SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13E-3
Rule 13e-3 Transaction Statement
(Pursuant to Section 13(e) of the
Securities Exchange Act of 1934)
ZING TECHNOLOGIES, INC.
-----------------------
(Name of the Issuer)
ZING TECHNOLOGIES, INC.
-----------------------
(Name of Person(s) Filing Statement)
COMMON STOCK, par value $.01
----------------------------
(Title of Class of Securities)
989601109
---------------
(Cusip Number of Class of Securities)
Henry A. Singer, Esq.
Morrison Cohen Singer & Weinstein, LLP
750 Lexington Avenue
New York, New York 10022
(212) 735-8600
-----------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of Person(s)
Filing Statement)
<PAGE>
This statement is filed in connection with (check the
appropriate box):
a. [X] The filing of solicitation materials or an
information statement subject to Regulation 14A
[17 CFR 240.14a-1 to 240.14b-1], Regulation 14C
[17 CFR 240.14c-1 to 240.14c-101] or Rule 13e-3(c)
[Sec.240.13e-3(c)] under the Securities Exchange Act
of 1934.
b. [ ] The filing of a registration statement under the
Securities Act of 1933.
c. [ ] A tender offer.
d. [ ] None of the above.
Check the following box if the soliciting materials or
information statement referred to in checking box (a) are
preliminary copies: [X]
Calculation of Filing Fee
Transaction Amount of filing fee
valuation* $12,017,285 $2,403.46
* For purposes of calculating fee only. Based on 1,467,760
shares of Common Stock, par value $.01 per share of Zing
Technologies, Inc. (the "Zing Shares"), having a value per
share of $8.1875 based on the average bid and asked prices
for such security on the NASDAQ National Market on March 30,
1995. The amount of the filing fee equals 1/50 of one
percent of the aggregate value of such shares, so
determined.
[X] Check box if any part of the fee is offset as provided by
Rule 0-11(a)(2) and identify the filing with which the
offsetting fee was previously paid. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
Amount Previously Paid: $2,403.46
------------------------------------------
Form or Registration No.: Preliminary Proxy Materials for
Zing Technologies, Inc.
June 1995 Shareholder Meeting
--------------------------------------------------
Filing Party: Zing Technologies, Inc.
----------------------------------------------------
Date Filed: April 3, 1995 (same date as the filing
date of this Schedule 13E-3
-------------------------------------------------------
2
<PAGE>
This Rule 13e-3 Transaction Statement relates to a
proposed merger (the "Merger") of Zing Merger Co., Inc., a New
York corporation wholly owned by Robert E. Schrader and his wife,
with and into Zing Technologies, Inc., a New York corporation
(the "Company" or "Zing"), pursuant to which the Company will be
the surviving corporation and wholly-owned by Mr. and Mrs.
Schrader.
Preliminary Proxy materials consisting of a Proxy
Statement/Prospectus (the "Proxy Statement/Prospectus"), Notice
of Annual Meeting and Proxy Card pursuant to Regulation 14A under
the Securities Exchange Act of 1934 with respect to the Merger
are being filed by Zing on the date hereof with the Securities
and Exchange Commission. The following Cross-Reference sheet is
being supplied pursuant to General Instruction F to Schedule 13E-
3 and shows the location by caption or page number, in the Proxy
Statement/Prospectus of the information required to be included
in response to the items of this Statement. The information in
the Proxy Statement/Prospectus, including all Annexes thereto,
which is attached hereto, is hereby expressly incorporated herein
by reference and the responses to each item are qualified in
their entirety by the information set forth in the Proxy
Statement/Prospectus. Certain supplemental information follows
the Cross-Reference Sheet.
3
<PAGE>
CROSS-REFERENCE SHEET
Item in Where located in
Schedule 13E-3 Proxy Statement/Prospectus
-------------- --------------------------
Item 1(a) . . . . . . . . . . Page 1
Item 1(b) . . . . . . . . . . The Annual Meeting - Outstanding
Shares and Voting Rights; The
Merger - Price of Zing Common
Stock - Dividends; Market Price
of and Dividends for the
Company's Common Stock
Item 1(c) . . . . . . . . . . The Annual Meeting - Outstanding
Shares and Voting Rights; The
Merger - Price of Zing Common
Stock - Dividends; Market Price
of and Dividends for the
Company's Common Stock
Item 1(d) . . . . . . . . . . The Merger - Price of Zing Common
Stock - Dividends; Market Price
of and Dividends for the
Company's Common Stock
Item 1(e) . . . . . . . . . . *
Item 1(f) . . . . . . . . . . (1)
Item 2(a) . . . . . . . . . . *
Item 2(b) . . . . . . . . . . *
Item 2(c) . . . . . . . . . . *
Item 2(d) . . . . . . . . . . *
Item 2(e) . . . . . . . . . . *
Item 2(f) . . . . . . . . . . Directors and Management of
Zing - Security Ownership
Management
Item 2(g) . . . . . . . . . . *
Item 3(a) . . . . . . . . . . *
Item 3(b) . . . . . . . . . . *
i
<PAGE>
Item 4(a) . . . . . . . . . . Pages 1 and 2; Proxy
Statement/Prospectus Summary -
The Merger; The Merger; Annex I
incorporated herein by reference
pursuant to Instruction D hereto
Item 4(b) . . . . . . . . . . Pages 1 and 2; Proxy
Statement/Prospectus Summary -
The Merger; Risk Factors -
Control by Major Shareholder; The
Merger - Purpose and Reason for
the Merger and -Shareholder
Differences Resulting From the
Merger
Item 5(a) . . . . . . . . . . *
Item 5(b) . . . . . . . . . . *
Item 5(c) . . . . . . . . . . *
Item 5(d) . . . . . . . . . . *
Item 5(e) . . . . . . . . . . *
Item 5(f) . . . . . . . . . . Proxy Statement/Prospectus
Summary - The Merger (Effects of
the Merger); The Merger - Effects
of the Merger
Item 5(g) . . . . . . . . . . Proxy Statement/Prospectus
Summary - The Merger (Effects of
the Merger); The Merger - Effects
of the Merger
Item 6(a) . . . . . . . . . . Pages 1 and 2; Proxy
Statement/Prospectus Summary -
The Merger; Risk Factors -
Uncertain Value of the Deferred
Payment Right; The Merger - Cash
Payment and - Deferred Payment
Right; Business of Omnirel - Bank
Loans; Omnirel Management's
Discussion and Analysis - Trends
(Interest)
Item 6(b) . . . . . . . . . . (1)
ii
<PAGE>
Item 6(c) . . . . . . . . . . The Merger - Cash Payment;
Business of Omnirel - Bank Loans;
Omnirel Management's Discussion
and Analysis - Trends (Interest)
Item 6(d) . . . . . . . . . . *
Item 7(a) . . . . . . . . . . Proxy Statement/Prospectus
Summary - The Merger (Reasons for
the Merger); The Merger - Purpose
and Reason for the Merger and
-Shareholder Differences
Resulting from the Merger
Item 7(b) . . . . . . . . . . Proxy Statement/Prospectus
Summary - The Merger (Summary of
Income Tax Consequences of the
Merger); Certain Federal Income
Tax Consequences of the Merger -
Recognition of Gain or Loss to
Zing on Distribution
Item 7(c) . . . . . . . . . . Proxy Statement Summary - The
Merger (Reasons for the Merger,
Summary of Certain Federal Income
Tax Consequences of the Merger);
The Merger - Purpose and Reason
for the Merger and - Shareholder
Differences Resulting from the
Merger; Certain Federal Income
Tax Consequences of the Merger -
Recognition of Gain or Loss to
Zing on Distribution
Item 7(d) . . . . . . . . . . Proxy Statement/Prospectus
Summary - The Merger (Effects of
the Merger, Reasons for the
Merger, Summary of Certain
Federal Income Tax Consequences
of the Merger); The Merger - The
Merger Agreement, - Effects of
the Merger, -Purpose and Reason
for the Merger and -Shareholder
Differences Resulting from the
Merger; Certain Federal Income
Tax Consequences of the Merger;
Proxy Statement/Prospectus
Summary - The Annual Meeting
(Vote Required); The Annual
Meeting - Outstanding Shares and
Voting Rights
Item 8(a) . . . . . . . . . . Page 4; The Annual Meeting -
Matters to be Considered
Item 8(b) . . . . . . . . . . Proxy Statement/Prospectus
Summary - The Merger (Effects of
the Merger, Reasons for the
Merger, Summary of Certain
Federal Income Tax Consequences
of the Merger); The Merger - The
Merger Agreement, - Effects of
the Merger, -Purpose and Reason
for the Merger and -Shareholder
Differences Resulting from the
Merger; Certain Federal Income
Tax Consequences of the Merger
iii
<PAGE>
Item 8(c) . . . . . . . . . . P a g e 2 , P r o x y
Statement/Prospectus Summary -
The Annual Meeting (Vote
Required); The Annual Meeting -
Outstanding Shares and Voting
Rights
Item 8(d) . . . . . . . . . . *
Item 8(e) . . . . . . . . . . Page 4; The Annual Meeting -
Matters to be Considered
Item 8(f) . . . . . . . . . . *
Item 9(a) . . . . . . . . . . *
Item 9(b) . . . . . . . . . . *
Item 9(c) . . . . . . . . . . *
Item 10(a) . . . . . . . . . Directors and Management of
Zing - Security Ownership of
Management; Security Ownership of
Certain Beneficial Owners and
Management of Zing
Item 10(b) . . . . . . . . . *
Item 11 . . . . . . . . . . . Page 3, Proxy Statement Summary -
The Merger (The Merger
Agreement), The Merger - The
Merger Agreement; Annex I
incorporated herein by reference
pursuant to Instruction D hereto
Item 12(a) . . . . . . . . . Page 4; The Annual Meeting -
Matters To Be Considered
Item 12(b) . . . . . . . . . Page 4; The Annual Meeting -
Matters To Be Considered
iv
<PAGE>
Item 13(a) . . . . . . . . . Appraisal Rights of Dissenting
Stockholders and Annex II
incorporated herein by reference
pursuant to Instruction D hereto
Item 13(b) . . . . . . . . . *
Item 13(c) . . . . . . . . . *
Item 14(a) . . . . . . . . . Proxy Statement/Prospectus
Summary - Zing Summary Selected
Consolidated Financial Data; Zing
Management's Discussion and
Analysis; Audited Financial
Statements of Zing set forth in
Zing's Annual Report on Form 10-K
for the fiscal year ended June
30, 1994, as amended, and
unaudited financial statements
set forth in Zing's Quarterly
Report on Form 10-Q for the three
months ended December 31, 1994,
as amended, incorporated herein
by reference pursuant to
Instruction D hereto
Item 14(b) . . . . . . . . . Zing Summary Selected
Consolidated Financial Data
Item 15(a) . . . . . . . . . *
Item 15(b) . . . . . . . . . The Annual Meeting - Solicitation
of Proxies
Item 16 . . . . . . . . . . . P r e l i m i n a r y P r o x y
Statement/Prospectus, Notice of
Annual Meeting of Shareholders
and the Proxy Card
Item 17(a) . . . . . . . . . (1)
Item 17(b) . . . . . . . . . *
v
<PAGE>
Item 17(c) . . . . . . . . . Annex I to the Proxy
Statement/Prospectus incorporated
herein by reference pursuant to
Instruction D hereto
Item 17(d) . . . . . . . . . Proxy Statement/Prospectus
annexed hereto
Item 17(e) . . . . . . . . . Annex II to the Proxy
Statement/Prospectus incorporated
herein by reference pursuant to
Instruction D hereto
Item 17(f) . . . . . . . . . *
-------------------
* The item is inapplicable or the answer thereto is in the
negative.
(1) Information is not available at this time and will be
provided by amendment.
vi
<PAGE>
SUPPLEMENTAL INFORMATION
------------------------
Item 1. Issuer and Class of Security Subject to the Transaction.
(f) Information to be provided by Amendment.
Item 2. Identity and Background.
The person filing this statement is the issuer of the class
of equity securities which is the subject of the Merger. The
issuer is a corporation, incorporated under the laws of the State
of New York with the address of its principal executive offices
being 115 Stevens Avenue, Valhalla, New York. A description of
its business is contained in the Proxy Statement/Prospectus at
the First Page, at the Proxy Statement/Prospectus Summary - The
Parties and at The Merger - The Parties - Zing - Omnirel -
TACTech.
Item 8. Fairness of the Transaction.
The Company reasonably believes that the Merger is fair to
unaffiliated shareholders because each unaffiliated shareholder
will receive as Merger Consideration his pro rata share of
substantially all of the Company's assets, while Mr. Robert E.
Schrader and his wife, who own approximately 45% of the Company's
common stock, will retain their pro rata share of substantially
all of the Company's assets as a result of their sole ownership
of the Company following the Merger. Mr. Robert E. Schrader and
his wife, each of whom is a director of the Company abstained
from voting upon the Merger Agreement at the meeting of the
Company's Board of Directors held on March 23, 1995 for the
purpose of approving the Merger Agreement due to their
substantial interest in the transaction.
Item 12. Present Intention and Recommendation of Certain Persons
With Regard to the Transaction.
(a) After making inquiry, the Company believes that each of
its executive officers and directors who own warrants to acquire
shares of Zing Common Stock will exercise those warrants (at an
exercise price of $1.34 per share) on or before the Annual
Meeting, and that all executive officers and directors of the
Company who are shareholders of the Company will vote to approve
the Merger Agreement at the Annual Meeting.
<PAGE>
SIGNATURE
---------
After due inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this
Statement is true, complete and correct.
Dated: March 30, 1995 ZING TECHNOLOGIES, INC.
By: s/ Martin S. Fawer
--------------------------------
Martin S. Fawer
Chief Financial Officer
<PAGE>
INDEX TO EXHIBITS
-----------------
Item 17.
(d). . . . . . . . . . . . . . . . Proxy Statement/Prospectus of
Zing Technologies, Inc. with
Annexes I, II and III thereto.
<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary proxy statement
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
ZING TECHNOLOGIES, INC.
-----------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
ZING TECHNOLOGIES, INC.
-----------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[ ] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(l),
or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
[X] Fee computed on table below per Exchange Act Rules 14a-
6(i)(4) and 0-11.
(1) Title of each class of securities to which
transaction applies:
Common Stock, par value $.01
-----------------------------------------------------------------
(2) Aggregate number of securities to which
transaction applies:
1,467,760 shares
-----------------------------------------------------------------
(3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act
Rule 0-11:
<PAGE>
$8.1875 per share, based on average high and low
bid and average high and low asked prices on March
30, 1995 on the NASDAQ National Market.
(4) Proposed maximum aggregate value of transaction:
$12,017,285
-----------------------------------------------------------------
(5) Total fee paid:
$2,403.46
-----------------------------------------------------------------
[ ] Fee paid previously with preliminary materials
-----------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided
by Exchange Act Rule 0-11(a)(2) and identify the filing
for which offsetting fee was paid previously. Identify
the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
-----------------------------------------------------------------
(2) Form, schedule or registration statement no.:
-----------------------------------------------------------------
(3) Filing party:
-----------------------------------------------------------------
(4) Date filed:
-----------------------------------------------------------------
<PAGE>
Draft of: March 28, 1995
PRELIMINARY PROXY MATERIALS
---------------------------
ZING TECHNOLOGIES, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR
ANNUAL MEETING OF SHAREHOLDERS OF ZING TECHNOLOGIES, INC.
The undersigned acknowledges receipt of a Notice of Annual
Meeting and of an accompanying Proxy Statement/Prospectus, and
hereby appoints Deborah J. Schrader and Martin S. Fawer and
either of them, proxies with several powers of substitution, to
vote for the undersigned at the Annual Meeting of Shareholders of
ZING TECHNOLOGIES, INC. (the "Company"), to be held on June __,
1995 or at any adjournment thereof, as indicated upon the
following matters as described in the Notice of Meeting and
accompanying Proxy Statement/Prospectus:
1. To approve the Agreement and Plan of Merger dated as
of March 29, 1995 between the Company and Zing Merger Co., Inc.
("MergerCo"), pursuant to which all holders of the Company's
common stock will have their shares converted into the right to
receive certain payments and stock distributions, MergerCo will
be merged with and into the Company and all of the Company's
outstanding common stock will thereafter be owned by Robert E.
Schrader and members of his family.
/ / FOR / / AGAINST / / ABSTAIN
2. In the event the Agreement and Plan of Merger is NOT
approved, to elect the three nominees for director listed below
(unless authority to vote is withheld as to all nominees by
crossing out this Item, or as to any individual nominee by
crossing out his name below) to serve in one of the two existing
classes of the board for staggered terms as described in the
accompanying Proxy Statement/Prospectus.
Henry A. Singer
John F. Catrambone
Laurence W. Higgitt
3. In the event the Agreement and Plan of Merger is NOT
approved, to approve the appointment of Ernst & Young LLP as the
independent public accountants for the Company.
/ / FOR / / AGAINST / / ABSTAIN
4. In the event the Agreement and Plan of Merger is NOT
approved, to transact any other business that may properly come
before the meeting or any adjournment thereof, including the
election of directors not named as nominees if any of such
nominees shall be unable to serve as a director by reason of
death, incapacity or for any other reason or for good cause will
not serve, according to the number of votes and as fully as the
undersigned would be entitled to vote if personally present,
hereby revoking any prior proxy or proxies. If more than one of
the above-named proxies shall be present in person or by
substitute, both of the proxies so present and voting shall have
and may exercise all the powers hereby granted.
<PAGE>
[Continued from other side]
Said proxies will withhold the vote on the election of
directors if so instructed under Item 2.
IF NO INSTRUCTION IS INDICATED, SAID PROXIES WILL VOTE IN FAVOR
OF PROPOSALS 1 AND 3, IN FAVOR OF THE NOMINEES LISTED IN PROPOSAL
2 AND WILL USE THEIR DISCRETION WITH RESPECT TO ANY MATTERS
REFERRED TO IN ITEM 4.
Dated: , 1995
--------------------
Please Date
Signature(s):
-----------------------------------
(Please sign under name exactly
as it appears on stock certificate)
___ Check here if you plan
to attend the meeting
<PAGE>
PRELIMINARY PROXY MATERIALS
---------------------------
ZING TECHNOLOGIES, INC.
115 Stevens Avenue
Valhalla, New York 10595
(914) 747-7474
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
June __, 1995
The Annual Meeting of Shareholders of Zing Technologies,
Inc. (the "Company") will be held at The Summit at Westchester,
Room A, Towers Perrin Training Center, 100 Summit Lake Drive,
Valhalla, New York 10595, on June __, 1995 at 10:00 A.M., for the
following purposes:
1. To consider and vote upon a proposal to approve an
Agreement and Plan of Merger dated as of March 29, 1995
(the "Merger Agreement") between the Company and Zing
Merger Co., Inc. ("MergerCo"), a New York corporation
wholly owned by Robert E. Schrader and his wife
(collectively, the "Major Shareholder"), pursuant to which
(the "Merger"): (A) all holders of the Company's common
stock, $.01 par value (the "Common Stock" or "Zing Common
Stock"), other than MergerCo and those shareholders who
perfect their rights of appraisal ("Dissenting
Shareholders"), will have such shares (the "Zing Shares"
or "Shares") converted into the right to receive a pro
rata share of substantially all of the Company's assets,
such pro rata share to consist of an initial cash
distribution, shares of stock of the Company's two
subsidiaries, and a non-assignable contract right to
receive on or about December 31, 1999 a contingent cash
distribution representing substantially all of the
remainder of the Company's assets; (B) MergerCo will be
merged with and into the Company, with the Company being
the surviving corporation (the Company, following the
Merger, being referred to hereinafter as the "Surviving
Corporation"); (C) all of the Company's outstanding common
stock will thereafter be owned by the Major Shareholder;
and (D) the Surviving Corporation will retain its pro rata
portion of the initial cash distribution, shares of stock
of the Company's two subsidiaries and non-assignable
contract right, based upon the percentage of Zing Common
Stock owned by MergerCo on behalf of the Major Shareholder
immediately prior to the Merger.
<PAGE>
2. In the event that the Merger Agreement is NOT
approved, to elect to the Board of Directors three members
to serve in a class, the term of which will expire at the
second succeeding annual meeting of shareholders and until
their successors shall be elected and shall qualify.
3. In the event that the Merger Agreement is NOT
approved, to approve the appointment of Ernst & Young LLP
as the independent public accountants for the Company.
4. In the event that the Merger Agreement is NOT
approved, to transact such other business as may properly
come before the Annual Meeting.
In the event that the Merger Agreement is approved, no
further business will be transacted at the Annual Meeting and the
Meeting will be adjourned.
As a result of the Merger, holders of Zing Shares (except
Dissenting Shareholders) shall have their Shares converted, on a
pro rata basis, into the right to receive cash, a non-assignable
contract right to receive on or about December 31, 1999 a
contingent cash distribution, shares of common stock of the
Company's two subsidiaries: Omnirel Corporation ("Omnirel") and
Transition Analysis Component Technology, Inc. ("TACTech"), and
shares of preferred stock of Omnirel. Dissenting Shareholders
who properly perfect their statutory appraisal rights under
Section 623 of the New York Business Corporation Law will have
the right instead to seek appraisal of their Shares. (See
"APPRAISAL RIGHTS OF DISSENTING SHAREHOLDERS" in the accompanying
--------------------------------------------
Proxy Statement/Prospectus for a statement of the rights of
Dissenting Shareholders and a description of the procedures
required to be followed to obtain appraisal of their Shares.)
Pursuant to the Merger Agreement, MergerCo will be merged with
and into the Company, with the Company being the Surviving
Corporation. Immediately following the
<PAGE>
Merger, all of the Surviving Corporation's issued and outstanding
Common Stock will be owned by the Major Shareholder and Omnirel
and TACTech will be publicly traded companies.
At a meeting held on March 23, 1995, the Company's Board
of Directors, with Mr. and Mrs. Schrader abstaining, unanimously
determined that the Merger is fair to, and in the best interests
of, the Company's shareholders, unanimously approved the Merger
Agreement and unanimously determined to recommend that the
shareholders approve the Merger Agreement.
The shareholders of record at the close of business on May
_____, 1995 will be entitled to notice of and to vote at the
Annual Meeting. The transfer books of the Company will not be
closed. Your attention is directed to the Proxy
Statement/Prospectus attached to this Notice for a full
discussion of the proposals to be acted upon at the meeting.
New York law requires that the Merger Agreement be
approved by holders of two thirds of the outstanding shares of
Common Stock entitled to vote thereon. The Major Shareholder,
through MergerCo, owned approximately 45.54% of the outstanding
shares of Zing Common Stock as of May _____ 1995 and intends to
vote all such shares for the approval and adoption of the Merger
Agreement.
Whether or not you plan to attend the Annual Meeting,
kindly fill in, date and sign the enclosed Proxy exactly as your
name appears on your stock certificate, and mail it promptly in
the enclosed return envelope in order that your vote can be
recorded. The giving of this Proxy will not affect your right to
vote in person in the event you find it convenient to attend the
Meeting. You may revoke your proxy in the manner described in
the accompanying Proxy Statement/Prospectus at any time before it
has been voted at the Meeting.
By Order of the Board of Directors
Deborah J. Schrader
Secretary
Dated: May , 1995
---
<PAGE>
PLEASE DO NOT SEND IN ANY STOCK CERTIFICATE AT THIS TIME.
NEITHER THE TRANSACTIONS CONTEMPLATED BY THE MERGER
AGREEMENT NOR THE SECURITIES TO BE ISSUED PURSUANT THERETO HAVE
BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION NOR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
FAIRNESS OR MERITS OF SUCH TRANSACTIONS OR UPON THE ACCURACY OR
ADEQUACY OF THE INFORMATION CONTAINED IN THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
<PAGE>
TABLE OF CONTENTS
-----------------
PROXY STATEMENT/PROSPECTUS . . . . . . . . . . . . . . . . . 1
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . 5
PROXY STATEMENT/PROSPECTUS SUMMARY . . . . . . . . . . . . . 6
ANNUAL MEETING - SUMMARY . . . . . . . . . . . . . . . . . . 7
Date, Time and Place of Meeting . . . . . . . . . . . 7
Purposes of the Annual Meeting . . . . . . . . . . . . 7
Record Date; Quorum . . . . . . . . . . . . . . . . . 7
Vote Required . . . . . . . . . . . . . . . . . . . . 8
Appraisal Rights of Dissenting Shareholders . . . . . 8
THE MERGER - SUMMARY . . . . . . . . . . . . . . . . . . . . 9
The Parties . . . . . . . . . . . . . . . . . . . . . 9
The Merger . . . . . . . . . . . . . . . . . . . . . . 9
Effective Time of the Merger . . . . . . . . . . . . . 10
Effects of the Merger . . . . . . . . . . . . . . . . 10
Conditions to the Merger . . . . . . . . . . . . . . . 11
Reasons for the Merger . . . . . . . . . . . . . . . . 11
Risk Factors . . . . . . . . . . . . . . . . . . . . . 12
Summary of Certain Federal Income Tax Consequences
of the Merger . . . . . . . . . . . . . . . . . . . 12
ZING TECHNOLOGIES, INC. - SUMMARY . . . . . . . . . . . . . . 14
OMNIREL CORPORATION - SUMMARY . . . . . . . . . . . . . . . . 15
Business . . . . . . . . . . . . . . . . . . . . . . . 15
Trading Market . . . . . . . . . . . . . . . . . . . . 15
Post-Merger Dividend Policy . . . . . . . . . . . . . 15
TRANSITION ANALYSIS COMPONENT TECHNOLOGY, INC. - SUMMARY . . 16
Business . . . . . . . . . . . . . . . . . . . . . . . 16
Trading Market . . . . . . . . . . . . . . . . . . . . 16
Post-Merger Dividend Policy . . . . . . . . . . . . . 16
ZING TECHNOLOGIES, INC. . . . . . . . . . . . . . . . . . . . 17
SUMMARY SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED
FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . 17
i
<PAGE>
ZING TECHNOLOGIES, INC.
SUMMARY SELECTED CONSOLIDATED FINANCIAL DATA . . . . . . . . 18
THE ANNUAL MEETING . . . . . . . . . . . . . . . . . . . . . 19
Matters to be Considered . . . . . . . . . . . . . . . 19
Proxies . . . . . . . . . . . . . . . . . . . . . . . 20
Outstanding Shares and Voting Rights . . . . . . . . . 21
Quorum . . . . . . . . . . . . . . . . . . . . . . . . 21
Solicitation of Proxies . . . . . . . . . . . . . . . 22
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . 22
Uncertain Value of the Deferred Payment Right . . . . 22
Deferred Payment Fund Subject to Post-Effective
Time Liabilities . . . . . . . . . . . . . . . . . . 23
Dependence Upon Major Customers/Projects for
Omnirel Products. . . . . . . . . . . . . . . . . . . 24
Decline in Defense and/or Aerospace Spending . . . . . 24
Dependence on Key Personnel . . . . . . . . . . . . . 25
Control by Major Shareholder . . . . . . . . . . . . . 25
Lack of Diversification; Fluctuation in Market Price . 25
Reduction in Financial Resources . . . . . . . . . . . 26
Lack of a Current Public Market for Omnirel and
TACTech Stock . . . . . . . . . . . . . . . . . . . . 27
Absence of Dividends; Redemption Restrictions . . . . 27
Omnirel Institutional Loans . . . . . . . . . . . . . 28
Competition . . . . . . . . . . . . . . . . . . . . . 28
Technological Change and New Product Development . . . 29
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . 30
The Parties . . . . . . . . . . . . . . . . . . . . . 30
The Merger Agreement . . . . . . . . . . . . . . . . . 31
Effective Time of the Merger . . . . . . . . . . . . . 32
Effects of the Merger . . . . . . . . . . . . . . . . 32
Vote Required . . . . . . . . . . . . . . . . . . . . 32
Termination of the Merger Agreement . . . . . . . . . 33
Treatment of Zing Options and Warrants . . . . . . . . 33
Purpose and Reason for the Merger . . . . . . . . . . 34
Shareholder Differences Resulting from the Merger . . 35
Cash Payment . . . . . . . . . . . . . . . . . . . . . 37
Deferred Payment Right . . . . . . . . . . . . . . . . 37
Paying Agent . . . . . . . . . . . . . . . . . . . . . 39
Accounting Treatment of the Merger . . . . . . . . . . 39
Price of Zing Common Stock; Dividends . . . . . . . . 40
Federal and State Regulatory Requirements . . . . . . 40
Surrender of Certificates . . . . . . . . . . . . . . 40
ii
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER . . . . 42
Tax Effects to Shareholders . . . . . . . . . . . . . 42
Recognition of Gain or Loss to Zing on Distribution . 44
Net Operating Loss Carryforwards of Zing . . . . . . . 45
Backup Withholding . . . . . . . . . . . . . . . . . . 46
Foreign Stockholders . . . . . . . . . . . . . . . . . 46
APPRAISAL RIGHTS OF DISSENTING SHAREHOLDERS . . . . . . . . . 47
CERTAIN TRANSACTIONS AMONG ZING, OMNIREL AND TACTECH . . . . 51
ZING TECHNOLOGIES, INC.
SELECTED CONSOLIDATED FINANCIAL DATA . . . . . . . . . . . . 52
ZING MANAGEMENT'S DISCUSSION OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . . 53
Results of Operations - Six Months Ended December
31, 1994 Compared to Six Months Ended December 31,
1993 . . . . . . . . . . . . . . . . . . . . . . . . 53
Results of Operations - Fiscal Year 1994 Compared
to Nine Months Ended June 30, 1993 . . . . . . . . 55
Results of Operations - Nine Months Ended June 30,
1993 Compared to Fiscal 1992 . . . . . . . . . . . 57
Liquidity and Capital Resources . . . . . . . . . . . 58
Impact of Inflation . . . . . . . . . . . . . . . . . 58
BUSINESS OF OMNIREL . . . . . . . . . . . . . . . . . . . . . 59
General . . . . . . . . . . . . . . . . . . . . . . . 59
Competition . . . . . . . . . . . . . . . . . . . . . 59
Marketing and Sales . . . . . . . . . . . . . . . . . 60
Product Warranty . . . . . . . . . . . . . . . . . . . 62
Suppliers and Materials Used . . . . . . . . . . . . . 62
Patents, Trademarks and Licenses . . . . . . . . . . . 63
Inventory . . . . . . . . . . . . . . . . . . . . . . 63
Environmental Compliance . . . . . . . . . . . . . . . 63
Research and Development . . . . . . . . . . . . . . . 64
Employees . . . . . . . . . . . . . . . . . . . . . . 64
Properties . . . . . . . . . . . . . . . . . . . . . . 64
Bank Loans . . . . . . . . . . . . . . . . . . . . . . 65
Legal Proceedings . . . . . . . . . . . . . . . . . . 65
OMNIREL MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . 66
Results of Operations - Six Months Ended December
31, 1994 Compared to Six Months Ended
December 31, 1993 . . . . . . . . . . . . . . . . . 66
iii
<PAGE>
Results of Operations - Fiscal Year 1994 Compared to Nine
Months Ended June
30, 1993 . . . . . . . . . . . . . . . . . . . . . 68
Trends . . . . . . . . . . . . . . . . . . . . . . . . 69
Sales . . . . . . . . . . . . . . . . . . . . . . . . 69
Interest . . . . . . . . . . . . . . . . . . . . . . . 70
Liquidity and Capital Resources . . . . . . . . . . . 72
BUSINESS OF TACTECH . . . . . . . . . . . . . . . . . . . . . 74
General . . . . . . . . . . . . . . . . . . . . . . . 74
Competition . . . . . . . . . . . . . . . . . . . . . 76
Marketing, Sales and Licensing . . . . . . . . . . . . 77
Customer Support and Warranty . . . . . . . . . . . . 77
Sources of Data Bases . . . . . . . . . . . . . . . . 78
Trademarks, Copyrights and Licenses . . . . . . . . . 78
Research and Development . . . . . . . . . . . . . . . 78
Employees . . . . . . . . . . . . . . . . . . . . . . 78
Properties . . . . . . . . . . . . . . . . . . . . . . 79
Legal Proceedings . . . . . . . . . . . . . . . . . . 79
TACTECH MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . 80
Results of Operations - Six Months Ended December
31, 1994 Compared To Six Months Ended December
31, 1993 . . . . . . . . . . . . . . . . . . . . . . 80
Results of Operation - Fiscal Year 1994 Compared to
Nine Months Ended June 30, 1993 . . . . . . . . 82
Trends . . . . . . . . . . . . . . . . . . . . . . . . 83
DIRECTORS AND MANAGEMENT OF ZING . . . . . . . . . . . . . . 83
Board of Directors . . . . . . . . . . . . . . . . . . 83
Board Committees and Meetings . . . . . . . . . . . . 84
Security Ownership of Management . . . . . . . . . . . 85
Executive Officers . . . . . . . . . . . . . . . . . . 86
Compensation of Directors and Executive Officers . . . 87
Executive Compensation . . . . . . . . . . . . . . . . 87
Grants of Warrants . . . . . . . . . . . . . . . . . . 88
Aggregated Warrant Exercises in Last Fiscal Year
and Fiscal Year-End Warrant Values . . . . . . . . . 88
Compensation of Directors . . . . . . . . . . . . . . 88
Employment Contracts, Termination of Employment and
Change-in-Control Arrangements . . . . . . . . . . . 88
Compensation Committee Interlocks and Insider
Participation . . . . . . . . . . . . . . . . . . . . 90
Compensation Committee Report . . . . . . . . . . . . 90
Comparative Stock Performance Graph For The
Company's Common Stock . . . . . . . . . . . . . . . 91
iv
<PAGE>
Interest in Certain Transactions of Directors,
Officers and Principal Holders of Voting Securities . 92
DIRECTORS AND MANAGEMENT OF OMNIREL . . . . . . . . . . . . . 93
Board of Directors . . . . . . . . . . . . . . . . . . 93
Security Ownership of Certain Beneficial Owners . . . 94
Security Ownership of Management . . . . . . . . . . . 95
Executive Officers . . . . . . . . . . . . . . . . . . 97
Compensation of Directors and Executive Officers . . . 98
Executive Compensation . . . . . . . . . . . . . . . . 98
Management Incentive Rights Plan . . . . . . . . . . . 99
Grants of Warrants, Options and SARs in Last Fiscal
Year . . . . . . . . . . . . . . . . . . . . . . . . 99
Qualified Stock Option Plan . . . . . . . . . . . . . 99
Non-Qualified Stock Option Exchange Plan . . . . . . . 100
1995 Non-Qualified Stock Option Plan . . . . . . . . . 100
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option/SAR Values . . . . . . . . 101
Compensation of Directors . . . . . . . . . . . . . . 101
Employment Contracts, Termination of Employment and
Change-in-Control Arrangements . . . . . . . . . . . 102
Compensation Committee Interlocks And Insider
Participation . . . . . . . . . . . . . . . . . . . . 102
Interest in Certain Transactions of Directors,
Officers and Principal Holders of Voting Securities.. 102
DIRECTORS AND MANAGEMENT OF TACTECH . . . . . . . . . . . . . 104
Board of Directors . . . . . . . . . . . . . . . . . . 104
Security Ownership of Certain Beneficial Owners . . . 105
Security Ownership of Management . . . . . . . . . . . 105
Executive Officers . . . . . . . . . . . . . . . . . . 106
Compensation of Directors and Executive Officers . . . 106
Executive Compensation . . . . . . . . . . . . . . . . 106
Summary Compensation Table . . . . . . . . . . . . . . 107
Grants of Warrants, Options and SAR's . . . . . . . . 107
Compensation of Directors . . . . . . . . . . . . . . 107
Employment Contracts, Termination of Employment and
Change-in-Control Arrangements . . . . . . . . . . . 108
Interest in Certain Transaction of Directors,
Officers and Principal Holders of Voting Securities . 108
MARKET PRICE OF AND DIVIDENDS FOR THE COMPANY'S COMMON STOCK
AND RELATED SHAREHOLDER MATTERS . . . . . . . . . . . . . . 109
DESCRIPTION OF OMNIREL CAPITAL STOCK . . . . . . . . . . . . 109
Authorized Capital Stock . . . . . . . . . . . . . . . 109
v
<PAGE>
Common Stock . . . . . . . . . . . . . . . . . . . . . 110
Market for Common Stock . . . . . . . . . . . . . . . 111
Dividends on Common Stock . . . . . . . . . . . . . . 111
Preferred Stock . . . . . . . . . . . . . . . . . . . 111
Dividends on Preferred Stock . . . . . . . . . . . . . 112
Redemption of Preferred Stock . . . . . . . . . . . . 112
Market for Preferred Stock . . . . . . . . . . . . . . 113
Transfer Agent and Registrar . . . . . . . . . . . . . 113
CAPITALIZATION OF OMNIREL . . . . . . . . . . . . . . . . . . 114
DESCRIPTION OF TACTECH CAPITAL STOCK . . . . . . . . . . . . 115
Authorized Capital Stock . . . . . . . . . . . . . . . 115
Common Stock . . . . . . . . . . . . . . . . . . . . . 115
Market for Common Stock . . . . . . . . . . . . . . . 116
Dividends . . . . . . . . . . . . . . . . . . . . . . 116
Transfer Agent and Registrar . . . . . . . . . . . . . 117
CAPITALIZATION OF TACTECH . . . . . . . . . . . . . . . . . . 117
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT OF ZING . . . . . . . . . . 118
Principal Security Holders . . . . . . . . . . . . . . 118
ELECTION OF ZING DIRECTORS . . . . . . . . . . . . . . . . . 119
General . . . . . . . . . . . . . . . . . . . . . . . 119
Nominees . . . . . . . . . . . . . . . . . . . . . . . 119
Security Ownership of Management . . . . . . . . . . . 120
Compensation of Directors and Executive Officers . . . 121
Executive Compensation . . . . . . . . . . . . . . . . 121
Grants of Warrants, Options and SARs in Last Fiscal
Year . . . . . . . . . . . . . . . . . . . . . . . . 121
Aggregate Warrant Exercises in Last Fiscal Year
and Fiscal Year-End Warrant Values . . . . . . . . . 121
Compensation of Directors . . . . . . . . . . . . . . 121
Employment Contracts, Termination of Employment and
Change-in-Control Arrangements . . . . . . . . . . . 122
Compensation Committee Interlocks and Insider
Participation . . . . . . . . . . . . . . . . . . . . 122
Interest in Certain Transactions of Directors,
Officers and Principal Holders of Voting Securities . 122
RATIFICATION OF APPOINTMENT OF INDEPENDENT
PUBLIC ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . 122
vi
<PAGE>
SHAREHOLDER PROPOSALS AT THE COMPANY'S
NEXT ANNUAL MEETING OF SHAREHOLDERS . . . . . . . . . . . . . 123
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . 123
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE . . . . . . . 124
OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . 124
INDEX TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . F-1
vii
<PAGE>
ZING TECHNOLOGIES, INC.
115 Stevens Avenue
Valhalla, New York 10595
(914) 747-7474
TRANSITION ANALYSIS
OMNIREL CORPORATION COMPONENT TECHNOLOGY, INC.
205 Crawford Street 22700 Savi Ranch Parkway
Leominster, Massachusetts 01453 Yorba Linda, California 92686
(508) 534-5776 (714) 974-7676
PROXY STATEMENT/PROSPECTUS
--------------------------
ANNUAL MEETING OF SHAREHOLDERS
To Be Held On June _____, 1995
This Proxy Statement/Prospectus is being furnished to
shareholders of Zing Technologies, Inc., a New York corporation
(the "Company" or "Zing"), in connection with the solicitation of
proxies by the Company's Board of Directors for use at the Annual
Meeting of Shareholders of the Company to be held on June _____,
1995 or at any adjournments thereof (the "Annual Meeting"). This
Proxy Statement/Prospectus, together with the Annual Report of
the Company for the fiscal year ended June 30, 1994, are being
mailed to shareholders on or about May _____, 1995. The
Company's Quarterly Reports for the three month periods ended
September 30, 1994, December 31, 1994 and March 31, 1995, have
been mailed to shareholders.
At the Annual Meeting the shareholders of the Company will
be asked to consider and vote upon a proposal to approve an
Agreement and Plan of Merger dated as of March 29, 1995 (the
"Merger Agreement") between the Company and Zing Merger Co., Inc.
("MergerCo"), a New York corporation wholly owned by Robert E.
Schrader and his wife (collectively, the "Major Shareholder"),
pursuant to which: (A) all holders of the Company's common stock,
$.01 par value, (the "Common Stock" or "Zing Common Stock"),
other than Dissenting Shareholders (as hereinafter defined) and
MergerCo (collectively, the "Zing Public Shareholders") will have
their shares (the "Zing Shares" or "Shares") converted into the
right to receive a pro rata share of substantially all of the
Company's assets, comprised of (i) an initial cash payment
1
<PAGE>
expected to be in the amount of $1.25 per Share, (ii) a non-
assignable contract right to receive on or about December 31,
1999 a contingent cash distribution (the "Deferred Payment
Right"), and (iii) shares of common stock, $.01 par value, of the
Company's two subsidiaries, Omnirel Corporation ("Omnirel" and
the "Omnirel Common Stock") and Transition Analysis Component
Technology, Inc. ("TACTech" and the "TACTech Common Stock"), and
shares of preferred stock of Omnirel with a liquidation
preference of $1.30 per share and a cumulative preferred dividend
in the amount of [ ]% per annum (the "Omnirel Preferred
Stock"); (B) MergerCo will be merged with and into the Company
(the "Merger"), with the Company being the surviving corporation
(the "Surviving Corporation"); (C) all of the Surviving
Corporation's common stock will thereafter be owned by the Major
Shareholder; and (D), the Surviving Corporation will retain its
pro rata portion of the initial cash distribution, Deferred
Payment Right, Omnirel Common Stock, TACTech Common Stock and
Omnirel Preferred Stock, based upon the percentage of Zing Common
Stock owned by MergerCo on behalf of the Major Shareholder
immediately prior to the Merger. The affirmative vote by holders
of two thirds of the Company's outstanding shares of Common Stock
entitled to vote thereon is required to approve the Merger
Agreement.
There are certain risks associated with the Merger and the
issuance of shares of stock of the Company's two subsidiaries.
See "RISK FACTORS."
------------
NEITHER THE TRANSACTIONS CONTEMPLATED BY THE MERGER
AGREEMENT NOR THE SECURITIES TO BE ISSUED PURSUANT THERETO HAVE
BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION NOR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
FAIRNESS OR MERITS OF SUCH TRANSACTIONS OR UPON THE ACCURACY OR
ADEQUACY OF THE INFORMATION CONTAINED IN THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
2
<PAGE>
Dissenting Shareholders who properly perfect their statutory
appraisal rights under Section 623 of the New York Business
Corporation Law ("Dissenting Shareholders") will have the right
to seek appraisal of their Zing Shares. See "APPRAISAL RIGHTS OF
-------------------
DISSENTING SHAREHOLDERS" for a statement of the rights of
------------------------
Dissenting Shareholders and a description of the procedures
required to be followed to obtain appraisal of their Shares.
Although the Surviving Corporation will retain its pro rata
share of substantially all of the Company's assets on the same
basis on which such assets will be distributed to the Zing Public
Shareholders, there are certain differences between the Major
Shareholder and the Zing Public Shareholders resulting from the
Merger, including differences in respect of (i) the tax
consequences of the Merger and (ii) the possibility that the
Major Shareholder will benefit to a greater extent than the Zing
Public Shareholders from Zing's net operating loss carryforwards
(see "THE MERGER - Shareholder Differences Resulting From The
-----------
Merger; CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER").
-----------------------------------------------------
After the Merger Omnirel and TACTech will be publicly traded
companies, with the Surviving Corporation owning approximately
38.93% of the outstanding Omnirel Common Stock, 45.54% of the
outstanding Omnirel Preferred Stock and approximately 40.98% of
the outstanding TACTech Common Stock, the Zing Public
Shareholders owning approximately 46.57% of the outstanding
Omnirel Common Stock, 54.46% of the outstanding Omnirel Preferred
Stock and approximately 49.02% of the outstanding TACTech Common
Stock, and the present minority shareholders of Omnirel and
TACTech owning the balance of such Common Stock, after giving
effect to the exercise of warrants to purchase 139,331 shares of
Zing Common Stock and options to purchase 407,806 shares of
Omnirel Common Stock held by Omnirel management and assuming that
no shareholders exercise appraisal rights. Unless otherwise
indicated, all references to percentages of share ownership
herein are on a fully diluted basis, reflecting the exercise of
all such Zing warrants and Omnirel options, and stock splits of
approximately 2.61414-for-one of Omnirel Common Stock and
approximately 49.25-for-one of TACTech Common Stock to be
effected upon shareholder approval of the Merger Agreement.
3
<PAGE>
At a meeting held on March 23, 1995, the Company's Board of
Directors, with Mr. and Mrs. Schrader abstaining, unanimously
determined that the Merger is fair to, and in the best interests
of, the Company's shareholders, unanimously approved the Merger
Agreement and unanimously determined to recommend that the
shareholders vote FOR approval of the Merger Agreement.
In the event that the Merger Agreement is NOT approved at
the Annual Meeting, shareholders will also be asked to elect
three directors of the Company to serve in a class for a term
that will expire at the second succeeding annual meeting of
shareholders, and to ratify the appointment of Ernst & Young LLP
as the independent public accountants for the Company. The Board
of Directors of the Company recommends unanimously that
shareholders vote FOR the election of the nominated directors and
the ratification of the appointment of Ernst & Young LLP. In the
event that the shareholders approve the Merger Agreement, no
further business will be transacted and the Annual Meeting will
be adjourned.
Omnirel has filed a Registration Statement on Form S-4
pursuant to the Securities Act of 1933, as amended (the
"Securities Act") covering 2,744,227 shares of Omnirel Common
Stock and 2,694,971 shares of Omnirel Preferred Stock (the
"Omnirel Registration Statement"), and TACTech has also filed a
Registration Statement on Form S-4 pursuant to the Securities Act
covering 748,603 shares of TACTech Common Stock (the "TACTech
Registration Statement"). Accordingly, this Proxy
Statement/Prospectus also constitutes the combined prospectuses
for Omnirel and TACTech filed as part of the Omnirel and TACTech
Registration Statements.
The date of this Proxy Statement/Prospectus is May _____,
1995.
4
<PAGE>
AVAILABLE INFORMATION
---------------------
The Company is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and, in accordance therewith files proxy statements,
reports and other information with the Securities and Exchange
Commission (the "SEC"). Reports, proxy statements and other
information filed by the Company may be inspected and copied at
the Public Reference Section of the SEC at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the SEC's Regional
Offices in Chicago (Suite 1400, Northwest Atrium Center, 500 West
Madison Street, Chicago, Illinois 60661) and in New York (75 Park
Place, New York, New York 10007). Copies of such material can be
obtained by mail from the Public Reference Section of the SEC at
prescribed rates.
Omnirel has filed the Omnirel Registration Statement with
the SEC pursuant to the Securities Act with respect to the
Omnirel Common Stock and Omnirel Preferred Stock to be
distributed to all holders of Zing Shares, and retained by the
Surviving Corporation, pro rata according to their Zing Common
Stock holdings, pursuant to the Merger, and TACTech has filed the
TACTech Registration Statement with the SEC pursuant to the
Securities Act with respect to the TACTech Common Stock to be
distributed to all holders of Zing Shares, and retained by the
Surviving Corporation, pro rata according to their Zing Common
Stock holdings, pursuant to the Merger. As permitted by the
rules and regulations of the SEC, this Proxy Statement/Prospectus
omits certain information, exhibits and undertakings set forth in
the Omnirel and TACTech Registration Statements. Such additional
information can be inspected at and obtained from the SEC in the
manner set forth above, upon payment of the prescribed rates.
For further information, reference is made to the Omnirel and
TACTech Registration Statements and the exhibits filed therewith.
Statements contained in this Proxy Statement/Prospectus or in any
document incorporated by reference in this Proxy
Statement/Prospectus relating to the contents of any contract or
other document referred to herein or therein are not necessarily
complete, and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to one of the
Registration Statements or such other document, each such
statement being qualified in all respects by such reference.
5
<PAGE>
NO PERSON IS AUTHORIZED BY THE COMPANY, OMNIREL OR TACTECH
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION, OTHER THAN
THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS, IN CONNECTION
WITH THE SOLICITATION AND THE OFFERING MADE BY THIS PROXY
STATEMENT/PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROXY STATEMENT/ PROSPECTUS DOES NOT CONSTITUTE
THE SOLICITATION OF A PROXY OR AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO PURCHASE, ANY SECURITIES IN ANY
JURISDICTION IN WHICH SUCH SOLICITATION OR OFFERING MAY NOT
LAWFULLY BE MADE.
NEITHER THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR
ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL IMPLY THAT
THERE HAS BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN OR
IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
Until ninety (90) days after the Effective Time, all dealers
effecting transactions in Omnirel Common Stock, Omnirel Preferred
Stock or TACTech Common Stock, whether or not participating in
the initial distribution to holders of Zing Shares of Omnirel
Common Stock, Omnirel Preferred Stock or TACTech Common Stock,
may be required to deliver a copy of this Proxy
Statement/Prospectus.
PROXY STATEMENT/PROSPECTUS SUMMARY
----------------------------------
The following is a summary of certain information contained
elsewhere in this Proxy Statement/Prospectus and is intended to
provide only certain facts and highlights of the material in this
Proxy Statement/Prospectus. Reference is made to, and this
summary is qualified in its entirety by, the more detailed
information contained in this Proxy Statement/Prospectus and the
Annexes hereto. Shareholders are urged to review carefully the
entire Proxy Statement/Prospectus and the Annexes hereto.
6
<PAGE>
ANNUAL MEETING - SUMMARY
------------------------
Date, Time and Place of Meeting
The Annual Meeting will be held at The Summit at
Westchester, Room A, Towers Perrin Training Center, 100 Summit
Lake Drive, Valhalla, New York 10595 on June _____, 1995 at
10:00 A.M.
Purposes of the Annual Meeting
At the Annual Meeting, including any adjournment or
postponement thereof, holders of the Company's Common Stock, will
be asked to consider and vote upon the proposal to approve and
adopt the Merger Agreement providing for the Merger of MergerCo
with and into the Company, with the Company continuing as the
Surviving Corporation, and all of the Company's issued and
outstanding Common Stock thereafter being owned by the Major
Shareholder. In the event that the Merger Agreement is NOT
approved, shareholders shall consider and vote upon the following
additional proposals: (i) to elect three nominees for director to
serve in one of the two existing classes of the Board of
Directors for staggered terms; (ii) to approve the appointment of
Ernst & Young LLP as the independent public accountants for the
Company; and (iii) to transact such other business as may
properly come before the Annual Meeting or any adjournment
thereof. In the event that the Merger Agreement is approved, no
further business will be transacted and the Annual Meeting will
be adjourned. The Merger Agreement is attached to this Proxy
Statement/Prospectus as Annex I.
Record Date; Quorum
Only holders of record of shares of Zing Common Stock at the
close of business on May ___, 1995 (the "Record Date") will be
entitled to notice of and to vote at the Annual Meeting or any
adjournment or postponement thereof. The presence, either in
person or by properly executed proxy, of the holders of one third
of the outstanding shares of Zing Common Stock entitled to vote
at the Annual Meeting is necessary to constitute a quorum at the
Annual Meeting.
7
<PAGE>
Vote Required
The affirmative vote of the holders of two thirds of the
outstanding shares of Zing Common Stock entitled to vote is
required to approve and adopt the Merger Agreement. The Major
Shareholder as the sole shareholder of MergerCo, controlled
approximately 45.54% of the Company's outstanding Common Stock as
of the Record Date, and has indicated his intention to vote all
such shares in favor of the Merger Agreement. In the event that
the Merger Agreement is NOT approved and the additional proposals
are voted upon, the affirmative vote of the holders of a
plurality of shares of Common Stock voting in person or by proxy
at the Annual Meeting is required to elect each of the three
nominees for directors, and the affirmative vote of the holders
of a majority of shares of Common Stock voting in person or by
proxy at the Annual Meeting is required to approve the
appointment of Ernst & Young LLP as the independent public
accountants for the Company.
Appraisal Rights of Dissenting Shareholders
Shareholders who object to the adoption and approval of the
Merger Agreement and who strictly comply with the statutory
requirements of Section 623 of the New York Business Corporation
Law (the "BCL") will have the right to receive fair value for
their shares of Zing Common Stock. ANY SUCH DISSENTING
SHAREHOLDER MUST FILE WITH THE COMPANY BEFORE THE ANNUAL MEETING,
OR AT THE ANNUAL MEETING PRIOR TO THE VOTE ON THE MERGER
AGREEMENT, WRITTEN OBJECTION TO THE MERGER, GIVING NOTICE OF HIS
ELECTION TO DISSENT AND A DEMAND FOR PAYMENT OF THE FAIR VALUE OF
HIS SHARES. A PROXY OR VOTE AGAINST APPROVAL AND ADOPTION OF THE
MERGER AGREEMENT BY ITSELF IS INSUFFICIENT TO CONSTITUTE SUCH
OBJECTION AND DEMAND. A vote FOR approval and adoption of the
Merger Agreement will constitute a waiver of a shareholder's
right of appraisal. Accordingly, a shareholder voting by proxy
who desires to preserve his appraisal rights must either vote
AGAINST approval and adoption of the Merger Agreement or ABSTAIN
from voting on such matter, and file a written objection giving
notice of his election as aforesaid.
8
<PAGE>
THE MERGER - SUMMARY
--------------------
The Parties
The parties to the Merger are the Company and MergerCo. The
Company is a holding company with two subsidiaries, Omnirel and
TACTech. Omnirel is a manufacturer of multi-chip power modules
and semiconductor components serving the high reliability
military and industrial markets. TACTech licenses proprietary
computer software data bases to military semiconductor
manufacturers, various segments of the Department of Defense and
defense contractors. MergerCo is a recently formed New York
corporation wholly owned by the Major Shareholder and was
organized solely for the purpose of effecting the Merger.
The Merger
Pursuant to the Merger Agreement, at the Effective Time (as
hereinafter defined) MergerCo will be merged with and into the
Company with the Company as the Surviving Corporation. As a
result of the Merger, each issued and outstanding Zing Share will
be converted into the following: (i) the right to receive cash,
expected to be in the amount of $1.25 per Zing Share (the "Cash
Payment"); (ii) the Deferred Payment Right; (iii) the right to
receive one share of Omnirel Common Stock; (iv) the right to
receive one share of Omnirel Preferred Stock; and (v) the right
to receive one-fourth of a share (one share for every four Zing
Shares) of TACTech Common Stock (collectively, and as further
described in "THE MERGER - The Merger Agreement," " - Cash
----------
Payment" and " - Deferred Payment Right". The Merger
Consideration represents a pro rata share of substantially all of
the Company's assets. As a result of the Merger, the Major
Shareholder will be the sole owner of the Surviving Corporation
and the Surviving Corporation will retain a pro rata share of the
Merger Consideration, based upon the Major Shareholder's interest
in Zing. All Dissenting Shareholders who do not vote in favor of
the Merger and who properly perfect appraisal rights under
Section 623 of the BCL will be entitled to receive fair value for
their Shares as determined under Section 623.
9
<PAGE>
Effective Time of the Merger
The Merger will become effective (the "Effective Time") at
the time a Certificate of Merger is filed with the Secretary of
State of the State of New York, which will be on or as soon as
practicable after the closing of the Merger (the "Closing"). It
is expected that the Closing will occur on the day of approval of
the Merger Agreement at the Annual Meeting.
Effects of the Merger
Immediately following the Merger, the Major Shareholder will
be the sole shareholder of the Surviving Corporation and,
assuming that no shareholders exercise appraisal rights, the
outstanding Omnirel Common Stock, outstanding Omnirel Preferred
Stock and outstanding TACTech Common Stock, will be owned as
follows:
Omnirel Omnirel TACTech
Common Stock Preferred Stock Common Stock
------------ --------------- ------------
Zing Public
Shareholders 46.57% 54.46% 49.02%
Surviving Corporation 38.93% 45.54% 40.98%
Management Shareholders 14.50% -- 10.00%
As a result of the Merger, no Zing Common Stock will be publicly
traded, but the Omnirel Common and Preferred Stock and the
TACTech Common Stock issued to holders of Zing Common Stock will
be registered with the Securities and Exchange Commission (the
"SEC") and will be eligible for public trading, either in the
Over-the-Counter market (the "OTC"), with quotations published in
the OTC Bulletin Board, with respect to the Omnirel Preferred
Stock and the TACTech Common Stock, or in the National Market
System ("NMS") of the National Association of Securities Dealers,
Inc. Automated Quotation System ("NASDAQ"), with respect to the
Omnirel Common Stock. See "CAPITALIZATION OF OMNIREL" and
--------------------------
"CAPITALIZATION OF TACTECH" below.
-------------------------
10
<PAGE>
Conditions to the Merger
Closing of the Merger is subject to a number of conditions
precedent in addition to shareholder approval of the Merger
Agreement. These include the following: the SEC shall have
declared the Omnirel Registration Statement and the TACTech
Registration Statement effective; the Omnirel Common and
Preferred Stock and the TACTech Common Stock shall have been
qualified with the securities commissions of all U.S.
jurisdictions where holders of Zing Shares reside; Omnirel shall
be in compliance with all of its obligations pursuant to certain
Bank Loans (as hereinafter defined) (see "BUSINESS OF OMNIREL -
-------------------
Bank Loans"); no material adverse change in the financial
condition of the Company shall have occurred; and the fair value
of Shares tendered by Dissenting Shareholders, if any, shall not
exceed $250,000. The Merger Agreement may also be terminated by
the Company or by MergerCo for various reasons (see "THE MERGER -
----------
Termination of the Merger Agreement").
Reasons for the Merger
Management of the Company believes that the value of Omnirel
Preferred and Common Stock and TACTech Common Stock, trading
separately in the public market, will exceed the combined market
value of those companies as represented by the applicable portion
of the value of Zing Common Stock, because the Merger will enable
investors to evaluate better the financial performance of each
company, enhancing the likelihood that each will achieve
appropriate market recognition and increase over time the value
of an investment in each of the respective companies. The Merger
will also provide the management of Omnirel and TACTech with an
incentive (through their existing stock and stock option
ownership) to increase the market value of their companies while
simultaneously imposing direct accountability to public investors
for their management policies and financial results. In
addition, the Merger will enable Omnirel and TACTech more easily
to obtain equity financing in the future and to use their stock
to make acquisitions.
As a result of the Merger, the Major Shareholder will retain
his pro rata interest in the assets of Zing through continued
ownership of the Surviving Corporation, rather than retaining
such interest in the assets of Zing through a pro rata
distribution of assets upon the liquidation of Zing. The Merger
thus will allow the Major Shareholder to avoid potential adverse
11
<PAGE>
tax consequences which would arise from his receiving upon
liquidation large blocks of illiquid stock in Omnirel and TACTech
in which he would have a low basis for tax purposes and which
stock could not be sold in the public market without
significantly depressing prices. See "THE MERGER -- Purpose and
----------
Reason for the Merger" and "Shareholder Differences Resulting
from the Merger" below.
Risk Factors
Shareholders should consider certain factors discussed under
"RISK FACTORS," as well as other information set forth herein,
-------------
before voting on the Merger proposal.
Summary of Certain Federal Income Tax Consequences of the Merger
This summary is for general information of shareholders only
as to their tax consequences and does not purport to be complete.
For a more extensive discussion of Federal income tax
consequences, see "CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE
----------------------------------------------
MERGER" below. The consequences to any particular shareholder
------
may differ depending upon that shareholder's own circumstances
and tax position. Certain types of shareholders (including
financial institutions, tax-exempt organizations, foreign persons
and persons who acquired their Zing Shares upon the exercise of
employee incentive stock options, warrants or otherwise as
compensation) may be subject to special rules. The discussion
does not consider the effect of any applicable foreign, state or
local tax laws. Each shareholder is urged to consult his tax
advisor as to the particular tax consequences of the Merger to
such shareholder, including the application of state, local and
foreign tax laws. For purposes of this summary, shareholders are
assumed to hold their Zing Shares as capital assets (generally,
property held for investment).
It is expected that the exchange of Zing Shares by the Zing
Public Shareholders for the Merger Consideration will be taxable
as a "sale or exchange" to the shareholder. In general, a
shareholder will realize gain or loss on such sale in an amount
equal to the difference between the value of the Merger
Consideration he receives in connection with the Merger, and such
shareholder's tax basis for the Zing Shares exchanged. Under the
Internal Revenue Code as presently in effect, any net capital
gain (i.e., the excess of net long-term capital gain over short-
term capital loss) recognized on such sale will be subject to
12
<PAGE>
taxation at the same rates applicable to ordinary income if the
Shares were held for one (1) year or less, up to 39.6% for
individuals and 35% for corporations. However, any net capital
gain recognized on such sale by a shareholder who has held his
Zing Shares for more than one year will be subject to taxation at
a marginal tax rate not exceeding 28%.
Capital losses recognized by individuals will be deductible
only to the extent of capital gains recognized by such holder in
that same year, plus $3,000. Excess net capital losses can be
carried forward and deducted in future years, subject to the
foregoing limitations. Capital losses recognized by corporations
will be currently deductible only to the extent of capital gains
recognized during the same year. With certain limitations,
excess losses may be carried back to the preceding three taxable
years, and carried forward five (5) taxable years.
It is possible that Zing will have substantial corporate
level taxes to pay as a result of the Merger, even after
utilizing all of the available net operating loss carryforwards
("NOL"). Assuming that the Effective Time occurs prior to June
30, 1995 and that the aggregate Merger Consideration is valued at
$8.75 per Zing Share, the taxes payable by Zing (on a
consolidated basis with Omnirel and TACTech), including taxes
payable as a result of the Merger, are estimated to be from
$550,000 to $750,000 after application of Zing's existing NOL of
approximately $1,200,000. The actual taxes may vary considerably
from the foregoing estimated taxes, depending upon a number of
assumptions, including (i) the market value of Zing Common Stock
at the Effective Time, (ii) the value of the respective
securities comprising a portion of the Merger Consideration, and
(iii) the amount of taxable income of Zing, Omnirel and TACTech
for the Fiscal Year ending June 30, 1995. For each incremental
increase or decrease of $1.00 in the market price of Zing Common
Stock above or below the value of $8.75 per share at the
Effective Time, it is estimated that, depending on a number of
assumptions, Zing's taxes will increase or decrease,
respectively, by approximately $500,000 to $600,000. Zing may
terminate the Merger Agreement if its Board of Directors
determines that Zing will be subject to significant taxes upon
the Merger as a result of the then market price of Zing Common
13
<PAGE>
Stock. On March 22, 1995, the closing bid price for Zing Common
Stock on the NASDAQ-NMS was $_______________ per share. If the
Merger were not to take place, it is likely that the Zing NOL
would be sufficient to shelter the taxable income of Omnirel and
TACTech and no additional taxes for Fiscal Year 1995 would be
payable by Zing and most of the Zing NOL would still be available
for future use.
In the event that the Merger were postponed until after June
30, 1996 (or more than five (5) years after Zing's acquisition of
Omnirel), it is possible that if the transaction were
restructured as a complete spin-off and liquidation of Zing, it
could qualify as a tax-free spin-off, as a result of which gain
or loss by Zing on the distribution of Omnirel Common and
Preferred Stock and TACTech Common Stock would not be recognized
and Zing Public Shareholders would receive their Omnirel and
TACTech securities tax free. There are a number of requirements
that must be met, however, in order for a spin-off to be a tax-
free transaction. Therefore, there can be no assurance that the
transaction, if postponed as aforesaid, would be able to qualify
as a tax-free spin-off. The Company believes that by completing
the Merger at this time, Omnirel and TACTech will derive the
benefit of being a public company, including being able more
easily to obtain equity financing in the future and to use their
stock to make acquisitions, which would outweigh any possible
benefit from waiting until July 1996 in order to seek
qualification of the transaction as a tax-free spin-off.
ZING TECHNOLOGIES, INC. - SUMMARY
---------------------------------
Zing is a publicly traded holding company with two
subsidiaries, Omnirel and TACTech. Omnirel is a manufacturer of
multi-chip power modules and semiconductor components serving the
high reliability military and industrial markets. TACTech is an
information service company which licenses its proprietary
computer software data bases to various segments of the
Department of Defense, defense contractors and manufacturers of
military-grade semiconductors. Immediately following the Merger,
Zing's Common Stock will cease being publicly traded and Zing
will be a holding company wholly owned by the Major Shareholder,
whose assets will be approximately 38.93% of the issued and
outstanding Omnirel Common Stock, 45.54% of the issued and
outstanding Omnirel Preferred Stock, approximately 40.98% of the
14
<PAGE>
issued and outstanding TACTech Common Stock (assuming no
shareholders exercise appraisal rights), possible net operating
loss carry forwards, cash and a pro rata portion of the Deferred
Payment Right. See "THE MERGER - Deferred Payment Right" below.
----------
OMNIREL CORPORATION - SUMMARY
-----------------------------
Business
Omnirel manufactures multi-chip power modules and
semiconductor components. Power modules combine active and
passive components in one package to produce integrated smart
power electronic modules which control, drive and regulate the
input and output of power in the motion control and power devices
of which they form a part. Omnirel's products are used where
circuit density, miniaturization, electrical performance and
reliability are critical design requirements, such as in defense,
aerospace, commercial aircraft and medical device industries, and
in the production of industrial controls and power supplies where
these same criteria are needed. Omnirel was organized as a
Massachusetts corporation on July 22, 1985 and acquired by Zing
on June 26, 1991. On _______________, 1995 Omnirel was
reincorporated as a Delaware corporation.
Trading Market
There is not currently a trading market for Omnirel Common
Stock or Omnirel Preferred Stock. Immediately following the
Merger, Omnirel Common Stock and Preferred Stock will be publicly
traded. Omnirel has applied for listing on the NASDAQ-NMS under
the symbol of "OMNL" for its Common Stock, and anticipates that
its Preferred Stock will be listed in the OTC Bulletin Board
under the symbol of "OMNL-P". See "RISK FACTORS -Lack of a
------------
Current Market for Omnirel and TACTech Stock."
Post-Merger Dividend Policy
Management of Omnirel does not presently intend to pay cash
dividends on Omnirel Common Stock following the Merger. The
Omnirel Preferred Stock is entitled to a [ ]% cumulative
preferred dividend, when and as declared by the Board of
Directors. The dividend policy will be reviewed from time to
time by Omnirel's Board of Directors based on Omnirel's earnings,
financial position and such other business considerations as its
Board of Directors considers pertinent. Omnirel's present
lending arrangements prohibit payment of dividends. Omnirel
expects that its lending arrangements as of the Effective Time
will allow for the payment of dividends, subject to restrictions.
15
<PAGE>
TRANSITION ANALYSIS COMPONENT TECHNOLOGY, INC. - SUMMARY
--------------------------------------------------------
Business
TACTech is an information service company which licenses
proprietary computer software data bases to various segments of
the Department of Defense, defense contractors and manufacturers
of military-grade semiconductors. The data bases provide
subscribers with information for determining the projected life
cycle (obsolescence) of micro-circuits and discrete semiconductor
devices, and identifying functionally interchangeable devices
from various manufacturers, used primarily in the manufacture of
systems for military and aerospace applications. TACTech is a
Delaware corporation organized by Zing on February 24, 1987.
Trading Market
There is not currently a trading market for TACTech Common
Stock. Immediately following the Merger, TACTech Common Stock
will be publicly traded. TACTech anticipates that its Common
Stock will be listed on the OTC Bulletin Board under the symbol
"TACT". See "RISK FACTORS - Lack of Current Market for Omnirel
------------
and TACTech Stock."
Post-Merger Dividend Policy
Management of TACTech does not presently intend to pay cash
dividends on TACTech Common Stock following the Merger. The
dividend policy will be reviewed from time to time by TACTech's
Board of Directors based on TACTech's earnings, financial
position and such other business considerations as its Board of
Directors considers pertinent.
16
<PAGE>
ZING TECHNOLOGIES, INC.
-------------------------
SUMMARY SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED
FINANCIAL DATA
The following table summarizes certain selected historical
and pro forma consolidated financial data of Zing from the
Consolidated Financial Statements for the periods stated. The pro
forma amounts reflect the pro forma effects of the Merger. The
information set forth below should be read in conjunction with
the information set forth under "ZING MANAGEMENT'S DISCUSSION AND
--------------------------------
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" and
------------------------------------------------------------
Zing's Consolidated Financial Statements and the Notes thereto
included in the Annual Report being mailed to shareholders with
this Proxy Statement/Prospectus. The Proforma data reflects the
change from majority to less than majority control of Zing's two
subsidiaries. Accordingly, the data reflects equity in earnings
(losses) of subsidiaries and eliminates the consolidation of
their results of operations and balance sheets.
17
<PAGE>
<TABLE><CAPTION>
Zing Technologies, Inc.
-----------------------
Summary Selected Consolidated Financial Data
--------------------------------------------
Historical Pro Forma
-------------------------------------------------------------------------- -------------------------
Nine Months Year Six Months Six Months
Ended Ended Ended Year Ended Ended
Year Ended September 30, June 30, June 30, December 31, June 30, December 31,
------------------------ ---------- -------- -------------- ----------- ------------
1990 1991 1992 1993 1994 1993 1994 1994 1994
(Unaudited)
--------------------------------------------------------------------------------------------------------
(000's omitted, except per share data)
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Gross Revenues $94,933 $96,445 $91,698 $52,602 $11,483 $ 5,444 $ 6,954 $ 861 $ 447
Equity in earnings (losses)
of subsidiaries -- -- -- -- -- -- -- (224) (35)
Income (loss) from operations 2,004 1,943 21 (1,989) (409) 12 (42) (755) (135)
Income (loss) before income
taxes and extraordinary item (147) (364) (2,376) (3,432) 165 12 417 34 62
Net Income $ 253 $ 26 $(2,132) $(3,623) $ 215 $ 65 $ 411 $ 34 $ 62
---------------------
PER SHARE DATA(1):
Net Income (loss) $ .09 $ .01 $( .79) $ (1.31) $ .08 $ .08 $ .16 $ .03 $ .03
Book Value $ 5.77 $ 5.77
---------------------
Balance Sheets Data
(end of period):
Working Capital $32,245 $20,632 $18,541 $ 6,228 $ 3,878 $ 3,039 $3,838 $1,876 $1,745
Total Assets 42,622 50,868 43,710 32,264 18,360 17,430 19,754 $8,199 $8,070
Shareholder's equity 18,524 18,300 16,168 12,540 12,424 12,478 12,405 $7,084 $7,076
</TABLE>
------------------------------
(1) Per share data represents income (loss) per common and common
equivalent share. See NOTE A to the Company's Selected Historical
Consolidated Financial Information.
(2) Equity in earnings (losses) of subsidiaries represent 45.54% of the
applicable earnings (losses) of the subsidiaries for the stated
periods.
(3) Pro forma selected financial data does not include any gain or loss
that may occur as a result of the proposed transaction.
18
<PAGE>
THE ANNUAL MEETING
------------------
Matters to be Considered
This Proxy Statement/Prospectus is being furnished to
shareholders of the Company in connection with the solicitation
of proxies by the Company's Board of Directors for use at the
Annual Meeting to be held on June ___, 1995 or at any
adjournments thereof.
The purpose of the Annual Meeting is to consider and vote
upon the approval and adoption of the Merger Agreement providing
for the Merger of MergerCo with and into the Company, which will
be the Surviving Corporation. Unless the context otherwise
requires, all references in this Proxy Statement/Prospectus to
"the Company" or "Zing" include Zing Technologies, Inc. and its
consolidated subsidiaries, Omnirel and TACTech, prior to the
Effective Time and Zing Technologies, Inc. as the Surviving
Corporation after the Merger.
At the Effective Time, each Zing Share which is issued and
outstanding immediately prior to the Effective Time will be
converted into the following series of rights, collectively
comprising a pro rata share of substantially all of the Company's
assets:
(i) the right to receive the Cash Payment, expected to be
in the amount of $1.25 per Share, without interest thereon;
(ii) the right to receive a Deferred Payment Right;
(iii) the right to receive one share of Omnirel Common Stock;
(iv) the right to receive one share of Omnirel Preferred
Stock; and
(v) the right to receive one-fourth of a share (one share
for every four Zing Shares) of TACTech Common Stock.
Immediately after the Effective Time, all of the issued and
outstanding shares of Zing Common Stock will be held by the Major
Shareholder and Zing, as the Surviving Corporation, will retain
its pro rata interest in the above rights. In addition, the
Major Shareholder, through ownership of the Surviving
Corporation, and not the Zing Public Shareholders, will own
Zing's remaining net operating loss carryforwards, if any, after
application of same to the Company's taxable income for Fiscal
19
<PAGE>
Year 1995, the Arrow Sale Proceeds (defined below) and taxes
arising out of the Merger. See "THE MERGER - Shareholder
----------
Differences Resulting from the Merger; CERTAIN FEDERAL INCOME TAX
--------------------------
CONSEQUENCES OF THE MERGER" below.) All Cash Payments and all
---------------------------
cash distributions pursuant to Deferred Payment Rights are to be
made without interest. All Dissenting Shareholders who properly
object to the Merger and perfect appraisal rights will be
entitled to receive fair value for their Zing Shares as
determined under Section 623 of the BCL. See "APPRAISAL RIGHTS
----------------
OF DISSENTING SHAREHOLDERS."
--------------------------
At a meeting of the Company's Board of Directors held on
March 23, 1995, those members present at the meeting unanimously
determined that the Merger is fair to, and in the best interests
of, the Company's shareholders. The Board of Directors approved
the Merger Agreement by the unanimous vote of those members
present at such meeting and recommends that the shareholders vote
FOR approval of the Merger Agreement.
In the event that the Merger Agreement is NOT approved at
the Annual Meeting, shareholders will be asked to elect three
directors of the Company to serve in a class for a term that will
expire at the second succeeding annual meeting of shareholders,
and to ratify the appointment of Ernst & Young LLP as the
independent public accountants for the Company. In such event,
the Board of Directors of the Company recommends unanimously that
shareholders vote FOR the election of the nominated directors and
the ratification of the appointment of Ernst & Young LLP. In the
event that the shareholders approve the Merger Agreement, no
further business will be transacted and the Annual Meeting will
be adjourned.
Proxies
Any shareholder giving a proxy may revoke it at any time
prior to its use at the Annual Meeting by filing with the
Secretary of the Company an instrument revoking it or by a duly
executed proxy bearing a later date. In addition, if the person
executing the proxy is present at the meeting, he or she may vote
his or her shares in person. Proxies, if duly signed and
received in time for voting, and not so revoked, will be voted at
the meeting. Where choices are specified by a shareholder by
20
<PAGE>
means of the ballot provided on the Proxy for that purpose, the
Proxy will be voted in accordance with such specifications. In
the absence of such specifications, the Proxy will be voted for
approval of the Merger Agreement and, if the Merger Agreement is
not approved by the requisite vote, for the election of the three
directors nominated by management to the class herein described
and the appointment of auditors selected by the Board of
Directors as set forth in this Proxy Statement/Prospectus.
Outstanding Shares and Voting Rights
As of ____________ __, 1995, the record date fixed for the
determination of shareholders entitled to vote at the Annual
Meeting (the "Record Date"), there were outstanding _____________
shares of the Company's Common Stock, which constitute the only
outstanding securities of the Company having voting rights. Each
outstanding share of Common Stock is entitled to one vote on each
matter to be voted. The affirmative vote of two thirds of the
outstanding shares of Common Stock is required to approve and
adopt the Merger Agreement. The affirmative vote of a majority
of the shares of Common Stock represented in person or by proxy
is necessary for the appointment of auditors and the affirmative
vote of a plurality of such shares is necessary for the election
of each director.
Quorum
Under New York State law and the Certificate of
Incorporation and By-Laws of the Company, for purposes of
determining whether a quorum is present abstentions will be
counted and broker non-votes will not be counted. The presence,
either in person or by properly executed proxy, of the holders of
one third of the outstanding shares of Zing Common Stock entitled
to vote at the Annual Meeting is necessary to constitute a
quorum. For purposes of determining whether the vote required
for the election of directors and for the appointment of auditors
selected by the Board of Directors, as set forth in this Proxy
Statement/Prospectus, has been achieved, abstentions and broker
non-votes will not be counted.
21
<PAGE>
Solicitation of Proxies
The cost of soliciting proxies will be borne by the Company.
In addition to solicitation by the use of the mails, certain
officers and regular employees of the Company may solicit proxies
personally and by telephone. The Company may request banks,
brokerage houses and custodians, nominees and fiduciaries to
forward soliciting material to their principals and will
reimburse them for their out-of-pocket expenses. The Company has
also retained the firm of Regan & Associates, Inc. to assist in
solicitations for a fee of $2,000 plus out-of-pocket
disbursements.
RISK FACTORS
------------
In deciding whether to approve the Merger Agreement,
shareholders of the Company should carefully consider the
following risks associated with the Merger, in addition to the
other matters set forth herein.
Uncertain Value of the Deferred Payment Right
Upon consummation of the Merger, the Zing Public
Shareholders will have no further equity interest in the Company.
Rather, their only remaining interest in the Company will be
represented by the Deferred Payment Right to receive on or about
December 31, 1999 their pro rata share of a contingent cash
distribution consisting of the amount of Zing cash on hand (after
provision for the Cash Payment) as of the Effective Time,
estimated to be approximately $2,000,000 (the "Initial
Contribution"), (i) decreased by all cash expenditures for taxes
(including taxes arising from the Merger and the distribution of
the Merger Consideration to the Zing Public Shareholders) and
other pre-Effective Time liabilities, including the fair value of
Dissenting Shareholders' Zing Shares and reasonable expenses
resulting from or attributable to Zing or its business prior to
the Effective Time, or incurred in connection with the
administration of the funds constituting the Initial Contribution
or the Deferred Payment Fund (as defined below), and
(ii) increased by all cash received after the Effective Time from
pre-Effective Time transactions, including (x) repayment to Zing
of certain loans, including a $250,000 loan to Omnirel, (y)
amounts which may be received by the Surviving Corporation from
22
<PAGE>
Omnirel and TACTech pursuant to a tax sharing agreement among
Zeus, Omnirel and TACTech, and (z) the amount received by the
Surviving Corporation, if any, net of corporate taxes thereon, as
a result of the obligation of Arrow Electronics, Inc. ("Arrow"),
subject to certain conditions, to pay Zing an additional purchase
price of up to a maximum of $2,000,000 (the "Arrow Sale
Proceeds") from the sale to Arrow of certain net assets of Zing
in May 1993 (the "Arrow Sale") and including all interest earned
or income from the investment of the Initial Contribution and any
of the foregoing additions thereto (the amount of the Initial
Contribution as adjusted by the foregoing being referred to
hereinafter as the "Deferred Payment Fund"). The amount of the
Arrow Sale Proceeds is presently estimated to be approximately
$1,300,000, based upon Arrow sales for the first nine (9) months
of the applicable two-year measuring period (May 1994-April 1996)
and assuming comparable results during the balance of such two-
year period. There can be no assurance that any amount of Arrow
Sale Proceeds will be received or, if received, that such
proceeds will equal or approximate the maximum of $2,000,000. If
the rate of Arrow sales decreases, even by a small amount, during
the remainder of the two-year measuring period, there may be no
Arrow Sale Proceeds to Zing. See "THE MERGER - Deferred Payment
----------
Right." Further, there can be no assurance as to the amount of
pre-Effective Time liabilities, including expenditures for taxes
and in particular taxes arising from the Merger, and,
accordingly, the value of the Deferred Payment Right is uncertain
at this time.
Deferred Payment Fund Subject to Post-Effective Time Liabilities
The Initial Contribution, Approved Investments (as
hereinafter defined) and proceeds therefrom, and all other monies
from whatever source to be deposited in the Deferred Payment Fund
will be retained by and remain assets of the Surviving
Corporation until transferred to the paying agent. Accordingly,
until such monies are transferred to the paying agent and
distributed to Zing Public Shareholders pursuant to the Deferred
Payment Right, they will be subject to the claims of the
Surviving Corporation's creditors, including creditors who seek
payment based upon post-Effective Time acts and transactions of
the Surviving Corporation unrelated to Zing's business prior to
the Effective Time. There can be no assurance that the Surviving
Corporation will have any assets other than the Deferred Payment
Fund, or that the value of any such assets will be sufficient to
pay claims of the Surviving Corporation's creditors, if any.
23
<PAGE>
Dependence Upon Major Customers/Projects for Omnirel Products
Sales of various products to a single customer, representing
multiple industrial and military/aerospace programs at four
separate locations, aggregated 19% of Omnirel's sales revenues
for the Fiscal Year 1994 and a single project accounted for
approximately 16% of Fiscal Year 1994 sales. The customer, due
to orders already placed, is expected to represent a larger
portion of Omnirel's Fiscal Year 1995 sales. For the six months
ended December 31, 1994, such customer accounted for 44% of
Omnirel's sales. Because of Omnirel's dependence on sales to one
major customer in 1994 and 1995, and anticipated dependence on
sales to such customer in 1996, which may not be realized, there
can be no assurance that fiscal 1996 sales will match 1995 sales,
or that, in the event sales to such major customer decline over
the succeeding years, Omnirel will be able to compensate for the
loss of such sales in Fiscal Year 1996 and beyond. Moreover,
sales to Arrow Electronics, Omnirel's primary distributor, were
13% of sales revenues for Fiscal Year 1994, and 8% of sales
revenues for the six months ended December 31, 1994. At the time
of the Arrow Sale, Arrow was appointed Omnirel's exclusive
distributor of its single and multi-chip semiconductor devices
for a period ending in May 1995, after which period it is
anticipated that Arrow will become a non-exclusive distributor
for Omnirel. Although management deems its relationship with
Arrow to be satisfactory, Omnirel does not expect significant
difficulty in selling its single and multi-chip products to
and/or through other distributors and customers, after the period
of exclusivity ends but there can be no assurance that Omnirel
will not experience difficulty in so doing.
Decline in Defense and/or Aerospace Spending
The businesses of both Omnirel and TACTech depend to a
substantial extent upon sales to military and defense
contractors. In the event that defense and/or aerospace spending
were to decline significantly over the next several years, sales
by Omnirel and TACTech could suffer a corresponding decline. In
such event, both companies would have to seek replacement markets
in other industries. There can be no assurance that such markets
would be available or that either company would be successful in
penetrating them.
24
<PAGE>
Dependence on Key Personnel
The businesses of Omnirel and TACTech are substantially
dependent upon the active participation and technical expertise
of their executive officers. Omnirel is dependent upon the
services of John F. Catrambone, its Chief Executive Officer,
while TACTech is dependent upon Malcolm Baca, its Executive Vice
President and Chief Operating Officer. It is anticipated that
key-man life insurance policies on such executive officers in the
amounts of $4,500,000 and $1,700,000, respectively, will be
transferred from Zing to Omnirel and TACTech, respectively, as of
the Effective Time. The Company's Board of Directors regularly
re-evaluates the need for and amount of such key-man life
insurance and has been assured by the Omnirel and TACTech Boards
of Directors that such re-evaluation will continue following
transfer of the policies. There can be no assurance, however,
that either company could obtain executives of comparable
expertise and commitment in the event of death, or that the
business of either company would not suffer material adverse
effects as the result of the death (notwithstanding coverage by
key-man insurance), disability or voluntary departure of any such
executive officer.
Control by Major Shareholder
Upon completion of the Merger, the Major Shareholder will
own indirectly 1,227,211 shares of Omnirel Common Stock and
306,803 shares of TACTech Common Stock, or approximately 38.93%
and 40.98%, respectively, of each company's voting securities.
Accordingly, the Major Shareholder may be deemed to be a
controlling person of both Omnirel and TACTech, although such
control may be diminished by virtue of the separation and
independence of the companies' boards of directors following the
Merger.
Lack of Diversification; Fluctuation in Market Price
The corporate structure of Zing prior to the Merger has
given it a degree of diversification. Since Omnirel and TACTech
are each engaged in distinctively different businesses, following
the Merger, an adverse development in either such business as a
result of competition, technological change, further reductions
in defense spending or other factors would have a greater impact
on the earnings and financial condition of the affected company,
and its ability to pay dividends, than such a development would
have had on Zing in its pre-Merger structure. As a result,
fluctuations in the value of the Omnirel Common Stock and the
TACTech Common Stock would likely be greater than for Zing Shares
prior to the Merger.
25
<PAGE>
Reduction in Financial Resources
As subsidiaries of Zing, Omnirel and TACTech have in the
past been able to resort to internal financial resources,
including loans from Zing, to finance operating, research and
development requirements. Although the management of each of
Omnirel and TACTech expects that, following the Merger, it will
have sufficient cash to finance its operating, research and
development requirements with internal resources, or will have
access to external debt or equity capital sources if required,
the Merger will result in Zing's cash reserves no longer being
available to each of Omnirel and TACTech. Historically, Zing has
guaranteed both equipment loans and short-term revolving bank
borrowings for Omnirel and has provided working capital and long-
term loans to TACTech and Omnirel, but will cease providing such
guarantees and loans following the Merger. The current amount of
the approximately $685,000 working capital loan from Zing to
TACTech will be contributed to the capital of TACTech and
$3,500,000 of the approximately $5,500,000 in working capital
loans from Zing to Omnirel, as of December 31, 1994
(collectively, the "Zing Loan"), will be exchanged for Omnirel
Preferred Stock, with the approximately $2,000,000 balance being
repaid as of the Effective Time. If funds were to be needed by
Omnirel or TACTech in excess of either company's internal
financial resources, there can be no assurance that such company
would be able to obtain financing, or that such financing would
be on terms as favorable as it would be if it had continued as a
subsidiary of the Company, or, in the case of Omnirel, if Zing
had continued to provide guarantees for equipment and short-term
revolving bank loans. See "OMNIREL/TACTECH MANAGEMENT'S
-----------------------------
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
-----------------------------------------------------------------
OPERATIONS - Liquidity and Capital Resources" below.
----------
As a result of the Merger, charges for SEC filing fees,
legal and accounting fees and similar types of expenses will be
borne directly by Omnirel and TACTech, which amounts are likely
to be greater than the prior allocations of corporate overhead,
and will have a corresponding depressing effect on earnings going
forward. Moreover, following the Merger Omnirel and TACTech will
26
<PAGE>
each pay a management fee to the Surviving Corporation in the
amount of $150,000 and $75,000, respectively, for managerial
oversight services to be provided by Robert E. Schrader and
Martin E. Fawer, the Chief Executive Officer and Chief Financial
Officer, respectively, of Zing, which services were previously
provided to Omnirel and TACTech and included in general corporate
charges. Omnirel and TACTech will also pay their respective pro
rata portions of costs related to the Merger.
Lack of a Current Public Market for Omnirel and TACTech Stock
There is not currently a public market for the Omnirel
Common Stock or Preferred Stock or the TACTech Common Stock and
there can be no assurance as to the prices at which trading in
either company's stock will commence after the Merger. The
process by which the securities trading markets establish a
market price for any security is complex, involving the
interaction of numerous factors, including the financial
condition and prospects of the issuer of such security and
general market forces. It is not possible to predict the market
price of a security with any level of certainty, nor is it
possible to isolate the specific market forces which determine
the trading price of a specific security. Until the Omnirel
Common and Preferred Stock and the TACTech Common Stock are fully
distributed and an orderly market develops, if any does, the
prices in any such stock may be depressed and/or may fluctuate
significantly. Omnirel has applied or will apply for listing of
its Common Stock on the NASDAQ-NMS under the symbol "OMNL" and
anticipates that its Preferred Stock will be listed on the OTC
Bulletin Board under the symbol "OMNL-P", while TACTech also
anticipates that its Common Stock will be listed on the OTC
Bulletin Board under the symbol of "TACT".
Absence of Dividends; Redemption Restrictions
Neither Omnirel nor TACTech currently intends to pay cash
dividends on its Common Stock. Dividends on Omnirel's Preferred
Stock, as well as on Omnirel's and TACTech's Common Stock, are
subject to being declared by their Boards of Directors. Each
company's dividend policy will be reviewed from time to time by
its Board of Directors in light of its earnings and financial
condition and such other business considerations as the Board of
Directors considers pertinent. Furthermore, the Omnirel
Preferred Stock is entitled to its dividend, on a cumulative
27
<PAGE>
basis, before payment of any dividend on the Omnirel Common
Stock. In addition, Omnirel is prohibited under its present
institutional lending agreements from paying dividends on and
from redeeming any capital stock, including both Common Stock and
Preferred Stock.
Omnirel Institutional Loans
Omnirel currently has outstanding to Fleet Bank (the "Bank")
the full amount of its $300,000 revolving line of credit (the
"Revolving Loan") and approximately $1,160,000 on its $1,200,000
equipment line of credit (the "Equipment Loan"). Omnirel is
negotiating to obtain a commitment from the Bank to lend
$2,000,000 to Omnirel upon the Merger being declared effective,
to be secured by a mortgage on Omnirel's real estate (the
"Mortgage Loan"), and to increase the Revolving Loan to $700,000
and the Equipment Loan to $1,800,000. It is anticipated that all
such loans will contain cross-default provisions and restrictions
on the payment of Preferred and Common Stock dividends. One
event of default is the occurrence of any event which gives the
Bank reasonable cause to consider the prospect of timely
repayment to be impaired, even though no specific financial
maintenance covenant has been breached. Any default under the
Revolving Loan, the Equipment Loan or the Mortgage Loan could
have a significant adverse impact on Omnirel and the value of the
Omnirel Common and Preferred Stock. Moreover, to the extent that
existing loans have priority liens on Omnirel's assets, any
additional financing in the future would require subordination to
the various Bank loans and may not be available to Omnirel on
terms as favorable as those for existing financing, or on any
terms acceptable to Omnirel. See "OMNIREL MANAGEMENT'S
---------------------
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
-----------------------------------------------------------------
OPERATIONS - Liquidity" below.
----------
Competition
Although the market for multi-chip power modules and
packaged semiconductor components is fragmented and no single
company maintains a dominant position, it is nevertheless highly
competitive among the five manufacturers (including Omnirel) who
collectively account for approximately 65% of sales to such
market. Omnirel believes that its products and technologies can
compete favorably with the products of its principal competitors.
28
<PAGE>
Nevertheless a few of these competitors have greater financial,
marketing, servicing and research and development resources than
those of Omnirel. There can be no assurance that existing or
potential competitors will not develop and market products that
are superior or perceived to be superior to multi-chip power
modules and other products supplied by Omnirel.
TACTech's license agreements are cancellable on thirty (30)
days' notice. Moreover, approximately 50% of TACTech's
information for its data bases comes from numerous companies in
the private sector. Accordingly, there can be no assurance that
existing arrangements with private suppliers of data will
continue in effect or, if they are canceled, that TACTech will be
able to enter into arrangements with other suppliers on terms as
beneficial to TACTech as those presently in effect. Moreover,
there can be no assurance that other companies, including
existing customers of TACTech, will not avail themselves of
sources of data to develop their own software and data base
services either in competition with TACTech or to enable them to
have their own sources for such services. TACTech's software
services and data bases are protected by trade secret provisions
of license agreements and by copyright laws, but because such
provisions and laws are frequently difficult or costly to
enforce, there can be no assurance that such protection will
prove effective.
Competition could adversely affect Omnirel's or TACTech's
revenues and profitability, and could have a greater effect on
either Omnirel or TACTech alone than it has had to date on the
consolidated operations of Zing. See "BUSINESS OF OMNIREL
---------------------
CORPORATION - Competition" and "BUSINESS OF TRANSITION ANALYSIS
----------- --------------------------------
COMPONENT TECHNOLOGY, INC." below.
--------------------------
Technological Change and New Product Development
In the event of changes in the structure of the computer
hardware systems used by subscribers to operate TACTech's data
base software, TACTech would incur capital costs for new
equipment and development costs for reconfiguring its software
programs, which costs could be substantial and could have an
adverse effect on TACTech's profitability.
29
<PAGE>
THE MERGER
----------
The Parties
Zing Technologies, Inc. a New York corporation with
executive offices at 115 Stevens Avenue, Valhalla, New York
10595, (914) 747-7474, is a holding company with two
subsidiaries, Omnirel and TACTech.
Omnirel is a manufacturer of multi-chip power modules and
semiconductor components, serving the high reliability military
and industrial markets. A power module combines active and
passive components in one package to produce an integrated smart
power electronic module which drives, controls and regulates the
input and output of power in motion control and power supply
applications used in electronic systems and equipment. Omnirel's
products are both standard and custom designed, and are used in
the defense, aerospace, commercial aircraft, medical
instrumentation and industrial controls. Omnirel was organized
as a Massachusetts corporation on July 22, 1985 and acquired by
the Company on June 26, 1991. On _______________, 1995 Omnirel
was reincorporated as a Delaware corporation. See "BUSINESS OF
-----------
OMNIREL CORPORATION."
-------------------
TACTech is an information service company which licenses its
proprietary computer software data bases to segments of the
Department of Defense, defense contractors and manufacturers of
military grade semiconductors. These data bases provide users
with information useful in determining the available sourcing
for, and projected life cycle (obsolescence) of, microcircuits
and discrete semiconductor devices used primarily in the
manufacture of electronic systems for military or aerospace
applications. TACTech is a Delaware corporation organized by
Zing on February 24, 1987. See "BUSINESS OF TRANSITION ANALYSIS
-------------------------------
COMPONENT TECHNOLOGY, INC."
--------------------------
Zing Merger Co., Inc., a New York corporation with executive
offices at 115 Stevens Avenue, Valhalla, New York 10595, (914)
747-7474, is a recently organized corporation wholly owned by the
Major Shareholder. MergerCo has no operating history and was
organized solely for the purpose of effecting the Merger.
30
<PAGE>
The Merger Agreement
Pursuant to the terms of the Merger Agreement, a copy of
which is annexed hereto as Annex I, MergerCo will be merged with
and into the Company at the Effective Time and the Company will
be the Surviving Corporation. At the Effective Time, each Zing
Share held by Zing Public Shareholders will be converted into the
following:
(i) the right to receive the Cash Payment of $1.25 per
Share, which represents the pro rata right to receive all
available cash of Zing at the Effective Time, except for the
Initial Contribution which will be retained by Zing to discharge
pre-Effective Time liabilities, including the fair value of
Dissenting Shareholders' Zing Shares and tax obligations, and
will constitute part of the Deferred Payment Fund;
(ii) the right to receive, on a pro rata basis,
contingent distributions of cash from the Deferred Payment Fund;
(iii) the right to receive one share of Omnirel
Common Stock;
(iv) the right to receive one of Omnirel Preferred
Stock; and
(v) the right to receive one-fourth of a share (one
share for every four Zing Shares) of TACTech Common Stock.
All Cash Payments and all cash distributions made pursuant
to the Deferred Payment Right are to be made without interest.
All Dissenting Shareholders who properly perfect appraisal rights
under Section 623 of the BCL will be entitled to receive fair
value therefor as determined under Section 623. See "APPRAISAL
---------
RIGHTS OF DISSENTING SHAREHOLDERS." Following the Merger the
----------------------------------
sole shareholder of the Surviving Corporation will be the Major
Shareholder and approximately 38.93% of Omnirel Common Stock,
45.54% of Omnirel Preferred Stock and 40.98% of TACTech Common
Stock will be held by the Surviving Corporation (assuming no
shareholders exercise appraisal rights).
In addition to shareholder approval of the Merger Agreement,
the Closing of the Merger (as hereinafter defined) is subject to
a number of conditions precedent. These include the following:
the SEC shall have declared the Omnirel Registration Statement
and the TACTech Registration Statement effective; no material
adverse change in the condition of the Company shall have
31
<PAGE>
occurred; Omnirel shall not be in default of any of its
obligations with respect to the Bank Loans; and the fair value of
Shares tendered by Dissenting Shareholders, if any, shall not
exceed $250,000. The Merger Agreement may also be terminated by
the Company or by MergerCo for various reasons (see "THE MERGER -
----------
Termination of the Merger Agreement").
Effective Time of the Merger
The Merger will become effective at the time a Certificate
of Merger is filed with the Secretary of State of the State of
New York. The Certificate of Merger will be filed on or as soon
as practicable after the Closing. It currently is expected that
the Closing will occur on the day of approval of the Merger
Agreement at the Annual Meeting.
Effects of the Merger
At the Effective Time, each Zing Share will be converted
into the right to receive the Merger Consideration and MergerCo
will be merged with and into the Company, whereupon the separate
corporate existence of MergerCo will cease. The Major
Shareholder will be issued one hundred (100) Shares of the
Surviving Corporation in exchange for the cancellation of all
issued and outstanding shares of stock of MergerCo, whereupon the
Major Shareholder will be the sole shareholder of the Surviving
Corporation. Shares of Zing Common Stock will be delisted from
the NASDAQ-NMS and public trading in shares of Zing Common Stock
will cease. In addition, at the Effective Time public trading of
the Omnirel Common and Preferred Stock will commence on the
NASDAQ-NMS and the OTC market, respectively, and public trading
of the TACTech Common Stock will commence in the OTC market.
Vote Required
The BCL requires, and the Merger Agreement provides, that
the Merger is subject to approval by the vote of a two-thirds
majority of the issued and outstanding shares of Zing Common
Stock entitled to vote thereon. The Major Shareholder, through
MergerCo, holds approximately 45.54% of such shares and intends
to vote for approval of the Merger Agreement.
32
<PAGE>
Termination of the Merger Agreement
Either the Company or MergerCo may terminate the Merger
Agreement in the event the other has committed a material breach
of the Merger Agreement or failed to perform a material covenant
thereunder. In addition, either party may terminate the Merger
Agreement if, for any reason, a condition cannot be satisfied and
is not waived or the Merger has not been consummated before
August 31, 1995. If the Company's shareholders fail to approve
the Merger, or the Merger is not consummated for any other reason
not the fault of MergerCo, the Merger Agreement will terminate
and MergerCo will be entitled to reimbursement of all fees, costs
and expenses incurred in connection with the Merger in an
aggregate amount not to exceed $250,000. The Company may
terminate the Merger Agreement, at its option and without any
liability whatsoever to MergerCo, if the fair value of Zing
Common Stock as reflected by the market price will result in the
Company's being obligated, as determined by its Board of
Directors, to pay taxes upon the Merger in an amount which would
outweigh the benefits of proceeding. MergerCo may terminate the
Merger Agreement if the fair value of Shares tendered by
Dissenting Shareholders, if any, exceeds $250,000, based upon the
number of Zing Shares tendered by Dissenting Shareholders and the
market value of such Shares determined on the day before the
Annual Meeting. In addition to the foregoing, the Closing of the
Merger is subject to further conditions precedent: the SEC shall
have declared the Omnirel and TACTech Registration Statements
effective; no material adverse change in the condition of the
Company shall have occurred prior to the Closing; and Omnirel
shall be in compliance with all of its obligations with respect
to the Bank Loans.
Treatment of Zing Options and Warrants
As of the date of this Proxy Statement/Prospectus the
Company has no outstanding options or other rights to acquire
Zing Common Stock except for outstanding warrants to purchase an
aggregate of 139,331 shares of Zing Common Stock at a price of
$1.34 per share (the "Warrants"). All such Warrants are
currently exercisable and expire on November 1, 1997. The
Warrant holders have received, or shortly will receive, notice of
the proposed Merger and the request that all Warrants be
exercised prior to the Effective Time or conditional upon the
Merger becoming effective. Any shares of Zing Common Stock
acquired upon exercise of a Warrant shall be deemed to be Zing
33
<PAGE>
Shares for purposes of the Merger Agreement. In the event that
the aggregate value of the Merger Consideration per Share is less
than the Warrant exercise price of $1.34, the Company believes no
Warrants will be exercised. The Company expects that all
Warrants will be exercised prior to the Merger. If any Warrant
is exercised after the Effective Time, including payment of the
exercise price of $1.34 for each such Warrant, the holder thereof
shall not be entitled to receive any shares of Zing Common Stock,
but shall be entitled to receive the same pro rata shares of
Merger Consideration as he would have received if he had
exercised such Warrant prior to the Effective Time.
Purpose and Reason for the Merger
Management of the Company believes that the value of Omnirel
Preferred and Common Stock and TACTech Common Stock, trading
separately in the public market, will exceed the market value of
the companies as represented by Zing Common Stock, because the
Merger will enable investors to evaluate better the financial
performance of each company, enhancing the likelihood that each
company will achieve appropriate market recognition and increase
over time the value of an investment in each of the respective
companies. In addition, the Merger will enable Omnirel and
TACTech more easily to obtain equity financing in the future and
to use their stock to make acquisitions. The Merger will also
provide the management of Omnirel and TACTech with an incentive
to increase the market value of their companies while
simultaneously imposing direct accountability to public investors
for their management policies and financial results.
As a result of the Merger, the Major Shareholder will retain
his pro rata interest in the assets of Zing through continued
ownership of the Surviving Corporation, rather than through a pro
rata distribution of assets upon the liquidation of Zing. The
Merger thus will allow the Major Shareholder to avoid potential
adverse tax consequences which would arise from his receiving
upon liquidation his pro rata share of the Merger Consideration,
including large blocks of illiquid stock in Omnirel and TACTech
in which he would have a low basis for tax purposes and which
stock could not be sold in the public market without
significantly depressing prices. The Merger will also allow the
Major Shareholder, and each of the Zing Public Shareholders, to
34
<PAGE>
independently control, or receive, respectively, his pro rata
share of Zing's cash.
Shareholder Differences Resulting from the Merger
As a result of the Merger, the Major Shareholder will
continue to own through the Surviving Corporation his pro rata
share of Zing's assets without any tax consequence to the Major
Shareholder caused by the Merger (other than indirectly bearing
his pro rata share of taxes payable by Zing arising from the
Merger) whereas the Zing Public Shareholders will receive their
Merger Consideration as a taxable distribution from Zing in
payment for the Shares exchanged, which is expected to result in
recognition of gain or loss on the difference between (a) the
cash and fair market value of the other Merger Consideration
received by a Zing Public Shareholder, and (b) such holder's tax
basis in the Shares surrendered. See also, "THE MERGER - Purpose
----------
and Reason for the Merger" and "CERTAIN FEDERAL INCOME TAX
----------------------------
CONSEQUENCES OF THE MERGER".
--------------------------
As a result of the Merger, each Share held by Zing Public
Shareholders will be converted into the right to receive a pro
rata share of substantially all of Zing's assets, comprised of
the Cash Payment, a Deferred Payment Right, one share of Omnirel
Common Stock (resulting in the Zing Public Shareholders owning
approximately 46.57% of the outstanding shares of such security),
one share of Omnirel Preferred Stock (resulting in the Zing
Public Shareholders owning approximately 54.46% of the
outstanding shares of such security), and one-fourth of a share
(one share for every four Zing Shares) of TACTech Common Stock
(resulting in the Zing Public Shareholders owning approximately
49.02% of the outstanding shares of such security). After the
Merger, Zing Public Shareholders (other than Dissenting
Shareholders) will no longer have any rights respecting or
interest in the Company except for their Deferred Payment Rights
and after they have received all distributions due to them
pursuant to their Deferred Payment Rights they will no longer
have any rights respecting, or interest in, the Company. After
the Merger, the Major Shareholder will be the sole owner of the
Surviving Corporation, which will own approximately 38.93% of the
outstanding Omnirel Common Stock, 45.54% of the outstanding
Omnirel Preferred Stock and 40.98% of the outstanding TACTech
Common Stock.
35
<PAGE>
The shares of Omnirel Common and Preferred Stock and TACTech
Common Stock issued to the former holders of Zing Shares will
trade separately in the public markets. Each share of Omnirel
Common Stock and each share of TACTech Common Stock will entitle
the holder thereof to one vote upon all matters as to which
holders of common stock are entitled to vote under the laws of
the State of Delaware. Upon a change in control of Omnirel,
however, the holders of Omnirel Preferred Stock, voting as a
class, shall have the right to elect two directors to Omnirel's
Board of Directors. Moreover, any dividends and liquidation
rights with respect to Omnirel Common Stock will be subordinate
to dividend and liquidation preferences of the Omnirel Preferred
Stock. In the event of the redemption of the Omnirel Preferred
Stock, however, shareholders of Omnirel and TACTech will have the
same pro rata interest, respectively, in the assets of Omnirel
and TACTech as they did before the Merger, as shareholders of
Zing and proportionately the same voting rights with respect to
both companies. See "DESCRIPTION OF OMNIREL CAPITAL STOCK -
--------------------------------------
Omnirel Common Stock" and "DESCRIPTION OF TACTECH CAPITAL STOCK -
------------------------------------
TACTech Common Stock."
The Company is unable to transfer to the Zing Public
Shareholders their pro rata interest in the net operating loss of
the Company of approximately $1,200,000 for Federal income tax
purposes as at June 30, 1994 (the "NOL"). The Company believes
that such NOL is likely to be substantially or completely
utilized against the consolidated taxable income of the Company,
including taxable income resulting from the Merger and as a
result of application against some or all of the Arrow Sale
Proceeds which the Company may receive. To the extent that the
NOL is utilized for such purposes, the Zing Public Shareholders
and the Major Shareholder will equally, on a pro rata basis,
benefit therefrom. To the extent of the remaining NOL, if any,
after application as aforesaid, one hundred percent (100%) of
such remaining benefit will accrue to the Major Shareholder,
whereas prior to the Merger only 45.54% of such remaining benefit
would have accrued to him.
The Company feels that the fair market value of the amount
of this possible remaining disproportionate benefit to the Major
Shareholder, in view of the various contingencies which must
materialize for him to realize such disproportionate benefit, is
36
<PAGE>
not significant. Moreover, if any pre-Effective Time liabilities
should be asserted after distribution of the amounts funding the
Deferred Payment Right, or if such liabilities should exceed the
amount of such fund, such liabilities (or such excess) would be
the sole obligation of the Surviving Corporation and therefore
would be borne entirely by the Major Shareholder.
Cash Payment
The Cash Payment, expected to be in the amount of $1.25 per
Share, will be made from and will represent substantially all of
Zing's cash on hand as of the Effective Time, in excess of the
amount of the Initial Contribution. A substantial portion of
such cash on hand will be the result of the repayment as of the
Effective Time by Omnirel to Zing of approximately $2,000,000 of
the principal amount of the Zing Loan. The funding for such
$2,000,000 repayment by Omnirel is expected to be provided upon
the closing of the $2,000,000 Omnirel Mortgage Loan. If such
closing does not occur or if the Mortgage Loan is for
substantially less than $2,000,000, then Zing's Board of
Directors may reduce the amount of the Cash Payment to less than
$1.25 per Share. The Cash Payment will be made on or about
_______________, 1995 to those persons who are holders of record
of certificates representing Zing Shares which are surrendered
pursuant to the Merger.
Deferred Payment Right
In addition to the Initial Contribution, it is anticipated
that funds for the Deferred Payment Right will be provided by the
following: (i) repayment to the Surviving Corporation of certain
loans, the largest of which is a $250,000 loan to Omnirel payable
on or before December 31, 1998 (see "DIRECTORS AND MANAGEMENT OF
---------------------------
ZING - Employment Contracts, Termination of Employment and
----
Change-in-Control Arrangements"); (ii) interest earned on the
account to be established for the Deferred Payment Fund; (iii)
the Arrow Sale Proceeds; and (iv) payments to Zing under a tax
sharing agreement with Omnirel and TACTech.
The foregoing funds will be used to pay tax and other
liabilities and reasonable expenses resulting from or
attributable to Zing or its business prior to the Effective Time
or incurred in administration of the funds constituting the
Initial Contribution or the Deferred Payment Fund, including the
37
<PAGE>
corporate tax payable as a result of the Merger and taxes on the
Arrow Sale Proceeds, as well as the fair value of Dissenting
Shareholders' Zing Shares. To the extent the aggregate amount of
such liabilities and expenses exceeds the amount of the Deferred
Payment Fund and the NOL benefits available to offset any such
tax liabilities, or other liabilities are discovered after
distribution of the Deferred Payment Fund, such liabilities will
be borne solely by the Surviving Corporation and not by the Zing
Public Shareholders.
The Initial Contribution and any further payments made to
the Deferred Payment Fund will be invested by the Board of
Directors of the Surviving Corporation in any one or more of the
following: (i) direct obligations of the United States of
America, or any agency thereof, or obligations guaranteed by the
United States of America, provided that such obligations mature
within ninety (90) days from the date of acquisition thereof;
(ii) certificates of deposit maturing within ninety (90) days
from the date of acquisition, in each case issued by, created by,
or maintained with a bank or trust company organized under the
laws of the United States or any state thereof having capital and
surplus aggregating at least $250,000,000 (an "Eligible Bank");
and/or (iii) money market accounts or interest bearing accounts
with an Eligible Bank (collectively, the "Approved Investments").
The Surviving Corporation will maintain the Deferred Payment
Fund at an Eligible Bank selected by Zing. The Deferred Payment
Fund (including the Initial Contribution) will be invested only
in Approved Investments. All funds constituting the Deferred
Payment Fund will be maintained by the Surviving Corporation and
will be subject to claims for both pre-Effective Time liabilities
of Zing and post-Effective Time liabilities of the Surviving
Corporation.
The Deferred Payment Fund will be liquidated and the final
payment made to Zing Public Shareholders on or about December 31,
1999 (the "Liquidating Distribution"), unless at that time there
is an ongoing tax audit or litigation which could affect such
Fund. In such event, the Deferred Payment Fund will be
distributed upon final resolution of such audit or litigation.
The Surviving Corporation may, at its option, determine to make
one or more distributions prior thereto. Any monies remaining in
the Deferred Payment Fund after the Liquidating Distribution
38
<PAGE>
which are unclaimed by and due to any Zing Public Shareholder
shall be held by the Surviving Corporation until such date as is
one day before such monies would otherwise escheat to the state
of domicile of such Zing Public Shareholder, at which time such
monies shall become the sole and exclusive property of the
Surviving Corporation, free and clear of any claims whatsoever.
Payments from the Deferred Payment Fund will be made to
those persons who are holders of record of certificates
representing Zing Shares which are surrendered pursuant to the
Merger. The Deferred Payment Right is not assignable or
transferable and, except as a result of death or by operation of
law, payment thereof will be made only to such holders of record.
Paying Agent
It is anticipated that the Company's transfer agent and
registrar will act as the paying agent for distribution to the
Zing Public Shareholders of the Cash Payment and Deferred Payment
Right monies. On or about the Effective Time, Zing shall
transmit to the paying agent sufficient funds for it to disburse
the Cash Payment to the Zing Public Shareholders. When and as
distributions of the Deferred Payment Fund are to be made to the
Zing Public Shareholders, the Surviving Corporation shall
transmit the necessary funds to the paying agent. The Company's
transfer agent and registrar is Mellon Securities Trust Company,
New York, New York.
Accounting Treatment of the Merger
As a result of the Merger, MergerCo will be merged with and
into the Company. MergerCo had no operations prior to the Merger
and was formed solely to accomplish the Merger. There will be no
effect on the consolidated financial statements of Zing for the
prior audited periods nor for the unaudited six months ended
December 31, 1994.
39
<PAGE>
Price of Zing Common Stock; Dividends
On March 28, 1995, the last full trading day for Zing Common
Stock before the Company announced the vote of the Board of
Directors to adopt the Merger Agreement, the high and low sales
price was $_______ and $_______, respectively, on the NASDAQ-NMS.
No cash dividends have been paid or declared on the Zing Common
Stock during the five fiscal years ending June 30, 1994 and the
six months ended December 31, 1994. The policy of the Company
has been to retain earnings to provide funds for operations and
expansion of its business.
Federal and State Regulatory Requirements
The shares of Omnirel Common and Preferred Stock and the
shares of TACTech Common Stock (collectively, the "Merger
Securities") must be registered by Omnirel and TACTech,
respectively, with the SEC pursuant to the Securities Act.
Registration Statements on Form S-4 for the Omnirel Common and
Preferred Stock and on Form S-4 for the TACTech Common Stock have
been filed with the SEC, and such Registration Statements must be
declared effective by the SEC before the Merger Securities may be
offered to holders of Zing Shares in connection with the Merger.
In addition, the Merger Securities must be qualified for offering
under the "Blue Sky" laws of all the states in which holders of
Zing Shares reside. Registration with the SEC and qualification
with various state securities commissions are conditions
precedent to consummation of the Merger.
Surrender of Certificates
As soon as practicable after the Effective Time, a letter of
transmittal will be mailed to each holder of record of
certificates representing Zing Shares, advising each such holder
of the procedure for surrendering such certificates in exchange
for the Merger Consideration. STOCK CERTIFICATES SHOULD NOT BE
SURRENDERED UNTIL SUCH LETTER OF TRANSMITTAL AND INSTRUCTIONS
HAVE BEEN RECEIVED.
If the certificate or certificates of any holder of Zing
Shares are not surrendered to the paying agent or the Surviving
Corporation prior to one day before the Merger Consideration
40
<PAGE>
exchangeable therefor would otherwise escheat to the state of
domicile of such holder, he shall be deemed to have waived his
right to surrender his certificate or certificates for such
Merger Consideration, which shall thereupon become the sole and
exclusive property of the Surviving Corporation, free and clear
of any claims whatsoever.
41
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
-----------------------------------------------------
The following is a general discussion of certain of the U.S.
Federal income tax consequences of the Merger. It is based upon
laws, regulations, rulings and decisions now in effect, all of
which are subject to change either prospectively or
retroactively. No rulings as to any of the matters discussed in
this summary have been requested or received from the Internal
Revenue Service (the "Service"). Each shareholder is urged to
consult and rely on his own tax advisor with respect to the tax
consequences to him of the Merger. This summary does not discuss
any aspects of state, local, foreign or other tax laws, nor the
special tax rules which can apply to certain types of
shareholders (such as insurance companies, tax-exempt
organizations, financial institutions, broker-dealers, and
shareholders who have acquired their shares upon the exercise of
options or otherwise as compensation).
Tax Effects to Shareholders
A Zing Public Shareholder's relinquishment of all of his
Shares in exchange for cash and the other Merger Consideration
pursuant to the Merger will be a taxable "redemption" transaction
for Federal income tax purposes under Section 317 the Internal
Revenue Code of 1986 as amended (the "Code"). If the redemption
qualifies under any of the provisions of Code Section 302(b), as
described below, the cash and other Merger Consideration
(including the fair market value of the Deferred Payment Right)
received pursuant to the Merger will be treated as a distribution
from Zing in payment for the Shares exchanged. Such treatment
will result in a holder recognizing gain or loss equal to the
difference between (a) the cash and the fair market value of the
other Merger Consideration received by the holder pursuant to the
Merger, and (b) the holder's tax basis in the Shares surrendered.
Assuming the Shares are held as a capital asset, such recognized
gain or loss will be capital gain or loss. If the Shares were
held longer than one year, such capital gain or loss will be
long-term.
Net capital gain, the excess of net long-term capital gain
over short-term capital loss realized by individuals, is
currently taxed at a maximum Federal income tax rate of 28%.
Short-term capital gains of individuals are taxed at ordinary
income rates, currently at a maximum Federal income tax rate of
39.6%. Capital gains of corporations are taxed at the Federal
income tax rates applicable to corporate ordinary income, a
maximum of 35%.
42
<PAGE>
Under Code Section 302(b), a redemption will be taxed as a
sale or exchange by the redeeming holder, and not as a
distribution (which may be wholly or partially treated as a
dividend, as described below), if the redemption (a) is "not
essentially equivalent to a dividend" with respect to a holder;
(b) is "substantially disproportionate" with respect to a holder;
(c) results in a "complete redemption" of all of the Shares owned
by a holder; or (d) is a redemption in "partial liquidation" of
the corporation from a shareholder that is not a corporation.
All of these provisions require that the holder's shareholdings
in the redeeming corporation be meaningfully reduced. In making
such determination, a holder must take into account not only
Shares actually owned by him but also Shares that are considered
to be "constructively" owned by him by virtue of stock ownership
attribution rules of Section 318 of the Code. Under Section 318,
a holder is considered to own constructively Shares owned by
certain of his family members, by entities in which the holder
has an interest, and Shares that such stockholder has the right
to acquire by exercise of an option or by conversion of
convertible securities.
If none of the provisions under Code Section 302(b) is
satisfied, a holder will be treated as having received a
distribution from Zing in an amount equal to the Cash
Distribution plus the fair market value of the other Merger
Consideration received pursuant to the Merger. The amount of
this distribution will be characterized: first, as a dividend to
the extent of Zing's current or accumulated earnings and profits
(including earnings and profits generated by virtue of the
distribution, discussed below); next, as a non-taxable return to
each holder up to the amount of his basis in the Shares
surrendered; finally, any excess distribution as a capital gain
(either long-term or short-term depending upon the holder's
holding period for the Shares). That portion of the distribution
treated as a dividend would be subject to Federal income tax at
ordinary income rates of up to 39.6% for individuals, and of up
to 35% for corporations.
43
<PAGE>
Under the terms of the Merger, each Zing Public Shareholder
will be receiving the Cash Distribution plus the other Merger
Consideration from Zing in complete redemption of all of such
shareholder's Shares. Therefore, it is expected that the
redemption will be treated as a "sale or exchange" within the
meaning of Code Section 302(b) as a complete redemption of each
Zing Public Shareholder's interest in Zing. The shares of Zing
owned by the Major Shareholder, indirectly through MergerCo, will
not be redeemed in the Merger and, therefore, the Merger will not
be taxable to the Major Shareholder.
Because the Zing Common Stock is publicly traded on an
established securities market, Code Section 453(k)(2)(A) will
prevent a shareholder from reporting his gain on the exchange of
his Zing Shares for the Merger Consideration on the installment
method. Therefore, the fair market value of a Deferred Payment
Right, calculated as of the Effective Time, is included in a
shareholder's amount realized for purposes of calculating his
gain or loss on the Merger in the tax year in which the Effective
Date occurs. The fair market value (if any) of a Deferred
Payment Right is determined by subtracting from the fair market
value of a Shareholder's Zing Shares surrendered in the Merger
the amount of the cash and the fair market values of the other
Merger Consideration he receives. Accordingly, if and to the
extent that a Deferred Payment Right has a fair market value on
the Effective Time, a shareholder may be taxed on his receipt of
a Deferred Payment Right for the tax year in which the Effective
Date occurs, even though his receipt of cash (if any) associated
with such Deferred Payment Right may not occur until several
years in the future. Any excess in the amount actually paid with
respect to a Deferred Payment Right, over such initial fair
market value, will be characterized as ordinary income to the
recipient when received.
Recognition of Gain or Loss to Zing on Distribution
Code Section 311(b) provides that if a corporation
distributes property having a fair market value in excess of the
corporation's tax basis in such property, whether as a dividend
or in redemption of its stock, the corporation will recognize
gain on such distribution as though it sold the distributed
property for its fair market value. However, if the corporation
distributes property having a fair market value which is less
than the amount of such property's tax basis, such loss will not
be recognized; if multiple properties are distributed, loss on
any distributed property will not be netted against the gain on
other distributed properties.
44
<PAGE>
The distribution of the TACTech and Omnirel shares pursuant
to the Merger will not qualify as a so-called tax-free "spin-off"
under Code Section 355 for a number of reasons - including,
principally, that Omnirel was acquired by Zing in June of 1991
and so does not have the requisite 5-year business history
required by Code Section 355(b)(2). If the Merger were postponed
until after June of 1996, and were otherwise restructured at that
time so as to comply with all the other requirements of Code
Section 355, then in general (i) the Company would not be
required to recognize gain on the distribution of at least an 80%
ownership interest in Omnirel and/or TACTech, (ii) a shareholder
would not be required to recognize gain or loss on the receipt of
such distributed Omnirel and/or TACTech stock in exchange for his
Zing Shares, but would be required to recognize any gain to the
extent of any other property received from Zing in the
distribution. Postponing such a transaction to 1996 would also
permit greater utilization of Zing's NOL to offset Zing, Omnirel
and TACTech taxable income, if any, through such time, inasmuch
as the currently contemplated Merger both consumes Zing's NOL and
brings into play the NOL limitation rules of Code Section 382, as
described below.
However, qualification of the transaction under Code Section
355, even if restructured and postponed until after June of 1996,
could by no means be assured even then, principally because of
uncertainties as to whether the Service would agree that such a
transaction were necessary to accomplish a corporate business
purpose which could not be accomplished by any other means (a
pre-requisite to Code Section 355 treatment).
Net Operating Loss Carryforwards of Zing
Code Section 382(a) limits a corporation's use of its own
NOL and NOL carryforwards following an ownership change. An
ownership change includes an equity shift in which one or more
"5-percent shareholders" increase their ownership in the
corporation by 50 percentage points over the lowest amount of
stock that they held during the preceding three-year testing
period. An equity shift includes any transaction (including a
redemption) which results in a change in the respective ownership
of a loss corporation. The change in the Company's ownership
pursuant to the Merger will be significant enough to cause the
Section 382 limitation to apply to the Company. Such limitation
will restrict utilization of the Company's pre-Merger NOL
45
<PAGE>
carryforwards (to the extent not consumed by gain recognized by
the Company on the distribution of the Merger Consideration, as
described above) in taxable years after the Merger to an amount
per year generally equal to (i) the fair market value of the
Company immediately after the Merger, multiplied by (ii) the
long-term tax-exempt rate as announced by the Service for the
calendar month in which the Merger takes place (currently 6.21%).
The amount of the Section 382 annual limitation amount is also,
subject to certain thresholds, increased (or decreased, as the
case may be) by any net unrealized built-in gain (or any net
unrealized built-in loss) recognized by the Company during the
five-year period after the Merger.
Backup Withholding
A tendering shareholder who fails to complete fully and sign
the substitute Form W-9 included in the letter of transmittal may
be subject to backup Federal income tax withholding equal to 31%
of the gross payments made pursuant to the Merger.
Foreign Stockholders
The paying agent will withhold Federal income taxes equal to
30% of the gross payments payable to a foreign stockholder or his
agent unless the paying agent determines that a reduced rate of
withholding is available pursuant to a tax treaty, or some other
exemption from withholding is applicable. Availability of such
reduced rate of, or exemption from, withholding depends upon a
foreign holder delivering a properly completed Form 1001 (for
withholding reductions or exemptions claimed under a treaty) or
Form 4224 (for exemption claimed on the grounds that the gross
proceeds are effectively connected with the conduct of a foreign
holder's trade or business within the United States). Upon the
filing of his own individual U.S. income tax return for the year
of the Merger, a foreign holder may be eligible to obtain a
refund of tax withheld if the redemption of such holder's Shares
constitutes a "sale or exchange" of his Shares under the Code
Section 302(b) rules described above, or is otherwise able to
establish that no tax or a reduced amount of tax was due. Backup
withholding will generally not apply to amounts subject to the
30% or treaty-reduced rate of withholding.
46
<PAGE>
APPRAISAL RIGHTS OF DISSENTING SHAREHOLDERS
-------------------------------------------
Any shareholder of the Company who dissents from the Merger
and perfects his rights in the manner provided under Section 623
of the BCL may elect to receive a cash payment equal to the fair
value of his Zing Shares in the event that the Merger is
effected. Such fair value is to be determined as of the day
prior to the date of the vote by the Company's shareholders on
the Merger Agreement.
In order to receive such cash payment, a Dissenting
Shareholder must comply with the procedures specified by Section
623, which is set forth in its entirety in Annex II to this Proxy
Statement/Prospectus. The following summary of the principal
provisions of Section 623 is qualified in its entirety by
reference to the complete text of Section 623. Further, the
following discussion is subject to the fact that the Company may
abandon the Merger if the fair value of Shares tendered by
Dissenting Shareholders exceeds $250,000. If the Company were to
abandon the Merger, the rights of Dissenting Shareholders would
terminate and such dissenters would be reinstated to all of their
rights as shareholders of the Company.
Any shareholder of the Company who intends to enforce his
right to receive a cash payment for his Zing Shares must (i) file
with the Company, before the Annual Meeting or at such Meeting
but before a vote is taken on the Merger Agreement, a written
objection to the Merger stating, among other things, that the
shareholder intends to demand payment for his Shares if the
Merger is consummated and (ii) not vote his Shares in favor of
the Merger Agreement.
A VOTE AGAINST THE MERGER WILL NOT CONSTITUTE THE WRITTEN
OBJECTION REQUIRED BY SECTION 623. A FAILURE TO VOTE AGAINST THE
MERGER AGREEMENT DOES NOT WAIVE A DISSENTING SHAREHOLDER'S RIGHTS
IF THE REQUIRED WRITTEN OBJECTION HAS BEEN DULY FILED. A VOTE IN
FAVOR OF THE MERGER AGREEMENT WILL RESULT IN THE FORFEITURE OF
DISSENTERS' RIGHTS.
47
<PAGE>
COMMUNICATIONS WITH RESPECT TO DISSENTERS' RIGHTS SHOULD BE
ADDRESSED TO DEBORAH J. SCHRADER, SECRETARY, ZING TECHNOLOGIES,
INC., 115 STEVENS AVENUE, VALHALLA, NEW YORK 10595.
If the Merger Agreement is approved by the Company's
shareholders, the Company will, within 10 days after the Annual
Meeting, give written notice of such approval by registered mail
to each shareholder who filed written objection to, and did not
vote for, the Merger Agreement. Within twenty (20) days after the
giving of such notice, any shareholder who was entitled to notice
and who elects to dissent must file with the Company a written
notice of such election, stating his name and residence address,
the number of Zing Shares which he owns and as to which he
dissents, and a demand for payment of the fair value of his
Shares. Such notice of election should be directed to Deborah J.
Schrader, at the address set forth above.
A SHAREHOLDER WHO ELECTS TO DISSENT MUST DISSENT AS TO ALL
THE SHARES THAT HE OWNS BENEFICIALLY.
Upon filing a notice of election to dissent, a Dissenting
Shareholder will cease to have any of the rights of a shareholder
except the right to be paid the fair value of his Zing Shares
pursuant to Section 623. A notice of election may be withdrawn
by the shareholder without the Company's consent at any time
before an offer is made by the Company to pay for his Shares (as
discussed below). Once the Company has made such an offer, a
shareholder may withdraw his notice of election to dissent only
with the written consent of the Company. At the time of, or
within one month after, the filing of his notice of election to
dissent, the shareholder must submit the certificates evidencing
his Shares to the Company's transfer agent, Mellon Securities
Trust Company, 120 Broadway, 33rd Floor, New York, NY 10271, for
notation thereon that a notice of election to dissent has been
filed. The certificates will then be returned to the
shareholder. Any Dissenting Shareholder who fails to submit any
of his certificates for notation shall, at the option of the
Company (exercised by written notice to him within 45 days after
the date of filing of his notice of election to dissent), lose
his dissenting rights unless a court, for good cause, otherwise
directs.
48
<PAGE>
If a shareholder loses his dissenters' right, either by
withdrawal of his notice of election, abandonment of the Merger
Agreement by the Company or otherwise, he shall not have the
right to receive a cash payment for his Shares as a dissenter and
shall be reinstated to all of his rights as a shareholder as they
existed at the time of the filing of his notice of election to
dissent.
Within fifteen (15) days after the expiration of the period
in which a shareholder may file his notice of election to
dissent, or within fifteen (15) days after the Effective Time,
whichever is later (but not later than ninety (90) days after the
Annual Meeting), the Company is required to make a written offer
by registered mail to each shareholder who has filed a notice of
election to purchase his Zing Shares at a specified price which
the Company considers to be their fair value, accompanied by an
advance payment to each Dissenting Shareholder who has
surrendered certificates(s) for all of his Zing Common Stock of
an amount equal to eighty percent (80%) of such offer or a
statement to each Dissenting Shareholder who has not surrendered
such certificate(s) that promptly upon submission of such
certificate(s) an advance payment in the amount of eighty percent
(80%) of such offer will be made to him. Such offer shall be
accompanied by a statement setting forth the aggregate number of
Shares and shareholders as to which notices of election to
dissent have been received. As stated above, however, the
Company reserves the right to abandon the Merger. Further, if
the Merger has not been consummated within ninety (90) days after
the Annual Meeting, such offer may be made contingent upon the
consummation thereof. The offer must be made at the same price
per Share to all Dissenting Shareholders and must be accompanied
by certain financial information about the Company. If, within
thirty (30) days after the making of such offer, the Company and
the Dissenting Shareholder agree as to the price to be paid for
his Zing Shares, payment must be made within sixty (60) days
after the later of the making of such offer or the consummation
of the Merger.
In the event that the Company fails to make an offer within
the aforementioned fifteen (15) day period or if the Company and
any Dissenting Shareholder fail to agree upon the price to be
paid for his Zing Shares within the aforementioned thirty (30)
day period, within twenty (20) days after the expiration of the
applicable period, the Company is required (if it has not
49
<PAGE>
abandoned the Merger) to institute a special proceeding in the
New York State Supreme Court in Westchester County to determine
the rights of the Dissenting Shareholders and to fix the fair
value of their Shares. If the Company fails to institute the
proceeding, any Dissenting Shareholder may institute such
proceeding not later than thirty (30) days after the expiration
of the twenty (20) day period within which the Company was
required to institute such proceeding. If no Dissenting
Shareholder timely institutes the special proceeding, all
dissenters' rights will be lost, unless a court, for good cause,
directs otherwise. All Dissenting Shareholders, except those who
have agreed on the price to be paid for their Shares, are
required to be made parties to such a proceeding.
In any such proceeding, the court, without a jury and
without referral to an appraiser, will fix the value of the
Shares as of the day prior to the date the Company's shareholders
voted on the Merger Agreement. Each party to such a proceeding
shall bear its own costs, expenses and fees, except that the
court may apportion all or any part of such costs, expenses and
fees to any shareholder whom it finds to have been not acting in
good faith in refusing an offer. The court may apportion all or
any part of the costs, expenses or fees incurred by any or all
shareholders who are a party to the proceedings if the court
finds that the fair value materially exceeds the amount the
Company offered to pay, the Company did not make the required
advance payment, failed timely to institute the special
proceeding referred to above or that the Company's failure to
comply with its obligations under Section 623 was not in good
faith. Subject to the Company's right to abandon the Merger,
within sixty (60) days after final determination of the
proceeding and upon a Dissenting Shareholder's surrender of the
certificates representing his Shares, the Company will pay to
each Dissenting Shareholder from the Initial Contribution the
amount found to be due him, plus interest thereon (at a rate
determined by the court to be equitable) from the date of the
Annual Meeting, except that no interest will be paid to a
Dissenting Shareholder if the court finds that he did not act in
good faith in refusing the Company's offer.
50
<PAGE>
CERTAIN TRANSACTIONS AMONG ZING, OMNIREL AND TACTECH
----------------------------------------------------
Zing and Omnirel have entered into an agreement dated as of
March 29, 1995 (the "Subscription Agreement"), pursuant to which
upon approval of the Merger Agreement, the Omnirel Preferred
Stock constituting part of the Merger Consideration will be
distributed by or on behalf of the Company pro rata to Zing
Public Shareholders. See "DESCRIPTION OF OMNIREL CAPITAL STOCK -
------------------------------------
Omnirel Preferred Stock."
Zing, Omnirel and TACTech have entered into a tax sharing
agreement which requires Omnirel and TACTech to reimburse Zing
for their pro rata share of income taxes paid by Zing, on a
consolidated basis, for the tax year which includes the Effective
Time.
51
<PAGE>
ZING TECHNOLOGIES, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE><CAPTION>
Nine Months Year Six Months
Ended Ended Ended
Year Ended September 30, June 30, June 30, December 31,
------------------------------- ----------- ---------- -------------
1990 1991 1992 1993(6) 1994 1993 1994
---------------------------------------------------------------------------
(000's omitted, except per share data)
---------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Gross revenues $94,933 $96,445 $91,698 $52,602 $ 11,483 $5,444 $6,954
Cost of goods sold 73,415 73,822 70,439 40,624 6,637 2,966 4,147
-------- ------- ------- -------- -------- ------- -------
Gross profit 21,518 22,623 21,259 11,978 4,846 2,478 2,807
Selling, general and administrative expenses(1) 19,514 21,130 21,238 13,967 5,255 2,734 2,849
Interest expense(2) 2,151 1,857 2,397 1,443 286 244 67
Interest and other income - net(3) -- -- -- -- (860) 512 526
Income (loss) before income taxes and extraordinary
item (147) (364) (2,376) (3,432) 165 12 417
Provision (credit) for income taxes (53) (64) (215) 36 3 -- 6
-------- ------ ------- ------- ------- -- --
Income (loss) before extraordinary item (94) (300) (2,161) (3,468) 162 12 411
Extraordinary item(4) 347 326 29 (155) 53 53 --
-------- ------ ------- -------- ------- ------- -------
NET INCOME (LOSS) $ 253 $ 26 $(2,132) $(3,623) $ 215 $ 65 $ 411
----------------- -------- ------ ------- -------- ------- ------- -------
-------- ------ ------- -------- ------- ------- -------
PER SHARE DATA(5)
Income (loss) before extraordinary item $ (.03) $ (.11) $ (.80) $(1.25) $ .06 $ --- $ .16
Extraordinary item .12 .12 .01 (.06) .02 .02 ---
-------- ------ ------- ------- ------- ------- -------
NET INCOME (LOSS) $ .09 $ .01 $(.79) $(1.31) $. 08 $ .02 $ .16
-------- ------ ------- -------- ------- ------- -------
-------- ------ ------- -------- ------- ------- -------
Weighted average shares outstanding 2,725 2,696 2,696 2,774 2,747 2,755 2,642
----------------
Six Months
Ended
September 30, June 30, December 31,
------------------------ -------------- --------------
1990 1991 1992 1993 1994 1993 1994
BALANCE SHEET DATA (Unaudited)
Working capital $32,245 $20,632 $18,541 $ 6,228 $ 3,878 $ 3,039 $ 3,838
Total assets 42,622 50,868 43,710 32,264 18,360 17,430 19,754
Long-term obligations 16,867 14,875 14,431 -- 626 --- 932
Stockholders' equity 18,524 18,300 16,168 12,540 12,424 12,478 12,405
</TABLE>
- -------------------------
(1) Includes provision for doubtful accounts, depreciation and amortization
of property and equipment.
(2) Includes amortization of deferred note issuance costs.
(3) Includes interest income, dividend income, realized and unrealized losses
on marketable securities and amortization of the non-compete agreement.
(4) A gain (loss) from the extinguishment of debt, net of income taxes for
1990 through 1994.
(5) Per share data represents income (loss) per common and common equivalent
share. See Note A to Consolidated Financial Statements for additional
information regarding per share data.
(6) During 1993 the Company changed its year end from September 30 to June 30.
52
<PAGE>
ZING MANAGEMENT'S DISCUSSION OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
-----------------------------------------------
The following table sets forth for the periods indicated the percentage
relationship to net sales of certain items from the Company's consolidated
statements of operations.
<TABLE><CAPTION>
Nine
Year Months Year Six Months Ended
Ended Ended Ended December 31,
Sept. 30, June 30, June 30, -------------
------------- ---------- ------------ 1993 1994
1992 1993 1994 (unaudited)
<S> <C> <C> <C> <C> <C>
Gross revenue ............... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold ............ 76.8 76.8 57.8 54.5 59.6
-------- ------- -------- ------- -------
Gross profit ................. 23.2 23.2 42.2 45.5 40.4
Selling, general and administrative
expenses ................. 21.4 24.7 38.3 41.0 35.8
Provision for doubtful
accounts .................. .1 .2 .6 1.0 .7
Depreciation and amortization ...... 1.6 1.7 6.9 8.2 4.5
Interest expense and amortization
deferred note issuance costs ..... 2.6 2.7 2.5 4.5 1.0
Interest and other income - net .... -- -- (7.5) (9.4) (7.6)
----- ------ ------- ----- -------
Income (loss) before income taxes 6.0
and extraordinary item ........ (2.5) (6.1) 1.4 0.2
Provision (credit) for income
taxes ................... (.2) .1 -- 0.0 0.1
------ ------ ------ ----- ------
Income (loss) before extraordinary
item ................... (2.3) (6.2) 1.4 0.2 5.9
Extraordinary item ............ -- (.3) .5 1.0 --
------ ------- ------ ------ ------
Net income (loss) ............. (2.3) % (5.9) % 1.9 % 1.2 % 5.9 %
-------- --------- -------- ------- --------
</TABLE>
Results of Operations - Six Months Ended December 31, 1994 Compared to
-------------------------------------------------------------------------
Six Months Ended December 31, 1993.
-----------------------------------
On a consolidated basis, the Company reported income of
$411,000 or $. 16 per share for the six months ended December 31,
1994 as compared to income of $65,000 or $.02 per share for the
six months ended December 31, 1993 which included extraordinary
income of $53,000 representing income realized from the repurchase
by the Company of $11,650,000 face value of its Senior
Subordinated Notes.
53
<PAGE>
Revenue for the six months ended December 31, 1994 was
$6,954,000 comprised of net sales of TACTech of $585,000 and net
sales of Omnirel of $6,369,000. Net sales for the six months
ending December 31, 1993 were $5,444,000 comprised of net sales
of TACTech of $411,000 and net sales of Omnirel of $5,033,000.
For the six months ended December 31, 1994 net revenue increased
42% and 27% for TACTech and Omnirel, respectively, over the prior
comparable period. Omnirel's increase is primarily due to its
increase in sales of industrial (non-military) products. TACTech
revenue increases were due, in part, to payments received from
the Department of Defense, pursuant to a contract it received to
develop and test an information parts management system, and in
part to increases in its subscriber base.
Improvements from the 1994 six month period over the 1993
period in consolidated gross profits, and the decline in gross
profit margins, are attributable to improvements in both net
sales and gross profit margin of TACTech and improvement in
Omnirel's net sales, which helped to offset the decline in
Omnirel's gross profit margin.
On a consolidated basis gross profit was $2,807,000 for the
six months ended December 31, 1994 as compared to $2,478,000 for
the prior comparable period ended December 31, 1993. The
Company's increase in gross profit is attributable in significant
measure to TACTech's improvement in net sales without a
comparable increase in fixed costs.
Consolidated selling, general and administrative expenses,
provision for doubtful accounts, depreciation and amortization
for the six months ended December 31, 1994 were $2,849,000
compared to $2,734,000 for the comparable period ended December
31, 1993. As a percentage of consolidated revenues these
expenses were reduced to 41% for the period ended December 31,
1994 from 50.2% for the comparable quarter. This is, again,
primarily attributable to an increase in consolidated revenues
without a comparable increase in selling costs.
54
<PAGE>
Interest expense was reduced to $67,000 in the six months
ended December 31, 1994 from $244,000 for the comparable period
ended December 31, 1993 as a result of the Company's retiring all
of its Senior Subordinated Notes.
Results of Operations - Fiscal Year 1994 Compared to Nine Months
-----------------------------------------------------------------
Ended June 30, 1993
-------------------
Effective April 30, 1993, Zing sold to Arrow the net assets
of its high reliability electronic component distribution and
value-added service businesses operated under the name "Zeus"
(the "Sold Business"). The purchase price was $24,254,000. This
represented a premium of approximately $3,000,000 over the net
book value of the assets transferred, which represented the value
paid for a non-compete agreement. Zing is also entitled to
receive, approximately three years from the closing of the Arrow
Sale, up to $2,000,000 from Arrow as additional purchase price
depending on the performance of Arrow's high reliability
electronic components and value-added business.
Subsequent to the disposition of the Sold Business, the
Company's operations have been principally a reflection of the
business of its principal subsidiary, Omnirel. The Company also
changed its fiscal year at that time to June 30. As a
consequence of these two changes, management's discussion of the
Company's results of operations are not directly comparable from
fiscal period to fiscal period. To facilitate understanding of
the comparative results of the Company's ongoing operations,
operations of the Company excluding the Sold Business, as well as
operations of the Company on a fully consolidated basis, are
described below where practical.
The Company reported income before extraordinary item of
$162,000 or $.06 per share, for the year ended June 30, 1994.
For the nine month transitional fiscal year ended June 30, 1993,
which included results for seven of those months attributable to
the Sold Business, the Company sustained a loss before
extraordinary item of $3,468,000 or $1.25 per share for the nine
months ended June 30, 1993.
Fiscal Year 1994 net income of $215,000 or $.08 per share
includes extraordinary income of $53,000 or $.02 per share
representing income realized from the repurchase by the Company
55
<PAGE>
of $11,650,000 face value of its Senior Subordinated Notes. The
net loss for the 1993 fiscal period was $3,623,000 or $1.31 per
share, inclusive of an extraordinary loss of $155,000 or $.06 per
share representing deferred financing costs realized from the
repurchase by the Company of $1,600,000 face value of its Senior
Subordinated Notes.
The improvement in Fiscal Year 1994 operating results
compared to 1993 is due to a combination of a reduced loss at
Omnirel resulting from improved sales and gross profit margins
and the elimination of losses attributable to the Sold Business.
Omnirel sustained a net loss of $440,000 in Fiscal Year 1994,
compared to a net loss of $1,877,000 in the prior nine month
period.
Net sales for the 1994 period were $11,483,000, comprised
primarily of net sales of Omnirel of $10,586,000; for the nine
month 1993 fiscal period, excluding the Sold Business,
consolidated net sales of $6,412,000 were comprised primarily of
Omnirel sales of $5,907,000. The Company realized a gross profit
on 1994 net sales of $4,846,000 compared to a gross profit of
$2,165,000 on 1993 net sales, exclusive of the Sold Business.
Including the Sold Business, the Company in 1993 realized gross
profits of $11,978,000 on net sales of $52,602,000.
The Company's higher gross profit margins in 1994 compared
to the prior fiscal period are due primarily to Omnirel's
improvement in net sales without a comparable increase in fixed
costs, as well as to the elimination of less profitable sales of
Sold Business products.
Selling, general and administrative expenses were $5,255,000
for the 1994 period and, excluding the Sold Business, $3,001,000
for the June 30, 1993 fiscal period. While Omnirel's expenses
declined from 1993 to 1994 as a percentage of its net sales, the
Company's expenses increased as a percentage of sales on a
consolidated basis. The Company's net sales declined much more
sharply, because of the elimination of the Sold Business in 1993,
than did consolidated selling expenses. Corporate overhead is
therefore allocated in 1994 against a smaller revenue base than
in 1993.
56
<PAGE>
Interest expense declined in 1994 compared to 1993 as a
result of the redemption by the Company of its Senior
Subordinated Notes.
As of July 1, 1993, the Company adopted FASB Statement No.
109, "Accounting for Income Taxes". This standard requires
companies to change the method of accounting for income taxes
from the deferred to the liability method. As permitted under
the statement, the Company has elected not to restate the
financial statements of prior years. The adoption of FASB
Statement No. 109 on the current year's financial statements is
discussed in Note G of the Consolidated Financial Statements.
Results of Operations - Nine Months Ended June 30, 1993 Compared
-----------------------------------------------------------------
to Fiscal 1992
--------------
Results of the Company's operations in the period ended June
30, 1993 are not directly comparable to the Fiscal Year 1992
since the June 30, 1993 period includes only nine months and in
only seven of such months did the Company operate its Sold
Business.
The Company incurred a loss before extraordinary items of
$3,468,000 or $1.25 per share, for the nine month period ended
June 30, 1993, on net sales of $52,602,000, compared to a loss of
$2,161,000 or $.80 per share for its fiscal year ended September
30, 1992. The net loss for the 1993 period was $3,623,000 or
$1.31 per share, inclusive of an extraordinary loss of $155,000
or $.06 per share representing deferred financing costs realized
from the repurchase by the Company of $1,600,000 face value of
its Senior Subordinated Notes. The net loss for 1992 was
$2,132,000 or $.79 per share, inclusive of an extraordinary gain
of $29,000 or $.01 per share realized from the repurchase by the
Company of $250,000 face value of its Senior Subordinated Notes
for $200,000.
Excluding operations of the Sold Business, net sales were
$6,412,000 in the nine month 1993 period and $9,484,000 for
Fiscal Year 1992.
The Company realized gross profits of $11,978,000 in the
1993 period, of which the Sold Business accounted for $9,814,000.
In the Fiscal Year 1992, the Company realized gross profit of
57
<PAGE>
$21,259,000, of which the Sold business accounted for
$17,436,000. Gross margins declined however, largely due to
lower sales and increased competition between the two fiscal
periods.
Selling, general and administrative expenses for the
Company, excluding the Sold Business, were $3,001,000 for the
1993 period and $3,211,000 for fiscal 1992. Selling, general and
administrative expenses for the Sold Business were $10,003,000
for the nine-month 1993 period and $16,415,000 for fiscal 1992.
Interest expense declined from 1992 to 1993 as a result of
the redemption by the Company during the 1993 fiscal period of a
portion of its Senior Subordinate Notes.
Liquidity and Capital Resources
-------------------------------
In Fiscal Year 1994, the Company employed most of its cash
and cash equivalents, which were the proceeds of the 1993 Arrow
Sale, to redeem its remaining Senior Subordinated Notes and to
acquire marketable securities. Omnirel operations, however, were
funded from internally generated cash, from intercompany
borrowings, and from two bank lines of credit, the Revolving Loan
line in the maximum amount of $300,000 and the Equipment Loan
financing the maximum amount of $1,200,000.
In the 1993 fiscal period the proceeds of the Arrow Sale
permitted the Company to satisfy $6,000,000 in bank notes and
repurchase $1,600,000 face value of its Senior Subordinated
Notes. The receipt of sales proceeds resulted in a significant
increase in the Company's cash and cash equivalents holdings as
of the end of the 1993 fiscal period compared to the prior year.
Impact of Inflation
-------------------
In Fiscal Year 1994, inflation did not have a significant
impact on the operations of the Company.
58
<PAGE>
BUSINESS OF OMNIREL
-------------------
General
Omnirel is a manufacturer of multi-chip power modules and
packaged semiconductor components, serving the high reliability
military and industrial markets. Power modules are defined as
electronic components and are single-package devices with a power
dissipation of five watts or more. They combine active power
semiconductor components and passive components (such as
capacitors and resistors) which form integrated smart power
electronic circuits which control, drive and regulate the input
and output of power (electricity) in motion control and power
supply applications for use in electronic systems and equipment.
Omnirel manufacturing techniques and design standards for the
military and industrial markets are more exacting than for
commercial general purpose hybrid circuit components. Omnirel
produces both standard and custom designed products in a clean
room environment, and is certified to MIL-STD 1772, the highest
level of military certification for a hybrid circuit
manufacturer, and is registered to ISO 9001. Omnirel's products
are used in applications where circuit density (including
miniaturization), packaging of multiple functions in a dense
environment, electrical performance and reliability are critical
design requirements, such as in the defense, aerospace,
commercial aircraft, medical instrumentation and industrial
control markets.
Competition
The market for power hybrid components is fragmented. There
is no single firm which maintains a dominant position, either in
technology or in market share. Based on recent industry
publications of Frost & Sullivan, Moody Associates and the
Semiconductor Industry Association, the total available market
for multi-chip power components within the United States was
approximately $300,000,000 in 1993 and $330,000,000 in 1994, and
is expected to grow at a rate greater than 10% during the later
1990's. The market for power hybrid products is in excess of
$125,000,000 a year and approximately 65% of the sales to such
market are made by five manufacturers (including Omnirel) of
power hybrid components. Omnirel is the only such manufacturer
whose primary focus is in power circuits. The principal
competitors of Omnirel are other hybrid manufacturers, original
equipment manufacturers with internal capability and power
semiconductor manufacturers who offer multi-chip modules as a
59
<PAGE>
complementary product line. Omnirel distinguishes itself in the
marketplace principally on the strength of its focus on power
applications. It has complete design, manufacturing and high
reliability screening capabilities in-house, and has developed a
reputation for innovative solutions for customer needs. Omnirel
also competes on the basis of pricing and delivery.
Marketing and Sales
Omnirel markets its products through five regional sales
managers in the United States and twenty-five sales
representative organizations world-wide. Omnirel sells both
standard and custom products to approximately two hundred
customers world-wide. Products are sold both through
distributors and directly to original equipment manufacturers.
Omnirel publishes and distributes to its existing customers
and potential new customers a catalogue of its standard products.
Omnirel management has focused its marketing effort in the United
States where nineteen independent sales representatives are
coordinated by Omnirel's sales management. Key accounts are also
covered by area managers in each sales region. Six
representatives/distributors are currently in place in Europe
marketing Omnirel's products.
Omnirel customers are primarily major electronic equipment
and systems manufacturers such as General Electric, Loral,
Bendix, Hamilton-Standard, Hughes Aircraft, Boeing, Texas
Instruments, Raytheon and Motorola. Sales of various products to
General Electric represented 19% of Omnirel's sales revenues for
the fiscal year 1994 and a single project accounted for
approximately 16% of Fiscal Year 1994 sales. Based on orders
already placed, it is expected that General Electric will
represent a significantly larger portion of Omnirel's Fiscal Year
1995 sales. Because of Omnirel's dependence on sales to General
Electric in 1994 and 1995, and anticipated dependence on sales to
General Electric in 1996, which may not be realized, there can be
no assurance that Fiscal Year 1996 sales will match Fiscal Year
1995 sales, or that, in the event sales to General Electric
decline over the succeeding years, Omnirel will be able to
compensate for the loss of such sales in Fiscal Year 1996 and
beyond. If such project were terminated or the pending orders
canceled, the loss of associated sales revenue could have a
material adverse effect on the business and financial condition
60
<PAGE>
of Omnirel. Omnirel believes that its military business will
grow at a rate greater than the overall growth rate of military
electronic components because of the need for higher performance,
higher reliability, smaller and lighter weight equipment.
Omnirel's sales to industrial markets represented 36% in Fiscal
Year 1994 and are expected to represent greater than 50% in
Fiscal Year 1995.
Sales to Arrow Electronics, Omnirel's exclusive distributor,
were 13% of sales revenues for Fiscal Year 1994 and 8% of sales
revenues for the six months ended December 31, 1994. Orders from
Arrow are cancellable in accordance with industry custom and
usage. As is the norm, however, cancelled orders are usually
replaced by orders of comparable dollar amounts. At the time of
the Arrow Sale, Arrow was appointed Omnirel's exclusive
distributor of its single and multi-chip semiconductor devices
for a period ending in May 1995, after which period it is
anticipated that Arrow will become a non-exclusive distributor
for Omnirel. Omnirel does not expect significant difficulty in
selling its single and multi-chip products to and/or through
other distributors and customers after the period of exclusivity
with Arrow ends.
Omnirel's customers outside the United States and export
sales outside the United States are as follows:
<TABLE><CAPTION>
Nine
Year Months
Ended Ended Year Ended Six Months Ended
June 30, June 30, June 30, December 31,
1992 1993 1994 1993 1994
(000's omitted)
<S> <C> <C> <C> <C> <C>
Canada $ - $ - $ 89 $ 60 $ 26
Europe 55 249 183 86 36
Mid East (Israel) 54 24 30 22 58
Far East (Japan) 10 4 5 - -
South Pacific (Australia) 107 44 151 141 5
--- --- --- --- ---
Total $226 $321 $458 $309 $125
=== === === === ===
</TABLE>
Omnirel's backlog at June 30, 1994 was $10,200,000, at least
90% of which is deliverable over the fiscal period ending June
30, 1995, and approximately $4,300,000 of which is attributable
to an order from General Electric. As of December 31, 1994,
Omnirel's backlog was $16,800,000, at least 90% of which was
deliverable over the twelve (12) months ended December 31, 1995,
of which amount approximately $10,500,000 was accounted for by an
order from General Electric.
61
<PAGE>
For the six months ended December 31, 1994, and the Fiscal
Years 1994, 1993 and 1992, Omnirel did not enter into any
contracts with either defense contractors or subcontractors for
the United States Government or any agency of the United States
Government. Omnirel sells its products to subcontractors of
certain government agencies through customer purchase orders.
Cancellation of such purchase orders from time to time is
customary in the electronic component industry. Under prevailing
industry practices, in the event of such cancellation Omnirel is
usually entitled to reimbursement for costs incurred and a
reasonable profit for work performed prior to the cancellation.
The sale of Omnirel products is not seasonal.
Product Warranty
Omnirel warrants that its products are free from defects in
workmanship and meet either the agreed upon specifications
supplied by the customer or Omnirel's current published
specifications. Omnirel's liability for defective products is
limited to solely replacement thereof upon receipt from the
customer of notice of breach of warranty within three (3) months
of the date of shipment. Omnirel disclaims any liability for a
customer's cost of replacement of defective products, for lost
profits, loss of use and consequential damages. Omnirel also
disclaims any warranty of merchantability and all other
warranties, express or implied.
Suppliers and Materials Used
Unpackaged semiconductors, in chip form, and other
components such as capacitors and resistor chips or surface mount
devices, metal and plastic packages and ceramic materials are
used by Omnirel in the manufacture of its products. These
materials and components, none of which is presently in short
supply, are purchased from time to time in the open market, and
Omnirel has no long term commitments for their purchase. Omnirel
is not dependent on any one supplier for a primary material.
Omnirel has relationships with a number of premier semiconductor
manufacturers which allow Omnirel to buy products directly from
such manufacturers. These arrangements allow Omnirel to be
apprised of current technological advances and developments.
62
<PAGE>
Patents, Trademarks and Licenses
Omnirel does not possess any patents for proprietary
manufacturing processes. Omnirel believes, however, that its
proprietary processes and product technologies are such that they
give it a unique position in the design and manufacture of power
semiconductor hybrids and multi-chip modules using advanced
semiconductor assembly technology.
The Omnirel name and logo are unique trademarks. While
Omnirel considers that in the aggregate its trademarks are
important in its operations, it does not consider that one or any
group of trademarks is of such importance that termination could
materially affect its business.
Inventory
Omnirel follows industry standards for procurement, sale and
return of its inventory. Materials are procured based upon
purchase orders which have standard terms and conditions
including the right of return for inferior quality or non-
compliance with purchase order terms. Omnirel inventory is
maintained at its principal place of business in storage
facilities with temperature and humidity controls. Omnirel
stocks inventory for standard products, and for certain of its
custom products.
Environmental Compliance
Omnirel does not use hazardous materials in its
manufacturing process nor does the manufacturing process result
in the discharge of potentially hazardous material. Omnirel does
not expect to incur significant expenditures relating to
environmental compliance. Omnirel does use a Class II ozone-
depleting cleaning solvent in compliance with currently
applicable governmental regulations.
63
<PAGE>
Research and Development
Generally, Omnirel's research and development expenditures
involve engineering and design of custom products for specific
applications, development of new packaging techniques and
development of packaging for new semiconductor devices. Research
and development expenditures for the fiscal year ended June 30,
1994, the nine months ended June 30, 1993 and the Fiscal Year
ended September 30, 1992 were $841,000, $808,000, and 735,000,
respectively, or 7.9%, 13.7% and 8.3% of sales in those
respective periods.
Employees
As of December 31, 1994, Omnirel had 112 employees, 74 of
whom were employed in a manufacturing capacity, nine in quality
assurance, nine in sales, 10 in research and development, and 10
in clerical and administrative positions. Owing to the technical
nature of Omnirel's products, Omnirel employs 17 professional
engineers in the manufacturing, quality assurance and research
and development groups. Except for four regional sales managers
located in Baltimore, Chicago, Florida and Los Angeles, all
employees are located in Leominster, Massachusetts. None of
Omnirel's employees are covered by a collective bargaining
agreement.
Properties
Omnirel owns a 6.5 acre parcel of land with a 38,000 square
foot, one story, modern facility located in Leominster,
Massachusetts. Omnirel manufactures its products in a clean-room
environment. Omnirel's processes are certified to MIL-STD 1772
and registered to ISO 9001. Approximately 12,000 square feet of
the Company's facility is rated and certified as a class 10,000
clean-room environment. This location houses all of the
operations of Omnirel Corporation. This clean room facility is
equipped with design, manufacturing, electrical test and
environment screen equipment which are state-of-the art.
Substantially all of Omnirel's facility is productively in use.
64
<PAGE>
Bank Loans
Omnirel's Revolving Loan for working capital is fully funded
in the maximum principal amount of $300,000, and approximately
$1,160,000 of its Equipment Loan in the maximum principal amount
of $1,200,000 is funded to finance equipment purchases. Omnirel
is negotiating to obtain a commitment from the Bank for a
Mortgage Loan in the principal amount of $2,000,000, such Loan to
be represented by a note in that amount (that "Mortgage Note")
and secured by a mortgage (the "Mortgage") on its land and plant
in Leominster, Massachusetts, and to increase the Equipment Loan
from $1,200,000 to $1,800,000 and the Revolving Loan from
$300,000 to $700,000, all upon the Merger being declared
effective. The proceeds from the Mortgage Loan will be used to
repay approximately $2,000,000 of the principal amount of the
Zing Loan as of the Effective Time. It is expected that the
Mortgage Note will bear interest at the rate of 10.5% per annum
and will mature on or about June _____, 2000, with amortization
based on a 20-year schedule. Omnirel anticipates that the
Mortgage and Mortgage Note will include cross-default provisions
in respect of the Revolving Loan and the Equipment Loan.
Legal Proceedings
None.
65
<PAGE>
OMNIREL MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
The following table sets forth for the periods indicated the
percentage relationship to net sales of certain items from
Omnirel's statements of operations.
Nine Months Year
Ended Ended Six Months Ended
June 30, June 30, December 31,
1993 1994 1993 1994
---------- -------- -----------------
(Unaudited)
Revenues . . . . . . . . . . 100.00% 100.00% 100.00% 100.00%
Cost of goods sold . . . . . 71.90 63.69 59.96 65.12
----- ----- ----- -----
Gross profit . . . . . . . . 28.10 36.31 40.04 34.88
Selling, general and
administrative expenses . . 30.27 21.24 26.06 23.52
Research and development . . 13.68 7.94 8.80 4.82
Depreciation and amortization
of property and equipment . 11.92 7.96 6.63 4.60
Interest expense . . . . . . 4.01 3.30 3.42 3.90
---- ---- ---- ----
(Loss) before income taxes . -31.78 -4.13 -4.87 -1.96
Provision for income taxes . 0.15 0.03 0.00 0.10
---- ---- ---- ----
Net (loss) . . . . . . . . . -31.93% -4.16% -4.87% -2.06%
====== ===== ===== =====
Results of Operations - Six Months Ended December 31, 1994
-----------------------------------------------------------------
Compared to Six Months Ended December 31, 1993
----------------------------------------------
Omnirel reported a net loss of $130,963, or $.12 per share,
for the six months ended December 31, 1994, as compared to a net
loss of $244,911, or $.23 per share, for the six months ended
December 31, 1993. The improvement is primarily attributable to
improved sales volume.
Revenues for the six months ended December 31, 1994 were
$6,369,000 as compared to $5,033,000 for the same period ended
December 31, 1993. This represented an increase of $1,336,000, or
26.5% over the prior period. The increase is primarily
attributable to sales of Omnirel's industrial products.
66
<PAGE>
The gross profit percentage for the six months ended
December 31, 1994 was 34.88% as compared to 40.04% for the six
months ended December 31, 1993. The decrease is attributable in
part to the increase in the cost of material to 33.05% of sales
revenues from 27.16% for the prior period. This increase in cost
of material is a result of a change in the mix of products
generating the revenues, and more specifically to the portion of
those products containing non-hermetic packaging, which have
higher material cost as a percentage of sale price. Although the
manufacturing overhead decreased to 20.31% of sales for the six
months ended December 31, 1994 from 21.63% for the prior period,
it increased in absolute terms in the amount of $205,081. A
portion of this increase is attributable to the need for
additional human resources and subcontractor services to
accommodate the anticipated requirements for additional
production of industrial products.
Selling, general and administrative expenses of $1,497,701
for the six months ended December 31, 1994 decreased to 23.52% of
sales from 26.06% of sales for the six months ended December 31,
1993. This decrease is due to the increase in sales revenue as
well as a decrease in sales commissions.
Depreciation and amortization was $292,938 for the six
months ended December 31, 1994 as compared to $333,823 for the
six months ended December 31, 1993.
The excess of cost over assets acquired was being amortized
over 15 years at an annual rate of $251,532. As of July 1, 1993,
Omnirel adopted FASB 109. The effect of adopting FASB 109 was to
reduce the excess of cost over assets acquired and reduce the
annual rate of amortization to $152,748, which in turn reduced
the amortization for the six months ended December 31, 1994 by
$49,392.
67
<PAGE>
Interest expense for the six months ended December 31, 1994
was $248,578 and increased $76,565 over the six months ended
December 31, 1993. This is attributable to the increased amount
borrowed from banks for capital equipment. The amounts owed to
banks as of December 31, 1994 and as of December 31, 1993 under
Omnirel's equipment line of credit were $1,088,052 and $767,845,
respectively.
For the six months ended December 31, 1993, the deferred
method was used in accounting for income taxes and the deferred
tax expense was based on items of income and expense that were
reported in different years in the financial statement and tax
returns and were measured at the tax rate in effect for the year
in which the difference originated. Using this method, no
provision for income tax was required in this period.
For the six months ended December 31, 1994, the liability
method pursuant to FASB 109 was used. Pursuant to this method,
Omnirel has a provision for this six month period in the amount
of $6,197.
Results of Operations - Fiscal Year 1994 Compared to Nine Months
-----------------------------------------------------------------
Ended June 30, 1993
-------------------
Effective June 30, 1993, Omnirel changed its fiscal year to
June 30. As a result of this change, the results of operations
for Fiscal Year 1994 are not directly comparable to those for the
nine month 1993 fiscal period.
Omnirel reported a loss of $440,000, or $.42 per share, for
the twelve months ended June 30, 1994. For the nine months ended
June 30, 1993, Omnirel sustained a loss of $1,886,000, or $1.78
per share. The improvement in Fiscal Year 1994 operating results
compared to those of the 1993 period is due to a combination of
improved sales and gross profit margins.
Revenues for the fiscal year ended June 30, 1994 were
$10,586,000, compared to $5,907,000 for the nine months ended
June 30, 1993. The improvement in sales was due primarily to the
introduction of new industrial products as well as the
acquisition of new assembly technology.
68
<PAGE>
Omnirel's gross profit margins were 36.31% for Fiscal Year
1994, as compared to 28.10% for the nine months ended June 30,
1993. The higher margins were due primarily to Omnirel's
improvement in net sales without a comparable increase in its
manufacturing overhead.
Selling, general and administrative expenses were 21.24% of
sales and 30.27% of sales, respectively, for Fiscal Year 1994 and
the nine months ended June 30, 1993. The improvement is
generally attributable to the improvement in net sales without a
comparable increase in administrative cost as well as a reduced
sales commission rate on sales to a major customer.
Research and development expenses were 7.94% of sales and
13.68% of sales, respectively, for Fiscal Year 1994 and for the
nine months ended June 30, 1993. During the nine month period
Omnirel incurred significant expenses for development of its new
products using non-hermetic packaging.
There was a net increase in borrowings of $265,000 during
Fiscal Year 1994 but an offsetting decrease in the interest rate
on the Zing Loan to 7.75% from 8.75%, resulting in a net increase
in the average monthly interest expense of approximately $3,000.
Trends
Sales
-----
As a result of Omnirel's increased focus on the design of
industrial products, there has been a corresponding increase in
its backlog from $10,200,000 as of June 30, 1994 to $16,800,000
as of December 31, 1994. Subject to customer cancellations,
Omnirel anticipates that the sales revenue for Fiscal Year 1995
should reflect a comparable increase over Fiscal Year 1994.
A significant portion of the growth of the backlog is
attributable to a large order obtained from General Electric for
a motion control module and assembly which will be used in the
field of transportation. While there is no assurance that there
will be continuing orders for this product, Omnirel believes that
there is a market for the application of the technologies
associated with the manufacturing of this product.
69
<PAGE>
Although there has been a substantial decrease in the
Department of Defense budget in the fiscal 1993 period and Fiscal
Year 1994, which in and of itself may signify a trend, Omnirel
believes that its military business will grow at a rate greater
than the overall consumption rate of military components because
of the need for high performance, smaller and lighter weight
electronics. Any such growth, however, is subject to the
specific types of military/aerospace programs selected by the
Department of Defense, as well as the amounts of appropriations
and funding for these programs by Congress.
Net Operating Loss
------------------
At June 26, 1991 Omnirel had available approximately
$6,100,000 of net operating loss carryforward for Federal income
tax purposes. As a result of the adoption of Statement 109, the
excess of cost over assets acquired was reduced by approximately
$1,275,000. Approximately $112,000 of the carryforward loss was
utilized for the year ended June 30, 1994. The net operating
loss carryforward of approximately $6,000,000 at June 30, 1994
expires through 2007.
Interest
--------
As a condition to the acquisition, Zing was required to
repay certain bank indebtedness in the approximate amount of
$3,000,000 and since that date Zing has continued to provide
Omnirel with its working capital requirements.
As of December 31, 1994, the balance on the Zing Loan was
approximately $5,500,000 with interest at the rate of 7.75%, or
approximately $426,000 annually. This loan is due on demand and
a portion of it ($1,500,000) is subordinated to the Bank, which
has also provided the Revolving Loan in the maximum principal
amount of $300,000 and the Equipment Loan in the maximum
principal amount of $1,200,000 to finance Omnirel's equipment
purchases. The rate of interest on the Zing Loan was reduced
from 8.75% to 7.75% as of July 1, 1993, as a result of the then
current reduction generally in market rates. The current rate
continues in effect through June 30, 1995. Since increases in
the prime rate subsequent to the end of Fiscal Year 1994 have
rendered the rate charged by Zing below the current market rate
of approximately 10%, Omnirel's profit for the six months ended
December 31, 1994 has been benefitted and will continue to be
benefitted through the end of Fiscal Year 1995, in relation to
what such profit would have been had Omnirel been charged
interest on the Zing Loan at market rates during those periods.
70
<PAGE>
Omnirel is negotiating to obtain a commitment for a Mortgage
Loan from the Bank in the principal amount of $2,000,000, to be
represented by the Mortgage Note and secured by the Mortgage on
its land and plant in Leominster, Massachusetts. The proceeds
from the Mortgage Loan will be used to reduce the principal
amount of the Zing Loan to $3,500,000 as of the Effective Time.
It is expected that the Mortgage Note will bear interest at the
rate of 10.5% per annum and will mature on or about June _____,
2000, with amortization based on a 20-year schedule. Omnirel
anticipates that the Mortgage and Mortgage Note will include
cross-default provisions in respect of the Revolving Loan and the
Equipment Loan. As a result of the difference between the
interest on the Mortgage Note and the interest previously paid by
Omnirel on the approximately $2,000,000 portion of the Zing Loan,
Omnirel's interest expense will increase by approximately $55,000
per annum.
As part of its refinancing of the Zing Loan and pursuant to
the Merger, Omnirel will issue its Preferred Stock (see
"DESCRIPTION OF OMNIREL CAPITAL STOCK - Preferred Stock" below)
-------------------------------------
in exchange for the $3,500,000 balance of the Zing Loan.
Although dividends on the Preferred Stock will accumulate at the
rate of [ ]% per annum, the payment of such dividends is
subject to declaration by the Board of Directors of Omnirel and
restrictions imposed by the Bank. As a result of the issuance of
its Preferred Stock, Omnirel will no longer have an interest
expense of approximately $270,000 on that portion of the Zing
Loan. It should be noted, however, that the approximately
$270,000 of interest on the $3,500,000 portion of Zing Loan was a
deductible expense for income tax purposes, whereas the $[ ]
in dividends on the Omnirel Preferred Stock will not be so
deductible.
71
<PAGE>
In addition to the foregoing, Omnirel is negotiating with
the Bank for an increase, from $300,000 to $700,000, in the
amount of its Revolving Loan and an increase, from $1,200,000 to
$1,800,000, in the amount of its Equipment Loan. In the event
that Omnirel obtains such increases, the amount of its borrowings
under these loans will very likely increase and there will be a
corresponding increase in interest expense.
Liquidity and Capital Resources
As a result of the capitalization of $3,500,000 of the Zing
Loan in exchange for the Preferred Stock and the repayment of the
approximately $2,000,000 balance of the Zing Loan, Omnirel's
balance sheet will be strengthened and management believes that
its ability to obtain credit from its vendors and the banking
community will be enhanced.
Historically, Omnirel has borrowed from banks in order to
satisfy its annual capital budget which is used primarily to
acquire machinery and equipment for its production facility.
These equipment loans were typically for five years from the date
of acquisition. Omnirel's current equipment line of credit allows
it to borrow up to $1,200,000 for the purchase of equipment. As
of December 31, 1994, approximately $40,000 was available under
this line of credit.
Omnirel, from time to time, has required short-term bank
borrowing secured by its trade receivables to finance its need
for working capital. Omnirel sells to large, well-financed
companies and therefore its accounts receivable are generally
collected within 30 to 60 days, with no material bad debt
exposure. Availability of components within a given
manufacturing cycle are critical to economic production, as a
result of which Omnirel is required to maintain adequate
quantities of inventory. The working capital requirements are
essentially driven by these inventory levels. Under its current
short-term revolving line of credit, Omnirel is permitted to
borrow up to $300,000, all of which was available to the Company
as of December 31, 1994.
72
<PAGE>
Historically, Zing has made loans to Omnirel and has
guaranteed both the Equipment Loan and the Revolving Loan.
Subsequent to the Merger, Zing will no longer make such loans or
offer its guarantee to banking institutions. Although current
negotiations between Omnirel and the Bank do not contemplate the
extension of Zing's guarantee, there can be no assurance as to
the type of banking lines of credit that may subsequently be
available, or whether or not their terms will be as favorable to
Omnirel as they were when Zing guaranteed such lines of credit.
Moreover, to the extent that assets in addition to Omnirel's real
property are used to collateralize the Mortgage Loan, or
additional assets are required by the Bank to collateralize
Omnirel's increased borrowing capacity under the Revolving Loan
or the Equipment Loan, Omnirel's liquidity may be adversely
affected and its ability to obtain further financing reduced.
73
<PAGE>
BUSINESS OF TACTECH
-------------------
General
TACTech is an information service company founded in 1987 by
Zing. Its proprietary software data base provides the user with
information useful in determining, among other things, the
projected life cycle (obsolescence) of microcircuits and discrete
semiconductor devices used primarily in the manufacture of
electronic systems for military and aerospace applications.
TACTech licenses its proprietary software data bases to defense
contractors and sub-contractors, manufacturers of military-grade
semiconductors, government agencies and various organizations
supporting the Department of Defense. As of December 31, 1994
TACTech services were subscribed to by fifty-five (55) customers
located throughout the United States and Canada.
The TACTech data base library contains the nomenclature and
general description for over 100,000 individual military
semiconductor devices, and is believed by management to include
virtually all standard microcircuits and discrete devices with
high reliability specifications used for military and aerospace
applications. The data base is constantly updated at TACTech's
headquarters and delivered on a real-time or near real-time basis
electronic system. TACTech software provides a description and
general specification of each microcircuit and discrete device in
the TACTech library, thereby allowing the user to identify
functionally interchangeable devices from various manufacturers
and to upgrade and rank devices according to projected life cycle
and availability based on changes in technology and sources of
supply.
TACTech has developed proprietary analysis procedures and
software to provide a life cycle projection assessment rating for
each device type (microcircuits, diodes and transistors)
contained in its library. TACTech's life cycle projections are
determined by tracking and weighing a device's attributes, such
as speed, density, packaging, manufacturing process, design-in
acceptance and available sources of supply.
74
<PAGE>
TACTech's proprietary software allows its customers to
receive information from TACTech's library in useable formats
through a personal computer with modem access or through
Internet. The system allows for device type information searches
to be conducted on a form-fit and function equivalent basis
and/or alternate technology basis. Updates to TACTech's
information library are available to TACTech's customers on a
real-time basis. Information searches can be conducted by the
subscriber through parametric product description or by generic
device type.
TACTech continually updates its library with information
that includes product introductions, product discontinuances and
changes in the quality level of available product. The TACTech
system permits subscribers to conduct individual device type
searches or to conduct an analysis on an entire bill of materials
for semiconductor devices. TACTech provides an automatic
electronic discontinuance notification service through its built-
in software, which automatically notifies the subscriber of
changes in availability with reference to specific subscriber
bill(s) of materials.
TACTech also maintains a "where used" library which contains
the semiconductor content in over 2,000 unclassified military
electronic systems. A user can access this "where used" library
to determine which specific device types are incorporated within
specific systems or to determine commonality of usage across
multiple systems. "Where used" information is particularly
valuable to semiconductor manufacturers, or electronic components
parts distributors, in determining marketing strategy or
analyzing device type usage trends based on design-in acceptance,
discontinuance or obsolescence.
In recent years the U.S. Government has effected defense
budget reductions while at the same time establishing procurement
policies aimed at cost control and efficiency. The Department of
Defense is encouraging its contractors to constantly analyze
trends of potentially diminishing manufacturing sources and
technological obsolescence as important considerations when
designing new electronic systems, thereby providing for more
predictable manufacture, better maintenance and longer
operational life of equipment.
75
<PAGE>
The Department of Defense has been emphasizing that military
electronic system designs are to be developed utilizing the best
commercial/industrial practices in order to control or reduce
cost while at the same time expanding design options without
degrading system reliability. In accordance with the mandate for
the application of best commercial/industrial practice, defense
contractors and subcontractors have become increasingly
interested in exploring the use of reliable industrial or
commercial components and process technologies as favorable
alternatives to previous standard "MilSpec only" designs.
TACTech believes that the trend which emphasizes alternative
design concepts will continue and that issues of military
component obsolescence and management of diminishing sources
relating to standard military designated components will continue
to be a problem facing the military electronics industry, thus
creating a growing market for the services offered by TACTech.
In addition to projecting the life cycle of military
semiconductors and providing information on technological updates
and source changes for military devices, TACTech has recently
developed an information service that allows the user to convert
most military specification semiconductors to their closest
industrial equivalent. The conversion is based on electrical
functionality as well as packaging availability. TACTech
believes that this data service will prove to be of significant
value to its customers.
Competition
TACTech competes with many data service companies which
possess greater financial and human resources than does TACTech.
Many of TACTech's competitors also offer a greater variety of
services than does TACTech. TACTech believes, however, that it
offers its customers a unique set of information services that
have been specially developed to assist the military/aerospace
market in solving problems relating to the management of
diminishing sources of supply and technological obsolescence, as
they pertain to high reliability semiconductor devices.
TACTech believes it is the only on-line data service company
which has focused all its resources on providing such highly
specialized services, thus giving it an advantage in competing
favorably with other information service organizations who
provide data services designed for more general application.
76
<PAGE>
Marketing, Sales and Licensing
TACTech maintains marketing, customer service and customer
training representatives in its Yorba Linda, California
headquarters and a marketing representative located in
Leominster, Massachusetts. TACTech markets its data services
through highly specialized and highly trained marketing personnel
who contact prospective customers directly. TACTech also
promotes its services and identifies prospective customers
through participation in conferences and conventions dedicated
predominantly or exclusively to the issue of shrinking
availability of military product due to a diminishing number of
manufacturing sources for military specified products, or due to
technological obsolescence. Video sales aids and literature
describing TACTech's data services are also utilized in its
marketing program.
TACTech licenses its proprietary software and data services
under written license agreements with subscribers. Although
TACTech provides customer support to its subscribers to
facilitate efficient use of its data services, TACTech does not
warrant the data provided to it and in turn provided to its
subscribers.
During the next twelve months, TACTech plans to expand its
marketing effort into western Europe.
Customer Support and Warranty
TACTech's subscription agreements with its customers include
in the base subscription price free on-site training for two
representatives of the customer; the cost of such training for
each additional subscriber representative is $400. The training
program runs for two days and covers three areas: operational,
conceptual understanding of the software program's capability and
application training for integrating TACTech's service into the
subscriber's system. Once on line, a subscriber may call TACTech
for technical assistance, at the subscriber's cost, or use e-mail
to obtain assistance. TACTech's subscription agreements
expressly disclaim any warranty, express or implied, for the
accuracy of its data bases.
77
<PAGE>
TACTech has adopted a number of security measures and
techniques, including scrambling, encryption and off-site storage
of its software, to prevent unauthorized use of its data base
services by subscribers and to frustrate penetration of its
system and theft of its data bases and programs by outsiders.
TACTech meets the highest standards set by the Pentagon for
security in its industry.
Sources of Data Bases
Information for TACTech's data base library is acquired from
various public and private sources, including semiconductor
manufacturers, defense contractors and the unclassified records
of the U.S. Government and its agencies. Approximately 50% of
TACTech's information for its data bases comes from numerous
companies in the private sector which generally make such
information available to persons having a recognized need for
same.
Trademarks, Copyrights and Licenses
TACTech maintains copyright protection for its computer
software and related data base service, and claims proprietary
trade secret protection through customer licensing agreements.
TACTech has not applied for Federal registration of its
tradename, and does not hold any patents to any of the technology
incorporated in its software or data services.
Research and Development
TACTech's research and development is principally concerned
with customer interface design, new information products and
system security.
Employees
TACTech employs nine (9) computer programmers and data
maintenance personnel, and an additional five (5) persons in
sales, marketing and customer support and two (2) persons in
administrative roles. No TACTech employees are covered by a
collective bargaining agreement.
78
<PAGE>
Properties
TACTech is currently renting facilities in Yorba Linda,
California from Arrow Electronics on a month-to-month basis at a
cost of $3,500 per month. Approximately 40% of TACTech's Yorba
Linda facility is currently in productive use.
Legal Proceedings
None.
79
<PAGE>
TACTECH MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
Results of Operations - Six Months Ended December 31, 1994
Compared To Six Months Ended December 31, 1993
----------------------------------------------------
TACTech generates revenues primarily through license
agreements for its data base services. These agreements are
generally for terms of 12 months, but may be cancelled by either
party upon 30 days' notice. The number of subscriber licenses
generating revenues was greater during the six months ended
December 31, 1994 as compared to the six months ended December
31, 1993. The following data indicates the licensing activity
for each period:
Six Months Ended
December 31, 1994 December 31, 1993
----------------- -----------------
Subscribers at beginning of period 47 34
Subscribers who did not renew (2) (2)
Subscribers added during period 10 10
-- --
Subscribers at end of period 55 42
== ==
TACTech earned net income of $43,000, or $2.81 per share,
for the six months ended December 31, 1994 compared to a net loss
of $51,000, or $3.37 per share, for the six months ended December
31, 1993.
Revenues for the six months ended December 31, 1994 were
$585,000 as compared to $411,000 for the six months ended
December 31, 1993. This represented an increase of 42% for the
six months ended December 31, 1994 over the prior comparable
period.
In May of 1994 TACTech was awarded a contract in the amount
of $79,000 for Phase I of a Department of Defense project to
survey, develop, demonstrate and test an information parts
management system to be used for management of component
obsolescence.
80
<PAGE>
Phase I of the project has been completed by TACTech. Phase
I involved the study of how obsolescence is affecting military
electronic systems and equipment an evaluation of ways to predict
future obsolescence problems and the design of a pilot project.
Phase I resulted in approximately $57,000 in revenue during the
six months ended December 31, 1994.
Phase II is to be awarded after an evaluation of the results
of Phase I. The maximum value of a Phase II award would be
$700,000 over a period of two years. Phase II would involve the
construction of a pilot project that analyzes and predicts
pending obsolescence within military platforms. TACTech intends
to bid on Phase II. No assurance can be given, however, as to
when Phase II will be awarded or whether TACTech will be awarded
a contract under Phase II.
In December 1994 TACTech released an additional information
service, which contains data for commercial and industrial grade
microcircuits. This service allows a subscriber to seek and
search for electronic component parts that are commercially
equivalent in function and packaging to military types of parts.
Selling, marketing, software development and maintenance
expense and depreciation increased to $543,000 for the six months
ended December 31, 1994 from $463,000 for the prior comparable
period. The increase is attributable primarily to an increase in
personnel as follows:
Number of Employees as of Six Months Ended
December 31, 1993 December 31, 1994
----------------- -----------------
Sales, marketing, training and
customer service 4 5
Software development, data base
maintenance and computer maintenance 8 9
General and administrative 1 2
-- --
Total 13 16
== ==
81
<PAGE>
Results of Operation - Fiscal Year 1994 Compared to Nine Months
-----------------------------------------------------------------
Ended June 30, 1993
-------------------
At the time of the Arrow sale in May 1993, TACTech changed
its fiscal year to June 30 and therefore the results of
operations are not directly comparable from fiscal period to
fiscal period.
Simultaneously with the disposition of the Sold Business,
TACTech entered into a three-year exclusive licensing agreement
with Arrow at an annual rate of $108,000. TACTech agreed that
during the term of this agreement it would not grant or authorize
any other party access to its data bases or services if such
party were in the business of distributing electronic components
parts. The agreement may be renewed for successive one-year
periods by mutual written consent of the parties.
The following data reflects TACTech's subscription history
for the fiscal periods indicated:
Nine Months Ended
June 30, 1993 Fiscal Year 1994
Subscribers at beginning of period 31 34
Subscribers who did not renew (3) (4)
Subscribers added during period 6 17
-- --
Subscribers at end of period 34 47
== ==
During the fiscal period ended June 30, 1994 TACTech
augmented and strengthened its marketing strategy by opening a
sales office in Leominster, Massachusetts. This office enabled
the Company to better penetrate the U.S. market east of the
Mississippi and the Canadian market.
During Fiscal Year 1994 TACTech expanded its information and
service capability by increasing its data base to include
military grade transistors and diodes (discrete devices) covering
82
<PAGE>
MIL-19500. Prior to the addition of discrete devices, the
TACTech data bases contained only microcircuits.
Trends
TACTech's intention is to position itself to capitalize on
the need for more efficient design service as the Department of
Defense budget contracts. Although a declining military budget
may result in a reduction in the total number or dollar value of
military projects, TACTech believes that Department of Defense
imperatives aimed at design efficiency for those projects will
make TACTech's services more valuable as a means of reducing the
incidence of technological obsolescence and assisting designers
in identifying the best available military industrial practices.
DIRECTORS AND MANAGEMENT OF ZING
--------------------------------
Board of Directors
In the event the Merger Agreement is NOT approved by
shareholders, Zing will continue to be managed under the
direction of its Board of Directors, which is currently comprised
of two classes with three members in each class as follows:
CLASS I CLASS II
(To Serve Until the (To Serve Until the
Annual Meeting of Annual Meeting of
Shareholders in 1996 Shareholders in 1995)
--------------------- ---------------------
Robert E. Schrader Henry A. Singer
Deborah J. Schrader John F. Catrambone
Martin S. Fawer Laurence W. Higgitt
At each annual meeting the class of directors whose terms
expire at such meeting is to stand for election for staggered
two-year terms ending on the date of the second annual meeting
following their election.
The following table sets forth certain information
concerning the directors of the Company.
83
<PAGE>
Director of
Name, Age, Principal Occupation, Other Directorships Zing Since
---------------------------------------------------- -----------
JOHN F. CATRAMBONE, 54, has been President and 1986
Chairman of the Board of Omnirel since 1985.
Omnirel has been a subsidiary of the Company since
June 1991.
MARTIN S. FAWER, 61, became Chief Financial Officer 1984
and Treasurer in February 1988. From October 1984
to January 1988 Mr. Fawer was Treasurer of the
Company. He is also a director of TACTech and
Omnirel. For more than five years, Mr. Fawer has
been a principal of Fawer and Kupczyk, P.C. and its
predecessors, certified public accountants.
LAURENCE W. HIGGITT, 48, has been employed by 1985
Stephen Rose & Partners, Limited, investment bankers,
in London, England since 1984 and has been on its
Board of Directors since 1985.
DEBORAH J. SCHRADER, 48, has been Secretary of the 1969
Company since its incorporation. She is also the
Secretary and a director of TACTech. She is the
wife of Robert E. Schrader.
ROBERT E. SCHRADER, 51, is the founder of the 1969
Company and has been President and Chief Executive
Officer since its incorporation in 1969. He is
also a director and vice president of TACTech and
Omnirel. He is the husband of Deborah J. Schrader.
HENRY A. SINGER, 57, has been a member of the law firm 1988
of Morrison Cohen Singer & Weinstein, LLP and its
predecessor for more than the past five years. Morrison
Cohen Singer & Weinstein, LLP serves as general counsel
to the Company.
Board Committees and Meetings
The Company maintains standing Audit, Executive and
Compensation Committees of the Board of Directors but does not
maintain a nominating committee. Each Committee was created on
July 31, 1985. The members of the Audit Committee are Henry A.
Singer and Laurence W. Higgitt. The Audit Committee, which met
during the fiscal year ended June 30, 1994 (the "1994 Fiscal
Year"), is responsible for assuring that management fulfills its
financial reporting responsibilities and will meet periodically
with representatives of management and with the Company's
independent auditors. The members of the Compensation Committee
during the 1994 Fiscal Year were Laurence W. Higgitt and Henry A.
Singer. The Compensation Committee, which met once during the
Fiscal Year 1994, is responsible for reviewing levels and methods
of executive compensation and making recommendations to the
Board. The members of the Executive Committee are Robert E.
84
<PAGE>
Schrader, Deborah J. Schrader and Martin S. Fawer. The Executive
Committee, which met twice during the Fiscal Year 1994, is
responsible for acting as required when the full Board is
unavailable for deliberation. The Company also maintains a Stock
Option Committee, whose members during the Fiscal Year 1994 were
Robert E. Schrader and Henry A. Singer. The Stock Option Com-
mittee did not meet during the Fiscal Year 1994. It has
responsibility to designate optionees under the Company's 1982
Incentive Stock Plan, the exercise price of the options, the date
of grant and period of the options, and other terms and
conditions. None of the members of the Stock Option Committee is
eligible to receive options while serving in such capacity. The
Board of Directors met twice during the Fiscal Year 1994. All of
the directors attended at least 75% of the Board's meetings,
except for Mr. Higgitt and Mrs. Schrader, each of whom attended
only one meeting.
Security Ownership of Management
The following table sets forth, as at March 1, 1995,
historical information (unadjusted for the Merger) concerning the
beneficial ownership of voting securities of the Company by all
current directors individually, by the Chief Executive Officer
and those executive officers of the Company whose total annual
salary and bonus exceeded $100,000 in Fiscal Year 1994, and by
all directors and officers as a group:
Title Name of Amount Percent
of Class Beneficial Owner Beneficially Owned of Class
-------- ----------------- ------------------ --------
Common John F. Catrambone 111,000 (1) 4.34%
Common Martin S. Fawer 104,736 (2) 4.03%
Common Laurence W. Higgitt 3,000 (1) *
Common Henry A. Singer 3,000 (1) *
___ Deborah J. Schrader -- --
Common Robert E. Schrader 1,227,211 47.08%
___ Malcolm Baca -- --
All Officers and Directors
as a Group (7 persons) 1,448,947 (3) 55.59%
_______________________
(*) Represents less than 1% of the shares outstanding.
(1) Includes 3,000 shares which may be acquired upon exercise
of Warrants.
(2) Includes 41,857 shares which may be acquired upon exercise
of Warrants.
(3) Includes 50,857 shares which may be acquired upon exercise
of Warrants.
85
<PAGE>
As of the date of this Proxy Statement/Prospectus, no
director of the Company is a director of any other company with a
class of securities registered pursuant to Section 12 of the Act
or of any company registered as an Investment Company under the
Investment Company Act of 1940. Other than Robert E. Schrader
and Deborah J. Schrader, who are married to each other, there is
no family relationship among any of the members of the Board of
Directors or the officers of the Company.
In November 1992, Mr. Singer settled a civil suit filed by
the SEC alleging that in August and November of 1987 he purchased
shares of common stock of a company listed on the New York Stock
Exchange based upon material non-public information. Mr. Singer
denied all allegations, except that he acknowledged that he in
fact purchased the shares of such company and sold them for a
profit of approximately $34,000 in April 1988. As part of such
settlement, Mr. Singer, without admitting any prior wrongdoing,
agreed to a permanent injunction against his violating securities
laws in future trading of any securities.
Executive Officers
Position with Company and Business
Name Age Experience During Past Five Years
---- --- ----------------------------------
Robert E. Schrader*
Deborah J. Schrader*
Martin S. Fawer*
John F. Catrambone*
Malcolm Baca 54 Vice President and
Treasurer of TACTech from
1987 to March 1995, and
Executive Vice President
and Chief Operating
Officer from March 1995.
_____________________
* See "Directors" above.
86
<PAGE>
Compensation of Directors and Executive Officers
Executive Compensation
----------------------
The following table sets forth a summary for the last three
fiscal years of the cash compensation paid by the Company and its
subsidiaries as well as certain other compensation paid or
accrued for those years, to the Chief Executive Officer of the
Company and the only two executive officers of the Company other
than the Chief Executive Officer whose aggregate total annual
salary and bonus exceeded $100,000 in the Fiscal Year 1994 (the
"Named Executive Officers").
<TABLE><CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term Compensation
--------------------------------------
Annual Compensation Awards Payouts
-------------------------------------------- --------------------- --------
Securities
Name and Other Restricted Underlying All Other
Principal Annual Stock Options/ LTIP Compensation(2)
Position Year(1) Salary($) Bonus($) Compensation($) Awards($) SARs (#) Payouts($) ($)
-------- ---- --------- -------- --------------- --------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert E. Schrader 1994 162,500 --- --- --- --- --- 1,800
President, Chief 1993 220,600 --- --- --- --- --- 1,481
Executive Officer 1992 318,270 --- --- --- --- --- 1,974
and Chairman of the Board
John F. Catrambone(3) 1994 185,004 50,000 --- --- --- --- 3,054
President of Omnirel 1993 146,750 --- --- --- --- --- 2,043
Corporation 1992 257,000 8,000 --- --- --- --- 3,969
Malcolm Baca 1994 161,479 --- --- --- --- --- 1,044
Vice President and 1993 111,754 --- --- --- --- --- 783
Treasurer of TACTech 1992 147,541 --- --- --- --- --- 1,044
</TABLE>
_______________
(1) On May 19, 1993 the Company's Board of Directors voted to change
the Company's fiscal year end to June 30 from September 30.
Information for Fiscal Year 1993 is for the nine months ended June
30, 1993. Information for the Fiscal Year 1992 is for the fiscal
year ended September 30, 1992.
(2) The amounts reflect the following payments of annual life
insurance premiums in the 1994 Fiscal Year: $1,800 on behalf of
Mr. Robert E. Schrader, $3,054 on behalf of Mr. John Catrambone
and $1,044 on behalf of Mr. Malcolm Baca.
(3) Amounts recorded as Salary include a contractually required annual
bonus of $60,000 ($45,000 for the nine-month Fiscal Year 1993).
See "Employment Contracts and Termination of Employment and
Change-of-Control Arrangements" below.
The above amounts do not include certain personal benefits, which do
not exceed as to any executive officer identified above, 10% of his
total Annual Compensation.
87
<PAGE>
Grants of Warrants
------------------
During the Fiscal Year 1994 no Warrants, options or stock
appreciation rights were granted by the Company to any Named
Executive.
Aggregated Warrant Exercises in Last Fiscal Year
and Fiscal Year-End Warrant Values
--------------------------------------------------
During the Fiscal Year 1994, no Warrants were exercised by
any of the Named Executive Officers. At the end of the Fiscal
Year 1994, of the Named Executive Officers only John F.
Catrambone owned unexercised Warrants. Of Mr. Catrambone's 3,000
unexercised Warrants, all were "in-the-money" and all were
exercisable at December 31, 1994. The value of Mr. Catrambone's
Warrants at December 31, 1994 was $11,355 based upon a value of
$5.125 per share of the Company's Common Stock which was the
closing bid price of such stock on the NASDAQ-NMS as at December
31, 1994. It is expected that prior to the Annual Meeting Mr.
Catrambone will exercise all of his Warrants.
Compensation of Directors
-------------------------
The Company pays each director who is not an officer or
employee of the Company (other than Henry A. Singer) $4,000 per
year for his services as a director plus $250 for each Board of
Directors meeting attended and for each Committee meeting
attended if not held on the same day as a Board meeting. Mr.
Singer does not receive such fee, since the firm of which he is a
partner is paid its customary legal fees for Mr. Singer's
attendance and participation. See "- Compensation Committee
Interlocks and Insider Participation" and "- Employment Contracts
and Termination of Employment and Change-in-Control Arrangements"
below.
Employment Contracts, Termination of Employment
and Change-in-Control Arrangements
Mr. John F. Catrambone has an employment agreement with
Omnirel. The five-year agreement, expiring in June of 1996,
provides for a base salary of $125,000 per year, a bonus of
$60,000 per year from Zing and an incentive bonus linked to a set
of performance criteria determined annually by Omnirel's Board of
Directors and subject to percentage limitations of Mr.
88
<PAGE>
Catrambone's base salary (70% for Fiscal Year 1994 and 75% for
Fiscal Year 1995). Mr. Catrambone was loaned $300,000, without
interest, by the Company when it purchased Omnirel. The Company
has guaranteed to Mr. Catrambone the base compensation payments
and pays the $60,000 annual bonus, which is used by Mr.
Catrambone to repay such loan. The Company also loaned Mr.
Catrambone $250,000 to purchase shares of the Company's Common
Stock. Such loan, which is due in June 2001, is secured by the
stock so purchased by Mr. Catrambone. Simultaneously with the
Merger, Zing will assign to Omnirel such $250,000 loan and
Omnirel will issue to Zing its $250,000 note due upon the earlier
to occur of Mr. Catrambone's repayment of the assigned loan or
December 31, 1998. The loan will be secured by the Merger
Consideration, other than the Cash Payment, to be received by Mr.
Catrambone in respect of such Company Common Stock.
Mr. Malcolm Baca has an employment agreement with TACTech.
The term of Mr. Baca's employment is set to expire on May 1,
1997. Mr. Baca's agreement entitles him to a salary of $120,000
per annum, plus five percent (5%) of TACTech's collected
revenues, except that on revenues attributable to another
commissioned member of TACTech's management Mr. Baca's commission
is two and one-half percent (2 1/2%). All commissions to Mr. Baca
are subject to his required contribution of one-half of one per
cent (1/2%) of TACTech's collected revenues to a bonus pool fund
for the benefit of non-commissioned members of management, which
contribution is matched by TACTech. In addition to other
customary terms, pursuant to the agreement Mr. Baca's
compensation is subject to a $350,000 per annum maximum. The
annual maximum is subject to increase based upon the National
Consumer Price Index. In the event Mr. Baca is terminated
without good cause, TACTech is obligated to continue to pay
compensation to Mr. Baca through April 30, 1997.
Mr. Robert E. Schrader does not have an employment agreement
with the Company and his compensation is set by the Compensation
Committee subject to the approval of the Board of Directors. In
connection with the Arrow Sale, Mr. Schrader entered into a
Consulting and Non-Competition Agreement with Arrow and Mr.
Martin Fawer (the Company's Chief Financial Officer) entered into
a one-year Consulting Agreement with Arrow. Pursuant to the
89
<PAGE>
terms of his agreement and after the May 19, 1993 closing of the
Arrow Sale, Mr. Schrader was required to devote up to fifteen
business days to the business of Arrow during the first three
months after such closing and up to ten business days during the
next three-month period after such closing, and currently is
required to devote up to five business days per quarter to the
business of Arrow. Mr. Fawer, upon reasonable request of and
notice by Arrow, was required to provide consulting services to
Arrow through March 19, 1994. Mr. Fawer assigned his rights to
receive his consulting fees under his agreement with Arrow to the
Company in exchange for the Company's setting his salary for
part-time services at $75,000.
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee during the 1994
Fiscal Year were Laurence W. Higgitt and Henry A. Singer. Henry
A. Singer, a director of the Company during the 1994 Fiscal Year,
is a partner of Morrison Cohen Singer & Weinstein, counsel to the
Company. Such firm was paid $179,548 for legal services rendered
to the Company for the Fiscal Year 1994, of which $5,491.50 was
paid in respect of Mr. Singer's attendance at Board and Committee
meetings.
Compensation Committee Report
-----------------------------
The Compensation Committee is responsible for reviewing
levels and methods of executive compensation and making
recommendations to the Board of Directors. Such recommendations
were made in the past primarily based upon comparisons of
executive compensation in other comparable companies engaged in
the distribution of high reliability electronic components.
Compensation in the Fiscal Year 1994 of the Named Executive
Officers other than the Registrant's Chief Executive Officer was
the result of contractual arrangements entered into between such
persons and their respective employers prior to the beginning of
the Fiscal Year 1994, and were not reviewed by the Compensation
Committee. Members of the Compensation Committee, which did not
formally meet in the Fiscal Year 1994, informally concurred in
management's decision to set 1994 compensation for Mr. Schrader
at $150,000 per annum, except that in the first fiscal quarter of
such year he was paid at an annual rate of $300,000 per annum.
The Committee has not met to determine 1995 compensation for Mr.
Schrader or any other executive officer, and as a result such
compensation continues at the 1994 annual rate. The Compensation
Committee is comprised of Laurence W. Higgitt and Henry A.
Singer.
90
<PAGE>
Comparative Stock Performance Graph For
---------------------------------------
The Company's Common Stock
--------------------------
The following is a graph comparing the annual percentage
change in the cumulative total shareholder return of the
Company's common stock with the cumulative total returns of the
published Dow Jones Equity Market Index and the Dow Jones
Semiconductors and Related Index for the Company's last five
fiscal years.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
Among Zing Technologies, Inc., Dow Jones Equity Market Index and
Semiconductors & Related Index
Fiscal Years Ended September 30, 1989 through 1992 and June 30,
1993 and 1994
- -------------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994
- -------------------------------------------------------------------------------
Zing Technologies, Inc. 100 72 76 44 68 64
- -------------------------------------------------------------------------------
Dow Jones Equity Market 100 115 124 142 162 164
- -------------------------------------------------------------------------------
Semiconductors & Related 100 142 140 167 326 361
- -------------------------------------------------------------------------------
91
<PAGE>
Interest in Certain Transactions of Directors,
Officers and Principal Holders of Voting Securities
The Company paid Morrison Cohen Singer & Weinstein, of which
Henry A. Singer, a director of the Company, is a partner,
$179,548 for legal services rendered to the Company for legal
services rendered to the Company in the Fiscal Year 1994, of
which $5,491.50 was paid in respect of Mr. Singer's attendance at
Board and Committee meetings.
As of the Effective Time, Omnirel and TACTech will enter
into three-year Management Services Agreements with Zing.
Omnirel will pay Zing $150,000 per annum and TACTech will pay
Zing $75,000 per annum to provide managerial oversight services
previously performed by Zing with charges for such services
included in general corporate charges. It is expected that such
services will be performed by Robert E. Schrader, Zing's Chief
Executive Officer, and Martin S. Fawer, Zing's Chief Financial
Officer.
92
<PAGE>
DIRECTORS AND MANAGEMENT OF OMNIREL
-----------------------------------
Board of Directors
The names and ages of all directors of Omnirel, their other
positions with Zing or TACTech, their term of office and their
business background are set forth below:
Director of
Name, Age, Principal Occupation, Other Directorships Omnirel Since
---------------------------------------------------- -----------
JOHN F. CATRAMBONE, 54, has been President of 1985
Omnirel since 1985 and was Chairman of the Board
from 1985 until 1991. He has also been a director
of Zing since 1986.
ROBERT E. SCHRADER, 51, has been Chairman of the Board 1991
of Omnirel since 1991 and is also President and a
director of TACTech. He is the founder of Zing and
has been the Chairman of the Board, President and Chief
Executive Officer since its incorporation in 1969. He is
the husband of Deborah J. Schrader.
MARTIN S. FAWER, 61, has been Secretary of Omnirel since 1991
1991 and its Chief Financial Officer since March 1995. He
is also a director, the Chief Financial Officer and
Treasurer of Zing and of TACTech. For more than five years,
Mr. Fawer has been a principal of Fawer and Kupczyk, P.C.
and its predecessors, certified public accountants.
[Add: 2 independent directors]
The Omnirel certificate of incorporation (the "Omnirel
Charter") provides for a classified Board of Directors, with not
fewer than three (3) nor more than eleven (11) members, but no
more than nine (9) members if any shares of Omnirel Preferred
Stock are outstanding. Subject to the foregoing, the Omnirel
Charter further authorizes the Board to create and fill new
directorships by a majority vote. Assuming that the Board does
not increase the number of directors above five (5), pursuant to
the Omnirel Charter, at the first annual meeting of stockholders
following the Effective Time, the members of one class will be
elected for a term of one year (1) and the members of the other
class will be elected for a term of two (2) years.
93
<PAGE>
Security Ownership of Certain Beneficial Owners
The following table sets forth, as of April ___, 1995,
(after giving effect to the Omnirel stock split which will occur
on or prior to the Effective Time) information concerning
beneficial ownership of voting securities of Omnirel by each
person who is known by management to own beneficially more than
5% of any class of such securities:
94
<PAGE>
Amount
Title Name and Address Beneficially Percent of
of Class of Beneficial Owner Owned(1) Class(1)
-------- ------------------- ----- -----
Common Zing Technologies, Inc. 2,694,971 98.21%
115 Stevens Avenue
Valhalla, NY 10595
_________________
(1) The foregoing table does not give effect to the exercise of the
following outstanding Omnirel options by certain members of
Omnirel management, the exercise of which is reflected
elsewhere in this Proxy Statement/Prospectus: options to
acquire 57,511 shares of Omnirel Common Stock at $3.83 per
share and options to acquire 350,295 shares of Omnirel Common
Stock at $3.06 per share (all on a post-Merger basis). None of
these options may be exercised within sixty (60) days of the
date hereof. See "Non-Qualified Stock Option Exchange Plan"
and "1995 Non-Qualified Stock Option Plan" below.
Security Ownership of Management
The following table sets forth, as of April ___, 1995,
(after giving effect to the Omnirel stock split which will occur
on or prior to the Effective Time) information concerning the
beneficial ownership of Omnirel Common Stock by all current
directors individually, by the Chief Executive Officer and those
executive officers of Omnirel whose total annual salary and bonus
exceeded $100,000 in the Fiscal Year 1994, and by all directors
and officers as a group:
Amount
Title Name and Address Beneficially Percent of
of Class of Beneficial Owner Owned(1) Class(1)
-------- ------------------- ----- -----
Common John F. Catrambone 0(2) 0%(2)
Common Robert E. Schrader 2,694,971(3) 98.21%(3)
Common All Officers and
Directors as a
Group (nine persons) 2,694,971(2)(3)(4) 98.21%(2)(3)(4)
----
_________________
(1) The foregoing table does not give effect to the exercise of the
following outstanding Omnirel options by certain members of
Omnirel management, the exercise of which is reflected
elsewhere in this Proxy Statement/Prospectus: options to
acquire 57,511 shares of Omnirel Common Stock at $3.83 per
share and options to acquire 350,295 shares of Omnirel Common
Stock at $3.06 per share (all on a post-Merger basis). None of
these options may be exercised within sixty (60) days of the
date hereof. See "Non-Qualified Stock Option Exchange Plan"
and "1995 Non-Qualified Stock Option Plan" below.
(2) Does not include (i) options to acquire 261,414 shares of
Omnirel Common Stock at an exercise price of $3.06 per share,
none of which options may be exercised within sixty (60) days
from the date hereof, (ii) previously owned shares of Omnirel
Common Stock and options to acquire shares of Omnirel Common
Stock which were exchanged for such 261,414 options, nor (iii)
111,000 Zing Shares to be exchanged for 111,000 shares of
Omnirel Common Stock pursuant to the Merger. See "Non-
Qualified Stock Option Exchange Plan" below.
(3) Reflects control of 2,694,971 shares of Omnirel Common Stock
through the Major Shareholder's control of Zing.
(4) Does not include (i) options to acquire 75,679 shares of
Omnirel Common Stock at an exercise price of $3.06 per share
and options to acquire 10,457 shares of Omnirel Common Stock at
an exercise price of $3.83, none of which options may be
exercised within sixty (60) days from the date hereof, nor (ii)
215,736 Zing Shares to be exchanged by certain officers and
directors for 215,736 shares of Omnirel Common Stock pursuant
to the Merger. See "Non-Qualified Stock Option Exchange Plan"
and "1995 Non-Qualified Stock Option Plan" below.
95
<PAGE>
John F. Catrambone, Robert E. Schrader, Martin S. Fawer [and
___________________] are directors of Zing. As of the date of
this Proxy Statement/Prospectus, except with respect to Zing, no
director of Omnirel is a director of any company with a class of
securities registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or of any
company registered as an Investment Company under the Investment
Company Act of 1940. There is no family relationship among any
members of the Board of Directors or the officers of Omnirel.
96
<PAGE>
Executive Officers
Position with Company and Business
Name Age Experience During Past Five Years
---- --- ---------------------------------
John F. Catrambone*
Martin S. Fawer*
Robert E. Schrader*
[Thomas C. Teebagy, Jr.] ___ [Vice President-Manufacturing]
Rosario Gioia 65 Vice President - Engineering since June
1989.
Mark W. Lynch 41 Vice President - Planning since October
1, 1994. Vice President - Operations
from April 5, 1993 until October 1,
1994. From February 1988 until April
1993 Mr. Lynch was Vice President -
Manufacturing of Avatar Corporation,
Hopkinton, MA.
Richard R. Muller 42 Vice President - Sales and Marketing
since January 18, 1994. From October
1991 until January 18, 1994, Mr. Muller
was National Sales Manager of TAG
Semiconductors Ltd. of Burlington, MA.
Prior to October 1991, Mr. Muller was
employed by Unitrode Corporation for a
period of 13 years, and most recently
served as Director of Sales and
Marketing.
Alan D. Tasker 52 Vice President - New Product Development
since October 15, 1994. From March 12,
1990 Mr. Tasker was Director of New
Product Development at Omnirel.
John H. Allwein, Jr. 40 Director of Finance since May 11,
1987.
_______________
* See "Directors" above.
97
<PAGE>
Compensation of Directors and Executive Officers
Executive Compensation
----------------------
The following table shows, for the three most recently ended
fiscal years, the cash compensation paid or accrued for those
years to the Chief Executive Officer of Omnirel. No executive
officer of Omnirel other than the Chief Executive Officer was
paid an aggregate annual salary and bonus in compensation, for
services rendered in all capacities in which he served, in excess
of $100,000 for Omnirel's last fiscal year.
<TABLE><CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term Compensation
--------------------------------------
Annual Compensation Awards Payouts
-------------------------------------------- --------------------- --------
Securities
Name and Other Restricted Underlying All Other
Principal Annual Stock Options/ LTIP Compensation(2)
Position Year(1) Salary($) Bonus($) Compensation($) Awards($) SARs (#) Payouts($) ($)
-------- ---- --------- -------- --------------- --------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John F. Catrambone(3) 1994 125,004 50,000 --- --- --- --- ---
Chief Executive Officer 1993 101,750 --- --- --- --- --- ---
1992 197,000 8,000 --- --- --- --- ---
</TABLE>
_______________
(1) On May 19, 1993, Omnirel's Board of Directors voted to
change Omnirel's fiscal year end to June 30 from
September 30. Information for the Fiscal Year 1993 is
for the nine months ended June 30, 1993. Information
for the Fiscal Year 1992 is for the fiscal year ended
September 30, 1992.
(2) Does not reflect payment by Zing for annual life
insurance premiums in Fiscal Year 1994 of $3,054, in
Fiscal Year 1993 of $2,043 and in Fiscal Year 1992 of
$3,969.
(3) Amounts recorded as Salary do not include a
contractually required annual bonus of $60,000 ($45,000
for the nine-month Fiscal Year 1993) payable by Zing.
See "Employment Contracts, Termination of Employment and
Change-of-Control Arrangements" below.
The above amounts do not include certain personal benefits,
which do not exceed, as to the Chief Executive Officer, 10%
of his total Annual Compensation.
98
<PAGE>
Management Incentive Rights Plan
--------------------------------
On June 26, 1991, Omnirel established a Management Incentive
Rights Plan (the "Incentive Plan") whereby various senior
management participants were granted rights, contingent upon
Omnirel's obtaining certain earnings levels ("Incentive Rights"),
to be compensated as the value of Omnirel increased.
Compensation was to be awarded upon the occurrence of certain
triggering events, and varied in amount according to which of
such events occurred. No compensation was earned under the
Incentive Plan in Fiscal Year 1994. The Incentive Plan was
terminated as of January 1, 1995 and Non-Qualified Exchange
Options were issued in replacement for the Incentive Rights under
the Incentive Plan (see "Non-Qualified Stock Option Exchange
Plan" below).
Grants of Warrants, Options and SARs in Last Fiscal Year
--------------------------------------------------------
No warrants, options or SARs were granted to the Chief
Executive Officer of Omnirel and no other executive officer was
paid an annual salary and bonus in excess of $100,000 for
Omnirel's last fiscal year.
Qualified Stock Option Plan
---------------------------
On August 15, 1986, Omnirel established a qualified stock
option plan, as amended June 26, 1991 (the "Qualified Option
Plan"), pursuant to which 15,030 shares (39,291 shares as
adjusted for the Merger) of Omnirel Common Stock have been
issued. On March 23, 1995, options for 6,056 Shares included in
the foregoing total (15,831 as adjusted for the Merger) were
granted under the Qualified Option Plan to various members of
Omnirel management and all such options were exercised on such
date and paid for with bonuses from Omnirel. All options granted
under the Qualified Option Plan were granted at exercise prices
of $3.00, $5.00 and $6.50 per share ($1.15, $1.91 and $2.49 per
share, respectively, as adjusted for the Merger). The Qualified
Option Plan has been terminated and no options are outstanding
thereunder.
99
<PAGE>
Non-Qualified Stock Option Exchange Plan
----------------------------------------
On March 23, 1995, Omnirel established its 1995 Non-
Qualified Stock Option Exchange Plan (the "Non-Qualified Exchange
Plan") covering 134,000 shares (350,295 shares as adjusted for
the Merger) of Omnirel Common Stock. Pursuant to the Non-
Qualified Exchange Plan, all holders of Incentive Rights under
the Incentive Plan (other than John F. Catrambone) exchanged such
Rights as of March 23, 1995 for options to purchase an aggregate
of 34,000 shares (88,881 shares as adjusted for the Merger) of
Omnirel Common Stock (the "Non-Qualified Exchange Options"). As
of March 23, 1995, Mr. Catrambone surrendered 18,872.4 shares
(49,335 shares as adjusted for the Merger) of Omnirel Common
Stock, 2,000 unexercised options (5,228 unexercised options as
adjusted for the Merger) under the Qualified Option Plan and 45
Incentive Rights under the Incentive Plan in exchange for 100,000
(261,414 as adjusted for the Merger) Non-Qualified Exchange
Options. Each Non-Qualified Exchange Option entitles the holder
to purchase a share of Omnirel Common Stock at an exercise price
of $8.00 per share ($3.06 per share as adjusted for the Merger).
Optionees may exercise such Options as follows: up to 33%
commencing one year from the date of grant; up to 67% commencing
two years from the date of grant; and the balance commencing
three years from the date of grant. With respect to all of the
options granted under the Non-Qualified Exchange Plan, credit has
been given for vesting purposes for service from January 1, 1995.
No further options are available for grant under the Non-
Qualified Exchange Plan.
1995 Non-Qualified Stock Option Plan
------------------------------------
On March 23, 1995, the Omnirel Board of Directors adopted
its 1995 Non-Qualified Stock Option Plan (the "1995 Non-Qualified
Option Plan") and on March 23, 1995, the Omnirel shareholders
approved the 1995 Non-Qualified Option Plan, pursuant to which
100
<PAGE>
45,000 shares (117,636 shares as adjusted for the Merger) of
Omnirel Common Stock have been reserved and authorized for
issuance. Each option under the 1995 Non-Qualified Option Plan
is exercisable as follows: up to 20% commencing one year from the
date of grant; up to 40% commencing two years from the date of
grant; up to 60% commencing three years from the date of grant;
up to 80% commencing four years from the date of grant; and the
balance commencing the fifth year from the date of grant. The
1995 Non-Qualified Option Plan terminates ten years after the
date of adoption. As of March 23, 1995, there were 22,000
options (57,511 options as adjusted for the Merger) granted under
the 1995 Non-Qualified Option Plan at an exercise price of $10.00
per share ($3.83 per share as adjusted for the Merger) and, with
respect to all such options, credit has been given for vesting
purposes for service from January 1, 1995.
<TABLE><CAPTION>
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option/SAR Values
-----------------------------------------------
Value of
Unexercised
Shares Number of Unexercised In-the-Money
Acquired Options/SARs at Options/SARs at
on Value FY-End (#)(1) FY-End($)(1)
Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John F. Catrambone 2,000 0
45 0
</TABLE>
_________________
(1) As of March 23, 1995, Mr. Catrambone surrendered all 2,000 options
(5,228 options as adjusted for the Merger) under the Qualified Option
Plan and 45 Incentive Rights for cancellation in partial consideration
for a grant of 100,000 (261,414 as adjusted for the Merger) Non-
Qualified Exchange Options. See "Non-Qualified Stock Option Plan"
above.
Compensation of Directors
-------------------------
Omnirel does not pay directors for their services as
directors. Omnirel may, in the future, pay directors who are not
officers or employees of Omnirel for their services as directors
plus a fee for committee meetings attended.
101
<PAGE>
Employment Contracts, Termination of Employment
and Change-in-Control Arrangements
John Catrambone has an employment agreement with Omnirel.
The five year agreement, expiring in June of 1996, provides for a
base salary of $125,000 per year, a bonus of $60,000 per year
from Zing and an incentive bonus linked to a set of performance
criteria determined annually by Omnirel's Board of Directors and
subject to percentage limitations of Mr. Catrambone's base salary
(70% for Fiscal Year 1994 and 75% for Fiscal Year 1995). Mr.
Catrambone was loaned $300,000, without interest, by Zing when it
purchased Omnirel. Zing has guaranteed to Mr. Catrambone the
base compensation payments and pays the $60,000 annual bonus,
which is used by Mr. Catrambone to repay such loan. Zing also
loaned Mr. Catrambone $250,000 to purchase shares of Zing Common
Stock, which loan is secured by the shares of Zing Common Stock
so purchased by Mr. Catrambone. Simultaneously with the Merger,
Zing will assign to Omnirel such $250,000 loan and Omnirel will
issue to Zing its $250,000 note due upon the earlier to occur of
Mr. Catrambone's repayment of the assigned loan or December 31,
1998. The loan will be secured by the Merger Consideration,
other than the Cash Payment, to be received by Mr. Catrambone in
respect of such Zing Common Stock.
Compensation Committee Interlocks And Insider Participation
There are no committees of the Omnirel Board of Directors.
Interest in Certain Transactions of Directors, Officers and
Principal Holders of Voting Securities.
As of the Effective Time, Omnirel and Zing will enter into a
three-year Management Services Agreement. Omnirel will pay Zing
$150,000 per annum to provide managerial oversight services
previously performed by Zing with charges for such services
102
<PAGE>
included in general corporate charges. Such services will be
performed by Robert E. Schrader, Zing's Chief Executive Officer,
and Martin S. Fawer, Zing's Chief Financial Officer. Messrs.
Schrader and Fawer are directors of Omnirel; Mr. Schrader is also
Chairman of the Board of Omnirel and Mr. Fawer is the Chief
Financial Officer and Secretary of Omnirel.
103
<PAGE>
DIRECTORS AND MANAGEMENT OF TACTECH
-----------------------------------
Board of Directors
The names and ages of all Directors of TACTech, their other
positions with Zing or Omnirel, their term of office and their
business background are set forth below.
Director of
Name, Age, Principal Occupation, Other Directorships TACTech Since
----------------------------------------------------- -------------
ROBERT E. SCHRADER, 51, has been President of TACTech 1987
since its organization in 1987 and is also Vice
President and a director of Omnirel. He is the founder
of Zing, its President and Chief Executive Officer
since its incorporation in 1969. He is the husband of
Deborah J. Schrader.
MARTIN S. FAWER, 61, has been the Chief Financial Officer 1987
and Treasurer of TACTech since _________, 1995 and from
June 1, 1987 until that date he was Vice President and
Assistant Treasurer. He is also the Chief Financial
Officer and Treasurer of Zing. For more than five years
Mr. Fawer has been a principal of Fawer and Kupczyk, P.C.,
and its predecessors, certified public accountants.
DEBORAH J. SCHRADER, 48, has been Secretary of TACTech 1987
since its organization in 1987. She has also been the
Secretary and a director of Zing since its organization
in 1969. She is the wife of Robert E. Schrader.
[Add 2 independent directors.]
The TACTech certificate of incorporation (the "TACTech
Charter") provides for a classified Board of Directors, with not
fewer than three (3) nor more than eleven (11) members. Subject
to the foregoing, the TACTech Charter further authorizes the
104
<PAGE>
Board to create and fill new directorships by a majority vote.
Assuming that the Board does not increase the number of directors
above five (5), pursuant to the TACTech Charter, at the first
annual meeting of stockholders following the Effective Time, the
members of one class will be elected for a term of one year (1)
and the members of the other class will be elected for a term of
two (2) years.
Security Ownership of Certain Beneficial Owners
The following table sets forth, as of April ___, 1995,
(after giving effect to the TACTech stocksplit which will occur
on or prior to the Effective Time) information concerning
beneficial ownership of voting securities of TACTech by such
persons who are known by management to own beneficially more than
5% of any class of such securities:
Amount
Title Name and Address Beneficially Percent of
of Class of Beneficial Owner Owned Class
-------- ------------------- ----- -----
Common Zing Technologies, Inc. 673,743 90.00%
115 Stevens Avenue
Valhalla, New York 10595
Common Malcolm Baca 74,860 10.00%
24611 Catalonia
Mission Viejo, California
Security Ownership of Management
The following table sets forth, as of April ___, 1995,
(after giving effect to the TACTech stocksplit which will occur
on or prior to the Effective Time) information concerning
beneficial ownership of voting securities of TACTech Common Stock
by all current directors individually, by the Chief Executive
Officer and the executive officers of TACTech whose total annual
salary and bonus exceeded $100,000 in Fiscal Year 1994, and by
all directors and officers as a group:
Amount
Beneficially Percent of
Owned Class
----- -----
Robert E. Schrader(1) 673,743 90.00%
Malcolm Baca 74,860 10.00%
All Officers and Directors
as a Group
(four persons)(2) 748,603 100.00%
_______________
(1)Reflects control of 673,743 shares of TACTech Common Stock
through the Major Shareholder's control of Zing.
(2)Includes the shares described in footnote (1).
105
<PAGE>
Martin S. Fawer, Robert E. Schrader and Deborah J. Schrader
are directors of Zing. As of the date of this Proxy
Statement/Prospectus, except for the foregoing no other director
of TACTech is a director of any company with a class of
securities registered pursuant to Section 12 of the Exchange Act,
or any company registered as an Investment Company under the
Investment Company Act of 1940. Other than Robert E. Schrader
and Deborah J. Schrader, who are married to each other, there is
no family relationship among any members of the Board of
Directors or the officers of TACTech.
Executive Officers
Position with Company and Business
Name Age Experience During Past Five Year
---- --- -----------------------------------
Robert E. Schrader*
Deborah J. Schrader*
Martin S. Fawer*
Malcolm Baca 54 Vice President and Treasurer from
1987 to March 1995; Executive Vice
President and Chief Operating
Officer since March 1995.
_______________
* See "Directors" above.
Compensation of Directors and Executive Officers
Executive Compensation
----------------------
The following table shows, for the three most recently ended
fiscal years, the cash compensation paid or accrued for those
years to the Chief Executive Officer of TACTech and to each of
the four most highly compensated executive officers of TACTech
other than the Chief Executive Officer whose aggregate annual
salary and bonus paid in compensation for services rendered in
all the capacities in which they served exceeded $100,000 for
TACTech's last fiscal year (the "Named Executives").
106
<PAGE>
<TABLE><CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term Compensation
--------------------------------------
Annual Compensation Awards Payouts
-------------------------------------------- --------------------- --------
Securities
Name and Other Restricted Underlying All Other
Principal Annual Stock Options/ LTIP Compensation(2)
Position Year(1) Salary($) Bonus($) Compensation($) Awards($) SARs (#) Payouts($) ($)
-------- ---- --------- -------- --------------- --------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert E. Schrader(3) 1994 --- --- --- --- --- --- ---
President 1993 --- --- --- --- --- --- ---
1992 --- --- --- --- --- --- ---
Malcolm Baca 1994 161,479 --- --- --- --- --- 1,044
Vice President 1993 111,754 --- --- --- --- --- 783
1992 147,541 --- --- --- --- --- 1,044
</TABLE>
_______________
(1) On May 19, 1993, TACTech's Board of Directors voted to change
TACTech's fiscal year end to June 30 from September 30. Information
for Fiscal Year 1993 is for the nine months ended June 30, 1993.
Information for the Fiscal Year 1992 is for the fiscal year ended
September 30, 1992.
(2) Reflects payment by Zing for annual life insurance premiums in the
Fiscal Year 1994 of $1,044 on behalf of Mr. Baca.
(3) Does not reflect any amounts of cash or other compensation received by
Mr. Robert E. Schrader as an executive officer of Zing. Mr. Schrader
does not receive any compensation from TACTech.
The above amounts do not include certain personal benefits, which do not
exceed, as to any executive officer identified above, 10% of his total
Annual Compensation.
Grants of Warrants, Options and SAR's
-------------------------------------
During the 1994 Fiscal Year and currently, TACTech has no
warrant, option, stock appreciation rights or other long-term
compensation plan for its employees and has not previously
granted or issued any warrants, options or stock appreciation
rights.
Compensation of Directors
-------------------------
TACTech does not pay directors for their services as
directors. TACTech may, in the future, pay directors who are not
officers or employees for their services as directors plus a fee
for committee meetings attended.
107
<PAGE>
Employment Contracts, Termination of Employment
and Change-in-Control Arrangements
Mr. Malcolm Baca has an employment agreement with TACTech.
The term of Mr. Baca's employment is set to expire on May 1,
1997. Mr. Baca's agreement entitles him to a salary of $120,000
per annum, plus five percent (5%) of TACTech's collected
revenues, except that on revenues attributable to another
commissioned member of TACTech's management Mr. Baca's commission
is two and one half percent (2 1/2%). All commissions to Mr. Baca
are subject to his required contribution of one-half of one
percent (1/2%) of TACTech's collected revenues to a bonus pool
fund for the benefit of non-commissioned members of management,
which contribution is matched by TACTech. In addition to other
customary terms, pursuant to the agreement, Mr. Baca's
compensation is subject to a $350,000 per annum maximum. The
annual maximum is subject to increase based upon the National
Consumer Price Index. In the event Mr. Baca is terminated
without good cause, TACTech is obligated to continue to pay
compensation to Mr. Baca through April 30, 1997.
Mr. Robert E. Schrader does not have an employment agreement
with TACTech. His compensation is paid by Zing and set by the
Compensation Committee of Zing's Board of Directors, subject to
the approval of Zing's Board of Directors.
Interest in Certain Transaction of Directors, Officers and
Principal Holders of Voting Securities
As of the Effective Time, TACTech and Zing will enter into a
three-year Management Services Agreement. TACTech will pay Zing
$75,000 per annum to provide managerial oversight services
previously performed by Zing with charges for such services
included in general corporate charges. Such services will be
performed by Robert E. Schrader, Zing's Chief Executive Officer,
and Martin S. Fawer, Zing's Chief Executive Officer. Messrs.
Schrader and Fawer are directors of TACTech; Mr. Schrader is also
the President of TACTech and Mr. Fawer is its Chief Financial
Officer.
108
<PAGE>
MARKET PRICE OF AND DIVIDENDS FOR THE COMPANY'S COMMON
-------------------------------------------------------
STOCK AND RELATED SHAREHOLDER MATTERS
-------------------------------------
The Common Stock of the Company is traded on NASDAQ-NMS,
under the symbol ZING. The following table sets forth the high
and low closing sales prices of the Company's Common Stock on the
NMS for each quarterly period during the last two fiscal years.
High Low
2nd Quarter Fiscal Year 1993 2 7/8 1 3/8
3rd Quarter Fiscal Year 1993 2 7/8 2 1/4
1st Quarter Fiscal Year 1994 2 1/2 1 7/8
2nd Quarter Fiscal Year 1994 2 1/4 1 5/8
3rd Quarter Fiscal Year 1994 2 1/4 1 7/8
4th Quarter Fiscal Year 1994 2 1/4 1 3/4
1st Quarter Fiscal Year 1995 2 2 1/4
2nd Quarter Fiscal Year 1995 6 3/4 2 1/16
There were 2,555,640 shares of Zing Common Stock
outstanding and 86 holders of record, and at least 390 beneficial
owners of the shares as of March 1, 1995.
No cash dividends have been declared or paid on Zing Common
Stock for the fiscal years ended June 30, 1994 and 1993. The
present policy of Zing is to retain earnings to provide funds for
the operation and expansion of its business.
DESCRIPTION OF OMNIREL CAPITAL STOCK
------------------------------------
Authorized Capital Stock
Omnirel's authorized capital stock currently [after
reincorporation in Delaware] consists of 10,000,000 authorized
shares of Omnirel Common Stock, $.01 par value, of which
1,049,761 shares are issued and outstanding, and 5,000,000 shares
of preferred stock, of which 2,694,971 shares constitute the
109
<PAGE>
series of Omnirel Preferred Stock, $.01 par value, referred to
herein, none of which is issued or outstanding. If the Merger
Agreement is approved, there will be a recapitalization of
Omnirel based upon an approximately 2.61414-for-one common stock
split. Assuming that no shareholders of Zing exercise their
appraisal rights, at the Effective Time there will be issued and
outstanding 2,744,227 shares of Omnirel Common Stock, and
2,694,971 shares of Omnirel Preferred Stock. The terms of such
capital stock will continue unchanged after the Merger.
Common Stock
The holders of Omnirel Common Stock after the Merger will
be entitled to one vote for each share on all matters to be voted
upon by Omnirel shareholders, including the election of
directors, and, except as otherwise required by law or provided
in any resolution adopted by the Omnirel Board of Directors with
respect to Omnirel Preferred Stock, the holders of such shares
will possess exclusively all voting power subject, however, to
the right of the holders of Preferred Stock voting as a class to
elect two members of the Omnirel Board of Directors in the event
of a change in control of Omnirel (see "Preferred Stock"). The
holders of Omnirel Common Stock will not have any cumulative
voting rights, nor any conversion, redemption or preemptive
rights. Subject to the rights of holders of any outstanding
Omnirel Preferred Stock to receive a preferred dividend (see
"Preferred Stock" and "Dividends on Preferred Stock" below), and
to any preferential rights of any outstanding series of other
Omnirel preferred stock designated by the Omnirel Board of
Directors from time to time, the holders of Omnirel Common Stock
will be entitled to such dividends as may be declared from time
to time by the Omnirel Board of Directors from funds legally
available therefor, and upon the dissolution, liquidation or
winding up of Omnirel, whether voluntary or involuntary, will be
entitled to receive pro rata all assets of Omnirel legally
available for distribution to such holders.
110
<PAGE>
Market for Common Stock
The shares of Omnirel Common Stock to be distributed to
holders of Zing Shares in connection with the Merger will be
freely transferable. There is not currently a public market for
the Omnirel Common Stock. Prices at which the Omnirel Common
Stock may trade after the Merger cannot be predicted. Until the
Common Stock is fully distributed and an orderly market develops,
the prices at which trading in such stock occurs may fluctuate
significantly. The prices at which the Omnirel Common Stock
trades will be determined by the marketplace and may be
influenced by many factors, including, among others, the depth
and liquidity of the market for Omnirel Common Stock, investor
perception of Omnirel and the industry in which Omnirel
participates, Omnirel's dividend policy and general economic and
market conditions.
Omnirel has applied for listing of its Common Stock on the
NASDAQ-NMS following the Merger under the symbol of "OMNL."
Dividends on Common Stock
Omnirel does not currently intend to pay cash dividends on
its Common Stock. The dividend policy of Omnirel will be
reviewed from time to time by the Omnirel Board of Directors in
light of its earnings and financial condition and such other
business considerations as the Board considers pertinent.
Preferred Stock
The holders of Omnirel Preferred Stock will not be entitled
to vote on any matters to be voted on by holders of Omnirel
Common Stock, except in the event of a change in control of
Omnirel, in which event the holders of Preferred Stock, voting as
a class, will be entitled to elect two members of the Omnirel
Board of Directors. A "change in control" means: (i) any sale or
issuances or series of sales and/or issuance of shares of
Omnirel's capital stock by Omnirel or any holders thereof which
results in any person or group of affiliated persons (other than
the owners of Common Stock and Preferred Stock or their
affiliates as of the Effective Time) owning capital stock of
Omnirel with voting power to elect a majority of the Board, and
111
<PAGE>
(ii) any merger or consolidation to which Omnirel is a party,
except for a merger in which Omnirel is the surviving corporation
if, after giving effect to such merger, the holders of Omnirel's
outstanding capital stock immediately prior to the merger possess
sufficient voting power to elect a majority of the Board.
Omnirel's certificate of incorporation provides for a Board of
Directors consisting of a minimum of three (3) members and a
maximum of eleven (11), provided that no more than nine (9)
directors may be elected for so long as any shares of Omnirel
Preferred Stock are outstanding.
Dividends on Preferred Stock
Holders of Preferred Stock will be entitled to receive a
cumulative preferred dividend
[ ]% per annum of the liquidation preference of $1.30 per
share. The aggregate amount of the liquidation preference is
$3,500,000. Payment of such dividends is subject to declaration
at the discretion of the Omnirel Board of Directors and to
restrictions imposed by the Bank and may be made only from funds
legally available therefor.
Redemption of Preferred Stock
The Preferred Stock may be redeemed in whole or in part
upon determination by the Omnirel Board of Directors at any time
upon not more than sixty (60) and not less than thirty (30) days'
written notice to the holders of Preferred Stock at a redemption
price per share equal to $1.30 per share. Upon redemption of the
Preferred Stock, the holders thereof will also be entitled to
receive payment in full of any unpaid dividends, without
interest, from funds legally available for payment therefor.
Upon the dissolution, liquidation or winding up of Omnirel,
whether voluntary or involuntary, holders of Preferred Stock will
be entitled to a preferential distribution for payment in full of
any unpaid dividends, without interest, and thereafter of $1.30
per share, from all assets of Omnirel legally available for
distribution to such shareholders. The amount of any partial
redemption shall be paid, pro rata, to all holders of Omnirel
Preferred Stock, first, in payment of any accrued but unpaid
dividends and, second, in partial payment of the redemption
price. In the event of any payment in partial redemption of the
112
<PAGE>
Preferred Stock, the payment to which a shareholder shall
thereafter be entitled upon full redemption, or upon Omnirel's
dissolution, liquidation or winding up, shall be reduced by the
amount of all prior payments in partial redemption (exclusive of
any amounts representing accrued but unpaid dividends). A copy
of Omnirel's Preferred Stock Certificate of Designation, which
describes in detail the rights of holders of Omnirel Preferred
Stock (identified in such Certificate of Designation as "Series A
Cumulative Redeemable Preferred Stock"), is appended to this
Proxy Statement/Prospectus as Annex III.
Market for Preferred Stock
The shares of Omnirel Preferred Stock to be distributed to
holders of Zing Shares in connection with the Merger will be
freely transferable. There is not currently a public market for
the Omnirel Preferred Stock. Prices at which the Omnirel
Preferred Stock may trade after the Merger cannot be predicted.
Until the Preferred Stock is fully distributed and an orderly
market develops, the prices at which trading in such stock occurs
may fluctuate significantly. The prices at which the Omnirel
Preferred Stock trades will be determined by the marketplace and
may be influenced by many factors, including, among others, the
depth and liquidity of the market for Omnirel Preferred Stock,
investor perception of Omnirel's financial condition, its ability
to pay the cumulative preferred dividend and the likelihood of
redemption.
It is anticipated that the Preferred Stock will trade on
the OTC Bulletin Board or in the pink sheets of the Automated
Quotation Bureau OTC market under the symbol of "OMNL-P." The
OTC market generally is less liquid than the NASDAQ-NMS and
NASDAQ-SCMS, and for that reason holders of Omnirel Preferred
Stock may not find a ready market for their shares.
Transfer Agent and Registrar
The Transfer Agent and Registrar for the Omnirel Common
Stock and Preferred Stock will be Mellon Securities Trust Company
of New York.
113
<PAGE>
CAPITALIZATION OF OMNIREL
-------------------------
The following table sets forth the capitalization of Omnirel as
of December 31, 1994 and, as adjusted, to give effect to the
issuance of approximately 2.6 shares for each share of common
stock (1,706,475), assuming there is no exercise of appraisal
rights of dissenting shareholders, the conversion of $3.5 million
of amounts due to Zing to cumulative preferred stock and the
refinancing of the remaining amount due to Zing (approximately
$2,000,000) to long-term bank debt.
December 31, 1994
--------------------------------
As Reported As Adjusted
-------------- -----------
Long-term debt $ 932,493 $2,930,682 (a)
Due to parent 5,498,189 (a)
Shareholders' equity:
Cumulative preferred stock,
$.01 par value, 5,000,000
shares authorized and 2,694,971
shares issued as adjusted;
$1.30 redemption value 3,500,000 (a)
Common stock, $.01 par value,
3,000,000 shares authorized,
1,057,201 shares issued,
2,802,967 shares issued as
adjusted 10,572 28,030 (b)
Additional paid-in capital 7,850,027 7,718,877(b),(c)
Deficit (3,085,105) (3,085,105)
Less: Treasury stock (3,568 shares
at cost, 58,661 shares,
as adjusted) (5,448) (5,448)(b),(d)
------------ ----------
Total shareholders' equity 4,770,046 8,156,354
------------ ----------
Total capitalization $11,200,728 $11,087,036
------------ ----------
============ ==========
(a) Amount due to parent converted to approximately $2,000,000
long-term bank debt and $3,500,000 of cumulative preferred
stock.
(b) Issuance of common shares on an approximately 2.6 to one
basis, and the exercise of options for 15,030 shares for
$86,000.
(c) Capitalization of approximately $200,000 of proposed
transaction costs.
(d) Includes 18,872 common shares contributed as treasury shares
by President of the Company.
114
<PAGE>
DESCRIPTION OF TACTECH CAPITAL STOCK
------------------------------------
Authorized Capital Stock
TACTech's authorized capital stock currently consists of
50,000 authorized shares of TACTech Common Stock, of which 15,200
shares are issued and outstanding. If the Merger Agreement is
approved, there will be a recapitalization of TACTech based upon
an approximately 49.25-for-one stock split. Assuming that no
shareholders of Zing exercise their appraisal rights, at the
Effective Time there will be issued and outstanding 748,603
shares of TACTech Common Stock. The terms of such capital stock
will continue unchanged after the Merger.
Common Stock
The holders of TACTech Common Stock after the Merger will be
entitled to one vote for each share on all matters to be voted
upon by TACTech shareholders, including the election of
directors, and, except as otherwise required by law, the holders
115
<PAGE>
of such shares will possess exclusively all voting power. The
holders of TACTech Common Stock will not have any cumulative
voting rights, nor any conversion, redemption or preemptive
rights. The holders of TACTech Common Stock will also be
entitled to such dividends as may be declared from time to time
by the TACTech Board of Directors from funds legally available
therefor and upon the dissolution, liquidation or winding up of
TACtech, whether voluntary or involuntary, will be entitled to
receive pro rata all assets of TACTech legally available for
distribution to such holders.
Market for Common Stock
The shares of TACTech Common Stock to be distributed to
holders of Zing Shares in connection with the Merger will be
freely transferable. There is not currently a public market for
the TACTech Common Stock. Prices at which the TACTech Common
Stock may trade after the Merger cannot be predicted. Until the
Common Stock is fully distributed and an orderly market develops,
the prices at which trading in such stock occurs may fluctuate
significantly. The prices at which the TACTech Common Stock
trades will be determined by the marketplace and may be
influenced by many factors, including, among others, the depth
and liquidity of the market for TACTech Common Stock, investor
perception of TACTech and the industry in which TACTech
participates, TACTech's dividend policy and general economic and
market conditions.
It is anticipated that the Common Stock will trade on the OTC
Bulletin Board or in the pink sheets of the Automated Quotation
Bureau OTC market under the symbol of "TACT." The OTC market
generally is less liquid than the NASDAQ-NMS and NASDAQ-SCMS, and
for that reason holders of TACTech Common Stock may not find a
ready market for their shares.
Dividends
TACTech does not currently intend to pay cash dividends on its
Common Stock. The dividend policy of TACTech will be reviewed
from time to time by the TACTech Board of Directors in light of
its earnings and financial condition and such other business
considerations as the Board considers pertinent.
116
<PAGE>
Transfer Agent and Registrar
The Transfer Agent and Registrar for the TACTech Common Stock
will be Mellon Securities Trust Company of New York.
CAPITALIZATION OF TACTECH
-------------------------
The following table sets forth the capitalization of Transition
Analysis Component Technology, Inc. as of December 31, 1994, and as
adjusted to give effect to the issuance of 733,403 shares of common
stock, assuming there is no exercise of appraisal rights of dissenting
shareholders, and the capitalization of due to parent into additional
paid-in capital.
December 31, 1994
------------------------------
As Reported As Adjusted
-------------- -------------
Due to parent $ 686,267 $ -0- (a)
Shareholders' equity:
Common stock, $.01 par value,
50,000 shares authorized,
15,200 shares issued and
outstanding, 748,603 shares
issued and outstanding, as
adjusted 152 7,486 (b)
Additional paid-in capital 848 579,781 (a),(b),(c)
Deficit (384,132) (384,132)
---------- -----------
Total shareholders' equity
(deficiency) (383,132) 203,135
------------ ------------
Total capitalization $ 303,135 $ 203,135
----------- ------------
============ ============
(a) Capitalization of due to parent into additional paid-in capital.
(b) Issuance of common shares on an approximately 49 to one basis.
(c) Capitalization of approximately $100,000 of proposed transaction
costs.
117
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
-----------------------------
BENEFICIAL OWNERS AND MANAGEMENT OF ZING
-----------------------------------------
Principal Security Holders
The following table sets forth, as at March 1, 1995,
historical information (unadjusted for the Merger) concerning the
beneficial ownership of voting securities of the Company by each
person who is known by management to own beneficially more than
5% of any class of such securities:
Amount
Title Name and Address Beneficially Percent of
of Class of Beneficial Owner Owned Class(1)
-------- ------------------- ----- -----
Common Robert E. Schrader 1,227,211 48.02%
72 Haight Cross Road
Chappaqua, NY 10514
Common Jesse Greenfield 217,350 8.50%
3765 Wild Plum Ct.
Boulder, CO 80434*
_______________
* Information with respect to the beneficial interest of the
holder is based on the most recent Schedule 13D or Schedule
13G delivered to the Company by such holder and not on the
basis of any independent information with respect to such
holdings which the Company may possess.
(1) Does not reflect issuance of 50,857 shares which may be
acquired upon exercise of Warrants by certain executive
officers and directors other than Robert E. Schrader.
118
<PAGE>
ELECTION OF ZING DIRECTORS
--------------------------
General
The Company's Certificate of Incorporation and By-Laws
provide for a Board of Directors consisting of not fewer than six
nor more than ten members, classified into three classes if there
shall be nine or more directors, or two classes if there shall be
fewer than nine directors, in either case with each class being
as nearly as possible equal in size to the others and with at
least three directors in each class. The Board of Directors is
comprised of the following members in the following classes:
CLASS I CLASS II
(To Serve Until the (To Serve Until the
Annual Meeting of Annual Meeting of
Shareholders in 1996) Shareholders in 1995)
--------------------- --------------------
Robert E. Schrader Henry A. Singer
Deborah J. Schrader John F. Catrambone
Martin S. Fawer Laurence W. Higgitt
Nominees
In the event that the Merger Agreement is NOT approved,
shareholders will be asked to vote for three nominees to serve
until the second succeeding annual meeting of the shareholders,
to be held in 1997. At each annual meeting the class of
directors whose term expires at such meeting stands for election
for a staggered two-year term ending on the date of the second
annual meeting following their election. The nominees are the
persons listed in Class II above: Henry A. Singer, John F.
Catrambone and Laurence W. Higgitt. The election of each nominee
requires the affirmative vote of a plurality of those authorized
to vote who are present in person or by proxy. All nominees are
incumbent directors of the Company. The Board of Directors of
the Company recommends that the shareholders elect all three
nominees for another term.
119
<PAGE>
Biographical information regarding the nominees is set forth
under "DIRECTORS AND MANAGEMENT OF ZING - Board of Directors"
---------------------------------
above. A description of the standing committees of the Company's
Board of Directors and information regarding attendance at Board
and committee meetings and the Compensation Committee Report are
set forth under "DIRECTORS AND MANAGEMENT OF ZING - Board
------------------------------------
Committees and Meetings" and "Compensation Committee Report"
above. The Company's executive officers and brief summaries of
their five-year employment history are set forth under "DIRECTORS
---------
AND MANAGEMENT OF ZING -- Executive Officers" above.
----------------------
Security Ownership of Management
The following table sets forth, as at March 1, 1995,
historical information (unadjusted for the Merger) concerning the
beneficial ownership of voting securities of the Company by all
current directors individually, by the Chief Executive Officer,
by the Named Executive Officers, and by all directors and
officers as a group:
Amount
Title Name and Address Beneficially Percent of
of Class of Beneficial Owner Owned Class
-------- ------------------- ----- -----
Common John F. Catrambone 111,000(1) 4.34%
Common Martin S. Fawer 104,736(2) 4.03%
Common Laurence W. Higgitt 3,000(1) *
Common Henry A. Singer 3,000(1) *
___ Deborah J. Schrader -- --
Common Robert E. Schrader 1,227,211 47.08%
___ Malcolm Baca -- --
All Officers and Directors
as a Group (7 persons) 1,448,947(3) 55.59%
_______________________
(*)Represents less than 1% of the shares outstanding.
(1)Includes 3,000 shares which may be acquired upon exercise of
Warrants.
(2)Includes 41,857 shares which may be acquired upon exercise of
Warrants.
(3)Includes 50,857 shares which may be acquired upon exercise of
Warrants.
As of the date of this Proxy Statement/Prospectus, no
director is a director of any company with a class of securities
registered pursuant to Section 12 of the Act or of any company
registered as an Investment Company under the Investment Company
Act of 1940. It is anticipated, however, that prior to the
Annual Meeting a company of which Henry A. Singer is a director
will be in registration under the Securities Act. Other than
Robert E. Schrader and Deborah J. Schrader, who are married to
each other, there is no family relationship among any of the
members of the Board of Directors or the officers of the Company.
120
<PAGE>
Compensation of Directors and Executive Officers
Executive Compensation
----------------------
For information regarding executive compensation, see the
Summary Compensation Table set forth above under "DIRECTORS AND
-------------
MANAGEMENT OF ZING - Compensation of Directors and Officers"
------------------
Grants of Warrants, Options and SARs in Last Fiscal Year
--------------------------------------------------------
During Fiscal Year 1994 no Warrants, options or stock
appreciation rights were granted to any Named Executive.
Aggregate Warrant Exercises in Last Fiscal Year
and Fiscal Year-End Warrant Values
-----------------------------------------------
During Fiscal Year 1994, no Warrants were exercised by any
of the Named Executive Officers. At the end of Fiscal Year 1994,
of the Named Executive Officers only John F. Catrambone owned
unexercised Warrants. Of Mr. Catrambone's 3,000 unexercised
Warrants, all were "in-the-money" and all were exercisable at
December 31, 1994. The value of Mr. Catrambone's Warrants at
December 31, 1994 was $11,355 based upon a value of $5.125 per
share of the Company's Common Stock which was the closing bid
price of such stock on the NASDAQ-NMS as at December 31, 1994.
Compensation of Directors
-------------------------
For information regarding the compensation of directors, see
"DIRECTORS AND MANAGEMENT OF ZING - Compensation of Directors"
----------------------------------
above.
121
<PAGE>
Employment Contracts, Termination of Employment
and Change-in-Control Arrangements
For information regarding the employment contracts and
change of control arrangements with the Company for each of
Messrs. Catrambone, Baca and Schrader, See "DIRECTORS AND
--------------
MANAGEMENT OF ZING - Employment Contracts, Termination of
---------------------
Employment and Change-in-Control Arrangements" above.
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee during the 1994
Fiscal Year were Laurence W. Higgitt and Henry A. Singer. Henry
A. Singer, a director of the Company during Fiscal Year 1994, is
a partner of Morrison Cohen Singer & Weinstein, LLP, counsel to
the Company. Such firm was paid $179,548 for legal services
rendered to the Company for Fiscal Year 1994, of which $5,491.50
was paid in respect of Mr. Singer's attendance at Board and
Committee meetings.
Interest in Certain Transactions of Directors,
Officers and Principal Holders of Voting Securities
The Company paid Morrison Cohen Singer & Weinstein, LLP of
which Henry A. Singer, a director of the Company, is a partner,
$179,548 for legal services rendered to the Company in the Fiscal
Year 1994.
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-------------------------------------------------------------
Messrs. Ernst & Young LLP have been the Company's
independent public accountants since 1983, and have been selected
by the Board of Directors to serve in such capacity for the
fiscal year ending June 30, 1995 as well. Accordingly, and in
the event that the shareholders do NOT approve the Merger
Agreement, the Board of Directors of the Company recommends that
the shareholders approve the appointment of Ernst & Young LLP as
the Company's auditors. Representatives of Ernst & Young LLP
will attend the Annual Meeting, will have an opportunity to make
a statement and will be available toanswer appropriate questions.
122
<PAGE>
SHAREHOLDER PROPOSALS AT THE COMPANY'S
---------------------------------------
NEXT ANNUAL MEETING OF SHAREHOLDERS
-----------------------------------
In the event that the shareholders do NOT approve the Merger
Agreement, shareholders who intend to submit proposals to the
Company's shareholders at the Company's next annual meeting of
shareholders must submit such proposals to the Company no later
than _______________, 1995, 120 days before the anticipated date
of mailing of the proxy statement for such meeting. In such
events, shareholder proposals should be submitted to Deborah J.
Schrader, Corporate Secretary, 115 Stevens Avenue, Valhalla, New
York 10595.
EXPERTS
-------
The Consolidated Financial Statements of Zing Technologies,
Inc. appearing in Zing's Form 10-K for the Fiscal Year 1994 have
been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon included therein and incorporated
herein by reference. Such Consolidated Financial Statements are
incorporated herein by reference in reliance upon such reports
given upon the authority of such firm as experts in accounting
and auditing.
The Financial Statements of Omnirel Corporation and
Transaction Analysis Component Technology, Inc., at June 30, 1994
and 1993 and for the year and the nine months then ended,
respectively, appearing in this Prospectus/Registration Statement
have been audited by Ernst & Young LLP, independent auditors, as
set forth in their reports thereon appearing elsewhere herein and
in the Omnirel and TACTech Registration Statements and are
included in reliance upon such reports given upon the authority
of such firm as experts in accounting and auditing.
LEGAL MATTERS
-------------
The validity of the shares of Omnirel Common Stock, Omnirel
Preferred Stock and TACTech Common Stock offered hereby will be
passed upon for the Company, Omnirel and TACTech by Morrison
Cohen Singer & Weinstein, LLP, New York, New York.
123
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
-----------------------------------------------
The Company hereby incorporates by reference the following:
its Annual Report being mailed to shareholders simultaneously
with this Proxy Statement/Prospectus; its Quarterly Reports on
Form 10-Q for the three months ended September 30, 1994 and for
the three months ended December 31, 1994; the Registration
Statement on Form S-4 for the Omnirel Common and Preferred Stock
filed with the SEC on _____________, 1995; and the Registration
Statement on Form S-4 for the TACTech Common Stock filed with the
SEC on ____________, 1995.
OTHER MATTERS
-------------
Management knows of no other matters to be presented at the
Annual Meeting. If any other matter does properly come before
the Meeting, the appointees named in the Proxy will vote the
Proxy in accordance with their best judgment.
By Order of the Board of Directors
Dated: Valhalla, New York
May _____, 1995 Deborah J. Schrader
Secretary
124
<PAGE>
Index to Financial Statements
Omnirel Corporation
Audited Financial Statements - June 30, 1994
Report of Independent Auditors ..........................................F-2
Balance Sheets ..........................................................F-3
Statements of Operations ................................................F-4
Statements of Stockholders' Equity ......................................F-5
Statements of Cash Flows ................................................F-6
Notes to Financial Statements ...........................................F-7
Omnirel Corporation
Unaudited Financial Statements - December 31, 1994
Balance Sheets ..........................................................F-14
Statements of Operations ................................................F-15
Statements of Cash Flows ................................................F-16
Notes to Financial Statements ...........................................F-17
Transition Analysis of Component Technology, Inc.
Audited Financial Statements - June 30, 1994
Report of Independent Auditors ..........................................F-19
Balance Sheets ..........................................................F-20
Statements of Operations ................................................F-21
Statements of Cash Flows .................................. .............F-22
Notes to Financial Statements ...........................................F-23
Transition Analysis of Component Technology, Inc.
Unaudited Financial Statements - December 31, 1994
Balance Sheets ..........................................................F-26
Statements of Operations ................................................F-27
Statements of Cash Flows ................................................F-28
Notes to Financial Statements ...........................................F-29
F-1
<PAGE>
[ERNST & YOUNG LOGO]
ERNST & YOUNG LLP One North Broadway Phone: 914 761 7888
White Plains, New York 10601
Report of Independent Auditors
To the Directors of
Omnirel Corporation
We have audited the accompanying balance sheets of Omnirel Corporation as of
June 30, 1993 and June 30, 1994 and the related statements of operations and
stockholders' equity, and cash flows for the year and nine months then ended.
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 Omnirel Corporation as of
June 30, 1993 and June 30, 1994 and the results of its operations and its
cash flows for the year and nine months then ended in conformity with
generally accepted accounting principles.
As discussed in Note 5 to the financial statements, in fiscal 1994 the
Company changed its method of accounting for income taxes.
March 17, 1995
White Plains, NY
F-2
<PAGE>
Omnirel Corporation
Balance Sheets
June 30
1993 1994
-------------------------
(In Thousands)
Assets
Current assets:
Cash and cash equivalents $ 80 $ 26
Accounts receivable, less reserve of
$72 and $92, respectively 1,269 2,211
Inventory 1,968 2,391
Other current assets 114 211
-------------------------
Total current assets 3,431 4,839
Property, plant and equipment 7,539 7,885
Less: accumulated depreciation and amortization 1,864 2,843
-------------------------
5,675 5,042
Excess of cost over assets acquired, net of accumulated
amortization of $563 and $716, respectively 3,248 1,821
Deferred income taxes 1,255
Other assets 68 6
---------------------------
Total assets $12,422 $12,963
---------------------------
---------------------------
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 853 $ 1,383
Accrued expenses 246 164
Accrued compensation 153 276
Current portion of long-term obligations 782 156
---------------------------
Total current liabilities 2,034 1,979
Long-term obligations, less current portion 626
Due to parent 5,267 5,532
Stockholders' equity:
Common stock (par value $.01 per share;
authorized 3,000,000 shares; issued and
outstanding 1,057,201 shares (1993) and
1,053,633 shares (1994) 11 11
Additional paid-in capital 7,625 7,775
Deficit (2,515) (2,955)
Less treasury stock (3,568 shares) (5)
---------------------------
Commitments 5,121 4,826
---------------------------
Total liabilities and stockholders' equity $12,422 $12,963
---------------------------
---------------------------
See accompanying notes.
F-3
<PAGE>
Omnirel Corporation
Statements of Operations
<TABLE>
<CAPTION>
Nine months
ended Year ended
June 30, June 30,
1993 1994
-------------------------------
(In Thousands)
<S> <C> <C>
Revenues $ 5,907 $10,586
Cost of goods sold 4,247 6,742
-------------------------------
Gross profit 1,660 3,844
Selling, general and administrative expenses 1,788 2,248
Research and development 808 841
Depreciation and amortization of property and
equipment 504 690
Amortization of excess of cost over assets acquired 200 153
Interest expense 237 349
-------------------------------
Loss before income taxes (1,877) (437)
Provision for income taxes 9 3
-------------------------------
Net loss $(1,886) $ (440)
-------------------------------
-------------------------------
Net loss per common share $ (1.78) $ (.42)
-------------------------------
-------------------------------
Number of shares used in computation 1,057,201 1,053,633
-------------------------------
-------------------------------
</TABLE>
See accompanying notes.
F-4
<PAGE>
<TABLE>
<CAPTION>
Omnirel Corporation
Statements of Stockholders' Equity
Additional
Common Paid-In Treasury Retained
Stock Capital Stock Deficit Total
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at October 1, 1992 $11 $7,512 $ (629) $ 6,894
Capital contribution of allocable corporate charges 113 113
Net loss (1,886) (1,886)
--------------------------------------------------------------------------
Balance at June 30, 1993 11 7,625 (2,515) 5,121
Purchase of treasury stock $(5) (5)
Capital contribution of allocable corporate charges 150 150
Net loss (440) (440)
--------------------------------------------------------------------------
Balance at June 30, 1994 $11 $7,775 $(5) $(2,955) $ 4,826
--------------------------------------------------------------------------
--------------------------------------------------------------------------
</TABLE>
See accompanying notes.
F-5
<PAGE>
<TABLE>
<CAPTION>
Omnirel Corporation
Statements of Cash Flows
Nine months
ended Year ended
June 30, June 30,
1993 1994
-----------------------------------
(In Thousands)
<S> <C> <C>
Operating activities
Net loss $(1,886) $ (440)
Adjusted to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 983 1,132
Provision for losses on accounts receivable 15 20
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 166 (962)
Increase in inventories (627) (423)
(Increase) decrease in other current assets 1 (97)
Decrease (increase) in other assets (43) 1,336
Increase in deferred income taxes (1,255)
(Decrease) increase in accounts payable, accrued
expenses and current portion of long-term debt 920 (55)
-----------------------------
Net cash used in operating activities (471) (744)
Investing activities
Purchases of property and equipment (755) (346)
-----------------------------
Net cash used in investing activities (755) (346)
-----------------------------
Financing activities
Net increase in long-term borrowings 879 891
Capital contribution 113 150
Purchase of treasury stock (5)
-----------------------------
Net cash provided by financing activities 992 1,036
-----------------------------
Net decrease in cash and cash equivalents (234) (54)
Cash and cash equivalents at beginning of period 314 80
-----------------------------
Cash and cash equivalents at end of period $ 80 $ 26
-----------------------------
-----------------------------
</TABLE>
See accompanying notes.
F-6
<PAGE>
Omnirel Corporation
Notes to Financial Statements
June 30, 1994
1. Organization and Summary of Significant Accounting Policies
Organization
On June 26, 1991, Zing Technologies, Inc. ("Zing"), acquired substantially all
(approximately 96%) of the issued and outstanding shares of common stock of
Omnirel Corporation (the "Company"). The acquisition has been accounted for
by the purchase method of accounting, and, accordingly, the purchase price has
been allocated to the assets acquired and the liabilities assumed based on
the estimated fair values at the date of acquisition. The excess of cost over
assets acquired is being amortized over 15 years.
The historical financial statements of the Company have been restated to give
effect of the allocation to the Company of a portion of administrative
expenses of Zing's corporate office (see Note 8).
General Business Description
The principal business of the Company is the manufacture and sale of power
hybrid circuits. The Company manufactures and sells electronic components for
use in military/aerospace and high-end industrial applications.
Revenue Recognition and Concentration of Credit Risk
The Company recognizes revenue at the time of shipment. The Company performs
periodic credit evaluations of its customers' financial condition and
generally does not require collateral. Receivables generally are due within
30 days. Credit losses relating to customers in the military/aerospace
industry consistently have been within management's expectations.
Sales to two customers aggregated 19% and 13%, respectively, of revenues for
fiscal 1994.
Cash Equivalents
The Company considers all short-term liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
F-7
<PAGE>
Omnirel Corporation
Notes to Financial Statements (continued)
1. Organization and Summary of Significant Accounting Policies (continued)
Inventory
Inventory is stated at the lower of cost (first-in, first-out method) or market.
Property, Plant and Equipment
Property, plant and equipment including equipment leased under capital leases
are stated at cost and are depreciated using the straight-line method over the
estimated useful lives of the assets, ranging from three to twenty five years.
Leasehold improvements are amortized over the terms of the respective leases
or the service lives of the improvements, whichever is shorter.
Research and Development
Research and development costs are expensed as incurred.
Net Income Per Common Share
Net income per common share is based on the weighted average number of shares
of Common Stock outstanding during each period.
2. Inventory
Inventory consists of the following:
June 30
1993 1994
---------------------------
(In Thousands)
Raw materials and purchased parts $1,342 $1,341
Work in process 442 769
Finished goods 184 281
---------------------------
$1,968 $2,391
---------------------------
---------------------------
F-8
<PAGE>
Omnirel Corporation
Notes to Financial Statements (continued)
3. Property, Plant and Equipment
Property, plant and equipment consists of:
June 30
1993 1994
-------------------------
(In Thousands)
Land $ 300 $ 300
Building 2,572 2,572
Equipment 3,849 4,118
Furniture and fixtures 326 368
Leasehold improvements 492 527
-------------------------
$7,539 $7,885
-------------------------
-------------------------
4. Long-Term Obligations
Long-term obligations consists of the following:
June 30
1993 1994
-------------------------
(In Thousands)
Note payable to bank $778 $782
Capital lease obligations (Note 7) 4
-------------------------
782 782
Less: current portion 782 156
-------------------------
$ - $626
-------------------------
-------------------------
The Company has $782,000 outstanding against the line of credit at
June 30, 1994. Interest is payable at the bank's base rate plus 3/4% (8% at
June 30, 1994). The bank has a security interest in the equipment purchased
(which has a net book value of approximately $776,000 at June 30, 1994).
Omnirel was not in compliance with certain covenants of its loan agreement
and has refinanced the debt, on a long-term basis, subsequent to year end.
The new debt is guaranteed by Zing, includes a $300,000 line of credit payable
on demand and a $1,200,000 equipment line of credit payable over five years
from respective draw downs with interest at the bank's prime rate plus 1-1/2%.
The annual payment requirements for long-term obligations for the five years
subsequent to June 30, 1994 are as follows:
F-9
<PAGE>
Omnirel Corporation
Notes to Financial Statements (continued)
4. Long-Term Obligations (continued)
1995 $156
1996 157
1997 156
1998 157
1999 156
Interest paid during the nine months ended June 30, 1993 and the year ended
June 30, 1994 was $203,000 and $447,000, respectively. These amounts include
$288,000 and $163,000, respectively, of interest paid to parent (see Note 8).
5. Income Taxes
The Company files its federal income taxes on a consolidated basis with its
parent Zing. The Company does not receive benefit nor make payment for any
tax loss utilized by members of the consolidated group.
As of July 1, 1993, the Company adopted FASB Statement No. 109, "Accounting
for Income Taxes". As permitted under the Statement, the Company had elected
not to restate the financial statements of prior years. Under Statement 109,
the liability method is used in accounting for income taxes. Under this
method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will
be in effect when the differences are expected to reverse. Prior to the
adoption of Statement 109, income tax expense was determined using the deferred
method. Deferred tax expense was based on items of income and expense that were
reported in different years in the financial statements and tax returns and
were measured at the tax rate in effect in the year the difference originated.
At June 26, 1991 Omnirel had available approximately $6,100,000 of net
operating loss carryforward for Federal income tax purposes. As a result of
the adoption of Statement 109, the excess of cost over assets acquired was
reduced by approximately $1,275,000. Approximately $112,000 of the
carryforward loss was utilized for the year ended June 30, 1994. The net
operating loss carryforward of approximately $6,000,000 at June 30, 1994
expires through 2007.
The Company made no income tax payments during the nine months ended
June 30, 1993 or for the year ended June 30, 1994.
F-10
<PAGE>
Omnirel Corporation
Notes to Financial Statements (continued)
5. Income Taxes (continued)
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's net deferred tax asset as of June 30, 1994 were as follows:
Net operating losses $1,833,000
Bases differences (578,000)
-------------
Net deferred tax asset $1,255,000
-------------
-------------
6. Employee Benefit Plans
Effective January 1, 1991 the Company introduced a deferred compensation
program for all employees, which is qualified under Section 401(k) of Federal
tax law. Under the program the contributions to be made by the Company are at
the discretion of the Board of Directors of the Company. The Company made no
contributions during 1993 and contributed approximately $5,000 in 1994. The
Company does not maintain post retirement benefit plans.
7. Leases
The Company leased certain equipment under capital leases which expired in
fiscal 1994. The equipment under the capital leases had a net book value of
approximately $49,000 at June 30, 1993. Lease amortization is included in
depreciation and amortization expense.
8. Related Parties
Advances received from Zing are payable upon demand, however Zing had
indicated that no demand for repayment will be made in the next year unless
such loans are refinanced externally, accordingly, such amounts were
classified as non-current (see Note 9). Interest on such advances was payable
at 8-3/4% for the nine months ended June 30, 1993 and 7-3/4% for the year ended
June 30, 1994. The Company is allocated a portion of Zing's corporate
administrative expenses amounting to $113,000 (1993) and $150,000 (1994).
In connection with the acquisition of the Company, Zing loaned $250,000 to an
officer/director of Omnirel to purchase common stock of Zing on the open
market in exchange for a non-interest bearing note. The note is due
July 1, 2001 and is secured by Zing's common stock. Zing also loaned the
officer/director $300,000 in exchange for a non-interest bearing note due in
five equal annual installments, commencing June 26, 1992 with interest
imputed at an effective annual rate of 9%.
F-11
<PAGE>
Omnirel Corporation
Notes to Financial Statements (continued)
8. Related Parties (continued)
In addition, the Company established an Incentive Rights Plan ("Rights")
whereby various members of management have been granted Rights, contingent
upon attaining certain earnings levels or other events, to appreciation in the
market value of 20% of the Company's common stock, as defined, subject to
certain forfeiture and adjustment provisions. The Rights expire on
June 30, 1996. Amounts earned, if any (none in 1993 or 1994) are to be paid
in three annual installments (see Note 9).
9. Subsequent Events (Unaudited)
In connection with the proposed transaction, the following will take place if
authorized by the Board of Directors and, where necessary, voted upon by the
shareholders as required:
a. The authorized and issued number of common shares of the Company will
increase on an approximately 2.6 to one basis (7,842,433 shares
authorized; 2,763,676 shares to be issued).
b. Approximately $2 million of obligations due Zing from the Company is
expected to be refinanced with a bank at approximately 10.5% interest and
will be used to repay Zing. In addition, the Company is currently
negotiating an increase in its lines of credit and discontinue Zing's
guarantees.
c. Preferred Stock will be authorized for 5,000,000 shares with a redemption
value of $1.30 per share. 2,694,971 shares will be issued to Zing in
repayment for their receivable from the Company in the amount of
$3,500,000.
d. Options held by officers and employees are expected to be exercised for
15,030 shares at prices ranging from $3.00 to $6.50 for a total amount
of $86,000.
e. A loan from Zing to the President of the Company in the amount of
$250,000, due in 2001, will be purchased by the Company.
f. The Company will pay a management fee to Zing in the amount of $150,000
per year, for three years, for managerial oversight services to be
provided by the Chief Executive Officer and Chief Financial Officer of
Zing.
F-12
<PAGE>
Omnirel Corporation
Notes to Financial Statements (continued)
9. Subsequent Events (Unaudited) (continued)
In addition, the President of the Company will contribute 18,872 common shares
of the Company as treasury shares; and options to purchase 156,000 common
shares of the Company will be given to various employees and officers of the
Company ranging in exercise price from $8 to $10 per share. Options to
purchase 23,000 shares will be reserved for issuance. The options will be
exercisable over terms ranging up to five years. The incentive rights and other
compensation plans will be terminated.
Further, following the transaction, the Company will no longer be a
consolidated subsidiary of Zing and will therefore need to establish its own
credit lines and sources of financing. There is no assurance that the Company
will be able to obtain independent sources of financing.
F-13
<PAGE>
Omnirel Corporation
Balance Sheets
(Unaudited)
December 31
1993 1994
---------------------------------
Assets
Current assets:
Cash and cash equivalents $ 104,682 $ 3,738
Accounts receivable, less reserve of $71,000
and $138,000 1,733,492 2,279,628
Inventories 2,056,331 3,458,640
Prepaid expenses 196,772 284,411
Other current assets 11,598 19,275
---------------------------------
Total current assets 4,102,875 6,045,692
Property, plant and equipment 7,688,743 8,276,759
Less: accumulated depreciation and amortization (2,346,655) (3,295,423)
---------------------------------
5,342,088 4,981,336
Excess of cost over assets acquired, net of
accumulated amortization of $695,000 and
$781,000, respectively 3,116,021 1,755,108
Deferred income taxes 1,238,113
Other assets 4,324
---------------------------------
Total assets $12,560,984 $14,024,573
---------------------------------
---------------------------------
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 900,215 $ 2,097,515
Accrued expenses 275,266 358,809
Accrued compensation expense 139,803 211,962
Current portion of long-term debt 767,845 155,559
---------------------------------
Total current liabilities 2,083,129 2,823,845
Long-term obligation, less current portion 932,493
Due to parent 5,532,286 5,498,189
Stockholders' equity:
Common stock (par value $.01 per share;
authorized 3,000,000 shares; issued
1,057,201 shares) 10,572 10,572
Additional paid-in capital 7,700,027 7,850,027
Deficit (2,759,627) (3,085,105)
Less treasury stock (3,568 shares and 3,598 shares) (5,403) (5,448)
---------------------------------
4,945,569 4,770,046
---------------------------------
Total liabilities and stockholders' equity $12,560,984 $14,024,573
---------------------------------
---------------------------------
See accompanying notes.
F-14
<PAGE>
Omnirel Corporation
Statements of Operations
<TABLE>
<CAPTION>
(Unaudited)
Six months ended
December 31
1993 1994
------------------------
<S> <C> <C>
Revenues $5,032,515 $6,369,049
Cost of goods sold 3,017,261 4,147,513
------------------------
Gross profit 2,015,254 2,221,536
Selling, general and administrative expenses 1,311,646 1,497,701
Research and development 442,682 307,085
Depreciation and amortization of property and equipment 201,000 227,299
Amortization of excess of cost over assets acquired 132,823 65,639
Interest expense 172,013 248,578
------------------------
Loss before income taxes (244,910) (124,766)
Provision for income taxes 6,197
------------------------
Net loss $ (244,910) $ (130,963)
------------------------
------------------------
Net loss per common share $ (.23) $ (.12)
------------------------
------------------------
Number of shares used in computation 1,053,633 1,053,603
</TABLE>
See accompanying notes.
F-15
<PAGE>
Omnirel Corporation
Statements of Cash Flows
(Unaudited)
Six months ended
December 31
1993 1994
----------------------------
Operating activities
Net loss $(244,910) $ (130,963)
Adjusted to reconcile net loss to net cash
provided by (used in) operaung activities:
Depreciation and amortization 615,376 517,831
Provision for losses on accounts receivable 1,000 46,000
Changes in operating assets and liabilities:
Increase in accounts receivable (465,495) (114,155)
Increase in inventory (88,392) (1,067,422)
Increase in prepaid expenses and other
current assets (94,813) (92,668)
Decrease in other assets 67,480 1,926
Decrease in short-term bank debt (14,350)
Decrease in deferred income tax asset 16,932
Increase in accounts payable and accrued
expenses 63,454 845,365
----------------------------
Net cash (used in) provided by operating activities (160,650) 22,846
Investing activities
Purchases of property and equipment (149,863) (391,851)
----------------------------
Net cash used in investing activities (149,863) (391,851)
----------------------------
Financing activities
Purchase of treasury stock (5,403) (45)
Capital contribution 75,000 75,000
Increase of long-term borrowings 265,783 271,607
----------------------------
Net cash provided by financing activities 335,380 346,562
----------------------------
Increase in cash and cash equivalents 24,867 (22,443)
Cash and cash equivalents at beginning of period 79,815 26,181
----------------------------
Cash and cash equivalents at end of period $104,682 $ 3,738
----------------------------
----------------------------
See accompanying notes.
F-16
<PAGE>
Omnirel Corporation
Notes to Unaudited Condensed Financial Statements
December 31, 1994
1. Organization and Basis of Presentation
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the six month period ended
December 31, 1994 are not necessarily indicative of the results that may be
expected for the year ending June 30, 1995.
Organization
On June 26, 1991, Zing Technologies, Inc. ("Zing"), acquired substantially all
(approximately 96%) of the issued and outstanding shares of common stock of
Omnirel Corporation (the "Company"). The acquisition has been accounted for by
the purchase method of accounting, and, accordingly, the purchase price has
been allocated to the assets acquired and the liabilities assumed based on the
estimated fair values at the date of acquisition. The excess of cost over
assets acquired is being amortized over 15 years.
2. Inventories
Inventories are stated at the lower of cost (first in, first out method) or
market.
Inventories consist of the following:
December 31
1993 1994
---------------------
(In Thousands)
Raw materials and purchased parts $1,282 $2,038
Work in process 501 1,170
Finished goods 273 251
---------------------
$2,056 $3,459
---------------------
---------------------
F-17
<PAGE>
Omnirel Corporation
Notes to Unaudited Condensed Financial Statements (continued)
3. Related Parties and Subsequent Events
The Company is allocated a portion of Zing's corporate administrative expenses
amounting to $75,000 in each of the six months ended December 31, 1993 and
1994.
In connection with the proposed transaction, the following will take place if
authorized by the Board of Directors and, where necessary, voted upon by the
shareholders as required:
a. The authorized and issued number of common shares of the Company will
increase on an approximately 2.6 to one basis (7,842,433 shares
authorized; 2,763,676 shares to be issued).
b. Approximately $2 million of obligations due Zing from the Company is
expected to be refinanced with a bank at approximately 10.5% interest and
will be used to repay Zing. In addition, the Company is currently
negotiating an increase in its lines of credit and to discontinue Zing's
guarantees.
c. Preferred Stock will be authorized for 5,000,000 shares with a redemption
value of $1.30 per share. 2,694,971 shares will be issued to Zing in
repayment for their receivable from the Company in the amount of
$3,500,000.
d. Options held by officers and employees will be exercised for 15,030
shares at prices ranging from $3.00 to $6.50 for a total amount of
$86,000.
e. A loan from Zing to the President of the Company in the amount of
$250,000, due in 2001, will be purchased by the Company.
f. The Company will pay a management fee to Zing in the amount of $150,000
per year, for three years, for managerial oversight services to be
provided by the Chief Executive Officer and Chief Financial Officer of
Zing.
In addition, the President of the Company will contribute 18,872 common shares
of the Company as treasury shares; and options to purchase 156,000 common
shares will be given to various employees and officers of the Company ranging
in exercise price from $8 to $10 per share. Options to purchase 23,000 shares
will be reserved for issuance. The options will be exercisable over terms
ranging up to five years. The incentive rights and other compensation
plans will be terminated.
Further, following the transaction, the Company will no longer be a
consolidated subsidiary of Zing and will therefore need to establish its own
credit lines and sources of financing. There is no assurance that the
Company will be able to obtain independent sources of financing.
F-18
<PAGE>
ERNST & YOUNG LLP One North Broadway Phone: 914 761 7888
White Pains, New York 10601
Report of Independent Auditors
To the Directors of
Transition Analysis Component Technology, Inc.
We have audited the accompanying balance sheets of Transition Analysis
Component Technology, Inc. ("TACTech") as of June 30, 1994 and 1993, and the
related statements of operations and stockholders' equity, and cash flows for
the year ended June 30, 1994 and nine months ended June 30, 1993. 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 TACTech as of June 30, 1994
and 1993, and the results of its operations and its cash flows for the year
ended June 30, 1994 and nine months ended June 30, 1993 in conformity with
generally accepted accounting principles.
March 17, 1995
White Plains, N.Y.
F-19
<PAGE>
Transition Analysis Component Technology, Inc.
Balance Sheets
June 30
1993 1994
---------------------
Assets
Current assets:
Cash and cash equivalents $109,733 $ 35,862
Accounts receivable, less reserve of $10,000 in 1993
and $5,000 in 1994 128, 191 173,494
Prepaid expenses and
other current assets 3,620 9,891
----------------------
Total current assets 241,544 219,247
Equipment 257,935 287,633
Less: accumulated depreciation 168,763 203,146
----------------------
89,172 84,487
----------------------
Total assets $ 330,716 $ 303,734
----------------------
----------------------
Liabilities and stockholders' equity
Current liabilities:
Accrued compensation expense $ 24,335 $ 22,640
Accrued expenses 8,950 26,953
Deferred income 14,250 15,820
----------------------
Total current liabilities 47,535 65,413
Due to parent 673,998 676,687
Stockholders' equity:
Common stock (par value $.01 per share;
authorized 50,000 shares; issued and
outstanding 15,200 shares) 152 152
Additional paid-in capital 848 848
Deficit (391,817) (439,366)
----------------------
Total stockholders' equity (deficiency) (390,817) (438,366)
----------------------
Total liabilities and stockholders' equity (deficiency)$ 330,716 $ 303,734
----------------------
----------------------
See accompanying notes.
F-20
<PAGE>
Transition Analysis Component Technology, Inc.
Statements of Operations
Nine months
ended Year ended
June 30, June 30,
1993 1994
--------------------------------
Revenues $ 505,300 $ 896,797
Selling, general and administrative expenses 599,676 904,963
Provision for doubtful accounts 10,000 5,000
Depreciation of equipment 24,557 34,383
---------------------------------
Net loss (128,933) (47,549)
Deficit at beginning of period (262,884) (391,817)
---------------------------------
Deficit at end of period $(391,817) $(439,366)
---------------------------------
---------------------------------
Net loss per common share $(8.48) $(3.13)
---------------------------------
---------------------------------
Number of shares used in computation 15,200 15,200
---------------------------------
---------------------------------
See accompanying notes.
F-21
<PAGE>
Transition Analysis Component Technology, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
Nine months
ended Year ended
June 30, June 30,
1993 1994
--------------------------------------
<S> <C> <C>
Operating activities
Net loss $(128,933) $ (47,549)
Adjusted to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation 24,557 34,383
Provision for losses on accounts receivable 10,000 (5,000)
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 20,664 (40,303)
Decrease (increase) in prepaid expenses and
other current assets 27,059 (6,271)
Increase in accrued compensation expense,
accrued expenses and deferred income 13,234 17,878
--------------------------------------
Net cash used in operating activities (33,419) (46,862)
Investing activities
Purchases of equipment (30,658) (29,698)
--------------------------------------
Net cash used in investing activities (30,658) (29,698)
--------------------------------------
Financing activities
Increase in due to parent 89,937 2,689
--------------------------------------
Net cash used in financing activities 89,937 2,689
--------------------------------------
Net increase (decrease) in cash and cash equivalents 25,860 (73,871)
Cash and cash equivalents at beginning of period 83,873 109,733
--------------------------------------
Cash and cash equivalents at end of period $ 109,733 $ 35,862
--------------------------------------
--------------------------------------
</TABLE>
See accompanying notes.
F-22
<PAGE>
Transition Analysis Component Technology, Inc.
Notes to Financial Statements
June 30, 1994
1. Organization and Summary of Significant Accounting Policies
Organization
TACTech is a 90% owned subsidiary of Zing Technologies, Inc. (Zing) and is
located in Yorba Linda, California. The remaining 10% is owned by one officer.
General Business Description
TACTech licenses proprietary computer software databases to military
manufacturers and defense contractors. The databases provide the users with
information in regards to microcircuits and semiconductor devices used in the
manufacture of systems for military and aerospace applications.
Revenue Recognition and Concentration of Credit Risk
The Company recognizes revenue on a monthly basis with substantially all
contracts cancelable on 30 days notice.
Equipment
Equipment is stated at cost and is depreciated using the straight-line method
over five years.
Net Income Per Common Share
Net income per common share is based on the weighted average number of shares
of Common Stock outstanding during each period.
Agreements
In April 1993, TACTech entered into a three-year exclusive licensing agreement
with a distributor at an annual rate of $108,000. TACTech agreed that during
the term of this agreement it would not grant or authorize any other party
access to its data bases or services if such party were in the business of
distributing electronic components parts. The agreement may be renewed for
successive one-year periods by mutual written consent of the parties.
F-23
<PAGE>
Transition Analysis of Component Technology, Inc.
Notes to Financial Statements (continued)
2. Income Taxes
The Company files its federal income taxes on a consolidated basis with its
parent Zing. The Company does not receive benefit nor make payment for any
tax loss utilized by members of the consolidated group.
As of July 1, 1993, the Company adopted FASB Statement No. 109, "Accounting
for Income Taxes." As permitted under the Statement, the Company has elected
not to restate the financial statements of prior years. The change had no
effect on net income.
Under Statement No. 109, the liability method is used in accounting for income
taxes. Under this method, deferred tax assets and liabilities are determined
based on differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse. Prior to the adoption
of Statement No. 109, income tax expense was determined using the deferred
method. Deferred tax expense was based on items of income and expense that
were reported in different years in the financial statements and tax returns
and were measured at the tax rate in effect in the year the difference
originated.
3. Employee Benefit Plans
Effective October 1991, the parent company introduced a deferred compensation
program for all employees, which is qualified under Section 401K of the
Internal Revenue Code. Under the program the contributions to be made by the
Company are at the discretion of the Board of Directors of the Company and
were not material for 1993 or 1994. The Company does not maintain post
retirement benefit plans.
4. Leases
TACTech is currently renting facilities in Yorba Linda, California on a
month-to-month basis. Lease expense for the year ended June 30, 1994 and
nine months ended June 30, 1993 was $42,000 and $21,000, respectively.
F-24
<PAGE>
Transition Analysis of Component Technology, Inc.
Notes to Financial Statements (continued)
5. Related Parties
The Company is allocated a portion of Zing's corporate administrative expenses
which amounted to $75,000 (1994) and $56,250 (1993) and are included in
selling, general and administrative expenses.
Advances received from Zing are payable upon demand, however, Zing has
indicated that no demand for repayment will be made in the next year,
accordingly, such amounts are classified as non-current (See Note 6). No
interest has been charged on such advances.
The President has an employment agreement expiring on May 1, 1997, entitling
him to a salary plus five percent of the Company's collected revenues, except
that on revenues attributable to another commissioned member of management the
President's commission is two and one-half percent.
6. Subsequent Event (Unaudited)
In connection with the proposed transaction, all intercompany advances as of
the effective date will be considered equity upon consummation of the proposed
transaction and, accordingly, will be shown as paid-in capital. Further, the
common shares authorized and outstanding will be split on an approximately
49 for one basis (748,603 shares will be issued and outstanding).
In addition, the Company will pay a management fee to Zing in the amount
of $75,000 per year, for three years for managerial oversight services to
be provided by the Chief Executive Officer and Chief Financial Officer of Zing.
Further following the transaction, the Company will no longer be a
consolidated subsidiary of Zing and will then need to establish its own credit
lines and sources of financing. There is no assurance that the Company will
be able to obtain independent sources of financing.
F-25
<PAGE>
Transition Analysis Component Technology, Inc.
Balance Sheets
<TABLE>
<CAPTION>
(Unaudited)
December 31
1993 1994
------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 43,444 $ 32,695
Accounts receivable, less reserve of $10,000 in 1993
and $5,000 in 1994 149,977 272,396
Prepaid expenses and other current assets 10,984 23,029
------------------------------------
Total current assets 204,405 328,120
Equipment 279,502 301,750
Less: accumulated depreciation 184,471 219,652
------------------------------------
95,031 82,098
------------------------------------
Total assets $ 299,436 $ 410,218
------------------------------------
------------------------------------
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued expenses $ 45,193 $ 48,231
Deferred income 36,050 58,852
------------------------------------
Total current liabilities 81,243 107,083
Due to parent 660,180 686,267
Stockholders' equity (deficiency):
Common stock (par value $.01 per share;
authorized 50,000 shares; issued and
outstanding 15,200 shares) 152 152
Additional paid-in capital 848 848
Deficit (442,987) (384,132)
------------------------------------
Total stockholders' equity (deficiency) (441,987) (383,132)
------------------------------------
Total liabilities and stockholders' equity (deficiency) $ 299,436 $ 410,218
------------------------------------
------------------------------------
</TABLE>
See accompanying notes.
F-26
<PAGE>
Transition Analysis Component Technology, Inc.
Statements of Operations
<TABLE>
<CAPTION>
(Unaudited)
Six months ended
December 31
1993 1994
--------------------------------------
<S> <C> <C>
Revenues $411,431 $585,262
Selling, general and administrative expenses 446,893 513,522
Depreciation of equipment 15,708 16,506
--------------------------------------
Net (loss)income $(51,170) $ 55,234
--------------------------------------
--------------------------------------
Net (loss) income per common share $(3.37) $3.63
--------------------------------------
--------------------------------------
Number of common shares used in computation 15,200 15,200
--------------------------------------
--------------------------------------
</TABLE>
See accompanying notes.
F-27
<PAGE>
Transition Analysis Component Technology, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
(Unaudited)
Six months ended
December 31
1993 1994
----------------------------------------
<S> <C> <C>
Operating activities
Net (loss) income $ (51,170) $ 55,234
Adjusted to reconcile net (loss) income to net cash
(used in) provided by operating activities:
Depreciation 15,708 16,506
Changes in operating assets and liabilities:
Increase in accounts receivable (21,786) (98,902)
Increase in prepaid expenses and
other current assets (7,364) (13,138)
Increase in accounts payable and
accrued expenses 33,708 41,670
----------------------------------------
Net cash (used in) provided by operating activities (30,904) 1,370
Investing activities
Purchases of equipment (21,567) (14,117)
----------------------------------------
Net cash used in investing activities (21,567) (14,117)
----------------------------------------
Financing activities
Net (decrease) increase in long-term borrowings (13,818) 9,580
----------------------------------------
Net cash (used in) provided by financing activities (13,818) 9,580
----------------------------------------
Net decrease in cash and cash equivalents (66,289) (3,167)
Cash and cash equivalents at beginning of period 109,733 35,862
----------------------------------------
Cash and cash equivalents at end of period $ 43,444 $ 32,695
----------------------------------------
----------------------------------------
</TABLE>
See accompanying notes.
F-28
<PAGE>
Transition Analysis Component Technology, Inc.
Notes to Unaudited Condensed Financial Statements
December 31, 1994
1. Organization and Basis of Presentation
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the six month period
ended December 31, 1994 are not necessarily indicative of the results that
may be expected for the year ending June 30, 1995.
Organization
TACTech is a 90% owned subsidiary of Zing Technologies Inc. ("Zing") and is
located in Yorba Linda, California. The remaining 10% is owned by one officer.
2. Related Parties and Subsequent Events
The Company is allocated a portion of Zing's corporate administrative expenses
amounting to $37,500 in each of the six months ended December 31, 1993 and
1994, which are included in selling, general and administrative expenses.
Advances previously received from Zing are payable upon demand, however Zing
has indicated that no demand for repayment will be made in the next year,
accordingly, such amounts are classified as non-current. TACTech has not been
charged interest on the account balance.
Subsequent Events
In connection with the proposed transaction, all intercompany advances as of
the effective date will be considered equity upon consummation of the proposed
transaction and, accordingly, will be shown as paid-in capital. Further, the
common shares authorized and outstanding will be split on an approximately 49
for one basis (748,603 shares will be issued and outstanding).
In addition, the Company will pay a management fee to Zing in the amount of
$75,000 per year, for three years for managerial oversight services to be
provided by the Chief Executive Officer and Chief Financial Officer of Zing.
Further following the transaction, the Company will no longer be a consolidated
subsidiary of Zing and will then need to establish its own credit lines and
sources of financing. There is no assurance that the Company will be able to
obtain independent sources of financing.
F-29
<PAGE>
INDEX TO EXHIBITS
-----------------
ANNEX I Agreement and Plan of Merger
ANNEX II Section 623 of the New York Business
Corporation Law
ANNEX III Omnirel Preferred Stock Certificate
of Designation
<PAGE>
ANNEX I
<PAGE>
MCSW-LLP - Draft - March 30, 1995
AGREEMENT AND PLAN OF MERGER
<PAGE>
ARTICLE I
THE MERGER
1.1 The Merger . . . . . . . . . . . . . . . . . . . . 3
1.2 Effect of the Merger . . . . . . . . . . . . . . . 3
1.3 Effective Time. . . . . . . . . . . . . . . . . . . 3
1.4 Certificate of Incorporation and By-Laws . . . . . 3
1.5 Directors . . . . . . . . . . . . . . . . . . . . . 4
1.6 Officers . . . . . . . . . . . . . . . . . . . . . 4
1.7 Taking of Necessary Action. . . . . . . . . . . . . 4
ARTICLE II
STATUS OF SHARES; MERGER CONSIDERATION
2.1 Status of Shares . . . . . . . . . . . . . . . . . 5
(a) MergerCo Common Stock. . . . . . . . . . . . . 5
(b) Zing Common Stock . . . . . . . . . . . . . . 5
2.2 Recapitalization of Omnirel and TACTech . . . 7
2.3 Merger Consideration . . . . . . . . . . . . . . . 7
ARTICLE III
DISSENTING SHARES; WARRANTS;
SURRENDER OF CERTIFICATES
3.1 Dissenting Shares . . . . . . . . . . . . . . . . . 11
3.2 (a) Appointment of Paying Agent. . . . . . . . . . 12
(b) Surrender of Certificates; Distribution of
Merger Consideration other than Deferred
Payment Rights. . . . . . . . . . . . . . . . 12
(c) Failure to Surrender Certificates; Waiver of
Rights to Receive Merger Consideration. . . . 13
(d) Transfer Agent . . . . . . . . . . . . . . . . 13
3.3 Zing Warrants. . . . . . . . . . . . . . . . . . . 14
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of Zing . . . . . . 15
(a) Authorization . . . . . . . . . . . . . . . . 15
(b) Organization; Subsidiaries. . . . . . . . . . 16
(c) Capitalization; Ownership of Subsidiaries. . . 16
(d) Non Contravention. . . . . . . . . . . . . . . 18
(e) Consents . . . . . . . . . . . . . . . . . . . 19
(f) Tax Matters . . . . . . . . . . . . . . . . . 20
(g) Accuracy of Information Furnished. . . . . . . 22
(h) Litigation . . . . . . . . . . . . . . . . . . 24
(i) No Material Liabilities. . . . . . . . . . . . 24
(i) Financing. . . . . . . . . . . . . . . . . . . 25
i
<PAGE>
(j) Solvency. . . . . . . . . . . . . . . . . . . 25
4.2 Representations and Warranties of MergerCo. . . . . 26
(a) Authorization . . . . . . . . . . . . . . . . 26
(b) Organization. . . . . . . . . . . . . . . . . 27
(c) Non-Contravention . . . . . . . . . . . . . . 27
(d) Consents. . . . . . . . . . . . . . . . . . . 28
(e) Accuracy of Information Furnished . . . . . . 29
(f) Litigation. . . . . . . . . . . . . . . . . . 30
(g) Business . . . . . . . . . . . . . . . . . . . 30
ARTICLE V
COVENANTS
5.1 Covenants of Zing . . . . . . . . . . . . . . . . . 31
(a) Notification . . . . . . . . . . . . . . . . . 31
(b) Conduct of Business; Certain Covenants. . . . 31
(c) Proxy Statement. . . . . . . . . . . . . . . . 33
(d) 13E-3 . . . . . . . . . . . . . . . . . . . . 33
(e) Registration of Omnirel Common and Preferred
Shares. . . . . . . . . . . . . . . . . . . . 33
(f) Registration of TACTech Shares . . . . . . . . 33
(g) Blue Sky Qualifications. . . . . . . . . . . . 33
(h) Financing. . . . . . . . . . . . . . . . . . . 34
5.2 Covenants of MergerCo. . . . . . . . . . . . . . . 34
(a) Proxy Statement/Prospectus. . . . . . . . . . 34
(b) Notification . . . . . . . . . . . . . . . . . 34
5.3 Governmental Filings. . . . . . . . . . . . . . . . 35
5.4 Publicity. . . . . . . . . . . . . . . . . . . . . 35
5.5 Best Efforts. . . . . . . . . . . . . . . . . . . . 35
ARTICLE VI
CONDITIONS
6.1 Conditions to Obligations of MergerCo . . . . . . . 36
(a) Copies of Resolutions. . . . . . . . . . . . . 36
(b) Representations, Warranties and Covenants . . 37
(c) Consents . . . . . . . . . . . . . . . . . . . 37
(d) Litigation . . . . . . . . . . . . . . . . . . 37
(e) No Material Adverse Change . . . . . . . . . . 37
(f) Warrants . . . . . . . . . . . . . . . . . . . 38
(g) Certificate . . . . . . . . . . . . . . . . . 38
6.2 Shareholder Approval and Effectiveness of
Registration Statements as Conditions to
Obligations of Zing. . . . . . . . . . . . . . . . 38
6.3 Additional Conditions to Obligations of Zing . . . 39
(a) Copies of Resolutions. . . . . . . . . . . . . 39
(b) Representations. Warranties and Covenants . . 39
(c) Consents . . . . . . . . . . . . . . . . . . . 39
(d) Financing . . . . . . . . . . . . . . . . . . 39
(e) Litigation. . . . . . . . . . . . . . . . . . 40
ii
<PAGE>
(f) Certificate. . . . . . . . . . . . . . . . . . 40
(g) Dissenting Shareholders. . . . . . . . . . . . 40
(h) Adverse Tax Consequences. . . . . . . . . . . 40
6.4 Failure of the Conditions Set Forth in Section 6.2 41
6.5 Failure to meet Conditions Set Forth in Section
6.1 or 6.3 . . . . . . . . . . . . . . . . . . . . 41
ARTICLE VII
CLOSING
7.1 Closing Date. . . . . . . . . . . . . . . . . . . . 42
7.2 Actions to be Taken. . . . . . . . . . . . . . . . 42
ARTICLE VIII
TERMINATION; REMEDIES FOR BREACH OF THIS AGREEMENT;
INDEMNIFICATION
8.1 Termination for Failure to Close on Time . . . . . 42
8.2 MergerCo Remedies; Expenses . . . . . . . . . . . . 43
8.3 Indemnification. . . . . . . . . . . . . . . . . . 43
(a) Directors and Officers. . . . . . . . . . . . 43
(b) The Surviving Corporation. . . . . . . . . . . 44
(c) Indemnification of MergerCo. . . . . . . . . . 45
ARTICLE IX
MISCELLANEOUS
9.1 Payment of Expenses . . . . . . . . . . . . . 46
9.2 Modification and Waiver . . . . . . . . . . . . . . 46
9.3 Assignment . . . . . . . . . . . . . . . . . . . . 46
9.4 Burden and Benefit . . . . . . . . . . . . . . . . 47
9.5 Entire Agreement. . . . . . . . . . . . . . . . . . 47
9.6 No Survival. . . . . . . . . . . . . . . . . . . . 48
9.7 Governing Law . . . . . . . . . . . . . . . . . . . 48
9.8 Notices. . . . . . . . . . . . . . . . . . . . . . 48
9.9 Counterparts. . . . . . . . . . . . . . . . . . . . 49
9.10 Rights Cumulative . . . . . . . . . . . . . . 49
9.11 Severability of Provisions . . . . . . . . . . 50
9.12 Headings. . . . . . . . . . . . . . . . . . . 50
9.13 Exhibits and Schedules. . . . . . . . . . . . 50
iii
<PAGE>
MCSW-LLP - Draft - March 30, 1995
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER made as of the 29th day of
March, 1995, by and between ZING TECHNOLOGIES, INC., a New York
corporation ("Zing" or the "Company") and ZING MERGER CO., INC.,
a New York corporation ("MergerCo").
RECITALS
--------
WHEREAS, the authorized capital stock of Zing consists
of (i) 12,000,000 shares (the "Shares") of common stock, par
value $.01 per share (the "Zing Common Stock"), of which, as of
the date hereof approximately 2,555,640 shares are issued and
outstanding; and
WHEREAS, the authorized capital stock of MergerCo
consists of 200 shares of common stock, no par value (the
"MergerCo Common Stock"); and
WHEREAS, on or before the Closing Date (as defined in
Section 7.1 hereof) and subject to satisfaction or waiver, if
permissible, of all the conditions set forth in Article VI
hereof, Robert E. Schrader and his wife (collectively, the "Major
Shareholder") will transfer 1,227,211 Shares to Merger Co in
consideration of the issuance by MergerCo to the Major
Shareholder of 100 shares of MergerCo Common Stock; and
<PAGE>
WHEREAS, immediately prior to the Closing, 1,227,211
shares of Zing Common Stock will be held of record by MergerCo
(the "MergerCo Shares"), and it is expected that 1,467,760 shares
of Zing Common Stock will be held of record by all other
shareholders (collectively, the "Public Shares"); and
WHEREAS, the Boards of Directors of Zing and MergerCo
have each determined that it is in the best interests of their
respective shareholders for MergerCo to be merged with and into
Zing upon the terms and subject to the conditions set forth
herein; and
WHEREAS, in furtherance of such acquisition, the Boards
of Directors of Zing and MergerCo have each approved this
Agreement and the merger of MergerCo with and into Zing in
accordance with the Business Corporation Law of the State of New
York (the "BCL") and upon the terms and conditions set forth
herein; and
WHEREAS, the Major Shareholder, as the owner of record
of all MergerCo Common Stock, has approved this Agreement and the
merger of MergerCo with and into Zing, subject to the approval of
the shareholders of Zing, in accordance with the BCL and upon the
terms and conditions set forth herein (the "Merger");
NOW, THEREFORE, in consideration of the foregoing
premises and the covenants and agreements hereinafter contained,
and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be
legally bound hereby, Zing and MergerCo hereby agree as follows:
2
<PAGE>
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the
-----------
conditions of this Agreement and in accordance with the relevant
provisions of the BCL, MergerCo shall be merged with and into
Zing as soon as practicable following the satisfaction or waiver,
if permissible, of the conditions set forth in Article VI hereof.
Following the Merger, the separate corporate existence of
MergerCo shall cease, and Zing shall continue as the surviving
corporation (the "Surviving Corporation") and shall continue its
corporate existence.
1.2 Effect of the Merger. The Merger shall have the
---------------------
effects set forth in Section 906 of the BCL.
1.3 Effective Time. The Merger shall not become
---------------
effective until, and shall become effective immediately upon, the
filing with the New York Secretary of State of a certificate of
merger in such form as is required by, and executed in accordance
with, the relevant provisions of the BCL, which filing shall be
made on the Closing Date. The time of such filing is sometimes
herein referred to as the "Effective Time."
1.4 Certificate of Incorporation and By-Laws. Subject
-----------------------------------------
to Section 8.3(a) hereof, at the Effective Time, the Certificate
of Incorporation and the By-Laws as then constituted of MergerCo
shall be the Certificate of Incorporation and By-Laws of the
Surviving Corporation.
3
<PAGE>
1.5 Directors. At the Effective Time, the directors of
---------
Zing immediately prior to the Effective Time shall cease to be
directors thereof and the directors of MergerCo shall become
directors of the Surviving Corporation and each of them, subject
to the By-Laws of the Surviving Corporation and the laws of the
State of New York, shall serve until his successor is elected or
appointed and qualified or until his earlier death, incapacity,
resignation or removal.
1.6 Officers. The officers of MergerCo immediately prior
--------
to the Effective Time shall be the officers of the Surviving
Corporation and will hold office from the Effective Time until
their respective successors are duly elected or appointed and
qualified in the manner provided in the Certificate of
Incorporation and By-Laws of the Surviving Corporation, or as
otherwise provided by law, or until their resignation.
1.7 Taking of Necessary Action. In case at any time
---------------------------
after the Effective Time any further action is necessary to carry
out the purposes of this Agreement or to vest the Surviving
Corporation with full title to all assets, rights, approvals,
immunities and franchises of MergerCo, the officers and
directors, or the former officers and directors, as the case may
be, of MergerCo and the Surviving Corporation shall take all such
action.
4
<PAGE>
ARTICLE II
STATUS OF SHARES; MERGER CONSIDERATION
2.1 Status of Shares. The effect of the Merger on the
----------------
shares of each of MergerCo and Zing and the consideration which
the holders of such shares shall receive, are as follows:
(a) MergerCo Common Stock. Each share of
------------------------
MergerCo Common Stock issued and outstanding immediately prior to
the Effective Time shall be canceled by virtue of the Merger.
(b) Zing Common Stock.
-----------------
(i) Each MergerCo Share issued and
outstanding immediately prior to the Effective Time
shall be canceled by virtue of the Merger and without
any action on the part of MergerCo and one hundred
(100) shares of the Surviving Corporation's common
stock shall be issued to the Major Shareholder in
exchange therefor.
(ii) Each Public Share issued and
outstanding immediately prior to the Effective Time
(other than Dissenting Shares, as defined in Section
3.1 hereof), shall by virtue of the Merger and without
any action on the part of the holder thereof, be
5
<PAGE>
converted into the right to receive a pro rata share of
substantially all of Zing's assets, such pro rata share
to consist of the right to receive (A) cash equal to
$1.25, subject to reductions as provided in subsection
2.3(b) hereof (the "Cash Payment"); (B) a non-
assignable contract right to receive contingent cash
distributions, on a pro rata basis based upon the total
number of MergerCo Shares and Public Shares outstanding
immediately prior to the Effective Time, from time to
time as the Surviving Corporation shall determine or,
subject to the conditions set forth in Subsection
2.2(d) hereof, on or about December 31, 1999 from the
Deferred Payment Fund described in Subsection 2.2(c)
(the "Deferred Payment Right"); (C) one share of common
stock, $.01 par value, of Omnirel Corporation
("Omnirel"), a Massachusetts corporation (anticipated
to be reincorporated as a Delaware corporation prior to
the Effective Time) and a Zing subsidiary
(collectively, the "Omnirel Common Shares"); (D) one
share of Omnirel preferred stock with a liquidation
preference of $1.30 per share, and a cumulative
preferred dividend at a rate to be determined by the
Board of Directors of Zing and Omnirel, redeemable in
whole or in part, at the option of Omnirel at a price
per share equal to the liquidation preference
(collectively, the "Omnirel Preferred Shares"); and (E)
one-fourth of a share (one share for every four Public
Shares) of common stock, $.01 par value, of Transition
Analysis Component Technology, Inc. ("TACTech"), a
Delaware corporation and a Zing subsidiary
(collectively, the "TACTech Shares"), all upon
surrender of the certificate representing such Public
Share. All Cash Payments and all cash distributions
made pursuant to the Deferred Payment Right shall be
made without interest.
6
<PAGE>
2.2 Recapitalization of Omnirel and TACTech. Prior to
----------------------------------------
the Effective Time and subject to the approval of this Agreement
by the shareholders of Zing, Zing shall cause the Boards of
Directors of Omnirel and TACTech to declare and implement the
following stock splits:
(a) Each outstanding share of Omnirel Common
Stock on the date such stock split is declared shall be exchanged
for 2.6141442 shares and of Omnirel Common Stock; and
(b) Each outstanding share of TACTech Common
Stock on the date such stock split is declared shall be exchanged
for 49.250219 shares of TACTech Common Stock.
2.3 Merger Consideration. (a) The Cash Payment, the
---------------------
Deferred Payment Right, the Omnirel Common and Preferred Shares
and the TACTech Shares are sometimes hereinafter referred to
collectively as the "Merger Consideration." The amounts payable
to each holder of Public Shares (the "Public Shareholders") as a
Cash Payment and as any pro rata cash distribution from the
Deferred Payment Fund (as such term is defined below) pursuant to
the Deferred Payment Right, shall be rounded to the nearest whole
cent.
7
<PAGE>
(b) The source of funds for the Cash Payment
shall be the Zing cash available at the Effective Time in excess
of a contingency reserve fund of approximately $2,000,000 (the
"Initial Contribution"). A substantial portion of such cash on
hand will represent proceeds from the repayment by Omnirel to
Zing on or before the Effective Time of approximately $2,000,000
of intercompany loans which were in the approximate amount of
$5,500,000 as of December 31, 1994. The Cash Payment will be
made as soon after the Effective Time as practicable to Public
Shareholders of record whose certificates representing Public
Shares are surrendered pursuant to the Merger in accordance with
the terms of this Agreement. The $3,500,000 balance of such loan
not repaid by Omnirel prior to the Effective Time shall be
capitalized by the issuance of Omnirel Preferred Shares having an
aggregate liquidation preference of $3,500,000. The amount of
the Cash Payment may be reduced to less than $1.25 per Public
Share if, by the Effective Time, Omnirel has not closed on its
intended financing with Fleet Bank (the "Bank") of a $2,000,000
mortgage loan.
(c) The sources of funds for the Deferred Payment
Right shall be the Initial Contribution (A) decreased by (i) all
cash expenditures for taxes payable by Zing or any of its
subsidiaries, including taxes arising from the Merger and the
distribution of the Merger Consideration to the Public
Shareholders and all other pre-Effective Time liabilities of Zing
or liabilities arising as a result of the Merger (together with
the expenses described in clause (iii), the "Eligible
Liabilities"), (ii) the fair value of Dissenting Shareholders'
Public Shares, and (iii) reasonable expenses resulting from or
attributable to Zing or its business prior to the Effective Time,
or from administration of funds constituting the Initial
Contribution and the Deferred Payment Fund, and (B) increased by
all cash received after the Effective Time from all pre-Effective
8
<PAGE>
Time transactions of Zing, including but not limited to, (i)
proceeds from repayment to the Surviving Corporation of certain
loans, the largest of which is a $250,000 loan to Omnirel payable
on or before December 31, 1998, (ii) interest earned on Approved
Investments (as such term is hereinafter defined); (iii) payments
to the Surviving Corporation under a tax sharing agreement among
Zing, Omnirel and TACTech, and (iv) the amount received by the
Surviving Corporation, if any, net of corporate taxes thereon, as
a result of the obligation of Arrow Electronics, Inc. ("Arrow"),
subject to certain conditions, to pay Zing an additional purchase
price of up to a maximum of $2,000,000 (the "Arrow Sale
Proceeds") from the sale to Arrow of certain net assets of Zing
in May 1993 (the "Arrow Sale"). The amount of the Initial
Contribution as adjusted by all of the foregoing is referred to
hereinafter as the "Deferred Payment Fund."
(d) The Surviving Corporation will maintain the
Deferred Payment Fund at a bank or trust company selected by Zing
(which bank or trust company shall have capital, surplus and
undivided profits of at least $250,000,000). The Deferred
Payment Fund (including the Initial Contribution) will be
invested only in one or more of the following: (i) direct
obligations of the United States of America, or any agency
thereof, or obligations guaranteed by the United States of
America, provided that such obligation mature within ninety (90)
days from the date of acquisition thereof; (ii) certificates or
9
<PAGE>
deposit maturing within ninety (90) days from the date of
acquisition, in each case issued by, created by, or maintained
with a bank or trust company organized under the laws of the
United States or any state thereof having capital and surplus
aggregating at least $250,000,000 (an "Eligible Bank"); and/or
(iii) money market accounts or interest bearing accounts with an
Eligible Bank (collectively, the "Approved Investments").
The Deferred Payment Fund will be liquidated
and the final payment made to Zing Public Shareholders on or
about December 31, 1999 (the "Liquidating Distribution"), unless
at that time there is an ongoing tax audit or litigation which
could affect such Fund. In such event, the Deferred Payment Fund
will be distributed upon final resolution of such audit or
litigation. The Surviving Corporation may, at its option,
determine to make one or more distributions prior thereto. Any
monies remaining in the Deferred Payment Fund after the
Liquidating Distribution which are unclaimed by and due to a
Public Shareholder who has surrendered his certificate(s) for all
of his Public Shares shall be held by the Surviving Corporation
until such date as is one day before such monies would otherwise
escheat to the state of domicile of such Public Shareholder, at
which time such monies shall become the sole and exclusive
property of the Surviving Corporation, free and clear of any
claims whatsoever.
Payments from the Deferred Payment Fund will
be made to those persons who are holders of record of
certificates representing Public Shares which are surrendered
pursuant to the Merger. The Deferred Payment Right is not
assignable or transferable and, except as a result of death or by
operation of law, payment thereof will be made only to such
holders of record.
10
<PAGE>
(e) The Surviving Corporation shall be
authorized, in its sole discretion, to withhold from available
cash or withdraw from cash previously transferred to the Deferred
Payment Fund from time to time, as the case may be, such funds as
are reasonably necessary to pay expenses incurred in connection
with the Merger, including but not limited to the expenses of
administering the funds constituting the Initial Contribution and
the Deferred Payment Fund and any expenses of the Merger or other
Eligible Liabilities which decrease the amount of the Deferred
Payment Fund as described in Section 2.3(c)(A).
ARTICLE III
DISSENTING SHARES; WARRANTS;
SURRENDER OF CERTIFICATES
3.1 Dissenting Shares. Notwithstanding anything in this
-----------------
Agreement to the contrary, any Public Shares which are issued and
outstanding immediately prior to the Effective Time and which are
held by shareholders who did not vote in favor of the Merger and
who comply with all of the relevant provisions of Section 623 of
the BCL (the "Dissenting Shares") shall not be converted into or
be exchangeable for the right to receive the Merger
Consideration, unless and until such holders shall have failed to
perfect or shall have effectively withdrawn or lost their rights
to appraisal under the BCL. If any such holder shall have failed
to perfect or shall have effectively withdrawn or lost such
right, such holder's Zing Public Shares shall thereupon be deemed
to have been converted into and to become exchangeable for the
right to receive, as of the Effective Time, the Merger
Consideration, without any interest thereon.
11
<PAGE>
3.2 (a) Appointment of Paying Agent. It is
--------------------------------
anticipated that the Company's transfer agent and registrar will
act as the paying agent for distribution to the Public
Shareholders of the Cash Payment and Deferred Payment Right
monies. On or about the Effective Time, Zing shall transmit to
the paying agent sufficient funds for it to disburse the Cash
Payment to the Public Shareholders. When and as distributions of
the Deferred Payment Fund are to be made to the Public
Shareholders, the Surviving Corporation shall transmit the
necessary funds to the paying agent. The Company's transfer
agent and registrar is presently Mellon Securities Trust Company,
New York, New York.
(b) Surrender of Certificates; Distribution of
---------------------------------------------
Merger Consideration other than Deferred Payment Rights. Within
--------------------------------------------------------
five business days after the Effective Time, such paying agent
shall mail a transmittal form to each holder of record of
certificates theretofore representing Public Shares, advising
each such holder of the procedure for surrendering to such paying
agent such certificates. Each holder of a certificate or
certificates representing a Public Share or Shares entitled to
receive the Merger Consideration shall surrender such
certificate(s) to the paying agent for cancellation, and the
paying agent shall distribute to each such holder, in exchange
for his certificate(s), the following: (i) cash in an amount
equal to the product of the number of Public Shares represented
by such certificate(s), multiplied by the amount of the Cash
Payment; (ii) a certificate representing that number of Omnirel
Common Shares as is equal to the number of Public Shares being
exchanged by such holder, (iii) a certificate representing that
number of Omnirel Preferred Shares as is equal to the number of
Public Shares being exchanged by such holder; and (iv) a
certificate representing that number of TACTech Shares as is
equal to one-fourth of the number of Public Shares (or one
TACTech Common Share for every four Public Shares) being
exchanged by such holder.
12
<PAGE>
(c) Failure to Surrender Certificates; Waiver of
---------------------------------------------
Rights to Receive Merger Consideration. If the certificate or
---------------------------------------
certificates of any holder of Public Shares are not surrendered
to the paying agent or the Surviving Corporation prior to one day
before the Merger Consideration exchangeable therefor would
otherwise escheat to the state of domicile of such holder, such
holder shall be deemed to have waived his right to surrender his
certificate or certificates for the Merger Consideration, and
such Merger Consideration shall be deemed to be the sole and
exclusive property of the Surviving Corporation, free and clear
of any claims whatsoever. Until so surrendered, each such
outstanding certificate, which prior to the Effective Time
represented a Public Share or Shares, shall be deemed for all
corporate purposes to evidence solely the right to receive the
Merger Consideration, pro rata according to the number of Shares
evidenced by such certificate. The Surviving Corporation shall
have no obligation to provide funds for the Cash Payment or for
distribution pursuant to the Deferred Payment Right with respect
to any Public Shares for which certificates have not been
surrendered. After the Effective Time, there shall be no
transfers of Public Shares which were outstanding immediately
prior to the Effective Time on the stock transfer books of the
Surviving Corporation.
(d) Transfer Agent. In the event that Zing's
---------------
transfer agent is not acting as the paying agent hereunder, the
Surviving Corporation shall cause the transfer agent for itself,
Omnirel and TACTech, to issue in the name of each holder of
13
<PAGE>
Public Shares whose certificate or certificates therefor have
been surrendered to the paying agent for cancellation, and
deliver to the paying agent as soon as practicable after receipt
of notice of such surrender, all certificates representing such
securities and in such denominations as are required to
distribute the Merger Consideration pursuant to the provisions of
Subsection 3.2(b) hereof. The securities represented by all such
certificates shall thereupon be deemed by their respective
issuers to be duly authorized, validly issued, fully paid and
non-assessable and free of preemptive rights.
3.3 Zing Warrants. Prior to the Effective Time, the
-------------
Company's Board of Directors shall notify all holders of all
outstanding warrants to purchase Zing Common Stock (individually,
a "Warrant" and collectively, the "Warrants") of this Agreement
and Plan of Merger in order that they may exercise such Warrants,
effective on or before the Closing Date. If any Warrant is
exercised after the Closing Date and before the date of
expiration of such Warrant, the holder thereof shall be entitled
to receive the same pro rata share of Merger Consideration as he
would have received if he had exercised such Warrant on or before
the Closing Date, but in no event shall such holder be entitled
to receive any shares of Zing Common Stock in exchange for any
Warrants surrendered after the Closing Date. Any Warrant holder
may make payment on account of the Warrant exercise price by
offsetting against the aggregate exercise price, the aggregate
Cash Payment to which he is entitled.
14
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of Zing. Zing
-------------------------------------------
represents and warrants to MergerCo as follows:
(a) Authorization. Zing has full corporate power
-------------
and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of Zing, and at or prior to
the Effective Time such actions and the consummation of the
transactions contemplated hereby will have been duly and validly
authorized by the shareholders of Zing. No other corporate
proceedings on the part of Zing are necessary to authorize this
Agreement or to consummate the transactions so contemplated by
this Agreement (other than approval of the Merger by the
shareholders of Zing). This Agreement has been duly and validly
executed and delivered by, and is the valid and binding
obligation of, Zing, enforceable against Zing in accordance with
its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect, or by legal or
equitable principles relating to or limiting creditors' rights
generally and except that the remedy of specific performance and
injunctive and other forms of equitable relief are subject to
certain equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
15
<PAGE>
(b) Organization; Subsidiaries. Zing is a
---------------------------
corporation duly organized, validly existing and in good standing
under the laws of the State of New York. The subsidiaries of
Zing are as set forth on Schedule 4.1(b) hereto (individually, a
"Subsidiary" and collectively, the "Subsidiaries"). Each of
Omnirel and TACTech is a corporation duly organized, validly
existing and in good standing under the laws of the state of its
incorporation. Zing and each of the Subsidiaries has the
corporate power and authority to own or lease its properties and
assets and to carry on its business as now being conducted and is
duly qualified or licensed to do business as a foreign
corporation and is in good standing in each jurisdiction in which
the failure to obtain such qualification or licensure would have
a material adverse effect on the business of Zing and the
Subsidiaries taken as a whole. Zing has delivered to MergerCo
true and correct copies of the charters, certificates of
incorporation or other instruments of organization, as amended
through the date hereof, and by-laws, as currently in effect, of
Zing and each of its Subsidiaries. Except as set forth in
Schedule 4.1(b), neither Zing nor the Subsidiaries own any shares
of capital stock or other interest in any other corporation,
partnership, association or other entity, other than those set
forth in Zing's investment portfolio, which shares are held by
Zing for investment only.
(c) Capitalization; Ownership of Subsidiaries.
-----------------------------------------
(i) The authorized shares of capital
stock of Zing and the issued and outstanding shares of
capital stock of Zing as of the date hereof are as set
forth above in the Recitals to this Agreement. The
authorized capital stock of each Subsidiary, the
respective par values thereof, and the number of shares
16
<PAGE>
of capital stock issued and outstanding of each such
Subsidiary are as set forth in Schedule 4.1(c) hereof.
Except as set forth on Schedule 4.1(c), all the shares
of capital stock of each of the Subsidiaries are owned
of record and beneficially by Zing. The outstanding
shares of Zing Common Stock have been duly authorized
and validly issued, are fully paid and non-assessable
and are free of preemptive rights. The issued and
outstanding shares of the capital stock of each of the
Subsidiaries are owned by Zing (or such third parties
as are set forth on Schedule 4.1(c)), and, as to such
shares owned by Zing, are free and clear of all claims,
options, liens, mortgages, charges, equities,
liabilities, security interests, encumbrances and other
restrictions or limitations of any kind whatsoever.
Neither Zing nor the Subsidiaries have issued any
securities, or taken any action or omitted to take any
action, presently giving rise to claims for violation
of federal or state securities laws or the securities
laws of any other jurisdiction, other than claims which
will not have a material adverse effect on the business
of Zing and the Subsidiaries taken as a whole.
(ii) As of the date of this Agreement,
there are outstanding currently exercisable warrants to
purchase 139,331 shares of Zing Common Stock at an
exercise price of $1.34 per share. Except as set forth
on Schedule 4.1(c), there are no outstanding or
authorized subscriptions, options, warrants, calls,
convertible securities, rights, commitments or any
other agreements of any character relating to any
securities of Zing or the Subsidiaries, and, except as
set forth on Schedule 4.1(c), there are no voting
trusts or other agreements or understandings with
respect to the voting of the capital stock of Zing or
the Subsidiaries. Zing shall use reasonable efforts so
that at the Effective Time all outstanding Warrants
shall have been exercised in accordance with the
provisions of Section 3.3 hereof.
17
<PAGE>
(d) Non Contravention. Except as set forth in
-----------------
Schedule 4.1(d), the execution and delivery of this Agreement and
the consummation of any of the transactions contemplated hereby
do not and will not:
(i) violate any provision of Zing's or
the Subsidiaries' respective charters, certificates of
incorporation or other instruments of organization, as
amended through the date hereof, and by-laws, as
currently in effect, of Zing and the Subsidiaries;
(ii) violate, or result with the passage
of time in the violation of, any provision of, or
result in the acceleration of or entitle any party to
accelerate (whether after the giving of notice or lapse
of time or both) any obligation under, or result in the
creation or imposition of any lien, charge, pledge,
liability, security interest or other encumbrance or
restriction upon any of the material properties of Zing
or the Subsidiaries pursuant to any provision of, any
mortgage, lien, lease, agreement, permit, indenture,
license, instrument, law, order, arbitration award,
judgment or decree to which Zing or any of the
Subsidiaries is a party or by which any of the
properties of any such entity is bound, except for such
violations and accelerations as to which requisite
waivers or consents have been obtained or which, in the
aggregate, would not have a material adverse effect on
18
<PAGE>
the business of Zing and the Subsidiaries taken as a
whole;
(iii) violate or conflict with any
other restriction of any kind or character to which
Zing or any of the Subsidiaries is subject, or by which
any of such entity's material assets may be bound where
such violation or conflict would have a material
adverse effect on the business of Zing and the
Subsidiaries taken as a whole; or
(iv) constitute an event permitting
termination of a material agreement to which Zing or
any of the Subsidiaries is subject and which
termination would have a material adverse effect on the
business as Zing and the Subsidiaries taken as a whole.
(e) Consents. Except for filings required
--------
pursuant to Section 904 of the BCL, and except as provided in
Schedule 4.1(e), no consent, authorization, order or approval of,
or filing or registration with, any governmental commission,
board or other regulatory body is required for or in connection
with the execution, delivery and performance of this Agreement by
Zing and the consummation by Zing of any of the transactions
contemplated hereby.
19
<PAGE>
(f) Tax Matters. For purposes of this Agreement,
-----------
"Taxes" or "Tax" means all net income, capital gains, gross
income, gross receipts, sales, use, ad valorem, franchise,
-- -------
profits, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property or windfall
profit taxes, customs duties, or other taxes, fees, assessments
or charges of any kind whatsoever, together with any interest and
any penalties, additions to tax, or additional amounts imposed by
any taxing authority ("Taxing Authority") upon Zing or any of the
Subsidiaries.
Except as set forth on Schedule 4.1(f):
(i) Zing and the Subsidiaries have
prepared in all material respects and timely filed all
returns and reports relating to Taxes required to be
filed by law as of the date of this Agreement, and will
so prepare and file any such returns and reports
required to be filed by law as of the Closing Date, and
have paid when due all Taxes due and payable as shown
thereon, except those Taxes which may be paid without
interest or penalty and are being contested in good
faith as described on Schedule 4.1(f) hereto. Except
for Taxes which occur in the ordinary course of
business or for which Zing's liability is adequately
provided for by reserves, there are no material Tax
liabilities, including those resulting from all
intercompany transactions, for which Zing or the
Subsidiaries may be held liable or which will become
due for any taxable period commencing prior to the
Closing Date, whether or not disputed.
20
<PAGE>
(ii) Zing and the Subsidiaries each have
withheld or will withhold amounts from their respective
employees and have filed or will file all federal,
foreign, state, and local returns and reports with
respect to employee income tax withholding and social
security and unemployment Taxes for all periods (or
portions thereof) ending on or before the Closing Date,
in compliance with the provisions of the Internal
Revenue Code of 1986, as amended and currently in
effect (the "Code"), and other applicable federal,
foreign, state and local laws the violation of which
would have a material adverse effect on the business of
Zing and the Subsidiaries taken as a whole.
(iii) Zing and the Subsidiaries each
have paid, or provided a sufficient reserve for the
payment of, all federal, state, local and foreign Taxes
with respect to all periods, or portions thereof,
ending on or before December 31, 1994, other than taxes
in immaterial amounts. The amount of any net operating
loss for federal income tax purposes shown on Zing's
federal income tax returns has been accurately and
properly determined in accordance with the Code without
giving effect to the transactions contemplated hereby.
(iv) There are no audits underway or, to
the best knowledge of Zing after due inquiry, pending,
with respect to, nor are there any outstanding
agreements or waivers extending the statutory period of
limitations applicable to the filing of, any return or
report for Taxes or payment of any Tax of Zing or the
Subsidiaries for any period; there are no actions,
suits, proceedings, investigations or claims now
pending or known by Zing to be threatened by or against
21
<PAGE>
Zing or the Subsidiaries in respect of Taxes which may
have a material adverse effect on the business of Zing
and the Subsidiaries, taken as a whole; and all
assessments by Taxing Authorities against Zing or the
Subsidiaries have been paid in full and there are no
deficiencies of Zing or the Subsidiaries with respect
to the payment of any Tax, other than taxes which, if
not paid, will not have a material adverse effect on
Zing and the Subsidiaries, taken as a whole.
(v) Neither Zing nor the Subsidiaries
have ever been, nor is Zing or the Subsidiaries
currently bound by or had any obligation under any
agreement relating to the sharing of any liability for,
or payment of, Taxes with any other person or entity,
except that Zing and the Subsidiaries file consolidated
tax returns.
Zing warrants to Merger Co. and undertakes that Zing
shall cure all tax deficiencies set forth on Schedule 4.1(f) and
pay all interest and penalties and any additional amounts
assessed, arising out of or due in connection with such
deficiencies prior to the Effective Time, any payment in respect
thereof to be made form the Deferred Payment Fund to the full
extent thereof.
(g) Accuracy of Information Furnished. No
-------------------------------------
statement by Zing contained in this Agreement or in the Schedules
hereto, and no statement contained in any certificate or other
instrument or document furnished or to be furnished by or on
behalf of Zing to MergerCo pursuant hereto, or in connection with
22
<PAGE>
the transactions contemplated hereby, contains or will contain
any untrue statement of a material fact, or omits or will omit to
state any material fact which is necessary to make the statements
contained herein or therein not misleading. The proxy
statement/prospectus (the "Proxy Statement") to be delivered to
stockholders of Zing in connection with the Merger, the
Transaction Statement on Schedule 13E-3 (the "13E-3") and the
Registration Statements (as defined in Subsections 5.1(e) through
5.1(g) hereof) to be filed with the Securities and Exchange
Commission (the "SEC"), will comply as to form and content in all
material respects with the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder
(collectively, the "1933 Act") and with the Securities Exchange
Act of 1934, as amended, and the rules and regulations
promulgated thereunder (collectively, the "1934 Act"). None of
the information in the Proxy Statement, any of the Registration
Statements or the 13E-3, or in any amendments thereof or
supplements thereto, other than information included therein and
furnished by or on behalf of MergerCo, will, on the date the
Proxy Statement is first mailed to shareholders or at the
Effective Time, or, in the case of the 13E-3 and the Registration
Statements, when filed with the SEC, contain any statement which,
at such time and in light of the circumstances under which it
will be made, will be false or misleading with respect to any
material fact, or will omit to state any material fact necessary
in order to make the statements therein not false or misleading
or necessary to correct any statement in any earlier
communication to Zing's shareholders which has become false or
misleading. In the event Zing discovers, after mailing the Proxy
Statement, that the Proxy Statement is false or misleading with
respect to a material fact, or omits to state a material fact,
Zing shall take such steps as it deems required under the 1934
Act to correct such false or misleading statement or omission.
23
<PAGE>
(h) Litigation. Except as set forth in Schedule
----------
4.1(h), there is no action, suit, claim, proceeding or
investigation pending or, to the best knowledge of Zing after due
inquiry, threatened, which could, in the aggregate, have a
material adverse effect on the condition (financial or
otherwise), business, earnings or results of operations of Zing
and the Subsidiaries, taken as a whole; to the best knowledge of
Zing after due inquiry there is no reasonable basis for any
specific claim that may result in a material adverse effect on
the condition (financial or otherwise), business, earnings or
results of operations of Zing and the Subsidiaries, taken as a
whole, and that is reasonably likely to be asserted; and Zing is
not in default in respect of any judgment, order, writ,
injunction or decree of any court or any federal, state, local or
other governmental department, commission, board, bureau, agency
or instrumentality which could have a material adverse effect on
the condition (financial or otherwise), business, earnings or
results of operations of Zing and the Subsidiaries, taken as a
whole.
(i) No Material Liabilities. Except as
---------------------------
specifically disclosed to MergerCo or reflected or reserved
against on the audited financial statements of Zing for the
fiscal year ended June 30, 1994, and the unaudited financial
statements of Zing for the six months ended December 31, 1994,
copies of which have previously been delivered to MergerCo, or in
the footnotes thereto and except as set forth specifically
herein, there are no outstanding liabilities of Zing and the
Subsidiaries, taken as a whole, of any nature whatsoever,
liquidated or unliquidated, fixed or contingent, known or
unknown, except such liabilities as have arisen in the ordinary
24
<PAGE>
course of business since December 31, 1994 or such liabilities
which, in the aggregate, are not material to the business of Zing
and the Subsidiaries, taken as a whole.
(i) Financing. Omnirel has received, or will
---------
have received prior to the Effective Time, the written commitment
of the Bank to lend Omnirel an aggregate of up to $2,000,000, on
or before the Effective Time, and on terms which permit Omnirel
to use such funds to repay a portion of its outstanding debt to
Zing. The definitive agreements relating to the same subject
matter are hereinafter collectively referred to as the "Financing
Documentation" and the transactions contemplated thereby are
hereinafter referred to as the "Financing". At the Effective
Time, provided that the proceeds of the Financing are received,
Zing will have sufficient cash to make the Cash Payment and to
pay all fees and expenses related to the Merger. As of the date
hereof, Zing does not know of any facts or circumstances that may
reasonably be expected to result in the Financing Documentation
not being obtained or the Financing not being consummated.
(j) Solvency. Zing, immediately prior to the
---------
Effective Time, and the Surviving Corporation, at and immediately
after the Effective Time (and after giving effect to any changes
in the Surviving Corporation's assets and liabilities as a result
of the Merger), will not (a) be insolvent (either because its
financial condition is such that the sum of its debts is greater
25
<PAGE>
than the fair value of its assets or because the present fair
saleable value of its assets will be less than the amount
required to pay its respective probable liabilities on its
existing debts as they become absolute and matured), (b) be
unable to pay its respective debts from time to time incurred as
such debts become absolute and mature, and (c) have unreasonably
small capital with which to engage in its business.
4.2 Representations and Warranties of MergerCo.
---------------------------------------------------
MergerCo represents and warrants to Zing as follows:
(a) Authorization. MergerCo has full corporate
-------------
power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly
authorized by the Board of Directors and shareholders of
MergerCo, and no other corporate proceedings on the part of
MergerCo are necessary to authorize this Agreement or to
consummate the transactions contemplated by this Agreement. This
Agreement has been duly and validly executed and delivered by,
and is the valid and binding obligation of MergerCo, enforceable
against MergerCo in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy,
reorganization, insolvency, moratorium or other similar laws now
or hereafter in effect, or by legal or equitable principles
relating to or limiting creditors' rights generally and except
that the remedy of specific performance and injunctive and other
forms of equitable relief are subject to certain equitable
defenses and to the discretion of the court before which any
proceeding therefor may be brought.
26
<PAGE>
(b) Organization. MergerCo is a corporation duly
------------
organized, validly existing and in good standing under the laws
of the State of New York, with all corporate franchise taxes duly
paid, and has the corporate power and authority to own or lease
its properties and assets and to carry on its business as now
being conducted. MergerCo has delivered to Zing a true and
correct copy of its Certificate of Incorporation, as amended
through the date hereof, and By-Laws, as currently in effect. The
authorized shares of capital stock of MergerCo as of the date
hereof, the issued and outstanding shares of capital stock of
MergerCo and the record and beneficial owners thereof are as set
forth on Schedule 4.2(b) hereto. As of the Effective Time, the
authorized shares of capital stock of MergerCo, the issued and
outstanding shares of capital stock of MergerCo and the record or
beneficial owners thereof (together with the number of shares of
MergerCo Common Stock each such owner owns beneficially and of
record as of the date hereof) will be as set forth on Schedule
4.2(b) hereto. The outstanding shares of MergerCo Common Stock
have been duly authorized and validly issued, are fully paid and
non-assessable and are free of preemptive rights. There are no
outstanding or authorized subscriptions, options, warrants,
calls, convertible securities, rights, commitments or any other
agreements of any character relating to any securities of
MergerCo. MergerCo has not issued any securities, or taken any
action or omitted to take any action, presently giving rise to
claims for violation of federal or state securities laws or the
securities laws of any other jurisdiction.
(c) Non-Contravention. The execution and delivery
-----------------
of this Agreement and the consummation of the transactions
contemplated hereby do not and will not:
27
<PAGE>
(i) violate any provision of the
Certificate of Incorporation or By-Laws of MergerCo;
(ii) violate, or result with the passage
of time in the violation of, any provision of, or
result in the acceleration of or entitle any party to
accelerate (whether after giving of notice or lapse of
time or both) any obligation under, or result in the
creation or imposition of any lien, charge, pledge,
security interest or other encumbrance or restriction
upon any of the material properties of MergerCo
pursuant to any provision of, any mortgage, lien,
lease, agreement, permit, indenture, license,
instrument, law, order, arbitration award, judgment or
decree to which MergerCo is a party or by which it or
any of its properties are bound;
(iii) violate or conflict with any
other restriction of any kind or character to which
MergerCo is subject, or by which any of its assets may
be bound where such violation or conflict would have a
material adverse effect on MergerCo; or
(iv) constitute an event permitting
termination of a material agreement to which MergerCo
is a party.
(d) Consents. Except for (i) filings required
--------
pursuant to Section 904 of the BCL, and (ii) as set forth on
Schedule 4.2(d) hereto, no consent, authorization, order or
approval of, or filing or registration with, any governmental
commission, board or other regulatory body is required for or in
connection with the execution, delivery and performance of this
28
<PAGE>
Agreement by MergerCo, the consummation by MergerCo of any of the
transactions contemplated hereby, and the acquisition, at or
before the Effective Time, of capital stock of MergerCo by the
Major Shareholder as set forth on Schedule 4.2(b).
(e) Accuracy of Information Furnished. No
-------------------------------------
statement by MergerCo contained in this Agreement or the
Schedules hereto, and no statement contained in any certificate
or other instrument or document furnished or to be furnished by
or on behalf of MergerCo to Zing pursuant hereto, or in
connection with the transaction contemplated hereby, contains or
will contain any untrue statement of a material fact, or omits or
will omit to state any material fact which is necessary to make
the statements contained herein or therein not misleading. None
of the information supplied in writing by MergerCo for express
inclusion in the Proxy Statement or set forth in the 13E-3, or in
any amendments thereof or supplements thereto, will, on the date
the Proxy Statement is first mailed to shareholders of Zing or at
the Effective Time or, in the case of the 13E-3, when filed with
the SEC, contain any statement which, at such time and in light
of the circumstances under which it will be made, will be false
or misleading with respect to any material fact, or will omit to
state any material fact necessary in order to make the statements
therein not false or misleading or necessary to correct any
statement in any earlier communication to Zing's shareholders
which has become false or misleading. MergerCo will cooperate
with Zing to correct any such statement which becomes false or
misleading.
29
<PAGE>
(f) Litigation. There is no action, suit, claim,
----------
proceeding or investigation pending or, to the best knowledge of
MergerCo after due inquiry, threatened, which, in the aggregate,
could have a material adverse effect on the condition (financial
or otherwise), business, earnings or results of operations of
MergerCo; to the best knowledge of MergerCo after due inquiry
there is no reasonable basis for any specific claim that may
result in a material adverse effect on the condition (financial
or otherwise), business, earnings or results of operations of
MergerCo and that is reasonably likely to be asserted; and
MergerCo is not in default in respect of any judgment, order,
writ, injunction or decree of any court or any federal, state,
local or other governmental department, commission, board,
bureau, agency or instrumentality which could have a material
adverse effect on the condition (financial or otherwise),
business, earnings or results of operations of MergerCo.
(g) Business. MergerCo has not engaged in any
--------
activities other than those incident to its organization or as
contemplated by the terms of this Agreement. Except for
obligations or liabilities incurred in connection with its
incorporation or organization or the negotiation and consummation
of this Agreement and the transactions contemplated hereby,
MergerCo has not incurred any obligations or liabilities or
entered into any agreements or arrangements with any person or
entity.
All of the representations and warranties of Zing
and MergerCo in this Article IV shall terminate as of the
Effective Time or upon the earlier termination of this Agreement.
30
<PAGE>
ARTICLE V
COVENANTS
5.1 Covenants of Zing.
-----------------
(a) Notification. Zing shall give prompt notice
------------
to MergerCo of (i) any notice or other communication received by
Zing subsequent to the date of this Agreement and prior to the
Closing Date relating to a default or event which, with notice or
lapse of time or both, would become a default by Zing in the
performance of any of its material obligations contained herein,
or which would cause any warranty or representation of Zing to be
untrue or misleading in any material respect, under this
Agreement, or (ii) any notice or other communication from any
third party alleging that the consent of such third party is or
may be required in connection with the transactions contemplated
by this Agreement, other than such consents which, in the
aggregate, would not result in a prohibition of the consummation
of the Merger.
(b) Conduct of Business; Certain Covenants. From
--------------------------------------
and after the date of this Agreement and until the Closing Date,
other than as necessary to consummate the transactions
contemplated hereby, and except as set forth on Schedule 5.1(b)
hereto, Zing will, and will cause the Subsidiaries to:
(i) conduct its and their business and
operations in the ordinary and usual course of business
and consistent with past practice;
31
<PAGE>
(ii) use its and their best efforts in a
manner consistent with its current practices to
preserve intact its business, organization and
relationships with employees, agents, customers,
suppliers and others having business dealings with it
or them;
(iii) refrain from engaging in any
activity which would violate any condition or provision
of the Financing Documentation; and
(iv) maintain their respective books and
records in accordance with generally accepted
accounting principles consistently applied over the
periods in question.
Prior to the Closing Date, and subject to the terms and
conditions herein provided, Zing, with the cooperation
of MergerCo, will, and will cause each of the
Subsidiaries to:
(v) promptly comply with all filing
requirements which foreign, federal or state law may
impose on Zing or the Subsidiaries with respect to the
Merger and the transactions contemplated hereby; and
(vi) use best efforts to obtain, as
promptly as possible, any consent, authorization or
approval of, or exemption by, any governmental
authority or agency or other third party, including
without limitation, its landlord and lenders and those
persons (other than Zing or the Subsidiaries) who are
parties to the agreements described in the Schedules
hereto required to be obtained or made by it in
connection with the Merger or the taking of any action
in connection with the consummation thereof; and
32
<PAGE>
(c) Proxy Statement. As promptly as practicable
---------------
after the date of this Agreement, Zing shall prepare and mail to
the shareholders of Zing the Proxy Statement, in compliance with
the 1934 Act and its by-laws.
(d) 13E-3. As promptly as practicable after the
-----
execution of this Agreement, Zing shall prepare and file the 13E-
3 with the SEC and, thereafter, shall prepare and file with the
SEC all amendments thereto required by the 1934 Act.
(e) Registration of Omnirel Common and Preferred
---------------------------------------------
Shares. As promptly as practicable after the execution of this
------
Agreement, Zing shall cause Omnirel to prepare and file a
registration statement on Form S-4 (the "Omnirel Registration
Statement") with the SEC for the registration of the Omnirel
Common and Preferred Shares.
(f) Registration of TACTech Shares. As promptly
-------------------------------
as practicable after the execution of this Agreement, Zing shall
cause TACTech to prepare and file a registration statement on
Form S-4 (the "TACTech Registration Statement") with the SEC for
the registration of the TACTech Shares (the Omnirel Registration
Statement and the TACTech Registration Statement being referred
to hereinafter sometimes collectively as the "Registration
Statements").
(g) Blue Sky Qualifications. As promptly as
-------------------------
practicable after the execution of this Agreement, Zing shall
cause Omnirel and TACTech to qualify the Omnirel Common and
Preferred Shares, and the TACTech Shares, respectively, for a
public offering, in all jurisdictions where Zing shareholders
reside.
33
<PAGE>
(h) Financing. Zing shall cause Omnirel to use
---------
commercially reasonable efforts to enter into the Financing
Documentation and obtain the Financing. Zing shall also cause
Omnirel to take all reasonable actions necessary to satisfy
before the Effective Time all requirements of the Financing
Documentation which are conditions to obtaining the proceeds of
the Financing.
5.2 Covenants of MergerCo.
---------------------
(a) Proxy Statement/Prospectus. As promptly as
--------------------------
practicable after the execution of this Agreement, MergerCo shall
provide to the Company all information concerning MergerCo, its
Board of Directors, officer(s), shareholders, agents and
representatives, and such other matters as the Company shall
reasonably request for inclusion in the Proxy
Statement/Prospectus.
(b) Notification. MergerCo shall give prompt
------------
notice to Zing of (i) any notice or other communication received
by MergerCo, subsequent to the date of this Agreement and prior
to the Closing Date, relating to a default or event which, with
notice or lapse of time or both, would become a default by Zing
in the performance of any of its material obligations contained
herein, or which would cause any warranty or representation of
Zing to be untrue or misleading in any material respect under
this Agreement, or (ii) any notice or other communication from
any third party alleging that the consent of such third party is
or may be required in connection with the transactions
contemplated by this Agreement, other than such consents which,
in the aggregate, would not result in a prohibition of the
consummation of the Merger.
34
<PAGE>
5.3 Governmental Filings. MergerCo shall cooperate with
--------------------
Zing in filing any necessary or advisable applications, reports
or other documents including, without limitation, the Proxy
Statement, 13E-3 each of the Registration Statements and any
amendments thereto and all Blue Sky disclosure documents and
applications, with any federal or state agencies, authorities or
bodies (domestic and foreign) having colorable jurisdiction with
respect to the Merger and the transactions contemplated thereby,
and in seeking necessary or advisable consultation with and
prompt favorable action by any such agencies, authorities or
bodies.
5.4 Publicity. Zing and MergerCo will consult with each
---------
other before making any public announcements with respect to the
Merger or any other transactions contemplated hereby, and any
public announcements shall be made only at such time and in such
manner as Zing and MergerCo shall mutually agree, except that
either party, upon prior notice to the other party, shall be free
to make such public announcements as it shall reasonably deem
necessary to comply with applicable laws.
5.5 Best Efforts. Subject to the terms and conditions
------------
of this Agreement, each of the parties hereto shall use its best
efforts to take, or cause to be taken, as promptly as possible,
all appropriate action, and to do, or cause to be done, all
things proper, necessary or advisable under applicable laws and
regulations to consummate and make effective as promptly as
possible the transactions contemplated by this Agreement,
including, without limitation, the convening a meeting of Zing
35
<PAGE>
shareholders and the obtaining of necessary governmental
approvals and third party consents. The parties will provide to
each other the information necessary to effect the foregoing.
ARTICLE VI
CONDITIONS
6.1 Conditions to Obligations of MergerCo. The
---------------------------------------------
obligation of MergerCo to consummate the Merger is subject to the
fulfillment of each of the following conditions, which may be
waived in whole or in part by MergerCo to the extent permitted by
applicable law.
(a) Copies of Resolutions. At the Closing
-----------------------
(hereinafter defined), Zing shall have furnished MergerCo with
certified copies of resolutions duly adopted by the Board of
Directors and shareholders of Zing approving the execution and
delivery of this Agreement as provided in Section 6.2 hereof and
the performance by Zing of the transactions contemplated hereby
and all other necessary or proper corporate action to enable Zing
to comply with the terms of this Agreement.
36
<PAGE>
(b) Representations, Warranties and Covenants.
--------------------------------------------
The representations and warranties of Zing contained in this
Agreement shall be true and correct in all material respects when
made and at and as of the Closing Date, with the same force and
effect as if made at and as of the Closing Date, and Zing shall
have performed in all material respects all covenants required to
be performed by Zing hereunder at or prior to the Effective Time.
(c) Consents. At the Closing, all consents,
--------
authorizations, orders or approvals described in Schedule 4.1(e)
hereto shall have been obtained.
(d) Litigation. At the Closing, there shall be
----------
no effective injunction, writ or preliminary restraining order or
any order of any nature issued by a court or governmental agency
of competent jurisdiction restraining or prohibiting the
consummation of the transactions provided for herein or any of
them and, immediately prior to the Closing, no proceeding or
lawsuit shall have been commenced and be pending or be threatened
by any governmental or regulatory agency or any other person with
respect to the transactions contemplated by this Agreement which
is likely to result in any of the foregoing or in the payment of
damages in excess of $250,000 by Zing, the Subsidiaries or
MergerCo.
(e) No Material Adverse Change. No material
------------------------------
adverse change in the affairs, condition, property or business of
Zing shall have occurred from the date hereof until the Closing
Date.
37
<PAGE>
(f) Warrants. All Warrants heretofore issued by
--------
Zing to purchase shares of Zing Common Stock shall have been
exercised or deemed to have been exercised in accordance with
Section 3.3.
(g) Certificate. The Board of Directors of
-----------
MergerCo shall have received a certificate from Zing, signed by
the Chief Executive Officer of Zing, stating that to the best of
such officer's knowledge the representations and warranties made
herein by Zing are true and correct as of the date of this
Agreement and at and as of the Closing Date as though made at and
as of the Closing Date and that Zing has performed in all
material respects all covenants required to be performed by Zing
hereunder prior to the Effective Time.
6.2 Shareholder Approval and Effectiveness of
----------------------------------------------------
Registration Statements as Conditions to Obligations of Zing.
----------------------------------------------------------------
The obligations of Zing to consummate the Merger are
unconditionally subject to: (i) the approval of the Merger by the
affirmative vote, in person or by proxy, of the holders of two
thirds of the issued shares of Zing Common Stock outstanding on
the record date fixed for determining the shareholders of Zing
entitled to vote thereon at the annual meeting of Zing
shareholders; (ii) effectiveness of the Registration Statements;
and (iii) notification from all U.S. jurisdictions in which
holders of Public Shares reside that all Blue Sky requirements of
38
<PAGE>
each such jurisdiction have been satisfied with respect to the
offer of the Omnirel Common and Preferred Shares and the TACTech
Shares.
6.3 Additional Conditions to Obligations of Zing. The
----------------------------------------------
obligation of Zing to consummate the Merger is further subject to
the fulfillment of each of the following conditions, which may be
waived in whole or in part by Zing to the extent permitted by
applicable law.
(a) Copies of Resolutions. At the Closing,
-----------------------
MergerCo shall have furnished Zing with certified copies of
resolutions duly adopted by its Board of Directors and
shareholders approving the execution and delivery of this
Agreement and the performance of the transactions contemplated
hereby and all other necessary or proper corporate action to
enable MergerCo to comply with the terms of this Agreement.
(b) Representations. Warranties and Covenants.
--------------------------------------------
The representations and warranties of MergerCo contained in this
Agreement shall be true and correct in all material respects when
made and at and as of the Closing Date, with the same force and
effect as if made at and as of the Closing Date and MergerCo
shall have performed in all material respects all covenants
required to be performed by MergerCo hereunder prior to the
Effective Time.
(c) Consents. At the Closing, all consents,
--------
authorizations, orders or approvals described in Schedule 4.2(d)
hereto shall have been obtained.
(d) Financing. At the Closing, Omnirel shall
---------
have received and shall have paid to Zing the full amount of the
Financing as contemplated by the Financing Documentation or such
lesser amount as Omnirel and Zing shall be willing to accept.
39
<PAGE>
(e) Litigation. At the Closing, there shall be no
----------
effective injunction, writ or preliminary restraining order or
any order of any nature issued by a court or governmental agency
of competent jurisdiction restraining or prohibiting the
consummation of the transactions provided for herein or any of
them and, immediately prior to the Closing Date. no proceeding or
lawsuit shall have been commenced and be pending or be threatened
by any governmental or regulatory agency or any other person with
respect to the transactions contemplated by this Agreement which
is likely to result in any of the foregoing.
(f) Certificate. The Board of Directors of Zing
-----------
shall have received a certificate from MergerCo, signed by the
chief executive officer of MergerCo, stating that to the best of
such officer's knowledge the representations and warranties made
herein by MergerCo are true and correct as of the date of this
Agreement and at and as of the Closing Date as though made at and
as of the Closing Date, and that MergerCo has performed in all
material respects all covenants required to be performed by
MergerCo hereunder prior to the Effective Time.
(g) Dissenting Shareholders. The fair value of
-----------------------
Public Shares tendered pursuant to Section 623 of the BCL shall
not exceed $250,000.
(h) Adverse Tax Consequences. Zing's Board of
--------------------------
Directors shall not have determined that the taxes to be incurred
as a result of the Merger are in such an amount that incurring
them would outweigh the benefits of proceeding with the Merger.
40
<PAGE>
6.4 Failure of the Conditions Set Forth in Section 6.2.
---------------------------------------------------
If the shareholders of Zing shall fail to approve the Merger, or
the SEC shall fail to declare any one or more of the Registration
Statements effective, or Omnirel or TACTech, as the case may be,
shall fail to receive notification of Blue Sky clearance from all
U.S. jurisdictions in which holders of Public Shares reside, in
accordance with the provisions of Section 6.2 hereof, or if the
Merger is not consummated for any other reason not the fault of
MergerCo, this Agreement shall terminate and Zing shall pay all
fees, costs and expenses of MergerCo up to $250,000.
6.5 Failure to meet Conditions Set Forth in Section 6.1
----------------------------------------------------
or 6.3. If any of the conditions set forth in Section 6.1 or 6.3
------
hereof cannot be met and is not waived on or before the Closing
Date, the party whose obligations are subject to the satisfaction
of such condition (provided such party is not in breach of any of
its material obligations hereunder), itself, at its sole option,
(i) may terminate this Agreement in accordance with Section 8.1
hereof, or (ii) may proceed to Closing without waiving any rights
hereunder with respect to the other party hereunder whether as a
matter of law or equity, including, but not limited to, the right
to specific performance as to any such condition, the
satisfaction of which is within the control of the other party.
41
<PAGE>
ARTICLE VII
CLOSING
7.1 Closing Date. The closing of the transactions
-------------
contemplated by this Agreement shall occur (i) as provided in
Section 6.5(ii); (ii) upon the later of the date upon which all
conditions set forth in Sections 6.1, 6.2 and 6.3 have been
satisfied or waived; or (iii) on such other date as the parties
may agree (the applicable date being the "Closing Date"),
whichever date is the first to occur.
7.2 Actions to be Taken. If no party lawfully exercises
--------------------
any right it may have to terminate this Agreement, the parties
shall consummate the Merger at the offices of Morrison Cohen
Singer & Weinstein, 750 Lexington Avenue, New York, New York, on
the Closing Date, and shall cause an executed copy of the
certificate of merger, with appropriate officers' certificates
attached, to be filed in accordance with the BCL.
ARTICLE VIII
TERMINATION; REMEDIES FOR BREACH OF THIS AGREEMENT;
INDEMNIFICATION
8.1 Termination for Failure to Close on Time. In the
------------------------------------------
event that for any reason, the Merger is not consummated on or
before August 31, 1995, as such date may be extended from time to
time by mutual consent of the parties hereto, and unless the
Agreement has been earlier terminated pursuant to Section 6.5
hereof, this Agreement may be terminated by action either of the
Board of Directors of Zing or of MergerCo upon notice from one
party to the other.
42
<PAGE>
8.2 MergerCo Remedies; Expenses. If any condition set
---------------------------
forth in Section 6.1 hereof is not satisfied and this Agreement
is terminated pursuant to Section 6.5 or 8.1 hereof, so long as
the representations and warranties of MergerCo contained herein
are true and correct in all material respects and MergerCo is not
in breach or violation of any of its covenants or obligations
contained in this Agreement, Zing shall pay all fees, costs and
expenses of MergerCo incurred with respect to this Agreement and
the transactions contemplated hereby, the aggregate of all such
fees and expenses not to exceed $250,000. In addition, MergerCo
shall be entitled to obtain from Zing court costs and attorneys'
fees incurred by it in enforcing its rights hereunder.
8.3 Indemnification.
---------------
(a) Directors and Officers. The parties hereto
-----------------------
agree to cooperate and use all reasonable efforts to defend
against and respond to any suit, action, proceeding or
investigation relating to this Agreement or to the transactions
contemplated hereby commenced by any third party, whether
commenced before or after the date hereof or the Effective Time.
It is understood and agreed that Zing shall indemnify and hold
harmless and, after the Effective Time, the Surviving Corporation
shall indemnify and hold harmless (and shall advance expenses
to), each present and former director and officer of Zing and any
of its Subsidiaries (the "Indemnified Parties") to the fullest
extent required or permitted under Zing's Certificate of
Incorporation and By-Laws as in effect on the date hereof, or
under New York law, against any losses, claims, damages,
liabilities, costs, expenses, judgments and amounts paid in
settlement in connection with any claim, action, suit, proceeding
or investigation arising out of or pertaining to any action,
alleged action, omission or alleged omission occurring at or
prior to the Effective Time (including without limitation, any
claims, actions, suits, proceedings or investigations which arise
43
<PAGE>
out of or relate to the transactions contemplated by this
Agreement). Zing's and, after the Merger, the Surviving
Corporation's Certificate of Incorporation and By-Laws shall not
be amended in a manner that adversely affects the rights of any
party to indemnification thereunder or under this Section 8.3.
The provisions of this Section 8.3 shall survive the Merger and,
at and after the Effective Time, the Surviving Corporation shall
assume and perform the obligations of Zing thereunder and
hereunder.
(b) The Surviving Corporation. The Surviving
---------------------------
Corporation shall use its best efforts to cause to be maintained
in effect for not less than three years from the Effective Time
the current policies of directors' and officers' liability
insurance maintained by Zing and Zing's Subsidiaries (provided
that the Surviving Corporation may substitute therefor policies
of at least the same coverage containing terms and conditions
which are no less advantageous so long as no lapse in coverage
occurs as a result of such substitution) with respect to all
matters, including the transactions contemplated hereby,
occurring prior to and including the Effective Time; provided,
however, that, in the event that any claim or claims are asserted
or made within such three year period, such insurance shall be
continued in respect of any such claim or claims until the final
disposition of any and all such claims; and, provided further,
the Surviving Corporation shall not be required to pay annual
44
<PAGE>
premiums in excess of 150% of Zing's total current annual
premiums for such insurance; and, provided further, that if the
Surviving Corporation is unable to obtain the insurance required
by this subsection it shall obtain as much comparable insurance
as can be obtained for an annual premium equal to such maximum
amount (including insurance in respect of any claim asserted or
made within such three year period and not yet finally disposed).
The cost of all insurance required hereunder shall be an Eligible
Liability, paid for from the Deferred Payment Fund, to the full
extent thereof.
(c) Indemnification of MergerCo. Zing agrees to
---------------------------
indemnify and hold harmless MergerCo and its shareholders,
affiliates, officers, directors, employees, and agents against
and in respect of any damage, liability, deficiency, loss, cost,
expense, obligation or claim (including reasonable attorneys'
fees) incurred or sustained by any of them arising out of,
resulting from or related to any information contained in the
Proxy Statement, any of the Registration Statements or the 13E-3
which contains any untrue statement of a material fact or omits
to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading,
except for information contained in the Proxy Statement or any of
the Registration Statements which was transmitted to Zing in
writing by MergerCo for express inclusion in the Proxy Statement
or any Registration Statement.
45
<PAGE>
ARTICLE IX
MISCELLANEOUS
9.1 Payment of Expenses. Except as otherwise provided in
-------------------
this Agreement, if the Merger is not consummated, all costs and
expenses incurred in connection with the transactions
contemplated by this Agreement shall be paid by the party
incurring such expenses. If the Merger is consummated, the
Surviving Corporation shall pay all such costs incurred by
MergerCo.
9.2 Modification and Waiver. No supplement,
-----------------------------
modification, or amendment of this Agreement shall be binding
unless executed in writing by all the parties. No waiver of any
of the provisions of this Agreement shall be deemed, or shall
constitute, a waiver of any other provision, whether or not
similar, nor shall any waiver constitute a continuing waiver. No
waiver shall be binding unless executed in writing by the party
making the waiver.
9.3 Assignment. Neither Zing nor MergerCo shall have the
----------
authority to assign its rights or obligations under this
Agreement without the prior written consent of the other party.
46
<PAGE>
9.4 Burden and Benefit.
------------------
(a) This Agreement shall be binding upon and, to
the extent permitted in this Agreement, shall inure to the
benefit of, the parties hereto and their respective successors
and permitted assigns.
(b) In the event of a default by Zing of any of
its obligations hereunder, the sole and exclusive recourse and
remedy of MergerCo shall be against Zing and its assets and under
no circumstances shall any officer, director, shareholder or
affiliate of Zing be liable in law or equity for any obligations
of Zing.
(c) In the event of a default by MergerCo of any
of its obligations hereunder, the sole and exclusive recourse and
remedy of Zing shall be against MergerCo and its assets, and
under no circumstances shall any officer, director, shareholder
or affiliate of MergerCo be liable in law or equity for any
obligations of MergerCo hereunder.
(d) It is the intent of the parties hereto that
no third-party beneficiary rights be created or deemed to exist
in favor of any person not a party to this Agreement unless
otherwise expressly agreed in writing by the parties.
9.5 Entire Agreement. This Agreement and the Schedules
----------------
referred to herein contain the entire agreement among the parties
hereto with respect to the transactions contemplated hereby and
47
<PAGE>
supersede all prior agreements with respect thereto, whether
written or oral, among the parties or any of them with respect to
the subject matter thereof.
9.6 No Survival. Except as specifically set forth
------------
herein, no representation, warranty or covenant of either party
hereto shall survive the Closing. Except as specifically set
forth herein, a party's sole remedy for the other party's breach
of a representation, warranty or covenant is to terminate this
Agreement and not to consummate the Merger. Upon the
consummation of the Merger, there shall be no liability of either
party to the other in the event of a breach by the other party of
any representation, warranty or covenant hereunder.
9.7 Governing Law. This Agreement shall be governed by
-------------
and construed according to the laws of the State of New York
governing a contract made and to be performed wholly within that
State.
9.8 Notices. Any notice, request, instruction or other
-------
document to be given hereunder by a party shall be in writing and
delivered personally or by facsimile transmission, or by telex,
or sent by registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:
If to Zing:
Zing Technologies, Inc.
115 Stevens Avenue
Valhalla, New York 10595
Attn: Robert E. Schrader
48
<PAGE>
with a copy to:
Morrison Cohen Singer & Weinstein
750 Lexington Avenue
New York, New York 10022
Attn: Henry A. Singer, Esq.
If to MergerCo:
Zing MergerCo Corp.
c/o Zing Technologies, Inc.
115 Stevens Avenue
Valhalla, New York 10595
Attn: Robert E. Schrader
with a copy to:
Morrison Cohen Singer & Weinstein
750 Lexington Avenue
New York, New York 10022
Attn: Henry A. Singer, Esq.
or to such other persons or addresses as may subsequently be
designated in writing by the party to receive such notice in
accordance with the terms hereof. If mailed as aforesaid, three
days after the date of mailing shall be the date notice shall be
deemed to have been received.
9.9 Counterparts. This Agreement may be executed in two
------------
or more counterparts, each of which shall be an original, but all
of which shall constitute but one agreement.
9.10 Rights Cumulative. All rights, powers and privileges
-----------------
conferred hereunder upon the parties, unless otherwise provided,
shall be cumulative and shall not be restricted to those given by
law. Failure to exercise any power given any party hereunder or
49
<PAGE>
to insist upon strict compliance by any other party shall not
constitute a waiver of any party's right to demand exact
compliance with the terms hereof.
9.11 Severability of Provisions. The parties agree that
--------------------------
(i) the provisions of this Agreement shall be severable in the
event that any of the provisions hereof are held by a court of
competent jurisdiction to be invalid, void or otherwise
unenforceable, (ii) such invalid, void or otherwise unenforceable
provisions shall be automatically replaced by other provisions
which are as similar as possible in terms to such invalid, void
or otherwise unenforceable provisions but are valid and
enforceable and (iii) the remaining provisions shall remain
enforceable to the fullest extent permitted by law.
9.12 Headings. The headings of the Articles and Sections
--------
of this Agreement and in the Schedules to this Agreement are
inserted for convenience of reference only and shall not be
deemed to constitute a part hereto.
9.13 Exhibits and Schedules. The Schedules attached
------------------------
hereto and referred to herein are a part of this Agreement for
all purposes. Terms which are defined in this Agreement shall
have the same meanings when used in the Schedules hereto.
50
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed and delivered on the date and year first above
written.
ZING TECHNOLOGIES, INC.
By:
--------------------------------
Name: Robert E. Schrader
------------------------------
Title: President
-----------------------------
ZING MERGER CO., INC.
By:
--------------------------------
Name: Robert E. Schrader
------------------------------
Title: President
-----------------------------
51
<PAGE>
SCHEDULE 4.1(b)
LIST OF SUBSIDIARIES
1. Omnirel Corporation
2. Transition Analysis Component Technology, Inc.
52
<PAGE>
SCHEDULE 4.1(c)
CAPITALIZATION OF SUBSIDIARIES
1. Omnirel Corporation
-------------------
Authorized Capital
------------------
3,000,000 shares of common stock, $.01 par value.
Record and Beneficial Owners
----------------------------
Name Number of Shares
---- ----------------
Zing Technologies, Inc. 1,030,919
John Allwein 538.2
Rosario Gioia 1,017.2
Timothy Hickey 1,200.0
Alan Taskar 200.0
Steven Dawe 380.4
James Goguen 20.0
Ronald Turley 326.0
William Gould 90.0
Thomas Grune 20.0
Nancy Jantzen 20.0
---------
TOTAL 1,034,731
53
<PAGE>
2. Transition Analysis Component Technology, Inc.
----------------------------------------------
Authorized Capital
------------------
50,000 shares of common stock, $.01 par value.
Record and Beneficial Owners
----------------------------
Name Number of Shares
---- ----------------
Zing Technologies, Inc. 13,680
Malcolm Baca 1,520
------
TOTAL 15,200
======
3. Outstanding Options and Warrants
--------------------------------
Zing Technologies, Inc.
-----------------------
Name No. of Warrants Exercise Price
---- --------------- --------------
John F. Catrambone 3,000 $1.34375
Martin S. Fawer 41,857 $1.34375
Laurence W. Higgitt 3,000 $1.34375
Henry A. Singer 3,000 $1.34375
John Burrows 23,034 $1,34375
Michael DeCesare 4,666 $1.34375
[ ] 7,500 $1.34375
Dorothy Schrader 1,762 $1.34375
Wayne Schrader 44,012 $1.34375
TOTAL 139,331
=======
Omnirel Corporation
-------------------
Name No. of Options Exercise Price
---- -------------- --------------
Allwein, John 50 $3.00
Allwein, John 3,530 $6.50
Allwein, John 8,450 $8.00
Backiel, Peter 412 $6.50
Backiel, Peter 150 $8.00
54
<PAGE>
Catrambone, John 100,000 $8.00
Comey, John 3,000 $10.00
Dawe, Steve 1,610 $6.50
Dawe, Steve 3,100 $8.00
Dorton, Dave 475 $6.50
Dorton, Dave 200 $8.00
Duval, Chet 317 $6.50
Duval, Chet 100 $8.00
Enwright, Martin 5,000 $10.00
Falk, Noble 162 $6.50
Falk, Noble 50 $8.00
Gioia, Roy 3,175 $6.50
Gioia, Roy 4,000 $8.00
Goguen, Jim 1.005 $6.50
Goguen, Jim 300 $8.00
Gould, Bill 460 $6.50
Gould, Bill 150 $8.00
Hebert, Paul 162 $6.50
Hebert, Paul 50 $8.00
Hickey, Michael Tim 1,400 $5.00
Hickey, Michael Tim 500 $8.00
Law, Lou Ann 317 $6.50
Law, Lou Ann 100 $8.00
Lynch, Mark 8,000 $8.00
Lynch, Mark 2,000 $10.00
Maloney, Ed 412 $6.50
Maloney, Ed 150 $8.00
Muller, Dick 8,000 $8.00
Muller, Dick 2,000 $10.00
Murphy, William 125 $6.50
Murphy, William 25 $8.00
Rutherford, Tom 124 $6.50
Sullivan, Richard 450 $6.50
Sullivan, Richard 150 $8.00
Taskar, Alan 500 $8.00
Teebagy, Tom 5,000 $10.00
Turley, Ron 24 $3.00
Turley, Ron 820 $6.50
Vaudo, Tony 5,000 $10.00
TOTAL 171,030
=======
55
<PAGE>
4. Voting Agreements
-----------------
Shareholders Agreement dated as of May 28, 1987 between
TACTech and Malcolm Baca, which however will terminate as of the
Effective Time.
56
<PAGE>
SCHEDULE 4.1(d)
NON-CONTRAVENTION
None.
57
<PAGE>
SCHEDULE 4.1(e)
APPROVALS AND CONSENTS
Securities and Exchange Commission
Securities Commissioners/Blue Sky Administrators of the
following states:
58
<PAGE>
SCHEDULE 4.1(f)
TAX MATTERS
[Identify tax returns to be filed by Closing Date.]
59
<PAGE>
SCHEDULE 4.1(h)
LITIGATION
60
<PAGE>
SCHEDULE 4.2(b)
CAPITAL STOCK OWNERSHIP
The authorized shares of capital stock of MergerCo and the
record and beneficial owners thereof are as set forth below:
Zing Merger Co., Inc.
---------------------
Authorized Capital
------------------
200 shares of common stock, no par value per share.
Record and Beneficial Owners as of the Effective Time
-----------------------------------------------------
Name Number of Shares
---- ----------------
Robert E. Schrader and
Deborah J. Schrader 100
61
<PAGE>
SCHEDULE 4.2(d)
CONSENTS REQUIRED
None.
62
<PAGE>
ANNEX II
<PAGE>
New York Consolidated Laws Service
Copyright (c) 1994, Lawyers Cooperative Publishing
*** THIS SECTION IS CURRENT THROUGH CHAPTER 738 APPROVED 8/16/94
***
BUSINESS CORPORATION LAW
ARTICLE 6 Shareholders
NY CLS Bus Corp Sec. 623 (1994)
Sec. 623. Procedure to enforce shareholder's right to receive
payment for shares
(a) A shareholder intending to enforce his right under a
section of this chapter to receive payment for his shares
if the proposed corporate action referred to therein is
taken shall file with the corporation, before the meeting
of shareholders at which the action is submitted to a vote, or at
such meeting but before the vote, written objection to
the action. The objection shall include a notice of his
election to dissent, his name and residence address, the
number and classes of shares as to which he dissents and a demand
for payment of the fair value of his shares if the action
is taken. Such objection is not required from any shareholder
to whom the corporation did not give notice of such meeting
in accordance with this chapter or where the proposed
action is authorized by written consent of shareholders without
a meeting.
(b) Within ten days after the shareholders' authorization
date, which term as used in this section means the date on
which the shareholders' vote authorizing such action was taken,
or the date on which such consent without a meeting was
obtained from the requisite shareholders, the corporation shall
give written notice of such authorization or consent by
registered mail to each shareholder who filed written objection
or from whom written objection was not required,
excepting any shareholder who voted for or consented in writing
to the proposed action and who thereby is deemed to have elected
not to enforce his right to receive payment for his shares.
(c) Within twenty days after the giving of notice to him, any
shareholder from whom written objection was not required and who
elects to dissent shall file with the corporation a written notice
of such election, stating his name and residence address, the
number and classes of shares as to which he dissents
and a demand for payment of the fair value of his shares. Any
shareholder who elects to dissent from a merger under
section 905 (Merger of subsidiary corporation) or paragraph (c)
of section 907 (Merger or consolidation of
domestic and foreign corporations) or from a share exchange under
paragraph (g) of section 913 (Share exchanges) shall file a
written notice of such election to dissent within twenty days
after the giving to him of a copy of the plan of
merger or exchange or an outline of the material features thereof
under section
905 or 913.
(d) A shareholder may not dissent as to less than all of the
shares, as to which he has a right to dissent, held by him of
record, that he owns beneficially. A nominee or fiduciary may
not dissent on behalf of any beneficial owner as to less than all
of the shares of such owner, as to which such nominee
or fiduciary has a right to dissent, held of record by such
nominee or fiduciary.
<PAGE>
NY CLS Bus Corp Sec. 623 (1994)
(e) Upon consummation of the corporate action, the shareholder
shall cease to have any of the rights of a shareholder except the
right to be paid the fair value of his shares and any other
rights under this section. A notice of election may be withdrawn
by the shareholder at any time prior to his acceptance
in writing of an offer made by the corporation, as provided in
paragraph (g), but in no case later than sixty days from the date of
consummation of the corporate action except that if the
corporation fails to make a timely offer, as provided in paragraph
(g), the time for withdrawing a notice of election shall
be extended until sixty days from the date an offer is made. Upon
expiration of such time, withdrawal of a notice of election shall
require the written consent of the corporation. In order to
be effective, withdrawal of a notice of election
must be accompanied by the return to the corporation of any
advance payment made to the shareholder as provided in paragraph (g).
If a notice of election is withdrawn, or the corporate action is
rescinded, or a court shall determine that the shareholder is not
entitled to receive payment for his shares, or the
shareholder shall otherwise lose his dissenters' rights, he shall
not have the right to receive payment for his shares and he shall be
reinstated to all his rights as a shareholder as of the consummation
of the corporate action, including any intervening preemptive
rights and the right to payment of any
intervening dividend or other distribution or, if any such rights
have expired or any such dividend or distribution other than in
cash has been completed, in lieu thereof, at the election of the
corporation, the fair value thereof in cash
as determined by the board as of the time of such expiration or
completion, but without prejudice otherwise to any corporate
proceedings that may have been taken in the interim.
(f) At the time of filing the notice of election to dissent or
within one month thereafter the shareholder of shares represented
by certificates shall submit the certificates representing his
shares to the corporation, or to its transfer agent, which shall
forthwith note conspicuously thereon that a notice
of election has been filed and shall return the certificates to
the shareholder or other person who submitted them on his behalf.
Any shareholder of shares represented by certificates who fails
to submit his certificates for such notation as herein
specified shall, at the option of the corporation exercised
<PAGE>
by written notice to him within forty-five days from the date of
filing of such notice of election to dissent, lose his dissenter's
rights unless a court, for good cause shown, shall otherwise
direct. Upon transfer of a certificate bearing such notation,
each new certificate issued therefor shall bear a similar
notation together with the name of the original dissenting holder
of the shares and a transferee shall acquire no rights in
the corporation except those which the original dissenting
shareholder had at the time of transfer.
(g) Within fifteen days after the expiration of the period
within which shareholders may file their notices of election
to dissent, or within fifteen days after the proposed
corporate action is consummated, whichever is later (but
in no case later than ninety days from the shareholders'
authorization date), the corporation or, in the case of a merger
or consolidation, the surviving or new corporation, shall make
a written offer by registered mail to each
shareholder who has filed such notice of election to pay for his
shares at a specified price which the corporation considers
to be their fair value. Such offer shall be accompanied by a
statement setting forth the aggregate number of
shares with respect to which notices of election to dissent have
been received and the aggregate number of holders of such
shares. If the corporate action has
been consummated, such offer shall also be accompanied by (1)
advance payment to each such shareholder who has submitted the
certificates representing his
<PAGE>
NY CLS Bus Corp Sec. 623 (1994)
shares to the corporation, as provided in paragraph (f), of an
amount equal to eighty percent of the amount of such offer,
or (2) as to each shareholder who
has not yet submitted his certificates a statement that advance
payment to him of an amount equal to eighty percent of the
amount of such offer will be made by
the corporation promptly upon submission of his certificates. If
the corporate action has not been consummated at the time of the
making of the offer, such advance payment or statement as to
advance payment shall be sent to each
shareholder entitled thereto forthwith upon consummation of the
corporate action. Every advance payment or statement as to
advance payment shall include advice to the shareholder to the
effect that acceptance of such payment does not
constitute a waiver of any dissenters' rights. If the corporate
action has not been consummated upon the expiration of the
ninety day period after the shareholders' authorization date, the
offer may be conditioned upon the consummation of such action.
Such offer shall be made at the same price per
share to all dissenting shareholders of the same class, or if
divided into series, of the same series and shall be accompanied
by a balance sheet of the corporation whose shares the dissenting
shareholder holds as of the latest available date, which shall
not be earlier than twelve months before the making
of such offer, and a profit and loss statement or statements for
not less than a twelve month period ended on the date of such
balance sheet or, if the corporation was not in existence
throughout such twelve month period, for the
portion thereof during which it was in existence. Notwithstanding
the foregoing, the corporation shall not be required to furnish
a balance sheet or profit and loss statement or statements to
any shareholder to whom such balance sheet or
profit and loss statement or statements were previously
furnished, nor if in connection with obtaining the shareholders'
authorization for or consent to the
proposed corporate action the shareholders were furnished with a
proxy or information statement, which included financial
statements, pursuant to Regulation 14A or Regulation 14C of the
United States Securities and Exchange Commission. If within thirty
days after the making of such offer, the corporation making the
offer and any shareholder agree upon the price to be paid
for his shares, payment therefor shall be made within sixty days
after the making of such offer or the consummation of the
proposed corporate action, whichever is later, upon the
surrender of the certificates for any such shares represented by
certificates.
<PAGE>
(h) The following procedure shall apply if the corporation
fails to make such offer within such period of fifteen days, or
if it makes the offer and any dissenting shareholder or
shareholders fail to agree with it within the period
of thirty days thereafter upon the price to be paid for their
shares:
(1) The corporation shall, within twenty days after the
expiration of whichever is applicable of the two periods
last mentioned, institute a special proceeding in the supreme court
in the judicial district in which the office of
the corporation is located to determine the rights of dissenting
shareholders and to fix the fair value of their shares. If, in
the case of merger or consolidation, the surviving or new
corporation is a foreign corporation without
an office in this state, such proceeding shall be brought in the
county where the office of the domestic corporation, whose shares
are to be valued, was located.
(2) If the corporation fails to institute such proceeding
within such period of twenty days, any dissenting shareholder
may institute such proceeding for the
same purpose not later than thirty days after the expiration of
such twenty day period. If such proceeding is not instituted within
such thirty day period,
<PAGE>
NY CLS Bus Corp Sec. 623 (1994)
all dissenter's rights shall be lost unless the supreme court,
for good cause shown, shall otherwise direct.
(3) All dissenting shareholders, excepting those who, as
provided in paragraph (g), have agreed with the corporation upon
the price to be paid for their shares, shall be made parties
to such proceeding, which shall have the
effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in such
proceeding upon each dissenting shareholder
who is a resident of this state in the manner provided by law for
the service of a summons, and upon each nonresident dissenting
shareholder either by registered mail and publication, or in such
other manner as is permitted by law. The jurisdiction of the court
shall be plenary and exclusive.
(4) The court shall determine whether each dissenting
shareholder, as to whom the corporation requests the court to
make such determination, is entitled to receive payment for
his shares. If the corporation does not
request any such determination or if the court finds
that any dissenting shareholder is so entitled, it shall
proceed to fix the value of the shares, which, for the
purposes of this section, shall be the fair value as of the close
of business on the day prior to the shareholders' authorization
date. In fixing the fair value of the shares, the court shall
consider the nature of the transaction giving
rise to the shareholder's right to receive payment for shares and
its effects on the corporation and its shareholders, the concepts
and methods then customary in the relevant securities and
financial markets for determining fair value of
shares of a corporation engaging in a similar transaction under
comparable circumstances and all other relevant factors. The
court shall determine the fair value of the shares without a
jury and without referral to an appraiser or
referee. Upon application by the corporation or by any
shareholder who is a party to the proceeding, the court may, in its
discretion, permit pretrial disclosure, including, but not
limited to, disclosure of any expert's reports
relating to the fair value of the shares whether or not intended
for use at the trial in the proceeding and notwithstanding
subdivision (d) of section 3101 of the civil practice law and rules.
(5) The final order in the proceeding shall be entered against
the corporation in favor of each dissenting shareholder who is a
party to the proceeding and is entitled thereto for the value of his
shares so determined.
(6) The final order shall include an allowance for interest at
such rate as the court finds to be equitable, from the date
the corporate action was consummated to the date of payment. In
determining the rate of interest, the
court shall consider all relevant factors, including the rate of
interest which the corporation would have had to pay to borrow
money during the pendency of the proceeding. If the court
finds that the refusal of any shareholder to accept the
corporate offer of payment for his shares was arbitrary,
vexatious or otherwise not in good faith, no interest shall be
allowed to him.
(7) Each party to such proceeding shall bear its own costs and
expenses, including the fees and expenses of its counsel and of
any experts employed by it. Notwithstanding the foregoing,
the court may, in its discretion, apportion
and assess all or any part of the costs, expenses and fees
incurred by the corporation against any or all of the dissenting
shareholders who are parties to the proceeding, including any who
have withdrawn their notices of election as provided in
paragraph (e), if the court finds that their refusal to accept the
corporate offer was arbitrary, vexatious or otherwise not in good
faith. The
<PAGE>
NY CLS Bus Corp Sec. 623 (1994)
court may, in its discretion, apportion and assess all or any
part of the costs, expenses and fees incurred by any or all
of the dissenting shareholders who are
parties to the proceeding against the corporation if the court
finds any of the following: (A) that the fair value of the
shares as determined materially
exceeds the amount which the corporation offered to pay; (B) that
no offer or required advance payment was made by the corporation;
(C) that the corporation failed to institute the special proceeding
within the period specified therefor; or (D) that the action of
the corporation in complying with its obligations as provided in
this section was arbitrary, vexatious or otherwise
not in good faith. In making any determination as provided in
clause (A), the court may consider the dollar amount or the
percentage, or both, by which the fair value of the shares
as determined exceeds the corporate offer.
(8) Within sixty days after final determination of the
proceeding, the corporation shall pay to each dissenting
shareholder the amount found to be due
him, upon surrender of the certificates for any such shares
represented by certificates.
(i) Shares acquired by the corporation upon the payment of the
agreed value therefor or of the amount due under the final order,
as provided in this section, shall become treasury shares or be
cancelled as provided in section 515
(Reacquired shares), except that, in the case of a merger or
consolidation, they may be held and disposed of as the plan of
merger or consolidation may otherwise provide.
(j) No payment shall be made to a dissenting shareholder under
this section at a time when the corporation is insolvent or when
such payment would make it insolvent. In such event, the
dissenting shareholder shall, at his option:
(1) Withdraw his notice of election, which shall in such event
be deemed withdrawn with the written consent of the corporation; or
(2) Retain his status as a claimant against the corporation
and, if it is liquidated, be subordinated to the rights of
creditors of the corporation, but have rights superior to
the non-dissenting shareholders, and if it is not
liquidated, retain his right to be paid for his shares, which
right the corporation shall be obliged to satisfy when the
restrictions of this paragraph do not apply.
(3) The dissenting shareholder shall exercise such option
under subparagraph (1) or (2) by written notice filed with the
corporation within thirty days after the corporation has given
him written notice that payment for his shares cannot
be made because of the restrictions of this paragraph. If the
dissenting shareholder fails to exercise such option as provided,
the corporation shall exercise the option by written notice given
to him within twenty days after the expiration of such period of
thirty days.
(k) The enforcement by a shareholder of his right to receive
payment for his shares in the manner provided herein shall exclude
the enforcement by such shareholder of any other right to
which he might otherwise be entitled by virtue
of share ownership, except as provided in paragraph (e), and
except that this section shall not exclude the right of such
shareholder to bring or maintain an appropriate action to
obtain relief on the ground that such corporate action
will be or is unlawful or fraudulent as to him.
<PAGE>
NY CLS Bus Corp Sec. 623 (1994)
(l) Except as otherwise expressly provided in this section,
any notice to be given by a corporation to a shareholder under
this section shall be given in the manner provided in section
605 (Notice of meetings of shareholders).
(m) This section shall not apply to foreign corporations
except as provided in subparagraph (e)(2) of section 907 (Merger
or consolidation of domestic and foreign corporations).
<PAGE>
ANNEX III
<PAGE>
PREFERRED STOCK CERTIFICATE OF DESIGNATION
STATEMENT OF THE DESIGNATIONS, PREFERENCES AND
RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF THE
SERIES A CUMULATIVE PREFERRED REDEEMABLE STOCK OF OMNIREL
CORPORATION, AND THE QUALIFICATIONS, LIMITATIONS, OR RESTRICTIONS
THEREOF, WHICH SHALL BE SET FORTH IN THE CERTIFICATE OF
INCORPORATION OF SUCH CORPORATION.
-------------------
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
-------------------
We, the undersigned, John F. Catrambone and Martin S.
Fawer, the President and Secretary, respectively, of Omnirel
Corporation, a corporation organized and existing under the laws
of the State of Delaware (the "Corporation"), in accordance with
the provisions of Section 151 of the Delaware General Corporation
Law (the "GCL"), DO HEREBY CERTIFY that the Board of Directors of
the Corporation (the "Board") duly adopted the following
resolutions on ____________ ___, 1995:
RESOLVED, that pursuant to the authority expressly
granted to and vested in the Board by the provisions of the
Certificate of Incorporation of the Corporation (the "Certificate
of Incorporation"), the Board hereby creates a series of
cumulative preferred redeemable stock of the Corporation, without
par value, and hereby fixes the designations, preferences and
relative, participating, optional or other special rights of the
shares of such class, and the qualifications, limitations, or
restrictions thereof (in addition to the designations,
preferences and relative, participating, optional or other
special rights, and the qualifications, limitations or
restrictions thereof set forth in the Certificate of
Incorporation which are applicable to preferred stock of all
series) as follows:
<PAGE>
1. DESIGNATION. The preferred stock created by this
resolution shall be designated as "Series A Cumulative Redeemable
Preferred Stock" (the "Preferred Stock"), and shall consist of
2,694,971 shares of Preferred Stock.
2. DEFINITIONS. The following terms shall have the
meanings set forth below.
"Change in Control" means: (a) any sale or issuance or
-----------------
series of sales and/or issuances of shares of the Corporation's
capital stock by the Corporation or any holders thereof which
results in any Person or group of affiliated Persons (other than
the owners of Common Stock or their affiliates as of the date on
which the Preferred Stock is issued) owning capital stock of the
Corporation possessing the voting power (under ordinary
circumstances) to elect a majority of the Board and (b) any
merger or consolidation to which the Corporation is a party,
except for a merger in which the Corporation is the surviving
corporation if, after giving effect to such merger, the holders
of the Corporation's outstanding capital stock immediately prior
to the merger shall own the Corporation's outstanding capital
stock possessing the voting power (under ordinary circumstances)
to elect a majority of the Board.
"Common Stock" means, collectively, the Corporation's
-------------
common stock, $ .01 par value per share, and any capital stock of
any class of the Corporation hereafter authorized which is not
limited to a fixed sum or percentage of par or stated value in
respect to the rights of the holders thereof to participate in
dividends or in the distribution of assets upon any liquidation,
dissolution or winding up of the Corporation.
2
<PAGE>
"Dividend Reference Dates" means March 31, June 30,
-------------------------
September 30 and December 31 of each year, beginning September
30, 1995.
"Junior Securities" means any of the Corporation's
------------------
equity securities, including the Common Stock, which does not
rank prior to the Preferred Stock, either as to dividends or upon
liquidation.
"Liquidation Value" of a share of Preferred Stock as of
-----------------
any particular date shall be equal to $1.30 (One Dollar and
Thirty Cents), as reduced from time to time by any partial
prepayment thereof pro rata pursuant to a Partial Redemption.
"Person" means an individual, a partnership, a
------
corporation, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental
entity or any department, agency or political subdivision
thereof.
"Redemption" or "Partial Redemption" as to any share of
---------- ------------------
Preferred Stock means the prepayment or partial prepayment,
respectively, in either case at the Corporation's option, of the
Liquidation Value or a portion of the Liquidation Value pursuant
to a notice of Redemption or Partial Redemption.
"Redemption Date" or "Partial Redemption Date" as to
--------------- ------------------------
any share of Preferred Stock means the Dividend Reference Date
specified in the notice of any Redemption or Partial Redemption,
at the Corporation's option; provided that no such Date shall be
a Redemption Date or Partial Redemption Date unless the
Liquidation Value, or such portion thereof as specified in the
notice of Partial Redemption, of such share of Preferred Stock
(plus all accrued and unpaid dividends thereon) is actually paid
in full in accordance with the notice of Redemption or Partial
Redemption, as the case may be, on such date, and if not so paid
in full, the Redemption Date or Partial Redemption Date shall be
the date on which such amount is fully paid.
3
<PAGE>
"Subsidiary" means, with respect to any Person, any
----------
corporation, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power
of shares of stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers
or trustees thereof is at the time owned or controlled, directly
or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if
a partnership, association or other business entity, a majority
of the partnership or other similar ownership interest thereof is
at the time owned or controlled, directly or indirectly, by any
Person or one or more Subsidiaries of that person or a
combination thereof. For purposes hereof, a Person or Persons
shall be deemed to have a majority ownership interest in a
partnership, association or other business entity if such Person
or Persons shall be allocated a majority of partnership,
association or other business entity gains or losses or shall be
or control the managing general partner of such partnership,
association or other business entity.
4
<PAGE>
3. DIVIDENDS.
(a) General Obligation. When and as declared by the
-------------------
Board and to the extent permitted under the GCL, the Corporation
shall pay preferential dividends to the holders of the Preferred
Stock as provided in this Section 3. Except as otherwise
provided herein, dividends on each share of Preferred Stock shall
accrue on a quarterly basis at the rate of [___%] per annum,
uncompounded, of the then outstanding amount of the Liquidation
Value thereof, from and including the date of issuance of such
share of Preferred Stock to and including the Dividend Reference
Date on which the Liquidation Value or any portion thereof of
such share of Preferred Stock is paid. Such dividends shall
accrue on a quarterly basis whether or not they have been
declared and whether or not there are profits, surplus or other
funds of the Corporation legally available for the payment of
dividends. The date on which the Corporation initially issues
the shares of Preferred Stock shall be deemed to be their "date
of issuance", regardless of the number of times transfer of such
shares of Preferred Stock is made on the stock records maintained
by or for the Corporation and regardless of the number of
certificates which may be issued to evidence such share of
Preferred Stock.
(b) Dividend Reference Dates. To the extent not paid
-------------------------
on the Dividend Reference Dates, all dividends which have accrued
on each share of Preferred Stock outstanding during the three-
month period (or shorter period, if any, in the case of the
initial Dividend Reference Date) ending upon each such Dividend
Reference Date shall be accumulated and shall remain accumulated
dividends with respect to such share of Preferred Stock until
paid.
5
<PAGE>
(c) Distribution of Partial Dividend Payments. Except
------------------------------------------
as otherwise provided herein, if at any time the Corporation pays
less than the total amount of dividends then accrued with respect
to the Preferred Stock, such payment shall be distributed pro
rata among the holders of the Preferred Stock based upon the
number of shares of Preferred Stock held by each such holder.
4. LIQUIDATION. Upon any liquidation, dissolution or
winding up of the Corporation, whether voluntary of involuntary,
each holder of Preferred Stock shall be entitled to be paid,
before any distribution or payment is made upon any Junior
Securities, an amount in cash equal to the aggregate Liquidation
Value then outstanding (plus all accrued and unpaid dividends) of
all shares of Preferred Stock held by such holder, and shall not
be entitled to any further payment. If upon any such
liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, the Corporation's assets to be
distributed among the holders of the Preferred Stock are
insufficient to permit payment to such holders of the aggregate
amount which they are entitled to be paid under this Section 4,
then all of the assets to be distributed shall be distributed
ratably among such holders based upon the aggregate Liquidation
Value then outstanding (plus all accrued and unpaid dividends) of
the Preferred Stock. Prior to the time of any liquidation,
dissolution or winding up of the Corporation, the Corporation
shall declare for payment all accrued and unpaid dividends with
6
<PAGE>
respect to the Preferred Stock. The Corporation shall mail
written notice of such liquidation, dissolution or winding up to
each record holder of Preferred Stock not fewer than 60 days
prior to the payment date stated therein. Neither the
consolidation nor merger of the Corporation into or with any
other entity or entities, nor the sale or transfer by the
Corporation of all or any part of its assets, nor the reduction
of the capital stock of the Corporation, shall be deemed to be a
liquidation, dissolution or winding up of the Corporation within
the meaning of this Section 4.
5. PRIORITY OF PREFERRED STOCK. Neither the Corporation
nor any Subsidiary shall redeem, purchase or otherwise acquire,
directly or indirectly, any Junior Securities, nor shall the
Corporation, directly or indirectly, pay or declare any dividend
or make any distribution upon any Junior Securities, if at such
time any Preferred Stock is outstanding and there exists any
accrued and unpaid dividends from any Dividend Reference Date
prior to the date on which such action is taken.
6. REDEMPTION; PARTIAL REDEMPTION.
(a) Full and Partial Redemptions. The Corporation
------------------------------
may, at any time, redeem all or any portion of the Preferred
Stock then outstanding. In the event the Corporation elects to
declare a full redemption ("Redemption"), the Corporation shall
pay a price per share of Preferred Stock equal to the Liquidation
7
<PAGE>
Value thereof plus all accrued and unpaid dividends thereon,
including all dividends thereon which will accrue after the date
of the notice of Redemption through the Dividend Reference Date
specified therein. In the event the Corporation elects to
declare a partial redemption of the Preferred Stock (a "Partial
Redemption"), the Corporation shall pay all accrued and unpaid
dividends on all outstanding shares of Preferred Stock, including
all dividends thereon which will accrue after the date of the
notice of Redemption through the Dividend Reference Date
specified therein and shall prepay, pro rata to all holders of
Preferred Stock, a portion of the then outstanding amount of the
Liquidation Value thereof. No Partial Redemption pursuant to
this Subsection 6(a) may be made for less than ten percent (10%)
of the then outstanding amount of the Liquidation Value of the
Preferred Stock.
(b) Redemption Payment; Surrender of Certificate(s).
-------------------------------------------------
In the event the Corporation elects to declare the Redemption of
the Preferred Stock and prepay the full amount of the Liquidation
Value then outstanding, plus all accrued and unpaid dividends
thereon, the Corporation shall not be obligated to pay the holder
thereof any such sum unless and until such holder has
surrendered, at the Corporation's principal office, the
certificates(s) representing such Preferred Stock. In the event
the Corporation elects to make a Partial Redemption, the
Liquidation Value of a share of Preferred Stock shall, without
the surrender of any certificate therefor or any other action on
the part of a holder thereof, be deemed automatically to have
been reduced pro rata by an amount equal to that portion of the
Liquidation Value being prepaid.
Prior to the time of Redemption or any Partial Redemption of
Preferred Stock, the Corporation shall declare for payment all
accrued and unpaid dividends with respect to the shares of
Preferred Stock which are to be redeemed, including all dividends
thereon which will accrue after the date of the notice of
Redemption or Partial Redemption through the Dividend Reference
Date specified therein.
(c) Notice of Redemption. The Corporation shall mail
---------------------
written notice of Redemption or any Partial Redemption to each
record holder of Preferred Stock not more than sixty (60) nor
fewer than thirty (30) days prior to the date on which such
8
<PAGE>
Redemption or Partial Redemption is to be made. Upon mailing any
notice of Redemption or Partial Redemption the Corporation shall
become obligated to pay the Liquidation Value or portion thereof
specified in such notice and all dividends required hereunder to
then be paid at the time specified therein.
(d) Dividends After Redemption Date Or Partial
--------------------------------------------------
Redemption Date. No share of Preferred Stock is entitled to any
---------------
dividends accruing after the Redemption Date. Shares of
Preferred Stock shall be entitled to dividends after a Partial
Redemption Date at the rate of [___%] per annum, uncompounded, of
the amount of Liquidation Value remaining unpaid immediately
following the Partial Redemption Date. On the Redemption Date,
all rights of the holder of shares of Preferred Stock shall
cease, and such shares of Preferred Stock shall not be deemed to
be outstanding. All shares of Preferred Stock outstanding prior
to a Partial Redemption Date shall remain outstanding immediately
thereafter, except that the Liquidation Value thereof shall be
reduced pro rata by the aggregate amount of the prepayment made
pursuant to such Partial Redemption. Shares of Preferred Stock
shall be entitled to dividends after a Partial Redemption Date at
the rate of [___%] per annum, uncompounded, of the amount of
Liquidation Value remaining unpaid immediately following the
Partial Redemption Date.
(e) Redeemed or Otherwise Acquired Shares of Preferred
--------------------------------------------------
Stock. Any shares of Preferred Stock which are redeemed or
-----
otherwise acquired by the Corporation shall be canceled and shall
not be reissued, sold or transferred.
9
<PAGE>
(f) Other Redemptions or Acquisitions. Neither the
----------------------------------
Corporation nor any Subsidiary shall redeem or otherwise acquire
any shares of Preferred Stock, except as expressly authorized
herein or pursuant to a purchase offer made pro rata to all
holders of the Preferred Stock.
7. VOTING RIGHTS. (a) Except as provided hereinbelow and
as otherwise required by law, the Preferred Stock shall have no
voting rights.
(i) In the event that a Change in Control occurs, upon
the effective date of such Change in Control there shall vest in
the holders of the Preferred Stock the exclusive right, voting as
a single class, to elect two directors of the Corporation, such
directors to be in addition to the number of directors
constituting the Board immediately prior to the vesting of that
right. The remaining directors shall be elected in accordance
with the provisions of the Corporation's Certificate of
Incorporation and By-laws by the other class or classes of stock
entitled to vote therefor at each meeting of stockholders held
for the purpose of electing directors. Such voting right of the
Preferred Stock shall continue until such time as the Preferred
Stock has been fully redeemed, at which time the voting right of
the holders of the Preferred Stock shall terminate.
(ii) Whenever the voting right described in
Subsection 7(a)(i) above shall have vested in the holders of the
Preferred Stock, the right may be exercised initially either at a
special meeting of the holders of the Preferred Stock, called as
hereinafter provided, or at any
10
<PAGE>
annual meeting of stockholders held for the purpose of electing
directors, and thereafter at each successive annual meeting.
(iii) At any time when the voting right described
in Subsection 7(a)(i) above shall have vested in the holders of
the Preferred Stock, and if the right shall not already have been
initially exercised, an appropriate officer of the Corporation
shall, upon the written request of the holders of record of 10%
in number of the shares of the Preferred Stock then outstanding,
addressed to the Secretary of the Corporation, call a special
meeting of the holders of the Preferred Stock for the purpose of
electing directors. Such meeting shall be held at the earliest
practicable date pursuant to the form of notice required for
annual meetings of stockholders at the place for holding annual
meetings of stockholders of the Corporation, or, if none, at a
place designated by the Secretary of the Corporation. If the
meeting shall not be called by the appropriate officers of the
Corporation within 30 days after the personal service of such
written request upon the Secretary of the Corporation, or within
30 days after mailing it within the United States by registered
or certified mail, return receipt requested and postage prepaid,
or by reputable overnight courier service, charges prepaid,
addressed to the Secretary of the Corporation at its principal
office, then the holders of record of 10% in number of shares of
the Preferred Stock then outstanding may designate in writing one
of their number to call such meeting at the expense of the
11
<PAGE>
Corporation, and such meeting may be called by such person so
designated pursuant to the form of notice required for annual
meetings of stockholders and shall be held at the same place as
is elsewhere provided for in this Subsection 7(a)(iii). Any
holder of the Preferred Stock shall have access to the stock
books of the Corporation for the purpose of causing a meeting of
stockholders to be called pursuant to the provisions of this
Subsection 7(a)(iii). Notwithstanding the provisions of this
paragraph, however, no such special meeting shall be held during
a period within 90 days immediately preceding the date fixed for
the next annual meeting of stockholders.
(iv) At any meeting held for the purpose of
electing directors at which the holders of the Preferred Stock
shall have the right to elect directors as provided herein, the
presence in person or by proxy of the holders of 33-1/3% of the
then outstanding shares of the Preferred Stock shall be required
and be sufficient to constitute a quorum of the holders of such
Preferred Stock for the election of directors by the holders of
Preferred Stock. At any such meeting or adjournment thereof, (A)
the affirmative vote of the holders of a plurality of shares of
Preferred Stock voting in person or by proxy shall be required to
elect each of the two directors elected at such meeting, (B) the
absence of a quorum of the holders of the Preferred Stock shall
not prevent the election of directors other than those to be
elected by the holders of Preferred Stock, and the absence of a
12
<PAGE>
quorum or quorums of the holders of other classes or series of
capital stock entitled to elect such other directors shall not
prevent the election of directors to be elected by the holders of
the Preferred Stock, and (C) in the absence of a quorum of the
holders of Preferred Stock, a majority of the holders of
Preferred Stock present in person or by proxy shall have the
power to adjourn the meeting for the election of directors which
the holders of Preferred Stock are entitled to elect, from time
to time, without notice other than announcement at the meeting,
until a quorum shall be present.
(v) The directors elected pursuant to Subsection 7(a)
shall serve until the next annual meeting or until their
respective successors shall be elected and shall qualify;
provided,
however, that when the right of the holders of the Preferred
Stock to elect directors as herein-above provided shall
terminate, the terms of office of all persons so elected by the
holders of Preferred Stock shall terminate, and the number of
directors of the Corporation shall thereupon be such number as
may be provided in accordance with the Certificate of
Incorporation and By-laws of the Corporation irrespective of any
increase made pursuant to Subsection 7(a).
(vi) So long as any shares of Preferred Stock are
outstanding, the Certificate of Incorporation and By-laws of the
Corporation shall contain provisions ensuring that the number of
Directors of the Corporation shall at all times be such that the
exercise by the holders of shares of Preferred Stock of the right
to elect directors under the circumstances provided in this
Subsection 7(a) will not contravene any provisions of the
Corporation's Certificate of Incorporation or By-laws.
(b) So long as any shares of the Preferred Stock
remain outstanding, the Corporation will not, either directly or
indirectly or through merger or consolidation with or into any
other corporation, without the affirmative vote at a meeting or
the written consent with or without a meeting of Preferred Stock
then outstanding, (i) create or issue, or increase the authorized
number of, shares of any class or classes or series of stock
ranking prior to the Preferred Stock either as to dividends or
upon liquidation, (ii) amend, alter or repeal any of the
provisions of the Certificate of Incorporation (including this
resolution) so as to affect adversely the powers, designations,
13
<PAGE>
preferences and relative, participating, optional or other
special rights and qualifications, limitations or restrictions of
the Preferred Stock or (iii) authorize any reclassification of
the Preferred Stock.
8. REGISTRATION OF TRANSFER.
The Corporation shall keep at its principal office a
register for the registration of the Preferred Stock, or shall
engage a registrar and transfer agent for such purpose. Upon the
surrender of any certificate representing Preferred Stock at such
place in connection with the transfer of all or a portion of the
shares represented thereby, the Corporation shall execute and the
Corporation or such registrar and transfer agent shall deliver
(at the Corporation's expense) to the transferee(s) of the shares
represented by the original certificate and, if applicable, to
the transferor for any remaining shares, a new certificate or
certificates in exchange therefor representing in the aggregate
the number of shares of Preferred Stock represented by the
name(s) of the transferee(s) of the surrendered certificate.
Each such new certificate shall be registered in the name(s) of
the transferee(s) and transferor, if applicable, and shall be
substantially identical in form to the surrendered certificate.
Dividends shall accrue on the Preferred Stock represented by such
new certificates from the initial Dividend Reference Date or the
date, if any, on which accrued dividends have been fully paid on
such Preferred Stock.
9. REPLACEMENT; REISSUANCE
(a) Upon receipt of an affidavit, or such other
evidence of loss as may be reasonably satisfactory to the
Corporation, attesting to the ownership and the loss, theft,
destruction or mutilation of any certificate evidencing shares of
Preferred Stock, and in the case of any such loss, theft or
destruction, upon receipt of indemnity reasonably satisfactory to
14
<PAGE>
the Corporation (provided that if the holder is a financial
institution or other institutional investor its own agreement
shall be satisfactory), or, in the case of any such mutilation
upon surrender of such certificate, the Corporation, at its
expense, shall execute and deliver in lieu of such certificate a
new certificate of like kind representing the number of shares of
Preferred Stock of such class represented by such lost, stolen,
destroyed or mutilated certificate and dated the date of such
lost, stolen, destroyed or mutilated certificate, and dividends
shall accrue on the Preferred Stock represented by such new
certificate from the initial Dividend Reference Date or the date,
if any, on which dividends have been fully paid on the Preferred
Stock represented by such lost, stolen, destroyed or mutilated
certificate.
(b) In the event of a Partial Redemption, the
Liquidation Value of each share of Preferred Stock shall be
automatically reduced pro rata according to the amount of partial
prepayment of the Liquidation Value. The Corporation shall have
no obligation to issue new certificates for any outstanding
shares of Preferred Stock to reflect the partial prepayment of
the Liquidation Value thereof, nor to accept any certificates
tendered in exchange for new certificates reflecting such partial
prepayment of the Liquidation Value.
10. AMENDMENT AND WAIVER.
No amendment, modification or waiver shall be binding
or effective with respect to any provision of this Certificate of
Designation without the prior written consent of the holders of
15
<PAGE>
at least two-thirds (66-2/3%) of the Preferred Stock outstanding
at the time such action is taken, and no change in the terms
hereof may be accomplished by merger or consolidation of the
Corporation with or into another corporation or entity unless the
Corporation has obtained the prior written consent of the holders
of the applicable percentage of the Preferred Stock then
outstanding.
11. NOTICES.
Except as otherwise expressly provided hereunder, all
notices referred to herein shall be in writing and shall be
delivered by registered or certified mail, return receipt
requested and postage prepaid, or by reputable overnight courier
service, charges prepaid (i) to the Corporation, at its principal
executive offices and (ii) to any stockholder, at such holder's
address as it appears in the stock records of the Corporation
(unless otherwise indicated by any such holder). Notices shall
be deemed to have been given when delivered personally, three
days after mailing when sent by registered or certified mail, or
one day after deposit with a reputable overnight courier service.
RESOLVED, FURTHER, that the appropriate officers of the
Corporation be, and they hereby are, authorized, empowered and
directed to execute and acknowledge a certificate setting forth
16
<PAGE>
these resolutions and to cause such certificate to be filed and
recorded, all in accordance with the requirements of Section
151(g) of the GCL.
IN WITNESS WHEREOF, the Corporation has caused this
Certificate to be duly executed on its behalf this ______ day of
_______, 1995.
------------------------------
John F. Catrambone
ATTEST:
-----------------------------------
Martin S. Fawer
17
