Registration No. 33-88818
As filed with the Securities and Exchange Commission on March 24, 1995
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2
to
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
____________
Glenayre Technologies, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction
of incorporation or organization)
3669
(Primary Standard Industrial
Classification Code Number)
98-0085742
(I.R.S. Employer
Identification No.)
4201 Congress Street
Suite 455
Charlotte, North Carolina 28209
704/553-0038
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
_____________________
CLARKE H. BAILEY
Chairman of the Executive Committee
520 Madison Avenue, 35th Floor
New York, New York 10022
212/935-5678
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
Please send copies of all communications to:
Myles E. Standish, Esq.
Kennedy Covington Lobdell & Hickman, L.L.P.
NationsBank Corporate Center
100 North Tryon Street, Suite 4200
Charlotte, N.C. 28202
704/331-7400
Robert H. Miller, Esq.
Gray Cary Ware & Freidenrich
400 Hamilton Avenue
Palo Alto, California 94301
415/328-6561
_________________
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
in connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box.
_______________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of Each Class Amount Proposed Maximum Proposed Maximum Amount of
of Securities to to be Offering Aggregate Registration
be Registered Registered Price per Unit Offering Price Fee
<S> <C> <C> <C> <C>
Common Stock, $.02 par value 750,000(1) $38.25 (2) $28,687,500 $9,893.00(3)
</TABLE>
(1) Includes 227,939 shares issuable upon exercise of stock options.
(2) Determined in accordance with Rule 457(f)(1) based upon the fair market
value of a share of Common Stock on January 25, 1995. Estimated solely
for the purpose of calculating the registration fee.
(3) Previously paid.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933, or until the
Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
<PAGE>
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
Item Number and Form S-4 Caption Location in Prospectus
<S> <C> <C>
1. Forepart of Registration Statement and Outside Front Cover Facing Page of Registration Statement; Cross-
Page of Prospectus reference sheet; Outside front cover page of
Prospectus
2. Inside Front and Outside Back Cover Page of Prospectus Available Information; Incorporation of
Certain Documents by Reference; Inside Front
Cover Page of Prospectus; Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed Charges and Other Summary; The Companies; The Merger; Selected
Information Consolidated Financial Information; Selected
Pro Forma Financial Information;
Comparative Per Share Data; Book Value Per
Share; Market Value Information; Glenayre
Risk Factors
4. Terms of the Transactions The Merger
5. Pro Forma Financial Information Pro Forma Financial Information
6. Material Contacts with the Company Being Acquired Not Applicable
7. Additional Information Required for Reoffering by Persons
and Parties Deemed to be Underwriters Not Applicable
8. Interests of Named Experts and Counsel Legal Matters; Experts
9. Disclosure of Commission Position on Indemnification for
Securities Act Liabilities Not Applicable
10. Information with Respect to S-3 Registrants Not Applicable
11. Incorporation of Certain Documents by Reference Incorporation of Certain Documents by
Reference
12. Information with Respect to S-2 or S-3 Registrants Not Applicable
13. Incorporation of Certain Documents by Reference Not Applicable
14. Information with Respect to Registrants Other than S-3 or
S-2 Registrants Not Applicable
15. Information with Respect to S-3 Companies Not Applicable
16. Information with Respect to S-2 or S-3 Companies Not Applicable
17. Information with Respect to Companies Other than S-3 or S-2
Companies MUX
18. Information if Proxies, Consents or Authorizations are to MUX Shareholders' Meeting; The Merger;
be Solicited Security Ownership of Certain Beneficial
Owners of MUX Common Stock; Rights of
Shareholders Electing to Exercise Their
Rights to Dissent; Incorporation of Certain
Documents by Reference
19. Information if Proxies, Consents or Authorizations are not
be solicited or in an Exchange Offer Not Applicable
</TABLE>
<PAGE> WESTERN MULTIPLEX CORPORATION
300 Harbor Boulevard
Belmont, California 94002
March 24, 1995
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of
Western Multiplex Corporation ("MUX") which will be held at 2:30 p.m., local
time, on April 25, 1995, at 300 Harbor Boulevard, Belmont, California.
At the Special Meeting, holders of the Common Stock of MUX ("MUX Common
Stock") will be asked to consider and vote upon a proposal to approve and
adopt an Acquisition Agreement dated as of January 3, 1995 (the "Acquisition
Agreement") among Glenayre Technologies, Inc., a Delaware corporation
("Glenayre"), MUX Acquisition Corp., a California corporation and wholly-owned
subsidiary of Glenayre ("Glenayre Sub"), MUX, John Woods and Frank Hegarty
(collectively, the "Principal Shareholders") and certain other MUX
shareholders and holders of options to acquire MUX Common Stock, and the
Agreement of Merger attached to the Acquisition Agreement as Exhibit C (the
"Agreement of Merger") (the Acquisition Agreement and the Agreement of Merger
are collectively referred to herein as the "Agreement"). The Agreement
provides for the merger of Glenayre Sub with and into MUX, with MUX as the
surviving corporation and continuing as a wholly-owned subsidiary of Glenayre
(the "Merger"). Under the Agreement, each share of MUX Common Stock (other
than shares, if any, held by shareholders who perfect their rights to dissent
under the California General Corporation Law (the "CGCL")) will be converted
into the right to receive .0943848 of one share of Glenayre Common Stock, $.02
par value ("Glenayre Common Stock"), and each stock option right to purchase
one share of MUX Common Stock (a "MUX Stock Option") will be converted into
the right to purchase .0943848 of one share of Glenayre Common Stock and the
option exercise price will be adjusted by dividing the current option exercise
price by .0943848. The Merger is intended to be tax-free to MUX's shareholders
for federal income tax purposes to the extent that shares of MUX Common Stock
are exchanged solely for shares of Glenayre Common Stock.
Under the Acquisition Agreement, certain shareholders of MUX who receive
Glenayre Common Stock pursuant to the Merger (the "Indemnifying Shareholders")
and certain holders of MUX Stock Options (the "Indemnifying Option Holders")
will be required, for a period of one year from the effective time of the
Merger, to indemnify Glenayre against certain potential losses specified in
the Acquisition Agreement incurred by Glenayre or MUX, to the extent such
losses exceed $150,000 in the aggregate. A percentage of the shares of
Glenayre Common Stock issued in connection with the Merger to each Indemnifying
Shareholder will be placed in escrow and a portion of the MUX Stock Options,
which will be converted into options to acquire Glenayre Common Stock in the
Merger, held by an Indemnifying Option Holder (and the shares of Glenayre
Common Stock received upon exercise) will be subject to forfeiture upon
application to satisfy the foregoing indemnification obligations. The
Indemnifying Shareholders and the Indemnifying Option Holders' indemnification
obligation is limited to, respectively, the shares escrowed and the options
subject to forfeiture.
On March 22, 1995, the closing sale price of Glenayre Common Stock on
the NASDAQ National Market System was $43.00 per share. Based on such
price, and after applying the exchange ratio of .0943848 for each share
of MUX Common Stock, the value of each share of MUX Common Stock after
the Merger would be $4.06 per share, or an aggregate of approximately
$32,261,552 for all shares and options for shares of MUX Common Stock.
The value of each share of MUX Common Stock at the actual closing of the
Merger could be higher or lower than $4.06, depending on the market
price of Glenayre Common Stock at the effective time of the Merger. You
are urged to review the current stock price of Glenayre Common Stock
during the period leading up to the meeting.
John Woods, Frank Hegarty and John Bartelme (the "Large Shareholders"),
who together beneficially own approximately 67% of the MUX Common Stock
issued and outstanding on the record date, have indicated they intend to
vote in favor of the Merger, although they are not contractually
obligated to Glenayre to do so. If they do vote in favor of the Merger,
their votes will be sufficient to assure approval of the Merger under
California law.
Although neither MUX nor Glenayre sought or received a fairness opinion
with respect to the terms of the Merger, the MUX Revised and Restated
Stock Ownership Plan and Trust (the "ESOP") has sought, and the closing
of the Merger
<PAGE>
is contingent on the MUX ESOP receiving, an opinion of Houlihan Lokey
Howard & Zukin to the effect that the terms of the Merger are fair to
the ESOP from a financial point of view. See the discussion in the
Proxy Statement/Prospectus at "The Acquisition Agreement--Fairness
Opinion for ESOP."
The Large Shareholders who collectively hold 68% of the MUX Common
Stock (including the shares of MUX Common Stock subject to exercisable
options held by the Large Shareholders) have granted to Glenayre an
option to purchase all their shares of MUX Common Stock and all of the
shares of MUX Common Stock subject to exercisable options held by the
Large Shareholders in the event the Merger is not consummated for
certain reasons or the Acquisition Agreement is terminated for certain
reasons.
The proposed Merger is described more completely in the accompanying
Proxy Statement/Prospectus, the forepart of which includes a summary of
the terms of the Merger and certain other information relating to the
proposed transaction and provides specific information concerning the
Special Meeting. I urge you to review carefully the Proxy
Statement/Prospectus and the accompanying Annexes and the information
contained therein.
The MUX Board of Directors has determined that the Merger is in the
best interests of MUX and its shareholders. We are enthusiastic about
the combination with Glenayre, which we believe carries distinct
advantages for MUX and its shareholders.
AFTER CAREFUL CONSIDERATION, YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY
APPROVED THE ACQUISITION AGREEMENT AND AGREEMENT OF MERGER AND RELATED
TRANSACTIONS AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF THE
ACQUISITION AGREEMENT AND AGREEMENT OF MERGER.
It is very important that your shares be represented at the Special
Meeting, regardless of whether or not you plan to attend in person. The
affirmative vote of a majority of the outstanding shares of MUX Common
Stock entitled to vote at the Special Meeting is required to approve the
Merger. Consequently, a failure to vote will have the same effect as a
vote against the proposal. Therefore, please complete, sign and date
the accompanying proxy card and promptly return it in the enclosed
prepaid envelope to ensure that your shares will be voted at the Special
Meeting. If you are present at the meeting you may, if you wish,
withdraw your proxy and vote in person.
If you elect to vote in favor of the Merger, you should also fill out
the enclosed acknowledgment and return it, along with your certificates
for shares of MUX Common Stock, to MUX in the enclosed prepaid envelope.
Participants in the MUX ESOP are entitled to vote any shares of MUX
Common Stock held in their account by the ESOP. However, certificates
for such shares will be delivered to MUX by the ESOP along with an
acknowledgment filled out by the ESOP.
Sincerely,
John Woods
President
<PAGE>
WESTERN MULTIPLEX CORPORATION
300 HARBOR BOULEVARD
BELMONT, CALIFORNIA 94002
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 25, 1995
To the Shareholders of Western Multiplex Corporation:
Notice Is Hereby Given that, pursuant to the call of its Board of
Directors, a Special Meeting of Shareholders (the "Special Meeting") of
Western Multiplex Corporation, a California corporation ("MUX"), will be
held on April 25, 1995, at 300 Harbor Boulevard, Belmont, California,
commencing at 2:30 p.m., local time, to consider and vote upon the
following matter:
A proposal to approve and adopt an Acquisition Agreement dated as
of January 3, 1995 (the "Acquisition Agreement") among Glenayre
Technologies, Inc., a Delaware corporation ("Glenayre"), MUX
Acquisition Corp., a California corporation and wholly-owned subsidiary
of Glenayre ("Glenayre Sub"), MUX, John Woods and Frank Hegarty and
certain other shareholders of MUX who will receive shares of the Common
Stock of Glenayre, $.02 par value, pursuant to the Acquisition
Agreement, and certain holders of options to purchase MUX Common Stock,
and the Agreement of Merger attached to the Acquisition Agreement as
Exhibit C, providing for the merger of Glenayre Sub with and into MUX,
with MUX as the surviving corporation and continuing as a wholly-owned
subsidiary of Glenayre (the "Merger"). Under the Acquisition
Agreement, each share of MUX Common Stock (other than shares, if any,
held by shareholders who perfect their rights to dissent under the
California General Corporation Law (the "CGCL")) will be converted into
the right to receive .0943848 of one share of Glenayre Common Stock and
each stock option right to purchase one share of MUX Common Stock will
be converted into the right to purchase .0943848 of one share of
Glenayre Common Stock and the option exercise price will be adjusted by
dividing the current option exercise price by .0943848.
The Merger and other related matters are more fully described in the
accompanying Proxy Statement/Prospectus and Annexes thereto, which form
a part of this Notice.
The Board of Directors unanimously recommends that the holders of MUX
Common Stock vote in favor of the Acquisition Agreement and the
Agreement of Merger.
Approval of the Merger requires the affirmative vote of the holders of
a majority of the outstanding shares of MUX Common Stock. Only
shareholders of record at the close of business on March 10, 1995, the
record date for the Special Meeting, are entitled to notice of and to
vote at the Special Meeting and any adjournment or postponements
thereof.
A summary of certain provisions of Chapter 13 of the CGCL pertaining to
the rights of dissenting shareholders in connection with the Merger is
included in the Proxy Statement/Prospectus in the section entitled
"Rights of Shareholders Electing to Exercise Their Rights to Dissent."
The complete text of Chapter 13 of the CGCL is set forth in Annex II to
the Proxy Statement/Prospectus.
Whether or not you plan to attend the Special Meeting, please fill in,
sign, date and return the enclosed form of proxy card promptly. A
return envelope is enclosed for your convenience and requires no postage
for mailing in the United States.
Sincerely,
John Woods
President
March 24, 1995
YOUR VOTE IS IMPORTANT
TO VOTE YOUR SHARES, PLEASE SIGN, DATE AND COMPLETE THE ENCLOSED PROXY
AND MAIL IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE.
<PAGE>
PROXY STATEMENT
WESTERN MULTIPLEX CORPORATION
Special Meeting to be Held on April 25, 1995
PROSPECTUS
GLENAYRE TECHNOLOGIES, INC.
750,000 Shares
Common Stock
$.02 par value
This Proxy Statement/Prospectus and the accompanying form of proxy are
being first furnished on or about March 24, 1995 to the holders of the
common stock of Western Multiplex Corporation, a California corporation
("MUX"), in connection with the solicitation of proxies by the MUX Board
of Directors, to be used at the Special Meeting of Shareholders of MUX
to be held on April 25, 1995 at 2:30 p.m., local time, and at any
adjournments or postponements thereof (the "MUX Meeting"). At the MUX
Meeting, the holders of MUX Common Stock (the "MUX Shareholders") will
be asked to consider and vote upon a proposal to approve and adopt an
Acquisition Agreement (the "Acquisition Agreement") attached hereto as
Annex I dated as of January 3, 1995, by and among Glenayre Technologies,
Inc., a Delaware corporation ("Glenayre"), MUX Acquisition Corp., a
California corporation ("Glenayre Sub"), MUX, John Woods and Frank
Hegarty (collectively, the "Principal Shareholders"), certain other
shareholders of MUX who will receive Glenayre Common Stock, $.02 par
value ("Glenayre Common Stock") in the Merger (defined below) and
certain holders of options to purchase MUX Common Stock ("MUX Stock
Options") and the Agreement of Merger attached thereto as Exhibit C (the
"Agreement of Merger") (the Acquisition Agreement and the Agreement of
Merger are collectively referred to herein as the "Agreement"). The
Agreement provides for the merger of Glenayre Sub with and into MUX with
MUX as the surviving corporation and continuing as a wholly-owned
subsidiary of Glenayre (the "Merger").
Pursuant to the terms of the Agreement, each share of MUX Common Stock
outstanding as of the time the Merger is consummated (the "Effective
Time"), except for shares as to which dissenters' rights have been
perfected under the California General Corporation Law (the "CGCL"),
will be converted into the right to receive .0943848 of one share of
Glenayre Common Stock (the "Exchange Ratio"). Cash will be paid in lieu
of the issuance of fractional shares of Glenayre Common Stock. In
connection with the Merger, MUX Stock Options will be converted into
options to purchase that number of shares of Glenayre Common Stock equal
to the number of shares of MUX Common Stock covered by the MUX Stock
Options multiplied by the Exchange Ratio and the exercise price will be
adjusted by dividing the exercise price by the Exchange Ratio. See "The
Merger--Conflicts of Interest." A total of 522,061 shares of Glenayre
Common Stock will be issued in the Merger in exchange for MUX Common
Stock (subject to adjustment for payments in cash to
(Cover continued on next page)
Consideration should be given to the factors set forth under the
caption "Glenayre Risk Factors."
______________________________________________________________________
THE SECURITIES ISSUABLE PURSUANT TO THIS PROXY STATEMENT/PROSPECTUS
HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
______________________________________________________________________
This Proxy Statement/Prospectus and the accompanying form of proxy and
Acknowledgment are first being mailed or delivered to shareholders of
MUX on or about March 24, 1995.
______________________________________________________________________
1
The date of this Proxy Statement/Prospectus is March 24, 1995.
<PAGE>
(continued from previous page)
dissenting MUX Shareholders, payment of fractional shares and for any
exercise of MUX Stock Options prior to the Effective Time) and 227,939
shares of Glenayre Common Stock will be reserved for issuance upon
exercise of MUX Stock Options (subject to adjustment for the exercise of
MUX Stock Options prior to the Effective Time).
Certain MUX Shareholders (the "Indemnifying Shareholders") and certain
holders of MUX Stock Options (the "Indemnifying Option Holders") (the
Indemnifying Shareholders and the Indemnifying Option Holders are
collectively referred to herein as the "Indemnifying Equity Holders")
will be obligated to indemnify Glenayre for a period of one year from
the Effective Time against losses which in the aggregate exceed $150,000
that Glenayre or MUX may incur as a result of the incorrectness or
breach of any representations, warranties or covenants of any holder of
a MUX Stock Option or a MUX Shareholder (collectively, a "MUX Equity
Holder") or MUX contained in the Acquisition Agreement, the
Acknowledgments executed by each of the MUX Equity Holders pursuant to
the Acquisition Agreement (the "Acknowledgments") or any other document,
certificate or agreement entered into or furnished by any MUX Equity
Holder or MUX pursuant to the Agreement or the Acknowledgments and for
certain other items specified in the Acquisition Agreement. Certain
shares of Glenayre Common Stock issued in connection with the Merger to
the Indemnifying Shareholders will be held in escrow and may be applied
to satisfy such indemnification obligations and a portion of certain MUX
Stock Options outstanding at the Effective Time, which will be converted
into options to purchase Glenayre Common Stock at the Effective Time,
held by the Indemnifying Option Holders (and the shares of Glenayre
Common Stock received upon exercise) will be subject to forfeiture upon
application to satisfy the foregoing indemnification obligations. All
shares held in escrow (the "Escrowed Shares") will be issued and
outstanding shares of Glenayre Common Stock registered in the names of
the respective Indemnifying Equity Holders and the respective
Indemnifying Equity Holders will be entitled to vote, sell and receive
dividends on the Escrowed Shares and will otherwise have full equity
rights to the Escrowed Shares, except that any proceeds related to the
Escrowed Shares will be placed in escrow until the expiration of the
escrow period. Indemnifying Option Holders will be entitled to exercise
any options subject to forfeiture and the shares received on the
exercise thereof will thereafter become Escrowed Shares until expiration
of the escrow period. The Indemnifying Equity Holders' indemnification
obligation is limited to the shares escrowed and the options subject to
forfeiture. See "The Acquisition Agreement-- Indemnification" and "The
Acquisition Agreement--Representations and Warranties."
Glenayre Common Stock is traded on the NASDAQ National Market System
under the symbol "GEMS." On March 22, 1995 the closing price of
Glenayre Common Stock as reported on the NASDAQ National Market System
was $43.00. Glenayre has filed with the Securities and Exchange
Commission (the "Commission") a Registration Statement (the
"Registration Statement") on Form S-4 pursuant to the Securities Act of
1933, as amended (the "Securities Act"), with respect to up to 750,000
shares of Glenayre Common Stock issuable in connection with the Merger,
of which this Proxy Statement/Prospectus is a part and a reference to
this document as a Proxy Statement/Prospectus shall also constitute a
reference to it as a prospectus.
All information concerning Glenayre contained in this Proxy
Statement/Prospectus has been furnished by Glenayre and all information
concerning MUX prior to the Merger contained in this Proxy
Statement/Prospectus has been furnished by MUX. No person is authorized
to give any information or to make any representation with respect to
the matters described in this Proxy Statement/Prospectus other than
those contained herein and, if given or made, such information or
representation must not be relied upon as having been authorized by
Glenayre, MUX or any other person. This Proxy Statement/Prospectus does
not constitute an offer to sell, or a solicitation of an offer to buy,
any securities, or the solicitation of a proxy, in any jurisdiction to
or from any person to whom it is not lawful to make any such offer or
solicitation in such jurisdiction. Neither the delivery of this Proxy
Statement/Prospectus nor any distribution of the securities made
hereunder shall, under any circumstances, create any implication that
there has not been any change in the assets, properties or affairs of
Glenayre or MUX since the date hereof or that the information contained
herein is correct as of any time subsequent to the date hereof.
2
<PAGE>
AVAILABLE INFORMATION
Glenayre is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information may be
inspected and copied at the Public Reference Facilities maintained by
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at
the Commission's regional offices at 75 Park Place, New York, New York
10007 and Northwestern Atrium Center, 500 West Madison Street, Chicago,
Illinois 60661. Copies of such materials may also be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates.
This Proxy Statement/Prospectus constitutes a part of the Registration
Statement filed by Glenayre under the Securities Act, with respect to
the shares of Glenayre Common Stock to be issued, and upon exercise of
options to purchase Glenayre Common Stock proposed to be issued, in the
Merger. As permitted by the rules issued by the Commission under the
Securities Act, this Proxy Statement/Prospectus omits certain of the
information contained in the Registration Statement, and reference is
hereby made to the Registration Statement and to the exhibits relating
thereto for further information with respect to Glenayre and Glenayre
Common Stock. Any statements contained herein concerning the provisions
of any document filed with the Commission are not necessarily complete,
and each such statement is qualified by reference to the copy of such
document filed with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission are hereby
incorporated by reference in this Proxy Statement/Prospectus: (i)
Glenayre's Annual Report on Form 10-K for the fiscal year ended December
31, 1993; (ii) Glenayre's Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1994, June 30, 1994 and September 30, 1994;
(iii) Glenayre's Current Report on Form 8-K dated March 7, 1995 and (iv)
the description of Glenayre's Common Stock contained in Glenayre's
registration statement filed pursuant to Section 12 of the Exchange Act
(and any amendment or report filed for the purpose of updating the
description).
All documents filed by Glenayre pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Proxy
Statement/Prospectus and prior to the MUX Meeting are deemed to be a
part hereof from the date of filing of such documents. Any statement
contained in the document incorporated or deemed to be incorporated
herein by reference will be deemed to be modified or superseded for the
purpose of this Proxy Statement/Prospectus to the extent that a
statement contained herein or in any other subsequently filed document
which is deemed to be incorporated herein by reference modifies or
supersedes such statement. Any such statement so modified or superseded
will not be deemed, except as so modified or superseded, to constitute a
part of this Proxy Statement/Prospectus.
This Proxy Statement/Prospectus incorporates documents by reference
which are not presented herein or delivered herewith. Such documents
(including the schedules to the Acquisition Agreement), other than
certain exhibits to such documents, are available without charge upon
request made to Glenayre Technologies, Inc., Attention: Stan
Ciepcielinski, 4201 Congress Street, Suite 455, Charlotte, North
Carolina 28209 (telephone 704/553-0038). In order to ensure timely
delivery of the documents, any request should be delivered to Glenayre
by April 18, 1995.
3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE. . . . . . . . . . . . . . . 3
SUMMARY OF PROXY STATEMENT/PROSPECTUS. . . . . . . . . . . . . . . . . . . 7
Shareholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . 8
The Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Effect of the Merger; Consideration . . . . . . . . . . . . . . . . . . . 8
Recommendations of the Boards of Directors. . . . . . . . . . . . . . . . 8
Effective Time of the Merger. . . . . . . . . . . . . . . . . . . . . . . 8
Option to Acquire Majority Interest in MUX. . . . . . . . . . . . . . . . . 9
Representations and Warranties. . . . . . . . . . . . . . . . . . . . . . . 9
Indemnification and Escrow Arrangements . . . . . . . . . . . . . . . . . . 9
Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Approval and Conditions to Consummation of the Merger . . . . . . . . . . 10
Termination of the Acquisition Agreement; No-Shop Provisions. . . . . . . 11
Transaction Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Dissenters' Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Federal Income Tax Consequences of the Merger . . . . . . . . . . . . . . 12
Accounting Treatment. . . . . . . . . . . . . . . . . . . . . . . . . . 12
Effects of Merger on Rights of Shareholders . . . . . . . . . . . . . . . 13
Conflicts of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Listing with the NASDAQ National Market System . . . . . . . . . . . . . .13
Market Value Information. . . . . . . . . . . . . . . . . . . . . . . . . .13
SUMMARY CONSOLIDATED FINANCIAL INFORMATION . . . . . . . . . . . . . . . . 14
Glenayre Technologies, Inc. . . . . . . . . . . . . . . . . . . . . . . . 14
GEMS Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Western Multiplex Corporation . . . . . . . . . . . . . . . . . . . . . . 17
SUMMARY PRO FORMA FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . .18
COMPARATIVE PER SHARE DATA . . . . . . . . . . . . . . . . . . . . . . . . 19
GLENAYRE RISK FACTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Potential Market Changes Resulting from Technological Advances . . . . . .20
Competitive Market Conditions . . . . . . . . . . . . . . . . . . . . . . .20
Variability of Quarterly Results. . . . . . . . . . . . . . . . . . . . . .20
Volatility of Stock Price . . . . . . . . . . . . . . . . . . . . . . . . .20
Dependence upon Key Personnel . . . . . . . . . . . . . . . . . . . . . . .21
International Business Risks. . . . . . . . . . . . . . . . . . . . . . . .21
Protection of Proprietary Technology and Infringement Claims. . . . . . . .21
Potential Changes in Government Regulation. . . . . . . . . . . . . . . . .21
Possible Anti-Takeover Effect of Glenayre's Charter and Bylaws and Delaware Law 22
Lack of Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
Dilution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
4
<PAGE>
MUX SHAREHOLDERS' MEETING . . . . . . . . . . . . . . . . . . . . . . . . 23
Meeting of Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . 23
Purpose of Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Record Date; Voting Requirements at Meeting . . . . . . . . . . . . . . . 23
Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Background and Reasons for the Merger . . . . . . . . . . . . . . . . . . 24
Accounting Treatment. . . . . . . . . . . . . . . . . . . . . . . . . . . .28
Operations After the Merger . . . . . . . . . . . . . . . . . . . . . . . .28
Conflicts of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Option to Acquire Majority Interest in MUX. . . . . . . . . . . . . . . . 30
THE ACQUISITION AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . .30
The Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
Effective Time of the Merger. . . . . . . . . . . . . . . . . . . . . . . 30
Consideration to be Received in the Merger. . . . . . . . . . . . . . . . 31
Surrender of Certificates . . . . . . . . . . . . . . . . . . . . . . . . 31
Certain Covenants of MUX . . . . . . . . . . . . . . . . . . . . . . . . 32
No-Shop Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Restrictions on Sales of Stock. . . . . . . . . . . . . . . . . . . . . . .33
Certain Covenants of Glenayre . . . . . . . . . . . . . . . . . . . . . . 33
Conditions to Consummation of the Merger. . . . . . . . . . . . . . . . . 33
Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Representations and Warranties. . . . . . . . . . . . . . . . . . . . . . 36
Transaction Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Amendment and Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Fairness Opinion for ESOP . . . . . . . . . . . . . . . . . . . . . . . . 42
WESTERN MULTIPLEX CORPORATION. . . . . . . . . . . . . . . . . . . . . . . 44
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
Industry Background . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
General Development of MUX. . . . . . . . . . . . . . . . . . . . . . . . .45
Strategy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45
Products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
Customer Service and Support. . . . . . . . . . . . . . . . . . . . . . . .47
Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
Marketing and Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . .48
Research and Development. . . . . . . . . . . . . . . . . . . . . . . . . .48
New Products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48
Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48
Proprietary Rights and Licenses . . . . . . . . . . . . . . . . . . . . . .49
Backlog . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
Regulation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
Facilities and Properties . . . . . . . . . . . . . . . . . . . . . . . . .50
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50
Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS OF MUX COMMON STOCK. . . . .51
5
<PAGE>
MUX MANAGEMENT'S DISCUSSION AND ANALYSIS . . . . . . . . . . . . . . . . . .52
COMPARATIVE RIGHTS OF SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . 58
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER. . . . . . . . . . . 60
Qualification of the Merger as a Tax-Free Reorganization. . . . . . . . . .60
Federal Income Tax Consequences to MUX Continuing Shareholders and Option Holders61
RIGHTS OF SHAREHOLDERS ELECTING TO EXERCISE THEIR RIGHTS TO DISSENT . . . 61
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
INDEX TO MUX CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . . . . F-1
INDEX TO PRO FORMA FINANCIAL INFORMATION . . . . . . . . . . . . . . . . .F-37
</TABLE>
ANNEX I
Acquisition Agreement dated January 3, 1995 and all exhibits (but
without schedules) thereto
ANNEX II
Sections 1300-13 of the California General Corporation Law
6
<PAGE>
SUMMARY OF PROXY STATEMENT/PROSPECTUS
The following is a summary of information contained elsewhere in the
Proxy Statement/Prospectus. This summary does not contain a complete
description of the terms of the Merger and the other matters summarized
herein and is qualified in its entirety by, and is subject to, the more
detailed information and financial statements, including the notes
thereto, contained elsewhere in reference to this Proxy
Statement/Prospectus and its Annexes. Except as otherwise noted, all
applicable information contained in this Proxy Statement/Prospectus has
been adjusted retroactively to reflect a three-for-two stock split by
means of a 50% stock dividend paid on January 5, 1995 by Glenayre with
respect to the Glenayre Common Stock.
Shareholder Approval
This Proxy Statement/Prospectus is being furnished to the MUX
Shareholders in connection with the solicitation of proxies by and on
behalf of the MUX Board of Directors for use at the MUX Meeting to be
held at 2:30 p.m., local time, on April 25, 1995 at 300 Harbor
Boulevard, Belmont, California and any adjournments or postponements
thereof. The close of business on March 10, 1995 is the record date (the
"Record Date") for determining the MUX Shareholders entitled to vote at
the MUX Meeting. As of the Record Date, there were 5,531,195
outstanding shares of MUX Common Stock, each holder of which is entitled
to one vote per share with respect to each matter to be voted on at the
MUX Meeting. This Proxy Statement/Prospectus and the enclosed proxy are
first being sent to MUX Shareholders on or about March 24, 1995.
All proxies that are properly executed and received prior to the MUX
Meeting will be voted in accordance with the instructions noted thereon.
Any proxy that does not specify to the contrary will be voted in favor
of the Merger. Any MUX Shareholder who submits a proxy will have the
right to revoke it, at any time before it is voted, by filing with the
Secretary of MUX written notice of revocation or a duly executed
later-dated proxy, or by attending the MUX Meeting and voting such MUX
Common Stock in person.
At the MUX Meeting, MUX Shareholders will consider and vote upon a
proposal to approve and adopt the Acquisition Agreement and the
Agreement of Merger pursuant to which Glenayre Sub will be merged with
and into MUX with MUX being the surviving corporation and continuing as
a wholly-owned subsidiary of Glenayre. Approval and adoption of the
Acquisition Agreement and the Agreement of Merger require the
affirmative vote of a majority of the outstanding shares of MUX Common
Stock. John Woods, Frank Hegarty and John Bartelme, who together
beneficially own approximately 67% of the MUX Common Stock outstanding
as of the Record Date, have indicated that they intend to vote in favor
of the Merger, although they are not contractually obligated to do so.
If they do vote in favor of the Merger, their votes will be sufficient
to assure approval of the Merger under the CGCL.
MUX Shareholders will be entitled to dissenters' rights with respect to
the Merger as provided for in Section 1300, et seq. of the CGCL, subject
to satisfaction by such shareholders of the conditions for dissenters'
rights established by Section 1300 et seq. See "Rights of Shareholders
Electing to Exercise Their Rights to Dissent."
Participants in the MUX Revised and Restated Stock Ownership Plan and
Trust (the "ESOP") will be entitled to vote shares of MUX Common Stock
allocated to their ESOP accounts.
The directors and executive officers of MUX beneficially own, as of the
Record Date, an aggregate of 2,782,315 shares of MUX Common Stock or
approximately 50% of the MUX Common Stock outstanding as of the Record
Date.
Holders of Glenayre Common Stock are not entitled to vote on the
approval of the Merger nor are they entitled to dissenters' rights with
respect to the Merger. As of the Record Date, there were 25,185,697
shares of Glenayre Common Stock outstanding.
7
<PAGE>
The Companies
Glenayre. Glenayre is a leading supplier of telecommunications
equipment and related software used by service providers in the wireless
personal communication markets. Glenayre designs, manufactures, markets
and services switches, transmitters, controls and software used in
personal communication systems (including its paging, voice messaging
and alphanumeric messaging and mobile data systems), transit
communication systems and mobile telephone systems. Glenayre markets
its products directly in over 80 countries to major paging, cellular and
telephone operating companies and to governmental agencies. Prior to
November 1992, Glenayre was engaged in the construction of oil and gas
pipelines through its indirect 64% interest in Global Pipe Line
Contractors, Inc. and in managing the disposition of its real estate
portfolio. In November 1992, Glenayre acquired the telecommunications
equipment and related software business of Glentel Inc., a Canadian
corporation, formerly known as Glenayre Electronics Ltd. (the "GEMS
Business" or "GEMS"). Effective December 31, 1992 and July 6, 1993,
Glenayre adopted formal plans to dispose of its oil and gas pipeline
construction and real estate operations, respectively, in order to focus
exclusively on the telecommunications industry. Glenayre's interest in
its oil and gas pipeline construction business was sold in October 1993
and the remaining real estate properties were sold by June 30, 1994.
Glenayre's executive offices are located at 4201 Congress Street, Suite
455, Charlotte, North Carolina 28209. Glenayre's telephone number is
704/553-0038.
MUX. MUX designs, manufactures and markets products for use in
point-to-point microwave communications systems. These products include
the microwave radios themselves, both in analog and digital transmission
formats, and analog baseband products. Approximately 65% of MUX's
fiscal 1994 sales were comprised of digital radios, while approximately
16% and 19% were comprised of analog radio and analog baseband products,
respectively. MUX's products are sold to communications service
providers, including cellular, specialized mobile radio ("SMR") and
inter- exchange common carriers; industrial companies, including
utilities, railroads and petroleum producers; federal, state and local
governmental entities; and users of wireless data communications.
MUX's principal executive offices are located at 300 Harbor Boulevard,
Belmont, California 94002. Its telephone number is 415/592-8832.
Effect of the Merger; Consideration
Upon consummation of the Merger, Glenayre Sub will be merged with and
into MUX with MUX being the surviving corporation and continuing as a
wholly-owned subsidiary of Glenayre. At the Effective Time, each share
of MUX Common Stock issued and outstanding immediately prior to the
Effective Time (other than dissenting shares, if any) will be converted
into the right to receive .0943848 of one share of Glenayre Common Stock
and each outstanding MUX Stock Option will be converted into an option
to acquire shares of Glenayre Common Stock at a price per share and for
a number of shares based on the Exchange Ratio. See "The Acquisition
Agreement-The Merger" and "The Acquisition Agreement-Consideration to be
Received in the Merger."
Recommendations of the Boards of Directors
The Glenayre and MUX Boards of Directors have approved and adopted the
Acquisition Agreement and the Agreement of Merger, and the MUX Board of
Directors has recommended that the MUX Shareholders vote in favor of the
Acquisition Agreement and the Agreement of Merger. See "The
Merger--Background and Reasons for the Merger."
Effective Time of the Merger
If the Merger is approved by the requisite vote of the MUX Shareholders
and the other conditions to the consummation of the Merger are satisfied
or, where permissible, waived, the Merger will become effective at the
time the Agreement of Merger is duly filed with the Secretary of State
of the State of California or at such a later time as may
8
<PAGE>
be specified in such Agreement (the "Effective Time"). It is
anticipated that the Agreement of Merger will be filed as soon as
practicable after the satisfaction or, where permissible, waiver of the
conditions in the Acquisition Agreement. See "The Acquisition
Agreement--Effective Time of the Merger."
Option to Acquire Majority Interest in MUX
On January 3, 1995, John Woods, The Woods Irrevocable Trust for the
benefit of Elizabeth Woods, The Woods Irrevocable Trust for the benefit
of Margaret Woods, Frank Hegarty and John P. Bartelme (collectively, the
"Large Shareholders") and Glenayre entered into a Stock Option Agreement
(the "Stock Option Agreement") pursuant to which the Large Shareholders
granted to Glenayre an option to acquire an aggregate of 4,770,691
shares of MUX Common Stock (or 68% of the MUX Common Stock, assuming
exercise of the MUX Stock Options held by the Large Shareholders),
exercisable in the event either the Merger is not consummated for
certain reasons or the Acquisition Agreement is terminated for certain
reasons. The exercise price per share of such option is the product of
the Exchange Ratio multiplied by the average of the closing price of
Glenayre Common Stock on the ten trading days preceding the date notice
of exercise of the option is given by Glenayre. See "The Merger--Option
to Acquire Majority Interest in MUX."
Representations and Warranties
Pursuant to the Acquisition Agreement, MUX, the Principal Shareholders
and the other Indemnifying Equity Holders will make certain
representations and warranties to Glenayre with respect to MUX's
properties and other assets and the conduct of its business. The
representations and warranties survive the Effective Time and terminate
on the first anniversary of the Effective Time. The representations,
warranties and covenants, pertain, without limitation, to the following
matters: (i) the organization and capitalization of MUX and Western
Multiplex International Sales Corporation ("MUX Sub"); (ii) the
financial statements of MUX and MUX Sub; (iii) the employee benefit
plans and arrangements of MUX; (iv) the title to, and operation and
condition of, all of the property of MUX and MUX Sub, including
equipment, inventory, receivables, intellectual property and contract
rights; (v) information concerning MUX material contracts and
transactions; (vi) the absence of any conflict with, under or violation
of any law, order, note, bond, mortgage, contract or similar instrument
or obligation; (vii) compliance with and disclosure of all warranty
obligations of MUX and MUX Sub; and (viii) the absence of any impending
changes in the business, assets, liabilities or relations with employees
or suppliers or customers of MUX or MUX Sub which would have a material
adverse effect on the business of MUX and MUX Sub. See "The Acquisition
Agreement -- Representations and Warranties."
Indemnification and Escrow Arrangements
Pursuant to the Acquisition Agreement, each Indemnifying Equity Holder
will indemnify Glenayre for a period of one year after the Effective
Time against losses which exceed in the aggregate $150,000 that Glenayre
or MUX may suffer as a result of the incorrectness or breach of any
representation, warranty or covenant by any MUX Equity Holder or MUX
contained in the Acquisition Agreement or the Acknowledgments or any
other agreement or document entered into in connection with the
Acquisition Agreement or the Merger and certain other items specified in
the Acquisition Agreement. Certain shares of Glenayre Common Stock
issued to the Indemnifying Shareholders in connection with the Merger
will be placed in escrow pursuant to an Escrow Agreement (the "Escrow
Agreement") among Glenayre, a representative of the Indemnifying Equity
Holders (the "Equity Holders' Representative") and NationsBank, N.A.
(Carolinas) (the "Escrow Agent") and may be applied to satisfy such
indemnification obligations. In addition, a portion of certain MUX Stock
Options outstanding at the Effective Time held by the Indemnifying
Option Holders, which will be converted into options to acquire Glenayre
Common Stock in the Merger, will be subject to forfeiture (the
"Forfeitable Options") upon application to satisfy such indemnification
obligations. Each Indemnifying Equity Holder may select the proportion
of Escrowed Shares and Forfeitable Options which will constitute such
holder's proportionate percentage of the Indemnity Pool and may change
such proportion at any time prior to one year after the Effective Time
(the "Release Date") upon written notice to Glenayre. The Escrowed
Shares and the Forfeitable Options are collectively referred to herein
as the "Indemnity Pool." Each Indemnifying Equity Holder's
indemnification obligation will not exceed such holder's contribution to
the Indemnity Pool. The Indemnity Pool will be released on the Release
Date, except for any portion of
9
<PAGE>
the Indemnity Pool subject to being applied to the satisfaction,
resolution or liquidation of pending claims. See "The Acquisition
Agreement-- Indemnification" and "The Acquisition
Agreement--Representations and Warranties."
All Escrowed Shares will be issued and outstanding shares of Glenayre
Common Stock registered in the names of the respective Indemnifying
Equity Holders and the respective Indemnifying Equity Holders will be
entitled to vote, sell and receive dividends on the Escrowed Shares and
will otherwise have full equity rights to the Escrowed Shares, except
that any proceeds related to the Escrowed Shares will be placed in
escrow until the Release Date. Indemnifying Option Holders will be
entitled to exercise any options subject to forfeiture and the shares
received on the exercise thereof will thereafter be Escrowed Shares
until the Release Date.
The following table sets forth the names of the Indemnifying Equity
Holders, the number of shares of Glenayre Common Stock and share
equivalents of options to purchase Glenayre Common Stock (into which MUX
Stock Options will be converted in connection with the Merger) which
will become a part of the Indemnity Pool and such Indemnifying Equity
Holders' proportionate percentage of the Indemnity Pool:
<TABLE>
<CAPTION>
Shares of Glenayre Common Stock and Proportionate Percentage of
Indemnifying Equity Holder Option Equivalents Indemnity Pool
<S> <C> <C>
Woods, John 25,167 33.56%
Hegarty, Frank 19,998 26.67%
Bartelme, John 13,542 18.06%
Gresham, Michael 8,112 10.82%
Zoufonoun, Amir 2,617 3.49%
Mulcay, Michael 1,635 2.18%
Barnes, Graham 1,308 1.74%
Foster, Barry 1,308 1.74%
Mitri, Elias 1,308 1.74%
Totals 74,995 100.0%
</TABLE>
Stock Options
At the Effective Time, MUX's obligations with respect to outstanding
MUX Stock Options will be assumed by Glenayre, provided that any
outstanding MUX Stock Option will expire at the Effective Time unless
such MUX Option Holder has entered into an appropriate Acknowledgment.
In the case of an Indemnifying Option Holder, such Acknowledgment
requires the Indemnifying Option Holder to acknowledge that certain of
his MUX Stock Options will be Forfeitable Options and will be subject to
forfeiture upon application to satisfy such option holder's
indemnification obligations. In addition, any shares of Glenayre Common
Stock received upon exercise of Forfeitable Options will be placed in
escrow and may be applied to satisfy such indemnification obligations.
The number of shares of Glenayre Common Stock to be received with
respect to each MUX Stock Option will be determined by multiplying the
number of shares subject to the MUX Stock Option by the Exchange Ratio
and the option price will be determined by dividing the current option
price by the Exchange Ratio. Such options will in all other respects
be subject to the same terms and conditions, except that the MUX Board
of Directors has elected to accelerate the vesting and exercisability of
the MUX Stock Options so that at the Effective Time all MUX Stock
Options will be fully vested and immediately exercisable. See "The
Merger--Conflicts of Interest" and "The Acquisition Agreement--
Indemnification."
Approval and Conditions to Consummation of the Merger
The obligations of Glenayre and MUX to consummate the Merger are
subject to the satisfaction or, where permissible, waiver of certain
conditions set forth in the Acquisition Agreement, including, among
others, obtaining the
10
<PAGE>
requisite approval of the Acquisition Agreement by the MUX Shareholders,
the effectiveness of the Registration Statement and the absence of any
stop order related thereto in effect or proceedings for such stop order,
the receipt of any required consents of governmental commissions, boards
or other regulatory bodies required in connection with the Merger and
the approval for listing on the NASDAQ/National Market System
("NASDAQ/NMS") (subject to official notice of issuance) of the shares of
Glenayre Common Stock issuable in connection with the Merger. It is
also a condition to consummation of the Merger that Glenayre, the Equity
Holders' Representative and the Escrow Agent enter into an Escrow
Agreement governing the terms and conditions of the investment and
distribution of the Indemnity Pool.
The consummation of the Merger is also subject to the expiration of the
relevant waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"). Glenayre filed
under the HSR Act on February 1, 1995 and MUX filed under the HSR Act on
January 31, 1995 and the waiting period expired on February 27, 1995.
The obligation of MUX to consummate the Merger is subject to certain
additional conditions, including, among others, the performance by
Glenayre of its obligations under the Acquisition Agreement required to
be performed by it at or prior to the Effective Time; the accuracy of
the representations and warranties of Glenayre contained in the
Acquisition Agreement; the absence of any material adverse change in the
financial condition, business or operations of Glenayre from the date of
the Acquisition Agreement through the Effective Time, other than any
change that affects MUX, MUX Sub and Glenayre in a substantially similar
manner; and the receipt by the ESOP Committee of a reasonably
satisfactory "fairness" opinion.
The obligation of Glenayre to consummate the Merger is also subject to
certain additional conditions, including, among others, the performance
by MUX of its obligations under the Acquisition Agreement required to be
performed by it at or prior to the Effective Time; the accuracy of the
representations and warranties contained in the Acquisition Agreement;
the receipt by Glenayre of "comfort letters" from Shilling & Kenyon,
Inc. with respect to the financial statements of MUX contained in the
Registration Statement; the absence of any material adverse change in
the financial condition, business or operations or prospects of MUX and
MUX Sub, other than any change that affects MUX, MUX Sub and Glenayre in
a substantially similar manner; the conversion of MUX Stock Options into
options to purchase Glenayre Common Stock; the qualification of MUX to
do business in the states of Georgia, Illinois, Texas and Arizona and
the receipt by Glenayre of an estoppel certificate from Harbor-Belmont
Associates satisfactory to Glenayre; the receipt of a letter from each
affiliate of MUX agreeing to be bound to certain restrictions on resale
of Glenayre Common Stock; the receipt by Glenayre from the Indemnifying
Equity Holders of executed Acknowledgments agreeing to be bound by the
terms of the Acquisition Agreement and, in the case of the MUX
shareholders exchanging their MUX Common Stock for Glenayre Common Stock
("MUX Continuing Shareholders"), of their stock certificates; the
execution of noncompetition agreements by certain employees of MUX; the
receipt of an estimate of MUX's transaction expenses incurred in
connection with the Merger and the final amount of such transaction
expenses not exceeding $800,000 in the aggregate; the termination of all
indemnification agreements or other arrangements pursuant to which MUX
is obligated to indemnify any shareholder, director, officer, employee
or agent of MUX; the termination of all shareholder, voting or similar
agreements with respect to MUX Common Stock; the receipt of agreements
to pay off all loans or advances from MUX to any shareholders,
directors, officers or employees of MUX; and the appointment by the
Indemnifying Equity Holders of Frank Hegarty as the Equity Holders'
Representative.
For a description of the conditions to the Merger, see "The Acquisition
Agreement--Conditions to Consummation of the Merger."
Termination of the Acquisition Agreement; No-Shop Provisions
The Acquisition Agreement may be terminated (i) at any time by the
mutual consent of Glenayre and MUX; (ii) by either Glenayre or MUX if
(a) the Merger is not consummated prior to April 30, 1995; (b) the
approval of the Merger by the MUX Shareholders is not obtained; or (c) a
federal or state court or agency prohibits the transactions contemplated
by the Acquisition Agreement; (iii) by MUX if (a) there is a breach by
Glenayre or Glenayre Sub of any representation or warranty set forth in
the Acquisition Agreement which would have or would be reasonably likely
to have a material
11
<PAGE>
adverse effect on Glenayre; or (b) there has been a material breach of
any covenant or agreement by Glenayre or Glenayre Sub that has not been
cured after notice; or (iv) by Glenayre if (a) there is a breach by MUX
or MUX Sub of any representation or warranty set forth in the
Acquisition Agreement which would have or would be reasonably likely to
have a material adverse effect on MUX; or (b) there has been a material
breach of any covenant or agreement by MUX or MUX Sub that has not been
cured after notice.
MUX has agreed not to solicit or enter into negotiations with respect
to a merger, sale of assets or similar transaction with any other entity
prior to April 30, 1995, subject to the exercise by the MUX Board of
Directors of its fiduciary duties required under applicable law. See
"The Acquisition Agreement--No Shop Provisions" and "The Acquisition
Agreement--Termination."
In addition, the Large Shareholders have granted to Glenayre an option
to purchase certain MUX Common Stock in certain circumstances. See "The
Merger--Option to Acquire Majority Interest in MUX."
Transaction Costs
MUX has agreed that it will incur no more than $800,000 of expenses,
including services provided by its attorneys, accountants, investment
bankers and financial advisers in connection with the consummation of
the Merger and the transactions contemplated by the Acquisition
Agreement ("MUX Transaction Expenses"). MUX will bear the expenses of
any employees of MUX and of any counsel, accountants or other
consultants or advisers engaged by MUX, MUX Sub or the ESOP in
connection with the due diligence conducted by Glenayre, preparation of
the Registration Statement or otherwise incurred in connection with such
transactions in the event the Merger is not consummated. See "The
Acquisition Agreement-- Transaction Costs."
Dissenters' Rights
Under the CGCL, holders of MUX Common Stock who properly dissent and
vote against or abstain from voting with respect to the Merger have the
right to obtain a cash payment for the "fair value" of their shares
(excluding any element of value arising from the accomplishment or
expectation of the Merger). See "Rights of Shareholders Electing to
Exercise Their Rights to Dissent."
Federal Income Tax Consequences of the Merger
In connection with the filing of the Registration Statement, Kennedy
Covington Lobdell and Hickman, L.L.P. ("KCLH"), counsel to Glenayre,
delivered an opinion to Glenayre to the effect that, although not free
from doubt, the Merger should be a tax-free transaction under the
reorganization provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), resulting in no gain or loss to the MUX Continuing
Shareholders (except for any cash received for fractional shares). This
opinion is conditioned upon certain assumptions and the accuracy of
certain representations to be made by certain parties to the Acquisition
Agreement. If the facts differ from such representations, the Merger
may be a taxable event. See "Certain Federal Income Tax Consequences of
the Merger."
The conclusion expressed above is not binding on either the Internal
Revenue Service or the courts and the opinion of KCLH was delivered only
to Glenayre and only Glenayre is entitled to rely thereon. There can be
no assurance that the Internal Revenue Service will not take a contrary
position and sustain such position in court. Each MUX Shareholder is
urged to consult with his own tax adviser with respect to the potential
foreign, federal, state and local tax consequences of the Merger as they
relate to his own particular circumstances.
Accounting Treatment
The Merger will be accounted for as a "purchase" by Glenayre of the net
assets of MUX in accordance with generally accepted accounting
principles. See "The Merger--Accounting Treatment."
12
<PAGE>
Effects of Merger on Rights of Shareholders
The rights of the holders of MUX Common Stock are generally similar to
the rights of holders of Glenayre Common Stock, except that MUX is a
California corporation and Glenayre is a Delaware corporation and that
Glenayre has taken certain actions which may serve to make an
unsolicited takeover of Glenayre less likely. See "Comparative Rights
of Shareholders."
Conflicts of Interest
In considering the recommendation of MUX's Board of Directors with
respect to the Merger, the MUX Shareholders should be aware that certain
members of MUX's Board of Directors and management, who will continue as
directors and employees of MUX after the Merger, may have certain
interests in the Merger in addition to those of holders of shares of MUX
Common Stock generally. MUX's Board of Directors was aware of these
interests and considered them, among other factors, in approving the
Merger, the Acquisition Agreement and the Agreement of Merger. See "The
Merger--Conflicts of Interest."
Listing on the NASDAQ National Market System
Application will be made for the listing on the NASDAQ/NMS of the
shares of Glenayre Common Stock to be issued in connection with the
Merger.
Market Value Information
The last sale price of Glenayre Common Stock on December 30, 1994,
the last trading day preceding the announcement of the proposed Merger,
as reported on the NASDAQ/NMS, was $38.50 per share. There is no public
market for MUX Common Stock.
13
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
Glenayre Technologies, Inc.
The selected information presented below for each of the five fiscal
years in the period ended December 31, 1993 has been derived from the
audited consolidated financial statements of Glenayre. The financial
statements for the three years ended December 31, 1993 were audited by
Deloitte & Touche LLP, independent certified public accountants, and
these financial statements and auditors' report are incorporated herein
by reference. The selected financial information for the nine month
periods ended September 30, 1994 and 1993 have been taken from unaudited
consolidated financial statements of Glenayre, which in the opinion of
Glenayre's management include all adjustments (which include only normal
recurring adjustments) necessary to present fairly the information set
forth therein. Results of operations for a nine month period are not
necessarily indicative of results of operations for a full year.
(In thousands, except per share data)
<TABLE>
<CAPTION>
Nine months
ended
Fiscal year ended December 31, September 30,
1993 1992(1) 1991 1990 1989 1994 1993
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Income Data:
Net sales (2) $136,139 $15,586 $--- $--- $--- $ 123,791 $99,564
Income (loss) from continuing
operations before
extraordinary item(2) 23,700 865 (183) 906 2,584 23,451 12,416
Discontinued operations 100 (7,990) 687 (812) 72 388 ---
Extraordinary item (1,695) --- --- --- --- --- ---
Net income (loss) 22,105 (7,125) 504 94 2,656 23,839 12,416
Primary Per Share Data(3):
Income (loss) from continuing
operations before
extraordinary item $ 1.08 $ 0.05 $(0.01) $0.05 $0.14 $0.90 $ .60
Net income (loss) 1.01 (0.43) 0.03 0.01 0.14 0.92 .60
</TABLE>
<TABLE>
<CAPTION>
As of December 31, As of September 30,
1993 1992 1991 1990 1989 1994
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital(4) $ 94,898 $ 20,217 $ 48,575 $ --- $ --- $120,156
Total assets 228,244 169,476 80,650 81,531 123,160 268,600
Long-term debt, including
current portion 3,451 67,981 1,751 7,005 26,572 2,022
Minority interest in
consolidated
subsidiaries --- 3,565 6,180 5,370 5,705 ---
Put warrants --- 459 --- --- --- ---
Stockholders' equity 198,708 64,022 59,964 59,328 65,200 232,636
</TABLE>
14
<PAGE>
________________
(1) Reflects 51 days of operating results for the acquisition of the
GEMS Business on November 10, 1992 (the "GEMS Acquisition").
Effective December 31, 1992 and July 6, 1993, Glenayre adopted
formal plans to dispose of its oil and gas pipeline construction
and real estate operations, respectively. These operations are
accounted for as discontinued for all periods presented.
(2) Income (loss) from continuing operations prior to November 10,
1992, resulted primarily from interest income and gains (losses)
related to Glenayre's cash and marketable securities and other
income and expenses unrelated to the discontinued operations.
(3) All per share data has been adjusted retroactively to reflect a
three-for-two stock split by means of a 50% stock dividend paid
on January 5, 1995 by Glenayre with respect to the Glenayre
Common Stock. (4) Prior to the year ended December 31, 1991,
Glenayre did not classify its balance sheet between current and
noncurrent amounts. Working capital includes approximately $2.1
million and $9.5 million attributable to Glenayre's discontinued
oil and gas pipeline construction operations at December 31, 1992
and 1991, respectively.
15
<PAGE>
GEMS Business
The following selected financial data of the GEMS Business has been
derived from the audited Consolidated Financial Statements of the GEMS
Business. The Canadian dollar Consolidated Financial Statements for the
year ended December 31, 1991 and for the period January 1, to November
10, 1992, have been audited by Grant Thornton, independent certified
public accountants, and these financial statements and auditors' report
are incorporated herein by reference. All such financial information
has been converted from the functional currency of Canadian dollars to
U.S. dollars for comparative purposes using the average of the exchange
rates (in effect as of the end of each calendar month within such period
and at November 10, 1992) for Statement of Income Data and period and
rates for Balance Sheet Data, as reported by The Wall Street Journal.
Although the prior owner of the GEMS business was a Canadian corporation
that reported its results of operations in Canadian dollars, a
substantial majority of sales were in U.S. dollars for all periods
presented. Glenayre acquired the GEMS Business on November 10, 1992.
The GEMS Business Consolidated Financial Statements have been prepared
in accordance with Canadian generally accepted accounting principles.
The differences between Canadian generally accepted accounting
principles and United States generally accepted accounting principles
are not material with respect to the GEMS Business results of operations
or financial condition.
(in thousands, except conversion rates)
<TABLE>
<CAPTION>
Period January 1, Year Ended Year Ended
to November December 31, 1991 December 31, 1990
10, 1992
(CDN$) (US$) (CDN$) (US$) (CDN$) (US$)
<S> <C> <C> <C> <C> <C> <C>
Statement of Income
Data:(1)
Net sales $100,900 $ 83,648 $106,032 $ 92,524 $ 92,309 $ 79,045
Income from operations 22,232 18,431 23,777 20,748 12,291 10,525
Net Income 11,576 9,597 12,392 10,813 3,486 2,985
Conversion rate from CDN$
to US$ 0.8290 0.8726 0.8563
</TABLE>
<TABLE>
<CAPTION>
As of As of As of
November 10, 1992 December 31, 1991 December 31, 1990
Balance Sheet Data: (CDN$) (US$) (CDN$) (US$) (CDN$) (US$)
<S> <C> <C> <C> <C> <C> <C>
Working Capital $ 24,113 $ 19,069 $ 12,898 $ 11,162 $ 20,599 $ 17,758
Total Assets 95,079 75,188 82,255 71,183 83,334 71,842
Long Term Debt, including
current portion 23,800 18,821 21,809 18,874 40,634 35,031
Net Assets 43,787 34,627 32,788 28,375 22,655 19,531
Conversion rate from CDN$
to US$ 0.7908 0.8654 0.8621
</TABLE>
_______________
(1) The financial statement captions reflect the method used by
Glenayre for reporting its results following the GEMS Acquisition.
For presentation purposes, Glenayre has retitled certain of the
captions in the GEMS Business Consolidated Financial Statements to
conform to Glenayre's reporting system.
16
<PAGE>
Western Multiplex Corporation
The selected information for each of the five fiscal years in the
period ended June 30, 1994 has been derived from consolidated financial
statements of MUX which for the year ended June 30, 1994 have been
audited by Shilling & Kenyon, Inc., independent certified public
accountants, and for the year ended June 30, 1993 have been audited by
Ireland San Filippo & Company, independent certified public
accountants. MUX management believes that the appropriate adjustments
have been made for the three fiscal years in the period ended June 30,
1992. The selected financial data of MUX for the three-month periods
ended September 30, 1994 and 1993 have been taken from unaudited
consolidated financial statements of MUX, which in the opinion of MUX's
management include all adjustments (which include only normal recurring
adjustments) necessary to present fairly the information set forth
therein. Results of operations for a three-month period are not
necessarily indicative of the results of operations for a full year.
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months
ended
Fiscal year ended June 30, September 30,
1994 1993 1992 1991 1990 1994 1993
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Income Data:
Net sales $15,759 $9,071 $ 5,851 $4,716 $5,156 $ 4,990 $ 2,960
Net income 1,685 532 160 28 59 617 304
Primary per share data:
Net income .23 .08 .03 .01 .01 .08 .05
</TABLE>
<TABLE>
<CAPTION>
As of June 30, As of September 30,
1994 1993 1992 1991 1990 1994
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital $3,588 $1,808 $ 1,401 $ 1,346 $ 1,161 $ 3,713
Total assets 7,622 4,453 3,159 2,425 2,399 7,467
Long-term debt, including
current portion 595 636 496 263 306 548
Stockholders' equity 4,037 2,338 1,806 1,646 1,506 4,654
</TABLE>
17
<PAGE>
SUMMARY PRO FORMA FINANCIAL INFORMATION
(Unaudited)
Glenayre Technologies, Inc.
The unaudited Summary Pro Forma Financial Information is presented
below to give effect to the Merger as if it had been consummated at
January 1, 1993 the fiscal year ended December 31, 1993, has been
derived from unaudited Pro Forma Financial Information contained
elsewhere in the Proxy Statement/Prospectus. The unaudited Summary Pro
Forma Financial Information presented below to give effect to the
Merger as if it had been consummated at January 1, 1994 for the nine
month period ended September 30, 1994 has been derived from unaudited
consolidated financial statements of Glenayre and MUX, which in the
opinion of Glenayre's and MUX's management, respectively, include all
adjustments (which include only normal recurring adjustments) necessary
to present fairly the information set forth therein. Results of
operations for a nine month period are not necessarily indicative of
results of operations for a full year.
The Summary Pro Forma Financial Information is presented for
informational purposes only and does not purport to present the actual
results of operations which would have been achieved had the Merger
been consummated at January 1, 1993 and January 1, 1994 for Statement
of Income Data for the fiscal year ended December 31, 1993 and nine
month period ended September 30, 1994, respectively, and at September
30, 1994 for the Balance Sheet Data, or to reflect the results of
operations which may be achieved in the future. The information
provided in the Summary Pro Forma Financial Information is qualified in
its entirety by, and should be read in conjunction with the Glenayre
Consolidated Financial Statements and Management's Discussion and
Analysis which are incorporated herein by reference and the MUX
Consolidated Financial Statements and Management's Discussion and
Analysis which are contained elsewhere herein.
(In thousands, except per share data)
<TABLE>
<CAPTION>
Nine months ended Year ended
September 30, 1994 December 31, 1993
<S> <C> <C>
Statement of Income Data:
Net sales $137,878 $148,272
Income from operations 27,945 28,215
Income from continuing operations
before extraordinary item 24,373 24,101
Primary per share data:
Income from continuing operations
before extraordinary item $0.91 $1.06
</TABLE>
As of
September 30, 1994
Balance Sheet Data:
Total current assets $161,621
Total assets 301,792
Long-term debt, including current
portion 2,570
Stockholders' equity 261,732
18
<PAGE>
COMPARATIVE PER SHARE DATA
The following tabulation reflects (a) the historical net income per
share of Glenayre Common Stock in comparison with the pro forma net
income per share after giving effect to the Merger on a purchase basis;
(b) the historical net income per share of MUX Common Stock in
comparison with the pro forma net income attributable to .0943848 of
one share of Glenayre Common Stock which will be received for each
share of MUX Common Stock; (c) the actual cash dividends per share of
Glenayre Common Stock and MUX Common Stock compared, in the case of
MUX, with the equivalent of 9.43848% of the cash dividends declared on
each share of Glenayre Common Stock; and (d) the historical book value
per share of Glenayre Common Stock and MUX Common Stock in comparison
with, in the case of Glenayre, the pro forma book value per share after
giving effect to the Merger and, in the case of MUX, the pro forma book
value attributable to .0943848 of one share of Glenayre Common Stock.
The information presented in this tabulation should be read in
conjunction with the financial statements and the notes thereto of
Glenayre incorporated herein by reference and of MUX included elsewhere
herein. MUX's fiscal year ends June 30, but the information for MUX is
presented consistent with the fiscal year of Glenayre, which ends
December 31.
<TABLE>
<CAPTION>
Glenayre
Nine Months Ended Year Ended
September 30, 1994 December 31, 1993
<S> <C> <C>
Primary income per share from continuing
operations before extraordinary item
Historical $ 0.90 $ 1.08
Pro forma(1) 0.91 1.06
Fully diluted income per share from
continuing operations before
extraordinary item
Historical $ 0.90 $ 1.07
Pro forma(1) 0.91 1.05
Cash dividends declared per share
Historical 0 0
Book value per share
Historical $ 9.42 $ 8.31
Pro forma 10.29 9.24
</TABLE>
<TABLE>
<CAPTION>
MUX
Nine Months Ended Year Ended
September 30, 1994 December 31, 1993
<S> <C> <C>
Primary income per share from continuing
operations before extraordinary item
Historical $0.20 $0.17
Equivalent of .0943848 of pro forma net
income per share of Glenayre
Common Stock 0.09 0.10
Cash dividends declared per share
Historical 0 0
Equivalent of 9.43848% of cash dividend
declared on each share of Glenayre
Common Stock 0 0
Book value
Historical 0.85 0.57
Equivalent of .0943848 of pro forma
book value per share of Glenayre
Common Stock 0.97 0.87
</TABLE>
____________________________
(1) With respect to the fiscal year data, reflects the net income per
share of Glenayre Common Stock by combining, on a pro forma
basis, the results of operations of Glenayre for the year ended
December 31, 1993 with the results of operations of MUX for the
year ended December 31, 1993. With respect to the data for the
nine months ended September 30, 1994, reflects the results of
operations of Glenayre for the nine months ended September 30,
1994 and of MUX for the nine months ended September 30, 1994.
19
<PAGE>
GLENAYRE RISK FACTORS
MUX Shareholders should carefully consider the following factors
as well as the other information set forth in this Proxy
Statement/Prospectus.
Potential Market Changes Resulting from Technological Advances
The paging industry and Glenayre's business are subject to
competition from alternative forms of data communication. In addition,
Glenayre's business is focused entirely upon the wireless
telecommunications industry. Future technological advances in the
wireless telecommunications industry, including digital-based cellular
telephone systems, could result in new products which are competitive
with Glenayre's products. There can be no assurance that Glenayre will
not be adversely affected in the event of such technological advances.
While the introduction of more advanced forms of telecommunication may
provide opportunities to Glenayre for the development of new products,
these advanced forms of telecommunication may reduce the demand for
pagers and thus the type of paging transmission systems and related
software designed and sold by Glenayre. In addition, there can be no
assurance that Glenayre will be able to develop successfully these new
products or to provide additional enhancements to its existing
products.
Competitive Market Conditions
Glenayre currently faces competition from a number of other
equipment manufacturers, certain of which are larger and have
significantly greater resources than Glenayre, and there can be no
assurance that Glenayre will be able to compete successfully in the
future. In addition, manufacturers of wireless telecommunications
equipment, including those in the cellular telephone industry, certain
of which are larger and have significantly greater resources than
Glenayre, could elect to enter into Glenayre's markets and compete with
Glenayre's products.
Variability of Quarterly Results
Glenayre's financial results in any quarter are highly dependent
upon various factors, including the timing and size of customer orders
and the shipment of products for large orders. Large orders from
customers can account for a significant portion of products shipped in
any quarter. Accordingly, the shipment of products in fulfillment of
such large orders can dramatically affect the results of operations of
any single quarter. Sales to three customers amounted to approximately
28% of sales during the nine month period ended September 30, 1994.
The customers with whom Glenayre does the largest amount of business
generally change from year to year. This results from the timing of
development and expansion of its customers' and new customers' systems.
Furthermore, if a customer delays or accelerates its delivery
requirements or a product's completion is delayed or accelerated,
revenues expected in a given quarter may be deferred or accelerated
into subsequent or earlier quarters. Therefore, annual financial
results are more indicative of Glenayre's performance than quarterly
results, and results of operations in any quarterly period may not be
indicative of results likely to be realized in the following quarterly
period. In addition, comparisons to Glenayre's prior quarterly periods
may not be appropriate indicators of future quarterly period results.
Volatility of Stock Price
The market price of Glenayre Common Stock is volatile. The market
price for Glenayre Common Stock could be subject to significant
fluctuations in response to variations in Glenayre's quarterly
operating results and other factors such as announcements of
technological developments or new products by Glenayre, developments in
Glenayre's relationships with its customers, technological advances by
existing and new competitors, general market conditions in the industry
and changes in government regulations. In addition, in recent years
conditions in the stock market in general and shares of technology
companies in particular have experienced significant price and volume
fluctuations which have often been unrelated to the operating
performance of these specific companies. Such market fluctuations and
economic conditions unrelated to Glenayre may adversely affect the
market price of Glenayre's Common Stock.
20
<PAGE>
Dependence upon Key Personnel
Glenayre believes its continued success will depend to a
significant extent upon the efforts and abilities of Ramon D.
Ardizzone, President and Acting Chief Executive Officer, who has been
one of the senior executives responsible for the GEMS Business since
1988. Glenayre believes that the loss of the services of Mr. Ardizzone
could have a material adverse effect on Glenayre's business. Mr.
Ardizzone has an employment agreement with Glenayre.
International Business Risks
Approximately 42% of Glenayre's net sales for the year ended
December 31, 1993 were generated in markets outside of North America.
International sales are subject to the customary risks associated with
international transactions, including political risks, local laws and
taxes, the potential imposition of trade or currency exchange
restrictions, tariff increases, transportation delays, difficulties or
delays in collecting accounts receivable, and, to a lesser extent,
exchange rate fluctuations. Approximately 90% of the 1993
international sales of Glenayre's products and services were paid for
in U.S. dollars. There can be no assurance, however, that Glenayre
will be able to maintain such a high percentage of U.S. dollar
denominated international sales. In certain instances, Glenayre seeks
to mitigate its currency exchange fluctuation risk by entering into
currency hedging transactions. Glenayre also acts to mitigate certain
risks associated with international transactions through the purchase
of political risk insurance and the use of letters of credit. A
significant portion of Glenayre's manufacturing operations is conducted
in Canada. To the extent Glenayre's Canadian manufacturing operations
do not generate sufficient revenues in Canadian dollars to cover
expenses incurred in Canadian dollars, Glenayre provides funds in U.S.
dollars to finance such operations and, consequently, may be subject to
the risk of exchange rate fluctuations.
Limits on Protection of Proprietary Technology and Infringement Claims
Glenayre owns or licenses numerous patents used in its operations.
Glenayre believes that while these patents are useful to Glenayre, they
are not critical or valuable on an individual basis. The collective
value of the intellectual property of Glenayre is comprised of its
patents, blueprints, specifications, technical processes and cumulative
employee knowledge. Although Glenayre attempts to protect its
proprietary technology through a combination of trade secrets, patent
law, nondisclosure agreements and technical measures, such protection
may not preclude competitors from developing products with features
similar to Glenayre's products. The laws of some foreign countries in
which Glenayre sells or may sell its products, including The Republic
of Korea, The People's Republic of China, Saudi Arabia, Thailand,
Dubai, India and Brazil, do not protect Glenayre's proprietary rights
in the products to the same extent as do the laws of the United States.
Although Glenayre believes that its products and technology do not
infringe on the proprietary rights of others, Glenayre is currently
party to certain infringement claims, and there can be no assurance
that third parties will not assert additional infringement claims
against Glenayre in the future. If such litigation resulted in
Glenayre's inability to use technology, Glenayre might be required to
expend substantial resources to develop alternative technology or to
license the prior technology. There can be no assurance that Glenayre
could successfully develop alternative technology or license the prior
technology on commercially reasonable terms. Glenayre does not
believe, however, that an adverse resolution of the pending claims
would have a material adverse effect on Glenayre.
Potential Changes in Government Regulation
Many of Glenayre's products operate on radio frequencies. Radio
frequency transmissions and emissions, and certain equipment used in
connection therewith, are regulated in the United States, Canada and
internationally. Regulatory approvals generally must be obtained by
Glenayre in connection with the manufacture and sale of its products,
and by Glenayre's customers to operate Glenayre's products. There can
be no assurance that appropriate regulatory approvals will continue to
be obtained, or that approvals required with respect to products being
developed for the personal communications services market will be
obtained. The enactment by federal, state, local or international
governments of new laws or regulations or a change in the
interpretation of existing regulations could affect the market for
Glenayre's products. Although recent deregulation of international
telecommunications industries along with recent radio frequency
spectrum allocations made by the FCC have increased the demand for
Glenayre's products by providing users of those
21
<PAGE>
products with opportunities to establish new paging and other wireless
personal communications services, there can be no assurance that the
trend toward deregulation and current regulatory developments favorable
to the promotion of new and expanded personal communications services
will continue or that other future regulatory changes will have a
positive impact on Glenayre.
Possible Anti-takeover Effect of Glenayre's Charter and Bylaws and
Delaware Law
Glenayre's Restated Certificate of Incorporation, as amended (the
"Certificate of Incorporation"), and Restated Bylaws (the "Bylaws") and
the Delaware General Corporation Law (the "DGCL") contain provisions
which may have the effect of delaying or preventing a change in control
of Glenayre. Glenayre's Certificate of Incorporation provides for: (i)
a classified Board of Directors, (ii) limitations on stockholder
actions and (iii) blank check preferred stock (the terms of which may
be fixed by the Board of Directors without stockholder approval).
These provisions can limit the ability of any person to gain control of
Glenayre's Board of Directors and provide Glenayre with the ability to
alter Glenayre's capital structure without further stockholder
approval. See "Comparative Rights of Shareholders."
Lack of Dividends
Glenayre has not paid cash dividends since 1982 and currently
intends to reinvest any earnings to finance its future growth.
Dilution
The MUX shareholders face significant dilution in net income per
share on a pro forma basis if the Merger is completed. See
"Comparative Per Share Data."
22
<PAGE>
MUX SHAREHOLDERS' MEETING
Meeting of Shareholders
This Proxy Statement/Prospectus is being furnished to the MUX
Shareholders in connection with the solicitation of proxies by and on
behalf of the MUX Board of Directors for use at the Special Meeting of
Shareholders of MUX to be held at 2:30 p.m., local time, on April 25,
1995 at 300 Harbor Boulevard, Belmont, California and any adjournments
or postponements thereof. The close of business on March 10, 1995 is
the record date for determining the MUX Shareholders entitled to vote
at the MUX Meeting. This Proxy Statement/Prospectus, the attached
Notice of Special Meeting and the accompanying form of Proxy and
Acknowledgments are first being sent to the MUX Shareholders on or
about March 24, 1995.
Purpose of Meeting
At the MUX Meeting, MUX Shareholders will consider and vote upon
the Merger and a proposal to approve and adopt the Agreement pursuant
to Section 1201 of the CGCL. The MUX Board of Directors unanimously
approved the Acquisition Agreement and the Agreement of Merger, having
concluded that the Merger, the Acquisition Agreement and the Agreement
of Merger are fair to and in the best interests of MUX and the MUX
Shareholders. The MUX Board of Directors recommends that the MUX
Shareholders vote FOR the approval and adoption of the Acquisition
Agreement and Agreement of Merger. For further information, see "The
Merger--Background and Reasons for the Merger."
Record Date; Voting Requirements at Meeting
Only MUX Shareholders of record at the close of business on March
10, 1995 (the "Record Date") will be entitled to notice of and to vote
at the MUX Meeting. Approval of the Merger requires the affirmative
vote of holders of a majority of the outstanding shares of MUX Common
Stock. As of the Record Date, there were 23 MUX Shareholders of record
and 5,531,195 shares of MUX Common Stock outstanding and entitled to be
voted.
Participants in the ESOP will be entitled to vote shares of MUX
Common Stock allocated to their ESOP accounts as of the Record Date at
the MUX Meeting.
The directors and executive officers of MUX and their affiliates
beneficially owned, as of the Record Date, 2,782,315 shares or
approximately 50% of the outstanding shares of MUX Common Stock. The
Large Shareholders, who together beneficially own approximately 67% of
the MUX Common Stock outstanding as of the Record Date, have indicated
that they intend to vote in favor of the Merger, although they are not
contractually obligated to do so. If they do vote in favor of the
Merger, their votes will be sufficient to assure approval of the Merger
under the CGCL.
Proxies
All proxies that are properly executed by MUX Shareholders and
received by MUX prior to the MUX Meeting, and not subsequently revoked,
will be voted in accordance with the instructions noted thereon. A
proxy that does not specify to the contrary will be voted FOR approval
and adoption of the Agreement. Any MUX Shareholder who submits a proxy
will have the right to revoke it, at any time before it is voted, by
filing with the Secretary of MUX written notice of revocation or a duly
executed later-dated proxy, or by attending the MUX Meeting and voting
such MUX Common Stock in person.
All costs relating to the solicitation of proxies of MUX
Shareholders will be borne by MUX. Proxies may be solicited by
officers, directors and regular employees of MUX and its subsidiaries
personally, by mail or by telephone or otherwise.
It is important that the proxies and Acknowledgments be returned
promptly. MUX Shareholders are urged to mark, sign and date the
accompanying proxy, and mail it in the enclosed postage paid return
envelope, along with the enclosed Acknowledgment and the shareholder's
certificates for shares of MUX Common Stock if the shareholder is
voting in favor of the Merger.
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THE MERGER
The detailed terms of the Merger are contained in the Acquisition
Agreement and the Agreement of Merger attached as Annex I to this Proxy
Statement/Prospectus. The following discussion describes the more
important aspects of the Merger and the terms of the Acquisition
Agreement. This description is not complete and is qualified by
reference to the Acquisition Agreement which is incorporated by
reference herein.
Background and Reasons for the Merger
Background. Glenayre was initially contacted regarding a
potential opportunity to invest in a company (later identified as MUX)
by Robert W. Barton & Associates of Phoenix, Arizona ("Barton") in
December 1993. Barton, through a verbal understanding, had been
engaged by Glenayre since December 1993 to search for acquisition or
merger candidates. According to the terms of the engagement, Glenayre
is only obligated to pay Barton a success fee in the event that
Glenayre consummates a merger with or an acquisition of a candidate
introduced to Glenayre by Barton. Prior to December 1993, MUX had
discussed various investments in MUX with other parties, but nothing
materialized from these discussions. Barton learned from The
Commonwealth Group Inc. of San Francisco ("Commonwealth") that MUX was
pursuing discussions with various parties regarding financing or an
investment to facilitate the purchase of MUX Common Stock from certain
MUX Shareholders. (As MUX had already engaged Commonwealth on a
success fee basis, Barton and Commonwealth agreed that Barton would
receive his compensation from a portion of the fee to be paid by MUX to
Commonwealth, an arrangement to which Glenayre agreed.)
In January 1994, Glenayre learned from Barton of MUX's identity
and its willingness to hold discussions with Glenayre. In March 1994,
following Glenayre's review of certain financial and product
information concerning MUX, Glenayre proposed and discussed with MUX an
acquisition of 100% of the equity of MUX, rather than just certain
shareholders' interests. Senior members of Glenayre management and MUX
management, including inside directors, held an initial meeting on
April 12, 1994 at MUX's office to introduce themselves and to explore,
in general terms, the benefits of a merger. On May 18, 1994, at MUX's
office, MUX's senior management, including inside directors, gave
detailed presentations of MUX's business to Glenayre's management
representatives, including members of senior management and inside
directors. On July 21, 1994, members of MUX's and Glenayre's senior
management, including inside directors, met in Glenayre's Charlotte,
North Carolina office so that Glenayre could make a presentation to MUX
regarding Glenayre's business. On August 11 and August 23, 1994,
members of senior management of MUX, including inside directors, toured
Glenayre's manufacturing facilities in Quincy, Illinois and Vancouver,
British Columbia, respectively. Glenayre management representatives,
including members of senior management and an inside director, met with
senior management of MUX, including inside directors, at MUX's office
from August 29-31, 1994 to conduct due diligence on MUX.
From September 1994 to December 1994, as Glenayre continued to
conduct due diligence both on and off site, several meetings and
negotiations occurred leading to the execution of the Acquisition
Agreement and the Stock Option Agreement on January 3, 1995. During a
meeting at an industry trade show on September 22, 1994 members of
Glenayre and MUX senior management, including inside directors,
discussed the timing of a forthcoming non-binding proposal from
Glenayre to MUX, which was subsequently sent to MUX on September 28,
1994. MUX sent a counter-proposal to Glenayre on October 3, 1994. In
order to address differences in the two proposals, members of senior
management of Glenayre and MUX, including inside directors, met in
Glenayre's Charlotte, North Carolina office on October 11, 1994. At
that meeting, certain of the principal economic and operational terms
were agreed to on a non-binding basis, which provided Glenayre with a
basis to begin preparation of an agreement between the parties.
Glenayre then provided MUX with an initial draft of the Acquisition
Agreement on October 27, 1994. In order to address unresolved issues
in the Acquisition Agreement, senior members of Glenayre and MUX
management, including inside directors, as well as attorneys for both
companies, met at the offices of MUX's counsel on November 10, 1994.
The same parties then met on December 13, 1994 to resolve differences
regarding the terms in the Acquisition Agreement. Following the review
of several more drafts of the Acquisition Agreement and negotiations
through the companies' counsel, the Glenayre Board of Directors and MUX
Board of Directors unanimously approved the terms of the
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<PAGE>
Acquisition Agreement on December 27, 1994 and January 3, 1995,
respectively. On January 3, 1995, the Acquisition Agreement and the
Stock Option Agreement were executed.
The terms of the Acquisition Agreement and the Stock Option
Agreement, including the consideration to be paid, were negotiated on
an arms-length basis by senior members of the managements of Glenayre
and MUX, including the Large Shareholders. During the negotiations,
Glenayre based its valuation of MUX on (i) its assessment of valuation
parameters of companies in the same or related business as MUX; (ii)
MUX's historical financial results and its prospects; and (iii) the
potential effects that a transaction would have on Glenayre's financial
results. Glenayre did not retain a financial advisor to advise it
regarding the valuation of MUX or to provide a fairness opinion.
Glenayre's decision not to utilize a financial advisor was based on the
size of the transaction relative to the market capitalization of
Glenayre and the experience of certain Glenayre officers and directors
in merger and acquisition transactions. MUX's decision not to utilize
a financial advisor was based on the MUX Board of Directors' view that
it had developed adequate information and general familiarity regarding
appropriate valuation ranges for MUX as a result of extensive efforts
over several recent years to address MUX's capital needs. See "MUX
Reasons for Merger" below. Additionally, two of the three Large
Shareholders are on the MUX Board of Directors; the third, John
Bartelme, was regularly involved with and informed of the valuation
range information which had been developed over time. Because the Large
Shareholders, together with director Michael Gresham, own in excess of
90% of the outstanding shares of MUX not owned by the ESOP, the MUX
Board of Directors did not feel that the retention of a financial
advisor was necessary for MUX as a whole. At the MUX Board of
Directors' direction, however, the ESOP, which holds approximately 30%
of the outstanding shares of MUX, has retained a financial advisor to
evaluate the fairness from a financial point of view of the
consideration to be received by the ESOP in the Merger.
The form of consideration to be utilized in the transaction was
chosen by Glenayre and MUX to satisfy both parties' desire for the
shareholders and employee owners of MUX to retain an ongoing equity
interest in MUX through the ownership of Glenayre Common Stock, as well
as to satisfy the liquidity needs of certain MUX shareholders.
The following two sections set forth all of the factors considered
by the Glenayre and MUX Boards of Directors, respectively, in their
decision to approve the terms of the Acquisition Agreement.
Glenayre's Reasons for Merger. Since 1993, Glenayre has been
seeking to make acquisitions of companies engaged in similar or related
businesses in order to expand its product lines and to expand its
presence in the wireless personal communications marketplace. Glenayre
believes acquisitions provide an opportunity for revenue and earnings
growth in addition to the growth that can be achieved internally.
Prior to the execution of the Acquisition Agreement and the Stock
Option Agreement, the Board of Directors of Glenayre considered, among
other things; (i) information concerning the financial performance,
condition, business operations and prospects of MUX; (ii) the proposed
terms and structure of the Merger; (iii) the potential of the markets
in which MUX competes and MUX's competitive position within such
markets; (iv) the availability of Glenayre's tax net operating loss
carryforwards to offset a substantial portion of the taxable income
generated by MUX; and (v) the benefits that Glenayre and MUX could
bring to each other as a result of the Merger. As part of its
consideration, Glenayre's Board of Directors reviewed financial data,
the results of due diligence examinations conducted by Glenayre's
management and outside advisors and management's plans for the
operation of MUX as a subsidiary of Glenayre following the Merger.
In connection with its review and evaluation of MUX, Glenayre
engaged Trott Communications Group, Inc. ("Trott") in October 1994 to
assess customer perceptions of MUX's products, technology, sales
support, service and product quality, as well as customer perceptions
of MUX's competitors; to analyze MUX's products and those of its
competition; and to assess market opportunities and potential risks
associated with MUX. Trott is a leading independent engineering firm
that provides services to the land mobile and telecommunications
industry. Trott has not otherwise been engaged by Glenayre in the
previous two years, but Glenayre occasionally refers its customers to
Trott to provide various consulting services in connection with such
customers' potential use of Glenayre products. Trott then engaged Jim
Stewart ("Stewart"), an independent market research consultant, to
perform the market research study. Stewart has extensive business and
secondary level teaching experience, and has excellent credentials,
including a B.B.A. and M.B.A.
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<PAGE>
in marketing and a PH.D. Trott and Stewart were paid collectively
approximately $15,500 for their services to Glenayre in connection with
the preparation of the assessment and market research study of MUX.
Trott interviewed MUX management individually and as a group.
Trott also conducted an on-site evaluation of MUX's products, reviewing
product specifica- tions and marketing materials. Trott's assessment
of competitive products in the industry was based on Trott's knowledge
of the products offered throughout the industry. In preparing his
report, Stewart interviewed 20 customers of MUX, either telephonically
or by written survey.
Trott concluded that MUX's products are based on state of the art
technology in design and construction; were comparable in
functionality, features and specifications to that of their
competition; generally were less costly than the competition, but were
not as complete as that of their competition. Trott also noted that
competitors are extending their products into different areas. Trott
found that MUX employs competent personnel in adequate quantities at
current levels of production. Trott found MUX's sales capability
adequate based upon volume. MUX's lack of a full line of digital
products compared to the competition was found to be a possible
impediment to supporting the relocation necessitated by the wide band
PCS implementation. Trott noted that competition is formidable.
In connection with his assessment of MUX customers, Stewart found
that MUX was well known by its customers and such customers are
generally pleased with MUX's customer service, product quality, product
support, product reliability, sales force and product delivery but were
slightly dissatisfied with MUX with respect to its product line
selection. Stewart noted that MUX's products were considered to be
better values from a pricing standpoint than the competition. Stewart
noted that negative comments about the competition primarily concerned
high pricing, poor customer service and delivery time. Trott noted
that most of the customers interviewed indicated that they will move to
some extent to fiber optic cable in the next three years. In addition,
such customers indicated that they are likely to or have already begun
to upgrade their equipment from analog to digital, but only 30% of the
respondents plan expansions for their analog equipment.
In addition, Glenayre engaged Deloitte & Touche LLP ("D&T") to
perform certain agreed-upon procedures to certain accounting records of
MUX solely to assist Glenayre personnel in connection with their due
diligence procedures to be performed in connection with Glenayre's
proposed acquisition of MUX. D&T is a nationally recognized
independent accounting firm and has served as Glenayre's independent
auditors for the past several years and currently serves as Glenayre's
independent auditors. Glenayre selected D&T to participate in the due
diligence based upon D&T's reputation and existing relationship with
Glenayre and a D&T manager's availability to participate. D&T was paid
approximately $4,500 for their services to Glenayre in connection with
the assistance provided to Glenayre management with the due diligence
procedures performed in connection with the MUX acquisition.
Glenayre management developed a list of accounting and financial
procedures to be completed in connection with its due diligence
investigation of MUX which were performed by Glenayre personnel, which
had available to it one D&T manager. D&T accompanied Glenayre personnel
on a two-day site visit to MUX on November 7 and 8, 1994. Specific
procedures performed by D&T at the request of Glenayre management
consisted of certain inquiries of MUX management regarding inventory
adjustments and reserves, litigation, variances in general and
administrative, sales and marketing, engineering and development and
interest expenses, ownership of trademarks, patents and similar items
and conditions affecting the possible accounting for the acquisition as
a pooling-of-interests. D&T also read certain working papers of and
met with the independent auditors of MUX regarding the audit of the MUX
financial statements as of June 30, 1993 and 1994 and for the years
then ended. D&T informed Glenayre management that: MUX management
informed D&T that there were no unusual reductions in general and
administrative expenses, selling and marketing expenses or engineering
and development expenses that are expected to materially adversely
affect future earnings; there were no material royalty payments for
trademarks, patents or similar items; at that point in time, there were
no significant MUX transactions or actions that would preclude
pooling-of-interests accounting for the proposed transaction; that
there were journal entries that may have resulted from the independent
audit of the MUX financial statements as of and for the year ended June
30, 1994, which included adjustments for warranty provision, bonus
accrual, ESOP accrual and income taxes; and that there were no apparent
changes in accounting policies for fiscal 1994 or 1993.
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<PAGE>
D&T was not engaged to conduct special procedures or reach any
conclusion independent of the overall due diligence performed by
Glenayre personnel. D&T was not engaged to and does not believe that
it issued a report as a result of the procedures performed. At no time
did D&T communicate to Glenayre any conclusions regarding the
appropriateness of the MUX acquisition or the adequacy of the due
diligence procedures performed. The procedures peformed by D&T were
primarily directed toward assisting management of Glenayre in their
consideration of matters relating to financial reporting and accounting
matters, and were not directed at providing observations, conclusions
or opinions as to the advisability of the acquisition or the adequacy
of due diligence procedures performed.
The positive factors considered by the Glenayre Board included the
strong earnings and cash flow of MUX based upon a review of the
historical financial results of MUX and companies engaged in the same
or related types of business as MUX; the strong reputation of MUX's
products in its markets based upon a review of reference checks
conducted on MUX; the experienced management of MUX, such assessment
being based upon several meetings between senior officers of Glenayre
and MUX; the unique nature of MUX's products following a review of the
reference checks mentioned above and of Glenayre management's technical
assessment of MUX; the opportunity for Glenayre to enter a new, but
related, business area and to broaden its personal communications
services product offerings; and the ability of Glenayre to broaden the
distribution of MUX's products through Glenayre's international sales
organization and to internally finance MUX's growth based on Glenayre
management's insights on how Glenayre's resources could assist MUX.
The negative factors included risks associated with the competitive
nature of MUX's industry, such assessment being based upon the
reference checks discussed above and Glenayre management's
investigation of the industry; the limited breadth of MUX's product
offerings as compared to its competitors, such assessment being based
upon Glenayre management's comparison of MUX's product offerings with
those of competitors and upon the reference checks discussed above;
MUX's lack of long-term financial performance following a review of its
historical financial results; and the typical lack of certain
management resources of a private company of MUX's size. Glenayre's
Board of Directors did not assign relative weights to any one of these
factors. Rather, Glenayre's Board of Directors' decision to approve
the Merger was based on a general conclusion that, after weighing both
the positive and negative aspects of the Merger, the Merger would be
beneficial to the shareholders of Glenayre.
MUX Reasons for Merger. Throughout its 15-year history, MUX has
been a closely-held corporation and has been entirely internally
financed with the exception of the use of bank lines of credit and
capital leases. Being a closely-held corporation, no market has
existed for the MUX Common Stock. Additionally, MUX has required that
only employees or ex-employees could own MUX Common Stock. In spite of
this lack of liquidity and the ownership restrictions, motivational
compensation programs offered by MUX have included incentive stock
options and the ESOP, both of which rely heavily or entirely on MUX
Common Stock as the investment vehicle. With the size of these
illiquid investments in the MUX Common Stock related to these programs
growing (1,645,320 shares, or 21% on a fully diluted basis, held by the
ESOP and 2,440,000 option shares, or 31% on a fully diluted basis),
providing a means for greater liquidity for the investors (employees)
became increasingly important to MUX's Board of Directors in relation
to MUX's interest in maintaining good investor and employee relations.
When the need for access to long-term financing became critical in
1991 and 1992, MUX's management, after talking to several venture
capitalists, decided that venture capital financing was not
appropriate. The valuation models used by the venture capitalists did,
however, provide useful information to the MUX Board of Directors
concerning the value of MUX. At that time, financing of MUX's efforts
was accomplished using internal funds combined with cost-cutting
elsewhere in MUX's operations.
Shortly thereafter, MUX was approached during 1992 by several
brokers who introduced MUX to several investors who were interested in
acquiring a minority stake in MUX, but with whom there was no perceived
synergy. The valuations offered by such investors were therefore too
low to be attractive to the MUX Board of Directors. Late in 1993, MUX
held preliminary talks with an operating company but discussions were
terminated for similar reasons.
Having experienced substantial growth in both revenues and profit
during 1993, and with the prospects for 1994 looking positive, MUX
decided to embark once again on a search for an investor, but this time
with a view to identifying
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<PAGE>
a strategic partner willing to make up to a 20% investment in MUX. The
timing of this decision to more aggressively seek outside capital
reflected the MUX Board of Directors' desire to achieve MUX's goals of
long-term financial stability and perhaps some investor liquidity.
Late in 1993, the Board of Directors of MUX engaged the services of
Commonwealth to help it identify possible candidates. The primary
criteria established for the candidates were that they should generate
approximately 10-20 times MUX's revenues, be involved in
telecommunications, be profitable and be able to help MUX improve its
marketing and sales efforts, especially internationally.
Based on the input of Commonwealth, Glenayre stood out as meeting
substantially all the criteria. No other candidate was identified as
meeting substantially all the criteria, particularly given the desire
for marketing and sales synergies. However, Glenayre indicated it was
only interested in a complete purchase of MUX, not a minority
investment. The MUX Board of Directors agreed to preliminary
discussions with Glenayre based on this premise because of the
potential of such an acquisition to address both the need for long-term
financial stability and greater liquidity for the MUX shareholders.
Additionally, Glenayre had confirmed its willingness to consider a
value range for MUX of $25 to $30 million, which MUX believed to be
appropriate in light of the feedback it had received from the venture
capital community in earlier discussions and given the improved market
position and financial condition of the Company since that time.
The MUX Board ultimately determined that the Merger is in the best
interests of MUX and its shareholders, and unanimously recommends that
the shareholders approve the Agreement. In arriving at this
conclusion, the MUX Board evaluated the price and terms being offered
in light of the following factors, though it did not assign any
specific or relative weight to these factors in its consideration: the
costs and challenges of obtaining long term financing as a closely-held
private corporation to finance major development projects in the
increasingly competitive telecommunications market; the MUX Board of
Director's review with its legal advisors of the provisions of the
Agreement; the market liquidity afforded by the listing of shares of
Glenayre on the NASDAQ/NMS for MUX shareholders and employees compared
to the privately-held restricted stock they currently hold; the ability
to provide increased incentives and enhanced liquidi- ty to its
employees with incentive stock options being based on a publicly traded
stock; the fact that the Merger should be tax-free for federal income
tax purposes for the MUX Shareholders (other than with respect to cash
paid in lieu of fractional shares); the fact that the due diligence
examination conducted by representatives of MUX indicated that Glenayre
is strong in capital, earnings, management, telecommunications
equipment manufacturing expertise and international sales experience;
and MUX's financial condition, results of operations, current business
and expansion opportunities and constraints, and overall prospects for
future performance and earnings.
The MUX Board of Directors believes MUX is fortunate to have been
introduced to Glenayre. In the Board's view, Glenayre satisfies in
virtually every respect the search criteria originally developed by
MUX, and also appears to add a compatible and like-minded management
team and work force. The MUX Board of Directors, as well as MUX's
management, believes that the future of MUX will be enhanced by the
Merger.
Accounting Treatment
The Merger will be accounted for as a "purchase" by Glenayre of
the assets and liabilities of MUX in accordance with generally accepted
accounting principles. Accordingly, the purchase price will be
allocated to the assets and liabilities of MUX based on the estimated
fair value of the assets and liabilities and the excess of the purchase
price, estimated at approximately $24.6 million, will be recorded as
goodwill. The goodwill will be amortized over a 30-year period. The
results of MUX's operations will be included in the consolidated
results of operations of Glenayre only from and after the Effective
Time.
Operations After the Merger
After the consummation of the Merger, Glenayre expects that MUX
generally will continue to operate its business as presently conducted.
Glenayre has no present plans for any merger, reorganization or
liquidation or any sale or
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transfer of a material amount of assets of MUX to any unaffiliated
third party. Changes in business and economic conditions and other
facts may result in Glenayre's reconsideration of its plans.
Glenayre currently expects that the present executive officers of
MUX generally will continue to serve, along with certain Glenayre
officers, as executive officers of MUX after the Merger and one member
of MUX's Board of Directors will continue to serve, along with certain
Glenayre officers and directors, as directors of MUX following the
Merger.
Conflicts of Interest
In considering the recommendations of the Board of Directors of
MUX with respect to the Merger, the MUX Shareholders should be aware
that, in addition to the fact that one member of MUX's Board of
Directors and the executive officers of MUX generally will continue to
serve in such capacities on behalf of the surviving corporation,
certain members of MUX's Board of Directors and management may have
certain interests in the Merger that are in addition to the interests
of the MUX Shareholders generally. The Board of Directors of MUX was
aware of these interests and considered them, among other factors, in
approving the Acquisition Agreement and Agreement of Merger.
At the Effective Time, the MUX Stock Options will be converted,
based on the Exchange Ratio, into options to purchase Glenayre Common
Stock (rounded down to the nearest share). The exercise price per
share of Glenayre Common Stock under the MUX Stock Options shall be
equal to the exercise price per share before the Effective Time divided
by the Exchange Ratio (rounded up to the nearest cent). Such options
shall in all other respects remain subject to the same terms and
conditions set forth in the stock option plans and agreements pursuant
to which they were granted, except that the MUX Board of Directors has
elected to accelerate the vesting and exercisability of the MUX Stock
Options so that at the Effective Time all MUX Stock Options will be
fully vested and immediately exercisable.
The table below sets forth certain information with respect to the
MUX Stock Options held by the executive officers and directors of MUX.
The table reflects the number of shares of MUX Common Stock subject to
options and the average exercise price, without giving effect to the
Merger and, assuming conversion of the MUX Stock Options into options
to acquire Glenayre Common Stock, the net amount realizable upon
exercise of such options based on the fair market value of Glenayre
Common Stock at January 3, 1995 (the date of the Acquisition Agreement)
and March 22, 1995.
<TABLE>
<CAPTION>
Net Amount Realizable
Name and Title of Average Exercise Unvested Upon Exercise
Executive Officer Price Per Share Vested Shares Shares 1/3/95(1) 3/22/95(1)
<S> <C> <C> <C> <C> <C>
John Woods $0.47 745,000 0 $2,351,041 $2,690,663
President
Frank Hegarty $0.43 350,000 0 $1,118,531 $1,278,085
Chief Financial
Officer
Michael Gresham $0.58 370,000 210,000 $1,767,531 $2,031,920
Vice President
Michael Mulcay $0.42 75,000 50,000 $ 400,744 $ 457,734
Vice President
</TABLE>
__________________________
(1) Represents the difference between the average of the high and low
for Glenayre Common Stock on January 3, 1995 and March 22, 1995
and the adjusted exercise prices multiplied by the number of shares
subject to options.
The Large Shareholders have granted to Glenayre an option to
purchase their MUX Common Stock in certain circumstances. See "The
Merger--Option to Acquire Majority Interest in MUX."
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<PAGE>
Option to Acquire Majority Interest in MUX
On January 3, 1995, the Large Shareholders and Glenayre entered
into the Stock Option Agreement pursuant to which Glenayre has the
right to acquire an aggregate of 4,770,691 shares of MUX Common Stock
(or approximately 68% of the MUX Common Stock, assuming exercise of the
MUX Stock Options held by the Large Shareholders) (the "Glenayre
Option") upon the occurrence of certain events (each an "Exercise
Event"). The exercise price per share of the Glenayre Option will be
equal to the product of the Exchange Ratio multiplied by the average
closing price of Glenayre Common Stock on NASDAQ/NMS for the ten
trading days immediately preceding the date the notice of exercise of
the Glenayre Option is given.
The Glenayre Option is exercisable in whole within 30 days of the
occurrence of an Exercise Event. An "Exercise Event" is the occurrence
of any one of the following: (i) MUX or any of its shareholders enter
into an agreement, arrangement or understanding, without Glenayre's
consent, with any person or entity with respect to a merger,
consolidation or similar transaction involving MUX or the acquisition
of 5% or more of the assets or voting securities of MUX (subject to
certain exceptions for purchases by MUX); (ii) the acquisition by any
person or entity other than Glenayre of the beneficial ownership of or
the right to acquire beneficial ownership of 5% of the voting power or
other economic interests of MUX (subject to certain exceptions for
purchases by MUX); (iii) the withdrawal by the MUX Board of Directors
of their recommendation that the MUX Shareholders approve the Merger or
the failure of the MUX Shareholders to approve the Merger; (iv) the
termination of the Acquisition Agreement by Glenayre because of a
breach by MUX of certain covenants contained in the Acquisition
Agreement, including the no-shop provisions, that MUX use its best
efforts to convene the MUX Meeting, that MUX deliver to Glenayre a list
of affiliates of MUX and that MUX not knowingly take any action which
would cause the obligations of the parties to effect the Merger not to
be fulfilled; or (v) the termination of the Acquisition Agreement by
Glenayre or MUX because of the existence of a final court order or
ruling permanently restraining, enjoining or prohibiting the Merger,
unless such action was not initiated or controlled by MUX, the ESOP or
a Large Shareholder. The Glenayre Option expires and shall no longer
be exercisable upon the occurrence of any one of the following (each an
"Expiration Event"): (i) the Effective Time; (ii) the termination of
the Acquisition Agreement upon the mutual consent of Glenayre and MUX;
(iii) the termination of the Acquisition Agreement by MUX because the
Effective Time of the Merger has not occurred by April 30, 1995
(subject to extension in certain events); (iv) the termination of the
Acquisition Agreement by MUX pursuant to a breach by Glenayre of its
covenants or representations and warranties contained in the
Acquisition Agreement; or (v) the conclusive determination that any
required governmental approval for the exercise of the options cannot
be obtained.
The Large Shareholders have agreed not to transfer the shares of
MUX Common Stock subject to the Glenayre Option except pursuant to the
exercise of the Glenayre Option by Glenayre or to any person or entity
who agrees to be bound by the terms of the Stock Option Agreement. The
shares of MUX Common Stock subject to the Glenayre Option have been
placed in escrow pursuant to the terms of the Stock Option Agreement,
but the Large Shareholders are entitled to vote their shares of MUX
Common Stock held in escrow.
THE ACQUISITION AGREEMENT
The following is a summary description of certain terms of the
Acquisition Agreement, which is attached as Annex I to this Proxy
Statement/Prospectus and is incorporated herein by reference. Such
description does not purport to be complete and is qualified in its
entirety by reference to the Acquisition Agreement.
The Merger
The Acquisition Agreement provides that, upon the satisfaction or
waiver of certain conditions, Glenayre Sub will be merged with and into
MUX, with MUX continuing as the surviving corporation and a
wholly-owned subsidiary of Glenayre.
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<PAGE>
Effective Time of the Merger
The Merger will become effective at the time of filing of the
Agreement of Merger with the California Secretary of State or at such
later time as the parties shall have agreed upon and designated in the
Agreement of Merger as the Effective Time, provided, however, the
Merger shall not become effective prior to the receipt of certain
regulatory approvals and the effectiveness of the Registration
Statement. From and after the Effective Time, the surviving
corporation will possess all the assets, rights, privileges, powers and
franchises and be subject to all the liabilities, restrictions,
disabilities and duties of Glenayre Sub and MUX, as provided under the
CGCL.
Until the Effective Time occurs, MUX Shareholders will retain
their rights as shareholders to vote on matters submitted to them by
the MUX Board of Directors.
Consideration to be Received in the Merger
In the Merger, each share of MUX Common Stock outstanding
immediately prior to the Effective Time, other than shares of MUX
Common Stock with respect to which dissenters' rights shall be
perfected in accordance with the CGCL (the "Dissenting Shares"), will
be converted into the right to receive .0943848 of one share of
Glenayre Common Stock. No fractional shares of Glenayre Common Stock
will be issued in connection with the Merger. In lieu of fractional
shares, a cash payment will be made equal to the fractional interest
which a MUX Shareholder would otherwise receive multiplied by the
closing price of Glenayre Common Stock on the NASDAQ/NMS two business
days before the Effective Time (or if the Glenayre Common Stock is not
traded on such date on the NASDAQ/NMS, the immediately preceding day on
which it is so traded). At the Effective Time, MUX Stock Options will
be converted, based on the Exchange Ratio, into options to purchase
Glenayre Common Stock (rounded down to the nearest share). The
exercise price per share of Glenayre Common Stock of the MUX Stock
Options shall be equal to the exercise price per share before the
Effective Time divided by the Exchange Ratio (rounded up to the nearest
cent). The MUX Stock Options shall otherwise continue to have the same
terms, except that the MUX Board of Directors has elected to accelerate
the vesting and exercisability of such options so that at the Effective
Time such options will be fully vested and immediately exercisable. See
"The Merger-- Conflicts of Interest." The total number of shares of
Glenayre Common Stock issued or reserved for issuance in connection
with MUX Stock Options in connection with the Merger shall in the
aggregate be no more than 750,000, less the number of Dissenting Shares
multiplied by the Exchange Ratio and the sum of all fractional shares
for which cash is paid. If prior to the Effective Time the outstanding
shares of Glenayre Common Stock or MUX Common Stock are increased,
decreased, changed into a different number or kind of shares or
securities through a change in Glenayre's or MUX's capitalization, then
an appropriate and proportionate adjustment in the Exchange Ratio will
be made. For a discussion of the rights of holders of Dissenting
Shares, see "Rights of Shareholders Electing to Exercise Their Rights
to Dissent."
Surrender of Certificates
Upon surrender of one or more duly endorsed certificates for MUX
Common Stock and an accompanying Acknowledgment, there will be issued
and mailed to the holder of such stock a certificate or certificates
representing the number of shares of Glenayre Common Stock to which
such holder is entitled, if any, and, where applicable, a check for the
amount representing any fractional shares determined in the manner
described above, subject to any retention of certain shares of such
Glenayre Common Stock pursuant to the escrow provisions described
below.
No dividend or other distribution payable after the Effective Time
with respect to Glenayre Common Stock will be paid to the holder of any
unsurrendered shares of MUX Common Stock until the holder surrenders
the certificate(s) therefor and an accompanying Acknowledgment, at
which time the holder will be entitled to receive all previously
withheld dividends and distributions, without interest.
After the Effective Time, there will be no transfers on MUX's
stock transfer books of shares of MUX Common Stock issued and
outstanding at the Effective Time.
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<PAGE>
Neither Glenayre nor MUX nor any other person will be liable to
any former MUX Shareholders for any consideration properly delivered to
a public official pursuant to applicable abandoned property, escheat or
similar laws.
If a certificate for MUX Common Stock has been lost, stolen or
destroyed, Glenayre will issue the consideration properly payable in
accordance with the Acquisition Agreement upon receipt of appropriate
evidence as to such loss, theft or destruction, appropriate evidence as
to the ownership of such certificate by the claimant and appropriate
and customary indemnification.
Certain Covenants of MUX
MUX has agreed that prior to the Effective Time MUX and MUX Sub
will operate their businesses substantially as presently operated and
only in the ordinary course. In this connection, MUX has agreed that
neither MUX nor MUX Sub will, without the prior written consent of
Glenayre or as expressly contemplated or permitted by the Acquisition
Agreement, (i) change any provision of its Articles of Incorporation or
Bylaws; (ii) change the number of shares of the authorized, issued or
outstanding capital stock of MUX or MUX Sub including the issuance of
or the grant of any option with respect to the capital stock of MUX or
MUX Sub, or declare, set aside or pay any dividend or other
distribution in cash or in kind with respect to the capital stock of
MUX or MUX Sub, except for the issuance of MUX Common Stock pursuant to
the exercise of any MUX Stock Option; (iii) incur any liabilities or
obligations, whether directly, indirectly, or by way of guaranty,
except in the ordinary course of business consistent with past
practices and prior periods; (iv) except as previously disclosed in the
Acquisition Agreement make any capital expenditure (or enter into any
lease required to be capitalized) individually in excess of $25,000 or
in the aggregate in excess of $150,000, other than reasonable
expenditures necessary to maintaining existing assets in good working
order and repair; (v) pay any bonuses to any employee of MUX or MUX
Sub, except as previously disclosed in the Acquisition Agreement, or
enter into any new or amend any existing employment agreement with any
person, adopt any new or amend any existing employee benefit plan,
except as may be otherwise required by law, grant any increase in
compensation or benefits to its employees, officers or directors,
except regularly scheduled increases in the ordinary course of business
and consistent with past practices and prior periods, and policies, or
effect any change in the retirement benefits of any class of employees
or officers, except as otherwise required by law; (vi) sell, mortgage
or otherwise dispose of or encumber any asset owned by MUX or MUX Sub
except in the ordinary course of business consistent with past
practices and prior periods; (vii) increase or deplete inventories,
incur or collect receivables, or incur or pay trade payables or accrue
liabilities in any manner other than consistent with past practices and
prior periods and in the ordinary course of business; (viii) cancel
without payment or satisfaction in full, waive or extend the time of
performance of any indebtedness inuring to the benefit of MUX or MUX
Sub; (ix) amend in any way any material contracts or agreements of MUX
or MUX Sub; (x) fail to maintain in full force and effect all insurance
carried by MUX or MUX Sub at the time of the Acquisition Agreement;
(xi) institute any changes in management policy of a significant
nature; (xii) take any action or fail to take any action that would
make the representations and warranties of MUX or MUX Sub made in the
Acquisition Agreement untrue; (xiii) knowingly take any action which
would cause the conditions to the consummation of the Merger not to be
fulfilled; and (xiv) make any agreement or commitment by or on behalf
of MUX or MUX Sub to do or take any of the actions referred to in items
(i) through (xiii). In addition, MUX has agreed not to take knowingly
any action or knowingly fail to take any action that would jeopardize
the qualification of the Merger as a reorganization within the meaning
of Section 368(a)(2)(E) of the Code.
No-Shop Provisions
MUX has agreed that, until April 30, 1995, MUX will not, and will
use its best efforts to cause its shareholders, directors, officers or
other representatives not to, solicit or encourage any inquiries or the
making of any proposals or offers from any parties other than Glenayre
with respect to a merger, acquisition or similar transaction involving
a significant portion of the assets or equity securities of MUX or
engage in any negotiations concerning, or provide confidential
information to or have any discussions with any party concerning such a
proposal or otherwise consider the adoption of such a proposal subject
to the exercise by the MUX Board of Directors of its fiduciary duties
required under applicable law. MUX is also obligated to terminate any
existing activities, discussions or negotiations with respect to any
such inquiries or proposals and to notify Glenayre immediately if any
such inquiries or proposals are received by it. See also "The
Merger--Option to Acquire Majority Interest in MUX."
32
<PAGE>
Restrictions on Sales of Stock
Shares of Glenayre Common Stock to be received by MUX Continuing
Shareholders who are deemed to be "affiliates" (as such term is defined
in Rule 144 under the Securities Act) of MUX prior to the Merger ("MUX
Affiliates") (the "Restricted Securities") may be resold by them only
pursuant to an effective registration statement under the Securities
Act covering such securities or in transactions permitted by the resale
provisions of Rule 145(d) under the Securities Act or as otherwise
permitted under the Securities Act. Under Rule 144 under the
Securities Act, an "affiliate" of MUX is a person that directly or
indirectly controls or is controlled by or is under common control with
MUX and may include certain officers and directors of MUX, principal
shareholders of MUX and certain other shareholders with special
relationships with MUX. This Proxy Statement/Prospectus may not be used
by such affiliates in connection with any resale of their Restricted
Securities.
Rule 145 requires that, in a resale of the Restricted Securities,
MUX Affiliates comply with volume restrictions and other restrictions
on the manner of sale and that certain information about Glenayre be
currently available to the public. The volume restrictions limit the
number of shares that a MUX Affiliate may transfer, in the aggregate,
within any three-month period to the greater of (i) 1% of the
outstanding Glenayre Common Stock or (ii) the average weekly reported
trading volume in the Glenayre Common Stock during the preceding four
calendar weeks. A MUX Affiliate may sell its shares without regard to
the volume restrictions and restrictions on the manner of sale if it
has owned the shares for at least two years, certain information about
Glenayre is currently available to the public and the MUX Affiliate is
not then an affiliate of Glenayre. A MUX Affiliate may also sell its
shares of Glenayre Common Stock without regard to the foregoing
restrictions (including the requirement that certain information about
Glenayre is currently available to the public) if it has held its
shares for a period of at least three years and such MUX Affiliate has
not been an affiliate of Glenayre for at least three months.
At least 30 days prior to the closing of the Merger, MUX will
deliver to Glenayre a list of MUX Affiliates and prior to the Effective
Time will deliver to Glenayre a letter from each MUX Affiliate
acknowledging certain restrictions on the resale of Glenayre Common
Stock received in the Merger. Any Restricted Securities to be received
by MUX Affiliates will bear a legend referencing such restrictions on
transfer.
Certain Covenants of Glenayre
Glenayre has agreed (i) that it will not take knowingly any action
or knowingly fail to take any action that would jeopardize the
qualification of the Merger as a reorganization within the meaning of
Section 368(a)(2)(E) of the Code, (ii) that it will prepare and submit
to the NASDAQ/NMS a listing application covering the shares of Glenayre
Common Stock issuable in the Merger, and use its best efforts to
obtain, prior to the Effective Time, approval for the listing of such
Glenayre Common Stock, subject to official notice of issuance, (iii)
that, without the prior written consent of MUX, Glenayre will not
knowingly take any action which would cause the conditions to the
consummation of the Merger not to be fulfilled; and (iv) that at any
time prior to the date that is two business days prior to the Effective
Time, any Indemnifying Equity Holder may adjust the proportion of
Escrowed Shares and Forfeitable Options which constitute such Equity
Holder's proportionate percentage of the Indemnity Pool, provided that
such Indemnifying Equity Holder may not reduce the value of his
proportionate percentage of the Indemnity Pool.
Conditions to Consummation of the Merger
Consummation of the Merger is conditioned upon the approval by the
holders of a majority of the aggregate issued and outstanding shares of
MUX Common Stock. In addition, it is a condition to Glenayre's
consummation of the Merger that Glenayre receive executed
Acknowledgments from the Indemnifying Equity Holders pursuant to which
such shareholders and option holders agree to be bound by the terms of
the Acquisition Agreement. In the case of the Indemnifying
Shareholders, such Acknowledgments must be accompanied by their stock
certificates for shares of MUX Common Stock.
The Merger is also conditioned upon the expiration or termination
of the applicable waiting period under the HSR Act (which expired
February 27, 1995) and that Glenayre, the Equity Holders'
Representative and the Escrow Agent enter into the Escrow Agreement.
33
<PAGE>
The obligations of Glenayre and MUX to consummate the Merger are
further conditioned, unless waived, upon (i) the absence of any action
or proceeding by a court or other governmental body or authority to
restrain or prohibit the transactions contemplated by the Acquisition
Agreement or to obtain an amount of damages or other material relief in
connection with the execution of the Acquisition Agreement or
consummation of the Merger, and the absence of any notice from a
governmental body or authority that the transactions contemplated by
the Acquisition Agreement constitute a violation of law; (ii) the
effectiveness of the Registration Statement under the Securities Act,
which shall not be subject to any Commission stop order or any
threatened stop order; (iii) the receipt of all required governmental
consents and approvals with respect to the Merger, except for the
filing of the Agreement of Merger and where the failure to receive such
consents or approvals would not have a material adverse effect on the
combined business of Glenayre and MUX following the Effective Time; and
(iv) the listing of the shares of Glenayre Common Stock issuable or
reserved for issuance in connection with the Merger with the
NASDAQ/NMS.
The obligation of Glenayre to consummate the Merger is further
conditioned, unless waived by Glenayre, upon (i) the accuracy of MUX's
representations and warranties contained in the Acquisition Agreement
and the performance by MUX of all of its covenants and agreements
contained in the Acquisition Agreement; (ii) the receipt by Glenayre of
opinions of counsel with respect to certain legal matters, including
the organization and good standing of MUX and MUX Sub and the due
authorization of the Acquisition Agreement by MUX and MUX Sub; (iii)
the receipt by Glenayre from Shilling & Kenyon, Inc. of "comfort"
letters with respect to the procedures undertaken by Shilling & Kenyon,
Inc. in connection with the financial statements of MUX contained in
the Registration Statement; (iv) the absence of any material change in
the financial condition, business or operations of MUX or MUX Sub that
would be reasonably likely to have a material adverse effect on MUX,
other than a change that affects Glenayre, MUX and MUX Sub in a
substantially similar manner; (v) the qualification as a foreign
corporation of MUX in certain states and the receipt of a satisfactory
estoppel certificate from MUX's landlord; (vi) the conversion of MUX
Stock Options into options to purchase Glenayre Common Stock; (vii) the
receipt of all required consents; (viii) the receipt by Glenayre of an
affiliate letter from each MUX Affiliate; (ix) the receipt by Glenayre
of executed noncompetition agreements from certain employees of MUX;
(x) the receipt by Glenayre of an estimate of all MUX Transaction
Expenses, and the final MUX Transaction Expenses not exceeding
$800,000; (xi) the termination as of the Effective Time of all
indemnification agreements or other arrangements pursuant to which MUX
or MUX Sub is obligated to indemnify any of the directors, officers,
employees, agents or shareholders of MUX; (xii) the termination as of
the Effective Time of all shareholder, voting or other agreements with
respect to MUX Common Stock; (xiii) the agreement to pay off all loans
or advances by MUX or MUX Sub to any of the shareholders, directors,
officers or employees of MUX; (xiv) the receipt of copies by Glenayre
of all resolutions adopted by MUX's Board of Directors and the MUX
Shareholders in connection with the approval of the Agreement and the
transactions contemplated thereby; (xv) the appointment by the
Indemnifying Equity Holders of Frank Hegarty as the Equity Holders'
Representative; and (xvi) the receipt of a list of the employees of MUX
and MUX Sub and the annual compensation of such employees.
The obligation of MUX to consummate the Merger is further
conditioned upon, unless waived by MUX, upon (i) the accuracy of
Glenayre's representations and warranties contained in the Acquisition
Agreement and the performance by Glenayre of all of its covenants and
agreements contained in the Acquisition Agreement; (ii) the absence of
any material change in the financial condition, business or operations
of Glenayre that would be reasonably likely to have a material adverse
effect on Glenayre, other than a change that affects Glenayre, MUX and
MUX Sub in a substantially similar manner; (iii) the receipt by MUX of
an opinion of counsel with respect to certain legal matters, including
the organization and good standing of Glenayre and Glenayre Sub, the
due authorization of the Acquisition Agreement by Glenayre and Glenayre
Sub and the valid issuance of the shares of Glenayre Common Stock being
issued to MUX Continuing Shareholders; (iv) the receipt of copies by
MUX of all resolutions adopted by Glenayre's Board of Directors in
connection with the approval of the Agreement and the transactions
contemplated thereby; and (v) the receipt by the ESOP Committee of a
"fairness" opinion from Houlihan Lokey Howard & Zukin reasonably
satisfactory to the ESOP Committee.
Indemnification
The Acquisition Agreement provides that the Indemnifying Equity
Holders will indemnify Glenayre with respect to any liability, damage
or loss (a "Loss") which in the aggregate exceeds $150,000 incurred by
Glenayre or MUX as a result of the incorrectness or breach of any
representation, warranty or covenant made by MUX or any MUX Equity
34
<PAGE>
Holder in the Acquisition Agreement, the Acknowledgments or any other
document or certificate entered into or furnished by any MUX Equity
Holder or MUX pursuant to the Agreement or the Acknowledgements or from
the failure of MUX or MUX Sub to qualify as a foreign corporation in
any state or the failure of MUX or MUX Sub to pay any taxes to any
taxing authority outside of the State of California, the failure of MUX
or any other person or entity to obtain appropriate permits with
respect to certain facilities' improvements or a potential claim
against MUX by a former MUX employee. The amount of any indemnifiable
Losses under the Acquisition Agreement shall be reduced by the amount
of (i) any tax benefits actually realizable by Glenayre and MUX or
their affiliates, (ii) insurance proceeds net of deductibles and
incidental expenses and premium increases reasonably anticipated to
result therefrom, and (iii) proceeds or amounts from third parties
(regardless of when received but only if actually received), in each
case of clauses (i), (ii) and (iii) in connection with or as a result
of such Losses, which tax benefits, insurance proceeds or amounts from
third parties Glenayre shall take reasonable steps to obtain. MUX
shall assign to the Equity Holders' Representative any choses in
actions that MUX may have against third parties with respect to
specific claims as to which Glenayre has received indemnification
hereunder. A percentage of the shares of Glenayre Common Stock issued
to each Indemnifying Shareholder in connection with the Merger will be
placed in escrow and subject to application to satisfy such
indemnification obligations. In addition, a portion of certain MUX
Stock Options held by an Indemnifying Option Holder, which will be
converted into options to acquire Glenayre Common Stock in the Merger,
(and the shares of Glenayre Common Stock received upon exercise) will
be subject to forfeiture upon application to satisfy such
indemnification obligations. Each Indemnifying Equity Holder's
proportionate percentage of the Indemnity Pool was established in the
Acquisition Agreement and is set forth in the table below. On the
Effective Date, each such holder will elect the proportion of Escrowed
Shares and Forfeitable Options which will constitute such holder's
proportionate percentage of the Indemnity Pool. Such proportions may be
adjusted by the Indemnifying Equity Holder at any time prior to the
Release Date upon written notice to Glenayre. The indemnification
obligations of the Indemnifying Equity Holders continue until the
Release Date. The application of any of the Indemnity Pool to satisfy
such indemnification obligations is subject to the terms and conditions
set forth in the Acquisition Agreement and in the Escrow Agreement
among Glenayre, the Escrow Agent and the Equity Holders' Representative
attached as Exhibit D to the Acquisition Agreement.
All Escrowed Shares will be issued and outstanding shares of
Glenayre Common Stock registered in the names of the respective
Indemnifying Equity Holders and the respective Indemnifying Equity
Holders will be entitled to vote, sell and receive dividends on the
Escrowed Shares and will otherwise have full equity rights to the
Escrowed Shares, except that any proceeds related to the Escrowed
Shares will be placed in escrow until the Release Date. Indemnifying
Option Holders will be entitled to exercise any options subject to
forfeiture and the shares received on the exercise thereof will
thereafter be Escrowed Shares until the Release Date.
The following table sets forth the names of the Indemnifying
Equity Holders, the number of shares of Glenayre Common Stock and share
equivalents of options to purchase Glenayre Common Stock (into which
MUX Stock Options will be converted in connection with the Merger)
which will become a part of the Indemnity Pool, and such Indemnifying
Equity Holders' proportionate percentage of the Indemnity Pool:
<TABLE>
<CAPTION>
Shares of Glenayre Common Stock Proportionate Percentage of
Indemnifying Equity Holder and Option Equivalents Indemnity Pool
<S> <C> <C>
Woods, John 25,167 33.56%
Hegarty, Frank 19,998 26.67%
Bartelme, John 13,542 18.06%
Gresham, Michael 8,112 10.82%
Zoufonoun, Amir 2,617 3.49%
Mulcay, Michael 1,635 2.18%
Barnes, Graham 1,308 1.74%
Foster, Barry 1,308 1.74%
Mitri, Elias 1,308 1.74%
</TABLE>
35
<PAGE>
<TABLE>
<S> <C> <C>
Totals 74,995 100.00%
</TABLE>
An Indemnifying Shareholder's liability is limited to the value of
such shareholder's Escrowed Shares, based on the average closing price
of Glenayre Common Stock between two and twelve trading days prior to
the Effective Time (the "Closing Value"). An Indemnifying Option
Holder's liability is limited to the sum of the difference between the
Closing Value and the exercise price for each Forfeitable Option.
Glenayre, upon at least 30 days' prior written notice to the Equity
Holders' Representative and the Escrow Agent, may apply all or any part
of the Indemnity Pool to the payment, settlement or discharge of any
Loss, any such payment, settlement, or discharge being based on the
Glenayre Common Stock having a value equal to the Closing Value. If
the Escrow Agent and Glenayre receive notice from the Equity Holders'
Representative that he protests such application of the Indemnity Pool,
such dispute will be settled by arbitration. Each of Glenayre and the
Indemnifying Equity Holders will bear its or their own attorneys' fees,
fees for expert witnesses and all other costs incurred by it or them in
connection with such arbitration and shall share equally any such costs
or fees incurred by the Escrow Agent or fees charged by the arbitrators
in connection with such arbitration. In the event of a dispute
regarding the application of the Indemnity Pool by Glenayre or if, on
or before the Release Date, Glenayre has given notice to the Escrow
Agent and the Equity Holders' Representative of the existence of a
claim for the discharge or settlement of a Loss which has not been
liquidated, the Escrow Agent will retain the appropriate portion of the
Indemnity Pool pending final determination of such claims.
Each Indemnifying Equity Holder's liability with respect to a Loss
will be determined based on his proportionate contribution to the
Indemnity Pool. The registered holder of any Escrowed Shares
(including shares received upon exercise of Forfeitable Options) will
be entitled to vote the Escrowed Shares. Dividends or distributions on
the Escrowed Shares generally will be held as part of the Indemnity
Pool.
The indemnification obligations of the Indemnifying Equity Holders
will expire on the Release Date, except as to any matter as to which
Glenayre has given notice prior to such date.
Representations and Warranties
Pursuant to the Acquisition Agreement, MUX, the Principal
Shareholders and (following their execution of their Acknowledgments)
the other Indemnifying Equity Holders make certain representations and
warranties to Glenayre with respect to the properties and other assets
and the conduct of the businesses of MUX and Mux Sub. All statements
contained in the Schedules to the Acquisition Agreement are deemed to
be representations and warranties under the Acquisition Agreement. The
representations and warranties survive the Effective Time and terminate
on the Release Date, except as to any matter as to which Glenayre has
given notice prior to such date. Each Indemnifying Equity Holder
should read carefully the representations, warranties and covenants
contained in the Acquisition Agreement. Any representation or warranty
made "to the knowledge" of MUX or that MUX "knows" a particular fact or
circumstance includes the knowledge of certain officers and key
employees of MUX assuming their review of the pertinent business
records in their files and assuming their inquiry of each MUX employee
and each MUX attorney and accountant who is reasonably believed to have
relevant information about such fact or circumstance. The
representations, warranties and covenants include the following
matters:
(i) Except as disclosed in the Acquisition Agreement, both MUX
and MUX Sub are corporations duly organized, validly existing and in
good standing under the laws of California and each has the requisite
power and authority and all necessary governmental approvals to own,
lease and operate its properties and to carry out its businesses as it
is now being conducted, and is duly qualified or licensed as a foreign
corporation, and is in good standing, in each jurisdiction where such
qualification or licensing is necessary, except where such failure to
be so qualified or licensed and in good standing would not have a
material adverse effect on the business, results of operations or
financial condition of MUX and MUX Sub.
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<PAGE>
(ii) The Articles of Incorporation and Bylaws of MUX and MUX Sub
provided to Glenayre are complete and correct and are in full force and
effect, and, except as disclosed in the Acquisition Agreement, neither
MUX nor MUX Sub is in violation of any provision of such Articles of
Incorporation or Bylaws. The minute books of MUX and MUX Sub contain
all records of meetings of the directors and shareholders of MUX and
MUX Sub and other corporate actions taken by them.
(iii) The authorized capital stock of MUX consists of 25,000,000
shares of MUX Common Stock, of which 5,503,695 shares were issued and
outstanding as of January 3, 1995. In addition, as of January 3, 1995,
2,442,500 shares of MUX Common Stock were reserved for future issuance
pursuant to MUX Stock Options. No such shares or options have been
issued in violation of any preemptive rights. In addition, the
information provided to Glenayre with respect to the names, addresses
and social security numbers of record owners of all shares of MUX
Common Stock and the certificate numbers for such shares is accurate
and complete. Except as disclosed to Glenayre in the Acquisition
Agreement, each share of MUX Common Stock is owned by the record owner
free and clear of any encumbrances. The authorized capital stock of
MUX Sub consists of 2,500 shares of Common Stock, all of which shares
are held by MUX free and clear of any encumbrances and were validly
issued and were not issued in violation any preemptive rights. Except
as disclosed in the Acquisition Agreement, there are no options,
warrants or other rights or agreements relating to the capital stock of
MUX or MUX Sub to issue or sell any capital stock or other equity
interests in MUX or MUX Sub.
(iv) Each of MUX and the Principal Shareholders has all necessary
power and authority to execute and deliver the Acquisition Agreement
and to perform its or his obligations under such agreement and to
consummate the transactions contemplated thereby. The execution and
delivery of the Acquisition Agreement by MUX and the Principal
Shareholders and the consummation of the Merger have been duly and
validly authorized by MUX. The Acquisition Agreement has been duly and
validly executed and delivered by MUX and the Principal Shareholders
and constitutes a legal, valid, binding and enforceable obligation of
each of MUX and the Principal Shareholders. In addition, each MUX
Continuing Shareholder and MUX Option Holder has all necessary power
and authority to execute and deliver his, her or its Acknowledgment.
Such execution and delivery have been duly and validly authorized by
all necessary action on the part of the MUX Continuing Shareholders and
MUX Option Holders and each such Acknowledgment constitutes a legal,
valid and binding obligation of such MUX Continuing Shareholder or MUX
Option Holder.
(v) Except as disclosed in the Acquisition Agreement, the
execution and delivery of the Acquisition Agreement by MUX and the
performance of the transactions contemplated thereby will not conflict
with or violate the Articles of Incorporation or Bylaws of MUX or MUX
Sub or conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to MUX or MUX Sub or by which any of
their property or assets is bound or affected, result in any breach of
or constitute a default under, result in the loss of a material benefit
under, or give to others any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
other encumbrance on any property or asset of MUX or MUX Sub pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or any other instrument or obligation to
which MUX or MUX Sub is a party or is bound or affected.
In addition, the execution and delivery of the Acquisition
Agreement and Acknowledgments by MUX, the Principal Shareholders and
each MUX Continuing Shareholder and MUX Option Holder, respectively,
will not require any consent, approval or authorization of, or filing
with or notification to, any governmental or regulatory authority other
than that required by the Exchange Act, the Securities Act, state
securities or "Blue Sky" Laws and state takeover laws, the HSR Act and
the filing or recordation of appropriate merger documents as required
by the CGCL.
(vi) Other than the ownership interest of MUX Sub by MUX, neither
MUX nor MUX Sub owns directly or indirectly any interest or investment
in any corporation, partnership, joint venture, business, trust or
other entity.
(vii) Each of the balance sheets included in the audited
consolidated financial statements of MUX for the years ended June 30,
1993, and June 30, 1994 and the unaudited interim financial statements
for each month subsequent to
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<PAGE>
June 30, 1994 through November 30, 1994 presents fairly the
consolidated financial position of MUX and MUX Sub as of its date, and
each of the statements of income, retained earnings and cash flows
presents fairly the results of operations, retained earnings and cash
flows of MUX and MUX Sub for the periods set forth therein. Such
financial statements have been prepared from the books and records of
MUX and MUX Sub which accurately and fairly reflect the transactions
and dispositions of the assets of MUX and MUX Sub. As of the date of
each such balance sheet, neither MUX nor MUX Sub had any liabilities,
contingent or otherwise, whether due or to become due, known or unknown
as of the date of such financial statements other than as indicated on
the balance sheet or in the notes thereto. MUX has adequately accrued
all employee benefit costs and such accruals are reflected in the
financial statements, and the funding of such employee benefit costs
has been and will be provided for in the ordinary course of business
consistent with past practices.
(viii) Since June 30, 1994, except as disclosed to Glenayre in the
Acquisition Agreement or as otherwise contemplated by the Acquisition
Agreement, there has not been (a) any material adverse change in the
business of MUX or MUX Sub and no such adverse change is reasonably
expected to occur; (b) any disposition or issuance by MUX or MUX Sub of
any of its capital stock or any option or right or privilege to acquire
any of its capital stock, any acquisition or retirement of any of its
capital stock or any dividend or other distribution on or with respect
to its capital stock except for the issuance of MUX Common Stock upon
the exercise of a MUX Stock Option or as required by the terms of the
ESOP; (c) any sale, mortgage, pledge, grant, dividend or other
disposition, transfer or encumbrance of any asset or interest owned or
possessed by MUX or MUX Sub, other than in the ordinary course of
business consistent with past practices and prior periods; (d) any
expenditure or commitment by MUX or MUX Sub for the acquisition of
assets of any kind other than in the ordinary course of business; (e)
any damage, destruction or loss of such character as to interfere
materially with the continued operation of or which would have a
material adverse effect on any part of the business of MUX or MUX Sub;
(f) any increase or any agreement for the increase of any compensation
payable or to become payable by MUX or MUX Sub to any officer,
shareholder or key employee of MUX or MUX Sub; (g) any change made or
authorized to be made to the Articles of Incorporation or Bylaws of MUX
or MUX Sub; (h) any loans or advances by or to MUX or MUX Sub other
than renewals or extensions of existing indebtedness and uses of lines
of credit in the ordinary course of business; (i) any cancellation or
payment by MUX or MUX Sub of any indebtedness owed to MUX or MUX Sub
(except for any amount less than $150 owed to MUX by any of its
employees) or any cancellation or settlement by MUX or MUX Sub of any
claims against others; (j) any failure by MUX or MUX Sub to operate its
business other than in the ordinary course of business, or any change
from past practices in the manner of building or depleting inventories,
incurring or collecting receivables or incurring or paying trade
payables or accrued liabilities; (k) any failure to maintain the books
and records of MUX or MUX Sub in accordance with past practices or any
write-down of assets shown on the books of MUX or MUX Sub or the
establishment of or failure to establish any reserves or accruals in an
amount or nature that is not consistent with past practices or prior
periods; (l) any change in accounting practices; or (m) any agreement
or commitment by or on behalf of MUX or MUX Sub to do or take any of
the actions referred to in clauses (a) through (l).
(ix) MUX has timely filed all required tax returns and reports and
has duly paid all taxes required to be paid or an adequate reserve has
been established for such taxes. MUX has provided to Glenayre true and
correct copies of certain tax returns beginning with the 1990 tax year.
The reserves for taxes contained in the financial statements and
carried on the books of MUX or MUX Sub are adequate to cover all tax
liabilities. Except as disclosed in the Acquisition Agreement, no
extension of time to file any tax return by MUX or MUX Sub is currently
in effect. Since June 30, 1994, neither MUX nor MUX Sub has incurred
any tax liability other than in the ordinary course of business. There
are no tax liens upon any properties or assets of MUX or MUX Sub and,
except as disclosed in the Acquisition Agreement and as shown in the
financial statements, there are no pending or, to the knowledge of MUX,
threatened questions or examinations relating to, or claims asserted
for, taxes or assessments against MUX or MUX Sub. Neither MUX nor MUX
Sub has granted or been requested to grant any extension of the
limitation period applicable to any claim for taxes or assessments with
respect to taxes. Except as disclosed in the Acquisition Agreement,
neither MUX nor MUX Sub is a party to any tax allocation or sharing
agreement. MUX and MUX Sub have withheld and paid all required
withholding taxes.
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(x) Representations and warranties regarding employment, bonus,
deferred compensation, pension, stock option, stock appreciation
rights, employee stock ownership, profit-sharing, retirement, medical,
vacation, retiree medical, severance pay and other agreements or fringe
benefit plans, arrangements or practices of MUX and MUX Sub, including
descriptions of such plans, arrangements or practices and assurances
that MUX and MUX Sub have complied in all material respects with all
applicable federal, state and local laws with respect to such plans,
arrangements or practices.
(xi) Neither MUX nor MUX Sub owns any real property. With respect
to all real property leased by MUX, representations and warranties
(limited in certain circumstances to the knowledge of MUX) regarding
MUX's title to, rights to and the condition of all such property
(including compliance with all applicable statutes, ordinances, orders,
requirements, laws, rules or regulations, including all environmental
laws, rules and regulations) and, except as disclosed in the
Acquisition Agreement, that there does not exist any event which would
constitute a default by either MUX or MUX Sub or, to the knowledge of
MUX, the landlord under any such lease. In addition, representations
and warranties that, to the knowledge of MUX, the landlord under each
lease has good and marketable fee simple title to the leased premises.
Representations and warranties that MUX and MUX Sub have good and
marketable fee simple title to all of their equipment, free and clear
of all encumbrances other than those disclosed in the Acquisition
Agreement, and have good and marketable fee simple title to all of
their inventories reflected on the balance sheet for the month ended
November 30, 1994 (adjusted for additions and dispositions since
November 30, 1994); that MUX's and MUX Sub's equipment is in good
condition and repair; that all of MUX's and MUX Sub's inventory is
usable or saleable in the ordinary course of business and each item of
inventory is in good condition and is not obsolete or defective; that
all accounts receivable of MUX and MUX Sub reflected on the November
30, 1994 balance sheet (adjusted for additions and collections)
constitute valid and enforceable claims of MUX or MUX Sub and that such
accounts receivable are pledged as collateral to Comerica Bank, San
Jose, California; except as disclosed in the Acquisition Agreement,
that MUX or MUX Sub has the right to use the names "Western Multiplex
Corporation" and "Western Multiplex International Sales Corporation"
where now used, all other material trademarks or service marks and all
other intellectual property belonging to or used in the business of MUX
and MUX Sub and, except as disclosed to Glenayre in the Acquisition
Agreement, neither MUX nor MUX Sub is a party to any agreement with any
person or entity with respect to the use of such intellectual property;
and that MUX has disclosed to Glenayre in the Acquisition Agreement all
material contracts, agreements and commitments it is a party to and
that such contracts constitute valid and enforceable obligations
against MUX or MUX Sub and neither MUX nor MUX Sub is in default in any
material respect with respect to such contracts.
(xii) The fixtures and leasehold improvements located on the
property leased by MUX or MUX Sub are in good condition and all
electrical, gas, water and sewer utilities serving such property are
adequate; to MUX's knowledge, the properties MUX leases and formerly
leased are or were at all times during the tenancy of MUX with respect
to such property used in compliance with all environmental laws, rules
and regulations and MUX has not illegally generated, used, treated,
stored or disposed of hazardous materials; and there are no threatened
claims against MUX or MUX Sub with respect to such matters.
(xiii) All leases of property or equipment by MUX or MUX Sub to or
from any other party have been fully disclosed in the Acquisition
Agreement.
(xiv) Except as disclosed in the Acquisition Agreement, since June
30, 1991, all material transactions with third persons involving MUX or
MUX Sub have been conducted on an arms-length basis; MUX has disclosed
in the Acquisition Agreement, to MUX's knowledge, any interest,
ownership or profit participation of any of the Indemnifying
Shareholders, officers or directors of MUX or their affiliates or
relatives in businesses which are MUX's or MUX Sub's competitors or
potential competitors; there are no outstanding loans or other advances
to any shareholder, officer, director or employee of MUX or MUX Sub or
their respective affiliates or relatives, except as disclosed in the
Acquisition Agreement; and, except as disclosed in the Acquisition
Agreement, none of the Indemnifying Shareholders, officers or directors
of MUX or MUX Sub or their respective affiliates or relatives is an
affiliate of any person that has a material business relationship with
MUX or MUX Sub.
(xv) Except as disclosed in the Acquisition Agreement, MUX and
MUX Sub are not in conflict with, or in default or violation of, any
law, rule, regulation, order, judgment or decree applicable to MUX or
MUX Sub or by which
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any property or asset of MUX or MUX Sub is bound or affected, or the
provisions of any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to
which MUX or MUX Sub or their property or assets is a party or is bound
or affected. MUX and MUX Sub are lawfully conducting their business
and their property has been and will be used and operated in compliance
with all laws, rules and regulations and other restrictions.
(xvi) All pending and threatened lawsuits or administrative
proceedings or investigations against MUX or MUX Sub have been
disclosed in the Acquisition Agreement. All material "loss
contingencies" have been fully disclosed in the Acquisition Agreement.
(xvii) Since June 30, 1989, neither MUX nor MUX Sub has been a party
to any collective bargaining agreement and neither has been the subject
of any union activity, labor dispute or strike, and MUX and MUX Sub
have not violated any applicable federal or state law or regulation
relating to labor or labor practices and do not have any liability to
any of their employees, agents or consultants in connection with
grievances of such employees, agents or consultants.
(xviii) All brokerage arrangements entered into in connection with
the negotiations leading to the Acquisition Agreement or the
consummation of the transactions contemplated thereby have been fully
disclosed in the Acquisition Agreement.
(xix) Neither MUX nor MUX Sub owns any shares of Glenayre Common
Stock or other securities convertible into Glenayre Common Stock.
(xx) All bank accounts, vaults and safe deposit boxes used by or
in the name of MUX or MUX Sub have been disclosed in the Acquisition
Agreement.
(xxi) The Acquisition Agreement fully discloses all insurance
policies in effect covering the assets, properties and business of MUX
and MUX Sub and all life insurance policies maintained by them and such
policies have not been invalidated in whole or in part.
(xxii) Except as disclosed in the Acquisition Agreement, the
products and services of MUX and MUX Sub comply with all express and
implied warranties and the requirements and standards of all federal
and state laws and regulations governing the sale or provision of such
products. Except as disclosed in the Acquisition Agreement, no product
or service warranty or liability claims are pending or threatened
against MUX or MUX Sub or in respect of products or services sold or
provided by either of them.
(xxiii) MUX has fully described in the Acquisition Agreement all
material warranty obligations of MUX and MUX Sub and all material
warranty contracts, agreements, understandings or arrangements to which
MUX or MUX Sub is a party or its property or assets are bound and all
material service and repurchase contracts, agreements, understandings
or arrangements to which MUX or MUX Sub is a party or by which any of
their property is bound. Complete copies of such agreements have been
delivered to Glenayre.
(xxiv) MUX has disclosed in the Acquisition Agreement the 30 largest
customers (based on dollar volume) of MUX and MUX Sub during the fiscal
years ended June 30, 1991, 1992, 1993 and 1994 and the 30 largest
suppliers (based on dollar volume) of MUX and MUX Sub during each such
period. Except as disclosed in the Acquisition Agreement, since June
30, 1994 no material adverse change has occurred in the business
relationship of MUX or MUX Sub with its customers and suppliers and MUX
has no knowledge that any such customers or suppliers are expected to
cease or substantially reduce purchasing or supplying goods or services
from or to MUX, or are currently involved in any bankruptcy or similar
proceeding.
(xxv) Neither MUX nor MUX Sub is a guarantor or otherwise liable
for any liability or obligation of any other person.
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(xxvi) Except as disclosed in the Acquisition Agreement, MUX knows
of no impending changes in MUX's or MUX Sub's business, assets,
liabilities, relations with employees, competitive situations or
relations with suppliers or customers, or in any governmental actions
or regulations affecting MUX's or MUX Sub's business which would
reasonably be expected to have a material adverse effect on the
business of MUX or MUX Sub.
(xxvii) All of the written information provided by MUX, MUX Sub and
each MUX Equity Holder to Glenayre and their representations in the
Acquisition Agreement and in the schedules and exhibits thereto or in
the Acknowledgments are true, correct and complete in all material
respects and no such representation, warranty or statement contains or
will contain any untrue statement of a material fact or omits or will
omit to state any material fact necessary to make such representation,
warranty or statement not misleading to Glenayre.
Pursuant to the Acquisition Agreement, Glenayre has also made
certain representations and warranties, including representations and
warranties (i) as to the organization, capitalization and qualification
of Glenayre and Glenayre Sub; (ii) as to the authority of Glenayre and
Glenayre Sub to enter into the Acquisition Agreement and to consummate
the transactions thereunder; (iii) as to the enforceability of the
Acquisition Agreement against Glenayre and Glenayre Sub; (iv) that the
execution of the Acquisition Agreement and the performance of the
transactions contemplated thereby do not conflict with the
organizational documents of Glenayre or Glenayre Sub or any law,
judgment or the equivalent or constitute a breach or event of default
under any instrument or obligation of Glenayre or Glenayre Sub, and do
not require the approval of any governmental entity except for that
required by the Exchange Act, the Securities Act, NASDAQ/NMS, state
securities or blue sky laws, the HSR Act and the CGCL; (v) that
Glenayre has filed all required documents with the Commission since
January 1, 1994, that each of such documents was prepared in accordance
with the material requirements of the Exchange Act and at the time they
were filed did not contain an untrue statement of material fact or omit
to state a material fact required to be stated therein; (vi) that
except as disclosed in the Acquisition Agreement, Glenayre has not
entered into any brokerage or finder's fee arrangement in connection
with the negotiations of the Acquisition Agreement or the consummation
of the Merger; and (vii) in connection with the federal income tax
consequences of the Merger, including that (a) prior to the Merger,
Glenayre will "control" Glenayre Sub; (b) Glenayre has no present plan
or intention to cause MUX to issue additional shares of its stock that
would result in Glenayre losing "control" of MUX; (c) Glenayre has no
present plan or intention to reacquire any of the Glenayre Common Stock
issued in the Merger, except for any Escrowed Shares as provided for in
the Acquisition Agreement; (d) Glenayre has no present plan or
intention to liquidate, merge or otherwise dispose of MUX or its assets
except in the ordinary course of business or transfers of assets to a
corporation controlled by Glenayre; (e) following the Merger,
Glenayre's present intention is that MUX will continue the historic
business of MUX or use a significant portion of the historic assets of
MUX in a business; (f) Glenayre does not own and has not for the past
five years owned any shares of stock of MUX; (g) both Glenayre and
Glenayre Sub are undertaking the Merger for a bona fide business
purpose; (h) Glenayre Sub will have no liabilities assumed by MUX and
will not transfer to MUX any assets subject to liabilities in the
Merger; (i) neither Glenayre nor Glenayre Sub is an investment company
as defined in Section 368(a)(2)(F)(iii) and (iv) of the Code; and (j)
the payment of cash in lieu of the issuance fractional shares of
Glenayre Common Stock in connection with the Merger is solely for the
purpose of avoiding the expense or inconvenience to Glenayre of issuing
fractional shares and does not represent separately bargained-for
consideration. Glenayre's representations and warranties will survive
the Merger for one year after the Effective Time.
Transaction Costs
MUX will bear the expenses of any employees of MUX or MUX Sub and
of any counsel, accountants or other consultants or advisers engaged by
MUX, MUX Sub or the ESOP in connection with the Merger and the
transactions contemplated by the Acquisition Agreement. MUX has agreed
that the "MUX Transaction Expenses" incurred by MUX in connection with
the Merger and the transactions contemplated by the Acquisition
Agreement will be limited to no more than $800,000. "MUX Transaction
Expenses" include fees and expenses of the attorneys, accountants,
investment bankers and brokers and financial advisors of MUX, MUX Sub
and the ESOP incurred in connection with negotiating, drafting and
preparing the Acquisition Agreement and the Registration Statement
(including the broker fees and expenses of Commonwealth and Barton,
whose charges are currently anticipated to be approximately $400,000),
expenses of attending the closing of the Merger, the expenses of due
diligence conducted by MUX and the expenses relating to the
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MUX Meeting. "MUX Transaction Expenses" do not include any ordinary
out-of- pocket expenses incurred by MUX for photocopying charges, long
distance telephone charges or similar incidental charges or expenses.
Amendment and Waiver
The Acquisition Agreement may be amended by mutual agreement of
Glenayre, Glenayre Sub and MUX at any time before or after approval of
the Merger by the MUX Shareholders; provided, that after any such
approval, no amendment will be made which by law requires further
approval by the MUX Shareholders without such further approval. Any
such amendment must be in writing and signed on behalf of each of
Glenayre, Glenayre Sub and MUX and, in the case of a modification to
the escrow provisions of the Acquisition Agreement, the Escrow Agent.
At any time prior to the Effective Time, Glenayre or MUX may, to the
extent legally allowed, (i) extend the time for the performance of any
of the obligations or other acts of the other parties to the
Acquisition Agreement, (ii) waive any inaccuracies in the
representations and warranties made by the other parties contained in
the Acquisition Agreement or in any document delivered pursuant thereto
or (iii) waive compliance with any of the agreements or conditions for
the benefit of such party contained in the Acquisition Agreement.
Unless expressly provided therein, any amendment to the Acquisition
Agreement prior to the Effective Time will not affect the obligations
of any Indemnifying Equity Holder under the Acquisition Agreement, as
amended.
Termination
The Acquisition Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time, before or after the
approval of the Merger by the MUX Shareholders, upon the mutual consent
of Glenayre and MUX. The Acquisition Agreement may be terminated and
the Merger may be abandoned by either MUX or Glenayre if (i) the Merger
has not been consummated by April 30, 1995; (ii) approval of the Merger
by the MUX Shareholders is not obtained; or (iii) a federal or state
court or governmental or administrative agency or commission has taken
action prohibiting the transactions contemplated by the Acquisition
Agreement and such order or action has become final and nonappealable.
The Acquisition Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time by either Glenayre or
MUX in the event of a material breach by the other party of any
representation or warranty which would have a material adverse effect
on such breaching party or in the event of a material breach by the
other parties of any covenant or agreement contained in the Agreement
which cannot be or has not been cured within thirty days after the
giving of written notice to the breaching party of such breach.
Fairness Opinion for ESOP
The MUX Board did not engage a financial advisor in connection
with its decision to proceed with the Merger. MUX's decision not to
utilize a financial advisor was based on the MUX Board of Directors'
view that it had developed adequate information and general familiarity
regarding appropriate valuation ranges for MUX as a result of extensive
efforts over several recent years to address MUX's capital needs. See
"The Merger--Background and Reasons for the Merger." Additionally, two
of the three Large Shareholders are on the MUX Board of Directors; the
third, John Bartelme, was regularly involved with and informed of the
valuation range information which had been developed over time.
Because the Large Shareholders, together with director Michael Gresham,
own in excess of 90% of the outstanding shares of MUX not owned by the
ESOP, the MUX Board of Directors did not feel that the retention of a
financial advisor was necessary for MUX as a whole. At the MUX Board
of Directors' direction, however, the ESOP has retained a financial
advisor to evaluate the fairness from a financial point of view of the
consideration to be received by the ESOP in the Merger. Specifically,
it is a condition to the closing of the Merger that the ESOP Committee
receive an opinion from Houlihan Lokey Howard & Zukin ("HLHZ") with
respect to the fairness from a financial point of view of the
consideration to be received by the ESOP in connection with the Merger.
The ESOP represents 1,645,320 shares of MUX Common Stock or 29.7% of
the MUX Common Stock outstanding at the Record Date. HLHZ is an
internationally known investment banking company which specializes in
corporate valuations as particularly related to employee stock
ownership plans. MUX, which is not affiliated with HLHZ, first hired
HLHZ on behalf of its ESOP (and paid HLHZ a retainer of $15,000) to
provide a comprehensive valuation of MUX Common Stock for ESOP purposes
at the end of
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its June 30, 1994 fiscal year. MUX later engaged HLHZ on behalf of the
ESOP to provide an opinion as to the fairness of the Merger to the
participants in the ESOP. MUX also paid a retainer to HLHZ for these
services and expects that the total expense for both the valuation and
the fairness opinion will be approximately $50,000. These represent the
only payments made to HLHZ and MUX does not expect to require HLHZ's
services in the future, should the Merger be completed. MUX has placed
no limitations on HLHZ with respect to conducting the analysis
necessary to render its opinion. Although HLHZ is not required to
render its opinion until the Closing, HLHZ has advised the ESOP that in
preparation for rendering its opinion, HLHZ will complete prior to the
Closing: (i) a review of the MUX financial statements for the past five
years, (ii) a review of this Proxy Statement/Prospectus, (iii) meetings
with MUX management and MUX's independent accountants to discuss the
operations, financial condition, and future prospects of MUX, (iv)
visits to the facilities of MUX, (v) a review of long range forecast
information concerning MUX, (vi) a review of historical market prices
and trading volume for Glenayre's Common Stock, and (vii) a review of
publicly available financial data for certain companies HLHZ deems
comparable to MUX. HLHZ has further advised that in arriving at its
opinion, it intends to apply a capitalization of earnings and cash flow
analysis, as well as a discounted cash flow analysis, and to compare
the resulting valuation data against selected public and private
companies viewed by HLHZ to be comparable to MUX. HLHZ does not intend
to complete its analysis until just prior to the Closing.
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WESTERN MULTIPLEX CORPORATION
General
MUX designs, manufactures and markets products for use in
point-to-point microwave communications systems. These products include
the microwave radios themselves, both in analog and digital
transmission formats, and analog baseband products. Approximately 65%
of MUX's 1994 sales were comprised of digital radios, while
approximately 16% and 19% were comprised of analog radio and analog
baseband products, respectively. MUX's products are sold to
communications service providers, including cellular, SMR and
inter-exchange common carriers; industrial companies, including
utilities, railroads and petroleum producers; federal, state and local
governmental entities; and users of wireless data communications.
Certain of the information disclosed in this Proxy
Statement/Prospectus with respect to MUX has been provided by MUX.
Glenayre has not independently verified the accuracy of all such
information.
Industry Background
Point-to-point microwave systems are used extensively to provide
wideband voice and data communications over long distances. One radio
link ("hop") typically covers 10 to 30 miles and hops can be cascaded
to form long networks. A limitation on transmission distance is the
fact that microwave communications must occur within line-of-sight and
that the earth is curved. To achieve long ranges, it is therefore
necessary to use tall buildings or mountains or to erect towers in
order to mount the antennae at a height sufficient for reliable
communications.
Alternatives to microwave transmission include leased access
telephone lines (also known as wirelines) and satellites.
Domestically, the decision between these alternatives is usually based
on cost, with leased lines generally being least expensive and
satellite communication generally being most expensive. Point-to-point
microwave transmission provides the user with a private networking
alternative that in many circumstances has a price/performance
advantage over other technologies. For example, a company may want to
provide voice and data communications between buildings separated by a
freeway, which has no wirelines running across it. Installing
microwave transmission equipment in this case would be much easier and
cost effective than either using a satellite system or laying
wirelines, if even possible.
Operators of microwave point-to-point communications systems fall
into four main categories: (i) communications service providers, such
as cellular, SMR or inter-exchange common carriers, who sell, directly
or indirectly, the transmission capacity provided by the microwave
system; (ii) industrial users, such as utilities, railroads and
petroleum producers, who use the microwave transmission system for
internal communications and/or control; (iii) federal, state and local
governmental entities, that use the systems to provide reliable,
independent internal communications, sometimes in areas not served by a
local telephone company; and (iv) users of wireless data
communications.
In North America, MUX's primary market, common carriers
(including cellular service providers) almost exclusively use digital
systems whereas the networks of the industrial and governmental
categories still have a significant proportion of analog installations.
However, for new installations even in these markets, the trend
continues to be towards digital communication systems.
Internationally, microwave radio transmission is used for many of
the same reasons and by many of the same users as described above.
However, due to the limited telecommunications infrastructure in
developing countries and the significant expense of installing
wirelines to remote areas, microwave transmission is a popular
alternative to providing basic telephone and telecommunications
services to underserved areas in these countries.
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General Development of MUX
MUX was incorporated in California on December 17, 1979 and
shipped its first product in April 1980, an analog baseband product
designed to work with analog microwave radios produced by other
manufacturers. MUX grew profitably over the next few years by adding
more baseband products and expanding its customer base. In pursuit of
further growth, MUX decided to design and manufacture microwave radios,
as well as their accessories.
In June 1990, MUX shipped its own internally designed and
manufactured microwave radio. This first radio product was the
beginning of a family of analog radio designs that were released over
the next few years. While the primary focus of MUX at this time was on
expanding its analog radio line, design was underway on MUX s unique
spread spectrum digital radio, the LYNX. This was the first long range,
wideband microwave radio put into production that did not require the
user to obtain an FCC license. It provided full duplex 1.544 MBps
("T1") transmission capability at 2.4 GHz with a 1 Watt power output.
First shipped in October 1992 and now available in an international
format and at 5.8 GHz, the LYNX has become the highest volume line of
equipment that MUX has produced.
Throughout its existence, MUX has been funded primarily by
internally generated case flow and bank lines of credit to finance its
growth. At the present time, all of MUX s equity holders are present or
former employees.
Strategy
MUX's strategic objective is to expand its market position as a
supplier of microwave transmission equipment. To achieve this goal,
MUX intends to leverage its low cost manufacturing techniques as it
expands its digital radio product offering. With a larger product
offering, MUX intends to compete for sales of microwave radios to
current microwave users whose systems will be relocated from the 2GHZ
band to new frequency bands as a result of the ongoing wideband
personal communication ("PCS") auctions being conducted by the FCC.
Finally, MUX will continue its efforts to expand its international
market presence.
MUX's competitive approach has always been to manufacture
reliable, high quality equipment at costs substantially lower than its
competition and to offer that equipment at significantly lower prices.
It is able to do so because it has a niche-oriented product focus
rather than a full product line. MUX targets a particular product
where it can supply it substantially cheaper than its competition by
determining the most cost effective way of producing that specific
product and omitting unnecessary functionality. MUX's engineering
effort is based on developing cost effective, quality products, rather
than leading-edge technology. MUX designs almost all parts of its
products, especially the radio frequency portions, unlike it
competitors which generally use parts designed and manufactured by
others, allowing MUX to obtain higher margins. MUX often concentrates
on markets that are underserved by larger competitors or which are no
longer profitable for competitors with higher cost structures.
The key elements of MUX's strategy are as follows:
Expansion of Product Line. MUX is developing a line of licensed
digital radios due to the continuing shift in demand from analog to
digital radios and the opportunity to successfully implement its low
cost strategy in this area. (Licensed digital radios are known as such
because they require a license by the FCC for use.) These radios would
be marketed to cellular, SMR and industrial markets. MUX is currently
developing its first licensed digital radio at 6GHZ, which is expected
to be introduced approximately in the middle of calendar 1995. Several
more licensed digital radios that are variations of the first radio
would be introduced shortly thereafter.
MUX has also identified five new variations of its successful LYNX
spread spectrum unlicensed digital radio that it believes it can
successfully offer and is preparing to introduce two of these in the
first quarter of calendar 1995.
Participation in PCS Relocation Market. As a result of the
ongoing FCC auction of frequency spectrum at 2GHZ, which will be used
for wideband PCS applications, current users of this spectrum,
including owners of microwave
45
<PAGE>
transmission networks, will be required to relocate to other frequency
bands. The FCC has stated that the new licensees will be required to
bear the costs of the relocation, but specific details have not been
established.
MUX believes that the relocation provides not only an opportunity
for users of analog microwave radios to buy new analog radios, but also
a larger opportunity for them to replace analog radios with digital
microwave radios, which are generally more expensive. With the
introduction of the products discussed above, MUX management believes
it will offer microwave radios in the frequency bands desired by the
relocated microwave radio users. However, there can be no assurance
that MUX will supply radios in the frequency bands to which these
microwave users decide to relocate.
Expansion of International Sales. The international marketplace
is a major opportunity for MUX, which it has begun to tackle only
recently because of limited resources. MUX is different from most of
its competitors, whose international/domestic sales mix is heavily
skewed toward international sales. This is due to the fact that,
although the competitors' products are more cost effective than
installing wireline systems to remote or underserved areas, especially
in developing countries, they are too expensive domestically relative
to leased lines. However, MUX's cost advantages have allowed it to
remain competitive versus leased lines domestically. With some
revisions to its current products and introduction of related new
products, MUX believes that it will be able to exploit the
international marketplace for the same reasons as its competitors.
Products
MUX today has three main families of products: digital microwave
radios, analog microwave radios and analog baseband products. Average
retail prices for MUX's products range from a low of $50 for some
analog baseband equipment to a high in excess of $22,000 for certain
analog microwave radios.
Digital Microwave Radios. MUX's current largest-selling product
line, representing $10.2 million or approximately 65% of fiscal 1994
sales, is its family of LYNX spread spectrum unlicensed digital radios.
MUX believes that it has the leading market share for spread spectrum
unlicensed digital radios in North America. MUX currently has four
LYNX radios, including one for international specifications. The
radios operate at 2.4GHz and 5.8GHz and have T1 capacity or its
international equivalent.
The LYNX radio, introduced in fiscal 1993, is the first digital
radio produced by MUX and was developed to satisfy requests from MUX's
customer base for an inexpensive digital radio. Cellular and SMR
customers use the LYNX radio to link cell sites and the central switch,
while industrial users, such as utilities and petroleum producers use
it to provide voice and data communications for their own field
networks. The LYNX was the first product offered by MUX to be marketed
to the rapidly growing cellular/SMR industry. Although MUX has
attempted to market the LYNX to the wireless data communications
market, these efforts have not been successful. Continuing market
analysis is being conducted to determine what product would be most
appropriate for this market segment.
Because the LYNX is a spread spectrum radio, a user in the United
States does not need to obtain a license for its use from the FCC,
making the radio even more attractive from a cost perspective. However
in late June, 1994, the FCC did set a limit on the amount of power at
which such a radio could transmit. MUX re- sponded by introducing a
new version that allows the user to set the power within acceptable
limits.
Partially due to the trend toward digital radios, sales of MUX's
digital radios have increased over time in absolute terms and as a
percentage of total sales. MUX expects this trend to continue. MUX
has identified four other variations of the LYNX radio that it would
like to offer and is preparing to introduce two of these in the first
calendar quarter of 1995. MUX is also developing a line of licensed
digital radios. See "Western Multiplex Corporation -- Strategy"
Analog Microwave Radios. MUX's family of analog radios accounted
for approximately 16% of fiscal 1994 sales. The analog radios are
offered at 2GHz, with capacities from 12 to 600 channels, at 6GHz, with
capacities from 120 to
46
<PAGE>
600 channels, and at 960MHz, with capacities from 3 to 12 channels. An
analog channel is a 4kHz wide slice of baseband spectrum suitable for
the transmission of a single voice channel.
Analog radios are sold to industrial users, including utilities,
railroads and petroleum producers, and to governmental entities.
Due to the continuing trend toward digital microwave radios, sales
of analog radios have decreased over time and are expected to decline
in the future. If current users of analog radios which are relocated
due to the PCS spectrum license auctions, choose to buy other analog
radios as replacements, this trend could be temporarily reversed.
There can be no assurance that this will occur.
Analog Baseband Products. MUX's analog baseband products
accounted for approximately 19% of fiscal 1994 sales. MUX believes that
it has the leading market share in North America for analog baseband
equipment. The analog baseband family contains products designed to
amplify, attenuate, filter or frequency- shift the analog signals that
are transmitted over analog microwave radios. Analog baseband products
include converters, frequency generation equipment, protection
equipment, baseband amplifiers, baseband filters, bridges, attenuators,
transformers and equalizers.
Analog baseband equipment is sold to industrial users, including
utilities, railroads and petroleum producers, and to governmental
entities.
Due to the continuing trend toward digital microwave radios, sales
of analog baseband equipment, which is used in conjunction with analog
microwave radios, have decreased over time and are expected to decline
in the future.
Customer Service and Support
From its inception, MUX has always made customer service a
priority. MUX believes that it is essential to provide reliable service
to customers in order to solidify customer relationships and be the
vendor of choice when system expan- sions are sought by customers.
Customer service begins at the system design stage with recommendations
as to which products to use and how to assemble them into a system.
This design is then implemented using reliable, high quality MUX
products, engineered for ease of manufacture and long life. Should a
customer experience any difficulty with any of MUX s products,
responsive and reliable customer service is provided via telephone
and/or facsimile. Except in rare instances, MUX does not provide field
installation or field service. Should a customer require installation
and/or on-site maintenance, MUX will subcontract this to a company
specializing in this type of work.
MUX's warranty terms vary by product line. Analog baseband
products carry a 5 year warranty, analog radio products a 3 year
warranty and all others a 12 month warranty. Warranty is limited to
repair or replacement at MUX s option upon return of the defective
product to MUX. For products no longer covered by warranty, MUX offers
a repair and return service with a charge limited to the lesser of $500
or 50% of the cost of a replacement unit. Defective products must be
returned to MUX's Belmont, California factory for any repairs to be
performed.
Customers
MUX has focused its marketing and sales efforts primarily in the
North American marketplace. Customers include most of the North
American cellular and SMR carriers, as well as inter-exchange carriers.
MUX entered the common carrier market in 1993 with the introduction of
the LYNX radio. Customers also include several major utilities,
railroads and petroleum producers. Government customers include
agencies of the federal government and regional authorities, as well as
state and local entities. Due to limited resources, MUX has entered
the international market only recently. Expansion into international
markets represents a major opportunity for MUX. See "Western Multiplex
Corporation -- Strategy." International customers include cellular
carriers and industrial users. No customer represented more than 6% of
MUX's sales in fiscal 1994.
47
<PAGE>
Marketing and Sales
MUX markets its products primarily through a direct sales force
consisting of approximately 18 marketing and sales personnel. MUX also
uses value-added resellers ("VARs"), system integrators and agents to
sell certain of its products domestically. Some products are sold to
other companies on an original equipment manufacturer basis. VARs and
agents account for nearly all of MUX's international sales. MUX has
Domestic Regional Sales Managers located in the Houston, Chicago,
Atlanta and Phoenix metropolitan areas, with the Director of Sales
located in MUX's headquarters in Belmont, California. Supporting these
field sales personnel is a team of sales engineers at MUX's
headquarters, who are responsible for making quotations and for
ensuring that any systems ordered are technically correct. In January
1994 MUX employed a full-time international sales manager located in
Dallas, Texas to establish international VARs.
Research and Development
MUX believes that a strong commitment to research and development
is essential to the continued growth of its business. MUX has always
endeavored to ensure that the technology used in its products is
current, even though the products themselves may be considered less
than state-of-the-art. For example, analog radios are not new, but MUX
believes that it has introduced some novel ideas and technology into
its versions of these products. In keeping with this philosophy, MUX
has consistently spent 10-17% of its revenues annually over the last 5
years on research and development.
MUX has expertise in the technologies required to develop low-cost
microwave radio products. The key technologies in which MUX's
development staff has extensive expertise include radio frequency
design, multiplexer design, and modem technology.
MUX's research and development organization is comprised of
approximately 13 employees, who are located at MUX's headquarters.
Nearly half of MUX's research and development staff are engineers.
New Products
In its new designs, MUX's focus continues to be on low cost. New
products presently in development include variations on the LYNX spread
spectrum unli- censed digital radio to increase its capacity and add
different frequency options. However, the major thrust of new product
development is in the area of licensed digital microwave radios. MUX
will shortly be announcing its first such product, a 6GHz digital radio
capable of carrying up to four T1 signals. The target markets are
cellular service providers and industrial microwave users, both of whom
are currently served by MUX. MUX also expects to introduce an
international version of this product in the future.
Manufacturing
All manufacturing takes place at MUX's headquarters in Belmont,
California. MUX s manufacturing operations consist of the purchase of
raw materials (electronic components), quality inspection, assembly and
testing. The actual assembly of the raw materials into sub-assemblies
is subcontracted to local assembly houses. By utilizing subcontractors,
MUX has great flexibility in regards to manufacturing capacity, yet
maintains control over the quality of the products through the
acquisition of the raw materials and the testing of both the
sub-assemblies and the final products. MUX believes that its
manufacturing facilities are sufficient to accommodate substantial
growth in its business.
Whenever possible, MUX tries to use standard components available
from multiple suppliers. However, occasionally, it is necessary to use
custom-designed items and/or components available from a single source
supplier. Less than 1% of the parts used in MUX's products are obtained
from single source suppliers. To date, such practices have not caused
any significant delivery problems for MUX, and MUX continues to work
with its suppliers to minimize the possibility of any future occurrence
of product shortages.
48
<PAGE>
Proprietary Rights and Licenses
MUX does not own or license patents related to any of its
products. It does rely on copyright protection for its logos and other
publications. MUX considers its trademark "Western Multiplex" to be a
valuable asset. The "Western Multiplex" trademark is protected through
trademark registrations.
Backlog
MUX estimates that its backlog was approximately $3.1 million as
of September 30, 1994 and $2.1 million as of September 30, 1993. The
orders supporting MUX's estimate of the backlog amount consist of
signed purchase orders and, in general, are expected to be shipped
within three months of the respective backlog dates.
Competition
Competition in MUX's markets is based upon quality, reliability,
product features and price. MUX believes that it compares favorably
with its competitors due to its ability to provide reliable, high
quality products and service at much lower prices. However, MUX has a
narrower product line than many of its competitors, and thus, cannot
bid on certain entire network projects.
MUX has continuously faced competition from a number of other
equipment manufacturers, most of which are larger and have
significantly greater resources than it, and there can be no assurance
that MUX will be able to compete successfully in the future.
MUX believes that it has the leading market share in North America
for spread spectrum unlicensed digital radios. The only other current
supplier of spread spectrum unlicensed digital microwave radios is
Cylink Corporation. However, MUX believes that other competitors are
planning entries into this market. Although this information has been
known for several months, MUX has no knowledge of a functioning product
from these companies.
In the licensed digital microwave market, which MUX intends to
enter, the primary competitors include Alcatel, Harris Corporation,
California Microwave Corporation and Digital Microwave Corporation.
In the analog microwave radio market, MUX's primary competitors
are California Microwave Corporation and Harris Corporation. Many
former competitors have exited this market due to the trend toward
digital microwave radios.
In the analog baseband equipment market, MUX's primary competitor
is Inter- Lac Inc.
Internationally there are additional major competitors, including
Siemens A.G., L M Ericsson Telephone Company and Philips Electronics
N.V.
MUX's determination of its competitive market position is based
upon its knowledge of sales of products of the type sold by it in its
markets, information derived from its working relationship with its
customers, and market information obtained from industry trade
publications and sources.
Regulation
Most of MUX's products operate on radio frequencies. Radio
frequency transmissions and emissions, and certain equipment used in
connection therewith, are regulated in the United States and
internationally. Regulatory approvals generally must be obtained by
MUX in connection with the manufacture and sale of such products, and,
in certain circumstances, by the customers of MUX to operate its
products. The enactment by federal, state, local or international
governments of new laws or regulations could affect the market for
MUX's products. In particular, on June 23, 1994, the FCC established
limitations on the amount of power at which a spread spectrum
unlicensed digital radio, such as
49
<PAGE>
MUX's LYNX, could transmit. MUX responded by introducing a new version
that allows the user to set the power within acceptable limits.
As a result of the ongoing FCC auction of frequency spectrum at
2GHZ, which will be used for wideband PCS applications, current users
of this spectrum, including owners of microwave transmission networks,
will be required to relocate to other frequency bands. The FCC has
stated that these new licensees will be required to bear the costs of
the relocation, but specific details have not been established. MUX
believes that the relocation provides an opportunity to supply
microwave radios to those users being relocated.
Facilities and Properties
MUX's principal offices and manufacturing facilities are located
in a leased section, consisting of approximately 29,000 square feet, of
a building in an industrial park in Belmont, California. The lease
expires on June 30, 1998. MUX also leases sales offices for its
Regional and International Sales Managers in various cities in the
United States, including Cumming, Georgia; Roselle, Illinois;
Scottsdale, Arizona; Dallas, Texas; and Houston, Texas.
Employees
As of March 10, 1995, MUX had approximately 88 full time and
temporary employees. None of its employees are currently represented by
a collective bargaining agreement. MUX has not experienced any strikes
or work stoppages in its history and believes its employee relations to
be strong. MUX believes that its continuing success will depend, in
part, on its ability to hire and retain qualified personnel in an
increasingly competitive market.
Litigation
MUX is subject to litigation from time to time in the ordinary
course of its business. No litigation is pending at this time.
50
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
OF MUX COMMON STOCK
As of March 10, 1995, MUX Common Stock was held of record by 23
holders. The following table sets forth certain information concerning
the beneficial ownership of MUX Common Stock as of March 10, 1995, by
(i) each person who is known to MUX to own beneficially more than 5% of
the outstanding shares of MUX Common Stock, (ii) each of MUX's
directors and named executive officers and (iii) all of MUX's directors
and executive directors and executive directors, as a group.
<TABLE>
<CAPTION>
Approximate Number
of Shares of Glenayre
Shares of MUX Common Stock to be
Common Stock Percentage of MUX received in the
Name of Beneficial Owner Beneficially Owned(1) Common Stock Merger(2)
<S> <C> <C> <C>
John Woods 2,068,253(3) 33.0% 195,211
Frank Hegarty 1,667,463(4) 28.4% 157,383
John Bartelme 1,034,975 18.7% 97,685
Michael Gresham 504,524(5) 8.6% 47,620
Michael Mulcay 82,075(6) 1.5% 7,746
ESOP 1,645,320(7) 29.7% 155,293
Directors and 4,322,315(8) 61.1% 407,960
Officers as a Group
(4 persons)
</TABLE>
_____________________
* Less than 1%.
(1) Unless otherwise indicated, the persons named in the table have
sole voting and sole investment power with respect to all shares
beneficially owned, subject to applicable community property laws.
(2) No beneficial owner will own more than 1% of the issued and
outstanding Glenayre Common Stock following the Merger.
(3) Includes 745,000 shares subject to options that are presently
exercisable or exercisable within 60 days and 200,000 shares held
in trust for the benefit of Mr. Woods' minor children of which he
is trustee. Does not include 1,500,392 shares held by the ESOP of
which Mr. Woods is a trustee which are beneficially owned by
others.
(4) Includes 350,000 shares subject to options that are
presently exercisable or exercisable within 60 days. Does not
include 1,506,182 shares held by the ESOP of which Mr. Hegarty is
a trustee which are beneficially owned by others.
(5) Includes 370,000 shares subject to options that are presently
exercisable or exercisable within 60 days.
(6) Includes 75,000 shares subject to options that are presently
exercisable or exercisable within 60 days.
(7) Mr. Woods and Mr. Hegarty are the trustees for the ESOP. The
beneficial owners of the shares held in the ESOP as of the Record
Date are entitled to vote such shares at the MUX Meeting.
(8) Includes 1,540,000 shares subject to options that are presently
exercisable or exercisable within 60 days.
51
<PAGE>
WESTERN MULTIPLEX CORPORATION MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The following table sets forth as dollars and as a percentage of
net sales certain items in MUX's statements of income for the years
ended June 30, 1994, 1993 and 1992 and the three month periods
ended September 30, 1994 and 1993. This table should be read in
connection with the Selected Financial Data and the Consolidated
Financial Statements and related Notes contained elsewhere herein.
52
<PAGE>
<TABLE>
<CAPTION>
Years ended June 30, Three month periods ended September 30,
1994 1993 1992 1994 1993
(dollars in thousands) (Unaudited) (Unaudited) (Unaudited)
Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales 15,759 100.0% $9,071 100.0% $5,851 100.0% $4,990 100.0% $ 2,960 100.0%
Costs and expenses:
Cost of sales 7,117 45.2 5,256 57.9 3,340 57.1 1,838 36.8 1,308 44.2
Selling, general, and
administrative expense 4,213 26.7 1,949 21.5 1,405 24.0 1,730 34.7 828 28.0
Research and
development expense 1,511 9.6 1,011 11.1 981 16.8 392 7.9 300 10.1
Total costs and
expenses 12,841 81.5 8,216 90.6 5,726 97.9 3,960 79.4 2,436 82.3
Income from operations 2,918 18.5 855 9.4 125 2.1 1,030 20.6 524 17.7
Interest expense, net (27) (.2) (48) (.5) (47) (.8) (4) (.1) (9) (.3)
Other income, net 14 .1 -- -- 9 .2 11 .2 9 .3
Income before income taxes
and change in accounting
principle 2,905 18.4 807 8.9 87 1.5 1,037 20.8 524 17.7
Provision for income taxes 1,220 7.7 275 3.0 (40) (.7) 420 8.4 220 7.4
Cumulative effect on prior
years of change in
accounting principle -- -- -- -- 33 .6 -- -- -- --
Net income $ 1,685 10.7% $ 532 5.9% $ 160 2.8% $ 617 12.4% $ 304 10.3%
</TABLE>
Note: For presentation purposes, MUX has reclassified certain financial
statement captions to reflect the method used by Glenayre for reporting
its results of operations except that depreciation and amortization are
included in the operating expense categories.
53
<PAGE>
YEAR ENDED JUNE 30, 1994 COMPARED TO YEAR ENDED JUNE 30, 1993
Net Sales
Net sales in 1994 increased to approximately $15.8 million from
1993 net sales of approximately $9.1 million, an increase of $6.7
million or 73.7%. This overall change included an increase of 6.5%
in unit sales of MUX's analog baseband products, a decrease of
40.9% in unit sales of its analog radios and an increase of 439.6% in
unit sales of its LYNX digital microwave radio family. The increase
in unit sales of the LYNX microwave radio was primarily
attributable to the increased market acceptance of the LYNX
microwave radio which was introduced in fiscal 1993. As there were
no significant price changes in any of the product families between
the periods, any increases or decreases in revenue were
attributable solely to the changes in sales volume of each product
family.
Gross Profit
Gross profit in 1994 increased to approximately $8.6
million from approximately $3.8 million in 1993, an increase of $4.8
million or 126.5%. MUX's gross profit as a percentage of net sales
increased from 42.1% for the year ended June 30, 1993 to 54.8% for
the year ended June 30, 1994. This increase was primarily due to
the lower sales volume of lower-margin analog products and an
increase in sales volume of the higher-margin LYNX products. In
addition, manufacturing overhead grew at a significantly lower rate
then did net sales. Increased volume also enabled MUX to purchase
components at a lower cost per unit.
Selling, General and Administrative Expense
Selling, general, and administrative expense, which consist
primarily of salaries, commissions to sales employees, employee
benefits, advertising expenses, the cost of participating in trade
shows and finance department and administrative costs increased by
$2.3 million or 116.2% from $1.9 million for the year ended June 30,
1993 to $4.2 million for the year ended June 30, 1994. The dollar
amount increase resulted primarily from the increase in the number of
employees, salaries and employee benefits required to support the
growth of the business.
Research and Development Expense
Research and development expenses increased to approximately $1.5
million or 9.6% of sales for the year ended June 30, 1994 from $1.0
million or 11.1% of net sales for the year ended June 30, 1993, an
increase of $500,000 or 49.5%. The increase in expense was primarily
due to increased labor, materials and overhead expenses associated
with the development of the LYNX and other products. Research and
development expenses consist primarily of salaries, development
materials and supplies, depreciation and amortization on development
equipment and consulting services. MUX expenses research and
development costs as they are incurred. MUX intends to maintain
research and development expenses within the range of 10-15% of net
sales. The failure to do so during 1994 was caused both by the high
sales volume and by MUX's inability to hire all of the engineering
personnel that it had planned on during the year.
Interest Expense, Net
Interest expense, net decreased to approximately $27,000 for the
year ended June 30, 1994 from $48,000 for the year ended June 30, 1993,
a decrease of $21,000 or 43.8%. The decrease is primarily
attributable to the payoff of loans due to Comerica Bank.
Income Taxes
The differences between the U.S. federal statutory tax rate of
approximately 34.0% and the effective tax rate of 42.0% for 1994 is
primarily the result of the utilization of research and development
credits offset by state taxes and certain non-deductible expenses.
The effective tax rate for 1993 was 34.1% which results from state
taxes offset by research and development credits. The increase in 1994
is attributable to state taxes and certain non- deductible expenses.
54
<PAGE>
YEAR ENDED JUNE 30, 1993 COMPARED TO YEAR ENDED JUNE 30, 1992
Net Sales
Net sales in 1993 increased to approximately $9.1 million from
1992 net sales of approximately $5.9 million, an increase of $3.2
million or 55.0%. This overall change included a decrease of 16.4%
in unit sales or MUX's analog baseband products and increase of
76.4% in units sales of the analog radios and reflects that 1993 was
the first year that its LYNX digital microwave radio was sold. As
there were no significant price changes to any of the analog products
during the year, any increases or decreases in revenue were
attributable to the changes in sales volume of each product family
and to the introduction of the LYNX digital microwave radio.
Gross Profit
Gross profit in 1993 increased to approximately $3.8
million from approximately $2.5 million, an increase of $1.3
million or 51.9%. MUX's gross profit as a percentage of net sales
remained essentially constant at 42.1% for the year ended June 30, 1993
versus 42.9% for the year ended June 30, 1992.
Selling, General and Administrative Expense
Selling, general, and administrative expense increased by
$545,000 or 38.8% from $1.4 million for the year ended June 30, 1992
to $1.9 million for the year ended June 30, 1993. This increase was
due to the marketing expenses associated with the expansion of the
analog microwave product line and the introduction of the LYNX
digital microwave radio as well as increases in the number of
employees, salaries and employee benefits associated with the growth of
the business.
Research and Development Expense
Research and development expenses increased to $1.0 million for the
year ended June 30, 1993 from $981,000 for the year ended June 30,
1992, a 3.1% increase. The decrease as a percentage of sales from
16.8% in 1992 to 11.1% in 1993 occurred because research and
development cost expenditures did not keep pace with the sales
growth rate.
Interest Expense, Net
Interest expense, net remained relatively constant at $48,000
in 1993 as compared to $47,000 in 1992.
Income Taxes
The effective tax rate of 34.1% for 1993 compares to a benefit
of 46.0% for 1992. The benefit in 1992 is primarily attributable to
research and development tax credits and the effect of the graduated
federal tax rates. The cumulative effect of adopting SFAS 109 was
approximately $33,000 for 1992.
UNAUDITED THREE MONTH PERIOD ENDED SEPTEMBER 30, 1994 COMPARED
TO UNAUDITED THREE MONTH PERIOD ENDED SEPTEMBER 30,1993
Net Sales
Net sales for the three months ended September 30, 1994
increased toapproximately $5.0 million from approximately $3.0
million, an increase of $2.0 million or 68.6%. This overall change
included a decrease of 31.5% in unit sales of MUX's analog baseband
products, a decrease of 25.8% in unit sales of analog radios and an
increase of 153.4% in unit sales of its LYNX digital microwave
family. The increase in unit sales of the LYNX microwave radio
was primarily attributable to the increased market acceptance of the
LYNX microwave radio which was introduced in fiscal 1993. As there
were no significant price changes in any of the product families
between the periods, any increases or decreases in revenue were
attributable solely to changes in sales volume of each product family.
55
<PAGE>
Gross Profit
Gross profit for the three month period ended September 30, 1994
increased to approximately $3.2 million from $1.7 million for the
comparable 1993 period, an increase of $1.5 million or 90.8%. MUX's
gross profit as a percentage of net sales increased to 63.2% for the
three months ended September 30, 1994 from 55.8% for the same period
in 1993. This increase was primarily due to increased LYNX sales
volume with its higher gross margins and a decrease in analog products
with lower margins.
Selling, General and Administrative Expense
Selling, general, and administrative expense increased by
approximately $900,000 or 108.9% from $828,000 for the three month
period ended September 30, 1993 to $1.7 million for the three month
period ended September 30, 1994. Selling, general, and administrative
expense as a percentage of net sales increased from 28.0% to 34.7%
over the same three month period. This increase was due to the
increased level of sales and marketing activity associated with the
introduction and planning of new products as well as increases in
the number of employees, salaries and employee benefits as a result of
the increased business activity.
Research and Development Expense
Research and development expenses increased to approximately
$392,000 for the quarter ended September 30, 1994 from approximately
$300,000 for the same period in 1993, an increase of approximately
$92,000 or 30.7%. The level of research and development spending as a
percentage of sales was 7.9% for the three months ended September
30,1994, compared to 10.1% for the same period in 1993. MUX intends
to maintain its research and development expenses within the range of
10-15% of net sales. The failure to do so during the three months
ended September 30, 1994 was caused by the high sales volume and MUX's
inability to hire all of the engineering personnel that it had planned
on during both this and the prior quarters.
Interest Expense, Net
Interest expense, net was $4,000 for the three months ended
September 30,1994 as compared to $9,000 for the three months ended
September 30,1993 due to the payoff of certain loan balances.
Income Taxes
The effective tax rate for the three months ended September 30,
1993 was 42.0%which results from utilization of research and
development credits offset by state taxes and certain non-deductible
expenses. The effective tax rate for the same period during 1994 was
40.5% which consists of the federal tax rate of 34.0% and a net state
tax rate of 6.5%.
FINANCIAL CONDITION AND LIQUIDITY
<TABLE>
<CAPTION>
At Sept. 30, At June 30, At June 30,
(dollars in thousands) (Unaudited)
<S> <C> <C> <C>
Cash and cash equivalents $ 1,181 $ 1,068 $ 102
Working capital 4,246 3,588 1,808
Long-term debt, including
current portion 548 595 636
Stockholders' equity 4,654 4,037 2,338
</TABLE>
The significant financial condition and liquidity
improvements resulted principally from MUX achieving record operating
results in fiscal 1994 and in the three months ended September 30,
1994.
56
<PAGE>
To date, MUX has funded its growth exclusively from cash
generated from operations, bank borrowings and lease financing. At
September 30, 1994 MUX had available a $1.0 million bank line of
credit facility and a $500,000 term debt facility. As of September
30, 1994 there were no outstanding borrowings on either facility.
Capital expenditures are generally financed with third party
leasing agencies.
MUX's cash and cash equivalents are placed in money market
accounts. MUX expects to use its cash and cash equivalents for
working capital and other corporate purposes, including expansion
and development of its existing products and markets and expansion
into complementary product lines.
Working capital excluding cash and cash equivalents increased
$545,000 from June 30, 1994 to September 30, 1994, a 21.6%
increase. This increase was primarily due to increases in accounts
receivable due to the higher sales level.
MUX believes that funds generated from continuing operations,
together with its current cash reserves, will be sufficient to support
its short-term and long- term liquidity requirements for current
operations (including annual expenditures for capital equipment).
MUX believes that inflation has not had a material effect on
results of operations to date.
Preliminary results of operations for the six month period
ending December 31, 1994 suggest a leveling off of sales and net
income during such period, although total sales and net income for
the six month period remain above the totals for the same period in
the prior fiscal year.
57
<PAGE>
COMPARATIVE RIGHTS OF SHAREHOLDERS
At the Effective Time of the Merger, MUX Shareholders (except any
dissenting MUX Shareholder properly exercising dissenters' rights)
automatically will become shareholders of Glenayre, and the rights of
such shareholders will be determined by Glenayre's Certificate of
Incorporation, Bylaws and the DGCL. The following is a summary of
certain material differences in the rights of MUX Shareholders and
holders of Glenayre Common Stock.
Authorized Capital. The authorized capital stock of Glenayre
consists of 50,000,000 shares of Glenayre Common Stock, par value
$.02 per share, and 5,000,000 shares of Glenayre Preferred Stock,
par value $.01 per share. As of March 10, 1995, 25,223,197 shares
of Glenayre Common Stock were issued and 25,185,697 shares of
Glenayre Common Stock were outstanding. In addition, as of the same
date, 3,405,355 shares of Glenayre Common Stock were reserved for
issuance pursuant to Glenayre's stock option plans.
The Glenayre Preferred Stock may be issued in one or more series
with such terms, limitations and preferences as may be established by
the Board of Directors without further shareholder action. No shares
of Glenayre Preferred Stock are currently issued or outstanding.
In the event of an unsolicited attempt to takeover Glenayre, it
might be possible for the Board of Directors to issue Preferred
Stock with rights which could impede the completion of such a
takeover. The existence of the Preferred Stock may make Glenayre a
less attractive takeover candidate.
The authorized capital of MUX consists of 25,000,000 shares of
MUX Common Stock. As of March 10, 1995, 5,531,195 shares of MUX Common
Stock were issued and outstanding. In addition, as of the same
date, 2,415,000 shares of MUX Common Stock were reserved for future
issuance pursuant to MUX's stock option plans.
Board of Directors. Glenayre's Certificate of Incorporation
and Bylaws divide its Board of Directors into three classes, each
class to consist of as nearly equal a number of directors as possible
serving for three-year terms. The Glenayre Board of Directors
currently has nine members. Glenayre's Certificate of Incorporation
authorizes the Board of Directors to set the number of directors at a
number not less than three. Pursuant to the DGCL, if the number of
directors and the manner of setting such number is set forth in the
Certificate of Incorpo- ration, they may be changed only by amending
the Certificate of Incorporation. Glenayre's Certificate of
Incorporation and Bylaws provide that a director may be removed from
office only for cause and by an affirmative vote of the shareholders
holding at least a majority of the outstanding shares then entitled
to vote for the election of directors. The DGCL also provides that
if the board of directors of a corporation is divided into classes,
directors may only be removed for cause. These provisions of
Glenayre's Certificate of Incorporation and Bylaws may make Glenayre
a less attractive candidate for an unsolicited takeover.
Glenayre's directors are elected by the vote of the holders of a
majority of the Glenayre Common Stock present in person or
represented by proxy and entitled to vote in the election of
directors. Holders of Glenayre Common Stock do not have cumulative
voting rights in the election of directors.
Vacancies on the Board of Directors of Glenayre created by
increasing the number of directors may be filled upon the approval of a
majority of the directors then in office, provided a quorum is present.
Any other vacancy occurring on the Board may be filled by a majority
of the directors then in office, even if lessthan a quorum.
MUX's Bylaws provide that MUX's Board of Directors will
consist of three directors, all of whom are in the same class and
serve one-year terms. The number may be changed by a duly adopted
amendment to the Articles of Incorporation or by an amendment to
the Bylaws adopted by a majority of the outstanding shares
entitled to vote.
Under certain circumstances, MUX's Bylaws entitle shareholders to
cumulative voting rights in the election of directors.
The CGCL provides that a director of MUX may be removed without
cause by a vote of shareholders holding a majority of the shares
entitled to vote in an election of directors. However, unless the
entire Board of Directors is removed, an individual director may not
be removed if the number of shares voting against the removal would
be sufficient to elect a director if such shares were voted
cumulatively at an annual election. The CGCL allows a court, upon a
suit by the shareholders holding at least 10% of the outstanding
shares of any class, to remove from office any director
58
<PAGE>
in the case of fraudulent or dishonest acts or gross abuse of
authority or discretion. The CGCL provides that a Board of
Directors may declare vacant the office of any director who has been
declared of unsound mind by an order of court or convicted of a
felony.
MUX's Bylaws authorize the Board of Directors to fill vacancies
on the Board by approval of a majority of the remaining directors, or
by the shareholders upon the consent of the holders of a majority of
the outstanding shares entitled to vote thereon in the event the
vacancy has not been filled by the Board of Direc- tors. However,
the Bylaws provide that a vacancy created by the removal of a
director may only be filled by an affirmative vote of a majority of
the shares represented at a meeting at which a quorum is present.
Meetings of Shareholders. Glenayre's Certificate of
Incorporation authorizes the Board of Directors, the Chairman of the
Board or the President to call a special meeting of Glenayre's
shareholders. The Certificate of Incorporation requires any
action taken by the shareholders to be effected at a duly called
annual or special meeting of such shareholders; such actions may not
be effected by written consent in lieu of a meeting.
The Certificate of Incorporation and the DGCL authorize a
Delaware Court to order a meeting between the corporation and its
creditors or shareholders to address a proposed compromise between
the Corporation and its creditors or shareholders. A majority,
representing at least 75% of the value of the creditors or
shareholders, or any class of either as the case may be, can bind
all such parties to the agreement if sanctioned by the Court.
In addition, the shareholders may apply to a court to appoint a
custodian or a receiver in certain circumstances.
Glenayre's Bylaws provide that a quorum is one-third of the
issued and out- standing shares entitled to vote. Shareholder action
requires the approval by the holders of a majority of the shares
present unless a greater number is required by an express provision of
the DGCL, the Certificate of Incorporation or the Bylaws. Glenayre's
Bylaws require that proposals submitted requesting certain action by
the Board of Directors be approved by a majority of the outstanding
shares.
The MUX Bylaws authorize the Board of Directors, the Chairman
of the Board,the President or one or more shareholders who hold shares
which in the aggregate entitle such shareholder or shareholders to cast
at least 10% of the votes at such meeting to call a special meeting of
the MUX shareholders at any time.
The MUX Bylaws provide that a quorum is a majority of the
issued and outstanding shares entitled to vote. The MUX Bylaws
provide that an act of the shareholders requires the affirmative vote
of a majority of shares represented and voting (unless a greater number
is otherwise required).
The MUX Bylaws authorize the shareholders to take action in
lieu of a meeting by written consent of the holders of a minimum
number of shares necessary to authorize action at a meeting at which
all shares entitled to vote on that action were present and voted.
In the case of an election of directors, the Bylaws require such
consent to be signed by the holders of all the outstanding shares
entitled to vote thereon. However, the Bylaws provide that
the shareholders may, by consent of the holders of a majority of
the outstanding shares entitled to vote in the election of the
directors, fill a vacancy on the board of directors provided the
vacancy was not created by the removal of a director and that it
has not yet been filled by the directors.
Inspection Rights. The DGCL allows any shareholder for any
purpose reason- ably related to such person's interest as a
shareholder to inspect, copy and make extracts of the corporation's
stock ledger, list of shareholders, and its other books and records
upon written demand.
The MUX Bylaws entitle a shareholder or shareholders holding at
least 5% in the aggregate of the outstanding voting shares of a
corporation or who holds at least 1% of such voting shares and has
filed a Schedule 14B with the Commission relating to the election of
directors of the corporation to an absolute right to inspect and copy
the record of shareholder names and addresses and shareholdings
and/or to obtain from the transfer agent for the corporation
a list of shareholders who are entitled to vote for the election of
directors. In addition, the accounting books and records, including
the record of shareholders, and minutes of proceedings of the
shareholders and the board of directors and the committees of the
board of directors are open to inspection upon the written demand
to the corporation of any shareholder at any reasonable time for a
purpose reasonably related to such shareholder's interests as a
shareholder.
59
<PAGE>
Amendment of Charter Documents. Glenayre's Certificate of
Incorporation requires that any amendment to the Certificate be
approved as a resolution by the Board of Directors. Glenayre's
Certificate of Incorporation, requires approval by at least 80% of the
shares which are entitled to vote, voting as a single class, to amend,
repeal or adopt any provision inconsistent with the following
provisions of the Certificate of Incorporation: (i) the terms and
conditions of the Board of Directors, including but not limited to,
the manner for setting the number of directors, the division of
Glenayre's directors into three classes serving stag- gered
three-year terms, the standards for removal of directors and the method
for filling vacancies on the Board; (ii) the prohibition on
shareholders acting by written consent in lieu of a meeting; (iii)
that special shareholder meetings may only be called by the Board of
Directors, the Chairman of the Board or the President and
limitations on such meetings to only those matters set forth in the
meeting notice; and (iv) the manner for approval of any amendment to
the Certificate of Incorporation, including the 80% supermajority
provision. Any other amendment must be approved by a majority of the
outstanding Shares entitled to vote.
The CGCL requires that any amendment to MUX's Articles of
Incorporation be approved by a majority of the outstanding shares and
the board of directors.
Amendment to Bylaws. Glenayre's Certificate of Incorporation
and Bylaws provide that the Bylaws may be amended, altered or repealed
by action of the Board of Directors or a majority of the shares
entitled to vote. However, certain Bylaws which are also set forth
in the Certificate of Incorporation may not be amended without
approval by the holders of 80% of the shares entitled to vote.
The CGCL and MUX's Bylaws provide that MUX's Bylaws may be
amended or repealed by approval of a majority of the outstanding
shares or by the approval of the Board of Directors.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following discussion of certain federal income tax
consequences of the Merger is based on the current provisions of
the Code, applicable Treasury Regulations, judicial authority and
administrative rulings and practice. This discussion, however, does
not address all aspects of federal income taxation that may be
relevant to a particular MUX Shareholder in light of his
personal investment circumstances and to certain types of shareholders
subject to special treatment under the federal income tax laws (for
example, insurance companies, tax exempt organizations, financial
institutions or broker-dealers and persons who are not citizens or
residents of the United States or who are foreign corporations,
foreign partnerships or foreign estates or trusts) and does not
discuss any aspects of state, local or foreign taxation. Further,
this discussion assumes that all MUX Shareholders have held their
shares of MUX Common Stock as capital assets.
There can be no assurance that the Internal Revenue Service (the
"IRS") will not take a contrary view to those expressed herein. No
ruling from the IRS has been or will be sought with respect to any
aspect of the Merger. Moreover, legislative, judicial or
administrative changes or interpretations may be forthcoming that
could alter or modify the statements and conclusions set forth
herein. Any such changes or interpretations may or may not be
retroactive and could affect the tax consequences to MUX Shareholders.
In connection with the filing of the Registration Statement,
KCLH delivered a tax opinion to Glenayre. The following discussion
summarizes the conclusions set forth in such opinion and the
assumptions upon which they were based, and is qualified in its
entirety by reference to such opinion which is an exhibit to the
Registration Statement.
EACH MUX SHAREHOLDER AND OPTION HOLDER IS URGED TO CONSULT
HIS OWN TAX ADVISER AS TO THE PARTICULAR TAX CONSEQUENCES TO
HIM OF THE MERGER, INCLUDING THE APPLICABILITY AND EFFECT OF ANY
STATE, LOCAL AND FOREIGN TAX LAWS, AND OF CHANGES IN APPLICABLE
TAX LAWS.
Qualification of the Merger as a Tax-Free Reorganization
Although the matter is not free from doubt and is subject to the
assumptions set forth in the following sentence, the Merger
should be a tax-free reorganization within the meaning of Section
368(a)(1) of the Code by reason ofthe application of Section
368(a)(2)(E) of the Code. The foregoing conclusion is based on
certain assumptions, including the
60
<PAGE>
following: (i) that the Merger will be consummated in accordance with
the Acquisition Agreement and the Agreement of Merger; (ii) that
Glenayre has no present plan or intention to liquidate MUX, to merge
MUX with or into another unaffiliated corporation, to sell or
otherwise dispose of the stock of MUX, to cause MUX to issue
additional shares of its stock that would result in Glenayre's loss of
"control" of MUX within the meaning of Section 368(c) of the Code or
to cause MUX to sell or dispose of any of its assets except for
dispositions made in the ordinary course of business or which would not
cause the Merger to fail to satisfy the "continuity of the business
enterprise" requirements to qualify as a reorganization under
Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code; (iii) that
following the Effective Time, MUX will continue to hold
substantially all of the properties it owned immediately prior
thereto; (iv) that following the Effective Time, the MUX Continuing
Shareholders will retain the Glenayre Common Stock received in the
Merger in amounts and for such periods of time as shall be necessary
to satisfy the "continuity of interest" requirements of Sections
368(a)(1)(A) and 368(a)(2)(E) of the Code; and (v) that following the
Effective Time, Glenayre will not take any actions that would cause
the Merger to fail to qualify as a reorganization within the meaning
of Sections 368(a)(1) and 368(a)(2)(E) of the Code.
Federal Income Tax Consequences to MUX Continuing Shareholders and
Option Holders
Assuming that the Merger constitutes a tax-free
reorganization under Sections 368(a)(l) and 368(a)(2)(E) of the Code,
(i) MUX Continuing Shareholders will not recognize gain or loss
upon the receipt of Glenayre Common Stock in exchange for their
shares of MUX Common Stock; (ii) any MUX Continuing
Shareholders receiving cash in lieu of a fractional share of Glenayre
Common Stock will recognize gain or loss equal to the difference
between the amount of cash received and the basis he would have had
in the fractional share of Glenayre Common Stock (such gain or
loss being a long-term capital gain or loss if the shares of MUX
Common Stock being surrendered for such Glenayre Common Stock were
held by such MUX Continuing Shareholder for more than one year);
(iii) each MUX Continuing Shareholder's tax basis in, and holding
period for, his shares of MUX Common Stock will carry over to the
Glenayre Common Stock received in exchange therefor (including
fractional shares of Glenayre Common Stock deemed received and then
redeemed as described in clause (ii) above); (iv) each of Glenayre,
Glenayre Sub and MUX will comply with all reporting obligations with
respect to the Merger required under the Code and the Treasury
Regulations thereunder; and (v), assuming the MUX Stock Options are
"incentive stock options" within the meaning of Section 422(b) of the
Code, MUX Option Holders will not recognize gain or loss as a result of
Glenayre's assumption of the MUX Stock Options, and the tax attributes
of the MUX Stock Options will not be changed by the Merger.
Any MUX Shareholder who exercises his right to dissent in
connection with the Merger will recognize capital gain or loss equal to
the difference between (i) the amount of cash and the fair market
value of any other property received and (ii) the shareholder's tax
basis in his shares of MUX Common Stock.
If the Merger were not to constitute a reorganization
under Section 368(a)(l) of the Code, each MUX Continuing
Shareholder would recognize gain or loss equal to the difference
between (i) the fair market value of the Glenayre Common Stock, cash
and other property received and (ii) his basis in his shares of
MUX Common Stock. Such gain or loss would be long-term capital gain
or loss ifsuch shares had been held for more than one year.
RIGHTS OF SHAREHOLDERS ELECTING TO EXERCISE THEIR RIGHTS TO DISSENT
Under the CGCL, each MUX Shareholder as of March 10, 1995 is
entitled to demand and receive payment of the fair value of all
or any portion of such holder's shares of MUX Common Stock pursuant
to Section 1300 et seq. of the CGCL owned by such holder if the
Merger is consummated. The fair value of such shares is determined as
of December 30, 1994, the last trading day before the first
announcement of the terms of the Merger. Any MUX Shareholder who
elects to perfect such holder's dissenter's rights and demands
payment of the fair value of such holder's shares of MUX Common Stock
must strictly comply with Section 1300 et seq. of the CGCL. The
following summary does not purport to be complete and is qualified in
its entirety by reference to Sections 1300 et seq. of the CGCL, the
text of which is attached as Annex II to this Proxy
Statement/Prospectus and is incorporated herein by reference. Any
holder of shares of MUX Common Stock considering demanding
dissenters' rights is advised to consult legal counsel. Dissenting
rights will not be available unless and until the Merger (or a similar
business combination) is consummated. To perfect the right to dissent
and receive the fair value of such holder's shares, the shareholder
must neither vote for the Merger nor return an executed proxy that is
left blank. A dissenting shareholder
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<PAGE>
must either vote against the Merger or abstain from voting. A
proxy returned without voting instructions will be voted in favor of
the Merger and as a result such MUX Shareholder will lose such
holder's dissenters' rights.
Within 10 days after the MUX Meeting, MUX will mail to each MUX
Shareholder who did not vote for the Merger notice (the "Notice")
of the approval of the Merger by the MUX Shareholders, accompanied by
a copy of Sections 1300-1304 of the CGCL. The Notice shall also
state the price determined by MUX to be the fair market value of the
Dissenting Shares and a brief description of the procedure to be
followed by a shareholder who elects to dissent.
Any dissenting MUX Shareholder who desires that MUX purchase his
shares of MUX Common Stock must make written demand upon MUX for
the purchase of such shares. The demand must be made no later than
30 days after the Notice was mailed to the shareholder. The MUX
Shareholder's demand must state the number and class of shares held of
record by the MUX Shareholder which the shareholder demands that MUX
purchase, as well as a statement by the MUX Shareholder as to what such
holder thinks the fair market value of such shares was as of the
day prior to the announcement of the Merger. The statement of
fair market value constitutes an offer by the MUX Shareholder to
sell the shares at such price. Neither voting against, abstaining
from voting nor failing to vote on the Merger constitutes such written
demand.
Within the same 30-day period following the mailing of the
Notice, the dissenting shareholder must submit to MUX for
endorsement certificates for any shares which the MUX Shareholder
demands MUX purchase. If MUX and the MUX Shareholder agree upon
the price of the Dissenting Shares, the dissenting MUX Shareholder
is entitled to the agreed price with interest at the legal rate on
judgments from the date of such agreement. Payment must be made within
30 days of the later of the date of the agreement between the MUX
Shareholder and MUX or the date the contractual conditions to the
Merger are satisfied.
If MUX and the shareholder cannot agree as to the fair market
value or as tothe fact that such shares are Dissenting Shares, such
MUX Shareholder may file within six months of the date of mailing
of the Notice a complaint with the California Superior Court for
the County of San Mateo demanding judicial determination of such
matters. MUX will then be required to make any payments in accordance
with such judicial determination. If the complaint is not filed within
the specified six-month period, the MUX Shareholder's rights as a
dissenter are lost.
Dissenting Shares lose their status as such if (i) MUX abandons
the Merger; (ii) the shares are transferred or are surrendered for
conversion into shares of another class; (iii) the MUX Shareholder
and MUX do not agree as to the fair market value of such shares and
a complaint is not filed within six months of the date the Notice was
mailed; or (iv) the dissenting MUX Shareholder withdraws, with the
consent of MUX, his demand for purchase of the Dissenting Shares.
At the Effective Time, the shares of MUX held by a MUX
Shareholder exercising his dissenters' rights will be canceled, and
such shareholder will be entitled to no further rights except the
right to receive payment of the fair value of such holder's shares
of MUX Common Stock. However, if the MUX Shareholder fails to
perfect or withdraws or loses such holder's rights as a dissenter
with respect to such holder's shares of MUX Common Stock, such
holder's shares of MUX Common Stock will be exchanged for Glenayre
Common Stock as provided in the Agreement of Merger.
Under Delaware law, shareholders of Glenayre are not entitled to
dissenters' rights in connection with the issuance of Glenayre Common
Stock in the Merger.
LEGAL MATTERS
The validity and legality of the Glenayre Common Stock offered
hereby and certain other legal matters will be passed upon for
Glenayre by Kennedy Covington Lobdell & Hickman, L.L.P., NationsBank
Corporate Center, Suite 4200, 100 North Tryon Street, Charlotte,
North Carolina 28202. Certain legal matters will be passed upon
for MUX and the MUX Shareholders by Gray Cary Ware & Freidenrich, 400
Hamilton Avenue, Palo Alto, California 94301 and by Robert E. Miller,
Esq., 1550 El Camino Real, Suite 220, Menlo Park, California
94025-4111.
62
<PAGE>
EXPERTS
The consolidated financial statements and supplemental schedules
of Glenayre and its subsidiaries at December 31, 1993 and 1992 and for
each of the three years in the period ended December 31,
1993 incorporated in this Proxy Statement/Prospectus by
reference to Glenayre's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993 have been audited by Deloitte & Touche LLP,
independent public accountants, as stated in their reports
incorporated by reference herein, and have been so included in
reliance upon the reports of such firm given upon their authority as
experts in accounting and auditing.
With respect to the unaudited interim financial information
for the nine month periods ended September 30, 1994 and 1993 which
is incorporated herein by reference, Deloitte & Touche LLP have
applied limited procedures in accordance with professional standards
for a review of such information. However, as statedin their report
included in Glenayre's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1994 and incorporated by reference
herein, they did not audit and they do not express an opinion
on that interim financial information. Accordingly, the degree
of reliance on their report on such information should be
restricted in light of the limited nature of the review procedures
applied. Deloitte & Touche LLP are not subject to the liability
provisions of Section 11 of the Securities Act of 1933 for their
report on the unaudited interim financial information because this
report is not a "report" or a "part" of the registration statement
prepared or certified by an accountant within the meaning of Sections 7
and 11 of the Act.
The consolidated financial statements of the GEMS Business
incorporated in this Proxy Statement/Prospectus by reference to
Glenayre's Annual Report on Form 10-K for its fiscal year ended
December 31, 1993 have been so incorporated in reliance on the
reports of Grant Thornton, independent accountants, given on the
authority of said firm as experts in accounting and auditing.
The consolidated financial statements of MUX and its subsidiaries
as of June 30, 1994 included in this Proxy Statement/Prospectus have
been audited by Shilling & Kenyon, Inc., independent public
accountants, as stated in their report appearing herein and have
been so included in reliance upon the reports of such firm and given
upon their authority as experts in accounting and auditing.
The consolidated financial statements of MUX and its
subsidiaries as of June 30, 1993 included in this Proxy
Statement/Prospectus have been audited by Ireland San Filippo &
Company, independent public accountants, as stated in their report
appearing herein and have been so included in reliance upon the
reports of such firm and given upon their authority as experts in
accounting and auditing.
63
<PAGE>
WESTERN MULTIPLEX CORPORATION
Index to Consolidated Financial Statements
Page
Consolidated Balance Sheet as of September 30, 1994 F-2
Consolidated Statement of Income for the
three months ended September 30, 1994 F-3
Consolidated Statement of Stockholders' Equity
for the three months ended September 30, 1994 F-4
Consolidated Statement of Cash Flows
for the three months ended September 30, 1994 F-5
Notes to September 30, 1994 Financial Statements F-6
Report of Shilling and Kenyon, Inc. F-8
Consolidated Balance Sheet as of June 30, 1994 F-9
Consolidated Statement of Income for the year ended
June 30, 1994 F-11
Consolidated Statement of Stockholders' Equity
for the year ended June 30, 1994 F-12
Consolidated Statement of Cash Flows for the
year ended June 30, 1994 F-13
Notes to June 30, 1994 Consolidated Financial Statements F-15
Report of Ireland San Filippo & Company F-22
Consolidated Balance Sheets as of June 30, 1993
and 1992 F-23
Consolidated Statements of Income and Expense
for the years ended June 30, 1993 and 1992 F-25
Consolidated Statements of Retained Earnings
for the years ended June 30, 1993 and 1992 F-26
Consolidated Statements of Cash Flows for the
years ended June 30, 1993 and 1992 F-27
Notes to June 30, 1993 Financial Statements F-29
F-1
<PAGE>
WESTERN MULTIPLEX CORPORATION
CONSOLIDATED BALANCE SHEET
(dollars in thousands, except per share amounts)
(unaudited)
September 30,
1994
ASSETS
Current Assets:
Cash and cash equivalents $ 1,181
Accounts receivable, less allowance 2,440
Inventories (Note 1) 2,556
Prepaid expenses and other assets 349
Total current assets 6,526
Property and equipment, net 941
TOTAL ASSETS $ 7,467
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 401
Accrued expenses 1,682
Current portion of long-term debt 197
Total current liabilities 2,280
Long-term debt, less current portion 351
Deferred income taxes 182
Total liabilities 2,813
Stockholders' Equity: (Note 3)
Common stock, no par value, 25,000,000 shares
authorized 757
Less: Stockholders' note receivable (13)
Retained earnings 3,910
Total stockholders' equity 4,654
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,467
See Notes to Consolidated Financial Statements.
F-2
<PAGE>
WESTERN MULTIPLEX CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share amounts)
(unaudited)
Three months ended September 30,
1994 1993
NET SALES $4,990 $2,960
COST AND EXPENSES
Cost of Sales 1,838 1,308
Sales, general and administrative 1,730 828
Research and development 392 300
Total costs and expenses 3,960 2,436
OPERATING INCOME 1,030 524
OTHER INCOME (EXPENSE)
Interest (net) (4) (9)
Other 11 9
Total other income (expenses) 7 -
INCOME BEFORE INCOME TAXES (Note 2) 1,037 524
PROVISION FOR INCOME TAXES 420 220
NET INCOME $ 617 $ 304
INCOME PER COMMON SHARE (Note 3) $ .08 $ .05
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
WESTERN MULTIPLEX CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(dollars in thousands)
(unaudited)
Common Stock Stockholder Total
Note Retained Stockholders'
Shares Amount Receivable Earning Equity
BALANCES
June 30, 1994 5,448 $ 749 - $ 3,288 $ 4,037
NET INCOME - - - 617 617
STOCK OPTION
ACTIVITY 25 8 (13) 5 -
BALANCES,
September 30, 1994 5,473 $ 757 $ (13) $ 3,910 $ 4,654
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
WESTERN MULTIPLEX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
Three months ended September 30,
1994 1993
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 299 $ 190
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (133) (123)
NET CASH USED IN INVESTING ACTIVITIES (133) (123)
CASH FLOWS FROM FINANCING ACTIVITIES:
Stock option activity (5) -
Payments on long term debt and capital
lease obligations (47) (94)
NET CASH USED IN FINANCING ACTIVITIES: (52) (94)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 114 (27)
CASH AND CASH EQUIVALENTS,
beginning of period 1,067 102
CASH AND CASH EQUIVALENTS,
end of period $1,181 $ 75
SUPPLEMENTAL DISCLOSURE OF NON-CASH
TRANSACTIONS:
Cash paid during the period of:
Interest $ 16 $ 13
Income taxes $ 970 $ 95
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
WESTERN MULTIPLEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(tabular amounts in thousands of dollars)
(unaudited)
The consolidated financial statements should be read in
conjunction with the audited financial statements and notes
thereto included in the Western Multiplex Corporation audited
financial statements for the year ended June 30, 1994.
The accompanying financial information is unaudited; however,
in the opinion of MUX, this information includes all adjustments
(consisting only of normal recurring adjustments)
necessary for a fair presentation of the financial
information therein.
The quarterly results of operations are not necessarily
indicative of the results that may be expected for the
entire year. MUX's financial results in any quarter are
highly dependent upon various factors, including timing and
size of customers orders and the shipment of products for
large orders. Large orders from customers can account for a
significant portion of products shipped in any quarter.
Accordingly, the shipment of products of such large orders can
dramatically affect the results of operations of any single
quarter.
NOTE 1 - INVENTORIES
Inventories consist of the following at September 30, 1994:
Raw materials $ 1,022
Work-in-process 554
Finished goods 980
$ 2,556
NOTE 2 - INCOME TAXES
MUX's consolidated tax provision was different from the
amount computed using the U.S. statutory income tax rate as
follows:
Three Months Ended
September 30,
1994 1993
Tax computed at federal statutory rate 34.0% 34.0%
State income taxes, net of federal
benefit 6.6 6.6
Research and development tax credits - (3.4)
Non-deductible expenses and other
items (.1) 4.8
40.5% 42.0%
F-6
<PAGE>
WESTERN MULTIPLEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(tabular amounts in thousands of dollars)
(unaudited)
NOTE 3 - STOCKHOLDERS EQUITY
Income per Common Share
Primary income per share was computed by dividing net income
by the weighted average number of shares of common stock
outstanding plus the shares that would be outstanding assuming
exercise of dilutive stock options, which are considered to be
common stock equivalents.
F-7
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders
Western Multiplex Corporation
We have audited the accompanying consolidated balance
sheet of Western Multiplex Corporation as of June 30, 1994,
and the related consolidated statements of income,
stockholders' equity and cash flows for the year then
ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit 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 audit
provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects,
the consolidated financial position of Western Multiplex
Corporation as of June 30, 1994, and the results of its
operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles.
Shilling & Kenyon, Inc.
San Jose, California
August 8, 1994
F-8
<PAGE>
WESTERN MULTIPLEX CORPORATION
CONSOLIDATED BALANCE SHEET
June 30, 1994
ASSETS
CURRENT ASSETS
Cash and cash equivalents - Note 3 $1,067,505
Accounts receivable, less allowance for
doubtful accounts of $20,000 - Notes 3 and 4 2,641,080
Inventories - Notes 2, 3 and 4 2,598,510
Prepaid expenses 34,617
Deferred income taxes - Note 9 287,896
Total current assets 6,629,608
PROPERTY AND EQUIPMENT - Notes 3,4 and 5
Office equipment 407,843
Test and production equipment 1,031,928
Equipment under capital lease obligations 632,726
Leasehold improvements 28,851
2,101,348
Less accumulated depreciation and amortization 1,207,304
894,044
OTHER ASSETS
Deposits 22,295
Other assets 76,381
98,676
$7,622,328
The accompanying notes are an integral part of these consolidated
financial statements.
F-9
<PAGE>
WESTERN MULTIPLEX CORPORATION
CONSOLIDATED BALANCE SHEET
June 30, 1994
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 50,580
Current portion of obligations under capital leases 182,654
Accounts payable 261,453
Accrued expenses - Note 6 1,623,909
Income taxes payable 922,960
Total current liabilities 3,041,556
LONG-TERM DEBT, less current portion - Note 4 31,505
OBLIGATIONS UNDER CAPITAL LEASES, less current portion - Note 5 329,812
DEFERRED INCOME TAXES - Note 9 182,000
COMMITMENTS - Note 10 -
STOCKHOLDERS' EQUITY - Note 8
Common stock, no par value, 25,000,000
shares authorized, 5,477,445 outstanding 749,132
Retained earnings 3,288,323
4,037,455
$7,622,328
The accompanying notes are an integral part of these consolidated
financial statements.
F-10
<PAGE>
WESTERN MULTIPLEX CORPORATION
CONSOLIDATED STATEMENT OF INCOME
Year Ended June 30, 1994
Amount Percent
NET SALES $15,759,232 100.0%
COST OF SALES 7,117,086 45.2
GROSS PROFIT 8,642,146 54.8
OPERATING EXPENSES
Sales and marketing 2,265,301 14.4
Engineering and development 1,511,463 9.6
General and administrative 1,948,091 12.3
5,724,855 36.3
OPERATING INCOME 2,917,291 18.5
OTHER INCOME (EXPENSE)
Interest (net) (26,630) (.1)
Other 14,429 -
(12,201) (.1)
INCOME BEFORE INCOME TAXES 2,905,090 18.4
PROVISION FOR INCOME TAXES - Note 9 1,220,000 7.7
NET INCOME $1,685,090 10.7%
INCOME PER COMMON SHARE $ .23
The accompanying notes are an integral part of these consolidated
financial statements.
F-11
<PAGE>
WESTERN MULTIPLEX CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Year Ended June 30, 1994
Total
Common Stock Retained Stockholders'
Shares Amount Earnings Equity
BALANCES,
July 1, 1993 5,444,945 $734,932 $1,603,233 $2,338,165
ISSUANCE OF COMMON
STOCK - Note 8 32,500 14,200 - 14,200
NET INCOME - - 1,685,090 1,685,090
BALANCES,
June 30, 1994 5,477,445 $749,132 $3,288,323 $4,037,455
The accompanying notes are an integral part of these consolidated
financial statements.
F-12
<PAGE>
WESTERN MULTIPLEX CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended June 30, 1994
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers $14,820,527
Cash paid to suppliers and employees (12,988,145)
Income taxes paid (306,863)
Interest paid (31,513)
Interest received 4,883
Net cash provided by operating activities 1,498,889
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (109,583)
Change in other assets (29,416)
Net cash used by investing activities (138,999)
CASH FLOWS FROM FINANCING ACTIVITIES
Notes payable to bank (250,000)
Payments on long term debt and capital lease obligations (158,692)
Proceeds from issuance of common stock 14,200
Net cash used by financing activities (394,492)
NET INCREASE IN CASH AND CASH EQUIVALENTS 965,398
CASH AND CASH EQUIVALENTS, July 1, 1993 102,107
CASH AND CASH EQUIVALENTS, June 30, 1994 $1,067,505
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS:
During the year ended June 30, 1994, the Company entered into
capital lease obligations for equipment totaling approximately
$367,700.
The accompanying notes are an integral part of these consolidated
financial statements.
F-13
<PAGE>
WESTERN MULTIPLEX CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)
Year Ended June 30, 1994
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
Net income $1,685,090
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization 336,125
Deferred income taxes (1,896)
Bad debts (20,491)
Cash provided by (used for):
Accounts receivable (932,643)
Inventories (957,497)
Prepaid expenses 15,764
Accounts payable (309,913)
Accrued expenses 769,317
Income taxes payable 915,033
Total adjustments (186,201)
Net cash provided by operating activities $1,498,889
The accompanying notes are an integral part of these consolidated
financial statements.
F-15
<PAGE>
WESTERN MULTIPLEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
June 30, 1994
NOTE 1 - DESCRIPTION OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
(a) Western Multiplex Corporation (the Company) was founded
and incorporated under the laws of California in December, 1979.
The Company is engaged in the development, manufacture, and
distribution of analog and digital microwave radio and baseband
equipment.
(b) The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiary,
Western Multiplex International Sales Corporation, a Domestic
International Sales Corporation (DISC). All significant intercompany
accounts have been eliminated.
(c) Revenue is recognized at the time products are shipped to
customers.
(d) Inventories are stated at the lower of average cost or
market.
(e) Property and equipment are stated at cost. Depreciation
is computed on the straight-line and accelerated methods, with
useful lives ranging from three to seven years. Leasehold
improvements are amortized over the shorter of the lease term or the
estimated useful life.
(f) The Company warrants certain products from between one
and five years after sale. A provision for estimated warranty costs
is recorded at the time of sale.
(g) All research and development costs are expensed as incurred.
(h) For purposes of the statement of cash flows, the Company
considers all highly liquid debt instruments purchased with a maturity
of three months or less to be cash equivalents.
(i) The Company accounts for income taxes in accordance with
statement of Financial Accounting Standards (SFAS) No. 109, Accounting
For Income Taxes.
Tax credits are recorded as a reduction of tax expense
when realized.
(j) Primary income per common share was computed by dividing
net income by the weighted average number of shares of common stock
outstanding plus the shares that would be outstanding assuming
exercise of dilutive stock options, which are considered to be common
stock equivalents.
F-16
<PAGE>
WESTERN MULTIPLEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June 30, 1994
NOTE 2 - INVENTORIES
Inventories consist of the following:
Raw materials $1,056,462
Work-in-process 357,939
Finished goods 1,184,109
$2,598,510
NOTE 3 - NOTE PAYABLE TO BANK
The Company has a $1,000,000 bank line of credit which
bears interest at the bank's prime rate (6.75% at June 30, 1994)
plus 1.25%. Maximum borrowings are limited to eighty percent of
eligible accounts receivable plus the lesser of $200,000 or twenty
percent of inventories. The line is secured by substantially all
the assets of the Company. The credit agreement requires the
Company, among other things, to maintain a minimum quick ratio of
.75 to 1, minimum working capital of $1,250,000 and a maximum debt
to net worth ratio of 1.25 to 1. There were no outstanding
borrowings on the line at June 30, 1994.
In addition, the Company has a $500,000 term debt facility
available under the above agreement through November, 1994 for the
purchase of equipment. There were no borrowings outstanding under
this facility at June 30, 1994.
NOTE 4 - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
<S> <C>
Note payable, secured by accounts receivable,
inventories and equipment, with monthly principal and interest
payments of $3,265 through November, 1995, with interest at the
Bank's prime rate plus 2% $ 55,485
Note payable, secured by accounts receivable,
inventories and equipment, with monthly principal and interest
payments of $950 monthly through November, 1996, with
interest at the Bank's prime rate plus 2% 26,600
82,085
Less current portion 50,580
$ 31,505
</TABLE>
F-16
<PAGE>
WESTERN MULTIPLEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June 30, 1994
NOTE 4 - LONG-TERM DEBT (Continued)
Maturities on long-term debt are as follows:
Year Ending
June 30,
1995 $ 50,580
1996 27,705
1997 3,800
$ 82,085
NOTE 5 - OBLIGATIONS UNDER CAPITAL LEASES
The Company leases equipment which is classified as capital
leases and consists of the following:
Equipment $632,726
Less accumulated amortization 164,346
$468,380
The capital leases expire on various dates through
February, 1999. The following is a schedule by year of future
minimum lease payments under these leases together with the present
value of the net minimum lease payments:
Year Ending
June 30,
1995 $231,723
1996 117,905
1997 108,435
1998 88,044
1999 43,569
Total payments 589,676
Less amounts representing interest 77,210
Present value of minimum lease payments 512,466
Current portion 182,654
Obligations under capital leases, less current portion $329,812
F-17
<PAGE>
WESTERN MULTIPLEX CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
June 30, 1994
NOTE 6 -ACCRUED EXPENSES
Accrued expenses consists of the following:
Wages and related taxes and benefits $647,543
ESOP payable 306,537
Bonus payable 394,759
Warranty accrual 175,000
Other 100,070
$1,623,909
NOTE 7 - EMPLOYEE BENEFIT PLANS
The Company has an Employee Stock Option Plan (ESOP) which
covers substantially all qualified employees. Contributions are
determined annually by the Board of Directors. The Company
contributed approximately $516,500 to the plan for the year ended
June 30, 1994.
In addition, the Company has a 401(k) plan which covers all
qualified employees. Semi-annual employer contributions to the plan
are made at the discretion of the Board of Directors. The employer
also matches 50% of employee contributions up to 2% of eligible
compensation. The Company contributed approximately $141,300 to the
plan for the year ended June 30, 1994.
NOTE 8 - STOCK OPTIONS
The Company has an incentive stock option plan that covers
substantially all employees. Under the provisions of the plan
options may be granted to employees to purchase common stock. The
option price under the plan is determined by the Board of Directors
and will not be less than the fair market value of the stock on the
date the option is granted. Options are granted for a period not to
exceed five years; some are exercisable at the date of grant, while
others are exercisable according to a vesting schedule. The Company
has the right of first refusal, to purchase at fair market value,
shares issued under the plan.
At June 30, 1994, 1,903,750 shares are fully vested and no
shares were available for future grant.
F-18
<PAGE>
WESTERN MULTIPLEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June 30, 1994
NOTE 8 - STOCK OPTIONS (Continued)
A summary of stock option activity follows:
Option
Shares Price
Balance, July 1, 1993 2,168,750 $.39-.51
Options granted 332,500 1.40
Options exercised (32,500) .39-.51
Balance, June 30, 1994 2,468,750 $.39-1.40
NOTE 9 - PROVISION FOR INCOME TAXES
The provision for income taxes consist of the following:
Current
Federal $1,032,200
State 297,800
Less research and development tax credits (100,000)
1,230,000
Deferred
Federal 12,000
State (22,000)
(10,000)
$1,220,000
The effective tax rate differs from the federal statutory
tax rate as follows:
Tax computed at federal statutory rate 34.0%
State income taxes, net of federal benefit 6.6
Research and development tax credits (3.4)
Non-deductible expenses and other items 4.8
42.0%
F-19
<PAGE>
WESTERN MULTIPLEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June 30, 1994
NOTE 9 - PROVISION FOR INCOME TAXES (Continued)
The tax effects of temporary differences that give rise to
deferred tax assets and deferred tax liabilities are as follows:
<TABLE>
<CAPTION>
<S> <C>
Deferred tax assets:
Accounts receivable, due to allowances for doubtful accounts $ 6,660
Inventories, due to reserves and capitalized costs for tax purposes 73,240
Warranty accrued 72,775
Vacation accrual 49,800
State taxes 85,421
Gross deferred tax assets 287,896
Deferred tax liabilities:
Depreciation (42,400)
Undistributed earnings of the DISC (139,600)
Gross deferred tax liabilities (182,000)
Net deferred tax assets $ 105,896
</TABLE>
NOTE 10 - COMMITMENTS
The Company has a noncancelable operating lease for its
office, manufacturing and warehousing facilities. The lease expires
on April 30, 1998 with scheduled rent increase after July, 1995.
Future minimum lease payment are approximately as follows:
Year Ending
June 30,
1995 $267,000
1996 293,000
1997 296,000
1998 246,000
$1,102,000
Total rent expense was approximately $271,500 for the year
ended June 30, 1994. The Company subleases a portion of the
facilities on a month to month basis. Sublease income was
approximately $31,800 for the year ended June 30, 1994.
F-20
<PAGE>
WESTERN MULTIPLEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
June 30, 1994
NOTE 12 -SUBSEQUENT EVENT
Subsequent to June 30, 1994, the Company authorized a 5
for 1 stock split. All share and per share amounts have been
restated to reflect the split.
F-21
<PAGE>
Independent Accountant's Report
August 19, 1993
Board of Directors
Western Multiplex Corporation
Belmont, California
We have audited the accompanying consolidated balance sheet of Western
Multiplex Corporation, Inc. (a California Corporation) and its subsidiary, as
of June 30, 1993, and the related consolidated statements of income and
expense, retained earnings, and cash flows for the year then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Western
Multiplex Corporation, Inc. and subsidiary as of June 30,1993, and the results
of their operations and their cash flows for the year then ended in conformity
with generally accepted accounting principles.
Ireland San Filippo & Company
F-22
<PAGE>
WESTERN MULTIPLEX CORPORATION
Consolidated Balance Sheets
ASSETS
June 30,
1993 1992
(Audited) (Unaudited)
Current assets:
Cash $ 102,107 $ 101,431
Accounts receivable - Notes 4 and 5 1,687,946 924,832
Inventories - Notes 3, 4 and 5 1,641,013 1,462,521
Prepaid expenses 50,381 12,265
Prepaid income taxes 10,294 3,256
Deferred income taxes - Note 12 139,000 81,659
Total current assets 3,630,741 2,585,964
Equipment and leasehold improvements -
Notes 4, 5 and 6:
Office equipment 245,536 207,764
Test and production equipment 1,049,258 1,012,783
Equipment under capital lease 304,020 -
obligations
Leasehold improvements 25,240 11,558
1,624,054 1,232,105
Less accumulated depreciation 871,179 714,015
752,875 518,090
Other assets:
Deposits 15,978 15,000
Other receivables 53,282 39,778
69,260 54,778
$ $4,452,876 3,158,832
The accompanying notes are an integral part of these consolidated financial
statements.
F-23
<PAGE>
WESTERN MULTIPLEX CORPORATION
Consolidated Balance Sheets
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30,
1993 1992
(Audited) (Unaudited)
Current liabilities:
Line of credit - Note 4 $ 250,000 $ 230,614
Notes payable - Note 5 67,024 116,447
Obligations under capital leases - 61,695 -
Note 6
Accounts payable 571,366 561,610
Accrued expenses:
Salaries and bonuses 222,919 67,492
Pension contribution - Note 8 219,017 30,500
Payroll and sales taxes 123,374 36,968
Income taxes 18,221 17,770
Vacation 128,014 91,708
Warranty reserve 66,000 4,987
Health insurance 45,354 -
Other 49,914 27,307
Total current liabilities 1,822,898 1,185,403
Long-term liabilities:
Notes Payable - Note 5 82,085 149,109
Obligations under capital leases - 174,728 -
Note 6
Deferred income taxes - Note 12 35,000 18,195
2,114,711 1,352,707
Commitment - Note 7
- -
Stockholders' equity:
Common stock, no par value,
5,000,000 shares authorized,
1,088,989 shares issued and 734,932 734,932
outstanding - Notes 8 and 9
Retained earnings 1,603,233 1,071,193
2,338,165 1,806,125
$ 4,452,876 $3,158,832
F-24
<PAGE>
WESTERN MULTIPLEX CORPORATION
Consolidated Statements of Income and Expense
Year Ended June 30,
1993 1992
(Audited) (Unaudited)
Sales - Note 10 $9,071,110 $ 5,851,465
Cost of goods sold 5,255,703 3,340,219
Gross profit 3,815,407 2,511,246
Operating expenses:
Sales and marketing 950,417 726,425
Engineering and development
(including research and 1,010,987 980,974
development of $712,948 and
$717,586)
General and administrative 999,075 678,208
2,960,479 2,385,607
Income from operations 854,928 125,639
Other income (expense):
Interest (net) (47,742) (47,177)
Gain on disposal of equipment 98 -
Other (108) 8,513
(47,752) (38,664)
Income before provision for taxes and
cumulative effect adjustment 807,176 86,975
Provision (benefit) for income taxes:
Current 315,672 19,982
Deferred (40,536) (60,175)
275,136 (40,193)
Income before effect of a change in 532,040 127,168
accounting principle
Cumulative effect on prior years of - 32,858
accounting change-Note 2
Net income $532,040 $160,026
Earnings per share of common stock:
Before effect of a change in $0.45 $0.12
accounting principle
Cumulative effect of the change in
accounting - $0.03
for income taxes
Net earnings per share $0.45 $0.15
The accompanying notes are an integral part of these consolidated
financial statements.
F-25
<PAGE>
WESTERN MULTIPLEX CORPORATION
Consolidated Statements of Retained Earnings
Year Ended June 30,
1993 1992
(Audited) (Unaudited)
Balance, beginning of year $ 1,071,193 $ 911,167
Net income 532,040 160,026
Balance, end of year $ 1,603,233 $ 1,071,193
The accompanying notes are an integral part of these consolidated
financial statements.
F-26
<PAGE>
WESTERN MULTIPLEX CORPORATION
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash
Year Ended June 30,
1993 1992
(Audited) (Unaudited)
Cash flows from operating activities:
Net income $ 532,040 $ 160,026
Adjustments to reconcile net
income to net
cash provided by operating
activities:
Depreciation 173,695 126,586
Deferred income taxes (40,536) (93,033)
Gain on disposal of (98) -
equipment
(Increase) decrease in operating
assets:
Accounts receivable (763,114) (252,961)
Inventories (178,492) (191,752)
Prepaid expenses (39,094) 13,667
Prepaid taxes (7,038) -
Increase (decrease) in operating
liabilities:
Accounts payable 9,756 255,098
Accrued expenses 596,081 96,214
Net cash provided by operating 283,200 113,845
activities
Cash flows from investing activities:
Purchases of fixed assets (315,569) (274,299)
Proceeds from sale of fixed assets 100 -
Increase in other receivables (13,504) (9,724)
Net cash used in investing activities (328,973) (284,023)
The accompanying notes are an integral part of these consolidated
financial statements.
F-27
<PAGE>
WESTERN MULTIPLEX CORPORATION
Consolidated Statements of Cash Flows (Continued)
Increase (Decrease) in Cash
Year Ended June 30,
1993 1992
(Audited) (Unaudited)
Cash flows from financing activities:
Proceeds from sale leaseback $ 186,242 $ -
agreements
Proceeds from notes payable - 202,300
Proceeds from line of credit (net) 19,386 166,958
Principal payments on notes (116,447) (135,723)
payable
Principal payments on lease (42,732) -
obligations
Decrease in employee receivables - 5,896
Net cash provided by financing 46,449 239,431
activities
Increase in cash 676 69,253
Cash, beginning of year 101,431 32,178
Cash, end of year $ 102,107 $ 101,431
Supplemental disclosures of cash flow
information
Cash paid during the year for:
Interest $ 51,287 $ 47,499
Income taxes $ 306,400 $ -
The accompanying notes are an integral part of these consolidated
financial statements.
F-28
<PAGE>
WESTERN MULTIPLEX CORPORATION
Notes to Financial Statements
June 30, 1993
(Audited - See accompanying accountant's report)
Note 1 - Summary of significant accounting policies:
Organization: - The Company was founded in 1978 and incorporated
under the laws of California in December 1979. The Company is
engaged in the development, manufacture, and distribution of
analog microwave radio and baseband equipment.
Principles of consolidation: - The consolidated financial
statements include the accounts of the Company and its
wholly-owned subsidiary, Western Multiplex International Sales
Corporation, a Domestic International Sales Corporation. All
significant intercompany accounts have been eliminated.
Revenue Recognition: - Revenue is recognized at the time products
are shipped to customers.
Inventories: - Inventories are stated at the lower of average
cost or market.
Equipment and leasehold improvements: - Equipment and leasehold
improvements are stated at cost. Major expenditures for
equipment acquisitions and those expenditures which substantially
increase the useful lives are capitalized. Expenditures for
maintenance, repairs, and minor replacements are expensed as
incurred. Depreciation is computed using the straight-line and
double declining balance methods, with useful lives ranging from
three to seven years. Leasehold improvements are amortized over
the shorter of the lease term or the estimated useful life.
Various accelerated methods are used for income tax reporting
purposes.
Income taxes: - Income taxes are provided for the tax effects of
transactions reported in the financial statements and consist of
taxes currently due plus deferred taxes. Deferred taxes relate
primarily to differences between the bases of equipment, and the
recognition of certain accrued expenses for financial and income
tax reporting purposes. The deferred taxes represent the future
tax return consequences of those differences, which will either
be taxable or deductible when the assets and liabilities are
recovered or settled.
Reclassification: - Certain balances as of June 30, 1992 have
been reclassified to conform to the current period's presentation
format. This reclassification does not alter the financial
position or results of operations previously reported for the
period ended June 30, 1992.
F-29
<PAGE>
WESTERN MULTIPLEX CORPORATION
Notes to Financial Statements
June 30, 1993
(Audited - See accompanying accountant's report)
Note 2 - Change in accounting principle:
Effective July 1, 1991, the Company adopted Statement of
Financial Accounting Standards No. 109, Accounting for Income
Taxes, which requires an asset and liability approach for
financial accounting and reporting for income taxes. Deferred
income tax assets and liabilities are computed annually for
differences between the financial statement and tax bases of
assets and liabilities that will result intaxable or deductible
amounts in the future based on enacted tax laws and rates
applicable to the periods in which the differences are expected
to affect taxable income. Valuation allowances are established
when necessary to reduce deferred tax assets to the amount
expected to be realized. Income tax expense is the tax payable or
refundable for the period plus or minus the change during the
period in deferred tax assets and liabilities.
Note 3 - Inventories:
Inventories at June 30 are comprised of:
1993 1992
(unaudited)
Raw Material $ 928,877 $ 762,974
Work-in-process 501,167 396,135
Finished goods 210,969 303,412
$1,641,013 $1,462,521
Note 4 - Line of credit:
The Company maintains a line of credit with interest computed at
1.25% over the Bank's "base" rate.Maximum borrowings are limited
to the lesser of $700,000 or eighty five percent of eligible
accounts receivable. The line is secured by accounts receivable,
inventory and equipment and contains certain restrictive
covenants. The line contains a personal guarantee by two of the
stockholders. Outstanding borrowings on the line at June 30, 1993
and 1992 were $250,000 and $230,614, respectively.
F-30
<PAGE>
WESTERN MULTIPLEX CORPORATION
Notes to Financial Statements
June 30, 1993
(Audited - See accompanying accountant's report)
Note 5 - Notes payable:
Notes payable consist of the following at June 30:
1993 1992
(unaudited)
Comerica Bank - California; secured
by accounts receivable, inventory
and equipment, $5,806 principal and
interest payable monthly through $ 16,444 $ 86,110
November 1993 with interest at 2%
above base rate
Comerica Bank - California; secured
by accounts receivable, inventory
and equipment, $3,265 principal and
interest payable monthly through 94,665 133,846
November 1995 with interest at 2%
above base rate
Comerica Bank - California; secured
by accounts receivable,inventory
and equipment,
$950 principal and interest payable
monthly through November 1996 with 38,000 45,600
interest at 2% above base rate
149,109 265,556
(67,024) (116,447)
$82,085 $149,109
Principal payments required to be made over the next four years
are as follows:
1994 $ 67,024
1995 50,580
1996 27,705
1997 3,800
$ 149,109
The notes contain certain restrictive covenants.
F-31
<PAGE>
WESTERN MULTIPLEX CORPORATION
Notes to Financial Statements
June 30, 1993
(Audited - See accompanying accountant's report)
Note 6 - Obligations under capital lease:
The Company has entered into capital lease agreements for
equipment with an aggregate cost of $304,020. The leases, which
expire at various dates through December 1997, require monthly
lease payments aggregating $7,039. Interest on these leases
range from 10% to 11% per annum.
The annual obligations under these agreements are as follows:
Year ending Amount
June 30,
1994 $ 83,691
1995 84,467
1996 59,700
1997 48,915
1998 9,472
Total payments 286,245
Less amounts representing 49,822
interest
Present value of minimum lease 236,423
payments
Less portion due within one year 61,695
Portion due after one year $ 174,728
F-32
<PAGE>
WESTERN MULTIPLEX CORPORATION
Notes to Financial Statements
June 30, 1993
(Audited - See accompanying accountant's report)
Note 7 - Commitment:
The Company has entered into a non-cancellable operating lease
for office space in its Belmont facility commencing on July 1,
1990. The lease was amended effective May 1, 1993 and extended
to expire on April 30, 1998. The amendment stipulates scheduled
rent increases after June 1993 and July 1995 to offset inflation.
The minimum annual lease obligation is summarized as follows:
Year ending Lease Payments
June 30, required
1994 $ 266,919
1995 266,919
1996 293,309
1997 295,708
1998 246,424
$ 1,369,279
Total rent expense included in costs and expenses at June 30,
1993 and 1992 was $189,582 and $169,970, respectively. Certain
portions of the facilities are subleased on a month-to-month
basis. Sublease income was approximately $31,000 in 1993 and
$28,000 in 1992.
Note 8 - Employee pension plan:
The Company maintains an Employee Stock Ownership Plan which
covers substantially all qualified employees. For the years
ended June 30, 1993 and 1992, the Company contributed $219,017
and $39,000, respectively, to the plan.
Note 9 - Stock options:
The Company's incentive stock option plan covers substantially
all employees. Under the provisions of the Plan, the Board of
Directors has the authority to determine which employees will be
granted options.The Board also determines when options will be
granted.
F-33
<PAGE>
WESTERN MULTIPLEX CORPORATION
Notes to Financial Statements
June 30, 1993
(Audited - See accompanying accountant's report)
Note 9 - Stock options (continued):
The Company has the right of first refusal, to purchase at fair
market value, shares distributed under the Plan. If the shares
are not purchased by the Company, the Plan has the right to
acquire such shares, at current fair market value.
Options may be granted at an option price, not less than the fair
market value, as determined by the Board of Directors on the date
of grant. Options are granted for a period not to exceed five
years and some are exercisable at the date of grant, while others
are exercisable according to a vesting schedule. When options
are repurchased, the excess of the purchase price over the option
price is charged to retained earnings.
A summary of stock option activity is as follows:
Number Per Total
of Shares Share Amount
June 30, 1991,
(unaudited)
Outstanding 272,500 $1.95 to $3.20 $ 588,350
Granted 57,750 $2.10 121,275
Exercised - - -
Terminated - - -
June 30, 1992,
(unaudited)
Outstanding 330,250 $1.95 to $3.20 $ 709,625
Granted 142,500 $2.50 to $2.53 345,920
Exercised - - -
Terminated (40,000) $1.95 to $3.20 (84,250)
June 30, 1993,
Outstanding 432,750 $1.95 to $3.20 $ 971,295
Exercisable 295,250
F-34
<PAGE>
WESTERN MULTIPLEX CORPORATION
Notes to Financial Statements
June 30, 1993
(Audited - See accompanying accountant's report)
Note 10 - Major customers:
Sales to customers constituting 10% or more of net sales are as
follows:
1993 1992
Customer A 11% Less than 10%
Customer B 10% Less than 10%
Note 11 - Noncash financing transactions:
During the year ended June 30, 1993, the Company acquired certain
equipment through noncash financing as follows:
Cost of equipment $ 100,377
Less cash paid (7,464)
Amount financed $ 92,913
Note 12 - Deferred income taxes:
The basis of equipment exceeds its tax basis by the cummulative
amount that accelerated depreciation exceeds straight-line
depreciation. The excess will be taxable in future periods
through reduced depreciation deductions.
The income tax provision differs from the expense that would
result from applying Federal and State statutory tax rates to
income before income taxes because certain income is not taxable,
and certain expenses are not deductible for tax puposes.
F-35
<PAGE>
WESTERN MULTIPLEX CORPORATION
Notes to Financial Statements
June 30, 1993
(Audited - See accompanying accountant's report)
Note 12- Deferred income taxes (continued):
Deferred tax assets (liabilities) are comprised of the following
at June 30, 1993:
Accrued warranty expense $ 29,000
Accrued vacation expense 36,000
(section mark) 263(a) Adjustment 36,000
Accrued medical insurance 19,000
State tax 19,000
Deferred tax assets 139,000
Less deferred tax assets valuation -
allowance
Net deferred tax asset $ 139,000
Depreciation 35,000
Total deferred tax liabilities (35,000)
Net deferred taxes $ 104,000
F-36
<PAGE>
GLENAYRE TECHNOLOGIES, INC.
INDEX TO PRO FORMA FINANCIAL INFORMATION
Page
Pro Forma Condensed Consolidated Income Statement for the year
ended December 31, 1993 . . . . . . . . . . . . . . . . . . . . . . . . F-39
Pro Forma Condensed Consolidated Income Statement for the nine
months ended September 30, 1994 . . . . . . . . . . . . . . . . . . . . F-40
Pro Forma Condensed Consolidated Balance Sheet as of September 30, 1994 . F-41
Notes to September 30, 1994 Pro Forma Condensed Consolidated Balance
Sheet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-42
F-37
<PAGE>
PRO FORMA CONDENSED FINANCIAL INFORMATION
(Unaudited)
Glenayre Technologies, Inc.
The unaudited Pro Forma Financial Information presented below to give
effect to the Merger as if it had been consummated at January 1, 1993 for the
fiscal year ended December 31, 1993 has been derived from the audited
consolidated financial statements of Glenayre and from the consolidated
financial statements of MUX for the year ended December 31, 1993, which are
unaudited because MUX's fiscal year ends June 30. The unaudited Pro Forma
Financial Information presented below to give effect to the Merger as if it
had been consummated at January 1, 1994 for the nine month period ended
September 30, 1994 has been derived from unaudited consolidated financial
statements of Glenayre and MUX, which in the opinion of Glenayre's and MUX's
management, respectively, include all adjustments (which include only normal
recurring adjustments) necessary to present fairly the information set forth
therein. Results of operations for a nine month period are not necessarily
indicative of results of operations for a full year.
For presentation purposes, MUX has reclassified financial captions to
reflect the method used by Glenayre for reporting its results of operation.
The Pro Forma Financial Information is presented for informational
purposes only and does not purport to present the actual results of operations
which would have been achieved had the Merger been consummated at January 1,
1993 and January 1, 1994 for Statement of Income Data for the fiscal year
ended December 31, 1993 and nine months ended September 30, 1994,
respectively, and at September 30, 1994 for the Balance Sheet Data, or to
reflect the results of operations which may be achieved in the future. The
information provided in the Pro Forma Financial Information is qualified in
its entirety by, and should be read in conjunction with the Glenayre
Consolidated Financial Statements and Management's Discussion and Analysis
which are incorporated herein by reference and the MUX Consolidated Financial
Statements and Management's Discussion and Analysis which are contained
elsewhere herein.
F-38
<PAGE>
GLENAYRE TECHNOLOGIES, INC.
PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1993
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Pro Forma Adjustment Pro
Glenayre MUX Adjustments Reference Forma
<S> <C> <C> <C> <C> <C>
Net sales $ 136,139 $ 12,133 $ 148,272
Costs and expenses
Cost of sales 60,561 5,971 66,532
Selling, general and administrative
expense 31,638 2,907 34,545
Research and development expense 11,843 1,084 12,927
Depreciation and amortization expense 5,059 218 $ 776 A 6,053
Total costs and expenses 109,101 10,180 776 120,057
Income from operations 27,038 1,953 (776) 28,215
Other income (expense)
Interest income (expense), net (2,828) (34) (2,862)
Other, net (49) 5 (44)
Total other income (expenses), net (2,877) (29) (2,906)
Income from continuing operations before
income taxes and extraordinary item 24,161 1,924 (776) 25,309
Provision for income taxes 461 747 1,208
Income from continuing operations
before extraordinary item $ 23,700 $ 1,177 $ (776) $ 24,101
Income from continuing operations
before extraordinary item per
share - primary $1.08 .17 1.06
Number of shares used to compute
primary per share data, adjusted for
January 5, 1995 3 for 2 stock split 21,955 6,762 750 B 22,705
A Increase in amortization expense:
Amortization for the period January 1, 1993 to December 31, 1993 of excess of cost over
value assigned to net assets acquired (on a straight-line basis over 30 years) $ 776
B Increase in number of shares used to compute primary per share data:
Issuance of common stock for MUX shares and options 750
</TABLE>
F-39
<PAGE>
GLENAYRE TECHNOLOGIES, INC.
PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Pro Forma Adjustment Pro
Glenayre MUX Adjustments Reference Forma
<S> <C> <C> <C> <C> <C>
Net sales $ 123,791 $ 14,087 $ 137,878
Costs and expenses
Cost of sales 52,906 5,963 58,869
Selling, general and administrative expense 29,016 4,081 33,097
Research and development expense 11,620 1,172 12,792
Depreciation and amortization expense 4,302 291 $ 582 A 5,175
Total costs and expenses 97,844 11,507 582 109,933
Income from operations 25,947 2,580 (582) 27,945
Other income (expense)
Interest income (expense), net 2,997 (15) 2,982
Other, net (410) 2 (408)
Total other income (expenses), net 2,587 (13) 2,574
Income from continuing operations before
income taxes 28,534 2,567 (582) 30,519
Provision for income taxes 5,083 1,063 6,146
Income from continuing operations $ 23,451 $ 1,504 $ (582) $ 24,373
Income from continuing operations per
share - primary 0.90 .20 0.91
Number of shares used to compute primary
per share data, adjusted for January 5, 1995
3 for 2 stock split 25,977 7,337 750 B 26,727
A Increase in amortization expense:
Amortization for the period January 1, 1994 to September 30, 1994 of excess of cost over
value assigned to net assets acquired (on a straight-line basis over 30 years) $ 582
B Increase in number of shares used to compute primary per share data:
Issuance of common stock for MUX shares and options 750
</TABLE>
F-40
<PAGE>
GLENAYRE TECHNOLOGIES, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1994
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Pro Forma Adjustment Pro
Glenayre MUX Adjustments Reference Forma
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 85,057 $ 1,181 $ 1,402 A $ 87,640
Accounts receivable 35,088 2,440 37,528
Trade notes receivable, current 4,921 4,921
Inventories 21,196 2,556 23,752
Deferred income taxes 4,100 4,100
Prepaid expenses and other current assets 3,331 349 3,680
Total current assets 153,693 6,526 1,402 161,621
Trade notes receivable 11,376 11,376
Property, plant and equipment 15,621 941 16,562
Goodwill and intangibles 62,108 23,285 B 85,393
Deferred income taxes 23,548 978 C 24,526
Other assets 2,314 2,314
TOTAL ASSETS $268,660 $ 7,467 $25,665 $301,792
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 5,783 $ 401 $ $ 6,184
Accrued liabilities 27,536 1,682 1,223 D 30,441
Current portion of long term debt 218 197 415
Total current liabilities 33,537 2,280 1,223 37,040
Long term debt, less current portion 1,804 351 2,155
Other liabilities 683 182 865
Stockholders' equity:
Shares issued and outstanding at
September 30, 1994:
Historical 24,694,068
Pro Forma 25,444,068 329 15 E 344
Contributed capital 211,576 744 28,337 F 240,657
Retained earnings from February 1, 1988 20,854 3,910 (3,910) G 20,854
Unearned stock compensation (123) (123)
Total stockholders' equity 232,636 4,654 24,442 261,732
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $268,660 $ 7,467 $ 25,665 $301,792
</TABLE>
See Notes to Pro Forma Condensed Consolidated Balance Sheet as of
September 30, 1994
F-41
<PAGE>
GLENAYRE TECHNOLOGIES, INC.
Notes to Pro Forma Condensed Consolidated Balance Sheet
SEPTEMBER 30, 1994
(Unaudited)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
<S> <C>
A Increase in cash:
Cash received from exercise of MUX options $ 1,402
B Increase in goodwill:
Excess of cost over value assigned to net assets acquired (see note H) $ 23,285
C Increase in deferred income taxes:
Change in valuation reserve of deferred tax asset due to increased
future earnings estimates after merger $ 978
D Increase in accrued liabilities:
Accrual of direct acquisition costs paid after closing (see note H) $ 1,194
SEC registration filing fee for 750,000 shares 29
$ 1,223
E Increase in common stock:
Issuance of common stock to MUX
(750,000 shares at $.02) $ 15
F Increase in contributed capital:
Issuance of common stock to MUX
(750,000 shares at $38.8133) $ 29,110
SEC registration filing fee for 750,000 shares (29)
Elimination of MUX historical equity (744)
$ 28,337
G Decrease in retained earnings:
Elimination of MUX historical equity $ (3,910)
H The following is a pro forma computation of the purchase price
as of the Closing Date:
Common stock issued (750,000 shares x estimated market price on
the Closing Date of $38.8333 per share) $ 29,125
Direct Costs of the Acquisition 1,194
Total purchase price $ 30,319
Allocation of purchase price:
Historical book value of total assets of MUX as of September 30, 1994 $ 4,654
(Management believes that fair value approximates net book
value for all tangible assets.)
Effect on Deferred Tax Asset due to Merger 978
Cash received from exercise of MUX options 1,402
Excess of cost over value assigned to net assets acquired (goodwill
and intangibles) 23,285
Total purchase price $ 30,319
</TABLE>
F-42
<PAGE>
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Section 102(7) of the DGCL enables a Delaware corporation to
eliminate or limit, through provisions in its original or amended
articles of incorporation, the personal liability of a director for
violations of the director's fiduciary duties, except (i) for any
breach of the director's duty of loyalty to the corporation or its
shareholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii)
any liability imposed pursuant to Section 174 of the DGCL (providing
for liability of directors for unlawful payment of dividends or
unlawful stock purchases or redemptions) or (iv) for any transaction
from which a director derived an improper personal benefit. The
Restated Certificate of Incorporation of Glenayre contains provisions
limiting the personal liability of its directors to the fullest extent
permitted by the DGCL.
Section 145 of the DGCL provides that a Delaware corporation may
indemnify any persons, including officers and directors, who are, or
are threatened to be made, parties to any threatened, pending or
completed legal action, suit or proceeding, whether civil, criminal,
administrative, or investigative (other than an action by or in the
right of such corporation), by reason of the fact that such person is or
was an officer, director, employee or agent of such corporation, or is
or was serving at the request of such corporation as a director,
officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees),
judgments, fines, and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit
or proceeding, provided, such officer, director, employee, or agent
acted in good faith and in a manner he or she reasonably believed to be
in or not opposed to the corporation's best interests and, with
respect to criminal proceedings, had no reasonable cause to believe
that the challenged conduct was unlawful. A Delaware corporation
may indemnify officers and directors in an action brought by or in
the right of the corporation under the same conditions, except that
no indemnification is permitted without judicial approval if the
officer or director is adjudged to be liable to the corporation. Where
an officer or director is successful on the merits or otherwise in the
defense of any action referred to above, the corporation must
provide indemnification against the expenses (including attorneys'
fees) that such officer or director actually and reasonably incurred.
The Restated Certificate of Incorporation of Glenayre
provides for indemnification of directors and officers of the
Company to the fullest extent permitted by the DGCL.
Section 145(g) of the DGCL authorizes a Delaware corporation to
provide liability insurance for directors and officers for certain
losses arising from claims or charges made against them while acting in
their capacities as directors or officers of the corporation. Glenayre
has a policy insuring its directors and officers and directors and
officers of its subsidiary companies and Glenayre and its subsidiaries
to the extent they may be required or permitted to indemnify such
directors or officers, against certain liabilities arising from acts or
omissions in the discharge of their duties that they shall become legally
obligated to pay.
<TABLE>
<CAPTION>
Item 21. Exhibits.
<S> <C>
2.1 Acquisition Agreement and all exhibits thereto, including the Agreement
of Merger attached thereto as Exhibit C (filed herewith as Annex I)
2.2 Schedules to the Acquisition Agreement (previously filed).
5 Opinion and Consent of Kennedy Covington Lobdell & Hickman, L.L.P.
(previously filed).
8 Opinion ofKennedy Covington Lobdell & Hickman,L.L.P. (previously filed).
II-1
<PAGE>
23.1 Consent of Deloitte & Touche LLP (previously filed).
23.2 Consent of Kennedy Covington Lobdell & Hickman, L.L.P. (see Exhibit 5).
23.3 Consent of Schilling & Kenyon Inc. (previously filed)
23.4 Consent of Grant Thornton. (previously filed)
23.5 Consent of Ireland San Filippo & Company. (previously filed)
24 Power of Attorney (see page II-4) (previously filed)
99.1 Form of Proxy (filed herewith)
99.2 Form of Acknowledgment and Transmittal Letter (Indemnifying
Shareholder) (previously filed)
99.3 Form of Acknowledgment and Transmittal Letter (Non-Indemnifying
Shareholder) (previously filed)
99.4 Form of Acknowledgment (Indemnifying Option Holder) (previously filed)
99.5 Form of Acknowledgment (Non-Indemnifying Option Holder) (previously filed)
99.6 Assessment of Western Multiplex Corporation prepared by Trott
Communications Group, Inc. (filed herewith)
</TABLE>
Item 22. Undertakings.
(a) The undersigned Registrant hereby undertakes:
(1) to file during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or event arising
after the effective date of the registration statement (or the
most recent post- effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement; and
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information statement.
(2) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement related to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(3) to remove from registration by means of post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of
1933, each filing of the registrant's annual report pursuant to
section 13(a) or section 15(d) of the Securities Exchange Act of
1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant
II-2
<PAGE>
to section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
(c)(1) The undersigned registrant hereby undertakes as
follows: that prior to any public reoffering of the securities
registered hereunder through use of a prospectus which is a part of
this registration statement, by any person or any party who is deemed
to be an underwriter within the meaning of Rule 145(c), the issuer
undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters,
in addition to the information called for by the other Items of the
applicable form.
(2) The Registrant undertakes that every prospectus: (i) that is
filed pursuant to the paragraph immediately preceding, or (ii) that
purports to meet the requirements of Section 10(a)(3) of the Act and is
used in connection with an offering of securities subject to Rule
415, will be filed as a part of an amendment to the registration
statement and will not be used until such amendment is effective, and
that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered,
the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
(e) The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the
prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form within
one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt
means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through
the date of responding to the request.
(f) The undersigned registrant hereby undertakes to supply by
means of a post-effective amendment all information concerning a
transaction, and the company being acquired involved therein, that was
not the subject of and included in the registration statement when it
became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
has duly caused this Amendment No. 2 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on March 23,
1995.
Glenayre Technologies, Inc.
By: /s/ Clarke H. Bailey
Name: Clarke H. Bailey
Title: Vice Chairman of the Board and
Chairman of the Executive Committee
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 2 to the Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.
Signature Capacity Date
* Director and Chairman March 23, 1995
Gerald B. Cramer
/s/ Clarke H. Bailey Director, Vice Chairman March 23, 1995
Clarke H. Bailey and Chairman of the
Executive Committee
* Director and Vice Chairman March 23, 1995
John J. Hurley
* Director, President and Acting March 23, 1995
Ramon D. Ardizzone Chief Executive Officer
(Principal Executive Officer)
* Director March 23, 1995
Barry W. Gray
* Director March 23, 1995
Thomas C. Israel
* Director March 23, 1995
Alma M. McConnell
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* Director March 23, 1995
Edward J. Rosenthal
* Director March 23, 1995
Thomas E. Skidmore
* Executive Vice President, March 23, 1995
Stanley Ciepcielinski Chief Financial Officer,
Secretary and Treasurer
(Principal Financial Officer)
* Controller and Chief March 23, 1995
Billy C. Layton Accounting Officer (Principal
Accounting Officer)
_____________
*By /s/ Clarke H. Bailey
Clarke H. Bailey, Attorney in Fact
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
EXHIBITS
ITEM 21(a)
Amendment No. 2
to
FORM S-4
GLENAYRE TECHNOLOGIES, INC.
Commission File No. 0-15761
EXHIBIT INDEX
Exhibit
Number Description Page
2.1 Acquisition Agreement and all schedules thereto A-1
including the Agreement of Merger attached thereto
as Exhibit C (filed herewith as Annex I)
99.1 Form of Proxy
99.6 Assessment of Western Multiplex Corporation prepared by Trott
Communications Group, Inc.
<PAGE>
ACQUISITION AGREEMENT
among
GLENAYRE TECHNOLOGIES, INC.,
MUX ACQUISITION CORP.,
WESTERN MULTIPLEX CORPORATION
and
CERTAIN EQUITY HOLDERS OF
WESTERN MULTIPLEX CORPORATION
Dated as of January 3, 1995
<PAGE>
TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS AND CERTAIN RULES OF CONSTRUCTION . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Certain Rules of Construction . . . . . . . . . . . . . . . . 6
ARTICLE 2
THE MERGER . . . . . . . . . . . . . . 6
2.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2 The Closing . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.3 Effective Time . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 3
ARTICLES OF INCORPORATION AND BYLAWS
AND OFFICERS AND DIRECTORS OF THE SURVIVING CORPORATION . . . 7
3.1 Articles of Incorporation . . . . . . . . . . . . . . . . . . 7
3.2 Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.3 Directors . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.4 Officers . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 4
CONVERSION OF MUX COMMON STOCK; EXCHANGE OF CERTIFICATES . . 8
4.1 Conversion of MUX Common Stock . . . . . . . . . . . . . . . 8
4.2 Fractional Shares . . . . . . . . . . . . . . . . . . . . . . 9
4.3 Exchange of Certificates . . . . . . . . . . . . . . . . . . 9
4.4 Distributions with Respect to Unexchanged Shares of MUX
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . 10
4.5 MUX Stock Options . . . . . . . . . . . . . . . . . . . . . . 11
4.6 Withholding Rights . . . . . . . . . . . . . . . . . . . . . 12
4.7 Dissenting Shares. . . . . . . . . . . . . . . . . . . . . . 12
4.8 Transaction Expenses . . . . . . . . . . . . . . . . . . . . 13
4.9 Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.10 Application of Indemnity Pool to a Loss. . . . . . . . . . . 15
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF MUX
AND THE INDEMNIFYING EQUITY HOLDERS . . . . . . . . 17
5.1 Organization and Qualification . . . . . . . . . . . . . . . 17
5.2 Articles of Incorporation; Bylaws; Minute Books . . . . . . . 18
5.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . 18
5.4 Authority Relative to this Agreement . . . . . . . . . . . . 19
5.5 No Conflict; Required Filings and Consents . . . . . . . . . 20
5.6 Other Interests . . . . . . . . . . . . . . . . . . . . . . . 20
5.7 Financial Statements . . . . . . . . . . . . . . . . . . . . 20
5.8 Subsequent Events . . . . . . . . . . . . . . . . . . . . . . 21
5.9 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . 22
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5.10 Employees and Fringe Benefit Plans . . . . . . . . . . . . . 23
5.11 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . 25
5.12 Condition of Tangible Assets . . . . . . . . . . . . . . . . 29
5.13 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.14 Arms-Length Transactions . . . . . . . . . . . . . . . . . . 31
5.15 Lawfully Operating . . . . . . . . . . . . . . . . . . . . . 32
5.16 No Litigation . . . . . . . . . . . . . . . . . . . . . . . . 32
5.17 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . 33
5.18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.19 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.20 Glenayre Stock Ownership . . . . . . . . . . . . . . . . . . 33
5.21 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . 33
5.22 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.23 Warranty and Product Liability Matters . . . . . . . . . . . 34
5.24 Warranty, Repurchase and Other Service Obligations . . . . . 34
5.25 Customers and Suppliers . . . . . . . . . . . . . . . . . . . 34
5.26 Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.27 Prospective Changes . . . . . . . . . . . . . . . . . . . . . 34
5.28 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF GLENAYRE AND MERGER SUB . . 35
6.1 Organization and Qualification . . . . . . . . . . . . . . . 35
6.2 Certificate of Incorporation and Bylaws. . . . . . . . . . . 35
6.3 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . 35
6.4 Authority Relative to this Agreement. . . . . . . . . . . . . 36
6.5 No Conflict; Required Filings and Consents. . . . . . . . . . 36
6.6 SEC Reports. . . . . . . . . . . . . . . . . . . . . . . . . 37
6.7 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.8 Federal Income Tax Representations . . . . . . . . . . . . . 38
ARTICLE 7
COVENANTS . . . . . . . . . . . . . . 39
7.1 Covenants of Glenayre and MUX . . . . . . . . . . . . . . . . 39
7.2 Covenants of MUX . . . . . . . . . . . . . . . . . . . . . . 41
7.3 Covenants of Glenayre . . . . . . . . . . . . . . . . . . . . 44
ARTICLE 8
CONDITIONS . . . . . . . . . . . . . . 45
8.1 Conditions to Each Party's Obligation to Effect the Merger . 45
8.2 Conditions to Obligation of MUX to Effect the Merger . . . . 46
8.3 Conditions to Obligation of Glenayre and Merger Sub to
Effect the Merger . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE 9
INDEMNIFICATION . . . . . . . . . . . . . 49
9.1 Indemnification . . . . . . . . . . . . . . . . . . . . . . . 49
9.2 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
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9.3 Definition of Loss or Losses . . . . . . . . . . . . . . . . 50
9.4 Appointment of Representative . . . . . . . . . . . . . . . . 51
ARTICLE 10
TERMINATION . . . . . . . . . . . . . . 52
10.1 Termination by Mutual Consent . . . . . . . . . . . . . . . . 52
10.2 Termination by Either Glenayre or MUX . . . . . . . . . . . . 52
10.3 Termination by MUX . . . . . . . . . . . . . . . . . . . . . 52
10.4 Termination by Glenayre . . . . . . . . . . . . . . . . . . . 52
10.5 Effect of Termination and Abandonment . . . . . . . . . . . . 53
10.6 Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE 11
GENERAL PROVISIONS . . . . . . . . . . . . 53
11.1 Effectiveness of Representations and Warranties . . . . . . . 53
11.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
11.3 Assignment; Binding Effect; Benefit . . . . . . . . . . . . . 55
11.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . 55
11.5 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . 56
11.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 56
11.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 56
11.8 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
11.9 Severability . . . . . . . . . . . . . . . . . . . . . . . . 56
11.10 Enforcement of Agreement . . . . . . . . . . . . . . . . . . 57
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<PAGE>
ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT (this "Agreement") is executed as of the
3rd day of January, 1995, by and among GLENAYRE TECHNOLOGIES, INC., a
Delaware corporation ("Glenayre"); MUX ACQUISITION CORP., a newly formed
California corporation and wholly-owned subsidiary of Glenayre ("Merger
Sub"); WESTERN MULTIPLEX CORPORATION, a California corporation ("MUX"); the
following shareholders of MUX: John Woods and Frank Hegarty (collectively,
the "Principal Shareholders"); and the Indemnifying Equity Holders
(hereinafter defined) who subsequently execute and deliver Acknowledgments
(Indemnifying)(hereinafter defined).
STATEMENT OF PURPOSE
The Boards of Directors of Glenayre, Merger Sub and MUX each have
determined that a business combination pursuant to which Merger Sub will
merge with and into MUX and MUX will become a wholly-owned subsidiary of
Glenayre is in the best interests of the respective corporations and their
shareholders, and accordingly have approved this merger upon the terms and
conditions set forth herein. For federal income tax purposes, it is
intended that this merger qualify as a reorganization within the meaning of
Section 368(a)(2)(E) of the Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, in consideration of the foregoing and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS AND CERTAIN RULES OF CONSTRUCTION
1.1 Definitions. In addition to any other terms defined elsewhere in
this Agreement, including any Exhibit or Schedule hereto (unless such
Exhibit or Schedule provides for a different definition), as used herein,
the following terms shall have the following meanings:
"Acknowledgment (Indemnifying Shareholders)" means the Acknowledgment
and Transmittal Letter (Indemnifying Shareholders) substantially in the
form of Exhibit A-1 hereto.
"Acknowledgment (Non-Indemnifying Shareholders)" means the Acknowledg-
ment and Transmittal Letter (Non-Indemnifying Shareholders) substantially
in the form of Exhibit A-2 hereto.
"Acknowledgment (Indemnifying Option Holders)" means the
Acknowledgment (Indemnifying Option Holders) substantially in the form of
Exhibit A-3 hereto.
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"Acknowledgment (Non-Indemnifying Option Holders)" means the
Acknowledgment (Non-Indemnifying Option Holders) substantially in the form
of Exhibit A-4 hereto.
"Acknowledgments (Indemnifying)" means, collectively, the
Acknowledgments (Indemnifying Shareholders) and the Acknowledgments
(Indemnifying Option Holders).
"Acknowledgments" means, collectively, the Acknowledgments
(Indemnifying Shareholders), the Acknowledgments (Non-Indemnifying
Shareholders), the Acknowledgments (Indemnifying Option Holders) and the
Acknowledgments (Non-Indemnifying Option Holders).
"Affiliate Letter" means the Affiliate Letter substantially in the
form of Exhibit B hereto.
"Agreement of Merger" means the Agreement of Merger substantially in
the form of Exhibit C hereto.
"Blue Sky Laws" means state securities Laws or "blue sky" Laws.
"Business Day" means any day other than a Saturday, Sunday or legal
holiday in the State of North Carolina.
"CGCL" means the California General Corporation Law, as amended.
"Closing" means the consummation of the Merger.
"Closing Date" means the date on which the Closing occurs.
"Closing Value" means the average closing price of the Glenayre Common
Stock on the NASDAQ National Market System for the 10 trading days
immediately prior to two Business Days before the Effective Time, subject
to appropriate adjustment in the event of a stock dividend on, or split-up
or other recapitalization of, the Glenayre Common Stock.
"Code" means the Internal Revenue Code of 1986, as amended.
"Dissenter Payment" is defined in Section 4.7(a).
"Dissenting Shares" is defined in Section 4.7(a).
"Effective Time" is defined in Section 2.3
"Encumbrances" means all liens, encumbrances, mortgages, pledges,
security interests, conditional sales agreements, charges, options, rights
of first refusal, reservations, restrictions or other encumbrances or
defects in title.
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"Equity Holders" means, collectively, the Shareholders and the Option
Holders.
"Equity Holders' Representative" means Frank Hegarty (or his
successor) as agent and attorney-in-fact for the Indemnifying Equity
Holders.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ESOP" means the Western Multiplex Corporation Revised and Restated
Employee Stock Ownership Plan and Trust Agreement, effective July 1, 1993.
"Escrow" is defined in Section 4.9.
"Escrow Agent" means NationsBank of North Carolina, N.A., a national
banking association organized and existing under the laws of the United
States of America, or its successor.
"Escrow Agreement" means the Escrow Agreement substantially in the
form of Exhibit D hereto.
"Escrowed Funds" is defined in Section 4.9.
"Escrowed Shares" is defined in
Section 4.9.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Agent" means American Stock Transfer & Trust, as exchange
agent for Glenayre.
"Exchange Ratio" is defined in Section 4.1(a).
"Expiration Date" means that date which is one year after the
Effective Time.
"Forfeitable Options" means the MUX Stock Options described on
Schedule 4.5 which will be part of the Indemnity Pool and subject to
forfeiture upon application to a Loss as provided in Section 4.10 and the
Escrow Agreement.
"Form S-4" is defined in Section 7.1(c).
"GAAP" means generally accepted accounting principles in the United
States of America as set forth in pronouncements of the Financial
Accounting Standards Board and the American Institute of Certified Public
Accountants, as such principles are from time to time supplemented and
amended.
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<PAGE>
"Glenayre Common Stock" means the $.02 par value Common Stock of
Glenayre.
"Glenayre Material Adverse Effect" means any change or effect that is
or would be materially adverse to the business, results of operations or
financial condition of Glenayre and its subsidiaries, taken as a whole,
excluding any changes or effects caused by changes in general economic
conditions or changes generally affecting Glenayre's and its subsidiaries'
industry.
"Governmental Authority" means any foreign, federal, state or local
government, political subdivision or governmental or regulatory authority,
agency, board, bureau, commission, instrumentality or court or quasi-
governmental authority.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations thereunder.
"Indemnifying Equity Holders" means, collectively, the Indemnifying
Shareholders and the Indemnifying Option Holders.
"Indemnifying Option Holders" means, collectively, the Option Holders
who execute and deliver to Glenayre the Acknowledgments (Indemnifying
Option Holders).
"Indemnifying Shareholders" means, collectively, the Shareholders who
execute and deliver to Glenayre the Acknowledgments (Indemnifying
Shareholders).
"Indemnity Claim" is defined in Section 9.2.
"Indemnity Pool" is defined in Section 4.10(f).
"Law" or "Laws" means any and all statutes, laws, ordinances,
proclamations, regulations, published requirements, orders, decrees and
rules of any Governmental Authority, including without limitation those
covering environmental, tax, energy, safety, health, transportation,
bribery, recordkeeping, zoning, discrimination, antitrust and wage and hour
matters, in each case as amended and in effect from time to time.
"Leased Property" is defined in Section 5.11(a).
"Loss" or "Losses" is defined in Section 9.3.
"Merger" means the merger of Merger Sub with and into MUX.
"Merger Consideration" means, with respect to any holder of MUX Common
Stock, (1) certificates evidencing the number of whole shares of Glenayre
Common Stock that such holder has the right to receive pursuant to Section
4.1(a) and (2) any cash in lieu of
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<PAGE>
fractional shares of the Glenayre Common Stock to which such holder is
entitled pursuant to Section 4.2.
"MUX Common Stock" means the Common Stock of MUX.
"MUX Material Adverse Effect" means any change or effect that is or
would be materially adverse to the business, results of operations or
financial condition of MUX and MUX Sub, taken as a whole, excluding any
changes or effects caused by changes in general economic conditions or
changes generally affecting MUX's and MUX Sub's industry.
"MUX Stock Option Plans" means, collectively, (1) MUX's 1981 Incentive
Stock Option Plan, (2) MUX's 1991 Incentive Stock Option Plan, (3) MUX's
1992 Incentive Stock Option Plan and (4) MUX's 1993 Incentive Stock Option
Plan.
"MUX Stock Option" means any option granted by MUX pursuant to any of
the Mux Stock Option Plans.
"Mux Sub" means Western Multiplex International Sales Corporation, a
domestic international sales corporation and a wholly owned subsidiary of
MUX.
"NASDAQ National Market System" means the National Market System
automated quotation system maintained by the National Association of
Securities Dealers, Inc.
"Noncompetition Agreements" means Noncompetition Agreements
substantially in the form of Exhibit I hereto to be executed by the
individuals listed on Schedule 8.3(l).
"Notice of Claim" is defined in Section 9.2.
"Option Holders" means, collectively, the holders of all MUX Stock
Options which will be converted into options for Glenayre Common Stock
pursuant to Section 4.5.
"Person" means an individual, corporation, partnership, limited
liability company, trust, association or other entity.
"Proportionate Percentage", with respect to an Indemnifying Equity
Holder, means such Indemnifying Equity Holder's "Proportionate Percentage"
of the Indemnity Pool as shown on Schedule 4.10.
"Rule 145" means Rule 145 of the rules and regulations promulgated
under the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
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<PAGE>
"Shareholders" means, collectively, the holders of all of the
outstanding capital stock of MUX.
"Surviving Corporation" is defined in Section 2.1.
"Tax" or "Taxes" means any foreign, federal, state or local income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under
Section 59A of the Code), customs duties, capital stock, franchise,
profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated or
other tax of any kind whatsoever, including any interest, penalty or
addition thereto, whether disputed or not.
"Transactions" means the transactions contemplated by this Agreement.
"November 30, 1994 Balance Sheet" is defined in Section 5.11(c).
1.2 Certain Rules of Construction. The captions in this Agreement
are for convenience of reference only and in no way define, limit or
describe the scope or intent of any provisions or sections of this
Agreement. All references in this Agreement to Articles or Sections are
references to the Articles or Sections in this Agreement, unless some other
reference is clearly indicated. All accounting terms not specifically
defined in this Agreement shall be construed in accordance with GAAP as in
effect on the date hereof. In this Agreement, unless the context otherwise
requires, (1) words describing the singular number shall include the plural
and vice versa, (2) words denoting any gender shall include all genders and
(3) references to "including" shall mean "including without limitation."
ARTICLE 2
THE MERGER
2.1 The Merger. Subject to the terms and conditions set forth in
this Agreement, and in accordance with the CGCL, at the Effective Time,
Merger Sub shall be merged with and into MUX and the separate corporate
existence of Merger Sub shall thereupon cease. MUX shall be the surviving
corporation in the Merger (sometimes referred to herein as the "Surviving
Corporation") and shall be a wholly-owned subsidiary of Glenayre. In
connection with the Merger, each of Glenayre, Merger Sub and MUX shall
adopt the Agreement of Merger.
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<PAGE>
2.2 The Closing. Subject to the terms and conditions of this
Agreement, the Closing shall be held (1) at the offices of Kennedy
Covington Lobdell & Hickman, L.L.P., NationsBank Corporate Center, Suite
4200, 100 North Tryon Street, Charlotte, North Carolina 28202-4006 at 9:00
a.m., Charlotte time, as promptly as practicable (and in any event within
two Business Days) following the day on which all of the conditions set
forth in Article 8 shall be fulfilled or waived in accordance herewith or
(2) at such other time, date or place as Glenayre and MUX may agree. The
Closing Date shall be the same as the date of the Effective Time.
2.3 Effective Time. If all of the conditions to the Merger set forth
in Article 8 shall have been fulfilled or waived in accordance herewith and
this Agreement shall not have been terminated as provided in Article 10,
the parties hereto shall cause the Agreement of Merger to be properly
executed and filed, together with appropriate officers' certificates, in
accordance with Section 1103 of the CGCL on the Closing Date. The Merger
shall become effective at the time the Agreement of Merger is filed or at
such later time as MUX, Glenayre and Merger Sub shall have agreed upon and
designated in such filing as the effective time of the Merger (the
"Effective Time").
ARTICLE 3
ARTICLES OF INCORPORATION AND BYLAWS
AND OFFICERS AND DIRECTORS OF THE SURVIVING CORPORATION
3.1 Articles of Incorporation. The Articles of Incorporation of MUX
in effect immediately prior to the Effective Time shall be the Articles of
Incorporation of the Surviving Corporation, until duly amended in
accordance with applicable Law.
3.2 Bylaws. The Bylaws of MUX in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation, until duly
amended in accordance with applicable Law.
3.3 Directors. The directors of the Surviving Corporation
immediately after the Effective Time shall be the following Persons:
Clarke H. Bailey
Ramon D. Ardizzone
Kenneth C. Thompson
John Woods
3.4 Officers. The officers of the Surviving Corporation immediately
after the Effective Time shall be the following Persons:
Chairman of the Board Clarke H. Bailey
President and Chief Executive Officer Ramon D. Ardizzone
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<PAGE>
Executive Vice President and John Woods
General Manager
Vice President Michael J. Gresham
Vice President Michael Mulcay
Secretary Stan Ciepcielinski
Treasurer Stan Ciepcielinski
Assistant Secretary Jerome Pintar
ARTICLE 4
CONVERSION OF MUX COMMON STOCK; EXCHANGE OF CERTIFICATES
4.1 Conversion of MUX Common Stock.
(a) Prior to the Effective Time, (1) the Board of Directors of MUX
may accelerate, effective as of the Effective Time, the vesting of any
unvested MUX Stock Options and (2) any shareholders of MUX who hold vested
MUX Stock Options may exercise such options and receive MUX Common Stock
subject to the terms and conditions of the applicable MUX Stock Option
Plans and agreements pursuant to which such MUX Stock Options were granted.
At the Effective Time, by virtue of the Merger and without any action on
the part of Glenayre, Merger Sub, MUX or the holders of any of their
respective securities, each share of MUX Common Stock, issued and
outstanding immediately prior to the Effective Time (other than any
Dissenting Shares, if applicable) shall be converted, subject to Section
4.2, into the right to receive .0943848 of one share of Glenayre Common
Stock (the "Exchange Ratio"). The shares of Glenayre Common Stock issued
pursuant to this Section 4.1, and the shares of Glenayre Common Stock
reserved for issuance pursuant to Section 4.5, shall in the aggregate be no
more than 750,000 shares (which number of shares takes into account the
three-for-two stock split effected by a 50% stock dividend distributable to
Glenayre stockholders of record as of December 22, 1994) less (1) the
number of Dissenting Shares multiplied by the Exchange Ratio and (2) the
sum of all fractional shares for which cash is to be paid pursuant to
Section 4.2; provided, however, that, in any event, if between the date of
this Agreement and the Effective Time the outstanding shares of Glenayre
Common Stock or MUX Common Stock shall have been changed into a different
number of shares or a different combination or exchange of shares, the
Exchange Ratio shall be correspondingly adjusted to reflect such stock
dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares. At the Effective Time, all shares of
MUX Common Stock shall no longer be outstanding and shall automatically be
cancelled and retired and shall cease to exist, and each certificate
previously evidencing any such shares shall thereafter represent the right
to receive, upon the surrender of such certificate in accordance with
Section 4.3 (or in case of a lost, stolen or destroyed MUX stock
certificate, compliance with the provisions of Section 4.3(b)),
certificates evidencing such number of whole
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<PAGE>
shares of Glenayre Common Stock into which such MUX Common Stock was
converted in accordance with the Exchange Ratio. The holders of such
certificates evidencing such shares of MUX Common Stock outstanding
immediately prior to the Effective Time shall cease to have any rights
with respect to such shares except as otherwise provided herein or by
Law. No fractional share of Glenayre Common Stock shall be issued,
and, in lieu thereof, a cash payment shall be made pursuant to
Section 4.2.
(b) At the Effective Time, by virtue of the Merger and without any
action on the part of Glenayre, Merger Sub or MUX, each share of capital
stock of Merger Sub issued and outstanding prior to the Effective Time,
shall be converted into the right to receive one share of Common Stock of
MUX as the Surviving Corporation. From and after the Effective Time,
Glenayre, as holder of all of the outstanding shares of capital stock of
Merger Sub, shall (1) have the right to receive Common Stock of MUX as
provided in this Section 4.1(b) upon its surrender of the certificate or
certificates representing all shares of the capital stock of Merger Sub and
(2) thereupon cease to have any rights with respect to such shares of the
capital stock of Merger Sub and its rights shall be solely in respect of
the Common Stock of MUX into which such shares of capital stock of Merger
Sub have been so converted. Until surrender, each outstanding certificate
which prior to the Effective Time represented capital stock of Merger Sub
shall be deemed for all corporate purposes to evidence ownership of the
number of whole shares of Common Stock of MUX into which the shares of
capital stock of Merger Sub have been so converted.
4.2 Fractional Shares. No fraction of a share of Glenayre Common
Stock shall be issued in the Merger. In lieu of any such fractional
shares, each holder of MUX Common Stock, upon surrender of a certificate
for exchange pursuant to Section 4.3, shall be paid an amount in cash
(without interest), rounded to the nearest cent, determined by multiplying
the fractional interest to which such holder would otherwise be entitled
(after taking into account all shares of MUX Common Stock then held of
record by such holder) by the closing price of the Glenayre Common Stock on
the NASDAQ National Market System two Business Days before the Effective
Time (or if the Glenayre Common Stock is not traded on the NASDAQ National
Market System on such date, the immediately preceding date on which the
stock is so traded).
4.3 Exchange of Certificates.
(a) At the Closing, Glenayre shall deliver to each Shareholder,
against receipt of certificates for all of such Shareholder's shares of MUX
Common Stock and the appropriate executed Acknowledgment, the Merger
Consideration (less the Escrowed Shares as provided in Section 4.9) that
such Shareholder has a right to receive pursuant to Section 4.1(a). After
the Effective Time, except for a Shareholder receiving payment of the
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Merger Consideration pursuant to the preceding sentence, each holder of
record of any certificate which immediately prior to the Effective Time
evidenced outstanding shares of MUX Common Stock (other than Dissenting
Shares, if applicable) upon surrender thereof (or compliance with Section
4.3(b), if applicable), and upon presentation of the appropriate
Acknowledgment (as set forth on Schedule 5.3) executed by such Shareholder,
to the Exchange Agent shall be entitled to receive in exchange therefor (1)
the Merger Consideration that such holder has the right to receive pursuant
to Section 4.1(a) and (2) any dividends or other distributions to which
such holder is entitled pursuant to Section 4.4, and the MUX Common Stock
certificate so surrendered shall immediately be cancelled. In the event of
a transfer of ownership of shares of MUX Common Stock that is not
registered in the transfer records of MUX, the Merger Consideration, and
any dividends or other distributions to which such holder is entitled
pursuant to Section 4.4, may be issued and paid in accordance with this
Article 4 to a transferee if the certificate evidencing such shares of MUX
Common Stock (or compliance with Section 4.3(b), if applicable) and the
appropriate Acknowledgment (as set forth on Schedule 5.3) executed by such
transferee, are presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and by evidence
that any applicable stock transfer taxes have been paid. Until surrendered
as contemplated by this Section 4.3(a) (or compliance with Section 4.3(b),
if applicable), each certificate representing shares of MUX Common Stock
shall be deemed at any time after the Effective Time to evidence only the
right to receive upon such surrender (or compliance with Section 4.3(b), if
applicable) and upon presentation of the appropriate Acknowledgment (as set
forth on Schedule 5.3) executed by such holder, the Merger Consideration
and any dividends or other distributions to which such holder is entitled
pursuant to Section 4.4.
(b) In the event that a stock certificate representing shares of MUX
Common Stock is alleged by the holder thereof to have been lost, stolen or
destroyed, Glenayre shall nevertheless deliver to such holder the Merger
Consideration, and any dividends or other distributions to which such
holder is entitled pursuant to Section 4.4, provided that Glenayre may
require such holder to give Glenayre a bond (or other adequate security)
sufficient to indemnify it and MUX against any claim that may be made
against it or MUX (including any expense or liability) on account of the
alleged loss, theft or destruction of the MUX stock certificate or the
issuance of the Glenayre stock certificate in exchange therefor.
4.4 Distributions with Respect to Unexchanged Shares of MUX Common
Stock. No dividends or other distributions declared or made after the
Effective Time with respect to Glenayre Common Stock with a record date
after the Effective Time shall be paid to the holder of any unsurrendered
certificate representing shares of MUX Common Stock until the holder of
such unsurrendered certificate shall
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surrender the certificate (or comply with Section 4.3(b), if
applicable) and upon presentation of the appropriate Acknowledgment (as set
forth in Schedule 5.3) executed by such holder.
4.5 MUX Stock Options.
(a) At the Effective Time, MUX's obligations with respect to each
outstanding MUX Stock Option, as amended in the manner described in this
Section 4.5, shall be assumed by Glenayre, provided that any outstanding
MUX Stock Option shall expire upon the Effective Time unless prior to the
Effective Time the holder thereof shall have entered into an Acknowledgment
(Indemnifying Option Holders) or an Acknowledgment (Non-Indemnifying Option
Holders) in accordance with Schedule 4.5. The MUX Stock Options so assumed
by Glenayre shall not expire and shall continue to have, and be subject to,
the same terms and conditions as set forth in the MUX Stock Option Plans
and agreements pursuant to which such MUX Stock Options were granted as in
effect immediately prior to the Effective Time, except that (1) each MUX
Stock Option shall be exercisable for that number of whole shares of
Glenayre Common Stock equal to the product of the number of shares of MUX
Common Stock covered by such MUX Stock Option immediately prior to the
Effective Time, multiplied by the Exchange Ratio and rounded down to the
nearest whole number of shares of Glenayre Common Stock, (2) the price at
which each such MUX Stock Option is exercisable shall be divided by the
Exchange Ratio (rounded up to the nearest cent), and (3) the Forfeitable
Options shall be part of the Indemnity Pool and subject to forfeiture upon
application to a Loss as provided in Section 4.10 (or, if exercised, all of
the shares of Glenayre Common Stock received on such exercise shall be held
as Escrowed Shares).
(b) Glenayre shall (1) reserve for issuance the aggregate number of
shares of Glenayre Common Stock that will become issuable upon the exercise
of all MUX Stock Options pursuant to Section 4.5 and (2) promptly after the
Effective Time issue to each holder of an outstanding MUX Stock Option a
document evidencing the assumption by Glenayre of MUX's obligations with
respect thereto under Section 4.5.
(c) For each outstanding MUX Stock Option, Schedule 4.5 sets forth
(1) the number of shares of MUX Common Stock for which such option is
exercisable and the exercise price with respect thereto, (2) the number of
shares of Glenayre Common Stock for which each such option shall be
exercisable upon its assumption by Glenayre and the exercise price therefor
as determined pursuant to Section 4.5 and (3) whether the holder thereof is
to execute and deliver an Acknowledgment (Indemnifying Option Holders) or
an Acknowledgment (Non-Indemnifying Option Holders).
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4.6 Withholding Rights. Glenayre, MUX or the Exchange Agent shall be
entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of MUX Common Stock or MUX Stock
Options such amounts as Glenayre, MUX or the Exchange Agent is required to
deduct and withhold with respect to the making of such payment under the
Code or any provision of any other Tax Law. Glenayre shall notify MUX at
least two Business Days prior to the Closing Date of any withholding
Glenayre plans to make, or cause the Exchange Agent or MUX to make,
pursuant to this Section 4.6. To the extent that amounts are so withheld
by Glenayre, MUX or the Exchange Agent, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to such
holder in respect of which such deduction and withholding was made by
Glenayre, MUX or the Exchange Agent.
4.7 Dissenting Shares.
(a) If provided for under the CGCL, notwithstanding any other
provision of this Agreement to the contrary, shares of MUX Common Stock
that are outstanding immediately prior to the Effective Time and which are
held by shareholders of MUX who shall not have voted in favor of the Merger
or consented thereto in writing and who shall have demanded properly in
writing payment for such shares in accordance with Sections 1300 et seq. of
the CGCL (a "Dissenter Payment") and who shall not have withdrawn such
demand or have been deemed or otherwise have forfeited the right to payment
(such shares of MUX Common Stock being referred to as "Dissenting Shares")
shall not be converted into or represent the right to receive the Merger
Consideration. Such shareholders shall be entitled to receive their
Dissenter Payments in accordance with the provisions of the CGCL, except
that all Dissenting Shares held by shareholders who shall have failed to
perfect or who effectively shall have withdrawn or lost their rights to
payment for such shares of MUX Common Stock under the CGCL shall thereupon
be deemed to have been converted into, as of the Effective Time, the right
to receive, without any interest thereon, the Merger Consideration, upon
surrender in the manner provided in Section 4.3 of the certificate or
certificates that formerly evidenced such shares of MUX Common Stock (or
compliance with Section 4.3(b) if applicable) and the presentation of the
appropriate executed Acknowledgment. All Dissenter Payments shall be paid
by MUX.
(b) MUX shall give Glenayre (1) prompt notice of any demands for
payment received by MUX pursuant to Sections 1300 et seq. of the CGCL,
withdrawals of such demands, and any other instruments served pursuant to
the CGCL and received by MUX and (2) the opportunity to direct all
negotiations and proceedings with respect to demands for payment under the
CGCL. MUX shall not, except with the prior written consent of Glenayre,
make any payment with respect to any demands for payment of, or offer to
settle, or settle, any such demands.
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4.8 Transaction Expenses. MUX shall bear the expenses of any
employees of MUX or MUX Sub and of any counsel, accountants or other
consultants or advisers engaged by MUX, MUX Sub or the ESOP in connection
with the due diligence conducted by Glenayre, preparation of the Form S-4,
or otherwise incurred in connection with the Transactions in the event the
Merger is not consummated. In the event the Merger is consummated, MUX
shall incur no more than $800,000 of MUX Transaction Expenses. As used
herein, "MUX Transaction Expenses" means the total amount of expenses
incurred by MUX, MUX Sub and the ESOP in connection with the Merger
and the Transactions for the following: fees and expenses of the attorneys,
accountants, investment bankers, brokers (including the fees and expenses
of The Commonwealth Group Inc. of San Francisco, California and Robert
W. Barton & Associates of Phoenix, Arizona, whose charges are anticipated
to be approximately $400,000) or financial advisers of MUX, MUX Sub or
the ESOP, any travel expenses or other direct out-of-pocket expenses
of MUX incurred in connection with negotiating, drafting and preparing
this Agreement and any other agreements or documents contemplated hereby,
expenses of attending the Closing, the expenses of the due diligence
conducted by MUX hereunder, and the expenses relating to the MUX shareholders'
meeting to approve the Merger (or the furnishing of consents to the
shareholders). However, "MUX Transaction Expenses" shall not include any
ordinary out-of-pocket expenses incurred by MUX for photocopying charges,
long distance telephone charges or similar incidental charges or expenses.
MUX shall cause its attorneys, accountants and other service providers to
provide periodic statements of MUX Transaction Expenses (no less frequently
than monthly and more frequently upon Glenayre's request) and shall
promptly provide summaries of such statements to Glenayre.
4.9 Escrow. On the Closing Date, Glenayre, the Equity Holders'
Representative and the Escrow Agent shall enter into the Escrow Agreement,
and Glenayre shall deliver to the Escrow Agent a certificate with respect
to each Indemnifying Shareholder for the percentage of the shares of
Glenayre Common Stock shown on Schedule 5.3 hereto (such shares, together
with (i) all shares issued in payment or distribution of any stock dividend
on or split-up or other recapitalization of, or in respect of, any such
escrowed shares, and any securities or other property issued or distributed
with respect to such shares in connection with any merger, consolidation or
liquidation of Glenayre and (ii) shares of Glenayre Common Stock issued
upon the exercise of Forfeitable Options being herein sometimes referred to
as the "Escrowed Shares"). Each such certificate shall be registered in
the name of such Indemnifying Shareholder and shall be duly endorsed in
blank, or shall be accompanied by stock powers duly signed in blank, by
such Indemnifying Shareholder. The Indemnifying Shareholders shall be
entitled to vote their Escrowed Shares. Any dividends or other
distributions on their Escrowed Shares shall be delivered to the Escrow
Agent and held as part of the Escrowed Shares if such dividends or other
distributions are in the form of the capital
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stock of Glenayre or held as part of the Escrowed Funds if such dividends
or distributions are in some other form. "Escrowed Funds" means any
cash or property, other than capital stock of Glenayre, held in escrow
by the Escrow Agent under this Agreement and the Escrow Agreement. The
Escrowed Shares and the Escrowed Funds are collectively referred to herein
as the "Escrow". The Escrow shall be applied to indemnify, defend and
hold harmless Glenayre against Losses in accordance with the terms and
conditions of this Agreement. The Escrow Agent shall hold, invest and
distribute the Escrow according to the provisions of this Article 4 and
the Escrow Agreement. In the event that there is any inconsistency between
the provisions of this Article 4 and the Escrow Agreement, the Escrow
Agreement shall control.
(a) Term of Escrow. Except as provided in Section 4.9(d), the Escrow
shall not be released by the Escrow Agent until the Expiration Date.
(b) Formula for Number of Escrowed Shares to be Returned to Glenayre.
To the extent that Escrowed Shares are applied to any portion of a Loss
pursuant to Section 4.10(e), the number of Escrowed Shares to be so applied
shall be computed by dividing the dollar amount of such portion of a Loss
by the Closing Value rounded up to the nearest whole share, subject to
appropriate adjustment in the event of a stock dividend on, or split-up or
other recapitalization of, or in respect of, the Escrowed Shares or in the
event that other securities or property have been deposited in escrow in
connection with any merger, consolidation or liquidation of Glenayre. Such
Escrowed Shares to be so returned to Glenayre shall be allocated among the
Indemnifying Shareholders in accordance with Section 4.10(e).
(c) Investment of Escrowed Funds. The Escrowed Funds shall, as
nearly as may be practicable, be continuously invested and reinvested by
the Escrow Agent as provided in the Escrow Agreement.
(d) Distribution of the Escrow.
(1) The Escrow Agent shall apply the Escrow to any Loss,
and distribute Escrow to Glenayre, in accordance with Section
4.10 and the Escrow Agreement.
(2) Not later than five Business Days after the Expiration
Date, the Escrow Agent shall deliver to the Equity Holders'
Representative (for delivery to the Indemnifying Shareholders)
the Escrow then held by the Escrow Agent, less the Escrow for
which a Notice of Claim was received by the Escrow Agent prior to
the Expiration Date; and such Escrow so distributed to the
Indemnifying Shareholders shall be allocated among the
Indemnifying Shareholders in accordance with their respective
interests in the Escrow. Any retained Escrow shall, upon
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final determination or settlement of the Loss being determined or
contested, be applied thereto in accordance with Section 4.10 and
any balance delivered to the Equity Holders' Representative (for
delivery to the Indemnifying Shareholders) in accordance with
their then respective interests in the retained Escrow.
4.10 Application of Indemnity Pool to a Loss.
(a) At any time prior to the Expiration Date, Glenayre may give the
Escrow Agent and the Equity Holders' Representative a Notice of Claim
pursuant to Section 9.2, together with notice that Glenayre intends to
apply all or a part of the Indemnity Pool (in the manner provided in
Section 4.10(e)) to the payment of the Loss specified in such Notice of
Claim. In the event that a Loss has not been liquidated or determined,
Glenayre may, at any time prior to the Expiration Date, give the Escrow
Agent and the Equity Holders' Representative a Notice of Claim in which
Glenayre describes the general nature of the Indemnity Claim and makes a
good faith estimate of the Loss.
(b) If the Equity Holders' Representative does not give written
notice to Glenayre and the Escrow Agent, within 30 days after the giving of
such Notice of Claim, that he protests the proposed application of the
Indemnity Pool to the Loss as specified in such Notice of Claim, then the
Indemnity Pool shall be applied to such Loss as set forth in such Notice of
Claim.
(c) If the Equity Holders' Representative does give written notice to
Glenayre and the Escrow Agent, within 30 days after the giving of such
Notice of Claim, that he protests the proposed application of the Indemnity
Pool to the Loss as specified in such Notice of Claim, then the proposed
application shall be referred by Glenayre to, and settled by, binding
arbitration in accordance with the Rules of Commercial Arbitration of the
American Arbitration Association. The arbitration panel or arbitrator (as
applicable) shall be selected as provided in Section 4.10(d). The arbitra-
tion panel or arbitrator (as applicable) shall determine the amount, if
any, of such proposed application which is proper. The venue of the
arbitral proceedings shall be in Mecklenburg County, North Carolina. The
proceedings shall be governed by the Rules of Commercial Arbitration of the
American Arbitration Association. In reaching a decision, the arbitration
panel or arbitrator (as applicable) shall apply the principles of law that
a North Carolina court, in applying North Carolina law, would use in the
event of litigation on the same issues. The decision rendered by the
arbitration panel or arbitrator (as applicable) shall be final and binding
on the parties hereto, including Glenayre, the Indemnifying Equity Holders
and the Escrow Agent. Judgment on the award rendered by the arbitration
panel or arbitrator (as applicable) may be entered in any court having
jurisdiction thereof. Each of Glenayre and the Indemnifying Equity Holders
shall bear its or their own
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attorneys' fees, fees for expert witnesses and
all other costs incurred by it or them in connection with the Indemnity
Claim which is the subject of the arbitration. Glenayre and the
Indemnifying Equity Holders shall share equally any attorneys' fees, fees
for expert witnesses and all other costs incurred by the Escrow Agent in
connection with the arbitration of such indemnification claim (including,
without limitation, costs incurred by Glenayre pursuant to paragraph 15(b)
of the Escrow Agreement) and any fees charged by the arbitrators or the
American Arbitration Association.
(d) Promptly after receiving notice of protest from the Equity
Holders' Representative under Section 4.10(c), Glenayre shall name a
suitable professionally qualified individual to serve as an arbitrator on
the arbitration panel to determine the Indemnity Claim and shall give the
Equity Holders' Representative notice thereof; within 10 days after such
notice, the Equity Holders' Representative shall name a second suitable
professionally qualified individual to serve as an arbitrator on such
arbitration panel; and the two individuals so named shall agree upon and
name a third individual to serve as an arbitrator on such arbitration
panel. In the event that the Equity Holders' Representative does not name
a second individual to serve on the arbitration panel within such 10-day
period, then the arbitrator named by Glenayre shall serve as the sole
arbitrator. In the event that the two individuals named by Glenayre and
the Equity Holders' Representative, respectively, cannot agree on a third
member within 10 days, then the selection of a third individual to serve on
the arbitration panel shall be made by the American Arbitration Association
or, if the American Arbitration Association fails to choose an arbitrator
within 15 days after request, by the Chief Resident Superior Court Judge of
Mecklenburg County, North Carolina.
(e) Each Indemnifying Equity Holder shall be liable for his, her or
its Proportionate Percentage (as shown on Schedule 4.10 hereto) of any Loss
indemnifiable under Section 9.1, provided that, notwithstanding any other
provision of this Agreement, no Equity Holder shall be liable for any Loss
in excess of his, her or its total interest in the Indemnity Pool. The
liability of each Indemnifying Equity Holder as so determined may be
satisfied, at the written direction of the Equity Holders' Representative
to Glenayre and the Escrow Agent within 30 days after such Notice of Claim
is given to the Equity Holders' Representative (or, if such Indemnity Claim
is contested pursuant to Section 4.10(c), within 30 days after final
resolution of such Indemnity Claim), by the Escrow Agent's payment of
Escrowed Funds to Glenayre, the Escrow Agent's delivery of the Escrowed
Shares to Glenayre, the forfeiture of Forfeitable Options, or any
combination of the foregoing. In the absence of any such direction by the
Equity Holders' Representative within the 30-day period described above,
the Proportionate Percentage of a Loss by such Indemnifying Equity Holder
shall be satisfied in accordance with the directions specified by Glenayre
in the Notice of Claim with respect to such Loss. For purposes of
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applying the Indemnity Pool to a Loss to satisfy the indemnity obligation of
any Indemnifying Equity Holder, (1) the value of any Escrowed Funds so applied
shall be the dollar amount (or fair market value, as applicable) of such
Escrowed Funds as of the date of such application, (2) the value of any
Escrowed Shares so applied shall be the number of such Escrowed Shares,
multiplied by the Closing Value and (3) the value of any Forfeitable
Options so applied shall be the sum of the Spreads for such Forfeitable
Options.
(f) As used in this Agreement, the following terms shall have the
following meanings:
"Indemnity Pool" means all Escrowed Shares, Escrowed Funds
and Forfeitable Options.
"Spread", with respect to any MUX Stock Option, means the
amount by which the Closing Value exceeds the exercise price of
such MUX Stock Option after giving effect to the adjustments to
the exercise price made under Section 4.5(a).
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF MUX
AND THE INDEMNIFYING EQUITY HOLDERS
MUX and the Principal Shareholders (and following the execution of
their Acknowledgments, the other Indemnifying Equity Holders) hereby
jointly and severally make the representations and warranties contained in
this Article 5. As used herein, where a statement is made "to the
knowledge" of MUX or a statement is made that MUX "knows" a particular fact
or circumstance, such knowledge shall include the knowledge of each of the
Persons listed on Schedule 5 assuming (1) their review of the pertinent
business records of MUX and MUX Sub in their files and (2) their inquiry of
each employee of MUX or MUX Sub, and each attorney or accountant retained
by MUX or MUX Sub, who is reasonably believed to have relevant information
about the matter as to which such knowledge or lack of knowledge is
asserted (the scope of such review and inquiry being that of a reasonable
person under the circumstances).
5.1 Organization and Qualification. Except as set forth in Schedule
5.1, each of MUX and MUX Sub is a corporation duly organized, validly
existing and in good standing under the laws of California and has the
requisite power and authority and all necessary governmental approvals to
own, lease and operate its properties and to carry on its business as it is
now being conducted. Except as set forth in Schedule 5.1, MUX and MUX Sub
are duly qualified or licensed as foreign corporations to do business, and
are in good standing, in each jurisdiction where the character of the
properties owned, leased or operated by them or
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the nature of their business makes such qualification or licensing
necessary, except for such failures to be so qualified or licensed
and in good standing that would not, individually or in the aggregate,
have a MUX Material Adverse Effect.
5.2 Articles of Incorporation; Bylaws; Minute Books. MUX has
provided to Glenayre a complete and correct copy of the Articles of
Incorporation and the Bylaws of MUX and MUX Sub. Such Articles of
Incorporation and Bylaws are in full force and effect. Except as set forth
in Schedule 5.2, neither MUX nor MUX Sub is in violation of any provisions
of its Articles of Incorporation or Bylaws. The minute books of MUX and
MUX Sub (a copy of which has been furnished to Glenayre) contain all
records of meetings of MUX's and MUX Sub's directors and shareholders and
other corporate actions taken by them.
5.3 Capitalization.
(a) The authorized capital stock of MUX consists of 25,000,000 shares
of MUX Common Stock. As of the date hereof, (1) 5,503,695 shares of MUX
Common Stock are issued and outstanding, all of which shares were validly
issued, fully paid and nonassessable and were not issued in violation of
any preemptive rights, and (2) 2,442,500 shares of MUX Common Stock are
reserved for future issuance pursuant to outstanding MUX Stock Options
(which options were not granted in violation of any preemptive rights).
The names and addresses, Social Security or Federal I.D. numbers of all of
the record owners of the outstanding shares of MUX Common Stock and the
certificate numbers for such shares are set forth in Schedule 5.3. Each
such share of MUX Common Stock is owned by such record owner free and clear
of all Encumbrances whatsoever, except (1) as set forth on Schedule 5.3 or
(2) restrictions imposed by applicable securities Laws.
(b) The authorized capital stock of MUX Sub consists of 2,500 shares
of Common Stock. As of the date hereof, 2,500 shares of Common Stock are
issued and outstanding, all of which shares are held by MUX and were
validly issued, fully paid and nonassessable and were not issued in
violation of any preemptive rights. Each such share owned by MUX is free
and clear of all Encumbrances whatsoever, except restrictions imposed by
applicable securities Laws.
(c) Except as set forth in Schedule 5.3 or Schedule 5.5, or except as
set forth in this Section 5.3(c), there are no options, warrants or other
rights, agreements, arrangements or commitments of any character relating
to the issued or unissued capital stock of MUX or MUX Sub to issue or sell
any shares of capital stock of, or other equity interests in, MUX or MUX
Sub. All shares of MUX Common Stock subject to issuance under the MUX
Stock Options, upon issuance on the terms and conditions specified in the
MUX Stock Option Plans and agreements pursuant to which they are issuable,
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will be duly authorized, validly issued, fully paid and nonassessable.
Except as set forth in Schedule 5.3, there are no outstanding contractual
obligations of MUX or MUX Sub to repurchase, redeem or otherwise acquire
any shares of MUX Common Stock or any capital stock of MUX Sub, or make any
investment (in the form of a loan, capital contribution or otherwise) in,
MUX Sub or any other Person. All offers and sales of MUX Common Stock and
the stock of MUX Sub prior to the date hereof were at all relevant times
duly registered under or exempt from the registration requirements of the
Securities Act and the applicable Blue Sky Laws.
5.4 Authority Relative to this Agreement.
(a) Each of MUX and the Principal Shareholders has all necessary
power and authority to execute and deliver this Agreement, to perform its
or his obligations hereunder and to consummate the Transactions. The
execution and delivery of this Agreement by MUX and the consummation by it
of the Transactions have been duly and validly authorized by all necessary
corporate action and no other proceedings on the part of MUX are necessary
to authorize this Agreement or to consummate the Transactions (other than,
with respect to the Merger, any approval and adoption of this Agreement by
the holders of MUX Common Stock and the filing and recordation of
appropriate merger documents as required by the CGCL). This Agreement has
been duly and validly executed and delivered by MUX and the Principal
Shareholders and, assuming the due authorization, execution and delivery by
Glenayre and Merger Sub, constitutes a legal, valid and binding obligation
of each of MUX and the Principal Shareholders enforceable against each of
them in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, reorganization, insolvency, moratorium or
similar laws affecting creditors' rights generally and by such principles
of equity as may affect the availability of equitable remedies.
(b) Each Equity Holder has all necessary power and authority to
execute and deliver his, her or its Acknowledgment at the Effective Time
and to perform his, her or its obligations thereunder and hereunder. The
execution and delivery of such Acknowledgments at the Effective Time will
have been duly and validly authorized by all necessary action on the part
of the Equity Holders and no other proceedings on the part of any Equity
Holder will have been necessary to authorize such Acknowledgments. The
Acknowledgment executed by each Equity Holder will have been duly and
validly executed and delivered by him, her or it and, assuming the due
authorization, execution and delivery by Glenayre and Merger Sub,
constitutes a legal, valid and binding obligation of such Equity Holder
enforceable against him, her or it in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy,
reorganization, insolvency, moratorium or similar laws affecting creditors'
rights generally
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and by such principles of equity as may affect the availability of equitable
remedies.
5.5 No Conflict; Required Filings and Consents.
(a) Except as set forth in Schedule 5.5 or as set forth in the
exceptions in Section 5.5(b) below, the execution and delivery of this
Agreement by MUX do not, and the performance of the Transactions by MUX
will not, (1) conflict with or violate the Articles of Incorporation or
Bylaws of MUX or MUX Sub, (2) conflict with or violate any Law applicable
to MUX or MUX Sub or by which any of their property or assets is bound or
affected, or (3) result in any breach of or constitute a default (or any
event which with notice or lapse of time or both would become a default)
under, result in the loss of a material benefit under, or give to others
any right of termination, amendment, acceleration or cancellation of, or
result in the creation of an Encumbrance on any property or asset of MUX or
MUX Sub pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or
obligation to which MUX or MUX Sub is a party or by which either of them or
any of their property or assets is bound or affected.
(b) The execution and delivery of this Agreement by MUX and the
execution and delivery of the Acknowledgments by each Equity Holder do not,
and the performance of the Transactions by MUX and the Principal
Shareholders and of the Acknowledgment by each Equity Holder will not,
require any consent or authorization of, or filing with or notification to,
any Governmental Authority except for (1) applicable requirements, if any,
of the Securities Act or Blue Sky Laws, (2) the pre-merger notification
requirements of the HSR Act and (3) filing and recordation of appropriate
merger documents as required by the CGCL.
5.6 Other Interests. Other than the ownership interest of MUX Sub by
MUX, neither MUX nor MUX Sub owns directly or indirectly any interest or
investment in any Person.
5.7 Financial Statements. MUX has delivered to Glenayre its audited
consolidated financial statements for the years ended June 30, 1993 and
June 30, 1994, respectively, and unaudited interim consolidated financial
statements for each month subsequent to June 30, 1994 through November 30,
1994 (collectively, the "Financial Statements"). Each of the balance
sheets provided to Glenayre (including the related notes and schedules)
fairly presents the consolidated financial position of MUX and MUX Sub as
of its date and each of the statements of income, retained earnings and
cash flows provided to Glenayre (including any related notes and schedules)
fairly presents the consolidated results of operations, retained earnings
or cash flows of MUX and MUX Sub for the periods set forth therein
(subject, in the case of unaudited statements, to normal year-end audit
adjustments which will be consistent with
20
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prior years' adjustments and which would not be material in amount or
effect, except as disclosed in Schedule 5.7) in each case in accordance
with GAAP consistently applied during the periods involved, except as may
be noted therein. The Financial Statements have been prepared from the books
and records of MUX and MUX Sub which accurately and fairly reflect the
transactions and dispositions of the assets of MUX and MUX Sub. As of any
date for which a balance sheet is provided, neither MUX nor MUX Sub had
any liabilities, contingent or otherwise, whether due or to become due,
known or unknown, as of such date other than as indicated on the balance
sheet, or in the notes thereto. MUX and MUX Sub have adequately accrued
all employee benefit costs and such accruals are reflected in each
balance sheet included in the Financial Statements. The funding of such
employee benefit costs have been, and will be, provided for in the ordinary
course of business consistent with past practices.
5.8 Subsequent Events. Except as set forth in Schedule 5.8 or as
otherwise contemplated by this Agreement, since June 30, 1994, there has
not been:
(a) any MUX Material Adverse Effect, and no prospective MUX Material
Adverse Effect is reasonably expected to occur;
(b) except for the issuance of shares of MUX Common Stock pursuant to
the exercise of a MUX Stock Option or as required by the terms of the ESOP,
any disposition or issuance by MUX or MUX Sub of any of its capital stock,
or of any option or right or privilege to acquire any of its capital stock,
or any acquisition or retirement by MUX of any of its capital stock, or any
dividend or other distribution on or with respect to its capital stock;
(c) any sale, mortgage, pledge, grant, dividend or other disposition,
transfer or Encumbrance of any asset or interest owned or possessed by MUX
or MUX Sub, other than those occurring in the ordinary course of business
consistent with past practices and prior periods;
(d) any expenditure or commitment by MUX or MUX Sub for the
acquisition of assets of any kind, other than expenditures or commitments
in the ordinary course of business consistent with past practices and prior
periods;
(e) any damage, destruction or loss of such character as to interfere
materially with the continued operation of any part of the business of MUX
or MUX Sub (whether or not such loss was insured against), or to have a MUX
Material Adverse Effect;
(f) any increase in the compensation payable or to become payable by
MUX or MUX Sub to any officer, shareholder or key employee of MUX or MUX
Sub, or any agreement therefor;
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(g) any change made or authorized in the Articles of Incorporation or
Bylaws of MUX or MUX Sub;
(h) any loans or advances by or to MUX or MUX Sub, other than
renewals or extensions of existing indebtedness and uses of lines of credit
in the ordinary course of business;
(i) any cancellation or payment by MUX or MUX Sub of any indebtedness
owing to it (except for any amount less than $150 owed to MUX by any of its
employees), or any cancellation or settlement by MUX or MUX Sub of any
claims against others;
(j) any failure by MUX or MUX Sub to operate its business other than
in the ordinary course of business, any change from past practices in the
manner of building or depleting inventories, incurring or collecting
receivables, or incurring or paying trade payables or accrued liabilities;
(k) any failure to maintain the books and records of MUX or MUX Sub
consistent with past practices, or any write-down of assets shown on the
books and records of MUX or MUX Sub, or the establishment of, or failure to
establish, any reserves or accruals in an amount or nature that is not
consistent with past practices or prior periods;
(l) any change in accounting practices; or
(m) any agreement or commitment by or on behalf of MUX or MUX Sub to
do or to take any of the actions referred to in Section 5.8 (a) through
(l).
5.9 Tax Matters. MUX and MUX Sub have (1) timely filed all Tax
reports and returns required to be filed by them and such reports and
returns were true and complete in all material respects, (2) duly paid all
Taxes and other charges (whether or not shown on any Tax return) due or
claimed to be due from them by federal, foreign, state or local taxing
authorities or an adequate reserve has been established therefor in the
Financial Statements and (3) true and complete copies of all Tax reports
and returns beginning with the 1990 tax year have been delivered to
Glenayre. The reserves for Taxes contained in the Financial Statements and
carried on the books of MUX or MUX Sub are adequate to cover all Tax
liabilities. Except as disclosed in Schedule 5.9, no extension of time to
file any Tax return by MUX or MUX Sub is currently in effect. Since June
30, 1994, neither MUX nor MUX Sub has incurred any material Tax liabilities
other than in the ordinary course of business. There are no Tax liens
(other than liens for current Taxes not yet due) upon any properties or
assets of MUX or MUX Sub and, except as disclosed in Schedule 5.9 and as
reflected in the Financial Statements, there are no pending or, to the
knowledge of MUX, threatened questions or examinations relating to, or
claims asserted for, Taxes or assessments against MUX or MUX Sub. Neither
22
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MUX nor MUX Sub has granted or been requested to grant any extension of the
limitation period applicable to any claim for Taxes or assessments with
respect to Taxes. Except as disclosed in Schedule 5.9, neither MUX nor MUX
Sub is a party to any Tax allocation or sharing agreement. MUX and MUX Sub
have duly withheld and paid all Taxes required to have been withheld and
paid in connection with amounts paid or owing to any employee, independent
contractor, creditor, shareholder or other Person that required withholding
(and have otherwise complied with all applicable Laws relating to the
payment and withholding of Taxes).
5.10 Employees and Fringe Benefit Plans.
(a) Schedule 5.10(a) sets forth the names and titles of all members
of the Boards of Directors and officers of MUX and MUX Sub and all
employees of MUX and MUX Sub.
(b) Schedule 5.10(b) lists each employment, bonus, deferred
compensation, pension, stock option, stock appreciation right, employee
stock ownership, profit-sharing or retirement plan, arrangement or
practice, each medical, vacation, retiree medical, severance pay plan, and
each other agreement or fringe benefit plan, arrangement or practice, of
MUX or MUX Sub, whether legally binding or not, which affects one or more
of their respective employees, including all "employee benefit plans" as
defined by Section 3(3) of ERISA (collectively, the "Plans").
(c) For each Plan which is an "employee benefit plan" under Section
3(3) of ERISA, MUX has delivered to Glenayre correct and complete copies of
the plan documents and summary plan descriptions, the most recent
determination letter received from the Internal Revenue Service, if any,
the most recent Form 5500 Annual Report, if any, the most recent trust
statement, financial statement or other document detailing the investments
and assets of such Plan, if any, and all related trust agreements,
insurance contracts and funding agreements that implement each such Plan.
(d) Neither MUX nor MUX Sub has any commitment, whether in writing or
not and whether legally binding or not, (1) to create any additional Plan;
(2) to modify or change any Plan in any material respect; or (3) to
maintain for any period of time any such Plan. Schedule 5.10(d) contains
an accurate and complete description of the funding policies (and
commitments, if any) of MUX or MUX Sub with respect to each such existing
Plan. For any Plan that is an "employee stock ownership plan" as defined
by Section 4975(e)(7) of the Code or Section 407(d)(6) of ERISA or is
invested in any securities issued by MUX or any of its affiliates, Schedule
5.10(d) also contains an accurate and complete description of (1) how and
when the Plan acquired any such securities and the amount acquired and (2)
any borrowings or indebtedness incurred by the Plan with respect to any
such acquisition.
23
<PAGE>
(e) None of MUX or MUX Sub or any Plan or any trustee, administrator,
fiduciary or sponsor of any Plan has engaged in any prohibited transaction
as defined in Section 406 of ERISA or Section 4975 of the Code for which
there is no statutory exemption in Section 408 of ERISA or Section 4975 of
the Code; all filings, reports and descriptions as to the Plans (including
Form 5500 Annual Reports, summary plan descriptions, and summary annual
reports) required to have been made or distributed to participants, the
Internal Revenue Service, the United States Department of Labor and other
Governmental Authorities have been made in a timely manner. There is no
litigation, disputed claim, governmental proceeding or investigation
pending or, to the knowledge of MUX, threatened with respect to any of the
Plans, the related trusts or other funding media, or any fiduciary,
trustee, administrator or sponsor of the Plans except (1) as described on
Schedule 5.10(e) or (2) for claims for health or medical benefits arising
in the normal course of plan administration that have not progressed beyond
the Plan's internal claims procedures and, if granted, will not differ in
any material respect from the plan benefits historically provided under the
Plan. Except as described in Schedule 5.10(e), such Plans have been estab-
lished, maintained and administered in all material respects in accordance
with their governing documents and in compliance in all material respects
with all applicable provisions of ERISA and the Code. Except as described
in Schedule 5.10(e), each Plan which is intended to be a qualified plan
under Section 401(a) of the Code has received, within the last three years,
a favorable determination letter from the Internal Revenue Service with
respect to its qualified plan status and, since the date of each most
recent determination letter, no event has occurred and no condition or
circumstance has existed that resulted or is likely to result in the
revocation of any such determination or that could adversely affect the
qualified status of any such Plan.
(f) MUX and MUX Sub have complied in all material respects with all
applicable Laws relating to employees' employment and/or employment
relationships, including, without limitation, wage and hour related Laws,
anti-discrimination Laws, employee safety and workers compensation Laws and
COBRA (defined herein to mean the requirements of Section 4980B of the
Code, Proposed Treasury Regulation Section 1.162-26 and Part 6 of Subtitle
B of Title I of ERISA).
(g) Except as described in Schedule 5.10(g), the consummation of the
Transactions will not (1) result in the payment or series of payments by
MUX or MUX Sub to any employee or other Person of an "excess parachute
payment" within the meaning of Section 280G of the Code, (2) entitle any
employee or former employee of MUX or MUX Sub to severance pay,
unemployment compensation or any other payment, or (3) accelerate the time
of payment or vesting of any stock option, stock appreciation right,
deferred compensation or
24
<PAGE>
other employee benefits under any Plan (including vacation and sick pay).
(h) None of the Plans which are "welfare benefit plans," within the
meaning of Section 3(1) of ERISA, provide for continuing benefits or
coverage after termination or retirement from employment, except for COBRA
rights under a "group health plan" as defined in Section 4980B(g) of the
Code and Section 607 of ERISA.
(i) Neither MUX nor any "affiliate" of MUX (defined herein to mean an
entity which is a member of a "controlled group of corporations," or under
"common control," with MUX as defined in Section 414(b) or (c) of the Code
or in the regulations promulgated thereunder) has ever participated in,
contributed to or withdrawn from a multiemployer plan as defined in Section
4001(a)(3) of ERISA, and neither MUX nor MUX Sub has incurred, or owes, any
liability as a result of any partial or complete withdrawal by any employer
from such a multiemployer plan as described under Sections 4201, 4203 or
4205 of ERISA.
(j) None of MUX or MUX Sub or any "affiliate" of MUX (as defined in
Section 5.10(i)) has ever sponsored, maintained, participated in or
contributed to an employee benefit plan or arrangement that is or was
subject to Title IV of ERISA or any of the minimum funding standards or
requirements of Section 412 of the Code.
5.11 Title to Assets.
(a) Real Property and Leasehold Interests. Neither MUX nor MUX Sub
owns any real property. Schedule 5.11(a) describes all leases (including
all amendments thereto) of real property under which MUX or MUX Sub is a
lessee or sublessee (the "Leases"). MUX has delivered to Glenayre copies of
all Leases and all material notices from the landlords thereunder or its
leasing agents with respect thereto, all of which are specifically
identified in Schedule 5.11(a). MUX or MUX Sub, as the case may be, has a
valid and enforceable leasehold interest under all of the Leases, subject
only to the terms and conditions set forth in the Leases and except as such
enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium or similar laws affecting creditors' rights
generally and by such principles of equity as may affect the availability
of equitable remedies. Neither MUX nor MUX Sub is in default under any
Lease, and there does not exist any event which with notice or the lapse of
time or both would constitute a default by either MUX or MUX Sub thereun-
der. To the knowledge of MUX, (1) except as set forth in Schedule 5.11(a)
the landlord under each Lease is not in default thereunder and there does
not exist any event which with notice or the lapse of time or both would
constitute a default by such landlord thereunder and (2) the landlord under
each Lease has good and marketable fee simple title to the premises leased
under the Lease, subject to the
25
<PAGE>
leasehold interest of the lessee under the Lease. As to all such real
property leased by MUX or MUX Sub (the "Leased Property") except as disclosed
in Schedule 5.11(a):
(1) MUX or MUX Sub has adequate rights of ingress and egress to
all such Leased Property;
(2) to the knowledge of MUX, there is no interest of any third
party which impairs the current use of the Leased Property by MUX or
MUX Sub;
(3) to the knowledge of MUX, the Leased Property, as currently
used by MUX or MUX Sub, is not in violation of any Law (including
building or environmental Laws) affecting the Leased Property which in
any material respect would affect the value thereof or materially
interfere with or materially impair the present and continued use
thereof in the usual and normal conduct of the business of MUX or MUX
Sub;
(4) no notice of violation of any applicable Law, or of any
covenant, condition, restriction or easement, affecting the Leased
Property or with respect to the use or occupancy of the Leased
Property, has been received by MUX (or, to its knowledge, any of the
landlords) from any Governmental Authority having jurisdiction over
the Leased Property or by any other Person entitled to enforce the
same;
(5) to the knowledge of MUX, there is no (i) intended public
improvement which may involve any charge being levied or assessed or
which may result in the creation of any Encumbrance upon the Leased
Property, (ii) intended or proposed Law (including zoning changes)
which may adversely affect the current or proposed use of the Leased
Property, or (iii) suit, action, or legal, administrative, arbitration
or other proceeding (including any proceeding for condemnation) or
governmental investigation pending, threatened or contemplated against
or affecting the Leased Property or the use of any part thereof;
(6) to the knowledge of MUX, there are no encroachments onto the
Leased Property or any improvements on any adjoining property which in
any material respect would affect the value thereof or interfere with
or materially impair the present and continued use thereof in the
usual and normal conduct of the business of MUX or MUX Sub, and no
improvement on the Leased Property materially encroaches on any
adjoining property or any easements or right-of-ways on, under or over
the Leased Property;
(7) neither MUX nor MUX Sub is in breach of any, and each of
them is currently complying in all material respects
26
<PAGE>
with, all covenants, conditions, restrictions, easements and similar
matters affecting the Leased Property;
(8) to the knowledge of MUX, the buildings and improvements
located on the Leased Property, and the present use thereof, comply
with all zoning Laws; and
(9) the water supply and sewage and waste disposal facilities
available at each such Leased Property have been adequate for the
business of MUX and MUX Sub as currently conducted and as proposed to
be conducted in the future.
(b) Equipment. MUX or MUX Sub, as the case may be, has good and
marketable fee simple title to all machinery and equipment, computers,
office supplies, furniture, parts, transportation equipment and other
tangible personal property (other than Inventory as hereinafter defined)
used in the businesses of MUX and MUX Sub (the "Equipment"), free and clear
of all Encumbrances other than those set forth in Schedule 5.11(b).
(c) Inventory. MUX and MUX Sub have good and marketable fee simple
title to all of their inventories reflected on the balance sheet included
in the consolidated financial statements for MUX and MUX Sub for the month
ended November 30, 1994 (the "November 30, 1994 Balance Sheet"), plus
additions made to such inventories since November 30, 1994 and less such
inventories disposed of in the ordinary course of business since November
30, 1994 (the "Inventory"), free and clear of all Encumbrances except those
described in Schedule 5.11(c).
(d) Receivables. At the Closing, all accounts receivable of MUX and
MUX Sub reflected on the November 30, 1994 Balance Sheet, plus additional
accounts receivable of MUX or MUX Sub arising after November 30, 1994 and
less any accounts receivables collected in full after November 30, 1994
(the "Receivables") will constitute valid and enforceable claims of MUX or
MUX Sub, as the case may be, enforceable by it in accordance with the terms
of the instruments or documents creating them. The Receivables are free
and clear of all Encumbrances, except that the Receivables are pledged as
collateral to Comerica Bank, San Jose, California, pursuant to the Bank
Agreement dated November 4, 1993 as set forth in Schedule 5.11(d).
(e) Intellectual Property. Except as disclosed on Schedule 5.11(e),
MUX or MUX Sub has the rights to use (1) the name "Western Multiplex
Corporation" and the name "Western Multiplex International Sales
Corporation" where now used and any trademarks or service marks in
connection therewith and the goodwill of the business of MUX or MUX Sub in
connection therewith (collectively, the "Name") and (2) all other trade
names, trademarks, service marks, copyrights, patents, and registrations
thereof or applications therefor as described in Schedule 5.11(e), and all
software,
27
<PAGE>
trade secrets, secret processes, customer lists, inventions,
formulae and other intellectual property used by MUX or MUX Sub, in
connection with the business of MUX and MUX Sub as and where now conducted
(with the Name, the "Intellectual Property"). Except as disclosed on
Schedule 5.11(e), neither MUX nor MUX Sub is a party to any agreement with
any other Person with respect to the use of any Intellectual Property.
Except as disclosed on Schedule 5.11(e), each of MUX and MUX Sub owns or
possesses all licenses and permits, and all rights to use all material
trademarks, service marks, trade names, software or copyrights necessary or
being used to conduct its business as and where now conducted and has not
received any notice of conflict with the asserted rights of any others.
Listed on Schedule 5.11(e) is an accurate and complete listing of all such
trademarks, service marks, trade names, software or copyrights owned by,
registered, licensed or used by MUX or MUX Sub which are material to the
business of MUX and MUX Sub taken as a whole. Except as disclosed in
Schedule 5.11(e), there are no instances where it has been held or claimed
and there is no basis upon which a valid claim may be made, that any of the
Intellectual Property or any use of the Intellectual Property by MUX or MUX
Sub infringes upon any rights of any Person. Except as disclosed in
Schedule 5.11(e), there are no instances where MUX or MUX Sub has
claimed, and, to the knowledge of MUX, there is no basis upon which a
claim may be made, that any Person infringes upon any rights of MUX or MUX
Sub with respect to the Intellectual Property.
(f) Contract Rights. Schedule 5.11(f) sets forth all of the material
executory contracts, agreements and commitments of MUX and MUX Sub of any
kind or nature, including (1) any contract, agreement or commitment which
requires MUX or MUX Sub to make aggregate payments thereunder in excess of
$50,000, (2) any contract, agreement or commitment pursuant to which MUX or
MUX Sub is entitled to receive aggregate payments thereunder in excess of
$50,000 and (3) any joint venture, partnership, participation or cost
sharing agreement, license agreement, lease, note or other evidence of
indebtedness, security agreement, mortgage, noncompetition agreement or
power of attorney, whether written or unwritten so long as it is an
enforceable obligation (collectively, the "Material Contracts"). The
rights of MUX or MUX Sub, as the case may be, under all Material Contracts
are valid and enforceable by MUX or MUX Sub, as the case may be, in
accordance with their respective terms except as such enforceability may be
limited by applicable bankruptcy, insolvency and other similar laws affect-
ing creditors' rights generally and by such principles of equity as may
affect the availability of equitable remedies. Neither MUX nor MUX Sub, as
the case may be, is in default in any material respect (nor does any cir-
cumstance exist which, with notice or the passage of time or both, would
result in such a default) under the Material Contracts (including the
Leases). To the knowledge of MUX, the other party to each Material
Contract is not in default thereunder in any material respect (nor does any
circumstance exist which,
28 <PAGE>
with notice or the passage of time or both, would result in such
a default). All amendments or supplements to the Material Contracts
and all material notices with respect to such Material Contracts
are specifically identified in Schedule 5.11(f).
5.12 Condition of Tangible Assets.
(a) Fixtures. The fixtures and leasehold improvements on the Leased
Property are in good condition and repair, ordinary wear and tear excepted,
and all electric, gas, water and sewer utilities serving the Leased
Property are adequate.
(b) Hazardous Substances. For purposes of this Agreement, the
following terms shall have the following meanings:
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, notices of
noncompliance or violation, investigations or proceedings relating in any
way to any Environmental Law (for purposes of (1) and (2) below, "Claims")
or to any material provision of any permit issued under any such
Environmental Law, including:
(1) any and all Claims by Governmental Authorities for
investigation, oversight, enforcement, cleanup, removal, response,
remedial or other actions or damages pursuant to any applicable
Environmental Law; and
(2) any and all Claims by any third party seeking damages,
response costs, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from Hazardous Materials
or arising from alleged injury or threat of injury to health, safety
or the environment arising from Hazardous Materials.
"Environmental Law" means any Law, now in effect and as amended, and
any judicial or administrative interpretation thereof, including any
judicial or administrative order, consent, decree or judgment, relating to
the environment, health or safety, or hazardous, toxic or dangerous
materials, substances or wastes, including the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C.
(section mark)(section mark) 9601 et seq. ("CERCLA"); the Toxic Substances
Control Act, as amended, 15 U.S.C. (section mark)(section mark) 2601 et seq.;
the Clean Air Act, as amended, 42 U.S.C. (section mark)(section mark) 7401
et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C.
(section mark)(section mark)1251 et seq.; the Federal Insecticide, Fungicide,
and Rodenticide Act, as amended, 7 U.S.C. (section mark)(section mark)136,
et seq.; the Hazardous Materials Transportation Act, as amended, 49 U.S.C.
(section mark)(section mark)1801 et seq.; the Resource Conservation and
Recovery Act, as amended, 42 U.S.C. (section mark)(section mark) 6901
et seq. ("RCRA"); the Safe Drinking Water Act, 42 U.S.C.
(section mark)(section mark)300f et seq.; and any similar state or
local Law.
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"Hazardous Materials" shall mean "hazardous substances" as defined in
Section 101(14) of CERCLA, "hazardous waste" and "hazardous constituents"
as defined in RCRA and its implementing regulations, and any other
substances defined as pollutants, contaminants, toxic, hazardous or harmful
or dangerous to human health or the environment under any Law, including:
(1) any petroleum or petroleum products, chlorinated solvents,
explosives, radioactive materials, asbestos, asbestos products, urea
formaldehyde foam insulation, polychlorinated biphenyls (PCB's),
including transformers or other equipment that contain dielectric
fluid containing detectible levels of polychlorinated biphenyls, and
radon gas;
(2) any hazardous, toxic or dangerous waste, substance or
material defined as such, or as harmful or dangerous to human health
or the environment, in (or for purposes of) any current Environmental
Law or currently listed as such pursuant to any Environmental Law; and
(3) any other chemical, material or substance, the addition of
which to the air, earth, surface water or groundwater is prohibited,
limited or regulated by any Environmental Law.
"MUX Property" shall mean (1) any real property and improvements
presently owned, leased, used, operated or occupied by MUX or MUX Sub, and
(2) any other real property and improvements at any previous time owned,
leased, used, operated or occupied by MUX or MUX Sub.
"Release" means disposing, depositing, discharging, injecting,
spilling, leaking, leaching, dumping, emitting, escaping, emptying,
seeping, placing and the like, into or upon any land or water (including
surface or ground water) or air, or otherwise entering into the
environment.
Except as set forth on Schedule 5.12:
(1) to the knowledge of MUX, during the tenancy of MUX with
respect to any MUX Property, Hazardous Materials have not been
illegally generated, used, treated or stored on, or transported to or
from, any MUX Property;
(2) to the knowledge of MUX, during the tenancy of MUX with
respect to any MUX Property, no asbestos-containing materials or other
Hazardous Materials have been installed in or affixed to structures on
any MUX Property;
(3) to the knowledge of MUX, during the tenancy of MUX with
respect to any MUX Property, Hazardous Materials have not been
disposed of or otherwise Released on any MUX Property,
30
<PAGE>
and Hazardous Materials used on or generated at any MUX Property have
not at any time been illegally disposed of on any other property;
(4) MUX and MUX Sub are currently, and have at all times in the
past been, in compliance with all applicable Environmental Laws and
the requirements of any permits issued under such Environmental Laws
with respect to any MUX Property during the tenancy of MUX with
respect to such MUX Property;
(5) there are no past, pending or, to the knowledge of MUX,
threatened Environmental Claims against MUX or MUX Sub or any MUX
Property currently occupied by MUX or MUX Sub;
(6) there are no facts or circumstances, conditions or
occurrences on any MUX Property or otherwise which are known to MUX
that could reasonably be anticipated by MUX or MUX Sub:
(A) to form the basis of an Environmental Claim against
MUX, MUX Sub or any MUX Property currently used or occupied by
MUX or MUX Sub; or
(B) to materially interfere with the ownership, occupancy
or use of such MUX Property as currently used or occupied by MUX
or MUX Sub, or the ability to transfer such MUX Property, under
any Environmental Law;
(7) to the knowledge of MUX, there are not now, nor have there
been during the tenancy of MUX with respect to any MUX Property, any
aboveground or underground storage tanks located on any MUX Property.
(c) Equipment. All of the Equipment is in good condition and repair,
ordinary wear and tear excepted.
(d) Inventory. Except to the extent provided for by inventory
reserves reflected on the November 30, 1994 Balance Sheet, each item of
Inventory is in good condition, not obsolete or defective and is useable or
saleable in the ordinary course of MUX's or MUX Sub's business.
5.13 Leases. Except as set forth in Schedule 5.13, none of the Leased
Property or Equipment is leased by MUX or MUX Sub to any other Person and,
except for the Leased Property or as set forth on Schedule 5.13, none of
the real or tangible personal property used in the business of MUX or MUX
Sub is leased by them from any other Person.
5.14 Arms-Length Transactions. Except as set forth in Schedule 5.14,
since June 30, 1991, all of the material transactions with third Persons by
MUX or MUX Sub have been conducted on an arms-length basis. Except as set
forth on Schedule
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5.14, (1) to the knowledge of MUX, none of the
Indemnifying Shareholders, officers or directors of MUX or their respective
Affiliates or Relatives (as hereafter defined) has any direct or indirect
interest, profit participation or ownership (other than through non-
controlling investments in securities of publicly-held corporations) in
businesses which are competitors or potential competitors of MUX or MUX
Sub, (2) neither MUX nor MUX Sub has any outstanding loans or other
advances to any shareholder, officer, director or employee of MUX or MUX
Sub or their respective Affiliates or Relatives and (3) to the knowledge of
MUX, none of the Indemnifying Shareholders, officers or directors of MUX or
MUX Sub or their respective Affiliates or Relatives is an Affiliate of any
Person that has a material business relationship with MUX or MUX Sub.
"Affiliate" shall mean any Person which (1) directly or indirectly
controls, is controlled by or is under common control with a specified
Person, (2) owns or controls 5% or more of the outstanding equity interests
of a specified Person or (3) is an officer, director, general partner,
trustee, manager, administrator, representative or agent of a specified
Person. For this purpose, the term "control" means possession, directly or
indirectly (through one or more intermediaries), of the power to direct or
cause the direction of management and policies of a Person through an
ownership of voting securities or other ownership interests, contract,
voting trust or otherwise. "Relative" means any brother or sister (whether
by whole or half blood or adoption), spouse or lineal ascendant or
descendant.
5.15 Lawfully Operating. Except as set forth in Schedule 5.15,
neither MUX nor MUX Sub is in conflict with, or in default or violation of,
(1) any Law applicable to MUX or MUX Sub or by which any of their property
or assets is bound or affected or (2) the provisions of any note, bond,
mortgage, indenture, contract, agreement, understanding, arrangement,
commitment, lease, license, permit, franchise or other instrument or
obligation to which MUX or MUX Sub is a party or by which MUX or MUX Sub or
any of their property or assets is bound or affected, nor does any
circumstance exist which with notice or the passage of time or both would
result in such a conflict, default, or violation, except where such
conflict, violation or default would not prevent or delay consummation of
the Merger in any material respect, or otherwise prevent MUX or any Equity
Holder from performing its, his or her obligations under this Agreement or
the Acknowledgments in any material respect. Except as set forth in
Schedule 5.15, MUX and MUX Sub have been and currently are conducting their
business, and the Leased Property has been and now is being used and
operated, in compliance with all Laws applicable to the same. MUX and MUX
Sub hold all of the licenses, permits and other governmental franchises
required for the conduct of their respective businesses as now conducted.
5.16 No Litigation. Schedule 5.16 sets forth all pending and, to the
knowledge of MUX, threatened lawsuits or administrative
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proceedings or investigations against MUX and MUX Sub or to which any of their
assets are subject. Neither MUX nor MUX Sub is subject to any currently existing
order, writ, injunction, or decree relating to its operations. Except as
described in Schedule 5.16, there are no material "loss contingencies" (as
defined in Statement of Financial Accounting Standards No. 5 issued by the
Financial Accounting Standards Board in March 1975 ("FAS 5")), which would
be required by FAS 5 to be disclosed or accrued in consolidated financial
statements of MUX and MUX Sub were such statements prepared at the time
this warranty is made or deemed made.
5.17 Labor Matters. Since June 30, 1989, neither MUX nor MUX Sub has
been a party to any collective bargaining agreement and neither has been
the subject of any union activity or labor dispute, and there has not been
any strike of any kind called or, to the knowledge of MUX and MUX Sub,
threatened to be called against MUX or MUX Sub. Neither MUX nor MUX Sub
has violated any applicable Law relating to labor or labor practices or has
any liability to any of its employees, agents or consultants in connection
with grievances by, or the termination or employment of, such employees,
agents or consultants.
5.18 [Intentionally Omitted]
5.19 Brokers. Except as set forth on Schedule 5.19, neither MUX nor
MUX Sub has entered into any contract, arrangement or understanding with
any Person which may result in the obligation of MUX or MUX Sub or Glenayre
or Merger Sub to pay any finder's fees, brokerage or agent's commissions or
other like payments in connection with the negotiations leading to this
Agreement or the consummation of the Transactions. Except as set forth in
Schedule 5.19 and Schedule 6.7, MUX is not aware of any claim for payment
of any finder's fees, brokerage or agent's commissions or other like
payments in connection with the negotiations leading to this Agreement or
the consummation of the Transactions.
5.20 Glenayre Stock Ownership. Neither MUX nor MUX Sub owns any
shares of Glenayre Common Stock or other securities convertible into
Glenayre Common Stock.
5.21 Bank Accounts. Schedule 5.21 describes all bank accounts, vaults
and safe deposit boxes used by, or in the name of, MUX or MUX Sub,
including the account, vault or box number, the institution at which the
account, vault or box is maintained, and the signatories authorized for the
account or persons authorized to have access to the vault or box.
5.22 Insurance. Schedule 5.22 identifies all policies of insurance
now in effect covering the assets, properties and business of MUX and MUX
Sub and all life insurance policies maintained by them. MUX has delivered
an accurate and complete copy of each of the policies listed on Schedule
5.22 to Glenayre.
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Neither MUX nor MUX Sub has done anything by way of action or inaction
that invalidates any of such policies in whole or in part.
5.23 Warranty and Product Liability Matters. Except as set forth in
Schedule 5.23, the products and services provided by MUX and MUX Sub are in
compliance with and meet all express and implied warranties and the
requirements and standards of all Laws applicable to the sale or provision
of such products and services. Except as set forth in Schedule 5.23, no
product or service warranty or liability claims are pending or, to the
knowledge of MUX, threatened against MUX or MUX Sub or in respect of
products of services sold or provided by it.
5.24 Warranty, Repurchase and Other Service Obligations. Schedule
5.24 describes (1) all material warranty obligations of MUX or MUX Sub and
all material warranty contracts, agreements, understandings or arrangements
to which MUX or MUX Sub is a party or by which any of their property or
assets is bound, including express warranties, implied warranties and
warranties established by a course of dealing and (2) all material service
and repurchase contracts, agreements, understandings or arrangements to
which MUX or MUX Sub is a party to or by which any of their property or
assets is bound. True and complete copies of such agreements have been
delivered to Glenayre.
5.25 Customers and Suppliers. Schedule 5.25 hereto lists, with
respect to the fiscal years of MUX and MUX Sub ended on June 30, 1991, June
30, 1992, June 30, 1993 and June 30, 1994, respectively, (1) the 30 largest
customers (by dollar volume) of MUX and MUX Sub during each such period
(showing the dollar volume for each) and (2) the 30 largest suppliers (by
dollar volume) of MUX during each such period (showing the dollar volume of
each). Except to the extent set forth in Schedule 5.25, since June 30,
1994, no material adverse change has occurred in the business relationship
of MUX or MUX Sub with its customers and suppliers reflected in Schedule
5.25 and MUX has no knowledge that any such customers or suppliers are
expected to cease or substantially reduce purchasing or supplying goods or
services from or to MUX, or are currently involved in any bankruptcy,
liquidation or similar proceeding.
5.26 Guarantees. Neither MUX nor MUX Sub is a guarantor or otherwise
liable for any liability or obligation (including indebtedness) of any
other Person.
5.27 Prospective Changes. Except as set forth on Schedule 5.27, MUX
knows of no impending changes in MUX's or MUX Sub's business, assets,
liabilities, relations with employees, competitive situation or relations
with suppliers or customers, or in any governmental actions or regulations
affecting MUX's or MUX Sub's business, which, if they occur, would
reasonably be expected to have a MUX Material Adverse Effect.
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5.28 Full Disclosure. All of the written information provided by MUX,
MUX Sub and each Equity Holder and their representations herein or in the
Schedules and Exhibits hereto or in the Acknowledgments are true, correct,
and complete in all material respects and no written representation,
warranty or statement made by MUX, MUX Sub or any Equity Holder in or
pursuant to this Agreement or the Acknowledgments contains or will contain
any untrue statement of a material fact or omits or will omit to state any
material fact necessary to make such representation, warranty, or
statement, in light of the circumstances under which it was made, not
misleading to Glenayre.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF GLENAYRE AND MERGER SUB
Glenayre and Merger Sub hereby jointly and severally represent and
warrant to MUX and the Equity Holders that:
6.1 Organization and Qualification. Each of Glenayre and Merger Sub
is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation and has the
requisite power and authority and all necessary governmental approvals to
own, lease and operate its properties and to carry on its business as it is
now being conducted. Merger Sub has not engaged in any activities other
than in connection with the Transactions. Glenayre and Merger Sub are each
duly qualified or licensed as a foreign corporation to do business, and
each is in good standing, in each jurisdiction where the character of the
properties owned, leased, or operated by such corporation or the nature of
its business makes such qualification or licensing necessary, except for
such failures to be so qualified or licensed and in good standing that
would not, individually or in the aggregate, have a Glenayre Material
Adverse Effect.
6.2 Certificate of Incorporation and Bylaws. The Articles or
Certificate of Incorporation and the Bylaws of Glenayre and Merger Sub are
in full force and effect. Neither Glenayre nor Merger Sub is in violation
of any provision of its Articles or Certificate of Incorporation or Bylaws.
6.3 Capitalization. The authorized capital stock of Glenayre
consists of 50,000,000 shares of Glenayre Common Stock and 5,000,000 shares
of Preferred Stock, par value $.01 per share ("Glenayre Preferred Stock").
As of December 29, 1994, approximately 24,922,702 shares of Glenayre Common
Stock were issued and approximately 24,885,202 shares of Glenayre Common
Stock were outstanding (each number of shares takes into account the three-
for-two stock split effected by a 50% stock dividend distributable to
Glenayre stockholders of record as of December 22,
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1994), all of which shares were validly issued, fully paid and
nonassessable. As of the date hereof, no shares of Glenayre Preferred
Stock are issued and outstanding. The authorized capital stock of Merger
Sub consists of 1,000 shares of common stock, of which, as of the date
hereof, 1,000 shares are issued and outstanding and held of record by
Glenayre free and clear of all Encumbrances, except for restrictions
imposed by applicable securities Laws. These shares were validly issued,
fully paid and nonassessable. The shares of Glenayre Common Stock to be
issued pursuant to the Merger will, when issued, (1) be duly authorized,
validly issued, fully paid and nonassessable, (2) be free and clear of any
Encumbrances except for applicable resale restrictions under Rule 145 and
under any Affiliate Letter, (3) not be subject to any preemptive rights,
and (4) be registered under the Securities Act and the Exchange Act and
registered or exempt from registration under applicable Blue Sky Laws.
6.4 Authority Relative to this Agreement. Each of Glenayre and
Merger Sub has all necessary power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
Transactions. The execution and delivery of this Agreement by Glenayre and
Merger Sub and the consummation by Glenayre and Merger Sub of the
Transactions have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of Glenayre
or Merger Sub are necessary to authorize this Agreement or to consummate
the Transactions (other than the filing and recordation of the appropriate
merger documents as required by the CGCL). This Agreement has been duly
and validly executed and delivered by Glenayre and Merger Sub and, assuming
the due authorization, execution and delivery by MUX, constitutes a legal,
valid and binding obligation of each of Glenayre and Merger Sub,
enforceable against them in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium or similar laws affecting creditors' rights
generally and by such principles of equity as may affect the availability
of equitable remedies.
6.5 No Conflict; Required Filings and Consents.
(a) Except as set forth in Schedule 6.5, the execution and delivery
of this Agreement by Glenayre and Merger Sub do not, and the performance of
the Transactions by Glenayre and Merger Sub will not, (1) conflict with or
violate the Articles or Certificate of Incorporation or Bylaws of Glenayre
or Merger Sub, (2) conflict with or violate any Law applicable to Glenayre
or Merger Sub or by which any of their property or assets is bound or
affected, or (3) result in any breach of or constitute a default (or any
event which with notice or the passage of time or both would result in a
default) under, result in the loss of a material benefit under or give to
others any right of termination, amendment, acceleration or cancellation
of, or result in the creation of an Encumbrance on any
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property or asset of Glenayre or Merger Sub pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise
or other instrument or obligation to which Glenayre or Merger Sub is a party
or by which either of them or any of their property or assets is bound or
affected.
(b) The execution and delivery of this Agreement by Glenayre and
Merger Sub do not, and the performance of the Transactions by Glenayre and
Merger Sub will not, require any consent or authorization of, or filing
with or notification to, any Governmental Authority, except (1) for (i)
applicable requirements, if any, of the Exchange Act, the Securities Act,
the NASDAQ National Market System and Blue Sky Laws, (ii) the pre-merger
notification requirements of the HSR Act and (iii) filing and recordation
of appropriate merger documents as required by the CGCL, and (2) where
failure to obtain such consents, approvals, authorizations or to make such
filings or notifications, would not prevent or delay consummation of the
Merger in any material respect, or otherwise prevent Glenayre or Merger Sub
from performing its obligations under this Agreement in any material
respect, and would not, individually or in the aggregate, have a Glenayre
Material Adverse Effect.
6.6 SEC Reports. Glenayre has filed all forms, reports and documents
required to be filed by it under the Exchange Act with the SEC since
January 1, 1994, and has delivered to MUX (1) its Annual Report on Form 10-
K for the fiscal year ended December 31, 1993, (2) its Quarterly Reports on
Form 10-Q for the periods ended March 31, 1994, June 30, 1994 and September
30, 1994 and (3) all proxy statements relating to Glenayre's meetings of
shareholders held since January 1, 1994 (the forms, reports and other
documents referred to in clauses (1), (2) and (3) above being referred to
herein, collectively, as the "Glenayre SEC Reports"). The Glenayre SEC
Reports (1) were prepared in accordance with the material requirements of
the Exchange Act and the rules and regulations thereunder and (2) did not
at the time they were filed contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
6.7 Brokers. Except as set forth in Schedule 6.7 hereto, Glenayre
has not entered into any contract, arrangement or understanding with any
Person which may result in the obligation of MUX, MUX Sub, Glenayre or
Merger Sub to pay any finder's fees, brokerage or other agent's commissions
or other like payments in connection with the negotiations leading to this
Agreement or the consummation of the Transactions. Except for the
obligations set forth in Schedule 5.19 and Schedule 6.7, Glenayre is not
aware of any claim for any finder's fees, brokerage or agent's commissions
or other like payments in connection with the negotiations leading to this
Agreement or the consummation of the Transactions.
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6.8 Federal Income Tax Representations.
(a) Prior to the Merger, Glenayre will be in control of Merger Sub
within the meaning of Section 368(c) of the Code.
(b) Glenayre has no present plan or intention to cause MUX to issue
additional shares of its stock that would result in Glenayre losing control
of the Surviving Corporation within the meaning of Section 368(c) of the
Code.
(c) Glenayre has no present plan or intention to reacquire any of its
stock issued in the Merger, except for any Escrowed Shares pursuant to
Sections 4.9 and 4.10.
(d) Glenayre has no present plan or intention to liquidate the
Surviving Corporation; to merge the Surviving Corporation with or into
another corporation; to sell or otherwise dispose of the stock of the
Surviving Corporation except for transfers of stock to another corporation
controlled by Glenayre; or to cause the Surviving Corporation to sell or
otherwise dispose of any of its assets, except for dispositions made in the
ordinary course of business or transfers of assets to a corporation
controlled by Glenayre.
(e) Following the Merger, Glenayre's present intent is that the
Surviving Corporation will continue the historic business of MUX or use a
significant portion of the historic business assets of MUX in a business.
(f) Glenayre does not own, nor has it owned during the past five
years, any shares of the stock of MUX.
(g) Each of Glenayre and Merger Sub is undertaking the Merger for a
bona fide business purpose and not merely for the avoidance of federal
income tax.
(h) Merger Sub will have no liabilities assumed by MUX, and will not
transfer to MUX any assets subject to liabilities, in the Merger.
(i) Neither Glenayre nor Merger Sub is an investment company as
defined in Section 368(a)(2)(F)(iii) and (iv) of the Code.
(j) The payment under Section 4.2 of cash in lieu of fractional
shares of Glenayre Common Stock is solely for the purpose of avoiding the
expense and inconvenience to Glenayre of issuing fractional shares and does
not represent separately bargained-for consideration.
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ARTICLE 7
COVENANTS
7.1 Covenants of Glenayre and MUX. During the period from the date
hereof and continuing until the Effective Time (except as expressly
contemplated or permitted hereby, or to the extent MUX consents in writing
in the case of Glenayre's obligations and to the extent Glenayre consents
in writing in the case of MUX's obligations) each of Glenayre and MUX
covenants with the other that, insofar as the obligations relate to it:
(a) Glenayre and MUX and their respective subsidiaries shall each
carry on and conduct their respective businesses only in the ordinary
course in substantially the same manner as previously conducted and shall
use all reasonable efforts to preserve intact their present business
organizations, maintain their rights and franchises and preserve their
relationships with customers, suppliers and others having business dealings
with them to the end that their goodwill and ongoing businesses shall not
be impaired in any material respect at the Effective Time.
(b) Each of MUX and Glenayre and their respective subsidiaries shall
allow all designated officers, attorneys, accountants and other
representatives of the other access at all reasonable times during regular
business hours to the records and files, correspondence, audits and
properties, as well as to all information relating to commitments,
contracts, titles and financial position, or otherwise pertaining to the
business and affairs, of MUX and Glenayre and their respective
subsidiaries.
(c) Glenayre and MUX and their respective subsidiaries shall
cooperate and promptly prepare, and Glenayre shall file with the SEC as
soon as practicable, a Registration Statement on Form S-4 (the "Form S-4")
under the Securities Act, with respect to the Glenayre Common Stock
issuable in the Merger (including shares of Glenayre Common Stock issuable
in substitution for MUX Common Stock pursuant to Section 4.5), a portion of
which Registration Statement shall also serve as the proxy statement with
respect to the meeting (or consent in lieu of a meeting) of the
shareholders of MUX in connection with the Merger (the "Proxy State-
ment/Prospectus"). The respective parties will cause the Proxy
Statement/Prospectus and the Form S-4 to comply as to form in all material
respects with the applicable provisions of the Securities Act and the rules
and regulations thereunder. Glenayre shall use all reasonable efforts, and
MUX will cooperate with Glenayre, to have the Form S-4 declared effective
by the SEC as promptly as practicable. Glenayre shall use all reasonable
efforts to obtain, prior to the effective date of the Form S-4, all
necessary state securities law permits or approvals required to carry out
the Transactions. MUX shall furnish all information concerning MUX and its
shareholders as Glenayre may reasonably request in connection with such
actions.
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As promptly as practicable after the Form S-4 shall have become
effective, MUX shall mail the Proxy Statement/Prospectus to its
shareholders. Glenayre agrees that the Proxy Statement/Prospectus at the
time of mailing thereof and at the time of the meeting of the shareholders
of MUX, will not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein, in light of circumstances under which they were
made, not misleading; provided, however, that the foregoing shall not apply
to the extent that any such untrue statement of a material fact or omission
to state a material fact relates to MUX or MUX Sub. MUX agrees that the
information relating to MUX and MUX Sub in the Proxy Statement/Prospectus,
at the time of mailing thereof and at the time of the meeting of the
shareholders of MUX (or during the period that consents are solicited or
received), will not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. No amendment or supplement to the Proxy
Statement/Prospectus will be made by Glenayre or MUX without the approval
of the other party. Glenayre will advise MUX, promptly after it receives
notice thereof, of the time when the Form S-4 has become effective.
Glenayre and MUX each hereby (1) consents to the use of its name, and on
behalf of its subsidiaries and affiliates, the names of such subsidiaries
and affiliates and to the inclusion of financial statements and business
information relating to such party and its subsidiaries and affiliates (in
each case, to the extent required by applicable securities Laws) in the
Form S-4 or Proxy Statement/Prospectus and (2) agrees to use reasonable
efforts to obtain the written consent of any Person retained by it which
may be required to be named (as an expert or otherwise) in the Form S-4 or
Proxy Statement/Prospectus. The form of Proxy (or consent) accompanying
the Proxy Statement/Prospectus will state that a vote by a MUX shareholder
in favor of the Merger shall also constitute a consent by such shareholder
to be bound by the terms of this Agreement and shall be in a form
reasonably satisfactory to Glenayre.
(d) MUX and Glenayre shall each use reasonable efforts to obtain and
furnish to the other party prior to the Effective Time the written consents
set forth on Schedules 5.5 and 6.5.
(e) Glenayre, Merger Sub and MUX shall cooperate and use their best
efforts to file a Notification and Report Form for Certain Mergers and
Acquisitions under the HSR Act with the U.S. Department of Justice and the
Federal Trade Commission.
(f) Glenayre, Merger Sub and MUX shall cooperate and use their best
efforts (1) to prepare all documentation, to effect all filings and to
obtain all consents and authorizations of all Governmental Authorities and
other third Persons necessary to
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consummate the Transactions and (2) to cause the Transactions to be consummated
as expeditiously as is reasonably practicable.
(g) Except and as to the extent required by Law, neither MUX nor its
representatives shall make any public statements regarding the Merger or
this Agreement without the prior approval of Glenayre.
7.2 Covenants of MUX. MUX covenants and agrees with Glenayre that
during the period from the date hereof and continuing until the Effective
Time (except as expressly contemplated or permitted hereby, or to the
extent that Glenayre shall otherwise consent in writing):
(a) Until April 30, 1995 (or earlier if this Agreement has been
terminated pursuant to Article 10), and subject to the exercise by the MUX
Board of Directors of fiduciary duties required by applicable Law, MUX
agrees that (1) it shall not, and shall direct and use its best efforts to
cause MUX's directors, officers, employees, shareholders, advisors,
accountants and attorneys (the "Representatives"), including such
Representatives of any of MUX's affiliated Persons, not to initiate,
solicit or encourage, directly or indirectly, any inquiries or the making
or implementation of any proposal or offer (including any proposal or offer
to its shareholders) with respect to a merger, acquisition, consolidation
or similar transaction involving, or any purchase of all or any significant
portion of the assets or any equity securities of MUX or MUX Sub (any such
proposal or offer being hereinafter referred to as an "Acquisition
Proposal") or engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions with, any
Person relating to an Acquisition Proposal, or otherwise facilitate any
effort or attempt to make or implement an Acquisition Proposal, or
otherwise consider the adoption of an Acquisition Proposal, whether or not
unsolicited; (2) it will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any Persons conducted
previously with respect to any of the foregoing and will take the necessary
steps to inform the Representatives of the obligations undertaken in this
Section 7.2(a); and (3) it will notify Glenayre immediately if any such
inquiries or proposals are received by, any such information is requested
from, or any such negotiations or discussions are sought to be initiated or
continued with, it.
(b) Promptly after the date of this Agreement and subject to the
timing of the SEC's review of Form S-4, MUX shall take all action necessary
in accordance with California Law and its Articles of Incorporation and
Bylaws to convene a special meeting of MUX's shareholders (or seek consent
in lieu of a meeting) for the purpose of considering and approving the
Merger and MUX shall consult with Glenayre in connection therewith. MUX
shall use its best efforts to solicit from its shareholders proxies in
favor of the Merger
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(and consenting to be bound by the terms of this Agreement) and
shall take all other actions necessary or advisable to secure the
vote or consent of shareholders required by California Law to approve
the Merger.
(c) MUX and the MUX Sub will make all normal and customary repairs,
replacements, and improvements to their facilities, will not dispose of any
assets other than at fair market value and with the prior written consent
of Glenayre, and without limiting the generality of the foregoing or the
covenants set forth in Section 7.1(a), neither MUX nor MUX Sub will,
without the prior written consent of Glenayre (such consent to be given by
either Clarke H. Bailey or Stan Ciepcielinski on behalf of Glenayre) or as
otherwise contemplated by this Agreement:
(1) change any provision of its Articles of Incorporation or
Bylaws;
(2) except for the issuance of MUX Common Stock pursuant to the
exercise of any MUX Stock Options and any related agreements, change
the number of shares of the authorized, issued or outstanding capital
stock of MUX or MUX Sub, including any issuance, purchase, redemption,
split, combination or reclassification thereof, or issue or grant any
option, warrant, call, commitment, subscription, right or agreement to
purchase relating to the authorized or issued capital stock of MUX or
MUX Sub, or declare, set aside or pay any dividend or other
distribution in cash or in kind with respect to the outstanding
capital stock of MUX or MUX Sub;
(3) incur any liabilities or obligations, whether directly or
indirectly, or by way of guaranty, and whether or not evidenced by any
note, bond, debenture, or similar instrument, except in the ordinary
course of business consistent with past practices and prior periods;
(4) except as set forth in Schedule 7.2(c)(4), make any capital
expenditures (or enter into any lease required to be capitalized in
accordance with GAAP) individually in excess of $25,000 or in the
aggregate in excess of $150,000, other than reasonable expenditures
necessary to maintain existing assets in good working order and
repair, reasonable wear and tear excepted;
(5) pay any bonuses to any employee of MUX or MUX Sub except as
set forth on Schedule 7.2(c)(5); enter into any new or amend in any
respect any existing employment agreement with any Person; adopt any
new or amend in any respect any existing Plan, except as may be
otherwise required by Law; grant any increase in compensation or
benefits of any kind to its employees, officers or directors, except
regularly scheduled general increases in the ordinary course of
business and
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consistent with past practices and policies; or effect
any change in any respect in retirement benefits to any class of
employees or officers, except as otherwise required by Law;
(6) sell, mortgage, pledge, or otherwise dispose of or encumber
any asset owned by MUX or MUX Sub, other than sales, mortgages,
pledges, or other dispositions or Encumbrances occurring in the
ordinary course of business consistent with past practices and prior
periods;
(7) increase or deplete inventories, incur or collect
receivables, or incur or pay trade payables or accrued liabilities in
any manner other than consistent with past practices and prior periods
and in the ordinary course of business;
(8) cancel without payment or satisfaction in full, waive or
extend the time for performance of, any notes, loans, or other
obligations inuring to the benefit of MUX or MUX Sub;
(9) make any modification of or amendment to any of the
contracts or agreements listed or described on any Schedule to this
Agreement;
(10) fail to maintain in full force and effect all insurance now
carried by MUX or MUX Sub;
(11) institute any changes in management policy of a significant
nature;
(12) take any action or fail to take any action that, if taken or
omitted, would be required to be disclosed under the provisions of
Section 5.8; or
(13) make any agreement or commitment by or on behalf of MUX or
MUX Sub to do or take any of the actions referred to in the foregoing
Section 7.2(c)(1) through (12).
(d) At least 30 days prior to the Closing Date, MUX shall deliver to
Glenayre a list, which shall be reasonably satisfactory to Glenayre, of
names and addresses of those Persons who were, in MUX's reasonable judgment
after discussion with its counsel, Gray Cary Ware & Freidenrich, at the
record date for its shareholders' meeting to approve the Merger,
"affiliates" (each such person, a "MUX Affiliate Shareholder") of MUX
within the meaning of Rule 145. MUX shall provide Glenayre such
information and documents as Glenayre shall reasonably request for purposes
of reviewing such list. MUX shall deliver or cause to be delivered to
Glenayre prior to the Closing Date, from each of the MUX Affiliate
Shareholders identified in the foregoing list, an Affiliate Letter.
Glenayre shall be entitled to place legends as specified in such Affiliate
Letters on the certificates evidencing any Glenayre Common Stock to
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be received by such Affiliates pursuant to the terms of this Agreement and to
issue appropriate stop transfer instructions to the transfer agent for the
Glenayre Common Stock consistent with the terms of such Affiliate Letters.
(e) Without the prior written consent of Glenayre, MUX shall not
knowingly take any action which would cause or would be likely to cause the
conditions upon the obligations of the parties hereto to effect the
Transactions not to be fulfilled, including without limitation, taking,
causing to be taken, or permitting or suffering to be taken or to exist any
action, condition or thing which would cause the representations and
warranties made by MUX or MUX Sub herein not to be true, correct and
accurate as of any time between the date hereof and the Closing Date.
(f) MUX shall promptly provide to Glenayre monthly and quarterly
consolidated financial statements of MUX.
(g) MUX shall not (1) knowingly take any action, or knowingly fail to
take any action, that would jeopardize qualification of the Merger as a
reorganization within the meaning of Section 368(a)(2)(E) of the Code; or
(2) enter into any contract, agreement, commitment or arrangement with
respect to the foregoing.
(h) The shares of MUX Common Stock held by the ESOP will be voted on
all matters pertaining to the Merger on which holders of MUX Common Stock
are entitled to vote, in a manner that fully complies in all respects with
the Code, ERISA and the provisions of the ESOP, including without
limitation, any matters as to which the ESOP participants are entitled to
direct the ESOP's Trustee as to the voting of the shares of MUX Common
Stock allocated to their respective ESOP accounts.
7.3 Covenants of Glenayre. Glenayre covenants with MUX that during
the period from the date hereof and continuing until the Effective Time
(except as expressly contemplated or permitted hereby, or to the extent
that MUX shall otherwise consent in writing):
(a) Glenayre shall promptly prepare and submit to the NASDAQ National
Market System a listing application covering the shares of Glenayre Common
Stock issuable in the Merger, and shall use its best efforts to obtain,
prior to the Effective Time, approval for the listing of such Glenayre
Common Stock, subject to official notice of issuance.
(b) Glenayre shall not (1) knowingly take any action, or knowingly
fail to take any action, that would jeopardize qualification of the Merger
as a reorganization within the meaning of Section 368(a)(2)(E) of the Code;
or (2) enter into any contract, agreement, commitment or arrangement with
respect to the foregoing.
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(c) Without the prior written consent of MUX, Glenayre shall not
knowingly take any action which would cause or tend to cause the conditions
upon the obligations of the parties hereto to effect the Transactions not
to be fulfilled, including without limitation, taking, causing to be taken,
or permitting or suffering to be taken or to exist any action, condition or
thing which would cause the representations and warranties made by Glenayre
herein not to be true, correct and accurate as of any time between the date
hereof and the Closing Date.
(d) Glenayre agrees that, at any time during the period between the
date of this Agreement and that date which is two Business Days prior to
the Effective Time, any Indemnifying Equity Holder may, upon written notice
to Glenayre, adjust the proportion of Escrowed Shares and Forfeitable
Options which will constitute such Equity Holder's Proportionate Percentage
of the Indemnity Pool, provided that such Indemnifying Equity Holder shall
not be permitted to reduce the value of such Indemnifying Equity Holder's
Proportionate Percentage of the Indemnity Pool (determined by using the
Closing Value for Escrowed Shares and the Spread for the Forfeitable
Options).
ARTICLE 8
CONDITIONS
8.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject
to the fulfillment at or prior to the Closing Date of the following
conditions:
(a) This Agreement and the Transactions shall have been approved in
the requisite manner by the holders of the issued and outstanding shares of
capital stock of MUX entitled to vote thereon, which approval and the
voting thereon shall be certified by the Chief Executive Officer of MUX.
(b) No action or proceeding shall have been instituted before a court
or other Governmental Authority to restrain or prohibit the Transactions or
to obtain an amount of damages or other material relief in connection with
the execution of the Agreement or the related agreements or the
consummation of the Merger; and no Governmental Authority shall have given
notice to any party hereto to the effect that consummation of the
Transactions would constitute a violation of any Law or that it intends to
commence proceedings to restrain consummation of the Merger.
(c) The Registration Statement shall have become effective, no stop
orders suspending its effectiveness shall have been issued, and no
proceedings for that purpose shall have been instituted or, to the
knowledge of Glenayre or MUX, shall be contemplated.
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(d) All consents, authorizations, orders and approvals of (or filings
or registrations with) any Governmental Authority required in connection
with the execution, delivery and performance of this Agreement shall have
been obtained or made, except for filings in connection with the Merger and
any other documents required to be filed after the Effective Time and
except where the failure to have obtained or made any such consent,
authorization, order, approval, filing or registration would not have a
material adverse effect on the business of Glenayre and MUX, taken as a
whole, following the Effective Time.
(e) The applicable waiting period under the HSR Act shall have
expired or been terminated.
(f) The shares of Glenayre Common Stock issuable in the Merger shall
have been approved for listing, subject to official notice of issuance, on
the NASDAQ National Market System.
(g) Glenayre, Merger Sub and MUX shall have executed and delivered
the Agreement of Merger and appropriate certificates for filing with the
Secretary of State of California.
(h) Glenayre, the Equity Holders' Representative and the Escrow Agent
shall have entered into the Escrow Agreement.
8.2 Conditions to Obligation of MUX to Effect the Merger. The
obligations of MUX to effect the Merger shall be subject to the fulfillment
at or prior to the Closing Date of the following conditions:
(a) Glenayre shall have performed its agreements contained in this
Agreement required to be performed on or prior to the Closing Date and the
representations and warranties of Glenayre and Merger Sub contained in this
Agreement shall be true and correct as of the Closing Date, and MUX shall
have received a certificate of the Chief Executive Officer or the Acting
Chief Executive Officer of Glenayre, dated the Closing Date, certifying to
such effect.
(b) From the date of this Agreement through the Effective Time, there
shall not have occurred any change in the financial condition, business or
operations of Glenayre that would have or would be reasonably likely to
have a Glenayre Material Adverse Effect other than any such change that
affects MUX, MUX Sub and Glenayre in a substantially similar manner.
(c) MUX shall have received a written opinion letter, dated as of the
Closing Date, from Kennedy Covington Lobdell & Hickman, L.L.P.
substantially in the form of Exhibit E attached hereto.
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(d) MUX shall have received a good standing certificate for Glenayre
from the Secretary of State of Delaware and for Merger Sub from the
Secretary of State of California.
(e) MUX shall have received from Glenayre and Merger Sub certified
copies of all resolutions adopted by the Board of Directors of each
respective corporation and the shareholders of Merger Sub in connection
with this Agreement and the Transactions.
(f) The ESOP Committee shall have received a "fairness opinion" from
Houlihan Lokey Howard & Zukin reasonably satisfactory to the ESOP Committee
(in accordance with Proposed Department of Labor Regulation 29 C.F.R.
2510.3-18).
8.3 Conditions to Obligation of Glenayre and Merger Sub to Effect the
Merger. The obligations of Glenayre and Merger Sub to effect the Merger
shall be subject to the fulfillment at or prior to the Closing Date of the
following conditions:
(a) MUX shall have performed its agreements contained in this
Agreement required to be performed on or prior to the Closing Date and the
representations and warranties of MUX contained in this Agreement shall be
true and correct as of the Closing Date, and Glenayre shall have received a
certificate of the Chief Executive Officer of MUX, dated the Closing Date,
certifying to such effect.
(b) [Intentionally Omitted]
(c) Glenayre shall have received from Shilling & Kenyon Inc.
"comfort" letters, (1) dated as of the effective date of the Pro-
spectus/Proxy Statement, substantially in the form of Exhibit F hereto, and
(2) dated either as of the date of the MUX shareholders' meeting to approve
the Merger or if there is no meeting dated as of the end of the period for
soliciting and receiving consents from the shareholders, a bringdown of the
letter provided in clause (1) substantially in the form of Exhibit G
hereto.
(d) From the date of this Agreement through the Effective Time, there
shall not have occurred any change in the financial condition, business,
operations or prospects of MUX or MUX Sub that would have or would be
reasonably likely to have a MUX Material Adverse Effect other than any such
change that affects MUX, MUX Sub and Glenayre in a substantially similar
manner.
(e) Glenayre shall have received a written opinion letter, dated as
of the Closing Date, from Gray Cary Ware & Freidenrich substantially in the
form of Exhibit H attached hereto.
(f) Glenayre shall have completed to its satisfaction a review of
MUX's and MUX Sub's business and operations and any matters raised in the
Schedules to this Agreement and the results
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of such review shall be satisfactory to Glenayre; provided, however, this
condition shall expire at the end of 10 Business Days after the date of this
Agreement.
(g) MUX shall have prior to the Closing Date (i) qualified to do
business as a foreign corporation (with both the Secretary of State's
office and the applicable State taxing authorities) in each of the States
of Georgia, Illinois, Texas and Arizona and (ii) obtained an estoppel
certificate from Harbor-Belmont Associates in form and substance
satisfactory to Glenayre.
(h) MUX and each Option Holder shall have entered into agreements
satisfactory to Glenayre as described in Section 4.5(a).
(i) The consents set forth in Schedules 5.5 and 6.5 shall have been
obtained in form satisfactory to Glenayre.
(j) Glenayre shall have received an Affiliate Letter from each MUX
Affiliate Shareholder.
(k) Glenayre shall have received certificates and executed
Acknowledgments (Indemnifying Shareholders) from the Indemnifying
Shareholders set forth on Schedule 5.3. Glenayre shall have received
executed Acknowledgments (Indemnifying Option Holders) from the
Indemnifying Option Holders set forth on Schedule 4.5.
(l) Glenayre shall have received good standing certificates for MUX
and MUX Sub from the Secretary of State of California and from the
Secretary of State of each state where MUX or MUX Sub is qualified to do
business.
(m) The individuals listed on Schedule 8.3(m) shall have executed
Noncompetition Agreements.
(n) Glenayre shall have received an estimate of all of the MUX
Transaction Expenses dated as of the Closing Date and the final MUX
Transaction Expenses shall not exceed $800,000.
(o) [Intentionally Omitted]
(p) All indemnification agreements or other arrangements pursuant to
which MUX or MUX Sub is obligated to indemnify any shareholder, director,
officer, employee or agent of MUX or MUX Sub shall have been terminated as
of the Closing Date.
(q) All shareholder, voting or other agreements with respect to the
MUX Common Stock or any capital stock of MUX Sub shall have been terminated
as of the Closing Date.
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(r) Glenayre shall have received from MUX certified copies of all
resolutions adopted by the Board of Directors and shareholders of MUX in
connection with this Agreement and the Transactions.
(s) Any shareholders, directors, officers or employees of MUX or MUX
Sub who have received loans or advances from MUX or MUX Sub (other than
routine travel advances) shall agree to pay off such loans or advances as
set forth on Schedule 8.3(s).
(t) The Indemnifying Equity Holders shall have entered into the
Agency Agreement in the form of Exhibit J appointing Frank Hegarty as the
Equity Holders' Representative; provided, however, such form of Exhibit J
may be changed if such change does not effect Glenayre as determined by
Glenayre in its sole discretion.
(u) Glenayre shall have received from MUX a list of the names of all
employees of MUX and MUX Sub, showing the annual rate of compensation (and
bonuses and Wellness Program payments) being paid to each employee as of
the Closing Date.
ARTICLE 9
INDEMNIFICATION
9.1 Indemnification. Subject to the limitation set forth in
Section 4.10(e), the Indemnifying Equity Holders shall, jointly and
severally, indemnify, defend and hold harmless Glenayre, its successors and
assigns, from and against any and all Loss or Losses which Glenayre or MUX
or their subsidiaries, their respective successors and assigns, or any one
or more of them, may sustain or incur, directly or indirectly, arising out
of or incident to or by reason of (1) the falsity or incorrectness of any
representation or warranty made by any Equity Holder or MUX in this
Agreement, the Acknowledgments or any document, certificate of other
agreement entered into, furnished or to be furnished by any Equity Holder,
MUX or MUX Sub pursuant to this Agreement or the Acknowledgments, (2) any
breach of any covenant to be performed by or on the part of any Equity
Holder or MUX under this Agreement, the Acknowledgments or any document,
certificate, or other agreement or instrument entered into, furnished or to
be furnished by any Equity Holder, MUX or MUX Sub pursuant to this
Agreement or the Acknowledgments, (3) any liability from the failure prior
to the Closing of MUX or MUX Sub to qualify as a foreign corporation in any
state or the failure of MUX or MUX Sub to pay any taxes to any taxing
authority outside the State of California, (4) the failure of MUX or any
Person to obtain a building permit with respect to tenant improvements
constructed by MUX at 300-310 Harbor Boulevard, Belmont, California or (5)
any matter disclosed on paragraph 1 of Schedule 5.16. Notwithstanding any
provisions in this Section 9.1 to the contrary, the Indemnifying Equity
Holders shall have no liability for indemnification under this Section 9.1
except to the
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extent that the aggregate amount of Losses exceeds $150,000.
Glenayre shall conduct its activities as to all matters referred to in
clauses (3) through (5) above as would a reasonable and prudent person to
whom no indemnity were available. All rights to indemnification under this
Section 9.1 shall expire on the Expiration Date except as to any matter as
to which Glenayre has given Notice of Claim pursuant to Section 9.2 prior
to such date. Notwithstanding anything in this Article 9 or elsewhere in
this Agreement to the contrary, except for (1) common law fraud,
(2) equitable relief in the nature of specific performance, (3) any
remedies available to Glenayre under the Noncompetition Agreements or
(4) any remedies available to Glenayre under Section 10.5, the
indemnification provisions of this Article 9 shall be the sole and
exclusive remedy available to Glenayre for any breach of MUX's or any
Equity Holder's representations, warranties, agreements, covenants or any
other agreement or provision contained in this Agreement or in any schedule
to this Agreement or certificate delivered pursuant to this Agreement or
otherwise in connection with this Agreement and the Transactions, or any
causes of action related to any of the foregoing.
9.2 Notice. If any matter shall arise which may involve or give rise
to a claim by Glenayre against the Indemnifying Equity Holders under the
provisions of Section 9.1 (an "Indemnity Claim"), Glenayre shall give
prompt written notice thereof (the "Notice of Claim") to the Equity
Holders' Representative and the Escrow Agent stating the general nature of
the Indemnity Claim with reasonable detail as to the alleged basis of the
Indemnity Claim and the Section of this Agreement of which a violation is
alleged. If any Indemnity Claim is based upon any claim, demand, suit or
action of any third party against any of Glenayre, MUX or their
subsidiaries, or their successors or assigns (a "Third Party Claim"), then
Glenayre shall, or shall cause MUX to, undertake the defense of such Third
Party Claim, shall conduct such defense as would a reasonable and prudent
person to whom no indemnity were available and shall permit the Equity
Holders' Representative (at the sole expense of the Indemnifying Equity
Holders) to participate in (but not control) such defense. Glenayre agrees
that it shall consult with the Equity Holders' Representative as to
Glenayre's selection of legal counsel to conduct such defense, but the
Equity Holders' Representative shall have no right to control such
selection.
9.3 Definition of Loss or Losses. For purposes of this Agreement,
"Loss" or "Losses" shall mean any and all liabilities, losses, damages,
actions, suits, proceedings, claims, demands, assessments, fines,
penalties, judgments, fees, costs and expenses (including reasonable
accountants' and attorneys' fees) of every nature and character arising out
of the matters of circumstances referred to in Section 9.1. The amount of
any indemnifiable Losses hereunder shall be reduced by the amount of (i)
any tax benefits actually realizable by Glenayre and MUX or their
affiliates, (ii) insurance proceeds net of deductibles and incidental
expenses
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and premium increases reasonably anticipated to result therefrom, and (iii)
proceeds or amounts from third parties (regardless of when received but
only if actually received), in each case of clauses (i), (ii) and (iii) in
connection with or as a result of such Losses, which tax benefits, insurance
proceeds or proceeds or amounts from third parties Glenayre shall take
reasonable steps to obtain. MUX shall assign to the Equity Holders'
Representative any choses in actions that MUX may have against third parties
with respect to specific claims as to which Glenayre has received
indemnification hereunder. Tax benefits actually realizable by Glenayre and
MUX shall be calculated on a "with and without" basis. (The total Taxes
payable by Glenayre and its affiliates if Glenayre had not incurred the
applicable Loss shall be referred to as the "Without Taxes"
and the total Taxes payable by Glenayre and its affiliates taking into
account the Loss shall be referred to as the "With Taxes." The excess, if
any, of the Without Taxes over the With Taxes shall be the measure of such
tax benefits accruing to Glenayre and MUX. The calculation of Without
Taxes and With Taxes shall be for all open years ending with the year
following the year during which the amount of the Loss for the applicable
Indemnity Claim is finally resolved. Glenayre shall make a reasonable
estimate of the With Taxes and Without Taxes for portion of the then
current fiscal year and the following fiscal year. In the event of any
dispute as to the calculation of the tax benefit, the determination of the
independent accounting firm regularly employed to prepare Glenayre's Tax
returns (or if there is no such firm, the firm that certifies Glenayre's
financial statements) shall be final and binding on all parties.
9.4 Appointment of Representative. Subject to the successorship
provisions set forth in the Agency Agreement, the Equity Holders'
Representative is hereby irrevocably appointed as the attorney-in-fact and
representative of the interests of the holders of MUX Common Stock and MUX
Stock Options for all purposes of this Agreement, and notice is hereby
given thereof to Glenayre, and, without independent verification, Glenayre
may rely upon the Equity Holders' Representative's undertakings in such
capacity. The Equity Holders' Representative shall have full and
irrevocable authority on behalf of the Indemnifying Equity Holders to:
(a) Participate in, represent and bind the Indemnifying Equity
Holders in all respects with respect to any arbitration or legal proceeding
relating to this Agreement, including without limitation, all matters
relating to any indemnification under this Article 9, and the calculation
thereof for every purpose thereunder, consent to jurisdiction, enter into
any settlement, and consent to entry of judgment, each with respect to any
or all of the Indemnifying Equity Holders;
(b) Receive, accept and give notices and other communications
relating to this Agreement;
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(c) Take any action that the Equity Holders' Representative deems
necessary or desirable in order to fully effectuate the Transactions; and
(d) Execute and deliver any instrument or document that the Equity
Holders' Representative deems necessary or desirable in the exercise of his
authority under this Article 9.
ARTICLE 10
TERMINATION
10.1 Termination by Mutual Consent. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time,
before or after the approval of this Agreement by the shareholders of MUX,
by the mutual consent of Glenayre and MUX.
10.2 Termination by Either Glenayre or MUX. This Agreement may be
terminated and the Merger may be abandoned by action or authorization of
the Board of Directors of either Glenayre or MUX if (1) the Merger shall
not have been consummated by April 30, 1995, or (2) the approval of MUX's
shareholders required by Section 8.1(a) shall not have been obtained at a
meeting duly convened therefor (or at any adjournment thereof) or pursuant
to a written consent in lieu of a meeting, or (3) a United States federal
or state court of competent jurisdiction or any Governmental Authority,
shall have issued an order, decree or ruling or taken any other action
permanently restraining, enjoining or otherwise prohibiting the
Transactions and such order, decree, ruling or other action shall have
become final and nonappealable; provided, however, that the party seeking
to terminate this Agreement pursuant to this clause (3) shall have used all
reasonable efforts to remove such order, decree, ruling or action.
10.3 Termination by MUX. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or
after the approval by the shareholders of MUX, by action or authorization
of the Board of Directors of MUX if (1) there has been a breach by Glenayre
or Merger Sub of any representation or warranty contained in this Agreement
which would have or would be reasonably likely to have a Glenayre Material
Adverse Effect or (2) there has been a material breach of any of the
covenants or agreements set forth in this Agreement on the part of
Glenayre, which breach is not curable or, if curable, is not cured within
30 days after written notice of such breach is given by MUX to Glenayre.
10.4 Termination by Glenayre. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, by
action or authorization of the Board of Directors of Glenayre if (1) there
has been a breach by MUX or MUX Sub of any representation or warranty
contained in this Agreement which would have or would be reasonably likely
to have a MUX
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Material Adverse Effect or (2) there has been a material breach of any of
the covenants or agreements set forth in this Agreement on the part of MUX or
MUX Sub, which breach is not curable or, if curable, is not cured within 30
days after written notice of such breach is given by Glenayre to MUX.
10.5 Effect of Termination and Abandonment. Upon termination of this
Agreement pursuant to this Section, this Agreement shall be void and of no
other effect, and there shall be no liability by reason of this Agreement
or the termination thereof on the part of any party hereto or on the part
of the respective directors, officers, employees, agents or shareholders of
any of them, in each case except that the agreements set forth in Section
7.1(g) and Articles 10 and 11 shall survive termination of this Agreement
pursuant to this Article 10. Notwithstanding anything to the contrary
contained in this Section 10.5, any party hereto shall be liable to any
other party hereto for the willful breach by such first party of its
representations, warranties, covenants or agreements contained herein.
10.6 Extension; Waiver. At any time prior to the Effective Time,
Glenayre or MUX, by action taken or authorized by its Board of Directors,
may, to the extent legally allowed, (1) extend the time for the performance
of any of the obligations or other acts of the other parties hereto, (2)
waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (3)
waive compliance with any of the agreements or conditions for the benefit
of such party contained herein. Any agreement on the part of Glenayre or
MUX to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
ARTICLE 11
GENERAL PROVISIONS
11.1 Effectiveness of Representations and Warranties.
(a) Except as set forth in Section 11.1(b), the representations,
warranties, covenants and agreements of each party hereto shall remain
operative and in full force and effect, regardless of any investigation
made by or on behalf of any other party hereto, any person controlling any
such party or any of their officers or directors, whether prior to or after
the execution of this Agreement. All statements contained in the Schedules
hereto shall be deemed to be representations and warranties by the parties
hereunder.
(b) The representations, warranties, covenants and agreements in this
Agreement shall terminate at the Effective Time or upon the termination of
this Agreement pursuant to Article 10; except (1)
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that the representations and warranties set forth in Article 5 and
Article 6 shall survive the Effective Time and expire on the first
anniversary of the Effective Time, (2) that the agreements set forth in
Articles 2, 3, 4, 9, 10 and 11 shall survive the Effective Time and
(3) as provided in Section 10.5 upon termination of this Agreement
pursuant to Article 10.
11.2 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly
given or made as of the date delivered, mailed or transmitted, and shall be
effective upon receipt, if delivered personally, mailed by registered or
certified mail (postage prepaid, return receipt requested) to the parties
at the following addresses (or at such other address for a party as shall
be specified by like changes of address) or sent by electronic transmission
to the facsimile numbers specified below:
(a) If to Glenayre or Merger Sub:
Glenayre Technologies, Inc.
520 Madison Avenue, 35th Floor
New York, New York 10022-4213
Attention: Clarke H. Bailey
Facsimile No.: (212) 935-4299
and
Glenayre Electronics, Inc.
4201 Congress Street, Suite 455
Charlotte, North Carolina 29209
Attention: Stan Ciepcielinski
Facsimile No.: (704) 553-7878
with a copy to:
Kennedy Covington Lobdell & Hickman, L.L.P.
NationsBank Corporate Center, Suite 4200
100 North Tryon Street
Charlotte, North Carolina 28202
Attention: Eugene C. Pridgen, Esq.
Facsimile No.: (704) 331-7598
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(b) If to MUX:
Western Multiplex Corporation
300 Harbor Boulevard
Belmont, California 94002
Attention: John Woods
Facsimile No.: (415) 592-4249
with a copy to (prior to the Effective Time):
Gray Cary Ware & Freidenrich
400 Hamilton Avenue
Palo Alto, California 94301-1825
Attention: Robert H. Miller, Esq.
Facsimile No.: (415) 327-3699
(c) If to any Indemnifying Equity Holder:
To his, her or its address set forth in the Acknowledgment
executed by such Indemnifying Equity Holder
(d) If to the Equity Holders' Representative:
Frank Hegarty
2114 Lyon Avenue
Belmont, California 94002
11.3 Assignment; Binding Effect; Benefit. Neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto (whether by operation of law or otherwise)
without the prior written consent of the other parties. Subject to the
preceding sentence, this Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and
assigns.
11.4 Entire Agreement. Except for the Bilateral Non-Disclosure
Agreement dated April 11, 1994 executed by MUX and Glenayre, this
Agreement, the Exhibits and the Schedules constitute the entire agreement
among the parties with respect to the subject matter hereof and supersede
all prior agreements and understandings among the parties with respect
thereto. No addition to or modification of any provision of this Agreement
shall be binding upon any party hereto unless made in writing and signed by
all parties hereto.
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11.5 Amendment. This Agreement may be amended by the parties hereto
at any time before or after approval of matters presented in connection
with the Merger by the shareholders of MUX, but after any such shareholder
approval, no amendment shall be made which by Law requires the further
approval of shareholders without obtaining such further approval. This
Agreement may not be modified or amended except by an instrument in writing
signed on behalf of Glenayre, Merger Sub, MUX and the Principal
Shareholders.
11.6 Governing Law. The validity of this Agreement, the construction
of its terms and the determination of the rights and duties of the parties
hereto shall be governed by and construed in accordance with the laws of
the United States and those of the State of North Carolina applicable to
contracts made and to be performed wholly within such state.
11.7 Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument. Each counterpart may consist of a
number of copies hereof each signed by less than all, but together signed
by all of the parties hereto.
11.8 Waivers. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including any investigation by or on behalf of
any party, shall be deemed to constitute a waiver by the party taking such
action of compliance with any representations, warranties, covenants or
agreements contained in this Agreement. Any waiver hereunder by Glenayre
shall not release or otherwise affect the obligations of any Equity Holder
hereunder except to the extent expressly provided in such waiver. The
waiver by any party hereto of a breach of any provision hereunder shall not
operate or be construed as a waiver of any prior or subsequent breach of
the same or any other provision hereunder. Glenayre may waive the
condition to issuing shares of Glenayre Common Stock to a Shareholder of
receipt of an executed Acknowledgment from such Shareholder.
11.9 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining
terms and provisions of this Agreement or affecting the validity or
enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction. If any provision of this Agreement is so broad as to
be unenforceable, the provision shall be interpreted to be only so broad as
is enforceable.
56
<PAGE>
11.10 Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of
this Agreement was not performed in accordance with its specific terms or
was otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in
any court of competent jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
* * *
57
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first written above.
[CORPORATE SEAL] GLENAYRE TECHNOLOGIES, INC.
ATTEST:
By:_____________________ By:
Name:
Title:
[CORPORATE SEAL] MUX ACQUISITION CORP.
ATTEST:
By:_____________________ By:
Name:
Title:
[CORPORATE SEAL] WESTERN MULTIPLEX CORPORATION
ATTEST:
By:___________________ By:_______________________________
Name:_____________________________
Title:____________________________
______________________________[SEAL]
John Woods
______________________________[SEAL]
Frank Hegarty
<PAGE>
EXHIBITS AND SCHEDULES
Exhibits
Exhibit A-1 Acknowledgment and Transmittal Letter
(Indemnifying Shareholders)
Exhibit A-2 Acknowledgment and Transmittal Letter (Non-
Indemnifying Shareholders)
Exhibit A-3 Acknowledgment (Indemnifying Option Holders)
Exhibit A-4 Acknowledgment (Non-Indemnifying Option Holders)
Exhibit B Affiliate Letter
Exhibit C Agreement of Merger
Exhibit D Escrow Agreement
Exhibit E Opinion of Kennedy Covington Lobdell & Hickman,
L.L.P.
Exhibit F Shilling & Kenyon Inc. Comfort Letter
Exhibit G Shilling & Kenyon Inc. Comfort Letter Bringdown
Exhibit H Opinions of Gray Cary Ware & Freidenrich and
Robert E. Miller, Inc.
Exhibit I Form of Noncompetition Agreement
Exhibit J Agency Agreement
Schedules
Schedule 4.5 MUX Stock Options
Schedule 4.10 Proportionate Percentages of Indemnifying Equity
Holders
Schedule 5 Knowledge of Certain Persons
Schedule 5.1 Organization and Qualification
Schedule 5.2 Articles of Incorporation; Bylaws; Minute Books
Schedule 5.3 Capitalization
Schedule 5.5 MUX Consents, etc.
Schedule 5.7 Material Year-End Adjustments to Interim Financial
Statements
Schedule 5.8 Subsequent Events
Schedule 5.9 Tax Matters
Schedule 5.10(a) Directors, Officers and Employees
Schedule 5.10(b) Benefit Plans
Schedule 5.10(d) Funding Policies
Schedule 5.10(e) Plan Claims and Litigation
Schedule 5.10(g) Benefit Plans - Effect of Merger
Schedule 5.11(a) Leasehold Interests and Exceptions
Schedule 5.11(b) Permitted Encumbrances
Schedule 5.11(c) Inventory Encumbrances
Schedule 5.11(d) Receivables Encumbrances
<PAGE>
Schedule 5.11(e) Intellectual Property
Schedule 5.11(f) Material Contracts
Schedule 5.12 Environmental Matters
Schedule 5.13 Leases
Schedule 5.14 Certain Transactions
Schedule 5.15 Compliance Exceptions
Schedule 5.16 Litigation
Schedule 5.19 MUX's Brokers
Schedule 5.21 Bank Accounts
Schedule 5.22 Insurance
Schedule 5.23 Warranty and Product Liability Matters
Schedule 5.24 Warranty, Repurchase and Other Service Obligations
Schedule 5.25 Customers and Suppliers
Schedule 5.27 Prospective Changes
Schedule 6.5 Glenayre's Consents
Schedule 6.7 Glenayre's Brokers
Schedule 7.2(c)(4) Capital Expenditures
Schedule 7.2(c)(5) Bonuses
Schedule 8.3(m) Individuals to Enter Into Noncompetition
Agreements
Schedule 8.3(s) Payoff of Certain Loans and Advances
<PAGE>
EXHIBIT A-1
TO BE COMPLETED BY EACH INDEMNIFYING SHAREHOLDER
WHO RECEIVES GLENAYRE COMMON STOCK IN THE MERGER
ACKNOWLEDGMENT AND TRANSMITTAL LETTER
(INDEMNIFYING SHAREHOLDERS)
Glenayre Technologies, Inc.
520 Madison Avenue, 35th Floor
New York, NY 10022-4213
Attention: Clarke H. Bailey
Glenayre Electronics, Inc.
4201 Congress Street, Suite 455
Charlotte, NC 28209
Attention: Stan Ciepcielinski
Ladies and Gentlemen:
The undersigned holder of Common Stock of Western Multiplex Corpora-
tion ("MUX") hereby acknowledges that he, she or it has received and
reviewed (1) the Prospectus/Proxy Statement dated _________, 1995 (herein-
after referred to as the "Prospectus/Proxy Statement") and (2) the Acquisi-
tion Agreement dated as of January 3, 1995 by and among Glenayre Technolo-
gies, Inc. ("Glenayre"), MUX Acquisition Corp., MUX and certain equity
holders of MUX (hereinafter referred to as the "Acquisition Agreement")
attached as Annex I to the Prospectus/Proxy Statement. Pursuant to the
terms of the Acquisition Agreement, MUX Acquisition Corp., which is a
wholly-owned subsidiary of Glenayre, will merge with and into MUX (the
"Merger"), and after the Merger, MUX will be a wholly-owned subsidiary of
Glenayre. Capitalized terms used but not otherwise defined herein shall
have the same meanings as are ascribed to them in the Acquisition Agreement.
1. Binding Acquisition Agreement. The undersigned agrees to be
bound by the terms of the Acquisition Agreement, including without limita-
tion the escrow and indemnification provisions contained therein, and
acknowledges that by signing this Acknowledgment and Transmittal Letter,
he, she or it is so bound as a party to the Acquisition Agreement.
2. Waiver and Amendment. Any waiver by Glenayre of a breach of or
compliance with any of the provisions or terms of the Acquisition Agreement
and any amendment to the Acquisition Agreement prior to the Effective Time
shall not release, waive or otherwise affect the obligations of the
undersigned shareholder except to the extent expressly provided in such
waiver or amendment.
<PAGE>
3. Transmittal.
(a) This Acknowledgment and Transmittal Letter should be
completed, signed and mailed or delivered with the certificates (and stock
powers executed in blank as described below) of the undersigned that
previously represented shares of MUX Common Stock, to Glenayre at the
following address:
Glenayre Electronics, Inc.
4201 Congress Street, Suite 455
Charlotte, NC 28209
Attention: Stan Ciepcielinski
(b) Delivery of Certificates and Stock Powers. The undersigned
hereby delivers to Glenayre (1) the below-described certificates, which are
enclosed herewith, in exchange for (A) .0943848 of one share of Glenayre
Common Stock for each such surrendered share of MUX Common Stock and (B)
cash in lieu of fractional shares determined by multiplying the fractional
interest to which the undersigned would otherwise be entitled by the
closing price of the Glenayre Common Stock on the NASDAQ National Market
System two Business Days before the Effective Time (or, if such stock is
not traded on the NASDAQ National Market System on such date, the closing
price thereon on the immediately preceding day on which the stock traded),
as provided in the Acquisition Agreement, and (2) the stock powers which
were attached to this Acknowledgement and Transmittal Letter and which have
been executed in blank by the registered owner of the certificates exactly
as the name appears on the stock certificates. Such stock powers are to be
held in escrow by the Escrow Agent together with the undersigned's Escrowed
Shares of Glenayre Common Stock.
2
<PAGE>
The undersigned hereby warrants that the undersigned is the legal
owner, free and clear of all Encumbrances, of the shares of MUX Common
Stock described below and that the undersigned has full authority to
deliver to you the certificate(s) identified below and that such delivery
does not require the consent of any third party. The undersigned will,
upon request, execute any additional documents necessary or desirable to
complete the delivery of such certificate(s). The undersigned acknowledges
and agrees that the Indemnifying Equity Holders, as defined in the Acquisi-
tion Agreement, shall be third party beneficiaries of the foregoing
representation. The undersigned shall indemnify each and every Indemnify-
ing Equity Holder from any damages incurred by such Indemnifying Equity
Holder as a result of any inaccuracy in such representation.
Please issue (1) the shares of Glenayre Common Stock the undersigned
is entitled to receive and (2) a check in payment for fractional shares in
the name of the registered owner and please mail such shares and check to
the registered owner at the address specified below.
DESCRIPTION OF CERTIFICATE(S) DELIVERED
(See Instructions 2 and 3)
MUX COMMON STOCK
Number of Shares of
Common Stock
Name of Registered Owner Certificate Represented by
(as they appear on certificate(s)) Number Such Certificate
Total
Shares
of Common
Stock
3
<PAGE>
(Signature(s) of Owner(s)) (See Instruction 2)
(Must be signed by registered owner(s) exactly as name(s)
appear(s) on stock certificate(s). If signature is by attor-
ney, executor, administrator, trustee or guardian or others
acting in a fiduciary capacity, please set forth full title and
see Instruction 2.)
Name(s)
(Please Print)
Address
(Include Zip Code)
(Area Code and Telephone No.) (Tax Identification or
Social Security No.)
Dated
(See Instruction 7)
PAYER'S NAME: GLENAYRE TECHNOLOGIES, INC.
Part 1 - PLEASE PROVIDE
YOUR TIN (SOCIAL SECU- Social Security Number
SUBSTITUTE RITY NUMBER OR EMPLOYER
IDENTIFICATION NUMBER) OR
Form W-9 IN THE BOX AT RIGHT AND _________________-
Department of the CERTIFY BY SIGNING AND ___________
Treasury DATING BELOW Employer Identification Number
Internal Revenue
Service Part 2 - Check the box if you are NOT sub-
Payer's Request ject to backup withholding under the provi-
for Taxpayer sions of Section 3406(a)(1)(C) of the In-
Identification ternal Revenue Code because (1) you have
Number [TIN] not been notified that you are subject to
backup withholding as a result of failure
to report all interest or dividends or (2)
the Internal Revenue Service has notified
you that you are no longer subject
to backup withholding [ ]
CERTIFICATION -- UNDER THE PENALTIES
OF PERJURY, I CERTIFY THAT THE Part 3 --
INFORMATION PROVIDED ON THIS
FORM IS TRUE, CORRECT, AND COMPLETE
Awaiting TIN [ ]
SIGNATURE DATE
<PAGE>
INSTRUCTIONS
1. Delivery of Acknowledgment and Transmittal Letter and Certificates.
This Acknowledgment and Transmittal Letter or a photocopy hereof, filled in
and signed, must be used in connection with a delivery of certificates.
The method of delivery of all documents is at the option and risk of the
shareholder, but it is recommended that documents be delivered either
personally or by registered mail properly insured with return receipt
requested.
2. Signatures on Letter of Transmittal and Endorsements. In case of
endorsement or signatures by executors, administrators, trustees, guard-
ians, attorneys, corporations and the like, the certificates delivered must
be accompanied by evidence satisfactory to Glenayre of authority of the
person to make the endorsement, or to sign, together with all supporting
documents necessary to validate the delivery. If certificates are deliv-
ered by joint holders or owners, all such persons must sign. If certifi-
cates are registered in different forms, it will be necessary to fill in,
sign and submit as many separate Acknowledgment and Transmittal Letters or
photocopies thereof as there are different registrations of certificates.
3. Inadequate Space. If the space provided herein is inadequate, the
certificate number(s) and the number of shares of MUX Common Stock should
be listed on a separate signed schedule attached hereto.
4. Deposit of Certificates. Issuance of shares of Glenayre Common
Stock and payment for fractional shares will be made only against deposit
of the certificates of MUX Common Stock to be exchanged therefor with
Glenayre as set forth herein.
5. Lost or Stolen Certificates. Please notify Glenayre in writing at
its address set forth above for the procedure to be followed if any
certificate has been lost, stolen, destroyed or mutilated and replacement
instructions will be mailed to you.
6. Dissenters Rights. Shareholders who are seeking to exercise their
dissenters rights under the California General Corporation Law should not
deliver certificates for shares pursuant to this Acknowledgment and
Transmittal Letter.
7. Substitute Form W-9. If you have not previously provided Glenayre
with your social security number or other taxpayer identification number on
Form W-9 or certified therein that you are not subject to back-up withhold-
ing, you should complete the substitute Form W-9 included herein.
All questions with respect to this Acknowledgment and Transmittal Letter
will be determined by Glenayre, which determinations shall be conclusive
and binding. Questions should be directed to Glenayre at the address set
forth above or by telephone at (704) 553-0038.
Additional copies of this Acknowledgment and Transmittal Letter may be
obtained from Glenayre at its address set forth above. Photocopies of this
Acknowledgment and Transmittal Letter will be accepted, however.
<PAGE>
EXHIBIT A-2
TO BE COMPLETED BY EACH NON-INDEMNIFYING SHAREHOLDER
WHO RECEIVES GLENAYRE COMMON STOCK IN THE MERGER
ACKNOWLEDGMENT AND TRANSMITTAL LETTER
(NON-INDEMNIFYING SHAREHOLDERS)
Glenayre Technologies, Inc.
520 Madison Avenue, 35th Floor
New York, NY 10022-4213
Attention: Clarke H. Bailey
Glenayre Electronics, Inc.
4201 Congress Street, Suite 455
Charlotte, NC 28209
Attention: Stan Ciepcielinski
Ladies and Gentlemen:
The undersigned holder of Common Stock of Western Multiplex Corpora-
tion ("MUX") hereby acknowledges that he, she or it has received and
reviewed (1) the Prospectus/Proxy Statement dated _________, 1995 (herein-
after referred to as the "Prospectus/Proxy Statement") and (2) the Acquisi-
tion Agreement dated as of January 3, 1995 by and among Glenayre Technolo-
gies, Inc. ("Glenayre"), MUX Acquisition Corp., MUX and certain equity
holders of MUX (hereinafter referred to as the "Acquisition Agreement")
attached as Annex I to the Prospectus/Proxy Statement. Pursuant to the
terms of the Acquisition Agreement, MUX Acquisition Corp., which is a
wholly-owned subsidiary of Glenayre, will merge with and into MUX (the
"Merger"), and after the Merger, MUX will be a wholly-owned subsidiary of
Glenayre. Capitalized terms used but not otherwise defined herein shall
have the same meanings as are ascribed to them in the Acquisition Agree-
ment.
1. Transmittal.
(a) This Acknowledgment and Transmittal Letter should be
completed, signed and mailed or delivered with the certificates of the
undersigned that previously represented shares of MUX Common Stock, to
Glenayre at the following address:
Glenayre Electronics, Inc.
4201 Congress Street, Suite 455
Charlotte, NC 28209
Attention: Stan Ciepcielinski
<PAGE>
(b) Delivery of Certificates. The undersigned hereby delivers to
Glenayre the below-described certificates, which are enclosed herewith, in
exchange for (A) .0943848 of one share of Glenayre Common Stock for each
such surrendered share of MUX Common Stock and (B) cash in lieu of frac-
tional shares determined by multiplying the fractional interest to which
the undersigned would otherwise be entitled by the closing price of the
Glenayre Common Stock on the NASDAQ National Market System two Business
Days before the Effective Time (or, if such stock is not traded on the
NASDAQ National Market System on such date, the closing price thereon on
the immediately preceding day on which the stock traded), as provided in
the Acquisition Agreement.
The undersigned hereby warrants that the undersigned is the legal
owner, free and clear of all Encumbrances, of the shares of MUX Common
Stock described below and that the undersigned has full authority to
deliver to you the certificate(s) identified below and that such delivery
does not require the consent of any third party. The undersigned will,
upon request, execute any additional documents necessary or desirable to
complete the delivery of such certificate(s). The undersigned acknowledges
and agrees that the Indemnifying Equity Holders, as defined in the Acquisi-
tion Agreement, shall be third party beneficiaries of the foregoing
representation. The undersigned shall indemnify each and every Indemnify-
ing Equity Holder from any damages incurred by such Indemnifying Equity
Holder as a result of any inaccuracy in such representation.
Please issue (1) the shares of Glenayre Common Stock the undersigned
is entitled to receive and (2) a check in payment for fractional shares in
the name of the registered owner and please mail such shares and check to
the registered owner at the address specified below.
DESCRIPTION OF CERTIFICATE(S) DELIVERED
(See Instructions 2 and 3)
MUX COMMON STOCK
Number of
Shares of
Common Stock
Name of Registered Owner Certificate Represented by
(as they appear on certificate(s)) Number Such Certificate
Total
Shares
of
Common Stock
2
<PAGE>
(Signature(s) of Owner(s)) (See Instruction 2)
(Must be signed by registered owner(s) exactly as name(s)
appear(s) on stock certificate(s). If signature is by attor-
ney, executor, administrator, trustee or guardian or others
acting in a fiduciary capacity, please set forth full title and
see Instruction 2.)
Name(s)
(Please Print)
Address
(Include Zip Code)
(Area Code and Telephone No.) (Tax Identification or Social
Security No.)
Dated
(See Instruction 7)
PAYER'S NAME: GLENAYRE TECHNOLOGIES, INC.
Part 1 - PLEASE PROVIDE
YOUR TIN (SOCIAL SECU- Social Security Number
SUBSTITUTE RITY NUMBER OR EMPLOYER
IDENTIFICATION NUMBER) OR
Form W-9 IN THE BOX AT RIGHT AND
Department of the CERTIFY BY SIGNING AND
Treasury DATING BELOW Employer Identification Number
Internal Revenue
Service Part 2 - Check the box if you are NOT sub-
Payer's Request ject to backup withholding under the provi-
for Taxpayer sions of Section 3406(a)(1)(C) of the In-
Identification ternal Revenue Code because (1) you have
Number [TIN] not been notified that you are subject to
backup withholding as a result of failure
to report all interest or dividends or (2)
the Internal Revenue Service has notified
you that you are no longer subject
to backup withholding [ ]
CERTIFICATION -- UNDER THE PEN-
ALTIES OF PERJURY, I CERTIFY Part 3 --
THAT THE INFORMATION PROVIDED
ON THIS FORM IS TRUE, CORRECT,
AND COMPLETE Awaiting TIN [ ]
SIGNATURE DATE
<PAGE>
INSTRUCTIONS
1. Delivery of Acknowledgment and Transmittal Letter and Certificates.
This Acknowledgment and Transmittal Letter or a photocopy hereof, filled in
and signed, must be used in connection with a delivery of certificates.
The method of delivery of all documents is at the option and risk of the
shareholder, but it is recommended that documents be delivered either
personally or by registered mail properly insured with return receipt
requested.
2. Signatures on Letter of Transmittal and Endorsements. In case of
endorsement or signatures by executors, administrators, trustees, guard-
ians, attorneys, corporations and the like, the certificates delivered must
be accompanied by evidence satisfactory to Glenayre of authority of the
person to make the endorsement, or to sign, together with all supporting
documents necessary to validate the delivery. If certificates are deliv-
ered by joint holders or owners, all such persons must sign. If certifi-
cates are registered in different forms, it will be necessary to fill in,
sign and submit as many separate Acknowledgment and Transmittal Letters or
photocopies thereof as there are different registrations of certificates.
3. Inadequate Space. If the space provided herein is inadequate, the
certificate number(s) and the number of shares of MUX Common Stock should
be listed on a separate signed schedule attached hereto.
4. Deposit of Certificates. Issuance of shares of Glenayre Common
Stock and payment for fractional shares will be made only against deposit
of the certificates of MUX Common Stock to be exchanged therefor with
Glenayre as set forth herein.
5. Lost or Stolen Certificates. Please notify Glenayre in writing at
its address set forth above for the procedure to be followed if any
certificate has been lost, stolen, destroyed or mutilated and replacement
instructions will be mailed to you.
6. Dissenters Rights. Shareholders who are seeking to exercise their
dissenters rights under the California General Corporation Law should not
deliver certificates for shares pursuant to this Acknowledgment and
Transmittal Letter.
7. Substitute Form W-9. If you have not previously provided Glenayre
with your social security number or other taxpayer identification number on
Form W-9 or certified therein that you are not subject to back-up withhold-
ing, you should complete the substitute Form W-9 included herein.
All questions with respect to this Acknowledgment and Transmittal Letter
will be determined by Glenayre, which determinations shall be conclusive
and binding. Questions should be directed to Glenayre at the address set
forth above or by telephone at (704) 553-0038.
Additional copies of this Acknowledgment and Transmittal Letter may be
obtained from Glenayre at its address set forth above. Photocopies of this
Acknowledgment and Transmittal Letter will be accepted, however.
EXHIBIT A-3
TO BE COMPLETED BY EACH INDEMNIFYING OPTION HOLDER
ACKNOWLEDGMENT
(INDEMNIFYING OPTION HOLDERS)
Glenayre Technologies, Inc.
520 Madison Avenue, 35th Floor
New York, NY 10022-4213
Attention: Clarke H. Bailey
Glenayre Electronics, Inc.
4201 Congress Street, Suite 455
Charlotte, NC 28209
Attention: Stan Ciepcielinski
Ladies and Gentlemen:
The undersigned holder of options to purchase Common Stock ("MUX Stock
Options") of Western Multiplex Corporation ("MUX") hereby acknowledges that
he or she has received and reviewed (1) the Prospectus/Proxy Statement
dated _________, 1995 (hereinafter referred to as the "Prospectus/Proxy
Statement") and (2) the Acquisition Agreement dated as of January 3, 1995
by and among Glenayre Technologies, Inc. ("Glenayre"), MUX Acquisition
Corp., MUX and certain equity holders of MUX (hereinafter referred to as
the "Acquisition Agreement") attached as Annex I to the Prospectus/Proxy
Statement. Pursuant to the terms of the Acquisition Agreement, MUX
Acquisition Corp., which is a wholly-owned subsidiary of Glenayre, will
merge with and into MUX (the "Merger"), and after the Merger, MUX will be a
wholly-owned subsidiary of Glenayre. Capitalized terms used but not
otherwise defined herein shall have the same meanings as are ascribed to
them in the Acquisition Agreement.
1. Binding Acquisition Agreement. The undersigned agrees to be
bound by the terms of the Acquisition Agreement, including without limita-
tion the escrow and indemnification provisions contained therein, and
acknowledges that by signing this Acknowledgment and Transmittal Letter, he
or she is so bound as a party to the Acquisition Agreement.
2. Waiver and Amendment. Any waiver by Glenayre of a breach of or
compliance with any of the provisions or terms of the Acquisition Agreement
and any amendment to the Acquisition Agreement prior to the Effective Time
shall not release, waive or otherwise affect the obligations of the
undersigned except to the extent expressly provided in such waiver or
amendment.
<PAGE>
3. MUX Stock Options.
(a) The undersigned hereby acknowledges and agrees that, at the
Effective Time, MUX's obligations with respect to each outstanding MUX
Stock Option held by the undersigned, as amended in the manner described in
this Paragraph 3, shall be assumed by Glenayre. The MUX Stock Options so
assumed by Glenayre shall not expire and shall continue to have, and be
subject to, the same terms and conditions as set forth in the MUX Stock
Option Plans and agreements pursuant to which such MUX Stock Options were
granted as in effect immediately prior to the Effective Time, except that
the undersigned hereby agrees that (1) each MUX Stock Option shall be
exercisable for that number of whole shares of Glenayre Common Stock equal
to the product of the number of shares of MUX Common Stock covered by such
MUX Stock Option immediately prior to the Effective Time, multiplied by the
Exchange Ratio and rounded down to the nearest whole number of shares of
Glenayre Common Stock, (2) the price at which each such MUX Stock Option is
exercisable shall be divided by the Exchange Ratio (rounded up to the
nearest cent) and (3) the Forfeitable Options shall be part of the Indemni-
ty Pool and subject to forfeiture upon application to a Loss as provided in
Section 4.10 of the Acquisition Agreement (or, if all or part of the
Forfeitable Options are exercised, all of the shares of Glenayre Common
Stock received on such exercise shall be held by the Escrow Agent as
Escrowed Shares).
(b) The undersigned understands that Glenayre shall (1) reserve for
issuance the aggregate number of shares of Glenayre Common Stock that will
become issuable upon the exercise of all MUX Stock Options pursuant to this
Paragraph 3 and (2) promptly after the Effective Time issue to the under-
signed a document evidencing the assumption by Glenayre of MUX's obliga-
tions with respect thereto under this Paragraph 3.
(c) For each outstanding MUX Stock Option held by the undersigned,
Schedule 1 sets forth (1) the number of shares of MUX Common Stock for
which such option is exercisable and the exercise price with respect
thereto, (2) the number of shares of Glenayre Common Stock for which each
such option shall be exercisable upon its assumption by Glenayre and the
exercise price therefor as determined pursuant to this Paragraph 3 and (3)
which MUX Stock Options will be Forfeitable Options and therefore part of
the Indemnity Pool.
2
<PAGE>
(Signature of Holder of MUX Stock Options)
Name(s)
(Please Print)
Address
(Include Zip Code)
(Area Code and Telephone No.) (Tax Identification or Social Security No.)
Dated
3
<PAGE> EXHIBIT A-4
TO BE COMPLETED BY EACH NON-INDEMNIFYING OPTION HOLDER
ACKNOWLEDGMENT
(NON-INDEMNIFYING OPTION HOLDERS)
Glenayre Technologies, Inc.
520 Madison Avenue, 35th Floor
New York, NY 10022-4213
Attention: Clarke H. Bailey
Glenayre Electronics, Inc.
4201 Congress Street, Suite 455
Charlotte, NC 28209
Attention: Stan Ciepcielinski
Ladies and Gentlemen:
The undersigned holder of options to purchase Common Stock ("MUX Stock
Options") of Western Multiplex Corporation ("MUX") hereby acknowledges that
he or she has received and reviewed (1) the Prospectus/Proxy Statement
dated _________, 1995 (hereinafter referred to as the "Prospectus/Proxy
Statement") and (2) the Acquisition Agreement dated as of January 3, 1995
by and among Glenayre Technologies, Inc. ("Glenayre"), MUX Acquisition
Corp., MUX and certain equity holders of MUX (hereinafter referred to as
the "Acquisition Agreement") attached as Annex I to the Prospectus/Proxy
Statement. Pursuant to the terms of the Acquisition Agreement, MUX
Acquisition Corp., which is a wholly-owned subsidiary of Glenayre, will
merge with and into MUX (the "Merger"), and after the Merger, MUX will be a
wholly-owned subsidiary of Glenayre. Capitalized terms used but not
otherwise defined herein shall have the same meanings as are ascribed to
them in the Acquisition Agreement.
1. MUX Stock Options.
(a) The undersigned hereby acknowledges and agrees that, at the
Effective Time, MUX's obligations with respect to each outstanding MUX
Stock Option held by the undersigned, as amended in the manner described in
this Paragraph 1, shall be assumed by Glenayre. The MUX Stock Options so
assumed by Glenayre shall not expire and shall continue to have, and be
subject to, the same terms and conditions as set forth in the MUX Stock
Option Plans and agreements pursuant to which such MUX Stock Options were
granted as in effect immediately prior to the Effective Time, except that
the undersigned hereby agrees that (1) each MUX Stock Option shall be
exercisable for that number of whole shares of Glenayre Common Stock equal
to the product of the number of shares of MUX Common Stock covered by such
MUX Stock Option immediately prior to the Effective Time, multiplied by the
Exchange Ratio and rounded down to the nearest whole number of shares of
Glenayre Common Stock and (2) the price at which each such MUX Stock Option
is exercisable shall be divided by the Exchange Ratio
<PAGE>
(rounded up to the nearest cent). The undersigned understands that none of
the undersigned's MUX Stock Options will be "Forfeitable Options" and will
therefore not be part of the Indemnity Pool and subject to forfeiture upon
application to a Loss as provided in Section 4.10 of the Acquisition Agreement.
(b) The undersigned understands that Glenayre shall (1) reserve for
issuance the aggregate number of shares of Glenayre Common Stock that will
become issuable upon the exercise of all MUX Stock Options pursuant to this
Paragraph 1 and (2) promptly after the Effective Time issue to the under-
signed a document evidencing the assumption by Glenayre of MUX's obliga-
tions with respect thereto under this Paragraph 1.
(c) For each outstanding MUX Stock Option held by the undersigned,
Schedule 1 sets forth (1) the number of shares of MUX Common Stock for
which such option is exercisable and the exercise price with respect
thereto and (2) the number of shares of Glenayre Common Stock for which
each such option shall be exercisable upon its assumption by Glenayre and
the exercise price therefor as determined pursuant to this Paragraph 1.
2
<PAGE>
(Signature of Holder of MUX Stock Options)
Name(s)
(Please Print)
Address
(Include Zip Code)
(Area Code and Telephone No.) (Tax Identification or Social Security No.)
Dated
3
<PAGE>
EXHIBIT B
FORM OF AFFILIATE LETTER
_____________, 1995
Glenayre Technologies, Inc.
520 Madison Avenue, 35th Floor
New York, NY 10022-4213
Attention: Clarke H. Bailey
Glenayre Electronics, Inc.
4201 Congress Street, Suite 455
Charlotte, NC 28209
Attention: Stan Ciepcielinski
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed
to be an "affiliate" of Western Multiplex Corporation, a California
corporation ("MUX"), as the term "affiliate" is defined for purposes of
paragraphs (c) and (d) of Rule 145 of the rules and regulations (the "Rules
and Regulations") of the Securities and Exchange Commission (the "SEC")
under the Securities Act of 1933, as amended (the "Securities Act").
Pursuant to the terms of the Acquisition Agreement dated as of January 3,
1995 (the "Acquisition Agreement"), among Glenayre Technologies, Inc., a
Delaware corporation ("Glenayre"), MUX Acquisition Corp., a California
corporation that is a wholly-owned subsidiary of Glenayre ("Merger Sub"),
MUX and certain equity holders of MUX, Merger Sub will be merged with and
into MUX, which will become a wholly-owned subsidiary of Glenayre (the
"Merger").
As a result of the Merger, I may receive shares of common stock, $.02
par value per share, of Glenayre ("Glenayre Common Stock") or options to
purchase shares of Glenayre Common Stock (the "Glenayre Options") (the
Glenayre Common Stock, the Glenayre Options and any Glenayre Common Stock
issued upon conversion of the Glenayre Options are collectively referred to
hereinafter as the "Glenayre Securities") in exchange for shares of the
common stock of MUX or options to purchase MUX common stock.
I represent, warrant and covenant to Glenayre that in the event I
receive any Glenayre Securities as a result of the Merger:
A. I shall not make any sale, transfer or other disposition of the
Glenayre Securities in violation of the Securities Act or the Rules and
Regulations.
B. I have carefully read this letter and the Acquisition Agreement
and discussed the requirements of such documents and other applicable
limitations upon my ability to sell, transfer or otherwise dispose of the
Glenayre Securities to the extent I felt necessary with my counsel or
counsel for MUX.
C. I have been advised that the issuance of Glenayre Common Stock to
me pursuant to the Merger has been registered with the SEC under the
Securities Act on a Registration Statement on Form S-4. However, I have
also been advised that, since at the time the Merger was submitted for a
vote of the shareholders of MUX, I may be deemed to have been an affiliate
of MUX and the distribution by me of the Glenayre Securities has not been
registered under the Act, I may not sell, transfer or otherwise dispose of
the Glenayre Securities issued to me in the Merger unless (i) such sale,
transfer or other disposition has been registered under the Securities Act,
(ii) such
<PAGE>
Glenayre Technologies, Inc.
______, 1995
Page 2
sale, transfer or other disposition is made in conformity with
Rule 145 promulgated by the SEC under the Securities Act, or (iii) in the
opinion of counsel reasonably acceptable to Glenayre, or a "no-action"
letter obtained by me from the staff of the SEC, such sale, transfer or
other disposition is otherwise exempt from registration under the
Securities Act. Pursuant to the regulations of the Securities and Exchange
Commission as currently in effect, I may make bona-fide gifts or
distributions without consideration so long as the recipients thereof agree
not to sell, transfer or otherwise dispose of the Glenayre Common Stock
except as provided herein. With respect to a transfer under Section C(ii)
above, I understand that unless you have a reasonable basis for believing
to the contrary, such transfer will be viewed by you as in conformity with
Rule 145 upon my delivery to you or your transfer agent of a broker's
letter in customary form stating that the requirements of Rule 145(d)(1)
have been met.
D. I understand that Glenayre is under no obligation to register the
sale, transfer or other disposition of the Glenayre Securities by me or on
my behalf under the Securities Act or to take any other action necessary in
order to make compliance with an exemption from such registration available
other than to timely file all reports as required under the Securities
Exchange Act of 1934, as amended, and the rules and regulations of the SEC
thereunder.
E. I also understand that stop transfer instructions will be given
to Glenayre's transfer agent with respect to the Glenayre Common Stock and
that there will be placed on the certificates for the Glenayre Common Stock
issued to me in the Merger or issued to me upon conversion of the Glenayre
Options, or any substitutions therefor, a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES
ACT OF 1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE
MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT DATED__________, 1995 BETWEEN THE REGISTERED HOLDER
HEREOF AND GLENAYRE TECHNOLOGIES, INC., A COPY OF WHICH AGREEMENT
IS ON FILE AT THE PRINCIPAL OFFICES OF GLENAYRE TECHNOLOGIES,
INC."
F. I also understand that unless the transfer by me of my Glenayre
Securities has been registered under the Securities Act or in a sale in
conformity with the provisions of Rule 145, Glenayre reserves the right to
put the following legend on the certificates issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ACQUIRED FROM A
PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE
145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES. THE
SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR
FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN
THE MEANING OF THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT OR IN ACCORDANCE WITH AN EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933."
It is understood and agreed that the legend(s) set forth in paragraphs
E and, if applicable, F above shall be removed by delivery of substitute
certificates without such legend if such legend is not required for
purposes of the Securities Act or this Agreement. It is understood and
agreed that such legend(s) and the stop orders referred
<PAGE>
Glenayre Technologies, Inc.
______, 1995
Page 3
to above will be removed if (i) two years shall have elapsed from the date
the undersigned acquired the Glenayre Securities received in the Merger and
the provisions of Rule 145(d)(2) are then available to the undersigned, (ii)
three years shall have elapsed from the date the undersigned acquired the
Glenayre Securities received in the Merger and the provisions of Rule 145(d)(3)
are then applicable to the undersigned, or (iii) Glenayre has received either
an opinion of counsel, which opinion and counsel shall be reasonably
satisfactory to Glenayre, or a "no action" letter obtained by the
undersigned from the staff of the SEC, to the effect that the restrictions
imposed by Rule 145 under the Securities Act no longer apply to the
undersigned.
Execution of this letter should not be considered an admission on my
part that I am an "affiliate" of MUX as described in the first paragraph of
this letter, or as a waiver of any rights I may have to object to any claim
that I am such an affiliate on or after the date of this letter.
Very truly yours,
(Print or type Name)
Accepted this _____ day of
________________, 1995 by
GLENAYRE TECHNOLOGIES, INC.
By:
Name:
Title:
<PAGE>
Glenayre Technologies, Inc.
______, 1995
Page 4
EXHIBIT C
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER (this "Agreement") is dated as of this _____
day of _____________, 1995, by and among MUX ACQUISITION CORP., a
California corporation ("SUB"), GLENAYRE TECHNOLOGIES, INC., a Delaware
corporation ("Glenayre"), and WESTERN MULTIPLEX CORPORATION, a California
corporation ("MUX").
WITNESSETH:
WHEREAS, SUB has outstanding 1,000 shares of Common Stock, all of
which are owned of record and beneficially by Glenayre;
WHEREAS, MUX has outstanding 5,503,695 shares of Common Stock; and
WHEREAS, the Boards of Directors of MUX, Glenayre and SUB deem it
advisable and in the best interests of MUX, Glenayre and SUB and their
respective shareholders, that SUB merge with and into MUX in a merger (the
"Merger") to be consummated under the terms and conditions set forth herein
and in accordance with the laws of the State of California; and
WHEREAS, the Boards of Directors of MUX on ________, 1994, of Glenayre
on December 27, 1994, and of SUB on __________, 1994, have, by resolutions
duly adopted, approved this Agreement; and
WHEREAS, the shareholders of MUX on ________, 1995, and the sole
shareholder of SUB on ___________, 1994 have approved the Merger pursuant
to the terms of this Agreement; and
WHEREAS, Glenayre has agreed that when the Merger becomes effective,
and as and when required hereby, it will deliver such shares of its Common
Stock as shall be required in exchange for the shares of MUX Common Stock
outstanding on the effective date of the Merger; and
WHEREAS, Glenayre, SUB, MUX and certain equity holders of MUX have
entered into an Acquisition Agreement dated as of January 3, 1995 (the
"Acquisition Agreement"), setting forth certain agreements and conditions
in connection with the Merger;
NOW, THEREFORE, the parties hereby agree that SUB shall be and is
hereby merged into MUX (sometimes referred to herein as the "Surviving
Corporation"), and that the terms and conditions of the Merger and the mode
of carrying them into effect, including the
<PAGE>
manner of converting the shares of MUX Common Stock into shares of
Glenayre Common Stock, shall be as follows:
1. Merger; Effective Date of Merger.
1.1 The Merger shall be effected in accordance with the provisions of
and have the effect provided in Sections 1100 et seq. of the California
General Corporation Law. Upon the effectiveness of the Merger, the separate
existence of SUB shall cease and MUX shall succeed, without other transfer,
to all the rights, privileges, powers, immunities and franchises of SUB,
all of the properties and assets of SUB, and all of the debts, choses in
action and other interests due or belonging to SUB, and shall be subject to
and responsible for all the debts, liabilities and obligations of SUB in
the same manner as if MUX had itself incurred them. All rights of
creditors and all liens upon the property of SUB shall be preserved
unimpaired, provided such liens shall be limited to the property affected
by such liens immediately prior to the Effective Time (defined below). Any
action or proceeding pending by or against SUB may be prosecuted to
judgment which shall bind MUX, or MUX may be proceeded against or
substituted in the place of SUB.
1.2 The Merger shall become effective on the date that this Agreement
of Merger is filed with the Secretary of State of the State of California
(the "Effective Time").
1.3 If, at any time after the Effective Time, MUX considers or is
advised that any deeds, bills of sale, assignments, assurances or any other
actions or things are necessary or desirable to vest, perfect or record in
MUX its right, title and interest in, to and under any of the rights,
properties or assets of SUB acquired or to be acquired by MUX as a result
of, or in connection with, the Merger or to otherwise carry out this
Agreement, then the officers and directors of MUX shall and will be
authorized to execute and deliver, in the name and on behalf of MUX or SUB
or otherwise, all such deeds, bills of sale, assignments and assurances,
and to take and do, in the name and on behalf of MUX or SUB or otherwise,
all such other actions as may be necessary or desirable to vest, perfect or
record any and all right, title and interest in, to and under such rights,
properties or assets in MUX or otherwise carry out this Agreement.
2. Surviving Corporation's Articles of Incorporation and Bylaws;
Directors; Officers.
2.1 At the Effective Time, the Articles of Incorporation and Bylaws
of MUX as in effect on the Effective Time shall be the Articles of
Incorporation and Bylaws of the Surviving Corporation from and after the
Effective Time (until altered, amended or repealed in the manner specified
therein or as provided by law).
2
<PAGE>
2.2 The directors of the Surviving Corporation immediately after the
Effective Time shall be the following persons:
Clarke H. Bailey
Ramon D. Ardizzone
Kenneth C. Thompson
John Woods
2.3 The officers of the Surviving Corporation immediately after the
Effective Time shall be the following persons:
Chairman of the Board Clarke H. Bailey
President and Chief Executive Officer Ramon D. Ardizzone
Executive Vice President and General John Woods
Manager
Vice President Michael J. Gresham
Vice President Michael Mulcay
Secretary Stan Ciepcielinski
Treasurer Stan Ciepcielinski
Assistant Secretary Jerome Pintar
3. Conversion of Shares.
3.1 At the Effective Time, each share of MUX Common Stock issued and
outstanding immediately prior to the Effective Time (except for shares, if
any, of MUX Common Stock which shall then constitute "dissenting shares"
within the meaning of Section 1300 et seq. of the California General
Corporation Law ("Dissenting Shares")), shall be converted into the right
to receive .0943848 of one share of the Common Stock of Glenayre. No
fractional shares of Glenayre Common Stock shall be issued or delivered
upon the conversion of shares of MUX Common Stock into shares of Glenayre
Common Stock hereunder; rather, such fractional portion shall be paid in
cash. The amount paid for a fractional share shall be an amount equal to
the fraction of the share of Glenayre Common Stock otherwise due multiplied
by the closing price of the Glenayre Common Stock on the NASDAQ National
Market System two business days before the Effective Time (or if the
Glenayre Common Stock is not traded on the NASDAQ National Market System on
such date, the immediately preceding day on which the stock is so traded).
3.2 Each holder of shares of MUX Common Stock, upon surrender at the
Effective Time to Glenayre or at any subsequent time to American Stock
Transfer & Trust, as Exchange Agent, for cancellation of the one or more
certificates representing such shares (or in case of a lost, stolen or
destroyed MUX stock certificate, compliance with the provisions of Section
3.6), shall thereafter be entitled to receive a certificate representing
the number of shares of Glenayre Common Stock and the cash in lieu of
fractional shares as determined pursuant to Section 3.1 of this Agreement.
3
<PAGE>
3.3 Until surrender as hereinabove provided (or compliance with
Section 3.6, if applicable), (i) each outstanding certificate which prior
to the Effective Time represented shares of MUX Common Stock (other than
certificates for Dissenting Shares) shall be deemed for all corporate
purposes, to evidence the right to receive the aggregate number of shares
of Glenayre Common Stock and cash for fractional shares to be delivered
with respect to such shares of MUX Common Stock; and (ii) each outstanding
certificate evidencing Dissenting Shares shall evidence the right of the
holder thereof to pursue such holder's remedies as a dissenting shareholder
as provided in the California General Corporation Law.
3.4 All Glenayre Common Stock delivered upon the surrender for
exchange of shares of MUX Common Stock (or compliance with Section 3.6, if
applicable) in accordance with the terms hereof shall be deemed to have
been delivered in full satisfaction of all rights pertaining to such shares
of MUX Common Stock. There shall be no further registration of transfers
on the stock transfer books of MUX of the shares of MUX Common Stock which
were outstanding immediately prior to the Effective Time. If for any
reason certificates are presented to MUX after the Effective Time, they
shall be cancelled and exchanged as provided herein.
3.5 Immediately upon the Effective Time, each outstanding share of
capital stock of SUB, by virtue of the Merger, and without any action on
the part of the holder thereof, shall automatically be converted into and
become one share of Common Stock of MUX as the Surviving Corporation. From
and after the Effective Time, Glenayre, as holder of all of the outstanding
shares of capital stock of SUB, shall have the right to receive Common
Stock of MUX as provided hereinabove upon its surrender of the certificate
or certificates representing all shares of the capital stock of SUB. Until
surrender, each outstanding certificate which prior to the Effective Time
represented capital stock of SUB shall be deemed for all corporate purposes
to evidence ownership of the number of whole shares of Common Stock of MUX
into which the shares of capital stock of SUB have been so converted. From
and after the Effective Time, Glenayre, as owner of all outstanding shares
of the capital stock of SUB, shall thereupon cease to have any rights with
respect to such shares and its rights shall be solely in respect of the
Common Stock of MUX into which such shares of capital stock of SUB have
been so converted.
3.6 In the event that a stock certifcate representing shares of MUX
Common Stock is alleged by the holder thereof to have been lost, stolen or
destroyed, Glenayre shall nevertheless deliver to such holder the
consideration described in Section 3.2, provided that Glenayre may require
such holder to give Glenayre a bond (or other adequate security) sufficient
to indemnify it and MUX against any claim that may be made against it or
MUX (including any expense or liability) on account of the alleged loss,
theft or destruction
4
<PAGE>
of the MUX stock certificate or the issuance of the Glenayre stock certificate
in exchange therefor.
4. Termination and Amendment.
4.1 Notwithstanding the approval of this Agreement by the
shareholders of MUX and SUB, this Agreement may be terminated at any time
prior to the Effective Time by the mutual agreement of the Boards of
Directors of Glenayre, SUB and MUX.
4.2 Notwithstanding the approval of this Agreement by the
shareholders of MUX and SUB, this Agreement shall terminate in the event
that the Acquisition Agreement shall be terminated prior to the Effective
Time as therein provided.
4.3 In the event of the termination of this Agreement as provided
above, this Agreement shall become void and there shall be no liability on
the part of MUX, SUB or Glenayre or their respective officers or directors
hereunder, except as otherwise provided in the Acquisition Agreement.
4.4 This Agreement may be amended by the parties hereto at any time
before or after approval hereof by the shareholders of MUX or SUB but,
after any such approval, no amendment shall be made which by law requires
the further approval of the shareholders of MUX or SUB without first
obtaining such approval. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
IN WITNESS WHEREOF, the parties to this Agreement pursuant to the
approval and authority duly given by resolutions adopted by their
respective Boards of Directors, have caused this Agreement to be executed
in their respective corporate names by the Chief Executive Officer,
President or a Vice President and attested by the Secretary or Assistant
Secretary of each party hereto.
MUX ACQUISITION CORP.
By:
____________________, President
Attested by:
_______________, Secretary
5
<PAGE>
GLENAYRE TECHNOLOGIES, INC.
By:
____________________, President
Attested by:
______________, Secretary
WESTERN MULTIPLEX CORPORATION
By:
_____________________, President
Attested by:
____________________, Secretary
6
<PAGE>
EXHIBIT D
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is made and entered into as
of the ___ day of_____, 1995 by and among GLENAYRE TECHNOLOGIES, INC., a
Delaware corporation ("Glenayre"); FRANK HEGARTY, as agent and attorney-in-
fact for the Indemnifying Equity Holders identified on Schedule 1 hereto
(the "Equity Holders' Representative"); and NATIONSBANK OF NORTH CAROLINA,
N.A. (the "Escrow Agent").
Statement of Purpose
Pursuant to the terms of an Acquisition Agreement dated as of January
3, 1995 among Glenayre, MUX Acquisition Corp., Western Multiplex Corpora-
tion ("MUX") and certain equity holders of MUX (the "Acquisition Agree-
ment"), MUX Acquisition Corp., which is a wholly-owned subsidiary of
Glenayre, is merging with and into MUX (the "Merger"), which will then
become a wholly-owned subsidiary of Glenayre.
Pursuant to the Acquisition Agreement, Glenayre is delivering to the
Escrow Agent on the date hereof a certificate with respect to each Indemni-
fying Shareholder identified on Schedule 1 hereto for the number of shares
of the common stock of Glenayre shown on Schedule 1 hereto. The Escrowed
Shares and the Escrowed Funds (each of which is defined below) shall be
held in escrow by the Escrow Agent subject to the terms, provisions and
conditions set forth herein as security for the indemnification obligations
of the Indemnifying Equity Holders under Article 9 of the Acquisition
Agreement. The Equity Holders' Representative has been appointed to act as
agent and attorney-in-fact for the Indemnifying Equity Holders (which
includes the Indemnifying Shareholders) in connection with this Agreement.
NOW, THEREFORE, in consideration of the foregoing Statement of Purpose
and the mutual promises contained herein, the parties hereto hereby agree
as follows:
1. General.
(a) Definitions. In addition to any other terms defined elsewhere in
this Agreement, including any Schedule hereto (unless such Schedule
provides for a different definition), as used herein, the following terms
shall have the following meanings:
"Acknowledgments" means the Acknowledgment and transmittal letter
executed and delivered to Glenayre by each Indemnifying Equity Holder in
connection with the Merger.
<PAGE>
"Agreement of Merger" means the Agreement of Merger to be filed with
the California Secretary of State in connection with the Merger.
"Business Day" means any day other than a Saturday, Sunday or legal
holiday in the State of North Carolina.
"Closing" means the consummation of the Merger.
"Closing Date" means the date on which the Closing occurs.
"Closing Value" means the average closing price of Glenayre Common
Stock on the NASDAQ National Market System for the ten trading days
immediately prior to two Business Days before the Effective Time, subject
to appropriate adjustment in the event of a stock dividend on, or split-up
or other recapitalization of, the Glenayre Common Stock.
"Effective Time" means the date on which the Agreement of Merger
becomes effective.
"Escrowed Funds" is defined in paragraph 3 of this Agreement.
"Escrowed Shares" is defined in paragraph 3 of this Agreement.
"Expiration Date" means the date which is one year after the Effective
Time.
"Forfeitable Options" means the options granted by MUX pursuant to
MUX's 1981 Incentive Stock Option Plan, MUX's 1991 Incentive Stock Option
Plan, MUX's 1992 Incentive Stock Option Plan or MUX's 1993 Incentive Stock
Option Plan, which at the Effective Time will be converted into options to
acquire Glenayre Common Stock and the exercise price will be appropriately
adjusted all in accordance with terms of the Acquisition Agreement, to the
individuals and in the amounts (as so adjusted) described on Schedule 2
hereto which are part of the Indemnity Pool and are subject to forfeiture
upon application to satisfy an Indemnifying Option Holder's indemnification
obligations with respect to a Loss as provided in this Agreement and the
Acquisition Agreement.
"Glenayre Common Stock" means the $.02 par value Common Stock of
Glenayre.
"Glenayre Transfer Agent" means American Stock Transfer & Trust
Company, 6201 15th Avenue, 3rd Floor, Brooklyn, NY 11219 and its successors
and assigns.
"Indemnifying Equity Holders" means, collectively, the Indemnifying
Shareholders and the Indemnifying Option Holders set forth on Schedule 1.
2
<PAGE>
"Indemnifying Option Holders" means, collectively, the holders of
Forfeitable Options who are obligated to indemnify Glenayre and MUX and
their subsidiaries pursuant to the terms of the Acquisition Agreement.
"Indemnifying Shareholders" means, collectively, the holders of MUX
Common Stock who are obligated to indemnify Glenayre and MUX and their
subsidiaries pursuant to the terms of the Acquisition Agreement.
"Indemnity Claim" means any matter which arises which may involve or
give rise to a claim by Glenayre against the Indemnifying Equity Holders
for any Loss.
"Indemnity Pool" means all Escrowed Shares, Escrowed Funds and
Forfeitable Options.
"Loss" or "Losses" means any and all liabilities, losses, damages,
actions, suits, proceedings, claims, demands, assessments, fines, penal-
ties, judgments, fees, costs and expenses (including reasonable accoun-
tants' and attorneys' fees) of every nature and character sustained or
incurred, directly or indirectly, by Glenayre or MUX or their subsidiaries,
arising out of or incident to or by reason of (1) the falsity or incorrect-
ness of any representation or warranty made by any Equity Holder or MUX in
the Acquisition Agreement, the Acknowledgments, or any document, certifi-
cate or other agreement entered into, furnished or to be furnished by any
Equity Holder, MUX or MUX Sub pursuant to the Acquisition Agreement or the
Acknowledgments; (2) any breach of any covenant to be performed by or on
the part of any MUX Equity Holder or MUX under the Acquisition Agreement,
the Acknowledgments or any document, certificate, or other agreement or
instrument entered into, furnished or to be furnished by any MUX Equity
Holder, MUX or MUX Sub pursuant to the Acquisition Agreement or the
Acknowledgments; (3) any liability from the failure prior to the Closing of
MUX or MUX Sub to qualify as a foreign corporation in any state or the
failure of MUX or MUX Sub to pay any taxes to any taxing authority outside
the State of California, (4) the failure of MUX or any Person to obtain a
building permit with respect to tenant improvements constructed by MUX at
300-310 Harbor Boulevard, Belmont, California, or (5) any matter disclosed
on paragraph 1 of Schedule 5.16 to the Acquisition Agreement. The amount
of any indemnifiable Losses under the Acquisition Agreement shall be
reduced by the amount of (i) any tax benefits actually realizable by
Glenayre and MUX or their affiliates, (ii) insurance proceeds net of
deductibles and incidental expenses and premium increases reasonably
anticipated to result therefrom, and (iii) proceeds or amounts from third
parties (regardless of when received but only if actually received), in
each case of clauses (i), (ii) and (iii) in connection with or as a result
of such Losses, which tax benefits, insurance proceeds or proceeds or
amounts from third parties Glenayre shall take reasonable steps to obtain.
MUX shall assign
3
<PAGE>
to the Equity Holders' Representative any choses in actions that MUX
may have against third parties with respect to specific claims as to which
Glenayre has received indemnification under the Acquisition Agreement. Tax
benefits actually realizable by Glenayre and MUX shall be calculated on a
"with and without" basis. (The total Taxes payable by Glenayre and its
affiliates if Glenayre had not incurred the applicable Loss shall be
referred to as the "Without Taxes" and the total Taxes payable by Glenayre
and its affiliates taking into account the Loss shall be referred to as the
"With Taxes." The excess, if any, of the Without Taxes over the With Taxes
shall be the measure of such tax benefits accruing to Glenayre and MUX. The
calculation of Without Taxes and With Taxes shall be for all open years ending
with the year following the year during which the amount of the Loss for the
applicable Indemnity Claim is finally resolved. Glenayre shall make a
reasonable estimate of the With Taxes and Without Taxes for portion of the
then current fiscal year and the following fiscal year. In the event of any
dispute as to the calculation of the tax benefit, the determination of the
independent accounting firm regularly employed to prepare Glenayre's Tax returns
(or if there is no such firm, the firm that certifies Glenayre's financial
statements) shall be final and binding on all parties.
"MUX Common Stock" means the Common Stock of MUX.
"MUX Equity Holder" means a holder of MUX Common Stock or an option to
purchase MUX Common Stock.
"MUX Sub" means Western Multiplex International Sales Corporation, a
domestic international sales corporation and a wholly-owned subsidiary of
MUX.
"Notice of Claim" means the written notice given to the Equity
Holders' Representative and the Escrow Agent by Glenayre which states the
general nature and amount of an Indemnity Claim with reasonable detail as
to the alleged basis of the Indemnity Claim. The Notice of Claim shall
also set forth the manner in which such claim shall be satisfied, whether
by delivery of Escrowed Shares, Escrowed Funds or the forfeiture of
Forfeitable Options.
"Spread" means, with respect to any Forfeitable Option, the amount by
which the Closing Value exceeds the exercise price of the Forfeitable
Options, as adjusted following the conversion of the options into options
to acquire Glenayre Common Stock in accordance with the terms of the
Acquisition Agreement.
(b) All representations, warranties, agreements, undertakings and
obligations of the Equity Holders' Representative contained herein shall
also be representations, warranties, agreements, undertakings and obliga-
tions of the Indemnifying Equity Holders.
4
<PAGE>
(c) All instructions received by the Escrow Agent from Glenayre must
be signed by an authorized representative of Glenayre, as shown on Schedule
3 hereto (an "Authorized Representative"). Instructions received from the
Equity Holders' Representative will be signed by the Equity Holders'
Representative, that individual's specimen signature being found on the
execution page of this Agreement.
2. Appointment of the Escrow Agent. The Escrow Agent is hereby
appointed Escrow Agent with respect to the "Escrow" as that term is herein
defined.
3. The Escrow. Concurrently with the execution and delivery hereof,
Glenayre has delivered to the Escrow Agent certificates representing the
shares of Common Stock of Glenayre described on Schedule 1 hereto and
executed blank stock powers with respect to such certificates. Such
shares, together with (1) all shares issued in payment or distribution of
any stock dividend on or split-up or other recapitalization of, or in
respect of, any such escrowed shares, and any securities or other property
issued or distributed with respect to such shares in connection with any
merger, consolidation or liquidation of Glenayre and (2) shares of Glenayre
Common Stock issued upon the exercise of Forfeitable Options are referred
to herein as the "Escrowed Shares." Glenayre will instruct the Glenayre
Transfer Agent to deliver to the Escrow Agent certificates for the shares
referred to in (1) and (2) above. Any cash or property other than capital
stock of Glenayre, including any dividends paid on the Escrowed Shares
(except any portion of such dividends necessary for the Indemnifying Equity
Holders to pay taxes on such dividends), which is delivered to the Escrow
Agent to be held hereunder (together with any interest or other income
earned thereon) is referred to herein as "Escrowed Funds." Glenayre will
instruct the Glenayre Transfer Agent to deliver any cash or property
payable upon the Escrowed Shares to the Escrow Agent. The Escrowed Shares
and the Escrowed Funds are collectively referred to herein as the "Escrow."
4. The Escrow Agent's Duties. Except as may be otherwise provided
in paragraph 24, in which event the special instructions in said paragraph
24 shall be controlling, the Escrow Agent shall hold the Escrow in safe-
keeping and deliver the same or any part thereof, only as set forth in this
Agreement.
(a) Term of Escrow. Except as provided in subsection (d) hereof, the
Escrow shall not be released by the Escrow Agent until the Expiration Date.
(b) Escrowed Shares. The Escrow Agent shall hold the Escrowed Shares
and shall not release such shares or otherwise allow such shares to be sold
or transferred other than pursuant to the terms of this Agreement.
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<PAGE>
(c) Formula for Number of Escrowed Shares to be Returned to Glenayre.
To the extent that Escrowed Shares are applied to any portion of a Loss
pursuant to Paragraph 5 herein, the number of Escrowed Shares to be so
applied shall be determined by Glenayre pursuant to the terms of the
Acquisition Agreement and shall be set forth in the Notice of Claim
delivered to the Escrow Agent. Such Escrowed Shares to be so returned to
Glenayre shall be allocated among the Indemnifying Shareholders in accor-
dance with Paragraph 5(e) herein.
(d) Investment of Escrowed Funds. The Escrow Agent shall invest cash
balances each day in such money market or other short-term investment funds
as shall be specified in writing by the Equity Holders' Representative
named. Such money market or short-term investment funds may include any
open-end or closed-end management investment trust or investment company
registered under the Investment Company Act of 1940, as amended, for which
the Escrow Agent or one of its affiliates acts as investment advisor,
custodian, transfer agent, registrar, sponsor, distributor, manager or
otherwise, and any fees paid to the Escrow Agent or its affiliate by such
fund shall be in addition to the fees and expenses owed to the Escrow Agent
under this Agreement.
(e) Distribution of the Escrow.
(i) The Escrow Agent shall apply the Escrow to any Loss,
and distribute the Escrow to Glenayre, in accordance with para-
graph 5 of this Agreement,
(ii) Not later than five Business Days after the Expiration
Date, the Escrow Agent shall deliver to the Equity Holders'
Representative (for delivery to the Indemnifying Shareholders)
the Escrow then held by the Escrow Agent, less the Escrow for
which a Notice of Claim was received by the Escrow Agent prior to
the Expiration Date; and such Escrow so distributed to the
Indemnifying Shareholders shall be allocated among the Indemnify-
ing Shareholders in accordance with their proportionate percent-
ages of the Escrow as shown on Schedule 4 attached hereto. Any
retained Escrow shall, upon final determination or settlement of
the Loss being determined or contested, be applied thereto in
accordance with paragraph 5 of this Agreement and any balance
delivered to the Indemnifying Shareholders in accordance with
their then respective interests in the retained Escrow.
5. Application of Indemnity Pool to a Loss.
(a) At any time prior to the Expiration Date, Glenayre may give the
Escrow Agent and the Equity Holders' Representative a Notice of Claim,
together with notice that Glenayre intends to apply all or a part of the
Indemnity Pool (in the manner provided
6
<PAGE>
in paragraph 5(e) of this Agreement) to the payment of the Loss specified in
such Notice of Claim. In the event that a Loss has not been liquidated or
determined, Glenayre may, at any time prior to the Expiration Date, give the
Escrow Agent and the Equity Holders' Representative a Notice of Claim in which
Glenayre describes the general nature of the Indemnity Claim and makes a good
faith estimate of the Loss.
(b) If the Equity Holders' Representative does not give written
notice to Glenayre and the Escrow Agent, within 30 days after the giving of
such Notice of Claim, that he protests the proposed application of the
Indemnity Pool to the Loss as specified in such Notice of Claim, then the
Indemnity Pool shall be applied to such Loss as set forth in such Notice of
Claim.
(c) If the Equity Holders' Representative does give written notice to
Glenayre and the Escrow Agent, within 30 days after the giving of such
Notice of Claim, that he protests the proposed application of the Indemnity
Pool to the Loss as specified in such Notice of Claim, then the proposed
application shall be referred by Glenayre to, and settled by, binding
arbitration in accordance with the Rules of Commercial Arbitration of the
American Arbitration Association. The arbitration panel or arbitrator (as
applicable) shall be selected as provided in subsection 5(d) of this
Agreement. The arbitration panel or arbitrator (as applicable) shall
determine the amount, if any, of such proposed application which is proper.
The venue of the arbitral proceedings shall be in Mecklenburg County, North
Carolina. The proceedings shall be governed by the Rules of Commercial
Arbitration of the American Arbitration Association. In reaching a
decision, the arbitration panel or arbitrator (as applicable) shall apply
the principles of law that a North Carolina court, in applying North
Carolina law, would use in the event of litigation on the same issues. The
decision rendered by the arbitration panel or arbitrator (as applicable)
shall be final and binding on Glenayre, the Indemnifying Equity Holders,
the Equity Holders' Representative and the Escrow Agent. Judgment on the
award rendered by the arbitration panel or arbitrator (as applicable) may
be entered in any court having jurisdiction thereof. Each of Glenayre and
the Indemnifying Equity Holders shall bear its or their own attorneys'
fees, fees for expert witnesses and all other costs incurred by it or them
in connection with the Indemnity Claim which is the subject of the arbi-
tration. Glenayre and the Indemnifying Equity Holders shall share equally
any attorneys' fees, fees for expert witnesses and all other costs incurred
by the Escrow Agent in connection with the arbitration of such indemnifica-
tion claim (including without limitation costs incurred by Glenayre
pursuant to paragraph 15(b) hereof) and any fees charged by the arbitrators
or the American Arbitration Association.
(d) Promptly after receiving notice of protest from the Equity
Holders' Representative under subsection 5(c), Glenayre
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<PAGE>
shall name a suitable professionally qualified individual to serve as an
arbitrator on the arbitration panel to determine the Indemnity Claim and shall
give the Equity Holders' Representative notice thereof; within 10 days after
such notice, the Equity Holders' Representative shall name a second suitable
professionally qualified individual to serve as an arbitrator on such
arbitration panel; and the two individuals so named shall agree upon and
name a third individual to serve as an arbitrator on such arbitration
panel. In the event that the Equity Holders' Representative does not name
a second individual to serve on the arbitration panel within such 10-day
period, then the arbitrator named by Glenayre shall serve as the sole
arbitrator. In the event that the two individuals named by Glenayre and
the Equity Holders' Representative, respectively, cannot agree on a third
member within 10 days, then the selection of a third individual to serve on
the arbitration panel shall be made by the American Arbitration Association
or, if the American Arbitration Association fails to choose an arbitrator
within 15 days after request, by the Chief Resident Superior Court Judge of
Mecklenburg County, North Carolina.
(e) Each Indemnifying Equity Holder shall be liable for his, her or
its Proportionate Percentage (as shown on Schedule 4 hereto) of any Loss,
provided that no Indemnifying Equity Holder shall be liable for any Loss in
excess of his, her or its total interest in the Indemnity Pool. The
liability of each Indemnifying Equity Holder as so determined may be
satisfied, at the written direction of the Equity Holders' Representative
to Glenayre and the Escrow Agent within 30 days after such Notice of Claim
is given to the Equity Holders' Representative (or, if such Indemnity Claim
is contested pursuant to paragraph 5 of this Agreement, within 30 days
after final resolution of such Indemnity Claim), by the Escrow Agent's
payment of Escrowed Funds to Glenayre, the Escrow Agent's delivery of the
Escrowed Shares to the Glenayre Transfer Agent for transfer to Glenayre,
the forfeiture of Forfeitable Options, or any combination of the foregoing.
The Escrow Agent will not be required to take any action to cause the
forfeiture of Forfeitable Options. In the absence of any such direction by
the Equity Holders' Representative within the 30-day period described
above, the Proportionate Percentage of a Loss by such Indemnifying Equity
Holder shall be satisfied in accordance with the directions specified by
Glenayre in the Notice of Claim with respect to such Loss. For purposes of
applying the Indemnity Pool to a Loss to satisfy the indemnity obligation
of any Indemnifying Equity Holder, (1) the value of any Escrowed Funds so
applied shall be the dollar amount (or fair market value, as applicable) of
such Escrowed Funds as of the date of such application, (2) the value of
any Escrowed Shares so applied shall be the number of such Escrowed Shares,
multiplied by the Closing Value and (3) the value of any Forfeitable
Options so applied shall be the sum of the Spreads for such Forfeitable
Options.
8
<PAGE>
6. Escrow Agent's Authority to Act.
(a) The Escrow Agent may act in accordance with the terms of this
Agreement upon any written notice, request, waiver, consent, certificate,
receipt, authorization, power of attorney or other document which it in
good faith believes to be genuine.
(b) The Escrow Agent shall be deemed to have properly delivered any
item of Escrow upon (i) placing the item in the United States mail in a
suitable package or envelope with first class prepaid postage affixed,
addressed to the addressee at such addressee's address as set forth in this
Agreement or such other address as the party shall have furnished to the
Escrow Agent in writing; (ii) delivery in person at the Escrow Agent's
offices; or (iii) delivery in any other manner pursuant to written instruc-
tions of the person to whom delivery is to be made.
(c) In performing its duties under this Agreement, or upon the
claimed failure to perform any of its duties hereunder, the Escrow Agent
shall not be liable to anyone for damages, losses or expenses which may be
incurred as a result of the Escrow Agent so acting or failing to so act;
provided, however, the Escrow Agent shall not be relieved from liability
for damages arising out of its proven gross negligence or willful miscon-
duct under this Agreement.
7. Other Agreements. The Escrow Agent is not a party to, nor is it
bound by, any other agreement or undertaking between Glenayre and the
Indemnifying Equity Holders, the Equity Holders' Representative or any of
them, or any of them and other persons, it being the intention of the
parties hereto that the Escrow Agent assent to and be obligated to give
consideration only to the terms and provisions hereof. Unless otherwise
provided in paragraph 24, the Escrow Agent shall have no duty to determine
or inquire into the happening or occurrence of any event or contingency or
the performance or failure of performance of any of Glenayre, the Indemni-
fying Equity Holders or the Equity Holders' Representative with respect to
arrangements or contracts with each other or with others, the Escrow
Agent's sole duty hereunder being to hold the Escrow and to dispose of and
deliver the same in accordance with instructions given to it as provided in
paragraphs 4 and 5 of this Agreement.
8. Standard of Care.
(a) The Escrow Agent undertakes to perform such duties and only such
duties as are specifically set forth in this Agreement and no implied
covenants or obligations shall be read into this Agreement against the
Escrow Agent.
(b) If the Escrow Agent is required by the terms hereof to determine
the occurrence of any event or contingency, the Escrow Agent shall, in
making such determination, be liable only for its
9
<PAGE>
proven willful misconduct or gross negligence, as determined in light of all
the circumstances, including the time and facilities available to it in the
ordinary conduct of its business. In determining the occurrence of any such
event or contingency the Escrow Agent may request from Glenayre or any of the
Indemnifying Equity Holders or the Equity Holders' Representative or any
other person such reasonable additional evidence as the Escrow Agent in its
sole discretion may deem necessary to determine any fact relating to the
occurrence of such event or contingency, and may at any time inquire of and
consult with others, including without limitation, Glenayre or any of the
Indemnifying Equity Holders or the Equity Holders' Representative, and the
Escrow Agent shall not be liable for any damages resulting from its delay
in acting hereunder pending its receipt and examination of additional
evidence requested by it.
(c) Whenever the Escrow Agent is required by the terms hereof to take
action upon the occurrence of any event of contingency, the time prescribed
for such action shall in all cases be a reasonable time after written
notice received by the Escrow Agent for the happening of such event or
contingency; provided, however, that this provision shall not be deemed to
limit or reduce the time allowed the Escrow Agent for action as provided in
paragraph 8(b).
9. Limitation on Liability. The Escrow Agent shall not be responsi-
ble or liable to Glenayre, any of the Indemnifying Equity Holders or the
Equity Holders' Representative or to any other person in any manner
whatsoever for the sufficiency, correctness, genuineness, effectiveness or
validity of any of the Escrow, or for the form or execution thereof, or for
the identity or authority of any person executing or depositing the same.
The Equity Holders' Representative represents and warrants that he is
authorized as agent and attorney-in-fact to make and enter into this
Agreement on behalf of the Indemnifying Equity Holders. The Escrow Agent
is authorized by each of the Glenayre and the Equity Holders' Representa-
tive to rely upon all representations, both actual and implied, of each of
Glenayre and the Equity Holders' Representative and all other persons
relating to this Agreement and/or the Escrow, including without limitation
representations as to marital status, authority to execute and deliver this
Agreement, notifications, receipts or instructions hereunder, and relation-
ships among persons, firms, corporations or other entities, including those
authorized to receive delivery hereunder, and the Escrow Agent shall not be
liable to any person in any manner by reason of such reliance. The duties
of the Escrow Agent hereunder shall be only to Glenayre and the Equity
Holders' Representative, their respective successors, heirs, assigns,
executors and administrators and to no other person, firm, corporation or
other entity whatsoever.
10. Time of Performance. Whenever under the terms hereof the time
for performance of any provision shall fall on a date which is not a
regular business day of the Escrow Agent, the performance
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<PAGE>
thereof on the next succeeding regular business day of the Escrow Agent shall
be deemed to be in full compliance. Whenever time is referred to in this
Agreement, it shall be the time recognized by the Escrow Agent in the ordinary
conduct of its normal business transactions.
11. Death, Disability, etc. The death, disability, bankruptcy,
insolvency, reorganization or absence of any of Glenayre, the Equity
Holders' Representative or any of the Indemnifying Equity Holders shall not
affect or prevent performance by the Escrow Agent of its obligations or its
right to rely upon instructions received hereunder.
12. Examination of the Escrowed Shares. Glenayre or the Equity
Holders' Representative may examine the certificates for the Escrowed
Shares during the regular business hours of the Escrow Agent; such examina-
tion shall, however, be permitted only in the presence of an officer of the
Escrow Agent.
13. Remedies of the Escrow Agent.
(a) As additional consideration for and as an inducement for the
Escrow Agent to act hereunder, it is understood and agreed that in the
event of any disagreement between the parties to this Agreement or in the
event any other person or entity claims an interest in the Escrow or any
part thereof, and such disagreement or claim results in adverse claims and
demands being made by them or any of them in connection with or for any
part of the Escrow, the Escrow Agent shall be entitled, at the option of
the Escrow Agent, to refuse to comply with the instructions or demands of
the parties to this Agreement, or any of such parties, so long as such
disagreement or adverse claim shall continue. In such event, the Escrow
Agent shall not be required to make delivery or other disposition of the
Escrow. Anything herein to the contrary notwithstanding, the Escrow Agent
shall not be or become liable to Glenayre, the Equity Holders' Representa-
tive or the Indemnifying Equity Holders or any of them for the failure of
the Escrow Agent to comply with the conflicting or adverse demands of
Glenayre or the Equity Holders' Representative or any of such parties or of
any other persons or entities claiming an interest in the Escrow or any
part thereof. The Escrow Agent shall be entitled to refrain and refuse to
deliver or otherwise dispose of the Escrow or any part thereof or to
otherwise act hereunder, as stated above, unless and until (i) the rights
of the parties and all other persons and entities claiming an interest in
the Escrow have been duly determined in accordance with paragraph 5(c) or
(ii) the parties to this Agreement and such other persons and entities have
reached an agreement resolving their differences and have notified the
Escrow Agent in writing of such agreement and have provided the Escrow
Agent with indemnity satisfactory to it against any liability, claims or
damages resulting from compliance by the Escrow Agent with such agreement.
In addition to the foregoing, the Escrow
11
<PAGE>
Agent shall have the right to
tender into the registry or custody of any court having jurisdiction, any
part of or all of the Escrow. Upon such tender, the parties hereto agree
that the Escrow Agent shall be discharged from all further duties under
this Agreement; provided, however, that the filing of any such legal
proceedings shall not deprive the Escrow Agent of its compensation hereun-
der earned prior to such filing and discharge of the Escrow Agent of its
duties hereunder.
(b) While any arbitration or proceeding arising out of or relating to
this Agreement or the Escrow is pending, whether the same be initiated by
the Escrow Agent or by others, the Escrow Agent shall have the right at its
option to stop all further performance of this Agreement and performance of
instructions (except its duty to safekeep the Escrow and to invest Escrowed
Funds) until all differences shall have been resolved by agreement or until
the rights of all parties shall have been fully and finally determined in
accordance with paragraph 5(c) hereof. The rights of the Escrow Agent
under this paragraph are in addition to all other rights which it may have
by law or otherwise.
14. Reliance on Counsel.
The Escrow Agent may from time to time consult with legal counsel of
its own choosing in the event of any disagreement, controversy, or question
or doubts as to the construction of any of the provisions hereof or its
duties hereunder, and it shall incur no liability and shall be fully
protected in acting in good faith in accordance with the opinion or
instructions of such counsel. Any such fees and expenses of such legal
counsel shall be considered part of the fees and expenses of the Escrow
Agent described below.
15. Fees and Expenses.
(a) Glenayre hereby agrees to pay the Escrow Agent for its ordinary
services hereunder the fees determined in accordance with, and payable as
specified in, the Schedule of Fees set forth in Schedule 5, attached
hereto. In addition, Glenayre hereby agrees to pay to the Escrow Agent its
expenses incurred in connection with this Agreement, including, but not
limited to, legal fees and expenses, in the event the Escrow Agent deems it
necessary to retain counsel. Such expenses shall be paid to the Escrow
Agent within 10 days following receipt by Glenayre of a written statement
setting forth such expenses.
(b) Glenayre agrees that in the event any controversy arises under or
in connection with this Agreement or the Escrow, or the Escrow Agent is
made a party to or intervenes in any litigation pertaining to this Agree-
ment or the Escrow, to pay to the Escrow Agent reasonable compensation for
its extraordinary services and to reimburse the Escrow Agent for all cost
and expenses associated
12
<PAGE>
with such controversy or litigation, including, but
not limited to legal fees and expenses. The Escrow Agent shall give
Glenayre notice prior to incurring any such fees, costs or expenses, and an
estimate of the amount of such fees, costs and expenses.
(c) Each of Glenayre and the Equity Holders' Representative warrant
and agree with the Escrow Agent that, unless otherwise expressly set forth
in this Agreement, there is no security interest in the Escrow or any part
thereof; no financing statement under the Uniform Commercial Code of any
jurisdiction is on file in any jurisdiction claiming a security interest in
or describing, whether specifically or generally, the Escrow or any part
thereof; and the Escrow Agent shall have no responsibility at any time to
ascertain whether or not any security interest exists in the Escrow or any
part thereof or to file any financing statement under the Uniform Commer-
cial Code of any jurisdiction with respect to the Escrow or any part
thereof.
(d) In the event fees and expenses of the Escrow Agent are to be paid
pursuant to paragraph 24 hereof, it is understood and agreed by Glenayre
and the Indemnifying Equity Holders that such fees and expenses are in
addition to those described above and that such fees and expenses shall be
subject to periodic review and modification by the Escrow Agent as deter-
mined by the Escrow Agent in its sole discretion.
16. Effective Date. The effective date of this Agreement shall be
the date hereof.
17. Termination and Resignation. Unless sooner terminated as
hereinafter provided, this Agreement shall terminate without action of any
party when all of the terms hereof shall have been fully performed. The
Escrow Agent or any successor hereunder may resign and be discharged from
its duties or obligations hereunder by giving notice in writing to Glenayre
and the Equity Holders' Representative of such resignation specifying a
date when such resignation shall take effect, provided that upon such
resignation shall not be effective until the Escrow Agent shall turn over
the Escrow Amount to a successor agreed to by Glenayre and the Equity
Holders' Representative.
18. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, and such counterparts shall
constitute and be one and the same instrument.
19. Assignment of Interests. None of Glenayre or the Indemnifying
Equity Holders shall assign or attempt to assign or transfer his or its
interest hereunder or any part thereof.
20. Amendments. This Agreement cannot be amended or modified except
by another agreement in writing signed by all the parties hereto or by
their respective successors in interest.
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<PAGE>
21. Headings. The paragraph headings contained herein are for
convenience of reference only and are not intended to define, limit or
describe the scope or intent of any provision of this agreement.
22. Governing Law. This Agreement shall be deemed to have been made
and shall be construed and interpreted in accordance with the laws of the
State of North Carolina.
23. Withholding; Investment of Escrow.
(a) The Escrow Agent shall not be responsible or liable for determi-
nation or payment of any taxes assessed against the Escrow or the income
therefrom nor for the preparation or filing of any tax returns other than
withholding required by statute or treaty. Each of Glenayre and the Equity
Holders' Representative agrees to provide the Escrow Agent any information
necessary to perform any such required withholding and the Escrow Agent
shall be entitled to rely on such information. The Escrow Agent will
establish the account holding the Escrow under the TIN of the Equity
Holders' Representative; if Escrow Agent is responsible for tax reporting
as set forth in paragraph 23, it will be rendered under the aforementioned
TIN. A W-9 certifying to the party's withholding status in the form set
forth on Schedule 6 attached hereto will be completed at closing.
(b) The Escrow Agent may make any and all investments through its own
bond or investment department. The Escrow Agent shall not be held liable
or responsible for the quality or diversity of the assets constituting the
Escrow or for any loss or depreciation in the value of such assets or any
loss resulting from any investment made by the Escrow Agent in accordance
with the terms of this Agreement. If the Escrow Agent is required to sell
or otherwise redeem or liquidate any part of the Escrowed Funds prior to
its maturity, the parties hereto agree that the Escrow Agent shall not be
personally liable for any loss to the Escrow (including either principal or
income) or other costs incurred as a result of any such early redemption or
liquidation.
24. Indemnification and Hold Harmless. Glenayre and the Equity
Holders' Representative (but only as agent and attorney-in-fact for the
Indemnifying Equity Holders) hereby agree jointly and severally to indemni-
fy and hold the Escrow Agent and its directors, employees, officers,
agents, successors and assigns harmless from and against any and all
losses, claims, damages, liabilities and expenses, including without
limitation, reasonable costs of investigation and counsel fees and expenses
which may be imposed on the Escrow Agent or incurred by it in connection
with its acceptance of this appointment as the Escrow Agent hereunder or
the performance of its duties hereunder. Such indemnity includes, without
limitation, all losses, damages, liabilities and expenses (including
counsel fees and expenses) incurred in connection with
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<PAGE>
any litigation
(whether at the trial or appellate levels) arising from this Agreement or
involving the subject matter hereof. The indemnification provisions
contained in this paragraph 24 are in addition to any other rights any of
the indemnified parties may have by law or otherwise and shall survive the
termination of this Agreement or the resignation or removal of the Escrow
Agent.
25. Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly
given or made as of the date delivered, mailed or transmitted, and shall be
effective upon receipt, if delivered personally, mailed by registered or
certified mail (postage prepaid, return receipt requested) to the parties
at the following addresses (or at such other address for a party as shall
be specified by like changes of address) or sent by electronic transmission
to the facsimile numbers specified below:
If to Glenayre:
Glenayre Technologies, Inc.
520 Madison Avenue, 35th Floor
New York, New York 10022-4213
Attention: Clarke H. Bailey
Facsimile No.: (212) 935-4299
and
Glenayre Electronics, Inc.
4201 Congress Street, Suite 455
Charlotte, North Carolina 28209
Attention: Stan Ciepcielinski
Facsimile No.: (704) 553-7878
with a copy to:
Kennedy Covington Lobdell & Hickman, L.L.P.
NationsBank Corporate Center, Suite 4200
100 North Tryon Street
Charlotte, North Carolina 28202
Attention: Eugene C. Pridgen, Esq.
Facsimile No.: (704) 331-7598
If to the Equity Holders' Representative:
Frank Hegarty
15
<PAGE>
2114 Lyon Avenue
Belmont, California 94002
If to the Escrow Agent:
NationsBank of North Carolina, N.A.
Corporate Trust Department
NationsBank Plaza, NC1-002-08-04
Charlotte, North Carolina 28255
Attention: Teresa A. Davis
Facsimile No.: (704) 386-6472
26. Reports. At least quarterly, the Escrow Agent shall provide
Glenayre and the Equity Holders' Representative with a full accounting of
the Escrow and a report of all transactions regarding the Escrow (including
receipts, investments and disbursements) not previously reported.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Escrow
Agreement to be executed this _______ day of _____________, 1995.
GLENAYRE TECHNOLOGIES, INC.
By:________________________________
Title:_____________________________
"EQUITY HOLDERS' REPRESENTATIVE"
___________________________________
Frank Hegarty, as Agent and Attorney-
in-Fact for the Indemnifying Equity
Holders
TIN:_______________________
NATIONSBANK OF NORTH CAROLINA, N.A.,
Escrow Agent
By:________________________________
Title:_____________________________
ATTACHMENTS
Schedule 1 - Indemnifying Equity Holders and Description of Escrow
Schedule 2 - MUX Option Holders and Forfeitable Options
Schedule 3 - Glenayre Authorized Representative(s)
Schedule 4 - Indemnifying Equity Holders' Proportionate Percentages
Schedule 5 - Fee Schedule
Schedule 6 - Form W-9
17
<PAGE>
SCHEDULE 1
INDEMNIFYING EQUITY HOLDERS AND DESCRIPTION OF ESCROW
<PAGE>
SCHEDULE 2
MUX OPTION HOLDERS AND FORFEITABLE OPTIONS
<PAGE>
SCHEDULE 3
GLENAYRE AUTHORIZED REPRESENTATIVE(S)
<PAGE>
SCHEDULE 4
INDEMNIFYING EQUITY HOLDERS' PROPORTIONATE PERCENTAGES
<PAGE>
SCHEDULE 5
FEE SCHEDULE
[fee schedule to come]
Out of pocket expenses such as, but not limited to, postage, courier,
insurance, long distance telephone, stationery, travel, legal or account-
ing, etc., will be billed at cost.
The initial and annual fee are due at closing.
These fees do not include extraordinary services which will be priced
according to time and scope of duties.
It is acknowledged that the schedule of fees shown above are accept-
able for the services mutually agreed upon and the undersigned authorizes
NationsBank to perform said services.
<PAGE>
SCHEDULE 6
FORM W-9
<PAGE>
EXHIBIT E
OPINION OF KENNEDY COVINGTON LOBDELL & HICKMAN, L.L.P.
[Date]
Western Multiplex Corporation
300 Harbor Boulevard
Belmont, California 94002
Re: Acquisition Agreement dated as of January 3, 1995 (the "Acquisi-
tion Agreement") by and among Glenayre Technologies, Inc. ("Glen-
ayre"), MUX Acquisition Corp. ("Merger Sub"), Western Multiplex
Corporation ("MUX") and Certain Equity Holders of MUX
Ladies and Gentlemen:
We have acted as counsel to Glenayre Technologies,Inc. and its wholly-
owned subsidiary, MUX Acquisition Corp. ("Merger Sub"), in connection with
the merger (the "Merger") of Merger Sub with and into MUX pursuant to the
terms of the Acquisition Agreement. This opinion is given to you pursuant
to Section 8.2(c) of the Acquisition Agreement. All capitalized terms used
and not otherwise defined herein shall have the meanings ascribed to such
terms in the Acquisition Agreement.
In rendering the opinions set forth below, we have examined originals
or copies of the Acquisition Agreement and the Agreement of Merger (such
documents being referred to herein individually as a "Transaction Document"
and collectively as the "Transaction Documents") and originals or copies,
certified or otherwise identified to our satisfaction, of such other docu-
ments, corporate records and certificates of public officials and corporate
officers, and have made such investigations of fact and law, as we have
deemed relevant and necessary as a basis for such opinions.
In giving the opinions expressed herein and making our investigations
in connection herewith, we have assumed (a) the due authorization, execu-
tion and delivery by the parties thereto other than Glenayre and Merger Sub
of the documents examined by us, (b) the genuineness of all signatures of
individuals, (c) the due existence of all corporations other than Glenayre
and Merger Sub and the personal legal capacity of all individual signa-
tories, (d) the authenticity of all documents presented to us as originals,
(e) the conformity to the originals of all documents presented to us as
copies, and (f) the integrity and completeness of the corporate minute
books of Glenayre and Merger Sub presented to us for our
<PAGE>
Western Multiplex Corporation
_____________, 1995
Page 2
examination, and we have no reason to believe that the foregoing
assumptions are unwarranted.
We have also assumed that the Transaction Documents and the transac-
tions evidenced thereby, are valid, binding and enforceable against all
parties thereto other than Glenayre and Merger Sub.
Based upon and subject to the foregoing, and subject to the comments
and qualifications set forth below, we are of the opinion that:
1. Glenayre is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Merger
Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of California.
2. Glenayre and Merger Sub each has all requisite corporate power
and authority to conduct its business, own, lease and operate its
properties and to enter into and perform its obligations under
the Transaction Documents.
3. The execution, delivery and performance by Glenayre and Merger
Sub of the Transaction Documents have been duly authorized by all
necessary action on the part of Glenayre and Merger Sub. The
Transaction Documents have been duly executed and delivered by
Glenayre and Merger Sub, and assuming the due execution and
delivery by the other parties thereto, each Transaction Document
constitutes the legal, valid and binding obligation of Glenayre
and Merger Sub, enforceable against them in accordance with their
respective terms.
4. The execution and delivery by Glenayre and Merger Sub of the
Transaction Documents do not, and the consummation of the trans-
actions contemplated thereunder and compliance by Glenayre and
Merger Sub with the terms, conditions and provisions of the
Transaction Documents will not, contravene or result in any
breach or default under (i) any provision of the certificate or
articles of incorporation or bylaws of either Glenayre or Merger
Sub, (ii) to our knowledge, any law, statute, rule or regulation
of any administrative agency or governmental body, or any judg-
ment, order, writ, stipulation, injunction, award or decree of
any federal or North Carolina court, arbiter,
<PAGE>
Western Multiplex Corporation
_____________, 1995
Page 3
administrative
agency or governmental body or (iii) any of the terms, conditions
or provisions of any material contract, undertaking, indenture or
other agreement or instrument binding on Glenayre or Merger Sub
and known to us.
5. Except for the filing of the Agreement of Merger with the Cali-
fornia Secretary of State and certain other filings not yet due
as of the date hereof, no authorization, approval or consent of,
or declaration or filing with, or taking of any action in respect
of or by, any federal or North Carolina governmental authority or
regulatory body, is necessary or required in connection with the
execution and delivery by Glenayre and Merger Sub of the Transac-
tion Documents or the performance by Glenayre or Merger Sub of
their respective obligations thereunder.
6. Upon the filing of the Agreement of Merger with the California
Secretary of State, together with appropriate officers' certifi-
cates and tax clearance certificates as required by the Califor-
nia General Corporation Law (the "CGCL"), the Merger shall be
effective in accordance with the CGCL.
7. The authorized capital stock of Glenayre consists of 50,000,000
shares of Common Stock, $.02 par value per share ("Glenayre
Common Stock"), and 5,000,000 shares of Preferred Stock, $.01 par
value per share. The authorized capital stock of Merger Sub
consists of 1,000 shares of Common Stock, all of which are issued
and outstanding and owned by Glenayre.
8. The shares of Glenayre Common Stock to be issued in the Merger,
when issued upon the terms and for the consideration set forth in
the Acquisition Agreement and the Agreement of Merger, will have
been duly authorized and will be validly issued, fully paid and
nonassessable, and will not have been issued in violation of any
preemptive rights.
9. The shares of Glenayre Common stock to be issued in the Merger
have been approved for listing on the NASDAQ National Market
System.
<PAGE>
Western Multiplex Corporation
_____________, 1995
Page 4
10. We have been informed by the Securities and Exchange Commission
that the Registration Statement on Form S-4 has become effective
under the Securities Act of 1933, as amended (the "Act"), and no
stop order suspending the effectiveness of the Registration
Statement has been issued under the Act and no proceedings
therefor have been instituted or threatened by the Commission.
Our opinions set forth above are subject to the following additional
qualifications:
(i) Enforcement of the Transaction Documents may be limited by
bankruptcy, insolvency, reorganization, fraudulent convey-
ance, moratorium or similar state or federal debtor relief
laws in effect from time to time and which affect the en-
forcement of creditors' rights in general.
(ii) Enforcement of the Transaction Documents is subject to the
effect of general principles of equity and the possible
unavailability of specific performance or injunctive relief
regardless of whether considered in a proceeding in equity
or at law.
(iii) Any part of the opinion set forth above relating to compli-
ance with or a lack of violation of the provisions of any
laws, statutes, rules or regulations, or relating to the
obtaining of all necessary governmental or regulatory ap-
provals, is based solely upon a review of those authorities
which, in our experience, are normally applicable to
transactions of the type contemplated by the Transaction
Documents.
(iv) Opinions or statements herein given "to our knowledge" or
qualified as "known to us" and the factual matters on which
we have relied in giving other opinions herein (except for
our opinions as to corporate matters that we have given in
reliance upon our own investigation of the minute books of
Glenayre and Merger Sub and certificates of public officials
and officers of Glenayre and Merger Sub) are based upon (a)
information coming to the attention of the lawyers in our
firm who have given substantive attention to the transac-
tions contem-
Western Multiplex Corporation
_____________, 1995
Page 5
plated by the Transaction Documents and (b) the
representations and warranties of Glenayre and Merger Sub
contained in the Acquisition Agreement. We have made no re-
view of the public record.
(v) We are licensed to practice law in the State of North Caro-
lina. Our opinions expressed above are limited to the laws
of the State of North Carolina and the federal laws of the
United States, and we express no opinion with respect to the
laws of any other jurisdiction, including principles of con-
flict of laws. As to matters governed by California law,
we have relied upon the opinion of__________________-
_____, California counsel, for purposes of this opinion
letter.
The opinions expressed herein may be relied upon by MUX, its Board of
Directors and its counsel, and may not be relied upon by any other party
without the prior written consent of the undersigned.
Very truly yours,
EXHIBIT F
FORM OF SHILLING & KENYON, INC. COMFORT LETTER
[effective date of registration statement]
Board of Directors
Western Multiplex Corporation
and
Board of Directors
Glenayre Technologies, Inc.
Ladies and Gentlemen:
We have audited the consolidated financial statements of Western
Multiplex Corporation ("MUX") and subsidiary as of June 30, 1994 and for
the year ended June 30, 1994 included in the registration statement on Form
S-4 filed by Glenayre Technologies, Inc. ("Glenayre") under the Securities
Act of 1933 (the "Act"). Such registration statement [, as amended as of
[effective date of registration statement],] is herein referred to as the
"Registration Statement."
In connection with the Registration Statement:
1. We are independent accountants with respect to MUX within the
meaning of the Act and the applicable published rules and regulations
thereunder.
2. In our opinion, the financial statements audited by us and
included in the Registration Statement comply as to form in all material
respects with the applicable accounting requirements of the Act and the
published rules and regulations thereunder with respect to registration
statements on Form S-4.
3. We have not audited any financial statements of MUX as of any
date or for any period subsequent to June 30, 1994; although we have
conducted an audit for the year ended June 30, 1994, the purpose (and
therefore the scope) of such audit was to enable us to express our opinion
on the consolidated financial statements as of June 30, 1994 and for the
year then ended, but not on the financial statements for any interim period
within such year. Therefore, we are unable to and do not express any
opinion on the unaudited consolidated balance sheet as of [date of interim
balance sheet included in S-4]; the unaudited consolidated statements of
income, of cash flows and of changes in stockholders' equity for the
________ month periods ended [dates of interim financials in S-4] included
in the Registration Statement, or on the financial position, results of
operations or cash flows as of any date or for any period subsequent to
June 30, 1994.
<PAGE>
4. For purposes of this letter, we have read the minutes of the
meetings of the stockholders and the Board of Directors of MUX and its
subsidiary, and of the Compensation and Audit Committees of the Board of
Directors of MUX during the fiscal year ended June 30, 1994, as set forth
in the minute books at [five days prior to effective date of the registra-
tion statement], officials of MUX having advised us that the minutes of all
such meetings through that date were set forth therein (except for the
minutes of the [insert applicable date(s)] Board of Directors meeting which
were not approved in final form, for which drafts were provided to us;
officials of MUX have represented that such drafts include all substantive
actions taken at such meeting), and have carried out other procedures to
[five days prior to effective date of the registration statement] (our work
did not extend to the period from [four days prior to effective date of the
registration statement] to [effective date of registration statement]) as
follows:
a. With respect to the __________ month periods ended [dates of
interim financials in S-4], we have:
(1) performed the procedures specified by the American
Institute of Certified Public Accountants for a review of interim financial
information as described in SAS No. 71, Interim Financial Information, on
the unaudited consolidated balance sheet [date of interim financials in S-
4], the unaudited consolidated statements of income, of cash flows and of
changes in stockholders' equity for the __________ month periods ended
[dates of interim financials in S-4] included in the Registration State-
ment; and
(2) inquired of certain officials of MUX who have responsi-
bility for financial and accounting matters whether the unaudited consoli-
dated financial statements referred to under subparagraph a(1) above comply
as to form in all material respects with the applicable accounting require-
ments of the Act and the published rules and regulations thereunder.
b. With respect to the period from [period from date of interim
financials to most recent month-end], we have:
(1) read the unaudited consolidated financial data of MUX
and subsidiaries for October and November [add other months up to date of
filing of Form S-4] of both 1994 and 1993 furnished us by MUX, officials of
MUX having advised us that no such financial data as of any date or for any
period subsequent to [month-end immediately preceding date of filing of S-
4] were available; and
(2) inquired of certain officials of MUX who have responsi-
bility for financial and accounting matters as to whether the unaudited
financial data referred to under subparagraph b(1) above are stated on a
basis substantially consistent with that of
2
<PAGE>
the audited financial statements included in the Registration Statement.
The foregoing procedures do not constitute an audit made in accordance
with generally accepted auditing standards. Also, they would not necessar-
ily reveal matters of significance with respect to the comments in the
following paragraph. Accordingly, we make no representations as to the
sufficiency of the foregoing procedures for your purposes.
5. Nothing came to our attention as a result of the foregoing
procedures, however, that caused us to believe that:
a. (i) the unaudited consolidated financial statements
described in subparagraph 4(a)(1) above, included in the Registration
Statement, do not comply as to form in all material respects with the
applicable accounting requirements of the Act and the published rules and
regulations thereunder or (ii) any material modifications should be made to
the unaudited consolidated financial statements described in subparagraph
4(a)(1) for them to be in conformity with generally accepted accounting
principles; or
b. (i) at [month-end immediately preceding date of filing of
S-4] there was any material change in the capital stock, increase in long-
term debt or any decreases in consolidated net current assets (working
capital) or stockholders' equity of MUX and subsidiary consolidated as
compared with amounts shown in the [date of interim balance sheet in Form
S-4] consolidated balance sheet included in the Registration Statement or
(ii) for the period from [period from date of interim financials to most
recent month-end], there were any decreases, as compared with the corre-
sponding period in the preceding year, in consolidated net sales or in the
total or per share amounts of income before extraordinary items or of net
income, except in all instances for changes or decreases which the Regis-
tration Statement discloses have occurred or may occur.
6. As mentioned under subparagraph 4(b), MUX officials have advised
us that no consolidated financial data as of any date or for any period
subsequent to [month-end immediately preceding date of filing of S-4], are
available; accordingly, the procedures carried out by us with respect to
changes in financial statement items after [month-end immediately preceding
date of filing of S-4], have, of necessity, been even more limited than
those with respect to the periods referred to in paragraph 4. We have made
inquiries of certain officials of MUX who have responsibility for financial
and accounting matters as to whether there was any material change at [five
days prior to effective date of registration statement] in the capital
stock, increase in long-term debt or any decreases in consolidated net
current assets (working capital) or stockholders' equity of MUX and its
subsidiary consolidated as compared with amounts shown on the [date of
interim balance sheet in Form S-4] consolidated balance sheet included in
the Registra-
3
<PAGE>
tion Statement. On the basis of these inquiries and our
reading of the minutes as described in paragraph 4, nothing came to our
attention that caused us to believe that there was any change, increase or
decrease, except in all instances for changes, increases or decreases which
the Registration Statement discloses have occurred or may occur.
Glenayre may, upon reasonable notice, ask for additional comfort with
respect to any items included or referred to in the Registration Statement.
This letter is solely for the information of, and assistance to, the
addressees in conducting and documenting their investigation of the affairs
of the Company in connection with the offering of the securities covered by
the Registration Statement, and is not to be used, circulated, quoted, or
otherwise referred to for any other purpose, including but not limited to
the registration, purchase, or sale of securities, nor is it to be filed
with or referred to in whole or in part in the Registration Statement or
any other document, except that reference may be made to it in any list of
closing documents pertaining to the offering of the securities covered by
the Registration Statement.
Yours very truly,
4
EXHIBIT G
FORM OF SHILLING & KENYON, INC. COMFORT LETTER UPDATE
[date of MUX shareholders' meeting]
Board of Directors
Western Multiplex Corporation
and
Board of Directors
Glenayre Technologies, Inc.
Ladies and Gentlemen:
We refer to our letter of [effective date of registration statement]
relating to the Registration Statement (No. ) of Glenayre Technologies,
Inc. We reaffirm as of the date hereof (and as though made on the date
hereof) all statements made in that letter, except that for purposes of
this letter:
1. [The Registration Statement to which this letter relates is as
amended as of [].] [Insert date if registration statement has been
amended; otherwise delete paragraph].
2. The reading of minutes described in paragraph 4 of that letter
has been carried out through [five days prior to date of MUX shareholders'
meeting].
3. The procedures and inquiries covered in paragraph 4 of that
letter were carried out to [five days prior to date of MUX shareholders'
meeting] (our work did not extend to the period from [four days prior to
date of MUX shareholders' meeting] to [date of MUX shareholders' meeting],
inclusive).
4. The period covered in subparagraph 4(b) of that letter is changed
to the period from [date immediately following date of interim financials
in Form S-4] to _______________; officials of MUX having advised us that no
such financial statements as of any date or for any period subsequent to
were available.
5. The references to [most recent month-end prior to date of filing
of Form S-4] in paragraph 5(b) of that letter are changed to
.
6. The references to [most recent month-end prior to date of filing
of Form S-4] and [five days prior to effective date of the registration
statement] in paragraph 6 of that letter are changed to , and
[five days prior to date of MUX shareholders' meeting], respectively.
This letter is solely for the information of, and assistance to, the
addressees in conducting and documenting their investigation of the affairs
of MUX in connection with the offering of the securities covered by the
Registration Statement, and is not to
<PAGE>
be used, circulated, quoted, or otherwise referred to for any other purpose,
including but not limited to the registration, purchase, or sale of securities,
nor is it to be filed with or referred to in whole or in part in the
Registration Statement or any other document, except that reference may be
made to it in any list of closing documents pertaining to the offering of the
securities covered by the Registration Statement.
Yours very truly,
2
<PAGE>
EXHIBIT H
OPINION OF GRAY CARY WARE & FRIEDENRICH
1. The Corporation has been duly incorporated and is validly
existing and in good standing under the laws of the State of California,
with corporate power and authority to conduct its business, own, lease and
operate its properties and enter into the Acquisition Agreement and the
Agreement of Merger (the "Agreements") and perform its obligations thereun-
der. Western Multiplex International Sales Corporation, a subsidiary of
the Corporation ("MUX Sub"), has been duly incorporated and is validly
existing in good standing under the laws of the State of California, with
corporate power and authority to conduct its business and own, lease and
operate its properties.
2. The execution, delivery and performance of the Agreements have
been duly authorized by all necessary corporate action of the Corporation.
The Agreements have been duly executed and delivered by the Corporation,
and the Acquisition Agreement has been duly executed and delivered by the
Principal Shareholders. The Merger has been duly and validly approved by
the shareholders of the Corporation in accordance with the General Corpora-
tion Law of the State of California (the "CGCL").
3. The Agreements constitute legally valid and binding obligations
of the Corporation, enforceable against the Corporation in accordance with
their terms. The Acquisition Agreement constitutes legal valid and binding
obligations of the Principal Shareholders and the other Indemnifying Equity
Holders who have executed and delivered Acknowledgments, enforceable
against them in accordance with its terms. The opinions expressed in this
Paragraph 3 are subject to the following limitations, qualifications and
exceptions:
(a) such opinions are subject to the effect of bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting the rights of creditors; and
(b) enforceability of the Agreements is subject to the effect of
general principles of equity and the possible unavailability of specific
performance or injunctive relief regardless of whether considered in a
proceeding in equity or at law.
4. The execution and delivery of the Agreements by the Corporation,
the execution and delivery of the Acquisition Agreement by the Principal
Shareholders, and the execution and delivery of the Acknowledgments by the
Indemnifying Equity Holders, and the consummation of the Merger by the
Corporation pursuant to the Agreements do not (i) to the best of our knowl-
edge, violate any (a) federal or California statute, rule or regulation
applicable to the Corporation or (b) judgment, order, writ, stipulation,
<PAGE>
injunction, award or decree of any federal or California court, administra-
tive agency or governmental body to which the Corporation or MUX Sub is
subject, (ii) violate the provisions of the Governing Documents or (iii) to
the best of our knowledge, except for the filing of the Agreement of
Merger, require any consents, approvals, authorizations, registrations,
declarations or filings by the Corporation under any federal or California
statute applicable to the Corporation.
5. The authorized capital stock of the Corporation consists of
25,000,000 shares of common stock (the "Common Stock"), of which 5,503,695
shares are issued and outstanding. All of the shares of issued and
outstanding Common Stock have been duly authorized and validly issued and
are fully paid and non-assessable and free of preemptive rights under
California law and the Governing Documents. To our knowledge based solely
on a review of the minute books of the Corporation, options to purchase
2,442,500 shares of Common Stock were outstanding under the Corporation's
Incentive Stock Option Plans, which options were not granted in violation
of any preemptive rights under California law or the Governing Documents.
The authorized capital stock of MUX Sub consists of 2,500 shares of common
stock ("MUX Sub Common Stock"), of which 2,500 shares are issued and
outstanding and held of record by the Corporation. All of the shares of
issued and outstanding MUX Sub Common Stock have been duly authorized and
validly issued and are fully paid and non-assessable and, free of preemp-
tive rights under California law and the Governing Documents. To our
knowledge, except as set forth on Schedule 5.3 or Schedule 5.5 to the
Acquisition Agreement, there are no options, warrants or commitments of any
character relating to the issued or unissued capital stock of the Corpora-
tion or MUX Sub.
6. Upon the filing of the Agreement of Merger with the California
Secretary of State, together with appropriate officers' certificates and
tax clearance certificates as required by MUX Sub, the Merger shall be
effective in accordance with the CGCL.
OPINION OF ROBERT E. MILLER, INC.
The execution and delivery of the Agreements by the Corporation, the
execution and delivery of the Acquisition Agreement by the Principal
Shareholders, and the execution and delivery of the Acknowledgments by the
Indemnifying Equity Holders, and the consummation of the Merger by the
Corporation pursuant to the Agreements do not result in the breach of or a
default under any of the material agreements set forth in Schedule 5.11(f)
to the Acquisition Agreement.
2
EXHIBIT I
NONCOMPETITION AGREEMENT
THIS NONCOMPETITION AGREEMENT (this "Agreement") is dated as of the __
day of _____, 1995, by and between GLENAYRE TECHNOLOGIES, INC., a Delaware
corporation (the "Corporation"), and ___________________("Equity Holder").
W I T N E S S E T H :
WHEREAS, pursuant to the Acquisition Agreement dated as of January 3,
1995 (the "Acquisition Agreement") by and among the Corporation, MUX
Acquisition Corp., a California corporation that is a wholly-owned subsid-
iary of the Corporation ("Merger Sub"), Western Multiplex Corporation, a
California corporation ("MUX"), and certain equity holders of MUX, Merger
Sub will be merged with and into MUX, which will become a wholly-owned
subsidiary of the Corporation (the "Merger");
WHEREAS, MUX is in the business of design, manufacture and sale of
analog baseband, point-to-point analog microwave radio and point-to-point
digital microwave radio products for the industrial (including without
limitation utility, railroad, petroleum and exploration companies),
communications service providers (including without limitation cellular,
specialized mobile radio and interexchange carriers), government and data
communications markets (the "Business");
WHEREAS, the value to the Corporation of the Merger is dependent in
part upon the Corporation's ability to have MUX continue the Business and
to obtain for its benefit the good will and going concern value associated
therewith; and
WHEREAS, in connection with the Closing under the Acquisition Agree-
ment and as a condition thereof and inducement therefor, and in consider-
ation of the receipt by the Equity Holder of shares of Common Stock of the
Corporation in exchange for his shares of MUX's Common Stock, the Equity
Holder has agreed to enter into certain covenants relating to competition
and confidentiality as set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, receipt of which is hereby acknowledged by the
Equity Holder, the Equity Holder does hereby agree with the Corporation as
follows:
1. Noncompetition, Non-Disclosure and Related Matters.
(a) In addition to other terms defined in this Agreement, the follow-
ing terms when used in this Agreement shall have the following meanings:
<PAGE>
"Cause" means any of the following: (1) any act of dishon-
esty or fraud on the part of the Equity Holder which is intended
to result in his substantial personal enrichment at the expense
of MUX, MUX Sub or Glenayre, (2) a material violation of the
Equity Holder's responsibilities as determined by the Board of
Directors of MUX, which is willful and deliberate or (3) the
conviction of the Equity Holder (after the exhaustion of all
appeals) of a felony involving moral turpitude or the entry of a
plea of nolo contendere for such a felony; provided, however,
that Glenayre shall cause MUX to give prior written notice to the
Equity Holder describing the conduct which constitutes "Cause"
and, in the case of "Cause" under clause (2) above, provide to
the Equity Holder a period of 30 days in which to correct such
conduct.
"Competition" means engagement (1) in the Business or (2) in any
business which is the same as or substantially similar to the Busi-
ness.
"Customer" means any Person to whom any products, processes,
goods or services have heretofore been sold or offered for sale, or
from whom purchases thereof have been solicited, at any time during
the two years preceding the date of this Agreement, by MUX.
"Employee" means any individual employed by the Corporation or
MUX or any of their affiliates at any time during the Restricted
Period.
"Good Reason" means any of the following without the Equity
Holder's express written consent: (1) a significant diminution of, or
the assignment to the Equity Holder of any duties or reporting respon-
sibilities materially inconsistent with, his status, duties or respon-
sibilities as in effect immediately prior to the Merger, except for
those which are contemplated by or consistent with the Acquisition
Agreement (including Article 3), (2) a reduction by MUX of the Equity
Holder's base salary as in effect immediately prior to the Merger or
(3) the relocation of MUX's principal office by more than 30 miles
from the current location of such office.
"Person" means an individual, corporation, partnership, limited
liability company, joint venture, trust or other entity.
"Restricted Period" means the period beginning on the date hereof
and ending on the third anniversary of the date hereof.
"Restricted Territory" means any State of the United States of
America.
(b) The Equity Holder agrees that during the Restricted Period he
will not either directly or indirectly:
(1) engage in any Competition in any Restricted Territory; or
2
<PAGE>
(2) be or become an employee, officer, director, shareholder, part-
ner, agent or consultant of, or acquire or have any proprietary
or other equity interest in, or otherwise participate or assist
in the business of, any Person who engages in any Competition in
any Restricted Territory; provided, that the Equity Holder may
own, directly or indirectly, solely as a passive investment,
securities issued by such Person if such securities are publicly
traded and do not constitute more than 1% in the aggregate of the
outstanding equity securities of such Person.
Provided, however, that the restrictions of this Section 1(b) shall
immediately terminate if the Equity Holder's employment by MUX is terminat-
ed by MUX without Cause or by the Equity Holder's resignation for Good
Reason.
(c) The Equity Holder agrees that during the Restricted Period he
will not, directly or indirectly through or on behalf of any other Person,
solicit or enter into any transaction with any Customer for the purpose of
any sale to such Customer of products, processes, goods or services the
sale of which would constitute Competition.
(d) The Equity Holder agrees that during the Restricted Period he
will not, directly or indirectly through or on behalf of any other Person,
induce or attempt to induce any Employee to leave his or her employment
with the Corporation or MUX or any of their affiliates.
(e) The Equity Holder understands that in his capacity as a former
shareholder and an employee of MUX, he has obtained "Confidential Informa-
tion" relating to the Business. As used herein, the term "Confidential
Information" means any information or compilations of information
(including without limitation trade secrets, know-how, technology, names,
addresses or needs of customers, other customer or supplier lists,
formulae, patterns, devices, plans or processes or any other proprietary
information relating to the Business) of MUX which is private or
confidential in that it is not known or available to the public and gives
MUX an opportunity to obtain an advantage over competitors who do not know
or use it. The Equity Holder shall not, without the prior written consent
of the Corporation, at any time during or after the Restricted Period (1)
use or disclose any such Confidential Information outside the Corporation
(or its affiliated companies, including MUX), (2) aid in the removal from
MUX or delivery to any third party of any such Confidential Information or
(3) sell, exchange or give away or otherwise dispose (or assist therein) of
any such Confidential Information now or hereafter owned by MUX, whether or
not the same shall or may have been originated, discovered or developed by
the Equity Holder. The Equity Holder acknowledges and confirms that he has
or claims no proprietary interest in any such information, or in any
technology, invention, patent, trademark or other intellectual property of,
used or to be acquired by the Corporation, MUX or any of their affiliates
at any time during the Restricted Period.
(f) The Equity Holder acknowledges that, in view of the nature of the
Business and the business objectives of the Corporation in entering into
this Agreement and the Acquisition Agreement, the restrictions contained in
this Section 1 are reasonably necessary to protect the legitimate business
interests of the Corporation, and that any violation of such restrictions
will result in irreparable injury to the Corporation for which damages will
not be an adequate
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remedy. The Equity Holder therefore acknowledges that if he violates any
such restrictions, the Corporation shall be entitled to preliminary and
permanent injunctive relief as well as to an equitable accounting of
earnings, profits and other benefits arising from such violation.
(g) If any of the provisions contained in this Section 1 shall for
any reason be held to be overly broad as to duration, scope, activity or
subject, any such provision shall be construed by limiting and reducing it,
so as to be enforceable to the extent compatible with the applicable law or
the determination by a court of competent jurisdiction.
(h) The rights and remedies of the Corporation hereunder are not
exclusive of or limited by or in limitation of any other rights or remedies
which it may have, whether at law, in equity, by contract or otherwise, all
of which shall be cumulative. Without limiting the generality of the
foregoing, the rights and remedies of the Corporation hereunder, and the
obligations and liabilities of the Equity Holder hereunder, are in addition
to their respective rights, remedies, obligations and liabilities under the
law of unfair competition.
2. Severability. Should any provision of this Agreement or part
thereof be held under any circumstances in any jurisdiction to be invalid
or unenforceable, such invalidity or unenforceability shall not affect the
validity or enforceability of any other provision or other part of such
provision, or of such provision or part thereof under any other circum-
stances or in any other jurisdiction.
3. Governing Law. The construction, validity and enforceability of
this Agreement shall be governed by the laws of the State of North Caroli-
na.
4. No Waiver. No failure or delay of the Corporation in enforcing
any of its rights hereunder at any time shall constitute or evidence any
waiver of such rights.
5. Consent to Jurisdiction. Each of the parties hereby consents and
agrees to the non-exclusive jurisdiction of all courts sitting in the State
of North Carolina in connection with any claim, dispute or controversy
arising under or in connection with this Agreement or any actual or alleged
breach hereof.
6. Miscellaneous. This Agreement and the Acquisition Agreement
constitute the sole and entire agreement and understanding between the
parties hereto as to the subject matter hereof, and supersedes all prior
discussions, agreements and understandings of every kind and nature between
them as to such subject matter. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
personal representatives, successors and assigns. The captions of this
Agreement are for convenience of reference only and shall not affect in any
manner any of the terms, covenants or conditions hereof. Words of the
masculine gender shall mean and include correlative words of the feminine
and neuter genders and words importing the singular number shall mean and
include the plural number and vice versa. This Agreement may be executed
in multiple counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same document.
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IN WITNESS WHEREOF, this Agreement has been duly executed under seal
by the Corporation and the Equity Holder as of the day and year first above
written.
GLENAYRE TECHNOLOGIES, INC.
By:
Name: ___________________________
Title: __________________________
[SEAL]
____________________
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EXHIBIT J
EQUITY HOLDERS' REPRESENTATIVE AGREEMENT
THIS EQUITY HOLDERS' REPRESENTATIVE AGREEMENT (the "Agreement")
is entered into this ____ day of _________, 1995 by and between -
(the "Representative") and the signatories hereto, which signatories
are set forth on the attached Exhibit A, who are recipients of a portion of
the Merger Consideration and/or Forfeitable Options (which are Glenayre
Stock Options received in connection with the Merger in substitution for
MUX Stock Options) ("MUX Recipients") in connection with that certain
Acquisition Agreement by and among Glenayre Technologies, Inc. ("Glen-
ayre"), MUX Acquisition Corp., Western Multiplex Corporation ("MUX") and
certain equity holders of MUX, dated as of January ____, 1995 (the "Acqui-
sition Agreement"). (Unless otherwise defined herein, terms used in this
Agreement shall have the meanings set forth in the Acquisition Agreement.)
RECITALS
a. Pursuant to the Acquisition Agreement, MUX Acquisition Corp.
is to be merged with and into MUX. By the terms of the Acquisition
Agreement, shareholders and optionholders of MUX will receive Glenayre
shares and/or options to purchase Glenayre Common Stock. A portion of such
shares will be held in escrow by NationsBank of North Carolina, N.A. and a
portion of such options will be subject to cancellation (the "Indemnity
Pool"), all as more particularly set forth in the Acquisition Agreement.
b. The Indemnity Pool is intended to provide a reserve for the
satisfaction of claims for indemnification, if any, pursuant to the
indemnification provisions set forth in Article 9 of the Acquisition
Agreement.
c. Pursuant to Article 9 of the Acquisition Agreement,
Frank Hegarty is currently appointed the Representative for the purposes
and with the authority set forth in Article 9.
d. As a condition to accepting the appointment as Representa-
tive under the terms of the Acquisition Agreement, MUX Recipients who have
an interest in the Indemnity Pool (the "Indemnifying Equity Holders") have
agreed to indemnify and share expenses incurred by the Representative (or
any successor representative) in performing the role as Representative
under the Acquisition Agreement.
e. The Indemnifying Equity Holders have agreed to share, in the
manner set forth herein, any unreimbursed liabilities incurred by those
persons who were officers and/or directors of MUX prior to the Merger ("MUX
Officers or Directors") or trustees of the ESOP ("ESOP Trustees") in
connection with their activities as such an officer or director and/or as
such a trustee.
<PAGE>
AGREEMENT
NOW, THEREFORE, the parties agree as follows:
i. The appointment of the Representative pursuant to Article 9
of the Acquisition Agreement is hereby agreed by all parties hereto, and
the provisions of said Article 9 are incorporated herein as though fully
set forth herein. In addition to and without limiting the provisions of
said Article 9, it is hereby agreed that:
(1) The Representative shall be, and hereby is, authorized
to retain counsel, accountants, or other professional advisors to assist in
determining the validity of claims made pursuant to the Acquisition
Agreement or in otherwise acting as the Representative.
(2) The Representative shall not be individually liable for
any expense incurred on behalf of the Indemnifying Equity Holders or any of
them in protesting, analyzing, resisting, arbitrating, litigating, negoti-
ating with respect to, or defending any claim made against the Indemnity
Pool, or for any amounts otherwise expended in acting hereunder.
(3) On demand by the Representative, each Indemnifying
Equity Holder shall contribute a pro rata portion (as determined below) of
the fees and expenses incurred by the Representative on behalf of the
Indemnifying Equity Holders in acting hereunder up to a maximum aggregate
amount of fees and expenses of $50,000. Each signatory hereto shall
contribute a pro rata portion (as determined below) of the fees and
expenses incurred by the Representative on behalf of the Indemnifying
Equity Holders in acting hereunder in excess of $50,000; provided, that the
Representative shall have obtained the prior written consent of Indemnify-
ing Equity Holders holding a majority in interest of the Indemnity Pool
before incurring fees and expenses in excess of $50,000. (There shall be
no separate fee payable hereunder to the Representative, but the Represen-
tative shall be reimbursed for any out of pocket expenses incurred by him
as Representative.) The amount due from each signatory hereto from time to
time shall be computed by taking the total of such fees and expenses times
a fraction (the "Escrow Fraction"), the numerator of which is the Merger
Consideration and Spread paid and payable to such signatory as set forth in
Schedule 4.10 of the Acquisition Agreement, and the denominator of which is
the Merger Consideration and Spread paid and payable to all Indemnifying
Equity Holders, all as more particularly described on Schedule 4.10 of the
Acquisition Agreement. In the event of any default by an Indemnifying
Equity Holder in making a contribution demanded hereunder by the Represen-
tative, the Escrow Fraction of a non-defaulting Indemnifying Equity Holder
shall be increased by subtracting from the denominator the
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Merger Consideration and Spread paid and payable to such
defaulting Indemnifying Equity Holder.
(4) The Representative shall keep the signatories hereto
reasonably informed of actions taken by the Representative in acting
hereunder.
(5) The Representative may resign at any time upon thirty
(30) days written notice to the Indemnifying Equity Holders and to Glen-
ayre; provided, that such resignation shall not become effective until a
successor Representative has been appointed pursuant to paragraph 1(g)
below, except that if the Indemnifying Equity Holders have not made the
appointment of a successor Representative pursuant to paragraph 1(g)(i)
within the required 25-day period for doing so, the resigning Representa-
tive shall be authorized to appoint his successor by written notice to the
Indemnifying Equity Holders and to Glenayre.
(6) Indemnifying Equity Holders holding a majority in
interest of the Indemnity Pool may by written consent remove the Represen-
tative upon written notice to the Representative and Glenayre; provided,
however, that such removal shall not become effective until a successor
Representative has been appointed pursuant to paragraph 1(g) below.
(7) Indemnifying Equity Holders holding a majority in
interest of the Indemnity Pool may by written consent appoint an additional
Representative and/or fill a vacant Representative position caused by the
death, disability, resignation or removal of a Representative. Notwith-
standing the foregoing, (i) the Indemnifying Equity Holders shall appoint
a successor Representative within twenty-five (25) days of the death, dis-
ability or notice of resignation of the sole (or last remaining) Represen-
tative and (ii) if there are an even number of Representatives, the
Indemnifying Equity Holders shall either appoint an additional Representa-
tive or remove a Representative.
(8) In the event there is more than one (1) Representative,
the Representatives shall act upon a majority vote of the Representatives
in office with each Representative being entitled to one (1) vote regard-
less of such Representative's interest in the Indemnity Pool. Notwith-
standing the foregoing, in the event there is an even number of Representa-
tives, the youngest Representative (based on the ages of the Representa-
tives rather than their respective tenures as Representatives) shall not be
entitled to vote.
i. The authorization granted to the Equity Holders'
Representative shall be irrevocable and shall not be terminated by any act
of any of the Indemnifying Equity Holders or by operation of law, whether
by death or incompetency of any Indemnifying Equity Holder or by the
occurrence of any other event
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except the termination of this Agreement as provided in paragraph 9 below. If,
after the execution hereof, any such Indemnifying Equity Holder shall die or
become incompetent, the Equity Holders' Representative is nevertheless
authorized and directed to exercise the authority granted in this Agreement as
if such death or incompetence had not occurred and regardless of notice
thereof.
ii. If any MUX Officer or Director or any ESOP Trustee (an
"Indemnified Agent") incurs a liability or expense arising out of the
Indemnified Agent's activities as a MUX Officer or Director or as an ESOP
Trustee (a "MUX Services Cost") and such MUX Services Cost is not fully
covered by insurance or otherwise, the amount of such MUX Services Cost
which is not covered by insurance or otherwise (the "Uncovered MUX Services
Cost") shall be shared by the Indemnifying Equity Holders as set forth
below. On demand by the Indemnified Agent each Indemnifying Equity Holder
shall pay the Indemnified Agent the Indemnification Amount as defined
below. The "Indemnification Amount" for each Indemnifying Equity Holder
shall equal the Uncovered MUX Services Cost multiplied by such Indemnifying
Equity Holder's Escrow Fraction.
iii. The obligations of the Indemnifying Equity Holders hereto to
reimburse the Representative pursuant to paragraph 1 for expenses and costs
incurred by the Representative, to share the expenses of an Indemnified
Agent pursuant to paragraph 2 and/or to indemnify the Representative
pursuant to paragraph 4 are in addition to and shall not be affected or
diminished by, any limitations on indemnification pursuant to Article 9 of
the Acquisition Agreement, nor shall the Indemnifying Equity Holders'
indemnification obligations under Article 9 of the Acquisition Agreement be
diminished by their reimbursement or expense sharing obligations under this
Agreement. Any Indemnifying Equity Holder who is in default of such
indemnifying Equity Holder's obligations hereunder shall be liable to any
and all Indemnifying Equity Holder's who are damaged by such default
including all costs and expenses of recovering such damages from such
defaulting Indemnifying Equity Holder, and each Indemnifying Equity Holder
specifically agrees that if at the time of the final disposition of the
Indemnity Pool to the Indemnifying Equity Holders, there remain unpaid
costs and expenses of the Representative incurred hereunder, the Represen-
tative shall be authorized to deduct from such final disposition the full
amount of such unpaid costs and expenses before making distribution of the
balance to the Indemnifying Equity Holders. In making such deduction and
final disposition, the Representative shall take into account and adjust
for any Indemnifying Equity Holders who have already paid or contributed
their fractional share of such costs and expenses.
iv. The Representative shall under no circumstances be liable to
the Indemnifying Equity Holders for actions taken by the Representative in
good faith hereunder and shall be indemnified by the Indemnifying Equity
Holders in proportion to their respective
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Escrow Fractions (as determined above) for any loss or damages suffered by the
Representative in the good faith carrying out of the Representative's duties
hereunder except for losses or damages caused by the Representative's gross
neglect, recklessness or willful misconduct.
v. This Agreement shall be binding on and shall inure to the
benefit of the heirs, legatees, personal representatives, successors and
assigns of the respective signatories hereto, including any successor
Representative; provided, however, that such successor in interest or
permitted assigns shall agree to be bound by the provisions of this
Agreement.
vi. This Agreement may be executed in any number of identical
counterparts, each of which shall be deemed to be an original, and all of
which together shall be deemed to be one and the same instrument when each
party has signed one such counterpart.
vii. This Agreement shall be subject in all respects to the
provisions of the Acquisition Agreement contained in Sections 11.2 (Notic-
es); provided, however, that addresses not set forth in the Acquisition
Agreement shall be as set forth in Exhibit A.
8. The validity of this Agreement, the construction of its
terms and the determination of the rights and duties of the parties hereto
shall be governed by and construed in accordance with the laws of the
United States and those of the State of California applicable to contracts
made and to be performed wholly within such state.
9. The provisions of paragraph 1 of this Agreement shall
terminate on the disposition of the entire Indemnity Pool to Glenayre or
the Indemnifying Equity Holders, as the case may be. The provisions of
this Agreement other than as contained in paragraph 1 shall not be affected
by the termination of the provisions of paragraph 1 and shall survive such
termination.
10. This agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall
be an original, but all such counterparts shall together constitute one and
the same instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all of the
parties hereto.
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IN WITNESS WHEREOF, the parties have executed this Equity
Holders' Representative Agreement on the date first above written.
REPRESENTATIVE:
INDEMNIFYING EQUITY HOLDERS:
Graham R. Barnes
John P. Bartelme
Barry Foster
Michael J. Gresham
Frank Hegarty
Elias Mitri
Michael Mulcay
John Woods
Amir Zoufonoun
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EXHIBIT A
NAMES AND ADDRESSES OF SIGNATORIES
Name Address
Graham R. Barnes
John P. Bartelme
Barry Foster
Michael J. Gresham
Frank Hegarty
Elias Mitri
Michael Mulcay
John Woods
Amir Zoufonoun
<PAGE>
Annex II
CHAPTER 13. DISSENTERS' RIGHTS
Section
1300. Reorganization or short-form merger; dissenting shares; corporate
purchase at fair market value; definitions.
1301. Notice to holders of dissenting shares in reorganizations; demand
for purchase; time; contents.
1302. Submission of share certificates for endorsement; uncertificated
securities.
1303. Payment of agreed price with interest; agreement fixing fair
market value; filing; time of payment.
1304. Action to determine whether shares are dissenting shares or fair
market value; limitation; joinder; consolidation; determination
of issues; appointment of appraisers.
1305. Report of appraisers; confirmation; determination by court;
judgment; payment; appeal; costs.
1306. Prevention of immediate payment; status as creditors; interest.
1307. Dividends on dissenting shares.
1308. Rights of dissenting shareholders pending valuation; withdrawal
of demand for payment.
1309. Termination of dissenting share and shareholder status.
1310. Suspension of right to compensation or valuation proceedings;
litigation of shareholders' approval.
1311. Exempt shares.
1312. Right of dissenting shareholder to attack, set aside or rescind
merger or reorganization; restraining order or injunction;
conditions.
(Section Mark) 1300. Reorganization or short-form merger; dissenting shares;
corporate purchase at fair market value; definitions
(a) If the approval of the outstanding shares (Section 152) of a
corporation is required for a reorganization under subdivisions (a)
and (b) or subdivision (e) or (f) of Section 1201, each shareholder of
the corporation entitled to vote on the transaction and each share-
holder of a subsidiary corporation in a short-form merger may, by
complying with this chapter, require the corporation in which the
shareholder holds shares to purchase for cash at their fair market
value the shares owned by the shareholder which are dissenting shares
as defined in subdivision (b). The fair market value shall be deter-
mined as of the day before the first announcement of the terms of the
proposed reorganization or short-form merger, excluding any apprecia-
tion or depreciation in consequence of the proposed action, but
adjusted for any stock split, reverse stock split, or share dividend
which becomes effective thereafter.
(b) As used in this chapter, "dissenting shares" means shares
which come within all of the following descriptions:
(1) Which were not immediately prior to the reorganization or
short-form merger either (A) listed on any national securities ex-
change certified by the Commissioner of Corporations under subdivision
(o) of Section 25100 or (B) listed on the list of OTC margin stocks
issued by the Board of Governors of the Federal Reserve System, and
the notice of meeting of shareholders to act upon the reorganization
summarizes this section and Sections 1301, 1302, 1303 and 1304;
provided, however, that this provision does not apply to any shares
with respect to which there exists any restriction on transfer imposed
by the corporation or by any law or regulation; and provided, further,
that this provision does not apply to any class of shares described in
* * * subparagraph (A) or (B) if demands for payment are filed with
respect to 5 percent or more of the outstanding shares of that class.
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(2) Which were outstanding on the date for the determination of
shareholders entitled to vote on the reorganization and (A) were not
voted in favor of the reorganization or, (B) if described in * * *
subparagraph (A) or (B) of paragraph (1) (without regard to the
provisos in that paragraph), were voted against the reorganization, or
which were held of record on the effective date of a short-form
merger; provided, however, that * * * subparagraph (A) rather than * *
* subparagraph (B) of this paragraph applies in any case where the
approval required by Section 1201 is sought by written consent rather
than at a meeting.
(3) Which the dissenting shareholder has demanded that the
corporation purchase at their fair market value, in accordance with
Section 1301.
(4) Which the dissenting shareholder has submitted for endorse-
ment, in accordance with Section 1302.
(c) As used in this chapter, "dissenting shareholder" means the
recordholder of dissenting shares and includes a transferee of record.
(Section Mark) 1301. Notice to holders of dissenting shares in
reorganizations; demand for purchase; time; contents
(a) If, in the case of a reorganization, any shareholders of a
corporation have a right under Section 1300, subject to compliance
with paragraphs (3) and (4) of subdivision (b) thereof, to require the
corporation to purchase their shares for cash, such corporation shall
mail to each such shareholder a notice of the approval of the reorga-
nization by its outstanding shares (Section 152) within 10 days after
the date of such approval, accompanied by a copy of Sections 1300,
1302, 1303, 1304 and this section, a statement of the price determined
by the corporation to represent the fair market value of the dissent-
ing shares, and a brief description of the procedure to be followed if
the shareholder desires to exercise the shareholder's right under such
sections. The statement of price constitutes an offer by the corpora-
tion to purchase at the price stated any dissenting shares as defined
in subdivision (b) of Section 1300, unless they lose their status as
dissenting shares under Section 1309.
(b) Any shareholder who has a right to require the corporation
to purchase the shareholder's shares for cash under Section 1300,
subject to compliance with paragraphs (3) and (4) of subdivision (b)
thereof, and who desires the corporation to purchase such shares shall
make written demand upon the corporation for the purchase of such
shares and payment to the shareholder in cash of their fair market
value. The demand is not effective for any purpose unless it is
received by the corporation or any transfer agent thereof (1) in the
case of shares described in clause (i) or (ii) or paragraph (1) of
subdivision (b) of Section 1300 (without regard to the provisos in
that paragraph), not later than the date of the shareholders' meeting
to vote upon the reorganization, or (2) in any other case within 30
days after the date on which the notice of the approval by the out-
standing shares pursuant to subdivision (a) or the notice pursuant to
subdivision (i) of Section 1110 was mailed to the shareholder.
(c) The demand shall state the number and class of the shares
held of record by the shareholder which the shareholder demands that
the corporation purchase and shall contain a statement of what such
shareholder claims to be the fair market value of those shares as of
the day before the announcement of the proposed reorganization or
short-form merger. The statement of fair market value constitutes an
offer by the shareholder to sell the shares at such price.
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(Section Mark) 1302. Submission of share certificates for endorsement;
uncertificated securities
Within 30 days after the date on which notice of the approval by
the outstanding shares or the notice pursuant to subdivision (i) of
Section 1110 was mailed to the shareholder, the shareholder shall
submit to the corporation at its principal office or at the office of
any transfer agent thereof, (a) if the shares are certificated securi-
ties, the shareholder's certificates representing any shares which the
shareholder demands that the corporation purchase, to be stamped or
endorsed with a statement that the shares are dissenting shares or to
be exchanged for certificates of appropriate denomination so stamped
or endorsed or (b) if the shares are uncertificated securities,
written notice of the number of shares which the shareholder demands
that the corporation purchase. Upon subsequent transfers of the
dissenting shares on the books of the corporation, the new certifi-
cates, initial transaction statement, and other written statements
issued therefor shall bear a like statement, together with the name of
the original dissenting holder of the shares.
(Section Mark) 1303. Payment of agreed price with interest; agreement fixing
fair market value; filing; time of payment
(a) If the corporation and the shareholder agree that the shares
are dissenting shares and agree upon the price of the shares, the
dissenting shareholder is entitled to the agreed price with interest
thereon at the legal rate on judgments from the date of the agreement.
Any agreements fixing the fair market value of any dissenting shares
as between the corporation and the holders thereof shall be filed with
the secretary of the corporation.
(b) Subject to the provisions of Section 1306, payment of the
fair market value of dissenting shares shall be made within 30 days
after the amount thereof has been agreed or within 30 days after any
statutory or contractual conditions to the reorganization are satis-
fied, whichever is later, and in the case of certificated securities,
subject to surrender of the certificates therefor, unless provided
otherwise by agreement.
(Section Mark) 1304. Action to determine whether shares are dissenting
shares or fair market value; limitation; joinder; consolidation; determination
of issues; appointment of appraisers
(a) If the corporation denies that the shares are dissenting
shares, or the corporation and the shareholder fair to agree upon the
fair market value of the shares, then the shareholder demanding
purchase of such shares as dissenting shares or any interested corpo-
ration, within six months after the date on which notice of the
approval by the outstanding shares (Section 152) or notice pursuant to
subdivision (i) of Section 1110 was mailed to the shareholder, but not
thereafter, may file a complaint in the superior court of the proper
county praying the court to determine whether the shares are dissent-
ing shares or the fair market value of the dissenting shares or both
or may intervene in any action pending on such a complaint.
(b) Two or more dissenting shareholders may join as plaintiffs
or be joined as defendants in any such action and two or more such
actions may be consolidated.
(c) On the trial of the action, the court shall determine the
issues. If the status of the shares as dissenting shares is in issue,
the court shall first determine that issue. If the fair market value
of the dissenting shares is in issue, the court shall determine, or
shall appoint one or more impartial appraisers to determine, the fair
market value of the shares.
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(Section Mark) 1305. Report of appraisers; confirmation; determination by
court; judgment; payment; appeal; costs
(a) If the court appoints an appraiser or appraisers, they shall
proceed forthwith to determine the fair market value per share.
Within the time fixed by the court, the appraisers, or a majority of
them, shall make and file a report in the office of the clerk of the
court. Thereupon, on the motion of any party, the report shall be
submitted to the court and considered on such evidence as the court
considers relevant. If the court finds the report reasonable, the
court may confirm it.
(b) If a majority of the appraisers appointed fail to make and
file a report within 10 days from the date of their appointment or
within such further time as may be allowed by the court or the report
is not confirmed by the court, the court shall determine the fair
market value of the dissenting shares.
(c) Subject to the provisions of Section 1306, judgment shall be
rendered against the corporation for payment of an amount equal to the
fair market value of each dissenting share multiplied by the number of
dissenting shares which any dissenting shareholder who is a party, or
who has intervened, is entitled to require the corporation to pur-
chase, with interest thereon at the legal rate from the date on which
judgment was entered.
(d) Any such judgment shall be payable forthwith with respect to
uncertificated securities and, with respect to certificated securi-
ties, only upon the endorsement and delivery to the corporation of the
certificates for the shares described in the judgment. Any party may
appeal from the judgment.
(e) The costs of the action, including reasonable compensation
to the appraisers to be fixed by the court, shall be assessed or
apportioned as the court considers equitable, but, if the appraisal
exceeds the price offered by the corporation, the corporation shall
pay the costs (including in the discretion of the court attorneys'
fees, fees of expert witnesses and interest at the legal rate on
judgments from the date of compliance with Sections 1300, 1301 and
1302 if the value awarded by the court for the shares is more than 125
percent of the price offered by the corporation under subdivision (a)
of Section 1301).
(Section Mark) 1306. Prevention of immediate payment; status as creditors;
interest
To the extent that the provisions of Chapter 5 prevent the payment to
any holders of dissenting shares of their fair market value, they shall
become creditors of the corporation for the amount thereof together with
interest at the legal rate on judgments until the date of payment, but
subordinate to all other creditors in any liquidation proceeding, such debt
to be payable when permissible under the provisions of Chapter 5.
(Section Mark) 1307. Dividends on dissenting shares
Cash dividends declared and paid by the corporation upon the dissent-
ing shares after the date of approval of the reorganization by the out-
standing shares (Section 152) and prior to payment for the shares by the
corporation shall be credited against the total amount to be paid by the
corporation therefor.
(Section Mark) 1308. Rights of dissenting shareholders pending valuation;
withdrawal of demand for payment
Except as expressly limited in this chapter, holders of dissenting
shares continue to have all the rights and privileges incident to their
shares, until the fair market value of their shares is agreed upon or
determined. A dissenting shareholder may not withdraw a demand for payment
unless the corporation consents thereto.
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(Section Mark) 1309. Termination of dissenting share and shareholder status
Dissenting shares lose their status as dissenting shares and the
holders thereof cease to be dissenting shareholders and cease to be
entitled to require the corporation to purchase their shares upon the
happening of any of the following:
(a) The corporation abandons the reorganization. Upon abandon-
ment of the reorganization, the corporation shall pay on demand to any
dissenting shareholder who has initiated proceedings in good faith
under this chapter all necessary expenses incurred in such proceedings
and reasonable attorneys' fees.
(b) The shares are transferred prior to their submission for
endorsement in accordance with Section 1302 or are surrendered for
conversion into shares of another class in accordance with the arti-
cles.
(c) The dissenting shareholder and the corporation do not agree
upon the status of the shares as dissenting shares or upon the pur-
chase price of the shares, and neither files a complaint or intervenes
in a pending action as provided in Section 1304, within six months
after the date on which notice of the approval by the outstanding
shares or notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder.
(d) The dissenting shareholder, with the consent of the corpora-
tion, withdraws the shareholder's demand for purchase of the dissent-
ing shares.
(Section Mark) 1310. Suspension of right to compensation or valuation
proceedings; litigation of shareholders' approval
If litigation is instituted to test the sufficiency or regularity of
the votes of the shareholders in authorizing a reorganization, any proceed-
ings under Sections 1304 and 1305 shall be suspended until final determina-
tion of such litigation.
(Section Mark) 1311. Exempt shares
This chapter, except Section 1312, does not apply to classes of shares
whose terms and provisions specifically set forth the amount to be paid in
respect to such shares in the event of a reorganization or merger.
(Section Mark) 1312. Right of dissenting shareholder to attack, set aside or
rescind merger or reorganization; restraining order or injunction; conditions
(a) No shareholder of a corporation who has a right under this
chapter to demand payment of cash for the shares held by the share-
holder shall have any right at law or in equity to attack the validity
of the reorganization or short-form merger, or to have the reorganiza-
tion or short-form merger set aside or rescinded, except in an action
to test whether the number of shares required to authorize or approve
the reorganization have been legally voted in favor thereof; but any
holder of shares of a class whose terms and provisions specifically
set forth the amount to be paid in respect to them in the event of a
reorganization or short-form merger is entitled to payment in accor-
dance with those terms and provisions or, if the principal terms of
the reorganization are approved pursuant to
Aa-5
<PAGE>
subdivision (b) of Section 1202, is entitled to payment in accordance
with the terms and provisions of the approved reorganization.
(b) If one of the parties to a reorganization or short-form
merger is directly or indirectly controlled by, or under common
control with, another party to the reorganization or short-form
merger, subdivision (a) shall not apply to any shareholder of such
party who has not demanded payment of cash for such shareholder's
shares pursuant to this chapter; but if the shareholder institutes any
action to attack the validity of the reorganization or short-form
merger or to have the reorganization or short-form merger set aside or
rescinded, the shareholder shall not thereafter have any right to
demand payment of cash for the shareholder's shares pursuant to this
chapter. The court in any action attacking the validity of the
reorganization or short-form merger or to have the reorganization or
short-form merger set aside or rescinded shall not restrain or enjoin
the consummation of the transaction except upon 10 days' prior notice
to the corporation and upon a determination by the court that clearly
no other remedy will adequately protect the complaining shareholder or
the class of shareholders of which such shareholder is a member.
(c) If one of the parties to a reorganization or short-form
merger is directly or indirectly controlled by, or under common
control with, another party to the reorganization or short-form
merger, in any action to attack the validity of the reorganization or
short-form merger or to have the reorganization or short-form merger
set aside or rescinded, (1) a party to a reorganization or short-form
merger which controls another party to the reorganization or short-
form merger shall have the burden of proving that the transaction is
just and reasonable as to the shareholders of the controlled party,
and (2) a person who controls two or more parties to a reorganization
shall have the burden of proving that the transaction is just and
reasonable as to the shareholders of any party so controlled.
Aa-6
<PAGE>
EXHIBIT 99.1
WESTERN MULTIPLEX CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR SPECIAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 25, 1995
The undersigned hereby appoints John Woods and Frank
Hegarty, and each or either of them proxies, with full power of
substitution, with the powers the undersigned would possess if
personally present, to vote, as designated below, all shares of
the Common Stock of the undersigned in Western Multiplex
Corporation ("MUX") at the Special Meeting of Shareholders to be
held on April 25, 1995, commencing at 2:30 p.m., local time, at
300 Harbor Boulevard, Belmont, California or at any adjournments
or postponements thereof.
This proxy will be voted FOR item 1 unless otherwise speci-
fied. The Board of Directors recommends voting for item 1.
1. A proposal to approve and adopt an Acquisition Agreement
dated as of January 3, 1995 (the "Acquisition Agreement")
among Glenayre Technologies, Inc., a Delaware corporation
("Glenayre"), MUX Acquisition Corp., a California corpora-
tion and wholly-owned subsidiary of Glenayre ("Glenayre
Sub"), MUX, John Woods and Frank Hegarty and certain other
shareholders of MUX who will receive shares of the Common
Stock of Glenayre, $.02 par value, pursuant to the Acquisi-
tion Agreement, and certain holders of options to purchase
MUX Common Stock, and the Agreement of Merger attached to
the Acquisition Agreement as Exhibit C, providing for the
merger of Glenayre Sub with and into MUX, with MUX as the
surviving corporation and continuing as a wholly-owned
subsidiary of Glenayre (the "Merger"). Under the Acquisi-
tion Agreement, each share of MUX Common Stock (other than
shares, if any, held by shareholders who perfect their
rights to dissent under the California General Corporation
Law (the "CGCL")) will be converted into the right to re-
ceive .0943848 of one share of Glenayre Common Stock and
each stock option right to purchase one share of MUX Common
Stock will be converted into the right to purchase .0943848
of one share of Glenayre Common Stock and the option exer-
cise price will be adjusted by dividing the current option
exercise price by .0943848.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued and to be signed on the reverse)
<PAGE>
(Continued from other side)
In their discretion, the proxies are authorized to vote
upon such other matters incidental to the Special Meeting.
Receipt of the Notice of Special Meeting and accompanying
Proxy Statement/Prospectus is hereby acknowledged. This proxy
will be voted as specified herein, and, unless otherwise direct-
ed, will be voted FOR item 1.
Please date, sign exactly as printed below and return
promptly in the enclosed postage-paid envelope.
Dated: ________________________, 1995.
________________________________________
________________________________________
(When signing as attorney, executor,
administrator, trustee, guardian, etc.,
give title as such. If a joint
account, each joint owner should sign
personally.)
<PAGE>
EXHIBIT 99.6
ASSESSMENT OF WESTERN MULTIPLEX CORPORATION
FOR
GLENAYRE CORPORATE HEADQUARTERS
BY
TROTT COMMUNICATIONS GROUP, INC.
dated
DECEMBER 11, 1994
George W. Weimer, P.E.
<PAGE>
ASSESSMENT OF WESTERN MULTIPLEXFOR GLENAYRE
(Bullet) Technology
Our review of the Western Multiplex products indicated State-of-the-Art
technology utilizing the latest construction practices and components.
The simplicity of the designs appears to be the most advantageous
aspect. This minimizes the difference between products and differences
in construction and testing, making the overall product lines more
efficient and less costly.
(Bullet) Personnel
Our review of the Western Multiplex personnel indicated a high-
technology design and test team utilizing advanced design techniques in
combination with a simplistic design philosophy. However, there is a
heavy dependence upon one person to lead the team and promote the
overall company design process and philosophy. This does not mean that
others within the company could not or would not promote the same
design concepts. The production, assembly and test personnel appear to
be adequate for the current volume of business, but if a large increase
in volume occurs, it is doubtful if the existing staff could support a
substantial increase. This potential problem is somewhat minimized by
the fact that a high percentage of the production work is out-sourced;
however, this may be a mixed blessing if a substantial increase in
volume occurs. The lack of system design, assembly and test personnel,
including facilities, was evident and may become a factor in acquiring
system-level projects, such as system replacement as a result of PCS
displacement.
(Bullet) Products
Our review of the Western Multiplex products indicate that they are
comparable in functionality, features and specifications to that of
their competition. In contrast, they generally appear to be less
costly than the competition. This is most likely due to simplicity of
design and the lower volume production. Also, the limited type and
quantity of other services offered can lower the overall cost of doing
business; however, it can also limit the potential business
opportunities.
Future plans for the Western Multiplex product lines are natural
technical extensions of existing products and product lines; however,
competitors are
<PAGE>
extending their products into other areas different from Western
Multiplex. For example, SpreadNet and others (competitors for the
Lynx products) are currently offering products in the 902MHz and
2.4GHz unlicensed spread spectrum band, and MDS is producing
digital radios in the 928-953MHz band with data rates up to 384kbps.
Western Multiplex's competitor radio is not scheduled until 1997.
Although MDS produces a competitor to the Western Multiplex ONE-960
analog 960MHz radio, they have recently introduced a digital version
capable of fractional T1 transmission.
The only questionable product extension is Western Multiplex's
expansion into the 928-952MHz point-to-multipoint business. This band
is fiercely competitive with Motorola, MDS, Alligator, and a few other
minor players. In addition to the strong competition, companies in
these services are expected by the buyers to provide other services
which may not be consistent with the Western Multiplex or Glenayre
business plan. There is no doubt that Western Multiplex equipment will
be a strong technical competitor, but in order to be successful, more
than technical competence is required. Alliances with "system houses"
or "turnkey system suppliers" may be required in order to enter the MAS
marketplace. This equipment may also be viewed as an adjunct to or in
competition with Glenayre's 900MHz link transmitters and receivers
utilized in the Paging industry.
(Bullet) Production
All circuit board production and enclosure metal work is accomplished
through outside contracts. Final assembly and test is accomplished
internally. The internal capabilities are not suitable for high-volume
production. This appears to be by design due to historically low
volume requirements. Should a substantial increase in volume occur,
the procedures and facilities in place appear to be inadequate.
Minimal quality control of incoming components and assembled boards
exists. Problems are addressed as they are observed through final
assembly and test.
(Bullet) Sales/Marketing
<PAGE>
Our review could not find any purposeful market research. The products
and product lines appear to have been developed through evolution and
the future development plans appear to be natural technical extensions
of existing product and product lines. Marketing appears to be
targeted to selected markets and/or customers rather than widespread
throughout the telecommunications industry. Although Western Multiplex
is expecting a surge in sales due to the PCS displacement, there does
not appear to be a concerted effort to do extensive marketing in that
area.
(Bullet) Selective Users/Markets
(Bullet) PCS Potential
Analog products appear to be well positioned for the PCS displacement;
however, the digital products are scheduled to be available after mid-
1995. An extensive marketing effort should already be underway to
existing licensees, potential PCS service providers and relocation s
specialists.
(Bullet) Competition
Western Multiplex appears to be placing an extreme emphasis on the Lynx
product line and is unaware of the competition. The impediments to new
entries into this marketplace are slowly being minimized since many
component manufacturers are regularly introducing components to provide
spread spectrum signal generation and detection. Any company wishing
to develop competitive products can buy the pre-assembled circuit
boards, design the ancillary circuits and packaging, and introduce a
new product in a very short period of time with minimal development
time and cost to recover.
The main competition for the licensed products at 2 and 6GHz are well
established, full service companies, such as Harris (Farinon),
TeleSciences (Motorola), Microwave Networks, and Digital Microwave.
The majority of the new products are digital rather than analog. Since
Western Multiplex does not have its digital 6GHz radio in production
and does not have plans for a digital 2GHz radio, it may not be able to
expand its market share due to its limited product line compared to
other competitors;
<PAGE>
however, some of the competitors listed above do not have or plan to
have analog radios in their product lines while others offer both
analog and digital products.
The only digital product currently offered by Western Multiplex is the
Lynx product line, which utilizes the unlicensed FCC Part 15
frequencies. We recognize that the Lynx Product operating at 2.4GHz or
5.7GHz is significantly different from other products operating in the
902-928MHz unlicensed band; however, this difference may not be
significant to the buying customer. Clever salesmen can minimize that
difference to the point where it is insignificant. Since many
companies are currently offering and developing a variety of products,
not necessarily point-to-point radio, utilizing these unlicensed bands,
we are noticing a severe increase in the noise level in these bands in
several major cities. As a result of this fact and the fact that these
unlicensed operations are not afforded any interference protection
from each other or other higher-priority services, it is doubtful if
this type of service and equipment will survive much longer.
<PAGE>
MARKET RESEARCH STUDY
BY JIM STEWART, PH.D.
<PAGE>
OBJECTIVE
The purpose of this study is to obtain current customer inputs
and perceptions of Western Multiplex's (and competitors') analog
and digital products, and support services. Additionally, trends
were evaluated regarding moving to fiber optic cable, upgrading
from analog to digital microwave systems, current and projected
frequency operations, expansion plans, and specific brands of
digital equipment installed.
The data was obtained by attempting to contact by telephone all
61 individuals identified on three different customer lists
provided by Glenayre. A total of only 7 of the 61 completed the
survey (12%) primarily because several on the list had retired,
quit their positions, etc. In addition, we attempted to contact
other Western Multiplex customers that were provided on a
separate list that only provided company names - no phone numbers
or persons to contact were included. Therefore, we had to look
up their phone numbers. Of those on the list that were not
redundant with one of the other lists, there were approximately
80 numbers. Given the short time frame, we were able to look up
only 43 company phone numbers. These companies were then
contacted and attempts were made to find those who were in charge
of microwave engineering or other likely departments. A total of
13 responded to this list (30% response rate).
To increase the response rate, participants were offered a $20.00
participation gratuity that they could receive or a like amount
would be donated to their favorite charity in their name (because
some are not allowed to accept gifts).
We were able to obtain 20 completed interviews. Therefore,
although the study was quantitative in nature, the results should
be interpreted qualitatively in the sense that it may not be
appropriate to project the respondents' answers to the rest of
the population of actual and potential customers.
<PAGE>
SUMMARY OF FINDINGS
Overall, Western Multiplex fared well. Seventy-five percent of the
respondents identified Western Multiplex as a manufacturer of
analog or digital microwave equipment (unaided). Sixty-five Percent
of respondents mentioned Harris-Farinon (unaided). Alcatel came in
third with 35% of respondents mentioning them.
When asked to rate Western Multiplex on several characteristics
(Customer Service, Product Quality, Product Support, Product
Reliability, Salesforce, Product Delivery, Product Selection, and
Overall Rating), respondents were pleased with everything with
the exception of Product Line Selection. Compared to ratings
given to competitors, Western Multiplex was rated the same on all
characteristics with the exception of Product Selection
(statistically significantly lower rating) and Customer Service
(statistically significantly higher rating). Also, when asked
whether Western Multiplex met their needs in terms of developing
new products or enhancements, respondents rated them the same as
competitors.
One finding of note is that concerning pricing. Western
Multiplex's products were considered to be better (statistically
significantly better rated) values from a pricing standpoint than
the competition (primarily Harris-Farinon). This suggests that
pricing could be increased slightly and it not negatively affect
customer's perceptions about product value.
While few negative comments were provided about Western
Multiplex, dislikes appear to be their limited product selection
and delivery times; whereas, negative comments about the
competition were more numerous -- primarily concerning high
pricing, poor customer service, and delivery times.
In terms of trends, it appears that many (70%) feel they
Definitely Will or Probably Will move to fiber optic cable in the
next three years. However, most stated that less than one-fourth
of their system would be moved to fiber optic.
Regarding upgrading of equipment from analog to digital, 75%
stated they Definitely Will, Probably Will Upgrade in the next
three years, or Have Already Begun or Completed such an Upgrade.
Most of the respondents operate at 6 gigahertz or less. Some
(40%) plan to upgrade as a result of the 2 gigahertz PCS
frequency reallocation.
<PAGE>
Only 40% felt that there are competing technologies that would impact
their equipment buying decisions in the near future -- primarily fiber
optics, T1 service, and satellites.
Only 30% plan expansions for their analog equipment.
