UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-17966
MICRONETICS WIRELESS, INC.
(Name of small business issuer in its charter)
Delaware 22-2063614
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
26 Hampshire Drive, Hudson, New Hampshire 03051
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (603) 883-2900
Securities registered under Section 12(b) of the Exchange Act:
None.
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $.01 per share
(Title of Class)
Check whether the issuer (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the past 12
months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes [X] No [ ].
Check if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B contained in this form, and no
disclosure will be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-KSB or any amendment to this Form 10-KSB. [X]
Issuer's revenues for its most recent fiscal year were $4,547,087.
The aggregate market value of the shares of Common Stock
held by non-affiliates of the issuer was approximately $4,179,519 based
on the closing price of the issuer's Common Stock, par value $.01 share,
as reported by NASDAQ on June 11, 1999.
On June 11, 1999, there were 3,767,914 shares of the
issuer's Common Stock outstanding.
The Proxy Statement of the registrant to be filed on or
before July 29, 1999 is incorporated by reference to Part III herein.
Transitional Small Business Issuer Disclosure Format Yes[] No[X]
Page 1 of 49
Part I
ITEM 1. Description of Business.
Business Development
The Company was incorporated under the laws of the State of
New Jersey in 1975 and reincorporated in Delaware in 1987. In
January 1999, the Company acquired all of the outstanding capital
stock of Microwave & Video Systems, Inc. ("MVS") and in February
1999, the Company acquired the business assets of Vectronics
Microwave Corporation. Micronetics and its wholly-owned
subsidiaries, MVS and Vectronics Microwave Corp. ("Vectronics")
are collectively referred to herein as the "Company".
Business of Issuer
The Company is a manufacturer of specialized radio frequency
(RF) components and test equipment which are designed to provide
solutions for its customers, original equipment manufacturers
(OEMs) of wireless communication systems and communication
service providers, to enable them to deliver high quality communication
systems or offer high quality communication services. The
Company's products are used in cellular, microwave, satellite,
radar and communications systems around the world. The Company
also manufactures a wide variety of subassemblies and components
primarily used in electronic warfare, counter-intelligence and
radar simulation applications.
Industry Overview. Wireless service providers compete in
dynamic markets characterized by evolving industry standards,
technologies and applications. In recent years, there has been a
significant increase in the demand for wireless telecommunications
services from business and consumer users worldwide. This trend
has been driven by lower overall subscriber costs made possible
by changes in the regulatory environment that encourage competition
and the emergence of new enabling technologies. Wireless service
providers are seeking to increase system capacity in order to
accommodate the growing number of subscribers. To increase
capacity, these service providers are investing in infrastructure
equipment that provides greater efficiency in the management of
the limited spectrum licensed to them.
The growth of wireless telecommunications services and
equipment sales are creating new market dynamics for industry
participants. Competition among service providers forsubscribers
has intensified and future market growth is being realized
primarily through the penetration of the consumer market. The
shift of the customer base from relatively high-usage price-
insensitive business subscribers to price-sensitive consumer
subscribers is leading to reduced revenue per subscriber. The
Company also expects that increasing competition for subscribers
and decreasing revenue per subscriber will cause wireless service
providers to seek the most cost-effective infrastructure available
without sacrificing quality. These changing market conditions,
the emergence of open hardware standards and protocols and new market
entrants in the form of PCS and wireless local loop providers
create a significant opportunity for the Company.
Technical Overview. Wireless communication is the
transmission of voice and data signals through the air, without a
physical connection, such as metal wire or fiberoptic cable.
Information transmitted through wireless communications equipment
is transmitted by electromagnetic waves, also known as signals.
Electromagnetic waves vary in length, or frequency, and intensity.
The range of electromagnetic waves is called the spectrum, which
encompasses sound near the low end and light toward the higher end.
In between is the radio spectrum which is used in all wireless
communications. Radio Frequency ("RF") indicates lower
frequencies, while "microwave" refers to relatively higher
frequencies in the spectrum.
Different types of wireless communications systems utilize
different frequencies in the spectrum. Frequency is measured in
cycles per second, or Hertz. The spectrum currently in use by all
types of wireless communications equipment ranges from 1 kilohertz
(1 thousand cycles per second) to 20 gigahertz (20 billion cycles
per second). The Federal Communications Commission ("FCC")
allocates portions of the spectrum for the various types of
wireless communication systems. Wireless communications systems
currently in use include cellular and PCS telephones and base
stations, wireless cable, satellite communications, global
positioning systems, direct broadcast satellites, local area
networks, as well as radar systems. The Company's products are
designed for use in these applications.
Higher demand for wireless communication is requiring higher
system capacity. Multiple access techniques are the key methods
for increasing such capacity. Multiple access refers to the
simultaneous transmission by numerous users to or through a common
receiving port. There are four domains in which such simultaneous
transmission or sharing can take place: (i) bandwidth; (ii) time;
(iii) code; or (iv) space. Frequency Division Multiple Access
(FDMA) divides the frequency bandwidth among different users. Time
Division Multiple Access (TDMA) enables each user to use the entire
frequency for a brief period of time. Code Division Multiple
Access (CDMA) utilizes spread spectrum modulation to allow multiple
users to share the frequency bandwidth; and Space Division Multiple
Access (SDMA) enables the same frequency to be used simultaneously,
but in a different geographic area. Initially this was done by
the use of cells; improved digital signal processing technology is
now able to utilize SDMA techniques within individual cells. The
Company's smart antenna test equipment currently under development
is being designed to address the SDMA market for simultaneous
transmission.
Products Micronetics's products may be classified into three
product groups: (1) Control Components and Subassemblies; (2)Noise
Components and (3) Wireless Test Equipment:
(1) Components and Subassemblies
(a) Control Components and Subassemblies. Micronetics
designs solid-state control components for the control of RF
signals in level, direction or phase shift in frequencies up to
26.5 GHz. The products consist of switches, attenuators, and phase
shifters and subassemblies including combinations of these items,
including switch filter assemblies. These products incorporate
either silicon PIN diodes, or GaAs MESFETs packaged in chip and
wire assemblies. Micronetics' PIN designs cover the frequency
range of 10MHz to 26.5GHz, with strong expertise in controlling
switching transients in 50 to 200MHz bandwidths; reducing inter-
modulation distortion by a factor of 100 over conventional PIN
switching designs; and linear switching capability with RF power
levels up to 25 watts. With GaAs MESFET designs, the product
capability extends from DC to 18GHz, with expertise in controlling
rise/fall times and high isolation characteristics.
(b) Frequency Generation Products - Voltage Controlled
Oscillators. Micronetics designs, manufactures and markets a
series of voltage controlled oscillators ("VCOs") which provide a
precise signal source within a given frequency range. The output
frequency of the oscillator is determined by a direct current
("DC") control voltage. This applied voltage tunes the oscillator
over a specified range. The Company's products generate sinusoidal
signals in frequency ranges from 100MHz to over 5GHz, utilizing
packaged silicon bipolar transistors which are controlled by an
input voltage signal. Most of the uses of those frequency ranges
are identified with wireless applications including some military
(MIL) communications and satellite voice/messaging. Products are
offered in a series of narrow-band, wide-band and selective octave
tuning bandwidths. Depending on the series, packaging configurations
for MIL and commercial applications include PIN types, SMT, hermetic
and miniature packages.
The Company's solid-state control components and subassemblies
are used widely in MIL ground-based, shipboard and airborne radar
for tracking and simulation, phased array radar, electronic warfare
systems, ELINT and tactical/satellite communications systems. To
a lesser extent, Micronetics' solid-state control components have
commercial applications such as wireless communications, radar
surveillance and test equipment support systems. Typical functions
include pulse shaping, attenuating, automatic gain control,
duplexing and receiver protection. Much of Micronetics' product
success has been identified with the high end radar simulation and
electronic intelligence (ELINT) markets. The Company's products
are typically designed to handle 100 watts average power, with peak
power levels to 1KW. Micronetics offers a range of package styles,
in both connectorless and connectorized types, including surface
mount, drop-in and microstrip. It also manufactures subassemblies
encompassing products in each of these categories.
Micronetics diode phase shifters offer several advantages over
the more conventional electro-mechanical or ferrite phase shifters;
namely, low drive requirements, fast switching speed, low
intermodulation distortion, low temperature sensitivity, high
reliability and repeatability. 2 and 6-Bits designs are available
for the cellular and PCN/PCS commercial bands. 5-Bit versions are
offered in the 6 to 18GHz bands and 6-Bits in the 1.2 to 1.5GHz and
9 to 1GHz frequency bands. Variable types are offered in octave
bandwidths from 2GHz to 18GHz.
(2) Noise Source Components
Noise sources are employed as a method of testing and
measuring sophisticated radar and communications systems to
determine the quality of the reception and transmission of
information being transmitted. Micronetics offers noise chips and
diodes, noise modules, and calibrated noise standards. The widest
application for the Company's noise source components are reference
standards in test instruments which measure unwanted noise in
devices and components in radar and communications equipment. This
is accomplished by comparing a noise source with known
characteristics to the unwanted noise found in the radar or
communication system being tested. By generating a random noise
signal, in combination with a live transmission signal, a noise
generator simulates signals the receiver will encounter in the
real world and allows a manufacturer to determine if its product is
performing to specifications. Noise source testing is often more
cost-efficient, faster and more accurate than alternative methods
using discrete signal generators.
The products can be incorporated into electronic equipment or
may serve as stand-alone components or devices that are connected
to, or used in conjunction with, operating equipment. Complex
measurements may be taken at increasing speeds to enhance
productivity, offer improved accuracy, provide wider performance
ranges, and present repeatable uniformity in results.
The Company's noise source components are widely used in
wireless communication systems as part of built-in test equipment
to continuously monitor the receiver. The major application of the
noise source products involves some function of detection,
calibration, simulation, security and statistical analysis.
Impulses of noise are applied to the receiver to measure the radar
sensitivity, signal gain, and frequency bandwidth. The products
used in conjunction with other electronic components are an
effective means of jamming, blocking and disturbing hostile radar
and other communications, as well as insulating and protecting
friendly communications. The Company's noise source components are
also used to test satellite communications receivers for video,
telephony and datacom.
The Company is capable of calibrating White Gaussian Noise
(AWGN) up to 3 Watts peak over frequency ranges which extend from
10Hz to 99GHz utilizing PIN and Schottky-Barrier diodes packaged in
chip and wire assemblies or packaged parts mounted on soft/hard
substrates.
(3) Wireless Test Instruments
Micronetics offers a line of test instruments specifically
designed to serve the wireless telecommunication markets employing
such application standards as TDMA, CDMA, GSM, PCS and others.
These products perform a variety of tests which are required for
performance verification and the emulation of impairments in
cellular/PCN/PCS and satellite communication systems. Products
include (1) Carrier-to-Noise ("CNG") Instruments; (2) Integrated
multipath fading emulator-CNG; and (3) Noise Generators.
A. Carrier to Noise Instrument CNG-100 Series. Fully
automated series of test equipment used to set accurate carrier to
noise (C/N) ratios over a wide range of signal power and frequency
ranges. The CNG-100 automatically accepts the C/N ratio to provide
precision bit-error-rate and sensitivity testing. The Series
features 12 models which address a multitude of frequency bands
which cover cellular, PCN/PCS, GSM, wireless local loop, CATV and
ISM. Product advantages include accuracy, self-test power meter
calibration, long-term accuracy and an active matrix color
display.
B. Multipath Fading Emulators/ Carrier to Noise
Instrument. These instruments include a CNG-100 instrument and
are able to emulate a wireless communications channel with a
multitude of different reflected RF signal paths and perform many
different testing functions including path fading, delay spread,
path loss and more. This is the Company's newest product and is
directed toward developing wireless communication standards. The
Company believes this will be the first instrument to include in
one instrument equipment capable of performing these two functions.
It was first announced at the CDMA Development Conference in
November 1998, and is expected to be commercially available during
the Company's fiscal year ending March 31, 2000 ("Fiscal 2000").
C. Noise Generators.
1) NOD 5000 Series. Portable instrument line which
consists of 15 models that selectively address frequency bands from
10Hz to 18GHz. The Series is designed to provide low cost accurate
carrier to noise measurements with spectrum analyzers. The
equipment has been approved for standard testing on certain
commercial wireless network platforms.
2) MX-5000 Series. Programmable multi-purpose
micro-processor noise generator that is designed for bench-top and
automatic testing equipment applications.
3) Multi-Channel Noise Generators. New digital beam-
forming product for use in global satellite, cellular and data
communications test platforms which allows several weak signals
from surface base mobile units to be combined for stronger
transmissions. The multi-channel noise generator stimulates the
beam-former to test for specified levels of noise reduction,
interference nulling and signal enhancement.
Manufacturing
The Company's components that require automated assembly
equipment are generally manufactured by third parties and tested by
the Company for quality assurance. The length of the production
process for these products is usually completed within two to three
weeks. Manufacturing of the Company's other products, which
involve less automated assembly equipment, takes place at its New
Hampshire or Danbury facilities. The length of the production
process for these products ranges from one to twenty-four weeks.
The Company generally maintains inventory of the raw materials
required for production of its products for a period of up to one
year or more.
Suppliers
The Company has approximately 300 suppliers, a few of which
are a sole source for some raw materials. Over the past ten years,
the Company has not experienced any unusual supply problems and
does not anticipate any in the foreseeable future. The Company
does not believe there would be any significant business disruption
if it were to lose one of its sole suppliers because it has
sufficient inventory to give it time to develop an alternative.
Sales and Marketing
In the past, the Company's primary business was to engineer,
manufacture and market high performance, high reliability microwave
signal processing components used in military applications like
advanced radar systems. Over the last few years the Company has
shifted its focus to the increased opportunities available in the
commercial marketplace. As a result of this shift, the Company
believes that variances in its business will now be more dependent
on general business cycles, changes in market demand for the
commercial products built with the Company's components, and on
technological innovations. In Fiscal 1998 and Fiscal 1999 the
approximate mix of customer orders was 50% for commercial
applications and 50% for military applications, of which 10% is
directly to the military.
The Company's sales are made primarily through six direct
sales personnel or through independent sales representatives who
promote and solicit orders for the Company's products on a
commission basis in exclusive marketing territories. The Company
selects its sales representatives on the basis of technical and
marketing expertise, reputation within the industry and financial
stability. These sales representatives represent other
manufacturers with products complementary to, rather than
competitive with, the Company's products.
The Company also uses various methods to promote its products
including field visits to customers, telephone solicitation, direct
mailing campaigns, advertising in trade journals, participation in
trade shows and maintenance of a website. The Company increased
its advertising expenditures during Fiscal 1999 and intends to
further expand these activities in its current fiscal year.
The Company has recently engaged several distributors for its
M3500 line of VCOs. These distributors maintain inventories of the
Company's products for resale to their customers. The Company
recognizes revenues from sales to distributors at the time of
shipment to the distributor. As is common in the industry, the
Company may grant price protection to distributors. Under this
policy, distributors will be granted credits for the difference
between the price they were originally charged for products in
inventory at the time of a price reduction and the reduced price
which the Company subsequently charges distributors. From time to
time, distributors may also be granted credits on an individual
basis for Company-approved price reductions to specific customers
made to meet competition.
Customers
The Company sells primarily to original equipment
manufacturers of communications equipment in either the commercial
or military marketplace. Many of those customers are prime
contractors for military work or larger Fortune 500 companies with
world-wide operations. Management believes it has a strong
reputation for high performance products.
Key customers of the Company include NEC, L3 Communications,
Lucent, EF Data, Dacom, Hughes, Loral, and Stanford Telecom in the
commercial market, and DASA, GEC-Marconi, Litton Industries, Texas
Instruments, General Dynamics and Lockheed Martin in the military
market. The Company's customers buy products from the Company on
the basis of purchase orders, rather than long-term supply
contracts.
Competition
The Company is subject to active competition in the sale of
virtually all of its products. Its competitors, including
divisions of major corporations, have significantly greater
resources than those currently available to the Company.
Additionally, some of the Company's customers compete directly by
manufacturing certain components themselves, rather than purchasing
them from the Company.
In the commercial VCO area, large foreign firms, principally
Japanese, manufacture competitive products in larger production
runs than those of the Company. The Company believes that its VCOs
produced for use in commercial applications compete with other
manufacturers' primarily on the basis of price and quality. Its
VCOs produced for use in military applications compete, primarily
on the basis of quality. These products are typically high
performance, high reliability components which are required to meet
high quality standards. The Company considers Mini-Circuits
Laboratory, Var-L Company, Inc., Z-Com, Inc., Synergy Microwave and
Modco, Inc. as competitors in the VCO market.
Its primary competitor in the noise component market is
Wireless Telecom Group, Inc. In the test instruments market, the
Company's primary competitor is Telecom Analysis Systems, Inc.
(especially after its acquisition in March 1999 of Wireless Telecom
Group, Inc.'s test equipment product line) and Hewlett Packard.
Research and Development
The Company maintains an engineering staff of six individuals
as of April 30, 1999, whose duties include the improvement of
existing products, modification of products to meet customer needs
and the engineering, research and development of new products and
applications. The Company also has engaged two independent
consultants, including John Vogler, formerly President and owner of
Vectronics Microwave Corporation, to assist in its research and
development activities. Expenses for research and development
predominantly involve engineering for improvements and development
of new products for commercial markets. Such expenditures include
the cost of engineering services, engineering-support personnel and
overhead allocation and were approximately $222,813 and $239,860
for the years ended March 31, 1999 and 1998, respectively.
The Company intends to expand its research and development
activities and considers these efforts to be vital to its future
business expansion and success.
Government Regulation
In many instances, the Company has been required to obtain
export licenses before filling foreign orders. United States
Export Administration regulations control high tech exports like
the Company's products for reasons of national security and
compliance with foreign policy, to guarantee domestic reserves of
products in short supply and, under certain circumstances, for the
security of a destination country. Thus, any foreign sales of the
Company's products requiring export licenses must comply with these
general policies. Although the Company has not experienced any
significant export licensing problems to date, such problems may
arise in the future, since many of the Company's products have
military and other governmental applications.
Employees
As of May 31, 1999, the Company had 56 full-time employees
including 12 engaged in management and administration, 8 in
engineering, 31 in production and testing, and 7 in sales. It also
periodically engages consultants to assist it in various
engineering related activities. The Company believes that its
employee relations are good.
Patents and Trademarks
The Company has been granted U.S. patents on its VCOs and its
Micro Cal noise sources. It has also filed for a patent on its
Smart Antenna Test instrument, for which it has received a Notice
of Allowance from the Patent office. In the absence of patents,
the Company relies upon trade secret laws to protect its
confidential and proprietary information. Due to the rapid rate of
technological change in its market, the Company believes that the
ability to innovate is of greater importance to its business than
availability of patents and proprietary rights. Other barriers to
competitor entry include the time and expense of new competitors to
design and manufacture components and the difficulty of selling to
an established customer who has already designed the Company's
products into its equipment.
The Company has registered "Micronetics," "The Noise Line,"
and "The Noise Source" as trademarks with the U.S. Patent and
Trademark Office.
Warranty and Service
The Company generally provides one year warranties on all of
its products covering both parts and labor. The Company, at its
option, repairs or replaces products that are defective during the
warranty period if the proper preventative maintenance procedures
have been followed by its customers. Repairs that are necessitated
by misuse of such products or are required outside the warranty
period are not covered by the Company's warranty.
In cases of defective products, the customer typically
returns them to the Company's facility. The Company's service personnel
replace or repair the defective items and ship them back to the
customer. Generally, all servicing is done at the Company's plant,
and it charges its customers a fee for those service items that are
not covered by warranty. It does not offer its customers any
formal written service contracts.
Product Liability Coverage
The testing of electronic communications equipment and the
accurate transmission of information entail a risk of product
liability by customers and others. Claims may be asserted against
the Company by end-users of any of the Company's products. The
Company maintained product liability insurance coverage with an
aggregate annual liability coverage limit, regardless of the number
of occurrences, of $2,000,000. There is no assurance that such
insurance will continue to be available at a reasonable cost or
sufficient to cover all possible liabilities. In the event of a
successful suit against the Company, lack or insufficiency of
insurance coverage could have a material adverse effect on it.
Environmental Laws
The costs and effects of compliance with federal, state and
local environmental laws were not material.
ITEM 2. Description of Property.
The Company's principal manufacturing facility consists of a
15,500 square feet of general office, warehouse and manufacturing
space in a 31,000 square foot building that it owns, which is
located at 26 Hampshire Drive, Hudson, NH. The building is located
in an industrial park and the Company believes its premises are in
good condition. The Company presently leases out 15,500 square
feet of this facility pursuant to a lease with an unaffiliated
entity.
The Company also operates its MVS subsidiary out of a 5,000
square foot facility located in Danbury, CT, which it leases from
an unaffiliated entity.
ITEM 3. Legal Proceedings.
The Company is not a party to any material legal proceedings.
ITEM 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
<PAGE>
PART II
ITEM 5. Market for Registrant's Common Equity and Related
Stockholder Matters.
(a) The Common Stock is traded on the Nasdaq Small Cap Market
under the symbol NOIZ. "The Nasdaq Stock Market" or "Nasdaq" is a
highly-regulated electronic securities market comprised of
competing Market Makers whose trading is supported by a
communications network linking them to quotation dissemination,
trade reporting, and order execution systems. This market also
provides specialized automation services for screen-based
negotiations of transactions, online comparison of transactions,
and a range of informational services tailored to the needs of the
securities industry, investors and issuers. The Nasdaq Stock
Market consists of two distinct market tiers: the Nasdaq National
Market and The Nasdaq SmallCap Market. The Nasdaq Stock Market is
operated by The Nasdaq Stock Market, Inc., a wholly-owned
subsidiary of the National Association of Securities Dealers, Inc.
The closing high and low bid prices for the Common Stock for
each fiscal quarter from April 1, 1997 until June 11, 1999 as
reported by the National Association of Securities Dealers
Automated Quotation System ("NASDAQ"), were as follows:
Bid Prices
High Low
Quarter Ended
Fiscal 1998
First Quarter 2 1/2 1 1/2
Second Quarter 2 3/4 1 5/8
Third Quarter 4 1/16 2 3/16
Fourth Quarter 2 3/4 2 1/32
Fiscal 1999
First Quarter 2 5/32 2 1/4
Second Quarter 2 13/16 1 3/8
Third Quarter 2 1/2 1 1/2
Fourth Quarter 2 3/16 1 1/4
Fiscal 2000
First Quarter 2 5/8 1 1/2
(through June 11, 1999)
These over-the-counter market quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commission and maynot
necessarily represent actual transactions.
(b) The number of recordholders of the Common Stock as of
June 11, 1999 was 301. The Company believes that there are a
substantially greater number of beneficial owners of shares of its
Common Stock who maintain their shares in "street" name.
(c) The Company has not paid any cash dividends during its
two most recent fiscal years, nor any subsequent interim period.
Under the Company's loan agreement with Bank of New Hampshire (the
"Bank"), it is restricted from paying dividends without the consent
of the Bank.
(d) Recent Sales of Unregistered Securities.
In January 1999, the Company issued an aggregate of 271,250
shares of Common Stock to Floyd S. Parin and Mark B. Goldman in
connection with the Company's acquisition of MVS.
On October 8, 1998, the Company issued non-plan stock options
to purchase an aggregate of 30,000 shares of Common Stock to three
directors of the Company. These options have a three-year term and
are exercisable at a price equal to $1.50 per share of Common Stock
covered thereby. Such options vest at a rate of 50% per year
commencing one year from the date of grant. On October 8, 1998,
the Company issued a non-plan stock option to purchase 50,000
shares of Common Stock to Richard S. Kalin, the President, Chief
Executive Officer and a director of the Company. The option had a
three-year term and was exercisable at a price equal to $1.50 per
share of Common Stock covered thereby and vested immediately. This
option was exercised by Mr. Kalin.
On June 16, 1998, the Company issued a non-plan stock option
to purchase 50,000 shares of Common Stock to Mr. Kalin. This
option has a five-year term, is exercisable at a price equal to
$2.3125 per share of Common Stock covered thereby and vests at a
rate of 50% per year commencing one year from the date of grant.
ITEM 6. Management's Discussion and Analysis.
(a) Results of Operations.
Net sales for the Company's fiscal year ended March 31, 1999
("Fiscal 1999") were $4,547,087 as compared to net sales of
$4,789,278 for its fiscal year ended March 31, 1998 ("Fiscal 1998),
a decrease of $242,191 or five percent. This was primarily due to
lower sales of the Company's wireless test instruments.
Gross profit as a percentage of net sales decreased to 41.6%
in Fiscal 1999 from 45.4% in Fiscal 1998. Gross profit decreased
due to the reduction in sales of test equipment in the Company's
product mix. Selling, general and administrative expenses ("SG&A")
as a percentage of net sales increased to 30.5% from 30.3% in
Fiscal 1998. The increase in SG&A was attributable primarily to
the reduction in sales in Fiscal 1999. Research and development
expenses decreased to $222,813 from $239,860. These costs are
expected to increase during the Company's current fiscal year.
The Company had net income for Fiscal 1999 of $276,171 or
$.08 per share. This compared to net income of $428,101 or $.13 per
share during Fiscal 1998. This is primarily due to lower sales of
test equipment and expenses related to integration of two companies
acquired by the Company during Fiscal 1999.
(b) Liquidity and Capital Resources.
On March 31, 1999, the Company's working capital was
$3,271,475 as compared with working capital of $2,891,793 at March
31, 1998. This reflects a current ratio of 5.8 to 1 at March 31,
1999 as compared to 5.1 to 1 at March 31, 1998.
Net cash of $500,819 was provided by operating activities
during Fiscal 1999 as compared to $96,656 during Fiscal 1998. Net
cash used by investing activities during Fiscal 1999 was $302,370
as compared to net cash used by investing activities of $71,168
during Fiscal 1998. This was largely due to the acquisition of two
companies by the Company during Fiscal 1999. Net cash used by
financing activities during Fiscal 1999 was $65,410 as compared to
$44,823 of cash provided during Fiscal 1998. This was largely due
to increased repayment of debt and the repurchase of Common Stock
in Fiscal 1999 as compared to lower repayment of debt and increased
proceeds from stock options in Fiscal 1998.
In accordance with loans from the Bank, the Company is
required to maintain a minimum net worth of at least $2,000,000, a
ratio of total debt to net worth not exceeding 1.25:1, and a debt
coverage ratio of not less than 1.25:1. At present, the Company
does not anticipate failing to comply with any of these financial
ratios.
(c) Year 2000 Compliance.
The Company is on schedule with a four step project that
addresses the Year 2000 (Y2K) issue by assessing its information
technology ("IT") and non-IT computer systems and operations to
identify and determine the extent to which any such systems may not
be able to properly recognize and process date-sensitive information
after December 31, 1999. The Y2K problem arose because
many computer systems use only the last two digits of a particular
year rather than four to define the year. Therefore, these
systems will not be able to properly recognize a year that begins with
"20" instead of the familiar "19". Any of the Company's systems
utilizing such a two-digit system to refer to a particular year,
will not be able to distinguish between the year 1900 and theyear
2000. This may lead to disruption in the operations of business
including, but not limited to, a temporary inability to process
transactions, billing and customer service or to engage in normal
business activities resulting from miscalculations or system
failures.
The Company is currently in the process of creating an
inventory of all hardware, software and embedded chips in the
Company. Each of these items will be assessed for testing
requirements. Once this first step is completed, the Company will
measure the business criticality for each of the different areas of
the Company including, but not limited to production,distribution,
management functions, operations and material acquisition (i.e.
buying of raw materials). Next, the Company will assign
contingencies for all Y2K threats, if any. Lastly, the Company
will address a remediation plan for all Y2K threats found. Based
upon a preliminary review of the effect of the Y2K problem on the
Company, the Company believes that Y2K will have little or no
impact on its products or services. The Company's product software
does not reference any date fields and therefore would continue to
function correctly, regardless of date. The Company does not
anticipate any Y2K issues relating to third parties with which they
have a material relationship. The Company does not rely on
Electronic Date interchange with any of its vendors. Furthermore,
the Company does not believe that its relationship with any one
vendor or supplier is material to the extent that such party's Y2K
noncompliance would have a material adverse effect on the Company's
business and operations. The Company's manufacturing process are
not computer dependent so that Y2K would have no impact on its
ability to deliver products. This project is designed to ensure
the compliance of all of the Company's applications, operating
systems and hardware platforms, and to address the compliance of
key business partners. Key business partners are those customers
and vendors that have a material impact on the Company's
operations. The total estimated cost of the required
modifications to become Y2K compliant should not be material to
the Company's financial position.
Failure to make all internal business systems Y2K compliant
could result in an interruption in, or failure of, some of the
Company's business activities or operations. The Y2K project is
expected to reduce the Company's level of uncertainty about the Y2K
problem and reduce the possibility of significant interruptions of
normal business operations. The most reasonably likely worst case
Year 2000 scenario would be short-term delivery interruption of
less than one week. The Company does not anticipate any material
lost revenue due to Y2K issues. The Company does not currently
have any contingency plans in the event its systems are not Y2K
compliant by December 31, 1999. There can be no assurance that any
effective contingency plans will be developed or implemented.
(d) Safe Harbor Statement.
Statements which are not historical facts, including
statements about the Company's confidence and strategies and its
expectations about new and existing products, technologies and
opportunities, market and industry segment growth, demand and
acceptance of new and existing products are forward looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995 that involve risks and uncertainties. These
risks include, but are not limited to, product demand and market
acceptance risks; the impact of competitive products and pricing;
the results of financing efforts; the loss of any significant
customers of any business; the effect of the Company's accounting
policies; the effects of economic conditions and trade, legal,
social, and economic risks, such as import, licensing, and trade
restrictions; the results of the Company's business plan and the
impact on the Company of its relationship with its lender.
<PAGE>
ITEM 7. Financial Statements.
This information is contained on pages F-1 through F-19
hereof.
(a) (1) Financial Statements Page
Report of Independent Auditor F-1
Balance Sheets - March 31, 1999 and 1998 F-2 - F-3
Statements of Income, Years
ended March 31, 1999 and 1998 F-4 - F-5
Statements of Changes in Shareholders'
Equity, Years ended March 31, 1999 and 1998 F-6
Statements of Cash Flows,
Years ended March 31, 1999 and 1998 F-7 - F-8
Notes to Financial Statements,
March 31, 1999 and 1998. F-9 - F-21
(a) (2) Financial Statement Schedules
Schedule 8 - Valuation and Qualifying Accounts S-1
ITEM 8. Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure.
None.
PART III
The information to be contained herein is incorporated by
reference to the Company's proxy statement to be filed with the
Securities and Exchange Commission on or before July 29, 1999.
<PAGE>
PART IV
ITEM 13. Exhibits and Reports on Form 8-K:
(a) Exhibits.
3.1 Certificate of Incorporation of the Company, as
amended, incorporated by reference to Exhibit
3.1 to Registration Statement No. 83-16453 (the
"Registration Statement").
3.2 By-Laws of the Company incorporated by reference to
Exhibit 3.2 of the Registration Statement.
10.1 Incentive Stock Option Plan incorporated by reference
to Exhibit 10.1 of the Registration Statement.
10.3 Stock Option Plan approved by the Board of Directors
of the Company incorporated by reference to Exhibit
10.8 of the 1994 10-K.
10.4 Loan Agreement dated February 2, 1996 between the
Company and Bank of New Hampshire incorporated by
reference to Exhibit 7(c)(1) of the Form 8-K filed
with the Securities and Exchange Commission on
February 16, 1996.
10.5 Fourth Amendment to Sublease Agreement dated February
3, 1995 assigned to the Company between Jokah Realty,
L.L.C and Ames Textile Corporation to Exhibit 10.6
of the Company's Annual Report on Form 10-KSB for
Fiscal 1998.
10.6 1996 Stock Option Plan is incorporated by reference to
Exhibit 4.1 of Registration Statement No. 333-48087
filed on Form S-8.
10.7 Promissory Note dated January 4, 1999 by the Company
to Bank of New Hampshire.
10.8 Commercial Security Agreement between the Company and
Bank of New Hampshire dated January 4, 1999.
10.9 Stock Purchase Agreement by and between the Company,
Floyd S. Parin and Mark B. Goldman dated as of October
29, 1998.
10.10 Employment Agreement between Microwave & Video
Systems, Inc. and Floyd S. Parin dated as of January
4, 1999.
ITEM 13. Exhibits and Reports on Form 8-K (Cont'd):
(a) Exhibits (Cont'd).
10.11 Employment Agreement between Microwave & Video
Systems, Inc. and Mark B. Goldman dated as of January
4, 1999.
10.12 Asset Purchase Agreement by and between the Company
and Vectronics Microwave Corporation dated as of
February 4, 1999.
10.13 Consulting Agreement between the Company and
Vectronics Microwave Corporation for the services of
John G. Vogler dated as of February 18, 1999.
10.14 Form of Manufacturer's Representation Agreement.
21 List of Subsidiaries of the Company.
23.1 Consent of Paul C. Roberts, C.P.A. dated June 22, 1999.
27 Financial Data Schedule.
(b) Reports on Form 8-K.
None.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MICRONETICS WIRELESS, INC.
Dated: June 22, 1999 By:s/Richard S. Kalin
Richard S. Kalin,
Chairman and President
In accordance with the Exchange Act this report has been signed
below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Signature Title Date
s/Richard S. Kalin Chairman and President June 22, 1999
Richard S. Kalin (principal executive
and financial officer)
s/David Siegel Director June 22, 1999
David Siegel
s/Roy L. Boe Director June 22, 1999
Roy L. Boe
s/Barbara Meirisch Director June 22, 1999
Barbara Meirisch
s/Donna Hillsgrove Treasurer and June 22, 1999
Donna Hillsgrove Secretary
(principal accounting
officer)
PAUL C. ROBERTS
Certified Public Accountant
600 Bedford Road
Pleasantville, NY 10570
(914) 741-1508
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholders
Micronetics Wireless, Inc.
Hudson, NH
I have audited the accompanying balance sheets of
Micronetics Wireless, Inc. as of March 31, 1999 and 1998 and the related
consolidated statements of income, changes in shareholders'equity
and cash flows for each of the two years in the period ended March
31, 1999. These financial statements are the responsibility of the
Company's management. My responsibility is to express an opinion
on these financial statements based on my audits. In connection
with my audits of the financial statements, I have also audited the
financial statement schedules as listed in the accompanying index.
I conducted my audits in accordance with generally accepted
auditing standards. Those standards require that I 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. I believe that my audits provide
a reasonable basis for my opinion.
In my opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of
Micronetics Wireless, Inc. as of March 31, 1999 and 1998 and the
results of its operations and its cash flows for each of the two
years in the period ended March 31, 1999 in conformity with
generally accepted accounting principles. Also in my opinion, the
related financial statement schedules, when considered in relation
to the basic financial statements taken as a whole, present fairly,
in all material respects, the information set forth therein.
PAUL C. ROBERTS
Certified Public Accountant
Pleasantville, New York
June 22, 1999
MICRONETICS WIRELESS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1999 AND 1998
ASSETS
(Note 3b)
1999 1998
Current assets:
Cash and cash equivalents $1,164,661 $1,031,625
Accounts receivable, net of
allowance for doubtful accounts
of $50,776 and $35,092 at March 31,
1999 and 1998, respectively 913,272 1,010,219
Inventories 1,738,128 1,421,685
Prepaid expenses 50,144 37,238
Deferred tax asset 18,102 43,302
Other current assets 70,106 57,338
Total current assets 3,954,413 3,601,407
Property and Equipment:
Furniture, fixtures and equipment 1,830,908 1,324,586
Equipment held under capital leases 182,588 82,990
Building and improvements 855,969 850,009
Land 162,000 162,000
3,031,465 2,419,585
Less: accumulated depreciation
and amortization 1,376,840 898,516
1,654,625 1,521,069
Other assets:
Security deposits 765 4,479
Intangibles, net of accumulated
amortization of $48,964 and
$37,525 at March 31, 1999 and
March 31, 1998, respectively 75,497 86,936
Goodwill 337,380 -
413,642 91,415
$6,022,680 $5,213,891
See accompanying notes to consolidated financial statements.
MICRONETICS WIRELESS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1999 AND 1998
LIABILITIES AND SHAREHOLDERS' EQUITY
1999 1998
Current liabilities:
Note payable - bank, current
portion $ 85,982 $ 79,766
Current portion - capital leases
payable 58,224 26,705
Other notes payable 81,328 25,000
Accounts payable 196,321 321,713
Accrued expenses and taxes, other
than income taxes 243,930 248,620
Income taxes payable 17,153 17,810
Total current liabilities 682,938 719,614
Long-term debt -- net of current
portion
Note payable - bank 782,450 868,720
Capitalized lease obligations 52,053 40,308
Notes payable - other 81,328 -
915,831 909,028
Shareholders' equity:
Preferred stock - $.10 par value;
authorized - 100,000 shares;
issued and outstanding - 0 shares
at March 31, 1999 and 1998 - -
Common stock - $.01 par value;
authorized - 10,000,000 shares;
issued and outstanding - 3,762,825
and 3,415,298 shares at March 31,
1999 and 1998, respectively 37,628 34,153
Additional paid - in capital 3,094,153 2,535,137
Retained earnings 1,292,130 1,015,959
4,423,911 3,585,249
$6,022,680 5,213,891
See accompanying notes to consolidated financial statements.
MICRONETICS WIRELESS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
1999 1998
Net sales $4,547,087 $4,789,278
Cost of sales 2,654,238 2,616,228
Gross profit 1,892,849 2,173,050
Selling, general and administrative
expenses 1,341,478 1,410,677
Research and development expenses 222,813 239,860
Legal fees - related party 45,084 37,816
1,309,375 1,688,353
Income from operations 283,474 484,697
Other income (expense):
Interest income 37,734 37,144
Interest expense (82,741) (87,523)
Rental income 67,404 60,250
Gain on sale of equipment 12,500 22,712
34,897 32,583
Income before provision for income
taxes and extraordinary item 318,371 517,280
Provision for income taxes 42,200 89,179
Net income $ 276,171 $ 428,101
See accompanying notes to consolidated financial statements.
<PAGE>
MICRONETICS WIRELESS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
(continued)
1999
1998
Basic and diluted earnings
per common share:
Net income $.08 $.13
Weighted average shares outstanding:
Basic 3,577,293 3,403,688
Diluted 3,577,293 3,403,688
See accompanying notes to consolidated financial
statements.
<PAGE>
MICRONETICS WIRELESS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
Common Stock Additional
Par Paid-In Retained
Shares Value Capital Earnings Total
Balance -
March 31, 1997 3,188,658 $31,887 $2,393,748 $587,858 $3,013,493
Shares issued upon
exercise of
options 226,640 2,266 141,389 - 143,655
Net income - - - 428,101 428,101
Balance -
March 31, 1998 3,415,298 $34,153 $2,535,137 $1,015,959 $3,585,249
Shares issued upon
exercise of
options 92,590 926 82,762 - 83,688
Net income - - - 276,171 276,171
Shares issued in
connection with
acquisitions 271,250 2,712 505,881 - 508,593
Purchase common
stock (16,313) (163) (29,627) - (29,790)
Balance -
March 31, 1999 3,762,825 $37,628 $3,094,153 $1,292,130 $4,423,911
See accompanying notes to consolidated financial
statements.
MICRONETICS WIRELESS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31, 1999 AND 1998
1999 1998
Cash flows from operating activities:
Net income $ 276,171 $428,101
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 174,865 163,195
(Gain) on sale of assets (12,500) (22,712)
Deferred tax asset 25,200 75,179
Changes in assets and liabilities:
(Increase) decrease in accounts
receivable 138,234 (254,503)
(Increase) decrease in inventories 105,486 (270,045)
(Increase) decrease in prepaid
expenses and other current
assets (12,906) (45,008)
(Increase) decrease in other
assets (12,768) (3,377)
Increase (decrease) in accounts
payable (152,767) (53,033)
Increase (decrease) in accrued expenses
and taxes, other than
income taxes (27,539) 92,667
Increase (decrease) in income taxes
payable (657) (13,808)
Net cash provided by operating
activities 500,819 96,656
Cash flows from investing activities:
Purchase of property and equipment (43,783) (102,656)
Proceeds from sale of assets 12,500 31,488
Proceeds from security deposits 3,714 -
Acquisition of business (274,801) -
Net cash (used) by investing activities (302,373) (71,168)
See accompanying notes to consolidated financial statements.
<PAGE>
MICRONETICS WIRELESS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31, 1999 AND 1998
(continued)
1999 1998
Cash flows from financing activities:
Repayment of bank loans $ (84,253) $ (78,392)
Net proceeds from stock options
exercised 83,688 143,655
Principal payments on capital lease
obligations (35,055) (20,440)
Purchase of common stock (29,790) -
Net cash provided by financing
activities (65,410) 44,823
Net increase in cash and
cash equivalents 133,036 70,311
Cash and cash equivalents,
beginning of year 1,031,625 961,314
Cash and cash equivalents,
end of year $1,164,661 $1,031,625
Supplemental Disclosure of Cash Flow
Information:
Cash paid during the years for:
Interest $ 82,143 $ 87,992
Income taxes $ 16,219 $ 61,571
Supplemental Schedule of Non-Cash Investing
and Financing Activities:
During the year ended March 31, 1998, the Company acquired equipment
through a capital lease obligation in the amount of $66,990.
During the year ended March 31, 1999, the Company issued 271,250 shares
of its Common Stock in connection with the acquisition of a
business.
See accompanying notes to consolidated financial statements.
1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business:
The Company changed its name in September 1995 from Micronetics,
Inc. to Micronetics Wireless, Inc. The Company and its subsidiary
are engaged in the design, development, manufacture and marketing
of a broad range of high performance wireless components and test
equipment used in digital cellular, microwave, satellite, radar and
communication systems around the world. Approximately 25% of the
Company's sales derive from foreign markets.
(b) Principles of Consolidation:
The Consolidated Financial Statements include the accounts of the
Company and its wholly-owned subsidiary. All significant
intercompany transactions are eliminated.
(c) Inventory Valuation:
Inventory is valued at the lower of cost (first-in, first-out
method) or market.
(d) Depreciation and Amortization:
Fixed assets are reflected at cost.
Depreciation and amortization of fixed assets are computed by both
straight-line and accelerated methods at rates adequate to allocate
the cost of applicable assets over their expected useful lives.
(e) Intangibles:
Patents and licensing agreements are carried at cost less
accumulated amortization which is calculated on a straight-line
basis over the estimated useful lives of the assets. Patents and
licensing agreements are both being amortized over 10 years.
(f) Goodwill:
The excess of the cost of investment in subsidiary over the
carrying value of assets acquired is shown as goodwill, which is
then amortized on a straight-line basis over a maximum of 40
years.
(g) Income taxes:
The financial statements (including the provision for income taxes)
are prepared on an accrual basis. Temporary differences occur when
income and expenses are recognized in different periods for
1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
financial reporting purposes and for purposes for computing income
taxes currently payable. Deferred taxes are provided as a result
of such temporary differences.
(h) Research and Development Costs:
Research and development costs are charged to expense in the year
incurred. The amounts expended for the years ended March 31, 1999
and 1998 were approximately $225,000 and $240,000, respectively.
(i) Net Income Per Share:
Primary and fully diluted net income per share is calculated based
on the net income for each period divided by the weighted average
number of common shares and common equivalent shares outstanding
during each period. Common stock equivalents represent the
dilutive effect of the assumed exercise of certain outstanding
stock options.
(j) Statement of Cash Flows:
For purposes of the statement of cash flows, the Company considers
all highly liquid investments purchased with an original maturity
of three months or less to be cash equivalents.
(k) Use of Estimates:
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and revenues
and expenses during the reporting period. Actual results could
differ from those estimates.
(l) Vulnerability Due to Certain Concentrations:
All of the Company's assets and operations are located in two
facilities.
(m) Revenue Recognition:
The Company recognizes revenues when goods are shipped.
<PAGE>
2--INVENTORIES
Inventories consist of the following:
March 31, March 31,
1999 1998
Raw materials and
work-in-process $1,517,966 $1,064,264
Finished goods 220,162 357,421
$1,738,128 $1,421,685
3--ACQUISITIONS
In January 1999, the Company acquired all of the outstanding stock
of Microwave & Video Systems, Inc. for $270,225 in cash, issuance
of 271,250 shares of Common Stock of the Company and issuance of a
note for $72,656. The total acquisition cost was $851,475. The
acquisition was accounted for using the purchase method;
accordingly the assets and liabilities of the acquired entity have
been recorded at their estimated fair values at the date of
acquisition. The excess of purchase price over estimated fair
value of the net assets acquired (goodwill) is being amortized on
a straight line basis over 40 years. Microwave & Video Systems,
Inc.'s results of operations have been included in the Consolidated
Statements of Income since the date of acquisition.
In February 1999, the Company acquired certain assets of Vectronics
Microwave Corporation for $197,569 in cash and issuance of a note
for $90,000. The excess of the purchase price over the fair value
of the assets is being amortized on a straight-line basis over 40
years.
The estimated fair values of all assets and liabilities acquired
are summarized as follows:
Cash $192,992
Accounts Receivable 41,287
Inventories 421,929
Machinery and Equipment 253,199
Liabilities (107,743)
$801,664
3--ACQUISITIONS (CONT'D)
The following unaudited proforma summary presents the consolidated
results of operations as if the acquisitions had occurred at the
beginning of the Company's fiscal year, after giving effect to
certain adjustments, including amortization of goodwill, interest
expense on the acquisition debt and related income tax effects.
These proforma results have been prepared for comparative purposes
only and do not purport to be indicative of what would have
occurred had the acquisitions been made as of those dates or of
results which may occur in the future.
1999 1998
Net sales $7,051,651 $6,912,333
Net income $ 330,841 $ 464,007
Net income per Common Share $ .09 $ .13
4--LONG-TERM DEBT
The following table summarizes the Company's long-term debt:
March 31, March 31,
1999 1998
Debenture
8% Debenture due
April 30, 1996 (b) $ - $ 25,000
Notes
Prime plus 1% note due
February, 2006 (a) 413,151 422,939
6.763% note due March, 2016 (a) 335,281 345,547
Prime plus 1% note due
April, 2001 (a) 120,000 180,000
7% note due February, 2001 (c) 90,000 -
6% note due January, 2001 (c) 72,656 -
Capital lease obligations (d) 110,277 67,013
Total 1,141,365 1,040,499
Less current maturities 225,534 131,471
Total long-term debt $ 915,831 $ 909,028
4--LONG-TERM DEBT (CONT'D)
(a) During the year ended March 31, 1996, the Company financed the
purchase of its headquarter's building and refinanced its equipment
loan, with three new loans, one of which was refinanced by the SBA
Loan defined below. The Company borrowed from a bank $440,000,
which bears interest at prime plus 1% and is due in equal monthly
installments with the final payment due on February 2, 2006. The
Company also borrowed (from the same bank) $225,000, which bears
interest at prime plus 1% requiring principal payments of $5,000
monthly plus accrued interest. In October 1996, the Company
refinanced the $225,000 loan (from the same bank) and borrowed
$270,000 at prime plus 1%, with payments due in $5,000 monthly
installments with the final payment due on April 2, 2001.
These two loans contain certain covenants pertaining to financial
ratios and payment of dividends. At March 31, 1998, the Company is
not in violation of these covenants.
The Company borrowed $365,000 from the Small Business
Administration (the "SBA Loan"), and bears interest at 6.763% per
annum. Payments are due in monthly installments of $2,777 through
March 1, 2016 when the unpaid balance of principal and interest
become due. These loans are secured by substantially all of the
assets of the Company.
(b) Debenture:
The Company issued this 8% Subordinated Debenture during the year
ended March 31, 1995.
(c) In January 1999, the Company issued a note for $72,656 in
connection with its acquisition of Microwave & Video Systems,
Inc.
The note bears interest at 6% per annum with $36,328 of principal
due in January 2000 and $36,328 due in January 2001.
In February 1999, the Company issued a note for $90,000 in
connection with its acquisition of assets of Vectronics Microwave
Corporation. The note bears interest at 7% per annum with $45,000
of principal due February 2000 and $45,000 due February 2001.
(d) Obligation Under Capital Leases:
Leases are reflected at their present value based upon an imputed
interest rate of 9% per annum.
4--LONG-TERM DEBT (CONT'D)
The assets are depreciated over their estimated productive lives.
For the years ended March 31, 1999 and 1998 depreciation of assets
under capital leases is included in depreciation expense.
As of March 31, 1999 and 1998, property held under capital leases
was as follows:
March 31, March 31,
1999 1998
Machinery and equipment $182,588 $82,990
Less: accumulated depreciation 61,889 13,100
$120,699 $69,890
Annual maturities of long term debt due in the next five years will
approximate $225,000 (2000), $200,000 (2001), $30,000 (2002),
$32,000 (2003), $35,000 (2004) and $619,000 thereafter.
5--INCOME TAXES
The Company adopted SFAS No. 109, "Accounting for Income Taxes."
Under the standard, a deferred tax liability or asset is recognized
for the estimated future tax effects attributable to net operating
loss carry-forwards and to temporary differences between the tax
basis and GAAP basis of an asset or liability. Under this method,
the Company's deferred tax assets and liabilities were determined
by applying federal and state tax rates currently in effect to its
cumulative temporary book/tax differences.
The Company's deferred tax asset relates entirely to its net
operating loss carry-forwards and tax credits.
At March 31, 1999, the Company has recognized a deferred tax asset
attributable to carryforwards of tax credits. A valuation allowance
has not been provided since management believes that all
tax credits will be utilized.
At March 31, 1998 the Company has tax credit carryovers of
approximately $18,000 for federal tax purposes.
<PAGE>
5--INCOME TAXES (CONT'D)
The following sets forth the provision for income taxes:
March 31, March 31,
1999 1998
Federal tax on income $100,785 $179,275
State tax provided for 17,000 14,000
Stock option compensation (a) (52,427) (117,445)
Deferred tax benefit 25,200 75,179
90,558 151,009
Less: Benefit from net operating
loss carryforward and
tax credit carryforward 48,358 61,830
Provision for income taxes $ 42,200 $89,179
(a) With the exercise of 112,050 and 226,640 of options during the
fiscal years ended March 31, 1999 and 1998, respectively, the
Company derived a permanent difference for tax purposes of
approximately $134,735 and $345,000 for the years ended March
31, 1999 and 1998, respectively.
6--COMMITMENTS
Leases:
Rent expense including real estate taxes, for the year ended March
31, 1999 was $29,100.
7--MAJOR CUSTOMERS
Approximately 40% of the Company's net sales for each of the years
ended March 31, 1999 and 1998, respectively, are for military
applications of which 10% is directly to U.S. governmental agencies
for both years.
8--CAPITAL STOCK, OPTIONS AND WARRANTS
(I) Common Stock:
(a) Stock Options:
(i) Stock Option Plans:
On August 7, 1987, the Company adopted an Incentive Stock Option
Plan, pursuant to which the Company may grant options to purchase
up to 100,000 shares of common stock in the form of incentive stock
options as defined in Section 422A of the Internal Revenue Code.
In December 1989, an amendment to increase the number of shares of
common stock which may be granted under the plan to 200,000 shares
was approved by the shareholders of the Company. The plan requires
that the exercise price of options granted not be less than the
fair market value at the date of grant. With respect to holders of
more than 10% of the Company's securities, the exercise price of
the option must be equal to 110% of the fair market value at the
date of grant. The maximum exercise period for any option under
the plan is ten years from the date the option is granted (five
years for an optionee who owns more than 10% of the Company's
securities).
(a)(i)(1):
On August 7, 1987, the Company also adopted an Executive Stock
Option Plan, pursuant to which the Company may grant options to
purchase up to 100,000 shares of common stock.
(a)(i)(2):
During the year ended March 31, 1995, the Company adopted a stock
option plan, "1994 Stock Option Plan", pursuant to which the
Company may grant options to purchase up to 300,000 shares of
common stock.
(a)(i)(3):
During the year ended March 31, 1997, the Company adopted a stock
option plan, "1996 Stock Option Plan", pursuant to which the
Company may grant options to purchase up to 300,000 shares of
Common Stock.
<PAGE>
8--CAPITAL STOCK, OPTIONS AND WARRANTS (CONT'D)
The following tables summarize the activity in options under the
stock option plans:
Price
ISOP Plans: Shares Range
Outstanding at March 31, 1997 123,150 $ .63 - $2.13
Granted 2,500 $1.78
Exercised 38,300 $ .63 - $2.13
Expired or Canceled 32,500 $2.13
Outstanding at March 31, 1998 54,850 $1.06 -$1.78
Granted - -
Exercised 36,510 $1.06 - $2.13
Expired or Canceled 18,340 $2.13
Outstanding at March 31, 1999 0 -
Exercisable at March 31, 1999 0 -
8--CAPITAL STOCK, OPTIONS AND WARRANTS (CONT'D)
Price
ESOP Plan: Shares Range
Outstanding at March 31, 1997 95,000 1.06
Exercised 55,000 1.06
Outstanding at March 31, 1998 40,000 1.06
Exercised 40,000 1.06
Outstanding at March 31, 1999 0 -
Exercisable at March 31, 1999 0 -
Other Options:
Outstanding at March 31, 1996 288,720 $ .63 -$2.88
Expired 15,000 $ .75
Granted 79,000 $1.78 - $2.50
Exercised 48,720 $ .63
Outstanding at March 31, 1997 304,000 $ .63 -$2.88
Granted 70,000 $1.78 - $2.50
Exercised 126,840 $ .63 - $1.25
Expired or Canceled 77,160 $ .63- $2.88
Outstanding at March 31, 1998 170,000 $1.78 -$2.25
Granted 80,000 $1.50 - $2.31
Exercised 10,000 $2.125
Expired or Canceled - -
Outstanding at March 31, 1999 240,000 $1.50 -$2.31
Exercisable at March 31, 1999 240,000 $1.50 -$2.31
8--CAPITAL STOCK, OPTIONS AND WARRANTS (CONT'D)
Price
Other Options Shares Range
1994 Stock Option Plan:
Outstanding at March 31, 1997 246,250 $1.25 -$2.41
Granted 37,500 $1.78 - $2.13
Exercised 6,500 $1.25 - $2.13
Expired or Canceled 9,500 $1.75
Outstanding at March 31, 1998 267,750 $1.25 - $2.41
Granted 15,000 $1.75 - $2.31
Exercised 25,540 $1.50 - $1.88
Expired or Canceled 85,960 $1.75- $2.41
Outstanding at March 31, 1999 71,250 $1.25 -$2.41
Exercisable at March 31, 1999 71,250 $1.25 -$2.41
1996 Stock Option Plan:
Granted 82,500 $1.875
Outstanding at March 31, 1997 82,500 $1.875
Granted 97,500 $2.00 - $2.13
Expired or Canceled 5,000 $2.00
Outstanding at March 31, 1998 175,000 $1.88 -$2.13
Granted 74,250 $1.50 - $2.03
Expired or Canceled 39,750 $1.88- $2.00
Outstanding at March 31, 1999 209,500 $1.50 -$2.13
Exercisable at March 31, 1999 209,500 $1.50 -$2.13
8--CAPITAL STOCK, OPTIONS AND WARRANTS (CONT'D)
In October 1995, the FASB issued Statement of Financial
Accounting Standards No. 123 "Accounting and Disclosure of Stock-
Based Compensation" (Statement 123). Statement 123 is effective
for fiscal years beginning after December 15, 1995, and allows for
the option of continuing to follow Accounting Principles Board
Opinion No. 25 (APB 25), "Accounting for Stock Issued to Employees"
and the related interpretations of selecting the fair value method
of expense recognition as described in Statement 123. The Company
has elected to follow APB 25 in accounting for its employees'stock
options. Under APB 25, because the exercise price of the Company's
stock options is equal to or less than the market price of the
underlying stock on the date of grant, no compensation expense is
recognized.
Pro forma net (loss) income, had Statement 123 been applied,
would have resulted in net income, net of taxes, of approximately
$220,000 and net (loss) of ($110,000) for the years ended March 31,
1999 and 1998, respectively.
9--PREFERRED STOCK
Pursuant to the Company's Certificate of Incorporation, the Board
of Directors has the authority, without further action by the
stockholders, to issue up to 100,000 shares of preferred stock, par
value $.10 per share, in one or more series and to fix the
designations, powers, preferences, privileges, and relative
participating, optional or special rights and the qualifications,
limitations or restrictions thereof, including dividend rights,
conversion rights, voting rights, terms of redemption and
liquidation preferences, any or all of which may be greater than
the rights of the Common Stock.
10--INTANGIBLES
Intangible assets at March 31, 1999 and 1998 are as follows:
1999 1998
Licensing agreements $ 100,000 $100,000
Patents 24,461 24,461
124,461 124,461
Less accumulated amortization 48,964 37,525
$ 75,497 $ 86,936
11--RELATED PARTY TRANSACTIONS
Related party legal fees of $45,084 and $37,816 for the years ended
March 31, 1999 and March 31, 1998, respectively, were to a firm of
which a member is an officer and significant shareholder of the
Company.
12--COMMITMENTS
The Company has an employment agreement with a key employee
terminating September 2001 which provides for a base salary of
$58,500 per annum plus three percent of the Company's pre-tax
profits up to the levels reported in the prior fiscal year and five
percent of any such profits in excess of such amount. The Company
has entered into a consulting agreement in connection with its
acquisition of assets of Vectronics Microwave Corporation (Note 3).
The agreement is for a period of 2 years and calls for a payment of
$5,000 per month plus a fee of 5% of sales over $600,000 to
existing Vectronics customers.
The Company has entered into two employment agreements in
connection with the acquisition of Microwave & Video Systems, Inc.
The first is for a period of 3 years with first year compensation
of $85,000 per annum with increases in the remaining two years at
the discretion of the Board of Directors. The second agreement is
for a period of two years with first year compensation of $72,000
per annum with an increase in the final year at the discretion of
the Board of Directors.
13--IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued
Statement No. 129, Disclosure of Information about Capital
Structure (SFAS No. 129). In June 1997, the Financial Accounting
Standards Board issued Statement No. 130, Reporting Comprehensive
Income (SFAS No. 130) and Statement No. 131, Disclosure about
Segments of an Enterprise and Related Information (SFAS No. 131).
The Company is required to adopt these statements in 1998. SFAS
No. 129 consolidates the existing guidance from several other
pronouncements relating to an entity's capital structure. SFAS No.
130 establishes new standards for reporting and displaying
comprehensive income and its components. SFAS No. 131 requires
disclosure of certain information regarding operating segments,
products and services, geographic areas of operation and major
customers. Adoption of these statements has had no impact on the
Company's financial position, results of operations or cash
flows.
<PAGE>
MICRONETICS WIRELESS, INC.
SCHEDULE 8 - VALUATION AND QUALIFYING ACCOUNTS
Balance Charged Charged
at to Costs to Balance
Beginning and Other at End
Description of Period Expenses Accounts Deductions(a) of Period
Reserve for
Bad Debts $35,092 $15,684 - - $50,766
(a) Write-off of accounts receivable against reserve.
S-1
EXHIBIT INDEX
10.7 Promissory Note dated January 4, 1999 by the Company to
Bank of New Hampshire.
10.8 Commercial Security Agreement between the Company and
Bank of New Hampshire dated January 4, 1999.
10.9 Stock Purchase Agreement by and between the Company,
Floyd S. Parin and Mark B. Goldman dated as of October
29, 1998.
10.10 Employment Agreement between Microwave & Video Systems,
Inc. and Floyd S. Parin dated as of January 4, 1999.
10.11 Employment Agreement between Microwave & Video Systems,
Inc. and Mark B. Goldman dated as of January 4, 1999.
10.12 Asset Purchase Agreement by and between the Company and
Vectronics Microwave Corporation dated as of February 4,
1999.
10.13 Consulting Agreement between the Company and Vectronics
Microwave Corporation for the Services of John G. Vogler
dated as of February 18, 1999.
10.14 Form of Manufacturer's Representation Agreement
21 List of Subsidiaries of the Company
23.1 Consent of Paul C. Roberts, C.P.A. dated June 22, 1999.
27 Financial Data Schedule.
-40-
EXHIBIT 10.7
PROMISSORY NOTE
Principal: $1,500,000.00
Loan Date: January 4, 1999
Maturity: August 31, 1999
Loan No.:
Call:
Collateral:
Account:
Officer:
Borrower: MICRONETICS WIRELESS, INC.
26 HAMPSHIRE DRIVE
HUDSON, NH 03051
Lender: BANK OF NEW HAMPSHIRE
300 FRANKLIN STREET
MANCHESTER, NH 03105
Principal Amount: $1,500,000.00
Initial Rate: 8.250%
Date of Note: January 4, 1999
PROMISE TO PAY. MICRONETICS WIRELESS, INC. ("Borrower") promises
to pay to BANK OF NEW HAMPSHIRE ("Lender"), or order, in lawful
money of the United States of America, the principal amount of One
Million Five Hundred Thousand & 00/100 Dollars ($1,500,000.00) or
so much as may be outstanding, together with Interest on the unpaid
outstanding principal balance of each advance. Interest shall be
calculated from the date of each advance until repayment of each
advance.
PAYMENT. Borrower will pay this loan on demand, or if no demand is
made, in one payment of all outstanding principal plus all accrued
unpaid interest on August 31, 1999. In addition, Borrower will pay
regular monthly payments of accrued unpaid interest beginning
February 4, 1999, and all subsequent interest payments are due on
the same day of each month after that. The annual interest rate
for this Note is computed on a 365/360 basis; that is, by applying
the ratio of the annual interest rate over a year of 360 days,
multiplied by the outstanding principal balance, multiplied by the
actual number of days the principal balance is outstanding.
Borrower will pay Lender at Lender's address shown above or at such
other place as Lender may designate in writing. Unless otherwise
agreed or required by applicable law, payments will be applied
first to accrued unpaid interest, then to principal, and any
remaining amount to any unpaid collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject
to change from time to time based on changes in an independent
index which is the Bank of New Hampshire Prime Rate (the "Index").
The Index is not necessarily the lowest rate charged by Lender on
its loans. If the Index becomes unavailable during the term of
this loan, Lender may designate a substitute index after notice to
Borrower. Lender will tell Borrower the current index rate upon
Borrower's request. Borrower understands that Lender may make
loans based on other rates as well. The interest rate change will
not occur more often than each DAY. The Index currently is 7.750%
per annum. The interest rate to be applied to the unpaid principal
balance of this Note will be at a rate of 0.500 percentage points
over the Index, resulting in an initial rate of 8.250% per annum.
NOTICE: Under no circumstances will the interest rate on this Note
be more than the maximum rate allowed by applicable law.
PREPAYMENT. Borrower may pay without penalty all or a portion of
the amount owed earlier than it is due. Early payments will not,
unless agreed to by Lender in writing, relieve Borrower of
Borrower's obligation to continue to make payments of accrued
unpaid interest. Rather, they will reduce the principal balance
due.
LATE CHARGE. If a payment is 15 days or more late, Borrower will
be charged 6.000% of the regularly scheduled payment.
DEFAULT. Borrower will be in default if any of the following
happens: (a) Borrower fails to make any payment when due. (b)
Borrower breaks any promise Borrower has made to Lender, or
Borrower fails to comply with or to perform when due any other
term, obligation, covenant, or condition contained in this Note or
any agreement related to this Note, or in any other agreement or
loan Borrower has with Lender. (c) Any representation or statement
made or furnished to Lender by Borrower or on Borrower's behalf is
false or misleading in any material respect either now or at the
time made or furnished. (d) Borrower becomes insolvent, a receiver
is appointed for any part of Borrower's property, Borrower makes an
assignment for the benefit of creditors, or any proceeding is
commenced either by Borrower or against Borrower under any
bankruptcy or insolvency laws. (e) Any creditor tries to take any
of Borrower's property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's
accounts with Lender. (f) Any guarantor dies or any of the other
events described in this default section occurs with respect to any
guarantor of this Note. (g) A material adverse change occurs in
Borrower's financial condition, or Lender believes the prospect of
payment or performance of the indebtedness is impaired. (h) Lender
in good faith deems itself insecure.
LENDER'S RIGHTS. Upon default, Lender may declare the entire
unpaid principal balance on this Note and all accrued unpaid
interest immediately due, without notice, and then Borrower will
pay that amount. Upon default, including failure to pay upon final
maturity, Lender, at its option, may also, if permitted under
applicable law, increase the variable interest rate on this Note to
18.000% per annum. The interest rate will not exceed the maximum
rate permitted by applicable law. Lender may hire or pay someone
else to help collect this Note, if Borrower does not pay. Borrower
also will pay Lender that amount. This includes, subject to any
limits under applicable law, Lender's attorneys' fees and Lender's
legal expenses whether or not there is a lawsuit, including
attorneys' fees and legal expenses for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post-judgment collection
services. If not prohibited by applicable law, Borrower also will
pay any court costs, in addition to all other sums provided by law.
This Note has been delivered to Lender and accepted by Lender in
the State of New Hampshire. If there is a lawsuit, Borrower agrees
upon Lender's request to submit to the jurisdiction of the courts
of HILLSBOROUGH County, the State of New Hampshire. This Note
shall be governed by and construed in accordance with the laws of
the State of New Hampshire.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $18.00
if Borrower makes a payment on Borrower's loan and the check or
preauthorized charge with which Borrower pays is later dishonored.
RIGHT OF SETOFF. Borrower grants to Lender a contractual security
interest in, and hereby assigns, conveys, delivers, pledges, and
transfers to Lender all Borrower's right, title and interest in and
to, Borrower's accounts with Lender (whether checking, savings, or
some other account), including without limitation all accounts held
jointly with someone else and all accounts Borrower may open in the
future, excluding however all IRA and Keogh accounts, and all trust
accounts for which the grant of a security interest would be
prohibited by law. Borrower authorizes Lender, to the extent
permitted by applicable law, to charge or setoff all sums owing on
this Note against any and all such accounts.
LINE OF CREDIT. This Note evidences a revolving line of credit.
Advances under this Note may be requested orally by Borrower or by
an authorized person. All oral requests shall be confirmed in
writing on the day of the request. All communications,
instructions, or directions by telephone or otherwise to Lender are
to be directed to Lender's office shown above. The following party
or parties are authorized to request advances under the line of
credit until Lender receives from Borrower at Lender's address
shown above written notice of revocation of their authority:
Richard Kalin, President; and Donna Hillsgrove, Treasurer.
Borrower agrees to be liable for all sums either: (a) advanced in
accordance with the instructions of an authorized person or (b)
credited to any of Borrower's accounts with Lender. The unpaid
principal balance owing on this Note at any time may be evidenced
by endorsements on this Note or by Lender's internal records,
including daily computer print-outs. Lender will have no
obligation to advance funds under this Note if: (a) Borrower or any
guarantor is in default under the terms of this Note or any
agreement that Borrower or any guarantor has with Lender, including
any agreement made in connection with the signing of this Note; (b)
Borrower or any guarantor ceases doing business or is insolvent;
(c) any guarantor seeks, claims or otherwise attempts to limit,
modify or revoke such guarantor's guarantee of this Note or any
other loan with Lender; (d) Borrower has applied funds provided
pursuant to this Note for purposes other than those authorized by
Lender; or (e) Lender in good faith deems itself insecure under
this Note or any other agreement between Lender and Borrower.
OUT OF DEBT PROVISION. Observe a thirty (30) day Out of Debt
Period annually.
FINANCIAL STATEMENTS. Furnish Lender with, as soon as available,
but in no event later than one hundred twenty (120) days after the
end of each fiscal year, Borrower's annual financial statements and
corporate tax returns.
COLLATERAL. A security interest in all business assets whether now
owned or hereafter acquired, whether now existing or hereafter
arising and wherever located. Evidenced by UCC's already in file.
YEAR 2000 COVENANTS. Borrower covenants with Lender that Borrower
will provide Lender with such information and analyses as Lender
may, in the exercise of its discretion, request from time to time
to enable Lender to assess the risk to Borrower of the impact of
the Year 2000 date change on Borrower's operations (The Y2K
Impact), as well as the actions taken by Borrower to address the
Y2K impact. Borrower acknowledges that if the Y2K impact poses a
material risk to Borrower's business notwithstanding the actions
taken by Borrower to address the Y2K impact. Borrower acknowledges
that if the Y2K impact poses a material risk to Borrower's business
notwithstanding the actions taken by Borrower to address the Y2K
impact, Lender may reasonably deem itself insecure. It shall be an
event of default hereunder if (a) Borrower fails to promptly
provide Lender with the information requested by Lender to assess
the Y2K impact. (b) Borrower fails to meet the deadlines required
by Lender to be Year 2000 compliant or a reasonable likelihood that
Borrower cannot be Year 2000 compliant on or before December 31,
1999.
GENERAL PROVISIONS. This Note is payable on demand. The inclusion
of specific default provisions or rights of Lender shall not
preclude Lender's right to declare payment of this Note on its
demand. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any
other person who signs, guarantees or endorses this Note, to the
extent allowed by law, waive presentment, demand for payment,
protest and notice of dishonor. Upon any change in the terms of
this Note, and unless otherwise expressly stated in writing, no
party who signs this Note, whether as maker, guarantor,
accommodation maker or endorser, shall be released from liability.
All such parties agree that Lender may renew or extend (repeatedly
and for any length of time) this loan, or release any party or
guarantor or collateral; or impair, fail to realize upon or perfect
Lender's security interest in the collateral; and take any other
action deemed necessary by Lender without the consent of or notice
to anyone. All such parties also agree that Lender may modify this
loan without the consent of or notice to anyone other than the
party with whom the modification is made.
Borrower expressly agrees that the interest rates specified in this
Note shall be the applicable interest rates due (a) on amounts
outstanding during the term of this Note, notwithstanding the rate
of interest prescribed by statute from time to time, and (b) with
respect to any amounts outstanding on and after the maturity date
of this Note.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE
PROVISIONS. BORROWER AGREES TO THE TERMS OF THE NOTE AND
ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.
BORROWER:
MICRONETICS WIRELESS, INC.
By:
Richard S. Kalin, President
LENDER:
BANK OF NEW HAMPSHIRE
By:
Authorized Officer
N:\ANNE\MICRO\PROM-NOT.A99
EXHIBIT 10.8
COMMERCIAL SECURITY AGREEMENT
Principal: $1,500,000.00
Loan Date: 01-04-1999
Maturity: 08-31-1999
Loan No:
Call:
Collateral:
Account:
Officer:
Borrower: MICRONETICS WIRELESS, INC.
Lender: BANK OF NEW HAMPSHIRE
26 HAMPSHIRE DRIVE
300 FRANKLIN STREET
HUDSON, NH 03051
MANCHESTER, NH 03105
THIS COMMERCIAL SECURITY AGREEMENT is entered into between
MICRONETICS WIRELESS, INC. (referred to below as "Grantor"); and
BANK OF NEW HAMPSHIRE (referred to below as "Lender"). For
valuable consideration, Grantor grants to Lender a security
interest in the Collateral to secure the Indebtedness and agrees
that Lender shall have the rights stated in this Agreement with
respect to the Collateral, in addition to all rights which Lender
may have by law.
DEFINITIONS. The following words shall have the following meanings
when used in this Agreement. Terms not otherwise defined in this
Agreement shall have the meanings attributed to such terms in the
Uniform Commercial Code. All references to dollar amounts shall
mean amounts in lawful money of the United States of America.
Agreement. The word "Agreement" means this Commercial Security
Agreement, as this Commercial Security Agreement may be amended or
modified from time to time, together with all exhibits and
schedules attached to this Commercial Security Agreement from time
to time.
Collateral. The word "Collateral" means the following described
property of Grantor, whether now owned or hereafter acquired,
whether now existing or hereafter arising, and wherever located:
All inventory, chattel paper, accounts, equipment and general
intangibles.
In addition, the word "Collateral" includes all of the following,
whether now owned or hereafter acquired, whether now existing or
hereafter arising, and wherever located:
(a) All attachments, accessions, accessories, tools, parts,
supplies, and additions to and all replacements of and
substitutions for any property described above.
(b) All products and produce of any of the property described
in this Collateral section.
(c) All accounts, general intangibles, instruments rents,
monies, payments, and all other rights, arising out of a sale,
lease, or other disposition of any of the property described in
this Collateral Section.
(d) All proceeds (including insurance proceeds) from the
sale, destruction, loss, or other disposition of any of the
property described in this Collateral section.
(e) All records and data to any of the property described in
this Collateral section, whether in the form of a writing,
photograph, microfilm, or electronic media, together with all of
Grantor's right, title, and interest in and to all computer
software required to utilized, create, maintain, and process any
such records or data on electronic media.
Event of Default. The words :Event of Default" mean and includes
without limitation any of the Events of Default set forth below in
the Section titled "Events of Default."
Grantor. The word "Grantor" means MICRONETICS WIRELESS, INC., its
successors and assigns.
Guarantor. The word "Guarantor" means and includes without each
and all of the guarantors, sureties, and accommodation parties in
connection with the indebtedness.
Indebtedness. The word "Indebtedness" means the indebtedness
evidenced by the Note, including all principal and interest,
together with all other indebtedness and costs and expenses for
which Grantor is responsible under this Agreement or under any of
the Related Documents. In addition, the word "Indebtedness"
includes all other obligations, debts and liabilities, plus
interest thereon, of Grantor, or any one or more of them, to
Lender, as well as all claims by Lender against Grantor, or any or
more of them, whether existing now or later; whether they are
voluntary or involuntary, due or not due, direct or in direct,
absolute or contingent liquidated or unliquidated; whether Grantor
may be liable individually or jointly with others; whether Grantor
may be obligated as guarantor, surely, accommodation party or
otherwise; whether recovery upon such indebtedness may be or
hereafter may become barred by statute of limitations; and whether
such indebtedness may be or hereafter may become otherwise
unenforceable.
Lender. The word "Lender" means BANK OF NEW HAMPSHIRE, its
successors and assigns.
Note. The Word "Note" means the note or credit agreement dated
January 4, 1999, in the principal amount of $1,500,000.00 from
MICRONETICS WIRELESS, INC. to Lender, together with all renewals
of, intentions of, modifications of, refinancing of, considerations
of and substitutions for the note or credit agreement.
Related Documents. The words " Related Documents" mean and include
without limitation all promissory notes, credit agreements, loan
agreements, environmental agreements, guaranties, security
agreements, mortgages, deeds of trust, and all other instruments,
agreements and documents, whether now or hereafter existing,
executed in connection with the indebtedness.
RIGHT OF SETOFF. Grantor hereby grants Lender a contractual
security interest in and conveys, delivers, pledges, and transfers
all of Grantor's right, title and interest in and to Grantor's
account with Lender (whether checking, savings, or some other
account), including all accounts held jointly with someone else and
all accounts Grantor may open in the future, excluding, however,
all IRA and Keogh accounts, and all trust accounts for which the
grant of a security interest would be prohibited by law. Grantor
authorizes Lender, to the extent permitted by applicable law, to
charge or setoff all indebtedness against any and all such
accounts.
OBLIGATIONS OF GRANTOR. Grantor warrants and covenants to Lender
as follows:
Organization. Grantor is a corporation which is duly organized,
validly existing and in good standing under the laws of the State
of New Hampshire. Grantor has its chief executive office at 26
HAMPSHIRE DRIVE, HUDSON, NH 03051. Grantor will notify Lender of
any change in the location of Grantor's chief executive office.
Authorization. The executive, delivery, and performance of this
Agreement by Grantor have been duly authorized by all necessary
action by Grantor and do not conflict with, result in a violation
of, or constitute a default under (a) any provision of its
articles of incorporation or organization, or bylaws, or any
agreement or other instrument binding upon Grantor or (b) any law,
governmental regulation, court decree, or order applicable to
Grantor.
Perfection of Security Interest. Grantor agrees to execute such
financing statements and to take whatever other actions are
requested by Lender to perfect and continue Lender's security
interest in the Collateral. Upon request of Lender, Grantor will
deliver to Lender any and all of the documents evidencing or
constituting the Collateral, and Grantor will note Lender's
interest upon any and all chattel paper if not delivered to Lender
for possession by Lender. Grantor hereby appoints Lender as its
irrevocable attorney-in-fact for the purpose of executing any
documents necessary to perfect or to continue the security interest
granted in this Agreement. Lender may at any time, and without
further authorization from Grantor, file a carbon, photographic or
other reproduction of any financing statement for use as a
financing statement. Grantor will reimburse Lender for all
expenses for the perfection and the continuation of the perfection
of Lender's security interest in the Collateral. Grantor promptly
will notify Lender before any change in Grantor's name including
any change to the assumed business names of Grantor. This is a
continuing Security Agreement and will continue in effect even
though all or any part of the indebtedness is paid in full and even
though for a period of time Grantor may not be indebted to Lender.
No Violation. The executive and delivery of this Agreement will
not violate any law or agreement governing Grantor or to which
Grantor is a party, and its certificate or articles of
incorporation and bylaws do not prohibit any term or condition of
this Agreement.
Enforceability of Collateral. To the extent the Collateral consist
of accounts, chattel paper, or general intangibles, the Collateral
is enforceable in accordance with its terms, is genuine, and
complies with applicable laws concerning form, content and manner
of preparation and execution, and all persons appearing to be
obligated on the Collateral have and capacity to contract and are
in fact obligated as they appear to be on the Collateral. At the
time any account becomes subject to a security interest in favor
of Lender, the account shall be a good and valid account
representing an undisputed, bona fide indebtedness incurred by the
account debtor, for merchandise held subject to delivery
instructions or therefore shipped or delivered pursuant to a
contract of sale, or for services therefore performed by Grantor
with or for the account debtor; there shall be no setoff or
counterclaims against any such account; and no agreement under
which any deduction or discounts may be claimed shall have been
made with the account debtor except those disclosed to Lender in
writing.
Location of the Collateral. Grantor, upon request of Lender, will
deliver to Lender in form satisfactory to Lender a schedule of real
properties and Collateral locations to Grantor's operations,
including without limitation the following: (a) all real property
owned or being purchased by Grantor; (b) all real property being
rented or leased by Grantor; (c) all storage facilities owned,
rented, leased, or being used by Grantor; and (d) all other
properties where Collateral is or may be located. Excepted in the
ordinary course of its business, Grantor shall not remove the
Collateral from its existing locations without the prior written
consent of Lender.
Removal of Collateral. Grantor shall keep the Collateral (or to
the extent the Collateral consists of intangible property such as
accounts, the records concerning the Collateral) at Grantor's
address show above, or at such other locations as are acceptable to
Lender. Excepts in the ordinary course of its business, including
the sales of inventory, Grantor shall not remove the Collateral
from its existing locations without the prior written consent of
Lender. To the extent that the Collateral consists of vehicles, or
other titled property, Grantor shall not take or permit any action
which would require application for certificates of title for the
vehicles outside the State of New Hampshire, without the prior
written consent of Lender.
Transactions involving Collateral. Except for inventory sold or
accounts collected in the ordinary course of Grantor's business,
Grantor shall not sell, offer, or otherwise transfer or dispose of
the Collateral. While Grantor is not default under this Agreement,
Grantor may sell inventory, but only in the ordinary course of its
business and only to buyers who qualify as a buyer in the ordinary
course of business. A sale in the ordinary course of Grantor's
business does not include a transfer in partial or total
satisfaction of a debt or any bulk sale. Grantor shall not pledge,
mortgage, encumber or otherwise permit the Collateral to be subject
to any lien, security interest, encumbrance, or change, other than
the security interest provided for in this Agreement, without the
prior written consent of Lender. This includes security interest
even if junior in right to the security interest granted under this
Agreement. Unless waived by Lender, all proceeds from any
disposition of the Collateral (for whatever reason) shall be held
in trust for Lender and shall not be commingled with any other
funds; provided however this requirements shall not constitute
consent by Lender to any sale or other disposition. Upon receipt,
Grantor shall immediately deliver any such proceeds to Lender.
Title. Grantor represents and warrants Lender that it holds good
and marketable title to the Collateral, free and clear of all
license and encumbrances except for the lien of this Agreement. No
financing statement covering any of the Collateral is on any public
office other than those which reflect the security interest created
by this Agreement or to which Lender has specifically consented.
Grantor shall defend Lender's right in the Collateral against the
claims and demands of all other persons.
Collateral Schedules and Locations. As often as Lender shall
require, and insofar as the Collateral consists of accounts and
general intangibles, Grantor shall deliver to Lender schedules of
such Collateral, including such information as Lender may require,
including without limitation names and address of account debtors
and aging of accounts and general intangibles. Insofar as the
Collateral consists of inventory and equipment, Grantor shall
deliver to Lender, as often as Lender shall require, such lists,
descriptions, and designations of such Collateral as Lender may
require to identify the nature, extent, and location of such
Collateral. Such information shall be submitted for Grantor and
each of its subsidiaries or related companies.
Maintenance and Inspection of Collateral. Grantor shall maintain
all tangible Collateral in good condition and repair. Grantor will
not commit or permit damage to or destruction of the Collateral or
any part of the Collateral. Lender and its designated
representatives and agents shall have the right at all reasonable
times to examine, inspect, and audit the Collateral wherever
located. Grantor shall immediately notify Lender of all cases
involving the return, rejection, repossession, loss or damage of or
to any Collateral; of any request for credit or adjustment or of
any other dispute arising with respect to the Collateral; and
generally of all happenings and events affecting the Collateral or
the value or the amount of the Collateral.
Taxes, Assessments and Liens. Grantor will pay when due all taxes,
assessments and liens upon the Collateral, its use or operation,
upon this Agreement, upon any promissory note or notes evidencing
the indebtedness, or upon any of the Related Documents. Grantor
may withhold any such payment or may elect to content any lien if
Grantor is in faith conducing an appropriate proceeding to contest
the obligation to pay and so long as Lender's interest in the
Collateral is not jeopardized in Lender's sole opinion. If the
Collateral is subjected to a lien which is not discharged within
fifteen (15) days, Grantor shall deposit with Lender cash, a
sufficient corporate surely bond or other security satisfactory to
Lender in an amount adequate to provide for the discharge of the
lien plus any interest, costs, attorneys' fees or other charges
that could accrue as a result of foreclosure or sale of the
Collateral. In any contest Grantor shall defend itself and Lender
and shall satisfy any final adverse judgement before enforcement
against the Collateral. Grantor shall name Lender as an additional
obligee under any surely bond furnished in the contest proceedings.
Compliance With Governmental Requirements. Grantor shall promptly
with all laws, ordinances, rules and regulation of all governmental
authorities, now or hereafter in effect, applicable to the
ownership, production, disposition, or use of the Collateral.
Grantor may contest in good faith any such law, ordinance or
regulation and withhold compliance during any proceeding, including
appropriate appeals, so long as Lender's interest in the
Collateral, in Lender's opinion, is not jeopardized.
Hazardous Substances. Grantor represents and warrants that the
Collateral never has been, and never will be so long as this
Agreement remains a liens on the Collateral, used for the
generation, manufacture, storage, transportation, treatment,
disposal, release or threatened release of any hazardous waste or
substance, as those terms are defined in the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as
amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the Super fund
Amendments and Reauthorization Act of 1986, Pub.L.No. 99-499
("SARA"), the Hazardous Materials Transaction Act, 49 U.S.C.
Section 1801, er seq., the Resource Conservation and Recovery Act,
42 U.S.C. Section 6901, et seq., or other applicable state or
Federal laws, rules, or regulations adopted pursuant to any of the
foregoing. The terms "hazardous waste" and "hazardous substance"
shall also include, without limitation, petroleum and petroleum by-
products or any fraction thereof and asbestos. The representations
and warranties contained herein are based on Grantor's due
diligence in investigation the Collateral for hazardous wastes and
substances. Grantor hereby (a) releases and waives any future
claims against Lender for indemnity or contribution in the event
Grantor becomes liable for cleanup or other costs under any such
laws, and (b) agrees to indemnify and hold harmless Lender against
any and all claims and losses resulting from a breach of this
provision of this Agreement. This obligation to indemnify shall
survive the payment of the indebtedness and the satisfaction of
this Agreement.
Maintenance of Casualty Insurance. Grantor shall procure and
maintain all risks insurance, including without limitation fire,
theft and liability coverage together with such other insurance as
Lender may require with respect to the Collateral, in form,
amounts, coverage and basis reasonably acceptable to Lender and
issued by a company or companies reasonably acceptable to Lender.
Grantor, upon request of Lender, will deliver to Lender from time
to time the policies or certificates of insurance in form
satisfactory to lender, including stipulations that coverage will
not be cancelled or diminished without at least ten (10) days'
prior written notice to Lender and not including any disclaimer of
the insurer's liability for failure to give such a notice. Each
insurance policy also shall include an endorsement providing that
coverage in favor of Lender will not be impaired in any way by any
act, omission or default of Grantor or any other person. In
connection with all policies covering assets in with Lender holds
or is offered a security interest, Grantor will provide Lender with
such loss payable or other endorsements as Lender may require. If
Grantor at any time fails to obtain or maintain any insurance as
required under this Agreement, Lender may (but shall not be
obligated to) obtain such insurance as Lender deems appropriate,
including if it so chooses "single interest insurance," which will
cover only Lender's interest in the Collateral.
Application of Insurance Proceeds. Grantor shall promptly notify
Lender of any loss or damage to the Collateral. Lender may make
proof of loss if Grantor fails to do so within fifteen (15) days of
the casualty. All proceeds of any insurance on the Collateral,
including accrued proceeds thereon, shall be help by Lender as part
of the Collateral. If Lender consents to repair or replacement of
the damaged or destroyed Collateral, Lender shall, upon
satisfactory proof of expenditure, pay or reimburse Grantor from
the proceeds for the reasonable cost of repair or restoration. If
Lender does not consent to repair or replacement of the Collateral,
Lender shall retain amount of the proceeds to pay all of the
indebtedness, and shall pay the balance to Grantor. Any proceeds
which have nit been disbursed within six (6) months after their
receipt and which Grantor has not committed to the repair or
restoration of the Collateral shall be used to prepay the
indebtedness.
Insurance Reserves. Lender may require Grantor to maintain with
Lender reserves for payment of insurance premiums, which reserves
shall be created by monthly payments from Grantor of a sum
estimated by Lender to be sufficient to produce, at least fifteen
(15) days before the premium due date, amounts at least equal to
the insurance premiums to be paid. If fifteen (15) days before
payments is due, the reserve funds are insufficient, Grantor shall
upon demand pay any deficiency to Lender. The reserve funds shall
be held by Lender as a general deposit and shall constitute a non-
interest-bearing account which may satisfy by payment of the
insurance premiums required to be paid by Grantor as they become
due. Lender does not hold the reserve funds in trust for Grantor,
and Lender is not the agent of Grantor for payment of the insurance
premiums required to be paid by Grantor. The responsibility for
the payment of premiums shall remain Grantors sole responsibility.
Insurance Reports. Grantor, upon request of Lender, shall furnish
to Lender reports on each existing policy of insurance showing such
information as Lender may reasonably request including the
following: (a) the name of the Insurer; (b) the risks insured; (c)
the amount of the policy; (d) the property insured; (e) the then
current value on the basis of which insurance has been obtained and
the matter of determining that value; and (f) the expiration data
of the policy. In addition, Grantor shall upon request by Lender
(however not more often than annually) have an independent
appraiser satisfactory to Lender determine, as applicable, the cash
value or replacement cost of the Collateral.
GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until
default and except as otherwise provided below with respect to
accounts, Grantor may have possession of the tangible personal
property and benefits use of all the Collateral and may use it in
any lawful manner not inconsistent with this Agreement or the
Related Documents, provided that Grantor's right to possession and
beneficial use shall not apply to any Collateral where possession
of the Collateral by Lender is required by Law to perfect Lender's
security interest in such interest in such Collateral. Until
otherwise notified by Lender, Grantor may collect consisting of
accounts. At any time and even though no Event of Default exists,
Lender may exercise its rights to collect the accounts and to
notify account deports to make payments directly to Lender for
application to the indebtedness. If Lender at any time has
possession of any Collateral, whether before or after an Event of
Default, Lender shall be deemed to have exercised reasonable care
in the custody and preservation of the Collateral if Lender takes
such action for the purposes as Grantor shall request or as Lender,
in Lender's sole discretion, shall deem appropriate under the
circumstances, but failure to honor any request by Grantor shall
not of itself be deemed to be a failure to exercise reasonable
care. Lender shall not be required to take any steps necessary to
preserve any rights in the Collateral against prior parties, nor to
protect, preserve or maintain any security given to secure the
indebtedness.
EXPENDITURES BY LENDER. If not discharge or paid when due, Lender
may (but shall not be obligated to) discharge or pay any amounts
required to be discharge or paid by Grantor under this Agreement,
including without limitation all taxes, liens, security interest,
encumbrances, and other claims, at any time levied or placed on the
Collateral. Lender also may (but shall not be obligated to) pay
all costs for insuring, maintaining and preserving the Collateral.
All such expenditures incurred or paid by Lender for such purposes
will then bear interest at the rate changed under the Note from
the date incurred or paid by Lender to the date of repayment by
Grantor. All such expenses shall become a part of the indebtedness
and, at Lender's option, will (a) be payable on demand, (b) be
added to the balances of the Note and be apportioned among and be
payable with any installment payments to become due during either
(i) the term of any applicable insurance policy or (ii) the
remaining term of the Note, or (c) be treated as a balloon payment
which will be due and payable at the Note's maturity. This
Agreement also will secure payment of these amounts. Such right
shall be in addition to all other rights and remedies to which
Lender may be entitled upon the occurrence of an Event of Default.
EVENTS OF DEFAULT. Each of the following shall constitute an Event
of Default this Agreement:
Default on Indebtedness. Failure of Grantor to make any payment
when due on the indebtedness.
Other Defaults. Failure of Grantor to comply with or to perform
any other term, obligation, covenant or condition contained in this
Agreement or in any of the Related Documents or in any other
agreement between Lender and Grantor.
False Statements. Any warranty, representation or statement made
or furnished to Lender by or on behalf of Grantor under this
Agreement, the Note or the Related Documents is false or misleading
in any material respect, either now or at the time made or
furnished.
Defective Collateralization. This Agreement or any of the Related
Documents cases to be in full force and effect (including failure
of any Collateral documents to create a valid and perfected
security interest or lien) at any time and for any reason.
Insolvency. The dissolution or termination of Grantor's existence
as a going business, the insolvency of Grantor, the appointment of
a receiver for any part of Grantor's property, any assignment for
the benefit of creditors, any type of creditor workout, or the
commencement of any proceeding under any bankruptcy or insolvency
laws by or against Grantor.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Grantor or by
any governmental agency against the Collateral or any other
Collateral securing the indebtedness. This includes a garnishment
of any Grantor's deposit accounts with Lender.
Events Affecting Guarantor. Any of the preceding events occurs
with respect to any Guarantor of any of the indebtedness or such
Guarantor dies or becomes incompetent.
Adverse Changes. A material change occurs in Grantor's financial
condition, or Lender believes the prospect of payment or
performance of the indebtedness is impaired.
Insecurity. Lender, in good faith, deems itself insecure.
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs
under this Agreement, at any time thereafter, Lender shall have all
the rights of a secured party under the New Hampshire Uniform
Commercial Code. In additional and without limitation, Lender may
exercise any one or more of the following rights and remedies:
Accelerate Indebtedness. Lender may declare the entire
indebtedness, including any prepayment penalty which Grantor would
be required to pay, immediately due and payable, without notice.
Assemble Collateral. Lender may require Grantor to deliver to
Lender all or any portion of the Collateral and any and all
certificates of title and other documents relating to the
Collateral. Lender may require Grantor to assemble the Collateral
and make it available to lender at a place to be designed by
Lender. Lender also shall have full power to enter upon the
property of Grantor to take possession of an remove the Collateral.
If the Collateral contains other goods not covered by this
Agreement at the time repossession, Grantor agrees Lender may take
such other goods, provided that Lender makes reasonable efforts to
return them to Grantor after repossession.
Sell the Collateral. Lender shall have full power to sell, lease,
transfer, or otherwise deal with the Collateral or proceeds thereof
in its own name or that of Grantor. Lender may sell the Collateral
at public auction or private sale. Unless the COLLATERAL threatens
to decline speedily in value or is of a type customarily sold on a
recognized market, Lender will give Grantor reasonable notice of
the time after which any private sale or any other intended
disposition of the Collateral is to be made. The requirements of
reasonable notice shall be met if such notice is given at least ten
(10) days before the time of the sale or deposition. All expenses
relating to the disposition of the Collateral, including without
limitation the expenses of retaking, holding, insuring, preparing
for sale and selling the Collateral, shall become a part of the
indebtedness secured by this Agreement and shall be payable on
demand, with interest at the Note rate from date of expenditure
until repaid.
Appoint Receiver. To the extent permitted by applicable law,
Lender shall have the following rights and remedies regarding the
appointment of a receiver: (a) Lender may have a receiver appointed
as a matter of right, (b) the receiver may be an employee of Lender
and may serve without bond, and (c) all fees of the receiver and
his or her attorney shall become part of the indebtedness secured
by this Agreement and shall be payable on demand, with interest at
the Note rate from date of expenditure repaid.
Collect Revenues, Apply Accounts. Lender, either itself or through
a receiver, may collect the payments, rents, income, and revenues
from the Collateral. Lender may at any time in its discretion
transfer any Collateral into its own name or that its nominee and
receive the payments, rents, income, and revenues therefrom and
hold the same as security for the indebtedness or apply it to the
payment of the indebtedness in such order of preference as Lender
may determine. Insofar as the Collateral consists of accounts,
general intangibles, insurance policies, instruments, chattel
paper, chooses in action, or similar property, Lender may demand,
collect, receipt for, settle, compromise, adjust, sue for,
foreclose, or realize on the Collateral as Lender may determine,
whether or not indebtedness or Collateral is then due. For these
purposes, Lender may, on behalf of and in the name of Grantor,
receive, open and dispose of mail addressed to Grantor; change any
address to which mail and payments are to be sent; and endorse
notes, checks, drafts, money orders, documents of title,
instruments and items pertaining to payments, shipment, or storage
of any Collateral. To facilitate collection, Lender may notify
account debtors and obligers on any Collateral to make payments
directly to Lender.
Obtain Deficiency. If Lender chooses to sell any or all of the
Collateral, Lender may obtain a judgement against Grantor for any
deficiency remaining on the indebtedness due to Lender after
application of all amounts received from the exercise of the rights
provided in this Agreement. Grantor shall be liable for a
deficiency even if the transaction described in this subsection is
a sale of accounts or chattel paper.
Other Rights and Remedies. Lender shall have all the rights and
remedies of a secured creditor under the provisions of the Uniform
Commercial Code, as may be amended from time to time. In addition,
Lender shall have and may exercise any or all other rights and
remedies it may have available at law, in equity, or otherwise.
Cumulative Remedies. All of Lender's rights and remedies, whether
evidenced by this Agreement or the Related Documents or by any
other writing, shall be cumulative and may be exercised singularly
or concurrently. Election by Lender to purse any remedy shall not
exclude pursuit of any other remedy, and an election to make
expenditures or to take action to perform an obligation of Grantor
under this Agreement, after Grantor's failure to perform, shall not
affect Lender's right to declare a default and to exercise its
remedies.
Miscellaneous Provisions. The following miscellaneous provisions
are a part of this Agreement.
Amendments. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties
as to the matters set forth in this Agreement. No alteration of or
amendment to this Agreement shall be effective unless given in
writing and signed by the party or parties sought to be charged or
bound by the alternation or amendment.
Applicable Law. This Agreement has been delivered to Lender and
accepted by Lender in the State of New Hampshire. If there is a
lawsuit, Grantor agrees upon Lender's request to submit to the
jurisdiction of the courts of the State of New Hampshire. This
Agreement shall be governed by and construed in accordance with the
laws of the State of New Hampshire.
Attorney's Fees; Expenses. Grantor agrees to pay upon demand all
of Lender's costs and expenses, including attorneys' fees and
Lender's legal expenses, incurred in connection with the
enforcement of this Agreement. Lender may pay someone else to help
enforce this Agreement, and Grantor shall pay the costs and
expenses of such enforcement. Costs and expenses include Lender's
fees and legal expenses whether or not there is a lawsuit,
including attorneys' fees and legal expenses for bankruptcy
proceedings (and including efforts to modify or vacate any
automatic stay or injunction), appeals, and any anticipated post-
judgement collection services. Grantor also pay all court costs
and such additional fees as may be directly by the court.
Caption Headings. Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret or
define the provision of this Agreement.
Notice. All notices required to be given this Agreement shall be
given in writing, may be sent by telefacsimile (unless otherwise
required by law), and shall be effective when actually delivered or
when deposited with a nationally recognized overnight courier or
deposited in the United States mail, first class, postage prepaid,
addressed to the party to whom the notice is to be given at the
address shown above. Any party may change its address for notices
under this Agreement by giving form written notice to the other
parties, specifying that the purpose of the notice is to change the
party's address. To the extent permitted by applicable law, if
there is more than one Grantor, notice to any Grantor will
constitute notice to all Grantors. For notice purposes, Grantor
will keep Lender informed at all times of Grantor's current
addresses(es).
Power of Attorney. Grantor hereby appoints as its true and lawful
attorney-in-fact, irrevocably, with full power of substitution to
do the following: (a) to demand, collect, receive, receipt for, sue
and recover all sums of money or other property which may now or
hereafter become due, owing or payable from the Collateral; (b) to
execute, sign and endorse any and all claims, arising under the
Collateral, and, in the place and stead of Grantor, to execute and
deliver its release and settlement for the claim; and (d) to file
claim or claims or to take any action or institute or take part in
any proceedings, either in its own name or in the name of Grantor,
or otherwise, which in the discretion of Lender may seem to be
necessary or advisable. This power is given as security for the
Indebtedness, and the authority hereby conferred is and shall be
irrevocable and shall remain in full force and effect until
renounced by Lender.
Severability. If a court of competent jurisdiction finds any
provision of this Agreement to be invalid or unenforceable as to
any person or circumstance, such finding shall not render that
provision invalid or unenforceable as to any other persons or
circumstances. If feasible, any such offending provision shall be
deemed to be modified to be within the limits of enforceability or
validity; however, if the offending provision cannot be so
modified, it shall be stricken and all other provisions of this
Agreement in all other respects shall remain valid and enforceable.
Successor Interests. Subject to the limitations set forth above on
transfer of the Collateral, this Agreement shall be binding upon
and inure to the benefit of the parties, their successors and
assigns.
Wavier. Lender shall not be deemed to have waived any rights
under this Agreement unless such waiver is given in writing and
signed by Lender. No delay or omission on the part of Lender in
exercising any right shall operate as a waiver of such right or any
other right. A waiver by Lender of a provision of this Agreement
shall not prejudice or constitute a waiver of Lender's right
otherwise to demand strict compliance with that provision or any
other provision of this Agreement. No prior waiver by Lender, nor
any course of dealing between Lender and grantor, shall constitute
a waiver of any of Lender's rights or of any of Grantor's
obligation as to any future transactions. Whenever the consent of
Lender is required under this Agreement, the granting of such
consent by Lender in any instance shall not constitute continuing
to subsequent instance where such consent is required and in all
cases may be granted or withheld in the sole discretion of Lender.
GRANTOR ACKNOWLEDGE HAVING READ THE PROVISIONS OF THIS COMMERCIAL
SECURITY AGREEMENT, AND GRANTOR AGREES TO ITS TERMS. THIS
AGREEMENT IS DATED JANUARY 4, 1999.
GRANTOR:
MICRONETICS WIRELESS, INC.
By:
Richard Kalin, President
LENDER:
BANK OF NEW HAMPSHIRE
By:
Authorized Officer
N:\ANNE\MICRO\CSA.A99
EXHIBIT 10.9
STOCK PURCHASE AGREEMENT
This AGREEMENT (the "Agreement") made as of this __ day of
October, 1998, by and between MICRONETICS WIRELESS, INC., a
Delaware corporation whose principal place of business is 26
Hampshire Drive, Hudson, NH 03051 (hereinafter referred to as
"Micronetics" or the "PURCHASER"), and FLOYD S. PARIN ("Parin") and
MARK B. GOLDMAN ("Goldman") (Parin and Goldman are collectively
referred to herein as the "Sellers").
The Sellers are the owners of all of the outstanding stock of
MICROWAVE & VIDEO SYSTEMS, INC. ("MVS"), a Connecticut corporation
whose principal office is 87 B Sandpit Road, Danbury, CT 06810 (the
"MVS Stock").
The Sellers desire to sell the MVS Stock, and the Purchaser
desires to purchase the CTAS Stock, all on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises, the mutual
covenants and agreements herein contained and other valuable
consideration, the receipt, adequacy and sufficiency whereof is
hereby acknowledged, the Sellers and the Purchaser do hereby
covenant and agree as follows:
1. Consideration and Sale of Shares.
1.1 MVS Stock to be Sold by Sellers. Subject to the
terms, provisions and conditions contained in this Agreement, and
on the basis of the representations and warranties herein set
forth, the Sellers agree to sell to the Purchaser on the date
hereof and the Purchaser agrees to purchase from the Sellers the
CTAS Stock owned by the Sellers.
1.2 Purchase Price. The aggregate purchase price to be
paid for the MVS Stock (the "Purchase Price") shall be (a) the
difference between the book value of all assets of MVS on the
Closing Date minus the liabilities directly related to those assets
of MVS on the Closing Date plus 15% of the book value of the
production and laboratory equipment of MVS on the Closing Date (the
"Book Value") and (b) the after-tax income of MVS for its calendar
year 1998 (determined in accordance with general accounting
principles applied or a consistent basis during the period) (the
"1998 Income") (collectively, the Book Value and the 1998 Income
are referred to as the "Purchase Price"). The final determination
of the Book Value and the 1998 Income shall be made by Micronetics'
independent certified public accountant, which amount, if disputed
by MVS, shall be subject to dispute resolution by each of MVS and
Micronetics designating an arbitrator and the two designees
designating a third arbitrator. The Purchase Price shall be paid
as set forth below in Paragraph 1.5(b).
1.3 Closing. The closing of the transactions
contemplated hereby shall occur on November 11, 1998 at 12:00 P.M.
at the offices of MVS or such other date and location as shall be
agreed to by the parties hereof (the "Closing").
1.4 Transfer of MVS Stock and Payment of Purchase Price
at Closing. At the Closing, subject to the terms of this
Agreement, the following transactions shall occur, and each such
transaction shall be deemed to occur simultaneously with the other
transactions:
(a) MVS Stock Certificates. The Sellers will
deliver certificates to the Purchaser representing the MVS Stock,
duly endorsed in blank, with any required stock transfer and other
documentary stamps affixed;
(b) Payment to Sellers at Closing. Upon the
delivery by the Sellers of certificates representing the MVS Stock,
the Purchaser shall deliver, or cause to be delivered:
(i) Stock Purchase Price. Micronetics shall
issue and deliver to the Sellers, in proportion to their ownership
of MVS (as set forth on Schedule 2.25 attached hereto),
(x) at the Closing (or within 15 days from
the Closing) such number of shares of common stock of Micronetics
(the "Common Stock") equal to fifty percent (50%) of the Book Value
based upon the average of the closing price of the Common Stock for
the trailing 30 days prior to the Closing Date (the "Price"), and
(y) within 30 days following determination
of the 1998 Income such number of shares of Common Stock (the
"Second Closing") based upon the average of the closing price of
the Common Stock for the trailing 30 days prior to the Second
Closing, equal to fifty percent (50%) of the 1998 Income
(collectively the "Stock Purchase Price"). In the event
Micronetics registers its securities under the Securities Act of
1933, as amended (the "Act"), or participates in a public offering
of its securities, Micronetics shall offer the Sellers the
opportunity to register their securities from the Stock Purchase
Price on the same terms and conditions as applicable to any other
shareholder participating in such registration. This registration
right shall not apply to any shares which may be sold pursuant to
Rule 144 promulgated under the Act; and
(ii) Cash Purchase Price. Micronetics shall
pay the Sellers, in proportion to their ownership of MVS (as set
forth on Schedule 2.25 attached hereto), the Cash Purchase Price,
as follows:
(w) on the Closing Date, Micronetics shall
pay the Sellers, in proportion to their ownership of MVS, twenty
five percent (25%) of the Book Value by check, subject to
collection;
(x) on the Closing Date, Micronetics shall
execute a note payable to each of the Sellers, in proportion to
their ownership of MVS, for twenty five percent (25%) of the Book
Value payable in two equal annual installments, which note shall
bear interest at a rate of 6% per annum (the "Note"), a copy of
which is attached hereto as Exhibit 1.5(b)(ii)(x); provided,
however, that the amount of the Notes shall be reduced by an amount
equal to (i) any accounts receivable listed on Schedule 2.11
annexed hereto not collected by Micronetics within six months of
the Closing Date and (ii) the value of any inventory set forth on
Schedule 2.18 annexed hereto not sold within one year of the
Closing Date.
(y) at the Second Closing, Micronetics
shall pay the Sellers twenty five percent (25%) of the 1988 Income
by check, subject to collection; and
(z) at the Second Closing, Micronetics
shall deliver a second set of Notes payable to the order of the
Sellers in proportion to their ownership of MVS, for twenty five
percent (25%) of the 1998 Income.
2. Representations and Warranties of MVS and the Sellers.
MVS and the Sellers each hereby warrants and represents to
Micronetics as follows:
2.1 Organization and Good Standing of MVS. MVS is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Connecticut, and has the full
corporate power to carry on its business as now conducted. MVS is
entitled to own or lease and to operate the Assets now owned or
operated by it directly, and has the requisite power and authority
to consummate the transactions contemplated by this Agreement. MVS
is duly qualified to do business and is in good standing under the
laws of each jurisdiction in which its ownership of property or
assets or the nature of business conducted therein requires such
qualification, possesses all licenses and franchises required under
Federal, state or local law to conduct its businesses in the manner
in which it is presently conducted, all of which are freely
assignable to Micronetics without the consent of any other party.
2.2 No Breach. Except as set forth on Schedule 2.2,
neither the execution or delivery of this Agreement by MVS or the
Sellers, nor performance hereunder will result in a violation or
breach of any term or provision, or constitute a default under any
indenture, mortgage, deed of trust or other contract, agreement,
authorization or permit to which MVS or the Sellers is a party or
is subject.
2.3 Litigation and Claims; Compliance with Applicable
Law.
(i) There is no litigation, claim,
governmental or other proceeding or investigation pending or, to
the knowledge of MVS, threatened or in prospect which will have an
adverse effect on (a) the Assets (defined below) or (b) the subject
matter of this Agreement or any action contemplated hereby or
incidental hereto.
(ii) To the best of MVS and Sellers' knowledge,
MVS is not in violation of any, and has been and will be as of the
Closing Date in compliance with, all provisions of any law, decree,
order or regulation applicable to the operation of its business,
including, without limitation those relating to environmental
requirements (such as air, water and noise pollution) and to
employment practices (such as discrimination, health and safety),
nor is MVS subject to any requirements to take remedial action by
reason of any violation (or to avoid in the future a violation) of
any such provision relating to the Assets.
2.4 Properties and Assets. MVS has good and marketable
title to the Assets subject to no liens or adverse claims. Assets
means all properties, assets and rights of any kind, to the extent
of MVS's right, title and interest therein, (i) reflected on the
balance sheet on the Closing Date or (ii) otherwise held or used in
connection with the business including but not limited to the
following: all tangible and intangible property, whether real,
personal, or mixed; all production, test, research and development
and office equipment and fixtures; all raw materials, work-in-
process, finished goods inventories, and packaging materials; all
contracts, leases, franchises, sale and purchase orders, and other
agreements; all transferable government licenses, permits, and
approvals; all technology know-how, trade secrets, patents,
trademarks, service marks, trade names, and copyrights and
applications therefor, and renewals, modifications and extensions
thereof (collectively, "Intellectual Property"); all licenses of
Intellectual Property; all books, records, files, software media,
advertising materials, customer lists, drawings, specifications,
and other documents as more specifically set forth on Schedule 2.4
annexed hereto. Schedule 2.4 is a complete list of all tangible
properties and assets included within the Assets other than the
accounts receivable which are scheduled on Schedule 2.11 and
inventory which is scheduled on Schedule 2.18. There shall be a
minimum of $175,000 in cash maintained by MVS at the Closing.
Micronetics shall have the right to inspect, at reasonable times,
the Assets during the period between execution of this Agreement
and the Closing Date.
2.5 List of Customer Accounts. Schedule 2.5 contains a
true, correct and complete list of all customers of MVS.
2.6 No Defaults or Undisclosed Liabilities. MVS is not
in default with respect to any material indebtedness or liability
and does not know of any event which has occurred which upon the
passage of time would result in any such default. There are no
facts in existence on the date hereof and known to MVS or the
Sellers which might reasonably serve as a basis for any material
liabilities or obligations not disclosed in this Agreement or in
schedules attached hereto, incorporated herein by reference or
previously delivered to Micronetics as herein provided. Except as
provided herein, in a schedule attached hereto or a document
delivered hereunder, no consent of any party to any agreement or
document is required for the execution, delivery or performance of
this Agreement, and the consummation of the transactions
contemplated hereby will not result in a breach of, or give rise to
the right of cancellation of, any such agreement or document.
2.7 Financial Condition. A copy of the unaudited
financial statements (balance sheet, statements of income and
statements of change in financial position) of MVS for its fiscal
years ended December 31, 1996 and December 31, 1997 and for the
period January 1, 1998 through the latest practical date are or
will be attached hereto as Schedule 2.7. Such financial statements
were true and correct at the dates thereof and were prepared and
present fairly the financial position of MVS as of the dates
thereof and its results of operations for the periods then ended in
accordance with generally accepted accounting principles (except as
to the omission of notes and explanatory comments) applied on a
basis consistent with the prior practice of MVS.
2.8 Insurance. MVS reasonably believes it maintains
adequate insurance on the Assets with respect to risks normally
insured against by companies similarly situated and engaged in
similar business with assets similar to the Assets. All insurance
policies maintained by MVS and the amounts of coverage and
deductible or co-insurance provisions provided in such policies,
are listed in Schedule 2.8 attached hereto, are currently in full
force and effect and are not in default and will be in effect on
the Closing Date. To MVS' knowledge, there has been no failure to
give any notice or present any claim under such policies in timely
fashion. MVS has not received any notice providing for the
termination of such insurance or that insurance upon terms
substantially the same as those currently in effect will not be
reoffered to it. No claim covered by such insurance policies has
arisen prior to the date hereof, the anticipated loss from which is
not adequately insured against (subject to any applicable
deductible or co-insurance provisions). If any of the Assets are
lost, stolen or damaged on or before Closing, which loss, theft,
damage or destruction is covered by insurance, MVS will assign to
Micronetics, at the Closing, the right to receive such insurance
proceeds, subject to a required prepayment of the Note and any
amounts otherwise owed to MVS.
2.9 Brokerage and Finder's Fees. Neither MVS, the
Sellers, nor any affiliate of theirs has employed any broker,
finder or agent, nor has it otherwise dealt with or become in any
way obligated for any finder's, broker's, agent's or similar fee
with respect to the transactions referred to herein.
2.10 Material Misstatements or Omissions. No
representations or warranties by MVS or the Sellers in this
Agreement nor any document, statement, certificate or schedule
furnished or to be furnished to Micronetics pursuant hereto, or in
connection with the transactions contemplated hereby, contains or
will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements
of facts contained herein or therein not misleading.
2.11 Accounts Receivable of MVS. Schedule 2.11 attached
hereto contains a true and correct statement of the accounts
receivable of MVS as of the date hereof. The parties agree that
the accounts receivable schedule will be updated on the Closing
Date. Such receivables will be referred to herein as the
"Receivables". If a customer takes a credit, it shall reduce the
Receivables.
2.12 Intangible Property. Schedule 2.12 attached hereto
contains a complete list of all of the patents, patent licenses,
patent applications, trademarks, trademark registrations, and
applications therefor, tradenames, copyrights and copyright
registrations and applications therefor of MVS included in the
Assets (the "Intangible Property"). MVS has not received any
notice of infringement or other complaint that its operations
traverse or infringe the rights of others under patents,
trademarks, tradenames, copyrights, or otherwise relating to the
Assets.
2.13 Conduct of the Business of MVS Prior to the Closing
Date. MVS agrees that at all times after the date hereof and prior
to the Closing Date:
(a) the business of MVS shall be conducted in the
ordinary course of business;
(b) MVS shall not (i) acquire any assets, other
than in the ordinary course of business; (ii) dispose of, encumber
or mortgage any assets or properties; (iii) incur any indebtedness
for borrowed money, discharge or satisfy any lien or encumbrance or
pay any obligation or liability (fixed or contingent), or enter
into any other material transaction, other than in the ordinary
course of business; (iv) waive, release, grant or transfer any
rights of value or modify or change in any material respect any
existing license, lease, contract or other document; or (v) enter
into any contract, agreement, commitment or arrangement with
respect to any of the foregoing;
(c) MVS shall not (i) increase the compensation
payable or to become payable by it to any employee of MVS, or (ii)
pay or provide for any bonus, profit sharing, stock option,
pension, retirement, deferred compensation, employment or other
payment plan, agreement or arrangement for the benefit of employees
of MVS, except in the ordinary course of the administration of its
existing employment agreements and benefit plans;
(d) the properties of MVS shall be maintained in
customary repair, order and condition, reasonable wear and use
excepted, and insurance on such properties and with respect to the
conduct of the business of MVS shall be maintained in such amounts
and of such kinds comparable to the insurance in effect on the date
hereof; and
(e) to the extent that Micronetics desires MVS to
make an expenditure that would not be consistent with MVS's
operation of its business in a limited manner as outlined above,
Micronetics may request MVS to make such expenditure, and such
expenditures, if made, shall be included as prepaid expenses in the
Cash Purchase Price. Whether MVS elects to make any such
expenditures will be determined solely by MVS in its sole and
absolute discretion.
2.14 Representations and Warranties at Closing. Unless
expressly herein otherwise provided or contemplated, the
representations and warranties of MVS set forth in this Agreement
shall be true on and as of the Closing Date as though such
representations and warranties were made on and as of such date and
all such representations and warranties shall survive the Closing.
Nothing in this paragraph shall affect the obligations and
indemnities of the parties with respect to covenants and agreements
contained in this Agreement that are permitted or required to be
performed, in whole or in part, after the Closing Date.
2.15 Indemnification. Subject to a limit of the
Purchase Price, and provided any such claim arises on or before one
year from the Closing Date, MVS and the Sellers agree to indemnify,
defend and hold harmless Micronetics, its successors and legal
representatives, from all demands, claims, actions, or causes of
action, losses, damages, suits, judgments, costs and reasonable
attorneys' fees and expenses incurred by or asserted against
Micronetics by reason of any claims, obligations, debts, demands,
or liabilities arising from events occurring prior to the Closing
Date or a breach of any representations, warranties or covenants
contained in this Agreement.
2.16 Acquiring Shares for Investment.
The Sellers represent that they are acquiring shares of Common
Stock for investment and not with a view toward the resale thereof
and the certificates evidencing the shares of Common Stock being
acquired pursuant will be legended in respect of restricted
securities.
2.17 Liabilities. Schedule 2.17(a) annexed hereto
contains a complete and accurate list of all of the liabilities of
MVS as of the date hereof and Schedule 2.17(b) contains a complete
and accurate list of all of the liabilities of MVS which shall not
be liabilities of MVS on the Closing Date. The parties agree that
Schedules 2.17(a) and (b) shall be updated on the Closing Date.
These schedules shall identify any leases (for real estate or
capital equipment) that currently are in place.
2.18 Inventory. Schedule 2.18 annexed hereto contains a
complete and accurate list of all of the inventory of MVS as of the
date hereof.
2.19 Bank Accounts. Schedule 2.19 annexed hereto
contains a complete and accurate list of each of the bank accounts
of MVS as of the date hereof and the authorized signatories to each
of said accounts.
2.20 Backlog. Schedule 2.20 annexed hereto contains a
complete and accurate list of all open orders for shipments
remaining to be made.
2.21 Employees. Schedule 2.21 annexed hereto contains a
complete and accurate list of all employees and consultants and
their current rate of pay and how much pay they received from MVS,
if any, in MVS' fiscal year ended December 31, 1997. MVS has no
pension, profit-sharing, option or other incentive or employee
benefit plan (including obligations to or customary arrangements
with employees for incentive compensation, allowances, vacations,
severance pay or other benefits) except as listed in Exhibit 2.21.
To the knowledge of the MVS and the Sellers, as of the date hereof,
(i) all obligations of MVS pursuant to any pension plan, (the
"Pension Plan"), if any, were fully funded as to past service
benefits under the Pension Plan; (ii) all accrued payments
thereunder had been paid or reserved for; (iii) the Pension Plan
did not have an accumulated funding deficiency, as such term is
defined in Section 3.02 of the Employment Retirement Income
Security Act of 1974, as amended; and (iv) no material liability to
the Pension Benefit Guaranty Corporation had been incurred with
respect to the Pension Plan.
2.22 Taxes. Except as set forth on Schedule 2.22, MVS
has paid all taxes that are due and filed all returns that were
required to be filed, and MVS has not received any notice of
nonpayment or audit with respect to any such taxes.
2.23 Environmental Requirements. Except as set forth in
Schedule 2.23, MVS is in compliance in all material respects with
all laws, governmental standards, rules and regulations applicable
to it or to any of its properties in respect to occupational health
and safety laws and environmental laws and has obtained all
governmental authorizations, kept all records and made all filings
required by applicable environmental laws with respect to emissions
or discharges into the environment and the proper disposal of any
hazardous wastes, hazardous substances, or other hazardous or toxic
materials as defined in the environmental laws. Except as set
forth in Schedule 2.23, none of the properties occupied or used by
MVS has been contaminated with any such hazardous wastes, hazardous
substances or other hazardous or toxic materials as a result of
actions of MVS or, to the knowledge of MVS, as a result of actions
of any other person or entity. Except as set forth in Schedule
2.23, MVS has not received any notices from the United States
Environmental Protection Agency that it is a potentially
responsible party under the Comprehensive Environmental Response,
Compensation and Liability Act ("Superfund Notices"), any citations
from any governmental authority for noncompliance with its
requirements with respect to air, water or environmental pollution,
or the improper storage, use or discharge of any hazardous waste,
other waste or other substance or material pertaining to its
business ("Citations") or any written notice from any private party
alleging any such noncompliance or impropriety; and there are no
pending or unresolved Superfund Notices, Citations or written
notices from private parties alleging any such noncompliance or
impropriety.
2.24 Subsidiaries, Joint Ventures, etc. MVS has no
subsidiaries and does not own or control any stock or other
interest in any enterprise (whether or not such enterprise is a
corporation). The Sellers have no interest in any enterprise
(whether or not such enterprise is a corporation) other than less
than 1% of the outstanding capital stock of a publicly-held
corporation.
2.25 Capitalization. The authorized, issued and
outstanding capital stock of MVS are set forth on Exhibit 2.25.
Each of the outstanding shares of MVS Stock is duly authorized,
validly issued and outstanding, fully paid and nonassessable, and
has not been issued and is not owned or held in violation of any
preemptive right of shareholders. The MVS Stock is owned of record
and beneficially entirely by the Sellers, free and clear of all
liens, adverse claims, and encumbrances. There are no commitments,
plans or arrangements to issue, and no outstanding notes, stock
options, warrants or other rights calling for the issuance by MVS
of any Capital stock of MVS.
3. Representations and Warranties of Micronetics.
Micronetics hereby warrants and represents to and agrees with MVS,
Parin and Goldman as follows:
3.1 Organization and Good Standing of Micronetics.
Micronetics is a corporation duly organized, existing and in good
standing under the laws of the State of Delaware.
3.2 Authority of Micronetics. Micronetics has the
full corporate authority to enter into the Agreement and the Note
and to carry out the terms of the Agreement and Note. Neither the
execution nor delivery of the Agreement or the Note, by
Micronetics, nor performance thereunder will result in a violation
or breach of any term or provision nor constitute a default under
any indenture, mortgage, deed of trust or other contract or
agreement to which Micronetics is a party. Except as provided
herein or in a schedule attached hereto, no consent of any party to
any such agreement or instrument is required for the execution,
delivery or performance of this Agreement, and the consummation of
the transactions contemplated hereby will not result in a breach
of, or give rise to a right of cancellation of, any such agreement
or instrument.
3.3 Material Misstatements or Omissions. No
representations or warranties by Micronetics in this Agreement, nor
any document, statement, certificate or schedule furnished or to be
furnished MVS pursuant hereto, or in connection with the
transactions contemplated hereby, contains or will contain any
untrue statement of a material fact, or omits or will omit to state
a material fact necessary to make the statement of facts contained
herein or therein nor misleading.
3.4 Brokerage and Finder's Fees. Micronetics has
engaged the services of Heath & Company with respect to the
transactions referred to herein whose fee shall be paid by
Micronetics.
3.5 Representations and Warranties at Closing. Except
as expressly herein otherwise provided or contemplated, the
representations and warranties of Micronetics as set forth in this
Agreement shall be true on and as of the Closing Date as though
such representations and warranties were made on and as of such
date and all such representations and warranties shall survive the
Closing. Nothing in this paragraph shall affect the obligations
and indemnities of the parties with respect to covenants and
agreements contained in this Agreement that are permitted or
required to be performed, in whole or in part, after the Closing
Date.
4. Covenants of MVS, Parin and Goldman. MVS, Parin and
Goldman hereby covenant to Micronetics as follows:
4.1 Subject to Micronetics operating in compliance with
the provisions of this Agreement, Parin and Goldman covenant and
agree that neither of them nor any person, firm or corporation
controlling, controlled by, or under common control with either of
them at any time during the period of two years from and after the
Closing Date within any of the states or countries in which MVS is
doing business on the Closing Date, directly or indirectly, in any
matter or under any circumstances or conditions whatsoever, shall
engage in any activity which is the same or is directly competitive
with the business of MVS on the Closing Date.
4.2 MVS, Parin and Goldman covenant and agree that
neither of them nor any person, firm or corporation controlling,
controlled by, or under common control with either of them shall at
all times hereafter keep secret and retain in strictest confidence,
and shall not to the detriment of Micronetics knowingly use or
disclose any Proprietary Information (as hereinafter defined)
directly or indirectly to any unauthorized person, firm or
corporation. Proprietary Information means any information as to
the business affairs or operations of Micronetics, including,
without limitation, all or part of any "know-how", trade secrets,
client lists, mailing operational methods, marketing plans or
strategies, project development, acquisition or bidding techniques
or plans, business acquisition plans, new personnel acquisition
plans, methods of construction, technical processes, designs,
design projects, inventions, developments, improvements,
statistical data and compilations, trademarks, patents, formulae,
other methods or processes, manuals, and research projects (i) not
generally known in the industry and (ii) acquired, used or
otherwise employed by Micronetics, or any client, or sub-
contractor, consultant, or any other person with which Micronetics
may do business, whether learned by MVS, Parin or Goldman
heretofore or hereafter.
4.3 MVS, Parin and Goldman shall promptly notify
Micronetics, as soon as either of them obtains knowledge thereof,
of any fact, circumstances or occurrences (including without
limitation any actual or threatened legal or other proceeding)
which has materially adversely affected or may materially adversely
affect any of the Assets or which might cause any of MVS's
warranties and representations in this Agreement to be or become
untrue.
4.4 MVS shall arrange to deliver to Micronetics
unaudited financials of MVS for its fiscal years ended December
31, 1996 and December, 1997 and the nine months ended September 30,
1998.
4.5 On the Closing Date, MVS, Parin and Goldman shall do
any and all acts and execute and deliver any and all documents
necessary to effect the assignment of the Intangible Property set
forth on Schedule 2.12 to Micronetics.
4.6 On the Closing Date, each of Parin and Goldman shall
enter into an employment agreement with Micronetics substantially
in the form annexed hereto as Exhibit 7(iv) and Exhibit 7(v),
respectively.
4.7 Parin and Goldman agree to negotiate mutually
acceptable terms of an election to be made under Section 338(h)(10)
under the Internal Revenue Code of 1986 and any corresponding
elections under state laws having the same or similar effects.
5. Covenants of Micronetics. Micronetics covenants and
agrees that all information, documentation and material relating to
MVS supplied to Micronetics in connection with the transactions
contemplated by this Agreement are confidential and proprietary to
MVS, whether or not so specifically legended, and shall not be
disclosed or otherwise be made available to others in the event
that such transactions are not consummated, in which case
Micronetics shall return all such information, documentation and
material to MVS.
6. Conditions Precedent to Micronetics' Obligations.
6.1 The obligations of Micronetics to consummate this
Agreement shall be conditioned upon each of the following:
(i) MVS's representations and warranties
contained in this Agreement shall be true at the Closing Date as
though such representations and warranties were made at such time.
(ii) MVS shall have performed and complied with
all agreements, covenants and conditions required by this Agreement
to be performed or complied with prior to or at the Closing,
including furnishing the Schedules hereto specifically including
delivery of the financial statements required by Paragraph 4.3
hereof.
(iii) The fulfillment by MVS of its obligations
under Section 6 required to be fulfilled on or before the Closing
Date.
6.2 Prior to the Closing, Micronetics shall have the
right to inspect the books and records of MVS relating to the
Assets being conveyed, transferred and delivered hereunder.
6.3 Prior to the Closing, MVS shall use its best efforts
to obtain all consents necessary to consummate this transaction and
shall have taken all other action necessary to transfer, assign,
set over and convey to Micronetics all of the Assets free and clear
of any and all claims, liabilities, liens and encumbrances of any
kind.
7. Sellers' Obligations at Closing. At the Closing or
thereafter as herein required, the Sellers shall deliver to
Micronetics the following:
(i) Certificates representing all of the
outstanding shares of MVS Stock endorsed in blank.
(ii) executed copies of the employment
agreements in the form annexed hereto as Exhibits 8(iv) and 8(v).
8. Micronetics's Obligations at Closing and Beyond.
(i) Micronetics shall deliver to the Sellers
the portion of the Cash Purchase Price at the Closing and the
Second Closing as specified in Paragraph 1.4 above.
(ii) Micronetics shall execute the Notes to be
delivered at the Closing and the Second Closing as specified in
Paragraph 1.4 above.
(iii) Micronetics shall issue and deliver to
MVS the certificates representing the Stock Purchase Price to be
delivered following the Closing and the Second Closing as specified
in Paragraph 1.4 above.
(iv) Micronetics shall enter into an employment
agreement with Parin substantially in the form annexed hereto as
Exhibit 8(iv).
(v) Micronetics shall enter into employment
agreement with Goldman substantially in the form annexed hereto as
Exhibit 8(v).
(vi) At any time and from time to time at
MVS's reasonable request (whether at or after the Closing and
without further consideration) Micronetics shall take such further
acts as may be required to more fully implement any of the
provisions of this Agreement.
9. Publicity. From the date hereof to the Closing Date,
neither MVS or Micronetics shall issue or make, or cause to have
issued or made, the publication or dissemination of any press
release or other announcement to divulge the existence of this
Agreement or with respect to the transactions contemplated hereby
except after consultation with and prior approval of the other
parties hereto, which approval shall not be unreasonably withheld.
It is understood and agreed that MVS and Micronetics may be
required by law to announce publicly the execution of this
Agreement. The parties agree to cooperate with one another so that
such announcements may be made promptly following the execution
hereof.
10. Fees and Expenses. Each party hereto shall pay all fees
and expenses incurred by it incident to the preparation of this
Agreement, carrying this Agreement into effect, and the
consummation of the transaction contemplated hereby.
11. Notices. Any notice or communication given pursuant
hereto by any party to any party hereto shall be in writing and
delivered or mailed by registered or certified mail, postage
prepaid, as follows:
If to MVS, a copy to the following address:
Microwave & Video Systems, Inc.
87 B Sandpit Road
Danbury Connecticut
CT 06810
Attn: Floyd S. Parin, President
If to Micronetics, a copy to the following:
Micronetics Wireless, Inc.
26 Hampshire Drive
Hudson, NH 03051
Attn: President
with a copy to:
Richard S. Kalin, Esq.
Kalin & Associates, P.C.
One Penn Plaza, Suite 1425
250 West 34th Street
New York, New York 10119
or at such other address as hereafter shall be furnished in writing
by either party to the other party hereto.
12. Entire Agreement. This Agreement and all schedules and
exhibits set forth herein, each of which is expressly incorporated
herein by this reference, constitutes the entire agreement between
the parties relating to the subject matter hereof and supersedes
and replaces all prior agreements or understandings, whether
written or oral, and sets forth all of the representations,
covenants and warranties upon which either party is relying in
entering into this transaction.
13. Original and Counterparts; Binding Effect. This
Agreement may be executed in counterparts, each of which shall be
deemed an original, and all of which together shall constitute one
and the same instrument and shall inure to the benefit of and be
binding upon the parties hereto and their respective legal
representatives, heirs, successors and assigns.
14. Applicable Law. This Agreement shall be construed in
accordance with the laws of the State of New York.
15. Headings. The headings contained in this Agreement are
for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
16. Severability. If any provision of this Agreement is
found to be void or unenforceable by a court of competent
jurisdiction, the remaining provisions of this Agreement shall be
binding upon the parties with the same force and effect as though
the unenforceable part has been severed and deleted.
17. Survival. All statements contained in certificates or
other instruments delivered by or on behalf of the parties hereto
pursuant to this Agreement or in connection with the transaction
contemplated hereby shall be deemed to be representations or
warranties hereunder. The covenant contained herein and all
representations, warranties, covenants and agreements made by the
parties hereto in connection with the Agreement shall survive the
Closing until December 31, 2000, and shall be unaffected by any
investigations made by the Purchaser or knowledge obtained as a
result thereof or otherwise.
18. Arbitration. Other than injunctive relief or specific
performance as provided in Section 4, any controversy or claim
arising out of or relating to this Agreement, or the breach
thereof, shall be submitted to and settled by arbitration by the
American Arbitration Association in the City of New York in
accordance with its Commercial Arbitration Rules, and judgment upon
the award rendered by the arbitrator(s) may be entered in any court
having jurisdiction thereof. Each party thereto shall separately
bear any costs incurred by its in connection with the prosecution
or defense of the arbitration.
IN WITNESS WHEREOF, the undersigned executed this agreement as
of the date first above written.
MICRONETICS WIRELESS, INC.
By:_____________________________
Richard S. Kalin, President
MICROWAVE & VIDEO SYSTEMS, INC.
By:
Floyd S. Parin, President
Floyd S. Parin
Mark B. Goldman
LIST OF SCHEDULES AND EXHIBITS
Schedule 2.2 Violation or Breach
Schedule 2.4 List of Assets (other than inventory or
accounts receivable)
Schedule 2.5 List of Customers
Schedule 2.7 Financial Statements
Schedule 2.8 Insurance
Schedule 2.11 Accounts Receivable
Schedule 2.12 Intangible Property
Schedule 2.17(a) List of All Liabilities
Schedule 2.17(b) List of Excluded Liabilities
Schedule 2.18 Inventory
Schedule 2.19 List of Bank Accounts
Schedule 2.20 List of Backlog
Schedule 2.21 List of Employees; Pension Obligations
Schedule 2.22 Taxes
Schedule 2.23 Environmental Requirements
Schedule 2.25 Capitalization
Exhibit 1.5(b)(ii)(x)Form of Promissory Note
Exhibit 8(iv) Form of Employment Contract for Floyd S. Parin
Exhibit 8(v) Form of Employment Contract for Mark Goldman
N:\ANNE\MICRO\STOCK-AG.II
EXHIBIT 10.10
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of this 4th day of January, 1999
between MICROWAVE & VIDEO SYSTEMS, INC., a Connecticut corporation
(hereinafter called the "Company") with offices at 87B Sandpit
Road, Danbury, Connecticut 06810, and FLOYD S. PARIN, residing at
109 Old Castle Drive, Monroe, CT 06468 (hereinafter called the
"Executive").
W I T N E S S E T H
WHEREAS, the Company manufactures and markets microwave
products; and
WHEREAS, the Company and the Executive desire to enter into an
agreement to memorialize their understandings with regard to the
employment of the Executive by the Company.
NOW, THEREFORE, in consideration of the mutual covenants,
conditions and promises contained herein, the parties hereby agree
as follows:
1. Employment Term. The Company hereby agrees to employ
the Executive and the Executive agrees to enter the employ of the
Company on the terms and conditions set forth below for a term
commencing on the date hereof (the "Commencement Date"), and
terminating three years from the date hereof unless sooner
terminated as herein provided (such term of this Agreement is
herein referred to as the "Term").
2. Duties. Subject to the authority, control and direction
of the Board of Directors of the Company, the Executive shall be
appointed President of the Company, and the Executive will perform
such duties and services commensurate with his position as
President of the Company, including such duties as may from time to
time be assigned to him by the Board of Directors.
3. Time Requirements. The Executive agrees that he will
devote all of his business time and attention to the business
affairs of the Company and that during the period of such
employment the Executive will not, without the prior permission of
the Board of Directors of the Company, engage in any other business
enterprise or enterprises which require more than a nominal amount
of the Executive's business time or attention. The foregoing shall
not prevent the purchase or ownership by the Executive of
investments or securities of publicly-held companies representing
less than 2% of any such companies and any other business which is
not competitive and does not have any business relations with the
Company or any subsidiary of the Company, provided the time or
attention devoted by the Executive to such activities does not
interfere with the performance of his duties hereunder.
4. Compensation. For the full, prompt and faithful
performance of all of the duties and services to be performed by
Executive hereunder, the Company agrees to pay, and the Executive
agrees to accept, the amounts set forth below.
(a) As a base compensation, during the period from the
date of execution of this Agreement to December 31, 1998, the
Executive shall be paid at a rate of per annum (the "Base
Compensation"), payable at such regular times and intervals as the
Company customarily pays its employees. During the period from
January 1, 1999 to December 31, 1999, the Executive shall be paid
at a rate of per annum payable at such regular times and
intervals as the Company customarily pays its employees. Effective
on each January 1st thereafter, the Board of Directors of Company
agrees to review the Executive's performance hereunder and, based
on such review, to grant to the Executive a salary increase in an
amount which, in the sole discretion of the Board of Directors of
the Company, is deemed appropriate.
(b) As incentive compensation, for each fiscal year
during the term of this Agreement, (such fiscal year beginning on
April 1st and ending on March 31st of the following year),
commencing on April 1, 1999, a bonus program will be established
for the Executive to earn up to an additional % of his Base
Compensation, of which it is anticipated 75% will be derived from
the performance of the Company and 25% will be derived from the
performance of Micronetics Wireless, Inc., the parent company of
the Company, which plan shall be jointly developed by the Executive
and the Board of Directors.
(c) The Company shall provide the Executive with health
benefits on the same terms as provided to other employees of the
Company.
(d) The compensation provided for herein shall be in
additional to any retirement, profit sharing, insurance (including
medical) or similar benefit which may at any time be payable to the
Executive pursuant to any plan or policy of the Company relating to
such benefits, which benefits shall be made available to the
Executive on the same basis as they are made available to other
similarly situated executives of the Company.
5. Vacation. The Executive shall be entitled to two weeks of
vacation per year during the Term, which shall be taken at such
time or times as shall be mutually determined by the Company and
the Executive.
6. Death. In the event of the death of the Executive
during the Term or any extension thereof, the employment of the
Executive hereunder shall terminate and come to an end on the last
day of the month following the death of the Executive. The estate
of the Executive (or such persons as the Executive shall designate
in writing) shall be entitled to receive, and the Company agrees to
pay, the Base Compensation of the Executive up to the end of the
month period in which such death occurs.
7. Disability. In the event that the Executive shall,
because of illness or incapacity, physical or mental, be unable to
perform the duties and services to be performed by him hereunder
for a consecutive period of six months, or nine months during any
twelve month period, the Company may terminate the employment of
the Executive hereunder after the expiration of such period. The
Executive shall be entitled to receive his base salary up to the
date of such termination.
8. Administration; Expenses. The Executive shall report to
Richard S. Kalin and the Board of Directors of the Company, or to
a person designated by the Board of Directors, at such intervals as
may be determined from time to time. The Executive shall be
reimbursed by the Company for all expenses reasonably incurred by
him on behalf of the Company in accordance with the Company's
standard policies with respect thereto.
9. Restrictive Covenants.
9.1 Inventions. Any program, discovery, process,
design, invention or improvement which the Executive makes or
develops during his employment by the Company, whether or not
during regular working hours or in connection with the Company's
business or research activities as then conducted or contemplated,
shall belong to the Company and shall be promptly disclosed to the
Company. During the Executive's employment and for a period of two
years thereafter, the Executive shall, without additional
compensation, execute and deliver to the Company any instruments of
transfer and take such other action as the Company may request to
carry out the provisions of this Section 9.1, including without
limitation, filing, at the Company's expense, patent applications
for anything covered by this Section 9.1 and the prompt assignment
of the same to the Company.
9.2 Covenant Not to Compete. The Executive covenants
and agrees that for a period of two years following the termination
of his employment with the Company other than as a result of a
breach of this Agreement by the Company, he shall not directly or
indirectly compete with the Company in the microwave control
components marketplace or in any other business in which the
Company may at such time be engaged, nor induce any person
associated with or employed by the Company or any subsidiary of the
Company, to leave the employ of or terminate his association with
the Company, or any subsidiary of the Company, or solicit the
employment of any such person on his own behalf or on behalf of any
other business enterprise. In the event of termination of this
Agreement by virtue of a breach by the Company, termination without
cause or expiration of the Term, the aforesaid covenant will be
applicable for a period of one year from such event.
9.3 Nondisclosure. The Executive covenants and agrees
for a period of two years following the termination of his
employment with the Company, he will not, directly or indirectly,
during or after the term of employment disclose to any person not
authorized by the Company to receive or use such information,
except for the sole benefit of the Company, any of the Company's
confidential or proprietary data, information, designs, styles, or
techniques, including customer lists. Notwithstanding the
foregoing, this applies solely to information that is not generally
known to anyone other than the Company, its Board of Directors or
its employees.
9.4 If any term of this Article 9 is found by any court
having jurisdiction to be too broad, then and in that case, such
term shall nevertheless remain effective, but shall be considered
amended (as to the time or area or otherwise, as the case may be)
to a point considered by said court as reasonable, and as so
amended shall be fully enforceable.
9.5 In the event that the Executive shall violate any
provision of this Agreement (including but not limited to the
provisions of this Article 9) the Executive hereby consents to the
granting of a temporary or permanent injunction against him by any
court of competent jurisdiction prohibiting him from violating any
provision of this Agreement. In any proceeding for an injunction,
the Executive agrees that his ability to answer in damages shall
not be a bar or interposed as a defense to the granting of such
temporary or permanent injunction against the Executive. The
Executive further agrees that the Company will not have an adequate
remedy at law in the event of any breach by Executive hereunder and
that the Company will suffer irreparable damage and injury if the
Executive breaches any of the provisions of this Agreement.
10. Termination for Cause. The Company may terminate the
Executive's employment without liability (other than for payments
accrued to the date of termination) if the Executive's employment
is terminated "for cause". The term "for cause" shall, for the
purposes of this Agreement, mean (i) a material breach by the
Executive of the provisions of this Agreement, (ii) the commission
by the Executive of a fraud against the Company or the conviction
of the Executive for aiding or abetting, or the commission of, a
felony or of a fraud or a crime involving moral turpitude or a
business crime, (iii) the knowing possession or use of illegal
drugs or prohibited substances, the excessive drinking of alcoholic
beverages which impairs the Executive's ability to perform his
duties hereunder, (iv) being under the influence of such drugs,
substances or alcohol during the Executive's hours of employment,
or (v) any violation of the Company's corporate policies described
in the Company's employee handbook, which handbook may supplemented
or amended by the Company from time to time, a copy of which has
been provided to the Executive. In the event of such termination
for cause, Executive shall be entitled to receive his base salary
up to the date of such termination.
11. No Impediments. The Executive warrants and represents
that he is free to enter into this Agreement and to perform the
services contemplated thereby and that such actions will not
constitute a breach of, or default under, any existing agreement.
12. No Waiver. The failure of any of the parties hereto
to enforce any provision hereof on any occasion shall not be deemed
to be a waiver of any preceding or succeeding breach of such
provision or of any other provision.
13. Entire Agreement. This Agreement constitutes the entire
agreement and understanding of the parties hereto and no amendment,
modification or waiver of any provision herein shall be effective
unless in writing, executed by the party charged therewith.
14. Governing Law. This Agreement shall be construed,
interpreted and enforced in accordance with and shall be governed
by the laws of the State of New York applicable to agreements to be
wholly performed therein.
15. Binding Effect. This Agreement shall bind and inure
to the benefit of the parties, their successors and assigns.
16. Assignment and Delegation of Duties. This Agreement
may not be assigned by the parties hereto except that the Company
shall have the right to assign this Agreement in connection with a
sale or transfer of all or substantially all of its assets, a
merger or consolidation. This Agreement is in the nature of a
personal services contract and the duties imposed hereby are non-
delegable.
17. Paragraph Headings. The paragraph headings herein have
been inserted for convenience of reference only and shall in no way
modify or restrict any of the terms or provisions hereof.
18. Notices. Any notice under the provisions of this
Agreement shall be given by registered or certified mail, return
receipt requested, directed to the addresses set forth above,
unless notice of a new address has been sent pursuant to the terms
of this paragraph.
19. Unenforceability; Severability. If any provision of
this Agreement is found to be void or unenforceable by a court of
competent jurisdiction, the remaining provisions of this Agreement,
shall, nevertheless, be binding upon the parties with the same
force and effect as though the unenforceable part has been severed
and deleted.
20. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be deemed to be duplicate
originals.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
MICROWAVE & VIDEO SYSTEMS, INC.
By:
(Authorized Officer)
Floyd S. Parin
N:\RSKLAW\MICRONET\EMP-AGR.I
EXHIBIT 10.11
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of this 4th day of January, 1999
between MICROWAVE & VIDEO SYSTEMS, INC., a Connecticut corporation
(hereinafter called the "Company") with offices at 87B Sandpit
Road, Danbury, Connecticut 06810, and MARK B. GOLDMAN, residing at
52 Sherwood Avenue, Ridgefield, CT 06877 (hereinafter called the
"Executive").
W I T N E S S E T H
WHEREAS, the Company manufactures and markets microwave
products; and
WHEREAS, the Company and the Executive desire to enter into an
agreement to memorialize their understandings with regard to the
employment of the Executive by the Company.
NOW, THEREFORE, in consideration of the mutual covenants,
conditions and promises contained herein, the parties hereby agree
as follows:
1. Employment Term. The Company hereby agrees to employ
the Executive and the Executive agrees to enter the employ of the
Company on the terms and conditions set forth below for a term
commencing on the date hereof (the "Commencement Date"), and
terminating two years from the date hereof unless sooner terminated
as herein provided (such term of this Agreement is herein referred
to as the "Term").
2. Duties. Subject to the authority, control and direction
of the President and Board of Directors of the Company, the
Executive will perform such duties and services commensurate with
his position as Senior Engineer for the Company, including such
duties as may from time to time be assigned to him by the President
or Board of Directors.
3. Time Requirements. The Executive agrees that he will
devote all of his business time and attention to the business
affairs of the Company and that during the period of such
employment the Executive will not, without the prior permission of
the Board of Directors of the Company, engage in any other business
enterprise or enterprises which require more than a nominal amount
of the Executive's business time or attention. The foregoing shall
not prevent the purchase or ownership by the Executive of
investments or securities of publicly-held companies representing
less than 2% of any such companies and any other business which is
not competitive and does not have any business relations with the
Company or any subsidiary of the Company, provided the time or
attention devoted by the Executive to such activities does not
interfere with the performance of his duties hereunder.
4. Compensation. For the full, prompt and faithful
performance of all of the duties and services to be performed by
Executive hereunder, the Company agrees to pay, and the Executive
agrees to accept, the amounts set forth below.
(a) As a base compensation, during the period from the
date of execution of this Agreement to December 31, 1999, the
Executive shall be paid at a rate of per annum (the "Base
Compensation"), payable at such regular times and intervals as the
Company customarily pays its employees. Effective on each January
1st thereafter, the Board of Directors of Company agrees to review
the Executive's performance hereunder and, based on such review, to
grant to the Executive a salary increase in an amount which, in the
sole discretion of the Board of Directors of the Company, is deemed
appropriate.
(b) As incentive compensation, for each fiscal year
during the term of this Agreement, (such fiscal year beginning on
April 1st and ending on March 31st of the following year),
commencing on April 1, 1999, a bonus program will be established
for the Executive to earn up to an additional % of his Base
Compensation, which plan shall be jointly developed by the
Executive and the President.
(c) The Company shall provide the Executive with health
benefits on the same terms as provided to other employees of the
Company.
(d) The compensation provided for herein shall be in
additional to any retirement, profit sharing, insurance (including
medical) or similar benefit which may at any time be payable to the
Executive pursuant to any plan or policy of the Company relating to
such benefits, which benefits shall be made available to the
Executive on the same basis as they are made available to other
similarly situated executives of the Company.
5. Vacation. The Executive shall be entitled to two weeks of
vacation per year during the Term, which shall be taken at such
time or times as shall be mutually determined by the Company and
the Executive.
6. Death. In the event of the death of the Executive
during the Term or any extension thereof, the employment of the
Executive hereunder shall terminate and come to an end on the last
day of the month following the death of the Executive. The estate
of the Executive (or such persons as the Executive shall designate
in writing) shall be entitled to receive, and the Company agrees to
pay, the Base Compensation of the Executive up to the end of the
month period in which such death occurs.
7. Disability. In the event that the Executive shall,
because of illness or incapacity, physical or mental, be unable to
perform the duties and services to be performed by him hereunder
for a consecutive period of six months, or nine months during any
twelve month period, the Company may terminate the employment of
the Executive hereunder after the expiration of such period. The
Executive shall be entitled to receive his base salary up to the
date of such termination.
8. Administration; Expenses. The Executive shall report to
Floyd S. Parin, and the Board of Directors of the Company, or to a
person designated by the Board of Directors, at such intervals as
may be determined from time to time. The Executive shall be
reimbursed by the Company for all expenses reasonably incurred by
him on behalf of the Company in accordance with the Company's
standard policies with respect thereto.
9. Restrictive Covenants.
9.1 Inventions. Any program, discovery, process,
design, invention or improvement which the Executive makes or
develops during his employment by the Company, whether or not
during regular working hours or in connection with the Company's
business or research activities as then conducted or contemplated,
shall belong to the Company and shall be promptly disclosed to the
Company. During the Executive's employment and for a period of two
years thereafter, the Executive shall, without additional
compensation, execute and deliver to the Company any instruments of
transfer and take such other action as the Company may request to
carry out the provisions of this Section 9.1, including without
limitation, filing, at the Company's expense, patent applications
for anything covered by this Section 9.1 and the prompt assignment
of the same to the Company.
9.2 Covenant Not to Compete. The Executive covenants
and agrees that for a period of one year following the termination
of his employment with the Company other than as a result of a
breach of this Agreement by the Company, he shall not directly or
indirectly compete with the Company in the microwave control
components marketplace or in any other business in which the
Company may at such time be engaged, nor induce any person
associated with or employed by the Company or any subsidiary of the
Company, to leave the employ of or terminate his association with
the Company, or any subsidiary of the Company, or solicit the
employment of any such person on his own behalf or on behalf of any
other business enterprise. In the event of termination of this
Agreement by virtue of a breach by the Company, termination without
cause or expiration of the Term, the aforesaid covenant will be
applicable for a period of one year from such event.
9.3 Nondisclosure. The Executive covenants and agrees
for a period of two years following the termination of his
employment with the Company, he will not, directly or indirectly,
during or after the term of employment disclose to any person not
authorized by the Company to receive or use such information,
except for the sole benefit of the Company, any of the Company's
confidential or proprietary data, information, designs, styles, or
techniques, including customer lists. Notwithstanding the
foregoing, this applies solely to information that is not generally
known to anyone other than the Company, its Board of Directors or
its employees.
9.4 If any term of this Article 9 is found by any court
having jurisdiction to be too broad, then and in that case, such
term shall nevertheless remain effective, but shall be considered
amended (as to the time or area or otherwise, as the case may be)
to a point considered by said court as reasonable, and as so
amended shall be fully enforceable.
9.5 In the event that the Executive shall violate any
provision of this Agreement (including but not limited to the
provisions of this Article 9) the Executive hereby consents to the
granting of a temporary or permanent injunction against him by any
court of competent jurisdiction prohibiting him from violating any
provision of this Agreement. In any proceeding for an injunction,
the Executive agrees that his ability to answer in damages shall
not be a bar or interposed as a defense to the granting of such
temporary or permanent injunction against the Executive. The
Executive further agrees that the Company will not have an adequate
remedy at law in the event of any breach by Executive hereunder and
that the Company will suffer irreparable damage and injury if the
Executive breaches any of the provisions of this Agreement.
10. Termination for Cause. The Company may terminate the
Executive's employment without liability (other than for payments
accrued to the date of termination) if the Executive's employment
is terminated "for cause". The term "for cause" shall, for the
purposes of this Agreement, mean (i) a material breach by the
Executive of the provisions of this Agreement, (ii) the commission
by the Executive of a fraud against the Company or the conviction
of the Executive for aiding or abetting, or the commission of, a
felony or of a fraud or a crime involving moral turpitude or a
business crime, (iii) the knowing possession or use of illegal
drugs or prohibited substances, the excessive drinking of alcoholic
beverages which impairs the Executive's ability to perform his
duties hereunder, (iv) being under the influence of such drugs,
substances or alcohol during the Executive's hours of employment,
or (v) any violation of the Company's corporate policies described
in the Company's employee handbook, which handbook may supplemented
or amended by the Company from time to time, a copy of which has
been provided to the Executive. In the event of such termination
for cause, Executive shall be entitled to receive his base salary
up to the date of such termination.
11. No Impediments. The Executive warrants and represents
that he is free to enter into this Agreement and to perform the
services contemplated thereby and that such actions will not
constitute a breach of, or default under, any existing agreement.
12. No Waiver. The failure of any of the parties hereto
to enforce any provision hereof on any occasion shall not be deemed
to be a waiver of any preceding or succeeding breach of such
provision or of any other provision.
13. Entire Agreement. This Agreement constitutes the entire
agreement and understanding of the parties hereto and no amendment,
modification or waiver of any provision herein shall be effective
unless in writing, executed by the party charged therewith.
14. Governing Law. This Agreement shall be construed,
interpreted and enforced in accordance with and shall be governed
by the laws of the State of New York applicable to agreements to be
wholly performed therein.
15. Binding Effect. This Agreement shall bind and inure
to the benefit of the parties, their successors and assigns.
16. Assignment and Delegation of Duties. This Agreement
may not be assigned by the parties hereto except that the Company
shall have the right to assign this Agreement in connection with a
sale or transfer of all or substantially all of its assets, a
merger or consolidation. This Agreement is in the nature of a
personal services contract and the duties imposed hereby are non-
delegable.
17. Paragraph Headings. The paragraph headings herein have
been inserted for convenience of reference only and shall in no way
modify or restrict any of the terms or provisions hereof.
18. Notices. Any notice under the provisions of this
Agreement shall be given by registered or certified mail, return
receipt requested, directed to the addresses set forth above,
unless notice of a new address has been sent pursuant to the terms
of this paragraph.
19. Unenforceability; Severability. If any provision of
this Agreement is found to be void or unenforceable by a court of
competent jurisdiction, the remaining provisions of this Agreement,
shall, nevertheless, be binding upon the parties with the same
force and effect as though the unenforceable part has been severed
and deleted.
20. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be deemed to be duplicate
originals.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
MICROWAVE & VIDEO SYSTEMS, INC.
By:
(Authorized Officer)
Mark B. Goldman
N:\RSKLAW\MICRONET\EMP-AGR.ONE
EXHIBIT 10.12
ASSET PURCHASE AGREEMENT
This AGREEMENT (the "Agreement") made as of this 4th day of
February, 1999, by and between MICRONETICS WIRELESS, INC., a
Delaware corporation whose principal place of business is 26
Hampshire Drive, Hudson, NH 03051 ("Micronetics" or the
"Purchaser"), and VECTRONICS MICROWAVE CORPORATION, a New Jersey
corporation whose principal place of business is 113 Lincoln
Boulevard, Middlesex, NJ 08846 ("Vectronics").
1. Subject Matter of and Consideration for Sale.
1.1 Assets to be Transferred. Upon the terms and
subject to all of the conditions herein contained and upon the
performance by each of the parties hereto of its obligations
hereunder, Vectronics agrees on the Closing Date (as hereinafter
defined) to sell, transfer, assign, convey, set over and deliver to
Micronetics and Micronetics agrees that on the Closing Date it will
purchase, acquire and accept from Vectronics, all of the assets of
Vectronics as listed on a schedule furnished to Micronetics by
Vectronics dated August 10, 1998, attached hereto as Schedule 1.1,
the present phone and telecopier numbers of Vectronics (732-356-
2377 and 732-356-6782) (the "Assets"). Vectronics represents that
Schedule 1.1 includes all of the assets currently utilized by
Vectronics to design, manufacture and sell all of the products of
its business. The only other assets at the Premises (defined
below) are the corporate records of Vectronics which will be
segregated at closing and moved to a designated storage area and
removed by Vectronics within 45 days after the Closing Date.
1.2 Debts, Liabilities and Obligations;
Indemnification. On the Closing Date, Micronetics shall not assume
any of the debts, liabilities or obligations of Vectronics, other
than those set forth on Schedule 1.2 hereto. Schedule 1.2 shall
contain any open purchase orders of Vectronics and invoices
received by Vectronics for parts to be received after the Closing
that Micronetics agrees to assume. The liabilities of Vectronics
that Micronetics shall not assume, include, but are not limited to,
the following:
(a) Environmental Liabilities. Any and all liabilities and
obligations arising under Environmental Laws with respect to
Vectronics's conduct of its business prior to the Closing or any
other business conducted by Vectronics at any facility at which the
Assets are currently or have been previously located.
"Environmental Laws" shall mean the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. 9601-
9657 and any amendments thereto ("CERCLA"), the Resource
Conservation and Recovery Act, 42 U.S.C. 6901-6987 and any
amendments thereto ("RCRA"), and any other federal, state or local
Environmental statute, regulation, ordinance, order or rule
relating to the generation, use, treatment, disposal, discharge,
ownership, operation, transportation, presence or storage of
Hazardous Materials. "Hazardous Material" shall mean any material,
waste or by products defined as "hazardous waste" or "solid waste"
under CERLA, RCRA or any other federal, state or local statute,
regulation, ordinance, order or rule, or any other unwholesome,
toxic or radioactive material;
(b) Product Liabilities. Any and all liabilities and
obligations relating to any personal injuries or property damage
(other than damage to products) caused or alleged to have been
caused by an product shipped or services rendered by Vectronics
prior to the Closing, including, but not limited to, any liability
for damages alleged to have been caused by design defects,
manufacturing defects, failure to warn or negligence;
(c) Government Contract Liabilities. Any and all
liabilities and obligations relating to (i) Vectronic's failure or
alleged failure to comply with applicable governmental procurement
laws, statute or regulations with respect to any contract, and (ii)
any claim by any government entity for any adjustment to the price
of any contract as a result of any disallowance of Vectronics'
overhead costs allocated to any contract or for recoupment of
development costs on any products shipped prior to the Closing;
(d) Product Warranties. Any and all product warranties of
Vectronics except as provided in Paragraph 2.10 hereof.
(e) Employee Liabilities. Any and all liabilities to
employees of Vectronics for severance, sick pay, vacation pay or
any other obligation.
Vectronics shall indemnify and hold Micronetics harmless from
and against any and all liabilities of Vectronics that are not
assumed by Micronetics pursuant to this Agreement. Micronetics
will be obligated to remove the Assets from the Premises (defined
below) at the termination of Micronetics' occupancy of the Premises
pursuant to the Occupancy Agreement, a form of which is set forth
as Exhibit 7(vi). The Premises means the facility located at 113
Lincoln Boulevard, Middlesex, NJ currently occupied by Vectronics.
1.3 Instruments of Transfer. The transfer of the
Assets shall be effected by bills of sale, assignments, drafts,
checks and other instruments of transfer and conveyance, in such
form as is reasonably satisfactory to Micronetics and Vectronics
and their respective counsel.
1.4 Consideration for Transfer. Micronetics, in
consideration for the purchase of the Assets and such other terms
and conditions hereof, shall pay Vectronics $225,000, of which
$13,650 shall be paid by crediting Micronetics with the advance
payment received on the P.E.I. purchase order (the "Advance"),
$121,350 shall be payable on the Closing Date (as hereinafter
defined) by wire transfer to the Trust Account of Budd and Gardner
or cashier's check (the "Cash Portion of the Purchase Price") and
the balance shall be payable pursuant to a two year 7% promissory
note payable in two annual payments of $45,000 on the next two
yearly anniversary dates of the Closing Date (the "Note"), a form
of which note is attached hereto as Exhibit 1.4 (the "Note Portion
of the Purchase Price") (the Advance, the Cash Portion of the
Purchase Price and the Note Portion of the Purchase Price are
collectively referred to as "the Purchase Price").
1.5 Closing Date. The closing under this Agreement (the
"Closing") shall take place at 9:30 A.M., on February 18, 1999 (the
"Closing Date"), at the offices of Budd and Gardner, Two Shunpike
Road, Madison, NJ 07940, unless extended (a) by up to two weeks
upon the reasonable request of either party hereto or (b) by mutual
agreement of the parties hereto.
1.6 Allocation. The Purchase Price shall be
allocated as mutually agreed upon by the parties hereto.
2. Representations and Warranties of Vectronics.
Vectronics hereby warrants and represents to Micronetics as
follows:
2.1 Organization and Good Standing of Vectronics.
Vectronics is a corporation duly organized, validly existing and in
good standing under the laws of the State of New Jersey, and has
the full corporate power to carry on its business as now conducted.
Vectronics is entitled to own or lease and to operate the Assets
now owned or operated by it directly, and has the requisite power
and authority to consummate the transactions contemplated by this
Agreement. Vectronics is duly qualified to do business and is in
good standing under the laws of each jurisdiction in which its
ownership of property or assets or the nature of business conducted
therein requires such qualification, possesses all licenses and
franchises required under Federal, state or local law to conduct
its businesses in the manner in which it is presently conducted,
all of which are freely assignable to Micronetics without the
consent of any other party.
2.2 No Breach. Except as set forth on Schedule
2.2, neither the execution or delivery of this Agreement by
Vectronics, nor performance hereunder will result in a violation or
breach of any term or provision, or constitute a default under any
indenture, mortgage, deed of trust or other contract, agreement,
authorization or permit to which Vectronics is a party or is
subject.
2.3 Litigation and Claims; Compliance with
Applicable Law. (i) There is no litigation, claim, governmental
or other proceeding or investigation pending or, to the knowledge
of Vectronics, threatened or in prospect which will have an adverse
effect on (a) the Assets, (b) the subject matter of this Agreement
or (c) any action contemplated hereby or incidental hereto.
(ii) To the best of Vectronics' knowledge, Vectronics is not in
violation of any, and has been and will be as of the Closing Date
in compliance with, all provisions of any law, decree, order or
regulation applicable to the operation of its business, including,
without limitation those relating to environmental requirements
(such as air, water and noise pollution) and to employment
practices (such as discrimination, health and safety), nor is
Vectronics subject to any requirements to take remedial action by
reason of any violation (or to avoid in the future a violation) of
any such provision relating to the Assets.
2.4 Properties and Assets. Vectronics has good and
marketable title to the Assets subject to no liens or adverse
claims. Schedule 1.1 is a complete list of all tangible properties
and assets included within the Assets. Micronetics shall have the
right to inspect, at reasonable times, the Assets during the period
between execution of this Agreement and the Closing Date.
2.5 List of Customer Accounts. Schedule 2.5
contains a true, correct and complete list of all customers of
Vectronics.
2.6 No Defaults or Undisclosed Liabilities.
Vectronics is not in default with respect to any material
indebtedness or liability, and does not know of any event which has
occurred which, upon the passage of time, will result in any such
default. Any and all liabilities of Vectronics not disclosed in
this Agreement and listed on Schedule 2.15 for Micronetics to
assume shall be the sole and exclusive responsibility of
Vectronics. Except as provided herein, in a schedule attached
hereto or a document delivered hereunder, no consent of any party
to any agreement or document is required for the execution,
delivery, or performance of this Agreement, and the consummation of
the transactions contemplated hereby will not result in a breach of
or give rise to the right of cancellation of any such agreement or
document.
2.7 Insurance. Vectronics reasonably believes it
maintains adequate insurance on the Assets with respect to risks
normally insured against by companies similarly situated and
engaged in similar business with assets similar to the Assets. All
insurance policies maintained by Vectronics and the amounts of
coverage and deductible or co-insurance provisions provided in such
policies, are listed in Schedule 2.7 attached hereto, are currently
in full force and effect and are not in default and will be in
effect on the Closing Date. To Vectronics' knowledge, there has
been no failure to give any notice or present any claim under such
policies in timely fashion. Vectronics has not received any notice
providing for the termination of such insurance or that insurance
upon terms substantially the same as those currently in effect will
not be reoffered to it. No claim covered by such insurance
policies has arisen prior to the date hereof, the anticipated loss
from which is not adequately insured against (subject to any
applicable deductible or co-insurance provisions). If any of the
Assets are lost, stolen or damaged on or before Closing, which
loss, theft, damage or destruction is covered by insurance,
Vectronics will assign to Micronetics, at the Closing, the right to
receive such insurance proceeds, subject to a required prepayment
of any amounts owed to Vectronics.
2.8 Brokerage and Finder's Fees. Neither
Vectronics nor any affiliate of Vectronics has employed any broker,
finder or agent, nor has it otherwise dealt with or become in any
way obligated for any finder's, broker's, agent's or similar fee
with respect to the transactions referred to herein.
2.9 Material Misstatements or Omissions. No
representations or warranties by Vectronics in this Agreement nor
any document, statement, certificate or schedule furnished or to be
furnished to Micronetics pursuant hereto, or in connection with the
transactions contemplated hereby, contains or will contain any
untrue statement of a material fact, or omits or will omit to state
a material fact necessary to make the statements of facts contained
herein or therein not misleading.
2.10 Accounts Receivable of Vectronics; Warranty
Repairs. Schedule 2.10 attached hereto contains a true and correct
statement of the accounts receivable of Vectronics as of the date
hereof. The parties agree that the accounts receivable schedule
shall be updated on the Closing Date. The list of accounts
receivable is to be used to determine whether any customer payments
are owed to Vectronics. Any payment of a Vectronics invoice
received by Micronetics shall be promptly paid to Vectronics. Any
warranty repairs undertaken by Micronetics of products shipped by
Vectronics prior to the Closing Date shall be handled in accordance
with the provisions of Schedule 2.10(a) attached hereto.
2.11 Intangible Property. Schedule 2.11 attached
hereto contains a complete list of all of the patents, patent
licenses, patent applications, trademarks, trademark registrations,
and applications therefor, tradenames, copyrights and copyright
registrations and applications therefor of Vectronics included in
the Assets (the "Intangible Property"). Vectronics has not
received any notice of infringement or other complaint that its
operations traverse or infringe the rights of others under patents,
trademarks, tradenames, copyrights, or otherwise relating to the
Assets.
2.12 Conduct of the Business of Vectronics Prior to
the Closing Date. Vectronics agrees that at all times after the
date hereof and prior to the Closing Date:
(a) the business of Vectronics shall be conducted
in the ordinary course of business;
(b) Vectronics shall not (i) dispose of, encumber
or mortgage any assets or properties listed on Schedule 1.1; (ii)
waive, release, grant or transfer any rights of value or modify or
change in any material respect any existing license, lease,
contract or other document; or (iii) enter into any contract,
agreement, commitment or arrangement with respect to any of the
foregoing;
(c) Vectronics shall not (i) increase the
compensation payable or to become payable by it to any employee of
Vectronics, or (ii) pay or provide for any bonus, profit sharing,
stock option, pension, retirement, deferred compensation,
employment or other payment plan, agreement or arrangement for the
benefit of employees of Vectronics, except in the ordinary course
of the administration of its existing employment agreements and
benefit plans and;
(d) the Assets of Vectronics shall be maintained in
the same condition as they were on December 20, 1998, reasonable
wear and use excepted, and insurance on such properties and with
respect to the conduct of the business of Vectronics shall be
maintained in such amounts and of such kinds comparable to the
insurance in effect on the date hereof.
2.13 Representations and Warranties at Closing.
Unless expressly herein otherwise provided or contemplated, the
representations and warranties of Vectronics set forth in this
Agreement shall be true on and as of the Closing Date as though
such representations and warranties were made on and as of such
date and all such representations and warranties shall survive the
Closing. Nothing in this paragraph shall affect the obligations
and indemnities of the parties with respect to covenants and
agreements contained in this Agreement that are permitted or
required to be performed, in whole or in part, after the Closing
Date.
2.14 Indemnification. Subject to a limit of the
Purchase Price, and provided any such claim arises on or before one
year from the Closing Date, Vectronics agrees to indemnify, defend
and hold harmless Micronetics, its successors and legal
representatives, from all demands, claims, actions, or causes of
action, losses, damages, suits, judgments, costs and reasonable
attorneys' fees and expenses incurred by or asserted against
Micronetics by reason of any claims, obligations, debts, demands,
or liabilities arising from events occurring prior to the Closing
Date or a breach of any representations, warranties or covenants
contained in this Agreement.
2.15 Liabilities. Schedule 2.15 annexed hereto
contains a complete and accurate list of all of the liabilities of
Vectronics as of the date hereof which are to be assumed by
Micronetics pursuant to this Agreement. The parties agree that
Schedule 2.15 shall be updated on the Closing Date. This schedule
shall identify any leases (for real estate or capital equipment)
that currently are in place.
2.16 Inventory. Schedule 2.16 annexed hereto
contains a complete and substantially accurate list of all of the
inventory (raw material, work-in-process and finished goods) of
Vectronics as of the date hereof.
2.17 Backlog. Schedule 2.17 annexed hereto
contains a complete and accurate list of all open orders for
shipments remaining to be made. This schedule shall be updated as
of the Closing Date.
2.18 Employees. Schedule 2.18 annexed hereto
contains a complete and accurate list of all employees and their
current rate of pay and how much pay they received from Vectronics,
if any, in Vectronics' fiscal year ended December 31, 1998. It
shall also include how long such employee has been an employee and
their job descriptions. Vectronics shall be responsible for any
severance obligations it has to its employees. Vectronics has no
pension, profit-sharing, option or other incentive or employee
benefit plan (including obligations to or customary arrangements
with employees for incentive compensation, allowances, vacations,
severance pay or other benefits) except as listed in Exhibit 2.18.
Vectronics does not have, nor has it ever had, any pension plan
covering any of its employees.
2.19 Taxes. Except as set forth on Schedule 2.19,
Vectronics has paid all taxes that are due and filed all returns
that were required to be filed, and Vectronics has not received any
notice of nonpayment or audit with respect to any such taxes.
2.20 Environmental Requirements. Except as set
forth in Schedule 2.20, Vectronics is in compliance in all material
respects with all laws, governmental standards, rules and
regulations applicable to it or to any of its properties in respect
to occupational health and safety laws and environmental laws and
has obtained all governmental authorizations, kept all records and
made all filings required by applicable environmental laws with
respect to emissions or discharges into the environment and the
proper disposal of any hazardous wastes, hazardous substances, or
other hazardous or toxic materials as defined in the environmental
laws. Except as set forth in Schedule 2.20, none of the properties
occupied or used by Vectronics has been contaminated with any such
hazardous wastes, hazardous substances or other hazardous or toxic
materials as a result of actions of Vectronics or, to the knowledge
of Vectronics, as a result of actions of any other person or
entity. Except as set forth in Schedule 2.20, Vectronics has not
received any notices from the United States Environmental
Protection Agency that it is a potentially responsible party under
the Comprehensive Environmental Response, Compensation and
Liability Act ("Superfund Notices"), any citations from any
governmental authority for noncompliance with its requirements with
respect to air, water or environmental pollution, or the improper
storage, use or discharge of any hazardous waste, other waste or
other substance or material pertaining to its business
("Citations") or any written notice from any private party alleging
any such noncompliance or impropriety; and there are no pending or
unresolved Superfund Notices, Citations or written notices from
private parties alleging any such noncompliance or impropriety.
2.21 Subsidiaries, Joint Ventures, etc. Vectronics
has no subsidiaries and does not own or control any stock or other
interest in any enterprise (whether or not such enterprise is a
corporation). Ruth K. Vogler ("Ruth") and John G. Vogler ("John")
have no interest in any enterprise (whether or not such enterprise
is a corporation) competitive with that of Vectronics or
Micronetics other than less than 1% of the outstanding capital
stock of a publicly-held corporation except John and Ruth own 82.2%
of Vectronics.
3. Representations and Warranties of Micronetics.
Micronetics hereby warrants and represents to and agrees with
Vectronics as follows:
3.1 Organization and Good Standing of Micronetics.
Micronetics is a corporation duly organized, existing and in good
standing under the laws of the State of Delaware.
3.2 Authority of Micronetics. Micronetics has
the full corporate authority to enter into the Agreement and to
carry out the terms of the Agreement. Neither the execution nor
delivery of the Agreement, by Micronetics, nor performance
thereunder will result in a violation or breach of any term or
provision nor constitute a default under any indenture, mortgage,
deed of trust or other contract or agreement to which Micronetics
is a party. Except as provided herein or in a schedule attached
hereto, no consent of any party to any such agreement or instrument
is required for the execution, delivery or performance of this
Agreement, and the consummation of the transactions contemplated
hereby will not result in a breach of, or give rise to a right of
cancellation of, any such agreement or instrument.
3.3 Material Misstatements or Omissions. No
representations or warranties by Micronetics in this Agreement, nor
any document, statement, certificate or schedule furnished or to be
furnished Vectronics pursuant hereto, or in connection with the
transactions contemplated hereby, contains or will contain any
untrue statement of a material fact, or omits or will omit to state
a material fact necessary to make the statement of facts contained
herein or therein nor misleading.
3.4 Brokerage and Finder's Fees. Micronetics has
engaged the services of Heath & Company with respect to the
transactions referred to herein whose fee shall be paid by
Micronetics.
3.5 Representations and Warranties at Closing.
Except as expressly herein otherwise provided or contemplated, the
representations and warranties of Micronetics as set forth in this
Agreement shall be true on and as of the Closing Date as though
such representations and warranties were made on and as of such
date and all such representations and warranties shall survive the
Closing. Nothing in this paragraph shall affect the obligations
and indemnities of the parties with respect to covenants and
agreements contained in this Agreement that are permitted or
required to be performed, in whole or in part, after the Closing
Date.
4. Covenants of Vectronics, Ruth and John. Vectronics,
Ruth and John hereby covenant to Micronetics as follows:
4.1 Non-Compete. Vectronics, Ruth and John
covenant and agree that neither of them nor any person, firm or
corporation controlling, controlled by, or under common control
with any of them at any time during the period of two years from
and after the Closing Date within any of the states or countries in
which Vectronics is doing business on the Closing Date, directly or
indirectly, in any matter or under any circumstances or conditions
whatsoever, shall engage in any activity which is the same or is
directly competitive with the business of Vectronics on the Closing
Date.
4.2 Non-Disclosure. Vectronics, Ruth and John each
covenant and agree that they and any person, firm or corporation
controlling, controlled by, or under common control with any of
them shall at all times hereafter keep secret and retain in
strictest confidence, and shall not to the detriment of Micronetics
knowingly use or disclose any Proprietary Information (as
hereinafter defined) directly or indirectly to any unauthorized
person, firm or corporation. Proprietary Information means any
information as to the business affairs or operations of Vectronics
or Micronetics, including, without limitation, all or part of any
"know-how", trade secrets, client lists, mailing operational
methods, marketing plans or strategies, project development,
acquisition or bidding techniques or plans, business acquisition
plans, new personnel acquisition plans, methods of construction,
technical processes, designs, design projects, inventions,
developments, improvements, statistical data and compilations,
trademarks, patents, formulae, other methods or processes, manuals,
and research projects (i) not generally known in the industry and
(ii) acquired, used or otherwise employed by Micronetics, or any
client, or sub-contractor, consultant, or any other person with
which Micronetics may do business, whether learned by Vectronics,
heretofore or hereafter.
4.3 Notification of Change. Vectronics, Ruth and
John each shall promptly notify Micronetics, as soon as either of
them obtains knowledge thereof, of any fact, circumstances or
occurrences (including without limitation any actual or threatened
legal or other proceeding) which has materially adversely affected
or may materially adversely affect any of the Assets or which might
cause any of Vectronics's warranties and representations in this
Agreement to be or become untrue.
4.4 Consulting Agreement. On the Closing Date,
Vectronics shall enter into Consulting Agreements with Micronetics
providing for John's and Thomas Vogler's services in the forms
annexed hereto as Exhibits 7(iv)(a) and (b) (the "Consulting
Agreements")
4.5 Occupancy Agreement. On the Closing Date,
Vectronics shall enter into an Occupancy Agreement in the form
annexed hereto as Exhibit 7(vi) (the "Occupancy Agreement").
4.6 Plating Training. After the public
announcement of this Agreement, for no additional consideration,
Vectronics agrees to train an employee of Micronetics on
Vectronic's plating processes before the Closing Date. If
Micronetics seeks such training, Micronetics agrees to provide
Vectronics with a Certificate of Insurance for Worker's
Compensation and other liability insurance that covers the employee
of Micronetics who will be trained on the plating process. The
plating process uses hazardous materials and Micronetis agrees to
assume all responsibility for its employee.
4.7 Change Name; Phone Numbers. After the Closing
Date, Vectronics agrees to change its name from Vectronics and to
change its phone and telecopier numbers; it also agrees to consent
to Micronetics' use of the name "Vectronics" and Vectronics' phone
and telecopier numbers.
4.8 Compliance with Bulk Sales Law. Vectronics
agrees to do all things and take all actions, if any, necessary to
comply with any Bulk Sales Law applicable to the transactions
contemplated by the terms of this Agreement.
4.9 Sales Tax. Vectronics agrees to promptly
remit all sales tax due, if any, to the appropriate governmental
authority.
5. Conditions Precedent to Micronetics'
Obligations.
5.1 The obligations of Micronetics to consummate
this Agreement shall be conditioned upon each of the following:
(i) Vectronics's representations and warranties
contained in this Agreement shall be true at the Closing Date as
though such representations and warranties were made at such time.
(ii) Vectronics shall have performed and complied
with all agreements, covenants and conditions required by this
Agreement to be performed or complied with prior to or at the
Closing, including furnishing the Schedules hereto.
(iii) The fulfillment by Vectronics of its
obligations under Section 5 required to be fulfilled on or before
the Closing Date.
5.2 Prior to the Closing until January 15, 1999,
(the "Inspection Period"), Micronetics shall have the right to
inspect the books and records of Vectronics relating to the Assets
being conveyed, transferred and delivered hereunder shall have the
right to confirm the existence and ownership of the Assets. This
inspection is not for the purpose of renegotiating the sales price
of the Assets. If, during the course of, or at the conclusion of,
this Inspection Period Micronetics determines there are facts,
conditions or other matters relative to the Assets that are
unacceptable to Micronetics, neither Vectronics nor Micronetics
will be obligated to proceed further. Micronetics agrees to use
its best efforts to conduct its on-site inspection during the week
of December 21, 1998. If the inspection cannot be performed during
that week the inspection must be performed outside regular working
hours.
5.3 Prior to the Closing, Vectronics shall use its
best efforts to obtain all consents necessary to consummate this
transaction and shall have taken all other action necessary to
transfer, assign, set over and convey to Micronetics all of the
Assets free and clear of any and all claims, liabilities, liens and
encumbrances of any kind. In addition, Vectronics agrees to use
its best efforts to transfer and assign to Micronetics at the
Closing all of the Customer-Owned Equipment maintained at the
Premises and identified on Schedule 5.3.
6. Vectronics' Obligations at Closing. At the Closing
or thereafter as herein required, Vectronics shall deliver to
Micronetics the following:
(i) Bills of sale, assignments, and such other
instruments of transfer and conveyance as may be necessary or
appropriate to the sale and delivery of the Assets pursuant to this
Agreement, all free and clear of any encumbrances.
(ii) At any time and from time to time at Micronetics'
request (whether at or after the Closing and without further
consideration) such further assignments, powers of attorney, and
other instruments of conveyance and transfer as may reasonably be
required; and Vectronics shall take such other action as
Micronetics may reasonably request to assign, grant, convey and
transfer more effectively to Micronetics any of the Assets to be
sold, conveyed, transferred and assigned to Micronetics hereunder.
(iii) an executed copy of the Consulting Agreements
in the forms annexed hereto as Exhibits 7(iv)(a) and (b).
(iv) an executed copy of the Occupancy Agreement in the
form annexed hereto as Exhibit 7(vi).
7. Micronetics' Obligations at Closing and Beyond.
(i) Micronetics shall deliver to Vectronics the
Cash Portion of the Purchase Price as specified in Paragraph 1.4.
above at the Closing.
(ii) Micronetices shall execute and deliver the Note
Portion of the Purchase Price to Vectronics at the Closing.
(iii) Micronetics shall reimburse Vectronics for
its payroll and all related expenses relating to the employment of
Vectronics' employees, working at the request of Micronetics, for
two weeks after the Closing unless any such employee terminates his
employment prior to that time. Vectronics shall agree to continue
its workmen's compensation insurance during this two week period.
In the event Micronetics desires the services of any current
employees of Vectronics after two weeks from the Closing,
Micronetics shall be required to hire these employees or otherwise
engage these employees.
(iv) Micronetics shall enter into the Consulting
Agreements with Vectronics substantially in the forms annexed
hereto as Exhibits 7(iv)(a) and (b).
(v) Micronetics shall be responsible for any
environmental matters that are the result of the actions of
Micronetics, including the removal of hazardous waste and filing of
necessary reports or obtaining of necessary permits while it is
occupying the Premises.
(vi) Micronetics shall enter into the Occupancy
Agreement with Vectronics substantially in the form annexed hereto
as Exhibit 7(vi).
(vii) Micronetics shall agree to honor Vectronics'
obligations to Alcatel pursuant to a letter from Vectronics to
Alcatel ITS Inc. dated July 21, 1997 attached hereto as Exhibit
7(vii).
(viii) At any time and from time to time at
Vectronics' reasonable request (whether at or after the Closing and
without further consideration) Micronetics shall take such further
acts as may be required to more fully implement any of the
provisions of this Agreement.
8. Fees and Expenses. Each party hereto shall pay all
fees and expenses incurred by it incident to the preparation of
this Agreement, carrying this Agreement into effect, and the
consummation of the transaction contemplated hereby.
9. Notices. Any notice or communication given pursuant
hereto by any party to any party hereto shall be in writing and
delivered or mailed by registered or certified mail, postage
prepaid, as follows:
If to Vectronics, a copy to the following address:
Vectronics Microwave Corporation
8 Symor Drive
Convent Station, NJ 07960
Attn: John G. Vogler, President
with a copy to:
Budd & Gardner
2 Shunpike Road
Madison, NJ 07940
Attn: Carlotta M. Budd, Esq.
If to Micronetics, a copy to the following:
Micronetics Wireless, Inc.
26 Hampshire Drive
Hudson, NH 03051
Attn: President
with a copy to:
Richard S. Kalin, Esq.
Kalin & Associates, P.C.
One Penn Plaza, Suite 1425
250 West 34th Street
New York, New York 10119
or at such other address as hereafter shall be furnished in writing
by either party to the other party hereto.
10. Entire Agreement. This Agreement and all schedules
and exhibits set forth herein, each of which is expressly
incorporated herein by this reference, constitutes the entire
agreement between the parties relating to the subject matter hereof
and supersedes and replaces all prior agreements or understandings,
whether written or oral, and sets forth all of the representations,
covenants and warranties upon which either party is relying in
entering into this transaction.
11. Original and Counterparts; Binding Effect. This
Agreement may be executed in counterparts, each of which shall be
deemed an original, and all of which together shall constitute one
and the same instrument and shall inure to the benefit of and be
binding upon the parties hereto and their respective legal
representatives, heirs, successors and assigns.
12. Applicable Law. This Agreement shall be construed
in accordance with the laws of the State of New Jersey.
13. Headings. The headings contained in this Agreement
are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
14. Severability. If any provision of this Agreement is
found to be void or unenforceable by a court of competent
jurisdiction, the remaining provisions of this Agreement shall be
binding upon the parties with the same force and effect as though
the unenforceable part has been severed and deleted.
15. Survival. All statements contained in certificates
or other instruments delivered by or on behalf of the parties
hereto pursuant to this Agreement or in connection with the
transaction contemplated hereby shall be deemed to be
representations or warranties hereunder. The covenant contained
herein and all representations, warranties, covenants and
agreements made by the parties hereto in connection with the
Agreement shall survive the Closing until December 31, 2000, and
shall be unaffected by any investigations made by the Purchaser or
knowledge obtained as a result thereof or otherwise.
16. Arbitration. Other than injunctive relief or
specific performance as provided in Section 4, any controversy or
claim arising out of or relating to this Agreement, or the breach
thereof, shall be submitted to and settled by arbitration by the
American Arbitration Association in the State of New Jersey in
accordance with its Commercial Arbitration Rules, and judgment upon
the award rendered by the arbitrator(s) may be entered in any court
having jurisdiction thereof. Each party thereto shall separately
bear any costs incurred by its in connection with the prosecution
or defense of the arbitration.
17. Public Disclosure. No public announcement of this
Agreement shall be made prior to execution of this Agreement and
notification of Vectronics' employees provided Vectronics'
employees are notified on the date of execution of this Agreement.
Any public announcement made of this Agreement before the Closing
Date shall be subject to the approval of the parties hereto, which
approvals shall not be unreasonably withheld or delayed.
18. Assignment. This Agreement shall not be
assignable except that Micronetics shall have the right to assign
it rights under this agreement to a corporation wholly-owned by it.
19. Sales Representatives. Micronetics will be
responsible to Vectronics' sales representatives for commissions
owed for shipments from the Closing Date to the expiration of each
such representative's contract. Micronetics shall accept orders
from these representatives from the Closing Date until at least the
expiration of each such representative's contract.
<PAGE>
IN WITNESS WHEREOF, the undersigned executed this agreement as
of the date first above written.
MICRONETICS WIRELESS, INC.
By:________________________________
Richard S. Kalin, President
VECTRONICS MICROWAVE CORPORATION
By:
John G. Vogler, President
John G. Vogler (as to provisions of
Paragraph 4)
Ruth K. Vogler (as to provisions of
Paragraph 4)
N:\ANNE\MICRO\VEC.6
<PAGE>
LIST OF SCHEDULES AND EXHIBITS
Schedule 1.1 List of Assets (other than inventory)
Schedule 1.2 List of Open Purchase Orders and Invoices to
be Assumed
Schedule 2.2 Violation or Breach
Schedule 2.5 List of Customers
Schedule 2.7 Insurance
Schedule 2.10 Accounts Receivable
Schedule 2.10(a) Warranty Repairs
Schedule 2.11 Intangible Property
Schedule 2.15 List of Liabilities to be Assumed by
Micronetics
Schedule 2.16 Inventory
Schedule 2.17 Lists of Backlog
Schedule 2.18 List of Employees
Schedule 2.19 Taxes
Schedule 2.20 Environmental Requirements
Schedule 5.3 List of Customer-Owned Equipment
Exhibit 1.4 Form of Promissory Note
Exhibit 7(iv)(a) Form of Consulting Agreement for the services
of John G. Vogler
Exhibit 7(iv)(b) Form of Consulting Agreement for the services
of Thomas Vogler
Exhibit 7(vi) Form of Occupancy Agreement
Exhibit 7(vii) Letter from Vectronics to Alcatel dated July
21, 1997
N:\ANNE\MICRO\VEC.6
EXHIBIT 10.13
CONSULTING AGREEMENT
CONSULTING AGREEMENT dated as of this 18th day of February,
1999 between MICRONETICS WIRELESS, Inc., a Delaware corporation,
(hereinafter called the "Company") with offices at 26 Hampshire
Drive, Hudson, NH 03051, and VECTRONICS MICROWAVE CORPORATION with
a mailing address at 8 Symor Drive, Convent Station, NJ 07960
(hereinafter called "Vectronics") for the services of JOHN G.
VOGLER (hereinafter referred to as the "Consultant").
W I T N E S S E T H
WHEREAS, the Company manufactures and markets microwave
products; and
WHEREAS, the Company and the Vectronics desire to enter into
an agreement to memorialize their understandings with regard to the
utilization of the Consultant's services by the Company.
NOW, THEREFORE, in consideration of the mutual covenants,
conditions and promises contained herein, the parties hereby agree
as follows:
1. Consultancy Term. The Company hereby agrees to engage
Vectronics and Vectronics agrees to furnish to the Company the
services of the Consultant to consult with the Company on the terms
and conditions set forth below for a term commencing on the date
hereof (the "Commencement Date"), and terminating two years from
the date hereof unless sooner terminated as herein provided in
Article 9 (such term of this Agreement is herein referred to as the
"Term").
2. Duties. Subject to the authority, control and direction
of the Board of Directors of the Company, the Consultant will
perform such duties and services commensurate with his position as
a Senior Engineer for the Company, including such duties as may
from time to time be assigned to him by David Robbins, Richard S.
Kalin and the Board of Directors.
3. Time Requirements. The Consultant agrees that during the
first year of the Term he will devote at least four days per week
to the business affairs of the Company, and during the second year
of the Term he will devote at least three days per week to the
business affairs of the Company. These services may be rendered by
the Consultant at a location chosen by the Consultant provided the
Consultant is available to communicate with the Company and the
Consultant agrees to travel to the offices of the Company from
time-to-time in a manner mutually acceptable between the Company
and the Consultant. During the Term, the Consultant will not,
without the prior permission of the Board of Directors of the
Company, engage in any other business enterprise or enterprises
which require more than a nominal amount of the Consultant's
business time or attention. The foregoing shall not prevent the
purchase or ownership by the Consultant of investments or
securities of publicly-held companies representing less than 2% of
any such companies or 47.5% of Vectronics Microwave Corporation and
any other business which is not competitive and does not have any
business relations with the Company or any subsidiary of the
Company, provided the time or attention devoted by the Consultant
to such activities does not interfere with the performance of his
duties hereunder.
4. Compensation. For the full, prompt and faithful
performance of all of the duties and services to be performed by
Consultant hereunder, the Company agrees to pay, and Vectronics
agrees to accept, the amounts set forth below:
(a) As a base compensation during the Term the Consultant
shall be paid at a rate of per month plus all business
related expenses (the "Base Compensation"), payable at such regular
times and intervals at least monthly.
(b) As contingent compensation, the Consultant shall be
paid at a rate of % of revenues from sales to existing customers
of Vectronics as of the Commencement Date of current products and
designs of Vectronics over $600,000 per year for/each year of the
Term, which products and designs are as more fully described on
Schedule A attached hereto. Any sums due hereunder will be paid
within 30 days after the end of each fiscal quarter of the Company.
(c) As additional compensation, the Company shall grant
to the Consultant a three year stock option pursuant to the
Company's Incentive Stock Option Plan for shares of the
Company's Common Stock exercisable at the fair market value on the
date hereof.
5. Death. In the event of the death of the Consultant
during the Term, the consultantcy of the Consultant hereunder shall
terminate and come to an end on the last day of the month following
the death of the Consultant. Notwithstanding the foregoing,
Vectronics shall be entitled to receive, and the Company agrees to
pay, the Base Compensation through the end of the Term.
6. Disability. In the event that the Consultant shall,
because of illness or incapacity, physical or mental, be unable to
perform the duties and services to be performed by him hereunder
for a consecutive period of six months, or nine months during any
twelve month period, the Company may terminate the consultantcy of
the Consultant hereunder after the expiration of such period. The
Consultant shall be entitled to receive and the Company agrees to
pay, the Base Compensation through the end of the Term.
7. Administration; Expenses. The Consultant shall report to
Richard S. Kalin, David Robbins (and the Board of Directors of the
Company), or to a person designated by the Board of Directors, at
such intervals as may be determined from time to time. The primary
person the Consultant shall report to is David Robbins. The
Consultant shall be reimbursed by the Company for all expenses
reasonably incurred by him on behalf of the Company in accordance
with the Company's standard policies with respect thereto.
8. Restrictive Covenants.
8.1 Inventions. Any program, discovery, process,
design, invention or improvement which the Consultant makes or
develops during his consultantcy by the Company, whether or not
during regular working hours or in connection with the Company's
business or research activities as then conducted or contemplated,
shall belong to the Company and shall be promptly disclosed to the
Company. During the Term and for a period of two years thereafter,
the Consultant shall, without additional compensation, execute and
deliver to the Company any instruments of transfer and take such
other action as the Company may request to carry out the provisions
of this Section 8.1, including without limitation, filing, at the
Company's expense, patent applications for anything covered by this
Section 8.1 and the prompt assignment of the same to the Company.
8.2 Covenant Not to Compete. The Consultant covenants
and agrees that for a period of two years from the date hereof, he
shall not directly or indirectly compete with the Company in the
microwave control components marketplace or in any other business
in which the Company may at such time be engaged, nor induce any
person associated with or employed by the Company or any subsidiary
of the Company, to leave the employ of or terminate his association
with the Company, or any subsidiary of the Company, or solicit the
consultant of any such person on his own behalf or on behalf of any
other business enterprise.
8.3 Nondisclosure. The Consultant covenants and agrees
for a period of two years following the Term, he will not, directly
or indirectly, during or after the term of consultantcy disclose to
any person not authorized by the Company to receive or use such
information, except for the sole benefit of the Company, any of the
Company's confidential or proprietary data, information, designs,
styles, or techniques, including customer lists. Notwithstanding
the foregoing, this applies solely to information that is not
generally known to anyone other than the Company, its Board of
Directors or its employees.
8.4 If any term of this Article 8 is found by any court
having jurisdiction to be too broad, then and in that case, such
term shall nevertheless remain effective, but shall be considered
amended (as to the time or area or otherwise, as the case may be)
to a point considered by said court as reasonable, and as so
amended shall be fully enforceable.
8.5 In the event that the Consultant shall violate any
provision of this Agreement (including but not limited to the
provisions of this Article 8) the Consultant hereby consents to the
granting of a temporary or permanent injunction against him by any
court of competent jurisdiction prohibiting him from violating any
provision of this Agreement. In any proceeding for an injunction,
the Consultant agrees that his ability to answer in damages shall
not be a bar or interposed as a defense to the granting of such
temporary or permanent injunction against the Consultant. The
Consultant further agrees that the Company will not have an
adequate remedy at law in the event of any breach by Consultant
hereunder and that the Company will suffer irreparable damage and
injury if the Consultant breaches any of the provisions of this
Agreement.
9. Termination for Cause. The Company may terminate this
Consulting Agreement without liability (other than for payments
accrued to the date of termination) "for cause". The term "for
cause" shall, for the purposes of this Agreement, mean (i) a
material breach by Vectronics or the Consultant of the provisions
of this Agreement, (ii) the commission by Vectronics or the
Consultant of a fraud against the Company or the conviction of the
Consultant for aiding or abetting, or the commission of, a felony
or of a fraud or a crime involving moral turpitude or a business
crime, (iii) the knowing possession or use of illegal drugs or
prohibited substances, the excessive drinking of alcoholic
beverages which impairs the Consultant's ability to perform his
duties hereunder, or (iv) being under the influence of such drugs,
substances or alcohol during the Consultant's hours of Consultancy.
In the event of such termination for cause, the Consultant shall be
entitled to receive his base salary up to the date of such
termination.
10. No Impediments. Vectronics and the Consultant each
warrant and represent that it or he is free to enter into this
Agreement and the Consultant is able to perform the services
contemplated hereby and that such actions will not constitute a
breach of, or default under, any existing agreement.
11. No Waiver. The failure of any of the parties hereto
to enforce any provision hereof on any occasion shall not be deemed
to be a waiver of any preceding or succeeding breach of such
provision or of any other provision.
12. Entire Agreement. This Agreement constitutes the entire
agreement and understanding of the parties hereto and no amendment,
modification or waiver of any provision herein shall be effective
unless in writing, executed by the party charged therewith.
13. Governing Law. This Agreement shall be construed,
interpreted and enforced in accordance with and shall be governed
by the laws of the State of New Jersey applicable to agreements to
be wholly performed therein.
14. Binding Effect. This Agreement shall bind and inure
to the benefit of the parties, their successors and assigns.
15. Assignment and Delegation of Duties. This Agreement
may not be assigned by the parties hereto except that the Company
shall have the right to assign this Agreement in connection with a
sale or transfer of all or substantially all of its assets, a
merger or consolidation. This Agreement is in the nature of a
personal services contract and the duties imposed hereby are non-
delegable.
16. Paragraph Headings. The paragraph headings herein have
been inserted for convenience of reference only and shall in no way
modify or restrict any of the terms or provisions hereof.
17. Notices. Any notice under the provisions of this
Agreement shall be given by registered or certified mail, return
receipt requested, directed to the addresses set forth above,
unless notice of a new address has been sent pursuant to the terms
of this paragraph.
18. Unenforceability; Severability. If any provision of
this Agreement is found to be void or unenforceable by a court of
competent jurisdiction, the remaining provisions of this Agreement,
shall, nevertheless, be binding upon the parties with the same
force and effect as though the unenforceable part has been severed
and deleted.
19. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be deemed to be duplicate
originals.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
MICRONETICS WIRELESS, INC.
By:
(Authorized Officer)
VECTRONICS MICROWAVE CORPORATION
By:
(Authorized Officer)
John G. Vogler
N:\RSKLAW\MICRONET\EMP.J#3
<PAGE>
SCHEDULE A
1. Existing designs with prior sales.
2. Modifications of existing designs, such as
a. Phase shifters and frequency translators -
modifications of driver/control circuitry, change of switching
speed, reverse bias voltage, addition or omission of clock
decoder, internal clock, differential line receiver, number of
bits, total phase range.
b. Attenuators and Vector Modulators -
Change in attenuation range, resolution/step size/number of
bits, switching speed, control code (binary-BCD)
c. Switches -
Change in switching speed, reverse bias voltage/RF power
level, isolation.
d. Switched-line phase shifters/Switched delay networks
Change of bit delay or phase value by scaling, switching
speed, resolution, number of bits.
e. Any product -
Optimizing tuning by technician for different RF band within
products range. Change of control logic interface, i.e.
parallel to serial, single to differential TTL, TTL to CMOS,
addition of latches/registers, use of RS-232 or IEEE
interface.
3. Integration of several existing designs, with or without minor
changes into multi-function modules.
4. New products with predictable performance generated by scaling
of existing designs or use of proven design methods. Such
products may or may not use existing elements, but have a
close relationship with existing designs.
5. Any products for which orders are received within 6 months
from closing as the result of quotation/proposals submitted
prior to closing.
EXHIBIT 10.14
MANUFACTURER S REPRESENTATION AGREEMENT
This AGREEMENT made this th day of , by and
between: MICRONETICS WIRELESS INC., hereinafter referred to as
"Manufacturer" and , hereinafter
referred to as the "Representative" follows:
1. APPOINTMENT AND ACCEPTANCE - Manufacturer appoints Representative as its
exclusive selling representative to sell products enumerated in
Section 3 hereof; and Representative accepts the appointment and
agrees to sell and promote the sale of the Manufacturer's products.
2. TERRITORY - Representative's territory ("Territory") shall consist
of the states, counties, boundaries as defined in Schedule A.
3. PRODUCTS - The "Products" of the Manufacturer to be sold by
the Representative are set forth in Schedule A attached.
4. AMOUNT OF COMPENSATION - As sole, complete and full remuneration
for its services pursuant to this Agreement, Representative shall be
paid a commission for services performed hereunder which shall be paid
in the following manner:
4.1 Commission as specified in Table 4.1.1 on the net F.O.B.
invoice price, after deduction of Manufacturer's regular trade discounts
of the Manufacturer's products shipped into Representative's Territory.
No commission shall be paid or be payable except on units supplied to a
customer at the unit price.
Table 4.1.1
NET F.O.B. INVOICE PRICE COMMISSION RATE
VCO
NOISE
CONTROL
4.2 A commission as specified in Table 4.1.1. on the engineering,
development or design portion of Non-recurring engineering ("NRE") orders
that are performed by the Manufacturer, provided that the order contains
provisions for production orders or follow-on business at the time
of its issuance. Portions of the NRE paid directly to Manufacturers
sub-contractor for support of the development effort for such items
as screens, masks, probe card, etc., are excluded from commissions.
4.3 No commission shall be paid or be payable on repair work,
tooling, set up, QCI, qualification test charges made to customers, or
outside testing required by customers. Commission shall be payable
for sales to U.S. based customers in the Territory who purchase and export
Manufacturer's products for sale to third parties outside the U.S.
4.4 When engineering, execution of order, or shipments involve
different territories, the Manufacturer will split the full commission
among the Representatives whose territories are involved.
The Manufacturer will make this determination and advise the participating
Representatives at the time the order is submitted to the Manufacturer
or shortly after the manufacturer becomes aware of this fact. The sum
of the split commission shall add up to a full commission and be in
compliance with the schedule presented in Table 4.4.1.
If one of the territories has no representative the Manufacturer
shall be deemed the Representative in that territory.
Table 4.4.1
Commission Split Rate
Engineering Territory 0% 0% 70%
Procurement Territory 100% 50% 15%
Destination Territory 0% 50% 15%
5. COMPUTATION AND PAYMENT OF COMMISSION
5.1 Commissions are due and payable to Representative on or
before 30 days from the close of the month in which the Manufacturer
received payment from the customer.
5.2 During the term of this agreement Manufacturer will
copy Representative on all shipping documentation on shipments made
to Representative's Territory and copies of all invoices.
5.3 "Net invoice price" shall mean the total price at which an
order is invoiced to the customer including any increase or decrease
in the total amount of the order (even though such increase or
decrease takes place after the effective date of termination and within
the limitations of Paragraphs 9.5), but excluding shipping and
mailing costs; taxes; insurance; outside testing costs and any
allowances or discounts granted to the customers by the Manufacturer.
5.4 There shall be deducted from any sums due Representatives:
5.4.1 An amount equal to commissions previously paid or
credited on sales of Manufacturer's products, which have since been
returned by the customer or on allowances credited to the customer for
any reason by the Manufacturer; and
5.4.2 An amount equivalent to commissions previously paid
or credited on sales which Manufacturer shall not have been fully paid
by the customer whether by reason of the customer's bankruptcy,
insolvency, or any other reason which, in Manufacturer's judgment,
renders the account uncollectible (if any sums are ever realized upon
such uncollectible accounts during the term of this agreement
Manufacturer will pay Representative its percentage of commission
applicable at the time of original sales upon the net proceeds of
such collection).
5.5 "Order" shall mean a formal commitment to purchase
Manufacturer's product which calls for shipment into Representative's
territory or which is subject to split commission in accordance
with the provisions of Paragraph 4.4 hereof.
5.6 Notice of disagreement of commissions due must be given
to the Manufacturer in writing no later than two months after receipt
of Representative's copy of Manufacturer's sales order confirmation.
Manufacturer's determination, after consultation with the Representative,
shall be final.
6. ACCEPTANCE OF ORDERS - All orders are subject to acceptance or
rejection by an authorized officer or manufacturer at its home office
and to the approval of Manufacturer's Credit Department. Manufacturer
shall be responsible for all credit risks and collections. If Manufacturer
notifies customer of its acceptance or rejection of an order, a copy of
any written notifications shall be transmitted to the Representative.
Manufacturer shall supply Representative with copies of all
orders received directly by Manufacturer from his territory.
7. TERMS OF SALE - All sales shall be at prices and upon terms established
by Manufacturer, and the Manufacturer shall have the right, in its sole
discretion, from time to time, to establish, change, alter or amend
prices and other terms and conditions of sale. Representative shall not
accept orders in the Manufacturer's name or make price quotations or
delivery commitments without Manufacturer's prior approval.
8. REPRESENTATIVE'S RELATIONSHIP AND CONDUCT OF BUSINESS
8.1 Representative shall maintain a sales office in the Territory
and shall use its best efforts to sell and promote the sale of
Manufacturer's products within the territory. This means that
Representative shall communicate to Manufacturer all opportunities for
the sale of manufacturer's products in the Territory. In addition,
Representative shall be required to furnish the Manufacturer
with an annual sales forecast for the territory, by January 31 of each
year of this agreement for the next twelve months to be updated at
least quarterly. Failure to exercise best efforts to sell the
Manufacturer's products in the Territory, as determined by the
Manufacturer, shall be grounds for termination of this agreement.
8.2 Representative will be deemed to be, and will be acting as
independent contractor; neither the Representative nor its employees,
agents or assistants are employed by the Manufacturer.
Representative will be responsible for paying its own expenses; it is
understood that the Manufacturer is not to pay any traveling, office or
other expenses incurred by Representative.
Representative expressly agrees to undertake in its own name all such
expenses, and under no circumstances is to represent that the Manufacturer
is responsible for the same.
8.3 In the event that the Manufacturer is having difficulty
collecting payment from any customer in the Territory, the Representative,
at the request of the Manufacturer, shall use its best
efforts to assist the Manufacturer to collect payment from the customer
for the Manufacturer.
8.4 During the term of this Agreement, Representative shall not
represent lines competitive with those of the Manufacturer. Any such
representation shall be grounds for immediate termination, of this
agreement including the forfeiture of any commissions due. Represented
products are defined in schedule A.
8.5 Nothing in this Agreement shall be construed to constitute
Representative as the partner, employee or agent of the Manufacturer,
nor shall either party have any authority to bind the other in any
respect, it being intended that each shall remain an independent contractor
responsible only for its own actions.
8.6 CONFLICT OF INTEREST. During the term of this agreement
Representative shall not, either directly or indirectly, own, manage,
operate, control, be employed by, participate in, or be connected with
the ownership, management, operation or control of any business that provides
services or products similar to, or competitive with, those provided by
Manufacturer.
8.7 PROPRIETARY INFORMATION. Representative will ensure that no
proprietary or confidential information entrusted to Representative
by Manufacturer, is in any way communicated or disclosed to third parties
without the proper consent of Manufacturer. This information may
include but is not limited to techniques of manufacture, certain
experimental and development work, new products, inventions,
discoveries, improvements, trade secrets, customer lists or price lists.
Any violation of this provision shall be grounds for immediate termination.
8.8 Use of Company Name and Logo Type. Representative shall use
the advertising materials, literature, and other promotional materials
furnished by Manufacturer. Any other use by Representative of
Manufacturer trademarks, trade names, symbols of the company, stationery or
graphic representation of Manufacturer's products shall be approved
in writing in advance by
Manufacturer.
8.9 Representative shall furnish to Manufacturer's Credit Department
any information which it may have from time to time relative to
credit-standing of any of its customers.
8.10 Representative shall not, without Manufacturer's prior written
approval, alter, enlarge or limit orders, make representations or
guarantees concerning Manufacturer's product or
accept the return of, or make any allowance for such actions.
8.11 Representative shall abide by Manufacturer's policies and
communicate same to Manufacturer' s customers.
8.12 Manufacturer shall be solely responsible for the design,
development, supply, production and performance of its products and the
protection of its trade name. Manufacturer agrees to indemnify and hold
Representative harmless from damages or expenses whatsoever, which
Representative may sustain or incur on account of infringement or alleged
infringement of patents, trademarks, or trade names, or breach of warranty
or claimed breach of warranty in any way resulting from the sale of
Manufacturer's products. Manufacturer will indemnify Representative
from and hold it harmless against all liabilities, losses, damages,
costs or expenses, which it may at any time suffer, incur, or be
required to pay by reason of injury or death to any person or damage to
property or both caused or allegedly caused by any products sold by
manufacturer.
8.13 Manufacturer shall furnish Representative, at no expense to
Representative, samples (when applicable and available) catalogues,
literature and any other material necessary for the proper
promotion and sales of its products in the territory. All such samples,
catalogues, literature and other material shall remain the property
of Manufacturer. Any literature which is not used or samples or other
equipment belonging to Manufacturer shall be returned to the Manufacturer
at its request.
8.14 Whenever Representative takes possession of Manufacturer's
products for the purpose of delivering such products to customers or for
any other purpose, the risk of loss or damage to, or destruction of,
such products shall be borne by the Representative.
9. RIGHTS UPON TERMINATION - This agreement shall continue in effect until
and unless terminated by either party by giving not less than the number
of days of written notice of termination to the other party set forth
below, such termination to be effective on the date set forth in the notice;
9.1 Ninety days from when notice of termination is given.
9.2 Commission shall be paid on all orders calling for shipment into
Representative's Territory which are dated or communicated to
Manufacturer, and accepted by the Manufacturer, prior to the effective
date of termination.
9.3 Representative's share of split commission on orders dated or
communicated to Manufacturer, and accepted by Manufacturer, prior to the
effective date of termination.
9.4 Any commissions payable upon termination will cease if
Representative and/or its associates directly or indirectly, accept or
promote a competitive product in the Territory (See schedule A)for ninety
(90) days.
10. GENERAL - This agreement contains the entire understanding
between the parties, shall supersede any other oral or written agreements,
and shall be binding upon and inure to the benefit of the parties'
successors and assigns. It may not be modified in any way without the
written consent of both parties. Representative shall not have the
right to assign this Agreement in whole or in part
without Manufacturer's prior written consent.
11. CONSTRUCTION OF AGREEMENT - This agreement shall be construed
according to the laws of the State of New Hampshire.
12. DISPUTES - The parties agree that any disputes arising hereunder,
including the construction of application of this Agreement, must be filed
and adjudicated in the Courts of Hudson, New Hampshire.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written in multiple counterparts, each of
which shall be considered an original.
MICRONETICS WIRELESS, INC.
Manufacturer Representative
By:______________________ By:______________________
Title:___________________ Title:___________________
Date:____________________ Date:____________________
Please supply you Federal Tax Id Number below or SSN#
________________________________ ____________________________
Federal Tax ID # SSN
Schedule A
PRODUCTS
TERRITORY
EXHIBIT 21
Subsidiaries of the Company
Name State of Incorporation
1. Microwave & Video Systems, Inc. Connecticut
2. Vectronics Microwave Corp. Delaware
EXHIBIT 23.1
Consent of Independent Public Accountant
As independent public accountant, I hereby consent to the
incorporation of my report included in this Form 10-KSB, into the
Company's previously filed Registration Statements File Nos. 33-
72516, 333-80151, 333-48087.
Paul C. Roberts, C.P.A.
Edgartown, Massachusetts
June 22, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,164,661
<SECURITIES> 0
<RECEIVABLES> 964,048
<ALLOWANCES> 50,776
<INVENTORY> 1,738,128
<CURRENT-ASSETS> 3,954,413
<PP&E> 3,031,465
<DEPRECIATION> 1,376,840
<TOTAL-ASSETS> 6,022,680
<CURRENT-LIABILITIES> 682,938
<BONDS> 0
0
0
<COMMON> 37,628
<OTHER-SE> 4,386,283
<TOTAL-LIABILITY-AND-EQUITY> 6,022,680
<SALES> 4,547,087
<TOTAL-REVENUES> 4,547,087
<CGS> 2,654,238
<TOTAL-COSTS> 3,202,224
<OTHER-EXPENSES> (105,134)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 82,641
<INCOME-PRETAX> 318,371
<INCOME-TAX> 42,200
<INCOME-CONTINUING> 276,171
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 276,171
<EPS-BASIC> .08
<EPS-DILUTED> .08
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