<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 13, 2000
REGISTRATION NO. 333-35980
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
WIRELESS TELECOM GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
-------------------
<TABLE>
<S> <C> <C>
NEW JERSEY 3825 22-2582295
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
WIRELESS TELECOM GROUP, INC.
EAST 64 MIDLAND AVENUE
PARAMUS, NJ 07652
TEL. (201) 261-8797
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------------
EDWARD GARCIA
PRESIDENT AND CHIEF EXECUTIVE OFFICER
WIRELESS TELECOM GROUP, INC.
EAST 64 MIDLAND AVENUE
PARAMUS, NJ 07652
TEL: (201) 261-8797
(NAME AND ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF AGENT FOR SERVICE)
-------------------
COPIES TO:
<TABLE>
<S> <C>
ROBERT H. COHEN, ESQ. MICHAEL J. NITA, ESQ.
MORRISON COHEN SINGER & WEINSTEIN, LLP DRINKER BIDDLE & SHANLEY LLP
750 LEXINGTON AVENUE 500 CAMPUS DRIVE
NEW YORK, NY 10022 FLORHAM PARK, NJ 07932-1047
(212) 735-8600 (973) 360-1100
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effectiveness of this Registration Statement and the
effective time of the merger of WTT Acquisition Corp., a New Jersey corporation,
and a wholly owned subsidiary of Wireless Telecom Group, Inc., a New Jersey
corporation, with and into Boonton Electronics Corporation, a New Jersey
corporation, pursuant to the agreement and plan of reorganization dated as of
March 2, 2000, as amended, among Wireless, WTT Acquisition Corp. and Boonton,
described in the enclosed proxy statement/prospectus.
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [ ]
-------------------
CALCULATION OF REGISTRATION FEE
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<S> <C> <C> <C> <C>
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE FEE(2)
Common Stock, par value $0.01 per share......... 1,927,470(1) Not Applicable Not Applicable $1,694
</TABLE>
(1) Based on 2,387,332 shares of common stock, $.10 par value, of Boonton
Electronics Corporation, which is the maximum number of shares of Boonton
common stock that may be outstanding immediately prior to the consummation
of the transactions herein. Based on the exchange ratio of .79 shares of
Wireless common stock for each share of Boonton common stock outstanding.
The amount of shares to be registered includes 41,478 shares which shall be
issued by Wireless as payment of Boonton's obligations to its directors for
fees and other liabilities.
(2) Pursuant to Rules 457(f)(1) and 457(c) under the Securities Act of 1933, as
amended, the registration fee was calculated as 0.000264 multiplied by
$2.6875 (the average of the high and low prices of Boonton common stock on
the OTC Electronic Bulletin Board on April 24, 2000), multiplied by the
total number of shares of Boonton common stock expected to be exchanged for
the shares of the Wireless' common stock hereunder. This registration fee
was paid on May 1, 2000 in connection with the original filing of the
Registration Statement.
-------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
________________________________________________________________________________
<PAGE>
BOONTON ELECTRONICS CORPORATION
25 EASTMANS ROAD
P.O. BOX 465
PARSIPPANY, NEW JERSEY 07054-0465
(973) 386-9696
PROXY STATEMENT/PROSPECTUS
MERGER PROPOSED -- YOUR VOTE IS VERY IMPORTANT
June 16, 2000
Dear Stockholder:
You are cordially invited to attend a special meeting of stockholders of
Boonton Electronics Corporation to be held at the offices of Boonton, 25
Eastmans Road, Hanover Township, New Jersey on July 6, 2000 at 10:00 a.m., New
Jersey time.
At the meeting, Boonton stockholders will consider and vote upon a proposal
to approve the Agreement and Plan of Reorganization dated as of March 2, 2000,
as amended, among Boonton, Wireless Telecom Group, Inc., WTT Acquisition Corp.
(a wholly-owned subsidiary of Wireless) and the principal stockholders of
Boonton named therein. The merger agreement provides for Boonton to become a
wholly-owned subsidiary of Wireless.
If the merger is completed, you will receive .79 shares of Wireless common
stock for each share of Boonton common stock that you own.
Stockholders of record at the close of business on May 12, 2000 are entitled
to notice of and to vote at the special meeting and any adjustment or
postponement thereof. The proposed merger requires the approval of at least
two-thirds of the outstanding shares of Boonton common stock cast at the
meeting. The enclosed proxy statement/prospectus provides you with detailed
information about the proposed merger. Please read the proxy
statement/prospectus carefully. IN PARTICULAR, YOU SHOULD READ THE 'RISK
FACTORS' SECTION BEGINNING ON PAGE 8 FOR A DESCRIPTION OF VARIOUS RISKS YOU
SHOULD CONSIDER IN EVALUATING THE PROPOSED TRANSACTION. It is important that
your shares are represented at the meeting, regardless of whether you plan to
attend in person. Please complete, execute and date the enclosed proxy and
return it in the enclosed postage prepaid envelope, which does not require
postage if mailed in the United States. Please do not send in your stock
certificates until you have received a letter of transmittal, which will be sent
to you if the merger is completed.
Your Board of Directors has determined that approval of the merger is in the
best interests of Boonton and its stockholders and has unanimously approved the
merger. The Board unanimously recommends that you vote 'FOR' approval of the
merger.
TO ENSURE THAT YOUR SHARES ARE REPRESENTED AT THE SPECIAL MEETING, PLEASE
COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE
POSTAGE-PAID ENVELOPE PROVIDED, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING IN PERSON. ANY EXECUTED BUT UNMARKED PROXY CARDS WILL BE VOTED FOR
APPROVAL OF THE MERGER. YOU MAY REVOKE YOUR PROXY IN THE MANNER DESCRIBED IN
THIS PROXY STATEMENT/PROSPECTUS AT ANY TIME BEFORE IT HAS BEEN VOTED AT THE
SPECIAL MEETING. IF YOU ATTEND THE SPECIAL MEETING, YOU MAY VOTE IN PERSON EVEN
IF YOU HAVE RETURNED A PROXY.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED THE SECURITIES TO BE ISSUED UNDER THIS PROXY STATEMENT/PROSPECTUS OR
DETERMINED IF THIS PROXY STATEMENT/PROSPECTUS IS ACCURATE OR ADEQUATE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This proxy statement/prospectus is dated June 15, 2000, and is first being
mailed to stockholders of Boonton on June 16, 2000.
BOONTON ELECTRONICS CORPORATION
Yves Guyomar
........................................................................
Yves Guyomar, President
<PAGE>
BOONTON ELECTRONICS CORPORATION
25 EASTMANS ROAD
P.O. BOX 465
PARSIPPANY, NEW JERSEY 07054-0465
(973) 386-9696
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS OF
BOONTON ELECTRONICS CORPORATION
Please take notice that a special meeting of stockholders of Boonton
Electronics Corporation will be held at the offices of Boonton, 25 Eastmans
Road, Hanover Township, New Jersey on July 6, 2000 at 10:00 a.m., New Jersey
time, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the Agreement
and Plan of Reorganization dated as of March 2, 2000, as amended, among Boonton,
Wireless Telecom Group, Inc., WTT Acquisition Corp., (a wholly-owned subsidiary
of Wireless) and the principal stockholders of Boonton named therein. The merger
agreement provides for Boonton to become a wholly-owned subsidiary of Wireless
and for Boonton stockholders to receive .79 shares of Wireless common stock in
exchange for each share of Boonton common stock that they own.
2. To transact any other matters incidental to the business to be conducted
at the meeting as may properly come before the meeting or at any adjournment or
postponement thereof.
Only those stockholders who owned Boonton common stock at the close of
business on May 12, 2000 are entitled to notice of and to vote at the meeting
and any adjournment or postponement thereof.
Regardless of whether you plan to attend the meeting in person, please
complete, date and execute the enclosed proxy and return it in the enclosed
postage prepaid envelope, which does not require postage if mailed in the United
States. If you decide to attend the meeting in person, you may revoke your proxy
and vote your shares in person or execute a new proxy.
By Order of the Board of Directors
Yves Guyomar
June 16, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
SUMMARY..................................................... 1
The Companies........................................... 1
The Special Stockholders Meeting........................ 1
The Merger Proposal..................................... 1
Consideration to be Received in the Merger.............. 2
Wireless Reasons for the Merger......................... 2
Boonton Reasons for the Merger.......................... 2
Joint Reasons for the Merger............................ 3
Recommendation to Boonton Stockholders.................. 3
Record Date; Voting Power............................... 3
Votes Required.......................................... 3
Share Ownership by Boonton Management and the Principal
Stockholders........................................... 3
Federal Income Tax Consequences of the Merger to Boonton
Stockholders........................................... 3
The Merger Agreement.................................... 3
Conditions to the Merger................................ 4
Termination of the Merger Agreement..................... 4
Interests of Certain Persons in the Merger.............. 4
The Rights of Boonton Stockholders Will Change.......... 4
No Dissenters' Rights................................... 5
Accounting Treatment.................................... 5
Risk Factors............................................ 5
Comparative Market Data................................. 5
Selected Historical Consolidated Financial Data of
Wireless............................................... 5
Selected Historical Financial Data of Boonton........... 6
Comparative Per Share Data.............................. 6
RISK FACTORS................................................ 8
Risks Associated with the Merger........................ 8
Risks of Wireless Business.............................. 9
Risks of Boonton Business............................... 11
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING
STATEMENTS................................................ 11
THE SPECIAL STOCKHOLDERS MEETING............................ 13
Proposed Time and Place................................. 13
Record Date; Stock Entitled to Vote; Quorum............. 13
Voting; Proxies......................................... 13
Revoking Proxies........................................ 14
Solicitation of Proxies................................. 14
Votes Required; Share Ownership by Management and
Principal Stockholders................................. 14
THE MERGER.................................................. 15
Background of the Merger................................ 15
Boonton Reasons For The Merger.......................... 16
Recommendation to Boonton Stockholders.................. 17
No Opinion of Financial Advisor......................... 17
Wireless Reasons for the Merger......................... 17
Joint Reasons for the Merger............................ 17
Material Federal Income Tax Consequences................ 18
Accounting Treatment.................................... 19
American Stock Exchange Listing......................... 20
Regulatory Matters...................................... 20
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
No Appraisal or Dissenters' Rights...................... 20
Federal Securities Laws Consequences; Stock Transfer
Restrictions........................................... 20
Resale Restrictions..................................... 21
MATERIAL PROVISIONS OF THE MERGER AGREEMENT................. 21
General................................................. 21
Structure of the Merger................................. 21
Closing; Effective Time................................. 21
Consideration to be Received in the Merger.............. 21
Cancellation of Shares.................................. 21
Procedures for Surrender of Certificates; Fractional
Shares................................................. 22
Representations and Warranties.......................... 22
Conditions to Completion of the Merger.................. 23
Conduct of Business Pending the Merger.................. 24
Wireless Loan........................................... 24
Termination............................................. 25
Fees and Expenses; Termination Fees..................... 25
Other Covenants and Agreements.......................... 26
Indemnification......................................... 26
Amendment and Waiver.................................... 26
No Solicitation by Boonton.............................. 26
Material Terms of the Voting Provisions................. 26
FINANCIAL INFORMATION....................................... 28
Selected Historical Consolidated Financial Data of
Wireless............................................... 28
Selected Historical Financial Data of Boonton........... 28
Comparative Per Share Data.............................. 29
Market Prices and Dividends............................. 30
Quarterly Dividend per Share of Wireless Common Stock... 31
THE COMPANIES............................................... 32
Business of Wireless.................................... 32
Market.................................................. 32
Products................................................ 32
Sale of Division........................................ 33
Marketing and Sales..................................... 33
Customers............................................... 33
Research and Development................................ 34
Competition............................................. 34
Backlog................................................. 34
Inventory, Supplies and Manufacturing................... 34
Warranty and Service.................................... 35
Product Liability Coverage.............................. 35
Intellectual Property................................... 35
Employees............................................... 35
Properties.............................................. 36
Legal Proceedings....................................... 36
Business of Boonton..................................... 36
Properties.............................................. 38
WIRELESS MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION........................ 39
Results of Operations................................... 39
Liquidity and Capital Resources......................... 40
BOONTON MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS....................... 42
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Results of Operations................................... 42
Liquidity and Capital Resources......................... 43
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT OF BOONTON..................................... 45
INTERESTS OF CERTAIN PERSONS IN THE MERGER.................. 46
DIRECTORS AND EXECUTIVE OFFICERS OF WIRELESS................ 47
EXECUTIVE COMPENSATION...................................... 48
RELATED PARTY TRANSACTIONS.................................. 48
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT OF WIRELESS.................................... 48
COMPARISON OF STOCKHOLDER RIGHTS............................ 49
DESCRIPTION OF WIRELESS CAPITAL STOCK....................... 52
General................................................. 52
Common Stock............................................ 52
Dividend Limitations.................................... 52
WHERE YOU CAN FIND MORE INFORMATION......................... 52
EXPERTS..................................................... 54
LEGAL MATTERS............................................... 54
INDEPENDENT PUBLIC ACCOUNTANTS.............................. 54
INDEX TO FINANCIAL STATEMENTS............................... F-2
AUDITOR'S REPORT............................................ F-3
FINANCIAL STATEMENTS OF BOONTON............................. F-4
LIST OF ANNEXES
ANNEX A Agreement and Plan of Reorganization (without
schedule and exhibits)................................. A-1
ANNEX B Amendment No. 1 to Agreement and Plan of
Reorganization......................................... B-1
ANNEX C Joinder Agreement............................... C-1
</TABLE>
iii
<PAGE>
AVAILABLE INFORMATION
This document incorporates important business and financial information
about our companies from documents we have filed with the SEC that we have not
included in or delivered with this document. Wireless will provide you with
copies of this information relating to Wireless, without charge, upon written or
oral request to:
Wireless Telecom Group, Inc.
East 64 Midland Avenue
Paramus, NJ 07652
Attention: Office of Investor Relations
Telephone number: (201) 261-8797
Boonton will provide you with copies of this information relating to
Boonton, without charge, upon written or oral request to:
Boonton Electronics Corporation
25 Eastmans Road
P. O. Box 465
Parsippany, New Jersey 07054-0465
Attention: Office of Investor Relations
Telephone number: (973) 386-9696
IN ORDER TO RECEIVE TIMELY DELIVERY OF THE DOCUMENTS IN ADVANCE OF THE
SPECIAL STOCKHOLDERS' MEETING, BOONTON STOCKHOLDERS SHOULD MAKE A REQUEST NO
LATER THAN JUNE 26, 2000.
For more information on the matters incorporated by reference in this
document, see 'Where You Can Find More Information' on page 52.
iv
<PAGE>
SUMMARY
This summary highlights selected information from this proxy
statement/prospectus. This summary is not complete and does not contain all of
the information that Boonton stockholders should consider before deciding to
vote on the merger proposal. To understand the proposed transactions fully and
the consequences to Boonton stockholders, Boonton urges its stockholders to read
carefully the entire proxy statement/prospectus and the documents referred to in
this document. See 'Where You Can Find More Information' on page 52. Boonton has
included page references directing its stockholders to a more complete
description of each item presented in this summary.
This document contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Forward-looking statements include information concerning
possible or assumed future results of operations and other statements and
information regarding assumptions about earnings per share, capital and other
expenditures, financing plans, cash flow, capital structure, pending legal
proceedings and claims, future economic performance, operating income,
management's plans, goals and objectives for future operations and growth and
markets for Wireless stock and Boonton stock.
Forward-looking statements are also identified by words such as 'believes,'
'expects,' 'anticipates,' 'intends,' 'estimates' or similar expressions. Boonton
stockholders should understand that these forward looking statements are
necessarily estimates based on assumptions believed to be reasonable. These
statements are subject to a number of risks and uncertainties that could cause
actual results to differ materially from those expressed or implied in the
forward-looking statements. 'See Cautionary Statements Concerning
Forward-Looking Statements' on page 11.
THE COMPANIES
WIRELESS TELECOM GROUP, INC.
East 64 Midland Avenue
Paramus, NJ 07652
Telephone: (201) 261-8797
Wireless, a New Jersey corporation, 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. On March 11, 1999,
Wireless consummated the sale of its wireless and satellite test equipment
business. Wireless products have historically been used to test the performance
and capability of cellular/PCS and satellite communications systems, radio,
radar, wireless local area network (WLAN) and digital television.
BOONTON ELECTRONICS CORPORATION
25 Eastmans Road
P.O. Box 465
Parsippany, NJ 07054-0465
Telephone: (973) 386-9696
Boonton is a New Jersey corporation organized in 1947. Boonton designs and
produces electronic testing and measuring instruments including power meters,
voltmeters, capitance meters, modulation and audio meters and VXI products.
Boonton's products are used to test terrestrial and satellite communications,
radar, telemetry and personal communications products.
THE SPECIAL STOCKHOLDERS MEETING (PAGE 13)
Boonton will hold a special meeting of its stockholders on July 6, 2000 at
10:00 a.m., New Jersey time, at the offices of Boonton, 25 Eastmans Road,
Hanover Township, New Jersey. At the special meeting, Boonton will ask its
stockholders to approve the merger proposal.
1
<PAGE>
THE MERGER PROPOSAL (PAGE 15)
Under the terms of the merger agreement and, subject to the satisfaction of
the conditions in the merger agreement, WTT Acquisition Corp., a wholly-owned
subsidiary of Wireless, will merge with and into Boonton and Boonton will become
a wholly-owned subsidiary of Wireless.
CONSIDERATION TO BE RECEIVED IN THE MERGER (PAGE 21)
If the merger is completed, Boonton stockholders will receive .79 shares of
Wireless common stock for each share of Boonton common stock that they own. No
fractional shares will be issued. Instead, each Boonton stockholder will receive
from Wireless a cash payment equal to the product of that fraction and the
closing price of a share of Wireless common stock on the date of closing of the
merger.
There is no minimum or floor on the market price of Wireless common stock to
be received in the merger.
WIRELESS REASONS FOR THE MERGER (PAGE 17)
Wireless has identified several potential benefits of the merger that it
believes will contribute to the success of the combined company. These potential
benefits include the ability to:
provide solutions to a wider segment of the total marketplace;
introduce Boonton's customers and products to Wireless' complete solutions
offerings;
avoid time consuming and costly internally developed alternatives; and
realize synergies and cost savings.
Additionally, Wireless considered the pro forma contribution of Boonton to
its net income. Based on the pro forma analyses, Wireless believes the merger
will be accretive; however, there can be no assurance that the merger will be
accretive in the near future, if ever. Wireless, for the strategic reasons
stated above, has determined that the merger is in the best interests of
Wireless and its stockholders and Wireless should proceed with the merger.
BOONTON REASONS FOR THE MERGER (PAGE 16)
Boonton believes that the merger provides many benefits to Boonton and its
stockholders, including:
The merger consideration offered by Wireless is greater than the historical
market value of Boonton common stock during the two years prior to
September 7, 1999; the date of the first merger agreement with Wireless and
the book value per share of Boonton;
Boonton's need for working capital for product development, operations and
marketing and to pay trade debt;
The inability of Boonton to obtain loans and its likely inability to obtain
equity investment to fund its working capital needs;
The availability of Wireless' cash resources to supply working capital;
Expected synergies and cost savings including an expected reduction in
administrative overhead, marketing and sales costs. In addition, both
Boonton and Wireless obtain parts and supplies from many of the same
suppliers. The merger of these two companies is expected to reduce
purchasing costs;
The reasons expressed in 'The Merger -- Joint Reasons for the Merger';
Boonton stockholders will receive Wireless common stock that is listed on
the American Stock Exchange and most stockholders will be able to freely
sell the common stock they receive in the merger;
Although there can be no assurances, the expected treatment of the merger
as a tax-free exchange of stock and only the cash received instead of
fractional shares is expected to be presently taxable;
2
<PAGE>
A review of strategic alternatives; and
The anticipated continuation and expansion of Boonton's business by
Wireless and the expected retention of a significant number of Boonton's
operational employees.
JOINT REASONS FOR THE MERGER (PAGE 17)
Boonton and Wireless believe that the merger will provide the combined
company with greater prospects for growth and profitability to:
compete effectively in the rapidly growing and changing global wireless
telecommunications equipment business;
offer a comprehensive range of products, services and technical solutions
for its customers;
cultivate a more diverse customer base with broader geographic coverage;
and
achieve economies of scale that are currently beyond the independent
capability of the companies separately.
RECOMMENDATION TO BOONTON STOCKHOLDERS (PAGE 17).
Boonton's board of directors has determined that the merger is fair to and
in the best interests of its stockholders, has unanimously approved the merger
agreement and the merger, and unanimously recommends that the stockholders vote
in favor of the merger proposal.
RECORD DATE; VOTING POWER (PAGE 13)
Boonton stockholders may vote at the special stockholders' meeting only if
they owned shares of common stock at the close of business on May 12, 2000.
At the close of business on May 12, 2000, 2,387,332 shares of Boonton's
common stock were outstanding. Each share of Boonton's common stock will have
one vote at the special stockholders' meeting on the proposal to approve the
merger.
VOTES REQUIRED (PAGE 14)
Approval of the merger proposal requires the favorable vote of at least
two-thirds of the outstanding shares of Boonton's common stock cast at the
meeting. Holders of approximately 73% of the outstanding shares of Boonton's
common stock have agreed to vote their shares for approval of the merger
proposal. Assuming those shares are voted in favor of the merger proposal at the
stockholders' meeting, the merger will be approved. The merger does not require
the approval of a majority of unaffiliated stockholders.
SHARE OWNERSHIP BY BOONTON MANAGEMENT AND THE PRINCIPAL STOCKHOLDERS (PAGES 14
AND 45)
At the close of business on May 12, 2000, Boonton's directors and executive
officers and their affiliates were entitled to vote 1,205,036 shares of its
common stock. These shares represent approximately 51% of the outstanding shares
of Boonton's common stock. Those shares, when combined with the shares owned by
Boonton's principal stockholders, represent approximately 73% of its outstanding
common stock. All of these directors, executive officers and principal
stockholders are parties to the voting provisions of the merger agreement and
accordingly have agreed to vote their shares in favor of the merger proposal.
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO BOONTON STOCKHOLDERS (PAGE 18)
The parties intend the merger to be a reorganization for United States
federal income tax purposes so that Boonton stockholders generally will not
recognize any gain or loss for United States federal income tax purposes on the
exchange of their shares for shares of Wireless common
3
<PAGE>
stock in the merger, except for any gain or loss recognized in connection with
the receipt of any cash in lieu of fractional shares.
Tax matters are very complicated, and the tax consequences of the merger to
each Boonton stockholder will depend on the facts of that stockholder's
situation. Each stockholder is urged to consult a tax advisor for a full
understanding of the tax consequences of the merger.
THE MERGER AGREEMENT (PAGE 21)
Boonton has attached to this proxy statement/prospectus the merger agreement
and amendment No. 1 to the merger agreement as Annex A and Annex B,
respectively. Boonton encourages each stockholder to read the merger agreement
because it is the legal document that governs the merger.
CONDITIONS TO THE MERGER (PAGE 23)
Boonton and Wireless can complete the merger only if a number of conditions
are satisfied or, as to some conditions, waived including the following:
holders of Boonton's common stock approve the merger proposal;
no law or court order prohibits the transaction;
the representations and warranties of the parties to the merger agreement
are materially accurate as of closing;
Boonton shall have repaid the principal and interest owed to the New Jersey
Economic Development Authority;
All authorizations, consents, and other necessary regulatory approvals are
received;
Wireless and Boonton shall be reasonably satisfied that the merger will be
treated as a tax free reorganization for federal income tax purposes;
Wireless shall have determined in good faith that the schedules to the
merger agreement disclosed no material information regarding Boonton
unsatisfactory to Wireless; and
Wireless shall have satisfied Boonton's obligations to pay its director's
fees and other accrued liabilities in cash or by issuing Wireless common
stock.
In addition, Boonton's obligation to complete the merger is subject to the
condition that its principal stockholders comply with the voting provisions in
all material respects.
TERMINATION OF THE MERGER AGREEMENT (PAGE 25)
Boonton and Wireless can jointly agree to terminate the merger agreement at
any time without completing the merger. In addition, Boonton or Wireless can
terminate the merger agreement if any of the following occurs:
the merger is not completed on or before July 14, 2000;
Boonton's stockholders fail to approve the merger;
the other party materially breaches any representation, warranty, covenant
or agreement and the breaching party does not cure the breach within 15
days; or
the other party fails to perform any of its obligations which failure could
constitute a failure of a condition under the merger agreement.
Boonton has agreed that it will pay Wireless a termination fee of $100,000
and up to $500,000 of out-of-pocket expenses to reimburse Wireless for expenses
incurred in connection with the merger agreement if Boonton breaches the merger
agreement under specific circumstances and it enters into a transaction relating
to the acquisition of any material portion of Boonton's capital stock or assets
within one year after termination.
4
<PAGE>
INTERESTS OF CERTAIN PERSONS IN THE MERGER (PAGE 46)
When you consider the merger agreement and the recommendation of the Boonton
board of directors that you vote in favor of the merger, you should be aware
that some Boonton officers and directors may have interests in the merger that
may be different from, or in addition to, yours.
THE RIGHTS OF BOONTON STOCKHOLDERS WILL CHANGE (PAGE 49)
The rights of Boonton stockholders are determined by New Jersey law and
Boonton's Articles of Incorporation and by-laws. When the merger is completed,
the stockholders' rights as Wireless stockholders will be determined by New
Jersey law and by the Wireless Certificate of Incorporation and by-laws.
NO DISSENTERS' RIGHTS (PAGE 20)
Under New Jersey law, holders of Boonton common stock are not entitled to
dissenters' or appraisal rights in connection with the merger.
ACCOUNTING TREATMENT (PAGE 19)
The merger is intended to be accounted for under the pooling method of
accounting.
RISK FACTORS (PAGE 8)
An investment in Wireless common stock involves a high degree of risk. There
may be additional risks associated with the business of Wireless and Boonton and
with the merger. You should consider the risk factors beginning on page 8 of
this proxy statement/prospectus before voting.
COMPARATIVE MARKET DATA (PAGE 30)
The following table presents trading information for Wireless common stock
and Boonton common stock on March 2, 2000 and June 8, 2000. March 2, 2000 was
the last full trading day prior to the announcement of the signing of the merger
agreement. June 8, 2000 was the last practicable trading day for which
information was available prior to the date of this proxy statement/prospectus.
For Wireless, the market price represents the high, low and closing price of a
share of Wireless common stock as reported on the American Stock Exchange as of
the dates indicated. For Boonton, the market price, historical, represents the
high and low bid price of a share of Boonton common stock as reported on the OTC
Electronic Bulletin Board as of the dates indicated, and the market price,
equivalent, represents the exchange ratio of .79 shares of Wireless common stock
multiplied by the closing price of Wireless common stock on the dates indicated.
Boonton stockholders should read the information presented below in conjunction
with 'Comparative Per Share Data' beginning on page 28.
<TABLE>
<CAPTION>
BOONTON BOONTON
WIRELESS (HISTORICAL) (EQUIVALENT)
------------------------ --------------- -------------
HIGH LOW CLOSING HIGH LOW HIGH LOW
---- --- ------- ---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C> <C>
March 2, 2000........................ $8.875 $ 7.75 $ 8.188 $2.125 $2.125 $7.01 $6.12
June 8, 2000......................... $ 2.75 $2.688 $ 2.688 $1.688 $1.688 $2.17 $2.12
</TABLE>
The market prices of shares of Wireless common stock and Boonton common
stock fluctuate. As a result, Boonton stockholders should obtain current market
quotations.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF WIRELESS (PAGE 28)
The following selected historical consolidated financial data for each of
the years ended December 31, 1995 through 1999 have been derived from Wireless'
audited financial statements
5
<PAGE>
after restatement for discontinued operations accounting. The selected
historical financial data for the three months ended March 31, 2000 has been
derived from Wireless' unaudited interim financial statement, which financial
statements, in the opinion of management, reflect all adjustments necessary for
the fair presentation of data. This information is only a summary and Boonton
stockholders should read it together with Wireless' historical consolidated
financial statement and related notes contained elsewhere in the annual reports,
quarterly reports and other information that Wireless' has filed with the SEC
and incorporated by reference. See 'Where You Can Find More Information' on
page 52.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED DECEMBER 31,
MARCH 31, -------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS DATA:
Revenue....................... $ 2,141,335 $ 6,848,557 $ 6,834,815 $ 6,762,833 $ 5,843,225 $ 4,982,629
Income from continuing
operations before income
taxes........................ 1,094,664 3,682,962 1,785,048 2,052,573 1,908,172 1,494,788
Net income from continuing
operations................... 662,678 2,422,793 1,455,605 1,307,620 1,223,345 929,758
SELECTED PER SHARE DATA: (1)
Earnings from continuing
operations per common
share........................ .04 .14 .08 .07 .07 .05
Shares used in computation of
earnings per share........... 17,934,395 17,441,552 17,548,460 17,785,882 17,735,007 17,510,538
</TABLE>
---------
(1) Common share data has been adjusted to reflect the 2-for-1 and 3-for-2 stock
splits paid on May 28, 1996 and July 8, 1995, respectively.
SELECTED HISTORICAL FINANCIAL DATA OF BOONTON (PAGE 28)
The following selected historical financial data for the years ended
September 30, 1999, September 30, 1998 and selected historical consolidated
financial data for the years ended September 30, 1995 through 1997 have been
derived from Boonton's audited financial statements and audited consolidated
financial statements, respectively. The selected historical financial data for
the six months ended March 31, 2000 has been derived from Boonton's unaudited
interim financial statements, which financial statements, in the opinion of
management, reflect all adjustments necessary for the fair presentation of the
data. This information is only a summary and Boonton stockholders should read it
together with Boonton's historical financial statements and related notes
contained in the annual reports, quarterly reports and other information that it
has filed with the SEC or otherwise contained herein. See 'Where You Can Find
More Information' on page 52.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, ---------------------------------------------------------------
1999 1999 1998 1997 1996 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS DATA:
Revenue............................ $4,117,284 $ 6,886,395 $6,849,143 $7,209,057 $6,038,336 $6,837,248
Income (loss) before income
taxes............................. 204,098 (913,554) 199,539 31,344 (824,606) (82,495)
Net income (loss).................. 204,098 (1,518,448) 142,959 31,344 (1,049,679) 233,844
SELECTED PER SHARE DATA:
Earnings (loss) per common share... .09 (.65) .09 .02 (.72) .17
Shares used in computation of
earnings per share................ 2,387,332 2,351,148 1,644,301 1,621,462 1,460,730 1,341,785
</TABLE>
COMPARATIVE PER SHARE DATA (PAGE 29)
Set forth below are the earnings (loss) before extraordinary items, cash
dividends declared, and book value (common stockholders' equity) per common
share data separately for both Wireless and Boonton on a historical basis, for
the combined company on a pro forma combined
6
<PAGE>
basis and for the combined company on a pro forma combined basis per Boonton
equivalent share. The exchange ratio for the merger is .79 shares of Wireless
common stock for each share of Boonton common stock outstanding.
The unaudited pro forma combined data below is for illustrative purposes
only. The companies may have performed differently had they always been
combined. Boonton stockholders should not rely on this information as being
indicative of the historical results that would have been achieved had the
companies always been combined or the future results that the combined company
will experience after the merger.
Boonton stockholders should read the information below together with the
respective historical financial statements and related notes contained in the
annual reports and information that Wireless has filed with the SEC and
incorporated by reference. To obtain copies of these documents, see 'Where You
Can Find More Information' on page 52. Boonton financial data is derived from
the financial statements included in this proxy/prospectus and should be read in
conjunction with those financial statements and notes related thereto.
<TABLE>
<CAPTION>
YEAR ENDED
THREE MONTHS DECEMBER 31,
ENDED MARCH 31, --------------
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
WIRELESS HISTORICAL PER COMMON SHARE DATA:
Earnings (loss) before extraordinary items.............. $.04 $ .14 $ .08
Earnings (loss) before extraordinary items -- assuming
dilution.............................................. .04 .14 .08
Cash Dividend........................................... .00 .00 .05
Book Value.............................................. 1.58 1.53 1.30
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
--------------
1999 1998
---- ----
<S> <C> <C>
BOONTON HISTORICAL PER COMMON SHARE DATA:
Earnings (loss)......................................... $ (.65) $ .09
Earnings (loss) -- assuming dilution.................... (.65) .09
Cash Dividend........................................... .00 .00
Book Value.............................................. .66 1.59
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
THREE MONTHS DECEMBER 31,
ENDED MARCH 31, --------------
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
WIRELESS PRO FORMA COMBINED PER COMMON SHARE DATA:
Earnings (loss) before extraordinary items.............. $.04 $ .05 $ .08
Earnings (loss) before extraordinary items -- assuming
dilution.............................................. .04 .05 .08
Cash Dividend........................................... .00 .00 .05
Book Value.............................................. 1.51 1.46 1.35
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
MARCH 31,
--------------
2000 1999
---- ----
<S> <C> <C>
BOONTON HISTORICAL PER SHARE INTERIM DATA:
Earnings (loss)......................................... $ .09 $(.05)
Earnings (loss) -- assuming dilution.................... .09 (.05)
Cash Dividend........................................... .00 .00
Book Value.............................................. .73 1.28
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
THREE MONTHS DECEMBER 31,
ENDED MARCH 31, --------------
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
WIRELESS PRO FORMA COMBINED PER BOONTON EQUIVALENT
COMMON SHARE DATA:
Earnings (loss) before extraordinary items.............. $.03 $ .04 $ .06
Earnings (loss) before extraordinary items -- assuming
dilution.............................................. .03 .04 .06
Cash Dividend........................................... .00 .00 .04
Book Value.............................................. 1.19 1.15 1.07
</TABLE>
7
<PAGE>
RISK FACTORS
The following risk factors, in addition to the other information contained
in this proxy statement/prospectus, should be considered carefully by the
stockholders of Boonton in determining whether to vote in favor of the merger
proposal. Boonton's stockholders should be aware that ownership of Wireless
common stock involves risks, including those described below, which could
adversely affect the value of their Wireless common stock. The risks described
below are not the only risks facing Wireless, Boonton or the combined company.
RISKS ASSOCIATED WITH THE MERGER
VALUE OF WIRELESS COMMON STOCK TO BE RECEIVED IN THE MERGER MAY DECLINE
SIGNIFICANTLY
The number of shares of Wireless common stock that Boonton stockholders will
receive upon closing of the merger is fixed as of March 2, 2000, the date of the
execution of the merger agreement. The market price of Wireless common stock may
decline significantly during the period between the special stockholders meeting
and the actual day the merger occurs. There is no minimum or floor on the market
price of Wireless common stock to be received in the merger. There can be no
assurances as to the market value of Wireless common stock at the time of the
merger, and after the merger.
INTEGRATING THE BUSINESS OF WIRELESS AND BOONTON WILL BE COMPLEX, TIME-CONSUMING
AND EXPENSIVE, AND WIRELESS MAY NOT SUCCESSFULLY INTEGRATE THE BUSINESSES, WHICH
WOULD HARM THE OPERATIONS OF THE COMBINED COMPANY
Integrating Wireless and Boonton will be a complex, time-consuming and
expensive process. Before the merger, Wireless operated independently and
Boonton operated independently, each with its own business, culture, clients,
employees and systems. After the merger, the companies must operate as a
combined organization, utilizing common information and communication systems,
operating procedures, financial controls and human resource practices, including
benefit, training and professional development programs. There may be
substantial difficulties, costs and delays involved in this type of integration.
These include:
diversion of management resources from the business of the combined
company;
potential incompatibility of business cultures;
perceived adverse changes in client service standards, business focus,
billing practices, or service offerings available to clients;
perceived uncertainty in career opportunities, benefits and the long-term
value of stock options available to employees;
costs and delays in implementing common systems and procedures;
potential inefficiencies in delivering services to the clients of the
combined company; and
merger related costs to be expensed in the quarter in which the merger is
consummated.
Any one or all of these factors may cause increased operating costs, lower
than anticipated financial performance or the loss of customers and employees.
Some of these factors are outside the control of Boonton and Wireless.
THE ISSUANCE OF SHARES OF WIRELESS COMMON STOCK IN THE MERGER MAY HAVE A
DILUTIVE EFFECT ON WIRELESS' RESULTS
The issuance of shares of Wireless common stock in this merger may have a
dilutive effect on Wireless' earnings per share. The pro forma financial
statements reflect that the merger would have caused a 'dilution' (reduction) in
Wireless' earnings per share. This dilution is reflected in the pro forma
financial statements and can be seen in the table under 'Comparative Per Share
Data' on page 29 by comparing the section captioned 'Wireless Historical per
Common Share
8
<PAGE>
Data' with the section captioned 'Wireless Pro Forma Combined per Common Share
Data.'
THE TERMINATION FEE AND THE MERGER STRUCTURE MAY DISCOURAGE OTHER COMPANIES FROM
TRYING TO COMBINE WITH BOONTON
If the merger is not consummated because of specified Boonton actions,
Wireless may receive a termination fee from Boonton if Boonton were to enter
into a transaction relating to the acquisition of Boonton or any material
portion of its capital stock or assets within one year of termination. These
arrangements could discourage other companies from trying to combine with
Boonton even if the terms they propose are superior to the terms of the merger.
If the termination fee were to be paid, the cost to Boonton would have a
material negative effect on its financial condition and results of operations.
This could also discourage other companies from trying to combine with Boonton.
FAILURE TO QUALIFY FOR POOLING-OF-INTERESTS ACCOUNTING TREATMENT MAY IMPACT
REPORTED OPERATING RESULTS
If, after completion of the merger, the merger no longer qualifies for
pooling-of-interests accounting treatment, the purchase method of accounting
will apply. Under that method, the estimated fair value of Wireless common
shares issued in the merger would be recorded as the cost of acquiring the
business of Boonton. That cost would be allocated to the individual assets
acquired and liabilities assumed according to their respective fair values, with
the excess of the estimated fair value of Wireless common shares over the fair
value of net assets acquired recorded as goodwill, to be amortized over a period
of from 10 to 40 years.
Purchase accounting treatment would have a material adverse effect on the
reported operating results of Wireless as compared to pooling-of-interests
accounting treatment because of required charges to Wireless' earnings for
in-process research and development and amortization of goodwill required by the
purchase accounting treatment.
WIRELESS MAY BE LIMITED IN ITS ABILITY TO UTILIZE BOONTON NET OPERATING LOSS
CARRYFORWARDS
Internal Revenue Code Section 382 provides that upon the occurrence of a
significant change in the ownership of a corporation having net operating loss
carryforwards, the taxable income of such corporation for any post-change tax
year that can be offset by such net operating loss carryforwards is generally
limited to an annual amount equal to (i) the fair market value of the acquired
corporation's stock, multiplied by (ii) the long-term exempt bond rate, with
certain other adjustments. Accordingly, post-acquisition deductibility of
Boonton's pre-acquisition net operating loss carry forwards will be limited by
reason of these rules.
RISKS OF WIRELESS BUSINESS
WIRELESS FACES AGGRESSIVE COMPETITION AND RAPID TECHNOLOGICAL CHANGE IN THE
INFORMATION SERVICES AND TECHNOLOGY MARKETPLACE
Wireless operates in an industry characterized by aggressive competition,
rapid technological change, evolving technology standards and short product life
cycles. Wireless competes against many companies which utilize similar
technologies some of which are larger and have substantially greater resources
and expertise in financial, technical and marketing areas, including Hewlett
Packard and English Electric Valve. Failure by Wireless to respond to changing
technologies, customer needs and industry standards could have material adverse
consequences to its business and results of operations. Future operating results
of Wireless will depend on the ability of Wireless to:
design, develop, introduce, deliver or obtain new and innovative products
and services on a timely and cost-effective basis;
9
<PAGE>
mitigate the effects of competitive pressures and volatility in the
information services and wireless telecommunications market on revenues,
pricing and margins;
effectively manage the shift of its business mix; and
attract and retain highly skilled personnel.
FAILURE BY WIRELESS TO MANAGE GROWTH EFFECTIVELY COULD ADVERSELY AFFECT ITS
BUSINESS
Current expansion plans of Wireless may place a significant strain on its
personnel and management resources and financial and management control systems.
Personnel, management resources and Wireless management and financial control
systems may not be adequate to address future expansion of its business and
operations. Failure by Wireless to maintain adequate personnel and management
resources or to upgrade its operating, management and financial control systems
or any difficulties encountered during such upgrades could adversely affect its
business. The success of Wireless' expansion plans will depend in part on its
ability to expand personnel and management resources and to improve its
management and financial control systems. Wireless may not be successful in any
of these regards.
WIRELESS ACQUISITION STRATEGY MAY ADVERSELY AFFECT ITS FINANCIAL CONDITION AND
PERFORMANCE
Wireless continues to look for opportunities to acquire businesses and
product lines. To that end, Wireless has had, and continues to have, discussions
with acquisition candidates. The level of this activity will vary from time to
time depending on the type of acquisition candidates Wireless identifies.
Acquiring additional businesses and product lines may require additional
capital and may have a significant impact on the financial position and results
of operations of Wireless. Acquisitions made with Wireless stock could dilute
existing stockholders. Wireless cannot assure Boonton stockholders that it will
be successful in identifying acceptable acquisition candidates or that any
acquired operations will be profitable or will be successfully integrated or
that any such future acquisitions will not materially and adversely affect its
business, financial condition and results of operations.
The ability of Wireless to accomplish its strategy will depend upon a number
of factors including, among other things, Wireless' ability to identify
acceptable acquisition candidates, to acquire the necessary funds for such
acquisitions, to consummate such acquisitions on terms favorable to it and to
promptly and profitably integrate the acquired operations into its operations.
Opportunities for growth through acquisitions, future operating results and
the success of acquisitions may be subject to the effects of, and changes in,
United States and foreign trade and monetary policies, laws and regulations,
political and economic developments, inflation rates, and the effect of taxes
and operating conditions. See 'Management's Discussion and Analysis of Financial
Condition and Results of Operations.'
WIRELESS PREFERRED STOCK COULD DELAY, DETER OR PREVENT A CHANGE IN CONTROL
Although Wireless does not expect to issue Preferred Stock in the
foreseeable future, its Preferred Stock could be used to delay, defer or prevent
a change in control or be used to resist takeover offers opposed by management.
Under some circumstances, Wireless' Board of Directors could create impediments
to or frustrate persons seeking to effect a takeover or otherwise gain control
of Wireless by causing shares of Preferred Stock with voting or conversion
rights to be issued to a holder or holders who might side with its Board of
Directors in opposing a takeover bid that the Board of Directors determines to
be not in the best interest of Wireless and its stockholders.
MAINTENANCE OF LISTING ON AMEX
Wireless common stock is listed on the American Stock Exchange (the AMEX),
and Wireless is subject to the AMEX's maintenance requirements. Wireless'
failure to meet the AMEX's
10
<PAGE>
maintenance requirements may result in a delisting of the common stock. Wireless
cannot assure you that its common stock will not be delisted by the AMEX. The
determination by the AMEX to delist a company is not based on a precise
mathematical formula, but rather on a review of all relevant facts and
circumstances in light of the AMEX's policies. The AMEX will normally consider
delisting a company which:
has stockholders' equity of less than $2,000,000 if such company has
sustained losses from continuing operations and/or net losses in two of its
three most recent fiscal years; or
has sustained losses which are so substantial to its overall operations or
its existing financial resources, or its financial condition has become so
impaired that it appears questionable, in the opinion of the AMEX, as to
whether such company will be able to continue operations and/or meet its
obligations as they mature.
WIRELESS STOCK PRICE HAS BEEN VOLATILE
Wireless cannot assure you of the prices at which its common stock will
trade. The market prices for securities of companies such as Wireless
historically have been highly volatile. From January 1, 1999 to June 8, 2000,
the market price of Wireless common stock has ranged from a high of $9.88 per
share, to a low of $1.50 per share. The following factors may have a significant
impact on the market price of the common stock:
announcements of technological innovations or new commercial products by
Wireless or its competitors:
regulatory developments;
disputes concerning patent or proprietary rights; and
economic and other external factors, as well as period-to-period
fluctuations in financial results.
CHARGE TO WIRELESS SECOND QUARTER EARNINGS
Wireless will experience a charge associated with the settlement of the
legal proceeding described on page 36 of this document. The charge net of
previous taken reserves and charges is expected to be approximately $630,000.
This charge will result in an adverse impact on the results of operations for
Wireless' second quarter of its 2000 fiscal year. These results may have an
adverse effect on the trading price of the Wireless common stock.
RISKS OF BOONTON BUSINESS
BOONTON FACES SIGNIFICANT COMPETITION
The electronic testing and measurement business experiences rapid changes in
technologies, short product life cycles and evolving technology standards.
Boonton's business faces competition from other manufacturers, several of which
are larger than Boonton and have much greater financial and technical resources.
As industry and customer needs constantly change, Boonton's competitors may be
in a stronger position to meet those needs. Failure by Boonton to respond to
these changing needs could have a material adverse effect on Boonton's business,
results of operations and financial condition.
BOONTON'S FINANCIAL CONDITION AND INABILITY TO OBTAIN ADDITIONAL FINANCING COULD
ADVERSELY AFFECT ITS ABILITY TO MEET ITS WORKING CAPITAL NEEDS
At March 31, 2000, Boonton's cash and cash equivalents amounted to $236,044.
Boonton's ability to meet its current liabilities is highly dependent on its
receiving timely payment on its accounts receivable. Because of its current
financial position, prior bankruptcy and existing debt, Boonton does not believe
that additional debt or equity financing is available. Consequently, there are
no assurances that Boonton will be able to meet its working capital needs.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This document contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Forward-looking statements include information concerning
possible or assumed future results of operations and other statements and
information regarding assumptions about earnings per share, capital and other
expenditures, financing plans, cash flow, capital structure, pending legal
proceedings and claims,
11
<PAGE>
future economic performance, operating income, management's plans, goals and
objectives for future operations and growth and markets for Wireless stock and
Boonton stock.
Forward-looking statements are also identified by words such as 'believes,'
'expects,' 'anticipates,' 'intends,' 'estimates' or similar expressions. Boonton
stockholders should understand that these forward looking statements are
necessarily estimates based on assumptions believed to be reasonable. These
statements are subject to a number of risks and uncertainties that could cause
actual results to differ materially from those expressed or implied in the
forward-looking statements.
Boonton stockholders should understand that the risks and uncertainties
including, but not limited to, the following important factors, in addition to
those discussed above in 'Risk Factors' and elsewhere in this document and in
the documents which are incorporated by reference, could affect the future
results of Boonton and Wireless and the combined companies, and could cause
those results or other outcomes to differ materially from those expressed or
implied in its forward-looking statements:
ECONOMIC AND INDUSTRY CONDITIONS
materially adverse changes in economic and industry conditions and customer
demand generally or in the markets served by Wireless and Boonton;
supply and demand for and pricing of supplies and components; and
changes in demographics and consumer preferences and demands for Boonton
and Wireless goods and services.
OPERATING FACTORS
supply disruptions;
technical difficulties, including the ability of material customers and
suppliers, to replace, modify or upgrade computer programs in order to
adequately address Year 2000 concerns;
the timing of and value received in connection with acquisitions or
divestitures;
changes in operating conditions and costs;
capital expenditure requirements; and
risks relating to performance of contracts, including dependence on
performance of third parties.
TRANSACTION FACTORS
the risk that the companies may not fully realize the benefits expected to
result from the merger.
COMPETITIVE FACTORS
availability of intellectual property rights for newly developed products;
the actions of competitors;
new technologies; and
industry consolidation.
Accordingly, Boonton stockholders should not place undue reliance on
forward-looking statements, which speak only as of the date of this proxy
statement/prospectus, or, in the case of documents incorporated by reference,
the date of those documents. There can be no assurance that any of the
forward-looking statements will prove accurate.
All subsequent written and oral forward-looking statements attributable to
Boonton or Wireless or any person acting on their behalf are expressly qualified
in their entirety by the
12
<PAGE>
cautionary statements contained or referred to in this section. Neither Boonton
nor Wireless undertakes any obligation to release publicly any revisions to
these forward-looking statements to reflect events or circumstances after the
date of this proxy statement/prospectus or to reflect the occurrence of
unanticipated events.
THE SPECIAL STOCKHOLDERS MEETING
PROPOSED TIME AND PLACE
This proxy statement/prospectus is being provided to stockholders of Boonton
in connection with the solicitation of proxies by Boonton's Board of Directors
for use at Boonton's special meeting of stockholders, and at any adjournment or
postponement thereof.
The special meeting of stockholders of Boonton is to be held at the offices
of Boonton, 25 Eastmans Road, Hanover Township, New Jersey at 10:00 a.m., New
Jersey time, on July 6, 2000.
At the meeting, holders of Boonton common stock will be asked to consider
and vote upon the proposal to approve the merger. Boonton is not aware of any
other matters that may come before the special meeting. However, Boonton
stockholders may be asked to consider and vote upon any other matters incidental
to the business to be conducted at the meeting.
RECORD DATE; STOCK ENTITLED TO VOTE; QUORUM
Only holders of record of Boonton common stock at the close of business on
May 12, 2000, the record date for the special meeting, are entitled to receive
notice of and to vote at the meeting. This proxy statement/prospectus is first
being mailed to stockholders on June 9, 2000. At the close of business on the
record date, 2,387,332 shares of Boonton common stock were issued and
outstanding and entitled to vote at the meeting. Each share of common stock is
entitled to one vote at the meeting.
The presence at the meeting in person or by proxy of a majority of the
shares of Boonton common stock entitled to vote at the meeting is necessary to
constitute a quorum for the purpose of transacting business at the meeting.
Abstentions and broker non-votes are considered as present for the purpose of
establishing a quorum. If a quorum is not present at the meeting, Boonton
expects that the meeting will be adjourned or postponed to solicit additional
proxies.
VOTING; PROXIES
The approval of the merger proposal requires the affirmative vote of at
least two-thirds of the outstanding shares of Boonton common stock cast at the
meeting. Abstentions and broker non-votes are not counted in tabulating the
number of votes cast with respect to the proposal to approve the merger.
Boonton stockholders may vote by attending the meeting and voting their
shares in person or by completing the enclosed proxy card. Shares represented by
properly executed proxies received before the meeting will be voted at the
meeting in accordance with the instructions given. If the proxy is properly
executed but does not contain voting instructions, the shares represented by
that proxy will be voted FOR approval of the merger proposal. It is not expected
that any matter other than the proposal to approve the merger will be brought
before the stockholders at the meeting. If any matters incidental to the merger
are properly presented at the meeting for consideration by the stockholders, the
persons named in your proxy will have authority to vote on those matters without
consulting you.
If shares are held by a broker or nominee, that is, in street name, unless
those brokers or nominees receive instructions from Boonton stockholders as to
how to vote their shares, those shares will not be voted at the meeting.
13
<PAGE>
REVOKING PROXIES
Boonton stockholders may revoke their proxy at any time prior to the time it
is voted at the meeting by:
Delivering by mail, prior to the date of the meeting, to Boonton
Electronics Corporation, 25 Eastmans Road, P.O. Box 465, Parsippany, New
Jersey 07054-0465, Attention: Yves Guyomar, written notice of revocation
bearing a later date than the proxy;
Delivering to Mr. Guyomar a duly executed proxy bearing a later date than
the revoked proxy; or
Attending the meeting and voting in person in accordance with the voting
procedures established for the meeting. Attendance at the meeting will not
in and of itself constitute a revocation of a proxy.
SOLICITATION OF PROXIES
Boonton's Board of Directors is soliciting the enclosed proxy. Boonton will
bear the costs of the solicitation. Arrangements will be made with brokerage
houses and other custodians, nominees and fiduciaries for the forwarding of
solicitation material to the beneficial owners of Boonton common stock held of
record by those persons and Boonton will reimburse those custodians, nominees
and fiduciaries for their reasonable out-of-pocket expenses. In addition to
solicitation by mail, the directors, officers and employees of Boonton may
solicit proxies from stockholders by telephone, telegram or in person. They will
not receive any additional compensation for their solicitation activities.
VOTES REQUIRED; SHARE OWNERSHIP BY MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The approval of the merger proposal requires the affirmative vote of at
least two-thirds of the outstanding shares of Boonton common stock cast at the
meeting.
As of the close of business on May 12, 2000, the directors of Boonton, and
the principal stockholders of Boonton who are parties to the merger agreement,
owned and were entitled to vote 1,745,969 shares of Boonton common stock. These
shares represent approximately 73% of the outstanding shares of common stock
entitled to vote at the special meeting. In the merger agreement, each of the
directors and those principal stockholders have agreed to vote, and have granted
a power of attorney to Wireless' President to vote, all of their shares in favor
of the merger proposal. If all of those shares are voted in favor of the merger
proposal at the meeting, the merger proposal will be approved.
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THE MERGER
BACKGROUND OF THE MERGER
In May 1999, a representative of Wireless approached management of Boonton
regarding the possibility of pursuing a business combination. Further
discussions ensued during the month of June. During this time, Boonton's
President engaged in general discussions with other companies regarding possible
strategic alliances. These discussions did not amount to any proposals or
offers. Members of Boonton's Board of Directors were apprised by Boonton's
management of the discussions concerning a business combination. Management of
Wireless and Boonton executed a customary nondisclosure agreement as of June 1,
1999.
On June 16, 1999, Boonton's Board of Directors met to consider the
possibility of a merger with Wireless, as well as other strategic alternatives.
After a presentation from management, the Board advised Boonton's President that
he should pursue negotiations with Wireless.
On July 16, 1999, officers of Wireless met with Boonton's officers to
negotiate further the terms of the proposed transaction, including the form of
the merger agreement. After extensive negotiation, in return for the acceptance
by Wireless of Boonton's requests to modify the terms of the merger and the form
of merger agreement in several areas, including elimination of the requirement
for an escrow against contingent liabilities, Boonton agreed to accept an offer
of 1.575 shares of Wireless common stock in return for each share of Boonton
common stock. The agreement was subsequently modified to 1.4 shares of Wireless
common stock, plus cash equivalent to .175 shares of Wireless common stock.
On July 27, 1999, Boonton's Board of Directors met to consider the terms of
the proposed merger. Management advised the Board that no other solicitations of
interest were pending or expected. Boonton's Board of Directors approved the
consideration offered by Wireless for the merger and authorized Boonton's
President to continue to negotiate the merger documents. At this time, Wireless
common stock was trading on the American Stock Exchange for approximately $2.125
per share and Boonton's common stock was trading on the OTC Electronic Bulletin
Board for approximately $.97 per share.
Negotiations of the proposed merger documents continued. Boonton's Board of
Directors approved the merger on August 13, 1999 and the merger agreement was
executed by the parties as of September 7, 1999.
On October 26, 1999, Wireless informed Boonton of Wireless' termination of
the merger agreement dated September 7, 1999.
Following the termination of that merger agreement, in December 1999,
management of Boonton was approached by a manufacturer of network and signal
analyzers about the possibility of merging with Boonton. The parties negotiated
for approximately two to three weeks but were unable to reach an agreement and
negotiations were terminated on February 2, 2000.
On or about February 10, 2000, management of Wireless and Boonton commenced
discussions regarding the possibility of merging. The parties agreed to proceed
on the basis that the form of the previous merger agreement would remain
substantially the same. The parties agreed on a merger consideration of .79
shares of Wireless common stock in exchange for each share of Boonton common
stock. Boonton's board of directors unanimously approved the merger agreement as
of February 24, 2000 and authorized the execution of the merger agreement with
such changes as Boonton's President would deem in the best interests of Boonton.
At February 24, 2000, the closing price of a share of Wireless common stock was
$6.1875 and the closing price of a share of Boonton common stock was $1.69. On
March 2, 2000, Wireless, WTT Acquisition Corp., Boonton and Boonton's principal
stockholders entered into the merger agreement. On April 28, 2000, the parties
amended the merger agreement to set forth the parties intentions to account for
the transaction as a pooling of interests.
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The material differences between the merger agreement executed on March 2,
2000, as amended, and the agreement executed on September 7, 1999 are as
follows:
The purchase price is .79 shares of Wireless common stock for each share of
Boonton common stock;
Wireless loaned to Boonton the sum of $250,000 evidenced by a promissory
note. If the closing occurs or if Boonton terminates the merger agreement
because of a material breach of Wireless, the promissory note will be
cancelled. If the closing does not occur for any other reason, the
promissory note will be converted into 225,000 shares of Boonton common
stock, which shares Boonton must register under the Securities Act within
150 days of maturity of the promissory note; and
The parties intend to account for the transaction as a pooling of
interests.
BOONTON REASONS FOR THE MERGER
Boonton's Board of Directors believes that the merger is fair to, and in the
best interests of, Boonton and its stockholders. In reaching this determination,
the Board considered a number of factors, including, without limitation:
The merger consideration offered by Wireless is greater than the historical
market value of Boonton common stock during the two years prior to
September 7, 1999, the date of the first merger agreement with Wireless and
the book value per share of Boonton;
Boonton's need for working capital for product development, operations and
marketing and to pay trade debt;
The inability of Boonton to obtain loans and its likely inability to obtain
equity investment to fund its working capital needs;
The availability of Wireless' cash resources to supply working capital;
Expected synergies and cost savings including an expected reduction in
administrative overhead, marketing and sales costs. In addition, both
Boonton and Wireless obtain parts and supplies from many of the same
suppliers. The merger of these two companies is expected to reduce
purchasing costs;
The reasons expressed in 'The Merger -- Joint Reasons for the Merger';
Boonton stockholders will receive Wireless common stock that is listed on
the American Stock Exchange and most stockholders will be able to freely
sell the common stock they receive in the merger;
Although there can be no assurances, the expected treatment of the merger
as a tax-free exchange of stock and only the cash received instead of
fractional shares is expected to be presently taxable;
A review of strategic alternatives; and
The anticipated continuation and expansion of Boonton's business by
Wireless and the expected retention of a significant number of Boonton's
operational employees.
Boonton's Board also considered negative factors relating to the merger,
including:
the possibility of a significant decrease in the market value of Wireless
common stock prior to and after the completion of the merger; and
the risk that the merger would not be completed and the effect of a public
announcement of the merger on Boonton's sales and operating results.
The Boonton Board concluded that these negative factors were substantially
outweighed by the potential benefits to be gained by the merger.
In view of the wide variety of factors considered by the Boonton Board, the
Board did not find it practicable to quantify, rank or otherwise assign relative
weights to the specific factors considered. In addition, the Board did not
undertake to make any specific determination as to
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whether any particular factor, or any aspect of any particular factor, was
favorable or unfavorable to the Board's ultimate determination, but rather the
Board conducted an overall analysis of the factors described above. In
considering the factors described above, individual members of the Board may
have given different weight to different factors.
After taking into account all of the factors set forth above, the Boonton
Board unanimously determined that the merger agreement and merger were in the
best interests of Boonton and its stockholders and that Boonton should proceed
with the merger and the transactions contemplated by the merger agreement.
When Boonton stockholders consider the merger agreement and the
recommendation of Boonton's board to vote in favor of the merger, the
stockholders should be aware that a number of Boonton's officers and directors
may have interests in the merger that may be different from, or in addition to,
its stockholders interests. See 'Interests of Certain Persons in the Merger'.
RECOMMENDATION TO BOONTON STOCKHOLDERS
Boonton's Board of Directors unanimously recommends that Boonton's
stockholders vote FOR the merger proposal.
NO OPINION OF FINANCIAL ADVISOR
Boonton's Board of Directors did not engage the assistance of a financial
advisor to assist in the sale of Boonton or render an opinion as to the
fairness, from a financial point of view, of the exchange ratio in the merger.
The Board determined that the factors which weighed in favor of the merger, as
discussed above, were substantial in relation to the factors which weighed
against the merger. The Board also considered the cost of obtaining a fairness
opinion as prohibitively expensive in light of Boonton's financial condition.
WIRELESS REASONS FOR THE MERGER
The Wireless board of directors has identified several potential benefits of
the merger that it believes will contribute to the success of the combined
company. These potential benefits include the ability to:
provide solutions to a wider segment of the total marketplace;
introduce Boonton's customers and products to the complete solutions
offerings of Wireless;
avoid time consuming and costly internally developed alternatives; and
achieve synergies and cost savings.
Additionally, the Wireless board considered the pro forma contribution of
Boonton to its net income. Based on the pro forma analyses, Wireless believes
the merger will be accretive; however, there can be no assurance that the merger
will be accretive in the near future.
JOINT REASONS FOR THE MERGER
Boonton and Wireless believe that the merger will provide the combined
company with greater prospects for growth and profitability to:
compete effectively in the rapidly growing and changing global wireless
telecommunications equipment business;
offer a comprehensive range of products, services and technical solutions
for its customers;
cultivate a more diverse customer base with broader geographic coverage;
and
achieve economies of scale that are currently beyond the independent
capability of the companies separately.
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MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following summary of the material federal income tax consequences of the
merger is provided for general information purposes only and does not
constitute, and is not intended to constitute, and should not be considered as,
legal or tax advice to Boonton's stockholders. This summary is not a
comprehensive description of all of the tax consequences that may be relevant to
you. For example, this summary does not describe tax consequences that arise
from rules that apply generally to all taxpayers or to some classes of
taxpayers. This summary does not discuss tax consequences under the laws of
states or local governments or of any other jurisdiction. This summary is based
upon the Internal Revenue Code, the regulations of the U.S. Treasury Department,
published positions of the Internal Revenue Service, and court and
administrative rulings and decisions in effect on the date of this proxy
statement/prospectus. These laws may change, possibly retroactively, and any
change could affect the continuing validity of this summary. This summary is
provided for general information purposes only, and does not constitute, and
should not be considered as, legal or tax advice. Each holder of Wireless and
Boonton stock is urged to obtain, and should rely only upon, his or her own tax
advice.
Boonton and Wireless have received a tax opinion from Drinker Biddle &
Shanley LLP, tax counsel to Boonton, to the effect that, for federal income tax
purposes, the merger will constitute a 'reorganization' within the meaning of
Section 368(a)(2)(E) of the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder, and that the federal income tax consequences
of the merger to Boonton stockholders, Boonton and Wireless will be as follows:
No gain or loss will be recognized by Boonton or Wireless as a result of
the merger;
No gain or loss will be recognized by the stockholders of Boonton who
exchange their Boonton common stock solely for Wireless common stock;
The aggregate tax basis of Wireless common stock received by a Boonton
stockholder who exchanges all of his or her Boonton common stock for
Wireless common stock in the merger will be the same as the aggregate tax
basis of his or her Boonton common stock surrendered in the exchange
(reduced by the basis allocable to fractional shares);
The holding period of the Wireless common stock received by a Boonton
stockholder will include the holding period of shares of Boonton common
stock surrendered by the Boonton stockholder in the exchange; provided that
the shares of Boonton common stock were held as capital asset at the time
of the merger; and
Generally, the holder of Boonton common stock that receives cash in lieu of
a fractional share will be treated as if a fractional share of Wireless
common stock had been issued in the merger and then redeemed by Wireless
for cash. A holder of Boonton common stock will generally recognize gain or
loss upon such payment, equal to the difference, if any, between the
holder's basis in the fractional share and the amount of cash received.
The parties are not requesting a ruling from the Internal Revenue Service in
connection with the merger. An opinion of counsel only represents counsel's best
judgment and neither binds the Internal Revenue Service nor the courts nor
precludes the Internal Revenue Service from adopting a contrary position. In
addition, the tax opinion is subject to certain assumptions and qualifications
and is based upon representations made by Wireless and Boonton and assumes that
the representations made by Wireless and Boonton are true, correct and complete
and will remain true, correct and complete through and after the effective time
of the merger. For example, of particular importance are those assumptions and
representations relating to the 'continuity of interest,' 'control' and
'continuity of business enterprise' requirements.
To satisfy the 'continuity of interest' requirement, Boonton's stockholders
must not, pursuant to a plan or intent existing at or prior to the merger, sell
or otherwise transfer to Wireless or a party related to Wireless so much of
either their Boonton common stock prior to the merger or their shares of
Wireless common stock to be received in the merger, such that the Boonton
stockholders, as a group, would no longer have a substantial proprietary
interest in the Boonton business being conducted by Wireless after the merger.
This includes, among other things, shares sold to Wireless before the merger.
Boonton's stockholders will generally be regarded as having
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retained a substantial proprietary interest as long as the shares of Wireless
common stock received in the merger, after reduction for any dispositions
described above, in the aggregate, represent at least 50% of the entire
consideration received by the Boonton stockholders in the merger and in sales to
Wireless in advance of the merger. To satisfy the 'continuity of business
enterprise' requirement, Wireless must continue the historic business conducted
by Boonton or use a significant portion of the historic business assets of
Boonton in a business. To satisfy the 'control' requirement, Boonton
stockholders owning at least 80% of the total voting power of Boonton common
stock entitled to vote must exchange their shares of Boonton common stock for
shares of Wireless common stock. For purposes of the 'control' requirement, the
amount of stock constituting control is measured immediately before the
transaction.
A successful Internal Revenue Service challenge to the 'reorganization'
status of the merger would result in a Boonton stockholder recognizing gain or
loss with respect to each share of Boonton common stock surrendered equal to the
difference between the stockholder's basis in the share and the fair market
value, as of the effective time of the merger, of the shares of Wireless common
stock received in exchange therefor. In that event, a stockholder's aggregate
basis in the shares of Wireless common stock received would equal their fair
market value and the holding period of those shares would begin the day after
the merger.
This summary also assumes that stockholders hold their shares of Boonton
common stock as a capital asset and does not address the tax consequences that
may be relevant to a particular stockholder receiving special treatment under
some federal income tax laws. Stockholders receiving this special treatment
include:
banks and other financial institutions;
tax-exempt organizations;
insurance companies;
investment companies and real estate and financial asset securitization
investment trusts;
dealers in securities or foreign currencies;
Boonton stockholders who received their Boonton common stock through the
exercise of employee stock options or otherwise as compensation;
Boonton stockholders who are not U.S. persons; and
Boonton stockholders who hold common stock as part of a hedge, straddle or
conversion transaction.
TAX MATTERS ARE VERY COMPLICATED AND THE TAX CONSEQUENCES OF THE MERGER TO
BOONTON STOCKHOLDERS WILL DEPEND ON EACH PARTICULAR SITUATION. BOONTON
STOCKHOLDERS ARE ENCOURAGED TO CONSULT THEIR OWN TAX ADVISOR REGARDING THE
SPECIFIC TAX CONSEQUENCES OF THE MERGER, INCLUDING TAX RETURN REPORTING
REQUIREMENTS, THE APPLICABILITY OF FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS
AND THE EFFECT OF ANY PROPOSED CHANGE IN THE TAX LAWS.
ACCOUNTING TREATMENT
The merger is intended to qualify as a pooling-of-interests for accounting
purposes. Under this method of accounting, the recorded historical cost basis of
the assets and liabilities of Wireless and Boonton will be carried forward to
the operations of the combined company at their historical recorded amounts.
Results of operations of the combined company will include income of Wireless
and Boonton for the entire fiscal period in which the combination occurs, and
the historical results of operations of the separate companies for fiscal years
prior to the merger will be combined and reported as the results of operations
of the combined company. No adjustments have been made to the unaudited combined
condensed pro forma financial information of Wireless and Boonton to conform the
accounting policies of the combined company as the nature and amounts of such
adjustments are not expected to be significant.
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Completion of the merger is conditioned upon receipt by each of Wireless and
Boonton of a letter from its respective independent public accountants stating
that, in their respective opinions, they concur with the conclusions of the
management of Wireless and Boonton as to the appropriateness of
pooling-of-interests accounting treatment for the merger under Accounting
Principles Board Opinion No. 16, if completed in accordance with the merger
agreement. However, some of the conditions to be met to qualify for
pooling-of-interests accounting treatment cannot be fully assessed until the
passage of specified periods of time after the effective time of the merger, as
certain of the conditions for pooling-of-interests accounting treatment address
transactions occurring within such specified periods of time. Certain events,
including certain transactions with respect to Wireless common shares by
affiliates of Wireless or Boonton common shares by affiliates of Boonton could
prevent the merger from qualifying as pooling-of-interests for accounting
purposes.
If, after completion of the merger, events occur that cause the merger to no
longer to qualify for pooling-of-interests accounting treatment, the purchase
method of accounting would be applied. The purchase method of accounting could
have a material adverse effect on the reported operating results of Wireless as
compared to pooling-of-interests accounting treatment. See 'Risk Factors --
Failure to Qualify for Pooling-of-Interests Accounting Treatment May Impact
Reported Operating Results.'
AMERICAN STOCK EXCHANGE LISTING
It is the obligation of Wireless and a condition to closing the merger that
the shares of Wireless common stock to be issued to Boonton stockholders in the
merger be approved for listing on the American Stock Exchange.
REGULATORY MATTERS
Boonton has complied with New Jersey's Industrial Site Recovery Act by
obtaining a Deminimis Quantity Exemption for its facility from the New Jersey
Department of Environmental Protection.
NO APPRAISAL OR DISSENTERS' RIGHTS
Under New Jersey law, holders of Boonton common stock are not entitled to
dissenters' or appraisal rights in connection with the merger.
FEDERAL SECURITIES LAWS CONSEQUENCES; STOCK TRANSFER RESTRICTIONS
This proxy statement/prospectus does not cover any resales of Wireless
common stock to be received by Boonton stockholders in the merger, and no person
is authorized to make any use of this proxy statement/prospectus in connection
with any such resale.
All shares of Wireless common stock to be received by Boonton stockholders
in the merger will be freely transferable, except shares received by those
persons deemed to be 'affiliates' of Boonton under the Securities Act of 1933 at
the time of the special stockholders meeting, who may resell their shares only
in transactions permitted by Rule 145 under the Securities Act or as otherwise
permitted under the Securities Act. Persons who may be affiliates of Boonton for
those purposes generally include directors, officers and other individuals or
entities that control, are controlled by, or are under common control with,
Boonton, and would not include stockholders who are not officers, directors or
principal stockholders of Boonton.
RESALE RESTRICTIONS
Securities and Exchange Commission guidelines regarding qualification for
the use of the pooling-of-interests method of accounting also limit sales by
affiliates of the acquiring and acquired companies in a business combination.
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Securities and Exchange Commission guidelines indicate further that the
pooling-of-interests method of accounting generally will not be challenged on
the basis of sales by affiliates of the acquiring or acquired company if they do
not dispose of any of the shares they own or shares they receive in connection
with a merger during the period beginning 30 days before the merger and ending
when financial results covering at least 30 days of combined operations have
been published.
Pursuant to Amendment No. 1 to the merger agreement, Boonton has caused each
of its affiliates to execute a written agreement restricting the disposition by
the affiliate of the Wireless common shares to be received by the affiliate in
the merger. Each of Boonton's affiliates shall be permitted to dispose of
Wireless common shares if the disposition constitutes the disposition of a
de minimis amount under GAAP, including Staff Accounting Bulletin No. 76.
MATERIAL PROVISIONS OF THE MERGER AGREEMENT
GENERAL
The following is a summary of the material provisions of the merger
agreement and amendment No. 1 to the merger agreement which documents are
incorporated by reference and attached to this proxy statement/prospectus as
Annex A and Annex B, respectively. This summary is not a complete description of
every provision of the merger agreement and amendment No. 1, and is qualified in
its entirety by reference to the full and complete text of the merger agreement
and amendment thereto. We urge each Boonton stockholder to read the entire
merger agreement and the amendment to the merger agreement.
STRUCTURE OF THE MERGER
Under the merger agreement, WTT Acquisition Corp., a wholly owned subsidiary
of Wireless, will merge with and into Boonton. As a consequence of the merger,
Boonton will become a wholly owned subsidiary of Wireless. Wireless management
will not change as a result of the merger. Assuming no additional shares of
Wireless stock are issued before the closing of the merger, Boonton stockholders
will own approximately 9.7% of the outstanding Wireless common stock
immediately following the merger.
CLOSING; EFFECTIVE TIME
Boonton and Wireless will close the merger at 10:00 a.m., New York City
time, no later than the third (3rd) business day after the conditions set forth
in the merger agreement have been satisfied or waived, unless another date is
agreed to in writing.
On the date of the closing of the merger, Wireless will file a certificate
of merger and other appropriate documents with the Treasurer of the State of New
Jersey in accordance with the relevant provisions of New Jersey law. The merger
will become effective when the certificate of merger is filed with the Treasurer
of the State of New Jersey, or at such later time as we specify in the
certificate of merger.
CONSIDERATION TO BE RECEIVED IN THE MERGER
At the time of the merger, each outstanding share of Boonton common stock
will be automatically converted into the right to receive .79 shares of Wireless
common stock. There is no minimum or floor on the market price of Wireless
common stock to be received in the merger.
CANCELLATION OF SHARES
Any share of Boonton common stock owned by Wireless, or held by Boonton as
treasury stock, will be automatically canceled and retired in the merger and
will cease to exist. Wireless will not exchange those shares for any of its
securities or other consideration.
PROCEDURES FOR SURRENDER OF CERTIFICATES; FRACTIONAL SHARES
As soon as reasonably practicable after the effective time of the merger,
the exchange agent for the merger will send Boonton stockholders a letter of
transmittal. The letter of transmittal will contain instructions with respect to
the surrender of Boonton stock certificates. BOONTON STOCKHOLDERS SHOULD NOT
RETURN STOCK CERTIFICATES WITH THE ENCLOSED PROXY.
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Commencing immediately after the effective time of the merger, upon
surrender by Boonton stockholders of stock certificates representing Boonton
shares in accordance with the instructions in the letter of transmittal, Boonton
stockholders will be entitled to receive stock certificates representing shares
of Wireless common stock into which those Boonton shares have been converted and
together with a cash payment instead of fractional shares, if any.
After the merger, each certificate that previously represented shares of
Boonton common stock will represent only the right to receive the shares of
Wireless common stock into which shares of Boonton common stock were converted
in the merger and the right to receive cash instead of fractional shares of
Wireless common stock.
Boonton's transfer books will be closed at the effective time of the merger
and no further transfers of shares will be recorded on the transfer books. If a
transfer of ownership of Boonton's stock that is not registered in the records
of Boonton's transfer agent has occurred, then, so long as the Boonton stock
certificates are accompanied by all documents required to evidence and effect
the transfer, as set forth in the transmittal letter and accompanying
instructions, and by evidence of payment of any applicable stock transfer taxes,
a certificate representing the proper number of shares of Wireless common stock
will be issued to a person other than the person in whose name the certificate
so surrendered is registered, together with a cash payment instead of fractional
shares, if any.
If certificates for any shares of Boonton common stock have been lost,
stolen or destroyed, the holder will be instructed in the letter of transmittal
to submit an affidavit to that effect. The holders may also be required to
deliver to the exchange agent a bond in an amount reasonably required to
indemnify the exchange agent and Wireless against claims with respect to the
lost certificates.
No fractional share of Wireless common stock will be issued upon surrender
of certificates previously representing Boonton shares. Instead, the exchange
agent will pay Boonton stockholders an amount in cash determined by multiplying
the fractional share interest to which Boonton stockholders would otherwise be
entitled by the closing price for a share of Wireless common stock on the
American Stock Exchange on the closing date of the merger.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains representations and warranties of each
principal stockholder (See 'Material Terms of the Voting Provisions' for a list
of principal stockholders) relating to:
capacity;
authority;
agreements between Boonton and the principal stockholders;
agreements for payments to principal stockholders by Boonton;
related party transactions; and
amounts owed to the principal stockholders.
The merger agreement contains representations and warranties by Boonton
relating to:
corporate organization, qualification, standing and power;
capitalization;
authorization, execution and enforceability of, required consents,
approvals and authorizations of governmental authorities;
documents filed with the SEC;
absence of undisclosed liabilities since September 30, 1999;
absence of specified changes or events since September 30, 1999;
compliance with applicable laws and litigation;
employee benefit and labor matters;
environmental matters;
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tax matters;
required board and stockholder votes in connection with the merger;
intellectual property matters;
title to assets and properties;
material agreements;
related party transactions;
suppliers;
customers and sales representatives; and
'Year 2000' compliance.
The merger agreement contains representations and warranties by Wireless
relating to:
corporate organization, qualification, standing and power;
capitalization;
continuity of business enterprise;
authorization, execution and enforceability of, required consents,
approvals and authorizations of governmental authorities;
documents filed with the SEC;
absence of undisclosed liabilities since December 31, 1999;
absence of changes or events since filing of the most recent 10-Q;
compliance with applicable laws and litigation;
tax representation letter;
tax matters; and
board approval in connection with the merger.
The representations and warranties survive the closing of the merger or
termination of the merger agreement for a period of two (2) years provided that
some specified representations and warranties survive indefinitely.
CONDITIONS TO COMPLETION OF THE MERGER
Each party's obligation to complete the merger is subject to a number of
conditions which must be met or, where permitted by law, waived by the closing
date. These conditions include:
the approval of the merger by the Boonton stockholders;
the receipt of all licenses, consents, approvals, and other authorizations
of governmental authorities and third parties;
the absence of any governmental rule, or any law prohibiting the merger;
the effectiveness of the registration statement of which this proxy
statement/prospectus is a part, and the absence of a stop order or any
proceedings or threats to suspend its effectiveness;
Wireless and Boonton are reasonably satisfied that the merger will qualify
as a tax-free reorganization under Internal Revenue Code Section 368;
the accuracy of the representations and warranties of the other party to
the merger agreement;
the repayment in full of principal and interest on Boonton's indebtedness
owed to the New Jersey Economic Development Authority;
each principal stockholder and all the employees of Boonton shall have
executed and delivered a confidentiality, non-competition and no
solicitation agreement;
review by Wireless of the schedules to the merger agreement disclosed no
material information regarding Boonton unsatisfactory to Wireless;
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the non-occurrence of any material adverse change or event having a
material adverse effect on Boonton;
each party's performance of and compliance in all material respects with
all of its obligations under the merger agreement at or before the closing
date; and
the payment by Wireless of Boonton's obligations to its directors for fees
and other liabilities, which payment shall be made in cash or Wireless
common stock.
CONDUCT OF BUSINESS PENDING THE MERGER
Pursuant to the merger agreement, Boonton has agreed to take or refrain from
taking the actions below from the date of the merger agreement until the
completion of the merger. Subject to exceptions contained in the merger
agreement, Boonton has agreed as follows:
to conduct its business in the ordinary course consistent with past
practice and in compliance in all material respects with all applicable
laws and regulations and use its commercially reasonable efforts to
preserve intact its current business organization;
not to take any action that would result in any of the representations and
warranties becoming untrue or any of the conditions of the merger not being
satisfied;
to use commercially reasonable efforts to maintain existing relations with
customers, suppliers, contractors, distributors, and others having business
dealings with it;
not to grant to any current or former officer or director any increase in
compensation, bonus or other benefits;
not to adopt or amend any collective bargaining agreement, or other
Boonton's benefit plans, in any manner;
not to declare, set aside or pay any dividends on its outstanding shares of
capital stock;
not to split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities;
not to purchase, redeem or otherwise acquire any shares of its capital
stock;
not to issue, deliver, sell, pledge or otherwise encumber or subject to any
lien any shares of its capital stock or any of its properties or assets;
not to amend its articles of incorporation, by-laws or other comparable
organizational documents;
not to incur any indebtedness for borrowed money or issue any debt
securities or assume, guarantee or endorse, or otherwise become responsible
for, the obligations of any person for borrowed money;
not to settle any material claim, action or proceeding involving money
damages;
not to enter into or terminate any material contract or agreement, or make
any change in any of its material leases or contracts;
not to sell, lease, or license or otherwise dispose of any assets except in
the ordinary course of business; and
not to authorize, commit or agree to take any of the foregoing actions.
WIRELESS LOAN
Concurrently with the execution of the merger agreement, Wireless loaned to
Boonton the principal sum of $250,000 evidenced by a promissory note made by
Boonton in favor of Wireless. If the closing occurs or if Boonton terminates the
merger agreement because of a material breach of Wireless, the promissory note
will be cancelled. If closing does not occur for any other reason, the
promissory note will be converted into 225,000 shares of Boonton common stock,
which shares Boonton must register under the Securities Act within 150 days of
maturity of the promissory note.
24
<PAGE>
TERMINATION
The merger agreement may be terminated at any time prior to the effective
time:
by mutual consent of Boonton and Wireless;
by either Boonton or Wireless if:
-- the conditions to the merger have not been met and the merger has not
been completed by July 14, 2000 which date may be extended at the
discretion of Wireless except if the conditions have not been met
solely as a result of the action or inaction of the party seeking to
terminate;
-- approval of Boonton's stockholders has not been obtained;
-- any court or other governmental body has taken any action enjoining,
restraining or otherwise prohibiting the merger; or
-- either party materially breached any representation, warranty,
covenant or agreement.
by the non-breaching party if the other party materially breaches its
representations, warranties or agreements under the merger agreement or
fails to perform any of its material obligations under the merger agreement
which breach or failure would constitute a failure of a condition to the
merger; and
by Wireless or Boonton, if the merger has become impractible by reason of
litigation, proceeding or investigation to restrain or prohibit the
consummation of the merger.
Upon termination in accordance with the above provisions, the merger
agreement will become void and have no effect, without any liability or
obligation on the part of Boonton or Wireless, other than the payment of fees
and expenses as described below, and provisions relating to confidentiality and
other provisions that survive generally; provided, however, that termination
will not relieve any party from liability for any willful material breach of the
merger agreement that occurs prior to termination.
If the merger agreement is terminated, Boonton will be obligated to issue
225,000 shares of common stock to Wireless in repayment of the promissory note
made by Boonton in favor of Wireless, unless the merger was terminated by
Boonton because of a material breach by Wireless.
If Wireless exercises its right to extend the July 14, 2000 deadline to
complete the merger to a date subsequent to July 14, 2000, Boonton will have the
right to terminate the merger agreement and abandon the merger after
October 15, 2000 if the merger has not been completed by that date.
FEES AND EXPENSES; TERMINATION FEES
All costs and expenses incurred in connection with the merger agreement and
the merger will be paid by the party incurring the expenses, whether or not the
merger is completed, it being understood that Boonton shall not incur more than
$175,000 in legal and accounting fees combined.
Boonton shall pay to Wireless a termination fee equal to $100,000 plus up to
$500,000 of all out of pocket expenses incurred by Wireless if Wireless
terminates the agreement because of:
a breach of the merger agreement by Boonton under specific circumstances;
and
Boonton enters into a transaction relating to the acquisition of Boonton or
a material portion of its capital stock or assets with a third party within
one year after termination of the merger.
If Boonton terminates the agreement because of a material breach by
Wireless, the $250,000 promissory note shall be cancelled.
OTHER COVENANTS AND AGREEMENTS
The merger agreement contains other covenants of the parties, including
covenants relating to:
public announcements and notification of material changes;
access to information;
25
<PAGE>
commercially reasonable efforts and further assurances;
compliance with legal requirements and cooperation in connection with
governmental and regulatory filings and in obtaining consents and
approvals;
confidential treatment of non-public information; and
pooling of interests restrictions.
INDEMNIFICATION
Boonton is required to indemnify Wireless from losses and expenses in some
circumstances including:
the breach of Boonton's or a principal stockholder's representations,
warranties or agreements; and
an action against Wireless by a stockholder or former stockholder of
Boonton relating to that stockholder's purchase of Boonton stock.
Subject to monetary thresholds and limitations, each principal stockholder
of Boonton who is a party to the merger agreement is required, in the event the
merger is completed, to indemnify Wireless from losses and expenses for a breach
of representations, warranties and covenants made by that particular
stockholder.
Subject to monetary thresholds and limitations, Wireless and WTT are
required to indemnify Boonton for all losses and expenses for a breach of their
representations, warranties, covenants and agreements.
Liability for indemnification expires on the second anniversary of the
closing of the merger, except for breaches of some representations and
warranties which may last longer.
AMENDMENT AND WAIVER
The provisions of the merger agreement may be waived or amended in writing
signed by all parties to the agreement. Some provisions, including the
requirement that Boonton stockholders approve the merger, may not be waived.
NO SOLICITATION BY BOONTON
Boonton has agreed in the merger agreement that, from the date of execution
of the merger agreement until its termination, Boonton will not directly or
indirectly solicit or encourage or authorize any individual, agent, corporation
or other entity to solicit or encourage any proposal that may reasonably be
expected to lead to a merger, consolidation or other business combination
involving Boonton other than the transactions contemplated by the merger
agreement.
MATERIAL TERMS OF THE VOTING PROVISIONS
Holders of Boonton common stock listed below agreed by entering into the
merger agreement to vote their shares according to the voting provisions of the
agreement.
Stockholders who have signed the merger agreement are:
Daniel Auzan
Ronald T. DeBlis
Jack Frucht
Yves Guyomar
Abel Sheng
Otto H. York
John M. Young
G.E.M. USA, Inc.
General Electronique Mesure, SA
SIDCO Investments, Inc.
26
<PAGE>
As of the close of business on May 12, 2000, these stockholders owned
approximately 73% of the outstanding common stock of Boonton. Under the voting
provisions of the merger agreement, each stockholder has:
agreed to vote all of the shares of Boonton common stock owned by them or
over which they exercise voting control in favor of the merger agreement;
agreed to vote all of the shares of Boonton common stock owned by them
against any merger with or disposition of 20% or more of the assets of
Boonton to any party other than Wireless;
granted to the President of Wireless an irrevocable proxy so that if any of
the holders fail to vote in favor of the merger, then Wireless may do so on
their behalf as their proxy.
The voting provisions of this merger agreement expire when the merger has
been approved or upon termination of the merger agreement, whichever comes
first.
27
<PAGE>
FINANCIAL INFORMATION
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF WIRELESS
The following selected historical consolidated financial data for each of
the years ended December 31, 1995 through 1999 have been derived from Wireless'
audited consolidated financial statements. The selected historical data for the
three months ended March 31, 2000 has been derived from Wireless' unaudited
interim financial statements which financial statements, in the opinion of
management, reflect all adjustments necessary for the fair presentation of data.
This information is only a summary and Boonton stockholders should read it
together with Wireless' historical consolidated financial statements and related
notes contained in the annual reports, quarterly reports and other information
that Wireless has filed with the SEC and incorporated by reference. See 'Where
You Can Find More Information' on page 52.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED DECEMBER 31,
MARCH 31, --------------------------------------------------------------
2000 1999 1998 1997 1996 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS DATA:
Revenue...................... $2,141,335 $6,848,557 $6,834,815 $6,762,833 $5,843,225 $4,982,629
Net income from continuing
operations before income
taxes...................... 1,094,664 3,682,962 1,785,048 2,052,573 1,908,172 1,494,788
Net income from continuing
operations................. 662,678 2,422,793 1,455,605 1,307,620 1,223,345 929,758
Cash Dividend................ 0 0 877,545 3,489,646 2,602,215 1,430,755
Earnings from continuing
operations per common
share(1)
Basic.................... .04 .14 .08 .07 .07 .05
Diluted.................. .04 .14 .08 .07 .07 .05
BALANCE SHEET DATA:
(as of the end of the period)
Total assets................. 34,651,168 33,365,375 24,091,815 24,211,054 19,044,242 13,402,353
Long-term debt............... 3,353,419 3,581,026 306,610 125,404 65,075 50,696
</TABLE>
---------
(1) Common Share data has been adjusted to reflect the 2-for-1 and 3-for-2 stock
splits paid on May 28, 1996 and July 8, 1995, respectively.
SELECTED HISTORICAL FINANCIAL DATA OF BOONTON
The following selected historical financial data for the years ended
September 30, 1999, September 30, 1998 and selected historical consolidated
financial data for the years ended September 30, 1995 through 1997 have been
derived from Boonton's audited financial statements and audited consolidated
financial statements, respectively. The selected historical financial data for
the six months ended March 31, 2000 has been derived from Boonton's unaudited
interim financial statements, which financial statements, in the opinion of
management, reflect all adjustments necessary for the fair presentation of the
data. These adjustments consist only of normal recurring accruals. Because of
seasonal and other factors, results for interim periods are not necessarily
indicative of the results to be expected for the full year. This information is
only a summary and Boonton stockholders should read it together with Boonton's
historical consolidated financial statements and related notes contained in the
annual reports, quarterly reports and other information that Boonton has filed
with the SEC, or otherwise contained herein. See 'Where You Can Find More
Information' on page 52.
28
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, ---------------------------------------------------------------
2000 1999 1998 1997 1996 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS DATA:
Revenue......................... $4,117,284 $ 6,886,395 $6,849,143 $7,209,057 $6,038,336 $6,837,248
Income (loss) before income
taxes......................... 204,098 (913,554) 199,539 31,344 (824,606) (82,495)
Net income (loss)............... 204,098 (1,518,448) 142,959 31,344 (1,049,679) 233,844
Earnings (loss) from continuing
operations per common share
Basic....................... .09 (.65) .09 .02 (.72) .17
Diluted..................... .09 (.65) .09 .02 (.72) .17
BALANCE SHEET DATA:
(as of the end of the period)
Total assets.................... $4,077,288 $ 3,503,308 $4,716,190 $4,487,848 $3,826,998 $4,088,995
Long-term debt.................. 422,610 453,819 526,466 $ 747,693 $ 498,312 $ 516,288
</TABLE>
COMPARATIVE PER SHARE DATA
Set forth below are the earnings (loss) before extraordinary items and book
value (common stockholders' equity) per common share data separately for
Wireless on a historical basis, for Boonton on a historical basis and for the
combined company on a pro forma combined basis. The exchange ratio for the
merger is .79 shares of Wireless common stock for each share of Boonton common
stock outstanding. The pro forma earnings per share data presented below assumes
exercise of all of the outstanding stock options of Boonton.
The unaudited pro forma combined data below is for illustrative purposes
only. The companies may have performed differently had they always been
combined. Boonton stockholders should not rely on this information as being
indicative of the historical results that would have been achieved had the
companies always been combined or the future results that the combined company
will experience after the merger.
The information set out under the pro forma combined per Boonton equivalent
share data is computed by multiplying the combined company pro forma information
by the exchange ratio .79.
Boonton stockholders should read the information below together with the
respective historical financial statements and related notes contained in the
annual reports and information that Boonton and Wireless have filed with the SEC
and incorporated by reference. To obtain copies of these documents, see 'Where
You Can Find More Information' on page 52.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED DECEMBER 31,
MARCH 31, -----------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Wireless Historical per Common Share Data:
Earnings before extraordinary items............ $ .04 $ .14 $ .08 $ .07 $ .07
Earnings before extraordinary items -- assuming
dilution..................................... .04 .14 .08 .07 .07
Cash Dividend.................................. .00 .00 .05 .20 .15
Book Value..................................... 1.58 1.53 1.30 1.27 1.01
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, -----------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Boonton Historical per Common Share Data:
Earnings (loss) before extraordinary items........ $.09 $(.65) $ .09 $ .02 $(.72)
Earnings (loss) before extraordinary
items -- assuming dilution...................... .09 (.65) .09 .02 (.72)
Cash Dividend..................................... .00 .00 .00 .00 .00
Book Value........................................ .73 .66 1.59 1.51 1.52
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED DECEMBER 31,
MARCH 31, -----------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Wireless Pro Forma Combined per
Common Share Data:
Earnings (loss) before extraordinary items..... $ .04 $ .05 $ .08 $ .07 $ .01
Earnings (loss) before extraordinary items --
assuming dilution............................ .04 .05 .08 .07 .01
Cash Dividend.................................. .00 .00 .05 .20 .15
Book Value..................................... 1.51 1.46 1.35 1.32 1.07
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED DECEMBER 31,
MARCH 31, -----------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Wireless Pro Forma Combined per Boonton Equivalent
Common Share Data:
Earnings (loss) before extraordinary items..... $ .03 $ .04 $ .06 $ .06 $ .01
Earnings (loss) before extraordinary items --
assuming dilution............................ .03 .04 .06 .06 .01
Cash Dividend.................................. .00 .00 .04 .16 .12
Book Value..................................... 1.19 1.15 1.07 1.04 .85
</TABLE>
MARKET PRICES AND DIVIDENDS
Wireless common stock is listed on the American Stock Exchange under the
symbol 'WTT.' Boonton common stock is listed on the OTC Electronic Bulletin
Board under the symbol 'BOON.'
The tables below set forth, for the periods indicated, the high and low sale
prices of Wireless common stock and high and low bid prices of Boonton common
stock as reported on the American Stock Exchange and on the OTC Electronic
Bulletin Board, respectively, in each case based on published financial sources.
<TABLE>
<CAPTION>
1998:
<S> <C> <C>
Quarter ended March 31, 1998............................ $9.63 $5.63
Quarter ended June 30, 1998............................. 7.88 2.31
Quarter ended September 30, 1998........................ 3.81 1.44
Quarter ended December 31, 1998......................... 2.38 1.44
1999:
Quarter ended March 31, 1999............................ 2.69 1.50
Quarter ended June 30, 1999............................. 2.94 1.56
Quarter ended September 30, 1999........................ 2.31 1.69
Quarter ended December 31, 1999......................... 4.31 1.50
2000:
Quarter ended March 31, 2000............................ 9.88 3.00
<S> <C> <C>
<CAPTION>
BOONTON
COMMON STOCK
-------------
YEAR ENDED SEPTEMBER 30, HIGH LOW
------------------------ ---- ---
1998:
<S> <C> <C>
Quarter ended December 31, 1997......................... $1.13 $ .91
Quarter ended March 31, 1998............................ 1.00 .81
Quarter ended June 30, 1998............................. .88 .69
Quarter ended September 30, 1998........................ 1.13 .41
1999:
Quarter ended December 31, 1998......................... .63 .44
Quarter ended March 31, 1999............................ 1.03 .56
Quarter ended June 30, 1999............................. 1.38 .44
Quarter ended September 30, 1999........................ 2.75 .81
</TABLE>
(table continued on next page)
30
<PAGE>
(table continued from previous page)
<TABLE>
<CAPTION>
WIRELESS
COMMON STOCK
-------------
YEAR ENDED DECEMBER 31, HIGH LOW
----------------------- ---- ---
<S> <C> <C>
2000:
Quarter ended December 31, 1999......................... 2.31 .53
Quarter ended March 31, 2000............................ 5.50 1.00
</TABLE>
Quarterly dividends on Wireless common stock had been declared since June
1993. The table below details quarterly dividends declared for the past two
years. On May 15, 1998, Wireless ceased paying a quarterly dividend. Boonton has
not paid any cash or stock dividends for the fiscal year ended September 30,
1998 and thereafter to date and does not anticipate paying dividends on the
common stock in the foreseeable future.
QUARTERLY DIVIDEND PER SHARE OF WIRELESS COMMON STOCK
<TABLE>
<CAPTION>
FISCAL YEAR 1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1999............................ $.00 $.00 $.00 $.00
1998............................ $.05 $.00 $.00 $.00
</TABLE>
On May 12, 2000 Wireless had approximately 437 stockholders of record.
As of May 12, 2000, Boonton had approximately 2,387,332 shares of common
stock issued and outstanding held by approximately 632 record holders.
Institutions, as holders of record, may hold common stock as nominees (street
name) on behalf of multiple beneficial holders.
On March 2, 2000, the last full trading day prior to the public announcement
of the proposed merger, the closing prices of Wireless common stock reported on
the American Stock Exchange and the closing bid price of Boonton's common stock
reported on the OTC Electronic Bulletin Board were $8.1875 and $2.125 per share,
respectively. On June 8, 2000, the most recent practicable date prior to the
printing of this proxy statement/prospectus, the closing price of Wireless
common stock reported on the American Stock Exchange was $2.688 per share and
the closing bid price of Boonton common stock reported on the OTC Electronic
Bulletin Board was $1.688 per share. Stockholders should obtain current market
quotations prior to making any decision with respect to the merger.
31
<PAGE>
THE COMPANIES
BUSINESS OF WIRELESS
Wireless Telecom Group, Inc., a New Jersey corporation, 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. Wireless' 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, Wireless
consummated the sale of its wireless and satellite test equipment business.
MARKET
Since Wireless' incorporation in the State of New Jersey in 1985, it has
been primarily engaged in supplying noise source products to various customers.
In 1993, Wireless 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. Approximately 82% of
Wireless' sales in fiscal 1999 were derived from commercial applications. The
remaining sales (approximately 18%) 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 Wireless' 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, Wireless' noise source products block out or disrupt unwanted
radar and radio transmissions generally without being detected.
Wireless' noise source products are used in radar systems as part of
built-in test equipment to continuously monitor the radar receiver and in
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 Wireless' noise source products assures that the back-up
receiver is always functional and ready should the communication using the first
receiver fail. Wireless' noise source products can test satellite communication
receivers for video, telephone and data communications.
Wireless' 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. Wireless' 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.
Wireless' products have extended useful lives but are generally recalibrated
every year to ensure their accuracy. Wireless provides recalibration services
for a fee to its domestic and
32
<PAGE>
international customers and also calibrates test equipment manufactured by
others. Although such services accounted for less than 5% of fiscal 1999 sales,
Wireless feels this area will continue to grow as more products are sold into
the global marketplace.
SALE OF DIVISION
On March 11, 1999 Wireless consummated the sale of all of its Wireless Test
Equipment Business to Telecom Analysis Systems, Inc., a New Jersey corporation,
for a purchase price of approximately $19 million pursuant to an Asset Purchase
Agreement, dated January 7, 1999, between Wireless and TAS. Also, pursuant to
the Asset Purchase Agreement, Wireless purchased TAS' products relating to
single-function noise generation, and Wireless and TAS entered into non-
competition agreements with the businesses associated with the respective
products purchased by each. In consideration for TAS' sale of the products
relating to single-function noise generation and TAS' entering into a
non-compete agreement with Wireless, Wireless paid $2.5 million to TAS.
MARKETING AND SALES
As of March 15, 2000, Wireless' in-house marketing and sales force currently
consists of two individuals. Wireless 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. Wireless
believes that extensive advertising is a major factor in generating in-house
sales.
Wireless' 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 Wireless' products.
Manufacturers' representatives accounted for an aggregate of 49% and 42% of
Wireless' sales for the years ended December 31, 1999 and 1998, respectively.
For the years ended December 31, 1999 and 1998, one of Wireless' representatives
accounted for approximately 20% and 7% of sales, respectively. Wireless 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.
Wireless' 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. Wireless continually reviews and assesses the performance of its
representatives and makes changes from time to time based on such assessments.
Wireless 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. Wireless has always placed great emphasis on designing its products to
be user-friendly.
CUSTOMERS
Since its inception in 1985, Wireless has sold its products to more than
1,000 customers. Wireless 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 Wireless' products into their
products for sale to the U.S. and foreign governments, multi-national concerns
and Fortune 500 companies. In fiscal 1999, approximately 82% of sales were
derived from commercial applications. The remaining sales were comprised of
government and military applications.
For fiscal 1999, no one customer accounted for more than 10% of total sales.
Wireless' 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 Wireless, Wireless has
experienced shifts in sales patterns with such large companies in the past
without any
33
<PAGE>
material adverse effect. There can be no assurance, however, that Wireless 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 1999
were $2,529,000, or approximately 30% of total sales. These sales were made
predominantly to customers in Asia ($1,366,000 or 16%) and Europe ($884,000 or
11%). In February 1996, Wireless established a Foreign Sales Corporation (FSC).
Wireless receives a federal tax deduction for a portion of its export profits.
See Note 5 of Notes to the Wireless Financial Statements incorporated by
reference herein.
RESEARCH AND DEVELOPMENT
Wireless currently maintains an engineering staff (six individuals as of
March 15, 2000) 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 $581,000 and $2,348,000 for
the years ended December 31, 1999 and 1998, respectively. See Note 1 of Notes to
the Wireless Financial Statements incorporated by reference herein.
Research and development expenditures for fiscal 1999 have decreased from
fiscal 1998 levels due to the sale of the Wireless Test Equipment Business.
Notwithstanding, Wireless continues to consider its research and development
efforts to be vital to its future business expansion and success.
COMPETITION
Wireless competes against many companies which utilize similar technology to
that of Wireless, some which are larger and have substantially greater resources
and expertise in financial, technical and marketing areas than Wireless,
including Hewlett Packard and Agilent Technologies.
Wireless 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. Wireless 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
Wireless' backlog of firm orders was approximately $1,100,000 at
December 31, 1999, compared to $1,600,000 at December 31, 1998. It is
anticipated that all of the backlog orders will be filled during the current
year. The stated backlog is not necessarily indicative of Company sales for any
future period nor is a backlog any assurance that Wireless will realize a profit
from the orders.
INVENTORY, SUPPLIES AND MANUFACTURING
Wireless 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 Wireless'
designs and specifications. Wireless' 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 Wireless' operations. No third party supplier accounted for more than
10% of Wireless' total inventory purchases for fiscal 1999.
Wireless 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
34
<PAGE>
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.
Wireless 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. Wireless
utilizes modern equipment for the design, engineering, manufacture, assembly and
testing of its products. See 'Marketing and Sales.'
WARRANTY AND SERVICE
Wireless provides one-year warranties on all of its products covering both
parts and labor. Wireless, 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 Wireless' warranty.
In cases of defective products, the customer typically returns them to
Wireless' facility. Wireless' service personnel replace or repair the defective
items and ship them back to the customer. Generally, all servicing is done at
Wireless' plant, and it charges its customers a fee for those service items that
are not covered by warranty. Wireless 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 Wireless by end-users of any of Wireless'
products. Wireless has maintained product liability insurance coverage since
August 1991. To date, Wireless 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 Wireless 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 Wireless' commercial
success. Wireless 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 Wireless. Certain key
employees have signed confidentiality and non-competition agreements regarding
Wireless' proprietary information.
Wireless 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, 2000, Wireless had 28 full-time employees, including its
officers, 14 of whom are engaged in manufacturing and repair services, 6 in
administration and financial control, 6 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. Wireless considers its relationship with its
employees to be satisfactory.
The design and manufacture of Wireless' products require substantial
technical capabilities in many disparate disciplines, from mechanics and
computer science to electronics and mathematics. While Wireless believes that
the capability and experience of its technical employees compares favorably with
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 Wireless.
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PROPERTIES
Wireless 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. Wireless also owns a 44,000 square foot facility located in
Mahwah, New Jersey. In connection with the sale of the Wireless Test Equipment
Business to TAS in March 1999, Wireless subleased 40% of the Mahwah premises
(excluding the warehouse area of the leased premises) to TAS for a period of
twelve months. Such lease terminated as of March 31, 2000. Also, in 1998,
Wireless leased a 600 square foot facility in San Diego, California but has
since terminated this lease. See Notes 3 and 8 of Notes to the Wireless
Financial Statements incorporated by reference herein.
LEGAL PROCEEDINGS
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 PLC 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. In June 2000, Wireless reached an agreement to
settle the foregoing litigation and pursuant to the terms of the settlement, the
defendant shall pay to the plaintiff an aggregate of $1,250,000.
BUSINESS OF BOONTON
Boonton is a New Jersey corporation organized in 1947. Effective October 1,
1997, Boonton dissolved its two wholly owned subsidiaries, Boonton International
Sales Corporation and Integra, Inc.
Boonton designs and produces electronic testing and measuring instruments
including power meters, voltmeters, capitance meters, modulation and audio
meters and VXI products. These products measure the power of RF and microwave
systems used in military and commercial sectors. Boonton's products are also
used to test terrestrial and satellite communications, radar, telemetry and
personal communication products. Recent models are microprocessor controlled and
are often used in computerized automatic testing systems. In March 1999, Boonton
announced the introduction of its 4530 Series RF Power Meters. The 4530 Series
Product is designed for measuring signals based on wide band modulation formats.
It allows a variety of measurements to be made, including maximum power, peak
power, average power and minimum power. Boonton's equipment is marketed
throughout the world to commercial and government customers in the electronics
industry.
Boonton markets and distributes its products throughout the United States
and abroad through non-employee domestic sales representatives and foreign
distributors. Representatives sell on a commission basis, while distributors buy
products for resale at discounted ex-factory prices. Boonton provides its
representatives and distributors with training either at Boonton or at their
place of business. Its representatives and distributors also handle the products
of other manufacturers, although these are not generally competitive with
Boonton's products except that some items handled by foreign distributors may be
somewhat competitive. Boonton employs an in-house organization to provide sales,
support and service to its representatives, distributors and customers.
Boonton is in competition with other manufacturers, several of which are
larger than Boonton and have larger professional staffs and greater financial
and technical resources. Some of these companies are Agilent Technologies
(formerly a part of Hewlett-Packard), IFR, Rhode and Schwartz, and Anritsu.
Boonton competes in two significant ways. Boonton believes that it has a niche
in several product areas where it capitalizes on its expertise in manufacturing
products with
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unique specifications. In addition, Boonton competes by striving to provide
prompt and efficient customer support, including after the sale service.
Boonton primarily produces its products by final assembly, calibration and
testing. It purchases components, devices and subassemblies from outside
sources. In fiscal 1997, Boonton discontinued its machine shop operations.
Boonton obtains raw materials and parts from a variety of sources. Boonton
believes it can obtain the majority of its raw materials and parts from a number
of alternative suppliers.
During the fiscal year ended September 30, 1999, no one customer accounted
for more than 10% of total sales; however, approximately 6% of Boonton's sales
were made to the United States Government and agencies thereof. Boonton believes
that an additional substantial portion of purchases made by its non-governmental
customers are related to the filling of orders placed with those customers by
the United States Government and agencies thereof. Boonton is not able to
determine the percentage of sales associated with purchases from
non-Governmental customers that are related to the filling of orders placed by
the United States Government and agencies thereof.
The trademark 'Boonton' was registered in the United States Patent and
Trademark Office on February 18, 1997 (Reg. No. 2,038,515). Boonton does not
have any other patents, trademarks, licenses, franchises, or royalty agreements.
Under established United States Government contract procedures,
substantially all of the Boonton's Government contracts are subject to
cancellation, in which case Boonton would be entitled to recover its costs
incurred to the date of cancellation plus a reasonable profit thereon. The
cancellation costs and a reasonable profit are determined in accordance with
standard Government accounting practices. Some of Boonton's products sold to the
United States government are subject to on-site quality assurance inspections by
the U.S. Department of Defense, which can include sample testing.
During the fiscal year ended September 30, 1999, Boonton spent approximately
$965,697 on company-sponsored research and development activities. Boonton spent
approximately $992,461 on those activities during the fiscal year ended
September 30, 1998. Boonton maintains an in-house engineering staff of seven
persons to develop new products, upgrade existing products and customize
products to customer specification. From time to time, Boonton utilizes outside
sources for product redesign for new technology. Boonton does not currently have
any customer-sponsored research and development activities.
The New Jersey Department of Environmental Protection has conducted an
investigation concerning disposal, at a facility in New Jersey previously leased
by Boonton, of certain materials formerly used by Boonton's manufacturing
operations at that site and the possible effect of such disposal on the aquifer
underlying the property. The disposal practices and the use of the materials in
question were discontinued in 1978. Boonton has cooperated with the NJDEP
investigation and has been diligently pursuing the matter in an attempt to
resolve it as rapidly as NJDEP operating procedures permit. Boonton and the
NJDEP have agreed upon a plan to correct ground water contamination at the site,
located in the Township of Parsippany-Troy Hills, pursuant to which wells have
been installed at an estimated cost to Boonton of $300,000. The plan
contemplates that the wells will be operated and that the soil and water samples
will be taken and analyzed until such time (which Boonton is unable to predict)
as contamination levels satisfactory to the NJDEP are attained. Operating
expenditures incurred by Boonton during the fiscal year ended September 30, 1999
in connection with the site amounted to approximately $80,000. Boonton estimates
that operating expenditures in this regard during the fiscal year ended
September 30, 2000, including the costs of operating the wells and taking and
analyzing soil and water samples, will amount to approximately $80,000.
As of September 30, 1999, Boonton had 51 full time employees, of which six
are in administration, including officers, six are in sales and support, seven
are in engineering and 32 serve in various manufacturing related capacities.
None of Boonton's employees are covered by a collective bargaining agreement or
are represented by a labor union. Boonton considers its relationship with its
employees to be satisfactory.
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PROPERTIES
Boonton entered into a lease agreement, effective October 1, 1994, with 25
Eastmans Road Associates, Ltd. Pursuant to which Boonton leases approximately
30,000 square feet of a facility located in Hanover Township, New Jersey.
Effective October 1, 1997, Boonton added an additional 3,200 square feet to the
lease. The lease expires September 30, 2001 and contains an option to renew the
term for five years. Boonton believes that the leased space, which houses
Boonton's headquarters and all of its administration and operations, is adequate
for its business.
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WIRELESS MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
The following discussion relates to Wireless' results of operations,
financial condition and liquidity for the periods indicated and should be read
in conjunction with Wireless' financial statements and the notes thereto. This
information with respect to Wireless is presented after restatement for
discontinued operations accounting (See Note 10 of Notes to Wireless' Financial
Statements).
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO
THREE MONTHS ENDED MARCH 31, 1999
For the three months ended March 31, 2000 as compared to the corresponding
period of the previous year, net sales increased to $2,141,335 from $1,543,724
an increase of $597,611 or 38.7%. This is primarily due to an increase in
application of Wireless' products as built-in testers in wireless networks and
an overall increase in the market for Wireless' noise-based communication
products.
Wireless' gross profit on net sales for the three months ended March 31,
2000 was $1,468,486 or 68.6% as compared to $1,154,524 or 74.8% for the three
months ended March 31, 1999. Wireless 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. Wireless continues to rigidly monitor costs associated
with material acquisition, manufacturing and production.
Operating expenses for the three months ended March 31, 2000 were $781,063
or 36.5% of net sales as compared to $496,981 or 32.2% of net sales for the
three months ended March 31, 1999.
For the three months ended March 31, 2000 as compared to the same period of
the prior year, operating expenses increased in dollars by $284,082. This
increase is primarily due to increased expenditures in research and development
and commission expenses. The amortization of goodwill in connection with the
acquisition of products relating to single-function noise generation from
Telecom Analysis Systems is also responsible for the increase in operating
expenses.
Interest, dividend and other income increased by $193,661 for the three
months ended March 31, 2000. This increase was due to a higher average
investment balance during 2000.
Net income from continuing operations increased to $662,678, or $.04 per
share, for the three months ended March 31, 2000 as compared to $543,277, or
$.03 per share for the three months ended March 31, 1999. The explanation of
these changes can be derived from the analysis given above of operations for the
quarters ending March 31, 2000 and 1999, respectively.
RESULTS OF CONTINUING OPERATIONS
YEAR ENDED DECEMBER 31, 1999 COMPARED TO 1998
Net sales for the year ended December 31, 1999 were $6,848,557 as compared
to $6,834,815 for 1998, an increase of $13,742 or .2%.
Wireless' gross profit on net sales for the year ended December 31, 1999 was
$4,827,232 or 70.5% as compared to $4,082,377 or 59.7% as reported in the
previous year. Wireless 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. Wireless continues to rigidly monitor costs associated with material
acquisition, manufacturing and production.
Operating expenses for the year ended December 31, 1999 were $2,384,782 or
34.8% of net sales as compared to $2,701,676 or 39.5% of net sales for the year
ended December 31, 1998. For the year ended December 31, 1999 as compared to the
prior year, operating expenses decreased in dollars by $316,894. This decrease
is attributable to a reduction in research and development expense as well as a
decrease in bad debt expense. The decrease in these and other expenses
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relate to the sale of the Wireless Test Equipment Business in March, 1999. (see
Note 1 of Notes of Financial Statements).
Interest, dividend and other income increased by $836,165 for the year ended
December 31, 1999. The increase was due to a larger average investment balance
in 1999 resulting primarily from the proceeds from the sale of the Wireless Test
Equipment Business.
Net income from continuing operations increased to $2,422,793 or $.14 per
share on a diluted basis, for the year ended December 31, 1999 as compared to
$1,455,605 or $.08 per share on a diluted basis, for the year ended December 31,
1998. The explanation of this increase can be derived from the operational
analysis provided above.
RESULTS OF CONTINUING OPERATIONS
YEAR ENDED DECEMBER 31, 1998 COMPARED TO 1997
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%.
Wireless' 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 Wireless'
expanding product line and other associated costs such as factory maintenance
and depreciation due to its expanding work force and larger facility. In
addition, Wireless 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. Wireless 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 Wireless's
products. Additional personnel, wage increases and bonuses, and rent expenses
for Wireless'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 the year ended December 31,
1997. The explanation of this increase can be derived from the operational
analysis provided above.
LIQUIDITY AND CAPITAL RESOURCES
Wireless' working capital has increased by $587,741 to $25,363,382 at March
31, 2000, from $24,775,641 at December 31, 1999. Wireless' working capital has
increased by $2,697,212 to $24,775,641 at December 31, 1999, from $22,078,429 at
December 31, 1998. At March 31, 2000 Wireless had a current ratio of 17.1 to 1,
and a ratio of debt to net worth of .17 to 1. At December 31, 1999, Wireless had
a current ratio of 19.9 to 1, and a ratio of debt to net worth of .17 to 1. At
December 31, 1999 Wireless had a current ratio of 19.9 to 1, and a ratio of debt
to net worth of .17 to 1. At December 31, 1998, Wireless had a current ratio of
24.3 to 1, and a ratio of debt to net worth of less than .1 to 1.
Cash provided by operations was $1,596,722 for the period ending March 31,
2000. Cash provided by net income was $662,678. In addition, prepaid expenses
decreased by $934,752 and accounts payable and accrued expenses increased by
$269,271. This was offset by an increase in accounts receivable of $341,551.
Net cash provided from operations has allowed Wireless to meet its liquidity
requirements, research and development activities and capital expenditures.
Operating activities provided
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$1,851,129 in cash flows for the comparable period in 1999. Operating activities
provided $2,594,885 in cash for the year ending December 31, 1999 compared to
$3,213,069 and $4,556,733 in cash flows for the years ending December 31, 1998
and 1997, respectively. Cash provided by operations was primarily due to net
income, decreases in accounts receivable and increases in accounts payable,
accrued expenses and income taxes payable.
Wireless 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
Wireless.
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 for the quarter ending March 31, 2000
was $539,083. The primary use of these funds was the purchase of a $500,000
investment in equity securities of an unrelated entity. For the quarter ended
March 31, 1999 net cash provided by investing activities was $13,105,544. Net
cash provided from investing activities for 1999 amounted to $11,515,921 as
opposed to net cash used for investing activities of $1,059,403 and $1,733,068
for the years ending December 31, 1998 and 1997, respectively. From 1997 to
1998, capital expenditures for the new leased facilities in Mahwah were the
primary use of funds. In 1999, Wireless realized proceeds of $16,730,730 from
the sale of its Wireless Test Equipment Business partially offset by $2,500,000
for the purchase of the Noise Product Line from Telecom Analysis Systems, and
$1,186,551 for expenses relating to the disposal of the Wireless Test Equipment
Business.
Net cash provided by financing activities for the quarters ending March 31,
2000 and 1999 were $370,513 and $0.00, respectively. Proceeds from the exercise
of stock options and warrants were the primary source of these funds in 2000.
These proceeds were partially offset by cash outlays for mortgage payments on
Wireless' Mahwah facility. Net cash used for financing activities was
$1,003,026, $668,567 and $3,316,168 for the years ending December 31, 1999, 1998
and 1997, respectively. For 1999, the principal use of cash was for the
acquisition of treasury stock. The payment of quarterly cash dividends was the
primary use of these funds in 1998 and 1997. Wireless 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 in 1998 and 1997.
On January 26, 1998, Wireless 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 Wireless ceased paying a quarterly cash dividend.
For details of dividends paid in the years ended December 31, 1998 and 1997
refer to Item 5. Wireless does not currently anticipate paying cash dividends.
Wireless believes that its financial resources from working capital provided
by operations are adequate to meet its current needs.
IMPACT OF THE YEAR 2000 ISSUE
Prior to January 1, 2000 Wireless assessed its information technology ('IT')
and non-IT computer systems and operations to identify and determine the extent
to which any such systems would 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
Wireless'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.
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Wireless upgraded its computer systems and operations to ensure that all
such systems are Y2K compliant. Wireless estimates that it incurred aggregate
costs of $60,000 for such upgrade. Such costs came from Wireless' general
working capital funds.
INFLATION AND SEASONALITY
Wireless does not anticipate that inflation will significantly impact its
business nor does it believe that its business is seasonal.
BOONTON MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion relates to Boonton's results of operations,
financial condition and liquidity for the periods indicated without giving
effect to the Merger and should be read in conjunction with Boonton's financial
statements and the notes thereto.
RESULTS OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 2000 COMPARED TO SIX MONTHS ENDED MARCH 31, 1999
Net sales for the six months ended March 31, 2000 of $4,117,284 were
$703,105 higher than net sales of $3,414,179 reported for the six months ended
March 31, 1999. Domestic revenues increased by $976,333 due to significant sales
of the new Peak Power/CW Power and RF Volt Meter to domestic customers. Export
sales declined by $273,228. Gross profit as a percentage of net sales decreased
to 44.9% in the current period versus 47.5% for the equivalent period a year
ago. This was due to an increase in cost of goods sold that occurred primarily
because of overtime needed to produce the increased number of units shipped.
Commission expense increased by $41,356 over the prior year's comparable
period. Research and development expense decreased by $70,220 due to completion
of the new product design at the end of fiscal year 1999. Income from operations
of $198,423 was reported for the six months ended March 31, 2000 as compared to
a loss from operations of $38,185 for the previous year's equivalent period. Net
income of $204,098 was a $311,426 increase over the prior year's comparable
period net loss of $107,328 primarily due to the increased revenues noted above.
Earnings per share for the current period were $.09 versus a loss per share of
$.05 for the prior year's comparable period.
FISCAL YEAR ENDED SEPTEMBER 30, 1999
COMPARED TO FISCAL YEAR ENDED SEPTEMBER 30, 1998
Net sales for the year ended September 30, 1999 were $6,886,395, an increase
of $37,252 compared to the year ended September 30, 1998. The increase was
primarily due to an increase in export sales, the result of a large order from a
British contractor. Although sales were slightly higher, sales did not meet
management's expectations as the introduction of several new products was
delayed. Near the end of fiscal 1998, Boonton announced a new RF Peak Power
Meter for the automatic-test-equipment production environment. Field
enhancements were made to the new product, to incorporate new modulation
techniques for telecommunications, that delayed its initial production by six
months delaying shipments to key customers. Due to a need to write-down
inventory by $211,648 and lower margins on export sales, cost of goods sold
increased by $608,604 for the year ended September 30, 1999 compared to the
prior year end. Gross profit was $2,846,790 or approximately 41% of net sales
for fiscal 1999 compared to $3,418,142 or approximately 50% of net sales for
fiscal 1998.
Operating expenses were $3,535,784 for the year ended September 30, 1999
compared to $3,132,794 for the year ended September 30, 1998. Commissions
increased by $250,851 due to the increase in export sales that carry higher
commission rates. Other operating expenses were $152,139 higher for fiscal 1999
compared to fiscal 1998 due primarily to reorganization expenses including
implementation of shifts in management personnel.
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There was a loss from operations of $688,994 for fiscal 1999 compared to
income from operations of $285,348 in fiscal 1998. The loss was attributable to
a combination of the higher cost of goods sold and the higher operating
expenses. The net loss for fiscal 1999 was $1,518,448 or $.65 loss per share
compared to net income of $142,959 or $.09 earnings per share for fiscal 1998.
Boonton wrote off $604,694 of deferred tax assets.
The September 30, 1999 production inventory was $44,674 lower than the
September 30, 1998 balance. The demonstrator inventory balance increased by
$41,990 for demonstrator additions for new products. At September 30, 1999
accounts receivable was $432,806 lower than the September 30, 1998 balance. The
current ratio at September 30, 1999 was 1.81 versus 2.07 at September 30, 1998.
Boonton's backlog at September 30, 1999 was $1,057,746, which was $76,078 higher
than the backlog balance at September 30, 1998.
FISCAL YEAR ENDED SEPTEMBER 30, 1998
COMPARED TO FISCAL YEAR ENDED SEPTEMBER 30, 1997
Net sales of $6,849,143 for the fiscal year 1998 was $359,914 or 4.9% below
the prior year. Gross profit increased to 49.9 % of sales versus a prior year
42.6% as the reduced revenue was primarily in military sales that carry lower
profit margins.
Commission expense increased to 10.3% of sales versus 9.9% of sales for the
prior year due to the decreased military contract revenues that carry lower
commission rates. Income from operations was $285,348 or 4.2% of sales as
compared to a prior years $71,845 or 1.0% of sales. Research and development
expenses increased $256,933 over the prior year as Boonton put increased
emphasis on new products. The other operating expense categories decreased
$113,978 as Boonton continued to take steps to hold these costs down.
Other expenses increased to $85,809 due to higher interest costs, higher
environmental expenses and lower gain on sale of assets. In fiscal 1997 the gain
on sales of assets was higher due to the sale of machine tools when Boonton shut
down its machine shop operations. The net income was $142,959 versus a prior
year income of $31,344. Earnings per share was $.09 versus a prior year $.02.
Accounts receivable increased to $1,299,281 due to sales in the month of
September of approximately $1,000,000. Inventories increased $138,130 to
$1,444,245. $69,250 of the inventory increase was due to increased demonstrator
equipment capitalized as a result of new product introductions. $68,880 of the
inventory increase was for manufacturing purposes in preparation for October and
November 1998 shipments. The average production turnover was 2.7 compared to 3.4
the prior year. The current ratio was 2.1 to 1 versus a prior year 2.2 to 1.
Boonton's order backlog at September 30, 1998 was $981,668 as compared to
$1,176,119 at September 30, 1997.
LIQUIDITY AND CAPITAL RESOURCES
Boonton's working capital at March 31, 2000, September 30, 1999 and
September 30, 1998 was $1,442,159, $1,226,783 and $1,689,311, respectively.
On February 6, 1995, some members of the Board of Directors loaned Boonton
the aggregate sum of $300,000 at 14% interest per annum. Initially these loans
were scheduled to be repaid by April 1995 however due to Boonton's need to
maintain the use of the proceeds from these loans repayment was waived.
Effective September 1, 1995, the interest rate for these loans was reduced to 9%
per annum. These loans are secured by a lien on Boonton's accounts receivable,
contract rights and instruments. In July 1996, the directors agreed to
subordinate repayment of the loans and the priority of their collateral to the
New Jersey Economic Development Authority ('NJEDA') under a loan made to
Boonton, which loan is discussed below. As of March 31, 2000, Boonton owed
$262,500 in principal under the loans from the directors.
On July 31, 1996, Boonton executed a Direct Loan Agreement by and between
Boonton and the NJEDA. The agreement provided for a direct loan of $500,000 at 6
3/4% per annum. The proceeds of the loan were used primarily for the acquisition
of capital assets. The NJEDA loan is
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secured by a lien on Boonton's accounts, inventory, machinery, equipment,
contract rights and general intangibles. As of March 31, 2000, Boonton owed
approximately $278,300 of principal and interest under the loan.
Under the terms of the merger agreement with Wireless Telecom Group, Boonton
obtained a $250,000 loan from Wireless evidenced by a promissory note made by
Boonton in favor of Wireless. The proceeds from the note are being used
primarily to pay past due trade payables. If the closing of the merger occurs or
if Boonton terminates the merger agreement because of a material breach of
Wireless, the promissory note will be cancelled. If the closing does not occur
for any other reason, the promissory note will be converted into 225,000 shares
of Boonton common stock.
Trade receivables at March 31, 2000 were higher than September 30, 1999 as a
result of increased sales. Inventory also increased to $1,580,633 and continues
to include a write down of approximately $212,000. The current ratio at March
31, 2000 decreased to 1.76 as compared to 1.81 at September 30, 1999.
The Company's backlog at March 31, 2000 was $2,738,423 reflecting an
increase of $1,680,677 over the September 30, 1999 backlog. The increase was
primarily due to a $1,112,320 order placed in December 1999 for 8701 VXI
Modulation Meters.
As of March 31, 2000 and September 30, 1999, cash and equivalents amounted
to $236,044 and $69,484, respectively. For the year ended September 30, 1999,
cash used by operations was $418,644 compared to cash provided by operations of
$235,967 for the year ended September 30, 1998. During fiscal 1999, Boonton
incurred some expenses that management believes are nonrecurring. Boonton made a
final payment of $144,993 to creditors under its Bankruptcy Plan of
Reorganization. Boonton also used a significant amount of cash to build/purchase
inventory to cover its anticipated production needs. Cash used by operations for
the six months ended March 31, 2000 was $42,616.
In October 1998, Boonton sold 666,669 shares of its common stock to some of
its directors and principal stockholders for an aggregate amount of $400,000 in
order to satisfy some current liabilities. The per share price of $.60
represented a premium of approximately 25% above the then trading price for
Boonton's common stock. In addition, in November 1998, Boonton issued 76,362
shares of its common stock to its directors for an aggregate amount of $42,000
as payment for directors' fees outstanding as of September 30, 1998. The shares
were issued at a value equivalent to $.55 per share representing a premium of
approximately 25% above the then trading price for Boonton's common stock.
Boonton's management believes that the use of cash for the year ended
September 30, 1999 was nonrecurring. However, the use of cash, together with
sales falling short of management's expectations has resulted in low cash
levels. Boonton's ability to meet its current liabilities is highly dependent on
receiving timely payment on its accounts receivable. Further, while Boonton is
seeking to increase its international sales, receipt of payments on
international receivables typically take longer than receipts on domestic
receivables. A majority of suppliers are now demanding to be paid cash on
delivery. This can lead to delays in product shipments that can lead to delays
in revenues.
Boonton believes its cash flows from operations shall need to be
supplemented to meet its working capital needs. Boonton has been unable to
obtain debt financing due, in part, to its prior bankruptcy and its current
financial position. No further borrowings are available under the NJEDA loan.
Management may consider financing Boonton's accounts receivable. Additionally,
management does not believe that further equity financing is available.
YEAR 2000
Boonton has prepared for the potential Year 2000 issues that could effect
its data management systems, personal computers, communications systems and
non-information technology equipment, as well as the products it manufactures.
Boonton tested and remedied its systems so that they would perform the essential
functions in the Year 2000.
44
<PAGE>
During 1999, Boonton replaced its data management system and the
manufacturer of the new system has provided assurances that the new system is
Year 2000 compliant. Boonton conducted an in-house program to test all personnel
computers for Year 2000 compliance and has replaced personal computers it
considered to be critical to operations. Boonton utilizes Microsoft Windows
Software for its network and office functions. Updates to the software were
installed as recommended by Microsoft.
Boonton's major suppliers are companies that provide it with parts and
materials. Boonton conducted a survey of its major suppliers and they indicated
that they would be Year 2000 compliant. Since Boonton obtains its parts and
materials from a number of suppliers, it believes that if any one its major
suppliers experience Year 2000 failure it would be able to obtain materials from
an alternative source. Boonton does not manufacture any components that rely on
real time clocks for certain year information. Products to be manufactured in
the future may contain time stamps and management expects that future
development and manufacturing shall take into account Year 2000 issues.
Boonton believes its worse case scenario is failures by its suppliers.
Management believes it can obtain most of its supplies from alternative sources,
however, should Boonton be unable to obtain key parts or materials it would be
unable to process orders that would have an adverse impact on Boonton's results
from operations and its financial condition. Boonton has not implemented
contingency plans and it does not expect to do so.
Boonton has not had any business interruptions related to Year 2000 issues
and presently does not anticipate having any future interruptions. However,
failures associated with the Year 2000 issue would have a material adverse
impact on Boonton's results of operations, liquidity and/or financial condition.
IMPACT OF INFLATION
Boonton does not anticipate that inflation generally significantly impacts
its business.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT OF BOONTON
The following table sets forth the beneficial ownership of Boonton common
stock, as of May 12, 2000 by: (i) each present director and the chief executive
officer, (ii) each other person known to Boonton to be the beneficial owner of 5
percent (5%) or more of Boonton common stock, and (iii) all directors and
executive officers as a group. Except as otherwise indicated by footnote, the
named persons possess sole voting and investment power with respect to the
shares.
<TABLE>
<CAPTION>
Number
of Shares
Beneficially Percent
Owned of Class
------------ --------
<S> <C> <C>
Daniel Auzan (Director) .................................... 12,727 .5%
c/o A Novo
31 rue de Peuplier
92100 Boulogne Billancourt
France
Ronald T. DeBlis (Director) ................................ 118,042 4.9%
37 Farmstead Road
Short Hills, NJ 07078
Jack Frucht (Director) ..................................... 91,176 3.8%
380 Mountain Road, Apt. #512
Union City, NJ 07087
Yves Guyomar (Director and President) ...................... 41,667 1.8%
1012 Gates Court
Morris Plains, NJ 07950
</TABLE>
(table continued on next page)
45
<PAGE>
(table continued from previous page)
<TABLE>
<CAPTION>
NUMBER
OF SHARES
BENEFICIALLY PERCENT
NAME OWNED OF CLASS
---- ----- --------
<S> <C> <C>
Abel Sheng (Director) ...................................... 435,948(1) 18.3%
270 Sylvan Avenue
Englewood Cliffs, NJ 07632
Otto H. York (Director) .................................... 360,481 15.1%
130 Hempstead Court
Madison, NJ 07940
John M. Young (Director) ................................... 144,995(2) 6.1%
9749 Maplecrest Circle, S.E.
Lehigh Acres, FL 33936
General Electronique Mesure, SA. .......................... 540,933(3) 22.7%
8/10 rue Nieuport
78140 Velizy
France
G.E.M. USA, Inc. ........................................... 374,266 15.7%
c/o Robert Regimbal, Esq.
Graham, Curtin & Sheridan
4 Headquarters Plaza
Morristown, N.J. 07962
Sidco Investment, Inc. .................................... 62,755 2.6%
270 Sylvan Avenue
Englewood Cliffs, NJ 07632
All directors and executive officers as a group
(7 persons)............................................... 1,205,036 50.5%
</TABLE>
---------
(1) Includes 62,755 shares owned by Sidco Investment, Inc., a company controlled
by Mr. Sheng.
(2) Includes 6,000 shares owned by his wife, to which Mr. Young disclaims
beneficial ownership.
(3) Includes 374,266 shares owned by G.E.M. USA, Inc., a subsidiary of General
Electronique Mesure, SA.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Some Boonton directors have interests in the merger that are in addition to
their interests as Boonton stockholders generally.
In 1995, some members of Boonton's Board of Directors made loans to Boonton.
These loans are secured by a lien on Boonton's accounts receivable, contract
rights and instruments. In July 1996, the directors agreed to subordinate
repayment of the loans and priority of their collateral to a loan made to
Boonton by the New Jersey Economic Development Authority. As of February 29,
2000, the outstanding amounts of principal and interest payable by Boonton under
the directors' loans were as follows: Ronald DeBlis: $46,641; Jack Frucht:
$93,281; Otto York: (by his company York Resources) $93,281; and John Young:
$92,719.
Directors of Boonton who are not salaried officers (Daniel Auzan, Ronald
DeBlis, Jack Frucht, Abel Sheng, Otto York and John Young) receive, as
compensation for their services as directors, the sum of $10,000 per year, plus
$500 for each Board or committee meeting attended. As of February 29, 2000,
Boonton owed its directors the following amounts for services as a director:
Daniel Auzan: $5,083; Ronald DeBlis: $5,583; Jack Frucht: $5,583; Abel Sheng:
$5,333; Otto York: $5,333; and John Young: $5,083.
Under the terms of the merger agreement, Wireless has agreed to, at the
closing of the merger, repay the full amount of the directors' loans and the
directors' fees. Mr. DeBlis agreed to be repaid in cash. Messrs. Auzan, Frucht,
Sheng, York (and York Resources) and Young agreed to be repaid in shares of
Wireless common stock determined by dividing the total sum owed by
46
<PAGE>
$8.1875, the closing price of a share of Wireless common stock reported on the
American Stock Exchange on March 2, 2000, the date of the merger agreement.
Consequently, under the terms of the merger agreement, in addition to the
shares of Wireless common stock to be received in exchange for shares of Boonton
common stock that they own, the directors will receive shares of Wireless common
stock in satisfaction of outstanding directors' loans and directors' fees as
follows: Mr. Auzan: 613 shares; Mr. Frucht: 12,075 shares; Mr. Sheng: 651
shares; Mr. York (together with York Resources): 12,044 shares and Mr. Young:
11,973 shares.
In addition, in satisfaction of future retirement benefits payable by
Boonton to Messrs. Frucht and Young, for services as former officers of Boonton,
Wireless shall pay a one-time lump sum amount to those persons as follows:
Mr. Frucht: $11,250 and Mr. Young: $22,500. Messrs. Frucht and Young agreed to
be paid in shares of Wireless common stock in the same manner as the payment of
directors' loans and fees, and thus, will receive 1,374 shares and 2,748 shares
of Wireless common stock, respectively, in satisfaction of future retirement
benefits.
DIRECTORS AND EXECUTIVE OFFICERS OF WIRELESS
The current directors and executive officers of Wireless are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Edward Garcia(1)(2)(3)............... 35 Chairman of the Board, Officer and President
Henry Bachman(4)..................... 70 Director
John Wilchek(1)(4)................... 59 Director
Demir Richard Eden(3)................ 60 Director
Franklin H. Blecher.................. 71 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 Wireless based on information supplied by each of them.
Edward Garcia has served as Chairman of the Board, Chief Executive Officer
and President of Wireless 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 Wireless in 1990
and has served in various positions, including sales manager and Chief Engineer.
Henry L. Bachman became a director of Wireless 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 Wireless in May 1993. He was the founder,
President, CEO and Chairman of Zenith Knitting Mills until his retirement in
1991.
Demir Richard Eden became a director of Wireless in May 1993 and served as
President of Wireless 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
47
<PAGE>
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 Wireless in November 1994.
In his 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.
EXECUTIVE COMPENSATION
For information regarding executive compensation, see the section captioned
'Executive Compensation' in the Wireless annual report on Form 10-K for the year
ended December 31, 1999 incorporated herein by reference.
Edward Garcia has entered into an employment agreement effective August 1,
1999 with Wireless. Mr. Garcia is currently compensated at a base annual salary
of $150,000. Mr. Garcia will also receive an annual bonus, the amount of which
shall be determined by the Board of Directors in their discretion. The
employment agreement provides that, in the event of termination of Mr. Garcia
for good reason, without cause, or in the case of Mr. Garcia's non-renewal, as
such terms are defined therein, Mr. Garcia shall be entitled to receive: (a) a
lump sum in an amount equal to three (3) years of his base annual salary;
(b) benefits coverage for him and his dependents, at the same level and at the
same charges as immediately prior to his termination, for a period of three (3)
years following his termination from Wireless; (c) all accrued obligations, as
defined therein; (d) with respect to each incentive pay plan (other than stock
options or other equity plans) of Wireless in which Mr. Garcia participated at
the time of his termination, an amount equal to the amount he would have earned
if he had continued employment for three (3) additional years; and (e) with
respect to stock options and other equity plans in which Mr. Garcia participated
at the time of termination, any stock options or restricted stock that would
vest or become non-forfeitable in the five (5) years after termination. If Mr.
Garcia is terminated by reason of disability, he shall be entitled to receive,
for three (3) years after such termination, his base annual salary less any
amounts received under a long term disability plan. If he is terminated by
reason of his death, his legal representatives shall receive the balance of any
remuneration due him. The term of the employment agreement is three (3) years
from the date of execution with a renewal period of two (2) ) years, such
renewal to occur automatically unless either Wireless or Mr. Garcia terminates
the employment agreement upon six (6) months written notice.
RELATED PARTY TRANSACTIONS
There have been no related transactions or business relationships in which
the amount involved exceeds $60,000 and in which any director, executive officer
or beneficial holder of more than 5% of Wireless' common stock had or will have
a direct or indirect material interest, other than compensation arrangements
which are described in the executive compensation information incorporated
herein by reference.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT OF WIRELESS
The following table sets forth certain information regarding Wireless'
Common Stock owned as of April 15, 2000 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
48
<PAGE>
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
NAME AND ADDRESSES BENEFICIAL OWNERSHIP(1) OWNED(2)
------------------ ----------------------- --------
<S> <C> <C>
Edward Garcia(3)...................................... 142,000 *
Demir Richard Eden(4) ................................ 45,000 *
120-10 Audley Street
Kew Gardens, NY
John Wilchek(5) ...................................... 32,000 *
211 Mohican Lane
Franklin Lake, N.J.
Franklin H. Blecher(6) ............................... 22,500 *
6039 Collins Avenue
Miami Beach, Fl
Henry Bachman(7) ..................................... 17,000 *
5 Brandy Road
Cold Spring Harbor, NY
All officers and Directors as a group
(5 persons)(3)(4)(5)(6)(7).......................... 258,500 1.5%
FMR Corp(8) .......................................... 1,606,500 9.3%
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 17,214,754 shares of Common Stock outstanding as of April 15,
2000.
(3) Includes 92,000 shares of Common Stock subject to options currently
exercisable or exercisable within 60 days of April 15, 2000. Excludes an
aggregate of 128,000 shares of Common Stock subject to options which are not
exercisable within 60 days of April 15, 2000.
(4) Includes 20,000 shares of Common Stock subject to options currently
exercisable or exercisable within 60 days of April 15, 2000. Excludes an
aggregate of 80,000 shares of Common Stock subject to options which not
exercisable within 60 days of April 15, 2000.
(5) Includes 20,000 shares of Common Stock subject to options currently
exercisable or exercisable within 60 days of April 15, 2000. Excludes an
aggregate of 80,000 shares of Common Stock subject to options which are not
exercisable within 60 days of April 15, 2000.
(6) Includes 20,000 shares of Common Stock subject to options currently
exercisable or exercisable within 60 days of April 15, 2000. Excludes an
aggregate of 80,000 shares of Common Stock subject to options which are not
exercisable within 60 days of April 15, 2000.
(7) Includes 16,000 shares of Common Stock subject to options currently
exercisable or exercisable within 60 days of April 15, 2000. Excludes an
aggregate of 64,000 shares of Common Stock subject to options which are not
exercisable within 60 days of April 15, 2000.
(8) Based on information set forth in Form 13-G dated February 14, 2000, filed
with the Securities and Exchange Commission.
COMPARISON OF STOCKHOLDER RIGHTS
Holders of shares of Boonton stock will become holders of shares of Wireless
common stock. The following chart summarizes the material differences between
the rights of Boonton stockholders (left column), and the rights of Wireless
stockholders (right column). This summary is not intended to be complete and is
qualified by reference to Boonton's Certificate of Incorporation and by-laws and
Wireless' Certificate of Incorporation and by-laws, copies of which are on file
with
49
<PAGE>
the SEC. Reference to the New Jersey Business Corporation Act is omitted since
both Wireless and Boonton are governed by New Jersey law and there are no
material differences.
SUMMARY OF MATERIAL DIFFERENCES BETWEEN CURRENT RIGHTS OF BOONTON
STOCKHOLDERS AND RIGHTS THOSE STOCKHOLDERS WILL HAVE FOLLOWING THE MERGER
<TABLE>
<CAPTION>
BOONTON WIRELESS
---------------------------------------- ----------------------------------------
<S> <C> <C>
CORPORATE GOVERNANCE The rights of Boonton stockholders are The rights of Wireless stockholders are
currently governed by New Jersey law and currently governed by New Jersey law and
the certificate of incorporation and the certificate of incorporation and by-
by-laws of Boonton. Upon completion of laws of Wireless. Upon completion of the
the merger, the rights of Boonton merger, the rights of Wireless
stockholders will be governed by New stockholders will continue to be
Jersey law, the Wireless certificate of governed by New Jersey law, the Wireless
incorporation and Wireless by-laws. certificate of incorporation and the
Wireless by-laws.
AUTHORIZED CAPITAL 5,000,000 shares of common stock, $0.10 30,000,000 shares of common stock, $.01
STOCK par value per share. par value per share. 2,000,000 shares of
preferred stock, $.01 par value per
share.
VOTING RIGHTS Holders of common stock are entitled to Holders of common stock are entitled to
one vote for each share held on all one vote for each share held on all
matters on which stockholders are matters on which stockholders are
generally entitled to vote. generally entitled to vote. Holders of
preferred stock are not entitled to vote
except under certain circumstances.
SIZE OF THE BOARD OF The Boonton by-laws provide that the The Wireless by-laws provide that the
DIRECTORS Board of Directors shall be not less Board of Directors shall consist of up
than six nor more than seven members, to nine members, with the exact number
with the exact number of directors to be of directors to be fixed by approval of
fixed by approval of the board. The the board. The Wireless board currently
Boonton board currently consists of 7 consists of 5 directors.
directors.
ELECTION AND The Boonton board of directors is All members of the Wireless Board of
CLASSIFICATION OF THE divided into three classes. One class is Directors are elected at the annual
BOARD OF DIRECTORS elected each year for a three year term. stockholders' meeting.
Boonton does not have cumulative voting
for the election of directors.
SPECIAL MEETINGS OF Boonton by-laws provide that a special Wireless by-laws provide that a special
STOCKHOLDERS meeting of the stockholders of Boonton meeting of the stockholders of Wireless
may be called at any time by a majority may be called by the president or the
of the Boonton Board of Directors, or board.
when so requested in writing, by
stockholders representing not less than
seventy-five percent (75%) of the
capital stock of Boonton.
</TABLE>
50
<PAGE>
<TABLE>
<S> <C> <C>
STOCKHOLDER ACTION BY Action by written consent is permitted. Wireless by-laws provide that action by
WRITTEN CONSENT The annual election of directors, if not written consent is permitted.
conducted at a stockholders' meeting,
may only be effected by unanimous
written consent. A stockholder vote on a
plan of merger or consolidation, if not
conducted at a stockholders' meeting,
may only be effected by either:
(i) unanimous written consent of all
stockholders entitled to vote on the
issue with advance notice to any other
stockholders, or (ii) written consent
of stockholders who would have been
entitled to cast the minimum number of
votes necessary to authorize such action
at a meeting, together with advance
notice to all other stockholders.
AMENDMENT OF BY-LAWS The Boonton by-laws provide that the by- The Wireless by-laws provide that the
laws may be amended by the Board of by- laws may be amended by the
Directors upon twenty days' notice of stockholders or the Board. Any by-law
the proposed amendment to each Director. amended by the stockholders may be
The by-laws may also be amended by an amended, unless the resolutions of the
affirmative vote of the stockholders stockholders adopting such by-laws
representing a majority of the entire expressly reserve such right to the
outstanding capital stock having voting stockholders.
power at an annual meeting or a special
meeting called for that purpose.
AMENDMENT OF Except in limited circumstances as Any amendment to the certificate of
CERTIFICATE OF provided by New Jersey law, any incorporation shall only be limited as
INCORPORATION amendment to the certificate of provided by New Jersey law. Wireless
incorporation requires the affirmative does not have provisions limited
vote of two-thirds of the votes cast by amendments to its Certificate of
stockholders entitled to vote thereon. Incorporation in its by-laws or
Certificate of Incorporation.
</TABLE>
51
<PAGE>
DESCRIPTION OF WIRELESS CAPITAL STOCK
GENERAL
Wireless authorized capital stock consists of 30,000,000 shares of common
stock and 2,000,000 shares of preferred stock. As of May 12, 2000, there were
approximately 17,832,507 shares of common stock and no shares of preferred stock
outstanding.
COMMON STOCK
Holders of shares of Wireless common stock:
are entitled to receive dividends when and as declared by Wireless board
from legally available funds;
except as otherwise may be required by law, have the exclusive right to
vote;
are entitled, upon any liquidation, dissolution or winding up, to a pro
rata distribution of the assets and funds available for distribution to
stockholders;
are entitled to one vote per share on all matters on which stockholders
generally are entitled to vote;
do not have preemptive rights to subscribe for additional shares of
Wireless common stock or securities convertible into shares of Wireless
common stock.
Wireless common stock is listed on the American Stock Exchange under the
symbol 'WTT.' American Stock Transfer and Trust Company of New York is the
transfer agent for Wireless common stock.
DIVIDEND LIMITATIONS
Quarterly dividends on Wireless common stock had been declared from June
1993 until May 15, 1998. No dividends have been declared or paid for the past
two years.
WHERE YOU CAN FIND MORE INFORMATION
Wireless has filed a registration statement on Form S-4 to register with the
SEC its common stock to be issued to Boonton stockholders in the merger. This
proxy statement/prospectus is a part of that registration statement and
constitutes Wireless' prospectus in addition to being a proxy statement of
Boonton for the meeting. As allowed by SEC rules, this proxy
statement/prospectus does not contain all the information Boonton stockholders
can find in the registration statement or the exhibits to the registration
statement.
In addition, Wireless files reports, proxy statements and other information
with the SEC under the Exchange Act. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. Boonton stockholders may read
and copy this information at the following locations of the SEC:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois 60661-2511
</TABLE>
Boonton stockholders may also obtain copies of this information by mail from
the Public Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, at prescribed rates. The SEC also maintains an Internet
world wide web site that contains reports, proxy statements and other
information about issuers, including Wireless and Boonton, who file
electronically with the SEC. The address of that site is www.sec.gov. Boonton
stockholders can also inspect reports, proxy statements and other information
about Wireless at the offices of American Stock Exchange, 86 Trinity Place, New
York, New York 10006.
52
<PAGE>
The SEC allows Wireless to 'incorporate by reference' information into this
document. This means that the companies can disclose important information to
Boonton stockholders by referring them to another document filed separately with
the SEC. The information incorporated by reference is considered to be a part of
this document, except for any information that is superseded by information that
is included directly in this document.
This document incorporates by reference the documents listed below that
Wireless has previously filed with the SEC. They contain important information
about Wireless' companies and their financial condition. Some of these filings
have been amended by later filings, which are also listed.
<TABLE>
<CAPTION>
WIRELESS SEC FILINGS (FILE NO. 1-11916) DESCRIPTION OR PERIOD/AS OF DATE
<S> <C>
------------------------------------------------------------------------------------
Report on Form 8-A, dated Discloses the listing of shares on the
April 23, 1993 American Stock Exchange
Annual Report on Form 10-K Year ended December 31, 1999
Current Report on Form 8-K, dated Discloses the entering into the merger
March 2, 2000 agreement and related matters
Quarterly Report on Form 10-Q Quarter Ended March 31, 2000
Current Report on Form 8-K, dated May 5, Discloses the entry into amendment No. 1
2000 to the merger agreement.
Current Report on Form 8-K, dated Discloses the settlement of litigation.
June 7, 2000
------------------------------------------------------------------------------------
</TABLE>
Wireless also incorporates by reference any additional documents that either
company may file with the SEC between the date of this document and the date of
the Boonton special stockholders meeting. These documents include periodic
reports, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q
and Current Reports on Form 8-K, as well as proxy statements.
Boonton stockholders can obtain any of the documents incorporated by
reference in this document through Wireless or Boonton, as the case may be, or
from the SEC through the SEC's web site at the address provided above. Documents
incorporated by reference are available from the companies without charge,
excluding any exhibits to those documents unless the exhibit is specifically
incorporated by reference as an exhibit in this proxy statement/prospectus.
Boonton stockholders can obtain documents incorporated by reference in this
proxy statement/prospectus by requesting them in writing or by telephone from
the appropriate company at the following addresses:
<TABLE>
<S> <C>
Wireless Telecom Group, Inc. Boonton Electronics Corporation
East 64 Midland Avenue P.O. Box 465
Paramus, NJ 07652 25 Eastmans Road
Parsippany, NJ 07054-0465
</TABLE>
IF BOONTON STOCKHOLDERS WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY
JUNE 26, 2000 TO RECEIVE THEM BEFORE THE SPECIAL STOCKHOLDERS MEETING. If they
request any incorporated documents from Boonton, Boonton will mail such
documents to its stockholders by first class mail, or another equally prompt
means, within one business day after Boonton receives such request.
Boonton stockholders may relay only on the information contained or
incorporated by reference in this document in making a decision to vote on the
merger proposal. Boonton has not authorized anyone to give any information or
make any representation about the merger of the companies that differs from, or
adds to, the information in this document or in its documents that are publicly
filed with the SEC.
The information contained in this proxy statement/prospectus speaks only as
of its date unless the information specifically indicates that another date
applies. Information in this document about Wireless has been supplied by
Wireless, and information about Boonton has been supplied by Boonton.
53
<PAGE>
EXPERTS
Wireless consolidated financial statements at December 31, 1999 and 1998,
and for each of the three years in the period ended December 31, 1999,
incorporated by reference in this proxy statement/prospectus, which is made a
part of this Form S-4 registration statement, have been audited by Lazar Levine
& Felix LLP, independent auditors, as set forth in their report incorporated by
reference in Wireless' annual report on Form 10-K, dated February 11, 2000,
except as to note 10 which is dated March 2, 2000, which is incorporated by
reference in this proxy statement/prospectus, and are included in reliance upon
such report given on the authority of such firm as experts in accounting and
auditing.
Boonton's balance sheets as of September 30, 1999 and 1998 and the related
statements of operations, stockholder's equity and cash flows for each of the
years in the three year period ended September 30, 1999 included in this proxy
statement/prospectus, have been included herein in reliance on the audit report
of Polakoff Weismann Leen LLC given on the authority of that firm as experts in
accounting and auditing.
LEGAL MATTERS
The legality of Wireless common stock offered by this proxy
statement/prospectus will be passed upon for Wireless by Morrison Cohen Singer &
Weinstein, LLP, New York, New York. Members of Morrison Cohen Singer &
Weinstein, LLP hold equity securities in Wireless. Drinker Biddle & Shanley LLP
will, as a condition to the merger, deliver an opinion to the effect that the
description of the federal income tax consequences of the merger under the
heading 'The Merger -- Material Federal Income Tax Consequences' correctly sets
forth the material federal income tax consequences of the merger to Boonton,
Wireless and their respective stockholders.
INDEPENDENT PUBLIC ACCOUNTANTS
Representatives of Polakoff Weismann Leen LLC will be present at the special
stockholders meeting of Boonton Electronics Corporation. These representatives
will have the opportunity to make a statement if they desire to do so and are
expected to be available to respond to appropriate questions.
54
<PAGE>
BOONTON ELECTRONICS CORPORATION
FINANCIAL STATEMENTS
YEAR ENDED SEPTEMBER 30, 1999
AND SIX MONTHS ENDED MARCH 31, 2000 (UNAUDITED)
F-1
<PAGE>
BOONTON ELECTRONICS CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AUDITED FINANCIAL STATEMENTS:
Report of Independent Certified Public Accountants.......... F-3
Financial Statements:
Balance Sheets as of September 30, 1999 and September
30, 1998............................................... F-4
Statements of Operations for the years ended September
30, 1999, 1998 and 1997................................ F-5
Statements of Changes in Stockholders' Equity for the
years ended September 30, 1999, 1998 and 1997.......... F-6
Statements of Cash Flows for the years ended September
30, 1999, 1998 and 1997................................ F-7
Notes to Financial Statements........................... F-8
UNAUDITED INTERIM FINANCIAL STATEMENTS:
Balance Sheets as of March 31, 2000 and September 30,
1999................................................... F-17
Statements of Operations for the six months ended
March 31, 2000 and 1999................................ F-18
Statement of Operations for the three months ended
March 31, 2000 and 1999................................ F-19
Statements of Cash Flows for the six months ended
March 31, 2000 and 1999................................ F-20
Notes to Unaudited Interim Financial Statements......... F-21
</TABLE>
F-2
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders of
BOONTON ELECTRONICS CORPORATION
Hanover Township, New Jersey
We have audited the accompanying Balance Sheets of Boonton Electronics
Corporation as of September 30, 1999 and 1998 and the related Statements of
Operations, Changes in Stockholders' Equity and Cash Flows for the years ended
September 30, 1999, 1998 and 1997. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Boonton Electronics
Corporation as of September 30, 1999 and 1998 and the results of its operations
and cash flows for the years ended September 30, 1999, 1998 and 1997 in
conformity with generally accepted accounting principles.
By /s/ POLAKOFF WEISMANN LEEN LLC
...................................
POLAKOFF WEISMANN LEEN LLC
LIVINGSTON, NEW JERSEY
January 27, 2000
F-3
<PAGE>
BOONTON ELECTRONICS CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1999 1998
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................... $ 69,484 $ 113,812
Trade receivables (Note 1).............................. 866,475 1,299,281
Inventories (Notes 1 & 3)............................... 1,441,561 1,444,245
Deferred tax benefit (Notes 1 & 10)..................... 86,000 86,000
Prepaid expenses and other receivables.................. 271,945 318,442
---------- ----------
Total current assets................................ 2,735,465 3,261,780
---------- ----------
Plant and equipment -- net (Notes 1 & 4)................ 375,287 457,160
---------- ----------
Other assets:
Deferred tax benefit (Notes 1 & 10)..................... 322,435 927,129
Deposits................................................ 70,121 70,121
---------- ----------
Total other assets.................................. 392,556 997,250
---------- ----------
Total assets........................................ $3,503,308 $4,716,190
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable (Note 6)................................... $ 84,303 $ 73,333
Related party loans (Note 6)............................ 43,530 43,530
Accounts payable-trade.................................. 1,082,132 783,247
Other current liabilities............................... 298,717 527,366
Unsecured claims payable (Chapter 11
settlement -- current)
(Note 2).............................................. -- 144,993
---------- ----------
Total current liabilities........................... 1,508,682 1,572,469
Note payable-noncurrent (Note 6)............................ 234,849 307,496
Related party loans-noncurrent (Note 6)..................... 218,970 218,970
---------- ----------
Total liabilities................................... 1,962,501 2,098,935
---------- ----------
Commitments and contingencies (Note 8)......................
Stockholders' equity:
Common stock (Note 9)................................... 238,733 164,430
Capital in excess of par................................ 5,005,563 4,637,866
Deficit................................................. (3,703,489) (2,185,041)
---------- ----------
Total stockholders' equity.......................... 1,540,807 2,617,255
---------- ----------
Total liabilities and stockholders' equity.......... $3,503,308 $4,716,190
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
BOONTON ELECTRONICS CORPORATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net sales................................................ $ 6,886,395 $6,849,143 $7,209,057
Cost of goods sold....................................... 4,039,605 3,431,001 4,140,099
----------- ---------- ----------
Gross profit............................................. 2,846,790 3,418,142 3,068,958
----------- ---------- ----------
Operating expenses:
Commissions.......................................... 959,412 708,561 715,835
Research and development............................. 965,697 992,461 735,528
Other operating expenses............................. 1,610,675 1,431,772 1,545,750
----------- ---------- ----------
Total operating expenses............................. 3,535,784 3,132,794 2,997,113
----------- ---------- ----------
Income (loss) from operations............................ (688,994) 285,348 71,845
----------- ---------- ----------
Other (income) expense:
Interest expense..................................... 50,588 52,096 47,823
Gain on sale of assets............................... (150) (3,700) (51,660)
Environmental expense................................ 79,855 57,205 43,173
Interest income...................................... (1,150) (1,302) (4,257)
Other (income) expense............................... 95,417 (18,490) 5,422
----------- ---------- ----------
Total other (income) expense............................. 224,560 85,809 40,501
----------- ---------- ----------
Income (loss) before taxes............................... (913,554) 199,539 31,344
Income taxes (Note 10)................................... 604,894 56,580 --
----------- ---------- ----------
Net income (loss)........................................ $(1,518,448) $ 142,959 $ 31,344
----------- ---------- ----------
----------- ---------- ----------
Earnings (loss) per common share (Note 12)............... $ (.65) $ .09 $ .02
----------- ---------- ----------
----------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
BOONTON ELECTRONICS CORPORATION
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
COMMON STOCK
---------------------------- ADDITIONAL PAID-IN RETAINED
NUMBER OF SHARES PAR VALUE CAPITAL EARNINGS/(DEFICIT) TOTAL
---------------- --------- ------- ------------------ -----
<S> <C> <C> <C> <C> <C>
Balance 10/1/96........ 1,556,585 $155,659 $4,421,637 $(2,359,344) $ 2,217,952
Exercise of stock
options.............. 80,000 8,000 192,000 -- 200,000
Net income -- year
ended 9/30/97........ -- -- -- 31,344 31,344
---------- -------- ---------- ----------- -----------
Balance 9/30/97........ 1,636,585 163,659 4,613,637 (2,328,000) 2,449,296
Exercise of stock
options.............. 7,716 771 24,229 -- 25,000
Net income -- year
ended 9/30/98........ -- -- -- 142,959 142,959
---------- -------- ---------- ----------- -----------
Balance 9/30/98........ 1,644,301 164,430 4,637,866 (2,185,041) 2,617,255
Stock purchased........ 743,031 74,303 367,697 -- 442,000
Net income -- year
ended 9/30/99........ -- -- -- (1,518,448) (1,518,448)
---------- -------- ---------- ----------- -----------
Balance 9/30/99........ 2,387,332 $238,733 $5,005,563 $(3,703,489) $ 1,540,807
---------- -------- ---------- ----------- -----------
---------- -------- ---------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
BOONTON ELECTRONICS CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)...................................... $(1,518,448) $142,959 $ 31,344
Adjustments to reconcile net income:
Depreciation and amortization.......................... 88,030 89,113 60,398
Deferred taxes......................................... 604,694 56,580 --
Gain on sale of assets................................. (150) (3,700) (51,660)
Decrease (increase) in current assets:
Accounts receivable.................................... 432,806 (247,394) (80,545)
Inventories............................................ 2,684 (138,130) (95,175)
Prepaid expenses and other receivables................. 46,497 14,883 (102,985)
Increase (decrease) in current liabilities:
Accounts payable....................................... 298,885 (17,684) 331,049
Accrued expenses....................................... (228,649) 242,838 (253,800)
Chapter 11 settlement -- current....................... (144,993) 96,502 --
----------- -------- ---------
Net cash provided (used) by operating activities....... (418,644) 235,967 (161,374)
----------- -------- ---------
Cash flows from investing activities:
Proceeds from sale of assets........................... 150 3,700 51,660
Purchase of equipment.................................. (6,157) (12,250) (430,563)
Other.................................................. -- 1,048 (3,401)
----------- -------- ---------
Net cash (used) by investing activities................ (6,007) (7,502) (382,304)
----------- -------- ---------
Cash flows from financing activities:
Proceeds from notes payable............................ -- -- 394,071
Payments on loans...................................... (61,677) (57,901) (43,681)
Related party borrowings............................... -- -- 50,000
Payments on related party loans........................ -- (50,000) --
Chapter 11 settlement -- non current................... -- (153,372) (48,133)
Proceeds from stock purchases.......................... 442,000 25,000 200,000
----------- -------- ---------
Net cash provided (used) by financing activities....... 380,323 (236,273) 552,257
----------- -------- ---------
Increase (decrease) in cash and cash equivalents....... (44,328) (7,808) 8,579
Cash and cash equivalents at beginning................. 113,812 121,620 113,041
----------- -------- ---------
Cash and cash equivalents at ending.................... $ 69,484 $113,812 $ 121,620
----------- -------- ---------
----------- -------- ---------
Supplemental disclosures of cash flow information:
Income taxes paid...................................... $ 20,916 $ 1,350 $ 1,425
----------- -------- ---------
----------- -------- ---------
Interest paid.......................................... $ 22,139 $ 28,061 $ 33,575
----------- -------- ---------
----------- -------- ---------
</TABLE>
The accompanying notes are an integral part of these statements.
F-7
<PAGE>
BOONTON ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND DESCRIPTION OF BUSINESS
A. The Company is a New Jersey Corporation organized in 1947. The Company
designs and produces electronic testing and measuring instruments
including power meters, voltmeters and modulation meters. Recent models
are microprocessor controlled and are often used in computerized
automatic testing systems. The Company's equipment is marketed throughout
the world to commercial and government customers in the electronics
industry.
The Company markets and distributes its products throughout the United
States and abroad through domestic sales representatives and foreign
distributors. Representatives sell on a commission basis, while
distributors buy products for resale at discounted ex-factory prices. Its
representatives and distributors also handle the products of other
manufacturers, although these are not generally competitive with the
Company's products except that some items handled by foreign distributors
may be somewhat competitive.
B. Use of estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
C. The company accounts for uncollectible accounts under the direct
write-off method whereas generally accepted accounting principals require
provision for such expenses under the allowance method. The effect of
using this method approximates the allowance method as all amounts are
deemed to be fully collectible.
D. Inventories -- stated at the lower of cost or market are valued by the
first-in, first-out (FIFO) method.
E. Property, plant and equipment -- Depreciation and amortization are
calculated by the straight-line method for financial reporting purposes
at rates based on the following estimated useful lives:
<TABLE>
<S> <C>
Building and improvement. 39
Machinery and equipment..................................... 5-10
Office furniture and fixtures............................... 5-10
Transportation equipment.................................... 3
</TABLE>
The accelerated cost recovery system and modified accelerated cost
recovery system are used for income tax purposes. Cost of major renewals
and betterments that extend the life of the property and equipment are
capitalized. Expenditures for maintenance and repairs are charged to
expenses as incurred.
F. Financial risk -- The Company regularly maintains bank account balances
in excess of FDIC insurable limit.
G. Income Taxes -- The Company adopted the provisions of Statement of
Financial Accounting Standards No. 109, 'Accounting for Income Taxes'
which requires a company to recognize deferred tax liabilities and assets
for the expected future tax consequences of events that have been
recognized in a Company's financial statements or tax returns. Under this
method, deferred tax liabilities and assets are determined based on the
differences between the financial statement carrying amounts and tax
basis of assets and liabilities using expected tax rates in effect in the
years in which the differences are expected to reverse. The Company
recognized the benefit of net operating loss carry forwards applying the
valuation allowance which requires that the tax benefit be limited based
on the weight of available evidence and the probability that some portion
of the deferred tax asset will not be realized.
F-8
<PAGE>
BOONTON ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 30, 1999
H. Financial Instruments -- The Company's financial instruments include
cash, cash equivalents, trade receivables and payables, long-term debt
and loans from related parties for which carrying amounts approximate
fair value. It is not practicable to estimate the fair value of related
party loans and long-term debt.
I. Stock-Based Compensation -- The Company has elected to follow Accounting
Principles Board Opinion No. 25, 'Accounting for Stock Issued to
Employees' (APB25) and related interpretations in accounting for its
employee stock options. Under APB25, because the exercise price of
employee stock options equals the market price of the underlying stock on
the date of grant, no compensation expense is recorded. Effective October
1, 1997, the Company has adopted the disclosure only provisions of
Statement of Financial Accounting Standards No. 123, 'Accounting for
Stock-Based Compensation' (Statement 123).
NOTE 2. PROCEEDINGS UNDER CHAPTER 11
The Company operated under Chapter 11 proceedings for the period September
7, 1993 through November 15, 1994 when, on the later date, an order confirming
the Plan of Reorganization was entered by the United States Bankruptcy Court,
District of New Jersey. The settlement of unsecured claims under the confirmed
Plan of Reorganization totaling 35% of allowed claims for accounts payable and
accrued expenses provided for the following payments to be made subsequent to
November 15, 1994:
<TABLE>
<S> <C>
10% From after tax proceeds from termination of the company's pension plan
5% One year after initial payment
5% Two years after initial payment
15% Three years after initial payment (Paid in full October 30, 1998.)
</TABLE>
Pre-petition liabilities in accordance with the November 15, 1994 confirmed
Plan of Reorganization were compromised of the following:
<TABLE>
<S> <C>
Accounts payable............................................ 702,233
Accrued expenses:
Commissions payable..................................... 126,370
Vacation pay............................................ 96,250
Severance pay........................................... 25,108
Other................................................... 78,282
---------
Total September 30, 1994............................ 1,028,243
Court authorized payments/adjustments....................... (75,073)
---------
Balance subject to settlement............................... 953,170
Amount discharged and/or paid to date....................... (953,170)
---------
September 30, 1999 balance.................................. $ --
---------
---------
</TABLE>
NOTE 3. INVENTORIES
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------------
1999 1998
---- ----
<S> <C> <C>
Raw material................................................ $ 846,594 $ 707,729
Work in process............................................. 326,332 532,470
Finished goods.............................................. 268,635 204,046
---------- ----------
Total inventories....................................... $1,441,561 $1,444,245
---------- ----------
---------- ----------
</TABLE>
F-9
<PAGE>
BOONTON ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 30, 1999
NOTE 4. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------------
1999 1998
---- ----
<S> <C> <C>
Building and improvements................................... $ 62,329 $ 62,329
Machinery and equipment..................................... 1,675,512 1,670,068
Office furniture and fixtures............................... 583,232 582,518
Transportation equipment.................................... -- 13,188
---------- ----------
Total................................................... 2,321,073 2,328,103
Accumulated depreciation.................................... (1,945,786) (1,870,943)
---------- ----------
Net depreciated cost.................................... $ 375,287 $ 457,160
---------- ----------
---------- ----------
</TABLE>
NOTE 5. RESULTS OF OPERATIONS
The loss for the fiscal year ended September 30, 1999 was mainly
attributable to; a) $211,648 inventory write down; b) increased export sales
that carry higher commission rates; c) $604,694 reduction in deferred tax
assets; and d) increased rent expense.
The Company reported a net income of $142,959 for the fiscal year ended
September 30, 1998. This was an increase of $111,615 over the net income of
$31,344 reported for the fiscal year ended September 30, 1997.
NOTE 6. NOTES PAYABLE
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------
1999 1998
---- ----
<S> <C> <C>
A. Board of Directors:
Notes, subordinated to NJEDA loan, dated February 6,
1995, payable in monthly installments of $5,449
including interest at 9% per annum through September
30, 2001:............................................. $262,500 $262,500
Less current portion.................................... 43,530 43,530
-------- --------
Non current portion..................................... $218,970 $218,970
-------- --------
-------- --------
</TABLE>
Interest expense for the fiscal years ended September 30, 1999 and 1998
amounted to $23,953 and $24,035, respectively. No principal payments were made
during the year ended September 30, 1999 since these notes are subordinated to
the NJEDA loan.
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------
1999 1998
---- ----
<S> <C> <C>
B. New Jersey Economic Development Authority:
Note, dated July 31, 1996, payable in monthly
installments of $7,620 Including interest at 6.75% per
annum through June 30, 2003:.......................... $319,152 $380,829
Less current portion.................................... 84,303 73,333
-------- --------
Non current portion..................................... $234,849 $307,496
-------- --------
-------- --------
</TABLE>
Interest expense for the fiscal years ended September 30, 1999 and 1998
amounted to $24,855 and $28,061, respectively. Future principal payments under
the terms of the agreement are as follows:
F-10
<PAGE>
BOONTON ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
----------- ------
<S> <C>
2000...................................................... $ 84,303
2001...................................................... 77,778
2002...................................................... 83,271
2003...................................................... 73,800
--------
Total................................................. $319,152
--------
--------
</TABLE>
NOTE 7. CONCENTRATION OF CREDIT RISK
The Company maintains cash and cash equivalents at three financial
institutions that are insured by the Federal Deposit Insurance Corporation
(FDIC) and/or Securities Investor Protection Corporation (SIPC). The Company at
times during the year had amounts in these institutions that exceeded insurable
limits of $100,000 FDIC and $500,000 SIPC. In the normal course of business the
Company extends unsecured credit to customers in the United States and Asia.
NOTE 8. COMMITMENTS AND CONTINGENCIES
COMMITMENTS:
A. Retirement Plans:
Effective July 1, 1989, the Company adopted a defined contribution plan
for all eligible employees. In accordance with Internal Revenue Code
Section 401(k), the plan provides for elective deferral of up to 15% of
total compensation. The plan further provided for a Company matching
contribution of 25% of the elective deferral amount of each participant
that did not exceed 6% of total compensation. Effective October 1, 1995,
the Company increased the matching contribution to 50% of the elective
deferral amount for each participant that does not exceed 6% of total
compensation. The amounts charged to operations were $32,854 and $33,792
for the years ended September 30, 1999 and 1998, respectively.
B. Employee Stock Options Plans:
On February 26, 1987, the Stockholders approved the 1987 Incentive Stock
Option Plan, the 1987 Employee Stock Purchase Plan and the 1987 Stock
Option Program for Non-Employee Directors. Subject to the provisions of
these plans, an aggregate of 150,000 shares of the Company's stock was
made available for option purchases; namely, 75,000 shares, 37,500 shares
and 37,500 shares, respectively. The plans ended effective December 1996
and no further grants may be made for options.
<TABLE>
<CAPTION>
OPTION
----------------------------------
PRICE PER SHARE NUMBER OF SHARES
--------------- ----------------
<S> <C> <C>
Shares under option at September 30, 1996............. $1.0625 46,500
Expired............................................... $1.0625 (20,000)
-------
Shares under option at September 30, 1997............. $1.0625 26,500
-------
-------
Shares under option at September 30, 1998............. $1.0625 26,500
Expired............................................... $1.0625 (14,000)
-------
Shares under option at September 30, 1999............. $1.0625 12,500
-------
-------
</TABLE>
C. Lease Commitments:
Subsequent to the sale of the Company's facility in Randolph, New Jersey
on September 28, 1994, the company entered into a seven-year lease for
its present office and manufacturing
F-11
<PAGE>
BOONTON ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 30, 1999
facility in Hanover Township, New Jersey with a five-year renewal option.
Rent that was charged to operations for the fiscal year ended September
30, 1999 totaled $332,000. Future minimum lease payments required under
the operating lease are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
----------- ------
<S> <C>
2000...................................................... $332,000
2001...................................................... 332,000
</TABLE>
The Company leases certain equipment under operating lease arrangements
that are generally for 60-month terms. These operating leases expire in
various years through 2005. One of these leases may be renewed at the end
of three years. Future payments consisted of the following at September
30, 1999:
<TABLE>
<CAPTION>
FISCAL
YEAR AMOUNT
---- ------
<S> <C>
2000................................................. $52,186
2001................................................. 54,624
2002................................................. 51,511
2003................................................. 49,287
2004................................................. 44,536
2005................................................. 2,438
</TABLE>
CONTINGENCIES:
A. Environmental Contingencies:
Following an investigation by the New Jersey Department of Environmental
Protection (NJDEP) of the Company's waste disposal practices at a certain
site that it formerly leased, the Company put a ground water management
plan into effect as approved by the Department. Costs associated with
this site are charged directly to income as incurred. The owner of this
site has notified the Company that if the NJDEP investigation proves to
have interfered with a sale of the property, the owner may seek to hold
the Company liable for any loss it suffers as a result. However,
corporate counsel has informed management that, in their opinion, the
lessor would not prevail in any lawsuit filed due to the imposition by
law of the statute of limitations.
Costs charged to operations in connection with the water management plan
amounted to $79,855 and $57,205 for the years ended September 30, 1999
and 1998, respectively. The Company estimates the expenditures in this
regard for the fiscal year ending September 30, 2000 will amount to
approximately $80,000. The Company will continue to be liable under the
plan in all future years until such time as the NJDEP releases it from
all obligations applicable thereto.
B. Contingent Subscription and Option Agreement:
On June 30, 1997, the Board of Directors of Boonton Electronics
Corporation (BEC) agreed to enter into a Subscription and Option
Agreement with G.E.M. USA, Inc. (GEM), a wholly-owned subsidiary of
General de Mesure et de Maintenance Electronique, S.A. (GMME), whereby
GEM had the option to buy 435,984 shares of the common stock of BEC at an
option price of $3.24 per share. The term of the option agreement was for
a period of two years effective October 1, 1997. GEM paid BEC $25,000 for
this option and simultaneously purchased 7,716 shares of BEC's common
stock from the corporation for an additional $25,000.
Further, on June 30, 1997, the Board of Directors of BEC resolved to
enter into a Shared Facilities Agreement with B&K Precision, Inc. (B&K),
a wholly-owned subsidiary of GEM, as additional consideration for the
above noted option. The term of the agreement was for a period of two
years effective October 1, 1997.
F-12
<PAGE>
BOONTON ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 30, 1999
C. Income Tax Contingencies:
The Company's income tax returns for the fiscal years ended September 30,
1996, 1997, 1998 and 1999 are subject to review.
D. The Company remains liable for certain claims by a former stockholder
until full payment of the Stock Purchase by an affiliated company.
E. A former employee has charged the Company with wrongful dismissal. The
Company contends there was no such discrimination and intends to contest
the suit.
F. In September 1999, the Company was a party to an Agreement and Plan of
Reorganization. In October 1999, the Purchasers terminated the Agreement
pursuant to specific conditions. The Agreement provided that should the
Company or its Shareholders enter into any acquisition transaction
involving a third party within one year after such termination, the
Company would be obligated to pay the Purchasers $100,000 plus certain
other expenses up to a maximum of $500,000. Management contends that any
such claim would be without merit and would vigorously defend their
position.
G. Management intends to pursue business alternatives including a
strategic-alliance, merger or sale of the Company.
NOTE 9. COMMON STOCK
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1999 1998
---- ----
<S> <C> <C>
$.10 par value authorized 5,000,000 shares, issued and
outstanding 2,387,332 shares and 1,644,301 shares,
respectively............................................ $238,733 $164,430
-------- --------
-------- --------
</TABLE>
NOTE 10. INCOME TAXES
The components of the deferred tax asset are:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1999 1998
---- ----
<S> <C> <C>
Deferred tax asset........................................ $ 3,029,700 $ 2,788,561
Valuation allowance....................................... (2,621,265) (1,775,432)
----------- -----------
Net deferred tax asset.................................... $ 408,435 $ 1,013,129
----------- -----------
----------- -----------
</TABLE>
Financial Accounting Standards Board Statement No. 109, 'Accounting for
Income Taxes', requires that the Company record a valuation allowance when it is
'more likely than not that some portion or all of the deferred tax assets will
not be realized'.
The ultimate realization of this deferred tax asset depends on the ability
to generate sufficient taxable income in the future. The Company has undergone
substantial restructuring changes and has made strategic realignments of its
operations that management believes will result in future profitability. While
it is management's belief that these measures will allow for future positive
operating results, the losses in recent years and a desire to be conservative
make it appropriate to record a valuation allowance. Accordingly, the Company
has provided a valuation allowance for the portion of the total deferred tax
asset that will not be realized as related to the operating loss carry forward.
Income tax laws allow for the utilization of loss carry forwards over
periods not to exceed 15 and 7 years for Federal and State purposes,
respectively. If the Company is not able to generate sufficient taxable income
in the future through operating results, increases in the valuation allowance
will be required through a charge to expense (reducing stockholders' equity). In
the event the Company
F-13
<PAGE>
BOONTON ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 30, 1999
reports sufficient profitability to use all of the deferred income tax assets,
the valuation allowance will be eliminated through a credit to expense
(increasing stockholders' equity).
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1999 1998
---- ----
<S> <C> <C>
Current provision:
Federal............................................... $ -- $--
State................................................. 200 --
-------- -------
Total current provision........................... 200 --
-------- -------
Deferred provision:
Federal............................................... 548,810 36,342
State................................................. 55,884 20,238
-------- -------
Total deferred provision.......................... 604,694 56,580
-------- -------
Total income tax provision................................ $604,894 $56,580
-------- -------
-------- -------
</TABLE>
The following is a reconciliation of income taxes at the federal statutory
rate with income taxes recorded by the Company:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1999 1998
---- ----
<S> <C> <C>
Computed income tax at statutory rate..................... $-- $ 61,737
Recognition of net operating loss......................... -- (61,737)
------- --------
Expense (benefit)......................................... $-- $ --
------- --------
------- --------
</TABLE>
The Company has net operating loss carry forwards for federal and state
purposes approximating $6,706,500 and $8,327,500 that expire in various years
through 2014 and 2006, respectively. These loss carry forwards can be utilized
to reduce future taxable income dollar for dollar.
In May 1997, the Company dissolved Boonton International Sales Corporation
(BIS) (former wholly-owned subsidiary) and received a Certificate of Dissolution
from the state of New Jersey. BIS, as an Interest Charge Domestic International
Sales Corporation (IC-DISC), had $1,456,000 of deferred income. The deferred
income became taxable to the Company upon the dissolution of BIS and therefore
reduced the deferred tax asset and related valuation allowance accordingly.
NOTE 11. SEGMENT INFORMATION
The Company is engaged in the manufacture and sale of electronic test and
measurement equipment and management considers its business as a single segment
for reporting purposes.
A. The Company's export sales were as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, EXPORT SALES % OF TOTAL SALES
------------------------ ------------ ----------------
<S> <C> <C>
1999............................................. $3,101,706 45%
1998............................................. 2,392,508 35%
1997............................................. 2,369,499 33%
</TABLE>
B. Customers sales to domestic government agencies were as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, DOMESTIC GOVERNMENT SALES % OF TOTAL SALES
------------------------ ------------------------- ----------------
<S> <C> <C>
1999.................................. $ 383,543 6%
1998.................................. 321,850 5%
1997.................................. 1,514,792 21%
</TABLE>
F-14
<PAGE>
BOONTON ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 30, 1999
NOTE 12. EARNINGS PER SHARE
Earnings (loss) per share have been computed by dividing net income (loss)
by the weighted average number of common shares outstanding of 2,351,148 for
1999, 1,644,301 for 1998 and 1,621,462 for 1997. Options to purchase a total of
428,268 shares of common stock at $3.24 per share in 1998 and 1997 were not
included because the exercise price exceeded the average market price and would
result in anti dilution. Incentive stock options to purchase 12,500 shares in
1999, 26,500 shares in 1998 and in 1997 were not included because they were
insignificant.
NOTE 13. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999 1ST QTR. 2ND QTR. 3RD QTR. 4TH QTR.
------------------ -------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales................................. $1,507,840 $1,906,339 $1,820,394 $1,651,822
Gross profit.......................... 631,842 988,727 897,226 328,995
Net income (loss)..................... (122,509) 14,263 68,462 (1,478,664)
Earnings (loss) per share............. (.05) .00 .03 (.63)
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998 1ST QTR. 2ND QTR. 3RD QTR. 4TH QTR.
------------------ -------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales................................. $1,657,200 $1,562,204 $1,422,653 $2,207,086
Gross profit.......................... 799,625 767,576 742,306 1,108,635
Net income (loss)..................... 18,209 (161) (31,642) 156,553
Earnings (loss) per share............. .01 .00 (.02) .10
</TABLE>
F-15
<PAGE>
BOONTON ELECTRONICS CORPORATION
FINANCIAL STATEMENTS
SIX MONTHS ENDED MARCH 31, 2000
(UNAUDITED)
The following financial statements have been prepared by management and are
not to be considered as part of or included in the financial statements and
notes to financial statements for the years ended September 30, 1999, 1998 and
1997 as audited by Polakoff Weismann Leen LLC.
F-16
<PAGE>
BOONTON ELECTRONICS CORPORATION
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, 2000 SEPTEMBER 30, 1999
-------------- ------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................... $ 236,044 $ 69,484
Trade receivables....................................... 1,184,357 866,475
Inventories............................................. 1,580,633 1,441,561
Deferred tax benefit.................................... 86,000 86,000
Prepaid expenses and other receivables.................. 264,898 271,945
----------- -----------
Total current assets................................ 3,351,932 2,735,465
----------- -----------
Plant and equipment -- net.............................. 332,800 375,287
----------- -----------
Other assets:
Deferred tax benefit.................................... 322,435 322,435
Deposits................................................ 70,121 70,121
----------- -----------
Total other assets.................................. 392,556 392,556
----------- -----------
Total assets........................................ $ 4,077,288 $ 3,503,308
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable........................................... $ 324,688 $ 84,303
Related party loans..................................... 43,530 43,530
Accounts payable........................................ 986,586 1,082,132
Other current liabilities............................... 554,969 298,717
----------- -----------
Total current liabilities........................... 1,909,773 1,508,682
Notes payable -- noncurrent................................. 203,640 234,849
Related party loans -- noncurrent........................... 218,970 218,970
----------- -----------
Total liabilities................................... 2,332,383 1,962,501
----------- -----------
Commitments and contingencies
Stockholders' equity:
Common stock............................................ 238,733 238,733
Capital in excess of par................................ 5,005,563 5,005,563
Deficit................................................. (3,499,391) (3,703,489)
----------- -----------
Total stockholders' equity.......................... 1,744,905 1,540,807
----------- -----------
Total liabilities and stockholders' equity.......... $ 4,077,288 $ 3,503,308
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these statements.
F-17
<PAGE>
BOONTON ELECTRONICS CORPORATION
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
-------------------------------
MARCH 31, 2000 MARCH 31, 1999
-------------- --------------
<S> <C> <C>
Net sales................................................... $4,117,284 $3,414,179
Cost of sales............................................... 2,265,530 1,793,608
---------- ----------
Gross profit................................................ 1,851,754 1,620,571
---------- ----------
Operating expenses:
Commissions............................................. 478,733 437,377
Research and development................................ 363,777 433,997
Other operating expenses................................ 810,821 787,382
---------- ----------
Total operating expenses............................ 1,653,331 1,658,756
---------- ----------
Income (loss) from operations............................... 198,423 (38,185)
---------- ----------
Interest expense........................................ 20,579 30,545
Other (income) expense.................................. (26,254) 38,598
---------- ----------
Total other (income) expense................................ (5,675) 69,143
---------- ----------
Income (loss) before taxes.................................. 204,098 (107,328)
Income taxes................................................ -- --
---------- ----------
Net income (loss)........................................... 204,098 (107,328)
Stockholders' equity -- beginning........................... 1,540,807 2,617,255
Common stock sold........................................... -- 442,000
---------- ----------
Stockholders' equity -- ending.............................. $1,744,905 $2,951,927
---------- ----------
---------- ----------
Weighted average shares outstanding......................... 2,387,332 2,314,765
---------- ----------
---------- ----------
Earnings (loss) per share................................... $ 0.09 $ (0.05)
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these statements.
F-18
<PAGE>
BOONTON ELECTRONICS CORPORATION
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
-------------------------------
MARCH 31, 2000 MARCH 31, 1999
-------------- --------------
<S> <C> <C>
Net sales................................................... $2,345,961 $1,906,339
Cost of sales............................................... 1,355,704 917,610
---------- ----------
Gross profit................................................ 990,257 988,729
---------- ----------
Operating expenses:
Commissions............................................. 252,040 301,279
Research and development................................ 189,773 199,463
Other operating expenses................................ 442,180 430,112
---------- ----------
Total operating expenses............................ 883,993 930,854
---------- ----------
Income from operations...................................... 106,264 57,875
---------- ----------
Interest expense........................................ 10,749 16,058
Other (income) expense.................................. (7,733) 26,636
---------- ----------
Total other expense................................. 3,016 42,694
---------- ----------
Income before taxes......................................... 103,248 15,181
Income taxes................................................ -- --
---------- ----------
Net income.................................................. 103,248 15,181
Stockholders' equity -- beginning........................... 1,641,657 2,936,746
Common stock sold........................................... -- --
---------- ----------
Stockholders' equity -- ending.............................. $1,744,905 $2,951,927
---------- ----------
---------- ----------
Weighted average shares outstanding......................... 2,387,332 2,314,765
---------- ----------
---------- ----------
Earnings per share.......................................... $ 0.04 $ 0.00
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these statements.
F-19
<PAGE>
BOONTON ELECTRONICS CORPORATION
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
-------------------------------
MARCH 31, 2000 MARCH 31, 1999
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)....................................... $ 204,098 $(107,328)
Adjustments to reconcile net income (loss):
Depreciation............................................ 42,487 44,008
Gain on sale of assets.................................. -- (150)
Decrease (increase) in current assets:
Accounts receivable..................................... (317,882) 305,198
Inventories............................................. (139,072) (246,241)
Prepaid expenses and other current assets............... 7,047 (189,674)
Increase (decrease) in current liabilities:
Accounts payable........................................ (95,546) 133,305
Accrued liabilities..................................... 256,252 (169,974)
Chapter 11 settlement -- current........................ -- (144,993)
--------- ---------
Net cash (used) by operations........................... (42,616) (375,849)
--------- ---------
Cash flows from investing activities:
Purchase of equipment................................... -- (5,872)
Proceeds from sale of assets............................ -- 150
--------- ---------
Net cash provided (used) by investing activities............ -- (5,722)
--------- ---------
Cash flows from financing activities:
Payments on loans....................................... (40,824) (33,256)
Proceeds from borrowings................................ 250,000 --
Proceeds from sale of common stock...................... -- 442,000
--------- ---------
Net cash provided by financing activities................... 209,176 408,744
--------- ---------
Increase in cash and cash equivalents....................... 166,560 27,173
Cash and cash equivalents at beginning of period............ 69,484 113,812
--------- ---------
Cash and cash equivalents at end of period.................. $ 236,044 $ 140,985
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of these statements.
F-20
<PAGE>
BOONTON ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
(UNAUDITED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND DESCRIPTION OF BUSINESS:
A. The Company is a New Jersey Corporation organized in 1947. The Company
designs and produces electronic testing and measuring instruments
including power meters, voltmeters and modulation meters. Recent models
are microprocessor controlled and are often used in computerized
automatic testing systems. The Company's equipment is marketed throughout
the world to commercial and government customers in the electronics
industry.
The Company markets and distributes its products throughout the United
States and abroad via domestic sales representatives and foreign
distributors. Representatives sell on a commission basis, while
distributors buy products for resale at discounted ex-factory prices. Its
representatives and distributors also handle the products of other
manufacturers, although these are not generally competitive with the
Company's products.
B. Use of estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
C. The Company accounts for uncollectible trade accounts under the direct
write-off method whereas generally accepted accounting principles require
provision for such expenses under the allowance method. The effect of
using this method approximates the allowance method as all amounts are
deemed to be fully collectible.
D. Inventories -- stated at the lower of cost or market are valued by the
first-in, first-out (FIFO) method.
E. Plant and equipment -- Depreciation and amortization are calculated by
the straight-line method for financial reporting purposes at rates based
on the following estimated useful lives:
<TABLE>
<S> <C>
Building and improvement.................................... 39
Machinery and equipment..................................... 5-10
Office furniture and fixtures............................... 5-10
</TABLE>
The accelerated cost recovery and modified accelerated cost recovery
systems are used for income tax purposes. Cost of major renewals and
improvements that extend the life of the plant and equipment are
capitalized. Expenditures for maintenance and repairs are charged to
expenses as incurred.
F. Financial risk -- The Company regularly maintains bank account balances
in excess of FDIC insurable limits.
G. Income taxes -- The Company adopted the provisions of Statement of
Financial Accounting Standards No. 109, 'Accounting for Income Taxes'
that requires a company to recognize deferred tax liabilities and assets
for the expected future tax consequences of events that have been
recognized in a company's financial statements or tax returns. Under this
method, deferred tax liabilities and assets are determined based on
differences between the financial statement amounts and tax basis of
assets and liabilities using expected tax rates in effect in the years in
which the differences are expected to reverse. The Company recognized the
benefit of net operating loss carry forward applying the valuation
allowance that requires that the tax benefit be limited based on the
weight of available evidence and the probability that some portion of the
deferred tax asset shall not be realized.
H. Financial instruments -- The Company's financial instruments include
cash, cash equivalents, trade receivables and payables, long-term debt
and loans from related parties for which the
F-21
<PAGE>
BOONTON ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
MARCH 31, 2000
(UNAUDITED)
carrying amounts approximate fair value. It is not practicable to estimate
the fair value of related party loans and long-term debt.
I. Stock-based compensation -- The Company has elected to follow Accounting
Principles Board Opinion No. 25, 'Accounting for Stock Issued to
Employees' (APB25) and related interpretations in accounting for its
employee stock options. Under APB25, because the exercise price of
employee stock options equals the market price of the underlying stock on
the date of grant, no compensation expense is recorded. Effective October
1, 1997, the Company has adopted the disclosure only provisions of
Statement of Financial Accounting Standards No. 123, 'Accounting for
Stock-Based Compensation' (Statement 123).
NOTE 2. INVENTORIES:
<TABLE>
<CAPTION>
MARCH 31, 2000 SEPTEMBER 30, 1999
-------------- ------------------
<S> <C> <C>
Raw material................................................ $1,115,241 $ 846,594
Work in process............................................. 234,655 326,332
Finished goods.............................................. 230,737 268,635
---------- ----------
Total inventories....................................... $1,580,633 $1,441,561
---------- ----------
---------- ----------
</TABLE>
NOTE 3. PLANT AND EQUIPMENT:
<TABLE>
<CAPTION>
MARCH 31, 2000 SEPTEMBER 30, 1999
-------------- ------------------
<S> <C> <C>
Building and improvements................................... $ 62,329 $ 62,329
Machinery and equipment..................................... 1,675,512 1,675,512
Office furniture and fixtures............................... 583,232 583,232
----------- -----------
Total -- at cost............................................ 2,321,073 2,321,073
Accumulated depreciation.................................... (1,988,273) (1,945,786)
----------- -----------
Plant and equipment -- net.................................. $ 332,800 $ 375,287
----------- -----------
----------- -----------
</TABLE>
NOTE 4. RELATED PARTY LOANS AND NOTES PAYABLE:
<TABLE>
<CAPTION>
MARCH 31, 2000 SEPTEMBER 30, 1999
-------------- ------------------
<S> <C> <C>
A. Related Party Loans
Board of Directors:
Notes, subordinated to NJEDA loan, dated February 6,
1995, payable in monthly installments of $5,449
including interest at 9% per annum through September
30, 2001.............................................. $262,500 $262,500
Less current portion........................................ 43,530 43,530
-------- --------
Non current portion......................................... $218,970 $218,970
-------- --------
-------- --------
</TABLE>
Interest expense for the fiscal years ended September 30, 1999 and 1998
amounted to $23,953 and $24,035, respectively. No principal payments were made
during the year ended September 30, 1999 since these notes are subordinated to
the NJEDA loan.
F-22
<PAGE>
BOONTON ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
MARCH 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, 2000 SEPTEMBER 30, 1999
-------------- ------------------
<S> <C> <C>
B. Notes Payable
New Jersey Economic Development Authority (NJEDA):
Note, dated July 31, 1996, payable in monthly
installments of $7,620 including interest at 6.75% per
annum through June 30, 2003:.......................... $278,328 $319,152
Wireless Telecom Group (see Note 11): Note, dated March
2, 2000, payable in full including interest at 9.75%
per annum:............................................ 250,000 --
-------- --------
Total notes payable..................................... 528,328 319,152
Less current portion.................................... 324,688 84,303
-------- --------
Non current portion..................................... $203,640 $234,849
-------- --------
-------- --------
</TABLE>
NJEDA interest expense for the fiscal years ended September 30, 1999 and
1998 amounted to $24,855 and $28,061, respectively. Future principal payments
under the terms of the NJEDA note agreement are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
----------- ------
<S> <C>
2000...................................................... $ 84,303
2001...................................................... 77,778
2002...................................................... 83,271
2003...................................................... 73,800
--------
Total..................................................... $319,152
--------
--------
</TABLE>
NOTE 5. CONCENTRATION OF CREDIT RISK:
The Company maintains cash and cash equivalents at two financial
institutions that are insured by the Federal Deposit Insurance Corporation
(FDIC). The Company at times during the period had amounts in these institutions
that exceeded the FDIC insurable limit of $100,000. In the normal course of
business the Company extends unsecured credit to customers in the United States
and abroad.
NOTE 6. COMMITMENTS AND CONTINGENCIES:
COMMITMENTS:
A. Retirement Plans:
Effective July 1, 1989, the Company adopted a defined contribution plan
for all eligible employees. In accordance with Internal Revenue Code
Section 401(k), the plan provides for elective deferral of up to 15% of
total compensation. The plan further provided for a Company matching
contribution of 25% of the elective deferral amount of each participant
that did not exceed 6% of total compensation. Effective October 1, 1995,
the Company increased the matching contribution to 50% of the elective
deferral amount of each participant that does not exceed 6% of total
compensation. The amounts charged to operations for the fiscal years
ended September 30, 1999 and 1998 were $32,854 and $33,792, respectively.
B. Employee Stock Option Plans:
On February 26, 1987, the Stockholders approved the 1987 Incentive Stock
Option Plan, the 1987 Employee Stock Purchase Plan and the 1987 Stock
Option Plan for Non-Employee Directors. Subject to the provisions of
these plans, an aggregate of 150,000 shares of the Company's stock was
made available for option purchases; namely 75,000 shares, 37,500 shares
F-23
<PAGE>
BOONTON ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
MARCH 31, 2000
(UNAUDITED)
and 37,500 shares, respectively. The plans ended effective December 1996
and no further grants may be made for options.
<TABLE>
<CAPTION>
PRICE PER SHARE NUMBER OF SHARES
--------------- ----------------
<S> <C> <C>
Shares under option at September 30, 1998................... $1.0625 26,500
Expired................................................. $1.0625 (14,000)
-------
Shares under option at September 30, 1999................... $1.0625 12,500
Expired................................................. $1.0625 (12,500)
-------
Shares under option at March 31, 2000....................... $1.0625 --
-------
-------
</TABLE>
C. Lease commitments:
Effective September 28, 1994, the Company entered into a seven-year lease
(with a five-year renewal option) for its present office and
manufacturing facility in Hanover Township, New Jersey. Rent that was
charged to operations for the fiscal year ended September 30, 1999
totaled $332,000. Future minimum lease payments required under the lease
for fiscal years 2000 and 2001 are $332,000 and $332,000, respectively.
The Company leases certain equipment under operating lease arrangements that
are generally 60-month terms. These operating leases expire in various years
through 2005. One of these leases may be renewed at the end of three years.
Future minimum payments consisted of the following at September 30, 1999:
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
----------- ------
<S> <C>
2000....................................................... $52,186
2001....................................................... 54,624
2002....................................................... 51,511
2003....................................................... 49,287
2004....................................................... 44,536
2005....................................................... 2,438
</TABLE>
CONTINGENCIES:
A. Environmental Contingencies:
Follow an investigation by the New Jersey Department of Environmental
Protection (NJDEP) of the Company's waste disposal practices at a certain
site that it formerly leased, the Company put a groundwater management
plan into effect as approved by the NJDEP. Costs associated with the plan
are charged directly to income as incurred. The owner of the site has
notified the Company that if the NJDEP investigation proves to interfere
with a sale of the property, the owner may seek to hold the Company
liable for any loss it suffers as a result. However, corporate counsel
has informed management that, in their opinion, the lessor would not
prevail in any lawsuit filed due to the imposition by law of the statute
of limitations. Costs charged to operations in connection with the
groundwater management plan for the fiscal years ended September 30, 1999
and 1998 amounted to $79,855 and $57,205, respectively. The Company
estimates the expenditures in this regard for the fiscal year ending
September 30, 2000 shall amount to approximately $80,000.
B. Income Tax Contingencies:
The Company's income tax returns for the fiscal years ended September 30,
1999, 1998, 1997 and 1996 are subject to review.
C. The Company remains liable for certain claims by a former stockholder
until full payment of the Stock Purchase by an affiliated company.
F-24
<PAGE>
BOONTON ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
MARCH 31, 2000
(UNAUDITED)
D. A former employee has charged the Company with wrongful dismissal. The
Company contends there was no such discrimination and intends to contest
the suit.
E. On March 2, 2000, the Company entered into an Agreement and Plan of
Reorganization (see Note 11). The Agreement provides that if it is
terminated under specific conditions and the Company or its Shareholders
enter into any acquisition transaction involving a third party within one
year after such termination, the Company would be obligated to pay the
Purchasers $100,000 plus certain other expenses up to a maximum of
$500,000. Management is confident that the specific conditions for
termination shall not arise and that no 'break-up fees' shall be
incurred.
F. Management intends to pursue business alternatives including a
strategic- alliance, merger or sale of the Company.
NOTE 7. COMMON STOCK:
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
2000 1999
---- ----
<S> <C> <C>
Common Stock:
$.10 par value authorized 5,000,000 shares, issued and
outstanding 2,387,332 shares.............................. $238,733 $238,733
-------- --------
-------- --------
</TABLE>
NOTE 8. INCOME TAXES:
The components of the deferred tax asset are:
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
2000 1999
---- ----
<S> <C> <C>
Deferred tax asset......................................... $ 3,029,700 $ 3,029,700
Valuation allowance........................................ (2,621,265) (2,621,265)
----------- -----------
Net deferred tax asset..................................... $ 408,435 $ 408,435
----------- -----------
----------- -----------
</TABLE>
Financial Accounting Standards Board Statement No. 109, 'Accounting for
Income Taxes', requires that the Company record a valuation allowance when it is
'more likely than not that some portion or all of the deferred tax assets will
not be realized'. The ultimate realization of this deferred tax asset depends on
the ability to generate sufficient taxable income in the future. The Company has
undergone substantial restructuring changes and has made strategic realignments
of its operations that management believes will result in future profitability.
The losses in recent years and a desire to be conservative make it appropriate
to record a valuation allowance. Accordingly, the Company has provided a
valuation allowance for the portion of the total deferred tax asset that will
not be realized as related to the operating loss carry forward.
Income tax laws allow for the utilization of loss carry forwards over
periods not to exceed 15 and 7 years for Federal and State purposes,
respectively. In the event the Company reports sufficient profitability in the
future to use all or a portion of the deferred tax asset the valuation allowance
shall be reduced or eliminated through a credit to expense (increasing
stockholders' equity). The Company has net loss carry forwards for Federal and
State purposes approximating $6,706,500 and $8,327,500 that expire in various
years through 2014 and 2006, respectively. These loss carry forwards can be
utilized to reduce future taxable income dollar for dollar.
F-25
<PAGE>
BOONTON ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
MARCH 31, 2000
(UNAUDITED)
The following is a reconciliation of income taxes at the federal statutory
rate with income taxes recorded by the Company:
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
2000 1999
---- ----
<S> <C> <C>
Computed income taxes at statutory rate..................... $69,393 $ --
Recognition of net operating loss........................... (69,393) --
------- --------
Expense (benefit)........................................... $ -- $ --
------- --------
------- --------
</TABLE>
NOTE 9. SEGMENT INFORMATION:
The Company is engaged in the manufacture and sale of electronic test and
measurement equipment and management considers its business as a single segment
for reporting purposes.
The Companies export sales were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH 31, AMOUNT % OF TOTAL SALES
-------------------------- ------ ----------------
<S> <C> <C>
2000.............................................. $1,476,560 36%
1999.............................................. 1,749,788 51%
</TABLE>
The Companies sales to domestic government agencies were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH 31, AMOUNT % OF TOTAL SALES
-------------------------- ------ ----------------
<S> <C> <C>
2000............................................... $206,655 5%
1999............................................... 241,597 7%
</TABLE>
NOTE 10. EARNINGS PER SHARE:
Earnings per share have been computed by dividing net income by the
weighted-average number of shares outstanding of 2,387,332 for 2000 and
2,314,765 for 1999. Options to purchase a total of 428,268 shares of common
stock at $3.24 per share in 1999 were not included because the exercise price
exceeded the average market price and would have therefore resulted in
anti-dilution. Also in 1999, incentive stock option shares were not included
because they were deemed to be insignificant.
NOTE 11. CHANGE IN CONTROL OF COMPANY:
Boonton entered into an Agreement and Plan of Reorganization (the 'Merger
Agreement') on March 2, 2000 with Wireless Telecom Group ('Wireless') and WTT
Acquisition Corp., a wholly owned subsidiary of Wireless. Boonton shall be
acquired by and become a wholly owned subsidiary of Wireless. Under the terms of
the Merger Agreement, each outstanding share of the Boonton's common stock shall
be converted into .79 shares of Wireless common stock on the closing date. It is
expected that the merger shall be completed before July 14, 2000. The Merger
Agreement is subject to approval by Boonton's stockholders as well as other
customary closing conditions and requirements. Wireless, headquartered in
Paramus NJ, is a global provider of noise generators used in the
telecommunications field.
Also, on March 2, 2000, Wireless and Boonton executed a Promissory Note
whereby Boonton promises to pay Wireless the sum of Two Hundred and Fifty
Thousand Dollars ($250,000) together with interest, equal to the rate of
interest announced on March 2, 2000 by Chase Manhattan Bank to be its prime or
reference rate plus one percent (1%) per annum, as follows. The principal due
and any accrued but unpaid interest shall immediately become due and payable on
the earlier of the 5th business day after the termination of the Merger
Agreement or July 14, 2000. If the note is not repaid in cash then it shall be
converted into 225,000 shares of Boonton common stock. If the closing of the
Merger Agreement shall occur before July 14, 2000, or Boonton's obligation to
repay the Promissory Note is cancelled in accordance with a specified section of
the Merger Agreement, the principal due and any accrued but unpaid interest
thereon shall be cancelled and forgiven and Wireless shall release, acquit and
discharge Boonton from any liability under the Promissory Note.
F-26
<PAGE>
ANNEX A
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF MARCH 2, 2000,
AMONG
WIRELESS TELECOM GROUP, INC.
WTT ACQUISITION CORP.
AND
BOONTON ELECTRONICS CORP.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE I
GENERAL
<C> <S> <C>
1.1 The Merger.................................................. A-1
1.2 The Effective Time of the Merger............................ A-1
1.3 Effect of Merger............................................ A-1
1.4 Certificate and By-laws of Surviving Corporation............ A-1
1.5 Taking of Necessary Action.................................. A-2
1.6 Tax-free Reorganization..................................... A-2
1.7 Closing..................................................... A-2
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1 Effect on Capital Stock..................................... A-2
2.2 Exchange of Certificates.................................... A-3
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL SHAREHOLDERS
3.1 Capacity; Authority; No Consents............................ A-5
3.2 Agreements, etc............................................. A-5
3.3 Certain Agreements.......................................... A-5
3.4 Brokers..................................................... A-5
3.5 Related Transactions........................................ A-5
3.6 Amounts Owed................................................ A-6
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
4.1 Organization; Good Standing; Qualification and Power........ A-6
4.2 Equity Investments.......................................... A-6
4.3 Margin Stock................................................ A-6
4.4 Capital Stock; Securities................................... A-6
4.5 Authority; No Consents...................................... A-7
4.6 SEC Documents............................................... A-8
4.7 Financial Statements........................................ A-8
4.8 Collectability of Accounts Receivable....................... A-8
4.9 Absence of Undisclosed Liabilities.......................... A-9
4.10 Absence of Changes; Conduct of Business..................... A-9
4.11 Tax Matters................................................. A-10
4.12 Books and Records; Audits and Investigations................ A-11
4.13 Title to Assets, Properties and Rights and Related
Matters..................................................... A-11
4.14 Environmental Liability..................................... A-13
4.15 Assessments................................................. A-13
4.16 Intellectual Property....................................... A-13
4.17 Agreements, etc............................................. A-14
4.18 Suppliers; Raw Materials.................................... A-15
4.19 Customers; Sales Representatives............................ A-15
4.20 No Defaults, etc............................................ A-15
4.21 Litigation, Observance of Statues, Regulations and Orders... A-16
4.22 Licenses, Permits, etc...................................... A-16
4.23 Compliance; Governmental Authorizations..................... A-16
4.24 Labor Relations; Employees.................................. A-17
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
SECTION PAGE
------- ----
<C> <S> <C>
4.25 Employee Benefit Plans and Contracts........................ A-17
4.26 Certain Agreements.......................................... A-19
4.27 Insurance................................................... A-19
4.28 Brokers..................................................... A-20
4.29 Related Transactions........................................ A-20
4.30 Board Approval.............................................. A-20
4.31 Vote Required............................................... A-20
4.32 Officers and Directors...................................... A-20
4.33 Information Supplied........................................ A-20
4.34 Bank Accounts; Credit and Charge Cards...................... A-21
4.35 Company not an Interested Shareholder....................... A-21
4.36 Investment Company Act; Public Utility Holding Company
Act......................................................... A-21
4.37 No Right of Action.......................................... A-21
4.38 Knowledge Definition........................................ A-21
4.39 Year 2000 Compliance........................................ A-21
4.40 Directors Liabilities....................................... A-21
4.41 Full Disclosure............................................. A-22
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION SUB
5.1 Organization; Good Standing; Qualification and Power........ A-22
5.2 Information Supplied........................................ A-22
5.3 Continuity of Business Enterprise........................... A-22
5.4 Authority; No Consents...................................... A-22
5.5 SEC Documents............................................... A-23
5.6 Financial Statements........................................ A-23
5.7 Absence of Undisclosed Liabilities.......................... A-24
5.8 Absence of Changes.......................................... A-24
5.9 Tax Representation Letter................................... A-24
5.10 Full Disclosure............................................. A-24
5.11 Tax Matters................................................. A-24
5.12 No Defaults, etc............................................ A-24
5.13 Board Approval.............................................. A-24
5.14 Parent Common Stock......................................... A-24
ARTICLE VI
VOTING AGREEMENT
6.1 Agreement to Vote........................................... A-24
ARTICLE VII
CONDUCT AND TRANSACTIONS PRIOR TO EFFECTIVE TIME;
ADDITIONAL AGREEMENTS
7.1 Access to Records and Properties of Each Party;
Confidentiality............................................. A-25
7.2 Operation of Business of the Company........................ A-26
7.3 Negotiation with Others..................................... A-26
7.4 Preparation of S-4; Other Filings........................... A-26
7.5 Advice of Changes........................................... A-27
7.6 Letter of the Company's Accountants......................... A-27
7.7 Letter of Parent's Accountants.............................. A-27
7.8 Shareholders' Approval...................................... A-27
7.9 Legal Conditions to Merger.................................. A-28
7.10 Consents.................................................... A-28
7.11 Efforts to Consummate....................................... A-28
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
SECTION PAGE
------- ----
<C> <S> <C>
7.12 Notice of Prospective Breach................................ A-28
7.13 Public Announcements........................................ A-29
7.14 Notice of Developments...................................... A-29
7.15 Agreement Regarding Proceedings............................. A-29
7.16 Certain Obligations......................................... A-29
7.17 Principal Shareholder Agreements............................ A-29
7.18 Certain Loan and Promissory Note............................ A-29
ARTICLE VIII
CONDITIONS PRECEDENT TO EACH PARTY'S OBLIGATIONS
8.1 Shareholder Approval; Agreement of Merger................... A-30
8.2 Approvals................................................... A-30
8.3 Legal Action................................................ A-30
8.4 S-4......................................................... A-30
8.5 Legislation................................................. A-30
8.6 Tax-free Reorganization..................................... A-30
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF PARENT AND ACQUISITION SUB
9.1 Representations and Warranties.............................. A-30
9.2 Performance of Obligations of the Company................... A-30
9.3 Authorization of Merger..................................... A-31
9.4 Merger Filing............................................... A-31
9.5 Certificate................................................. A-31
9.6 Good Standing Certificates.................................. A-31
9.7 Opinion of the Company's Counsel............................ A-31
9.8 Acceptance by Counsel to Parent and Acquisition Sub......... A-31
9.9 Consents and Approvals...................................... A-31
9.10 Government Consents, Authorizations, etc.................... A-31
9.11 Transaction Documents....................................... A-31
9.12 Repayment of Indebtedness................................... A-31
9.13 Confidentiality, Non-competition and No Solicitation
Agreements.................................................. A-32
9.14 Schedules................................................... A-32
9.15 Settlement Agreement........................................ A-32
9.16 Deminimus Quantity Exception................................ A-32
9.17 UCC Termination Statements.................................. A-32
ARTICLE X
CONDITIONS TO OBLIGATIONS OF THE COMPANY
AND THE PRINCIPAL SHAREHOLDERS
10.1 Representations and Warranties.............................. A-32
10.2 Performance of Obligations of Parent and Acquisition Sub.... A-32
10.3 Authorization of Merger..................................... A-33
10.4 Certificate................................................. A-33
10.5 Good Standing Certificates.................................. A-33
10.6 Opinion of Parent's Counsel................................. A-33
10.7 Acceptance by Counsel to Company............................ A-33
10.8 Consents and Approvals...................................... A-33
10.9 Government Consents, Authorizations, etc.................... A-33
10.10 Transaction Documents....................................... A-33
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
SECTION PAGE
------- ----
<C> <S> <C>
ARTICLE XI
CONFIDENTIALITY, NON-COMPETE AND NO SOLICITATION
11.1 Confidentiality............................................. A-33
11.2 Non-compete................................................. A-33
11.3 No Solicitation............................................. A-34
ARTICLE XII
INDEMNIFICATION
12.1 Indemnification by the Company.............................. A-34
12.2 Indemnification by Principal Shareholder.................... A-35
12.3 Indemnification by Parent and Acquisition Sub............... A-35
12.4 Loss Indemnity Procedure.................................... A-35
12.5 Duration of Indemnification................................. A-36
12.6 No Claim Against Surviving Corporation/Company.............. A-36
12.7 Limitations on Indemnity.................................... A-36
12.8 Other Indemnification Provisions............................ A-37
ARTICLE XIII
PAYMENT OF CERTAIN FEES AND EXPENSES
13.1 Payment of Certain Fees and Expenses........................ A-37
ARTICLE XIV
TERMINATION; AMENDMENT, MODIFICATION AND WAIVER
14.1 Termination................................................. A-38
14.2 Effect of Termination....................................... A-38
ARTICLE XV
MISCELLANEOUS
15.1 Survival; Effect of Disclosure.............................. A-39
15.2 Entire Agreement............................................ A-39
15.3 Descriptive Headings........................................ A-39
15.4 Notices..................................................... A-39
15.5 Counterparts................................................ A-40
15.6 Governing Law............................................... A-40
15.7 Benefits of Agreement....................................... A-40
15.8 Pronouns.................................................... A-40
15.9 Waiver, Amendment and Modification.......................... A-40
15.10 Specific Performance........................................ A-41
15.11 Severability................................................ A-41
</TABLE>
EXHIBITS
<TABLE>
<S> <C>
1.2 Form Plan of Merger
5.9 Tax Representation Letter
7.18 Parent Promissory Note
9.7 Opinion of Company's Counsel
10.6 Opinion of Parent's Counsel
</TABLE>
iv
<PAGE>
SCHEDULES
<TABLE>
<CAPTION>
SCHEDULE SECTION
-------- -------
<S> <C> <C>
Schedule 3.2 -- Agreements
Schedule 3.3 -- Certain Agreement
Schedule 4.5 -- Environmental Consents
Schedule 4.6 -- 10b-5
Schedule 4.10(d) -- Liabilities Not in the Ordinary Course
Schedule 4.10(g) -- Current Liabilities
Schedule 4.10(k) -- Termination of Material Contracts
Schedule 4.10(s) -- Termination of Employment
Schedule 4.10(u) -- Litigation
Schedule 4.11(c) -- Tax
Schedule 4.12 -- Audits and Investigations
Schedule 4.13(a) -- Encumbrances
Schedule 4.13(e) -- Real Properties
Schedule 4.13(g) -- Rights to Assets
Schedule 4.13(i) -- Machinery and Equipment
Schedule 4.14 -- Environmental Liability
Schedule 4.16 -- Intellectual Property
Schedule 4.17 -- Agreements
Schedule 4.18 -- Suppliers
Schedule 4.19(a) -- Customers
Schedule 4.19(b) -- Sales Representatives
Schedule 4.20 -- No Defaults
Schedule 4.21 -- Litigation
Schedule 4.23 -- Compliance
Schedule 4.24 -- Employees
Schedule 4.24(h) -- Labor Relations
Schedule 4.25(a) -- Employee Benefit Plans
Schedule 4.25(d) -- Employee Benefit Plans
Schedule 4.25(i) -- Employee Benefit Plans Government Approvals
Schedule 4.25(k) -- Employee Benefit Plans to Former Employees
Schedule 4.27 -- Insurance
Schedule 4.32 -- Officers and Directors
Schedule 4.34 -- Bank Accounts; Credit and Charge Cards
Schedule 4.39 -- Year 2000 Compliance
Schedule 4.40 -- Directors Liabilities
Schedule 7.16 -- Lafferty Liabilities
Schedule 9.12 -- Company EDA Indebtedness
</TABLE>
v
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Acquisition Sub............................................. 1
Acquisition Transaction..................................... 26
Actions..................................................... 16
affiliate................................................... 20
Agreement................................................... 1
Assets...................................................... 12
associate................................................... 20
Assumption Notice........................................... 35
Benefit Arrangements........................................ 5
Books and Records........................................... 10
Break-Up Fee................................................ 37
Business Day................................................ 2
Certificate................................................. 1
Closing..................................................... 2
Closing Date................................................ 2
Code........................................................ 2
Collectible Accounts Receivable............................. 8
Company..................................................... 1
Company Common Stock........................................ 1
Company EDA Indebtedness.................................... 31
Company Financial Statements................................ 8
Company Options............................................. 7
Company Returns............................................. 10
Company Sales Representatives............................... 15
Company SEC Documents....................................... 8
Company Warrants............................................ 7
Constituent Corporations.................................... 1
Covered Action.............................................. 35
DB&S........................................................ 24
EDA Advance................................................. 32
Effective Time.............................................. 1
Employee.................................................... 18
Employee Plans.............................................. 17
Encumbrances................................................ 12
Environmental Laws.......................................... 13
ERISA....................................................... 17
ERISA Affiliate............................................. 17
Exchange Act................................................ 7
Exchange Agent.............................................. 3
Exchange Fund............................................... 3
Executory Period............................................ 25
FAS No. 5................................................... 9
GAAP........................................................ 8
Government Contracts........................................ 14
Governmental Authority...................................... 7
Hazardous Substance......................................... 13
HSR Act..................................................... 28
Indemnification Notice...................................... 35
Indemnified Party........................................... 35
Indemnifying Party.......................................... 35
Intellectual Property Rights................................ 13
</TABLE>
vi
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Lafferty Liability.......................................... 21
Liability................................................... 9
Loan Agreement.............................................. 31
Losses...................................................... 34
Mailing Date................................................ 28
Material Adverse Effect..................................... 6
Merger...................................................... 1
Merger Shares............................................... 3
Modification................................................ 40
Multiemployer Plan.......................................... 18
New Jersey Statute.......................................... 1
NJEDA....................................................... 31
Old Certificates............................................ 3
Order....................................................... 13
Ordinary Course............................................. 9
Other Filings............................................... 27
Parent...................................................... 1
Parent Common Stock......................................... 1
Parent Financial Statements................................. 23
Parent Returns.............................................. 24
Parent SEC Documents........................................ 23
Pension Plans............................................... 18
Permitted Transaction Costs................................. 37
Person...................................................... 4
Plan of Merger.............................................. 1
Principal Shareholders...................................... 1
Purchasing Companies........................................ 33
S-4......................................................... 7
SEC......................................................... 7
Share Consideration......................................... 2
Shareholder Action.......................................... 27
Shareholder Statement....................................... 28
Shareholders................................................ 3
Shareholders' Materials..................................... 28
Shareholders' Meeting....................................... 27
Subsidiary.................................................. 2
Surviving Corporation....................................... 1
Tax......................................................... 11
Taxes....................................................... 11
to the best knowledge of the Company........................ 21
Transaction Documents....................................... 1
Uncollectable Accounts Receivable........................... 8
Year 2000 Compliant......................................... 21
</TABLE>
vii
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION dated as of March 2, 2000, among
Wireless Telecom Group, Inc., a New Jersey corporation ('Parent'), WTT
Acquisition Corp., a New Jersey corporation and wholly-owned subsidiary of
Parent ('Acquisition Sub'), and Boonton Electronics Corp., a New Jersey
corporation (the 'Company'), and the Company's shareholders listed on the
signature page to this Agreement (the 'Principal Shareholders').
The Boards of Directors of Parent, Acquisition Sub and the Company have each
duly approved and adopted this Agreement and Plan of Reorganization (this
'Agreement'), the plan of merger (the 'Plan of Merger') and the proposed merger
of Acquisition Sub with and into the Company in accordance with this Agreement,
the Plan of Merger and the New Jersey Business Corporation Act (the 'New Jersey
Statute'), whereby, among other things, the issued and outstanding shares of
common stock, $.10 par value, of the Company (the 'Company Common Stock'), will
be exchanged and converted into shares of common stock, $.01 par value, of
Parent (the 'Parent Common Stock') in the manner set forth in Article II hereof
and in the Plan of Merger, upon the terms and subject to the conditions set
forth in this Agreement and the Plan of Merger. As used herein, the term
'Transaction Documents' shall mean collectively, this Agreement, the Plan of
Merger, Parent Promissory Note, the Confidentiality Agreement, Non-competition
Agreement, and No Solicitation Agreements, and the other documents, instruments
and agreements contemplated hereby and executed and delivered in connection
herewith.
NOW, THEREFORE, in consideration of the mutual benefits to be derived from
this Agreement and the Plan of Merger and the representations, warranties,
covenants, agreements, conditions and promises contained herein and therein, the
parties hereby agree as follows:
ARTICLE I
GENERAL
1.1 The Merger. In accordance with the provisions of this Agreement, the
Plan of Merger and the New Jersey Statute, Acquisition Sub shall be merged with
and into the Company (the 'Merger'), which at and after the Effective Time shall
be, and is sometimes herein referred to as, the 'Surviving Corporation.'
Acquisition Sub and the Company are sometimes referred to as the 'Constituent
Corporations.'
1.2 The Effective Time of the Merger. Subject to the provisions of this
Agreement, the Plan of Merger in substantially the form set forth in EXHIBIT 1.2
shall be executed, delivered and filed with the Treasurer of the State of New
Jersey by each of the Constituent Corporations on the Closing Date in the manner
provided under Section 14A:10-4.1 of the New Jersey Statute. The Merger shall
become effective (the 'Effective Time') upon the filing of the Certificate of
Merger (to which the Plan of Merger is an exhibit) with the Treasurer of the
State of New Jersey.
1.3 Effect of Merger. At the Effective Time, the separate existence of
Acquisition Sub shall cease and Acquisition Sub shall be merged with and into
the Company and the Company shall continue as the Surviving Corporation. The
Surviving Corporation shall possess all of the rights, privileges, powers and
franchises as well of a public as of a private nature, and be subject to all the
restrictions, disabilities and duties of each of the Constituent Corporations
and the Merger shall have such other effects as provided by the New Jersey
Statute.
1.4 Certificate and By-Laws of Surviving Corporation. From and after the
Effective Time: (a) the Certificate of the Company shall be amended, and the
Certificate of the Company, as so amended, shall be the Certificate of the
Surviving Corporation, unless and until altered, amended or repealed as provided
in the New Jersey Statute; (b) the by-laws of the Acquisition Sub shall be the
by-laws of the Surviving Corporation; (c) the directors of Acquisition Sub shall
be the directors of the Surviving Corporation, unless and until removed, or
until their respective terms of office shall have expired, in accordance with
the New Jersey Statute, the Certificate or the by-laws of the Surviving
Corporation, as applicable; and (d) the officers of the Acquisition Sub shall be
the officers of the Surviving Corporation, unless and until removed, or until
their terms of office shall have expired, in accordance with the New Jersey
Statute, the Certificate or the by-laws of the Surviving Corporation, as
applicable.
A-1
<PAGE>
1.5 Taking of Necessary Action. Prior to the Effective Time, the parties
hereto shall do or cause to be done all such acts and things as may be necessary
or appropriate in order to effectuate the Merger as expeditiously as reasonably
practicable, in accordance with this Agreement, the Plan of Merger, and the New
Jersey Statute. In case at any time after the Effective Time, any further action
is necessary or desirable to carry out the purpose of this Agreement and to vest
in the Surviving Corporation full title to all Assets, privileges, rights and
entitlements (as well as the obligations and duties) of either Constituent
Corporations, the officers and directors of such corporations shall take all
such lawful and necessary action.
1.6 Tax-Free Reorganization. For Federal income tax purposes, the parties
intend that the Merger be treated as a tax-free reorganization within the
meaning of Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended
(the 'Code'), by reason of Section 368(a)(2)(E) of the Code.
1.7 Closing. Unless this Agreement shall have been terminated and the
transactions contemplated by this Agreement abandoned pursuant to the provisions
of Article XIII, and subject to this Agreement, the closing of the Merger (the
'Closing') will take place at 10:00 a.m. (New York City time) on a date (the
'Closing Date') to be mutually agreed upon by the parties, which date shall be
not later than the third (3rd) Business Day after all the conditions set forth
in Articles VIII, IX and X shall have been satisfied (or waived to the extent
the same may be waived), unless another date is agreed to in writing by the
Parent and the Company. The Closing shall take place at the offices of Morrison
Cohen Singer & Weinstein, LLP 750 Lexington Avenue, New York, New York 10022,
unless another place is agreed to in writing by the parties. As used herein, the
term 'Business Day' shall mean any day other than a Saturday, Sunday or day on
which banks are permitted to close in New Jersey or New York.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1 Effect on Capital Stock. At the Effective Time, subject and pursuant to
the terms and conditions of this Agreement and the Plan of Merger, by virtue of
the Merger and without any action on the part of the Constituent Corporations or
the holders of the capital stock of the Constituent Corporations:
(a) Capital Stock of Acquisition Sub. Each issued and outstanding share
of common stock, par value $.01 per share, of Acquisition Sub shall
immediately prior to the Effective Time be deemed cancelled and converted
into and shall represent the right to receive one share of common stock, par
value $.10 per share, of the Surviving Corporation.
(b) Cancellation of Certain Shares of Company Common Stock. Each share
of Company Common Stock that is immediately prior to the Effective Time:
(i) owned by the Company as treasury stock; (ii) owned by any Subsidiary of
the Company; or (iii) owned by Parent or any subsidiary of Parent, shall be
cancelled and no Parent Common Stock or other consideration shall be
delivered in exchange therefor. As used in this Agreement, a 'Subsidiary'
means with respect to any Person (a) any corporation or other entity with
respect to which such Person, directly or indirectly, has the power to vote
or direct the voting of securities sufficient to elect a majority of the
directors or other managers thereof or (b) any corporation or other entity
with respect to which another Person, directly or indirectly, owns fifty
percent (50%) or more of the aggregate equity interests therein.
(c) Exchange Ratio for Company Common Stock. Subject to Section 2.2,
each share of Company Common Stock issued and outstanding immediately prior
to the Effective Time (other than shares cancelled pursuant to Section
2.1(b)) shall be deemed cancelled and converted into and shall represent the
right to receive .79 shares of Parent Common Stock in accordance with
Section 2.2 (the 'Share Consideration') For convenience of reference, the
shares of Parent Common Stock to be issued upon the exchange and conversion
of Company
A-2
<PAGE>
Common Stock in accordance with this Section 2.1(c) are sometimes
hereinafter collectively referred to as the 'Merger Shares.'
(d) Adjustments for Capital Changes. If, prior to the Effective Time,
Parent or the Company recapitalizes through a subdivision of its outstanding
shares into a greater number of shares, or a combination of its outstanding
shares into a lesser number of shares, or reorganizes, reclassifies or
otherwise changes its outstanding shares into the same or a different number
of shares or other classes, or declares a dividend on its outstanding shares
payable in shares of its capital stock or securities convertible into shares
of its capital stock, then the Share Consideration shall be adjusted
appropriately so as to maintain the relative proportionate interests of the
holders of shares of Company Common Stock and the holders of shares of
Parent Common Stock.
2.2 Exchange of Certificates.
(a) Procedure for Exchange. Prior to the Closing Date, Parent shall select
American Stock Transfer & Trust Company as exchange agent (the 'Exchange Agent')
to act in such capacity in connection with the Merger. As of the Effective Time,
Parent shall deposit with the Exchange Agent, for the benefit of the holders
(the 'Shareholders') of shares of Company Common Stock, for exchange in
accordance with this Article II and the Plan of Merger certificates representing
the shares of Parent Common Stock contemplated to be issued as Merger Shares
(which shares of Parent Common Stock, together with any dividends or
distributions with respect thereto, being hereinafter collectively referred to
as the 'Exchange Fund'). As soon as practicable after the Effective Time, the
Exchange Agent shall mail to each holder of record of a certificate or
certificates which immediately before the Effective Time represented issued and
outstanding shares of Company Common Stock (collectively, the 'Old
Certificates'): (i) a letter of transmittal advising such holders of the terms
of the exchange effected by the Merger (and specifying how delivery shall be
effected, and risk of loss and title to the Old Certificates shall pass, only
upon delivery of the Old Certificates to the Exchange Agent and shall be in such
form and have such other provisions as Parent may reasonably specify); and
(ii) instructions for use in effecting the surrender of Old Certificates in
exchange for certificates representing Merger Shares. Upon surrender of an Old
Certificate for cancellation to the Exchange Agent, together with a duly
executed letter of transmittal and such other documents as may be reasonably
required by the Exchange Agent, the holder of such Old Certificate shall be
entitled to receive in exchange therefor a certificate representing that number
of whole shares of Parent Common Stock which such holder has the right to
receive pursuant to the provisions of this Article II and the Plan of Merger,
and the Old Certificate so surrendered shall forthwith be cancelled. In the
event of a transfer of ownership of shares of Company Common Stock which are not
registered on the transfer records of the Company, it shall be a condition of
the exchange thereof that the Old Certificate representing such Company Common
Stock is presented to the Exchange Agent properly endorsed and otherwise in
proper form for transfer and accompanied by all documents required to evidence
and affect such transfer and by evidence that any applicable stock transfer
taxes have been paid. Until surrendered as contemplated by this Section 2.2(a)
and the Plan of Merger, each Old Certificate shall be deemed, on and after the
Effective Time, to represent only the right to receive upon such surrender
(x) the certificate representing shares of Parent Common Stock and (y) cash in
lieu of fractional shares (as hereinafter provided) of Parent Common Stock as
contemplated by this Article II and the Plan of Merger.
(b) Distributions With Respect to Unsurrendered Certificates. No dividends
or other distributions declared or made after the Effective Time with respect to
Parent Common Stock with a record date after the Effective Time shall be paid to
the holder of any unsurrendered Old Certificate with respect to the shares of
Parent Common Stock represented thereby and no cash payment in lieu of
fractional shares shall be paid to any such holder pursuant to Section 2.2(d) or
the Plan of Merger until the holder of record of such Old Certificate shall
surrender such Old Certificate. Subject to the effect of applicable laws,
following surrender of any such Old Certificate, there shall be paid to the
record holder of the certificates representing whole shares of Parent Common
Stock issued in exchange therefor, without interest: (i) at the time of such
surrender, the amount of any
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cash payable in lieu of a fractional share of Parent Common Stock to which such
holder is entitled pursuant to Section 2.2(d) and the Plan of Merger and the
amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of Parent
Common Stock; and (ii) at the appropriate payment date, the amount of dividends
or other distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect to
such whole shares of Parent Common Stock.
(c) No Further Ownership Rights in Company Common Stock. All shares of
Parent Common Stock issued upon the surrender for exchange of shares of Company
Common Stock in accordance with the terms of this Article II and the Plan of
Merger (including any cash paid pursuant to Section 2.2(b) or 2.2(d)) shall be
deemed to have been issued in full satisfaction of all rights pertaining to such
shares of Company Common Stock and there shall be no further registration or
transfers on the stock transfer books of the Surviving Corporation of the shares
of Company Common Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, any Old Certificate is presented
to the Surviving Corporation for any reason, such Old Certificate shall be
cancelled and exchanged as provided in this Article II and the Plan of Merger.
(d) No Issuance of Fractional Shares. No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Old Certificates, and such fractional share interests shall not
entitle the owner thereof to vote or to any rights of a shareholder of Parent
such as rights to dividends, stock splits or interest in lieu of issuing
certificates for fractional shares. In lieu of any such fractional shares, each
holder of Company Common Stock who would otherwise have been entitled to receive
a fraction of a share of Parent Common Stock upon surrender of certificates
evidencing Company Common Stock for exchange pursuant to this Section 2.2(d)
shall be entitled to receive from Parent a cash payment equal to the product of
such fraction and the closing price of a share of Parent Common Stock on the
Closing Date.
(e) Lost, Stolen or Destroyed Certificates. In the event any Old
Certificates shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such Old Certificate to be lost,
stolen or destroyed, the Exchange Agent shall issue an exchange for such loss,
stolen or destroyed Old Certificate the consideration payable and exchange
therefor pursuant to this Article II. The Exchange Agent or the Surviving
Corporation may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed Old Certificate to
give the Exchange Agent a bond in such reasonable sum as it may direct as
indemnity against any claim that may be made against the Surviving Corporation
with respect to the Old Certificate alleged to have been lost, stolen or
destroyed. As used in this Agreement, the term 'Person' shall mean any
individual, firm, corporation, limited liability company, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
Governmental Authority or other entity of any kind, and shall include any
successor (by merger or otherwise) of such entity.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the shareholders of the Company for eighteen (18)
months after the Effective Time shall be delivered to Parent, and upon demand
from any former Shareholders of the Company who have not theretofore complied
with this Article II, any cash in lieu of fractional shares of Parent Common
Stock and any dividends or distributions with respect to Parent Common Stock
shall be distributed, to the former Shareholders of the Company upon the receipt
of proper Certificates and/or evidence reasonably satisfactory in form and
substance to the Parent.
(g) No Liability. Neither the Exchange Agent, Parent, Acquisition Sub nor
the Company shall be liable to any holder of shares of Company Common Stock or
Parent Common Stock, as the case may be, for either shares (or dividends or
distributions with respect thereto) of Parent Common Stock to be issued in
exchange for Company Common Stock pursuant to this Section 2.2, if, on or after
the expiration of eighteen (18) months following the Effective Date, such shares
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are delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL SHAREHOLDERS
Each Principal Shareholder represents and warrants to Parent and Acquisition
Sub with respect to himself or itself only that:
3.1 Capacity; Authority; No Consents. Each such Principal Shareholder who is
a natural Principal Shareholders has the requisite capacity and authority to
execute, deliver and perform the Transaction Documents to which he is a party
and in the case of a non-natural Principal Shareholder, the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all action, hereby necessary corporate action, on the part of such
Principal Shareholder; and this Agreement and the other Transaction Documents to
which he/it is a party have been, and will be, duly and validly executed and
delivered by him/it, and this Agreement and the other Transaction Documents to
which he/it is a party are, and will be, the valid and binding obligations of
such Principal Shareholder, enforceable against him/it in accordance with their
respective terms subject to bankruptcy, fraudulent conveyance, insolvency,
moratorium or similar laws affecting the rights of creditors generally or
general equitable principles.
3.2 Agreements, Etc. Schedule 3.2 sets forth opposite such Principal
Shareholder's name a true and complete list and accurate description of the
material terms of (i) all the employment and consultancy arrangements between
the Company and such Principal Shareholder and (ii) any other type of contract,
commitment or understanding between the Company and such Principal Shareholder
which (except as otherwise generally provided by applicable law) is not
immediately terminable without cost or other liability at or at any time after
the Effective Time, in each case to which such Principal Shareholder is a party
and not made in the Ordinary Course of business, or made in the Ordinary Course
of business which are currently in effect.
3.3 Certain Agreements. Except as provided in this Agreement or as otherwise
set forth on Schedule 3.3 attached hereto, neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby
will:
(a) result in any payment (including, without limitation, severance,
unemployment compensation, golden parachute, bonus or otherwise) becoming
due to such Principal Shareholder, under any Employee Plan, Benefit
Arrangement or otherwise;
(b) increase any benefits otherwise payable under any Employee Plan or
Benefit Arrangement to such Principal Shareholder; or
(c) result in the acceleration of the time of payment or vesting of any
such benefits to such Principal Shareholder.
3.4 Brokers. Such Principal Shareholder has not employed any broker or
finder or incurred any liability for any brokerage fees, commissions or finders'
fees in connection with the transactions contemplated by the Transaction
Documents.
3.5 Related Transactions. Such Principal Shareholder is not now, and has not
been during the last three (3) fiscal years:
(a) a party to any transaction with the Company which requires filing of
a 10-KSB or definitive proxy statement with the SEC (including, but not
limited to, any contract, agreement or other arrangement providing for the
furnishing of services by, or rental of real or personal property from, or
borrowing money from, or otherwise requiring payments to, such Principal
Shareholder or any of his/its associates or affiliates), other than any
transaction which has been disclosed in a definitive proxy statement or
report filed by the Company in a timely fashion with the SEC;
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(b) the direct or indirect owner, including any ownership by a family
member, of a 10% or greater interest in any non-natural Person, which is, or
has been, a supplier, customer, or, within the last 12 months, competitor,
of the Company (other than non-affiliated holdings in publicly-held
companies); or
(c) a party to any transaction with the Company whereby such Principal
Shareholder received compensation (other than dividends paid by a publicly
held corporation) from any other Person, which is, or has been, a supplier,
customer, or, within the last 12 months, competitor of the Company.
3.6 Amounts Owed. Other than the amount owed to each such Principal
Shareholder under the Director Liabilities (as defined in Section 4.40), the
Company owes no other amounts to such Principal Shareholder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Acquisition Sub
that:
4.1 Organization; Good Standing; Qualification and Power. The Company:
(a) is a corporation duly organized, validly existing and in good
standing under the laws of the State of New Jersey; (b) has all requisite
corporate power and authority to own, lease and operate its properties and
Assets and to carry on its business in the Ordinary Course; and (c) is duly
qualified and in good standing to do business in all jurisdictions in which
the failure to be so qualified and in good standing could be reasonably
expected to have a material adverse effect on such Person's business,
Assets, operations, results of operations, liabilities, properties,
condition (financial or otherwise), affairs or an effect which could
materially impair the ability of a Person to perform any obligation under
this Agreement or materially impair the consummation of the transaction
contemplated hereby ('Material Adverse Effect'). The Company has all
requisite corporate power and authority to enter into this Agreement and the
Plan of Merger and each of the other Transaction Documents to which it is a
party, to perform its obligations hereunder and thereunder and to consummate
the transactions contemplated hereby and thereby. The Company has delivered
to Parent true and complete copies of the Charter and by-laws of the Company
as amended to the date hereof, and its minute books. As used in this
Agreement, 'Certificate' shall mean, with respect to any corporation, those
instruments that at the time constitute its corporate charter as filed or
recorded under the general corporation law of the jurisdiction of its
incorporation, including the articles or certificate of incorporation or
organization, and any amendments thereto, as the same may have been
restated, and any amendments thereto (including any articles or certificates
of merger or consolidation or certificates of designation or similar
instruments which effect any such amendment) which became effective after
the most recent such restatement.
4.2 Equity Investments. The Company does not own any capital stock or other
proprietary interest, directly or indirectly, in any corporation, association,
trust, partnership, limited liability company, joint venture or other entity.
The Company does not have any Subsidiaries. There are no options, warrants,
rights, calls, commitments or agreements of any character to which the Company
is a party or by which the Company is bound calling for the issuance of shares
of capital stock of the Company or any securities convertible into or
exercisable or exchangeable for, or representing the right to purchase or
otherwise receive, any such capital stock, or other arrangement to acquire, at
any time or under any circumstance, capital stock of the Company or any such
other securities of the Company or the Company Sub.
4.3 Margin Stock. The Company owns no 'margin stock' as such term is defined
in Regulation U, as amended (12 C.F.R. Part 221) of the Federal Reserve Board.
4.4 Capital Stock; Securities. The authorized capital stock of the Company
consists of 5,000,000 shares of Company Common Stock, of which 2,387,332 shares
are outstanding as of the Closing
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Date. As of the Closing Date, the Company has no outstanding warrants for shares
of Company Common Stock (with no shares of Company Common Stock reserved for
such purpose) (collectively, the 'Company Warrants'). The Company does not have
outstanding any options to purchase, or any preemptive rights or other rights to
subscribe for or to purchase, any securities or obligations convertible into, or
any contracts or commitments to issue or sell, share of its capital stock or any
such options, rights, convertible securities or obligations. All outstanding
shares of Company Common Stock are validly issued and outstanding, fully paid
and non-assessable and not subject to preemptive rights. There are no voting
trusts, voting agreements (except pursuant to Section 6.1 below), first offer
rights, co-sale rights, transfer restrictions (other than restrictions imposed
by federal or state securities laws) or other agreements, instruments or
understandings (whether written or oral, formal or informal) with respect to the
voting, registration, transfer or disposition of Company Securities to which the
Company is a party or by which it is bound, or to the knowledge of the Company,
among or between any Persons other than the Company.
4.5 Authority; No Consents. The execution, delivery and performance by the
Company of the Transaction Documents to which it is a party and the consummation
of the transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of the Company; and
this Agreement and the other Transaction Documents to which the Company is a
party have been, and the Plan of Merger when executed and delivered by the
Company will be, duly and validly executed and delivered by the Company, and
this Agreement and the other Transaction Documents to which the Company is a
party is, and the Plan of Merger when executed and delivered by the parties
thereto will be, the valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms subject to
bankruptcy, fraudulent conveyance, insolvency, moratorium or similar laws
affecting the rights of creditors generally or general equitable principles.
Neither the execution, delivery and performance of the Transaction Documents to
which the Company is a party nor the consummation by the Company of the
transactions contemplated hereby or thereby nor compliance by the Company with
any provision hereof or thereof will: (a) conflict with; (b) result in any
violations of (c) cause a default under (with or without due notice, lapse of
time or both); (d) give rise to any right of termination, amendment,
cancellation or acceleration of any obligation contained in or the loss of any
material benefit under; or (e) result in the creation of any Encumbrance on or
against any Assets, right or property of the Company under any term, condition
or provision of: (x) any instrument or agreement to which the Company is a
party, or, to the knowledge of the Company, by which the Company, its
properties, Assets or rights may be bound (except as shall have been waived or
with respect to which consent shall have been obtained prior to the Closing)
except where the foregoing would not result in a Material Adverse Effect on the
Company; (y) any law, statute, rule, regulation, order, writ, injunction,
decree, permit, concession, license or franchise of any Federal, state,
municipal, foreign or other governmental court, department, commission, board,
bureau, agency or instrumentality ('Governmental Authority') applicable to the
Company or any of its properties, Assets or rights except where the foregoing
would not result in a Material Adverse Effect on the Company; or (z) the
Company's Certificate or by-laws, as amended through the date hereof. Except as
contemplated by this Agreement or the Plan of Merger, no permit, authorization,
consent or approval of or by, or any notification of or filing with, any
Governmental Authority is required in connection with the execution, delivery
and performance by the Company and each Principal Shareholder of this Agreement,
the Plan of Merger or the Transaction Documents to which the Company is a party
or the consummation of the transactions contemplated hereby or thereby, except
for: (i) the filing with the Securities and Exchange Commission (the 'SEC') of
(A) Form S-4 with respect to the Merger Shares, the shares of Parent Common
Stock to be issued in exchange for Vested Company Options and the shares of
Parent Common Stock reserved for issuance upon exercise of the assumed Unvested
Company Options and Company Warrants (as to which the option or warrant holder
is, by the terms of the Company option plan or warrant in effect, entitled upon
exercise of the option or warrant, to receive registered stock) (the 'S-4') and
(B) such reports and information under the Securities and Exchange Act of 1934,
as amended (the 'Exchange Act'), and the rules and regulations promulgated by
the SEC thereunder, as may be
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required in connection with this Agreement, the Plan of Merger and the
transactions contemplated hereby and thereby; (ii) such filings as may be
required by the American Stock Exchange with respect to Parent Common Stock to
be issued in connection with the Merger and the Company Warrants and Company
Options to be assumed by Parent in the Merger; (iii) the filing of such
documents with, and the obtaining of such orders from, various state securities
and blue-sky authorities as are required in connection with the transactions
contemplated hereby; (iv) the distribution of the Shareholders' Materials with
respect to the adoption by the Shareholders of this Agreement and the Plan of
Merger; (v) the filing of the Plan of Merger with the Treasurer of the State of
New Jersey and appropriate documents with the relevant authorities of other
states in which the Company is qualified to do business; (vi) the filings or
notices that may be required under Environmental Laws as set forth on Schedule
4.5; and (vii) such other consents, waivers, authorizations, filings, approvals
and registrations which if not obtained or made would not have a Material
Adverse Effect on the Company or materially impair the ability of the Company
and the Shareholders to consummate the transactions contemplated by this
Agreement or the Plan of Merger, including, without limitation, the Merger.
4.6 SEC Documents. The Company has furnished Parent with a correct and
complete copy of each report, schedule, registration statement and definitive
proxy statement filed by the Company with the SEC on or after September 30, 1998
(the 'Company SEC Documents'), which are all the documents (other than
preliminary material) that the Company was required to file (or otherwise did
file) with the SEC on or after September 30, 1998. As of their respective dates,
except as set forth on Schedule 4.6, none of the Company SEC Documents
(including all exhibits and schedules thereto and documents incorporated by
reference therein) contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and the Company SEC Documents complied when filed in all
material respects with the then applicable requirements of the Securities Act or
the Exchange Act, as the case may be, and the rules and regulations promulgated
by the SEC thereunder.
4.7 Financial Statements. The financial statements of the Company included
in the Company SEC Documents (the 'Company Financial Statements'):
(a) complied as to form in all material respects with the then
applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, were prepared in accordance with generally
accepted accounting principals ('GAAP'), consistently applied (except as may
have been indicated in the notes thereto or, in the case of the unaudited
statements, as permitted by Form 10-Q promulgated by the SEC);
(b) were in accordance with the books and records of the Company; and
(c) fairly present (subject, in the case of the unaudited statements, to
normal, nonrecurring audit adjustments) the financial position of the
Company as at the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended.
4.8 Collectability of Accounts Receivable. All accounts receivable included
in the Company Financial Statements, net of any reserves for losses as reflected
thereon, and net of costs, which costs shall not exceed $15,000 in the
aggregate, are fully collectible in cash within three (3) months from the date
hereof, with the exception of financed accounts receivable which by their terms
are not payable in full within such three-month period ('Collectible Accounts
Receivable'). All accounts receivable which cannot be fully collectable in cash
within three (3) months from the date hereof with the exception of accounts
receivable which by their term are not payable in full within such three month
period are uncollectable accounts receivable ('Uncollectable Accounts
Receivable'). Credits, returns and rebates shall not constitute payment of
accounts receivable. (In determining whether there has been any nonpayment of
any Account Receivable, all payments received from any account debtor shall,
unless otherwise specified by such account debtor, be first applied to the
oldest outstanding account Receivable of such account debtor until all accounts
receivable of such account debtor have been paid in full.)
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4.9 Absence of Undisclosed Liabilities. At September 30, 1999: (a) the
Company had no material liability or obligation of any nature (whether known or
unknown, matured or unmatured, fixed or contingent ('Liability')), which was not
provided for or disclosed on the Company SEC Documents for the fiscal year ended
September 30, 1999; and (b) all liability reserves established by the Company
and set forth on the Company Financial Statements were adequate, in the good
faith judgment of the Company, for all such Liabilities at the date thereof.
There were no material loss contingencies (as such term is used in Statement of
Financial Accounting Standards No. 5 issued by the Financial Accounting
Standards Board in March 1975 ('FAS No. 5')) which were not adequately provided
for on the Company Financial Statements as required by FAS No. 5.
4.10 Absence of Changes; Conduct of Business. Since September 30, 1999, the
Company has been operated in the ordinary course, consistent with the Company's
past practice ('Ordinary Course') and:
(a) the Company has notified Parent in writing of any Material Adverse
Effect on the Company;
(b) there has not been any damage, destruction or loss, whether or not
covered by insurance, having or which could have a Material Adverse Effect
on the Company;
(c) the Company has kept in a normal state of repair and operating
efficiency all tangible personal property used in the operation of its
business;
(d) except as set forth on Schedule 4.10(d), there has not been any
Liability created, assumed, guaranteed or incurred, or any material
transaction, contract or commitment entered into, by the Company, other than
the license, sale or transfer of the Company's products to customers in the
Ordinary Course except for liabilities to Parent or incurred or to be
incurred in connection with negotiation and execution of this Agreement;
(e) there has not been any declaration, setting aside or payment of any
dividend or other distribution of any Assets of any kind whatsoever with
respect to any shares of the capital stock of the Company, or any direct or
indirect redemption, purchase or other acquisition of any such shares of the
capital stock of the Company;
(f) there has not been any payment, discharge or satisfaction of any
material Encumbrance or Liability or any cancellation by the Company of any
material debts or claims or any amendment, termination or waiver of any
right of material value to the Company;
(g) except as otherwise provided for in this Agreement the Company has
paid or incurred only those fees and expenses not in the Ordinary Course of
its business approved in writing or ratified in writing by Parent
(including, without limitation, statements of fees for legal and accounting
services, only on a time basis at regular hourly rates). Except as otherwise
provided for in this Agreement, no such fees have been paid or incurred in
respect of services performed in connection with the negotiation,
preparation or execution of any documents, instruments, exhibits, schedules
or any other matter relating to the transactions contemplated hereby. Except
as set forth on Schedule 4.10(g), the Company has paid all of its current
liabilities as and when they became due;
(h) there has not been any stock split, reverse stock split,
combination, reclassification or recapitalization of any Company Common
Stock, or any issuance of any other security in respect of or in exchange
for, any shares of Company Common Stock;
(i) the Company has not redeemed, repurchased, or otherwise acquired any
of its capital stock or securities convertible into or exchangeable for its
capital stock or entered into any agreement to do so;
(j) there has not been any issuance by the Company of any shares of its
capital stock or any debt security or securities, rights, options or
warrants convertible into or exercisable or exchangeable for any shares of
its capital stock or debt security;
(k) except as set forth on Schedule 4.10(k), there has not been any
termination of or indication of an intention to terminate or not renew, any
material contract, license,
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commitment or other agreement between the Company and any other Person, or
the assignment by the Company of any interest in any contract to which the
Company is a party;
(l) the Company has used commercially reasonable efforts to maintain the
good will associated with its business, and the existing business
relationships with its agents, customers, key employees and consultants,
suppliers and other Persons having relations with it;
(m) there has not been any material write-down or write-up of the value
of any Asset of the Company, or any material write-off of any accounts
receivable or notes receivable of the Company or any portion thereof.
(n) the Company has not sold, leased, licensed or otherwise disposed of
any Assets or created or permitted to exist any Encumbrance on its Assets
except in the Ordinary Course and which would not have a Material Adverse
Effect on the Company;
(o) there has not been any increase in or modification or acceleration
of compensation or benefits payable or to become payable to any officer,
employee, consultant or agent of the Company, or the entering into of any
employment contract or consulting contract with any such Person;
(p) there has not been any making of any loan, advance or capital
contribution to or investment in any Person or the engagement in any
transaction with any employee, officer, director, consultant or shareholder
of the Company;
(q) there has not been any Encumbrance created, or agreement to do so,
with respect to any Company Assets, tangible, or intangible;
(r) there has not been any change in the accounting methods or practices
followed by the Company, or any change in depreciation or amortization
policies or rates theretofore adopted by the Company;
(s) except as set forth on Schedule 4.10(s) there has not been any
termination of employment or consultancy of any officer or key employee or
key consultant of the Company or, any expression of intention by any
officer, key consultant or key employee of the Company to terminate such
office, employment or consultancy with the Company;
(t) there has not been any amendments or changes in the Company's
Certificate or by-laws;
(u) except as set forth on Schedule 4.10(u), there has not been any
commencement of any litigation or other action by or against the Company
and, to the Company's knowledge, there has been no occurrence which could
give rise thereto;
(v) the Company has kept in all material respects true, complete and
correct books and records of account ('Books and Records') with respect to
its business, in which entries have made of all transactions up to the
Effective Time in the Company's Ordinary Course; and
(w) there has not been any agreement, understanding, authorization or
proposal, whether in writing or otherwise, for the Company to take any of
the actions specified in items (a) through (v) above.
4.11 Tax Matters. The Company and each other corporation included in any
consolidated or combined tax return in which the Company has been included:
(a) have filed and will file, in a timely and proper manner, consistent
with applicable laws, all Federal, state and local Tax returns and Tax
reports required to be filed by them through the Closing Date (the 'Company
Returns') with the appropriate governmental agencies in all jurisdictions in
which Company Returns are required to be filed and have paid or will pay all
amounts shown thereon to be due; and (b) have paid and shall timely pay all
Taxes required to have been paid on or before the Closing Date. All Taxes
attributable to all taxable periods ending on or before the Closing Date, to
the extent not required to have been previously paid have been adequately
provided for on the Company Financial Statements and the Company will not
incur or accrue a Tax liability from the date of the Company Financial
Statements up to and including the Closing Date, other than a Tax liability
incurred or accrued in the
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Ordinary Course of business. The Company has not been notified by the
Internal Revenue Service or any state, local or foreign taxing authority
that any issues have been raised (and are currently pending) in connection
with any Company Return, and no waivers of statutes of limitations have been
given or requested with respect to the Company. Any deficiencies asserted or
assessments (including interest and penalties) made as a result of any
examination by the Internal Revenue Service or by any other taxing
authorities of any Company Return have been fully paid or are adequately
provided for on the Company Financial Statements and no proposed additional
Taxes have been asserted. The Company has not made an election to be treated
as a 'consenting corporation' under Section 341(f) of the Code nor is it a
'personal holding company' within the meaning of Section 542 of the Code.
The Company has not agreed to, nor is required to make any adjustment under
Section 481(a) of the Code by reason of a change in accounting method or
otherwise. The Company will not incur a Tax liability resulting from the
Company ceasing to be a member of a consolidated or combined group that had
previously filed consolidated, combined or unitary Tax returns. As used in
this Agreement, 'Tax' means any of the Taxes and 'Taxes' means, with respect
to any entity: (x) all income taxes (including any tax on or based upon net
income, gross income, income as specially defined, earnings, profits or
selected items of income, earnings or profits) and all gross receipts,
sales, use, ad valorem, transfer, franchise, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property or
windfall profits taxes, alternative or add-on minimum taxes, customs duties
and other taxes, fees, assessments or charges of any kind whatsoever,
together with all interest and penalties, additions to tax and other
additional amounts imposed by any taxing authority (domestic or foreign) on
such entity; and (y) any liability for the payment of any amount of the type
described in the immediately preceding clause (x) as a result of: (i) being
a 'transferee' (within the meaning of Section 6901 of the Code or any other
applicable law) of another entity; (ii) being a member of an affiliated or
combined group; or (iii) any contractual obligations or otherwise.
(b) Prior to the Merger, the Company's shareholders did not dispose of
any Company Stock, or receive any distribution from the Company, in a manner
that would cause the Merger to violate the continuity of shareholder
interest requirement set forth in Treasury Regulation Section 1 .368-1(e).
(c) Schedule 4.11(c) hereto sets forth the following information with
respect to the Company as of the most recent practicable date: (A) the Tax
basis of the Company in its Assets; (B) the amount of any net operating
loss, net capital loss, unused investment or other credit, unused foreign
Tax credit, research and development credit, excess charitable contribution
or other carryover allocable to the Company, the years in which such Tax
attributes arose and the years (if any) in which such Tax attributes are
scheduled to expire; and (C) a list of any Tax elections made by the Company
and affecting the Company. The Company has no net operating losses or other
Tax attributes subject to limitation under Code Section 382, 383 or 384, or
the federal consolidated return regulations, or under any similar provision
of state, local or foreign law. The amount of any net operating loss, net
capital loss, unused investment or other credit, unused foreign Tax credit,
research and development credit, excess charitable contribution or other
carryover allocable to the Company is fully utilizable by the Company.
4.12 Books and Records; Audits and Investigations. All the books and records
of the Company have been kept and were prepared in accordance with GAAP. The
Company has delivered to Parent all responses to auditors' inquiry letters
received in the past four years and all letters to the Company from the auditors
during such period. Schedule 4.12 hereto identifies all correspondence received
from a Governmental Authority in the past four years relating to tax and
accounting, regulatory compliance reviews, audits or investigations.
4.13 Title to Assets, Properties and Rights and Related Matters.
(a) The Company has good and marketable title to, or valid leasehold
interests in, all its Assets, subject to no security interests, mortgages,
liens, pledges, guarantees, charges, easements, reservations, restrictions,
clouds, equities, rights of way, options, rights of first refusal and all other
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encumbrances, whether or not relating to the extension of credit or the
borrowing of money ('Encumbrances') except: (i) liens for current Taxes not yet
due and payable, (ii) mechanics' and materialmen's liens arising or incurred in
the Ordinary Course of its business, and (iii) as reflected on Schedule 4.13(a).
(b) The properties, assets, rights, contracts, leases, easements, permits,
licenses and real and personal property (the 'Assets') evidenced on the Company
Financial Statements are the sole items of tangible and intangible personal
property heretofore utilized by the Company in the (and necessary for the
Company to) conduct of its operations.
(c) The real and personal property owned or leased by the Company,
including, without limitation, all equipment and machinery of the Company, are
in reasonable working order and have been maintained in accordance with standard
maintenance procedures, and meet all material standards, clearances and ratings
in effect on the date hereof in respect of those rules and regulations
promulgated by any Governmental Authority applicable thereto except where the
failure to meet the above would not have a Material Adverse Effect.
(d) Except as set forth elsewhere in this Section 4.13, the Company makes no
representations or warranties regarding the real or personal property owned or
leased by the Company, specifically excluding any representations or warranties
with respect to merchantibility or fitness for a particular purpose of the
Company's products or services.
(e) Schedule 4.13(e) hereto identifies all real property owned by the
Company and all improvements located thereon, all unexpired options held by the
Company or contractual obligations on its part to purchase or sell any interest
in real property, and all mortgages held by the Company. There exists no event
constituting a default under any such mortgage and no notice of deficiency has
been issued with respect thereto. The real property identified on such Schedule
4.13(e) as owned by the Company is the same as the real property owned by the
Company on September 30, 1999, and the condition thereof, including the
improvements thereon, has not deteriorated since such date, reasonable wear and
tear excepted.
(f) Each lease or license of an Asset by the Company is a valid and
subsisting obligation enforceable against the lessor or licensor, as the case
may be, in accordance with its terms.
(g) Except as set forth on Schedule 4.13(g), to the knowledge of the
Company, none of the Shareholders nor any third party owns or has any rights in
any Assets or property used to carry on the business or operations of the
Company.
(h) Such of the Assets as constitute inventory on the date hereof is in good
and merchantable condition and usable for its intended purpose, and, as to
finished goods inventory, saleable at its normal gross profit margins
experienced over the last twelve (12) months;
(i) Schedule 4.13(i) hereto is a true and correct list of all of the
machinery and equipment owned or leased by the Company as of the date hereof
having an initial cost exceeding $10,000 or requiring annual lease payments
exceeding $10,000, and, as to each item under lease or license, a brief
description of the material terms of such lease. The Company has good and
marketable title or, if reflected as a leasehold interest in the Company
Financial Statements, a valid and enforceable leasehold interest in and to the
machinery and equipment, merchandise, materials, supplies and other property of
every kind, tangible or intangible, which are shown as or reflected in the
Assets on the most recent Company Financial Statements, or which, whether or not
shown on the Company Financial Statements, were acquired directly or indirectly
by the Company through the purchase of Assets or stock from or through merger,
consolidation or other transaction with, another Person, except for machinery
and equipment and other Assets which have been consumed, sold or disposed of in
the Ordinary Course since the date of those Company Financial Statements or such
acquisition, free and clear of all Encumbrances.
(j) The Company has complied with all obligations under all material leases
and licenses to which it is a party or to which it has succeeded by merger or
acquisition of stock or Assets of any other Person and under which it is in
occupancy or license, as the case may be, and all such leases and licenses are
in full force and effect. The Company enjoys peaceful and undisturbed possession
under all real property leases.
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4.14 Environmental Liability. The Company has obtained all permits, licenses
and other authorizations which are required with respect to its operation under
means, any federal, state, local or foreign laws, ordinance, rule, regulation,
order, writ, injunction, decree, judgment, award, determination, direction,
stipulation or demand of a Government Authority ('Order'), demand letter,
request for information, or schedule or time table set forth in any Federal,
state, local or foreign law, ordinance, rule, regulation, Order, demand letter
or request for information issued, promulgated, approved or entered thereunder
relating to pollution or protection of the environment or to occupational health
or safety, including, without limitation, laws relating to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes into the
environment (including, without limitation, ambient air, surface water, ground
water, land, surface or subsurface strata), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, chemicals, or industrial,
toxic or hazardous substances or wastes ('Environmental Laws'); (b) the Company
is in compliance with the terms and conditions of the required permits, licenses
and authorizations required by the Environmental Laws; (c) except as set forth
on Schedule 4.14 there is no civil, criminal or administrative action, suit,
demand, claim, hearing, notice of violation, proceeding, notice or demand letter
pending relating to the Company or threatened against it relating in any way to
any Environmental Laws or any regulation, code, plan or Order issued, entered,
promulgated or approved thereunder; (d) except as set forth on Schedule 4.14
there are no investigations or internal or non-public agency proceedings pending
regarding the Company relating in any way to any Environmental Laws or any
regulation, code, plan or Order issued, entered, promulgated or approved
thereunder; and (e) except as set forth on Schedule 4.14 there has been no
generation, production, refining, processing, manufacturing, use, storage,
disposal, treatment, shipment, emission, receipt or release of a substance or
material regulated by any Environmental Law, and in the regulations adopted and
publications promulgated pursuant thereto and include, without limitation, any
flammable explosives, radioactive materials, hazardous materials, hazardous
wastes, toxic substances, asbestos or any material containing asbestos or
petroleum or petroleum by-product ('Hazardous Substance') on, in or under such
of the Assets of the Company constituting real property which would subject the
owner or operator of the real property or business, or any past or future owner
or operator of the real property to liability for the removal, remediation or
cleanup of the Hazardous Substance, petroleum or petroleum by-product under the
Environmental Laws or common law. The Company has delivered to Parent true and
complete copies of all environmental studies made in the last ten years relating
to the Company's real property or the business of the Company. Except as set
forth on Schedule 4.14 no Hazardous Substance has ever been spilled, released,
leaked, poured, leached, dumped, discharged, placed or disposed of, or otherwise
caused to be located at any property which has at any time been owned, leased or
used by the Company in violation of any Environmental Law and all Hazardous
Substances have been handled in compliance with Environmental Laws.
4.15 Assessments. The Company has not received notice of a special
assessment, or demand for payment of a special assessment or other payment as
contemplated by Section 5 a. of the Lease dated September 26, 1994 between
Eastmans Road Association, Ltd. and the Company.
4.16 Intellectual Property. Schedule 4.16 sets forth a list of all patents,
copyrights, trademarks, tradenames and service marks and any licensed
intellectual property rights (other than commercial or 'shrink-wrap' licenses
covering software generally available to the public on a retail basis)
(collectively, 'Intellectual Property Rights') of the Company. The ownership or
use of such Intellectual Property Rights by the Company does not infringe on the
intellectual property rights of others and the Company has not received notice
alleging any such infringement, and, to the knowledge of the Company, no third
party is infringing on the Intellectual Property Rights of the Company. The
Company is not obligated to pay any third party any royalty or fee for the use
of the Intellectual Property Rights used in its business. The execution and
delivery of this Agreement by the Company and the consummation of the
transactions contemplated hereby, will neither cause the Company to be in
violation or default under any such license, sublicense or agreement, nor
entitle any other party to any such license, sublicense or agreement to
terminate or modify such
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license, sublicense or agreement. The Company is the sole and exclusive owner or
licensee of, with all right, title and interest in and to (free and clear of any
Encumbrances), the Company Intellectual Property Rights, and, to the knowledge
of the Company, has sole and exclusive rights to the use thereof or the material
covered thereby in connection with the services or products in respect of which
the Company Intellectual Property Rights are being used. To the knowledge of the
Company, there is no unauthorized use, infringement or misappropriation of any
of the Company Intellectual Property Rights by any third party, including,
without limitation, any employees, former employee, Shareholder or former
shareholder of the Company.
4.17 Agreements, Etc. Schedule 4.17 sets forth a true and complete list of
all written or oral contracts, agreements and other instruments to which the
Company is a party and not made in the Ordinary Course of business, or made in
the Ordinary Course of business which are currently in effect, and referred to
in any of clauses (a) through (k) of this Section 4.17
(a) any joint venture, partnership or other agreement or arrangement for
the sharing of profits;
(b) any collective bargaining contract or other contract with or
commitment to any labor union;
(c) the future purchase, sale or license of products, material,
supplies, equipment or services requiring payments to or from the Company in
an amount in excess of $25,000 per annum, which agreement, arrangement or
understanding is not terminable on thirty (30) days' notice without cost or
other liability at or at any time after the Effective Time, or in which the
Company has granted or received manufacturing rights, most favored nations
pricing provisions or exclusive marketing or other rights relating to any
product, group of products, services, technology, Assets or territory;
(d) the employment or consultancy of any officer, employee, consultant
or agent or any other type of contract, commitment or understanding with any
officer, employee, consultant or agent which (except as otherwise generally
provided by applicable law) is not immediately terminable without cost or
other liability at or at any time after the Effective Time;
(e) an indenture, mortgage, promissory note, loan agreement, guarantee
or other agreement or commitment for the borrowing of money, for a line of
credit or, if involving payments in excess of $25,000 per annum, for a
leasing transaction of a type required to be capitalized in accordance with
Statement of Financial Accounting Standards No. 13 of the Financial
Accounting Standards Board;
(f) a contract or commitment for capital expenditures individually in
excess of $25,000;
(g) any agreement or contract with a 'disqualified individual' (as
defined in Section 280G(c) of the Code), which could result in a
disallowance of the deduction for any 'excess parachute payment' (as defined
in Section 280G(b)(i) of the Code) under Section 280G of the Code;
(h) an agreement or arrangement for the sale of any Assets, properties
or rights having a value in excess of $25,000;
(i) an agreement which restricts the Company from engaging in any aspect
of its business or competing in any line of business in any geographic area;
(j) the Company accounts for all of its software, hardware, consulting,
licensing, distribution and other similar agreements and contracts under
which the Company provides services or sells or distributes goods or
equipment in accordance with GAAP; and
(k) a list of all agreements ('Government Contracts') with the Company's
vendors where the Company is an approved vendor with the United States
Department of Defense or other applicable Governmental Authority.
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The Company has furnished to Parent true and complete copies of all such
agreements listed in Schedule 4.17 and Schedule 3.2 and each such agreement:
(i) is the legal, valid and binding obligation of the Company and, to
the best knowledge of the Company, the legal, valid and binding obligation
of each other party thereto, in each case enforceable in accordance with its
terms;
(ii) is in full force and effect; and
(iii) the other party or parties thereto is or are not, to the knowledge
of the Company, in material default thereunder.
4.18 Suppliers; Raw Materials. Schedule 4.18 sets forth the names and
addresses of the ten largest suppliers of the Company based on the aggregate
value of raw materials, supplies, merchandise and other goods and services
ordered by the Company from such suppliers during the one year period ended
September 30, 1999 and the three month period ended December 31, 1999.
4.19 Customers; Sales Representatives.
(a) Schedule 4.19(a) sets forth for the year ended September 30, 1999 and
for the three month period ending December 31, 1999 (i) a list of the top 10
customers (inclusive of distributors) of the Company based on the aggregate
value of goods and services ordered from the Company by such customers during
each such period and (ii) the products purchased by each such customer and the
amount for which each such customer was invoiced during each period. The Company
has not received any notice or has any reason to believe that any material
customer (i) has ceased, or will cease, to use the products, goods or services,
(ii) has materially reduced or will materially reduce, the use of products,
goods or services or (iii) has sought, or is seeking, to materially reduce the
price it will pay for products, goods or services, which cessations and
reductions, either individually or in the aggregate, are reasonably likely to
result in a Material Adverse Effect on the Company.
(b) Schedule 4.19(b) sets forth a complete and correct list of (a) each
sales representative who is individually responsible for the account of any
customer of the Company business that ordered goods and services from the
Company with an aggregate value of $100,000 or more during the year ended
September 30, 1999 and the three month period ended December 31, 1999 and (b)
all sales representatives who collectively are responsible for the account of
any customer of the Company that ordered goods and services from the Company
with an aggregate value of $100,000 or more during the three month period ended
December 31, 1999 (collectively, the 'Company Sales Representatives'),
indicating with respect to each such Company Sales Representative the aggregate
value of goods and services ordered from the Company by customers for whose
accounts such Company Sales Representative was responsible. Each of the Company
Sales Representatives is continuing to act as a sales representative on behalf
of the Company and the Company has no reason to believe that any such
representative has ceased or will cease to act on behalf of the Company.
4.20 No Defaults, Etc. Except as set forth on Schedule 4.20 the Company has
in all respects performed all the material obligations required to be performed
by it to date and is not in material default or alleged to be in material
default under: (a) its Certificate or by-laws; or (b) any material agreement,
lease, mortgage, indenture, contract, commitment, instrument or obligation to
which the Company is a party or by which any of its Assets or rights are or may
be bound or affected, and there exists no event, condition or occurrence which,
with or without due notice or lapse of time, or both, would constitute such a
default by it of any of the foregoing. No current customer has notified, or to
the knowledge of the Company expressed an intention to notify, the Company or
its employees, officers or agents, that such customer will materially reduce the
dollar amount of business it will do with the Company or cease doing business
with the Company. Provided that the Company obtain the consents which may be
required to consummate the transaction which are set forth on the Schedule 4.20,
no such mortgage, indenture, lease, contract, agreement, license, instrument or
order limits in any material way the freedom of any Person acquiring control of
the Company, whether directly or indirectly, or from performing this
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Agreement in accordance with its terms. The Company has not received any notice
from any party to any such contract with respect to such party's unwillingness
or inability to perform thereunder.
4.21 Litigation, Observance of Statues, Regulations and Orders. Except as
set forth on Schedule 4.21 there are no:
(a) actions, suits, claims, investigations or legal or administrative or
arbitration proceedings (collectively, 'Actions') pending, or to the
knowledge of the Company, threatened against the Company, or to the
knowledge of the Company facts which could give rise to any of the
foregoing, whether at law or in equity, or before or by any Governmental
Authority;
(b) outstanding judgments, decrees, injunctions or orders of any
Governmental Authority or arbitrator against the Company or disputes with
customers or vendors;
(c) violations of or defaults with respect to any Order of any
arbitrator or Governmental Authority and, there is no basis for there to be
declared any such violation or Default;
(d) to the knowledge of the Company, Company officers, directors,
employees, agents, shareholders or representatives who have made, directly
or indirectly, with respect to the business of the Company, any illegal
political contributions, payments from corporate funds not recorded in the
Books and Records of the Company, payments from corporate funds that were
falsely recorded on the Books and Records of the Company, payments from
corporate funds to governmental officials in their individual capacities for
the purpose of affecting their action or the action of the government they
represent to obtain special concessions or illegal payments from corporate
funds to obtain or retain business; or
(e) no holder of capital stock of any Person which was, at any time,
directly or indirectly a subsidiary of the Company, or which merged with or
into the Company or any direct or indirect subsidiary of the Company, or a
Person from which the Company, directly or indirectly, acquired
substantially all of such Person's Assets or a shareholder of such Person,
has asserted any claim against the Company arising out of the acquisition of
such Assets or of such holder's capital stock and the Company knows of no
basis for any such claim.
4.22 Licenses, Permits, Etc. The Company possesses adequate licenses,
clearances, ratings, permits and franchises, and all rights with respect
thereto, to conduct its business as now conducted, and without any conflict with
the rights of others in any such license, clearance, rating, permit or
franchise. The Company has no knowledge of, nor has received notice of
termination, revocation or limitation of, or of the pendency or threatened
commencement of any proceeding to terminate, revoke or limit any such licenses,
clearances, ratings, permits or other approvals by the Governmental Authority or
other Person issuing same.
4.23 Compliance; Governmental Authorizations. Except as set forth on
Schedule 4.23, the Company has complied within the last five (5) years and is
presently in compliance in all material respects with all material Federal,
state, local or foreign laws, ordinances, regulations and orders applicable to
it or its business, including, without limitation, the Environmental
Authorities, all Federal and state securities or 'blue sky' laws, and all laws
and regulations relating to occupational safety and health and the environment.
Except as set forth on Schedule 4.23, the Company has all material
authorizations, security clearances, consents, approvals, licenses and permits
necessary to be obtained from Governmental Authorities in the conduct of its
business as presently conducted and as currently proposed by the Company to be
conducted, such authorizations, consents, approvals, licenses and permits are in
full force and effect, no violations are or have been recorded in respect of any
thereof and no proceeding is pending or, to the best knowledge of the Company,
or threatened to revoke or limit any thereof. All of the Company's full-time and
temporary personnel who provide services in a manner or of the type that require
specific certifications or clearances have provided such services at all times
while having such certifications or clearances in full force and effect. Neither
the Company has nor, to the knowledge of the Company, any of its full-time or
part-time personnel have, with respect to each of their activities, actions, or
services for or on behalf of the Company, has been cited or alleged by the
Environmental Authorities or other regulatory authority within the last five (5)
years as failing to comply with regulatory requirements or guidelines.
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4.24 Labor Relations; Employees. Schedule 4.24 sets forth the name of all
full-time and part-time employees of the Company and the primary locations at
which such employees provide their services as of the Closing Date. In addition,
except as set forth on Schedule 4.24,
(a) the Company is not delinquent in payments to any of its employees or
consultants for any wages, salaries, commissions, bonuses or other direct
compensation for any services performed by them to date or amounts required
to be reimbursed to such Persons;
(b) neither Acquisition Sub nor the Surviving Corporation will by reason
of anything done prior to the Closing be liable to any of such employees or
consultants for severance pay or any other payments other than for ordinary
wages and salaries payable through Closing;
(c) the Company is in compliance in all material respects with all
material Federal, state, local and foreign laws and regulations respecting
labor, employment and employment practices, terms and conditions of
employment and wages and hours;
(d) there is neither pending nor, threatened labor dispute, strike or
work stoppage involving employees of the Company (or otherwise) which
affects or which may affect the Company's business or which may interfere
with its continued operations;
(e) to the knowledge of the Company, there are no union organization
efforts relating to employees of the Company or any representation question
involving recognition as a collective bargaining agent for any employees of
the Company;
(f) there is not pending or, to the knowledge of the Company, threatened
any charge or complaint against the Company by the National Labor Relations
Board or any representative thereof;
(g) there have been no strikes, walkouts or work stoppages involving
employees of the Company in the last five (5) years;
(h) except as set forth on Schedule 4.24(h), there is no unfair labor
practice, sexual harassment or other employment-related complaint pending
or, to the knowledge of the Company, threatened against the Company or any
employee of the Company. Schedule 4.24(h) assesses managements current
belief in connection with the Company's liability with respect to any such
complaint or threat. No employee or consultant of the Company is, to the
knowledge of the Company, in material violation of any term of any
employment contract or consulting contract, confidentiality agreement or any
other contract or agreement relating to the relationship of such employee or
consulting contract with the Company or any other party because of the
nature of the business conducted or proposed to be conducted by the Company
or the execution and delivery of such agreement or contract by such employee
or consultant.
4.25 Employee Benefit Plans and Contracts.
(a) Schedule 4.25(a) identifies each 'employee benefit plan,' as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended
('ERISA'), and all other material written or formal plans or agreements
involving direct or indirect compensation (including any employment agreements
entered into between the Company and any Employee of the Company, but excluding
workers' compensation, unemployment compensation, other government-mandated
programs and the Company's salary and wage arrangements) currently or previously
maintained, contributed to or entered into by the Company or any ERISA Affiliate
thereof for the benefit of any Employee or former Employee under which the
Company or any ERISA Affiliate thereof has any present or future obligation or
liability (the 'Employee Plans'). The Company has provided to Parent true and
complete copies of all Employee Plans (and, if applicable, related trust
agreements) and all amendments thereto and written interpretations thereof. For
purposes of the preceding sentence, 'ERISA Affiliate' shall mean any entity
which is a member of (A) a 'controlled group of corporations,' as defined in
Section 414(b) of the Code, (B) a group of entities under 'common control,' as
defined in Section 414(c) of the Code or (C) an 'affiliated service group,' as
defined in Section 414(m) of the Code or treasury regulations promulgated under
Section 414(o) of the Code, any of which includes the Company. Any Employee
Plans
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which individually or collectively would constitute an 'employee pension benefit
plan,' as defined in Section 3(2) of ERISA, but which are not Multiemployer
Plans (collectively, the 'Pension Plans'), are identified as such in Schedule
4.25(a). For purposes of this Section 4.25, 'Employee' means any common law
employee, consultant or director of the Company.
(b) Each Employee Plan that is intended to be qualified under Section 401(a)
of the Code is so qualified and has been so qualified during the period from its
adoption to the date hereof, and each trust forming a part thereof is exempt
from tax pursuant to Section 501(a) of the Code. The Company does not know of
any facts or circumstances that would materially adversely affect such
qualification prior to the Closing. The Company has provided Parent with copies
of the most recent Internal Revenue Service determination letters with respect
to any such Employee Plans. Each Employee Plan has been maintained substantially
in compliance with its terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations, including, without limitation, ERISA
and the Code, which are applicable to such Employee Plans.
(c) No Employee Plan constitutes or since the enactment of ERISA has
constituted a 'multiemployer plan,' as defined in Section 3(37) of ERISA (a
'Multiemployer Plan').
(d) Schedule 4.25(d) lists each employment, severance or other similar
contract, arrangement or policy and each plan or arrangement (written or oral)
providing for insurance coverage (including any self-insured arrangements),
workers' benefits, vacation benefits, retirement benefits, deferred
compensation, profit-sharing, bonuses, stock options, stock appreciation or
other forms of incentive compensation or post-retirement insurance, compensation
or benefits which:
(i) is not an Employee Plan;
(ii) is entered into, maintained or contributed to, as the case may be,
by the Company;
(iii) covers any Employee or former Employee; and
(iv) under which the Company has any present or future obligation or
liability (excluding workers' compensation, unemployment compensation or
other government-mandated programs and the Company's salary and wage
arrangements). Such contracts, plans and arrangements as are described above
are hereinafter referred to collectively as the 'Benefit Arrangements.' Each
Benefit Arrangement has been maintained in substantial compliance with its
terms and with the requirements prescribed by any and all material laws,
statutes, rules, regulations, orders and judgments which are applicable to
such Benefit Arrangements. Except as indicated on Schedule 4.25(d), no
Benefit Arrangement or Employee Plan provides benefits including, without
limitation, death or medical benefits (whether or not insured), with respect
to any employee or former employee of the Company beyond such employee's
retirement or other termination of service (other than (i) coverage mandated
by applicable law, (ii) death benefits or retirement benefits under any
'employee pension plan', as that term is defined in Section 3(2) of ERISA,
or (iii) benefits the full cost of which is borne by the current or former
employee (or his or her beneficiary)).
(e) The Company has provided, or will have provided, to individuals entitled
thereto who are current or former Employees of the Company all required notices
within the applicable time period and coverage pursuant to Section 4980B of the
Code with respect to any 'qualifying event' (as defined in Section 4980B(f)(3)
of the Code) occurring prior to and including the Closing Date, and no tax
payable on account of Section 4980B of the Code has been incurred with respect
to any current or former Employees of the Company.
(f) None of the Employee Plans is subject to Title IV of ERISA. There are no
pending or, to the best knowledge of the Company, threatened claims (other than
routine claims for benefits), actions, suits or proceedings by, or on behalf of
or against any of the Employee Plans or any trusts related thereto.
(g) With respect to each Employee Plan, neither the Company nor any ERISA
Affiliate has engaged in a 'prohibited transaction' (as such term is defined in
Section 4975 of the Code or Section 406 of ERISA) that would subject the Company
or the Parent to any taxes, penalties or
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other liabilities resulting from prohibited transactions under Section 4975 of
the Code or Section 409 or 502(i) of ERISA.
(h) Neither the Company nor any ERISA Affiliate is a party to or obligated
under any agreement, plan, contract or other arrangements that will result,
separately or in the aggregate, in the payment of any 'excess parachute payment'
within the meaning of Section 280G of the Code.
(i) Except to the extent set forth on Schedule 4.25(i) hereto, to the extent
any Employee Plan is subject to approval by any governmental agency (or such
approval is available under applicable law), such Employee Plan has received
such approval and such approval is current.
(j) The Company is not subject to, and no facts exist which could subject
the Company to, any liability whatsoever which is directly or indirectly related
to any Employee Plan, including, but not limited to, liability for benefits
payments or related claims (other than the ordinary usual claims by participants
or beneficiaries which have been made for benefits called for under the terms of
such Employee Plans), any liability for any Tax or related penalty under the
Code, or liability for any damages or penalties arising under Title I or Title
IV of ERISA.
(k) Except as set forth on Schedule 4.25(k) hereto, no ERISA Welfare Plan
provides benefits to former employees of the Company other than continuation
coverage required by Section 4980B of the Code and Section 601 of ERISA.
(l) There are no pending or, to the knowledge of the Company, threatened
claims, suits or other proceedings with respect to any Employee Plan other than
the ordinary usual claims by participants or beneficiaries which have been made
for benefits called for under the terms of such Employee Plans and which will be
paid under such Employee Plans in the Ordinary Course.
(m) There is no requirement that Parent, Surviving Corporation or the
Company make any further contributions to any Employee Plan after the Closing
Date, and each Employee Plan which provides benefits to or on behalf of
employees or former employees of the Company may be terminated by Parent,
Surviving Corporation or the Company in its sole discretion on or after the
Closing Date without liability of any kind or description whatsoever to Parent,
the Company, Surviving Corporation, any of Parent's ERISA Affiliates, or any
other person, entity or governmental agency; provided, however, that Plan
benefits upon such termination are distributed to Participants in accordance
with the Plan terms and consistent with the requirements of ERISA and the Code.
4.26 Certain Agreements. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will:
(a) result in any payment (including, without limitation, severance,
unemployment compensation, golden parachute, bonus or otherwise) becoming
due to any director, Shareholder, or employee of the Company from the
Company, under any Employee Plan, Benefit Arrangement or otherwise;
(b) increase any benefits otherwise payable under any Employee Plan or
the Benefit Arrangement;
(c) result in the acceleration of the time of payment or vesting of any
such benefits; or
(d) violate any no shop, nonsolicitation, noncompetition or
nondisclosure agreement that the Company may be a party to.
4.27 Insurance. The Company maintains policies of liability, theft,
fidelity, fire, product liability, workmen's compensation, indemnification of
directors and officers and other similar forms of insurance. Schedule 4.27 sets
forth and accurately describes such policies, and a history of all claims within
the last three (3) years in excess of $50,000 made by the Company thereunder and
the status thereof. All such policies of insurance are in full force and effect
and all premiums with respect thereto are currently paid and, to the knowledge
of the Company, no basis exists for termination or non-renewal of any thereof on
the part of the insurer. The amounts of coverage under such policies conform to
the requirements set forth in the Company's customer contracts. The Company has
not, during the last three fiscal years, been denied or had revoked or rescinded
any policy of insurance.
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4.28 Brokers. The Company has not, nor have any of its officers, directors,
shareholders or employees, employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated by the Transaction Documents.
4.29 Related Transactions. Except for compensation to regular employees of
the Company, no current or former director, officer or shareholder that is an
affiliate of the Company or any associate (as defined in the rules promulgated
under the Exchange Act) thereof, is now, or has been during the last three (3)
fiscal years:
(a) a party to any transaction with the Company which would be required
to be included in a Form 10K-SB or definitive proxy statement with the SEC
(including, but not limited to, any contract, agreement or other arrangement
providing for the furnishing of services by, or rental of real or personal
property from, or borrowing money from, or otherwise requiring payments to,
any such director, officer or affiliated shareholder of the Company or
associate thereof), other than any transaction which has been disclosed in a
definitive proxy statement or report filed by the Company in a timely
fashion within the SEC;
(b) the direct or indirect owner, including any ownership by a family
member, of a 10% or greater interest in any non-natural Person, which is, or
has been, a supplier, customer, or, within the last 12 months, competitor,
of the Company (other than non-affiliated holdings in a publicly held
companies); or
(c) a party to any transaction with the Company whereby such Person
received compensation (other than dividends paid by a publicly held
corporation) from any other Person, which is, or has been, a supplier,
customer, or, within the last 12 months, competitor of the Company.
4.30 Board Approval. Each of the Board of Directors of the Company has
unanimously:
(a) approved the Transaction Documents to which the Company is a party
and the transactions contemplated hereby and thereby;
(b) determined that the Merger is in the best interests of the
Shareholders of the Company and is on terms that are fair to such
Shareholders; and
(c) recommended that the Shareholders of the Company approve the Merger
in accordance with the Plan of Merger and the New Jersey Statute. No other
Company approvals are required other than that of the Board of Directors and
Shareholders of the Company.
4.31 Vote Required. The affirmative vote of at least a majority of the
outstanding shares voting of the Company Common Stock approving the Merger, this
Agreement, the Plan of Merger, and the transactions contemplated hereby and
thereby are the only votes of the holders of any class or series of the
Company's capital stock necessary to approve the Transaction Documents to which
the Company is a party and the transactions contemplated hereby and thereby.
4.32 Officers and Directors. The duly elected, qualified and acting officers
and directors of the Company are as set forth in Schedule 4.32.
4.33 Information Supplied. None of the information supplied or to be
supplied by the Company for inclusion in:
(a) the S-4 will, at the time that the S-4 is filed with the SEC and at
the time that the S-4 becomes effective under the Securities Act, contain
any untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading; and
(b) the Shareholders' Materials will, at the dates mailed to the
Shareholders and at the effective date of the Shareholder Action, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they are made, not misleading. The
Shareholders' Materials will comply as to form with the provisions of all
applicable laws, rules and regulations of all Governmental Authorities.
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4.34 Bank Accounts; Credit and Charge Cards. Schedule 4.34 hereto contains a
true and complete list as of the date hereof (i) of all banks, trust companies
and savings and loan associations in which the Company maintains an account (and
the account number thereof) or safe deposit vault and the names of all Persons
authorized to draw thereon and the balances on such accounts on the date hereof;
and (ii) of all credit and charge cards issued in the name of the Company or any
of its employees or officers and for which the Company has any liability and the
outstanding balances on each such card as of January 31, 2000.
4.35 Company Not An Interested Shareholder. As of the date of this
Agreement, neither the Company nor, to the best of the Company's knowledge, any
of its Affiliates is an 'Interested Shareholder' of Parent as such term is
defined in Section 14A:10A-3 of the New Jersey Business Corporation Act.
4.36 Investment Company Act; Public Utility Holding Company Act. The Company
is not, and is not directly or indirectly controlled by, or acting on behalf of,
any Person which is an 'investment company' within the meaning of the Investment
Company Act of 1940, as amended. The Company is not a 'holding company' as that
term is defined in or is otherwise subject to regulation under, the Public
Utility Holding Company Act of 1935, as amended.
4.37 No Right of Action. The execution and delivery of this Agreement and
the other agreements, documents and instruments contemplated hereby and the
completion of the transactions contemplated hereby and thereby, shall not cause
Parent, the Surviving Corporation, or any of their respective affiliates to be
liable for damages to any other Person or give such Person any equitable right
against any of them or the Company or any of their respective Assets.
4.38 Knowledge Definition. As used in this Agreement, 'to the knowledge of
the Company' and like phrases shall mean and include:
(a) actual knowledge; and
(b) that knowledge which a prudent businessperson (including the
officers, directors and other key employees of the Company) would have
obtained in the management of his or her business affairs after reviewing
this Article IV in detail and making due inquiry and exercising reasonable
diligence with respect thereto. In connection therewith, the knowledge (both
actual and constructive) of Yves Guyomar, Dick Blackwell, and the Company's
CFO shall be imputed to be the knowledge of the Company.
4.39 Year 2000 Compliance. All computer software or hardware owned or used
by the Company or licensed by the Company, as licensor or as licensee, other
than any shrinkwrap software available to retail customers generally, is 'Year
2000 Compliant', except where failure to be so could not have a Material Adverse
Effect on the Company and except as disclosed on Schedule 4.39 attached hereto.
As used herein 'Year 2000 Compliant' shall mean (i) all such software or
hardware shall operate in four-digit year format, without errors in the
recognition, calculation and processing of date data relating to century
recognition, leap years, single and multi-century formulae, date values and
interfaces of date-related functionalities; (ii) all date processing shall be
conducted in a four-digit year format and all date sorting that includes a 'year
field' or 'year category' shall be based upon a four-digit year format; and
(iii) any date arithmetic programs or calculators in the software or hardware
shall operate in accordance with the related user documentation in the Year
2000, and the years following, without degrading functionality or performance.
4.40 Directors Liabilities. The Company has furnished the Parent Schedule
4.40 setting forth, opposite each respective name, a true correct and complete
list of (a) the amount of accrued fees owed to members of the Company's board of
directors (or their affiliates) as at the date hereof; (b) the principal amount
of the loans to Company directors (or their affiliates) as at the date hereof
plus accrued and unpaid interest through February 29, 2000; and (c) the amount
representing benefit payments owed to members of the Company's board of
directors (or their affiliates) as at February 29, 2000 (together 4.40(a),
4.40(b) and 4.40(c), the 'Director Liabilities'). Schedule 4.40 also sets forth
certain liabilities owed to Raymond Lafferty (the 'Lafferty Liabilities') The
Director Liabilities are demand obligations, and Schedule 4.40 has been
initialed
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by each of the Principal Shareholders' to whom any such fees, benefits, salaries
or loans are owed directly (or indirectly to his/its affiliates or associates).
4.41 Full Disclosure. No financial statement, Exhibit, Schedule or document
required by this Agreement to be prepared or furnished by or on behalf of the
Company or any Principal Shareholder to the Parent and/or Acquisition Sub in
connection with this Agreement or any other Transaction Document hereby or
delivered pursuant hereto, contained or contains any material misstatement of
fact or omits to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The representations and warranties set forth in this Article IV do
not contain any material misstatement of fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION SUB
Parent and Acquisition Sub, jointly and severally, represent and warrant to
the Company and each of the Principal Shareholders that:
5.1 Organization; Good Standing; Qualification and Power. Each of Parent and
Acquisition Sub:
(a) is a corporation duly organized, validly existing and in good
standing under the laws of the State of New Jersey;
(b) has all requisite corporate power and authority to enter into the
Transaction Documents to which either is a party, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated
hereby and thereby; and
(c) is duly qualified and in good standing in all jurisdictions in which
the failure to be so qualified and in good standing could reasonably be
expected to have a Material Adverse Effect on the Parent or Acquisition Sub.
Parent has delivered to the Company true and complete copies of the
Certificate and by-laws of each of Parent and Acquisition Sub.
5.2 Information Supplied. None of the information supplied or to be supplied
by Parent or Acquisition Sub for inclusion or incorporation by reference in the
S-4 will, at the time the S-4 is filed with the SEC and at the time the S-4
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading.
5.3 Continuity of Business Enterprise. It is the present intention of Parent
to continue at least one significant historic business line of the Company or to
use at least a significant portion of the Company's historic business Assets in
a business, in each case within the meaning of Treasury Regulation Section
1.368-1(d).
5.4 Authority; No Consents. The execution, delivery and performance by
Parent and Acquisition Sub of the Transaction Documents to which each is a party
and the consummation of the transactions contemplated hereby and thereby have
been duly and validly authorized by all necessary corporate action on the part
of Parent and Acquisition Sub, and this Agreement and the other Transaction
Documents to which each is a party have been, and the Plan of Merger when
executed and delivered by Parent and Acquisition Sub will be, duly and validly
executed and delivered by Parent and Acquisition Sub, and this Agreement and the
other Transaction Documents to which each is a party are, and the Plan of Merger
when executed and delivered by the parties thereto will be, the valid and
binding obligations of Parent and Acquisition Sub, enforceable against Parent
and Acquisition Sub in accordance with their respective terms subject to
bankruptcy, fraudulent conveyance, insolvency, moratorium or similar laws
affecting the rights of creditors generally or general equitable principles.
Neither the execution, delivery and performance of the other Transaction
Documents to which each is a party nor the consummation by Parent and
Acquisition Sub of the transactions contemplated hereby or thereby nor
compliance by Parent and Acquisition Sub with any provision hereof or thereof
will: (a) conflict with; (b) result in any
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violations of; (c) cause a default under (with or without due notice, lapse of
time or both); (d) give rise to any right of termination, amendment,
cancellation or acceleration of any obligation contained in or the loss of any
material benefit under; or (e) result in the creation of any Encumbrance on or
against any assets of Parent or Acquisition Sub, right or property of Parent or
Acquisition Sub under any term, condition or provision of: (x) any instrument or
agreement to which Parent or Acquisition Sub is a party, or, to the knowledge of
Parent and Acquisition Sub, by which Parent or Acquisition Sub, their respective
properties, assets or rights may be bound (except as shall have been waived or
with respect to which consent shall have been obtained prior to the Closing)
except where the foregoing would not result in a Material Adverse Effect on
Parent; (y) any law, statute, rule, regulation, order, writ, injunction, decree,
permit, concession, license or franchise of any Governmental Authority
applicable to Parent or Acquisition Sub or any of their respective properties,
assets or rights except where the foregoing would not result in a Material
Adverse Effect on Parent; or (z) the Certificate or by-laws of Parent or
Acquisition Sub, respectively, as amended through the date hereof. Except as
contemplated by this Agreement or the Plan of Merger, no permit, authorization,
consent or approval of or by, or any notification of or filing with, any
Governmental Authority is required in connection with the execution, delivery
and performance by Parent and Acquisition Sub of this Agreement, the Plan of
Merger or the Transaction Documents to which Parent and Acquisition Sub is a
party or the consummation of the transactions contemplated hereby or thereby,
except for: (i) the filing with the SEC of (A) the S-4 with respect to the
Merger Shares, the shares of Parent Common Stock to be reserved for issuance
upon exercise of the assumed Company Options and Company Warrants and (B) such
reports and information under the Exchange Act, and the rules and regulations
promulgated by the SEC thereunder, as may be required in connection with this
Agreement, the Plan of Merger and the transactions contemplated hereby and
thereby; (ii) such filings as may be required by the American Stock Exchange
with respect to notification and listing of Parent Common Stock to be issued in
connection with the Merger and the Company Warrants and Company Options to be
assumed by Parent in the Merger; (iii) the filing of such documents with, and
the obtaining of such orders from, various state securities and blue-sky
authorities as are required in connection with the transactions contemplated
hereby; (iv) the distribution of the Shareholders' Materials with respect to the
adoption by the Shareholders of this Agreement and the Plan of Merger; (v) the
filing of the Plan of Merger with the Treasurer of the State of New Jersey and
appropriate documents with the relevant authorities of other states in which the
Company is qualified to do business; and (vi) such other consents, waivers,
authorizations, filings, approvals and registrations which if not obtained or
made would not have a Material Adverse Effect on the Parent or materially impair
the ability of Parent and Acquisition Sub to consummate the transactions
contemplated by this Agreement or the Plan of Merger, including, without
limitation, the Merger.
5.5 SEC Documents. Parent has filed each report, schedule, registration
statement and definitive proxy statement with the SEC on or after December 31,
1999 (the 'Parent SEC Documents'), which are all the documents (other than
preliminary material) that Parent was required to file (or otherwise did file)
with the SEC on or after December 31, 1999. As of their respective dates, none
of the Parent SEC Documents (including all exhibits and schedules thereto and
documents incorporated by reference therein) contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, and the Parent SEC
Documents complied when filed in all material respects with the then applicable
requirements of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations promulgated by the SEC thereunder.
5.6 Financial Statements. The financial statements of the Parent included in
the Parent SEC Documents (the 'Parent Financial Statements'):
(a) complied as to form in all material respects with the then
applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, were prepared in accordance with GAAP,
consistently applied (except as may have been indicated in the notes thereto
or, in the case of the unaudited statements, as permitted by Form 10-Q
promulgated by the SEC);
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(b) were in accordance with the books and records of the Parent; and
(c) fairly present (subject, in the case of the unaudited statements, to
normal, nonrecurring audit adjustments) the financial position of the Parent
as at the dates thereof and the consolidated results of their operations and
cash flows for the periods then ended.
5.7 Absence of Undisclosed Liabilities. At January 31, 2000(a) Parent had no
Liability which was not provided for or disclosed on the Parent SEC Documents
for the fiscal year ended December 31, 1999; and (b) all liability reserves
established by Parent and set forth on the Parent Financial Statements were
adequate, in the good faith judgment of Parent, for all such Liabilities at the
date thereof. There were no material loss contingencies (as such term is used in
FAS No. 5) which were not adequately provided for on the Parent Financial
Statements as required by FAS No. 5.
5.8 Absence of Changes. Since the filing with the SEC of the Parent's most
recent 10-Q, the Parent has not experienced any Material Adverse Effect.
5.9 Tax Representation Letter. Set forth on Exhibit 5.9 is a copy of the tax
representation letter to be addressed by the Parent to DB&S in connection with
the issuance of a tax opinion by DB&S.
5.10 Full Disclosure. No financial statement, Exhibit, Schedule or document
required by this Agreement to be prepared or furnished by or on behalf of the
Parent or Acquisition Sub to the Company or and/or the Principal Shareholders in
connection with this Agreement or any other Transaction Document hereby or
delivered pursuant hereto, contained or contains any material misstatement of
fact or omits to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The representations and warranties set forth in this Article V do
not contain any material misstatements of fact or omit to state any material
fact necessary to make the statements therein in light of the circumstances
under which they were made, not misleading.
5.11 Tax Matters. The Parent:
(a) has filed and will file, in a timely and proper manner, consistent
with applicable laws, all Federal, state and local Tax returns and Tax
reports required to be filed by Parent through the Closing Date (the 'Parent
Returns') with the appropriate governmental agencies in all jurisdictions in
which Parent Returns are required to be filed and have paid or will pay all
amounts shown thereon to be due; and (b) have paid and shall timely pay all
Taxes required to have been paid on or before the Closing Date.
5.12 No Defaults, Etc. The Parent and Acquisition Sub have in all respects
performed all the material obligations required to be performed by it to date
and is not in material default or alleged to be in material default under:
(a) its Certificate or by-laws; or (b) any material agreement, lease, mortgage,
indenture, contract, commitment, instrument or obligation to which the Parent
and Acquisition Sub is a party or by which any of its Assets or rights are or
may be bound or affected.
5.13 Board Approval. The Board of Directors of the Parent and Acquisition
Sub have approved the Transaction Documents to which the Parent and Acquisition
Sub are a party and the transactions contemplated hereby and thereby;
5.14 Parent Common Stock. The shares of Parent Common Stock issued in the
Merger pursuant to Article II of this Agreement shall at the Effective Time be
duly authorized, validly issued, fully paid, and nonassessable and in compliance
with the listing rules and regulations of the American Stock Exchange.
ARTICLE VI
VOTING AGREEMENT
6.1 Agreement to Vote.
(a) Each Principal Shareholder hereby agrees that at any meeting of the
Shareholders of the Company, however called, or in any action by written consent
of the Shareholders, such Principal
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Shareholder shall: (i) vote all of the Company Common Stock owned or controlled
by him in favor of this Agreement, the Plan of Merger, and the Merger and the
other transactions contemplated hereby and thereby, provided that the Board of
Directors of the Company shall have approved such Merger; and (ii) until the
termination of this Agreement pursuant to Article XIV, vote such Shares against
any (A) merger, consolidation, share exchange, business combination or other
similar transaction pursuant to which control of the Company would be
transferred to any Person other than Parent, or (B) sale, lease, exchange,
mortgage, pledge, transfer or other disposition of twenty percent (20)% or more
of the Assets of the Company, taken as a whole, in a single transaction or in a
series of transactions. Notwithstanding the foregoing, this Section 6.1(a) shall
be null and void and not binding on such Principal Shareholder unless the
Principal Shareholder will receive in the Merger shares of Parent Common Stock
in the same proportion or ratio as all other holders of the Company Common
Stock.
(b) The Principal Shareholders hereby constitute, appoint and instruct
Edward Garcia (the 'Proxy Holder') as the Principal Shareholders' true and
lawful proxy and attorney-in-fact, with full power of substitution, to: (a) vote
at any meeting of the Shareholders, all Company Common Stock which the Principal
Shareholders owned as of the record date for such meeting (or to execute any
consent of the Principal Shareholders of the Company in lieu of such meeting for
the number of shares of the Company Common Stock that the Principal Shareholders
owned as of the date of or record date for such consent) in favor of the
approval of this Agreement, the Plan of Merger, and the Merger and the other
transactions contemplated hereby and thereby, provided that the Board of
Directors of the Company shall have approved such Merger; and (b) until the
termination of this Agreement pursuant to Article XIV, to vote at any meeting of
the Shareholders of the Company, however called, all Company Common Stock which
the Principal Shareholders owned as of the record date for such meeting (or to
execute any consent of the Shareholders of the Company in lieu of such meeting
for the number of Shares that the Principal Shareholders owned as of the date of
or record date for such consent) against an matter referred to in
Section 6.1(a)(ii)(A) and/or Section 6.l(a)(ii)(B) hereof. Such proxy shall be
limited strictly to the power to vote Company Common Stock in the manner set
forth in the preceding sentence and shall not extend to any other matters
presented for vote at such meeting, and the Principal Shareholders shall have
the right to vote the Company Common Stock on any other matter whatsoever in the
Principal Shareholders' sole discretion. The Principal Shareholders acknowledge
that the proxy granted hereby is coupled with an interest and is irrevocable to
the full extent permitted by the New Jersey Statute. In the event that the
Principal Shareholders fail for any reason to vote the Principal Shareholders'
Company Common Stock in accordance with the requirements of this Section 6.1,
then the Proxy Holder shall have the right to vote the Company Common Stock in
accordance with the provisions of this Section 6.1. The vote of the Proxy Holder
shall control in any conflict between the vote by the Proxy Holder of Company
Common Stock and a vote by the Principal Shareholders of Company Common Stock.
Notwithstanding the foregoing, this Section 6.1(b) shall be null and void and
not binding on the Principal Shareholders unless the Principal Shareholders will
receive in the Merger shares of Parent Common Stock in the same proportion or
ratio as all other holders of the Company Common Stock.
ARTICLE VII
CONDUCT AND TRANSACTIONS PRIOR TO
EFFECTIVE TIME; ADDITIONAL AGREEMENTS
7.1 Access to Records and Properties of Each Party; Confidentiality. From
and after the date hereof until the Effective Time or the earlier termination of
this Agreement pursuant to Section 13.1 hereof (the 'Executory Period'), the
Company shall afford: (i) representatives of the Parent or Acquisition Sub, free
and full access at all reasonable times upon reasonable notice to all
properties, books and records (including tax returns filed and those in
preparation) of the Company provided that such activities shall not interfere
with the Company's normal operations, in order that the Parent and Acquisition
Sub may have full opportunity to make such investigations as they shall
reasonably desire to make of the business and affairs of the Company.
Additionally,
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the Company will permit the Parent and Acquisition Sub to make such reasonable
inspections of the Company and its respective operations during normal business
hours, upon reasonable notice, as the Parent and Acquisition Sub may reasonably
require and the Company will cause its officers to furnish to the Parent and
Acquisition Sub, such additional financial and operating data and other
information as to the business and properties of the Company as the Parent and
Acquisition Sub shall from time to time reasonably request (it being understood
that, subject to the terms of the Confidentiality Agreement, Parent and
Acquisition Sub shall be entitled to make copies of such information and take
notes with respect thereto). No investigation pursuant to this Section 7.1, or
made prior to the date hereof, shall affect or otherwise diminish or obviate in
any respect any of the representations and warranties made in this Agreement.
7.2 Operation of Business of the Company. During the Executory Period, the
Company will operate its business as now operated and only in the normal and
Ordinary Course and, consistent with such operation, will use its commercially
reasonable efforts to preserve intact its present business organization, to keep
available the services of its officers, consultants and employees and to
maintain satisfactory relationships with licensors, franchisees, licensees,
suppliers, contractors, distributors, customers and other Persons having
business dealings with it. Without limiting the generality of the foregoing,
during the Executory Period, the Company shall not:
(a) take any action that would result in any of the representations and
warranties of the Company herein becoming untrue or in any of the conditions
to the Merger not being satisfied.
(b) take or cause to occur any of the actions or transactions described
in Section 4.10 hereof.
7.3 Negotiation with Others.
(a) During the Executory Period, the Company and the Principal Shareholders
shall not, and the Company shall not permit any agent or other representative of
the Company or any Principal Shareholder to, directly or indirectly:
(i) solicit, initiate or engage in discussions or engage in negotiations
with any Person (whether such negotiations are initiated by the Company or
Principal Shareholder or otherwise) or take any other action to facilitate
the efforts of any Person, relating to the possible acquisition of the
Company (whether by way of merger, purchase of capital stock, purchase or
lease of Assets or otherwise) or any material portion of its capital stock
or Assets (any such acquisition being referred to as an 'Acquisition
Transaction');
(ii) provide information to any Person, other than the Parent or
Acquisition Sub, relating to a possible Acquisition Transaction;
(iii) enter into an agreement with any Person, other than the Parent or
Acquisition Sub, relating to or providing for a possible Acquisition
Transaction;
(iv) consummate an Acquisition Transaction with any Person other than
the Parent or Acquisition Sub; or
(v) make or authorize any statement, recommendation or solicitation in
support of any possible Acquisition Transaction, unless the Parent or
Acquisition Sub are a party to such Acquisition Transaction.
7.4 Preparation of S-4; Other Filings. As promptly as practicable after the
date of this Agreement, Parent and the Company shall properly prepare and file
with the SEC a Registration Statement on Form S-4 with respect to the Merger
Shares in which the Shareholder Statement will be included as a prospectus. Each
of Parent and the Company shall use its best efforts to respond to any comments
of the SEC, to have the S-4 declared effective under the Securities Act as
promptly as practicable after such filing and to cause the Shareholder Statement
to be mailed to the Shareholders at the earliest practicable time, but in any
event within ten (10) Business Days (if permitted under applicable law or
regulation without any further requirements to prepare and/or file any
additional filings) after the S-4 has been declared effective by the SEC. As
promptly as practicable after the date of this Agreement, Parent and the Company
shall properly
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prepare and file any other filings required under the Exchange Act, the
Securities Act or any other Federal or state laws and Parent shall properly
prepare and file any filings required under state securities or 'blue sky' laws,
in each case, relating to the Merger and the transactions contemplated by this
Agreement and the Plan of Merger (collectively, the 'Other Filings'). The
Company shall promptly furnish Parent with all information concerning the
Company and the Shareholders as may be reasonably required in connection with
any action contemplated by this Section 7.4, including without limitation a tax
opinion as required by Section 10.4 as to 'reorganization' status of the Merger
under Code section 368(a)(i) and appropriate language for inclusion in the Form
S-4 with respect to the 'reorganization' status of the Merger. Each Party will
notify the other Party promptly of the receipt of any comments from the SEC or
its staff and of any request by the SEC or its staff or any other government
officials for amendments or supplements to the S-4 or any Other Filing or for
additional information and will supply the other Party with copies of all
correspondence between such Party or any of its representatives, on the one
hand, and the SEC or its staff or any other government officials, on the other
hand, with respect to the S-4, the Merger or any Other Filing. Each Party shall
promptly provide the other Party (or its counsel) copies of all filings made by
such Party with any Governmental Authority in connection with this Agreement,
the Plan of Merger and the transactions contemplated hereby and thereby. The S-4
and the Other Filings shall comply in all material respects with all applicable
requirements of law. Whenever any event occurs which should be set forth in an
amendment or supplement to the S-4 or any Other Filing, Parent or the Company,
as the case may be, shall promptly inform the other Party of such occurrence and
cooperate in filing with the SEC or its staff or any other government officials,
and/or mailing to Shareholders of the Company, such amendment or supplement.
7.5 Advice of Changes. The Company and Parent shall confer on a regular and
frequent basis with the other, report on operational matters and promptly advise
the other orally and in writing of any change, event or circumstance having, or
which, insofar as can reasonably be foreseen, could have, a Material Adverse
Effect on either such Person or which could impair (negatively or positively)
its financial projections or forecasts.
7.6 Letter of the Company's Accountants. The Company shall use its best
commercial efforts to cause to be delivered to Parent a letter of Polakoff
Weismann Leen, LLC, the Company's independent accountant, dated a date within
two (2) Business Days before the date on which the S-4 shall become effective
and addressed to Parent, in form and substance reasonably satisfactory to Parent
and customary in scope and substance for letters delivered by independent public
accountants in connection with registration statements similar to the S-4 (and,
if requested, a bring-down comfort letter at the closing of the Merger).
7.7 Letter of Parent's Accountants. Parent shall use its best commercial
efforts to cause to be delivered to the Company a letter of Lazar Levine &
Felix, LLP Parent's independent public accountants, dated a date within two (2)
Business Days before the date on which the S-4 shall become effective and
addressed to the Company, in form and substance reasonably satisfactory to the
Company and customary in scope and substance for letters delivered by
independent public accountants in connection with registration statements
similar to the S-4 (and, if requested, a bring-down comfort letter at the
closing of the Merger).
7.8 Shareholders' Approval. The Company shall:
(a) call a special meeting of the Shareholders (the 'Shareholders'
Meeting') within 30 days (or such other period as may be required by
applicable law) after the S-4 shall have been declared effective by the SEC
for the purpose of obtaining the approval of the Merger, this Agreement and
the Plan of Merger and the transactions contemplated hereby and thereby (the
'Shareholder Action'); and
(b) recommend that the Shareholders vote in favor of the Merger and
approve this Agreement and the Plan of Merger and take or cause to be taken
all such other action as may be required by the New Jersey Statute and any
other applicable law in connection with the Merger, this Agreement and the
Plan of Merger, in each case as promptly as possible. The Company shall
prepare and distribute any written notice and other materials relating to
the
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Shareholder Action, including, without limitation, a proxy statement (the
'Shareholder Statement'), in accordance with the Certificate and by-laws of
the Company, the New Jersey Statute and any other Federal and state laws
relating to the Merger, such Shareholders' Meeting or any other transaction
relating to or contemplated by this Agreement (collectively, the
'Shareholders' Materials'); provided, however, that Parent and its counsel
shall have the opportunity to review all Shareholders' Materials prior to
delivery to the Shareholders, and all Shareholders' Materials shall be in
form and substance reasonably satisfactory to Parent and its counsel;
provided, further, however, that if any event occurs which should be set
forth in an amendment or supplement to any Shareholders' Materials, the
Company shall promptly inform Parent thereof (or, if such event relates
solely to Parent, Parent shall promptly inform the Company thereof), and the
Company shall promptly prepare an amendment or supplement in form and
substance satisfactory to Parent in accordance with the Certificate and
by-laws of the Company, the New Jersey Statute and any other Federal or
state laws.
7.9 Legal Conditions to Merger. Each Party shall take all reasonable actions
necessary to comply promptly with all legal requirements which may be imposed on
such Party with respect to the Merger and will take all reasonable action
necessary to cooperate with and furnish information to the other Party in
connection with any such requirements imposed upon such other Party in
connection with the Merger. Each Party shall take all reasonable actions
necessary:
(a) to obtain (and will take all reasonable actions necessary to
promptly cooperate with the other Party in obtaining) any consent,
authorization, order or approval of, or any exemption by, any Governmental
Authority, or other third party, required to be obtained or made by such
Party (or by the other Party) in connection with the Merger or the taking of
any action contemplated by this Agreement or the Plan of Merger;
(b) to defend, lift, rescind or mitigate the effect of any lawsuit,
order, injunction or other action adversely affecting the ability of such
Party to consummate the transactions contemplated hereby; and (c) to fulfill
all conditions precedent applicable to such Party pursuant to this
Agreement;
(c) if required, to complete all filings required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 ('HSR Act') in
connection with the Merger and the applicable waiting period with respect to
each such filing (including any extension thereof by reason of a request for
additional information) shall have expired by the date the Shareholder
Statement is first sent to the Shareholders of the Company (the 'Mailing
Date').
7.10 Consents. Each Party shall use its commercially reasonable efforts, and
the other Party shall cooperate with such efforts, to obtain any consents and
approvals of, or effect the notification of or filing with, each Person or
authority, whether private or governmental, whose consent or approval is
required in order to permit the consummation of the Merger and the transactions
contemplated hereby and to enable the Surviving Corporation to conduct and
operate the business of the Company substantially as presently conducted and as
proposed to be conducted.
7.11 Efforts to Consummate. Subject to the terms and conditions herein
provided, each of the Parties hereto shall, in good faith, use reasonable effort
to do or cause to be done all such acts and things as may be necessary, proper
or advisable, consistent with all applicable laws and regulations, to consummate
and make effective the transactions contemplated hereby and by the Plan of
Merger and to satisfy or cause to be satisfied all conditions precedent that are
applicable to each such Party that are set forth in this Agreement as soon as
reasonably practicable (including, without limitation, in the case of the
Company cooperating with (and executing and delivering appropriate
certifications to) any Person who has been requested by a party hereto to
analyze (and/or furnish an opinion with respect to) whether the Merger shall be
treated as a tax-free reorganization under the Code).
7.12 Notice of Prospective Breach. Each Party hereto shall immediately
notify the other Party in writing upon the occurrence of any act, event,
circumstance or thing that is reasonably likely to cause or result in a
representation or warranty hereunder to be untrue at the Closing, the failure
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of a closing condition to be achieved at the Closing, or any other breach or
violation hereof or default hereunder.
7.13 Public Announcements. Each of the Company and the Parent hereto agrees
that it shall consult with the other parties before issuing any press releases
or otherwise making any public statements with respect to the Merger; and shall
not issue any such press release or make any such public statement prior to such
consultation, except as may be required by law or by obligations pursuant to any
listing agreement with any national securities exchange or as may be advised by
counsel to be desirable or appropriate, without the prior written consent of the
other. Each Party further agrees that no Party shall unreasonably withhold their
written consent to the issuance of a public disclosure referred to in this
Section 7.13.
7.14 Notice of Developments. Each party hereto will use all commercially
reasonable efforts to ensure that its respective representations and warranties
will be accurate and complete at the time this Agreement is executed. However,
notwithstanding the foregoing, each party shall at any time from the date of
this Agreement throughout the Closing notify the other party if the notifying
party becomes aware of any fact or condition that causes or constitutes a breach
of any of its representations and warranties as of the date of this Agreement or
of any development causing a breach of any of its representations and
warranties.
7.15 Agreement Regarding Proceedings. In the event of any threatened,
pending or completed claim, action, suit, investigation or any legal,
administrative or other proceeding (a 'Proceeding') by any Governmental
Authority or other Person which questions the validity or legality of the
transactions contemplated by this Agreement or seeks to enjoin, restrain or
prohibit such transactions, or seeks damages in connection therewith, whether
before or after the Effective Time of the Merger, Parent, Acquisition Sub, the
Company, and the Surviving Corporation agree, to the fullest extent permissible
by law, to cooperate in the defense thereof.
7.16 Certain Obligations. The Parent has reviewed Schedule 4.40 and
acknowledges that the Director Liabilities, as set forth on such Schedule 4.40,
are the obligations and liabilities of the Company. Parent agrees that it shall
satisfy the Director Liabilities and Lafferty Liabilities in cash or by issuing
Parent Common Stock, at the Closing as set forth on Schedule 7.16. The amount of
Parent Common Stock to be issued pursuant to this Section 7.16 shall be
equivalent to (with respect to each of the members of the Company's board of
director's listed on Schedule 4.40) the quotient of (i) the Director Liabilities
owed as set forth on Schedule 4.40 divided by (ii) the closing price of a share
of Parent Common Stock as reported on the American Stock Exchange on the date
hereof, or, if the date hereof is not a trading day, the first date prior to the
date hereof on which there is a closing price of the Parent Common Stock
reported on the American Stock Exchange. By executing this Agreement, the
members of the Company's board of directors who are owed Director Liabilities
agree to accept Parent Common Stock in lieu of any liabilities owed to them with
respect to the Director Liabilities set forth on Schedule 4.40.
7.17 Principal Shareholder Agreements. Notwithstanding anything contained
herein to the contrary, the execution of this Agreement by each of the Principal
Shareholders shall terminate, effective as of the date hereof, any and all oral
or written agreement (other than this Agreement), understanding or similar
arrangement (to the extent not set forth on Schedule 3.2 or specifically set
forth in this Agreement) to which any such Principal Shareholder is a direct or
indirect party or beneficiary and to which the Company, its affiliates or
agents, is a direct or indirect party or beneficiary without any further
liability or obligations of the Company, its successors, assigns, affiliates or
agents.
7.18 Certain Loan and Promissory Note. Concurrently with the execution of
this Agreement, the Parent agrees that it will lend to the Company $250,000 and
that the Company shall issue a promissory note in favor of the Parent (the
'Parent Promissory Note'), which note is substantially in the form attached
hereto as Exhibit 7.18. The terms and provisions of the Parent Promissory Note
shall set forth the following: (i) that the note shall be due and payable only
in the event the Closing does not occur by June 16, 2000, (ii) that if the
Closing shall occur, the Parent Promissory Note shall be forgiven, (iii) the
maturity of the Note shall be the 5th business day after the termination of this
Agreement; and (iv) in the event the note is not paid at maturity, any unpaid
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amount thereunder shall be automatically converted into 225,000 shares of the
Company's common stock to be registered with the Securities and Exchange
Commission for resale within 150 days of maturity.
ARTICLE VIII
CONDITIONS PRECEDENT TO EACH PARTY'S OBLIGATIONS
The obligations of each Party to perform this Agreement and the Plan of
Merger and to consummate the transactions contemplated hereby and thereby will
be subject to the satisfaction of the following conditions unless waived (to the
extent such conditions can be waived) by each other Party:
8.1 Shareholder Approval; Agreement of Merger. This Agreement, the Plan of
Merger and the Merger shall have been approved and adopted by at least a
majority of the outstanding shares voting of Company Common Stock, and the Plan
of Merger shall have been executed and delivered by Acquisition Sub and the
Company and filed with and accepted by the Treasurer of the State of New Jersey.
8.2 Approvals. All authorizations, consents, orders or approvals of, or
declarations or filings with or expiration of waiting periods imposed by any
Governmental Authority necessary for the consummation of the transactions
contemplated hereby shall have been obtained or made or shall have occurred.
8.3 Legal Action. No temporary restraining order, preliminary injunction or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any Federal or state court or other Governmental
Authority and remain in effect.
8.4 S-4. The S-4 shall have become effective under the Securities Act and
shall not be the subject of any stop order or proceeding seeking a stop order.
8.5 Legislation. No Federal, state, local or foreign statute, rule or
regulation shall have been enacted which prohibits, restricts or delays the
consummation of the transactions contemplated by this Agreement or the Plan of
Merger or any of the conditions to the consummation of such transactions.
8.6 Tax-free Reorganization. The Company and Parent shall be reasonably
satisfied that the Merger shall be treated for Federal income Tax purposes as a
tax-free reorganization within the meaning of Section 368(a)(1)(A) of the Code,
by reason of Section 368(a)(2)(E) of the Code.
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF PARENT AND ACQUISITION SUB
The obligations of Parent to perform this Agreement and to consummate the
transactions contemplated hereby and of Acquisition Sub to perform this
Agreement and the Plan of Merger and to consummate the transactions contemplated
hereby and thereby will be subject to the satisfaction of the following
conditions unless waived (to the extent such conditions can be waived) by Parent
and Acquisition Sub:
9.1 Representations and Warranties. The representations and warranties of
the Principal Shareholders set forth in Article III and the representations and
warranties of the Company set forth in Article IV hereof shall in each case be
true and correct in all respects as of the date of this Agreement, and as of the
effective date of the Shareholder Action and as of the Closing Date as though
made at and as of such dates, respectively.
9.2 Performance of Obligations of The Company. The Company shall have
performed in all material respects the obligations required to be performed by
it under this Agreement and the Plan of Merger prior to or as of the Closing
Date.
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9.3 Authorization of Merger.
(a) As of the Mailing Date, all action necessary to authorize the execution,
delivery and performance of the Transaction Documents by the Company and the
consummation of the transactions contemplated hereby and thereby shall have been
duly and validly taken by the Board of Directors and the Parent shall have
received copies of all resolutions evidencing same certified by the Secretary of
the Company. The Company shall have full power and right to effect the Merger on
the terms provided herein.
(b) As of the Mailing Date, all action necessary to authorize the execution,
delivery and performance of the Transaction Documents by each Principal
Shareholder, with respect to himself/itself, and the consummation of the
transactions contemplated hereby and thereby shall have been duly and validly
taken by each of the Principal Shareholders, with respect to himself/itself, and
the Parent shall have received copies of all resolutions evidencing same
certified by the Secretary of the Company. The Principal Shareholders shall have
full power and right to effect the Merger on the terms provided herein.
(c) As of the Effective Time, all action necessary to authorize the
execution, delivery and performance of the Transaction Documents by the
Shareholders and the consummation of the transactions contemplated hereby and
thereby shall have been duly and validly taken by the Shareholders, and the
Parent shall have received copies of all resolutions evidencing same certified
by the Secretary of the Company. The Shareholders of the Company shall have full
power and right to effect the Merger on the terms provided herein.
9.4 Merger Filing. The Merger Filing shall be duly executed by the Company.
9.5 Certificate. Parent and Acquisition Sub shall have received a
certificate dated the Closing Date, signed by the President of the Company as to
the satisfaction of the conditions contained in Sections 9.1 through 9.3.
9.6 Good Standing Certificates. A certificate of the appropriate officials,
as of a recent date, of the due organization and good standing to do business
and tax standing of the Company in New Jersey and in each jurisdiction wherein
the conduct of its business or the ownership of operation of Assets requires the
Company to maintain qualification as a foreign corporation.
9.7 Opinion of The Company's Counsel. Parent and Acquisition Sub shall have
received an opinion in the form set forth on Exhibit 9.7, dated the Closing
Date, of Drinker Biddle & Shanley, LLP, a Pennsylvania limited liability
partnership ('DB&S'), counsel to the Company.
9.8 Acceptance by Counsel to Parent and Acquisition Sub. The form and
substance of all legal matters contemplated hereby and of all papers delivered
hereunder shall be reasonably acceptable to Morrison Cohen Singer & Weinstein,
LLP, counsel for Parent and Acquisition Sub.
9.9 Consents and Approvals. Parent and Acquisition Sub shall have received
duly executed copies of all consents set forth on Schedule 4.5, and other
consents and approvals contemplated by this Agreement, in form and substance
satisfactory to Parent and Acquisition Sub.
9.10 Government Consents, Authorizations, Etc. All consents, authorizations,
orders or approvals of, and filings or registrations with, any Governmental
Authority which are required for or in connection with the execution and
delivery by the Company of the Transaction Documents and the consummation by the
Company of the transactions contemplated hereby and thereby shall have been
obtained or made.
9.11 Transaction Documents. Each of the Transaction Documents shall be in
full force and effect as of the Effective Time in accordance with the respective
terms thereof, and each Person or entity who or which is required or
contemplated by the parties hereto to be a party to any Transaction Documents
who or which did not theretofore enter into such Transaction Documents shall
execute and deliver such Transaction Documents.
9.12 Repayment of Indebtedness. The Company shall have repaid in full any
principal and interest outstanding on the Company's indebtedness ('Company EDA
Indebtedness') owed to the New Jersey Economic Development Authority ('NJEDA')
pursuant to a Loan Agreement dated July 31, 1996 and/or any amendment, addition
or deletion thereto (the 'Loan Agreement'). On
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the Closing Date, Parent shall advance (the 'EDA Advance') such funds as shall
be required to repay the Company EDA Indebtedness as set forth on Schedule 9.12.
The Company represents and warrants that (i) no payment required by the 'Premium
upon the Sale of a Controlling Interest of the Borrower' section of the $500,000
Direct Loan Promissory Note dated July 31, 1996 between the Company and the
NJEDA or (ii) any other payment, penalty, interest or similar charge or expense
to the Company or any of its successors or assigns shall be due if the Company
EDA Indebtedness is satisfied in the manner contemplated by this Section 9.12.
In addition, the Company shall deliver to Parent and Acquisition Sub such
evidence from the NJEDA, in form and substance acceptable to the Parent and the
Acquisition Sub, that (i) and (ii) of this Section 9.12 shall be satisfied and
that the Company EDA Indebtedness has been repaid in full.
9.13 Confidentiality, Non-Competition and No Solicitation Agreements. Each
of the Principal Shareholders, with respect to himself/itself only, and all the
employees of the Company shall have executed and delivered to the Parent a
Confidentiality Agreement, a Non-competition Agreement and a No Solicitation
Agreements in form and substance acceptable to Parent. Such agreements shall
only contain those provisions as are set forth in Article XI hereof.
9.14 Schedules. Parent and Acquisition Sub shall have determined in its sole
discretion, exercised in good faith, that the respective observations of Parent
and Acquisition Sub made during their review of the schedules to this Agreement
disclosed no material information regarding the Company unsatisfactory to the
Parent or Acquisition Sub.
9.15 Settlement Agreement. Each and every party to that certain Stock
Purchase and Settlement Agreement (the 'Settlement Agreement') dated January 19,
1998 between Holmes Bailey, Judith Bailey, the Company, G.E.M. USA, Inc. and
Abel Sheng have fully satisfied all of the liabilities and obligations under the
Settlement Agreement, including the full payment, satisfaction and cancellation
of all promissory notes contained therein, and the Parent and Acquisition Sub
shall have received evidence of the foregoing in form and substance acceptable
to it.
9.16 Deminimus Quantity Exemption. The Company shall comply with New
Jersey's Industrial Site Recovery Act, N.J.S.A. 13:1K-6 and shall have filed the
Deminimus Quantity Exemption application for the Company's current facility
located in Hanover.
9.17 UCC Termination Statements. Upon satisfaction of the obligations set
forth in Section 7.16, (i) the Company will provide Parent with duly executed
UCC-3 termination statements in form and content satisfactory to extinguish all
security interests and/or liens created by Directors' Loans against any and all
assets of the Company and (ii) each of the applicable members of the Company's
board of directors shall execute a termination and satisfaction notice with
respect to the Director Liabilities set forth opposite each of their names on
Schedule 4.40.
ARTICLE X
CONDITIONS TO OBLIGATIONS OF THE COMPANY
AND THE PRINCIPAL SHAREHOLDERS
The obligations of the Company and the Principal Shareholders to perform
this Agreement and the Plan of Merger, and to consummate the transactions
contemplated hereby and thereby will be subject to the satisfaction of the
following conditions unless waived (to the extent such conditions can be waived)
by the Company and the Principal Shareholders:
10.1 Representations and Warranties. The representations and warranties of
Parent and Acquisition Sub set forth in Article V hereof shall be true and
correct in all material respects (except for any representation or warranty that
by its terms is qualified by materiality, in which case it shall be true and
correct in all respects) as of the date of this Agreement, and as of the Closing
Date as though made at and as of such dates, respectively.
10.2 Performance of Obligations of Parent and Acquisition Sub. Parent and
Acquisition Sub shall have performed in all material respects their respective
obligations required to be performed by them under this Agreement and the Plan
of Merger prior to or as of the Closing Date.
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10.3 Authorization of Merger. All action necessary to authorize the
execution, delivery and performance of the Transaction Documents by Parent, the
execution, delivery and performance of this Agreement and the Plan of Merger by
Acquisition Sub, and the consummation of the transactions contemplated hereby
and by the Plan of Merger shall have been duly and validly taken by the board of
directors of Parent and Acquisition Sub and by Parent as the sole shareholder of
Acquisition Sub, and the Company shall have received copies of all such
resolutions certified by the respective Secretary of Parent and Acquisition Sub.
10.4 Certificate. The Company shall have received a certificate dated the
Closing Date, signed by the President of each of Parent and Acquisition Sub as
to the satisfaction of the conditions contained in Sections 10.1 through 10.3,
except to the extent waived by the Company.
10.5 Good Standing Certificates. A certificate of the appropriate officials,
as of a recent date, of the due organization and good standing to do business
and tax standing of each of the Parent and Acquisition Sub in New Jersey and in
each jurisdiction wherein the conduct of its business or the ownership of
operation of its business requires such Person to maintain qualification as a
foreign corporation.
10.6 Opinion of Parent's Counsel. The Company and the Principal Shareholders
shall have received an opinion dated the Closing Date of Morrison Cohen Singer &
Weinstein, LLP, counsel to Parent and Acquisition Sub in form and substance
reasonably satisfactory to the Company, in the form annexed hereto as Exhibit
10.6.
10.7 Acceptance by Counsel to Company. The form and substance of all legal
matters contemplated hereby and of all papers delivered hereunder shall be
reasonably acceptable to S&F.
10.8 Consents and Approvals. The Company shall have received duly executed
copies of all consents referenced in Section 5.4 and other consents and
approvals contemplated by this Agreement in form and substance reasonably
satisfactory to the Company.
10.9 Government Consents, Authorizations, Etc. All consents, authorizations,
orders or approvals of, and filings or registrations with, any Governmental
Authority which are required for or in connection with the execution and
delivery by Parent and Acquisition Sub of the Transaction Documents and the
consummation by the Parent and the Acquisition Sub of the transactions
contemplated hereby and thereby shall have been obtained or made.
10.10 Transaction Documents. Each of the Transaction Documents shall be in
full force and effect as of the Effective Time in accordance with the respective
terms thereof, and each Person who or which is required or contemplated by the
parties hereto to be a party to any Transaction Documents who or which did not
theretofore enter into such Transaction Documents shall execute and deliver such
Transaction Documents.
ARTICLE XI
CONFIDENTIALITY, NON-COMPETE AND NO SOLICITATION
11.1 Confidentiality. From and after the date hereof, the Principal
Shareholders agree not to divulge, communicate, use to the detriment of the
Parent, Acquisition Sub, or the Company or for the benefit of any other Person,
or misuse in any way, any confidential information or trade secrets included in
or relating to the Company or its Assets including, without limitation,
personnel information, secret processes, know-how, customer lists or other
technical data.
11.2 Non-Compete.
(a) Until the first anniversary of the Closing Date, no Principal
Shareholder and no Affiliate of any Principal Shareholder shall, anywhere in
North America or Europe, directly or indirectly, alone or in association with
any other Person, firm corporation or other business organization (i) acquire or
own in any manner, any interest in any Person that is engaged in any facet of
the power measurement and/or noise generation business (the 'Business') of the
Parent or Acquisition Sub or its subsidiaries or affiliates (collectively, the
'Purchasing Companies'), (ii) engage in any facet of the Business of the Company
or compete in any way with the Business of the Purchasing Companies, (iii) be
employed in any capacity by, serve as an employee of, or consultant or be an
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advisor to, or otherwise participate in the management or operation of, any
Person that (x) engages in any facet of the Business of the Parent, or (y)
competes with the Business of the Parent in any way.
(b) The parties hereto intend that the covenants contained in this
Section 11.2 shall be construed as a series of separate covenants, one for each
state or country. Except for geographic coverage, each such separate covenant
shall be deemed identical in terms to the covenant contained in Section 11.2(a)
above. If, in any judicial proceeding, a court shall refuse to enforce any of
the separate covenants deemed included in Section 11.2(a), then such
unenforceable covenant shall be deemed reduced in scope or, if necessary,
eliminated from these provisions for the purpose of those proceedings to the
extent necessary to permit the remaining separate covenants to be enforced.
(c) The provisions of this Section 11.2 shall not apply to investments by
the Principal Shareholders in shares of stock traded on a national securities
exchange or on the national over-the-counter market which shall have an
aggregate market value, at the time of acquisition, of less than 5% of the
outstanding shares of such stock.
Each of the Principal Shareholders acknowledge that the provisions of this
Section 11.2, and the period of time, geographic area and scope and type of
restrictions on its activities set forth herein, are reasonable and necessary
for the protection of the Parent and the Acquisition Sub and are an essential
inducement to the Parent and the Acquisition Sub entering into the Transaction
Documents to which they are a party and consummating the transactions
contemplated thereby.
11.3 No Solicitation. No Principal Shareholder shall to, from and after the
Closing Date, and for a period of one (1) year thereafter, directly or
indirectly, for itself or on behalf of any other Person, employ, engage or
retain any Person who, at any time during the preceding 12-month period, shall
have been an employee of the Parent, Acquisition Sub, or the Company, or contact
any supplier, customer or employee of the Company for the purpose of soliciting
or diverting any such supplier, customer or employee of the Parent, Acquisition
Sub, or the Company.
ARTICLE XII
INDEMNIFICATION
12.1 Indemnification by The Company. The Company agrees to indemnify and
hold harmless the Parent, Acquisition Sub and (after the Merger) Surviving
Corporation from and against, without duplication, all costs, fees, liabilities,
Taxes, charges, claims, expenses, losses and damages, including reasonable legal
expenses and costs of investigation (both of those incurred in connection with
the defense or prosecution of an indemnifiable claim and those incurred in
connection with the enforcement of this provision), as and when actually
incurred or as and when actually paid by the Parent, Acquisition Sub and
Surviving Corporation or any of their respective subsidiaries, successors,
assigners, officers, employees, directors, agents or affiliates, arising out of
or in connection with any action or proceeding (collectively 'Losses') as a
result of or arising in connection with:
(a) the breach of any of the Company's or where applicable Principal
Shareholder's representations, warranties or agreements contained in the
Transaction Documents;
(b) the commencement and/or prosecution of any action brought against
Parent or Surviving Corporation by a Principal Shareholder (or equity
interest holder) or former Shareholder (or equity interest holder) of the
Company, or any predecessor thereof or any Person acquired thereby, arising
out of or relating to the purchase of all or a portion of such Person's
capital stock or the acquisition of all or substantially all of the Assets
of the entity the capital stock of which was owned by such Person or, in
each case, any direct or indirect shareholder of any of the foregoing;
(c) the actual or threatened commencement of any proceeding, suit or
action against Parent, Surviving Corporation or any direct or indirect
Subsidiary thereof, or any director, officer, agent or employee of any of
them, which, if determined adversely thereto (regardless
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of the actual determination thereof) would result in a Loss (any such
pending or threatened suit or action being a 'Covered Action'); or
(d) any and all actions, suits or proceedings, claims or demands
incident to any of the foregoing or such indemnities.
12.2 Indemnification by Principal Shareholder. The Principal Shareholders
agree to indemnify and hold harmless the Parent, Acquisition Sub and Surviving
Corporation from and against, without duplication, all costs, fees, liabilities,
Taxes, charges, claims, expenses, losses and damages, including reasonable legal
expenses and costs of investigation (both of those incurred in connection with
the defense or prosecution of an indemnifiable claim and those incurred in
connection with the enforcement of this provision), as and when actually
incurred or as and when actually paid by the Parent, Acquisition Sub and
Surviving Corporation or any of their respective subsidiaries, successors,
assigners, officers, employees, directors, agents or affiliates, arising out of
or in connection with any Losses as a result of or arising in connection with
the breach of any such Principal Shareholder's representations, warranties,
covenants or agreements contained in those sections of the Agreement set forth
above their name on the signature page hereto. Prior to Closing, no Principal
Shareholder shall have any indemnification obligations hereunder.
12.3 Indemnification by Parent and Acquisition Sub. The Parent and
Acquisition Sub agree to indemnify and hold harmless the Company from and
against, without duplication, all Losses arising out of or in connection with
any action or proceeding as a result of or arising in connection with the breach
of any of the Parent or Acquisition Sub's representations, warranties or
agreements contained in the Transaction Documents.
12.4 Loss Indemnity Procedure. Upon learning of the commencement of a
Covered Action or the actual receipt by the parties claiming a right of
indemnification (the 'Indemnified Party') of information relating to the
purported existence of facts or circumstances which could result in the
commencement of a Covered Action or other incurrence of Loss, the Indemnified
Party shall promptly, but no later than fifteen (15) days after learning of such
commencement or receipt, give notice ('Indemnification Notice') thereof, with
reasonable specificity of the facts as then known to the party having the
indemnification obligation (the 'Indemnifying Party'); provided, however,
failure to give timely such notice shall not release the Indemnifying Party of
its obligations hereunder except, and only, to the extent the Indemnifying Party
suffers actual prejudice as a proximate result of such failure.
(a) The Indemnifying Party shall have the right to assume the defense of any
such Covered Action by giving written notice (the 'Assumption Notice') to the
Indemnified Party within 20 days after notice given pursuant to this
Section 12.4 which Assumption Notice shall state that (i) the Indemnifying Party
agrees that the claimant is entitled to indemnification hereunder and that any
resulting Loss for which it is or they are liable; and (ii) it agrees or they
agree to assume the defense thereof in the name and on behalf of the Indemnified
Party with counsel reasonably satisfactory to the Indemnified Party, in either
event at the sole cost and expense of the Indemnifying Party; provided, however,
(x) all such costs and expenses of the foregoing counsel, if not paid by the
Indemnifying Party and instead paid by the Indemnified Party shall be Losses for
which the Indemnified Party is indemnified under this Section 12.4, (y) the
Indemnified Party, notwithstanding the timely delivery of an Assumption Notice,
may participate in such Covered Action through counsel separately selected and
paid for by the Indemnified Party, and (z) if no Assumption Notice is timely
given, or despite the giving of the Assumption Notice the defendants in any
Covered Action include both the Indemnified Party and the Indemnifying Party,
and the Indemnified Party shall have reasonably concluded that there may be
legal defenses available to it which are different from or additional to those
available to the Indemnifying Party, or if there is a conflict of interest which
would prevent counsel for the Indemnifying Party from also representing the
Indemnified Party, the Indemnified Party shall have the right to select one
separate counsel to conduct the defense of such action on its behalf, and all
such costs and expenses shall be paid by the Indemnifying Party and, if paid by
the Indemnified Party, shall be Losses under this Section 12.4. The Indemnified
Party may take such action with respect to a Covered Action as it may
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deem appropriate to protect against further damage or default, including
obtaining an extension of time to answer the complaint or other pleading or
filing an answer thereto.
(b) In no event shall a Principal Shareholder (where a Principal Shareholder
is the Indemnifying Party or where the Principal Shareholders are Indemnifying
Parties) consent to the entry of any judgment or enter into any settlement
without the written consent of Surviving Corporation, which shall not be
unreasonably withheld or delayed. Subject to Section 12.4(a) above, no
Indemnified Party shall consent to the entry of any judgment or enter into any
settlement relating to a Loss without the written consent of the Indemnifying
Party, which shall not be unreasonably withheld or delayed.
12.5 Duration of Indemnification. Liability for indemnification under this
Article XII shall expire on the second anniversary of the Closing Date (or, in
the case of indemnification arising out of the breach of a representation or
warranty, the survival period of such representation or warranty under
Section 15.1 below).
12.6 No Claim against Surviving Corporation/Company. In no event following
Closing may any Principal Shareholder seek or assert any claim whatsoever,
whether for contribution or otherwise, against Surviving Corporation arising out
of any facts or any action or failure to act by the Company or a Principal
Shareholder existing or occurring prior to or as of the Closing, including,
without limitation, based upon any breach of any representation, warranty,
covenant or condition herein by the Company or a Principal Shareholder, whether
by way of contribution based upon the gross negligence or willful misconduct of
the Company or a Principal Shareholder, or otherwise.
12.7 Limitations on Indemnity.
(a) The parties acknowledge and agree that each Principal Shareholder shall
only have liability hereunder for the Losses incurred by the Parent or the
Acquisition Sub arising directly out of any breach of any representation,
warranty, covenant or other agreement made by such Principal Shareholder
hereunder; provided, however, that (i) notwithstanding anything herein to the
contrary, in no event shall such Principal Shareholder be liable for any such
Loss unless and until the aggregate amount of all Losses suffered by the Parent
and the Acquisition Sub caused by such Principal Shareholder's breach exceeds
the Threshold and then such Principal Shareholder shall only be liable for the
excess thereof and (ii) in no event shall such Principal Shareholder be liable
for any Losses suffered by the Parent and the Acquisition Sub in excess of the
Cap. As used in this Section 12.7(a), with respect to any Principal Shareholder,
the Threshold shall mean, 1% of(i) the product of (A) the number of shares of
Parent Common Stock received by such Principal Shareholder in the Merger
multiplied by (B) the closing price of a share of Parent Common Stock as
reported on the American Stock Exchange on the Closing Date or, if the Closing
Date is not a trading day, the first date prior to the Closing Date on which
there is a closing price of the Parent Common Stock reported on the American
Stock Exchange (the 'AMEX Closing Price'). As used in this Section 12.7(a), with
respect to any Principal Shareholder, the Cap shall mean, 10% of (i) the product
of (A) the number of shares of Parent Common Stock received by such Principal
Shareholder in the Merger multiplied by (B) the AMEX Closing Price.
(b) The parties acknowledge and agree that Parent and Acquisition Sub shall
only have liability hereunder for the Losses incurred by the Company and
Principal Shareholders arising directly out of any breach of any representation,
warranty, covenant or other agreement made by Parent and Acquisition Sub
hereunder; provided, however, that (i) notwithstanding anything herein to the
contrary, in no event shall the Parent and Acquisition Sub be liable for any
such Losses unless and until the aggregate amount of all Losses suffered by the
Company and Principal Shareholders caused by such Parent and/or Acquisition
Sub's breach exceed the Parent Threshold and then the Parent and Acquisition Sub
shall only be liable for the excess thereof and (ii) in no event shall the
aggregate liability of the Parent and the Acquisition Sub to provide
indemnification for Losses under this Article XII exceed the Parent Cap
(regardless of whether Persons (other than Parent and Acquisition Sub) suffer
aggregate Losses in excess of the Parent Cap). As used in this Section 12.7(b),
with respect to the Parent and Acquisition Sub, the Parent Threshold shall mean
1% of (i) the product of (A) the number of shares of Parent Common Stock
received by
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such Principal Shareholder in the Merger multiplied by (B) AMEX Closing Price.
As used in this Section 12.7(a), with respect to any Principal Shareholder, the
Cap shall mean, 10% of (i) the product of (A) the number of shares of Parent
Common Stock received by such Principal Shareholder in the Merger multiplied by
(B) the AMEX Closing Price.
12.8 Other Indemnification Provisions.
(a) Unless otherwise specifically provided herein, the indemnification
provisions of this Article XII shall, absent fraud, be the sole and exclusive
remedy of the parties for any breach of any covenants, representations or
warranties made by any other Party in this Agreement and each Party hereby
waives all statutory, common law and other claims with respect thereto, other
than claims for indemnification pursuant to this Article XII and claims based on
fraud.
(b) Indemnification hereunder shall include liability for any special,
incidental, punitive or consequential damages to the extent the Indemnified
Party is required to pay such amount to a third party. Except as expressly
provided in the preceding sentence, there shall be no indemnification by any
party for any special, incidental, punitive or consequential damages.
(c) In calculating amounts payable to an Indemnified Party, the amount of
the indemnified Losses shall be computed net of(i) payments that the Indemnified
Party actually receives under any insurance policy with respect to such Losses,
(ii) the net amount of any prior or subsequent recovery by the Indemnified Party
from any third party with respect to such Losses, and (iii) any Tax benefit to
the Indemnified Party with respect to such Losses.
ARTICLE XIII
PAYMENT OF CERTAIN FEES AND EXPENSES
13.1 Payment of Certain Fees and Expenses.
(a) Except as set forth below in this Section 13.1, Parent and the
Company shall pay its own expenses that are incidental to negotiation,
preparation, execution, delivery of the Transaction Documents and the
Closing whether or not this Agreement and the transactions contemplated
hereby are actually consummated; it being understood that the Company shall
not be permitted to incur more than $150,000 of legal fees and accounting
fees in connection with the negotiation, preparation, execution and delivery
of the Transaction Documents and the Closing, including any amounts
previously paid or incurred in any proposed transaction with Parent and/or
Acquisition Sub ('Permitted Transaction Costs'). Any unpaid Permitted
Transaction Costs shall be paid by the Parent in full at Closing and any
transaction costs in excess of the Permitted Transaction Costs shall be paid
on or before closing by Yves Guyomar.
(b) If (i) this Agreement is terminated by Parent or Acquisition Sub
pursuant to Section 14.1(b)(except Section 8.2 through Section 8.6 to the
extent the Company uses its reasonable commercial efforts to see the
conditions of Section 8.2 through Section 8.6 fulfilled) or Section 14.1(c)
(except Section 9.8, Section 9.10 and Section 9.15 to the extent the Company
uses its reasonable commercial efforts to see the conditions of
Section 9.8, Section 9.10 and Section 9.15 fulfilled) and (ii) the Company
and/or Principal Shareholders enter into an Acquisition Transaction
involving a third party within one year after such termination, then the
Company agrees to pay the Parent within sixty (60) days following the
entering into of such Acquisition Transaction (A) $100,000 plus (B) up to a
maximum amount of $500,000 of all out-of-pocket expenses (including, without
limitation, all attorneys' fees, investment banking fees, printing costs,
governmental filing and other governmental fees, and finder's fees and
expenses) incurred by the Parent and Acquisition Sub in connection with the
transactions contemplated by this Agreement (collectively the 'Break-Up
Fee') as reimbursement for the lost profit opportunity of Parent and the
time and expense of Parent's executives. Parent and Acquisition Sub hereby
waive any and all right, claim or interest for any fees or expenses incurred
by Parent or Acquisition Sub in any prior proposed transaction between the
Company and Parent and/or Acquisition Sub. Company hereby waives any and
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all right claim or interest for any fees or expenses incurred by the Company
in any prior proposed transaction between the Company and Parent and/or
Acquisition Sub.
(c) In the event that the Closing occurs, each Principal Shareholder
shall indemnify and hold the Parent and the Surviving Corporation harmless
from all legal and professional fees incurred by such Principal Shareholder
(other than the Permitted Transaction Costs) in connection with the
negotiation, preparation, execution and delivery of this Agreement and the
other Transaction Documents and the Closing.
ARTICLE XIV
TERMINATION; AMENDMENT, MODIFICATION AND WAIVER
14.1 Termination. This Agreement may be terminated, and the Merger
abandoned, notwithstanding the approval by Parent, Acquisition Sub and the
Company of this Agreement, at any time prior to the Effective Time, by:
(a) the mutual consent of Parent, Acquisition Sub and the Company.
(b) Parent, Acquisition Sub or the Company, if:
(i) the conditions set forth in Article VIII hereof shall not have
been met and the Merger has not occurred by June 16, 2000, which date may
be extended at the discretion of the Parent or Acquisition Sub, except if
such conditions have not been met solely as a result of the action or
inaction of the party seeking to terminate; or
(ii) the other party or parties have materially breached at the time
made a representation and warranty, covenant or agreement set forth
herein and such breach is not cured (if curable) within 15 days following
written notice thereof from the non-breaching party;
(c) Parent and Acquisition Sub if the conditions set forth in Article IX
hereof shall not have been met (or waived by the Person(s) entitled to
satisfaction thereof), and the Company if the conditions set forth in
Article X hereof shall not have been met (or waived by the Person(s)
entitled to satisfaction thereof), in either case by June 16, 2000 which
date may be extended at the discretion of Parent or Acquisition Sub, except
if such conditions have not been met solely as a result of the action or
inaction of the party seeking to terminate. Notwithstanding the provisions
of this Section 14.1(c), the Company shall have the right to terminate this
Agreement and abandon the Merger after September 15, 2000, except if the
Merger cannot be completed by such date as a result of the action or
inaction of the party seeking to terminate.
(d) Parent and Acquisition Sub on the one hand, or the Company on the
other hand, if such party or parties shall have determined in its or their
sole discretion, exercised in good faith, that the Merger contemplated by
this Agreement and the Plan of Merger has become impracticable by reason of
the institution of any litigation, proceeding or investigation to restrain
or prohibit the consummation of the Merger, so long as such litigation,
proceeding or investigation has not been instituted, initiated, commenced or
undertaken without the approval of the party or parties seeking to terminate
the Agreement (which in the Company's case would include any actions of the
Principal Shareholders).
(e) Parent or Acquisition Sub if during the sixty (60) day period after
the date of this Agreement, Parent shall have determined in its sole
discretion, exercised in good faith, that the respective observations of
Parent and Acquisition Sub made during their due diligence process disclosed
information regarding the Company unsatisfactory to it and such information
is (i) material and (ii) not adequately disclosed in this Agreement.
Any termination pursuant to this Section 14.1 shall be effected by written
notice from the party or parties so terminating to the other parties hereto.
14.2 Effect of Termination. In the event of the termination of this
Agreement as provided in Section 14.1, this Agreement shall be of no further
force or effect and no party hereto, nor its
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shareholders, directors, officers or affiliates, shall have any liability in
connection herewith; provided, however, that Article XII, Article XIII, this
Section 14.2 and Article XV shall survive the termination of this Agreement.
Notwithstanding the foregoing, except as set forth in the following sentence,
this Section 14.2 shall not relieve any party from liability in connection with
an intentional or willful material breach of this Agreement prior to its
termination. If this Agreement is terminated by the Company pursuant to
Section 14.1(b)(ii), then the Company's obligation to repay the Parent
Promissory Note shall be cancelled ('Parent Break-up Fee') and the Parent and
Acquisition Sub shall be relieved from any liability in connection with any
termination or breach of this Agreement, whether intended, willful or otherwise.
ARTICLE XV
MISCELLANEOUS
15.1 Survival; Effect of Disclosure. Except as otherwise specifically
provided herein all statements, representations, warranties and covenants shall
survive the Closing for two (2) years, regardless of any inspection or discovery
whether by reason of due diligence or otherwise, and shall remain in effect
continuously during such period; provided that the representations, warranties
and covenants set forth in (a) Sections 3.4, 4.4 and 4.28 shall survive
indefinitely and remain in effect continuously after the Closing and (b)
Sections 4.11, 4.14 and 4.25 shall survive and remain in effect continuously
after the Closing for the lesser of (i) seven (7) years and the (i) statute of
limitations applicable to the subject representation, warranty or covenant. None
of the Company, Parent or Acquisition Sub shall be liable or bound in any manner
by representations, warranties, covenants or agreements pertaining to the
subject matter of this Agreement, whether express or implied, or any other
matter whatsoever, which are made or furnished by any Person representing or
purporting to represent the Company, Parent or Acquisition Sub unless and only
to the extent that such representations, warranties, covenants, or agreements
are expressly and specifically set forth in this Agreement or the Exhibits or
Schedules hereto or in any certificate or other agreement, document or
instrument delivered pursuant to the provisions of this Agreement.
15.2 Entire Agreement. This Agreement and the Plan of Merger (including the
Schedules and the Exhibits attached hereto) and the other writings referred to
herein contain the entire agreement among the parties hereto with respect to the
transactions contemplated hereby and supersede all prior agreements or
understandings, written or oral, among the parties with respect thereto.
15.3 Descriptive Headings. Descriptive headings are for convenience only and
shall not control or affect the meaning or construction of any provision of this
Agreement.
15.4 Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally
or sent by nationally-recognized overnight courier or by registered or certified
mail, postage prepaid, return receipt requested or by telecopier, with
confirmation as provided above addressed as follows:
if to Parent or Acquisition Sub, to:
Wireless Telecom Group Inc.
East 64 Midland Avenue
Paramus, NJ 07652
Attention: Edward Garcia
Telephone: (201) 261-8797
Telecopier: (201) 261-8339
with a copy to:
Morrison Cohen Singer & Weinstein, LLP
750 Lexington
New York, NY 10022
Attention: Robert H. Cohen, Esq.
Telephone: 212-735-8600
Telecopier: 212-735-8708
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<PAGE>
if to the Company, to:
Boonton Electronics Corp.
25 Eastmans Road
P.O. Box 465
Parsippany, NJ 07054
Attention: President
Telephone: (973) 386-9696
Telecopier: (973) 386-9191
with a copy to:
Drinker, Biddle & Shanley LLP
500 Campus Drive
Florham Park, NJ 07932-1047
Attention: Michael E. Helmer, Esq.
Telephone: 973-360-1100
Telecopier: 973-360-9831
or to such other address as the party to whom notice is to be given may have
furnished to the other party in writing in accordance herewith. All such notices
or communications shall be deemed to be received: (a) in the case of personal
delivery or telecopy, on the date of such delivery; (b) in the case of
nationally-recognized overnight courier, on the next business day after the date
when sent; and (c) in the case of mailing, on the third business day following
the date on which the piece of mail containing such communication was posted.
15.5 Counterparts. This Agreement may be executed in any number of
counterparts by original or facsimile signature, each such counterpart shall be
an original instrument, and all such counterparts together shall constitute one
and the same agreement.
15.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the New Jersey Statute and with the laws of the State of New
Jersey applicable to contracts made and to be performed wholly therein without
regard to such state's principles of conflicts of law.
15.7 Benefits of Agreement. All the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, and shall not confer any rights or
benefits on any other persons or entities. This Agreement shall not be
assignable by any party hereto without the consent of the other parties hereto;
provided, however, that anything contained herein to the contrary
notwithstanding, Acquisition Sub may assign and delegate any or all of its
rights and obligations hereunder to any other direct or indirect wholly-owned
subsidiary of Parent.
15.8 Pronouns. As used herein, all pronouns shall include the masculine,
feminine, neuter, singular and plural thereof whenever the context and facts
require such construction.
15.9 Waiver, Amendment and Modification.
(a) No failure or delay on the part of any of the parties hereto in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies provided for herein are cumulative
and are not exclusive of any remedies that may be available to the parties
hereto at law, in equity or otherwise.
(b) No amendment, supplement or modification of or to any provision in this
Agreement, or any waiver of any such provision or consent to any departure by
any party from the terms of any such provision may be made orally. Any (i)
amendment, supplement or modification hereto, (ii) consent hereunder or (iii)
waiver of any provision (collectively, 'Modification') of this Agreement or of
any of the Notes shall be effective if given pursuant to a written agreement
signed by the parties to this Agreement.
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15.10 Specific Performance. The parties hereto agree that if for any reason
any party hereto shall have failed to perform its obligations under this
Agreement, then any other party hereto seeking to enforce this Agreement against
such non-performing party shall be entitled to specific performance and
injunctive and other equitable relief, and the parties hereto further agree to
waive any requirement for the securing or posting of any bond in connection with
the obtaining of any such injunctive or other equitable relief.
15.11 Severability. If any one or more of the provisions contained herein,
or the application thereof in any circumstance, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired, unless the provisions held
invalid, illegal or unenforceable shall substantially impair the benefits of the
remaining provisions hereof. The parties hereto further agree to replace such
invalid, illegal or unenforceable provision of this Agreement with a valid,
legal and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such invalid, illegal or unenforceable
provision.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement and
Plan of Reorganization to be executed on its behalf as of the day and year first
above written.
WIRELESS TELECOM GROUP INC.
By: /s/ EDWARD GARCIA
..................................
Name: Edward Garcia
Title: Chief Executive Officer
WTT ACQUISITION CORP.
By:/s/ EDWARD GARCIA
..................................
Name: Edward Garcia
Title: Chief Executive Officer
BOONTON ELECTRONICS CORP.
By: /s/ YVES GUYOMAR
..................................
Name: Yves Guyomar
Title: President and CEO
The undersigned shall have no liability under the aforesaid Agreement and
Plan of Reorganization except with respect to Article 3, Article 6, Sections
7.3, 7.17, 9.1 (as to the Principal Shareholders representations only), 9.3(b),
9.13, Article 11, Article 12, Section 13.1(a), Section 13.1(c), Article 14, and
Article 15.
PRINCIPAL SHAREHOLDERS
/S/ DANIEL AUZAN
.....................................
Daniel Auzan
/s/ RONALD T. DEBLIS
.....................................
Ronald T. Deblis
/s/ JACK FRUCHT
.....................................
Jack Frucht
/s/ YVES GUYOMAR
.....................................
Yves Guyomar
/s/ ABEL SHENG
.....................................
Abel Sheng
/s/ OTTO H. YORK
.....................................
Otto H. York
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/s/ JOHN M. YOUNG
.....................................
John M. Young
G.E.M. USA, INC.
By: /S/ HENRI TRIEBEL
..................................
Name: Henri Triebel
Title: General Manager
SIDCO INVESTMENT, INC.
By: /S/ ABEL SHENG
..................................
Name: Abel Sheng
Title: President
With respect to Section 7.16, the undersigned members of the Company's board
of directors agree to accept Parent Common Stock in lieu of any liabilities owed
to them with respect to the Director Liabilities set forth on Schedule 4.40.
DIRECTORS
/s/ DANIEL AUZAN
.....................................
Daniel Auzan
/s/ JACK FRUCHT
.....................................
Jack Frucht
/s/ YORK RESOURCES
.....................................
York Resources
/s/ OTTO YORK
.....................................
Otto York
/s/ JOHN YOUNG
.....................................
John Young
/s/ ABEL SHENG
.....................................
Abel Sheng
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ANNEX B
AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF REORGANIZATION
This Amendment No. 1 dated April 28, 2000 to the Agreement and Plan of
Reorganization (the 'MERGER AGREEMENT') dated as of March 2, 2000, among
Wireless Telecom Group, Inc., a New Jersey corporation ('PARENT'), WTT
Acquisition Corp., a New Jersey corporation and wholly-owned subsidiary of
Parent ('ACQUISITION SUB'), and Boonton Electronics Corporation, a New Jersey
corporation (the 'COMPANY'), and the Company's shareholders listed on the
signature page to such Agreement (the 'PRINCIPAL SHAREHOLDERS') is dated as of
the date set forth on the signature page below.
WHEREAS, for financial reporting purposes, it is intended that the Merger
(as defined in the Merger Agreement) be accounted for as a 'pooling of
interests' in accordance with GAAP (as defined in the Merger Agreement).
The parties to this Amendment No. 1, intending to be legally bound, agree as
follows:
A. The Merger Agreement is hereby amended as follows:
1. The following new Section 1.8 is added to the Merger Agreement:
'1.8 ACCOUNTING CONSEQUENCES. For financial reporting purposes,
the Merger is intended to be accounted for as a 'pooling of
interests' in accordance with GAAP.'
2. The following new Section 4.40A is added to the Merger Agreement:
'4.40A ACCOUNTING MATTERS. To the actual knowledge of the Company
after due inquiry, on the date of this Agreement, neither the Company
nor any affiliate (as that term is used in Rule 145 under the
Securities Act of 1933, as amended) thereof has taken or agreed to
take, or plans to take, any action that could prevent from accounting
for the Merger as a 'pooling of interests.'
3. The last sentence of Section 7.18 of the Merger Agreement is
hereby deleted in its entirety and replaced by the following:
'The terms and provisions of the Parent Promissory Note shall set
forth the following: (i) that the note shall be due and payable only
in the event the Closing does not occur by July 14, 2000, (ii) that
if the Closing shall occur, the Parent Promissory Note shall be
forgiven, (iii) the maturity of the Note shall be the 5th business
day after the termination of this Agreement; and (iv) in the event
the note is not paid at maturity, any unpaid amount thereunder shall
be automatically converted into 225,000 shares of the Company's
common stock to be registered with the Securities and Exchange
Commission for resale within 150 days of maturity.'
4. The following new Section 7.19 is added to the Merger Agreement:
'7.19 POOLING OF INTERESTS. Each of the Company and Parent agrees
(a) not to take any action during the period prior to Closing that
would adversely affect the ability of Parent to account for the
Merger as a 'pooling of interests,' and (b) to use all reasonable
efforts to attempt to ensure that none of its 'affiliates' (as that
term is used in Rule 145 under the Securities Act of 1933, as
amended) takes any action that could adversely affect the ability of
Parent to account for the Merger as a 'pooling of interests.' The
Company agrees to provide to the Company's and the Parent's auditors,
such letters as shall be reasonably requested by any such auditors
with respect to the letters referred to in Section 9.18 below. The
Parent agrees to provide to the Company's and the Parent's auditors,
such letters as shall be reasonably requested by any such auditors
with respect to the letters referred to in Section 9.18 below.'
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5. The following new Section 7.20 is added to the Merger Agreement:
'7.20 AFFILIATE AGREEMENTS. The Company shall use all reasonable
efforts to cause each Person who as of the date hereof is or after
the date hereof becomes an executive officer, director or beneficial
holder of more than 10% of the outstanding capital stock of the
Company, and each Person who is otherwise identified by the SEC as an
'affiliate' within the meaning of Rule 144(a)(1) promulgated under
the Securities Act of 1933, as amended to execute and deliver to
Parent, prior to the Mailing Date, an Affiliate Agreement in the form
of Exhibit 7.20.'
6. The following new Section 7.21 is added to the Merger Agreement:
'7.21 RELEASE OF FINANCIAL STATEMENTS. Parent will use all
reasonable efforts to prepare, file, release and publish, on or
before 60 days after the Closing, its financial statements and
results of operations which includes no less than 30 days of
post-merger combined consolidated operations of the Company and
Parent sufficient to satisfy the SEC's rules, regulations and
releases, including Accounting Series Release Nos. 130 and 135.
Parent agrees and acknowledges that following the publishing by
Parent of its financial statements and results of operations in
accordance with the foregoing sentence, any disposition of securities
of the Parent by each Person who as of the date hereof is or after
the date hereof becomes an executive officer, director or beneficial
holder of more than 10% of the outstanding capital stock of the
Company or the Parent, and each Person who is otherwise identified by
the SEC as an 'affiliate' within the meaning of Rule 144(a)(1)
promulgated under the Securities Act of 1933, as amended, shall not
interfere with accounting for the Merger as a 'pooling of interests'
in accordance with GAAP and the rules, regulations and releases of
the SEC.'
7. The following new Section 9.18 is added to the Merger Agreement:
'9.18 POOLING DELIVERIES.
(a) Affiliate Agreements shall have been executed by each Person
who as of the date hereof is or after the date hereof becomes an
executive officer, director or beneficial holder of more than 10% of
the outstanding capital stock of the Company, and each Person who is
otherwise identified by the SEC as an 'affiliate' within the meaning
of Rule 144(a)(1) promulgated under the Securities Act of 1933, as
amended;
(b) a letter from Parent's auditors (Lazar Levine & Felix LLP),
dated as of the Closing Date, confirming that Parent may account for
the Merger as a 'pooling of interests' in accordance with GAAP,
Accounting Principles Board Opinion No. 16 and all published rules,
regulations and policies of the SEC; provided, however, that the
failure to deliver such letter shall not excuse Parent and
Acquisition Sub from performing their obligations under this
Agreement if such failure does not result from any breach of the
representations, warranties or covenants made by the Company in this
Agreement; and
(c) a letter from the Company's auditors (Polakoff Weismann Leen,
LLC), dated as of the Closing Date, confirming that no transaction of
the Company, and no other fact or circumstance relating to the
Company, will prevent Parent from accounting for the Merger as a
'pooling of interests' in accordance with GAAP, Accounting Principles
Board Opinion No. 16 and all published rules, regulations and
policies of the SEC contingent upon the compliance with
Section 4.40A of the Merger Agreement, as of the Closing Date and
subsequent thereto, and compliance by all parties under the Affiliate
Agreement attached hereto as Annex A; provided, however, that the
failure to deliver such letter shall not excuse Parent and
Acquisition Sub from performing their obligations under this
Agreement if such failure does not result from any breach of the
representations, warranties or covenants made by the Company in this
Agreement.'
B-2
<PAGE>
8. The first sentence of Section 13.1(a) of the Merger Agreement is
hereby deleted in its entirety and replaced by the following:
'Except as set forth below in this Section 13.1, Parent and the
Company shall pay its own expenses that are incidental to
negotiation, preparation, execution, delivery of the Transaction
Documents and the Closing whether or not this Agreement and the
transactions contemplated hereby are actually consummated; it being
understood that the Company shall not be permitted to incur more than
$175,000 of legal fees and accounting fees in connection with the
negotiation, preparation, execution and delivery of the Transaction
Documents and the Closing, including any amounts previously paid or
incurred in any proposed transaction with Parent and/or Acquisition
Sub ('Permitted Transaction Costs').'
9. Section 14.1(b)(i) of the Merger Agreement is hereby deleted in
its entirety and replaced by the following:
'(i) the conditions set forth in Article VIII hereof shall not
have been met and the Merger has not occurred by July 14, 2000, which
date may be extended at the discretion of the Parent or Acquisition
Sub, except if such conditions have not been met solely as a result
of the action or inaction of the party seeking to terminate; or.'
10. Section 14.1(c) of the Merger Agreement is hereby deleted in its
entirety and replaced by the following:
'Parent and Acquisition Sub if the conditions set forth in
Article IX hereof shall not have been met (or waived by the Person(s)
entitled to satisfaction thereof), and the Company if the conditions
set forth in Article X hereof shall not have been met (or waived by
the Person(s) entitled to satisfaction thereof), in either case by
July 14, 2000 which date may be extended at the discretion of Parent
or Acquisition Sub, except if such conditions have not been met
solely as a result of the action or inaction of the party seeking to
terminate. Notwithstanding the provisions of this Section 14.1(c),
the Company shall have the right to terminate this Agreement and
abandon the Merger after October 15, 2000, except if the Merger
cannot be completed by such date as a result of the action or
inaction of the party seeking to terminate.'
B. The form of Affiliate Agreement contemplated by this Amendment No. 1
is attached hereto as Annex 1.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment No.
1 to Agreement and Plan of Reorganization to be executed on its behalf as of
April 28, 2000.
WIRELESS TELECOM GROUP INC.
By /S/ EDWARD GARCIA
..................................
Name: Edward Garcia
Title: Chief Executive Officer
WTT ACQUISITION CORP.
By /S/ EDWARD GARCIA
..................................
Name: Edward Garcia
Title: Chief Executive Officer
BOONTON ELECTRONICS CORP.
By /S/ YVES GUYOMAR
..................................
Name: Yves Guyomar
Title: President and CEO
[AMENDMENT NO. 1 SIGNATURE PAGE 1]
B-4
<PAGE>
PRINCIPAL SHAREHOLDERS
/S/ DANIEL AUZAN
.....................................
Daniel Auzan
/S/ RONALD T. DEBLIS
.....................................
Ronald T. Deblis
/S/ JACK FRUCHT
.....................................
Jack Frucht
/S/ YVES GUYOMAR
.....................................
Yves Guyomar
/S/ ABEL SHENG
.....................................
Abel Sheng
/S/ OTTO H. YORK
.....................................
Otto H. York
/S/ JOHN M. YOUNG
.....................................
John M. Young
GENERAL ELECTRONIQUE MESURE, SA
By /S/ HENRI TRIEBEL
..................................
Name: Henri Triebel
Title: President
G.E.M. USA, INC.
By /S/ HENRI TRIEBEL
..................................
Name: Henri Triebel
Title: General Manager
SIDCO INVESTMENT, INC.
By /S/ ABEL SHENG
..................................
Name: Abel Sheng
Title: President
[AMENDMENT NO. 1 SIGNATURE PAGE 2]
B-5
<PAGE>
ANNEX 1 TO AMENDMENT NO. 1
EXHIBIT 7.20
[FORM OF] AFFILIATE AGREEMENT
THIS AFFILIATE AGREEMENT ('Affiliate Agreement') is being executed and
delivered as of , 2000 by ('Stockholder') in
favor of and for the benefit of WIRELESS TELECOM GROUP, INC., a New Jersey
corporation ('Parent').
RECITALS
A. Stockholder is a stockholder of, and is an officer and/or director of,
BOONTON ELECTRONICS CORP., a New Jersey corporation (the 'Company').
B. Parent, the Company and WTT ACQUISITION CORP., a wholly owned subsidiary
of Parent ('Merger Sub') and certain other parties, have entered into an
Agreement and Plan of Reorganization dated as of March 2, 2000 (the
'Reorganization Agreement'), as amended, providing for the merger of Merger Sub
into the Company (the 'Merger'). The Reorganization Agreement contemplates that,
upon consummation of the Merger, (i) holders of shares of the common stock of
the Company will receive shares of common stock of Parent ('Parent Common
Stock') in exchange for their shares of common stock of the Company and
(ii) the Company will become a wholly owned subsidiary of Parent. It is
accordingly contemplated that Stockholder will receive shares of Parent Common
Stock in the Merger.
C. Stockholder understands that the Parent Common Stock being issued in the
Merger will be issued pursuant to a registration statement on Form S-4, and that
Stockholder may be deemed an 'affiliate' of the Company: (i) as such term is
defined for purposes of paragraphs (c) and (d) of Rule 145 under the Securities
Act of 1933, as amended (the 'Securities Act'); and (ii) for purposes of
determining Parent's eligibility to account for the Merger as a 'pooling of
interests' under Accounting Series Releases 130 and 135, as amended, of the
Securities and Exchange Commission (the 'SEC'), and under other applicable
'pooling of interests' accounting requirements.
AGREEMENT
Stockholder, intending to be legally bound, agrees as follows:
1. Representations and Warranties of Stockholder. Stockholder represents
and warrants to Parent as follows:
(a) Stockholder is the holder and 'beneficial owner' (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of the
number of outstanding shares of common stock of the Company set forth
beneath Stockholder's signature on the signature page hereof (the
'Company Shares'), and Stockholder has good and valid title to the
Company Shares, free and clear of any liens, pledges, security interests,
adverse claims, equities, options, proxies, charges, encumbrances or
restrictions of any nature. Stockholder has the sole right to vote and to
dispose of the Company Shares.
(b) Stockholder does not own, of record or beneficially, directly or
indirectly, any securities of the Company other than the Company Shares.
(c) Stockholder has carefully read this Affiliate Agreement and, to
the extent Stockholder felt necessary, has discussed with counsel the
limitations imposed on Stockholder's ability to sell, transfer or
otherwise dispose of the Company Shares and the shares of Parent Common
Stock that Stockholder is to receive in the Merger (the 'Parent Shares').
Stockholder fully understands the limitations this Affiliate Agreement
places upon Stockholder's ability to sell, transfer or otherwise dispose
of securities of the Company and securities of Parent.
B-6
<PAGE>
(d) Stockholder understands that the representations, warranties and
covenants set forth in this Affiliate Agreement will be relied upon by
Parent and its counsel and accountants for purposes of determining
Parent's eligibility to account for the Merger as a 'pooling of
interests' and for purposes of determining whether Parent should proceed
with the Merger.
2. Prohibitions Against Transfer.
(a) Subject to Section 2(c) below, Stockholder agrees that, during
the period (the 'Restriction Period') from the date 30 days prior to the
date of consummation of the Merger through the date on which financial
results covering at least 30 days of post-Merger combined operations of
Parent and the Company have been published by Parent (within the meaning
of the applicable 'pooling of interests' accounting requirements):
(i) Stockholder shall not sell, transfer or otherwise dispose of,
or reduce Stockholder's interest in or risk relating to, (A) any
capital stock of the Company (including, without limitation, the
Company Shares and any additional shares of capital stock of the
Company acquired by Stockholder, whether upon exercise of a stock
option or otherwise), except pursuant to and upon consummation of the
Merger, or (B) any option or other right to purchase any shares of
capital stock of the Company, except pursuant to and upon
consummation of the Merger; and
(ii) Stockholder shall not sell, transfer or otherwise dispose
of, or reduce Stockholder's interest in or risk relating to, (A) any
shares of capital stock of Parent (including without limitation the
Parent Shares and any additional shares of capital stock of Parent
acquired by Stockholder, whether upon exercise of a stock option or
otherwise), or (B) any option or other right to purchase any shares
of capital stock of Parent.
(b) Subject to Section 2(c) below, Stockholder agrees that
Stockholder shall not effect any sale, transfer or other disposition of
any Parent Shares unless:
(i) such sale, transfer or other disposition is effected pursuant
to an effective registration statement under the Securities Act;
(ii) such sale, transfer or other disposition is made in
conformity with the requirements of Rule 145 under the Securities
Act, as evidenced by a broker's letter and a representation letter
executed by Stockholder (satisfactory in form and content to Parent)
stating that such requirements have been met;
(iii) counsel reasonably satisfactory to Parent shall have
advised Parent in a written opinion letter (satisfactory in form and
content to Parent), upon which Parent may rely, that such sale,
transfer or other disposition will be exempt from the registration
requirements of the Securities Act; or
(iv) an authorized representative of the SEC shall have rendered
written advice to Stockholder to the effect that the SEC would take
no action, or that the staff of the SEC would not recommend that the
SEC take action, with respect to such sale, transfer or other
disposition, and a copy of such written advice and all other related
communications with the SEC shall have been delivered to Parent.
(c) Notwithstanding the foregoing contained in Sections 2(a) and
2(b), Parent agrees and acknowledges that, upon two business days prior
written notice received by Parent, the Stockholder may sell, transfer or
dispose of Company Shares and/or Parent Shares, if such sale, transfer or
disposition (together with any other such sales, transfers and
dispositions in the Restricted Period by Stockholder) constitutes the
sale of a de minimis amount under GAAP (including, without limitation,
Staff Accounting Bulletin No. 76) as in effect from time to time (the 'De
Minimis Exception'); it being understood, that the Stockholder hereby
covenants that it shall constitute a breach of this Agreement if any such
sale, transfer or disposition does not fall within the De Minimis
Exception.
B-7
<PAGE>
3. Stop Transfer Instructions; Legend.
Stockholder acknowledges and agrees that (a) stop transfer instructions
will be given to Parent's transfer agent with respect to the Parent Shares,
and (b) each certificate representing any of such shares shall bear a legend
identical or similar in effect to the following legend (together with any
other legend or legends required by applicable state securities laws or
otherwise):
'THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145(d) OF THE SECURITIES ACT OF 1933 APPLIES
AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED
OR HYPOTHECATED EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SUCH RULE AND
IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED AS OF , 2000,
BETWEEN THE REGISTERED HOLDER HEREOF AND THE ISSUER, A COPY OF WHICH IS
ON FILE AT THE PRINCIPAL OFFICES OF THE ISSUER.'
4. Independence of Obligations. The covenants and obligations of
Stockholder set forth in this Affiliate Agreement shall be construed as
independent of any other agreement or arrangement between Stockholder, on
the one hand, and the Company or Parent, on the other. The existence of any
claim or cause of action by Stockholder against the Company or Parent shall
not constitute a defense to the enforcement of any of such covenants or
obligations against Stockholder.
5. Specific Performance. Stockholder agrees that in the event of any
breach or threatened breach by Stockholder of any covenant, obligation or
other provision contained in this Affiliate Agreement, Parent shall be
entitled (in addition to any other remedy that may be available to Parent)
to: (a) a decree or order of specific performance or mandamus to enforce the
observance and performance of such covenant, obligation or other provision;
and (b) an injunction restraining such breach or threatened breach.
Stockholder further agrees that neither Parent nor any other person or
entity shall be required to obtain, furnish or post any bond or similar
instrument in connection with or as a condition to obtaining any remedy
referred to in this Section 5, and Stockholder irrevocably waives any right
he may have to require the obtaining, furnishing or posting of any such bond
or similar instrument.
6. Other Agreements. Nothing in this Affiliate Agreement shall limit any
of the rights or remedies of Parent under the Reorganization Agreement, or
any of the rights or remedies of Parent or any of the obligations of
Stockholder under any agreement between Stockholder and Parent or any
certificate or instrument executed by Stockholder in favor of Parent; and
nothing in the Reorganization Agreement or in any other agreement,
certificate or instrument shall limit any of the rights or remedies of
Parent or any of the obligations of Stockholder under this Affiliate
Agreement.
7. Notices. Any notice or other communication required or permitted to
be delivered to Stockholder or Parent under this Affiliate Agreement shall
be in writing and shall be deemed properly delivered, given and received
when delivered to the address or facsimile telephone number set forth
beneath the name of such party below (or to such other address or facsimile
telephone number as such party shall have specified in a written notice
given to the other party):
if to Parent or Acquisition Sub, to:
Wireless Telecom Group Inc.
East 64 Midland Avenue
Paramus, NJ 07652
Attention: Edward Garcia
Telephone: (201) 261-8797
Telecopier: (201) 261-8339
B-8
<PAGE>
with a copy to:
Morrison Cohen Singer & Weinstein, LLP
750 Lexington
New York, NY 10022
Attention: Robert H. Cohen, Esq.
Telephone: 212-735-8600
Telecopier: 212-735-8708
8. Severability. If any provision of this Affiliate Agreement or any
part of any such provision is held under any circumstances to be invalid or
unenforceable in any jurisdiction, then (a) such provision or part thereof
shall, with respect to such circumstances and in such jurisdiction, be
deemed amended to conform to applicable laws so as to be valid and
enforceable to the fullest possible extent, (b) the invalidity or
unenforceability of such provision or part thereof under such circumstances
and in such jurisdiction shall not affect the validity or enforceability of
such provision or part thereof under any other circumstances or in any other
jurisdiction, and (c) the invalidity or unenforceability of such provision
or part thereof shall not affect the validity or enforceability of the
remainder of such provision or the validity or enforceability of any other
provision of this Affiliate Agreement. Each provision of this Affiliate
Agreement is separable from every other provision of this Affiliate
Agreement, and each part of each provision of this Affiliate Agreement is
separable from every other part of such provision.
9. Applicable Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the New Jersey Statute and with the laws of the
State of New Jersey applicable to contracts made and to be performed wholly
therein without regard to such state's principles of conflicts of law.
10. Waiver; Termination. No failure on the part of Parent to exercise
any power, right, privilege or remedy under this Affiliate Agreement, and no
delay on the part of Parent in exercising any power, right, privilege or
remedy under this Affiliate Agreement, shall operate as a waiver of such
power, right, privilege or remedy; and no single or partial exercise of any
such power, right, privilege or remedy shall preclude any other or further
exercise thereof or of any other power, right, privilege or remedy. Parent
shall not be deemed to have waived any claim arising out of this Affiliate
Agreement, or any power, right, privilege or remedy under this Affiliate
Agreement, unless the waiver of such claim, power, right, privilege or
remedy is expressly set forth in a written instrument duly executed and
delivered on behalf of Parent; and any such waiver shall not be applicable
or have any effect except in the specific instance in which it is given. If
the Reorganization Agreement is terminated, this Affiliate Agreement shall
thereupon terminate.
11. Captions. The captions contained in this Affiliate Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Affiliate Agreement and shall not be referred to in connection with the
construction or interpretation of this Affiliate Agreement.
12. Further Assurances. Stockholder shall execute and/or cause to be
delivered to Parent such instruments and other documents and shall take such
other actions as Parent may reasonably request to effectuate the intent and
purposes of this Affiliate Agreement.
13. Entire Agreement. This Affiliate Agreement, the Reorganization
Agreement and any Voting Agreement between Stockholder and Parent
collectively set forth the entire understanding of Parent and Stockholder
relating to the subject matter hereof and thereof and supersede all other
prior agreements and understandings between Parent and Stockholder relating
to the subject matter hereof and thereof.
14. Non-Exclusivity. The rights and remedies of Parent hereunder are not
exclusive of or limited by any other rights or remedies which Parent may
have, whether at law, in equity, by contract or otherwise, all of which
shall be cumulative (and not alternative).
B-9
<PAGE>
15. Amendments. This Affiliate Agreement may not be amended, modified,
altered or supplemented other than by means of a written instrument duly
executed and delivered on behalf of Parent and Stockholder.
16. Assignment. This Affiliate Agreement and all obligations of
Stockholder hereunder are personal to Stockholder and may not be transferred
or delegated by Stockholder at any time. Parent may freely assign any or all
of its rights under this Affiliate Agreement, in whole or in part, to any
other person or entity without obtaining the consent or approval of
Stockholder.
17. Binding Nature. Subject to Section 16, this Affiliate Agreement will
inure to the benefit of Parent and its successors and assigns and will be
binding upon Stockholder and Stockholder's representatives, executors,
administrators, estate, heirs, successors and assigns.
18. Survival. Each of the representations, warranties, covenants and
obligations contained in this Affiliate Agreement shall survive the
consummation of the Merger.
Stockholder has executed this Affiliate Agreement on , 2000.
.....................................
(Signature)
.....................................
(Print Name)
NUMBER OF OUTSTANDING SHARES OF COMMON
STOCK OF THE COMPANY HELD BY
STOCKHOLDER:
.....................................
B-10
<PAGE>
ANNEX C
JOINDER AGREEMENT
Joinder Agreement made as of the 28th day of April, 2000 by General
Electronique Mesure, SA ('Shareholder').
WHEREAS, Shareholder is the owner of 166,667 shares (the 'Shares') of the
common stock, no par value, of Boonton Electronics, Inc., a New Jersey
corporation ('Boonton'); and
WHEREAS, Boonton and certain shareholders (the 'Principal Shareholders') of
Boonton entered into a Plan and Agreement of Reorganization (the 'Merger
Agreement') with Wireless Telecom Group, Inc. ('Wireless') and WTT Acquisition
Corp. ('WTT') dated as of March 2, 2000 pursuant to which WTT will merge with
and into Boonton and Boonton will become a wholly-owned subsidiary of Wireless;
and
WHEREAS, Shareholder's subsidiary executed the Merger Agreement as to the
Shares; and
WHEREAS, as the owner of Shares, Shareholder should have been a party to the
Merger Agreement as a Principal Shareholder but was inadvertently not made a
party to the Agreement; and
WHEREAS, Wireless, WTT, Boonton and the Shareholder desire to correct the
inadvertent omission of Shareholder as a party to the Agreement and make
Shareholder a party to the Merger Agreement pursuant to the terms and conditions
of this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual representations,
warranties and covenants contained herein, the parties agree as follows:
1. Joinder. Shareholder hereby agrees that it is a party to the Merger
Agreement, bound by all of its terms and conditions, and entitled to all of the
rights and liabilities of a 'Principal Shareholder' thereunder, and hereby
(i) affirms, as to itself only, the accuracy of the representations and
warranties set forth in Article III of the Merger Agreement and (ii) agrees to
be bound by the covenants, agreements, and obligations set forth in
Sections 7.3, 7.17, 9.1, 9.3(b), 9.13, Article 11, Article 12, Section 13.1(c)
Article 14, and Article 15.
2. Applicable Provisions. The undersigned shall have no liability under the
Merger Agreement except with respect to Article 3, Article 6, Sections 7.3,
7.17, 9.1 (as to the Principal Shareholder representations only), 9.3(b), 9.13,
Article 11, Article 12, Section 13.1(c), Article 14, and Article 15.
3. Release. Wireless and WTT acknowledge and agree that the inadvertent
omission of Shareholder as a party to the Merger Agreement was without harm to
any party, and, accordingly, they hereby release and forever discharge the
Company and all of the Principal Shareholders from any and all claims and
liabilities that may arise solely out of such omission, including, without
limitation, claims of breach of representation or warranty under the Merger
Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
C-1
<PAGE>
4. Governing Law. This Agreement shall be governed by the laws of the state
of New Jersey regardless of principles of conflicts of law.
Shareholder:
GENERAL ELECTRONIQUE MESURE, SA
/S/ HENRI TRIEBEL
.....................................
Henri Triebel, President
BOONTON ELECTRONICS, INC.
/S/ YVES GUYOMAR
.....................................
Yves Guyomar, President
WTT ACQUISITION CORP.
/S/ EDWARD GARCIA
.....................................
Edward Garcia, President
WIRELESS TELECOM GROUP, INC.
/S/ EDWARD GARCIA
.....................................
Edward Garcia, President
C-2
<PAGE>
PART II
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
(i) Limitation of Liability of Directors and Officers. Section 14A:2-7(3) of
the New Jersey Business Corporation Act permits a corporation to provide in its
Certificate of Incorporation that a director or officer shall not be personally
liable to the corporation or its stockholders for breach of any duty owed to the
corporation or its stockholders, except that such provision shall not relieve a
director or officer from liability for any breach of duty based upon an act or
omission (a) in breach of such persons' duty of loyalty to the corporation or
its stockholders, (b) not in good faith or involving a knowing violation of law
or (c) resulting in receipt by such person of any improper personal benefit.
Wireless' Certificate of Incorporation includes limitations on the liability of
officers and directors to the full extent permitted by New Jersey law.
(ii) Indemnification of Directors and Officers. Wireless' Board of Directors
has authorized the Company to provide a general indemnification of its officers,
directors and employees regarding any claims or liabilities incurred in the
course of their employment. Section 14A:3-5 of the New Jersey Business
Corporation Act provides that a corporation may indemnify its directors,
officers, employees and agents against judgments, fines, penalties, amounts paid
in settlement, and expenses, including attorney's fees, resulting from various
types of legal actions or proceedings if the actions of the party being
indemnified meet the standards of conduct specified therein. Determinations
concerning whether or not the applicable standard of conduct has been met can be
made by (a) a disinterested majority of the Board of Directors, (b) independent
legal counsel, or (c) an affirmative vote of a majority of shares held by the
stockholders. No indemnification is permitted to be made to or on behalf of a
corporate director, officer, employee or agent if a judgment or other final
adjudication adverse to such person establishes that his acts or omissions (a)
were in breach of his duty of loyalty in the corporation or its stockholders,
(b) were not in good faith or involved a knowing violation of law or (c)
resulted in receipt by such person of an improper personal benefit.
(iii) Insurance. The Company has in effect under a policy effective January
19, 2000 and expiring on January 19, 2001, insurance covering all of its
directors and officers against certain liabilities and reimbursing the Company
for obligations for which it occurs as a result of its indemnification of such
directors, officers and employees.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
1. (a) Condensed Balance Sheets as of March 31, 2000 (unaudited) and
December 31, 1999
Condensed Statements of Operations for the Three Months Ended
March 31, 2000 and 1999 (unaudited)
Condensed Statements of Cash Flows for the Three Months Ended
March 31, 2000 and 1999 (unaudited)
Notes to Interim Condensed Financial Statements (unaudited)
Review Report on Interim Condensed Financial Statements
(b) Report of Independent Auditors of Wireless
Consolidated Balance Sheets as of December 31, 1999 and 1998
Consolidated Statements of Operations for the Three Years in the
Period ended
December 31, 1999
Consolidated Statements of Changes in Stockholders' Equity for
the Three Years in the
Period ended December 31, 1999
II-1
<PAGE>
Consolidated Statements of Cash Flows for the Three Years in the
Period ended
December 31, 1999
Notes to Consolidated Financial Statements
2. Financial Statement Schedules.
All schedules have been omitted because the required information is
included in the financial statements or notes thereto or because they
are not required.
3. Exhibits:
<TABLE>
<C> <S>
2.1 -- Agreement and Plan of Reorganization dated March 2, 2000
among Wireless Telecom Group, Inc., WTT Acquisition
Corp. and Boonton Electronics Corp.(1) (Also filed as
Annex A)
2.2 -- Amendment No. 1 to the Agreement and Plan of
Reorganization dated April 28, 2000 among Wireless
Telecom Group, Inc., WTT Acquisition Corp. and Boonton
Electronics Corp.*
2.3 -- Joinder Agreement dated April 28, 2000 by General
Electronique Mesure, SA**
3.1 -- Certificate of Incorporation, as amended(2)
3.2 -- Amended and Restated By-laws(2)
3.3 -- Amendment to the Certificate of Incorporation(3)
3.4 -- Amendment to the Certificate of Incorporation(4)
4.2 -- Form of Stock Certificate(2)
5.1 -- Morrison Cohen Singer & Weinstein, LLP Legal Opinion
8.1 -- Drinker Biddle & Shanley LLP Tax Opinion
10.3 -- Summary Plan Description of Profit Sharing Plan of the
Registrant(2)
10.4 -- Incentive Stock Option Plan of the Registrant and related
agreement(2)
10.4a -- Amendment to Registrant's Incentive Stock Option Plan and
related agreement(4)
10.7 -- Form of Manufacturers Representative agreement(2)
10.11 -- Credit agreement with Chemical Bank dated August 10,
1992(5)
10.11a -- Amendment to Credit agreement with Chemical Bank(4)
10.11b -- Amendment to Credit agreement with Chase Manhattan
Bank(6)
10.11c -- Amendment to Credit agreement with Chase Manhattan
Bank(7)
10.12 -- Lease between Wireless and Paramus Parkway Building
Associates(6)
10.13 -- Lease, July 14, 1998, between Wireless and Panorama Park,
Inc., as amended(9)
10.14 -- Asset purchase agreement, dated as of January 7, 1999,
between Wireless and Telecom Analysis Systems, Inc.(8)
10.15 -- Non-Competition agreement, dated March 11, 1999, between
Wireless and Telecom Analysis Group, Inc. relating to
the Test Equipment Assets(8)
10.16 -- Non-Competition agreement, dated March 11, 1999, between
Wireless and Telecom Analysis Group, Inc. relating to
the Noise Assets(8)
11.1 -- Computation of Per Share Earnings(9)
23.1 -- Consent of Independent Auditors (Lazar Levine & Felix
LLP)
23.2 -- Consent of Independent Auditors (Polakoff Weismann Leen
LLC)
99.1 -- Form of Proxy of Boonton Electronics Corporation
</TABLE>
---------
* filed as Annex B
** filed as Annex C
(footnotes continued on next page)
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<PAGE>
(footnotes continued from previous page)
(1) Filed as an exhibit to the Current Report on Form 8-K, dated March 2, 2000,
filed with the Securities and Exchange Commission on March 8, 2000.
(2) Filed as an exhibit to Wireless' Registration Statement on Form S-18 (File
No. 33-42468-NY) and incorporated by reference herein.
(3) Filed as an exhibit to Wireless' Annual Report on Form 10-K for the year
ended December 1994 and incorporated by reference herein.
(4) Filed as an exhibit to Wireless' Annual Report on Form 10-K for the year
ended December 1995 and incorporated by reference herein.
(5) Filed as an exhibit to Wireless' Annual Report on Form 10-K for the year
ended December 1992 and incorporated by reference herein.
(6) Filed as an exhibit to Wireless' Annual Report on Form 10-K for the year
ended December 1996 and incorporated by reference herein.
(7) Filed as an exhibit to Wireless' Annual Report on Form 10-K for the year
ended December 1997 and incorporated by reference herein.
(8) Filed as an exhibit to Wireless' Current Report on Form 8-K, dated March 11,
1999, filed with the Securities and Exchange Commission on March 26, 1999.
(9) Filed as an exhibit to Wireless' Annual Report on Form 10-K for year ended
December 31, 1999, filed with the Securities and Exchange Commission on
March 30, 1999.
ITEM 22. UNDERTAKINGS
(A) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933 (the 'Securities Act');
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this registration statement (or the most recent
post-effective amendment thereof) which, statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this registration statement or
any material change to such paragraphs is contained in periodic reports
filed by the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 (the 'Exchange Act') that are
incorporated by reference in this registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(B) The undersigned Registrant hereby undertakes, that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
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<PAGE>
(C) The undersigned Registrant hereby undertakes:
(1) That, prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of the applicable form.
(2) That every prospectus (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to
the Registration Statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(D) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(E) The undersigned Registrant hereby undertakes:
(1) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11, 13 of this
Form S-4, within one business day of receipt of such request, and to send
the incorporated documents by first class mail or other equally prompt
means. This includes information contained in documents filed subsequent to
the effective date of the Registration Statement through the date of
responding to the request.
(2) To supply by means of a post-effective amendment all information
concerning a transaction, and Wireless being acquired involved therein, that
was not the subject of and included in the Registration Statement when it
became effective.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this amendment to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Paramus, State of New Jersey, on June 5, 2000.
WIRELESS TELECOM GROUP, INC.
By: /S/ EDWARD GARCIA
.................................
EDWARD GARCIA
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, as amended, this
amendment to the registration statement has been signed by the following persons
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/S/ EDWARD GARCIA Chairman of the Board, Chief June 5, 2000
......................................... Executive Officer
EDWARD GARCIA
/S/ JOHN WILCHEK Director June 5, 2000
.........................................
JOHN WILCHEK
/S/ DEMIR RICHARD EDEN Director June 5, 2000
.........................................
DEMIR RICHARD EDEN
/S/ FRANKLIN H. BLECHER Director June 3, 2000
.........................................
FRANKLIN H. BLECHER
/S/ HENRY H. BACHMAN Director June 5, 2000
.........................................
HENRY H. BACHMAN
</TABLE>
II-5
