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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1998
-----------------
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______________ to _______________
Commission file number 1-11916
WIRELESS TELECOM GROUP, INC.
(Exact name of registrant as specified in its charter)
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<S> <C>
New Jersey 22-2582295
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
East 64 Midland Avenue,
Paramus, New Jersey 07652
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(Address of principal executive offices) (Zip Code)
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(201) 261-8797
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(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
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<CAPTION>
Name of each exchange
Title of each class on which registered
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<S> <C>
Common Stock, par value $.01 per share American Stock Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
none
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(Title of Class)
Indicate by check whether the registrant: (1) filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES _X_ NO ___
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K [X]
The aggregate market value of Wireless Telecom Group, Inc.
Common Stock, $.01 par value, held by non-affiliates computed by reference to
the closing price as reported by AMEX on March 15, 1999: $31,696,634
Number of shares of Wireless Telecom Group, Inc. Common Stock,
$.01 par value, outstanding as of March 15, 1999: 17.557,298
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DOCUMENTS INCORPORATED BY REFERENCE
N/A
PART I
ITEM 1. BUSINESS
Wireless Telecom Group, Inc., a New Jersey corporation (the "Company"),
develops, manufactures and markets a wide variety of electronic noise sources,
and in addition, until March 11, 1999, test instruments for the wireless
telecommunication industry. The Company's products have historically been
primarily used to test the performance and capability of cellular/PCS and
satellite communications systems. Other applications include radio, radar,
wireless local area network (WLAN) and digital television. On March 11, 1999,
the Company consummated the sale of its wireless and satellite test equipment
business ("Wireless Test Equipment Business"). See "-Recent Development."
MARKET
Since the Company's incorporation in the State of New Jersey in 1985,
it has been primarily engaged in supplying noise source products to various
customers. In 1993, the Company expanded its product line to include test
equipment designed specifically for use by commercial customers in wireless
communications, and, as stated above, disposed of such business on March 11,
1999. Through the constant introduction of new instruments, as well as the
increased demand by commercial users for pre-existing products, approximately
90% of the Company's sales in fiscal 1998 were derived from commercial
applications. The remaining sales (approximately 10%) were comprised of sales
made to the United States government (particularly the armed forces) and prime
defense contractors.
PRODUCTS
Noise source products are primarily used as a method of testing to
determine if sophisticated communications systems are capable of receiving the
information being transmitted. The widest application for the Company's noise
source products are as a reference standard in test instruments which measure
unwanted noise and interference in devices and components utilized in
communications equipment. This is accomplished by comparing a noise source with
known characteristics to the unwanted noise found in the communications system
being tested. By generating a random noise signal, in combination with a live
transmission signal, a noise generator simulates real world signals and allows
the manufacturer to determine if its product is performing to specifications.
Noise source testing is often more cost-efficient, faster and more accurate than
alternative conventional methods using signal generators.
Coupled with other electronic devices, noise generators are also an
effective means of jamming, blocking and disturbing enemy radar and other
communications, as well as insulating and protecting friendly communications. In
the jamming mode, the Company's noise source products block out or disrupt
unwanted radar and radio transmissions generally without being detected.
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The Company's noise source products are widely used in radar systems as
part of built-in test equipment to continuously monitor the radar receiver. The
Company has continually experienced sales growth in the area of satellite
communications where the use of back-up receivers are becoming more common as
the demand for communication availability and reliability is increasing. Testing
by the Company's noise source products assures that the back-up receiver is
always functional and ready should the communication using the first receiver
fail. The Company's noise source products can test satellite communication
receivers for video, telephone and data communications.
The Company's products come in various sizes, styles and models with
varying degrees of capabilities and can be customized to meet particular
customer requirements. They may be incorporated directly into the electronic
equipment concerned or may be stand alone components or devices that are
connected to, or used in conjunction with, such equipment operating from an
external site, in the factory or in the field. The Company's noise source
products range from relatively simple items with no control mechanisms or
auxiliary components to complex, automated components containing computerized or
microprocessor based controls. Prices of noise source devices range from
approximately $200 to $50,000 per unit, with most sales occurring between $700
and $2,500 per unit.
The Company's products have extended useful lives but are generally
recalibrated every year to ensure their accuracy. The Company provides
recalibration services for a fee to its domestic and international customers and
also calibrates test equipment manufactured by others. Although such services
accounted for less than 5% of fiscal 1998 sales, the Company feels this area
will continue to grow as more products are sold into the global marketplace.
RECENT DEVELOPMENT
On March 11, 1999 the Company consummated the sale of all of its
Wireless Test Equipment Business to Telecom Analysis Systems, Inc., a New Jersey
corporation ("TAS"), for a purchase price of approximately $19 million ($2
million of which is held in escrow to secure certain obligations of the Company
under the Asset Purchase Agreement) pursuant to an Asset Purchase Agreement,
dated January 7, 1999, between the Company and TAS (the "Asset Purchase
Agreement"). Also, pursuant to the Asset Purchase Agreement, the Company
purchased TAS' products relating to single-function noise generation (the "Noise
Assets"), and the Company and TAS entered into non-competition agreements with
the businesses associated with the respective products purchased by each. The
Company anticipates adopting and integrating the Noise Assets into the Company's
on-going operations. In consideration for TAS' sale of the Noise Assets and TAS'
entering into a non-compete agreement with the Company, the Company paid $2.5
million to TAS.
MARKETING AND SALES
As of March 30, 1999, the Company's in-house marketing and sales force
currently consists of three individuals. The Company attempts to promote the
sale of its products to customers and manufacturers' representatives through
its product literature, publication of articles, presentations at technical
conferences, direct mailings, trade advertisements and trade show exhibitions.
The Company believes that extensive advertising is a major factor in generating
in-house sales.
The Company's products are sold globally through its in-house sales
people and by over thirty non-exclusive manufacturers' representatives.
Generally, manufacturers' representatives do not stock inventories of the
Company's products. Manufacturers' representatives accounted for an aggregate of
42% and 49% of the Company's sales for the years ended December 31, 1998 and
1997, respectively. For the years ended December 31, 1998 and 1997, one of the
Company's representatives accounted for
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approximately 7% and 18% of sales, respectively. The Company does not believe
that, although there can be no assurance, the loss of any or all of its
representatives would have a material adverse affect on its business.
The Company's relationship with its representatives is usually governed
by written contracts that run for one year renewable periods terminable by
either party on 60 days prior notice. The contracts generally provide for
exclusive territorial and product representation, and prohibit the handling of
competing products. One of its representatives oversees and supervises its
international sales through foreign representatives. The Company continually
reviews and assesses the performance of its representatives and makes changes
from time to time based on such assessments.
The Company believes that educating its existing and potential
customers as to the advantages and applications of its products is a vital
factor in its continued success as is its commitment to rapid product
introductions and timely revisions to existing products. Management believes
that its products offer state-of- the-art performance combined with outstanding
customer and technical support. The Company has always placed great emphasis on
designing its products to be user-friendly.
CUSTOMERS
Since its inception in 1985, the Company has sold its products to more
than 1,000 customers. The Company currently sells the majority of its products
to various commercial users in the communications industry. Other sales are made
to large defense contractors which incorporate the Company's products into their
products for sale to the U.S. and foreign governments, multi-national concerns
and Fortune 500 companies. In fiscal 1998, approximately 90% of sales were
derived from commercial applications. The remaining sales were comprised of
government and military applications.
For fiscal 1998, no one customer accounted for more than 10% of total
sales. The Company's largest customers vary from year to year. Accordingly,
while the complete loss of any large customer or substantial reduction of sales
to such customers could have a material adverse effect on the Company, the
Company has experienced shifts in sales patterns with such large companies in
the past without any material adverse effect. There can be no assurance,
however, that the Company will not experience future shifts in sales patterns
not having a material adverse effect on its business.
Export sales, including sales of discontinued operations, for fiscal
1998 were $6,138,000, or approximately 35% of total sales. These sales were made
predominantly to customers in Asia ($3,307, 000 or 19%) and Europe ($2,658,000
or 15%). In February 1996, the Company established a Foreign Sales Corporation
(FSC). The Company receives a federal tax deduction for a portion of its export
profits. See Note 4 of Notes to the Financial Statements.
RESEARCH AND DEVELOPMENT
In fiscal 1998, the Company opened an office in San Diego, California
to expand its research and development efforts. However, in connection with the
Company's sale of the Wireless Test Equipment Business to TAS in March 1999, the
Company has closed this office. The Company currently maintains an engineering
staff (seven individuals as of March 15, 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. Expenses for research and development involve engineering for
improvements and development of new products for commercial markets. Such
expenditures include the cost of engineering services and engineering-support
personnel and were $2,348,000 and $2,468,000 for the years ended December 31,
1998 and 1997, respectively. See Note 1 of Notes to the Financial Statements.
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The Company anticipates that in light of the sale of the Wireless Test
Equipment Business to TAS in March 1999, its research and development
expenditures for fiscal 1999 will decrease from fiscal 1998 levels.
Notwithstanding, the Company continues to consider its research and development
efforts to be vital to its future business expansion and success.
COMPETITION
The Company competes against many companies which utilize similar
technology to that of the Company, some which are larger and have substantially
greater resources and expertise in financial, technical and marketing areas than
the Company, including Hewlett Packard and English Electric Valve.
The Company designs its products with special attention to making them
user-friendly, and constantly re-evaluates its products for the purpose of
enhancing and improving them. The Company believes that these efforts, along
with its willingness to adapt its products to the particular needs of its
customers and its intensive efforts in customer and technical support, are
factors that add to the competitiveness of its products.
BACKLOG
The Company's backlog of firm orders was approximately $1,600,000 at
December 31, 1998, compared to $3,000,000 at December 31, 1997. It is
anticipated that all of the backlog orders will be filled during the current
year. The Company anticipates that its backlog will decrease as a result of the
reduction in total sales due to the sale of the Wireless Test Equipment Business
to TAS. The stated backlog is not necessarily indicative of Company sales for
any future period nor is a backlog any assurance that the Company will realize a
profit from the orders.
INVENTORY, SUPPLIES AND MANUFACTURING
The Company purchases components, devices and subassemblies from a wide
variety of sources. For example, its noise source diodes, a key component in all
of its noise source products, are made by third parties in accordance with the
Company's designs and specifications. To date, because of its multiple sources
of supply, the Company has experienced only minimal difficulties in obtaining
components and materials for its manufacturing and assembly process. The
Company's inventory policy stresses maintaining substantial raw materials in
order to lessen its dependency on third party suppliers and to improve its
capacity to facilitate production. However, shortages or delays of supplies may,
in the future, have a material adverse impact on the Company's operations. No
third party supplier accounted for more than 10% of the Company's total
inventory purchases for fiscal 1998. See "-Marketing and Sales."
The Company is not party to any formal written contract regarding the
deliveries of its supplies and components. It generally purchases such items
pursuant to written purchase orders of both the individual and blanket variety.
Blanket purchase orders usually cover the purchase of a larger amount of items
at fixed prices for delivery and payment on specific dates. See "-Marketing and
Sales."
The Company does not manufacture nor assemble its products on a
continuous mass-production basis. Instead, small lot production techniques are
used. Testing of products is generally accomplished at the end of the
manufacturing process and is performed in-house as are all quality control
processes. The Company utilizes modern equipment for the design, engineering,
manufacture, assembly and testing of its products. See "-Marketing and Sales."
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WARRANTY AND SERVICE
The Company 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 preventive
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. The Company usually 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 has maintained product liability insurance
coverage since August 1991. To date, the Company has not received or encountered
any formal claims for liability due to a defective or malfunctioning device made
by it. However, it is possible that the Company may be subject to such claims in
the future and corresponding litigation should one or more of its products fail
to perform or meet certain minimum specifications.
INTELLECTUAL PROPERTY
Proprietary information and know-how are important to the Company's
commercial success. The Company holds no patents nor owns any trademarks. There
can be no assurance that others will not either develop independently the same
or similar information or obtain and use proprietary information of the Company.
Certain key employees have signed confidentiality and non-competition agreements
regarding the Company's proprietary information.
The Company believes that its products do not infringe the proprietary
rights of third parties. There can be no assurance, however, that third parties
will not assert infringement claims in the future.
EMPLOYEES
As of March 15, 1999, the Company had 31 full-time employees, including
its officers, 16 of whom are engaged in manufacturing and repair services, 6 in
administration and financial control, 7 in engineering and research and
development, and 2 in marketing and sales.
None of its employees are covered by a collective bargaining agreement
or are represented by a labor union. The Company considers its relationship with
its employees to be satisfactory.
The design and manufacture of the Company's products require
substantial technical capabilities in many disparate disciplines, from mechanics
and computer science to electronics and mathematics. While the Company believes
that the capability and experience of its technical employees compares favorably
with
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other similar manufacturers, there can be no assurance that it can retain
existing employees or attract and hire the highly capable technical employees it
may need in the future on terms deemed favorable to the Company.
ITEM 2. PROPERTIES
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The Company leases a 25,000 square foot facility located in Paramus,
New Jersey which is currently being used as its principal corporate headquarters
and manufacturing plant. The Company also leases a 44,000 square foot facility
located in Mahwah, New Jersey pursuant to a lease dated July 14, 1998 and
expiring in August 2013, and has an option to purchase such facility from July
1999 until July 2012 (the "Option"). In addition, in connection with the sale of
the Wireless Test Equipment Business to TAS in March 1999, the Company subleased
40% of the Mahwah leased premises (excluding the warehouse area of the leased
premises) to TAS for a period of six months, and granted to TAS the right to
require the Company, by written notice to the Company no later than August 9,
1999, to exercise the Option and sell the Mahwah facility to TAS. Also, in 1998,
the Company leased a 600 square foot facility in San Diego, California but has
since terminated this lease. See "Recent Development" and Notes 8 and 10 of
Notes to the Financial Statements.
ITEM 3. LEGAL PROCEEDINGS
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On March 15, 1999, a complaint was filed in the Superior Court of the
State of California for the County of Orange. The action was brought by Mr.
David Day, an individual; David Day d/b/a Day Test & Measurements and Day Test &
Measurements, as plaintiffs against Noise Com, Inc., a New Jersey corporation;
Wireless Telecom Group, Inc., a New Jersey corporation; Telecom Analysis
Systems, Inc., Bowthorpe PIC and Does 1 through 100, inclusive, as defendants.
The action sets forth several causes of action, including breach of contract and
fraud relating to an alleged failure of the defendants to pay full commissions
allegedly owed to the plaintiff. The plaintiffs allege damages in excess of $1
million from each of the defendants. The Company believes that the damages that
might be awarded to the plaintiffs in connection with this matter would not have
a material adverse effect on the Company's business, financial condition or
results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
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The Common Stock of the Company has traded on the American Stock
Exchange under the name Wireless Telecom Group, Inc. (Symbol: WTT) since
September 12, 1994. The following table sets forth the high and low sales prices
of the Company's Common Stock for the periods indicated as reported on the
American Stock Exchange.
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1999 Fiscal Year High Low
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1st Quarter $2.69 $1.50
(through March 15, 1999)
1998 Fiscal Year
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1st Quarter $9.63 $5.63
2nd Quarter 7.88 2.31
3rd Quarter 3.81 1.44
4th Quarter 2.38 1.44
1997 Fiscal Year
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1st Quarter $13.38 $9.38
2nd Quarter 11.25 8.81
3rd Quarter 13.00 9.06
4th Quarter 9.63 5.75
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On March 15, 1999 the Company had approximately 434 stockholders of
record.
Quarterly dividends on the Company's Common Stock had been declared
since June 1993. The table below details quarterly dividends declared for the
past two years. On May 15, 1998, the Company ceased paying a quarterly dividend.
Quarterly Dividends/Share of Common Stock
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<CAPTION>
Fiscal Year 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
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<S> <C> <C> <C> <C>
1998 $.05 $.00 $.00 $.00
1997 $.05 $.05 $.05 $.05
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ITEM 6. SELECTED FINANCIAL DATA
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The selected financial data presented below as of December 31, 1998,
1997, 1996, 1995 and 1994 were derived from the Company's financial statements
after restatement for discontinued operations accounting (See Note 10 of Note to
Financial Statements). The information set forth below is qualified in
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its entirety by reference to, and should be read in conjunction with, the
financial statements and related notes contained elsewhere in this Form 10-K.
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SELECTED STATEMENT OF OPERATIONS DATA:
1998 1997 1996 1995 1994
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Net Sales $6,834,815 $6,762,833 $5,843,225 $4,982,629 $4,333,081
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Income from continuing operations 1,785,048 2,052,573 1,908,172 1,494,788 1,299,924
before income taxes
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Provision for income taxes 329,443 744,953 684,827 565,030 506,970
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Net income from continuing operations 1,455,605 1,307,620 1,223,345 929,758 792,954
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SELECTED PER SHARE DATA(1):
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Net income from continuing operations per $.08 $.07 $.07 $.05 $.05
common share - Diluted
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Shares used in computation of earnings per 17,548,460 17,785,882 17,735,007 17,510,538 16,672,614
share - Diluted
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Cash dividends per common share $.05 $.20 $.15 $.08 $.04
SELECTED BALANCE SHEET DATA:
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Working Capital $19,639,121 $19,452,489 $16,183,137 $11,650,974 $7,162,455
Total Assets 24,122,199 24,211,054 19,044,242 13,402,353 8,117,150
Total liabilities 1,282,804 1,982,823 1,444,716 953,938 467,551
Shareholders' equity 22,839,395 22,228,231 17,599,526 12,448,415 7,649,599
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</TABLE>
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(1) Common share data has been adjusted to reflect the 2-for-1, 3-for-2 and
2-for-1 stock splits paid on May 28, 1996, July 18, 1995 and November 28,
1994, respectively.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
The following discussion and analysis provides information which the
Company's management believes is relevant to an assessment and understanding of
the Company's results of operations and financial condition. This information is
presented after restatement for discontinued operations accounting (See Note 10
of Notes of Financial Statements). This discussion should be read in conjunction
with the financial statements and notes thereto included elsewhere herein.
This report contains forward-looking statements and information that is
based on management's beliefs and assumptions, as well as information currently
available to management. When used in this document, the words "anticipate,"
"estimate," "expect," "intend," and similar expressions are intended to identify
forward-looking statements. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable, it can give no
assurance that such expectations will prove to be correct. Such statements are
subject to certain risks, uncertainties and assumptions. Should one or more of
these risks or uncertainties materialize, or should the underlying assumptions
prove incorrect, actual results may vary materially from those anticipated,
estimated or expected. Among the key factors that may have a direct bearing on
the Company's operating results are fluctuations in the global economy, the
degree and nature of competition, the risk of delay in product development and
release dates and acceptance of, and demand for, the Company's products.
RESULTS OF CONTINUING OPERATIONS
YEAR ENDED DECEMBER 31, 1998 COMPARED TO 1997
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Net sales for the year ended December 31, 1998 were $6,834,815 as
compared to $6,762,833 for 1997, an increase of $71,982 or 1.1%. This volume
increase in sales was due to continued demand for the Company's existing
products.
The Company's gross profit on net sales for the year ended December 31,
1998 was $4,082,377 or 59.7% as compared to $4,122,444 or 60.9% as reported in
the previous year. Variations in gross profit are attributed to an increase in
labor costs due to the hiring of additional personnel to support the Company's
expanding product line and other associated costs such as factory maintenance
and depreciation due to its expanding work force and larger facility. In
addition, the Company can experience variations in gross profit based upon the
mix of product sales as well as variations due to revenue volume and economies
of scale. The Company continues to rigidly monitor costs associated with
material acquisition, manufacturing and production.
Operating expenses for the year ended December 31, 1998 were $2,701,676
or 39.5% of net sales as compared to $2,176,472 or 32.2% of net sales for the
year ended December 31, 1997. For the year ended December 31, 1998 as compared
to the prior year, operating expenses increased in dollars by $525,204. This
increase is attributable to greater advertising, promotional and selling
expenses incurred to generate sales and to expand customer awareness of the
Company's products. Additional personnel, wage increases and bonuses, and rent
expenses for the Company's larger facility were also a factor.
Interest, dividend and other income increased by $297,746 for the year
ended December 31, 1998. The increase was due to a larger average investment
balance in 1998.
Net income from continuing operations increased to $1,455,605 or $.08
per share on a diluted basis, for the year ended December 31, 1998 as compared
to $1,307,620 or $.07 per share on a diluted basis, for
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the year ended December 31, 1997. The explanation of this increase can be
derived from the operational analysis provided above.
RESULTS OF CONTINUING OPERATIONS
YEAR ENDED DECEMBER 31, 1997 COMPARED TO 1996
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Net sales for the year ended December 31, 1997 were $6,762,833 as
compared to $5,843,225 for 1996, an increase of $919,608 or 15.7%. This volume
increase was the result of the continued growth of commercial applications of
the Company's products.
The Company's gross profit on net sales for the year ended December 31,
1997 was $4,122,444 or 60.9% as compared to $3,770,032 or 64.5% as reported in
the previous year. The Company rigidly monitors costs associated with material
acquisition, manufacturing and production. Gross profit margins can vary based
upon the mix of product sales.
Operating expenses for the year ended December 31, 1997 were $2,176,472
or 32.2% of net sales as compared to $1,953,599 or 33.4% of net sales for the
year ended December 31, 1996. For the year ended December 31, 1997 as compared
to prior year, operating expenses increased in dollars by $222,873.
Approximately 25% of this increase is attributable to greater advertising,
promotional and selling expenses incurred to generate sales and to expand
customer awareness of the Company's wireless telecommunications instruments. An
additional 47% of this increase is due to increased expenditures for research
and development of new products. Bonuses, increased salaries and additional
personnel accounted for 8% of the increase in dollars for 1997. Operating
expenses when viewed as a percentage of net sales have declined by 1.2% due to
the fixed nature of many of these costs and the economies of scale resulting
from the increase in sales volume.
Interest, dividend and other income increased by $14,862 for the year
ended December 31, 1997. The increase was due to a larger investment balance
during 1997.
Net income from continuing operations increased to $1,307,620 or $.07
per share on a diluted basis, for the year ended December 31, 1997 as compared
to $1,223,345 or $.07 per share on a diluted basis, for the year ended December
31, 1996. The explanation of this increase can be derived from the operational
analysis provided above.
LIQUIDITY AND CAPITAL RESOURCES
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The Company's working capital has increased by $186,632 to $19,639,121
at December 31, 1998, from $19,452,489 at December 31, 1997. At December 31,
1998, the Company had a current ratio of 21.1 to 1, and a ratio of debt to net
worth of less than .1 to 1. At December 31, 1997, the Company had a current
ratio of 11.5 to 1, and a ratio of debt to net worth of less than .1 to 1.
Net cash provided from operations has allowed the Company to meet its
liquidity requirements, research and development activities and capital
expenditures. Operating activities provided $3,213,069 in cash for the year
ending December 31, 1998 compared to $4,556,733 and $5,255,044 in cash flows for
the years ending December 31, 1997 and 1996, respectively. Cash provided by
operations was primarily due to net income and decreases in accounts receivable
and inventory.
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The Company has historically been able to turn over its accounts
receivable approximately every two months. This average collection period has
been sufficient to provide the working capital and liquidity necessary to
operate the Company.
Due to the sale of the Wireless Test Equipment Business line, the
volume of items and accordingly the total dollar value of inventory has
decreased. Inventory is being monitored to balance anticipated production
requirements while maintaining manageable levels of goods on hand.
Net cash used for investing activities were $1,059,403, $1,733,068 and
$756,435 for the years ending December 31, 1998, 1997 and 1996, respectively.
Capital expenditures for the new leased facilities in Mahwah were the primary
use of funds. From 1996 to 1997, capital expenditures for machinery and
equipment were the primary use of funds.
Net cash used for financing activities were $668,567, $3,316,168 and
$2,299,346 for the years ending December 31, 1998, 1997 and 1996, respectively.
The payment of quarterly cash dividends were the primary use of these funds in
1997 and 1996. The Company also reacquired 20,000 shares of its common stock in
the open market during the second quarter of 1997. These cash outlays were
partially offset by proceeds from the exercise of stock options.
The Company entered into an agreement with its bank which provides for
an unsecured line of credit in the amount of $7,000,000 at the bank's prime
lending rate. The line of credit agreement expired on September 30, 1998 and was
not renewed by the bank.
On January 26, 1998, the Company announced the declaration of a
quarterly cash dividend of $.05 per share to shareholders of record on March 23,
1998. This cash dividend aggregated $877,545 and was paid on March 31, 1998. On
May 15, 1998 the Company ceased paying a quarterly cash dividend.
For details of dividends paid in the years ended December 31, 1998 and
1997 refer to Item 5. The Company does not currently anticipate paying cash
dividends.
The Company believes that its financial resources from working capital
provided by operations are adequate to meet its current needs.
IMPACT OF THE YEAR 2000 ISSUE
The Company is in the process of assessing its information technology
("IT") and non-IT computer systems and operations to identify and determine the
extent to which any such systems will be susceptible to potential malfunctions
as a result of the Year 2000 ("Y2K") problem. The Y2K problem arose because many
existing computer programs use only the last two digits to refer to a particular
year, rather than four. Therefore, these computer programs do not properly
recognize a year that begins with "20" instead of the familiar "19". Any of the
Company's systems utilizing such last two-digit system to refer to a particular
year may not recognize the year 2000; but rather, assume the year to be 1900.
This could potentially result in major system failures or miscalculations,
causing disruption of operations, including, but not limited to, a temporary
inability to process transactions, billing and customer service or to engage in
normal business activities.
The Company is currently upgrading its computer systems and operations
to ensure that all such systems are, or will be prior to January 1, 2000, Y2K
compliant. The Company estimates that it will incur aggregate costs of $60,000
for such upgrade, of which the Company has incurred $29,000 to date. Such costs
-12-
<PAGE>
<PAGE>
will be borne out of the Company's general working capital funds. There can be
no assurance, however, that the Company will achieve full Y2K compliance before
the end of 1999 or that such costs will not increase.
In addition to assessing its own computer systems and operations, the
Company is currently conducting an external review of its vendors and suppliers.
However, 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.
Notwithstanding, the Company may experience problems to the extent that a large
number of its suppliers or vendors are not Y2K compliant, and there can be no
assurance that such problems would not have a material adverse effect on the
Company.
Although the Company anticipates, although there can be no assurance,
that its computer systems and operations will be fully Y2K compliant by the end
of 1999, the Company does not currently have any contingency plans in the event
such systems and operations are not, and there can be no assurance that any
effective contingency plans will be developed or implemented. A failure of the
Company to effectively upgrade its computer systems to become Y2K compliant
before the end of 1999 could have a material adverse effect on the Company's
business, financial position and results of operations. The most reasonably
likely worst case scenario would be a systems failure beyond the control of the
Company from operating its business. The Company believes that such failure
would likely lead to lost revenues, increased operating costs, loss of customers
or other business interruptions of a material nature.
INFLATION AND SEASONALITY
The Company does not anticipate that inflation will significantly
impact its business nor does it believe that its business is seasonal.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
Not Applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
The response to this item is submitted in a separate section of
this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
------------------------------------------------
Not Applicable.
-13-
<PAGE>
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
The current directors and executive officers of the Company are as
follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Edward Garcia (1)(2)(3) 34 Chairman of the Board, Chief Executive
Officer and President
Henry L. Bachman 69 Director
John Wilchek (1)(4) 58 Director
Demir Richard Eden (3)(4) 59 Director
Franklin H. Blecher 70 Director
</TABLE>
- -----------------------------
(1) Member of Stock Option Committee
(2) Trustee for Profit Sharing Plan
(3) Member of Compensation Committee
(4) Member of Audit Committee
All directors hold office until the next annual meeting of
shareholders or until their successors are elected and qualify. Executive
officers hold office until their successors are chosen and qualify, subject to
earlier removal by the Board of Directors.
Set forth below is a biographical description of each director
and executive officer of the Company based on information supplied by each of
them.
Edward Garcia has served as Chairman of the Board, Chief
Executive Officer and President of the Company since January 1999. Prior to
becoming Chairman of the Board, Chief Executive Officer and President,
Mr. Garcia had served as Vice President of Operations since October 1995 and
Executive Vice President and Chief Operating Officer since August 1996.
Mr. Garcia joined the Company in 1990 and has served in various positions,
including sales manager and Chief Engineer.
Henry L. Bachman became a director of the Company in January
1999 and has a 48 year career in the electronics industry. From 1951 to 1996,
Mr. Bachman served as Vice President of Hazeltine, a subsidiary of Marconi
Aerospace Systems Inc., Advanced Systems Division, on a full-time basis and
currently provides consulting services to them on a part-time basis. Mr. Bachman
was President of The Institute of Electrical and Electronics Engineers (IEEE).
Mr. Bachman has a bachelor's degree and MS degree from Polytechnic University as
well as completed the Advanced Management Program at Harvard Sloan School of
Management.
John Wilchek became a director of the Company in May 1993. He
was the founder, President, CEO and Chairman of Zenith Knitting Mills until his
retirement in 1991.
-14-
<PAGE>
<PAGE>
Demir Richard Eden, became a director of the Company in May
1993 and served as President of the Company from October 1998 to January 1999.
Mr. Eden has also served as President, CEO and the Chairman of Intra Computer,
Inc., a manufacturing and engineering consulting company, since its founding in
1979. Mr. Eden has a Master of Science degree in Electronics and Business
Administration from Istanbul Technical University as well as an MS in Computer
Science from New York Polytechnic University.
Franklin H. Blecher, Ph.D. became a director of the Company in
November 1994. In a distinguished thirty-seven year career with AT&T Bell
Laboratories, Dr. Blecher held several significant positions including Executive
Director of the Technical Information Systems Division from 1987 to 1989 and
Executive Director of the Integrated Circuit Design Division from 1982 to 1987
and previously Director of the Mobile Communications Laboratory. Dr. Blecher has
made significant contributions in the area of transistor design for computer
applications. He has also developed widely used telephone and cellular
transmission systems. His laboratory's work in the cellular field was used by
the FCC to establish standards for commercial cellular systems. Dr. Blecher
received his Ph.D. from New York Polytechnic University where he is presently a
member of the Corporate Board and is Past Chairman of the Engineering
Foundation.
ITEM 11. EXECUTIVE COMPENSATION
----------------------
EXECUTIVE COMPENSATION
The following table sets forth, for the years ended December
31, 1998, 1997 and 1996, the annual and long-term compensation for the Company's
chief executive officer and its most highly compensated executive officers whose
annual compensation exceeded $100,000 for the fiscal year ended December 31,
1998 (the "named executive officers").
<PAGE>
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION> LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------- AWARDS
-----------
NAME AND ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OTHER OPTIONS COMPENSATION (1)
------------------ ---- ------ ----- ----- ------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Edward Garcia
- -Chairman of the Board, CEO
and President (3) 1998 $128,376 - - 75,000 $7,947
1997 $125,185 $20,000 - 25,000 (7) $7,802
1996 $102,692 $15,000 - 20,000 $7,702
Dale Sydnor
- -Chairman of the Board, CEO
and President (no longer
affiliated with the Company) (2) 1998 $232,692 - - 110,000 $8,405
1997 $235,577 $50,000 - 40,000 (7) $8,375
1996 $181,731 - - 40,000 $7,900
Eugene Ferrara
- --Exec. Vice President, Chief
Financial Officer (no longer an
officer or director of Company)
(4) 1998 $118,604 - $60,000 (5) 75,000 $7,946
1997 $114,921 $20,000 - 25,000 (7) $6,346
1996 $96,346 $15,000 - 20,000 $5,401
Inho Alex Kim
- --Vice President -Business
Development (no longer affiliated
with the Company)(6) 1998 $108,437 - - 75,000 $2,500
1997 $95,387 $5,000 - 45,000 (2) $475
1996 $78,095 $3,000 - 4,000 -
</TABLE>
- ------------------------
(1) Includes the total estimated value for the use of an automobile of
$1,470, $1,420 and $1,320 for fiscal years ended December 31, 1998,
1997 and 1996, respectively, for Mr. Garcia and $1,370 in 1998,
$1,320 and $850 for fiscal years ended December 31, 1998, 1997 and
1996, respectively, for Mr. Ferrara. Also includes the total
premiums paid on split-dollar life insurance for Messrs. Sydnor,
Garcia, and Ferrara and the matching contribution to the Wireless
Telecom Group 401(k) Profit Sharing Plan.
(2) Mr. Sydnor served as President of the Company from July 1995 to March
1998, Chief Executive Officer from May 1996 to January 1999 and Chairman
of the Board from May 1997 to January 1999. Mr. Sydnor is no longer
affiliated with the Company.
(3) Mr. Garcia currently serves as the Company's Chief Executive
Officer, Chairman of the Board and President and has done so since
January 1999. From October 1995 to August 1996, Mr. Garcia served as
the Company's Vice President of Operations, and from August 1996 to
January 1999 as Vice President and since August 1996 as Chief
Operating Officer. See "Item 10. Directors and Executive Officers of
the Registrant."
(4) Mr. Ferrara served as the Chief Financial Officer of the Company from
August 1994 to January 1999. Mr. Ferrara is no longer an officer or
director of the Company.
(5) Severance payment paid by the Company to Mr. Ferrara.
(6) Mr. Kim served as Vice President of Business Development until March
1999. Mr. Kim is no an officer or director of the Company.
-16-
<PAGE>
<PAGE>
(7) These options were repriced on June 15, 1998. See "Report on Repricing
of Options" and "10-Year Option Repricings" chart.
17
<PAGE>
<PAGE>
OPTION GRANTS IN FISCAL YEAR 1998*
-----------------------------------
<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------------------------------------------------
Percent Of
Number of Total Options Potential Realizable Value At
Securities Granted To Assumed Annual Rates Of Stock
Underlying Employees In Exercise Of Price Appreciation For Option Term
Option/SARs Fiscal Year Base Price Expiration ----------------------------------
Name Granted (#) 1998 ($/Sh) Date 5% ($) 10% ($)
---- ----------- ---- ------ ---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Edward Garcia
- -Chairman of the Board,
CEO and President 75,000 6.9% $2.63 6/14/08 $123,814 $313,768
Dale Sydnor
- -Chairman of the Board,
CEO and President (no
longer affiliated with the
Company) 110,000 10.2% $2.63 6/14/08 $181,593 $460,193
Eugene Ferrara
- -Exec. Vice President,
Chief Financial Officer
(no longer an officer or
director of the Company) 75,000 6.9% $2.63 6/14/08 $123,814 $313,768
Inho Alex Kim 75,000 6.9% $2.63 6/14/08 $123,814 $313,768
- -Vice President of
Business Development
(no longer affiliated with
the Company)
</TABLE>
- -----------------------------------
* See "-Report on Repricing of Options" and "-10-Year Option Repricings"
chart.
-18-
<PAGE>
<PAGE>
AGGREGATE OPTION EXERCISES IN THE
YEAR ENDED DECEMBER 31, 1998 AND OPTION VALUES
-----------------------------------------------
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised Options In-the-Money Options at
at Fiscal Year End (2) Fiscal Year End (3)
----------------------------- ------------------------
Shares
Acquired Value
Name on Exercise Realized (1) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Edward Garcia
- -Chairman, CEO and
President - - 35,000 105,000 - -
Dale Sydnor
- -Chairman, CEO and
President (no longer
affiliated with the
Company) - - 61,000 164,000 - -
Eugene Ferrara
- -Exec. Vice President,
Chief Financial
Officer (no longer an
officer or director of
the Company) - - 32,600 105,000 - -
Inho Alex Kim - - 9,000 79,800 - -
- -Vice President of
Business Development
(no longer affiliated
with the Company)
</TABLE>
- ------------------------
(1) Some options have been cancelled and reissued in June 1998. See "Report on
Repricing of Options" and "10-year Option Repricings" chart.
(2) Based upon the closing market price of the Company's Common Stock ($1.875
per share) on December 31, 1998.
(3) Based the aggregate value realized upon the date of exercise.
REPORT ON REPRICING OF OPTIONS
------------------------------
On June 15, 1998, the Company cancelled options granted to (i)
Mr. Dale Sydnor, the Company's then Chairman and Chief Executive Officer, on May
28, 1995 and October 27, 1997 to purchase 50,000 and 40,000 shares of the
Company's Common Stock, respectively, at exercise prices equal to $8.25 and
$7.38 per share, respectively, in consideration for options to purchase 110,000
shares of the Company's Common Stock at an exercise price equal to $2.63 per
share of Common Stock, (ii) Mr. Edward Garcia, the Company's then Vice President
and Chief Operating Officer, on May 28, 1995 and October 27, 1997 to purchase
30,000 and 25,000 shares of the Company's Common Stock, respectively, at
exercise prices equal to $8.25 and $7.38 per share, respectively, in
consideration for options to purchase 75,000 shares of the Company's Common
Stock at an exercise price equal to $2.63 per share of Common Stock, (iii) Mr.
Eugene Ferrara, the Company's then Chief Financial Officer, on May 28, 1995 and
October 27, 1997 to purchase 30,000 and 25,000 shares of the Company's Common
Stock, respectively, at exercise prices equal to $8.25 and $7.38 per share,
respectively, in consideration for options to purchase 75,000 shares of the
Company's Common Stock at an exercise price equal to $2.63 per share of Common
Stock and (iv) Mr. Inho Alex Kim, the Company's then Vice President of Business
Development, on January 24, 1997 and October 27, 1997 to purchase 20,000 and
25,000 shares of the Company's Common Stock, respectively, at exercise prices
equal to $11.63 and $7.38 per share, respectively, in consideration for options
to purchase 75,000 shares of the
-19-
<PAGE>
<PAGE>
Company's Common Stock at an exercise price equal to $2.63 per share of Common
Stock. The Company, upon the recommendation of the Compensation Committee,
cancelled and reissued (i.e., repriced) such executive officer's stock options
due to the sustained lower price levels at which the Company's Common Stock had
been trading on the American Stock Exchange (Symbol: WTT) and the Company's
continued interest in, and philosophy of, utilizing stock options as a means of
retaining and providing talented personnel with an added incentive for their
efforts and ingenuity.
Members of the Compensation Committee
- --Edward Garcia
Demir Richard Eden
-20-
<PAGE>
<PAGE>
10-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
Number of Length of
Securities Original
Underlying Market Price Exercise Term
Options of Stock At Price At Remaining
Repriced or Time of Time of At Date Of
Amended Repricing or Repricing or New Exercise Repricing or
Name Date (1)(2) Amendment Amendment Price Amendment
- ---- ---- ------ --------- --------- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
Edward Garcia
- -Chairman, CEO
and President 6/15/98 30,000 $2.63 $8.25 $2.63 7.2 years
6/15/98 25,000 $2.63 $7.38 $2.63 9.3 years
Dale Sydnor
- -Chairman, CEO
and President (no
longer affiliated
with the
Company) 6/15/98 50,000 $2.63 $8.25 $2.63 7.2 years
6/15/98 40,000 $2.63 $7.38 $2.63 9.3 years
Eugene Ferrara
- -Exec. Vice
President, CFO
(no longer an
officer or director
of the Company) 6/15/98 30,000 $2.63 $8.25 $2.63 7.2 years
6/15/98 25,000 $2.63 $7.38 $2.63 9.3 years
Inho Alex Kim
- -Vice President of
Business
Development (no
longer affiliated
with the
Company) 6/15/98 20,000 $2.63 $11.63 $2.63 8.5 years
6/15/98 25,000 $2.63 $7.38 $2.63 9.3 years
</TABLE>
- ------------------------
(1) The Company cancelled Mr. Sydnor's options in exchange for options to
purchase 110,000 shares of Common Stock of the Company at an exercise
price of $2.63 per share of Common Stock expiring June 15, 2008.
(2) The Company cancelled each of Messrs. Garcia's, Ferrara's and Kim's
options in exchange for options to each to purchase 75,000 shares of
Common Stock of the Company at an exercise price of $2.63 per share of
Common Stock expiring June 15, 2008.
-21-
<PAGE>
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
-----------------------------------------
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the
Company's Common Stock owned as of March 24, 1999 by (i) each person who is
known by the Company to own beneficially more than 5% of its outstanding Common
Stock, (ii) each director and named executive officer, and (iii) all officers
and directors as a group. Except as otherwise set forth below, the address of
each such person is c/o Wireless Telecom Group, Inc., E. 64 Midland Avenue,
Paramus, New Jersey, 07652.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENTAGE
NAMES AND ADDRESSES BENEFICIAL OWNERSHIP (1) OWNED(2)
------------------- ------------------------ --------
<S> <C> <C>
Edward Garcia (3) 78,000 *
Demir Richard Eden 25,000 *
120-10 Audley Street
Kew Gardens, NY
John Wilchek 12,000 *
211 Mohican Lane
Franklin Lakes, NJ
Franklin H. Blecher 2,500 *
6039 Collins Ave.
Miami Beach, FL
Henry Bachman - --
5 Brandy Road
Cold Spring Harbor, NY
All officers and directors 117,500 *
as a group (5 persons) (3)
FMR Corp (4) 1,755,700 10.0%
82 Devonshire Street
Boston, MA 02109
</TABLE>
- ---------------------------
* Less than one percent.
(1) Except as otherwise set forth in the footnotes below, all shares are
beneficially owned, and the sole voting and investment power is held by
the persons named.
(2) Based upon 17,557,298 shares of Common Stock outstanding as of March 24,
1999.
(3) Includes 48,000 shares of Common Stock subject to options
exercisable within 60 days of March 24, 1999. Excludes an aggregate
of 92,000 shares of Common Stock subject to options which are not
exercisable within 60 days of March 24, 1999.
(4) Based on information set forth in Form 13-G dated February 1, 1999, filed
with the Securities and Exchange Commission.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
None
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
---------------------------------------------------------------
<TABLE>
<S> <C> <C>
(a) (1) Report of Independent Auditors
Consolidated Balance Sheets as of December 31, 1998 and 1997
Consolidated Statements of Operations for the Three Years in
the Period ended December 31, 1998
Consolidated Statements of Changes in Shareholders' Equity
for the Three Years in the Period ended December 31,
1998
Consolidated Statements of Cash Flows for the Three Years
in the Period ended December 31, 1998
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules
</TABLE>
All schedules have been omitted because the required
information is included in the financial statements or notes thereto
or because they are not required.
-22-
<PAGE>
<PAGE>
<TABLE>
<S> <C>
(3) Exhibits
3.1 Certificate of Incorporation, as amended (1)
3.2 Amended and Restated By-laws (1)
3.3 Amendment to the Certificate of Incorporation (3)
3.4 Amendment to the Certificate of Incorporation (4)
4.2 Form of Stock Certificate (1)
10.3 Summary Plan Description of Profit Sharing Plan of the Registrant (1)
10.4 Incentive Stock Option Plan of the Registrant and related agreement (1)
10.4a Amendment to Registrant's Incentive Stock Option Plan and related agreement (4)
10.7 Form of Manufacturers Representative Agreement (1)
10.11 Credit Agreement with Chemical Bank dated August 10, 1992 (2)
10.11a Amendment to Credit Agreement with Chemical Bank (4)
10.11b Amendment to Credit Agreement with Chase Manhattan Bank (5)
10.11c Amendment to Credit Agreement with Chase Manhattan Bank (6)
10.12 Lease between the Company and Paramus Parkway Building Associates (5)
10.13 Lease, July 14, 1998, between the Company and Panorama Park, Inc., as amended
10.14 Asset Purchase Agreement, dated as of January 7, 1999, between the Company and Telecom
Analysis Systems, Inc.(7)
10.15 Non-Competition Agreement, dated March 11, 1999, between the Company and Telecom
Analysis Group, Inc. relating to the Test Equipment Assets (7)
10.16 Non-Competition Agreement, dated March 11, 1999, between the Company and Telecom
Analysis Group, Inc. relating to the Nosie Assets (7)
11.1 Computation of Per Share Earnings
23.1 Consent of Independent Auditors (Lazar Levine & Felix LLP)
27.1 Financial Data Schedule (EDGAR version only)
</TABLE>
- ------------------------
(1) Filed as an exhibit to the Company's Registration Statement on Form S-18
(File No.33-42468-NY) and incorporated by reference herein.
(2) Filed as an exhibit to the Company's Annual Report on Form 10-K for the
year ended December 1992 and incorporated by reference herein.
(3) Filed as an exhibit to the Company's Annual Report on Form 10-K for the
year ended December 1994 and incorporated by reference herein.
-23-
<PAGE>
<PAGE>
<TABLE>
<S> <C>
(4) Filed as an exhibit to the Company's Annual Report on Form 10-K for the
year ended December 1995 and incorporated by reference herein.
(5) Filed as an exhibit to the Company's Annual Report on Form 10-K for the
year ended December 1996 and incorporated by reference herein.
(6) Filed as an exhibit to the Company's Annual Report on Form 10-K for the
year ended December 1997 and incorporated by reference herein.
(7) Filed as an exhibit to the Company's Current Report on Form 8-K, dated
March 11, 1999, filed with the Securities and Commission on March 26, 1999.
(b) Reports on Form 8-K -- None
(c) See Item 14(a)(3), above.
(d) See Item 14(a)(2), above.
</TABLE>
-24-
<PAGE>
<PAGE>
S I G N A T U R E S
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
WIRELESS TELECOM GROUP, INC.
Date: March 24, 1999 By: /s/ Edward Garcia
-------------------------------------
Edward Garcia, Chairman of the Board,
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ Edward Garcia
- ---------------------------------- Chairman of the Board, March 24, 1999
Edward Garcia Chief Executive Officer
Director
- ----------------------------------
John Wilchek
/s/ Demir Richard Eden Director March 24, 1999
- ----------------------------------
Demir Richard Eden
/s/ Franklin H. Blecher Director March 24, 1999
- ----------------------------------
Franklin H. Blecher
- ----------------------------------
Henry L. Bachman Director
</TABLE>
-25-
<PAGE>
<PAGE>
Exhibits
<TABLE>
<S> <C>
10.13 Lease, July 14, 1998, between the Company and Panorama Park, Inc.,
as amended
11.1 Computation of Per Share Earnings
23.1 Consent of Independent Auditors (Lazar Levine & Felix LLP)
27.1 Financial Data Schedule (EDGAR version only)
</TABLE>
-26-
<PAGE>
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Wireless Telecom Group
<TABLE>
<CAPTION>
Page(s)
--------
<S> <C>
Independent Auditors' Report F - 2
Consolidated Financial Statements:
Balance Sheets as of December 31, 1998 and 1997 F - 3
Statements of Operations for the Three Years in the Period
Ended December 31, 1998 F - 4
Statement of Changes in Shareholders' Equity for the Three
Years in the Period Ended December 31, 1998 F - 5
Statements of Cash Flows for the Three Years in the Period
Ended December 31, 1998 F - 6
Notes to Consolidated Financial Statements F - 7
</TABLE>
F-1
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Board of Directors
Wireless Telecom Group, Inc.
Paramus, New Jersey
We have audited the accompanying consolidated financial statements of Wireless
Telecom Group, Inc. as listed in the index under item 14 in this Form 10-K.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Wireless Telecom
Group, Inc. as of December 31, 1998 and 1997 and the results of its operations
and its cash flows for the three years in the period ended December 31, 1998 in
conformity with generally accepted accounting principles.
LAZAR LEVINE & FELIX LLP
New York, New York
February 9, 1999
F-2
<PAGE>
<PAGE>
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
- ASSETS -
<TABLE>
<CAPTION>
December 31,
-----------------------
1998 1997
---- ----
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 9,031,724 $ 7,546,625
Accounts receivable - net of allowance for doubtful accounts of
$134,013 and $120,616 for 1998 and 1997, respectively 2,611,953 4,728,640
Inventories (Note 1) 7,862,143 8,810,230
Prepaid expenses and other current assets 1,109,495 224,413
------------- --------------
TOTAL CURRENT ASSETS 20,615,315 21,309,908
PROPERTY, PLANT AND EQUIPMENT - NET (NOTES 1 AND 2) 2,875,426 2,254,829
OTHER ASSETS 631,458 646,317
-------------- --------------
$24,122,199 $24,211,054
============== ==============
- LIABILITIES AND SHAREHOLDERS' EQUITY -
CURRENT LIABILITIES:
Accounts payable $ 780,410 $ 1,652,601
Accrued expenses and other current liabilities 195,784 204,818
-------------- --------------
TOTAL CURRENT LIABILITIES 976,194 1,857,419
-------------- -------------
DEFERRED INCOME TAXES (NOTES 1 AND 6) 306,610 125,404
-------------- --------------
COMMITMENTS AND CONTINGENCIES (NOTES 4, 5, 7 AND 8)
SHAREHOLDERS' EQUITY (NOTE 3):
Preferred stock, $.01 par value, 2,000,000 shares authorized, none issued - -
Common stock, $.01 par value, 30,000,000 shares authorized,
17,702,298 and 17,613,498 shares issued for 1998 and 1997, respectively 177,023 176,135
Additional paid-in capital 6,631,061 6,422,971
Retained earnings 16,299,120 15,896,934
Treasury stock, at cost - 145,000 shares (267,809) (267,809)
------------ ------------
22,839,395 22,228,231
------------ ------------
$24,122,199 $24,211,054
============ ============
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended December 31,
----------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
NET SALES (NOTES 4 AND 10) $6,834,815 $6,762,833 $5,843,225
---------- ---------- ----------
COSTS AND EXPENSES:
Cost of sales 2,752,438 2,640,389 2,073,193
Operating expenses (Note 1) 2,701,676 2,176,472 1,953,599
Interest, dividends and other income (404,347) (106,601) (91,739)
---------- ------------ -------------
TOTAL COSTS AND EXPENSES 5,049,767 4,710,260 3,935,053
---------- ----------- -----------
INCOME BEFORE PROVISION FOR INCOME TAXES 1,785,048 2,052,573 1,908,172
Provision for income taxes (Notes 1 and 6) 329,443 744,953 684,827
---------- ------------ ------------
INCOME FROM CONTINUING OPERATIONS 1,455,605 1,307,620 1,223,345
DISCONTINUED OPERATIONS:
(Loss) income from operations of a product division to be disposed of - net
of income taxes of ($39,805), $3,781,247
and $3,485,927 for 1998, 1997 and 1996, respectively (Note 10) (175,874) 6,637,253 6,227,112
---------- ----------- -----------
NET INCOME $1,279,731 $7,944,873 $7,450,457
========== ========== ==========
NET INCOME PER COMMON SHARE - BASIC (NOTE 1)
Continuing operations $0.08 $0.07 $0.08
Discontinued operations (0.01) 0.39 0.35
------ ------ ------
$0.07 $0.46 $0.43
===== ===== =====
NET INCOME PER COMMON SHARE - DILUTED (NOTE 1)
Continuing operations $0.08 $0.07 $0.07
Discontinued operations (0.01) 0.38 0.35
----- ------ ------
$0.07 $0.45 $0.42
===== ===== =====
CASH DIVIDENDS PER COMMON SHARE (NOTE 3) $0.05 $0.20 $0.15
===== ===== =====
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
<PAGE>
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
<TABLE>
<CAPTION>
Additional Treasury
Common Paid-in Retained Stock
Stock Capital Earnings at Cost Total
----- ------- -------- ------- -----
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995 $ 87,138 $5,833,138 $ 6,593,465 $ (65,326) $12,448,415
Dividends - $.15 per share (Note 3) - - (2,602,215) - (2,602,215)
Two-for-one common stock split (Note 3) 87,137 (87,137) - - -
Exercise of stock options (Note 3) 754 298,781 - 3,334 302,869
Net income - - 7,450,457 - 7,450,457
---------- ------------ ----------- ---------- -----------
Balance at December 31, 1996 175,029 6,044,782 11,441,707 (61,992) 17,599,526
Dividends - $.20 per share (Note 3) - - (3,489,646) - (3,489,646)
Purchase of treasury stock - - - (207,483) (207,483)
Exercise of stock options (Note 3) 1,106 378,189 - 1,666 380,961
Net income - - 7,944,873 - 7,944,873
---------- ------------ ----------- ---------- -----------
Balance at December 31, 1997 176,135 6,422,971 15,896,934 (267,809) 22,228,231
DIVIDENDS - $.05 PER SHARE (NOTE 3) - - (877,545) - (877,545)
EXERCISE OF STOCK OPTIONS (NOTE 3) 888 208,090 - - 208,978
NET INCOME - - 1,279,731 - 1,279,731
--------- ------------ ----------- ---------- -----------
BALANCE AT DECEMBER 31, 1998 $177,023 $6,631,061 $16,299,120 $(267,809) $22,839,395
========= ========== =========== ========= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
<TABLE>
<CAPTION>
For the Year Ended December 31,
-----------------------------------------------
1998 1997 1996
------------- ------------ -------------
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 1,279,731 $ 7,944,873 $ 7,450,457
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 468,725 291,386 169,053
Deferred income taxes 181,206 60,329 14,379
Provision for losses on accounts receivable 13,397 45,909 39,097
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 2,103,290 (522,434) (927,023)
(Increase) decrease in inventory 948,087 (3,811,655) (2,224,650)
Increase (decrease) in prepaid expenses and other current assets (900,142) 70,547 257,332
Increase (decrease) in accounts payable and accrued expenses (881,225) 477,778 476,399
------------ ------------- ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,213,069 4,556,733 5,255,044
------------ ------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,089,322) (1,523,529) (616,590)
Officers' life insurance 29,919 (209,539) (139,845)
------------ ------------- ------------
NET CASH USED FOR INVESTING ACTIVITIES (1,059,403) (1,733,068) (756,435)
------------ ------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (877,545) (3,489,646) (2,602,215)
Proceeds from exercise of stock options 208,978 380,961 302,869
Acquisition of treasury stock - (207,483) -
------------ ------------- ----------------
NET CASH USED FOR FINANCING ACTIVITIES (668,567) (3,316,168) (2,299,346)
------------ ------------- ------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 1,485,099 (492,503) 2,199,263
Cash and cash equivalents, at beginning of year 7,546,625 8,039,128 5,839,865
------------ ------------- -------------
CASH AND CASH EQUIVALENTS, AT END OF YEAR $ 9,031,724 $ 7,546,625 $ 8,039,128
============ ============ ============
SUPPLEMENTAL INFORMATION:
Cash paid during the year for:
Taxes $ 1,038,000 $ 4,350,000 $ 3,807,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
NOTE 1 - DESCRIPTION OF COMPANY AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES:
ORGANIZATION AND BASIS OF PRESENTATION:
Wireless Telecom Group, Inc. and Subsidiary (the Company),
manufactures a wide variety of test equipment for wireless
telecommunications which it sells to customers throughout the
United States and through its foreign sales corporation to
certain foreign customers. The consolidated financial statements
include the accounts of Wireless Telecom Group, Inc. and its
wholly-owned subsidiary, WTG Foreign Sales Corporation. All
intercompany balances and transactions have been eliminated. The
Company's accounting policies are in accordance with generally
accepted accounting principles. Outlined below are those
policies which are considered particularly significant.
The financial statements for 1997 and 1996 have been restated to
reflect discontinued operations accounting - see Note 10 re:
Subsequent Event.
REVENUE RECOGNITION:
The Company recognizes revenue from all product sales at the
time of shipment.
CASH AND CASH EQUIVALENTS:
The Company considers all highly liquid investments with an
original maturity of three months or less to be cash
equivalents. Cash and cash equivalents consist of bank and money
market accounts and commercial paper, all stated at cost, which
approximates market value. As of December 31, 1998 and 1997, the
Company had approximately $6,000,000 invested in commercial
paper.
CONCENTRATIONS OF CREDIT RISK AND FAIR VALUE:
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash
investments and accounts receivable.
The Company maintains significant cash investments primarily
with one financial institution. The Company performs periodic
evaluations of the relative credit rating of this institution as
part of its investment strategy.
Concentrations of credit risk with respect to accounts
receivable are limited due to the Company's large customer base.
However, at December 31, 1998 primarily all of the Company's
receivables do pertain to the wireless telecommunications
industry.
The carrying amounts of cash and cash equivalents, trade
receivables, other current assets and accounts payable
approximate fair value.
F-7
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
NOTE 1 - DESCRIPTION OF COMPANY AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED):
INVESTMENTS IN EQUITY SECURITIES:
Effective January 1, 1994, the Company adopted the provisions of
SFAS 115 Accounting for Certain Investments in Debt and Equity
Securities which requires greater disclosure of these
instruments including the methods to be used in determining fair
value, and when to record unrealized holding gains and losses in
earnings or in a separate component of shareholders' equity. As
of December 31, 1998 and 1997, the Company had no investments in
such securities.
INVENTORIES:
Raw material inventories are stated at the lower of cost
(first-in, first-out method) or market. Finished goods and
work-in-process are valued at average cost of production, which
includes material, labor and manufacturing expenses.
Inventories, including the portion related to discontinued
operations, consist of:
<TABLE>
<CAPTION>
December 31,
1998 1997
----------- -----------
<S> <C> <C>
Raw materials $2,702,878 $4,159,272
Work-in-process 2,512,054 2,739,634
Finished goods 2,647,211 1,911,324
----------- -----------
$7,862,143 $8,810,230
=========== ===========
</TABLE>
FIXED ASSETS AND DEPRECIATION:
Fixed assets are reflected at cost. Depreciation and
amortization are provided on a straight-line basis over the
following useful lives:
Machinery and equipment 8 years
Furniture and fixtures 5 years
Transportation equipment 5 years
Leasehold improvements are amortized over the term of the lease.
Repairs and maintenance are charged to operations as incurred;
renewals and betterments are capitalized.
RESEARCH AND DEVELOPMENT COSTS:
Research and development costs, including those of discontinued
operations, are charged to operations when incurred and are
included in operating expenses. The amounts charged for the
years ended December 31, 1998, 1997 and 1996 were $2,348,353,
$2,467,879 and $1,653,224, respectively.
F-8
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
NOTE 1 - DESCRIPTION OF COMPANY AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED):
INCOME TAXES:
The Company has adopted SFAS 109, "Accounting for Income Taxes"
which requires use of the asset and liability approach of
providing for income taxes. This statement requires recognition
of deferred tax liabilities and assets for the expected future
tax consequences of events that have been included in the
financial statements or tax returns. Under this method deferred
tax liabilities and assets are determined based on the
differences between the financial statement and tax basis of
assets and liabilities using enacted tax rates in effect for the
year in which the differences are expected to reverse. Under
Statement 109, the effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period
that includes the enactment date (see also Note 6).
INCOME PER COMMON SHARE:
The Company has adopted SFAS 128 "Earnings Per Share" ("SFAS
128"), which has changed the method for calculating earnings per
share. SFAS 128 requires the presentation of "basic" and
"diluted" earnings per share on the face of the income
statement. Prior period earnings per share data has been
restated in accordance with Statement 128. Income per common
share is computed by dividing net income by the weighted average
number of common shares and common equivalent sales outstanding
during each period.
USE OF ESTIMATES:
In preparing financial statements in accordance with generally
accepted accounting principles, management makes certain
estimates and assumptions, where applicable, that affect the
reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial
statements, as well as the reported amounts of revenues and
expenses during the reporting period. While actual results could
differ from those estimates, management does not expect such
variances, if any, to have a material effect on the financial
statements.
ADVERTISING COSTS:
Advertising expenses, including those of discontinued
operations, are charged to operations during the year in which
they are incurred and aggregated $697,849, $665,573 and $537,300
for the years ended December 31, 1998, 1997 and 1996,
respectively.
F-9
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
NOTE 1 - DESCRIPTION OF COMPANY AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED):
POSTRETIREMENT BENEFITS:
During 1997, the Company provided certain health care and life
insurance benefits for its former Chairman and CEO, who retired
during the year. The costs incurred for health benefits were
charged to operations while the insurance benefits are reflected
as a corporate asset for the cash surrender value of the life
insurance.
The Company does not currently provide any other Postretirement
benefits. However, the Company will utilize the provisions of
SFAS 106 "Employers' Accounting for Postretirement Benefits
Other Than Pensions," if such a plan is established.
NEW ACCOUNTING PRONOUNCEMENT:
SFAS 130 "Reporting Comprehensive Income" is effective for years
beginning after December 15, 1997 and early adoption is
permitted. This statement prescribes standards for reporting
comprehen sive income and its components. Since the Company
currently does not have any items of other comprehensive income,
a statement of comprehensive income is not yet required.
SFAS 131 "Disclosures About Segments of an Enterprise and
Related Information", is effective for years beginning after
December 31, 1997 and early adoption is encouraged. The Company
does not presently believe that it operates in more than one
identifiable segment.
See also Income Per Common Share, above.
IMPACT OF THE YEAR 2000 ISSUE:
The Company is in the process of assessing its information
technology ("IT") and non-IT computer systems and operations to
identify and determine the extent to which any such systems will
be susceptible to potential malfunctions as a result of the Year
2000 ("Y2K") problem. The Y2K problem arose because many
existing computer programs use only the last two digits to refer
to a particular year, rather than four. Therefore, these
computer programs do not properly recognize a year that begins
with "20" instead of the familiar "19". Any of the Company's
systems utilizing such last two-digit system to refer to a
particular year may not recognize the year 2000; but rather,
assume the year to be 1900. This could potentially result in
major system failures or miscalculations, causing disruption of
operations, including, but not limited to, a temporary inability
to process transactions, billing and customer service or to
engage in normal business activities.
F-10
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
NOTE 1 - DESCRIPTION OF COMPANY AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED):
IMPACT OF THE YEAR 2000 ISSUE (CONTINUED):
The Company is currently upgrading its computer systems and
operations to ensure that all such systems are, or will be prior
to January 1, 2000, Y2K compliant. The Company estimates that it
will incur aggregate costs of $60,000 for such upgrade, of which
the Company has incurred $29,000 to date. Such costs will be
borne out of the Company's general working capital funds. There
can be no assurance, however, that the Company will achieve full
Y2K compliance before the end of 1999 or that such costs will
not increase.
In addition to assessing its own computer systems and
operations, the Company is currently conducting an external
review of its vendors and suppliers. However, the Company does
not believe that its relationship with any one vendor or
supplier is material to the extent that such party's Y2K
non-compliance would have a material adverse effect on the
Company's business and operations. Notwithstanding, the Company
may experience problems to the extent that a large number of
suppliers or vendors are not Y2K compliant, and there can be no
assurance that such problems would not have a material adverse
effect on the Company.
Although the Company anticipates, although there can be no
assurance, that its computer systems and operations will be
fully Y2K compliant by the end of 1999, the Company does not
currently have any contingency plans in the event such systems
and operations are not, and there can be no assurance that any
effective contingency plans will be developed or implemented. A
failure of the Company to effectively upgrade its computer
systems to become Y2K compliant before the end of 1999 could
have a material adverse effect on the Company's business,
financial position and results of operations. The most
reasonably likely worst case scenario would be a systems failure
beyond the control of the Company from operating its business.
The Company believes that such failure would likely lead to lost
revenues, increased operating costs, loss of customers or other
business interruptions of a material nature.
NOTE 2 - PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment, including the assets related to
discontinued operations, consists of the following (see also
Note 1):
<TABLE>
<CAPTION>
December 31,
----------------------------
1998 1997
---------- ----------
<S> <C> <C>
Machinery and equipment $3,251,546 $2,737,973
Furniture and fixtures 665,259 209,878
Transportation equipment 86,472 155,254
Leasehold improvements 353,300 183,361
---------- ----------
4,356,577 3,286,466
Less: accumulated depreciation and amortization 1,481,151 1,031,637
---------- -----------
$2,875,426 $2,254,829
---------- -----------
---------- -----------
</TABLE>
F-11
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
NOTE 3 - SHAREHOLDERS' EQUITY:
On October 27, 1995, the shareholders approved a proposal to
amend the Company's Certificate of Incorporation to increase its
number of authorized common shares to 30,000,000.
On May 13, 1996, the Company announced the declaration of a
two-for-one common stock split. The split was effective for
shareholders of record on May 22, 1996 and was paid by May 28,
1996. On June 12, 1995, the Company announced the declaration of
a three-for-two common stock split. The split was effective for
shareholders of record on July 5, 1995 and was paid by July 18,
1995. All share and per share data, as appropriate, reflect the
effects of these splits.
The Company has paid quarterly cash dividends aggregating
$877,545, $3,489,646 and $2,602,215 for the years ending
December 31, 1998, 1997 and 1996.
In June 1998, the Company retained J.W. Genesis as its financial
adviser. In connection with this appointment, the Company issued
to J.W. Genesis, warrants to acquire 250,000 shares of the
Company's common stock at a price of $3.0625 per share, the fair
market value at the date of issuance. These warrants expire in
June 2003.
The Company has elected to follow Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" (APB
25) and related interpretations in accounting for its employee
stock options because, as discussed below, the alternative fair
value accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation" requires use of option
valuation models that were not developed for use in valuing
employee stock options. Under APB 25, because the exercise price
of the Company's employee stock options equals the market price
of the underlying stock on the date of grant, no compensation
expense is recognized.
The Company's 1995 Incentive Stock Option Plan ("the Plan") has
authorized the grant of options to purchase up to a maximum of
1,750,000 shares of common stock to be granted to officers and
other key employees. Prior to 1995, the Company had established
an Incentive Stock Option Plan under which options to purchase
up to 1,500,000 shares of common stock were available to be
granted to officers and other key employees. All options granted
have 10 year terms and vest and become fully exercisable after a
maximum of five years from the date of grant.
Pro forma information regarding net income and earnings per
share is required by Statement 123, and has been determined as
if the Company had accounted for its employee stock options
under the fair value method of that Statement. The fair value
for these options were estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted
average assumptions for 1998, 1997 and 1996, respectively;
risk-free interest rates of 5%, 6.1% and 6.8%; dividend yields
of 1.9%, 2.6% and 1.8%; volatility factors of the expected
market price of the Company's common stock of 60%, 65% and 65%;
and a weighted average expected life of the options of seven
years.
F-12
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
NOTE 3 - SHAREHOLDERS' EQUITY (CONTINUED):
The Black-Scholes option valuation model was developed for use
in estimating the fair value of traded options which have no
vesting restrictions and are fully transferable. In addition,
option valuation models require the input of highly subjective
assumptions including the expected stock price volatility.
Because the Company's employee stock options have
characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions
can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a
reliable single measure of the fair value of its employee stock
options.
For purposes of pro forma disclosures, the estimated fair value
of the options is amortized to expense over the options vesting
period. The Company's pro forma information follows:
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- -----------
<S> <C> <C> <C>
Net income:
As reported $1,279,731 $7,944,873 $7,450,457
Pro forma 1,082,259 7,701,088 7,272,191
Basic earnings per share:
As reported $.07 $.46 $.43
Pro forma .06 .44 .42
Diluted earnings per share:
As reported .07 .45 .42
Pro forma .06 .44 .41
</TABLE>
F-13
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
NOTE 3 - SHAREHOLDERS' EQUITY (CONTINUED):
A summary of stock activity, and related information for the
years ended December 31, follows:
<TABLE>
<CAPTION>
Weighted Average
Options Exercise Price
------- --------------
<S> <C> <C>
Outstanding, December 31, 1995 737,460 $4.72
Granted 296,000 7.02
Exercised (75,400) 4.02
Canceled (54,000) 6.93
----------- -----
Outstanding, December 31, 1996 904,060 5.40
Weighted average fair value of options
granted during the year 2.30
Granted 401,000 7.89
Exercised (110,600) 3.44
Canceled (101,060) 6.53
---------- -----
Outstanding, December 31, 1997 1,093,400 6.38
Weighted average fair value of options
granted during the year 2.32
Granted 1,177,400 2.74
Exercised (88,800) 2.35
Canceled (935,000) 6.08
---------- -----
OUTSTANDING, DECEMBER 31, 1998 1,247,000 $3.46
========== =====
Weighted average fair value of options
granted during the year $0.73
=====
Options exercisable:
December 31, 1996 186,460 $3.17
December 31, 1997 238,600 4.84
December 31, 1998 194,000 4.94
</TABLE>
Exercise prices for options outstanding as of December 31, 1998
ranged from $2.50 to $6.75. The weighted average remaining
contractual life of these options is eight years.
F-14
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
NOTE 4 - OPERATIONAL INFORMATION AND EXPORT SALES:
The Company's operations are in a single industry segment and
involve the manufacture of various types of electronic test
equipment. All of the Company's assets are domestic.
For the years ended December 31, 1998, 1997 and 1996, no
customer accounted for more than 10% of total assets.
In addition to its in-house sales staff, the Company uses
various manufacturers representatives to sell its products. For
the years ended December 31, 1998, 1997 and 1996, one
representative accounted for 7%, 18% and 15% of sales,
respectively.
Export sales, including sales related to discontinued
operations, which are all transacted in US dollars, were
approximately 35%, 31% and 35% of total sales for the years
ended December 31, 1998, 1997 and 1996, respectively. Export
sales by geographic location are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Asia $3,307,000 $4,853,000 $4,312,000
Europe 2,658,000 3,002,000 2,677,000
Other 173,000 501,000 852,000
---------- ---------- ----------
$6,138,000 $8,356,000 $7,841,000
========== ========== ==========
</TABLE>
NOTE 5 - 401(k) PROFIT SHARING PLAN:
During the year ended December 31, 1990 the Company adopted a
resolution to institute a 401(k) profit sharing plan effective
January 1, 1991, to cover all eligible employees. The Company's
contributions to the plan are discretionary but may not exceed
6% of participants' compensation. Contributions to the plan for
the years ended December 31, 1998, 1997 and 1996 aggregated
$47,544, $48,485 and $42,013, respectively.
F-15
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
NOTE 6 - INCOME TAXES:
The components of income tax expense related to income from
continuing operations are as follows (see Note 1):
<TABLE>
<CAPTION>
December 31,
----------------------
1998 1997 1996
---------- --------- ---------
<S> <C> <C> <C>
Current:
Federal $262,931 $582,977 $534,095
State 15,000 152,105 148,381
Deferred:
Federal 44,908 2,601 2,351
State 6,604 7,270 -
-------- -------- ----------
$329,443 $744,953 $684,827
======== ======== ========
The components of deferred income taxes are as follows:
<CAPTION>
December 31,
------------
1998 1997
------- -------
Deferred tax assets:
Uniform capitalization of inventory costs for tax purposes $ 56,083 $ 23,689
Allowances for doubtful accounts 33,899 43,776
Deferred tax liabilities:
Tax over book depreciation (268,192) (152,120)
Other (128,400) (40,749)
--------- ---------
Net deferred tax liability $(306,610) $(125,404)
========= =========
The following is a reconciliation of the maximum statutory
federal tax rate to the Company's effective tax rate:
<CAPTION>
December 31,
-----------------------------------
1998 1997 1996
-------- -------- -------
% OF % of % of
PRE TAX Pre Tax Pre Tax
EARNINGS Earnings Earnings
-------- -------- --------
<S> <C> <C> <C>
Statutory federal income tax rate 34.0% 35.0% 35.0%
State income tax 5.1 5.2 5.2
Foreign sales corporation (2.9) (0.8) (1.0)
Other, including research and development
credit (17.7) (3.1) (3.3)
------ ----- -----
18.5% 36.3% 35.9%
==== ==== ====
</TABLE>
F-16
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
NOTE 7 - REVOLVING CREDIT LINE:
The Company had an agreement with its bank which provided for an
unsecured line of credit in the amount of $7,000,000 with
interest at the bank's prime rate. As of December 31, 1997,
there were no direct borrowings under this agreement. This
agreement expired on September 30, 1998 and was not renewed.
NOTE 8 - COMMITMENTS AND CONTINGENCIES:
The Company provides one year warranties on all 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 preventive maintenance procedures
have been followed by its customers. The costs related to these
warranties are not certain and cannot be reasonably estimated.
In addition, based upon past experience, these costs have been
minimal and therefore, no provision for these costs has been
made.
The Company currently leases a 25,000 square foot facility in
Paramus, New Jersey which is used as its principal corporate
headquarters and manufacturing plant. Rent expense for the years
ended December 31, 1998, 1997 and 1996 was $480,161, $378,930
and $188,302, respectively. The lease on the facility includes
an option for the Company to rent additional space within the
complex. The lease on this space terminates in 2006 and the
Company has an option to renew this lease for an additional five
year term. In 1998, the Company leased an additional 600 square
foot facility in San Diego, California.
On July 14, 1998 the Company entered into a 15 year lease for a
44,000 square foot facility located in Mahwah, New Jersey. This
new facility was leased to serve as the headquarters and
manufacturing plant for one of the Company's divisions. Annual
base rentals on this property aggregate approximately $407,000
per year for the initial five years, $438,000 per year for the
second five years and $489,000 per year for the final five
years. Rent expense on this facility for the period ended
December 31, 1998 aggregated $170,000. The lease also includes
an option to acquire the building at a future date (see also
Note 10 re: sale of assets - discontinued operations).
The Company is also responsible for its proportionate cost of
utilities, repairs, taxes and insurance. The future minimum
lease payments (including the Mahwah, New Jersey facility) are
shown below:
<TABLE>
<S> <C>
1999 $ 701,792
2000 705,512
2001 721,942
2002 726,076
2003 729,255
Thereafter 5,354,565
----------
$ 8,939,142
===========
</TABLE>
F-17
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
NOTE 9 - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED):
The following is a summary of selected quarterly financial data
from continuing operations (in thousands, except per share
amounts).
<TABLE>
<CAPTION>
1998
----
QUARTER
-----------------------------------------
1ST 2ND 3RD 4TH
------ ------ ------ ------
<S> <C> <C> <C> <C>
NET SALES $2,067 $2,005 $1,383 $1,380
GROSS PROFIT 1,282 1,252 723 825
OPERATING INCOME 669 539 56 117
NET INCOME 491 407 107 451
DILUTED NET INCOME $.03 $.02 $.01 $.02
<CAPTION>
1997
----
Quarter
----------------------------------------
1st 2nd 3rd 4th
------ ------ ------- -------
<S> <C> <C> <C> <C>
Net sales $1,772 $1,745 $1,677 $1,569
Gross profit 1,114 1,086 999 923
Operating income 553 519 451 423
Net income 368 353 297 290
Diluted net income per share $.02 $.02 $.02 $.01
</TABLE>
NOTE 10 - SUBSEQUENT EVENT:
On January 7, 1999, the Company reached an agreement to sell the
assets of a product division which is in the business of
designing, developing, assembling, manufacturing and selling
certain wireless and satellite test equipment. The purchase
price to be paid to the Company will initially be approximately
$18.8 million, which amount may be adjusted prior to closing
based upon certain provisions in the asset purchase agreement.
The net assets being sold aggregate approximately $8,000,000.
The agreement also contains non-compete clauses and a provision
for a portion of the purchase price ($2 million) to be placed in
escrow to secure payment of certain indemnification obligations
and/or purchase price adjustments.
F-18
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
NOTE 10 - SUBSEQUENT EVENT (CONTINUED):
This product division is being accounted for as discontinued
operations and accordingly, amounts in the financial statements
and related notes for all periods shown have been restated to
reflect discontinued operations accounting. Operating results of
the discontinued operations are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Net sales $10,465,848 $20,503,776 $16,619,804
----------- ----------- -----------
Earnings (loss) before taxes (215,679) 10,418,500 9,713,039
Income taxes (benefit) (39,805) 3,781,247 3,485,927
----------- ----------- -----------
Net earnings (loss) from
discontinued operations $ (175,874) $ 6,637,253 $ 6,227,112
=========== =========== ===========
</TABLE>
The product division being sold by the Company occupies the
facilities located in Mahwah, New Jersey (see Note 8) and the
purchaser will sublease this facility for a six month period. At
the request of the purchaser, at the end of the six month
period, the Company has agreed to exercise its option to acquire
this building and to sell it to the purchaser on terms and
conditions no less favorable to those on which the Company
acquired the building.
The agreement also provides that the Company will acquire the
noise generation product line of the above purchaser and
incorporate these assets and related business into its on-going
operations. The cost of these assets will approximate
$2,500,000.
The closing of the aforementioned transactions contemplated by
the asset purchase agreement is expected to occur during the
first quarter of 1999.
F-19
<PAGE>
<PAGE>
L E A S E
Panorama Park, Inc.,
a New Jersey corporation
Landlord,
-and-
WIRELESS TELECOM GROUP, INC.,
a New Jersey corporation,
Tenant
<PAGE>
<PAGE>
<TABLE>
<S> <C>
TABLE OF CONTENTS
ARTICLE 1 - TERM............................................................. 1
ARTICLE 2 - RENT............................................................. 1
ARTICLE 3 - TAXES AND ASSESSMENTS............................................ 3
ARTICLE 4 - REPAIRS.......................................................... 5
ARTICLE 5 - CHANGES AND NEW CONSTRUCTION..................................... 6
ARTICLE 6 - INSURANCE........................................................ 8
ARTICLE 7 - DESTRUCTION...................................................... 11
ARTICLE 8 - CONDEMNATION..................................................... 12
ARTICLE 9 - DEFAULT.......................................................... 13
ARTICLE 10 - ASSIGNMENT AND SUBLETTING....................................... 14
ARTICLE 11 - CONDITION OF AND TITLE TO THE PROPERTY.......................... 15
ARTICLE 12 - (INTENTIONALLY DELETED)......................................... 16
ARTICLE 13 - INTEREST AND LATE CHARGES....................................... 16
ARTICLE 14 - INDUSTRIAL SITE RECOVERY ACT AND ENVIRONMENTAL LAWS............. 16
ARTICLE 15 - COMPLIANCE WITH LAW, ORDINANCES, ETC............................ 20
ARTICLE 16 - DISCHARGE OF LIENS.............................................. 21
ARTICLE 17 - ENTRY ON PROPERTY BY LANDLORD, ETC.............................. 22
ARTICLE 18 - QUIET ENJOYMENT................................................. 23
ARTICLE 19 - SURRENDER OF THE PROPERTY....................................... 23
ARTICLE 20 - THE BUILDINGS; USE OF THE BUILDINGS............................. 23
ARTICLE 21 - LIABILITY; LANDLORD'S DESIGNEE.................................. 24
ARTICLE 22 - ESTOPPEL CERTIFICATES........................................... 24
ARTICLE 23 - HOLDOVER TENANT................................................. 24
ARTICLE 24 - ABANDONMENT OF PROPERTY......................................... 25
</TABLE>
i
<PAGE>
<PAGE>
<TABLE>
<S> <C>
ARTICLE 25 - STRICT PERFORMANCE.............................................. 25
ARTICLE 26 - MISCELLANEOUS................................................... 25
ARTICLE 27 - LIMITATION OF LIABILITY......................................... 26
ARTICLE 28 - BROKERAGE....................................................... 26
ARTICLE 29 - FINANCIAL STATEMENTS............................................ 27
ARTICLE 30 - MORTGAGE SUBORDINATION AND ATTORNMENT........................... 27
ARTICLE 31 - SIGNS........................................................... 28
ARTICLE 32 - TENANT'S REIMBURSEMENT.......................................... 28
ARTICLE 33 - NO SETOFF....................................................... 28
ARTICLE 34 - MORTGAGEE PROTECTION CLAUSE..................................... 29
ARTICLE 35 - OPTION TO EXTEND TERM........................................... 29
ARTICLE 36 - FORCE MAJEURE................................................... 30
ARTICLE 37 - PARTIES......................................................... 31
ARTICLE 38 - LENDER'S CONSENT................................................ 31
</TABLE>
ii
<PAGE>
<PAGE>
LEASE
LEASE AGREEMENT ("Agreement" or "lease"), dated July 14, 1998, by and
between PANORAMA PARK, INC., a New Jersey corporation, ("Landlord"), with its
office at 15 Maple Avenue, Morristown, New Jersey 07960, and WIRELESS TELECOM
GROUP, INC., a New Jersey corporation ("Tenant"), with its office at East 64
Midland Avenue, Paramus, New Jersey 07652;
ARTICLE 1 - TERM
----------------
1.1 In consideration of the rents reserved herein and in consideration
of the agreements and conditions herein contained on the part of the Tenant to
be performed and observed, Landlord does hereby demise and lease to Tenant, and
Tenant does hereby hire from Landlord, the land, building and improvements and
the fixtures located thereon, located at 3 Industrial Avenue, Mahwah, Bergen
County, New Jersey, which is described in Exhibit "A" attached hereto (the
"Demised Premises"), for an original term of fifteen (15) years plus the partial
month at the beginning of the term, commencing on the date Landlord, or its
assignee, acquires title to the Demised Premises (the "Commencement Date") which
term will end on August 14, 2013. The parties will execute an addendum to this
lease confirming the Commencement Date. In the event that the Commencement Date
does not occur on or before August 10, 1998, this lease will terminate,
automatically, and neither party will have any right or recourse against the
other.
ARTICLE 2 - RENT
----------------
2.1 Beginning on the Commencement Date, Tenant agrees to pay Landlord
fixed rental (the "Fixed Rent") payable in equal monthly installments, in
advance, on the fifteenth day of every month, as follows:
<TABLE>
<CAPTION>
Monthly Installment of
Period Fixed Rent
------ -----------------------
<S> <C>
Commencement Date to and including
August 14, 2003 $33,910.17
August 15, 2003 to and including
August 14, 2008 36,505.17
August 15, 2008 to and including
August 14, 2013 40,787.00
</TABLE>
If the Commencement Date does not fall on the fifteenth day of a month, rent
shall be prorated for the first month in which the Commencement Date occurs, and
rent for the period from the Commencement Date to the fifteenth day of the
following month will be paid on the Commencement Date. Said rental payments
together with all other payments required hereunder shall be payable to Landlord
at:
1
<PAGE>
<PAGE>
c/o Management and Accounting Services, Inc.
15 Maple Avenue
Morristown, New Jersey 07960
until further notice from Landlord.
2.2 A. It is intended that the Fixed Rent shall be paid by Tenant
pursuant to Article 2 hereof and Additional Rent pursuant to this lease shall be
paid to Landlord throughout the term hereof, free of any expense, charge or
other deduction whatsoever with respect to the Demised Premises and/or the
ownership, leasing, operation, management, maintenance, repair, rebuilding, use
or occupation thereof, or any portion thereof. Landlord shall not be required
to furnish any service or facility whatsoever to the Demised Premises or make
any payment of any kind whatsoever or be obligated or liable hereunder except as
otherwise expressly set forth herein. The provisions of this Section 2.2
(paragraphs A and B) shall not release Landlord from complying with any of its
obligations or performing any services required of Landlord under this lease.
Tenant hereby assumes the full and sole responsibility for the condition,
operation, repair, alteration, improvement, replacement, maintenance and
management of the Demised Premises and any portion thereof, except those matters
or conditions which are specifically the obligation of Landlord pursuant to this
lease. Landlord shall not be responsible for any loss or damage to any property
of Tenant or any subtenant, franchisee, concessionaire or other user or occupant
of any part of the Demised Premises, except to the extent the same shall be
caused by the negligence, intentional acts or willful misconduct of Landlord or
its agents, employees or contractors.
B. This is an absolutely net lease and, except as otherwise
specifically provided in this lease, (a) this lease shall not terminate nor
shall Tenant have any right to terminate this lease; (b) Tenant shall not for
any reason whatsoever be entitled to any abatement, deduction, deferment,
suspension or reduction of, or setoff, defense or counterclaim against, any
rent, charge, or other sums payable by Tenant under this lease; (c) the
respective obligations of Landlord and Tenant shall not be affected by reason of
damage to or destruction to all or any portion of the Demised Premises from
whatever cause, except as provided in this lease, any taking by condemnation,
eminent domain, except as provided in this lease, or by agreement between
Landlord and those authorized to exercise such rights, the lawful or unlawful
prohibition of Tenant's use of all or any portion of the Demised Premises, any
default or breach of any warranty by Landlord under this lease or any other
agreement between Landlord and Tenant, or for any other cause whether similar or
dissimilar to the foregoing; it being the intention that the obligations of
Landlord and Tenant hereunder shall be separate and independent covenants and
agreements and that the Fixed Rent and Additional Rent and all other charges and
sums payable by Tenant hereunder shall continue to be payable in all events
unless the obligations to pay the same shall be terminated pursuant to the
express provisions of this lease. Tenant covenants and agrees that it will
remain obligated under this lease in accordance with its terms, and that it will
not take any action to terminate, cancel, rescind or void this lease for any
reason whatsoever, including without limitation any bankruptcy, insolvency,
reorganization, composition, liquidation, dissolution,
2
<PAGE>
<PAGE>
or other proceedings affecting Landlord or any assignee of, or successor to,
Landlord, and notwithstanding any action with respect to this lease that may be
taken by a trustee or receiver of Landlord or any assignee of, or successor to,
Landlord or by any court in any such proceeding.
ARTICLE 3 - TAXES AND ASSESSMENTS
---------------------------------
3.1 Beginning with the Commencement Date, Tenant agrees to pay directly
to the taxing authority as Additional Rent all "Impositions" (hereinafter
defined) before the same becomes delinquent, prorated and payable for any period
between the Commencement Date of the term of this lease and the expiration of
the term of this lease. Every Imposition payable for a period beginning before
the date hereof and ending during the term of this lease shall be paid by
Landlord, subject to apportionment with, or reimbursement by, Tenant. Every
Imposition payable for a period beginning before the expiration of the term of
this lease and ending after the expiration of the term shall be apportioned and
adjusted be tween Landlord and Tenant as of the termination date. Tenant will
furnish to Landlord evidence of payments of Impositions promptly following
payment of the same. Landlord shall send to Tenant all bills and/or notices
which Landlord receives, within ten (10) days after Landlord's receipt of same.
"Impositions" shall mean real estate taxes, betterments, assessments (special or
general, ordinary or extraordinary), taxes upon gross rents received from
occupying subtenants and the Fixed and Additional Rent payable pursuant to this
lease, water and sewer taxes, sewer usage fees, sprinkler usage and standby
fees, and any other charges made by any public authority which upon assessment
or upon failure of payment become a lien upon the Demised Premises. Impositions
shall not include any franchise, estate, inheritance, succession, capital levy
or transfer tax of Landlord, or any income tax of Landlord; provided, however,
that if at any time during the term of this lease the present method of taxation
or assessment shall be so changed that there shall be substituted in whole or in
part for the types of taxes, assessments, levies, impositions or charges now or
hereafter levied, assessed or imposed on real estate and the improvements
thereon, a capital levy or other tax levied, assessed or imposed on the land,
buildings and/or improvements or the income or other assets of Landlord, then
any such capital levy or other tax shall, to the extent that it is so
substituted, be deemed to be included within the term "Impositions." However, if
a tax on rents is levied or assessed by the State of New Jersey or any political
subdivision on the rent, whether or not it is in substitution in whole or part
for real estate taxes, all of such tax or excise on rents shall be included
within the definition of "Imposition." Landlord shall promptly forward to Tenant
all bills, notices or other communications it shall receive with respect to
Impositions.
3.2 If, by law, any Imposition is payable, or may at the option of the
taxpayer be paid, in installments (whether or not interest shall accrue on the
unpaid balance of such Imposition), Tenant may pay the same (and any accrued
interest on the unpaid balance of such Imposition) in installments as the same
respectively become due and before any fine, penalty interest or penalty cost
may be added thereto for the nonpayment of any such installment. However, any
installment which shall fall due after the expiration of the term of this lease
and any Imposition relating to a fiscal period of the taxing authority in which
3
<PAGE>
<PAGE>
the term of this lease shall end (whether or not such installment or Imposition
shall be levied, imposed or become a lien upon the Property or any part thereof,
or become payable in respect thereto during the term of this lease) shall be
apportioned and Tenant shall pay to Landlord, or Landlord will reimburse Tenant,
at the termination of this lease that proportion of such installment or
Imposition which may apply, on a prorated basis, to any period of time after the
term of this lease.
3.3 Tenant shall have the right to contest in good faith any Imposition
in the manner provided by law for contesting the same, provided that if payment
of any Imposition shall be deferred pending such contest, such deferment of
payment or deferment of compliance shall not jeopardize Landlord's interest in
the Demised Premises. Such contest shall be in the names of Tenant and Landlord.
At Landlord's own cost or expense, Landlord shall have the right to join in any
contest, and, whether or not Landlord chooses to participate actively in such
proceeds, Tenant, at its own expense, shall keep Landlord advised of all
proceedings and furnish Landlord with copies of all rulings or determinative
documents. Tenant shall not settle or compromise such proceedings without
Landlord's consent, which consent shall not be unreasonably withheld,
conditioned or delayed. Landlord shall promptly execute any and all documents in
connection therewith as Tenant may reasonably request. Tenant shall indemnify
Landlord against, and save Landlord harmless from, any and all loss, damage,
claims, liabilities, judgments, costs and expenses (including the cost and
expense of defending any claim), arising out of any such contest or out of any
deferring of payment of any Imposition; however, Tenant shall not be liable to
Landlord for any increase in real estate taxes as a result of a tax contest,
except to the extent that such increase applies during the term of this lease.
Until such time as an abatement or refund shall be obtained, an Imposition shall
be deemed the amount assessed; after an abatement or refund shall be obtained,
the Imposition shall be deemed the amount assessed less the net abatement or
refund.
3.4 A. If Tenant defers payment of the contested Imposition beyond any
date on which interest and/or penalties may accrue or beyond the date on which
the taxing authority may place a lien on the Demised Premises and/or sell a tax
lien certificate, prior to the due date thereof, Tenant shall deposit (the
"Deposit") with the Landlord the amount of the contested Imposition and an
estimated amount of interest, penalties and charges which might be assessed
against or become a charge on the Demised Premises or any part thereof by reason
of such contest as reasonably determined by Tenant. Landlord shall hold the
Deposit in trust in an interest bearing certificate of deposit for the benefit
of Tenant and Landlord, as herein provided and not commingle the Deposit with
any of Landlord's other assets. Upon the termination of the contest, Tenant
shall pay the Imposition, as finally determined, together with the interest,
penalties and other charges in connection therewith, and upon such payment the
Deposit shall be returned to Tenant or, if Tenant so elects, the Deposit may be
used for such payment. Any surplus shall be returned to Tenant and any
deficiency shall be made good by Tenant, immediately. The Deposit shall be
maintained by Landlord in (i) a certificate of deposit at a banking institution
located in New Jersey with a net worth in excess of $100,000,000.00, or (ii)
obligations of the United States Government, as directed by Tenant. Interest
4
<PAGE>
<PAGE>
shall become part of the Deposit.
B. If at any time during the pendency of the contest, Landlord
reasonably shall determine the amount of the Deposit insufficient to cover the
contested Imposition, interest, penalties and charges, Tenant, upon demand of
Landlord and within fifteen (15) days after such demand, shall increase the
Deposit by such additional sum as Landlord may reasonably request. Upon failure
of Tenant to make such additional Deposit, Landlord may pay the contested
Imposition and interest, penalties and charges out of the Deposit. Any surplus
shall be returned to Tenant immediately and any deficiency shall be made good by
Tenant, within fifteen (15) days after Landlord's demand.
C. Any tax refund (whether in cash or credit against future
Impositions payable) with respect to Impositions paid by Tenant or paid by
Landlord and for which Landlord has been reimbursed shall be the property of
Tenant. If the tax refund is received by or credited to Landlord after the
expiration of the term of this lease, Landlord will pay to Tenant its share
within fifteen (15) days after its receipt.
3.5 If monthly escrow deposits of Impositions are required pursuant to
the provisions of any mortgage ("Mortgage") which encumbers the Demised
Premises, Tenant shall deposit monthly with Landlord on the first day of each
month during the term of this lease a sum equal to such required deposits as
Additional Rent, and Landlord will cause the mortgagee to pay the Impositions
directly to the assessing authority. If the holder of the Mortgage requires that
it or its servicing agent pay the Impositions, then Tenant will cooperate by
either depositing the amount of each installment with the agent or sending a
check to the agent payable to the taxing authority in sufficient time so that
the agent can make or send the payment to the taxing authority no later than the
due date.
ARTICLE 4 - REPAIRS
-------------------
4.1 Except as specifically provided to be the Landlord's obligations
pursuant to Section 4.2 hereof, Tenant shall keep the Demised Premises
(including all improvements that may from time to time be thereon) in a good
state of repair and condition based upon generally accepted standards for
comparable property of a similar type, class and age in the same general
area, and Tenant shall comply with any present or future regulations, laws,
ordinances or requirements of the federal, state or municipal governments, or
of any departments, subdivisions, bureaus or offices thereof having jurisdiction
over the Demised Premises. Tenant shall make all repairs and replacements to
satisfy the provisions of this Article, including repairs and/or replacements of
a structural and/or capital nature, except those which are Landlord's obligation
pursuant to Section 4.2 hereof and those repairs and replacements caused by the
negligence, intentional acts or wilful misconduct of Landlord or its agents,
employees or contractors. In order to assist Landlord to fulfill its obligations
pursuant to Section 4.2 hereof, Tenant will notify Landlord of the existence of
any roof problems (including those which are Tenant's responsibility) and any
problems with the foundation, exterior walls, load-bearing columns and roof
structure of which Tenant becomes aware; provided that Tenant's failure to
notify Landlord shall not relieve Landlord of its obligations hereunder.
5
<PAGE>
<PAGE>
4.2 Landlord shall be responsible to make the following repairs and/or
replacements at Landlord's expense: foundation, exterior walls, load-bearing
columns and roof structure (but not roof coverings); provided that they have not
been altered by Tenant nor the condition caused by the negligent acts of Tenant
or its agents, employees, or contractors, in which events, the obligation to
repair and/or replace will be Tenant's.
4.3 Tenant shall indemnify Landlord against, and save Landlord harmless
from, any and all loss, damage, claims, liabilities, judgments, costs and
expenses (including the reasonable cost and expense of defending any claim,
arising during the term of this lease out of any condition existing upon the
Demised Premises for which Tenant is responsible under this lease, any act
occurring upon the Demised Premises, (other than negligence, intentional acts or
wilful misconduct of Landlord or its agents, employees or contractors), any use
made of the Demised Premises, or any omission or failure to act upon the Demised
Premises during the term hereof; provided that in the event of any claim made
against Landlord, Landlord shall promptly give Tenant notice of such claim.
ARTICLE 5 - CHANGES AND NEW CONSTRUCTION
----------------------------------------
5.1 Promptly after the Commencement Date, Tenant, at Tenant's expense
but subject to reimbursement by Landlord as provided in this Agreement, will
cause to be performed by reputable contractors, the work ("Tenant's Work") which
is set forth on Exhibit "B" attached hereto and made a part hereof.
5.2 At least seven (7) business days prior to the Commencement Date,
Tenant, at Tenant's expense, will cause plans and specifications for Tenant's
Work to be prepared and submitted to Landlord for its approval, which approval
will not be unreasonably delayed or withheld provided Tenant's Work does not
involve changes to the structure of the Demised Premises nor modifications to
its electrical, plumbing and HVAC systems. Landlord will review Tenant's plans
within five (5) business days of its receipt and give written notice to Tenant
of its approval or rejection (stating the reasons for rejection) within said
five (5) day period. Failure to give such notice will be deemed approval,
automatically. When the plans and approvals have been approved by both parties,
the plans and approvals will be deemed to have been incorporated into this
lease, automatically, as Exhibit "B" without the necessity of physically
attaching them to this lease.
5.3 As Tenant's Work progresses, but not more frequently than every
three (3) weeks, Landlord will pay directly to Tenant's contractors and/or
materialmen, an amount equal to ninety (90%) percent of their charges for work
and/or materials actually performed and/or installed in the Demised Premises
upon presentation of reasonably detailed invoices and those documents specified
in provision (i) and (iv) of this section, up to a maximum obligation of
$489,600.00. Upon completion of the Tenant's Work and delivery to Landlord of
(i) an architect's certificate that the construction has been completed in
accordance with the approved plans, (ii) a set of "as built" plans or final
plans which accurately show Tenant's Work as actually constructed, (iii) a final
unconditional Certificate of Occupancy, (iv) verification that all contractors
and subcontractors have been fully paid except for Landlord's final payment
under
6
<PAGE>
<PAGE>
this paragraph and there are no liens or possible lien claims against the
Demised Premises, and (v) a survey of the Demised Premises if any of the
improvements have changed the footprint of the building or have been made to the
outside of the Demised Premises, Landlord will pay to Tenant's Contractors
and/or materialmen an additional $54,400.00 (for a total of $544,000.00) as
Landlord's full share of the cost of Tenant's Work.
5.4 Tenant shall not have the right, during the term of this lease,
without the prior written consent of Landlord, which consent shall not be
unreasonably withheld, conditioned or delayed, to make any additional changes or
alterations to any portion of the Demised Premises. In the event that Landlord
does not respond to Tenant's written request within fifteen (15) days, Landlord
will be deemed, automatically, to have given its consent. Landlord shall not
unreasonably withhold its consent to any changes or alterations which involve
structural changes unless they will decrease the value of the Demised Premises.
Landlord's consent will not be required for any work solely involving (i)
painting, decorating and/or wall covering or (ii) work not involving structural
changes at a maximum reasonable cost of $50,000.00 for any one time or
$100,000.00 on a cumulative basis for any twelve (12) month period.
5.5 All work done by Tenant and/or Landlord upon the Demised Premises
shall be done subject to, and in compliance with, all laws, ordinances and
regulations of all public authorities having jurisdiction. Tenant will obtain
all permits in connection with any work performed by Tenant at the Demises
Premises and furnish copies to Landlord. Tenant will pay or will cause to be
paid all charges for all work done (labor or materials) upon the Demised
Premises during the term of this lease and will not suffer or permit any
mechanics' or similar liens for labor or materials furnished to the Demised
Premises during the term of this lease to be filed against the Demised Premises
or any part thereof; and if any such lien shall be filed, Tenant will either pay
the same or procure the discharge thereof by giving security or in such other
manner as may be required or permitted by law. Tenant shall have the right,
however, at the election of Tenant, in the name of Tenant or in the name of
Landlord or in the names of both, to contest any such lien, provided that the
existence of such lien pending such contest shall not jeopardize Landlord's
interest in the Demised Premises. Landlord and Tenant shall indemnify the other
against, and save the other harmless from any and all loss, damage, claims,
liabilities, judgments, costs and expenses arising out of the filing of any lien
resulting from work which is performed by contractors engaged by the other
party. Notice is hereby given that Landlord shall not, under any circumstances,
be liable to pay for any work, labor or services rendered or materials furnished
to Tenant or any of its subtenants upon credit.
5.6 Prior to the commencement of Tenant's Work and any repairs,
alterations or construction which will cost more than $25,000.00, Tenant, at its
own cost and expense, shall cause all contractors to obtain a completion bond
from a recognized surety company authorized to conduct business in New Jersey.
5.7 Whenever Landlord consents to any alterations or improvements by
the Tenant, except the Tenant's Work at the beginning of the term, Landlord will
notify Tenant which of the same, if any, must be removed and/or restored at the
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end of the term of this lease. Tenant will not be required to remove and/or
restore Tenant's Work (at the beginning of the term) at the end of the term of
this lease.
ARTICLE 6 - INSURANCE
---------------------
6.1 Beginning on the Commencement Date, Tenant, at no expense to Land
lord, shall maintain or cause to be maintained:
A. insurance covering the Demised Premises against loss or
damage by fire and such risks as are customarily included in extended
coverage endorsements attached to fire insurance policies in the State
of New Jersey in an amount which is the lesser of (i) 100% of the full
insurable value of the Demised Premises or (ii) the maximum amount
obtainable;
B. rent insurance against loss resulting from any of the
hazards required to be covered by insurance under subparagraph A of
this Article in an amount at least equal to total rents for one year,
which amount shall be at least equal to the Fixed Rent and the
Additional Rent and estimated Impositions and estimated insurance
premiums hereunder for one year;
C. workmen's or workers' compensation insurance, covering
disability benefit and other similar employee benefit acts, meeting all
statutory requirements in respect of any work or other operations on or
about the Demised Premises;
D. glass breakage coverage; and
E. insurance in such amounts as Landlord may reasonably
require against other insurable hazards which at the time are commonly
insured against by prudent owners of buildings and premises similarly
situated, due regard being given to the height, type, construction, use
and occupancy of the Demised Premises and the cost of premiums.
The words "full insurable value," as used in this lease, shall
mean the cost of actual replacement of the building (excluding foundation and
excavation costs and costs of underground flues, pipes, drains and footings
below the lowest basement floor). Landlord agrees that the full insurable value
will be as determined by Tenant's insurance company. Tenant will be responsible
for having its insurance company determine the full insurable value at every two
years thereafter, and the insurance will be carried in that amount.
If any of the insurance provided for in this Section should be
unobtainable (unless the same are unobtainable by reason of the negligence or
wilful misconduct of Tenant) and if Tenant shall obtain the maximum insurance
obtainable and shall promptly give notice to Landlord of the extent of Tenant's
inability to obtain any insurance required to be maintained hereunder, then the
failure of Tenant to procure and maintain such insurance as is unobtainable as
aforesaid shall be excused; provided, however, that Landlord shall have the
right to procure such insurance up to the maximum limits provided
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for herein and Tenant shall pay the cost and premiums therefor.
6.2 Tenant, at no expense to Landlord, shall maintain, for the mutual
benefit of Landlord and Tenant and the holder of any mortgage, $3,000,000 of
Single Limit Comprehensive General Liability Insurance against claims for bodily
injury, death or property damage occurring on or about the Property or any
adjoining sidewalk, curb or vault. If requested by Landlord, the aforementioned
limit shall be increased to such amount as may reasonably be designated by
Landlord provided that such increased amount is then customarily carried by
prudent owners of similar property in the same general area.
6.3 The insurance required under this Article shall be effected by
valid and enforceable policies issued by insurance companies of recognized
responsibility doing business in the State of New Jersey. Tenant may carry the
insurance required under this Article under a blanket policy which also covers
other properties, provided that any insurance covered under a blanket policy
shall give the same protection to Landlord and any named insured as would a
separate policy relating only to the Demised Premises.
6.4 Notwithstanding the foregoing, each party shall look first to any
insurance in its favor before making any claim against the other party for
recovery for loss or damage resulting from fire or other casualty, and to the
extent that such insurance is in force and collectible and to the extent
permitted by law, Landlord and Tenant each hereby releases and waives all right
of recovery against the other or any one claiming through or under each of them
by way of subrogation or otherwise. The foregoing release and waiver shall be in
force only if both releasors' insurance policies provide that such a release or
waiver shall not invalidate the insurance and if such a policy can be obtained
without additional premiums (or, in the event that a policy so providing can be
obtained by either party with additional premium, if the other party shall pay
for such additional premium).
6.5 At least three (3) business days prior to the Commencement Date of
this lease, and thereafter not less than 15 days prior to the expiration date of
the expiring policies theretofore furnished pursuant to this Article, true
copies (or certificates) of such policies or renewals thereof (or binders, if
policies or renewals are not available) shall be delivered by Tenant to Landlord
and the holder of any Mortgage, and, if requested by Landlord, with reasonable
proof of payment of premium (or the current installment thereof if the premium
is payable in installments). If the insurance is carried under a blanket policy,
Tenant may deliver certificates thereof referable to and specifying the amount
of insurance allocated to the Demised Premises in lieu of true copies of the
blanket policy, accompanied by an endorsement executed by the insurer of such
policy to the effect that all named insureds are entitled to the same rights
they would have if said policy were not a blanket policy.
6.6 All policies of insurance required under this Article shall name
Landlord, and the holder of any Mortgage, as additional insureds. They shall
also be payable under a standard mortgagee clause to the mortgagees as provided
in each such mortgage, and shall provide that insurance proceeds are to be
adjusted, held, disbursed and applied in accordance with the provisions of this
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lease. Each policy required under this Article shall contain an agreement, if
customarily obtainable, that it will not be cancelled or modified without at
least 30 days' notice to Landlord (and any mortgagee named therein) and that no
omission or negligence of Tenant shall result in forfeiture of the insurance.
6.7 Subject to the rights of the holder of any Mortgage, the loss, if
any, under policies required by Paragraph 6.1 hereof shall be adjusted by and
paid to Landlord. All insurance policies to the extent reasonably obtainable,
shall provide that the loss, if any thereunder, shall be adjusted and paid as
provided in this Article.
6.8 Insurance proceeds under policies required by Paragraph 6.1 hereof, to
the extent that they are payable to Landlord (and to the holder of any Mortgage,
if such mortgagees shall agree to permit Landlord to use same for restoration
and repair), shall be held in trust by Landlord and used to pay for the
cost of the work required to be performed by Landlord under this lease, and the
cost of making temporary repairs and doing such work as may be necessary to
protect the Demised Premises against further injury. If the proceeds of such
insurance received by Landlord shall exceed such cost, such excess shall belong
to Landlord.
6.9 Tenant shall not take out separate insurance concurrent in form or
contributing in the event of loss with that required in this Article to be
furnished by or which may reasonably be required to be furnished by Tenant,
unless Landlord is included therein as an insured, with loss payable as in this
lease provided.
6.10 If monthly escrow deposits of insurance premiums are required pursuant
to the provisions of any Mortgage, Tenant shall deposit monthly with Landlord on
the first day of each month during the term of this lease a sum equal to such
required deposits as Additional Rent, and Landlord will cause the mortgagee to
pay the insurance premiums.
6.11 Each party hereto does hereby remise, release and discharge the other
party hereto and any officer, agent, employee, or representative of such party,
of and from any liability whatsoever hereafter arising from loss, damage, or
injury caused by fire or other casualty normally covered by extended coverage
policy for which insurance (permitting waiver of liability and containing a
waiver of subrogation) is carried by the injured party at the time of such loss,
damage or injury to the extent of any recovery by the injured party under such
insurance. Whenever (a) any loss, cost, damage or expense resulting from fire,
explosion or any other casualty or occurrence is incurred by either of the
parties to this lease in connection with the Demised Premises, and (b) such
party is then covered, in whole or in part, by insurance with respect to such
loss, cost, damage or expense, then, the party so insured hereby releases the
other party from any liability it may have on account of such loss, cost, damage
or expense to the extent of any amount recovered by reason of such insurance,
and waives any right of subrogation which might otherwise exist in or accrue to
any person on account thereof, provided that such release of liability and
waiver of the right of subrogation shall not be operative in any case where the
effect thereof is to invalidate such insurance coverage or increase the cost
thereof
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(provided that in the case of increased cost, the other party shall have the
right, within thirty (30) days following written notice, to pay such increased
cost, thereupon keeping such release and waiver in full force and effect).
ARTICLE 7 - DESTRUCTION
-----------------------
7.1 If the Demised Premises shall be partially damaged by fire or other
cause, the damage shall be repaired by and at the expense of Landlord to the
extent that Landlord receives the casualty insurance proceeds and the Fixed Rent
until such repairs shall be made shall be apportioned and abated according to
the part of the Demised Premises which is usable by Tenant; however, if the
casualty insurance proceeds are not received by Landlord or its mortgagee or the
gross amount of such proceeds before Landlord's mortgagee applies such proceeds
to payment of any moneys due pursuant to the First Note or First Mortgage are
not sufficient to complete the repairs for any reason whatsoever other than
Landlord's malfeasance, then Tenant shall be responsible for the amount by which
the repairs exceed the insurance proceeds. No penalty shall accrue for any delay
which may arise by reason of adjustment of insurance on the part of Landlord and
for any delay on account of "labor troubles" or any other cause, similar or
dissimilar, beyond Landlord's control. Tenant shall give immediate notice to
Landlord in case of fire in the Demised Premises.
7.2 If the Demised Premises are totally or substantially damaged or are
rendered wholly or substantially untenantable by fire or other cause, and if
Landlord shall decide not to restore or not to rebuild the same, or if the
building shall be substantially damaged so that Landlord shall decide to
demolish it or to rebuild it or to remodel it (whether or not the Demised
Premises have been damaged), then or in any of such events Landlord may, within
thirty (30) days after such fire or other cause, give Tenant a notice in writing
of such decision, and thereupon the term of this lease shall expire by lapse of
time upon the third day after such notice is given, and Tenant shall vacate the
Demised Premises and surrender the same to Landlord. Whether or not Landlord
elects to rebuild or terminate, Tenant will have the right to terminate this
lease by written notice to Landlord within thirty (30) days after such casualty.
If Tenant does not exercise its right to terminate or if the Demises are
partially damaged, Landlord will restore or rebuild the Demised Premises. If
restoration or rebuilding of the Demised Premises is not commenced within sixty
(60) days after the casualty and are not restored or rebuilt and substantially
completed within nine (9) months after the occurrence of the casualty, Tenant
shall have the right to terminate this lease within a period of thirty (30)
thereafter, in the same manner as if Landlord had exercised its decision not to
rebuild or restore. If Tenant shall not be in default under this lease beyond
any applicable notice and grace periods, then, upon the termination of this
lease, under the conditions provided for in the sentence immediately preceding,
Tenant's liability for rent shall cease as of the day following the casualty and
any security or other money on deposit with Landlord and any unearned Fixed Rent
or Additional Rent shall be paid to Tenant.
7.3 The term "substantially" shall mean fifteen (15%) percent or more
of the floor area of the Demised Premises, and the term "partially" shall mean
less than fifteen (15%) percent of the floor area of the Demised Premises.
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7.4 No damages, compensation or claims shall be payable by Landlord for
inconvenience, loss of business or annoyance arising from any repair or
restoration of any portion of the leased premises or of the building except for
rent abatement as provided in 7.1 above.
7.5 Tenant will bear the expense and reimburse Landlord on the Commence
ment Date for the amount of "gap" insurance premiums to maintain insurance
coverage for the benefit of the holder of the First Mortgage in the event that
this lease is terminated because the criteria for the area destroyed by casualty
or taken by condemnation as provided in this lease is less than the criteria
required by the holder of the First Mortgage.
ARTICLE 8 - CONDEMNATION
------------------------
8.1 If after the execution of this lease and prior to the expiration of
the term of this lease fifteen (15%) percent or more of the floor area of the
Demised Premises shall be appropriated by right of eminent domain or any part of
the parking area is taken or ingress and egress are adversely affected, then the
term of this lease shall cease as of the time of such appropriation, and Fixed
Rent and Additional Rent shall be apportioned and adjusted as of the time of
termination. Tenant shall have the right at its election to continue to occupy
the Demised Premises, to the extent permitted by law, for all, or such part, as
Tenant may elect, of the period between the time of such appropriation and the
time when physical possession of the Demised Premises shall be taken, subject to
the provisions of this lease insofar as the same may be made applicable to such
occupancy by Tenant, but the amount, if any, charged Tenant by the taking
authority of its assigns for rent or use and occupancy shall not be deductible
from the Fixed Rent or Additional Rent paid or payable by Tenant hereunder. The
aggregate condemnation award shall be paid entirely to Landlord.
8.2 In the event of a partial taking not resulting in the termination
of this lease, Landlord shall make all repairs to improvements on the Demised
Premises affected by such taking to the extent necessary, and all condemnation
awards, except those paid to Tenant for its claims, shall be paid to Landlord.
8.3 In the event of a partial taking, whether or not resulting in the
termination of this lease, the amount of the awards shall be paid to Landlord.
Tenant shall have a right to pursue compensation for loss of its leasehold
interest and other losses and expenses directly from the condemning authority,
provided such claim does not diminish the amount of Landlord's claim.
8.4 In the event of a partial taking, which does not result in a
termination of this lease, the Fixed Rent and Additional Rent payable for the
balance of the term of this lease shall be reduced in proportion to the useable
area of the Demised Premises.
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ARTICLE 9 - DEFAULT
-------------------
9.1 If Tenant shall default in the performance or observance of any
agreement or condition in this lease contained on its part to be performed or
observed other than an obligation to pay money and shall not cure such default
within thirty (30) days after notice from Landlord specifying the default (or
shall not within said period commence to cure such default and thereafter prose
cute the curing of such default to completion with due diligence), Landlord may,
at its option, without waiving any claim for damages for breach of agreement, at
any time thereafter cure such default for the account of Tenant, and any amount
paid or any contractual liability incurred by Landlord in so doing shall be
deemed paid or incurred for the account of Tenant, and Tenant agrees to
reimburse Landlord therefore or save Landlord harmless therefrom; provided that
Landlord may cure any such default as aforesaid prior to the expiration of said
waiting period but after notice to Tenant, if the curing of such default prior
to the expiration of said waiting period is reasonably necessary to protect the
real estate or Landlord's interest therein or to prevent injury or damage to
persons or property. If Tenant shall fail to reimburse Landlord upon demand for
any amount paid for the account of Tenant hereunder, said amount shall be added
to and become due as part of the next payment of rent due hereunder and shall be
Additional Rent.
9.2 (1) If Fixed Rent or Additional Rent or any other payment required
to be made hereunder shall not be paid for more than ten (10) days after receipt
of written notice from Landlord specifying the default (however, Tenant will not
be entitled to receive such notice if such default occurs more than twice during
any four (4) consecutive months but Tenant will still have a ten day grace
period from the due date) or (2) if there shall be a default in the performance
or observance of any other agreement or condition contained herein on the part
of Tenant to be performed or observed and such default shall not be cured within
thirty (30) days after Tenant shall receive notice from Landlord of such default
(or within such longer period as may be required to cure such nonmonetary
default if within said thirty 30 day period Tenant shall commence to cure the
same and thereafter diligently pursue the curing of the same to completion),
then Landlord shall have the right at its election, to terminate the term of
this lease by giving notice to Tenant of the exercise of said election, and in
the event of Landlord's giving such notice of election to terminate, the term of
this lease shall terminate on the date designated therefor in said notice, which
date shall be not less than three days after the receipt of such notice by
Tenant, and thereupon, or at any time thereafter, and without any further notice
or demand, Landlord may re-enter the Demised Premises and have possession
thereof as of its former estate and/or may recover possession thereof in the
manner prescribed by law. It is expressly understood and agreed that no action
or proceeding to oust Tenant from possession or to terminate the term of this
lease shall be taken or brought by Landlord unless the notices herein specified
be first given and the times to cure defaults hereinabove specified have expired
without such defaults having been cured.
9.3 Tenant hereby waives any constitutional, statutory or other rights
pursuant to federal or New Jersey law which affect, prevent or inhibit
Landlord's right to re-enter and take possession of the Demised Premises.
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9.4 In case of any such termination, Tenant will indemnify Landlord
against all loss of Fixed Rent, Additional Rent and other payments provided
herein to be paid by Tenant to Landlord between the time of termination and the
expiration of the stated term of this lease. It is understood and agreed that at
the time of the termination or at any time thereafter Landlord may rent the
Demised Premises, and for a term which may expire after the expiration of the
term of this lease, without releasing Tenant from any liability whatsoever, that
Tenant shall be liable for any reasonable expenses incurred by Landlord in
connection with obtaining possession of the Demised Premises and in connection
with any reletting, including, but without limitation, reasonable attorneys'
fees and reasonable brokers' fees, and that any moneys collected from any
reletting shall be applied first to the foregoing expenses and then to the next
ensuing payments of rent and then to the payment of expenses of operating,
maintaining and repairing the Demised Premises and then to the payment of all
other payments due from Tenant to Landlord. However, Landlord is to be entitled
to and may sue for each rental payment and other payment as provided herein, the
day after the same remains unpaid, or at any later time, at Landlord's option as
if no termination had occurred. Notwithstanding any provisions or requirement
of law to the contrary, Landlord will not have any obligation to re-let the
Demised Premises or mitigate Landlord's damage in any way.
ARTICLE 10 - ASSIGNMENT AND SUBLETTING
--------------------------------------
10.1 Tenant shall not have the right to assign all or any part of its
interest in this lease nor mortgage or encumber the Demised Premises or any
interest therein nor sublet more than ninety (90%) percent, including previous
subleases then in effect, of the floor area of the Demised Premises without the
consent of the Landlord, which consent will not be unreasonably withheld or
delayed. In the event Tenant desires to assign this lease or let or sublet more
than the said ninety (90%) percent of the Demised Premises, Tenant shall give
written notice in advance of its intention to do so to Landlord together with
(i) a copy of the proposed agreement of assignment or sublease wherein the
proposed assignee assumes all of the obligations of Tenant hereunder and
containing the name and address of the proposed assignee, (ii) the names and
addresses of the principals of the proposed assignee or subtenant, (iii)
financial statements and bank and other financial and business references of the
proposed assignee or subtenant reasonably sufficient to enable Landlord to
ascertain the financial responsibility of the proposed assignee or subtenant,
and (iv) the federal Standard Industrial Classification number of the proposed
assignee or subtenant in the form of an Environmental Affidavit and all other
information required pursuant to Paragraph 14.14 of this lease. Within thirty
(30) days after its receipt of said notice and in the event the assignment or
sublease involves more than ninety (90%) percent of the floor area of the
Demised Premises (including any previous subletting then in effect), Landlord,
at its option, may either (i) terminate this lease upon ninety (90) days'
written notice to Tenant and recover the Demised Premises, or (ii) consent or
refuse to consent to the assignment or sublease. If Landlord consents to the
assignment or subletting, the Fixed Rent due to Landlord under this lease shall
automatically be increased by fifty (50%) percent of the amount, if any,
which all rent or other consideration received by Tenant from such assignee or
subtenant (prorated on a square-foot basis for less than the entire leased
premises) exceeds the Fixed Rent then due to Landlord
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pursuant to this lease less the amount of real estate brokerage commissions and
other expenses reasonably related to the assignment or sublease paid to
unrelated third parties. Any such assignment or subletting shall not relieve
Tenant from all of its obligations and responsibilities under this lease for the
entire leased premises.
10.2 The merger or consolidation with another entity or the transfer of all
or substantially all of Tenant's assets to another entity or transfer of a
majority of the issued and outstanding capital stock of any corporate Tenant or
a transfer of the total proprietary interest of any partnership Tenant, however
the same may be accomplished, and whether in a single transaction or in a series
of related or unrelated transactions, shall be deemed to be an assignment of
this lease. Likewise, an increase in the number of issued and/or outstanding
shares of the capital stock of any corporate Tenant and/or the creation of one
or more additional classes of capital stock of any corporate Tenant, however
accomplished and whether in a single transaction or a series of related or
unrelated transactions, with the result that at least fifty-one (51%) percent
of the beneficial interest and record ownership in and to such Tenant shall no
longer be held by the beneficial and record owners of the capital stock of such
corporate Tenant as of the date hereof, or the date on which such corporation
shall become the Tenant hereunder (whichever is later), shall be deemed to be an
assignment of this lease.
10.3 Notwithstanding any provision of this Article 10 to the contrary,
Landlord's consent shall not be required nor shall Landlord have the right to
terminate this lease and recover the Demised Premises nor shall the rent be
increased in the event Tenant (i) merges or consolidates with another entity, or
(ii) transfers substantially all of its assets or common stock to another
entity, or (iii) assigns this lease or sublets the leased premises to another
entity which is under the control of Tenant, all provided that the entity to
which this lease is assigned and the original Tenant have a combined net worth
(excluding goodwill and similar intangible assets) at the time of the assignment
not less than $20,000,000.00. However, if any of said events should occur,
Tenant shall give prompt written notice of the event to Landlord and shall
furnish Landlord with the information provided for in (i), (ii), (iii), and (iv)
of Section 10.1 together with a current financial statement of the new entity
and a financial statement of the assignor as of the date provided in the next
preceding sentence.
ARTICLE 11 - CONDITION OF AND TITLE TO THE PROPERTY
---------------------------------------------------
11.1 Tenant represents that the Demised Premises and the title thereto, all
subsurface conditions thereof, including but not limited to hazardous waste,
discharges and spills and other environmental conditions, and the present uses
and non-uses thereof, have been examined by Tenant and that Tenant accepts the
same in the condition and state in which they now are, without representation or
warranty, express or implied in fact or by law, by Land lord and without
recourse to Landlord, as to the title thereto (except as herein expressly
provided), the nature, condition or usability thereof or the use or uses to
which the Demised Premises or any part thereof may be put.
11.2 Tenant acknowledges that, because of the additional 4,850 square feet
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of office space which was constructed in 1993 ("Additional Space"), the Township
of Mahwah may possibly have the right to require either (i) the construction of
additional parking space to meet its zoning requirements, (ii) direct the
removal of the Additional Space, or (iii) prohibit Tenant from occupying the
Additional Space. If any of these occur, Tenant will give Landlord prompt notice
of any notice or communication received from the Township, and Landlord, at
Landlord's expense, will have the right to contest such determination and/or
apply for a variance or waiver from such requirement. In the event that Landlord
does not obtain relief from such determination by variance, waiver or other
action by the Township and Tenant is denied use of, or must remove, the
Additional Space, then the Fixed Rent will be reduced pro rata based upon the
ratio the square feet floor area of the Additional Space to the square feet
floor area of the Demised Premises, for such period of the remaining term of
this lease as Tenant may be denied occupancy of the Additional Space. Tenant
will bear the expense, if any, of constructing additional parking spaces and/or
removing the Additional Space without reimbursement from Landlord, except for
the reduction in Fixed Rent as provided in this Section 11.2.
11.3 Tenant acknowledges that a Developer's Agreement ("Developer's
Agreement") dated May 22, 1989 between SSPC Land Associates and Township of
Mahwah and the Township of Mahwah Planning Board is recorded in the Bergen
County Clerk's Office in Deed Book 7298 at page 135, the subject of which is the
Demised Premises. Landlord, at Landlord's expense, will attempt to obtain
confirmation from the Township of Mahwah that the Developer's Agreement has been
fully complied with and, if possible, its cancellation of record. If the
Township of Mahwah requires any compliance with the Developer's Agreement,
Tenant will be responsible for such compliance at Tenant's expense without
contribution or reimbursement by Landlord and without any reduction in Fixed
Rent.
ARTICLE 12 - (INTENTIONALLY DELETED)
------------------------------------
12.1 (Intentionally Deleted)
ARTICLE 13 - INTEREST AND LATE CHARGES
--------------------------------------
13.1 In the event any payment of Fixed Rent, Additional Rent or any other
moneys which may be due hereunder are not received by Landlord within seven (7)
days after the applicable due date, there shall be added to such payment, and
simultaneously due and owing, a late charge equal to five (5%) percent of the
amount of such payment, and, if not paid within thirty (30) days after due,
interest shall accrue on the amount of such payment and shall be payable at an
annual rate equal to five (5%) percent above the prime rate then charged by
Chase Manhattan Bank, N.A., for ninety (90) day commercial loans, as it is
changed from time to time, adjusted on the same day as the effective date of
change in the prime rate. The late payment charge and interest are not intended
as a penalty but are intended to compensate Landlord, partially, for loss of
interest on funds which it is to receive and/or may advance to cure Tenant's
default and for administrative and other expenses it may incur to give Tenant
notice of its default and to pursue various remedies.
ARTICLE 14 - INDUSTRIAL SITE RECOVERY ACT AND ENVIRONMENTAL LAWS
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14.1 Tenant shall, at Tenant's own expense, comply with all federal, state
and local laws, rules and regulations relating to environmental matters
("Environmental Laws") affecting the Demised Premises and the Industrial Site
Recovery Act, N.J.S.A. 13:1K-6 et seq. and the regulations promulgated
thereunder ("ISRA") for which Tenant is obligated pursuant to this lease. Tenant
shall, at Tenant's own expense, comply with all requirements of, the New Jersey
Department of Environmental Protection or its replacement or similar department,
agency, bureau or division ("NJDEP"). Should any division of NJDEP determine
that a remediation action work plan must be prepared and that a remediation must
be undertaken because of any spills or discharges of hazardous substances or
wastes at the building or land in or on which the Demised Premises is located
(the "Property") occurring during the term of this lease and including that
caused by leaching from other properties or caused by a stranger (commonly
called a "midnight dumper"), then Tenant shall, at Tenant's own expense, prepare
and submit the required plans and financial assurances, and carry out the
approved plans. Landlord will be responsible for any hazardous substances or
waste on the Property on the Commencement Date ("Landlord's Responsibility").
Tenant's obligations under this paragraph shall arise if there is any closing,
terminating or transferring of operations of an industrial establishment at the
Property or a sale or transfer of title of the Property by Landlord, and it is
therefor necessary for Tenant to comply with ISRA. If the Property is being sold
or transferred by Landlord, Landlord shall bear the expense of such applications
and submissions, but if Tenant is responsible for any spills or discharges, then
Tenant shall prepare and file, at Tenant's expense, all applications, tests,
reports and remediation required by the NJDEP. At no expense to Landlord, Tenant
shall promptly provide all information requested by Landlord for preparation of
documents supporting, as applicable, an application for a determination by the
NJDEP of non-applicability of ISRA to Tenant or submission of an application for
a de minimis exception or a no-further-action letter to the NJDEP and shall
promptly sign and submit such documents when requested by Landlord, provided
that the information contained therein is, to Tenant's knowledge, accurate and
complete. Tenant shall indemnify, defend and save harmless Landlord from all
fines, suits, procedures, claims and actions of any kind arising out of or in
any way connected with any spills or discharges of hazardous substances or
wastes at the Property which occur during the term of this lease (except for
Landlord's Responsibility), and from all reasonable expenses incurred for legal,
engineering and expert fees, and from all fines, suits, procedures, claims and
actions of any kind arising out of Tenant's failure to provide all information,
make all submissions and take all actions required under applicable
Environmental Laws. Tenant shall furnish financial security which will guarantee
the implementation of the remediation action work plan if same is required under
ISRA. Tenant's obligations and liabilities under this paragraph shall continue
so long as Landlord remains obligated for compliance with ISRA regarding any
spills or discharges of hazardous substances or wastes at the Property which
occur during the term of this lease. Tenant's failure to abide by the terms of
this paragraph shall be restrainable by injunction.
14.2 Notwithstanding anything to the contrary contained above, Tenant will
have no obligation pursuant to this Article 14 and all other provisions of this
lease with regard to environmental matters resulting from any environmental
condition which exists on the date of this lease.
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14.3 Tenant shall promptly supply to Landlord all reports and notices made
by Tenant pursuant to the Hazardous Substance Discharge-Reports and Notices Act,
N.J.S.A. 13:1K-15 et seq. and the regulations promulgated thereunder ("Reports
and Notices Act") relating to the Property.
14.4 Tenant shall promptly supply Landlord with any notices, correspondence
and submissions made by Tenant to NJDEP, the United States Environmental
Protection Agency (EPA), the United States Occupational Safety and Health
Administration (OSHA), or any other local, state or federal authority which
requires submission of any information concerning environmental matters or
hazardous wastes or substances relating to the Property.
14.5 Tenant shall promptly comply with all requirements of the Spill
Compensation and Control Act (N.J.S.A. 58:10-23.11 as amended) and supply
Landlord with copies of all notices, reports, tests or filings in relation
thereto whether received from any governmental agency or promulgated by
Tenant.
14.6 Tenant shall promptly comply with all requirements of the Hazardous and
Solid Waste Amendment of 1984 Pub. L98-616 (42 U.S.C. 699) and adopted by New
Jersey for registration of underground storage tanks pursuant to N.J.S.A.
58:10A-21, et seq., and supply to Landlord copies of all notices, reports,
questionnaires, registration statements, tests, or filings in relation thereto
whether received from any governmental agency or promulgated by Tenant relating
to the Property. In connection herewith, Tenant shall not install or remove any
underground or above-ground storage tanks without first obtaining the express
written consent of Landlord.
14.7 Tenant shall promptly furnish to Landlord true and complete copies of
all documents, submissions and correspondence provided by Tenant to the NJDEP
and all documents, reports, directives and correspondence provided by the NJDEP
to Tenant. Tenant shall also promptly furnish to Landlord true and complete
copies of all sampling and test results obtained from samples and tests taken at
and around the Property.
14.8 Within ten (10) days prior to the termination of this lease, Tenant
will furnish Landlord with (i) evidence that Tenant has satisfactorily complied
with ISRA for the cessation of its operations, or (ii) a letter of non-
applicability to ISRA issued by the NJDEP. Tenant shall also furnish Landlord,
without expense to Landlord, copies of all applications, tests, submissions and
correspondence to and from NJDEP and others relating to these matters.
14.9 Tenant further agrees to implement and execute all of the provisions of
this paragraph in a timely manner so as to coincide with the termination of this
lease or to coincide with the vacating of the leased premises by the Tenant at
any time during the term of this lease.
14.10 If Tenant is responsible for spills and/or discharges pursuant to this
Article 14, Tenant further agrees to make application to the NJDEP for a
remediation agreement ("RA") in the event that Landlord shall seek to sell or
transfer title to the Property. In making such an application, Tenant agrees
that it shall furnish financial security acceptable to the NJDEP to guarantee
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the implementation of any potential remediation at the leased premises, as
required by the NJDEP, and that it shall diligently prosecute such application
for an RA. As with all other aspects of any ISRA application by Tenant
respecting Tenant's use and occupancy of the leased premises, Tenant shall bear
all costs in connection with same, and perform all other acts necessary or
required by the NJDEP in order to obtain an RA.
14.11 In the event the Tenant shall have failed to obtain evidence of ISRA
compliance pursuant to Section 14.8 hereof, it shall be deemed the Tenant has
remained in possession of the leased premises, and shall be considered as a
holdover tenant as provided in Article 24 hereof. These rights are in addition
to any other rights and remedies the Landlord may have under law.
14.12 As a condition precedent to Tenant's right to sublease the leased
premises or to assign the lease, Tenant shall have received from the NJDEP
either (i) no-further-action letter, (ii) a de minimis exception, or (iii) a
nonapplicability letter. If this condition shall not be satisfied, then Landlord
shall have the right to withhold consent to sublease or assignment.
14.13 If Landlord has reasonable cause to believe that a spill or discharge
has occurred and Landlord makes written demand to Tenant sitting forth the basis
of its cause, Tenant will obtain, at its own expense, and furnish to Landlord,
without charge, within thirty (30) days after receipt of Landlord's demand a
Phase I environmental report prepared by a recognized environmental engineer
which will show the status of the leased premises with regard to all
environmental conditions. In the event that the report shows or indicates the
presence or possibility of the presence of any environmental condition which
violates Environmental Laws, then Tenant will obtain such additional
inspections, reports and tests as may be required to determine the nature and
scope of the environmental condition, except for Landlord's Responsibility,
and what will be required to remedy the condition and the cost thereof. Tenant,
at its expense, will remediate the environmental condition to the satisfaction
of all governmental agencies, etc. and to the reasonable satisfaction of
Landlord. In the event that the report does not show or indicate the presence
of any environmental condition which violates the Environmental Laws which are
the responsibility of Tenant pursuant to Section 14.1 hereof, Landlord will bear
the cost of such testing and reports, and, if already paid by Tenant,
Landlord will reimburse Tenant promptly.
14.14 Within thirty (30) days after the date of this lease, Tenant shall
supply to Landlord an affidavit of an officer of Tenant ("Environmental
Affidavit"), setting forth Tenant's Federal Standard Industrial Classification
number and a detailed description of the operation and processes Tenant will
undertake at the leased premises, organized in the form of a narrative report,
including a description and quantification of hazardous substances and
wastes generated, manufactured, refined, transported, treated, stored, handled
or disposed of at the leased premises. During the lease term, Tenant shall
notify Landlord by way of Environmental Affidavit as to any changes in Tenant's
operation, federal Standard Industrial Classification number or use and
generation of hazardous substances and wastes, by way of a supplemental
Environmental Affidavit. Tenant shall also supplement and update Environmental
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Affidavit upon each January 1st of the lease term; however, if not submitted to
Landlord on January 1st, it will be submitted within ten (10) days after
Landlord's written request.
14.15 Within the last thirty (30) days of the term of this lease, Tenant
will obtain, at its own expense, and furnish to Landlord, without charge, a
Phase I environmental report prepared by a recognized environmental engineer
which will show the status of the Demised Premises with regard to all
environmental conditions. In the event that the report shows or indicates the
presence or possibility of the presence of any environmental condition which
violates Environmental Laws then Tenant will obtain such additional
inspections, reports and tests as may be required to determine the nature and
scope of the environmental condition, except for Landlord's Responsibility, and
what will be required to remedy the condition and the cost thereof. Tenant, at
its expense, will remediate the environmental condition to the satisfaction of
all governmental agencies, etc. and to the reasonable satisfaction of Landlord.
ARTICLE 15 - COMPLIANCE WITH LAW, ORDINANCES, ETC.
--------------------------------------------------
15.1 The Tenant, during the term of this lease, shall promptly execute and
comply with all statutes, ordinances, regulations and requirements of the
federal, state and local governments and all of their departments, bureaus and
agencies applicable to the Demised Premises, for the correction, prevention, and
abatement of nuisances, violations or other grievances, in, upon or connected
with the Demised Premises during the term of this lease; and Tenant shall also
comply at its own cost and expense with and execute all rules, orders and
regulations of the Board of Fire Underwriters, or any other similar body, for
the prevention of fires in the Demised Premises.
15.2 In case the Tenant, within thirty (30) days (or such shorter period if
required under the circumstances) after receiving notice to comply, shall fail
or neglect to comply with the aforesaid statutes, ordinances, rules, orders,
regulations and requirements or any of them, or in case the Tenant shall fail or
neglect to make any necessary repairs, then the Landlord or its agents may enter
said Demised Premises and make said repairs and comply with any and all of the
said statutes, ordinances, rules, orders, regulations or requirements, at the
cost and expense of the Tenant and in case of the Tenant's failure to pay
therefor, the said cost and expense shall be added to the next month's rent and
be due and payable as such as Additional Rent, or the Landlord may deduct the
same from the balance of the Security in the Landlord's hands. This provision is
in addition to the right of the Landlord to terminate this lease by reason of
any default on the part of the Tenant.
15.3 Tenant shall have the right to contest by appropriate legal proceedings
diligently conducted in good faith, in the name of Tenant or Landlord or both,
at no expense to Landlord, the validity or application of any law, ordinance,
order, rule, regulation or requirement of the nature referred to in Section 15.1
hereof, subject to the following:
(a) If by the terms of any such law, ordinance, order, rule,
regulation or requirement, compliance therewith pending the prosecution
of
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any such proceeding may legally be delayed without any lien, charge or
liability of any kind against the Demised Premises or any part thereof
and without subjecting Tenant or Landlord to any liability, civil or
criminal, for failure so to comply therewith, Tenant may delay
compliance therewith until the final determination of such proceeding.
(b) If any lien, charge or civil liability would be incurred
by reason of any such delay, Tenant nevertheless may contest as
aforesaid and delay as aforesaid, provided that such delay would not
subject Landlord to criminal liability and Tenant (i) furnishes to
Landlord security, reasonably satisfactory to Landlord, against any
loss or injury by reason of such contest or delay and (ii) prosecutes
the contest with due diligence.
Landlord will promptly execute and deliver all papers which may be necessary and
proper to permit Tenant so to contest the validity or application of any such
law, ordinance, order, rule, regulation or requirement.
ARTICLE 16 - DISCHARGE OF LIENS
-------------------------------
16.1 Tenant shall not create or permit to be created or to remain, and shall
discharge, any lien, encumbrance or charge (levied on account of any imposition
or any mechanic's, laborer's or materialman's lien or any mortgage, conditional
sale, title retention agreement or chattel mortgage, or otherwise) which upon
the Demised Premises, or any part thereof or the income therefrom, having any
priority or preference over or ranking on a parity with the estate, rights and
interest of Landlord in the Demised Premises or any part thereof or the income
therefrom, and Tenant will not suffer any other matter or thing whereby the
estate, rights and interest of Landlord in the Demised Premises or any part
thereof might be impaired, provided that any Imposition may, after the same
becomes a lien, be paid or contested in accordance with Article III hereof and
any mechanic's, laborer's or materialman's lien may be discharged in accordance
with Section 16.2 hereof. The foregoing notwithstanding, Tenant shall not be
required to discharge any such lien, encumbrance or charge created by Landlord.
16.2 If any mechanic's, laborer's or materialman's lien shall at any time be
filed against the Demised Premises or any part thereof, Tenant, within thirty
(30) days after notice of the filing thereof, shall cause the same to be
discharged of record by payment, deposit, bond, order of a court of competent
jurisdiction or otherwise. If Tenant shall fail to cause such lien to be
discharged within the period aforesaid, then, in addition to any other right or
remedy, Landlord may, but shall not be obligated to, discharge the same either
by paying the amount claimed to be due or by procuring the discharge of such
lien by deposit or by bonding proceedings.
16.3 Nothing contained in this lease shall be deemed or construed in any way
as constituting the consent or request of Landlord, to any contractor,
sub-contractor, laborer or materialman for the performance of any labor or
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the furnishing of any material for any improvement, alteration to or repair of
the Demised Premises or any part thereof. Notice is herein given that Landlord
shall not be liable for any labor or material furnished or to be furnished to
Tenant upon credit, and that no mechanic's or other lien for any such labor or
material shall attach to or affect the interest of Landlord in and to the
Demised Premises or any part thereof.
ARTICLE 17 - ENTRY ON PROPERTY BY LANDLORD, ETC.
------------------------------------------------
17.1 Tenant shall permit Landlord and its authorized representatives to
enter the Demised Premises at all reasonable times upon reasonable notice to
Tenant for the purpose of (a) inspecting the same and (b) making any repair
thereto and performing any work therein that may be necessary by reason of
Tenant's failure to make any such repair or perform such work or to commence the
same within the time required by this lease, except that no notice shall be
required in an emergency. Nothing herein shall be construed as imposing any duty
upon the part of Landlord to do any such work, and performance thereof by
Landlord shall not constitute a waiver of Tenant's default in failing to perform
the same. Tenant will have the right to have its representative accompany
Landlord or its representative, and all such entries shall be during normal
business hours (except for emergencies).
17.2 Landlord may during the progress of any work at the Demised Premises
performed or caused to be performed by it in accordance with Section 17.1
hereof, keep and store upon the Demised Premises, all necessary materials,
tools, supplies and equipment. Landlord shall not be liable for inconvenience,
annoyance, disturbance, loss of business or other damage of Tenant or any
subtenant by reason of making such repairs or the performance of any such work,
or on account of bringing materials, tools, supplies and equipment into, over or
through the Demised Premises during the course thereof and the obligations of
Tenant under this lease shall not be affected thereby. In making any such repair
or doing any such work, Landlord shall proceed with a minimum of inconvenience
to Tenant and its tenants and subtenants. Landlord will use its best efforts not
to interfere with (i) Tenant's business, (ii) access and egress to the Demised
Premises and (iii) the functioning of building systems (excluding during any
emergencies).
17.3 In the event Landlord incurs any obligation or spends any money to make
repairs or perform work pursuant to this Article 17 upon failure of Tenant to
meet its obligations after notice and cure periods as provided in this lease,
Tenant shall reimburse Landlord for the reasonable cost thereof, including
reasonable fees and expenses incurred by Landlord relating thereto, within
fifteen (15) days after notice from Landlord of the amount due, and such amount
shall be Additional Rent.
17.4 Landlord shall have the right to enter the Demised Premises at all
reasonable times during usual business hours for the purpose of showing the same
to prospective purchasers or mortgagees, and, at any time during the last year
of the term of this lease, for the purpose of showing the same to prospective
tenants. The provisions of Section 17.1 above shall apply.
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ARTICLE 18 - QUIET ENJOYMENT
----------------------------
18.1 Landlord covenants and agrees that Tenant, upon paying the Fixed Rent
and Additional Rent and observing and keeping the covenants, agreements and
conditions of this lease on Tenant's part to be kept, shall lawfully and quietly
hold, occupy and enjoy the Demised Premises during the term of this lease
without hindrance or molestation of anyone claiming by, through or under
Landlord, subject, however, to the matters herein set forth.
ARTICLE 19 - SURRENDER OF THE PROPERTY
--------------------------------------
19.1 Tenant shall and will on the last day of the term hereof or upon any
earlier termination of this lease, or upon any re-entry by Landlord upon the
Demised Premises pursuant to the provisions hereof or otherwise, well and truly
surrender and deliver up (i) the Demised Premises into the possession and use of
Landlord without fraud or delay and in good order, condition and repair,
ordinary wear and tear excepted (except as provided herein as a result of
casualty or condemnation) and broom clean without any debris, and free and clear
of all lettings and occupancies and free and clear of all liens and encumbrances
other than those, if any, created by Landlord or as permitted hereby and (ii)
all assignable service contracts and other agreements and records relating to
the Demised Premises or any portion thereof, or the operation thereof, for the
period subsequent to such termination of this lease and/or surrender of the
Demised Premises (provided Tenant has obtained releases from all of its
obligations by the contractor) and which service contracts and other agreements
or records Landlord may accept or assume. Tenant will not be obligated to remove
any improvements which it made pursuant to this lease, except as provided in
Section 5.7 hereof. Tenant shall remove all personal property at the end of the
term.
ARTICLE 20 - THE BUILDINGS; USE OF THE BUILDINGS
------------------------------------------------
20.1 The buildings now erected on the Demised Premises are and shall be the
property of the Landlord from the date hereof and any buildings hereafter
erected on the Demised Premises shall automatically and without further act or
payment by Tenant or Landlord become the property of Landlord free and clear of
all liens and encumbrances other than those, if any, created by Landlord or
permitted hereby.
20.2 It is the intention and agreement of the parties that except as
otherwise set forth herein, Tenant's interest in this lease and all of Tenant's
right, title and interest in and to the Demised Premises are non-separable and
that any attempt to transfer or mortgage either of such interests shall be void
and ineffective.
20.3 Tenant shall not use or allow the Demised Premises or any part thereof
to be used or occupied for any unlawful purpose or in violation of any
certificate of occupancy or governmental permit or license covering or affecting
the use of the Demised Premises or any part thereof and shall not knowingly
suffer any act to be done or any condition to exist on the Demised Premises or
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any part thereof or any article to be brought thereon which may be dangerous,
unless safeguarded as required by law, or which may, in law, constitute a
nuisance, public or private, or which may make void or voidable any insurance
then in force with respect thereto.
ARTICLE 21 - LIABILITY; LANDLORD'S DESIGNEE
-------------------------------------------
21.1 The term "Landlord" as used in this lease, so far as covenants or
obligations on the part of Landlord are concerned, shall be limited to mean and
include only the owner or owners at the time in question of the Demised Premises
and, in the event of any transfer or transfers of the title thereto, Landlord
herein named (and in case of any subsequent transfers or conveyances, the then
grantor) shall be automatically freed and relieved from and after the date of
such transfer and conveyance of all liability as respects the performance of any
covenant or obligation on the part of Landlord contained in this lease
thereafter to be performed, provided that, with respect to all funds or
securities in the hands of Landlord or the then grantor, at the time of such
transfer in which Tenant has an interest, Landlord shall not be freed or
relieved of personal liability therefor until such funds and securities shall be
accounted for and turned over to the grantee with such grantee's assuming
responsibility to Tenant for such funds or securities, and Landlord shall assign
to such grantee all right, title and interest of Landlord or such grantor in and
to the sums held by any depository or escrow holder on behalf of Tenant. Any
assignee from Landlord or future owner of the Demised Premises shall be deemed,
automatically, to have assumed the obligation of Landlord pursuant to this lease
during the period of its ownership.
ARTICLE 22 - ESTOPPEL CERTIFICATES
----------------------------------
22.1 Tenant, at any time and from time to time, upon not less than twenty
(20) days' prior notice by the Landlord, shall execute, acknowledge and deliver
to the Landlord or its mortgagee or assignee, a statement in writing certifying
that this lease is unmodified and in full force and effect (or if there have
been modifications, that the same is in full force and effect as modified and
stating the modifications) and the dates to which the Fixed Rent and Additional
Rent have been paid in advance, if any, and stating whether or not to the best
of Tenant's knowledge the Landlord is in default in the performance of any
covenant, agreement or condition contained in this lease and, if so, specifying
each such default, it being intended that any such statement delivered pursuant
to this paragraph may be relied upon by any prospective purchaser of the Demised
Premises or any mortgagee or insurer thereof or any assignee of any mortgage
upon the Demised Premises. The estoppel certificates will be prepared at
Landlord's expense. If Landlord requests Tenant to execute an estoppel
certificate more than twice in any twelve month period, then Landlord will pay
Tenant's reasonable attorneys' fees incurred in reviewing the same.
ARTICLE 23 - HOLDOVER TENANT
----------------------------
23.1 If Tenant remains in possession of the Demised Premises after the
expiration of the original term of this lease or of any option term, except
pursuant to an exercise of an option to extend, or after Tenant's right of
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occupancy has been properly terminated by Landlord, such possession shall be
considered as a tenant at sufferance of Landlord, and the possession may be
terminated by Landlord at any time upon three days' prior written notice to
Tenant. During such period of occupancy as a tenant at sufferance of Landlord,
rent shall be payable on the first day of every month, in advance, at a rate
equal to twice the rent for the last month of the term in addition to the
Additional Rent, and the payment of various operating expenses and carrying
charges, which shall continue to be payable as provided in this lease. The
increased rent is not intended to be a penalty but is intended to be an agreed
amount in order to avoid a controversy over the determination of fair market
rent or similar phrase.
ARTICLE 24 - ABANDONMENT OF PROPERTY
------------------------------------
24.1 If after default in payment of rent or violation of any other
provisions of this lease, the Tenant moves out or is dispossessed and fails
to remove any trade fixtures or other property prior to the date on which the
term ends or such removal or the issuance of the final order or execution of the
warrant, then and in that event, the said fixtures and property shall be deemed
abandoned by the Tenant and shall become the property of the Landlord. Upon
expiration of the term of this lease Tenant shall have thirty days within which
to remove its property prior to same being abandoned pursuant to this section.
ARTICLE 25 - STRICT PERFORMANCE
-------------------------------
25.1 The failure of the Landlord or Tenant to insist upon strict performance
of any of the terms, covenants or conditions of this lease or to exercise any
option herein conferred in any one or more instances, shall not be construed as
a waiver or relinquishment for the future of any such covenants, conditions or
options, but the same shall be and remain in full force and effect.
ARTICLE 26 - MISCELLANEOUS
--------------------------
26.1 It is agreed that if any provision of this lease shall be determined
to be void by any court of competent jurisdiction, then such determination
shall not affect any other provision of this lease, all of which other
provisions shall remain in full force and effect; and it is the intention of
the parties hereto that if any provision of this lease is capable of two
constructions, one of which would render the provision void and the other of
which would render the provision valid, then the provision shall have the
meaning which renders it valid.
26.2 All notices sent or required to be sent hereunder shall be sent by
registered or certified mail, return receipt requested, postage prepaid, or by
public courier, charges prepaid; if sent to Landlord, the same shall be
addressed to Landlord at the address of Landlord set forth on Page 1 of this
lease, or such other legal entity or address as Landlord may hereafter designate
by notice to Tenant; if sent to Tenant, the same shall be addressed to Tenant at
the Demised Premises, or to such other legal entity or address as Tenant may
hereafter designate by notice to Landlord. All notices shall be effective upon
receipt by addressee or upon refusal of delivery by addressee.
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26.3 Landlord agrees to cooperate fully with Tenant, without cost or expense
to Landlord, in connection with the exercise by Tenant of any of its
rights under this lease. In particular, and without limitation, Landlord agrees
to execute such applications for construction and occupancy permits and such
other documents as Tenant may reasonably request with respect to a dedication of
any part for public use or a grant of easement for utilities or access with
approval of Landlord which shall not be unreasonably withheld.
26.4 Nothing contained in this lease shall create a partnership or joint
venture between Landlord and Tenant or cause Landlord to be liable in any way
for the debts or obligations of Tenant.
26.5 Tenant shall execute and deliver such documents as may be reasonably
required by Landlord and various utility companies to permit the Demised
Premises to be encumbered by utility easements which may be reasonably necessary
to service the Demised Premises.
26.6 Notwithstanding any other provision in this lease to the contrary, in
no event shall either party be liable to the other for any consequential
damages, even in cases of negligence.
ARTICLE 27 - LIMITATION OF LIABILITY
------------------------------------
27.1 Notwithstanding anything to the contrary herein, if Landlord or any
successor in interest of Landlord shall default in the performance of the
obligations under this lease, there shall be absolutely no personal liability
on the part of Landlord or on the part of the partners of any partnership or
joint venture comprising Landlord nor its officers, directors and stockholders
if Landlord is a corporation nor its trustees and beneficiaries if Landlord is a
trust nor its manager and members if Landlord is a limited liability company,
with respect to any of the terms, covenants, and conditions of this lease, and
Tenant shall look solely to the equity of Landlord or such successor in interest
in the estate of Landlord in the Demised Premises and under the leases of
subtenants upon the Demised Premises for the satisfaction of each and every
successor in interest of any of the terms, covenants, and conditions of
this lease to be performed by Landlord, such exculpation of personal liability
to be absolute and without any exception whatsoever.
ARTICLE 28 - BROKERAGE
----------------------
28.1 Landlord and Tenant represent that they have not dealt with any real
estate broker or other party who may claim or be entitled to a commission in
connection with this lease, except CB Richard Ellis, Inc. whose commission
Landlord shall pay pursuant to a separate agreement. Each party agrees to
indemnify and hold harmless the other from any and all claims for any such
brokerage commissions, finder's fees or the like made by any other broker or
entity. It is agreed that if any claims for brokerage commissions or fees are
ever made against Landlord or Tenant in connection with this lease, all such
claims shall be handled and paid by the party whose actions were alleged commit
ments for the basis of such claim, and the party whose actions or alleged
commitments form the basis of such claim shall indemnify and hold harmless the
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other from and against any and all such claims and demands, including reasonable
attorney's fees incurred in defending the same, with respect to any brokerage
fees or agent's commissions or other compensation asserted by any person, firm
or corporation in connection with this lease.
ARTICLE 29 - FINANCIAL STATEMENTS
---------------------------------
29.1 Within ninety (90) days after the end of each of Tenant's fiscal years
during the term of this lease, or, if it fails to do so, then within twenty (20)
days after written notice from Landlord, Tenant will furnish Landlord with a
copy of Tenant's financial statements, consisting of a balance sheet, profit and
loss statement and cash flow statement. Such statements shall be issued as
compilation statements by the independent public accountant then servicing
Tenant, and if such accountant issues a certified statement to Tenant, then such
certified statement will be furnished to Landlord. If the accountant does not
issue a compilation or certified statement, then the statements shall be
certified to be true, accurate and complete by the president or managing partner
of Tenant. If Tenant is a publically owned company, it will furnish such
financial statements as are issued to the public. If Tenant is privately owned,
Landlord will keep all financial information confidential and will not
release any information to third parties, except Landlord may show these
statements to prospective purchasers, mortgagees or investors.
ARTICLE 30 - MORTGAGE SUBORDINATION AND ATTORNMENT
--------------------------------------------------
30.1 Except as otherwise stated in Section 30.2 below, this lease is and
will be subject and subordinated to the lien of the mortgage which will affect
the Demised Premises on the Commencement Date pursuant to a subordination,
non-disturbance and attornment agreement which will be entered into by Landlord,
Tenant and the holder of the Mortgage on the Commencement Date. This lease is
and shall be subject and subordinated to the lien of mortgages affecting the
Demised Premises on the Commencement Date and thereafter, and to all renewals,
modifications, consolidations, replacements, or extensions thereof, irrespective
of the time of recording such mortgage, provided the mortgagee is a recognized
bank, savings and loan association, insurance company or other lending
institution, and further provided that such mortgagees agree in a written
document, in a form reasonably satisfactory to all parties thereto, that
Tenant's occupancy and all rights pursuant to this lease shall not be disturbed
nor terminated so long as Tenant is not in default of its obligations hereunder
beyond any cure periods; however, such agreement may provide that (i) Tenant
shall not have any claim against the mortgagee or its successors in interest by
assignment, foreclosure, deed in lieu of foreclosure or deed for any default by
Landlord prior to the date on which mortgagee or such successors take possession
and/or title to the Demised Premises, (ii) such mortgagee and its successors and
assigns will not be bound by any prepayment of more than one month's rent by
Tenant, (iii) such mortgagee and its successors and assigns will not be subject
to any offset which may accrue to Tenant except for the allowance as provided in
Section 5.3 above, (iv) such mortgagee and its successors and assigns will not
be bound by any modification of this lease made without the mortgagee's prior
consent, and/or (v) Tenant will give such mortgagee and its successors and
assigns written notice of any default by Landlord and the right,
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but not the obligation, to cure such default on behalf of Landlord within thirty
(30) days after any cure period allowed to Landlord in this lease.
30.2 In the absence of a subordination, attornment and nondisturbance
agreement and in the event that any holder of any mortgage or anyone claiming
from or through any such holder or any purchaser of holder's estate in any
foreclosure sale shall enter into and lawfully become possessed of the leased
premises or shall otherwise succeed to the rights of Landlord under this lease,
either through foreclosure of any mortgage or the acquisition of the estate of
Landlord thereby mortgaged, Tenant agrees to attorn to such successor landlord
and recognize successor landlord as its landlord under this lease and to
execute, upon request of such successor landlord, an attornment agreement. Such
an attornment provision will also be included in any subordination, attornment
and non-disturbance agreement entered into with a mortgagee.
ARTICLE 31 - SIGNS
------------------
31.1 The Tenant may place such sign or signs of any kind whatsoever at, in
or about the Demised Premises provided that such signs shall comply with all
laws and ordinances. All signs will be removed at the end of the term by Tenant,
unless Landlord notifies Tenant to the contrary before the end of the term, and
Tenant will repair any damage caused by such removals.
ARTICLE 32 - TENANT'S REIMBURSEMENT
-----------------------------------
32.1 Tenant shall reimburse Landlord for the actual, reasonable attorneys'
fees incurred by Landlord in connection with each review of any requested
consent for subletting or assignment not to exceed $500.00 for each request, and
for the preparation or review of any documents or instruments pertaining to the
same, and if Landlord prevails for any action to enforce Tenant's obligation
pursuant to this lease, including, but not limited to, collection of Fixed Rent
and/or Additional Rent or any other monetary obligations, dispossess actions and
distraint. Landlord shall reimburse Tenant for its reasonable attorneys fees
and costs incurred if Tenant prevails in any litigation, proceeding or action
against Landlord or in defense of Landlord's action. Such reimbursement shall be
paid to Landlord or Tenant within fifteen (15) days after receipt of written
demand, and, if not so paid by Tenant, then such reimbursement shall be due and
payable as Additional Rent on the first day of the next month.
ARTICLE 33 - NO SETOFF
----------------------
33.1 Tenant shall not be entitled to assert any claim, credit or right of
setoff against Landlord in any action to dispossess Tenant for non-payment of
rent or other default hereunder, and Tenant's sole remedy shall be to pursue
such claims in a separate lawsuit against Landlord; however, if Tenant is
required by law to assert its claim as a mandatory counterclaim in a suit by
Landlord, then Tenant may assert its counterclaim. The rent due hereunder,
whether fixed or additional, and all money to become due and owing to Landlord,
shall be paid without credit or setoff, except for such amount as may be due and
owing by Landlord to Tenant pursuant to a judgment entered in a court of
competent jurisdiction.
28
<PAGE>
<PAGE>
ARTICLE 34 - MORTGAGEE PROTECTION CLAUSE
----------------------------------------
34.1 Tenant agrees to give all mortgagees, by certified mail, a copy of any
notice of default served on Landlord, provided that prior to such notice Tenant
has been notified, in writing by Landlord of the name and address of such
mortgagees. The mortgagees shall have the same time within which to cure such
default as is given to Landlord under this lease.
ARTICLE 35 - OPTION TO EXTEND TERM
----------------------------------
35.1 Upon expiration of the term of the lease as set forth in Article
1, Tenant shall have the right and option to extend the term of the lease for
one period of five (5) years. The right and option to extend the term of the
lease shall be subject to and contingent upon each and every of the conditions
set forth hereinafter. Tenant's right and option to extend the term of the lease
shall be exercisable by Tenant giving written notice of the exercise of the
right and option to Landlord at least nine (9) months prior to the expiration of
the original term as set forth in Article 1. In the event Tenant fails to give
written notice of its intention to exercise its right and option as provided
above within the stated time period, Tenant's right and option to extend the
term of the lease shall (upon the date by which written notice should have been
received by Landlord) be deemed to have been waived by Tenant and shall be of no
further force or effect. In the event Tenant exercises its right and option in
accordance with the provisions hereof, the term of the lease shall be extended
accordingly, and all references contained in the lease to the term shall be
construed to refer to the original term of the lease, as extended, whether or
not specific reference is made thereto in the lease. Unless otherwise expressly
provided to the contrary, the extended term of the lease shall be upon the same
terms, conditions and covenants as set forth in the lease except that there
shall be no further right or option to extend the term of the lease. It is
important to Landlord that it know whether or not the options are exercised by
Tenant so that it may seek a replacement tenant to avoid loss of rent, and,
therefore, the time within which the options must be exercised is hereby made of
the essence. The right and option to extend the term of the lease shall be
subject to and contingent upon each and every one of the following conditions:
(i) The lease is in full force and effect;
(ii) Tenant shall not remain in material default beyond applicable
notice and grace periods under any of the terms, provisions, covenants
and conditions of the lease; and
(iii) During the entire option period, Fixed Rent to be paid by
Tenant during such year period shall be the greater of fair market rent
or the Fixed Rent for the last month of the original term, but in no
event shall the monthly rental be less than the Fixed Rent for the last
month of the original term, notwithstanding that fair market rent shall
be lower. Rent shall be determined as follows:
29
<PAGE>
<PAGE>
Within thirty (30) days after Landlord receives Tenant's
notice, Landlord shall submit to Tenant, in writing, its determination
of fair market rent. Within thirty (30) days after Tenant receives the
fair market rental figure, Tenant shall have the right to dispute the
rent by written notice received by Landlord within the thirty (30) day
time period. Failure by Tenant to dispute the rent in this manner shall
be deemed, automatically and conclusively, an acceptance by Tenant of
the rent submitted. Within thirty (30) days after Landlord receives
Tenant's notice disputing the rent, Landlord and Tenant shall each
designate an independent, qualified commercial real estate appraiser or
expert, who regularly conducts business in Bergen County and who is
familiar with Bergen County rentals of comparable properties, for the
purpose of having them agree on the then fair market rent for the
Demised Premises which shall be the rental then being collected by
owners of other properties for new leases of space reasonably
comparable in type, size, location and usage to the Demised Premises
(without any leasing commissions or any tenant improvements) within
Bergen County, New Jersey for a term of approximately five (5) years
with similar tenant expense assumptions and contributions. In the event
that the two designees cannot agree upon one figure, then the designees
shall select a third person with comparable qualifications, and the
agreement of two of the three designees shall prevail, or if two
cannot agree, the average of their three rents shall prevail. Landlord
and Tenant shall each pay the fees and expenses of their own designee,
and they shall share, equally, the fees and expenses of the third; and
the greater of the Fixed Rent for the last month of the first original
term or the fair market rent so determined shall be the fixed minimum
rental payable monthly for the entire five-year option term. If Tenant
gives notice of the exercise of its option more than nine (9) months
prior to the expiration of the original term, then Landlord shall have
until eight (8) months prior to the expiration of the original term to
submit its determination of fair market rent. The Landlord and Tenant
shall execute and deliver to each other a written statement of the rent
for the extended term when determined as herein provided.
ARTICLE 36 - FORCE MAJEURE
--------------------------
36.1 Neither Landlord nor Tenant shall be required to perform any term,
condition, or covenant in this lease so long as such performance is delayed or
prevented by force majeure, which shall mean acts of God, strikes, lockouts,
material or labor restrictions by any governmental authority, civil riot,
floods, and any other cause not reasonably within the control of Landlord or
Tenant and which by the exercise of due diligence Landlord or Tenant is unable,
wholly or in part, to prevent or overcome.
30
<PAGE>
<PAGE>
ARTICLE 37 - PARTIES
--------------------
37.1 Except as herein otherwise expressly provided, the covenants,
conditions and agreements contained in this lease shall bind and inure to
the benefit of Landlord and Tenant and their respective successors and assigns.
ARTICLE 38 - LENDER'S CONSENT
-----------------------------
38.1 Landlord will request its lender, WMF Capital Corp. to (i) agree with
Tenant on the language of the Estoppel Certificate and Subordination, Non-
Disturbance and Attornment Agreement, (ii) consent to this lease, (iii) consent
now to the purchase of the Demised Premises by Tenant pursuant to the Option
Agreement of Sale between Landlord, as Seller, and Tenant, as Purchaser, which
will be executed contemporaneously with this lease if Tenant exercises its
option and (iv) specify the financial criteria as provided in Section 14 of
the Option Agreement of Sale. In the event that these conditions are not
satisfied on or before August 10, 1998, then this lease will terminate,
automatically, and neither party will have any right or recourse against the
other.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals
the day and year first above written.
PANORAMA PARK,INC.
By: /s/ Mark S. Rosen
-------------------------------------
Mark S. Rosen, Vice President
Wireless Telecom Group, Inc.
By: /s/ Dale Sydnor
-------------------------------------
Dale Sydnor, Chief Executive Officer
31
<PAGE>
<PAGE>
Exhibit "B"
Tenant's Work
-------------
Plans prepared by Sterba, Pagani & Associates entitled "New Facilities
For Wireless Telecom Group" dated June 4, 1998 and last revised on July 10,
1998.
<PAGE>
<PAGE>
FIRST AMENDMENT TO LEASE
This Amendment ("Amendment"), dated July 27, 1998 by and between
PANORAMA PARK, INC., a New Jersey corporation, ("Landlord"), with its office at
15 Maple Avenue, Morristown, New Jersey 07960, and WIRELESS TELECOM GROUP, INC.,
a New Jersey corporation ("Tenant"), with its office at East 64 Midland Avenue,
Paramus, New Jersey 07652.
RECITALS
A. Landlord and Tenant entered into a certain lease ("Lease") dated
July 14, 1998 for the land, building, improvements and fixtures located thereon,
located at 3 Industrial Avenue, Mahwah, Bergen County, New Jersey ("Demised
Premises").
B. The parties intend to amend the Lease in certain respects.
Now, therefore, in consideration of the mutual promises herein
contained and other good and valuable consideration, it is mutually agreed as
follows:
1. The Recitals hereinabove set forth are hereby incorporated into this
Agreement as if fully set forth herein at length. The definitions of words and
phrases in the Lease will have the same meanings in this Agreement.
2. The first sentence of Section 8.1 of the Lease is hereby amended by
deleting the present sentence, in its entirety, and substituting the following:
"If after the execution of this lease and prior to the expiration of the term of
this lease fifteen (15%) percent or more of the floor area of the Demised
Premises shall be appropriated by right of eminent domain or more than ten (10%)
percent of the parking area is taken or ingress and egress are adversely
affected, then the term of this lease shall cease as of the time of such
appropriation, and Fixed Rent and Additional Rent shall be apportioned and
adjusted as of the time of termination."
3. Except as herein amended or modified, all of the provisions of the
Lease will remain in full force and effect. In the event of any conflict or
inconsistency between the provisions of this Amendment and those of the Lease
the provisions of this Amendment will govern and prevail.
4. The covenants, conditions and agreements contained in this Amendment
shall bind and inure to the benefit of Landlord and Tenant and their respective
successors and assigns.
<PAGE>
<PAGE>
Executed by the parties on the date first above written.
Panorama Park, Inc.
By:/s/ Mark S. Rosen
-------------------------------
Mark S. Rosen, Vice President
Wireless Telecom Group, Inc.
By:/s/ C. Ronald Deitrich
-------------------------------
C. Ronald Deitrich, President
<PAGE>
<PAGE>
SECOND AMENDMENT TO LEASE
This Amendment ("Amendment"), dated July , 1998 by and between WT
MAHWAH L.L.C., a New Jersey limited liability company, ("Landlord"), with its
office at 15 Maple Avenue, Morristown, New Jersey 07960, and WIRELESS TELECOM
GROUP, INC., a New Jersey corporation ("Tenant"), with its office at East 64
Midland Avenue, Paramus, New Jersey 07652.
RECITALS
A. Landlord's predecessor in interest, Panorama Park, Inc. and Tenant
entered into a certain lease dated July 14, 1998 as amended July 27, 1998
(together the "Lease") for the land, building, improvements and fixtures located
thereon, located at 3 Industrial Avenue, Mahwah, Bergen County, New Jersey
("Demised Premises").
B. The parties intend to confirm the Commencement Date and to
acknowledge that the provisions of Article 38 of the Lease have been satisfied.
Now, therefore, in consideration of the mutual promises herein
contained and other good and valuable consideration, it is mutually agreed as
follows:
1. The Recitals hereinabove set forth are hereby incorporated into this
Amendment as if fully set forth herein at length. The definitions of words and
phrases in the Lease will have the same meanings in this Amendment.
2. The Commencement Date is July , 1998, and neither party will have
any right to terminate this Lease as provided in Section 1.1 of this Lease.
3. All of the conditions set forth in Section 38.1 of this Lease have
been satisfied, and neither party will have any right to terminate this Lease as
provided in Section 38.1 of this Lease.
4. Except as herein amended or modified, all of the provisions of the
Lease will remain in full force and effect. In the event of any conflict or
inconsistency between the provisions of this Amendment and those of the Lease
the provisions of this Amendment will govern and prevail.
5. The covenants, conditions and agreements contained in this Amendment
shall bind and inure to the benefit of Landlord and Tenant and their respective
successors and assigns.
<PAGE>
<PAGE>
Executed by the parties on the date first above written.
WT Mahwah L.L.C.
By: WT Mahwah Management Corp.,
its Manager
By:/s/ Mark S. Rosen
----------------------------------
Mark S. Rosen, Vice President
Wireless Telecom Group, Inc.
By: /s/ C. Ronald Dietrich
---------------------------------
C. Ronald Dietrich, President
<PAGE>
<PAGE>
EXHIBIT 11.1
<TABLE>
<CAPTION>
For the Year Ended December 31,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Income from continuing operations $1,455,605 $1,307,620 $1,223,345
Income (loss) from discontinued operations (175,874) 6,637,253 6,227,112
------------------------------------------------------------
Net income $1,279,731 $7,944,873 $7,450,457
============================================================
BASIC EARNINGS:
Weighted average number of common shares outstanding 17,539,259 17,438,834 17,334,750
============================================================
Basic earnings per common share:
Continuing operations $0.08 $0.07 $0.08
Discontinued operations (0.01) 0.39 0.35
------------------------------------------------------------
$0.07 $0.46 $0.43
============================================================
DILUTED EARNINGS: 1998 1997 1996
---- ---- ----
Weighted average number of common shares outstanding 17,539,259 17,438,834 17,334,750
Stock options 9,201 347,048 400,257
------------------------------------------------------------
Weighted average number of common shares outstanding, as adjusted 17,548,460 17,785,882 17,735,007
============================================================
Diluted earnings per common share:
Continuing operations $0.08 $0.07 $0.07
Discontinued operations (0.01) 0.38 0.35
------------------------------------------------------------
$0.07 $0.45 $0.42
============================================================
</TABLE>
<PAGE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of our report dated February 9, 1999 which appears on page
F-2 of Form 10-K for Wireless Telecom Group, Inc. for the year ended December
31, 1998.
LAZAR LEVINE & FELIX LLP
New York, New York
March 24, 1999
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
consolidated financial statements for the year ended December 31, 1998 and is
qualified in its entirety by reference to such statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 9,031,724
<SECURITIES> 0
<RECEIVABLES> 2,745,966
<ALLOWANCES> 134,013
<INVENTORY> 7,862,143
<CURRENT-ASSETS> 20,615,315
<PP&E> 4,356,577
<DEPRECIATION> 1,481,151
<TOTAL-ASSETS> 24,122,199
<CURRENT-LIABILITIES> 976,194
<BONDS> 306,610
<COMMON> 177,023
0
0
<OTHER-SE> 22,662,372
<TOTAL-LIABILITY-AND-EQUITY> 24,122,199
<SALES> 6,834,815
<TOTAL-REVENUES> 6,834,815
<CGS> 2,752,438
<TOTAL-COSTS> 5,049,767
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,785,048
<INCOME-TAX> 329,443
<INCOME-CONTINUING> 1,455,605
<DISCONTINUED> (175,874)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,279,731)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
