdiction in which it owns assets (other than an
immaterial part thereof) or carries on business

<PAGE>

(other than minor business activities) and it is a corporation duly
organized, validly existing and in good standing under the laws of the
Relevant Jurisdiction;

(2) It has the power to enter into, exercise its rights and perform and
comply with its obligations under each of the Facility Documents to which it
is a party, subject to bankruptcy, insolvency, fraudulent transfer,
reorganisation, moratorium and similar laws of general applicability relating
to or affecting creditors' rights and to general equity principles;

(3) The execution, delivery and performance of the Facility Documents to
which it is a party does not and will not violate or exceed the powers
granted to it by, or any provision of, (i) any law or regulation in force as
of the date hereof in the Relevant Jurisdiction, (ii) any order or decree in
force as of the date hereof of any governmental agency or court of or in the
Relevant Jurisdiction, (iii) its charter or by-laws or (iv) (in any material
respect) any mortgage, deed, indenture, contract or agreement or (v) any bond
issue (including, but not limited to the Wavetek Bond) to which it is a party
or which is binding upon it or any of its respective assets and will not
cause any encumbrance to arise over or attach to all or any part of its
revenues or assets nor oblige it to create any such encumbrance except as
contemplated hereby;

(4) All actions, conditions and things required in the Relevant
Jurisdiction in order (i) to enable it lawfully to enter into and exercise
and perform its respective rights and obligations under the Facility
Documents to which it is party, (ii) to ensure that its obligations hereunder
are legal, valid and enforceable, and (iii) to make the Facility Documents
admissible in evidence in such jurisdiction have been obtained or made and
are in full force and effect;

(5) Each Facility Document to which it is party constitutes its legal,
valid, binding and unconditional obligations enforceable against it in
accordance with the terms thereof, subject to bankruptcy, insolvency,
fraudulent transfer, reorganisation, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles;

(6) Neither it nor, to the best of its knowledge after due enquiry, any of
its subsidiaries is currently in default with the payment of any material sum
(as set out in Article 21 (E)) due and payable and no event has occurred and
is continuing which constitutes, or which with the giving of notice or lapse
of time or fulfilment of any other condition would constitute an Event of
Early Repayment;

(7) Neither it nor any other member of the Group is involved in any legal
or arbitration or administrative proceedings other than disclosed in the
financial statements of the Borrower as of September 30, 1998 and the notes
thereto nor, so far as the Borrower is aware, are any such

<PAGE>

proceedings pending or threatened against any member of the Group where such,
proceedings if determined adversely, could reasonably be expected to have a
Material Adverse Effect other than the proceedings threatened by the law firm
of Fried, Frank, Harris, Shriver & Jacobson, New York, in a letter dated
December 11, 1998 with respect to the Wavetek Bond;

(8) Neither it nor, to the best of its knowledge after due enquiry, any of
its subsidiaries has taken any corporate action or have any other steps been
taken or legal proceedings been started (except for the purpose of a solvent
restructuring) or, so far as the Obligors are aware, threatened against any
Obligor or any member of the Group for its winding-up, dissolution,
administration or re-organisation or for the appointment of a receiver,
administrator, administrative receiver, trustee or similar officer of it or
of any material part or all of its assets or revenues, except for the
voluntary dissolutions of inactive or Immaterial Subsidiaries;

(9) Its Original Financial Statements are complete and correct in all
material respects and present fairly the financial position and the results
of the operations of the Obligors as of the date as of which they were
prepared and for the financial year then ended on such date and have been
prepared in accordance with GAAP and applied on a consistent basis with the
financial statements in respect of previous financial years 1996 and 1997 and
accordingly as of the date of its Original Financial Statements there were
neither any material liabilities, direct or indirect, actual or contingent,
of it nor any material unrealized or anticipated losses from any unfavourable
commitments required to be disclosed by it or reserved against in any such
financial statement or in the notes thereto (in accordance with GAAP) and not
disclosed or reserved;

(10) Between the date its Original Financial Statements refer to and the
date hereof there has been no material adverse change in its business, assets
or financial condition or the business, assets or financial condition of any
Obligor or the Group taken as a whole;

(11) It is in compliance with all relevant laws, regulations, permits,
treaties and agreements (including, without limitation, laws and permits
pertaining to environmental matters), non-compliance which can reasonably be
expected to have a Material Adverse Effect;

(12) Its respective obligations under this Agreement rank and will continue
to rank at least pari passu in respect of priority of payment and in all
other respects with all its other unsecured and unsubordinated indebtedness
and the obligations of the Obligors under this agreement will in any case
rank before any of their current or future obligations under the Wavetek
Bond, save as provided by applicable laws of bankruptcy, insolvency,
liquidation or similar laws of general

<PAGE>

application and, save as permitted by Article 19 (C), no encumbrance exists
over all or any of its present or future revenues or assets;

(13) The holders of the Wavetek Bond are not and will not be entitled to
repayment of any outstandings under the Wavetek Bond and the Borrower was not
and will not be required to make a Change of Control Offer as set out under
Section 4.06 of the indenture relating to the Wavetek Bond because (i) the
Borrower and WGMH consummated the transactions contemplated under the Merger
Agreement, and/or (ii) the Obligors enter into this Agreement (and in the
case of the Borrower the Share Pledge Agreement and the Ancillary
Facilities), and/or the Obligors or the Banks exercise their rights hereunder
(other than pursuant to Article 21) nor will the aforesaid result in a
default under or breach of the indenture relating to the Wavetek Bond.

(14) Under the laws of the Relevant Jurisdiction in force at the date
hereof, it will not be required to make any deduction or withholding from any
payment it may make hereunder on account of any withholding taxes referred to
in the proviso to Article 13 (A) which cannot be avoided by the relevant
Bank(s) by complying with Article 13 (G);

(15) Under the laws of the Relevant Jurisdiction in force at the date
hereof, it is not necessary to ensure the legality, validity, enforceability
or admissibility in evidence of this Agreement in such jurisdiction in
respect of such Obligor that it be filed, recorded or enrolled with any
governmental authority or agency in such jurisdiction or that it be stamped
with any stamp, registration or similar transaction tax in such jurisdiction.

(B) The Obligors further represent that:

Each Plan is in substantial compliance with ERISA, and the Code and any
applicable requirement of law; no Reportable Event has occurred with respect
to any Plan; no Plan is insolvent or in reorganisation, and no written notice
of any insolvency or reorganisation has been given to any member of the Group
or any ERISA Affiliate with respect to any Multiemployer Plan; no Plan has an
Unfunded Current Liability; no Plan has an accumulated or waived funding
deficiency or has applied for an extension of any amortisation period within
the meaning of Section 412 of the Code; all contributions required to be made
with respect to a Plan and a Foreign Pension Plan have been timely made;
neither any member of the Group nor any of its subsidiaries nor any ERISA
Affiliate has incurred any material liability to or on account of (i) a Plan
pursuant to Section 409, 502 (1), 515, 4062, 4063, 4064, 4069, 4201, 4204 or
4212 of ERISA or Section 401 (a)(29), 4971, 4975 or 4900 of the Code or
(ii) a Multiemployer Plan pursuant to Section 515, 4201, 4202 or 4112 of ERISA
or Section 4971 of the Code or expects to

<PAGE>

incur any liability (including any indirect, contingent, or secondary
liability) under any of the foregoing Sections with respect to any Plan; no
proceedings have been instituted to terminate or appoint a trustee to
administer any Plan; no condition exists which presents a material risk to
the Company or any member of the Group or any ERISA Affiliate of incurring a
liability to or on account of a Plan pursuant to the foregoing provisions of
ERISA and the Code; no lien imposed under the Code or ERISA on its or any
subsidiaries assets or on the assets of any ERISA Affiliate exists or is
likely to arise on account of any Plan; and it and its subsidiaries may cease
contributions to or terminate any employee benefit plan maintained by any of
them without incurring any material liability.

19. UNDERTAKINGS

Each of the Obligors undertakes or, as the case may be, the Borrower
undertakes to procure

(A) to supply to the Agent (with a sufficient number of copies for the Banks)

(1) as soon as the same are available, and in any event within 120 days of
the end of each of its financial years, the Borrower's audited
consolidated balance sheet and profit and loss account for that
financial year and the Borrower's, WGMH's and the Guarantor's
unaudited unconsolidated balance sheet and profit and loss account
(included in Form 10-K with the U.S. Securities and Exchange
Commission); and

(2) as soon as the same are available, and in any event within 45 days of
the end of each of the first, second and third financial quarters, the
Borrower's unaudited financial statements for that quarter included in
Form 10-Q with the U.S. Securities and r WGMH's unaudited
unconsolidated semi-annual financial statements); and

(3) (in the case of the Borrower) as soon as the same are available, and
in any event within 30 days of the end of the respective month of its
consolidated key figures on incoming orders, sales and earnings before
interest and taxes, as available in the Borrower's unaudited internal
financial statements; and

(4) such other information regarding its business or financial condition
as the Agent or any Bank through the Agent may from time to time in
accordance with normal market practice and regulatory requirements
reasonably request; and

(5) as soon as the same are available, and in any event within 20 days
following the date hereof a certificate of WGMH confirming the receipt
of a notification in accordance with

<PAGE>

Section 16 of the Limited Liabilities Companies Act (GMBHG) relating
to the Share Pledge Agreement.

(B) that the financial statements to be furnished from time to time in
accordance with paragraph (A)(1) are prepared in accordance with GAAP (in the
case of WGMH in accordance with GAAP or the Commercial Code (HGB)) and are
complete in all material respects and shall present fairly the consolidated
or, as the case may be, the unconsolidated financial position and the results
of the operations of the relevant Obligor as of such date and for the period
to which the financial statements relate and to notify in writing the Agent
of any material change in the application of accounting principles unless
such change has been disclosed in the notes to or, as the case may be, the
notes to the relevant financial statement.

(C) none of the Obligors shall and the Borrower shall ensure that no other
member of the Group shall at any time while any amounts remain outstanding
from any Borrower under this Agreement, create or permit to subsist any
encumbrance over all or any of its present or future revenues or assets
(including but not limited to for the avoidance of doubt the proportion of
approximately 35 % of the share in WGMH remaining unpledged under the Share
Pledge Agreement) as security for any financial indebtedness of any person
other than:

(1) encumbrances set out in the Disclosure Letter;

(2) any encumbrance in connection with the assignment of trade receivables
made with respect to the indebtedness assumed by the Group's
distribution subsidiaries in accordance with paragraph (I)(4) provided
that the aggregate financial indebtedness which is at any time
outstanding and secured by encumbrances created or existing in
reliance on this sub-paragraph (2) does not exceed the amount set out
under paragraph (I)(4);

(3) any encumbrance arising in the ordinary course of business solely by
operation of law (or by an agreement evidencing the same) and not due
to a default;

(4) in the case of an acquisition of assets (including for the avoidance
of doubt stock) any encumbrance over assets and which encumbrance is
in existence prior to such acquisition (provided that such encumbrance
is not created in contemplation of such acquisition and the
acquisition is at fair market value and on an arms' length basis);

(5) encumbrances created or permitted to subsist with the prior written
consent of the Majority Banks;

<PAGE>

(6) any attachment, judgement or encumbrance not constituting an Event of
Early Repayment.

(D) none of the Obligors shall and the Borrower shall procure that no
other member of the Group shall, either in a single transaction or in a
series of transactions, whether related or not and whether voluntarily or
involuntarily, sell, transfer, grant or lease or otherwise dispose of any
part of its assets or enter into any merger agreement or transfer any of its
assets by way of a spin off or any contribution to another entity (a "hive
down", AUSGLIEDERUNG) other than:

(1) disposals in the ordinary course of business (including, but not
limited to customary forfaiting) on an arm's length basis and at fair
market value; or

(2) disposals made by one member of the Group (other than the Borrower) to
another member of the Group or any merger between or spin off or
contribution to any member of the Group; or

(3) disposals (other than such disposals referred to under subparagraph
(1) above) on an arm's length basis and at fair market value provided
that the book value of such assets or revenues derived from such
assets when aggregated over the lifetime of this Agreement under this
sub-clause (3) does not exceed 5 per cent. of the total consolidated
assets of the Group or its consolidated revenues as to be determined
on the basis of the most recent annual balance sheet and income
statement; or

(4) disposals made in the way of sale- and lease-back transactions
generating at least book value of the assets and if such assets are
pledged or otherwise being used as security for any financial
indebtedness the net proceeds of such transactions are applied towards
the repayment of the relevant secured debt; or

(5) disposals made with the prior consent of the Majority Banks.

(E) the Borrower shall under no circumstances dispose of and shall procure
that no member of the Group disposes of any of its shareholdings (including
in particular but not limited to the Pledged Share in WGMH) in its
subsidiaries other than the certain subsidiary referred to under Article 9
(E) without the prior written consent of the Banks or any disposals within
the Group.

(F) that it will obtain promptly at any time and from time to time such
registrations, licenses, consents and approvals as may be required in respect
of this Facility Agreement to which it is

<PAGE>

party under applicable law or regulation to enable it to perform its
obligations hereunder and upon the Agent's request promptly supply the Agent
with copies thereof.

(G) all members of the Group shall comply in all respects with all
obligations under ERISA and with all environmental laws the failure to comply
with or to observe could reasonably be expected to have a Material Adverse
Effect.

(H) no member of the Group shall, without the prior written consent of the
Majority Banks, make any loans, grant any credit or give any guarantee or
indemnity to or for the benefit of any person or otherwise voluntarily assume
any liability, whether actual or contingent, in respect of any obligations of
any other person other than (i) loans made or credits granted to or in favour
of any other members of the Group or otherwise in the ordinary course of
business or (ii) any guarantee or indemnity given in the ordinary course of
business or (iii) guarantees required under the Wavetek Bond.

(I) no member of the Group will incur or permit to subsist any financial
indebtedness other than:

(1) any such indebtedness incurred hereunder; or

(2) any such indebtedness owing by a member of the Group to another member
of the Group; or

(3) any indebtedness incurred under the existing DM 10 million credit
facility maintained by Wandel & Goltermann Elektronische Messtechnik
GmbH & Co. KG with Kreissparkasse Reutlingen; or

(4) any short-term facilities maintained by any distribution subsidiaries
to the extent the aggregate amount of such indebtedness does not
exceed DM 30 million (or its equivalent); or

(5) any indebtedness incurred under the long-term facility of the Group
set out in the Disclosure Letter to the extent any indebtedness
thereunder does not exceed an amount of DM 70 million (or its
equivalent); or

(6) any amount outstanding under the Wavetek Bond at the time being USD
85,000,000; or

<PAGE>

(7) any indebtedness in the aggregate amount of DM 85,000,000 or its
equivalent incurred under the Ancillary Facilities maintained in
accordance with the provisions hereof or any facilities supported by
the Ancillary Facilities; or

(8) in the case of an acquisition of assets (including for the avoidance
of doubt stock) any financial indebtedness acquired in connection
therewith provided that (i) such indebtedness is not created in
contemplation of such acquisition and (ii) the acquisition is at fair
market value and on an arms' length basis and (iii) the aggregate
amount of such financial indebtedness does at any time not exceed an
amount of DM 10,000,000 and the Borrower shall in any case following
such acquisition give notice to the Agent about the amount of the
Acquired Financial Indebtedness;

(9) the shareholder loans to WGMH as of September 1998 in the amount of DM
19,658,235;

(10) a certain additional amount to be agreed upon with the Banks in a
separate agreement.

(J) each member of the Group shall ensure that adequate contributions are
made to pension insurance schemes (including but not limited to ERISA
requirements) in respect of employees of the Group where such pension
insurance schemes are required in the Relevant Jurisdiction of such Group
members.

(K) as soon as it becomes aware thereof promptly to notify in writing the
Agent of any Event of Early Repayment or any event which with the giving of
notice, lapse of time or fulfilment of any other condition would or might
constitute an Event of Early Repayment.

(L) to ensure that at all times the claims of the Agent, the Arrangers,
the Banks and Deutsche Bank AG, Reutlingen Branch against the Obligors under
this Agreement and the Ancillary Facilities rank at least PARI PASSU with the
claims of all its other unsecured and unsubordinated creditors save those
whose claims are preferred by any bankruptcy, insolvency, liquidation or
other similar laws of general application.

(M) it maintains insurances on and in relation to its business and assets
with reputable underwriters or insurance companies against such risks and to
such extent as is usual for companies carrying on a business comparable to
its business.

(N) the Borrower will provide the Agent within a period of ten Business
Days following the date hereof with a confirmation of Commerzbank
Aktiengesellschaft, Reutlingen Branch that the existing security pooling
agreement between Commerzbank Aktiengesellschaft, Baden-

<PAGE>

Wurttembergische Bank AG, Deutsche Bank AG, Kreissparkasse Reutlingen,
Landesgirokasse Stuttgart and Stuttgarter Bank AG was cancelled and that all
collateral provided thereunder or in connection therewith was released.

(O) the Borrower undertakes that it will repay or refinance with
guarantees provided under the Ancillary Facilities (or, as the case may be
cancel) all Bilateral Facilities by the end of January 1999 and the Borrower
will provide the Agent immediately thereafter with a confirmation of
Commerzbank Aktiengesellschaft, Reutlingen Branch, that all Bilateral
Facilities were repaid, refinanced or cancelled respectively.

20. FINANCIAL COVENANTS

(A) The Borrower shall ensure that the consolidated financial condition of
the Group to be tested quarterly by reference to the Borrower's consolidated
financial statements shall be such that:

(1) the Gearing Ratio is always not more than 2.2 before September 30,
1999 and not more than 1.9 at September 30, 1999 and thereafter, to be
reduced following an initial public offering of the Borrower.

(2) the Interest Coverage Ratio (to be tested on a Rolling Basis) in
respect of any Relevant Period calculated shall be not less than 2.3:1
for testing at December 31, 1998 and not less than 2.6:1 thereafter
and before September 30, 1999 and not less than 3.0 : 1 for the fiscal
year ended September 30, 1999 and thereafter.

(B) In this Article 20 the following terms have the following meanings:

"EBITDA" means, in respect of any Relevant Period, the consolidated operating
income of the Borrower plus (i) depreciation expenses, (ii) amortisation
expenses and (iii) acquired in-process research and development and
provisions for restructuring operations and other non-recurring charges
resulting from the transactions contemplated in the September 30, 1998
financial statements, in each case for the Relevant Period.

"GEARING RATIO" means the ratio of Net Financial Indebtedness to Net Worth.

"INTEREST COVERAGE RATIO" means the ratio of the sum of EBITDA of the
Borrower and its subsidiaries on a consolidated basis for the four
fiscal-quarter period most recently ended to Net Financial Result for the
same period.

<PAGE>

"LIQUID ASSETS" means cash, cash equivalents and short-term investments as
reflected on the consolidated balance sheet of the Borrower.

"NET FINANCIAL INDEBTEDNESS" means (i) all of the Borrower's consolidated
obligations for borrowed money, (ii) all obligations evidenced by debentures,
notes or similar instruments, (iii) all obligations to pay a deferred
purchase price for property, which appear as a liability in the consolidated
balance sheet of the Borrower prepared in accordance with GAAP, except trade
accounts payable, (iv) all obligations as lessee which are capitalized in
accordance with GAAP, (v) all financial indebtedness of third parties which
are secured by a security interest on any of its assets, (vi) all its
contingent liabilities to the extent required to be included as debt in the
balance sheet in accordance with GAAP, and (vii) the net amount of all of its
payment obligations under financial derivative transactions, which appear as
a liability in the consolidated balance sheet of the Borrower prepared in
accordance with GAAP, less (viii) Liquid Assets, less (ix) the Wavetek Bond,
less (x) the other subordinated debt permitted under Article 19 (I) (10) and
less (xi) any loans made by stockholders.

"NET FINANCIAL RESULT" means, in respect of any Relevant Period, the
difference (if positive) between any interest expense and any interest income.

"NET WORTH" means (i) the consolidated equity of the common stockholders and
any preferred stockholders of the Borrower and its consolidated subsidiaries
as of such date (for the avoidance of doubt as defined in the consolidated
balance sheets of the Borrower included in the 10_K-filing within the
Securities Exchange Commission for the fiscal year ended September 30, 1998
as stockholders equity: common stock, additional paid-in capital, retained
earnings/accumulated deficit and foreign currency translation adjustments/,
less (ii) the amount of any writing up the book value of any assets of any
member of the Group and the amount of any writing back of provisions after
the date hereof (other than write-ups resulting from foreign currency
translations and write-ups of tangible assets of a going concern business
made within 12 months after the acquisition of such business), less (iii) any
amount attributable to minority interests in the consolidated accounts of the
Group, less (iv) any amounts attributable to goodwill after the date hereof
but not making any adjustments for any amounts positive or negative
attributable to goodwill resulting from the transactions contemplated in the
September 30, 1998 financial statements plus (v) the Wavetek Bond, plus (vi)
the other subordinated debt permitted under Article 19 (I) (10) and plus
(vii) any loans made by stockholders.

"RELEVANT PERIOD" means each calendar quarter.

<PAGE>

"ROLLING BASIS" refers to the calculation of a ratio for the preceding twelve
months.

(C) The Borrower shall deliver to the Agent within a period of 45 days
after the end of each Relevant Period other than the end of a fiscal year,
there within 90 days after the end of a fiscal year, a compliance certificate
("COMPLIANCE CERTIFICATE") setting out in reasonable detail the Borrower's
compliance with its obligations set out under paragraph (A).

Each Compliance Certificate shall be executed by the Chief Financial Officer
and another authorised signatory of the Borrower (in case of a Compliance
Certificate delivered in conjunction with the Borrower's audited annual
financial statements certified by the Borrower's auditors).

(D) In case the accounting policies, practices and procedures applied in
preparing any financial statements delivered after the date hereof pursuant
to paragraph (A) are different from the accounting policies, practices and
procedures applied in the preparation of the Borrower's Original Financial
Statements then

(1) The Borrower shall procure that its auditors provide to the Agent a
description of such changes and the adjustments necessary in order to
determine the Borrower's compliance with its obligations set out in
paragraph (A) as if such change to the Borrower's accounting policies,
practices and/or procedures would not have occurred; and

(2) The Borrower's compliance with its obligations set out in paragraph
(A) will be determined as if such change to the Borrower's accounting
policies, practices and/or procedures would not have occurred unless
the Borrower and the Agent have agreed that such changes are
irrelevant in the context of this Article 20 or are sufficiently
compensated by amendments to paragraph (A) agreed upon by the Borrower
and the Agent.

21. EVENTS OF EARLY REPAYMENT

If:

(A) the Borrower fails to pay when due any sum which shall have become due
hereunder and (in case the non-payment is solely due to technical problems or
administrative failures) the non-payment continues unremedied for three
Business Days after notice thereof has been given by the Agent to the
Borrower; or

<PAGE>

(B) any representation, warranty or statement made or repeated by any of
the Obligors in this Agreement or any notice or other document, certificate
or statement delivered by it pursuant hereto or in connection herewith is or
proves to have been incorrect or inaccurate or misleading in a material
respect when made or repeated and such incorrectness or inaccuracy is, if
capable of remedy, not remedied within fifteen Business Days after notice
thereof has been given by the Agent to such Obligor; or

(C) The Obligors fail to comply with the provisions of Article 19 and such
failure should continue to be unremedied (if capable to remedy) for fifteen
Business Days or the Borrower fails to comply with the provisions of Article
20 (A); or

(D) any of the Obligors fails duly to perform or observe any other
provision of this Agreement and such failure shall continue unremedied for
fifteen Business Days (if capable of remedy, otherwise immediately) after the
Agent has given notice of such failure to such Obligor; or

(E) any financial indebtedness of the Borrower or any member of the Group
incurred otherwise than hereunder is not paid when due or after any
applicable grace period or any financial indebtedness of the Borrower or any
member of the Group is declared to be or otherwise becomes due and payable
prior to its specified maturity pursuant to the occurrence of an event of
default (howsoever described) or any creditor of the Borrower or any member
of the Group becomes entitled to declare any financial indebtedness of the
Borrower or any member of the Group due and payable prior to its specified
maturity, unless the aggregate amount of all such financial indebtedness is
less than DM 5 million (or, following its introduction, Euro 2,5 million) (or
its equivalent in any other currency or currencies); or

(F) the Borrower or any other member of the Group shall enter into
voluntary or involuntary bankruptcy or shall become insolvent or is unable to
pay its debts as they fall due, commences negotiations with any one or more
of its creditors with a view to the general readjustment or rescheduling of
its indebtedness or makes a general assignment for the benefit of or a
composition with its creditors, or a receiver or liquidator shall be
appointed for all or any part of the undertaking or assets of the Borrower or
of any member of the Group or proceedings (other than proceedings which are
either vexatious or frivolous and being contested by appropriate means) are
commenced by or against the Borrower or any member of the Group (other than
Immaterial Subsidiaries) under any reorganization, arrangement, re-adjustment
of debts, or liquidation law or regulation, or if any event shall occur
which, under the law of the country of incorporation of the relevant entity,
shall have an equivalent effect and not discharged within a period of thirty
days; or

<PAGE>

(G) any governmental or other consent, licence or authority required to
make this Agreement legal, valid, binding, enforceable and admissible in
evidence or required to enable any of the Obligors to perform its obligations
under the Facility Documents is withdrawn or ceases to be in full force and
effect; or

(H) it becomes unlawful for any of the Obligors to perform all or any of
its obligations hereunder; or

(I) any Material Member of the Group shall cease or suspend or threaten to
cease or suspend all or a material part of its operations or business; or

(J) the Borrower or any of its subsidiaries (other than Immaterial
Subsidiaries) takes any corporate action or legal proceedings (which
proceedings are not discharged of within thirty Business Days provided such
proceedings are contested in good faith by the relevant company(ies)) are
started for its winding-up, dissolution or administration (or its equivalent
in any other applicable jurisdiction) (other than any solvent reorganisation
previously approved in writing by the Majority Banks) or for the appointment
of a liquidator, receiver, administrator, administrative receiver, trustee or
similar officer of it or of any or all of its revenues and assets or any
application is made or petition is lodged for the making of an administration
order in relation to any subsidiary (other than Immaterial Subsidiaries) and
not discharge within thirty Business Days (provided such proceedings are
contested in good faith by the relevant company(ies)) or any analogous
proceedings shall be commenced against any subsidiary (other than Immaterial
Subsidiaries) under the laws of any jurisdictions; or

(K) any execution or distress with respect to an amount of or exceeding DM
5 million (and following its introduction EURO 2,5 million) is levied
against, or encumbrances takes possession of the whole or any part other than
a wholly immaterial part of, the property, undertaking or assets of the
Borrower or any subsidiary (other than Immaterial Subsidiaries) or any
analogous proceedings shall be commenced against the Borrower or any
subsidiary (other than Immaterial Subsidiaries) under the laws of any
jurisdiction and not discharged within fifteen Business Days provided such
proceedings are contested in good faith; or

(L) WGMH ceases to be a (direct or indirect) wholly-owned subsidiary of
the Borrower or if any person, or group of persons acting together which does
not or doe not have control at the date hereof acquires control over 50 per
cent of the voting rights and/or the capital stock of the Borrower; or

<PAGE>

(M) the Borrower's auditors qualify their annual audited report to the
consolidated financial statements of the Borrower in a manner which is, in
the reasonable opinion of the Majority Banks, material in the context of the
Facilities; or

(N) any situation or material adverse change in the business, assets or
financial condition of the Borrower or the Group taken as a whole occurs,
which situation or change of circumstance gives reasonable grounds to
conclude that the Borrower may likely not, or will be unable to, perform or
observe in the normal course its financial obligations under this agreement;
or

(O) the Wavetek Bond is repaid or shall become due and payable, or the
Borrower makes or will be under the obligation to make a Change of Control
Offer (as defined under Section 4.06 of the indenture relating to the Wavetek
Bond) to the holders of the Wavetek Bond or the shareholders of the Borrower
take any action or enter into any agreement that would result in an
obligation of the Borrower to make such offer, before the Final Maturity Date
save to, following the cancellation of the Revolving Credit Commitments in an
amount of DM 100,000,000 any repayment of the Wavetek Bond in the maximum
amount of one third of the principal amount of the Wavetek Bond if such
repayment is made out of the free funds (meaning all funds raised by such a
public offering minus all costs accrued in connection therewith) raised by an
initial public offering of share in the Borrower; or

(P) there shall occur any of the following events which have a Material
Adverse Effect:

(1) the happening of a Reportable Event (as defined in Section 4043 of
ERISA) with respect to any Plan;

(2) the disqualification or involuntary termination of a Plan for any reason;

(3) the voluntary termination of any plan while such plan has a funding
deficiency (as determined under Section 412 of the Code);

(4) the institution of any proceedings by the PBGC to terminate any such
Plan or to appoint a trustee to administer any such Plan;

(5) the failure of any of the Obligors to notify the Agent and the Banks
promptly upon the receipt by such Obligor or any of its affiliates of
any notice of the institution of any proceeding or other actions which
may result in the termination of any such Plan

<PAGE>

then, and in any such event and at any time thereafter, if any such event
shall be continuing, the Agent may (and, if so instructed by the Majority
Banks, shall) take either or both of the following actions:

(1) by notice to the Borrower declare the Loan immediately due and payable
whereupon the same shall become so payable together with interest
accrued thereon and all other amounts payable hereunder; or

(2) by notice to the Borrower declare that the Revolving Facility
Commitments of all the Banks shall be cancelled, whereupon the same
shall be cancelled and all amounts payable hereunder shall become due
and payable.

22. FEES

(A) The Borrower shall pay (i) to the Agent for account of the Banks a
commitment fee in Deutsche Mark (and, following its introduction, Euro)
computed on a daily basis on the undrawn part of the Revolving Credit
Facility Commitments and (ii) to each relevant Bank and Deutsche Bank AG,
Reutlingen Branch, a commitment fee in Deutsche Marks (and, following its
introduction, Euro) computed on a daily basis on the undrawn part of such
Bank's (and Deutsche Bank AG's, Reutlingen Branch respectively) commitment
with respect to the Ancillary Facilities as set forth in the Sixth Schedule,
in either case calculated at the rate of 0.25 per cent. per annum. Accrued
commitment fee shall be payable in arrears on the last day of each successive
period of three months which ends during the period commencing on the date
hereof and ending on the Final Maturity Date and shall be calculated on the
basis of a year of 360 days and for the actual number of days elapsed.

(B) The Borrower shall pay to the Agent and the Arrangers the fees
specified in the letter of even date from the Agent to the Borrower
countersigned by the Borrower on the dates and in the amounts specified in
such letter.

23. EXPENSES AND STAMP DUTIES

(A) Each Obligor shall reimburse the Agent and the Banks on demand for all
reasonable costs and expenses (including reasonable legal fees and value
added tax or similar tax) incurred by them or any of them in, or in
connection with, the enforcement of or preservation of its or their rights
against such Obligor under the Facility Documents or in connection with any
amendments, waivers or consents required during the term of this Agreement in
respect thereof.

<PAGE>

(B) Each Obligor shall pay any and all stamp, registration and similar
taxes and charges of whatsoever nature (other than any tax referred to in
Article 13 (A)) which may be payable or determined to be payable on, or in
connection with, the execution or performance of the Facility Documents, by
such Obligor, the enforcement of the Facility Documents against such Obligor
or any registration or notarization of this Agreement with respect to such
Obligor and shall, from time to time on demand of the Agent, indemnify the
Agent and the Banks against any and all liabilities with respect to or
resulting from delay or omission on its part to pay any such taxes.

24. THE AGENT, THE ARRANGERS AND THE BANKS

(A) Each Bank hereby appoints the Agent to act as its agent in connection
herewith and authorizes the Agent to exercise such rights, powers and
discretions as are specifically delegated to the Agent by the terms hereof
together with all such rights, powers and discretions as are reasonably
incidental thereto.

(B) When acting in connection with this Agreement, the Agent may:

(1) assume that no Event of Early Repayment and no event which with the
giving of notice, lapse of time or fulfilment of any other condition
would or might constitute an Event of Early Repayment has occurred and
that none of the Obligors is in breach of or default under its
respective obligations hereunder unless it has received express notice
thereof from any party hereto or (in the case of a payment default
hereunder) gained actual knowledge thereof;

(2) assume that each Bank's Lending Office is that identified with its
signature below until it has received from such Bank notice
designating any other office of such Bank as its Lending Office and
act upon any such notice until the same is superseded by a further
such notice;

(3) engage and pay for the advice or services of any experienced lawyers,
accountants, surveyors or other experts whose advice or services may
to it seem necessary, expedient or desirable and rely upon any advice
so obtained;

(4) rely as to any matters of fact which might reasonably be expected to
be within the knowledge of any of the Obligors upon a certificate
signed by or on behalf of such Obligor;

<PAGE>

(5) rely upon any communication or document believed by it to be genuine;

(6) refrain from exercising any right, power or discretion vested in it
hereunder unless and until instructed by the Majority Banks as to the
manner in which such right, power or discretion should be exercised;

(7) refrain from acting in accordance with any instructions of the
Majority Banks to begin any legal action or proceeding arising out of
or in connection with this Agreement until it shall have received such
security as it may require (whether by way of payment in advance or
otherwise) for all costs, claims, expenses (including legal fees) and
liabilities together with any value added tax or similar tax thereon
which it will or may expend or incur in complying with such
instructions;

(8) if it is unable to obtain instructions or communicate with a Bank
after making reasonable attempts to do so, either refrain from acting
as Agent on behalf of such Bank or take such action on behalf of such
Bank as it in its absolute discretion deems appropriate and shall not
be liable to such Bank as a result of any such action or inaction
(save in the case of gross negligence or wilful misconduct); and

(9) refrain from acting in accordance with any instructions of the
Majority Banks if in its reasonable opinion they are contrary to
applicable law.

(1) promptly inform each Bank of the contents of any notice or document
received by it from any of the Obligors hereunder or from any Bank
where such notice or document concerns the rights, interest and/or
obligations of all the Banks hereunder;

(2) promptly notify each Bank of the occurrence of any Event of Early
Repayment or any event which with the giving of notice or lapse of
time or fulfilment of any other condition would or might constitute an
Event of Early Repayment or any failure of any of the Obligors duly to
perform its respective obligations under this Agreement of which the
Agent has received express notice from any party hereto or (in the
case of a payment default hereunder) gained actual knowledge;

(3) subject as herein provided, act in accordance with any instructions
given to it by the Majority Banks and, if so instructed by the
Majority Banks, refrain from exercising a right, power or discretion
vested in it hereunder.

<PAGE>

(D) The Agent shall not:

(1) be bound to enquire as to the occurrence or otherwise of any Event of
Early Repayment (unless a payment default has occurred hereunder or
the Agent has been informed in writing by a Bank describing in
reasonable detail an occurrence of an event which is expressly stated
to be an Event of Early Repayment) or any event which with the giving
of notice or lapse of time or fulfilment of any other condition would
or might constitute an Event of Early Repayment or as to any failure
of any of the Obligors duly to perform its respective obligations
hereunder;

(2) be bound to account to any Bank for any sum or the profit element of
any sum received by it for its own account;

(3) initiate any legal proceedings on behalf of any Bank unless
specifically authorized by such Bank to do so, but the failure of any
Bank to give such authorization shall not limit the right of the Agent
to do so on behalf of any other Bank;

(4) be bound to disclose to any other person any information relating to
any of the Obligors received by the Agent if such disclosure would or
might in the opinion of the Agent constitute a breach of any law or
regulation or be otherwise actionable by any person; or

(5) be under any fiduciary duty towards any Bank or under any obligations
other than those for which express provision is made herein.

(E) Each Bank shall indemnify the Agent in the proportion its share of the
Loan bears to the amount of the Loan or, as the case may be, the amount of
its Commitment bears to the Total Commitments at the time any such
instructions are given, against any and all costs, claims, expenses
(including legal fees) and liabilities which the Agent may incur in complying
with any instructions received by it from the Banks insofar as such expenses
are not punctually reimbursed by the Obligors pursuant to the terms hereof
except routine administrative costs and expenses of the Agent or to the
extent that these costs, claims, expenses and liabilities are sustained or
incurred as a result of the gross negligence or wilful misconduct of the
Agent or any of its personnel or agents.

(F) Each Bank agrees that neither the Agent nor the Arrangers shall be
responsible for the accuracy and completeness of any representations made
(whether orally or otherwise) herein or in connection herewith, for the
validity, effectiveness, adequacy or enforceability of this

<PAGE>

Agreement or for the creditworthiness of any of the Obligors, any other
member of the Group or the Group as a whole. Neither the Agent nor the
Arrangers nor any of their directors, officers or employees shall be under
any liability for or in respect of any action taken or omitted by any of them
in relation to this Agreement save for its or his gross negligence or wilful
misconduct.

(G) The Arrangers and the Agent may accept deposits from, lend money to
and generally engage in any kind of banking or other business with the
Borrower.

(H) It is understood and agreed by each Bank that it has been, and will
continue to be, solely responsible for making its own independent appraisal
of and investigations into the financial condition, creditworthiness and
affairs of each of the Obligors, each other member of the Group and the Group
as a whole and accordingly each Bank confirms to the Agent and the Arranges
that it has not relied, and will not hereafter rely, on the Agent or the
Arrangers:

(1) to check or enquire on its behalf into the adequacy, accuracy or
completeness of any information provided by any of the Obligors in
connection with this Agreement or the transactions herein contemplated
whether or not such information has been or is hereafter circulated to
such Bank by the Agent or any of the Arrangers; or

(2) to assess or keep under review on its behalf the financial condition,
creditworthiness or affairs of any of the Obligors, any other member
of the Group or the Group as a whole.

(I) In acting as agent for the Banks under the Facility Documents the
Agent shall be regarded as acting through its agency division which shall be
treated as a separate entity from any other of its divisions or departments
and, notwithstanding the foregoing provisions of this Article 24, any
information received by some other division or department of the Agent may be
treated as confidential and shall not be regarded as having been given to the
Agent's agency division, unless the Agent had actual knowledge thereof or as
a matter of good faith (TREU UND GLAUBEN) the Banks could expect that such
information would have been passed on to them. Notwithstanding anything to
the contrary expressed or implied herein and without prejudice to the
provisions of this paragraph (I), the Agent shall not as between itself and
the Banks be bound to disclose to any Bank or any other person any
information which is supplied by the Obligors to the Agent other than in ist
capacity as agent hereunder.

(J) The Agent may (and if so instructed by the Majority Banks, shall) for
any reason at any time retire upon not less than forty-five days' written
notice to each of the parties hereto of its intention to do so and, if any
such notice is given by the Agent, the Agent shall upon the appointment of a
successor agent as hereinafter provided for cease to be under any further

<PAGE>

obligation as Agent hereunder. Following delivery of any such notice, the
Majority Banks may appoint a successor agent and if, before the expiry of
such notice, such successor agent notifies the parties hereto that it accepts
such appointment, (i) each reference herein to "the Agent" shall thereafter
be construed as a reference to the successor agent and (ii) the successor
agent and the parties hereto other than the retiring Agent shall thereafter
have such rights and obligations INTER SE as they would have had if the
successor agent had been a party hereto as the Agent. If no successor agent
appointed by the Majority Banks notifies the parties hereto, prior to the
expiry of the Agent's notice of its intention to retire giving rise to the
need to appoint the same, of its acceptance of such appointment, the Agent in
consultation with the Borrower may appoint any experienced and reputable bank
to be the successor agent and, if it does and such successor agent notifies
the parties hereto that it accepts such appointment, (a) each reference
herein to "the Agent" shall thereafter be construed as a reference to the
successor agent so appointed and (b) the successor agent so appointed and the
parties hereto other than the retiring Agent shall thereafter have such
rights and obligations INTER SE as they would have if the successor agent so
appointed had been named herein as the Agent.

(K) If any Reference Bank shall be prepaid under this Agreement or shall
cease to have any Commitment or after the first drawdown cease to have any
principal or interest owing to it hereunder, the Agent may in consultation
with the Borrower and the Majority Banks appoint a substitute Reference Bank.

(L) The Agent shall be released from the restrictions set out in paragraph
181 of the German Civil Code (BURGERLICHES GESETZBUCH).

25. CERTIFICATES

A Bank which makes a demand in respect of (i) the amount being necessary to
compensate such Bank under Article 7 (D) or (ii) its cost of funding as
referred to in Article 8 (C) or (iii) the amount necessary to compensate it
for any damages or losses referred to in Article 14 (D) or (iv) the amount
for the time being required to compensate it for any cost as mentioned in
Article 16 (A) or (v) to indemnify it against any such claim or liability as
is mentioned in Article 16 (B) shall deliver a certificate which sets out in
reasonable detail the calculation of such amount and the factual basis for
such calculation. Any such certificate shall constitute PRIMA FACIE evidence
for the purposes hereof save for manifest error.

<PAGE>

26. NO WAIVER

No failure to exercise and no delay in exercising on the part of the Agent or
any Bank any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege preclude any other or future exercise thereof, or the exercise of
any other right, power or privilege. The rights and remedies herein provided
are cumulative to any rights or remedies provided by law.

27. PARTIAL INVALIDITY

If at any time any provision of this Agreement is or becomes illegal, invalid
or unenforceable in any respect under the law of any jurisdiction, neither
the legality, validity or enforceability of the remaining provisions hereof
nor the legality, validity or enforceability of such provision under the law
of any other jurisdiction shall be affected or impaired thereby. Any
provision which is or becomes illegal, invalid or unenforceable shall be
deemed to be substituted by a provision which comes as close as possible to
purpose and spirit of the illegal, invalid or unenforceable provision.

28. AMENDMENTS AND WAIVERS

If authorised by the Majority Banks, the Agent may (except where any other
authority is required for the same by the provisions of this Agreement) grant
waivers or vary the terms of the provisions of this Agreement. Any such
waiver or variation so authorised and effected by the Agent shall be binding
on all the Banks and the Agent shall be under no liability whatsoever in
respect of any such waiver or variation, provided always that, except with
the prior consent of all the Banks, nothing in this Article 28 shall
authorise:

(1) any reduction in any rate at which interest or any fee is payable
under this Agreement;

(2) any extension of the date for, or alteration in the amount or currency
of, any payment of principal, interest, fees or any other amount
payable under this Agreement or any extension of the Final Maturity
Date;

(3) any increase in or decrease of (i) any Bank's Total Commitment and
(ii) the commitment of Deutsche Bank AG, Reutlingen Branch as set out
in the Sixth Schedule;

(4) any variation of a term of this Agreement which expressly provides for
the consent of all the Banks; and

<PAGE>

(5) any variation of Article 1 Definition of "Majority Banks" and
"EURIBOR", Article 2 (The Facilities), Article 15 (Set-off and
Redistribution of Payments), Article 17 (Guarantee), Article 20
(Financial Covenants), Article 29 (Change of Lending Office and
Assignments), or this Article 28;

provided that any such waiver or variation relating to Article 24 or
otherwise affecting the rights and/or obligations of the Agent shall also
require the consent of the Agent and provided further that any such variation
affecting the rights and/or obligations of an Obligor shall also require the
consent of such Obligor.

29. CHANGE OF LENDING OFFICE AND ASSIGNMENTS

(A) None of the Obligors may assign or transfer all or any of its rights,
benefits and obligations hereunder without the prior written consent of all
the Banks.

(B) Any Bank may at any time (i) change its Lending Office by notifying
such other office to the Agent or (ii) assign and transfer with the prior
consent of the Borrower (such consent not to be unreasonably withheld), any
of its rights or obligations under this Agreement to another bank or
financial institution provided (i) such assignment shall be made in minimum
amounts of DM 10 million (or following its introduction Euro 5 million) and
(ii) that no consent of the Borrower shall be required (a) if the transferee
is another Bank or an affiliate of the transferor or (b) following the
occurrence of an Event of Early Repayment.

(C) A Bank may neither assign or transfer any of its rights arising out of
an Advance separately from any corresponding share of its Revolving Credit
Facility Commitment under this Agreement (save for cases where such
assignment is made in order to avoid or mitigate any withholding tax on
account of which no payment would have to be made to such Bank pursuant to
Article 13 (A) (1)) nor assign or transfer any part of its Revolving Credit
Facility Commitment under this Agreement separately from its rights arising
out of its corresponding participation in any existing Advance(s).

A transfer and assignment may be effected only by the delivery to the Agent
of a duly completed and duly executed Transfer Certificate (subject to the
minimum transfer amount set out therein) in which event, on the transfer
date(s) specified in such Transfer Certificate:

(i) to the extent that in such Transfer Certificate the Bank party thereto
seeks to transfer its rights, benefits and obligations hereunder, each
of the Obligors and such Bank shall be

<PAGE>

released from further obligations towards one another hereunder and
their respective rights against one another shall be cancelled (such
rights, benefits and obligations being referred to in this paragraph (C)
as "DISCHARGED RIGHTS AND OBLIGATIONS");

(ii) each of the Obligors and the transferee party thereto shall assume
obligations towards one another and/or acquire rights against one
another which differ from such discharged rights and obligations only
insofar as such Obligor and such transferee have assumed and/or
acquired the same in place of such Obligor and such Bank; and

(iii) the Agent, the Arrangers, such transferee and the other Banks shall
acquire the same rights and benefits and assume the same obligations
between themselves as they would have acquired and assumed had such
transferee been an original party hereto as a Bank with the rights,
benefits and/or obligations acquired or assumed by it as a result of
such transfer

The Agent shall give notice of any such transfer and assignment to the
Borrower.

(D) If as a direct or, on the basis of information which is in the public
domain, foreseeable result of any change of Lending Office or any assignment
and transfer as referred to in paragraph (B) at the time of such change of
Lending Office or such assignment and transfer or immediately thereafter any
Obligor would be liable to make a payment pursuant to Article 13 (A) (1) or
Article 16 (A) or to pay an indemnification pursuant to Article 16 (B), then
the obligation to make such payment or to pay such indemnification shall not
arise, unless such change of Lending Office or transfer and assignment was
made pursuant to Article 16 (D).

(E) Each transferee shall pay to the Agent for its own account on the
transfer date(s) (as set out in the Transfer Certificate) a registration fee
of DM 2,000 (EURO 1,000 following the commencement date), payable under
pre-advice.

(F) A Bank may disclose information relating to the Obligors and any other
member of the Group or this Agreement and the Facility to its auditors,
legal, tax and other professional advisers upon their request but in each
case only where the same are advising on matters relating to the Facility or
performing their auditing functions; or to any actual or potential assignee
or transferee or any person with whom it may in accordance with paragraph (A)
enter into a transfer, assignment or other agreement in relation to this
Agreement.

<PAGE>

(G) Each Bank (and Deutsche Bank AG, Reutlingen Branch) (the "ASSIGNOR")
may assign and transfer its commitment under the Ancillary Facility to which
it is party provided that the assignee accepts any relevant obligation
assumed by the Assignor hereunder.

30. LANGUAGE

Each document, instrument, certificate, statement or notice referred to
herein or to be delivered hereunder shall, if not in the English language, be
accompanied by an English translation thereof (certified to be true and
correct by a duly authorized officer of the person making or delivering the
same), provided that the documents delivered pursuant to the Second Schedule
and (with the consent of the Agent) any other documents originating from a
public register may be delivered in their respective original language.

31. APPOINTMENT OF WGMH AS REPRESENTATIVE

The Obligors hereby appoint WGMH as their representative with respect to any
declaration or notice or negotiation to be made hereunder or in connection
herewith (including, but not limited to a Notice of Borrowing) and authorize
WGMH to sign/or dispatch or receive on its behalf all documents and notices
to be signed and/or dispatched by it under or in connection with this
Agreement.

32. NOTICES

(A) Each communication to be made hereunder shall be made in writing but,
unless otherwise stated, may be made by telefax or letter save that any
Notice of Borrowing shall, if made by telefax, be confirmed by letter
(provided that failure to provide such letter shall not invalidate the
original communication) and save that the documents listed in the Second
Schedule shall be received by the Agent in the original version.

(B) Any communication or document to be made or delivered by one person to
another pursuant to this Agreement shall (unless that other person has by
fifteen days' written notice to the Agent specified another address) be made
or delivered to that other person at the address identified with its
signature below (or, in the case of a transferee, at the end of the Transfer
Certificate to which it is a party as transferee) and shall be deemed to have
been made or delivered when despatched (in the case of any communication made
by letter) when left at that address or (in the case of any communication by
telefax) when actually received, provided that

<PAGE>

any communication or document to be made or delivered to the Agent shall be
effective only when received by the Agent and then only if the same is
expressly marked for the attention of the department identified with the
Agent's signature below (or such other department as the Agent shall from
time to time specify for this purpose) and provided further that if the time
of receipt of any communication or document is not a business day in the
country of the addressee or is not within working hours, such communication
or document shall be deemed to have been received at the opening of business
on the next Business Day.

33. APPLICABLE LAW AND JURISDICTION

(A) This Agreement and all rights and obligations hereunder shall be
governed by and construed in accordance with the laws of the Federal Republic
of Germany.

(B) For the benefit of the Agent, the Arrangers and each Bank, each of the
Obligors agrees that any legal action or proceedings arising out of or in
connection with this Agreement may be brought in the Regional Court
(LANDGERICHT) in Frankfurt am Main. The submission to such jurisdiction shall
not (and shall not be construed so as to) limit the right of the Agent and
the Banks or any of them to bring any legal action or proceedings with
respect to this Agreement in any other competent jurisdiction. The Obligors
hereby irrevocably authorize WGMH, Muhleweg 5, 72800 Eningen, Federal
Republic of Germany, as its agent for service of process relating to the
commencement of any proceedings or legal action out of or in respect to this
Agreement before the Regional Court (LANDGERICHT) in Frankfurt am Main.
Nothing herein contained shall affect the right of the Agent or the Banks or
any of them to serve process in any other manner permitted by law.

(C) Not withstanding the foregoing, for the benefit of the Agent, the
Arrangers and each Bank, the Obligors hereby submit to the non exclusive
jurisdiction of, agree that any legal action or proceeding arising out of
this Agreement may be brought in any United States Federal or State Court
sitting in the State of New York, and waive the defence of forum non
convenience on inconvenient forum and any all rights to trial by jury in any
legal proceeding (whether in New York or elsewhere) arising out of or
relating to any of the Finance Documents. The submission to such jurisdiction
and such waiver shall not (and shall not be construed so as to) limit the
right of the Agent, the Arrangers and the Banks any of them to bring any
legal action or proceedings with respect to this Agreement in other competent
court or jurisdiction.

<PAGE>

34. COUNTERPARTS

This Agreement shall be executed in any number of counterparts, each of which
shall constitute an original.

THE BORROWER

WAVETEK WANDEL & GOLTERMANN, INC.
11995 El Camino Real, # 301
San Diego, CA 92130
USA
Tel.: [001] 619 / 7932300
Fax: [001] 619 / 7932310

By: WAGNER EISEMANN

THE GUARANTOR

WANDEL & GOLTERMANN TECHNOLOGIES, INC.
1030 Swabia Court
Research Triangle Park
North Carolina
USA
Tel.: [001] 919 / 941 5730
Fax: [001] 919 / 941 5751

By: WAGNER R. SCHMID

THE ARRANGERS

COMMERZBANK AKTIENGESELLSCHAFT
Kaiserplatz
60261 Frankfurt am Main
Tel.: [+49] 69 / 1362-4815
Fax: [+49] 69 / 1362-9556

By: BECKMANN SCHOPP

<PAGE>

DEUTSCHE BANK AG
Taunusanlage 12
D-60262 Frankfurt
Tel.: [+49] 69 / 910-33806
Fax: [+49] 69 / 910-38793

By: GAAB MURB

THE AGENT

COMMERZBANK INTERNATIONAL S.A.
11 Rue Notre Dame
L-2240 Luxembourg

Tel.: [+352] 477911-1
Fax: [+352] 477911-386

By: BECKMANN

THE BANKS

COMMERZBANK AKTIENGESELLSCHAFT, REUTLINGEN BRANCH
Unter den Linden 1
D-72762 Reutlingen
Tel.: [+49] 7121 / 304-0
Fax: [+49] 7121 / 304-182

By: SCHOPP BECKMANN

DEUTSCHE BANK LUXEMBOURG S.A.
2, boulevard Konrad Adenauer
L-1115 Luxembourg
Tel.: [+352] 42122-331 or -292
Fax: [+352] 42122-287

By: GAAB MURB

<PAGE>

BADEN-WURTTEMBERGISCHE BANK AG, REUTLINGEN BRANCH
Marktplatz 9
D-72764 Reutlingen
Tel.: [+49] 7121/ 3195-50
Fax: [+49] 7121 / 3195-93

By: K.-D. KOPKA ARNDT

LANDESGIROKASSE OFFENTLICHE BANK UND LANDESSPARKASSE
Kronenstrasse 20
D-70173 Stuttgart
Tel.: [+49] 711 / 129 2693
Fax: [+49] 711 / 129 3996

By: KOCH EISENMANN

ADDITIONAL LENDER

DEUTSCHE BANK AG, REUTLINGEN BRANCH
Kaiserpassage 1
D-72764 Reutlingen
Tel.: [+49] 7121 / 335 100
Fax: [+49] 7121 / 335 112

By: BEER T. HOSLE

For the purpose of the Protocol annexed to the Convention on Jurisdiction and
the Enforcement in Civil and Commercial Matters signed at Brussels on 27
September 1968 (as amended) we hereby expressly and specially confirm our
agreement with the provisions of Article 33 (B) hereof which provides for our
submission to the non- exclusive jurisdiction of the Regional Court in
Frankfurt am Main.

BECKMANN GAAB MURB
____________________________ ____________________________

COMMERZBANK INTERNATIONAL S.A. DEUTSCHE BANK LUXEMBOURG S.A.

<PAGE>

EXHIBIT 10.17

EMPLOYMENT AGREEMENT

AGREEMENT, dated as of August 1, 1999, by and between Wavetek Wandel
Goltermann, Inc., a Delaware corporation (the "Company"), and Joe Budano (the
"Employee").

WHEREAS, Employee has been employed as an Senior Executive of Company; and

WHEREAS, Company and Employee wish to set forth the terms of the Employee's
continued employment by Company;

NOW, THEREFORE, IN CONSIDERATION OF the mutual covenants herein contained,
and other good and valuable consideration, the parties hereto agree as
follows:

1. EMPLOYMENT

Company hereby employs Employee, and Employee agrees to serve as an employee
of the Company, on the terms and conditions set forth in this Agreement.

2. PERIOD OF EMPLOYMENT

The "Period of Employment" shall be the period commencing on August 1, 1999,
and ending on July 31, 2000; provided, however, that commencing on August 1,
2000 and on the August 1 of each year thereafter, the term of the Agreement
shall automatically be extended for one additional year unless at least 30
days prior to any such date, Company or Employee shall have given notice in
accordance with Section 11 hereof that such extension shall not occur.

3. DUTIES DURING THE PERIOD OF EMPLOYMENT

During the Period of Employment, Employee shall serve as Senior Vice
President North American Operations of the Company and shall have such duties
and responsibilities as are assigned to Employee by the Board of Directors of
Company commensurate with such position. Employee shall devote Employee's
full business time, attention and efforts to the affairs of Company during
the Period of Employment, provided, however, that Employee may engage in
other activities, such as activities involving professional, charitable,
educational, religious and similar types of organizations, speaking
engagements, membership on the board of directors of such other organizations
as Company may from time to time agree to, and similar type activities to the
extent that such other activities do not inhibit or prohibit the performance
of Employee's duties under this Agreement, or conflict in any material way
with the business of Company and its affiliates.

<PAGE>

4. CURRENT CASH COMPENSATION

As compensation for Employee's services hereunder, during the Period of
Employment Employee will be entitled to target total compensation at the
annual rate of $ 300.000,-- of which:

(i) $ 210.000,-- shall be base salary, payable in accordance with the
Company's payroll practices for senior executives and

(ii) $ 90.000,-- shall be target bonus, payable in accordance with Company's
annual bonus plan. Company shall review such target total compensation
annually and in light of such review may, in the discretion of the Board of
Directors of Company (but shall not be obligated to), increase such target
total compensation taking into account any change in Employee's then
responsibilities, increases in the cost of living, performance by Employee,
and other pertinent factors.

5. OTHER EMPLOYEE BENEFITS.

(a) VACATION AND SICK LEAVE

Employee shall be entitled to reasonable paid annual vacation periods
and sick leave in accordance with the Company's executive vacation and
sick leave policies.

(b) REGULAR REIMBURSED BUSINESS EXPENSES

Company shall reimburse Employee for all expenses and disbursements
reasonably incurred by Employee in the performance of Employee's duties
during the Period of Employment, and provide such other facilities or
services as Company and Employee may, from time to time, agree are
appropriate, all in accordance with Company's established policies.

In addition to the cash compensation provided for in Section 4 hereof,
Employee, subject to meeting eligibility provisions and to the
provisions of this Agreement, shall be entitled to participate in
Company's employee benefit plans, as presently in effect or as they may
be modified or added to by Company from time to time.

(d) EXECUTIVE COMPENSATION PLANS

In addition to the cash compensation provided for in Section 4 hereof
and the employee benefits provided for in paragraph (c) of this
Section, Employee, subject to meeting eligibility provisions and to the
provisions of this Agreement, shall be entitled to participate in
Company's executive compensation plans, as presently in effect or as
they may be modified or added to by Company from time to time.

(e) ADDITIONAL BENEFITS

In addition to the cash compensation provided for in Section 4 hereof
and participation in the employee benefit and executive compensation
plans provided in paragraphs (c) and (d) of this Section, Employee
shall be entitled to the additional benefits set forth in Exhibit A.

<PAGE>

6. TERMINATION

(a) TERMINATION BY COMPANY WITHOUT CAUSE

If Company should terminate the Period of Employment without Cause as
defined below, in addition to any other compensation and benefits
payable as provided for hereunder, Company shall pay to Employee a lump
sum amount equal to the base salary payable to Employee pursuant to
Section 4 as of the date of termination of the Period of Employment for
the greater of (i) the balance of the Period of Employment or (ii)
twelve months; provided, however, that such payment is conditioned on
Employee's execution of Company's severance and general release
agreement. "Cause" shall mean the willful and continued failure by
Employee to use reasonable effort to substantially perform Employee's
duties with Company (other than any such failure resulting from
incapacity due to physical or mental illness) after a demand for
substantial performance is delivered to Employee by the Company which
specifically identifies the manner in which Company believes Employee
has not substantially performed his duties; conviction of, or plea of
nolo contendere to, a felony; habitual abuse of narcotics or alcohol;
fraud, material dishonesty or gross misconduct in connection with the
business of the Company.

(b) TERMINATION BY EMPLOYEE; TERMINATION BY COMPANY FOR CAUSE

Employee shall have the right, upon 30 days' prior written notice given
to Company, to terminate the Period of Employment. If Employee should
terminate the Period of Employment or Company should terminate the
Period of Employment for Cause, Employee will be entitled only to be
paid the base annual salary otherwise payable to Employee under
paragraph (a) of Section 4 through the end of the month in which the
Period of Employment is terminated.

7. CONFIDENTIAL INFORMATION

Employee agrees to keep secret and retain in the strictest confidence all
confidential matters which relate to Company or any affiliate of Company,
including, without limitation, customer lists, client lists, trade secrets,
pricing policies and other business affairs of Company and any affiliate of
Company learned by Employee from Company or any such affiliate or otherwise
before or after the date of this Agreement, and not to disclose any such
confidential matter to anyone outside Company or any of its affiliates, whether
during or after Employee's period of service with Company, except as may be
required by a court of law, by any governmental agency having supervisory
authority over the business of the Company or by any administrative or
legislative body (including a committee thereof) with apparent jurisdiction to
order him to divulge, disclose or make accessible such information. Employee
agrees to give Company advance written notice of any disclosure pursuant to the
preceding sentence and to cooperate with any efforts by Company to limit the
extent of such disclosure. Upon request by Company, Employee agrees to deliver
promptly to Company upon termination of Employee's services for Company, or at
any time thereafter as Company may request, all Company or affiliate memoranda,
notes, records, reports, manuals, drawings, designs, computer files in any media
and other documents (and all copies thereof) relating to Company's or any
affiliate's business and all property of Company or any affiliate associated
therewith, which Employee may then possess or have under Employee's control,
other than personal notes, diaries, rolodexes and correspondence.

8. REMEDY

<PAGE>

Should Employee engage in or perform, either directly or indirectly, any of the
acts prohibited by Sections 7 and 8 hereof, it is agreed that Company shall be
entitled to full injunctive relief, to be issued by any competent court of
equity, enjoining and restraining Employee and each and every other person,
firm, organization, association, or corporation concerned therein, from the
continuance of such violative acts. The foregoing remedy available to Company
shall not be deemed to limit or prevent the exercise by Company of any or all
further rights and remedies which may be available to Company hereunder or at
law or in equity.

9. GOVERNING LAW

This Agreement is governed by and is to be construed and enforced in accordance
with the laws of the State of Delaware, without reference to rules relating to
conflicts of law. If under such law, any portion of this Agreement is at any
time deemed to be in conflict with any applicable statute, rule, regulation or
ordinance, such portion shall be deemed to be modified or altered to conform
thereto or, if that is not possible, to be omitted from this Agreement; the
invalidity of any such portion shall not affect the force, effect and validity
of the remaining portion hereof.

10. NOTICES

All notices under this Agreement shall be in writing and shall be deemed
effective when delivered in person, or five (5) days after deposit thereof in
the U.S. mails, postage prepaid, for delivery as registered or certified mail,
addressed to the respective party at the address set forth below or to such
other address as may hereafter be designated by like notice. Unless otherwise
notified as set forth above, notice shall be sent to each party as follows:

Employee, to:

Joe Budano
14385 Salem Drive West
Carmel, Indiana 46033

Company, to:

Wavetek Wandel Goltermann, Inc.
1030A Swabia Court
P.O. Box 113585
Research Triangle Park, North Carolina 27709-3585

Attention: Chief Executive Officer

In lieu of personal notice or notice by deposit in the U.S. mail, a party may
give notice by confirmed telegram, telex or fax, which shall be effective upon
receipt.

<PAGE>

11. MISCELLANEOUS

(a) Entire Agreement

This Agreement constitutes the entire understanding between Company and
Employee relating to employment of Employee by Company and supersedes
and cancels all prior written and oral agreements and understandings
with respect to the subject matter of this Agreement. This Agreement
may be amended but only by a subsequent written agreement of the
parties. This Agreement shall be binding upon and shall inure to the
benefit of Employee, Employee's heirs, executors, administrators and
beneficiaries, and Company and its successors.

(b) Withholding Taxes

All amounts payable to Employee under this Agreement shall be subject
to applicable withholding of income, employment and other taxes.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
year and day first above written.

WAVETEK WANDEL GOLTERMANN, INC.

By:
------------------------------------------------------
Peter Wagner Jean-Philippe Dara
CEO SVP Human Resources

------------------------------------------------------
Joe Budano

<PAGE>

EMPLOYMENT AGREEMENT

AGREEMENT, dated as of January 14, 1999 by and between Wavetek Wandel &
Goltermann Management Holding GmbH (the "Company"), and Jean-Philippe Dara (the
"Employee").

WHEREAS, Employee has been employed as a senior executive of Company; and

WHEREAS, Company and Employee wish to set forth the terms of the Employee's
employment by Company;

NOW, THEREFORE, IN CONSIDERATION OF the mutual covenants:

herein contained, and other good and valuable consideration, the parties hereto
agree as follows:

1. EMPLOYMENT.

Company hereby employs Employee, and Employee agrees to serve as an employee of
the Company, on the terms and conditions set forth in this Agreement.

2. PERIOD OF EMPLOYMENT.

The "Period of Employment" shall be the period commencing on February 15, 1999,
and ending on February 14, 2002; provided, however, that commencing on February
15, 2002 and on the February 15 of each year thereafter, the term of the
Agreement shall automatically be extended for one additional year unless at
least 12 months prior to any such date, Company or Employee shall have given
notice in accordance with Section 11 hereof that such extension shall not occur.

-1-

<PAGE>

3. DUTIES DURING THE PERIOD OF EMPLOYMENT.

During the Period of Employment, Employee shall serve as Senior Vice President
Human Resources of the Company and shall have such duties and responsibilities
as are assigned to Employee by the Chief Executive Officer commensurate with
such position. Employee shall devote Employee's full business time, attention
and efforts to the affairs of Company during the Period of Employment, provided,
however, that Employee may engage in other activities, such as activities
involving professional, charitable, educational, religious and similar types of
organizations, speaking engagements, membership on the board of directors of
such other organizations as Company may from time to time agree to, and similar
type activities to the extent that such other activities do not inhibit or
prohibit the performance of Employee's duties under this Agreement, or conflict
in any material way with the business of Company and its affiliates.

In performing such duties, Employee's principal place of employment shall be at
the offices of the Company

Wavetek Wandel & Goltermann
Management Holding GmbH
Arbachtalstr. 6
72800 Eningen u.A.
Germany

The company has the right to change the working location, the assigned duties
and function if personal or company internal circumstances require this.

4. CURRENT CASH COMPENSATION.

As compensation for Employee's services hereunder, during the Period of
Employment Employee will be entitled to target total compensation at the annual
rate of DM 420,000 (fourhundredandtwentythousand Deutsch Mark) of which:

(i) DM 300,000.-- shall be base salary, payable in accordance with the Company's
payroll practices for senior executives and

(ii) DM 120,000.-- shall be target bonus, payable in accordance with Company's
annual bonus plan. Company shall review such target total compensation annually
and in light of such review may, in the discretion of the Chief Executive
Officer of Company (but shall not be obligated to), increase such target total
compensation taking into account any change in Employee's then responsibilities,
increases in the cost of living, performance by Employee, and other pertinent
factors.

-2-

<PAGE>

(iii) The targeted salary is assured for one year on a pro rata basis, e.g.
7.5/12 of DM 420,000 for period February 15 to September 30, 1999 and 4.5/12 of
DM 420,000 for FY 1999/00. The 4.5/12 will be balanced with the bonus payment
for FY 1999/00.

5. OTHER EMPLOYEE BENEFITS.

(a) VACATION AND SICK LEAVE.

Employee shall be entitled to a 30 days paid annual vacation period and 6 weeks
sick leave in accordance with the Company's executive vacation and sick leave
policies.

(b) REGULAR REIMBURSED BUSINESS EXPENSES.

Company shall reimburse Employee for all expenses and disbursements reasonably
incurred by Employee in the performance of Employee's duties during the Period
of Employment, and provide such other facilities or services as Company and
Employee may, from time to time, agree are appropriate, all in accordance with
Company's established policies.

In addition to the cash compensation provided for in Section 4 hereof, Employee,
subject to meeting eligibility provisions and to the provisions of this
Agreement, shall be entitled to participate in Company's employee benefit plans,
as presently in effect or as they may be modified or added to by Company from
time to time.

(d) EXECUTIVE COMPENSATION PLANS.

In addition to the cash compensation provided for in Section 4 hereof and the
employee benefits provided for in paragraph (c) of this Section, Employee,
subject to meeting eligibility provisions and to the provisions of this
Agreement, shall be entitled to participate in Company's executive compensation
plans, as presently in effect or as they may be modified or added to by Company
from time to time.

(e) ADDITIONAL BENEFITS.

In addition to the cash compensation provided for in Section 4 hereof and
participation in the employee benefit and executive compensation plans provided
in paragraphs (c) and (d) of this Section, Employee shall be entitled to the
additional benefits set forth in Exhibit A.

-3-

<PAGE>

6. TERMINATION.

(a) TERMINATION BY COMPANY WITHOUT CAUSE.

"Cause" shall mean the willful and continued failure by Employee to use
reasonable effort to substantially perform Employee's duties with Company (other
than any such failure resulting from incapacity due to physical or mental
illness) after a demand for substantial performance is delivered to Employee by
the Company which specifically identifies the manner in which Company believes
Employee has not substantially performed his duties; conviction of, or plea of
NOLO CONTENDERE to, a felony; fraud, material dishonesty or gross misconduct in
connection with the business of the Company.

(b) TERMINATION BY EMPLOYEE; TERMINATION BY COMPANY FOR CAUSE.

Employee shall have the right, upon 12 months' prior written notice given to
Company, to terminate the Period of Employment. If Employee should terminate the
Period of Employment or Company should terminate the Period of Employment for
Cause, Employee will be entitled only to be paid the base annual salary
otherwise payable to Employee under paragraph (i) of Section 4 through the end
of the month in which the Period of Employment is terminated.

7. CONFIDENTIAL INFORMATION.

-4-

<PAGE>

business of the Company or by any administrative or legislative body (including
a committee thereof) with apparent jurisdiction to order him to divulge,
disclose or make accessible such information. Employee agrees to give Company
advance written notice of any disclosure pursuant to the preceding sentence and
to cooperate with any efforts by Company to limit the extent of such disclosure.
Upon request by Company, Employee agrees to deliver promptly to Company upon
termination of Employee's services for Company, or at any time thereafter as
Company may request, all Company or affiliate memoranda, notes, records,
reports, manuals, drawings, designs, computer files in any media and other
documents (and all copies thereof) relating to Company's or any affiliate's
business and all property of Company or any affiliate associated therewith,
which Employee may then possess or have under Employee's control, other than
personal notes, diaries, rolodexes and correspondence.

8. NON-COMPETITION AGREEMENT.

Without the consent in writing of the Chief Executive Officer which will not be
unreasonably withheld, upon termination of Employee's employment for any reason
whatsoever, Employee will not

(i) for a period of one year engage in, or carry on, directly or indirectly,
either for himself or as a member of a partnership or as a stockholder,
investor, officer or director of a corporation or as an employee, agent,
associate, adviser or consultant of any person, partnership or corporation, any
business in competition with the business carried on by Company or any of its
affiliates or

(ii) for a period of one year employ or seek to employ any person then employed
by the Company or any of its affiliates. Notwithstanding the preceding sentence,
Employee shall not be prohibited from owning less than five percent (5%) of any
publicly traded corporation (whether or not such corporation is in competition
with Company or its affiliates).

It is the intention of the parties hereto that the restrictions contained in
this Section be enforceable to the fullest extent permitted by applicable law.
Therefore, to the extent any court of competent jurisdiction shall determine
that any portion of the foregoing restrictions is excessive, such provision
shall not be entirely void, but rather shall be limited or revised only to the
extent necessary to make it enforceable.

Employee confirms that all restrictions in this Section are reasonable and valid
and hereby waives all defenses to the strict enforcement thereof by Company.

-5-

<PAGE>

9. REMEDY.

10. GOVERNING LAW.

This Agreement is governed by and is to be construed and enforced in accordance
with the German laws, without reference to rules relating to conflicts of law.
If under such law, any portion of this Agreement is at any time deemed to be in
conflict with any applicable statute, rule, regulation or ordinance, such
portion shall be deemed to be modified or altered to conform thereto or, if that
is not possible, to be omitted from this Agreement; the invalidity of any such
portion shall not affect the force, effect and validity of the remaining portion
hereof.

11. NOTICES.

All notices under this Agreement shall be in writing and shall be deemed
effective when delivered in person, or for delivery as registered or certified
mail, addressed to the respective party.

12. MISCELLANEOUS.

(a) ENTIRE AGREEMENT.

This Agreement constitutes the entire understanding between Company and Employee
relating to employment of Employee by Company and supersedes and cancels all
prior written and oral agreements and understandings with respect to the subject
matter of this Agreement. This Agreement may be amended but only by a subsequent
written agreement of the parties. This Agreement shall be binding upon and shall
inure to the benefit of Employee, Employee's heirs, executors, administrators
and beneficiaries, and Company and its successors.

-6-

<PAGE>

(b) WITHHOLDING TAXES.

All amounts payable to Employee under this Agreement shall be subject to
applicable withholding of income, employment and other taxes.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
year and day first above written.

Wavetek Wandel & Goltermann Employee
Management Holding GmbH

Peter Wagner Karl-Heinz Eisemann Jean-Philippe Dara

-7-

<PAGE>

EXHIBIT A

TO EMPLOYMENT AGREEMENT
BETWEEN
WAVETEK WANDEL & GOLTERMANN
AND
JEAN PHILIPPE DARA

Additional Benefits

(i) The company provides the employee with a company car for company
business as well as for private use. The employee may freely select
from a list of makes, models and price classes, approved by the
company.

(ii) The company pays the telephone and facsimile charges for employee's
private telephone connection and a mobile telephone including the
standing charges.

(iii) The company guarantees employee an option to purchase 20,000 shares,
vested for 4 years, under the conditions of the "Share Option Program"
which is currently under discussion with the Board of Directors.

(iv) The company insures employee against accident at work or outside work
for the sum of DM 200,000 in the event of death and DM 400,000 in the
event of disablement.

(v) The company will relocate employee's household goods from employee's
home in France to Germany. Until that time the company will pay for a
hotel room and for up to six two-way-flights from Stuttgart to Paris
during this period. The company also pays for agency fees for
employee's new home/apartment.

(vi) The company pays for employee's and his wife's language lessons in
German as required.

(vii) The company looks for professional tax assistance by Arthur Andersen.

-8-

<PAGE>

EXHIBIT 12

WAVETEK WANDEL GOLTERMANN, INC.

SCHEDULE RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Income (loss) before provision for income taxes and
minority interest in income (loss)..................... $(11,078) $(25,822) $ 14,605 $ 6,380 $(16,743)
Interest expense....................................... 20,965 7,629 8,509 9,340 10,591
Interest portion of rental expense..................... 2,924 1,948 1,457 1,280 2,997
-------- -------- -------- -------- --------
Earnings $ 12,811 $(16,245) $ 24,571 $ 17,000 $ (3,155)
======== ======== ======== ======== ========

Interest expense....................................... $ 20,965 $ 7,629 $ 8,509 $ 9,340 $ 10,591
Interest portion of rental expense..................... 2,924 1,948 1,457 1,280 2,997
-------- -------- -------- -------- --------
Fixed charges.......................................... $ 23,889 $ 9,577 $ 9,966 $ 10,620 $ 13,588
======== ======== ======== ======== ========

Ratio of Earnings to Fixed Charges 0.5x (1.7)x 2.5x 1.6x (0.2)x
======== ======== ======== ======== ========
</TABLE>

<PAGE>

EXHIBIT 21

SUBSIDIARIES OF WAVETEK WANDEL GOLTERMANN, INC.

<TABLE>
<CAPTION>
SUBSIDIARIES JURISDICTION OF INCORPORATION
<S> <C>
Wavetek U.S. Inc. (1) Delaware
Digital Transport Systems, Inc. (2) California
Wavetek Export Corporation (2) U.S. Virgin Islands
Wavetek (G.B.) Ltd. (1) United Kingdom
Wavetek Limited (3) United Kingdom
Wavetek S.A. (1) France
Wavetek GmbH (1) Germany
Wavetek Asia-Pacific Pte. Ltd. (1) Singapore
Wavetek Hong Kong Ltd. (1) Hong Kong
Wavetek Wandel Goltermann GmbH (1) Germany
Wandel & Goltermann Technologies, Inc. (1) North Carolina
Wandel & Goltermann A.T.E. Systems, Inc. (1) North Carolina
Wandel & Goltermann GmbH & Co. Elektronische Messtechnik (4) Germany
Wandel & Goltermann CTS S.A. (4) France
Wandel & Goltermann Management Ltd. (4) United Kingdom
Switching Test Solutions AG (4) Switzerland
Wavetek Wandel Goltermann Vertriebsholding GmbH (4) Germany
Wavetek Wandel Goltermann GmbH & Co. Vertriebsgesellschaft (5) Germany
Wavetek Wandel Goltermann Europe GmbH (6) Germany
Wandel & Goltermann Verwaltungs GmbH (5) Germany
Wandel & Goltermann & Co. (5) Switzerland
Wandel & Goltermann S.A. (7) Guatemala
Wandel & Goltermann de Venezuela, C.A. (7) Venezuela
Wandel & Goltermann, Inc. (8) North Carolina
W&G Equities Inc. (8) Delaware
Wandel & Goltermann Technologies Canada Inc. (8) Canada
Wavetek Wandel Goltermann Plymouth Ltd. (9) United Kingdom
Wandel & Goltermann S.R.L. Tecnologie di Misura Electroniche (10) Italy
Wandel & Goltermann Singapore Pte. Ltd. (11) Singapore
Wavetek Wandel Goltermann UK Ltd. (9) United Kingdom
Wandel & Goltermann AB (12) Sweden
Wavetek Wandel Goltermann Asia Pacific Pty. Ltd. (12) Australia
Wandel & Goltermann Investments Pty. Ltd. (12) Australia
Wandel & Goltermann Private Limited (13) India
Wavetek Wandel Goltermann Benelux B.V. (12) Netherlands
Wavetek Wandel Goltermann Canada Inc. (12) Canada
Wavetek Wandel Goltermann Schweiz AG (12) Switzerland
Wandel & Goltermann France S.A.R.L. (12) France
Wavetek Wandel Goltermann K.K. (12) Japan
Wandel & Goltermann Vertriebs-Ges.m.b.H. (12) Austria
<PAGE>

SUBSIDIARIES (CONTINUED) JURISDICTION OF INCORPORATION

Wavetek Wandel Goltermann Korea Ltd. (14) South Korea
Wavetek Wandel Goltermann Espana S.A. (12) Spain
Wandel & Goltermann Spolka Z OO (12) Poland
Wandel & Goltermann Malaysia SDN.BHD (12) Malaysia
Empowered Networks Inc. (12) Canada
Wandel & Goltermann Instrumentacao Ltda. & Cia. (12) Brazil
Wandel & Goltermann S.A. (12) Argentina
Wavetek Wandel Goltermann de Mexico S.A. de C.V. (12) Mexico
Wandel & Goltermann Telektronik B.V. (12) Netherlands
Wavetek Wandel Goltermann Ltd. (15) Hong Kong
Wavetek Wandel Goltermann Austria Ges.m.b.H. (15) Austria
Wandel & Goltermann Russia (16) Russian Federation
WGB - Electronica de Precisao Ltda. (12) Brazil
</TABLE>
- ---------

(1) The Company owns all of the outstanding shares of these subsidiaries.
(2) Wavetek U.S. Inc. owns all of the outstanding shares of these
subsidiaries.
(3) Wavetek (G.B.) Ltd. owns all of the outstanding shares of its
subsidiary, Wavetek Limited.
(4) Wavetek Wandel Goltermann GmbH owns all of the outstanding shares of
these subsidiaries.
(5) Wandel & Goltermann GmbH & Co. Elektronische Messtechnik owns all of
the outstanding shares of these subsidiaries.
(6) Wavetek Wandel Goltermann GmbH & Co. Vertriebsgesellschaft owns all
of the outstanding shares of its subsidiary, Wavetek Wandel
Goltermann Europe GmbH.
(7) Wandel & Goltermann & Co. owns all of the outstanding shares of
these subsidiaries.
(8) Wandel & Goltermann Technologies, Inc. owns all of the outstanding
shares of these subsidiaries.
(9) Wandel & Goltermann Management Ltd. owns all of the outstanding
shares of these subsidiaries.
(10) Wandel & Goltermann S.R.L. Tecnologie di Misura Electroniche is
owned 50% by Wavetek Wandel Goltermann Plymouth Ltd. and 50% by
Wavetek Wandel Goltermann Vertriebsholding GmbH.
(11) Wavetek Wandel Goltermann Plymouth Ltd. owns all of the outstanding
shares of Wandel & Goltermann Singapore Pte. Ltd.
(12) Wavetek Wandel Goltermann Vertriebsholding GmbH owns all of the
outstanding shares of these subsidiaries.
(13) Wandel & Goltermann Investments Pty. Ltd. owns all of the
outstanding shares of Wandel & Goltermann Private Limited.
(14) Wavetek Wandel Goltermann Korea Ltd. is owned 10% by Wavetek Wandel
Goltermann Vertriebsholding GmbH and 90% by Wandel & Goltermann
Telektronik B.V.
(15) Wandel & Goltermann Telektronik B.V. GmbH owns all of the
outstanding shares of these subsidiaries.
(16) Wavetek Wandel Goltermann Austria Ges.m.b.H.owns all of the
outstanding shares of its subsidiary, Wandel & Goltermann Russia.

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANTS CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED
SEPTEMBER 30, 1999.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> SEP-30-1999
<CASH> 17,089
<SECURITIES> 0
<RECEIVABLES> 107,140
<ALLOWANCES> 4,608
<INVENTORY> 62,515
<CURRENT-ASSETS> 204,694
<PP&E> 156,396
<DEPRECIATION> 95,821
<TOTAL-ASSETS> 434,733
<CURRENT-LIABILITIES> 135,696
<BONDS> 228,083
0
0
<COMMON> 132
<OTHER-SE> 72,948
<TOTAL-LIABILITY-AND-EQUITY> 434,733
<SALES> 497,258
<TOTAL-REVENUES> 497,258
<CGS> 204,733
<TOTAL-COSTS> 486,979
<OTHER-EXPENSES> 1,069
<LOSS-PROVISION> 176
<INTEREST-EXPENSE> 20,965
<INCOME-PRETAX> (11,078)
<INCOME-TAX> (3,082)
<INCOME-CONTINUING> (7,996)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,996)
<EPS-BASIC> (0.61)
<EPS-DILUTED> (0.61)

</TABLE>