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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
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Microlog Corporation
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it is determined)
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary proxy materials.
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[ ] 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 the 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:
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(2) Form, Schedule or Registration Statement no.:
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(3) Filing Party:
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(4) Date Filed:
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[GRAPHIC OMITTED]
July 1, 1999
Dear Shareholder:
You are cordially invited to attend the Special Meeting of
Shareholders of Microlog Corporation (the "Company") to be held on September 16,
1999, at 10:00 a.m., at 20270 Goldenrod Lane, Germantown, Maryland 20876.
The matters to be acted upon at the Special Meeting, principally an
investment in the Company which would bring us much needed capital, as well as
other important information, are described in the accompanying Notice of Special
Meeting and Proxy Statement which you are urged to review carefully.
Your vote is important, regardless of the number of shares you own. On
behalf of the Board of Directors, I urge you to vote, sign, date, and return the
enclosed proxy form as soon as possible, even if you plan to attend the Special
Meeting. Signing this proxy will not prevent you from voting in person should
you be able to attend the Special Meeting. Signing the proxy will assure that
your vote is counted if, for any reason, you are unable to attend.
We hope that you can attend the Special Meeting. Your interest and
support in the affairs of Microlog Corporation are appreciated.
Sincerely yours,
Stephen D. Smith
President and
Chief Executive Officer
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MICROLOG CORPORATION
20270 Goldenrod Lane
Germantown, MD 20876-4070
(301) 428-9100
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 16, 1999
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of Microlog
Corporation (the "Company") will be held on September 16, 1999, at 10:00 a.m.,
local time, at 20270 Goldenrod Lane, Germantown, Maryland 20876, for the
following purposes:
(1) to consider and vote upon a proposal to approve the issuance and
sale of 1,812,104 shares of Common Stock of the Company to TFX
Equities Incorporated for $1.50 per share; and
(2) to transact such other business as may properly come before the
Special Meeting or any adjournments or postponements thereof.
Pursuant to the By-Laws of the Company, the Board of Directors has
fixed July 28, 1999 as the record date for the Special Meeting with respect to
this solicitation. Only shareholders of record at the close of business on that
date will be entitled to notice of and to vote at the Special Meeting or any
adjournments thereof.
In the event there are not sufficient votes to approve the foregoing
proposal at the time of the Special Meeting, the Special Meeting may be
adjourned in order to permit further solicitation of proxies by the Company.
By Order of the Board of Directors,
Stephen D. Smith
President and Chief Executive Officer
Germantown, Maryland
July ____, 1999
PLEASE FILL OUT, DATE, AND SIGN THE ENCLOSED PROXY FORM AND RETURN IT IN THE
ENCLOSED POSTAGE-PAID ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. YOU MAY, IF YOU WISH, WITHDRAW YOUR PROXY AND VOTE YOUR SHARES
PERSONALLY AT THE SPECIAL MEETING.
<PAGE>
MICROLOG CORPORATION
20270 GOLDENROD LANE
GERMANTOWN, MD 20876-4070
(301) 428-9100
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PROXY STATEMENT
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SPECIAL MEETING OF SHAREHOLDERS
SEPTEMBER 16, 1999
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Microlog Corporation, a Virginia
corporation (the "Company"), for use at the Special Meeting of Shareholders to
be held on September 16, 1999 at 10:00 a.m., local time, at 20270 Goldenrod
Lane, Germantown, Maryland 20876 and at any adjournments or postponements
thereof (the "Special Meeting").
The Special Meeting is being called for the following purposes:
(1) to consider and vote upon a proposal to approve the issuance and
sale of 1,812,104 shares (the "Additional Shares") of Common Stock,
par value $.01 per share (the "Common Stock"), of the Company to
TFX Equities Incorporated ("TFX") for $1.50 per share; and
(2) to transact such other business as may properly come before the
Special Meeting or any adjournments or postponements thereof.
This Proxy Statement and the accompanying notice of the Special Meeting
and proxy form will first be sent or given to shareholders on or about August 4,
1999.
Record holders of the Common Stock at the close of business on July 28,
1999, the record date, are entitled to notice of, and to vote at, the Special
Meeting. As of July 15, 1999, there were outstanding 5,150,723 shares of Common
Stock. Each shareholder will be entitled to one vote for each share of Common
Stock held at the close of business on the record date. At the Special Meeting,
votes will be counted by written ballot. Only business described in the notice
accompanying this proxy statement may be conducted at the Special Meeting.
The presence, in person or by proxy, of a majority of the outstanding
shares of Common Stock entitled to vote at the Special Meeting shall constitute
a quorum for the transaction of business. The issuance and sale of the
Additional Shares to TFX requires the approval of the holders of a majority of
the votes present and entitled to vote thereon at the Special Meeting. However,
under special rules of the Nasdaq Stock Market, the Company will not count any
votes cast by TFX with respect to the proposed issuance and sale of the
Additional Shares to TFX.
In order to approve the transaction of any other business as may
properly come before the Special Meeting, or any adjournments or postponements
thereof, the votes cast at the Special Meeting approving the action must exceed
the votes cast opposing the action, unless a greater number of affirmative votes
is required by law. Abstentions and broker non-votes will not be counted as
either approving or opposing the action.
The shares of Common Stock represented by valid proxies received by the
Company in time for the Special Meeting will be voted as specified in such
proxies. Executed but unmarked proxies will be voted FOR the issuance and sale
of the Additional Shares to TFX.
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If any other matters properly come before the Special Meeting, the
persons named as proxies will, unless the shareholder otherwise specifies in the
proxy, vote upon such matters as determined by a majority of the Board of
Directors.
Any shareholder giving a proxy has the right to revoke it at any time
before it is exercised by attending the Special Meeting and voting in person or
by delivering to the Secretary of the Company at the Company's principal
executive office, 20270 Goldenrod Lane, Germantown, MD 20876-4070, a written
notice of revocation or duly executed proxy bearing a later date.
The cost of soliciting proxies will be borne by the Company. The
Company has engaged Morrow & Co., Inc. to assist in the distribution of proxy
materials and solicitation of votes for a fee of approximately $6,000.00 plus
out-of-pocket expenses. In addition to the use of the mails, proxies may be
solicited personally or by telephone, facsimile, or telegraph by officers,
directors, and employees of the Company who will not be specially compensated
for such solicitation activities. Arrangements will also be made with brokerage
houses and other custodians, nominees, and fiduciaries for forwarding
solicitation materials to the beneficial owners of such shares held of record by
such persons, and the Company will reimburse such persons for their reasonable
expenses incurred in connection therewith. TFX will bear its own expenses in
connection with the issuance and sale of the Additional Shares.
STOCK OWNED BY MANAGEMENT AND PRINCIPAL SHAREHOLDERS
The following table sets forth information as of July 15, 1999 with
respect to the ownership of shares of Common Stock by (i) owners of more than 5%
of the Company's outstanding Common Stock, (ii) each director and nominee for
director of the Company, (iii) each of the named executive officers of the
Company, and (iv) all directors and executive officers of the Company as a
group. The information is based on the most recent filings with the SEC by such
persons or upon information provided by such persons to the Company. Unless
otherwise indicated, the persons shown in the table are believed to have sole
voting and investment power with respect to the entire number of shares
reported.
NAME AND ADDRESS OF NUMBER OF SHARES PERCENTAGE OF
BENEFICIAL OWNER (1) BENEFICIALLY OWNED OWNERSHIP (2)
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TFX Equities Incorporated 854,563 16.6%
1787 Sentry Parkway West
Building 16, Suite 220
Blue Bell, PA 19422
Hathaway & Associates, Ltd 373,000 7.2%
119 Rowayton Avenue
Rowayton, Connecticut 06853
Joe J. Lynn 310,000 6.0%
20270 Goldenrod Lane
Germantown, MD 20876-4070
Steven R. Delmar 116,300 (3) 2.2%
20270 Goldenrod Lane
Germantown, MD 20876-4070
Deborah M. Grove 57,711 (4) 1.1%
20270 Goldenrod Lane
Germantown, MD 20876-4070
David M. Gische 46,000 (5) *
20270 Goldenrod Lane
Germantown, MD 20876-4070
Robert E. Gray, Jr. 33,520 (6) *
20270 Goldenrod Lane
Germantown, MD 20876-4070
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David B. Levi 57,000 (7) 1.1%
20270 Goldenrod Lane
Germantown, MD 20876-4070
John C. Mears 53,000 (8) 1.0%
20270 Goldenrod Lane
Germantown, MD 20876-4070
John Sickler 854,563 (9) 16.6%
1787 Sentry Parkway West
Building 16, Suite 220
Blue Bell, PA 19422
Stephen D. Smith 0 (10) *
20270 Goldenrod Lane
Germantown, MD 20876-4070
All executive officers and director
as a group (9 persons) 1,528,094 (9)(11) 29.7%
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* Less than 1% of the shares outstanding.
(1) In accordance with Rule 13d-3 under the Securities Exchange Act of 1934,
a person is deemed to be the beneficial owner of a security for purposes
of the Rule if he or she has or shares voting power or investment power
with respect to such security or has the right to acquire such ownership
within 60 days. As used herein, "voting power" is the power to vote or
direct the voting of shares, and "investment power" is the power to
dispose or direct the disposition of shares.
(2) For the purpose of computing the percentage of ownership of each
beneficial owner, any securities which were not outstanding but which
were subject to options, warrants, rights, or conversion privileges held
by such beneficial owner exercisable within 60 days were deemed to be
outstanding in determining the percentage owned by such person but are
not deemed outstanding in determining the percentage owned by any other
person.
(3) Includes 63,000 shares that may be acquired by Mr. Delmar within 60 days
of the record date upon the exercise of stock options and approximately
24,300 shares in a 401k Plan. Does not include 10,000 shares that may be
acquired by Mr. Delmar more than 60 days after the record date upon the
exercise of stock options.
(4) Includes 25,000 shares that may be acquired by Ms. Grove within 60 days
of the record date upon the exercise of stock options. Does not include
28,000 shares that may be acquired by Ms. Grove more than 60 days after
the record date upon the exercise of stock options.
(5) Includes 33,000 shares that may be acquired within 60 days of the record
date upon the exercise of stock options. Includes 3,000 shares held by
Mr. Gische's spouse. Mr. Gische disclaims beneficial ownership of such
shares. Does not include 3,000 shares that may be acquired by Mr. Gische
more than 60 days after record date upon the exercise of stock options.
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(6) Includes 23,000 shares that may be acquired within 60 days of the record
date upon the exercise of stock options that have been granted. Includes
6,500 shares held by Mr. Gray's spouse. Mr. Gray disclaims beneficial
ownership of such shares. Does not include 3,000 shares that may be
acquired by Mr. Gray more than 60 days after record date upon the
exercise of stock options.
(7) Includes 57,000 shares that may be acquired by Mr. Levi within 60 days
after the record date upon the exercise of stock options. Does not
include 6,000 shares that may be acquired by Mr. Levi more than 60 days
after the record date upon the exercise of stock options.
(8) Includes 25,000 shares that may be acquired by Mr. Mears within 60 days
of the record date upon the exercise of stock options and approximately
28,000 shares in a 401k Plan. Does not include 58,000 shares that may be
acquired by Mr. Mears more than 60 days after the record date upon the
exercise of stock options.
(9) Mr. Sickler was elected as a director of the Company in connection with
the purchase by TFX Equities Incorporated ("TFX") of 854,563 shares of
the Company's Company Stock. See "Approval of the Issuance of the
Additional Shares to TFX Equities Incorporated--Background of Transaction
with TFX" for a description of this transaction. Mr. Sickler is an
officer of TFX and, thus, under the rules and regulations of the SEC, may
be deemed to be the beneficial owner of the the shares of Common Stock
owned by TFX. Accordingly, those shares are included in the table as
beneficially owned by Mr. Sickler and for all directors and executive
officers as a group. Mr. Sickler disclaims beneficial ownership of such
shares.
(10) Upon being hired as the Company's President and Chief Executive Officer,
Mr. Smith was granted an option to purchase 275,000 shares of Common
Stock, which shares may be acquired upon exercise of such option more
than 60 days after the record date. Information shown above with respect
to Mr. Smith's beneficial ownership does not include such shares.
(11) Includes 226,000 shares that may be acquired within 60 days of the record
date upon the exercise of stock options. Does not include 383,000 shares
that may be acquired more than 60 days after the record date upon the
exercise of stock options.
MATTERS TO BE CONSIDERED
APPROVAL OF THE ISSUANCE OF THE ADDITIONAL SHARES TO
TFX EQUITIES INCORPORATED
(PROPOSAL NO. 1)
OVERVIEW
At the Special Meeting, holders of the Common Stock will consider and
vote upon the proposed sale of the Additional Shares to TFX at a purchase price
of $1.50 per share. The sale of the Additional Shares, if approved by the
Company's shareholders, will be the second of a two-part investment of $4.0
million in the Common Stock by TFX.
The $2.7 million of gross proceeds that would be received by the
Company in the sale is critical to the continued operations of the Company. Due
to increased competition and the declining rate of growth for stand-alone
interactive voice response (IVR) systems, the revenues from the Company's voice
processing business have declined significantly. Accordingly, the Company has
invested significant amounts of time and money to become a premier company in
the call center arena and in developing its uniQue family of call center
solutions. To become a premier company in the call center arena, the Company's
management and the Board of Directors have concluded that
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significant investments and additional capital expenditures will be required,
and that the TFX investment will provide critical capital resources to the
Company during this very important transitional period. The Board of Directors
has also determined that the proceeds to the Company from the sale of the
Additional Shares to TFX is very important to the Company's future financial
stability and, based on these factors, has unanimously approved the issuance of
the Shares to TFX and believes that this sale of stock is in the best interests
of the Company.
As part of the transaction, the Company would increase the size of its
Board of Directors to seven and TFX would become entitled to nominate an
additional director to the Board. The Company has already increased the size of
the Board to six and elected one nominee of TFX, John Sickler, to the Company's
Board as part of its initial $1.3 million investment.
This matter is being submitted to the holders of the Common Stock for
consideration and vote pursuant to the rules of the Nasdaq Stock Market.
BACKGROUND OF TRANSACTION WITH TFX
The Company has been seeking additional capital for well over a year to
fund its operating losses and the development of its uniQue product. On June 9,
1999, the Company entered into a non-binding letter of intent with TFX in which
TFX agreed in principle to invest $4 million in the Company's Common Stock at a
purchase price of $1.50 per share. The Company believes the TFX investment will
provide much-needed capital and give the Company the support of an important
strategic investor.
TFX is a wholly owned subsidiary of Teleflex Incorporated (NYSE: TFX).
Teleflex Incorporated is a diversified industrial company with annual sales of
more than $1.4 billion. Teleflex designs, manufactures and sells quality
engineered products and services for the automotive, marine, industrial, medical
and aerospace markets worldwide. Teleflex has produced 24 consecutive years of
increased revenues and earnings based on its diversified portfolio of
businesses.
On July 1, 1999, the Company and TFX executed an Investment Agreement
(the "Investment Agreement") and closed the initial sale of 854,563 shares of
Common Stock to TFX at $1.50 per share for an aggregate price of approximately
$1.3 million. The 854,563 shares represented approximately 19.9% of the total
shares of Common Stock issued and outstanding immediately prior to the
investment.
The Investment Agreement also provides for a sale of 1,812,104
Additional Shares to TFX at $1.50 per share for an aggregate of approximately
$2.7 million, subject to approval of the sale by the Company's shareholders.
NASDAQ RULES AND SHAREHOLDER APPROVAL
Under the rules of the Nasdaq Stock Market, including the Nasdaq
SmallCap Market where the Common Stock is listed, the Company is required to
obtain shareholder approval of any issuance of Common Stock (or a series of
related issuances) equal to 20% or more of the Common Stock outstanding before
the issuance where the sale price is less than the greater of book or market
value (the "Nasdaq 20% Rule"). In addition, shareholder approval is also
required by the Nasdaq Stock Market in connection with transactions which are
deemed to be a "change in control" under Nasdaq rules. The staff of the Nasdaq
Stock Market has advised the Company that an issuance of Common Stock (or a
series of related issuances) which would result in a shareholder holding 30% or
more of the Common Stock likely would be deemed to be a "change in control"
under Nasdaq rules.
The issuance by the Company of the Additional Shares to TFX, when added
to the issuance of the 854,563 shares to TFX on July 1, 1999, would result in an
issuance subject to shareholder approval under the Nasdaq 20% Rule. The issuance
of the Additional Shares to TFX would result in TFX holding approximately 38.3%
of the Common Stock then outstanding. Accordingly, we have called the Special
Meeting and delivered to you these proxy materials to request your approval of
the
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issuance of the Additional Shares to TFX. The Company has agreed with TFX that
the Company will use its best efforts to obtain shareholder approval of the
issuance of the Additional Shares to TFX.
TERMS OF THE INVESTMENT AGREEMENT
The following is a summary of the material terms of the Investment
Agreement, including the proposed sale of the Additional Shares to TFX. This
summary is qualified by reference to the full text of the Investment Agreement,
which is attached hereto as Exhibit A.
Sale of Shares to TFX. The Investment Agreement provides for the
Company to sell a total of 2,666,667 shares of Common Stock to TFX at $1.50 per
share for an aggregate of $4.0 million. The Company sold 854,563 shares to TFX
at $1.50 per share for an aggregate of approximately $1.3 million as of July 1,
1999, concurrently with the execution of the Investment Agreement. Upon receipt
of shareholder approval of the sale of the Additional Shares to TFX, the Company
will hold a second closing, which the Investment Agreement requires to be held
on or before September 30, 1999, 90 days after the first closing.
Two Board Seats for TFX. The Investment Agreement provides that if the
entire investment by TFX is concluded, the Company will take all necessary
action to increase the size of its Board of Directors to seven and grants TFX
the right to nominate two directors to the Board. The Company has already
increased the size of the Board to six and elected one nominee of TFX, John
Sickler, to the Company's Board as part of its initial $1.3 million investment.
Upon completion of the sale of the Additional Shares to TFX, TFX would be
entitled to nominate another director to the Company's Board.
Corporate Transactions Requiring Approval of TFX Directors. The
Investment Agreement contains various corporate governance provisions. Under
that Agreement, without the approval of at least six of the Company's seven
directors (which must include at least one of the TFX nominees), the Company may
not do any of the following:
1. Sell all or any substantial part of its assets other than in the
ordinary course of business, or consolidate or merge with any other corporation;
2. Issue any shares of capital stock, any securities exchangeable for
or convertible into any such shares or any right or option to acquire any such
shares or securities. This limitation would not apply to shares issuable under
the Company's stock option plans, up to 250,000 shares in connection with the
proposed sale of the Company's European operations to Comsys International,
B.V., and issuances in the ordinary course of the Company's business;
3. Guarantee the indebtedness of another person or entity;
4. Pay any dividend or other distribution in respect of any shares of
its capital stock or redeem, purchase or acquire any shares;
5. Amend its Articles of Incorporation or Bylaws; or
6. Change the number of persons constituting the entire Board of
Directors from seven.
These "supermajority" approval requirements would be in effect from completion
of the second TFX investment until TFX (or certain of its successors or assigns)
ceases to own 15% or more of the issued and outstanding shares of the Company's
Common Stock.
Registration of TFX Shares. The Investment Agreement requires the
Company, at its expense, to register the shares issued to TFX under the
Securities Act of 1933, as amended, for resale by TFX on a Form S-3 Registration
Statement and to keep the registration statement current and effective until all
of the shares are sold. The Company presently is not eligible to use Form S-3,
and will not become eligible to use Form S-3 until at least April 2000. TFX also
has the right, subject to certain exceptions and
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limitations, to have the Company register TFX's shares if the Company proposes
to register any shares of Common Stock under the Securities Act.
Other Provisions. The Investment Agreement also contains certain other
representations, warranties, agreements and indemnification obligations of the
Company, including the Company's obligation to indemnify TFX with respect to any
misrepresentation, breach of warranty or non-fulfillment of any covenant
contained in the Investment Agreement or other document delivered in connection
with the Investment Agreement.
CONSEQUENCES IF SHAREHOLDER APPROVAL IS NOT OBTAINED
The Investment Agreement and Nasdaq rules require the Company to obtain
shareholder approval for the sale of the Additional Shares to TFX. If approval
is not obtained, the Company would have to restructure its deal with TFX, obtain
a waiver from TFX or abandon the sale of the Additional Shares. If the Company
proceeded with the sale of the Additional Shares to TFX without obtaining
shareholder approval, its Common Stock likely would be delisted from the Nasdaq
Stock Market.
Due to increased competition and the declining rate of growth for
stand-alone interactive voice response (IVR) systems, the revenues from the
Company's voice processing business have declined significantly. Accordingly,
the Company has invested significant amounts of time and money to become a
premier company in the call center arena and in developing its uniQue family of
call center solutions. To become a premier company in the call center arena, the
Company's management and the Board of Directors has concluded that significant
investments and additional capital expenditures will be required, and that the
TFX investment will provide critical capital resources to the Company during
this very important transitional period. The Board of Directors further believes
that it is critical to the Company's future to complete the sale of the
Additional Shares to TFX and bring the resulting additional capital into the
Company. Accordingly, the Board urges all shareholders to vote in favor of the
transaction. If shareholder approval is not received, the Board will consider
what actions to take at that time to try to preserve some portion of its
proposed transaction with TFX.
USE OF PROCEEDS
The aggregate gross proceeds to the Company for the issuance of the
1,812,104 Additional Shares to TFX at $1.50 per share is approximately $2.7
million. These proceeds, and the approximately $1.3 million already received by
the Company from the initial sale of shares to TFX, will be used for working
capital and general corporate purposes, including the funding of the uniQue
product development and other programs to develop and advance the Company's
products and technology, and its call center business, the payment of
obligations to the Company's vendors and other third parties, and the payment of
salaries to the Company's officers and employees, and other operating expenses.
EFFECTS OF THE ISSUANCE OF THE ADDITIONAL SHARES
Dilution. The net tangible book value of the Company at April 30, 1999
was approximately $0.1 million, or $0.03 per share of Common Stock. Net tangible
book value represents the amount of total tangible assets of the Company reduced
by the amount of its total liabilities, divided by the total number of shares of
Common Stock outstanding. After giving effect to the issuance and sale by the
Company of the 2,666,667 shares to TFX pursuant to the Investment Agreement, and
after deducting estimated expenses incurred in connection with the issuance of
such Shares, the net tangible book value of the Company as of April 30, 1999
would have been approximately $4.1 million, or $0.58 per share of Common Stock.
This represents an increase in net tangible book value of $0.55 per share to
existing shareholders.
Corporate Governance. As discussed above under the caption "Terms of
the Investment Agreement," the Investment Agreement contains various corporate
governance provisions. Under the Investment Agreement, without the approval of
at least six of the Company's seven directors
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(which must include at least one of the TFX nominees), the Company may not sell
any substantial part of its assets other than in the ordinary course of
business, consolidate or merge, issue any shares of capital stock, convertible
securities or right or option to acquire securities of the Company (subject to
certain exceptions described above), guarantee debt, pay any dividend or redeem
any capital stock, amend its Articles of Incorporation or Bylaws or change the
number of directors. These "supermajority" approval requirements would be in
effect from completion of the sale of the Additional Shares to TFX until TFX (or
certain of its successors or assigns) ceases to own 15% or more of the issued
and outstanding shares of the Company's Common Stock.
INTERESTS OF CERTAIN PERSONS
Prior to the issuance of the shares of Common Stock to TFX on July 1,
1999, none of TFX or any of its affiliates was a director, executive officer or
5% or greater shareholder of the Company or any affiliate of the Company. After
the issuance of 854,563 shares to TFX on July 1, 1999, TFX became the holder of
approximately 19.9% of the issued and outstanding shares of Common Stock and
John Sickler, an officer of TFX, was elected to the Company's Board of
Directors. Under special rules of the Nasdaq Stock Market, the Company will not
count any votes cast by TFX with respect to the proposed issuance and sale of
the Additional Shares to TFX.
VOTE REQUIRED; RECOMMENDATION OF THE BOARD OF DIRECTORS
The proposal requires the approval of a majority of the votes cast,
either in person or by proxy, at the Special Meeting by holders of the Common
Stock. Under special rules of the Nasdaq Stock Market, the Company will not
count any votes cast by TFX with respect to the proposed issuance and sale of
the Additional Shares to TFX.
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO ISSUE THE ADDITIONAL SHARES TO TFX.
OTHER MATTERS
The Board of Directors does not intend to present, and has not been
informed that any other person intends to present, any matters for action at the
Special Meeting other than those specifically referred to herein. If, however,
any other matters should properly come before the Special Meeting, it is the
intention of the person named in the enclosed proxy to vote the shares
represented thereby in accordance with the determination of a majority of the
Board of Directors.
The Board of Directors of the Company urges each shareholder, whether
or not he or she intends to be present at the Special Meeting, to complete,
sign, and return the enclosed proxy as promptly as possible.
By Order of the Board of Directors
Stephen Smith
President and Chief Executive Officer
Dated: July ___, 1999
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REVOCABLE PROXY
MICROLOG CORPORATION
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned shareholder hereby appoints Stephen Smith or Steven R.
Delmar, or either of them, attorneys and proxies of the undersigned, with full
power of substitution and with authority in each of them to act in the absence
of the other, to vote and act for the undersigned at the Special Meeting of
Shareholders of the Company to be held at 20270 Goldenrod Lane, Germantown,
Maryland 20876, on September 16, 1999, at 10:00 a.m., local time, and at any
adjournments or postponements thereof, in respect of all shares of the Common
Stock of the Company which the undersigned may be entitled to vote, on the
following matters:
1. Proposed issuance of 1,812,104 shares of Common Stock to TFX Equities
Incorporated for $1.50 per share:
|_| FOR |_| AGAINST |_| ABSTAIN
2. In their discretion, on any other matters that may properly come before the
meeting, or any adjournments or postponements thereof, in accordance with
the recommendations of a majority of the Board of Directors.
(Continued and to be dated and signed on reverse side.)
<PAGE>
(continued from other side)
This proxy, when properly executed, will be voted as directed herein by
the undersigned shareholder. However, if no direction is given, this proxy will
be voted FOR the proposed issuance of 1,812,104 shares of Common Stock to TFX
Equities Incorporated for $1.50 per share.
The undersigned hereby acknowledges prior receipt of a copy of the
Notice of Special Meeting of Shareholders and Proxy Statement dated
________________, 1999, including the attachments thereto, and hereby revokes
any proxy or proxies heretofore given. This Proxy may be revoked at any time
before it is voted by delivering to the Secretary of the Company either a
written revocation of proxy, or a duly executed proxy bearing a later date, or
by appearing at the Special Meeting and voting in person.
If you receive more than one proxy form, please sign and return all
cards in the accompanying envelope.
|_| I PLAN TO ATTEND THE SEPTEMBER 16, 1999
SPECIAL SHAREHOLDERS MEETING Date: _____________________, 1999.
Signature of Shareholder(s)
or Authorized Representative(s)
Please date and sign exactly as
name appears hereon. Each
executor, administrator, trustee,
guardian, attorney-in-fact, and
other fiduciary should sign and
indicate his or her full title. In
the case of stock ownership in the
name of two or more persons, BOTH
PERSONS SHOULD SIGN.
PLEASE MARK, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY TO ENSURE A QUORUM
AT THE MEETING. IT IS IMPORTANT WHETHER YOU OWN FEW OR MANY SHARES. DELAY IN
RETURNING YOUR PROXY MAY SUBJECT THE COMPANY TO ADDITIONAL EXPENSE.
<PAGE>
EXHIBIT A
THIS IS AN INVESTMENT AGREEMENT (this "Agreement"), dated as of July 1,
1999, between MICROLOG CORPORATION, a Virginia corporation ("MICROLOG"), and
TFX EQUITIES INCORPORATED, a Delaware corporation ("TFX").
The parties hereto, intending to be legally bound hereby, agree as
follows:
ARTICLE 1
Financing
1.1 Purchase of Common Stock. Subject to the terms and conditions
hereof, at the Closings (defined in Article 3) MICROLOG will issue and TFX will
purchase 2,666,667 shares of MICROLOG common stock, par value $.01 per share
("Common Stock"), at the aggregate price of $4,000,000.
1.2 First and Second Closings. Subject to the terms and conditions
hereof, such transaction will be consummated at two Closings. At the First
Closing (defined in Section 2.2), MICROLOG will issue and TFX will purchase
854,563 shares of MICROLOG common stock valued at $1.50 per share for payment of
the sum of $1,281,844. At the Second Closing (defined in Section 2.3), MICROLOG
will issue and TFX will purchase 1,812,104 shares of MICROLOG common stock
valued at $1.50 per share for payment of the sum of $2,718,156. The purchase
price will be paid by interbank wire transfer of immediately available funds.
ARTICLE 2
Closings
2.1 Place of Closing. Each closing hereunder (a "Closing" and
collectively the "Closings") will be held at the offices of TFX, 1787 Sentry
Parkway West, Building 16, Suite 220, Blue Bell, Pennsylvania 19422.
2.2 The First Closing. The First Closing hereunder will be held on the
date of this Agreement at 10:00 am.
2.3 The Second Closing. The Second Closing hereunder will be held after
approval by MICROLOG's shareholders of the issuance of the 1,812,104 shares of
MICROLOG Common Stock to be issued and sold at the Second Closing and not later
than ninety (90) days after the date of the First Closing on such date as
MICROLOG shall specify by notice to TFX at least fifteen (15) days prior to the
date fixed for such Closing.
<PAGE>
ARTICLE 3
Conduct of Business and Affairs by MICROLOG Pending the Second Closing
From and after the date hereof to and including the Second Closing
date, except as TFX may otherwise agree in writing, MICROLOG will:
3.1 Ordinary Course. Except with respect to the proposed sale by
MICROLOG of its European operations to Comsys International, B.V., conduct its
business only in the ordinary course, consistent with past practices and
policies, and not make any material change in the nature or character of or the
manner of conducting the business conducted by it.
3.2 Default. Not do or omit to do any act nor permit any event to occur
or condition to exist which will result in or cause a breach of any material
contract, lease or other commitment, the breach of which would have a material
adverse effect on the business, condition or prospects of MICROLOG.
ARTICLE 4
Conditions Precedent to the Obligations of TFX to Complete Closings
4.1 Conditions of Closing. The obligations of TFX to complete the
transactions provided herein to be completed at either of the Closings are
subject to the fulfillment prior to or at such Closing of the following
conditions (any of which may, at its option, be waived by TFX) and the
obligation of MICROLOG to complete the transactions provided herein to be
completed at the Second Closing are subject to MICROLOG obtaining its
shareholders' approval in the manner and as described in Section 4.1.2.1:
4.1.1 Opinion of Counsel for MICROLOG. MICROLOG shall have
delivered to TFX an opinion of its counsel, Hogan and Hartson, dated the Closing
date, in the form attached hereto as Exhibit 4.1.1.
4.1.2 Conditions of the Second Closing. The obligations of TFX and
MICROLOG to complete the Second Closing contemplated by this Agreement are
subject to MICROLOG obtaining the following:
4.1.2.1 Shareholder Approval. The obligation of MICROLOG and
TFX to complete the Second Closing contemplated by this Agreement is subject to
MICROLOG obtaining prior shareholder approval of such transaction.
4.1.3 Additional Conditions of the Second Closing. The obligation
of TFX to complete the Second Closing contemplated by this Agreement is subject
to the following additional condition:
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4.1.3.1 Y2K Plan of Action. MICROLOG warrants that its
computer software and related items of systems hardware are, or will be prior to
year 2000, reasonably capable of accurately processing, managing and
manipulating date/time data from, into and between the twentieth and
twenty-first centuries, and the years 1999, 2000 and leap year calculations, and
that the obligation of TFX to complete the Second Closing contemplated by this
Agreement is subject to MICROLOG implementing such plan of Y2K compliance that
is reasonably satisfactory to TFX.
4.2 Representations and Warranties. The representations and warranties
of MICROLOG contained in Article 5 shall be true at and as of the time of the
Second Closing, and TFX shall receive a certificate to that effect signed by the
Chairman and Chief Financial Officer of MICROLOG.
ARTICLE 5
Representations, Warranties and Covenants by MICROLOG
MICROLOG represents, warrants and covenants as follows:
5.1 Organization and Qualification. MICROLOG (i) is a corporation duly
organized, validly existing and in good standing under the laws of Virginia and
(ii) has the corporate power, holds all necessary licenses and permits and is in
all respects entitled to carry on its business as now being conducted. Neither
the character of the properties owned or leased by MICROLOG nor the nature of
its business makes qualification to do business as a foreign corporation in any
other jurisdiction necessary. The copies (certified by MICROLOG'S Secretary) of
such company's Articles of Incorporation and bylaws, each as amended to date,
which have been delivered to TFX are correct as at the date of this Agreement.
5.2 Capitalization. The authorized capital stock of MICROLOG consists
of ten million (10,000,000) shares of common stock, par value $.01 per share and
one million (1,000,000) shares of preferred stock, par value $.01 per share, of
which 4,294,285 and 0 shares respectively are issued and outstanding. 601,870 of
such issued shares are held by MICROLOG in its treasury. 1,832,370 shares of
such authorized common stock are reserved for issuance pursuant to stock option
plans, of which 1,468,846 shares are reserved for issuance pursuant to
outstanding stock options. Upon shareholder approval of an amendment to
MICROLOG's 1995 Employee Stock Option Plan, the number of shares of such
authorized common stock reserved for issuance pursuant to stock option plans
shall increase by 600,000. Except for such outstanding stock options, there are
no outstanding options, warrants or other commitments of any character
obligating MICROLOG to issue any shares of its capital stock or options or
rights with respect thereto, and there are no existing or outstanding securities
of MICROLOG or any of its Subsidiaries of any kind convertible into or
exchangeable for shares of MICROLOG capital stock. There are not outstanding any
obligations or commitments of MICROLOG or any of its Subsidiaries to purchase,
redeem or otherwise acquire any outstanding shares of such company's capital
stock, except as disclosed on the Schedule of Stock Options. Attached hereto as
Schedule 5.2 is a list of the MICROLOG shareholders of record as of April 29,
1999.
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<PAGE>
5.3 Authorization of Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by the Board of Directors of MICROLOG and, except for the
Shareholder approval required to consummate the Second Closing pursuant to
Section 4.1.2.1 hereof, the Shareholders of MICROLOG where required.
5.4 No Violation of Law or Default by Execution and Performance of this
Agreement. The execution, delivery and performance of this Agreement by MICROLOG
will not violate any applicable law or constitute a default or result in a right
of acceleration, termination or similar right by any party (or would, but for
the passage of time or the giving of notice or both, constitute a default or
result in such a right of acceleration, termination or similar right) under any
contract, agreement or instrument to which MICROLOG is a party.
5.5 Approvals and Consents. Except as set forth in the Schedule of
Required Approvals and Consents, no approval, consent or authorization of, or
declaration or filing with, any governmental or judicial authority or any other
person is required in connection with the execution and delivery of this
Agreement by MICROLOG or the performance of its obligations hereunder or the
consummation of the transactions contemplated hereby.
5.6 Financial Statements. MICROLOG has delivered to TFX: (i) the
balance sheets of MICROLOG as at October 31, 1998 and 1997 and the statements of
profit and loss and of stockholders' equity of MICROLOG for the years ending on
each such date, in each case certified by PricewaterhouseCoopers, MICROLOG'S
independent accountants and (ii) the unaudited balance sheet of MICROLOG as of
April 30, 1999 and the statement of profit and loss and of stockholders' equity
of MICROLOG for the period then ended on such date (collectively, the "Interim
Financial Statements"). (Such October 31, 1998 balance sheet is sometimes
referred to herein as the "Balance Sheet" and October 31, 1998 as the "Balance
Sheet Date.") All such audited financial statements are correct and complete;
fairly present in all material respects the financial condition, assets and
liabilities of MICROLOG as at the date thereof and the results of its operations
for such periods; and have been prepared in accordance with generally accepted
accounting principles ("GAAP") consistently maintained since the beginning of
such periods. The Interim Financial Statements have been prepared in accordance
with GAAP.
5.7 No Undisclosed Liabilities. As at the Balance Sheet Date and the
respective dates of the Interim Financial Statements, MICROLOG had no material
liability or obligation of any nature, whether due or to become due, absolute,
contingent or otherwise, including any liabilities for taxes (including any
interest or penalties relating thereto) in respect of or measured by the income
of MICROLOG for any period prior to the Balance Sheet Date, except to the extent
reflected or reserved against in its Balance Sheet, the Interim Financial
Statements or as disclosed by this Agreement. MICROLOG does not know or have any
reasonable ground to know of any basis for the assertion against MICROLOG as at
the Balance Sheet Date of any material liability of any nature or in any amount
not fully reflected or reserved against in the Balance Sheet or disclosed by
this Agreement.
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<PAGE>
5.8 Licenses and Permits. MICROLOG has all permits, licenses,
certificates of inspection and other authorizations necessary for or used to
carry on its business as now being conducted, or to use and occupy the premise
as now being used, which are required by presently effective laws, rules or
regulations, the loss of which would have a material adverse effect.
5.9 Compliance with Laws and Regulations., MICROLOG neither is nor has
been (by virtue of any action, omission, occurrence of any event, existence of
any circumstances or contract to which it is a party) in violation of any law,
ordinance, regulation, order or decree (including, without limitation, all
regulations of governmental agencies having jurisdiction or supervision over its
business or properties), the violation of which may have a material adverse
effect on the business, assets, condition or prospects of MICROLOG.
5.10 Employee Benefit Plans. (a) MICROLOG is in compliance in all
material respects with all laws, including ERISA and the Internal Revenue Code
of 1986, as amended ("Code"), applicable to its employee benefit plans as
defined in Section 3(3) of ERISA ("Benefit Plans"). Each Benefit Plan has been
maintained, operated and administered in compliance in all material respects
with its terms and any related documents or agreements and the applicable
provisions of ERISA and the Code.
(b) There are no pending audits or investigations by any
governmental agency involving the Benefit Plans, and no threatened or pending
claims (except for individual claims for benefits payable in the normal
operation of the Benefit Plans), suits or proceedings involving any Benefit
Plan, any fiduciary thereof or service provider thereto in connection with the
Benefit Plan, nor to the knowledge of MICROLOG is there any reasonable basis for
any such claim, suit or proceeding.
(c) Neither Seller nor any employee of Seller on behalf of
Seller has engaged in or, in connection with the transactions contemplated by
this Agreement, will engage in a "prohibited transaction" within the meaning of
Section 406 of ERISA or Section 4975 of the Code, nor has any such person
breached any duty imposed by Title I of ERISA, with respect to any Benefit Plan.
To the knowledge of Seller, no other person has engaged in such a prohibited
transaction or breach in connection therewith. Except for the 12,000 shares of
MICROLOG common stock that the Microlog Corporation Money Purchase Pension Plan
has invested in, none of the assets of any Benefit Plan is invested in any
property constituting "employer real property" or an "employer security" within
the meaning of Section 407 of ERISA.
5.11 Material Contracts. MICROLOG has filed with the Securities and
Exchange Commission (the "Exchange") all contracts required to be filed as
material contracts under the rules and regulations promulgated by the Exchange
(collectively, the "Material Contracts") True copies of all such Material
Contracts have been made available to TFX. No event has occurred which
constitutes a default or results in a right of acceleration, termination or any
similar right by any party (or would, but for the passage of time or the giving
of notice, constitute a default or result in such a right of acceleration,
termination or similar right) under any Material Contract.
<PAGE>
5.12 Intellectual Property Rights.
(a) The Schedule of Intellectual Property Rights contains a
complete and accurate list of all patents and patent applications, copyright
registrations, trademarks, service marks, trade names, and registrations and
applications for registration of trademarks, service marks, trade names, trade
dress used by MICROLOG ("the Intellectual Property Rights") specifying as to
each such item, as applicable: (i) the owner of the item; (ii) the jurisdictions
in which the item is issued or registered or in which any application for
issuance or registration has been filed, including the respective issuance,
registration, or application number; (iii) the date of application and issuance
or registration of trademarks or service marks and the class or classes of goods
or services on which each such trademark or service mark is or is intended to be
used.
(b) The Schedule of Intellectual Property Rights contains a
complete and accurate list of all licenses, sublicenses, consents and other
agreements (whether written or otherwise) (i) pertaining to any patents,
trademarks, service marks, trade names, trade dress, copyrights, trade secrets,
computer software programs, or other intellectual property used in the conduct
of the business, and (ii) by which MICROLOG licenses or authorizes a third
person to use such intellectual property. MICROLOG is not in breach of or
default under any such license or other agreement, except where such breach or
default would not, individually or in the aggregate, have a material adverse
effect upon MICROLOG and each such license or other agreement is now and
immediately following the Closing will be valid and in full force and effect.
5.13 Litigation. Except as set forth in the Schedule of Litigation,
there is no litigation, proceeding or investigation pending, or to the knowledge
of MICROLOG, threatened, against or affecting MICROLOG, whether or not fully
covered by insurance.
5.14 Absence of Creditors' Arrangements or Proceedings. MICROLOG has
not made any arrangement with its creditors otherwise than in the ordinary
course of its business, nor has any involuntary or voluntary proceeding been
instituted against or by MICROLOG or relating to any of its property under any
bankruptcy, insolvency or similar law.
5.15 No Change in Contractual Relations. No person or entity dealing
with MICROLOG has given it any oral or written notice that it intends to reduce
or otherwise materially modify its business with MICROLOG, where such
modification would have a material adverse effect on MIRCROLOG's business. No
person having a Material Contract with MICROLOG has indicated that such person
may breach, terminate or not renew such person's material contract.
5.16 Minute Books, Stock Records, Officers, Directors. MICROLOG has
made available for inspection by TFX the minute books and stock books of
MICROLOG, which contain all of such corporation's minutes and stock records.
Such minute books contain minutes of all meetings of the Board of Directors,
committees of the Board of Directors and the shareholders of MICROLOG, and such
minutes reflect all actions taken at such meetings that
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<PAGE>
may have a material adverse effect on MICROLOG. The Schedule of Officers and
Directors sets forth a complete list of all the current officers and directors
of MICROLOG.
5.17 Brokers. MICROLOG has not made any agreement or taken any action
which may cause anyone to become entitled to a commission as a result of the
transactions contemplated by this Agreement.
5.18 Full Disclosure. No representation or warranty by MICROLOG
contained in this Agreement and no statement contained in any certificate or
other instrument furnished or to be furnished to TFX pursuant hereto or in
connection with the transactions contemplated hereby, including MICROLOG'g
reports filed with the Exchange, taken collectively, contains or at the Closing
will contain any untrue statement of a material fact, or omits or will omit at
the Closing to state a material fact necessary to provide TFX with proper
information as to MICROLOG and its affairs.
ARTICLE 6
Corporate Governance
6.1 Period of Effectiveness. Subject to completion of the Closings, the
provisions of this Article 6 shall be in effect (the "Period of Effectiveness of
this Article 6") from the date of the Second Closing until none of TFX, any
successor to any part of its business or any assignee to whom TFX or any such
successor shall have transferred its rights under this Agreement by a writing
specifically referring to this Agreement (such successors and assigns are
sometimes referred to herein as the "Contract Assigns of TFX") shall own a
number of shares of Common Stock acquired pursuant hereto which shall equal 15%
or more of the total number of shares of Common Stock issued and outstanding.
Any transfer by TFX of its rights hereunder to a non-affiliate of TFX shall
require the prior written consent of MICROLOG, which consent shall not be
unreasonably withheld.
6.2 Board of Directors. MICROLOG will take all such action as shall be
necessary (or as any party hereto may reasonably request) to cause (a) one (1)
of the directors of MICROLOG in office to be a person nominated by TFX upon
consummation of the First Closing and (b) one (1) additional director of
MICROLOG in office to be a person nominated by TFX upon consummation of the
Second Closing.
6.3 Board of Directors Approval by Super Majority Required for Certain
Corporate Action. Without the prior approval of at least six (6) of its
directors then in office (which number of directors required for approval shall
be reduced during any period where there is a vacancy on the board of directors
by one (1) director for each such vacancy), MICROLOG will not do any of the
following:
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<PAGE>
(a) Merger or Reorganization. Sell or otherwise dispose of all or
any substantial part of its assets otherwise than in the ordinary course of
business, or consolidate with or merge into any other corporation or permit any
corporation to merge into it;
(b) Issuance of Shares, Rights or Options. Issue any shares of
capital stock or any securities exchangeable for or convertible into any such
shares or any right or option to acquire any such shares or securities other
than (i) up to 2,432,370 shares of common stock which may be issued pursuant to
an Employee Stock Option Plan, (ii) up to 250,000 shares of common stock in
connection with the proposed sale by MICROLOG of its European operations to
Comsys International, B.V. and (iii) issuances in the ordinary course of
MICROLOG's business;
(c) Guarantees. Guarantee or otherwise assume liability for the
indebtedness of another person or entity;
(d) Dividends; Redemption or Other Acquisition of Shares of
Capital Stock. Pay any dividend or other distribution in respect of any shares
of its capital stock or redeem, purchase or otherwise acquire any such shares.
(e) Amendment of Articles or Bylaws. Amend its Articles of
Incorporation or bylaws.
(f) Change Size of Board. Take any action to increase or decrease
the number of persons constituting the entire Board of Directors from seven (7).
6.4 Remedies. In the event of a breach or threatened breach of this
Article, the remedy at law shall be inadequate, and TFX will be entitled to
appropriate injunctive relief.
ARTICLE 7
Shares Acquired for Investment
7.1 TFX represents and warrants to MICROLOG as follows:
(a) TFX is acquiring the shares of Common Stock in good faith
solely for its own account, for investment only and without any view toward the
resale or other distribution thereof within the meaning of the Securities Act of
1933, as amended (the "Securities Act");
(b) TFX has such knowledge and experience in financial and
business matters that TFX is capable of evaluating the merits and risks of its
investment in the Common Stock. TFX understands and is able to bear any and all
economic risks associated with such investment (including, without limitation,
the necessity of holding such shares for an indefinite period of time, inasmuch
as the shares have not been registered under the Securities Act, and of a total
loss of the investment). TFX is an Accredited Investor as that term is defined
in Regulation D promulgated under the Securities Act. TFX confirms that the
MICROLOG has made available to
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<PAGE>
TFX and its representatives and agents the opportunity to ask questions of the
officers and management employees of the MICROLOG about the business and
financial condition of the MICROLOG as TFX or its representatives have
requested;
(c) TFX understands that the Common Stock to be issued hereunder
has not been registered under the Securities Act and is being offered and sold
in reliance on specific exemptions from the registration requirements of U.S.
securities laws and that MICROLOG is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and understandings of
TFX set forth herein in order to determine the applicability of such exemptions
and the TFX's suitability to acquire the Common Stock. TFX represents and
warrants that the information contained herein is complete and accurate.
(d) TFX acknowledges and hereby agrees that the certificate
representing the Common Stock to be issued to TFX hereunder shall bear a legend
substantially in the following form:
The shares of stock represented by this certificate have
not been registered under the Securities Act of 1933, as
amended (the "Act"), or applicable state securities laws
and may not be offered, encumbered, pledged,
hypothecated, sold, transferred or otherwise disposed of
in the absence of registration or the availability of an
exemption from registration under the Act and
regulations promulgated thereunder and applicable state
securities laws. Microlog Corporation reserves the right
prior to any such transfer to require delivery of an
opinion of counsel satisfactory to it with respect to
compliance with the foregoing restrictions.
7.2 Demand for Registration.
7.2.1 Demand Registration. At any time from and after the date
hereof that MIRCOLOG becomes eligible to register the Common Stock under the
Securities Act on a Form S-3 Registration Statement, TFX may request that
MICROLOG effect one (1) (and only one) registration for resale on a Form S-3
Registration Statement by TFX of all of the shares of Common Stock that were
issued hereunder to, and are then owned by, TFX (free and clear of all
encumbrances) and that are not then eligible for resale pursuant to Rule 144
under the Securities Act (the "Registrable Securities").
7.2.2 Demand Registration Procedure. Upon receipt of a request by
TFX as set forth in section 7.2.1 above, MICROLOG agrees to use reasonable
commercial efforts to: (i) prepare and file with the SEC, within sixty (60) days
after receipt of such request, a Form S-3 Registration Statement providing for
the registration of the Registrable Securities; (ii) keep such registration
statement effective and current for a period of not less than sixty (60) days or
such shorter period which will terminate when all of the Registrable Securities
have been sold; and (iii) register or qualify the Registrable Securities under
the securities or blue sky laws of such states as TFX shall reasonably request
and do any and all other acts and things which may be necessary to enable TFX to
complete any disposition in such jurisdiction of such Registrable
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Securities; provided, however, that MICROLOG shall not for any such purpose be
required to (a) qualify to do business as a foreign corporation in any
jurisdiction where, but for the requirements of these procedures, it is not then
so qualified, (b) subject itself to taxation in any such jurisdiction, or (c)
take any action which would subject it to consent to general or unlimited
service of process in any such jurisdiction where it is not then so subject.
7.2.3 Restrictions on Demand Registration. MICROLOG may delay the
filing or effectiveness of the registration statement requested pursuant to this
Section 7.2 for a period of not less than ninety (90) days and not to exceed one
hundred eighty (180) days after the date of receipt of a request for
registration pursuant to this Section 7.2 if (i) at the time of such request
MICROLOG is engaged, or has plans to engage within ninety (90) days of the date
of receipt of such request, in a firm commitment underwritten public offering of
primary shares of Common Stock in which TFX may include the Registrable
Securities pursuant to Section 7.3 below or (ii) MICROLOG shall furnish to TFX a
certificate signed by the chief executive officer of MICROLOG stating that, in
the good faith judgment of the Board of Directors of MICROLOG, and with the
concurrence of the investment banker, if any, that is then currently being
advising MICROLOG, it would be seriously detrimental to MICROLOG and its
shareholders for such registration statement to be filed and it is therefore
essential to defer the filing of such registration statement.
7.3 Piggyback Registration.
7.3.1 Right to Piggyback. If MICROLOG proposes to register any of
its securities under the Securities Act (other than (i) registrations solely for
the registration of shares in connection with an employee benefit plan or a
merger or share exchange or consolidation and (ii) the registration pursuant to
Section 7.2), whether or not for sale for its own account, and the registration
form to be used may be used for the registration of the Registrable Securities
(a "Piggyback Registration"), MICROLOG will at each such time give prompt
written notice to TFX of its intention to do so. Upon the written request of TFX
made within thirty (30) days after the receipt of any such notice, MICROLOG will
use reasonable commercial efforts to effect the registration of the Registrable
Securities that TFX requests to be so registered on the same terms and
conditions as the securities otherwise being sold in such registration, to the
extent requisite to permit the disposition of such Registrable Securities. No
registration effected under this Section 7.3.1 shall relieve MICROLOG of its
obligation to effect one (1) registration upon request under Section 7.2 above.
7.3.2 Priority in Piggyback Registrations. If (i) a registration
pursuant to this Section 7.3 involves an underwritten offering of the securities
so being registered, whether or not for sale for the account of MICROLOG, to be
distributed (on a firm commitment basis) by or through one or more underwriters
of recognized standing under underwriting terms appropriate for such a
transaction and (ii) the managing underwriter of such underwritten offering
shall inform MICROLOG in writing of its belief that the number of securities
requested to be included in such registration exceeds the number which can be
sold in (or during the time of) such offering without adversely affecting the
price to be received thereon, then MICROLOG will include in such registration,
to the extent of the number which MICROLOG is so advised can be sold in (or
during the time of) such offering, first, all securities proposed by MICROLOG to
be sold for its
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own account or all securities (other than the Registrable Securities) proposed
by MICROLOG to be sold for the account of the holders thereof, as the case may
be, second, the Registrable Securities requested to be included in such
registration, and third, other securities requested to be included in such
registration.
7.4 Termination of Registration Rights. In the event that either (i)
all of the Registrable Securities become eligible for resale pursuant to Rule
144 under the Securities Act or (ii) the number of Registrable Securities owned
beneficially and of record by TFX falls below 5% of the total number of shares
of Common Stock issued and outstanding, then all registration rights pursuant to
Sections 7.2 and 7.3 shall immediately terminate and be of no further force or
effect.
ARTICLE 8
Indemnification
MICROLOG shall indemnify and hold TFX harmless from and against any
damage or deficiency resulting from any misrepresentation, breach of warranty or
non-fulfillment of any covenant contained in this Agreement or in any statement
or certificate furnished or to be furnished to TFX pursuant hereto or in
connection with the transactions contemplated hereby and any actions, judgments,
costs and expenses incident to the foregoing.
ARTICLE 9
Nature and Survival of Representations
All statements contained in any certificate or other instrument
delivered by or on behalf of MICROLOG pursuant to this Agreement or in
connection with the transactions contemplated hereby shall be deemed
representations and warranties by MICROLOG hereunder. All representations,
warranties and agreements made by MICROLOG shall survive the Second Closing
hereunder for a period of two (2) years.
ARTICLE 10
Governing Law
This Agreement will be governed by, and construed in accordance with,
the laws of the Commonwealth of Pennsylvania.
ARTICLE 11
Parties in Interest; Assignment
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, successors and assigns. TFX may
assign this agreement to an affiliate.
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ARTICLE 12
Notices
All notices and other communications hereunder shall be in writing and
shall be deemed to have been duly given if delivered or mailed in the
continental United States, first-class postage prepaid, to a party at the
following address, or to such other address as such person may hereafter specify
by notice:
If to MICROLOG:
Microlog Corporation
20270 Goldenrod Lane
Germantown, Maryland 20876-4070
Attention: Stephen Smith, President and Chief Executive Officer
If to TFX:
TFX Equities Incorporated
1787 Sentry Parkway West
Building 16, Suite 220
Blue Bell, Pennsylvania 19422
Attention: John J. Sickler, President
ARTICLE 13
Headings and Titles
The headings and titles of Articles, Sections and the like in this
Agreement are inserted for convenience of reference only, form no part of this
Agreement and shall not be considered for purposes of interpreting the text
hereof.
ARTICLE 14
Schedules
Each Schedule referred to herein and listed in the Table of Contents
hereof has been delivered by a party hereto and has been identified by a legend
thereon referring to this Agreement, signed for purposes of such identification
by representatives of MICROLOG and TFX.
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ARTICLE 15
Modification
Except as provided in Article 9, no amendment or modification of or
supplement to this Agreement will be effective unless it is in writing and duly
executed by the party to be charged thereunder.
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ARTICLE 16
Counterparts
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
MICROLOG CORPORATION
By: /s/ Steven R. Delmar
----------------------------
Steven R. Delmar
Executive Vice President and
Chief Financial Officer
TFX EQUITIES INCORPORATED
By: /s/ John J. Sickler
---------------------------
John J. Sickler
President
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SCHEDULE OF REQUIRED APPROVALS AND CONSENTS
1. The Shareholder Approval to the issuance and sale of the 1,812,104 shares of
MICROLOG Common Stock at the Second Closing.
2. Consent of Silicon Valley Bank to the issuance and sale of the 1,812,104
shares of MICROLOG Common Stock at the Second Closing.
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